Synergia Energy (LSE:SYN) — Investor Update

0:01 Good morning, ladies and gentlemen. Welcome to the SYNERGY LTD investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the q and a tab that's just situated on the right hand corner of your screen. Please 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 we'll publish those responses where it is appropriate to do so. Before we begin, we would just like to

0:32 submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to CEO, Roland Wessel. Roland, good morning, sir. Yes. Good morning. Good morning, everybody. Thanks for this opportunity. I'm going to talk roughly through the the presentation, but I may may ad lib from time to time. This is really an update as to the status of the company. And starting on the first slide, just want to reinforce the strategy of the company. It's very much a carbon reduction strategy, and we're focusing on two major CCS projects and the Cambay gas field development in India.

1:19 So the Medway Hub CCS project is now a joint venture with Harbor Energy because Harbor Energy has purchased Wintershall Dea. That was effective in September. And is very much a major TNS service project transporting c o two from both the Medway power station target emitters and also European target emitters from Zebrocha, Rotterdam, Williams Harbin, etcetera. Some developments in in India. The major development, obviously, was the farm out of the Kambay PSC to Ceylan Exploration Limited.

2:10 They are now basically conducting a $20,000,000 work program, which we have a free carry. And I'll come come into the details of that work program further into the presentation. And then finally, in terms of our strategy, we are pursuing a major CCS scheme in India to take carbon dioxide emissions from the proximity to the Cambay PSC for storage in formation called the old pad formation. And we're in the process of pulling together a proof of concept pilot scheme.

2:55 So just to reinforce our carbon reduction strategy, we see the development of the gas field in India as a major way to replace both imported LNG and also reduce the dependence on coal fired power generation. So it's not a direct carbon reduction strategy as as would be classically thought of, but by burning gas rather than coal, for example, there will be a fairly dramatic reduction in c o two emissions in India. The Medway Hub CCS project in The UK aims to store up to six and a half million tons per annum of c o two, and we believe this is going to have a major contribution to The UK Government's goal of carbon reduction, net zero carbon reduction.

3:50 And we are pretty pleased with the progress of this project, and I'll come to to that in some detail later on. And then as I mentioned, the CAM based CCS scheme in India, very large project, will require central government support and central government funding, but it's it's progressing quite quite rapidly now.

4:17 So the Medway Hub Camelot CCS project is determined by a carbon storage license, c s zero one nine from the NSTA. We are working through the NSTA work stream, the program, and I'm making very good good good progress on that. Just to describe the project, we aim to take c o two from the power stations, emitters at the Isle Of Grain, but also from continental European emitters via the carbon hubs that are being planned in Zabrocha in Belgium, Rotterdam in The Netherlands, Willemshaven. In addition, there there are some French carbon hubs that are being planned. It's a marine scheme, so we basically take the c o two in liquid form via marine tankers to the Camelot field.

5:17 And we don't have any pipelines. So we have a great deal of flexibility here. We can take cargoes at any time from any emitter as long as it's on a on a tanker. And indeed, because we are using a Pfizer, which is a floating vessel for c o two storage and injection, that Pfizer can be moved to additional stores in the future. So we're not limited to Camelot. We can actually take the same the same Pfizer and and move it to the the next storage storage field. And as I mentioned, we we are planning to up to six and a half million tons per year of c o two commencing twenty twenty nine, twenty thirty.

6:10 So this is a broad schematic of scheme. You can see the carbon emitters on the left hand side there, be they, Medway, Zabrocha, Rotterdam, Williams Harbin based. And from there, we would load the c o two in liquid form onto the marine shuttle tanker. And the marine shuttle tanker would then have a sale of about twelve hours to the Camelot field where our Pfizer will be moored. Pfizer stands for floating injection storage and offloading vessel, it's a it's a novel scheme, albeit one that has been adopted in a number of different countries. So the the concept is is is is gaining momentum, and we're hoping to leverage off that so that when we when we come to acquiring the Pfizer, this technology will hopefully be relatively mature.

7:08 The Pfizer has a number of advantages of as I mentioned before. Essentially, the Pfizer is a CCS version of a floating production vessel that's been in use by the oil and gas industry for for for decades. The FIZO incorporates storage, loading facilities to take c o two from the tankers, put it into the storage onboard the the FIZO. And then we have pumping equipment to inject c o two into the reservoir via umbilicals. The reservoirs being two primary reservoirs in the Camelot Storage Complex, the Bunta sandstone and the Rotligan Leman sandstone. So what this does is it eliminates any needs for pipelines.

