Petroamerica Announces Third Quarter Results with Highlights on Balay Oil Production Revenue and the Las Maracas Light Oil Discovery

TSXV: PTA

CALGARY, Nov. 24, 2011 /CNW/ - Petroamerica Oil Corp. ("Petroamerica" or the "Company"), a company focused on oil exploration and production in Colombia, is pleased to announce the financial and operating results for the quarter ended September 30, 2011. Copies of the Company's Management Discussion and Analysis ("MD&A") and Financial Statements have been filed with the Canadian Securities Regulatory Authorities and can be viewed or downloaded at the Company's website at www.petroamericaoilcorp.com or at www.sedar.com.

Third Quarter highlights include:

(all balances in Canadian dollars, unless otherwise noted)

  • Revenue, after royalty, from Balay oil sales of $2.5 million for the third quarter and $5.0 million for the year-to-date;
  • Quarterly oil production of 512 barrels of oil per day ("bopd") net after royalties ("NAR");
  • Sales price of US $104.10 per barrel, generating an operating netback of approximately US $62 per barrel;
  • Discovered light oil with the Las Maracas-2 Sidetrack well, producing on test up to 938 bopd of 37o API oil from the Mirador Formation;
  • Spud the Balay-3 well on September 8, 2011 with results expected late in the fourth quarter of 2011 or early in 2012;
  • Completed the acquisition of 237km2 of 3D seismic on block LLA-10 delineating prospects for drilling;
  • Farmed out 50% of the Company's working interest in the Los Ocarros block in return for a carry on the Las Maracas-2 Sidetrack well;
  • Signed a sale and purchase agreement to divest Petroamerica's 50% contractual rights in the VMM-3 exploration block for a consideration of US $7 million and cancellation of the Company's exploration commitments;
  • Increased the Company's working interest in the El Eden block, excluding the Chiriguaro oil discovery, from 25% to 75% at no cost and subsequently farmed out 35% for US $3.5 million and a carry on the next exploration well, thereby reducing the Company's final working interest to 40%;
  • Acquired a 50% participating interest in the Chiriguaro discovery area in the El Eden block;
  • Relinquished the Company's interest in the El Sancy block at no cost;
  • Adopted a Shareholder's Rights Plan, which is to be ratified by the shareholders at the upcoming Annual General and Special Meeting on November 29, 2011.

The following table presents the highlights of Petroamerica's financial and operating results for the three and nine months ended September 30, 2011 and 2010.


 

 

 

 

 

 
    Three Months Ended Nine Months Ended
Highlights   September 30 September 30
(in $000 except share and per share and per barrel amounts) 2011 2010 2011 2010
           
Oil revenue net of royalties $2,506 $- $5,038 $-
Total sales volumes bbls 29,900 - 55,500 -
Average selling price US$/bbl $104.10 $- $105.76 $-
Average production cost US$/bbl $26.33 $- $30.31 $-
Loss for period   $9,755 $1,589 $28,867 $8,043
Total comprehensive loss $6,799 $1,349 $24,044 $9,064
Loss per share - Basic and Diluted $0.02 $0.01 $0.06 $0.02
Common shares outstanding  
578,331,594 344,486,094
Weighted average shares outstanding        
Basic and Diluted 578,331,594   344,486,094   504,460,973   346,666,651
Exploration costs   $8,716 $1,815 $22,123 $6,243
Total assets       $98,517 $82,486
Shareholders' equity     $89,333 $72,088
           
Share trading          
   High   $0.185 $0.240 $0.305 $0.040
   Low
$0.060 $0.155 $0.060 $0.060
   Close   $0.075 $0.225 $0.075 $0.075
   Trading volume
12,966,673 18,815,531 70,690,369 90,482,503
           

 


Third Quarter Financial Summary

NAR sales volumes for the third quarter of 2011 averaged 512 bopd. During the third quarter of 2011 the realized sales price was US $104.10 per barrel generating an operating netback of approximately US $62 per barrel. The realized sales price was closer to Brent benchmark pricing and 29,900 barrels of oil was sold generating proceeds of approximately $2.5 million after royalties.

