President Energy (AIM: PPC), the upstream oil and gas company with a diverse portfolio of production and exploration assets focused primarily in Argentina, announces that President Petroleum S.A. ("PSA"), it's Argentine subsidiary, has agreed its first commercial bank lending arrangements ( "the Loan") through the established Argentinian Banks, BACS Banco de Credito y Securitizacion S.A and Banco Hipotecario (the “Banks").

 

The Loan is for the sum of US$8 million and is for a term of 42 months with capital and interest repayable over that time on a quarterly basis and benefiting from a 6 month initial capital repayment holiday. The interest rate is 7.5% over Libor, which compares favourably with the existing IYA shareholder credit line facilities which attract an interest rate of 10.5%, with the loan being secured by pledges over the shares of PSA. The Loan monies are designated in defraying part of the consideration payable for the recent acquisition made by the Company in the Neuquén Basin thereby freeing up more of President's other financial resources and positive cash flow to materially grow its Argentine business as appropriate.

 

President is in a strong financial position. The last six weeks have seen the Company raise over US$21 million in cash via the Loan and the recent share issuances. These funds augment the existing substantial credit line from IYA, a company related to Peter Levine, of which over US$2 million was last week converted to equity. The Company’s cash balances are further bolstered by the continued positive free cash flows being generated by its operations.

Peter Levine, Chairman and Chief Executive, commented:

 

“This is an important step for President in the continued pursuit of its declared profitable growth strategy and reflects the Company's increasing reputation and credibility.

 

"As well as generating immediate cost savings over the current IYA shareholder credit line facilities and reducing reliance thereon, it adds an important component to our financial tool kit for the future expansion of the Company.

 

"We are particularly grateful for the constructive support given to us by these two established Argentine financial institutions and look forward to developing a mutually rewarding relationship with them."