PACIFIC RUBIALES ANNOUNCES FINANCIAL RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2011
TORONTO, May 18 /PRNewswire-FirstCall/ - Pacific Rubiales Energy Corp. (TSX: PRE; BVC: PREC) announced today the release of its audited consolidated financial results for the quarter ended March 31, 2011, together with its Management's Discussion and Analysis ("MD&A") for the corresponding period. These documents are posted on the Company's website at www.pacificrubiales.com and SEDAR at www.sedar.com.
Ronald Pantin, Chief Executive Officer of the Company, commented: "For this quarter we have continued to grow and build upon the strong base of resources and our technical expertise, taking advantage of the increase in oil prices. Average net production volume sold in the first quarter was 82,747 boe/d from a strong platform of 61 new development wells, primarily in the Rubiales and Quifa fields. Our production increase generated revenues of $583.5 million, an increase of 54% from the same quarter last year of $379.4 million, and EBITDA ending the quarter at $362.5 million, a 56% increase from the same quarter last year of $231.9 million."
The historical milestone of 225,000 boe/d, reached on May 12, 2011 is the result of the continuous growth in production of heavy oil in the Rubiales/Piriri and Quifa Blocks and incorporates the development of the Company's light and medium oil blocks, as well as the natural gas volume produced from the La Creciente field and other smaller fields. This significant achievement demonstrates our ability to grow rapidly in a competitive and concentrated oil region, and is the result of an integrated effort by our Company to secure market access and flexibility, and generate capacity ahead of our growth objectives from the wellhead all the way to the end customer.
The strategy of the Company is to continue its growth through exploration, development and production of new and existing reserves and to secure market access by participating in key oil and gas transportation, and infrastructure projects.
Management will hold a live conference call in English on Thursday, May 19, 2011, to discuss the Company's financial results beginning at 9:00 a.m. (EDT) / 8:00 a.m. (Bogota time). A Spanish translator will be available. Analysts and interested investors are invited to participate as follows:
Participant Number (International/Local): (647) 427-7450
Participant Number (Toll free Colombia): 01-800-518-0661
Participant Number (Toll free North America): 1-888-231-8191
Conference ID: 67112346
The conference call will be available for replay for two weeks, starting at 12:00 p.m. (EDT) / 11:00 a.m. (Bogota time) on May 19, 2011.
The encore will be available in both English and Spanish.
Participant Number (Toll free): 1.800.642.1687
Participant Numbers (Local): 403.451.9481
778.371.8506
416.849.0833
613.667.0035
514.807.9274
902.455.3955
Conference ID (English): 67112346
Conference ID (Spanish): 67185044
Investor Presentation
The Company has posted a presentation with respect to the Company's financial and operational results for the first quarter of 2011 on the Company's website at www.pacificrubiales.com.
Summary of financial results for the three months ended March 31, 2011
| Three Months Ended March 31 | ||||
| (in thousands of US$ except per share amounts or as noted) | 2011 | 2010 | ||
| Oil and gas sales(1) | 583,549 | 379,431 | ||
| EBITDA(2) | 362,527 | 231,966 | ||
| EBITDA Margin (EBITDA/Revenues) | 62% | 61% | ||
| Per share | - basic ($)(4) | 1.35 | 0.97 | |
| Net earnings before non-cash items(3) | 134,221 | 98,929 | ||
| Per share | - basic ($)(4) | 0.50 | 0.41 | |
| Net earnings (loss)(3) | (69,593) | 76,127 | ||
| Per share | - basic ($)(4) | (0.26) | 0.32 | |
| - diluted ($) | (0.26) | 0.30 | ||
| Cash Flow from Operations | 319,803 | 257,599 | ||
| Per share | - basic ($)(4) | 1.19 | 1.07 | |
| (1) | See additional details explained in the section entitled "Commercial Activity" on page 13 of the MD&A. |
| (2) | See "Additional Financial Measures" on page 36 of the MD&A. |
| (3) | The first quarter of 2011 net earnings was impacted by a number of non-cash items totaling $203.8 million which generated a net loss of $69.6 million for the period. The adjusting non-cash items are mainly related to unrealized mark-to-market losses on derivatives of $92.6 million, the equity tax in Colombia of $68.5 million fully recognized in this quarter, stock-based compensation effect of $46.7 million, and unrealized foreign exchange gain of $4 million (with the exception of the equity tax in Colombia, these non-cash items may or may not materialize in future periods). See "Additional Financial Measures" page 36 of the MD&A. |
