TIDMPELE
RNS Number : 1076I
Petrolatina Energy PLC
08 June 2011
8 June 2011
PetroLatina Energy Plc
("PetroLatina", "PELE" or the "Company")
Final Results for the year ended 31 December 2010
PetroLatina (AIM: PELE), the independent oil and gas
exploration, development and production company focused on Latin
America, announces its audited final results for the year ended 31
December 2010.
Operational Highlights:
-- Continuation of ongoing drilling campaign: 3 new wells
drilled (Querubin-1, Chuira-1, Colon-3ST)
-- Completed the Zoe-1 exploration well which is currently
producing at a stable rate of 42 bopd of 23 degree API oil
-- Gross production for the year increased by 35 per cent. to
660,137 (2009: 489,159) bbls, at an average daily gross production
rate of 1,809 (2009: 1,340) bopd
-- Net production for the year increased by 25.5 per cent. to
292,694 (2009: 233,285) bbls, at an average daily net production
rate of 802 (2009: 639) bopd
-- Petrophysical and field performance studies and resulting
reservoir simulation exercises commissioned on the Los Angeles and
Santa Lucia fields
-- High resolution seismic reinterpretation commissioned from
Arcis Seismic Solutions on the Colon field
-- Seismic reprocessing, fault orientation and density analysis
and formation fluid study commissioned from Landocean Energy
Services Inc. on the Chuira discovery
Financial Highlights:
-- Revenues increased by 46 per cent. to US$20.1m (2009:
US$13.8m)
-- Gross underlying profits (before depreciation and impairment
charges) increased to US$10.8m (2009: US$10.1m)
-- Underlying EBITDA generation of US$3.1m (2009: US$5.25m)
-- Loss after tax of US$27.6m (2009: US$12.5m)
-- Loss per share of US$0.43 (2009: US$0.28)
-- Cash and cash equivalents (including term deposits) of US$10m
(2009: US$4.9m)
-- Successfully raised, in aggregate, US$25m in new equity from
management, existing shareholders and senior lenders to the Company
in July/August 2010
-- Entered into a Senior Secured Debt Facility of up to US$75m
with Macquarie Bank Limited ("Macquarie"), of which an initial
tranche of US$25m was made available and drawndown at completion in
March 2010
Post Balance Sheet Events:
-- Announced initial production flow rates of 5.5MMscf/d in
respect of a 6 month extended test of the Serafin-1 gas well (50
per cent. working interest and operator, which reduces to 25 per
cent. if Ecopetrol S.A. back-in, and after PELE has recovered 200
per cent. of its capex incurred to date from revenues.)
-- Announced an updated independent assessment of the Company's
reserves, future production and income attributable to its
concessions in Colombia as at 31 December 2010
o Based upon the average oil price received in 2010 and as
adjusted to actual prices received for each property, Ryder Scott
Company, L.P. provided an NPV10 figure for the Company's 3P
reserves of US$280.6m (30 November 2009: US$247m)
-- US$4.875m first tranche of the loan notes held by Tribeca Oil
and Gas Financing, Inc. ("TOGF"), a subsidiary of existing
substantial shareholder Tribeca Oil & Gas Inc. (a portfolio
investment company of Tribeca Asset Management Inc ("Tribeca")), a
Colombian private equity firm, converted in full into equity
Outlook:
-- Well positioned to resume development drilling in a more
effective and lower risk manner
-- Prospect of strong short term cash flow generation and
economic returns from the potential further development of the
Serafin field:
o High probability of further gas deposits on the licence
area
o Studies underway utilising existing 3D seismic coverage to
identify further drillable prospects
Luc Gerard, Executive Chairman of PetroLatina, commented:
"I am pleased to report on another year of progress for
PetroLatina. During the year we have consolidated our position as a
leading operator in Colombia, with one of the largest acreages in
the Middle Magdalena Valley, increasing both production and
revenue.
Our decision to continue to focus our efforts on the development
of our Colombian assets has proved successful - the country is now
generally considered to be amongst the fastest growing and most
stable in the region."
Enquiries:
PetroLatina Energy Plc Tel: +57 1627 8435
Juan Carlos Rodriguez, Chief Executive Officer
Pawan Sharma, Executive Vice President - Corporate Tel: +44 (0)20 7766
Affairs 0081
Strand Hanson Limited
Simon Raggett / Matthew Chandler Tel: +44 (0)20 7409
3494
Evolution Securities Limited
Chris Sim / Adam James Tel: +44 (0)20 7071
4304
Financial Dynamics
Ben Brewerton / Chris Welsh Tel: +44 (0)20 7831
3113
Availability of Annual Report and Financial Statements
Copies of the Company's full Annual Report and Financial
Statements are expected to be posted to shareholders today and,
once posted, will also be made available to download from the
Company's website at www.petrolatinaenergy.com.
The Annual Report and Financial Statements will also be made
available for inspection at the Company's registered office during
normal business hours on any weekday. PetroLatina Energy Plc is
registered in England and Wales with registered number 05173588.
The registered office is at 2nd Floor Suite 2.3, Stanmore House,
29-30 St James's Street, London SW1A 1HB.
Annual General Meeting
The Company's next Annual General Meeting ("AGM") will be held
at the offices of Strand Hanson Limited, 26 Mount Row, London W1K
3SQ at 11.00 a.m. on 30 June 2011. The formal Notice of AGM and
proxy form have also been posted to shareholders today and can also
be downloaded from the Company's website at
www.petrolatinaenergy.com.
