Talos Updates On Pre-Unitization Agreement With Pemex

(Talos Energy Inc., 5.Nov.2018) — Talos Energy Inc. and its partners in Block 7 offshore Mexico signed a Pre-Unitization Agreement (PUA) with Pemex that enables information sharing related to the Zama discovery and its potential extension into Pemex’s neighboring block.

The agreement also establishes a clear path for the signing of a Unit Agreement and Unit Operating Agreement in the event a shared reservoir is confirmed, with a defined process based on international practices to determine the resulting participation of each party in the potential overall development.

The PUA was previously approved by the Ministry of Energy (SENER) in Mexico.

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Ecopetrol Attends Oil Spill In Tibú River

(Energy Analytics Institute, Aaron Simonsky, 5.Nov.2018) — Colombia’s state oil company Ecopetrol installed a series of barriers in a rural area of the Tibú municipality (Norte de Santander) in an effort to contain an oil spill in the Tibú River.

The spill originated over the weekend when stolen crude oil that was being stored in a pool overflowed into the river, reported the daily newspaper El Tiempo. Armed groups in the area often illegally store stolen oil in pools, which they later used to process cocaine, according to the daily.

Ecopetrol personnel conducted a fly over of the affected area and verified the spill occurred near the village of Campo Seis, and to confirm the spill didn’t correspond to an criminal act directed against its infrastructure.

The environmental emergency was reported on Saturday Nov. 3 by communities officials from the Catatumbo region, according to the daily.

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Related Stories

Ecopetrol Cleans Spill After Bomb Attack On Cano Limon Pipeline

 

Santa Cruz Reports Sale of 200,000 Liters of Ethanol 92 In Four Days

(Energy Analytics Institute, Jared Yamin, 5.Nov.2018) — Commercialization of Bolivia’s new ‘Super Ethanol 92’ gasoline reached nearly 200,000 liters in the first four days after it was introduced in the department of Santa Cruz, reported the daily newspaper La Razón, citing National Hydrocarbons Agency (ANH) Director Gary Medrano.

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Related Stories

Bolivia To Kick Off Sale Of Super Ethanol 92 On Nov. 1

 

Argus Launches Series Of Daily Jet Fuel Prices In Brazil

(Argus, 5.Nov.2018) — Global energy and commodity price reporting agency Argus has launched a series of daily jet fuel prices for the aviation fuel market in Brazil.

Local and international airlines continue to invest in the growing Brazilian aviation market, driving the need for an independent reference for delivered jet fuel costs in the country.

Key trading and aviation activity centres on Brazil’s four largest, most liquid hubs — Itaqui, Suape, Rio de Janeiro and Santos. While liquidity is still gathering pace in these locations, Argus has developed a series of constructed daily prices showing the cost of delivering jet fuel from the US Gulf coast to these hubs, which supply Brazil’s largest, busiest airports.

The new delivered prices take into account jet fuel assessments at the US Gulf coast, freight rates, insurance, losses, demurrage costs, port waiting times and maritime tax to applicable ports.

“Argus is pleased to be the first global price reporting organisation to publish a Brazil jet fuel price, bringing transparency to the rapidly growing Latin American aviation markets,” Argus Media chairman and chief executive Adrian Binks said.

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FMC Corporation Updates On Ag Solutions In Brazil

(FMC Corporation, 5.Nov.2018) — FMC delivered another very strong quarter.

“In Ag Solutions, we executed our commercial strategy particularly well in Brazil, where we implemented significant price increases to largely offset FX headwinds,” said FMC CEO and chairman Pierre Brondeau.

FMC Agricultural Solutions reported third quarter revenue of approximately $924 million, an increase of 67 percent year-over-year due to the strength of the DuPont acquisition. On a pro forma basis, revenue increased 5 percent, with particularly strong demand and higher prices in Brazil. Segment earnings before interest, tax, depreciation and amortization (EBITDA) of $216 million increased 57 percent year-over-year and were $11 million above the midpoint of the prior guidance range. In the important Brazil market, higher prices and hedging were able to offset 100 percent of the FX impact on earnings in the quarter.

