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(Sharecast News) - Peru-focussed exploration and production company PetroTal announced an oil sales contract with state-owned Petroperu on Friday, for oil production from the Bretaña oil field, operated 100% by PetroTal.
The AIM-traded firm said commissioning of the central production facility was underway, with oil production having surpassed 10,000 barrels of oil per day from the Bretaña field.
It said the oil sales contract would enable PetroTal to ship all oil in excess of its existing 1,200 bopd sales agreement with the Iquitos refinery, through the 854 kilometer North Peruvian Oil Pipeline, which is owned and operated by Petroperu.
Petroperu had agreed to purchase the oil at pump station 1, located at Saramuro, about 460 kilometers from Bretaña.
The company said it would barge the oil to Saramuro at an estimated average cost of $4.25 per barrel.
It said the oil delivered at Saramuro would be sold based on the monthly average reference price of ICE Brent, minus $4.00 per barrel.
When the oil is ultimately sold by Petroperu at Bayovar, PetroTal said it would receive a valuation adjustment based on the actual price achieved by Petroperu, whether higher or lower.
The sales contract would allow PetroTal to receive oil sales revenue earlier, allowing it to maintain "strong" liquidity, the board explained.
It said the oil sales contract would allow it to submit monthly invoices, rather than having to wait for the ultimate sale at Bayovar after sufficient oil volumes had been achieved for a tanker to take the oil to its final market.
The contract was initially for one year, and could be extended with the agreement of both parties.
For Petroperu, the increased oil volumes through the pipeline would enhance economics, since Petroperu would earn the previously-published pipeline tariffs along with a commercialisation fee.
"We're pleased that Petroperu has exhibited such confidence in oil production from the Bretaña oil field as our good quality oil output increases," said PetroTal president and chief executive officer Manolo Zuniga.
"This will ensure that Petroperu has the ability to manage Peru's expanding oil production and an adequate supply of oil for the Talara refinery expansion when complete."
At 1553 GMT, shares in PetroTal were up 5.08% at 31p.
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