Petrominerales Reports Another Record Quarter With 105 Percent Increase in Production
Last Update: 8/4/2010 10:10:38 PM
BOGOTA, COLOMBIA, Aug 4, 2010 (Marketwire via COMTEX) --Petrominerales Ltd. ("Petrominerales" or the "Company") (PMG), a 66percent owned subsidiary of Petrobank Energy and Resources Ltd. (PBG),is pleased to announce another quarter of record results highlighted bya 105 percent increase in production to 44,203 barrels of oil per day("bopd"), funds flow from operations of US$176.0 million (US$1.68 perdiluted share) and net income of US$81.2 million (US
.78 per dilutedshare) for the second quarter of 2010. We realized operating netbacksof US$50.93 per barrel, a 38% increase over 2009. Our balance sheetremains strong with a US$67.3 million net working capital surplus andno bank debt outstanding. This financial flexibility gives us thestrength to execute our largest capital program to-date in 2010.
FINANCIAL & OPERATING RESULTS
The following table provides a summary of Petrominerales'financial and operating results for the three and six month periodsended June 30, 2010 and 2009. Interim consolidated financial statementswith Management's Discussion and Analysis ("MD&A") are available onthe Company's website at www.petrominerales.com and will also beavailable on the SEDAR website at www.sedar.com.
Three months ended June 30,
Six months ended June 30,
2010
2009
% change
2010
2009
% change
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Financial
(
00s, except
where noted)
Crude oil
revenue
318,776
104,823
204
566,622
181,175
213
Funds flow from
operations (1)
175,989
64,098
175
316,075
105,944
198
Per share
- basic ($)
1.77
0.65
172
3.19
1.07
198
- diluted ($)
1.68
0.63
167
3.02
1.05
188
Net income
81,218
15,323
430
154,594
22,711
581
Per share
- basic ($)
0.82
0.16
413
1.56
0.23
578
- diluted ($)
0.78
0.15
420
1.50
0.23
552
Capital
expenditures
112,697
79,527
42
224,489
144,898
55
Total assets
1,052,284
633,237
66 1,052,284
633,237
66
Net working
capital surplus
(deficit) (1)
67,277
(7,503)
997
67,277
(7,503)
997
Common shares,
end of period
(000s)
Basic
99,363
97,930
1
99,363
97,930
1
Diluted (2)
110,778
104,383
6
110,778
104,383
6
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Operations
Operating
netback ($/bbl)
(1)
WTI benchmark
price
78.06
59.79
31
78.47
51.68
52
Crude oil
revenue (3)
63.53
47.96
32
64.95
40.90
59
Royalties
6.35
4.30
48
6.81
3.98
71
Production
expenses
6.25
6.76
(8)
6.46
6.34
2
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Operating
netback
50.93
36.90
38
51.68
30.58
69
Crude oil
production
(bopd) (4)
44,203
21,548
105
41,218
21,659
90
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(1) Non-GAAP measure. See "Non-GAAP Measures" section within this press
release.
(2) Consists of common shares, stock options, deferred common shares,
incentive shares and convertible debentures outstanding as at the
period-end date.
(3) Net of transportation and excludes revenue from purchased oil.
(4) Actual production sold for the three and six months ended June 30, 2010
was 49,466 and 43,995 bopd respectively (2009 - 21,390 bopd and 21,399
bopd).
HIGHLIGHTS
(comparisons are second quarter 2010 compared to the second quarter of 2009, except where noted)
- We increased crude oil production to 44,203 bopd, a 105percent gain over the prior year and a 16 percent gain over the firstquarter of 2010.
- We generated a solid operating netback of $50.93 per barrel in the quarter, a 38% increase.
- We recorded funds flow from operations of $176.0 million($1.68 per diluted share) and net income of $81.2 million (
.78 perdiluted share).
- We drilled two new oil discoveries on our Central Llanos Basin acreage in Colombia, Yenac-1 and Capybara-1.
