LON:PPC | President Energy - Ready For Take-Off?

9th Oct '17 by LongValue

30 comments 9486 reads

President Energy is an oil and gas company with a long history of not fulfilling its potential. Only now things may have fundamentally changed. It has moved from simply being an idea to actually being a producer. Moreover, its assets are huge with fields in the US, Paraguay and Argentina. Although difficult to value using Stockopedia metrics, the upside could be very substantial.

It's producing some 300 BOPD in the US. Not much by most standards. But it's getting the oil out of the ground and running the operation profitably.

Paraguay is a completely different story. Its acreage is simply enormous, some 8.4 million acres (Apparently it's the size of the US state of Maryland) and it has a large body of seismic evidence gathered over a long period of time to support its optimism. It's now looking for farm-out partners.

As for Argentina, it produces some 2000 BOPD after what appears to be an excellent acquisition from Chevron. In addition, last month it bought two more fields and has just announced that it will begin workovers on five wells within those fields next month. It also pointed out that it has the necessary infrastructure in place to go ahead with production from these wells by the year end if the results are positive.

Something I really like about the company is its focus on generating cash. It has a programme of workovers where it brings back into operation wells that have been shut-in. Basically, it's a lot cheaper and less riskier than a full-on drilling campaign targeting new resources. At the same time, there is the huge potential from farm outs.

Like all these plays, it's clearly not without risks – it's currently experiencing problems with a pumping system that is delaying its production in Argentina. And obviously the price of oil is almost impossible to predict.

Without producing assets the business would be just another explorer looking for the next round of fundraising. However, after entering production mode it might indicate something could be about to take off. It's producing and is aiming to push up production in the near-term and it has some very big irons in the fire. It may also be in the right spot at the right time – Latin America seems to be in the cross hairs of…

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LongValue

10th Oct '17

I used the Argentine debt issuance and BP's efforts simply to demonstrate the environment in which President Energy operates.

Interestingly, President has assets in Puesto Guardian the concession for which was extended to 2050 by the Argentine Government in 2015. Not only does it contain 1P of some 9MMBB but the extension duration was something of an achievement. It seems to indicate that it may well be operating in a more business friendly environment than most people imagine.

11th Oct '17

For anyone seeking a better understanding of President Energy, this interview is well worth a look. In particular, the CEO, Peter Levine, discusses the recent acquisition from Chevron where President has partnered with the local provincial Government in a deal giving the latter a 10% stake. Not only is it working over existing wells in the fields but it's also trying to exploit reserves from the those wells through reinterpreting the original data. This strikes me as a smart idea, especially with developments in oil industry technology. That said, Chevron are clearly experienced operators and may have baked it into the price.

http://www.corelondon.tv/busy-times-ahead-president-energy-announces-well-program-neuquen-basin/

As Levine goes on to say, Argentina is attracting some very big players from the oil industry. However, their focus appears to be on Shale. It might be the case, as it appears to be with Chevron, that divestments and reorganisations could present the company with more compelling acquisition opportunities. Essentially picking up the crumbs from the rich man's table.

Incidentally, Levine mentioned that he was looking at an EBITDA of US$27m for the next, presumably, financial year.

17th Oct '17

Peter Levine, Executive Chairman of President Energy, has just given a rather interesting interview with the IC. Amongst other things, he discusses the Chevron deal and why it worked so well for President. He also makes a few points about shale that many investors may not be aware of.

https://www.investorschronicle.co.uk/shares/2017/10/16/the-extraction-podcast-president-energy/

12th Jan '18

The company appears to be taking off a little sooner than expected. It has just issued a very upbeat RNS. The work over of the four wells in the recently acquired Puesto Flores field, has been completed , ahead of time and under budget. The payback period is expected to be three months. Gross production for the field should reach 1,700 BOPD in February. The results are described as “Substantially ahead of expectations”.

It has a considerable programme for 2018, including further work overs for the Puesto Flores field, but this is fully funded from current resources. So I would suggest that any fund raising is not on the cards for the foreseeable future.

What really caught my attention was the potential in its adjacent Estancia Vieja field. Between 1992 and 1993, it was apparently producing 18,000 BOEPD. However, when it was shut-in by the previous owner in 2011, production had fallen to just 63 BOEPD. It will begin testing this field in February.

Incidentally, it expects to generate US$4.5 million from cash sales for January 2018 from its Argentine production. It's clearly monetising its assets.

