PPC.L Regulatory News (PPC)

2 June 2017

PRESIDENT ENERGY PLC

("President", "the Company", or "the Group")

Results for the year ended 31 December 2016

President (AIM: PPC), the oil and gas exploration and production company, announces its full year audited results for the year ended 31 December 2016.

Corporate & Financial Highlights

· Average production in Argentina increased 26% to 342 bopd (2015: 271 bopd)

· Group production increased 3% to 506 boepd (2015: 490 boepd), since increased in 2017 by 117% having reached approximately 1,100 boepd in April

· Independently audited 2P (proven and probable) reserves in Puesto Guardian Concession increased by 10% to 19.9 mmboe

· Cash at year end of US$17.6 million, net US$8.5 million (2015: cash US$0.2 million, net debt US$8.1 million)

· Group-wide administrative costs reduced by 30% to US$4.5 million (2015: US$6.4 million) reflecting the on-going commitment to costs

· Whilst group turnover was marginally down 2% to US$9.9 million (2015: US$10.1 million) reflecting lower oil prices, turnover in the first five months of 2017 is ahead of the comparative period in 2016

· Operating losses before impairment charges, non-operating gains and adjusted for workover expenses narrowed by 15% to US$5.5 million (2015: loss US$6.5 million)

· Positive operating margins achieved in spring 2017, boosted by the additional interest acquired in Louisiana and Argentina workover results

· Successful refinancing supported by all major shareholders - placing raising US$20.0 million of new money and conversion of US$12.0 million of debt to equity with a reduction of the interest burden and extension of term in relation to debt to December 2021

Argentina

· First part of the year spent conducting workovers of certain wells in our Puesto Guardian Concession with solid progress in production rates

· Workovers reaffirm and confirm certain productive zones underpinning a 10% increase in independently audited 2P reserves at the Puesto Guardian Concession to 19.9 mmboe

· DP-1002 S/T at the Dos Puntitas field in the Concession horizontally drilled to the reservoir ready for the production leg, but suffered throughout from various mechanical and service quality issues - well rendered incapable of completion for production and costs impaired giving rise to a one-off impairment charge of US$10.9 million. President announced last month that it is pursuing claims against certain service providers in connection with that well

· Post period end, the Company successfully worked-over the DP-1001 well which initially returned to production at approximately 300 bopd from a vertical section

· On-going subsurface and geochemical studies at the Puesto Guardian Concession have yielded encouraging results indicative of the potential for structures and reservoir targets on the Concession that have not to date been targeted

· Significant increase in interest in Argentina - President is well placed to expand by way of suitable acquisition opportunities as and when they arise

Paraguay

· Geological and geophysical work continued through 2016 and is on-going

· President remains in the Exploration Phase in the Pirity Concession - continues until at least March 2018

· President has determined that it is now appropriate to move forward to identify serious farm-out partners for its Paraguay interests

· President's interests in Paraguay include several undrilled Cretaceous prospects of over 340 mmboe in Prospective Resources supported by extensive 3D and 2D seismic data, of which two are drill ready, as well as multi-Tcf gas potential

Louisiana

· Louisiana contributed profitably to the Group despite declines in revenue due to oil prices, operational issues and natural declines

· Steps taken to reduce overheads and improve margins

· In April 2017, the Group announced the acquisition of an additional 50% WI (37.5% NRI) and the assumption of operatorship in the Triche Well, East Lake Verret, Louisiana, for an initial cash consideration of US$2.25 million and an additional production related earn-out of up to US$0.4 million.

Australia

· The Group's interest in Australia, already completely written off in the Group's accounts, has now been relinquished without penalty

Outlook

· President entered 2017 in a healthy state and production in the spring broke through the 1,100 boepd‎ barrier

· Workover programme continues - the Group continues to target 1,200 bopd from Argentina by end September

· The new acquisition in Louisiana is performing as expected

· Steps are being taken to market Paraguay for farm-out

· In Argentina in particular, the macro business environment continues to strengthen and stabilise under the pro-business Government of President Macri

· President is well positioned to take advantage of opportunities to grow by way of acquisition of existing production and development assets - actively considering several alternatives

Peter Levine, Chairman, commented: ''I believe President is now well positioned to take advantage of the opportunities our portfolio presents, with low geological risk and material upside, coupled with early mover advantage in a region where we are confident acquisition targets will emerge. After an at times difficult 2016, we are regaining momentum and are excited by the potential of the ongoing workover programme and the value it can create for shareholders. We look forward to updating the market on our progress.'

