Seascape Energy Asia (LSE:SEA) — Investor Presentation

0:01 Good morning, and welcome to the Longboat Energy PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. 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 questions submitted today and publish responses where appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Helge Hammer. Good morning to

0:33 you, sir. Good morning, Alex, and good morning, everyone, and welcome to our interim research presentation. This morning, I'm joined by Nick Ingrescia, our corporate development director John Cooper, our CFO and from Stavanger, we have Hilde Salte, who is the managing director of newly formed Japanese 50% owned Longboat Japan subsidiary, Longboat JPEG, NOGAN AS. It's been a very busy half year. We have done three transactions and which have basically refocused our business entirely. The most significant transactions is the one with JPEGs, where we have issued shares in a subsidiary to give JPEGs 49.9% ownership in a subsidiary.

1:32 And together with that, we have a financing package for growth and development in Norway. We've also delivered our first transaction together with JPEGs in in Norway, which is the acquisition of interest in the SEASCAPE ASIA PLC, Relatively small, but important deal because it's our first deal where we have actually shown that the joint venture is working and and efficiently can make decisions. The third the third transaction is in Malaysia where we acquired a company called two pass, which was our partner in s k two a and gives us a 52 and a half percent ownership in the very large Catan prospect, which we'll show you later on.

2:32 We are really now in a quite a different position with Longbow. We have refocused the business and we are set to grow. In Norway, we are aligned up with the JPEG facility to pursue development and production deals. In in Malaysia, we have been joined by James Mansis and Pierre Elliott, who are seasoned oilman and and very experienced in the Southeast Asia region and will help us deliver value accretive transactions in that area, and there's a lot ongoing.

3:16 We will continue some exploration activity, but at a lower spend level than we have had in the past few years. We will be more focused on coming in early and farming out as as we've done in in Malaysia. And with that as an introduction, I'll hand over to Nick. Give us a little bit more more flavor on on the deals we have done and and where we're heading. Thank you, Helga. Good morning, everybody. I'm Nick and Gracia, the corporate development director here at Longboat. So just wanna talk a little bit about how we've refocused the business in the past six months through the the acquisitions that we've made and and the sort of partial pivot around to to Southeast Asia. So first of all, starting with our Norwegian business, we really reshaped that with the Japx joint venture.

4:07 JAPE ENERGY ASIA sort of after sort of seeking to grow in Northwest Europe, identified Longboat as someone they wanted to do a transaction with jointly grow a substantial business. And so we struck a deal where they made an initial investment of $20,000,000, which is both for the existing business and an investment into the satellites, which we announced shortly thereafter, as well as providing us with a very significant financing facility available for both acquisitions and for development CapEx. And this five year financing is is at a very low cost, especially if you look at where bonds are are trading in the market. And and this is a a desire by us to show potential sellers our financial wherewithal to go and execute transactions.

4:55 The strategy is really development led strategy to grow significant two p reserves and reach significant production levels within three to five years. We believe that with a a number of field developments currently ongoing, almost record levels in Norway following recent tax changes from the COVID era, that there's gonna be a lot of projects for sale, and we believe we'll be able to get into those at a at a more relative value than we can currently buy production. We're gonna be looking for largely nonoperated interests, hopefully, in in sort of reasonable sized fields, and we really see that the Norwegian tax system provides downside risk protection for getting into these developments. So we're working hard together with with JAPE ENERGY ASIA screening and and going in and seeing people, and and we're very hopeful that that we'll be able to move some transactions forward in the near future in in Norway.

5:49 The ENA piece, so expiration and appraisal, you know, we will kinda continue doing that. We do believe I think we're all kind of explorers at heart, and we believe it does create value. I think at the moment, we're gonna be refocusing around protecting our current positions. We'll come on to, you know, where we are in a few slides, and Hilda will take you through the advice area, which is very exciting. And I think one of the shifts we will have is is moving towards larger, earlier equity positions, which allowed us to sort of farm out and and get our cost carried as opposed to the farm in model, which is really what we've been pursuing previously. And, hopefully, that will allow us to deliver the exploration program at a lower cost overall. We've also been growing a Southeast Asian presence.

