Canada: Pacific Rubiales 2Q Net Earnings Up

Pacific Rubiales Energy released its unaudited consolidated financial results for the quarter ended June 30, 2012.

Second Quarter 2012 Highlights

• EBITDA increased to a record $560 million ($1,098 million for the first six months, an increase of 19% compared to the same period in 2011), driven by production growth and higher netbacks.
• Net Earnings of $224 million ($483 million for the first six months, an increase of 73% compared to the same period in 2011).
• Adjusted Net Earnings from Operations of $187 million ($480 million for the first six months, an increase of 20% compared to the same period in 2011).
• Operating netbacks from oil and gas production of $63.12/boe, an increase of 2% over the second quarter 2011, despite a 9% decrease in WTI benchmark oil prices.
• Sales volumes increased to a record 117 Mboe/d (108 Mboe/d for the first six months, an increase of 13% compared to the same period in 2011).
• Total production net of royalties of 92,611 boe/d including 1,740 bbl/d* attributed from the acquisition in Peru (93,092 boe/d for the first six months, an increase of 11% compared to the same period in 2011).
• Total capital expenditures of $316 million compared to $308 million in the same period in 2011, with 38% ($121 million) invested in production facilities, 35% ($111 million) in exploration and, 20% ($64 million) in development drilling.
• Exploration success of 82% from drilling a total of 22 gross exploratory wells of which 18 were successful.
• Significant and material acquisitions aligned with the Company’s long-term growth strategy, including new production in Peru and Colombia, and new exploration acreage and resources in Colombia, offshore Guyana and onshore Papua New Guinea.
• Authorization of the environmental license for increased water injection in Rubiales oil field which will allow oil production ramp-up in the field.
• Agreement in principle from Ecopetrol for a declaration of commerciality of a portion of the Quifa North oil field which will allow the Company to move the field into development and ramp-up production, once it is formally approved by the Association’s Executive Committee, next week.
• Standard and Poor’s Rating Services revised its outlook for the Company from “Stable” to “Positive” while affirming the Company’s BB corporate rating and its BB senior unsecured debt rating; providing a strong endorsement of the Company’s financial and operational strength, and continuing execution on its production and reserve growth targets.
• In the second quarter of 2012, the Company paid a cash dividend of $0.11 per share, to shareholders of record.

Ronald Pantin, Chief Executive Officer of the Company commented:

“The second quarter was very strong from a financial results standpoint, with oil and gas sales revenues and sales volumes, EBITDA, and funds flow from operations, at record levels despite year-on-year and sequential 9% and 10% respectively, drop in WTI benchmark oil prices.

Despite pipeline transportation disruptions affecting the O&G Industry in Colombia during the second quarter, Pacific Rubiales was able to deliver all of its production without any disruptions. This illustrates the strategic importance and value of the proactive investments the Company has made in midstream infrastructure.

Year-to-date production continues to grow but not as rapidly or as much as we anticipated when we first laid out the operating plan and guidance at the beginning of the year. The 2012 guidance we provided in early January this year of 15 – 35% growth in average net production was based on a realistic expectation around the pace of Colombia’s licensing issuance. But license delays have been much longer than was anticipated and delays have now become an issue affecting all Industry producers.

In the case of Pacific Rubiales it is important to recognize that so far the delay in the licensing has only represented a delay in development, rather than a loss of production. Receiving the Rubiales water injection licence today, removes some but not all of the remaining uncertainty around our 2012 production range, allowing us to revise our guidance parameters. At this point we are confident that the Company will meet its production guidance range, including production volumes coming from the PetroMagdalena acquisition that closed on July 23, and from its 49% deemed participating share attributed from block Z-1 in Peru effective from January 1, 2012. The Company’s net after royalty production including PetroMagdalena and Peru volumes hit a new record this week exceeding 100 Mboe/d.

I am particularly pleased with the significant strategic steps the Company has made thus far this year through a number of asset acquisitions and other strategic investments. This includes our plans to export LNG from northern Colombia, the first such project in Colombia, allowing us to accelerate and unlock value from our large natural gas reserves and resources in the country. In addition, our participation in the building of a new oil export terminal on the Colombia Caribbean coast at Puerto Bahia will ensure export facilities to support an expected doubling of our Colombia oil production in the next five years.

We have acquired new and growing production in Peru through the 49% participating interest in block Z-1, and in Colombia through the 100% acquisition of PetroMagdalena. The latter provides a reliable and growing source of light oil diluent required for our rising heavy oil production in Colombia. Both were acquired on an accretive basis, will add significant reserves and resources, while offering considerable exploration and development upside.

On the exploration front, we acquired a 40% participating interest in the onshore Portofino exploration block which lies along the same trend as the giant Rubiales/Quifa and Castilla/Chichemene heavy oil fields, adjacent and on-trend to the developing Capella oil field. The Portofino block establishes the Company as one of the largest exploration acreage holders as well as the largest producer along the under-explored and under-developed heavy oil resource trend in Colombia. The Company is stepping outside of Colombia with its increased investment in CGX Energy Inc. (currently 35% with an option to increase to 41% and a farm-in on the next two exploration wells) with its very large exploration acreage position in offshore Guyana; and the acquisition of a 10% net participating interest in the PPL-237 exploration block onshore Papua New Guinea containing the large Triceratops natural gas and condensate discovery.

Both the Guyana and Papua New Guinea exploration acquisitions should be viewed in the context of early stage large resource capture for the future. We view both as representing world class hydrocarbon basins with the potential for hosting very large resources. In the case of Papua New Guinea, large natural gas and condensate resource sitting on the doorstep of the world’s fastest growing primary energy markets; and in the case of offshore Guyana, a basin with analogous geology to west Africa and Brazil that have produced giant oil discoveries. This is a similar strategy that led to the Company’s successful “first-mover”, large resource capture and rapidly rising production along the heavy oil resource trend in Colombia.

Each of these acquisitions have been funded by cash on hand, while associated exploration and development capital are expected to be funded by internally generated cash flow. These acquisitions represent a transformational move for the Company and illustrate the Company’s capacity to look out far beyond the short and medium term, layering in opportunities to support, enhance and develop new growth prospects into the future.

In this uncertain economic environment, the Company’s Balance Sheet remains strong; our growth targets in the medium term remain intact underpinned by our extensive low cost heavy oil exploration and development assets in Colombia. We will continue our strategy of repeatable and profitable growth by building for the long-term future, the leading E&P Company focused in Latin America.”

[mappress]
LNG World News Staff, August 09, 2012