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SEPTEMBER 2011
INVESTOR PRESENTATION
PMD - TSXV
Staying The Course
Forward-looking statement
All monetary amounts in U.S. dollars unless otherwise stated.
This presentation contains certain “forward-looking statements” and “forward-looking information” under applicable Canadian securities lawsconcerning the business, operations and financial performance and condition of PetroMagdalena Energy Corp. Forward-looking statements
and forward-looking information include, but are not limited to, statements with respect to estimated production and reserve life of the variousoil and gas projects of PetroMagdalena Energy; synergies and financial impact of completed acquisitions; the benefits of the acquisitions andthe development potential of the properties of PetroMagdalena Energy; the future price of oil and natural gas; the estimation of oil and gasreserves; the realization of oil and gas reserve estimates; the timing and amount of estimated future production; costs of production; success ofexploration activities; ANH/ Ecopetrol approval of transfer of title and operatorship of joint ventures; and currency exchange rate fluctuations.Except for statements of historical fact relating to the company, certain information contained herein constitutes forward-lookingstatements. Forward-looking statements are frequently characterized by words such as “plan,” “expect,” “project,” “intend,” “believe,”“anticipate”, “estimate” and other similar words, or statements that certain events or conditions “may” or “will” occur. Forward-lookingstatements are based on the opinions and estimates of management at the date the statements are made, and are based on a number of
assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materiallyfrom those projected in the forward-looking statements. Many of these assumptions are based on factors and events that are not within thecontrol of PetroMagdalena Energy and there is no assurance they will prove to be correct. Factors that could cause actual results to varymaterially from results anticipated by such forward-looking statements include changes in market conditions, risks relating to internationaloperations, fluctuating oil and gas prices and currency exchange rates, changes in project parameters, the possibility of project cost overrunsor unanticipated costs and expenses, labour disputes and other risks of the oil and gas industry, failure of plant, equipment or processes tooperate as anticipated, acquisitions not being integrated successfully or such integration proving more difficult, time consuming or costly thanexpected as well as those risk factors discussed or referred to in PetroMagdalena Energy’s public filings with the securities regulatory authoritiesin the provinces of Canada and available at www.sedar.com. Although PetroMagdalena Energy has attempted to identify important factorsthat could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other
factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-lookingstatements will prove to be accurate, as actual results and future events could differ materially from those anticipated in suchstatements. PetroMagdalena Energy undertakes no obligation to update forward-looking statements if circumstances or management’sestimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance onforward-looking statements. Statements concerning oil and gas reserve estimates may also be deemed to constitute forward-lookingstatements to the extent they involve estimates of the oil and gas that will be encountered if the property is developed. Comparative marketinformation is as of a date prior to the date of this presentation.
Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an energy equivalency conversionmethod primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The management estimates of
resources presented herein are arithmetic sums of multiple estimates of remaining recoverable resources (unrisked), which statistical principlesindicate may be misleading as to volumes that may actually be recovered. Readers should give attention to the estimates of individual classes
of resources and appreciate the differing probabilities of recovery associated with each class. Estimates of remaining recoverable resources(unrisked) include prospective resources that have not been adjusted for risk based on the chance of discovery or the chance of developmentand contingent resources that have not been adjusted for risk based on the chance of development. It is not an estimate of volumes that maybe recovered. Actual recovery is likely to be less and may be substantially less or zero.
Although PetroMagdalena has closed the acquisitions of its working interests in Carbonera, Cerrito, Rio Magdalena, Arrendajo, Topoyaco andMecaya, it is currently in the process of completing the required approvals from ANH/ Ecopetrol, as applicable, for the formal transfer of title
and operatorship.
