Petrominerales Ltd.
TSX : PMG

Petrominerales Ltd.
Petrobank Energy and Resources Ltd.
TSX : PBG

Petrobank Energy and Resources Ltd.

May 06, 2009 23:57 ET

Petrominerales Announces First Quarter Results

BOGOTA, COLOMBIA--(Marketwire - May 6, 2009) - Petrominerales Ltd. ("Petrominerales" or the "Company") (TSX:PMG), a 76.9% owned subsidiary of Petrobank Energy and Resources Ltd. (TSX:PBG), is pleased to announce first quarter financial and operating results.

FINANCIAL & OPERATING RESULTS

The following table provides a summary of Petrominerales' financial and operating results for the three months ended March 31, 2009 and 2008. Interim consolidated financial statements with Management's Discussion and Analysis ("MD&A") are available on the Company's website at www.petrominerales.com and will also be available on the SEDAR website at www.sedar.com.



(All references to $ are United States dollars unless otherwise noted)

Three months ended March 31, 2009 2008 % change
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Financial
($000s, except where noted)
Crude oil revenue 76,352 69,592 10
Funds flow from operations (1) 41,846 45,153 (7)
Per share - basic ($) 0.42 0.45 (7)
- diluted ($) 0.42 0.43 (2)
Net income 7,388 22,228 (67)
Per share - basic ($) 0.07 0.22 (68)
- diluted ($) 0.07 0.21 (67)
Capital expenditures 65,371 68,498 (5)
Total assets 582,667 465,892 25
Working capital surplus (1) 16,273 83,130 (80)
Common shares outstanding, end of period (000s)
Basic 98,656 100,354 (2)
Diluted (2) 108,266 109,045 (1)
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Operations
Operating netback ($/bbl) (3)
Crude oil revenue (4) 33.79 86.19 (61)
Royalties 3.67 8.22 (55)
Production expenses 5.92 10.82 (45)
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Operating netback 24.20 67.15 (64)

Average daily crude oil production (bbls) (5) 21,771 8,635 152
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(1) Non-GAAP measure. See "Non-GAAP Measures" below.
(2) Assumes the Company's convertible debentures, issued in December 2007,
are converted into common shares (2009 -2,987,367 shares, 2008 -
3,656,508 shares).
(3) Excludes hedging activities.
(4) Net of transportation expenses.
(5) Actual production sold for the three months ended March 31, 2008 was
21,409 bopd (2008 - 8,635 bopd).


HIGHLIGHTS

(All references to $ are United States dollars unless otherwise noted)

- Significant production growth in the quarter; crude oil production increased 152% to 21,771 barrels per day ("bopd") due to drilling successes at Corcel, Mapache and Neiva.

- Strong operating netbacks resulted in cash flow of $41.8 million ($0.42 per share) and net income of $7.4 million ($0.07 per share) despite a sharp drop in world oil prices.

- Solid financial position with net working capital of $16.3 million, an undrawn $80 million credit facility, strong cash flows and operating netbacks combined with significant production growth.

- Continued drilling success has resulted in production averaging 25,252 bopd to date in May.

- Repurchased 802,200 common shares under our normal course issuer bid.

OPERATIONAL UPDATE

Petrominerales reported strong cash flow of $41.8 million, or $0.42 per share, in the first quarter of 2009 due to a 148% increase in year over year sales volumes. Cash flow decreased 7% from the prior year, driven by a 56% decrease in world oil prices. Production for the first quarter grew to 21,771 bopd, up 42% from the fourth quarter of 2008 due to the success of our Corcel, Neiva and Mapache drilling programs. Continued improvements in production operations reduced operating expenses to $5.92 per barrel, helping preserve strong operating netbacks of $24.20 per barrel while the WTI crude oil benchmark price averaged $43.08 per barrel.

Corcel

During the first quarter, our exploration program continued on the block with the drilling and completion of Corcel-D2, drilling D3, and initial drilling operations on E1. In January, Corcel-D1 was recompleted in the Mirador formation, and combined with D2 added 13,000 bopd of flush production in February. Corcel-D3 was brought on production in April at an initial rate of 8,400 bopd from the Mirador formation. Following normal declines, Corcel production May to date has averaged 17,096 bopd.

