President Energy PLC - Subscription for new ordinary shares by Trafigura
("President" or the "Company")
Subscription for new ordinary shares by Trafigura
Intended conversion of debt into equity
Intended reduction of Group debt by at least
Placing of new ordinary shares to raise up to
Retail offer of new ordinary shares on PrimaryBid
· The international commodity trader Trafigura has agreed to substantially increase its stake in President pursuant to a subscription (the "Subscription") of
· The net effect of the Subscription and the Conversion will be to reduce net debt of the Group by a minimum of approximately
· The Company is also raising up to
· As part of the Placing, certain directors and employees in the Company are intending to subscribe for a total of 15,136,619 new ordinary shares in the Company
· In addition to the Placing, there will be an offer made by the Company on the PrimaryBid platform of new ordinary shares in the Company (the "Retail
· The Subscription, Conversion, Placing and the Retail Offer are conditional upon the passing of the resolutions (the "Resolutions") at the general meeting of the Company more particularly referred to later in this announcement
· Irrevocable undertakings amounting to approximately 35.6% of the Company's current issued share capital have been received in support of the Resolutions
· After the Subscription, the intended Conversion and the Placing but subject to the Retail Offer, Trafigura will hold approximately 18.3 per cent of the entire enlarged issued share capital in the Company and
· The board of directors of the Company (the "Board") is proposing to obtain necessary shareholder approval, where required, to implement the above at a general meeting to be held on
Directors and employee participation in the Placing
Certain Directors and other employees (together, the "PDMRs") of the Company intend to subscribe directly with the Company for Placing Shares in the Placing at the Placing Price. The intended participation by Directors is as per the table below:
Number of Placing Shares acquired
Resultant shareholding post Placing
% of Enlarged Issued Share Capital
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In addition, other employees intend to subscribe for a total of 3,481,215 Placing Shares.
The participation of the PDMRs in the Placing will (at the time commitments are entered into) constitute a related party transaction under AIM Rule 13.
"We are pleased that Trafigura has expanded their interest in the Company, thereby having a major interest in the future growth and success of our Group.
"In difficult times for our industry, there will always be those, perhaps the few, who rise to the challenge and come through it the better and stronger for it being able to grasp opportunities as they arise. President is now well placed to be one of those."
"Trafigura is pleased to continue to expand its cooperation with President, whilst ensuring that the Company maintains a lean balance sheet and optimal cost structure.
"We believe that the current times, while certainly challenging for the entire industry, offer growth and consolidation opportunities as well and we are excited to cooperate with President, as we do with other producers in
Trafigura, already an important off-taker of the Group, is an international commodity trading and logistics company with extensive interests in the energy sector and whose reported turnover in 2019 was some
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(i) Trafigura has agreed, conditionally on the passing of the Resolutions, to exercise its rights to subscribe for the Subscription Shares at the Subscription Price on the terms more particularly referred to below;
(ii) it is intended that IYA, conditionally on the passing of the Resolutions, will inter alia exercise its rights to convert part of its debt under the IYA Loan Facility into the Conversion Shares on the terms more particularly referred to below, and extend the maturity of the IYA Loan Facility until
(iii) the Company is raising up to
(iv) As part of the Placing, certain directors and employees in the Company are intending to subscribe for a total of 15,136,619 new ordinary shares in the Company; and
(v) there will be an offer made by the Company on the PrimaryBid platform of new ordinary shares in the Company at the Subscription Price to provide existing shareholders and retail investors with an opportunity to participate. A separate announcement will be made shortly regarding the Retail Offer and its terms.
In relation to the Subscription, the Company has agreed with Trafigura to amend the terms of the subscription agreement entered into with Trafigura on
In relation to the Resolutions, irrevocable undertakings amounting to approximately 35.6% of the Company's currently issued share capital have been received in support thereof.
It is further intended, subject to the passing of the Resolutions that an amendment to the IYA Loan Facility be made reducing the conversion price from
It is intended that completion of the Subscription, the Conversion and the issue of the Placing Shares will take place on
Application will be made to the
The net effect of the Subscription and the Conversion will be to reduce the net debt of the Company by a minimum of US$10.1 million. Net debt of the Company will have accordingly been reduced by an aggregate total of at least
This reduction will transform the balance sheet of the Company and will have a material beneficial effect on cash flow, profits and prospects.
The net proceeds of the Placing and the Retail Offer will be used for general working capital purposes.
Following the completion of the Proposals:
(i) the Company's third-party financial debt (excluding amounts owed to IYA) will only be
(ii) The debt to IYA would be similarly reduced to a maximum of US$12.1 million, representing a 33% reduction since the start of the year.
(iii) Trafigura will own 334,743,721 ordinary shares representing around 18.3% of the Company's enlarged issued share capital (excluding the Retail
(iv) PLLG will own ordinary shares representing 29.95% of the Company's enlarged share capital.
Background to the Proposals
The world, and in particular the oil and gas industry, has dramatically changed in only a few months since the
This change has nowhere been more dramatically reflected than in oil prices and the significant decline in the share prices of publicly listed oil stocks including that of President.
The Proposals reflect the new reality for our industry where the key factors to future success are strong and strategic partners, solid financials with good liquidity, low debt and a plan for growth with the ability to deliver.
Trafigura is a world leading international commodity trader with a turnover of
The Proposals provide the Company with a strong strategic industry partner having a major stake aligned with a driven management all committed to a dynamic growth plan for
All money invested by Trafigura in the Company pursuant to the Subscription will be advanced to
Whilst IYA had intended to initially convert
Further, under the Proposals it is intended that the maturity date for repayment of the IYA Loan Facility will be extended to
The Circular will shortly be sent to shareholders to explain the background to and reasons for the Proposals and to set out why the Directors consider the Proposals fair and reasonable and recommend them to the members.
