Good morning, and welcome to the Prospex Energy PLC investor presentation. Throughout this recorded presentation, investors will be in a listen-only mode. Questions are encouraged and can be submitted at any time by the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll, and I'd now like to hand you over to Mark Routh, CEO. Good morning, sir.
Good morning to everyone, and good morning to the shareholders for Prospex Energy. I'm delighted to be talking to you today about what the company is up to, and I'm going to run through a few slides on the investor presentation, which is very much based on the corporate presentation, which you can find on our website. So this is a snapshot of the share price year to date, taken yesterday. So I'm Mark Routh. I'm the CEO of your company. I'm a petroleum engineer by background. I founded CH4 Energy in 2002, and that was sold after four years to another oil company. I was also a founding shareholder in Warrego Energy, and that was sold in 2023, last February, after 13 years. I'm...
I was the CEO of Independent Oil and Gas. I was a non-exec director of Warrego Energy, and I, I'm now the CEO of Prospex Energy. So I have experience in AIM-listed companies and private companies. The headline here is that Prospex is now completely debt-free, having paid back all the loans that we took out in order to get the Selva Malvezzi production concession into production. And we have no warrants in the company, which is a nice place to be for shareholders, so no more dilution coming out. We've got production income from two assets in Spain and in Italy, and that covers our G&A, our general and administrative overheads, and the current working capital commitments for 2024. So the near-term catalysts are that we've got some...
We've got wells to be drilled in both Spain and Italy, and I can come on to a little more detail as to what's happening there. Now, I know a lot of you will be very familiar with the assets, but some of you won't be, and you might be hearing it for the first time. So bear with me when I go through. I'm not gonna dwell on each word in the presentation. So we're an AIM-listed company with assets in northern Italy and southern Spain.
We are an investment company, so we do not operate the assets that we own, but we have the Selva Malvezzi production concession in northern Italy, and we have the El Romeral gas to power plant in southern Spain, and the Tesorillo exploration permit, near the very south of Spain, in the Cádiz province. That's our schedule of activity. We hope to be drilling by the end of this year or early next year, subject to permitting. Now, I have to stress, it is all subject to permitting. That is not a timeline which is defined, and so we are in the permitting process, but I can't put my hand on my heart and say exactly when it's gonna happen. But we are pushing and pushing to get these wells drilled.
So on to Italy, Selva Malvezzi production concession. We own 37% working interest in the asset, and the operator is Po Valley Energy, which is an ASX-listed company that is on the Sydney Stock Exchange in Australia. And they own the balance of 63%, and they are the operator. So this is a picture of the well site and the gas processing plant that was installed in 2023 in order to get our gas into production. So there's. It's a small processing plant with dehydration column separators, and you can see the picture of the well head there.
Construction completed in May 2023, but due to the permitting process and actually floods at the time, where the fire department were dealing with floods in June 2023, we didn't get into production until the 4th of July. Since then, we've been producing almost continuously with just shutdowns now and then for slickline workover interventions and pressure monitoring. So on this concession, we have upside. We have three targets to be drilled at Selva North and Selva South which are discoveries. So they're contingent resources. They're not yet developed, but they're contingent resources in the Competent Person Report. And we have East Selva, which is a prospective resource, which is larger. So there's a picture of the concession. The red blob in the middle is Selva. That's 13 Bcf gas field. That's billion cubic feet.
Selva North and Selva South, nine and five Bcf, respectively, and East Selva, the prospective resource to the east of the concession, which is 35 Bcf. These are gross numbers, so Prospex is 37% of all of these. The important thing is that the green bounded limit of the Selva Malvezzi concession is the area in which Po Valley and Prospex have the absolute right to produce hydrocarbons from this area. All we need to do to drill wells is to permit each individual well and the routes of the pipeline, which is a much shorter process than granting production concession, which took some years, as some of our shareholders may remember. So on to Spain, we have the El Romeral Power Plant and Tesorillo Exploration Permit.
We are 49.9% of the power plant, and we own 50% interest in Tesorillo currently, and we have the right to move to 49.9% prior to drilling of a well. So El Romeral is near a town called Carmona, which is east of Seville. That's a picture of the power plant on the roof of which we have installed solar panels. So we're already a hybrid generating company. The nameplate number here is that the power plant has the ability to export, and the capacity and the rights to export 8.1 MW of power into the grid. However, currently, we're only running one of the three gas engines at a time because we can only... we only have enough gas behind pipe to run one engine.
So we're at 30% capacity of the power station, so we export just 2.7 MW of power on a daily basis. We've converted the plant to 24/7 operation, and we've got production from two gas wells only. We are wanting to drill further wells to get the plant up to 100% capacity, and that's why we've submitted permits to drill five extra wells on the concession, which is what I'm going to go on to now. Just briefly on Tesorillo. Tesorillo Exploration Permit, there's a bit more about that at the end, but, Prospex has the right to increase to 49.9% prior to drilling the well and on the payment of EUR 1.725 million, and that brings us up to, 49.9% on the concession.
