La Cortez Energy Highlights First Quarter 2011 Financial Results

BOGOTA, Colombia, May 26, 2011 /PRNewswire/ -- La Cortez Energy, Inc. (OTC: LCTZ), a company focused on oil and gas exploration and production in South America, recently announced financial and operating results for the quarter ended March 31, 2011. For the first quarter 2011, the company reported revenue of $363,433 and net income of $2.26 million, compared to revenues of $90,383 and a net loss of $835,072 for the same period last year. The revenue increase was due in large part to the successful work over activity conducted on the Maranta block in January 2011, which significantly increased production from the Mirto-2 discovery well.

Production and Revenue Summary

Total net oil production after royalties for the three months ended March 31, 2011 was 7,730 bbls or 98 barrels of oil per day (bopd), compared to 1,198 bbls or 24 bopd, for the same period in 2010. The company achieved operational profit of $93,456 for the quarter ending March 31, 2011.

As of March 31, 2011, the company is producing from the Mirto-2 well only. Production for the three months ended March 31, 2010 was derived from the Mirto-1 well only, which started producing during the fourth quarter of 2009 and continued producing until the fourth quarter of 2010 when the well was shut-in due to mechanical failure of a pump. The Mirto-1 well remains shut in, and it is expected that a work over job in the Villeta N sand will be conducted within the next 2 months.

For the three months ended March 31, 2011, net oil revenue increased to $363,433 from $90,383 for the same period in 2010, while net income increased to $2,259,653 compared to a net loss of $835,072 for the three months ended March 31, 2010. The increase in net oil revenue during the recent quarter is primarily due to the successful results of the work over conducted on the Mirto-2 well and the production testing initiated in January 2011.

The increase in net income is primarily due to the increase in the non-operating income to $4,504,748 (due to the unrealized gain on fair value of derivative warrant instruments recognized of $4,535,322) compared to non-operating income of $561,189 for the three months ended March 2010.

Expense Summary

Operating costs

Operating costs for the three months ended March 31, 2011, which pertain mainly to costs incurred in production activities for the Mirto-2 well, which began producing in January 2011, amounted to $269,977.  Our operating costs during the first quarter of 2010 included significant costs to work over the Mirto-1 well, which were not eligible to be capitalized.

Depreciation, Depletion, Accretion, and Amortization Expenses

The increase in our depreciation, depletion, accretion, and amortization expenses for the three months ended March 31, 2011 as compared to 2010 was mainly due to the depletion expense on proved oil properties due to the increase in production in the Mirto-2 well, depreciation of other property and equipment, and accretion of our asset retirement obligation recognized for the three months ended March 31, 2011.

General and Administrative Expenses

We incurred total general and administrative expenses of $2,281,042 for the three months ended March 31, 2011 compared to $1,052,493 for the three months ended March 31, 2010. In particular, the increase in professional fees and other general and administrative expenses during the 2011 period as compared to the 2010 period is primarily due to increased audit, accounting, legal and consultancy expenses arising from our administrative exploration activities and growth in our operations and an expense recognized during the 2011 period of approximately $779,000 arising from an equity-based tax effective January 1, 2011, implemented by the Colombian tax authorities on all Colombian entities.

Liquidity, Capital Expenditures and Capital Resources

Capital Expenditures

The Company reported $47,664 in total capital expenditures for the first quarter ending March 31, 2011 summarized as follows:

• $11,629 for Maranta Block and $36,035 for Puerto Barco and Rio de Oro.

Expected capital expenditures over the next twelve months are as follows: 

• $8.3 million for our share of commitments with respect to the Putumayo 4 Block, related to Phase 1 permitting activities, seismic acquisition and drilling of the 1st exploration well expected by 1st quarter 2012;
• $1.8 million to carry out our proposed activities on Catatumbo area projects, Puerto Barco field, related to road and facilities upgrading and existing well work overs;
• $2.5 million of additional investment in the Maranta Block which will be determined once further information on the Mirto-2 well is acquired and evaluated.

