President Energy plc share price, company news, analysis and interviews

President Energy plc (LON:PPC) Chief Executive Officer and Chairman Peter Levine caught up with DirectorsTalk for an exclusive interview to discuss their latest operation & production update, whether they’ll need to fundraise for drilling wells & more infrastructure, and an update on operations in Paraguay.

Q1: Peter, you made an announcement on the London Stock Exchange, can you just summarise what was said and what it means for President Energy?

A1: The announcement was to say that production had hit 4,000 boe from our various fields, that’s net group production and that means net to us after deducting the share of all minority interests that we have in certain of our fields.

The daily rate itself, which we announced, which is a commendable one and a commendable increase is a daily rate that we’ve achieved and in which we feel is a level that is unachievable on a normal basis, obviously daily rates fluctuate and one shouldn’t rely simply on a daily rate  but instead rely on the average over a period of time.

To achieve that milestone, as it were, is a significant step as far as the company is concerned. Now, what we’ve said in the announcement is that step has been achieved by materially increasing gas, the oil and gas is split roughly 50/50 in this instance, and oil is pretty steady and the gas has come up a fair amount.

Of course, whilst we get a certain amount of dollars per barrel, it’s wrong to say that that dollar per barrel for example, in terms of oil 42, is the same as a barrel of oil equivalent, the boe in this instance is gas. So, you can’t say for example, we’re doing 2,000 boe per day of gas that we’re actually getting 42 dollars a barrel, it’s doesn’t work like that and I would refer the listeners to our twitter account which explains the difference in monetary terms between a barrel of oil and a barrel of, effectively, gas equivalent.

The important thing that we’re drawing attention to is the capability of our fields and how far we’ve come in such a short period of time in terms of production of gas, whether it’s from the existing wells or from, indeed, just one of the new wells.

It’s worth pointing out that one of the two successful wells that we’ve drilled recently, over the last two months, is not included in that figure that we’ve announced and it’s not included because it’s not yet on, it should be on before the end of the year. Likewise, the most recent workover success that we’ve done, LB-1, Las Bases 1, is also not included as is also will only be on during the course of this current month, December.

So, it’s progress that can be made and, as I said in the commentary, it’s significant progress, 4,000 boe split 50/50 but what it does show is it underlines to the potential that we’ve got in our fields. In that announcement, we did flag the point that we’re now actively looking at potentially drilling shallow wells in our Rio Negro in Argentina as well as our Salta producing field which is a long term licence. We’ve neglected for a bit because we’ve been concentrating on Rio Negro where we are actively looking and discussing with our contractors in relation to how we can drill this field in the most economic way. There’s lots of reserves there and there’s lots of potential to get out of the ground.

All in all, it’s a progress report, significant in terms of the headline but more significant in terms of what actually it finds. It demonstrates the fact of the significant potential that we have organically in our fields and the upside and basically points to a year of 2021 where we’ve got lots of things to exercise our mind as well as exercise our hands.

Q2: You talked about drilling wells and more infrastructure, is there a placing on the horizon?

A2: No, absolutely not. Not a lot of people have said in the past and, factually it’s correct we’ve done a lot of placings and we have, I’m not going to deny that but likewise I’m also going to deny that we did placings for good reason. At that point in time, we weren’t that much bank-friendly first of all, and second of all we were doing this to acquire assets which we did and that is really important.

In the past, yes, we’ve done this but I can categorically state to your listeners that the infrastructure works that we’re doing and the drilling that we’re planning will not be funded out of any placing. There’s no need to do that because we’ve got debt capacity and now that we’ve got that to use in expansion mode then we’ll certainly consider using that as appropriate. I do not rule out using that debt capacity to fund that work programme as well as, of course, the positive cash flow that we’re generating ourselves.

Q3: I notice that you haven’t mentioned Paraguay in the update, is there any update on operations going on in that country?

A3: Yes, that’s very observant, I didn’t and the reason I didn’t is because I think it’s even better to underplay this and manage expectations. Having that said, I’ve got to say that the work going on behind the scenes in relation to this potential farm-out should not be underestimated, there is significant work going on behind the scenes in a number of areas relating to the farm-out discussions we’re having with one particular substantial party.

