London-listed energy firm plans exit from ‘uninvestable’ Argentina

London-listed Molecular Energies UK said it was planning to sell its Argentine oil and gas business, citing an unfavorable operating environment.

The news comes shortly after US major ExxonMobil said it was mulling offloading shale assets in the Neuquén basin.

Business headwinds have been building in Argentina, where inflation is rampant, political risk is elevated and access to dollars is crimped.

“The country of Argentina is economically and politically volatile and unstable and has degraded materially since the Company became invested there, especially so this year,” Molecular Energies said in a statement.

The transaction, involving up to US$40mn, would see Molecular Energies offload President Energy Holding UK, the beneficial owner of Argentine unit President Petroleum. Peter Levine, a Molecular Energies director and shareholder, would purchase the business via his company PLLG Investments Limited.

The sale, the statement said, would provide Molecular Energies with “potential to grow significantly as a public company without the anchor drag of being involved in a country sadly regarded by many investors in both the London and international markets as uninvestable at the present time.”

Citing the impact of capital controls, the company said it was “inadvisable” for Molecular Energies to keep pumping funds into the unit to continue expanding it, as there is “no guarantee when or if at all that monies can be repaid, and dividends paid.”  

President has conventional mature fields in Río Negro and Salta provinces. Average net output in 2Q23 fell to 1,514boe/d from 1,650boe/d in 2022. Registered 2P hydrocarbon reserves as of December 31, 2022 were around 19Mboe (million barrels of oil equivalent).

The business is profitable, the statement said, generating Ebitda of around US$3.5mn in 1H23, money used chiefly to service around US$33mn in third-party financial debts.

Molecular Energies also has an exploration license in Paraguay – where drilling is due to start this month – and two subdivisions focused on the green hydrogen segment. 

Argentine energy firm Pampa Energía recently said it was analyzing the potential purchase of ExxonMobil’s shale oil assets. The US firm is involved in several areas in the formation, with almost all production of around 1,170m3/d (7,359b/d) corresponding to flagship block Bajo del Choique-La Invernada, according to operator data published by the federal energy department. 

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In related news from Argentina, local driller Tecpetrol, a unit of Italian-Argentine group Techint, said it had achieved record gas output at its flagship Fortín de Piedra license in the Vaca Muerta unconventional hydrocarbons formation.

Output spiked at 24Mm3/d last month, with the company citing the impact of commitments under production promotion scheme Plan Gas and the commissioning of the first phase of the Vaca Muerta gas pipeline, a major debottlenecking project.

Tecpetrol has spent US$3.5bn at the acreage since 2017, state news agency Télam reported. 

The firm expects to export an average of 1.1Mm3/d this year, generating forecast revenue of US$100mn.

Authorities plan to start a tender process within days for the second phase of the Vaca Muerta duct, local press reported.

In June, according to the latest monthly report published by local energy think tank the General Mosconi institute, national gas production was 138Mm3/d, down 1% year-on-year and up 2.4% month-on-month.

Gas production in Neuquén province, home to the bulk of Vaca Muerta, was 91.4Mm3/d in July, up 0.29% year-on-year, the provincial government said. Officials estimated that producers in the province were injecting 100Mm3/d into the system in August.