President Energy (AIM: PPC), the oil and gas exploration and production company provides the following update on Argentina operations and revised loan agreements (the “Loan Restructuring”).
- President has now engaged drilling contractors for a 2016 three horizontal well programme due to commence by end July.
- Objective of the drilling campaign is to increase sustainable production above 1,000 bopd.
- Revised funding arrangements with IYA Global Limited (“IYA”) provides the Company with the funding to undertake the 2016 drilling campaign and increased working capital headroom.
- Loan Restructuring provides increased funding of US$20.0 million comprising an additional US$5.0 million to the Company’s existing US$10.0 million loan facility and US$1.0 million to the existing convertible loan of US$4.0 million.
- The maturity of both the loan facility and the convertible loan will be extended by two years to 30 June 2019 with the same interest rates and payment terms as the existing loan agreements.
The objective of the initial drilling campaign is to elevate sustainable production beyond the 1,000 bopd level from the Puesto Guardian Concession. In pursuit of this objective President Energy has now engaged contractors to provide the main drilling services. The operations will be managed by the Company’s own Argentine technical team.
The drilling rig is currently being readied and will then be mobilized to site with drilling of the first well planned to commence at the end of July. As previously announced each well will be a re-entry and side track with a horizontal producing leg and will be on each of three fields within the Company’s Puesto Guardian Concession. The first well will be at Dos Puntitas with a 500 metre horizontal section. The subsequent two wells will be at Pozo Escondido Este and Puesto Guardian.
It is estimated that each well will take approximately one month to drill and complete. The first two wells will be drilled back to back and the third well will be drilled in autumn 2016, after the drilling rig is utilised by another neighbouring operator.
To finance the drilling programme, President Energy have entered into revised funding arrangements with the Group’s current funder, IYA, a member of the PLLG Investments Group, and a company that is beneficially owned by the Company’s Executive Chairman and Chief Executive, Peter Levine.
The revised funding arrangements will result in an increased facility of US$20.0 million comprising an additional US$5.0 million to the Company’s existing loan facility of US$10.0 million and a US$1.0 million addition to the existing convertible loan of US$4.0 million. The maturity of both the loan facility and convertible loan will be extended by two years to 30 June 2019.
The revised funding arrangements are not subject to any due diligence, remain unsecured and continue to be free of any reserve base or production level conditions or covenants. The terms of the existing loan facility and convertible loan will continue to apply to the additional loan monies being provided including the unsecured nature of all the loans, the same interest rates, payment terms and in relation to the convertible loan, conversion price. Interest on the enlarged convertible loan will accrue but not be payable until 30 June 2017. If and while the production achieved from the new wells is less than 75 per cent. of the Proved Reserve projection for each well’s production which are aggregated in the Reserves Report from Gaffney Cline & Associates dated 23rd September 2015 (a copy of which is published on the Company’s web-site), interest on the US$5.0 million addition to the loan facility will be deferred and not be paid out until maturity of the loan. Interest will not be payable on amounts so deferred. In addition, a 3% Net Profit Interest based on profits over the life of the three new wells will be payable to IYA.
The revised funding arrangement is classified as a related party transaction under AIM Rules. The Directors, excluding Peter Levine, who is not considered to be independent by virtue of his relationship with IYA, having consulted with Peel Hunt LLP in its capacity as the Company’s nominated advisor, consider the terms of the Loan Restructuring fair and reasonable insofar as the Company’s shareholders are concerned.
Miles Biggins, Bsc Joint Honours University College London, with 25 years of experience in the oil and gas sector, is a Petroleum Engineer and member of the Society of Petroleum Engineers who meets the criteria of qualified persons under the AIM guidance note for mining and oil and gas companies, has reviewed and approved the technical information contained in this announcement.