President Energy signs farm-out deal for Pirity

The AIM-traded firm said the agreement signed with a “substantial” northern hemisphere state-owned energy company, to farm in for a 50% participating interest in Pirity.

In return, the farminee would pay 60% of the costs of an exploration well, currently scheduled to start during the first half of 2022, and would also pay President $4m (£2.83m) in consideration of the company agreeing to enter into its performance obligations under the deal.

The agreement remained subject to regulatory approval, and prolongation of the licence for a defined period.

President said the exploration well would target the Delray complex of prospects, which it estimated to contain more than 260 million barrels of unrisked resources in total.

Costs of the well were estimated at between $10m and $15m, with an estimated chance of success of 30%.

President said it would continue as the operator of Pirity.

“Having in the course of negotiations visited the farminee in its home country, I have been impressed by the professionalism of its workforce, the country and its people,” said executive chairman Peter Levine.

“I am sure that the farminee will be an excellent and supportive partner as together we embark with enthusiasm and the appropriate level of optimism on an unfinished journey President started but never completed in the quest to create history and be the first to find oil in Paraguay.

“President itself is a transformed company since our previous Paraguayan drilling campaign.”

Levine said that with lessons learned, the firm had mobilised its “significant” in-depth management, operational and technical expertise, leveraging on its production and exploration assets in neighbouring Argentina, combined with its “financial strength”, to maximise the potential of success for the upcoming drilling in 2022.

“With the recent robust oil prices and demand increases, the timing is perfect especially when taking into account in a success case the end market opportunities provided in a country that currently imports all its oil in refined form by barge all the way from the River Plate.

“We have in this regard a significant joker in our pack of cards through the possibilities which will be no doubt available through our second largest shareholder Trafigura, one of the world's leading commodity traders whose associated company in Paraguay, Puma, is an important importer of fuel into the country and has there an extensive and significant network of retail filling stations.”

At 1339 BST, shares in President Energy were down 1.05% at 2.13p.