Hello, everyone. Welcome to the PetroTal Q2 2023 results call. Your host today will be Manolo Zúñiga, CEO, and Doug Urch, CFO of PetroTal. There will be a Q&A session after the presentation, so if you would like to ask a question, please submit it via the online platform, and the team will do their best to answer it in the time available. I will now hand over to Manolo and Doug. Please take it away.
Thank you, Jimmy. Good day, everyone, and thank you for joining the PetroTal 2023 second quarter webcast. We will provide a brief summary of our second quarter 2023 operational and financial results. If anyone wants further information on the company, please see our website for additional materials. My name is Manolo Zúñiga, and I am the President and CEO of PetroTal. I am joined by my colleague, Doug Urch, Executive VP and CFO. If you have clicked on the link in the last few weeks, you should hopefully have signed up to the webcast, you may see the slides on your screen. If you have any issues seeing them, please contact petrotal@celicourt.uk, 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, 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 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 $500 million. We have a 100% working interest in the Bretaña oil field, which we have expanded from minimal production to over 25,000 barrels of oil per day in late June 2022.
The second quarter of 2023 was a record setting quarter, as we had produced at or above 20,000 for roughly 2/3 of the quarter and achieved tremendous growth rates for both production and sales over Q1 2023, readiness very significantly done many on three categories. First, a brief summary of our assets. In the Bretaña field in northwestern, northwestern Peru, they delivered first commercial production in mid-2018 and has since grown from zero to over 20,000 barrels of oil per day in the past five years. Currently, the 2022 year-end two million barrels are 97 million barrels, which have an after-tax 2P NPV-10 per share of $1.75. The field currently has 16 producing oil wells and three water disposal wells capable of disposing approximately 50,000 barrels of water per day each.
The company is able to deliver all of this from a relatively small 30-acre footprint compared to the 16,000-acre field size, and with Scope 1 CO2 emissions of approximately 11.4 kilograms per barrel as of 2021. The company was really Well 15H for most of the quarter, with the well flowing at 7,900 barrels of oil per day for the last 90 days in June, an average of 7,140 barrels of oil per day for a 30-day period from June 12 to July 11. Based on current oil pricing, these wells should pay out on around 18 to two months mark and will be considered one of the company's top performing wells from an early production standpoint.
Once the investment vehicle was Well 15H, it will move to successfully work over three of the company's older wells at an average cost of $1.6 million each, including lead move time. Initial rates seen by each of these three wells are very strong thus far, in the range of 600 to 825 barrels of oil per day, also being able to achieve payout at around two months. PetroTal sells oil via barges through three critical sales routes as seen in our country map. Our priority sales route is via the Amazon River to a major terminal at Porto Manaus, Brazil, where recently we have upsized 1,000 to 20,000 barrels of oil per day.
Over 600,000 barrels per month, with a large field totaling 1.5 million barrels of capacity at normal river levels. This route currently secures the strongest economics and has been the main preference for the company to deliver over 20,000 barrels of oil per day since the end of February 2023. We also sell oil to the nearby Iquitos refinery, where we sell around 1,500-2,000 barrels per day at daily pricing. Lastly, we have environmental pipeline route from Maranon to the near the Petroperu, where it all pipeline for up to 20,000 barrels of oil per day. This route was recently announced open in April, however, PetroTal has not yet consumed shipments to happen at this time.
Finally, later in 2023, the company will pilot a test shipment using barges to Ecuador to make sure it can compete to the OCP pipelines in Ecuador. The company estimates, if successful, the ability to ship approximately 4,000 barrels of oil per day at around the current operating impact profile of the company, becoming a fourth commercial posting route. We're very excited to communicate details about the second quarter 2023 results, later read our 2023 guidance, and provide a September return on capital update, all of which Doug will cover in this section. Slide 3 summarizes key and selected Q2 2023 highlights. From an operational perspective, during the first quarter, we delivered a record 19,000 barrels of oil per day, with a corresponding in the record of 18,483 barrels of oil in sales....
It was a production increase of 60% over Q1 2023, despite a slightly production constraint for a week in early June. During Q2 2023, we invested approximately $26 million of CapEx, focused on completing and on Well 15H, along with other continued infrastructure projects. Based on Q2 2023 being slightly under our projected Q2 2023 spending, the company plans to increase the spending to $71 million in the second half of 2023, which was partially the majority of the L2 West platform and further erosion control costs. The last quarters of the year have typically been higher spending quarters during the company's project cycles. From a overall perspective, the second quarter, the company delivered strong unit operating results compared to the previous Q1 2023 and Q4 2022 results.
