Revenue more than Doubled; 52% Increase in Value of Proved Reserves; Cash and Short-term Investments of $56.5 Million at year-end
CALGARY, ALBERTA--(Marketwire - May 1, 2012) - Americas Petrogas Inc. ("Americas Petrogas" or the "Company") (TSX VENTURE:BOE) announces that it has filed its 2011 audited consolidated financial statements and Management's Discussion and Analysis ("MD&A") relating to its 2011 year-end results. The Company also filed the disclosure and reports relating to reserves data and other oil and gas information required pursuant to National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities. These filings can be accessed electronically on the System for Electronic Document Analysis and Retrieval (SEDAR) website: www.sedar.com. All amounts are in Canadian dollars unless otherwise stated.
Highlights for 2011 and Subsequent
- Oil sales from conventional blocks totaled 190,564 barrels of oil during 2011, generating $11.4 million of gross revenues and $8.9 million of net revenues, more than doubling the equivalent figures from 2010.
- Average production cost for 2011 was $16.04 per barrel, a cost-reduction of nearly 40% compared to 2010.
- In 2011, drilling activity on Medanito Sur was limited as the Company awaited receipt of the exploitation license for the block. Subsequent to year-end, in March 2012, the Company received a 25-year exploitation license on the Medanito Sur block, allowing for a significantly expanded drilling program. The Company is increasing drilling activity in 2012 with the expectation to increase production and reserves in 2012. Americas Petrogas is the Operator of Medanito Sur.
- The Company was successful in raising $50.0 million of financing in 2011 and subsequent to year-end, raised $70.8 million through the issuance of 20,217,000 common shares at $3.50 per share. The Company currently has approximately $90 million of cash and short-term investments.
- The recent financings mentioned above will allow facilities expansion and acceleration of exploration and development plans including a planned 30 well conventional drilling program and a planned 10 well shale drilling program over the next 12 to 18 months.
- The Company entered into a farm-out agreement with a subsidiary of Exxon Mobil Corporation ("ExxonMobil") for the exploration and potential exploitation of the Los Toldos blocks. Under the farm-out terms, ExxonMobil has committed to drilling a minimum of four (4) wells, including one (1) horizontal well, during the exploration phase. ExxonMobil and Americas Petrogas will each have a 45% working interest and Gas y Petróleo del Neuquén (provincial oil company) holds a 10% working interest. The first Vaca Muerta shale well on these blocks was drilled on Los Toldos II. Drilling was completed in 2012 and the comprehensive data that was collected is currently being analyzed and integrated.
- In June 2011, the Company acquired an additional working interest in the Totoral, Yerba Buena and Bajada Colorada blocks increasing Americas Petrogas' working interest to 90%. Americas Petrogas is Operator of these blocks.
- The Company now has 90% working interest in the Loma Ranqueles block, subsequent to acquiring an additional 40%. The Company is the Operator of this block.
- The Company now has 39% working interest in the Huacalera block after increasing its working interest and entering into a farm-out agreement with Apache Corporation ("Apache"), the Operator. The Vaca Muerta shale well on this block was drilled in 2011 and testing commenced early in 2012.
- The Company increased the value of its after-tax Proved Reserves of oil and gas by 52%.
- In Peru, the Company is performing brine pumping tests under the supervision of Ercosplan.
- Also in Peru, the Company completed a 15-well evaluation drilling campaign for phosphates.
"Based on published reports, the Neuquen Basin is a proven, producing basin with large prospective Vaca Muerta shale resources." said Barclay Hambrook, President and CEO of Americas Petrogas Inc. "The U.S. Energy Information Administration ranks Argentina third after the U.S. and China in total estimated oil and gas prospective resources. During 2011, the Company increased its working interest in several blocks with shale oil and gas potential and joint ventured with ExxonMobil to advance drilling on the Los Toldos blocks. This is in addition to the Company's joint venture with Apache on the Huacalera block. As well, the Company more than doubled its revenue from conventional operations in 2011, compared to 2010, and the Company expects to increase its revenue from production even more in 2012. The Company is well-funded with over $90 million of cash and short-term investments, allowing it to continue its exploration and development activities on all of its blocks."
He went on to say: "In Peru, the Company continues to progress on its potash brine project, with additional pump tests under the supervision of Ercosplan. New drilling, which targets evaporites, brines, phosphates and other minerals, is expected in the coming months."
