Prospex Energy (PXEN ), an oil and gas investment company, announced this morning unaudited interim results for the 6 months ended 30 June 2022 (H1 2022).
Financial performance
Prospex recorded £5.1m of net profit after tax from continuing operations, a nearly 40x increase from the £129K recorded in H1 2021. The net book value of the company more than doubled to £14.3m half-on-half, compared to £6.7m on 31 December 2021.
Prospex saw £7.6m gain on revaluation of investments and loans, compared to £488K a year ago. This increase brings the valuation of the additional 20% Prospex acquired of the Podere Maiar license in Italy (Selva field) during the period in line with the valuation of the 17% already held on 31 December 2021.
Prospex increased its stake in Selva field to 37% following a successful fundraise of £2.45m. The fundraise was widely supported by existing institutional and retail investors as well as directors of the company.
Net cash outflow from operations was £2.5m for the period with cash on the balance sheet at the end of the period of c. £0.2m.
Post period
Prospex successfully raised £2.37m in aggregate through the issue of two separate unsecured convertible loan notes to existing and new investors, with participation of all directors, to strengthen the balance sheet.
The financing, plus exercise of remaining warrants and some outstanding options, will new enable Prospex to fund all expected development costs to first gas from Selva field, expected in Q2 2023.
Mark Routh, CEO of Prospex, summarised the half-year: "Prospex has had a very busy year with outstanding progress made across both our investments, Selva and El Romeral. The Company’s acquisition of the El Romeral gas concessions has proved to be an outstanding success. Operational improvements, including the full automation of the plant, have allowed us to run the plant 24 hours a day 7 days a week, increasing output and revenues at a time when electricity prices were averaging more than four times the prices achieved for the same period last year.
At Selva, we are one step closer to production following the approval of the Production Concession by the Italian authorities and the appointment of building contractors. Recent funding during and post-period, allowed us to increase our stake in Selva to 37% and also, along with the operator Po Valley, have sufficient funds to achieve first gas in the second quarter of 2023."
View from Vox
Prospex continues to make the right investments to answer strong European demand for locally produced energy, particularly in natural gas and renewables. Investors have rewarded the company's stellar financial performance in H1 2022, including a nearly 40x increase in net profit, sending PXEN shares up 143% YTD. A major value inflection point for Prospex will be the opening of its 37%-owned Selva field in Italy, expected in Q2 2023.
Yesterday we reported on another crucial step in the process of bringing Selva field online. As has been the case with its El Romeral plant in Spain, Prospex's natural gas operations in Italy are expected to yield strong revenues amid rocketing energy prices.
Last month, Prospex announced a key contract with TESI to install the gas plant and pipeline for Selva field, securing development costs at £2.91m - less than previously expected. Operator Po Valley also said on 19 September 2022 that it was able to procure the land at below original cost estimates, further enhancing the profitability of the asset. Selva now has full regulatory approval for production.
Prospex's 49.9%-owned El Romeral plant in Spain is now running 24 hours a day 7 days a week following optimisation and automation carried out by operator Tarba, allowing Prospex to reap the full benefit of higher energy prices. In June, the Spanish government capped prices on gas sold for electricity generation, resulting in an expected average daily rate of €150/MWh for the next 12 months.
Investors have also welcomed Prospex's diversification into solar. The company's pilot solar Project Apollo saw a 41.5 kW solar array installed on the roof of its El Romeral plant. Project Apollo paved the way for the much larger Project Helios, a 5 MW array, to be built next to El Romeral and cogenerate with the plant, sharing its connection to the Spanish grid. Project Helios is currently at FEED stage. Solar in the Toledo province of Spain currently has an ROI of only 3-4 years, making this an ideal hedge for the company.
The outlook for Prospex is bright. The company is well-funded and well-positioned to serve high European demand for local energy. The introduction of a second revenue stream from Selva field will further strengthen its financial position.
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