PetroTal shuts in Bretana field amid Covid-19 crisis

PetroTal announced on Thursday that the Northern Oil Pipeline (ONP), operated by Petroperu, has been shut down by a public health directive from the Peru government, resulting in PetroTal having to shut in the Bretana oil field as a result of storage capacity limitations.

The AIM-traded firm also updated the market on financing initiatives to accommodate the impact of oil price reductions on oil sales at the Bretana field, in Peru’s block 95.

It explained that Peru's health department issued a directive for Covid-19 prevention in high risk areas and for high risk individuals, leading Petroperu to temporarily shut down pipeline operations to comply.

PetroTal said that as a result, it was temporarily shutting in operations at the Bretana oil field, due to storage capacity limitations.

The company said its planned capital expenditure for 2020 was still deferred, with management and director compensation being reduced by 20%.

It said the oil field shutdown would trigger “significant” cost reductions for operating, transportation and general and administrative expenses.

As a result of the global slide in oil prices, the firm said it had a contingent derivative liability of $42m as at 31 March.

The actual liability of the oil price difference determination was expected to be lower, due to the projected improvement in oil prices when physical sales occur in the third and fourth quarters.

PetroTal said it was holding financing discussions for a multi-year settlement of that contingent liability.

“PetroTal continues to support initiatives to ensure the Peruvian government provides the support needed during this pandemic, just as other countries have done,” said president and chief executive officer Manolo Zuniga.

“In the meantime, we continue to work on securing the necessary financial backing to ensure we are properly funded and emerge stronger from this crisis.

“PetroTal appreciates the ongoing dedication of all employees and the support for our business during these challenging times of the pandemic impact.”

At 1534 BST, shares in PetroTal were down 41% at 7.38p.