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(Sharecast News) - PetroTal shares were sliding on Tuesday, after it said its 2026 budget and production guidance were designed to preserve liquidity and improve operational reliability following a challenging 2025, as the Peru-focused oil producer prioritised cost discipline over near-term production growth.
The AIM- and TSX-listed company said it was targeting average production of between 11,750 and 12,250 barrels of oil per day in 2026, broadly in line with the low-case scenario outlined with its third-quarter 2025 results.
Capital investment for the year was set at $80m to $90m, including around $18m carried over from 2025, with the programme structured to maintain minimum unrestricted cash liquidity of $60m throughout the year.
PetroTal said it expected the budget to support adjusted EBITDA of around $30m at a Brent oil price of $60 per barrel, underpinned by reductions in operating costs, lower run-rate general and administrative expenses and tighter capital allocation.
The firm said the capital programme would allow development drilling at the Bretaa field to resume by the fourth quarter, subject to the successful appointment of a third-party drilling contractor.
Management said the decision to move away from its existing drilling arrangement followed operational challenges in 2025 related to rig availability and production reliability, which weighed on output and investor confidence.
A tender process for a third-party drilling provider was underway, with contractor selection expected by the end of the first quarter of 2026 and a target spud date of 1 October for the first of two planned development wells.
PetroTal said it had started discussions to exit the lease on the Amazonia-1 rig, with conservative cost assumptions included in guidance for any termination and settlement expenses.
Under the approved capital plan, around $45m was allocated to drilling, rig mobilisation and well facilities, assuming two development wells were completed at Bretaa by year-end.
A further $16m was earmarked for essential operational continuity projects, including camp upgrades and safety improvements, while $33m would be spent on erosion control during the year, split between operating expenditure and capitalised costs.
Additional capital would be directed towards water handling upgrades at Bretaa, infrastructure at the Ucawa field and exploration activities.
PetroTal said production additions from new drilling in 2026 were unlikely to materially affect average output for the year, given the expected timing of drilling activity.
The company said it had incorporated planned downtime for proactive maintenance, including the replacement of electric submersible pumps and production tubing, into its guidance.
All 2026 production from Bretaa was expected to be sold via the Brazil export route, while output from the Los Angeles field would continue to be sold under short-term contracts to the PetroPeru-operated Iquitos refinery.
Commenting on the update, Manuel Pablo Zuniga-Pflucker, president and chief executive, said the 2026 budget was "a direct response" to investor feedback following last year's operational issues.
"By moving to a third-party drilling provider and deferring non-essential infrastructure spend, we are prioritizing liquidity over near-term production growth."
He said the decision to suspend the dividend was necessary to protect long-term value and reiterated confidence that Bretaa could deliver competitive returns at $60 oil prices, with investments in 2026 intended to help restore production to 20,000 barrels per day in 2027.
At 1338 GMT, shares in PetroTal Corporation were down 19.25% at 17.76p.
Reporting by Josh White for Sharecast.com.