It’s proceeding and I also want to make the point to your listeners who may not be aware of the history of our company and Paraguay, that the value proposition of Paraguay remains the same as it was in 2012, 2013 and 2014. It’s just that we drilled two wells, they were commercially unsuccessful but we learned a lot, we saw the petroleum system and now we’re fishing in the pond that we should ‘ve fished in in Paraguay. It is exploration and therefore, I say to you that the value proposition is still there.

I also say to you that people who come on board President Energy shouldn’t be coming on board our company for that exploration, it is at the moment purely speculative. The situation may change if and when we do the farm-out but at this point in time, it’s on the back burner, it’s every bit as interesting and worthwhile in terms of value as it was a few years ago.

As I said, it’s probably most prudent at this moment in time to underplay it because we’ve got so much else to talk about in terms of real production, real test flow and real potential that we don’t want to be seen to be morphing into an exploration company. We’ve got as much exploration as many companies who are worth a multiple of what we have who have only got  exploration. Bearing in mind what’s happened in the past and the last few years, I think we’ve learned and we’ve learned our lesson, at the moment, underplay this particular asset that we have in Paraguay.

More about that in due course, in the not too distant future whether it’s going to be the end of this year or more likely in the first part of next year, I think these things will in due course come out.

President Energy plc (LON:PPC) Chairman and Chief Executive Officer Peter Levine caught up with DirectorsTalk for an exclusive interview to discuss their latest drilling update and what we can expect in terms of news flow in the coming weeks and months.

Q1: Now you’ve announced a testing success at Las Bases field in Argentina this morning. Peter, how does this impact on President Energy?

A1: Well, we need to look at the history first. We drilled and we announced very recently, in October, Las Bases 1001, it’s a new development gas well and we achieved a good result, we announced that on the 26th of October which achieved a good result, both from the electric logs and testing.

Now those logs showed several pay zones, one of which was a cretaceous formation called the Centenario which was a shallow interval i.e. less than 1000 meters. Now, in Las Bases 1001 because our logs showed we had several intervals, as is normal we tested from the bottom up. Now, we happen to have a very good result from the lowest interval and therefore we decided to produce from that zone and leave the testing and production of a higher intervals until later. What we then did with the logs from the recently drilled well of Las Bases 1001, we then read across and considered the logs of the well drilled by our predecessors Chevron, called Las Bases 1, which they drilled in 1999.

It identified the same scenario, but it was present but they never produced from that, they produced from a lowest zone, a deeper zone, they prolifically produced gas but then it watered out. So, they shut in the well and that’s where it lay for several years until we decided to take a chance card from the monopoly pack and re-enter the well and perforate it, which we’ve now done, and test that Centenario section which had been, up till the time we tested it, completely undrained.

The results of such test is the result we’ve just announced and whilst it’s perhaps a tighter formation, even allowing for this, we tested a good commercial flow of gas as indicated in recent announcement today. It will be put on production by the year end and so Las Bases 1 will once again, after many years, be back onto production, albeit from a different level.

Now, as we can’t see any water nearby, it will be certainly a candidate for artificial stimulation which we expect would further significantly enhance the flow rigs. However, this is a test of an old well, it’s an intervention, it’s a well which hasn’t been produced, I’s a workover.

What is the importance of this? Well, the importance of this test is the read across because at this interval is widely present in the Las Bases field, it’s shallow, can therefore can be drilled quickly, for example, in 7-10 days, economically will cost us less to drill and we have all our infrastructure to plug in the new found production. So, it will have a significant impact.

Furthermore, there are no reserves currently booked for this interval so most certainly we will see in this year’s results report, which is due out in February, with an effective date of 31 December, a positive addition of both proved and probable reserves.

So, what does this demonstrate? This demonstrates the running room and the potential in our existing fields and that’s very important. The two wells that we’ve drilled, both successful, one, an exploration well which is EVN -x which we’re putting into production in the next few days and the other one, Las Bases 1001 combined with this test has demonstrated the fact that we have ample scope here for low cost, good margin production, onshore from our existing fields.

Wrap that all in one package and you can see that the test result have slightly more importance than a normal test result for perforating an old shutting well, hence the announcement that we just made.

Q2: So, what’s next and what news can we expect coming out over the next few weeks and months?

