Pacific Rubiales Energy Corp. announces the release of its unaudited consolidated financial results for the three month and nine month periods ended September 30, 2009, together with its Management's Discussion and Analysis for the corresponding periods.
Ronald Pantin, the Chief Executive Officer of the company, commented: "We are very pleased with our third quarter results which continue to show strong production growth, more than compensating for the significant weakness in the current oil price when compared with the same period last year. Our 63% increase in production from the same period last year is an achievement that demonstrates our leadership and growth potential among the Colombian E&Ps. We remain focused on executing on our capital expansion plan."
Production
The results for the third quarter of 2009, and by implication those of the first nine months of 2009, reflect the continuous ramp-up of production in the company's operations.
During the third quarter, the company's operated production (volume produced) reached an average of 81,753 boe/d gross (33,398 boed/d net), an increase of 31,574 boe/d gross (12,133 boe/d net) or 63% over the same period last year. This growth in operated production derives primarily from the increase in production at the Rubiales heavy crude oil field. As at November 2nd, the production at Rubiales had reached 90,000 bbl/d (gross), making this the fastest growing and highest producing field in Colombia. Production costs per barrel continue to decrease, showing a 55% reduction over the same period last year. This is evidence of management's commitment to control costs while increasing production.
The company continued its marketing strategy of exporting oil production to its most attractive international markets (US, Canada, Caribbean), while maintaining a presence in the local market with direct sales to the bunker and industrial sectors. During the third quarter the company exported 1,606,858 bbl to US refineries and sold 617,000 bbl in the Colombian domestic market.
As a result of the significant increase in production, and in spite of the relative lower prices for oil and gas during the third quarter of 2009, compared with the same period last year (WTI US$67.88/bbl versus US$118.05/bbl), the company was able to maintain revenues as compared to the prior period (US$156.6 million in 2009, US$202.4 million in 2008). These revenues and the operational successes that enabled the company to achieve them were modulated by a number of financial charges arising from financial and non-cash items that will level off during the course of the year. These non-cash financial charges reflect mainly foreign exchange risks associated with future income tax liabilities, which may or may not materialize, offset with the effect of overlift volumes that the company marketed during the second quarter which were settled during the third quarter.
The company continues to move forward on its aggressive capital expansion plan, with a focus on the Rubiales field and the Quifa block.
Year to date highlights
- During the third quarter of 2009, the company continued to be the most dynamic exploration & production company operating in Colombia, with an average production of 81,753 boe/d gross (33,398 boed/d net), an increase of 31,574 boe/dgross (12,133 boe/d net) over the same period of 2008. This growth in operated production came through increases in the Rubiales field production and development of other assets.
- On June 30 2009, the company announced an update to the independently certified Statement of Reserves Data and Other Oil and Gas Information for the Rubiales/Piriri field, which estimated gross working interest proved plus probable (2P) reserves to be 258.8 mmboe. Proven reserves increased 5.4%, from 204 mmboe at the end of 2008, to 215.5 mmboe as of June 2009. These reserves represent almost one barrel of net proven reserves (P1) per outstanding share.
- During the quarter, the company was able to sell 1.61 million barrels to the international markets at an average price of WTI less US $2.33/bbl, taking advantage of the significant increase in the price of heavy crude oils vs. light crudes and negotiating cargoes mainly with oil majors (Exxon, Shell, Chevron, BP, etc.) and the biggest US/Canadian independent refinery companies (Valero, Tesoro, IrvingOil, etc.).
- During the third quarter of 2009 the company handled an average of 24,281 bbl/d (a 30% increase from the average for the third quarter of 2008) through the new facility in Guaduas (PF2), generating revenues of US$3.9 million.
- The company continues to maintain transportation flexibility for its producing assets by utilizing existing systems, pipelines and trucking capacity to ensure it meets its production growth projections for the fourth quarter. This is accomplished in great part through the recently completed construction of the ODL pipeline and its early start-up of operations, thereby allowing the early utilization of 60,000 bbl/day of capacity, as well as the continued operation of PFZ to secure export and domestic market sales.
- The construction of the first phase of the Oleoducto de los Llanos Orientales ("ODL") pipeline concluded in early September. The line fill started on September 10, 2009, four days before its inauguration by Colombian President Mr. Alvaro Uribe. The completion of this first phase allowed the transportation of 60,000 bbl/d of diluted crude (18.5 degrees API) from the Rubiales field to the OCENSA System through the Monterrey pumping station, as soon as the line fill was completed. During September the Supertintendencia Financiera de Colombia (the financial regulatory authority in Colombia) approved the issuance by ODL of a structured debt instrument in the local capital market. The transaction was successfully completed on October 1, 2009. A total of 500 billion Colombian pesos (equivalent to US$260 million) was allocated among local institutional investors.
- The official inauguration of the ODL pipeline by the President of Colombia, Mr. Alvaro Uribe, took place in September 14, 2009. ODL is the most significant oil infrastructure project in Colombia in this decade.
- Despite lower realized crude oil prices in the third quarter of 2009 when compared with the same period in 2008, the company was able to maintain revenues as compared to the prior period (US$156.6 million in 2009, US$202.4 million in 2008), primarily due to a substantial increase in production.
- On October 22, 2009 the company announced that it had reached the historical milestone of exceeding 100,000 boe/d of gross operated production, equivalent to 41,138 boe/d net after royalties. The 100,000 boe/d milestone was reached principally as a result of the continuous growth in production of heavy oil in the Rubiales/Piriri blocks, made possible by the ODL pipeline coming into operation in September of 2009, as well as by the development of the light and medium oil blocks and the natural gas volume produced (6,000 scf/b) from the La Creciente block and other smaller fields.
- EBITDA during the first nine months of 2009 totalled US$180.7 million, while in the third quarter of 2009 EBITDA amounted to US $82.7 million. EBITDA from international sales represented 71% of this amount, while EBITDA from gas and domestic sales contributed 19% and 10%, respectively.
- Total cash capital expenditures during the nine months of 2009 totalled US$272.6 million. The actual cash capital expenditures of the period were US$88.1 million of which US$5.82 million went into exploration activities including seismic, aerogravimetry, aeromagnetometry and drilling (US$3.61 million to geophysics and US $2.21 million to drilling of wells); US$52.16 million were invested in the expansion and construction of production infrastructure and US $30.12 million in production drilling activities. The company announced on November 4, 2009 an expanded capital plan for 2010 that includes a US$853 million capital expenditure program. With this investment program the company expects to double its net production, after royalties, from the current estimate for year end 2009 of 46,000 boe/d to 92,000 boe/d at the end of 2010. The US$853 million capital program for 2010 includes US$165.5 million for development drilling, US$190.8 million for exploration, US$471.8 million for production facilities and US$25 million to advance the STAR pilot project. This is an increase of US$471 million over the 2009 capital expenditures and US$394 million over the previously projected 2010 budget.
- On May 5, 2009 the company closed on initial commitments totalling US $180 million under a previously announced senior secured revolving credit facility of US$250 million. The company subsequently closed on the remaining US$70 million of the facility by October, 2009, prior to repaying the facility in full with the proceeds from its recently announced offering of US$450 million 8.75% Senior Unsecured Notes due 2016, which was completed on November 10, 2009.