Prospex Energy (LSE:PXEN) — Annual General Meeting

0:00 Good morning, and welcome to the PROSPEX ENERGY PLC Annual General Meeting. Throughout this quarter, meeting attendees will be in listen only mode. Questions are encouraged and they can be submitted at any time by the Q and A tab situated in the right corner of your screen. I'd now like to hand you over to CEO, Mark Ralph. Good morning to you, sir.

0:17 Good morning to all shareholders, and welcome to the PROSPEX ENERGY twenty twenty five AGM. We're going to run through the formal business of the meeting first, and then I'll open the floor to the Q and A session. And then run through that, so they can take questions from the floor as they come in through the investor meeting company platform. And I'll endeavor to answer all the questions at the table.

0:50 Without further ado, I'm going to kick off. So it's now just after 11AM, and I declare the meeting open. We'll now proceed with the meeting. May I take the notice of the meeting as read? Yes? So that's sure. Positive. But we still have some shareholders arriving, I think. It's taking a little longer downstairs because of the logging in process. Yeah. Okay. So if there are any questions from the room, could you raise your hand and give your name before asking your question. Are there any questions?

1:37 So no questions. We'll move on to the formal business of the meeting. So the formal business of the meeting is to go through the resolutions. And ordinary resolution one, I propose that the annual report and audited accounts of the company for the year ended 12/31/2024 are received and adopted. I put the resolution to the meeting. Those in favor? Those against? I declare the resolution passed. Ordinary resolution number two provides for the reappointment of Alastair Buchanan as director of the company, who retires in accordance with article 78 of the company's articles association.

2:25 I propose that Alastair Buchanan be reappointed as a director to the company. I put the resolution to the meeting. Those in favor? Those against? Proxy votes. Sorry. The I declare the resolution is carried. Ordering resolution three provides for the reappointment of myself as director of the company in accordance with article 78 of the company's articles of association. Since this resolution involves my reappointment, I ask Ben Harbour, the company's secretary, to propose resolution three.

3:06 Thank you, Mark. I propose that Mark Routh be reappointed as a director of the company. Those in favor? Those against? Thank you. I declare the resolution carried and I'll pass the chair back to Mark. Thank you, Ben. Ordinary Resolution four provides for the reappointment of Adler LLP as the company's auditors. I propose that Atlas Shine LLP be reappointed as auditors of the company to hold office until the conclusion of the next annual general meeting at which accounts are laid before the members.

3:58 I put the resolution to the meeting. Those in favor, those against. I declare the resolution carried. Ordinary resolution five authorizes the board of directors to determine the remuneration of Atlas Shine LLP as the company's auditors. I put the resolution to the meeting. Those in favor? Those against? I declare the resolution carried. Ordinary resolution six provides for the authorization of the directors to allot new shares in the capital of the company. An explanation of this resolution is set out in the notice of AGM. I propose that resolution number six are set out in the notice of the Annual General Meeting to be passed as an ordinary resolution.

4:51 Those in favor? Those against? I declare the resolution carried. Special resolution seven provides for the authorization of the directors to allot new shares free of preemption rights. Again, an explanation of this resolution is set out in the notice of AGM. I propose that resolution seven is as set out in the notice of the end of general meeting be passed as a special resolution. Those in favor? Those against? I declare the resolution carried by unanimous vote of those present in the room. Ladies and gentlemen, that concludes the formal business of the AGM. I thank you for attending.

5:40 So we'll now turn to the Q and A session. And questions will be loaded onto the Investor Meet platform. We have so far a list of seven pre submitted questions, which I will read out and answer.

6:03 So question one, why aren't we seeing consolidated accounts? Investors deserve to see the full picture. This is a question which has been repeatedly asked. And the bottom line is the cost of consolidating the accounts of the parent company, frankly, outweighs the benefits of doing so. As an an investing company, we do not consolidate to the. And the benefits of doing that are really really do not justify the cost of doing so. We know on a day to day basis what the cash in the businesses is on all the all the subsidiaries.

6:49 And if we become an operating company, then we will have to suspend and relist. That at the moment isn't on the cards. It's a very expensive procedure. So we're we're we're not going to do that, but I can I can assure you that we are on top of the company's cash position? And I'm not sure quite what investors need to see or why they need to see it. Any further information on that? Grant, do you want to make any further comment on that? No. I think you've summed it up pretty well. And, ultimately, it's something we we definitely aspire to, I think it's worth saying that, is to become an operating company one day, but now is not the time.

