PetroTal Corp. (ticker PTT) has announced a strong start to 2024 with record sales and production figures in its first-quarter earnings call. The energy company reported average sales of 18,347 barrels of oil per day and production of 18,518 barrels per day. Financially, PetroTal showed robust performance, including an increase in net revenue to $100.6 million, operating income of $79.6 million, and free funds flow of $52.6 million.
The acquisition of CEPSA Peru's Block 131 is expected to further boost production and is set to close subject to regulatory approvals. With a solid balance sheet featuring $85.2 million in cash and no long-term debt, PetroTal declared a dividend of $0.02 per share and repurchased 5.17 million shares for around $3 million.
Key Takeaways
- PetroTal achieved record sales and production with average sales of 18,347 barrels per day and production of 18,518 barrels per day.
- The company's financials for Q1 2024 include net revenue of $100.6 million, operating income of $79.6 million, and free funds flow of $52.6 million.
- Acquisition of CEPSA Peru's Block 131, producing about 900 barrels of light oil per day, is expected to close upon regulatory approval.
- PetroTal declared a Q1 2024 dividend of $0.02 per share and repurchased shares worth approximately $3 million.
- The company has a strong balance sheet with $85.2 million in cash and no long-term debt.
Company Outlook
- PetroTal is optimistic about growth and recovery in the oil market.
- The company plans to increase production levels from 40,000 to 70,000 barrels per month with the help of CEPSA oil and Block 131.
- Future acquisitions will be cautious and opportunistic, with a focus on integrating Block 131 before considering further opportunities.
Bearish Highlights
- Erosion control projects have forced the rescheduling of drilling programs, potentially impacting short-term production.
- No additional resources at Block 131 will be detailed until the transaction closes.
Bullish Highlights
- PetroTal reported an increase in net revenue, operating income, and free funds flow from the previous quarter.
- The company plans to maintain and potentially increase production levels through continued drilling operations.
- The acquisition of CEPSA's assets at an attractive price presents significant upside and synergies.
Misses
- The company is rescheduling wells from 2025 to 2024 due to erosion control projects but still plans to drill all 32 wells in their 2P reserves.
Q&A Highlights
- PetroTal addressed concerns about river erosion with a detailed engineering plan to protect facilities and the Bretaña community.
- The company does not plan to accelerate its share buyback program in 2024.
- Social conditions on Block 131 are calm, and a fund for environmental issues has been set up.
- PetroTal is committed to paying dividends and expressed gratitude to investors for their support.
In summary, PetroTal Corp. is navigating through operational challenges like erosion control with strategic planning while capitalizing on acquisitions and maintaining strong financial health. The company's commitment to shareholder returns and cautious yet opportunistic growth strategy positions it as a resilient player in the energy sector.
Full transcript - None (PTALF) Q1 2024:
Jimmy Lea: Ladies and gentlemen, thank you for joining the PetroTal Q1 2024 Results Webcast. Your presenters today will be Manolo Zuniga, President and CEO; and Camilo McAllister, Executive Vice President and CFO. There will be a question-and-answer session at the end of the presentation. If you would like to ask a question, please submit it via the platform, and the team will do their best to answer it during the allotted time. I will now hand over to the presenters. Please take it away, Manolo and Camilo.