7:59 It allows us to take c o two deliveries from just about anywhere as long as they they they are on a on a on a tanker. And just to describe how we intend to go about this, we do not intend to own the the Pfizer and the marine tankers. We we intend to enter into long term lease leasing of those those assets.

8:28 So the timeline for the project, we're going through the site characterization phase at the moment. The early risk assessment is a is an ongoing document, document, if you will. It's a live document that gets updated as we do more and more technical work. The the the storage permit application is planned for 2028, at which point, hopefully, we will have contracts lined up for taking c o two on a TNS transportation and storage service from the emitters. And, also, we we would anticipate that we would pass by the the the investment decision milestone.

9:18 So 2028 is a is an important date here, and we're working up to that with the the predefined NSTA work program ongoing.

9:34 So some of the commercial highlights here. As mentioned, Wintershell were awarded in in conjunction with SYNERGIA, a carbon storage license in June 2023. HARBOR ENERGY has now purchased Wintershall Dea, so HARBOR ENERGY are our new fifty fifty joint venture partners. SYNERGIA remains as operator. We've had a lot of discussions, obviously, with the primary emitting customers and indeed the the the the management of the National Grid grain terminal, which is pretty important for the the Arla Grain project. We are now very much focusing on providing a transportation and storage project. So we're not gonna get involved in the carbon capture of the the c o two from the the power stations.

10:27 We simply will provide a service to collect the liquid c o two from the Isle Of Grain or indeed Zaproch, Rotterdam, Willershaven, transport that c o two to the Camelot Storage Complex, and inject the c o two into the storage complex for permanent storage.

10:45 This is gonna be a merchant scheme, so we plan to to to to provide a TNS service on a tariff basis, so many pounds per ton, on on a on a long term contracted basis. And, hopefully, we will be able to offer the emitters an advantage over the prevailing cost cost of emitting c o two to the atmosphere. It's not predicated by UK government funding, albeit we are encouraged with the recent announcement by the UK government of the track one projects, some £22,000,000,000 of funding. This means that The UK is very serious about CCS. But our read is that beyond those initial track one projects, the funding will not necessarily be there. And I think the government's going to be relying on merchant schemes such as our own to to to meet their net zero targets.

11:48 So moving on to Cambay in India. This is just a a recap. Cambay PSC is essentially a a a gas field development in the Eocene Reservoir where we believe we have a TCF of contingent gas resources. It's onshore Gujarat state. The the reservoir is a tight siltstone, so it requires fracking to to provide commercial production rates. It's a very thick reservoir between fifty and ninety meters across, and it's not an exploration project. This is a monetization project because over 30 wells have been drilled into the Eocene and have tested with with gas production.

12:39 So, essentially, this is a a very important asset to the company. We are anticipating very, very good results from the the farm out agreement that we executed with Silan exploration in February, and it was given central government approval from the Indian government in August 2024. So the work program is commencing as we speak. We have a have received a $2,500,000 upfront cash payment from Cielan for the the back costs on the on the on the project.

13:24 We also can anticipate up to $9,000,000 of production link bonuses going forward during this eighteen month work program. And the work program is kicking off with workovers of up to six wells. These are legacy wells that have demonstrated productivity. The work program is varied according to the individual wells. Some of the wells will be given artificial lift equipment to stimulate production. Some of the other wells will be re perforated. And the details of the individual well performance and workover progress will be announced announced as we go through the program.

14:19 But we're pretty pleased with the thorough approach that CLAN are taking to this development program. They're being very assiduous in terms of making sure that as much knowledge as possible is gained ahead of the drilling of the new wells, which will commence q two of twenty twenty five. So three new wells would be drilled. Two of them would be vertical, and one will be horizontal. And we anticipate a significant increase in production gas production from those wells. And in addition, obviously, we anticipate significant increased cash flow from the from the project. The whole aim here is that come the end of the eighteen month work program, we're generating sufficient cash flow from the field that will self fund a full development program in order to exploit all of the reserves in the Eocene, some 205 BCF of p 50 reserves.

15:23 We will need to drill in excess of 30 wells, and we anticipate that that will be a self funded project from the incremental gas production from the three new wells.

15:41 Just to be clear, CLAN are the lead operator. SYNERGIA is the joint operator. Consistent with the fact that SYNERGY LTD are funding this $20,000,000 work program, only logical for them to take the lead in terms of operatorship, but we are joint operators. So we're very, very much involved in the definition of the workovers, definition of the the new new well drilling program.

