LatAmNRG Prospector: Week 29 2019

LATAMNRG PROSPECTOR VOL 29 2019

Vista Commences Proposed Public Offering

Pemex Presents Business Plan 2019-2023

South America’s Guyana Enters The Oil Age ENERGY ANALYTICS INSTITUTE | LATAMNRG PROSPECTOR | HOUSTON • CARACAS

Energy Analytics Institute’s weekly LatAmNRG prospector and select highlights from the week. Read the full stories online 24/7 at www.energy-analytics-institute.org

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ARGENTINA YPF Will Sell CNG At Its Gas Stations (PetroPlaza, 15.Jul.2019) — The high production of Vaca Muerta’s field has driven the oil company to enter the Argentinian natural gas market. The high production of natural gas from Vaca Muerta’s field has prompted YPF Argentina to offer natural-based fuel in its network of gas stations. The company has stated that this offer will be made under more advantageous commercial conditions than the existing ones, according to surtidores.com.ar.

Vista Commences Proposed Public Offering

Energy Analytics Institute (EAI) is a Houston-based private organization focused on provided integrated services related to the Latin American and Caribbean upstream, downstream, midstream and renewable energy sectors.

I. EAI’s primary focus related to the Latin American and Caribbean petroleum sectors is to assist businesses establish and nurture relationships with other businesses or consumers by facilitating integrated business-to-business (B2B) and business-to-consumer (B2C) solutions.

II. EAI also organizes timely forums, seminars or executive speaking engagements related to the Latin American and Caribbean petroleum sector covering topics relevant to the upstream, midstream, downstream and renewable enegy sectors.

III. EAI also provides unbiased breaking news, among project updates, related to the Latin American and Caribbean petroleum sectors covering countries small and big from Jamaica and Trinidad and Tobago in the Caribbean to Guyana, Bolivia and Peru in South America and bigger regional players including Mexico, Colombia, Venezuela, Brazil and Argentina.

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(Vista, 18.Jul.2019) — Vista Oil & Gas, S.A.B. de C.V. announced commencement of an underwritten public offering of the company’s Series A shares (the “Series A shares”), which may be represented by American Depositary Shares (ADSs), as part of a global primary offering of 10,000,000 Series A shares pursuant to a registration statement on Form F-1 with the Securities and Exchange Commission (SEC). Each ADS represents one Series A share. The global offering consists of an international offering in the United States and other countries outside of Mexico and a concurrent public offering in Mexico to be authorized by the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores or CNBV).

In connection with the global offering, the company intends to grant the underwriters the option to purchase up to 1,500,000 additional Series A shares, which may be represented by ADSs. The company has applied to list the ADSs on the New York Stock Exchange under the ticker symbol “VIST.” The company’s Series A shares are listed on the Mexican Stock Exchange under the ticker symbol “VISTA.” The company intends to use the net proceeds from the international offering to fund capital expenditures relating to its development plan.

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BRAZIL Petrobras Starts Non-Binding Phase Asset Sales In Brazil (Petrobras, 15.Jul.2019) — Petrobras, following up on the release dated 06/28/2019, announces the beginning of the non-binding phase related to the first phase of the sale of assets in downstream and associated logistics in Brazil, which includes the refineries Abreu e Lima (RNEST) in Pernambuco, Landulpho Alves (RLAM) in Bahia, Presidente Getúlio Vargas (REPAR) in Paraná, and Alberto Pasqualini (REFAP) in Rio Grande do Sul. Potential buyers qualified for this phase will receive a descriptive memorandum with more detailed information about the aforementioned assets, as well as instructions on the divestment process, including guidelines for preparing and submitting non-binding proposals.

This disclosure to the market is in line with Petrobras’ divestment methodology, which is in line with the special regime for the divestment of assets by federal mixedcapital companies, provided for in Decree 9,188/2017.

Petrobras Announces Baúna Field Sale Offer (Petrobras, 15.Jul.2019) — Petrobras informs that in the scope of the competitive sale process for the sale of its entire stake in Baúna field (concession area BM-S-40), located in shallow waters in the Santos basin, Karoon Petróleo & Gás Ltda. presented the best proposal.

However, in relation to the news published in the media about this transaction, we clarify that the transaction is still under approval phase by Petrobras’ governance bodies and that the subsequent phases will be disclosed to the market in accordance with the company’s Divestment Methodology.