Manuel Zuniga Pflucker: Yes. Thank you, Jimmy and good day everyone, and thank you for joining the PetroTal 2024 first quarter webcast, where we will provide a brief summary of our first quarter 2024 operational and financial results. If anyone wants further information on the company, please see our website for additional materials. My name is Manolo Zuniga, and I'm the President and CEO of PetroTal. And I'm joined by Camilo McAllister, our new Executive VP and CFO, replacing Doug Urch, who recently announced his retirement from PetroTal late last month. I would like to formally welcome Camilo to his first webcast, and thank Doug for his contribution to the company over the last five years. If you have clicked on the link in last evening's press release, you should have hopefully have signed up to the webcast so you may see the slides on your screen. But if you have or having any issue seeing them, please contact petrotal@celicourt.uk, and they will be able to assist you. Before I begin, I need to mention that there are some disclaimers towards the end of the presentation on our website, which I would urge you to read at your own leisure. As shown in Slide 2, PetroTal is an onshore Peru-focused oil company that, in just five years has become Peru's largest crude oil producer. The company is listed on London's AIM market, the Toronto Stock Exchange and the U.S. OTC, having a market cap of approximately $550 million. We have 100% working interest in the Bretaña oil field, which we have expanded from first production in mid-2018 to over 20,000 barrels of oil per day in late June 2022. The first quarter of 2024 was being a record quarter for the company, delivering average sales and production of 18,347 barrels of oil per day and 18,518 barrels per day, respectively. The quarter had the benefit of production additions from two new wells, the 16H and the 17H, higher river levels and $80-plus Brent levels. But first, a brief summary of our assets. The Bretaña field in Northeastern Peru has certified 2023 year-end 2P reserve of 100 million barrels, which have an after-tax NPV10 valuation of $1.8 per share. The field currently has 18 producing wells and three water disposal wells and is completing its 19th oil well. The company is able to deliver all of these on just a small 30-acre surface field footprint that, as referenced in our 2022 Sustainability Report, during 2022, generated that 6.96 kilograms per barrel of Scope 1 carbon emissions. We would like to cover Q1 2024 results and our recently announced CEPSA Peru acquisition in this webcast, while providing some updates on current production, drilling and erosion control. As shown on Slide 3, PetroTal has signed a definitive agreement to acquire 100% working interest in CEPSA Peru's Block 131 that currently produces approximately 900 barrels of light oil per day on four wells in the Los Angeles oil field. The acquisition is expected to close upon receipt of applicable regulatory permits. As shown on the map, Block 131 is approximately 130 kilometers by road from the company's Block 107, and has access to multiple offtake options that could allow the company to have increased Bretaña sales capacity during the dry season. The consideration for the transaction was $5 million prior to working capital and other closing adjustments, with an effective date of January 1, 2024. The field also boasts excellent infrastructure that is in place, able to handle production growth to approximately 5,500 barrels of oil per day, something that the team is eager to fully utilize. Slide 4 provides some key highlights of the conventional Los Angeles oil field, which produces light oil of around 44 API gravity from the Cushabatay formation. The reservoir has good closure and thickness and with good porosity sands. Similar to the Bretaña field, it has a strong water drive, which allows for naturally high-recurring factors that are estimated at above 40% on a 2P basis. The field has produced approximately 7.6 million barrels to date, with an estimated oil-in-place volume of 30 million barrels. NSAI certified reserve for the Los Angeles field as of March 31, 2024, providing an estimate of 2P reserve of approximately 4.9 million barrels of oil with three booked wells locations costing between $10 million to $12 million each. Slide 5 shows some of the key strategic considerations and synergies with the asset. Additional synergies over and above these may become available after integration and during development. In particular, the PetroTal team is extremely excited about the possibility of additional identified relocations in deeper zones. From an offtake standpoint, the crude from Block 131 will be sold at the Iquitos refinery, which is able to accommodate lighter oil. The company will incur variable trucking and margin costs totaling an estimated $6 to $8 per barrel and is estimating a favorable differential compared to Bretaña sales to Iquitos. Fixed cost guidance will be better understood during the integration phase. As shown in the pictures on Slide 6, the current Los Angeles infrastructure in place is of high quality with little to no infrastructure investments estimated during the future