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BPZ Resources, Inc. (NYSE:BPZ)

Q3 2012 Earnings Conference Call

November 9, 2012 11:00 ET

Executives

Pierre Dubois - Investor Relations

Manolo Zuniga - President and Chief Executive Officer

Richard Spies - Chief Operating Officer

Rick Menniti - Chief Financial Officer

Analysts

John Freeman - Raymond James

Neal Dingmann - SunTrust

Jeff Hayden - KLR Group

Chris McDougall - Westlake Securities

Irene Haas - Wunderlich Securities

Adam Michael - Miller Tabak

Operator

Good day, everyone and welcome to the BPZ Energy Third Quarter 2012 Conference Call to review earnings and operations. This call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Mr. Pierre Dubois, Investor Relations of BPZ Energy. Mr. Dubois, please go ahead, sir.

Pierre Dubois - Investor Relations

Thank you, Kevin. We appreciate everyone's interest in the BPZ Energy call this morning. With me today are Manolo Zuniga, President and Chief Executive Officer, Richard Spies, Chief Operating Officer; and Rick Menniti, Chief Financial Officer.

Our format for the call today will include opening remarks by Manolo followed by a financial summary that Rick will provide. We will then ask the operator to open up the question-and-answer session, and after Q&A, Manolo will provide closing remarks, but before we move forward, I'd like to provide you with the customary cautionary statements. This call and related earnings release contain forward-looking statements. These statements are based on current expectations about our company, our properties, our estimates of required capital expenditures and our industry.

Actual results could differ materially from those anticipated in these forward-looking statements. Such uncertainties include the success of our project financing efforts, accuracy of well tests, refurbishment efforts, successful production of indicated reserves, satisfaction of the well test period requirements, installation of required processing facilities, receipt of required permits, acquisition of seismic data, the successful management of our capital expenditures and other normal business risks associated with our business and the global economy.

With respect to any oil and gas reserve estimates discussed on this call, we are prohibited from disclosing estimates of oil and gas resources that do not constitute reserves in our SEC filings. With respect to probable and possible reserves, we are required to disclose the relative uncertainty of such classifications. Further, the reserve estimates and referential price information contained in the earnings call and release are not designed to be nor are they intended to represent an estimate of the fair market value of any unproved reserves. In connection with the information conveyed in this call today, please also consider the additional disclaimers and information contained in the company's SEC filings. Manolo?

Manolo Zuniga - President and Chief Executive Officer

Thank you, Pierre, and thanks to everyone for your interest in BPZ Energy. I am happy to report that we have a new addition to our family, the new CX-15 platform. Rise in Peru during the third quarter, I want to congratulate our integrated teams who for the last two years have been working hard to make this a reality. These two years are measured from conception and (indiscernible) to finally sign financing, fabricating, transporting and selling at the Corvina field, and of course per meeting. Regarding per meeting, I am especially excited to report that we have received the environmental permit that will allow us to complete installation, operate the production and reinjection facilities, and drill 24 wells from the new CX-15 platform.

Now, sales at the Corvina field. Finally, equipment tie-ins are now been completed at the CX-15. The drilling rig is being mobilized and we expect to spud our first well in December. In anticipation of the environmental permit, the company was given the green light 10 days ago to carryout equipment tie-ins on the platform that were needed before the rig can be mobilized, including the support crane and the flare-boom. As you know, the CX-15 tower whole and top side deported Nantong, China in August and a rise in Peru in September. You can see the latest project pictures on our website, including the whole tower flowed off and operating and the meeting of the top side to the whole tower. We then set the platform about a mile southwest from the CX-11 platform near the crest of the structure. So, I encourage you to look at our website, because it was all quite an impressive operation.

Looking forward, with a December spud date expected for our first developing well from the CX-15 platform, completion of this first well is scheduled during the first quarter of 2013. After we drilled and completed the first two wells, we expect to drill and complete a well every 6 to 8 weeks. We have 24 drill slots. So, of course, some of those will serve as injectors. We call the CX-11 and Albacora platforms did not come equipped with reinjection equipment. So, those had to be added after the effect. With the CX-15 all the reinjection equipment came installed on the top side already making it a custom-built fully equipped platform. The new multi-year development drilling program at the CX-15 is a material catalyst for production growth and will cover all of Corvina's proved undeveloped reserves or PUDs as they are referred to in the industry.

