Seascape Energy Asia (LSE:SEA) — Operational Update

0:01 Good morning, and welcome to the Longboat Energy PLC operational update investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the Kine 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 can review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll.

0:32 And I would now like to hand you over to CEO Helge Hammer. Good morning to you. Good morning. Thank you, and good morning, everyone, and thank you for attending. Today, I have James Menzies with me. He is is chairing our Southeast Asia business development effort. Yeah. Great pleasure to present today and reveal a little bit more on the path that the company is on at the moment. The longboard business is to build a full cycle E and P business. And by that, we mean that we are going to have both production development and exploration activity.

1:17 We've done this before, and our methodology or our approach is m and a and drill bit. And in Norway, we already have a number of discoveries, and we have first production coming through with our transaction on the Statfull satellites. And in Malaysia, we have made the entry by getting operatorship of block two a in the deep water, which is a a giant gas prospect. So this year, we've done a a number of transactions and most significantly, a transaction with JPEGs, which we'll come back to, and also a transaction with Topaz and our first production deal. And all of that has put us in an excellent position on from where we are now. We're very excited about all the opportunities that we are looking at at the moment.

2:16 Focus now is very much on getting production in both regions, both in Norway and in the Southeast Asia region. We are shareholders ourselves and are very focused on creating shareholder value with with with everything we do. The it's all about actually having a very strong team and having good people, which is what we have in in Longboat. We have a very strong group at with with very significant competence both in the on Norwegian shelf and the Norwegian industry and also in the Southeast Asia region. We've done this before. We have both in terms of business development, in terms of technical competence, and and the relationships we have across across the industry.

3:12 I'll hand over to James a little bit on the track record. Thanks. Yes. Thanks, Helbert. I mean, I'd I'd also emphasize, I think, on on that last slide, when you look at the people in this company, it's highly unusual to have expertise in the two different areas, which I'm gonna mention here. But, you know, also, you you frequently see companies that are full of bankers and accountants. And we have got a lot of financial innovation and expertise within the board and the senior levels of the company, but we also have a a huge depth in terms of the technical and operational and engineering, and that's what I like to see on that slide. So I always say great comfort when I see small E and Ps that have got a a very strong technical and operational piece in their their DNA.

4:02 But this is the other bit that Longboat have, and it's the the background. It's the it's the FARO experience and the salamander experience put side by side. In many ways, kind of sister companies on the London Stock Exchange. FARO grew very successfully, built their portfolio in The UK and Norway, and ultimately were acquired by DNO in 2019. Salamander, very similar path in Southeast Asia, focusing on Indonesia, Thailand, Vietnam, also Malaysia, and were acquired by OFFE ENERGY in in 2015, coincidentally for roughly the same sort of value. And this is showing you really the the life cycle of the independent on the London market. And, you know, what I what I want you to take away from this is is this is a journey.

4:57 You know? These companies started around a kitchen table, and they end up being acquired for large sums of money on the on the London.

5:05 So I I think, you know, Longboat isn't a kitchen table. It's much more highly evolved than that. But but, really, this is a journey that, you know, Longboat wanna be on. We've we've done it before in in two different areas. We know how it works. We're very familiar with the challenges of getting deals done, wells drilled, portfolios managed, and ultimately leading to a successful acquisition or resolution for for the shareholder base. So, you know, this is something that I I hope people will look at and believe that we know what we're doing. You know, we've we've walked this. So, you know, we're there.

5:52 On the next slide, I think another and I'll let I'll let Elgar about this. But I think what I what I would really point to or I would love investors to look at here is this this financing that Longboat announced with with JAPE ENERGY ASIA PLC very, very innovative. I don't know any other EMP that's done anything similar to this. So, you know, this is not a trivial matter. You know, this is a very, very strong vote of confidence by the Japanese government actually in Longboat's ability to to build a business in Norway. So it's it's them coming to the ball and and wanting to dance with Longboat. But, Helga, do you want to Thanks. Yeah. Thanks, James. No. I think you're absolutely right. I mean, this is a very unique unique deal. And and JPEGs JPEGs is a conservative, long time established E and P company.

6:51 They they were formed in the fifties, actually, and they list listed in 2003. They are very technical, very financially solid, and they were looking at getting into Norway. And they chose Longboat, and it's it shows the competence that we have in Norway. It shows the strength of our team. And we have formed a deal, which is, as James points out, is very innovative. It actually recapitalizes our subsidiary company without any dilution to shareholders. We got up to 20,000,000 of cash that that was paid for the the share, the 49.9% share.

