Petro Andina Resources Inc.
TSX : PAR

Petro Andina Resources Inc.

August 11, 2009 16:30 ET

Petro Andina Releases Second Quarter Results and Provides Update on Shareholder Value Maximization Process

CALGARY, ALBERTA--(Marketwire - Aug. 11, 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 June 30, 2009 (which will also be referred to below as the second quarter). Copies of the Company's consolidated financial statements for the quarter ended June 30, 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.

Shareholder Value Maximization Process

The Petro Andina Board of Directors wishes to reiterate its unanimous recommendation that shareholders reject the unsolicited take-over offer to acquire Petro Andina by a wholly-owned subsidiary of Pluspetrol Resources Corporation N.V. Petro Andina's Board of Directors and financial and legal advisors continue to consider and pursue a range of alternatives to maximize shareholder value.

In response to the unsolicited take-over offer, data rooms in Calgary, Houston, London and Buenos Aires were opened. Petro Andina's Board of Directors and financial and legal advisors are currently reviewing submitted proposals and anticipate providing an update by August 18, 2009 in respect of the shareholder value maximization process. The Board cautions that such a process will not necessarily result in a transaction.

Second Quarter Results

The Company's net income for the second quarter of 2009 was $8.6 million ($0.20 per share fully diluted), compared to $3.0 million ($0.07 per share fully diluted) for the second quarter 2008. Funds flow from operations per share fully diluted increased to $0.68 for the second quarter 2009 compared to $0.53 per share fully diluted for the second quarter 2008. Second quarter funds flow from operations and net income include costs accrued in relation to the unsolicited take-over offer in the amount of $0.11 per share fully diluted. Excluding these costs second quarter funds flow from operations was $0.79 per share fully diluted.

Petro Andina completed its first oil export shipment in the second quarter which allowed the Company to realize US$5.6 million on the Petroleum Plus program for the first time. Excluding the price effects of the export shipment and the Petroleum Plus program, second quarter domestic oil sales were priced at US$37.26 per barrel (bbl), compared to US$36.84 per bbl in the first quarter of 2009. Further, looking ahead we have executed our domestic oil sales contracts for the month of August to realize approximately US$40 per bbl, excluding the effect of the Petroleum Plus program. Domestic prices in Argentina have been increasing as domestic refining demand increases.

Operating netbacks for the second quarter increased to $33.12 per barrel of oil equivalent (boe), compared to $29.14 boe for the first quarter of 2009. Production expenses for the six months ended June 30, 2009 averaged $7.59 per boe (US$6.27 per boe) compared to $9.85 per boe (US$9.76 per boe) for the six months ended June 30, 2008. Production costs on a per boe basis continue to decrease largely as a result of peso devaluation and cost efficiencies.

Sales volumes for the second quarter of 2009 averaged 15,627 barrels of oil equivalent per day (boe/d), an increase of 39 percent over the second quarter of 2008. Production volumes for the second quarter of 2009 averaged 14,403 boe/d, an increase of 28 percent over the second quarter of 2008, and a decrease of 8 percent over the first quarter of 2009. Sales volumes were higher than produced volumes as oil produced in the first quarter of 2009 and inventoried was exported. The Company has received a second oil export permit and anticipates that additional Petroleum Plus fiscal credits will be used to offset the applicable export tax.

As we advised in the first quarter, in response to a reduced Argentine domestic demand for oil, generally poor global market conditions and delays in receiving approvals from La Pampa province to activate water injection wells, only three waterflood patterns were added in the first quarter of 2009, as compared to 15 added in the fourth quarter of 2008. Also, water injection levels on existing patterns were reduced by 10 percent. The Company cleared its inventory volumes in April 2009 with its initial export shipments and subsequently, in May 2009, approval was received to commence water injection in La Pampa. Waterflood expansion then proceeded back to normal course with 27 waterflood patterns added late in the second quarter. Water injection in June 2009 was 45,177 barrels of water per day which is an increase of more than 40 percent from injection volumes of 31,214 in March 2009. In summary, water injection was delayed and reduced for three to five months and area re-pressure generally requires three to six months. As a consequence, during the second quarter, production remained relatively flat between 14,000 to 14,500 boe/d. We expect to see production contributions from the resumption of waterflood expansion beginning in the third quarter, but with the bulk of the impact in the fourth quarter.

