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.