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PetroTal - Fully funded 2020 Capital Budget of US$99 million

Calgary and Houston - January 21, 2020-PetroTal Corp. ("PetroTal" or the "Company") (TSX-V: TAL and AIM: PTAL), the Peruvian focused E&P company, is pleased to announce its 2020 capital program of US$99 million, expected to be fully funded with funds generated from operations and existing cash resources.  This capital program will allow PetroTal to become a free cash-flowing company and reach 20,000 barrels of oil per day ("bopd") from the Bretaña oil field, operated 100% by PetroTal, before year-end 2020.  All amounts are quoted in US dollars. 


HIGHLIGHTS:


-     Drill four horizontal oil production wells and a second water disposal well.


-     Accelerate commissioning of the second phase of central processing facilities ("CPF-2") to late August.


-     Triple last year's average production to 13,500 bopd.


-     Target a 2020 exit rate of 20,000 bopd.


2020 CAPITAL BUDGET


Based on the successful results of the most recent horizontal wells (5H and 4H), PetroTal will drill four new horizontal oil production wells in 2020 and a second water disposal well.  The new horizontal wells will have an average cost of $13 million per well, and will include longer lateral sections (more than 1,000 meters) in addition to being completed with automatic inflow control devices ("AICD").  To accommodate associated water production, another water disposal well will be drilled in the western flank of the field at a cost of $9 million, inclusive of a coring program to further refine Bretana's oil-in-place estimates. 


Based on the Company's operating experience of optimizing oil production rates in excess of nameplate facility capacities, CPF-2 is now designed for a nominal processing capacity of 15,000 bopd.  This will enable total field facility capacity to handle approximately 24,000 bopd.  It will also reduce the CPF-2 estimated investment to $22 million, leading to a saving of approximately $5.5 million from the original estimate.  Enhancements to the loading dock to handle larger oil volumes and optimal integration of the CPF-1 and CPF-2, will require $9 million.  Fast tracking CPF-2 to commence commissioning by late August will allow us to achieve our average oil production target along with handling increased oil production coming from the new horizontal oil wells to be drilled in 2020.


The remaining capital investments include the environmental drilling permit for the Constitucion prospect in Block 107, an environmental seismic permit over the Envidia prospect and a couple of other leads in Block 95, as well as abandonment costs for a legacy asset in accordance with regulatory obligations.  Approximately $8 million of the 2020 Capital Budget represents projects carried forward from 2019, with about $4 million carried forward for the completion and commissioning of the CPF-1.   


PRODUCTION GUIDANCE


With this capital program, the Company expects 2020 average production to range between 12,500 bopd and 14,500 bopd with an average target of 13,500 bopd, representing a 227% increase from the 2019 average production of 4,131 bopd, and 74% above the Q4 2019 average production of 7,757 bopd.  The 2020 exit production rate is expected to be 20,000 bopd, a significant increase from the 2019 exit rate of 13,300 bopd.


In the first half of 2020, the Company will drill one new oil production well and one water disposal well after the drilling rig has completed its annual maintenance program; resulting in expected production for the first half to average 10,750 bopd, ranging between 10,000 bopd and 11,500 bopd.  This represents a 35% increase from the Q4 2019 oil production average.  In the second half of 2020, the Company will drill three new oil production wells and expects that average production will increase to 16,500 bopd, ranging between 15,500 bopd and 17,500 bopd.


CAPITAL PROGRAM FUNDING


Based on this production guidance and utilizing an average forward strip Brent oil price of $61.60 per barrel, the Company expects to fully fund the 2020 capital program with funds generated from operations and available cash resources; setting the stage to become a free cash flowing company by year-end 2020.


Manolo Zuniga, President and Chief Executive Officer, commented:


"We are pleased with the success the Company has achieved to date developing the Bretaña oil field and plan to build on that success in 2020.  PetroTal's Board has approved the 2020 capital budget which is similar in scope to last year. and we are confident in our ability to execute it.  With each new well drilled, we better understand the underlying reservoir, thereby enhancing our confidence in continued, focused growth in our two Peruvian blocks.  The current and expected oil production levels provide a solid base which optimizes our cost structure and generates significant funds from operations. 


Building on the 2018 goal of putting the original oil well online in just five months, 2019 became a successful catalyst year for determining the oil fields' capacity for strong organic growth.  2020 is the year we expect to grow into a Company with long term production and cash flow stability.  PetroTal remains committed to bring about a beneficial change for the populations within its scope of influence in the region.  I sincerely thank the entire PetroTal team and Board, as well as all our shareholders, for their continued support.

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