A2: Well, I’ve alluded to the fact that we are starting to produce from the two wells that we just drilled which is Las Bases 1001 and EVN-x1, the latter being an oil well and the former being a gas. So, the next piece of news that we see will be to look at the initial production figures from those wells, we’ve got test production figures which we announced but not when we put these in line in production.

We anticipate being able to say something in the relatively near future and then we would be looking at announcing our plans for the forthcoming year a bit later on towards the end of this year.

So, in important terms, I think the next most important announcement will be showing the initial online production, taking into account the gas wells, taking into account the commissioning of the compressor, effectively bringing you on stream the Estancia Vieja well and the Las Bases well. Also, of course, the increase in oil, we hope, from EVN-x1 well, which as I said is, as we speak now being put into production.

In a nutshell, that’s where President Energy is at.

President Energy plc (LON:PPC) Chairman and Chief Executive Officer Peter Levine caught up with DirectorsTalk for an exclusive interview to discuss their latest drilling update, what this means for the company, the next steps and what investors should be looking out for in the coming months.

Q1: Now I understand that you’ve made an important announcement this morning, can you just talk us through the highlights?

A1: It’s a very pleasing announcement for President Energy, actually, because what we’re announcing is the results of our testing of the exploration well which we successfully drilled in the last month and beginning of this month.

In Q4 drilling campaign, we’ve drilled two wells, one was a successful gas well which will be on stream at the end of this month but that was a development well. What I mean by that, as a development well is it was always a structure which has produced so all you’re doing is you’re developing further the hydrocarbons in that known producing structure.

However, what we’ve announced today on Estancia Vieja North exploration 1 well is completely different because this well was an exploration well, an exploration has substantially greater risks than a development well and it’d all down to delivery of the drilling and, of course, your subsurface team and not an insubstantial amount of luck and anybody who says that need luck in exploration, doesn’t understand exploration.

So, the bottom line here is that we have tested the well, we’ve already announced previously that we’ve logged two hydrocarbon intervals tools, one principally of oil and one with gas, the oil being the lower as is normal as your test from the bottom up.

We tested the oil and this was on a structure which has never been drilled before, never been identified as a structure, is near our existing Estancia Vieja field but it’s north of that, on the other side, and it never been touched.

What we’ve done is we’ve drilled it, as we’ve said before, and now we’ve tested it and oil has come to surface, actually free floating oil has come to surface. That means we’ve not stimulated it by swabbing, we’ve not stimulated by a pump, it’s just come up because of the pressure. It’s good quality oil, it’s 36 API, it’s light oil, and we’re very pleased with the results because obviously it’s a first and our medium pre-bill estimates, we’re looking at initial production over 200. Just how over 200, it will be wrong to say at this stage, we would prefer to err on the side of caution, simply because there’s no analogues, it’s alright testing at over 36 hours but in terms of longer term production, you want to see what’s going to happen to the reservoir, especially where there’s going to be water coming through and such like.

So, the good part of this is that we can call it a discovery, it’s an exploration well, if you’ve identified oil, you’ve found oil where no one has found old before. It’s very good, it adds to our ability to produce overall, but not only that, it opens up the possibility of other wells on the structure which we are taking, again, a very careful view on. We’re looking at how the production profile goes over the next two or three months and then we’ve got a more educated and mature view of just the capability of this structure and down to this structure, we’ll be able to have at least one more oil well.

Now, it’s also important to note that we haven’t touched the gas interval which has been identified by the logs. Now, we’re pretty confident that that will produce but as we have, first of all, tested and produced from the lower oil section, there’s no point going up north as the gas will produce from the oil and, as and when it’s appropriate, for example, when the oil comes down to nothing or not material amounts, then we’ll look at going up the scale and up the hole and then we’ll perforate and we’ll test.

We feel pretty confident we’ll produce the gas as well when that should be producing likewise, at a pretty significant rate because we can see from analogues, the productivity of gas here. That’s a bit more consistent than certainly the oil which, again I say, was something that we projected but it’s very nice to find.

So, all in all, a success, and it’s a not insignificant success, it is very nice to find oil where other people, and there have been other people investigating these blocks in the past, our predecessors have not produced any oil from.

Q2: So, what does this mean for the company then?