Besides the CX-15 project, we continue working at both fields to optimize existing production through various means, including a gas cap reinjection program at Corvina, artificial lift, and work-overs. We began a 6 well work-over program during the third quarter at the CX-11 platform. Having completed the first two work-overs, the program will extend into next year. In addition, we are interconnecting the CX-11 and CX-15 platforms via subsea pipelines, which will increase efficiencies at the Corvina's field. So, even though, we will have two different platforms, we will have a consolidated processing facility, which means we can use equipment on each platform to optimize our operations at the field.

As we have stated previously, reservoir management is of critical importance to optimally develop Corvina. In addition to the Corvina CX-11 and Albacora platforms currently on production, the CX-15 is expected to commence production in the first quarter of 2013. Regarding Albacora as you recall another of our key initiatives for this year was to receive the environmental permit for Albacora to startup commission and operate the necessary reinjection equipment, which was installed early this year. We have also received this permit, so commissioning is now underway.

Moving to exploration as you know a comprehensive 3D seismic survey has been ongoing at Block Z-1 covering almost the entire block. I’ll remind that our future development and exploration plans will be driven by the 1600 square kilometers of 3D seismic data which we are expected to complete acquiring by year end. The high quality 3D seismic data already acquired during phase I which amounted to some 1200 square kilometers is in process and interpreted as we speak. We started the second phase of the 3D seismic acquisition by covering Corvina including the PUD locations where we’ll be drilling from the CX-15.

We are now acquiring data at Albacora after which we will finish with Barracuda and part of Piedra Redonda. The Corvina data has been sent out for processing. We expect to have the data in hand before we start the second well from the CX-15 platform. By the second quarter of 2013 we expect to have an interpretation of the Z-1 data. These will help us to determine where to focus of our future exploration efforts or in the case of Albacora where we might return to drilling developing wells. This comprehensive 3D seismic survey is a significant investment which will serve us well throughout the remaining life of the Block Z-1 license contract. At our three onshore exploration blocks, we are continuing with necessary steps to obtain permits for additional seismic and drilling. The data room is also opting on blocks 19 and 23. And we would expect to provide an update on our plans for those blocks sometime next year.

I would like to take a moment to address the Block Z-1 joint venture. All of the work on Block Z-1 is being done in partnership with Pacific Rubiales or PRE. Also during 2013, we expect to receive the formal approval of our joint venture with PRE from the Peruvian authorities who as I have mentioned before have expressed their support. Remember however, that we are already operating with PRE under the joint operating agreements. As we have previously reported as a result of our joint venture with PRE we have our 2012 and 2013 capital and exploratory programs for Block Z-1 fully funded and some if not all of 2014.

Let me take a moment to emphasize that we worked closely with the Peruvian authorities to obtain the necessary environmental and engineering permits needed for our operations. Some of you may wonder why certain permits can take more than a year to receive in some cases. The applications and processes we follow are very thorough. Keep in mind as I had mentioned before that the environmental permits are in some respects social permits. Our ability to show that we are a responsible operator is key to our ability to obtain these permits which I will illustrate we have never failed to obtain.

We are committed to operating in a safe and environmentally friendly manner. We strive for standards of excellence, these standards are duly noted by authorities when we seek our permits and that considered as part of their evaluation. To highlight this commitment you may recall during the third quarter we’ve received a special recognition as a socially responsible company by Peru 2021 in association with the Mexican Center of Philanthropy. I can assure you that we’re working collaboratively in partnership with high ranking government authorities to help our industry make the permitting process more efficient so that everyone can achieve their goals.

I believe the CX-15 permitting process will serve as a great case study to show where the process can be optimized. All these efforts support our commitment to raise production and cash flow, to lower costs and increase shareholder value in a responsible way. So, the speaking of the numbers at this point I’m going to hand over the call to Rick Menniti, our CFO who will provide a brief financial overview. Rick?

Rick Menniti - Chief Financial Officer

Thank you, Manolo and good morning everyone. Before I provide my financial summary, just a reminder that a copy of our earnings release is available on our website under Investor Relations section along with other company financial information. We filed our 10-Q for the third quarter today Friday, November 9. For the third quarter 2012 the company reported an operating loss of $13.2 million and a net loss of $17.1 million or a $0.15 loss per share. This compares to operating income of $7.1 million and a net income of $5.7 million or $0.05 per share for the same period last year. Earnings before interest, income taxes, depletion, depreciation and amortization exploration expense, and non-recurring charges, our EBITDAX was lower at $6 million for the third quarter of 2012 compared to $16.9 million for the same period last year due to the higher costs and lower revenue in the recent quarter.

