Australis Oil & Gas Limited (ATS.AX) Earnings Call Transcript & Summary

I welcome shareholders and visitors to this Annual General Meeting of Australis Oil and Gas Limited. My name is Jonathan Stewart, and I'm the Chairman of the company and Chair of this Annual General Meeting. Mr. Ian Lusted, Mr. Graham Dowland, Steve Scudamore, Director of Australis; and Julie Foster, our Company Secretary, on the end there are alongside me. Mr. Alan Watson, a director of Australis, will participate in the meeting via webcast from Sydney, Mr. Phillip Murdoch from the company's auditors, BDO Audit WA Pty Ltd is also present. There are no apologies. Before we start the formal part of the AGM, I wish to take a few minutes to say a few words. Thank you very much to those of you in attendance today at the AGM of Australis, and thank you to those listening or watching online. I wish you all the best in these times of pandemic difficulties and disruption. The past year or more has been a difficult one from an oil industry perspective with initially a supply-led crash in oil prices being somewhat turbocharged by demand falling off the cliff due to the travel restrictions associated with COVID-19 and resulting in drop in demand for oil. Whilst internationally, we're a long way from back to normal, many countries are experiencing material improvements in their economies and a consequent increase in oil demand. This, in turn, has generated some better oil pricing. Ian will talk later in his presentation about how we see the macro scenario, moving to meet our long strategy in a manner we believe will deliver value to all our shareholders. As a Board, our primary objective during this past period has been to ensure that we maintain ownership and control of our key assets as this is what we consider will be the driver of future returns. To achieve this, we have significantly reduced our costs where we can, and our staff at all levels have participated in these measures. We also needed to ensure we met and continue to meet all of our debt covenants and repayment obligations, and this has been done. We are an operating oil and gas company with production. And a very large undeveloped oil position. Accordingly, we have maintained at least minimum staffing numbers and appropriate expertise. We also must retain the internal capacity to work with potential partners on a technical, financial and corporate basis and meet our corporate and reporting obligations. I'd like to acknowledge the following deliveries by our management during a tough period of time. Firstly, a 100% safety record in the field; positive cash flow for each quarter of 2020 and the first quarter of 2021; a 39% reduction in debt last year, independent valuation of our producing reserves at more than USD 50 million, so that number is significantly more than our current market capitalization, somewhat disappointingly; the compilation and management of the largest acreage position in the core of the TMS. Of course, we will prefer that our share price reflected the value of our production as a starting point, but also the inherent value of our currently undeveloped acreage. The reason why I, along with the board, recently committed to invest more cash into the company alongside many of you is that we are confident in our strategy and capacity to execute on that strategy will deliver a good result for all shareholders. In the U.S., we are witnessing the green shoots of a recovery in the oil industry and the confirmation of our consistently repeated theme of the maturing of several of the larger onshore shale oil plays and a looming shortage of quality development drilling inventory for players outside of the few large companies that now control the Permian. We are witnessing an improved environment for investment, which I should say is improving off a very low base, and we're witnessing that in our discussions with third-party potential partners. We will report progress with those discussions in a manner that's consistent with our continuous disclosure, obligations and also in a manner cognizant of commercial sensitivities. Our current low share price and refusal to alter strategy towards momentarily fashionable new business ideas and thought bubbles can lead to criticism. We will wear that. It can also lead to challenges from third parties who do not have the capacity to offer funded, logical deals that reward our shareholders. We will resist such approaches. Our team will continue to work hard to deliver the value we see in our asset base. I now return to the formal part of the meeting, and you'll have to bear with me during this because there's quite a lot to cover. As at least 2 shareholders are present, I advise the meeting that a quorum is present, and the Annual General Meeting is properly constituted. In accordance with the Corporate Governance principles and recommendations, and where applicable, the ASX Listing Rules, I declare all resolutions of this meeting will be put to a poll as follows: Resolutions 1 to 15 will be proposed and shareholders present at the meeting will be able to ask questions on each resolution. However, voting by poll will be conducted following the table -- tabling of all 15 resolutions. Should any shareholder physically present at the meeting, wish to ask a question on a resolution, please raise your hand. We will endeavor to answer as many questions as possible during the meeting. As advised in the Notice of Meeting, shareholders unable to physically attend the meeting were advised to send to the company in advance any questions they may have on any resolution. We have received general questions in advance of the meeting, and we'll attempt to address those during