- We completed the acquisition of PanAndean Resources plc("PanAndean") on April 14, 2010. PanAndean assets include fourexploration contracts in Peru and one in Colombia totalling 6.7 milliongross (2.6 million net) acres.
OPERATIONAL REVIEW
COLOMBIA
Guatiquia
Production from the Candelilla structure averaged 27,779 bopdduring the second quarter of 2010, an increase of 6,807 bopd, or 32percent on a quarter-over-quarter basis. Production is being handledthrough early production facilities built on the Block, now capable ofhandling up to 55,000 barrels of fluid per day. Once the requiredregulatory approvals have been obtained, we plan to tie-in theCandelilla production to our Corcel central processing facility, whichis expected to be completed by the end of the year. During the quarter,we shut-in the Candelilla-1 well for ten days in April to optimize oilproduction. In late July, we turned on the electric submersible pumpsin the Candelilla wells to further optimize production. July monthlyaverage production was 19,346 bopd and is currently over 21,000 bopd.
On July, 25, 2010, we began drilling operations on theCandelilla-4 exploration well, targeting previously identified pay inthe Guadalupe and Mirador formations. Well results are expected by theend of August. In addition, we plan to drill an additional twoexploration wells on the Guatiquia Block, Yatay-1 and Azalea-1, and toacquire 3D seismic over the entire Block.
Corcel
Corcel production during the second quarter 2010 averaged 8,220bopd and 7,915 bopd during the month of July. Production has decreasedfrom 2009 as no additional wells had been drilled on the block from thetime the A2 sidetrack well was put on production September 28, 2009until the C2 well came on production May 31, 2010. Second quarterCorcel production was also affected by certain wells being restrictedor shut-in due to temporary limitations in our water disposal capacityin May and June. We expect to complete our installation of additionalwater disposal facilities in early August.
We resumed the Corcel drilling program on April 13, 2010 whenwe commenced drilling operations on the Corcel-C2 development well,reaching total measured depth of 13,750 feet on May 13, 2010. Well logsindicated 21 feet of potential net oil pay in the Lower Sand 1formation and 14 feet of pay in the Guadalupe formation. On May 31,2010, the well was placed on production at over 3,000 bopd of 21 degreeAPI oil.
In the northeast area of Corcel, we have drilled our firstexploration well, Amarillo-1. The well began drilling operations onJune 10, 2010 and reached total measured depth of 13,457 feet on July27, 2010. Well logs indicated a total of 46 feet of potential net oilpay in the Guadalupe formation. The Lower Sand 1 zone indicated ananomalous well log response and compelling hydrocarbon indicationsduring drilling. The well is being cased and the drilling rig will bemobilized to the Arion-1 location to spud this well by mid-August.Amarillo-1 will be tested with the completion rig, starting with theLower Sand 1 formation. Initial test results are expected in August.
We plan to drill up to three additional exploration wells inthe northeast area of Corcel by the end of 2010 and continue drillingin the area in 2011 to complete the remainder of our initial ten-wellnortheast exploration program. The Boa-2 development well is alsoexpected to commence drilling in September.
On April 23, 2010, we completed the acquisition of 354 squarekilometres of 3D seismic comprised of 205 square kilometres on theCorcel Block and 150 square kilometres on the adjacent Block 31. We nowhave 3D seismic coverage over the entire Corcel Block.
Block 31
We began the interpretation of the 150 square kilometre 3Dseismic program we recently acquired on the southern portion of Block31, contiguous with the Corcel Block. This program satisfies ourseismic work commitment on the Block. An initial review of the dataindicates the potential to add to our prospect inventory. Following theseismic interpretation, we plan to drill our first exploration wells onthe Block in 2011.
Central Llanos (Casimena, Castor, Casanare Este, Mapache)
In January, we initiated a 13-well exploration program in theCentral Llanos Basin starting with the Yenac-1 well on the CasimenaBlock that was placed on an extended test on April 13, 2010. The wellcommenced production at over 1,800 bopd at 16 degree API oil and hasproduced 173,000 barrels through the end of July.