A2: Well, it opens up a new structure for us which is interesting because we’re always hungry to increase our organic assets and this is an organic asset and it demonstrates that we’ve got running room in our existing assets.

So, we’re going to wait and see, it will, of course, immediately mean that lift in our production, just how much, again we can’t say.

By the way, I did forget to mention for which I apologise, but at the same time it’s producing oil from the section, it also produced associated gas so this is not a gas section but the gas comes with the oil and the gas itself is not also insubstantial either. We’re going to monetise that gas so we’re going to be selling that gas in due course, and because it’s relatively near Estancia Vieja main infrastructure to be able to put it on production, it’s going to be very quick, and it’s all going to be in the next 14 days.

So, it means immediate production,  in the medium term it gives us prospectivity for that structure as a whole, and it gives us a bit of an enthusiasm in our step in terms of where we go. It’s very nice to do and especially because we brought this well on time and on budget.

Q3: What are the next steps? I know you said they’re going to bring it on in 14 days, what next?

A3: As well as this one in 14 days, we’ve got the well that we just drilled previously, the first well which is Las Bases 1001 and that comes on stream at the end of the month and that’s, in terms of barrels of oil equivalent, it’s a gas well, about 600 barrels of oil equivalent. So, you can see it’s all adding up, we’re all putting points on the board, as it were here.

We’re going to be doing another workover of another gas well in Las Bases, we’ll see how that goes, speculative but with what the success in Las Bases 1001 has done is it has suggested that we have got more running room in Las Bases. So, if this works, the next workover, we’ve got at least another workover and at least another well to drill in Las Bases.  

So again, it’s a bit of a domino effect really about the things that we can do.

So, what next? Well, we’re nearly at the end of the year so we’ve got that work to do, those wells to be putting on, that production to increase both gas and oil. Therefore, that gives us a bit more spring in our step in terms of the exit year production but we’re not really interested in exit year production, we’re more interested in average year going forward in 2021.

In 2021, what this does is gives us the belief, the strength, and the conviction to be drilling as we said in our presentation, which I invite your listeners to look at on our website, the latest presentation, where we talk about next wells.

We’ve got three in Rio Negro in Argentina to drill which are on the blocks, we’ve got two in Salta and we like the look of Salta, we’ve been re-costing it, the price we want has come down and we still got that one in Paraguay.

So, there’s lots of running room and these are all organic, ignoring anything else that we may be acquiring in due course and as you listeners may know, and those who’ve read the presentation, we do have running room in terms of financial flexibility. We’ve got minimal debt and we would certainly not rule out there being the right acquisitions in due course but it’s got to be the right acquisitions, particularly bearing in mind that we’ve got all this running room organically.

Q4: Finally, what else can investors expect over the coming months from President Energy? Is there anything that they should be looking out for in terms of other news flow?

A4: Yes, we anticipate talking about the putting online of production of this well and seeing how it’s going, this is all before the end of the year, the putting online of the gas wells, the final installation of the compressors and the facilities and the commencement of infrastructure planning on a not insignificant project to reduce our opex which we’ll talk about in due course.

I don’t anticipate any news before the end of the year in the advanced discussions that we’re having on Paraguay, on the exploration, I might be surprised but I want to manage expectations. Fingers crossed, it’s not done until the fat lady sings. So far so good on those discussions but absolutely no guarantee, people shouldn’t invest on the basis of that, certainly I wouldn’t recommend it. Having said that, from an internal point of view, we’ve been working hard at it.

So that is where we’re coming from, we’re going to be announcing production wells and well plans, probably the end of January or thereabouts, we’ll be talking about the actual concrete plans for drilling in 2021 but certainly, there will be drilling in 2021.

What we’ve got to look forward to now, between now and the end of the year, is announcements on the fruits of our labour this year in rising to the challenges of COVID and protections for our people and expanding our offering in terms of production.

President Energy plc (LON:PPC) Chairman and Chief Executive Officer Peter Levine caught up with DirectorsTalk for an exclusive interview to discuss what the company does, the greatest challenges & opportunities for their business and the reasons for the change in share price over the last two years.

Q1: Peter, this is the first time that we’ve spoke on Director’s talk, can you give us a little background on what President Energy does?

