Prospex Energy (PXEN ) has described the year ended 31 December 2021 as a period of “transformation” as it transitioned from being an investing firm with interests in exploration assets to a business including interests in a gas producing and electricity generating asset.
Total assets rose by 56% over the period to £8.984 million, compared to £5.748m reported in 2020 and with the increase dominated by “a revaluation reflecting measured recognition of positive changes in the forward curve of European gas prices as at 31 December 2021.”
The value of these total assets largely comprises Prospex’s investment in PXOG Marshall Ltd, the vehicle for its Italian assets. Shares in group undertakings represent investments in PXOG Marshall Limited of £6,647m over the period compared to £3,570m in the year prior.
Administrative expenses for the full year totalled £0.891m - an 8% reduction from £0.972m in FY20, as management took steps to reduce the Company’s cost base. By period end, the company held cash and cash equivalents of £0.22m compared to £220,618 reported in 2020.
In February 2022, Prospex raised £2.455m at a price of 3.50 pence per share to complete the acquisition of 20% of the Selva Field in Italy, thus increasing its ownership from 17% to 37%, and to contribute towards the field’s development and general working capital requirements.
Prospex’s transition into a gas producing, electricity and income generating investment firm - and an income generating company - was marked in March 2021 with the acquisition of the El Romeral gas producing licences and gas to power plant near Carmona in southern Spain.
The acquisition of El Romeral, which as an asset produces gas to a power station selling electricity into the Spanish grid, was completed by Tarba, the joint venture vehicle in which Prospex, via its wholly owned subsidiary PXOG Muirhill Ltd, holds its Spanish investments.
Currently, two of the three generators at the El Romeral power plant currently operate alternately, and further work is now being planned to recommission the third generator in preparation for further gas production expected from the future infill well drilling campaign.
The El Romeral plant is running 24 hours a day 7 days a week following optimisation and automation carried out by Tarba at the end of 2021, allowing Prospex to benefit from the unprecedented rise in electricity prices, Mark Routh, Prospex’s CEO informed investors.
Last month, Prospex Energy was reassured by the operator of the El Romeral power project that continuous operations at the Spanish-based power plant were both “feasible and safe.”
In March 2021, Prospex received the full environmental approval from Italy’s Ecological Transition Ministry for production development at the Selva field with a final Environmental Impact Assessment (‘EIA’) decree, paving the way for the grant of a full production licence.
The Operator, Po Valley Energy, is pursuing the various strands that support its application for a full production licence for Selva which is currently expected in the second quarter of 2022.
“Looking ahead, with Selva expected to commence production in Q2-2023 and with the application process now commenced for a multi-well drilling programme at El Romeral, potentially in 2023, the year ahead promises to see major progress,” commented Routh.
In relation to the wider energy market, Prospex acknowledged that with the current shortage of gas across Europe, markets have experienced historically high gas and electricity prices
The Board says energy prices seen since the end of 2021 are “not sustainable in the long term,” and that whilst benefiting from the increased demand and pricing, Prospex has continued to apply a conservative approach when looking at forward energy prices.
The company considers that in this current environment, governments are rightly taking steps to find alternative energy sources, improve energy security and reduce energy costs to end consumers. In line with this, Prospex said it is well positioned to contribute positively.
“To put this in context, local indigenous onshore gas production in Spain has a carbon footprint which is ten times lower than the importation of LNG from the USA, and at a substantially lower delivered cost. With this in mind, we intend to grow its gas production assets and simultaneously become a model for the energy transition process,” it wrote.
Going forward, Routh says Prospex is in “a strong operational position with an experienced team” - namely the recently appointed CEO, Mark Routh as well as Non-Executive Director, Alasdair Buchanan - who remain committed to increasing shareholder value for Prospex.
The Company
Since revenues generated by El Romeral had been at an all-time high as a result of recent electricity prices, the switch to almost continuous operations is expected to boost revenue.
Last month, the price of electricity in Spain was recorded at unprecedented levels at more than six-times what it was back in March 2021 when the El Romeral project was acquired.
Looking ahead, Prospex saud Tarba is set to increase power generation capacity at El Romeral as soon as it secures permits to drill further infill wells on the site’s concessions.
While Prospex has pledged its support for the drive to renewable energy, it also recognises that natural gas will be required to contribute to the energy mix during the transitional period, “and that local indigenous onshore gas is the optimum source to meet this need,” it states.
Prospex believes it is well positioned to grow its business into these market opportunities. Since the beginning of the year, shares in Prospex Energy have jumped by nearly 30%.
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