life of the project. Abandonment is estimated under $15 million in 2027, which potentially impacts the company's current balance sheet by around $5 million to $7 million from a discounting standpoint. As mentioned before, this team is very excited to integrate and fully further develop this oil field. Slide 7 showcases the successful [indiscernible] erosion control projects located in Southern Peru, which we are using as a model to protect the Bretaña oil field. And that continues experiencing riverbank erosion, which has surpassed initial expectations. The company has now completed the detailed engineering work to address this issue and propose a solution that involves designing a larger and deeper groynes to redirect river currents away from the riverbank. The estimated two-year total project cost has been adjusted to a range of $65 million to $75 million, up from the previous estimate of $50 million to $60 million, $45 million to $55 million of the total project costs are now anticipated to reincur in 2025, with $20 million estimated for 2024. These costs are estimated to be allocated approximately 60% to OpEx and 40% to CapEx in both 2024 and 2025. In addition, the scheduled rig release or the currently contracted drilling rig in late Q2 2024 cannot proceed as planned due to dry dock constraints caused by the erosion. Therefore, the company is rescheduling its planned drilling program to avoid rig standby cost, minimize water disposal risk and to ensure we can produce above 20,000 barrels of oil per day in 2025. Therefore, in Q3/Q4 2024, PetroTal is now planning our fourth water disposal well with associated tie-in infrastructure and an additional horizontal oil well. Total estimated 2024 capital spend, inclusive of the changes outlined above will now be in the range of $150 million to $160 million, up from the original $134 million. The company will be providing a more detailed corporate guidance update in early August 2024. I will now turn over the meeting to our new CFO, Camilo McAllister, who will provide a brief update on our Q1 2024 results.
Camilo McAllister: Thank you, Manolo. I am Camilo McAllister, recently appointed as PetroTal's CFO. I would like to start off on Slide 8 by highlighting some of the key items from our recent press release and financial statements. As you will see from the slide, it basically summarizes the key first quarter 2024 highlights. From an operational perspective, during the fourth quarter, we delivered 18,518 barrels of oil per day with corresponding sales of 18,347 barrels of oil per day. This was the company's second best producing quarter-to-date. High river levels allowed for near maximum sales through Brazil, representing more than 85% of our total volumes sold. During the first quarter of 2024, we invested just over $30 million of CapEx, focused on the continuation of our drilling campaign with 17H and some further infrastructure projects. Spend in the quarter is slightly slower due to some delays of certain infrastructure projects that will be executed during the rest of the year. On a per barrel basis, our lifting costs were $5.56 per barrel, and that compares to $7.24 in the fourth quarter of 2023. Primarily, our higher volumes sold in the current quarter and stable cost inflation have allowed us to achieve these lower unit metrics. Our first quarter 2024 direct transportation costs were $1.32 per barrel versus $3.61 per barrel in the fourth quarter of 2023. We experienced lower floating storage costs related to the Brazilian route and also reduced the diluent needed for crude sales to the Iquitos refinery. All in, the company delivered a total OpEx and transportation costs of under $7 per barrel versus the previous quarter, which was $10.85 per barrel, resulting in a 35% reduction, thanks to the increased volumes. The company continues to have a strong balance sheet. PetroTal exited the quarter with $85.2 million of total cash and is in a $55 million net surplus position, considering other working capital amounts. The company had no long-term debt and/or any amounts drawn on its short-term credit facility as of the end of the first quarter. Our cash has decreased slightly from the prior quarter, but it's mainly due to capital collections, working capital collections, timing during the first quarter. Large cash collections were subsequently realized in April. And overall, the company has delivered strong financial metrics in the quarter on approximately 1.67 million barrels of oil sales in the quarter compared to just over 1.38 million barrels in the fourth quarter of 2023. Following is a short summary on key profit and loss line items. Net revenue, for example, was at $100.6 million or $60.25 per barrel. Contracted Brent price in the quarter was $81.14 per barrel compared to $81.05 in the fourth quarter, with the Brazilian transportation differentials and backwardation reconciliation, the realized net revenue per barrel amounts. Royalties for the quarter totaled $9.5 million or $5.69 on a per barrel basis and includes the social trust provisions. This was down on a per barrel versus also from the fourth quarter of 2023 due to the onetime year-end royalty adjustment