Q3 2024 Financial and Operating Results
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Generated Q3 2024 EBITDA of $47.5 million
Exited the quarter with $133 million in total cash
Declaring dividend of $0.015/share payable December 13, 2024
Calgary, AB and Houston, TX - November 14, 2024 - PetroTal Corp. (TSX: TAL) (AIM: PTAL) (OTCQX: PTALF) ("PetroTal" or the "Company") is pleased to report its operating and financial results for the three and nine months ended September 30, 2024.
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, 2024, 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 Q3 2024 Highlights
- Average Q3 2024 sales and production of 14,760 and 15,203 barrels ("bbls") of oil per day ("bopd"), respectively;
- Despite record low river levels on PetroTal's primary export route, production volumes were 39% higher than the same period last year (10,909 bopd) and 17% ahead of previous Q3 guidance (13,000 bopd);
- Generated Q3 2024 EBITDA(1) and free funds flow(1) of $47.5 million ($35.00/bbl) and $6.5 million ($4.82/bbl), respectively;
- Capital expenditures ("Capex") totaled $43.0 million in Q3 2024, primarily associated with the drilling of wells 5WD and 20H;
- Exited Q3 2024 with $133 million in total cash ($121 million unrestricted), an increase of $20 million compared to the same period last year;
- Ended the quarter with a net surplus of $10.1 million, compared to $50.3 million at the end of the prior quarter, and $86.5 million at the end of Q3 2023. The decline in net surplus is mainly due to the impact of falling oil prices on a long-term, unrealized derivative liability, as well as to working capital adjustments associated with the Company's ongoing capital program;
- Successfully drilled two new wells in the quarter, including one water disposal well and one production well. The 20H well has produced an average of 4,209 bopd over the last 14 days, as Bretaña field production and exports have returned to capacity;
- For the first time at Bretaña, PetroTal drilled and tested a lateral into the Upper Vivian sandstone (VS1). The brief production test of this zone in the 20H well flowed 320 bopd, potentially setting the stage for incremental reserve additions at year-end 2024;
- Q3 2024 net income totaled $7.2 million ($0.01/share), representing the 19th straight quarter in which PetroTal has returned net income profits; and,
- Paid total dividends of $0.015/share and repurchased 1.0 million common shares in Q3 2024, representing approximately $14.3 million of total capital returned to shareholders (approximately 3.5% of September 30, 2024 market capitalization).
Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
"The third quarter is typically the most challenging period of the year for PetroTal, due to seasonal declines in river levels which impact our ability to export crude oil from the Bretaña field. With that in mind, I am proud of the results our team has delivered this quarter. Although production declined relative to the prior quarter, we increased output by 39% compared to the same period last year and our YTD production is now tracking 23% higher than the first nine months of 2023, all while the Company is building cash and returning more than $51 million to shareholders through dividends and buybacks.
"Looking ahead to 2025, PetroTal is well prepared to handle a period of lower oil prices. We have no debt and a stable, high-margin production base. As planned, our drilling program at Bretaña is pausing in Q1 2025, while we import a new, modern drilling rig to Peru. The new drilling rig is expected to drive material cost savings, while allowing us to control the pace of development, giving us a higher degree of flexibility to respond to changes in oil pricing as necessary. We look forward to providing detailed guidance on our 2025 budget and operational program in January."