Chairman's Statement
The Company has undergone significant transformation since
Tribeca's initial sizeable investment in July 2008, and I am
pleased to report on another progressive year for the Group, which
has seen it consolidate its standing as a leading operator in
Colombia, holding one of the largest acreages in the Middle
Magdalena Valley.
The Group remained focused on its operations in Colombia
throughout the year, a strategic decision which has proved
successful given the increasing attractiveness of Colombia as a
regional oil industry centre and sustained high crude prices.
Colombia is generally considered to be one of the fastest growing
and most stable countries in Latin America and has regained a
coveted investment-grade rating - Standard & Poor's now rate
the country's long-term and short-term foreign-currency sovereign
credit at BBB- and A3 respectively.
Operational highlights
-- Continuation of an aggressive drilling campaign with 3 new
wells being drilled in 2010
-- Gross production for the year increased by 35 per cent. to
660,137 (2009: 489,159) bbls, at an average daily gross production
rate of 1,809 (2009: 1,340) bopd; and
-- Net production for the year increased by 25.5 per cent. to
292,694 (2009: 233,285) bbls, at an average daily net production
rate of 802 (2009: 639) bopd.
-- Total revenues for the year increased by approximately 46 per
cent. to US$20.17 million (2009: US$13.81 million).
-- Announcement of an updated independent assessment of the
Group's reserves, future production and income attributable to its
concessions in Colombia as at 31 December 2010. Based upon the
average oil price received in 2010 and as adjusted to actual prices
received for each property, Ryder Scott, the independent petroleum
consultants, provided an NPV10 figure for the Group's 3P reserves
of US$280.6 million (30 November 2009: US$247 million).
The Company completed its exploratory work commitments during
the year within the stipulated contractual time limits.
The disappointing results from the Chuira-1 and Colon-3 wells
have provided the Company with an opportunity to re-evaluate its
development drilling programme. Having commissioned a number of
geological studies from external specialist consultants, the
Company is now poised to resume development drilling in a more
effective and lower risk manner.
Financial highlights
-- Gross underlying profits* increased to US$10.8 million (2009:
US$10.1 million*).
-- Underlying EBITDA generation of US$3.1 million* (2009:
US$5.25 million*).
* Excluding the impact of impairment charges for the Chuira-1,
Colon-3ST, Santa Lucia Sur-1 and Zoe-1 wells of, in aggregate,
US$19.8m (2009: US$6.59m for the Zoe-1 well) and Depreciation &
Depletion charges of US$8.36m (2009: US$5.72m).
The loss before tax increased to US$28.72 million (2009:
US$12.83 million) principally as a result of: (i) one-off
impairment charges of US$19.8 million (2009: US$6.59 million)
relating to the Chuira-1 exploration well (US$8.66 million);
Colon-3ST (US$8.82 million); Santa Lucia Sur-1 (US$1.68 million)
and additional costs incurred in 2010 for the Zoe-1 well (US$0.64
million); (ii) a non-cash financing charge of US$3.21 million
(2009: US$3.74 million) and non-cash financing income of US$2.96
million (2009: US$Nil) relating to the accounting treatment and
fair value of convertible loan notes subscribed by TOGF in 2009;
(iii) the recognition of US$3.66 million (2009: US$Nil) reflecting
the fair value of derivative instruments in the form of oil price
hedges placed with Macquarie; and (iv) foreign exchange losses of
US$1.95 million (2009: US$0.12 million) arising as a result of the
revaluation of the Colombian peso against the US dollar experienced
during the year. The ongoing cost reduction measures and the
expected absence of significant non-cash charges in future years
should serve to enhance the Group's reported profitability going
forwards alongside an anticipated build-up in the level of
production.
Average throughput in PELE's wholly owned RZA pipeline decreased
by approximately 13.2 per cent. to 3,041 bopd (2009: 3,504) bopd as
a result of maintenance works undertaken on the pipeline.
Subsequent to the reporting period end, we were pleased to
announce in March 2011 that commercial gas sales had commenced from
our Serafin gas field, offering the prospect of strong short-term
cash generation and economic returns.
Outlook and objectives for 2011 and beyond
We continue to firmly believe that Latin America, and in
particular Colombia, offers attractive consolidation, corporate and
new license acquisition opportunities. The consensus view of
analysts is that Colombia's total oil production is set to increase
substantially from 690 million bopd in 2009 to 1.3 billion bopd by
2015, rising to approximately 2 billion bopd by 2020. PELE is well
placed to contribute to such national production growth as it
continues to pursue its development programme in Colombia.
The recently completed updated reserves assessment by Ryder
Scott revealed a slight reduction in 2P reserves to 5.9 million boe
(30 November 2009: 6.09 million), but importantly attributed an
NPV10 figure for these reserves of approximately some US$139
million (approximately GBP86 million) based upon an average oil
price received in 2010 of US$79.43 per barrel and as adjusted to
actual prices received for each property. The report also
highlighted a number of prospective resources amounting to 8.72
million bbls on a net unrisked basis, which are predominantly
located in the Santa Lucia field and in various formations of the
La Paloma Block (in which PetroLatina has an 85 per cent. working
interest (78.2 per cent. net after royalty)).
The Group has recently appointed Luis Guillermo as Chief
Operating Officer, who brings over 22 years' oil and gas industry
experience including 14 years at BP operating divisions in the UK,
Colombia, and most recently Houston. His proven technical expertise
and international project development experience will be invaluable
in helping us to accelerate our ongoing exploration and development
programme which aims to fully develop our existing assets.