this meeting. Shareholders and shareholder representatives present at the meeting have been provided with a poll form. Upon declaring the poll open, I will ask these shareholders to complete their poll forms. Upon tabling each resolution, I will disclose the combined valid proxies received in favor, against, abstaining and undirected. As Chair of the meeting, I intend to vote all available undirected proxies held in favor of Resolutions 1 to 14 and against Resolution 15. The company's Notice of Annual General Meeting have been provided online for all shareholders to download and has been sent to all directors and the company's auditor, BDO Audit WA Pty Ltd. If there is no objection from the meeting, I will take the notice of the Annual General Meeting as having been read. Thank you. For procedural efficiency, I request that any general questions be left until the formal part of the meeting has been concluded. Financial reports. I now table the financial report for the year-end of 31st of December 2020, together with the director's report and the auditor's report. This is not a resolution. Does anyone have any comments or questions on these documents? As there are no questions in relation to the financial report, I will now ask the meeting to consider Resolutions 1 to 15. Resolution 1 relates to the adoption of the remuneration report of the company for the year ended December 31, 2020, as set out in the company's 2020 annual report. Shareholders should note that the vote on this resolution is advisory only and does not bind the directors of the company. In addition, key management personnel and their closely related parties are not permitted to vote on this resolution unless they are voting on behalf of a proxy. The remuneration report is included in the annual report on Pages 51 to 82. The Corporation's Act requires companies to put to shareholders a nonbinding vote to enable shareholders to voice their opinion on matters included in the report. I advise that the number of proxy votes exercisable by all proxies validly appointed in respect to this resolution are as indicated on the screen. For procedural efficiency, I will not ask for motions to be seconded as it's not required by our company's constitution. I now invite discussion, if any. I advise, there has been a question raised by a shareholder, [ Mr. Kirk Barrell ], with a subject of Resolution 15, nominating himself as a director of the company. And his query was a quote, "Why are the shareholders continuing to reward management if the stock is at historic lows?" Thank you for the question. In answer is my view and a view shared by so many shareholders that I interact with, that our management is efficient, hard-working, dedicated, honest and always work in the best interest of shareholders as a whole. If the question was meant to be directed at management incentive plans, I would respond additionally as follows, and I'll focus my response to this question on the 2 executive directors and then make a couple of general comments about management and staff. Australis' cash remuneration to the executive directors has been reduced by 50% over the last 18 months. In addition, for each of the last 3 years, the executive directors have voluntarily forfeited short-term incentive bonus payments that have been earned under the Board and shareholder approved schemes. The other component of executive directors remuneration is the long-term incentive program or LTIP program. For a reporting purposes, the value ascribed to the LTIP award assumes all performance rights granted will ultimately vest. For the executive directors, 75% of the LTIP award is performance tested. The details which are provided in each of our remuneration reports. Over the last 2 years, only 5% of LTIP performance rights have vested which the Board feels is an accurate reflection of the share price performance in an absolute and relative basis. The Board continues to believe that the executive directors are key to completing the business strategy we have laid out and that has -- it has the right balance of retention cash remuneration with upside exposure to a success case. More broadly, all of our management and staff have made some level of cash salary sacrifice and loss of annual short-term incentive payments, but the small workforce we have retained remain loyal and committed to achieving the overall goals of the company. I'll now hand over to Ian Lusted for Resolution 2.

Thank you, Jon. Resolution 2 deals with the reelection of Mr. Jonathan Stewart as a director. I advise that the number of proxy votes exercisable by all proxies validly appointed in respect to this resolution are as indicated on the screen. I now invite discussion, if any. I'll now hand back to Mr. Jon Stewart, for Resolution #3.

Resolution 3 deals with the reelection of Mr. Steve Scudamore as a director. I advise that the number of proxy votes exercisable by all proxies validly appointed in respect to this resolution are as indicated on the screen. I now invite discussion if any. Resolution 4 deals with the ratification of the issue of shares that occurred in March this year at $0.05 per share. I advise the number of proxy votes exercisable by all proxies validly appointed in respect to this resolution are as indicated on the screen. I now invite discussion, if any. Back to you, Ian?

Thank you, Jon. So Resolution #5. This resolution deals with the issue of placement shares at the March 2021 placing price of $0.05 to Mr. Jonathan Stewart, director or his nominees. I advise that the number of proxy votes exercisable by all proxies validly appointed in respect to this resolution are as indicated on the screen. I now invite discussion, if any.