Selected Financial Results
|Year ended December 31,|
|Net revenue (1)||$||8,887,511||$||4,186,682|
|Net income (loss) attributable to owners of the Company||$||(16,740,226) (2||)||$||(12,378,722||)|
|Income (loss) per share, basic & diluted||$||(0.09||)||$||(0.10||)|
December 31, 2011
December 31, 2010
|Cash and cash equivalents||$||27,762,717||$||42,039,429|
|Total current assets||$||60,771,658||$||44,469,164|
|Total current liabilities||$||28,829,896||$||7,686,291|
|(1)||Net revenue is gross revenue, excluding interest income, net of royalties.|
|(2)||For 2011, $4.3 million of this loss is attributable to a non-cash, non-recurring loss required by mandatory conversion to IFRS from Canadian GAAP.|
|(3)||Short-term investments are bank-sponsored investments and other investment grade instruments which are current in nature, with an initial maturity greater than three months when purchased and which are not redeemable at face value on demand.|
Oil production from the Company's conventional blocks totaled 190,564 barrels in 2011 (2010 - 99,530). The Company is currently producing oil from nine wells, with additional production behind pipe, as it awaits the construction of expanded facilities and additional licenses before tying in additional production.
In March 2012, the Company received a 25-year exploitation license, granted by the provincial government, for the Medanito Sur block.
In April 2012, the Company commenced a new drilling program on Medanito Sur.
Los Toldos I, II, III, IV
In late 2011, the first well under the farmout agreement between Americas Petrogas and ExxonMobil (LTE.x-1) was spudded on the Los Toldos II block. Subsequent to year end, in 2012, this well reached total depth ("TD") of approximately 3,250 meters. A full suite of logs and cores was acquired from the Vaca Muerta formation, and production casing was successfully set and cemented to TD. The well encountered 343 metres or 1125 feet of the primary target Vaca Muerta Shale Formation with hydrocarbon shows. Hydrocarbon shows were also encountered and data acquired in the Mulichinco, Quintuco and Tordillo formations.
The Company is in the process of integrating the comprehensive data set in order to provide fracing and testing options for shale oil or shale gas reservoirs, as well as other identified targets.
The Company is preparing to drill, on the Los Toldos I block, its second deep well with ExxonMobil with the primary target being the Vaca Muerta formation, and other formations of interest.
Americas Petrogas is the operator on the four Los Toldos blocks and ExxonMobil is a joint venture partner.
Totoral, Yerba Buena, Bajada Colorada
No significant activity occurred on the Totoral, Yerba Buena, Bajada Colorada blocks in 2011. The Company is preparing to spud a Vaca Muerta shale well at Totoral, Yerba Buena, Bajada Colorada in the near future.
In July 2011, a deep exploration well (Hua.x-1) drilled on the Huacalera block reached total depth of 4,100 metres (13,450 feet).
The primary target Vaca Muerta Shale Formation (531 metres or 1,742 feet approximate gross thickness) has initial indications of overpressure. Gas shows were encountered in the Mulichinco Formation (140 metres or 459 feet approximate gross thickness), the Quintuco formation (414 metres or 1,358 feet approximate gross thickness) through the Vaca Muerta Formation and into the Tordillo Formation.
A full suite of logs, including image logs, was run and production casing was successfully set all the way to TD. The vertical cores, sidewall cores and rock cuttings were sent to three different laboratories for analysis to measure the petrophysical and geochemical characteristics of the samples, both shales and sands.
In February 2012, testing commenced on the Hua.x-1 well. The testing program will initially focus on the Vaca Muerta formation followed by additional testing in the Quintuco and Mulichinco zones since these additional zones of interest were also identified from the petrophysical and geochemical analyses of the cores, cuttings and log data. The first stage of completion of the Hua.x-1 well was initiated in mid-February by Apache. The first zone of interest being tested is a select 360 foot thick interval below 12,465 feet in the Vaca Muerta Shale, which has a gross thickness of 1,742 feet in the well. The zonal selection was made based on leading edge core and integrated petrophysical analyses carried out during late 2011. The selected interval appears to hold favorable flow potential based on the analyses. The hydraulic fracture stimulation was successfully completed in late February, placing just over 300,000 lbs of proppant in the formation. Testing is expected to continue, collecting valuable fluid and reservoir data in the Vaca Muerta Shale. Careful evaluation of the current interval will be important in assessing the potential of the Vaca Muerta section in order to determine next steps. In addition to the Vaca Muerta, uphole zones of interest include Quintuco and Mulichinco, to be tested at a later date.
Bayovar Project in the Sechura Desert of Peru
In 2011, the Company began an exploratory drilling program for phosphates, separate and distinct from its existing potash brine project. The phosphates drilling was conducted in the southwestern block of the Company's Bayovar concession; whereas, the Company's potash brine project is located in the northern portion of the Bayovar concession. As well, the southwestern block is located a few kilometers to the north-east of the open-pit surface phosphate mine that was put into production in August 2010 by Vale S.A., a Brazilian mining company, which sold a 60% interest in the project to Mitsui & Co. and Mosaic Company in 2010, just prior to the start of production. Published reports indicate that production by Vale began at approximately 3.9 million tonnes per year with a recent announcement to expand production to 5.8 million tonnes by 2014. Also, another nearby phosphates project, operated by Fosfatos del Pacifico, was partially acquired by a joint venture of Mitsubishi Corp. and Zuari Industries Ltd. in 2011.
