PetroTal Announces Q4 and 2023 Financial and Operating Results

Rhea-AI Summary

PetroTal Corp. reports strong financial performance in Q4 2023 and 2023, with average production growth of 17% and a 30% return on capital employed. The company generated $91 million in free funds flow, returned over $61 million to shareholders, and maintained a robust cash position. Despite challenges due to dry season conditions, PetroTal achieved market guidance and exited 2023 with a production of approximately 20,000 bopd. The company's strong balance sheet positions it well for future growth opportunities.

Positive

• Strong average production growth of 17% in 2023 compared to 2022.
• Return on Capital Employed of 30% in 2023.
• Generated $91 million in free funds flow and returned over $61 million to shareholders in 2023.
• Maintained a robust cash position of $111 million at the end of 2023.
• Successfully drilled new oil wells and executed workover operations in 2023.
• Q4 2023 EBITDA and free funds flow were $50.8 million and $8.1 million, respectively.
• Delivered Q4 net income of $21.5 million and over $110.5 million for 2023.
• Paid total dividends of $0.06/share and repurchased 11.3 million common shares in 2023.
• Financially strong with no debt and a net surplus of $57 million in Q4 2023.
• Robust oil production in 2024 exceeding guidance, with production averaging 15,600 bopd in March.
• Commenced drilling of well 18H with an estimated cost of $14 million.
• Continued advancements on the OCP oil export pilot project in Ecuador.
• Company trending in line with budget expectations for 2024.
• Updated reserves profile for 2023 with 2P reserves of 100 million bbls and a reserve life index of 19 years.

Negative

• None.

Q4 2023 average sales and production of 15,033 bopd and 14,865 bopd, respectively
2023 average year on year production growth of 17% to 14,248 bopd
Generated 2023 free funds flow of $91 million
Returned over $61 million through dividends and share buybacks in 2023
2023 Return on Capital Employed of 30%

Calgary, Alberta and Houston, Texas--(Newsfile Corp. - March 21, 2024) - PetroTal Corp. (TSX: TAL) (AIM: PTAL) (OTCQX: PTALF) ("PetroTal" or the "Company") is pleased to report its operating and audited financial results for the three ("Q4") and twelve months ended December 31, 2023 ("2023").

Selected financial and operational information is outlined below and should be read in conjunction with the Company's audited consolidated financial statements and management's discussion and analysis ("MD&A") for the three and twelve months ended December 31, 2023, which are available on SEDAR+ at www.sedarplus.ca and on the Company's website at www.PetroTal‐Corp.com. All amounts herein are in United States dollars unless otherwise stated.

Selected Q4 and 2023 Highlights

• Average Q4 sales and production of 15,033 and 14,865 barrels ("bbls") of oil per day ("bopd"), respectively, impacted by a severe dry season and consequent low river levels that limited barge transport and tanker unloading capacity at Manaus;

• Average 2023 sales and production of 14,421 bbls and 14,248 bopd, respectively, within guidance range for the year and generating a production growth rate of 17% over 2022;

• 2023 return on capital employed of 30% compared to 49% in 2022;⁽¹⁾

• Exited 2023 in a strong cash position with $111 million in total cash ($91 million unrestricted), after repaying $80 million of bonds in early 2023 and returning over $61 million in dividends and share buybacks in 2023;

• Capital expenditures ("capex") totaled $32.2 million in Q4 and were focused on drilling well 16H, bringing 2023 total capex spend to just over $108 million, lower than guidance of approximately $120 million;

• Successfully drilled three new oil wells and one water disposal well in 2023. During 2023, the three new oil wells produced nearly 1 million bbls of oil and generated approximately $45 million in net operating income representing nearly a full payout of their cost to drill by December 31, 2023;

• PetroTal successfully executed workover operations on wells 1XD and 2XD in May and June 2023, with both wells producing between 500 and 700 bopd since July 2023 and accumulating over 180,000 bbls of oil in the second half of 2023 thereby recovering their workover cost approximately 2.5 times by the end 2023;

• Generated Q4 EBITDA² and free funds flow² of $50.8 million ($36.71/bbl) and $8.1 million ($5.87/bbl), respectively, and 2023 EBITDA and free funds flow of $210.8 million ($40.06/bbl) and $90.7 million ($17.23/bbl) respectively and in line with cash flow guidance for 2023;

• Delivered Q4 net income of $21.5 million ($0.02/share) and over $110.5 million for 2023 ($0.12/share); and,

• Paid total dividends of $0.06/share and repurchased 11.3 million common shares in 2023, representing approximately $61 million of total capital returned to shareholders (approximately 11% of December 31, 2023, market capitalization).