Resolution 6 deals with the issue of placement shares at the March 2021 placing price of $0.05 to Mr. Ian Lusted, director, or his nominees. I advise that number of proxy votes exercisable by all proxies validly appointed in respect to this resolution are as indicated on the screen. I now invite discussion, if any. Resolution 7 deals with the issue of placement shares at the March 2021 placing price of $0.05 to Mr. Graham Dowland, director or his nominee. I advise that the number of proxy votes exercised by all proxies validly appointed in respect to this resolution are as indicated on the screen. I now invite discussion, if any. Resolution 8 deals with the issue of placement shares at the March 2021 placing price of $0.05 to Mr. Steve Scudamore, director or his nominees. I advise that a number of proxy votes exercisable by all proxies validly appointed in respect to this resolution are as indicated on the screen. I now invite discussion, if any. Resolution 9 deals with the issue of placement shares at the March 2021 placing price of $0.05, to Mr. Alan Watson, Director or his nominee. I advise that the number of proxy votes exercisable by all proxies validly appointed in respect to this resolution are as indicated on the screen. I now invite discussion, if any. Resolution 10 deals with the issue of performance rights to Mr. Ian Lusted or his nominee. I advise that the number of proxy votes exercisable by all proxies validly appointed in respect to this resolution are as indicated on the screen. I now invite discussion, if any. Resolution 11 deals with the issue of performance rights to Mr. Graham Dowland or his nominee. I advise that the number of proxy votes exercised or by all proxies validly appointed in respect to this resolution are as indicated on the screen. I now invite discussion, if any. Resolution -- oh, I have to hand to you, Ian.

Thanks, Jon. So Resolution #12. This deals with the issue of fee rights #A to Mr. Jonathan Stewart, or his nominees in lieu of nonexecutive director, cash fees. I advise that the number of proxy votes exercisable by all proxies validly appointed in respect to this resolution are as indicated on the screen. I now invite discussion, if any.

We're getting there. Resolution 13 deals with the issue of fee rights, A, to Mr. Steve Scudamore or his nominee in lieu of nonexecutive director cash fees. I advise that number of proxy votes exercisable by all proxies validly appointed in respect to this resolution are as indicated on the screen. I now invite discussion, if any. Resolution 14 deals with the issue of fee rights A to Mr. Alan Watson or his nominee in lieu of nonexecutive director cash fees. I advise that the number of proxy votes exercisable by all proxies validly appointed in respect to this resolution are as indicated on the screen. I now invite discussion, if any. Resolution 15 deals with the election of Mr. Kirk Barrel as a director. I advise that the number of proxy votes exercisable by all proxies validly appointed in respect to this resolution are as indicated on the screen. I now invite discussion, if any. Calling a poll. As all resolutions have been tabled, resolutions 1 to 15 will now be put to a poll. The persons entitled to vote on this poll are all shareholders, representatives and attorneys of shareholders who are physically present at the meeting or have submitted a valid proxy. A poll form was provided to eligible shareholders, representatives and attorneys of shareholders at registration. If anyone in the room is entitled to vote, but has not received a poll form, please raise your hand for assistance. I will now go through the procedures for completing the poll form. Shareholders need to mark the box beside each resolution on the poll form to indicate how and how many votes you wish to cast for each resolution. Proxy holders have been provided with a summary of voting instructions that details the votes to be cast on the resolutions for which you have been appointed as proxy. And proxyholders and appointed representatives of shareholders have been instructed to vote in a particular manner for a resolution. You'll be deemed to have completed the poll form in accordance with that instruction. In respect of any open votes that the proxyholder may be entitled to cast, you'll need to mark the box beside each resolution on the poll form to indicate how you wish to vote. Please ensure you complete the registered holder name where indicated. When you're finished filling in your voting paper, please lodge it in a ballot box to ensure your votes are counted. If you require any assistance, please raise your hand. Are there any questions? Okay. Thank you. Ian Lusted will provide the meeting with his CEO presentation whilst the poll forms are being completed and returned. I will deliver the results of the poll following his presentation. Thanks, Ian.