Shareholders' approval will be sought in respect of the Resolutions.
The General Meeting will be convened for 11.00 a.m. on 22 June 2020 for this purpose. A form of proxy to be used in connection with the General Meeting will be enclosed with the Circular which will contain the form of notice to members and the Resolutions and will be posted to shareholders shortly.
PLLG and Trafigura who are the registered holders of 450,451,237 ordinary shares, representing approximately 35.6 per cent. of the Company's issued share capital at the time of the General Meeting, have provided undertakings to vote in favour of all of the Resolutions.
The Directors consider the Proposals to be in the best interests of the shareholders as a whole. Accordingly, the Directors unanimously recommend that the shareholders vote in favour of the Resolutions to be proposed at the forthcoming General Meeting.
Full Year Audited Results for the Year Ended
The Company will publish audited results for full year 2019 during the week commencing 22 June.
It is currently expected that turnover, adjusted EBITDA and cash operating profit (after all administrative expenses and workovers, but before depreciation) are all expected to be in line with the unaudited numbers published on
After a careful review, reflecting a conservative approach in changing circumstances, the Company has decided to provide for the non-cash impairment of the values it carries in its accounts for the non-producing
However this in no way affects, impacts or reflects adversely on the Group's current trading, financial prospects and independent audited reserves and will certainly not prohibit in due course writing back value for those assets into the accounts if or when conditions improve, particularly Puesto Guardian where the licence extends to 2050, with all work commitments already fulfilled. The impairments taken in these accounts will mitigate, going forward, the level of any future possible non-cash impairment of those assets as well as their depreciation. At the same time and in the same vein, it is to be noted that President has not taken any benefit into the accounts for the profitable producing Angostura asset it acquired last year for nil consideration payable to the seller, notwithstanding it has positive independent audited reserves.
Following on from this, the Company is intending in due course to take the necessary steps in relation to the Group's share premium account to allow the declaration of dividends in the future should circumstances permit.
Q1 Argentine unaudited results
The unaudited results for Q1 2020 for
· Group turnover of
· each of the Argentine and
· net cash profit in
The performance this current quarter will obviously be impacted by low oil price, mitigated somewhat by the significant reductions in opex and G&A achieved since March (see below).
As referred to in the Company announcement of
(i) the immediate coming into effect of such legislation and royalties payable to the provinces calculated using
(ii) the term of the relevant price provisions being until either
(iii) provisions supporting, subject to demand levels of activity on the part of producers;
(iv) subject to demand mandatory requirements for refiners to pay producers on such fixed price basis and prohibiting refiners from buying crude abroad instead of domestically produced feedstock; and
(v) anti-monopoly and restrictive practices provisions.
Out of an abundance of caution, the practical implications of the Decree, its implementation and effect upon President is being considered by the Company inter alia in relation to demand, off-take levels and level of royalties payable. Further comment will be made once the effect on the ground becomes clear.
A copy of the Decree in its original Spanish language version is now available on the Company's website together with a translation into English the accuracy of which is not warranted.
President's gas production in
Current production in
Net backs and G&A
The Company, already before the crisis a leader in its peer group in this regard, continues to successfully focus on margins and cash preservation and is achieving further economies in both operational expenses and general and administrative expenses.
The Company has materially reduced the break-even level of the figures referred to in the announcement of
With regards to net backs generally, we are particularly focusing on our lowest margin concession, Puesto Guardian in
The level of G&A, like operational expenses, has been materially reduced across the board. In
Working in the time of Coronavirus
The first priority is the welfare and health of our employees and families as well as our contractors working in the field. President monitors and checks on the health of all its employees and follows strict guidelines. Measures include restricting numbers travelling to fields in vehicles, monitoring health of operatives daily and social distancing. These necessary extra precautions have had no impact on production levels.
The Company has successfully transitioned to 100% home working for all of our administration and office staff in
Capex for 2020
With regards to our development plans for 2020, we would like to drill at least two wells - one gas and one oil - before the end of the year and are reviewing budgets accordingly.
Licence extension for the Rio Negro key asset
As part of our planning for the future, working with our partner EDHIPSA, the provincial oil company in
The extension, which, subject to Provincial approval, we hope will be granted later this year, will enable President to better plan for longer life capex and measured production programmes whilst at the same time beneficially extending the current cut-off in its reserves calculation in that concession by a decade as well as spreading depreciation over a much longer period. The current reserves figure for that concession only takes into account hydrocarbons that can be produced until 2027 i.e. the current expiry.
"Boepd" barrels of oil equivalent per day
"MMBoe" million of barrels of oil equivalent
Notes to Editors
The Company has operated interests in Puesto Flores, Estancia Vieja, Puesto Prado, Angostura and Las Bases,
The Group is also actively pursuing value accretive acquisitions of high-quality production and development assets in
Founded in 1993, Trafigura is one of the largest physical commodities trading groups in the world. Trafigura sources, stores, transports and delivers a range of raw materials (including oil and refined products and metals and minerals) to clients around the world. The trading business is supported by industrial and financial assets, including 49.3 percent owned global oil products storage and distribution company Puma Energy; global terminals, warehousing and logistics operator Impala Terminals; Trafigura's
This announcement contains inside information for the purposes of article 7 of Regulation 596/2014.
This information is provided by RNS, the news service of the
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