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RNS Number : 6612B
President Energy PLC
03 February 2020
3 February 2020
PRESIDENT ENERGY PLC
("President", "the Company" or "the Group")
2019 full year Trading Update
A solid performance in the face of unforeseen challenges
A good start to 2020
President Energy (AIM: PPC), the upstream oil and gas company
with a diverse portfolio of production and exploration assets
focused primarily in Argentina, provides highlights from the
unaudited Group management report for the full year 2019, a
comparison with the previous year and a review of current
trading.
Financial Highlights
-- Turnover of approximately US$41m (2018 - US$47m) with average
price realisation in Argentina 19% less in 2019 than in 2018
-- Average production of 2,414 boepd is 6% up on the previous year (2018 - 2,279 boepd)
-- Free cash generation from operations before G&A of US$16m (2018 - US$21m)
-- Adjusted EBITDA* circa US$12m (2018 - US$17m)
-- Cash operating profit of approximately US$10m after all
administrative expenses and workovers, but before depreciation
(2018 - US$14m)
Commentary
The internal unaudited Group management accounts for the year
2019 reflect a solid and indeed commendable performance in the face
of unforeseen challenges throughout the year.
The year saw significant progress on the ground. First oil was
produced by the Group from the Estancia Vieja field with the field
facilities in Puesto Prado and the Gas plant in Las Bases
re-commissioned. First gas was transported from the Estancia Vieja
field to market throught the Company's pipelines. The Puesto
Flores/Estancia Vieja fields were unified in one enlarged
Concession and, at the end of 2019, the producing Angostura field
was purchased, which whilst coming too late in the year to have a
material impact in the results, is already contributing profitably
this year.
The challenges encountered included unplanned downtime in key
producing wells and electricity supply outages in Rio Negro,
Argentina, a three month shutdown of production in Louisiana and
the harsh effects of the temporary Decree 566 in Argentina which
reduced realised oil prices by almost 25% for a full three months
between September and December. Consequently, margins were
squeezed, which was mitigated only to a certain degree by the
Company's prudent cash management and good housekeeping.
The results in the year were further impacted by lower oil
prices which was reflected in average Group sales prices declining
to US$49.63, down nearly 17% from the previous year (2018 -
US$59.60) with Argentina itself down almost 19% to US$49.90 (2018 -
US$61.54).
As a result of the above factors, the Group prudently suspended
planned drilling activity in Argentina. Nevertheless, and
notwithstanding the operational issues previously identified, each
and every month the Group continued to deliver operating profits
after all operating expenditure and g&a but before depreciation
with average Group production actually increasing by 6% over the
previous year, albeit not as much as originally hoped at the start
of the year. Furthermore, independent audited reserves as at 31
December 2019 actually increased.
In light of the above, the performance in 2019 is creditable and
demonstrates the resilience of the Group in the face of the
confluence of unrelated negative factors which transpired as the
year progressed. Free cash flow generated on an operating basis and
adjusted EBITDA are notable positive key performance indicators
complemented by the efficiencies and cost savings that have been
made which will be reflected in improved cost metrics in the
present year. Further progress is also reflected in the recently
announced positive year end 2019 Argentine reserves audit.
Trading and Outlook
The current year has got off to a good and profitable start with
January showing a material improvement from H2 2019.
The international commodity trader and logistics company
Trafigura has consolidated its position as an active strategic
commercial partner by coming on-board as a significant equity
shareholder with Group debt commensurately reduced by some US$6m
and potentially up to US$15m. Compañia General De Combustibles S.A.
also continues to subscribe for new shares in the Company under the
agreement made in late 2019.
Temporary Decree 566 in Argentina lapsed in December and so,
with prices recovering from its effect, the Group is preparing to
drill three new wells in Rio Negro, with the first expected to be
spudded by the end of H1. Additionally, with Louisiana production
largely restored, we expect to drill in Jefferson Island, Louisiana
during H1. A further six wells are targeted to be drilled across
our assets later in the year of which two are expected to be
exploration. Each successful exploration well would lead to further
drilling and reserves enhancement. Further details of all wells to
be drilled wells will be released in due course.
In relation to the funding for such activity, whilst the Company
carefully manages its cash, it is successfully negotiating terms
with its service providers with the objective of facilitating the
capital expenditure currently envisaged this year within the free
operating cash flows being generated.
The construction of the new gas pipeline between Estancia Vieja
and Las Bases in Rio Negro has now been completed on time and
budget and should be commissioned by end of this month. Group
production will be supplemented by gas flowing through that
enlarged pipeline where we expect, by the end of February, gas
deliveries to market of some 1,000 boepd with a target of 1,500
boepd by the end of H1 being the start of the winter months. In
this regard, the recently acquired Angostura exploration block is
expected to make a good contribution of some 600 boepd by
mid-February.
The Company is cautiously optimistic that the macro environment
in Argentina has calmed and that we may well see beneficial
developments during the year .
The Company repeats its guidance for 2020 of average production
in excess of 4,000 boepd.
Peter Levine, Chairman commented:
"With all key performance indicators improving, significantly
lower debt levels, an expanded asset base and exploration upside
through our asset base, we look forward to a year of growth and
tangible improvement."
*Adjusted EBITDA is Earnings before interest, tax, depreciation,
amortisation and impairment and adjusted to exclude non-recurring
items
Contact:
President Energy PLC
Peter Levine, Chairman
Rob Shepherd, Group FD +44 (0) 207 016 7950
finnCap (Nominated Advisor)
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
Notes to Editors
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 the Puesto Flores,
Estancia Vieja, Puesto Prado and Las Bases Concessions and
Angostura exploration area, Rio Negro Province in the Neuquén Basin
of Argentina 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 Schroders,
Trafigura and 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
access to the Argentinian growth story combined with world class
standards of corporate governance, environmental and social
responsibility.
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.
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
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