PetroTal Announces Year-end 2018 Oil Reserves

RNS Number : 8904V

PetroTal Corp.

11 April 2019

 

PetroTal Announces Year-end 2018 Oil Reserves

New report shows NPV-10 growth of 90% to $535 million for 2P Reserves and $1.25 billion for 3P Reserves

Calgary, Alberta and Houston, Texas - April 11, 2019-PetroTal Corp. ("PetroTal" or the "Company") (TSX-V: TAL and AIM: PTAL) is pleased to provide a summary of the Company's 2018 year-end reserves in the Bretaña field in Northern Peru.  Reserves numbers presented herein were derived from an independent reserves report (the "NSAI Report") prepared by Netherland, Sewell & Associates, Inc. ("NSAI") effective December 31, 2018. Unless otherwise noted, all figures referred to in this press release are denominated in U.S. Dollars.

2018 Year-end Reserve Highlights

·      Proved ("1P") Reserves estimated at approximately 17.9 million⁽¹⁾ barrels ("bbl") of oil gross;

·      Proved + Probable ("2P") Reserves estimated at approximately 39.4 million⁽¹⁾ bbl of oil gross;

·      Proved + Probable + Possible ("3P") Reserves estimated at approximately 78.7 million⁽¹⁾ bbl of oil gross;

·      NPV-10 of approximately $535 million for 2P Reserves and $1.25 billion for 3P Reserves; and

·      2P Reserves NPV-10 increase of 70%.

Note:

1.     Reserves include a total of approximately 2,963.6 Mbbl (3P) of oil for surface facility use across all categories (960.7 Mbbl (1P) and 1,818.2 Mbbl (2P)). See "Summary of Oil Reserves and Net Present Values as of December 31, 2018" for a summary of Company reserves, which exclude these amounts.

The Company has certified total 2P reserves of 39.4 million barrels of recoverable oil at the Bretaña field. The net present value of before tax future net revenues discounted at 10 percent ("NPV-10") of 2P oil reserves is approximately $535 million.  On a 1P Reserves basis, reserves increased by 22% to 17.9 million bbl from 14.7 million bbl gross, with an associated NPV-10 increasing three-fold to $151 million from $38 million.  Additionally, the NPV-10 of the 3P Reserves increased by 58%. 

Manolo Zuniga, PetroTal's President and Chief Executive Officer, stated:

"The increased NPV-10 is a result of lower than expected development costs, partly as a result of using produced oil to power the field.  The lower development costs truly drive the NPV-10 of the project, where we see a major increase from $282 million to $535 million.   Even more important is the NPV-10 of the 3P reserves, estimated at $1.25 billion, which underpins our future value, which could primarily be obtained by increasing the field's recovery factor."

2018 Year-end Reserves Summary

The summary below sets forth PetroTal's reserves as at December 31, 2018, as presented in the NSAI Report.  The figures in the following tables have been prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook (the "COGE Handbook") and the reserve definitions contained in National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). In addition to the summary information disclosed in this press release, more detailed information will be included in PetroTal's annual information form for the year ended December 31, 2018 (the "AIF") to be filed on SEDAR (www.sedar.com) and posted on PetroTal's website (www.Petrotal-corp.com) in April 2019.

The reserves estimated by NSAI on the charts below exclude up to three million barrels that are expected to be used for power generation in the field.

Summary of Oil Reserves and Net Present Values as of December 31, 2018

		Company				Future Net Revenue
		Heavy Oil Reserves(2)				Before Income Taxes (USM$)(4)(5)(6)
		(Mbbl)(1)				Discounted		Discounted		Discounted		Discounted		Discounted
Category		Gross		Net(3)		at 0%		at 5%		at 10%		at 15%		at 20%
Proved Developed Producing		1,559.0		1,559.0		75,696.3		61,506.5		51,624.6		44,472.9		39,112.0
Proved Undeveloped		15,378.5		15,378.5		202,879.9		143,618.9		99,380.2		66,606.6		42,129.6
Total Proved		16,937.5		16,937.5		278,576.2		205,125.4		151,004.8		111,079.5		81,241.6
Probable Undeveloped		20,597.8		20,597.8		772,240.6		523,525.2		384,528.6		299,631.9		243,749.6
Proved + Probable		37,535.4		37,535.4		1,050,816.8		728,650.6		535,533.4		410,711.4		324,991.2
Possible Undeveloped		38,278.9		38,278.9		1,684,251.1		1,060,626.2		718,814.0		516,783.2		389,791.8
Proved + Probable + Possible		75,814.2		75,814.2		2,735,067.9		1,789,276.8		1,254,347.5		927,494.6		714,783.0

Notes:

1.     Totals may not add because of rounding.  Mbbl are thousands of barrels.

2.     PetroTal owns a 100 percent company gross interest and a 100 percent company net interest in these properties.  Company reserves exclude a total of approximately 2,963.6 Mbbl (3P) of oil for surface facility use across all categories (960.7 Mbbl (1P) and 1,818.2 Mbbl (2P)).

3.     Net reserves do not include deductions for royalty expenses for net oil volumes; government royalties are included in property and mineral taxes.

4.     Based on NSAI's December 31, 2018 escalated price forecast. See "Summary of Pricing and Inflation Rate Assumptions - Forecast Prices and Costs".

5.     It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to the Company's reserves estimated by NSAI represent the fair market value of those reserves. 

6.     All future net revenues are estimated using forecast prices and cost assumptions, arising from the anticipated development and production of reserves, after the deduction of royalties, operating costs, development costs and abandonment and reclamation costs but before consideration of indirect costs such as administrative, overhead and other miscellaneous expenses. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. The recovery and reserve estimates of the Company's reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered.  Actual reserves may be greater than or less than the estimates provided herein.