For the nine months of 2012, the company reported an operating loss of $38.9 million and a net loss of $52.9 million or a $0.46 loss per share compared to an operating income of $16.4 million and a net loss of $2.1 million or $0.02 per share loss for the same period last year. EBITDAX was lower at $30.7 million for the first nine months of 2012 compared to $53.4 million for the same period last year. This was due to the higher costs and lower revenues in the first nine months of this year compared to the nine months of last year.

I am going to focus the rest of my comments on third quarter results, but we are more than happy to answer questions on either the third quarter, our full year-to-date results during the Q&A portion of the call. Recall, all production revenues and expenses are for BPZ Energy’s account until the JV transaction with Pacific Rubiales is approved by the Peruvian authorities. So, all production numbers I reference are on a 100% gross basis.

Total oil production from the Corvina and Albacora fields for the third quarter ended September 30, 2012 was 262,000 barrels or 2,845 barrels of oil per day compared to 321,000 barrels or 3,490 barrels of oil per day the same period in 2011. Third quarter net oil revenue decreased by $6.4 million from the same period in 2011 to $28.5 million. The lower net oil revenue is due to a 53,000 barrel decrease in the amount of oil sold to 285,000 barrels for the third quarter 2012 and a decrease of $2.81 per barrel in the average net sales price received. The average net oil sales price for the recent quarter was $100.25 still a significant premium over WTI for the period.

Now, I’ll take you through our expenses for the period. Overall, operating and administrative expenses of some $41.9 million in the third quarter 2012 increased by $12.8 million as compared to the same period last year. The main driver was higher geological, geophysical and engineering, our GG&E expenses of $5.8 million related to the offshore 3D seismic acquisition activity at Block Z-1. Though expense in the current period, the seismic is an investment we need to incur to evaluate the potential of our Z-1 Block. Lease operating expense was also higher by $3.4 million related to the increased cost associated with sales out of inventory in the current period. We also reported $1.5 million of charges related to the abandonment of portions of a pre-existing platform at the Piedra Redonda field in Block Z-1.

We are pleased to report that these increased costs for the period were partially offset by a decrease in general administrative or G&A costs of $1.5 million. For the third quarter of 2012, other expense increased $6.2 million to $6.5 million compared to the same period in 2011. The increase was driven by the recognition of the loss on derivatives of $4.3 million due to the higher crude oil prices at the end of the quarter versus the unrealized gain of $4.6 million we had in the same period in 2011. The higher other expense in the third quarter was partially offset by lower interest expense of $2.3 million due to higher capitalized interest. As we reported losses before income taxes mainly due to the increased expenses in the third quarter of 2012, we had a resulting increased tax benefit of $3.5 million compared to the same period last year.

I’d like to expand on a couple of points we have touched on during the call so far. The majority of the 3D seismic survey in Block Z-1 has been completed and we expect to finish the survey in the fourth quarter at an additional expense of some $9 million bringing the total program cost this year to some $42 million. Remember that even though this expense flows through our GG&E in our profit and loss statements, it will be fully funded by the Pacific Rubiales under our joint venture agreements. This is a significant investment for our future exploration and development activity of Block Z-1. Our overall G&A expenses were lower for the nine months of September by $2.3 million as compared to the same period last year. You might recall that in our 2012, nine month expenses we also had $1.1 million of costs related to the Block Z-1 joint venture process. We’ll of course continue to look for efficiencies in our G&A, and are reducing expenses where we can.

I will close with the comment on our liquidity and capital expenditures. At September, 30, 2012, the company had cash and cash equivalents of $75.4 million, a current accounts receivable balance of $8.2 million and a working capital surplus of $90.6 million. For the three months ended September 30, 2012, capital expenditures were $27.8 million including $5.3 million of capitalized interest. This brought nine months capital expenditures to $68.1 million including $12 million of capitalized interest.

