Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
President Energy
Following the PPC announcement last week I took the opportunity to have a chat with Chairman Peter Levine to catch up on the news from Puesto Flores and Estancia Vieja in Argentina. With three fully funded wells expected in the autumn drilling campaign starting next month a base case of 600 b/d is expected with an upside considerably higher. Current production of 2,700 b/d, already way in excess of my forecasts only a few months ago, even with some natural decline could therefore see at least 3,700 boepd and more likely nearer 4,000 boepd.
At Estancia Vieja the gas is flowing pretty much as expected, the second well produced at 200 boepd but after a pressure buildup test is now likely to be looking at nearer 300 boepd. All the applications have been made for local generation and certification is expected within six months powering all their fields with their own gas. These cost savings go straight through to the bottom line and prove the absolute value in this gas. There is still a distinct possibility that the company will be able to monetise this resource as the amount required to power their own facilities is only around 15% of the gas the company could produce. Accordingly a route to market for EV gas of say 700 boepd is being investigated at the moment and would be another significant contributor to cash flow and profits.
President has moved on smartly in the last few months and whilst Puesto Flores and Estancia Vieja are the current play areas it would be wrong to forget about Puesto Guardian and other parts of the portfolio. PG still delivers quality, stable cash flow with longer term upside whilst PF and EV are more the ‘icing on the cake’ as described by PL. Finally I suspect that although there is a lot going on at PPC there are still opportunities in the area and the company is extremely well financed and could handle an acquisition comfortably if appropriate.
The President share price is 10% lower than at the raise last November with production up 60% in the meantime and positive cash flow from operations running at over $2m per month. This is totally unfathomable given that significant value has been added and that the company is making real money and throwing off cash, something that should be recognised in the market.
Your buy shows as a sell which largely confirms the sea of red since yesterday's announcement is misleading to say the least
The Investors Chronicle tipped to sell a few months ago at 12p. ironically it was a very positive write up but justification of having tipped to buy ay 6-7p. After release of FY17 they re rated as a buy in an online only write up. I would say this in on their radar as a full new rec at some point may be after the HY. Having said that sometimes the IC is a kiss of death but credit to them over the last year having called PPC better than most.
Notice the if/when bit for EV:-
"In addition to the above, the currently shut in gas production capability of certain wells in the Estancia Vieja field would further add in excess of 500 boepd additional initial production if/when placed on line"
There will be more gushing from Malcy's update today than from one of the wells in Puesto Flores
Belter - so much to get your teeth into on that. Flagging Paraguay and acquisitions. End stages of PF workover successful with one further well completed. New exp on unproven reserves in fertile ground. Arg bank debt to be repaid. So many key positive trigger words in here. You only write that RNS if you have "considerable confidence" ahead.
The majority of P2 (18.6m out of 26.6m) is booked at PG which is coming to surface at a slow rate 500bopd. Ideally you would want the reserve to be at PF/EV where ability to extract is stronger. I suspect you will get an increase in reserves at PF/EV this year. The Co believes this as well as stated in their last update on Argentine Reserves "2018 Capex programme capital expected to further increase President's Neuquén Basin reserves". We need that coupled with better production at PG. PG will require further capex to hit that but focus is on Neuquén for the time being.
as for my valuation of 14p, I consider the house broker's 2019 EPS estimate of 1.6p eminently achievable and assume a forward multiple of 8 - 10 times = a range of 12.8p to 16p
Brasso the house broker doesn't get PBT close to £34m until YE2020 (est $40m). For YE2018 they forecast $7.6m giving at EPS of 0.4p. They forecast EPS for YE2020 of 3.1p
so the shares are trading on 22 times forecast earnings for this year dropping to 2.8 times forecast earning for 2020
the 26.6m reserves is only Argentina with most being at Puesto Guardian
Brasso3 he was replying on a thread which outlined the changes in mcap resulting from PF/EV. Shares in issue increased by about 51m new shares following the open offer announcement including loan cancellation by PL and some shares to service provider.
I think we are all wondering (including the BOD) how on earth the market is valuing PPC at present. Clearly there are many other factors on valuation other than production so excluding the 27p but the thrust of DRichi's post stands in that the expansion of group production does not appear to be reflected in the SP.
I wonder as there appears to be a large seller out there. Today's 500,000 sell is one of the largest trades for a while as was the 350,000 sell on Wednesday
Issue of Shares to a service provider
Taken from the RNS on result of the open offer. I wonder who this was, if they are still holding and presume it was shares in lieu of payment.
"The Company has agreed to issue 1,642,036 Ordinary Shares ("Service Provider Shares") to a service provider following a request from that service provider which the Company was happy to accommodate as in President's view this contributes to future alignment of interests. The Service Provider Shares will be issued at a price of 10p per Ordinary Share. "
now making that an uplift in mcap of £21m or 28% since pre PF/EV
When looking at where the price is now, it is helpful to look back to pre PF/EV. I bought in Summer 2017 prior to the PF/EV deal. I was buying into a company with production in Arg (potential to increase on a work over program), non core production in US along with possible upside from Paraguay and acreage in Argentina. In my opinion it was also under financed, loss making and not generating free cash. It was also only getting $55 pb for its oil. Being generous, group production was at best 1000 - 1100 bopd.
The PF/EV deal was announced on 21 Sep 2017. The day before the shares closed at 7.2p giving a market cap of £74m. Today at a price of 9.15p and allowing for the issue of new shares to fund the deal the market cap is £98m so an increase in value of £24m or 32%
But look what has changed since before the PV/EV deal:- group production towards the top end of 2500 - 3000 bopd (up something like 125 to 150% )with potential for it to move beyond following further workover and drills, They are now getting $68 for their oil, they are cash generative with a stronger balance sheet. Paraguay is still there, acreage in Salta is still there.
You can draw one of two conclusions either they were massively overpriced in Sep 2017 or they are great value today.
As I said before based on available information my personal target is 14p.
This is of course just in my humble opinion
I for one consider the Senior Management to have lost a significant amount of credibility over the last 12 months although not quite as great a loss as shareholders have had to endure during the same period. I would support change right at the top for the good of shareholders. As the grand architect of strategy, Coveney must take responsibility for the massive erosion in shareholder value.
Noted in the PI conf call (which I only got around to watching this weekend) that PL gave a conservative timeline on another acquisition of 12 months although, interestingly, he said he wished he could say more on this subject which I took to be he has more to say. I really enjoyed the call and wish I had been around to ask my own questions - may be next time. To me they seem to be playing down Paraguay and all focus on PF/EV. They details revealed on PG and the Chinese supplier are also very interesting. You have to say this looks very sloppy and hardly a ringing endorsement for the management team. House Broker target is 18p and Malcy have given vague targets on multiples of the current price if I am not mistaken. For what it is worth my personal target based on where we are now is 14p. Paraguay and Salta province upside plus further success at PL/EV not considered in this. Obviously just my own opinion.
I have been critical at times of PL and PPC but I disagree with you here. No conspiracy theory based on him doing the AGM by video link of telecon
I appreciate the sentiment but it is hardly a ringing endorsement when the average PI has more at risk than the Board members. Wonder if PL strong armed them into buying. Whilst we cannot estimate on the financial circumstances of the board members, 100,000 shares at 9.25p is hardly going in balls deep. looking forward to seeing the next announcement on progress in Arg. That RNS should be new news rather than basking in the glory of what we already know. I re entered at 9p plus. Compare it to the 6p this time last year considering the oil price and transformational PF/EV deal and there appears to be a lot of value. Did anyone go to the AGM?
Suspect that will edge the price higher. Can't knock the PF/EV news flow