President Energy plc (LON:PPC), the energy company with a diverse portfolio of production and exploration assets, has provided a Group update on the treatment plant development and its beneficial impact on opex.
· Treatment plant development commenced with first stage set to open by end June
· Material savings in opex expected from start H2 2021
Treatment plant development
The development of the treatment plant in Puesto Flores referred to in the Company’s announcement of 22 December 2020 has commenced and to date is on time and on budget.
The first stage of the development, which President has now fast tracked, is projected to be completed by the end of June whereupon oil will be capable of being delivered by truck to refineries direct from the core Puesto Flores/Estancia Vieja fields without going through third-party pipelines, treatment and water disposal facilities.
On completion of the first stage, savings and value-added benefits are estimated for oil so delivered to be approximately US$4 per barrel representing a reduction of some 20% of opex and sales cost per barrel. Whilst Trafigura remains President’s largest offtaker, the completion of the first stage will also allow for the flexibility to supply certain quantities of oil to smaller more local refineries. The proximity to the fields of these mini refineries will result in lower transport costs.
The second stage of the project involving an updated pipeline delivery system is currently projected for the end of August. Discussions with the relevant third party currently treating President’s oil continue with regard to tie in facilities circumventing their plant thereby on completion of the second stage giving President optionality to deliver oil by truck or through its pipeline system.
Treatment plant funding
As announced on 22 December 2020, the project has been funded by an Argentine peso denominated loan of US$5 million meaning that it is repayable in pesos in the total amount of that currency using the exchange rate applicable when the loan was taken out. Due to changes in the peso dollar exchange rate, the amount of the outstanding loan in dollar equivalent if it was repaid as at close of business yesterday shows a reduction of US$270,000 resulting in US$4.73 million dollar equivalent as the outstanding principal sum. Interest paid/accrued to such date on the loan is approximately US$160,000 giving a positive differential of over US$100,000 since the loan was taken out in late December.
Market consensus is that a similar progression in exchange rates will continue though this year.
Peter Levine, Chairman, commented
“Every little helps.
“With concentration this year in Argentina on expanding production of gas in Rio Negro and oil in Salta it is very important that we get the best value out of our existing oil production in Rio Negro”.