President Energy bags bargain in Argentina

There are serious concerns about the state of the oil exploration and production (E&P) sector as the market reels from OPEC's decision not to cut output. But on the plus-side, it has allowed President Energy to drive down the purchase price for the Puesto Guardian concession in Argentina by two-thirds to $5.8 million.

President took over the operation and complete ownership of the concession from

Tripetrol Petroleum and Petrolera San Jose, who were after funding to expand in Latin America. It already owned half the concession and acquired the remaining 50% stake for an initial $5 million (£3.2 million) plus deferred consideration of almost $1.9 million over two years - $880,000 at the end of 2015 and $1 million at the end of 2016. President was also due to pay 5% overriding royalty on production up to $11 million.

But a lack of cash for the sellers meant President could modify the terms, with President agreeing to pay up $880,000 earlier in return for the deferred compensation and royalty being cancelled.

"President has been the first gainer from the oil price problems it seems as its purchase price of the Puesto Guardian concession in Argentina has just come down," said industry expert Malcolm Graham-Wood.

Before work starts at the concession in the first quarter of next year, President ran an initial review of an old shut-in well. It produced 130 barrels of oil per day on a light swap test with good pressure support.

"We believe the Puesto Guardian Concession offers considerable untapped potential and are greatly encouraged by the strong recent well test performance," said chairman Peter Levine.

The company has also managed to boost its operational flexibility by renewing its $15 million unsecured revolving loan facility from IYA Global Limited until the end of next year.

However, President shares fell by 8% to 27.5p as negative sentiment hammers the oil sector.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.