Petrolifera Petroleum provides activity update
cnw
CALGARY, Jan. 14 /CNW/ - Petrolifera Petroleum Limited (PDP - TSX) hereby provides an update on the company's activity during calendar 2007.
Petrolifera had a productive if somewhat challenging year in 2007. The company drilled at total of 47 wells, all on its Puesto Morales/Rinconada Concession in the Neuquen Basin, Argentina, during the year. This drilling resulted in 33 oil wells, two natural gas wells, three water injector wells, two dry holes, four non-productive or suspended wells and three wells were being completed at year end.
At Puesto Morales, a total of 35 wells were drilled, resulting in 25 oil wells, two natural gas wells, three water injector wells, two dry holes, one suspended well and two wells were on completion at year end. At Rinconada, a total of twelve wells were drilled, resulting in eight oil wells, three non-productive or suspended wells and one well was being completed at year end. This brings to over 60 the number of wells drilled on the Concession since first drilling was initiated in late 2005.
A major undertaking during 2007 was the design, construction and activation of the company's infrastructure and production facilities. This included gathering lines, water treatment facilities, water disposal facilities, a high pressure natural gas pipeline and initiation of a waterflood at Puesto Morales North. The timetable for these projects was frustrated during the year by energy shortages in Argentina, especially during their winter months, which delayed access to requisite parts and equipment for the various component parts needed by Petrolifera to activate its pressure maintenance program. There were also delays encountered in securing pumps and certain high pressure valves for the company's natural gas pipeline and related facilities.
Petrolifera's sales grew considerably during 2007. All sales were of production in Argentina. Crude oil sales increased 45 percent over 2006 levels, to average 8,657 barrels per day. Much of the improvement occurred during the early part of the year, when flush production from new Sierras Blancas discoveries at Puesto Morales contributed to record quarterly sales, cash flow from operations before changes in working capital and near-record earnings. Subsequently, production curtailments for natural gas conservation purposes, water incursion at a key high productivity well (1013), pressure depletion awaiting the waterflood and delays and equipment shortages affected production levels.
Natural gas sales were stronger at modestly better prices during 2007, awaiting the startup of the waterflood and completion of the company's high pressure natural gas pipeline to Medanito. Sales rose 97 percent to average 2.3 mmcf/d in 2007.
On an equivalent basis, Petrolifera's 2007 sales rose 47 percent to average 9,047 boe/d compared to only 6,171 boe/d in 2006, the company's first full year of operations. Again, full year results were reflective of the influence of oil production declines during the year, awaiting activation of the company's pressure maintenance scheme which is now underway. Fourth quarter sales were 7,042 boe/d, slightly below third quarter for similar reasons. During November, production was curtailed due to field activities associated with the startup of certain key facilities, pump installations and the like, well in excess of the impact of natural declines. This was evidenced by the fact that December sales exceeded November levels by 23 percent and early January 2008 levels were even higher.
Petrolifera expects robust growth in production and sales in 2008 as increased natural gas volumes are marketed at improved average prices and as new drilling and the impact of the company's recently activated pressure maintenance or waterflood program at Puesto Morales is felt. Also, the company is optimistic about the risk adjusted potential of its planned exploration program in Argentina during the current year as it continues to evaluate new Jurassic Sierras Blancas and Loma Montosa prospects at Puesto Morales as well as Cretaceous Centenario opportunities on its Puesto Morales block as well as at its Gobernador Ayala II concession, on which a 3D seismic program was recently completed. This latter block lies just east of and on trend with an area being developed by another Canadian company.
Petrolifera has already announced a 69 well, $76 million capital budget for Argentina during 2008. This planned program will include extensive drilling at Puesto Morales/Rinconada, seismic and drilling on Vaca Mahuida, drilling on the Gobernador Ayala II concession and 3D seismic and drilling on the recently confirmed Puesto Guevara Concession in Rio Negro Province, Argentina. Petrolifera now owns 493,310 net acres of oil and gas rights in Argentina, the equivalent of 21 townships in Western Canada. The total does not include any interest which Petrolifera may ultimately hold in the Salinas Grande concession in La Pampa Province. Currently, the company is operating with three rigs and four service rigs.
