PetroTal Corp.

Hello and thank you for joining PetroTal's Q2 webcast. Your presenters today are Manolo Zuniga, President and CEO, and Camilo McAllister, CFO. As usual, questions can be submitted via the platform during the webcast and we'll do our best to answer them in the time available.

Manolo, thank you. Thank you, Mark. And good morning, everyone. And thank you for joining PetroTal's Q2 2026 webcast. where we're going to discuss the financial and operational results we release overnight. My name is Manolo Zúñiga, and I am the president and CEO of PetroTal. I am joined today by Camilo McAllister, our executive vice president and chief financial officer. If you have clicked on the link this morning, press release, you should hopefully see our slide presentation on your screen. But before I begin, I should mention that there are some disclaimers towards the end of the main presentation on our website, which I encourage you to read after we prepare comments. On slide two, before we get into the quarter results, I want to step back and remind everyone why we believe PetroTal represents a compelling investment. Starting with the asset itself, PetroTal is the largest oil producer in Peru. We have 110 million barrels of remaining 2p reserves. representing $1.2 billion of net present value, NPV10 value, against 32 million barrels produced to date. So we are still in the early innings of developing this field. Our track record speaks for itself. Since inception, we have invested $675 million in Peru, generated over $1 billion of EBITDA, and returned more than $150 million to shareholders, and also tripled the size of our Bretagne oil field. Turning to the catalyst ahead of us, we're excited to restart our development drilling program in the fourth quarter of this year. as we target a return over previous production levels of more than 20,000 barrels per day. Considering our production has recently been tracking around our annual guidance of 12,000 barrels per day, we expect to show significant growth in production over the next few months. We believe successful execution of this multi-well program represents a meaningful re-rate opportunity for the stock. On the right-hand side of this slide, you can see our current production, financial, and capital market snapshot. The first quarter, first half of the year, production averaged 13,726 barrels per day, ahead of our 12,000 BOPD annual guidance. We ended the second quarter with $137 million of total cash against just $37.5 million of total debt, a strong net cash position. As a reminder, our 26 guidance called for adjusted EBITDA of $110 to $120 million and capital expenditures of $80 to $90 million. On slide three, I'd like to give an update on our operations at Britannia and our preparation for the resumption of development drilling. In mid-July, we began a pulling campaign at Bretagne to replace producing tubing and electric commercial pumps in up to five wells. This work is already helping to mitigate production declines and sustain our production levels in the second half of the year. Turning to our development drilling program, preparations remain on track as we have increasing confidence in an early October spot. The Estrella rig, which we have contracted for an eight-well campaign, It's now in Peru, and we hope to have it at Bretagne by the end of this month. As you can see on this map, we have highlighted the first two wells in our upcoming drilling program, wells PT and PV, circling red in the north half of the Bretagne structure. We are particularly excited about these drilling locations, which directly offset well 10H that has already produced more than 2.1 million barrels of oil. We look forward to notifying the market once the first whale has a spot, and we remain focused on returning PetroTal to sustainable production growth in 2027. On slide four, I want to show you how we get to our 20,000 whales per day production target for 2027. Whale by whale. The great shaded area of the left shows our historical production base at Bretagne and Los Angeles going back to January of 2021. You can see the periodic steps up as new wells have come online, followed by natural base declines in between drilling campaigns. That decline has continued through 2026, consistent with what we have discussed on prior calls as we pause development drilling. The color layers on the right-hand side of the chart shows our production recovery profile as our eight-well drilling program comes online, beginning with our first spot in October. Each color band represents one new well added sequentially to the base as our drilling completion crew move down the program. This production plot has been built using the median type curve from the 19 horizontal wells we have already drilled at Britannia. So this reflects the actual proven productivity we have demonstrated in this field. As you can see, as each well is layered on top of the declining base, our total production builds through 2027, reaching a monthly average rate of 20,000 barrels per day by the middle of the next year. I believe you will probably see us show daily production rates of 20,000 barrels per day by the first quarter of 2027, but it may take us until the middle of next year to sustain production at that level for a month or more. As mentioned before, the first two locations offset the 10-H well. You may recall that this well delivered the highest initial production of any of the 19 wells we have drilled to date, a 30-day average rate of just over 9,000 barrels per day, being able to target Offset locations near one of our best performing wells give us real confidence in the productivity of these first two new wells. However, as you can see on slide four, we are assuming that these new wells will average just 5,000 barrels of oil per day. Before handing the call to Camilo, I would like to remind our investors that PetroTal's proposition is that we should be able to replicate Bretagne's success more than once. especially now using all the experience we have acquired during the past eight years. I look forward to not only reporting on Britannia's production revamp, but also about future similar opportunities that some of our investors have repeatedly asked about. With that, I will now hand the call over to Camilo to discuss our financial results.

