President Energy welcomes oil price policy in Argentina

Argentina-focussed President Energy updated the market on current trading conditions on Thursday, specifically around restrictions announced late on 10 March by the Argentina Government around the import of crude and petroleum products.

The AIM-traded firm said the restrictions had been introduced to promote continued work and investment in the domestic hydrocarbon industry as a “key building block” for the economy.

It noted market speculation that “pressure is building” from provinces, producers and unions alike to introduce a fixed price for oil sales going forward, in a 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.

During that time, President explained that 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, adding that there were times when the fixed price was higher than the Brent price.

President said it would provide further updates “when and if” appropriate.

Looking at its net backs, the company added that it was continuing to focus on margins and cash preservation.

It said it was guiding the market that the current field level breakeven price, after all operational expenditure and royalties, from its core assets in Rio Negro Province was a realisation price of $21.50 per barrel.

The Louisiana breakeven figure was likewise similar, with Puesto Guardian fields currently a level some $10 per barrel higher.

All of those figures would reduce as and when extra volume was added, President explained.

Looking at its debt, President added that in the current climate there was increased focus on debt levels, noting that its third-party financial debt had “reduced considerably” recently.

It said bank debt was now $3.7m, having come down from a peak of $10.7m within the last 18 months.

The rest of the debt was said to be owed to significant shareholders, both of whose interests were closely aligned with the company and its other shareholders.

Such debts, together with the bank debt, were being serviced in accordance with their terms.

Such shareholder creditors were chairman Peter Levine, whose current $16.5m loan was unsecured and covenant light, and secondly an advance of $6m made by Trafigura - President's principal offtaker which held more than 6% of its shares.

The advance from Trafigura had reduced from $10m around nine months ago.

On the subject of gas production, President reported that production from Rio Negro was now more than 1,000 barrels of oil equivalent per day, and reiterated that it was on target to achieve 2,000 barrels equivalent per day by the end of the first half.

All of that production is, and would be, from existing wells without the need for further drilling.

Finally, given “recent market developments” and in line with most energy companies, President said its capital expenditure budget for 2020 was under review.

While awaiting greater visibility for domestic prices going forward in Argentina, it said it was still continuing planning for drilling wells in its value added areas.

“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,” said chairman Peter Levine.

“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.”

At 1217 GMT, shares in President Energy were down 4.09% at 2.35p.