Full-year 2018 revenue for Agricultural Solutions is still forecasted to be in the range of $4.2 billion to $4.26 billion. At the midpoint, this implies 10 percent year-over-year growth on a pro forma basis. Full-year segment EBITDA is expected to be in the range of $1.195 billion to $1.215 billion, which is an increase of $5 million at the midpoint versus prior guidance. In the fourth quarter, the company is expecting 12 percent year-over-year growth on a pro forma basis, driven by Brazil and Europe; segment revenue is forecasted to be in the range of $1.015 billion to $1.075 billion, and segment EBITDA is expected to be in the range of $280 million to $300 million.

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Talos Energy, Pan American Ink Deal To Cross-Assign Interests In Mexico

(Talos Energy Inc., 5.Nov.2018) — Talos Energy Inc. entered into a transaction with, Hokchi Energy, S.A. de C.V., a subsidiary of Pan American Energy, to cross-assign its Participating Interest (PI) in Block 2 and Pan American’s PI in Block 31, both in the Sureste Basin offshore Mexico.

Under the agreed conditions for the swap, Talos will assign a 25% PI in Block 2 to Pan American in exchange for a 25% PI in Block 31, which is immediately to the south of Block 2.

On October 30th, CNH approved the PI transfer of Block 2 to Pan American. Approval of the transfer of the Block 31 PI to Talos and the transfer of operatorship of Block 2 to Pan American are expected in the coming weeks. Once that occurs and the transaction is closed, Pan American will be the operator of both blocks and Talos will own a 25% PI on Block 2 and a 25% PI on Block 31. The goal of this transaction is to better aggregate each party’s inventory into one potential development program to increase scale in terms of total resources and total combined production. The contract areas are located in water depths between 100 and 150 feet (25 and 35 meters).

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Talos Energy Announces Approval Of Zama Appraisal Plan In Mexico

(Talos Energy Inc., 5.Nov.2018) — The National Hydrocarbons Commission (CNH), the Mexican oil & gas regulator, has approved the appraisal plan for the Zama discovery.

The approval by the CNH was a key approval required to commence the appraisal of the Zama discovery. CNH has also approved the consortium drilling permits, which are required to commence drilling operations. Talos estimates it will spud the first appraisal well, Zama-2, in late November of 2018 and that the appraisal program will be completed by mid-2019.

The appraisal plan includes three new reservoir penetrations. The first well in the program, Zama-2, will be deepened by approximately 500 meters to test an exploration prospect called Marte. The estimated cost to deepen the Zama-2 wellbore for the Marte test is approximately $10 million gross, with Talos’s share expected to be approximately $3.5 million. Talos expects its net share of the costs to be approximately $75.0 million to $80.0 million for the entire appraisal campaign.

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Pattern Energy Reports Third Quarter 2018 Financial Results

(Pattern Energy Group, 5.Nov.2018) — Pattern Energy Group Inc. announced its financial results for the 2018 third quarter.

Highlights
(Comparisons made between fiscal Q3 2018 and fiscal Q3 2017 results, unless otherwise noted)

— Proportional gigawatt hours (“GWh”) sold of 1,623 GWh, up 7%

— Net cash provided by operating activities of $106.9 million

— Cash available for distribution (CAFD) of $31.7 million, up 235% and on track to meet full year guidance(1)

— Net loss of $31.5 million

— Adjusted EBITDA of $79.5 million, up 45%

— Revenue of $118.4 million, up 29%

— Declared a fourth quarter dividend of $0.4220 per Class A common share or $1.688 on an annualized basis, subsequent to the end of the period, unchanged from the previous quarter’s dividend

— Committed to a plan to repower the 283 MW Gulf Wind project starting in 2019

— Acquired a 51% owned interest in the 143 MW Mont Sainte-Marguerite project in Québec, for a purchase price of $37.7 million, representing a 10x multiple of the five-year average CAFD(1) of the project

— Completed the sale of the Company’s operations in Chile, which principally consist of its 81 MW owned interest in the 115 MW El Arrayán project for which Pattern Energy received cash proceeds of $70.4 million

“It was another solid quarter with CAFD up more than three times the same period last year, which puts us in a great position to achieve our targeted CAFD(1) for the year,” said Mike Garland, President of Pattern Energy. “We continue to take proactive measures to increase our CAFD without issuing common equity including, asset recycling, repowering Gulf Wind and the implementation of cost savings. During the quarter we sold El Arrayán at a premium to the multiple at which we trade and we are in the final stages of a second sale. This asset recycling provides us additional flexibility to make new investments in accretive opportunities, like the Mont Sainte-Marguerite acquisition or the Gulf Wind repowering, which increase CAFD. As the opportunity set at Pattern Energy Group 2 LP (“Pattern Development 2.0”) continues to mature and grow, especially in exciting markets like Japan, our material ownership interest in the development business is a clear differentiator to other players in the market.”