related to diluent. Our total gross operating expenses and transportation costs in the quarter were $11.5 million or $6.88 per barrel compared to approximately $15 million or $10.85 per barrel in the fourth quarter of '23. This was driven largely by high sales volumes sold in the first quarter compared to the previous quarter and low diluent and floating storage costs in the quarter. During the first quarter of 2024, net operating income was at $79.6 million or $47.68 per barrel compared to $59.4 million or $42.92 per barrel in the fourth quarter of '23. This again was as a result of our increased oil sales and stable realized prices quarter-on-quarter. Our first quarter '24 free funds flow increased to $52.6 million and were up from $8.1 million in the prior quarter. Again, this is due to higher sales and lower executed CapEx and favorable derivative movements. And lastly, our net income for the quarter was $47.6 million or $0.05 per share. Now this was compared to $21.5 million or $0.02 per share in the fourth quarter of 2023, making it the 17th consecutive quarter of positive net income for the company. Our Slide 9 summarizes our return of capital policy and amounts paid since inception. And during the third -- sorry, the first quarter of '24, PetroTal was very pleased to announce and approve a dividend of $0.02 per share, which was based on the fourth quarter 2023 results and paid on March 15 of 2024. That represented an additional $0.05 per share over the base of $0.015 per share as the company's cash liquidity policies. Now the company is also pleased to declare its second quarter 2024 dividend to be paid on June 14 based on the first quarter 2024 results and cash balances. And PetroTal has approved a 1.5% per share dividend, representing an estimated 10% annualized dividend yield based on the prevailing share price. There is no dividend top-up this quarter due to the company's estimate of heavier future cash needs over the next two quarters, mainly related to the points mentioned earlier by Manolo on both erosion control and our core E&P activities. Finally, the existing share buyback program, the company repurchased 5.17 million shares for approximately $3 million and now has repurchased approximately 16.5 million shares through the last 12 months. The company is also intending to renew its normal course issuer bid share buyback program for the May '24 to May '25 time line, subject to any trading constraints imposed by the TSX and Board approvals. We thank you for your continued investor support, and I will now turn the call back to Celicourt for the Q&A session.
A - Jimmy Lea: Thank you. First question, which is a three-part question. Does the 3.0 million to 4.9 million barrels of oil reserves represent 1P versus 2P range? Does PetroTal believe it can sustain the 900 barrels of oil per day production level? And given the effective date, what is the estimated net purchase price at closing?
Manuel Zuniga Pflucker: Regarding the first question, indeed, that will be equivalent to the 1P and 2P certified reserves, where we have certified the locations to be able to drain those extra volumes of oil. And there is still an upside beyond that. And in produce information, as I mentioned in my remarks, we believe that there is deeper potential. So as we have done in Bretaña, the idea is to go in and squeeze as much value as we see possible from the Los Angeles field. Regarding the second question, the possibility of maintaining the 900 barrels of oil per day. Once we take over the operations, once the approval permit is all done based on the regulatory process in Peru, which should take a few months, we will not only strive to maintain, but as I mentioned earlier, we strive to use the maximum facilities that we can use in the order of 5,500 to even 6,000 barrels of oil per day. That's my goal. And then on the price, the net price after we take over, yes, as you can imagine, this field is generating free cash flow. So at the end, if things are going to be netted, which will make this acquisition even more attractive, especially based on the upside we see as well as already synergies within Bretaña oil production.
Jimmy Lea: The second question is also a three-part question. When is the latest date that you can drill your two exploration wells on Block 107 as far as the exploration commitments for the block? And then when are you now planning to drill the first well? And finally, has a location already been chosen for it?
Manuel Zuniga Pflucker: The deadline that we have now is April of 2026, these two well commitments. So we can -- we are still working on the environmental permit. That may push that date that I just mentioned more into the future. Permitting process, as you all know in Peru are very complex. But we are expecting, based on that time line, that we will want to drill by the end of 2025. And we have indeed selected already not only a location for that first well, that, if it's successful, we will be doing the follow-up to comply with the commitments. And as we did in Bretaña, the idea will be that it is scoring production as soon as possible. But we expect to find also light oil like in the Los Angeles field.