Summary of Pricing and Inflation Rate Assumptions - Forecast Prices and Costs

The forecast cost and price assumptions assume increases in wellhead selling prices and include inflation with respect to future operating and capital costs.  Crude oil benchmark reference pricing, inflation and exchange rates utilized by NSAI as at December 31, 2018 were as follows:

Period Ending		Oil Price (US$/BBL)
12-31-2019		63.88
12-31-2020		68.20
12-31-2021		70.98
12-31-2022		73.35
12-31-2023		75.40
12-31-2024		77.35
12-31-2025		79.40
12-31-2026		81.61

Thereafter, escalated 2 percent on January 1 of each year.

Future Development Costs

The following information sets forth development costs deducted in the estimation of PetroTal's future net revenue attributable to the reserve categories noted below:

Proved                                                 $178.0 million

Proved + Probable                               $251.1 million

Proved + Probable + Possible             $368.8 million

The future development costs are estimates of capital expenditures required in the future for PetroTal to convert the corresponding reserves to proved developed producing reserves. 

About PetroTal

PetroTal is a publicly-traded, dual-listed (TSX-V: TAL and AIM: PTAL) oil and gas development and production company domiciled in Calgary, Alberta, focused on the development of oil assets in Peru. PetroTal's development asset is the Bretaña field in Peru's Block 95 where oil production was initiated in June 2018. Additionally, the Company has large exploration prospects and is engaged in finding a partner to drill the Osheki prospect in Block 107. The Company's management team has significant experience in developing and exploring for oil in Northern Peru and is led by a Board of Directors that is focused on safely and cost effectively developing and exploiting the Bretaña oil field.

Qualified Person Review

Manuel Pablo Zúñiga-Pflücker, President and CEO, has approved the technical disclosure in this regulatory announcement in his capacity as a qualified person under the AIM Rules. Mr. Zúñiga is a petroleum engineer with over 30 years of industry experience. Mr. Zúñiga holds a Bachelor of Science degree in Mechanical Engineering from the University of Maryland and a Masters of Science degree in Petroleum Engineering from Texas A&M University. Mr. Zúñiga is a member of the Society of Petroleum Engineers.

For further information, please contact:

Greg Smith

Executive Vice President and Chief Financial Officer

[e-mail]

T: [phone]

Manolo Zuniga

President and Chief Executive Officer

[e-mail]

T: [phone] Mark Antelme / Henry Lerwill Celicourt Communications (Financial PR) [e-mail] T: 44 (0) 207 520 9261 James Spinney / Ritchie Balmer / Eric Allan Strand Hanson Limited (Nominated & Financial Adviser) T: 44 (0) 207 409 3494 John Prior / Emily Morris / George Price Numis Securities Limited (Joint Broker) T: [phone] Jonathan Wright / Hugh R. Sanderson GMP FirstEnergy (Joint Broker) T: [phone]

READER ADVISORIES 

FORWARD-LOOKING STATEMENTS: This press release may contain certain statements that may be deemed to be forward-looking statements. Such statements relate to possible future events, including, but not limited to: PetroTal's business strategy, objectives, strength and focus; drilling and completion activities and the results of such activities; the ability of the Company to achieve drilling success consistent with management's expectations; anticipated future production and revenue; future development and growth prospects; and the timing of release of the AIF. All statements other than statements of historical fact may be forward-looking statements. In addition, statements relating to expected production, reserves, recovery, costs and valuation are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions that the reserves described can be profitably produced in the future. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "believe", "expect", "plan", "estimate", "potential", "will", "should", "continue", "may", "objective" and similar expressions. The forward-looking statements are based on certain key expectations and assumptions made by the Company, including, but not limited to, expectations and assumptions concerning the ability of existing infrastructure to deliver production and the anticipated capital expenditures associated therewith, reservoir characteristics, recovery factor, exploration upside,  prevailing commodity prices and the actual prices received for PetroTal's products, the availability and performance of drilling rigs, facilities, pipelines, other oilfield services and skilled labour, royalty regimes and exchange rates, the application of regulatory and licensing requirements, the accuracy of PetroTal's geological interpretation of its drilling and land opportunities, current legislation, receipt of required regulatory approval, the success of future drilling and development activities, the performance of new wells, the Company's growth strategy, general economic conditions and availability of required equipment and services. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses; and health, safety and environmental risks), commodity price and exchange rate fluctuations, legal, political and economic instability in Peru, access to transportation routes and markets for the Company's production, changes in legislation affecting the oil and gas industry and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Please refer to the risk factors identified in the Company's annual information form for the year ended December 31, 2017 and management's discussion and analysis for the three and nine months ended September 30, 2018 which are available on SEDAR at www.sedar.com. The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

OIL AND GAS INFORMATION: This press release contains oil and gas metrics, including "future development costs", which do not have standardized meanings or standard methods of calculation and therefore such measures may not be comparable to similar measures used by other companies. Such metrics have been included herein to provide readers with additional measures to evaluate the Company's performance; however, such measures are not reliable indicators of the future performance of the Company and future performance may not compare to the performance in previous periods. Future development costs are calculated as the sum of development capital plus the change in future development costs for the period.

FOFI DISCLOSURE: This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about PetroTal's prospective results of operations, production, NPV-10, future net revenue, future development costs, and components thereof, all of which are subject to the same assumptions, risk factors, limitations and qualifications as set forth in the above paragraphs. FOFI contained in this press release was made as of the date of this press release and was provided for the purpose of providing further information about PetroTal's anticipated future business operations. PetroTal disclaims any intention or obligation to update or revise any FOFI contained in this press release, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this press release should not be used for purposes other than for which it is disclosed herein. All FOFI contained in this press release complies with the requirements of Canadian securities legislation, including NI 51-101.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.

 

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