PetroTal Provides Update on the Filing of 2019 Year-End and First Quarter 2020 Results

Bretana oil field operations expected to resume in July 2020

Calgary, Alberta and Houston, Texas--(Newsfile Corp. - May 29, 2020) - PetroTal Corp. (TSXV: TAL) and (AIM: PTAL) ("PetroTal" or the "Company") advises that, due to the impact of the global COVID-19 pandemic, it is necessary to delay its corporate filings for the three months ended March 31, 2020, as provided for by Canadian Securities Administrators.

First Quarter 2020 Filings

As a result of delays in accessing information due to mandatory stay at home orders in Peru, the Company will postpone the filing of its unaudited consolidated financial statements and management's discussion and analysis for the three months ended March 31, 2020 ("Interim Filings") until no later than July 16, 2020, in reliance on the exemption provided in Alberta Securities Commission ("ASC") Blanket Order 51-517 Temporary Exemption from Certain Corporate Finance Requirements (and similar exemptions provided by the other Canadian securities regulators) ("Blanket Order").

2019 Year-end Filings

As previously announced on April 29, 2020, the Company will also postpone the filing of its audited consolidated financial statements, management's discussion and analysis and annual information form (inclusive of the reserves disclosure required by National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities) for the year ended December 31, 2019 ("Annual Filings") until no later than June 12, 2020, in reliance on the exemption provided in the Blanket Order.

Until the Company has filed the Annual Filings and the Interim Filings, members of the Company's Board, management and other insiders are subject to an insider trading black-out policy that reflects the principles in section 9 of National Policy 11-207 - Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions.

Annual Shareholder Meeting

The Company continues to monitor public health directives and recommendations relating to the COVID-19 pandemic, including continued restrictions on in-person gatherings, and looks forward to holding its annual meeting of shareholders without having to limit physical attendance by shareholders and guests. In the circumstances, the Company has determined to defer its annual meeting until the second half of the year and, in connection therewith, the filing of proxy materials containing disclosure on director nominees, the Company's auditor, executive compensation and corporate governance, in reliance on temporary relief issued by the TSX Venture Exchange and the Canadian Securities Administrators as a result of the pandemic. In particular, the Company relies on the exemption in ASC Blanket Order 51-518 Temporary Exemptions from Certain Requirements to File or Send Securityholder Materials (and similar exemptions provided by the other Canadian securities regulators) with respect to the filing of executive compensation disclosure, which is included in the information circular for annual shareholders meetings. The requisite shareholder communications and other actions necessary to call the meeting will be undertaken when the meeting date is decided.

Corporate Update

An update on material business developments since the press release dated April 29, 2020 is described below, the majority of which have already been disclosed in prior press releases:

  • On May 7, 2020, the Company announced that the Bretana oil field was temporarily shut in due to a Peruvian government health directive for COVID-19 prevention, that caused the oil sales pipeline, operated by Petroperu, to be shut down. PetroTal continues to monitor this situation closely, and based on discussions with Petroperu, expect that in July 2020, the oil sales pipeline will re-open allowing for Bretana oil field operations to recommence;
  • PetroTal announced on May 7, 2020 a contingent liability under the Company's oil swap and sales arrangements with Petroperu, of approximately $42 million as at March 31, 2020 arising from the drop in global oil prices. As a result of the recent recovery in oil prices, the Company estimates that the contingent liability has decreased to approximately $35 million as of May 28, 2020. The ultimate liability will not be crystallized until Q3 and Q4 2020, when the physical oil sales materialize. The Company is in discussions to facilitate an arrangement whereby the contingent liability, when crystallized, will be settled over a three-year period from future cash flow, and;
  • As announced on May 7, 2020, PetroTal continues to assess a variety of financial arrangements to ensure it has the necessary funding for its operations. When finalized, the Company will update the market.


ABOUT PETROTAL

PetroTal is a publicly‐traded, dual‐quoted  (TSXV: TAL) and (AIM: PTAL) oil and gas development and production company domiciled in Calgary, Alberta, focused on the development of oil assets in Peru. PetroTal's flagship asset is the Bretaña oil field in Peru's Block 95 where oil production was initiated in June 2018, six months after acquisition. Additionally, the Company has large exploration prospects and is engaged in finding a partner to drill the Osheki prospect in Block 107. The Company's management team has significant experience in developing and exploring for oil in Northern Peru and is led by a Board of Directors that is focused on safely and cost effectively developing the Bretaña oil field.