16:14 We put a forecast here in terms of what we expect to get in terms of incremental gas production by the end of twenty twenty five going into 2026. We're targeting 8,000,000 scuffs a day. That's 2,000,000 scuffs a day from the vertical wells and 4,000,000 scuffs a day from the horizontal well. This is guidance. Obviously, until we actually drill and put these wells on on stream, we can't give any definitive estimates, but we're anticipating a significant uptick in in in cash flow from the field. And currently, we're enjoying very strong pricing. We're getting $9 approximately $9 per MCF from the low pressure grid.

17:02 So this should be a very significant increase in the the fortunes of of both SYNERGY and ENERGY and also CLAM.

17:17 And then moving on to the CANBE CCS project. This is something that we introduced to the the regulator, the director of hydrocarbons at the beginning of last year. We represented to the new director general of the DGH in July of this year. That that resulted in a request from the DGH for us to pull together a proof of concept pilot project to essentially prove up the Old Pad formation. The Old Pad formation is our target formation. It sits below the the Eocene reservoir. It's a very, very thick formation, extends way beyond the Kampay PSC license, and we believe the old Pad could be India's equivalent of the Bunta sandstone in terms of a significant regional CCS resource where significant volumes of CO2 can be stored permanently.

18:23 But we need to prove up the old pad. We we've got a number of well logs that have been acquired as a result of drilling into the old pad, but we need to drill a pilot well into the old pad, take cores, do the petrophysical, geochemical analysis of the of the formation

18:45 ahead of a a full scale CCS development. And the DGH have indicated that they will be supporting us to gain central government funding for this in India. We're also pulling together a consortium of partners to help us in the process. Those partners would include, for example, the Institute of Technology in Mumbai. We're We're asking the BGS here in The UK who have ongoing CCS work in India. We're asking them to to participate as well. So we believe this will be a flagship CCS project in India, and we're pretty excited by it. So that concludes the the the the presentation.

19:37 Hopefully, I've shed some light on the the progress of the company. Personally, I'm pretty excited by the developments this year. Some of our shareholders may say, well, you know, things have gone slower than anticipated. But in the in the big picture, I think we've derisked the the the Cambe field development by entering into this joint venture with Ceylan. We're very impressed with Ceylan's technical capabilities, and we look forward to finally providing shareholders some material return on investment from the Cambay field. We're also very excited by the CCS development both in The UK and in India. And that concludes the presentation.

20:24 Perfect. Ronen, if I may just jump back in there. And thank you very much indeed for your presentation this morning. What I'll do is I'll just bring up your your camera there. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab that's situated on the right hand corner of your screen. But just while the company takes a few moments just to review those questions that were submitted already, I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q and A can all be accessed via your investor dashboard. Roland, as you can see, we have received a number of questions and thank you to all of those on the call for taking the time to submit their questions. But Roland, perhaps if we dive straight into it, the first question that we have here reads as follows. There had previously been no indication even in the RNS that the work program would include vertical wells.

21:12 Can you discuss the reasons for this? Yes. Actually, we did announce the the plan to drill two vertical wells in addition to the horizontal well in our RNS of the September 11. But the the the rationale here is that the vertical wells will target areas of proven productivity, and we'll provide additional well performance data ahead of the horizontal well at a much lower cost than a horizontal well. So it's it's a very logical thing to do. Vertical wells are obviously much cheaper than the horizontal wells, and we are targeting those areas where previous wells have demonstrated good good tests of the of the ESM formation.

22:02 Perfect. Thank you. The next question that we have here asks, the target for vertical wells is 2,000,000 standard cubic feet of gas per day, which seems very high compared to the horizontal wells at 4,000,000 standard cubic feet per day. Realistic? Well, some of the the the the viewers will notice a slide where the the the Eocene wells are depicted and the initial test data from those wells. So vertical wells have been drilled into the Eocene. They weren't fracked. They didn't have artificial lift, and they have tested in excess of 2,000,000 scuffs a day. So we believe with fracking and artificial lift, 2,000,000 scuffs a day is a realistic target.

22:51 Perfect. Thank you. The next question here asks, how many frac zones will there be in a vertical well? Well, that's gonna be determined, but you're by the vertical extent of the p zone, obviously, with a vertical well. But, frankly, the the the the number of fracs will be maximized to to optimize production, and it's it's just pure economics. The cost of fracking is really the mobilization of the equipment. The number of fracs incremental incremental costs is is is not that significant in the big picture. So we will maximize, but I can't give you the exact number until we do the the detailed planning of those those vertical wells.

