Latin American oil producer President Energy (PPC:AIM) is in demand with investors – up 6.4% to 25p - as it suggests there is a scope for a 'giant find' on its acreage in Paraguay. We discussed the valuation case for President here back in July and again last month in our Microcap marvels cover article and the shares have undergone a partial re-rating since.
House broker Jefferies, which reiterates its buy recommendation and 35p price target, estimates the stock is trading at a modest premium to the value of its producing and development-based assets and current cash of $6.8 million. President still remains some way below the levels it was at in April 2012 when the Argentine government seized the assets of Spanish firm Repsol (REP:MC) – a move which increased the perception of political risk in the country where the majority of President's 7.8 million barrels of oil equivalent of reserves are located.
Today's update, which accompanies a solid set of first-half numbers from the company, highlights positive initial results from a seismic survey aimed at delineating the potential in neighbouring Paraguay. Management believe the findings may increase the estimated pre-drill size of the resource from a previous 159 million barrels of oil to more than 500 million barrels of oil. Full results of the survey are expected in December and the company says it remains on track for a three well Paraguayan drilling campaign commencing in the second quarter of next year.
Notably the company's executive chairman Peter Levine has successfully created value for shareholders in politically-risky jurisdictions before. He founded Russia-focused Imperial Energy on Aim in 2004 with an initial market cap of £2 million. Four years later it had been snapped up by Indian state energy firm ONGC for £1.4 billion.