(1) The forward looking measures of 2018 full year cash available for distribution (CAFD) and the five-year average annual purchase price multiple are non-GAAP measures that cannot be reconciled to net cash provided by operating activities as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking changes in working capital balances which are added to earnings to arrive at cash provided by operations and subtracted therefrom to arrive at CAFD. A description of the adjustments to determine CAFD can be found within Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Metrics, of Pattern Energy’s 2018 Quarterly Report on Form 10-Q for the period ended September 30, 2018.

Financial and Operating Results

Pattern Energy sold 1,622,991 megawatt hours (“MWh”) of electricity on a proportional basis in the third quarter of 2018 compared to 1,513,997 MWh sold in the same period last year. Pattern Energy sold 6,021,515 MWh of electricity on a proportional basis for the nine months ended September 30, 2018 (“YTD 2018”) compared to 5,663,782 MWh sold in the same period last year. The 7% increase in the quarterly period was primarily due to volume increases as a result of acquisitions in 2017 and 2018, favorable wind and increased availability compared to last year. Production for the quarter was 8% below the long-term average forecast for the period with strength in Canada, Japan and Puerto Rico offset by weakness in the Eastern U.S.

Net cash provided by operating activities was $106.9 million for the third quarter of 2018 compared to $2.1 million for the same period last year. Net cash provided by operating activities was $230.5 million for YTD 2018 as compared to $159.3 million for the same period last year. The increase in the quarterly period of $104.8 million was primarily due to a $24.3 million increase in revenue (excluding unrealized loss on energy derivative and amortization included in electricity sales), a $33.8 million increase in advanced lease revenue, decreased payments of $26.7 million in payable, accrued and current liabilities, due primarily to the timing of payments, a $13.6 million increase in other current assets primarily due to a $7.7 million increase in sales tax receivable and a $7.3 million increase in related party receivable, a $6.5 million decrease in interest payments, and a $1.7 million  decrease in transmission costs. The increase to net cash provided by operating activities was partially offset by a decrease of $1.6 million in distributions from unconsolidated investments.

Cash available for distribution increased 235% to $31.7 million for the third quarter of 2018, compared to $9.5 million for the same period last year. Cash available for distribution increased 28% to $133.4 million for YTD 2018 compared to $103.8 million for the same period in the prior year. The $22.2 million increase in the quarterly period was primarily due to a $24.3 million increase in revenues (excluding the unrealized loss on the energy derivative and amortization included in electricity sales) due to acquisitions in 2017 and 2018, a $5.9 million decrease in principal payments of project-level debt, a $1.7 million decrease in transmission costs and a $0.8 million increase in the release of restricted cash. These increases were partially offset by a $3.0 million increase in distributions to noncontrolling interests, a $4.0 million decrease in distributions from unconsolidated investments and $1.4 million of costs related to the sale of El Arrayán.

Net loss was $31.5 million in the third quarter of 2018, compared to a net loss of $48.4 million for the same period last year. Net loss was $45.9 million for YTD 2018 compared to a net loss of $60.5 million in the same period last year. The improvement of $16.8 million in the quarterly period was primarily attributable to a $26.4 million increase in revenue due to 2017 and 2018 acquisitions and a $5.1 million decrease in other expense primarily due to gains on derivatives. These increases were partially offset by a $4.5 million increase in cost of revenue related to 2017 and 2018 acquisitions, a $3.3 million increase in operating expenses related to an impairment expense on the El Arrayán sale and a $6.9 million increase in tax provisions.

Adjusted EBITDA increased 45% to $79.5 million for the third quarter of 2018 compared to $54.7 million for the same period last year. Adjusted EBITDA increased 19% to $292.2 million for YTD 2018 compared to $244.8 million for the same period last year. The $24.8 million increase in the quarterly period was primarily due to a $24.3 million increase in revenue (excluding unrealized loss on energy derivative and amortization included in electricity sales) primarily attributable to volume increases as a result of 2017 and 2018 acquisitions, favorable wind and increased availability compared to last year. Adjusted EBITDA for the third quarter also reflects a charge to earnings of approximately $4.3 million for the equity pick-up in the financial results of Pattern Development 2.0.