The aforementioned phosphates drilling program by the Company was completed and involved a total of 15 boreholes, each ranging in depth from 52 to 99 meters for a total drilling depth of approximately 1,150 meters (3,800 feet). Recently, Americas Petrogas has retained SRK Consulting (U.S.), Inc. ("SRK") to assist Americas Petrogas with overseeing its activities relating to exploration for phosphates and delineation of resources. SRK has also been engaged to prepare a report in accordance with NI 43-101 pertaining to Americas Petrogas' phosphate resources.
Americas Petrogas signed an offtake agreement with Kisan International Trading FZE, a subsidiary of the Indian Farmers Fertiliser Co-operative ("IFFCO"), to supply up to one-half of the total future production of potash from the Bayovar project to the IFFCO group of companies at a modest discount to the market price for potash in India. The Board of Directors of the Company approved this agreement in June 2011.
During the third quarter of 2011, the Company completed a LIDAR aerial survey of its potash concession to provide the necessary 3D imaging data for optimization of evaporation ponds.
In early 2012, the Company drilled ten exploration/production brine wells and has recently been conducting pumping tests on three of those wells, under the supervision of Ercosplan Ingenieurgesellschaft Geotechnik und Bergbau mbH ("Ercosplan"), the consultant that has been hired to complete the Company's NI 43-101 resource assessment for potash. The pumping tests are necessary in order to determine the flow rates, permeability, porosity and other aspects of the area where the brine is located. These pumping tests are expected to continue into May 2012, followed by analysis and compilation of the data.
For the second quarter of 2012, the Company is planning to drill 20 exploration wells on its southeastern block at Bayovar to identify the presence and the extent of evaporites, phosphates, and brine.
The Company completed one equity financing in 2011 and two in February 2012 as follows:
- March 2011- the Company completed a bought-deal private placement raising aggregate gross proceeds of $50.0 million from the issuance of 20,162,000 common shares at $2.48 per share.
- February 2012 - the Company completed two equity private placements raising aggregate gross proceeds of $70.8 million from the issuance of 20,217,000 common shares at $3.50 per share.
Financial Review of 2011
Oil production continued on the Company's conventional blocks. For the year ended December 31, 2011, the Company reported gross oil sales revenue of $11,385,271 and net oil sales revenue, after deducting royalties, of $8,887,511 compared to net oil sales revenue of $4,186,682 for the year ended December 31, 2010. The Company limited its drilling on the Medanito Sur block while waiting approval of the exploitation concession and, as a result, its revenue was lower than expected. However, subsequent to year end, in March 2012, the Company received a 25-year exploitation license on the Medanito Sur block and has since commenced a new drilling program.
The Company reported a net loss attributable to owners of the Company of $16,740,226 or $0.09 per share for the year ended December 31, 2011 compared to a net loss of $12,378,722 or $0.10 per share for the same period of 2010. The increase in net loss for the year ended December 31, 2011, compared to the same period of 2010, is attributable to increased general and administrative expenses (including stock-based compensation) and a $4.3 million non-cash loss on the conversion option associated with the convertible promissory note. Partially offsetting the net loss is a foreign exchange gain.
From a cash flow perspective, during the year ended December 31, 2011, the Company used $1.0 million in operating activities, compared to $6.8 million in 2010. The decrease in 2011 can be primarily attributed to increased gross profit from oil sales (excluding non-cash depletion and depreciation) and favorable changes in non-cash working capital items. With respect to investing activities, the Company spent $29.3 million on capital expenditures in the year ended December 31, 2011, compared to $20.7 million in the same period of 2010.
As of December 31, 2011, the Company has a cash position (including cash, cash equivalents and short-term investments) of $56.5 million and a working capital position of $31.9 million. The increase in current assets during 2011, particularly cash and short-term investments, reflects the completion of an equity financing of 20,162,000 common shares in 2011. Accounts receivable has increased as a result of increased oil sales. The Company's reported exploration and evaluation assets have increased in 2011, primarily as a result of (1) the acquisition of an additional working interest in the Huacalera block, (2) the acquisition of additional working interests in the Los Toldos, Totoral, Yerba Buena and Bajada Colorada blocks, (3) the acquisition of additional working interest in the Loma Ranqueles block and (4) continuing activities on the Bayovar concession in Peru with respect to potash, phosphates and other minerals. The Company's reported property, plant and equipment has increased, net of depletion, primarily as a result of the Company reclassifying its Rinconada Norte block from exploration and evaluation assets to property, plant and equipment. During the fourth quarter of 2011, the Company issued two promissory notes (with combined face values of US$18.95 million) in respect of the acquisition of an additional working interest in the Loma Ranqueles block. Subsequent to year end, US$12.5 million of the promissory notes have already been paid.
