PetroMagdalena provides exploration and production update including new discoveries at Cubiro and Arrendajo
18 January 2012 - 11:30PM
PR Newswire (Canada)
TORONTO, Jan. 18, 2012 /CNW/ - PetroMagdalena Energy Corp. , today
provided an update on its ongoing exploration program, cash and
debt balances, and announced its production results for 2011
following the Company's fiscal year end. Luciano Biondi, Chief
Executive Officer of the Company stated: "We are entering 2012 with
a full exploration and development drilling program on the back of
a challenging but successful year repositioning PetroMagdalena into
a focused junior oil and gas player, operating in the most prolific
basins in Colombia. I am pleased with the discoveries at Cubiro and
Arrendajo which reinforce our focus on finding economic, near-term
production opportunities within our portfolio. We project
approximately $45 million in net cash flow from operations (after
G&A, equity tax installments and debt service) for 2012, based
on an $80 WTI for estimated average annual production of 4,500
boepd ("barrels of oil equivalent per day"). This represents the
midpoint of our previously disclosed range of production guidance
of 4,300 boepd to 4,700 boepd for 2012. Together with our December
31, 2011 cash balance of approximately $15 million and expected
proceeds from asset dispositions, we are fully funded for our
planned capital expenditure program of approximately $50 million to
$60 million. With this capital program, we fully expect to grow our
resources and reserves, add incremental production in 2012 from our
core assets and maximize value from our entire portfolio of assets.
The Company has rigs available and environmental permits are in
good standing at all our exploration targets in 2012." EXPLORATION
UPDATE Discoveries at Cubiro and Arrendajo Yopo Discovery at Cubiro
PetroMagdalena has discovered a new field with the Yopo 1X
exploration well, which was drilled to explore the prospectivity of
the Carbonera Formation in the Yopo Prospect, located on Polygon B
of the Cubiro Block, where the Company holds a 70% working interest
("WI"). The Yopo 1 well was perforated in the Carbonera C7 sand and
it is currently testing at 970 barrels per day of 39.9 degrees API
oil with 4.7% BS&W ("Basic Sediments and Water"), on natural
flow over the initial 6.5 hour stabilized period at an average of
385 psi well head pressure, testing will continue. The Yopo 1 well
was spud on December 11, 2011, drilled to a final depth of 6,790
feet measured depth ("MD") and logged on December 29, 2011. The top
of the Carbonera C7 sand was found at a depth of 5,871 feet MD.
Petrophysical data show 8 feet of net pay in C7 A, with porosity of
27% and hydrocarbon saturation of 60%; and 25 feet in C7 B, with
porosity of 28% and oil saturation of 80%. Based on seismic
interpretations, the accumulation discovered by Yopo 1 is a 2 km
long structure, corresponding to the typical exploration play in
the Llanos Basin. The structure is on trend with the Palmarito and
Petirrojo fields to the north and south respectively. Azor
Discovery at Arrendajo PetroMagdalena has discovered a new field
with the Azor-1X exploration well, which was drilled to explore the
prospectivity of the Carbonera Formation in the Arrendajo Block,
where the Company holds a beneficial 67.5% WI, subject to ANH
approval. The Azor-1 well was perforated in the Carbonera C5 sand
and it is currently testing at 752 barrels per day of 35.5 degrees
API oil with 1% BS&W, stabilized natural flow over an initial 8
hour period, at an average of 265 psi well head pressure, testing
will continue. The Azor-1 well was spud on December 24, 2011,
drilled to a final depth of 7,225 feet MD and logged on January 6,
2012. The top of the producing Carbonera C5 sand was found at a
depth of 6,724 feet MD. Petrophysical data show 41 feet of net pay
in C5, with porosity of 28% and hydrocarbon saturation of 80%. The
Azor-1 well is located on a structural trend with prospects to the
north and south. This discovery reveals significant potential for
Carbonera C5 in the Arrendajo Block, where there are five
additional prospects to be targeted with future exploration
drilling. 2012 Exploration Program The Company's fully funded
exploration program includes 7 exploration wells in the Llanos
basin; the targeted exploration drilling program is outlined below
along with management's volumetric estimates based on 3D seismic
information and analogies to off-setting wells.
________________________________________________________ | | 2012
Exploration Wells | |Well name |_________________________________|
| |Well Scheduled to Spud in Quarter|
|______________________|_________________________________| |Cubiro
Block | |
|______________________|_________________________________| |
Cernicalo-2 | 1 |
|______________________|_________________________________| |
Tijereto Sur-1X | 1 |
|______________________|_________________________________| | Copa
C-1X | 1 |
|______________________|_________________________________| |
Turpial-1X | 1 |
|______________________|_________________________________| |
Petirrojo Sur-1X | 2 |
|______________________|_________________________________| | Copa A
Norte-1X | 4 |
|______________________|_________________________________|
|Arrendajo Block | |
|______________________|_________________________________| |
Arrendajo Norte-1X | 1 |
|______________________|_________________________________|
|Carbonera Block | |
|______________________|_________________________________| | San
Roque-1X (MBOE)| 1 |
|______________________|_________________________________| Santa
Cruz Block, Catatumbo Basin: Santa Cruz-1X Exploration well This
well is currently drilling with oil based mud at approximately
8,450 feet MD and making good progress. The well is planned
for a total depth of 13,000 feet MD and intermediate casing is
planned for approximately 11,100 feet MD. Topoyaco Block, Putamayo
Basin: Yaraqui-1X Exploration well As announced on January 9, 2012,
the Yaraqui-1 exploration well in which the Company has a 50% WI
has been suspended by Pacific Rubiales Energy Corp., which holds
the remaining 50% WI and is the operator for the block. The well
was suspended due to uneconomic heavy oil flows. The Company is now
reviewing activity in this block together with the operator. For a
map of all exploration targets, please see the Company's investor
presentation on its website at www.petromagdalena.com. 2012
Development Drilling Program 10 development wells including one
injection well are scheduled for the Cubiro Block in 2012. These
development wells are targeted for drilling with 1 well in the
first quarter of 2012 and 3 wells in each subsequent quarter.
