PetroLatina, an independent oil and gas exploration, development and production company focused on Latin America, announces its audited final results for the year ended December 31, 2008.
Post Balance Sheet Events
Luc Gerard, Executive Chairman of PetroLatina, commented, "PetroLatina's ongoing drill programme has met with initial success and we are now firmly on track to deliver considerably increased production, cash flow and reserves in the near future. Our cost saving initiatives introduced in the year will have a material impact on future profitability and we are focused on delivering significantly improved results to shareholders in 2009 and beyond."
I am pleased to report on a year of considerable progress for the Company, which has undergone a significant transformation. The restructured management team appointed in the summer of 2008 has embarked on a strategy aimed at: rapidly reducing central overheads costs; securing the long-term future of the Group's operating licenses; ensuring access to sufficient funding; and commencing a new drill program.
Revenues for the period increased by approximately 10% to $7.8 million (2007 - $7.1 million) assisted by the higher oil price throughout much of the year. Average net oil production of 244 barrels of oil per day ("bopd") (2007 - 314 bopd) was slightly lower than last year but in line with expectations due to the Company's reduced working interest stemming from the license extension terms negotiated in May 2008. In return, PELE secured the Tisquirama license for the economic life of the fields.
Gross profits increased significantly to $3.4 million (2007 - $0.2 million) and loss before tax was reduced by approximately 52% to circa $4 million (2007 - $8.4 million), reflecting management's actions to reduce the Company's central overhead and running costs.
Furthermore, there were a number of largely one-off costs including a $1,712,000 (2007 - $2,904,000) charge relating to share based payments in respect of current and outgoing directors and a $946,000 charge upon the surrender of the Gaita license to Colombia's Agencia Nacional de Hidrocarburos ("ANH"). The cost reduction measures and absence of such one-off charges in future years should serve to enhance the Group's profitability alongside an anticipated build-up in the level of production.
In July 2008, the Company was successfully refinanced by way of a significant $25 million equity investment from Tribeca Oil & Gas Inc. ("TOGI"), a portfolio investment company of Tribecapital Partners S.A. ("Tribeca"), a Colombian private equity firm. This investment, at a significant premium to the then prevailing market share price, served to secure the Company's future and enabled us to fund the commencement of our planned work program of exploration and appraisal wells whilst also retiring all outstanding third party indebtedness. The Group currently has access to sufficient financial resources to meet its working capital requirements for the remainder of 2009, but it is expected that additional funding will be required in due course in order to complete our entire planned work program. At the period end the Company had cash and cash equivalents of $2.7 million (2007 - $3.5 million).
At the Annual General Meeting held in August 2008, we stated our intention to commence our new drilling program within 100 days and subsequently succeeded in spudding our first exploratory well, Colon-1,on the La Paloma block in the Middle Magdalena valley, Colombia in November 2008.
We are currently aiming to drill a minimum of six wells across our three Colombian licence areas during 2009 and have made good progress in achieving this objective. Our overall plan is to seek to considerably increase production and cash flow, and further develop and commercialize the Company's reserves through our ongoing drilling program.
Average throughput in PELE's wholly owned RZA pipeline decreased by 8.9% to 2,696 bopd due to a fall in production at the Rio Zulia and Tibu fields, but has risen significantly since the period end. Throughput for the first quarter of 2009 averaged 4,041 bopd, a 33% increase over the prior year.
In late December 2008, it was confirmed that the Company was the successful bidder for the Putumayo-4 block in the Colombian licence bidding round 'Mini-Ronda 2008'. The Putumayo-4 block covers an area of 51,333 hectares located in the Putumayo Basin of southern Colombia and has over 400km of pre-existing 2D seismic data from which PELE has already identified promising leads. The Putumayo Basin is considered by ANH to be one of the most promising exploration areas in Colombia and is rapidly becoming a prolific hydrocarbon producer. In January 2009, the Company announced that it had entered into a memorandum of understanding for a proposed farm-out agreement for the project with La Cortez Energy Inc. ("La Cortez"). The Company is in the process of finalizing the terms of this arrangement.
Initial commercial gas sales are now expected to commence from our Serafin gas field in the fourth quarter of 2009, offering the prospect of strong short-term cash flow and economic returns. PELE has a 25% interest in the project.
Developments post the period end
There have been a number of significant achievements since the period end, which should have a positive impact on the current and future year's production volumes and financial results.
In January 2009, a subsidiary of TOGI subscribed for $4.875 million of secured convertible loan notes with an option to subscribe for up to a further $5 million,which has yet to be exercised. We were delighted with Tribeca's continued support for the Company, against a challenging backdrop of considerable global economic uncertainty, which enabled us to maintain momentum on our work programme.
In February 2009, we announced successful preliminary test results for our Colon-1 exploratory well at La Paloma where the Company retains an 80 per cent working interest and is the operator. The Colon-1 well was drilled to a final total measured depth of 9,125ft and is expected to be brought on to production in mid-2009 at a rate of approximately 1,200 bopd gross. A total of approximately 6,000 bbls had already been extracted as at April 2009.
In April 2009, further positive results were obtained from our Los Angeles-11 development well, the second well in our current drilling programme. Los Angeles-11 was brought into production at an initial rate of approximately 220 bopd with log interpretation indicating 217ft of net oil pay in the primary target, and is currently producing approximately 170 bopd. Oil was also tested at a deeper secondary target which should ultimately serve to increase the field's reported reserves. It was also announced in April that our third well, Los Angeles-12, had already been drilled to 8,000ft (target depth of 7,700ft) and was undergoing evaluation.
The Board now has a greater operational focus and I strongly believe that PELE is well placed to build on its early drilling success as it continues to pursue its development program in Colombia despite the current challenging global macro-economic environment. Although the Group will need to secure additional funds to complete its entire planned work programme, its work commitments for the remainder of 2009 are funded and with a positive operating cash flow and clear investment plan in place we believe that PELE is now firmly on track to achieving both increased production and reserves. The benefits of our cost saving initiatives, introduced in the first half of 2008, should be even more evident in our results for the current financial year and should enhance the group's future profitability.
I would like to thank our shareholders and employees for their patience and support throughout the restructuring period and remain confident that their loyalty will be rewarded as PELE begins to realise its true potential. The Board looks forward to reporting further progress during the remainder of 2009.
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