(1) Return on capital employed = earnings before interest and tax ("EBIT") / (Total Assets - Current Liabilities)
(2) Non-GAAP (defined below) measure that does not have any standardized meaning prescribed by GAAP and therefore may not be comparable with the calculation of similar measures presented by other entities. See "Selected Financial Measures" section.

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:

"PetroTal's operational and financial targets were achieved in 2023, increasing average production 17% over 2022, repaying $80 million in debt and returning over $61 million to shareholders in the form of dividends and share buybacks. The Company managed through a challenging dry season, to achieve market guidance and exit December 2023 with production of approximately 20,000 bopd.

2024 is off to a record start having maintained nearly 19,000 bopd over the first two months in an eighty-dollar oil price environment, enabling us to maintain a robust cash position through the first quarter. With continued advancements on the OCP oil export pilot through Ecuador, the Company will continue to prioritize derisking oil sales so PetroTal can embark on new production growth projects.

With its strong, debt free, balance sheet, PetroTal will continue to evaluate accretive growth opportunities. I would like to thank shareholders for their continued support, as well as PetroTal's board of directors and the rest of the PetroTal team for their continued valuable contributions to our success."

Selected Financial Highlights

The table below summarizes PetroTal's comparative financial position.

	Three Months Ended				Year Ended December 31
	Q4-2023		Q3-2023		2023		2022
	$/bbl	$ 000	$/bbl	$ 000	$/bbl	$ 000	$/bbl	$ 000
Average Production (bopd)		14,865		10,909		14,248		12,200
Average sales (bopd)		15,033		11,553		14,421		13,168
Total sales (bbls)(1)		1,383,061		1,062,851		5,263,485		4,806,431
Average Brent price	$82.21		$84.65		$81.53		$98.92
Contracted sales price, gross	$81.05		$84.31		$80.54		$96.67
Tariffs, fees and differentials	($20.28)		($19.25)		($20.33)		($21.96)
Realized sales price, net	$60.77		$65.05		$60.21		$74.71
Oil revenue(1)	$60.77	$84,046	$65.05	$69,142	$60.21	$316,911	$74.71	$359,106
Royalties(2)	$7.00	$9,676	$5.49	$5,835	$5.82	$30,648	$6.66	$31,991
Operating expense	$7.24	$10,010	$8.45	$8,982	$6.16	$32,446	$6.86	$32,954
Direct Transportation:
Diluent	$1.46	$2,020	$1.72	$1,829	$1.30	$6,857	$1.96	$9,440
Barging	$0.60	$828	$0.80	$845	$0.66	$3,475	$1.34	$6,431
Diesel	$0.10	$142	$0.13	$141	$0.10	$516	$0.23	$1,083
Storage	$1.45	$2,001	$1.99	$2,114	$0.78	$4,115	$0.76	$3,668
Total Transportation	$3.61	$4,991	$4.64	$4,929	$2.84	$14,963	$4.29	$20,622
Net Operating Income(3,4)	$42.92	$59,369	$46.47	$49,396	$45.39	$238,854	$56.90	$273,539
G&A	$6.21	$8,588	$6.92	$7,355	$5.33	$28,049	$4.14	$19,891
EBITDA(3)	$36.71	$50,781	$39.55	$42,041	$40.06	$210,805	$52.77	$253,648
Adjusted EBITDA(3,5)	$29.13	$40,284	$50.76	$53,953	$37.83	$199,127	$53.28	$256,070
Net Income	$15.57	$21,529	$23.86	$25,359	$20.99	$110,505	$39.22	$188,527
Basic Shares Outstanding (000)		912,314		916,700		912,314		862,209
Market Capitalization(6)		$556,512		$522,519		$556,512		$431,104
Net Income/Share ($/share)		$0.02		$0.03		$0.12		$0.219
Capex		$32,157		$17,011		$108,453		$94,203
Free Funds Flow(3) (7)	$5.87	$8,127	$34.76	$36,944	$17.23	$90,674	$33.68	$161,868
% of Market Capitalization(6)		1.5%		7.1%		16.3%		37.5%
Total Cash(8)		$111,299		$112,827		$111,299		$119,969
Net Surplus (Debt) (3) (9)		$57,298		$86,545		$57,298		$74,224