6:35 This has sort of come out of an initiative that's almost just kind of, I think, a year in the making where where we identified growing opportunities set out in Southeast Asia, really led by the fact that Southeast Asia looks a lot like the North Sea did fifteen or twenty years ago, really with sort of majors exiting or refocusing their businesses and creating opportunities for smaller players supported by regulators who are keen to encourage smaller players into the mix. We see much more limited competition, especially from private equity, which has been a real challenge in Northwest Europe in terms of trying to transact. And so we entered through a license award earlier this year with a large 12,000 square kilometer block in Sarawak in the deep water with a giant Kerten prospect, which we'll we'll go through a little while.

7:33 And then recently, we purchased Topaz, who is our partner there, bringing on board a couple of new team members there to push that business forward. Down in Southeast Asia, I think the strategy is gonna be building a full cycle business,

7:48 you know, really focused on sort of production and and, you know, developments where we see there being kind of low CapEx and short lead times. It's a different operating environment out there. It's a it's a different physical environment with shallower water, shallower targets, and and, you know, you can chase after things a lot quicker. And we've seen really the reemergence of some smaller businesses really focused on doing that. We've got, you know, quite a bit of m and a experience in doing innovative, interesting transactions, and we're looking to exploit that and our sort of expanded network there that the Topaz team brings to sort of deliver this. And and you'll see from our recent press releases that the team there is very much incentivized to to to deliver that. You know, the team now has been expanded to include the the the two topaz people.

8:34 We see James and Pierre down on the bottom there. James is probably best known for having grown Salamander Energy from a private equity upstart to a Putsi two fifty company, which was sold in 2015 to OFIR, and then subsequently was involved in in running and reshaping a couple of businesses focused on Southeast Asia. And Pierre has very good experience out in Southeast Asia. He's actually based in in Kuala Lumpur and will be providing a regional presence for us there. And he's helped a number of businesses obtain and grow assets out in the Southeast Asia region. And he's also a technical person by background, so giving a a an extra boost to to the overall technical resources in the business.

9:22 John, maybe over to you to to talk about the interims. Thanks, Nick. So the purpose of this slide is to try and sort of help people see through the the interims, which are about a different presentation to what people would be familiar with because we signed the JAPE ENERGY deal before the period end, but it hadn't completed. And so, therefore, we had to, under IFRS, show the results for Norway. Even though we owed it a 100%, we had to sort of collapse it down to one line in the income statement and two lines in the balance sheet. So just yeah. It obviously, it then subsequently completed on the July 14. And, again, I'll have another I'll show you the next slide. I'll show you. We'll sort of break down what that means for cash. But as at the period end, we had in continuing ops, which is PLC, continuing operations, we had £2,100,000.

10:21 And in health, the resale, we had £2,200,000, which was Longbow, Japx, Norga. Now, obviously, you know, that was getting tight, and that's, yeah, part of the Japx transaction helped helped refinance the business and bring in a really credible partner that will no doubt help our b BD activity in in Norway. This is seen as a heavyweight. In terms of drawings under the FF, it is yeah. We had £33,000,000 just over that drawn, and we had a tax receivable of £37,200,000, of which 35.5 is due in November 23. So most of the most of the effect will get cleared, which brings it back down and means we can use it. We we will we will be using it on we have used it on post period end, and, yeah, we will be using it on on Lotus or or shortcut cut cut. It's just now renamed.

11:25 G n we've got the g and a split out separately there. The the the big item, I think, that went through held for resale, which was Longbeck Norge, was 10,500,000 of pretax Egyptian vulture write off, which is sort of 2,300,000 post tax. So I think that sort of splitting splitting out, obviously, if you you you want the results, you have to then aggregate the the two, but that's done for you in on page seven and eight of the interim statements. I think the other thing to mention in the interims was there was a we put a going concern, uncertainty in there. It's kinda usual for a a pre revenue exploration company.