The Board of directors has for some time believed that the
Company's market capitalisation has failed to fully reflect its
current and future business prospects. The Board considers that the
NPV10 of PetroLatina's 2P Reserves is significantly ahead of the
Company's current market capitalisation, and that the current
market share price represents a significant discount to the
intrinsic, underlying value of the Company.
Despite announcing increased production last year and, more
recently, in the first quarter of the current financial year and
the acquisition of the VMM-28 block in the Middle Magdalena basin,
there has been no corresponding increase in the Company's market
capitalisation. Accordingly, we are currently in the process of
reviewing and evaluating strategic alternatives for the further
development of the Company with the objective of maximising
shareholder value.
I would like to thank our shareholders and employees for their
continued valuable support and loyalty and look forward to
reporting further progress during the remainder of 2011 as PELE
continues to realise its potential.
Luc Gerard
Executive Chairman
7 June 2011
Operational & Financial Review
Overview
The Group achieved an average daily gross production rate for
2010 of 1,809 bopd (2009: 1,340 bopd) ending the year with a gross
aggregate production volume of 660,137 bbls (2009: 489,159 bbls).
Reflecting the improved global oil price environment, the Group
generated total revenues of US$20.17 million, exceeding 2009
revenues by approximately US$6.36 million. Regretably, the
increasingly competitive market in Colombia also led the Group to
experience higher service costs and an unanticipated escalation in
the costs of transportation.
Review of Operations
Colombian Assets
The Group completed the last of its exploratory drilling
commitments in 2010 with the drilling of two exploration wells and
three development wells.
The La Paloma field produced 185,874 gross bbls (2009: 130,734
bbls) at an average daily gross production rate of 509 bopd (2009:
358 bopd). Net oil production to the Group from the La Paloma field
was 154,280 bbls (2009: 111,123 bbls) at an average daily net
production rate of 423 bopd (2009: 304 bopd).
On the Santa Lucia field, three new wells were drilled during
2010, only one of them (Santa Lucia Sur-1) was dry, leading to an
increased field production rate. During 2010, the Santa Lucia, Los
Angeles and Querubin fields (Tisquirama Licence) and the Dona Maria
field (Lebrija Licence) produced 462,847 gross bbls (2009: 354,310
bbls) at an average daily gross production rate of 1,268 bopd
(2009: 971 bopd). Total net oil production to the Group from the
Tisquirama Licence and the Lebrija Licence in 2010 was 128,966 bbls
(2009: 118,663 bbls) at an average daily net production rate of 353
bopd (2009: 325 bopd). This represented an approximate 8.6 per
cent. increase to the net production volumes achieved during 2009.
The level of production exceeded our budgeted expectations
primarily due to the drilling of the new wells and workovers and
the optimisation of resources.
Despite being impaired at the end of 2009, the Midas field
produced 11,416 gross bbls (2009: 4,117 bbls) at an average daily
gross production rate of 31 bopd (2009: 11 bopd). Net oil
production to the Group from the Midas field was 9,447 bbls (2009:
3,499 bbls) at an average daily net production rate of 26 bopd
(2009: 10 bopd).
RZA Pipeline
During 2010, 1,109,788 bbls (2009: 1,279,041 bbls) or 3,041 bopd
(2009: 3,504 bopd) were transported through the Group's RZA
pipeline representing a decrease of approximately 13.2 per cent.
compared to throughput achieved in 2009, as a result of maintenance
works undertaken on the pipeline.
Serafin Gas Development
The Group commissioned the construction of a connection to the
main Colombian gas trunk line in the first quarter of 2010 and
initial commercial gas sales commenced at a stable rate of
5.5mmscf/day in March 2011 providing valuable revenues to the Group
to support the development of its producing fields. The project
offers the prospect of short term cash flow generation and economic
returns, with a projected payback period of less than three months
post the connection being made and gas sales commencing.
The Board believes that there is a high probability of further
gas deposits on the licence area and PELE is currently conducting
studies using its existing 3D seismic coverage to identify further
drillable prospects. PELE has a 50 per cent. working interest in
the project, which will reduce to 25 per cent. if Ecopetrol S.A.
exercises its back-in right and once PELE has recovered 200 per
cent. of its capex incurred to date from revenues.
Guatemalan Assets
Further to the sale in July 2007 of our assets (Licences A7-2005
and A-6-93) in Guatemala to Quetzal Energy Inc. ("Quetzal"), PELE
retained a 20 per cent. carried interest in the first three wells
to be worked over, and a 20 per cent. working interest in future
wells. We understand that Atzam-2 is currently producing and have
approached Quetzal on a number of occasions regarding our carried
interest in this well. To date, no satisfactory responses have been
received and we intend to continue to pursue Quetzal and to seek
recovery of our share of production revenues.
Financial Review
During 2010, revenues totalled US$20.17 million (2009: US$13.81
million) an increase of approximately 46 per cent. on the previous
year. The main contributory factors were:
-- Increased production from the Los Angeles and Santa Lucia
fields primarily resulting from the new wells drilled during the
course of 2010;
-- Increased production from the La Paloma field as a result of
the installation of electrical submersible pumps ("ESP") on the
Colon-1 and Colon-2 wells;
-- Higher crude oil prices. The average WTI price per barrel
achieved in the year being US$79.84 (2009: US$61.69). Oil produced
and sold during the year amounted to 292,694 net barrels or 802
bopd (2009: 233,285 net barrels or 639 bopd); and
-- A 13.2 per cent. decrease in the average throughput in PELE's
wholly owned RZA pipeline.
