Synergia Energy (LSE:SYN) — Investor Presentation

0:01 Good morning, and welcome to the SYNERGY LTD investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, can be submitted at any time via 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. Company may not be in a position to answer every question received during the meeting itself. Have a company review your questions submitted today, we'll publish responses where appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Roland Russell, CEO. Good morning. Good morning. Thank you very much,

0:30 and good morning, everybody else on this on this call. So I got a presentation, which hopefully won't take me more than ten or fifteen minutes, but I guess the main meeting the reason for this meeting is to address questions. So without further ado, I'll go into the first slide. And just to really set the scene here, we had a strategy reset for the company a couple of years ago. Essentially, what we're doing now is focusing on carbon reduction. And the way that we're going about that is to get get into CCS, carbon capture and storage, and also to encourage and to to promote promote gas production in India.

1:19 The more gas in India that is produced, the less coal the Indian power generation industry will have to consume. So that's quite a dramatic impact on on carbon reduction. We renamed the company July 2022, and that was really to reflect the new strategy. We're now solely listed on the A market in London, and and we we have have a a London centric management team. So, essentially, we we are very focused on AIM investors. And finally, we have appointed a joint broker, Pamir Gordon, to help us look for long term institutional funding as well as the retail funding that we currently enjoy.

2:11 So the carbon reduction strategy, CCS in The UK, you will have noticed that recently we were awarded a carbon storage license by the NSTA in The UK. And we hope that and the project in India, which is a considerably large scheme based on the Cambay field, we hope a carbon reduction strategy will make a significant contribution. So gas production in India is important. It's important to the company. In terms of cash flow, it's important to investors. But just to reiterate, gas production in India will help reduce coal fired power station dependence, and that's gonna have a big impact on CO2 in India.

3:05 Let's talk about the Cambay Gas Field. Most of you will know that we're currently focused on the Eocene Reservoir. It's an extensive reservoir, goes across the license. It's about 90 meters thick, and it comprises tight siltstones that need fracking to to stimulate production. We have about a TCF of contingent gas resources, and we have certified 205 BCF of p 50 reserves. We've been using the c 77 well as a, if you like, a test to to to prove out our full field development thesis.

3:52 Originally, the well was producing about a million scuffs a day intermittently from four frac zones. I'll talk more about the the well in detail later. In terms of what we've done to to prove up our full field development thesis, We refrac two zones to prove plateau production. So as I mentioned previously, the original four zones were producing intermittently. And since we did the refrac, we've been able to establish plateau production even without artificial lift. Now the Eocene does produce about 40 barrels of condensate for every million scuffs of gas, so artificial lift is is important.

4:44 And this, we hope, will stimulate the the gas production as well as optimizing the condensate production. Condensate is sold at Brent. So the cash contribution from the condensate is is not insignificant.

5:04 We have installed the artificial lift system on C 77, and I'll talk about that in detail in a while. Just to to point point out on the right hand part of this slide, this is not exploration. This is development. There's been over 30 wells drilled into the into the Eocene. Most of them tested gas, some tested tested oil to the western side of the the field. So this is very much a a development process. As I mentioned, we have about two zero five Bcf of p 50 reserves. And if you were to extrapolate that at $15 per MCF, that theoretically could produce gross revenues of about $3,000,000,000.

5:57 So it's it's a significant resource here. We developed a 10 well model for illustration purposes, which would produce about 63 BCF. Said that, if we want to fully exploit the reserves, we will need to drill over 30 wells. The refrac success proved the development methodology, and, you know, we we get into what we will get from drilling new wells. The first two wells would provide sufficient cash flow for the further development to be self funded. And we intend to drill the initial 10 wells all from the existing drilling pad.

6:46 So they would be horizontal fracked wells all drilled from the same pad using the same export pipeline. The new wells will be not only horizontal, but multistage fracked. And the number of fracks per well will determine the initial production rates. Incidentally, having multi stage fracs is very cost effective because, basically, the the the majority of the cost for fracking is in the mobilization of the equipment. So the difference in cost between drilling two or three zones sorry, fracking two or three zones or fracking 10 or 15 zones is is is is minimal.

