Petrominerales Ltd.
TSX : PMG

Petrominerales Ltd.

November 06, 2007 20:29 ET

Petrominerales Achieves Record Third Quarter and Preliminary Corcel-2 Test Results

BOGOTA, COLOMBIA--(Marketwire - Nov. 6, 2007) - Petrominerales Ltd. (TSX:PMG) ("Petrominerales" or the "Company"), a 76.6% owned subsidiary of Petrobank Energy and Resources Ltd. (TSX:PBG) ("Petrobank"), is pleased to announce record third quarter 2007 financial and operating results fueled by an 87 percent increase in year over year production to 4,522 barrels of oil per day ("bopd") and a $56.62 per barrel operating netback, a reflection of high world oil prices, our high quality assets, and Colombia's superior fiscal regime. Production has now increased to 8,130 bopd excluding Corcel-2 production. Our Corcel-2 well was tested from the initially completed perforation intervals over a 24-hour period at rates increasing to 3,100 bopd on natural flow.

FINANCIAL & OPERATING HIGHLIGHTS (U.S. dollars, except where noted)

The following table provides a summary of Petrominerales' financial and operating results for the three and nine month periods ended September 30, 2007 and 2006. Consolidated financial statements with Management's Discussion and Analysis ("MD&A") are available on the Company's website at www.petrominerales.com and will also be available on the SEDAR website at www.sedar.com.



Three months Nine months
ended ended
September 30, % September 30, %
2007 2006 Change 2007 2006 Change
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Financial
(US$000s, except
where noted)
Crude oil revenue 29,058 12,818 127 53,202 32,638 63
Funds flow from
operations (1) 20,201 8,202 146 34,105 22,044 55
Per share - basic ($) 0.21 0.09 133 0.36 0.26 38
Per share - diluted ($) 0.20 0.09 122 0.35 0.26 35
Net income 10,242 4,252 141 24,060 12,121 98
Per share - basic ($) 0.11 0.04 175 0.25 0.14 79
Per share - diluted ($) 0.10 0.04 150 0.25 0.14 79
Capital expenditures 39,895 21,696 84 105,806 49,748 113
Total assets 291,408 178,570 63 291,408 178,570 63
Net debt (working
capital) (2) 4,581 (28,341) 4,581 (28,341)
Common shares outstanding,
end of period (000s)
Basic 100,212 95,000 5 100,212 95,000 5
Diluted 105,096 98,090 7 105,096 98,090 7
----------------------------------------------------------------------------
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Operations
Operating netback
($/bbl) (3)
Crude oil revenue 69.85 57.57 21 61.95 56.05 11
Royalties 6.07 4.60 32 5.20 4.50 16
Production expenses 7.16 6.97 3 6.83 6.70 2
----------------------------------------------------------------------------
Operating netback 56.62 46.00 23 49.92 44.85 11

Average daily crude
oil production (bbls) 4,522 2,420 87 3,146 2,133 47
----------------------------------------------------------------------------
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(1) Non-GAAP measure calculated based on cash flow from operations before
changes in non-cash working capital. See "Funds flow from operations"
section within MD&A.

(2) Non-GAAP measure includes bank debt plus accounts payable and accrued
liabilities less current assets.

(3) Non-GAAP measure demonstrating Company's revenue less royalties and
production expenses per barrel of oil produced.


Highlights:

- Crude oil production increased by 87 percent, averaging 4,522 bopd compared to 2,420 bopd in the third quarter of 2006.

- Production increased a further 80 percent to average 8,130 bopd in early November 2007 (excluding Corcel-2).

- Preliminary 24-hour Corcel-2 test reached rates of 3,100 bopd on natural flow.

- Funds flow from operations increased by 146 percent to $20.2 million.

- Net income increased by 141 percent to $10.2 million.

- Issued 5.1 million common shares for gross proceeds of Cdn$61.0 million.

OPERATIONAL UPDATE

Third quarter 2007 production averaged 4,522 bopd compared to 2,848 bopd in the second quarter of 2007. The increase is mainly due to the Corcel-1 discovery well that was placed on an extended six-month production test, initially at 4,000 bopd increasing to current rates of over 4,500 bopd. Production has averaged 8,130 bopd to-date in November 2007 excluding test results from the Corcel-2 well. Significant further production additions are expected as a result of the recently drilled Corcel-2 well and our ongoing drilling programs at Corcel and Orito.