So that's a map of all the prospectivity on the El Romeral concessions, Romeral one, two, three. There's some large structures in there, mapped. These structures are very shallow. It's a Tertiary reservoir, it's turbidite, and it's biogenic gas, so that means that the gas is very rich in methane and no impurities. So, since 1980, when Chevron drilled the first wells, there hasn't been a well which, did not discover gas. They've all discovered gas. We have high-graded those prospects, and we have high-graded the five most likely to be into production. So you've got Sevilla-3 East, and you have Santa Clara-2, which are drilling structures which have already proven gas in them.
While they're small numbers, it is an absolute certainty that we will get gas out of those wells 'cause we're drilling updip of a well which has already produced. The other three are prospects, so they're prospective resources. So we can't attach any value to those until a well is drilled in them, and it's likely to be developed. So that's Nug amo, Santa Rita, and Romeral-2S, and Romeral-2S is the largest, as you can see, of the structures. The red line there is the pipelines, inter-field pipelines connecting to the power plant, which is located at the Sevilla-3 well location, on the picture that I showed you before. So we don't have to tie in for very long distances.
The longest distances are Romeral-2S, which is 4.4 km away from the tie-in point. So that's our board of directors. It's a small board, four gentlemen at the top, including me. We have a small team, Head of Finance, Grant Glanfield. Carlos is our Chief Geoscientist, and Alecos, our Senior Geologist. We don't operate the field, so we can... we, we monitor what the operators are doing. And, in fact, our technical team are doing a lot of the subsurface technical work on the Tarba asset, the Romeral asset. When it came to submitting the permits, it was the Prospex technical team that did the bulk of the technical subsurface work because Warrego's down tools on their subsurface team. So this is on our AIM Rule 26 page on our website.
It's showing the major shareholders that we have. There's another list of 12 or 15 shareholders who I know I speak to on occasional, sometimes regular basis. And this is just showing the number of shares issued and the number of options which past and present management have in order to enjoy growth in the company when it comes. So, the investment case here is that we have secured reserves and revenue from two assets in stable European countries. We're still trading at a massive discount to the target price, which is just this week being changed to 18p by VSA Capital. And so there's huge-...
Upside because the net asset value of our assets is a multiple of the market cap of the company, which yesterday was trading at GBP 19 million. We're focused on growth for shareholders, and we have a diversified portfolio, which we hope to expand upon. So not only by drilling, but also if we get the right deal, we could have other prospects and farm-ins, which we could do, but only if they're going to be accretive for shareholders. We passed on a few, as you might have noticed in the RNSs at the end of last year. Prospex Energy is focused on mature markets, natural gas, onshore Europe. And I believe, and I firmly believe, that geographical and product focus is very important for a company moving forward.
So we're a highly experienced team of professionals. We know what we're doing, we know the gas industry, and I have a very strong and supportive independent board who speak to me on a regular basis. We are looking for opportunities to grow the company from this base, which, as I said, is debt-free, warrant-free. So any investment we do will be going straight into the assets that we are developing, starting with the three wells in Italy and the five wells in Spain. So that's all I was gonna say. There's a brief summary here of the Tesorillo license. This is suspended, it was suspended during the COVID era, and in May 2021, we applied to convert this exploration permit into a production concession and drill a well.
That has fallen foul of the political landscape in Spain, and we just need to drill the well, and twin the well that was drilled in 1957, which produced gas to surface. This is potentially an enormous gas field. The most likely prospective resource is 831 Bcf. This is very exciting, but we've got to unlock the permitting process and the concession. So since 2021, we've had very little movement from the regulator in Spain, which is highly frustrating. But we're gonna concentrate on getting the five wells done on Romeral, which, as I say, the ministry is engaged with us on the permitting process. So there's the CVs of the board and management team, and that's all I was going to cover for the time being on this.
So I can now address the questions that anyone has. I see there's a few popped up, which I shall endeavor to answer now.
Mark, thank you very much for the presentation. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab situated on the top right-hand corner of your screen. Just while the company take a few moments to review those questions submitted today, I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. Mark, as you can see, we have received a number of questions throughout today's presentation. Can I please ask you to read out the questions and give responses where appropriate? Do so, and I'll pick up from you at the end.
