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

0:01 Good morning, ladies and gentlemen. Welcome to the FALCON OIL and GAS LTD. Q and A session. Questions are encouraged and can be submitted at any time via the Q and A tab that's situated on the right hand corner of your screen. Please just simply type in your questions and press send. If you could please hold off submitting your questions until the team have addressed those that were presubmitted just to avoid any duplication that would be most appreciated by the company.

0:29 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 that are submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand over to CEO, Filippo Quickley. Good morning, sir. Good morning, Jake, and thank you. And, good morning, everybody. And especially thanks to those who could join the call this morning, on such short notice. We normally like to give shareholders a couple of days at least advanced notice of an investor meet. But on the basis of this press release this morning in particular, it's not our usual, operational update. I thought it'd be a good opportunity to give people a better idea of what this press release we announced this morning in terms of a letter of intent having been signed with, Tambern and Sheffield.

1:21 And, really, what that's all about is, as you may have remembered, back in around the September 19, Origin announced that they were exiting the beta loop, and they're doing so by selling their

1:32 entire 77 and a half percent interest to a company called Tamber and b one. And then we announced that ourselves saying that, look. I see the announcement, and, please note we have preemption rights. So we worked on those preemption rights and all efforts towards preempting the deal over the last number of weeks. During that process, then there was an opportunity to come up an alternative to to doing a a preemption, which resulted in this letter of intent that was executed last night, which, of course, then we announced, this morning. So I think there's a there's a number of good questions on the press release, which if I kinda hand back to Jake, maybe to run through those, and we we can kind of maybe give some clarity and some color and context about the what really is this letter content all about. So back over to you, Jay, please. Philip, that's great. Thank you very much for that. And, obviously, as you did just kindly mention, we did receive a number of pre submitted questions ahead of today's event. So perhaps before turning to those live ones, if we could take these. The first pre submitted question that we have here reads as follows. Can you tell us a bit more about who the other

2:34 parties to the lesser of intent are? Yeah. So there are two parties, really. One is Sheffield Holdings, is represented by Brian Sheffield. Brian came in as a 9% shareholder in FALCON earlier this year, and he's also an investor in Empire and investor in Tamil Resources. He's heavily invested in the beta though. Brian is the founding of Parsley Energy, a company which he built up from about 2008, 2009, and sold it last year for 7,500,000,000. So these rate is a a very, very successful share investor in The US. And then

3:09 the other party, as I mentioned, is Tamarin Resources. And Tamarin, as most people might know, are already in the Beetaloo. They're in the Beetaloo in partnership with, Santos, and also they have their own acreage one thirty six, which have just completed actually a very successful vertical well on in the last few days. Philip, thank you very much for that. And perhaps a related question that we have here, which as follows, why is Falcon entering into an LOI with Sheffield and Tamboran?

3:34 Yeah. So as I said, Sheffield and Tamboran, they they own 50% of a company called Tamboran b one, and that's the company that agreed to deal with Origin Energy a few weeks ago to acquire its 77 and a half percent interest in what is actually is our JV in the basin. And under the terms of that, our JOA with with Origin, we have preemption rights. As I said at the outset, we were working on a plan to execute those rights over the last few weeks. And then discussions opened up between FALCON and Sheffield, while we're going through the whole preemption process, that then led gave rise to an LOI being entered into instead of us proceeding with the preemption itself. Thank you very much for that. And I know you just touched on, preemption, but perhaps a bit more color here. How close was FALCON to concluding a preemption deal before entering discussions with Sheffield?

4:24 Yeah. Good question. I I kinda got I got a call on that probably every day from shareholders. How's it going? Are you gonna preempt? And, of course, I I couldn't comment on any of them. But, look, to be honest, since the deal between Origin and Tamperin was announced on the nineteenth, FALCON's board of management literally working around the clock, on a preemption deal, you know, which would have involved, you know, raising equity in the market, but also bringing in a strategic third partner, of our own. And discussions were advancing pretty well on both fronts up until, you know, negotiations opened up with Sheffield just over a week ago. But, yeah, they were we were we were making some pretty good headway on it. But as I said, negotiations