These costs were $4.2 per barrel in the quarter, versus $5.6 in Q1 2023, due to higher sales volumes. Transportation costs were $1.6 per barrel versus $2.1 in 2023, as a result of shipping over 91% of sales with Brazilian development. Only the company was able to achieve a total OpEx per barrel, the cost of $5.8 per barrel, versus the prior quarter of $7.7 per barrel. This was the first time the company was able to generate total OpEx of under $6 per barrel and showcases our scalable aggressive cost structure is. In slide 4, we showcase that company is reiterating its full year production guidance of between 14,000 and 15,000 barrels per day.
We're hoping to see higher river levels as communicated in SSP. This has not been the case as seen on slide 4. River levels during the key those are well below seasonal averages and close to the barrier peak in oil patterns in recent weeks. It is expected to carry Q3 and into early October. This is in line with company's original budget and forecast at this time. Slide 5 shows the latest retention struggle map. The company is currently producing at constrained rate, having delivered just over 11,500 barrels per day in July 2023, due to large activities. Our contract is being briefly spring and we're going to the maintenance, and we should be in August of 2023 for the beginning of next year of Well 16H, once the ONP request start has been completed and commission.
The company intends to start reading Well 17H in late 2023, with an additional water disposal well early in 2024. Those locations can be seen on the right most map of this slide. As with the current quarter, we have updated our commercial slide 2, includes an additional off take routes we are currently analyzing for sales and ability. Now that we have expanded our production fleet and created a line both with our Brazilian shipper, the company is now currently focused on reducing the total fleet time on the Brazilian route. The company is currently with its partners, economics, our dedicated storage, further out the Amazon River, that would allow the company to continue production with devices. We estimate a commercial decision on this in 2024, as we continue examining the economic and technical aspects of this project.
Slide 46 also shows some of the other routes the company is examining with, which include the OCP in Ecuador, the ONP Station Number 5, and more at the Malwas, thanks to the passing initial section of the ONP, an indication of a role in the regular week has been in 2019. These other routes commercial anticipate another 10,000 barrels per day of, off taking availability. Slide 7, we always want to remind investors about the company's unique and simple value proposition. Most important is our commitment to shareholders for material year-over-year production growth, while being able to maintain and grow a robust internal capital program. The team as large as deals that will be dealt with.
From a technical perspective, a strong analyst first support in our well access and natural water operation support to provide more travel with climate age, once the wheels normalized for production, especially in the corresponding chapters slide of our progress indication. I will now turn over the meeting to our CFO, Doug Urch, who will provide a key financial update. Go ahead, Doug.
Thank you, Manolo. I'm Doug Urch, PetroTal CFO, and would like to start off highlighting a few select financial items from our recent press release and financial statements with visual support from slide 8. From a balance sheet standpoint, PetroTal exited the quarter with over $92.6 million of total cash and is in a $98 million net surplus position, considering other working capital amounts, including short and long-term debt. The ending Q2 2023 cash balance of $92.6 million includes a short-term debt draw on our revolving credit facility of $20 million, which the company repaid in early August 2023. The company delivered solid, and in some cases, record financial metrics in the quarter, with approximately 1.68 million barrels of oil sales in the quarter, compared to just under 1.1 million barrels in Q1, 2023.
Following is a short summary on key P&L line items. Net revenue of $95.2 million, which represents $56 per barrel. Contracted price in the quarter was $78 per barrel compared to $80 per barrel in Q1, with the Brazilian transportation differentials and backwardation reconciling the realized net revenue per barrel amounts. Royalties for the quarter were $8.9 million, or $5.29 per barrel, including community social trust. This was down slightly on a per barrel basis from Q1 2023. Total gross OpEx in the quarter was $9.8 million, or $5.80 per barrel, compared to $8.7 million, or $7.70 per barrel in Q1 2023. Note, this is the first time total OpEx per barrel has been below $6 per barrel.
