TIDMPPC
RNS Number : 2404A
President Energy PLC
20 January 2020
20 January 2020
PRESIDENT ENERGY PLC
("President" or the "Company")
Subscription for new Ordinary Shares by Trafigura
Conversion of debt into equity
Immediate reduction of Group debt by US$5.95 million and
potentially up to US$14.8 million
Trading update
TRANSACTION HIGHLIGHTS:
-- The international commodity trader Trafigura has agreed to
take a significant stake in President pursuant to a subscription to
raise up to US$10 million, comprising an initial subscription of
US$4 million for 75,997,775 new ordinary shares in President
("Ordinary Shares") at a price of 4.04 pence per share (the
"Initial Subscription Shares") and, at Trafigura's option,
potential further subscriptions of up to US$6 million through the
issue of further new Ordinary Shares at a price of 4.65 pence per
Ordinary Share. All subscription monies will be applied in paying
down the advances made by the Trafigura group to the Company and
its subsidiaries (the "Group") referred to in President's
announcement of 25 July 2019.
-- IYA Global Limited ("IYA"), a company beneficially owned by
Peter Levine, has agreed to convert up to US$4.825 million of debt
outstanding under the existing unsecured loan facility between IYA
Global Limited and President dated 2 January 2018 (as amended) into
new Ordinary Shares in President. IYA has agreed to initially
convert US$ 1.95 million of such debt at the price of 4.04 pence
per Ordinary share. It is also proposed that the existing loan
facility be amended so that up to a further US$2.875 million being
part of the outstanding loan becomes convertible at the discretion
of IYA at a price of 4.65 pence per Share, being on the same
commercial terms as the Trafigura subscription to be converted at
same times and in proportionate amounts to the further
subscriptions by Trafigura.
-- The net effect of the initial subscription and the initial
conversion will be to reduce net debt of the Group by US$5.95
million with the potential to reduce net debt by US$14.8 million in
aggregate with the resultant benefits to the balance sheet, cash
flow and profits.
-- After the initial subscription and the initial conversion,
Trafigura will hold 6.09% of the entire enlarged issued share
capital of the Company and Peter Levine (through his investment
vehicles) will hold 29.99%.
-- The Group is now projected to be free of all financial
third-party debt (other than IYA) by end H1 2021.
-- The Board of Directors of the Company ("Board") is proposing
to obtain necessary shareholder approval, where required, to
implement the above at a general meeting to be held on 6 February
2020. A circular will be published shortly, setting out the details
of the proposals and a notice of general meeting, and will be
posted to shareholders.
Peter Levine, Chairman, commented:
"We welcome Trafigura as a significant stakeholder in
President.
Trafigura, already an important off-taker of the Group, is an
international trading and logistics company with extensive
interests in the energy sector and whose reported turnover in 2019
was some US$171.5 billion.
The practical effect of both the subscriptions and conversions
announced today will immediately reduce debt by a minimum of nearly
US$6 million and potentially nearly US$15 million which will
benefit both the balance sheet and profit and loss account. The
Group on present projections will be free of all of its existing
third party financial debt within the next 18 months.
Despite the significant vagaries of 2019 layered on top of the
normal day to day challenges, the Group made sound progress last
year. Each and every month the Group delivered operational profits
(after taking account of all G&A but before depreciation) with
operational free cash flow and positive adjusted EBITDA. Further
selective unaudited information of the performance last year will
be given at or around the end of this month.
With reduced debt and concomitant lower servicing requirements
combined with a substantial and supportive international industry
partner as a significant shareholder alongside myself and other
shareholders, we are well placed to deliver on our strategy to
generate growth not only organically but also through being able to
take advantage of appropriate opportunities in various
jurisdictions as they arise in the future."
Martin Urdapilleta, General Manager, Argentina, of Trafigura
commented:
"Trafigura is very pleased to become a significant and we hope
long term committed shareholder in President, a company with a
proven and strong management team, a defined strategy and in our
view great potential.