5:01 started about seven, eight days ago, which resulted then in this LOI being executed instead. Perfect. And I guess, quite a big question here. What's in it for Falcon by signing the LOI? Yeah. That is a big question. A lot. And probably a lot more, which is why we're doing this investor meet, this morning. I think a lot more than meets the eye, literally, in what you read in the press release. There's a lot in it for FALCON. It's really we believe it's a really, really great deal for FALCON shareholders. When you read the press release, the first thing we'll probably jump out at you is the extra $30,000,000 carry, but that's only a piece of the overall deal that we've negotiated. Because the really important thing we've negotiated are what's called proration units, and they're limited

5:45 proration units based on sole risk operations. Now these are public concepts which are not familiar to people who are not in the oil and gas industry, but I think I see a few other questions on these. So I'll I'll address, you know, you know, the issues around what what is a proration unit and risk upper sole risk operation further on. Thank you very much for that. And perhaps turning on to the next pre submitted question we have here. I see you negotiated an additional carry on of $30,000,000 on future wells as part of the deal. When does this new carry start applying?

6:17 Yeah. So first of all, remember, we still have a carry, under the original deal at Origin. So and our focus right now is on the drilling of these two stage three wells, which we expect to start drilling on those in the next couple of weeks. Once they are completed and tested by, let's say, the end of q one, the new JV partners of ourselves, Tambern and Sheffield, will look to, you know, the the future of the drilling program, which hopefully will be a much more aggressive one, bringing in the h and p rig from The US as was announced by, Tamber back, last September. And the 30,000,000 new carry that we're getting, is split roughly fifty fifty. It's not all in one well, so it's fifty fifty. 50% will be on that first well we drill once we've completed the stage three, and then 50% of it will be on a well that we drill anytime past June 2024. So it's a split carry of 30,000,000, 15,000,000 effectively next year, and 15,000,000 in in 2024.

7:12 That's great, Philip. And turning on to another pre submitted question we have here. Can you explain what a proration unit and sole risk is, and how do they work? Yeah. This is this is a big question, and this is kind of one of the main reason of doing this investor meet this morning, to get people to understand, hopefully, a bit more around the real value of the letter of intent that we've executed. So let me just take the sole risk part of the question first how it applies to the new joint venture partnership of ourselves, Tamber and Sheffield, once we've completed stage three. So a sole risk operation is an operation that is carried out by fewer than all parties to the joint operating agreement.

7:52 So, for example, let's say, tambourine b one proposes a well in June 23, and for whatever reason, FALCON decides it doesn't wanna participate in that well. Then what happens is that well proceeds, but while it proceeds as a a probation unit is created around that well. And under the terms of our LOI, it can be up to a maximum of 6,400 acres. So 640 acres is a square mile, so that's effectively going to 10 square miles. Now if we opt out of the well and the well comes in a gangbuster, we can always come back in, and there's usually a penalty for coming back in. You typically pay two to three times the cost to get back into the well, and then you then you carry on with your your interest. But you don't have to come back in.

8:37 We can stay out of that well, and then we're out of any future drilling and any production from drilling from that one proration unit of 6,400 acres.

8:48 So I hope that I hope that goes to explaining some way of how they this proration unit it's it's not an it's not a new concept. It's a it's a very common concept in oil and gas world, particularly in The US, and sole risk operation is very common as well. It just might be not be as as submitted to people, in looking what FALCON has been doing in their JV with Origin for the last nine years because it was never an issue. We were just into the whole 4,600,000 acres. Now we're in a position where we have these very, very small proration units that if we decide not to participate, well, we're just out of 6,400 acres. Thank you very much for that. And I believe you touched on this briefly, so perhaps a related question we have here. If there's any further color that you could add to this, that would be great. Why would FALCON choose not to participate in all wells?

9:36 Well well, firstly, I'm not suggesting that we wouldn't participate in all wells, but we do have an option. And that's the beauty of this letter of intent. We do have an option not to participate for whatever reason. So let's say, you know, we don't like geology of where they're drilling or proposing a new well, for example, or we don't like the cost of the drilling of this particular well for whatever reason. The cost might be at a level that we think are are not justified. Or we just simply want to preserve our capital for future wells. But the beauty of of this is the optionality if FALCON has going forward to choose to to participate or not to participate for whatever reason. So it's it's wonderful options that we've opened up. And and and it is not just for now, but it is for the for the future development of the vision.

