LATAM NRG PROSPECTOR
Venezuela and Trinidad Natural Gas, LNG, and Missed Opportunities
Venezuela’s New Oil Minister
Petrobras, Total Finalize Strategic Alliance
Guyana’s Output to\ Surpass Trinidad
IN THIS ISSUE … 1.May.2017
Panama ….. 94
Peru ….. 95
Trinidad and Tobago ….. 96
Trump Nationalism Should Scare Exporters, Venezuela
Venezuela and Trinidad: Missed Opportunities
Taiwan’s president got the call, Mexico’s president will get a wall. At least, that’s what U.S. President Donald Trump is proclaiming. ….. 47-48
Eighteen years after Trinidad and Tobago starting shipping LNG, Venezuela is finally close to doing the same. Well it’s not quite ‘game on’ yet and at least not for now. ….. 97-99
Bolivia ….. 59
ON THE COVER …
Brazil ….. 60-66
Chile ….. 67
Colombia ….. 68-77
Dominican Republic ….. 78-79
Ecuador ….. 80
Guyana ….. 81-84
Mexico ….. 85-93
PDVSA workers attend a May Day event in the Hugo Chavez Orinoco Heavy Oil Belt (the Faja) in Venezuela. Photo credit: PDVSA Contact us for subscription details to the full Professional version of the NRG Prospector or for Ad Hoc reports:
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ABBREVIATIONS HYDROCARBON SECTOR B/d: Barrels per day Bbls: Barrels Bcf: Billion cubic feet Bcfe: Billion cubic feet equivalent Bcm: Billion cubic meters Bln: Billion Boe/d: Barrels per day equivalent EHCO: Extra heavy crude oil E&P: Exploration and Production Faja: Venezuela’s Orinoco heavy oil belt Ft: Feet JV: Joint venture LNG: Liquefied natural gas LPG: Liquefied petroleum gas M3: Cubic meters M2: Square meters M: Meters Mbbls: Thousands of barrels Mcf: Thousand cubic feet Mcfe: Thousand cubic feet equivalent MMbbls: Millions of barrels MMBtu: Millions of British thermal units MMcm: Million cubic meters MMcf: Million cubic feet MMcfe: Million cubic feet equivalent Mscf: Thousands of standard cubic feet MMscf: Millions of standard cubic feet MMscf/d: Millions of standard cubic feet per day MTPA: Million tons per annum MTPY: Million tons per year NGLs: Natural gas liquids PPM: Parts per million Tcf: Trillion cubic feet Tcfe: Trillion cubic feet equivalent Tcm: Trillion cubic meters WTI: West Texas Intermediate Note: All monetary figures are in USA dollars unless stated otherwise.
FINANCIAL CAPEX: Capital expenditures DD&A: Depreciation, deletion and amortization LOI: Letter of Intent MOU: Memoranda of Understanding YE: Year end WI: Working interest
STATE OIL ENTITIES (COUNTRY) ANCAP: Administración Nacional de Combustibles, Alcoholes y Portland (Uruguay) Cupet: Cubapetróleo (Cuba) Ecopetrol: Empresa Colombiana de Petróleos S.A. (Colombia) ENAP: Empresa Nacional de Petróleo (Chile) Eni SpA: Ente Nazionale Idrocarburi (Italy) PDVSA: Petróleos de Venezuela S.A. (Venezuela) PEMEX: Petróleos Mexicanos (Mexico) Petrobras: Petróleo Brasileiro S.A. (Brazil) PetroEcuador: Ecuador PetroPeru: Peru Petrotrin: Petroleum Co. of Trinidad & Tobago Ltd. YPFB: Yacimientos Petrolíferos Fiscales Bolivianos (Bolivia)
OTHER OIL & GAS ORGANIZATIONS API: American Petroleum Institute EIA: Energy Information Administration MEEI: Ministry of Energy and Energy Industries (Trinidad and Tobago) MENPET: Ministry of Energy and Petroleum (Venezuela) OPEC: Organization of Petroleum Exporting Countries
REGIONAL INITIATIVES ALBA: Bolivarian Alternative for America CELAC: Community of Latin America and Caribbean states Petrocaribe: Petrocaribe oil initiative
LATAM/CARIBBEAN COUNTRIES ARG: Argentina ARW: Aruba BHS: Bahamas BRB: Barbados BLZ: Belize BOL: Bolivia BRA: Brazil CYM: Cayman Islands CHL: Chile COL: Colombia CRI: Costa Rica CUB: Cuba DMA: Dominica DOM: Dominican Republic ECU: Ecuador FLK: Falkland Islands (Malvinas) GUF: French Guiana GLP: Guadeloupe GTM: Guatemala GUY: Guyana HTI: Haiti HND: Honduras JAM: Jamaica MTQ: Martinique MEX: Mexico NIC: Nicaragua PAN: Panama PRY: Paraguay PER: Peru PRI: Puerto Rico KNA: Saint Kitts and Nevis LCA: Saint Lucia VCT: Saint Vincent and the Grenadines SUR: Suriname
TTO: Trinidad and Tobago URY: Uruguay VEN: Venezuela VGB: Virgin Islands (British) VIR: Virgin Islands (USA)
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PDVSA President Eulogio Del Pino speaks in Venezuelan media outlets in Caracas, Venezuela. Source photo: PDVSA
Nicolas Maduro Names Citgo President as Venezuela’s Oil Minister Venezuela President Nicolas Maduro announced the appointment of Nelson Martínez, the actual president of Citgo Petroleum Corporation, as the country’s new petroleum minister. Martínez replaces outgoing Petroleum Minister Eulogio Del Pino. “Our friend Eulogio Del Pino remains in front of PDVSA,” reported state oil company PDVSA in an official Twitter post, citing Maduro. PDVSA, as the Caracas-based company is known, also reported Maduro as saying they “we’re going to restructure the industry,” without providing details and referring to the troubled oil sector of the member country to the Organization of Petroleum Exporting Countries (OPEC). Houston-based Citgo is capable of refining 749,000 barrels per day of crude at refineries in the United States of America located in Texas, Illinois and Louisiana. Citgo markets more than 600 different types of lubricants and sells motor fuels through more than 5,300 independently owned, branded retail outlets, according to data on the company’s website. [Energy Analytics Institute, Aaron Simonsky, 20.Jan.2017]
Petrobras Receives Request for Replacement of Substitute Candidate Petrobras, as stated in Circular Letter CVM/SEP/01/2017, reported that it has received a request for the replacement of the substitute candidate to the Fiscal Council (FC) nominated by preferred shareholders Leblon Previdência Fundo de Investimento Multimercado and Ataulfo LLC, whose elections will take place at the Annual Shareholders Meeting to be held on April 27, 2017. Candidates nominated by preferred shareholders Leblon Previdência Fundo de Investimento Multimercado and Ataulfo LLC Candidate
Sonia Julia Sulzbeck Villalobos Roberto Lamb
Member of FC - preferred (full member) Member of FC - preferred (alternate)
Source: Petrobras Below are the resumes of the nominated candidates: Sonia Julia Sulzbeck Villalobos, Brazilian citizen, married, administrator, Bachelor of Public Administration (1985) from EAESP - Getúlio Vargas Foundation and Master of Business Administration with specialization in Finance (2005) from EAESP - Getúlio Vargas Foundation. In 1994, she was the First Person in South America to receive the Chartered Financial Analyst - CFA credential, by the CFA Institute. She is Professor of Post-Graduation Lato Sensu, in the matters of Asset Management and Analysis of Financial Statements by Insper. He holds positions on the Boards of Directors of CEG - Distribuidora de Gas do Rio de Janeiro SA and Telefônica do Brasil SA. He has extensive experience in the financial market, having served as Head of the investment analysis department of Banco de Investimentos Garantia SA (1989 to 1996), Where he was voted Best Analyst in Brazil by Institutional Investor magazine in 1992, 1993 and 1994. He served as Senior Vice President of Bassini, Playfair & Associates, LLC (1996 to 2002) and Latin America Manager of Larrain Vial SA (2005 to 2011). She was the founding Partner and Manager of Lanin Partners Ltd., responsible for Long / short and long-only funds of Latin American stocks (2012 to 2016).
Roberto Lamb, Brazilian, physicist. Specialized in Monetary Economics and a holds a Master's degree in Financial Management. Former career employee at Banco do Brasil, he has served as standing Audit Committee member for several Brazilian companies, among which Marcopolo, Gerdau and AES Eletropaulo, AES Tiete Energia, and MARFRIG. Board of Directors member for CADAM S.A. based in Belém, PA, a company whose purpose is the extraction and processing of ultrafine kaolin. It is controlled by KaMin, a company that operates in the kaolin extraction and processing segment, based in the state of Georgia, USA. He is a Certified Counselor by IBGC, where he coordinated the guidelines for best practices of the Audit Committee and the Auditing Committee and participated in the development of the handbook on best practices in Risk Management. He is a professor of Financial Management at UFRGS. He is the author of the Brazilian version of the book "Fundamentals of Financial Management" by Ross, Westerfield, and Jordan (McGraw Hill-Bookman, 2013) and of the Brazilian version of "Financial Administration" by Ross, Westerfield, and Jaffe (McGraw Hill-Bookman, 2015). The names nominated above: -- In the last 5 years, they have not been subjected to criminal conviction, conviction in an administrative proceeding of the CVM and a final and unappealable conviction, in the judicial or administrative sphere, that has suspended or disqualified them for practicing professional or commercial activity; -- Do not have a marital relationship, stable union or informationable parentage according to item 12.9 of the Reference Form; -- They have no relationship of subordination with related parties of the Company. -- Meet the independence criteria of the Brazilian Institute of Corporate Governance (IBGC). -- They had the information provided by the "Fiscal Counselor Registry of the Ministry of Planning, Development and Management" analyzed by Petrobras and the Ministry of Finance, which concluded that the nominees are not subject to any impediment and have all the requirements set forth in the Law 6,404/1976, Law 13303/2016 and Decree 8.945/2016, according to the minutes of the Temporary Eligibility Committee of Petrobras, which will be disclosed at http://www.investidorpetrobras.com.br/en/governancacorporativa/Governing bodies/committees, up to the date of the Annual General Meeting. [Petrobras, 29.Mar.2017]
Petrobras Updates on Resolutions of the Extraordinary General Shareholders Meeting Petrobras informed that the Extraordinary General Shareholders Meeting, held in the Auditorium of the company's headquarters on Avenida Republic of Chile nº 65-1st floor, in the city of Rio de Janeiro (RJ), decided, by the majority, and has adopted the following: I. Election of Mr. Adriano Pereira de Paula as a member of the Fiscal Council appointed by the controlling shareholder, and; II. Approval of the sale of 100% (one hundred percent) of the shares held by Petróleo Brasileiro S.A. – PETROBRAS of Petroquímica Suape and CITEPE, to GRUPO PETROTEMEX, S.A. DE C.V. and DAK AMERICAS EXTERIOR, S.L., subsidiaries of Alpek, S.A.B. de C.V., for the amount, in Reais, equivalent to $385,000,000.00 (three hundred and eighty five million dollars).
Federal Government, as the controlling shareholder, voted on item II of the agenda, considering a manifestation of the STN - Secretariat of the National Treasury that there may have been possible irregularities in the companies of the PQS Complex, and has determined that Petrobras promotes due determination of the facts, as well as to adopt any and all legal measures necessary accountability of the agents responsible for damages and also to recover the damages caused to them. [Petrobras, 27.Mar.2017]
Petrobras candidates appointed by controlling shareholder to the Fiscal Council Petrobras, as stated in Circular Letter CVM/SEP/Nº01/2017, informs that has received appointment of candidates by the Controlling shareholder, represented by the Federal Government of Brazil, to Fiscal Council (FC). Elections will take place at the Annual Shareholders Meeting to be held on April 27, 2017. The following candidates have been appointed by the controlling shareholder: Nombre del Candidato
Cargo a Postular
Adriano Pereira de Paula Paulo José dos Reis Souza Marisete Fátima Dadald Pereira Agnes Maria de Aragão da Costa Luiz Augusto Fraga Navarro de Britto Filho Maurycio José Andrade Correia
Miembro del CF (titular) Miembro del CF (suplente) Miembro del CF (titular) Miembro del CF (suplente) Miembro del CF (titular) Miembro del CF (suplente)
Source: Petrobras Curriculum of the appointed candidates: Adriano Pereira de Paula, Brazilian, economist and public servant. It was approved in the first selective process carried out for General Coordinator in the Treasury (April 2010). He was the head of the General Coordination of Credit Operations, responsible for the budgetary, financial and accounting management of Official Loan Operations - OOC, aimed at the promotion of agricultural, agroindustrial and export activities. In addition, to manage the economic subsidies for programs to promote the productive infrastructure, industry, housing, individual productive credit related to the Financial Charges of the Union (EFU), and the payments of indemnities and restitutions of the Program of Guarantee of the Agricultural Activity (PROAGRO). In August 2016, he assumed the position of Undersecretary of Fiscal Policy of the National Treasury, having at his charge the planning and financial programming of the federal government, the management of federal funds, risks and assets of the Union, control of Treasury participation in state companies Subsidies and subsidies directly responsible to the Treasury. Paulo José dos Reis Souza, Brazilian, a business administrator. Director of Programs of the National Treasury Department (STN) of the Ministry of Finance since August 2016. He held the following positions STN/MF: Undersecretary of Fiscal Policy; General Coordinator of Financial Programming; Coordinator of Financial Programming; and Manager. He joined the STN as Finance and Control Analyst in 1991, current Federal Auditor of Finance and Control. He has a postgraduate degree in Administration in the following areas: Public Policies and Government Management (Public Administration) and Public Sector Economics (Economy).
He was Fiscal Counselor in the following companies: Infraero S/A (Airport Infrastructure); SERPRO (Technology and Information Systems); Eletropaulo S/A (Energy Distributor); Petrobras Distribuidora SA (Distribuidora de Combustíveis); INB - Nuclear Industries of Brazil S/A (Nuclear Fuel Production); Petrobras (Exploration and refining of Petroleum); and Banco do Brasil (Financial Sector). Currently, he is also Fiscal Council member of VALE. (Mining Sector). Marisete Fátima Dadald Pereira. She has been a member of the Fiscal Council of Petrobras since 2011 and currently holds the position of head of the Special Advisory for Economic Affairs of the Ministry of Mines and Energy, a governmental entity, since August 2006, where she has held the position of special adviser to the Minister of Mines and Energy from August 2005 to July 2006. Her main professional experiences include: (i) manager of the Economic and Financial Department of Eletrosul Centrais Elétricas SA from 1987 to 2005; And (ii) Accounting and Fiscal Specialist of the Accounting and Fiscal Counsel David Rafael Blochtein, accounting advisory company, from 1973 to 1987. She is an accountant, graduated from Vale do Rio dos Sinos University, and holds a postgraduate degree in Accounting University of Vale do Itajaí and post-graduate in Auditing and Economic Sciences by the Federal University of Santa Catarina. Agnes Maria de Aragão Da Costa, Brazilian, economist. She is a director and senior economist at the Ministry of Mines and Energy, with special emphasis on Energy and Mining Economies. She acts in the formulation of public policy recommendations and in the monitoring of the results of these policies, and has been in the Economic Advisory Service of MME for 10 years. She holds a bachelor's degree in Economics from the Federal University of Rio de Janeiro (UFRJ) and a master's degree in Energy from the University of São Paulo (USP). Her professional experience also includes having worked in a Brazilian bank in the area of Project Finance in the energy sector. She is currently a PhD student at the Technical University of Berlin. Fiscal Counselor of Eletrobras, servant of the career of Specialist of Public Policies and Governmental Management. Luiz Augusto Fraga Navarro de Britto Filho, Brazilian, lawyer. He graduated in Law in 1991 and holds a post-graduate degree in Law and State in 2001 - both from the University of Brasília (UnB) - has served as a career counselor for the Federal Senate since 2004. He is Counselor of the Ethics of the Presidency of the Republic. He is a member of the Senior Committee of the International Anticorruption Academy. He was a member of the Executive Committee of the International Association of Anti-Corruption Authorities. He was Chief Minister of the Office of the Comptroller General of the Union (CGU) from March to May 2016. At CGU, where he served for approximately ten years, he held the positions of Deputy Corregidor of the Economic Area (2003/2006), Secretary of Prevention of Corruption and Strategic Information (2006) and CGU Executive Secretary (2006/2013). Still in the Federal Executive Power, he held the position of specialist in Public Policy and Government Management, Ministry of Planning and Budget (MPOG) in 1998, and Market Regulation Manager of the National Sanitary Surveillance Agency (Anvisa) between 2000 And 2002. He was a member of the Financial Activities Control Council (Coaf) from 2003 to 2006. He served as a senior consultant for Veirano Advogados in the Anticorruption area and was a member of Petrobras' Board of Directors from March 2015 to March 2016. Maurycio José Andrade Correia, Brazilian, he holds a bachelor's degree in Law from the Federal University of Pernambuco - UFPE. In the Regional Electoral Tribunal of Pernambuco - TRE, from 1996 until August 03, 2007: effective positions of Judicial Technician and Judicial Analyst - Judicial Area; Advisor to the Presidency of the TRE/PE; Legal Adviser of the TRE/PE General Directorate and Head of the Jurisprudence Section of the TRE/PE Judicial Secretary. In the Attorney General's Office (AGU), as Lawyer of the Union, from August 2007 to the present date: from August 2007 until January 2010: exercise in the Ministry of Social Development and Fight against Hunger and from January 2010 onwards Ministry of Mines and Energy - MME: Appointed to the position in advisory committee - DAS 102.4 at 09/26/2011 to date; Appointed in May 2016 to act as Deputy Legal Consultant and as Lawyer of the Union in Conjur of the MME acting in the areas of oil, natural gas biofuels, electricity, mining.
The names nominated above: -- In the last 5 years, they have not been subjected to criminal conviction, conviction in an administrative proceeding of the CVM and a final and unappealable conviction, in the judicial or administrative sphere, that has suspended or disqualified them for practicing professional or commercial activity; -- Do not have a marital relationship, stable union or informationable parentage according to item 12.9 of the Reference Form; -- They have no relationship of subordination with related parties of the Company. -- Meet the independence criteria of the Brazilian Institute of Corporate Governance (IBGC). -- They had the information provided by the "Fiscal Counselor Registry of the Ministry of Planning, Development and Management" analyzed by Petrobras and the Ministry of Finance, which concluded that the nominees are not subject to any impediment and have all the requirements set forth in the Law 6,404/1976, Law 13303/2016 and Decree 8.945/2016, according to the minutes of the Temporary Eligibility Committee of Petrobras, which will be disclosed at http://www.investidorpetrobras.com.br/en/governancacorporativa/Governing bodies/committees, up to the date of the Annual General Meeting. [Petrobras, 27.Mar.2017]
Reelection of Petrobras CEO Petrobras reports that in the meeting held yesterday Petrobras' Board of Directors approved the reelection of CEO Pedro Pullen Parente for a two-year term in the company's Executive Office. Mr. Pedro Parente had been elected CEO as of May 31, 2016, following the term in office of the previous CEO, Mr. Aldemir Bendine. A new two-year term begins with this reelection. The election process followed the rules of Petrobras Nomination Policy for the Members of the Fiscal Council, Board of Directors and Executive Office, including the review of integrity analyzes and the fulfillment of such other requirements for the position. The Nominating, Compensation and Succession Committee of Petrobras' Board of Directors evaluated all relevant documentation and recommended the approval of the new term in office to the Company's Board of Directors. [Petrobras, 27.Mar.2017]
Petrobras Announces Resignation of Fiscal Council member Petrobras informed that Mr. Paulo JosĂŠ dos Reis Souza, member of the Fiscal Council, submitted his resignation to the post, effective on March 27, 2017. The election of the new member of the Fiscal Council appointed by the controlling shareholder will be in the Extraordinary General Meeting, on March 27, 2017. [Petrobras, 23.Mar.2017]
GeoPark Appoints Dingman to Its Board of Directors GeoPark Limited announced appointment of Mr. Michael D. Dingman as a new member of the Board of Directors of the company, effective January 1, 2017. Dingman is a respected and successful international investor, businessman and philanthropist, with more than 50 years of investment experience and an impressive track record of building companies and conglomerates in the U.S. and emerging markets. Dingman currently is Founder, President and CEO of the Shipston Group, an international private investment firm with diverse holdings around the globe. In addition to a successful career on Wall Street as a partner of Burnham & Company, Dingman has been Chairman and Chief Executive or President of several major US-based industrial corporations, including Wheelabrator-Frye, Signal, AlliedSignal, the Henley Group and Fisher-Scientific. His energy investment experience includes working with the Liedtke family of Pennzoil at Pogo Producing Company and as an early investor of Sidanco, one of Russia’s largest oil companies, where he spearheaded the introduction of best management practices. Dingman is a former director of Ford Motor Company (21 years), Time and then Time Warner (24 years), the Mellon Bank, Temple Industries, Temple-Inland, Continental Telephone and Teekay Shipping. He is the founder of the Michael D. Dingman Center for Entrepreneurship at the University of Maryland, a center that fosters entrepreneurship and provides mentoring services to emerging growth companies around the world. He is a benefactor and former trustee of the Boston Museum of Fine Arts and the John A. Hartford Foundation. “I am pleased to be joining GeoPark’s Board of Directors and working with its management to support the Company’s exciting expansion. GeoPark has high quality assets, a strong team, a proven operational track record and a unique platform across Latin America, a region that is poised for outsized energy growth and development,” said Dingman. [GeoPark Limited, 4.Jan.2017] SUBSCRIBE TO THE LATAM NRG PROSPECTOR AND NRG BRIEF
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FINANCIAL Ecuador Announces $1 Billion Bond Placement Ecuador, the only other Latin American country to belong to the Organization of Petroleum Exporting Countries (OPEC), successfully completed a $1 billion bond placement, announced President Rafael Correa in an official Twitter post. The bonds, placed on January 10, 2017, have an annual interest rate of 9.1 percent and mature in 2027. Demand for the offering was $2.2 billion, which â€œreflects confidence in the country,â€? wrote Correa. [Energy Analytics Institute, Ian Silverman, 16.Jan.2017]
Clarification on news - Addendum: Strategic Alliance between Petrobras and Total Petrobras understands that the content disclosed to the market on the Strategic Alliance with Total on 10/24/2016, 12/21/2016 and 3/1/2017, includes the relevant information about this partnership, informing the values that refer to the purchase and sale contracts that were signed between the two companies and to the credit line negotiated. It should be noted that the contracts signed were based on internal and external economic-financial assessments, as well as fairness opinion issued by independent institutions. In relation to the internal memo disclosed exclusively to the workforce, Petrobras considered that its content is not a matter of relevant information that could impact an investorâ€™s decision in respect to the Company's securities, since the main partnership elements were already included in the releases disclosed to the market. It is important to note that the potential additional gains mentioned in the internal memo depends on synergy gains from the technological cooperation in the future, involving research components, exchange of knowledge and expertise, which may or may not materialize, so that they did not present sufficient certainty to be disclosed to the market, due to the preliminary level of discussions in progress and the low maturity of their estimates. [Petrobras, 10.Mar.2017]
Strategic Alliance Between Petrobras and Total - Potential Additional Gains Petrobras clarified that the R$ 500 million amount mentioned in the article published by the newspaper O Estado de S. Paulo and mentioned by President Pedro Parente in an internal communication to the companyâ€™s work force, represents a preliminary estimate of potential gains that may result from the Strategic Alliance signed between Petrobras and Total. The synergy between the companies, where Petrobras brings in technical knowledge from the operation of pre-salt layer fields in Brazil, and Total brings in its experience in the operation of deep water fields in the Western African coast and in carbonate reservoirs, might facilitate production optimization in the future as a consequence of an increase in the recovery factor in carbonate reservoirs and resulting increase in volume produced. As such, the aforementioned amount has not been recorded in the global value of the Strategic Alliance announced to the market on 10/24/2016, 12/21/2016, and 03/01/2017, in the amount of $2.2 billion, since materialization of the foreseen synergies will depend on the progress of technical discussions and development plans to be jointly prepared. [Petrobras, 7.Mar.2017]
Petrobras, Total Finalize Strategic Alliance Petrobras and Total signed the sales contracts for the assets in the Strategic Alliance, as set out in the Master Agreement signed on the 21st of December, 2016. The contracts signed yesterday form a Strategic Alliance between both companies creating new partnerships in the Upstream and Downstream segments, and they reinforce technical cooperation in operations, research and technology. This alliance should allow both companies to bring together their internationally recognized expertise in all segments of the oil and gas value chain in Brazil and abroad. Through these contracts: - Petrobras will transfer 22.5% of the rights to Total in the concession area called Iara (comprising Sururu, BerbigĂŁo and Oeste de Atapu fields, which are subject to unitization agreements with the area called Entorno de Iara, a transfer of rights area in which Petrobras holds a 100% stake), in the Block BM-S-11. Petrobras will continue as operator and hold the largest stake, with 42.5%. The partnership with Total will allow Petrobras to reduce its investment and will benefit from technological solutions for its development that will be jointly studied by Petrobras and Total, maximizing profitability and the volume of oil to be recovered. BG E&P Brasil, a subsidiary of Royal Dutch Shell plc, with 25%, and Petrogal Brasil, with 10%, are also part of the consortium. - Petrobras will transfer 35% of the rights to Total, along with its operation, in the Lapa field concession area, in Block BM-S-9. Petrobras will keep 10%. The Lapa field is in the production phase and came onstream in December 2016. Total, as the new operator of this field, will benefit the Consortium by incorporating valuable experience in deepwater projects for the next phases of the challenging Lapa project, which has distinct characteristics from other operating pre-salt fields. BG E&P Brasil, a subsidiary of Royal Dutch Shell plc, with 30%, and Repsol-Sinopec Brasil, with 25%, are also part of this consortium.
- Sale of Petrobras’ 50% stake to Total in Termobahia, which includes two cogeneration plants, Rômulo de Almeida and Celso Furtado, located in Bahia. Both plants are connected to the regasification terminal located in São Francisco do Conde, Bahia, where Total will take the regasification capacity to supply gas to the thermoelectric plants. This initiative constitutes an innovative partnership in the Brazilian thermal market. The above contracts are in addition to other agreements already entered into on the 21st of December, namely: (i) Letter granting Petrobras the option to purchase a 20% stake in block 2 of the Perdido Foldbelt area, in the Mexican sector of the Gulf of Mexico, only taking on future obligations in proportion to its stake (ii) Letter of intent for joint exploration studies in the exploratory areas of the Equatorial Margin and the Santos Basin; and (iii) Technological partnership agreement in digital petrophysics, geological processing and subsea production systems. The deal includes Total paying $2,225 million to Petrobras, made up of $1,675 million in cash for assets and services, a $400 million line of credit that could be triggered by Petrobras for part of their investment in the Iara development fields and $150 million for contingent payments. After signing the contracts, Pedro Parente, CEO of Petrobras and Patrick Pouyanné, Chairman and CEO of Total, have declared: “We are delighted today to see our Strategic Alliance becoming reality. These new partnerships together with a reinforced technological cooperation should create significant synergies and values, mutualizing our operational excellence and further reducing costs on our joint projects for the benefit of both companies” The deal is subject to the approval of the relevant regulatory entities, the potential exercise of preemptive rights by current Iara partners in addition to other preceding conditions. For Petrobras, this Strategic Alliance is an important part of the Petrobras 2017-2021 Business and Management Plan. It increases information, experience, and technology sharing, which strengthens corporate governance, and improves the company's financeability through mitigation of risks, cash inflows, and the release of investments. For Total, these new partnerships with Petrobras reinforce Total’s position in Brazil through the access to new fields in the Santos Basin while entering a promising gas value chain. Total and Petrobras: Currently, Petrobras and Total jointly participate in 19 Exploration and Production consortiums worldwide. In Brazil, the companies are partners in the development of the giant Libra field, which is the first Production Sharing Contract in the Brazilian pre-salt Santos basin. Outside Brazil, Petrobras and Total are partners in the Chinook field in the US Gulf of Mexico, in the deep-water Akpo field in Nigeria and in the gas fields of San Alberto and San Antonio/Itau in Bolivia, as well as in the Bolivia-Brazil gas pipeline. [Petrobras, 1.Mar.2017]
Petrobras, Total Move Forward with Strategic Alliance with New Agreements Petrobras signed a Master Agreement with the French company Total, in connection with the Strategic Alliance established in the Memorandum of Understanding signed on 10/24/2016, as previously announced to the market.
Entering into strategic partnerships is an important part of Petrobras’ 2017-2021 Business and Management Plan, as it contributes to mitigating risks, strengthening corporate governance and sharing information, experiences and technologies, in addition to improving the Company’s financial viability through cash inflows and the release of investments. Petrobras and Total have strong similarities in the upstream segment, sharing a relevant common base of E&P assets and the search for technological development in similar themes. The companies jointly participate in 19 consortiums worldwide in exploration and production in key projects such as the Libra area, which is the first production sharing contract in the Brazilian pre-salt in Santos Basin, besides exploration areas in Equatorial Margin, Espírito Santo Basin and Pelotas Basin. In addition, both companies are partners in the Brazil-Bolívia gas pipeline. With this new agreement, both companies will strongly reinforce their technological cooperation in the areas of geoscience, subsea systems and joint studies in areas of mutual interest, aiming to reduce investment risks and increase the probability of exploratory success over the next years. The companies will also become partners in the Iara and Lapa fields, in the pre-salt Santos Basin, and in two thermal plants, sharing the use of the regasification terminal infrastructure in the state of Bahia. The companies also undertake to expand their joint activities outside Brazil, with Petrobras having the option of taking a stake in the Perdido Foldbelt area in the Mexican portion of the Gulf of Mexico. The transaction has a global estimated value of $2.2 billion including cash, contingent payments and the carry of investments in production development of common assets to both companies, to be paid by Total to Petrobras and its subsidiaries as appropriate. The signing of the relevant Sale and Purchase Agreements (SPA) related to the assets from this Master Agreement is subject to internal and external control and regulatory approvals, including the Brazilian Federal Accounting Court (TCU), potential preemptive rights from the current partners of Iara, plus other precedent conditions. The companies have a mutual commitment to make all the necessary efforts to sign all contracts within 60 days. The main terms and conditions of this Agreement are as follows: - the sale of a 22.5% interest to Total, in the Iara area (Sururu, Berbigão and Oeste de Atapu fields) in Block BM-S-11. Petrobras will remain the operator and will keep the largest stake in that consortium, with a 42.5% interest. - the sale of 35% interest to Total in Lapa field in Block BM-S-9, with transfer of the operation to Total. Petrobras will have a 10% interest in this concession. - Petrobras’ option to take a 20% participation in block 2 of the Perdido Foldbelt area in the Mexican portion of the Gulf of Mexico, acquired by Total in partnership with Exxon in the round of bidding held by the Mexican government on 12/05/2016. - shared use of the Bahia regasification terminal, with a capacity of 14 million m3/day. - partnership, with Total holding a 50% stake, in the thermal plants Rômulo de Almeida and Celso Furtado, located in Bahia, with energy generation capacity of 322 MW. - joint studies in the exploratory areas in the Equatorial Margin and in the southern area of Santos Basin, taking advantage of the existing synergy between the two companies, since each has outstanding geological knowledge of the oil basins located on both sides of the Atlantic.
- technological partnership agreement in geological processing and subsea engineering, in which the companies have complementary knowledge, which can boost the gains from the application of new technologies in the partnership areas. The information below refers to the concessions established in the Agreement: Concessions in Upstream In the Iara concession, Petrobras holds a 65% interest and is the operator. Shell, with 25%, and Galp with 10%, are partners in this area, which is part of Block BMS-11. The reservoirs of this concession have higher complexity and are in the production development phase. The partnership with Total in this area will bring benefits such as the release of investments and new technological solutions for its development, maximizing profitability and the volume of oil to be recovered. The limits of this consortium extend into the Entorno de Iara area, from the Transfer of Rights agreement, in which Petrobras holds a 100% interest. The fields Berbigão, Sururu and Oeste de Atapu must enter into Individualization Production Agreements (unitization) with this area of the Transfer of Rights. In the Lapa field, Petrobras holds a 45% interest and is the operator. Shell, with 30%, and Repsol with 25%, are partners in this field, which is part of BM-S-9 block. The development of the Lapa field is at an advanced stage, with the recent start of production, as announced on 12/20/2016, and presents geological characteristics and oil quality different from other pre-salt fields. Total, as future operator of this field, will bring benefits to the consortium, by incorporating its experience and knowledge in the continuity of its development plan. The technological partnerships in the Iara and Lapa areas will develop and apply certain subsea technologies in a pioneering manner in Brazil. The efforts to reduce risks and increase the probability and the success in exploration will rely on a 4D seismic application in the context of carbonate reservoirs, with specific studies on CO2 migration and geomechanical studies, in addition to the development of a methodology for the construction of models to support investment decisions. Gas & Energy Concessions In the case of the G&E area, Petrobras and Total are forming an innovative partnership in the Brazilian thermal market. The initiative is aligned with the strategies of Petrobras for the Gas and Energy segment in the 2017-2021 Business and Management Plan, which establishes the restructuring of the Energy Businesses and maximizes the value generated in the gas chain. This vision considers a regulatory evolution, that is already under discussion with Brazilian federal authorities, forecasting an improvement of the procurement rules, access to the pipeline network and LNG regasification terminals. The partnership with Total includes two thermal plants (Rômulo Almeida and Celso Furtado), connected to the Regasification Terminal located in São Francisco do Conde, in Bahia. [Petrobras, 21.Dec.2016]
Petrobras Updates on Nova Transportadora do Sudeste Sale Process Petrobras informed that it was suspended today by the President of the Federal Regional Court for the 5th Region, the injunction that determined the interruption of the sale of 90% of Petrobras stake in Nova Transportadora do Sudeste (NTS). With the favorable decision by said Court, the company may move forward with this sale process. The transaction is part of Petrobras’ partnership and divestment program, which amount to a total of $13.6 billion in the 2015-2016 biennium. [Petrobras, 10.Mar.2017]
Colombia’s TermoCandelaria Fined 35.4 Billion Pesos Colombian energy generator TermoCandelaria was fined 35,410 million pesos, equivalent to 48,000 minimum salaries, by the country’s Public Services Superintendent. The entity justified its fine by saying the company had put the entire electrical system at risk in an ‘unjust manner’ during a time when the country confronted the Niño phenomena, reported the daily newspaper El Tiempo. “TermoCandelaria unjustly failed to complete its obligations to generate electric energy during moments of scarcity,” reported the daily, citing the government entity. [By Energy Analytics Institute, Jared Yamin, 10.Mar.2017]
Gran Tierra Energy Announces Sale of Brazil Business Gran Tierra Energy Inc. announced a purchase and sale agreement was executed pursuant to which Maha Energy AB agreed to purchase Gran Tierra's Brazil business unit through the acquisition of all of the equity interests in one of Gran Tierra's indirect subsidiaries, and the assignment of certain debt owed by the corporate entities comprising Gran Tierra's Brazil business unit to the Gran Tierra group of companies. Upon completion of the Brazil divestiture, Maha will acquire all of Gran Tierra's assets in Brazil, including its 100% working interest in the Tiê Field and all of Gran Tierra's interest in exploration rights and obligations held pursuant to concession agreements granted by the Agência Nacional do Petróleo, Gás Natural e Biocombustíveis of Brazil (ANP). The completion of the Brazil divesture is subject to Maha obtaining financing, as well as customary closing conditions, including the receipt of required regulatory approval from the ANP. The consideration to be received by Gran Tierra on the completion of the Brazil divestiture is $35 million, subject to adjustments, plus the assumption by Maha of certain existing and potential liabilities of Gran Tierra's Brazil business unit. Pursuant to the Agreement, Maha will pay a deposit $3.5 million by February 9, 2017, which is not refundable in the event Maha is not successful in obtaining financing to complete the Brazil divestiture. As previously disclosed, the company's assets in Brazil are not considered core to Gran Tierra's Colombia growth strategy, and we believe this divestiture allows Gran Tierra a significant advantage by reallocating resources (people and money) to our core Colombian exploration, development and production operations. The economic effective date of the transaction will be on or before August 1, 2017, and Gran Tierra will continue to operate its Brazil business unit until the completion of the Brazil divestiture. [Gran Tierra Energy Inc., 6.Feb.2017]
Petrobras Concludes Nansei Sekiyu Sale Petrobras concluded the sale of its 100% stake in Nansei Sekiyu (NSS) to the Taiyo Oil Company. The transaction was done by Taiyo paying $165 million, after complying with all previous conditions set forth in the agreement as signed on October 17, 2016. This amount is still subject to final adjustments.