2
3
1. Leadership team focused on strategy execution
2. Enhancing netbacks, reducing costs, increasing
efficiency
3. Focus on core oil assets – exploration and
development
4. Maximize value from other assets in the portfolio -
with strong partners
EXPERIENCED LEADERSHIP
IMPROVING OPERATING CASH FLOW
HIGH POTENTIAL
EXPLORATION ASSETS
DRIVING VALUE
PetroMagdalena today
Goal is to increase production and reserves
Focus on core oil assets
Catatumbo Basin•Santa Cruz•Cerrito
•Carbonera-La Silla•Carbonera•Catguas
Llanos Basin•Cubiro•La Punta•Arrendajo•Yamu
Putumayo Basin•Topoyaco•Mecaya
Magdalena Basin•Las Quinchas•Rio Magdalena
4
On Target Ongoing
Reduced G&A by 29% Q2 2011 vs 2010 Qtrly average
Increased Netback by 47% H1 2011from FY2010 average
Increasing production and reserves O
Drilling program at Cubiro
Exploration at Cubiro
Spudding of Topoyaco – D
Received environmental permit for Santa Cruz
Spudding of Santa Cruz * O
Funded work plan in place
Farm out Carbonera and Catguas to YPF**
Sale of Las Quinchas & farm out of other non-core assets O
5
PetroMagdalena is staying the course with achievable milestones
Achievement scorecard
* Civil and other works have begun to prepare the field
** Subject to ANH approval
2P Reserves*
Crude Oil(mmbbl)
Natural Gas (mmcf)
NGL (mmbbl)
Total(mmBOE)
December 31, 2010:
Total Proved (P1) 2.77 27.78 0.71 8.12
Total Proved + Probable (2P)
9.33 99.78 4.37 30.33
Change in 2P vs
December 20092.72 (19.86) (0.73) (1.33)
*December 2010 and 2009 Petrotech Reports (available at www.petromagdalena.com and www.sedar.com);
represents PetroMagdalena’s gross share before deduction of royalties.6
Focus on Core Oil Assets:
• Game changer at Cubiro: added 1 MMbbls at Cubiro C (from acquisition)
and exploration success at Petirojo +1.87 MMbbls and Copa B +1.28
MMbbls (mgmt estimate; not yet certified)
• Company’s gross 2P oil reserves increased by 41% in 2010
• Cubiro key driver fuelling recent 2P oil reserve growth
• Increased 126% in 2010 to 5.8 MMbbls
• Represents 62% of 2P oil reserves
7
Daily Average Production 2010-2011
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Year 2010 Q1 2011 Q2 2011 Current *
bo
ed
Copa B-1 (3-day test)
Petirrojo-1
Yamu
32.13% Cubiro Block C acquired
Arauco5/ Careto 13H
2010 base wells/ working interests
* September 1-11, 2011 daily average
8
• Re-capitalized balance sheet in February 2011 through equity financing
• Reduced debt by $31 million to $10 million, freeing up $1.0 million
per month of operating cash flow to fund capital investments in core
assets
• Enhancing operating netback from Cubiro production
• New oil marketing contract in conjunction with Pacific Rubiales
• Implementing initiatives to reduce opex
• Cost reductions generating positive trend in G&A per barrel produced
Ne
tba
ck
G &
A p
er b
arre
lStrengthened operating cash flow
$-
$5
$10
$15
$20
$25
$30
$35
$-
$10
$20
$30
$40
$50
$60
Q2 - 2010 Q3 - 2010 Q4 - 2010 Q1 - 2011 Q2- 2011
Operating Netback G&A
9
Enhancing Cubiro’s netback
• New 3-year conventional oil marketing agreement signed with
Pacific Rubiales effective February 1, 2011
• Three potential delivery points to Colombian pipeline infrastructure
(1) Management estimates, as of September 2011(2) Signing agreement in process – delivery volumes on availability
Illustrative summary of potential netbacks from crude oil sales from Cubiro production (1)
(US$ per barrel)
Delivery PointRubiales/
Vasconia
Guaduas/
Vasconia
Araguaney/
Vasconia (2)
WTI (Nymex) $80 $80 $80
Benchmark Quality Adjustment +8 +20 +20
Net revenue 88 100 100
Production costs (2011E; year
avg) 13 13 13
Transportation & pipeline 16 23 10
Netback $57 $64 $77
10
(1) Management estimate
(2) Represents estimated revenues less royalties, production and transportation costs based upon average
daily production of 2,800 boe/d for the year.