10:24 Thank you very much. And, just perhaps expand on this a bit further. Another question, that we had was presubmitted, reads as follows. Surely, it's not a good idea to be excluded from the 6,400 acres every time a well is drilled that we do not participate in.

10:39 Yeah. But, look, once a creation proration unit is created, any further well drilled within that, you know, proration unit don't forget it's it's 10 square miles. You could have a number of wells drilled in that. That doesn't create a new proration unit, or it doesn't increase the existing one. So it's not like every time a well is drilled, we don't participate, we lose 6,400. It's only if the step outside of an already created proration unit that we then have another decision to make. Will we won't we participate in that? But in all reality, you know, when you look at us being excluded from 6,400 for whatever reason, and it could be, like, June next year, it could be June the following year, know, you're you're only giving up participation in a tiny, tiny you know, less than point two of a percent of the total acreage. So it's not like we're losing out. If you're in the Permian Basin in The US, you wouldn't dream of being excluded from 6,400 acres in a, you know, in an area that is a very highly, prolific producing basin. You just wouldn't. But when you're in a Frontier

11:41 Basin and you got 4,600,000 acres, you know, 6,400 acres, you know, it's it might seem like a lot if you're a a farmer in in in County Mead, for example, in Ireland or anywhere for that matter. But in in a frontier base of 4,600,000 acres, it is something we can always consider whether we want to stay or not, but we're not losing a huge a huge amount by not participating. Thank you very much for that. And the next question that we have here reads as follows. Is Falcon's election to participate in a new world an all or nothing?

12:12 Ah, great question. And the answer is absolutely not. But I love the question because that that's another beauty of the optionality we've created. So we're at 22 and a half percent, but that doesn't mean we have do 22 and a half percent of everything. We can drop, for example, down to 10%. So if we decide, you know and I'm only just saying, if we decide in June of next year or what is proposed and we feel better off staying at a temp going in at a 10% level, well, we can decide to go in at 10%, and then the other parties pick up the other 12 and a half. So it's it's as I said, it just creates an awful lot more optionality. Perfect. And the second part to that question was, what happens in that case? Is that considered a sole risk operation giving rise to the creation of a new operation unit?

12:58 Yeah. So when I said about sole risks is an operation carried out by fewer than all parties, that same concept applies where it's fewer than all parties, not at the at the same percent. So yes is the answer. It would create a new proration unit. So if, for example, a well is proposed in a new area and we go down to 10%, we pay 10% of that well cost, and then we'll get 10% of production. And then any further wells drilled in that same proration unit that has then been created up to a max of 6,400, we can then participate at the 10% level going forward. But, yes, it's just it is it is creating a new proration unit, but we still stay in it at 10%. We're not out of that 6,400 acres now at all. We now have almost 50% of what we could have had if we go in at 10%.

13:47 And I guess, just while we're on, proration unit, another question we have here. If FALCON does not participate in a well and is excluded from operations in a proration unit, how will it know whether operations are successful or not?

13:59 Yeah. No. That that's a really good one because what you don't want information is is very valuable. And if you're not participating in a, you know, in a play, how are you going to know how it's doing? Well, under the terms of our our letter of intent, we actually will have access to all data, and I mean all data. Every data in, around the drilling of the well, all the log data, all the production data, everything to do with it. And we'll actually have it on the exact same time as every other partner who's actually participating in the drilling of that well. So regardless of whether or not we participate in in the drilling itself, we'll always have, you know, real time, lifetime data, which is a very, very useful, thing to have access to because that can inform our decisions whether to go back into that well after it's completed, whether we wanna be drilling in the block right next to it because we can see all of this data from the from the 6,400 acre unit right beside us. So, yes, it's, it's a great position to be in.