Impairment charges of US$19.80 million (2009: US$6.59 million)
were incurred, which included US$8.66 million for Churia-1, US$8.82
million for Colon-3ST, US$1.68 million for Santa Lucia Sur-1, and
an additional US$0.64 million for the Zoe-1 well (2009: US$6.59
million).
Other cost of sales, including hedging, increased to US$9.39
million (2009: US$3.71 milion). Total general and administrative
costs and net finance costs were US$11.34 million (2009: US$10.6
million); including a non-cash charge of approximately US$3.21
million (2009: US$3.74 million) ) and non-cash income of US$2.96
million (2009: US$Nil) being applied to recognise the fair value
accounting of convertible loan notes subscribed by TOGF in 2009,
and US$3.67 million (2009: US$Nil) being applied to recognise the
fair value of derivative instruments in the form of oil price
hedges placed with Macquarie.
Other cost of sales were higher due to the workovers performed
on the Santa Lucia 1, 2 and 3 wells in the Santa Lucia field and
workovers on the Los Angeles 10,11,12,14,15 and 16 wells in the Los
Angeles field.
Reflecting the exploration write-offs and impairment charges,
pre-tax losses for the 2010 financial year were US$28.72 million
(2009: US$12.83 million).
Taxation
The total tax credit (current and deferred) for the year was
US$1.158 million (2009: US$0.34 million) arising from the increased
losses incurred during the year. Since the Group has incurred tax
losses during the period, corporation tax charges are not
anticipated. The cumulative tax losses in Colombia as of 31
December 2010 were approximately US$26.7 million (2009: US$15.7
million), which based on the Directors' expected utilisation gives
rise to a deferred tax asset at the reporting date of US$0.988
million (2009: US$Nil).
Cash flow
Cash generated from operations was US$3.75 million (2009:
US$11.09 million).
Net cash used in investing activities was higher at US$39.77
million (2009: US$31.14 million) and included the drilling of the
new exploration and development wells.
Net cash from financing activities was higher at US$41.11
million (2009: US$20.80 million) as a result of equity placings
which raised a total of US$25 million, a short term bridge loan of
US$5 million and the drawdown of a US$25 million tranche of a
senior secured loan facility held with Macquarie. The short term
bridge loan of US$5 million was repaid, along with a US$6.7 million
short term loan held locally with Interbolsa. Interest paid during
the period amounted to US$2.1 million (2009: US$1.17 million).
Assets
The Group's total assets at US$90.68 million (2009: US$86.9
million) have increased by approximately 4.3 per cent. principally
due to the capitalisation of development and exploration costs for
the Los Angeles, La Paloma and Midas blocks. Total Group
liabilities of US$60.4 million (2009: US$58.7 million) comprise
external borrowings, short and long term loans, derivative
liabilities and trade and other payables.
The Group currently has access to sufficient financial resources
to meet its working capital requirements for the remainder of 2011,
but it is expected that additional funding will be required in due
course in order to complete our entire planned work programme. At
the year end, the Group had cash and cash equivalents (including
term deposits) of US$10.01 million (2009: US$4.91 million). Our
plans for 2011 include the drilling of two exploratory and
commitment wells which should further transform some of the Group's
oil reserves into producing reserves. The Group's current
production and near term production potential, as reflected in the
Group's recent announcements, will fund part of our planned work
programme. We remain confident of being able to raise the necessary
finance for the remainder of the programme, and in the event that
the Group is unable to raise the necessary equity funding, maintain
the flexibility of negotiating a draw down from the long-term debt
facility in place with Macquarie to ensure that the Group is able
to fully fund its planned development programme.
Financial risk
PetroLatina's activities are subject to a range of financial
risks including commodity prices, liquidity within the business and
of counterparties, exchange rates and the potential loss of
operational equipment or wells. These risks are managed through
regular ongoing review taking into account the operational,
business and economic circumstances at that time. The Group has a
hedging programme in place to hedge oil price movements over the
life of the senior secured credit facility provided by Macquarie.
To date, the Board has not hedged against exchange rate movements,
but intends to regularly review this policy.
Revenues are generated primarily in US Dollars and matched where
possible against US Dollar denominated expenditures within the
business. However, capital and operating expenditures are Colombian
Peso denominated which results in a currency exposure.
Liquidity
Detailed cash forecasts are prepared frequently and reviewed by
both management and the Board. The Group's production activities
provide a monthly inflow of cash which is currently the main source
of working capital and project finance.
Developments in 2010 to date
The test results from the Zoe-1 exploration well on the Midas
block in our ongoing 2010 drill programme were not as encouraging
as expected. As announced on 8 February 2010, the Zoe-1 well
reached a total depth of 10,924ft and testing commenced in the Umir
section. This section was found to be somewhat over pressured and a
stable flow of approximately 42 bopd of 23 degree API oil was
recorded. The well remains on production at this rate, however the
carrying value has been fully impaired as discussed below. Based on
the test results and using petrophysical parameters, the seismic
data and mapping of the subthrust structure, the presence of an oil
bearing zone is indicated with original oil in place ("OOIP") of
1.3 MMBO (management estimate). Testing of the Lisama zone was
initiated in March 2010, and whilst this was found to be normal
pressured it flowed approximately 15 barrels of very heavy oil
(tar) and water. A second test flowed water only and accordingly
Lisama has been classified as a wet zone, and unlikely to be
productive as a reservoir. We deemed the deeper zones to be
non-commercial and recorded an impairment charge against this
prospect relating to the costs incurred up to and including 31
December 2009 of US$6.59 million in last year's financial
statements. We have recorded an additional US$0.64 million relating
to costs incurred during 2010 in these financial statements.