Aligned with President on both a commercial and now shareholder
level, we look forward to working with President and assisting in
their future growth plans."
Contact:
President Energy PLC
Peter Levine, Chairman
Rob Shepherd, Group FD +44 (0) 207 016 7950
finnCap (Nominated Adviser)
Christopher Raggett, Scott Mathieson +44 (0) 207 220 0500
Whitman Howard (Broker)
Hugh Rich, Grant Barker +44 (0) 207 659 1234
Tavistock (Financial PR)
Nick Elwes, Simon Hudson +44 (0) 207 920 3150
Introduction
President Energy (AIM: PPC), the upstream oil and gas company
with a diverse portfolio of production and exploration assets
focused primarily in Argentina, announces the taking of a
significant stake in the Company by Trafigura and the conversion of
debt by IYA into equity which will together result initially in a
further reduction of Group balance sheet debt of nearly US$6
million with the potential to reduce net debt by US$14.8 million in
aggregate.
Trafigura
Trafigura, the international commodity trader has agreed to
become a significant shareholder in President by way of a
subscription for new Ordinary Shares in President, pursuant to the
terms of a subscription agreement dated 20 January 2020 (the
"Subscription Agreement") (the "Subscription"). The Subscription
comprises:
i. an initial subscription by Trafigura for 75,997,775 new
Ordinary Shares (the "Initial Subscription Shares") at a price of
4.04 pence per share (the "Initial Share Subscription Price"),
being the volume weighted average middle market for the 5 days
prior to the date of the Subscription Agreement (the "Initial
Subscription"); and
ii. potential further subscriptions by Trafigura for additional
new Ordinary Shares (the "Additional Subscription Shares") at a
price of 4.65 pence per share, being a 15% premium to the Initial
Share Subscription Price, up to an aggregate subscription amount of
US$6 million (the "Additional Subscriptions").
Application has been made to London Stock Exchange plc (the
"London Stock Exchange") for the Initial Subscription Shares to be
admitted to trading on AIM and admission of those shares is
expected to become effective on 23 January 2020. Following
admission of the Initial Subscription Shares, the issued share
capital of the Company will be 1,211,280,665 Ordinary Shares and
this figure may be used by shareholders as a denominator for the
calculations by which they will determine if they are required to
notify their interest in, or change to their interest, the Company,
under the Disclosure Guidance and Transparency Rules published by
the UK Financial Conduct Authority.
The right for Trafigura to subscribe for the Additional
Subscription Shares, which may take place at Trafigura's option at
any time up until 30 September 2020, is conditional on the passing
of the Resolutions to be proposed at the General Meeting (both as
defined below).
All money invested by Trafigura in the President pursuant to the
Subscription will be advanced to President Petroleum S.A., the
Company's wholly owned subsidiary ("PPSA") and PPSA shall apply
such money solely for the purpose of satisfying its liabilities to
Trafigura under the existing prepayment and off-take
arrangements.
The net effect of the Initial Subscription and the initial Loan
Conversion (as described below) will be to immediately reduce net
debt of the Company by US$5.8 million which benefits the balance
sheet and cash flow/profits. Any monies comprising the Additional
Subscription will likewise be applied in reducing the net debt of
the Company.
In addition to the terms of the Initial Subscription and the
Additional Subscriptions, the Subscription Agreement contains the
right for Trafigura to appoint an observer or director to the board
of President if its interest in the Ordinary Shares exceeds 3% or
10% respectively of the entire issued equity at the relevant time.
Trafigura has also agreed to a six month lock-in in relation to the
Initial Subscription Shares and a further three month lock-in over
any Additional Subscription Shares.
The Subscription Agreement also provides Trafigura with
anti-dilution protection for such a time as Trafigura (together
with its associates) holds an interest in the ordinary shares
representing at least 3% of the entire issued share capital of the
Company at the relevant time.
President views the above provisions as positive, demonstrating
Trafigura's interest in maintaining a significant position with
regard to the Company and its commitment in working together with
President on a long term basis.
