Americas Petrogas Inc.
TSX VENTURE : BOE

Americas Petrogas Inc.

June 30, 2011 09:20 ET

Americas Petrogas Announces First Quarter Results

Continued to produce and sell oil, continued exploration activities in both Argentina and Peru, completed $50 million bought-deal private placement, cash and cash equivalents of $85 million

CALGARY, ALBERTA--(Marketwire - June 30, 2011) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Americas Petrogas Inc. ("Americas" or the "Company") (TSX VENTURE:BOE) announces that the Company continued to sell oil produced from exploratory wells on the Medanito Sur block. As well, during the quarter, the Company continued to invest in both its Argentine oil and gas properties and its potash and other minerals project in the Sechura Desert, Bayovar, Peru. Highlights of the first quarter of 2011 and recent developments are as follows:

Highlights

  • As of March 31, 2011, Americas has $85 million of consolidated cash and cash equivalents that may be used without restriction for exploration drilling and development activities.
  • The Company sold approximately 47,119 barrels of oil during the quarter, generating $2.57 million of gross revenues, $1.99 million of net revenues and $0.76 million of cash flow from operating activities.
  • The Company completed a bought-deal private placement raising aggregate gross proceeds of $50,001,760 from the issuance of 20,162,000 common shares at $2.48 per share.
  • In February 2011, the Company began an exploratory drilling program for phosphates, separate and distinct from GrowMax's existing potash brine project. The drilling program was recently completed. It involved 15 boreholes varying in depth from 52 to 99 meters, resulting in an accumulated total depth of approximately 1,150 meters (3,800 feet). The Company is in the process of retaining an independent consulting company with a qualified person under National Instrument 43-101.
  • In March 2011, the Company drilled and cased an exploration well on Gobernador Ayala IV.
  • In April 2011, the Company announced the initiation of drilling of the first deep vertical shale gas well on the Huacalera block in the Neuquen Basin of Argentina. The well is programmed for total depth of 4,200 meters (approximately 13,800 feet) and is currently at approximately 3,900 meters (12,800 feet). The Company anticipates that total depth will be reached in early to mid July.
  • In June 2011, the Company acquired all of the issued and outstanding shares of Energicon S.A. ("Energicon"), a private Argentine company that holds a 19.5% participating interest in the Huacalera block along with other assets and liabilities. Americas paid US$240,000 in cash and issued 2,000,000 common shares priced at $2.44 per common share to acquire the shares of Energicon. Americas Petrogas Argentina, a subsidiary of the Company, also holds an existing 19.5% interest in the Huacalera block.
  • In June 2011, Americas Petrogas Argentina entered into agreements with Ingenieria Alpa S.A. ("Alpa") to acquire Alpa's 33% working interest in Los Toldos I, II, III and IV as well as Alpa's 19% working interest in Totoral, Yerba Buena and Bajada Colorada, all of which are located in the Neuquen province in Argentina. Americas Petrogas Argentina has agreed to pay a total of US$4.6 million in cash for the acquisitions. Closing of the transactions is subject to receipt of all necessary regulatory, board and other approvals and is scheduled for July 2011. Americas Petrogas Argentina already holds existing working interests in these same blocks and, as a result, upon closing of the transactions, Americas Petrogas Argentina will hold a 90% working interest in the Los Toldos blocks along with a 90% working interest in Totoral, Yerba Buena and Bajada Colorada. The remaining 10% working interest on these blocks is held by Gas y Petróleo of the Neuquen province.
  • GrowMax and Potash Peru signed an agreement with Kisan International Trading FZE, a subsidiary of the Indian Farmers Fertiliser Co-operative ("IFFCO"), to supply up to one-half of the total future production of potash from the Bayovar project to the IFFCO group of companies at a modest discount to the market price for potash in India.

Financial Results

Copies of the Company's IFRS (International Financial Reporting Standards) consolidated financial statements and the related Management's Discussion and Analysis ("MD&A") for the quarter have been filed under the Company's profile at www.sedar.com and are also available on the Company's website at www.americaspetrogas.com. All amounts are in Canadian dollars unless otherwise stated.

