TIDMPPC
RNS Number : 4126J
President Energy PLC
22 December 2020
22 December 2020
PRESIDENT ENERGY PLC
("President" or the "Company")
Developments in Rio Negro, Argentina
Paraguay update
President Energy (AIM: PPC), the energy company with a diverse
portfolio of production and exploration assets focused primarily in
Argentina announces an update on developments in Rio Negro.
Highlights
-- New treatment plant to be built in Rio Negro with a projected
completion of August 2021
-- Will eliminate third party treatment costs with total savings
estimated at US$2.5 million per year
-- $5 million aggregate cost of project funded by favourable new
Peso based medium term loan provided by Banco Hipotecario
-- Of the US$3.7 million bank loan outstanding at the half year,
US$2.2 million has already been repaid
-- Paraguay farm out negotiations materially advanced
New treatment plant
Currently President's battery in its Puesto Flores/Estancia
Vieja Concession, Rio Negro, transports the Company's oil through
President's pipeline to a third party treatment plant which then
processes the oil to sales quality and dispatches it onwards via
pipeline to the main regional hub. In order to transport the oil
through the pipeline, some water has to be sent to the third party
which is ultimately disposed of following processing. President
pays the third party for that treatment, transportation of oil and
the disposal of residual water.
President has now sanctioned a project to eliminate such third
party costs by engineering a new plant with the capacity to treat
all the Company's oil to sales specification. The solution also
will provide President with the capacity to transport its oil
either through pipelines or by truck.
The plant has been designed by President's in-house engineering
team who will also supervise its construction.
The aggregate savings of opex including shrinkage, quality
discount and transport fees are estimated to be approximately
US$2.5 million per year with the total cost of the project
estimated to be US$5 million. The feasibility study has been
completed with work commencing in January and projected completion
of end August 2021.
Funding of plant
The project is being funded by a new US$5 million secured loan
from Banco Hipotecario. The Argentine pesos denominated loan is
repayable in 36 months with an initial 12 months payment holiday.
The interest rate in pesos is fixed at 30% with the projected rate
of peso depreciation in Argentina for 2021 currently estimated to
be in the range of 28-40%.
This type of loan has been propounded by the Argentine
Government to stimulate growth and investment. Taking into account
those projected depreciation rates and the fact that President is
paid in pesos at the dollar equivalent at the time of payment (not
invoice) for its oil and gas, it is considered that the loan is
likely, in the absence of unforeseen circumstances, to have an
effective zero or negative rate of interest.
As the Company has in H2 2020 repaid US$2.2 million of the
US$3.7 million bank debt reported at the half year ended 30 June
2020, the total current bank debt is now US$6.5 million which by
end June 2021 will have reduced by a further US$1.5 million leaving
US$5 million, being the amount required to fund the plant.
Paraguay update
Negotiations with a substantial and reputable National Oil
Company in relation to a farm out of the Pirity Concession,
Paraguay have materially advanced recently with the next step to
negotiate and agree legal documentation which follow the form of
the AIPN international precedent documentation for operating and
farm out agreements. Drafts of these agreements are already in
circulation.
President's principal focus has been on a contribution to well
costs and finding a partner with sympathetic aims and ambitions.
Inter alia under the terms of the deal under discussion, President
will remain operator and retain a 50% interest in the relevant
Concession.
As stated in previous announcements, although there can be no
guarantee of a successful conclusion of negotiations, with every
tick in the box the prospects of a positive outcome come ever
closer. With that caveat, there has been material progress recently
leading to the view that on current evidence there is a better than
a 50% chance of a mutually satisfactory conclusion to the
discussions. It is hoped to conclude matters before the end of Q1
2021 with a view to drilling an exploration well targeting a
location in the Delray complex within approximately 12 months.
By way of reminder the Delray complex is estimated by President
to have a mid case of 230 Million barrels of unrisked oil resources
in place. The complex is unrelated to the two structures targeted
in the previous exploration campaign and has as its analogue proven
producing oil fields on the same trend located over the border in
Argentina. A concise geological presentation on the Delray complex
has been published by President and can be found on the Company's
web site at www.presidentenergyplc.com.
Peter Levine, Chairman, commented
"The new plant will materially reduce opex and produce improved
cash flow and bottom line profits
"The benefits are enhanced by the funding terms which are
projected to have a zero or even negative interest rate thanks to
the Government's initiative for which President is appreciative.
President is likewise grateful to the Province of Rio Negro and its
partner EDHIPSA for their continued support and encouragement
"The funding underlines the debt capacity and good credit
standing of President and the project demonstrates the commitment
of the Company to constantly find ways to improve its margins and
profits
"As to Paraguay, in relation to the farm out, it is still very
much a matter of step by step with each step bringing one closer to
a positive outcome. In this regard although patience is required
and whilst there can be no guarantees, we are encouraged by the
progress to date and are cautiously optimistic as to a successful
conclusion."
Glossary:
Boepd barrels of oil equivalent (oil and gas) per day
MMscft/d million standard cubic feet of gas per day
Oil in place means the total oil content of a reservoir
Contact:
President Energy PLC
Rob Shepherd, Group FD +44 (0) 207 016 7950
Nikita Levine, Investor Relations info@presidentpc.com
finnCap (Nominated Advisor)
Christopher Raggett, Charlie Beeson +44 (0) 207 220 0500
Shore Capital (Corporate Broker)
Jerry Keen, Antonio Bossi +44 (0) 207 408 4090
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 contract, all of which are situated in the
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 capable of
delivering positive cash flows and shareholder returns. With a
strong strategic and institutional base of support, including the
international commodity trader and logistics company Trafigura, an
in-country management team as well as the Chairman whose interests
as the largest shareholder are aligned to those of its
shareholders, President Energy gives UK investors access to an
energy 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
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