Thanks Jon. Okay. Thank you very much. And ladies and gentlemen, good morning. Welcome to those who have joined us in person, and welcome for those who joined us online at the webinar. I know that we've gained a number of new shareholders over the course of the last 12 months, and so I thought we'd start this presentation just by touching upon an outline of the strategy that we laid out in the original IPO documentation back in 2016, and just a review of what we've been able to do to date and where do we see the next steps going forward. I'll talk about the assets just for a short while and talk to it in terms of its characteristics. I'll talk about out performance during 2020 in an operational sense. And then I'd like to spend a few minutes talking about the U.S. unconventional industry, the status of that industry, particularly in the context for the remaining steps of our strategy. So if we talk about the strategy in the first instance, the plan was actually quite simple. We wanted to secure a material, high-quality, oil unconventional play in the U.S., and we wanted to do it at a low entry cost. We felt at the time that the low oil price of 2014 to 2016 would offer the opportunity to be able to do that back into some of the established plays in the U.S., which would be things like the Eagle Ford, the Bakken and the Permian. What we actually found is that capital was available for participants in the U.S. space to reenter those plays at what we felt were prohibitively high entry costs that effectively would limit returns to be a mere nominal type value, and that wasn't of interest for us. So we ended up following our -- the data, and we ended up focusing down on the Tuscaloosa Marine Shale or the TMS for short. While it was a relatively contrarian position, our decision to enter this play and focus on it was based on real data, production data. The wells were performing. We knew we had quality reservoir rock, and that was an important factor for us, together with some other characteristics, which we learned from our Aurora story, which is really around control and flexibility with that actually being important to us. So we secured our initial position through an acquisition. And then our timing was good because in a relatively uncompetitive environment, we were able to aggregate the large consolidated acreage position we have today, and we were able to do so at a very low cost base. Then in 2018 and '19, we went through our drilling operations and drilled 6 wells ourselves. We're the first to accept that we had our own operational challenges as we went through those, but we were able to achieve most of our key objectives. We were certainly able to demonstrate again that the rock is productive, it's quality rock, and the results of those wells speak to that on top of the historical wells that have already been drilled in the play. In addition, when we drilled full-length laterals and completed them, we were able to demonstrate well economics that were on par with some of the best plays in the U.S. are much more mature, much more refined and optimized in terms of completion and drilling [ result ]. So that was another tick in the box from our side. In the intervening period, since that program stopped, we've been continuing the technical work that's allowed us to be able to explain to others why this particular part of the play works and to better and further our own technical understanding. The next stage in our strategy was around seeking a partner, bringing a partner in to put more capital to work to drill more wells to raise the profile of the play and ultimately, to deliver value to shareholders. And obviously, that step has had some headwinds associated with both the macro story from a global perspective and the COVID pandemic, but also because of the status of the U.S. unconventional industry as a whole, and I'll be talking about that during the latter part of the presentation. So let's just talk a little about the technical aspects of this play. There's a lot of data on this slide and the next. I'm not going to go through it in detail, but I'd just like to pick out a few key points. The first is, this is not exploration. This is a proven play. We've got proven productivity. We've got wells that have been on production now for more than 6 years and a number of them. It means we know how these wells will behave as a base case, and that is unusual particularly in mind of the entry costs that we've been able to achieve. We know that it produces a light sweet crude that we can sell at a premium. And we also know that we're close to infrastructure, et cetera, which gives us benefits associated with this particular play. We know that the wells are productive. They produced at over 1,000 barrels a day in terms of their initial months of production, and that's on -- as a parallel in terms of oil production, is akin to some of the best parts of the U.S., and I'll share some slides to back that up over the course of the presentation. We know we've got strong well economics. Even from the costs that we've been able to execute on these wells, we were able to generate base case economics that sit $5 million NPV(10) per location or about a 32% IRR. And even with a very modest upticks to some of the inputs to that, we can generate upside economics that are substantially higher at $11.8 (sic) [$11.9] million per well and IRRs in excess of 80%. We've got significant control of this play which gives us flexibility. And you recall, there were key indicators and key requirements for the play when we went into it. We have a contiguous large operated position that gives us flexibility. And in today's environment in terms of cautious capital application, that's important for us, and it's also important for partners when they come in. Importantly, we have no federal leases, and we're in a very supportive jurisdiction in terms of some of the field rules and state rules that we have to adhere to relative to other parts of the U.S. Make no mistake, this is a substantial position. We have over 100,000 acres. We're the largest operator. We're the largest producer in the