President Petroleum Company plc (LSE:PPC) has entered the oil industry in Paraguay through a farm-in agreement in two licences that the firm says will transform the company into a middle-sized oil and gas company.
In a statement today, the company announced it signed a deal that would earn the company up to 59% and 60% for blocks Pirity and Demattei, which hold an aggregate risked recoverable resource of over 150 million barrels of oil.
The working interests are scheduled to be obtained gradually, with a total combined cost for the work programme in both licences to be approximately US$92 million, which will be spent on seismic and drilling of three wells on both concessions as well as pay past costs incurred by previous holders of the licences.
In line with the move, the AIM-quoted explorer plans to raise £30.92 million by way of equity financing, subject to shareholder approval at the company’s general meeting to be held on 28th September 2012.
The nearly 155 million shares to be issued, about 25 million shares more than the currently issued capital stock of the company, will be priced at 20 pence each, or 20% less than yesterday’s close of 25 pence.
Transformational
“This transaction is a transformational step for President which will allow it to achieve substantial growth and reflects our determination to transform President into a mid-cap company,” President’s Chief Executive, Peter Levine said in a statement.
President considers the move to enter Paraguay as a significant transaction for the company as the South American country is still relatively “untapped” despite having a proven petroleum system.
“The ability to solely operate and control almost an entire under-drilled Cretaceous rift basin is a unique opportunity for President to leverage our extensive knowledge of the play systems from our nearby Argentine operations,” Mr. Levine added.
President holds 50% working interest in Puesto Guardian concession north west of Argentina, near the Paraguay borders.
“The transaction builds critical mass in the region while providing entry into a new country, and utilises President’s expanding technical and operational team,” the company declared.
On the London Stock Exchange, shares traded at 22 pence by 2:00 PM GMT, as the market aligns President’s market value in anticipation of the equity financing, the firsts of which will be issued next week, 17th September.
Company Spotlight
President Petroleum Company plc is an independent oil and gas company with assets in the United States, Argentina, and Australia. The company is listed on the Alternative Investment Market in London. It also plans to change its name to President Energy plc to be decided on the said general meeting.