Pacific Rubiales announces second quarter 2015 results
Pacific Rubiales Energy Corporation has announced the release of its unaudited consolidated financial results for the quarter ended June 30, 2015, together with its Management Discussion and Analysis ('MD&A'). These documents will be posted on the Company's website at http://www.pacificrubiales.com/, SEDAR at http://www.sedar.com,/ and the SIMEV website at http://www.superfinanciera.gov.co/web_valores/Simev. A corporate presentation relating to the second quarter results will be posted on the Company's website. All values in this release and the Company's financial disclosures are in $US, unless otherwise stated.
Ronald Pantin, Chief Executive Officer of the Company, commented:
"During the second quarter of 2015, international oil prices have continued to pose difficult challenges for the industry. However, as you will see from our results, we at Pacific Rubiales have been very successful in executing upon the Company's strategy delivering competitive results in this tough environment.
"Through a combination of sustainable cost reduction, focused investment and maintenance of production levels, the Company is adapting to the low oil price environment. We have put in place prudent financial measures and the Company has commenced a liability management strategy that will prepare the Company for any foreseeable challenges ahead.
"Consistent with our first quarter results, I am pleased to tell you that the plans that we executed in late 2014 and early 2015 to align the Company's operations with the low oil price environment continue to deliver results. You will see in the second quarter results that the Company has maintained its drive to reduce G&A and cash operating costs. While these reductions do not fully offset the significant drop in oil prices since late 2014, they do set-up the base upon which to build the Company's profitability through the remainder of 2015 and beyond within foreseeable oil price scenarios.
"The Company is well advanced in its liability management strategy. We expect to close the sale of our remaining equity interest in Pacific Midstream during the third quarter, which will have a significant impact in our financial results and liquidity. Also, we continue our process of strategic non-core divestures - namely, the sale of our equity interest in Pacific Infrastructure (Puerto Bahía) and in the longer term the farm-out of part of our exploration portfolio. Focusing on high value assets will allow us to optimise our use of resources.
"For production, in the second quarter of 2015, we have achieved volumes from our assets in Colombia and Peru of 152 428 boe/d. Production continues to be on track with our internal plans and above our 2014 exit rate of approximately 150 000 boe/d.
"The Company continues to focus its production portfolio on light and medium oil assets. Exploration discoveries that were made in 2014 in the Colombian foothills continue to provide near-term production growth. In addition, we have confirmed the potential of the offshore Brazil Kangaroo discovery and announced a second potentially similar oil discovery nearby at the Echidna prospect. The modest exploration activity in 2015 has so far identified a number of other light oil prospects similar to the discoveries already made and, more importantly, our program is evaluating new light oil development drilling locations that should allow production growth to continue well into 2016.
"For the second quarter of 2015, we earned revenues of US$703 million and generated US$307 million in Adjusted EBITDA and US$168 million in funds flow from operations. Our operating netback for the quarter was US$32.64/boe, benefitting from reduction of total costs and the strengthening of realised prices.
"We continued to streamline our operations and achieved further cost reductions during the quarter, with underlying operating costs of US$23.71/boe and total operating costs (including overlift and other costs) of US$21.08/boe, compared with US$21.16/boe and US$26.72/boe, respectively, for the first quarter of 2015. Further cost savings are still possible through 2015, due to the restructuring of work processes and the impact of the weakening Colombian Peso.
"As you know, during the second quarter, the Company received an offer from ALFA, S.A.B. de C.V. and Harbour Energy Ltd. for the acquisition of all of the outstanding common shares of the Company. At the request of ALFA and Harbour Energy, the offer was later terminated with no further obligations by the Company to ALFA and Harbour Energy, including any termination/break fee or expense reimbursement. Throughout this process, we have maintained our long-term focus on the fundamentals of the Company and delivery of value to all of our Shareholders.
"As we continue through this challenging year, it is clear that forecasting an accurate guidance for oil prices is difficult. Instead, we shall focus on updating our 2015 operational outlook: we expect average production for the year of 150 to 156 M boe/d, representing 1% to 5% growth over 2014 production levels; realised prices to be approximately equal to the WTI benchmark price; expected operating costs will continue to reflect the reductions made by the Company and averaging US$24 to US$26/boe, with G&A costs of US$200 million, financing costs of US$270 million and cash taxes of US$100 million. Consistent with our objectives, capital expenditures and cash flow are expected to be balanced for the year as we preserve cash on our balance sheet.
"In summary, while maintaining focus in production levels and necessary exploration activity, our financial and capital strategy remains focused on maintaining a healthy balance sheet by: (1) maintaining reduced operating and G and A costs; (2) reducing capital expenditures to match cash flow under the prevailing oil price environment; (3) allocating capital to the most material and highest return projects; (4) maintaining liquidity; (5) hedging adequate volumes of our production; and (6) implementing strategic liability management initiatives. These are all aimed at ensuring funding for future growth and generating strong returns to our Shareholders.
"These are difficult times globally for the oil industry, but we are sure that the Company can weather the storm and continue to move forward with a judicious use of our resources and efficient use of our technical expertise. We are prepared for the long-term as well as for the opportunities before us and any challenges that may emerge."
- Net production after royalties for the quarter totaled 152 428 boe/d, which represented an increase of 2% from the average net production after royalties of 149 118 boe/d reported in the same period of 2014 and remained stable in comparison with the previous quarter.
- Net production from the Rubiales Field has been relatively flat with only modest levels of low-cost activities having been undertaken.
Net production after royalties at the Quifa SW Field increased to 29,906 bbl/d during the second quarter of 2015, which was 33% higher than the same period of 2014, in part from the tie-in of additional producing wells and from the impact of lower oil prices on the high-price royalty.
- Light and medium net oil production increased 14% compared to the same period of 2014 and remained stable compared with the first quarter of 2015, at 55 783 bbl/d.
- Light and medium oil production represents 37% of total net oil and gas production, while production from the Rubiales Field represented 36% of the total quarter net production, down from 43% for the same period in 2014.
Adapted from a press release by Louise Mulhall