President Energy completes acquisition of Las Bases, Puesto Prado concessions

LEEDS -- President Energy, the upstream oil and gas company with a diverse portfolio of production and exploration assets focused primarily in Argentina, has provided details on the completion of the acquisition of its interests in the Las Bases and Puesto Prado Concessions, Rio Negro Province, Argentina (President, Operator and 90%; EDHIPSA, 10%) (together "the New Concessions").

Las Bases and Puesto Prado

The acquisition of the New Concessions from the Rio Negro Province has now been completed and paid for with the relevant Provincial decrees, having been issued formally awarding the New Concessions to President. The Province has granted President 90% operating interests over the New Concessions, which have a 10-year term. President has partnered with EDHIPSA, the Provincial energy company, who will hold a 10% interest. The 10-year terms are renewable.

The purchase price of the New Concessions is $9,904,000 in aggregate of which $8,704,000 was paid to the Province yesterday (the "Initial Consideration") and the balance will be paid in 12 months' time, utilizing operational cash flow. The Initial Consideration has been partly financed through an additional $4 million of secured term loan bank facility (the "Bank Facility") and an additional $4 million unsecured loan made to the Company by the Company's existing lender IYA Limited ("IYA") under the terms of President's current line of credit facility with IYA. The balance of the Initial Consideration was paid out of the Company's own cash flow.

IYA is a company whose ultimate beneficial owner is Peter Levine, the Chairman and CEO of President and as such, the facility extension is a Related Party Transaction pursuant to AIM Rule 13 in respect of which further reference is made below. The additional bank facility is repayable by quarterly instalments of principal and interest in line with the Company's existing bank facility with both being fully paid off by mid-2021. The additional unsecured loan made by IYA is not repayable until Dec. 31, 2021 and bears interest at the same rate as the extra tranche of $4-million bank facility being 12.5% over three month U.S. Dollar Libor per annum.

Las Bases and Puesto Prado have historically audited proven reserves estimated at approximately 1 MMbbl of 1P category hydrocarbon reserves being proven developed producing reserves which management believes can, in the right circumstances, be expanded by end 2019 to 4 MMbbl of 2P (proven and probable hydrocarbon reserves).

The New Concessions have extensive infrastructure facilities as well as a strategic pipeline of some 60 kms in aggregate with its own valuable tie and metering facility at the main regional pipeline. President's pipelines now stretch from the Company's Estancia Vieja Concession, through Puesto Prado and then Las Bases to the tie in. President is immediately benefiting from pipeline income currently being generated from the transport of gas produced by Compania General de Combustiles S.A. (CGC), from its neighboring concession in Rio Negro. President will seek in the future to capitalize on its infrastructure by offering capacity to its other neighbors, particularly through the 38-km, eight-inch steel section of pipeline from Las Bases to the tie in.

President is now working expeditiously to bring into production certain wells that are currently shut in on the New Concessions. Whilst at this early stage it is inappropriate to be specific as to expected production levels, it is targeted that both oil production from Puesto Prado and some gas production from Las Bases will contribute to year end production figures. The process of bringing wells on will continue into first-quarter 2019, which will help the Company understand the capabilities of the New Concessions. Further information on progress will be provided in December once known.

Testing of the pipeline between Estancia Vieja and Puesto Prado is taking place shortly with a view to initially using the Estancia Vieja's gas to generate electricity to power the Puesto Prado facilities and wells by the end of the year. It is expected that the Company will commence commercial sales of Estancia Vieja gas to the local market during first-quarter 2019.

The Company is in the course of subsurface reviews and is provisionally targeting, subject to subsurface conditions and our partners approval, to drill at least one gas well at Las Bases in H1 2019 with work there and in Puesto Prado continuing into H2.