Contact:

Chairman's Statement

Summary

2016 was a rollercoaster of a year. It began with solid ‎progress in production, progressed to a disappointing mechanical result of what otherwise would have been a successful horizontal well in Argentina and ended with a positive financial reorganisation and debt conversion leaving the Group well set up for progress with cash at the year-end of US$17.6 million, net US$8.5 million, (2015: cash US$0.2 million, net debt US$8.1 million). In 2017, Group production was increased to a level of approximately 1,100 boepd, at that figure a 117% increase on the 2016 full year average.

Taking this topsy turvey year into account, and mixing in the challenging macro environment, highlights of the now historic results for 2016 show the following:

· Average production in Argentina increased 26% to 342 bopd (2015: 271 bopd)

· Group production increased 3% to 506 boepd (2015: 490 boepd), since increased in 2017 by 117% having reached approximately 1,100 boepd in April

· Independently audited 2P (proven and probable) reserves in Puesto Guardian Concession increased by 10% to 19.9 mmboe

· Cash at year end of US$17.6 million, net US$8.5 million (2015: cash US$0.2 million, net debt US$8.1 million)

· Group-wide administrative costs reduced by 30% to US$4.5 million (2015: US$6.4 million) reflecting the on-going commitment to costs

· Whilst group turnover was marginally down 2% to US$9.9 million (2015: US$10.1 million) reflecting lower oil prices, turnover in the first five months of 2017 is ahead of the comparative period in 2016

· Operating losses before impairment charges, non-operating gains and adjusted for workover expenses narrowed by 15% to US$5.5 million (2015: loss US$6.5 million)

· Positive operating margins achieved in spring 2017, boosted by the additional interest acquired in Louisiana and Argentina workover results

· In December 2016 a refinancing of the Group was effected by a placing supported by all major shareholders raising US$20.0 million of new money and a conversion of US$12.0 million of debt to equity with a reduction of the interest burden and extension of term in relation to debt to December 2021

Argentina

The first part of the year was spent conducting workovers of certain wells in our Puesto Guardian Concession with solid progress in production rates, albeit not spectacular. However, the workovers did reaffirm and confirm certain productive zones which helped underpin a 10% increase in independently audited 2P reserves at the Puesto Guardian Concession to 19.9 mmboe

The decision was then taken in the second part of the year to drill new horizontal wells, the first of these being at the DP-1002 S/T at the Dos Puntitas field in the Concession. As previously announced this well, whilst eventually horizontally drilled to the reservoir ready for the production leg, suffered throughout from various mechanical and service quality issues, which ultimately rendered the well incapable of completion for production and drew the specific drilling programme to its current halt. As a result, the Board has determined that the costs of the DP-1002 well as at the balance sheet date should be impaired giving rise to a one-off charge of US$10.9 million. President announced last month that it is pursuing claims against certain service providers in connection with that well.

Since the period end, the Company successfully worked-over the DP-1001 well which initially returned to production at approximately 300 bopd from a vertical section. Additionally, on-going subsurface and geochemical studies at the Puesto Guardian Concession have yielded encouraging results indicative of the potential for structures and reservoir targets on the Concession that have not to date been targeted and in certain cases ignored totally. This, combined with the workovers performed in 2016 and during 2017 to date, reinforces our view that there exist multiple development and appraisal drilling opportunities as well as workover opportunities in the Puesto Guardian Concession that could yield material upside, particularly should oil prices recover from their present levels. The current workover programme is continuing.

On a macro basis we are noticing a significant increase in interest from outside parties in doing business in Argentina and we certainly feel that President is well placed to expand by way of suitable acquisition opportunities as and when they arise.

Paraguay

Geological and geophysical work behind the scenes continued through 2016 and is on-going. President remains in the Exploration Phase in the Pirity Concession and this currently continues until at least March 2018.

With the improvement in oil prices since the lows of early 2016, the positive results of President's further technical work combined with appetite returning for exploration projects, President has determined that it is now appropriate to move forward to identify serious farm-out partners for its Paraguay interests.

President's interests in Paraguay include several undrilled Cretaceous prospects of over 340 mmboe in Prospective Resources supported by extensive 3D and 2D seismic data, of which two are drill ready, as well as multi-TCF gas potential.

Accordingly Paraguay remains very much on President's radar and it retains its optimism as to its assets in that country.

Louisiana

Whilst the year saw declines in revenue due to oil prices, operational issues and natural declines, Louisiana contributed profitably to the Group. Steps were taken to reduce overheads and improve margins.

