PetroTal reports second-best quarter of production

PetroTal updated the market on operations in its third quarter on Thursday, reporting production of 1.12 million barrels, or 12,229 barrels of oil per day, making for its second-best producing quarter to date.

The AIM-traded firm said the current technical production capacity of the Bretana oilfield was around 18,000 barrels per day, prior to the upcoming completion of well 13H.

It described the third quarter as a “seasonally dry” one, but this year the river water levels were unusually low, so PetroTal took the precaution of loading barges to a reduced capacity to ensure safe operation.

As a result, production was constrained during the period to match reduced export capacity, which was impacted from the continued closure of the Northern Peruvian Pipeline (ONP).

PetroTal said that as the dry period passed and water levels rose, it expected to return to increased levels of barge capacity.

On 4 October, well 13H reached its total depth and was now being completed.

At an unconstrained level, the company said it expected to again have production capacity of more than 20,000 barrels per day that could be quickly activated once river levels normalised, and additional barges became available.

The company said the ONP was still down, as Petroperu worked through maintenance activities related to damage at various points on the pipeline.

It said it was working with the new management at Petroperu to develop a view on when it could be able to resume exports through the ONP, but currently assumed it would not happen in 2022.

The firm said it was also working actively to expand the capacity of its export route to Brazil, both through expansions of the barge fleet and optimisation of the round trip time with the eventual goal of reaching one million barrels of capacity.

PetroTal said it expected to continue increasing its monthly Brazilian export capacity from the initial 120,000 barrels exported in December 2020 to an average of 600,000 barrels per month in 2023, without reliance on the ONP.

In May and August, it exported 470,000 and 450,000 barrels respectively to Brazil, before being impacted by low river levels.

As at 30 September, the company had $93m in total cash, with $18m being restricted.

At the end of the third quarter, accounts payable totalled $50.6m, and estimated accounts receivable were $123.7m.

Subsequent to the end of the quarter, $12m was received related to Brazilian export sales, with the majority of remaining receivables owing from Petroperu related to June's sales export at Bayovar, and for oil that entered the ONP in February.

The overdue amount owed from Petroperu, related to the July sales export, was $64m including VAT.

PetroTal said it had been “working diligently” with the finance group at Petroperu to establish a repayment schedule for the $64m, and to ensure the February invoice amount was a “priority” once their credit was reactivated.

The company also announced its adjusted 2022 guidance, saying it now expected average production of between 13,500 and 14,000 barrels of oil per day, with four oil wells completed by the end of the year.

It also said it now expected the full bond settlement to be made by the end of the first quarter of 2023, at which time there would be a reduction of the call premium, saving around $2.6m in buyout costs.

After that, as it previously indicated and liquidity permitting, the firm was expecting to begin a capital return program to shareholders.

PetroTal was currently in compliance with all bond covenants, and expected to remain so prior to the expected retirement date.

“We continue to work with our trader to increase their overall available contracted barging fleet size to alleviate oil export constraints, which have been compounded by the unavailability of the ONP since early 2022,” said president and chief executive officer Manuel Pablo Zuniga-Pflucker.

“We are adjusting our 2022 guidance to reflect a conservative sales scenario, which we hope to exceed should the ONP become a viable sales option in the fourth quarter of 2022.”

Zuniga-Pflucker said that under that conservative scenario, cash flow was still “very strong”, allowing the company to deliver on its promised shareholder return program in 2023.

“Additionally, we are looking forward to finalising the ongoing successful working table discussions related to the social trust.”

At 1240 BST, shares in PetroTal were down 1.06% at 39.58p.

Reporting by Josh White at Sharecast.com.