Operating cash flow from netbacks (2) $58 million
Less: G&A (including one-time costs in Q1) $15 million
Less: Debt service ongoing (principal & interest) $18 million
Net cash flow from operations $25 million
Cash available from equity financing $35 million
Total sources to fund 2011 capex plan and
working capital$60 million
2011E capex plan $40-$50 million
2011E Cash flow (1)
Property Work Program 2011(1) Approximate timing
Exploration Plan
Cubiro • 3 wells (1 Block B, 2 Block C) • 2 drilled, 2 discoveries
• Yopo well added to program (Block B)
• Yopo well, Q4-2011
La Punta • 2 wells (LP-4 dry) • LP-4 drilled Q2, LP-5 Q4
Topoyaco • 1 well (Yaraqui-1X) • Spud August 31st
Santa Cruz • 1 well • Spud Early Q4-2011
Development Plan
Cubiro • 3 wells + 3 WOs + facilities, including storage
• 2 wells completed in Q1-2011
• 1 well in Q3, WO’s in Q4-2011
• 1 well added to program (Block B)
• Petirrojo-2 well in Q4-2011
11
(1) Management Estimate, subject to change
Estimated 2011 capital investment budget: $40 million - $50 million (1)
2011 Work program
12
Operator: PetroMagdalena EnergyWI: A:60.5% B:70% C:57.13%Contract: ANH
Product: L/M OilArea: 61,295 acres2P Reserves: 5.8 MMbbl (1)
Production: 2010 A (Year Avg): 1,905 boe/d2011E (Year Avg): 2,100 boe/d – 2,300 boe/d(2)
Llanos Basin – Cubiro
(1) Petrotech Dec 31, 2010 Report , PetroMagdalena share,
gross before royalties
(2) Management estimate , including impact of April 15,. 2011
Jaguar acquisition
(3) Company share, not yet certified
About Cubiro
• Most prolific hydrocarbon basin in continental Colombia
• Currently producing from 18 wells in the Careto, Arauco, Barranquerro and Copa fields
• 126% increase in 2P reserves (Dec 2010 vs Dec 2009)
• April 15, 2011 acquisition (Jaguar) represents incremental 1.0 MMbbls in 2P reserves as of Dec 31, 2010
• Improved marketing contract PRE and reduced opex has significantly improve the netback per
barrel vs 2010
• 2011 Exploration program two discoveries with Mgmt estimate of 3.1 MMbbls (3) of recoverable reserves.
13
Llanos Basin - Cubiro
Polygon A :
Development Area
60.5% W.I.
Polygon B :
Exploration Area
70% W.I.
Polygon C :
Exploration Area
57% W.I.
Field
Prospect
C537 °API
PalmaritoC7 40 °API
Caño GandulC5-C738 °API
Careto
Arauco Sirenas
Guanapalo
C7
30 °API
BarranqueroPetirrojo
Altair
Copa
C7
Cernicalo
Q1-2012
CanarioSirenas
Sur
Turpial
Tijereto Sur
Q1-2012
Yopo, Q4-2011
Petirrojo Sur
Copa B
Copa AS
Jordán
C7
29 °API
Copa C, Q1-2012
Highlights
• Operated by PetroMagdalena Energy
• All production is subject to the sliding scale royalty rates of ANH and a 3% overriding royalty on total production from the Block.
• The Cubiro Block has been under an Exploration and Production (E&P)
Contract with ANH since October 8, 2004, followed by a 25 year production period.
• Currently, there are six producing oil fields: Careto, Arauco, Barranquero,
Copa, Copa B and Petirrojo.
• Currently producing from Carbonera C-5, C-7 and Gacheta formations.