Net operating income of $76.6 million, representing $45.53 per barrel, compared to $53.5 million or $47 per barrel in Q1 2023. Q2 2023 free funds flow before all debt service and changes in non-cash working capital of $37.8 million, up from $7.9 million in the prior quarter. Positive net income for the quarter of approximately $46.6 million, compared to $16.9 million in Q1, making it the 14th consecutive quarter of positive net income for the company. That represented $0.051 per share of income. The company is reiterating its 2023 production guidance, as Manolo has already mentioned. Cash flow guidance was lifted slightly to $230 million of EBITDA, with corresponding minor increases to CapEx, now $130 million in CapEx.
The company still estimates $85 million of after-tax free funds flow, an increase of $30 million from the original 2023 guidance. We've been somewhat conservative in our Q3 and Q4 2023 Brent price assumptions at around $80 per barrel, and hopefully, the robust macro oil environment outperforms our estimates, which would enhance free cash flow further. We have expanded our free cash flow matrix slide to include a broader range of yearly production amounts, as shown on the right of slide 9. Slide 10 summarizes our cash sources and uses for 2023 and outlines our recently announced return of capital program. The company now expects to exit the year with $67 million in cash, compared to our previous estimates of $50 million. Note that this includes repayment of the $20 million revolving credit facility in August, leaving the company debt-free.
During Q2 2023, the company successfully declared and paid its first dividend of $0.015 per share and repurchased 583,000 shares for approximately $330,000. The company also successfully formulated its minimum cash policy, which will be used as a mechanical way to top up returns to shareholders as PetroTal's cash position becomes more robust in the long term. PetroTal is now very pleased to announce the enactment of this program and has approved a dividend of $0.025 per share based on Q2 2023 results, which will be paid in Q3 2023. This represents an additional $0.10 per share... Sorry, $0.01 per share over the base of $0.015 per share.
Ex and record dividend dates are August 30th and 31st, respectively, and the cash dividend expected on September 15th of 2023. During the last two weeks in July, the company has increased its buyback volume in excess of 110,000 shares per day, roughly double what it was in June. The company executes purchases in accordance with TSX limits and a soft dollar cap of approximately $1 million per month. To conclude, the company has delivered a record quarter in Q2 2023, and is continuing with its high-yield return of capital plan. The company believes it will continue to execute on time and on budget and continued with pure investment considerations in the short term and long term. Slide 11 summarizes our research coverage targets in US dollars per share and our reserve report valuation metrics on a per share basis.
I thank you for your continuing investor support and will now turn it back to Selwyn Gort for the Q&A session.
Doug, thank you. First question: How is existing well performance adjusting the company's view on reserve assumptions? Has performance had a positive or negative impact relative to what was used in the 2022 assessment?
Manolo, are you available?
Yeah, can you repeat the question? Like, the, without communication. Can you repeat, please?
Yes, apologies. How is existing well performance adjust the company's view on reserve assumptions? Has performance had a positive or negative impact relative to what was used in the 2022 assessment?
Oh, yeah, that's a good question. The wells are performing as we expected. You know, as investors know, last year, we had a big jump on the different categories of reserves. Things are looking, should stay about the same, this time around, because the wells are performing as expected. We have always mentioned that we are, you know, targeting the 2P case, and maybe in the future, as more data is collected, we can enhance that somewhat. Yeah, things are looking good.
Thank you. You have indicated that the L2 West platform would be approved in Q2, 2023. What are the news here? Is it approved? When is the money to be used?
As, as, as we mentioned, the, the West Platform will be ready in, in September, and we will be, be ready to move the rig to start bringing the, again, you know, that project is on, undergoing right now on the way and, and on schedule.
Why was only $0.3 million used on share buybacks during Q2 instead of the whole limit?
Well, in Q2, we essentially were trying out the program. It started in the latter part of May. Given that some back-office processes that need to be set up and associated with the, with the buybacks, we, we slowed things down a little bit. As we can see, we ramped up back to the full limit in July, and we'll continue on with that.
Could you refresh our memories with regards to the $22 million outstanding Petroperu receivables, which relate to oil delivered to the ONP in early 2022? Why have these not been paid yet, and what needs to happen so that this amount is paid?
PetroPeru had their credit facilities frozen in early 2022, and in the past, this is how we'd previously been paid, was through their credit facilities by PetroPeru once oil entered the ONP. We are still waiting for the credit to return so that payment is assured. As of now, this hasn't happened, and hence why we're no longer putting oil into the pipeline until the credit facility issue has been resolved.