7:43 And we also have a $100,000,000

7:46 financing facility, which has a 6% interest initially going six, seven, eight, ten, 13. That is very low cost of capital in today's market. And that also is very unique for a small company to have access to such low low cost debt. And it's subordinated. By that, it means it can then be also added up with the bank debt or bond debt. So, basically, a 100,000,000 could be could be 200,000,000 in a in a transaction. So this is great. This puts us in a brilliant position in Norway to pursue the m and a opportunities that are there.

8:35 And Norway is not a is not a small country in terms of E and P. It's small. It's a small country, but it's it has still production of 4,000,000 barrels per day, half of it gas. There are something like 20 to 30 field development plans maturing. There is 30 to 40 exploration wells being drilled per annum. It's a huge it's a huge industry and very active industry and strongly supported by by the government. We are in a in a very, good position to to to grow in this area, and we are looking for looking at a number of opportunities. We are also very conscious that we don't wanna do any anything stupid or do any any bad deals. So we have a very high threshold.

9:31 But but, you know, there are lots of qualities as quality assets, and and we're working to deliver our next deal in Norway. We already have a position in Norway. We've drilled a number of wells. We made discoveries. The best of these discoveries is the Kveikir discovery, which is excellent quality, so called inject type reservoir, which are very, very productive, have light oil light, very producible oil in it. So this is clearly commercial and and underway to development. It will be part of a development that is, at the moment anyway or or is operated by Equinor.

10:19 But there are a number of of players in this area, so there's a bit of an alignment that needs to happen. And that's that's there's a huge amount of activity at the moment to to put this quite sizable development project together. The other asset I want to highlight today is the well we drilled this year, the exploration well, Velocet, unfortunately is subcommercial size, but it is a successful play opener. It found a gas and it found a high quality reservoir. And there are many more of these anomalies in the license. So that one is being matured technically before a decision is made on on where to go next. So, I mean, all of these exploration wells, sometimes they need some time before the values come through.

11:16 I'll hand over to to James on on the giant Katanga prospect. Thank you. Yeah. I mean, we look we're changing gears here in exploration terms quite radically because now we're looking at a monster. And both both ourselves as topaz originally and Longboat as operator came in, got awarded this license. And now, of course, Longboat have acquired Topaz. So we're all in in one, which is great news because it gives us 52.5% of this license.

11:50 It's a huge area. You know, it's over 12,000 square kilometers, so it's it's a huge bit of acreage, and there are multiple prospects all over it. But there is one particular standout. Kirtang, you've you've heard us talk about it before. You may have heard me talk about it before, but it's it's one of those structures that just won't go away. It doesn't matter what you do to it. You can't get rid of this prospect. It's it's it's immense in terms of its size. You know, we screen this, and and we've had external people looking at it and giving it a size between eight and eight and ten trillion cubic feet of gas, which is but, you know, I don't know. You may not understand the volumetrics of these things, but I can tell you that is a world class monster. So it's a big one. We can see the seismic there. It's got gas clouds sitting above the structure. You've got brights in the seismic. That's basically indicating there's there's gas in there that's making the seismic light up.

12:48 It's a very the other point to make about this, it's sitting in Southeast Asia's exploration hotspot. In 2022, I think there were 16 wells drilled in Malaysia, exploration wells, of which 10 were discoveries, and eight of them were in Sarawak. So this this offshore area has has seen a lot of success in the last couple of years, and that's continued this year where we've seen

13:14 more gas discoveries to the south of Kurtaang in the shallower zone. So where we see brights above the main structure, the Petrans have been finding gas in those reservoirs too. It's a very similar looking feature to two big giants that are that are undergoing development now called Kasawari and Langlo Park. They're two big fields that that sit out in in the Central Laconia area here. And they're around five to six TCF each, but they have a lot of c o two in them.

13:48 This particular feature, we've done the seafloor sampling, and we don't see any c o two in the seafloor sediment, but we do see a lot of methane, very, very high concentrations of methane, which is, you know, what you wanna see. So we're extremely excited about it. It has all the right ingredients technically. And, of course, commercially, this gas would go to Bintulu, which is an LNG plant on the coast of Sarawak. It's the second largest LNG plant in the world. It's got nine trains, and it's gonna be short of gas, of feedstock. Even with these new discoveries, the the feedstock to the plant is is coming off.

14:28 So now we have 52.5, as I mentioned. The really good thing about that is we are very confident we're gonna farm this down to get this drilled. It probably won't be drilled until 2025 because we're gonna join a drilling program that Petronas will put together. So we'll take a a slot within that.

