Aj Lucas Group Limited · ASX:AJL
Aj Lucas — Investor Presentation (September 2022)
41 slides from Aj Lucas's investor presentation, Sep 29, 2022
Slide 1: AJ Lucas completes $19.7m placement
AJ Lucas Group ABN: 12 060 309 104 Level 22, 167 Eagle Sreet Brisbane QLD 4001 GPO Box 144 Brisbane QLD 4001 T (07) 3363 7333 F (07) 3740 6670 www.lucas.com.au 29 September 2022 AJ Lucas Group Limited AJ Lucas completes $19.7m placement • $19.7 million capital raising successfully completed via a sh
Slide 2: AJ Lucas Equity Raising Presentation
ASX:AJL AJ LUCAS Equity Raising Presentation September 2022
Slide 3: Disclaimer
DISCLAIMER This investor presentation (Presentation) has been prepared by AJ Lucas Group Limited (ACN 060 309 104) (AJL or the Company) in connection with AJL’s proposed issuance of new ordinary shares in AJL (New Shares) by way of a placement of New Shares to institutional and sophisticated investo
Slide 4: Disclaimer
DISCLAIMER To the maximum extent permitted by law, AJL, the lead manager and each of their respective affiliates and related bodies corporate, and each of their respective directors, officers, partners, employees and agents disclaim any responsibility for the accuracy or completeness of any forward-
Slide 5: Company Overview
COMPANY OVERVIEW AJ Lucas Group Limited (“AJL” or “Company”) is an ASX listed drilling services and gas exploration company focussed on the following: • Gas exploration (Cuadrilla Oil & Gas) o AJL owns 96% of British shale gas exploration and production company, Cuadrilla Resources Limited (“Cuadril
Slide 6: Corporate Snapshot
CORPORATE SNAPSHOT Capital Structure Shareholders2 Share Price (at 27 September 2022) $0.155 Kerogen Investments No. 1 (HK) Limited1 65.2% Paul Fudge 4.9% Shares on Issue (at 27 September 2022) 1,196.2m Top 20 shareholders by % 87% Market Capitalisation $185.4m Total number of shareholders 2,425 Cas
Slide 7: Fracking Moratorium Lifted
FRACKING MORATORIUM LIFTED • Recent months have highlighted the risks associated with the UK’s reliance on expensive, uncertain, higher emission gas imports which has significantly increased gas prices and the cost of living for residents in the UK. • The UK was set to import over two thirds of its
Slide 8: Cuadrilla Resources
CUADRILLA RESOURCES • Formed in the UK in 2007, Cuadrilla is an exploration and production company focused on discovering and recovering natural gas from shale rock • Cuadrilla is 96% owned by AJ Lucas and 4% owned by current and former Cuadrilla employees • Cuadrilla aims to be a model company for
Slide 9: Cuadrilla Bowland License Details
CUADRILLA BOWLAND LICENSE DETAILS • Cuadrilla is the operator of licenses in the Bowland shale totalling >600,000 acres (~2,500km2), making it one of three significant operators by license areas along with INEOS and IGAS (each with gross license area >490,000 acres or almost 2,000km2) • IGAS has dem
Slide 10: Cuadrilla Bowland Shale
CUADRILLA BOWLAND SHALE BGS estimates Bowland Shale located several shale holds 1,300Tcf gas in thousand feet below place aquifers Shale thickness (>1km) High quality natural gas has enables multiple horizontal flown to surface from the wells at different levels shale Complex network of Bowland shal
Slide 11: Comparison UK and US Shale Gas Metrics
COMPARISON UK AND US SHALE GAS METRICS Preston New Road site1 AJ LUCAS 10
Slide 12: Cuadrilla Preston New Road Initial Drilling Campaign
CUADRILLA PRESTON NEW ROAD INITIAL DRILLING CAMPAIGN One pilot well and two horizontal wells drilled through the Bowland Shale • Drilling of the first vertical well at Preston New Road completed in January 2018 to a depth of ~2,700m through the Upper and Lower Bowland shales • Extensive core samples
Slide 13: Cuadrilla PNR1z Flow Testing Indicates Large Potential
CUADRILLA PNR1Z FLOW TESTING INDICATES LARGE POTENTIAL • PNR-1z horizontal well section was completed with 41 separate sliding sleeves. Cuadrilla had planned to fracture each sleeve with 400m3 of fracturing fluid and 50 tonnes of proppant (sand) • Operations were limited by the 0.5ML (local magnitud
Slide 14: Cuadrilla PNR-2 Flow Testing Indicates Large Potential
CUADRILLA PNR-2 FLOW TESTING INDICATES LARGE POTENTIAL • Encouraging results from hydraulic fracturing of PNR-2 with the initial 5 (of 45 total) sleeves treated with the full proppant design volume: • Textbook fractures with targeted proppant volumes of 30 tonnes for Sleeve 1 and 50 tonnes for Sleev