For the third quarter of 2011, the Company's net loss was $9.8 million ($0.02 per share diluted). The Company's funds flow for the current quarter from operating activities increased by $16.5 million over the third quarter in 2010. The Company's capital expenditures for the third quarter were $14.8 million, all invested in Colombia. These capital expenditures were funded from available cash and funds flow from operations.

Operations Update

The Balay-1 and Balay-2 wells continued to produce on long-term test at combined average rates of over 3,700 bopd (512 NAR to the Company). To date, the Company has sold approximately 85,500 barrels and has received over $9.2 million in gross revenue while realizing average prices of over US $105 per barrel. The Balay-3 appraisal well was spud on September 8, 2011 and drilling results are expected late in the fourth quarter of 2011 or early in 2012. The Balay partners are working towards sanctioning the development of the Balay field. The development plan will be executed in two phases and approval of the first phase by the joint venture is expected in the fourth quarter of 2011. The first phase entails the construction of the production facilities and the drilling of two or three additional production wells, beginning in the first quarter of 2012. The second phase of the plan is expected to be approved later in 2012 and may include the drilling of another three producers and an expansion of the fluid handling capacity. The execution of the second phase is conditional on the results of the Balay-3 well and proving up sufficient reserve volumes.

On August 31, 2011 the Company announced the Las Maracas light oil discovery. The original Las Maracas-2 exploratory well reached total depth on June 9, 2011 and was found to be on the edge of a structural closure. On July 4, 2011 Petroamerica announced that it had signed an agreement with Parex Resources Colombia Ltd. Surcusal ("Parex") to farm-out 50% of the Company's working interest in the Los Ocarros block. In return Parex funded the first US $7.0 million to drill a sidetrack from the Las Maracas-2 well. The sidetrack was drilled as an exclusive operation between Petroamerica and Parex who will both share equally the non-consenting party's working interest, or in the event of a back-in, any penalty payment. The sidetrack well was a discovery, producing on test up to 938 bopd of 37° API oil from the Mirador formation. The petrophysical analysis indicates a net oil pay thickness of between 30 to 40 feet with an average porosity of 21%. Drilling to deeper reservoir objectives in the Gacheta and Une Formations within the Las Maracas structure was also planned for the sidetrack well, however, due to operational difficulties these targets were not reached and will be evaluated by the next well to be drilled in the structure. Long-term testing of the discovery well with an electro-submersible pump is planned, and is anticipated to begin early in 2012. An extensive appraisal drilling program for 2012 has been agreed with the partner Parex. Notwithstanding, the non-consenting party has the right to back-in to the discovery, by paying a thousand per cent penalty of its participating interest share of the cost to drill and test the Las Maracas-2 Sidetrack discovery well, for thirty days after the appraisal program is presented, which will occur before the year end.

As part of the Company's strategy to rationalize its portfolio and focus on those blocks capable of delivering near-term value, on August 25, 2011, the Company announced that it had entered into a sale and purchase agreement with Shell Exploration and Production Colombia GmbH (SEPC) Surcusal Colombia ("Shell E&P Colombia"), an affiliate of the Royal Dutch Shell group of companies, to divest its entire 50% contractual rights in the VMM-3 exploration block. Under the terms of this agreement, Shell E&P Colombia will commit to pay the Company a cash bonus of US $7.0 million, replace the US $1.8 million bank guarantee that the Company currently has in place and cancel the Company's first phase exploration commitments which are 2D seismic and one exploratory well to a cap of US $10.7 million. The Company will receive payment following approval by the ANH of the 100 % participating interest transfer and assignment of Shell E&P Colombia as operator of the contract. In the event that any of the conditions are not satisfied, Shell E&P Colombia has the right to terminate the agreement. Due to the outstanding nature of aspects of this agreement, the Company has not recognised the overall financial effect of this transaction in its records for the three and nine months ended September 30, 2011.