Okay, so a question here: "What can you say about the timeline to obtaining permits to drill at El Romeral, and what's the potential increase in production and cost to drill?" Okay, I didn't cover that, so that's a good question. The timeline I covered. We're hoping to get the permits by the end of this year. I'm hoping we can be drilling by the end of this year, but more likely it's gonna be early 2025. The cost to drill, that was a very relevant question, and thank you for answering it. I omitted to state that in El Romeral, the structures are all very shallow, Tertiary turbidite reservoirs. They're only about 900 meters deep. So what that means is that the cost to drill a well is about EUR 1 million or EUR 1.1 million gross.
Prospex is half of that cost. So drilling these wells is very cheap, and tying them into the pipelines, which we own, is also not that expensive because it's a short distance to go. Those pipelines have to be permitted. The routes that join our pipeline network has to be permitted, and the environmental impact assessment has to be agreed by the regulators and the authorities. The production, when it comes, we only need production from two of those wells to come in in order to get to 100% capacity in the power plant to generate 8.1 MW.
So if, if they all come in, we're gonna have three wells with gas behind pipe, which we can, either, increase the capacity of the power plant, or, what I would like to do in the future is possibly connect that to the local Enagás pipeline, the 26-inch pipeline, which traverses the concessions. So that could be an investment in the future, which would give payback extremely quickly, because you could connect to the pipeline, and you could sell gas, and you could generate electricity, and you could do that on a daily basis, and you have an arbitrage opportunity between the two products. So the next question I'm going to answer is the: "Can you extend the agreement with BP past 2024?" And the answer is, I was in,...
I was in Rome for an operating committee meeting last week with the operator, and this is one of the questions we've been addressing. It's gonna go out to tender again, as you have to do for large contracts. BP is, I understand, is keen to renew the contract. I introduced BP to the operator, as I know BP Gas Marketing from previous roles I've had at running companies. And I understand they are keen to renew the marketing agreement with us. But it will go out to tender, and we'll get the best deal on offer. Okay, the next question from Joe A: For Romeral to go to full production, does the mothballed turbine need replacing, and at what cost?
Yes, the gas engine, which is mothballed, will need refurbishing. The cost of that is in the region of EUR 400,000-500,000 to refurbish. There's a project ongoing at the moment as to what's best to do with that turbine and with that gas engine. Either replace it or refurbish it. Sorry, I've lost the question. There it is. Have any offers been received in the last 12 months for any assets? And the answer is no. We've not received any offers for the assets in our portfolio in the last 12 months. A question from David M: Can you talk about the current M&A market for similar assets in Europe? What kind of acquisition provides the best synergies portfolio diversification? That's quite a broad question.
The M&A market in Europe for similar assets is quite active. Some of them are very large, but the trouble is a lot of people are wishing to farm down very high-risk exploration opportunities, which we regard as quite a risky investment. I wouldn't be wishing to risk the company's money or shareholders' funds on risky exploration, but an element of exploration on the existing portfolio is always going to be a good thing. The acquisitions we are looking at have to be of a size that we can manage.
As I said in last December, in an RNS update on business development, we actually went through due diligence on an asset, which was turned out that the drilling costs were going to be so large, it was going to be something that prospects would struggle to fund and keep it shell. It was an exploration asset in Europe, onshore, offshore. In the end, we turned it down, so that was. We didn't go for it, although it did pass our technical due diligence. As far as diversification, we're looking at as I said, we're concentrating on natural gas, not conventional natural gas, so nothing that needs stimulation. So conventional natural gas onshore, where wells are cheap and where it's not too deep. That's what we're looking to diversify into.
We're finding there's quite a large number of opportunities available. We're in the data room at the moment for two or three, and they are onshore Europe. I can't give you any more details at this point. So the next question from a Mark R. Balancing capital allocation, do you have the capital to run the drilling program to its fullest? What's the anticipated revenue expect to come from the production, and what's the margin? I'm gonna have to come back to you on the second half of that question. The capital allocation, if we drill all 8 wells, I think we will need to build the funds up in order to drill all 8.
But depending on the timing of those drilling, that drilling and the income that we generate from the assets, we may be able to do it because the costs are low. We may be able to get there without having to raise extra capital for the drilling campaign, but that's not an absolute certainty. The timing is all important. We're building cash up this year, and we hope to get the permits in good time so that we can drill. If we can drill earlier, then yes, we might need to raise funds, but I think we, we could make it to the... By the end of this year, we should have enough funds to, to drill what we need to drill in the timeframe. But it's all gonna depend on the gas price, which is firming up nicely.
It's just this week, it's been coming up 5% or 10%, which is always good news. The anticipated revenue is gonna be down to the gas price again, but we know what the revenue is from, from both assets. In Spain, we're going to... When we get two wells drilled, we're going to go from one-third capacity to full capacity, so from 30%- 100%. As for the margin, I'd have to get back to you on that number. The margins is not-- it's something I'd have to compute and get the economic model up on whichever prospects have been drilled. So I think that's all the questions I've seen so far on the Q&A.