 

1. Approximately 85% of Q4 2023 sales were through the Brazilian route vs 82% in Q3 2023.
2. Royalties at year to date December 31, 2023 and December 31, 2022 include the impact of the 2.5% community social trust.
3. Non-GAAP (defined below) measure that does not have any standardized meaning prescribed by GAAP and therefore may not be comparable with the calculation of similar measures presented by other entities. See "Selected Financial Measures" section.
4. Net operating income represents revenues less royalties, operating expenses, and direct transportation.
5. Adjusted EBITDA is net operating income less general and administrative ("G&A") and plus/minus realized derivative impacts.
6. Market capitalization for Q4, 2023, Q3 2023, and Q4 2022 assume share prices of $0.61 $0.57, and $0.50 respectively.
7. Free funds flow is defined as adjusted EBITDA less capital expenditures. See "Selected Financial Measures" section.
8. Includes restricted cash balances.
9. Net Surplus (Debt) = Total cash + all trade and net VAT receivables + short and long term net derivative balances - total current liabilities - long term debt - non current lease liabilities - net deferred tax - other long term obligations.

Q4 2023 Financial Variance Summary

	Three Months Ended			Year Ended December 31
US$/bbl Variance Summary	Q4 2023	Q3 2023	Variance	2023	2022	Variance
Oil Sales (bopd)	15,033	11,553	3,480	14,421	13,168	1,253
Contracted Brent Price	$81.05	$84.31	($3.26)	$80.54	$96.67	($16.13)
Realized Sales Price	$60.77	$65.05	($4.28)	$60.21	$74.71	($14.50)
Royalties	$7.00	$5.49	$1.51	$5.82	$6.66	($0.84)
Total Opex and Transportation	$10.85	$13.09	($2.24)	$9.00	$11.15	($2.15)
Net Operating Income(1,2)	$42.92	$46.47	($3.55)	$45.39	$56.90	($11.51)
G&A	$6.21	$6.92	($0.71)	$5.33	$4.14	$1.19
EBITDA	$36.71	$39.55	($2.84)	$40.05	$52.77	($12.72)
Net Income	$15.57	$23.86	($8.29)	$20.99	$39.22	($18.23)
Free Funds Flow(1,3)	$5.87	$34.76	($28.89)	$17.23	$33.68	($16.45)

 

Q4 2023 Financial Variance Commentary

• Weaker contracted Brent price of $81.05/bbl compared to the preceding quarter of $84.31/bbl, resulting in a 7% lower realized price of $60.77/bbl.
• Lower operating expenses per bbl resulting from higher sales volumes in Q4 2023 compared to Q3 2023. Q4 2023 operating expenses included additional floating storage costs caused by longer than usual barge travel times during the final months of the dry season.
• Capital spending in the quarter was $32 million compared to $17 million in Q3 2023 driven by the drilling commencement of well 16H and continued investment in water handling facilities. This resulting in a decrease in Q4 2023 free funds flow^(1,3) dollar figure to approximately $8.1 million compared to $37 million in Q3 2023.
• Liquidity was flat in Q4 2023 compared to Q3 2023, with total cash decreasing by $1.5 million to $111 million driven by favorable working capital timing.
• Strong balance sheet position in Q4 2023 with no debt and a net surplus ^(1,4) of $57 million now inclusive of a $42 million net deferred tax liability.

