Petro Andina Resources Inc.
TSX : PAR

Petro Andina Resources Inc.

May 01, 2009 11:14 ET

Petro Andina Provides First Quarter Operational Update and Announces Formal Award of Exploration Blocks in Colombia

CALGARY, ALBERTA--(Marketwire - May 1, 2009) - Petro Andina Resources Inc. (TSX:PAR) (Petro Andina or the Company) is pleased to provide information on first quarter 2009 Argentine oil pricing and production, first export cargo of Argentine oil, and on key milestones in both Trinidad & Tobago and Colombia exploration programs.

Oil Pricing and Export Sales

In the year-end 2008 Management's Discussion and Analysis, the Company disclosed that at the prevailing fiscal regime, it expected a realized price of US$31 per bbl when WTI was US$45 per bbl. In the first quarter 2009, WTI averaged US$43 per bbl and Petro Andina was able to realize an oil price of approximately US$37 per bbl by negotiating higher prices from refiners.

Future Argentine oil pricing for Petro Andina will be determined by the interplay of four factors: pricing in the Argentine domestic market, prices in the world markets, the percentage of Petro Andina production that is sold into the export market and the impact of the Petroleum Plus program.

Currently, the Company expects that when world oil prices approximate US$50 per bbl, Petro Andina's realized price for sales into the Argentine domestic market and excluding any benefit of the Petroleum Plus program, would remain at approximately US$37 per bbl.

At quarter-end, the Company received an export license for 390,000 bbls. During the final week of April, Petro Andina completed an initial export shipment of approximately 260,520 bbls. The export pricing formula was based on WTI pricing for a five day average prior to loading (US$49 per bbl) less adjustments for basin and quality differentials. The Company believes that based on the experience of other exporters, the adjusted realized export oil price will be comparable to domestic pricing. A second oil export shipment is scheduled for early May. A more detailed discussion of Argentine domestic and export oil pricing will be included in the first quarter 2009 Management's Discussion and Analysis.

An analysis of the Argentine Petroleum Plus program was disclosed in the Company's press release dated December 11, 2008. Petro Andina has met with officials of the Argentine Secretariat of Energy and has applied for Petroleum Plus credits in respect of its 2008 fourth quarter production growth and 2008 reserves replacement. The potential value to Petro Andina of the program for fiscal 2008 is calculated to be US$46 million before income tax. In addition, the value of the first quarter 2009 Petroleum Plus production growth credit is calculated to be US$6.5 million before income tax. To date Petro Andina has not received the Petroleum Plus credits related to 2008, nor has the Company accrued the benefits of the program, if any, in its financial results.

Oil Production

Oil production from the Company's core operating area in the Neuquen Basin in Argentina during the first quarter of 2009 was approximately 15,630 barrels of oil per day (bbls/d), an increase of two percent compared to production of 15,299 bbls/d during the fourth quarter of 2008.

First quarter production volumes were influenced by the following:

- low first quarter world oil prices and expected higher future oil prices;

- reduced Argentine domestic consumption due to economic slowdown and seasonal agricultural fuel demand; and

- reduced refinery output as refiners reduced exports of finished product.

Petro Andina's production strategy for the first quarter was to produce the maximum volume that the Argentine market could absorb and any additional volumes that the Company could reasonably store. In addition, the Company deferred capital expenditures related to exploration and non-essential facilities enhancement.

Given current oil pricing and economic conditions in Argentina, Petro Andina expects its year-end exit rate production to be at the lower end of its guidance of 18,500 to 20,000 bbls/d.

First quarter oil sales volumes in Argentina averaged approximately 14,290 bbls/d, compared to production of 15,630 bbls/d. During the first quarter not all production volumes could be sold domestically. As noted above, the Company completed its first crude oil export shipment of approximately 260,520 bbls, which has cleared excess oil inventory. The Company expects to apply for and receive additional export licenses in the future.

The benefits of exporting are twofold. Upon being received, the Petroleum Plus tax credits will be used to offset the export taxes that would be payable on the export volumes. Export shipments will thereby have transparency with world oil prices. A second benefit of exporting is it allows Petro Andina to better manage foreign exchange risk since export sales are paid in US dollars.

Operations

Petro Andina is responding to the current domestic market environment by deferring a portion of its 2009 Argentine capital expenditures into later quarters and accelerating programs in other jurisdictions, specifically exploration in Colombia and Trinidad & Tobago. The Company has the flexibility to respond to improved Argentine oil prices when the benefits of the Petroleum Plus program are realized or as world oil prices increase. Petro Andina currently has three drilling rigs and four service rigs operating in Argentina. During the first quarter, the Company moved a rig from the La Banda exploration concession to the main operating area and now has three rigs dedicated to development drilling.

The expansion of the El Corcobo Norte oil treatment facility is on track for completion at the end of April with commissioning in May. This will lead to greater oil and water handling capabilities which will further reduce in-field treating and trucking requirements. The company is now operating a total of 20 trucks for in-field operations. The facility expansion will bring water handling capability to approximately 100,000 bbls/d.