7:35 And finally, all the permits are in place and the surface facilities. So we're basically ready to go. So let's talk about the jet pump installation on the C 77 well. On the left hand side of this slide is a schematic of what we've installed. It's it looks complicated, but, essentially, we have a a high capacity triplex pump, which is powering the injection of fluid. In our case, it's water. Goes down the well inside the spaghetti tubing, and it goes through what's called a venturi, which creates low pressure, which essentially introduces the the fluids in the whirlpool inside the production tubing.

8:35 So it's a continuously pumping system. And on the right hand side, you can see the actual installation that we have at the moment on on.

8:47 Now this slide really tells you how it how it works. So look at the wellbore there, we have production tubing. And inside of production tubing, we have IJ tubing. IJ tubing is small diameter jointed tubing. So, basically, the pump at the surface is pumping water down into the jet pump at the bottom of the assembly that creates, if you like, a partial vacuum. And then the fluid and the gas is is returned to the surface. So gas is being produced up the annulus, and also it comes up inside the spaghetti tubing. It's also important to note that the surface facilities will accommodate three or four jet pumps simultaneously.

9:45 So for future wells, we already have the artificial lift system in place. So let's talk about the details of what's going on right now with the C 77 well. And just to to give you a backdrop, the C 77 well has been on intermittent production since thousand and fourteen, so it is partially depleted. And this well is being used very much to to to to demonstrate the the thesis for the full field development. So before the jet pump was installed, we were producing about a 120,000 scuffs a day and about four barrels of condensate from zones five and six.

10:34 The original four zones were isolated by a bridge plug. So for the last twelve months, we've only been producing from the refrac zones. And we know that we had a lot of fluid in the wellbore, which was inhibiting gas production. So when we install the jet pump, we remove the bridge plug, and we reconnect it with the original four zones, zones one to four. And the jet pump is basically connected now to six zones, so the refrac zones and also the original four zones. To remind you, those four zones were only producing intermittently. They would produce for a period of time before the the fluid loading would stop the the gas production.

11:27 The well was historically shut in for a period of a week, ten days. Pressure would build up. Gas production would be resumed until the well killed itself again. So it was very much intermittent production and not the basis for a full field development. So when we did the refrac, we were able to establish plateau production, which kinda confirmed our fracking methodology is is sound. And that was despite the fact that we had a sizable column of fluid primarily condensate in the wellbore.

12:06 So the current status is that the pump has been operating now for about ten days. It's operating reliably. It's not optimized, however, so we're only removing about 40 barrels of water. We've got all the brine out the well.

12:25 What what we have right now is water production and condensate. And we're pretty sure that the water is coming from the original one to four zones because the refrac zones had water production at all. So we did an echo meter survey last weekend, and it confirms that we have a fluid level in the well at about 900 meters, and that compares to 1,500 meters prior to the bridge bug removal. So the the original four zones, one to four, are producing water. The pump is capable of removing that water, and we

13:12 have tested the well just to see where we're at from a production perspective. We got peak production of about 350,000 barrels sorry, 350,000 scuffs a day. And we're pretty sure that production is coming only from the refrac zones. We don't think we have any production from Zone 1 Zones 1 to 4 yet in terms of gas production.

13:39 So the forward plan is to continue to optimize the pump. The pump should be capable of removing about 250 barrels a day. So we're gonna build up to peak pump production. And the aim is to remove all of the fluids in the wellbore and stimulate gas production. If we we continue to get water from zones one to four, the forward plan would be to reinstall the bridge plug so that we can optimize the production from the refrac zones five and six.

14:19 Not only will we get more gas production, but we'll get more condensate production as well. So that's the forward plan. The pump is working as advertised. The flow rates have yet to demonstrate it. The peak potential that we think is there, but the rocks don't always cooperate. We are dealing with rocks here. So we will provide an RNS update over the next couple of weeks to to see where we're at. Moving on to the joint venture and the full field development.

14:56 As advertised before via RNSs where the the discussions regarding a a farm out agreement have been ongoing. Many people have asked why has it taken such a long time. Well, you don't always get what you asked for, and it's our job to optimize shareholder value. So all I can say right now is that in recent weeks, discussions discussions have intensified, and we have an increased likelihood of achieving a good joint venture arrangement.