A1: The company is an international oil and gas company, we produce in Argentina and America with exploration in Argentina and Paraguay. We’ve got a significant independent audited preserves, 16 million barrels of proven reserves, 26 million of proved and probable reserves and there is a 500 million of exploration resources.

We actually are successful in replacing our reserves and we’ve replaced our reserves by 167% since the end of 2017. Our average production estimation, we estimate for 2020 for the year is 2,850 to 3000 of barrels of oil equivalent, that’s oil and gas, and in 2021, we’re estimating projecting between 3000 to 4,000 barrels of oil equivalent. That’s not a forecast, these are simply management guidance and estimates.

We have material upside in our assets, which we own, we own all our assets, all our fields, all are onshore and all are conventional. We own our pipelines and infrastructure to get into the market, over 120 kilometres of pipeline we own and operate, of which a good part of it we’ve built ourselves.

All our fields are profitable, we have significant strategic investment, besides myself, I own 29.95%, just shy of 30%, and we have Trafigura. Trafigura is one of the leading international commodity traders and logistics companies in the world with $117 billion dollars of turnover, they own 16% of us, they’re our strategic partner and, of course, with their assistance, we are able to secure the end market for our products, something very crucial.

We are manically focused on driving down costs, we’re a low cost producer, we focus on cashflow, margins and decreasing G&A, we don’t have any kind of Head Office in the UK, we work above the shop wherever we are producing. We have a balanced business of gas and oil and we’ve got real class ESG – Environmental, Social, and Governance – management.

Our core production is in Argentina and I invite your audience, if they’re interested to learn more about us, to go onto our website and/or as well go on to our Twitter account.

Now let’s come up front with Argentina. Most people have heard major macro issues, yes, there’s an economic downturn, yes, coronavirus has hit them very hard, ironically, they’re coming out of it now, summer cases are decreasing and people are out on the streets.

From a strategic point of view, our industry is vital to Argentina. First of all, our production is taken up by domestic demand, the government support our industry, it protects our industry against imports, it gives price support, we’re a dollar-based business and we don’t have any material foreign exchange exposure. We get paid by our customers at the exchange rate at the time that our money is paid, not the invoice date, the time our customers pay us, that’s the exchange rate. Obviously, we are very good at treasury management, as  you can see from the recent interim accounts.

In the hydrocarbon-rich basement of Neuquen, which is our main area in Argentina, we’ve got five fields, we’ve got pipeline infrastructure, we’ve got facilities, mostly which are computerised. In the last two months, we’ve drilled in times of crisis and safely, we’ve drilled two successful wells, one a production well which is going on stream shortly and another one, which is a discovery world and we’ve made a very promising identification of oil and gas in that well, which we’ll be testing in the next few weeks.

In the North, we operate in Salta, that’s near The Andes, where we’ve got a large field which we need, next year, to be drilling and we also operate a production facility in Louisiana, in America.

As I said, each one of our fields, independently, is profitable.

Finally, in terms of where our assets lie, we’ve got very significant exploration assets in Paraguay and, as we speak, we’re in advanced discussions with a national oil company to farm into that asset with a view to drilling and an exploration in 2021.

So, what are our plans for the future going forward, just telling you a bit about the company?

Next year, it’s more well, looking at farm out in Paraguay, building infrastructure, therefore increasing production, cost-effective production and we’ve got the financial capacity for the right acquisition.

Why? Because crucially, we don’t have any material third party financial debt, we had a deliberate policy at the beginning of this year to reduce debt, we’ve reduced it by some 50% from the start of the year, 60% from the same period last year, and therefore our debt to third parties is minimal.

My private office, my family office, is financial due diligence for the company if it needs it and apart from that, we got financial flex and financial capability to grow.

We’ve looked at renewables, we will do that, if it only makes sense, we’re not going to go at it and I’m going to say to you quite clearly, we’re not ashamed, we’re an oil and gas company. We fulfil a need for markets where we are, we employ people and what we’re particularly proud of is, throughout this crisis, we have not shut a single well, we’ve kept producing, we’ve kept employing all our people, not one person has been laid off, not one person has been furloughed.

We’re well-managed and we ensure that we run our business for the right reasons, not for ego, we run our business for profits, for cashflow and for developing for the future and we’ve got the assets and determination to do it.

Hopefully, that gives you a snapshot.

Q2: What do you see as the greatest challenges to your business?