Slide 15: UK Energy Overview A Problem With a Visible Solution
UK ENERGY OVERVIEW A PROBLEM WITH A VISIBLE SOLUTION UK DEMAND FOR NATURAL GAS • The UK remains highly dependent on hydrocarbons for primary energy. In 2021 natural gas fuelled the generation of 39.8% of the UK’s electricity1 • In a 2022 survey, 78% of respondents used gas central heating in their h
Slide 16: UK Energy Overview A Problem With a Visible Solution
UK ENERGY OVERVIEW A PROBLEM WITH A VISIBLE SOLUTION Three major events in the past 12 months have exposed the flaws in the UK’s energy strategy: a) Renewables can be unreliable: in October 2021, the Jet Stream moved north and limited wind generation. This spiked demand for Natural Gas just before t
Slide 17: UK Energy Overview: Gas Imports and Prices
UK ENERGY OVERVIEW A PROBLEM WITH VISIBLE SOLUTION • The war in the Ukraine and the increase in oil and natural gas prices has highlighted the extent of the UK’s vulnerability to insecure and high-priced international supply • The extent of UK gas supply vulnerability is highlighted by the growing d
Slide 18: Australian Operations Lucas Drilling Services
AUSTRALIAN OPERATIONS LUCAS DRILLING SERVICES The Australian Operation is divided into three key divisions providing drilling services to top tier coal miners along the east coast of Australia, primarily focused on gas drainage of underground coal mines, which is essential for safe mining. • Degassi
Slide 19: Australian Operations Long Term Blue Chip Customers
AUSTRALIAN OPERATIONS LONG TERM BLUE CHIP CUSTOMERS Excellent client base • Lucas Drilling Services provides drilling services to some of the world’s largest underground miners • Relationships with certain customers have lasted for 20+ years. 1 LDS possesses a strong incumbency advantage as its proc
Slide 20: Australian Operations Lucas Drilling Services
AUSTRALIAN OPERATIONS LUCAS DRILLING SERVICES Operations • The Group’s Australian drilling operations delivered an EBITDA of $19.1 million (2021: $21.9 million) during the year) on revenue of $123.2 million (2021: $111.1 million). • AJL’s main operating business performed well during the year, despi
Slide 21: AJ Lucas Share Price & Gas Journey
AJ LUCAS SHARE PRICE & GAS JOURNEY AJL Share Price (A$) UK Gas Price (US$/mm BTU) 0.50 12 January 2018 $80.00 Cuadrilla complete shale rock sampling 13 September 2022 at Lancashire exploration site. Results 'in Newly elected UK Prime Minister, Liz Truss advises 0.45 line with' British Geological Sur
Slide 22: Equity Raising Details
EQUITY RAISING DETAILS • ~$19.7 million placement of approximately 179.4 million new fully paid ordinary shares (“New Shares”) to sophisticated and professional Offer Size and investors (“Placement”) pursuant to the Company’s existing placement capacity under ASX Listing Rule 7.1 Structure Fixed off
Slide 23: Pro Forma Balance Sheet
PRO FORMA BALANCE SHEET Balance Sheet Audited as at 30 Equity Raising Proforma as at 30 (A$m) June 2022 Adjustments1 June 2022 Cash & Cash in Trust 3.1 19.7 22.8 Other assets 32.1 32.1 Property, Plant and Equipment 29.4 29.4 Exploration assets 156.1 156.1 Total assets 220.7 19.7 240.4 Payables, prov
Slide 24: Debt Summary
DEBT SUMMARY Current Debt structure: Facility Balance at 30 June 2022 ($m) Maturity Senior-ranking, revolving Asset Based Lending Facility up to $30 million (“ABL”) 19.1 Apr 2023 Junior loan notes (“Junior Loan”) 33.5 Apr 2023 Shareholder loan provided by Kerogen Capital (“Shareholder loan”) 53.8 Oc
Slide 25: Investment Summary
INVESTMENT SUMMARY AJ Lucas mining services is an established operation delivering strong underlying EBITDA and supports the balance sheet After three difficult years the considerable potential of AJ Lucas’ UK gas assets has begun to resurface The UK Government’s announcement on 22 September 2022 li
Slide 26: AJ Lucas Direct and Indirect Licence Interests
APPENDIX 1 AJ Lucas direct and indirect licence interests AJL has a 96% interest AJL direct interest in Cuadrilla. Cuadrilla through foreign TOTAL AJL Licence Sq. km interest in licenses owned subsidiaries (direct & indirect) Other licence holder interests Bowland - Lancashire region PEDL 165 1,065
Slide 27: Board of Directors
APPENDIX 2 Board of Directors FRANCIS EGAN MEng MBA Francis has over 36 years of diverse international experience in the upstream oil and gas industry, working in engineering and senior management roles. Prior to joining CEO, Cuadrilla Resources Cuadrilla as CEO in July 2012, Francis worked in Houst
