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President Announces Unaudited Interim Results for H1 2020

Source: www.gulfoilandgas.com 10/26/2020, Location: South America

President, the oil and gas upstream company with a diverse portfolio of production and exploration assets focused primarily in Latin America, announces its unaudited interim results for the six months ended 30 June 2020.

Corporate and Financial Summary
- Trafigura, one of the largest commodity traders and logistic companies in the world, and a key offtaker, became a significant shareholder in President, now holding over 16%
- Group turnover decrease attributed to the 43% fall in realised prices in the most sudden peacetime fall in living memory
- Solid positive free cash flow from core operations (US$2.6 million) and intelligent pro-active treasury management giving an aggregate of US$5.9 million
- Net debt down by nearly 60% over the same period last year and 48% from the start of the year
- Third party financial borrowings now only US$3.7 million with the balance being covenant lite, long term largest shareholder related debt which itself has been reduced by 39%
- Adjusted EBITDA* remains positive in the face of the severe turbulent times encountered in the period
- Positive Group cash balances at period end showing the benefit of the share placing in the period
- Modest operational profit before noncash items
- Positive net profit after tax before non-cash items and after these items (comprising depletion, depreciation, amortisation, impairment, non-operating gains/losses and deferred tax) a loss largely reflecting the DDA charge of US$5.2 million in the period
- Further cost cutting resulted in Group administration expenses down by 31% year on year with administrative expenses per barrel* decreased by 38% over the same period

Operational Summary
- Average group net daily production in the period increased by 14% over the full year 2019, split 71% oil and 29% gas
- Well operating costs per boe decreased by 17% over same period last year
- A new reserves report issued showing Group proven reserves of 15 MMboe and proven and probable reserves of 26 MMboe with the more valuable Rio Negro proven and probable reserves increasing by 20% over the previous 12 months
- In Rio Negro, Argentina, since 31 December 2017, President has not only replaced all its production in the period but has increased its total proven reserves by 67% and its 2P reserves by 42%
- A new 16 km sub-surface 6" steel gas pipeline constructed in Rio Negro Province unlocking the potential of the Estancia Vieja gas field
- Even through the darkest times of the period when both prices and demand plunged to depths not envisaged by any reasonable prior planning scenario, President did not shut in any one of its wells due to inability to have its production off taken. This vindicates the management strategy of focusing on the end market for its products
- President exported oil from Argentina for the first time
- Louisiana produced normally throughout the pandemic without shut-ins. The minority 20% interest in the Jefferson Island project in Louisiana was relinquished as uneconomic in the light of depressed oil prices

Current trading
- Management reports show average Group monthly revenue for the first two months of Q3 2020 ran at the rate of US$2.635 million a substantial increase compared to the US$1.47 million per month average for Q2 of this year
- President is currently drilling its second well in the two well programme in the Rio Negro Province, Argentina, where we are the only company to have drilled since the pandemic started
- The first well of this programme, Las Bases-1001 was drilled on time and budget. The well has been successfully tested and is expected to be placed on production by the end of November with an initial gas production rate of 100,000 m3/d (588 boepd)
- The second well, Estancia Vieja North-x1, is an exploration well. Drilling continues and preliminary results should be available by mid-November
- Although overshadowed by the new drilling, the workover campaign in the Rio Negro Province continues with generally positive results. A review of all the results will be announced once the present cycle of work comes to an end at or near the end of this year. In the interim it is estimated that an additional 75,000 m3/d (440 boepd) of new gas production arising from this work will be able to be placed into production by the end of November ie at the same time as Las Bases LB-1001 comes on stream
- President continues its focus on reducing costs with the objective of further reducing its operational expenses next year
- The Louisiana low cost production remains stable, positive cash generative and has not been materially affected by the Hurricane season in that part of the world with no operational shutdowns
- Farm out discussions in relation to the Pirity Concession, Paraguay are continuing with a national oil company with a view to drilling an exploration well at the Delray complex of prospects next year. President's internal resource estimate for that complex is 230 million barrels of Pmean original oil in place
- President, on current trading, estimates average production for the full year to end 2020 to be in the range 2,800 to 3,000 boepd with an approximate split of 70% oil and 30% gas

Commenting on today's announcement, Peter Levine, Chairman said:
"President has, in the first half of 2020, traded through the hardest and most sudden global peacetime crisis in a century. Notwithstanding this, the Group has weathered the turbulence and is in a fit and solid financial and trading shape

"Despite the difficulties, President has delivered a positive adjusted EBITDA and free cash generation from core operations and finance income. The results reflect President's resilience and resourcefulness, together with the focus on conventional onshore production and its recognition of the importance of securing the end market for its production

"The concentration on our core businesses, margins and the strategic decision taken to pro-actively materially reduce debt in times of sustained lower prices have resulted in a sound financial and trading platform on which sustained growth can be developed. In particular it would be wrong to overlook the organic potential of our producing and exploration portfolio.

"Especially in this most challenging of years, I would like to express my thanks and appreciation to our loyal and hard-working employees for their dedication and substantial efforts in times of great personal stress and hardship. I have been truly humbled by their efforts.

"Finally my sincere gratitude also extends to both our major shareholder Trafigura for their close support with whom we look forward to continued cooperation and growing our strategic partnership, as well as those shareholders who have remained supportive in these challenging times."

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