Audited Results for year ended 31 December 2020

24 August 2021

PRESIDENT ENERGY PLC

("President", "the Company", or "the Group")

Audited Results for the year ended 31 December 2020

2021 update and outlook

AGM date and Investor Presentation

President (AIM: PPC), the upstream oil and gas company with a diverse portfolio of production and exploration assets focused primarily in Argentina, is pleased to announce its audited results for the year ended 31 December 2020 and a 2021 update and outlook.

In the face of the unprecedented challenges in 2020, including the dramatic drop in the oil price to less than US$20 per barrel, the Company still delivered solid progress and operational profitability, with adjusted EBITDA* of almost US$2.1 million on turnover of approximately US$28 million. This demonstrates the continued strength of the Group and resilience in navigating through the perfect storm of Covid-19 and its tsunami of economically challenging waves which enveloped the whole of the World.

The Company's Annual Report will be posted to shareholders by the end of August.

Highlights FY2020

Financial

Corporate

Operations

Production and reserves

* calculation of all quoted metrics not directly corresponding to GAAP measures are detailed in the Alternative Performance Measure glossary and cross referenced to the Notes where applicable

Peter Levine, Chairman, commented in the Chairman's Statement:

"When I wrote my statement on 30 June last year, I don't think any of us could have imagined that 14 months on we would still be battling the impact of Covid-19. As I said previously, I spent several months earlier this year travelling around our operations in South America overseeing our exciting work programme and advancing a material investment in our Paraguay assets. During that time, I saw first-hand the devastation wrought by the global pandemic and the significant sacrifices required to keep businesses operational during such difficult times. Having myself been hospitalised for two weeks, although thankfully now well on the way to recovery, I remain eternally grateful for the skill and dedication shown by the medical professionals in Paraguay and across the Globe. 

As I said at the time, I have never been one to sit behind a desk to manage my business and I am willing to put myself in harm's way for the benefit of our stakeholders so say none of this to gain sympathy. I make these observations so that people might understand the dedication shown by our hardworking employees in the face of such adversity. It is this dedication that has led to us delivering all the progress noted in the last 20 months.

Day by day our Company gets stronger although always subject to intermittent variables which do throw stones in our path to deflect us. We do all we can to grow President organically and by strategic initiative. I am confident that 2021 will be seen by its end as a year of progress with the Paraguay farmout, new drilling in Salta and the spin off and float of Atome all set to be completed by year end.

We successfully controlled what we could and the key performance metrics through 2020 bear witness to this: - increased average production, reduced operating and administrative costs as well as overall debt. I am sincerely grateful to everyone within the business for their efforts. We have a lot of work to do this year, but we are very much up for it and relishing the prospects.

The energy landscape has changed even faster and more dramatically than anticipated. President, as an energy company focused on long term goals, embraces this and shareholders may have noticed the rapid progress we are making with Atome Limited, the subsidiary we formed earlier this year to focus on hydrogen-related opportunities."

Production

Reserve revisions in Argentina reflect the results of production performance and workovers in the year and the subsequent independent auditor's reserve report by J@R Consultora. It is important to note that the reserves as at 31 December 2020 do not represent the total of what is present and/or recoverable in the respective fields in Rio Negro but only rather what are present and/or recoverable over the term of President's current licenses as at the audit date.

Impact of COVID-19 on our operations

The first priority is the welfare and health of our employees and families as well as our contractors working in the field. President monitors and checks on the health of all its employees and follows strict guidelines. Measures include restricting numbers travelling to fields in vehicles, monitoring health of operatives daily and social distancing. These necessary extra precautions have had no impact on production levels. 

The Company successfully transitioned in the year to staggered office / home working for all our administration and office staff in Argentina, with everyone equipped with all necessary IT infrastructure when working remotely. Moral is excellent with a strong sense of togetherness throughout and there has been no decrease in efficiency although there have been delays in administration, particularly in relation to the annual audit that led to the delay in the release of these annual results. At the time of this statement, office working is making a partial carefully planned and implemented comeback. President has no offices in the UK or Louisiana, so the Company is well used to working remotely and economically.

Production from operations has not been affected and there have been no shut-in wells or choke back of our wells.

Climate Change

President, acknowledges and takes due regard to the increasing emphasis on climate change around the World as evidenced by the activities regarding Atome. With regards to our core non renewables business, we acknowledge climate change as a risk facing President that will continue to be considered regularly by the Board.