Drilling and logging operations on our Corcel-E1 exploration well are now complete. Well logs indicate 110 feet of potential net pay in the Mirador, Guadalupe and Lower Sand-1 intervals and we are casing the well as a potential oil producer. We are planning a multi-zone testing program on the well and expect to have the well on-stream in early June. The next well in our multi-well drilling program, F1, will spud next week.

The Corcel central processing facility is capable of handling 70,000 barrels of fluid per day. An upgrade to 140,000 barrels of fluid per day is expected to be completed in the third quarter of this year.

Construction on our Monterrey offloading facility is now 73% complete. Early start up of 11,000 bopd delivery capacity is expected to be on-line this month and the final capacity of 20,000 bopd will be available in the third quarter. The facility will be the closest offloading station to Corcel, 77 kilometers away, and will significantly reduce our Llanos Basin trucking costs.

Neiva

On our Neiva block, we have drilled 16 new wells, 13 in the Doima Chicoral and three in the Honda formation as part of our multi-well development drilling program. Twelve wells have been completed and are on production, three in the Honda and nine in the Doima Chicoral. Neiva production averaged 1,205 bopd in March and we are currently producing 2,348 bopd, more than five times our average in 2008. The increase reflects the effectiveness of our innovative multi-stage fracture stimulation technique, now being used to complete these wells. We plan to drill up to 15 additional wells at Neiva in 2009 and have identified 29 existing wells as recompletion candidates for our multi-stage fracture stimulation technique.

Orito

Orito production has continued to ramp up following the resolution of the general strike in the Putumayo province averaging 2,676 bopd in the first quarter and has since increased to 3,790 bopd. Following the successful completion of the Orito-170 and Orito-171 wells, we have temporarily suspended our development drilling program as part of our strategy to refocus capital deployment to the highest value-add areas of our portfolio during this period of lower commodity prices. We have received expressions of interest for our Orito property and we are considering a sale of this non-core asset through a formal marketing process.

Mapache

At Mapache, both the Mapache-1 and Mirasol-1 wells are tied-in to production facilities at a combined rate of 2,018 bopd. In April, we completed the acquisition of 91 square kilometres of 3D seismic to the south and on-trend with our initial discoveries. This seismic will help define our 2010 exploration drilling program.

Exploration

Following recent successful 3D seismic programs at Guatiquia, Corcel and Mapache, we have initiated the acquisition of an additional 332 square kilometres of 3D seismic. At Castor and Casanare Este, we are currently in the field acquiring seismic data, with the Casimena and Rio Ariari programs to follow. This will satisfy our current phase commitments on these blocks. Our enhanced 3D seismic database is expected to further define previously identified leads and structures derived from our extensive 2D seismic data set.

On our Guatiquia Block, immediately southwest of Corcel, the first of our two-well exploration drilling program, is expected to spud in July 2009. These wells will target two separate prospects identified from 3D seismic and will satisfy both our 2009 and 2010 work commitments.

Late in 2008, we were granted two contiguous blocks north of Corcel, Blocks 25 and 31, on trend with the "super giant" Cusiana-Cupiagua fields. We are currently reprocessing the existing 2D seismic grid, from which several preliminary leads have been identified. The first phase of these contracts has a term of 36 months, and our work commitments include acquiring 3D seismic and drilling exploration wells on both properties. In 2009, we will conduct environmental studies with plans to commence our exploration program in early 2010.

Our three-well heavy oil exploration drilling program is on schedule to commence in May 2009, with one well to be drilled on each of the Chiguiro Este, Chiguiro Oeste and Rio Ariari blocks.

Last November, Petrominerales acquired a 55 percent interest in the 2.6 million acre Block 126 in the Ucayali Basin of Peru. The block's first phase commitments included the reinterpretation of 1,200 kilometres of 2D seismic, which has been completed and confirmed a large anomaly, the La Colpa structure, which was encountered by a well drilled on the block 20 years ago. Initially, two other structural leads have also been identified from the existing reprocessed 2D seismic. The next exploration phase will include the acquisition of 150 square kilometres of 3D seismic and 50 kilometres of 2D seismic, which is likely to commence later this year or in early 2010. An Environmental Impact Assessment has been submitted to the Peruvian government and a public consultation was completed in February 2009. Approval for the seismic program is expected in the second quarter of this year. The first exploration well on the block could be drilled in late 2010.

