Seascape Energy Asia (LSE:SEA) — Post AGM Investor Presentation

0:00 Good morning, ladies and gentlemen, and welcome to the Longbow Energy PLC Post AGM Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time using the Q and A tab just on the right hand corner of your screen. Just type in your question at any time and press send. May not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today, and we'll publish those responses where it's appropriate to do so on the Investor Meet company platform. Before we begin, we'd like to submit the following poll, and I'm sure the company, as usual, will be grateful for participation. And I'd

0:31 now like to hand over to CEO, Good morning. Good morning, and thank you, Mark. Very happy to present to you today. It's not that long ago since we announced our deal with JPEGs. And this morning, we announced that we have now the approval from Norwegian authorities, which is is really good and very timely, and that we are heading for completion in in early July. So so that that's that's great progress. And other than that, it's not gonna be that much new in this presentation, but we're really happy to run through where we are generally with with our assets and and our plans.

1:22 The the strategy for the company is is unchanged at this stage. You know, we are we are set out to build a full E and P business. We have been active on exploration and and and the next phase, very focused on adding production into the business. And as you will remember from the announcement on JPEGs, we have a a small production acquisition that is is being worked on in in Norway. The company has has really is really in a much stronger position now to deliver growth. And, you know, the the the next big value trigger is the drilling of the Vellosat exploration well, which is now expected to to commence quite soon. I think the expected spread date is between the July 20 and August 20.

2:24 So early early August is the most likely time. We also focused on the licensing rounds very selectively so both in in the in Norwegian round and in the Malaysian round. And in parallel with that, we continue to to pursue m and a opportunities in in both regions in in in Norway together with JPEGs and and in Malaysia on on our own. Company is in a good financial position from where we are now. Once we complete, we would get the cash injection into into the Norwegian subsidiary.

3:13 Very happy to be to bring some fresh capital in without having to do an equity raise.

3:21 The we also have the financing facility with the with Norwegian bank, SR Bank, and ING, which is can be drawn on for Norwegian exploration. And we have a facility that is coming with the for the joint venture, which is being provided by by JPEGs.

3:45 The You know, I think you all you all know us, so I'm not gonna kinda dwell on this one here. The just a little reminder of the Norwegian e and p business. Norway is still a very, very big and active industry. It is more than more than four there's 4,000,000 BOEs produced daily in Norway, 2,000,000 of oil, and 2,000,000 of gas. Norway is one of the biggest provider of gas to Central Europe. And Norway is also in this in the very active on on the ESG front, both in terms of being active in energy transition and in producing oil and gas as clean as possible.

4:35 And and many of many fields are being electrified. There is CCS schemes. There is a windmill, as you see on the picture there, windmills and and generated power to to to power platforms. And all of that is making the industry attractive, and longboard is all about building an attractive portfolio,

5:00 which will be sought after in the coming years. So I think we are we are in the right geographies chasing chasing these opportunities. I'll hand over to to Nick on on the JPEGs deal, which he you'd made a huge effort in in putting in place. Thank you, Helga. Good morning, everyone. I'm Nick Ingracia. I'm the corporate development director here at Longboat Energy. I know we've gone through this before, but just as a refresher, in a little over a month ago, we we announced a joint venture with Japx, which is a Japanese listed partially state owned upstream and midstream oil and gas company.

5:50 This transaction really transforms our Norwegian business with JapEX investing up to $50,000,000 to become a 49.9% shareholder in our Norwegian subsidiary, which would be renamed Longboat JapEX NORGA AS.

6:08 We received regulatory approval for the transaction announced today, and it is our expectation that the transaction will now go through to completion sometime in in early July after an investment procedures are are met in the investment agreement. This transaction was was something we worked on for a very, very long time. We've got to know the the Japix team extremely well, and we're very excited to be working with them. They have a huge amount of expertise, and we feel that they are an excellent partner for Longboat in Norway. Transaction itself is a it's a $50,000,000 initial investment, which is made up of an initial cash consideration of $16,000,000, a further $4,000,000 contingent consideration in relation to a production acquisition, which remains ongoing, and then a further 30,000,000, which would be payable in the event that bill offset is successful.

7:10 And I know Herve has mentioned that would be drilling shortly, and I think Hilda will also talk a little bit about that as a prospect. For us, the most exciting part of the the transaction is this financing facility, which is a $100,000,000 facility for the joint venture, which is there to assist us in making acquisitions. And I think that that this is a real differentiator in our ability to engage with potential sellers of assets without needing to have a subject tos all over any offers that we make. And the facility itself is is at a very competitive interest rate, especially if you look at the sort of interest costs that are being paid in the bond market at the moment for five year money, which is well in excess of, you know, usually in the sort of teens at the moment.