With regards to the Chuira-1 well on the Midas block, having
completed a fracture of the La Luna formation, the intention is to
drill a new well in order to develop the lower areas of La Luna
outside the current position of the well. Based on the results of
current testing, the well has been unsuccessful, and accordingly
the net present value of the well is less than its carrying value.
The directors have therefore decided to record an impairment charge
of US$8.66 million for this year which represents the difference
between the expected value and the carrying value as of 31 December
2010.
The pre-impairment carrying value for the Colon-3ST well on the
La Paloma structure of US$9 million (2009: US$Nil) was also tested
for impairment during the year. Drilling this well confirmed the
presence of hydrocarbons at a depth of 8,817 feet which increased
the proved area of the Colon field. However, the production levels
of this well were lower than expected due to rock conditions. As a
consequence, an impairment test was required and the directors have
recorded an impairment charge of US$8.82 million representing the
difference between the expected value and the carrying value at the
year end.
The test results from the Santa Lucia Sur-1 exploratory
commitment well were also not as encouraging as expected. The Santa
Lucia Sur-1 well reached its target depth of 8,500 feet and whilst
hydrocarbon shows and a well developed sand channel were
encountered while drilling through the La Paz formation, subsequent
evaluation of wire-line logs indicated the reservoir to be water
bearing. Accordingly, in consultation with our partners in the
well, PetroSantander Inc., and following this evaluation, the well
was plugged and abandoned. As a result we have recorded an
impairment charge against this prospect relating to our (50 per
cent.) share of costs incurred during 2010 of US$1.68 million in
these financial statements.
In the first quarter of the current financial year to 31 March
2011, the Group achieved total gross production of 193,790 bbls
(2010 equivalent period: 155,323 bbls) at an average daily gross
production rate of 2,154 bopd (2010 equivalent period: 1,726 bopd),
with net oil production of 90,536 bbls (2010 equivalent period:
72,465 bbls) at an average daily net production rate of 1,006 bopd
(2010 equivalent period: 805 bopd).
Since being placed on an extended test in late March 2011 to 30
April 2011, a gross total of 39,019 boe of gas has been produced
from the Serafin-1 gas well and 17,949 boe net to the Company.
Current and Future Work Programme
With the Company now focused on accelerating the development
drilling of its much larger Magdalena Valley and Putumayo-4
properties, the number of personnel in our Colombian office has
been increased. Activities during 2010 have established a strong
foundation from which to reconvene and accelerate our drilling
programme.
We continue to pursue our strategy of maximising the potential
of our asset portfolio and, subject to securing the requisite full
funding, our proposed work programme for the remainder of 2011 and
2012 includes:
-- At Midas
o Exploration activities involving the acquisition of 78km(2) of
3D seismic data and the drilling of one exploratory well.
o Development activities involving the reprocessing of 3D
seismic data and the seismic attributes relating to Midas Norte,
drilling of the Chuira-2 development well, reprocessing of 3D
seismic data and the seismic attributes relating to Midas Sur, and
the drilling of the Zoe-2 development well.
-- At La Paloma
o Exploration activities comprising the drilling of one
exploratory well.
o Development activitiescomprising drilling of the Colon-4 and
Colon-5 development wells.
-- At Putumayo
o Exploration activities involving completing the acquisition of
an initial 103km of 2D seismic data followed by an additional 48km
of 2D seismic data and the drilling of one exploratory well.
-- At VMM-28
o Acquiring 2D seismic data.
o The drilling of one exploratory well.
-- At Tisquirama Association Contract - Tisquirama B
o Conducting simulation studies on the Los Angeles field and the
drilling of one exploratory well (Tronos-1).
-- At Tisquirama Association Contract - Tisquirama A
o Conducting simulation studies on the Santa Lucia field.
We look forward to delivering further progress and significantly
improved results to shareholders in 2011 and beyond.