In addition, President and Trafigura have entered into a
strategic terms agreement with a view to future cooperation.
IYA
In parallel with the entry into the above arrangements, IYA
Global Limited (a company beneficially owned by Peter Levine, the
Chairman and largest shareholder) ("IYA") and the Company have
conditionally agreed to revised arrangements with regard to certain
monies owed to IYA by the Company, as follows;
i. the Company has agreed to convert US$1.95 million of debt
outstanding under the existing unsecured loan facility entered into
between the Company and IYA dated 2 January 2018 (as amended) (the
"Existing Loan Facility") into 37,048,915 new Ordinary Shares (the
"Initial Loan Conversion Shares") at a price of 4.04 pence per
share (the "Loan Conversion") being the same price as the initial
Subscription Price; and
ii. the Company has further agreed that the Existing Loan
Facility be amended (to become the "Amended Loan Facility") so that
a further amount of US$2.875 million being part of the amount
outstanding under the Amended Loan Facility could be converted into
new Ordinary Shares at a price of 4.65 pence per share (the
"Further Loan Conversion") being the same price as the Additional
Subscription Price.
The Loan Conversion Shares will be issued to PLLG Investments
Limited ("PLLG"). Following admission of the initial Loan
Conversion Shares becoming effective in accordance with Rule 6 of
the AIM Rules, PLLG will own 374,453,462 ordinary shares in the
Company, representing 29.99% of the Company's enlarged issued share
capital. It is intended that the Further Loan Conversion will be
utilised by PLLG to maintain its holding at that level going
forwards.
The Loan Conversion and the amendment of the Existing Loan
Facility so as to become the Amended Loan Facility are conditional
on the passing of the Resolutions to be proposed at the General
Meeting. Application has been made to the London Stock Exchange for
the Loan Conversion Shares to be admitted to trading on AIM. It is
expected that, subject to the passing of the Resolutions at the
General Meeting, admission of the Loan Conversion Shares will take
place on 7 February 2020.
Related Party Transactions
The amendment of the Existing Loan Facility and issue of the
Loan Conversion Shares to PLLG as well as the Further Loan
Conversion arrangements are classified as related party
transactions for the purposes of Rule 13 of the AIM Rules.
Accordingly, the directors of the Company, excluding Peter Levine
(who is not considered to be independent), consider, having also
consulted with finnCap Limited in its capacity as the Company's
nominated adviser, that the amendment of the Existing Loan Facility
and the terms of IYA's and PLLG's participation in the Loan
Conversion and the Further Loan Conversion are fair and reasonable
insofar as the shareholders are concerned.
Circular and General Meeting
The board is proposing resolutions to obtain the necessary
shareholder approval related to the above (the "Resolutions") at a
general meeting to be held at 11.00 a.m. on 6 February 2020 (the
"General Meeting").
A circular will shortly be posted to shareholders (the
"Circular") setting out the reasons for the proposals referred to
in this announcement. The notice convening the General Meeting will
also be set out in the Circular. The Circular will be available for
download on the Company's website at
www.presidentenergyplc.com.
Current Trading and Prospects
President's hydrocarbon interests are extensive and multi
layered covering three countries. The common thread running through
them all is that President operates all its fields, facilities and
pipelines with its own in-country management teams. Producing oil
and gas in both Argentina and the USA, the Company also has
extensive and potentially significant exploration assets in
Argentina and Paraguay.
In the last two and a half years, President has invested over
US$57 million in the Rio Negro Province, Argentina alone in
acquisition and capital costs and expenditure with a further
approximately US$5 million currently being spent there on the new
pipeline and infrastructure which President is building. The result
has been the gaining of a significant critical mass of assets in
Rio Negro.
With the adverse effects of both the Argentinian Decree 566 and
the lengthy stoppages in Louisiana step by step receding in the
rear-view mirror, President is getting back to business.