12:11 You know, under some scenarios, the cash flow gets tight post the post the period end and and later in '24. Go to the next slide, please, Nick. So this slide is unaudited, so it comes with its own health warnings, and it's it's trying to see it's non IFRS. It's trying to see through sort of the IFRS to actually

12:34 show you the cash on on hand. So I think, yeah, I've already talked about the the the left hand graph, which is the which is effectively just the waterfall of how money is being spent during first half of twenty three. The four point and this is looking at it on a on a sort of group basis. I say group because it's I put it in dog ears because it's not splitting it out between continuing operations and held for resale. But we ended the period with £2,100,000 in PLC, as I've said, 2.2 in Norga, 4.3 in total, having spent 4.6 on expiration pretax and 4.5 pretax g and a.

13:22 So that's the g and a. You won't see all that g and a appearing in the p and l because, you know, it gets charged. So you it gets charged time written to assets and things like that. But that's the that's the cash movements. Post completion, if we look at Norga, which is the sort of the the the the which is now post completion is called Longbow, Japx Norga, LJN, the short. They had 2.2 of cash, 12,000,000 of of consideration less less cost during during that period. It repaid £3,500,000 to PLC, leaving the the JV with approximately £10,600,000 on the on the fourteenth of of July.

14:12 And we've tried to show how you would then split that between Longbow, the shareholders, Longbow and JapEX. But, of course, this is a joint venture with its own board, its own life, and is although we're sharing that money in gray as as Longbow's, that's the the amount attribute attributable to Longbow if you took Longbow's share. But, of course, you know, Longboat, Japx, Norga at the stage is out, is not paying dividends. And so that that funding is not available to PLC. That's, you know, it's not Japx money. And then if you go if you look at group again, we've got group, and I say group in sort of dog ears because it's it's non IFRS, but it just to give you a sort of a group cash position. Have 2.1 on the June 30 in in in PLC, you've got that sort of that gray bar on the on the in the middle graph, the sort of the attributable amount that you could say in the in the joint venture, and then the loan repayment, which gives you 10,900,000 of PLC cash. So, you know, it it's fixed the balance sheet to enable us to, you know, drill a better set, look at drilling Lotus.

15:20 You know, we'll see what we where we get to with that. And I think it was a was a good deal. Think the other thing to mention on the Topaz deal is,

15:28 you know, that was a deal where we issued a small amount of shares. And most of the consideration for Topaz is dependent on success on SK two a. And so, you know, you don't see the take as deal appear in in the in the cash flows. I think it's very exciting to have James and Pierre come on board as as as employees and gives us sort of strength and depth in in in what will be a core area for Longbow. And I I think the the Longbow Japx, normally joint venture is hugely exciting with the, you know, the financing it brings, the financing facility, the partnership in terms of just the strength of JAPECs, in terms of the the people, the the ability to to peer review, and also the reputation, which will will help us in in Norway.

16:22 So with that, I think I'm handing over to the next slide to Hilda. Yeah. So I'm very excited that we announced our first production deal in earlier this summer. It is really the a demonstration of the joint venture ability to do deals together. So as Helge mentioned, it is it's a modest deal. We've done it together with INPEX ITEMIZU, and it's fully funded with no requirements to raise equity from shareholders. It's it consists of Statford East and Signa, and it sits it's tied back to the giant Statford Field. And it's a it's an it's an older subsea tieback, so even the the the field in the cells is is actually giant.

17:13 And because of that, as Statford East has undergone redevelopment this year and where they have drilled a portfolio of wells. Five was planned, three is already drilled, and also include introducing gas lift to the to the well stock. So the net production planned for '23 is 300 barrels 300 barrels per day, but we expect that this will increase significantly for 2024. And this redevelopment causes stat release to have a kind of a a new era and would produce until the late twenty thirties.