2018 Financial Guidance

Pattern Energy is re-confirming its targeted annual cash available for distribution(2) for 2018 within a range of $151 million to $181 million, representing an increase of 14% compared to cash available for distribution in 2017.

(2) The forward looking measure of 2018 full year cash available for distribution (CAFD) is a non-GAAP measure that cannot be reconciled to net cash provided by operating activities as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking changes in working capital balances which are added to earnings to arrive at cash provided by operations and subtracted therefrom to arrive at CAFD. A description of the adjustments to determine CAFD can be found within Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Metrics, of Pattern Energy’s 2018 Quarterly Report on Form 10-Q for the period ended September 30, 2018.

Quarterly Dividend

Pattern Energy declared a dividend for the fourth quarter 2018, payable on January 31, 2019, to holders of record on December 31, 2018 in the amount of $0.4220 per Class A common share, which represents $1.688 on an annualized basis. The amount of the fourth quarter 2018 dividend is unchanged from the third quarter 2018 dividend.

Acquisition Pipeline

Pattern Energy Group LP (Pattern Development 1.0) and Pattern Development 2.0 (together, the Pattern Development Companies) have a pipeline of development projects totaling more than 10 GW. Pattern Energy has a ROFO on the pipeline of acquisition opportunities from the Pattern Development Companies. The identified ROFO list stands at 743 MW of potential owned capacity and represents a portion of the pipeline of development projects of the Pattern Development Companies, which are subject to Pattern Energy’s ROFO. Since its IPO, Pattern Energy has purchased, or agreed to purchase, 1,564 MW from Pattern Development 1.0 and in aggregate grown the identified ROFO list from 746 MW to more than 2 GW.

Below is a summary of the identified ROFO projects that Pattern Energy has the right to purchase from the Pattern Development Companies in connection with its respective purchase rights:

Cash Available for Distribution and Adjusted EBITDA Non-GAAP Reconciliations

The following tables reconcile non-GAAP net cash provided by operating activities to cash available for distribution and net loss to Adjusted EBITDA, respectively, for the periods presented (in thousands):

Conference Call and Webcast

Pattern Energy will host a conference call and webcast to discuss these results at 10:30 a.m. Eastern Time on Monday, November 5, 2018. Mike Garland, President and CEO, and Mike Lyon, CFO, will co-chair the call. Participants should call (888) 231-8191 or (647) 427-7450 and ask an operator for the Pattern Energy earnings call. Please dial in 10 minutes prior to the call to secure a line. A replay will be available shortly after the call. To access the replay, please dial (855) 859-2056 or (416) 849-0833 and enter access code 4369558. The replay recording will be available until 11:59 p.m. Eastern Time, November 28, 2018.

A live webcast of the conference call will be also available on the events page in the investor section of Pattern Energy’s website at www.patternenergy.com. An archived webcast will be available for one year.

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Colombia Postpones Renewable Energy Projects Auction

(PV Magazine, Emiliano Bellini, 5.Nov.2018) — Colombia’s national mining and energy planning unit UPME has announced in a circular it will postpone the final bidding rules for the country’s first auction for large-scale renewable energy projects.

The authority said that it will provide an updated schedule of the auction in an upcoming circular, without providing further details. Meanwhile, local newspaper La República has reported that UPME’s director, Ricardo Ramírez, and the vice-minister of energy and mines, Diego Mesa, said during a conference that the auction will not be held on January 2, as initially planned, and that it may be held at a later date in the first quarter of 2019.

According to them, the postponement of the auction was made at request of all interested investors and developers, after a meeting they held with the Colombian government.

Through the technology-neutral auction, which is expected to assign between 1 GW and 1.5 GW of renewable energy capacity, the Colombian authorities will select solar, wind and biomass projects with a capacity of over 10 MW. Selected developers will be awarded 10-year PPAs.

Colombia is currently turning to solar and renewables in order to diversify its electricity mix, which is largely dependent on hydropower. In March, the government published the Decreto 348 del 1 de marzo de 2017, a new legislation to support the installation of small and medium-sized renewable energy and solar power generators across the country.

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