President Energy, the energy company with a diverse portfolio of production and exploration assets focused primarily in Argentina, provides an update to the market on certain relevant matters pertinent to current conditions.
Oil Prices in Argentina
President is pleased to note the restrictions announced late on 10 March 2020 by the Argentine Government relating to the import of crude and petroleum products.
These restrictions have been introduced to promote continued work and investment in the domestic hydrocarbon industry as a key building block for the economy.
The Company further notes market speculation that pressure is building from Provinces, producers and unions alike to introduce a fixed price for oil sales going forward, in similar manner to that which existed under the Presidency of Christina Kirchner, the current Vice-President and continued under the subsequent administration of President Macri for certain periods until 2018, where in order to provide a solid and less volatile platform for the industry and the economy as a whole, the domestic oil price benchmark was fixed. During that period there were times when the fixed price was higher than the Brent price.
The Company continues to focus on margins and cash preservation.
President guides the market that the current field level breakeven price (after all opex and royalties) from its core assets in Rio Negro Province, Argentina is a realisation price of US$21.5 per barrel. Lousiana breakeven figure is likewise similar with Puesto Guardian fields currently a level some US$10 per barrel higher. All these figures will reduce as and when extra volume is added.
Debt levels reducing
In these times there is quite understandably increased focus on debt levels. Accordingly, it is important to note that President's third party financial debt has reduced considerably recently.
Bank debt is now only US$3.7 million having come down from a peak of US$10.7 million within the last 18 months.
The rest of the debt is owed to significant shareholders both of whose interests importantly are closely aligned with the Company and its other shareholders. Such debts together with the bank debt are all being serviced in accordance with their terms.
Such shareholder creditors are Peter Levine, the Chairman and 29.97% shareholder whose current approximately US$16.5 million loan is unsecured and covenant light and secondly an advance of US$6 million made by Trafigura, President's principal offtaker who holds in excess of 6% of the Company's shares. The advance from Trafigura has reduced from US$10 million some 9 months ago.
President reports that gas production from Rio Negro is now in excess of 1,000 boepd (6 MMScft/d) and building. President reiterates that it is on target to achieve 2,000 boepd (12 MMscft/d) of gas production by the end of H1 2020.
All this production is and will be from existing wells without the need for further drilling.
Capex for 2020
Given recent market developments and in line with most energy companies, President's capex budget for 2020 is under review. Whilst awaiting greater visibility for domestic prices going forwards in Argentina, President is nevertheless continuing the planning for drilling wells in its value added areas.
Peter Levine, Chairman, commented:
"In unprecedented times and volatile outlook, we continue to focus on key performance indicators, extract maximum value with the minimum of expenditure, optimise our significant asset base and manage our cash and finances in the manner of prudent good housekeeping.
"The golden thread in Argentina is the current alignment of all industry stakeholders in endeavouring to protect and ring fence the strategic hydrocarbon industry for the future good of the country as a whole.
"As such the recent Government initiative is well timed, appropriate and welcomed."