DEVELOPMENT BLOCKS

Orito

Petrominerales drilled one well at Orito in the third quarter and completed a further two wells. We also recently cased the Conga-1 exploration well on the Las Aguilas Block adjacent to Orito as a potential oil well. The Orito program for the remainder of the year includes drilling two more wells, completing four wells, and performing workovers and pump changes on three additional wells. We originally planned to have two drilling rigs working in the Putumayo Basin for most of 2007, but, based on our Corcel discovery, one of these rigs has remained on the Corcel Block to drill additional delineation and exploration wells and to assist with our Llanos Basin dry season exploration drilling program in early 2008. This re-configures our Orito development drilling program to a single rig schedule, which can be expanded based on equipment availability. In addition to our ongoing development drilling program, a 3D seismic program is planned for Orito in 2008 which will help delineate the southern extension and eastern flanks of the main Orito field. This is expected to add further to our large inventory of development drilling locations.

Neiva

At Neiva, production has increased as a result of well optimizations and the initial success of our pilot waterflood program. Due to the results from the well optimization program and an earlier than expected waterflood response, we will continue the well optimization program and we plan to expand the waterflood. In addition, we have an inventory of approximately 31 infill locations and 25 fracture stimulation candidates.

EXPLORATION PROGRAM

Petrominerales has completed drilling all five wells planned for the 2007 exploration program. Four of these wells were drilled in the Llanos Basin, two of which were completed as new pool discoveries (Joropo and Corcel). The final 2007 exploration well, Conga-1, has now been drilled and will be completed as a potential oil well on the Las Aguilas Block adjacent to Orito, in the Putumayo Basin. Petrominerales holds over 1.5 million acres of land in Colombia, on which we have acquired 357 square kilometres of 3D seismic and reprocessed all available 2D seismic data. Currently we have an additional 18 leads and prospects on these lands. In 2008, we plan to drill eight further exploration wells focused primarily in the Llanos Basin. We continue to acquire additional 2D and 3D seismic, which should result in an expanded exploration drilling programs beyond 2008.

Corcel Block

The Corcel-1 exploration well, located in the southern Llanos Basin, was drilled to a total depth of 12,000 feet. Logs indicated that the target reservoir sands in the Tertiary Mirador and Cretaceous Guadalupe formations were primarily oil bearing with total potential net pay of approximately 140 feet of high quality sand. The Guadalupe and Mirador intervals were completed and commingled for an initial six-day test that was conducted at rates increasing to 2,500 bopd. A six-month extended production test then commenced on September 7, 2007 at initial rates of 4,000 bopd. We have been slowly ramping up production rates and the well is now producing in excess of 4,500 bopd.

We recently completed drilling our first Corcel delineation well, Corcel-2. The well spudded on August 25, 2007 and reached a total depth of 12,140 feet on October 17, 2007. Logs indicate total potential net pay of approximately 125 feet of high quality reservoir sands in the Mirador and Guadalupe formations. We have initially completed four intervals, with a total of 45 feet of sand, in the Upper and Lower Mirador formations of the Corcel-2 well. These intervals were tested over a 24-hour period at rates increasing to 3,100 bopd on natural flow. The well is now shut in for pressure build up and will then be placed on an extended production test with an electric submersible pump. The pump will be capable of handling up to 6,000 barrels of total fluid production per day.

This initial Mirador completion is being executed with the drilling rig. The rig will then move to drill the third well from the same platform, Corcel-3, to further delineate our first Corcel discovery. After drilling Corcel-3 we expect to use the drilling rig to drill at least one of our Llanos Basin dry-season-only exploration wells, after which we plan to resume our Corcel drilling program starting with the Corcel-C exploration well. The rig is then expected to remain at Corcel for the rest of 2008 to continue drilling additional exploration and delineation wells.

The Corcel Block is situated in a drier region of the Llanos Basin and we have an all-weather road to the location which will accommodate year round production. Production is currently being processed through temporary facilities and trucked. We are designing permanent production facilities and a pipeline and applying for required governmental approvals.

The ultimate size of the Corcel discovery will be defined through our long-term production testing and delineation drilling program. Petrominerales has identified five additional Corcel prospects, and at least four contingent delineation wells. These locations have been defined from our 47 square kilometre 3D seismic survey, which covers approximately 15 percent of the 79,815-acre Block. A 2008 3D seismic program is planned for our 26,341-acre Guatiquia Block, which adjoins the Corcel Block to the south. At that time we also plan to further expand the 3D seismic coverage over our Corcel Block.

Joropo Block

Our Ojo de Tigre-2 well on the Joropo Block in the Llanos Basin was completed and initial production testing commenced, but was suspended with the onset of the rainy season earlier in 2007. Initial test rates reached 450 barrels of fluid per day with a water cut of 20 percent and a gravity of 29 degrees API. The test interpretation indicated very high skin damage which was likely caused by the gravel pack completion. We will be returning to remediate the skin damage and conduct further testing of the well after the end of the rainy season in late 2007 or early 2008. The ultimate size of the prospect will be determined through long-term production testing and follow-up drilling. A second Joropo exploration well is planned for the first quarter of 2008. Successful development of the Joropo Block will require upgraded surface access to support year-round production.