14:56 And another pretty specific question, that I can see there's a few questions coming in the live channel as well about this. If FALCON is only losing out on 6,400 acres every time a new well is drilled in a new proration area, how much acreage could FALCON realistically lose over, say, the next two to three years? Yeah. That's, that's that's an interesting question. To be honest, we haven't really thought about that, in terms of well, one, in terms of losing anything or or not participating. But let me just you know, if, for example, you know, 10 wells were drilled, and this is 10 wells in 10 new areas, not 10 wells within one proration year. So if you think, like, you know, every 10 square miles is a new well drilled, and you do that, let's say, 10 times over the next two to three years, yeah, we lose out on 64,000 acres. Again, you wouldn't dream of doing that

15:45 in the Permian Basin. I mean, you gotta remember, you know, in The US Permian Basin, if you had 64,000 acres, you were you were king. You you had a serious, foothold in the Permian with that level of acreage. But in our case, 64,000 acres, you know, call it losing out on, it's like it's one, what is it, one and a half percent of our total acreage? But that that that that basically answers the question. That's what we, well, realistically could lose, but I don't plan on losing any. But but, again, that's the optionality we have. And I guess just, following on from that, would FALCON not be better off sitting on the fence for the next few years and see how things go and also hopefully see significant reduction in the cost of wells in the B 2 L? Yeah. Again, another another really interesting question. Look.

16:31 Look. We're an oil and gas company. We're in the oil and gas business. We're in the Beetaloo to develop the Beetaloo, and to benefit from its development. But, again, you know, if as your question seems to suggest, if we're looking to prove up the acreage using, you know, potentially hundreds of millions of dollars of other people's money instead of FALCON shareholders' money, you know, it's something we can we certainly can consider. Like I said, at the end of my press release this morning, you know, we can tailor our participation, to best preserve our capital while at the same time maximizing our optionality. And that's what this letter of intent is all about. I know you were just talking about the press release and the question here that says, mentioned in your press release that the drilling of stage three wells will commence shortly. Can you be a bit more specific on this?

17:20 Yeah. My CFO hates me being specific about, putting timelines and dates and date stamping when we're gonna split a well. And, look, it's it's always a moving target of splitting a well, especially in the. But rest assured, we fully, fully, really do expect this first well to split by before the end of October. I mean, I've you know, in January, that will that should be splitting before the end of October. So that's that's gonna be great news. And in addition to this announcement this morning, actually, getting back drilling is is really what it's all about. So end of October. And I guess just turning on to the next question. I can see a few questions, I think, that have come in as well during the live q and a as well. FALCON is still benefiting financially from the remainder of the carry. Can you, please elaborate on this? Yeah. Sure. The first key thing to note is Argent leaving the has no impact whatsoever on FALCON's carry.

18:12 So the balance of FALCON's carry is effectively being assumed by Tamron d one. We will continue to benefit financially from the remainder of that carry as if Origin was still there. Now as we would have said over the course of the last six or nine months, you know, that carry, you know, doesn't cover us to the full end of stage three. It will run out eventually. I mean, it's been a great carry since, gosh, way back to 2014, but it will run out, and it'll probably run out in the next, you know, few months. But bearing in mind, you know, we still have 17,000,000 US dollars cash in the balance sheet, So we're fully funded between the carry and cash in the balance sheet to complete well beyond, actually, to complete stage three, and then step into, if you like, the new, drilling phase, starting in, you know, hopefully, May, June of next year.

19:00 And I guess just following on from this, does this mean that Origin are completely out of the B2B? Yes. They are. As in they've sold out the whole 77 and a half percent. Ourselves along with lots of others, we thought that they were looking at farming down a significant interest in the BLU rather than actually exiting. But they've decided to exit completely. And they've done this, you know if you look at their own press release, they've done this to case basically give them greater flexibility to allocate more capital towards their what they call their new strategic priorities of growing cleaner energy solutions. Now when I say they're out completely, they have, at the same time, negotiated a ten year gas sales agreement with Tambern b one for future gas sales coming from the Peterloo. And more importantly, they've created a brand new five and a half percent royalty on Tambern and Sheffield's 77 and a half percent interest in the Peterloo. So, yes, they're out in terms of their no future involvement, their no future capital commitment, but they're not out in terms of the future potential of the beta bill, which obviously they still raise, in terms of doing a deal, which was, you know, $60,000,000 cash, which was quite a low number in anyone's estimation.

