Seascape Energy Asia (LSE:SEA) — Investor Presentation

0:03 Good afternoon, and welcome to the Longbow Energy PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, can be submitted anytime by the q and a tab situated on the right hand corner of your screen. Just click q and a, scroll to the bottom, type your question, and press send. The company may not be in a position to answer every question received during the meeting itself. But the company review all questions submitted to same and publish responses where appropriate to do so. Before we begin, we'd like to submit the following poll.

0:28 I'd now like to hand you over to Nick Ingrisa, corporate development director, Jonathan Cooper, CFO, and Helga Hammer, CEO. Good afternoon to you all. Good afternoon. Good afternoon. Very pleased to present you with an update this afternoon. So we we are a very active drilling company, exploration drilling. We have drilled eight wells in fifteen months, which is probably most among the most of in the North Sea. The success rates have been good. We have made four discoveries in eight wells. Technical discoveries is five. Finding costs are low. So we are ahead of of industry average in terms of discoveries.

1:19 The very happy with the the last one, the Husvik discovery, which we made announced on on Friday, and we'll come back to that shortly. In terms of going forward now, the focus is really moving into appraisal and monetization and demonstrating the value of what we have discovered. So we're moving from making technical discoveries to making them into commercial discoveries. And in that sense, when we're talking about that and discovery from the spring is is high on the agenda, and we'll come back to that shortly.

1:59 Other than the kind of moving forward with the discoveries, we are working actively to generate a drilling program for next year. The plan is to have three to five high impact wells in in 2023. We have, at the moment, one committed well. That's the Vellosat exploration target. Exciting well coming next year, and we'll explain that to you shortly. We've also applied in the licensing round in Norway in the so called APA round. We've applied for a a drillable prospect that we can move forward with right away, provided we get it. And we have a long list of BD opportunities that we are continuously pursuing, and Nick will cover that.

2:53 Also looking a bit wider than than only Norway. With that as an introduction, I'll hand over to John. Thank you, Elgar. I think balance sheet is probably something people are interested in, so let's start there. We finished the six month period to the June 30 with 22,500,000 cash on the balance sheet, slightly ahead of expectations. And that's really due to lower than forecast drilling costs. When we originally farmed in, did the three farm ins, and got the seven well program lined up, we had our own estimates of drilling costs. We then got AFEs from operators that were lower, and we've pretty much drilled to the AFEs or or less. So the the drilling in Norway has been safe and efficient, and that enabled us to take on you know, to do a fourth farm in transaction and take on the Ausweg and Velocet wells.

3:52 We were 15,700,000 drawn on our exploration finance facility, and we had a noncurrent tax receivable of £21,000,000, which is due to be paid in q four twenty twenty three from the Norwegian government. So if you remember, in Norway, you get 70 well, you used to get 78% of your exploration costs repaid to you. We had tax changes in Norway last year. The government flagged these tax changes, went through a exhaustive consultation period, which was useful. They they listened. They understood what we need, what small companies such as ourselves needed. Helga led a a sort of a consultation group of small companies and went in to see the the the the people heading it up.

4:37 These changes were were proposed by an ex an outgoing conservative party and have been ratified this June by an incoming labor coalition.

4:52 So that was so it's a sort of cross party consensus, if you like, for this. The good good thing we had good communication from the government that enabled us to continue to draw on our EFF from the January 1 despite some uncertainty as to the exact nature of the changes. And then we signed new agreements in June this year, which was exactly as expected. So a really well run process. It went from 78% of your exploration cost being rebated to 71.8% of a broader sort of broader cost pool. So you got your 71.8% of your g and a, your expiration, and you can also get your development costs included. So effectively, you get a 100% writing down allowance or the first year rather than having six years of amortization.

5:44 So I think a good good balance sheet is where we where we would expect it to be or slightly ahead of expectations. Had a loss for the period of 1,700,000. No write off of intangibles. We're still working on some of the licenses where we did drill dry wells. They that will come to that work will come to completion, you know, sort of around the year end or just after the year end, and decisions will be made on, yeah, in line with accounting standards as to whether we need to write off or or not. I I would, you know, imagine there may there may be some write offs. We'll see. Depends on the outcome. If we go to the next slide. I think the two points to note here is we were we also had not only a change to the underlying tax regime regime, but we had a change.

6:34 We were under temporary tax rules in Norway last year, which were more generous than the the underlying tax rules. And so we had 10,600,000. This is where they paid you out in six installments, three in the current year and three post the year end. So we got paid 10,600,000 from the government under the old under the temporary COVID interim rules to help the offshore industry, and then we've drawn 15.7 on the EFF.

