ArPetrol Ltd. Announces Third Quarter 2011 Financial Results and Initiates Redevelopment of Faro Virgenes

CALGARY, Nov. 28, 2011 /CNW/ - ArPetrol Ltd. ("ArPetrol" or the "Company") (TSX-V: RPT) is pleased to announce the highlights of its unaudited interim financial and operating results for the three-and nine-month periods ended September 30, 2011 and to provide an operational update on activities this year to date as well as an outlook for the remainder of the year. The complete quarterly reporting package for the Company, including the unaudited interim condensed consolidated financial statements and associated management's discussion and analysis, have been filed on SEDAR at www.sedar.com and posted on the Company's website at www.arpetrol.com.

All dollar amounts stated are in Canadian currency.

Third Quarter 2011 Highlights

Operating and Financial

The Company remains well financed with $37 million of working capital as at September 30, 2011 and no long-term debt.  This working capital will fund our operations through to the end of 2012.  We also continue to look to expand our asset base in the Austral and Neuquén basins.

During the third quarter of 2011, the Company's production through its Argentine subsidiary averaged 309 barrels of oil equivalent (boe) per day.  This is an increase of 21 boe per day over the second quarter of 2011 and came after the successful resolution of processing interruptions.  Third-quarter volumes were down year-on-year from 413 boe per day for the third-quarter of 2010 due to natural declines.

The Company continues to realize higher prices for its production over prior periods.  For the third quarter of 2011 the average price received for its natural gas was $2.19 per thousand cubic feet (Mcf), significantly higher than the $1.61 per Mcf received in the third-quarter of 2010.  This increase is due to the Company receiving Gas Plus incentive program approval in August of 2010, thereby avoiding redirection of its production to the lower priced residential market.  Third-quarter 2011 natural gas prices were lower than the prior quarter when we received $2.47 per Mcf.  This variance in price is part of the yearly cycle of pricing in Argentina.

For the third-quarter of 2011 the Company received on average $65.45 per barrel for its natural gas liquids, 11% higher than the $59.08 per barrel received in the second-quarter of 2011 and 132% higher than the $28.22 per barrel received in the third-quarter of 2010.  This rise in the realized price of natural gas liquids reflects both an increase in the general market price and a change to the Company's marketing strategy in late 2010.

Processing revenue in the third-quarter of 2011 was $350,712 compared to $408,468 for the second quarter and $532,856 for the third quarter of 2010. Processing revenue to date in 2011 continues to be affected by the September 2010 disruption at the third-party facility which ships gas to the Company's gas plant for processing. The disruption was partially rectified in January 2011 but is not expected to be fully resolved until December 2011.  The Company realizes part of its processing revenue through the sale of natural gas liquids and the increase in the liquids price helps offset some of the effect of reduced third-party volumes.

Operating costs for the third-quarter of 2011 were $843,509 compared to $952,644 for the second-quarter and $608,157 for the third-quarter of 2010. Operating costs in Argentina are affected by the country's general inflation rate of 20-25 percent annually. Along with the inflation rate, operating costs in 2011 increased due to compressor repairs and higher camp costs.

The production, price, processing and operating factors mentioned above resulted in field netbacks in the third-quarter of 2011 of negative $88,345 compared to netbacks of negative $134,172 in the second-quarter and positive $263,203 in the third-quarter of 2010.  (Field netback is a non-IFRS measure -see the advisory under "Non-IFRS Measures" at the end of this news release.)

Summary of Results

  Q3 2011     Q2 2011     Q3 2010
Financial (Cdn$ except shares outstanding and per boe1 amounts)              
               
Production sales 490,409     493,307     417,152
Processing revenues 350,712     408,468     532,856
Funds flow from operations 1 (1,099,790)     (1,146,074)     (321,763)
Cash generated from operating activities (1,338,856)     (2,418,256)     (34,156)
Net loss and comprehensive loss 759,316     1,628,475     3,882,391
Capital expenditures 386,061     407,254     114,388
Weighted average shares outstanding (millions)              
   - basic and diluted 572.5     572.2     204.4
               
Operations              
               
Production              
    Natural gas - Mcf per day 1,710     1,572     2,302
    Natural gas liquids - bbls per day 24     26     30
    Total - boe per day 1 309     288     413
               
Average sales price              
   Natural gas - $ per Mcf 2.19     2.47     1.61
   Natural gas liquids - $ per bbl 65.45     59.08     28.22
               
Average operating netback              
    Production - $ per boe 1 5.16     4.63     2.90
    Processing - $ per Mcf  processed 1 (0.12)     (0.10)     0.03

Note:1. See advisories at the end of this news release with respect to non-IFRS measures and BOE presentations.