15:33 I don't have anything I can announce via RNS now because until we actually sign up a letter of intent with the other party, we're not in a position to do that, but it's looking quite quite favorable. And the current program right now is to the drilling campaign of new wells during the first half of twenty twenty four. So just to reiterate, our carbon reduction strategy is to develop CCS projects and also to maximize gas production from the Cambe gas field.

16:23 The Medway Hub CCS project in The UK is significant to us, and this is something that we spend a lot of time and effort pulling together. It's a project that aims to transport transport and store up to seven and a half million tons of c o two per year. And it's a merchant scheme. It's a scheme that does not rely on government funding. It's a scheme whereby we hope to offer the emitters, which currently are three big power stations on the Isle Of Grain to offer those emitters a cost saving over the existing cost that they incur

17:01 through The UK carbon allowance scheme. So for every ton of c o two that is emitted, they have to pay either in cash or in allowances, credit allowances, approximately £45 a ton. And we believe that we can provide them with a significant cost saving through CCS. And this is a project that we're doing in conjunction with a very, very important and significant partner, Wintershell. Wintershell are a very large German company. Their parent company is BASF, and Wintershell has a carbon capture and storage commitment.

17:46 They have projects in in Norway with Equinor, Denmark with INEOS, and we are their UK CCS partner. Now Now the CCS scheme at Cambe is just that it's a scheme. It's not a project yet, but it's the first scheme that's been presented in India with an end to end solution. And the primary reason for this is that we have a formation below the Eocene called the Old Pad formation, which is about a kilometer thick. It goes across the entire field beyond the the the

18:26 license, and it's capable of storing very, very significant quantities of c o two. So the scheme we presented is basically to transport and store c o two from some 20 power stations in the Cambay vicinity. They're a mixture of coal fired and gas fired power stations, but they're currently emitting over 40,000,000 tons per year of c o two. So this scheme, if it goes ahead, would be significant.

19:08 The Midway Hub CCS project, as I mentioned, current target is to remove and and transport and store c o two from three power stations in the Isle Of Grain. You can see on the right hand side there, the Isle Of Grain is the the black circle. And the left hand side is a schematic of the process. So we have CCGT power stations. There's three of them. They have a combined peak output capacity of about three gigawatts. The CCGT power station operators would be responsible for the carbon capture because the carbon capture kit would be bolted onto the power station and operated by the power station personnel.

19:54 But we would take the c o two from the export flange of the c o two capture kit, and it would be liquefied and stored at the National Grid Isle Of Grain terminal. National Grid operates a very large LNG terminal at the Isle Of Grain, and we've had discussions with them, and they would be willing to liquefy and store the c o two and also provide loading facilities for the c o two to be loaded onto c o two tankers. The tankers would basically take the c o two from the Isle Of Grain to what we call the Pfizer, and I'll talk more about that later. But the Pfizer would be moored over the target storage reservoir.

20:45 And currently, that is Camelot. Camelot is the license we were given by the NSTA, and we believe that Camelot can store up to about a 100,000,000 tons of CO2. From the Pfizer, the c o two would be injected through the umbilical pipes that would be connected to a subsea manifold. And from there, wells in the target formation would receive the CO two, which would be permanently stored in the rocks. This is a scheme scheme of of the Cambay CCS project or scheme.

21:34 I can't really call it a project yet because the regulatory framework in India does not exist.

21:40 We're helping the regulators to develop that. The UK is somewhat ahead of India as far as that's concerned. But if you can see the the blobs on the map on the right hand side, the purple blob is the Kambay Field. The black blobs are coal fired power stations, and we're talking large coal fired power stations over half a gigawatt of power capacity. And the red blobs or orange blobs are CCGT power stations. And, essentially, what we would do would be pipe through over overlying pipes pipe pipe the c o two to a c o two hub at Canbe, and

22:23 the c o two would be injected into the old pad formation underneath the the Canbe PSC. And as I mentioned, this is something that we are quite enthused about, but it's a it's a longer term project because we cannot really get this kicked off until the the regulatory framework is put in place. Having said that, mister Modi has advertised his intention for CCS to to be occurring from 2035. So there's a lot of attention being paid to this this this scheme. It's gonna be the first pure CCS scheme in India if get it launched.

