Energypathways (LSE:EPP) — Investor Presentation

0:00 Good morning, and welcome to the ENERGYPATHWAYS PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the q and a tab situated in the right corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where it is 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 Steves, non executive chairman. Good morning to you, sir. Thank you. Thank you. Thank

0:31 you. Good morning. Good morning, everyone, and thank you all for attending. My name is Mark Steves, and I am chairman of AIM listed ENERGYPATHWAYS PLC. We have a great opportunity at ENERGYPATHWAYS. The Marram gas field in The UK Irish Sea, a proven gas discovery surrounding infrastructure all in place, easy to bring to market. We have a high quality management team led by our CEO, Ben Klube, who's gonna do the bulk of the talking shortly, who knows The UK Irish Sea very well. We know that the development of Marham presents lots of other opportunities in the vicinity. Further known, proven, undeveloped gas reserves, but also further less well known reserves, as well as practical opportunities to play a role in the decarbonization of, industry in the region.

1:29 Russia's war in The Ukraine has changed the energy market. The plus side to this, it has been to make us all realize that the critical role of gas in the energy mix is really significant, particularly in this country, in this domestic our domestic UK. The market has come to realize the actual advantages of domestic gas over the environmental and socioeconomic impact of some alternatives, including imported LNG. Specifically, and I quote the North Sea Transition Authority, domestically produced gas has an average emission intensity of 21 kilograms c o two per barrel of oil equivalent, whereas imported LNG has a significantly higher average intensity of 79 kilograms c o two per barrel of oil equivalent.

2:23 Marram will actually emit significantly less again at no more than five kg. That's the data. So the UK government, the NSTA, UK Government of whatever flavor realizes all this. Gas is key to energy transition, not least because it gives us The UK time, but also because gas will be a catalyst that enables The UK to transition to and facilitate other technologies. First and foremost, it's about Marram. And as Ben will outline outline, the near term development of Maram has exceptional economics with rapid payback. The net asset value of this project alone

3:03 is over 15 times our pre money valuation. So eighteen months to production and significant cash flow. This is a great opportunity. And over to you, Ben, for the detail. Thank you, Mark.

3:22 So as Mark has outlined, the the company is an energy transition company seeking to supply domestic gas to The UK and provide the The UK with energy security and assist its transition to net zero. We have a foundation asset, which is the Marram Gas Field Development, which is located in The UK, RSC. It is a fully appraised gas field of in the order of 46,000,000,000 cubic feet of gas. It is a simple low cost development in shallow water, and it generates excellent returns for investors.

4:10 We estimate the NPV of the project to be in the order of £100,000,000 delivering a rate of return in the order of 70% and pays back within twelve months. This development opportunity has the prospect of being providing gas supply into The UK in relatively short time frames and can throw off significant cash flow for shareholders and and provide investment for future growth. Now this particular part of the UK REC is is an area that the management team has worked in before. It has good familiarity with it and has identified significant undeveloped gas resources, which we believe have been overlooked.

5:03 We estimate those to be in the order of two TCF of gas, and the company has established an early mover position to take advantage of that potential. We've submitted a number of requests for new licenses in the region that are being advanced with the UK government, and there are other fields that we've identified that essentially can be brought to to market in a relatively short time frame. So those resources we're targeting with short cycle in the in the order of a 134 BCF of gas. Furthermore, what makes this region exciting is its its colocation with a number of other energy assets.

5:54 This region has significant wind power generating capacity in the order of seven to eight gigawatts of generating capacity, either existing or planned. It has potential for carbon capture storage reservoirs, and it is closely located to The UK's leading hydrogen development projects, including High Net Northwest.

6:29 The company has established a strong management team with expertise across the the ENERGY space, a team that has worked together before on previous ventures and deepened experience in The UKCS and development of gas and commercializing gas projects. We have expertise on the board in the clean energy front with Horacio Cavallo, who has a number of years experience in the developments of the renewable sector.

7:10 So the opportunity, as we see it, is is around The UK gas market and its and the critical role that gas has to play in the in the future of of The UK energy supply. Gas is going to be a critical have a critical role to play in The UK energy market for decades to come. That is an inescapable truth. And, however, we go domestic gas supply is going to decrease significantly. And by the end of the decade, 80% of domestic demand is going to be met by imports.