23:38 Thank you. How much income is expected from the work program, and will it be sufficient to pay for subsequent programs? Well, I'm not gonna forecast income, we do anticipate that, as I said before, the subsequent full field development wells will be self funded from the cash flow of the field. The viewers will note the the pricing we're getting and we've submitted regarding productivity. So the production times the dollars per MCF, $9 roughly per MCF will give give a a good good indication indication as to what, you know, what we anticipate in terms of income. Thank you.

24:25 The next question that we have here asks, in the annual report, it says that the workover for c 77 will involve increase in the production tube diameter. Since the low production has been said to be caused by water from the old zones, would it not be better to isolate those zones by reinstating the plug? That's certainly an option going forward, and we we haven't decided whether we're going to to plug off the four original frac zones. Having said that, with an optimized tubing diameter, we believe the jet pump can more than handle the the water that's coming from those zones. So we're we're we're keeping our options open on that. Perfect. Thank you. Is it still the intention to connect to the higher pressure grid with the consequence higher gas prices when production is sufficient?

25:18 Absolutely. In fact, we will need to connect to the high pressure grid when we get much beyond six to 8,000,000 scuffs a day because the low pressure grid cannot take much more capacity than six to 8,000,000 scuffs a day. Luckily, the high pressure grid is not that far away. A relatively small diameter pipeline and and and connecting to that grid is is is gonna be cost effective. And as as we we stated before, we hope to attract the higher marginal prices determined by the marginal cost of LNG that that prevails for the for the high pressure grid. Perfect. Thank you. Is there there any any progress with the CCS farm out?

26:06 Yeah. We we it's an ongoing process. We still have a number of very interested parties. Having said that, Harbor Energy have indicated support of the Camelot project. So this has somewhat reduced the urgency of the farm out, but we're still keen to to get an additional partner on board. And And as soon as we we have something definitive, we'll announce, but it's an ongoing process. Perfect. Thank you. The next question that's come in asks, have you considered taking your remuneration in shares rather than drawing out in excess of a £100,000 a year? Well, obviously, my remuneration package is a matter of public record.

26:52 But also as a matter of public record is the fact that there's a fairly substantial part of my remuneration package in terms of share options. So I'm I'm already, if you like, a a de facto shareholder in the company. A significant part of my package is in shares. Perfect. Thank you. Just turning to the next question. Do you feel you have done a good job of keeping investors informed of events that have impacted the company? We do our best. We don't believe in issuing spurious ramping type messaging to to the market. We wish to stick to material facts, and we believe the best message to shareholders will be continued solid progress on the CCS projects and material cash flow from Canbe.

27:44 We do routinely answer emails from shareholders, text messages, etcetera. So there's there's a fair amount of dialogue. But in terms of regular RNSs, we will continue to provide RNS messaging, but only on material facts as opposed to any kind of spurious messaging. So we're doing our best. Thanks, Roland. The recent UK government announcement of funding towards CCS projects, will this have any impact on the company? Well, indirectly, it will. The the the Midway Hub Camelot CCS project is not predicated by government funding.

28:29 It's it's a merchant scheme, but we take great encouragement from the fact that the government has elected and announced a £22,000,000,000 package for the two track one projects. This really underlines the new government's commitment to CCS. And we're getting a lot of support from the NSTA in in in terms of our technical work. So it's it's good news for the sector. Doesn't really have a huge impact on on our project, but but it it it does does mean that The UK, I think, intends to be a a leader in the CCS sector. Perfect. Thank you. The next question that we have, there's actually a couple of questions relating to this topic.

29:15 Perhaps if we take this one, I think it will speak to the other questions that have come in. Palmier recently released a broker note with a share price target of 0.9 p. Can you explain why this increase in share price would happen? Well, first of all, we did not collaborate with in that research note. It's an independent research note. But Panmir believe that this is a true reflection of the company's value taking into account the the $20,000,000 work program on the Cabay PSC, $9,000,000 of potential bonuses, and the significant value of the company's two CCS projects. So the share price is is is very much determined by investor sentiment.

30:08 But, Pam, you'll believe that we are currently quite undervalued. The next question that we have asks, SYNERGIA has never had much interest from institutional investors. Why do you think that is, and are there any plans to change that moving forwards? For the past year, we have been conducting, if you like, road shows, presentations to institutions via via. We've had an awful lot of interest from the institutions, and we already have institutional investment on our shareholder list. This is not as much as we would like. We'd like to have greater institutional support, and we'll continue continue to to to market to the institutions.