The company's Argentinean budget will continue to be evaluated in the context of the actual outcome of exploratory drilling results and the evolving policy framework for the country. Recently announced price controls for crude oil and continuing control of natural gas prices below fair value will impact on anticipated cash flow, especially if refineries attempt to transfer imposed burdens on to producers. It is apparent that if increased deregulation was to occur, improved cash flow from operations before changes in working capital would likely result in higher levels of reinvestment in Argentina. Since Petrolifera commenced drilling operations in late 2005, the company has invested approximately $100 million in the country.
Plans are advancing for early drilling in Colombia. Petrolifera has identified three prospective drillable prospects on its Sierra Nevada I License in the Lower Magdalena Basin. Discussions to secure a drilling rig for a July/August commencement of activities are continuing. A seismic program is also anticipated in 2008 on the company's Turpial Block in the Upper Magdalena Basin. Staffing is underway and an office has been established in Bogota, Colombia. Petrolifera controls over one million acres of petroleum and natural gas rights in Colombia, fast becoming one of the exploration hotspots in South America for the oil and natural gas industry. An initial 2008 capital budget of $8 million has been established for Colombia; this may be expanded depending upon results and as mentioned, developments in Argentina, although regardless the company has the wherewithal to expand its Colombian budget as warranted by opportunities that develop.
Petrolifera's 2008 Peru capital budget has been established at $56 million, to cover the cost of extensive seismic programs on both Ucayali Block 107 and on Maranon Block 106 and for the drilling of the company's first well on Block 107. These are both jungle blocks with attendant high costs of exploration, including for access and when drilling, for helicopter support. Petrolifera's seismic program on Block 107 is proceeding very favorably, with 62 percent of lines cut at year-end 2007; 60 percent of shot holes have been drilled and 24 percent of lines have been shot. Early indications from received data are considered excellent and the company is proceeding with preparation of its Environmental Impact Assessment ("EIA") applications for a number of drilling locations. The data will be received, interpreted and reviewed for selection of the preferred prospects, which are anticipated to have considerable potential.
As with Colombia, discussions for a suitable heli-transportable rig are advancing to the contract negotiation stage, initially for a two-well commitment. Drilling is tentatively anticipated for approximately October 2008, subject to regulatory approval of the company's drilling EIA.
Petrolifera continues to await clarification with respect to its significant $37.7 million face value investment in Asset Backed Commercial Paper ("ABCP"). It will be recalled the company recorded a book impairment of this investment during the third quarter 2007 and recategorized the investment from a short term asset to long term on its balance sheet. We continue to seek ways to recover the full amount of our investment into what was rated as R-1 High by a recognized bond rating agency in Canada. Included in this process is a continuing dialogue with the chartered bank whose investment arm sold the investment to Petrolifera and awareness of the initiatives of the Montreal Accord. This has been a slow and arduous process with limited free flow of information. We will advise shareholders and the investment community of any developments directly affecting Petrolifera or its holdings to the extent we are apprised of same.
In the interim, Petrolifera has sufficient cash flow from operations before changes in working capital and access to available credit to be able to fund its capital program without undue difficulty. Obviously, the company would prefer to receive its funds from its ABCP on a timely basis to avoid accessing available credit arrangements for its activities, but fortunately is in a position where it does not have to compromise its growth programs as a consequence of the mid-2007 disappearance of liquidity for these short-term, highly-rated instruments.
In late January 2008 Petrolifera is hosting a visit by invitation of numerous Canadian investment analysts and some portfolio managers from Canada and the United States. These individuals will visit the company's facilities at Puesto Morales and will be provided insight into the opportunities and challenges facing the oil and gas industry in South America by a number of regional experts. Additionally, the company will be reviewing its assets and activities. Accordingly, in conjunction with this press release we will be posting an updated Investor Presentation on our website at www.petrolifera.ca. Click on the link Investor Info and then on Investor Presentations to access the January 2008 Power Point slides.
The company has commissioned GLJ Petroleum Consultants of Calgary, Alberta to prepare its year-end 2007 reserve report. This report is anticipated to be received during the month of February 2008 and will be released to the public after it has been reviewed by the company's Reserves Committee and accepted by its Board of Directors.
The company's audited financial and operating results are anticipated to be released to the public by way of press release on or about March 8, 2008.