| (4) | The basic weighted average number of common shares outstanding for the first quarter ended March 31, 2011 and 2010 was 267,946,959 (fully diluted - 267,946,959) and 240,126,671 (fully diluted - 251,582,984), respectively. |
Operating Netback Crude Oil and Gas:
The Company produces and sells crude oil and natural gas. It also purchases crude oil from third parties as diluents and for trading purposes. The following sets out the netback for the first quarter of 2011 as well as a comparison of the combined total for the first quarter of 2010:
| Three months ended March 31, | ||||||||
| 2011 | 2011 | 2011 | 2010 | |||||
| Oil | Gas | Combined | Combined | |||||
| Average net production (after royalties and field consumption)(1) | 68,991 | 10,657 | 79,648 | 52,227 | ||||
| Average daily production sold (boe/day)(1) | 71,953 | 10,794 | 82,747 | 65,702 | ||||
| Operating netback ($/boe) (2) | ||||||||
| Crude oil and natural gas sales price | 85.58 | 30.21 | 78.36 | 64.17 | ||||
| Cost of production (3) | 6.10 | 1.48 | 5.50 | 3.74 | ||||
| Transportation (trucking and pipeline) | 12.44 | 0.52 | 10.88 | 5.96 | ||||
| Diluent cost (4) | 15.38 | - | 13.37 | 12.83 | ||||
| Other costs (5) | (2.36) | 1.58 | (1.84) | 0.01 | ||||
| Overlift/Underlift (6) | (2.18) | (4.08) | (2.43) | (0.82) | ||||
| Operating netback ($/boe) | 56.20 | 30.71 | 52.88 | 42.45 | ||||
| (1) | See additional comments at the section entitled "Reconciliation of Volumes Produced Vs. Volumes Sold" on page 14 of the MD&A. |
| (2) | Combined operating netback data based on weighted average daily production sold which includes diluents necessary for the upgrading of the Rubiales blend. |
| (3) | Cost of production mainly includes lifting costs and other production costs such as personnel, energy, security, insurance and others. |
| (4) | Net blending cost is estimated at $3.9 per bbl of Rubiales crude, considering an average diluents purchase price delivered at the Rubiales field of $92.83 per bbl (Light Crude Oil (38°API) and Natural Gasoline (79°API), plus pipeline fees from the Rubiales field to Coveñas of $7.76 per bbl, less the average Rubiales Blend (Castilla) sale price of $84.38 per bbl, times the Rubiales average blending ratio of around 24%. |
| (5) | Other costs mainly correspond to royalties on gas production, external road maintenance at the Rubiales field, inventory fluctuation, and the net effect of the currency hedges of operating expenses incurred in Colombian pesos during the period. The negative cost for oil of $1.84 per bbl was mainly attributable to the realized hedge gain recognized against operating expenses during this period. See additional comments on page 26 - Risk Management Contracts of the MD&A. |
| (6) | Corresponds to the net effect of the overlift position for the period amounting to $18.1 million, which generated a reduction in the combined production costs of $2.43 per boe as explained in the section "Corporate Development Highlights - Financial Position - Operating Costs" on page 20 of the MD&A. |
Results, Analysis and Highlights:
During the first quarter of 2011, the Company continued the trend of outstanding production growth and exploratory success, leveraging its technical know-how and operational expertise. The results for this period underline the strength of the Company's operational activity and its capacity to increase production, as well as management's commitment to deliver robust financial results. Management is focused on achieving challenging operational goals, while pursuing an ambitious exploration and production ("E&P") investment program, under the umbrella of the Company's paramount strategic focus: Growth.
Revenue increased 54% to $583.5 million compared to $379.4 million in the same period in 2010. The increase resulted from higher production, optimization of marketing activities and higher combined crude and gas prices. Revenues in the first quarter of 2011 were impacted by the timing of the revenue recognition of 732,934 bbl of crude oil production exported in the first week of April 2011.
EBITDA for the first quarter of 2011 totalled $363 million, representing a significant increase of 56% as compared to EBITDA for the previous year's first quarter of $232 million. First quarter 2011 EBITDA represents a 62% margin in comparison to total revenues for the period.
Net earnings, before non-cash items, amounted to $134.2 million, or $0.50 per common share, compared to $98.9 million in the previous year. Net earnings after non-cash items of $203.8 million, was a net loss of $69.6 million for the period. The non-cash items include unrealized mark-to-market losses on derivatives of $92.6 million, the equity tax in Colombia of $68.5 million fully recognized in this quarter, share-based compensation of $46.7 million, and foreign exchange gain of $4 million.