8:00 The JV itself will pursue a real growth led strategy targeting both, I think, production and developments with a with a target of sort of significant production within three to five years, but we will also continue to drill exploration wells as we believe exploration really is a is a real value driver in the business. Just a little bit about Japix. I I've mentioned that they're it's a it's a big a big business listed in in Tokyo. It's got a $2,000,000,000 market cap. It's about 35% owned by the Japanese government. It's got touch a over a 150,000,000 barrels of oil reserves and about 60,000 barrels of oil equivalent per day production.

8:47 So for us, this is a is a big business, but it's not a giant business. And and what we'd like to sort of point out is that the potential for Norway to be a meaningful and significant part of JAPE X is is large, and and therefore, we have gotten a lot of attention internally at JAPE ENERGY and and we see a huge amount of support of what we're trying to do with them. They've got both global and domestic E and P operations, and I think like us,

9:15 in terms of ESG, they're very focused on delivering energy responsibility. You wanna yeah. Okay. I think we have covered a lot of this, but, I mean, it's it's quite clear that the the deal with JPEGs is transformational for our business in Norway. And and and I think we are extremely pleased to be able to do that without having to do a big equity raise. And they'll be in a position to actually pursue growth and and heading for some production in in in the kind of the medium term. So the the next phase is to bring in also some third party financing and and and and make that facility with long haul go as far as possible.

10:05 Norway is in a position where there are a lot of development projects underway,

10:10 and and we can we are, you know, in a very strong position to to pick to pick some of these projects and and get share in some high quality projects. So I think with that, I'll hand over to Hilde to give us a little update on the Norwegian assets. I I think we can I mean, I think this probably is something you have seen before? So I I suggest we go straight to Yeah. No. Okay. To if you're okay with that. It just it just hears a little bit on the on the on the drilling schedule. So it's the well, which is the next well, and then we have a pro we have a program of two to three wells in 2024.

11:00 Not exactly we don't know exactly which ones except that Lotus is already firm and and has a

11:07 rig. And licenses are are still being matured, and they can they can be 2024. They could end up being 2025. And we're also looking at farming opportunities. So so we we will kind of keep working on delivering a very attractive drilling program both in 2024 and '25 of of, you know, two to three wells here and then and then also look to to drill in in Malaysia.

11:41 So over to to Hilde on on Velocet. Yeah. Yeah. Good morning, everyone. I'm Hilde Salste. I'm the managing director of Norway, soon to be CapEx longboat CapEx in Norway. Looking forward to that. Our first well in the drilling sequence is the very exciting VeloCet.

12:02 On this prospect, we have both a material interest, 20%, and it has it's one of the, I would say, the most exciting prospect being drilled on the shelf this year. It has very large resource potential, 177,000,000 barrels, with a 30% chance of success. These numbers are from

12:23 from ERC, so they are validated by a third party. And what is even more exciting is that on success on on Velocet, as you can see from the drawing at over the picture to the right there, then you have numerous other fault blocks, which looks very similar. It has amplitude support for being a gas filled reservoir. And then the follow on potential is around 200,000,000 barrels. So we like

12:58 prospects or licenses where you you have follow on potential in the same license. And this is in Tyrebrik distance to Osta Hans Den in the Norwegian Sea where there is believed to be a capacity.

13:14 So keep your eyes open for this one. It's as Hal discussed, it's gonna come start drilling towards the end of the summer. And, yeah, this is incredibly exciting for longboard and Longboat JapEX, but also for the Norwegian continental shelf.

13:30 Moving further south. Now with our our joint venture with JapEX, we are in the position that we no longer is monetizing Croatia. Croatia is actually our first development.

13:44 If you remember from the view graph that Helgi showed earlier with the the discoveries in Norway last year, Croatia is the best discovery in Norway last year. It has the address. It has sound volumes, and it sits in an area where there's multiple other discoveries adding up to 200 to 300,000,000 barrels. So here, there will be an area solution worked up by the majors. In

14:14 addition to this, as part of the APA in last year, we we saw additional potential. Creche is an injector, has a special reservoir type, and we have specialist competencies in the team. So we've been able to unlock more of these opportunities. Being awarded.