During the first nine months of the year, capital expenditures excluding capitalized interest were $48.1 million related to costs incurred in design and fabrication of the CX-15 platform, $4.6 million for the Albacora permanent production facilities and some $3.4 million for other projects. Our capital resources at September 30, 2012 consists of our outstanding long-term debt and short-term debt, which include the 2015 convertible notes with a par value of $170.9 million, a $36.4 million secured debt facility, a $35 million secured debt facility and a $176.6 million of loans from Pacific Rubiales mainly related to the Block Z-1 capital and seismic expenditures we discussed earlier. We expect full year 2012 CapEx to come in to be some $88 million with the expenditures for the CX-15 project and startup of the drilling activity being the largest outlays in the fourth quarter, This plus the full year 2012 exploratory expenses of $42 million I previously mentioned will bring our estimate for the total capital and exploratory expenses to some $130 million for the year.

That concludes my financial summary. So, now I will turn the call over to Kevin to open up the line for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from John Freeman with Raymond James.

John Freeman – Raymond James

My first question on the JV approval process, if I could just get a little bit more details on that I believe that our first step is you got to Perupetro and then the Board of Directors there has to approve it before it goes on to the Ministry of Mines and Energy, and I believe at the time of your last call we thought that the Board of Directors was pretty close to approving that, can you just give an update there?

Manolo Zuniga

John, hello, how are you doing? This is Manolo. Before the paper work goes into Perupetro there is actually whole step that was the preparation all of the documentation, public notices, filings. And all of that has been done already and the all of the file is now in Perupetro’s hands. I cannot provide you a specific timetable on the timing in side Perupetro. But as I had mentioned before and we hear these from Perupetro’s new President a couple of months ago, they are going to be very supportive of this transaction.

John Freeman – Raymond James

Can you at least say how long has Perupetro had the documents?

Manolo Zuniga

The actual package with all of the public notices and filings probably about 2 to 3 weeks, so something like that.

John Freeman – Raymond James

Okay and then if we could get an update on I believe the data room on both Blocks 19 and 23 has been open since early August, just an update on if the data room has been closed yet when you would anticipate getting bids etcetera?

Manolo Zuniga

The data room is still open. We are still getting some companies enquiring about it. And as I mentioned in my statement sometime next year we will update the market on that. As you know John, I don’t want to create a fuss about this process.

John Freeman – Raymond James

That’s understandable. And then just last question from me, when would you anticipate being able to provide like a 2013 CapEx budget?

Manolo Zuniga

Well usually we do it at the beginning of the year, and that will be the intent again this time.

John Freeman – Raymond James

But conceptually should I think about it your 2013 program as basically drilling just at Corvina and assume nothing else happens in 2013 in terms of drilling?

Manolo Zuniga

That's something that you can count on. As we mentioned in my statements, we are going to use it freely to see we go to back Albacora and we have some commitments onshore, but they are depending on permits. So, they may or may not have in next year or may happen later in the next year, so we don't have timing on that yet.

John Freeman – Raymond James

Okay, great.

Manolo Zuniga

Well, onshore is going to be compared to offshore small, very small.

John Freeman – Raymond James

Okay. Well, congratulations on getting the platform installed and I was getting to go back to drilling next month.

Manolo Zuniga

Well, thank you so much John.

John Freeman – Raymond James

Thanks a lot.

Operator

Our next question comes from Neal Dingmann with SunTrust.

Neal Dingmann – SunTrust

Say, first question Manolo, just wondering you've obviously done a great job and got these not only to Corvina drilling permit, but the Albacora. Just wondering now is that something, I guess just refresh me going forward, will you just have to continue to get those ahead of time going forward as you lay out the drilling plan or how you kind of gauge that for the going into 2013?

Manolo Zuniga

The permit?

Neal Dingmann – SunTrust

Yes.

Manolo Zuniga

Don't forget is for the 24 wells is to be able to operate, drill all of these wells is the whole package. We don't have to get more permits to drill from the CX-15. Now, when we go to explore, then we will then have to get a new set of permits for exploring the prospects on the ones which are going to be based on the 3D seismic, but for that you need to have the maps done first to decide where you are going to drill, so you can get the corresponding permit.

Neal Dingmann – SunTrust

Okay. So, Albacora you are set there as well with those slots?

Manolo Zuniga

That's why. We have – when we have obtained the drilling permit couple of years ago for Albacora U.S. for drilling about six wells. So, we still have a permit to drilling at Albacora.

