Targeting 2021 average oil production between 11,000 and 12,000 bopd, with a 2021 exit range of 18,000 to 19,000 bopd

• Capital Budget Summary ($ millions)
• Drilling and Completion: $68
• Production Facilities: $13
• Infrastructure and ESG: $17
• Other – Block 107: $2
• Total 2021 Capital Budget: $100

PetroTal Corp., a publicly-traded oil and gas development and production company focused on the development of oil assets in Peru, today announced a 2021 capital program of US$100 million. The program will be fully funded from the recently announced US$100 million bond issue, supplemented with funds generated from operations and existing cash resources.

The drilling focused development program is expected to start in March 2021 and continue through December 2021. The program is designed to enable PetroTal to more than double production from Q1 2021 to Q4 2021, and complete phase two of the highly scalable central processing facility (“CPF-2”) in Q3 2021. All amounts are quoted in US dollars.

2021 Capital Program Highlights

• Drill and complete three horizontal development wells, one deviated production well and a second water disposal well at the Bretana oil field;
• Complete the second phase of CPF-2 in Q3 2021, taking overall fluid production capacity up to 124,000 barrels per day, sufficient to handle 24,000 barrels of oil per day (“bopd”);
• Target average 2021 oil production between 11,000 and 12,000 bopd with a target 2021 exit range of 18,000 to 19,000 bopd,
• Generate cash flow (“EBITDA”) of approximately $90 million, based on a forecast Brent oil price of $50 per barrel flat;
• Total 2021 capital expenditures of $100 million, fully funded from proceeds of the recent $100 million bond issue, funds from operations and existing cash resources; and,
• In addition to ongoing Environmental, Social and Governance (“ESG”) initiatives, PetroTal has allocated over $1 million in operating and capital spending for specific community investments.

2021 Capital Budget

Based on the successful 2019 and 2020 drilling results, PetroTal will spud five new development wells at Block 95 costing approximately $7 million for the deviated well and between $12- $14 million per horizontal well. Four of these oil wells are expected to be producing in 2021, with the fifth well on production in February 2022. A second water disposal well is planned in May at an estimated cost of $9 million, providing an expected 50,000 barrels of water per day of additional disposal capacity and enabling oil production growth beyond 20,000 bopd.

Completion of CPF-2 in Q3 2021 for an estimated $12 million will boost fluid handling capacity to 124,000 barrels per day, sufficient for approximately 24,000 bopd. The additional investment will bring total investment in CPF-2 to $24 million, approximately $4 million less than the original estimate. Extensions to the loading dock to handle larger oil volumes and optimal integration of CPF-1 and CPF-2 will require $3 million. Commissioning CPF-2 for commencement in Q3 2021 is designed to facilitate our Q4 2021 average oil production target of between 16,000 and 17,000 bopd.

Remaining notable capital investments include injection pumps, electrical infrastructure, and various field and security upgrades. These smaller capital items will complement the expected operational pace and fluids growth profile throughout 2021. In addition, a $1 million workover on the 4H well will commence in March that will result in a higher capacity pump being installed. The 4H well has been shut in since late January due to a transformer failure during the commissioning of the new crude oil power generation plant, thereby causing issues with the original pump. With the enhanced capacity pump, the estimated lost production of approximately 100,000 barrels of oil will be recovered in Q3 2021 and will lead to consistently higher production rates and a higher estimated ultimate recovery for the 4H well.

Approximately $1.8 million will be allocated for continued technical and permitting work at Block 107, representing approximately 2% of the 2021 total capital program.

Production Guidance

With this capital program, PetroTal estimates 2021 average production of between 11,000 and 12,000 bopd, an increase from the 2020 average production of 5,675 bopd, and well above the Q4 2020 average production of 6,413 bopd.

The first 2021 development well is expected to be on production in April and increase oil production rates to pre-May 2020 shut-in levels of between 10,500 and 11,500 bopd, inclusive of base reservoir declines. In addition, before the end of June 2021, PetroTal will drill a water disposal well, resulting in H1 2021 average production of 9,000 to 10,000 bopd, equivalent to the Q1 2020 pre COVID-19 rate. Three additional horizontal development wells are expected on production through H2 2021 with the final well of the 2021 program drilled in late 2021 and on production in early February 2022. Production is expected to average between 14,000 and 15,000 bopd in H2 2021.

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
“We are excited about our early achievements in 2021. As a management team, we overcame many unique challenges in 2020 and we are now positioned stronger than before the pandemic. With the successful placement of our three year bond, we can pivot into a forward leaning position operationally and have the financial confidence to execute what we do best, namely development of the Bretana oil field. We believe our approved 2021 capital budget is balanced and paced appropriately to fit our short and long-term targets. Ongoing operational success and financial discipline will allow the Company to be rewarded in a rising oil price environment. We intend for 2021 to be a year of operational excellence as we continue to demonstrate our repeatable organic growth story to the market. Having additional liquidity will also allow our highly experienced technical team to evaluate further opportunities to the benefit of our stakeholders.

2021 will be a defining year for the Company as we look to double production and realize scale and synergies that compete with the best oil plays in the world. I would like to sincerely thank the entire PetroTal team, the Board, our shareholders, and our new bondholders for their continued support in what is an exciting period for PetroTal.”

KeyFacts Energy: PetroTal Peru country profile