Petro Andina Resources Inc.
TSX : PAR

Petro Andina Resources Inc.

May 13, 2009 18:06 ET

Petro Andina Releases First Quarter Results and Provides Exploration Update

CALGARY, ALBERTA--(Marketwire - May 13, 2009) -

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

Petro Andina Resources Inc. (Petro Andina or the Company) (TSX:PAR) announces its operating and financial results for the three months ended March 31, 2009. Copies of the Company's consolidated financial statements for the quarter ended March 31, 2009 and the related Management's Discussion and Analysis (MD&A) have been filed with Canadian Securities Regulatory Authorities and will be made available under the Company's profile at www.sedar.com and on the Company's website at www.petroandina.com. All amounts below are in Canadian dollars unless otherwise stated.

The Company's net income for the first quarter of 2009 was $9.5 million ($0.22 per share fully diluted), compared to $2.0 million ($0.05 per share fully diluted) for the first quarter 2008. Funds flow from operations per fully diluted share increased to $0.68 for the first quarter 2009 compared to $0.37 per fully diluted share for the first quarter 2008, and $0.97 per fully diluted share for the previous quarter. Based on realized first quarter prices, oil production volumes held in inventory at March 31, 2009 would have increased net income by approximately $0.08 per share and funds flow from operations by approximately $0.13 per share ($5.3 million) in the first quarter of 2009.

The decrease in funds flow from operations per fully diluted share from the previous quarter was primarily due to timing of sales as a result of first quarter inventory build and a reduced realized price. Petro Andina's first quarter realized price of US$36.84 per barrel was US$6.54 per barrel lower than the previous quarter realized price of US$43.38 per barrel. The decrease in realized price is due to lower world oil prices and reduced Argentine refinery demand.

Operating netbacks for the first quarter of 2009 increased to $29.14 per boe, compared to $23.87 boe for the first quarter of 2008. The principal driver behind the increase in operating netbacks was the decreased Canadian-US foreign exchange rate, as the operating netback per boe in US dollars was flat. Production expenses averaged $8.41 per boe (US$6.75 per boe) for the first quarter of 2009 compared to $8.86 per boe (US$8.83 per boe) for the first quarter of 2008.

Sales volumes for the first quarter of 2009 averaged 14,305 boe/d, an increase of 47 percent over the first quarter of 2008. Production volumes for the first quarter of 2009 averaged 15,645 boe/d, an increase of 61 percent over the first quarter of 2008, and an increase of two percent over the fourth quarter 2008. Petro Andina's production strategy for the first quarter was to produce the maximum volume that the Argentine market could absorb plus any additional volumes that the Company could reasonably store. In April and May 2009, the Company cleared its oil inventory by exporting 385,700 barrels in two oil shipments.

Current sales and production is approximately 14,500 boe/d. In 2008, about 12 waterflood patterns were added per quarter, increasing the total waterflood patterns from 11 to 59 by year end. During the first quarter of 2009, three waterflood patterns were added, mainly as a result of waterflood expansion approval delays in the province of La Pampa and reduced Argentine refining demand. Approvals for water injection have now been received and waterflood expansion is proceeding as quickly as possible with an expected 23 waterflood patterns added in the second quarter. The performance of the developed waterflood area continues to meet or exceed company expectations. Petro Andina is currently utilizing three drilling rigs in Argentina which are working in the core development area. The expansion of the El Corcobo Norte oil treatment facility was commissioned in early May.

Since Petro Andina disclosed its 2009 operating and capital budget in November 2008, world oil prices during the first quarter were significantly below the Company's original forecast, resulting in a decline in the realized oil price as compared to budget, and the Company's key Argentine working interest partner has requested a reduction of capital investment. Assuming world oil prices at US$50 per bbl with a realized oil price of approximately US$35 per bbl from April 1, 2009, Petro Andina anticipates 2009 funds flow from operations to be in the range of US$110 million to US$115 million. Capital expenditures are expected to be US$85 million in Argentina, US$9.5 million in Trinidad & Tobago and US$7.0 million in Colombia with potential for acceleration. The reductions in Argentine capital expenditures are due to a reduction in 2009 exploration activity, a lower cost structure and deferral of some minor facility enhancements. The 2009 exit rate production is forecast at the lower end of the 18,500 bbls/d to 20,000 bbls/d range that was the previous guidance.

The Company exited the first quarter of 2009 with working capital of $41.0 million, including $67 million of cash and cash equivalents. First quarter free cash flow, defined as funds flow from operations less capital expenditures and debt repayment was positive. Further, clearing oil inventory through exports during the second quarter will positively impact second quarter free cash flow. Long-term debt of $32.7 million represents approximately 0.3 times debt to annualized first quarter funds flow from operations.

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 underway. The Government of Trinidad & Tobago has provided official notice that due to the amount of private petroleum rights held over the contract area, the work commitment has been reduced. The work commitment reduction is approximately 30 percent of the three-dimensional (3D) seismic program and one shallow well.

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. Bids have been received for the initial 3D seismic programs and contract award is anticipated in June, 2009. Selection of drilling locations for environmental permitting is underway, using 3D seismic acquired by our partner that overlapped block boundaries.

Based on operational and regulatory timelines, the Company expects to commence drilling during the first quarter 2010 on a range of prospects spread over the four blocks. Petro Andina is encouraged by the possibility to significantly accelerate its planned Colombian expenditures.



Financial Highlights (Unaudited)
For the three months
ended March 31
2009 2008
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Average daily production
Oil (bbls/d) 15,635 9,725
Natural gas (mcf/d) 62 96
Total (boe/d) 15,645 9,741

Average daily sales
Oil (bbls/d) 14,295 9,703
Natural gas (mcf/d) 62 96
Total (boe/d) 14,305 9,719

Realized sales price ($/boe) $ 45.73 $ 38.74

Financial ($000s except per share amounts)
Oil and natural gas revenue 58,874 34,267
Net income 9,474 1,956
Per share - basic $ 0.23 $ 0.05
Per share - diluted $ 0.22 $ 0.05
Funds flow from operations 28,633 15,264
Per share - basic $ 0.68 $ 0.38
Per share - diluted $ 0.68 $ 0.37
Total assets (end of period) 357,351 227,849
Working capital (end of period) 40,984 49,736
Long-term debt (end of period) 32,701 22,633

Weighted average shares outstanding (000s)
Basic 42,022 40,588
Diluted 42,413 41,575
Outstanding shares (end of period) (000s)
Basic 42,031 42,725
Diluted 45,995 45,755
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Conference Call and Webcast

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

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 211,000 acre (105,500 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, except as required by law.

Non-GAAP Terms

Funds flow from operations and operating netback per barrel are used in this document, but do not have any standardized meaning under GAAP and may not be comparable to similar measures presented by other companies. Funds flow from operations includes all cash from operating activities and is calculated before changes in non-cash working capital. Funds flow from operations is reconciled with net earnings in the Consolidated Statements of Cash Flows. Funds flow per share is calculated by dividing funds flow from operations by the weighted average number of shares outstanding. Operating netback per barrel equals sales revenue, less royalties, production expenses and transportation expenses, divided by total equivalent sales volumes. Management uses these non-GAAP measures for its own performance measurement and to provide its shareholders and investors with additional measurement of the Company's efficiency and its ability to fund a portion of its future growth expenditures.

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)