March 31
For the three months ended
2011 2010
Net revenue (1) $ 1,987,781 $ 367,190
Net loss (2) $ 6,791,031 $ 1,555,229
Loss per share, basic & diluted $ 0.041 $ 0.015
Cash flows generated from (used by) operations $ 763,429 $ (1,419,988 )
Capital expenditures $ 2,255,486 $ 2,019,995
March 31, 2011 December 31, 2010
Cash and cash equivalents $ 84,983,747 $ 42,039,429
Total current assets $ 87,391,174 $ 44,469,164
Total assets $ 137,407,154 $ 94,043,791
Total current liabilities $ 8,440,733 $ 9,676,281
Long-term debt - $ 3,835,663
Non-controlling interest $ 3,142,717 $ 2,820,377
Total equity $ 128,828,270 $ 80,394,009
Note:
  1. Net revenue is gross revenue, excluding interest income, net of royalties.
  2. For 2011, primarily attributable to a non-cash, non-recurring loss required by mandatory conversion to IFRS from Canadian GAAP.

The Company continued to produce and sell oil in the first quarter of 2011 after beginning production in early 2010. For the three months ended March 31, 2011, the Company reported gross oil sales revenues of $2,573,504 and net oil sales revenues, after deducting royalties, of $1,987,781 compared to net oil sales revenues of $367,190 for the first quarter of 2010. The Company's revenues in the current quarter are higher than those in the same period of 2010 but have been lower than expected because approval of the exploitation concession on the Medanito Sur block remains pending with the government. The Company has limited its drilling activities on Medanito Sur while waiting for approval of the exploitation concession and, accordingly, production growth has been limited. Revenue is expected to continue to be relatively low for the second quarter of 2011 and perhaps longer, producing from just three exploratory wells, while the matter is still pending.

For the three months ended March 31, 2011, the Company reported a net loss of $6,791,031 or $0.041 per share due mainly to a non-cash loss as a result of the mandatory conversion to IFRS. The increase in net loss for the first quarter of 2011 compared to the same period of 2010 is primarily attributed to a non-cash loss of $4,289,534 required under IFRS for adjusting the conversion option associated with the convertible note. This loss would not have been required by previous Canadian GAAP. The remaining balance of the convertible note was converted to common shares in March 2011; therefore, this is a one-time event and such a non-cash expense will not recur in respect of this note. In addition to the foregoing, the Company incurred higher general and administrative expenses, offset by foreign exchange gains.

From a cash flow perspective, during the three months ended March 31, 2011, the Company generated $0.8 million from operating activities, compared to the first quarter of 2010 when the Company used $1.4 million in operating activities. The positive cash flow from operating activities in the first quarter of 2011 can be attributed to increased gross profit from oil sales (excluding non-cash depletion and depreciation). With respect to investing activities, the Company spent $2.3 million on capital expenditures in the three months ended March 31, 2011, compared to $2.0 million in the same period of 2010. Another major cash flow item that arose from investing activities in the first quarter of 2011 was an outflow of $1.3 million related to restricted investments – this was a result of a term deposit that is being used as security for a foreign currency exchange account. In respect of financing activities, in the first quarter of 2011, the Company raised gross proceeds of $50.0 million via the issuance of common shares at $2.48 per share and received $0.2 million from the exercise of previously granted options.

The Company's balance sheet at March 31, 2011, compared to December 31, 2010, reflects the transactions and activities described above. The March 31, 2011 balance sheet showed higher cash balances, which reflects the raising of equity financing. The Company's reported exploration and evaluation assets has increased, primarily as a result of additional exploration activities on Gobernador Ayala as well as continuing activities on the Bayovar concession. The Company's reported property, plant and equipment has decreased primarily because of depletion and depreciation. The Company's other long term assets decreased during the first quarter of 2011 as a result of VAT receipts exceeding VAT payments. The increase in restricted investments during the current period can be attributed to a term deposit that is being used as collateral for a foreign currency exchange account. In addition, during the first quarter of 2011, the remaining balance of the convertible promissory note was converted to common shares. The increase in non-controlling interest is attributable to the continued vesting of stock options granted by GrowMax in 2010 – this was slightly offset by the portion of GrowMax's net loss attributable to non-controlling interest. Share capital increased mainly because of the aforementioned private placement that was completed during the first quarter of 2011 and the conversion of the promissory note. With respect to contributed surplus, the increase was primarily attributable to previously-granted stock options that continued to vest, and the issuance of broker warrants as a consequence of the equity financing that was completed during the quarter. Partially offsetting the increase in contributed surplus was the exercise of stock options which resulted in the Company reclassifying some contributed surplus to share capital. A final significant change in 2011 compared to 2010 was in accumulated other comprehensive income/loss, which reflects the strengthening of the Canadian dollar (presentation currency) compared to the U.S. dollar and the Argentine Peso (functional currencies). The Company's accumulated other comprehensive income/loss is solely related to foreign currency translation adjustments.