7:02 So the only other point is that, you know, we now have discoveries, and Nick and help we'll talk about those discoveries, and we'll talk about options around monetizing certain of those discoveries as well as we work on our biz and, you know, as a way of funding our BD pipeline because we don't wanna just sit here and drill, you know, sidetrack on Oslo again and one well on Valiset next year. So over to you, Helga. Thanks, John. Yeah. So is the discovery we just announced on Friday looking very promising, I must say. The the discovery is just to the west of the Oseberg Field. Oseberg Field is right in the middle of the Norwegian North Sea. It's it's a huge huge field with multiple platforms.

7:54 It's planned for electrification. It has gas export lines, oil export lines, and it has multiple satellites already. One of them is Tuna. Tuna is a field that we had as an analog to our exploration prospect called. So sitting down dip into the HPHT setting on on the down down front flank. The this one came in very, very correlatable to tuna. So reservoir and reservoir quality, porosity, gas presence, and and

8:37 porosity, sand. All of that is looking very similar to tuna. We have announced that we think the in place volumes are on the high side compared to predrilled expectations. Main drivers for that is that we now have a gas a gas water contact that is deeper than the predrill expectation. And we have a and we have what looks like a more condensate rich fluid than what also was the predrill expectation. Predrill expectation in terms of reserves is 93,000,000 BOE gross. The the that has I mean, the missing piece of the puzzle to get to that number is the recovery factor.

9:27 And to get a good grip on the recovery factor is is kind of the main objective of this flow test. So we prove the producibility, the flow rates, and then we also then get a a good grip on the recovery factor. So assuming that is similar to tuna in the 60%, then reserves would also be on the high side compared to previous expectations. The the you know, assuming that's all successful, then we have follow on potential shown in these yellow areas, mostly north, west, and mid, also having predrilled 80,000,000.

10:12 So it can it can almost double if you if you add these extra volumes. Maybe take a look on the next page. So where we are now, we have started drilling on the sidetrack, and then we are rigging up for a production test. All of that will take six to eight weeks, started last Friday. Two net area is showing production profile. I think that that production will produce something like five watts. So this is potentially very productive. So fingers crossed for the test. If that comes in well, this is exactly what we've been looking for. We'll take a look at the other discovery we have from this year. It's creation. I'll hand over to Rick.

11:04 Thank you, So as you may recall, Kvaische's discovery made this spring. It's we're very, very excited about. It's it's one of the best discoveries of of '22 so far and one of Equinor's largest discoveries. It's great for two reasons. First of all, excellent reservoir quality, which we don't think will require which we don't think will require

11:28 appraisal, and it's in a wonderful location in terms of infrastructure. As you can see, there's been a very busy period for Equinor in this area. There have been a number of discoveries, and what's going on is that they are looking at potential area wide developments as well as individual developments through FRAAM and through the Troll infrastructure there. Again, this is Equinor's heartland, Troll being one of the largest gas fields in Europe, if not the world. Unfortunately, we only have 10% of Kvaishan. I wish we have more, and I wish we're in some of the other ones as well. But but that means, I think, for us, it was kind of getting to a decision point. We try and grow or go in this area. And based on a number of the reverse inquiries that we've had, we decided to begin to investigate what a go might look like.

12:21 So we're actively pursuing some of these discussions, trying to understand, you know, what a deal might look like. As some of you may recall, FARO was well known for doing interesting and innovative transactions, both in terms of just selling discoveries for cash, but also in terms of looking for potential swap opportunities and swapping into production. And so we're gonna consider the whole range of of opportunities here. You know, the one thing we definitely wanna do is be we don't want to be do is be pressured into anything. So we're definitely gonna take our time here. The key is to have a a good competitive tension amongst people who are interested. And so watch this space. It'll be an area of focus for us in the coming months. And then we have, say, comment on on the discovery we made last year in December, Egyptian vulture.

13:14 And we we were expecting to make an appraisal decision on that midyear, which was postponed till the end of this year. In the meantime, we have had a competent person report on this asset and which has provided a a two c resource range of 4 to 68,000,000. So a wider range than what we announced at as as the discovery was made,

13:42 which reflects the uncertainty, I think, in this asset, but also the upside. And clearly, we are keen to to go after this with an appraisal well because we are strong believers in the in the higher end of that two c range. We believe the well was drilled and missed the sweet spot in terms of sandlobes in this setting. So a lot of the technical work that's been going on is is all about kind of making sure that the appraisal well targets a and maximizes the chance of penetrating these good the good sands, which kind of would then also prove up the bigger volume and producibility of this. I mean, just a reminder, this is in the Norwegian Sea surrounded by infrastructure.

