PetroTal Announces Q3 2023 Financial and Operating Results

Source: www.gulfoilandgas.com 10/13/2023, Location: North America

Q3 2023 average sales and production of 11,553 bopd and 10,909 bopd respectively
Q3 2023 unrestricted cash of $94 million
OCP sales pilot commencing shortly with support from Ecuadorian government
US$0.02 per share dividend to be paid December 15, 2023

PetroTal Corp. is pleased to report its operating and financial results for the three and nine months ended September 30, 2023 ("Q3").

Selected financial and operational information is outlined below and should be read in conjunction with the Company's unaudited consolidated financial statements and management's discussion and analysis ("MD&A") for the three and nine months ended September 30, 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 Highlights
Average quarterly sales and production of 11,553 and 10,909 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;

Exited the quarter in a strong cash position with $113 million in total cash ($94 million unrestricted), up 22% from the end of the second quarter ("Q2") of 2023;

The Company has declared a cash dividend of $0.02 per common share that will be paid December 15, 2023, with a record date of November 30, 2023. This represents a 15% annualized yield based on the current share price. In addition, the Company will continue to buy back shares under its normal course issuer bid, at approximately $1 million per month during the fourth quarter of 2023 ("Q4");

Completed the latest well, 15H, in early June 2023 averaging 7,203 bopd during its first 30 days online. The well was shut-in in mid July due to production constraints caused by low river levels, and was briefly reopened last month for 10 days, averaging 5,000 bopd. The well is expected to be fully reopened the last week of November as river levels continue to rise;

Completed installation of the new west drilling platform ("L2 West Platform") where the Company expects to drill future oil wells;

Generated EBITDA and free funds flow of $42.0 million ($39.55/bbl) and $36.9 million ($34.76/bbl) respectively, compared to $70.0 million ($41.63/bbl) and $37.7 million ($22.41/bbl) in Q2 2023;

Achieved net income of $25.4 million ($0.03/share) in Q3 2023 compared to $46.6 million ($0.05/share) in Q2 2023;

Paid a dividend of $0.025/share and repurchased 5.6 million common shares in Q3 2023, representing a total of $26.1 million of capital returned to shareholders (~5.0% of September 30, 2023, market capitalization) due to record results in Q2 2023 financial performance; and,

Enhanced the Board of Directors ("Board") by adding two new independent directors since June 30, 2023. Mr. Felipe Arbelaez Hoyos and Ms. Emily Morris joined the Board, each bringing significant breadth and depth in commercial strategy, capital markets, ESG and M&A to the PetroTal team.

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
"Despite a challenging Q3 from an oil sales perspective due to extremely low river levels, the Company delivered strong cash flows for the quarter, driven by robust Brent prices and prudent spending by the management team. This has allowed the Company to declare a cash dividend of $0.02 per common share. With river levels now rising we expect to be producing approximately 20,000 bopd consistently by the last week of November 2023.

Looking ahead to Q4 2023, management is very focused on optimizing existing logistics and unlocking new commercial sales routes, starting with our 100,000 barrel oil sales pilot through the Ecuador pipeline ("OCP"). If successful, and with some added facilities, we estimate this route could carry up to 5,000 bopd, significantly limiting the impact of future dry seasons. In addition, the commercial team has completed a significant Brazilian export milestone by unloading directly from barge to ship without requiring a terminal to unload the crude, bypassing that potential bottleneck.

As we contemplate future sales routes in our 2024 budget planning, including the route via Yurimaguas that should be ready next year, we are still expecting an ONP sales option in 2024 as Petroperu continues to work through their financial and operational challenges. We will continue to support constructive discussions with Petroperu in this area."

Selected Financial Highlights

Q3 2023 Financial Variance Commentary
Strong contracted Brent price of $84.31/bbl compared to the preceding quarter of $77.88/bbl, resulting in a higher realized price by 15%;
Higher operating expenses per barrel resulting from lower sales volumes in Q3 2023 compared to Q2 2023 and the inclusion of approximately $2 million in well servicing and erosion control costs in the quarter. Higher transportation costs were driven by an increase in floating storage costs caused by longer than usual barge travel times during the dry season;
Capital spending in the quarter was $17 million compared to $26.4 million in Q2 2023 driven by lower rig activity. This generated a flat Q3 2023 free funds flow(1,3) dollar figure of approximately $37 million compared to Q2 2023, which increased 64% on a per barrel basis;
Enhanced liquidity in Q3 2023 compared to Q2 2023, with total cash growing by $10 million to $112.8 million driven by timely AR collections, strong Brent prices and lower rig activity in the quarter; and,
Strong balance sheet position in Q3 2023 with no debt and a net surplus (4) of $87 million.

Current oil production. With river levels gradually increasing, production is ramping up. Production for October 2023 averaged 11,808 bopd, but increased to 13,420 bopd for the period October 17, 2023, to November 9, 2023. The Company expects to achieve an average of approximately 14,500 bopd for Q4 2023 and over 14,000 bopd for the 2023 full year.

OCP pilot project. PetroTal continues with plans to sell 100,000 barrels of crude oil into the OCP Ecuador pipeline for eventual arrival at Esmeralda's port. Subject to logistical optimization, facility additions and completion of the pilot, the Company estimates an eventual reliable oil sales route of up to 5,000 bopd. Notably, this route is expected to be less impacted by the lower water levels in dry seasons. PetroTal has secured the required barging and trucking service to support the route logistics and are now finalizing commercial terms for payment with an internationally recognized oil trading company.

Upcoming operations. The L2 West Platform has been completed on time and on budget. This will allow the Company to drill new locations. PetroTal will commence drilling its 17th well (16H) shortly, at an estimated cost of approximately $15 million, with production expected to begin early 2024.

Brazilian route optimization. PetroTal is pleased to announce a barge-to-ship arrangement recently approved by Transpetro, a Brazilian infrastructure and maritime transportation company. PetroTal will unload crude oil directly from barges to tanker, considerably reducing barge waiting times currently caused by terminal availability thereby allowing increased sales through the Brazilian route.

Q3 2023 dividend declaration. Based on the Company's current liquidity exceeding $60 million, PetroTal confirms that a cash dividend of $0.02 per common share will be declared and paid in Q4 2023. This represents a 15% annualized yield based on current share price and includes the recurring US$0.015 per common share amount plus an amount for a minimum liquidity sweep equal to US$0.005 per common share. The total dividend of $0.02 per common share will be paid according to the following timetable:

Ex dividend date: November 29, 2023
Record date: November 30, 2023
Payment date: December 15, 2023

The dividend is an eligible dividend for the purposes of the Income Tax Act (Canada) and investors should note that the excess liquidity sweep portion of all future dividends may be subject to fluctuations up or down in accordance with the Company's return of capital policy. Shareholders outside of Canada should contact their respective brokers or registrar agents for the appropriate tax election forms regarding this dividend.

Canon distribution update. On October 20, 2023, Peruvian congress voted in favour of the new proposed canon distribution law, which was approved by Peruvian congress on November 9, 2023. The new law will reallocate 40% of the canon (payment from the government to the communities generated by oil and gas royalties) to the producing province encompassing municipalities and districts near the Bretana oil field. This should result in a smoother process for the Company to carry out exploration activities in Block 95, creating alignment between the Company, government and communities.


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