28th Aug 2019 10:35
(Alliance News) - President Energy PLC said Wednesday it intends to continue to be profitable in Argentina, despite the government's recent attempt to control fuel prices in the country, as it shifts focus from oil sales to gas sales.
Shares in the Latin America-focused upstream oil & gas company were down 20% in London in mid-morning trade at 5.01 pence each.
The Argentinian government has issued a 90 day decree to limit fuel prices for customers.
"The Decree fixed, solely for oil producers, the base values for the peso/dollar exchange rate and the reference price of Brent used in the calculation of the oil price receivable," explained the company.
The exchange rate is fixed at 45.19 peso per dollar, with Brent fixed at USD59 per barrel.
President continued: "The decree has met significant resistance from oil producers and key Provincial authorities with the important Province of Neuquen amongst others issuing court applications to have the Decree declared illegal."
The company said it is not ruling out a compromise being reached but this will not happen "in the early course". President said negotiations between key stakeholders and the government are continuing.
"Notwithstanding this President will continue to be a profitable company in its Argentine operations irrespective of whether or not the temporary decree continues in effect," President stressed.
The company believes this due to its focus on operating expenditure and cash management. President said it is focussed on high-margin production, "rather than production for its own sake".
As a result, the company has decided to defer its drilling campaign scheduled for this year and instead expand its existing gas projects. President said the decree does not affect gas prices.
President has re-scheduled its well drilling campaign for the first quarter of 2020, with an emphasis on new gas wells.
Chair Peter Levine added: "Although the management decisions we take reflect the macro circumstances currently affecting our oil business, in doing so we are in no way neglecting our core oil production. Our opportunities in our oil assets and from our reserves remain, like assets in a safe deposit, which can and should be unlocked at the optimum time commercially."
First gas sales from President's Estancia Vieja and Las Bases fields are expected from the end of September, with 400 barrels of oil equivalent estimated. The new 16 kilometres of gas pipeline, as part of the expansion, is expected to be completed by the end of December.
Initial sales from a total of eight wells is estimated at 1,250 barrels of oil equivalent a day by the end of January, rising to 1,850 barrels of oil equivalent a day by the end of March.
"From zero contribution in 2017, to some 5% of sales in 2018 and on average similar so far this year, gas sales will increase materially from the first quarter of 2020 with a major contribution in both average production and revenue to our group expected to continue into the future providing a much more balanced portfolio as well as moving away from dependency on a limited number of hydrocarbon producing wells," added Levine
President said its oil production remains "stable".
Related Shares:
PPC.L