Resource World Magazine

56 www.resourceworld.com A U G U S T / S E P T E M B E R 2 0 1 4 the oil patch report J o e l C h u r y W hen talking about South American petroleum development, the small, landlocked country of Paraguay is never mentioned – and for good reason. Throughout the nation's entire history, not a single barrel of commercial oil has been produced. That dubious distinction could soon come to an end, as a major joint ven- ture effort is underway for what is believed to be one of the most massive onshore plays the continent has seen in quite some time. At the helm for this round of explora- tion is a joint venture between the UK's President Energy plc [PPC-AIM] and freshly IPO'ed Petro-Victory Energy Corp. [VRY-TSXV] based out of Texas. At stake: a combined gross mean unrisked prospective resource of 5.2 trillion cubic feet (Tcf) of gas, 157 million barrels of con- densate, and possibly more. It has been long known that the Chaco region holds vast petroleum potential. Paraguay paid dearly to secure it when it went to war with Bolivia in 1928 until 1935, resulting in 100,000 casualties. Decades of poor planning, internal cor- ruption, and lack of foresight resulted in only 48 exploratory wells (28 of which had hydrocarbon shows), and 15,859 km of seismic between 1945 and 2013. Data was acquired, lost, and acquired again. This is where Petro-Victory's CEO Richard Gonzalez comes into the story. Born of Paraguayan lineage, but having spent most of his oil and gas career in the US, Gonzalez was aware of the problems required to play out his dream oil and gas play. In 2006 Gonzalez and his team acquired a prospecting permit for two blocks under two different corporations (Crescent Global Oil and Petro-Victory). His road from prospecting to exploration was arduous, and would've shooed away most suitors. Long story short, every roadblock imaginable was thrown at him, including lost data, four changes in government, a lengthy and costly legal battle, and more. Finally once he'd jumped through all of the hoops and spent roughly $10 million of his and his partners' personal funds, it was time to align with a capable partner. With a few deals already far along the road towards being signed, Gonzalez was approached by Dr. Richard Hubbard, COO of President Energy. While much larger outfits were in play for the Paraguayan property, Hubbard was convincing in his company's capabilities. "At first I told him flat out, 'You're too small to do my deal,'" said Gonzalez. At the time they were only a $46 million penny stock on London's AIM Exchange. It was at that point that Hubbard revealed his company's backstory and why he was with them. Hubbard himself was one of President's biggest assets. Brandishing a PhD from Stanford, and a resume that included being top international geologist for British Petroleum, and later for Stat Oil, Hubbard is considered by many to be a major talent in the industry. Over his career he's found over 11 billion barrels of oil. Next, President is the baby of busi- nessman Peter Levine who had already made fortunes in Russia growing a startup company to its sale for approximately $2.2 billion. Levine already had Hubbard looking over President's Argentine assets on the other side of the border, when Hubbard hypothesized that the bigger potential trended over onto the Paraguayan side. That was when Gonzalez got onto Hubbard and Levine's radar. A deal was struck, and Gonzalez was brought along to help raise money for President's carried costs. After President's spending obligations are met, the share will be 60% on one concession and 64% on the other for President, and the remain- der for Petro-Victory. Together they went about de-risking the asset as thoroughly as possible. Since sign- ing together, they've garnered the support of Schlumberger, and even the World Bank which did 11 months of due diligence in 2013. At $24 million, the World Bank is now President Energy's largest institu- tional shareholder. Finally in June of this year, the first well, called Jacaranda-1, was spudded, and should hit total depth of 4,200 metres by mid to late August. "We've de-risked the sub-surface, we brought in Schlumberger to de-risk the mechanical, and now we've gotten the World Bank to de-risk the geo-political," says Gonzalez. "Now we're finalizing the long form IPO to go public in Canada." "The people that are enamored with this play are the PhD geologists, geophysicists, and geochemists, because there's been so much money poured into the ground in terms of geological and geophysical efforts." Since its initial involvement, President Energy has grown from $43 million to $257 million in market cap. That's the market giving them over $200 million more worth for the value since this started. Paraguay's population is only 7.5 mil- lion and consumes a total of 28,000 bbls/d in petroleum products. Up until now, 100% of that has been imported. If President and Petro-Victory are suc- cessful in exploiting trillions of cubic feet in gas, and hundreds of millions of barrels of oil, it'll be an absolute game changer for the impoverished country, as well as these companies at play. n President Energy/Petro-Victory leading the charge in Paraguay

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