About Americas Petrogas Inc.

Americas Petrogas Inc. is a Canadian company whose shares trade on the TSX Venture Exchange under the symbol "BOE". Americas Petrogas has oil and gas interests in 16 blocks involving exploration, development and production. Americas Petrogas has proven conventional oil and gas reserves, as well as evolving unconventional resource plays including shale gas, shale oil, and tight sand oil and gas in Argentina's prolific Neuquen basin. For more information about Americas Petrogas, please visit www.americaspetrogas.com

About Vaca Muerta Shales

The Vaca Muerta Shale is one of two principal source rocks in the Neuquen Basin of Argentina. The shale is late Jurassic-early Cretaceous in age, covers an area of approximately 8500 square miles, varies in depth between 5,500 to 14,000 feet and in places is up to 2,000 feet in thickness.

The Vaca Muerta characteristics are similar to shale reservoirs such as the Eagle Ford, Haynesville and Horn River in North America which have so far resulted in discoveries of both shale gas and shale oil. The shale has recently become the focus for many of the important shale gas players in North America, including Apache, Exxon Mobil, Total as well as YPF in Argentina.

About GrowMax Agri Corp.

GrowMax Agri Corp., a subsidiary of Americas Petrogas Inc., is developing a surface potash (KCl or Muriate of Potash) brine reservoir and evaporite deposit at Bayovar in the Sechura Desert of Northwest Peru. Additional mineral potential includes Phosphate, Bromine and others. For more information about GrowMax Agri Corp., please visit www.growmaxagricorp.com

This Press Release contains forward-looking information including, but not limited to, expected future revenue, the closing of transactions with Alpa, and future exploration and development plans and opportunities in Argentina and Peru. Additional forward‐looking information is contained in the Company's Management's Discussion and Analysis for this quarter and the Company's Annual Management's Discussion and Analysis for December 31, 2010, and reference should be made to the additional disclosures of the assumptions, risks and uncertainties relating to such forward‐looking information in those Management's Discussion and Analysis documents.

Forward‐looking information is based on management's expectations regarding the Company's future growth, results of operations, production, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, plans for and results of drilling activity (including the timing, location, depth and the number of wells), environmental matters, business prospects and opportunities and expectations with respect to general economic conditions. Such forward‐looking information reflects management's current beliefs and assumptions and is based on information, including reserves information, currently available to management. Forward‐looking information involves significant known and unknown risks and uncertainties. A number of factors could cause actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by the forward‐looking information, including but not limited to, risks associated with the oil and gas industry (e.g. operational risks in development, exploration and production, delays or changes to plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of geological interpretations; the uncertainty of estimates and projections in relation to production, costs and expenses and health, safety and environment risks), the risk of commodity price and foreign exchange rate fluctuations, the uncertainty associated with negotiating with foreign governments and third parties located in foreign jurisdictions and the risk associated with international activity.

Although the forward‐looking information contained herein is based upon assumptions which management believes to be reasonable, the Company cannot assure investors that actual results will be consistent with this forward-looking information. This forward‐looking information is made as of the date hereof and the Company assumes no obligation to update or revise this information to reflect new events or circumstances, except as required by law. Because of the risks, uncertainties and assumptions inherent in forward‐looking information, prospective investors in the Company's securities should not place undue reliance on this forward‐looking information.

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