The second well of our Central Llanos exploration program,Capybara-1 on our Castor Block, was cased as a potential oil well basedon well logs that indicated 18 feet of potential net oil pay in twoseparate sands within the Carbonera C7 formation. Following testing,which indicated Capybara-1 is capable of producing 660 bopd of 29degree API oil, the well was suspended and we are evaluating potentialup-dip locations and developing a water handling strategy.
The third well of the program, Cerillo-1 on our Casanare EsteBlock, reached total measured depth of 9,580 feet on April 19, 2010. Weswab tested five intervals in the Gacheta and Carbonera C7 formations.Four of the intervals were wet, while the fifth C7 interval testednon-commercial amounts of 31 degree API oil. The well has beensuspended and we are assessing the up-dip potential of the Cerillostructure.
The fourth well of the program, Mapana-1 on our Mapache Block,reached total measured depth of 8,220 feet on May 27, 2010. Wecompleted three of four prospective intervals in the Guadalupe, Miradorand Carbonera C7 formations which tested wet. A fourth interval in theCarbonera C7 remains to be tested, but the interval would requireremedial cement work. The well was suspended and the rig moved to theManzanillo-1 well.
Manzanillo-1, the fifth well of our program, reached totalmeasured depth of 8,101 feet on June 24, 2010 and was cased as apotential oil well based on indications of hydrocarbons encounteredduring drilling operations. Initial swab test results from the firstinterval tested in the Guadalupe formation recovered 35 degree APIlight oil. We are planning to swab test a number of additionalintervals in the well before placing the Guadalupe formation onlong-term production test.
We plan to recommence our Central Llanos drilling program inSeptember starting with two follow-up wells at our Yenac discovery andthen we plan to continue drilling our Mapache multi-well explorationprogram, drilling through the rest of 2010 and into 2011.
Neiva
Neiva production averaged 3,415 bopd in the second quarter, a 45percent increase from 2009, and has increased to average 3,924 bopdduring the month of July. In 2010, we drilled and completed sixteenwells and performed eight workovers. In 2010, we started drilling wellstargeting the Monserrate formation, which have demonstrated similarproductive capacity as Doima-Chicoral wells. We currently have anadditional 38 development locations to be drilled and we plan to keepactively drilling on the block through the remainder of 2010 and into2011, focusing on Doima-Chicoral and Monserrate locations.
Orito and Las Aguilas
In response to declining world oil prices in 2009, wediscontinued drilling at Orito and commenced a formal sale process forour Orito asset and the adjoining Las Aguilas exploration block.Following the conclusion of this process we determined not to sell theOrito asset at this time and in response to higher oil prices, we areplanning a multi-well drilling program in the area that is expected tocommence in December and continue into 2011. The program is expected toinclude two exploration wells on the Las Aguilas Block and an initialfour-well development program at Orito. In addition, we plan to acquire48 square kilometres of 3D seismic over the Orito and adjoined LasAguilas acreage.
Heavy Oil (Rio Ariari, Chiguiro Oeste, Chiguiro Este, Antorcha)
In July, we mobilized a drilling rig onto our Llanos Basin heavyoil acreage and commenced drilling operations July 30, 2010 on theAvellana-1 exploration well on our Chiguiro Oeste Block. Results areexpected by mid-September. Following Avellana-1, we plan to conduct amulti-well exploration drilling program of up to nine wells on our RioAriari Block to follow-up on our Rio Ariari discovery and target newexploration prospects and play-types on the Block. We expect to runthis program continuously for the remainder of 2010 and into 2011.
We acquired the 87,383 acre Antorcha Block from our acquisitionof PanAndean on April 14, 2010. This Block provides Petrominerales withanother heavy oil exploration opportunity in an area close toinfrastructure in the Middle Magdalena Basin. We commenced drilling theAntorcha-1 well on July 25, 2010 and reached total measured depth of1,320 feet on August 2, 2010. Well logs indicated no pay, however someoil shows were seen in the core. We plan to release the rig,incorporate the well results into our geological model and plan futureexploration work in 2011.