On September 27, 2011, Petroamerica announced that it had, through a two-step process, increased its final participating interest in the El Eden block from 25% to 40%. The first step of the process was for the Company to increase its participating interest from 25% to 75%, at no additional cost to the Company, by acquiring an additional 50% participating interest that had been held by another party who was in the process of withdrawing from the block. The second step saw the Company farming out a 35% participating interest to Parex. Under the terms of the farm out, Parex paid the Company US $3.5 million, and will fund the first 65% of an exploratory commitment well on the block. These transfers of participating interests are subject to both Talisman and ANH approvals. The farm out to Parex does not include any interest in the Chiriguaro discovery area, where, with the withdrawal of the other party on the block, the Company and Talisman will each hold a 50% participating interest share.

On September 27, 2011, the Company also announced that due to the poor prospectivity, it had relinquished its 50% participating interest in the El Sancy Block at no additional cost to the Company.

During the month of September 2011, Petroamerica completed the acquisition of 237 km2 of 3D seismic on the LLA-10 Block in October 2011. The data has been processed and several targets have been identified for drilling. The Company is committed to drill one exploration well on this block before September 2012.

Outlook
With Balay-1 and Balay-2 continuing to produce on long-term test the Company is anticipating that it will continue to realize production revenues. Additionally, the Company and partners envisage finalizing the development plan for the Balay discovery, with approval for the first phase expected in the fourth quarter of 2011. Sanctioning of the second development phase will depend on the results of Balay-3 which should enable the joint venture to properly assess the size of the Balay oil discovery.

The Company plans to evaluate and appraise the Las Maracas discovery in 2012. This will include placing the discovery well on long-term test and the drilling of several appraisal wells. Subject to the outcome of the appraisal results, the Company and current partner are committed to fast tracking the development of this discovery. The Las Maracas discovery is viewed to be an extremely positive event for the Company.

The Company will continue its strategy of rationalising the portfolio to leverage some of its high working interest positions into more strategic and cost effective holdings. This strategy, which began with the relinquishment of the COR-12 and COR-14 Blocks early in 2011 and has continued with the sale of the VMM-3 block and equity changes in the El Eden block, is expected to enhance the Company's competitive position by allowing it to free up working capital, recover past costs and to enhance the risk/reward balance of its portfolio. The Company is also considering reducing its working interest positions in the LLA10, CPO1 and SSJN5 blocks.

Furthermore, the Company will participate in an extensive exploration program in 2012 with the drilling of seven exploratory wells targeting net mean unrisked prospective resources of 45 million barrels of oil equivalent ("BOE"). All of the prospects to be drilled in 2012 will be covered by 3D seismic, thereby significantly reducing the exploration risk.

Overall, the 2012 outlook for the Company is expected to be one of rising production and revenues, as the Balay development and Las Maracas appraisal programs get underway, and significant exploration upside exposure by way of a seven well drilling program.

Petroamerica Oil Corp.        
Condensed Statement of Financial Position       
(in thousands of Canadian Dollars)        
(Unaudited)        
    As at   As at
    September 30,   December 31,
    2011   2010
   
   
         
Assets        
  Cash and cash equivalents   $ 18,075 $ 24,112
  Available for sale investments   -   2,832
  Trade and other receivables   5,098   1,170
  Prepayments and deposits   98   162
  Inventories   410   532
  Restricted cash   7,587   9,984
  Property, plant and equipment   15,017   121
  Exploration and evaluation assets   52,232   62,201
Total assets $ 98,517 $ 101,114
         
Liabilities        
  Current tax liabilities $ 368 $ -
  Accounts payable and accrued liabilities   5,462   17,017
  Deferred tax liabilities   2,635   3,932
  Equity tax   719   -
Total liabilities   9,184   20,949
Shareholders' equity        
  Share capital   140,484   114,438
  Contributed surplus   20,306   13,141
  Reserves   1,366   (3,458)
  Deficit   (72,823)   (43,956)
Total shareholders' equity   89,333   80,165
Total liabilities and shareholders' equity $ 98,517 $ 101,114
         

 