In summary, Petrolifera made considerable progress in 2007. Crude oil sales were up 45 percent over 2006. Natural gas sales were up 97 percent over 2006. On an equivalent basis, sales were up 47 percent year over year to 9,047 boe/d, compared to sales of 6,171 boe/d in 2006. During 2007 Petrolifera drilled a record 47 wells in Argentina, resulting in 33 oil wells, two natural gas wells and three injectors, with only two dry holes (the first dry holes since activation of drilling in 2005), four suspended wells and three wells being completed at year end. Major expenditures were made during 2007 on field facilities including for water treatment and disposal, a waterflood or pressure maintenance facility and a high pressure natural gas pipeline to Medanito from Puesto Morales. Over $100 million of capital expenditures are anticipated for the full year. These investments are expected to result in restoration of the company's production and sales growth during 2008, aided by continued drilling activity in Argentina (including on new blocks at Gobernador Ayala II, Vaca Mahuida and Puesto Guevara) where the company controls over 493,000 net acres of petroleum and natural gas rights. Seismic and drilling is also anticipated in 2008 in Colombia and in Peru on what are anticipated to be high potential prospects. The company is financially self-sufficient with adequate cash, anticipated cash flow and available credit to fund an anticipated $140 million capital program in 2008.
Petrolifera is a Calgary-based crude oil and natural gas exploration, development and production company with activities in Argentina, Peru and Colombia. The company has branch offices in Buenos Aires, Argentina; Bogota, Colombia and Lima, Peru. Its common shares are listed for trading on the Toronto Stock Exchange under the symbol PDP. There are presently 50.1 million common shares outstanding (54.4 million fully-diluted). The company's growth from a modest startup base in late 2005 when it went public has been organic, through successful drilling programs in Argentina. Since that time the company has expanded into both Colombia and Peru, and controls approximately 6.5 million net acres of exploration and production rights in these three South American countries. Petrolifera operates with a very small head office staff of three full-time professionals, two part-time individuals and solely employs nationals in all of its foreign offices. The company prides itself on its efficiency of operations, low finding and development and on stream costs, low operating costs and its efficient use of capital.
Monday, January 14, 2008
Petrolifera Petroleum provides activity update
Sunday, January 13, 2008
Inside a stock fraud
Business Reporter
The future didn't look bright for serial swindler and parolee Michael Lee Mitton when RCMP officers frisked him at Vancouver International Airport on a cloudy June day in 2004.
Inside his suitcase, they found diagrams and calculations on deals involving companies with names like Pender International, IMM Investments Inc., Kamposse Financial Corp. and Firestar Capital Management Corp.
There was a fax from a financial adviser named Michael Ciavarella, a technical report on a gold mining project and documents relating to Bahamian investment firms.
Police discovered blank fax sheets containing the letterhead of "Tree Valley Garden Centre," a handwritten note with the words "to be done Neil," and contact information for Cosimo Commisso, whom police claim to be the head of an organized crime family in Toronto, as well as Johnny and Raymond Commisso.
Mitton was carrying four cellphones, and had cheques worth more than $13,000 in his wallet.
For years, he had prospered on the then-Vancouver Stock Exchange, a noted playpen for stock hustlers, of which Mitton was one of the most notorious. By the end of 2000, he had already piled up 103 convictions in Canada, primarily related to his specialty – stock fraud.
Last March, Mitton pleaded guilty to fraud and money laundering, and received a seven-year prison sentence plus a $2.6-million restitution order payable to HSBC Bank. In an agreed statement of facts filed in court, Mitton confessed to being the "architect" of an elaborate stock fraud involving several companies.
In piecing together the tale of Mitton's fraud scheme, the Star has relied on Mitton's agreed statement of facts when he pleaded guilty, and on more than 1,000 pages of RCMP affidavits filed with the court in support of search warrants. These contain allegations that have not been proven in court.
The Star further relied on transcripts of wiretaps and interviews conducted by the RCMP, which are also filed in court, National Parole Board reports and documents filed with the Ontario Securities Commission and U.S. Securities and Exchange Commission. In addition, the Star interviewed people involved in or familiar with RCMP operations.
Police have also charged Michael Ciavarella with fraud, conspiracy, money laundering, possession of the proceeds of crime and two counts of extortion. The allegations have yet to be proved in court. Ciavarella's lawyer did not return calls seeking comment.