Average gross production in the first quarter of 2011 reached 196,272 boe/d, 51% higher than in the same period of 2010, and is the result of the production yield from more than 61 new development wells, mainly in the Rubiales and Quifa fields. The operated production in the first quarter of 2011 was negatively impacted by land transportation logistics, caused by heavy rains that generated a country-wide state of emergency, and delays in the OCENSA expansion from 450,000 bbl/d to 560,000 bbl/d. Once the transportation problems were solved, the Company's production reached 225,000 boe/d of gross operated production as of May 12, 2011, which continues to make the Company the fastest growing oil and gas company in Colombia, as well as the country's second largest operator.
Crude oil operating netback during the first quarter of 2011 was $56.20/bbl, higher by 22% in comparison to the same period in 2010, due to higher realized prices and lower differentials with respect to WTI. Natural gas operating netback was $30.71/boe, higher by 44% in comparison to the same period of 2010.
Capital expenditures in the first quarter of 2011 totalled $175.7 million (2010 - $80.8 million), of which $75.5 million was invested in the expansion and construction of production infrastructure; $41.5 million went into exploration activities including seismic, aerogravimetry, aeromagnetometry and drilling; $56.1 million was invested in production drilling activities; and $2.6 million was invested in other projects.
On March 10, 2011, the Company's Board of Directors approved a cash dividend in the aggregate amount of $25 million, or $0.093 per common share. The dividend was paid on March 30, 2011 to shareholders of record as of March 16, 2011.
On March 6, 2011, the Company announced that it had filed with the Toronto Stock Exchange (the "TSX") a Notice of Intention to commence a normal course issuer bid to purchase for cancellation up to a maximum of 11,598,513, or 4.3%, of the total issued and outstanding common shares in the capital of the Company as of March 31, 2011. The Company has not purchased any common shares to date pursuant to the normal course issuer bid.
On March 31, 2011, the Company announced the acquisition of 49.999% of the interests held by Maurel et Prom in the Sabanero, Muisca, SSJN-9, CPO-17 and COR-15 blocks, which are all located on-shore in Colombia. The Sale and Purchase Agreement was executed on April 28, 2011, subject to legal and regulatory approvals of the ANH and certain contractual approvals with the partners in Colombia. The Company will pay to Maurel et Prom cash consideration to a maximum of $66 million as a reimbursement for past exploration costs in the blocks incurred as of March 31, 2011. In addition, the Company will assume: (i) a fully carried obligation up to $120 million in three years for exploration activities in the SSJN-9, CPO-17 and Muisca Blocks; and (ii) a fully carried obligation on the exploration activities in the Sabanero and COR-15 blocks with a reimbursement out of the free cash flow.
On April 27, 2010, the Company closed the syndication of the unsecured revolving credit facility in the amount of $250 million (the "Revolving Credit Facility"). On April 13, 2011, the Company closed an amendment to the Revolving Credit Facility. As a result of the demand generated among the lending syndicate, the amount of the Revolving Credit Facility was increased from the $250 million initially committed by the lenders to $350 million, and the Company extended the term of the Revolving Credit Facility to April 2013 and reduced the applicable commitment fees and the applicable margin. As of March 31, 2011, no borrowing has been made under the Revolving Credit Facility. The Company believes it has adequate resources to fund its capital plan for 2011, with the Company's cash flows from operations and current debt facilities. With respect to the Company's broader integration strategy, the Company will pay for the expansion plan with its own cash flow. However, if additional resources are required, possible sources of funds available to the Company to finance additional capital expenditures and operations include the Revolving Credit Facility, existing working capital and incurring new debt, and the issuance of additional common shares, if necessary.
On April 13, 2011, the Company and Ecopetrol announced an agreement to carry out a pilot project of the Synchronized Thermal Additional Recovery ("STAR") technology, provided by the Company, in the Quifa field in the Llanos Orientales in Colombia. The two companies, after a period of studies and tests in the research laboratories at the University of Calgary, have reached the conclusion that the implementation of in-situ combustion based technologies, such as STAR, is one of the best options to increase the recovery factor in the heavy oil fields of Colombia. Both companies have agreed to start a pilot project as soon as possible under field conditions at the Quifa field, under the terms, conditions and obligations established in the existing Quifa Association Contract between the two companies.
On May 5, 2011 Moody's Investors Service assigned to the Company a first-time Corporate Family Rating of Ba3 with a positive outlook.
Exploration Milestones
During the first quarter of 2011, the results of the exploratory campaign included the drilling of 20 exploratory wells, and the acquisition of 649.5 km of 2D seismic and 130 km2 of 3D seismic.
- In the Rubiales-Piriri Block, the Rub-243, Rub-446, Rub-447 and Rub-448 wells extended the Rubiales field to southernmost buffer-part of the Rubiales contract area, while the Rub-363, Rub-404 and Rub-534 wells extended the field to the eastern buffer-part of the Pirirí Contract.