7:36 I think that's fair to say. Okay. Thank you. So on to question two. The Board needs to show some confidence in the company and buy some stock with their own money. I rather suspect this question preceded the RNSs of yesterday evening and of this morning. The board has subscribed to the front raise. Board will subscribe to placings where the company benefits from their investment. Buying company buying company stock on the open market does not benefit the company. The other factor is that board members are almost permanently in possession of inside information and simply cannot purchase shares on the market anyway.

8:22 So this is actually one of the first opportunities that we've had in recent months to actually invest in the company. So we've done what we can, and that's the answer to that question. Question three, the company should be clear about costs. For example, did prospects have to contribute to the recent repair at If so, how much? The answer to that question is categorically yes. If we do not contribute to our share of the repair of the Viro field, then the operator under the shareholders' agreement can dilute our shareholding in Viro.

9:09 Now diluting the share of the assets in the future is a far worse outcome than doing a small dilution of shareholders at the moment. This asset is going to throw off some €8,000,000 per year cash flow, free cash flow net to PROSPEX from next year onwards for the foreseeable future, probably five or ten years. So diluting our asset share in that in that investment is a far worse business outcome than doing a small fundraise now to fund the workover to get us back into production on Vallera.

9:55 The money that we'll raise on this placing will cover the recent repair, which is ongoing at Vallera, and production is imminent. Recommencement of production from Vale is imminent.

10:12 So that's question three. I'm not going to expand any further on that. Question four, engagement with individual shareholders is poor. That, frankly, is an opinion. And all I can say to that is some individual shareholders seem not to understand the market abuse regulations and expect me to provide them information before other shareholders. This could then get shared on bulletin boards and closed social media groups. This activity is actually a criminal offense under the MAAR regulations. By law, I must communicate market sensitive information with all shareholders at the same time. This is done by RNSs, podcasts, and webinars and the shareholder meetings we have recently convened.

11:04 If shareholders choose not to participate in those meetings, then do not expect me to provide preferential treatment to any shareholder, however large or small. The sense that larger shareholders should be entitled to preferential treatment and be privy to inside information before anyone else is contrary to the malregulations and could lead to criminal prosecution. While some shareholders seem to be oblivious of the regulations or worse still have an attitude that it does not apply to them, I will not engage in diverting inside information to any shareholder unless it is via the RNS process or unless all shareholders have access to that same information at the same time. Question five, why not set up a notice board on the website where questions can be asked and a representative of the company respond within a reasonable time frame?

12:00 Again, communications with shelves are strictly strictly regulated, and the correct channel for that is via RNSs. Such a notice board will not provide any more information than that which is disclosed by the official channels.

12:19 Question six. Shareholders are particularly disappointed by missed deadlines, poor communications, many shareholders have reached out regarding the direction of the company, and there's no acknowledgment or response from the company. The Board needs to recognize the consistent disregard they are showing to shareholders is affecting the share price and give a clear direction to achieve its aim of growing this company. I happen to disagree strongly with this statement. The direction of this company is one of growth. Increasing production income by investing in onshore natural gas assets onshore in Europe. This strategy is clear, updated and repeated, and the company is delivering on that strategy.

13:10 Deadlines for receiving permits to drill wells in Spain and Italy are notorious for their slippage and delay, a process over which the company has no control. Communications with shareholders is important to PROSPEX and to me and has been addressed in the recent past with more podcasts, webinars and shareholder meetings and events. There is no disregard for shareholders. Clear direction to achieve growth of the company is evidenced by the deals done to date since I have been in charge of PROSPEX, increasing the share in Selvo Malvetsi by 20% to 37% working interest in April 2022, achieving first gas from Selvo Malvetsi in July 2023, the application to drill five new wells in El Romero in May 2024 acquiring a 7.24% working interest in Via AGI in August 2024, leading to more than doubling the company's production income with two permitted future wells to drill application for onshore licenses in Poland in October 2024 the application to drill four wells on Selvo Malvetsi in December 2024 increasing the ownership of El Romero via Taba from 49% to 100% in April 2025 increasing the ownership of Tesarillo Valtava from 15%

14:43 to a 100% in April 2025. I don't really see that that is a disregard for aiming to grow the company. So I strangely disagree with this this questioner. Question seven. Do you think it was wise to take a bonus whilst Valeura is going through a workover and no other drilling this year? It would have been better to post a profit when we could have done a buyback of approximately £50,000 worth of shares for the business. The bonuses were awarded early this year to all staff and prospects after the Viro deal was closed and the company's production income more than doubled.