23:09 Now I just wanna go back to this slide here because as you can see, the Mudway hub project is somewhat more complicated than the Kanban scheme. The Kanban scheme technically is easier, although the scale is larger. But Mudway hub scheme is a is a is a maritime scheme. We don't don't have have any any pipelines. We basically load the c o two onto marine tankers, and we transport to the Pfizer. The Pfizer is the CCS equivalent of a floating production vessel, the likes of which have been used in the oil and gas industry for decades. So it's not really new technology. The kit on the Pfizer would comprise storage tanks and bulk handling equipment to pump the CO2 into the subsea manifold and into the into the formation.

24:06 And this idea is something that we came up with. But since then, other companies have adopted the same scheme in The USA, in Australia, and it's gaining momentum. And the big advantage is that once we filled up Camelot, we can move the Pfizer to another reservoir for further injection operations. And on top of that, we can accept c o two cargoes from anywhere. Any any source of c o two that is in as if it's being loaded onto a marine tanker, we can we can take cargoes. So for example, we've had discussions with base regarding the importation of CO two from Continental Europe.

24:56 Our joint venture partner, Wintershall, are building a CO two hub at Williams Harbin, and base have basically indicated that they would be very, very open to c o two injection operations using cargoes from outside The UK. So I'm going to hand over for the q and a session. That's fantastic, Arun. Thank you very much indeed for your presentation. Ladies and gentlemen, do please continue to submit your questions just using the Q and A tab situated on the right hand corner of your screen. But just while the team take a few moments to review those questions submitted today, I'd like to remind you the recording of the presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard.

25:45 Roland, as you can see, we've had a number of questions come through from investors, both pre submission during today's event. Perhaps if I could start with the first one or actually blend two together because they're they're on the same same theme here. If no JV deal can be agreed, how do you see the company moving forward with the drilling in q one twenty twenty four? What's going on with the JV discussions? I know you did mention that during the presentation, but any further color you can add would be great. Sure. Obviously, we have a plan b, but our current preference is for a JV. The reason for that is it's obviously gonna be enormously helpful for us to to have a a local partner that has the the the capacity to to help us develop the Cambe field.

26:37 And that capacity would be financial as well as operational, and we think it's in the best interest of the shareholders to go down that road. As I mentioned before, the discussions are looking very promising, and we're hopeful that we can actually announce something in the near future with regards to a a a farm out arrangement for the Cambe field. We do have a plan b. We have had discussions with other parties, but also we have a plan b which would potentially potentially kick in in the event that we're not able to arrive at a joint venture arrangement that makes sense for for the company.

27:28 We want to make sure that we maximize shareholder value, But at the same time, we're looking to get the funding that we require for the full field development. And, as I said, things are looking quite promising on that front at the moment with regards to a farm out arrangement. Fantastic. Thank you. Next question we've got here is after being invested in the company for many years, the share price has gone from 0.5 to 0.07. What are the company doing for us long term holders to improve the share price? Plus, with the amount of time things take in India or else the company doing to give us long term holders a return on investment ASAP. Well, I am very sympathetic towards the the long term shareholders of the company because they have seen an erosion of their share price.

28:20 I can only talk about the last couple of years since I've been on board. We we we we are striving to add value, first of all, by kicking off the full field development. That's a a big priority to us. As I mentioned before, the C 77 well is never gonna make us rich. It's It's a semi depleted well, but I think we've done sufficient groundwork to provide the basis for the full field development. We have new wells planned, and we think we have the the complete engineering solution required for new wells to be productive and profitable, very profitable.

29:06 So that's one area that we've been working very hard to to try and provide an underpinning to increase the value of the stock for the company. The other area that we've been working on is obviously CCS, I don't think we've had a, you know, a fair reflection in the share price with regards to the value of the CCS project. We are the only independent listed company that's involved in CCS. If investors want to get involved in CCS, at the moment, they have to invest in some of the larger companies like Shell, BP, Equinor, etcetera. So we are the the only game in town as far as that's concerned.

29:54 We were able to attract a very, very powerful and committed joint venture partner in the form of Wintershell. So, you know, that's another way that we're looking to to add value. Will not be surprised to to know that we have avoided any further exploration activities. We don't think it's appropriate for a company of our size to be involved in exploration. That's for the big boys. So, basically, what we're focusing on is value add and cash generation from the Cabay gas field. Thank you very much indeed. Right. Next one we've got here. Back in March, you stated the jet pump will be operational in ninety days. The jet pump deadlines have continually been missed. What confidence do you have and thus investors should have on the published time scales for the first wells being drilled?