Liquidity

Our cash and cash equivalents balance as of March 31, 2011, was $7,450,889 compared to $8,327,020 as of December 31, 2010.  

This cash balance does not include $2,777,057 in restricted cash deposited into a trust account in November 2009 as collateral for the Company's share of a performance guarantee required by the ANH (Colombia's National Agency of Hydrocarbons) in connection with future work obligations on the Putumayo-4 exploration and production contract.  Such funds are not available to be used by La Cortez for other corporate purposes during the life of the guarantee.  The guarantee expires upon completion of the minimum work commitments in respect of the Putumayo-4 contract, and the cash held in the trust account will be released to La Cortez.  The amount of the performance guarantee is equivalent to 50% of the Company's minimum work commitment on the Putumayo-4 Block. 

The company anticipates that after August 2011 we will need to obtain additional capital to fund the future capital requirements of the work plan as outlined above. Additionally, the listing standards of the TSX Venture Exchange, to which we have made an application as discussed below, require that we demonstrate that we have adequate working capital and financial resources available to carry out our stated work program or execute our business plan for the 12-month period following listing, plus $100,000 in unallocated funds.  This requirement will necessitate that we raise capital in the range $5 to $7 million prior to the listing.

Toronto Venture Exchange Listing

As previously indicated, we submitted initial materials in connection with an application to list our common stock on the Toronto Venture Exchange during March 2011. The application is subject to Exchange review and listing will be subject to the company fulfilling all of the listing requirements of the Exchange.  We view the potential listing as part of a strategic plan of action that would allow us to increase our shareholder base, increase market liquidity, and provide access to analyst coverage and new sources of financing.

Andres Gutierrez, President and CEO of La Cortez, commented on the quarterly results. "We are quite pleased at having increased our production base as well as having generated revenues from our operations in the Putumayo Area. Our plans are to continue growing our production and revenues during the balance of 2011, with our initial focus on increasing production at the Mirto field and achieving first production from workover activity at the Puerto Barco field during the 4th quarter 2011. We view the company's potential listing on the Toronto Venture Exchange as part of a strategic plan of action that would allow us to increase our shareholder base, increase market liquidity, and provide access to analyst coverage and new sources of financing."

About La Cortez Energy, Inc.

La Cortez Energy, Inc. is an early stage oil and gas exploration and production company currently pursuing a business strategy in the energy sector in South America, with an initial focus on identifying oil and gas exploration and production opportunities in Colombia. To that end, the Company has established a branch, La Cortez Energy Colombia, Inc., with offices in Bogota, Colombia, and has signed a Joint Operating Agreement for a 50% working interest in the Putumayo 4 block and a Joint Venture agreement for a 20% working interest in the Maranta block and has acquired the interests of Avante Colombia in the Rio de Oro and the Puerto Barco fields, all in Colombia.

Forward-Looking Statements:

Certain statements in this news release are forward-looking. These statements are subject to risks and uncertainties. Words such as "expects," "intends," "plans," "may," "could," "should," "anticipates," "likely," "believes" and words of similar import also identify forward-looking statements. Forward-looking statements are based on current facts and analyses and other information that are based on forecasts of future results, estimates of amounts not yet determined and assumptions of management. There can be no assurance that the Putumayo 4, Maranta and Rio de Oro and Puerto Barco projects will be successfully developed. Actual results may differ materially from those currently anticipated due to a number of factors beyond the reasonable control of the Company, including, but not limited to, the Company's ability to identify corporate acquisition and/or joint venture opportunities in the energy sector in Colombia, Peru and Brazil and, more generally, in Latin America, and to establish the technical and managerial infrastructure, and to raise the required capital, to take advantage of, and successfully participate in such opportunities, future economic conditions, political stability and energy prices. Additional information on risks and other factors that may affect the business and financial results of the Company can be found in filings of the Company with the U.S. Securities and Exchange Commission.

SOURCE La Cortez Energy, Inc.