14:37 There is a subsea template called Maria, which is sitting just to the west of Egyptian venture, and it's actually drillable from that template. So the economic cutoff volume for Egyptian venture to work is is very small. I I think many of you would ask why has this decision been done already. I think I here have to say that we are in a in a joint venture with with other companies which have their own priorities. We have Equinor as an operator, and it's not entirely in our control to to control the timing of these appraisal well decisions.

15:22 The then take a we'll take a look at the well that we have ahead of us in q three, the last well in the current program. This is one that we also found into through OMV in the spring. It was the well and the well. This is exciting. Very exciting, actually. This is a potentially twice as big as. It's a it's a it's a tilted fault block, and it has a seismic anomaly that actually conforms to that that structural definition. So so it it it has the all the right characteristics and a chance of success of thirty percent.

16:08 So low risk prospect, high volumes, and very exciting follow on potential.

16:17 As you can see there, if it comes in, you have a further 200,000,000 in these additional structures around Vellasat, all all within within our license. So this is a key one, and we we secured a rig for this this exploration well just last week. That was announced Transocean. Nogat was

16:43 was secured at a reasonable rig rate, so it's within the budget that we had for for this one. So that's kind of the what we have here in the program already. And and so we have, have potential appraisal drilling, Egyptian venture, and you and and could also be appraisal on Husvig if that is successful. And then we're also in the market to to find additional opportunities, and I love to you, Nick. Thank you. So just a quick couple minutes on sort of the outlook and and what we've been up to on the business development front, which is kind of one of the major pillars here at Longboat. So we have a very active business development pipeline.

17:31 It's been a very competitive landscape, and and I think that the the overall commodity volatility has not helped in terms of trying to transact. Just to give you an idea of the sort of stuff we've been doing, we've we've looked at about 16 opportunities, of which we consummated one,

17:48 which was the ONB transaction, which has resulted in in the discovery. You know, from those sort of the ringing ones, about half of them got to a stage where we would make offers. Some of those offers, I think, were were effectively stopped. The sooner processes were stopped when when the Ukrainian situation kicked off earlier this year. And then on on the remainder of those, the price has not been right. And I think the reality is is that we are happy to lose on price, and some of that price element can also be our views on volumes

18:25 of sort of production and or reserves. And the reality is that we are very focused on value accretive opportunities. We are heavily invested in the business ourselves, and we're not in business of buying a dollar for a dollar. So we really are trying to maintain a disciplined approach to how we evaluate opportunities,

18:44 And I'm I'm certain that we will uncover some some really exciting ones. And what we are seeking is, you know, material value catalysts, things that will really make a difference to the share price. We're looking for ways we can sort of put our creative take on things, maybe unique opportunities where we can get involved and unlock things. We also have a fantastic technical team, so we're also looking for opportunities where people have misinterpreted something in terms of volume or risk and see if we can use that to leverage our way into exciting things. Our main focus remains on the North Sea, but almost as a thought exercise, we've been looking at at a wider range of things recently, and I think it helps us compare and contrast the sort of opportunities that we're seeing in Norway.

19:33 We've got a fantastic team with a a very wide experience set in addition to the executive here. And so it's been a really interesting process over the past few months to sort of open our minds a little bit. I think the reality is is that for us to dip our toe in the water somewhere else, it would have to be a very exciting and very unique opportunity, and I think it would need a sort of a common thread. And that common thread would likely to be something around our our gas focus. I I think recent events here in Europe has really sharpened people's minds around how, you know, gas is very important, both in terms of the energy transition,

20:11 but also in terms of energy security. And we think having a gas focus in the business will make us a more sustainable investment over the medium and long term. But our focus still remains on maximizing value from the existing portfolio, and that will be something that will be very, very focused on over the coming months. So so continue to watch the space, and and we will update as and when we have anything to update you. Very good. So to summarize, I mean, we we have drilled five wells this year. We made an excellent discovery in Quechua. We have a very promising discovery in Husvik. We have exciting news, hopefully, very exciting in six to eight weeks.

20:57 We are excited about it anyway. It's looking promising.