NSS is a company wholly-owned by Petrobras International Braspetro – PIB BV located on the Island of Okinawa, in Japan. It has a refinery with a processing capacity of 100,000 barrels of oil per day, 36 tanks that store 9.5 million barrels of oil and oil products, three piers for loading and unloading ships and a monobuoy. Taiyo is a privately-held Japanese company headquartered in Tokyo that imports, exports, refines and sells oil products. It has nine offices/branches including one oil refinery in Japan. Nansei was sold through a bidding process, and the transaction price was assessed by three financial institutions and through two independent fairness opinions and a valuation report. The transaction was recorded in the partnership and divestment program reaching $13.6 billion during 2015-2016. The sale is in line with the Petrobras Strategic Plan, which aims to optimize its business portfolio. [Petrobras, 28.Dec.2016]
Petrobras Sells Sugar, Ethanol and Petrochemical Assets for $587 Million These transactions are part of the company’s partnerships and divestments program. The target for the period 2017-2018 is $21 billion … On December 28, 2016, Petrobras closed two asset sales for the total sum of $587 million. The subsidiary Petrobras Biocombustível (PBio) sold to Tereos Participations - a company in the French Tereos group - its entire stake in Guarani, representing 45.97% of the company's equity capital, for $202 million. The Petrobras Board of Directors also approved the sale of Companhia Petroquímica de Pernambuco (PetroquímicaSuape) and Companhia Integrada Têxtil de Pernambuco (Citepe) to two subsidiaries of the Mexican company Alpek, for $385 million. With these transactions, the Petrobras partnerships and divestments program has chalked up a total of $13.6 billion in the period 2015-2016, which is below the $15.1 billion target set for the two-year period. This failure to meet the target is explained by the company's obligation to comply with the preliminary injunction of the Sergipe Court that blocked the completion of the negotiations for sale of the Tartaruga Verde and Baúna fields, located in the Campos Basin and the Santos Basin, respectively, which were already at an advanced stage. The target for the partnerships and divestments program in the period 2017-2018 will automatically be increased by the respective amounts, to the sum of $21 billion. The assets sold do not have any Petrobras employees and the employment ties with the respective companies will not change as a result of the transactions. The two agreements closed are among the five transactions that may see their contracts signed in accordance with a precautionary decision handed down by the Federal Audit Court (TCU). All the transactions were conducted through a competitive process and the sale prices were appraised by several financial institutions, by means of independent opinions regarding the fair value (fairness opinion) and the valuation report. More about the companies involved in the transactions:
Guarani Guarani is one of the leading companies in the Brazilian sugar and ethanol market, ranked third among the largest sugar producers in Brazil. The company has eight industrial units: seven in Brazil, in the state of São Paulo (Andrade, Cruz Alta, São José, Severínia, Mandu, Tanabi and Vertente mills, the last in a joint venture with the Humus Group, which owns 50%) and one in Africa, in Mozambique (Sena mill). Tereos Tereos, which is a partner of PBio (Petrobras Biofuels) in Guarani, with a 54.03% equity stake, is the world’s third largest sugar producer. The group specializes in transforming raw materials into sugar, ethanol, alcohol and starch and has 24,000 employees at 42 industrial units across Europe, South America, the Indian Ocean, Africa and Asia. PetroqímicaSuape and Citepe PetroquímicaSuape and Citepe are fully-owned subsidiaries of Petrobras and form part of the company's Chemical-Textile Industrial Complex in Ipojuca, in the state of Pernambuco. These companies bring together three integrated industrial units: PTA (purified terephthalic acid), polyester fibers and PET (polyethylene terephthalate) resin. Alpek Alpek is a listed Mexican company, owned by Alfa, S.A.B. de C.V., which operates in the petrochemical segment and is a world leader in the production of polyester (PTA, PET and fibers). [Petrobras, 28.Dec.2016]
Petrobras Approves Settlements with Investors to End Four Lawsuits in the US Petrobras announces its Board of Directors has approved settlements to end four individual lawsuits filed before the Federal Court of New York, USA, by New York City Employees Retirement System (and others), Transamerica Income Shares, Inc. (and others), Internationale Kapitalanlagegesellschaft mbH, Lord Abbett Investment Trust - Lord Abbett Short Duration Income Fund (and others). Petrobras had already agreed settlements for fifteen other individual lawsuits before the Federal Court of New York, as announced on October 21, 2016 and November 23, 2016. As a result of the agreements reached and the stage of ongoing negotiations with other plaintiffs in individual lawsuits, the Company, currently, expects the total provision for 2016 to be $372 million, of which a $364 million provision has already been set on September 30, 2016. These four individual lawsuits had been consolidated for the purposes of the judgment with twenty-three other individual lawsuits and a class action filed against the Company (and others) before the Federal Court of New York, USA. With today's announcement, Petrobras has reached an agreement in nineteen individual lawsuits from a total of twenty-seven, which were consolidated with the class action. Currently, Petrobras cannot reliably estimate the outcome of the class action. These agreements, the terms of which are confidential, aim to eliminate uncertainties, charges and costs associated with the continuity of such disputes and do not constitute any acknowledgment of liability on the part of Petrobras, which will continue to firmly defend itself in other ongoing lawsuits. [Petrobras, 24.Feb.2017]
Nova Fronteira Merger into São Martinho S.A. Finalized Petrobras announced that, further to the statement on 12/15/2016, its wholly owned subsidiary Petrobras Biocombustível S.A. (PBIO) finalized the merger of Nova Fronteira into São Martinho S.A. The transaction was concluded on PBIO’s receipt of 24 million new ordinary shares issued by São Martinho, representing 6.593% of the voting and total capital of this company, replacing and proportionally to the Nova Fronteira shares held by PBIO. These shares will not be subject to any type of lock-up and any sale shall be done in an organized manner, with the collaboration of São Martinho, for a period of up to four years. The project is part of the five transactions that can be signed in accordance with the provisional ruling of the Brazilian Federal Accounting Court (TCU), as disclosed in the material fact dated 12/20/2016. [Petrobras, 23.Feb.2017]
Standard & Poor's Improves Petrobras' Rating Petrobras announced that the credit rating agency Standard & Poor’s raised its rating for the company’s corporate debt to 'BB-' from 'B+' and changed its outlook to stable from negative. The agency stated that the improvement in Petrobras’ rating reflects the evolution of its liquidity and a robust cash position that confers greater capacity to handle eventual liabilities. The recovery in the relationship with domestic and foreign banks and in Petrobras’ capacity to access capital markets was also highlighted by the agency, which considered debt management operations to be positive. The progress in the Divestment Program and the perspectives to reach the targets set for 2017 and 2018 were also emphasized. Standard & Poor’s further stressed the management's focus on profitability, a more balanced capital structure, and the commitment to deleverage the company, as well as the consistency of the new Pricing Policy, which enables greater visibility over Petrobras’ cash flow. The agency has also reinforced the progress in corporate governance and the measures adopted to improve internal controls, relationship with suppliers, and decision-making processes. [Petrobras, 11.Feb.2017]
Petrobras Announces Final Tender Results and Final Settlement for Cash Tender Offers Petróleo Brasileiro S.A. – Petrobras (PBR) announced that holders of $4,899,100,000 and €631,753,000 principal amount of the outstanding notes of the series set forth in the table below (all such notes, collectively, the "Old Notes" and each a "series" of Old Notes), issued by its wholly-owned subsidiary Petrobras Global Finance B.V. ("PGF"), tendered their Old Notes at or prior to 11:59 p.m., New York City time, on February 8, 2017 (the "Expiration Date"), pursuant to PGF's previously announced cash tender offers (the "Tender Offers").
The following table summarizes the final tender results as of the Expiration Date and the principal amount of Old Notes that PGF has accepted for purchase: Holders of $13,542,000 and €200,000 principal amount of Old Notes tendered their Old Notes after 5:00 p.m., New York City time, on January 25, 2017 (the "Early Tender Date"), and on or prior to the Expiration Date. PGF has accepted for purchase all of the Old Notes validly tendered in the Tender Offers after the Early Tender Date and on or prior to the Expiration Date. The final settlement date on which PGF will make payment for Old Notes accepted in the Tender Offers after the Early Tender Date is expected to be February 13, 2017 (the "Final Settlement Date"). Holders of Old Notes that validly tendered on or prior to the Early Tender Date and whose Old Notes were accepted for purchase received the applicable total consideration set forth in the table above, which included an early tender premium as set forth therein, and accrued and unpaid interest on their accepted Old Notes from the last interest payment date to, but not including, January 30, 2017, the early settlement date of the Tender Offers. Holders of Old Notes that validly tendered after the Early Tender Date but on or prior to the Expiration Date and whose Old Notes have been accepted for purchase are entitled to receive only the applicable tender offer consideration set forth in the table above, which is equal to the total consideration set forth in the table above minus the applicable early tender premium as set forth therein, and to receive accrued and unpaid interest on their accepted Old Notes from the last interest payment date to, but not including, the Final Settlement Date. The total cash payment to purchase the accepted Old Notes on the Final Settlement Date will be $13,975,639.76 and €209,913.02, in each case including accrued and unpaid interest. Old Notes that have been validly tendered after the Early Tender Date and on or prior to the Expiration Date cannot be withdrawn, except as may be required by applicable law. The Tender Offers have now expired. No Old Notes tendered after the Expiration Date will be accepted for purchase pursuant to the Tender Offers. Any tendered Old Notes that are not accepted for purchase will be returned or credited to the holder's account. The Tender Offers were made pursuant to the offer to purchase dated January 9, 2017 (as amended or supplemented from time to time, the "Offer to Purchase"), and the related letter of transmittal dated January 9, 2017 (as amended or supplemented from time to time, the "Letter of Transmittal"), which set forth in more detail the terms and conditions of the Tender Offers. PGF engaged Banco Bradesco BBI S.A., Citigroup Global Markets Inc., HSBC Securities (USA) Inc., Itau BBA USA Securities, Inc. and Morgan Stanley & Co. LLC to act as dealer managers (the "Dealer Managers") in connection with the Tender Offers. Global Bondholder Services Corporation acted as the depositary and information agent for the Tender Offers. [Petrobras, 9.Feb.2017]
Moody's Says Petrobras' B2 Ratings Unaffected by Brazil's Outlook Change On 15 March 2017 Moody's changed the outlook on the Government of Brazil's Ba2 rating to stable from negative, reflecting Moody's expectation that the downside risks are abating and macroeconomic conditions stabilizing. As stated in our previous reports, the change in Brazil´s outlook does not directly affect the B2 ratings or stable outlook of state-owned oil company Petroleo Brasileiro S.A. (Petrobras). Petrobras' ratings and outlook reflect Moody's joint-default analysis for the company as a governmentrelated issuer. The ratings reflect the rating agency's assumption of a moderate likelihood of timely extraordinary support from the Brazilian government. As well, Moody's assumption for default dependence between Petrobras and the government continues to be moderate. This assessment currently results in a one-notch uplift of Petrobras' senior unsecured rating to B2 from its b3 Baseline Credit Assessment (BCA).
On 21 October 2016, Moody's raised Petrobras' Baseline Credit Assessment to b3 from caa2, upgraded its ratings to B2 from B3, and changed the ratings outlook to stable from negative. The action incorporated improvements in the company's liquidity profile and in the regulatory framework in Brazil, both of which reduced Petrobras' credit risk. Moody's continues to monitor progress on Petrobras' execution of asset sales, operational improvements, and debt refinancing initiatives. Following the $13.75 billion in bond issuances since May 2016, Petrobras' debt amortization schedule has improved, although debt maturing in 2017 and 2018 remains high at $21.45 billion as of September 30, 2016. In addition, the class action lawsuit, the US Securities Exchange Commission (SEC)'s civil investigation and the US Department of Justice (DoJ)'s criminal investigation related to bribery and corruption could negatively affect the company's cash position in an amount yet unclear. While Moody's believes Petrobras' dispute with Brazil's federal securities regulator CVM over the company's 2013-15 financial statements will not cause a material enough restatement to prompt the agency to take a negative rating action, any resolution with CVM could result in some future cash implications for dividend payments. Petrobras' lower capital spending in relation to about $13.6 billion in asset sales could indicate a reduction in its future revenues and cash flow. But any actions that strengthen Petrobras' liquidity while also improving its operating margins and leverage would likely have a greater impact on the company's credit quality than reductions in its production, revenues and reserve base. Petrobras is an integrated energy company, with total assets of $247 billion as of 30 September 2016. The company dominates Brazil's oil and natural gas production, as well as downstream refining and marketing. Petrobras also holds a significant stake in petrochemicals and a position in sugar-based ethanol production and distribution. The Brazilian government directly and indirectly owns about 46% of Petrobras' outstanding capital stock and 60.5% of its voting shares. [Moody's, 15.Mar.2017]
Petrobras Updates on Sale Process for BaĂşna and Tartaruga Verde Petrobras, in continuation to the material facts of 10/6/2016, 12/20/2016, and 3/15/2017 and to the press release of 11/21/2016, clarifies that it has notified the Federal Supreme Court of the impossibility to proceed with the divestment process for the transfer of rights relating to the fields of BaĂşna and Tartaruga Verde. Furthermore on today's date the company submitted the same information to the Federal Court of Aracaju, requesting the termination of court proceedings. On March 15, as disclosed by Petrobras, TCU revoked the preventive order and, among other measures, upheld the permission to proceed with this sale process for being in advanced stage of negotiation, with the determination of compliance with the CourtÂ´s rules. In the face of this decision, the lack of conditions presented in the acquisition proposal and the maintenance of the effects of the judicial injunction, the continuation of this divestment process proved to be unfeasible, given the negotiation or procedural impossibility of resuming negotiations. For this reason, the company waived the appeal before the Federal Supreme Court, which aimed to reverse the Court injunction. Finally, Petrobras informs that requested in all judicial instances for granting judicial secrecy, considering the need to preserve its own interests and third parties interests. [Petrobras, 30.Mar.2017]
Moody's Takes Action on Cosan's Ratings Moody's Investors Service affirmed the ratings of the notes issued by Cosan Overseas Limited and Cosan Luxembourg S.A. and guaranteed by Cosan at Ba3. At the same time, Moody's América Latina affirmed Cosan S.A. Indústria e Comércio's corporate family ratings at Ba2 (global scale) and upgraded the national scale (NSR) rating to Aa1.br from Aa2.br. The outlook was revised to stable from negative. The action mirrors the change in outlook to stable from negative, on March 17, of the ratings of its subsidiaries Raizen (Ba1 stable) and Comgás (Ba2 stable), both of which are constrained by Brazil's sovereign bond ratings. On March 15, Moody's changed Brazil's outlook to stable from negative and affirmed its issuer rating, senior unsecured at Ba2 and shelf ratings at (P)Ba2. Ratings affirmed: Issuer: Cosan Luxembourg SA - $51 million equivalent senior unsecured notes due 2018: Ba3 - $121 million senior unsecured notes due 2023: Ba3 - $650 million senior unsecured notes due 2027: Ba3 Issuer: Cosan Overseas Limited - $500 million perpetual bonds: Ba3 Outlook actions: Revised to stable from negative RATING RATIONALE Cosan's Ba2 corporate family rating reflects the group's aggregate credit risk, and is supported by the company's diversified portfolio of businesses, including the entire sugar-ethanol chain, fuel and gas distribution, and lubes in Brazil, and its adequate liquidity profile. The company's diversification, especially towards resilient businesses such as the fuel and gas distribution, translates into a stable cash source over the long-term. We expect Raízen and Comgás to distribute a significant amount of dividends over the next several years, which will be the primarily liquidity source to service Cosan's obligations. Constraining the ratings is Cosan's ongoing corporate restructure, likely high dividend upstream to Cosan Limited -- although the company is expected to generate enough cash to fund those dividends and reduce leverage -- and an acquisitive growth history. Still, the company has not made any significant acquisitions over the past few years and entered a deleveraging path with strong dividends from Comgás and Raizen. Cosan no longer proportionally consolidates its stake in Raízen, but we continue to incorporate Raízen's strengths, including its strong cash generation, and risks, such as the exposure to the underlying volatility of the sugar-ethanol business, in Cosan's ratings. The bulk of Cosan's cash generation comes from dividends from Raízen and Comgás and, consequently, we see the debt at Cosan S.A.'s level as structured subordinated to the debt at the operating companies. The recent rating action affirming Raízen and Comgás ratings and outlook change to stable from negative followed the action that affirmed Brazil's government bond rating to Ba2 and changed the outlook to stable from negative. Although we believe a significant portion of Cosan's cash flows, represented by Raízen Combustíveis and Comgás, is more resilient than the overall economy in Brazil, these entities are not fully insulated from the deterioration in the domestic environment. The stable outlook on Cosan's ratings mirrors the stable outlook on its two main subsidiaries, Raízen and Comgás. A downgrade of Cosan's ratings could result from further negative rating actions on Comgás or Raízen or if liquidity deteriorates. In addition, the ratings could be downgraded if total adjusted debt to EBITDA is sustained above 4.0x.
An upgrade of Cosan's ratings could result from positive rating actions on Comgás or Raízen. In addition, the company would have to maintain an adequate liquidity and gross leverage below 3.2x (All pro-forma ratios including Raizen figures) Headquartered in São Paulo, Cosan S.A. Indústria e Comércio has a 50% stake in Raízen (Ba1/Aaa.br stable) and a 62.6% stake in Comgás (Ba2/Aa1.br stable). With annual revenue of BRL 81.2 billion (approximately $24.9 billion) as of December 2016, Raízen is one of the global leading players in the sugar-ethanol segment with an installed crushing capacity of 68 million tons and also the third largest Brazilian fuel distributor, operating 6,027 gas stations, mainly under the Shell brand name. Comgás, with annual net revenues of approximately BRL 7.0 billion (approximately $2.1 billion) in the same period, is Brazil's largest gas distributor, providing natural gas to industrial, residential, commercial, automotive, thermal-power generation and co-generation consumers. The company benefits from an attractive concession area strategically located in one of the most densely populated and economically robust regions in the country. Additionally, Cosan produces and distributes automotive lubricants and base oil under the Mobil brand name with net revenues of BRL 1.9 billion ($0.5 billion) as of December 2016. In the fiscal year 2016 Cosan's net sales reached BRL 7.5 billion (approximately $2.3 billion). [Moody's Investors Service, 17.Mar.2017]
Petrobras Considered Company with Best Debt Management During 2016 Voted the company with the best debt management performance in the international capital markets in 2016, Petrobras was presented by LatinFinance magazine with the Corporate Liability Management of the Year award, at a ceremony held in New York on January 12, 2017. The award took into consideration two securities issue and repurchase transactions in the international market, in May and July last year. In the former, Petrobras issued securities with a total value of $6.75 billion and maturities of five and ten years. In the latter, the company raised an additional $3 billion by reopening the bond series. In both transactions, the company used the proceeds to repurchase securities maturing between 2017 and 2019, so as to extend its average debt maturity profile. It was the first time the company had been presented with this award. [Petrobras, 16.Jan.2017]
Petrobras Announces the Pricing of Global Notes and Increase of Tender Cap Petrobras announces the pricing of global notes denominated in U.S. Dollars (the “Notes”) to be issued by its wholly-owned subsidiary Petrobras Global Finance B.V. (PGF). The Notes will be unsecured obligations of PGF and will be fully and unconditionally guaranteed by Petrobras. Closing is expected to occur on January 17, 2017. The terms of the 6.125% Global Notes due 2022 are as follows: -- Issue: 6.125% Global Notes due 2022 -- Amount: US$2,000,000,000 -- Coupon: 6.125% -- Interest Payment Dates: January 17 and July 17 of each year, commencing on July 17, 2017 -- Issue price: 100.000% of principal amount, plus accrued interest (if any) from July 17, 2017 -- Yield to Investors: 6.125% -- Maturity: January 17, 2022
The terms of the 7.375% Global Notes due 2027 are as follows: -- Issue: 7.375% Global Notes due 2027 -- Amount: US$2,000,000,000 -- Coupon: 7.375% -- Interest Payment Dates: January 17 and July 17 of each year, commencing on July 17, 2017 -- Issue price: 100.000% of principal amount, plus accrued interest (if any) from July 17, 2017 -- Yield to Investors: 7.375% -- Maturity: January 17, 2027 PGF intends to use a portion of the net proceeds from the sale of the Notes to repurchase notes validly tendered and accepted for purchase by PGF in the previously announced cash tender offers (the “Tender Offers”), and to use any remaining net proceeds for general corporate purposes. In connection with the Tender Offers, PGF announces that it has increased the tender cap from $2 billion to $4 billion. Except as described in this press release, all other terms of the Tender Offers as described in the offer to purchase dated January 9, 2017 (as may be amended or supplemented from time to time, the “Offer to Purchase”), and in the related letter of transmittal dated January 9, 2017 (as may be amended or supplemented from time to time, the “Letter of Transmittal”) remain unchanged. PGF has engaged Banco Bradesco BBI S.A., Citigroup Global Markets Inc., HSBC Securities (USA) Inc., Itau BBA USA Securities, Inc. and Morgan Stanley & Co. LLC to act as dealer managers in connection with the Tender Offers. Global Bondholder Services Corporation is acting as the depositary and information agent for the Tender Offers. [Petrobras, 10.Jan.2017]
Moody's Assigns B2 Rating to Petrobras Global Finance's Proposed Notes Moody's Investors Service assigned a B2 rating to Petrobras Global Finance B.V.'s proposed global notes, which will be unconditionally guaranteed by Petroleo Brasileiro S.A. (B2 stable). The B2 rating on the proposed notes is based on the rating of Petrobras. The proposed notes are senior unsecured and pari passu with Petrobras Global Finance B.V. and Petrobras' other senior foreign currency debt. Proceeds from the proposed notes issuance will be used for debt refinancing and other general corporate purposes. The outlook on the ratings is stable. RATINGS RATIONALE Petrobras' b3 BCA, which indicates Moody's view of the company's standalone credit strength, considers its high financial leverage, low to negative free cash flow, weak liquidity, local currency volatility risk and operating challenges in a difficult industry and economic environment. Consolidated free cash flow will remain under pressure in the foreseeable future as its upstream business suffers from low oil prices and downstream operations are hurt by low demand, high competition and local currency volatility, at the same time that the company's new pricing policy for fuel is tested. Petrobras' b3 BCA and B2 rating are supported by the company's solid reserve base and dominance in the Brazilian oil industry, and its importance to the Brazilian economy. Furthermore, the ratings reflect the company's sizeable reserves at 10,515.9 Mboe, its renown technological offshore expertise and potential for continued growth in production over the long-term.
Petrobras' B2 ratings also consider Moody's joint-default analysis for the company as a governmentrelated issuer. Petrobras' ratings reflect Moody's assumption for a moderate likelihood of timely extraordinary support from the government of Brazil. Despite its stated willingness to stand behind Petrobras, Moody's believes that the government's current fiscal situation tempers its capacity to support Petrobras sufficiently to avoid a default. Moody's continues to assume moderate default dependence between Petrobras and the government. Petrobras' rating incorporates one notch of uplift between Petrobras' BCA and its senior unsecured rating. Petrobras' liquidity risk has declined over 2016 on the back of $13.6 billion in asset sales and around $10 billion in exchanged notes during the third quarter last year, which helped to extend the company's debt maturity profile. However, liquidity risk remains significant. As of September 30, 2016, Petrobras' maturing debt in fiscal years 2017 and 2018 was $7.9 billion and $13.5 billion, respectively, for a total of $21.4 billion in the next 2 years. In addition, the class action lawsuit, the US Securities Exchange Commission (SEC)'s civil investigation and the US Department of Justice (DoJ)'s criminal investigation related to bribery and corruption will negatively affect the company's cash position in an amount yet unclear. Other threats to Petrobras' liquidity, as well as to its operating and financial performance, include tax contingent liabilities, execution risk related to the 2017-21 business plan and potential delays in fully executing its asset sales plan. Petrobras' ratings have a stable outlook, reflecting Moody's expectation that, in the next 12 to 18 months, the company's liquidity and overall credit profile will gradually improve, supported by managerial focus on improvements in operations and capital allocation; further debt refinancing; and additional asset sales, despite the uncertainty around the payment of fines related to the class action lawsuit as well as the SEC and DoJ investigations. Positive rating actions could be considered if the company raises sufficient sums through asset sales or new debt arrangements to refinance its upcoming debt maturities and significantly strengthen its liquidity profile while also improving operating and financial performance. Although current low levels of capex in connection with asset sales would reduce future revenues and cash flow, actions that further strengthen the company's liquidity but also help improve operating margins and prospects of leverage reduction are currently likely to have a greater credit impact than possible reductions in production, revenues and reserve base. Negative actions on Petrobras' ratings could result from deterioration in its liquidity or financial profile. Downgrades could also be prompted if negative developments from the corruption investigations or litigation against the company appear to have the potential to significantly worsen the company's liquidity or financial profile. Petrobras is an integrated energy company, with total assets of $247 billion as of September 30, 2016. Petrobras dominates Brazil's oil and natural gas production, as well as downstream refining and marketing. The company also holds a significant stake in petrochemicals and a position in sugar-based ethanol production and distribution. The Brazilian government directly and indirectly owns about 46% of Petrobras' outstanding capital stock and 60.5% of its voting shares. [Moody's Investors Service, 9.Jan.2017]
Extraordinary General Meeting Approved the Sale of PetroquĂmicaSuape and Citepe Petrobras, in continuation to the material fact disclosed on December 28, 2016, informed that, the Shareholdersâ€™ Extraordinary General Meeting approved the sale of 100% of the shares held by Petrobras in PetroquĂmicaSuape and Citepe to Grupo Petrotemex S.A. de C.V. and Dak Americas Exterior, S.L, subsidiaries of Alpek, S.A.B. de C.V., for the amount of $385 million, which will be paid on the closing date, and it is subject to working capital, net debt, and recoverable taxes adjustments.
This transaction is part of the 2015-2016 partnership and divestment program, that reached $13.6 billion in the biennium, and it is still subject to the fulfillment of usual precedent conditions, among them the approval of the operation by the Administrative Council for Economic Defense (CADE). The sale is aligned to Petrobras Strategic Plan, which provides for business portfolio optimization with full withdrawal from petrochemical interests. Furthermore, at the moment, there is no restriction to continuing this transaction, since the Regional Federal Court revoked the injunction that suspended the operation, as disclosed on the material fact of February 22, 2017. Petrobras also clarifies that the decision of the Brazilian Federal Accounting Court (TCU), issued and announced on March 15, 2017, does not interfere in this sale process, due to the fact that the purchase and sale agreement of PetroquímicaSuape and Citepe was already signed on December 28, 2016, prior to the publication of said decision. [Petrobras, 27.Mar.2017]
Court Ruling Allows Petrobras to Proceed with Sale of PetroquímicaSuape and Citepe Further to the relevant fact disclosed on January 31, 2017, Petrobras announced that the Federal Regional Court of the 5th Region granted the stay of proceedings sought by Petrobras concerning the sale of the shares in Companhia Petroquímica de Pernambuco (PetroquímicaSuape) and Companhia Integrada Têxtil de Pernambuco (Citepe). With the Court’s favorable decision, the company can proceed with this sale, one of five transactions given the go-ahead following the provisional ruling of the Brazilian Federal Accounting Court (TCU), as disclosed on December 20, 2016. [Petrobras, 23.Feb.2017]
Gran Tierra Energy Inc. Announces Fourth Quarter and Year-End Results for 2016 Gran Tierra Energy Inc. announced its financial and operating results for the fourth quarter and year ended December 31, 2016. Unless otherwise expressly stated, all reserves and resources values have been calculated in compliance with Canadian National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the Canadian Oil and Gas Evaluation Handbook ("COGEH") and are based on the company's 2016 year-end estimated reserves as evaluated by the company's independent qualified reserve evaluator McDaniel & Associates Consultants Ltd. in a report with an effective date of December 31, 2016. Key Highlights -- Announced two successful strategic acquisitions in the Ecopetrol 2016 Bidding Round in the Putumayo Basin on November 28, 2016, which are expected to close by end of first quarter 2017. -- Increased average WI production before royalties in 2016 to 27,062 barrels of oil equivalent per day (BOEPD), 16% higher than 2015's average WI production before royalties of 23,401 BOEPD. -- Increased average WI production before royalties in fourth quarter 2016 to 31,031 BOEPD, 34% higher than fourth quarter 2015's average WI production before royalties of 23,138 BOEPD.
-- Increased net asset value to $4.852 per share, based on before tax net present value (NPV) discounted at 10% of 2P reserves, and year-end 2016 net working capital deficit and long term debt of $220.4 million (including convertible senior notes). -- Demonstrated ongoing strong financial performance in 2016, with full year average operating, transportation and general and administrative (G&A) expenses on a per BOE basis decreasing by 9%, 37% and 28%, respectively, compared to 2015, while fourth quarter 2016 operating netback1 of $20.79 per BOE increased 31% relative to the third quarter 2016. -- Successfully drilled and cased the Acordionero-7 development oil well and spud the Acordionero-8i development water injection well during the fourth quarter of 2016, both of which pushed down the depth of the lowest known oil in Acordionero's reservoirs. -- Continued evaluating an exciting new oil play in Costayaco's "A" Limestone, where the Costayaco-9 and 19 wells continue to produce an average of 527 and 1,587 barrels of oil per day (bopd), respectively (2017 year-to-date), from the "A" Limestone with virtually no water; commenced drilling of the Costayaco-28, Gran Tierra's first dedicated "A" Limestone horizontal well, which continues with testing expected to begin on or around March 15, 2017; a second horizontal well, Costayaco-29, is expected to spud immediately after Costayaco-28 and is planned to test the "A" Limestone in a different part of the Costayaco structure. -- Continued drilling in the "N" Sands and "A" Limestone exploration plays in the Putumayo Basin, and spud the Confianza-1 exploration well on January 17, 2017, which is designed to test both formations. -- Maintained financial flexibility with an increased committed borrowing base of $250 million, of which only $90 million was drawn as of December 31, 2016. Message to Shareholders Gary Guidry, President and Chief Executive Officer of Gran Tierra, commented "During 2016, Gran Tierra successfully transformed its portfolio by delivering on our strategy of building a high-quality, diversified suite of assets in Colombia with high netback production, low base production declines, an expanded drilling inventory and a large resource base. Now that we have transformed the portfolio, our focus is on execution. With our delivery of strong production growth in fourth quarter 2016, we are demonstrating that Gran Tierra has created a sustainable business model which we expect to be fully funded point-forward by forecasted cash from operating activities. Since we operate over 90% of our production, Gran Tierra also has significant control and flexibility on capital allocation and timing. We transformed our portfolio through four strategic, accretive acquisitions in Colombia in 2016 (three completed, one pending), which established a dominant land position in the highly prospective, underexplored Putumayo Basin and a new core area in the prolific Middle Magdalena Valley Basin. Our high quality asset base now has 74% of its 2P reserves contained in three large operated, conventional, onshore Colombian oil assets: Acordionero, Costayaco and Moqueta. As we reported on January 23, 2017, this transformed portfolio delivered, during 2016, proved (1P), proved plus probable (2P) and proved plus probable plus possible (3P) WI reserves growth of 51%, 91% and 146% respectively, compared to 2015. Our inventory of net undrilled development locations has grown to 36 (2P) and 54 (3P) during the year. We are also pleased that we were able to increase our 2P reserve life index from 7.8 years to 11.1 years3. This robust set of assets is now expected to have visibility to 2018 WI production greater than 40,000 BOEPD by 2018, based on the 2P forecast. With our large resource base, we also plan to drill 30 to 35 exploration wells over the next three years, which are all expected to be funded by cash from operating activities. Our exploration campaign is designed to test the majority of our portfolio of prospective resources with these wells, including our now dominant Putumayo position in the emerging "N" Sand and "A" Limestone oil play fairways.
We believe Gran Tierra ended 2016 on a strong note by delivering strong production growth in fourth quarter 2016, as we realized the first full three months of production from the PetroLatina acquisition which closed August 23, 2016. Fourth quarter 2016 WI production averaged 31,031 BOEPD, an increase of 34% from fourth quarter 2015's level of 23,138 BOEPD and an increase of 20% from the prior quarter. Commensurate with our increased production, our funds flow from operations1 saw a substantial increase of 54% in fourth quarter 2016 to $36.2 million compared with $23.5 million in the Prior Quarter. Oil prices increased in fourth quarter 2016, with Brent prices averaging $51.13 per barrel, a 9% increase from the prior quarter, while Gran Tierra's realized oil price also rose by 9% to $31.89 per BOE in the same time period. Gran Tierra continued to be successful in driving down combined operating and transportation expenses to $11.10 per BOE in the fourth quarter, a decrease of 17% from the prior quarter. We believe our low cost structure and growing production base allow us to be successful in a variety of pricing environments. Our ongoing focus on cost reductions allowed us to increase our operating netback in fourth quarter 2016 to $20.79 per BOE, up 31% from the prior quarter, a larger increase than the 9% increase in the Brent oil price over the same period. Financial and operating highlights for the year include: Production: -- WI production before royalties for the quarter averaged 31,031 BOEPD, or 26,263 BOEPD NAR, compared with 25,835 BOEPD WI production before royalties and 21,980 BOEPD NAR in the Prior Quarter. WI annual production before royalties for 2016 averaged 27,062 BOEPD, or 23,187 BOEPD NAR, compared with 23,401 BOEPD WI annual production before royalties or 19,489 BOEPD NAR in 2015. -- Sales volumes for the fourth quarter were 26,477 BOEPD compared with 21,485 BOEPD in the Prior Quarter. Sales volumes increased due to higher working interest production (5,196 BOEPD) and a reduction of inventory (709 BOEPD), partially offset by higher royalty volumes (913 BOEPD). Annual sales volumes were 23,954 BOEPD compared with 18,260 BOEPD in 2015. -- Gran Tierra expects 2017 average WI production before royalties to be 34,000 to 38,000 BOEPD from the Company's assets in Colombia and Brazil, which would represent an increase of 26% to 40% from our 2016 average WI production before royalties of 27,062 BOEPD. The 2017 guidance includes 1,200 to 1,500 BOEPD of production from Brazil. The Company's production guidance only includes forecasted volumes from existing operations and expected development projects; no volumes are assumed for any exploration success. Financial: -- Funds flow from operations(1) was $105.0 million for the year ended December 31, 2016 compared with $107.6 million in 2015, and, for the fourth quarter, $36.2 million compared with $23.5 million in the Prior Quarter. -- Net loss was $465.6 million, or $1.45 per share basic and diluted, for the year ended December 31, 2016 compared with $268 million, or $0.94 per share basic and diluted, in 2015. The increase in net loss was primarily due to higher impairment losses. Impairment losses increased by $183.1 million, net of income tax recovery, compared to 2015. For the fourth quarter, net loss was $127.4 million, or $0.36 per share basic and diluted, compared with $229.6 million, or $0.71 per share basic and diluted, in the prior quarter. Impairment losses decreased by $76.1 million, net of income tax recovery, compared with the prior quarter. -- At December 31, 2016, cash and cash equivalents (including current restricted cash) were $33.5 million, working capital deficiency (including cash and cash equivalents) was $23.3 million and $90 million was outstanding on the company's revolving credit facility. The working capital deficiency was primarily a result of current tax related to a one-time restructuring.
-- Average realized prices decreased to $28.38 per BOE for the year ended December 31, 2016 from $34.06 per BOE in 2015, but for the fourth quarter increased to $31.89 per BOE from $29.28 per BOE in the prior quarter. -- Operating expenses decreased to $8.51 per BOE for the year ended December 31, 2016 from $9.31 per BOE in 2015, primarily as a result of Colombian operating cost savings, partially offset by the effect of the weakening of the U.S. dollar against local currencies in South America. Workover expenses increased by $0.46 per BOE compared with the prior year. Excluding workover expenses, operating costs decreased by $1.26 per BOE to $6.28 per BOE. For the fourth quarter, operating expenses decreased to $8.50 per BOE from $10.93 per BOE in the prior quarter, primarily as a result of workover expenses of $1.92 per BOE compared with $4.30 per BOE in the Prior Quarter. Excluding workover expenses, operating costs per BOE were consistent with the prior quarter. -- Transportation expenses decreased to $3.12 per BOE for the year ended December 31, 2016 from $4.96 per BOE in 2015 primarily due to a lower percentage of volumes sold using pipelines, and the use of alternative transportation routes, which had lower costs per BOE than the routes used in 2015. For the quarter, transportation expenses increased to $2.60 per BOE from $2.47 per BOE in the prior quarter. The increase was primarily due to a lower percentage of sales at the wellhead, 50% in the current quarter, compared with 56% in the prior quarter. -- G&A expenses per BOE for the year ended December 31, 2016 decreased to $2.66 per BOE from $3.67 per BOE in 2015. [Gran Tierra Energy Inc., 1.Mar.2017]
Gran Tierra Energy Inc. to Make a Normal Course Issuer Bid Gran Tierra Energy Inc. intends to implement a normal course issuer bid through the facilities of the Toronto Stock Exchange (TSX) and the NYSE MKT. Pursuant to the Bid and subject to regulatory approval, Gran Tierra would be able to purchase for cancellation up to approximately 5% of its issued and outstanding shares of common stock for a one year period at prevailing market prices at the time of purchase. Management of Gran Tierra believes the Shares, at times, have been trading in a price range which does not adequately reflect their value in relation to Gran Tierra's current operations, growth prospects and financial position. At such times, the purchase of Shares for cancellation may be advantageous to stockholders by increasing the value of the remaining Shares. [Gran Tierra Energy Inc., 30.Jan.2017]
Gran Tierra Energy Closes Public Offering of Common Stock Gran Tierra Energy Inc. closed the previously announced underwritten public offering of shares of its common stock. The company sold 43,335,000 shares of its common stock at a public offering price of US$3 per share, for aggregate gross proceeds to the company of approximately $130 million. The company intends to use the net proceeds from the offering to repay borrowings outstanding under the company's revolving credit facility, which amounts may be reborrowed for general corporate purposes, including to fund appraisal and development and to finance potential acquisitions.