Exploration

During the fourth quarter 2008 the Company's most significant exploratory success was at Cerro Huanul Sur (50 percent working interest). The Company has continued to further delineate the UC50 member of the Upper Centenario formation, which is the highest stratigraphic unit proven productive to date, and plans to implement waterflood throughout the second half of 2009.

The second exploratory well drilled under the terms of the farm-in agreement with Repsol-YPF on the La Banda Concession was drilled and encountered oil and gas bearing sands. The primary objective tested 160 bbls/d of light oil, representing 20 percent oil cut on 800 bbls/d of total fluid. A delineation drilling program to determine commerciality is planned for the fourth quarter of 2009.

On March 17, 2009, the Company was officially assigned a 50 percent working interest and operatorship of the Central Range Shallow and Central Range Deep Blocks in Trinidad & Tobago. During the first quarter, the airborne geophysical survey over the entire Central Range Block area was completed. Work on the first phase of the two dimensional seismic program is also underway.

Following the Company's successful bids on four exploration blocks totaling 495,000 acres in the Colombia Mini-Round 2008, Petro Andina and its partner, Columbus Energy Sucursal Colombia, were formally awarded the blocks by the Colombia National Hydrocarbons Agency on April 20, 2009. Initial plans are to conduct a three dimensional seismic program and to drill the first exploration well in late fourth quarter of 2009 or first quarter of 2010.

Petro Andina continues to maintain significant cash reserves, which along with expected internally generated cash flow, is available to fund the Company's continued expansion in Argentina, exploration work commitments in Trinidad & Tobago and Colombia, and scheduled bank debt amortization payments.

Petro Andina is planning to announce its 2009 first quarter financial and operating results at close of business on Wednesday, May 13, 2009. Petro Andina will host a conference call and live webcast to discuss these results on Thursday, May 14, 2009 beginning at 10:30 am Mountain Daylight Time (12:30 pm Eastern Daylight Time). Media, analysts or any other interested parties wishing to participate in the call can access it by calling 403-537-9608 or 1-800-952-4972 (toll free in North America). No access codes are required.

The live audio webcast of the conference call will be available through Windows Media Player by following the link posted under the Investor Relations, News & Events section of the Company's website at www.petroandina.com. Following the conclusion of the call, a link to a replay of the webcast will also be posted on the Company's website.

About Petro Andina Resources Inc.

Petro Andina is engaged in oil and natural gas exploration, development and production in South America and the Caribbean region. The Company is continuing to develop its existing reserves and to conduct appraisal and exploration drilling on its 628,000 acre (346,000 net acre) land position in the Neuquen Basin of Argentina. Exploration activities have also begun on its 495,000 acre (247,500 net acre) holdings in the Llanos Basin of Colombia and 214,000 acre (107,000 net acre) holdings onshore Trinidad & Tobago. Petro Andina is headquartered in Calgary, Canada.

This news release does not constitute an offer to sell securities, nor is it a solicitation of an offer to buy securities, in any jurisdiction. All sales will be made through registered securities dealers in jurisdictions where the offering has been qualified for distribution. The securities offered are not, and will not be, registered under the securities laws of the United States of America, nor any state thereof and may not be sold in the United States of America absent registration in the United States or the availability of an exemption from such registration.

Forward-Looking Statements

Certain statements regarding Petro Andina Resources Inc., including management's assessment of future plans and operations, may constitute forward-looking statements under applicable securities laws and necessarily involve known and unknown risks and uncertainties, most of which are beyond Petro Andina's control. These risks may cause actual financial and operating results, performance, levels of activity and achievements to differ materially from those expressed in, or implied by, such forward-looking statements.

Such risks and uncertainties include, but are not limited to: the impact of general economic conditions in Canada, Argentina, Colombia and Trinidad & Tobago, industry conditions including changes in laws and regulations including adoption of new environmental laws and regulations, and changes in how they are interpreted and enforced, in Canada, Argentina, Colombia and Trinidad & Tobago, competition, the lack of availability of qualified personnel, fluctuations in commodity prices, the results of exploration and development drilling and related activities, imprecision in reserve estimates, the production and growth potential of Petro Andina's assets, fluctuations in foreign exchange or interest rates, the ability to access sufficient capital from internal and external sources, and obtaining required approvals of regulatory authorities, in Canada, Argentina, Colombia and Trinidad & Tobago. Many of these risk factors are discussed in further detail in the Company's Annual Information Form dated March 31, 2009 on file with Canadian securities commissions. Readers are also referred to the risk factors described in other documents that Petro Andina files from time to time with securities regulatory authorities.

Accordingly, Petro Andina gives no assurance nor makes any representations or warranty that the expectations conveyed by the forward-looking statements will prove to be correct and actual results may differ materially from those anticipated in the forward-looking statements. Petro Andina undertakes no obligation to publicly update or revise any forward-looking statements.

The Toronto Stock Exchange has not received and does not accept responsibility for the adequacy or accuracy of this news release.

Contact Information

  • Petro Andina Resources Inc.
    Michael Kruchten
    Investor Relations
    (403) 517-1733
    (403) 265-8216 (FAX)
    or
    Petro Andina Resources Inc.
    Kenneth G. Pinsky
    Vice President, Finance and Chief Financial Officer
    (403) 517-1729
    (403) 265-8216 (FAX)
    Website: www.petroandina.com