14:51 But we'll look to farm this down early next year. Right now, the the focus of the work is really on you know, with such a huge closure, where do you you know, to be frank with you, most prospects, the the the the drill location kind of offers itself up. But here, you know, do you go to the North? Do you go to the South? Do you try and or and try and hit the reservoir in a certain area? What about the shallow amplitudes? You know? So it's a lot of debate as to where we should drill this, and we're we're working with our partners on a drill location. Once we have that and we put together the, you know, the detailed drilling program, we'll take it to the farm out market. We've got plenty of equity here to farm down. And, of course, this is a big company project. And, you know, big companies want 25.

15:39 They want 30%. That's what they need. You know? So we have that to offer them now. So, you know, we're confident this is gonna farm down. We're not gonna be putting our own dollars into drilling here. We'll we'll be using other people's.

15:54 So extremely exciting project to have. And, of course, it's given us a an operatorship in an area where we see high profile big companies, blue chip companies operating. So, you know, Longboat sits out in Malaysia as as a as a as a tier one operator alongside the likes of Shell and Exxon, people like that. So it's it's no mean achievement, and, you know, it's a fantastic calling card to have

16:21 in Malaysia as a start. On the next slide, as we've been saying, you know, we we we don't wanna be an ex pure explorer. I mean, it's a good way to to get going, but, actually, we're looking for deals. And, you know, that's the history of Salamander and and FARO. So we're looking at the m and a market in Southeast Asia.

16:45 It's quite a simple market. Generally speaking, the larger companies are are exiting. So the majors see it as as noncore to them these days. We don't see any competition from private equity. The national oil companies have been buyers, though they seem to be a bit full at the moment. But it has given rise to quite a a number of smaller independents who are who are growing, and and longboats can absolutely be on that on that train. And even some of the domestic players, you know, Malaysians and Indonesians have actually grown quite rapidly in the last few years as a result of, you know, this this liquidity in the asset market, if you like. So, you know, I think you'll see probably the next transformational step in Asia, at least, will be in the in the m and a market for us.

17:39 So there's there's there's good liquidity. There's a number of deals we're we're chasing hard. We're very focused, obviously, on the met the cash metrics around that, but that's where that's where we're going. On the next slide, I think the the other great thing, of course, about about Asia and how it links in with Norway even here. But, you know, in Asia, it's a young it's a large, large, large, young population that has very high growth rates as we saw on that previous slide. And, actually, most of the primary energy is is generated by coal. So what we expect to see in the middle here is actually gas be relatively stable over the over the mid to long term.

18:25 We're gonna see renewables come in at the expense of oil and particularly coal in Asia. So from an ESG point of view, this is a real win win. You know, we we can we can be looking for for developments and production assets which are displacing

18:41 coal from the primary energy mix. So we like gas generally. You know, we're not averse to oil, but but, generally, gas is a good thing. And as we see on the right hand hand side here, you know, we're in we're in areas which are net gas exporters. So if you're looking at the transition in a in a in a in a stepping back and taking a macro view, I think both of these two jurisdictions are very, very good in terms of how gas can play displacing some of these other, you know, heavier fossil fuels. So Helga? Thank thanks, James. Just to to finish off, you know, I I think the point we're making today is also that, you know, this is not a Norwegian team that is trying to use its skills in Norway in in in a different region. I mean, I think there are many of examples of that going quite horribly wrong.

19:46 We we have a very, very strong team in Longboat for Norway, focused on Norway, working on Norway. We also have a very strong team focused on the Southeast Asia who has strong competence and a huge network and experience in Southeast Asia. So we are in a strong position to deliver growth, production deals, and successful exploration wells in both both Southeast Asia and in Norway. You know, following the the the deals that we've done this year, starting with entering Malaysia and and getting a an incredible license in the offshore deepwater in in Sarawak.

20:34 And then then delivering the JPEGs transaction, and we talked about that earlier, which is putting us into a very unique position in Norway being for a small company in a strong position, not being subject to finance for for for deals of the right size.