Operational Update and Outlook

The Company has initiated a two well redevelopment drilling program on its 100% owned Faro Virgenes Concession and plans to spud the first well under this program in Q1 2012.  Each well is expected to take 45 days to drill and is expected to have an initial production rate in excess of 6 MMcf per day.

The Company expects the disruption at the third-party facility which ships gas to the Company's gas plant to be resolved in December 2011. This should allow the delivery of third-party gas for processing at the Company's gas plant to return to the previous throughput of approximately 76 MMcf per day versus the average processing through-put of 22 MMcf per day for the third-quarter of 2011.

The Company commenced its exploration program on its operated lands on the Blanco de Los Olivos Oriental ("BOO") and Catriel Viejo Sur ("CVS") permits in the Rio Negro province of the Neuquén Basin in Argentina.  The Company has just completed the drilling of its first well in its three to four well program.  The well had gas shows, but the zones were deemed to be non-commercial, and the Company and its partner have decided to plug and abandon the well.

In addition to the conventional targets, ArPetrol will also evaluate shale oil potential by taking a core sample and by completing a full log evaluation of the lower Vaca Muerta zone on its 55km2 CVS permit, which is located approximately 60 km northeast of the Yacimientos Petrolíferos Fiscales (YPF) shale oil well drilled in the Loma La Lata field.

The Company has a 20% operated working-interest in the BOO and CVS permits, which can be increased to a 50% working interest by paying back costs following drilling of the first well on each block.

In respect of the foregoing operational plans, as of September 30, 2011 ArPetrol had approximately $37 million of working capital available to fund its work programs through the end of 2012. Capital expenditures for 2011 are estimated at $5.4 million, depending on the results from the exploration wells to be drilled in the fourth quarter. The 2012 capital budget has been approved at $25 million to cover the redevelopment program.  The Company is targeting an exit rate for 2012 production in the range of 2500 to 3000 boe per day, depending on the results of the drilling program.

In October Presidential elections were held in Argentina and the incumbent President was re-elected.  Following the election a change in legislation was made that requires oil, gas and mining exporters to repatriate export revenues to Argentina. As the Company's business model has always assumed only internal markets for oil and gas production, this change is not considered material to the Company.  ArPetrol continues to believe that market pricing for oil and gas will steadily increase in Argentina as subsidies are removed and market forces prevail.

Business Development

The Company believes that Argentina offers a wide range of growth opportunities. A number of alternatives are under evaluation which would be complementary to the current portfolio of assets. Management continues to be approached by companies attracted by ArPetrol's experienced management and Board of Directors as well as its strong balance sheet. While Argentina is its prime area of interest, the Company may pursue acquisitions in other Latin American regions on an opportunistic basis.

About ArPetrol Ltd.

The Company is a Calgary-based publicly traded company currently engaged in oil and natural gas exploration, development and production and third-party natural gas processing in Argentina where it also owns and operates a gas processing facility with capacity of 85 million cubic feet (MMcf) per day.

The Company is the resulting entity from the business combination of the Company (formerly RPT Resources Ltd. ("RPT") and ArPetrol Inc. (now ArPetrol Holdings Inc., a wholly owned subsidiary of the Company) completed in the first quarter of 2011. This business combination is described further in the Company's interim condensed consolidated financial statements as at and for the period ended September 30, 2011. The Company's Common Shares are listed on the TSX Venture Exchange under the symbol "RPT".

Non-IFRS Measures

This news release includes references to financial measures commonly used in the oil and natural gas industry. The terms "field netback" (production and processing revenue less royalties, turnover taxes and operating expenses) and "funds flow from operations" (cash generated from operating activities before changes in refundable Argentinean tax, non-cash working capital, and translation adjustment on operating items) do not have any standardized meaning under International Financial Reporting Standards ("IFRS")  and may not be comparable with similar measures presented by other companies.  Funds flow from operations should not be considered an alternative to, or more meaningful than, cash generated from operating activities, net income (loss) or other measures determined in accordance with IFRS, as an indicator of the Company's performance.