Jimmy Lea: Thank you. When was the latest well drilled on Block 131?
Manuel Zuniga Pflucker: They were in 2018. They drilled the last -- the fourth oil producer and their water disposal well.
Jimmy Lea: How do you see the OCP route opening up for PetroTal after the pilot project ends in terms of capacity and timing?
Manuel Zuniga Pflucker: Well, we are first of all, extremely happy that last week, we signed an initial agreement with Petroperú to be able to carry the planned pilots. These are two pilots of about 100,000 barrels each. And we -- based on that, we will need to, of course, as always happens, do the proper adjustments to optimize the route. And then my goal will be to do much higher volumes in the future on a consistent basis. I won't -- may not be probably as much as in Brazil, but I would like to remind our investors, in December 2020, we did 140,000 to Brazil. And now we've been doing close to 600,000 per month when the river levels allow us to do that. So we have our goals set, and the team will go through the motions to try to maximize this well. I'm extremely happy that, Petroperú, we're working closely to do all of that.
Jimmy Lea: Could you provide decline rates on the various wells?
Manuel Zuniga Pflucker: The Slide 25 of the corporate presentation shows you the -- how is -- through the tanker, it shows you the production curves of all the wells will. So you can estimate that very clearly. So this is -- these are typical, highly permeable sands type of reservoir supported by a strong aquifer. So as I always say, these wells don't decline on fluid production because they all have the submersible Pumps. They produce on a consistent basis. It is the oil cut that drops as the water comes in. And depending on the location, the water making -- coming faster than as you are hiring restructure. So you can look at that in its cycle of life. These wells, just to make a point, we recouped the reinvestment quite fast. On average, our wells recouping investment in just three months. And on average, they are going to produce about 3 million barrels. So they are extremely prolific oil wells.
Jimmy Lea: Could you please update us to peak production capacity at present?
Manuel Zuniga Pflucker: We can produce now a little bit more than 20,000 barrels per day. That's why in my remarks, by adjusting what we scheduled in our drilling plan, we're indicating that we're expecting when we announced our 2025 guidance, that it will be above 20,000 barrels per day.
Jimmy Lea: What is the company's plan over the next six to 18 months in terms of acquisitions, mergers, drilling? And also, what is the goal for production?
Manuel Zuniga Pflucker: In the case of drilling, as we have been doing in Bretaña from a historical point of view, we try to drill, on average, four oil wells, one water disposal. Keep in mind that for every four oil wells, we need to have one water disposal well. And now our 2P oil well count is 32. So you can do the math based on that, we're going to end up reading 32 oil wells and probably in the order of eight water disposal wells. So we're still basically a little bit beyond halfway in the development. So this is a very prolific oil field, which we are very happy if we're able to do. And the idea will be then with this, maintain the 20,000 barrel per day mark for a few years until we stop drilling, and then it's going to decline, as we have seen in our corporate presentations and the certification of reserves, that gives us 100 nowadays, 100 million barrels of 2P reserves. And as I have indicated in the past, as petrol engineers, our job is to squeeze as much oil as possible. I'm very confident that we will be able to surpass the 30% recovery factors, which should take 2P reserves in the order to 230 million, or I should say, the ultimate recovery. So we're still a long way to go. We've done a fantastic job, people in the size of each field. So I want to give you confidence that the team be very eager to maintain a growing production over the next few years. Now about M&A, this is something that investors asked me from the time I was raising capital initially for PetroTal, what will be my vision on going and doing M&A and acquisitions. And I always say, we will be always looking and always being opportunistic to do something that will make sense to us and to our investors. I think this small acquisition that we have done on CEPSA, basically buying oil at $1 per barrel is fantastic, especially when we see so much upside and so many synergies with Bretaña. So I don't know if, in the future, we'll be able to find something like that. But I can assure to our investors, we will be very cautious. But know that I only have to go step by step, and we have proven that to all of you, and we will continue doing that.