1. See "Selected Financial Measures"
2. Net operating income represents revenues less royalties, operating expenses, and direct transportation.
3. Free funds flow is defined as adjusted EBITDA less capital expenditures.
4. Net Surplus (Debt) = Total cash + all trade and net VAT receivables + short and long term net derivative balances - total current liabilities - long term debt - non current lease liabilities - net deferred tax - other long term obligations.

Financial and Operating Updates Subsequent to December 31, 2023

Robust oil production. Production continues to trend ahead of 2024 guidance with the Company producing 20,453 bopd in January and 17,411 bopd in February 2024. March production to date has averaged 15,600 bopd with the Company's most recently drilled well (16H) producing around 2,500 bopd and nearing full investment payout. The field was shut down from March 6, 2024 until March 8, 2024 as a safety precaution after an independently operated barging incident caused a small release of oil into the Puniuaha river approximately 2km away from the field. No injuries were reported and the cleanup has been substantially completed. The field downtime did not materially impact Q1 2024 production and the Company is still expected to meet Q1 2024 production guidance of 18,500 bopd.

Well 17H update. The Company has completed drilling well 17H on time, materially on its $14 million budget, and commenced production on March 1, 2024. The well has a total depth of approximately 4,960 meters with a lateral section of 1,245 meters. Production since start up has averaged 3,300 bopd under natural flow conditions allowing the well continuing to clean out drilling fluids and reach maximum initial production.

Well 18H drilling commencement. The Company commenced drilling well 18H on March 5, 2024 with an estimated cost of $14 million. The well is expected to take approximately 60 days to drill and complete with initial production estimated to occur by mid May 2024.

OCP pilot project. PetroTal is pleased to announce continued advancement on the OCP pilot oil shipment with the signing of three key approvals. In early February 2024, the Company received approval letters from the Ecuadorian Ministry of Environment and Ecuadorian Navy along with the successful signing of a use of port agreement with Petroecuador. The Company is awaiting on a final letter from the Port Subsecretariate to start the 100,000 bbl pilot. Pending success of the first pilot, the Company anticipates an additional pilot in the second half of 2024 with recurring sales expected in Q4 2024.

2024 Budget guidance. On January 22, 2024, the Company released its 2024 guidance, forecasting an average 2024 production and sales target of 17,000 bopd, delivering an estimated 20% growth rate over 2023 average production. If this forecast is acheived, PetroTal will generate approximately $200 million in EBITDA underpinned by a total 2024 capex spend of $134 million and allowing for a stable return of capital program. Should production and/or Brent price outperform the Company's base case budget assumptions (Brent oil at $77/bbl), liquidity sweep for shareholder return upside is possible. At March 15, 2024, the Company estimates it is trending in line with budget expectations.

2023 year ended reserves. On February 12, 2024, PetroTal announced its updated reserves profile ending December 31, 2023. The Company was able grow its 2P after tax per share reserves value to $1.80/share with a $1.64 billion after tax net present value of reserves, discounted at 10% ("NPV10") and associated 2P reserves of 100 million bbls. The Company's 2023 year ended 2P reserve replacement ratio is at 167%, with an associated 2P reserve life index of 19 years. For the full text of this announcement, please refer to PetroTal's press release dated February 12, 2024, filed on SEDAR+ (www.sedarplus.ca) and posted on PetroTal's website (www.petrotalcorp.com). In addition to the summary information disclosed in this press release, more detailed information will be included in the annual information form for the year ended December 31, 2023, to be filed on SEDAR+ (www.sedarplus.ca) and posted on PetroTal's website (www.petrotalcorp.com) on March 28, 2024.

Corporate presentation update. The Company has updated its Corporate Presentation, which is available for download or viewing at www.petrotal-corp.com.

Q4 and 2023 full year webcast link for March 21, 2024

PetroTal will host a webcast for its Q4 2023 and 2023 full year results on March 21, 2024 at 9am CT (Houston). Please see the link below to register.

https://stream.brrmedia.co.uk/broadcast/65d6373035af67d51a41b45b

ABOUT PETROTAL

PetroTal is a publicly traded, tri‐quoted (TSX: TAL) (AIM: PTAL) (OTCQX: PTALF) oil and gas development and production Company domiciled in Calgary, Alberta, focused on the development of oil assets in Peru. PetroTal's flagship asset is its 100% working interest in Bretana oil field in Peru's Block 95 where oil production was initiated in June 2018. In early 2022, PetroTal became the largest crude oil producer in Peru. The Company's management team has significant experience in developing and exploring for oil in Peru and is led by a Board of Directors that is focused on safely and cost effectively developing the Bretana oil field. It is actively building new initiatives to champion community sensitive energy production, benefiting all stakeholders.