20:12 But a five and a half percent royalty could be worth quite a significant amount of money over the next twenty years or so. And perhaps just two final presubmitted questions before then turning to those that were submitted during today's meeting. FALCON is still carried for the time being. It has 17,000,000 US dollars in the bank. It's negotiated a new carry of 30,000,000 and still has the option of sitting on the fence for the next two to three years. Does this mean that FALCON never has to raise money again? Gosh. I wish that was the case. Look. As an e and p company, you'd never say, oh, we'd never need need to raise money again, especially when the p side of the e and p doesn't actually produce any revenue yet. But I like the question in in in the whole way. It's it's structured of, yeah, we've got a lot of money in the in the bank. We're carried, right now, not not forever. We've got a new $30,000,000 carry.

21:07 And I guess, yeah, we do have the optionality of sitting on the fence, but, you know, it's optionality. I mean, I'll never say we don't need money. Of course, we do, at some point in the future. But the beauty of this deal is, you know, we can now decide when and how much we wanna raise in the future without having being ever put under pressure again, which is a great position to be in. And it just opens up, as I said, it just opens up this whole optionality and being able to preserve our capital going forward, and then tap to market when the time is right based on results, based on the market, based on lots of other things. And I guess a really good question here just to conclude the pre submitted questions. Are there any other benefits arising out of this LOI that are not expressly covered in today's press release?

21:53 Ah, nice one. Yeah. But it's not really LOI specific. But one of the immediate benefits we see from all of this is more out of Brian Sheffield and Sheffield Holding because they've got investments now in FALCON, 9%. Tamper, and I think they're up to 15%. They've got about four or 5% in Empire. So Sheffields are they're in they're invested all the way through the beetle loop. And Brian is a major advocate for collaboration between all parties. And with this cross investment, you know, there's going to be significant collaboration going forward. Certainly, initially, a technical front, which is to everyone's benefit because there's no land grabbing going on here. This is about kinda coming together and sharing knowledge and sharing technical information so we can all better do what we need to do to develop the beta loop. So that's a significant, you know, benefit arising out of the evolution of of Chefy's investment in the beta loop, if you like, not specifically related to the letter of intent, but still a significant benefit going forward.

22:53 That's great. Philip, as you can see, we've also received a number of questions, throughout today's meeting as well. Perhaps I could just hand back to you to run through that q and a tab, respond to any questions where it's appropriate to do so. And if I pick up from you at the end, that would be great. Okay. So let me just read these. Why deal with Tamborin and not find a new partner to acquire Arden's stake? This this looks like a backdoor deal.

23:20 Not really a backdoor deal. It's not at all. When we did an option to preempt, we decided not to. We felt this even though we were proceeding and working on a preemption, it would have always been difficult. When we started negotiations on this letter of intent, eight or nine days ago and what we've got out of this, it's it's not certainly not a backdoor deal. It's a very good deal for FALCON OIL's shareholders. So so question from. Did you have any advanced warning of the Origin exit, or were you blindsided? You know, Origin is a very transparent company with us, great partner with us over the last, gosh, nearly nine years now. And they flagged to us back, I think, in November last year. They were looking to farm down. The exit was a little bit of a surprise to us. We always felt it was a farm down. We were hoping for you know, they'd still be in for 30% or 40%, but the but I wouldn't call it blindsided.

24:20 I know we didn't have warning that they were exiting completely, but I still wouldn't call it blindsided and that we knew they were fully engaged in a in a farm out process. Next one. Good one. The big question is, did Origin sell out because it became disenchanted with prospects for the beta loop? Absolutely not. And there and there are three reasons I can say that, you know, quite honestly. When you look at why they exited, you know, they have they're in coal seam gas, project, major coal seam gas. It chucks out a lot of cash flow to them. They wanna devote that cash flow to investing in future transition, the energy transition. That's their mission. That's what they're on there. They're very much into the green energy space. And rather than putting dollars back to work, exploration dollars, appraisal dollars back to work in the bideloo, they wanted to burp those dollars into a greener, newer energy.

25:12 But to say that this enchanted with the prospects of the bideloo would actually go against the deal that actually struck in terms of, you know, the 60,000,000 is kind of small change in what's I mean, you compare it with they spent. But you look at the royalty that negotiate as part of the deal. I mean, that royalty will be will be worth probably hundreds and hundreds of millions of dollars and even more into the future. So, no, I they're they're definitely not disenchanted with the prospects of. Big question is, what about Bitloop part of FALCON expansion or divestment?

