28th Jun 2016 10:59
LONDON (Alliance News) - President Energy PLC Tuesday said it expects to start drilling three new wells in Argentina at the end of July in an attempt to double production from the Puesto Guardian concession, building on the material rise in production already delivered this year.
The company's Puesto Guardian concession was producing around 500 barrels of oil per day in late May - almost double the average level over the entirety of 2015 - but President Energy believes production will rise to over 1,000 barrels per day once the three new wells are drilled.
One of the ways that President has already increased production this year is through a workover programme focused on improving the rate and efficiency that oil is pumped out of the ground from existing wells.
President had already guided it would drill the new wells earlier this year and seems to be on time, as it had hoped to launch the drill programme before the end of July. President has now engaged drilling contractors for the programme and activity will start before the end of that month.
As previously announced, each well will be a re-entry and side track with a horizontal producing leg and will be on each of three fields within the company's Puesto Guardian concession. The first well will be at Dos Puntitas with a 500-metre horizontal section. The subsequent two wells will be at Pozo Escondido Este and Puesto Guardian.
"It is estimated that each well will take approximately one month to drill and complete. The first two wells will be drilled back to back and the third well will be drilled in autumn 2016, after the drilling rig is utilised by another neighbouring operator," said President.
Earlier this year, President said the results from the three-well programme would be analysed with a view to considering a further drilling programme in 2017 on a step-by-step basis.
Importantly, the company has only been able to fund the programme after striking a deal to amend its existing funding arrangements with its existing lender, IYA Global Ltd, which is part of the PLLG Investments Group, and beneficially owned by President's Executive Chairman Peter Levine.
The agreement has led to the company's existing facilities being increased by a total of USD6.0 million to a total of USD20.0 million. The existing loan facility has been increased to USD15.0 million from USD10.0 million whilst the convertible loan facility has increased to USD5.0 million from the previous USD4.0 million.
The maturity of both facilities has also been extended for a further two years and will expire at the end of June 2019. The revised funding arrangements are not subject to any due diligence, remain unsecured and continue to be free of any reserve base or production level conditions or covenants.
Interest on the enlarged convertible loan will accrue but not be payable until the end of June 2017. However, if production from the three wells fails to hit certain targets then that interest will not be payable until the facility matures in 2019, the company said.
President said it will also pay a 3.0% net profit interest to IYA Global based on profits over the life of the three new wells.
President Energy shares were trading up 1.5% to 7.10 pence per share on Tuesday.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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