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PetroTal Corp. - Proposed Placing to Raise at Least £15 million to Accelerate Bretaña Development

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CALGARY, May 31, 2019 /CNW/ - PetroTal Corp. ("PetroTal" or the "Company") (TSXV:TAL), an independent oil and gas company with assets and operations in Peru, today announces its intention to issue new common shares in the Company ("Common Shares") to raise in aggregate gross proceeds of not less than £15 million (the "Placing") at a price of 15 pence per Common Share (the "Placing Price").

The Placing will be conducted by way of an accelerated bookbuild (the "Bookbuild") which will open immediately following the release of this announcement. The Placing will only be made available to invited eligible institutional investors in certain specified jurisdictions. A further announcement confirming the number of new Common Shares to be issued pursuant to the Placing (the "Placing Shares") and final details of the Bookbuild is expected to be made in due course.

GMP FirstEnergy, Numis and Pareto are acting as joint bookrunners (the "Joint Bookrunners") in relation to the Placing. Strand Hanson is acting as Nominated & Financial Adviser to the Company.

Use of Proceeds

It is intended that the net proceeds of the Placing will be applied to accelerate development activity at the Company's Bretaña oilfield on Block 95, onshore Peru.  In particular, PetroTal plans to use the net proceeds of the Placing to:

  • Drill one additional water well in 2019 which was originally planned to be drilled in 2020 to provide additional water disposal assurance;
  • Re-complete the existing water disposal well as an oil producer;
  • Sidetrack the existing 2XD well and re-complete as a horizontal production well; and
  • Workover the existing 1XD well to install an electro-submersible pump to increase its oil productivity.

The combined impact of this additional work is to exit 2019 with five oil producing wells and two water disposal wells, with an estimated exit rate of approximately 10,000 to 11,000 barrels of oil per day (BOPD), an increase over the previously announced 7,000 BOPD.

Achievements to Date and Dividend Policy

The Company has executed on bringing the Bretaña field online and increasing production.  Previously announced highlights include:

  • initiating production on June 1, 2018, five months ahead of schedule;
  • installation of facilities for 25 per cent. less cost than budgeted in 2018, allowing the Company to exit 2018 with more cash on the balance sheet than management expected;
  • Declaration of Commerciality in late 2018 at the Bretaña field which allowed the Company to begin using the prior net operating losses, incurred prior to acquisition, to reduce tax liability;
  • increased the net present value discounted to 10 per cent. ("NPV10") of the Company's proved plus probable ("2P") reserves year over year by 90 per cent.;
  • drilled and completed the Company's first development well, the second oil producer in the field, and brought the well online at an announced 2,250 BOPD;
  • increased production at Bretaña from nil in May 2018, to approximately 1,000 BOPD in June 2018, to 2,000 BOPD in November 2018, to over 3,200 BOPD in May 2019;
  • secured approval in May 2019 of the Environmental Impact Assessment to fully develop the Bretaña oil field in Block 95; and
  • signed a contract with PetroPeru, the State owned oil company, who operate the Oil Northern Pipeline ("ONP"), to deliver oil to the Pacific coast via the ONP, thus allowing the Company to efficiently access commercial markets for the Company's production.

To review announcements related to these highlights please see the investor page at www.PetroTal‑Corp.com

The board of directors of the Company (the "Board") understands the importance of optimising value for shareholders and believes in balancing returns to shareholders with investment in the business to support future growth. To this end, subject to the ongoing satisfactory performance of the Company's operations in Peru, the Board intends to implement a dividend policy pursuant to which the Company will pay dividends following completion of the Placing.  The current intention is for an interim dividend to be paid in Q4 2019 with a final dividend to be paid in or around May 2020, both in respect of the period from 1 July 2019 to 31 December 2019.  With the initial interim and final dividend payments, the Company intends to target an annualised yield of 4% (based on the Placing Price).