play. And with that scale of activity and that scale of ownership, then consistently, our independent reserve engineers have allocated big recoverable estimates to this. As of year-end 2020, that number sits at 170 million barrels. And again, that's the number I'm going to come back to. Moreover, we've got the option issue to add to it. We can infill lease and we can add to the acreage position, which adds to the recoverable volumes. So it's already big, but with the right partner, we can scale this up, and we've got control. Probably the most important thing to point out is that this play has been derisked. Not only do we have the production data to prove that, but there's been over $1 billion now spent in this play, overcoming the early stages of the learning curve that all of these unconventional plays have to go through. The steepest part of that, the most expensive part of that is now behind us. And even with some of the challenges that we faced, our post-operational review has allowed us to identify the causes and put in place the mitigation for it as and when we go around next time. So in summary, what is our position within the play, and again, in context to the criteria we set out originally. It's large, it's material. It's high quality. We know that. And we've obviously got the ability to scale it up if we want to, in terms of partnering as we go forward. So let's just spend a couple of minutes talking about the land position. This is a map that we show regularly. And obviously, it is ultimately our assets, so it's important. The shaded blue area there shows the area that we originally delineated out through production results. That's the area we focused on. And the dark blue is the acreage that we actually hold. Because we've done this in an uncompetitive environment, it's 100% focused with inside that core area. We haven't had to take broad positions across other parts of the play that we don't think perform. It's contiguous, which we think is obviously important. And because, again, because it's been an uncompetitive entry into this play, then we've been able to ensure that the acreage position has long lease life to it. So as we stand today, around about 1/3 of it is held by production. That basically means that it's probably good for the next 10 to 20 years in terms of the life of the existing wells, and the rest of the acreage has a relatively benign expiry profile to it. And again, that's an important factor for us as we think about the flexibility in terms of deployment of capital. Again, big position, over 100,000 acres and over 400 net locations as we go forward. We've talked before about whether this is good rock, and this is a slide that we use to try and demonstrate that. So this is a data assessment that was done by an independent body in the U.S., one of the data aggregators, a group called ShaleProfile. What they did is they looked at the 4 main oil plays in the U.S., the Permian, the Eagle Ford, the Bakken and another play called the Powder River. They looked at each area, each county or parish of those. And on the left-hand side, what you're looking at there in the blue bars is the cumulative average oil production out of wells in those different plays and in the parishes and counties in those different plays. If you're familiar with the U.S., you see a number of very familiar names in terms of those counties on the left-hand side of it. Excuse me. What we've then done is we've overlain in red, the performance of 15 wells that were drilled by Encana back in 2014. The reason we've done this -- we're not really comparing apples-to-apples because most of the data that makes up the blue was actually originated in 2017 and '18 when the design on these wells have been optimized. But nevertheless, if we look at pure oil production, this rock sits right at the top tier in terms of U.S. unconventional oil productivity, and that's key for us. We wanted quality rock, you'll recall. Now the same study then went on to look at a longer period of time. It actually took the best county or parish out of each of those plays and looked at a 5-year term. The profile is a little bit different. It's actually a cumulative oil plot over the course of the 60-month period. And what we've done again is we've overlain the actual production out of those 15 wells, the average production over the 60 months. And you can see that even if we take the very best parts of each of those plays and compare it over a longer period of time, the TMS looks good and stands up well. And again, we're just getting started on this play. There's a lot of optimization to go. So make no mistake, this is good rock, and we're exclusively in it, and we have been able to do that because of the uncompetitive nature of the play. I wanted to spend just a couple of minutes just talking about our performance in 2020, and this is a chart we used in our annual report, so we thought it was worth talking to. The first thing is that a lot of our revenues through 2020 were supported by the defensive hedge program that we put in place. The gray line that you see there is the closing WTI price and the black bars show you the achieved oil price that Australis got through the course of 2020. In particular, the months of March, April, May and June, were obviously to generate significant additional revenues as they're associated with the hedge program that was in place. So we were cautious going into the year, and it paid dividends in terms of what then transpired. The other point to make on this particular slide is around the flexibility and control that I talked to. The shaded area is the 3-month period that Australis elected to curtail production. In the months of April and June, we actually made sure that our production stayed below our hedge volumes. So we never produced oil and sold it at market value. We'd only ever produced oil and made the difference in terms of the hedge protection that we had in place. Moreover, in the month of May, you can see the red dot there, which shows the monthly production was actually 0. We shut the field in at that point. So we were still making revenues from our