In April 2017, the Group announced the acquisition of an additional 50% WI (37.5% NRI) and the assumption of operatorship in the Triche Well, East Lake Verret, Louisiana, for an initial cash consideration of US$2.25 million and an additional production related earn-out of up to US$0.4 million. The Group already held a 12% WI (9% NRI and 3% ORRI) in the Triche well and the acquisition represents an incremental production stream of approximately 150 boepd at the time of completion. The Triche Well is performing in line with expectations since the acquisition of the additional WI and this transaction reflects the Group's focus on increasing production and in its operating assets on-shore USA.

Australia

The Group's interest in Australia, already completely written off in the Group's accounts, has now been relinquished without penalty.

Corporate

Following delays arising from the Dos Puntitas horizontal drilling‎, it was determined that a refinancing of the Group was required to make the progress currently being achieved in 2017. In December 2016 this was effected by a placing supported by all major shareholders raising US$20.0 million of new money and a conversion of US$12.0 million of debt to equity with a reduction of the interest burden and extension of term in relation to debt to December 2021. This left the Group at the year end with cash of US$17.6 million (US$8.5 million net cash).

During the year continued steps to reduce Group-wide administrative costs were taken with a material 30% reduction compared to the prior period. Work on further efficiencies continues.

Financial Review

In 2016, the Group recognised a gross loss of US$2.7 million (2015: loss US$0.2 million) due principally to the on-going depressed oil price environment during the year and to expensed workovers in Argentina of US$1.7 million (2015: US$0.05 million). After administrative expenses of US$4.5 million (2015: US$6.4 million) are taken in to account, this led to operating loss before impairment and non-operating gains of US$7.2 million (2015: loss US$6.6 million). The loss for the year from continuing operations of US$14.0 million (2015: loss US$18.5 million loss) was after impairment charges of US$11.0 million (2015: US$ 11.4 million) relating primarily to the full impairment of the DP-1002 S/T well in Argentina at 31 December 2016.

Revenue was marginally reduced against the prior year by 2% to US$9.9 million (2015: US$10.1 million), reflecting lower average oil prices for the year of US$53.51/boe (2015: US$56.48/boe). Overall Group production increased by 3% to 506 boepd (2015: 490 boepd), which was driven by a 26% increase in production at Argentine operations to 342 boepd (2015: 271 boepd).

The Company's main operational focus in 2016 has been on Argentina whilst is has also continued to evaluate the Hernandarias Concession and assess farm-out options for Paraguay. Investment in Property, Plant and Equipment in the year amounted to US$15.6 million (2015: US$4.0 million) and included the development well DP-1002 drilled in the Puesto Guardian Concession which successfully entered and confirmed the target reservoir horizontally, albeit with a disappointing mechanical result in casing, capitalised workovers and tangible equipment purchases in Argentina, development drilling on the East White Lake field in the USA and an increase in the asset abandonment recognition. As a result of service quality issues encountered with drilling and casing the DP-1002 S/T well, the Board subsequently determined that it was not capable of completion for production and has taken the decision to impair the well fully at the balance sheet date resulting in a one-off charge of US$10.9 million.

Intangible fixed asset additions of US$0.6 million (2015: US$11.3 million) arose in Paraguay and primarily comprise expenditure on evaluation of the Hernandarias Concession.

Production and reserves

Reserve movements in Argentina reflect the results of workovers in the year and the subsequent independent auditor's reserve report by VYP Consultants.

Outlook

President entered 2017 in a healthy state and production, after a slow start, in the spring broke through the 1,100 boepd‎ barrier. A workover programme continues and whilst it is too early to say anything concrete, the Group continues to target 1,200 bopd from Argentina by end September. The new acquisition in Louisiana is performing as expected and steps are being taken to market Paraguay for farm-out.

In Argentina in particular, the macro business environment continues to strengthen and stabilise under the pro-business Government of President Macri. As an established operator in Argentina with a healthy balance sheet and track record, President is well positioned to take advantage of opportunities to grow by way of acquisition of existing production and development assets and we are actively considering several alternatives in this regard.

Detailed Financial Review

In 2016, the Group recognised a gross loss of US$2.7 million (2015: loss US$0.2 million) due principally to the on-going depressed oil price environment during the year and to expensed workovers in Argentina of US$1.7 million (2015: US$0.05 million). After administrative expenses of US$4.5 million (2015: US$6.4 million) are taken in to account, this led to an operating loss before impairment and non-operating gains of US$7.2 million (2015: loss US$6.6 million). The loss for the year from continuing operations of US$14.0 million (2015: loss US$18.5 million loss) was after impairment charges of US$11.0 million (2015: US$ 11.4 million) relating primarily to the full impairment of the DP-1002 S/T well in Argentina at 31 December 2016.