Colombia 2010 Bid Round
In June's 2010 Bid Round, we were awarded Block 59 and Block 15, both in the Llanos Basin of Colombia.
Block 59 is located just north of the Apiay and Castilla oilfields. The Block covers 131,286 acres and our first phase workcommitments will include spending $24.2 million over three years toacquire 300 square kilometres of 3D seismic and drilling fourexploration wells. The Block has over 500 kilometres of existing 2Dseismic from which we have already identified several leads.
Block 15 is located northeast of the Cusiana-Cupiagua oilfields. The Block covers 63,188 acres and our first phase workcommitments will include spending $10.0 million over three years toacquire 100 square kilometres of 3D seismic and drilling twoexploration wells. The Block currently has over 90 kilometres ofexisting 2D seismic from which we have identified several fault trends.The Block is located 12 kilometres southeast of the Huron discovery onthe Niscota Block.
Both of these blocks will be subject to a new Colombia NationalHydrocarbon Agency ("ANH") contract (8% initial royalty) plus a furtherstate participation of 1% of gross production, payable to the ANH. Inaddition, the 2010 ANH hydrocarbon contracts include a high priceparticipation payment when the cumulative production from the blockexceeds five million barrels. The Block 15 and 59 contracts are subjectto the final approval of the Directive Council of the ANH andresolution of our previously announced contractual dispute with theANH.
PERU
On April 14, 2010 we completed our previously announcedacquisition of PanAndean. The acquisition was completed by way ofscheme of arrangement (the "Scheme") in accordance with the UnitedKingdom Companies Act 2006. The Scheme resulted in Petromineralesacquiring PanAndean's Colombian and Peruvian assets, consisting of fourexploration blocks in Peru totaling 6.7 million gross acres (2.6 netacres) and the Antorcha Block in Colombia.
Combining the PanAndean acquisition with our existing 55percent working interest in Block 126, we have the exploration rightsto a significant concentration of land in the highly under-exploredUcayali Basin of Peru. On Block 126, we completed a 150 squarekilometre 3D seismic program earlier this year and we are in the finalstages of evaluating the data and establishing drilling locations.Lease construction and infrastructure improvements are anticipated tobegin on Block 126 in the third quarter of 2010 and an initial drillingprogram of up to three wells is expected to commence in early 2011.Additionally, we plan to reprocess approximately 1,000 kilometres ofexisting 2D seismic data. Pending interpretation of the reprocessedseismic data, we intend to initiate further environmental impactassessments in these new areas, with a view to expanding our drillingprogram on the Block.
Our recently acquired PanAndean acreage in Peru consists of twooperated Blocks and two non-operated Blocks. On Block 161 in theUcayali Basin, we plan to complete the reprocessing 150 kilometres of2D seismic during the third quarter of 2010. On Block 141 in theTiticaca Basin, we plan to complete a 300 kilometre 2D seismic programin 2011. On Blocks 114 and 131, we are carried by the operator oncurrent phase seismic activity, the first exploration wells, and 50% ofthe second exploration wells drilled on each block. On Block 131, theoperator has initiated a 300 km 2D seismic program and the first wellcould be drilled in 2012. On Block 114, the first well is expected tobe drilled in late 2011.
COLOMBIA STOCK EXCHANGE LISTING
We are in the process of preparing necessary information to listPetrominerales' shares on the Colombian stock exchange, Bolsa deValores de Colombia ("BVC"). Subject to customary regulatory approvals,we expect to have our shares trading on the BVC by the end of 2010. Wehave engaged Citivalores S.A. Colombia, a Citibank company, to act asour advisors in this process.
QUARTER RESULTS CONFERENCE CALL
Management of Petrominerales will be holding a conference callfor investors, financial analysts, media and any interested persons onThursday, August 5, 2010 at 9:00 am (Mountain time) (11:00 a.m. EasternTime) to discuss our second quarter financial and operating results.The investor conference call details are as follows:
Live call dial-in numbers: 416-695-6622 / 800-446-4472
Replay dial-in numbers: 416-695-5800 / 800-408-3053
Replay pass code: 5803441
The live audio webcast link is:https://events.digitalmedia.telus.com/petrominerales/080510/index.phpand is also available on our website at:https://www.petrominerales.com/investors/.