30:52 Well, yeah, this is a question we get a lot. It's generally why do things take such a long time? And it's a combination of of things. But I would say that the biggest issue for us is equipment availability, the supply chain, the whole nature of the oil and gas business has resulted in a shortage of equipment globally, and delivery times are are slow. We also also are subject to equipment availability issues in India. So we had to impose a delay on the installation of the jet pump of approximately a a month month because the workover rig was not available.

31:43 We also were asked by the regulator DGH to provide a baseline production without the jet pump, which put delays in. Unfortunately, this is a business where it's not always possible to to come up with solid deadlines. So going forward, I'm trying to avoid doing that because otherwise, I get held to hostage. But all I can say is we've been working very hard. The team in India has been working flat out to to make this make this happen as quickly as possible. Thanks indeed. Whilst it says the jet pump installation was not a precursor to the JV being signed, in reality, has the JV partner seen the new flow rates before they'll sign a deal?

32:29 No. I don't I can generally say that's not the case with the the the parties that we've been talking to recently. And the main reason for that is that they understand the the oil and gas business. They understand drivers behind it. Simply stated, they they have sufficient ex expertise to to to see beyond the C 77 well. They see the the big picture, and they're actually actually operational quite close to Cambe anyway, so they understand the issues that we we we face. Thanks. Again, just touching on on the JV, the of questions really focus on that. But why is the JV process taking almost a year to complete? What's been the most significant sticking points?

33:28 Have been dealing almost exclusively with Indian companies to get interest from outside of India has been quite quite a stretch. And I think that's due to oil and gas companies not wanting to commit to a new area of operations where they don't necessarily have the the the local expertise. And there's potentially been some kind of reluctance for foreign companies to get involved, and this is an historical issue to do with tax issues of of of some of the foreign companies historically.

34:15 So we've been dealing with Indian companies. And, you know, when you deal with a joint venture or a farm out arrangement, you cannot cannot dictate your own time frame. You basically have to to fit in with third party's time frame. So, you know, we could have done a a deal which would been suboptimal as far as the shareholders are concerned. We're holding up for something that maximizes shareholder value and at the same time gives us certainty of of the commencement of the full field development. And, yeah, at the end of the day, the full field development is is is job number one right now.

35:04 We We need to drill those those new wells, boost production, and establish significant cash flow. And we believe the current discussions that we're having would lead to that that that end. So it's been worth waiting for. Thank you. In terms of the JV, you're still talking to multiple, I. E, more than one interested party, or is this just reduced to one interested part? We have more than one interested party. Thank you. On the September 29, you tweeted anticipated another three days before fluids are removed. Then four days later, the October 3, you tweeted c 77 well is still cleaning up. Why is it that you appear never to be able to hit a self imposed deadline even over three days?

35:54 Yeah. Again, this has to do with the fact that we're dealing with rocks, and rocks don't always cooperate. So we had an expectation that we could remove the calculated volume of fluid in the wellbore based on the pump's theoretical output capacity. That fluid has been pumped out, but we hadn't anticipated that we would have as as as much fluid as we're getting from the original one to four zones. So, you know, this is the nature of the beast. We're dealing with geology here. We're dealing with rocks. And, you know, I didn't I didn't say that, you know, we were going to get all the fluids out in that three day period.

36:49 What What I I meant meant was that we could we could pump out a theoretical volume that was in the wellbore with the pump operating at maximum capacity in a three day period. But we're we're having fluids coming in in from from the, from the wellbore, so that's why it's taking longer than, than advertised. But I apologize, but we are dealing with the geology here. This is not something that, we can control from the surface. Thank you. Once the JV is signed, does it require approval from the Indian authorities before confirming? The transfer of ownership on a PSC production sharing contract subject to government of India approval. We had this issue when we took over GSBC's 55% shareholding a couple of years ago.