Slide 28: Risks
APPENDIX 3 RISKS Introduction • The Risks section describes some of the potential risks associated with an investment in the Company. Any investment in the Company is subject to risk factors specific to the Company and its business activities and those of a more general nature including general risk
Slide 29: Risks (Con't)
RISKS (CON’T) A. Investment in UK exploration licences UK political & regulatory a) AJL has an interest in a number of onshore gas exploration and production licences located in the United Kingdom (“the Licences”). Such licences are risk subject to changes in UK laws, regulations, practices and poli
Slide 30: Risks (Con't)
RISKS (CON’T) A. Investment in UK exploration licences (continued) Extent of, and ability to a) AJL’s ability to develop its concession for unconventional hydrocarbons depends upon the presence of significant in-place resources and the ability of recover unconventional AJL to recover those resources
Slide 31: Risks (Con't)
RISKS (CON’T) A. Investment in UK exploration licences (continued) a) Impact of induced Where seismic events induced by hydraulic fracturing operations exceed the 0.5ML threshold prescribed under the current Traffic Light System, the seismicity Operator of an onshore exploration or production licenc
Slide 32: Risks (Con't)
RISKS (CON’T) A. Investment in UK exploration licences (continued) Inability to meet Under joint operating agreements between owners of the licences that AJL has interests in, the operator is generally required to prepare a budget for exploration of exploration licence funding these areas which is t
Slide 33: Risks (Con't)
RISKS (CON’T) B. Lucas Drilling Services and the markets in which it operates Commercial, financial and a) As a business operating in the drilling industry, AJL faces general operational and commercial risks affecting both current and future operations. Such risks include the loss of operational ris
Slide 34: Risks (Con't)
RISKS (CON’T) B. Lucas Drilling Services and the markets in which it operates (continued) Project delays a) Delays to the commencement or completion of work on projects by AJL clients and or the Company have occurred from time to time and may occur in the future due to a variety of reasons, includin
Slide 35: Risks (Con't)
RISKS (CON’T) B. Lucas Drilling Services and the markets in which it operates (continued) Natural disasters and Some of the areas in which AJL has operations, particularly its drilling operations in Queensland, may be adversely affected by seasonal weather conditions. AJL is seeking to seasonal weat
Slide 36: Risks (Con't)
RISKS (CON’T) C. Other operational, financial and business risks Debt facilities a) The terms of the AJL’s borrowing facilities include a number of events of default, including non-payment of any amount due under the facility and breach of financial covenants, which, if triggered, could require AJL
Slide 37: Risks (Con't)
RISKS (CON’T) C. Other operational, financial and business risks Climate change Environmental laws are evolving and, as the world is becoming increasingly aware of the impact of climate change, the State and Federal governments in jurisdictions where the Company operates may introduce regulatory cha
Slide 38: Risks (Con't)
RISKS (CON’T) C. Other operational, financial and business risks (continued) Reliance on Key Personnel Like other companies, AJL’s performance is dependent on the ability of its senior executives and key personnel to manage and grow its business and respond to customers' needs. The loss of the servi
Slide 39: Risks (Con't)
RISKS (CON’T) D. Risks relating to investing in the New Shares Market conditions The market price of shares can fall, as well as rise, and may be subject to varied and unpredictable influences. Neither AJL nor the Directors warrant the future performance of either the New Shares, AJL or any return o
Slide 40: Selling Restrictions
APPENDIX 4 SELLING RESTRICTIONS International Offer Restrictions This document does not constitute an offer new ordinary shares ("New Shares") of the Company in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares may n
Slide 41: Selling Restrictions (Con't)
SELLING RESTRICTIONS (CON’T) Singapore This document and any other materials relating to the New Shares have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore. Accordingly, this document and any other document or materials in connec
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