12th Mar '18

Even at this early stage, the news released this morning by President Energy (LON:PPC) appears extremely promising for its Estancia Vieja field. It has tested three wells and the results are positive. In fact, they are so good that it's planning on going into production later this year. In terms of volume, the tests suggest that two of the wells could be looking at producing between 450 and 820 BOEPD. It might also be worth considering that it will test three further wells in the second half of this year. Basically, it now has an economically viable gas field on its hands. Bearing in mind, that its Estancia Vieja field has some 33 shut-in wells, I would suggest that it's reasonable to expect further developments from this asset. Incidentally, this points to a substantial increase in the field's 2P reserves.

As a slight aside, it's now preparing to obtain a secondary listing on the Buenos Aires stock exchange (BCBA). I would suggest that its inclusion in Latin American ETFs and Index Funds could, over the long-term, add an uplift to the company's share price.

6th Jun '18

There was a conference call earlier today in which Peter Levine, President's Chairman, made an interesting comment that may have been overlooked by the market. Although Argentina appears to have some serious economic problems, these are not impacting President's business model. The company's production of oil is sold in US Dollars. However, it is paid the Peso equivalent on the day of payment and not on the day of invoice. It's quite immaterial as to how the Peso performs over the period between invoice and actual payment. I would suggest that this is not a small point.

21st Jun '18

For the first time in some ten years, Argentina has been promoted to the MSCI Emerging Market Index (It was previously a component of the Frontier Index). This could, in my view, have a very positive long-term impact on President. The company is pressing ahead with a listing on the BCBA, Argentina's local bourse. Should it go ahead with a listing then its stock will obviously be included in a wider variety of tracker funds. Basically, more money will be chasing the same amount of stock.

9th Aug '18

To what degree President is being viewed negatively as a result of its focus on Argentina is difficult to tell. However, I would suggest that today's update is very positive. Broadly, it's now generating significant amounts of free positive cash flow (Around US$2 million per month) and has a fully funded drilling programme in place.

Current production is around 2,700 BOEPD. It aims to increase this figure by some 600 BOPD by drilling three wells targeting proven reserves in Puesto Flores, its main area of operation, later this year.

Interestingly, it has several shut-in gas wells in its Estancia Vieja field. One is on long-term testing. It believes that it's looking at some 500 BOEPD in production. The aim is to use this internally to make the company energy self-sufficient in its two main fields from early 2019. However, what the RNS did not mention is that if it is used internally then no royalties are due to be paid. With the company currently spending some US$150,000 – US$200,000 per month on electricity, I would suggest the savings could be considerable.

On the negative side, there was no immediate news about its Puesto Guardian field. It's trying to reach a settlement with a Chinese provider of pumping equipment that appears not to have been fit for purpose. That said, it's planning to drill wells next year.

The update gave no indication of the impact of Argentina's economic problems. But I would have thought that with its output valued in US Dollars while most of its costs are in Pesos, the net effect of a slide in the local currency would be positive for the company. Maybe Peter Levine was being tactful in not mentioning this.

Something that may have passed some investors by is that Argentina was promoted from a Frontier market to an Emerging market in June. Longer term this may have implications for the company as it has put in place the necessary arrangements for a local listing at some point. In my opinion, that may be on hold for the moment but it could change at short notice.

6th Sep '18

President appears to be getting on with the business of building a business. According to Peter Levine, Chief Executive, it's now generating some US$2.3-US$2.5 million in free cash flow per month. Since acquiring its Puesto Flores assets from Chevron at the end of last year it has carried out some 14 workovers on the licence and is due to spud its first well there later this month, part of a three well programme for this year targeting the area. The acquisition, in my view, has dramatically changed the outlook for the company. And at today's oil price, its organic growth plans are fully funded through 2019.

The development of its gas resources at Estancia Vieja is moving ahead rapidly. It plans to use these resources to become energy self-sufficient in two of its fields by early next year and then selling the remaining electricity to the grid.

Any hopes of compensation from the Chinese suppliers of faulty pumps appear to have gone. President has had to spend some US$1.5 million on replacements. So it's clearly not all plain sailing.

Importantly, and something I am not sure that the market appreciates is that Argentina's latest economic crisis appears to be having no adverse material impact on the company. It does not seem to affect its business operations.

Attached is a link to an interview conducted yesterday with Levine which will probably give a better understanding of the direction of the company. And it might be worth remembering that he owns around 30% of the business. So when private shareholders bleed so does he.

https://www.malcysblog.com/2018/09/core-finance-interview-peter-levine-of-president-energy/

10th Oct '18

As the adage goes, people sell stock for many reasons but buy for only one. How accurate that is I am unsure. However, in recent days President Energy has been subject to insider buying. In this case, the amounts are reasonably small but, interestingly, the people involved appear to be Managers rather than Directors. The company's Finance Manager and its Chief Geologist have bought stock. The backdrop to this is the company's drilling campaign. It recently spudded its first well of three planned for the latter part of this year. The well is targeting 2P reserves on its Puesto Flores acreage. The base target for the three wells is 600 BOPD. If successful, this would be brought into production by the year-end. And, of course, it would add to the company's growing reserves.