Also charged – with fraud, conspiracy, robbery, assault and two cases of extortion – is Anneillo (Neil) Peluso, whom the RCMP describe in court affidavits as being "a high-ranking member of Cosimo Commisso's organized crime group." The allegations have not been proved in court.
Peluso, who has no criminal record, owns Tree Valley Garden Centre in Richmond Hill. A quiet businessman, he also sponsored and managed minor hockey teams in the area.
Alan Gold, Peluso's lawyer, has said that allegations about his client's ties to Commisso are groundless. "They're not worth the search warrant paper they're written on."
Gold said he would not comment on the charges because the case is still before the courts.
On the day he was picked up at Vancouver's airport, Michael Lee Mitton was scarcely an unknown figure to the RCMP. A career criminal, the diminutive man with hazel eyes and curly hair had strong connections to the Montreal, Toronto and Vancouver underworlds.
He routinely ignored trading bans, fines and restitution orders. Prison was a temporary inconvenience. Sometimes he didn't wait to finish a sentence. While on parole, he would work on details of his next fraud.
His signature moves involved purchasing public shell companies and manipulating their shares in what the industry calls a "pump and dump" operation. The scheme, one of the oldest forms of stock market fraud, is a favourite of con artists.
In Mitton's version, he would find a shell company, set up a personal network of buyers and sellers, release "news" and then direct the network's trading in company shares. The idea was to artificially create investor interest and trigger a jump in the company's stock price.
Network players would unload any shares they held and pocket the profits before regulators, brokerages and average investors realized anybody had duped them. In the aftermath, Mitton usually left a trail of misery for victims who suffered everything from financial ruin to family breakups and humiliation.
But Mitton, a man of many aliases, also had another unusual calling card – sometime undercover RCMP agent. His second stint as an agent – while on parole for an earlier stock fraud – had just ended a few weeks before his airport encounter with the RCMP. He had pulled out of a Mountie money-laundering sting, claiming police had put his life in danger.
According to police affidavits, one of the targets of that sting operation had been Cosimo Commisso and his group, although no charges were ever laid.
After going through Mitton's luggage at the Vancouver airport, the RCMP arrested him on suspicion of criminal activity.
At the time, police had a tip that Mitton might have skimmed cash during his earlier role as a phony, money-laundering salesman for the RCMP sting operation. What police didn't know then, was that earlier in the week, Mitton had been setting up an integral piece of his newest venture back in Ontario.
At the RBC Dominion Securities branch in Richmond Hill, representatives of Kamposse Financial Corp. – another name from Mitton's suitcase – had opened an account. Among the representatives was someone calling himself "Michael Douglas," a name he just happened to share with the actor who portrayed corporate raider Gordon Gekko in the movie Wall Street. The representative's real name: Michael Lee Mitton.
After his arrest in Vancouver, Mitton languished in jail for two months. At a subsequent hearing, Mitton's parole supervisor recommended that the parole board revoke his release because what police had found in Mitton's suitcase was "consistent with past fraudulent behavior."
But the board released Mitton, saying police had not provided enough information to support their suspicions.
Mitton was back on the street and, despite parole restrictions, he turned his attention to a company called Pender International.
Incorporated in Delaware in the 1990s, Pender had moved to Markham in early 2004. Pender was listed on the over-the-counter market of the U.S.-based National Association of Securities Dealers, but the firm was dormant, with no real assets and its shares traded at less than a dime each.
That would soon change dramatically, with a series of announcements and transactions during Mitton's summer sojourn in jail. In a news release, Pender said it was abandoning its previous business of importing furniture to become a merchant bank for small firms.
Mitton and others had paid about $900,000 to buy most of the shares in Pender, according to regulatory filings with the U.S. Securities and Exchange Commission. It turned out to be just part of a complicated series of transactions.
The money to buy Pender had come from another company – Armistice Resources Ltd. – which had raised more than $2 million from investors in a private placement. Armistice owned a non-working gold mine near Kirkland Lake in Northern Ontario.
Pender then bought IMM Investments, which in turn held a minority stake in Armistice. Among IMM's key executives were Kalano Jang and his son, Kalson Jang. According to filings with the SEC, a Kalano Jang holding company received roughly one third of Pender's shares as part of the sale of IMM.