Neal Dingmann – SunTrust

Great, great, okay. And then on now that you have these and you currently have more than ample liquidity or financial cash for next year, how do you see your 2013 drilling schedule? I mean, any idea on how many wells you are targeting in either Corvina and the Albacora or you have determined that yet from you are. Richard?

Richard Spies

Well, as I mentioned in my statement and we have make reference to this in the past, the first couple of wells we are going to be very cautious, don’t forget we intend to use an extra drilling stream, casing stream in the first well, do a good conventional core. So, it's going to take a little extra time the first couple of wells. From then on the idea is to drill them in 6 to 8 weeks and ideally 8 to 6 weeks, the idea is to shorter lead time as we continue drilling.

Neal Dingmann – SunTrust

Okay. And then lastly just I guess with these first Corvina wells, I used kind of what (indiscernible) or will you all be looking at going after some of the deeper zones as well that maybe you haven’t gone after yet or at least maybe you've just tested?

Manolo Zuniga

No, Corvina, I think this also will be fine and these are, don't forget, PUD locations. So, these are – we are going for the undeveloped proved volume.

Neal Dingmann – SunTrust

Okay. And one last one, any I guess early estimates on kind of on what’s your guessing now on sort of initial rates on some of these wells or it's jut too early?

Manolo Zuniga

We have mentioned in our presentations to expect between 1000 and 1500 IPRs.

Neal Dingmann – SunTrust

Okay. We'll try to stick there.

Manolo Zuniga

So, you stick to that one, please.

Neal Dingmann – SunTrust

Thank you all.

Operator

Our next question comes from Jeff Hayden with KLR Group.

Jeff Hayden – KLR Group

Good morning guys. Just a quick – couple of quick questions. One, I wonder if you can give us an update on where we currently sit as far as production goes. I mean, about 2050 for the quarter, are we still about those levels? And then kind of following up on that, can you give us a little color on what you guys have seen from the first two work-overs you have completed?

Richard Spies

Jeff, this is Richard Spies, good morning. To put it in perspective, you mean you saw the numbers for the third quarter, but in fact if you look at it month-by-month, what you see is that not too long after the middle of the quarter, we actually had production, total production down to about 2500 barrels a day. And today it's back up over 3000 and that, that improvement is due to our work-over program. We have done full work so far on two wells. One is what caused the drop in production I'll remind you was pretty much your gas breakthrough from one of our injectors, so it affected two producers. We have worked on one of those producers and successfully got it back to production and that’s why the production is back up and stopped the excess gas movement through (indiscernible) that well. And then we’ve worked on the injector that was causing the problem. We believe we saw that, but we are still testing that to verify it. So, we have a number of work-overs remaining to do and we hope to look for more improvement. Again each one of those has mechanical issues associated with them and I am reluctant to put a forecast out there, but so far so good with the work-over program.

Jeff Hayden – KLR Group

Okay great I appreciate the color on that one. And then I think you guys have estimated about $2 million of work-over, is that about what they are coming in at?

Manolo Zuniga

Yeah that’s a reasonable ballpark number as there is a couple that are more expensive and there is a couple that are less expensive so that’s a sort of an average number.

Jeff Hayden – KLR Group

Okay I appreciate that and then just last couple of quarters sales have exceeded productions or it looks like we have had some inventory sales, can you just kind of give us a little color on what’s currently in inventory and is that a trend that can continue or is that kind of started normalizing?

Rick Menniti

Well. Hi Jeff this is Rick Menniti, so we’ve got inventory balance or we keep crude in inventory between the time it leaves the platform and until it gets on the ship and arrives at Lara. So, we have a lot of that inventory we have is timing. I mean at the end of September we had about 42,000 barrels in inventory. So, it fluctuates and again it depends on what we see going on in the rigs and the delivery schedules with the refinery and the weather etcetera. So, because we have to use the floating transportation, there is some timing within that inventory versus production as well. Our goal is to sell all that we produce and if we have inventory we want to sell that as well which is what we’ve tried to do in these couple of months where the production has dropped off.

Jeff Hayden – KLR Group

Okay I appreciate it guys. That’s it for me.

Operator

(Operator Instructions) Our next question comes from Chris McDougall with Westlake Securities.

Chris McDougall – Westlake Securities

So, on the JV transaction, once that gets approved will the financing and everything be retroactive or will it be effectively you’ll just go from that date as forward as far as the production accountant and so forth.

