In its final results for the year ended 31 December 2020, Prospex Energy (PXEN ) said it has emerged from a “challenging” year with strong asset backing and a focused portfolio of investments.
The investment firm said it emerged from 2020 with ‘strong asset backing’ with £5.74m in total assets (FY19: £6.34). While it slashed its administrative expenses by 11%, Prospex reported a net loss after taxation from continuing operations of £1.8m (FY19: loss of £1.3m).
Despite the disruption caused by the global pandemic, the Company said it saw ‘major progress towards building Prospex into a European focused gas and power business.’
In particular, Prospex hailed the successful acquisition of a 49.9% interest in the El Romeral Integrated gas and power project in Spain, which the company said has added an interest in three producing gas wells as well as an operational power plant to Prospex's portfolio.
Prospex raised £0.72m gross via an oversubscribed placing of 600,000,000 new ordinary shares to help fund the Company's acquisition of a 49.9% indirect stake in El Romeral.
At full capacity, El Romeral will become a second material revenue generator for Prospex. The Group stated that it has the potential to deliver indicative project level annual revenues and profit before tax of €4.2m and €2.4m respectively (€1.8m profit after tax). It said this level of revenues and profits would put El Romeral on a par with Selva gas field in Italy.
In Italy, the company said ‘regulatory milestones’ were passed in the permitting process required to bring the 17%-owned Selva gas field in Italy into production. The Company said this gas field is set to ‘transform Prospex's financial profile in the medium to long term.’
Edward Dawson, MD of Prospex, said that the application for a full production licence at Selva, which is “expected to be submitted shortly”, will pave the way for production to commence in mid-2022 at a maximum rate of up to 150,000 cubic metres per day.
“Having recently completed the acquisition of a 49.9% interest in the vertically integrated El Romeral gas and power project in Q1 2021, the permitting process is underway for a multi-well drilling programme, potentially commencing in 2022, targeting an increase in gas production and electricity generation at the 100% project-owned power plant,” he added.
As at 31 December 2020, Prospex held cash and cash equivalents of £0.22m (FY19: £0.069m). Post-period, the group raised £0.75m via a placing to fund planned programmes in Spain and Italy and also to fund the evaluation of new business opportunities.
Post period end, the company told investors that its Spanish affiliate, Tarba Energia ('Tarba'), has submitted early stage environmental documents as part of the application process for the drilling of multiple wells at El Romeral, potentially commencing in 2022.
Addressing its shareholders, Prospex Energy stated that both of its gas-focused projects based in Spain and Italy are either ‘already or soon to be producing’ and that both hold ‘multiple and significant low risk follow-up exploration / development opportunities.’
The company said ‘the building blocks are in place to transform Prospex into a highly cash generative gas and power producer that is fit for purpose for the energy transition.’
Looking ahead, Prospex said, ‘With Selva expected to commence production in mid-2022 and with the application process now commenced for a multi-well drilling programme at El Romeral, potentially in 2022, the year ahead promises to see major progress made.’
"As a result, we have two independent work programmes ongoing, each of which have the potential to generate material revenue streams for Prospex in 2022 and beyond.
These revenues will in turn be reinvested in the multiple follow-up opportunities that have been identified on our licences in Italy and Spain to grow the Company further and, in the process, build Prospex into a European energy supplier, one with visible and stable earnings and one with a focus on cleaner natural gas,” added Dawson.
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Prospex’s recent receipt of full environmental approval for the development of the Selva Gas-Field follows a placing conducted in March in which Prospex raised £0.75m in order to fund planned programmes at both Selva in Italy as well as in El Romeral in southern Spain.
The approval will enable Prospex to advance its planned Selva development which has a small footprint of less than half a hectare and will have no emissions from any future commissioning of its gas inventory. Shares in Prospex were down 15.09% this morning.
Prospex Energy 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.”
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