Petrominerales Ltd.
Petrominerales Ltd. is a Latin America-based exploration andproduction company producing oil in Colombia with 17 exploration blockscovering a total of 2.1 million acres in the Llanos and Putumayo Basinsand five exploration blocks in Peru covering a total of 9.4 milliongross (5.2 million net) acres in the Ucayali and Titicaca Basins.Petrominerales is 66 percent owned by Petrobank Energy and ResourcesLtd. (PBG).
Non-GAAP Measures
This press release contains financial terms that are notconsidered measures under Canadian generally accepted accountingprinciples ("GAAP"), such as funds flow from operations, funds flow pershare, net working capital surplus and operating netback. Thesemeasures are commonly utilized in the oil and gas industry and areconsidered informative for management and shareholders. Specifically,funds flow from operations and funds flow per share reflect cashgenerated from operating activities before changes in non-cash workingcapital. Management considers funds flow from operations and funds flowper share important as they help evaluate performance and demonstratethe Company's ability to generate sufficient cash to fund future growthopportunities and repay debt. Net working capital surplus includescurrent assets less accounts payable, accrued liabilities and incometaxes payable, and is used to evaluate the Company's financialleverage. Operating netback is determined by dividing oil sales lessroyalties, transportation and other and operating expenses by salesvolumes of produced oil. Management considers operating netbackimportant as it is a measure of profitability per barrel sold andreflects the quality of production. Funds flow from operations, fundsflow per share, net working capital surplus and operating netbacks maynot be comparable to those reported by other companies nor should theybe viewed as an alternative to cash flow from operations, net income orother measures of financial performance calculated in accordance withGAAP.
Forward-Looking Statements
Certain information provided in this press release constitutesforward-looking statements. The words "anticipate", "expect","project", "estimate", "forecast" and similar expressions are intendedto identify such forward-looking statements. Specifically, this pressrelease contains forward-looking statements relating to the timing ofcapital projects, financial results and the results of operations andtiming of resolving our dispute with the ANH and listing our shares onthe BVC. The reader is cautioned that assumptions used in thepreparation of such information, although considered reasonable at thetime of preparation, may prove to be incorrect. Actual results achievedduring the forecast period will vary from the information providedherein as a result of numerous known and unknown risks anduncertainties and other factors. A discussion of those risks anduncertainties can be found in the Company's Canadian securitiesfilings. Such factors include, but are not limited to: generaleconomic, market and business conditions; fluctuations in oil prices;the results of exploration and development drilling, recompletions andrelated activities; timing and rig availability, outcome of explorationcontract negotiations and arbitration process; fluctuation in foreigncurrency exchange rates; the uncertainty of reserve estimates; changesin environmental and other regulations; risks associated with oil andgas operations; and other factors, many of which are beyond the controlof the Company. There is no representation by Petrominerales thatactual results achieved during the forecast period will be the same inwhole or in part as those forecast. Except as may be required byapplicable securities laws, Petrominerales assumes no obligation topublicly update or revise any forward-looking statements made herein orotherwise, whether as a result of new information, future events orotherwise.
SOURCE: Petrobank Energy and Resources Ltd.
Petrominerales Ltd.
John D. Wright
Chairman and Strategic Advisor
403.750.4400 or 011.571.629.2701
Petrominerales Ltd.
Corey C. Ruttan
President and Chief Executive Officer
403.750.4400 or 011.571.629.2701
Petrominerales Ltd.
Jack F. Scott
Executive Vice President and Country Manager, Colombia
403.750.4400 or 011.571.629.2701
Petrominerales Ltd.
Kelly D. Sledz
Chief Financial Officer
403.750.4400 or 011.571.629.2701
ir@petrominerales.com
www.petrominerales.com
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