14:33 This has sound volumes and chances of success for being so close to Croatia, and we hope to increase our share in this area and and use our expertise to build in this area.

14:47 And you can see from the the drawing in the bottom there, is the one with the solid colors and then prospect is sitting to the to the right of it. The well is being planned with we are contributing into the license on that one, and that's another exciting well for 2024, where, Helmut, you said we have secured a rig. Last year, we also did another very exciting discovery, the discovery. Here, we drilled a successful main bore and a sidetrack, which we tested. The test results were less optimistic than we had hoped for, but we have very large in place gas volumes here, 100 to 250,000,000 barrels.

15:34 So a lot of the focus in the in the license is to look into technologies that can improve the rate, improve the recovery factor,

15:43 and bring this along. And as part again of the APA, we look for opportunities where we already have knowledge. We picked up the URSVIC South, which sits, as you can see from this cartoon at the bottom, it's the continuation of the same fault block really to the south. It is shallower in the stratigraphy, so it could have improved reservoir quality. And this this is a good could double the volumes on given we have we get to a position where we could get good recovery factors. Moving on to the status of the Norwegian shelf. We are, of course, very, very happy to join forces with JapEX, and Nick and Helge has elaborated on that. So I will not do that, but this puts us in a position to change our wider strategy with both development, exploration, and production.

16:39 We our objective is to grow our 2P reserves and become a significant producer within the next three to five years. We will target 10 to 30% shares in in discoveries and production producing assets within a non operated with non operated interest. We would kind of like to focus on straightforward projects like subsea tiebacks. Then the Norwegian tax system provides a downside risk protection in Norway. As you can see from the the picture on the side that these are all the PDO submissions in 2022. A lot of these ones are now being approved by the ministry. The investments here are sizable.

17:26 $29,000,000,000 is numbers that are floating around. And we expect that the operators and partners will start to divest parts of this as they have received approval from the ministry. But we of course, then we will still be an active exploration and appraisal company targeting now one to three years one to three wells a year. Norway is still a very active shelf with more than 30 wells drilling and high success rate. 2023 has been a good year so far, so we will keep chasing exploration in the future as well together with development opportunities and production opportunities.

18:14 And, yeah, we already mentioned how to well that is firm in in a project. Of course, parallel to this, the APA, its submission date is the August 23. We're, of course, looking into that as well. So I'll hand over again to Nick to present our Malaysia portfolio. Thank thank you, Hilde. The this this is just as we we haven't talked a lot about our Malaysian license. You know, this this license is actually extremely exciting. This is is a huge area of of something like 12,000 square kilometers in the in the deepwater offshore Sarawak.

19:00 Sarawak is extremely prolific oil and gas basin We where the where the where the the majors have been dominating is big, big shell big shell area and huge infrastructure network of of pipelines bringing the gas down to Bintoulu, which is, I think, the world's largest LNG terminal. So so we are in a an area here which is very exciting and with a which offers a huge amount of opportunity for us. And and this is a a start for long boat and an exciting start. And this license has a has a has a giant prospect in it called Katang, which covers something like over 200 mega closure with some exciting geological and geophysical indications of of of a of a good quality gas prospect of of multi TCF.

20:09 It's we have some time here to to mature this prospect and and and and bring in some and farm it down, get some carry on it, and, you know, a lot a lot more to come in this area. And Nick is very busy with, you know, pursuing BD opportunities. And I'll hand over to to you to talk a little bit about what we are trying to to achieve in the in in the area. Thank you so much, Hulge. So as Hulge says, we were awarded SK two a earlier this year, and we really saw it as a an opportunity to to put our toe in the water over in Malaysia, begin to build those important relationships with partners out there, with the government.

20:58 And and really what we saw in Malaysia was was what we sort of saw here in in the North Sea broadly fifteen to twenty years ago where there was a significant amount of prospectivity remaining. There were a number of counterparties exiting the area, refocusing their portfolios, which which creates opportunities for smaller businesses like Longboat in in both sort of exploration, but also in the discovery discovery space where there are almost hundreds of discoveries across Malaysia, which should have set fallow and ready for development. And your ability to go in and and potentially source those through direct discussions with the government or through their licensing rounds is is very high.

21:44 And in in the month subsequent to being awarded the the license, we've been spending some time on the ground out there and meeting with with both government and counterparties trying to look for what would be an interesting opportunity for us to to really grow the business out there. And I think that the business itself will really be a a replication of what we're trying to do in Norway, which is create a full cycle business in the region, add adding production, hopefully, followed by sort of developments, which have sort of lower CapEx and shorter lead times than we often see here in Northwest Europe. And this can happen either through licensing rounds, through direct discussions with the government, and and potentially m and a opportunities.