Thereafter, consistent with the anticipated improvement in earnings and of cash generation in 2020 and beyond, and subject to prevailing market conditions and other corporate activity, it is expected that the dividend policy of the Company will establish semi-annual dividends, the amount of which will be declared at the discretion of the Board as appropriate and subject to applicable laws.

The Placing and the Bookbuild

GMP FirstEnergy, Numis and Pareto will commence the Bookbuild with immediate effect. The Joint Bookrunners have entered into the Placing Agreement under which, subject to the conditions set out therein, the Joint Bookrunners have agreed to use their respective reasonable endeavours to procure subscribers for the Placing Shares at the Placing Price and as set out in the Placing Agreement.

The Placing Shares, upon issue, will rank equally in all respects with the Existing Common Shares.

The timing of the closing of the Bookbuild and allocations of Placing Shares are at the discretion of the Joint Bookrunners and the Company. The details of the results of the Placing will be announced as soon as practicable after the close of the Bookbuild. Attention is drawn to the Appendix to this Announcement containing, inter alia, the terms and conditions of the Placing (representing important information for invited Placees only).

By choosing to participate in the Placing and by making an oral and legally binding offer to acquire Common Shares in the Placing, Placees will be deemed to have read and understood this Announcement in its entirety (including the Appendix) and to be making such offer on the terms and subject to the conditions in it, and to be providing the representations, warranties and acknowledgements contained in the Appendix.

Manolo Zúñiga, President and CEO of PetroTal commented:
"Having executed like clockwork since taking over the Bretaña project at the end of 2017, while at the same time optimizing the operations as reflected by the 90% increase of the 2P NPV10 estimated by NSAI, our independent qualified reserves evaluator, in the most recent financial year end reserves report, the proposed Placing will allow the Company to reach its initial goal of 10,000 BOPD ahead of plan, resulting in optimized unit lifting and operating expenses, as well as per unit general and administrative costs going forward. This will also allow the Company to continue evaluating the expected crude oil recovery factor, and reach additional oil markets.  This capital will allow PetroTal to maintain an active drilling schedule and avoid rig standby or de-mobilization costs.  The proposed dividend policy is designed to reward shareholders as our increased production delivers significant cash generation." 

Notes to Editors:
PetroTal is a publicly-traded, dual-listed (TSXV:TAL) oil and gas development and production company domiciled in Calgary, Alberta, focused on the development of oil assets in Peru. PetroTal's development asset is the Bretaña oil field in Peru's Block 95 where oil production was initiated in June 2018. Additionally, the Company has large exploration prospects and is engaged in finding a partner to drill the Osheki prospect in Block 107. The Company's management team has significant experience in developing and exploring for oil in Northern Peru and is led by a Board of Directors that is focused on safely and cost effectively developing and exploiting the Bretaña oil field.  More information on the Company can be found at www.PetroTal-Corp.com

Details of the Placing
The Company is seeking to raise at least £15 million by way of the Placing through the issue of the Placing Shares at 15 pence per share. The Placing Shares will be offered by way of an accelerated book building process which will launch immediately following this announcement.

Placing Agreement
The Company GMP FirstEnergy, Numis and Pareto have today entered into the Placing Agreement, pursuant to which the Company has appointed GMP FirstEnergy, Numis and Pareto as the Company's agents to use their respective reasonable endeavours to procure subscribers for the Placing Shares at the Placing Price. The Placing is not being underwritten by GMP FirstEnergy, Numis and/or Pareto. The Company has agreed to pay GMP FirstEnergy, Numis and Pareto certain commissions and fees in connection with the Placing.

The Placing is conditional on, amongst other things, Admission of the Placing Shares occurring on or before 7.00 a.m. on  5 June 2019 (or such later time and/or date as the Company, GMP FirstEnergy, Numis and Pareto may agree, being not later than 7.00 a.m. on 19 June 2019.