Kalson Jang, who is chief operating officer at Trillion Financial Corp., also became Pender's chairman. Kalano Jang is Trillion's president.
In an affidavit filed with the court, the RCMP say Elisa and Patrick Perl of Toronto invested $235,000 in Armistice after meeting with their advisers at Trillion. The Perls were instructed to make their cheque payable to Firestar Capital Management, a company controlled by Ciavarella. The Perls say in the affidavit that they never received any money back.
The Jangs did not respond to requests for an interview. No charges have been laid against any Trillion officials.
As a result of the deals involving Armistice and IMM, Pender was transformed. It now had an indirect interest in a mining company, Armistice. It also gained new management when Ciavarella became Pender's chief executive officer in July.
By then, however, Pender was already coming under RCMP scrutiny. According to affidavits filed with the court, the police say they were by then tapping the phones of Pender insiders. In one affidavit, the RCMP alleges that Ciavarella told Peluso that so-called market makers – who facilitate the buying and selling of stock – needed to agree to trade Pender shares at $5 apiece, much higher than the pennies at which the stock then traded.
In one call, police say, Ciavarella recommended changing Pender's name, but then decided the process would take too long. Ciavarella, according to the RCMP transcript, then tells Peluso: "We'll just trade it among ourselves for five bucks and then we'll put news out."
Despite the shakeup and changes at Pender, the stock price languished at 6.5 cents (U.S.) with no trading on the over-the-counter market until almost mid-October, a few weeks after Mitton had popped out of jail.
Without warning or a single news development, Pender took off on Oct. 14 to 30 cents. The stock price doubled to 60 cents a day later and broke through the $1 mark for the first time on Oct. 20. It surged past $2.50 on Oct. 26.
About a dozen investment accounts were actively involved in trading Pender shares, according to police, including the Kamposse account at RBC that Mitton had set up posing as Michael Douglas. Also trading actively in Pender stock were accounts held by Ciavarella and two of his companies, Firestar Capital and Firestar Investment Management, according to RCMP affidavits citing OSC trading records.
In a four-week period in October and November, Kamposse sold 376,000 Pender shares for proceeds of $2.74 million, far more than the $475,000 Kamposse had originally paid for them. Meanwhile, Firestar Capital's account bought 392,000 shares in November alone for $3.55 million.
In his agreed statement of facts, Mitton admits to employing numerous techniques to bolster Pender's stock price, including "wash trading," in which Pender's shares were simultaneously bought and sold through different brokers to create the impression of market action.
Mitton also orchestrated so-called "high closings" – bidding up the price of Pender stock at the very end of a day's trading.
In late October, Pender put out a news release about its investment in Armistice that showed a certain kind of resourcefulness. Normally, firms such as Armistice announce estimates of the gold content in their mines and the cost of extracting it. But the mine owned by Armistice, a company with $29.6 million (Cdn.) of debt, also contained something else: water. Lots of it.
So Pender announced that Armistice had hired a firm to pump the water out of the mine and reactivate it. In a news release, Pender CEO Ciavarella promised the job would be completed within four months and "production" at the "flagship acquisition" would start in early 2005.
Within a few days, Pender stock hit $5.75 (U.S.). By Remembrance Day, it had topped $10 before hitting a peak of $11.35 on Nov. 18.
In the span of just 35 days, the number of Pender shares traded had reached 2.1 million, and their value had shot up by 3,783 per cent. For some investors, it was a lucrative run.
According to OSC trading records cited in RCMP affidavits, Ciavarella personally bought 15,500 Pender shares in early November for an average price of roughly $5.80, or $91,545. Within two weeks, he had sold the shares for $161,391.
Trading records also show that Giovanni (Johnny) Commisso generated a gross profit of $125,855 in four weeks of trading in Pender shares, while Raimondo (Raymond) Commisso earned a profit of $5,890 in less than two weeks.
There were other transactions that November, the affidavits revealed. In one, Firestar Capital deposited $243,991 into the trust account of a Toronto lawyer. According to police, that money was then transferred to a bank account belonging to Mitton's wife, Janet, in British Columbia.
