Calgary and Houston - October 21, 2019-PetroTal Corp. ("PetroTal" or the "Company") (TSX-V: TAL and AIM: PTAL) is pleased to provide an update in respect of its operations and production at the Bretaña oil field in Block 95 in Peru (100% working interest). All monetary amounts in this release are in United States dollars.
· Completed the BN 95-4H ("4H") horizontal well on time and under budget by approximately $3.0 million using new technology to maximize oil production
· 4H initial four-day production rate of 6,200 barrels of oil per day ("BOPD"), exceeding management's expectations
· Bretaña reached new record production of over 8,000 BOPD, with three of five wells online
· Current Bretaña field production of approximately 7,800 BOPD
· Interim upgrades to production facilities increased production capacity to 7,500 BOPD
· Spud the BN 95-5H ("5H") well, which will be the Company's second horizontal development oil well
PetroTal has successfully completed the 4H well, the Company's first horizontal well in the Bretaña oil field. The well had an approximately 500-meter lateral completion utilizing autonomous inflow control device ("AICD") valves to maximize oil production. Initial production from the well during the first four days of production was 6,200 BOPD. The 4H well was drilled updip towards the crest of the structure and provided data to confirm management's analysis of the reservoir. The well was drilled under budget by approximately $3.0 million (representing 20 percent savings), which will expedite payout of the well. The Company will announce additional well data, including sustained rates, with its quarterly financial filings and operations update in November 2019.
During the third quarter, the Company upgraded the production facilities, expanding PetroTal's production capacity to over 7,500 BOPD. The Company plans to commission phase one of its central production facilities for Bretaña ("CPF-1") in December 2019, which will increase full field production capacity to over 10,000 BOPD. Incremental implementation of phase two of the Company's production facilities ("CPF-2") is planned for July 2020. When CPF-2 is fully integrated by year-end 2020, PetroTal will have the capacity to produce up to 20,000 BOPD. Facility expansion is being implemented on a modular basis to time facilities with well completions to most efficiently deploy capital.
As a result of the Company's successful drilling campaign in Block 95 to date, the Board of Directors has approved an additional $19.0 million of capital expenditures for 2019. Approximately $14.0 million will be deployed to drill and complete the 5H well, which will target updip oil to the northern portion of the structure; and $5.0 million will be directed to bring additional production facilities to the field by mid-2020, as an interim step to installing CPF-2 by year-end 2020. The Company expects the interim capital spent will yield an additional 5,000 BOPD of capacity in mid-2020. As mentioned above, the CPF-2 should bring total field oil production capacity to 20,000 BOPD by year end 2020.
Once completed, the 5H well will be the Company's second horizontal well. Production from the well is expected to help the Company achieve a targeted exit rate of 10,000 BOPD at year-end 2019. The 5H well will also be completed with AICD valves in the lateral section. The well is expected to come online simultaneously with the facilities commissioning at year-end. The Company plans to drill a second water disposal well in January 2020 as part of a new capital budget once approved by the Board of Directors.
Management expects to fund the 2019 additional capital spending with existing working capital and cash flow from operations. As of September 30, 2019, the Company has cash and cash equivalents of approximately $40.0 million. The Company produced approximately 4,800 BOPD in the fiscal third-quarter. Management expects average above 6,500 fourth quarter production above 6,500 BOPD, a projected increase of over 35 percent over the third quarter average.
Manolo Zuniga, President and Chief Executive Officer, commented:
"Our drilling campaign continues to yield excellent results. The strong initial production from the 4H well validates our development plan. Our first horizontal well completion will provide significant data and the AICD valve will bring more oil into the wellbore. We are please to announce a number of recent milestones: 500 days of production, more than 1 million barrels of oil produced and new record production of over 8,000 BOPD (from only three wells as the production facilities reached the upper limits of capacity). Our team is doing an outstanding job in its drilling and capital discipline. As a result, we asked the Board for additional capital to continue our development drilling program and make facility upgrades to sustain oil production of over 10,000 BOPD. This additional capital will allow the Company to reach free cash flow generation faster and see our future drilling campaign funded from cash flow.
Capital discipline is key, and having stressed that from day one, we have seen the teams in Houston, Lima, and the field execute at a high level and in a safe and environmentally friendly manner. To save twenty percent on a single well is a very strong achievement. Our Board's approval of the additional capital to continue the development drilling campaign through year-end is testament to solid execution and ongoing capital efficiency.
Facilities to enable us to attain the 10,000 BOPD mark are scheduled to be commissioned in December 2019. The 5H well will help sustain oil production through the first quarter of 2020 which is key as our next well will be an additional water disposal well in early 2020 to provide assurance in the field. As part of the capital raise completed in May 2019, we promised to drill the 5H well and to drill a second water disposal well to provide assurance to production at Bretaña, and that is what we are delivering."