Falcon Oil & Gas (LSE:FOG) — Investor Q&A

0:01 Good afternoon, ladies and gentlemen, and welcome to the FALCON OIL and GAS LTD investor Q and A session. Screen, please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all of the questions submitted today and publish responses where it is appropriate to do so.

0:30 If I could please ask investors to hold off submitting their questions until the team have addressed those that were presubmitted, just to avoid any duplication that would be most appreciated by the company. And before we begin, if I may just submit the following poll. I'd now like to hand you over to CEO, Filippo Quigley. Good afternoon, sir. Good afternoon, Jake, and thank you. And hello, and welcome, everybody. And thank you all for dialing in to today's I'm meeting. A lot has happened actually since our last meeting, I'm meeting back in October. So I just wanna take this opportunity to update shareholders on, you know, many exciting developments that have taken place, particularly in relation to the drilling of the Amunji horizontal well. Also, thanks to all of you that submitted questions in advance of this meeting, and I'll do my best to answer all of them.

1:17 So with that, I'll just hand back over to Jake, and he can run through the questions. Philip, that's great, and thank you very much indeed for that. And as you did kindly mention, we did receive a number of pre submitted questions ahead of today's event. So perhaps if we may just start off with those, that would be great. The first question that we have here reads as follows. We see that you announced via social media that Tamboran has awarded the fracking contract to Condor Energy Services.

1:41 Can you tell us a bit more about this company, and why award the contract to them over one of the bigger companies such as Schlumberger? Yeah. Sure. You know, Condor is, you know, not a household name around the world, but certainly, it's one of Australia and New Zealand's leading well service companies. And it competes pretty strongly with the more recognizable international well service companies. Another benefit, actually, it's headquartered out of Brisbane, so it's got a lot of local in country contacts, which also is an advantage. But But in terms of the award itself, you know, obviously, this is a very detailed tendering process, a lot of money involved, which is a norm for all major contracts. And Contour was a you know, they were selected primarily because, you know, it has the newest and the most suitable equipment for large volume high pressure fracs in all of Australia.

2:29 They've a very experienced stimulation and coil tubing personnel globally, but also in the Northern Territory. And they have access to global technical support providing technical assurance in stimulation design. And then last but not least, they have a very suitable and fit for purpose safety management system with a really good safety track record. So, you know, it was a good tendering process, but they were a good winner. We're we're

2:50 delighted that they won it. So That's great. Thank you very much for that. And perhaps just turning on to the the next question we have here, which reads as follows. Can you tell us a bit more about the well that was drilled, cased, and cemented at the end of last year? And how happy is FALCON with the results to date? Yeah. I'm very happy. Extremely happy with the results to date, and here's why. The drilling, the casing, the cementing of the Mungi well, it, you know, it went better than the predrill plan. You know, with the JV, we set out to drill a thousand meter horizontal section. The drilling was going so well. We extended that out to 1,275 meters. But more importantly, the horizontal section was landed well within the Mungi member b shale, and we got, you know, elevated gas shows throughout that whole horizontal section.

3:38 You know, and it's really, I suppose, it's important to recognize that, you know, this part of the operation, the drilling and the casing, it's always considered to be the riskiest. But to be honest, you know, the guys at Tamber and, you know, headed up by their COO, Farron Thibodeau, I mean, they nailed the execution of this operation. We could tell, you know, looking at the daily reports every day as we get them through in the middle of the night, you know, these guys brought great experience, to this drilling operation. So, yeah, answer to the question is FALCON is extremely happy with

4:09 results today. Philip, that's great. Thank you very much, for that. The next question that we have here relates to, the frac design and says, what are the key differences we should be looking, out for in terms of the frac design of this well compared to, previous wells fracked in the B2Lu? Great question. One of the fundamental differences of the Amunji well, it's the first well in the Beteloo that was drilled using five and a half inch casing. And this is a very significant because it'll allow our operator to attain pumping rates and fresh desire to place larger fracs than ever before. And when you combine that with, you know, Condo's equipment, it being the newest, the most suitable for larger volume high fracs, we are really setting ourselves up for success.