30:56 It's been a question of of education as far as CCS is concerned, but we we are getting traction, and we're we're gonna continue those efforts going forward. Thank you. The next question asks, could you provide more detail on what exactly is going to happen with the workovers? Is it plug and isolating old zones, increasing the diameter of tubing, and or dealing with water ingress? Anything else? Okay. Well, as I said on the presentation, the workover program varies from from one well to the next. They all have different characteristics. Some of the wells require artificial lift. When you have a well without pressure support, obviously, production declines over time. So these are legacy wells. Production the the the pressure of the reservoir is very low. Artificial lift will will help stimulate production in those wells.

31:55 We're also gonna do some reperforations. We potentially may may refrac one one well, and we're gonna optimize the completion. So C 77 currently has a jet pump installation, which is not optimized because the tubing is too small. So we're gonna increase the diameter of that production tubing to increase increase the pump efficiency. So out of the six candidate workover wells, each workover is gonna be different from the other. Perfect. Thank you. And perhaps just turning back to another question on the share price. The question asks, the share price hasn't reacted positively to any of the JV events. What do you think it would take to get the share price heading in the right direction?

32:43 Well, I think the proof of the pudding is in the tasting and the incremental production that we anticipate from the workovers and new wells, we we will announce to the market as as we progress through the work program with Ceyland JV. I also think that the value of our CCS projects has not been recognized in in in our share price. We are, in The UK, a major player alongside the the the big companies such as BP, Equinor, Shell, etcetera. So we're punching above our weight with regards to the Medway Hub Camelot CCS project. And also the the value of well, potential value of the Cambe CCS project has has not been reflected in our share price.

33:29 But at the end of the day, we intend to plug away to do a best the best job that we can from an operational perspective. And And I I think think once we start seeing serious cash flow coming from Cambay, hopefully, that will be reflected in the share price. Thanks, Roland. A question here on Cambay India. For Cambay India, the company expects gas production of greater than 8,000,000 standard cubic feet per day by year end 2025. Can you please explain how many horizontal and vertical wells will be needed for this level of production? Oil production from these wells over and above 8,000,000 standard cubic feet of gas per day?

34:16 We anticipate 2,000,000 scuffs a day from each vertical well. So that's 4,000,000 scuffs in total and 4,000,000 scuffs a day from the horizontal well to to make up the 8,000,000 scuffs per day. And with each million scuffs when I say scuff, that stands for standard cubic feet. For each million standard cubic feet of gas, we get 40 barrels of condensate from the the Eocene. So this is gonna be both both material, additional gas production, and and condensate production as well. Thank you. The the next question asks for fulfilled developments with 30 plus wells, what can be the peak level of production for both oil and gas?

35:08 Well, this depends on the timings of the wells, but we forecast that in excess of 30,000,000 scuffs a day can be achieved. Perfect. Thank you. And just a a couple of final questions here. Given the inflation in prices of workover and drilling rigs, who will bear the cost between SELEN and SYNERGIA turns out to be more than $20,000,000? Well, we have a very firm agreement with CLAN that we will review expenditure on a constant ongoing basis. If we jointly decide to increase expenditure beyond the $20,000,000, then as per the JOA, it's a fifty fifty split in terms of cost sharing. Thank you. And perhaps just one final question here.

35:58 The question asked, the recent r and s lists six workovers workovers in order of priority and says three to six workovers will be carried out. It seems very surprising that c 77 h is last on the list. Does this mean the world may not have a workover in the current program? Absolutely not. We we do intend to to work over c 70 7, but it's our current current big producer. It's our main production. So it wouldn't make any sense for us to to take that offline at the beginning of the workover program. Hence, it it it appears as the the the final workover. Perfect, Roland. That's great. And thank you very much indeed for being so generous for your time and addressing all of those questions that came in. And, of of course, course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended just for you to review and to then add any additional responses, of course, where it's appropriate to do so. And we'll publish all those responses out on the platform.

36:57 But Roland, perhaps before really just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments just to wrap up with, that'd be great. Yes. I just wanna reiterate, really, from my perspective, I'm I'm very encouraged with the the the progress that we've made over the last twelve months. I know some of our shareholders have the sentiment that things seem to go slowly. We did have a painful approval process in in India, but at the end of the day, we we we we got to where we want to be with the government of India approving the the project. And I'm very encouraged with the way that CLAN is is going about this this work program.

37:46 I'm also very encouraged by Harbor Energy's sentiments with regards to their support of the the Medway Hub Camelot CCS project. So I think the next twelve, eighteen months are gonna be quite exciting for the company. Perfect. Roland, that's great. And thank you once again for updating investors this morning. Could Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of SYNERGY LTD, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all. Thank you.