hedge position, but we weren't incurring the field costs associated with the production of the -- and on a net basis, that was the right thing to do. We could only do this because we have operatorship and control of the position within the play. How did all this then pan out in terms of fiscal performance through the year? Well, the first thing to point out, and Jon touched upon it, is that we've been following and hitting our cost base with an absolute focus. Operating costs during the course of 2020 on an absolute basis were down 45%. And on a per barrel basis, remember, we curtailed production, so production was lower during the year, we were actually down about 13%. That was a big contributor to our overall economic performance. Workovers, this is well repairs. It's an important part of our business, and we've been actually focused on that since we took over operatorship. If you look at the period from 2017 to now, the frequency of well failures and the workovers associated with them is actually reduced down by 66% or 2/3. Again, that adds to the cost base or reduces the cost base associated with our production. And G&A, we lost a lot of people. We had to let them go. And as Jon alluded to, everybody has shared in terms of the pain of keeping those costs down, and we managed to reduce them year-on-year by 54%. The hedge program delivered. And ultimately, what did that mean? We made operating profits in every quarter of last year. Not only that, we were able to pay down $13 million of the debt that we had. And for a small company, it was a great performance. We emerged actually at the end of the year in a stronger position than we went in, and there are very few oil and gas companies in the U.S. that can say that. So whilst we've certainly had our challenges associated with the year, overall, we were able to manage our program well. The last point I'll make before I start to talk more broadly is just around the reserve bases. So we have Ryder Scott independently assess our reserve base, and this is the fourth year that they've done it. Obviously, each time they do, they have an additional year worth of data to assess and to include in their analysis. Each year, they've ascribed to the play a significant recoverable volume. Today, that's 170 million barrels recoverable from our asset. To try and put that in context, the chart on the right-hand side just compares us to some of our oil-weighted peers on the ASX, some of whom -- or all of whom have a significantly higher market cap than we do and some of whom have no production as we stand today. This is a material asset base we put our foot on, and our entry cost, again, has been on a very low basis. We talked about the NPV(10) at year-end at a $47 oil price, which is what we used. We had an NPV(10) of $47 million. And if we fast forward to a strip price from a couple of weeks ago, then that number sits at just shy of USD 60 million. And that's a number I'll come back to at the end of the presentation. The last point I'll make in terms of the 2020 versus '19 is that we took a much more conservative view as to the well program that would be drilled. Our reserve numbers did drop, but effectively, it's just because we assumed we'd be drilling less wells within the 5-year qualifying period that we're allowed to assess as part of the reserve assessment. We only put 58 wells in the ground versus 180 when we were modeling this out in 2020, and obviously, that decision was driven by the economic conditions that were prevalent at the time. That all hasn't gone [indiscernible] anyway. It simply moved across, obviously, to the contingent resource. And to be clear, it is contingent only on a qualifying development plan. It's not contingent on the oil price that was present. It's not contingent on the well costs. All we need to do is to be bigger, have more capital, drill the wells within a 5-year period, and the majority of that will make it across to our reserve base. So a significant resource. Okay. I mentioned it before, and I think it's worth -- because it is important to us from a strategic sense, just trying to give you a sense of where we feel the U.S. industry is. And the next 4 or 5 slides will touch upon this. So those of you that are familiar may have seen graphs like this before. This is showing you U.S. unconventional oil production in the period from 2007 to 2021. And obviously, it shows the growth. It's really in 2 phases. There was one between 2010 or '11 to 2014, '15, and then there was a second growth period that took place in the last 5 years or so. The contributors to the first one were predominantly the colors that you can see there in green and purple, and the contributor in terms of the last 5 years was actually the Permian. So this has been profound, this has turned the global oil market on its head. The U.S. produced 14 million barrels of oil at its peak at the end of 2019, 9 million barrels a day came from these unconventional plays. People understand that and are familiar with it. What perhaps they're not quite so familiar with is that 85% of that unconventional oil comes from just 3 plays: the Permian, the Bakken and the Eagle Ford. 85% of it actually comes from just those 3 plays. The other thing is perhaps is less well understood is that for a variety of different reasons that we'll explore in the next couple of minutes, the rate of production increase out of the U.S. was starting to plateau. Certainly, out of 2 of those 3 plays, it was actually starting to show modest declines, and that was before COVID hit, and we'll explain what happened after that point. So the reason it's predominantly is that these plays have their own life cycle. This is a slide that we've shown once or twice before, but I think it's worth just spending a couple of minutes on. They have a life cycle, but they are finite in terms of their size. And we picked out here the Eagle Ford Shale. It's probably the most mature of those 3. There are 3 pictures that you see at the top of the screen. And effectively, they're snapshots of wells that have been drilled in the play, first of all, in 2011, 2015 in the center and 