37:46 It took about six months to to get it finally signed off, but it didn't stop us doing anything. As long as the the intent is there and we have a JOA that's been signed up, the transfer of ownership is is is a a formality. Formality. So I don't expect to have any problems. But in terms of the time frame, it can take quite a few months. That's just the speed of things in India. Thank you. What have got here? The latest flow rates consist of the total from both the old suboptimal frac zones and the new zone fracs with the improved methodology. Is it possible to estimate how much this flow is coming from the new zones given that that's more relevant new wells? It's very hard to measure, and we don't have a direct measurement of the contribution, but I think we are about 90% certain that all the gas production is currently coming from the newly refrac zones.

38:51 And I think all we're doing from the original one to four zones is actually pumping off the formation water from those zones. Thank you. Given that 77H is a partially depleted well, did the improved flow rates throw any light on what rates can be expected from the new wells drilled into virgin rock? With a with a well that's been on production for such a long time, expectations should not be should not be huge. But the reason we did the refrac was to understand what kind of plateau production we could get from newly frac zones where the fracking was was was optimal.

39:44 And I think we're pretty happy with the frac job that we did on zones five and six. And to really get an indication as to what we can expect for the new wells, we probably need to put the bridge black back into the well, isolate those zones five and six, and remove the compensates efficiently with the with the pump, and we'll get an idea. I don't wanna throw out any numbers right now, but based based on what I said before about fracking multiple zones, I'm pretty confident that new wells can have an initial production rate of between four and six million scarfs a day. Thank you very much indeed.

40:34 Okay. What have we got next? What positive news can we take away from today's presentation regarding the C 77 well? Well, regarding the C 77 well, the pump is working, and the fluids are being removed. The jury is out right now as to whether we're going to continue to to to remove fluids indefinitely. I mean, we won't. We will probably, in a couple of weeks' time, decide whether we're going to reset the bridge plug and just get production from the the two refrac zones where we are we are very optimistic that we can improve the productivity just from those two zones. But, yeah, the artificial lift system is in place.

41:24 It's operational. And it also means that when we drill new wells, we have artificial lift systems available on-site to to help production from new wells. And just on this timescale, and I touched on this before, but what's timescale of getting the water out of seventy seven h? I don't really wanna give a timescale because I I you know, I I as I mentioned before, we are dealing with rocks here. If we do not see a significant reduction in in the height of the the column of fluid in the well, then we will probably run-in with a bridge plug and isolate zones one to four.

42:14 On the other hand, we could well see that we were able to draw down the water and start getting gas production from zones one to four. Thank you. If we need to plug the zones one to four, how soon could a rig be attained? Workover rigs are available, and we could probably mobilize one in a sort of thirty day time frame. That's great. Thank you very much indeed. And the last one we've got here now is, is SYNERGY a feeling that has made solid progress today in relation to what has been brought in to do, bring on board institutional investors?

43:02 Yes. I mean, we've had some very good introductions to the institutions. That process is ongoing. We we have more sessions scheduled for next week. So, yes, we are getting those introductions to new institutional shareholders, and that's going to be an ongoing process. Fantastic. Thank you very much indeed. And, of course, the company review any additional questions that come through and submitted by investors. And thank you for all the investors for submitting those questions. And we publish responses where appropriate to do so on the Investor Meet company platform. Roland, just before redirecting investors to provide you with their feedback, which is particularly and the team, I could just ask you for a few closing comments, please.

43:48 Yes. Well, I hope I've got the impression across that we've been we've been working hard to maximize shareholder value. There's an awful lot going on both on the side of things, but also on the CCS activities. The big questions, I think, are probably more to do with the joint venture. I think that's where most of the shareholders would like to know where we're headed. I'm I'm I'm looking at that very positively at the moment. And c seventy seven, well, like I had said before, it's not gonna make us rich, but we've got everything in place to maximize the production of gas from that well. So it's work in progress.

44:36 And I'd just like to thank shareholders for their understanding and, be assured that we're doing everything we can to maximize shareholder value. Well, thank you indeed for updating investors today. Can I please ask investors not to close this session? It should be automatically redirected to provide your feedback, nor the team can better understand your views and expectations. This may take a few moments to complete, and that's greatly valued by the company. On behalf of the management team at SYNERGY LTD, we'd like to thank you for attending today's presentation. That concludes today's session, and good morning to you all.