17:55 Cigna is also a part of the deal. It's there's no development plan for that, that it will just continue producing with its well stock as it has until until the early twenty thirties. So, yeah, this is kind of the first production deal we have and makes the first building block for going for further.

18:19 Can you do the next slide?

18:21 And then as Nick alluded to, we have kind of focus areas, and we've talked about the the Croatia area for for a long time, and we still have great faith in this area. Here you can see on the map Croatia in red. That's our kind of our most important building blocks. I believe that was the most exciting discovery, the best in 2023, and one of the largest. It has a solid resource base, and it has excellent reservoir quality.

18:52 Together with the team and our partners, we had then built on this position and secured the, which is now planned for drilling in twenty twenty four four. This one as well is the same play as Croatia. We're building on our unlocking this this play in this area. And this has healthy volumes being a tieback to existing infrastructure.

19:20 And in addition, we have actually managed to secure old P L 1049.

19:27 The team's experience identified exciting opportunities there at a shallower level. And then so then we have actually announced the fact that we have secured this acreage, and we will, together with our new operator, DNO, mature that going forward. And during the summer, there was a very exciting discovery in this area. The Kaumann that was announced by DNO and NPD, Velleslie is the operator.

20:00 As you can see from the map, it actually stretches most likely based on our mapping and the NPD press release into the Croatia license. So the operator is here looking into this one to try to evaluate where the position that we have here. So that is very, very exciting. And Croatia together with a number of other good discoveries in this area is being pushed forward by Equinor, the operator, to form Ringway Vest development back to Torb. So this this this has a kind of a development solution and also interesting volumes.

20:47 Thanks. Thanks, Hilda. And just to finalize on on Malaysia. I quite frequently asked why why Malaysia. And I think it's I don't Just to repeat, Carlos, the you know, the the when you look at that map of both from Sarawak, you see very significant gas infrastructure. You see an area which has been active for a very long time. All the majors are still very active here. Actually, resembles quite a lot of the North Sea and Norway, particularly Norway, big gas gas producer,

21:27 big gas deliveries to to Europe, and plenty of opportunities to to add more more to the to the existing infrastructure in a timely manner. And and and we, with our experience from Norway, can use that in this area, and that's that's very exciting. And both both from a geological point of view, but also from a commercialization point of view. And Malaysia has a very similar type of industry setup as as Norway have, and transactions are likely to happen as as companies refocus and and particularly big companies focus on the biggest biggest assets.

22:17 It's incredible that we have actually this block here, S K 2 A. It it's a it is a giant one of the few undrilled giants that you have in in in this part of the world.

22:36 The the Katanga structure, you see in the bottom right hand corner is around 200 square kilometer large. So it is truly a giant and could be multiple TCF in this in this restaurant. So very exciting to have come in early and and also very exciting. We now have 52 and a half percent of this this block.

23:10 The focus is now on working it up in in huge detail, making absolutely the maximum out of the seismic. We have modern three d seismic here. And so that we are ready to make a drilling decision

23:31 and that, you know, we we would probably look to bring in a a partner with with 52 and a half percent. We have a lot of big big companies, big players who who would be interested when they see that they could get a relatively large stake in this. So, hopefully, we will be able to deliver a deal and make a a drilling decision during next year, and then we we should be then in a position to drill it in 2025. Okay. And then just to finalize, it's been it's been a extremely busy first half of the year where the business longboard has really reinvented itself, and we are looking at some exciting opportunities.

24:27 And we're now really well placed to exploit opportunities both both in Norway where we have JPEGs with us, where we have a financing facility in place, which is really a door opener. Both JPEGs and the financing is a door opener in Norway. So we are looking at the number of opportunities there, and and that's that's kind of focus number one. And then the second focus is Southeast Asia m and a opportunities where we now have a stronger team and a stronger presence in Southeast Asia. And we are also there looking at a long list of opportunity. A lot a lot is going on at the moment.

