President Energy (PPC) announces the conditional acquisition of an exploration contract in Rio Negro Province, Argentina (the Acquisition) and the subscription for US$1.825m of new ordinary shares (Ordinary Shares) in the capital of the Company (the Subscription).
Highlights
On 18 October 2019, President Petroleum S.A, a wholly owned subsidiary of the Company agreed to take an assignment from Compania General De Combustibles S.A.(CGC), a significant oil and gas producer in Argentina, of their 100% interest in the exploration contract area known as Angostura, Rio Negro Province, Argentina.
Separately, CGC, has agreed to invest US$1.825 million in a number of instalments by subscribing for new Ordinary Shares at the prevailing market price at the time each instalment is due.
The Acquisition
President has conditionally acquired from CGC the exploration contract covering the 384 sq km area known as Angostura in the Rio Negro province, Argentina (the Exploration Contract). Angostura is situated directly to the west of President's Las Bases Concession and the Company's pan-regional pipeline passes through the south west corner of the area.
Angostura currently produces 80,000 m3/day of gas (2.8 MMscft/day) and 50 bopd, representing in total slightly in excess of net 500 boepd, the Acquisition will therefore increase President's daily production by more than 10%. All the gas is currently compressed and dehydrated within Angostura, sent by pipeline to President's Las Bases facility and then conveyed by the Company's own pan-regional gas pipeline to offtakers. The oil will be taken by truck to Las Bases/Puesto Prado and added to President's existing oil production. There are currently no reserves booked for Angostura.
The Acquisition is conditional on the consent of the Rio Negro Province to the assignment of the Exploration Contract. It is currently anticipated that such consent will be given within the following 30 days. No consideration is to be payable by President for the assignment of the Exploration Contract with President assuming both income ,and certain liabilities and commitments in relation to Angostura.
Whilst the first period of the Exploration Contract extends until November 2019, President is entitled to request access to a second exploration period , with a royalty of 15% over volumes produced during the exploration phase. In the event that the Exploration Contract, in due course, is converted at the request of the Company into an Exploitation Concession of 25 years, for which under the law no bonus is payable, the royalty is reduced from 15% to 12%, and EDHIPSA (the Province's energy company and partner of President in its other blocks in Rio Negro) will thereupon take a 20% interest in the Exploitation Concession with a deferred carry.
The Subscription
CGC has agreed, conditional upon completion of the Acquisition, to invest US$1.825 million in President by way of the Subscription.
On completion of the Acquisition, CGC will invest the sum of US$500,000, converted into Pounds Sterling at the prevailing exchange rate on the day prior to completion of the Acquisition, ("the Initial Subscription Amount") in order to subscribe for such number of Ordinary Shares (the "Initial Subscription Shares"), calculated at the closing mid-market price per Ordinary Share ("MMP") on the trading day prior to the completion of the Acquisition. CGC has agreed not to dispose of any interest in the Initial Subscription Shares for a period of six months after their issue.
CGC will thereafter invest the remaining US$1.325 million in seven quarterly instalments in consideration for the issue of new Ordinary Shares at the prevailing MMP on the date prior to the relevant quarter date, with the first such quarterly payment being due on 25 January 2020.
Peter Levine, Chairman, commented as follows:
"This corporate action represents a continuation of the strategy of leveraging on our critical mass in Rio Negro and, in this case in particular, our strategic gas pipeline. The contemplated assignment would increase our production by over 10% whilst at the same time providing synergies and enhancing economies of scale.
"I welcome the contemplated investment of CGC, a substantial well-known and respected oil and gas Company, as a shareholder in the Company."