This initial result at Joropo is very encouraging as we have only evaluated a very small part of the 72,257 acre Joropo Block to-date, and we have now acquired two adjoining Blocks, Jabali and Jaguar, totalling an additional 69,122 acres.

Las Aguilas Block

Our Conga-1 exploration well was recently drilled, logged and cased as a potential oil well on our Las Aguilas Block, offsetting the Orito field in the Putumayo Basin. Completion and testing operations will commence later in November.

2008 Exploration Program

We plan to drill eight exploration wells during our 2008 exploration program, which will be focused once again on the Llanos Basin, where we plan to test seven new prospects. Six of these wells are scheduled to be drilled during the upcoming dry season (December 2007 through April 2008) with two wells to be drilled at Mapache, one at Joropo, one at Castor, one at Casanare Este, and one at Casimena. Our next Corcel exploration well is expected to be drilled in the second quarter of 2008 and our second Las Aguilas exploration well, in the Putumayo Basin, is expected to be drilled in the second half of 2008. We also plan to shoot additional 3D seismic at Joropo and Corcel, to further delineate prospects on these Blocks. This program will also include seismic on our adjoining blocks to satisfy our first phase work commitments.

Heavy Oil

Petrominerales has three large blocks in the southern Llanos Basin heavy oil belt, Chiguiro Oeste, Chiguiro Este and Rio Ariari. Our heavy oil blocks offset the Cano Sur Block, which is being developed by a recently announced partnership between Shell and Ecopetrol, reflecting the increasing interest in the heavy oil potential of this area.

In 2008, we plan to shoot 576 kilometres of reconnaissance 2D seismic on our Chiguiro Oeste and Rio Ariari Blocks and a combination of 2D and 3D seismic over our Chiguiro Este Block where we are targeting large heavy oil accumulations.

In addition, Petrominerales intends to participate in the upcoming Heavy Oil Bid Round, expected to be announced early next year. Petrobank's proprietary THAI™ technology, which Petrominerales has licensed, represents a paradigm shift in heavy oil recovery technology. THAI™ is well suited to the Colombian heavy oil environment and should give us a competitive advantage to efficiently develop Colombian heavy oil opportunities in an environmentally and socially responsible fashion.

THAI ™ is being field-proven by Petrobank in the Canadian oil sands and provides the opportunity to create a step change in the development of heavy oil resources globally. During the process, a high temperature combustion front is created underground where part of the oil in the reservoir is burned, generating heat, which reduces the viscosity of the remaining oil allowing it to flow by gravity to a horizontal production well. The combustion front sweeps the oil from the toe to the heel of the horizontal producing well, recovering up to an estimated 80 percent of the original-oil-in-place while partially upgrading the heavy crude oil in-situ.

Petrominerales Ltd.

Petrominerales Ltd. is a Latin American-based exploration and production company producing oil from three blocks in Colombia and has contracts on 13 exploration blocks covering a total of 1.5 million acres in the Llanos and Putumayo Basins. Petrominerales is 76.6 percent owned by Petrobank Energy and Resources Ltd. (TSX:PBG).

Forward-Looking Statements

Certain information provided in this press release constitutes forward-looking statements. The words "anticipate", "expect", "project", "estimate", "forecast" and similar expressions are intended to identify such forward-looking statements. Specifically, this press release contains forward-looking statements relating to the timing of capital projects and the results of operations. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. You can find a discussion of those risks and uncertainties in our Canadian securities filings. Such factors include, but are not limited to: general economic, market and business conditions; fluctuations in oil prices; the results of exploration and development drilling, recompletions and related activities; timing and rig availability, outcome of exploration contract negotiations; fluctuation in foreign currency exchange rates; the uncertainty of reserve estimates; changes in environmental and other regulations; risks associated with oil and gas operations; and other factors, many of which are beyond the control of the Company. There is no representation by Petrominerales that actual results achieved during the forecast period will be the same in whole or in part as those forecast. Except as may be required by applicable securities laws, Petrominerales assumes no obligation to publicly update or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.

Contact Information

  • Petrominerales Ltd.
    John D. Wright
    President and Chief Executive Officer
    (403) 750-4400 or 011 571 629 2701
    or
    Petrominerales Ltd.
    Corey C. Ruttan
    Vice-President Finance and Chief Financial Officer
    (403) 750-4400 or 011 571 629 2701
    or
    Petrominerales Ltd.
    Jack F. Scott
    Executive Vice-President and Colombian Country Manager
    (403) 750-4400 or 011 571 629 2701
    011 571 629 4723 (FAX)
    Website: www.petrominerales.com