Rick Menniti

Hi Chris this is Rick Menniti again. So, the way the JV transaction will work after approval is our financials going forward will look as if we only have 51% of production and 51% I think share of the expenses, etcetera. But on the capital that’s going to be carried by our partner would not be on our book, so it would remain on the partner’s books and so we’re funding that all. We are in a bit of anomaly here in the period where we’ve actually started working together, is that we’re in the JV back to the first of this year and until that approval happens. And because the way the documents are structured that if something drastic would happen or catastrophic that wouldn’t allow us to close this JV, we would have to approximately pay all that money back to Pacific Rubiales. So, our structure right now and our financials we have to show that money as loans from PRE until we actually can close the deal. We’re required under SEC filings when we close that deal to issue pro forma statements that would show our historic data as if the JV had been priced, so at that point we’ll have that information out there for comparability.

Chris McDougall – Westlake Securities

Okay, so they will basically be when you get the comparable period you will update the information as if it had been in place.

Rick Menniti

We’ll have that information out there.

Chris McDougall – Westlake Securities

Okay, great. Thanks. And then back on the operation side so for your lease operating costs, how do you see that trending kind of as you drill out the CX-17 and so forth?

Richard Spies

Yeah this is Richard. That’s CX-15

Chris McDougall – Westlake Securities

CX.

Richard Spies

There will be two effects. One is that we’ll start seeing the cost to operate the CX-15 will come into the numbers. But the barrels that are being produced will go up, so what you should see is the LOE per barrel coming down through the year and that’s what our plan is – the shape of our plan and that’s what we intend to make happen. So, the numbers are high right now because we have a lot of facility out there that’s not being supported by sufficient production and the CX-15 should help take care of that.

Chris McDougall – Westlake Securities

And do you have any I mean just kind of at a high level should we see those drop on what sort of percentage basis as you fill out that platform?

Rick Menniti

We are still working on those numbers and I haven’t even reviewed them with my board yet. So, I think I need to do that before I talk about them.

Chris McDougall – Westlake Securities

Fair enough, fair enough. And you mentioned the IP rates for the wells, is that a 30-day IP or is that like a 24-hour number?

Rick Menniti

That’s on the order of a 30-day kind of number.

Chris McDougall – Westlake Securities

Okay, sure. I understand it's just the target, but I just want to know going forward. And then for your current production, walk me through the decline rate kind of on your current wells and then the example you are talking about where you worked over a couple. So, aside from the new wells drilling, what should I model in for a decline rate on the existing stuff and how will your work-overs affect that?

Rick Menniti

Okay. What you ask for is a really complicated story right? And so, let me say if I can simplify it and put it in perspective and at least point you in a direction, so you can get some understanding.

Chris McDougall – Westlake Securities

Sure Rick.

Rick Menniti

The issue is that our reservoir and the performance of our reservoir declines is entirely dependent upon how we maintain the reservoir pressure. Last year, at this time, we did some work in Corvina to be able to inject into the gas cap, which we are not doing before that we supported that it considerably improved declines, so it flattened the declines, we saw production stabilize. We had some problems with gas breakthrough, some issues this year. We are working on fixing those. The plans going forward to cut the cores in the CX-15 will allow us to evaluate whether we can inject water in the future to help maintain reservoir pressure.

And then the extra compression that's on the CX-15 should help us to be able to inject gas once we have the wells in place to be able to put that gas back into the gas cap there. So, there is a lot going on, a lot of work being done and planning to be able to maintain reservoir pressure fully, which will considerably decrease decline. What I would point you to is if you want to gross kind of estimate look at the first three quarter results this year versus last year. I mean, if you look at that, you can kind of get a feel, it’s a smear over time granted, but it’s much more accurate than looking day-to-day, point-to-point.

Chris McDougall – Westlake Securities

Got you.

Rick Menniti

If you look at that, I think you are going to get a feel for what kind of decline is happening over a period, but remember it’s very much a function of how we are maintaining reservoir pressure and we are working to do a better job with that, which will help to decline.

Chris McDougall – Westlake Securities

Okay, great. And then lastly, so does Peru have a like a well reporting system like the Texas Railroad Commission, where you can get in there and see their production coming out of individual wells or fields, is that something….

