CALGARY: PetroTal Corp., the Peruvian focused E&P company, announced an oil sales agreement with PETROPERU S.A., a state owned company, for oil production from the Bretaña oil field, operated 100% by PetroTal.

Given the Company’s increased oil production from the Bretaña oil field in Peru, the oil sales agreement enables PetroTal to ship all oil in excess of its existing 1,200 barrels of oil per day sales agreement with the Iquitos refinery, through the 854 kilometer North Peruvian Oil Pipeline, owned and operated by Petroperu.  Petroperu has agreed to purchase the oil at pump station No. 1 located at Saramuro, approximately 460 kilometers from the Bretaña oil field.

The Company will barge the oil to Saramuro at an estimated average cost of US$4.25 per barrel.  The oil delivered at Saramuro will be sold based on the monthly average reference price of ICE Brent minus US$4.00 per barrel.  When the oil is ultimately sold by Petroperu at Bayovar, PetroTal will receive a valuation adjustment based on the actual price achieved by Petroperu, whether higher or lower.

This sales agreement will allow PetroTal to receive oil sales revenue earlier, allowing PetroTal to maintain strong liquidity.  The oil sales contract allows us to submit monthly invoices, rather than having to wait for the ultimate sale at Bayovar after sufficient oil volumes have been achieved for a tanker to take the oil to its final market.

This oil sales contract is initially for one year and can be extended with the agreement of both parties.  For Petroperu, the increased oil volumes through the pipeline will enhance economics since Petroperu will earn the previously published pipeline tariffs along with a commercialisation fee.

Manolo Zuniga, President and Chief Executive Officer, commented: “We’re pleased that Petroperu has exhibited such confidence in oil production from the Bretaña oil field as our good quality oil output increases.  This will ensure that Petroperu has the ability to manage Peru’s expanding oil production and an adequate supply of oil for the Talara refinery expansion when complete”.