25:46 I'm not sure I understand that question, but, look, we're not looking to divest. On that, actually, I think maybe I'll just answer it in a slightly different way. We were always put ourselves up as a kind of company that will build and and then exit at some point in the future. And I would have said it at the last investor meet, I think, back in July or August, that since September results of last year, the kind of the exit strategy has kind of been taken off the table. This letter of intent takes it firmly off the table for the foreseeable future. So with the optionality we've we've now created going forward on proration units and sole risk options and everything else, with no desire to exit, at least not for the foreseeable future. And that, I would say, you know, in the next three to five years. We can stay in this for as long as we need to to create massive value for the shareholders.

26:37 Next one is what is expected well spacing in core development?

26:41 How many wells would likely be within a proration unit? Good question. You know, you'll you'll let's take a pad in the center of a 10 square mile proration unit, and you could drill, you know, perhaps six wells off that pad. And you could drill 3,000 meter wells in any direction you wanted. You could probably cover, you know, the majority of operation years with with six wells. You know, if you work out the maths on that, 10 square miles is about three three miles across. So you might reach you might have to do a bit more than than than six wells. But what if expect the exact formula for coming back into a unit that becomes successful? Well, I didn't specifically get exact of what it is. It's you know, it typically can be 200%, 300%, 400% range.

27:37 That's the norm in The US, and those kind of norms will will be applied to the BDAL. So, for example, if a well costs, know, for argument's sake, $30,000,000, we're in for 22 and a half percent, which, let's say, rounded numbers is, suppose that 6.75. And let's say there's a 300% penalty. We'd have to pay $20,000,000 to come back into that well. You know, it's it's a big ask, in terms of a shale play, particularly wells at this cost. So we're more focused on, you know, if we decided not to go in, what are we limiting ourselves from in the future rather than looking to see can we come back into it well? Next one, I think, is I understand the value of the option on the proration unit, but doesn't that presuppose that you see Tamron taking on commercial drilling decisions? Not at all. Gosh. No. I mean, I don't see Tamron making I mean, who would who would want to take noncommercial drilling decisions? They're the operator. They're in the driving seat. They propose wells, that will be based on science and geology and lots of other good things as well as lot of commercial decisions going into them.

28:49 We have the option to participate or not. It's not to say that there's they're going to make noncommercial drilling decisions. I mean, it could look very commercial to us. We just might choose not to go in or not to win it for 22 and a half percent. That's not to do with the commerciality of the of the decision being made. That's just to do with us choosing, for example, to preserve our capital or choosing not to participate at 22 and a half or, you know, maybe the odd case, we really don't like the geology in an area, or it might be kind of a new area, you know, in a few years' time, further down south in in E P 117, for example, that we might wanna step back from the first few wells drilled in the first probation unit. So I wouldn't say it's a noncommercial. There might be some wells in the future, not in the immediate future, which might have a higher geological risk that we could choose to step back from.

29:38 Next one I see is when will the next well drilling start, and when would results of the drilling be expected? So as I said, drilling starts and this is this is the real key. I mean, the drilling of these two wells, letter of intent is great. Enanta is fantastic today, but the drilling is what it's all about. And drilling will commence by the end of October. We'll drill the first well. It's it's shown to be about a 1,000 meter, at least 1,000 meter horizontal, and then the rig will move straight onto the second well. Those two wells will get drilled. You know, we're in the kind of the October, November call it the getting closer to the wet season. But the good thing is we're very close to highways, so we don't have wet weather issues as such, particularly in terms of, logistics and infrastructure. And then those wells got completed. We'll frack them and then put them on production. You probably at best, at this stage, we probably won't get to see results proper flow results until the end of q one, 2023, which actually isn't that far away.

30:37 Can you please confirm again that FALCON can buy back in at a penalty? Yes. We can buy back in at a penalty, if we choose to. And that's that's an option we'll always have. You know, even if we go at 10%, for example so, actually, if we do a ten percent one, that's quite that's actually slight different. So let's say we go from 22 and a half. We opt to win at 10%. Well, then we're actually at 10% going forward. But if the well that we've chose or any of wells that we chose to drop down to 10% and if they then pay out in terms of production from that well to the people who took up our 12 and a half percent to the level of the of the penalty, then the 12 and a half percent actually reverts automatically to our ownership. So we don't have to pay the penalties. It gets paid for out of production. In the case where we actually just decide not to go into a well at all, yeah, look, we can always back in. But as I said, you know, a two or three or 400% penalty just might not be worth it, and you might just say, look, we're not gonna go into this probation unit.