Manolo Zuniga

No, this is Manolo, you can do it by company. You can go to the Perupetro website you can go company by company on a block by block basis not on individual basis. Now, yes, to impress everybody here, (indiscernible) so you can actually contact Perupetro and ask for information that we are very happy to give it you, but in the website it is on a block by block basis.

Chris McDougall – Westlake Securities

Okay, great. Thanks a lot, gentlemen.

Manolo Zuniga

Thanks.

Operator

Our next question comes from Irene Haas with Wunderlich Securities.

Irene Haas – Wunderlich Securities

A question for you is that you got the Phase 2 seismic going, so therefore you look at some better picture of Albacora along with other sort of existing discoveries and leads. And I just kind of want to get a feel as to how you guys and your partner will look at this. Are you going to be going back to Albacora for sure to drill in 2013 or are there alternative use for your money that’s more attractive, i.e., maybe going to drilling your exploration wells. So, just wonder…

Manolo Zuniga

Irene, this is something that we have experienced for the last couple of years since we drilled that second well in Albacora that we wanted to see the seismic and rank our prospects to decide where best to put your money. We want to follow a disciplined approach. And now we are acquiring that data, so we are just very close to be able to do that type of ranking and decide.

Irene Haas – Wunderlich Securities

And so it’s not a full - we should not take for granted that you will go back and drill Albacora even if you (indiscernible).

Manolo Zuniga

That’s right. I mentioned that in my statements that the seismic is going to be look at to the side if we go back to Albacora.

Irene Haas – Wunderlich Securities

Okay. Now…

Manolo Zuniga

No, in Albacora you have the platform, the facility, the permit, so that accounts for some, but the data is one of the key way to take the decision.

Irene Haas – Wunderlich Securities

Got you. And also gas sale, are we ever going back to that whole project at all to sell gas from Corvina back on shore?

Richard Spies

It has been reviewed, as we speak as well.

Irene Haas – Wunderlich Securities

Thank you.

Richard Spies

Thank you, Irene.

Operator

Our next question comes from Adam Michael with Miller Tabak.

Adam Michael – Miller Tabak

My questions have been answered, but I do want to ask one there is so much focus on Z-1 and you have an interested prospects on Block 23, it’s over by the (indiscernible) and I am just wondering is there something I think that it’s shallow and it wouldn’t take a lot of capital expenditures to go drill a couple of well there is that something you would wait for a JV partner on could you maybe drill something later in 2013?

Manolo Zuniga

It all depends on Michael we need to – Adam I mean, it is a mater of looking at what the process is ongoing, what type of results we are getting and then we take decisions accordingly. So, it’s all about taking disciplined decisions. You are right about the shallow prospects in order with that. And we have 3D seismic, so it’s exciting.

Adam Michael – Miller Tabak

If I were to think about it and permitting it’s like what would need as far as environmental permits and drilling permits and how long does that process normally takes for onshore will that be similar to offshore?

Manolo Zuniga

Yes, yes, any type of permit, it takes time because several agencies are involved in reviewing the documentation. And probably not as long as the offshore, no and that’s why earlier we mentioned that the investments onshore are very much dependent on obtaining the permits that’s why we can not estimate we are going to do any next year or not.

Adam Michael – Miller Tabak

Okay, thanks guys.

Operator

(Operator Instructions) I am not showing any further questions at this time. I would turn the converse back over to Manuel Zuniga for closing remarks.

Manolo Zuniga - President and Chief Executive Officer

Thanks Kevin. In summary, I would like to express my pleasure with the progress of our initiatives. And I would like to thank again all of our employees who each day strived to help us achieve our goals which I would like to highlight as follows. Our new partnership at Block Z-1 is working well. The JV transaction at Block Z-1 greatly improved our ability to raise production and provides us with liquidity. The new CX-15 platform is in place, and we are ready to return to drilling. Albacora startup and commissioning of reinjection equipment is underway. 3D seismic acquisition is almost complete at Block Z-1. Process and interpretation is already underway and using this new 3D data together with our JV partner while looking for new opportunities. The latest two environmental permits mentioned during the call showed that we have good working relationships with the different Peruvian agencies. In the communities where we operate, we continue to engage with all of our stakeholders and we have committed to leadership and a great team of employees ready to take us into the new phase of growth for our company.

With that said, I want to thank everyone for participating in today’s call. Thank you.

Operator

Ladies and gentlemen that concludes today’s presentation. You may now disconnect and have a wonderful day.

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