Jimmy Lea: It's quite a large number for erosion control. Please, can you comment on that?
Manuel Zuniga Pflucker: Yes, indeed, it is. We have, although a small footprint, that acquired an investment in facilities and oil wells and water disposal wells that need to be protected. And part of the issue will be the erosion in the last couple of years is that the river levels dropped quite a bit and with the river levels dropping so suddenly, as it happened in the last couple of years, that increased the erosion. We have now, as I mentioned, the detailed engineering., We're following a model of a project that was done in Southern Peru, very similar to our situation. It has worked beautifully, extensive. Now they have actually been able to regain ground. And that's what I would like to do here, to safeguard Bretaña, given that we have just accumulated 80 million barrels of production. And I foresee that we have another 120 million to go, if not more, as we squeeze as much oil as possible and as profitable as possible. And so on a relative basis, yes, $70 million, you put it on a per barrel basis, is less than $1, but we have to do it. Otherwise, we will be negatively impacted.
Jimmy Lea: Given the International Energy Agency is forecasting price falls for 2025, and this is, itself, predicated on OPEC not restoring previous supply levels, is buying assets, at this time, wise?
Manuel Zuniga Pflucker: Well, when you buy the price, we're buying this one, I think it makes a lot of sense. A lot of sense, I can assure you. So we've been very opportunistic. This reminds me as when we took over Bretaña in late 2017, and our investors have seen that we have done with Bretaña. I'm not trying to say we're going to do exactly the same because it's a much more oil field, but we will try to squeeze as much value on a relative basis at Bretaña. This has been a fantastic acquisition for us. They have something that we have looked to do in the past, and we could not do. And now the opportunity came back at an amazing price that we could not clearly design.
Jimmy Lea: What regulatory hurdles are required to complete the CEPSA acquisition?
Manuel Zuniga Pflucker: These are the typical ones in Peru. It goes first, through Perúpetro's Board of Directors approving the transaction. We have already communicated with them. They have given us also support. Then onto the Energy and Mines Ministry for approval, then to the Finance Ministry for approval. And while we've spoken already with them, we should not see anything. And then it goes to the President to sign the supreme decree, giving the green light to Perúpetro, making the net changes in the license contract. So very straightforward, but of course, it takes several months. We need to be just patient.
Jimmy Lea: Are rigs easy to get to Block 131? And would we use the same rig as for Block 95?
Manuel Zuniga Pflucker: As you have seen in the map on that Slide 2, we have a road that connects not only Block 107 to Block 131. It's almost a brand-new road, wherein nearby is the Sea of Pucallpa, which is the main city in the central jungle of Peru. So what CEPSA does is they truck their oil to Pucallpa, and then Petroperú buys FOB Pucallpa, and they take it their Iquitos refinery. Their barges actually passed the front of our Bretaña oil field. And the more we can produce from the Los Angeles field, the more we'll be able to blend to go into Iquitos or we have our best netback. So that's one of the key synergies.
Jimmy Lea: Is it realistic to change payment terms re-ONP to FOB since oil in the pipelines isn't PetroTal's responsibility and hedging costs are high? And would you be willing to reopen the ONP on terms less favorable than FOB plus 30 days, or something less favorable to the Manaus export terms?
Manuel Zuniga Pflucker: The issue with the ONP is that Petroperú is -- the financial situation is still quite difficult. They have not yet began the lines of credit as they used to have in the past. And that makes any type of financial transaction to sell the oil at the pump station #1 difficult. We talk to them often to see the best time to be able to go back to the ONP. As our investors know, we see a lot of potential on Block 95, where we expect to find more Bretaña oil fields. So eventually, we're going to need for sure, to go into the ONP. But in the meantime, we're talking to Petroperú and seeing how best we can structure something that will make a lot of sense with both parties.
