President Energy pivots focus to gas amid Argentina oil price fix
President Energy updated the market on recent activities in Argentina on Wednesday, reporting that the country’s government had recently issued a time-limited decree in an attempt to temporarily control prices at the fuel pumps for end consumers.
The AIM-traded firm said the decree, which was effective for 90 days, on its wording, fixed - solely for oil producers - the base values for the peso-to-dollar exchange rate and the reference price of Brent used in the calculation of the oil price receivable.
It said the exchange rate as per the decree was fixed at ARS 45.19 to $1 when payment for oil was made by offtakers, and the reference price of Brent was fixed at $59 per barrel.
“The decree has met significant resistance from oil producers and key provincial authorities with the important Province of Neuquen amongst others issuing court applications to have the decree declared illegal,” the company’s board said in its statement.
“President does not rule out a compromise being reached in due course but not necessarily in early course.
“Negotiations with key stakeholders continue with the government.”
The board said that notwithstanding the move, the firm would continue to be a profitable company in its Argentine operations irrespective of whether or not the temporary decree continued in effect.
It put that down to its focus on opex and cash management, as well as its ability to adapt quickly to the prevailing circumstances, pivoting where appropriate.
“The company is focussed on high-margin production rather than production for its own sake.
“Whilst the current volatility prevails, President has therefore deferred this year's drilling campaign in favour of greater near term emphasis on progressing and expanding its existing gas project.”
The prices for gas were not directly affected by the decree.
President said it now anticipated well drilling would commence in the first quarter of 2020, with an initial emphasis on new gas wells.
“From zero contribution in 2017, to some 5% of sales in 2018 and on average similar so far this year, gas sales will increase materially from the first quarter 2020 with a major contribution in both average production and revenue to our group expected to continue into the future providing a much more balanced portfolio as well as moving away from dependency on a limited number of hydrocarbon producing wells,” said President Energy chairman Peter Levine.
“Although the management decisions we take reflect the macro circumstances currently affecting our oil business, in doing so we are in no way neglecting our core oil production.”
Levine said the firm’s opportunities in its oil assets, and from its reserves, remained “like assets in a safe deposit”, which could be unlocked at the optimum time commercially.
“In the meantime we adapt, mobilise and concentrate the resources at our disposal to expand our business in the most expedient and profitable way possible.”