For further information, please see the Company's website at www.petrotal-corp.com, the Company's filed documents at www.sedar.com, or contact:

Douglas Urch
Executive Vice President and Chief Financial Officer
Durch@PetroTal-Corp.com
T: (713) 609-9101

Manolo Zuniga
President and Chief Executive Officer
Mzuniga@PetroTal-Corp.com
T: (713) 609-9101

Celicourt Communications
Mark Antelme / Jimmy Lea
petrotal@celicourt.uk
T : 44 (0) 208 434 2643

Strand Hanson Limited (Nominated & Financial Adviser)
James Spinney / Ritchie Balmer
T: 44 (0) 207 409 3494

Stifel Nicolaus Europe Limited (Joint Broker)

Callum Stewart / Simon Mensley / Ashton Clanfield
Tel: +44 (0) 20 7710 7600

Numis Securities Limited (Joint Broker)
John Prior / Emily Morris
T: +44 (0) 207 260 1000

READER ADVISORIES

FORWARD‐LOOKING STATEMENTS: This press release contains certain statements that may be deemed to be forward‐looking statements. Such statements relate to possible future events, including, but not limited to: PetroTal's business strategy, objectives, strength and focus; the Company's ability to operate in accordance with developing public health efforts to contain COVID-19; the timing of filing the Annual Filings and the Interim Filings; the timing of the Company's next annual shareholder meeting. All statements other than statements of historical fact may be forward‐looking statements. Forward‐ looking statements are often, but not always, identified by the use of words such as "anticipate", "believe", "expect", "plan", "estimate", "potential", "will", "should", "continue", "may", "objective" and similar expressions. The forward‐looking statements are based on certain key expectations and assumptions made by the Company. Although the Company believes that the expectations and assumptions on which the forward‐looking statements are based are reasonable, undue reliance should not be placed on the forward‐looking statements because the Company can give no assurance that they will prove to be correct. Since forward‐looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e. g. , operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses; and health, safety and environmental risks), commodity price and exchange rate fluctuations, legal, political and economic instability in Peru, access to transportation routes and markets for the Company's production, changes in legislation affecting the oil and gas industry and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. In addition, the Company cautions that current global uncertainty with respect to the spread of the COVID-19 virus and its effect on the broader global economy may have a significant negative effect on the Company. While the precise impact of the COVID-19 virus on the Company remains unknown, rapid spread of the COVID-19 virus may continue to have a material adverse effect on global economic activity, and may continue to result in volatility and disruption to global supply chains, operations, mobility of people and the financial markets, which could affect interest rates, credit ratings, credit risk, inflation, business, financial conditions, results of operations and other factors relevant to the Company. Please refer to the risk factors identified in the Company's annual information form for the year ended December 31, 2018 and management's discussion and analysis for the three and nine months ended September 30, 2019 which are available on SEDAR at www.sedar.com. The forward‐looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward‐looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.

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To view the source version of this press release, please visit https://www.newsfilecorp.com/release/56764


PetroTal Announces Temporary Shut In of Bretana Oil Field Due to COVID-19 Pipeline Closure

PetroTal provides update on financing arrangements

Calgary, Alberta and Houston, Texas--(Newsfile Corp. - May 7, 2020) - PetroTal Corp. (TSXV: TAL) (AIM: PTAL) ("PetroTal" or the "Company") announces that the Northern Oil Pipeline ("ONP") operated by PETROPERU S.A. ("Petroperu") has been shut down by a public health directive from the Peruvian government, thereby resulting in PetroTal having to shut in the Bretana oil field as a result of storage capacity limitations. Additionally, PetroTal provides an update on financing initiatives to accommodate the impact of oil price reductions occurring from oil sales at the Bretana oil field in Block 95 in Peru. All monetary amounts in this release are in United States dollars.

Highlights

  • The health department of the Peruvian government issued a directive for COVID-19 prevention in high risk areas and for high risk individuals;
  • Petroperu temporarily shuts down pipeline operations to comply with this directive;
  • PetroTal temporarily shuts in Bretana oil field operations due to storage capacity limitations;
  • The Company's planned capital expenditure for 2020 continues to be deferred;
  • Reduce compensation for Management and Directors by 20%;
  • Oil field shutdown will trigger significant cost reductions of operating, transportation and general and administrative costs;
  • Resulting from the global oil price reduction, the Company has a contingent derivative liability of $42 million at March 31, 2020;
  • The actual liability of the oil price difference determination is expected to be lower due to the projected improvement in oil prices when physical sales occur in Q3 and Q4, and;
  • PetroTal advises of financing discussions for a multi-year settlement of the contingent liability.