The Placing Agreement contains certain customary warranties given by the Company concerning the accuracy of the information in this Announcement as well as other matters relating to the Group and its business. The Placing Agreement is terminable by GMP FirstEnergy, Numis and/or Pareto in certain circumstances prior to Admission, including for force majeure or in the event of a material adverse change to the business of the Company or the Group. The Company has also agreed to provide a market standard indemnity and undertakings to GMP FirstEnergy, Numis and Pareto.

The Placing Shares will, when issued, be subject to the Articles and By Laws, be credited as fully paid and non-assessable and rank equally in all respects with each other and with the Existing Common Shares, including the right to receive all dividends and other distributions declared, made or paid in respect of the Common Shares after the date of issue of the Placing Shares.

Admission, settlement and CREST
Application will be made to: (a) the London Stock Exchange for Admission of the Placing Shares to trading on AIM; and (b) the TSXV for listing of the Placing Shares for trading on the facilities of the TSXV.

It is expected that Admission will become effective at 7.00 a.m. on 5 June 2019 (or such later date as the Company, GMP FirstEnergy, Numis and Pareto may agree, being not later than 7.00 a.m. on 19 June 2019) and that dealings in the Placing Shares will also commence at that time. The Placing Shares will not trade on the TSXV until the date that is four months and a day after the day of issuance. 

Settlement of transactions in the Placing Shares following Admission will take place through depositary interests ("DIs") within the CREST system, subject to certain exceptions. GMP FirstEnergy, Numis, Pareto and the Company reserve the right to require settlement for, and delivery of, the Placing Shares to Placees by such other means that they deem necessary if delivery or settlement of DIs is not possible within the CREST system within the timetable set out in this Announcement or would not be consistent with the regulatory requirements in the Placee's jurisdiction. Each Placee will be deemed to agree that it will do all things necessary to ensure that delivery and payment is completed in accordance with either the standing CREST or certificated settlement instructions which they have in place with GMP FirstEnergy, Numis and/or Pareto.

DEFINITIONS

The following definitions apply throughout this announcement unless the context otherwise requires:

Admission

the admission of the Placing Shares to trading on AIM becoming effective in accordance with Rule 6 of the AIM Rules



Affiliate

in respect of any of party, any of its directors, officers, employees or consultants, or, in the case of any of the Joint Bookrunners, any person connected with that Joint Bookrunner as defined in FSMA



AIM

the market of that name operated by the London Stock Exchange



AIM Rules

the AIM Rules for Companies published by the London Stock Exchange as they may be amended and replaced from time to time



Articles

the articles of amalgamation of the Company (as amended from time to time)



By Laws

the by- laws of the Company adopted on 18 December 2017 (as amended from time to time)



Common Shares

common shares in the capital of the Company



Company or PetroTal

PetroTal Corp., a public company incorporated under the laws of Alberta with corporate access number 2020869455 and whose registered office is at c/o Stikeman Elliott LLP Suite 4300, 888 3rd Street S.W., Calgary Alberta T2P 5C5



CREST

the relevant system (as defined in the CREST Regulations) which enables title to units of relevant securities (as defined in the CREST Regulations) to be evidenced and transferred without a written instrument and in respect of which Euroclear is the Operator (as defined in the CREST Regulations)



Enlarged Share Capital

together, the Existing Common Shares and the Placing Shares



Exchange Information

shall have the meaning set out in paragraph 8.1.6 of the Appendix to this Announcement



Existing Common Shares

the 537,740,991 Common Shares in issue at the date of this announcement



GMP FirstEnergy

FirstEnergy Capital LLP, a Joint Bookrunner and joint broker to the Company and a limited liability partnership incorporated in England and Wales, with registered number OC346410, whose registered office is at  85 London Wall, London, EC2M 7AD



Group

the Company and its subsidiaries and subsidiary undertakings from time to time



Joint Bookrunners

GMP FirstEnergy, Numis and Pareto



London Stock Exchange

London Stock Exchange plc



Numis

Numis Securities Limited, a Joint Bookrunner and joint broker to the Company and a private company registered in England and Wales with registered number 2285918, whose registered office is at  10 Paternoster Square, London, EC4M 7LT


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