Thank you, Manolo. Turning to slide five, we have laid out PetroTal's financial performance for the second quarter. compared both to the prior quarter and to the same period last year. Production averaged 12,557 barrels per day in Q2, which was down 16% from Q1 2026 and down 40% from Q2 2025. As we've discussed, this reflects our natural decline in our production base during a pause in our development drilling. And it is a trend we will reverse shortly. Despite these lower volumes, our net back economics tell a much stronger story. Brent oil prices have increased $15.46 per barrel quarter over quarter and $24.56 per barrel year over year. And that flowed through to our bottom line. net operating income per barrel has increased by $12.78 and $22.59, respectively, over those same periods. This is a really good illustration of how our business is built to capture upside when oil prices strengthen. On costs, our operating expenses were essentially flat quarter over quarter, you know, in total dollar terms at $11 million. The increase you see on upper barrel basis from $8.46 to $10.11 is a function of spreading a relatively fixed cost base across fewer barrels. It is not a deterioration in an underlying cost structure. Our adjusted EBITDA for the quarter was 43.5 million. That is up 24% from Q1 26. On a year-over-year basis, it was down modestly, reflecting the substantially higher production base in Q2 2025. Our free funds flow came in at 32.4 million, up 26% quarter-over-quarter, and 19% year-over-year. Our net income was 4.8 million for the quarter, which reflects the impact of a $10.2 million non-cash impairment charge related to the sale of the Amazonia One drilling rig. Excluding that item, our underlying earnings debt continues to strengthen alongside higher realized pricing. On a year-to-date basis, Our first half 2026 adjusted EBITDA was 78.7 million, which puts us in good shape to hit our annual guidance of 110 to 120 million. First half 2026 capital expenditures were modest 15.6 million, with the bulk of our capital spending expected in the second half of the year as our development drilling program gets under way. We ended the quarter with 137 million of total cash, including 105 million of available cash. Available cash was out modestly from Q1 and Q2 2025 levels. On slide six, we show our full year 2026 guidance summary. which you'll also find in our corporate presentation, so I won't spend too much time walking you through every line, but I do want to use it to frame where our cash position is headed for the balance of the year. As we discussed on the last slide, our available cash position was largely flat throughout the first half of the year, ending Q2 at 105. That reflects two significant cash outflows in the first six months. First, a sizable tax payment and the retirement of a lease liability associated with our former drilling rig following its sale. We usually tend to see large cash outflows in March and April as we settle our prior year tax bill. And also looking at the guidance summary itself, based on a 12,000 barrels of oil per day of average annual production and an $83.60 per barrel rent assumption, we expect to generate $180 million of net operating income and about $117 million of EBITDA for the full year. And this is all after Russian control spend, GNA, and realized derivative losses or gains. Against that, we are planning for an $85 million of capital expenditures. That represents a meaningfully more active back half of the year as our development drilling program ramps up, along with about $24 million of accrued tax and finance expenses. That leaves approximately $8 million of after-tax refunds flow for the year, with no cash dividends contemplated in this guidance. Now, putting it all together, even accounting for that step-up in company spending in the second half, and after the tax and lease-related draws we saw in the first half, we expect to build our available cash position from approximately $105 million today to approximately $120 million by year-end. That reflects the combination of production growth, continued strength in oil prices, and our disciplined cost controls. And it's all a good illustration of how our cash generative power of this business, even while we're refunding, our next leg of growth. So with that, I will turn the call back over to Mark. Please let us know if you have any questions.

Thank you, Camilo. First question. Does the company have any optionality to extend the new drill rig beyond the Egg World campaign?

Indeed, we do have the optionality Let's keep in mind that the company has always drilled proof locations. And right now we have a total of 13 proof locations. So, of course, we intend to continue drilling. On a 2P basis, we have a total of 22 locations. So basically doubling the size of the field. So that gives you an idea. And the rig that has come all the way from Colombia, the owners want to keep it busy as long as possible.

Thank you. When is the pulling campaign expected to be completed and where do you see production levelling off to after that?

We should complete the campaign by the end of the month. As I mentioned in my remarks, the idea is to level off the rates, so overcoming some of the declines. So the idea is to keep it about this level as now.

Okay, next question. Is the purchaser of the Amazonia One rig the same personal contractor doing the drilling in the fall?

No, it's not. The purchaser of the drilling rig is a company from Romania, a drilling services company from Romania, and the rig is right in that country right now.

What's the status of true-up payments from Petro Peru for the oil in the OMP pipelines?