25:16 And and then the third focus is then on SK two a itself to mature that for up to a an exciting drilling project in in in the in the next year or two. So with that, I will I'll finalize this presentation, and and we can look at a q and a session. I'll hand over to Nick to to take us through that. Thanks. I'll take the I'll take the first question. So first question you're really a question. Did you I was gonna you shall I moderate, and then you can move to your hip? Yeah. So the first question is regarding the Japx transaction. I think just some of the financials have moved around. It's it's a question around why only 12,000,000 was received versus the 16,000,000 and contingent of four. Yeah. So we're mixing currencies there. 16,000,000 was $16,000,000 received from JAPE ENERGY. That was about 12.5. It was received in dollars and NOK. I think $10,000,000, the balance being in NOK.

26:28 And at the exchange rates, that was about £12,500,000. We've netted off some of the costs in that in that bar chart, and so that shows you, you know, it's that bar chart needs to be labeled. CapEx received less cost in period or whatever. The contingent consideration of $4,000,000 is is relating to the Statfjord satellites, and that needs to close to receive that money. And that will go towards helping pay for the the acquisition. And then there was a contingent payment on Velocet, which is gone because Velocet wasn't wasn't successful enough to trigger that or wasn't wasn't commercially successful, so it didn't trigger that final claim.

27:21 Right. Oh, I see. I mean, I've started at the bottom. Right? Sorry. I started at the bottom rather than at the top. So there's a question here around Egyptian vulture. The write off signifies what does that signify? Are we still looking at applying for the license, or is this is this something that that is now not really on the radar? I don't know if if you wanna do that, Helga. I can I can answer that? I think this is one of the kind of situations where, unfortunately, you know, further technical work actually is not has not helped to reduce risk. I think we we we, disappointingly, Egyptian voucher, you know, with more and more work didn't really become lower risk.

28:19 So it it it does not have to do with partners and not attracting partners. It is our own perception of of the risk of drilling that appraisal well in in Egyptian Russia. So, unfortunately, we have that. We have dropped the opportunity. Can I just also add to that that, of course, when you do an APA, you high grade your opportunities? And, unfortunately, with the technical view that Helge explains here, it didn't meet its targets compared to others. Alright. Let's see. John, another one for you perhaps. Once the Norwegian subsidiary receives its reimbursement, will you be able to redraw on the financing facility or only on the undrawn amount? I guess it's a is a revolving facility is the question. On the what? On the EFF? Yes.

29:13 Yeah. The EFF is a revolving facility. And to the extent you don't have profits and from production, then you can can draw on that. And, obviously, one of the scenarios that we ran with the auditors was, you know, does Stafford satellite close? Doesn't it close? How does it look? You know, at the end at the end at the end of the day, if the Stafford satellites closes, then there'll be less drawings on the FF because we'll have revenue, which will be quite pleasant for the finance director. That leads me into the question. There was a question on, you know, why have you got material uncertainty? I don't think material uncertainties are unusual for pre revenue exploration companies. The auditors get very, very focused on these things these days. The you know, they run their many downside scenarios, and they run them for way past twelve month period. Period. They run them for eighteen months, and it it is what it is. I don't think it should surprise people or concern people.

30:14 Right. Maybe a couple of things on Southeast Asia. There are a few kinda good questions here. Will the Topaz team have a big effect on the cash burn going forward? Oh, look. They're they're senior executives getting getting paid as employees, but it means you're not you're using less consultants down there. But, yes, it will affect the cash burn. That's all taken into account. I mean, I think to get 15% of that block for a handful of longboat shares and, you know, contingent what our, you know, initial consideration was very low. You know, the contingent consideration, well, if it's successful, it will be it'd be worth it for the the contingent consideration, which is also available in shares or cash depending on our situation at the time.