• Acquired an additional 32.13% of the Cubiro C eastern area on April 15, 2011.
• Two new fields discovered at Petirrojoand Copa B in Q3 2011
Petirrojo Field, Petirrojo South & Yopo
Prospects• Petirrojo-1 encountered 32 ft of net pay.
After an initial test rate of 1,545 bopd of
40 API light oil the well averaged 1,849 bopd (Company share, 1,294 bopd) over the next 15 days and remains on production.
• Petirrojo-2 development well will be drilled
from the same location Q4-2011.
• Yopo exploration well to be drilled when civil work is completed, Q4-2011.
• Petirrojo South will be drilled when civil work has been completed, Q2-2012
Recoverable
Reserves
(MM Bbls)
Petirrojo 1,870
RESOURCES
(MM Bbls)
Petirrojo South 1,100
Yopo 1,700
CURRENT MGMT. ESTIMATES (1)
(1) Company share, not yet certified
Yopo Prospect
Petirrojo Field
1 Km
Petirrojo-1
Carbonera C7
TWT Seismic Map
Petirrojo Dev. Locations
Petirrojo South Prospect
Recoverable
Reserves
(MM Bbls)
Copa B-1 1,260
RESOURCES
(MM Bbls)
Copa AS-1 1,002
CURRENT MGMT. ESTIMATES (1)
Copa B Field, Copa AS & Copa AN Prospect
• Copa B-1 exploration well encountered 41 ft of net pay. Initial 3-day test rate of 1,045 bopd (Company share, 597 bopd) of 39.3°
API light oil. The well will be put on test in 2 zones for approximately 6 weeks and then a full testing program on all zones will be completed.
• Copa AS-1 exploration well will be drilled
from the same location in Q3-2011.
• The Copa C structure to the south of Copa B will be drilled in Q1-2012
Carbonera C7
TWT Seismic Map
Copa B Field
Copa B -1
Copa AS Prospect
Copa AS-1
1 Km
Copa AN Prospect
15
(1) Company share, not yet certified
Cubiro ‘C’ Area – Copa Upside
16
@ 25% WI @ 57% WI Change
COPA 2P Reserves (MM bbl) 798 1,825 1,027
COPA B Recoverable (MM bbl) 553 1,260 708
COPA Exp. Risked Upside (MM bbl) 1,528 3,490 1,962
RESOURCES
100% 25% 57% COS Risked
% 57%
Copa A North 3,363 841 1,920 60 1,152
Copa A South 2,925 731 1,670 60 1,002
Copa C 3,509 877 2,004 40 802
Copa D 2,340 585 1,336 40 534
12,137 3,034 6,930 200 3,490
Mgmt Volumetric Estimates: C7, C5, C3 (MM bbls)
RESERVES
Petrotech Dec 2010
100% 25% 57.13%
Proved 1,592 398 910
Probable 1,599 400 914
2P 3,192 798 1,825
Gross
COPA (MM Bbls)
RESERVESManagement Estimate
100% 25% 57.13%
2,210 553 1,260
COPA B (MM Bbls)
Gross
Recoverable
Reserves
Copa Field
Copa A North
Copa A South
Copa B
Copa C
Copa D
Exploration 2011
Exploration 2012
Development
17
Topoyaco & MecayaContracts: ANH
Operator:Topoyaco - Pacific Rubiales (1)
WI: 50%, subject to ANH approvalMecaya – Gran Tierra
WI: 42%, subject to ANH approvalProduct: L/M oil exploration potentialProduction: Nil
About Putumayo
• Putumayo Basin is located in southwest Colombia
• High potential exploration targets
Highlights
• Partnered with experienced operators.
• The possibility of finding a large field and on trend with Costayaco
• PetroMagdalena Energy has a 50% working interest in the Topoyaco Block, subject to the ANH approval, with a 6% overriding royalty to Trayectoria. In
addition, there is a 3.5% profit interest payable to Grant Geophysical for the seismic work.