The offering was made to the public in the United States and Canada through a syndicate of underwriters led by Scotia Capital Inc., RBC Capital Markets and Dundee Capital Markets as joint book-running managers. The syndicate also included TD Securities Inc. as co-lead manager and Peters & Co. Limited, GMP Securities L.P., Morgan Stanley Canada Limited, CIBC World Markets, Canaccord Genuity Corp., Cormark Securities Inc., HSBC Securities (Canada) Inc., Natixis Securities Americas LLC and Paradigm Capital Inc. as co-managers. The company has also granted underwriters an over-allotment option to purchase up to an additional 6,500,250 shares of its common stock solely to cover over-allotments, if any, on the same terms and conditions as the offering, including the offer price, exercisable at any time, in whole or in part, until 30 days after the date of the execution of the definitive agreement in respect of the offering. If the overallotment option is exercised in full, the aggregate gross proceeds from the offering will be approximately $149.5 million. [Gran Tierra Energy Inc., 29.Nov.2016]
GeoPark Reports Fourth Quarter and Full Year Ended December 31, 2016 Results GeoPark Limited reported its consolidated financial results for the three-month period ended December 31, 2016, and its audited annual results for 2016. FOURTH QUARTER AND FULL YEAR 2016 HIGHLIGHTS More Oil and Gas -- Record Oil and Gas Production: - Consolidated production up 2% to 23,593 boepd - Colombia production up 13% to 17,535 bopd - Current production of 25,900 boepd -- Consolidated production up 2% to 23,593 boepd -- Colombia production up 13% to 17,535 bopd -- Current production of 25,900 boepd -- Record Oil and Gas Reserves: - Proven and Probable (2P) PRMS reserves up 14% to 142.8 mmboe - Colombia 2P PRMS reserves up 45% to 67.4 mmboe -- Proven and Probable (2P) PRMS reserves up 14% to 142.8 mmboe -- Colombia 2P PRMS reserves up 45% to 67.4 mmboe More Efficiencies / Less Cost -- Finding and Development Costs: - Consolidated 2P of $1.7/boe - Colombia 2P of $1.0/bbl -- Consolidated 2P of $1.7/boe -- Colombia 2P of $1.0/bbl -- Operating Costs: - Consolidated operating costs down 19% to $8.1 per boe / full year down 31% - Colombia down 32% to $6.1 per bbl / full year down 39% -- Consolidated operating costs down 19% to $8.1 per boe / full year down 31% -- Colombia down 32% to $6.1 per bbl / full year down 39%
More Cash Generation -- Adjusted EBITDA up 154% to $27.0 million / full year up 6% to $78.3 million -- Operating Netback up 83% to $39.5 million / full year up 3% to $122.1 million -- Cash Flow from Operating Activities up to $28.0 million / full year up 220% to $82.9 million -- Net loss reduced to $26.0 million / full year net loss of $60.6 million (impacted by $25.7 million in noncash write-offs and impairments) -- Over $160 million in cash and available facilities ($73.6 million cash) More Value -- Independently-certified proven (1P) reserves NPV10 up 26% to $1.1 Billion (equivalent to net debt adjusted NPV10 of $12.3 per share) -- Independently-certified 2P reserves NPV10: - Consolidated NPV10 up 15% to $1.9 Billion (equivalent to net debt adjusted NPV10 of $23.6 per share) - Colombia NPV10 up 54% to $1.0 Billion (equivalent to net debt adjusted NPV10 of $10.2 per share) -- Consolidated NPV10 up 15% to $1.9 Billion (equivalent to net debt adjusted NPV10 of $23.6 per share) -- Colombia NPV10 up 54% to $1.0 Billion (equivalent to net debt adjusted NPV10 of $10.2 per share) -- $28 million 2016 capital investment program produced $351 million increase in 2P NPV10 in Colombian assets (despite using lower oil price forecast) More Opportunity -- 2017 $80-90 million base case capital investment program, at a $45-50 per barrel oil price, targets 2025% production growth and exit production of 30,000 boepd consisting of: - 15-20 gross well development, appraisal and exploration drilling program in Llanos 34 Block in Colombia - 8 gross well exploration drilling program in prolific Neuquen Basin in Argentina - 4 gross well exploration and development drilling program in mature Magallanes Basin in Chile - 3 gross well exploration drilling program in mature onshore Reconcavo and Potiguar Basins in Brazil -- 15-20 gross well development, appraisal and exploration drilling program in Llanos 34 Block in Colombia -- 8 gross well exploration drilling program in prolific Neuquen Basin in Argentina -- 4 gross well exploration and development drilling program in mature Magallanes Basin in Chile -- 3 gross well exploration drilling program in mature onshore Reconcavo and Potiguar Basins in Brazil -- New acquisition opportunities in Colombia, Brazil, Argentina, Mexico and other operated countries OIL AND GAS RESERVES GeoPark consolidated 2P reserves increased by 14% in 2016 to 142.8 mmboe compared to 2015. The increase in reserves mainly results from new discoveries in the Llanos 34 Block (GeoPark operated with 45% WI) in Colombia. -- PDP Reserves: Net proven developed producing (PDP) reserves increased by 13% (2.2 mmboe) to 19.5 mmboe, with a PDP reserve replacement index (RRI) of 127%. Total NPV10 of PDP reserves increased by 49% ($93.1 million) to $282.2 million -- 1P Reserves: Net 1P reserves increased by 10% (7.1 mmboe) to 78.3 mmboe, with 1P reserve life index (RLI) of 9.5 years and a 1P RRI of 187%. Total NPV10 of 1P reserves increased by 26% ($228 million) to $1.1 billion -- 2P Reserves: Net 2P reserves increased by 14% (17.5 mmboe) to 142.8 mmboe, with a 2P RLI of 17.4 years and a 2P RRI of 312%. Total NPV10 of 2P reserves increased by 15% ($241 million) to $1.9 billion -- Colombia 2P Reserves: Net 2P reserves in Colombia increased by 45% (20.9 mmboe) to 67.4 mmboe with a 2P RLI of 11.8 years and a 2P RRI of 468%. Total NPV10 of 2P reserves in Colombia increased by 54% ($351 million) to $1.0 billion
For further detail, please refer to 2016 Reserves Release published on February 6, 2017. [GeoPark Limited, 7.Mar.2017]
Moody's Assigns First Time B3 Rating to Pampa EnergĂa; Stable Outlook Moody's Investors Service assigned a B3 Corporate Family Rating (CFR) to Pampa EnergĂa S.A. At the same time, Moody's assigned a B3 rating to the company's proposed long term senior unsecured notes. Proceeds from the notes will be used to refinance debt and for capital investments as well as other general business purposes. The outlook on the ratings is stable. This is the first time that Moody's assigns ratings to Pampa. RATINGS RATIONALE Pampa's B3 ratings assume a successful merger of Petrobras Argentina S.A. into Pampa, expected to be finalized in the first quarter of 2017. From one side, the ratings consider Pampa's negative free cash flow, although fueled by expansionary capex in natural gas and power projects, which have favorable prospects; low interest coverage and low retained cash flow compared to total debt, pro forma for the proposed notes; as well as exposure to volatile, highly-regulated power and oil and gas industries in Argentina. On the other hand, these factors are mitigated by the company's strategy to focus on businesses with positive pricing outlooks, namely natural gas production and power generation; the expected stable demand for electricity and strong demand for natural gas in Argentina; as well as low foreign exchange risk. Pro forma for the acquisition of PESA, Pampa's free cash flow will be negative for the foreseeable future, given high expansionary capital expenditures, which are little flexible, compared to operating cash generation. Moody's assumes that Pampa will issue up to $1 billion in new notes, and thus that its debt burden will be high compared to retained cash flow in the next 2 years: retained cash flow/total debt ratio will hover between 20% and 25% in the next two years (Moody's considers the $300 million owed to Cammesa, Argentina's wholesale power market administrator, as short-term payable, not financial debt). Likewise, Moody's forecasts that the company's Moody's-adjusted EBITDA/interest expenses will be below 3.5 times in 2017, which is currently low for a volatile business profile, although with prospects of improvement in the medium term. Pampa operates in the power as well as the oil and gas industries in Argentina, which are highly-regulated and pose high operating risk. But the industry fundamentals in Argentina for the gas industry in particular are favorable since local natural gas production supplies only 75% of the country's needs, while the 25% difference is imported from Bolivia and Chile, among others, a situation which should prevail for the next 6 to 7 years, at current local natural gas production growth rate. This dependence on imports of gas, which is paid in kind and with scarce US dollars, sustains solid prospects for the gas industry in the country in the medium to long term. While margins in the refining business have been under pressure given low economic growth and demand for oil products, as well as labor pressure for high wages and benefits, this line of business is small on a consolidated basis. Similarly, Pampa's electricity distribution assets are well-positioned to benefit from regulatory reforms and tariff increases, which should come over the course of 2017 and 2018. In addition, the company owns a co-controlling interest in Transener, the largest high voltage power transmission company in Argentina, which has with 20,630 km of transmission lines, equivalent to an 85% market share. However, margins at the power industry have been historically low and Moody's expects that flat demand for power, in line with the country's weak GDP growth rate, will challenge the company's ability to transfer inflation and local currency devaluation costs to power tariffs in later years. For instance, Moody's estimates that, during 2016, inflation in Argentina was around 30%.
Thus, Moody's believes that Pampa's credit metrics related to debt burden and interest coverage will remain in line with its B3 rating in the next 24 months or more, even considering a successful resetting of electricity tariffs at profitable levels, which Pampa expects to happen before the end of February. Foreign exchange risk is low for Pampa. About half of the company's costs, mainly in the oil and gas business, is linked to the US dollar and, pro forma for the proposed notes, close to 100% of the company's debt will be in US dollars. However, close to 80% of Pampa's EBITDA is generated in the gas and power generation businesses, whose sales are US dollar-linked, although dependent on prevailing exchange rate. While the peso/dollar exchange rate had been controlled and kept low by the Argentine government in the past, since the new government took place, in early 2016, the exchange rate has been set by the market, with limited government intervention. Currently there is a low level of structural subordination between the holding company's debt and its subsidiaries'. Pro forma for the merger of PESA into Pampa, close to 50% of the consolidated EBITDA, which Moody's estimates will reach about $810 billion in 2017, will be generated at the holding level (i.e. at Pampa itself) and will be related to exploration and production of oil and gas. In turn, the holding company will hold about 90% of the group's debt. Most of the cash-generating subsidiaries in the group are controlled by Pampa at around 99%. However, the proposed notes' indenture provides for no limit to debt increase at the subsidiaries level, although on a consolidated basis Pampa's debt leverage cannot exceed 3.5 times on an incurrence basis. As of September 2016 and pro forma for the acquisition of PESA, Pampa's refinancing risk is high but would decline significantly after the issuance of the proposed new notes, which Moody's believes will amount to $1 billion. In addition, the company counts with solid relationships with banks, although credit facilities are uncommitted, and is currently working with Export Credit Agencies and other multilateral financial institutions in order to diversify its external funding sources. The company's liquidity situation depends on a timely refinancing of upcoming debt maturities of about $760 million in 2017, $100 million in 2018 and $33 million in 2019. In addition, as per the company's financial policies, it would always maintain a minimum of up to $100 million in cash at all times, which would not be available to repay debt. Furthermore, Moody's believes that Pampa will spend about $720 million in capex in 2017. However, besides the proceeds from the new notes, sources of cash include a sizable $476 million in consolidated cash on hand as of September 2016, pro forma for the merger with PESA, and about $810 million in EBITDA in 2017, as per Moody's estimates. Convertibility of local currency into US dollars and transferability of foreign currency abroad are risks also considered in Pampa's ratings. The stable outlook on Pampa's ratings reflects Moody's expectation that the Argentine power companies will be successful in the current negotiations with the government to increase electricity tariffs, to be set for the next 5 years. It also considers that natural gas prices will remain strong in Argentina given lower local supply vis-a-vis demand. Pampa's B3 ratings could be downgraded if the company materially increases its leverage, measured as retained cash flow (funds from operations less dividends) to total debt lower than 10%, or if its interest coverage, as per EBITDA to interest expense, declined to below 2 times with limited prospects of a quick turnaround. Also, a deterioration of the company's liquidity profile could lead to a rating downgrade. In turn, a rating upgrade could occur is Pampa's retained cash flow to total debt ratio is higher than 35% and its EBITDA to interest expense rate is above 6 times on a sustainable basis. An upgrade on the ratings of the Government of Argentina would not necessarily translate into an immediate upgrade of Pampa's ratings.
Pampa is engaged in generation, distribution and transmission of electric power in Argentina as well as on oil and gas production, refining, petrochemicals and hydrocarbon commercialization and transportation in Argentina and, to a lesser extent, in Venezuela. Pro forma for the merger with PESA, as of September 30, 2016, Pampa was the third largest power generator in Argentina, with approximately 10.6% market share. In addition, it was the fourth oil and gas producer in the country, with an equity oil and gas production of over 58.3 thousands of barrels of oil equivalent per day. [Moody's Investors Service, 6.Jan.2017]
Moody's Changes Outlook to Positive from Stable on Argentine Companies Moody's Investors Service revised to positive from stable the outlook for several companies operating in Argentina, while all ratings were affirmed. The companies' outlook change follows the revision of the Argentine government's B3 rating outlook to positive from stable on March 6, 2017. ISSUERS AND RATINGS AFFIRMED -- OUTLOOK CHANGED TO POSITIVE Arauco Argentina S.A.: the Corporate Family Rating (CFR) was affirmed at B1 and the rating of the senior unsecured notes, guaranteed by Celulosa Arauco y Constitucion S.A. (Baa3 stable), was affirmed at Baa3. The outlook of the issuer was changed to positive from stable and the outlook of the notes remains stable. Arcor S.A.I.C.: the CFR and the rating of the senior unsecured global bonds was affirmed at B1. Pan American Energy LLC, Argentine Branch: the ratings of the backed senior unsecured medium-term notes programs were affirmed at (P)B1 and the rating of the backed global medium-term notes was affirmed at B1. The outlook was changed to positive from stable. Pan American Energy LLC: the CFR was affirmed at B1. The outlook was changed to positive from stable. YPF Sociedad Anonima: the senior unsecured notes were affirmed at B3. The rating of the medium-term notes program was affirmed at (P)B3. The outlook was changed to positive from stable. RATINGS RATIONALE The rating outlook revision for these companies follows the outlook change of Argentine government's B3 Issuer rating outlook to positive from stable on March 6th, 2017, supported by the rising likelihood that the recently policies introduced, which have laid the ground for future improvements to Argentina's economic and fiscal strength, and the improvements in Argentina's institutional strength will be sustained and bring improvements in Argentina's credit profile. Moody's expects that Argentina's economy will return to growth in 2017 and 2018, supported by the government's improved policy mix which has sought to reduce inflation and increase investor confidence. The positive outlook for the affected companies reflects Moody's view that the creditworthiness of these companies cannot be completely de-linked from the credit quality of the Argentine government, and thus their ratings need to closely reflect the risk that they share with the sovereign. Moody's believes that a weaker sovereign has the potential to create a ratings drag on companies operating within its borders, and therefore it is appropriate to limit the extent to which these issuers can be rated higher than the sovereign, in line with Moody's Rating Implementation Guidance. [Moody's Investors Service, 7.Mar.2017]
Colombia to Benefit from Internationalizing Currency The Oxford Business Group said that Colombia only stands to benefit from further internationalizing its currency as it attempts to diversify its sources of foreign exchange, reported the Trinidad Guardian newspaper, citing a report last month launched at Lloyds of London during a visit by Colombian President Juan Manuel Santos. [Energy Analytics Institute, Ian Silverman, 26.Dec.2016]
Fitch Ratings Improves Ecopetrol's Credit Rating Outlook, Granting BBB Stable Rating Ecopetrol S.A. reported that on March 14, 2017, rating agency Fitch Ratings improved the outlook for the company's rating from a negative to a stable outlook. At the same time it maintained the local and foreign currency long-term risk rating at BBB. According to Fitch, the improved outlook for the rating of Ecopetrol incorporates the improvement to stable of the rating of the Republic of Colombia. [Ecopetrol S.A., 15.Mar.2017]
Fitch Reaffirms Ecopetrol Investment Grade Ecopetrol S.A. reported the risk rating agency Fitch Ratings kept the company at investment grade, with an international rating of BBB. Fitch notes the important link between the company and the Republic of Colombia's rating, and the Ecopetrol business group's strategic relevance to the country. The agency further reported that Ecopetrol's individual rating is also investment grade with a rating of BBB; and including the government's support this rating raises to BBB. The aspects the rating agency took into account in issuing its rating included: the company's solid financial profile, a downward-trending debt/EBITDA ratio, solid liquidity and a schedule of moderate debt maturities in coming years. The agency also noted Ecopetrol's operational metrics and the decline in extraction costs in recent years. Finally, it maintained the company's negative perspective, consistent with the Republic of Colombia's outlook. [Ecopetrol, 12.Dec.2016]
Ecopetrol Notice Regarding Auction of Equity Divestment Plan in ISA Ecopetrol S.A. announced that on December 10, 2016, as established in the Offering Notice of Second Stage, the company published the offering notice regarding the fourth auction for the second stage of Ecopetrol's equity divestment plan for its shares in InterconexiĂłn ElĂŠctrica S.A. E.S.P (ISA) in a newspaper widely circulated in Colombia.
The fourth auction is part of the second stage of the equity divestment plan and the purpose is to offer publicly, in Colombia and/or abroad, the shares that were not acquired during the first, second and third auctions. The public offering will be conducted prior to the beginning of common stock trading in the Colombian Stock Exchange on December 14, 2016, in accordance with the provisions set forth in the Divestment Regulation and the applicable addenda. Ecopetrol's equity divestment plan, including the second stage, was approved by the National Government of Colombia through Decree 1800 of September 09, 2015. [Ecopetrol, 10.Dec.2016]
Ecopetrol Auction to Transfer Equity Interest in EEB Declared Void Ecopetrol S.A. reported results of the fourth auction corresponding to Stage Two of the Program to Transfer and Award its 28,465,035 shares of Empresa de Energía de Bogotá S.A. E.S.P. The bidding session was declared void. [Ecopetrol S.A., 15.Feb.2017]
Approval of Program to Transfer Ecopetrol's Equity Interest in EEB Ecopetrol S.A. reported results of the third auction corresponding to Stage Two of the Program to Transfer and Award its 86,585,888 shares of Empresa de Energía de Bogotá S.A. E.S.P., the results of which were as follows:
Auction equilibrium price Number of shares offered Number of shares awarded at the equilibrium price Total amount awarded Execution Date
$1,815 86,585,888 58,120,853 $105,489,348,195 December 12, 2016
Including these results, Ecopetrol has transferred 602,632,965 shares, having 28,465,035 shares remaining. Ecopetrol also reported on December 5, 2016 the Council of Ministers approved a one (1) year extension of the mentioned program, allowing Ecopetrol to transfer its remaining shares within a period expiring on December 31, 2017. [Ecopetrol, 6.Dec.2016]
Auction of the Program to Transfer Ecopetrol's Equity Interest in ISA Ecopetrol S.A. reported results of the fourth auction corresponding to Stage Two of the Program to Transfer and Award its 13,630,446 shares of Interconexión Eléctrica S.A. E.S.P., the results of which were as follows:
Auction equilibrium Price Number of shares offered Number of shares awarded at the equilibrium price Total amount awarded Execution Date
$10,001 13,630,446 13,630,446 $136,318,090,446 December 19, 2016
Including these results, the Stage Two of the Program finishes in terms of article 3, numeral 2 of Decree 1800 of 2015. [Ecopetrol, 14.Dec.2016]
Ecopetrol Publishes Offering Notice for Shares in Empresa de Energía de Bogota Ecopetrol S.A. announced on February 8, 2017, as established in the Offering Notice of Second Stage, the company published the offering notice regarding the fourth auction for the second stage of Ecopetrol's equity divestment plan for its shares in Empresa de Energía de Bogota S.A. E.S.P. (EEB) in a newspaper widely circulated in Colombia. The fourth auction is part of the second stage of the equity divestment plan and the purpose is to offer publicly, in Colombia and/or abroad, the shares that were not acquired during the first, second and third auctions. The public offering will be conducted prior to the start of common stock trading in the Colombian Stock Exchange on February 15, 2017, in accordance with the provisions set forth in the Divestment Regulation and the applicable addenda. Ecopetrol's equity divestment plan, including the second stage, was approved by the National Government of Colombia through Decree 2305 of November 13, 2014, with an extension to December 31, 2017 through Decree 2110 of December 22, 2016. [Ecopetrol S.A., 8.Feb.2017]
Ecopetrol’s Annual General Shareholders' Meeting The Chief Executive Officer of Ecopetrol S.A. announced details of the Annual General Shareholders' Meeting held on March 31, 2017 at the International Center of Business and Exhibitions (Centro Internacional de Negocios y Exposiciones, Corferias), Bogotá, Colombia. The agenda for the meeting included:
-- Safety guidelines -- Quorum Verification -- Opening by the Chief Executive Officer -- Approval of the Agenda -- Appointment of the Meeting's President -- Appointment of the Commission in charge of scrutinizing elections and polling -- Appointment of the Commission in charge of reviewing and approving the minutes of the meeting -- Presentation of the report concerning the Board of Directors' activities, the Board's evaluation of the Chief Executive Officer's performance, as well as the company's compliance with the corporate governance code -- Presentation of 2016 performance report by the Board of Directors and by the Chief Executive Officer -- Review and consideration of financial statements and consolidated financial statements as of December 31, 2016 -- Review of the External Auditor's Report -- Approval of reports presented by the Management, and the External Auditor and approval of Financial Statements -- Approval of proposal for dividend distribution -- Election of the External Auditor and assignment of remuneration -- Election of the Board of Directors -- Propositions and miscellaneous As from March 8, 2017, shareholders will exercise the right to inspect the books and documents that the Colombian Commercial Code refers to. This information may be consulted at the company's main offices (Cra. 7 No. 37-69 Bogota, Colombia), in a time schedule from 7:30 a.m. to 4:00 p.m. 2015 performance report may be consulted on Ecopetrol web site. [Ecopetrol, 27.Feb.2017]
Ecopetrol Reports Fourth Quarter and Year Ended December 31, 2016 Results Ecopetrol S.A. announced the Ecopetrol Group's financial results for the fourth quarter and full year 2016, prepared and expressed in billions of Colombian pesos (COP) pursuant to International Financial Reporting Standards applicable in Colombia.
Ecopetrol Group's Consolidated Financial Results COP Billion
Total Sales Operating Profit Net Income Consolidated
13,313 1,633 358
12,777 (7,301) (6,021)
4.2% >100% >100%
Non-Controlling Interests Net Income Attributable to Owners of Ecopetrol
EBITDA EBITDA Margin
* These figures are included for illustration purposes only. Unaudited.
Ecopetrol Group's Consolidated Financial Results COP Billion
Total Sales Operating Profit Net Income Consolidated Non-Controlling Interests Net Income Attributable to Owners of Ecopetrol
47,732 8,253 2,404 (839) 1,565
52,091 1,456 (3,083) (905) (3,988)
(8.4%) >100% >100% (7.3%) >100%
EBITDA EBITDA Margin
* These figures are included for illustration purposes only. Unaudited. Juan Carlos Echeverry G., CEO of Ecopetrol S.A., commented: "2016 was a year of enormous challenges for Ecopetrol. The oil industry experienced the lowest crude prices in 12 years, thus resulting in cuts in investment. The quest for efficiencies and liquidity became the mantra in surviving the crisis. Added to this scenario were the challenges raised by the peace negotiation process, the closure of the border with Venezuela, El Niño climate Phenomenon, completion of the Reficar and Bioenergy projects, and approval of the tax reform. Ecopetrol focused its efforts on reducing costs, producing profitable barrels, prioritizing investments, strengthening cash flow and, at the same time, maintaining its investment-grade rating. Investment in 2016 totaled $2.5 billion. The company's operating and financial performance was solid, as a result of the adjustment measures. EBITDA and EBITDA margin rose to 18 trillion pesos and 38% respectively; EBITDA margin grew 3 percentage points over 2015, and is one of the highest in oil and gas industry. At 718 thousand barrels of oil-equivalent per day, the company exceeded its 2016 production target by 3 thousand barrels. This was despite a drop in production by 25 thousand barrels of oil-equivalent per day for 45 days, due to the closure of the Caño Limón Coveñas oil pipeline; and a 16% drop in Brent prices. The fourth quarter closed with a robust cash position of 14 trillion pesos (approximately $4.7 billion), reducing financial leverage and allowing opportunities for inorganic growth. The resumption and operation of the Rubiales and Cusiana fields demonstrated our operating capacity, which has benefited from the efficiencies and structural changes achieved in practically every business line. Ecopetrol is currently operating at over 500 thousand barrels of oil-equivalent per day directly. The improved recovery program is a reality. Eighteen pilot projects were active in 2016, 12 of which showed production increases. In this phase, the program has contributed 1.65 million barrels of accumulated reserves of oil. A significant share of these results was achieved in large fields such as Castilla and Chichimene. The discovery of oil in the Warrior well, in the United States' Gulf of Mexico, is the result of Ecopetrol's new exploration strategy, which includes joint ventures with top-tier companies to diversify risk, engage in further exploration and increase the probability of discoveries. Warrior is Ecopetrol Group's fifth discovery in this prosperous oil region, and is contributing to increasing the company's contingent resources.
The exploration campaign has also yielded good results in the Lower Magdalena Valley (Bullerengue) and Middle Magdalena Valley (Boranda). Colombia's offshore is a region of high potential. During the fourth quarter, two wells, Purple Angle (Kronos appraisal well) and Gorgon, were being drilled to have a better assessment of the potential of the Colombian Caribbean. In refining, the greatest achievement was the startup of the 34 Reficar units, giving way to the stabilization and testing period. December saw a record load of crude for refining: Reficar, with 150 thousand barrels of oil, and Barrancabermeja, with 230 thousand barrels of oil per day, for 21 days. Average margin per barrel of Reficar rose from $2.8 per barrel between January and July to $8.4 since August, once all the units were fired up. In the future we will continue stabilizing and optimizing Reficar's load and margin. Another refining milestone was the change in Barrancabermeja's operating layout, which stabilized operations and yielded an average conversion factor of 73%. This refinery's EBITDA also rose to 2.1 trillion pesos, two times higher than in 2014. The company's priority is to extract greater value from the crude it markets. 2016 saw higher sales referenced to more liquid indicators, strengthening the crude basket. The Brent-basket spread for Ecopetrol's crude in 2016 was -9.4 dollars, 3 cents less than in 2015. The quality and consistency of our crude is a significant value lever. As part of our dilution efficiencies strategy, we improved crude transport viscosity from 200 to 400 centistokes (cSt). Since the fourth quarter, the Ocensa oil pipeline has increased its viscosity handling capacity to 600 cSt. This has contributed to lower costs and a lower dilution factor, which fell from 19% to 17% between 2015 and 2016, and saved the Ecopetrol Group near one trillion pesos. Consolidated savings for the year totaled 2.5 trillion pesos, exceeding the savings target of 1.6 trillion pesos set for 2016. Out of this, 2.2 trillion were structural savings. The principal savings levers were lower dilution of heavy crude by approximately 660 billion pesos, and 375 billion pesos in operating and maintaining transportation assets. These greater efficiencies were critical for mitigating the impact of lower crude prices on the 2016 proven reserves balance. Reserves are at 1,598 million barrels of oil-equivalent, 14% less than the 1,849 million figure in 2015. We estimate the price impact negatively affected reserves by 202 million barrels of oil-equivalent. In 2016, the SEC price used for valuation fell 20% versus 2015, from $55.6 per barrel to $44.5 per barrel. This decline in reserves, due to the price effect, was offset by an addition of 186 million barrels of oil-equivalent attributable to efficiencies and new drilling projects, among other factors. Net profit attributable to Ecopetrol Group shareholders totaled 1.6 trillion pesos, versus a 2015 loss of 3.9 trillion pesos. This was despite of 6.8 trillion pesos in lower revenue during the year due to lower crude prices. The higher profits were due to savings and efficiencies. Not counting the impairment impact, the company saw earnings of 2.3 trillion pesos in 2016. Challenges in 2017 are no less serious. Adding reserves and maintaining the pace of production are the company's focus. The exploration campaign will be stepped up significantly in regions of high prospectivity. Investment in exploration will rise from $280 million to $650 million, thus increasing offshore wells from 2 to 6 and onshore wells from 5 to 11 from 2016 to 2017. Enhanced recovery will continue to leverage additional reserves in mature fields. We stress that a strong cash position allows us to assess opportunities for inorganic growth in the Ecopetrol Business Group's reserves.
The company will continue to pursue its Transformation to ensure operational and financial sustainability. We have named Phase 3.0 of the business Transformation plan Ecopetrol's New Frontier. It will focus on opening up new markets; multi-year field development plans; improved return on assets; attracting and retaining the best human talent; and committing ourselves to integrity, respect for the environment and shared prosperity with the communities in which we operate. The $3.5 billion 2017 investment plan will focus on opportunities to generate value for the Business Group. As for Reficar, the stabilization stage will be completed, and in the second half of the year global performance will be tested. Efforts will focus on improving margins and load, and on adding value. The company has launched a new Corporate StakeholderÂ´s Management strategy, seeking sustainable and shared prosperity with communities in the operating regions, the development of local governability, and contributions to the country's peace agreement. It has also strengthened its leadership in every area, its commitment to life and the effective mitigation of risks to individuals, facilities and processes. Ecopetrol has once again addressed the challenges imposed by the price environment. It has ended the year as a transformed, operationally sustainable and financially robust company. The breakeven for the operational profit was reduced due to the efficiencies achieved over the past years. The future looks promising. The 2020 Business Plan is based on three fundamental pillars: i) protection of cash and cost efficiency; ii) strict capital discipline; and iii) growth in reserves and production; these pillars will strengthen the company's financial sustainability and afford it opportunities for both organic and inorganic growth, generating value and profitability for its shareholders." [Ecopetrol S.A., 6.Mar.2017]
EcoStim Secures $17 Million in New Funding Eco-Stim Energy Solutions, Inc. announced that an affiliate of Fir Tree Partners (FTP) entered into a transaction with an affiliate of Albright Capital Management LLC (ACM) pursuant to which FTP has purchased from ACM $22 million aggregate principal amount of the company's outstanding 14% convertible notes due 2018 and approximately two million shares of the company's outstanding common stock. This transaction is part of a comprehensive recapitalization designed to position the company to capitalize on attractive growth prospects and create a path to a potential equitization of substantially all of the company's debt, subject to shareholder approval. As part of the recapitalization, the company issued to FTP an additional $17 million aggregate principal amount of convertible notes to provide the company with needed growth capital and issued to FTP approximately $2.4 million principal amount of additional convertible notes in payment of accrued interest on the existing convertible notes. After giving effect to these transactions, the company now has approximately $41.4 million of outstanding convertible notes, which FTP has agreed to convert into common stock at a conversion price of $1.40 per share, subject to receipt of shareholder approval and satisfaction of certain other conditions. Assuming all of the $41.4 million in notes are converted, on a proforma basis the company would issue 29.6 million shares to FTP and would then have approximately 44.6 million shares outstanding and no outstanding debt. The company's management team and largest shareholder have agreed to vote in favor of the conversion. If the note conversion is not approved by shareholders all of the outstanding convertible notes will mature in May 2018. All outstanding convertible notes will accrue interest at 20%. In addition, FTP has the right, which they exercised, to name three members to the Board of Directors, which now consists of seven members. FTP will also have approval rights with respect to certain future actions by the company. "The company has endured through a challenging period and its outstanding debt with ACM had certain covenants that were likely to be violated in the near term. This recapitalization with FTP allows the company to avoid these covenant defaults, while providing the company with needed growth capital and a clear path to eliminating debt while preserving upside to our current shareholder base," said Eco-Stim President and CEO J. Chris Boswell.
Alexander Nickolatos, Chief Financial Officer added, "The debt conversion price of $1.40 represents a significant premium to the last 30-day average trading price. If shareholders approve the conversion of all outstanding debt, we believe the debt free balance sheet should unlock value for all shareholders and allow the Company to grow as the market continues to recover. We are pleased to welcome Fir Tree and their three directors onto the Board of Directors. It has been a real pleasure working with them on this transaction and we look forward to growing the Company together." Andrew Teno, a Director at FTP, said, "Fir Tree looks forward to working with EcoStim's management team to pursue long-term growth opportunities in the US and in Argentina. We believe that access to growth capital and a fully equitized balance sheet will benefit all of EcoStim's shareholders." [Eco-Stim Energy Solutions, Inc., 6.Mar.2017]
Eco-Stim Energy Solutions Secures $2 Million Shareholder Loan Eco-Stim Energy Solutions, Inc. finalized a $2 million secured loan from existing shareholders. The loan will have a one-year term with the proceeds used to prepay a $1 million note scheduled to mature on December 15, 2016, related to previous equipment purchases, as well as for general corporate purposes. "This note is one of the sources of liquidity we discussed on our recent quarterly conference call. We continue to pursue other financing solutions to enhance our liquidity and to fund the future growth of our company, and believe this transaction is an important signal of support from our shareholders and their confidence in our business plan," said EcoStim's Chief Financial Officer Alexander Nickolatos. "We are also pleased that our largest creditor fully cooperated to free up certain collateral and accommodate this shareholder loan." [Eco-Stim Energy Solutions, Inc., 1.Dec.2016]
Harvest Natural Resources Announces 2016 Third Quarter Results Harvest Natural Resources, Inc. reported a third quarter 2016 net loss of approximately $7.1 million, or $0.55 per diluted share, compared with net income of $5.7 million, or $0.52 per diluted share, for the same period last year. The third quarter results include exploration charges of $0.6 million, or $0.05 pre-tax per diluted share, and transaction costs related to the sale of Harvest-Vinccler Dutch Holding B.V. of $1.8 million, or $0.14 pre-tax per diluted share. Adjusted for exploration charges and transaction costs, Harvest would have posted a third quarter net loss of approximately $4.7 million, or $0.36 per diluted share, before any adjustment for income taxes. Sale of HNR Energia On October 7, 2016, the company, and its wholly owned subsidiary, HNR Energia, completed the sale of all of HNR Energia's 51% interest in Harvest Holding, to Delta Petroleum, pursuant to the Share Purchase Agreement. Harvest Holding owns, indirectly through wholly owned subsidiaries, a 40% interest in Petrodelta, S.A., a mixed company organized under Venezuelan law, through which all of the company's interests in Venezuela were owned. Thus, under the Share Purchase Agreement, the company sold all of its interests in Venezuela to Delta Petroleum. Delta Petroleum is an affiliate of CT Energy, which assigned all of its rights and obligations under the Share Purchase Agreement to Delta Petroleum on September 26, 2016.
At the closing, the company received consideration consisting of: -- $69.4 million in cash paid after various closing adjustments; -- an 11% non-convertible senior promissory note payable by Delta Petroleum to HNR Energia six months from the closing date in the principal amount of $12.0 million, guaranteed by the sole member and sole equity-holder of Delta Petroleum; -- the return of all of the company's common stock owned by CT Energy, consisting of 8,667,597 shares (approximately 2,166,900 shares taking into account the November 3, 2016 one-for-four reverse stock split) which was approximately 16.8% of all outstanding shares pre-closing, to be held by the company as treasury shares; -- the cancellation of $30 million in outstanding principal under the 15% Note; and -- the cancellation of the CT Warrant. At the closing, the outstanding principal and accrued interest totaling $38.9 million and $1.4 million, respectively, under both the 15% Note and the Additional Draw Note, were repaid, net of withholding tax, as a closing adjustment to cash, and the 15% Note and Additional Draw Note were terminated. To fund Harvest's transaction expenses and operations until the closing under the Share Purchase Agreement, CT Energy had loaned Harvest $2 million on each of June 21, 2016, July 20, 2016, August 24, 2016 and September 21, 2016 under the Additional Draw Note. The relationship between the company and CT Energy effectively terminated upon the closing under the Share Purchase Agreement. In addition to the termination or relinquishment of all company securities held by CT Energy, Oswaldo Cisneros and Alberto Sosa resigned as CT Energy's non-independent designees to the company's board of directors. The company decreased its number of board members from seven to five immediately after the resignations. Additionally, the Securities Purchase Agreement and certain agreements related to the Securities Purchase Agreement, including the Management Agreement, terminated. Finally, all liens securing company debt formerly owed to CT Energy were released at the closing. NYSE Listing Requirements On October 25, 2016, the company announced that it would conduct a one-for-four reverse split of its authorized, issued and outstanding common stock. The one-for-four reverse stock split became effective after the market closed on November 3, 2016, and the company's common stock began trading on a splitadjusted basis at market open on November 4, 2016. The reverse stock split will not impact any stockholder's ownership percentage of the company or voting power, except for minimal effects resulting from the treatment of fractional shares. Following the reverse split, the number of outstanding shares of the company's common stock was reduced from 44,171,215 to approximately 11,042,804. Additionally, the number of authorized shares of the company's common stock decreased from 150,000,000 to 37,500,000. On November 3, 2016, the company completed a one-for-four reverse split of its common stock. As of November 4, 2016, the closing price of the company's common stock had increased to $4.45 per share. Given the increase in the company's share price, the company expects that it will have regained compliance with the Pricing Standard by December 19, 2016. On April 25, 2016, the company received a notice from the NYSE stating that the company was not in compliance with a second NYSE continued listing requirement, which provides that a company is not in compliance if its average global market capitalization over a consecutive 30 trading-day period is less than $50 million and, at the same time, its stockholders' equity is less than $50 million.
The company believes that the sale of its Venezuelan interests on October 7, 2016 ultimately will allow it to regain compliance with the Financial Standard by increasing its stockholders' equity. However, the company must demonstrate compliance for two consecutive financial quarters before the deficiency can be cured. [Harvest Natural Resources, Inc., 9.Nov.2016]
PDVSA and Schlumberger Discuss Business Relation On February 21, 2017, Schlumberger CEO Paal Kibsgaard, visited the headquarters of Petróleos de Venezuela S.A. (PDVSA) to hold a meeting with PDVSA President Eulogio Del Pino. The agenda focused on Venezuela opportunities as the low oil price cycle is coming to an end. They exchanged views on the existing portfolio and the future that brings together both companies. It is important for Schlumberger to strengthen its activities in Venezuela; they are working on models to cover the needs of both companies, while at the same time creating new jobs thus increasing the efficiency of operations for PDVSA, said Kibsgaard. Del Pino expressed satisfaction with the discussion of projects and proposals made by Schlumberger. This is an ideal time for the industry to come up with creative solutions to bring about necessary investment for the benefit of both companies and the stability of the oil market, he said. [PDVSA, 22.Feb.2017]
PDVSA Pays Interest to Bond Holders PDVSA informed all holders of PDVSA Bonds maturing in 2022, that payment of interest was made on February 17, 2017 corresponding to the semester ending February 2017, according to preset conditions on paper issued February 2011. [PDVSA, 20.Feb.2017]
New PDVSA Actions in the Rincón and Shiera Court Cases As has been informed, PDVSA subsidiary Bariven, S.A., has been the victim of a fraud perpetrated by former contractors and suppliers of the company led by Roberto Enrique Rincón Fernández and Abraham José Shiera Bastidas, who in complicity with former employees of a foreign PDVSA subsidiary obtained procurement contracts through acts of corruption. To date, eight implicated persons, including Rincón and Shiera, have pleaded guilty to such fraud before the United States District Court for the Southern District of Texas Houston Division. Upon learning of the fraud, the company's internal control bodies were immediately instructed to thoroughly investigate the situation. PDVSA has made significant progress in this ongoing legal case. To compensate for the damage suffered as a result of these acts of corruption, the following actions have been taken: -- Bariven, as a direct victim of the acts of corruption, has introduced before the criminal court in Houston, Texas familiar with the criminal proceedings against the accused, a request for restitution to be recognized as a victim and order the defendants to compensate financially for the damages suffered by Bariven.
-- On January 17, 2017, the trial judge adopted Bariven's position and ordered all parties to the proceedings, including the federal prosecution representing the interests of the United States government as well as the accused, to submit their positions on Bariven's request no later than February 20, 2017. This is a major breakthrough for Bariven, that had opposed the request by the federal prosecutor's office to defer this process indefinitely. With this order, the judge ensures that Bariven will be heard and that the accused individuals will have to face up to their responsibilities. -- Companies linked to the persons accused in Houston, Texas were ordered to immediately stop receiving payment. Several of these companies initiated claims in arbitration tribunals requesting the payment of allegedly owed invoices. Bariven, as the other party in such contracts, has opposed said payment and furthermore, it has filed a counter claim against the plaintiff companies for damages caused as a result of contracts that show elements of corruption. The plaintiff companies in these cases are directly linked to Rincรณn and his family. -- We have investigated and identified in several countries, assets and property of persons linked to these acts of corruption and their possible front persons. The filing of all corresponding legal actions, both civil and criminal, has been authorized in the appropriate foreign jurisdictions. Finally, the company has strengthened its internal controls and implemented new procedures to prevent situations such as these from happening again and ensure its prompt prevention, detection and response. PDVSA and its affiliates will not tolerate acts of corruption and will continue to investigate and act with the aim of establishing responsibilities for all identified facts. [PDVSA, 20.Feb.2017]
TOP OIL Trump Nationalism Should Scare LAC Region Exporters, Venezuela Taiwan’s president got the call, Mexico’s president will get a wall. At least, that’s what U.S. President Donald Trump is proclaiming. From all accounts, Mexico’s President Enrique Peña Nieto has not been shown the same courtesy as Taiwan’s President Tsai Ing-wen. Witnessing the manner in which Trump has treated trade partner Mexico over the U.S.-Mexico border wall, it is safe to assume that other partners could be in for worse or harsher treatment less they offer something that is first in Americas’ interest. The visit by United Kingdom’s Primer Minister Theresa Mary May to Washington is a case in point regarding the latter. Trump may be a successful and wealth businessman but much talent is missing and desired in his role as a statesman. The ruthless manner in which he is dealing with Mexico, a key trading partner under the North American Free Trade Agreement (NAFTA), in the name of nationalism, is alarming at most. As a result, countries in the Latin American and Caribbean (LAC) region -- and worldwide for that matter -that export products and services to the U.S. better brace themselves for what U.S. Speaker of the House of Representatives Paul Ryan recently called ‘an unconventional’ presidency. LAC region countries that should be worried -- if not already, they should and better be -- about the ongoing bout between Trump vs. Peña Nieto include but are not limited to: Argentina (some exports to the U.S.: aluminum, wines), Brazil (mineral fuels, aircraft, iron, steel), Chile (copper, fish, seafood, wine), Colombia (mineral fuels, coffee, cut flowers), Ecuador (mineral fuels, seafood), Peru (precious metals, mineral fuels), and Nicolas Maduro’s Venezuela (crude oil). The list goes on. Most of my concern is for the latter country since crude oil exports constitute 96 percent of its foreign export revenues, and due to the fact that this OPEC-member country is the lone one in the LAC region with basically one export product. Additionally, should Trump view the asset expropriations in the oil sector under late Venezuelan President Hugo Chávez as unfair (remember U.S.-based oil giants ConocoPhillips and ExxonMobil were pushed out or kicked out, depending on your view of what happened and how), the government of Maduro & Company could be in for a big surprise. Trump’s revival of the Keystone XL Pipeline project could easily displace some if not all of the crude oil that Venezuela currently exports to the U.S. Gulf Coast.
On the flip side, Trump’s ‘America First’ nationalist message could someday be a good thing for importreliant Venezuela seeing that the country – which imports basically everything, is practically a war zone with homicide rates constantly around 30,000 each year, and which cannot devalue its already worthless currency to export itself out of its crisis – will need to rebuild nearly all its industries once the regime change occurs. How and when are the lingering questions regarding said change. If there were ever a time to push for strengthening regional integration among the LAC region countries, it’s now. Existing initiatives that come to mind including Mercosur, Alba, and Celac, among others, should be revisited and improved. If Mexican products are indeed slapped with a 20 percent tax into the U.S., many will need to be redirected to other countries around the world. Why shouldn’t some of these products be redirected to LAC region countries? Back to Venezuela. Since Maduro is unlikely to visit Washington and Trump less likely to visit Caracas, we’ll all have to wait for their political bout to play out on Twitter. It would be wise if LAC region officials started to have these regional trade discussions now and take a proactive, not reactive approach to Trumpism. [Energy Analytics Institute (EAI), By Pietro Donatello Pitts, 27.Jan.2017]
Twitter: #Venezuela, Oil, @realDonaldTrump, @exxonmobil “Two potential ways U.S. Pres.-elect Trump’s appointment of @exxonmobil CEO Rex Tillerson as U.S. Secretary of State could affect Venezuela: a) since late-Venezuelan Pres. Hugo Chavez expropriated Exxon’s assets there and pushed the company out of the country, oil-man Tillerson could be out for revenge with Venezuela and look for a way to punish the country’s government. Remember the Faja? or b) since Tillerson has obvious negotiations with #Russia, a country that is likely the 2nd biggest financial supporter to Venezuela, Tillerson could opt to try to regain a footing in Venezuela via partnerships with Russian companies (in essence a back door move to get back in Venezuela which could be great for Exxon given recent success in neighboring #Guyana). It’s still too early to make a call either way but makes for a very interesting story board,” wrote contributing columnist Pietro Donatello Pitts in a series of Twitter posts. [By @PietroDPitts via Twitter, 13.Dec.2016]
GeoPark Announces 2P Reserves of 143 MMBOE - Valued at NPV10 of $1.9 Billion GeoPark Limited announced its independent oil and gas reserves assessment, certified by DeGolyer and MacNaughton (D&M), under PRMS methodology, as of December 31, 2016. Year-End 2016 D&M Certified Reserves and Company Highlights: -- Per Share Value: Net debt adjusted 2P NPV10 increased by 19% to $23.6 per share, mainly resulting from increased net debt adjusted 2P NPV10 in Colombia (up 112%) to $10.2 per share -- PDP Reserves: Net proven developed producing (PDP) reserves increased 12% (by 2.1 MMBOE) to 19.4 MMBOE, with a PDP reserve replacement index (RRI) of 126% -- 1P Reserves: Net proven (1P) reserves increased 10% (by 7.1 MMBOE) to 78.3 MMBOE, with 1P reserve life index (RLI) of 9.5 years and a 1P RRI of 187%. Total NPV10 of 1P reserves increased by $228 million (up 26%) to $1.1 billion
-- 2P Reserves: Net proven and probable (2P) reserves increased 14% (by 17.5 MMBOE) to 142.8 MMBOE, with a 2P RLI of 17.4 years and a 2P RRI of 312%. Total NPV10 of 2P reserves increased by $241 million (up 15%) to $1.9 billion -- Colombia 2P Reserves: Net 2P reserves in Colombia increased 45% (by 20.9 MMBOE) to 67.4 MMBOE with a 2P RLI of 11.8 years and a 2P RRI of 468%. Total NPV10 of 2P reserves in Colombia increased by $351 million (up 54%) to $1.0 billion -- F&D Costs: Net finding and development costs (F&D Costs) for 2016 were $2.9 per boe on a 1P basis and $1.7 per boe on a 2P basis, including F&D Costs for Colombia of $1.8 per boe on a 1P basis and $0.9 per boe on a 2P basis, following unaudited capital expenditures in 2016 of $44 million for the total Company, and $25 million in Colombia "Oil and gas reserves are up. Total asset value is up. Per share value is up. Costs are down. Opportunities are expanding. Coming out of two years of industry turbulence, our important certified gains demonstrate the strength and quality of our people, assets and plan to be able to continuously create and deliver big value across our rich asset portfolio in any price environment," said GeoPark CEO James F. Park. "GeoPark can look forward to a meaningful and rewarding 2017, with one of the most compelling new land-based oil plays in Latin America today - our Tigana/Jacana fields in Colombia - and backed by a forceful drilling and work program this year across our high potential project inventory." [GeoPark Limited, 6.Feb.2017]
GeoPark Announces Fourth Quarter 2016 Operational Update GeoPark Limited announced its operational update for the three-month period ended December 31, 2016 (â€œ4Q2016â€?). 100% drilling success in Llanos 34 Block (GeoPark operated with 45% WI) -- Jacana 6 appraisal well successfully tested and put on production at approximately 650 bopd with 5-6% water cut - extending the southwest limit of the field with new certified reserve volumes expected to be announced in the first half of February -- Tigana 4 and Tigana Sur 4 wells successfully drilled, tested and put on production at current rate of approximately 6,000 bopd gross - Jacana 6 appraisal well successfully tested and put on production at approximately 650 bopd with 5-6% water cut - extending the southwest limit of the field with new certified reserve volumes expected to be announced in the first half of February - Tigana 4 and Tigana Sur 4 wells successfully drilled, tested and put on production at current rate of approximately 6,000 bopd gross Initiated 2017 drilling program to accelerate production growth by 20-25% -- 2017 average production expected to grow to 26,500-27,500 boepd with approximately 30-35 new wells -- Chiricoca 1 exploration well successfully drilled and currently being completed for testing expected in mid-January 2017 -- 5-6 new wells expected to be drilled in 1Q2017 to continue appraising and developing the Tigana/Jacana oil field trend -- Initiate onshore exploration drilling in Brazil in early February, with one exploration well in the Reconcavo basin - 2017 average production expected to grow to 26,500-27,500 boepd with approximately 30-35 new wells - Chiricoca 1 exploration well successfully drilled and currently being completed for testing expected in mid-January 2017
- 5-6 new wells expected to be drilled in 1Q2017 to continue appraising and developing the Tigana/Jacana oil field trend - Initiate onshore exploration drilling in Brazil in early February, with one exploration well in the Reconcavo basin Peruvian Presidential Decree received for Morona Block acquisition from Petroperu -- Final regulatory approval received for block which includes Situche Central field (40.2 mmboe gross 2P reserves) and 300-500 mmboe gross exploration resources - Final regulatory approval received for block which includes Situche Central field (40.2 mmboe gross 2P reserves) and 300-500 mmboe gross exploration resources New hedges provide $53-54/bbl oil price floor -- Secured minimum Brent price of $53/bbl and $54/bbl for 2,000 bopd and 4,000 bopd respectively through September 2017 -- New volumes complement existing hedged production of 6,000 bopd through June 2017 with a minimum Brent price of $50/bbl -- 50-60% of oil production hedged during 1H2017 -- Secured minimum Brent price of $53/bbl and $54/bbl for 2,000 bopd and 4,000 bopd respectively through September 2017 -- New volumes complement existing hedged production of 6,000 bopd through June 2017 with a minimum Brent price of $50/bbl -- 50-60% of oil production hedged during 1H2017 Breakdown of Quarterly Production by Country The following table shows production figures for 4Q2016, as compared with 4Q2015:
Colombia Chile Brazil TOTAL
4Q:16 Total (boe/d)
Oil (*) (bo/d)
4Q:15 Total (boe/d)
17,535 3,523 2,535 23,593
17,470 1,296 32 18,798
390 13,362 15,018 28,770
15,510 4,006 3,546 23,062
+13% -12% -29% +2%
Source: GeoPark * Includes royalties paid in kind in Colombia for 718 bopd approximately in 4Q2016. No royalties were paid in kind in Chile and Brazil operations. Oil and Gas Production Update Consolidated: Average consolidated oil and gas production increased to 23,593 boepd in 4Q2016 compared to 23,062 boepd in 4Q2015. The increase was mainly attributed to higher production in Colombia (new production from Jacana and Tigana oil fields - with 5 new wells drilled and put into production during 2H2016), partially offset by lower production in Chile (due to lower oil production resulting from natural decline of the fields) and Brazil (due to lower gas consumption in northeastern Brazil).
Compared to 3Q2016, consolidated production was up 7% mainly explained by increasing production in Colombia (+12%), and partially compensated by lower production both in Chile (-6%) and Brazil (-4%). Production mix showed an increase in oil weight to 80% of total reported production in 4Q2016 (vs. 77% in 3Q2016 and 74% in Q42015) explained by the successful drilling campaign in Llanos 34 Block (GeoPark operated with 45% WI). Colombia: Average net production in Colombia increased by 13% to 17,535 boepd in 4Q2016 compared to 15,510 boepd in 4Q2015, primarily attributed to the Jacana and Tigana oil fields in Llanos 34 Block (GeoPark operated with 45% WI). Llanos 34 Block represented 95% of GeoPark’s Colombian production in 4Q2016. During 4Q2016, GeoPark’s drilling campaign in Llanos 34 Block (GeoPark operated with 45% WI) continued with the following results: -- Jacana 6 appraisal well was successfully drilled and completed, extending the southwest limits of the field. The well is currently producing approximately 650 bopd with 5-6% water cut -- Tigana 4 and Tigana Sur 4 development wells were drilled, completed and put on production in 4Q2016 – with current production of approximately 6,000 bopd gross. Excellent drilling performance: approximately 9 days drilling to TD and drilling and completion costs of $3 million -- Chiricoca 1 exploration well was successfully drilled and is currently being completed for testing expected in mid-January 2017 GeoPark expects to continue developing and appraising the Tigana/Jacana oil field trend in 2017 to determine the full extent of the oil accumulation. For a summary of the drilling activities coming in the next quarter, please refer to the table Expected Drilling Schedule for 1Q2017 included below. Chile: Average net oil and gas production in Chile decreased by 12% to 3,523 boepd in 4Q2016 compared to 4,006 boepd in 4Q2015 due to natural decline of the fields with limited drilling activity since 2014, and no drilling activity in Chile during 4Q2016. Production mix during 4Q2016 was 63% gas and 37% oil (vs. 59% gas and 41% oil in 4Q2015). The Fell Block (GeoPark operated with a 100% WI) represented 98% of GeoPark’s Chilean production. Brazil: Average net oil and gas production in Brazil decreased 29% to 2,535 boepd in 4Q2016 compared to 3,546 boepd in 4Q2015, primarily attributed to lower gas consumption by Brazilian industrial users. Manati Field production capacity remained unaffected and net production could increase to approximately 3,500 boepd average levels in case gas consumption increases. The Manati Field (GeoPark non-operated with a 10% WI) represented 100% of GeoPark’s Brazilian production. Ongoing drilling start-up activities in the Reconcavo Basin, with expected exploration drilling during 1Q2017 in Praia do Espelho prospect, with an exploration potential of 7-16 MMbbls. For a summary of the drilling activities coming in the next quarter, please refer to the table Expected Drilling Schedule for 1Q2017 included below.
Argentina: Ongoing start-up activities in Argentina, with expected exploration drilling during 2Q2017 to test three different exploration plays in the Neuquen Basin: CN-V Block (GeoPark operated with a 50% WI) in partnership with Wintershall (subsidiary of BASF) and Sierra del Nevado and Puelen Blocks (GeoPark non-operated with 18% WI) in partnership with Pluspetrol. Quarterly Production Evolution (boepd)
Colombia Chile Brazil TOTAL
15,510 4,006 3,546 23,062
14,871 4,061 3,586 22,518
14,084 4,118 2,941 21,143
15,678 3,756 2,636 22,070
17,535 3,523 2,535 23,593
Source: GeoPark Expected Drilling Schedule for 1Q2017 The following is a summary of the expected drilling activities scheduled for 1Q2017 with estimated net Capital Expenditures of $30-35 million (drilling and completion costs of $15-18 million plus facilities of $1517 million). All wells are operated by GeoPark. Prospect/Well
Tigana Sur 6 Jacana 7 Jacana 8 Jacana Sur 1 Jacana Sur 2 Jacana 11 Praia do Espelho 1
Colombia Colombia Colombia Colombia Colombia Colombia Brazil
Llanos 34 Llanos 34 Llanos 34 Llanos 34 Llanos 34 Llanos 34 REC-T-94
45% 45% 45% 45% 45% 45% 100%
Development Development Appraisal Appraisal Appraisal Appraisal Exploration
Source: GeoPark Note: Information included in the table above is subject to change and may also be subject to partner or regulatory approval OTHER NEWS/RECENT EVENTS Reporting Date for 2016 Year-End Reserves Release GeoPark expects to report its PRMS Reserves Release for the year ended December 31, 2016, as independently certified by DeGolyer and MacNaughton, in the first half of February 2017. 2017 Work Program and Investment Guidelines GeoParkâ€™s 2017 main features of its dynamic and self-funded work program, adaptable to different oil price scenarios are described below:
Base Case ($45-50/bbl Brent Oil Price) -- Focus on unfolding potential of the Tigana/Jacana oil field complex -- Fully funded $80-90 million adaptable capital program, with 70-75% allocated to Colombia -- Associated production growth of 20-25% to 26,500-27,500 boepd -- Estimated 2017 exit production above 30,000 boepd -- Drilling of approximately 30-35 gross wells - Focus on unfolding potential of the Tigana/Jacana oil field complex - Fully funded $80-90 million adaptable capital program, with 70-75% allocated to Colombia - Associated production growth of 20-25% to 26,500-27,500 boepd - Estimated 2017 exit production above 30,000 boepd - Drilling of approximately 30-35 gross wells Above $50/bbl Brent Oil Price -- Capital expenditures can be increased to $110-120 million by adding 25+ incremental projects (mainly in Colombia) -- Associated production growth of 30-35% to 28,500-30,000 boepd - Capital expenditures can be increased to $110-120 million by adding 25+ incremental projects (mainly in Colombia) - Associated production growth of 30-35% to 28,500-30,000 boepd Below $40/bbl Brent Oil Price - -Capital expenditures can be reduced to $50-60 million â€“ focusing on lowest-risk and fastest cash-flow producing projects -- Associated production growth of 10-15% to 24,500-25,500 boepd - Capital expenditures can be reduced to $50-60 million â€“ focusing on lowest-risk and fastest cash-flow producing projects - Associated production growth of 10-15% to 24,500-25,500 boepd Consolidated Operating Netback per boe: Defined as Net Revenues minus Transportation & Discounts, Selling Expenses & Royalties and Operating Costs, estimated to be approximately $15-20/boe for a Brent Oil Price of $45-50/bbl, approximately $10-12/boe for a Brent Oil Price of $40/bbl, and approximately $2123/boe for a Brent Oil Price of $55/bbl. [GeoPark Limited, 9.Jan.2017]
Gran Tierra Announces 2017 Guidance: Capital Budget of $200-$250 Million Gran Tierra Energy Inc. announced its 2017 capital budget and production guidance. Gary Guidry, President and Chief Executive Officer of Gran Tierra, commented: "During 2016, we have successfully delivered on our strategy of expanding, upgrading and diversifying Gran Tierra's portfolio in Colombia. Our 2017 capital budget is expected to be fully funded from cash from operating activities1 and to deliver strong organic production and reserves growth as we drill development and exploration oil wells throughout our newly diverse Colombian opportunity set. We expect to further delineate the exciting new "A" Limestone play at Costayaco. We will also continue drilling "N" sands and "A" Limestone exploration prospects throughout the Putumayo Basin where our first "N" sands well, the Cumplidor-1 on the Putumayo-7 Block, was declared a discovery on December 12, 2016. We are the largest landholder in the Putumayo with approximately 1.1 million gross acres (0.9 million net acres) of land and believe we have a competitive advantage in this under-explored proven basin with our dominant land position and proprietary seismic database.
In the Middle Magdalena Valley Basin, we anticipate an ongoing ramp up in production at our Acordionero field, where results to date have exceeded our original expectations. At Acordionero, we expect to continuously drill both development and water injection wells throughout 2017 and beyond. "Gran Tierra operates over 90 percent of its production and 23 out of 33 blocks in Colombia. Therefore, we have significant control and flexibility on capital allocation and timing. The company now has a robust portfolio of reserves to develop that can be paced with oil price recovery. We can accelerate our capital program if oil prices increase significantly in 2017 or decrease capital investment in the event of a depressed commodity environment. At our budgeted 2017 Brent oil price of $56.00/barrel(2) ("bbl"), we forecast that we will generate cash from operating activities(1) of $240 million to $260 million, which is expected to equal or exceed our 2017 capital budget of $200 million to $250 million. With our operated, low cost, high netback, positive cash-flowing asset base, our focus is on organic production growth and drilling 30 to 35 exploration wells over the next three years, all funded from cash from operating activities (1)." Highlights of 2017 Capital Budget and Production Guidance 2017 Capital Budget Gran Tierra is forecasting the following ranges for the company's 2017 capital budget: Area
# of Wells (Gross)
# of Wells (Net)
Development Exploration Total Colombia
15-19 8-11 23-30
13-14 7-9 20-23
$100-$140 $85-$95 $185-$235
Brazil Peru Corporate
n/a n/a n/a
n/a n/a n/a
$8 $6 $1
Source: Gran Tierra -- Colombia remains Gran Tierra's primary focus and, based on the midpoint of the guidance, is expected to represent approximately 93 percent of the 2017 capital program; -- Based on the midpoint of the guidance, the capital budget is forecasted to be split with approximately 57 percent directed to development and 43 percent to exploration; -- Approximately, 15-20 percent of the 2017 capital program is expected to be directed at facilities, a large portion of this investment would be dedicated to facilities expansion at the Acordionero field in order to increase its oil production capacity to 15,000 barrels of oil equivalent per day (boepd) by 2017 yearend -- The 2017 capital program assumes up to 6 drilling rigs being active during the year. 2017 Production Guidance Gran Tierra expects 2017 average working interest (WI) production before royalties of 34,000 to 38,000 boepd from the company's assets in Colombia and Brazil, which would represent an increase of 25 to 40% from our approximate 2016 average WI production before royalties of 27,200 boepd. The 2017 guidance includes 1,200 to 1,500 boepd of production from Brazil. The company's production guidance only includes forecasted volumes from existing operations and expected development projects; no volumes are assumed for any exploration success.
2017 Cash from Operating Activities (1) With expected 2017 average WI production before royalties of 34,000 to 38,000 boepd, Gran Tierra expects approximate 2017 cash from operating activities(1) and approximate 2017 expenses to be in the following ranges (barrel oil equivalent = boe): Brent ($/bbl)
Cash from Operating Activities ($ million) (1)
Expenses ($/boe) Transportation and Discount Royalties Operating Costs General and Administrative Interest and Financing Taxes
$13-$15 $7-$9 $7-$9 $2-$3 $1-$2 $2-$4
Source: Gran Tierra (1) "Cash from operating activities" refers to the GAAP line item "net cash provided by operating activities". (2) Budgeted 2017 Brent oil price of $56.00/bbl is approximately equal to the average forward month pricing for Brent for 2017 of $56.68/bbl as of December 16, 2016. [Gran Tierra Energy Inc., 19.Dec.2016]
Gran Tierra Announces a 91% Increase in 2P Reserves Gran Tierra Energy Inc. announced its 2016 year-end estimated reserves as evaluated by independent qualified reserve evaluator McDaniel & Associates Consultants Ltd. in a report with an effective date of December 31, 2016. Gran Tierra has also updated its corporate presentation, which is available on the company's website. Gary Guidry, President and Chief Executive Officer of Gran Tierra, commented: Gran Tierra had a transformational year during 2016 in which we expanded, upgraded and diversified our portfolio in Colombia through four strategic and accretive acquisitions: Petroamerica, PetroGranada, PetroLatina and the Ecopetrol 2016 Bid Round, which is expected to close in 2017. In 2016 the company was able to add approximately 9.2 million barrels of oil equivalent (MMBOE) of Proved plus Probable (2P) working interest before royalties (WI) reserves organically in both existing assets and our new assets postacquisition, despite only commencing exploration and appraisal drilling in late September 2016. The 2016 exploration drilling delivered 2016 2P WI reserve additions of 2.1 MMBOE in the N-sands exploration play in the acquired Putumayo-7 ("PUT-7") Block. Total 2P WI reserves booked on PUT-7 are now 5.4 MMBOE.
Development activities delivered 2P WI reserves additions of 2.6 MMBOE in the newly acquired asset at Acordionero in the Middle Magdalena Basin and 2.0 MMBOE of 2P WI reserves in the legacy asset at Costayaco in the Putumayo Basin from the "A" Limestone. In 2017 the company looks to further proving up Acordionero through ongoing development drilling which targets 48 MMBOE of Possible reserves (out of Acordionero's total Proved plus Probable plus Possible (3P) WI reserves of 96 MMBOE), and developing the "A" Limestone in Costayaco through horizontal drilling, which commenced at the end of 2016. During 2016, Gran Tierra's total 2P WI reserves increased by 91% compared with year-end 2015, while the company's 3P WI reserves increased by 146% over the same time period. In addition, the company's exploration portfolio has been substantially enhanced and expanded. Our 2P reserves replacement ratio in 2016 was 708%1 including acquisitions. The company also inceaesed its 2P reserve life index from 7.8 years to 11.1 years. Since the senior management team joined the company in May 2015, 2016 represents the first full year in which the company has been delivering on its focused strategy. The company has grown its before tax net asset value per share during 2016 by 5%, on a 2P reserves basis and by 37% on a 3P reserves basis, despite a 10% decrease in forecasted pricing. The company increased 2P WI reserves by 60 MMBOE, increased 3P WI reserves by 118 MMBOE and exploration inventory has increased to 72 locations and over 680 MMBOE WI unrisked net prospective resources. After effectively no reserves growth between 2010 and 2015, the company is once again significantly growing reserves on an accretive basis. During 2016, Gran Tierra's portfolio achieved a 2P finding, development and acquisition, excluding changes in future development costs, cost of $9.81 per barrel of oil equivalent (BOE) and a 2P recycle ratio of 2.1 times excluding changes in future developments costs and 1.5 times including changes in future development costs. Gran Tierra now has visible production growth from its existing asset base through 2019 on a 2P reserves basis and through 2020 on a 3P reserves basis and a world class exploration portfolio that can be funded through cash flow. The developed reserves base is currently producing approximately 32,000 barrels of oil equivalent per day (BOEPD) (January 2017 year to date) and it is expected cash flow from the 2P WI reserves base will be more than enough to fund exciting exploration portfolio. The asset portfolio is forecasted to generate cumulative net cash provided by operating activities on a 2P basis of approximately $1.0 billion during the next three years (2017 - 2019), with is expected to fund development and exploration programs over this time period. With an operated, low cost, high netback, positive cash-flowing asset base, the company will focus on organic reserves development for production growth and drilling 30 to 35 exploration wells over the next three years, all funded from cash from operating activities. [Gran Tierra Energy Inc., 23.Jan.2017]
ARGENTINA Andes Energía, YPF to Jointly Develop Vaca Muerta Andes Energía and YPF plan joint investments to boost hydrocarbon production in the Vaca Muerta in Argentina. “We have projects to drill hundreds of wells,” reported the daily Clarín, citing Andes General Manager Alejandro Jotayan. “The great potential is in shale oil in the Vaca Muerta where we have 250,000 net acres (1,000 square kilometers), both in Neuquén as well as in the south in Mendoza.” In 2016, we invested almost all our cash flow in Chachahuen (Mendoza) in a block in partnership with YPF, announced Jotayan during an interview with Télam. Both companies invested $100 million on 90 exploration and development wells as well as production management and treatment facilities. In 2017, Andes plans to deepen its work in Chachahuen and continue with development of the Vaca Muerta, said Jotayan. “YPF and Chevron are producing 50,000 barrels per day on 60,000 acres,” said Jotayan. “You can imagine what we could do with 250,000 acres.” [Energy Analytics Institute (EAI), Clifford Fingers III, 16.Feb.2017]
President Energy Provides Update on Argentine Operations President Energy announced that the first workover of a previously producing well, DP12 at the Dos Puntitas field, has been completed on time and on budget. The workover of DP12 went to plan with minimal non-productive time and the well, which had previously had a leak in the production packer and a faulty Jet Pump Bottom Hole Assembly, has been treated with an acid stimulation and is achieving an initial production in excess of 120 bopd, in line with expectations. The rig has now moved to workover the second of the previously producing wells, DP1001 at the Dos Puntitas field, and operations have now commenced at that site after which the previously announced workover and frac programme of old shut-in wells is still expected to commence end March.
“A good start for the warm-up to the 2017 workover campaign where we have successfully broken in the Rig provided by our new drilling contractor Quintana, with the new crew and field management team bedding in and working efficiently. Pleasingly, no performance issues were experienced during drilling relating to the rig, crew or any other of President’s contractors,” said President Energy Chairman Peter Levine. “The experience gained so far stands us in good stead when we start to work over and frac the old shut-in wells come end of March onwards, targeting our objective of 1,200 bopd by end September 2017.” [President Energy Plc, 12.Mar.2017]
President Energy Reports Audited Argentine Reserves Upgrade President Energy Group 2P Hydrocarbon Reserves now in excess of 20 MMBoe … President Energy provided the following reserves update on its Puesto Guardian Concession, Salta Province, Argentina. Highlights: -- Argentine 1P Oil Reserves increase by 9% to 12 MMBoe of which 11.5 MMBbls is oil -- Argentine 2P Reserves increase by 10% to 19.9 MMBoe of which 19.1 million barrels (MMBbls) is oil with the balance gas -- President Energy Group 2P Reserves now total over 20 million barrels of oil equivalent (MMBoe), including the Company’s producing Louisiana interests President Energy’s Hydrocarbon Reserves at its Puesto Guardian Concession, Salta, Argentina have been independently certified and audited by VYP Consultants, a Reserves Auditor regulated by and registered with the Argentine Federal Secretary of Energy. The audit, conducted under SEC and World Petroleum Congress regulatory principles, will be submitted to and filed with the Secretary of Energy as part of President Energy’s annual operating obligations. The increase in reserves reflects the impact of successful frac and stimulation campaigns on previously non-producing carbonate zones in the Cretaceous Formations which we are looking to replicate and enhance in this year’s programme. The Argentine Audited Reserves are shown in the following table: Type
Source: President Energy “The company’s 2P Hydrocarbon Reserves are comparable to companies whose market capitalisation is a multiple of President’s. Whilst five separate fields in the Concession have each their own characteristics, with the 2017 workover programme the key factor is to increase the production to reserves ratio,” said President Energy Chairman Peter Levine. “The audit nevertheless highlights the potential of Puesto Guardian and its asset value is clear with the results demonstrating the continued ability of President to replace reserves even with the projected increase in production this year.” [President Energy Plc, 15.Mar.2017]
BOLIVIA Bolivia Says El Alto Population to Have Gas in 2018 The entire population of the city El Alto will have access to domestic gas service in 2018, reported the daily newspaper La Razón, citing Bolivia’s Vice President García Linera. Bolivia’s state oil company Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) has invested an estimated $195 million in El Alto since 2006 and to-date has achieved an 80 percent completion rate for the project. YPFB plans to invest an additional $7.87 million in the project to reach its projected goal by 2018, reported the daily. El Alto has an estimated 191,000 installed connections and this year the plan is to connect another 9,509 installations. [Jared Yamin, Energy Analytics Institute (EAI), 10.Mar.2017]
FPSO Pioneiro de Libra. Source photo: Petrobras
ANP Notice on Participation in Lula Field Petrobras announced that, on March 30, 2017, Consortium BM-S-11 received a notice of violation issued by the National Petroleum, Natural Gas and Biofuels Agency (ANP), relating to the Lula Field in the Santos Basin pre-salt, for the amount of R$2.6 billion. This notice is due to the variance in applying oil prices used to calculate the governmental share from May 2013 to December 2016. The consortium will contest the ANP notice and, if necessary, adopt all judicial measures to defend its interests.