22nd Oct '18

The first of President's three well drilling campaign appears to have come in significantly ahead of expectations. It will be completed early in November and then go into production. The CEO, Peter Levine, seems confident that the company will reach its target of increasing production from the current 2700 BOPD to 3300 BOPD by the year-end.

A striking feature of the company is the speed at which it's actioning its plans. So for example, it has four gas wells on long-term testing in its Estancia Vieja concession. Rather than building a very expensive pipeline, which would also be time-consuming, it's in the throes of buying two concessions, Puesto Prado and Las Bases, for US$10 million. That will allow it to get its gas to market via the pipelines that come with those concessions. The concessions offer exploration upside but the pipelines on their own appear to make the deal very attractive.

It might also be worth mentioning that the latest Argentine economic crisis seems to be having no negative impact on the company. It certainly doesn't look as though it's impacting its investment plans.

23rd Nov '18

Not only has the first well of its drilling programme in Puesto Flores come in way ahead of expectations but it offers even greater development potential going forward. As it now stands, this first well is in production at 600BOPD. And that's with netbacks of around US$40 per barrel. However, the well has another secondary target that the company will exploit at a later date and that should flow at some 240BOPD. Basically, its initial well in the campaign has surpassed its target for what it aimed for with all three. And, of course, it will ultimately increase its reserves in the highest margin part of its operations.

18th Dec '18

Strange times indeed. The last well in its three well drilling campaign has come in successful. In total, it targeted an extra 600 BOPD but the final figure looks set to be more than 1200 BOPD. And that does not include the substantial secondary targets that can be recovered at a later date. It might also be worth remembering that it receives a local Argentine price for its oil. In November, this was US$66 per barrel. And that provided netbacks of some US$40 per barrel, after all operating costs, royalties and taxes but before G&A.

Although it looks very positive, the market has barely reacted. For the time being, oil stocks seem to be out of fashion.

31st Jan '19

Today's RNS adds a lot of weight to the company's strategy of focusing on cash generation. Its operating profit for 2018 was US$14.3 million (2017: US$4.3 million loss). Not forgetting that the figure for 2018 only includes less than two months' production from its Puesto Flores drilling programme. Exiting 2018 with production of 3,300 BOPD and exceeding its target by around 10%. Moreover, the company appears to be changing shape and scale. Moving from being a small oil producer to being a medium-sized energy business covering oil and gas production and the supply of electricity to the Grid.

It now powers its operations on its Puesto Prado field with electricity generated from generators on its Estancia Vieja gas field. However, it's in the throes of building a 16km overhead cable that will link Estancia Vieja with Puesto Flores, its major producing field. Not only will that make the latter self-sufficient in energy but it will allow the company to sell some 2-3 MW into the Grid. And the time frame is just six months. It also comes with the added benefit that the energy that is used for its own purposes is royalty-free.

As for its gas assets, the problem has been getting what it believes are substantial reserves in Estancia Vieja to market. The solution came with 60km of gas pipelines that were part of its recent acquisition of Puesto Prado and Las Bases. Wasting no time, it has already gone to work reactivating a gas well at Las Bases that should be in production with 1-2 months and this is a field that was producing some 4,000 BOEPD. It has also announced its intention of using Las Bases as a hub for other producers' gas.

Although its production is centred in the South of Argentina, the bulk of its 1P reserves are in its Puesto Guardian assets in the north. This has not been as successful as it had hoped with a programme of workovers. Therefore it plans a three well drilling programme for later this year. Whether or not this will be successful is anyone's guess. But it does have time on its side with a licence that runs until 2050 and it has carried out all the required mandatory work.

The company has a small amount of production from its US assets and it recently made an acquisition that will involve drilling in April. However, this is really small beer compared to what is going on in Argentina. The impression I have is that it simply wants to bulk its US operation up before selling it on.

The joker in the pack is Paraguay. It has tried and failed to make a discovery and appears intent on trying again. However, the costs for the prospective drill are considerably less than it spent before. Should it succeed the upside would simply be huge. The downside looks like being around US$12 million. Do I think that it will work? I doubt it. Why? Most oil drilling is not successful and it's generally more successful in areas where oil is already being produced. As a pioneer, I don't think that it will work. But the downside when viewed in terms of the company's growing cash generation is limited. On the other hand, if it gets lucky it really could propel it into a different league. And as it points out, it's far better prepared this time.

Can Peter Levine replicate the success he had with Russian focused Imperial Energy? Who knows but he certainly seems intent on trying and unlike most CEOs of resource companies he does own a very substantial chunk (some 30%) of the business.