You know, now that we have a new government in Peru led by Keiko Fujimori, the PetroPeru issue is being discussed thoroughly by the government. So we will see, you know, how we can resolve that.

Okay, thank you, Minerva. With flooding from El Niño predicted to start in December, will the company have to accelerate the erosion control program?

I think I mentioned in the last webcast, in El Niño phenomenon, it rains quite a bit in the northwest part of Peru, in the coast, in the Pacific coast, while in the Andes and in the jungle, many times it's dry. So actually we expect the river levels to be lower and we will manage that as we need to. We are careful to manage the erosion issues and we expect the project to restart soon.

Okay. Given the logistical challenges in getting a rig to site, is the plan still to aim for a flat production profile around 20,000 barrels per day, or would you be more inclined to drill at a faster pace?

The whales drill at the normal pace, so we cannot go faster. You have to be very careful when drilling the whales, but the idea is to drill one after another. That's the idea.

Can you please talk a little about the current water processing situation, e.g., when will additional water disposal wells be required? When will more processing capacity need to be added?

You may remember that when we provided guidance at the beginning of the year, we mentioned that Our water handling is estimated to be at 170,000 bottles of water per day. We've been able to improve that to about 180,000 now, a little bit beyond that, which is one of the reasons we are able to maintain the current production levels. And the idea is then to step up those volumes as time goes by from 180,000 to 200,000 to 40,000 and so on. As we have more wells, we need to manage more fluids. Thank you, Mario.

In order to drill out maining 2P and 3P locations at Britannia, will additional land and or permits be required? And if so, what's the likely timeframe to obtain these?

We don't need more permits. The modified EIA that took us such a long time to get allows us to drill the entire 3P campaign that we have and plus additional wells. And we already bought some land just in case, but the concept that we're managing now is to be able to develop fully the field with the current existing area that we have.

Okay, next question. The tendering process for erosion control has taken longer than expected. Any reason for this? What's the contractor market like for erosion control activities?

This is a great question. It has taken a little bit longer than we've expected. We are still on track to receiving proposals by the middle of August, evaluate them and kind of get going back in September. This is, of course, a project that had already begun. So any company that will restart the construction and the piloting wants to do visits to the sites. They want to review all the engineering work. They want to make sure that none of the learnings from the previous contractor happen again. So they are taking their time and we're doing it very rigorously. Thank you, Camilo.

Are you in a position to give us a steer on the expected costs to get to water injection capacity of 320,000? Not at this moment.

This is part of the studies that are being carried out as we speak.

When would you expect the riverbank work to be completed, given the new contractor? Where would you see CAPEX in 2027 incorporating the drilling campaign, the river work and water handling?

Yes, definitely the riverbank work will be completed by 2027. In terms of CAPEX guidance for next year, it's still too early to say, but we will have an active drilling program, as Manolo mentioned. We still have 13 P1 locations to be drilled and you know these these initial contract with Estrella will take care of the first eight and, if you remember each each well takes about you know 45 to 50 days to drill and we plan to do them back to back so so we plan to be very busy in 2027.

Okay, next question. Some time ago, you mentioned in a conference call that you were going to focus on operational cost reductions. Can you elaborate a bit more on what's been done so far and how this impacts Brent breakeven price?

Yes, absolutely. So we have been extremely focused on operational cost reductions. In fact, if you look at the quarter two numbers, they are down about 18% to our historical levels. on an absolute basis, and in terms of a year-on-year, you will see an index of 20% of savings, which is obviously tough when you have such a small facility with a fixed cost structure, but that continues to be a focus for the company, despite where oil prices are. We want to make sure that when we grow our production by about 80%, which is happening soon, that all those barrels flow through the bottom line. Thanks, Caleb.

With Gran Tierra selling their holdings in Colombia and Ecuador, are they planning to keep their backing option in Block 107, or is that also sold?

We have not discussed this with Gran Tierra, and that project is still under evaluation. The reason they kept that option is that they really like that structure, but we have not discussed anything with them.

Can you remind us what production contribution you're assuming from new wells this year? How much downtime do you assume for H2?

As mentioned in my remarks, we're assuming that the wells will come in initially at 5,000 bars of oil per day. We usually assume the typical 1-2% downtime. We're not expecting any social issues like we used to have in the past, as the company has done a fantastic job with social issues.

If everything goes as indicated, you mentioned that a reinstatement of dividends would be considered before year-end. Is this still the plan?

This is always under review and given where oil prices are and how they continue to remain high and how well we're performing and hopefully by the year end we will have more visibility on the result of those first wells, we will definitely continue to talk about it.

Okay, I think for now that is all the questions that have been submitted.

Well, as always, I want to thank all of our shareholders for their support for the company. And thank you, Mark, for setting this up. Thank you.