Americas Petrogas Inc.
TSX VENTURE : BOE

Americas Petrogas Inc.

August 26, 2011 13:26 ET

Americas Petrogas Announces Second Quarter Results

Continued to produce and sell oil, increased working interest in several blocks in Argentina, $76.4 million of consolidated cash, cash equivalents and short-term investments

CALGARY, ALBERTA--(Marketwire - Aug. 26, 2011) - 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 its oil and gas properties in Argentina and its potash and other minerals project in the Sechura Desert, Bayovar, Peru. Highlights of the second quarter of 2011 and recent developments are as follows:

Highlights

  • As of June 30, 2011, Americas has $76.4 million of consolidated cash, cash equivalents and short-term investments that may be used for exploration drilling and development activities.
  • The Company sold 43,143 barrels of oil during the quarter, generating $2.39 million of gross revenues and $1.84 million of net revenues.
  • 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 items. 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 for a total Company-wide ownership of 39%.
  • 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. Subsequent to quarter end, in July 2011, these transactions were completed, paying a total of US$4.6 million in cash for the acquisitions. Americas Petrogas Argentina already held existing working interests in these same blocks and, as a result, upon closing of the transactions, it now holds 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.
  • In July 2011, a deep exploration well being drilled on the Huacalera block reached total depth of 4,100 metres (13,450 feet). A full suite of logs, including image logs, has been run and production casing has been successfully set all the way to total depth. The comprehensive suite of logs and mud log information is now being integrated and interpreted. The vertical cores, sidewall cores and rock cuttings have been sent to three different laboratories for analysis to measure the petrophysical and geochemical characteristics of the samples, both shales and sands. The results, which are expected during the third quarter of 2011, will provide fracing and testing options for tight sands and shale gas or oil reservoirs.
  • In August 2011, the Company spudded the first of three exploration wells on the Rinconada Norte block.

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.

Three months ended June 30 Six months ended June 30
2011 2010 2011 2010
Net revenue (1) $ 1,837,976 $ 1,536,958 $ 3,825,757 $ 1,904,148
Net loss attributable to owners of the Company (2) $ (3,399,034 ) $ (2,393,817 ) $ (10,030,041 ) $ (3,930,876 )
Loss per share, basic & diluted $ (0.018 ) $ (0.019 ) $ (0.058 ) $ (0.034 )
Capital additions $ 7,075,742 $ 6,042,431 $ 9,517,317 $ 9,744,783
June 30, 2011 December 31, 2010
Cash and cash equivalents $ 28,939,751 $ 42,039,429
Short-term investments $ 47,457,209 $ 496,862
Total current assets $ 79,036,674 $ 44,469,164
Total assets $ 133,451,017 $ 94,043,791
Total current liabilities $ 3,474,245 $ 9,676,281
Long-term debt $ - $ 3,835,663
Non-controlling interest $ 3,556,007 $ 2,820,377
Total equity $ 129,839,376 $ 80,394,009
Note:
(1) Net revenue is gross revenue, excluding interest income, net of royalties.
(2) For the six months ended June 30, 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 second quarter of 2011 after beginning production in early 2010. For the three months ended June 30, 2011, the Company reported gross oil sales revenues of $2,386,360 and net oil sales revenues, after deducting royalties, of $1,837,976 compared to net oil sales revenues of $1,536,958 for the second quarter of 2010. The Company's revenues have been lower than expected because its application for an 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 third quarter of 2011 and perhaps longer, producing from just three exploratory wells, while the application remains pending.

The Company reported a net loss attributable to owners of the Company of $3,399,034 or $0.018 per share for the three months ended June 30, 2011 compared to a net loss of $2,393,817 or $0.019 per share for the same period of 2010, and further compared to a net loss of $6,631,007 or $0.041 per share for the three months ended March 31, 2011. The increase in net loss for the second quarter of 2011 compared to the same period of 2010 is attributable to increased stock-based compensation, general and administrative expenses.

From a cash flow perspective, during the six months ended June 30, 2011, the Company used $1.6 million in operating activities, compared to $2.1 million in 2010. The decrease in 2011 can be primarily attributed to increased gross profit from oil sales (excluding non-cash depletion and depreciation). With respect to investing activities, the Company spent $5.0 million on capital expenditures in the six months ended June 30, 2011, compared to $8.1 million in the same period of 2010. Recently the Company began investing some of its excess cash in bank-sponsored, short-term investments with an initial maturity greater than three months when purchased and which are not redeemable at face value on demand. Another major cash flow item that arose from investing activities in 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 half of 2011, the Company raised gross proceeds of $50.0 million via the issuance of common shares at $2.48 per share and received $0.3 million from the exercise of previously granted options. In May 2011, the Company repaid the non-interest bearing loan that it obtained in May 2010.

The Company's balance sheet at June 30, 2011, compared to December 31, 2010, reflects the transactions and activities described above. The June 30, 2011 balance sheet showed higher current assets, which reflects the raising of equity financing. The Company's reported exploration and evaluation assets have increased, primarily as a result of the acquisition of Energicon as well as exploration activities on Gobernador Ayala and continuing activities on the Bayovar concession. The Company's reported property, plant and equipment has decreased primarily because of depletion and depreciation. The increase in restricted investments during 2011 can be attributed to a term deposit that is being used as collateral for a foreign currency exchange account. The Company's other long term assets decreased during the first half of 2011 as a result of value-added-tax ("VAT") receipts exceeding VAT payments. During the second quarter of 2011, the non-interest bearing loan was fully repaid. 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 in the first quarter of 2011. 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 numerous 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 8,500 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, ExxonMobil, 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, future revenues, exploration and development activities in respect of the projects in Argentina, timing of the results on the Huacalera block, and future exploration and development plans and opportunities in Argentina and Peru.

Additional forward‐looking information is contained in the Company's MD&A for this quarter and the Company's Annual MD&A 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 MD&A 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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