In Argentina the newly acquired Angostura block is being
integrated into the Group with new larger, more cost effective and
efficient compressors being installed. In relation to capital
expenditure, as well as infrastructure in the fields, the building
of the new 16km gas pipeline is on track to be completed and
commissioned by the end of February with completion of the welding
and burying of the pipe expected by the end of this week. From the
date of full commissioning, gas production will materially escalate
as shut in wells will be brought on-stream, timed to benefit from
the usual winter increase in prices which normally starts in May
which historically can mean a 100% uplift from the relatively low
summer prices currently being paid.
The Company is now planning to re-commence drilling new vertical
wells in the latter part of H1 2020 with an initial three well
programme slated for Rio Negro Province. The Company has agreed
terms in principle with the preferred drilling contractor. Further
details of the wells will be announced in due course.
Later in the year, the Company is planning to drill further
wells both in the Rio Negro Province and the Puesto Guardian
Concession, Salta Province, Argentina.
In Louisiana, daily production is back to levels not seen since
before the flooding in the spring of 2019. The review of the
reprocessed seismic data at Jefferson Island (operator with 20%)
has taken longer than originally anticipated. As a result, the
schedule for drilling there has been pushed back until the end Q1
2020. Two good prospects have been identified as targets.
In Paraguay, the farm out process continues. While this process
continues, further extensive sub-surface studies have lent
encouragement to and support for the exploration prospectivity of
the Pirity Block.
The Company maintains its previously stated projections for
average 2020 production of in excess of 4000 Boepd.
Finally, President expects to issue the results of an updated
independent reserves report in February 2020 on its Argentine
assets as at 31 December 2019. Notwithstanding depletion by
production during the year and that no new wells were drilled, the
report is expected to show stability in the level of proven and
probable reserves compared to the previous year which had net 2P
reserves in Argentina of approximately 25 MMboe. It is expected
that there will be a material increase in 3P possible reserves due
to the significant amount of field and sub-surface work undertaken
there in 2019.
As stated above, at or around the end of this month the Company
expects to issue further unaudited information relating to the
trading and financial performance of the Group last year.
Glossary
"Boepd" barrels of oil equivalent per day
"MMBoe" million of barrels of oil equivalent
Notes to Editors
About President
President Energy is an oil and gas company listed on the AIM
market of the London Stock Exchange (PPC.L) primarily focused in
Argentina, with a diverse portfolio of operated onshore producing
and exploration assets.
The Company has operated interests in Puesto Flores, Estancia
Vieja, Puesto Prado, Angostura and Las Bases, Rio Negro Province
and in the Puesto Guardian Concession, in the Noroeste Basin in NW
Argentina. Alongside this, President Energy has cash generative
production assets in Louisiana, USA and further significant
exploration and development opportunities through its acreage in
Paraguay and Argentina.
The Group is also actively pursuing value accretive acquisitions
of high-quality production and development assets in Argentina
capable of delivering positive cash flows and shareholder returns.
With a strong institutional base of support, including the IFC,
part of the World Bank Group, an in-country management team as well
as a Board whose interests are aligned to those of its
shareholders, President Energy gives UK investors rare access to
the Argentinian growth story combined with world class standards of
corporate governance, environmental and social responsibility.
About Trafigura
Founded in 1993, Trafigura is one of the largest physical
commodities trading groups in the world. Trafigura sources, stores,
transports and delivers a range of raw materials (including oil and
refined products and metals and minerals) to clients around the
world. The trading business is supported by industrial and
financial assets, including 49.3 percent owned global oil products
storage and distribution company Puma Energy; global terminals,
warehousing and logistics operator Impala Terminals; Trafigura's
Mining Group; and Galena Asset Management. The Company is owned by
over 700 of its 8,000 employees who work in 80 offices in 41
countries around the world. Trafigura has achieved substantial
growth over recent years, growing revenue from USD12 billion in
2003 to USD 171.5 billion in 2019. The Group has been connecting
its customers to the global economy for more than two decades,
growing prosperity by advancing trade. Visit:
https://www.trafigura.com
This announcement contains inside information for the purposes
of article 7 of Regulation 596/2014.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IOEBLMMTMTJBTBM
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