4:55 And then in addition to the the five and a half inch casing, it allows, you know, for a larger production tubing to be placed in the completed well, and that then will accommodate higher flow rates. So it's a lot of good differences than than previous wells before. Thank you very much for that. And just turning on to the next question that we have here. Will the experience within the new JV, and particularly that of Tamboran as operator, give us a better chance of higher success, or do you have any concerns?

5:24 Yeah. That's a that's an interesting question, and one I get asked actually quite a lot. You know, because anyone looking in from the outside and trying to compare, you know, Tamron's experience with that of, you know, the large company that Origin is, you know, you might be forgiven in arriving at the wrong conclusion based on bigger means better. But that would be a huge mistake. You know, what impressed me most about our new operator is the level of experience within Tamron. You know, a lot of that is coming from The United States. But it's actually there's more than that, you know, because they've also brought across a large number of the team out of Brisbane, the origin team based in Brisbane. So there's great continuity on that transfer or operatorship over to Tamarin. And, of course, you know, they've Dave Close who's been involved in the Beadaloo since way back since 2013 and 2014 when we first got involved with Origin.

6:13 And I would say it actually goes even further than that. You know, when we sat down, in Austin, Texas last month, myself, Tom, and Anne, and, you know, you look around the room, it's not just about the experience within the team, but it's a vast experience within Brian Sheffield's Daily Waters energy company. You know, most of Brian's current team, they work with him at Prosper Energy. So they know what success looks like. And more importantly, they know how to achieve it. And then Brian recently added Alex Cote, senior res engineer formerly at Origin, and he's been involved in the Beadaloo since, I think, it's 2015. So you put all that team together together with Tom Lehman who sits on our board, and Tom has you know, he's overseen the drilling of 4,000 shale wells, in The United States. You kinda have yourselves a team that would be the envy of, you know, most of the major oil and gas companies.

7:03 And added, I guess, to all of that is, you know, the collaboration amongst all of this experience. Can that that's kind of the magic sauce. You know, it's this collaborative experience that could give us the highest possible chance of success. So, no, I have absolutely no concerns whatsoever when it comes to the experience that hopefully

7:21 will provide us all with the best chance of success going forward. That's great. The next question, that we have here asks, what is the likely timing with regards to the fracking operation? Yeah. That's a that's usually a tricky one. Well, one, because we don't wanna promise too much, or two, because we we're never really sure in terms of, you know, the logistics around weather and mobilizing all those equipment to a remote location. But, you know, we are planning our Tambern store condo. We are planning to start fracking operations around the middle of February. That's what we're hoping to do. We could get a setback if the weather kind of changes materially between now and then. But as we are aiming for the middle of December oh, sorry, middle of February, and we'll update the market as soon as we commence those operations. Once we get started in terms of the operation itself, it'll probably take two to three weeks, to complete the 24 stages. You kinda typically do one, two stage per day, but allowing, let's say, two to three weeks. And then you kinda put the well back on you put the well on production, and you'll have your initial kind of cleanup of fluid. And you could allow up to, depending on mother nature, you know, maybe another two to three weeks before you get your initial flow. So adding all of that up, you know, we might get, you know, initial flow rates by,

8:37 let's say, you know, end of March, heading towards then an IP rate, let's say, you know, end of April. Thank you, very much for that, Philip. And perhaps a couple of questions, that we have here which relate to flow rates. The first one reads as follows. What can we expect as a flow rate, and what would be considered a good flow rate? Yes. You know, if that's kind of, you know, one of the most important questions. And when I'm when I'm talking about flow rates, the flow rate I'm talking about is a kind of the IP thirty day rate measured over 1,000 meters. You know, bearing in mind, we've got 1,275 meters, of total horizontal. But the rate we're looking for is around 3,000, MCF per day because we've run all our economics based on a 3,000 meter horizontal well, you know, flowing circa 10,000 MCF a day.

9:29 And based on that, you know, that would drive an EUR of around 12 BCF. And using the gas prices that we know around in country or export prices, that in in a term, that's a very good commercial flow rate. So it's 3,000,000 a day or 3,000 MCF a day, would certainly be considered a very good flow rate.