8:02 And increasingly, those imports are going to be LNG. By the nature of that, the LNG is a significantly dirtier fuel supply compared to UK domestic supply. And so the mere ability of generating gas supply from The UK from The UK resources, it will displace imported LNG and significantly reduce UK's carbon footprint. Gas also has a critical role to play in The UK's energy transition. And that is because as renewable wind power generation increases, there's going to be a need for flexible power generation, and gas has a key role to play in that it can provide that flexible power generating capacity to increase renewable wind penetration into into the gas market.

9:13 As Mark has commented, there's been a change in the the pricing of UK gas, and that is a reflection not just on the the the war in Ukraine, but also with the dynamic that UK is increasingly importing its energy supply and effectively UK gas prices are now linked to global LNG prices.

9:50 So this slide shows the location of the region that the company is initially focused on, the AREC. And as you'll see, the in the center of the map is the location, the Marram Gas Field. As you'll see, the the this region has an array of energy assets in it immediately to the West. The red blobs there are the Milken Bay gas fields, which are late life gas fields, which are now significantly depleted. You'll see this gas pipeline infrastructure that goes to shore, which are the red lines, and that there is available capacity in those pipelines for for further developments of gas fields.

10:47 You also see the the wind farm generating capacity of the region, which are the the blue shaded areas and the the blue lines, which are the associated electricity transmission lines. As you that is essentially setting out that there is significant renewable wind generating capacity in this region. And then to the south, you have the old Livable Bay gas fields, which are the blobs in red, and that is The UK's leading carbon capture storage project, which is tied back to the High Net Northwest project, which is The UK's first hydrogen hub project.

11:36 So we see a lot of potential for the Maran gas and new gas resources to be to be brought to The UK market and integrated into the the energy transition for The UK. This region is sorry. Marram is located in shallow water, and and it's got short distances to existing infrastructure, which make it a low cost development environment that we're operating in. The this slide summarizes the the the value and the resource potential of the Marrow Gas Field.

12:29 NPV of the Marrow Gas Field, we estimate to be in the order of a 100,000,000, which is circa 15 times that of the the post listing price of the company. The economics indicate that payback will be within twelve months, and it generates a high rate of return of 70%. We estimate net cash flow from the first two years of production will be in the order of a £100,000,000. And just to show that this the the attractive economics here that we're describing is not just an aberration of the stronger gas prices that we see in the market.

13:14 This project breakevens gas prices in the order of 30p 35p a third. The reserves summarized on the bottom half of this slide, reserves and contingent resources, The combined mid case contingent and reserve resources of this field are in the order of 46 BCF. However, the thing to note is that the reserve range is very tight on this field, and that is a reflection on the low subsurface risk associated with this field. And that enables this field to attract, we believe, debt financing for development.

14:07 So Marib subsurface. The the simple message here is this is a very well understood field with with very low subsurface risk. We have good subsurface definition with two wells drilled into the the Marram structure, and it's covered by two d seismic, which we've reprocessed. The reservoirs we have here are very good quality. Wamsco coco oleon sandstones with great porosity and permeabilities. The the reservoirs we produce out of here are the same reservoirs that have been produced out of in the region. And so there's plenty of analog data and recovery factors that we see on these fields is in the order of 85%.

15:00 And we there's no nasties in the gas composition here. And given the high quality nature of these reservoirs, we see a lot of potential for the for this reservoir and similar ones to it to be used for future gas or hydrogen storage.

15:27 So the Marram development concept we have in mind, as I mentioned before, this is a shallow water development environment, 15 to 20 meters. Plan to drill two horizontal wells. They're shallow wells in shallow water, making them cost effective. We'll sub we'll tie back those two wells, subsea, to the existing infrastructure, which is a short distance away, circa 15 to 20 kilometers. And given this field is fully appraised, we've already submitted the field development plan to the government regulator, and and we're now in the final phase of the the the development approval process.

16:18 We've already selected our vendors for the front end engineering design work. We're progressing through optimization studies for the tieback, and we've already received offers of debt financing for the development, which are in the order of 70% of debt. We estimate the total capital cost to be in the order of £70,000,000.