15:31 The requirement for a workover on Viro was not known until April 2025. The Viro deal was a transformational deal for the company. We spent £4,000,000 on this deal, which will result in net cash flow to the company of €8,000,000 per year for the next five years at least from the Vallera one b well alone. And the source of that is the Hanneman Partners research note, reference page 51 for anyone that has it. If you add the new wells to be drilled on Vallera, the net cash flow rises another €40,000,000 per year from 2027 onwards. The same research note will verify that. This deal was not open to the general market industry.

16:17 And I would argue to you that the £4,000,000 deal to get that kind of cash flow in the next two years or so is an extremely worthwhile deal to have closed. It was achieved solely through my contacts with our brokers at PSA introducing me to the owners of HAYCO Energy, who then did substantial due diligence over a period of fifteen months on me, the company, and all of its assets, which also resulted in HAYCO becoming our largest shareholder. A 50 k bonus, by the way, under the current tax rules amounts to almost half that number after tax. So I have answered the pre submitted questions, and there are some more coming in which I shall attempt to answer.

17:12 So give me a moment while I read the questions, and then I shall try and answer them after reading them out.

17:33 I'm afraid, again, there's some opinions in here which are being put through the question, which I think requires some answers. So question here, it's great that PROSPEX finally has a strong asset base that generates positive cash flows. Given this enviable position, I have noted there have been far too many placings to raise cash to in twelve months alone at almost always low share prices. Over dilution has hence resulted. Why are directors not being more diligent in not diluting shareholders often at lows? I can assure you the directors are extremely diligent on fundraisers and prices.

18:18 We are at a stage now where viral production is shut in because of the workover, and it's disappointing that share prices drifted downwards. When we get back into production on Viro, the share price will go up again. But I as I said before, I would argue to you that diluting shareholders slightly in this fundraise is far better than diluting the asset, which would happen if we did not stand our share of the investment required to bring Viro back into production.

18:55 Next question. Your recent RNS said the viral workover was on track, cost of production would be back in mid June as it anticipated. Is that still the case? If so, why are we having to raise further cash now at very low share prices now? As stated in the RNS of yesterday afternoon, we had we've spent some £500,000 acquiring 50% of TAVA from Morocco. We've also got other costs coming in and a cash call to be met at the end of June for the Viro workover.

19:35 This means that we have to raise money now in order to make sure that we have sufficient cash in our accounts to cover the costs. And as I said, I would argue that this is a better outcome than diluting in the asset.

19:55 The work of it is ongoing right now. The rig is currently running the production tubing back in the hole. And yes, it has taken a bit longer than mid June, but we really expect to be back into production early next month. I can't give you the exact date of that because, as always, operations can slip slightly. This is a complicated recompletion. The well is some four and a half kilometer kilometers deep, and it's an expensive operation, which is being funded by the other investors in AGI, HEICO Energy Iberia as well. I wish we weren't having we weren't having to raise money at these share prices. Unfortunately, the fact that we were doing a raise was leaked to the market.

20:44 That leak was not from the company. It was not from me. I happen to know actually where it might have come from. And as I said on the market abuse regulations, be careful what you spout and post on social media. Your anonymous, monikers aren't all that anonymous.

21:07 Okay. I've got actually another question here. It's not really a question. It says, thanks for the answer. Please keep up the good work. Hopefully, dilution won't keep hurting us, and you can keep our cash flows for future opportunities your team is getting good at. Well, thank you for that. It's nice to see a positive remark from some shareholders because the social media vitriol that's been put at me and the idea that the some shareholders have decided that voting me off as a director is a good idea without proposing a new director to replace me is simply unfathomable to me as to why you would want to do that. Next question. Can you do more PR in the future? Yes. I will endeavor to do more PR.

21:52 I'm doing my best to do that. It is time consuming, but I there's nothing more important to me than communicating with shareholders who are going to be supportive and not just throw rocks at me through the social media platforms.

22:07 You shouldn't be reappointed. Thank you, Michael B. That's your opinion. I put it to you if you want to try and run a company on AIM. If you have the experience to do so, then fill your boots.

22:24 Next question. The last investor meet, you said you were growing the company, but if dilution is high, the value added to shareholders may not increase. What is your plan to try and get higher share price and not just increase market cap by issuing new cheap shares? This is the age old question I get that dilution is a bad thing. I put it to you that owning a small percentage of a large entity is better than owning a huge percentage of a tiny entity. My objective is and has always been to grow this company. And as I have, evidenced from the questions I answered before, we have numerous deals and numerous things in place which demonstrate that the growth of the company is being delivered and that I am doing so. One question I've been asked particularly is how are we going to fund the expansion into Poland?