Mark, thank you for answering all those questions you can from investors, and of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, can I please just ask you for a few closing comments?
Oh, I have another question coming in. Can you please confirm the ongoing viability of Project Helios solar farm in Spain and expected implementation timeline? Yes, Project Helios solar farm, we're waiting for environmental and regulatory approval for that. The land adjacent to the, the power plant has been leased for 25 years on a, a low start rate until we get the project actually sanctioned. We're waiting for a number of things to happen. We have the FEED contractor and the EPC contract is still in negotiation, and we hope to get that implemented in 2024. Again, exact timeline is not available. One question for you, Lily. Do we need to address the pre-submitted questions, or are those going to be done after the event?
That's totally up to you. If you've written responses, then they'll be available on the Investor Meet Company platform.
Well, okay. Well, what I'll do just to make sure that these questions are addressed, I'll address them quickly here, if we've got time, which I think we do. So question one of the pre-received requests, have you received any offers for assets in the group, and rejected? If so, why, and what are discussions ongoing? I've already addressed this question. We have not received any offers for the assets in our portfolio. A question about Andrew Hay and what's his role in the company. So Andrew Hay is an experienced non-executive director. He's got decades of experience in his career in corporate finance and is a very valued member of the board, and he's been on the board of several listed energy companies.
He's the chair of the audit committee and is a very valued member of the board of directors. You have to note, non-exec directors don't get paid very much, but they have the responsibility of directors of the company. So, a lot of regulatory and corporate governance work goes on behind the scenes, which is a requirement of an AIM-listed company. The next question was: When do you think licensing permits will be granted in Spain and Italy? Again, I think I've answered that in the live Q&A session.
It has to be said that the regulatory environment of both Spain and Italy is changing all the time, and there's a lot of political resistance to the development of fossil fuels, but both countries have realized the independence of energy supply is very important to them. So they're having to manage that agenda against the backdrop of political resistance. Question 4 was: Why has VSA downgraded the share price from 20p- 18? You can see the VSA report on our website. This is largely due to the downward pressure on forward curve gas pricing, which has softened in 2023. However, we see the forward curve rising from here.
It's currently about 32 EUR MWh , and that's rising to 35 or more by the end of 2024 and early 2025. So, there's a question here on admin costs. The answer to this is the regulations attached to being listed on AIM require companies to have a nominated advisor and at least one broker. And in addition, you have to audit the accounts twice a year, and so we have other costs associated with being listed. Company registrars, legal advisors, auditors, accountants, stock exchange costs. It costs each time we put an RNS out, it costs us money to publish that. We have to have insurance, and we have website and IT support. These are base costs for an AIM listing.
Importantly, they won't increase significantly on any expansion in the company or the company's portfolio. So we don't have a physical office, we have a small team working virtually, and our salaries are mid-quartile in comparison with our peer group. So that's how I'd address that question. Question six was: Will the board of directors consider any buyout offers? If an offer is received, which would be of value to shareholders, then, of course, the board of directors will evaluate this and consult the shareholders and recommend if we do get a buyout offer. I'm afraid to say we have not had a buyout offer yet. So that was question seven as well: Has the company had any buyout offers? The answer is no. Question eight: Update on the Tesorillo project. I think I covered that in the live session.
Tarba Energía, the operator of Tesorillo and El Romeral, applied to convert the exploration permit to a production concession in May 2021. Since that time, it's been stalled by the political process in Spain, not least because there was no government for some 18 months in Spain, in 2022 and 2023, as it was a hung parliament. So there was nothing decided during that time. It's very frustrating, but as I said on the live presentation, the political backdrop is such that both Spain and Italy are realizing the importance of indigenous energy security, which we hope will unlock some progress on the permitting of both Tesorillo and El Romeral, and Selva Malvezzi in Italy. The last question was: administration costs in 2023 are high for a company that has low turnover.
I refer to question five above. The base costs being listed are unavoidable, but the route to profitability is to get the five new wells drilled in Spain and the three new wells drilled in Italy. So that, I think, addresses all nine of the pre-submitted questions, and I'll hand back to you, Lily.
Mark, thank you for covering off all those questions. Just before redirecting investors to provide you their feedback, can I please just ask you for a few closing comments?
Well, I reiterate that Prospex Energy is debt-free, warrant-free, and we're poised for growth. So any investments which, we attract into the company is gonna go straight into the growth of the company. That's growth of the assets, but of the concessions we have. And if the right deal comes along, which we, which we like and we want to invest in, then any investment will go directly into that asset. It won't be covering G&A. So that puts us in a very strong footing to expand this company into a much larger energy investment company.
Mark, thank you for updating investors today. Can I please ask investors not to close this session, as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Prospex Energy PLC, we'd like to thank you for attending today's presentation, and good morning to you all.