For further information, please see the Company's website at www.petrotal-corp.com, the Company's filed documents at www.sedarplus.ca, or below:

Douglas Urch
Executive Vice President and Chief Financial Officer
Durch@PetroTal-Corp.com
T: (713) 609-9101

Manolo Zuniga
President and Chief Executive Officer
Mzuniga@PetroTal-Corp.com
T: (713) 609-9101

PetroTal Investor Relations
InvestorRelations@PetroTal-Corp.com

Celicourt Communications
Mark Antelme / Jimmy Lea
petrotal@celicourt.uk
T : 44 (0) 20 7770 6424

Strand Hanson Limited (Nominated & Financial Adviser)
Ritchie Balmer / James Spinney / Robert Collins
T: 44 (0) 207 409 3494

Stifel Nicolaus Europe Limited (Joint Broker)
Callum Stewart / Simon Mensley / Ashton Clanfield
T: +44 (0) 20 7710 7600

Peel Hunt LLP (Joint Broker)
Richard Crichton / David McKeown / Georgia Langoulant
T: +44 (0) 20 7418 8900

READER ADVISORIES

FORWARD-LOOKING STATEMENTS: This press release contains certain statements that may be deemed to be forward-looking statements. Such statements relate to possible future events, including, but not limited to, oil production levels and guidance. All statements other than statements of historical fact may be forward-looking statements. 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. Without limitation, this press release contains forward-looking statements pertaining to: PetroTal's drilling, completions, workovers and other activities; the Company's plans and expectations with respect to the OCP pilot oil shipment and its continued advancement; anticipated future production and revenue; drilling plans including the timing of drilling, commissioning, and startup; PetroTal's 2024 guidance, including in respect of its production and sales target of 17,000 bopd and estimate that it will deliver a 20% growth rate over 2023 production and anticipated benefits thereof (i.e., that PetroTal will generate approximately $200 million in EBITDA as a result, underpinned by a total 2024 capex spend of $134 million and allowing for a stable return of capital program and shareholder return upside); expectations with respect to well 17H production; 2024 budget guidance; plans with respect to well 18H including in respect of anticipated costs, completion and timing thereof including the Company's plans to begin production at well 18H in May of 2024; the Company's expectation to meet Q1 2024 pr

FAQ

What was PetroTal's average production growth in 2023 compared to 2022?

PetroTal reported an average production growth of 17% in 2023 compared to 2022.

What was PetroTal's Return on Capital Employed in 2023?

PetroTal achieved a Return on Capital Employed of 30% in 2023.

How much free funds flow did PetroTal generate in 2023?

PetroTal generated $91 million in free funds flow in 2023.

What was PetroTal's net surplus in Q4 2023?

PetroTal had a net surplus of $57 million in Q4 2023.

What was PetroTal's Q4 2023 EBITDA and free funds flow?

PetroTal's Q4 2023 EBITDA was $50.8 million and free funds flow was $8.1 million.

What was PetroTal's net income for 2023?

PetroTal delivered over $110.5 million in net income for 2023.

What was PetroTal's total dividends paid in 2023?

PetroTal paid total dividends of $0.06/share in 2023.

How much common shares did PetroTal repurchase in 2023?

PetroTal repurchased 11.3 million common shares in 2023.

What was PetroTal's average production in March 2024?

PetroTal's production averaged 15,600 bopd in March 2024.

What was the estimated cost of drilling well 18H?

Drilling well 18H had an estimated cost of $14 million.

What advancements did PetroTal make on the OCP oil export pilot project?

PetroTal made advancements on the OCP oil export pilot project in Ecuador.

How is PetroTal trending in terms of budget expectations for 2024?

PetroTal is trending in line with budget expectations for 2024.