23:19 The Polish licenses have been delayed by a very sluggish ministry. We expect to see an announcement on that toward the end of this year. The licenses probably won't be awarded until next year, but I don't have the timeline on that. If we get awarded the licenses, they'll be awarded 100 percent. At that point, I would have the opportunity to farm down to get a carried interest to drill the wells. The drilling of those wells in Poland probably would not happen until 2028. So in the meantime, Poland will be funded from production income from the other assets. Another question about you do not have to give consolidated accounts, but at a point in time, in one of your PR updates, you can give a one off cash picture which could be communicated.

24:11 It is to give us a feel for generation.

24:16 Yes. The one off cash picture is all very well, but I don't quite see what that benefits, making it public how much cash this company has.

24:32 Correct. Grant is just speaking here. I mean, I think you do need to leave it to the board's discretion to some extent, you know, what would benefit the share price. And also, you know, do we want to show

24:57 everybody, not just Shell, is what current cash position is. I don't think that's necessary nor necessarily desirable at some points. Okay. The next question says, last year's accounts had a line explaining cash position of subsidiaries, but not this year. Why? I'm not sure that's entirely accurate. I'll have to go and look at it. Correct. So another question. I got a question. How do you explain the pathetic share price performance? Okay. This is obviously coming from someone who is using PROSPEX as a platform to trade shares to make a five or 2% profit within a week on buying and selling shares.

25:43 I can't predict what the share price performance is going to be. We have had shut in production from our main producing asset, which we are now going to get back into production imminently. I would put it to you that the share price will improve and increase as we grow the company. As I said, owning a small part of a large company is better than having a large part of a small company. I can't predict what the share price is going to be or how it's going to react to market forces and to some shareholders selling down their stock. I can't control the share price. And to blame me and the board directly for poor share price performance is not really fair.

26:36 Please, would you confirm by what is meant by imminent? It was announced on the ninth of on the ninth, the same, and it was previously communicated that would be recommenced by mid June. Please, could you also provide more transparency around future funding requirements? Okay. This is a valid question in here. Yes. Mid June was the predicted recommencement production from Virea. It is imminent. I'm not going to give you a date. I'm actually not allowed to give you a date. But as soon as it is back in production, I will let you know. As I said, the operator is running in the production tubing on a very complex recompletion, And that will be back in production. And as soon as it is announced, I will do so.

27:22 Now the valid question here is, could you provide more transparency around future funding requirements? Yes. I've been endeavoring to do this as much as possible. I'd like to point out that in Royal, we are now 100% in the asset. And the current current drilling campaign is expected to commence toward the end of this year or early next year. I'm just fast forwarding to the the schedule slide on the drilling, which I will also display here in the the room. If you just give me a moment. It's not working for me now.

28:19 So right. The the just give me a moment. Apologies, the technology is getting the better of me there. What I'm showing to the people online is the drilling schedule, which we expect to be the earliest expected time line we expect to be drilling in, which is Q1 twenty twenty six. This is subject to the permitting and all the permitting process in Spain.

29:44 Now I'd like to point out, we are 100 of this asset. And when we get some permits in the Montreal, my objective would be to see if we could get a farmony, that is someone else, to come in to participate in the drilling of the wells by carrying our interest in that. That would be a good outcome for funding the company. It might not be a good outcome if we are having to dilute in the asset. So this is an age old issue. Do we dilute the shareholders by issuing shares or do we dilute any asset by having a lower production income but a carried interest in the wealth? I will look at doing farm outs to get participation from other companies actively.

30:32 I will do so also do that for the Polish assets, where we're a 100%. So we have the opportunity to farm down these assets. The other thing is that Enviroa, the workover that's about to be completed will have a run of some nine or ten months of production. During that time, the operator is going to be talking to a syndicate of five banks for a debt facility to fund the development wells that are scheduled for Q2 twenty twenty six. If the operator gets a debt facility and if we have accrued production income with a robust gas price from the production from Vaiura in the next ten or so months, then the requirement for funding the development wells by equity diminishes or goes to zero.

31:22 So I can't tell you absolutely exactly when or if we're going to need to raise money again, but I will endeavor to ensure that the company's shareholding in its assets is not diluted. Because if we don't fund our share, then we get diluted in the asset. Okay. Another question here. Appreciate many seem to be very disappointed the share price is still languishing at three year lows despite all the progress PROSPEX has made. I'd be willing to bet that when management fix the sentiment, we'll massively improve. Mark and team, keep your chins up. I just hope you keep delivering shareholder value you should follow.