Petroamerica Oil Corp.                
Condensed Statement of Income and Comprehensive Income        
(in thousands of Canadian Dollars)                
(Unaudited)                
    Three months ended   Nine months ended
    September 30,   September 30,
    2011   2010   2011   2010
Revenue                
Oil revenue - net of royalties $ 2,506 $ - $ 5,038 $ -
    2,506   -   5,038   -
Expenses                
  Production costs   (788)   -   (1,683)   -
  Exploration and evaluation   (8,717)   (1,816)   (22,124)   (6,243)

Depreciation, depletion & amortization   (541)   -   (992)   -
  General and administration   (1,717)   (1,465)   (5,258)   (4,616)

Share-based compensation   (389)   (325)   (2,901)   (1,136)
  Other   -   -   (1,423)   -
    (12,152)   (3,606)   (34,381)   (11,995)
  Interest income   151   120   528   404
  Gain (loss)on marketable securities   -   52   (1,674)   3,057

Interest and financing fees   (26)   (156)   (169)   (453)
  Foreign exchange gain (loss)   (234)   (460)   193   (1,718)
    (109)   (444)   (1,122)   1,290
  Loss from equity investments   -   -   -   (288)
Loss before income taxes   (9,755)   (4,050)   (30,465)   (10,993)
Current income tax   -   -   -   -
Deferred tax (expense)recovery   -   2,461   1,598   2,950
Net loss for the period   (9,755)   (1,589)   (28,867)   (8,043)
Other comprehensive income (loss)                
Reserve on translation of and on net investments in foreign operations   2,956   (289)   3,539   469
Net change in fair value of available-for-sale investments   -   529   1,284   (1,490)
                 
Other comprehensive income (loss)   2,956   240   4,823   (1,021)
                 
Total comprehensive (loss) $ (6,799) $ (1,349) $ (24,044) $ (9,064)
                 
Basic and diluted loss per share $ (0.02) $ (0.01) $ (0.06) $ (0.02)
Weighted average number of basic and diluted common shares outstanding   578,331,594   344,486,094   504,460,973   343,666,651
                 

Petroamerica Oil Corp.          
Condensed Statement of Changes in Equity      
(in thousands of Canadian Dollars, except per share amounts)        
(Unaudited)            
             
  Nine months ended Year ended Nine months ended
  September 30, 2011 December 31, 2010 September 30, 2010
  Number $ Number $ Number $
Share capital        
 
Balance, beginning of period 418,362,094 $114,438 342,254,094 $90,983 342,254,094 $90,983
Issued pursuant to private placements 157,999,500 25,347 71,875,000 21,993 - -
Exercise of stock options 1,970,000 699 4,233,000 1,462 2,232,000 769
Share capital, end of period 578,331,594 $140,484 418,362,094 $114,438 344,486,094 $91,752
             
Contributed surplus            
Balance, beginning of period   $13,141   $6,376   $6,376
Issued pursuant to private placements   4,469   4,461   -
Exercise of stock options   (206)   (583)   -
Stock-based compensation   2,901   2,887   938
Contributed surplus, end of period   $20,305   $13,141   $7,314
             
Reserves      
   
Balance, beginning of period   $(3,457)   $(251)   $(251)
Other comprehensive income(loss)   4,823   (3,206)   (1,021)
Reserves, end of period   $1,366   $(3,457)   $(1,272)
             
Deficit            
Balance, beginning of period   $(43,956)   $(17,664)   $(17,663)
Loss for the period   (28,867)   (26,292)   (8,043)
Deficit, end of period   $(72,823)
$(43,956)   $(25,706)

 

Petroamerica Oil Corp.                
Condensed Statements of Cash Flows      
       
(in thousands of Canadian Dollars)                
(Unaudited)                
    Three months ended   Nine months ended
    September 30,
  September 30,
                 
    2011   2010   2011   2010
Operating Activities                
Net loss for the period $ (9,755) $ (1,589) $ (28,867) $ (8,043)
Items not involving cash:                

Share-based compensation   389   324   2,901   1,198
  Depreciation, depletion & amortization   541   -   992   -

               
  Loss from equity investments   -   -   -   288
  Loss (gain) on marketable securities   -   (52)   1,674   (3,057)