• PetroMagdallena Energy has a 42% working interest in the Mecaya Block, subject to ANH approval, with no overrriding royalty and will pay 85% of the cost of the first 3D and well.
Capital Investment Plan
• One exploration well, at Prospect D on Topoyaco, will be drilled in Q3 of 2011
Putumayo Basin
(1) Contract assignment in process subject to approval by ANH
18
Well: Yaraqui-1X
Prospect: D
Putumayo Basin – Topoyaco
Prospect ‘D; Resource Estimate -100% (mbbls)
PROSPECT LOW BEST HIGH
‘D’ 15,808 46,907 147,119
Gross
PetroMagdalena7,904 23,453 73,560
Source: April 30, 2010 Petrotech Report (available at
www.petromagdalena.com)
Yaraqui-1X well spud
August 31, 2011, in the
central part of the
block. The well plan is
to reach a total depth
of 10,509 feet MD, or
9,402 feet TVD,
targeting the
Cretaceous Villeta and
Caballos formations, in
a sub-thrust structure
called prospect “D”.
19
Maximize Value From
Catatumbo Assets
Actions Taken
Farm Out Agreement for Santa Cruz:
• Retain Operatorship
• Retain 70% Working Interest
• Pay 40% of first well in Q4 – 2011, 55% of second well, 70% thereafter
Farm Out Agreement for Carbonera:
• YPF becomes Operator, bring extensive gas experience
• Retain 40% Working Interest
• Carried through US$23 million work program
Farm Out Agreement for Catguas:
• YPF will led exploration program
• Retain working interests of 15% in North area and 4.5% in South area
• Carried through 2012 work program
20
• Santa Cruz-1 will be drilled in Q4-2011, in
the A Block, with an area of 750 acres and
an expected primary target (Mirador)
thickness of over 300 ft of high porosity
and permeability sandstone reservoir.
• The environmental permit has been issued
and civil work has started on the location.
• The Santa Cruz Block prospective resources are based on the 3D seismic interpretations and surrounding analog fields.
• The Santa Cruz Block has several faulted
structures assigned prospective resources based on the 3D seismic interpretations and information from the offset Rio Zulia field
Source: Management estimate of recoverable resources based
on the 3D interpretation and are reported gross of royalties.
Catatumbo Basin – Santa Cruz-1
Operator: PetroMagdalenaWI: 70%
Santa Cruz-1 Resource Estimate -100% (m bbls)
PROSPECT LOW BEST HIGH
‘A’ 17,000 73,000 308,000
Gross
PetroMagdalena11,900 51,100 215,600
Source: Management Estimate
C: 700 acres
Total of 3480 acres
F: 420 acres
E: 580 acres
D: 230 acres
A: 750 acres
B: 800 acres
Santa Cruz – 1, Q4 - 2011
21
Cash position (June 30, 2011): $26.5 million
Debt (June 30, 2011):
Bank term loans
18-month factoring Loan
3-year 9% Senior Notes
$9.5 million
$8.6 million
CA$31.1 million
Share price (Sept 6, 2011): CA$0.95
Shares outstanding: 142.3 million
Options outstanding ($2.52 average)
Warrants outstanding ($3.50)
9.5 million
19 million
Fully diluted: 170.8 million
Market capitalization (Sept 6, 2011): CA$135.2 million
Capitalization
22
Leadership team
Luciano Biondi
Chief Executive Officer
Gregg K. Vernon, P.Eng
Chief Operating Officer
Michael Davies, C.A.
Chief Financial Officer
Francisco Bustillos, M.Sc.
Colombian Finance &
Administration Manager
Jesus Aboud
Exploration Manager
Peter Volk, LL.B.