21:01 Our focus for us is on monetizing where we could sell for cash or swap or do some sort of other deal. That's gonna take some time, but it's there's a significant interest for it. And on generating a high impact program for for next year, which we also are very confident we will deliver. So thank you for that, and then we can go to q and a session. Fantastic. Thank you very much indeed for the presentation. Ladies and gentlemen, do please continue to submit your questions using the q and a tab just I'd

21:42 like to remind you that the recording of this presentation, along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. And perhaps before we touch on some of the questions you've had during today's meeting, we can just take a couple of the pre submitted questions. The first one reads as follows. You mentioned last year the Egyptian voucher appraisal well will be planned in spring twenty twenty two. But your comments in the interim support sorry, in interim support suggests that progress has been slow. When do you anticipate an appraisal well might be drilled? Because clearly, the range of potential resources needs to be narrowed before it can be monetized.

22:17 Yeah. No. That's a good question. And the the situation is that we are in a joint venture here. We own 15% of Egyptian venture. Operator Equinor is is a is a big company with a lot of assets in Norway, and we have limited influence on how they prioritize their drilling and a drilling program. We are we have decided in the license to make that appraisal well decision at year end. That will happen

22:52 if once once that decision has been made, then if it will be drilled in in in '23 or or or early twenty four, it's it's come remains to be seen. So we we we just don't control it.

23:12 Fantastic. Thank you very much. Next question we've got here is you mentioned that you're planning three to five wells next year. How many do you anticipate will be expiration? How many appraisal? Also, how are you going how are they going to be funded? It'd be very poor to dilute the equity further at the current price. Yeah. It it kind of two good questions there. I think the obviously, one one will be in high impact exploration well as Velocet.

23:39 Let's say there are two or three other wells. I I would expect one of them maybe maybe two of them to be appraisals, but that remains to be seen. In terms of the funding, think we have covered that. I mean, we have flexibility, and the flexibility is around mainly. I think none of us want to and I know and I've seen there are several questions that are kinda focused on this. None of us want to issue equity at at this in this kind of market, very unsettled market, and particularly with our share price having failed to react to the good news we have come up with. So so we we we will be focused on on getting monetizing Croatia, and then we will see what the DST on does and and and make that announcement, and then we see what the share price do and then what our options are. I mean, we have more flexibilities than having to try to raise equity in this market.

24:47 I don't know if you wanna add then to that. No. I think you've answered the question very well. You know, we do have a good team of people. We see opportunities to drill, and we think that's the way to add value to this business, and it will will show through eventually. And I think you, you know, proved the concept by monetizing Kevatia. I think that that will help. And then, you know, a a good DST on Ozwik will help as well. So I think there's a catalyst coming up. Fantastic. The last pre submitted question, kind of very similar, it's just talking about funding and drilling programs. So perhaps we've addressed that there. Nick, may I just ask you just to click on that q and a tab and just start at the top and where appropriate to do so, just read out the question or take the question yourself. So around Equity. Around equity. So I think we we kind of covered those ones. I mean, we are shareholders as as as are you many of you who who are funding this. I mean, we we I mean, we all hate the idea of of having some sort of massive dilution at this kind of level. So so, I mean, don't don't be worried that we also share that share that concern.

25:48 Another question on the tax refund. The tax refund is received in November. Yeah. We're back to the old style rules even under slightly different rates and slightly different rules, but that comes in November 23. And we have one from Stefan. What would you need to assuming successful test in Uzvik, what would be the chance of success on the various neighboring prospects? That's a hard one to to answer on the spot. It would I think the whole derisking and rerisking of those prospects will have to happen after we have well well well got the the results in house and have studied that.

26:34 But but the only thing you know is that you have massively derisked it with the whole suit discovery. The main the main risk predrill on Husqvik was Foard SEAL and Rasor quality. Foard SEAL I mean, that risk is gone. The Rasor risk is about to gonna be resolved with the test. So then drilling those further four blocks, you go a little bit deeper again. So but so it's kind of the well test result will be quite important for those follow-up prospects as far as I can see. Then we have a question.

27:21 How many I think I think we've kind of done I think we've answered bits on Ausfried. You know, I think I think we'll be able to put out quite a bit more information about Ausfried once we have the We just need to get the results. Have the results of the DST. I'm sure a lot more will become clear. Have a rough estimate Which is when the assessment shows reservoir performance the same way as tuna. Yeah. I think we we I mean, just from what we presented, you see that we said it's it's higher than the previous year expectation. But but it is not massively higher because you see the the fall block is pretty well constrained. The porosity data and the net to gross is pretty much as as as by the analog in tuner.

