President Petroleum Farms-In to Argentina License
President Petroleum announced the farm-in of a 50% working interest in the CNO-8 Puesto Guardian license in Salta Province, Argentina.
- Entry into very prospective onshore license block with existing oil production, and material upside potential through exploitation of reserve base and further exploration
- Immediately increases net production to President by approximately 225 bopd
- Targeting net 1200 bopd from Argentina by end 2Q 2012 from an initial firm five well drilling program; with further production drilling in 2012 planned.
- Acquisition price $2.20 per 2P barrel
- Acquisition increases Company estimates of net 2P reserves by approximately 500 percent (estimate 2.1 million 1P and 6.6 million 2P barrels of oil, assuming license period extended to 2026), based on assessment performed by internationally recognized reserve auditors
- 2P reserves (net) valued by President at NPV10 US $60 million, assuming license extension to 2026, with material further upside from bringing in Possible reserves and exploration
- Consideration of US $1.5 million cash, 5,102,041 President shares (equivalent to approximately US $2 million at the closing middle share price on 24 June 2011 and an exchange rate of GBP1:US $1.60), a US $10.75 million carry (representing 50% of drilling costs on a US $21.5 million drilling program), plus 1 million warrants to purchase President shares at £0.50 per share
- Acquisition and work program expected to be funded from existing cash resources and current and anticipated production
- Creation of Latin American business unit, charged with managing the acquired business and expanding regional interests
- Energy pricing dynamic in Argentina undergoing positive structural change
- Completion of transaction July 1, 2011
Peter Levine, Chairman of President Petroleum Company Holdings BV commented, "This transaction reflects the determination of the new management of President to concentrate on acquiring producing assets with proved and probable reserves combined with realistic near term potential to materially increase production.
"This acquisition has a solid foundation around existing producing fields, and holds significant exploitation potential with the ability to materially grow production through a clearly thought out near term drilling and completion program. This production is complemented by our production assets in Louisiana, where as previously announced we are embarking on a series of PUD wells and workovers.
"President considers Argentina a very fertile location to build a major hydrocarbon producing business, making material investments in the local economy, engaging with well connected partners, training and growing a local workforce and benefiting the communities where the Company works. President expects to achieve rapid progress in the short to medium term in this regard."