PXEN Prospex Energy Plc

The information contained within this announcement is deemed by the Company to constitute inside information pursuant to Article 7 of EU Regulation 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 as amended. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

Prospex Energy Plc / Index: AIM / Epic: PXEN / Sector: Energy

19 September 2024

Prospex Energy Plc

('Prospex' or the 'Company')

Half Year Report

Prospex Energy Plc, the AIM quoted investment company, is pleased to announce its unaudited Interim Results for the six months ended 30 June 2024.

Corporate and Operational Overview:

·    The Company's investment portfolio projects continued to operate on a fully self-funded basis.

·    No serious Health and Safety incidents or environmental issues across both its operations in Italy and Spain.

·    Annulment of Italy's Plan of Areas, which had previously limited the extent of hydrocarbon prospecting, exploration and production in Italy, signals a commitment to promote and enable more domestic gas production.

·    Actively advancing the permitting of 5 new wells on the El Romeral concessions in order to bring the utilised electricity production capacity of the gas-to-power plant to 100% (currently at 33%).

Post period

·    Acquisition of 7.2365% in the Viura gas field in northern Spain ("Viura"), its third onshore producing and revenue generating well.

·    Successful fundraise of approximately £4.2m via the issue of 69,955,393 new shares at 6p each. The funds raised were used to acquire 7.5% of HEYCO Energy Iberia S.L. ("HEI") which has majority ownership in the Viura gas field in northern Spain.

o  Prospex is funding 15% of the cost of the development programme to earn 7.5% of HEI.  The Company will earn a 10% coupon on its capital investment and will be repaid its capital investment from 15% of the HEI production income (after OPEX and taxes), until payback at which point Prospex's share of net income reverts to 7.5%.

·    Ten-year extension of the natural gas exploitation concessions at "El Romeral 1, 2 and 3"  to July 2034.

·    12-month extension to Selva Malvezzi's gas supply contract with BP Gas Marketing Ltd.

Financial Overview

·    All interest-bearing debt outstanding plus accrued interest has been repaid.

·    Well positioned for growth, cash generative with no debt.

·    The Company reports a £275,120 loss after taxation from continuing operations for the six-months ended 30 June 2024 (H1 2023 loss: £888,473).

·    This includes a £nil unrealised gain/loss on revaluation of financial assets at fair value (H1 2023 unrealised loss: £489,037).

·    The valuation undertaken at 30 June 2024 resulted in no change in the net book value of investments.  Forward gas prices and exchange rates at 30 June 2024 were taken into consideration as well as gas produced from the assets in reaching this conclusion.

·    Loan capital repayments in the period were £168,487 and interest payments were £6,753.  All debt finance and interest accrued from the Convertible Loan Notes issued in September 2022 was settled from accumulated cash within the Company during the reporting period.  No further debt-finance has been raised subsequently.

·    At 30 June 2024, the Company held cash and cash equivalents of £10,991 (30 June 2023: £395,202).  Prospex's net share of Cash and cash equivalents held in Euros in its non-consolidated investment and joint venture companies amounted to €794,762.

·    The bulk of the decrease in trade and other receivables of £505,890 comprises debt repayments to the Company by its investment vehicles on investment loans made during the exploration and development phases of its projects.

·    The Company and its investment vehicles are expected to have sufficient funds to meet existing commitments.

Mark Routh, CEO of Prospex, said:

"Firstly, I am pleased to be able to report that our operations both in Italy and in Spain have been executed this year with no serious Health and Safety incidents nor any reportable environmental issues, which is a credit to the operators in country.

"It has been a transitional period for Prospex, but one in which the Company consolidated its position as an onshore gas producer in two stable European countries, Italy and Spain.  The Company now has no debts outstanding.  Post period-end, the Company announced the acquisition of an interest in Viura, a producing gas field in Northern Spain thereby adding a third onshore gas producing asset to our portfolio.  This acquisition delivers the next step of our growth strategy to increase the portfolio of onshore Europe producing gas assets.

"A development well is being drilled on Viura with two further development wells being planned next year to increase production even further.  Applications have been submitted to permit five further wells on the El Romeral concessions in Andalucía southern Spain and preparations are in place to drill four more wells on the Selva Malvezzi concession in the Po Valley in northern Italy following the acquisition of a short low-cost 3D seismic survey across the concession.  Accordingly, in the Board's view, all three of Prospex's producing onshore gas investments have significant upside potential within the existing production concessions and I look forward to updating shareholders as we progress with the conversion of both our contingent and prospective resources on our three production concessions into proved developed producing reserves."

Operational Highlights

·    The Company's investment vehicles continued to operate on a fully self-funded basis throughout the reporting period.

Selva Malvezzi

·    Gas production operations continued at Podere-Maiar-1 well in Italy with gross production of 13,220,652 scm during the period.  Gross gas sales in the period were €4,218,630, with €1,560,893 attributable to Prospex's working interest.

·    In January 2024, after six months of strong gas production, PVO confirmed the optimum flow rate from the well should be set at 80,000 scm/d to ensure that there is no debris accumulation.

