Page 17 - LatAmOil Week 19 2020

LatAmOil
NEWS IN BRIEF
LatAmOil
UPSTREAM
Trinidad: Columbus Energy
receives approval for
continuous injection of CO2
in the Trinity Inniss field
Columbus Energy has announced receipt of Ministry on Energy and Energy Industry approval for the start of continuous injection of CO2 in the Trinity Inniss field.
The Company has also announced a continu- ation, for the month of May 2020, of the cost con- trol measures first implemented in April 2020.
Leo Koot, Executive Chairman of Columbus, commented: “The Company is pleased to have received Ministry consent for the start of con- tinuous injection of CO2 in the Trinity Inniss field. The CO2 project is an important enhanced oil recovery project for both the Company and Trinidad and I look forward to updating the market upon the commencement of continuous injection.
“The Company has decided, for the month of May, to continue to manage some of its third party costs through the issuance of shares under the Lind Facility and the Contractor Shares scheme. However, we are conscious of the dilu- tion this has on shareholders and so will, in the coming weeks, carefully review the effect of the share issuances and whether it makes sense to consider its use in the future.”
As previously announced, the term of the Trinity Inniss Incremental Production Service Contract (IPSC) was extended to allow for the implementation of the CO2 Pilot Project.
The Company’s interest in the Trinity Inniss field benefits from an agreement with Predator Oil and Gas, whereby Predator will help plan and fund the CO2 EOR Pilot Project. As part of the agreement with Predator, the Company and Predator share 50:50 in any incremental oil pro- duction (after Predator recovers its costs associ- ated with the project). Additionally, Predator has the right (until 30 September 2020) to purchase the Company’s interest in the Trinity Inniss field for $4.2m.
Columbus Energy, May 13 2020
PetroTal announces
temporary shut-in
of Peru’s Bretaña oilfield
PetroTal has been notified by Petroperu, the operator of Peru’s Northern Oil Pipeline (ONP), that it has temporarily shut down the pipe- line as a result of a directive from the Peruvian
government intended to combat the spread of COVID-19 in the communities adjacent to the pipeline operations. The directive states that no employees over the age of 60 nor with serious chronic diseases, should be working in the high risk regions of Peru. Although Petroperu has filed an appeal with the Peruvian government to allow the pipeline to resume operations on the basis that it is an essential service, it is not clear how long the pipeline operations will remain suspended. PetroTal has commenced steps to temporarily shut down oil production at the Bretaña oilfield due to storage capacity limita- tions. The shutdown is being managed to ensure that operations can be returned to full produc- tion levels in an orderly manner upon reopening of the ONP. As a consequence of this directive, PetroTal will necessarily move to significantly curtail all costs related to oilfield operations, as the company moves into a temporary hiber- nation mode. PetroTal is pleased to report that no COVID-19 cases have been reported at the Bretaña oilfield.
Additional cost reductions: The company announces that, in addition to ongoing cost rationalisation of operating, transportation and capital development costs, PetroTal has reduced overall general and administrative costs by approximately 20%. This includes com- pany-wide salary cuts, including cash compen- sation reductions of 20% for management and directors. The Company continues to prudently manage its cash resources and is exploring ways to further reduce its cost structure, as needed. The temporary Bretaña oilfield shut down in response to the public health directive gives PetroTal the opportunity to reduce costs more than if production was voluntarily shut in, and the company will temporarily layoff all but essential personnel at the field and offices.
Financial update: On May 27, 2019, PetroTal entered into a Pipeline Transportation Service Contract with Petroperu, a state-owned com- pany, to have access to Peru’s ONP that included an oil swap arrangement that allowed PetroTal to deliver volumes of its Bretaña oil by barge to the ONP Pump Station No. 1 (PS#1), located at Saramuro, in exchange for equivalent volumes of Petroperu’s premium supreme residual oil at the port of Bayovar. The Company delivered a total of approximately 580,000 barrels of Bretaña oil to PS#1 pursuant to this arrangement before it expired in early December 2019.
On December 23, 2019, PetroTal entered into a new sales contract with Petroperu whereby all the Bretaña oil delivered at PS#1 is sold to Petroperu at a monthly average reference price of ICE Brent minus $4 per barrel. As of March 31, 2020, PetroTal has delivered a total of approx- imately 1.2mn barrels of Bretaña oil to PS#1 pur- suant to the sales contract.
It can take up to eight months for Bretaña oil to reach the Bayovar port, where it can be stored for a further four months before it is ultimately sold by Petroperu. The swap and sale contracts enable the Company to receive oil sales revenue earlier, improving PetroTal’s liquidity. When the oil is ultimately sold by Petroperu at Bayovar, PetroTal will be subject to a valuation adjustment based on the actual price achieved by Petroperu, whether higher or lower as compared to the price received at the time of delivery to PS#1.
On a monthly basis, the Company tracks the impact of fluctuating oil prices on volumes sold under both the swap contract and sales contract, as a commodity derivative and, as a result of the recent drastic drop in oil prices, the contin- gent liability accruing under these contracts is approximately $18mn and $24mn, respectively, at the end of March 2020.
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