20:54 Then then consolidating opposition in in Katang with a two pass deal and and having James and Pierre joining us. And then finally, doing our first production deal in the Statfew satellite. It's a rather small production deal, but it has a lot of upside in it, and it has tax synergy. All of that combined is putting us into a really, really strong position for what's to come into next year. So I'm very, very excited about that. And finally, you know, we are shareholders ourselves. So we are not keen to do some sort of very, very value and dilutive or disruptive thing. We're very focused on delivering deals that are value accretive on in

21:52 all senses of that world. And that's what we that's the kind of opportunities we're focused on. So thank you, everyone, for attending. And I think we'll have time for some questions, relatively short Q and A session. So that's coming up next. Thank you. Yes. Thank you. There are some questions that popped up. I'll read some out, Helga and I will attempt to answer them. So the first first one is our initial transaction is a small production deal. Can we expect something of size fitting our ambitions near term? I mean, I I would just answer that with yes. We should. I mean, that's why we're here. We're we're putting a huge amount of effort into that, and, you know, we're running hard at at a number of things. And in our experience, you know, you you work hard enough, something gives us. So, yes, I think I I agree with that. And just to add to that, I think we're also conscious that we're not gonna do something which is ridiculously big.

22:53 So so I think there is a right sized deal, but but the right sized deal is a deal that kind of look at look at shareholder value and look at and also kind of takes into account the size of the company. But but, you know, in deals in the range, you know, that that kind of fits the in Norway, fits with the facility we have and and and likewise in Southeast Asia, I would say. Then there is, are we likely to see shareholder dilution next year? Well, I think I I would say, you know, given the well, two things. First of all, the the innovative deal that that Longbow have done with JapEX, that that didn't give any shareholder dilution. But, of course, you know, when one man shareholder dilution, okay, but we would always say, look. We're only gonna be doing these things if it's value accretive on a per share basis. So from a shareholder's perspective, we would be doing deals, which is gonna see your shares worth more.

23:52 Hilda, anything to add to that? But No. I I I think that summarizes it, actually. So Good. Thanks. Full production from Statfjord East when all the wells are on stream, maybe you might be ahead. No. Go ahead. Yeah. The question is what will production be when all the wells are producing in Statfjord East? You know, we have a field that is currently just producing from one well, and that's the well that was in there from before. That well was drilled from the platform, and then they've installed a subsea wells. They installed or installed gasket in those wells, and and we've drilled four out of five new wells. Those wells are looking good.

24:39 But, you know, I'm not gonna quantify anything here except saying that, you know, you should see a a very significant increase when you go from from one to to to five wells. Yeah. Then we have a question on exploration track record, which I paraphrase saying that, you know, it's been patchy in Norway. Can we can we assure investors we'll concentrate on development and production from now on? I mean, I think I I would say that exploration is a long term game. You know? And and we we don't wanna be an exploration company per se. You know? We we we see it as part of a wider portfolio. It has a role to play.

25:28 But, you know, you need to have a balance of the production to help you play that long term game, and then you have to take measured risks. And and I think exploration works well if you can farm down and get other people to take the financial risk on your behalf. Yeah. So, absolutely, we're not gonna throw the baby out with the bathwater, but, you know, we we we still see value in it, but it's, you know, it's it's not something that we should expect. No. I think that's I agree with that, James. I think the the the what we we are basically following the same recipe as Faroe Petroleum did and Salamander did, and and we're focused on M and A. And, particularly, we have already drilled quite a few exploration wells.

26:14 The the you know, with exploration, you know, you're always looking for that really big bang that can kind of lift the share price at the the five baggers and 10 baggers, you know, that would that's wonderful stuff. Maybe maybe Katanga would be one like that, but occasionally, you find stuff that would take a bit of time to mature. And with Pharaoh and and Salamander, we we we had quite a few of those. Eventually, the the value came through, and I'm I'm very confident that will happen this time again. We will we will explore, but we will explore at a much more a low a lower pace, I would say, and more focused and also being very, very focused on minimizing exploration spend.

27:04 So farming out rather than farming in is is is kind of a key to to being successful in that sense. Okay. Has the topan Topaz transaction completed? I think we are awaiting one document, one letter, but, informally, you know, we're we're told it's on its way. We've had emails. So to all intents and purposes, it's it's there, but I think we are awaiting so it's not a condition, but it's just one one bit of paperwork needs to come in, but it it it should close imminently. So I I I would think of it as as being there. Then rather tech financially technical question, will the initial first year 6% interest rate on the JapEX facility run from the date of drawdown or from the date of completion of JapEX's investment in Longbow? It's from the it's from the date of it's from the date of drawdown. It's it's from it's from we start using it. Yeah. Yeah.