See the management's discussion and analysis for the three and nine months ended September 30, 2011, filed on SEDAR at www.sedar.com and on the Company's website, for further discussion, including a reconciliation of funds flow from operations to cash generated from operating activities which is the most directly comparable measure calculated in accordance with IFRS.  There is no IFRS measure that is reasonably comparable to field netbacks and a detailed calculation of such netbacks is presented in the "Results of Operations" section.

BOE Presentation

Production information is commonly reported in units of barrels of oil equivalent (boe). For purposes of computing such units, natural gas is converted to equivalent barrels of oil using a conversion factor of six thousand cubic feet (mcf) to one barrel (bbl). This conversion ratio of 6:1 represents energy equivalency, which is primarily applicable at the burner tip, and does not represent a value equivalency at the wellhead. Such disclosure of boe may be misleading, particularly if used in isolation.

Forward-Looking Information

This news release contains certain forward‐looking statements relating, but not limited, to operational information, targeted production rates, anticipated processing volumes, expected capital expenditures, drilling plans and the timing associated therewith. Forward‐looking information typically contains statements with words such as "anticipate", "target", "estimate", "expect", "potential", "could", "should", or similar words suggesting future outcomes. The Company cautions readers and prospective investors in the Company's securities not to place undue reliance on forward‐looking information as, by its nature, it is based on current expectations regarding future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially from those anticipated by the Company.

Forward-looking information is based on management's current expectations and assumptions regarding, among other things, plans for and results of future transactions, the resolution of disruptions at the third party facility that ships gas to the Company's plant and the expected increase in throughput and processing revenues, future drilling activity and  production rates, future capital and other expenditures (including the amount, nature, timing and sources of funding thereof), future production and processing revenue, future economic conditions, future currency and exchange rates, continued political stability in the areas in which the Company is operating, receipt of necessary government approvals in a timely fashion and the Company's continued ability to obtain and retain qualified staff and equipment in a timely and cost-efficient manner. Although the Company believes the expectations and assumptions reflected in such forward‐looking information are reasonable, they may prove to be incorrect.

Forward‐looking information involves significant known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from those anticipated by the Company, including but not limited to risks associated with the oil and natural gas industry (e.g., operational risks in exploration and drilling; inherent uncertainties in interpreting geological data; changes in plans with respect to exploration or capital expenditures; the uncertainty of estimates and projections in relation to costs and expenses; and health, safety and environmental risks), weather delays and natural disasters, processing interruptions and natural declines, disruptions at third party facilities, union activities, the risk of commodity price and foreign exchange rate fluctuations, the risk of changes in legislation and fiscal regimes, the uncertainty associated with negotiating with third parties (including governments) in countries other than Canada and other risks associated with international activity.

In addition, statements relating to "reserves" contained from time to time in the Company's continuous disclosure documents including some of its press releases are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions which are subject to change, that the resources described can be economically produced in the future.  In respect of the estimate of prospective resources, there is no certainty that any portion of the resource will be discovered.  If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.  Terms related to reserve classifications referred to herein are based on the definitions and guidelines in the Canadian Oil and Gas Evaluation Handbook. The Company's information circular, filed on SEDAR at www.sedar.com and dated February 14, 2011, contains detail with respect to the Company's reserves estimates and the independent report prepared by Gaffney, Cline & Associates dated February 7, 2011 and effective December 31, 2010, auditing the reserves attributable to the principal properties of the Company in Argentina.

The forward‐looking information included herein is expressly qualified in its entirety by this cautionary statement. The forward‐looking information included herein is made as of the date hereof and the Company assumes no obligation to update or revise any forward‐looking information to reflect new events or circumstances, except as required by law.

Additional information relating to the Company is also available on SEDAR at www.sedar.com.

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

SOURCE ArPetrol Ltd.

For further information:

Tim Thomas, President and Chief Executive Officer
t.thomas@arpetrol.com

Or

Ian Habke, Chief Financial Officer
i.habke@arpetrol.com

ArPetrol Ltd.
Main Phone: 403-263-6738

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ArPetrol Ltd.

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