Pipeline and Bretana Oil Field Shut Down

PetroTal has been notified by Petroperu, the operator of Peru's ONP that it has temporarily shut down the pipeline as a result of a directive from the Peruvian government intended to combat the spread of COVID-19 in the communities adjacent to the pipeline operations. The directive states that no employees over the age of 60 nor with serious chronic diseases, should be working in the high risk regions of Peru. Although Petroperu has filed an appeal with the Peruvian government to allow the pipeline to resume operations on the basis that it is an essential service, it is not clear how long the pipeline operations will remain suspended. PetroTal has commenced steps to temporarily shut down oil production at the Bretana oil field due to storage capacity limitations. The shut down is being managed to ensure that operations can be returned to full production levels in an orderly manner upon reopening of the ONP. As a consequence of this directive, PetroTal will necessarily move to significantly curtail all costs related to oil field operations, as the Company moves into a temporary hibernation mode. PetroTal is pleased to report that no COVID-19 cases have been reported at the Bretana oil field.

Additional Cost Reductions

The Company announces that, in addition to ongoing cost rationalization of operating, transportation and capital development costs, PetroTal has reduced overall general and administrative costs by approximately 20%. This includes company-wide salary cuts, including cash compensation reductions of 20% for management and directors. The Company continues to prudently manage its cash resources and is exploring ways to further reduce its cost structure, as needed. The temporary Bretana oil field shut down in response to the public health directive gives PetroTal the opportunity to reduce costs more than if production was voluntarily shut in, and the Company will temporarily layoff all but essential personnel at the field and offices.

Financial Update

On May 27, 2019, PetroTal entered into a Pipeline Transportation Service Contract with Petroperu, a state-owned company, to have access to Peru's ONP that included an oil swap arrangement ("Swap Contract") that allowed PetroTal to deliver volumes of its Bretana oil by barge to the ONP Pump Station No.1 ("PS#1"), located at Saramuro, in exchange for equivalent volumes of Petroperu's premium supreme residual oil at the port of Bayovar. The Company delivered a total of approximately 580,000 barrels of Bretana oil to PS#1 pursuant to this arrangement before it expired in early December 2019.

On December 23, 2019, PetroTal entered into a new Sales Contract with Petroperu whereby all the Bretana oil delivered at PS#1 is sold to Petroperu at a monthly average reference price of ICE Brent minus $4 per barrel. As of March 31, 2020, PetroTal has delivered a total of approximately 1.2 million barrels of Bretana oil to PS#1 pursuant to the Sales Contract.

It can take up to eight months for Bretana oil to reach the Bayovar port where it can be stored for a further four months before it is ultimately sold by Petroperu. The Swap and Sale Contracts enable the Company to receive oil sales revenue earlier, improving PetroTal's liquidity. When the oil is ultimately sold by Petroperu at Bayovar, PetroTal will be subject to a valuation adjustment based on the actual price achieved by Petroperu, whether higher or lower as compared to the price received at the time of delivery to PS#1.

On a monthly basis, the Company tracks the impact of fluctuating oil prices on volumes sold under both the Swap Contract and Sales Contract, as a commodity derivative and, as a result of the recent drastic drop in oil prices, the contingent liability accruing under these contracts is approximately $18 million and $24 million, respectively, at the end of March 2020. Given the current ONP timetable, it is expected that Bretana oil delivered pursuant to the Swap Contract will be sold by Petroperu in late Q3 2020, and Bretana oil delivered pursuant to the Sales Contract will be sold by Petroperu commencing in Q4 2020, at which time the contango effect forecasts a higher Brent oil price, which would result in a lower liability. The current shut in status of the ONP could result in these physical oil sales occurring further into the future. Under the terms of the Sales Contract, the Company is required to settle this contingent liability when the balance exceeds $10 million.

The Company is in discussions to facilitate an arrangement that is expected to result in this contingent liability, when crystallized, to be paid over a three year period from future cash flow. This is an effective way to settle these obligations now, thereby allowing the Company to realize the favorable impact of the expected future higher oil prices when the physical oil sales occur. As specific details are finalized, more information on this potential source of finance will be announced in due course. The Company continues to assess other financing alternatives to ensure it has the necessary funding for its operations.

Manolo Zuniga, President and Chief Executive Officer, commented:

"PetroTal continues to support initiatives to ensure the Peruvian government provides the support needed during this pandemic, just as other countries have done. In the meantime, we continue to work on securing the necessary financial backing to ensure we are properly funded and emerge stronger from this crisis. PetroTal appreciates the ongoing dedication of all employees and the support for our business during these challenging times of the pandemic impact."