Revenue was marginally reduced against the prior year by 2% to US$9.9 million (2015: US$10.1 million), reflecting lower average oil prices for the year of US$53.51/boe (2015: US$56.48/boe). Overall Group production increased by 3% to 506 boepd (2015: 490 boepd), which was driven by a 26% increase in production at Argentine operations to 342 boepd (2015: 271 boepd). Cost of sales of US$12.6 million (2015: US$10.3 million) increased on a per boe basis, most of the increase representing well workovers designed to offset production declines in Argentina.

Production in Argentina increased by 26% to 125,135 bbls (2015: 98,781 bbls) or 342 bopd (2015: 271 bopd) due to successful workovers of wells at the Puesto Guardian Concession. As well as increasing production, the workovers also informed independently assessed additions to 2P reserves at the Puesto Guardian Concession of nearly 2.0 mmboe representing a reserves replacement ratio of nearly 16 times production volumes in 2016. Oil sales in Argentina averaged US$57.83 per bbl (2015: US$67.16 per bbl) as the regulated price moved more in line with prevailing global oil prices. Well operating costs before workover expenses were managed down during the year to US$55.69/boe (2015: US$63.02/boe) whilst depreciation also fell during the year to US$13.68/boe (2015: US$16.67/boe) as a result of reserves upgrades. There has been a continued focus in 2017 on efficiency gains in field operating costs and we anticipate that this, combined with successful workovers, should lead to a further reduction of unit well operating costs in 2017.

Production from US operations fell by 25% to 164 boepd (2015: 219 boepd) due to gas pipeline outages at the Triche well and natural decline at East Lake Verret and East White Lake. Realised prices in the US edged up 3% on the prior year to US$44.51/boe (2015: US$43.27/boe). Cost of Sales decreased by 4% to US$2.2 million (2015: US$2.3 million) as higher one off operating cost adjustments were more than offset by lower depreciation following the impairment last year and lower production. On a per boe basis, cost of sales increased to US$37.48/boe (2015: US$29.14/boe) primarily due to the fall in production. Despite this, the EBITDA contribution from the US operations was positive at US$0.8 million (2015: US$2.1 million). During the second half of 2016 steps were taken to manage down further operational and administrative costs in the Group's US operations, the benefits of which should be seen in 2017.

In line with the broader E&P sector, the Board managed Group-wide administrative expenses aggressively during the year resulting in a 30% reduction to US$4.5 million (2015: US$6.4 million).

Other gains in the year of US$0.6 million (2015: US$0.2 million) arise from insurance proceeds received arising from the DP-1002 well in Argentina.

Total impairment charges during the year of US$11.0 million (2015: US$11.4 million) relate in the most part to the DP-1002 S/T well, US$10.9 million, which was impaired fully by the Board at the balance sheet date due to service quality issues encountered in drilling and casing which were subsequently determined to have rendered the well incapable of completion for production. The balance of the impairment charge relates to the US operation's East White Lake field within tangible assets which has been made as higher estimated abandonment costs recognised during the year on that particular field impacted its estimated carrying value.

Many of the headwinds facing the global E&P sector in 2015 carried over into 2016. In the early months of 2016, the West Texas Intermediate oil price traded below US$27/bbl before recovering to trade above US$53/bbl at the end of the year. This stiffened the Group's resolve to focus on further central cost reductions, as outlined above, and to focus in particular on increasing production in Argentina through well sidetracks and also through numerous workover opportunities, whilst also looking for bolt-on opportunities for the Group's low cost US operations.

With support from existing and new shareholders, the Company raised US$20.0 million of equity (before expenses) in December 2016 to fund the Group's workover programme of shut in wells in Argentina designed to increase production and also the strengthen the Group's balance sheet, provide critical mass and enable the pursuit of additional internal and inorganic growth opportunities. Concurrent with the equity fundraising, the Group's loan facility with IYA Limited was restructured such that US$12.0 million of the outstanding principal was capitalised into equity and the remaining balances under the facility were replaced by a new, fully drawn US$10.8 million loan at an interest rate of 9%, a maturity date of 31 December 2021 and with no equity conversation rights. At the year end, total borrowings under this facility amounted to US$9.1 million (2015: US$8.4 million). Together, the new equity raise and loan capitalisation represent the US$31.0 million net placing proceeds set out in the Consolidated Statement of Changes in Equity.