Consortium members understand that they have acted according to the legislation which has been in force since 2000. The change in the interpretation of the rules applicable to the concession contract by the regulatory agency directly affects the economic and technical assumptions that support investment decisions. Consortium BM-S-11 is formed by Petrobras (65% WI), as operator, in partnership with BG E&P Brasil - a subsidiary company of Royal Dutch Shell plc (25% WI) - and Petrogal Brasil (10% WI). Consortium BM-S-11 will contest the notice. [Petrobras, 1.Apr.2017]
Petrobras Says P-69 Arrives in Brazil to Complete Construction Work Platform is now at Brasfels shipyard in Angra dos Reis On March 28, the hull of floating production, storage and offloading vessel (FPSO) P-69 arrived at the Brasfels shipyard in Angra dos Reis, in the state of Rio de Janeiro. This shipyard will do the platform’s integration work, encompassing the installation of modules on the hull, the interconnection of all equipment, and the commissioning of operating systems (a series of tests to check whether the systems have turned out as planned and are able to function properly). Each of the platform’s 18 modules has a specific function, such as generating power, supplying and treating water, producing oil, and offloading gas. The hull is 288 meters long, 54 meters wide, and 31.5 meters tall (from the bottom of its tanks to the main deck). It was built at the Cosco shipyard in Zhoushan, China. After it has been integrated, the platform will be capable of processing 150,000 barrels of oil and 6 million cubic meters of natural gas per day. Able to store 1.6 million barrels of oil, it will operate at a water depth of 2,200 meters. P-69 will be installed in Lula field, in the Far South Lula module, in the Santos Basin pre-salt. This field is operated and 65% owned by Petrobras, in partnership with Royal Dutch Shell plc subsidiary BG E&P Brasil (25% WI) and Petrogal Brasil (10% WI). Start up is scheduled for 2018. [Petrobras, 30.Mar.2017]
Petrobras Offers Clarification: CARF Ruling Petrobras informed that the Administrative Board of Tax Appeals (CARF) issued on 3/22/17 a decision in favor of the Company, in the administrative proceeding that addresses the deductibility of expenses incurred by Petrobras in the development of oil and gas production, for the purposes of calculating the Income Tax for Legal Entities (IRPJ) and Social Contribution on Net Profits (CSLL) for the 2009 period. However, the Company has not yet been notified of the content of the decision, so that its legal department can proceed to an appropriate analysis. It should be noted that the National Treasury may still appeal the decision. In such a case, if the appeal is accepted, Petrobras may apply to the courts to defend their rights. Therefore, this is not a final decision in favor of the company. The information pertaining to this proceeding has been incorporated in the 2014 financial statements, the year of sanction, and remained reflected therein in the Company's financial statements for the 2015 and 2016 fiscal years, in explanatory note 30 (Judicial proceedings and contingencies – item 30.3 – taxation proceedings). Petrobras did not consider the information to be suitable to the effect that it could impact investor decisions in relation to Company securities. [Petrobras, 24.Mar.2017]
Petrobras Offers clarifications on the Libra Pilot Project Petrobras and its partners are committed to implementing the production sharing agreement (PSA) for the Libra area, executed in 2013 and for which Libra Pilot, the first definitive production system, scheduled for late 2020, is an important milestone. Petrobras and its partners have, since 2015, carried out bids with different levels of local content to gather competitive proposals aligned with international metrics and to assist ANP on discussions about the feasible level of local content for those items that make up the Libra Pilot system project. According to the contract, ANP has the possibility to ease compliance with local content percentage in the procurement of goods and services if such percentage leads to excessive terms and prices by granting a Waiver, which has already been requested by the consortium. The consortium estimates that, by comparing the local content level required in the contract against the level it deems feasible, in the case that ANP decides not to grant the Waiver and the project is nevertheless implemented, the contractual fine value for the portion of required local content not met could reach $630 million. The consortium is sparing no efforts to facilitate the implementation of the Libra Pilot Project at the highest possible level of local content within competitive deadlines, quality, and prices. [Petrobras, 23.Mar.2017]
Petrobras Reports 2016 Results Main highlights Petrobrasâ€™ results in 2016 were marked by a significant improvement in its operational performance over the course of the year, reflected in a reversal from the loss posted in 3Q16 to a net profit of R$2.51 billion in 4Q16, and a reduction in indebtedness. Despite lower oil prices in 2016, an 8% decline in sales of oil products in the Brazilian market, and reduced power generation, the company obtained higher diesel and gasoline margins than in 2015. It also cut its spending on imports, royalties, sales, general and administrative expenses, and net financial expenses. Exports increased 12% in 4Q16, amounting to 634,000 barrels per day of oil and oil products. Most notably, oil exports rose 14%, making the company a net exporter from Brazil in 2016. In operational terms, Petrobras also achieved its production target for the second year in a row, producing 2.144 million barrels per day of oil in Brazil, and in December it set a new monthly record by producing 2.9 million barrels of oil equivalent per day, including oil and gas, in Brazil and abroad. Thanks to higher operating cash generation and a 32% reduction in investment, the company achieved free cash flow of R$41.57 billion. 4Q16 was the seventh consecutive quarter of positive free cash flow, demonstrating the greater capital discipline the company has been pursuing. Petrobrasâ€™ net debt declined 20%, to R$314 billion or $96.4 billion, due to the amortization and early payment of debts using resources from disposals and cash flow, as well as the appreciation of the Brazilian real. Debt management also enabled an increase in the average debt term, from 7.14 to 7.46 years.
EBITDA, an indicator widely used in the financial markets as a yardstick for cash flow, was R$24.8 billion in 4Q16 and R$88.7 billion in 2016, up 16% from the previous year. As a result, the net debt to EBITDA ratio fell from 5.11 at the end of 2015 to 3.54 at the end of 2016. The target established in the company’s Business and Management Plan is to reach 2.5 by the end of 2018. [Petrobras, 21.Mar.2017]
Petrobras Reports Federal Accounting Court Authorizes Resuming Divestment Program Petrobras, in continuation to the material facts disclosed on 12/8/2016 and 12/20/2016, reports that the decision by the Federal Accounting Court (TCU) issued, repealed the preventive order preventing the company from initiating new divestment projects and concluding those in progress and, as for the merit, ordered Petrobras to adopt its reviewed divestment process methodology for the divestment projects of the company. The decision also allows Petrobras to conclude two of its projects – sale of interest in the Baúna and Tartaruga Verde fields and sale of interest in Saint Malo field in the U.S. Gulf of Mexico – which were already included in the list of five projects authorized by TCU in the 12/7/2016 preventive order, using the reviewed divestment process methodology, as of the currently stage, and to apply the reviewed divestment process methodology to other projects from the beginning. Petrobras also informs that the divestment process methodology is subject to continuous improvement, always observing the best market practices in acquisition and divestment transactions. In order to improve its competitive process, based on the recommendations suggested by the TCU, the divestment process methodology was then reviewed and presented to the Court, culminating with the decision issued today. Such decision is crucial for the company to move forward with its Divestment Plan, which is considered one of the main pillars to achieve the goal of reducing leverage. Petrobras reaffirms the maintenance of its partnership and divestment target established in the Strategic Plan of $21 billion for the 2017/2018 biennium. [Petrobras, 15.Mar.2017]
Petrobras Reports Crude Oil, Natural Gas Production in February Petrobras’ oil and natural gas production in February totaled 2.82 million barrels of oil equivalent per day (boed), with 2.703 million boed produced in Brazil and 113,000 boed abroad. Average domestic oil output stood at 2.20 million barrels per day (bpd), 1% down on the January figure. This was mainly due to a scheduled stoppage on FPSO Cidade de Paraty in the Santos Basin’s Lula Nordeste pre-salt field, and termination of the Anticipated Production System (SPA) test phase in the Búzios field under the Rights Transfer Agreement. The SPA was designed to gather information about the behavior of the reservoirs in the oilfield. In February, production of natural gas in Brazil (excluding liquefied gas) stood at 80.2 million m³/d, 1% down on the previous month, mainly because of a scheduled stoppage on the FPSO Cidade de Paraty. Pre-salt Production
In February, oil and natural gas production managed by Petrobras (own and third party output) in the presalt layer was 1.53 million boed, showing growth of 41% against the February 2016 figure. However, compared to January this year, this figure is represents a 3% drop, which was due to a scheduled stoppage on FPSO Cidade de Paraty in the Santos Basin’s Lula Nordeste pre-salt field, and termination of the SPA test phase in the Búzios field. Gas and oil production abroad In February, oil output from oilfields abroad stood at 63.5 million bpd, 8% down on the previous month. Natural gas production amounted to 8.4 million m³/d, 3% down on the January 2017 figure. This was mainly due to operational stoppages in the Lucius and Hadrian South fields in the U.S. because of limitations in the distribution capacity of third-party facilities. [Petrobras, 14.Mar.2017]
Petrobras Reports Crude Oil, and Natural Gas Production in January Petrobras’ total oil and natural gas production in January was 2.86 million barrels of oil equivalent per day (boed), of which 2.74 million boed were produced in Brazil and 0.12 million boed abroad. The average oil production in the country was 2.23 million barrels per day (bpd), 3% lower than December, 2016. This result was mainly due to the scheduled stoppage of platform P-40, located in the Marlim Sul field, and to maintenance in one of the producing wells in FPSO Cidade de Anchieta, located in Parque das Baleias, both in Campos Basin. In January, the natural gas production in Brazil, excluding the liquefied volume, was 81.4 million m³/d, in line with the production of December, 2016. Pre-salt production reaches new daily and monthly records In January, oil production operated by Petrobras (wholly-owned and partner shares) at the pre-salt layer achieved two new records, namely, the 1.28-million-bpd monthly production record and the 1.34-millionbarrel daily production record achieved on Jan. 4. It is also worth noting that oil and natural gas production operated by Petrobras reached a new record of 1.59 million boed. Those results are mainly due to production increase in the new wells interconnected to the FPSOs Cidade de Caraguatatuba (in the Lapa field); Cidade de Saquarema, Cidade de Mangaratiba, and Cidade de Itaguaí (located in the Lula field); and Cidade de São Paulo (in the Sapinhoá field); all in Santos Basin. Another highlight was the higher operating performance at platform P-58, located in Parque das Baleias, in Campos Basin. Oil and gas production abroad In January, oil production in fields abroad reached 69 thousand bpd, a volume 13% higher than in the previous month. This increase was particularly due to resumed operations in the Agbami field, in Nigeria, after a scheduled stoppage that took place in December. Natural gas production was 8.6 million m³/d, 16% lower than the volume produced in the previous month. This decrease occurred mostly because of the demand reduction for the gas from Bolivia. [Petrobras, 15.Feb.2017]
Petrobras Reaches Production Target for Second Consecutive Year Petrobras reported average oil production in Brazil reached an annual historical record in 2016, at 2.144.256 barrels per day (bpd), 0.75% above the results for the prior year and in line with the 2,145 thousand bpd target forecast for the period. For the second year in a row, the company has met forecast plans, reinforcing its commitment to the predictability of its projections. Average annual production operated in the pre-salt layer in 2016 was also the highest in the company’s history, reaching 1.02 million barrels of oil per day and surpassing the 2015 production by 33%. If Petrobras’ own natural gas production, which reached in 2016 an unprecedented 77 million m³ per day, is considered, total production in the country reaches 2.63 million of barrels of oil equivalent per day (boed) – 1% more than the levels for 2015, also a new record for Petrobras. The main highlights for production expansion in 2016 were the significant production growth in the Lula field (Iracema Norte and Iracema Sul areas, with FPSOs Cidade de Itaguaí and Cidade de Mangaratiba) and in the Sapinhoá field (FPSO Cidade de Ilhabela), located in the Santos Basin’s pre-salt layer, in addition to the Parque das Baleias area (P-58), in the Espírito Santo state section of the Campos Basin. Additionally, operations for three production systems started, two of which in the Lula field (FPSO Cidade de Maricá and FPSO Cidade de Saquarema) and one in Lapa (FPSO Cidade de Caraguatatuba), located in the Santos Basin’s pre-salt layer. The utilization rate for Petrobras’ gas in Brazil also achieved its annual record in 2016, reaching 96%, a result of the efforts undertaken by the operating efficiency improvement and gas use optimization programs. Record productions in December In December 2016, the company also surpassed its monthly and daily production historical records: average oil production in Brazil for the first time exceeded 2.3 million bpd, 3% above the record registered in September 2016, and production on December 28 achieved 2.4 million barrels of oil. In gas production, there was a 2% increase in comparison to the previous month, achieving 81.8 million m³/day. As such, oil and natural-gas production in Brazil in December were 2.82 million boed, 3% higher than what was recorded in November 2016 and 6% higher than December 2015, which also represents a new monthly production record for the company. Oil production operated by Petrobras in the pre-salt layer reached in December the new monthly record of 1.27 million bpd, a 9% increase in comparison to production in November, which was 1.16 million bpd. Moreover, Petrobras reached a 1.34 million barrels daily record on December 29. Meanwhile, oil and natural-gas production operated in the pre-salt layer were 1.58 million boe/d, displaying a significant 45% increase between December 2015 and December 2016, also representing a new monthly record. Internationally, average oil production in December was 61 thousand bpd and average natural gas production was 10.3 million m³/day. As such, in December, 122 thousand boe/d were produced globally. If oil and gas production in Brazil and internationally are consolidated, production in December 2016 was 2.94 million boed, which also represents a new monthly record.
International oil and gas production in 2016 Internationally, average oil production in 2016 was 80 thousand bpd, 19% below the volumes in the previous year. Average natural gas production reached 13.7 million m³/day, 11% below 2015 production. Reduction occurred mainly because of divestments executed, such as the sale of Petrobras Argentina. If production in Brazil and internationally are consolidated, average oil production in 2016 was 2.22 million bpd, while average annual production of oil and gas was 2.79 million boed, the same level as in 2015. [Petrobras, 12.Jan.2017]
P-66 Leaves Shipyard for Lula Field The floating platform will operate in the Santos Basin pre-salt and it will be the seventh unit deployed in Lula field … On February 4, 2017 the floating production, storage and offloading vessel (FPSO) P-66 left the Brasfels shipyard in Angra dos Reis, Rio de Janeiro. It is now heading to the Lula Sul module in the Lula field, Santos Basin pre-salt, where it is expected to arrive in days. The production system will come online after the vessel has been moored and the first production well has been connected. P-66 is the Lula Consortium’s first FPSO to be deployed in the Santos Basin pre-salt. It was assembled at the Brasfels shipyard in Angra dos Reis, where the equipment and systems were also tested. The FPSO will separate the oil from the gas and water during the production process, storing it in tanks, and finally transferring it into oil tankers, which will then transport it. P66 will be connected to 10 production wells and 8 injector wells, and it will be able to process up to 150,000 barrels of oil per day and 6 million cubic meters of natural gas per day. Lula field is located within the BM-S-11 concession area, operated by Petrobras (65% WI) in partnership with BG E&P Brasil (25% WI), a subsidiary of Royal Dutch Shell plc (25% WI), and Petrogal Brasil (10% W). [Petrobras, 6.Feb.2017]
P-66 Details Oil processing: 150,000 barrels per day Gas treatment and compression: 6 million m³ per day Injection water treatment: 181,100 barrels per day Oil storage capacity: 1.67 million barrels Mooring water depth: 2,200 meters Total length: 288 meters Width: 54 meters Height: 31.5 meters Source: Petrobras
CHILE Enap Celebrates 71 Years Since Discovery of First Oil Well in Chile On 29 December 2016, Chile’s state oil company Empresa Nacional de Petróleo (Enap) celebrated 71 years since the first oil well discovery in Chile’s Springhill sector in Magallanes, the company reported in an official twitter post. [By Energy Analytics Institute, Jared Yamin, 30.Dec.2016]
Venezuela Initiates Sale of Gasoline in Colombian Pesos in La Guajira Venezuela, the South American country with the regionâ€™s largest crude oil and natural gas reserves, initiated the sale of its gasoline in ParaguachĂłn, located in the La Guajira Department in Colombia. Cooperation between the governments of Colombia and Venezuela has allowed activities to move forward.
Venezuelan President Nicolas Maduro thanked his Colombian counterpart Juan Manuel Santos for his collaboration which allowed for the distribution of gasoline along the border area near the Colombian and Venezuelan border, reported PDVSA in an official Twitter post. [Piero Stewart, Energy Analytics Institute, 4.Jan.2017]
Ecopetrol Announces Oil Discovery at Santander Ecopetrol S.A. reported the Boranda-1 well discovered the presence of crude in the Magdalena Middle Valley, municipality of Rionegro, department of Santander. The Boranda-1 well was at a depth of 3,657 meters, where the discovery of medium crude (20Âş API) was confirmed in the Esmeraldas formation, in four intervals of oil sands with a total thickness of 40 meters. Boranda-1 is operated by Parex, with an interest of 50%, while Ecopetrol holds the other 50%. The nearby crude receiving stations (Payoa at 30 km; Provincia at 40 km) and the Barrancabermeja refinery (90 km) afford it a competitive and operational advantage. This new discovery forms part of Ecopetrol's strategy. One of its focuses is on exploration in regions near production fields. Boranda is in the production range of the Aullador and Cristalina fields to the southwest, and Pavas-Cachira to the northeast. Over the past four months the country's leading company has participated in deep-water discoveries in the Gulf of Mexico, the United States (Warrior) and the Colombian Caribbean (Purple Angel). In addition, its Hocol subsidiary announced the finding of Bullerengue Sur-1. For 2017, Ecopetrol has an exploration budget of $652 million, with which it will drill 17 wells directly and with partners; six will be drilled offshore, one in the Gulf of Mexico (United States) and the other five in Colombia; the remaining 11 will be in various regions of the country. [Ecopetrol S.A., 30.Mar.2017]
Ecopetrol's Proven Reserves Fall to 1,598 MMboe in 2016 This valuation was made at a regulatory price of $44.5/barrel, lower prices negatively impacted 202 million barrels â€Ś Ecopetrol S.A. announced its proven reserves (1P, according to the international designation) of crude oil, condensate and natural gas owned by the company, including its interest in affiliates and subsidiaries, as of December 31, 2016. The reserves were estimated based on the U.S. Securities and Exchange Commission (SEC) standards and methodology. 99% of them were audited by two well-known specialized independent companies (Ryder Scott Company and DeGolyer and MacNaughton). Ecopetrol's proven net hydrocarbon reserves were 1,598 million barrels of oil equivalent (mmboe) at the close of 2016, a 14% reduction compared with 1,849 mmboe at the end of 2015. It is estimated that price was the cause of most of the negative impact on proven reserves (-202 mmboe). In 2016, the SEC price used for the valuation had a 20% decrease compared to 2015, from $55.57 per barrel Brent to $44.49 per barrel and a 56% decrease compared to 2014, which was $101.80 per barrel.
This effect was partially offset by the addition of 186 mmboe, attributable to continued optimization of operating costs, higher efficiencies, new drilling projects as planned in the Palagua-Caipal fields and extensions of the proven area in fields such as Castilla, Rubiales and Chichimene, among others. The reserve replacement ratio, excluding price effect, was 79%. By including the price factor, the reserve replacement ratio stands at -7%. The reserves/production ratio (average life of reserves) was 6.8 years. Ecopetrol's proven reserves as of December 31 of 2016 Proven Reserves (1P)
Oil Equivalent (MMboe)
Proved Reserves as of Dec 31 of 2015 Production 2016 Hydrocarbon Price Effect Cost optimization, management and others Proved Reserves as of Dec 31 of 2016
1,849 (235) (202) 186 1,598
Source: Ecopetrol Fields operated directly by Ecopetrol as Rubiales and Chichimene, presented positive reviews of reserves due to good performance in production and optimization of their conditions, among others. The 95% of proven reserves are owned by Ecopetrol, while Hocol, Ecopetrol América and Equión and Savia Perú contribute 5%. [Ecopetrol S.A., 17.Feb.2017]
GeoPark Announces Further Expansion of Tigana/Jacana Oil Play in Colombia GeoPark Limited announced the successful drilling and testing of the Jacana 11 appraisal well in the Jacana oil field in the Llanos 34 Block (GeoPark operated with a 45% working interest) in Colombia. GeoPark drilled and completed the Jacana 11 appraisal well to a total depth of 11,618 feet. A production test conducted with an electric submersible pump in the Guadalupe formation resulted in a production rate of approximately 2,100 bopd of 18.7 degrees API, with less than 1% water cut, through a choke of 33/64 mm and well head pressure of 98 pounds per square inch. The well is still cleaning up and additional production history is required to determine stabilized flow rates of the well. Surface facilities are in place and the well is already in production. The Jacana 11 well was drilled to a bottom-hole location that is approximately 2,500 meters south-west of the recent Jacana 6 appraisal well, and did not encounter the oil-water contact. With the preliminary production test results, the Jacana 11 well extends the Tigana/Jacana oil play towards the south-west limits of the Llanos 34 Block. The next well to be drilled will be the Jacana South 2 well, which is targeted to further test the extension of the field in the north-west direction. James F. Park, Chief Executive Officer of GeoPark, said: “More oil, more production, more area, more value, more to come. A great beginning already from the start-up of our 30+ well 2017 drilling program.” [GeoPark Limited, 2.Mar.2017]
GeoPark Announces Drilling Success in Colombia, Hits Year-End Production Targets GeoPark Limited announced the successful drilling and testing of the Tigana Sur 4 development well in the Tigana oil field in the Llanos 34 Block (GeoPark operated with a 45% working interest) in Colombia, resulting in consolidated net exit production of approximately 24,400 boepd. GeoPark drilled and completed the Tigana Sur 4 development well to a total depth of 11,414 feet. A test conducted with an electric submersible pump in the Guadalupe formation resulted in a production rate of approximately 1,800 bopd of 14.7 degrees API, with 3% water cut, through a choke of 46/64 mm and wellhead pressure of 78 pounds per square inch. Additional production history is required to determine stabilized flow rates of the well. Surface facilities are in place and the well is already in production. The Tigana Sur 4 well was drilled to total depth in a record time of 8.8 days, with an estimated drilling and completion cost of $3.1 million. At current oil prices and production rates, this well is expected to have a payback period of less than 6 months and an IRR greater than 500%. The Tigana oil field, discovered by GeoPark in December 2013, has a current production rate of approximately 17,000 bopd gross from 9 wells that have produced over 10 million barrels of oil to-date. Adjacent to Tigana, the Jacana oil field, discovered by GeoPark in September 2015, has a current production rate of approximately 12,600 bopd gross from 6 wells that have produced more than 3 million barrels of oil to-date. GeoPark has initiated its 2017 work program, with completion activities currently underway in the Chiricoca 1 exploration well â€“ located northwest of the Tigana oil field - with testing expected in midJanuary 2017, and with the spudding of the Tigana Sur 6 development well. By the end of January, a second rig will be used to start drilling the Jacana 11 appraisal well. GeoPark's dynamic and fully funded 2017 work program includes a Base Case ($45-50/bbl Brent Oil Price) with capital expenditures of $80-90 million to accelerate production growth by 20-25% to 26,50027,500 boepd with the drilling of approximately 30-35 gross wells and an estimated exit production of 30,000+ boepd. Approximately 70-75% of capital expenditures will be allocated to Colombia where GeoPark expects to continue exploring and appraising the Tigana/Jacana oil field trend to determine the full extent of the oil accumulation. [GeoPark Limited, 4.Jan.2017] GeoPark Announces New Exploration Discovery, Development Successes in Colombia GeoPark Limited announced new drilling successes in the Llanos 34 Block (GeoPark operated with a 45% working interest), in Colombia, consisting of: 1. Discovery of the new Chiricoca oil field, following the successful drilling and testing of the Chiricoca 1 exploration well, and 2. Further expansion of the Tigana oil field, following the successful drilling and testing of the Tigana Sur 6 development well. Chiricoca 1 Well GeoPark drilled and completed the Chiricoca 1 exploration well to a total depth of 11,966 feet. A production test conducted with an electric submersible pump in the Mirador formation resulted in a production rate of approximately 1,000 bopd of 34 degrees API, with 9% water cut, through a choke of 33/64 mm and wellhead pressure of 34 pounds per square inch. The deeper Guadalupe formation was also tested and produced water with traces of heavy oil. Additional production history is required to determine stabilized flow rates of the well. Surface facilities are in place and the well is already in production.
Tigana Sur 6 Well GeoPark drilled and completed the Tigana Sur 6 development well to a total depth of 11,645 feet. A production test conducted with an electric submersible pump in the lower Guadalupe formation resulted in a production rate of approximately 1,600 bopd of 15 degrees API, with 8% water cut, through a choke of 52/64 mm and wellhead pressure of 70 pounds per square inch. Additional production history is required to determine stabilized flow rates of the well. Surface facilities are in place and the well is already in production. The Tigana Sur 6 well encountered a good quality reservoir in the lower Guadalupe formation, with a net pay of approximately 57 feet as well, which represents a significant thickening (almost 60% more) of the average net pay of the lower Guadalupe formation in other producing wells in the Tigana oil field. In addition, the well encountered a new set of reservoir sands in the upper Guadalupe formation, which appear to be oil-bearing from preliminary petrophysical logging information. Further production testing will be required to confirm if this zone is oil productive. James F. Park, CEO of GeoPark, commented: “GeoPark’s active drilling program in the first half of 2017 is already paying off – all underpinned by continued exciting results from our Colombia projects; especially the Tigana and Jacana oil fields, where our team keeps drilling to push out and define field boundaries. During 2017, additional big rewards are expected from our total 30-35 well drilling program in Colombia and across our rich asset platform in Latin America – including high potential prospects in Argentina, Chile, and Brazil.” [GeoPark Limited, 2.Feb.2017]
GeoPark Announces Further Expansion of Jacana Oil Field GeoPark Limited announced the successful testing of the Jacana 6 appraisal well in the Jacana Oil Field in the Llanos 34 Block (GeoPark operated with a 45% working interest) in Colombia. GeoPark drilled and completed the Jacana 6 appraisal well to a total depth of 11,684 feet. A test conducted with an electric submersible pump in the Guadalupe formation, across multiple sand units, resulted in a production rate of approximately 1,800 bpd of 16 degrees API, with a 17% water cut, through a choke of 38/64 mm and wellhead pressure of 80 pounds per square inch. Additional selective interval testing and production history are required to determine the stabilized flow rate and water cut source. Surface facilities are in place and the well is already in production. The Jacana 6 well was drilled to test the western limits of the field and is located approximately 1.7 km southwest of the successful Jacana 5 appraisal well which extended the northwest field boundaries and continues to produce at approximately 3,600 bopd with less than 1% water cut (at a formation depth approximately 50 feet down dip of the Jacana 6 well). The successful appraisal drilling in the Jacana Field this year has substantially increased the field size, as well as, grown field production to over 13,000 bopd gross from six wells. As recently announced, GeoPark will focus the bulk of its 2017 work and investment program on appraising and developing the Tigana/Jacana oil trend to determine the full extent of the oil accumulation and continue to grow production. GeoPark’s total five country program (at a $45-50 oil price) is targeting 20-25% production growth from a fully-funded $80-90 million capital program and with a forecasted consolidated exit production of 30,000+ boepd net.
“Great rocks, big traps, high-recovery wells, growing scale, supporting infrastructure, good geography, efficient low costs, and fast cycle self-funding cash. The Tigana/Jacana oil complex is proving up all the ingredients of a world class oil play and a foundational asset to drive GeoPark’s value growth now and in the coming years,” said GeoPark Chief Executive Officer James F. Park. “Our team continues to push out the boundaries of the field with every new appraisal well. We still have the opportunity to drill 1-2 more development wells before the end of the year and are gearing up to drill another 15+ wells to further appraise this play in 2017.” [GeoPark Limited, 23.Nov.2016]
Gran Tierra Energy Provides Operational Update Gran Tierra Energy Inc. provided an operational update. Gary Guidry, President and Chief Executive Officer of Gran Tierra, commented "2017 is off to an exciting start for Gran Tierra. We are pleased to report that the Acordionero field in the Middle Magdalena Basin continues to exceed our expectations and are encouraged by the discovery of a new and deeper 24 degree API gravity oil reservoir in the field, which we plan to effectively exploit using our existing infrastructure. We continue to see encouraging results with the A Limestone play in the Costayaco field in the Putumayo Basin, with a recent third recompletion in the field in the CYC-2 well producing at an initial rate of 2,023 barrel of oil per day (bopd). In the Putumayo-7 Block (PUT-7), the Confianza-1 exploration/appraisal well has encountered potential oil pay in three reservoirs, two of which would be new zones for this block. We believe that our focused strategy is delivering results on several fronts in Colombia. With our positive results from development drilling in Acordionero, our exciting new A Limestone play at Costayaco, and our high potential Putumayo N Sand and A Limestone exploration program, Gran Tierra is well positioned for potential growth in 2017 and beyond." Development Program Update Acordionero Field Development (Gran Tierra 100% Working Interest ("WI") and Operator) The AC-8i development well was spud on December 26, 2016 and drilled to a total depth of 10,340 feet (ft) total measured depth (MD) and 10,028 ft true vertical depth (TVD). This well is planned as a water injector in the Lisama A and C reservoirs as a pilot test for enhanced oil recovery. The well was drilled in the lowest structural position to date in the field, and crossed the oil-water contact (OWC) in the Lisama A at a depth 143 feet deeper than the previous Lowest Known Oil depth (LKO). Petrophysical analysis of the AC-8i's well logs indicates that the Lisama C reservoir's 2P OWC was likely found at approximately the expected depth. The AC-8i was drilled below the Lisama C in order to appraise the lower part of the Lisama interval, and an oil-bearing Lisama D sand was found. A total of 8 ft of gross pay was perforated in the Lisama D sand for testing. Over a three day period, the well flowed naturally and produced 24 degree API oil at an average rate of 144 bopd and 0.2% water cut from only 8 feet of perforated pay. The test results for the Lisama D sand at AC-8i are positive since they indicate the existence of a previously untested reservoir at the deepest position in the reservoir that has been drilled to date. The AC-8i will be completed initially as a Lisama C injector. The initial waterflood pilot for Acordionero is forecasted to be onstream in early second quarter 2017. The AC-9 development well was spud on February 6, 2017 and reached 8,929 ft MD and 8,708 ft TVD on February 23, 2017 and completion operations began on the same day. The Lisama A sand was cored and 88 ft of core was recovered. Total cost to drill, core, complete and tie-in this well is forecasted to be $4.4 million, which the lowest cost to date in Acordionero. Based on logging while drilling (LWD) data, the following potential net pays were identified: Lisama A (240 ft); Lisama C (140 ft); and Lisama D (19 ft). The completion plan for AC-9 is to start with the lowest productive interval and conduct a short term test of the Lisama D before completing the Lisama C and equipping with an electric submersible pump (ESP).
Based on petrophysical analysis of logs, the Lisama-D is also present in the AC-3 well with 13 ft of net pay and in the AC-4 well with 18 ft of net pay. Both of these wells were drilled by the previous operator, however they were not tested. The next well, AC-10, is designed to target reserves in the Lisama A and C reservoirs. This will be the first well in the next phase of the development targeting the northern portion of the field from a pad where the existing AC-2 well is located. Costayaco Field Development (Gran Tierra 100% WI and Operator) CYC-2 was drilled in first quarter 2008 and was producing 247 bopd at a 95% water cut (approximately 4,750 barrels of water per day) from the Caballos and T Sands. Potential pay was identified in the A Limestone and M2 Limestone and a packer was set to temporarily isolate the active Caballos and T Sands. A 36-ft interval was perforated in the lower A Limestone, with no initial pressure or fluid flow response. The lower A Limestone interval was stimulated with acid, and a pump run to clean up the well. The well cleaned up and tested 2,023 bopd of 30 degree API oil, along with a low water cut of 1.1% over a 24 hour time period on February 25, 2017. Over the past 24 hours the production from the well has averaged 2,083 bopd with a water cut of 0.6%. CYC-2 is now the third well producing from the A Limestone formation in the Costayaco field. Production from the lower A Limestone interval will continue to be evaluated before making a decision to move uphole to perforate and stimulate an additional 18 feet of pay in the upper A Limestone, and 54 feet of pay in the M2 Limestone intervals. CYC-28 was spud on December 31, 2016 and will be the first horizontal well into the A Limestone. A pilot hole was successfully drilled into the A Limestone formation where 78 feet of core was recovered. The core showed extensive fracturing and strong oil shows including visible oil not only from the fractures but also the matrix structure of the rock. Extensive core analysis is currently underway to better understand the A Limestone throughout the Costayaco field and the Putumayo basin. While oil shows were found throughout the cored interval, a specific 25-ft interval has been identified as having the best fracture density and will be the targeted zone for the 1,000-meter horizontal leg. The well has been kicked off and was landed 8 feet below the top of the targeted 25-ft zone within the A Limestone as planned. Casing is currently being set and drilling will continue within the next couple of days. The two recompleted A Limestone wells, CYC-9 and CYC-19, continue to perform well and have produced an average of 527 and 1,587 bopd respectively (2017 year to date) of 30 degree API oil along with an average gas-oil ratio (GOR) of 201 standard cubic feet per stock tank barrel ("scf/stb") and an average water cut of 0.9%. Water injection was a key focus throughout the second half of 2016 where injection volumes were increased by 33%. Several plans are in place to continue to increase injection volumes through 2017. By converting wells to injectors, stimulating existing injectors and adding pump capacity, injection volumes should increase by another 25% through the year to provide pressure support and optimize recoveries. Moqueta Field Development (Gran Tierra 100% WI and Operator) With the previously reported increase in water injection into Moqueta, the overall GOR in this field has started to decrease and production has started to increase in a number of wells. In particular, MQT-12 production has increased by about 400 bopd since September of 2016 and is currently producing record high volumes for that well of around 1,000 bopd. We anticipate the trend to continue and therefore, we are not forecasting any oil production decline at Moqueta in 2017, with little capital requirements. On February 1, 2017, a total of 168 ft of pay was perforated across the A and M2 Limestones in the MQT19 wellbore. The final completion string was run in the hole to allow for selective stimulations and testing of each zone. An 84 gallon/ft concentration of hydrochloric acid was used to stimulate both zones and although injectivity plots demonstrated that the acid was effective, the stimulation volumes may not have been large enough to effectively access the fractures within the reservoir. A higher volume acid stimulation of this well is currently being evaluated and will be performed in the first half of 2017.
Exploration Program Update Putumayo 7 ("PUT-7") Block (Gran Tierra 100% WI and Operator) Confianza-1 is the third exploration/appraisal well drilled within the Cumplidor-Alpha field within PUT-7. This well was located on amplitudes interpreted from two dimensional (2D) seismic between the Cumplidor-1 and Alpha-1 wells. The well was spud on January 17, 2017. In addition to serving as an appraisal well for the N Sand of the Villeta formation discovered in Cumplidor-1 and Alpha-1, the well was planned to test deeper prospective horizons including the "A" Limestone and the "U" Sand of the Villeta formation. A final depth of 12,500 ft MD and of 10,118 ft TVD was reached in the Caballos formation on February 24, 2017. Based on well logs and oil show while drilling, the well has encountered interpreted oil pay in the U Sand (6 ft), the A Limestone (50 ft of gross interval with 15 ft of net pay), and the N Sand. The N Sand shows three potential reservoir intervals totaling 24 ft of net pay. The pay thickness encountered in the N Sand based on amplitudes from 2D seismic was as expected. Therefore, our confidence continues to build in the interpretation of seismic amplitudes as correlated to pay thickness. The Confianza-1 is a significant step out from current A Limestone production in the northern portion of the Putumayo Basin at Costayaco. Testing of all three interpreted zones (U Sand, N Sand and A Limestone) is planned to begin immediately with the drilling rig onsite. Information collected from this well could be helpful with the interpretation of the evolving basin-wide A Limestone play. The Cumplidor-1 well produced 19 degree API oil with a GOR of less than 100 scf/stb and a water cut of less than 1% at a rate of 236 to 1,403 bopd. A maximum instantaneous rate of 1,900 bopd was achieved just prior to jet pump failure. Progressively larger jet pump nozzles were run in the well, and the last attempt resulted in sticking a tool string and wireline in the well. The well is on the same pad as the Confianza-1 well, and a workover will be conducted once the testing on Confianza-1 is completed. Gran Tierra has obtained the regulatory approvals to acquire 95 square kilometers of three dimensional (3D) seismic starting in late second quarter 2017 in two separate programs, over the Cumplidor field area and the N Sand prospects in the central area of PUT-7 called Pomorroso and Northwest. The seismic fulfills the contractual commitments for the block in this phase. Acquiring 43 square kilometers of 3D seismic over the Cumplidor-field area is expected to provide high quality amplitude information to optimize potential future development well locations and for future waterflooding of the field. The seismic project timing was sequenced to locate the exploration wells to be drilled to the west at Pomorroso and Northwest based on 3D seismic amplitudes. These exploration wells are expected to be drilled in fourth quarter 2017. Putumayo 4 ("PUT-4") Block (Gran Tierra 100% WI and Operator) On December 30, 2016, the license was granted to drill the Siriri-1 exploration well which is planned to test both N Sand amplitudes on 2D seismic and the deeper A Limestone exploration play. Civil works are forecasted to start in early March 2017 for access road and lease construction. Putumayo 1 ("PUT-1") Block (Gran Tierra 55% WI and Operator) The Vonu-1 exploration well is expected to spud during second quarter 2017. The well is planned to be a directional drill with the pad located in the adjacent Chaza Block which contains the Costayaco and Moqueta fields. Civil works preparations are underway on the existing pad site within the Costayaco field and a contracted drilling rig is planned to be mobilized to this pad after civil works are completed. The Vonu-1 is planned to target an interpreted structural prospect, similar to the Costayaco field. It is a multi-zone prospect with potential in the Caballos formation, the Villeta U and T Sands, the A Limestone and the N Sand.