31:32 We'll sit on the sidelines on this one, and we'll into the next one. How the does FALCON intend to sell its share of the gas from? Can this go into the Origin contract? Great question. Basically, if you're the operator in terms of the Tamron b one and you're looking to sell gas to whether it's Origin or to INPEX or COGAS in Korea or Santos in Darwin, you as the operator will want to sell the most amount of gas you can actually sell. And the buyer, mostly, unless they've got some, restrictions in terms of capacity, which doesn't often apply, they want to buy the largest volume of gas they can buy. So going forward, we will probably get included in any future gas sales agreement. But, you know, there could be a situation where the buyer says, no. We only want 60% of the gas. We don't want a 100%, or we want 77 and a half percent of the gas. But, you know, as I said, that that would be an unusual situation. So we don't see you know, getting our gas to market hasn't changed, and that's the big, big price for anyone in the in terms of of the market potential for for gas is absolutely enormous.

32:50 What is your assessment of Tamron's operating ability compared to the origin? Look. They've just drilled a fantastic well, in e p one thirty six. Record time, I think, about half the time of of a previous well drilled to 3,000 meters. So that that shows it got a operating capability. I suspect a lot of the team at Origin in Brisbane, and this is the operating team, which we have know, I've known them for eight years. Fantastic group of people. I suspect some of those will end up on the with the Tamron guys. So that would bring a lot of continuity in terms and and and then overall operation capability. We don't have any concerns at all about Tamra's operating capability. Why is this deal a better deal than exercising the preemption? Also, can you speak to the funding cash position of FALCON going forward in the context of this new JOA and likely spend required.

33:44 So why is it a better deal than than exercise in preemption? Well, we'll we'll kinda never know the real answer to that because we're not doing the preemption. Preemption would have been quite challenging. I mean, apart from the time frame itself, we would have had to give up a lot. We would have to dilute shareholders a lot. We'd have to we were looking at bringing in a strategic partner because there's no way we're gonna do an you know, being operated a 100%. We were working closely with somebody else in Australia to come in as a partner alongside us, but we would never have the optionality we've created under this deal. So when we started negotiation on this at over a week ago, it became obvious that this was going to be, by far, the better route for FALCON and its shareholders.

34:30 And then the second part of your question, funding cash position, I think I touched on that in terms of, yes, we're still carried, not forever. We do have 17,000,000. We're getting a new carry. So our immediate need for cash is, you know, it's pretty limited. It's not like, as I said in another question, it's not like we're never gonna have to raise money. We will surely, but we have huge optionality. We're we're not under any pressure to raise money anytime soon. So we actually moved ourselves into a really good position. I think one of the comments I got back, the most frequent comment, in fact, I got back, when this deal with Origin and Tamron was announced was how can FALCON stay in the game? How can a protected position in the beast room? What with Sheffield coming in and H and P drilling and Tamron coming in? How can we keep up?

35:16 Well, I hope the previous q and a have kind of addressed that concern is that, you know, we can't keep up, we don't have to. Not all the time. We can choose to to come in, to come out, to stay there, to stay on the fence, so on. So it's it's actually put us in a in a in a really, really strong position. So next one is to clarify. For what comes in on a probation, FALCON choose to sit it out. FALCON's the right to buy it back in. Yes. I think I've I've answered that. We do. But will we? Maybe, maybe not. I mean, instead of, you know, two or three or 4% buyback in might be expensive relative to what you're actually giving up in terms of the acreage. So you could just sit on that and then be ready to to jump into the, you know, those next 6,400 acres right bank next to the one that you didn't participate in. It is such a tiny fraction of our overall 4,600,000 acres.

