President Energy (LSE:PPC) has confirmed that major drilling activity at one of its Argentinean assets will start next month, leading shares to jump 5.1pc to 9.3p in morning trading. The business said the previously-indicated three development well drilling programme at its Puesto Flores field will begin by the end of September and will be funded out of cash flow.
Since announcing an accelerated work schedule for the field, President said it has contracted a rig, ordered long-lead items, chosen sub-contractors, and obtained approvals, consents and permits for the drilling programme. The three wells will all target proven undeveloped reserves aimed at increasing gross field production by 600bopd in aggregate on the base case. Each well is planned to be vertical with a depth of between 2,300 and 2,700 metres and will be completed with a workover rig.
President said it expects the wells to deliver a rapid payback, and it is projected that all three will be completed and on stream by year-end. It is also nearing the completion of a workover programme at Puesto Flores, with one well still left to complete. The company believes this work will enhance its total current normalised net production, which currently sits at a record 2,700boepd, of which some 95pc is oil. This production is providing the firm with free positive cash generation from operations of more than $2m a month, enabling it to self-fund full-year 2018 capital payments of more than $25m.
Elsewhere in a trading update today, President said that it expects shut-in gas production capability of certain wells at its Estancia Vieja field to add more than 500boepd of additional initial production when placed online. It said it is still working on ways to utilise this gas and monetise any excess by early next year.
It also said it has already received nine additional drilling permits for locations at Puesto Flores, where it expects drill new developments wells and two exploration wells next year. Finally, the business said it plans to carry out additional development drilling at its Puesto Guardian field in Argentina, and exploration drilling at its assets in Paraguay.
Peter Levine, chairman of President, said: ‘With production and cash generation at record levels and the capability to further expand organically, we now move to the drilling programme with all at President focused on delivering continued operational success and profits. At the same time, we continue to explore opportunities for growth by acquisition. In all of this, as we rightly concentrate on profits, margins and cash, it is easy to neglect the fact that President also has significant exploration prospects in the north of Argentina and Paraguay. Finally, I continue to be most grateful to all of our employees, partners and provincial authorities who, by their understanding and support are helping us deliver these good results. The board looks to the future with considerable confidence.’
Levine’s points here echo his comments when ValueTheMarkets.com spoke to him in May. He told us President decided to step up its rate of work because it had the financial capacity to do so and the right macro conditions were in place:
‘Improving oil prices and Argentina’s active energy market have meant there is no time to waste. We have the money, so why not capitalise on it. There is a lot of work to be done here, and everyone is extremely busy; effectively we are doing most of the work for the programmes of 2018 and 2019 by the middle of Q4 2018. Everything is heading in the right direction.’