News and AnalysIs for

The National Hydrocarbons Agency (ANH) published their (outgoing) president’s slides from his presentation to Cera Week, the big oil and gas investor show in Houston last week. What he said is just as important as what the slides say but there still are messages. Orlando Cabrales could not have displayed these slides and said things that radically deviated from their implicit message. Here we focus on unconventional resources for adding to reserves. The graph shows how important unconventional resources are to the ANH’s “Abundance” scenario for new reserves up to 2030.

Petrominerales announced its 2012 results this morning and had its conference call at 10:00 am Eastern. At the close, the share price in Toronto was down 8.4%. The company declared a Net Loss of US$54M in 4Q12 versus a profit of US$77M in 2011. For the year the company turned a profit of US$102M but that was 69% less than in 2011. The problem was production which was down 29%. This was offset by higher oil prices and better netbacks so funds from operations were only down 18%. As the graph shows, additions to reserves were minimal meaning 1P (proven) reserves are down 15%.

National business magazine Dinero reported that despite the country achieved an average production of 1,011,992 bpd; the priority now is to find oil reserves. Reserves in Colombia are of 2.259M barrels, which virtually allow a production for four or five years; however, according Amylkar Acosta, member of the board of Ecopetrol: “On average, in the world, the relationship between production and reserves is for a horizon of 10 years. But in Colombia, in 2012, that equation has declined for the fourth consecutive year, as production increases faster than the amount of reserves.

Firstly, Pacific Rubiales shareholders should not be concerned. Management did its job and proved (1P) and probable (2P) reserves both increased over 2011 thanks to the Z-1 Block in Peru and the acquisitions of PetroMagdalena and C&C Energy in Colombia. The company has made strategic plays in Papua New Guinea, Guatemala and Guyana that are not yet reflected in either proved or probable reserves. But stepping back and looking at the Colombian results to understand what is happening with the industry as a whole, the picture is far less rosy, as seen in the above graph.

Ecopetrol issued a brief press release with its year-end 2012 reserve figures. After rising 10% in each of the previous two years, Ecopetrol only managed a 1% increase in reserves in 2012. Revisions played an important role, representing 45Mboe or 17.5% of the additions. Enhanced recovery contributed 26% leaving new discoveries and extensions with 57% of the additions. In this early release of the numbers, the company did not separate Colombian from non-Colombian reserves. It only said that 95% came from the “mothership” versus 5% for subsidiaries which include Colombian subsidiaries like Hocol and Equion. Considering the importance the government puts on reserves and the importance of Ecopetrol to overall statistics, this result has to be a disappointment.

Recently the press picked up a statistic that none of the exploratory wells drilled in 2012 had entered into production. We did not publish the story because we knew there had been announcements of wells entering production or at least getting to the stage of production. Now National Hydrocarbons Agency head Orlando Cabrales has given the statistics seen in the above chart. This was part of an excellent presentation he made to the International Forum on Hydrocarbons 2103 jointly organized by Colombia’s best business school CESA and the Alberta School of Business.

Radio Nacional de Colombia reports that according to the Colombian Petroleum Association (ACP), foreign investment will decline despite the country’s reserves increasing this year. Oil industry representatives said that “with the drilling of 135 new wells, the oil industry hopes to increase hydrocarbon reserves, currently estimated at 2,200 million barrels,” adding that “findings such as those achieved by Canacol in January 2012, in the Magdalena River middle valley with a daily production of 1,242 barrels per day, reinforces the official forecasts that the country could reach 41,000 million barrels in 2030.”

Gran Tierra recently issued a press release on its reserves for year-end 2012. The good news is that the company’s Colombian oil reserves 2P (Proved and Probable) are up 34% over 2011. Proved (P1) reserves are up 22% and Probable (P2) are up 85%. The bad news is that Colombian 2P gas reserves are down 64% although Proved gas reserves are only down 35%. Gas now represents only 5% of the company’s Colombian 2P reserves. Argentina gas reserves have also declined but the growth in oil in Colombia, Argentina and Brazil is sufficient to push 1P reserves up 20% and 2P reserves 15% on a total company basis. The official long-form filing may not appear until the end of this month and the company gave no explanation of the decline in gas reserves in its press release.

Portafolio.co reports that, according to a study by Central Bank, despite the last 20 years’ worth of investment, exploration and successful drilling, it has not been possible to find oil fields with reserves as large as those of the Cupiagua (Casanare), Cusiana (Llanos) or Caño Limón (Arauca).

We have not published these statistics from Campetrol for a while and they are somewhat old considering all the evidence of drilling activity in 4Q12. They do indicate where the action is and the Free / Contract statistics are evidence of availability for those who need equipment (for glass half full types) or perhaps lack of activity (for glass half empty types). Utilization was at 70% in October 2012 versus 83% in November 2011. (Note that our numbers vary somewhat from Campetrol’s figures. See the Methodological Note at the bottom of the article.)