(Sharecast News) - PetroTal has entered into an arrangement with Petroperu, it announced on Friday, and also revealed details of a placing of 141.2 million units at a price of 10p each, to raise gross proceeds of £14.1m.
The AIM-traded firm said each placing unit would comprise one new common share and one half of one warrant.
It said the arrangement with Petroperu would result in its liability to Petroperu, in relation to recent oil price movements, being payable over a three-year period, rather than at the point of sale of the oil.
The arrangements were structured to minimise the impact of the recent oil price decline on the company's cash flows and forward plans, while allowing it to benefit from any future increase in oil prices when physical oil sales occur.
As it announced on 7 May, the liability related to the oil price differential between the date that oil enters the Northern Oil Pipeline (ONP) and the current oil price and, ultimately, the physical oil sales price.
Additionally, PetroTal confirmed an extension of the oil sales contract with Petroperu dated 23 December, from one year to three years on "enhanced terms".
It explained that the contingent liability announced on 7 May had been structured into a three-year payment arrangement with Petroperu, at an interest rate of 6.5%.
The contingent liability at the end of May was estimated to be around $43m.
PetroTal said the arrangement allowed it to settle the obligations to Petroperu now, while still allowing it to benefit from higher oil prices forecast by the Brent forward strip pricing curve when the physical oil sales occur.
The parties would establish a framework to ensure that future oil sales under the oil sales contract have adequate hedge protection, to avoid future downside losses, and had agreed to further amendments to the oil sales contract for lower pipeline tariffs and fees during the period of low oil prices.
PetroTal said it was coordinating with Petroperu to reopen the Bretana oil field in early July.
"PetroTal is pleased to embrace the strong working relationship it has with Petroperu," said president and chief executive officer Manolo Zuniga.
"Oil production from the Bretana oil field is an important component of Petroperu's pipeline and refinery network.
"Solidifying a three-year arrangement for both settlement of the contingent liability and ensuring future oil sales, significantly enhances PetroTal's operations."
Zuniga said it also set the stage for PetroTal to continue the development of the Bretana oil field, as and when oil prices recovered.
"Our focus on balance sheet strength and enhancing liquidity will ensure PetroTal has the financial strength for working capital management and the ongoing development of Bretana.
"PetroTal appreciates the support of its suppliers and the continued dedication of our employees and contractors.
"Together, PetroTal will emerge from the pandemic stronger, in order to rebuild value for shareholders."
Looking at the placing, which PetroTal said was "significantly" oversubscribed, it explained that it intended to use the net proceeds of the placing for ongoing development of the Bretana oilfield, and to enhance working capital.
With a stronger balance sheet, PetroTal said it would be able to finalise a credit facility for day-to-day operations, and structure derivatives to minimise the impact of future oil price fluctuations.
"In light of the recent fall in global oil prices and the temporary shut in of the Bretana oil field, we have sought to preserve liquidity and are taking the opportunity to strengthen the company's balance sheet via this fundraise," Manolo Zuniga added.
At 1054 BST, shares in PetroTal were down 0.44% at 11.2p.
PetroTal (PTAL)7 Jun 2024 14:37