Secondary Offering

On April 27, 2009, Petrobank announced plans to sell part of their investment in Petrominerales, subject to regulatory approvals, which will result in Petrobank owning approximately 66.7% of Petrominerales after the proposed transaction is completed. One of the anticipated benefits of this transaction is to increase the trading liquidity of our common shares. Prior to the announcement, the average daily trading volume of Petrominerales averaged under 100,000 shares in 2009. Since the transaction was announced, the average daily trading volume has increased to over 486,000 shares.

Annual and Special Meeting

Our Annual and Special Meeting of shareholders is scheduled to take place May 7, 2009 at 10:00 AM Bogota time (9:00 AM Mountain Standard Time) in the Millennium Meeting Room at the Radisson Royal Bogota Hotel, Calle 113 No.7-65, Bogota, Colombia. All shareholders are cordially invited to attend. Alternatively, shareholders are encouraged to attend and participate in the question and answer session via live video webcast at www.flywan.net/streaming/07052009/.

Non-GAAP Measures. This press release contains financial terms that are not considered measures under Canadian generally accepted accounting principles ("GAAP"), such as funds flow from operations, funds flow per share, working capital surplus and operating netback. These measures are commonly utilized in the oil and gas industry and are considered informative for management and shareholders. Specifically, funds flow from operations and funds flow per share reflect cash generated from operating activities before changes in non-cash working capital. Management considers funds flow from operations and funds flow per share important as they help evaluate performance and demonstrate the Company's ability to generate sufficient cash to fund future growth opportunities and repay debt. Working capital surplus includes current assets less accounts payable and accrued liabilities and bank debt, and is used to evaluate the Company's financial leverage. Management considers operating netback important as it is a measure of profitability per barrel of production. Funds flow from operations, funds flow per share, working capital surplus and operating netbacks may not be comparable to those reported by other companies nor should they be viewed as an alternative to cash flow from operations, net income or other measures of financial performance calculated in accordance with GAAP.

Forward-Looking Statements. Certain information provided in this press release constitutes forward-looking statements. The words "anticipate", "expect", "project", "estimate", "forecast" and similar expressions are intended to identify such forward-looking statements. Specifically, this press release contains forward-looking statements relating to the timing of capital projects, financial results and the results of operations. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. You can find a discussion of those risks and uncertainties in our Canadian securities filings. Such factors include, but are not limited to: general economic, market and business conditions; fluctuations in oil prices; the results of exploration and development drilling, recompletions and related activities; timing and rig availability, outcome of exploration contract negotiations; fluctuation in foreign currency exchange rates; the uncertainty of reserve estimates; changes in environmental and other regulations; risks associated with oil and gas operations; and other factors, many of which are beyond the control of the Company. There is no representation by Petrominerales that actual results achieved during the forecast period will be the same in whole or in part as those forecast. Except as may be required by applicable securities laws, Petrominerales assumes no obligation to publicly update or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.

Petrominerales Ltd. is a Latin American-based exploration and production company producing oil in Colombia with 16 exploration blocks covering a total of 1.9 million acres in the Llanos and Putumayo Basins and 2.6 million acres in the Ucayali Basin of Peru. Petrominerales is currently 76.9% owned by Petrobank Energy and Resources Ltd. (TSX:PBG).

Contact Information

  • Petrominerales Ltd.
    John D. Wright
    President and Chief Executive Officer
    (403) 750-4400 or 011.571.629.2701
    011.571.629.4723 (FAX)
    or
    Petrominerales Ltd.
    Corey C. Ruttan
    Vice President Finance and Chief Financial Officer
    (403) 750-4400 or 011.571.629.2701
    011.571.629.4723 (FAX)
    or
    Petrominerales Ltd.
    Jack F. Scott
    Executive Vice President and Country Manager, Colombia
    (403) 750-4400 or 011.571.629.2701
    011.571.629.4723 (FAX)
    Email: ir@petrominerales.com
    Website: www.petrominerales.com