A2: The greatest challenge is to make sure that we keep our costs down whilst increasing our production. There’s certain things that we can’t affect; we cannot affect the international price, we cannot affect the domestic ore price or the domestic gas price. What we can do is make sure that we plan ahead, we certainly see that for example, next year, we see that there’s going to be a gas deficit in Argentina, we see that prices are going to be quite robust.

So, what we’ve done is we’ve switched our emphasis in developing the growth in hydrocarbons from oil, to gas whilst still trying to increase our oil a bit more but, certainly, some of the emphasis is going to be on gas because we see the gas prices rise.

What we need to do is make sure that we conduct our business in the right way, grow our production, which we can do, keep a cap on our costs, try to reduce our costs, you can always look at making more efficiencies. In terms of risk, we don’t see a risk in our markets, frankly, because Argentina is effectively starting step by step, very, very slowly, teeny baby steps, to get out of this crisis, as I’ve said, in the southern hemisphere we’re coming out of the crisis now. Whilst planes are starting to fly, people on the street, Buenos Ares looks very very lively, people are having coffees and eating, people are traveling so we can see that it’s starting to grow.

But if you’re talking about the risks, ensuring that, whilst we’re growing, we nail down our costs, we procure correctly, we partner with our customers, we partner with our contractors and we manage our business efficiently. Those are the factors which drive our business and effectively, cashflow, cashflow, cashflow, positive cashflow as it is now.

Q3: What do you see as the greatest opportunities in your business? I think you’ve just touched on one but what do you see as the greatest opportunities?

A3: Well, we’ve got opportunities within our portfolio, within our portfolio we’ve already identified Paraguay. We’ve effectively bought a very expensive ticket to the market in Paraguay, we spent $100 million of our money in 2012 to 2014, we identified the petroleum system but we came second i.e. we didn’t actually get a commercial well. We actually, ironically, have now identified the best well, which is the well we didn’t drill, which is the one that we’re looking forward to drilling in 2021. So, there are opportunities there, and there are opportunities in our existing core businesses in Argentina.

In terms of external opportunities, as I said, we’ve got the financial flex because we have driven down on net debt to be able to look at other acquisition opportunities, together with our strategic partner Trafigura, who is, as I said, one of our major off-takers.

So, these are the opportunities that we’re looking at for next year particularly, we see that there’s going to be many more opportunities next year, as perhaps larger companies are driven by the ESG requirements of the larger companies to dispose of some of their, for them, non-core activities.

We will not restrict ourselves simply to Argentina, we’ve got deep experience of oil and gas throughout the world, hydrocarbons and, as I said to you, in terms of renewables, if there’s something comes up, that’s fine but it won’t be simple buying an annuity.

Q4: Finally, around two years ago, your share price was above 10 pence, it’s now sitting at about 1.5 pence. What’s happened in the business in those two years?

A4: What’s happened in the business in the last two years? Whilst that price share price has gone down, President Energy has increased production significantly, we’ve increased our asset base very significantly, we have extended our understanding of our areas, we have extended our management expertise, and the old prices happened effectively and external forces like certain of our shareholders selling down so those are the factors.

If you’re looking at the progress that’s been made in the last two or so years, the net debt that we have now is minimal compared to what we have before, the financial debt is very, very small and therefore our capabilities have significantly increased. If I look at the company two years ago, when our share price 10 pence, and now at 1.5p, it absolutely bears no comparison. We are significantly better in our management, in our extent, in our assets, in our reserves and in our production and in our potential so that’s what’s happened in two years now.

We are looking here for the long-term, we’re in for the long haul, I am and management is as well. If you mind your own business, which we are doing, then the rest will come right, I’ve identified where we’re at and we have great faith in our company, we’ve got great potential and, as I’ve already said, that is evident. If you look at our website, there’s a video on our website showing some of our assets, slightly out of date, but it will give you a taste of where our assets are and also on our Twitter, which we keep up to date regularly.

So, there’s lots of interest going forward, we’ve got lots of interesting things and we’ve got news coming up, of course certainly going to be testing that discovering well, which is very promising at the moment. Nevertheless, we can’t have an eye for the market all the time, we’ve got to explain why share price is where it is but the most important thing for us and management, is mind you our own business and value will come.