16:42 Given it's a simple development approach in low cost environment, we believe that we can bring this project to market in a relatively short time frame, and we're estimating the potential to get to FID within six to nine months to be followed by an execution phase of twelve to eighteen months. So in summary, there's potential here for revenues by the end of twenty twenty five.

17:21 As I mentioned before, the this region we see is has a significant growth potential.

17:30 First of all, there's opportunities that we're pursuing that are similar to Maram that are in the order of a 130 BCF gas, which are similar tiebacks, discovered resources that can be brought to market quickly. We have requested with the government regulator for all those licenses.

17:59 Furthermore, there's additional discovered and exploration resources in this region, which we believe are overlooked. We're making progress towards securing those additional resources.

18:16 This region is unique in that not just having untapped gas resources, it contains a significant renewable wind energy capacity.

18:33 There is existing infrastructure, energy, electricity transmission lines, and gas pipelines. And there is also carbon capture storage reservoirs in the region as well as the development of hydrogen hub projects in with the high net Northwest project in in in and around Liverpool in the Manchester Industrial Area. So with that, we see great potential to integrate the the untapped gas resource of this region and connect them with those other energy assets and to deliver for The UK low emission energy supply and secure energy supply for for The UK going forward.

19:30 So going forward, here's an indicative schedule. So there's over the next six to twelve months, there is significant news flow across all of the arms of workflow that we're progressing across the Marron project, environmental approvals for that project. We're expecting news flow on project financing across the debt and the equity arenas, and news from the license requests and the new new acreage that we're pursuing, as well as the developing partnerships on delivering clean energy supply for The UK. So in in summary, the macro story is it's clear that domestic gas has a critical role to play in The UK's energy security and transition to net zero going forward, and that's that's going to be the case for decades to come.

20:36 And with that change and the increased connection of UK gas prices to imported LNG, we gas prices, we anticipate, will remain strong in that space. Our Foundation gas Project gas field is a new 46,000,000,000 cubic feet of gas. It's fully appraised. It's ready to be brought quickly, and and development cycle is is short in the order of eighteen to twenty four months, and it generates excellent rates of return and high value for investors. There's a big growth story in terms of the untapped gas resources of the region.

21:25 There's other short cycle development opportunities available similar to Marum, and the the company is positioned as an early mover in into securing all of those resources in the in the region. And there is a good potential to integrate these gas resources into in the region with the other energy transition assets, including renewable wind, gas and hydrogen storage, backing up power generation, and hydrogen. Thank you. That's the end of the formal presentation. Perfect. Thank you very much for your presentation.

22:11 Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab, which is situated on the top right hand corner of your screen. But just while the company take a few moments to review those questions that have been submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed by your investor dashboard. As you can see, we received a number of questions throughout today's presentation. And Ben, if I could just hand over to you just to read out those questions, that'd be great, and I'll pick up from you at the end. Okay. I'm gonna read them in the the order they were they arrived. So the first one is regarding the company's footprint on social media. Mark, it'll be one for you. I mean, what's the approach to communications and utilizing, you know, social media platforms for the company?

23:02 Well, we recognize the need to communicate with all stakeholders. Social media is a is a is a critical communications tool for all companies. Yes. So we're we're committed to ensuring we have appropriate and effective comms, PR comms, IR, etcetera. We have a strong investment story to promote, and we'll do so in a responsible manner. Thanks, Mark. I've got another question here that that notes the admission price of 4p and

23:32 references your IPO brokerage search that had a a target price of 24 p and a longer term target price of 50 p. Okay. Just what's what's the view on the the delta between the current price and the the broker forecast? Yes. The the Marron project has an MPV 10 of of a £100,000,000, roundabout, versus our current market cap of of of six. The target price, the upside value referenced within Optiva note Optiva's note, factors in the project, that project, as well as the potential to obtain further reserves through outstanding license applications. The analyst's model and its recommendation is wholly independent.