Outlook 

2021 will be a very busy year for the Company with a record number of wells to be drilled and a return to growth. There are several things for investors to look out for in the full year results of 2021. 

Oil and gas business acquisition strategy 

President remains committed to growing its oil and gas business by acquisition where appropriate and material efforts continue to be made in this regard, including considering opportunities outside of its present areas. 

Each and every opportunity is carefully considered; however, in the absence of suitable prospects and terms, the Company continues to avoid spending acquisition dollars with all the direct and hidden risks, costs and expenses when much under-utilised existing production assets in the Company's portfolio, such as Salta, can be exploited.

Atome 

President is progressing high impact work with potential major long-term upside.

The Directors consider that there is present and potential future material shareholder value in Atome which we expect the projected forthcoming flotation to realise and unlock for President's own shareholders as well as providing those coming in on the listing with significant upside in a sector of increasing importance in the drive towards a carbon neutral future.

Annual General Meeting and Investor Q&A

The Annual General Meeting will be held on Thursday 23 September 2021 at 11 a.m. BST at Field Fisher, Riverbank House, 2 Swan Ln, London EC4R 3TT and President is pleased to announce that Peter Levine (Chairman) and Rob Shepherd (Finance Director) will provide a live presentation relating to Annual General Meeting via the Investor Meet Company platform on the same day, 23rd Sep 2021, at 1:00pm BST.

The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via your Investor Meet Company dashboard up until 9am the day before the meeting or at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet PRESIDENT ENERGY PLC via:

https://www.investormeetcompany.com/president-energy-plc/register-investor.

Investors who already follow PRESIDENT ENERGY PLC on the Investor Meet Company platform will automatically be invited.

Contact:

Detailed financial review

In 2020, we faced unprecedented challenges with the Covid-19 pandemic and resulting economic turbulence that led, amongst other things, to a collapse in oil prices. Our continued focus on financial discipline throughout the business has allowed the Group to continue to make progress in our core business through investment in new wells and development of gas assets in Argentina.

Revenue fell by 32% to US$27.8 million (2019: US$40.8 million), depressed by lower oil prices in both Argentina and the USA despite higher overall sales volume. Overall Group production rose by 12% reaching 2,714 boepd (2019: 2,415 boepd). Lower average product prices for the year of US$30.0/boe (2019: US$49.6/boe) in part reflected the growth in gas sales but mainly lower oil prices through a turbulent year. Cost of sales of US$31.8 million (2019: US$37.3 million) decreased due to lower well operating costs and lower product price related royalty and production tax expenses.

After depreciation, depletion and amortisation of US$10.3 million (2019: US$10.5 million) and administrative expenses of US$4.6 million (2019: US$4.4 million), the Group recorded an operating loss of US$8.7 million (2019: loss US$0.9 million)

After an impairment of US$1.9 million (2019: US$88.2 million) related principally to intangible exploration assets in Argentina, the loss for the year before tax was US$10.3 million (2019: loss US$93.6 million) and, after tax, a loss for the year arose of US$11.3 million (2019 loss: US$88.3 million).

Argentine operating performance

Production in Argentina increased by 9% to 898,704 boe (2019: 824,272 boe) or 2,455 boepd (2019: 2,258 boepd). Oil production fell by 19% more than offset by a near fourfold increase in gas production for the second year running. Average realised sales prices in Argentina fell 40% to US$30.0 per boe (2019: US$49.9 per boe) in line with the decline in world prices during the year.

Well operating costs in Argentina before non-recurring items* fell by 17% to US$17.6/boe (2019: US$21.1/boe) as the focus remained on cost control. Depreciation fell during the year to US$10.9/boe (2019: US$12.3/boe)* following the impairment of Puesto Guardian at the end of 2019.

Overall, following the annual independent review, proved and probable reserves in Argentina fell by 3%. An impairment review was conducted on Puesto Guardian following on from the write down in 2019 and on Rio Negro following a reduction in reserves recognised at 31 December 2020. With respect to Rio Negro, President intends to exercise its legal right to renew and extend its core Puesto Flores/Estancia Vieja concession, currently due to expire in November 2027, for a further ten years until November 2037 in accordance with Argentine legislation, and consequently concrete discussions with the Province of Rio Negro are progressing. Such an extension will have a positive effect on reserves and on future cash flow generation but was not considered in the impairment review. No impairment was considered in relation to either asset nor were the conditions considered sufficient to reverse the impairment on Puesto Guardian recognised in 2019.

