Pacific Rubiales Energy Corp. today provided a revision to the company's 2015 capital budget guidance, reducing capital expenditures from US$1.5 billion to a range of US$1.1 to US$1.3 billion, reflecting a WTI oil price assumption range of US$55 to US$60.
All amount values in this release are in U.S.$ and all production numbers are expressed in net after royalty volumes, unless otherwise stated.2015 Revised Guidance - Key Highlights:
- Net production of 150 to 160 Mboe/d, a slight decrease from the previous guidance, representing approximately 1 to 8% growth over expected 2014 production levels.
- Average WTI oil price assumption of US$55 to US$60/bbl during the year.
- Oil price realization is expected to be US$1 to US$2 above the WTI benchmark price assumption.
- A significant reduction in 2015 cash costs: with operating costs estimated at US$28/boe, G&A costs of US$200 million, financing costs of US$250 million and cash taxes of US$200 million expected.
- Generating Adjusted EBITDA of US$1.5 to US$1.7 billion (including funds from hedging programs and dividends from affiliates), and Funds Flow (Cash Flow) of US$1.1 to US$1.3 billion.
- Exploration and development capital expenditures of US$1.1 to US$1.3 billion, the majority directed to development drilling and facilities, and a small amount to exploration.
Ronald Pantin, Chief Executive Officer of the company, commented:
"The uncertainty in oil prices continues and although we believe that oil prices will recover, we are taking a cautious view on the timing, reducing both our costs and our 2015 capital budget to match expected cash flow. The company has the operational and financial flexibility to adapt to the changing environment while continuing to grow production. Our reduced capital budget only has a marginal impact on production targets as we focus expenditures on our highest return and most material near-term projects.
"We continue to maintain the integrity of our balance sheet. As of this date, our Consolidated Debt/Adjusted EBITDA leverage ratio is approximately 1.80:1.0, well below the 3.5:1.0 restricted covenant, giving the company capacity to withstand the existing oil price environment.
"Contrary to market rumours, the Company is not in default under any of its debt obligations and does not expect to be at risk of payment default. The leverage covenants in our senior notes are "incurrence based covenants" which simply means the company's ability to take on additional debt may be restricted by such ratios, subject to various exemptions. All of our senior notes have maturities that extend out from 2019 to 2025.
"Pacific Rubiales remains fully focussed on maintaining liquidity in this environment, by significantly reducing costs and also reducing capital expenditures by US$200 to US$400 million, to match expected cash flow. Furthermore, we have additional flexibility from our US$1.0 billion revolving credit facility, which is currently undrawn.
"Reducing costs remains a priority. Our cash operating costs are now expected to be approximately US$28/boe, benefiting from the lower Colombia Peso, a number of cost reduction initiatives put in place before year-end 2014, and lower supplier service costs. We expect significantly lower G&A costs to be driven by the lower local currency exchange rate and a reduction in staff and other costs. Average royalty rates and cash taxes are also expected to be reduced in the lower oil price environment.
"Our planned monetisation of midstream assets will continue. Prior to the end of 2014, we closed the 43% sale of Pacific Midstream to the International Financial Corporation for proceeds of approximately US$320 million. The company has additional levers to raise cash without impacting production including, the remaining 57% of Pacific Midstream, other midstream assets including our 41% interest in Pacific Infrastructure, and divestment of non-core small producing and exploration properties.
"In summary, Pacific Rubiales enters 2015 in solid standing. We have reduced our capital expenditures to match expected cash flow in a lower oil price environment and have the flexibility and further discretionary components to adjust to the external environment. In addition, we continue to reduce costs through efficiency gains and operational adjustments.
"We have extended out our corporate debt maturity and have significant levers we can pull to raise additional cash. The company has the capacity to maintain liquidity and the integrity of its balance sheet through the lower oil price environment. We expect to meet all of our financial obligations under the terms and timing of the various debt instruments. Capital will only be allocated to the highest return and most material projects. We will continue our strategy of repeatable, profitable growth, building for the long-term benefit of our shareholders, employees and other stakeholders, the leading E&P Company focused in Latin America."
Adapted from press release by Joe Green