Nancy-Burdine-Maxine ("NBM") Block Gran Tierra announced the acquisition of this block from Ecopetrol late fourth quarter 2016. This block is strategic for both its infrastructure and prospective resource potential. Existing drilling pads may be used to test some of the potential exploration upside in this new block. The planned near term exploration program calls for permitting, followed by acquisition of approximately 100 square kilometers of 3D seismic, permitting of three new drilling pad locations, and then the potential drilling of several multi-zone prospects. Similar to the northern Putumayo, Gran Tierra plans to explore for N Sand, A Limestone and deeper U, T, and Caballos Sands potential in this new block. Llanos - El Porton Block (Gran Tierra 100% WI and Operator) The civil works for road access and pad construction have been completed for the Prosperidad-1 exploration well. The drilling rig has commenced mobilizing to the lease site. This well is planned to target a multi-zone structural exploration prospect with oil potential in the Mirador, Gacheta, and Une formations. Middle Magdalena Valley Basin - Acordionero Exploitation Area (Gran Tierra 100% WI and Operator) Progress is underway to obtain site access to drill the Totumillo-1 structural exploration prospect that is immediately south of the Acordionero field. The structural prospect is planned to target reservoirs of the Lisama Formation, as found in the Acordionero field. The prospect is within the Acordionero exploitation license, and the Totumillo-1 exploration well is planned to spud in the second quarter of 2017. Sinu-San Jacinto Basin - Sinu-Sinu-3 Block (Gran Tierra 51% WI and Operator) The recently acquired 2D seismic has been interpreted and a new prospect has been identified on this block called Tonga-1. An integrated scouting team is reviewing the existing environmental license for potential site access. The planned spud of this well is in late second quarter 2017. [Gran Tierra Energy Inc., 1.Mar.2017]
Gran Tierra Energy Announces Successful Putumayo Basin Bid Round Gran Tierra Energy Inc. announced that it submitted winning bids totaling a combined $30.4 million for two blocks which Ecopetrol S.A., Colombia's national oil company, offered as part of the Ronda Campos Ecopetrol 2016 (Bid Round) in an electronic live auction held on November 25, 2016. Gran Tierra's winning bids are for the Santana and Nancy-Burdine-Maxine Blocks, which are located in the Putumayo Basin. Under the terms of the Bid Round, a purchase and sale agreement relating to each block must be submitted to Ecopetrol by December 7, 2016, and executed by December 22, 2016. Gran Tierra intends to finance these acquisitions with cash on hand and available borrowings under its revolving credit facility. Ecopetrol holds operatorship and a 100% working interest (WI) in each of the Santana and NancyBurdine-Maxine Blocks. Upon execution of definitive documents relating to the purchase of these blocks, Ecopetrol will transfer ownership of the blocks' assets, contracts, permits and licenses, as well as 100% ownership of Ecopetrol's rights and obligations in respect of the oil and gas assets, by entering into assignment agreements with Gran Tierra. Each assignment agreement would be subject to the prior approval of Colombia's Agencia Nacional de Hidrocarburos (ANH).
Key Attributes of Acquisitions: Santana and Nancy-Burdine-Maxine Blocks (100% WI) -- Aggregate amount of Gran Tierra's winning bids: $30.4 million -- Gross WI 2016 average production before royalties of approximately 600 barrels of oil per day (1) (bopd) and estimated 300 bopd behind-pipe (1) -- Gran Tierra has identified potential upside with enhanced oil recovery (EOR) waterflooding techniques, and prospective resources on the new lands from "N" sands and "A" Limestone exploration plays, with mapped prospects based on existing company 2D and 3D seismic data -- Approximately 27,400 gross WI acres (1) -- Establishes a centralized transportation and production hub in the Putumayo Basin with strategic, operated, pipeline infrastructure and gathering facilities which include: - 26,000 bopd of pipeline capacity, 25,000 barrels of oil storage and capacity to load and unload 11,500 and 13,500 bopd by truck, respectively (1) - the O.M.U and O.U.S pipelines which connect Costayaco, Moqueta and Guayuyaco oil fields with Santana Station - transportation and commercialization flexibility, which is expected to further strengthen the Company's competitive advantage in the Putumayo Basin -- 26,000 bopd of pipeline capacity, 25,000 barrels of oil storage and capacity to load and unload 11,500 and 13,500 bopd by truck, respectively (1) -- the O.M.U and O.U.S pipelines which connect Costayaco, Moqueta and Guayuyaco oil fields with Santana Station -- transportation and commercialization flexibility, which is expected to further strengthen the company's competitive advantage in the Putumayo Basin Note: (1) As reported in Ecopetrol's Bid Round Summary Flyer - published December 2015 "These acquisitions are a continuation of Gran Tierra's focused strategy to build a high-quality, diversified portfolio to efficiently create value in the multi-horizon, proven hydrocarbon producing basins of Colombia," said Gary Guidry, President and Chief Executive Officer of Gran Tierra. "The Nancy-BurdineMaxine Block provides upside potential through EOR by investing in advanced drilling and waterflooding techniques. Having already established reserves and production in the Villeta N, T and U sands, the Nancy-Burdine-Maxine Block provides a core operating hub for the identified multi-horizon exploration drilling plans on adjoining Gran Tierra lands over the next 3 years." He continued: "Gran Tierra operated the Santana Block through July 2015 when the contract expired, so we know these assets well. The important fluid processing, and transportation infrastructure where we ship, under tariff, Costayaco, Moqueta and Guayuyaco production, will be the core transportation system as we explore and expand throughout the Putumayo. We will be able to scale the system as required, and maintain the efficient cost structure and appropriate investment timing being the operator of the network. As with the Nancy-Burdine-Maxine Block, the Miraflor, Mary, Linda and Toroyaco fields in the Santana Block provide upside with EOR investment, and multi-horizon exploration potential." [Gran Tierra Energy Inc., 28.Nov.2016]
D REPUBLIC AES Dominicana Terminal to Supply Gas to Caribbean, Central America The AES Dominicana Liquefied Natural Gas reception terminal, located in the AES Andres energy complex, has completed the modifications to allow for re-loading and re-exportation of LNG to neighboring Caribbean islands and Central American countries, which can now benefit from the environmental and economic advantages of natural gas. The information was provided by George Nemeth, Director of LNG Business Development at AES Mexico, Central America and the Caribbean (MCAC) during the 17th Annual Conference on Energy in the Caribbean organized by the Platts international institute, held in the Dominican Republic from January 26 to 27. According to Nemeth, nine million dollars were invested in the project to build the new installations of the "AES Andres Marine Facility," which consisted in adapting the existing LNG Reception Terminal to be a port of entry and exit for ships as small as 10,000 cubic meters, which can be filled directly from the existing LNG receiving terminal jetty. For smaller customers, AES will load LNG into ISO tanks at the Liquefied Natural Gas Truck Terminal so that LNG can be delivered via container vessels to neighboring countries. AES has recently begun exporting LNG to the Caribbean via ISO containers. Innovative project "This is a highly innovative project that counts on all the guarantees of safety and reliability in addition to the experience that all our professionals have in AES Dominicana that for more than 13 years have successfully operated the LNG terminal and during seven years the terminal to fill trucks," said AES Dominicana President Edwin De los Santos. With this project, which concluded at yearend 2016 - De los Santos says - Dominican Republic takes advantage of its excellent geographical location and becomes the first hub of Central America and the Caribbean for the import and export of natural gas, which translates into advantages of being an environmentally-friendly non-renewable energy, it's clean because it doesn't spew ash when ignited, it's non-toxic and produces lower emissions than the traditional naphtha and diesel. 2017 and a vision of clean energy and innovation.
The commissioning of the AES Andres Marine Facility is one of the projects AES Dominicana has in its portfolio and joins the large-scale battery energy storage array system at AES Andres, Itabo and DPP, first and only in the Dominican Republic and the Central American and Caribbean region, which consists of installing around 30 megawatts (MW) to contribute to the stability of the interconnected electrical system (SENI) and continue with the injection of more efficient energy into the system. The DPP combined cycle will also start operations, which will inject an additional 114 MW of clean energy. As to renewable energy, AES will add an average of 3.5 MW, through two solar projects in AES Andres and Itabo and two projects of micro hydraulic turbines, to maximize the injection of clean energy into the SENI. [AES Dominicana, 27.Jan.2017]
ECUADOR Ecuador’s Shushufindi Plant Has Capacity to Produce 20 Mb/d of LPG Ecuador's Shushufindi refinery has the capacity to bottle or fill 20,000 cylinders per day of liquefied petroleum gas or LPG, Ecuador's Hydrocarbon Ministry wrote in a twitter post, citing Oil Minister Jose Icaza Romero during a visit to the plant. [Clifford Fingers III, Energy Analytics Institute, 10 March 2017]
ICSID Orders Ecuador Pay ConocoPhillips $380 Million for Unlawfully Expropriation ConocoPhillips’ wholly owned subsidiary, Burlington Resources Inc., received an arbitration award of $380 million from an international arbitration tribunal, constituted under the International Centre for the Settlement of Investment Disputes (ICSID), for Ecuador’s unlawful expropriation of Burlington’s significant investment in breach of the U.S.-Ecuador bilateral investment treaty. “The Tribunal’s decision on damages sends a clear message that governments cannot expropriate investments without fair compensation,” said Janet Carrig, senior vice president, Legal and General Counsel. “ConocoPhillips sought to protect its interests to the fullest degree and the Tribunal acknowledged our legal rights and the unlawful nature of Ecuador’s actions.” The decision is subject to potential annulment proceedings, but the company believes any application seeking to annul the award would be meritless and ConocoPhillips would strongly defend against it. The timing and manner of collection remain to be determined. The Tribunal also issued a separate decision finding that Ecuador was entitled to $42 million for limited environmental and infrastructure impacts associated with the operations of the Consortium (comprising Burlington and Perenco). The Tribunal noted that “…while Ecuador also prevailed on part of its counterclaims, the amount awarded to Ecuador is an extremely small percentage of the amount claimed.” [ConocoPhillips, 8.Feb.2017]
Guyanaâ€™s Initial Oil Output to Surpass Trinidad, Create Ops Sleepy Guyana is gearing up to surpass twin-island nation Trinidad and Tobago in terms of oil production. Production plans by Irving, Texas-based Exxon Mobil Corporation at the promising Stabroek Block offshore Guyana will assist the small country to initially produce more oil than its Caribbean neighbor Trinidad, which has been producing oil for over a century. Exxon -- which plans to make an investment decision later this year regarding finds at the Stabroek Block, including the Liza, Liza deep and Payara wells â€“ expects production of 100,000 barrels per day in 2020 in the initial phase using a Float Production, Storage and Offloading (FPSO) unit, said Jeff Woodbury, Exxon Mobil Vice President of Investor Relations during a conference call on January 31, 2017.
“Guyana is to become the newest petrostate. It has two neighbors from which to learn what to do, Trinidad, and what not to do, Venezuela,” Francisco J. Monaldi, Ph.D. and Fellow in Latin American Energy Policy & Lecturer in Energy Economics at Rice University’s Baker Institute for Public Policy wrote in a twitter post. The Stabroek Block covers 6.6 million acres (26,800 square kilometers). The operator of the block is Esso Exploration and Production Guyana Limited with a 45 percent interest. Other partners in the block include: Hess Guyana Exploration Ltd. with a 30 percent interest and CNOOC Nexen Petroleum Guyana Limited with a 25 percent interest. Trinidad produced an average of around 72,000 barrels per day in the eleven months between January and November of 2016, according to data published in a bulletin by the country’s Ministry of Energy and Energy Industries. [Pietro D. Pitts, Special to Energy Analytics Institute, 2.Mar.2017]
ExxonMobil Announces New Oil Discoveries Offshore Guyana ExxonMobil announced positive results from its Payara-1 well offshore Guyana. Payara is ExxonMobil’s second oil discovery on the Stabroek Block and was drilled in a new reservoir. The Payara-1 well targeted similar aged reservoirs that were proven successful at the company’s Liza discovery. “This important discovery further establishes the area as a significant exploration province,” said Steve Greenlee, president of ExxonMobil Exploration Company. “We look forward to working with the government and our co-venturers to continue evaluating broader exploration potential on the block and the greater Liza area.” The well was drilled by ExxonMobil affiliate Esso Exploration and Production Guyana Limited, and encountered more than 95 feet (29 meters) of high-quality, oil-bearing sandstone reservoirs. It was safely drilled to 18,080 feet (5,512 meters) in 6,660 feet (2,030 meters) of water. The Payara field discovery is about 10 miles (16 km) northwest of the 2015 Liza discovery. In addition to the Payara discovery, appraisal drilling at Liza-3 has identified an additional high quality, deeper reservoir directly below the Liza field, which is estimated to contain between 100-150 million oil equivalent barrels. This additional resource is currently being evaluated for development in conjunction with the world-class Liza discovery. “These latest exploration successes are examples of ExxonMobil’s technological capabilities in ultradeepwater environments, which will enable effective development of the resource for the benefit of the people of Guyana and our shareholders,” Greenlee said. Drilling on Payara began on November 12 with initial total depth reached on December 2. Two sidetracks have been drilled to rapidly evaluate the discovery, and a well test is underway to further evaluate the successful well results. The well data will be analyzed in the coming months to better determine the full resource potential. The Stabroek Block is 6.6 million acres (26,800 square kilometers). Esso Exploration and Production Guyana Limited is operator and holds 45 percent interest in the Stabroek Block. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest. [ExxonMobil, 12.Jan.2017]
ExxonMobil Awards Key Contracts for Liza Oil Development and Production in Guyana ExxonMobil subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), has awarded contracts to SBM Offshore for a floating production, storage and offloading (FPSO) vessel, a key step in moving the Liza field toward first production. Under the contracts, SBM Offshore will perform front end engineering and design for the FPSO, and, subject to a final investment decision on the project in 2017, will construct, install and operate the vessel. “Liza development activities are steadily progressing, and we’re excited to reach this important milestone,” said Neil Duffin, president of ExxonMobil Development Company. “We look forward to working with the government of Guyana to develop its valuable resources, which have the potential to provide long-term, sustainable benefits to the country.” ExxonMobil submitted an application for a production license and its initial development plan for the Liza field in early December. The development plan, submitted to the Guyana Ministry of Natural Resources, includes development drilling, operation of the FPSO, and subsea, umbilical, riser and flowline systems. The Liza field has a potential recoverable resource estimate in excess of 1 billion oil-equivalent barrels and is located in the Stabroek block approximately 120 miles (193 kilometers) offshore Guyana. The Stabroek block currently comprises 6.6 million acres (26,800 square kilometers). Esso Exploration and Production Guyana Limited is the operator and holds a 45 percent interest in the Stabroek block. Hess Guyana Exploration Ltd. holds a 30 percent interest, and CNOOC Nexen Petroleum Guyana Limited holds a 25 percent interest. [ExxonMobil, 20.Dec.2016]
Guyana’s Ministry of Natural Resources Continues Engagement with Stakeholders As part of the Ministry of Natural Resources’ continuous engagement of stakeholders on preparations of Guyana’s developing oil and gas industry, the Ministry hosted a number of meetings. Members of the National Assembly including, members of the Parliamentary Sectoral Committee on Natural Resources, have also been engaged in the progress of activities as a part of regular briefs they have been provided from Minister Trotman and team at the Ministry on the progress of preparations for oil and gas production. Further, efforts are underway to reach out to a wide range of stakeholders and the relevant private sector bodies and civil society groups have already benefited from these engagements. More consultations are scheduled to share the plans and policies that have been developed for the oil and gas sector with an even wider cross-section of Guyanese. These engagements will commence during February 2017. The Ministry of Natural Resources welcomes opportunities to engage with all stakeholders for the advancement of the Oil and Gas industry in Guyana and encourages discourse that will promote understanding about the sector and transparency in its management. [Guyana Ministry of Natural Resources, 26.Jan.2017]
The Ministry of Natural Resources Clarifies Huffington Post’s Article The Ministry of Natural Resources would like to clarify for the benefit of the public an article by online media outlet The Huffington Post published on January 17, 2017. The article, headlined ‘Conflict: Tillerson would Write the Rules for Exxon’s Major Oil Find in Guyana’ inaccurately states that the United States’ Energy Governance and Capacity Initiative (EGCI) is “involved in writing oil and gas regulations for the country of Guyana, where Exxon just announced another major oil find.” There is no truth to the assertion in the article that the EGCI will be playing any part in writing Guyana’s oil governance laws, or any laws for that matter. The Commonwealth Secretariat is the lead agency supporting Guyana in preparing a suite of legislation for the oil and gas industry. The opportunity is taken to indicate that while the EGCI has been lending support to Guyana for the past six years in the area of capacity building to manage eventual oil and gas revenues, it is in no way writing oil and gas laws or regulations for this country. It is important to note that this relationship between Guyana and the EGCI programme in Guyana predates the Ministry of Natural Resources and the current Coalition Administration as it commenced in 2010. Indeed, the Government of Guyana has had many engagements with the officials of the United States’ Department of State as part of the capacity building initiative. However, the EGCI programme has only been partially implemented through a series of scoping studies that were conducted in 2016. The EGCI can be a useful programme once implemented and is but one in a raft of assistance measures that Guyana is receiving to bolster and in some cases build capacity in oil and gas governance. [Guyana Ministry of Natural Resources, 19.Jan.2017]
Mexicoâ€™s Fuel Consumption in January 2017 Mexico consumed 193 million liters of fuel in January 2017, state oil company PetrĂłleos Mexicanos (Pemex) Gasolinera wrote in a twitter post. Of the total consumption, approximately 130 million liters or equivalent to 817,000 barrels per day (67 percent of total consumption) corresponded to PEMEX Magna and PEMEX Premium grade gasolines. The remaining 63 million liters or equivalent to 396,000 barrels per day (33 percent of total consumption) corresponded to PEMEX Diesel. [Fidencio Casillas, Energy Analytics Institute, 12.Mar.2017]
Mexico’s Gasoline Price Lowest in LAC Region, Uruguay’s the Highest The average gasoline price in Mexico, the largest Spanish speaking country in the Americas, is still the lowest amongst select countries in the Latin American and Caribbean (LAC) region. Mexico’s average gasoline price of 15.9 Mexican pesos per liter remains the lowest among select countries in the LAC region, according to data published by state oil company Petróleos Mexicanos S.A. de C.V. (Pemex). Uruguay, with an average gasoline price of 29.3 Mexican pesos per liter, is the Southern Cone country in the LAC region with the highest average gasoline price, followed thereafter by Cuba in the Caribbean and then Belize in Central America. Country
Gasoline Price in Mexican Pesos per Liter
Uruguay Cuba Belize Brazil Dominican Republic Chile Argentina Costa Rica Peru Paraguay Honduras Nicaragua Mexico
29.3 27.3 24.4 23.7 23.3 23.1 23.1 20.2 20.2 20.0 19.6 19.0 15.9
Source: Pemex Gasoline prices in Mexico increased -- effective as of January 1, 2017 -- as part of a plan by the government to boost fuel prices in line with international oil prices, said Mexican President Enrique Pena Nieto in a speech broadcast on Mexico’s Televisa television station. [Fidencio Casillas, Energy Analytics Institute, 16.Jan.2017]
Mexico’s Double-Digit Gasoline Price Increase, Effective 1 January 2017 The prices of gasoline in Mexico is set to increase gradually and up to 20 percent on average, effective January 1, 2017, although the increases were originally planned to take place in 2018, reports La Radio del Sur. With the stipulated price increases the different octane grades of gasoline in Mexican pesos per liter will reach the following price ranges: - Magna 87 octane: currently 13.98 pesos, to increase 18.2 percent to 16.52 pesos - Premium 93 octane: currently 14.81 pesos, to increase 24.2 percent to 18.40 pesos - Diesel: currently 14.63 pesos, to increase 17.8 percent to 17.24 pesos
In Mexico’s principal cities the price increases will be higher than the national average, La Radio reported. In cities such as Mexico City, Puebla, Monterrey and Guadalajara, the price increases will be higher as well as in certain municipalities such as the state of Mexico as revealed by Mexico’s Regulatory Energy Commission (CRE by its Spanish acronym). Puebla will be the city with the highest gasoline prices as of January 1, 2017. In this city, located about 131 kilometers southeast of Mexico City, the price of Magna gasoline will reach 16.59 Mexican pesos per liter, up 18.7 percent or 2.61 pesos compared to 13.98 pesos before the implementation of the price increase. The new gasoline prices in Mexico will now surpass prices in other selected countries as follows: USA (13.67 pesos/liter), Colombia (14.61 pesos/liter), Bolivia (10.77 pesos/liter), and Iraq (13.05 pesos/liter), according to La Radio. [Fidencio Casillas, Energy Analytics Institute, 5.Jan.2017]
President Peña Nieto Presides the March 18th Commemoration Ceremony Mexican President Enrique Peña Nieto presided over the commemoration ceremony on March 18, 2017 at the maritime terminal of Ciudad del Carmen, Campeche. He assured that Petróleos Mexicanos is the most representative company of Mexico and an important part of the country’s national identity. “We are,” he said, “on the right path to turn Pemex into a synonym of operating efficiency and financial reliability so that, with its invaluable human capital, it can spearhead the global oil industry.” The General Director of Pemex, José Antonio González Anaya, affirmed that Pemex is being transformed with the advantages and opportunities provided by the Energy Reform, which was promoted by the president and approved by congress. He pointed out that Pemex has set its course, and for the first time, has prepared a Business plan that has become the axis of this transformation. "Today, we celebrate the birth of the national oil industry and the strength that lies behind this great company: its workers, who push it forward day to day." Thanks to their hard work and efforts, he added, we are turning Pemex around with direction and determination. During this event, the President instructed Pemex to build the Peninsular Project this year. With the installation of ducts and storage terminals, Progreso and Mérida will be connected with Cancún to supply fuels in the cheapest, most efficient way for the states of Quintana Roo and Yucatán, with an investment of $185 million. The president made a symbolic handover of the modern habitational vessel “Reforma Pemex”, with a capacity for housing 700 workers who operate on platforms in the Sonda de Campeche. González Anaya remarked that the Energy Reform is changing the way that business is made, because with the alliances, the company can now do more with the same resources. “The great oil companies have also been looking to Pemex’ transformation, as proven by the recent associations that have been established. The Energy Reform goes forward and Pemex, which has been a part of the modern history of Mexico, becomes stronger,” said Anaya. “The development of our country cannot be understood without Petróleos Mexicanos, which will continue, for many years to come, being the flagship company of Mexico,” he emphasized. The General Secretary of the Union of Oil Workers of the Mexican Republic, Carlos Romero Deschamps, pointed out that the workers have never ceased to honor their commitment to Pemex and to México. There is no doubt, he said, that together, we will once more go down the road of progress.
During the ceremony, the first great alliance established by Pemex with the Australian company BHP Billiton to develop the Trion field in the deep waters of the Gulf of Mexico, which will entail an investment of $11 billion. Likewise, for the first time, Pemex competed for an oil field that was not assigned to the company in Round Zero and, as a consortium with the U.S. company Chevron and the Japanese company Inpex, it won the bidding process for the exploration of Block 3 North in the deepwater field of Cinturón Plegado Perdido. Pemex also grows stronger in matters of refining, with the first alliance to modernize the hydrogen plant in the Tula refinery. This will allow for savings of 30 percent in the supply of this product, and to increase production based on operating improvements. In this way, the company will be able to transfer part of the risks to a third party and thus absorb the most advanced technology of the industry. [Pemex, 18.Mar.2017]
Pemex Director Visits Families of Workers Injured in Salamanca Terminal Accident José Antonio González Anaya, General Director of Petróleos Mexicanos, met with the family members of the workers who were injured in the explosion of the Dispatch Terminal in Salamanca. He visited the family of the worker who is being cared for at the Hospital in Picacho in Mexico City. He reassured all of them that they will continue to receive all the support that they should require as the best possible care. Together with the governor of Guanajuato, Miguel Márquez Márquez; the senator Carlos Romero Deschamps, General Secretary of the STPRM, and the mayor of Salamanca, Carlos Antonio Arredondo Muñoz, the head of Pemex walked through the filling area of the TAD (Dispatch and Storage Terminal) where the accident occurred. He ratified the commitment of the company to fully support the investigations currently being made by the Safety, Energy and Enviroment Agency (ASEA, as per its Acronym in Spanish), the Ministry of Labor and Social Security, and the Office of the Attorney General of the Republic, which seek to find the root cause of the accident. On his part, senator Romero Deschamps also expressed is solidarity and support for the families of the injured workers. Governor Márquez gave his deepest condolences and highlighted that there has been a close and permanent communication with Pemex regarding all the matters connected to the accident. Regrettably, two hours after this visit, one of the workers from the private company, who was receiving healthcare at the Regional Hospital in Salamanca, passed away. Pemex expresses its deepest condolences to his family and friends. The three workers who are currently receiving care at the Pemex Hospital in Picacho in Mexico City, the Regional Hospital in Salamanca, and the Burns Hospital in Salamanca, shall continue to receive appropriate care, and their families will continue receiving the company’s full support. [Pemex, 17.Mar.2017]
The First Open Season Auction will be Replaced Before the end of March Last December 20th, the application period for those interested in participating in the first Open Season auction, was opened. From March 10, they submitted their financial proposals for the capacity reserve for storage and transport by duct. According to the Schedule, the winners of this auction for the states of Baja California and Sonora will be announced. The services to be offered again are: nine storage systems (Rosarito, Ensenada, Mexicali in Baja California, and Hermosillo, Guaymas, Ciudad Obregón, Navojoa, Magdalena and Nogales en Sonora), as well as four duct transport systems (Rosarito to Ensenada, Rosarito to Mexicali, Guaymas to Hermosillo and Guaymas to Ciudad Obregón). Petróleos Mexicanos and the Energy Regulatory Commission have informed that this Open Season auction will be replaced with a new procedure before the current month is over. This, due to problems encountered with the methodology. Those companies that have already been prequalified will participate in this new process, without the need to hand in any new documentation or securities. Pemex and the CRE will indicate the steps that are to be followed during the replacement of the proceeding, in order to guarantee máximum transparency and certainty for both the participating companies and the general public. [Pemex, 15.Mar.2017]
Pemex Director Holds Several Meetings with Leaders of the Worldwide Oil Sector The General Director of Petróleos Mexicanos, José Antonio González Anaya, had an intense activity during CERA week, the most important event of the oil industry globally, which is held annually in the city of Houston. Throughout three days, he met with directors of various oil companies and financial institutions. During the event, he held a fruitful meeting with the Governor of Texas, Greg Abbott, with whom he reviewed alternatives for the development of joint projects and businesses with entrepreneurs from that state, which concentrates some of the largest oil activities in the world. Likewise, the head of Pemex undersigned two memoranda of understanding with British Petroleum and the Colombian Ecopetrol to establish a framework of cooperation that will allow for the exchange of technical knowledge, information and experience. Business development opportunities with diverse segments of the hydrocarbon industry will also be explored. During the event, González Anaya was invited as keynote speaker, and in his speech, he referred to Pemex’ progress in the implementation of its Business Plan and its perspective in looking ahead. He also detailed the alliances strategy in the different business lines, both with regards to exploration and production and in industrial transformation. He highlighted the undersigning of the first contracts of Pemex in deep waters, with Chevron and Inpex in block 3 North, and with BHP Billiton in the Trion Block, both located in the Cinturón Plegado Perdido. He pointed out that these achievements have been made possible thanks to the advantages granted to the company by the Energy Reform.
The Director of Pemex held a meeting with the presidents of BP, Bob Dudley; Ecopetrol, Juan Carlos Echeverry; Total, Patrick PouyannĂŠ; Statoil, Eldar Saetre; Petrobras, Pedro Parente; Conoco Phillips, Ryan Lance; Anadarko, R. Al Walker; Vopak, Eelco Hoekstra; Honeywell, Darius Adamczyk; Tesoro, Gregory Goff; Hunt Oil, Hunter Hunt; Energy Transfer, Kelcy Warren; Air Products, Seifi Gasemi, and Enesa, Jaime Chico Pardo. He also held talks with the president of Chevron for Latin America and Africa, Clay Neff; with the executive director of the International Energy Agency, Fatih Birol, and with the directors of Goldman Sachs, Maria Jelescu; of Apollo Global Management, John Bookout, and of the Massachusetts Technological Institute, Robert Armstrong. The purpose was to tighten the bond with global leaders of the sector and to analyze the possibility of establishing future alliances and collaboration that will help to strengthen the State Productive Company. As part of the activities of his tour, he also visited the Deer Park refinery that Pemex holds in partnership with the Anglo-Dutch oil company Shell. He held a work meeting with the directors of both the company and the refinery, where he witnessed how well this association, which has held for 24 years, is progressing. [Pemex, 8.Mar.2017]
The Process for the Pemex Second FarmOut Begins The approval of the bidding process for the selection of a partner for the exploration and extraction of the Ayin and Batsil fields in the coastline of Tabasco, it strengthens the PetrĂłleos Mexicanos strategy to establish associations to stabilize the oil production and to begin increasing it in a profitable, safe, and sustainable manner. The National Hydrocarbons Commission published the terms of the said bidding process in the modality of a shared production contract in shallow waters. This is the second association or farm-out entered into by Pemex, with which it will have strategic associations in both shallow and green waters. As it occurred for the Trion field, Pemex joins the bidding rounds of the CNH, as this process will be a part of Round 2.1, the results of which will be disclosed on June 19. So, the Pemex Business Plan continues to be applied, which considers that it is fundamental to take advantage of the instruments provided by the Energy Reform in order to make alliances and associations. This way, it will be possible to increase the availability of resources to increase production and accelerate the financial recovery of the company. The Ayin and Batsil fields contain total 3P reserves of nearly 300 million barrels of crude oil equivalent. They cover an area of 1,096 square kilometers with a waterway of 82 meters in the Batsil field and of 176 metres in the Ayin field, a depth that surpasses that of all the fields that Pemex has developed in shallow waters. The block includes a total of 12 wells (10 exploratory wells and two development wells), mainly of heavy crude, as well as medium crude and dry gas. The exploration success probability is greater than 50 per cent. It is estimated that initial production will occur in 2020, with a maximum of almost 80 thousand barrels per day over the following years.
These fields are located 50 kilometers from the port of Frontera, Tabasco, and 70 kilometers of great fields, such as Ku Maloob Zaap and Cantarell. They have a nearby preexisting infrastructure, such as Dos Bocas marine terminal in Tabasco and the island of Ciudad del Carmen, in Campeche, as well as an established supply chain. Due to the above, it is a very attractive block for its commercial and expedited development. [Pemex, 7.Mar.2017]
Pemex and BHP Billiton Sign Agreement to Develop Deep-Water Trion Block Petróleos Mexicanos and the Australian company BHP Billiton signed an agreement to develop the deep-water Trion Block during an event hosted by the President of Mexico, Enrique Peña Nieto. This is the first farm out agreement that Pemex has undertaken to explore and produce and is the result of a greater degree of flexibility and mechanisms stemming from the Energy Reform. The Trion Block, discovered by Pemex in 2012, has 3P reserves totaling 485 million barrels of crude oil equivalent, meaning that this is a commercially viable venture. President Peña Nieto commented said that the Energy Reform not only opens new investment possibilities to private companies, but that it gives Pemex an opportunity to modernize itself. This type of association that Pemex kicks off will allow Pemex to reinvent itself in the next years, he emphasized. Also, he recognized the workers of Pemex for the efforts undertaken to date, which has allowed the company to improve its financial situation. With regard to this partnership, the CEO of Pemex, José Antonio González Anaya, commented on how it represents a milestone in the history of this State-run company, given that, for the first time ever, a field, which was assigned during Round Zero by the Ministry for Energy, will be developed in partnership with a global leader in the industry. He explained that this partnership will enable Pemex to continue aligning its operations with international best practices, in addition to sharing financial, technological and geological risks. This alliance strengthens Mexico, he added. The CEO of BHP Billiton, Andrew Mackenzie, stated that this agreement was a historic moment for Mexico and the beginning of a new chapter in the working relationship between BHP Billiton and Pemex. “It is an honor to be the first international company to work alongside the people of Mexico in developing their oil resources, ensuring mutual benefit for all,” said Mackenzie. BHP Billiton is the one of the world’s biggest mining-oil company in the world, with more than 15 years of history and presence in 12 countries. It has successfully developed oil fields on the US side of the Gulf of Mexico and has one of the lowest accident indexes in the industry. PEMEX is the world’s number 9 company, internationally recognized for its results in shallow waters and onshore fields. It has more than 70 years of experience exploring Mexican territory, and 15 years systematically exploring Perdido. In June, Pemex’s Board of Directors approved the development of the Trion Block, which Pemex had been assigned, with this partner. On July 27th, the Mexican National Hydrocarbons Commission (CNH) approved the terms and conditions for the bidding process, which took place on December 5th. The winner of this transparent and competitive process was BHP Billiton.
Trion has a depth of more than 2,500 meters, and is located 200 kilometers east of Matamoros, Tamaulipas, and 40 kilometers from the maritime boundary of the Gulf of Mexico. The development of the project, as a whole, will require an investment of $11 billion, and it is estimated that primary production will begin in six or seven years, with more than 100,000 barrels of crude oil equivalent per day. The exploratory studies will be undertaken jointly by the Pemex-BHP Billiton consortium and will provide further information about the existing and potential reserves. The event, held at the President’s Official Residence, Los Pinos, was attended by the Minister for Energy, Pedro Joaquín Coldwell; the Chairman of the CNH, Juan Carlos Zepeda; President Operations, Petroleum at BHP Billiton, Steve Pastor; the President of BHP Billiton Mexico, Timothy Callahan; the Director of Pemex, Exploration and Production, Javier Hinojosa; the Australian Ambassador to Mexico, David Engel; and the Secretary General of the STPRM, Carlos Romero Deschamps. As Pemex takes on new challenges in deepwater exploration and production, the company begins a new era. With these type of alliances Pemex advances the implementation of its energy reform, which allows us to work together in favor of Mexico. [Pemex, 3.Mar.2017]
Renaissance To Partner With Lukoil In Mexico To Develop Amatitlán Oil Block Renaissance Oil Corp. announced that PJSC LUKOIL, one of the world’s largest oil producers, has chosen Renaissance as their partner for the Integrated Exploration and Production Contract for the 230 km2 (56,800 acres) Amatitlán block, near Poza Rica, Veracruz, Mexico. Highlights -- Renaissance acquires 25% indirect interest in Amatitlán contract for US$1,750,000 -- Finalizing options to acquire up to 62.5% -- Renaissance will take the lead role in operations -- Amatitlan holds 4.2 billion barrels of oil and 3.33 trillion cubic feet of natural gas originally in place in shallower Chicontepec formation1 -- Deeper oil-rich Upper Jurassic shales are highly prospective for development About the Amatitlán Block The Amatitlán block is located within the Tertiary aged Chicontepec paleochannel formation, in East Central Mexico. The Chicontepec formation, referred to as Aceite Terciario del Golfo in Mexico, covers approximately 3,800 km2 and contains the country’s largest hydrocarbon resource, with certified original oil in place estimated at 59 billion barrels of oil equivalent. “The Upper Jurassic shale interval is widely considered to be the major carbonate source rock for the oilrich Chicontepec formation but the Upper Jurassic formations have not been commercially developed,” stated Renaissance Chief Geochemist Dan Jarvie. “Renaissance’s analysis indicates the Upper Jurassic interval is an oil-rich, hybrid system in the Amatitlán block and is highly prospective for targeted stacked pay development of this thick unconventional resource.”