Selected Financial Highlights
| Three Months Ended | Nine Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| Q3-2024 | Q2-2024 | Q3-2024 | Q3-2023 | |||||
| $/bbl | $ 000 | $/bbl | $ 000 | $/bbl | $ 000 | $/bbl | $ 000 | |
| Average Production (bopd) | 15,203 | 18,290 | 17,329 | 14,040 | ||||
| Average sales (bopd) | 14,760 | 18,050 | 17,044 | 14,214 | ||||
| Total sales (bbls) (1) | 1,357,961 | 1,642,578 | 4,670,076 | 3,880,424 | ||||
| Average Brent price | $77.74 | $83.87 | $80.85 | $81.88 | ||||
| Contracted sales price, gross | $78.58 | $83.92 | $81.37 | $80.35 | ||||
| Tariffs, fees and differentials | ($20.52) | ($21.15) | ($20.87) | ($20.34) | ||||
| Realized sales price, net | $58.06 | $62.76 | $60.50 | $60.01 | ||||
| Oil revenue (1) | $58.06 | $78,850 | $62.76 | $103,086 | $60.50 | $282,519 | $60.01 | $232,865 |
| Royalties (2) | $5.47 | $7,433 | $6.08 | $9,991 | $5.77 | $26,924 | $5.40 | $20,972 |
| Opex (excl. Erosion Control) | $8.23 | $11,176 | $6.10 | $10,023 | $6.53 | $30,477 | $5.78 | $22,436 |
| Opex (Erosion Control) | $0.40 | $548 | $0.12 | $548 | ||||
| Direct Transportation: | ||||||||
| Diluent | $0.90 | $1,218 | $1.16 | $1,898 | $1.00 | $4,684 | $1.25 | $4,838 |
| Barging | $0.68 | $927 | $0.58 | $951 | $0.62 | $2,883 | $0.68 | $2,647 |
| Diesel | $0.13 | $173 | $0.11 | $186 | $0.09 | $439 | $0.10 | $374 |
| Storage | $0.51 | $690 | $0.01 | $12 | $0.05 | $245 | $0.54 | $2,114 |
| Total Transportation | $2.22 | $3,008 | $1.86 | $3,047 | $1.76 | $8,251 | $2.57 | $9,973 |
| Net Operating Income (3,4) | $41.74 | $56,685 | $48.72 | $80,025 | $46.32 | $216,319 | $46.26 | $179,484 |
| G&A | $6.75 | $9,160 | $6.41 | $10,528 | $5.94 | $27,757 | $5.02 | $19,462 |
| EBITDA (3) | $35.00 | $47,526 | $42.31 | $69,499 | $40.38 | $188,562 | $41.24 | $160,021 |
| Adjusted EBITDA (3,5) | $36.49 | $49,556 | $45.78 | $75,201 | $42.14 | $196,805 | $42.19 | $163,721 |
| Net Income | $5.29 | $7,179 | $21.56 | $35,406 | $19.32 | $90,208 | $22.93 | $88,975 |
| Basic Shares Outstanding (000) | 913,259 | 914,196 | 913,259 | 917,454 | ||||
| Market Capitalization (6) | $429,231 | $504,152 | $429,231 | $522,519 | ||||
| Net Income/Share ($/share) | $0.01 | $0.04 | $0.10 | $0.10 | ||||
| Capex | $43,019 | $38,867 | $112,238 | $76,296 | ||||
| Free Funds Flow (3) (7) | $4.81 | $6,537 | $22.12 | $36,334 | $18.11 | $84,567 | $22.53 | $87,424 |
| % of Market Capitalization (6) | 1.5% | 7.2% | 19.7% | 15.8% | ||||
| Total Cash (8) | $133,072 | $95,859 | $133,072 | $112,827 | ||||
| Net Surplus (Debt) (3) (9) | $10,124 | $50,324 | $10,124 | $86,545 | ||||
- Approximately 89% of Q3 2024 sales were through the Brazilian route vs 87% in Q2 2024.
- Royalties include the impact of the 2.5% community social trust.
- Market capitalization for Q3 2024, Q2 2024 and Q3 2023 assume share prices of $0.53, $0.56, and $0.45 respectively on the last trading day of the quarter.
- Includes restricted cash balances.
