President Energy upbeat on progress at Rio Negro, Pirity

The AIM-traded firm said locations have been identified for two new wells which it was planning to start drilling within the next four months.

Preliminary discussions were taking place with service providers to capitalise on current pricing, in view of the fact that many currently had “significant” capacity, and there was currently “virtually no new drilling” of conventional wells taking place in the whole of Argentina.

The board said the first well would be the Las Bases 1001 development well, targeting proven unproduced attic gas in the Las Bases structure, with six billion cubic feet of total recoverable reserves.

It explained that the target depth would be 1,700 metres, with a P50 well rate of 100,000 cubic metres, or 605 barrels of oil equivalent, per day, with a high chance of success and estimated costs of $1.9m (£1.52m) completed.

The second well would be the Estancia Vieja EVN-x1 exploration well, which would target a new and thus far undrilled independent structure for both gas and oil to the north of the producing Estancia Vieja field.

There, it said the P50 case was oil production of 40 cubic metres, or 252 barrels of oil, per day, and 60,000 cubic metres, or 350 barrels of oil equivalent, per day.

Target depth would be 2,000 metres, and President said there was a “good exploration chance of success” for that well, with estimated costs of $2.5m completed.

In a success case, the whole of the Estancia Vieja north structure would be opened up with an estimated 14 million barrels of oil and 26 billion cubic feet of gas in place, which would require up to a further six wells.

Once completed, the wells could be placed on stream without delay, the board claimed.

There were no 2P reserves booked for the Estancia North structure in the current independent audited 2P group reserves of 26.4 million barrels of oil, calculated as at 31 December 2019.

In addition to those plans, the firm said there would be follow up infill drilling and workovers in Puesto Flores, but for the current year the two planned wells were the priority.

As a result, the permitting and procurement processes had started, with permits expected within the next two months.

In Paraguay, President said the term of the Pirity Concession, being its principal asset in the country, had benefited from an extension of time due to force majeure, meaning the concession period was extended until the first quarter of 2022.

In the event of successful drilling, that period would be extended further into a long-term production licence.

Before the Covid-19 crisis, President was in “substantive discussions” with an unnamed foreign national oil company which, after detailed due diligence, made a preliminary offer in relation to a farm-in, including the drilling of a well on the Delray complex containing, in total, an estimated 230 million barrels of oil equivalent in place.

Due to the Covid crisis, those discussions were suspended, and as a result, while at present there had been no concrete reengagement with that party and there was no guarantee that would happen, the board said the detailed discussions “encouragingly demonstrated” that the farm-in prospectivity was “real and tangible”.

The force majeure extension of the concession period would be of significant benefit in the ongoing farm-out process, it added.

In the Pirity Concession as a whole, as it had previously indicated, President had identified in its estimation more than 500 million barrels of oil equivalent in place.

“We believe now is the time to plan and invest for the future, particularly as we will have negligible third party debt at the half year end and are in a solid position,” said chairman Peter Levine.

“The fact that we will be able to bring successful wells into production in Rio Negro without any delay or excessive costs demonstrates the value of our conventional onshore wells in central locations with the benefit of owning and operating the regional pipelines and infrastructure.

“This enables us to transport produced oil and gas from the fields to the main national pipelines and on to our offtaker Trafigura, a strategically important major shareholder in President.”

At 1130 BST, shares in President Energy were up 0.75% at 1.69p.