22:35 I think that, you know, some of the some of the structures and some of the ideas that we've used here in Northwest Europe are are there often options and opportunities to put those to play out in Southeast Asia. So we're really, really excited. The the there is a lot to be done out there, and we'll be speaking more about that in the months to come. Thanks, Nick. And so just to to to finalize, we are entering a really exciting period with Longboat. The deal with JPEGs put us in a strong position in Norway, and we will have full focus now on delivering both both on the assets we have. So in Norway, it's to mature the discovery, and then we have the exciting Velocet world coming up. And then in parallel with that, we would also have a strong focus on on on growing our position from from the one entry and and and a really exciting entry we made into Malaysia.

23:46 So I think with that, we'll finalize the presentation, and we'll move to some q and a. That's great. Helga, Nick, Hilda, thank you very much indeed for updating investors this morning. Ladies and gentlemen, please do continue to submit your questions just using the Q and A tab on the right hand corner of your screen, which is why the company just take a couple of moments to review the questions you submitted already. I'd just like to remind you that recording this presentation along with a copy of the slides and the published Q and A will be available via your Investor Me company dashboard. Helgre, if I could invite you please to open up the Q and A tab on the right hand side of the screen, you'll see there's a number of questions from investors throughout today's call. So thank you to everybody for your engagement. If I may hand back to you to read out the questions and then give a response where it's appropriate to do so. I'll pick up from you at the end. Thanks. Thanks, Mark. So we have some questions, and let's take one at a time. First question is a presubmitted one.

24:37 The recent JV news was better than the market could expect. I know the company do not speculate on the share price, but the current market cap does not correlate with the value of the business. How are the board going to get the value of the business reflected into the share price? Well, I think it's a good question, and I think we agree with the views. We we cannot do much with the share price other than continue to announce everything that is relevant and and announceable, which we which we continue to do. And, also, we are running an active IR program, meeting investors, and doing presentations like today.

25:25 The share price is often driven by momentum and and sentiment and, you know, a setup in the right direction. But but the real step change will come from drilling success. The first of the commit in Norwegian exploration was spreading in the coming weeks, so that should create quite a lot of excitement. And then and then the acquisitions we plan to make both in Norway and JV will be significant once we can announce them. Then we have a a next question here, which is related to tax. Who will a Norwegian joint venture with JPEGs work in terms of tax refund? How much tax back or longboard expecting to receive in November 2023.

26:15 I don't know. Yeah. I'm happy to yeah. I'm happy to answer that. There is there's no impact on the on the tax position because of the joint venture, so we still will receive the refunds that are reflected in our annual accounts to the year end of '22, and a vast majority of those proceeds will go to repaying the expiration finance facility drawings that we have against those those rebates. So so there's no impact. We'll continue to operate just like any other business in Norway. And to the extent that we continue to to have a loss in the business from drilling, we will continue to get refunds going forward. Thanks, Nick. Now we have another question here. Now you have the approval from Norwegian authorities.

27:02 Will the JPEG's deal completion in early July? How long do you imagine it would take for the announcement of the small production deal? That that that's one that is difficult to answer because, you know, you don't do a deal before you have the signatures on it, and then we announce it immediately. But, you know, when we announced in in May, it was because we have some confidence in this deal happening. So I think I cannot comment on the timing, but other than what we've already said in the public domain. We're still working on it. It's still going on. Yeah. And and so we're hard at work. We we recognize that that lending production is is a is a key target for the business. So we're working hard behind the scenes to make that happen. Other than funding, what other benefits does the JPEG's relationship bring?

27:53 And maybe because Hilda is is I can spending a lot of time with them. I'll I'll Yeah. I can take that one. I think this is a very like, I'm really looking forward to work together with JPEGs. They are a very technically focused company, and we also value technical quality and evaluate the opportunities thoroughly. So we are very aligned there. They will contribute with the second d's into the organization. They also have a large technical team in Tokyo with specialists that we can draw upon. So that's that's gonna strengthen us a lot. And they also have a a thorough understanding for the E and P business, which I think is gonna be important for our joint venture going forward.