The development drilling program will be reviewed and modified with
the results of the exploration program and the Company will provide
regular updates to the market. LIQUIDITY UPDATE The Company ended
2011 with a cash balance at December 31, 2011 of approximately $15
million. In addition, the Company has CA$4.3 million set aside in a
trust account as of December 31, 2011 to be used toward the first
annual principal repayment in May 2012 of the senior secured notes
. In December 2011, since Ecopetrol's approval for the transfer of
the working interest and operatorship in the Cerrito block remained
pending, the Company transferred its working interest in the
Cerrito block back to Pacific Rubiales Energy Corp ("PRE") for cash
consideration of $7.5 million. The Company had initially acquired
the Cerrito block from PRE in 2008. At December 31, 2011, the
Company's debt position comprised the CA$31.1 million senior
secured notes maturing May 2014 and a total of $11.7 million of
long-term debt due under three local bank loan facilities maturing
between October 2012 and August 2013. PRODUCTION UPDATE The
Company's annual average gross share of production, before
deduction of royalties, for 2011 was 2,758 boepd. The Company
reached 98% of its target guidance of 2,800 average boepd. The
Company's gross share of production for the fourth quarter of 2011
averaged 3,624 boepd, up 33% from the third quarter of 2011 and up
44% from the fourth quarter of 2010. The increase in daily
production in the fourth quarter reflected a full quarter's
contribution from Copa B-1, which started production in September
2011, and production from Copa A Sur-1, Petirrojo-2 and
Petirrojo-3, all of which commenced production during the fourth
quarter. The Company exited 2011 at a daily production rate of
4,182 boepd (average for the month of December). Cubiro represented
90% of total production in the month of December 2011.
PetroMagdalena is a Canadian-based oil and gas exploration and
production company, with working interests in 18 properties in five
basins in Colombia. Further information can be obtained by visiting
our website at www.petromagdalena.com All monetary amounts in U.S.
dollars unless otherwise stated. This news release contains certain
"forward-looking statements" and "forward-looking information"
under applicable Canadian securities laws concerning the business,
operations and financial performance and condition of
PetroMagdalena. Forward-looking statements and forward-looking
information include, but are not limited to, statements with
respect to estimated production and reserve life of the various oil
and gas projects of PetroMagdalena; the estimation of oil and gas
reserves; the realization of oil and gas reserve estimates; the
timing and amount of estimated future production; costs of
production; success of exploration activities; and currency
exchange rate fluctuations. Except for statements of historical
fact relating to the company, certain information contained herein
constitutes forward-looking statements. Forward-looking statements
are frequently characterized by words such as "plan," "expect,"
"project," "intend," "believe," "anticipate", "estimate" and other
similar words, or statements that certain events or conditions
"may" or "will" occur. Forward-looking statements are based on the
opinions and estimates of management at the date the statements are
made, and are based on a number of assumptions and subject to a
variety of risks and uncertainties and other factors that could
cause actual events or results to differ materially from those
projected in the forward-looking statements. Many of these
assumptions are based on factors and events that are not within the
control of PetroMagdalena and there is no assurance they will prove
to be correct. Factors that could cause actual results to vary
materially from results anticipated by such forward-looking
statements include changes in market conditions, risks relating to
international operations, fluctuating oil and gas prices and
currency exchange rates, changes in project parameters, the
possibility of project cost overruns or unanticipated costs and
expenses, labour disputes and other risks of the oil and gas
industry, failure of plant, equipment or processes to operate as
anticipated. Although PetroMagdalena has attempted to identify
important factors that could cause actual actions, events or
results to differ materially from those described in
forward-looking statements, there may be other factors that cause
actions, events or results not to be anticipated, estimated or
intended. There can be no assurance that forward-looking statements
will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such statements.
PetroMagdalena undertakes no obligation to update forward-looking
statements if circumstances or management's estimates or opinions
should change except as required by applicable securities laws. The
reader is cautioned not to place undue reliance on forward-looking
statements. Statements concerning oil and gas reserve estimates may
also be deemed to constitute forward-looking statements to the
extent they involve estimates of the oil and gas that will be
encountered if the property is developed. Boe may be misleading,
particularly if used in isolation. A boe conversion ratio of 6
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. Estimated values of future net
revenue disclosed do not represent fair market value. Neither TSX
Venture Exchange nor its Regulation Services Provider (as that term
is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this news release.
PetroMagdalena Energy Corp. CONTACT: Peter VolkGeneral
Counsel and Secretary(416) 360-7915Belinda LabatteInvestor
Relations Representative(647) 436-2152
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