               
  Deferred income tax recovery   -   (2,461)   (1,598)   (2,950)
  Unrealised foreign exchange loss   2,981   260   3,936   1,608
  Impairment of exploration & evaluation assets     4,104   -   6,754   -
                   
Net changes in non-cash working capital balances:              
  Changes in trade and other receivables   5,602   (1,202)   (4,370)   (1,699)
  Changes in prepaid and other deposits   (1,174)   -   63   -
  Changes in inventories   221   (551)   122   (551)
  Changes in accounts payable & accruals   5,553   (2,749)   3,660   (2,744)
Cash (used) in operating activities   8,462   (8,020)   (14,733)   (15,950)
Investing activities                
Exploration & evaluation expenditures   (9,339)   (1,059)   (14,478)   (3,599)
Property, plant and equipment   (5,479)   -   (5,520)   -
Interest received   173   -   441   -
Payment for assets relinquished   -   -   (6,800)   -
Restricted cash investments   -   -   2,300   (2,290)
Short-term investments   -   -   -   18,000
Proceeds on marketable securities   -   91   2,441   2,853
Cash (used in) provided by investing activities   (14,645)   (968)   (21,616)   14,965
Financing activities                
Proceeds on exercise of stock options   -   -   493   510
Issuance of shares, net of costs   -   -   29,816   -
Loan to Petro Vista   -   3,043   -   5
Cash (used in) provided by financing activities   -   3,043   30,309   515
                 
Effect of foreign exchange rate on cash held   2   7   3   82
Increase (decrease) in cash during the period   (6,181)   (5,938)   (6,037)   (388)
Cash and cash equivalents, beginning of period   24,255   9,241   24,112   3,691
                 
Cash and cash equivalents, end of period $ 18,074 $ 3,303 $ 18,074 $ 3,303

 

Petroamerica is a junior oil and gas company operating in Colombia and its shares are listed on the TSX Venture Exchange under the symbol "PTA".

Forward Looking Statements:

This news release includes information that constitutes "forward-looking information" or "forward-looking statements". More particularly, this news release contains statements concerning expectations regarding the timing of test results from the Balay-3 well, regulatory and partner approvals on the Company's development plan, drilling and operational opportunities and production revenues in addition to the potential exploration and development opportunities and expectations regarding regulatory approval and the strategic direction of the Company. The forward-looking statements contained in this document, including expectations and assumptions concerning the obtaining of the necessary regulatory approvals, including ANH approval, and the assumptions, opinions and views of the Company or cited from third party sources, are solely opinions and forecasts which are uncertain and subject to risks. A multitude of factors can cause actual events to differ significantly from any anticipated developments and although the Company believes that the expectations represented by such forward-looking statements are reasonable, undue reliance should not be placed on the forward-looking statements because there can be no assurance that such expectations will be realized. Material risk factors include, but are not limited to: the inability to obtain regulatory approval, including ANH approval, for the transfer of participating interests, the risks of the oil and gas industry in general, such as operational risks in exploring for, developing and producing crude oil and natural gas, market demand and unpredictable shortages of equipment and/or labour; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; fluctuations in oil and gas prices, foreign currency exchange rates and interest rates, and reliance on industry partners.

Neither the Company nor any of its subsidiaries nor any of its officers, directors or employees guarantees that the assumptions underlying such forward-looking statements are free from errors nor does any of the foregoing accept any responsibility for the future accuracy of the opinions expressed in this document or the actual occurrence of the forecasted developments.

The forward-looking statements contained in this document are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

BOE may be misleading, particularly if used in isolation. A BOE conversion ratio of 6,000 cubic feet:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Neither the 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.

 

 

 

 

SOURCE Petroamerica Oil Corp.

For further information:

Nelson Navarrete  Colin Wagner
President and CEO CFO
Petroamerica Oil Corp. Petroamerica Oil Corp.
   
Tel: 57-1-629-3534 Tel: 403-237-8300
Email: investorrelations@pta-oil.com Email: investorrelations@pta-oil.com

 

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Petroamerica Oil Corp.

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