Over the past few years, the Group has been considering future steps relating to the Matorras & Ocultar licences in Argentina; in light of the uncertainty of future activity on the licence, the Directors have now prudently decided to impair the intangible asset in line with IFRS6 impairment indicators.

USA operating performance

Production from the Group's working interest in US operations rose by 65% to 258 boepd (2019: 156 boepd). Production levels recovered in 2020 following extensive flooding in Louisiana and a workover of the Triche well in 2019 which had resulted in the shutdown of the wells and facilities for four months.

Average realised prices in the US fell 34% on the prior year to US$29.9/boe (2019: US$45.6/boe). Well operating costs excluding royalty related expenses and non-recurring workovers* fell by 33% to US$6.6 /boe (2019: US$9.8 /boe). Depreciation fell during the year to US$3.6/boe (2019: US$4.9/boe)* following an increase in reserves.

Following the completion of the technical review of the Jefferson Island licence in the USA, and in light of the macroeconomic conditions, it was decided to impair the asset (US$0.1 million). The licence has been relinquished.

Corporate

Group administrative expense remained stable at US$4.6 million (2019: US$4.4 million). While operations in Argentina and the USA progressed, the price environment proved challenging, generating an operating loss of US$8.7m (2019 loss US$0.9 million).

At the end of 2019, the Directors made the judgement that a partial impairment of US$48.5 million was appropriate on the Pirity licence reflecting indications arising during the farm out process. When considering the fair valuation of the Paraguay asset, the Directors have considered both the output of discussions from the farm down process and internal assessments. Discussions with a state-owned energy partner resumed in 2020 with an agreement subject to regulatory approval announced in June 2021. It is anticipated that the drilling in Paraguay will take place in 2022 after the farm down process has been completed later in 2021. Accordingly, management considered that in light of the commitment to drill and that the potential economic value remains unchanged, it is appropriate to continue to capitalise the balance of US$53 million at 31 December 2020 (2019: US$54 million).

The Group's primary investment focus during 2020 was on maintaining growth in core areas, increasing production in Argentina whist maintaining a tight control on costs and cash flow margins. In response to the challenging environment, the Group took action to maintain financial stability.

In the first six months of 2020, the international commodity trading and logistics group Trafigura agreed to subscribe for new ordinary shares in the Company for a total sum of US$10 million at an average share price of 2.4 pence per share, thereby becoming a 16.7 per cent shareholder in President. During the same period, IYA, a Peter Levine group company, converted US$7.2 million of monies owed to it from the Company into new ordinary shares at the same average price. The net effect of the above has been to reduce liabilities by some US$17 million.

On 4 June 2020, the Company announced that it had raised £4.73 million before expenses by way of placing ordinary shares, including certain shares issued in settlement under direction agreements. During 2020, US$0.83 million was received from Compañia General De Combustibles S.A under a subscription agreement.

Investment in the Oil & Gas Assets component of Property, Plant and Equipment in the year amounted to US$8.9 million (2019: US$ 10.3 million) with the drilling and completion of two wells on Las Bases and Estancia Vieja concessions, completion of gas infrastructure projects and capital workovers. In the USA, President acquired additional licence interests in the Triche well. Lease additions of US$2.5 million (2019: US$ 1.4 million) largely comprise the recognition of new contracts on a compressor and generators in support of the increase in gas production. Contract modifications during the initial phase of the Covid-19 pandemic and the termination of drilling equipment contracts resulted in net disposals in the year.

Overall, Trade and Other Payables decreased to US$13.8 million (2019: US$26.5 million) largely due to early repayment of the US$10.0 million contract liability with Trafigura S.A under an offtake agreement and lower drilling related accruals.

Trade and Other Receivables decreased to US$4.6 million (2019: US$6.5 million) in connection with the settlements made. The Group's net current liability of US$4.8 million (2019: US$19.8 million) has decreased during the year due to early repayment of the advance under the offtake arrangement with Trafigura S.A. Furthermore, stripping out the liabilities on drilling and acquisition investment activity, as detailed in Note 19, which are periodic in nature, shows that the underlying net current liability from ongoing operations is significantly lower at US$0.8 million (2019: US$3.2 million). Year-end cash balances were US$1.1 million (2019: US$0.9 million).

Key Performance Indicators

Key Performance Indicators are used to measure the extent to which Directors and management are reaching key objectives. The principal methods by which the Directors monitor the Group's performance are volumes of net production, well operating costs and the extent of exploration success. The Directors also carry out a regular review of cash available for exploration and development and review actual capital expenditure and operating expenses against forecasts and budgets.