36:04 The next question, Origin made a big deal for selling out the issues of first generation people, and this was backed up by supporting comments by them. The ingression, I'm not sure I understand that question. I think I'll have to pass on that question. Apologies for that. Have you any thoughts on now on the time scale when FALCON OIL and GAS will be sold? Yeah. Look. As as I I think I alluded to earlier, the exit strategy is firmly taken off the table. We don't need to sell. We're not looking to sell. We're now better off staying in this for longer, much, much longer, seeing this developed up past pilot development and actually even into production.

36:49 So the the value creation that we can see with the option of putting in hard dollars or not or a combination of is such a huge, shift in in value creation for our shareholders that, look, we're not looking at an exit anytime soon. Next, is there a particular well cost or a flow rate of which FALCON wants to see before participating in a unit? That's a you know, that's an interesting question, but look, if you're not going to sit back, that's like having, you know, twenty twenty rear vision in in in what, you know, particular flow rate. But let's take a scenario where, you know, these wells that we're currently drilling, and let's let's not forget the most important ones are the ones we're drilling. We're looking to to to, get a flow rate here of 3,000,000 scuffs of gas a day, 3,000 MCF for a 1,000 meter horizontal, and we wanna do that twice.

37:41 They're the kind of rates that make beetleu wells in the Mundi and, certainly, the Mundi member, shale, b shale, really, really commercial. So that's if that's an answer to your question, you wanna see 3,000 meter well producing 10,000 MCF gas a day. In terms of the well costs, yeah, look at the well costs are gonna keep coming down. But even at the current well costs, that kind of flow rate, given the particularly the commodity prices, they will be commercial. So you would certainly want to consider participating in in wells that are gonna come in at ten minute a day. Why wouldn't you? Philip, what do you see happening to the FALCON share price over the next nineteen eighteen months? And I can't answer. Well, I can have a guess, but, I mean, it's really up to the market. Given where we we were to where we can go in the next eighteen months, I could see an absolute explosion in our share price. I mean, these two wells alone that we're starting drilling on in the next couple of weeks, and the results we'll have out in q one next year, I think, could be hugely, material impact on our share price. And then you bring in The US drilling rigs.

38:46 You get a much greater activity going forward in '23. And then, you know, we get this success out of that. We'd be a very, very different company in eighteen months' time. And then is there a chance of production from these wells and therefore cash flow in '23? Yeah. Look. It's one of the things we're all focused on is not just drilling for drilling's sake, not flowing gas for for flowing gas sake, but actually commercializing flow of gas. So not only are we very close to the highway where we're drilling these wells, we're also close to a small pipeline that can take small scale production. So you could actually see, you know, cash flow. It's not gonna be very material cash flow, but more importantly, you're gonna see commercial production. You know, if it's not by the end of twenty three, certainly, you'd like to see it somewhere in 2024 that you're actually we do have commercial production even if it's only at a small rate.

39:37 Won't be material in the cash flow. It's not gonna be paying out dividends to shareholders. It's not gonna be paying our way into the future. But more importantly, it's just demonstrating commercial sales of gas, from the in the shortest time frame possible. And, you know, Tambern are very, very aligned on this as are of Sheffield and, certainly, so too as FALCON. And I think that is the end of yeah. That's the end of the questions I see on my screen. Philip, absolutely. And thank you very much indeed for taking the time to address all of those questions that came in from investors this morning. 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 and then publish any responses where it's appropriate to do so. Philip, perhaps before redirecting those on the call to provide you 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.

40:32 Yeah. I guess the the main comment I have is, look, letter of intent, it's fantastic. It is terrific news for for the shareholders. But the real, real focus now got to be on the drilling. And as I said, that starts in a few weeks' time, and the results of those that we're very, very confident on. I mean, you know, the we really are. I mean, we we're very confident these wells will produce the kind of flow rates that we're hoping of 3,000 mcf and even better. But 3,000 is kind of the hurdle. You might hear other people talk about 5,000 mcf a day. But at 3,000 mcf a day, we're then then moving towards pilot development in 2023. I think that's the thing to take from all of this that, you know, we are you know, with this with this drilling, we can move into pilot development. And with this LOI now signed, FALCON can be in this for the long term all the way through and beyond, in fact, pilot development. So it's it's a pretty good day for for all.

41:26 Philip, that's great. And thank you once again for taking the time to update investors today. 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. This will only 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 morning to you all. Good morning, and thank you.