Q3 2024 Financial Variance Summary
| Three months ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| US$/bbl Variance Summary | Q3 2024 | Q2 2024 | Variance | Q3 2024 | Q3 2023 | Variance |
| Oil Sales (bopd) | 14,760 | 18,050 | (3,290) | 17,044 | 14,214 | 2,830 |
| Average Brent Price | $77.74 | $83.87 | ($6.13) | $80.85 | $81.88 | ($1.03) |
| Realized Sales Price | $58.06 | $62.76 | ($4.70) | $60.50 | $60.01 | $0.49 |
| Royalties | $5.47 | $6.08 | ($0.61) | $5.77 | $5.40 | $0.37 |
| Total OPEX and Transportation | $10.85 | $7.96 | $2.89 | $8.41 | $8.35 | $0.06 |
| Net Operating Income (1,2) | $41.74 | $48.72 | ($6.98) | $46.32 | $46.26 | $0.06 |
| G&A | $6.75 | $6.41 | $0.34 | $5.94 | $5.02 | $0.92 |
| EBITDA | $35.00 | $42.31 | ($7.31) | $40.38 | $41.24 | ($0.86) |
| Net Income | $5.29 | $21.56 | ($16.27) | $19.32 | $22.93 | ($3.61) |
| Free Funds Flow (1,3) | $4.81 | $22.12 | ($17.31) | $18.11 | $22.53 | ($4.42) |
- Sales volumes declined by 18% QoQ, due to seasonal patterns in river levels which constrain PetroTal's ability to export crude oil from the Bretaña field. However, on a YTD basis, sales volumes are tracking 20% above prior year levels;
- Brent oil prices declined by $6.13/bbl in Q3, compared to Q2 2024. However, PetroTal's realized sale price only declined by $4.70/bbl. Relative to 2023, Brent oil and PetroTal's realized sale price are essentially unchanged on a YTD basis;
- Operating and transportation expenses increased by $2.89/bbl in Q3 2024, mainly due to barging and logistics costs associated with the pilot shipment of Bretaña crude to the OCP in Ecuador. However, on a YTD basis, operating and transportation costs are essentially unchanged relative to last year;
- Net operating income and EBITDA both fell by approximately $7.00/bbl relative to the prior quarter, due in approximately equal parts to a decline in realized pricing and higher operating costs.
- Net income fell by $16.27/bbl in Q3 2024, mainly due to a large unrealized derivative loss ($21.5 million, or $15.82/bbl) related to the Company's historical crude oil sales with PetroPeru.
- See "Selected Financial Measures".
- Free funds flow is defined as adjusted EBITDA less capital expenditures.
Additional Financial and Operating Updates during, and subsequent to September 30, 2024
Current Production
Bretaña field production has averaged 21,136 bopd in the first ten days of November, and 16,400 bopd on a Q4 2024 to-date basis. Supported by the results of its ongoing drilling program, PetroTal was able to respond quickly to rising river levels in mid-October and returned field production to capacity within a matter of days. The Company continues to observe strong production response from recently-drilled wells; the 20H well averaged 4,086 bopd over the last week of October, while wells 18H and 19H averaged 2,589 bopd and 2,774 bopd, respectively. PetroTal is reiterating previous guidance for Q4 2024 production to average approximately 18,500 bopd, on capital spending of $41-$53 million.
2024 Guidance
PetroTal reaffirms guidance for corporate production to average 16,500 to 17,500 bopd in 2024, on total capital spending of $150-175 million. With Brent oil prices averaging approximately $78.00/bbl YTD through October, in-line with the Company's original budget assumption of $77.00/bbl, 2024 annual EBITDA is still expected to fall within a range of $200-$240 million.
Drilling Update
As disclosed previously, PetroTal commenced drilling well 21H at Bretaña on September 25, 2024. The well reached Total Depth in early November, and was brought onstream on November 9. The Company will provide an update on initial flow rates once the well has been onstream for at least 30 days. PetroTal will now drill the 22H and 23H locations, before pausing the Bretaña drilling program in Q1/25. Well 21H was drilled on-time and on-budget, at a cost of approximately $14.4 million.
Drilling Rig Acquisition
On October 11, 2024, PetroTal executed an agreement to acquire a drilling rig from a Houston-based equipment company. The purchase of the rig was financed through a lease agreement with a Peruvian bank, for a term of 36 months at a payment of approximately $0.5 million per month. PetroTal intends to import the rig to Peru in Q1 2025, and expects to bear approximately $3.0 million in one-time costs associated with the transportation and commissioning of the rig. The new drilling rig is expected to drive several key benefits for PetroTal, including immediate savings on day rates and improved uptime, while retaining more flexibility over its drilling program.