Camilo McAllister: And Manolo, if I may add, liquidity is really important to the company. So sacrificing our working capital availability, this is something we would not look at lightly.
Manuel Zuniga Pflucker: Indeed.
Jimmy Lea: Why are we the sole payers for the river erosion? Is the erosion due exclusively to PetroTal's use of the area?
Manuel Zuniga Pflucker: No. The erosion is happening in other places. Just upriver in an adjacent district, where recently, a small community lost their school and a small medical post. So the river erosion can be quite drastic. And therefore, it is important for us to take action. And we finally have the solution at hand to take care of that. And keep in mind that some of these groynes, three of them actually, are in front of the community of Bretaña. Therefore, they're considered OpEx from that point of view and two are in front of our tank. So we are going to be also protecting the Bretaña community. That is needed for us as well, of course.
Jimmy Lea: What risks do you see associated 2025 production with the update on the erosion situation?
Manuel Zuniga Pflucker: Well, right now, we're managing the erosion, protecting on a temporary basis, the riverbed. So nothing will happen to our facilities. We have reinforced, and we are reinforcing the loading dock, and it is to ensure that nothing happens. So we feel confident that we'll be able to execute our plan on an ongoing basis and produce an average for the first time beyond 20,000. And the reason, by the way, that -- and worth mentioning that is that we continue to grow the fleet of barges that we have to go to via Brazil to the export markets, and that gives us confidence that we'll be able to manage more volumes. And of course, accessing the OCP, and we're looking at the Yurimaguas route. All of that give us confidence that we'll be able to do what we planned to do.
Jimmy Lea: The next question is a four-part question. Regarding the acquisition of Block 131, when you're expecting to close, that should increase your full-year '24 guidance to almost 18,000 barrels a day, if that's right? The second question, if I've got it right, you would be netting the purchase price with free cash flow generated year-to-date. Could you give us a sense on actual cash outflow? Number three, could you give us a sense of EBITDA generated by this asset? And four, drilling of new wells expected could or would you need to build additional water handling capacity? And sorry, a fifth one, will there be seismic coverage?
Camilo McAllister: Okay. Let me see if I can remember the five-part question. The first part, yes, it will be added, but we don't know when the transaction will be closed. So if it does close by the end of '24, it will be added to the guidance we provided you before, which was you remember is somewhere between 16,500 barrels to 17,500. Second part, yes, we would net purchase price, the cash flow that was accrued from January 1 to the closing. It's third part correct. The field can handle up to 5,500 barrels of oil, so there is no need for additional spend at the facilities. In terms of the fourth part question, we have not disclosed any run rate cash flows that -- from the existing operator. And we would rather wait until this is all integrated and we have better information before providing any details around the asset. And lastly, seismic coverage, the existing field has three wells booked in their research report with no further seismic needed.
Jimmy Lea: Thank you. With respect to the dry season, what current volumes could be predicted working on a low river scenario such as last year?
Manuel Zuniga Pflucker: As you've seen on our corporate presentation, we gave a guidance for this year on the dry season, especially on the third quarter. We are estimating 13,000 barrels of oil per day. Last year, we averaged 11,000, and that's because of the increase on the size of our fleet, which we continue to look at.
Jimmy Lea: What do you expect the Iquitos capacity to be after having oil from Block 131?
Manuel Zuniga Pflucker: Well, in our -- also in our corporate presentation, we have a slide where we discuss these other potential routes for our crude oil. And we mentioned there that our goal will be to reach 5,000 barrels of oil per day, equivalent to 150,000 per month. Right now, we do between 40,000 and 70,000. So basically, double or triple the current levels. And I do believe that the CEPSA oil, the addition of the increased production from the Block 131 will help that as well as the Block 8 coming on stream.
Jimmy Lea: Do you have plans to accelerate the share buyback plan in 2024?
Camilo McAllister: No. For now, we just intend to renew the program, as I mentioned earlier at its current level.
