Further to its announcement on May 12, 2025, PetroTal Corp. ("PetroTal" or the "Company") (TSX: TAL, AIM: PTAL and OTCQX: PTALF) is pleased to provided additional details on the syndicated term loan facility it has entered into with Banco Interamericano de Finanzas ("BanBif") and Corporacion Financiera de Desarrollo ("COFIDE"), the Development Bank of Peru. All amounts are in US dollars unless stated otherwise.
Key Highlights
· The Term Loan has been established for the purpose of financing PetroTal's ongoing investments in erosion control infrastructure in the vicinity of the Bretana oil field; for the common benefit of the operations and the community;
· Drawable in two tranches ($50 million and $15 million), with total commitments of up to $65 million, for a 4-year amortizing term;
· Fixed annual percentage rate of 8.65%, with manageable covenants and no material restrictions on distributions to shareholders - highly competitive terms in a challenging macro environment; and
· This is COFIDE's first loan focused on environmental and social financing in Peru's extractive resource sector. PetroTal's long-standing commitment to the district of Puinahua, and the permanent benefits of the erosion control project for the village of Bretana, were key factors in the Company's ability to secure the credit facility.
Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer of PetroTal, commented:
"We are very happy to work with BanBif and COFIDE on this credit facility. Since PetroTal began operations in 2017, our stakeholders in the district of Puinahua have been integral to the success of our Company. Our ongoing commitment to the residents of Puinahua has been evidenced by the establishment of the 2.5% social fund, through which we have now returned a total of $21 million to the district. The erosion control project, which will benefit the village of Bretana for decades to come, is a continuation of our commitment to the region."
Camilo McAllister, Executive Vice President and Chief Financial Officer of PetroTal, commented:
"PetroTal has evaluated a number of options to finance our ongoing investments in erosion control, and we are pleased to have found valued partners in BanBif and COFIDE. This term loan will be used to fund the construction of critical erosion control infrastructure, allowing us to unlock the full value of the Bretana field, while protecting the surrounding community. Importantly, this loan reinforces our liquidity position and should relieve any doubt about our ability to finance this project without compromising our ongoing development program."
Jose Antonio Sarmiento Giove, General Manager COFIDE, commented:
"PetroTal has played an important role in the district of Puinahua, since 2017. The Company has always sought to ensure that the local communities benefit from production at Bretana, through improvements in education, health, infrastructure, and sustainability, and this erosion control project is another example of that. The project will aim to reduce further erosion along the river line, protecting local communities and ensuring that villagers can continue to go about their day to day lives without further worry. We look forward to working with the PetroTal team on this project."
Juan C. García-Vizcaíno, General Manager of BanBif, commented:
¨This loan represents a milestone in our commitment to strengthening collaboration and trust between the private banking sector and the extractive resources industry. The recent formalization of the loan with PetroTal reflects our shared dedication to a stronger and more sustainable energy future. "
Rationale for the Term Loan
Although PetroTal remains well capitalized to execute its 2025 capital program, which includes investments in erosion control infrastructure, the Company has been evaluating alternate means of financing the project. PetroTal sees the erosion control project as critical infrastructure that will ensure the Company captures the full value of Bretana resource for years to come. However, these costs are ultimately expected to be non-recurring, and the Company acknowledges investor concerns that the project represents a drain on near-term free cash flow. With that in mind, this loan essentially ring-fences erosion control expenses within a credit facility, allowing PetroTal to repay project costs over the next four years on favorable terms. There are no material changes to cost estimates for the erosion control project at this time; PetroTal continues to guide to total project costs of $65-75 million, of which $35-40 million has been budgeted for 2025.
Additional Information on the Term Loan
The Term Loan is drawable in two tranches, the first for $50 million and the second for $15 million. With the signing of the contract and the disbursement documents, the amount of the first tranche will be deposited in the escrow account, from which PetroTal will be able to withdraw amounts corresponding to the disbursements already paid. The balance will be held in the escrow account until it is withdrawn to fund cash expenses associated with the erosion control project. The project will begin with the construction of breakwaters 1, 2, and 3, which are for the benefit of the community and in which COFIDE is involved. The second tranche can be drawn within 18 months of the first tranche and will come due at the same date. This is an amortizing term loan, with a maturity date of April 2029. The loan is being extended to PetroTal's Peruvian subsidiary, PetroTal Peru, with a parent guarantee in place.
The term loan carries a fixed annual interest rate of 8.65%, plus a 1.4% structuring fee payable at loan execution. Key covenants include a liquidity ratio greater than 1.2x, a debt ratio less than 2.0x, and a debt service coverage ratio greater than 1.2x. Dividends may be distributed as long as this does not lead to a breach of financial covenants.