COLOMBIA Judge Issues Order For U.S. Oil Executive (OCCRP, 15.Jul.2019) — A Colombian judge requested on Friday the extradition of an American oil executive who is a suspect in one of the biggest corruption scandals in Colombia. Local media say he and his associates spent nearly US$16 million of embezzled money on prostitutes.

Masoud Deidehban is accused of embezzling two billion dollars meant for the modernization of an Ecopetrol refinery, a state-run oil company, based in the northern coastal city of Cartagena.

Canacol Says Ocarina 1 And Nelson 7 Test At 59 MMcf/d (Canacol, 15.Jul.2019) — Canacol Energy Ltd. announced results of the Ocarina 1 exploration well located on its 100% operated VIM 5 block, and the flow testing results of the Nelson 7 development well located on its 100% operated Esperanza block, both situated in the Lower Magdalena Valley Basin of Colombia.

Ocarina 1 Well Tests 30 MMscfpd As previously announced earlier in June 2019, the Acordeon 1 exploration well encountered a significant gas accumulation in the Cienaga de Oro (“CDO”) sandstone reservoir which tested at a final rate of 33 million standard cubic feet per day (“MMscfpd”). The Ocarina 1 well tested the accumulation at a bottom hole location situated approximately 1 kilometer to the south east of the Acordeon 1 well and has encountered a thick section of gas pay within the same CDO sandstone reservoir, thus confirming a significant new accumulation of gas within the CDO. Using the Pioneer 53 drilling rig, the Ocarina 1 well was spud on June 10, 2019 and reached a total depth of 8,751 feet measured depth in 15 days. The well encountered 530 feet of gross gas pay between 6,384 and 6,914 feet true vertical depth (“ft TVD”) with average porosity of

ENERGY ANALYTICS INSTITUTE | LATAMNRG PROSPECTOR | HOUSTON • CARACAS

23% within the primary CDO sandstone reservoir target.

An interval between 6,444 and 6,457 ft TVD was production tested at multiple rates for a 32 hour period.

This interval flowed at a final rate of 30.4 MMscfpd at a flowing tubing head pressure of 913 psi and a choke of 82/64 inch. The average flow rate for the entire period was 16 MMscfpd.

GUYANA South America’s Guyana Enters The Oil Age (Kevin Ramnarine, 18.Jul.2019) — In February 2017, I captioned an article about the Guyana-Suriname basin, The New North Sea, comparing ExxonMobil’s discoveries in Guyana to discoveries in the Norwegian North Sea starting in 1969.

When I wrote that article, ExxonMobil announced its success with the Payara-1 exploration well after two years of drilling in the Liza area, in its 6.6 million-acre Stabroek Block. After Payara-1 came a string of discoveries — 13 in all. ExxonMobil’s most recent estimate for total recoverable reserves is 5.5 billion oil equivalent barrels.

Not included are the reserves in some other discoveries that are still being studied. As exploration continues this number will keep growing. More recent discoveries in 2019 like Haimara have been reported as gas condensatebearing sandstone.

ExxonMobil expects production to reach 750,000 barrels of oil per day by 2025, which would require five floating production storage and offloading (FPSO) vessels.

Guyana’s oil production could eclipse the one million barrels per day mark towards the end of the next decade.

That level of production would make Guyana one of the biggest oil producers in the world on a per capita basis, placing them in a league with countries that have high levels of production and small populations such as Kuwait, Qatar and Oman. On an absolute basis, Guyana would be producing almost as much oil as the United Kingdom and more oil than larger countries like Colombia and Indonesia.

MEXICO Pemex Presents Business Plan 2019-2023 (Pemex, 16.Jul.2019) — In the presence of the president of Mexico, Andrés Manuel López Obrador, the chief executive officer of Petróleos Mexicanos, Octavio Romero Oropeza, presented Pemex’s Business Plan for the years 2019-2023. It was unanimously approved by the Board of Directors and lays the foundations for the modernization of the company, making it more competitive and guaranteeing its long-term financial viability. This consolidates Pemex as an engine of national development and guarantor of energy sovereignty.

— The company lays the foundations for its modernization, making it more competitive and guaranteeing its long-term financial viability.