28:13 So the reasons for the reason for the higher volume is the is the confirmation of the deep contact and the fluid property. So, you know, in in the 20 to 30% range, I would say, rather than in the, like, a a doubling or anything like that. K. As a question on a major shareholder, we can't comment on what major shareholders do and don't do. They run portfolios. You know, we see as shareholders and broadly they're supportive. Yeah. Yeah. We've seen a lot of shareholders this week as we've been on the road and and and, you know, there's a lot of support for the business. So so we find that very encouraging. Morning, Terry. Value for the stake in LB. So I would direct you to instead of sort of making comments on that, you know, what we've disclosed so far is is the CPR numbers in this in this presentation.

29:09 And then I think we have previously disclosed, you know, valuation ranges for what people pay Per dollar. On a per dollar basis. And so I think that that's a kind of a useful benchmark in terms of of looking at and thinking about what the value might be. I would also point you in in the direction of the Optus research, which is available to everybody, which also has a a valuation on on all of our assets there. Rigs next year. Look. Norway's a very active market, far more active than The UK for drilling. That reflects the Norway's where Norway is on the maturity curve and the fact that it's a great regime because of the tax system to explore in. You know, the the as usual, the the the rig providers are talking the prices up.

29:59 You know, we're secured on Vela Set, which is great. You know, we'll see. Who knows what's happening in the markets right now? Very, very challenging markets for everyone in terms of inflation and some of the decisions being made around monetary and fiscal policy. Deals. Yeah. Yeah. The question around deals there in terms of, you know I think a number of the wells are likely to come from the existing portfolio. We have a very active pipeline. We're always looking at a whole range of stuff, everything from, you know, exploration appraisal all the way through to production. So it's it's something we we actively are are pursuing. So I I I wouldn't wanna sort of say anything more than that other than it's it's a it's a core area of focus for us.

30:47 Yeah. And it doesn't need to be more than one one deal, actually, to have a a really good program. You know? So it could be two deals. It could be one deal, but, you know, the we're not concerned we don't have have that available. Yeah. I mean, I am asking for updates on numbers, you know, but we're talking about the half year numbers here. We have as we've said, we will upsize the EFF with the lenders. We're gonna apply to do that. I'm not gonna give updates on the numbers, but as I said, we're ahead of where we expected to be, and we can fund what we're committed for. Question on the chance of success on test. I think the the I think what we can say is that with the data we have from the main wellbore, the indications are that this will be a good test, so we are optimistic. But if it was risk free, we wouldn't have had to do it. So there there are risks, but we're optimistic.

31:48 Another one on the other ones. I think Yeah. There's bunch of other things. I think we've covered all of those at at the moment, and I think they're just sort of questions around, you know, what what might be acceptable ranges for transactions. But I think we've covered that already, and there's there's lots of data available. In fact, I think we've even published historic data around what what asset values have been paid for discoveries in in Norway. So in essence, some of our previous presentations, I'd I'd direct you in that way. That's lovely. Thanks. Fantastic. Thank you very much indeed. I think you have covered off all those questions that we've had through that you can. Of course, any further questions that are submitted to the company will have the ability to review those. And we'll publish responses on the Investor Me company platform. And Hugab, just before redirecting investors to give you their feedback, which I know is particularly important to you, I could just ask you for a few closing comments, please?

32:39 Yeah. Thanks. Thanks for your time, everyone. I mean, this is I mean, I think our our business is going in the right direction. I mean, we've we've we've had really good results, and it has not come through in the share price. And I think it's frustration for all of us. It will come through. You know, the the the evidence will be there when we commercialize, monetize, have flow rates, have fields that are moving to developments. It is not like you may drill one well and then it's a big bang and, you know, we can always dream of that exploration well. But very often, a bit more effort is required before before the the value comes through. But we are I mean, we're I'm very confident. And being in the energy space, being in EMP, being in gas in Norway, close infrastructure, I mean, we're definitely in in a really sought after type of resource business. So I'm yeah. We'll we'll just push on, and and it will all come through.

33:42 Thanks a lot, everyone. Fantastic. Thank you all for updating investors today. Can I please ask investors not to close this session as you'll be automatically redirected to provide your feedback, and all the team can better understand your views and expectations? This will only take a few moments to complete, and I know it's greatly valued by the company. On behalf of the management team at Longbow Energy PLC, we'd like to thank you for attending today's presentation. That concludes today's session. Thank you, and good afternoon.