Small cap oil firm President Energy (PPC:AIM) is raising £6.5m by issuing shares at 8p to help accelerate the development of natural gas assets in Argentina.
In the words of house broker FinnCap’s analyst Jonathan Wright the company is looking to ‘turbocharge growth’. Chief executive Peter Levine tells Shares he hopes the move will help ignite interest in a stock which has been drifting lower despite recent operational progress. At 7.8p it is down 20% in the last 12 months.
READ MORE ABOUT PRESIDENT ENERGY HERE
On 31 January the company revealed a 160% increase in turnover to $47.2m and a 498% increase in free cash flow (before administrative costs) to $21.5m in 2018. Production increased 194% to 3,300 barrels of oil equivalent per day (boepd) and President is targeting an increase to 4,500 boepd, excluding the accelerated gas production, and further 50% growth in the following two years.
Levine acknowledges weak sentiment towards Argentina, in the wake of the recent economic turmoil endured by the country, has played a part in the poor share price performance.
LOOKING TO ‘REENERGISE THE SHAREHOLDER BASE’
He adds: ‘We have to do something to reenergise the shareholder base otherwise there is frankly no point being a public company.’
President Energy has a portfolio of assets in the Neuquen basin in Argentina and as Wright explains a recent independent audit shows these barrels are predominately oil with gas accounting for 19% of the proved and probable reserves but gas production is just 3% of the current total.
In order to increase the output of natural gas the company will use the funds raised to upgrade the gas treatment and pipeline infrastructure with the impact beginning to be felt in 2020, Levine suggests if the company had financed the work from internal cash flow the development would have taken around 12 months longer.
The industry veteran, who made investors a lot of money when his Russian Imperial Energy E&P venture was bought by Indian state energy company ONGC for £1.4bn in 2011, is also converting some of his personal loans to the company into equity. As a result FinnCap estimates that by the end of 2019 net debt will have fallen from $17m to $14m.
The fundraise is being completed through an offer for subscription which is open to both existing shareholders and non-shareholders until 8 March - a mechanism which the company hopes will also increase in liquidity in the stock.