28:39 And then just to add to that as well, they are they are the ones we have met, they are very nice. So I think this is gonna be a a good good working relationship going forward. Thanks, Then we have a question about the current cash position of the company and how is GNA and Malaysia funded. Does Longbow need to contribute cash for Norwegian JV production acquisition? Yeah. I'm I'm not sure we can comment on the on the current cash position at the moment. All that stuff come out in our interim results Yeah. Which we published in September. The GNA and and Malaysia stuff is funded through through PLC. I think we previously announced that there's a a repayment of an intercompany loan that's made from PLC into our Norwegian subsidiary.

29:29 As part of the transaction, PLC will be receiving money back on that intercompany loan. So there will be funds available in in PLC to maintain the money running of that and our our g and a. The the I I'm not sure I can comment too much on the acquisition, but but the way that that we think about the JV at the moment is that that it is the funder of the acquisitions, and that's why we put together the the financing package that's in there. So I'd expect us to to focus on acquisitions that can be financed by the JV and its existing resources. Thanks, Nick. We have another question. Are you in just any discussions for potential deals once the JPEG deal is complete other than the small one you mentioned before? And the answer to that is, like, we are continuously in discussions regarding deals, and we and we, you know, unfortunately, cannot comment on them because you don't know if you get the deal before you you are kind of all the way there. But there are a lot of a lot of discussions ongoing, and there are so so we are we we have several targets that we are working very actively on.

30:43 I'd say that in terms of the joint venture, it's it's we're not waiting for it to complete to behave as if we are a joint venture. So we're working very actively with our partners already, so so so not wasting any time. And there's a question here. There are no insider purchases. Why do insiders consider longboard shares fairly priced? I think we we we do consider our share price or a company, you know, significantly undervalued, and we would we would love to buy some shares. And we have been, you know, continuously in close periods, unfortunately. So We're right. Yeah. Hopefully, that was soon. Hopefully, soon that will we there will be so once there is an opportunity, I think we would we would love to buy some shares, actually.

31:33 I think we we are getting to the end here. Maybe there's one more. Can you explain the cash flow requirements for the next twelve months? I think I think that's something that we'll we'll sort of talk about. We can talk about cash and and forward when when in our interim results when with our our CFO when when he's available. Yeah. And then I think we'll as a last question, could you please give a summary of the fiscal regime in Malaysia? We can comment a little bit of that, Nick. Yeah. I can do a little bit of commentary. We could run an entire seminar about about Malaysia, but Malaysia is a is a PSC regime. It's a production sharing contract regime. So the the the government remains in ownership of the resources, and then the investee company ourselves invest money, and then you recoup from production. You recoup your investment plus a return.

32:31 We were looking at it the other day, and and they think about it. We talked to tax, you know, here in Northwest Europe, they talked to the government take. But I think what you would broadly see in in Malaysia is they've had a lot of amendments to their PSCs recently. They have a lot of different types of PSCs to encourage different types of players to chase different types of things. I think you would broadly see that the the government take in in Malaysia is somewhere between sort of, let's say, 60 to 75%. You know, if you compare that with with Norway, which has a 78% tax rate, you know, it actually is is quite favorable. And in some cases, for smaller fields and things, they've they've done things quite differently, and there's a huge incentive to get after things. So we think it's very competitive. I think the other benefit of having a production sharing contract regime is that it is a contract.

33:18 It's a contract between you and the government, and they can't change it unlike places like The UK where we've seen huge fiscal instability and an inability of people to invest in the longer term. So we see that as being a big advantage in in Malaysia. Thanks, Nick. I think we we will have to end the QA session at this stage. There and we're sorry there are some some questions we didn't have time to to answer, but, you know, I think we've covered the the large majority of it. That's great, Helga. Thank you, Nick and Hilda, for taking time with those questions. I know investor feedback will be important to you to you all. And, Helga, I'll shortly redirect everyone on the call to give you their feedback. But I wonder before doing so, if I may, just ask you for a few closing comments to wrap up with, and then I'll send investors to give you their feedback.

34:09 Thank you, Mark. And I think just to to finalize, thank you all for for attending. And, you know, we are we are in a a really exciting period. You know, times ahead are gonna be you know, there's there there are lots of opportunities. So, you know, we are really looking forward to to keep to keep working on all these and and hopefully keep delivering some good news to to all of us. Thanks a lot. That's great. Thank you very much indeed. Please could I ask investors not to close this session as we're now automatically redirect you for the opportunity to provide your feedback in order the company can better understand your views and expectations. This may take a few moments to complete, but I'm sure it'll be greatly appreciated by the company. On behalf of the management team of Longbow Energy PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.