9:49 Thank you very much for that. And the second question relating to flow rates, asks, I've seen Tambrand refer to potential flow rates of 5,000,000 scuffs of gas per day. So which is it? Is it 3,000,000, or is it 5,000,000? Yeah. You're you're absolutely correct, whoever asked that question. Yeah. Cameron does talk about potential flow rates of 5,000,000 scuffs of gas, as measured over 1,000 meters. But, look, when I talk about the 3,000,000, I'm not talking about the potential flow rates. I'm talking about what FALCON considers to be a good rate, and one that would take us into pilot development and ultimately full scale development. Any rate above 3,000,000 scus of gas a day, you know, that that's a real bonus. Yes. It is tamperence, what they're talking about in terms of potential, and, hopefully, we'll get there. But, really, it's a 3,000,000 number is what we see it as the kind of the green light to go forward with pilot development.

10:40 That's great. And just, perhaps turning on to the next question that we have here, reads as follows. Will the gas from these early horizontal test wells, be produced? Are these, wells designed so that they can potentially be reentered and extended by, the soon to be utilized h and p rig? Yeah. So the plan would be all wells drilled from now on, you know, including this Mungi well, will be tied back into production line, you know, at some stage in the future. And that's the real focus of this new JV with Tambern. I mean, Tambern are all about getting into production by the end of twenty twenty four. So every well we drill going forward, as I said, including this one, it's all about hooking those into into production. In terms of the second part of that question, reentering, or and extending the 1,000 meter wells, simple answer to that is no. They're they're not set up for for reentry, using the h and p rig. No.

11:32 Many thanks for that, Philip. And perhaps moving on to looking at the current plans, for the JV in 2023, a question here reads, what are the 2023 drilling plans for the JV?

11:44 Yeah. That's an important question. You know, as critically important as our flow results are from the Amunji well, you know, the Beeloo, it's all gonna be about the future drilling, and moving the Beeloo into commercial production. But, look, you know, even as a JV, we haven't finalized the 2023 drilling plans yet. I mean, we've had several discussions about them, but they haven't been finalized. Ideally, however, we'd like to see at least two wells drilled two more wells being drilled in the beetle this year, and that would include, let's say, a 1,000 meter final well of stage three, and then perhaps a 3,000 meter horizontal well drilled using the this new h and p rig that's coming in from The US. But, you know, as soon as we finalize our future our going forward plans for '23, we'll be out and and updating the market on what those plans look like. But like I said, hopefully, we'd be drilling at least two wells for the remainder part of 2023.

12:35 Thank you very much for that, Philip. The next question that we have here reads as follows. Does FALCON have much input into where the next well will be drilled? And if so, what criteria determines the location of this next well, specifically locating on the current Amunji well pad or a step out location?

12:54 Yeah. That's another, you know, good interesting question. In terms of FALCON's input, you know, as a JV, you know, we meet regularly, ourselves, Daily Waters, Tamron. We discuss, you know, many operational issues, you know, including things like well locations. You know, FALCON together with Daily Waters, you know, we can influence Tamron's decision making process, and we certainly share with them our collective thoughts and experiences. But at the end of the day, Tamron are the operator. And, you know, they they do have the final say, but we can have input into that final say. But it is the operator's final say. In terms of the second part of that question, in terms of, location of the next well, as mentioned in our previous press release, the JV, you know, we're still assessing various locations for this next well.

13:40 A lot will depend on, you know, what hopefully will be successful outcome of the Well, but also we'll take into consideration where might be, you know, the best location for, you know, an initial pilot development. And therefore, out locations, you where know, where, you know, they're being seriously considered, by the JV. But regardless of whether we step out or stay on the, we'll we'll be staying within a similar play window and only targeting the member b shale for any near or or medium term future wells with a view to moving any wells we do drill into production by the end of twenty twenty four. Thank you very much for that, Philip. The next question that we have here talks to the company's current financial position and really ask, what is the, what is FALCON's current financial position? How much cash do you have left? When does, the carry run out, and when does FALCON need to raise more money?

14:33 Okay. There's a few questions on that. Let me let me take each one of them separately. Firstly, our financial position. Yeah. We've got 16,900,000 US dollars as of the end of September last, so we're in a pretty strong financial position still. In terms of the carry running out, you know, bearing in mind, FALCON has been carried since the beginning of twenty twenty twenty fourteen, so, like, nine years ago. It's only inevitable that the carry will run out someday. And, yep, that day, it's getting closer, but we're not there yet. It'll probably happen sometime before we complete the drilling and testing of this next well, the final stage three well this year. But then we still have plenty of financial resources to pay for any part of of those well costs which we're carried. So we're still in a in a strong financial position.