General Counsel & Secretary
Management
Jaime Perez Branger
Executive Chairman
Miguel de la Campa
Serafino Iacono
Ian Mann
Robert Metcalfe
Luis Miguel Morelli
Directors
Appendix
23
Assets in the most prolific basins
Area Operator(1) Gross
Acres WI Contract Stage Product Status
Llanos Basin
Cubiro PMD 61,295 60-70-57% ANH E&P Light Oil Core Asset*
La Punta Vetra 19,313 Up to 6% ECP E&P Light Oil Drilling Q4
Arrendajo PRE 78,102 35% ANH Exploration Light Oil Near Cubiro
Yamu WOGSA 18,194 10% ANH Prod & Exp Light Oil Producing
Catatumbo Basin
Carbonera PMD 63,727 96% ANH E&P Oil & GasJoint Venture
or
Farm-Out
Cerrito PRE 10,165 76-81% ECP E&P Gas
Catguas GTE 330,35515%/50%
S N (2) ANH Exploration Oil & Gas
Santa Cruz PMD 40,058 100% ANH Exploration Light Oil Farm out potential
Carbonera –
La SillaPMD 12,558 58% ECP
E&P Light Oil
3D seismic Work
plan in place
Magdalena Basin
Las Quinchas PRE 124,493 24.5% ECP E&P H Oil To Be Sold
Rio Magdalena GTE 36,156 56% ECP E&P Gas/Cond/
OilJV or Farm-Out
Putumayo Basin
Topoyaco PRE 60,035 50% ANH Exploration L/M Oil PRE now Operates
Mecaya GTE 74,128 43% ANH Exploration L/M Oil 3D seismic planned
(1) See Slide 2. (2) Option to acquire additional 10% S/ 30% N.
* Working interest reflects post-acquisition of Jaguar E&P CPR Consultants, S.A Yellow background = Core portfolio assets24
25
Highlights
• Operated by Pacific Rubiales Energy
• Several light oil prospects on trend with producing oil fields
• 120 km2 of 3D survey completed in April 2011, currently being evaluated
• Five prospects in the Carbonera formation have been identified: Mirla Blanca, Yaguazo, Tigua, Buho and Babillas
• Mirla Negra-1 well tests on the C-5 over the perforated interval of 5,506 - 5,510 feet MD showed a daily rate of 130 barrels of oil at 34.5°API with a 69% water cut.
• Management estimates resources of ~ 5 MMbbl with addition of the new 3D seismic
survey
• PetroMagdalena acquired overriding royalties of 4% and 3% in the A and B sectors, respectively, on the block in April 2011.
• Arrendajo is 7 km NE of the Cubiro block
Llanos Basin – Arrendajo
20Petirrojo
Cubiro
Sector B: 3% ORR
Sector A: 3% ORR
ARRENDAJO
(1) Petrotech Engineering report April 2010
Operator: Pacific Rubiales WI: 35%
Contract: ANHProduct: Light Oil Area: 78,102 acresResources: 3,059 Mbbl (1)
Stage: Exploration
26
VSM 12
VMM 35
COR 33
VSM 13
LLA 41VMM 11
MIDDLE MAGDALENA VALLEY BASIN
CORDILLERA BASIN
UPPER MAGDALENA VALLEY BASIN
LLANOS BASIN
2010 ANH Bid Round
Six New E&P Assets
Agreement for funding the
exploration commitment
resulting in PetroMagdalena
holding a 10% Working Interest.
27
Colombian Pipeline Infrastructure
As at September 6, 2011
28
$64,338x
$114,122x
$-
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
PetroMagdalena Energy
Corp
Peer*
Ma
rke
t C
ap
ita
liza
tio
n /
Pro
du
ctio
n (
bo
ed
)
Source: Bloomberg & Company 2011 Q2 MD&A Reports *Peer: Gran Tierra, Canacol, Parex, Petrodorado & C&C Energia
$14,488,295x
$49,559,154x
$-
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
PetroMagdalena Energy
Corp
Peer*
Ma
rke
t C
ap
ita
liza
tio
n /
Re
serv
es
(mm
BO
E)
Valuation metrics