In a half-year report, Prospex Energy (PXEN ) said it has made “significant strides” to establish itself as a European-focused energy production and electricity generation company in 1H21.
Since the investment firm’s acquisition of the El Romeral project back in March 2021, the Company has earnt an increasing income throughout the year from electricity generation.
This has resulted in the Company reporting a net profit after taxation of £0.129m during 1H21 from continuing operations, up from a loss of £1.02m in 1H20, as well as a 13.48% increase in the net book value of investments to £4.1m compared to £3.8m in the prior 2020 period.
In March 2021, the Company raised £750,000 gross via an oversubscribed placing primarily to fund the planned programmes at El Romeral and the Podere Gallina licence.
At El Romeral, the first well workover on one of the suspended wells (Rio Corbones) is planned for October 2021 and the permitting process for the infill wells is underway.
The El Romeral asset is a producing gas to power station selling electricity into the Spanish grid which is operated by Tarba, through which Prospex holds its Spanish investments.
In May 2021, an application was submitted to convert the Tesorillo Project exploration permit into an exploitation concession before Spain’s Climate Change Act came into force.
Whilst the outcome of this application is still unknown, applications from existing permits prior to the Climate Change Act coming into force should maintain their validity under the new law.
Prospex explained to its shareholders that Tarba’s application, which is currently under review, is being considered by the regulators at a time of significantly rising prices for gas and LNG imports in Spain, which the Board believes should work in the Company’s favour.
The Company also confirmed that the El Romeral exploitation concessions at which Tarba operates its gas to power plant are in force and are unaffected by the Climate Change Act.
Subsequent to the end of the period, there have been significant increases in electricity revenues with record prices being realised from the sale of electricity, Prospex explained.
Meanwhile, since 1H21, the Company has also approved the budget for Tarba Energia to proceed with a well workover and data acquisition programme on the El Romeral gas wells.
Post-period end, Prospex signed a sale & purchase Agreement for the conditional acquisition of 20% of Podere Gallina licence in Italy. Should the financing of the acquisition be sufficiently financed, Prospex’s holding in the licence would increase from 17% to 37% as a result.
The transaction would add a further 2.7 billion cubic feet of 2P gas reserves to Prospex’s portfolio, increasing its share in Selva’s 2P gas reserves to 5 Bcf. At Selva the Podere Maiar well which was successfully drilled in 2018 is expected to come into production by 2Q22.
“As shareholders will be aware, the landscape for European-focussed energy production companies has never been so positive in terms of pricing, and whilst we appreciate that the current pricing environment is unsustainable, we do recognise that there remains a critical need for indigenous energy resources to be unlocked in order to deliver accessible, reliable and affordable energy across Europe,” commented Mark Routh, CEO of Prospex Energy.
He stated, “The team at Prospex is working judiciously with our partners and the relevant authorities in Spain and Italy to set a benchmark for sustainable energy production and to help bridge this crucial energy gap alongside the proliferation of renewable sources.”
“We are an energy company, not an oil company, with the ambition to expand our portfolio with further gas-to-power projects and in time, blue hydrogen and other initiatives,” he said.
Routh added that despite the recent corporate disruptions, stemming from a group of shareholders requisitioning a GM to remove the Board, it has continued to make solid progress as evidenced from the company’s recent El Romeral well workover update.
He concluded, “We expect this forward momentum to continue once the General Meeting is resolved and I look forward to providing further updates on both our operational and debt financing developments in the coming weeks.”
Prospex said its outlook going forward was ‘one of consolidation and growth’ and that with a shortage of gas across Europe, markets are experiencing record high gas and electricity prices. As a result, it stated that these prices are unlikely to be sustainable longer term.
The Group outlined: ‘The drive to convert energy supply towards renewable energy sources must continue but cannot be achieved quickly. Local indigenous onshore gas is the optimum energy source to fulfil the energy gap whilst the transition to renewables gains pace. Prospex is well positioned to grow its business into this undeniable market opportunity, while using the strength of our team and our assets to invest in appropriate alternative energy sources.’
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