24:22 Okay. And just just on that, I mean, there's also a question about, you know, internally, what sort of time frames do you put on on achieving those sorts of price targets referenced in that note? Well, it's not appropriate for us to discuss target share prices and time frames. The job is to focus on progressing the operational work streams to move Maram to FID. Obviously, ensuring transparent regular communication into our listing obligation. Yeah. I mean, hopefully, market will recognize our progress as it as it as as as we achieve the Thank you. Had a question here from from Andrew who asks why you're listed on the main market versus AIM. You are, of course, on the AIM market. So, Ben, you just wanna touch on the the process of the RTO with Dial Square.

25:19 Yes. Sure. So the the process is an audio transaction at Daskware's company that was on the this given the the size of the company, the listed on AIM, and that process was concluded at the the end of last year, end of December. And, yeah, so we we started training on on the completion of the RT at the end of December. Great. Thank you. Got a follow on question from Andrew who asked if there are any regulatory hurdles that are outstanding in regards to future development.

26:10 So if with any development in The UK sector, there's regulatory approval process. And as as is normal, that that requires a government approval of a field development plan. We are in the middle of that process with the Marram gas project. We've progressed along that process already, and we've now moved to what's called the authorization phase, which is the final phase of the field development approval process. Running in conjunction with that is the environmental approval process. And, again, we have made good progress moving through that exercise, and an interim environmental statement has submitted, feedback received from the government regulator, Opred, and they we're anticipating final statement in in the coming months.

27:17 Okay. Great. I'm I'm gonna combine the these next two questions just because they're they're on the same theme. But one one question relates to approximate costing to production, which is obviously referenced in your presentation. One is the the approach to fund things is, you know, how how are you dealing with that? Again, I know this is something that we referenced in the r and s this morning. Yes. So so firstly, the company carries an estimated development cost for the Marrow gas field of in the order of £70,000,000. Part of our future work journey is obviously to firm that cost estimate as we complete front end engineering and design work in terms of the financing sources for that development.

28:12 Again, that's an activity that we're working through. As I mentioned in the presentation, we have offers of debt financing. This the nature of this development clearly has the ability to attract debt financing given we've already received offers. Indicatively, those are in the order of 70% of total CapEx costs. And in parallel, we're progressing sources of for for the equity component for the development, and we've we've already received some expressions of of interest there as well, but we will be working through that in the coming months. Okay. Great. And I got a a last question here, which I think is is is very appropriate in terms of the macro.

29:05 Could a change in The UK political landscape, you know, what what sort of impact would that have on on you and and future license approval? So, yes, a good question. And the first of all, it's probably worth noting that all existing licenses, including the development based on labor party's rhetoric, would not be affected by a change in in government. The in terms of and and and the development approvals all associated with developing the Marrow gas resource and the licenses that are already in existence.

29:55 What is clear to us is that energy security and low emission gas supply is a a priority for for both political parties is is inescapable. And given that the the gas resources in this basin are will provide energy security for The UK and can effectively reduce The UK's carbon footprint, then I think the investment proposition here will be attractive to both political parties and what is being said.

30:43 Let's say, election versus what actually happens in practice may well be a different thing because the really, the facts speaks for themselves. This is a great opportunity for The UK to secure its energy future and energy security and contribute significantly to its journey to net zero. K. Great. Thank you. That's all the questions I that have been submitted. Perfect. And thank you for answering those. And of course, the company can review all the questions submitted today, and we'll publish those responses on the investor meet company platform. But just before redirecting investors to provide you with their feedback, which is particularly important to the company, Mark, could I just ask you for a few closing comments?

31:32 Thank you. Thank you. Well done, Ben. I I particularly like to endorse what you you you said at the end about the politics. You know, the facts are the facts. The case for the development of the Marram field, our cornerstone asset, is is is compelling. The fact that there are a number of Marum look alike opportunities that we have the intent and ambition, the capability to participate in the wider energy generation and storage capacity of the region is hugely exciting. And it starts with Marram. But thank you. Thank you, Ben, for organizing this. Thank you, Alex, and thank you, listeners. Mark, and thank you once again for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This loan take a few moments to complete, but I'm sure it'll be greatly valued by the company.

32:29 On behalf of the management team of ENERGYPATHWAYS PLC, we'd like to thank you for attending today's presentation, and good morning to you all.