- In the Quifa southwest area of the Quifa Block, the Quifa-36, Quifa-45, Quifa-48, Quifa-49 and Quifa-53 appraisal wells in Prospect "H" confirmed the extension of the reservoir to the northeast and the southwest, and the Quifa-DW1 and Quifa-77 appraisal wells extended the Quifa SW reservoir to the south and southeast into Prospect "J".
- In the northern part of the Quifa Block, the Jaspe-2 appraisal well and the Jaspe-3 stratigraphic well were drilled in Prospect "A". This last well confirmed the extension of Prospect "A" to the northeast. The Jaspe-2 appraisal well only showed 2 feet of net pay. The Zircon-1 stratigraphic well was drilled in Prospect "Q" but the well did not show any prospective interval. The Company also finished drilling the Ambar-3 stratigraphic well in Prospect "F" which showed 3 feet of net pay.
- In the CPE-6 Block, the Guairuro-5 stratigraphic well was drilled in the northeastern part of the block. The Guairuro-5 confirmed the presence of hydrocarbons in the well with 14 feet of net pay in the basal sand unit of the C-7 interval.
- In the La Creciente Block, the Company finished drilling the Apamate-1X exploratory well. The well showed 53 feet of net pay and resulted in a new gas discovery for the Block. Initial production tests showed an average of 24 MMscfd of gas with a well head flowing pressure of 3,730 psig.
- In the Arrendajo and SSJN-3 Blocks, the Company finished the acquisition of 130 km2 of 3D seismic and 112.5 km of 2D seismic, respectively.
- In the Peru Block 138, the Company continues with the acquisition of 537 km of a 2D seismic program.
- The exploration activity for the rest of 2011 includes: 1) the continuation of the drilling campaign in Colombia with 40 additional wells, which include drilling activity in the recently acquired Maurel et Prom blocks and appraisal wells in the buffer zone of the Rubiales-Piriri Block and Quifa southwest; 2) the acquisition of 2,811 km of 2D seismic in five blocks in Colombia and in Block 135 in Peru; and 3) the acquisition of 1,486 km2 of 3D seismic in three blocks in Colombia and in the two exploratory blocks of Guatemala
The Company's exploration program for 2011 is budgeted at $340 million and includes exploration across 26 blocks, in which 20 exploratory wells will be drilled, 36 appraisal wells and 3 stratigraphic wells. In addition, 539 km of 2D seismic and 440 km2 of 3D seismic is planned during the year. The exploration activity for the next months of 2011 includes the drilling of the planned wells and the Company is evaluating additional exploration activities.
Pacific Rubiales, a Canadian-based company and producer of natural gas and heavy crude oil, owns 100 percent of Meta Petroleum Corp., a Colombian oil operator which operates the Rubiales and Piriri oil fields in the Llanos Basin in association with Ecopetrol, S.A., the Colombian national oil company. The Company is focused on identifying opportunities primarily within the eastern Llanos Basin of Colombia as well as in other areas in Colombia and northern Peru. Pacific Rubiales has working interests in 40 blocks in Colombia, Peru and Guatemala.
The Company's common shares trade on the Toronto Stock Exchange and La Bolsa de Valores de Colombia under the ticker symbols PRE and PREC, respectively.
Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 5.7 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Cautionary Note Concerning Forward-Looking Statements
This press release contains forward-looking statements. All statements, other than statements of historical fact, that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future (including, without limitation, statements regarding estimates and/or assumptions in respect of production, revenue, cash flow and costs, reserve and resource estimates, potential resources and reserves and the Company's exploration and development plans and objectives) are forward-looking statements. These forward-looking statements reflect the current expectations or beliefs of the Company based on information currently available to the Company. Forward-looking statements are subject to a number of risks and uncertainties that may cause the actual results of the Company to differ materially from those discussed in the forward-looking statements, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on the Company. Factors that could cause actual results or events to differ materially from current expectations include, among other things: uncertainty of estimates of capital and operating costs, production estimates and estimated economic return; the possibility that actual circumstances will differ from the estimates and assumptions; failure to establish estimated resources or reserves; fluctuations in petroleum prices and currency exchange rates; inflation; changes in equity markets; political developments in Colombia or Peru; changes to regulations affecting the Company's activities; uncertainties relating to the availability and costs of financing needed in the future; the uncertainties involved in interpreting drilling results and other geological data; and the other risks disclosed under the heading "Risk Factors" and elsewhere in the Company's annual information form dated March 10, 2011 filed on SEDAR at www.sedar.com. Any forward-looking statement speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein.
SOURCE Pacific Rubiales Energy Corp.
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