15:22 In terms of when does FALCON need to raise money, the short answer is that, you know, because of the financial flexibility we negotiated with the JV partners last October, we don't necessarily need to raise money. You know? However, we may, at some time in the future, you know, choose to raise money, but that's only because we want to and not really because, you know, because we need to. And perhaps, just a follow on question I can see here, which asks, can you explain how this new, 30,000,000 Australian dollar carry works for FALCON?

15:53 Yeah. That's an easy one. You know, the 30,000,000 Aussie dollars, that's the gross value of a well that we're carried for or actually over two wells, where FALCON doesn't contribute. So the net cash benefit to FALCON will be 22 and a half percent of that 30,000,000. So the net cash to us is $6,750,000, and this cash credit is split over two wells. The first 3,000,000 would be applied to that first well drilled after the last stage three well. So whatever our next well will be, the stage three well, then the well after that, we'll get a credit of 3,000,000. And then the balance of 3,750,000, that would be applied against the first well drilled post June 2024. Thank you very much for that, Philip. And perhaps a a couple of final, presubmitted questions that we have here. Would you please tell us how important the opt in or opt out of the 6,400 acre blocks really is towards giving FALCON more flexibility, participating in future drilling plans, along with describing how the addition of that, clause into the

16:55 new JOA has given Falcon a great deal of protection from possibly being forced out of the beta loop by excessive capital outlays by the other parties, to the JOA. Yeah. Thanks for that question. And, you know, I dealt with most of the aspects of this one during our last I'm meeting. I'll I'll I'll give you a quick summary of it. But if anybody wants to go back to the previous recording of the I'm meeting back in October, I think you'll get a good a fuller analysis. But the position for everyone regarding this opt in or out scenario is that we negotiated a very favorable position. So we don't have to participate in any future well after this final stage three well. If we opt out, we're just out of a unit, let's say, of up to 6,400 x in size. You know, we could potentially buy back in once that well has has come in, and let's say it's very successful, but that would probably cost us something in the order of three x to cost of that well. But if we opt out and stay out, we're only out of that 6,400 unit, and they may drill, you know, 10 up to 20 wells max in in a unit like that.

17:59 But you gotta bear in mind, it sounds like a lot, but you gotta bear in mind, there's 718 units, you know, of 6,400 acres each making up this 4,600,000 acres. So we really don't lose out by not participating in just, you know, one unit. But the best part of the deal, actually, and I and I think it's the question poses us, it does give FALCON great protection against ever being forced out of the by excessive capital outlays by our partners. And that just simply can't happen because of this financial flexibility we've negotiated. Thank you very much for that, Philip. And perhaps before just moving on to the final pre submitted question that we have here, may I just ask ladies and gentlemen on the call to continue to submit your questions? And we will look to address those after this one here.

18:47 But perhaps the final pre submitted question, Philip, As an investor in FALCON Australia, we got allocated shares. Are these available to trade now? And if so, where slash which exchange? Thank you. That's that'll be an a shareholder from FALCON Australia Limited rather than the parent company that's quoted on the the Canadian and London stock exchanges. Yeah. Listen. You've got shares in the Australian sub, as I said. It's not a publicly traded company, so there is no readily available exchange to trade these shares on. You're a shareholder amongst the I think it's 85 shareholders representing 1.9% of Falcon Australia. The remainder of Falcon Australia, 98.1% is held by the parent company, Falcon Canada or Falcon OIL and GAS LTD, but it's it's a Canadian company.

19:34 If you want any further information, I think the best simplest thing to do is is make contact with the company's CFO and FLAIN at any time in the future. Philip, thank you very much. That that's great. And as you can see there in the q and a tab, we have received a number of questions today's meeting. And thank you to all of those on the call for taking the time to submit their questions. Philip, if I could just hand back to you now just to respond to those questions where it's appropriate to do so. And then what I'll do is I'll pick up from you at the end. Thank you. Okay. So, Keith, I'm unclear what happens as a 22 and a half percent shareholder with the gas that gets extracted. Do we just get it at the wellhead and we have to take it to market, or is there an arrangement for it to be sold via Tambern?