32:07 Well, I can agree with that sentiment. I'm doing my damnedest to grow this company and increase its value. It's disappointing that the share price is where it is, and we've had to raise money at this price. Would the board welcome an unpaid nonexec director added to the board to look after the shareholders' interests? Yes. The board will welcome nonexec director with the qualifications to actually, be on the board of a name listed company. The board of directors of PROSPEX, This is the best board of directors I've ever worked on of about five that I've had experience of working with.

32:56 The dynamic is quite important to us. I hope and believe that we are looking after Shell's interests. The opinion of some on the bulletin boards is not quite the same, but I would put it to you that qualifications are probably more important than perceived shareholder interests. Okay. I've got another question here. Thanks for your answers. I do believe your shareholder mutiny is not getting special access. At the cost of the recent share price damage. Anyhow, let's get the PR going and production drills progress permits, pounds 8,000,000 per annum sounds nice. Would you ever consider a full company sale?

33:53 Well, it's not exactly just a question there. We would, of course, consider a full company sale. I have to say that the company had not received an offer from outside. If we did, we would consider that and recommend it to shareholders if it was perceiving value for the company. There was a price, you know, we're at 5 now. We obviously don't want to be selling at five p. If if the price is 50 p, we might well consider that and recommend it to shareholders. Somewhere in between, there's a number, and that is going to be down to shareholders to decide and for the board to recommend what is, what they believe is a perceived correct value for the company should an offer come in. But I have to say that has there has been no offer.

34:41 And if there is, we would give it due consideration. Next question. Share prices dropped 40% while the company has grown. I own 2x your shareholding, so it hurts me a whole lot more. I feel your pain. I understand that. And I'm doing my best to grow the company and boost shareholder value. I can't actually control what the share price does. Okay. Similar to add, I have held for three to four years, just scratching my head why I'm 30% underwater at this point. I think there are lots of people scratching their heads on that one. When do you foresee the Italian permits to drill?

35:28 On the schedule, which I'm sharing on the screen now, the earliest I can see the permits land on that is Q1 twenty twenty six. The next question. The company has achieved great things with the asset position. Congratulations to all, but why is this not reflected in the share price? I'm afraid I'll be glib on that. I wish I knew. AIM is a strange place. Share price performance is disappointing. And it does lead to the question as to why we're listed on AIM. But I think the the benefits of being on AIM are are there, and I can I intend to continue to do that? So another question here. Mark, congratulations to you and the entire team on successful acquisition of 100 of El Romero.

36:23 Has the recent blackout in Spain prompted any increased interest or action from the authorities regarding either El Romero or Teserilac? That is a good question. The authorities, have had a shock after the blackout at the end of April in Spain, and we have been to the ministry and we have spoke. However, their masters at the ministry are political party, who are on the, not quite on the Ed Miliband spectrum of, ecozalatory, but they are trying to cancel fossil fuels in Spain in spite of the fact that the Spanish nation imports the most LNG from overseas and is still importing some 28% of its gas requirement from Russia.

37:12 These things seem to be lost on the politicians. The people of the ministry are being very supportive in trying to get our permits done. As for Tessarillo, it's a similar it's a similar subject. We're to get L Rummel done first, and then we can turn our attention to Tesarulo, which, if we ever got drilling there, would be a real game changer for the company. Next question. Once revenue starts rolling in, would the board consider a share buyback scheme? The answer to that is yes. Share buyback or dividends in the future, but having cash in the bank often trumps such activity and might not be beneficial to shareholders in the long run. So the answer is we'd consider it, but we'd have to take advice on that.

38:06 So the last question I'm seeing at the moment is, I understand this year that Elvira will be generating negative free cash flow and will continue to do so if permits are not received. Has there been a contingency plan for the asset should permits not be obtained? The El asset is producing less and less gas, and we have cut costs in El Romero to ensure that we are getting positive cash flows from the asset. If permits are not received, then yes, we would have to consider what we're going to do with the asset. But at the moment, we have a good headwind and some very good indications that we are in the final straights of getting those permits done.

38:57 As I said, the earliest I can see that happening is q one twenty twenty six. I hope it will be sooner. Right. That is the end of the q and a session online. Are there any questions in the room, from shareholders we have present or from any other people? Okay. Thank you very much. I think that concludes the q and a session. Alexander, back to you. Perfect. Well, Mark, thank you very much for updating attendees today. What I'll do is I'll I'll close the session off now. And on behalf of the board of PROSPEX ENERGY PLC, we'd like to thank you for attending today's meeting, and good afternoon to you.

39:43 Thank you very much. Goodbye.