|Three months ended|
|December 31, 2011||December 31, 2010|
|Net income (loss) attributable to owners of the Company||$||(8,763,014||)||$||(6,110,664||)|
|Basic and diluted income (loss) per share||$||(0.05||)||$||(0.04||)|
|Barrels of oil sold||62,099||22,666|
|Gross oil sales revenue average per barrel(1)||$||66.73||$||55.15|
|Production costs average per barrel||$||14.94||$||28.69|
|Depletion and depreciation average per barrel||$||34.68||$||30.18|
|(1)||Excludes Oil Plus benefits.|
|(2)||Gross revenue net of royalties.|
In the fourth quarter of 2011, the Company continued to produce and sell oil. In this period, the Company delivered approximately 62,099 barrels at a domestic price averaging approximately $66.73 per barrel. Along with sales revenue, the Company reported production costs of $14.94 per barrel and depletion and depreciation of $34.68 per barrel. The recent increase in barrels of oil sold can be attributed to: (i) oil production that began on the Rinconada Norte block during the fourth quarter of 2011 and (ii) a new well that was put into production on the Medanito Sur block in December 2011. The fourth quarter of 2011 also includes a foreign exchange loss in the amount of $1,777,171.
For further information, including a more detailed financial review and discussion of operational highlights, please see the Company's consolidated financial statements for the year ended December 31, 2011 and the related MD&A for 2011 filed under the Company's profile at www.sedar.com.
About Americas Petrogas Inc.
Americas Petrogas Inc. is a Canadian company whose shares trade on the TSX Venture Exchange under the symbol "BOE". Americas Petrogas has conventional and unconventional shale oil and gas and tight sands oil and gas interests in numerous blocks in the Neuquén Basin of Argentina. Americas Petrogas has joint venture partners, including ExxonMobil and Apache, on various blocks in the shale oil and gas corridor in the Neuquén Basin, Argentina. Americas Petrogas also owns an 80% interest in GrowMax Agri Corp., a private company involved in the exploration and potential development of a potash, phosphates and other minerals project in Peru. For more information about Americas Petrogas Inc., please visit www.americaspetrogas.com
This Press Release contains forward-looking information including, but not limited to, the Company's goals and growth strategy, estimates of reserves and future net revenues, estimates of future costs, estimates of future production and reserves, exploration and development activities in respect of the projects in Argentina and Peru, the integrating of comprehensive data in respect of well LTE.x-1 on the Los Toldos II block, drilling on the Los Toldos I, II, III, IV blocks, the Totoral, Yerba Buena, Bajada Colorada blocks and the Loma Ranqueles block, testing (including future testing plans) of well Hua.x-1 on the Huacalera block, fulfillment of farm-out commitments by Apache and ExxonMobil, testing activities in Peru, the preparation of NI 43-101 resource assessments for potash and phosphates, future exploration and development plans and opportunities in Argentina and Peru, future drilling plans in Argentina and Peru and future production in Argentina and Peru. Additional forward‐looking information is contained in the Company's Annual Management's Discussion and Analysis for December 31, 2011, and reference should be made to the additional disclosures of the assumptions and risks and uncertainties relating to such forward‐looking information in that Management's Discussion and Analysis document.
Forward‐looking information is based on management's expectations regarding the Company's future growth, results of operations, production, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, plans for and results of drilling activity (including the timing, location, depth and the number of wells), environmental matters, business prospects and opportunities and expectations with respect to general economic conditions. Such forward‐looking information reflects management's current beliefs and assumptions and is based on information, including reserves information, currently available to management. Forward‐looking information involves significant known and unknown risks and uncertainties. A number of factors could cause actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by the forward‐looking information, including but not limited to, risks associated with the oil and gas industry (e.g. operational risks in development, exploration and production, delays or changes to plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of geological interpretations; the uncertainty of estimates and projections in relation to production, costs and expenses and health, safety and environment risks), the risk of commodity price and foreign exchange rate fluctuations, the uncertainty associated with negotiating with foreign governments and third parties located in foreign jurisdictions and the risk associated with international activity.
Although the forward‐looking information contained herein is based upon assumptions which management believes to be reasonable, the Company cannot assure investors that actual results will be consistent with this forward-looking information. This forward‐looking information is made as of the date hereof and the Company assumes no obligation to update or revise this information to reflect new events or circumstances, except as required by law. Because of the risks, uncertainties and assumptions inherent in forward‐looking information, prospective investors in the Company's securities should not place undue reliance on this forward‐looking information.
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