Paraguay potential underlined
President Energy, (PPTC) has released a resource update, detailing the results of the extensive seismic acquisition programme in 2013. Well-respected independent consultants RPS detail the results of analysis across five prospects, with three examined in greater detail. The gross unrisked resource has increased to 1,093mmboe, a massive increase from the 374mmboe pMean given by a 2012 D&M CPR. The report also confirms our modelling of the value of any discoveries. With the largest prospect (Jacaranda) potentially holding 647mmboe, President’s 59% share in any discovery could be worth many multiples of the current share price.
RPS identifies >1bnboe of gross potential
The report identifies 1,093mmboe of gross unrisked resource across the prospects so far, which equates to 647mmboe of unrisked resource net to President. With an overall CoS of around 20%, this means net risked resources are around 130mmboe. Importantly, the prospects are spread across a number of intervals, with significant potential in both the Cretaceous and Paleozoic, giving multiple independent chances for exploration. The largest prospect examined, Jacaranda, is over 600mmboe (gross unrisked), while there are 20 prospects still in the inventory. A second RPS report is expected in time to cover the full inventory.
Value of each discovery is very significant
The report also gives valuations to the potential fields and these confirm our previous illustrative modelling. We had modelled a 50mmboe oil discovery at around $18/bbl, while RPS give overall value (both for oil, condensate and gas) of $18/bbl. While we employ a slightly higher discount rate of 12.5% (RPS employ 10%), this report confirms our assessment on the value of every potential barrel.
Valuation: RENAV to increase from 55p/share
We will update our valuation in time. However, our last published RENAV of 55p is based on the development of just one 50mmboe field, as well as the Argentinian and US assets. We are now closer to the spudding of the first well (May) and investors should start to value the greater potential of three wells. As a very rough guide to the potential value, the RPS report values the three areas at a mean risked value (net to President) of c $2,400m or c 480p/share (at current FX). This is significantly above the current share price. While we note that President will need to source further capital of some kind to develop any discoveries, the value of the prospects given in the report is a multiple of the current market capitalisation. Despite a recent strong share appreciation, there should be more to come.
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