ABOUT PETROTAL

PetroTal is a publicly‐traded, dual‐quoted (TSXV: TAL) (AIM: PTAL) oil and gas development and production company domiciled in Calgary, Alberta, focused on the development of oil assets in Peru. PetroTal's flagship asset is its 100% working interest in Bretaña oil field in Peru's Block 95 where oil production was initiated in June 2018, six months after acquisition. Additionally, the Company has large exploration prospects and is engaged in finding a partner to drill the Osheki prospect in Block 107. The Company's management team has significant experience in developing and exploring for oil in Northern Peru and is led by a Board of Directors that is focused on safely and cost effectively developing the Bretaña oil field.

For further information, please see the Company's website at www.petrotal-corp.com, the Company's filed documents at www.sedar.com, or contact:

Douglas Urch
Executive Vice President and Chief Financial Officer
Durch@PetroTal-Corp.com
T: (713) 609-9101

Manolo Zuniga
President and Chief Executive Officer
Mzuniga@PetroTal-Corp.com
T: (713) 609-9101

Celicourt Communications
Mark Antelme / Jimmy Lea
petrotal@celicourt.uk
T : 44 (0) 208 434 2643

Strand Hanson Limited (Nominated & Financial Adviser)
James Spinney / Ritchie Balmer
T: 44 (0) 207 409 3494

Stifel Nicolaus Europe Limited (Joint Broker)
Callum Stewart / Simon Mensley / Ashton Clanfield
Tel: +44 (0) 20 7710 7600

Numis Securities Limited (Joint Broker)
John Prior / Emily Morris
T: +44 (0) 207 260 1000

READER ADVISORIES

FORWARD‐LOOKING STATEMENTS: This press release contains certain statements that may be deemed to be forward‐looking statements. Such statements relate to possible future events, including, but not limited to: PetroTal's business strategy, objectives, strength and focus; the Company's ability to resume operations in accordance with developing public health efforts to contain COVID-19; additional cost reductions; and liability under the Swap Contract and Sales Contract and the settlement of such liability. All statements other than statements of historical fact may be forward‐looking statements. Forward‐ looking statements are often, but not always, identified by the use of words such as "anticipate", "believe", "expect", "plan", "estimate", "potential", "will", "should", "continue", "may", "objective" and similar expressions. The forward‐looking statements are based on certain key expectations and assumptions made by the Company. Although the Company believes that the expectations and assumptions on which the forward‐looking statements are based are reasonable, undue reliance should not be placed on the forward‐looking statements because the Company can give no assurance that they will prove to be correct. Since forward‐looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses; and health, safety and environmental risks), commodity price volatility, price differentials and the actual prices received for products, exchange rate fluctuations, legal, political and economic instability in Peru, access to transportation routes and markets for the Company's production, changes in legislation affecting the oil and gas industry and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. In addition, the Company cautions that current global uncertainty with respect to the spread of the COVID-19 virus and its effect on the broader global economy may have a significant negative effect on the Company. While the precise impact of the COVID-19 virus on the Company remains unknown, rapid spread of the COVID-19 virus may continue to have a material adverse effect on global economic activity, and may continue to result in volatility and disruption to global supply chains, operations, mobility of people and the financial markets, which could affect interest rates, credit ratings, credit risk, inflation, business, financial conditions, results of operations and other factors relevant to the Company. Please refer to the risk factors identified in the Company's annual information form for the year ended December 31, 2018 and management's discussion and analysis for the three and nine months ended September 30, 2019 which are available on SEDAR at www.sedar.com. The forward‐looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward‐looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

FOFI DISCLOSURE: This press release contains future‐oriented financial information and financial outlook information (collectively, "FOFI") about PetroTal's temporary shut down of operations, the anticipated resumption of operations, storage capacity, cost reductions, pipeline transportation arrangements, liability under the Swap Contract and Sales Contract and components thereof, all of which are subject to the same assumptions, risk factors, limitations and qualifications as set forth in the above paragraphs. FOFI contained in this press release was approved by management as of the date of this press release and was included for the purpose of providing further information about PetroTal's anticipated future business operations. PetroTal disclaims any intention or obligation to update or revise any FOFI contained in this press release, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this press release should not be used for purposes other than for which it is disclosed herein.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.

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To view the source version of this press release, please visit https://www.newsfilecorp.com/release/55509