— The plan consolidates Pemex as an engine of national development and guarantor of energy sovereignty.

— The high tax burden imposed on the company, its debt and low investment, have been the main problems that have trapped the company in a vicious circle.

— Production is expected to increase to levels of 2,697 thousand barrels per day in the last year of this administration.

— The Business Plan was unanimously approved by the Board of Directors.

During the morning conference at the National Palace, the president of Mexico, Andrés Manuel López Obrador, supported the plan and stated that it is a rescue of the country’s energy industry, after the resounding failure of the Energy Reform. He reiterated the support of the Government of Mexico for Petróleos Mexicanos, stating a gradual reduction of its fiscal burden, in such a way that it alleviates the necessary resources to invest in new projects in order to increase oil production.

ENERGY ANALYTICS INSTITUTE | LATAMNRG PROSPECTOR | HOUSTON • CARACAS

The head of Pemex emphasized that the plan establishes the measures to face the main structural problems facing the company: the high tax burden, its debt and low investment, all of which are difficulties that trapped the company in a vicious circle.

Mr. Romero Oropeza said that the strategy and measures adopted through the Business Plan, the company will achieve a balanced budget in 2021 and is expected to increase production to levels of 2 million 697 thousand barrels a day in the last year of the present administration.

In the document, he expressed that “Pemex makes clear its openness to business schemes with the private sector, under strict observance of the company’s interests, and with fair and transparent agreements, leaving behind the practices in which Pemex participated at a disadvantage”.

This Business Plan, said the CEO of Pemex, demonstrates a different management model based on innovation, efficiency and, above all, without corruption, is possible.

He assured that, with the support of the Government of Mexico, Pemex will have relief in its tax burden, which will allow it to free resources to trigger investment projects in oil production. It should be noted that, as a first measure, for 2019, the fiscal benefit in the payment of oil production rights was extended through the publication of a decree that resulted in a benefit of around 30 billion pesos for this year.

Mr. Romero Oropeza explained that the objective for the Government is to support Pemex for the first three years of the administration, in what will be a transition stage to recover oil production, so that, in the second half of the administration, Pemex will support the Federal Government in financing the development and economic growth of our country.

He indicated that, in order to solve the problem of the high tax burden, the Federal Government plans to present a proposal to reform the Hydrocarbons Revenue Law in order to reduce the rate of the shared utility tax, through a gradual reduction scheme of 7% for 2020 and 4% by 2021. It should be noted that the current rate is 65%, meaning that the rate will reach 54% by 2021.

He maintained that by 2021, the capital contributions of the Federal Government will be reduced to only 38 billion pesos.

Diagnosis While reviewing the company’s recent performance, the CEO of Pemex, recalled that in the last 14 years there was a considerable drop in oil production, as a result of decrease in investment. He highlighted that in the last five years, the average reduction in production was almost 600 thousand barrels daily.

He went on to mention that, like the case of upstream activities, investment in refineries as well registered significant decreases in recent years. This lack of investment even affected the availability of funds for maintenance, causing the fall of the processing levels of the National Refining System, bringing refined production to historical lows.

At the same time, Mr. Romero Oropeza said, Pemex’s debt increased considerably, only from 2013 to 2016, Pemex’s debt doubled, from just over one trillion to more than two trillion pesos, causing the company to record financial deficits for the last ten years.

He clarified that Pemex is a company that generates value. If the profitability of the company is measured in terms of EBITDA (income before interest, taxes, depreciation and amortization), comparing against other international oil companies, Pemex is above the industry average.

The CEO also mentioned that it is contemplated that public investment will be complemented by private investment, through long-term service contracts for oil production (CSIEEs). This will allow Pemex to have resources to invest in oil production and in the recovery of refinery capacity.

Investment To increase the production of oil and gas, one of the fundamental cornerstones of the Business Plan is to accelerate the development of newly discovered reservoirs, as well as increasing the development activity in fields currently in operation, with new wells and with major repairs, confirmed the CEO of Pemex.

At the same time, he said that the plan foresees a gradual recovery of refining capacity based on larger amounts of investment destined for the rehabilitation of the six refineries and the development of the new Dos Bocas refinery.

ENERGY ANALYTICS INSTITUTE | LATAMNRG PROSPECTOR | HOUSTON • CARACAS

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