Erosion Control Project
Preparation for the erosion control project is ongoing. On October 10, 2024, PetroTal agreed to contract terms with its construction consortium, which were subsequently approved by the Company's Board of Directors on October 25. The key details of the project are consistent with PetroTal's existing public disclosure; the Company intends to invest $65-$75 million in erosion control over the next 18 months, with most of the cash impact to be felt in 2025. In total, it is expected that approximately 60-65% of the project costs will be allocated to opex, while 35-40% will be allocated to capex. PetroTal completed the advance purchase of steel components for the erosion control project in Q3 2024, at a cost of $7.3 million; these components have been included in inventory as of September 30, 2024.
Cash and Liquidity Update
PetroTal ended Q3 2024 with a total cash position of approximately $133 million, of which $121 million was unrestricted. This compares to total cash of $96 million at the end of Q2 2024, and $113 million at the same time last year. Net Surplus, a non-IFRS measure which PetroTal uses to describe its liquidity position net of working capital and various non-current liabilities, declined to $10.1 million at the end of Q3 2024 (from $50.3 million at the end of Q2 2024). The quarter-over-quarter decline was due to an unrealized change in the value of PetroTal's embedded derivative liability, associated with the Company's historical sales agreement with PetroPeru, and to other working capital adjustments. The change in value of the derivative liability was mainly due to a decline in forward oil prices. PetroTal still has 1.9 million barrels of pending crude sales with PetroPeru, of which 0.4 million barrels are expected to occur in 2025, and the Company will continue to adjust the value of this derivative liability at the end of each fiscal quarter.
During the quarter, PetroTal obtained two lines of credit with Peruvian banks, totaling $30 million. The interest rates are determined by the prevailing market rate at the time of borrowing, and the lines of credit have payment terms of 120-180 days. PetroTal now has total credit capacity of $77 million, which is completely undrawn at the time of this report.
As disclosed previously, PetroTal entered into a hedge agreement during Q3 2024, for an average of 172,000 barrels per month through August 2025. The costless collars have a Brent floor price of $65.00/bbl and a ceiling of $84.25/bbl, with a cap of $104.25/bbl. Subsequent to the end of the quarter, the Company executed hedges on an additional 570,000 barrels, at the same terms as the initial agreement. PetroTal is now hedged on approximately 50% of its forecast crude oil sales through January 2025, and approximately 25% of its oil sales through August 2025.
Share Buyback Plan Update
PetroTal's updated liquidity strategy prioritizes dividend sustainability, the company's ongoing development program, and erosion control working capital requirements. In Q3 2024, the Company set additional constraints on the share buyback program that better align daily buyback execution with lower share prices. As a result, the volume of buybacks decreased compared to previous quarters. The Company will continue to monitor buyback levels and will operate in the quarterly approved bandwidths announced in May 2024.
Q3 2024 dividend declaration
A cash dividend of USD$0.015 per common share has been declared to be paid in Q4 2024. This represents a 13% annualized yield based on the current share price. The dividend will be paid according to the following timetable:
- Ex dividend date: November 28, 2024
- Record date: November 29, 2024
- Payment date: December 13, 2024
Corporate Presentation Update
Q3 2024 Webcast Link for November 14, 2024
PetroTal will host a webcast for its Q3 2024 results on November 14, 2024 at 9am CT (Houston) and 3pm BST (London). Please see the link below to register.
Camilo McAllister
Executive Vice President and Chief Financial Officer
Manolo Zuniga
President and Chief Executive Officer
PetroTal Investor Relations
Celicourt Communications
Mark Antelme / Jimmy Lea
Strand Hanson Limited (Nominated & Financial Adviser)
Ritchie Balmer / James Spinney / Robert Collins
Stifel Nicolaus Europe Limited (Joint Broker)
Callum Stewart / Simon Mensley / Ashton Clanfield
Peel Hunt LLP (Joint Broker)
Richard Crichton / David McKeown / Georgia Langoulant
READER ADVISORIES
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