2021 on the right-hand side. Roughly speaking, about 1,000 wells drilled on the left, around about 12,000 or 13,000 wells drilled in the center, and we're up at about 24,000 wells drilled on the right-hand side. The first observation to make is this play isn't getting any bigger. If you look at the map in the center and on the right-hand side, it's exactly the same shape. All the wells drilled in that period of time were infill wells. It is finite. It is being drilled out, and it is being consumed. Moreover, natural inclination for all of these companies is they'll drill their best acreage first. How does that manifest itself? Well, if you look at the bottom left-hand side, it shows you production out of the Eagle Ford. In that first 5-year period, I was talking about, it effectively grew from 0 to about 2.6 million BOEs a day or about 1.2 million barrels a day in a 5-year period, and 12,000 wells were drilled in that period. In the next 5 years, another 12,000 wells were drilled. You can see what the production profile has done in that period. It's actually declined in that period of time. Why? Because there's variation in reservoir performance across the whole of the Eagle Ford, the best stuff has now largely been drilled, and this play is becoming more mature. The other factor that was at play here is actually, you can see on the right-hand there -- right-hand graph there. And there, what we're showing is we're actually showing the same plots as I used earlier when we're doing the comparison to the TMS cumulative oil, but now split down by year. The bottom one is actually 2010. And year-on-year, you can see how that performance has steadily improved. Interestingly, though, if you actually look at the last 3 years, they're all on top of each other. These plays are optimized. They steadily get better as we drill more wells and optimize the completion and the frac design and the drilling design, but there is a point of diminishing return, and the Eagle Ford is certainly there at the moment. It has now been optimized, and the opportunities to get more out of these wells is becoming quite limited. The Bakken is very similar. I said there were 3 plays. The other play that's mature is the Bakken, and it is similar. It's a little bit further behind. But to give you some context, there were around about 60 rigs running in the Bakken at the beginning of 2020. By the middle of 2020, they were only 9. And when you look at the recovery today, we've only actually increased to 15 rigs. The Bakken is actually 27% down on its production from the beginning of 2020 to where it sits today. Even in 2021, with a $60 oil plus price, we've actually dropped production now to the Bakken by about 100,000 barrels a day over the course of the last 4 months. These plays are becoming more mature. It means that your opportunity to secure new inventory of high-quality within these plays becomes limited. Now the other big contributor in the U.S. is the Permian. And the Permian the story is a little bit different. It is a big play, and it still certainly has running room. It's responsible for the bulk of the growth in that last 5-year period certainly, but there's been a couple of interesting things happen over the course of the last 18 months. The first is, is that there is no better spotlight on a play to help accelerate delineation and a low oil price. The low oil price that occurred during the course of 2020 allowed the Permian to be delineated and the differentiated between the good and the poor acreage in a much more accelerated fashion. The second thing that happened is that those companies with strong balance sheets took full advantage of that. Since the beginning of middle of 2020, there's been nearly $50 billion worth of transactions in the Permian alone around consolidation. The explanation is adding quality inventory. That consolidation is now largely coming to an end. Most of the obvious and big deals have been done, and we're in a situation now where the majority of the acreage is held by a relatively small number of companies. In fact, the top 10 largest acreage holders in the Permian now holds 62% of the quality acreage within [indiscernible] . That's quite an outstanding figure. So for us, when we think about this in context of the TMS, we want people to come and have a look at the contrarian asset that we hold. Whilst they had opportunities to secure good quality inventory within the more conventional targets and traditional targets, then obviously, it was difficult to encourage them to do so. As we move into this phase where the Eagle Ford and the Bakken are becoming more mature and opportunities reduce, then our options obviously become limited. And for companies that didn't participate in this consolidation, then the opportunities in the Permian are now starting to diminish as well. But let's just follow the argument forward a little bit and talk about what the price has done over the course of the last few quarters. The first thing, and Jon touched upon it is that OPEC were actually heading in the wrong direction for us at the beginning of 2020. You can see that on the left-hand side there, production out of the OPEC+ consortium, which is actually starting to grow, and that was the price war that you may recall that's boiling between Saudi Arabia and Russia. When COVID hit, you can see the reaction from OPEC. They immediately agreed to reduce production, and it's very important that they stayed disciplined since that time. You can see that even today, we're still running at about 5 million barrels a day less than the 2019 average out of OPEC. That discipline has been important. If you look at the right-hand side, then we're showing from a U.S. perspective, both oil price and rig count. The first thing to point out is that, as I said earlier, there was a bit of a transition occurring already in the U.S. in terms of the availability of capital and limited inventory, and you can see that the rig count was dropping during 2019 by about 20%. You see the rapid decline that took place following the oil price drop with the COVID implications. But interestingly, despite the