A few days after Pender stock reached its peak, Firestar Capital used its account at HSBC to buy $2.6 million-worth of Pender shares. Before Firestar's cheque had cleared, HSBC advanced the money to the seller of the stock – Mitton's Kamposse trading account at RBC.
After Firestar's cheque bounced, according to Mitton's agreed statement of facts, HSBC was short $2.6 million. And because HSBC had become suspicious about the transaction, under securities law it was precluded from reselling the Pender stock to recover the loss.
At the same time, RBC was expressing similar concerns about the Kamposse account. As Pender stock approached its peak, Kamposse had delivered certificates for 3.4 million Pender shares to RBC. Those certificates were by then valued at roughly $34 million, far more than the $340,000 they would have fetched a few months earlier. Kamposse asked that the certificates be cleared – and its account credited with that amount – as soon as possible.
But an RBC official noticed something odd. The telephone number and address for Pender was the same as Kamposse. RBC immediately suspended trading in the Kamposse account and alerted the Ontario Securities Commission.
Pender shares started tanking. Just two weeks after reaching their peak, Pender stock had lost half its value.
That helped spark a new RCMP probe, code-named Project Nemesis – a reference to Mitton's long criminal record. The probe included other police forces and staff from the OSC, which by mid-December had frozen more than a dozen trading accounts with alleged links to Pender.
The OSC also ordered Ciavarella, Mitton, Kamposse and the Firestar companies to cease all trading in Pender stock.
By Christmas, 2004, Pender's stock price had stablilized in the $6 range, even though the task of pumping water out of the Armistice mine had come to a halt because the company had run out of money.
But Mitton, according to his agreed statement of facts, wasn't going to be idle. He was busy developing plans to crank up the amount of "news" emanating from Pender. Early in the new year, that included the appointment of a new CEO to replace Ciavarella, who resigned.
In a securities filing a few weeks later, a bullish Pender claimed it was similar to Onex Corp., the big Toronto conglomerate, except that Pender was looking to acquire smaller companies "in the advance stages and near profitability."
The company was still calling its only asset, the flooded mine near Kirkland Lake, "our flagship gold project."
Mitton was also transforming himself. In a webcast to discuss Pender's prospects with investors, Mitton assumed an alias, "Michael Hennesey," posing as "a Pender investor."
A few weeks later, Pender issued another news release, saying the company had switched gears and would now be considering real estate projects. Pender followed that with "news" that it had gained a $100-million equity line of credit.
A subsequent news release claimed that Pender had concluded the purchase of Montebello Development, with construction starting soon on a Mexican resort.
"We continue to evaluate some very interesting properties in Europe, as well as a 400-acre resort and casino in the Caribbean," the company gushed. "We would expect the Pender property portfolio to exceed $350 million in value by the end of the second quarter."
And yet, Pender shares continued to fall, sliding to $1.05 by early February, 2005, and to 30 cents a month later.
On April 1, Pender announced it had "cancelled negotiations" for a "final agreement" on its $100-million line of credit, only to bounce back a few days later with news of "final talks" for an even bigger credit line.
Then came an announcement that Pender's new subsidiary, Montebello, had reached a deal to buy the Sheraton Fallsview Hotel and Conference Centre in Niagara Falls, along with another news release claiming the dewatering of the Northern Ontario mine would take four to six weeks.
But there was no line of credit. No resort construction. No hotel acquisition. No work at the flagship gold mine.
Mitton himself, however, was busy. Ignoring the trading freezes, he used other companies with names like Wonderland Capital to shuffle Pender shares. According to trading records, Mitton still managed to generate a profit of nearly $1.1 million in the first quarter of 2005.
He certainly didn't show any signs of personal financial difficulty. He had a penthouse in Markham in the same building as Ciavarella, a house in Ottawa, and drove around in a Mercedes E320.
And all the while, the RCMP were tracking his movements. They would soon be executing a series of search warrants.
At Mitton's house, they seized hundreds of computer files, emails, financial data, press releases, shareholder lists.
But even this didn't appear to faze Mitton. Posing as Hennesey, now a Pender "consultant," Mitton spun a tale of more pending "good news" to a prospective investor, including the purchase of the hotel in Niagara Falls.
Like Hennesey, the investor was really someone else. He was an RCMP corporal.
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