28:07 Okay. Then a question on the farm out farm down of, I'm guessing, Kurtang here and the sort of deal we'll look for, will you will you negotiate a signing bonus to help fund the PLC? Look. You try and get the best deal you can. So rest assured, we'll we'll maximize what we can get for it in in all sorts of ways. What we wanna do is give investors a shot at this prospect without having to put their hand in the pocket. And we'll we'll keep that as meaningful as we possibly can. And if we can get cash as well, that's wonderful. Certainly, the the interest we've seen from the industry so far gives us really opt optimism for for getting a a cracking deal done there. So that's what we're gonna work towards.

28:54 One other question on Kirtang, why we think the c o two risk is is low. I mean, it's and but methane risk is high. There is a seafloor one once we showed this prospect to Petronas, they were running a seafloor coring survey in the area. They had a vessel out offshore taking seafloor samples. And when we showed them the prospect, they they shot the vessel went over to the prospect and took a survey over the prospect itself, analyzed the cause in the seafloor. And you would expect to see c o two. If there's a c o two leaking out of that structure, you'd expect to see it in the in the sea the seafloor sediment. And they're only minimal. There was there was some c o two, but it's very, very small.

29:42 But extremely high concentrations of methane, that's what's giving us cause for optimism there. Would we keep operatorship? I think we're absolutely not beholden to be to keeping operatorship through the drilling of a prospect. If you have a big player, often they wanna do this themselves. Understandable. Timing for Kurthang farm down, we we would look for first half next year. Question on any news on the tax rebate that was due this month. I'm not sure how it go. Maybe you might Yeah. I mean, the tax rebate yes. But I I I think we have to be careful disclosing that because it's, financial.

30:33 But but, you know, the you can you can basically estimate that, but we you know, the tax rebate is is a dead cert. You know? Like, it's the Norwegian it's the Norwegian tax office paying back our expiration spend, and that is more than the that is more than the draw on the EFF facility. So there is a cash there is a positive cash impact on our our on our bank account. That that I mean, all I can say is that that has happened and is a positive news. I I think I'm not kind of positioned to say exactly what the number is. Okay. Then okay. Let's just take a couple more.

31:22 One, again, on the JapEX facility, Hugo. Will will you access the JapEX facility to fund the small Norwegian production deal? Yeah. There will be a there will be a small draw on that facility for for that completion. That's kind of that's there's a lot of calculations on, like, working cap. We we know the working capital calculations there, but that there will will be a small draw. But, you know, what exactly it will be, it it depends on kind of fine fine tuning calculations on working capital. Excellent. And last one, you already have three d seismic and other data on the Kurtan prospect. How much would it have cost to have done all that data collection from a standing start? Well, I can tell you, you know, it's high quality, extensive three d over that block. Would that alone would have run you to, I don't know, $2,030,000,000 dollars, I'm thinking, and plus the sea floor, you know, coring, plus, of course, the time it takes to shoot all that. I mean, that's the other thing is, you know, we've we've come into this block, and all the data is there, is is just waiting for you.

32:41 So it's a fantastic job, and I think, you know, we we really love working with Malaysians. They've done a tremendous job at at at exciting the industry about about what's going on in Malaysia by giving them the access to to their to their database. So they've effectively opened up everything they have. Now Malaysia is a country. It's very difficult to enter. You know, the barriers to entry are very high for the industry. But if you're in, they're extremely accommodating. And I to be honest, I'm not aware of anywhere else in the world that's done anything quite like this. But, yeah, we've walked into, you know, two d seismic, high quality three d, all the analysis we want. And, you know, it's not just over two a, by the way.

33:28 We we have access to other data too as does the as do the other players in country. You know, it's a level playing field, but it's a it's it's a fantastic opportunity for companies who want to build a business there. So, you know, we we we're very, very appreciative of what they're doing. Sorry. I walked on a bit there. I think we've called it quits. I think that's all the questions answered anyway. Thanks, James. I think we've answered everything. Thanks a lot. That's great. That's great, Helga James. Thank you for that. And I believe you have addressed all the questions for investors today. And of course, the company can review all questions submitted today, and we will 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, Helmut, could I please ask you for a few closing comments?

34:16 Thank you. Well, I would just like to thank you all for for attending, and and it's kind of I'm I'm very excited and optimistic at this point in time. I think we've had some some great things happening in Longboat last last few months, you know, with and and some big big kind of steps with, you know, having JPEGs joining us in Norway, Petronas approving us in Malaysia. You know, we are we are in a prime position actually actually, to to take some major steps. So thanks a lot, everyone. Perfect. Helga, James, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be redirected to provide a feedback in order that the board can better understand your views and expectations.

35:03 This will only take a few moments to complete, and 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.