Prospex 1H20 Reports Positive Outlook
(PXEN ) 1H20 results report Total Assets of £6,202,327 as at 30 June 2020, with a 14% reduction in administrative expenses to £416,885 (1H19: £484,713).
Reported operating loss, was therefore reduced to £382,768 (1H19: 484,713).
Importantly, the Company successfully raised £720,000 via an oversubscribed placing of 600,000,000 new ordinary shares to help fund the Company's acquisition of a 49.9% indirect stake in El Romeral during the period with significant Director participation worth an aggregate value of £140,000 as part of the Placing.
Post period end the Company changed its name from Prospex Oil and Gas to Prospex Energy to better reflect the portfolio and ambitions of the Company.
Portfolio Highlights
Spain
The Company completed the acquisition of 49.9% interest in El Romeral for net consideration of €375,000, which has been paid. However, the transfer of interest to Prospex's Spanish affiliate has been delayed by COVID-19.
The Company is currently evaluating multiple low risk opportunities to increase gas production via two further locations with 5 billion cubic feet ('Bcf') of gross contingent resources and 11 prospects with 90 Bcf of gross, un-risked prospective resources with high Chance of Success of >70% (in most cases).
There is also significant scope to increase power generation with the power plant, which is currently constrained to operating at c. 22% capacity due to current wells' tail production. However, full capacity at the plant can be readily achieved with one successful new well coming on stream.
Modelling suggests operating at 100% capacity and selling electricity at Spain's historic average price of €70 per MWh (including subsidy) has the potential to generate annual revenues and profit before tax of €4.2 million and €2.4 million, respectively, (€1.8 million profit after tax) from the asset.
The Tesorillo Gas Project has delivered “encouraging results” from the ongoing work programmes, with initial results indicating multiple potential gas traps following reprocessing and interpretation of historic 2D seismic data with indications of four promising leads in the northern half of the concession following integration of new structural maps and cross sections with well reinterpretation and satellite images.
Italy
The Company as received formal technical environmental approval for the development of Selva from the Italian Environment Ministry
Next steps include final sign off by Ministerial decree, the issuing of the required INTESA (intergovernmental agreement) and the final grant of a production concession from Italy's Economic Development Ministry and the non-dilutive / non-equity linked funding of Prospex's c. €400,000 share of Selva development costs.
First production at Selva gas field, at an initial rate of up to 150,000 scm/day, is expected to commence 1H21 with the Company progressing permitting processes for production concession.
Romania
Onshore Romania has performed 10% above expectations with production at Bainet field with Average daily production at 15,000m3 per day and above the 14,000m3 per day average achieved in 2019.
The Company is continuing its evaluation of the concession's gas prospectivity to determine licence extension and next drilling targets.
Shares in PXEN opened at 2.05p to find support at 1.9p in early trading following publication of the results.
Outlook
While the Company recognises the unprecedented backdrop to the half year, the Company states the roadmap it has in place to achieve a major step-up in production and revenues remains intact and achievable.
Upcoming milestones for investors to note include first gas at Selva in Italy and the transfer of a 49.9% interest in the El Romeral gas and power project to our Spanish affiliate.
Once these have been achieved, Prospex will have material interests in five gas wells, which it estimates will have the potential to produce 7,800,000 scm net in 2021, and a 49.9% interest in an operational power plant, which cost €10 million to build.
At that point, the Company assures investors Prospex will be a highly cash flow generative energy investment company.
Looking further into the future, the Company said it will target ramping up electricity generation at the El Romeral power plant towards its name plate capacity and advancing the numerous follow-up opportunities that have been identified across our asset base.
Edward Dawson, Managing Director of Prospex, said, "Total asset value of £6,202,327 as at period end provides significant asset backing when compared to our current market cap, but it does not tell the whole of the story. Total Assets do not reflect the considerable run room that exists within our portfolio to grow production and revenues: the additional prospects identified on the Podere Gallina permit in Italy, which are estimated to hold aggregate gross prospective resources (best estimate) of 91.5 Bcf; the 11 prospects on the El Romeral Project, which have been assigned 90 Bcf of gross, un-risked prospective resources with high chance of success of >70% (in most cases); and the up to 830 Bcf of gross prospective resources estimated at the Tesorillo Project in Spain. With a roadmap in place to de-risk these company-making volumetrics, we are confident we can generate a substantial uplift in the value of the Company for our shareholders.
"Prospex is not just an asset play but a revenue growth one too. Starting with first gas at the Selva field in Italy in H1 2021 and the transfer of a 49.9% interest in the El Romeral project to our Spanish affiliate, our annual production could reach 7,800,000 scm net to Prospex in 2021. This would translate into a significant revenue stream even at current gas prices, which in turn will enable us to pursue the additional prospectivity and opportunities that have been identified across our asset base. COVID-19 may impact exact timings, but the roadmap we have to build a highly cash flow generative investment company focused on cleaner natural gas and power projects remains very much in place and I look forward to providing further updates on our progress in the months ahead."
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