Quetzal Energy Ltd.

Quetzal Energy Ltd.

May 30, 2012 16:46 ET

Quetzal Energy Ltd. Announces First Quarter 2012 Results

CALGARY, ALBERTA--(Marketwire - May 30, 2012) -


Quetzal Energy Ltd. (TSX VENTURE:QEI) announces its unaudited results for the three months ended March 31, 2012.


  • The Company's management decided to sell all of its Guatemalan operations in order to focus its efforts on the Colombian operations. A purchase and sale agreement was concluded on January 25, 2012. Pursuant to the agreement, the purchaser acquired all of the outstanding common shares of Quetzal Energy Inc., a wholly owned subsidiary of Quetzal which in turn owns all of the outstanding common shares of Quetzal Energy (Bahamas) Ltd. (QEG), owner and operator of the Guatemalan blocks. Consideration received in the sale was comprised of cash of $1,500,000 and a 10% carried interest in the first two wells to be drilled by the purchaser on the Guatemalan properties. Quetzal received $500,000 upon closing the agreement and the remaining $1,000,000 will be payable on the earlier of when the second well is spudded; initiation of a seismic program; or one year after the closing date. The purchaser will assume all liabilities and obligations associated with the property, regardless of whether they arose prior to or after the sale. An impairment loss to reflect the consideration received of $17,299,608, included in the loss from discontinued operations, was recorded in the annual financial statements for the year ended December 31, 2011. No value was attributed to the 10% carried interest in the first two wells.
  • Following the Mani-1 oil discovery at Block 27 and the successful workover completed at the Canaguaro Block, Quetzal has re-evaluated its spending and investment priorities and has decided to focus capital expenditure activity on Block 27 and the Canaguaro Block. As a result, the Company entered into an agreement with Omega Energy Colombia to renegotiate its farm-in arrangement at Block 21, whereby Quetzal will cap its capital expenditure commitment to an agreed amount in return for a reduced production income participation. Under the terms of the original farm-in agreement, Quetzal was to pay 50% of two wells in exchange for an income production participation of 35%. Under the new arrangement, Quetzal will pay a maximum of $3,875,000 towards the two wells and will have the option, following the completion of those wells to: (a) waive any right to an income production participation going forward and have no further financial obligations; or (b) retain a 24.75% income production participation in the block by reimbursing Omega Energy Colombia for its incurred cost in the two wells, such that Quetzal will have paid 50%.
  • Quetzal and its partners completed an additional work-over on the Canaguay-1 well at a net cost to Quetzal of $321,250. The well was put back into production on April 25, 2012 and is averaging 1000 - 1,100 bop/d with a 38 - 40% water cut.
  • Quetzal announced that NCT Energy Group C.A. Colombia, as official Operator of the Llanos 27 Block, along with Quetzal and its partners, commenced drilling the Flami-1 well on the Llanos 27 Block in the Llanos Basin of Colombia on April 23, 2012. The well is being drilled with the Saxon 132 1,500 horsepower rig and has a planned total depth of 10,000 feet and drilling is expected to be completed the first week of June. The well is programmed to test the hydrocarbon potential of the Mirador and Une formations with secondary targets being the Carbonera and Gacheta formations. The gross budget for drilling the well is US$10 million with a testing budget of US$4 million. The Company is paying 50% of the gross amount to earn a private participating interest of 45.275% before payout and 34.25% after payout.
  • The Company accepted the resignations of Mr. Steven Austin and Mr. Kevin O'Connor as directors of the Company and at the same time, announced the appointment of Mr. Steve VanSickle and Mr. Doug Manner as directors of the Company. Mr. VanSickle has over 25 years of experience in the Canadian and international oil and gas industry and is currently the President, Chief Executive Officer and a Director of Fairborne Energy Ltd. (a TSX-listed company) and the lead independent director of CUB Energy Inc. (a TSXV-listed company). Mr. Manner has over 35 years of experience in the Canadian and international oil and gas industry and is currently the Chief Executive Officer and a Director of Sintana Energy Corporation (a TSX-listed company).
  • The Company will seek approval at its annual meeting on May 31, 2012 to consolidate issued and outstanding Common Shares on the basis of one post-consolidated Common Share for every 10 pre-consolidation Common Shares. The Board believes that consolidation of the Common Shares should enhance their marketability as an investment and should facilitate additional financings to fund operations in the future. The Consolidation is subject to TSX Venture Exchange (The "TSXV") approval. Subject to obtaining Shareholder and TSXV approval, the 600,764,492 pre-consolidation Common Shares that are currently outstanding would be reduced to approximately 60,076,449 post-consolidation Common Shares.
  • The Company will seek by passing a special resolution at its annual meeting to change the name of the Company to Santa Maria Petroleum Inc.
  • The Company announced that the board of directors has adopted a new incentive share option plan (the "Option Plan") and has granted stock options to purchase an aggregate of 14,937,593 common shares of the Company at a price of $0.10 per share to certain eligible participants. The Options are exercisable for a period of five years from the date hereof and vest as to one-third on each of the first, second and third anniversaries of the date hereof. The Option Plan is subject to approval by the shareholders of the Company and the TSX Venture Exchange and no further stock options may be granted until such approvals have been received. As of the date hereof, the Company has granted Options to purchase an aggregate of 24,587,559 common shares of the Company.

Forward Looking Statements - Certain information set forth in this news release may contain forward-looking statements that involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the control of Quetzal, including, but not limited to the impact of general economic conditions, industry conditions, volatility of commodity prices, risks associated with oil and gas activities, currency fluctuations, dependence upon regulatory approvals, the availability of future financing and exploration risk. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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