Juan Carlos Rodriguez
Chief Executive Officer
7 June 2011
Consolidated statement of comprehensive income
For the year ended 31 December 2010
2010 2009
US$'000 US$'000
Revenue 20,171 13,812
-------------------------------------------------------- --------- ---------
Impairment of Oil & Gas assets 19,804 6,590
Depreciation of property, plant and equipment 8,355 5,720
Other cost of sales including hedging 9,392 3,709
-------------------------------------------------------- --------- ---------
Total cost of sales 37,551 16,019
Gross loss (17,380) (2,207)
Administrative expenses (7,646) (4,857)
Loss from operations (25,026) (7,064)
Finance income 3,332 160
Finance expense (7,030) (5,930)
Loss before tax (28,724) (12,834)
Taxation 1,158 338
Total loss and comprehensive loss for the year
attributable to equity shareholders of the
parent (27,566) (12,496)
2010 2009
US$ US$
Loss per share attributable to the equity shareholders
of the parent during the year (basic and diluted) 0.43 0.28
Consolidated statement of financial position
As at 31 December 2010
2010 2009
US$'000 US$'000
ASSETS
Non-current assets
Property, plant and equipment 67,257 64,566
Intangible Exploration and Evaluation Assets 8,495 14,376
Deferred tax asset 988 -
76,740 78,942
Current assets
Inventories 367 149
Trade and other receivables 2,130 2,250
Withholding taxes 1,435 623
Cash and cash equivalents 8,042 3,232
Term deposits 1,970 1,675
13,944 7,929
--------- ---------
Total Assets 90,684 86,871
LIABILITIES
Non-current liabilities
Provisions 3,125 2,225
Loans and borrowings 24,937 12,407
Deferred tax liability 5,506 5,960
--------- ---------
33,568 20,592
Current liabilities
Trade and other payables 8,385 24,388
Taxation 285 50
Derivative liability 6,812 6,120
Loans and borrowings 11,364 7,501
--------- ---------
26,846 38,059
Total Liabilities 60,414 58,651
--------- ---------
Total Net Assets 30,270 28,220
EQUITY
Share capital 26,550 22,212
Share premium 98,372 76,800
Warrant and option reserve 4,576 2,400
Retained deficit (99,228) (73,192)
--------- ---------
Total equity 30,270 28,220
Consolidated statement of cashflows
For the year ended 31 December 2010
2010 2009
US$'000 US$'000
Loss for the year (27,566) (12,496)
Share-based payments 497 470
Depreciation of property, plant and equipment 8,355 5,720
Impairment of intangible asset 19,804 6,590
Finance income (3,332) (160)
Finance expense 7,030 5,930
Income tax credit (1,158) (338)
Cash flows from operating activities before
changes in working capital and provisions 3,630 5,716
Increase in inventories (218) (113)
(Increase)/decrease in trade and other receivables (407) 1,395
Increase in trade and other payables 743 4,095
Cash generated from operations 3,748 11,093
Income taxes paid (285) (50)
Net cash from operating activities 3,463 11,043
Investing activities
Finance income 252 160
Purchase of property, plant and equipment (8,420) (2,492)
Payments for oil & gas exploration and development (31,304) (27,310)
Investment fixed term deposits (295) (1,498)
Net cash flows from operating and investing
activities (36,304) (20,097)
2010 2009
US$'000 US$'000
Financing activities
Issue of ordinary share capital 25,000 -
Loan notes subscribed during the period - 11,165
Short and long term loans subscribed during
the period 30,275 12,090
Repayment of loans during the period (12,052) (1,287)
Interest paid (2,109) (1,168)
Net cash flows from financing activities 41,114 20,800
Increase in cash and cash equivalents including
restricted cash 4,810 703
Cash and cash equivalents at the start of the
period 3,232 2,529
Cash and cash equivalents at the end of the
period 8,042 3,232
Notes forming part of the financial information for the year
ended 31 December 2010
1 Basis of preparation
The financial statements of the Group for the twelve months
ended 31 December 2010 have been prepared in accordance with
International Financial Reporting Standards, International
Accounting Standards and Interpretations (collectively "IFRS")
issued by the International Accounting Standards Board ("IASB") as
adopted by European Union.
The audited financial information set out above does not
constitute the Company's statutory accounts for the years ended 31
December 2010 or 2009 but is derived from those accounts. Statutory
accounts for 2009 have been delivered to the registrar of
companies, and those for 2010 will be delivered in due course. The
auditors have reported on those accounts; their reports were: (i)
unqualified but did include a reference to matters to which the
auditors drew attention by way of emphasis without qualifying their
report and (ii) did not contain a statement under section 498 (2)
or (3) of the Companies Act.
This announcement does not constitute the Group's annual report
and statutory accounts.
Going concern
The Group plans to continue an ongoing drilling programme in the
next twelve months, which should further transform more of its oil
reserves into producing assets. With future anticipated additional
revenues from the ongoing work programme, the Group is well placed
to be able to fund part of its ongoing work programme without the
need to raise additional capital. The Group has development
commitments and repayment obligations in respect of the credit
facility with Macquarie which are due to commence in the fourth
quarter of 2011. The repayment obligations will be satisfied from
future cashflows, however the development commitments will require
additional funds to be raised prior to the first quarter of 2012,
or earlier if these works are accelerated and commenced prior to
the first quarter. The Directors remain confident that the Group's
current and future exploration and near term production potential,
which includes future anticipated revenues from the Colon,
Querubin-1 and Serafin-1 wells, together with the Group's historic
proven ability to raise additional funds, will enable the Group to
fully finance its future working capital requirements beyond the
period of 12 months of the date of this report. However, there can
be no guarantee that the required funds will be raised within the
necessary timeframe. Consequently a material uncertainty exists
that may cast significant doubt on the Group's ability to fund this
cash shortfall and therefore be able to meet its commitments and
discharge its liabilities in the normal course of business for a
period not less than 12 months from the date of the annual report
and financial statements.
The financial statements do not include the adjustments that
would result if the Group was unable to continue in operation.
2 Loss per share
Basic loss per share amounts are calculated by dividing loss for
the period attributable to ordinary equity holders of the parent by
the weighted average number of ordinary shares outstanding during
the year. The weighted average number of equity shares in issue for
the period 64,362,830 (2009: 44,589,672).
Losses for the Group attributable to the equity holders of the
Company for the year are US$27,566,000 (2009: US$12,496,000). The
effect of the options and warrants in issue is anti-dilutive;
therefore a diluted loss per share is not presented.
The Group would still report a diluted loss per share after
adjustment for the effect of the convertible loan note, hence no
reconciliation is provided.