As a result of the delay in the waterflood expansion, achievement of peak production will be delayed until 2010; the previous 2009 oil production exit rate target is now anticipated to be delayed until 2010 with the 2009 oil production exit rate expectations being reduced to approximately 17,000 bbls/d. In line with the reduced activity in the first and second quarters, the 2009 Argentine capital expenditures forecast has been reduced to US$80 million, while capital expenditure budgets in Colombia and Trinidad & Tobago have been adjusted to accommodate increased seismic acquisition programs in 2009. Petro Andina completed a 216 kilometre 2D seismic acquisition program in Trinidad & Tobago. Further we are pleased to announce that a 270 square kilometre 3D seismic program will begin in Colombia in August.

Petro Andina has appointed Ms. Melesia Kasha as the Country Manager for its Colombian operations replacing Mr. Don Jones who has left to pursue other business opportunities. Ms. Kasha was previously Manager Corporate Affairs in the Calgary office and prior to that was the initial commercial manager in the Buenos Aires office at the start-up of the Argentine operations.



Financial Highlights (Unaudited)
For the three months For the six months
ended June 30 ended June 30
2009 (1) 2008 (2) 2009 2008
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Average daily production
Oil (bbls/d) 14,392 11,209 15,010 10,467
Natural gas (mcf/d) 64 87 63 91
Total (boe/d) 14,403 11,224 15,021 10,482

Average daily sales
Oil (bbls/d) 15,616 11,201 14,959 10,452
Natural gas (mcf/d) 64 87 63 91
Total (boe/d) 15,627 11,215 14,970 10,467

Realized sales price, net of
export taxes ($/boe) $ 41.41 $ 49.20 $ 43.46 $ 44.35

Financial ($000s except per
share amounts)
Oil and natural gas revenue,
net of export taxes 58,879 50,214 117,753 84,481
Net income 8,608 2,967 18,082 4,923
Per share - basic $ 0.20 $ 0.07 $ 0.42 $ 0.12
Per share - diluted $ 0.20 $ 0.07 $ 0.42 $ 0.12
Funds flow from operations 29,991 23,042 58,624 38,306
Per share - basic $ 0.70 $ 0.54 $ 1.38 $ 0.92
Per share - diluted $ 0.68 $ 0.53 $ 1.35 $ 0.90
Total assets (end of period) 368,057 250,683 368,057 250,683
Working capital (end of period) 65,650 51,882 65,650 51,882
Long-term debt (end of period) 25,008 39,897 25,008 39,897

Weighted average shares
outstanding (000s)
Basic 43,094 42,728 42,561 41,658
Diluted 43,970 43,680 43,329 42,654
Outstanding shares (end of
period) (000s)
Basic 46,899 42,775 46,899 42,775
Diluted 50,275 45,890 50,275 45,890
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Notes:
(1) Net income and funds flow from operations for the three months ended
June 30, 2009 include accrued costs relating to the unsolicited
take-over offer of $4.6 million ($0.11 per share fully diluted).
(2) Realized oil price, oil and natural gas revenue, net income and funds
flow from operations for the three months ended June 30, 2008 included
the effects of a retroactive oil sales price increase related to the
period November 16, 2007 to March 31, 2008.


Conference Call and Webcast

Petro Andina will host a conference call and live webcast to discuss these results on Wednesday, August 12, 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 489,000 acre (244,500 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.

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 December 31, 2008 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 other than required by applicable securities 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 and Petroleum Plus credits, less export taxes, 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)
    Website: www.petroandina.com