Prospex Energy (PXEN) said it expects to close its acquisition of El Romeral, an integrated gas production and power station operation in southern Spain, on 28 February 2021.
The investment company focused on European gas and power projects announced its intention to acquire a 49.9% interest in El Romeral back in December 2019 while Australia's Warrego Energy would take a 50.1% interest through its Tarba Energia joint venture.
The El Romeral project includes three producing wells that supply gas, through its own network, to a 100% project-owned 8.1 MW power station, via Tarba Energia. Prospex owns a 49.9% interest in Tarba B shares with its partner Warrego Energy owning the balance.
Prospex told investors back in December 2020 that it had received approvals from Spanish authorities to close the purchase. The Group had hoped to close the acquisition on January 31, however, due to ‘slower than anticipated progress’ made during the period following the festive period, the acquisition is now expected to complete on 28 February 2021.
In the meantime, Tarba, which will assume the day-to-day management and control of El Romeral following the completed acquisition, is said to be utilising this extended time frame to continue its preparatory work in order to ensure a smooth transfer of operations.
The Company said that this is expected to be achieved via the drilling of new wells targeting already identified development locations and very-low risk prospects which have been assigned gross contingent and prospective gas resources of 5Bcf and 90Bcf, respectively.
Tarba is also expected to carry out a review of existing wells to evaluate the potential to undertake workovers to enhance recovery rates. Historically, the power station at El Romeral regularly produced c. 60,000 Mwh per annum when gas was not a limiting factor.
The medium-term target at El Romeral is to increase on-site gas production and electricity generation at its power plant towards its nameplate capacity. Given the plan it currently only operating at 22% capacity, this will have a significant positive financial impact on the Company. Shares in Prospex Energy have increased by nearly 10% in value since the beginning of December 2020 and opened at 2p a share this morning.
Reasons to Follow PXEN
Prospex Energy (PXEN ) is an AIM quoted investment company focused on high impact onshore and shallow offshore European opportunities with short timelines to production.
The Company's strategy is to acquire undervalued projects with multiple, tangible value trigger points that can be realised within 12 months of acquisition and then applying low cost re-evaluation techniques to identify and de-risk prospects.
For €0.374m, PXEN will acquire a 49.9% interest in El Romeral which can generate significant revenues from the 8.1MW power station and which cost €10 million to construct.
“It was not only the excellent value however that attracted us to El Romeral but also the significant growth potential,’ Prospex’s Non-Executive Chairman, Bill Smith, said of the project, highlighting the fact that the project presents ‘multiple low risk opportunities.’
Based on historic average prices revenue per Mwh, this would equate to annual revenues of over €4.2m.
Smith said, “As well as the advancement of El Romeral, in 2021 these subscribers along with our existing shareholders can expect to see the commencement of production at the Selva gas field on the Podere Gallina permit in Italy at an initial rate of up to 150,000 scm/day.
Together with El Romeral, our annual gas production has the potential to reach 7,800,000 scm in 2021. This would translate into a material revenue stream for the Company which we will look to reinvest into further development activity across our existing asset base.”