20:18 There are no arrangements yet, but it's our gas to do with what we wish. So we can have our own offtake agreement, who will take that gas from us. Obviously, there'll be joint processing facilities that we would share with, you know, Tamron Stroke Daily Waters. But the actual gas itself, we do own the 22 and a half percent of that. So that would be to our account to decide where we wanna go. We can sell it along with Tamron, or we can, as I said, have our own offtake agreement. Next question is from Walter. As we are allowed to participate in some drilling sites or decline that site, can we sell chosen site options to a third party? That would get very complex and complicated if we weren't I think the question is if we don't participate, could we sell that on to somebody else? I think the short answer to that is no.

21:08 But it's that we're not we're not looking to do piecemeal sales of our asset in Australia anyhow. So, no, if we're not if we don't participate, the other parties, the j o a, would have the right to tick up our interest. So Patrick asks, what cash can FALCON be asked to put up to continue the expansion of drilling production 2324? In other words, can we be squeezed out? So I think I've answered that in an in an earlier question that we can't. So, yes, we've got a stage three well. We're fully funded for that. If they decide, you know, to go off and drill, you know, a whole bunch of wells and put up a major CapEx, you know, I've said before in an in an earlier answer, we can't be squeezed out is the answer to that. David and Philip, why haven't we seen greater consolidation in the sector? What needs to happen in terms of risk resource or commercial if we see more m and a?

21:59 Well, to be honest, we don't wanna see m and a just just yet. We'd like to continue as we are, into this year. Let's see these flow rates. Let's see how we get on with our drilling, into this year and probably into next year before there's m and a. Consolidation, you know, doesn't need to happen as per se. M and a, yes, in terms of other interested parties coming in. And I think what you'll find with the likes of Brian Sheffield having invested about a 100,000,000 US of his own money in the to date. You've got the huge h and p company, rate company coming in. You know, we demonstrate good flow rates over the next couple of months. You're gonna we're gonna get a lot more interest from from US oil companies, and you might then see a bit more m and a activity. But as I said, we don't wanna see it just yet.

22:45 Fleming e, is Falcon Oil in contact with Impex? Is this a possible partner? Impex is a large Japanese oil and gas company. They operate it's it's because project in Darwin is a big LNG. It's about a 12 TCF gas field, shipping about 9,000,000 tons. So they're a big, local, sorry, big Japanese company operating in our backyard. Look. We know them. They know us. Is it a possible partner? Absolutely. Why wouldn't it be? As an exit route for GAS LTD to go via Darwin, that's not going down to the East Coast. We got two already ready to go, facilities at Darwin. One is owned by Santos, and the other is Impact. So, yeah, they are a potential future partner. So I think that's that's all the questions I see.

23:35 Jacob, so I can hand back to you. Philip, absolutely. And thank you very much indeed for being so generous of your time there and addressing all of those questions that were both presubmitted, as well as those that came in, during today's presentation as well. And, of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended for you to review to then add any additional responses, of course, where it's appropriate to do so. Philip, perhaps before redirecting those on the call to provide you with their feedback, which I know is particularly important to yourself and the company, If I could please just ask you for a few closing comments to wrap up with, that'd be great. Yeah. Thanks, Jake, and and thanks to everyone, listening in today. Look. To be honest, we're entering, you know, the most exciting phase in the history of FALCON's involvement in the Biteloop, and we don't have too long to wait until we see these flow rates from the well.

24:25 We know we've drilled a really, really good well, cased with five and a half inch casing all through the member. We've just awarded a fracking contract to one of the best service companies in the industry that has the best equipment and personnel in country. And on top of that, we have a huge experienced team, both at operator level and at JV level. So our confidence, you know, on a successful outcome, you know, couldn't be higher right now. And, you know, I'll just leave you with this, but I I really look forward to updating you all, during our next I'm meeting, which we'll hold shortly after, you know, we announce these flow rates. And, thank you all again for your attendance. Philip, that's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations?

25:17 This may take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of FALCON OIL and GAS LTD, we would like to thank you for attending today's presentation. That now concludes today's session, so good afternoon to you all. Thank you.