Of the $100 million of receivables at the end of June, $57 million relates to Brazil. Has this amount been paid now?
Yes, they have been paid. All the receivables are current.
Would the company consider hedging some production if oil continues to strengthen?
Possibly. Hedging right now is extremely expensive, which is why the company has taken a pause on new corporate hedges. However, if oil goes high enough, it may be prudent to lock some barrels in if we feel the economics are compelling enough.
Could you elaborate on how river levels constrain barge capacity? Is it certain stretches of the river which cause the problem? What is the minimum level required for a barge to pass safely while fully loaded?
Yeah, as you can, can see in the slide 4, on the right-hand side, in rather, you know, on the right axis, the vertical axis, you can see the actual river levels. In, in the yellow horizontal line, it's around 3 meters. As, as you have seen in the, in the, in the line that is circled, you know, we've been hovering around 5 meters. In different sections, especially where you have those sandbars, it, it may drop, and so it's in certain, certain specific spots that the pilots need to be very careful in navigating. To avoid any issues, they fill up the barges to 70% or 60%, all depending on how they see these river levels, going up or down.
Hopefully, as we mentioned, if things will settle down in the next couple of months, and we can increase the, the, the capacity again. Keep in mind that last year, we were filling up barges at less than 40% of capacity because of the low river levels, and, and this year it, it's looking like that, you know. That's why we were conservative with our guidance, and, and we are reiterating on the guidance for this year.
Are you planning more buybacks before this calendar year end, as there is some additional tax in Canada on buybacks from the beginning of 2024 calendar year?
Yes, we are continuing our buyback program as part of our long-term return of capital program. The tax on the company, the Canadian tax on the company, is immaterial for the amount we are buying back, which is approximately $3 million per quarter.
Can you elaborate a little on what you mean when you write that source and value accretive M&A opportunities in North and South America? Have you looked at specific countries, blocks, et cetera?
We, we have, and we continue to do that, as I mentioned, because it's always difficult when you compare the potential M&A with the current oil field. That is such a wonderful field, because of economics, you know. We're always looking, and we're looking for the right opportunity at the right time, something that will really add value to the company. You know, we're not going to miss that chance on any opportunity, but we've been very careful.
Thank you. Just a reminder, if you'd like to ask a question, please submit it via the online platform. On to the next question. On slide 24, you have stated that the used CapEx can deliver 20,000 barrels a day. Previously you stated 26,000 barrels a day. What should we put in this downgrade? Do you not expect your existing CapEx to deliver 26,000, as previously stated?
No, the, the, the reason that we mentioned the, the, the 20,000, is that ballpark. You know, we, and we, we just managed the expectation. We, we know that we can, and we have proven that we can, deliver, 20,000 barrels per day. We're just managing the expectations, you know. The, the idea is to continue growing production capacity, to beyond the 26,000 that we have right now.
Thank you. Could you please explain the situation with ONP and the Petroperu credit line? Why not pump now and get paid later, at least with 2,000-3,000 barrels a day in the pipeline during dry season and low river levels?
Well, as mentioned, Petroperu still owes us an outstanding amount of $20 million from oil we put into the pipeline in February of 2022. Shipping additional barrels to them without their factory lines in place would be too risky at this point.
Thank you. What drove the reduction in 2023 G&A from $34 million to $32 million, provided on slide 6?
Essentially, delays in hiring new headcount, among other small factors that were considered, in our, in our latest forecast in July of 2023.
Thank you. Manolo, Doug, there are no further questions at this time, so I'll hand back over to you for closing remarks.
Well, you know, we just want to thank our investors. Hope you can see that we continue to deliver on everything that we promised, five and a half years ago. One of the key is, of course, the return of capital. I believe, and the board believes that the way we have set up the dividend plan, it makes a lot of sense. What we have announced today, was tapping an extra $0.01 per share, is proof of our commitment. After all, when I was raising initial capital, I always said that Bretana was gonna be a free cash flow machine for years to come, and now I'm very happy that we are delivering on that and on both the return of capital and buybacks.
Thank you so much for all the support. We'll continue growing the company, and we will, we will make sure that we can take some of the challenges that river levels and so on, and actually continue to grow the company for the future. Thank you so much.
Thank you, everyone.