Jimmy Lea: How will you fund the erosion project costs? Will this result in a significantly reduced dividend or potentially a cease of dividend?
Camilo McAllister: No. I mean, we can't speculate on what will happen in terms of future dividends because we look at it on a quarter-to-quarter basis. But the company has the strong liquidity, and we'll be able to fund the project from our cash from operations. And remember, this is a project that is going to take two years, and it's a combination between CapEx and OpEx. So it's phased through a period of time, where we feel comfortable we have the liquidity.
Jimmy Lea: Please, can you comment on the environmental and social conditions on Block 131 as well as any ARO on the asset?
Manuel Zuniga Pflucker: And from a social point of view, things are quite calm. They have also set up a similar fund of 1.5% in their case. So we don't foresee any issues. And then from an ROA basis, I think we have mentioned that is $5 million. We mentioned that in our release. 2027. 2027, way into the future.
Jimmy Lea: Please, could you give us an idea of the amount of the resources upside beyond the 2P at Block 131? Are there, for instance, additional contingent resources or prospective resources?
Manuel Zuniga Pflucker: I would prefer to say that once we close the transaction. I don't think it's smart to do it ahead of time.
Jimmy Lea: Thank you. This is a three-part question. Will the two additional wells now planned for 2024 replace wells, which were planned to be drilled in 2025? Secondly, could the riverbank erosion issue become a problem, large enough to prevent or restrict exports of oil by barge or restrict drilling operations? And finally, what could the capital requirements of Block 131 be in the near-term?
Manuel Zuniga Pflucker: So on the first one, the -- what we are doing is rescheduling wells, indeed, from that we have initially put for 2025 into 2024. But keep in mind that we have on a 2P basis, a total of 32 wells. So eventually, we have to drill all of them. So maybe next year, we may or may not add more wells. Ideally, we should drill four oil wells and one water disposal. But we always tell investors is that we have quite a bit of flexibility to move things around. And you have seen now how quickly, given the issue of the rig on standby, we decided to continue drilling. So we have that flexibility. But keep in mind, again, we're going to be drilling Well #20. We still have 12 wells to go. So we drilled four oil wells per year. That's another three years of quarrying, and then a few more oil water wells. So I hope that helps you. And about what the erosion, as I mentioned earlier, all of the effort we're doing is to protect the field now. And then with this erosion control project is to bring a permanent solution. It's expensive, but the idea is they will be permanent, and then we don't need to worry about that anymore in the future.
Jimmy Lea: For future acquisitions, would we be talking about mergers, equity raises or just buyouts?
Manuel Zuniga Pflucker: Well, we just need a very small one. And as I have mentioned before, from the time we set up the company, I promised our investors that we will be very cautious in what we think, it has to be extremely opportunistic like this one. So for now, we want to close this transaction. We want to integrate it, and then we can think about what else to do in the future. And as you know, we have plenty to do in Bretaña. There is quite a bit of upside on Block 95, and we like Block107. And we see this upside on the Los Angeles field. We're going to be busy for a while.
Jimmy Lea: Thank you. And the final question. How does the effective date of January 1, 2024, for the acquisition of Block 131 work in terms of adjustments after the possible closing date of the $5 million deal?
Camilo McAllister: So closing, as we mentioned earlier, is obviously subject to all the regulatory approvals. So for example, if we close on the fourth quarter of this year, the $5 million will be reduced by the cash flow from the asset retroactively. So that was the earlier question about the netting effect.
Jimmy Lea: Manolo, Camilo, thank you. There are no further questions at this time. So I'll hand back to you both for closing remarks.
Manuel Zuniga Pflucker: Well, as always, we would like to thank our investors for all the support that we received from all of you. And again, I promise that we will continue to work very diligently step by step, ensuring that we continue paying dividends. And as I always say, my wife love dividends. We're fully aligned on that. All of our planning is to ensure that we give you dividends. And we, at the same time, able to grow the company and make it stronger, therefore to everybody's benefit. Thank you so much.
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