Petro Vista Letter to Shareholders
January 28, 2010January 28th, 2010
To our Shareholders,
Several important milestones have been achieved during the previous year. We completed several strategic farmouts, a loan agreement, and an equity financing, resulting in a very active program and setting the formation for a fully-funded capital and exploration program planned for 2010. With this funding we will drill at least 4 wells in Brazil and Colombia as well as conduct an extensive 2D seismic campaign in Colombia. One key component of our overall Corporate strategy in 2010 is to build cash flow from production and maximize the value of the Tartaruga asset through additional drilling. The immediate significance of Tartaruga is that, assuming success, it is expected to provide sufficient cash flow needed for current expenses as well as remaining exploration costs in 2010. Mid to long term the Tartaruga development, has the potential to provide us production and cash flow over a long life with the addition of significant upside.
Brazil-Tartaruga
Petro Vista has a 27.3% net revenue interest in this project in partnership with Petrobras and TDC Engineering. Inc., as operator. At the writing of this letter, we are currently underway with drilling operations for our first new well in this field. Drilling to a TD of -3800m is anticipated by February 15th. Assuming success, production would commence immediately. The Tartaruga Field was originally discovered by Petrobras in 1994 (SES-107D) and has been producing for over 15 years. The crude oil is light, high quality 41 API. The Tartaruga development and exploration program in Brazil provides Petro Vista a low risk opportunity to achieve fast track production. Tartaruga is a unique asset with one well on production, existing facilities, an oil sales contract at world pricing and a development program already approved by the government. A work over of the existing producing well is planned immediately after current drilling is completed. In addition to the current well at least 3-4 more wells can be drilled in this field to exploit the full production potential of both the upper reservoir intervals and the deeper level where there is upside potential.
In addition to Tartaruga in Brazil, we hold interests in two Blocks in the Reconcavo Basin. In Block 170 where we have a 25% interest, we expect to drill an exploration well by the end of May 2010. In Block 169 we have 50% interest and are currently evaluating the blocks potential for a drilling recommendation prior to May 2010.
La Maye
In our La Maye Block in Colombia, we expect to drill the second of a four-well exploration program in April 2010. The first well was drilled in November 2009 encountering oil and gas shows in several formations before reaching TD at 3341 ft MD. The participants determined to set 4 ½ inch production casing down to TD. Testing of this well will be considered upon completion of the second well. Petro Vista has a 25% net revenue interest in this project.
Our plan since inception has been to drill two of the 4 wells, under a prepaid turnkey contract, evaluate results and then determine the best plan forward on the Block. Our well costs at La Maye are low and run approximately US$2MM/well vs. that of our competitors in the area that range between US$4-6 MM. Five prospects have been identified in the block having both limestone and clastic reservoirs. La Maye is near existing infrastructure with gas and oil pipelines running through both the northern and southern portions of the Block.
Block SSJN-5
The Phase 1, 2D seismic program is delayed until Q3 2010. This is primarily due to availability of seismic crews and an ongoing review of other potential geophysical methods of data acquisition including airborne high resolution gravity magnetic surveying. We may also undertake surface geochemistry surveys which will ultimately reduce geotechnical risk and costs associated with seismic program.
The Company previously held a 50% participating interest in Block SSJN-5. The Company has now concluded a farmin to PetroAmerica Oil Corp. for a 25% participating interest. As part of the deal terms Petro Vista will be carried on the 2D seismic program. Internal geotechnical studies have identified several interesting potential play types with structural traps in 5 prospect areas. This block is located close to La Maye and is surrounded by a number of producing fields. Drilling of one well in Block 5 is anticipated for 2011 (per contract obligations) as part of the overall 3-year exploration term.
Morichito
In the Morichito block in Colombia we have commenced preparations for the drilling of an exploration well (Morichito #5) that is anticipated to spud by the end of March 2010, our obligation on this well is carried in full as a result of out farmout to Petroamerica Oil Corp. of a 25% participating interest. Petro Vista retains a 25% participating interest in this project and is operator.
In the last few months we have concluded extensive post drill geo-technical analysis including amplitude versus offset or AVO analysis of the Morichito Block. We have chosen the M5 prospect location as our next drill site. The M5 prospect is a four way structural rollover that is AVO supported. We believe we may also have developed a tool that can reduce our risk in identifying higher potential (larger) prospects in the Block. If we can establish the accuracy of this tool (and related techniques) through success in our next well, we will have several additional prospects to pursue not only in our Block, but also in the surrounding Llanos area. AVO, if successful would allow us to accurately map and target these highly productive sands of the Carbonera formation.
Growth
In addition to work in our current portfolio there are several new opportunities expected to become available through 2010 bid rounds in Colombia, Peru and Brazil. The Company will continue to review under-valued, stressed assets for possible acquisition. We are evaluating several such opportunities and our goal is to add 1-2 assets achieving an appropriate mix of near term production objectives and large upside potential in prospective areas with higher risk and higher reward. We will be making these growth decisions based on potential internal funding capabilities (production cash flow) geo-technical and commercial evaluations, required capital programs, engineering metrics and as well as various partnering options.
I would like to thank our Board and management group for their insight and the strong efforts and dedicated work by our technical and foreign staff. I would also like to express our sincere appreciation to our shareholders and look forward to 2010 as our turnaround year.
Best Regards,
"Read Taylor"
Read B. Taylor
CEO President