* calculation of all quoted metrics not directly corresponding to GAAP measures are detailed in the Alternative Performance Measure glossary and cross referenced to the Notes where applicable

Consolidated Statement of Comprehensive Income

Year ended 31 December 2020

Consolidated Statement of Financial Position

31 December 2020

Consolidated Statement of Changes in Equity

Year ended 31 December 2020

Consolidated Statement of Cash Flows

Year ended 31 December 2020

Notes

The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 31 December 2020 or 2019 but is derived from the 2020 accounts.

A copy of the statutory accounts for the year to 31 December 2019 has been delivered to the Registrar of Companies and is also available on the Company's website. Statutory accounts for 2020 will be delivered in due course. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2019 nor 2020.

Whilst the financial statements from which this preliminary announcement is derived have been prepared in accordance with International Financial Reporting Standards ("IFRS") and applicable law, this announcement does not itself contain sufficient information to comply with IFRS. The Annual Report, containing full financial statements that comply with IFRS, will be sent out to shareholders later in August 2021.

The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Therefore, in the preparation of the 20120financial statements they continue to adopt the going concern basis.

Well operating costs include US$86,000 (2019: US$1,163,000) in non-recurring workover costs expensed in the period. During 2019, an exceptional bonus of US$305,000 was paid to field personnel and hence included in well operating costs in Argentina.

To allow for meaningful comparison, staff costs, share based payments and depreciation expenses are reflected gross before the effect of allocations to operating costs or balance sheet assets. Other expenses are shown net of the effect of allocations US$1.5 million (2019: US$1.6 million). During 2019, an exceptional bonus of US$609,000 was included in director and staff costs. This was partly offset by a one-off credit of US$428,000 arising on change in bank transaction taxes in Argentina.

At 31 December 2020, 32,146,921 (2019: 42,126,694) share option and share warrant awards were in issue that, if exercised, would dilute earnings per share in the future. No dilution per share was calculated for 2020 and 2019 as with the reported loss they are anti-dilutive.

8 Segment reporting

Segment assets can be reconciled to the Group as follows:

Alternative Performance Measures

The Group uses certain measures of performance that are not specifically defined under IFRS or other generally accepted accounting principles. These non-IFRS measures include net debt and well operating and underlying well operating costs per boe and free cash flow. Where used in the context of segmental disclosure the metrics are calculated in the same manner.

Total operating cost and underlying well operating cost per boe

Total operating cost per boe is a useful straight forward indicator of the Group's costs incurred to produce oil and gas including all relevant expenses. However, since royalty, production taxes and similar expenses are not controllable these have been disaggregated to allow well operating costs to be measured.

Where one-off or cyclical costs, such as workovers, are material these have been disclosed and the underlying well cost per boe referred to show the core performance. These have been defined and calculated as follows:

A 17% reduction in core operating performance arose in Argentina and was calculated as follows:

Administrative cost per barrel

Underlying administrative expense excluding non-recurring items is calculated as follows:

Adjusted EBITDA

The calculation is detailed on the Income Statement with further details on the non-recurring items below.

Non-recurring items

Where referred to in the calculation of Adjusted EBITDA and in alternative performance measures these comprise the following:

Free cash generation from core operations

A measure of cash generation from operations excluding changes in working capital, administrative expense and non-recurring workovers. Used by management as an indication of cash generation at asset level.

Including the foreign exchange gains of US$4.4 million which largely arise on the treasury management of cash resources ("treasury income") takes the cash generation in the period to US$10.6 million (2019: US$15.5 million).

Reconciliation to cash flow from operations

The reported cash flow generated from operating activities can be reconciled to free cashflows from core operations as follows:

Deprecation per boe

Depreciation per barrel of oil equivalent can change between accounting periods due to costs incurred, changes in reserves or changes in future costs and hence is a useful metric for reporting purposes. Where calculated on at a group or segment level the calculation is as follows:

Glossary

Boe   barrels of oil equivalent

Bopd   barrels of oil per day

Boepd   barrels of oil equivalent per day

MMscf/d   million standard cubic feet of gas production per day

1P   proven hydrocarbon reserves

2P  proven and probable hydrocarbon reserves

Contingent Resources  Quantities of hydrocarbons estimated to be potentially recoverable from known accumulations

Prospective Resources  Quantities of hydrocarbons estimated to be potentially recoverable from undiscovered accumulations

NPV10 net present value over the life of the concessions/licences discounted by 10%