BPZ has announced the signing of a new crude oil sales contract with PetroPeru for approximately 17 million barrels of oil, with an estimated total contract value of $1.3 billion. Oil supplied under the contract will be delivered from the Company's Corvina field to the State-owned Talara refinery. The contract has an approximate term of seven years.
However, the Company expects that commodity price fluctuations and production levels will determine the actual number of barrels sold and the corresponding term of the contract. Corvina is located in the Company's offshore Block Z-1 in northwest Peru approximately 100 miles north of the Talara refinery.
For budgetary purposes, PetroPeru assigned the contract a referential value of approximately $1.3 billion, including the applicable value added tax of 19%, based on an estimated forward average price of approximately $65 per barrel. Corvina's actual oil sales price will be equivalent to a basket of crude oils based on a 15-day average of Forties, Oman, and Suez blend crude oil prices, as quoted in the Spot Crude Prices Assessment published in Platt's Crude Oilgram Price Report, minus $1 per barrel. As in most crude oil sales contracts, Corvina's oil would need to meet certain specifications and a penalty would be applied to the per barrel price if the crude oil doesn't meet the minimum contract requirements. Invoices are to be presented on the first business day after the 1st and 15th of every month, and be paid ten days later.
Manolo Zuniga, BPZ Energy's President and Chief Executive Officer commented, "This long-term contract gives us a secure market for the sale of oil from our Corvina field. The oil production we are achieving through the current long-term testing program has also allowed us to continue appraising the field and for the refinery to assess the refined oil products derived from our Corvina crude oil which, due to its high middle distillate composition, has resulted in a lesser price discount against West Texas Intermediate prices. This long-term contract is another important piece on our ongoing growth and development, as well as providing support to our pending financing with Natixis, indicating that the Company has delivered exploration success which benefits Peru, BPZ, and our shareholders."
The Company intends to file the translated executed contract in its entirety with the Securities and Exchange Commission in a future filing.
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