President Energy has provided details on the completion of the acquisition of its interests in the Las Bases and Puesto Prado Concessions, Rio Negro Province, Argentina (President Operator and 90%, EDHIPSA 10%).
The attendees included representatives from all the key provincial authorities, landowners, union representatives, suppliers, contractors and members of the public.
The acquisition of the New Concessions from the Rio Negro Province has now been completed and paid for with the relevant Provincial decrees having been issued formally awarding the New Concessions to President.
The Province has granted President 90% operating interests over the New Concessions, which have a 10-year term. President is pleased to partner with EDHIPSA, the Provincial energy company, who will hold a 10% interest.
In line with President’s plan to bring the New Concessions in to production in a controlled manner, the first two Puesto Prado oil wells have been reactivated and are producing in line with expectations.
The purchase price of the New Concessions is US$9,904,000 in aggregate of which US$8,704,000 was paid to the Province yesterday (the “Initial Consideration”) and the balance will be paid in 12 months’ time utilising operational cash flow.
The oil is currently being shipped for treatment and sale by President’s contracted road transport to the Puesto Flores battery plant, 30 km away. The flow of gas is currently suspended, awaiting the necessary volume metering equipment for inter Concession pipeline measurement.
Over the course of 2019, after necessary infrastructure works, Puesto Prado’s own battery will be reactivated which will then allow the oil to be sold directly to nearby refineries.
The Initial Consideration has been partly financed through an additional US$4 million of secured term loan bank facility and an additional US$4 million unsecured loan made to the Company by the Company’s existing lender IYA Limited under the terms of President’s current line of credit facility with IYA.
After testing of the 15 km of newly acquired pipeline between Estancia Vieja and Puesto Prado, gas has flowed from Estancia Vieja and to Puesto Prado field. The balance of the Initial Consideration was paid out of the Company’s own cash flow.
IYA is a company whose ultimate beneficial owner is Peter Levine, the Chairman and Chief Executive Officer of President and as such, the facility extension is a Related Party Transaction pursuant to AIM Rule 13 in respect of which further reference is made below.
The additional bank facility is repayable by quarterly instalments of principal and interest in line with the Company’s existing bank facility with both being fully paid off by mid-2021.
The additional unsecured loan made by IYA is not repayable until 31 December 2021 and bears interest at the same rate as the extra tranche of US$4 million bank facility being 12.5% over three month US Dollar Libor per annum.
One million barrels of 1P category hydrocarbon reserves being proven developed producing reserves which management believes can in the right circumstances be expanded by end 2019 to four million barrels of 2P (proven and probable hydrocarbon reserves).
The New Concessions have extensive infrastructure facilities as well as a strategic pipeline of some 60 kms in aggregate with its own valuable tie and metering facility at the main regional pipeline.
President’s pipelines now stretch from the Company’s Estancia Vieja Concession, through Puesto Prado and then Las Bases to the tie in. President is now working expeditiously to bring into production certain wells that are currently shut in on the New Concessions.
President is immediately benefiting from pipeline income currently being generated from the transport of gas produced by Compania General de Combustiles (‘CGC’), from its neighbouring concession in Rio Negro.
President will seek in the future to capitalise on its infrastructure by offering capacity to its other neighbours, particularly through the 38 kms 8-inch steel section of pipeline from Las Bases to the tie in.
Whilst at this early stage it is inappropriate to be specific as to expected production levels, it is targeted that both oil production from Puesto Prado and some gas production from Las Bases will contribute to year end production figures.
The process of bringing wells on will continue into Q1 2019, which will help the Company understand the capabilities of the New Concessions. Further information on progress will be provided in December once known.
Testing of the pipeline between Estancia Vieja and Puesto Prado is taking place shortly with a view to initially using the Estancia Vieja’s gas to generate electricity to power the Puesto Prado facilities and wells by the end of the year.