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(Sharecast News) - PetroTal announced the signing of a definitive agreement to acquire a 100% working interest in Block 131 in Peru on Wednesday, including the producing Los Angeles field, through the acquisition of CEPSA Peruana.
The AIM-traded firm said the acquisition, valued at $5m in cash subject to adjustment, was expected to bolster its strategic position and operational capabilities in the region.
It said the strategic rationale for the acquisition included adding low-cost light oil reserves with significant upside potential, estimated between three and 4.9 million barrels of oil.
Furthermore, the acquisition was expected to generate synergies with the Iquitos refinery, enabling PetroTal to increase sales capacity for heavier Bretana crude and potentially realise lower Brent differentials from the combined lighter oil mix sold to Iquitos.
PetroTal's management outlined three near-term operational initiatives for Block 131, including the identification of bypassed oil for low-risk horizontal well locations, potential use of hydraulic pumps to reduce operating costs, and implementation of solutions to lower chemical costs from treating asphaltene.
CEPSA Peru's assets, which include the Los Angeles oil field, had produced around 7.6 million barrels as of 31 March.
The assets were held under a concession agreement expiring in 2037 and were subject to a royalty rate.
All crude oil produced was sold to Petroperu and transported by barge along the Ucayali River to the refinery in Iquitos.
Completion of the acquisition remained subject to regulatory approvals, with the effective date set to be 1 January 2024.
"This is PetroTal's first acquisition since entering Peru in late 2017," said president and chief executive officer Manuel Pablo Zuniga-Pflucker.
"This transaction marks an important step forward in delivering on our ongoing growth vision.
"The assets being acquired are synergistic, highly accretive to the company's current operations and we have immediate plans for development once the transaction is complete. All production from the assets is directed to the Iquitos refinery."
Zuniga-Pflucker said completion of the acquisition would add around 900 barrels of oil per day to the company's current 18,500 dai;ly barrels of Bretana production, with the potential for further upside in the near-to-medium term.
"Furthermore, our operational team is assessing the potential upside in the deeper zones of the Los Angeles field, that were previously penetrated but were not tested.
"Finally, the location of Block 131 is of strategic importance, as it is connected by a 130 kilometre highway to the company's Block 107 prospect.
"We look forward to announcing further updates on this acquisition process in due course."
At 1233 BST, shares in PetroTal Corporation were up 1.29% at 47.1p.
Reporting by Josh White for Sharecast.com.