“Innovations in drilling and completion techniques have dramatically improved recoveries in tight oil formations and shales throughout the United States and Canada”, said Renaissance Drilling and Completions Advisor Nick Steinsberger. “Our goal is to apply modern oilfield development technologies in Amatitlán to re-establish production in the underdeveloped Chicontepec formation and to commercialize the Upper Jurassic shale formations.” Discovered in 1962, and still largely undeveloped, the main field Amatitlán has produced over 175,000 bbls of light oil ranging from 34° to 44° API with peak production of 650 bbl/d in 2005. As a result of the lack of recent drilling and development activities on the Amatitlán Block, production has currently declined to negligible volumes. The Comisión Nacional de Hidrocarburos evaluation of resources effective January 1, 20161 estimates Amatitlán contains, in the Chicontepec formation only, 4.2 billion bbls of crude oil and 3.33 trillion cubic feet of natural gas originally in place. Previous exploration wells on the Amatitlán block have shown the presence of oil and natural gas at various depths of drilling throughout the block. The Integrated Exploration and Production Contract for Amatitlán allows for the development of the full stratigraphic column, however, to date oil has been produced only from the Chicontepec formation. Transaction Overview Renaissance has entered into a definitive agreement with LUKOIL and Marak Capital S.A. whereby the company will acquire an indirect 25% interest from Marak in Petrolera de Amatitlán S.A.P.I., the contractor of the Integrated Exploration and Production Contract for the Amatitlán block for $1,750,000. Marak currently owns a 50% indirect interest in Petrolera, with the remaining 50% held by LUKOIL. The company and LUKOIL have agreed that Renaissance will take the lead role in operations for Petrolera for joint development of the Amatitlán block currently held by Pemex-Exploración y Producción. The Integrated Exploration and Production Contract is expected to migrate into a Contract of Exploration and Extraction in Q4 2017 with an improved fiscal regime, pursuant to the constitutional amendments of December 20, 2013 reforming the Mexican Energy Industry. Upon closing of the Transaction, and with the expected migration to a Contract of Exploration and Extraction (“CEE”), the Amatitlán CEE will join the existing portfolio of four CEEs now held by Renaissance. Renaissance is finalizing separate option agreements whereby Renaissance will have an exclusivity period to increase its participating interest in Petrolera up to 62.5%, by acquiring a further 12.5% from Marak and 25% from LUKOIL, upon migration of the Integrated Exploration and Production Contract to a CEE. Renaissance expects the closing of the Transaction to occur in late January 2017. “Renaissance, while playing the lead role in operations, is delighted to be working alongside LUKOIL in order to fully develop this high potential property,” stated Renaissance Chief Executive Officer Craig Steinke. “Amatitlán is a strong strategic fit for Renaissance as the leading independent on-shore oil field operator in Mexico with a solid technical team of global experts in shale resource development.” [Renaissance Oil Corp., 11.Jan.2017]
PANAMA VTTI Announces Acquisition In Panama VTTI B.V., an independent provider of energy storage, announced an acquisition of a 230,000 m3 facility in Panama, resulting in a joint venture between VTTI and Global SLI. This deal sees VTTI take a 75% interest in PetroAmerica Terminal, S.A. (PATSA), a terminal strategically located on the Pacific side of the country, close to the Panama Canal, with a wide range of refined products storage. [VTTI B.V., 25.Jan.2017] SUBSCRIBE TO THE LATAM NRG BRIEF
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PERU GeoPark’s Morona Block Approval GeoPark Limited obtained final regulatory approval for its acquisition of the Morona Block in Peru. In its first project returning to the upstream business, the Peruvian state-owned company Petróleos del Perú S.A. (Petroperu) awarded a 75% working interest (“WI”) in and operatorship of the Morona Block to GeoPark by a Joint Investment and Operating Agreement dated October 1, 2014, and its amendments. The agreement was subject to Peru regulatory approval, which was completed on December 1, 2016 following the issuance of Supreme Decree 031-2016-MEM. The Morona Block covers an area of 1.9 million acres in the Marañón Basin, a priority target basin for GeoPark and one of the most prolific hydrocarbon basins in Latin America, with over 1 billion barrels of oil produced. The Morona Block contains the Situche Central oil field, which has been delineated by two wells (with short term tests of approximately 2,400 and 5,200 bopd of 35-36° API oil) and by 3D seismic. The block also includes extensive geophysical surveys, an operating field camp and logistics infrastructure. The area has undergone oil and gas exploration activities for the past 40 years, with ongoing association agreements and cooperation projects with the local communities. DeGolyer & MacNaughton, the independent reserve engineering firm, has certified 2P reserves of 40.2 million barrels of oil (mmbo) and 3P reserves of 82.9 mmbo for the Situche Central oil field (at 100% WI) with no oil-water contact yet encountered in the field. Gaffney, Cline & Associates has audited a maximum unrisked upside potential in the Situche Central oil field to be approximately 200 mmbo (at 100% WI). The total Morona Block also includes a large exploration potential with high impact prospects and plays – including gross unrisked exploration resources ranging from 300 to 500 mmbo, as audited by Gaffney, Cline & Associates. In accordance with the terms of the Agreement, GeoPark has committed to carry Petroperu on a work program that provides for testing and start-up production of one of the existing wells in the field, subject to certain technical and economic conditions being met. Expected capital expenditures in 2017 for the Morona Block are mainly related to facility maintenance and environmental and engineering studies. “We appreciate the support of the Peruvian government to advance the Morona Block and we very much look forward to partnering with Petroperu and the local communities in developing and exploring this exciting project,” said GeoPark Chief Executive Officer James F. Park. “ The Morona Block is the type of high-value project we look for in Latin America – with an already-discoered big oil field and the opportunity to convert existing reserves into production and cash flows, combined with high impact exploration potential in a proven and prolific hydrocarbon system. The timing and size of this project also fits very well within GeoPark’s existing high quality portfolio of production and exploration assets across the region and represents an important piece of GeoPark’s ambitious medium to long term growth plans.” [GeoPark Limited, 1.Dec.2016]
TRINIDAD LGO Receives Approval for Mayaro Sandstone Infill Wells in Trinidad LGO Energy plc provided a further update on its plans to recommence production drilling at the Goudron Field in Trinidad following its announcement of December 21, 2016. The company's local operating subsidiary, Goudron E&P Limited (GEPL), received approval from the Petroleum Company of Trinidad and Tobago (Petrotrin) and the Ministry of Energy and Energy Industries (MEEI) for the first of its planned Mayaro Sandstone infill wells, currently designated H18E G11(5). That well will be drilled vertically to a total depth of 1,250 feet and is expected to intersect the Mayaro Sandstone oil pay between 650 and 1,050 feet. GEPL has awarded a drilling contract to Trinidad specialist drilling contractor Sadhna Petroleum Services Company Limited for the drilling for two firm and a number of optional wells on a turnkey drilling basis using a small footprint conventional (rotary table) drilling rig. Site preparation will be conducted by Sadhna and will commence as soon as practical, after which rig mobilisation and drilling are anticipated to commence without delay. Individual wells are expected to take about 14 days to drill and complete for immediate production. LGO has engaged Bedrock Drilling Limited, a UK based specialist drilling engineering company, to provide drilling engineering supervisory support to the drilling program. Bedrock will provide a site supervisory team during drilling and additional engineering and advisory support to GEPL. Permission to drill the second Mayaro Sandstone infill well in the program, designated H18E N4, was sought from Petrotrin and the MEEI in December 2016 and approval is expected to be received shortly after which site preparation is expected to commence immediately following the site work at H18E G11(5). GEPL has outline approval for up to 45 new wells in the Goudron Field and a program of up to 70 infill production wells to the field-wide Mayaro Sandstone oil pay is contemplated, commencing with the current initial well program which will be expanded based on results and the availability of funding. The information contained in this announcement has been reviewed and approved by Neil Ritson, Chief Executive Officer and Director for LGO Energy plc, who has over 38 years of relevant experience in the oil industry. Mr. Ritson is a member of the Society of Petroleum Engineers (SPE), an Active Member of the American Association of Petroleum Geologists (AAPG) and is a Fellow of the Geological Society of London (BGS). [LGO Energy plc, 4.Jan.2017]
Photo source: PDVSA
COMMENTARY: Venezuela and Trinidad: Natural Gas, LNG, and Missed Opportunities Eighteen years after Trinidad and Tobago starting shipping liquefied natural gas (LNG), Venezuela is finally close to doing the same. Well it’s not quite ‘game on’ yet and at least not for now. Venezuela and Trinidad recently signed an agreement that could finally see Venezuela export its massive natural gas resources located off its eastern coast. The catch: it will initially have to use the infrastructure of its smaller twin-island nation neighbor, which in 1999 beat Venezuela to the punch in terms of constructing the first LNG exporting terminal in the Latin America and Caribbean (LAC) region. Nonetheless, Venezuela inched even closer to fulfilling its long-time goal to commercialize its massive gas resources which totaled 201.349 trillion cubic feet (Tcf) at year-end 2015, the last year official data was released by state oil company Petróleos de Venezuela, S.A. Of that figure, approximately 50 percent was associated with crude oil and the other non-associated. The gas supply deal -- signed in Caracas by Venezuela’s Petroleum Minister Nelson Martínez and Trinidad’s minister in the Office of the Prime Minister and Office of the Attorney General Stuart Young -includes construction, operation and maintenance of a gas pipeline that will span 30 kilometers from Venezuela’s Dragón Field to Trinidad’s Hibiscus Field, reported Venezuela’s Petroleum Ministry in an official statement. The project also contemplates connection with the Hibiscus-Lisas gas pipeline, and supplying Venezuelan gas to Trinidad for domestic usage as well as supplying a LNG plant for commercialization in international markets.
“This is an agreement where the parts have a clearly defined compromise and objective,” reported the ministry, citing Martínez. “In the case of Venezuela, the Dragón Field project has interesting perspectives and can generate gas for the [Venezuelan] internal market and for export.” The deal will benefit three companies: PDVSA as well as the National Gas Company of Trinidad and Tobago (NGC) and Shell via a Special Purpose Vehicle or SPV conformed of the two Trinidadian companies, the ministry reported. HISTORIC AGREEEMENT The initial agreement will allow the companies to leverage use of existing infrastructure already in place on the Trinidad side of the maritime border that separates the two Caribbean nations, advance negotiations and identify the best conditions for the companies and the project. The historic agreement pretends to boost trade and unity between Trinidad and Venezuela and should for this reason be of interest to countries in LAC region as it stands to better relations with CARICOM countries since it advances the vision of an integrated Caribbean region. The deal comes at a time when Trinidad’s declining gas reserves are failing to produce sufficient supply to cover the nation’s gas demands, and cash flow problems in Venezuela have pushed this nation to the brink of a major financial default. “We are very close to achieving our objectives and we can continue to strengthen relations not only in the energy area but also in education and culture,” said Young. Venezuela -- the country with the world’s largest oil reserves and eighty largest gas reserves – continues to suffer a corruption and revenue mismanagement induced economic crisis that was already present when oil prices started their decline nearly three years ago. The country, which relies on its oil sector to generate 96 percent of its foreign export earnings, is looking to boost production of non-associated gas to supply its domestic market and reduce the use of fuel imports to generate energy and for export in order to diversity its foreign export revenue matrix. Oil companies from the U.S.’ Chevron Corporation to France’s Total have reduced investments to a minimum in Venezuela’s oil sector due to issues ranging from late payments from PDVSA to continuous changes to the rules of the game, and where PDVSA is stipulated by law to have a controlling interest in all projects. Despite the issues facing Venezuela’s oil sector, the same faith has not stopped investment flows into the offshore gas projects where foreign companies can still retain a controlling interest in the projects. One needs to look no further that the Cardon IV offshore natural gas project which starting production in 2015 and which partners Italy’s Eni and Spain’s Repsol. PDVSA has a right to back-in to the project but has yet to exercise the option owing to a lack of cash. Venezuela’s Information Ministry, the clearing house for all questions regarding the country, and media officials at PDVSA didn’t immediately reply to an e-mail request for comments about the Cardon IV, Mariscal Sucre or Deltana Platform offshore gas projects or the agreements with Trinidad and Tobago. MISSED OPPORTUNITY Venezuela’s plans to export gas have been a long time coming and especially when one considers the initial plans for a gas project in the 1990s dubbed the Cristobal Colon project, which was under study by the then Lagoven, Shell, Exxon, and Mitsubishi as a potential LNG export project for gas produced from Venezuela’s offshore Sucre state. Twelve years ago Shell Venezuela S.A. was slated to develop two offshore gas fields in conjunction with PDVSA and Mitsubishi as part of greater Mariscal Sucre Liquefied Natural Gas (MSLNG) project in Venezuela. However, the then president of Venezuela, Hugo Chavez Frias, announced that PDVSA would develop the fields on its own, in essence pushing Shell Venezuela out of the project.
Chavez, who had announced he would recoup Venezuela’s oil sovereignty, also had other ideas for Venezuela’s gas reserves. Back then, Chavez created a major buzz in the region with his idea to build a massive Great South American Pipeline that would span from Venezuela to Brazil to Argentina. With an estimated price tag of $15-$20 billion, that project idea was soon relished to just that, an idea. Fast forward to today and Venezuela -- home to looting induced by scarcities of essential medicines and basic foodstuffs from water to milk, and the world’s highest inflation -- is finally just about ready to export its initial gas molecules. Initial gas production offshore Venezuela commenced in 2015 at the Cardon IV project. That coupled with future production from the Mariscal Sucre and Deltana Platform projects is expected to boost the country’s gas production, help it alleviate a long-running gas deficit in the highly industrialized western region and allow for a ramp-up in gas exports. The latter will be achieved initially with Trinidad’s existing infrastructure and someday via the CIGMA LNG plant in Guiria, Venezuela. WIN-WIN The new gas deal falls under guidelines set forth by Venezuelan President Nicolás Maduro who assured that his country was “working on its border politics, with gas blocks, and reaching agreements that were a win-win for both countries.” Still, widespread uncertainties continue in Venezuela related to the longevity of the current government and the future of this energy-rich country should it finally seek financial assistance from international agencies. Likewise, it is still unclear the extent to how the current opposition controlled National Assembly will view this deal and others like it signed by the administration of Maduro should a regime change final come. Trinidad has stepped up to the plate in recent years during Venezuela’s varied crises when other countries have shied away for whatever reasons, and also offered widespread expertise to Guyana to assist that small country develop and commercialize its recent oil discoveries in a region disputed by Venezuela as its own. Just how long the good times will last between Trinidad and Venezuela is anyone’s guess. But, operational issues have to be considered as well. How quickly can Venezuela ramp up production offshore in its eastern region? Will Trinidad’s demand in the internal market consume most of its Venezuelan gas imports and thus reduce potential gas for export in the form of LNG? These and other lingering questions specific to Venezuela under Chavez and now Maduro should provoke any number of emotions among investors ranging from happiness to uncertainty even when there appears to be light at the end of the tunnel. [Pietro Donatello Pitts, Special to Energy Analytics Institute, 26.Mar.2017]
Twitter: Maduro Says #Venezuela Moving Towards Oil Industry Restructuration “Venezuelan President Nicolas Maduro says ‘we’re going towards a restructuration of the (oil) industry’ and names Nelson Martínez, the actual president of Houston-based Citgo Petroleum Corporation, as Venezuela’s Petroleum Minister. Martínez replaces Eulogio Del Pino in this position. Del Pino retains his post as the president of PDVSA. The announcement is a departure from the dual post assignments held by Del Pino and his former boss Rafael Ramirez, who also simultaneously held the posts of oil and mining minister and president of PDVSA, as the Caracas-based company is known. I view any separation of persons and/or powers between the two entities (PDVSA and the oil ministry) as a good starting point for further restructuring and much-needed and welcomed restructuring to come to the industry, if it indeed does,” wrote contributing writer Pietro Donatello Pitts in a series of Twitter posts. [Energy Analytics Institute, Aaron Simonsky, 4.Jan.2017]
Venezuela Holds 8th Largest Gas Reserves Worldwide Venezuela, the country with the world’s largest crude oil reserves, also continues to hold the world’s eighth largest accumulation of natural gas reserves (see table below), according to BP’s Statistical Review of World Energy. Top Ten Holders of Natural Gas Reserves Worldwide Rank
Natural Gas Reserves (Tcf)
1 2 3 4 5 6 7 8 9 10
Iran Russia Qatar Turkmenistan USA Saudi Arabia United Arab Emirates Venezuela * Nigeria Algeria
1,201.4 1,139.6 866.2 617.3 368.7 294.0 215.1 198.4 180.5 159.1
Source: BP * Note: PDVSA reported that Venezuela’s natural gas reserves were 201.349 trillion cubic feet (Tcf) at year-end 2015, the last time the company reported annual auditing operational data. Of this total, 64.916 Tcf corresponded to associated gas in the Hugo Chávez Heavy Oil Belt, and 36.452 Tcf corresponded to associated gas related to extra heavy oil in Venezuela’s Eastern Basin, according to PDVSA data. [Piero Stewart, Energy Analytics Institute, 11.Mar.2017]
Venezuela’s Jusepin 200 Plant to Assist PDVSA Gas Reduce Flaring PDVSA said that the start of the Jusepin 200 gas processing plant will allow its affiliate PDVSA Gas to reduce gas flaring by 100 million cubic feet per day (MMcf/d), announced Venezuela's oil ministry in a twitter post. The compression plant, located in the NIF Complex (Hato El Limón), is comprised of four compression trains with capacity to handle 200 MMcf/d of gas at a level of 60 pounds per square inch gage (PSIG). [Piero Stewart, Energy Analytics Institute, 11.Mar.2017]
Venezuela’s Guri Dam Water Level 12 Meters Above 2016 Levels The water level at Venezuela’s Guri Dam was at 261 meters above sea level as of March 1, 2017, and up 12 meters over the same period in 2016 when the water level was at 249 meters above sea level, reported the daily newspaper El Universal, citing Venezuela’s Electric Energy Minister Luis Motta.
In 2016, the water level at the Guri Dam -- the fourth largest hydroelectric power plant in the world in terms of generating capacity -- fell to 241.35 meters above sea level on May 28, 2016. [Piero Stewart, Energy Analytics Institute, 11.Mar.2017]
Venezuelan Oil, Products Imports from U.S. Reach 75 Mb/d in 2016 U.S. exports of crude oil and petroleum products to Venezuela increased to 75 thousand barrels per day (Mb/d) in 2016 compared to 73 Mb/d in 2015, and 76 Mb/d in 2014 (see table below), according to data from the U.S.-based Energy Information Administration (EIA). U.S. exports during the combined 17-year administrations of late Venezuelan President Hugo Chávez Frías and current President Nicolas Maduro from 1999-2016 reached a low of 7 Mb/d in 2004 and a peak of 85 Mb/d in 2012, according to EIA data. Venezuelan annual exports of crude oil and petroleum products to the U.S. again dipped below the 800 thousand barrels per day (Mb/d) mark in 2016, marking the second time during the combined administrations of Chávez and Maduro. Venezuelan exports fell to 796 Mb/d in 2016 compared to 827 Mb/d in 2015, and 789 Mb/d in 2014 (see table below), according to EIA data. Venezuelan exports, which peaked during 1999-2016 at 1,554 Mb/d in 2004, first dipped below the 1 million barrel per day (MMb/d) mark in 2010, according to EIA data. Oil, Petroleum Product Imports/Exports U.S. Exports to Vzla
U.S. Imports from Vzla
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
16 14 11 12 7 (low) 14 27 21 27 26 20
1,546 1,553 1,398 1,376 1,554 (peak) 1,529 1,419 1,361 1,189 1,063 988
2011 2012 2013 2014 2015 2016
32 85 (peak) 81 76 73 75
951 960 806 789 (low) 827 796
Source: EIA [Piero Stewart, Energy Analytics Institute, 11.Mar.2017]
Venezuela Oil Output to Fall 100-150 Mb/d in 2017 An inability to boost foreign and domestic investments in Venezuela’s oil sector in 2017 will result in further declines in the Caribbean nation’s production of crude oil, according to IESA Professor Richard Obuchi. Producing petroleum requires investments, and if they do not materialize, oil production is expected to fall an additional 100,000 to 150,000 barrels per day, announced Obuchi during the conference titled “Economic Perspectives 2017” held at the Instituto de Estudios Superiores de Administración (IESA) in Caracas. “Economic activity is expected to fall between 4 and 6 percent of GDP,” he added. “PDVSA’s capacity to maintain production fell in 2016 due to, [but not limited to], a lack of investments and obligations related to financial debts,” said the Full Professor of Political Economy and Governance at the IESA Business and Public Policy School Michael Penfold during the conference. As a result, in 2016, PDVSA experienced a 12 percent decline in production, he said. “When someone compares PDVSA’s investments levels with other state oil companies such as Pemex and Ecopetrol they will see the companies have been reducing investments. PDVSA has reduced investments much more than Pemex, Ecopetrol and even Rosneft, and we’re talking about investment reductions at PDVSA that not only prevents it from maintaining production but fundamentally explains why production has been declining so much in recent years,” concluded Penfold. [Piero Stewart, Energy Analytics Institute, 26.Mar.2017]
Maduro Announces Shakeup to PDVSA Board Venezuela's President Nicolas Maduro announced changes to the Board of Directors at PDVSA and said the members would be expected to assume the homework of deepening the transformation of the entity into a Socialist Corporation. PDVSA’s President Eulogio Del Pino was restated to head the company and will preside over the board, reported PDVSA in an official statement, citing comments made by Maduro during his Sunday program that took place in the Ciudad Guayana in Bolivar state. The board of PDVSA, as the Caracas-based company is known, is comprised of the following members: Maribel Parra, the new Executive Vice President; Nelson Ferrer, the new Exploration & Production Vice President; Guillermo Blanco Acosta, the new Refining Vice President; Simón Zerpa, the new Finance Vice President; Delcy Eloína Rodríguez, who maintains her post as Vice President of International Affairs; Ismel Serrano, the new Commerce and Supply Vice President; Marianni Gómez, the new head over Planning and Engineering; and César Triana, new Director of PDVSA Gas. Maduro also announced new external directors Yurbis Gómez and Ricardo León would be the spokespersons for the oil sector workers and said that Rodolfo Marco Torres, Ricardo Menéndez and Wills Rangel would retain their existing posts. [Pietro Donatello Pitts, special to Energy Analytics Institute, 29.Jan.2017]
PDVSA Says Financial Debt Fell by $2.7 Billion in 2016 Cash-strapped PDVSA went out on a limb again last year to reduce its long-term financial debt. PDVSA, as the Caracas-based company is known, may not have invested heavily in exploration and production activities to boost falling crude oil production or in its six ailing domestic refineries but it did somehow manage to reduce its total financial debt by $2.7 billion in 2016, the company announced in an official statement. “This figure demonstrates the financial strength of the Venezuelan Bolivariana Republic and PDVSA, whom have honored all their obligations despite the cycle of low oil prices,” announced PDVSA. Energy investors have continued to take a wait and see attitude regarding Venezuela’s oil and gas sectors among others in this South American country amid ongoing economic and political crises that have triggered negative economic growth, three-digit inflation, and scarcity of medicines and foodstuffs. Resultantly, energy sector investments and subsequently oil production in the country continues to wane. [Energy Analytics Institute, Aaron Simonsky, 20.Jan.2017]
PDVSA’s Domestic Refining Utilizations Fall to 30.7 Pct in 2016 Refining utilization rates at PDVSA’s six domestic refineries averaged 30.7 percent in 2016 owing to permanent and temporary plant shut downs and continued problems procuring replacement parts all due to finance issues. PDVSA’s domestic refineries – Amuay, Cardón, Bajo Grande, Puerto la Cruz, El Palito and San Roque – which have a combined installed processing capacity of 1,303,000 barrels per day only processed an average 400,000 barrels per day in 2016, said oil union official Iván Freites, who represents the United Federation of Venezuelan Oil Workers (FUTPV) in an phone interview from Punto Fijo. Cash-strapped PDVSA, as the state oil company is known, needs a cash infusion of $5 billion to boost the utilization rates to 60 percent, he added. [Energy Analytics Institute, Aaron Simonsky, 16.Jan.2017]
PDVSA PetroMonagas Initiates Directional Drilling at UBCP14 PDVSA PetroMonagas initiated directional drilling activities in Río Yabo -- located in the Aceital del Yabo community in Anzoátegui state -- and plans to install 800 meters of 30-inch tubing over 60 days, state oil company PDVSA reported in an official statement. The tubing will have a transport capacity of 70,000 barrels per day and handle production from the Basic Construction and Production Units (UBCP by its Spanish acronym) #14 and #21. PDVSA PetroMonagas expects to produce 16,000 barrels per day of extra heavy crude oil from UBCP #14. To-date, capital expenditures at this project have surpassed $7 million and an additional $5 million are expected to be invested in 2017 during the second phase of the project, reported PDVSA, as the state oil company is known. [Piero Stewart, Energy Analytics Institute, 2.Jan.2017]
Venezuela Oil Output to Near 2 MMb/d Mark after OPEC Cut OPEC member nation Venezuela, which produced 2.097 million barrels per day (MMb/d) in November, according to the December 2016 Monthly Oil Market Report published by the Organization of Petroleum Exporting Countries (OPEC), which cited secondary sources, could see its crude oil production reach 2.002 MMb/d after it implements recently announced production cuts of 95,000 barrels per day by the organization. Using OPEC direct communication data for Venezuela, the South American nation’s production could reach 2.179 MMb/d, down from 2.274 MMb/d in November. Venezuela -- reeling in political and economic crises and suffering from the world’s highest inflation -- is preparing to reduce its oil production as part of a reduction agreement reached on November 30, 2016 in Vienna, Austria by OPEC and non-OPEC nations, reported PDVSA in an official statement. Effective January 1, 2017, PDVSA and/or its affiliate companies will reduce production volumes in total conformity with the terms and conditions of existing contracts, the statement said. [Energy Analytics Institute, Piero Stewart, 27.Dec.2016]
PDVSA Incorporates 124 New Graduates into Workforce Three officials from PDVSA participated in a graduation ceremony in San Tomé, south of Anzoátegui state, whereby 124 graduates received diplomas and were immediately incorporated into the payroll of state oil company PDVSA, reported the company in an official statement. The officials included PDVSA Exploration and Production Vice President Orlando Chacín, Orinoco Oil Belt Production Executive Director Pedro León, and Orinoco Belt Formation Plan Coordinator Héctor Andrade. To-date, more than 2,000 engineers -- and others with specialties in geophysics, chemicals, petrochemicals, gas and the environmental as well as other graduates specializing in administration and accounting – have participated in the program dubbed ‘The Socialist Project for the Formation of the Hugo Chavez Orinoco Heavy Oil Belt,’ also known as the Faja. [Energy Analytics Institute, Piero Stewart, 26.Dec.2016]
PDVSA Says It Maintains Full Ownership of Citgo Petroleum Corporation PDVSA maintains full ownership and control over its Houston-based subsidiary Citgo Petroleum Corporation, announced the entity in an official statement. PDVSA also downplayed media versions and comments emitted by persons it claims are only interested in generating political instability in Venezuela based on speculation, rumors and biased information in an attempt to discredit the company.
In October, PDVSA used a 50.1 percent interest in Citgo as a guarantee for bond swap operations and the remaining 49.9 percent interest in its U.S.-based refining subsidiary as a guarantee to raise new financing, according to the statement. Redd Intelligence, on November 30, uncovered a Delaware Uniform Commercial Code (UCC) filing and broke initial news regarding the filing against Citgo parent PDV Holding, Inc. that revealed Venezuela had secretly mortgaged its Citgo refineries in the U.S. to Russia's state-controlled oil company Rosneft. [Piero Stewart, Energy Analytics Institute, 25.Dec.2016]
Venezuela’s Mariscal Sucre Project Has 600 MMcf/d Production Potential Venezuela’s Mariscal Sucre natural gas project offshore has a production potential of 600 million cubic feet per day, announced PDVSA in an official statement. The company plans to use this gas production to supply export markets in Colombia, Ecuador, Central America and the Caribbean, according to the statement. The fields associated with the Mariscal Sucre project, located in water depths between 328-427 feet (100130 meters), are situated nearly 25 miles north of Venezuela’s Paria peninsula in Sucre state, according to Technip. PDVSA expects peak production from the four fields that comprise the Mariscal Sucre project: Mejillones, Rio Caribe, Dragon and Patao, will reach 1.2 billion cubic feet per day (Bcf/d) of natural gas and 28,000 barrels per day (b/d) of condensates. Production will be destined for export markets as well as the Venezuelan’s domestic market via the CIGMA gas plant located in Guiria in Sucre state, according to PDVSA. [Piero Stewart, Energy Analytics Institute, 1.Feb.2017]
PDVSA Fuel Truck Accident Claims Six Military Lives An accident between a fuel transport truck owned by PDVSA and a vehicle carrying six persons from Venezuela’s armed forces unfortunately claimed the lives of all the military personnel. The accident occurred in Tachira state and is under investigation by personnel employed with the state oil entity, according to reports from Venezuelan journalist Anggy Polanco in numerous twitter posts. PDVSA has yet to emit an official statement about the accident. [Energy Analytics Institute, Piero Stewart, 27.Dec.2016]
Maduro Fires Pequiven President Citing Production, Supply Shortfalls Venezuela’s newly appointed Vice President Tareck Aissami announced that the country’s President Nicolas Maduro had ordered the dismissal of Pequien President Juancarlo Depablos Contreras due to issues related to shortfalls in production and supply of raw materials. “Serious acts of corruption have been uncovered at Pequiven and he [Contreras] is being held in custody in order to soon discuss the irregularities within the company,” reported the daily newspaper El Nacional, citing Aissami.
Maduro subsequently named military General Rubén Ávila Ávila as the new president of Pequien. [Energy Analytics Institute, Piero Stewart, 16.Jan.2017]
Venezuela NRG Briefs MARISCAL SUCRE EXPECTED TO PRODUCE 300 MMCF/D IN 4Q:17 The Mariscal Sucre offshore project is expected to be producing 300 million cubic feet per day in the fourth quarter of 2017, PDVSA announced in an official statement. The Mariscal Sucre project is comprised of four fields: Dragón, Patao, Mejillones and Río Caribe. [Energy Analytics Institute, 2.Mar.2017] EXXONMOBIL SUCCESS IN GUYANA CONTINUES WITH NEW OIL FIND ExxonMobil’s successful drilling streak continues in Guyana as the Irving, Texas-based company announced positive results from its second offshore well Payara-1 also located on the Stabroek Block. The well, located just 16 kilometers from the earlier game-changing Liza discovery, encountered over 29 meters of high-quality, oil-bearing sandstone reservoirs. [Energy Analytics Institute, 16.Jan.2017] MADURO SAYS VENEZUELA TO END OIL RENTIER MODEL Venezuela’s President Nicolas Maduro announced that this year the South American country would change its oil rentier model for an economic model whereby the private sector would work with his revolutionary government. [Energy Analytics Institute, 26.Mar.2017] CITGO SAYS NO AGAIN TO U.S. HEATING OIL PROGRAM Citgo Petroleum Corporation, the U.S.-based refinery arm of PDVSA, had to skip out on sending heating oil to citizens in the U.S. northeast under a program dubbed “Joe-4-Oil” amid a continued economic crisis in the oil-rich nation, reported the news agency AP. [Energy Analytics Institute, 26.Mar.2017] ELECTRIC MINISTER SAYS THREE PERSONS PLANNED TO SABOTAGE EL TABLAZO Venezuela’s Electric Energy Minister Luis Motta Domínguez announced three persons planned actions to sabotage the sub-station El Tablazo 400 in Zulia state. One of the persons unfortunately was electrocuted during the process, reported the daily Panorama, while the other two are currently in police custody. [Energy Analytics Institute, 2.Feb.2017] NEW PDVSA BOARD TO PREPARE COMPANY FOR MARKET TURN AROUND A newly appointed Board of Directors at PDVSA will be charged with taking actions to prepare the company for the eventually turn around in the crude oil export market. Venezuela’s President Nicolas Maduro said during his weekly broadcast that the new board will work on recuperation of issues vital at PDVSA including but not limited to sustainability, growth and advance investments. [Energy Analytics Institute, 2.Feb.2017] PDVSA PRESIDENT SAYS COSTS REDUCED BY MORE THAN 30 PERCENT PDVSA reduced operating costs by more than 30 percent, announced the entity in an official statement, citing company President Eulogio Del Pino. [Energy Analytics Institute, 2.Feb.2017] MADURO CALLS ON CITIZENS TO REDUCE FUEL CONSUMPTION Venezuela’s President Nicolas Maduro called on the Venezuelan citizens to reduce their consumption of fuels so that they could be used for exports to international markets. [Energy Analytics Institute, 2.Feb.2017]
VENEZUELAN OIL EXECUTIVES DISCUSS HYDROCARBON AGENDA Members of the Hydrocarbon Motor of the Bolivariana Economic Agenda met in Caracas to discuss advances under the plan. The meeting, held January 26, 2017 at the headquarters of PDVSA, in La Campiña in Caracas was attended by representatives from the Bolivariana Energy and Petroleum Federation (FEBEP), Venezuela’s Hydrocarbon Chamber (CPV), Venezuela’s Hydrocarbon Association (AVHI), Venezuela’s Gas Processors Association (AVPG), the Venezuela’s Industrial Federation (Fedeindustria) for small, medium and artisans as well as Covencaucho, announced PDVSA in an official statement. [Energy Analytics Institute, 29.Jan.2017] MADURO NAMES SANGUINO TO HEAD VENEZUELA’S CENTRAL BANK Venezuela’s President Nicolas Maduro named Ricardo Sanguino as the new President of the Venezuelan Central Bank (BCV). Sanguino replaces Nelson Merentes, who resigned the post. [Energy Analytics Institute, 2.Feb.2017] VENEZUELA AND CHINA 22 DEALS, EIGHT RELATED TO OIL Venezuela signed 22 agreements with China, including eight related to heavy and extra heavy oil ventures in the OPEC-member country, with an estimated value of $2.7 billion, announced Venezuelan President Nicolas Maduro during a signing ceremony in Caracas. [Energy Analytics Institute, 17.Feb.2017] PUERTO LA CRUZ REFINERY DEEP CONVERSION PROJECT TO CONCLUDE IN LATE 2018 PDVSA estimates that the deep conversion project at its 100 percent owned Puerto La Cruz refinery, which will require foreign investments of $10.5 billion and allow the refinery to process 210,000 barrels per day, will conclude in late 2018. [Energy Analytics Institute, 17.Feb.2017] GOLD RESERVE, FUTURE LAWSUITS COULD PUSH VENEZUELA TO BRINK OF DEFAULT A Paris Court of Appeal’s rejection of an annulment from Venezuela will force the cash-strapped South American country to pay $730 million to Canada’s Gold Reserve Inc. This lawsuit and others pending at international courts, should they be rendered with final decision against Venezuela, could push the country to the brink of default. [Energy Analytics Institute, 17.Feb.2017] CITGO PETROLEUM LEFT WITHOUT CEO AFTER DEPARTURE OF NELSON MARTINEZ Citgo Petroleum Corporation has yet to the report on a possible replacement to head the company after its CEO and President Nelson Martinez was appointed as Venezuela’s Oil Minister by the country’s President Nicolas Maduro. The appointment leaves Citgo, the Houston-based refining arm of PDVSA, leaderless amid approval of the Keystone XL Pipeline when intends to send more Canadian oil to the U.S. Gulf Coast where Citgo has a large presence. [Energy Analytics Institute, 17.Feb.2017] LOOTING RAISES CONCERNS OF IMPACT TO OIL PRODUCING REGIONS Looting in Bolivar state will not yet affect Venezuela’s crude oil production or export capacity. However, fears of similar looting spreading to oil producing regions raises concerns about the potential impact they could have on Venezuela’s main export revenue source during a time when the country’s oil production is already in a freefall. [Energy Analytics Institute, 23.Dec.2016] MADURO TO TRAVEL TO SEEK PRICE STRATEGY CLOSURE Venezuela’s relentless search for a fair oil price continues as President Nicolas Maduro prepares to travel to various oil producing countries to finalize a strategy reached last month to stabilize oil prices, announced the official during his weekly radio and television program En Contacto con Maduro #75. The US Federal Reserve’s raised interest rates with the objective to impact oil prices, said Maduro “It’s the obsession of Obama against Russia, Iran, Venezuela and OPEC,” he proclaimed. [Energy Analytics Institute, 23.Dec.2016]
VENEZUELA AND TRINIDAD REACH DEALS “Together with President @NicolasMaduro and Prime Minister of Trinidad Keith Rowley we reached historic energy agreements. Together with Shell Venezuela we agreed to start negotiations to obtain financing for Petroregional del Lago, S.A.,” wrote PDVSA President Eulogio Del Pino in a series of twitter posts. [Energy Analytics Institute, Piero Stewart, 5.Dec.2016]
PDVSA Says Fire at Barinas Oil Pipeline Under Investigation PDVSA announced a fire along a section of an oil pipeline located in Barinas state was controlled with the assistance of the state fire department, state police and civil protection personnel. The fire occurred along the San Silvestre–El Real section of the 20-inch pipeline in Barinas Municipal, the company announced in an official statement on February 12, 2017. PDVSA is investigating the causes of the fire. No injuries were reported to PDVSA workers, or residents living or working near the pipeline, the company said. [Piero Stewart, Energy Analytics Institute, 17.Feb.2017]
Paris Court of Appeal Decides in Favor of Gold Reserve Inc. Gold Reserve Inc. announced that on February 7, 2017, the Paris Court of Appeal rejected all of Venezuela’s arguments and issued a judgment dismissing the annulment applications filed by Venezuela pending before the French courts in relation to the arbitral award dated September 22, 2014 rendered by the International Centre for Settlement of Investment Disputes (ICSID), against the Bolivarian Republic of Venezuela. At the Court in October 2014 and January 2015, respectively, Venezuela filed annulment applications regarding the Award and regarding the December 15, 2014 arbitral decision dismissing its request for rectification. During the same period, the company applied to the Court for exequatur of the Award, which entails recognition and enforcement of the Award in France. The Court issued the exequatur on January 29, 2015 declaring the Award to be recognized and enforceable in France. The Court considered and rejected each of the arguments raised by Venezuela, confirming that (a) the arbitral tribunal properly took jurisdiction over the matter, (b) the parties were treated equitably, and the rights of defense and the adversarial principles were respected, (c) the arbitral tribunal ruled within the mandate conferred upon it, and (d) the Award is not contrary to French international public policy. As a result, the Court has dismissed the annulment applications filed by Venezuela, and therefore the Award in the amount of $713,032,000 plus interest remains enforceable in France. The Court also ordered Venezuela to pay an amount of €150,000 for the company’s legal fees and costs. Venezuela can consider the option of appealing the judgment before the French Cour de cassation, which is the court of final resort in the French judicial system. James Coleman, Chairman of the Board, stated, “Even though we prevailed in this matter we consider Venezuela our partner and look forward to satisfaction of the Settlement Agreement and advancing the development of the gold copper silver Siembra Minera Project (Brisas Cristinas).” [Gold Reserve Inc., 7.Feb.2017]
Why is Venezuela’s Oil Sector So Shattered? By: Igor Hernández, IESA Professor 8 February 2017 For oil-dependent Venezuela, the drop in oil prices since 2014 has been hard. Combined with the collapse in production, it has created an unprecedented economic crisis. Output decreased by 337,000 barrels per day (bpd) between December 2015 and December 2016 to 2.27 million bpd, according to figures Venezuela’s government provided to OPEC. This is more than other OPEC countries over the same period and is on par with Nigeria. This follows a 359,000 bpd cut between 2005 and 2012. Why has the industry crisis been so severe in Venezuela? I address the question at length with my colleague Francisco Monaldi in a recent working paper for the Center for International Development at Harvard University. Here are a few insights from our analysis. Financially, state-owned oil company PDVSA—which controls upstream activities directly or through tightly controlled joint ventures with private companies—is losing on all fronts: it is missing out on revenue collection and it is spending its shrinking budget on noncore activities. Meanwhile, production costs in Venezuela have increased. PDVSA is losing a quarter of its revenue to fuel subsidies, oil imports and shipments of oil that do not generate revenues for the company: USD (in millions)
Gasoline and diesel subsidy Non-cash exports value Oil imports from the U.S. TOTAL
$11,165 $9,547 $1,672 $22,384
Note: PDVSA reported total revenues of 88,554 Source: Igor Hernández and Francisco Monaldi. Weathering Collapse: An Assessment of the Financial and Operational Situation of the Venezuelan Oil Industry. (Harvard University, The Growth Lab, November 2016) The deviation of resources into general public expenditures, such as development funds and social spending, limits PDVSA’s ability to invest in exploration, production and maintenance. The extent of this deviation is unclear given inconsistent government statements. Data shows that the difference between what PDVSA reports for social program spending in its financial statements and in its annual report is as large as $90 billion for the cumulative period between 2010 and 2015. Moreover, there are several factors affecting the cost structure of petroleum projects: geological constraints, taxes, the exchange rate, the lack of infrastructure for crude transport and financing costs. Developing extra-heavy crude oil, which constitutes most of the country’s remaining reserves, is costlier than lighter crudes. It requires particular infrastructure, technology and skilled labor that Venezuela lacks. Extra-heavy oil must also be blended with lighter crudes to meet refinery requirements. A lack of locally sourced light crude has forced PDVSA to import light crude oil from the United States.