31:05 Maybe a technical question on here for you, Houga. It's is quite far away from infrastructure. Do you have any idea about the minimum economic field size? Yeah. We do. I mean, it it depends on the number of factors, obviously, but around around 600 Bcf, I think, of what we have assumed is the typically, the the cutoff volume. But, you know, that's About a 100,000,000 barrels just per Yeah. Like a 100,000,000 BOE. 1,000,000 BOE. Yeah. I think if you should have surfed around on the Internet, just to sort of add to that, I think there's some previous numbers that are kinda out and about suggesting could be up to nine TCF, which is in excess of a billion barrels of of oil equivalent. So, you know, I I I can't those are not our numbers, but I I know I've seen some stuff historically around that. So I think that some of them are are there are some very significant numbers there. So but it is true, I think, fair to say that that you it needs to be a reasonable size because it is in slightly deeper water. Otherwise, you see infrastructure has been building out, and, certainly, the LNG plant there is hungry for gas.

32:13 It's quite interesting that, you know, there's been been a lot of exploration activity in in in the. And and have announced discoveries in on kind of slightly shallower, but in in the in the northern part of of the basin. And the other indications are that, you know, because there's always there's a risk of c o two content, but indications on shallow boreholes and nearby discoveries have been very positive in terms of this not not carrying such a high risk of high c o two. I think we've so I'm just trying to say Safford. Yeah. In Safford, effective date. So what do you think the cash flow will be outflow will be on the closing of Safford?

32:59 Yeah. We're various scenarios on the pro and contra. It's very much on oil price and production rates with these new development wells coming on. I think the production rates have been slightly down. The development was being slightly slower, but oil prices have been higher than we budgeted. So I think it'll be you're not gonna get the benefit of that production because there's been big CapEx. So I think it'd be the pro and contra will be broadly neutral. It's the latest sort of forecast we have, so we'll be paying out the consideration, which is $12,500,000 from them. K. Will the directors be buying on the open market? The directors have bought several times on the open market, including a reasonable purchase this this summer.

33:47 So, you know, obviously, we're we're we're all very heavily invested in the business. And, you know, I I I guess we can't sort of speak to any particular purchases, but we've been supporters of the business and and both in the fundraisers, the refund raise that we've done and and also in the market. So we are all very, very invested in this business. Think it's fair to say. Yeah. Let's see. Is ultimately, would you like to do a joint venture in Malaysia? Maybe I'll I'll do that one one for me. I I think look. The world is our oyster. I think we have shown our ability both here at Longboat and, you know, previously at FARO and other businesses. I think we've all been in to do interesting and innovative transactions, looking to partner, looking for win win scenarios.

34:36 We have a history of doing swaps and and bringing interesting partners in and interesting shareholders and all that sort of stuff. So, you know, I we certainly can't comment on anything specifically, but, you know, that's the sort of thing that's always at the forefront of our minds in terms of trying to find interesting ways of creating value for everyone involved. And and, you know, we certainly would not say no to to bring in interesting partners out in Malaysia as we have done in in Norway. I think that's pretty much all of them. I think we've kind of managed to to to hit all of the questions unless there any last minute ones. That's great. Helga, John, Hilda, Nick, I think you have addressed those questions you can for investors today.

35:22 And, of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet company platform. But before we direct investors to provide you with their feedback, which one is particularly important to the company, Helga, could I please ask you for a few closing comments? Thank you, Alex. Yeah. And thank thank you all for attending today. I mean, it's I think we're in a in a period which is, like, a a a big a big change in the company and and some really exciting opportunities ahead. And, yeah, you know, just we just keep working hard to deliver it as soon as we can. Thanks a lot, everyone. How good, John, Hilda, Nick? Thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations?

36:17 This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of Longboat Energy PLC, we'd like to thank you for attending today's presentation, and good morning to you all.