WTI (June) $78.38 -10c, Brent (July) $83.16 -17c, Diff -$4.78 -17c
USNG (June) $2.21 +1c, UKNG (June) 74.75p -2.75p, TTF (June) €30.67 -€1.145

Oil price

The duel effects of a ceasefire and also an overnight attack on Rafah have either balanced each other out or the attack was a relatively modest affair if one can say that about anything like that. Oil is getting used to not much bother either way and has retreated 50% from the recent high. 

The API stats were poor, crude built 509/- barrels against the whisper of a 1.43m draw but perhaps more importantly was the gasoline build of 1.46m b’s, which three weeks ahead of Memorial Day and the start of the driving season is indicating a concern about demand. Finally with the White House announcing that they were going to buy back some of the barrels they sold from the SPR the bulls heaved a sigh of relief.

PetroTal Corp

PetroTal has announced the execution of a definitive agreement  to acquire a 100% working interest in Peru’s Block 131, including the producing Los Angeles field, through the acquisition of CEPSA Peruana, S.A.C, which represents the entire Peruvian business unit of Compania Española de Petroleos S.A.U, for a purchase price of approximately $5.0 million in cash, subject to adjustment as set forth in the Acquisition Agreement.

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented: 
“This is PetroTal’s first acquisition since entering Peru in late 2017. This transaction marks an important step forward in delivering on our ongoing growth vision. The assets being acquired are synergistic, highly accretive to the Company’s current operations and we have immediate plans for development once the transaction is complete. All production from the assets is directed to the Iquitos refinery.

Completion of this acquisition will add approximately 900 bopd to our current 18,500 bopd of Bretana production, with the potential for further upside in the near to medium term. Furthermore, our operational team is assessing the potential upside in the deeper zones of the Los Angeles field, that were previously penetrated but were not tested. Finally, the location of Block 131 is of strategic importance, as it is connected by a 130km highway to the Company’s Block 107 prospect. We look forward to announcing further updates on this acquisition process in due course.”

For not a great deal of money invested, this acquisition serves up a useful synergistic add-on to the existing production from the Bretana field, but make no mistake it is for its almost immediate plans for development that has such potential upside. 

Sure it adds light oil, albeit only 900 b/d but even that has attractive side effects of being able to be cohered with the heavier Bretana crude but the deeper zones of the field offer up a significant opportunity from previous drilling and could add to the current production.  

In summary this is a perfectly good acquisition which is meat and drink for PetroTal who can add a combination of the production and upside from this deal and participate in the upside which could be substantial. I would expect more of the same if they were available.

The assets to be acquired, pursuant to the Acquisition, are currently producing approximately 900 barrels of oil per day from four wells previously drilled into the Cretaceous aged Cushabatay sand at the Los Angeles field. With strong aquifer support, these wells are producing with a low base decline profile, high recovery factor, and at a 40-45º API oil quality. The Company’s expectation is for near term development and production growth from this block.

Strategic Rationale

Management and the Board of PetroTal believe the Acquisition provides the following strategic attributes:

• Low-cost light oil reserve additions with upside potential.

Recoverable reserves estimated between 3.0 and 4.9 million barrels of oil (“bbls”);

• Iquitos Refinery capacity synergies. Block 131’s light oil production will allow PetroTal to increase the sales capacity of heavier Bretana crude through Iquitos and allow more oil to be sold in dry river conditions; and,
• Netback enhancements. From the combined lighter oil mix sold to Iquitos, lower Brent differentials can potentially be realized.

Operational Strategy

PetroTal’s management team have identified three near term low risk operational initiatives at Block 131:

• Identification of bypassed oil for low risk horizontal well locations drilled high on structure;
• Potential use of hydraulic pumps (vs ESPs) and optimized tubing to reduce operating costs; and,
• Implementation of an operationally straightforward solution to lower chemical costs from treating asphaltene.

Asset Background

Discovered in 2013, CEPSA Peru’s assets include the Los Angeles oil field on Block 131 (100% working interest), which are all located onshore Peru. At March 31, 2024 the assets have produced a total of approximately 7.6 million barrels. The assets are held under a concession agreement expiring in 2037 and are subject to a 23.9% royalty rate at field production levels under 5,000 bopd with a similar scaling factor as Block 95 above 5,000 bopd. All the crude oil produced is sold to Petroperu, the State-owned oil company, and transported by barge along the Ucayali River, passing by PetroTal’s Bretana oil field, to the refinery in Iquitos.

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