Member Info for fiveeights

Apologies for no Spanish speakers - you can always google translate

https://www.energia.gov.ar/contenidos/archivos/Reorganizacion/informacion_sectores/direccion_exploracion/jornada_sobre_transportepdf/presentaciones_empresas/empresas_transportistas_integradas/chevron_san_jorge.pdf

A deal with Capex on Loma Negra and La Yesera? The blocks are outlined on slide 11 today which I though was interesting considering Las Bases and Puesto Prado. I understand Chevron sold their stake in both Loma Negra and Yesera last year to capex. Obviously deals to be done in Arg

Obviously a hot topic at the moment for PPC as well as the millions of Argentineans. What does it mean? For PPc I think 3 things
1. Change of government. Would be a disaster for PPC if Arg re trenched back to previous administration or similar. Reaility is there is no one else emerging other than Macri IMHO. I see this as unlikely in the coming elections - not too far away
2. Exchange controls - would be a hammer blow to PPC and all other international companies. Can't see Macri doing this
3. Liberalised energy prices. Was going in the right direction but I don't see a growing political view to increase energy price in Arg so may not see a catch up to market as fast as previously anticipated.

$29m would be a good result. House broker forecasts $64.5m for FY Dec 18 which I presume is loaded to second half. My model has got it just under $29m but think I have been a little cautious. I think we will be at $30m which would be astounding

In House Broker FinnCap's update today they mention Paraguay as well:- "Also in Paraguay, where President intends to return to drilling in 2019, it expects positive news soon regarding its application to extend the Pirity licence to September 2020."
Not sure where that has come from

why the long line of buys today I wonder.

bit.ly/2wP595f

So much in here to ponder

Thanks Stockable. your paragraph (copied below) is very interesting and ideally would benefit from a lot more detail. It is very key so the detail need to be correct. What peso balances are they holding I wonder. If they are getting paid in peso they need that into hard currency ASAP.

Is this an accurate account of the payment process they have in place?

"Very importantly, the depreciation of the Argentine Peso has almost no impact on President's cash generation. To put it in a nutshell, the company receives the Peso equivalent of the US Dollar price on the day of payment, not on the day of invoice. The currency fluctuation in the intervening period is irrelevant. Sure, if it was in a period of hyper-inflation with prices doubling in hours, it would be an issue. But it's not. It simply requires good treasury management and that is what they have put in place."

It is interest rates that are at 60%

given the history of PPC I suspect that the PL loan was at some point critical to the business - holders should be grateful that the finance was provided. That is not the case now and at 10.5% it is a high cost of capital eg they have just re paid part of the cheaper Arg bank debt. With strong cash generation BoD should give consideration to allocating capital for part repayment. Obviously there is an opportunity cost to that and other uses may generate a return greater than 10.5% but it needs to be on the table. I wouldn't begrudge part repayment although given the related party element it is sensitive. One thing it re emphasises is that PL more than anyone else wants this to come good and is doing his upmost to make that happen. He is clearly a very wealthy man and all credit to him but with 30% of the stock and $13.5m debt there is an element of being balls deep in PPC. That fact should allow other holders an easier sleep although on occasions I am sure it has stopped PL from enjoying the same.

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