Successive modifications in the hydrocarbons law have produced the current tax structure. These changes increased royalties and income taxes, and introduced other contributions. Gross taxes now account for almost 40 percent of the total cost of oil projects, higher than any other major oil producer but Russia. Production costs are also highly sensitive to inflation, as the currency is pegged to the dollar. Accelerating inflation levels and the government’s policy in maintaining a fixed exchange rate have led to a large real appreciation of the exchange rate. This has led to higher domestic costs for PDVSA and its joint venture partners. PDVSA’s cash-flow constraints led it to resort to direct financing from the central bank to cover local expenses and increase its debt from less than $3 billion in 2006 to almost $41 billion in 2016. Central Bank financing has led to an exponential increase in money supply and has been a direct cause of the rapid acceleration in prices. PDVSA has also delayed payments to suppliers, which led to a halt in activities from contractors such as Schlumberger, Halliburton and Baker Hughes. This has accelerated recent production declines. PDVSA’s response to its financing crisis is short term in nature. It transformed debt to suppliers into financial debt, agreed on direct payments in kind to some creditors, emitted costly bond swaps and used overseas assets as collateral for mortgages. This combination means that PDVSA is further reducing its future cash flows and could end up losing valuable assets to creditors. PDVSA is also facing tremendous operational challenges, including basic ones like a shortage of inputs and access to electricity. There is a lack of skilled labor, particularly since the massive layoff of expert technical and management personnel in 2003. Safety, environmental and security risks are concerning as well. Companies engaged in joint ventures with PDVSA have expressed concern at the high concentration of decision-making power inside the company and at the discretional use of financial resources that lead to project execution delays and additional operational risks. All of these considerations are reflected in a recent survey by the Fraser Institute. The study places Venezuela at the bottom of a global ranking of jurisdictions attractive for petroleum investments. Lack of a solid institutional framework and increasing uncertainty regarding future political developments have not helped. Profound reform of Venezuela’s oil industry is urgent. But in a country so dependent on oil exports, any attempt to improve the operations of the oil sector would have to address the distribution of oil rents, the quality of public institutions and the governance of PDVSA. Igor Hernández is a professor at the Center on Energy and the Environment (CIEA) at IESA in Caracas and a graduate student fellow at the Center on Energy Studies at the Baker Institute at Rice University. Editor’s Note: The link to full article with tables can be found here: http://www.resourcegovernance.org/blog/why-venezuela-oil-sector-so-shattered
Harvest Natural Resources Announces 2016 Fourth Quarter and Year-End Results Harvest Natural Resources, Inc. announced 2016 fourth quarter and year-end earnings. Harvest posted a fourth quarter 2016 net income of $100.6 million, or $9.00 per basic and diluted share, compared with a net loss of $73.2 million, or $5.70 per basic and diluted share, for the 2015 fourth quarter. For the year-ended December 31, 2016, Harvest's net income was $66.6 million, or $5.35 per basic and diluted share, compared with a net loss of $98.6 million, or $8.71 per basic and diluted share, for 2015. The fourth quarter 2016 results include non-recurring items of (i) gain on the sale of Harvest-Vinccler Dutch Holding B.V. of $118.9 million or $10.64 pre-tax per basic and diluted share; and (ii) loss on extinguishment of debt of $10.3 million, or $0.92 pre-tax per basic and diluted share. Adjusted for these non-recurring items, Harvest would have had a fourth quarter net loss, unadjusted for any income tax effects, of $8 million, or $0.72 per basic and diluted share. The year-end 2016 results include exploration charges of $2.4 million, or $0.19 pre-tax per basic and diluted share, and non-recurring items of (i) gain on the sale of Harvest Holding of $115.5 million, or $9.29 per basic and diluted share; (ii) loss on the impairment of oilfield inventories of $1.5 million, or $0.12 pretax per basic and diluted share; (iii) interest expense of $4.2 million, or $0.34 pre-tax per basic and diluted share; (iv) loss on the change in fair value of warrant liabilities of $9.4 million, or $0.75 pre-tax per basic and diluted share; (v) gain on the change in fair value of derivative assets and liabilities of $2.4 million, or $0.19 pre-tax per basic and diluted share; (vi) loss on the extinguishment of debt of $10.3 million, or $0.83 pre-tax per basic and diluted share; and (vii) impairment of a note receivable of $5.2 million, or $0.41 per basic and diluted share. Adjusted for exploration charges and these non-recurring items, Harvest's net loss, unadjusted for any tax effects, for 2016 would have been $18.5 million, or $1.49 per basic and diluted share. VENEZUELA Sale of Venezuela Interests On October 7, 2016, Harvest completed the sale of all of its interests in Venezuela. The sale occurred pursuant to a June 29, 2016 share purchase agreement under which HNR Energia B.V. sold its 51 percent interest in Harvest Holding to Delta Petroleum N.V., a limited liability company organized under the laws of Curacao. Harvest Holding indirectly owned a 40% interest in Petrodelta S.A., through which all of the company's interests in Venezuela were owned. As a result of the sale, Harvest Holding's effect on results of operations and other items directly related to the sale have been reported as discontinued operations. CT Energy Holding SRL, a private investment firm organized as a Barbados Society with Restricted Liability, assigned all of its rights and obligations under the Share Purchase Agreement to its affiliate, Delta Petroleum, on September 26, 2016. Harvest has no control or ownership interest in Delta Petroleum. At the closing, the company received consideration consisting of:
-- $69.4 million in cash paid after various closing adjustments. -- An 11% non-convertible senior promissory note payable by Delta Petroleum to HNR Energia six months from the closing date in the principal amount of $12 million, guaranteed by the sole member and sole equity-holder of Delta Petroleum. This note plus accrued interest is due April 7, 2017. -- The return of all of the company's common stock owned by CT Energy, consisting of 2,166,900 shares to be held by the company as treasury shares. -- The cancellation of $30 million in outstanding principal under the 15% Note. -- The cancellation of the warrant issued to CT Energy in 2015 to purchase up to 8,517,705 shares of common stock for $5 per share (after adjustments for the November 3, 2016 stock split). The relationship between the company and CT Energy effectively terminated upon the completion of the sale under the Share Purchase Agreement. All company securities held by CT Energy were terminated or relinquished, and Oswaldo Cisneros and Alberto Sosa resigned as CT Energy's non-independent designees to the company's board of directors. Additionally, all liens securing company debt formerly owed to CT Energy were released at the closing. Upon the closing, the company's primary assets were cash from the proceeds of the transaction and the company's oil and gas interests in Gabon. NOL Poison Pill Rights Agreement to Protect Net Operating Losses On February 16, 2017, the Board adopted a Rights Agreement designed to preserve the company's tax assets. As of December 31, 2016, the company had cumulative net operating loss carryforwards (NOLs) of approximately $56 million, which can be utilized in certain circumstances to offset possible future U.S. taxable income. Harvest's ability to use these tax benefits would be limited if it were to experience an “ownership change” as defined under Section 382 of the Internal Revenue Code. An ownership change would occur if stockholders that own (or are deemed to own) at least five percent or more of Harvest’s outstanding common stock increased their cumulative ownership in the company by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. The Rights Plan reduces the likelihood that changes in Harvest’s investor base would limit Harvest’s future use of its tax benefits. Shareholder Vote At the company’s special meeting of stockholders on February 23, 2017, the stockholders voted to (1) authorize the sale by us, indirectly through a subsidiary, of all of our interests in Gabon upon the terms and conditions set forth in the Sale and Purchase Agreement; (2) approve, on an advisory basis, compensation that will or may become payable by us to our named executive officers in connection with the sale of our Gabon interests; and (3) authorize the complete liquidation and dissolution of Harvest. Proposed Dissolution and Liquidation Following the successful sale of our Venezuelan interests in October 2016 and in light of the proposed sale of our Gabon interests, our board of directors considered dissolution and liquidation as a possible alternative. On January 12, 2017, the Board unanimously determined that the dissolution and liquidation of Harvest was advisable, authorized the dissolution and liquidation and recommended that the proposed complete dissolution be submitted to a vote of Harvest's stockholders. Our Board also adopted a plan of complete dissolution, liquidation, winding up and distribution (the "Plan of Dissolution") on this date. Harvest's stockholders approved the proposed dissolution and liquidation at the special meeting on February 23, 2017.
Under the dissolution, liquidation and winding up process, which remains subject to the control of the Board and company management, the proceeds from the Gabon transaction would be combined with other Harvest assets to be distributed to Harvest's stockholders, subject to the payment of certain costs and expenses. The company currently expects to commence dissolution proceedings as soon as practicable after the closing of the sale of its Gabon interests. Distributions to Shareholders The Board intends to declare a distribution payable to the shareholders after the Gabon transaction has closed. The exact amount of the distribution has not been determined at this time. Once the record date is set, the company will disclose the proposed distribution. [Harvest Natural Resources, Inc., 6.Mar.2017]
PDVSA Steps up Legal Actions Against PetroSaudi PDVSA, through its subsidiary PDVSA Servicios SA, has been involved in a legal battle against PetroSaudi Oil Services Ltd. Among other claims, PDVSA seeks to obtain compensation for damages incurred due to the poor performance of the offshore drilling unit contracted to carry out drilling and well completion activities in the gas reservoirs located north of Sucre state, as part of the Gran Mariscal Sucre project. Following a PDVSA Executive Committee decision, a series of legal actions were agreed upon in August 2015, leading to Commercial Arbitration based in Paris and governed under the laws of the Bolivarian Republic of Venezuela. During the course of legal actions several decisions have been made in favor of PDVSA, thus preventing the defendant, PetroSaudi Oil Services Ltd. from continuing to abuse, in an unscrupulous manner, the good faith of the parties in the execution of the activities related to the rendering of the offshore drilling services. The Arbitral Tribunal, which has heard the reasons for the contractual disputes, is expected to issue a Final Award during the fourth quarter of this year. The High Court of Justice in England, having heard the case in first instance, issued a judgment last October 2016, declaring fraudulent, null and void the actions taken by PetroSaudi Oil Services Ltd. to execute guarantees and obtain payments in flagrant contravention to the decision by the Arbitral Tribunal prohibiting access to amounts of money that are in dispute in said proceedings until a final judgment on merits is rendered. This Judgment was appealed by the contractor to the Court of Appeal of England, which erroneously overturned the decision of the High Court of Justice. However, the execution of this Judgment has been temporarily suspended and accordingly, PDVSA is taking all pertinent legal actions. Pursuant to the foregoing, on February 9 of the current year an application for permission to appeal was made to the Supreme Court of the United Kingdom to ask for a correction of the errors made by the aforementioned Court of Appeal. PDVSA will tirelessly pursue all means to defend its assets, which belong to the Venezuelan people. [PDVSA, 24.Feb.2017]
PDVSA - Rosneft Technical Conference on Heavy and Extra Heavy Crude PDVSA and the Russian company Rosneft held a technical conference on strategy, innovation and technology for a sustainable future, February 22-23, 2017 at PDVSA Intevep’s headquarters in Los Teques, Miranda state. The event brought together 150 PDVSA and Rosneft specialists from various fields to strengthen cooperation, exchange and technological integration between the People’s Power Ministry of Petroleum, PDVSA, Intevep, joint ventures and Rosneft. At the opening event, President of PDVSA Intevep Omar Uzcátegui spoke about the potential of this PDVSA subsidiary for the development of technologies and providing specialized technical assistance services. He also spoke about the participation of PDVSA Intevep in the Hydrocarbons Economic Driver to facilitate the massification and implementation of its technologies. Technical Director of Rosneft in Venezuela Kim Gobert, spoke about the importance of the Hugo Chávez Orinoco Oil Belt, the worl’s largest proven hydrocarbon reserve base. He said that it was necessary to make progress in the strengthening of relations between the two companies to accelerate research projects on the development of heavy and extra heavy crude oil. The conference brought together specialists from PDVSA and Rosneft, who spoke on diluent management, enhanced hydrocarbon recovery technologies for heavy and extra heavy crude, infrastructure and transportation of crude oil, electricity demand in oil and gas areas, gas management and handling, innovative technological solutions in oil and gas areas including offshore, and a new vision in the improvement and management of solids, effluents and gases. There are technical round tables for the discussion of four priority issues, such as: integrated gas management, reservoir development and enhanced hydrocarbon recovery, crude oil upgrading and diluent management, and infrastructure and transportation. The conference aimed to boost the development of PDVSA and Rosneft joint ventures, such as Petromonagas, Petromiranda and Petrovictoria in the Hugo Chávez Orinoco Oil Belt for extra heavy crude oil, and Petroperija and Boquerón in traditional areas. [PDVSA, 23.Feb.2017]
PDVSA Strengthens Cuba-Venezuela Agreement to Boost Oil Exports The vice president of trade and supply of PDVSA Ysmel Serrano, concluded a work trip to Cuba in order to strengthen energy cooperation ties as part of the Cuba-Venezuela Agreement. Key issues for the development of integration policies with the peoples of the Caribbean were discussed in a meeting with the Minister of Energy and Mines Alfredo López Valdez, and the General Director of state-owned company Unión Cuba-Petróleo (CUPET) Juan Torres. Serrano said this bilateral agreement, since its inception in 2000, has fulfilled the obligations set forth in the comprehensive energy cooperation accord, “having a positive impact on the economic and social development of both nations.”
Accompanied by Operations Manager and President of PDV Marina Admiral Franklin Montplaisier, he visited the Matanzas Supertanker Base, the main marine terminal for the reception of hydrocarbons and operations logistics system for storage and distribution. Supply strategies to ensure ongoing and efficient shipment reception operations were discussed. “It was made clear to us the excellent conditions and the high operational level of this base,” said Serrano. They also held a meeting with Vice President of the Executive Committee of the Council of Ministers Ricardo Cabrisas Ruiz, on refining, production, exploration, commercialization and distribution of hydrocarbons, highlighting the key role of Venezuela in the development of their Economic and Social Plan 2017-2030. Cabrisas acknowledged efforts made by Venezuelan President Nicolás Maduro to support the recovery of oil prices. He also expressed his solidarity and emphatic support for the Bolivarian Revolution and the Vice President of the Republic Tareck El Aissami, in the midst of the U.S. empire’s vile attack of recent days. Finally, Serrano ratified the support and commitment of oil industry workers in the construction of a multipolar world where the sovereignty of the peoples is respected, as dreamed by Commander Fidel Castro and our Supreme Commander Hugo Chávez. [PDVSA, 22.Feb.2017]
Venezuela, China Hold 15th High Level Joint Commission in Caracas The 15th China-Venezuela High Level Joint Commission took place at the José Félix Ribas Hall of Teresa Carreño Theater in Caracas, with the aim of discussing the progress of the Economic Agenda for Binational Cooperation and continue strengthening relations between the two nations throughout the year. The Commission was chaired by Venezuela’s Vice President of Planning Ricardo Menéndez, accompanied by the country’s Oil Minister Nelson Martínez, PDVSA President Eulogio Del Pino, the Economic Vice President Ramón Lobo, the Communes Minister Aristóbulo Istúriz, the Vice President of the National Development and Reform Commission of China Ning Jizhe and representatives of Chinese companies. The Commission will review issues related to mining, investment of Chinese companies in Venezuela and mechanisms to strengthen the process of domestic industrialization while at the same time addressing critical issues of the Venezuelan economy, said Menéndez. “This High Level Joint Commission aspires to take a fundamental leap forward with the issue of production lines and placing China's surplus capacity in Venezuela as a new stage from the point of view of the relationship between our countries,” Menéndez said. With regard to investment, Menéndez said that new construction and cargo transportation companies will be set up in Venezuela, and announced the signing of new production agreements for the factories set up by both nations as well as the visit to flagship projects in oil fields. “The strengthening of the national industry will be reflected in the production lines and development capacities of the 15 economic drivers of the Bolivarian Economic Agenda, created by the President of the Republic Nicolás Maduro to boost the economy of the country,” said Menéndez. [PDVSA, 13.Feb.2017]
Venezuela Signs Eight Oil Cooperation Agreements with China PDVSA ratified its cooperation with the People's Republic of China with the signing of eight agreements at the 15th China-Venezuela High Level Joint Commission, which was held at the José Félix Ribas Hall of the Teresa Carreño Theater in Caracas. The event was headed by Venezuela’s President Nicolás Maduro, and the Vice Chairman of the National Development and Reform Commission (CNDR) Ning Jizhe, with the participation of Vice President of Planning and External Director of PDVSA Ricardo Menéndez, Venezuela’s Oil Minister Nelson Martínez, PDVSA President Eulogio Del Pino, Economic Vice President Ramón Lobo, Communes Minister Aristóbulo Istúriz, Foreign Minister and Vice President of International Affairs of PDVSA Delcy Rodríguez, and others. PDVSA signed a memorandum of understanding (MOU) to participate in the construction project of Nahai refinery in China; the engineering, procurement and facilities construction contract to increase extra heavy crude production at the facilities of Petrolera Sinovensa, S.A.; a MOU for the development of the Petrozumano JV; and financing by China Development Bank as part of the Special Fund for oil projects. PDVSA also signed a MOU for a well exploitation pilot test work plan for the Petrourica JV; set up the mixed capital company Venezolana de Mantenimientos Especializados Remensa; set up a JV between PDVSA and Shandong to develop maintenance capacities for the delivery of specialized services; and a MOU between PDVSA and Shanghai for the corporate insurance and reinsurance program of PDVSA and its subsidiaries. These agreements were signed by PDVSA President Eulogio Del Pino, PDVSA Vice President of Exploration and Production Nelson Ferrer Sánchez, the representative of PDVSA Servicios Petroleros Osmel Molina, and their Chinese counterparts. President Maduro said these 22 agreements are for $2.7 billion. “This makes 2017 the year of the economic recovery of our country, with the collaboration of a friendly nation like China, in a win-win relationship,” Maduro said. Speaking about these financing projects for the people of Venezuela, he said: “Nothing and nobody will be able to stop them; it is the ultimate will of our government and the people to continue to expand the mechanisms that have proven their viability.” He said he was satisfied with the results of the work of the Joint Commission, “which has been the ultimate expression of the success of China-Venezuela relations.” [PDVSA, 13.Feb.2017]
Venezuela, Algeria Officials Discuss Bilateral Cooperation Venezuela’s Foreign Minister Delcy Rodríguez and Oil Minister Nelson Martínez visited the People's Democratic Republic of Algeria to continue working visits to member a and non-member countries of the OPEC.
The officials discussed bilateral cooperation issues during their meeting with Algerian Foreign Minister Ramtane Lamamra, and Energy Minister Noureddine Bouterfa. Algeria is a member of the Joint OPEC-Non OPEC Ministerial Monitoring Committee that oversees compliance with the production adjustment agreement of 24 oil producing countries. The ministerial tour has included OPEC countries such as Iran, Iraq, Qatar, Kuwait, Saudi Arabia and Algeria, and not OPEC, such as Russia and Oman, following instructions by Venezuela’s President Nicolás Maduro, to continue with the Bolivarian Peace Diplomacy and strengthen relations with strategic partners in energy matters. The initial OPEC decision to freeze production between 32.5 and 33 million barrels per day (MMb/d), with individual country quotas, was taken in Algeria. Venezuela made the proposal for non OPEC countries to join in the agreement. [PDVSA, 13.Feb.2017]
Venezuela Oil Minister Martínez meets Omani Counterpart Venezuela’s Foreign Minister Delcy Rodríguez and the country’s Oil Minister Nelson Martínez traveled to the Sultanate of Oman to meet with Omani Oil Minister Mohammed bin Hamad Al Rumhy, as part of a tour of member and non-member countries of OPEC. Oman, together with Venezuela, Algeria, Kuwait and Russia make up the Joint OPEC – non OPEC Ministerial Monitoring Committee to monitor compliance with the agreement signed last December by oil producing countries to bring balance to the market. At this meeting with Minister Rumhy, they assessed compliance with the agreement as good, said Rodríguez. Producing countries have the historical responsibility to defend oil market stability, Martinez said. Oman was one of the non OPEC producers that provided ongoing support to the strategy of adjusting production to recover oil prices. Both countries agreed to strengthen bilateral relations and cooperation mechanisms for mutual benefit, according to a Twitter post by Rodríguez. As part of the Peace Diplomacy promoted by the President of the Republic Nicolás Maduro, Rodríguez and Martinez delivered a letter to the Sultan of Oman Qaboos bin Said al-Said addressed to him, on the OPEC-non OPEC agreement. [PDVSA, 10.Feb.2017]
Venezuela Announces Implementation of Oil Production Cut Agreement PDVSA announced implementation of an agreement to reduce production reached by member and non member countries of the Organization of the Petroleum Exporting Countries (OPEC). Under the agreement, Venezuela must implement a production cut of 95,000 barrels per day.
As of January 1, 2017 PDVSA and /or its subsidiaries will implement a reduction of the volumes of the main crude oil sales contracts without prejudice to PDVSA’s international contractual commitments and in accordance with the terms and conditions of current contracts. It is public knowledge that Venezuela, together with the other members of OPEC, agreed to curb production to 32.5 million barrels per day as of January 1, 2017 at the 171st Meeting of the Conference which was held November 30, 2016 in Vienna, Austria. PDVSA honors the commitment made by Venezuela, and reaffirms its commitment to comply with the decisions reached by it and contribute to the stability of the world oil industry. [PDVSA, 27.Dec.2016]
PDVSA Exploration VP Tours Drilling Operations in the Chavez Orinoco Oil Belt PDVSA Vice President of Exploration and Production Nelson Ferrer, led a tour of the facilities of the Orinoco Drill Operators Cooperative Association, which absorbed former Petrex Sudamérica workers, in the Hugo Chávez Orinoco Oil Belt. He was able to see the progress of the new labor scheme promoted by the oil workers and spoke with those involved in this new way of protagonist participation of the workers. He listened to their experiences and learned how the hydrocarbons extraction process has been optimized. He also visited drilling rigs LGV-103 and PDV-57, located 15 minutes from the Ayacucho Division, in southern Anzoátegui state. Both rigs are currently part of the restoration of 28 wells, which represent an associated production of 10,000 barrels per day (mb/d) since August 2016. "We believe in the workers; with them we generate production and added value. The organized mass of workers, with commitment and loyalty to Chávez, President Nicolás Maduro and the homeland, can achieve excellent results,” said Mr. Ferrer. The President of the Orinoco Drill Operators Cooperative Jesús Díaz, said the workers are proud that their work transcends the borders of the state of Anzoátegui all the way to Caracas. “We are heads of households committed to the homeland, workers’ President Nicolás Maduro and the legacy of Hugo Chávez the Giant, who always shared the idea that the workers should take over their work places,” Díaz said. PDVSA continues to promote actions for the transformation of the oil industry, deepening its socialist vision by meeting the objectives and following the guidelines of the Homeland Plan Act and the “Golpe de Timón” or “The Turnaround”, a legacy of Supreme Commander Hugo Chávez. [PDVSA, 4.Feb.2017]
Bariven to be Heard in Restitution Process for Compensation for Damages Suffered Bariven, S.A., a PDVSA subsidiary, has taken legal action to obtain compensation for damages suffered due to fraudulent actions by former contractors and suppliers who in collusion with former workers of Bariven and some of its subsidiaries, obtained procurement contracts through acts of corruption, causing property and moral damage to the company.
Legal actions include this restitution request made by Bariven so that is recognized as a victim of acts of corruption and the accused of such acts are ordered to compensate financially for damages suffered by Bariven. This restitution request is currently before a criminal court in Houston, Texas, which is familiar with the criminal proceedings against those accused with acts of corruption. On January 17, 2017, the judge hearing the case adopted Bariven's position and ordered all parties to the proceedings, including the Federal Prosecutor's Office representing the interests of the U.S. government, and the accused to present their positions on Bariven's request no later than February 20, 2017. This is an important development for Bariven, which opposed the Federal Prosecutor's request to defer this process indefinitely. With this order, the judge ensures that Bariven will be heard and that the accused individuals will face up to their responsibilities. PDVSA will continue to inform the nation and the international community on the ongoing actions against these persons and their property. Bariven reiterates its commitment to the pursuit of justice and will fight relentlessly so that those responsible, with no exceptions, are criminally and materially punished. [PDVSA, 28.Jan.2017]
Del Pino: 2017 will be of Great Advance and Boost to the Hydrocarbons Economic Driver Members of the Hydrocarbons Economic Driver of the Bolivarian Economic Agenda, met at La Campiña headquarters of PDVSA in Caracas, for the presentation of the first annual report. The first session of 2017 was attended by more than 30 representatives from the Bolivarian Federation of Energy and Oil (FEBEP), Venezuelan Oil Chamber (CPV), Venezuelan Hydrocarbons Association (AVHI), Venezuelan Gas Processors Association (AVPG), Federation of Small and Medium Size Industries and Artisans (Fedeindustria), and Covencaucho. “This was one of the economic drivers with the most activity, dynamism and results; it was extremely productive,” said Eulogio Del Pino, president of PDVSA and coordinator of the hydrocarbons sector. He said the agenda is already set for the first four meetings which will focus on each of the sectors that are particularly important for the hydrocarbons sector, on a weekly basis. He also announced key achievements, including $5 billion financing obtained for oil production joint ventures with the main partners, both national and international. Also, large scale projects continued, such as Puerto La Cruz Refinery’s Deep Conversion in the state of Anzoátegui, with an investment of more than $8 billion. New joint ventures were created with the national private productive sector. “Traditionally, they had imported supplies which now we will produce in the country, such as grooved pipes. About eight of these companies are already in full production,” he said. And a discussion group is being formed to look at the production, supply and remand of lubricants. “We signed export agreements with our neighboring countries and strengthened our efforts geared at the Caribbean refineries where we have operations, including Aruba and Curacao. We also held binational events with Trinidad and Tobago, specifically in the border areas where we have common reservoirs,” he said. Del Pino said that the meeting was productive. “It definitely means that 2017 will be of great boost and advance.”
Debt reduction For the president of PDVSA, reducing PDVSA's financial debt in an economically difficult year was particularly important. This was possible thanks to the bond swap and timely payments. “We were required to publish our consolidated debt before January 20. Currently, the debt is down by $2.7 billion from the previous year,” Del Pino said. Finally, he spoke about new financing strategies and novel oil industry hiring schemes which contributed to positive results, and indicated that PDVSA lowered costs by 30%, which is fundamental for the Venezuelan economy. [PDVSA, 26.Jan.2017]
Venezuela to Export Natural Gas to Trinidad and Tobago During a meeting in Miraflores Palace, the People’s Power Minister of Petroleum and President of PDVSA Eulogio Del Pino and the Prime Minister of Trinidad and Tobago Keith Rowley, signed an agreement to implement the Natural Gas Supply Project from Venezuela to Trinidad and Tobago through a gas interconnection from the Dragon Field in northeastern Venezuela. This agreement will boost gas production and exports, as Venezuela continues with its policy of strategic alliances. Through this partnership, one or more gas pipelines will be built from the Mariscal Sucre area in Venezuela to Trinidad and Tobago. The interconnection to export gas will be established from the Venezuelan Dragon Field to the Hibiscus platform in Trinidad and Tobago. Another potential route will be evaluated from Güiria, in Sucre state, to Point Lisas in Trinidad. Decade for energy integration For President Nicolás Maduro, this strategic alliance makes a reality a decade of Latin American and Caribbean integration. "We are working on our maritime borders with blocks of gas. We have reached agreements for their joint exploitation, taking advantage of the strengths of both nations for a win-win. This is what we call Bolivarian Peace Diplomacy. Through a dialogue we seek to develop common interests,” Maduro said. He asked Minister Del Pino to accelerate implementation and investment on these projects. Historic development Prime Minister Rowley described the signing of the agreement as a historic development that will improve relations between the two nations. “Today’s development marks a commitment to develop face to face, holding onto opportunities that are beneficial to the people of Venezuela, to the people of Trinidad and Tobago and the wider Caribbean,” Rowley said. The prime minister believes the agreement will open opportunities for various “significant and necessary commercial developments in the hydrocarbons sector.”
“These units of commerce open doors towards a staircase upon which Trinidad and Tobago can walk confidently into the international marketplace…We look forward to climbing these stairs, side by side with Venezuela as we enjoy the benefits of our petro Caribbean basin,” concluded Rowley. [PDVSA, 5.Dec.2016]
PDVSA Signs Agreements with Shell Venezuela to Boost Energy Output PDVSA and Shell Venezuela signed two agreements at Miraflores Palace. Both companies have stakes in the joint venture Petroregional del Lago, S.A. and plans to boost its production to 344 million barrels from 2017 to 2035, the first agreement provides for an investment of $2.8 billion ($400 million on a first phase and $100 million in early 2017). These are heavy crude reservoirs and they will use multilateral drilling technology. The second agreement aims to reduce gas venting or burning in northern Monagas state. Venezuela’s President Nicolás Maduro thanked PDVSA and Shell executives for all the work they do for the nation, and called on international companies to work embracing this vision. "Venezuela is the country of investment opportunities in oil and gas. We have 15 powerful economic drivers that we are developing with a new strategic vision. We will work together, be good partners and seek out new paths”, Maduro said. [PDVSA, 5.Dec.2016]
Venezuela Advances with Puerto La Cruz Deep Conversion Project Members of the China-Venezuela High Level Joint Commission toured the facilities of the Puerto La Cruz Refinery in Anzoátegui state, to review the progress of the Deep Conversion Project, a big scale project of PDVSA for the processing of heavy and extra heavy crude from the Hugo Chávez Orinoco Oil Belt. For the president of PDVSA, Eulogio Del Pino, investment continues in Venezuela and is making headway. “This is the largest engineering project being done in the Americas. It is in the order of $10.5 billion, with HDH Plus® Venezuelan technology made by Intevep, the research and development center of the oil industry,” Del Pino said. Approximately 210,000 barrels per day (mb/d) of heavy and extra heavy crude oil will be processed through Puerto La Cruz Refinery’s deep conversion project, with international financing. The project is expected to be completed by the end of next year. It will change the refinery’s current light crude diet to include heavy and extra heavy crude oil from the Hugo Chávez Orinoco Oil Belt, also known as the Faja, and will generate world quality end products. For the development of this project 850 families that lived around the complex’s expansion area were relocated and received homes through the Great Housing Mission Venezuela, said Del Pino. PDVSA Vice President of Planning and External Director Ricardo Menéndez, together with the Chinese ambassador to Venezuela Zhao Bentang, and the Vice Chairman of the National Development and Reform Commission Ning Jizhe also participated in the inspection of the works.
“This project is strategic for the development of our country, reflecting the vision of the Eternal Commander Hugo Chávez to use the Orinoco Oil Belt as the main reserve for the future of the country. President Nicolás Maduro has continued this legacy,” said Menéndez. The Chinese ambassador to Venezuela spoke about the vision of development that both countries have supported. “We have made a number of agreements that have expanded and deepened cooperation in all areas. Today, I join the working commissions to seek more opportunities for future cooperation. I am convinced that this relationship will contribute to the development of our peoples,” he said. Through the China-Venezuela High Level Joint Commission, social, cultural and academic projects have been supported such as the Great Housing Mission Venezuela, Barrio Nuevo-Barrio Tricolor, and the Confucius Center which strengthen the relationship between both countries. According to Menéndez, these international investments show that “they believe in Venezuela, they believe in our country and only the revolution can deal with situations and lead us into the future.” [PDVSA, 14.Feb.2017]
PDVSA to Industrialize Faja Oil Through Deep Conversion Project As of 2019, PDVSA, through Puerto La Cruz Refinery’s Deep Conversion Project, will industrialize crude oil from the Orinoco Oil Belt using HDHPLUS®, a Venezuelan technology, announced the People’s Power Minister of Foreign Trade and International Investment Jesus Faría. Minister Faría and the Ambassador of South Korea to Venezuela Kyung Tea Hwang, travelled to the state of Anzoátegui to meet with the Executive Director of New Refinery Projects, Upgraders and Terminals Gabriel Oliveros, and the General Manager of Eastern Refining Diego Astudillo. The General Manager of the VONE Consortium B.I. Kim, and state governor Nelson Moreno were also at the meeting. This is the largest crude oil refining project in our continent; it will receive an investment of $9 billion, said Faria, who was satisfied with its 73.8% progress. It currently employs 6,500 workers, and uses technology developed by PDVSA Intevep. This demonstrates the trust of large companies in South Korea, the People's Republic of China and Japan that invest in Venezuela and its potential and sets the foundations for a productive, independent, and technologically sovereign Venezuela. The Ambassador of South Korea Kyung Tea Hwang highlighted the investment made by Hyundai in Venezuela, which is a clear indication of the strengthening of bilateral relations between the two countries. The General Manager of Eastern Refining Diego Astudillo said that when it is fully operational, Puerto La Cruz Refinery will process 210,000 barrels of heavy crude oil per day into light products of high commercial value. Additionally, social investment projects are being implemented to benefit the community. Anzoátegui state governor Nelson Moreno said that this PDVSA project goes hand in hand with human development. 820 families that lived within the safety zone of Puerto La Cruz Refinery were moved away and craftsmen involved in the construction of the project received training. [PDVSA, 15.Dec.2016]
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LatAm NRG panorama for the first quarter of 2017.