The Group's primary investment focus during 2016 was on increasing production in Argentina whilst also continuing to evaluate the Hernandarias Concession and farm-out options in Paraguay. Investment in Property, Plant and Equipment in the year amounted to US$15.6 million (2015: US$ 4.0 million) and included the DP-1002 well drilled in the Puesto Guardian concession, capitalised workovers and tangible equipment purchases in Argentina, development drilling on the East White Lake field in the USA and an increase in the asset abandonment recognition. For the reasons explained above, the Board subsequently determined that the DP-1002 S/T well should be impaired fully at 31 December 2016. As in the prior year, the Argentine Peso fell again in value relative to the US dollar, resulting in a reduction in the carrying value of the assets as presented in the Group financial statements.

Intangible fixed asset additions amounted to US$0.6 million (2015: US$11.3 million) relating to Paraguay. The technical evaluation of the Matorras/Occultar block in Argentina continued and the Group has applied to extend this licence for a further 18 months which we are confident will be granted.

Trade and other payables increased to US$10.8 million (2015: US$3.1 million). This includes a prudent provision for all accrued costs in relation to the DP-1002 well. Notwithstanding this, President, having taken expert legal advice, considers that its claims against service providers relating to that well on a full liability basis extinguish and exceed the amounts so provided. No benefit from President's potential claims has been taken into account given that legal action is in process. On 12 May 2017, President updated the market about such actions.

Year-end cash balances were US$17.6 million (2015: US$0.2 million).

Key Performance Indicators

Production in Argentina increased by 26% to 125,135 bbls (2015: 98,781 bbls) or 342 bopd (2015: 271 bopd) due to successful workovers of wells at the Puesto Guardian Concession.

Production from US operations fell by 25% to 164 boepd (2015: 219 boepd) due to gas pipeline outages at the Triche well and natural decline at East Lake Verret and East White Lake.

In Argentina, well operating costs before workover expenses were managed down during the year to US$55.69/boe (2015: US$63.02/boe) whilst depreciation also fell during the year to US$13.68/boe (2015: US$16.67/boe) as a result of reserves upgrades. Expensed workover costs amounted to US$1.7 million (2015: US$0.1 million) or US$13.35/boe and were the principal driver behind the 27% increase in production during the year and the 2.0 mmboe increase in 2P reserves at the Puesto Guardian Concession.

In USA, well operating costs increased by 31% to US$1.6 million (2015: US$ 1.2 million) due to higher one off operating cost adjustments. On a per boe basis, this increase was accentuated by lower production to US$27.03/boe (2015: US$15.43/boe).

Consolidated Statement of Comprehensive Income

Year ended 31 December 2016

Consolidated Statement of Financial Position

31 December 2016

Consolidated Statement of Changes in Equity

Year ended 31 December 2016

Consolidated Statement of Cash Flows

Year ended 31 December 2016

Notes

1 Accounting policies and preparation

The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 31 December 2016 or 2015 but is derived from the 2016 accounts.

A copy of the statutory accounts for the year to 31 December 2015 has been delivered to the Registrar of Companies, and is also available on the Company's web site. Statutory accounts for 2016 will be delivered in due course. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2014 nor 2015.

Whilst the financial statements from which this preliminary announcement is derived have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use in the EU, this announcement does not itself contain sufficient information to comply with IFRS. The Annual Report, containing full financial statements that comply with IFRS, will be sent out to shareholders later in June 2016.

The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Therefore, in the preparation of the 2016 financial statements they continue to adopt the going concern basis.

Well operating costs include US$1,670,465 (2015: US$52,771) in Argentine non-recurring workover costs expensed in the period.

To allow for meaningful comparison, staff costs, share based payments and depreciation expenses are reflected gross before the effect of capitalising relevant costs to the balance sheet assets. Other expenses are shown net of the effect of US$0.75 million (2015: US$1.0 million) being capitalised.

One-off legal costs were incurred in 2015 due to disputes connected to the Pirity Concession in Paraguay which amounted to US$0.6 million.

The gain arising in 2015 on the Argentine acquisition related to the settlement of monetary liabilities associated with the original 2014 acquisition on favourable terms.

Insurance proceeds amounting to US$0.585 million were received in 2016 from claims arising in connection with the DP1002 well in Argentina.

At 31 December 2016, 105,507,307 (2015: 76,174,896) weighted potential ordinary shares in the Company which underlie the Company's share option and share warrant awards and may dilute earnings per share in the future, have been included in the calculation of diluted earnings per share. No dilution per share was calculated for 2015 or 2016 as with the reported loss they are anti-dilutive.

7 Segment reporting

Segment assets can be reconciled to the Group as follows: