President Energy’s (PPC) drilling activity is due to recommence in H120 and, alongside significantly increased production from Estancia Vieja, will contribute to a 2020 management estimated average production rate of over 4,000boepd, up from an average of c 2,400boepd in 2019. Following the debottlenecking of a section of the evacuation pipeline system, PPC expects to increase the share of gas in its production mix to c 30%. This comes at a time when there seems to be more clarity from the new president of Argentina, Alberto Fernández, on the importance of the country’s oil and gas industry. PPC also announced that Trafigura acquired an equity position in the company, with PPC’s debt reduced by c $6m, demonstrating confidence in its business plan. CEO Peter Levine is a 29.7% shareholder and principal funder, ensuring that interests are aligned with those of all shareholders.
PPC is focusing on its Rio Negro assets in Argentina, which provide the highestmargin returns in the company’s portfolio. Independently assessed net Argentinian 2P reserves of 25.9mmboe at end 2019 include 13.4mmboe in the Nequen Basin, an increase of 20% from 2018. An important milestone of first gas from Estancia Vieja was achieved in November 2019 and group production is expected to increase by more than 1,000boepd in gas from late February 2020, when a 16km section of restrictive pipeline is expected to have been replaced and commissioned.
Although there is still no defined programme for Argentina’s oil and gas industry, the newly appointed president, Alberto Fernández, recognises the importance of the industry to the country. He emphasised that currently there is low exploration activity and low investment in conventional oil production, and that the government will work to bring stability to the industry and stimulate investment.
Argentina currently has an unsustainable debt burden, with more than $50bn due in 2020, and fears of defaulting are still reflected in the US dollar vs Argentine peso exchange rate. Nonetheless, PPC’s cash losses due to FX were only c 1% of revenues in 2019. Decree 566, imposed by the previous government following the primary elections in August 2019, limited realisable prices for oil producers in Argentina and squeezed margins, negatively affecting PPC’s H219 results. However, since the decree’s expiry in November 2019, realised prices have recovered and with that revenue and profits. This is reflected in consensus estimates, which show revenue increasing from c $42m in 2019 to c $71m in 2021.