TIDMPPC
RNS Number : 0942B
President Energy PLC
08 June 2021
8 June 2021
PRESIDENT ENERGY PLC
("President" or the "Company")
Paraguay farm-out signed
Drilling projected to commence in H1 2022
President Energy (AIM: PPC), the energy company with a diverse
portfolio of production and exploration assets focused primarily in
South America, announces the signing of the agreement for the
farm-out of its Pirity Concession, Paraguay ("Pirity").
Highlights
-- Agreement signed with a substantial Northern Hemisphere
state-owned energy company ("the Farminee"), to farm in for a 50%
participating interest in the Pirity Concession, Paraguay
-- In return, the Farminee will pay 60% of the costs of an
exploration well currently scheduled to commence during H1 2022 and
will also pay President US$4m in consideration of the Company
agreeing to enter into its performance obligations under the
Agreement
-- Agreement subject only to regulatory approval and
prolongation of the licence for a defined period
-- The exploration well will target the Delray complex of
prospects, estimated by the Company to contain in aggregate over
260 MMbo of Pmean Unrisked Resources
-- Costs of the well are estimated at between US$10-15 million
with an estimated chance of success of 30%
-- President will continue as the operator of Pirity
Background to the Farminee
The Farminee is a substantial state-owned energy and
petrochemicals company from the Northern Hemisphere whose identity
shall remain confidential until the farm-in is completed. For the
purpose of the farm-in to Pirity, the Farminee has formed a special
purpose vehicle.
Background to the Pirity Concession
The Pirity Concession, in which President holds 100% and
operates, is an exploration block in the Chaco area of
Paraguay.
President acquired its initial interest in Pirity in 2012 and
conducted an extensive exploration campaign in 2013/14 that
commenced with the acquisition of over 1,000 km of 2D seismic and
850 square km of 3D seismic and culminated in the drilling of two
exploration wells. Whilst the exploration wells identified a
petroleum system in the north of the block with significant shows
of hydrocarbons whilst drilling, no commercial production was
achieved.
It subsequently became clear from these results and further
detailed analysis of data that the most prospective exploration
area in Paraguay was the Delray complex of prospects containing
what the Company estimates are over 260 MMbo of Pmean Unrisked
Resources in place.
It is this complex that bears the nearest similarity to the
prolific long life Palmar Largo field complex 100 km across the
border in Argentina. It has been determined that, of the usual
exploration factors to be taken into account, there is good
reservoir rock present in Delray capable of prolific production if
charged and an excellent four way closure with seal, with the main
exploration risk being migration from the hydrocarbon source.
President estimates a 30% chance of success for the exploration
well.
Since the previous exploration campaign, President has
identified at least one proven analogue to demonstrate that
hydrocarbons have migrated some distance from the source rock being
the same source which successfully charged the reservoir in Palmar
Largo.
A geological presentation relating to the Delray complex is now
available on the Company's web site www.presidentenergyplc.com
The Farm-in terms and conditions
The agreement entered into between President and the Farminee
contains the following key terms:
1. The Farminee will farm in for 50% of Pirity
2. In consideration therefore the Farminee will bear 60% of the
costs of the first well up to US$15.5 million and thereafter (if
applicable) each of the Company and the Farminee will bear 50% of
the costs both of that well and any future costs relating to other
work which may be agreed to be undertaken
3. The Farminee will also pay President on completion of the
agreement the sum of US$4m in consideration of the Company agreeing
to enter into its performance obligations under the Agreement
4. The Agreement is conditional on approval by the relevant
Paraguayan regulatory authorities to the transfer of interests to
the Farminee and prolongation of the licence term for a defined
period of time taking into account inter alia the pandemic and the
concomitant restrictions
5. Whilst there is a 6-month long stop date by which the said
conditions have to be fulfilled, the Company is nevertheless
confident that these conditions will be satisfied within the time
allocated
6. The parties have agreed a form of Joint Operating Agreement
to take effect on completion under which inter alia President will
continue to be the operator of Pirity
Commentary on farm-in by the Farminee
The agreements signed today are the culmination of 20 months of
negotiations which continued right through the pandemic. In the
context of the prevailing circumstances and facts, they are
considered by President to be fair and proportionate, managing
risks whilst bringing in a substantial respected international
partner from a country with established diplomatic relations with
Paraguay.
The first well location has been agreed by the parties which
will allow the necessary preparatory work to commence as soon as
possible after completion. Taking into account the pandemic, the
raft of preliminary work that needs to be performed, weather
factors as well as issues arising from the pandemic, it is
currently projected that drilling will commence in Delray during H1
2022. Further details on timing will be announced as and when it is
available.
The total costs of the first well with a target depth of
approximately 3,750 metres are currently estimated by President to
be between US$10-15 million. President's share of the well will be
funded out of its own resources where applicable, with, for the
avoidance of doubt, no equity issuance contemplated in this regard.
In the event of success, President has no doubt that there will be
many funding solutions for project development.
Next steps
President and the Farminee will now pursue the necessary
applications to satisfy the above conditions. It is considered that
this may take time taking into account once again the prevailing
pandemic conditions in Paraguay.
Upon satisfaction of the conditions, the agreements will be
completed. Thereafter the parties will work together as envisaged
under the agreements.
The Company will keep the market informed as to all material
developments and again urges patience during this time.
Peter Levine, Chairman, commented:
"I am very pleased that President is entering into a partnership
with this substantial state-owned energy company whose name will
remain confidential until the conditions attaching to the farm-out
agreement are completed.
"Having in the course of negotiations visited the Farminee in
its home country, I have been impressed by the professionalism of
its workforce, the country and its people. I am sure that the
Farminee will be an excellent and supportive partner as together we
embark with enthusiasm and the appropriate level of optimism on an
unfinished journey President started but never completed in the
quest to create history and be the first to find oil in
Paraguay.
"President itself is a transformed company since our previous
Paraguayan drilling campaign. With lessons learnt, we have
mobilised our significant in depth management, operational and
technical expertise, leveraging on our extensive production and
exploration assets in neighbouring Argentina combined with our
financial strength to maximise the potential of success for the
upcoming drilling in 2022.
"With the recent robust oil prices and demand increases, the
timing is perfect especially when taking into account in a success
case the end market opportunities provided in a country that
currently imports all its oil in refined form by barge all the way
from the River Plate. We have in this regard a significant joker in
our pack of cards through the possibilities which will be no doubt
available through our second largest shareholder Trafigura, one of
the World's leading commodity traders whose associated company in
Paraguay, Puma, is an important importer of fuel into the Country
and has there an extensive and significant network of retail
filling stations.
"Finally, I would like to extend my thanks to the Farminee for
their friendship and hard work to get us to this point. In
particular, I would also like to extend my personal gratitude to
the President, Government and regulatory authorities of Paraguay
for their help and understanding in our work. It is a country and
people I hold dear to my heart. Together with the Farminee we will
do what we can within our powers to make this well as successful as
possible.
Glossary
Bopd means barrels of oil per day
Boepd means barrels of oil and gas equivalent
MMBtu means million standard cubic feet of gas
MMbo means million barrels of oil
Mmsft/d means Million standard cubic feet of gas per day
M(3) /d means million of cubic metres of gas per day
Pmean means the arithmetic mean of all the volumetric outcomes,
for oil in place
Contact:
President Energy PLC +44 (0) 207 016 7950
Nikita Levine, Investor Relations
info@presidentpc.com
finnCap (Nominated Advisor and broker)
Christopher Raggett, Tim Harper +44 (0) 207 220 0500
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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