3 Tangible fixed assets
Fixtures,
fittings Field, Proven
and plant and oil and
equipment machinery Pipelines gas assets Total
US$'000 US$'000 US$'000 US$'000 US$'000
Cost
At 1 January
2009 217 2,141 13,361 24,913 40,632
Additions 102 1,944 525 18,467 21,038
Transfers (11) (170) (218) 16,618 16,219
At 31 December
2009 308 3,915 13,668 59,998 77,889
Additions 70 510 - 10,605 11,185
Disposals - - (139) - (139)
At 31 December
2010 378 4,425 13,529 70,603 88,935
Depreciation,
depletion and
impairment
At 1 January
2009 45 198 1,677 5,683 7,603
Charge for
period 43 89 699 4,889 5,720
At 31 December
2009 88 287 2,376 10,572 13,323
Charge for
period 49 302 665 7,339 8,355
At 31 December
2010 137 589 3,041 17,911 21,678
Net book value
At 31
December
2010 241 3,836 10,488 52,692 67,257
At 31 December
2009 220 3,628 11,292 49,426 64,566
The directors considered the carrying value of the Oil & Gas
assets and concluded, based on the carrying value versus the value
in use, that there has been no indication of impairment.
Reserves estimates
There are numerous uncertainties inherent in estimating reserves
and assumptions that, whilst valid at the time of estimation, may
change significantly when new information becomes available.
Changes in the forecast prices of commodities, exchange rates,
production costs or recovery rates may change the economic status
of reserves and may, ultimately, result in the reserves being
restated. Such changes in reserves could impact on depreciation
rates, asset carrying values, and provisions for close down,
restoration and environmental cleanup costs. The Group utilises the
expertise of third party consultants to report on the reserves
estimates to increase the reliability of their estimations.
4 Intangible fixed assets
2010 2009
US$'000 US$'000
Cost and Net book value
At 1 January 14,376 13,336
Additions 13,923 23,849
Transfer to oil and gas assets - (16,219)
Impairment (19,804) (6,590)
Cost and Net book value at 31 December 8,495 14,376
The amounts for intangible E & E assets represent costs
incurred on active oil and gas exploration projects.
In accordance with the Group's oil and gas asset accounting
policy, E & E assets are evaluated when circumstances exist
that suggest the possibility of impairment as well as when E &
E assets are reclassified to the development and producing phase.
The outcome of ongoing exploration, and therefore whether the
carrying value of assets will be recovered, is inherently
uncertain.
As at 31 December 2010, the Group's unevaluated Oil & Gas
assets split into deferred exploration costs on the Putumayo and
Tisquirama licences totalled US$2.5 million (2009: US$2.1 million).
In addition, there were costs totalling US$1.8 million relating to
the Chuira-1 and Colon-3 and Colon-3 Side Track wells (together
"Colon-3") and US$4.1 million relating to seismic costs at Midas.
In performing an assessment of the carrying value of the
unevaluated Oil & Gas properties at the reporting date, the
directors concluded that no further impairment existed for the
Group's unevaluated Oil & Gas assets at 31 December 2010.
The directors have reviewed the impairments required on each of
the intangible asset licence areas and the details of those
considerations are set out below.
Midas - Zoe-1
The carrying value for the Zoe-1 well on the Midas structure
tested for impairment at 31 December 2009 was US$6.59 million. The
results of testing evidenced that the deeper zones of Zoe-1 were
proven to be non-commercial therefore, the Directors recorded an
impairment charge of US$6.59 million as of 31 December 2009.
Additional costs of US$0.63 million were incurred during 2010 and
as a consequence they have been impaired during the year. The total
additional impairment charge for Zoe-1 in 2010 was US$0.63 million
and represents the difference between the expected value in use and
the carrying value of the Zoe-1 well.
Midas - Chuira-1
The carrying value for the Chuira-1 well on the Midas structure
tested for impairment during the year ended 31 December 2010 was
US$10 million (2009: US$9.4 million). Having completed a fracture
of the La Luna formation, the intention is to drill a new well in
order to develop the lower areas of La Luna outside the current
position of the Chuira-1 well. Based on the results of current
testing and the net present value of the well being less than the
carrying value, the well has proved to be unsuccessful. The
directors have recorded an impairment charge of US$8.66 million in
the year (2009: Nil) which represents the difference between the
expected value and the carrying value as of 31 December 2010. The
resultant carrying value of the Chuira-1 well was US$1.34
million.
La Paloma - Colon-3 sidetrack
The carrying value for the Colon-3ST well on the La Paloma
structure tested for impairment during the year ended 31 December
2010 was US$9 million (2009: US$ Nil). Drilling this well confirmed
the presence of hydrocarbons at a depth of 8,817 feet which
increased the proved area of the Colon field. However, the
production levels of this well were lower than expected due to rock
conditions. As a consequence, an impairment test was required and
the directors have recorded an impairment charge of US$8.82 million
(2009: US$Nil) representing the difference between the expected
value and the carrying value as of 31 December 2010. The resultant
carrying value of the Colon-3ST well was US$0.18 million.
Santa Lucia - Santa Lucia Sur-1
The Santa Lucia Sur-1 exploration well was a commitment well and
was drilled to a total depth of 8,500 feet, at a total cost to
PetroLatina of US$1.68 million (2009: US$Nil). The Company has a 50
per cent. interest in the well with PetroSantander Inc. holding the
remaining 50 per cent. share. Hydrocarbon shows and a well
developed sand channel were encountered while drilling through the
La Paz formation, but evaluation of wire-line logs indicated the
reservoir to be water bearing. Following this evaluation, the well
was plugged and abandoned. The remaining prospectivity in the block
is being evaluated for future exploration. The entire value of the
asset was written off and the impairment charge was recognised for
US$1.68 million.