And, yes, I am still a shareholder.

29th Apr '19

President's stock price has leapt this morning on the back of a review by the Mail On Sunday. However, what I think is more interesting and something that gives a lesson to most other AIM-listed companies is an RNS that it issued on 25th March 2019. The link to the RNS is attached below. In essence, it has clearly laid out its plans for 2019/2020. There are understandable and measurable targets and clear time frames. It's specific, concise and appears quite achievable. But the real point I am making is that in the absence of small company research, obviously with the impact of MiFID, small companies need to explain more clearly to shareholders what their plans are and put them in a clear format. Simply issuing historic information is not sufficient. There need to be near-term milestones by which performance can be judged.

Regardless as to whether President achieves its goals or not, it has laid out its plans. And, in my view, that makes it a lot easier to evaluate the company as an investment.

https://www.stockopedia.com/share-prices/president-energy-LON:PPC/news/president-energy-plc-201920-work-programme-urn:newsml:reuters.com:20190325:nRSY8036Ta/

BarrieLomas

9th Jul '21

Diversification into Ammonia see 9 uly 2021

President Energy is an independent oil and gas company focusing primarily on high margin production opportunities in Latin America.

https://atomeplc.com/

ATOME is a new alternative energy company formed to focus on developing a green hydrogen and ammonia production business.

Price of Ammonia from Net

Sold at $355-360/tonne FOB Arzew, the cargo will load for the US Gulf - where there is unconfirmed talk of further plant outages - and will feature a CFR price of around $400/tonne.
'
RNS extracts calculated
'
HCO is optimistic that an appropriate power purchase agreement ("PPA") can be satisfactorily concluded to progress a necessary pilot programme for hydrogen production in the relevant country projected during, at, or around end of 2023 with, subject to that success, a targeted estimated second phase industrial production of 80,000 metric tonnes ("MT") of ammonia production per year around the middle of the decade____say $32 million pa

-- With the Americas Project, announced on 1 July 2021, Atome has now two separate spheres of interest which, if they both progress to an industrial production stage, have the potential to generate over 250,000MT per year of green ammonia by the end of the decade. ____say $100 million pa

For scale_____PPC _____Revenue 2018 $47 million _____2019 $40 million

Although I’m no longer a shareholder, I still follow the company. And it continues hammering away with an increasing pivot towards natural gas production where it sells into a very strong local market.

After many years of searching, it recently agreed on a farm-out deal with a national oil company for its Paraguayan assets. With the prospect of drilling an exploration well in H1 2022. Should it prove successful, it could take the company into another league. On the other hand, it could be a duster. It estimates the total cost to be around US$10-15m and the chance of success about 30%. But the cost is mitigated. Its partner will pay President Energy (LON:PPC) some US$4m and shoulder 60% of the cost. Should the drilling prove unsuccessful, the company still has enough resources to continue. It’s not betting the ranch on success.

Incidentally, unlike many other AIM oilers, the CEO owns around 30% of the stock. He has invested a considerable amount of his own money in the venture - it's not a lifestyle company. In local terms, it appears to be a mid-sized oil and gas producer. And the company has come through a collapse in oil prices and an economic meltdown in Argentina. Trafigura is a major investor and seems to be working closely with the company in improving its margins for its Salta Province oil production. Basically, it's a real business with the infrastructure in place to add to its oil and gas production base and benefit from operational gearing.

But I think that reviving these old Argentine oil and gas fields has proved to be far more difficult than it first envisaged. Nevertheless, it’s still moving forward and is now advancing with a Green Hydrogen and Ammonia project. This new entity (85% owned by President Energy (LON:PPC)), Atome, is looking at a London listing later this year. In my opinion. with so few pure Hydrogen plays, it could attract significant investor interest.

But I think that reviving these old Argentine oil and gas fields has proved to be far more difficult than it first envisaged. Nevertheless, it’s still moving forward and is now advancing with a Green Hydrogen and Ammonia project. This new entity (85% owned by President Energy (LON:PPC), Atome, is looking at a London listing later this year. In my opinion. with so few pure Hydrogen plays, it could attract significant investor interest.

BouncingBack

30th Oct '21

With COP26 about to start and climate change firmly on the agenda, with the govenment spending our money on it, could the the floatation of Atome be expected to push up the share price for President Energy?

10th Dec '21

PPC has Special Specie dividend is available as of Year End roughly equally to 20% based on shares in ATOME a green energy and ammonia company whose IPO s due at or around Year End.

Specie based on PPC's large holding in company which it will retain roughly half of its original .

Based on Iceland and Paraguay dam, , second largest hydro in the world. Lots of new fashionable interesting business experinced Board but an IPO

President Energy - Ready For Take-Off?

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