·    Po Valley Energy, Prospex's joint venture partners confirm potential for a new seismic acquisition programme over the licence area following the successful reprocessing of the existing 2D seismic lines in the production concession.  The new programme aims to optimise the drilling programmes of the identified contingent resources at Selva North, Selva South and the East Selva and Riccardina prospects.

·    In June 2024, the Italian Ministry of Environment and Energy Security ("MASE") accepted the annulment of Italy's Plan of Areas which had previously limited the extent of hydrocarbon prospecting, exploration and production in Italy.  This is an important sign of the current Government's commitment to promote and enable more domestic gas production to address the serious energy security challenges which Italy and more broadly Europe, are facing.  It will also enable the Joint Venture owners of Selva Malvezzi to realise maximum value from its natural gas investments, whilst helping improve Italy's energy security.

El Romeral

·    Electricity generation operations continued from natural gas produced from the El Romeral production concessions in Andalucía, southern Spain where the Company's investment is in the operator, Tarba Energía s.l. ("Tarba").  Income from electricity generated during the period was €398,000 gross of which €199,000 is attributed to Prospex's share.  Revenues were impacted by low electricity prices in Spain with the high contribution of local renewable energy sources, including wind, solar and hydroelectricity power generation.

·    The Company, together with its co-shareholder in Tarba, is actively advancing the permitting of 5 new wells on the El Romeral concessions in order to bring the utilised electricity production capacity of the gas-to-power plant to 100% (currently at 33%).  Tarba also continues to evaluate the possibility of expanding the capability of the El Romeral assets to sell gas directly to the national grid, as well as expanded solar power generation.

Post period end:

·    In July 2024 a ten-year extension, to July 2034, of the natural gas exploitation concessions "El Romeral 1, 2 and 3" was granted to Tarba by the Spanish regulatory authority.

·    In August 2024 Po Valley Energy, on behalf of the Selva Malvezzi Joint Venture, signed a 12-month extension to the gas supply contract with BP Gas Marketing Ltd ("BPGM").  BPGM buys the gas produced from Selva Malvezzi at a premium to the quoted TTF gas price.

·    At the end of August 2024, the Company completed the acquisition of 7.5% of HEYCO Energy Iberia S.L. ("HEI"), which has majority ownership in the Viura gas field in northern Spain, having raised, in aggregate, gross proceeds of approximately £4.2 million.  By committing to fund 15% of the 2024-2026 HEI development programme, Prospex now owns 7.5% of HEI which translates to a Prospex ownership of 7.2365% in the Viura concession.

·    Prospex is funding 15% of the cost of the Viura development programme to earn 7.5% of HEI.  The Company will not only earn a 10% coupon on its capital investment but will also be repaid its capital investment from 15% of the HEI production income (after OPEX and taxes), until payback at which point Prospex's share of net income reverts to 7.5%.

Business Development

The Company is actively evaluating a number of assets for potential investment.  The assets under consideration are all onshore in Europe and include high impact exploration targets.  The Company will keep shareholders updated as these projects come to fruition.

CHAIRMAN'S STATEMENT

Operational Report

The first six months of 2024 was a period of preparation for the further growth of the Company.  The production income from both the Selva field in northern Italy and from the electricity generation at El Romeral in southern Spain laid the foundations for opportunities to increase the Company's investments in onshore European gas assets, culminating post period end in the acquisition of Prospex's third onshore producing gas asset in Viura, Northern Spain.

With reliable income streams from three onshore gas producing assets in Europe the Company is well placed for further growth.

Financial Review

For the six months ended 30 June 2024, the Company is reporting a net loss after taxation from continuing operations of £275,120 (H1 2023: loss - £888,473).  Included in this is an unrealised loss of £nil arising on revaluation of financial assets at fair value (H1 2023: loss - £489,037).

A valuation as at 30 June 2024 resulted in no change in the carrying value of the Company's investments.  The principal asset of the Company at the reporting date was its shares in its subsidiary PXOG Marshall Limited in which the producing assets in the Selva Malvezzi concession in Italy are held.  In addition to the 13,220,652 scm produced gas in the period from the asset, the valuation takes into account the impact of changes in the forward curve of European gas prices and the EUR:GBP exchange rate at 30 June 2024.

Administrative expenses of £521,209 were incurred in H1 2024, compared with £461,322 in the same period last year.

At 30 June 2024, the Company held cash and cash equivalents of £10,991 (30 June 2023: £395,202).  Prospex's net share of cash and cash equivalents held in Euros in non-consolidated investment and joint venture companies amounted to €794,762.

Outlook

The Board and management continue to focus on developing and growing the Company's portfolio of assets and income streams, both by increasing the productivity and profitability of existing assets, and through active search and investigation of new investment opportunities which meet the Company's discerning investment criteria.

Bill Smith

Non-Executive Chairman

Glossary:

scm                 Standard cubic metres

scm/d             Standard cubic metres per day

MMscm         Million standard cubic metres

Bcf                   Billion standard cubic feet

MMscfd        million standard cubic feet per day

MWh              Mega Watt hour

TTF                  The 'Title Transfer Facility' - a virtual trading point for natural gas in the Netherlands.

Prospex Energy Plc

Interim results

For the six months ended 30 June 2024

Statement of profit or loss and other comprehensive income

Statement of financial position - As at 30 June 2024