5 Loans and Borrowings - Senior Secured Debt Facility
On 8 March 2010, the Company entered into a four year Senior
First Lien Secured Credit Facility (the "Senior Facility") of up
to, in aggregate, US$75 million with Macquarie to finance part of
the Company's planned ongoing drilling programme.
During negotiations of the credit facility, an initial
US$5,000,000 promissory note short term facility was agreed and
drawndown on 26 February 2010 carrying an interest rate of 18 per
cent. per annum and was secured over the assets and undertakings of
the Group on 26 February 2010.
The Company drew down US$25m under Tranche A and allotted the
associated warrants to Macquarie. The funds were used to repay the
aforementioned US$5m bridging loan extended to the Company from
Macquarie and to repay trade payables, with the remainder used to
part fund existing exploration and development operations.
The Senior Facility consists of the following drawn and undrawn
facilities and terms:
-- Tranche A: US$25 million. Under the terms of the agreement,
Macquarie were allotted 8 million warrants exercisable at a price
of GBP0.757 per share at any time over the 5 year period from
drawdown of Tranche A. These warrants were valued at US$2.7 million
and will be amortised over the 5 year exercise period together with
the loan facility fee.
-- Tranche B/C: consist in aggregate of US$50m, to fund pre
agreed development work, potential future acquisitions and for
general working capital purposes. The tranches can be drawn down,
at Macquarie's sole discretion, at any time during the three year
period ended 8 March 2013. Under Tranche B (to be used for
development activities), Macquarie would be allotted up to 12
million new warrants exercisable at a 20 per cent. premium to the
prevailing previous 20 day VWAP. If any funds are drawn down under
Tranche C (to fund new projects or commitments) in addition to the
12 million warrants detailed above, Macquarie will be eligible for
additional warrants.
-- An interest rate payable ranging between 3 month US LIBOR +
7.5 per cent. and 3 month US LIBOR + 9 per cent. dependent upon the
NPV of the Company's proved oil and gas reserves.
-- The debt facility has a four year term expiring on 7 March
2014. Repayment is on a quarterly linear amortisation basis
starting 30 months prior to the final maturity date.
-- The Group must accomplish certain covenants related to:
production levels; cumulative net revenue; current ratio (not lower
than 1:1); EBITDA covenant ratio (not lower than 2.5:1); Group Debt
EBITDA ratio (not higher than 3.5:1); Adjusted Present Value ratio
(not lower than 2:1) and an agreed G&A cap not higher than
US$375,000.
The exercise price of the 8 million warrants previously issued
was amended on 4 August 2010 and reduced to GBP0.50 (US$0.85) per
share in consideration of Macquarie investing US$5 million and
subscribing for new ordinary shares in the capital of the Company
as set out in note 21 of the Group's Financial Statements. The
incremental charge of US$0.5 million has been charged to share
premium as part of financing costs.
The warrants are exercisable in whole or in part at any time
within 4 years of their date of issue. These warrants remain
outstanding at the year end.
The amortisation of the costs of the loan issue taken to the
P&L during the period was US$261,000 (2009: US$Nil).
6 Post Reporting Date Events
On 21 January 2011, the Company issued and allotted (credited as
fully paid) (i) 571,083 new ordinary shares of US$0.10 par value
each ("Ordinary Shares") to TOGF in satisfaction of the third six
monthly interest instalment to 17 December 2010 due in respect of
the second tranche of US$6.29 million convertible loan notes
subscribed by TOGF on 17 June 2009, (ii) a further 423,022 new
Ordinary Shares to TOGF in satisfaction of the fourth and final six
monthly interest instalment to 21 January 2011 due in respect of
the first tranche of US$4.875 million convertible loan notes
subscribed by TOGF on 21 January 2009 (together the "Interest
Shares"), and (iii) 14,695,521 new Ordinary Shares in satisfaction
of the conversion in full of the first tranche of US$4.875 million
convertible loan notes subscribed by TOGF on 21 January 2009. The
Interest Shares rank pari passu in all respects with the Company's
existing Ordinary Shares.
On 8 March 2011, the Company issued and allotted (credited as
fully paid) 246,154 Ordinary Shares as a result of the exercise of
warrants, and a further 204,491 Ordinary Shares on 15 March 2011 as
a result of additional warrant exercises.
7 Related party transactions
Details of key management personnel's remuneration are given in
note 3 of the full Group's Financial Statements.
Latinamerican Drilling Company ("Latco"), a company controlled
for part of 2010 by Tribeca, and in which Juan Carlos Rodriguez had
a material interest, has entered into an agreement to provide rig
services to the Group. During the year US$6,542,970 (2009:
US$12,665,724) was incurred for services provided by Latco. At the
year end, a total of US$357,533 (2009: US$6,034,776) was due and
outstanding to Latco. Details of the convertible loan note provided
by TOGF, a company controlled by TOGI, are set out in note 18 of
the full Group's Financial Statements.
TDN, a company controlled by Juan Carlos Rodriguez, a director
and substantial shareholder in PELE, provides transportation
services to the Company. During the year US$1,782,468 (2009:
US$2,122,807) was incurred for services provided by TDN. At the
year end, a total of US$100,817 (2009: US$1,162,943) was due and
outstanding to TDN.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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