Prospex Energy receives regulatory approval for acquisition of El Romeral

Vox Markets
Vox Newswire
10:14, 24th December 2020

Prospex Energy (PXEN) has received regulatory approval for the acquisition of a 49.9% interest in El Romeral, and issues £415,838.28 convertible loan notes and associated warrants to new and existing investors, and certain members of the Board and staff in settlement of deferred stipends and salaries as a result of the COVID-19 pandemic.

El Romeral Acquisition

El Romeral is an operational integrated gas production and power station operation located in the Guadalquivir basin in southern Spain.

El Romeral is comprised of three producing wells that supply gas, via its own network, to a 100%-owned 8.1 MW power station. 

In addition, the El Romeral contains two development locations and 11 very-low risk prospects with gross contingent and prospective gas resources of 5Bcf and 90 Bcf, respectively.

Tarba Energia, has now informed its shareholders that both the Ministerial and Regional authorities sign-off has been received for the transfer of El Romeral to Prospex Energy. 

This represents the final regulatory approval required for the acquisition of El Romeral, which can now proceed to completion. 

Completion is now expected on 31 January 2021 whereby Prospex will own 49.9% interest in Tarba's B shares with its partner Warrego Energy Limited owning the balance.

Next steps

Following completion of the acquisition, Tarba will assume the day-to-day management and control of El Romeral and will look to implement a number of short-term operational enhancements and efficiencies.

Whilst there is no committed work programme, Tarba's medium-term target is to increase gas production and, in turn, electricity generation at the Project's power plant towards its nameplate capacity via the drilling of new wells targeting already identified development locations / prospects.

Tarba will also carry out a review of existing wells to evaluate the potential to undertake workovers to enhance recovery rates. 

Prospex non-executive Chairman, Bill Smith, said; "Ministerial sign-off for the acquisition of El Romeral sees Prospex become an integrated gas and power investment company. For €374,250 we have acquired a 49.9% interest in a gas-to-power project that can generate significant revenues from the 8.1MW power station and which cost €10 million to construct.

 It was not only the excellent value however that attracted us to El Romeral but also the significant growth potential.  Gross contingent and prospective gas resources of 5Bcf and 90Bcf respectively at two development locations and 11 prospects provide multiple low risk opportunities to increase the volumes of gas supplied to the power station which, when gas was not a limiting factor, regularly produced c. 60,000 Mwh per annum. Based on historic average prices revenue per Mwh, this would equate to annual revenues of over €4.2 million. We are not the only ones to see El Romeral's potential, so too, in our view, do the subscribers to the CLN. As well as the advancement of El Romeral, in 2021 these subscribers along with our existing shareholders can expect to see the commencement of production at the Selva gas field on the Podere Gallina permit in Italy at an initial rate of up to 150,000 scm/day.

Together with El Romeral, our annual gas production has the potential to reach 7,800,000 scm in 2021. This would translate into a material revenue stream for the Company which we will look to reinvest into further development activity across our existing asset base. With this in mind, I look forward to providing further updates on our progress in the year ahead."

Convertible Loan Note and Warrants

The Company has also issued new unsecured Convertible Loan Notes (“CLN”), with denomination of £1, to new and certain existing investors, enabled the Company’s 2018 unsecured loan notes to be rolled over into the CLN and issued £38,250 of CLN to certain directors and staff in settlement of deferred stipends and salaries as a result of the VOVID-19 pandemic.

A total of £415,838.28 of the CLN has therefore been issued to all the above subscribers, each of whom will also be issued with 44.4444 warrants for each £1 of the CLN subscribed. 

CLN carry 10% interest per annum with the first six monthly payment due in June 2021. 

Each Warrant confers to the subscriber the right to acquire one Ordinary Share at 2.25p

Save for certain events triggering an earlier expiry the Warrants will expire in December 2022.

The Company can elect at any time to repay the CLNs early in cash.

The CLN subscriber group is made up of 13 individuals or their pension funds, including certain Directors

The net proceeds of the issue of the CLN will be used for general working capital purposes.

 

Investors were reminded today ‘there is the potential to increase the number of generating days at the El Romal (historically equivalent to five days per week) and in the medium-term increase utilisation of the generation equipment (current 22%) by increasing onsite gas production. Furthermore, when gas was not a limiting factor, the power station regularly produced c. 60,000 Mwh per annum’. Shares in PXEN reacted positively to the news opening 10% up following the announcement. FOLLOW

PXEN price chart

Disclaimer & Declaration of Interest

The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

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