demand-driven and disciplined display by OPEC and not the associated rising oil price, you haven't seen the reaction, but traditionally, we would have seen out of the U.S. in the unconventional play. It's being perceived as the global swing producer. It's being perceived as immediately filling any gap, and obviously, that's been what's driven oil price thematics over the course of the last 10 or 11 years. You're not seeing that this time. This time, you're seeing discipline. Even today, the rig count still sits at less -- at about 400 rigs running in the U.S., and that's still 50% of where we started 2020. So that discipline that's being shown across the board is becoming important. Why is it important? But what it's been able to do is, is it's been able to give confidence to the market, certainly in the short and medium term. The table at the top there just gives some of the investment banks and their outlooks now for 2021 and 2022. They are actually showing an average of $69 a barrel for Brent in 2022. That level of confidence is obviously as a result of seeing the discipline that's occurred both from OPEC, who are now only now slowly starting to increase their production, and out of the U.S. as well. Is it well grounded, that confidence in the U.S.? Well, on the bottom left there, we actually show the capital allocations for the U.S. industry. You can see there that for 2021, the allocations are exactly as they were back in 2020. So at this point in time, nobody is getting ahead of themselves. They remain cautious. Why they're being cautious? They're being driven by 2 factors. One is shareholder pressure in terms of the availability of capital and what they have to do with it. And the second is around a diminishing inventory for these companies as they look for development opportunities. For some, I should stress not for all. So for us, what does that mean? It means that these countries -- these companies now, they're generating significant cash flow. Where does that cash go to? They're not putting it back in the ground in terms of CapEx. They're either paying down debt for some. Certainly, a quantum is being returned to shareholders. But importantly, for us, balance sheets are being improved. As balance sheets are being improved and sentiment starts to improve, then those companies that were either oil-weighted within those more mature plays at the Eagle Ford and the Bakken or missed out on the consolidation that took place in the Permian, that provides the opportunity to us as Australis. It allows the focus to come back to the TMS. And just to recap a little bit about the TMS, and this is really the last one that I'll talk to. First thing is, is that the U.S. industry was going through this transition, pre-COVID and COVID, in many ways, has actually accelerated. We know that, that shareholder pressure has been there for returns as opposed to recycling cash, and that's obviously been a key differentiator at this point in time, relative, for instance, back in 2014 to '16 when we were finding companies were willing to pay very high prices to secure additional inventory. We know that those options are starting to be reduced in the traditional plays, and the other option for all these companies will be to explore. But bear in mind that unconventional exploration is very different to conventional. This isn't around going and finding a new play. It's around testing known source rocks. They already knew where they all were. It was a question of going out and testing them. So the world is a very different place today about trying to find new unconventional plays, and that leads back to us. We believe today that the TMS core is probably one of the only delineated but undeveloped, high-quality oil play that's now left in the U.S. We've got a large material controlling position within it. We're custodian of practically all of the historical data associated with it and whilst we'll inevitably get lots of -- we've got it too and lots of sort of [ unlikely ] to it. Ultimately, the hard data, the production data is irrefutable. And that's what's given us the confidence all the way through this. We're in a position to drive value, and we've got the team to do it. We've done it before. We've been patient, and we'll continue to invest in this ourselves. I'll make one final point before I just close out. And again, it's around timing. Jon said, I would do it, and I ask you maybe just to recall the number associated with our existing revenue -- our existing reserve base and what it was actually worth. Today, the enterprise value of the company is less than the value of the existing production. There is not a single cent of value allocated to the 170 million barrels of recoverable that we've consistently had reinforced by our independent auditors, reserve auditors. If I take that mid-case -- that base case I was talking about of $5 million per barrel -- per well in terms of NPV, that correlates to $10 per barrel for each recoverable out of the ground. Now we can't drill all the wells at once. If we did, then obviously, the numbers would look better still. But it gives you a sense of the gap between the valuation being ascribed to the company today and what the upside is. That's what we're trying to chase, and that we're committed to trying to deliver to shareholders as we go forward. So I'll finish up with the last slide. We believe we've got a quality asset, and we believe that the empirical data supports that. We know that the asset has a number of strategic advantages, which will be important for partnering as they come in. We believe that the U.S. shale industry is continuing down this transition, and the more it does and the more attractive the team [ at stops ] look. And our absolute focus is on trying to generate the value associated with that differential, and that's the opportunity that we've been pursuing and we'll continue to pursue going forward. So that's as much as I plan to say today. I am happy to answer any questions if there are any from the [ poll ]. Otherwise, I'll probably hand back to Jon, who I think we'll deal with a few questions that we've had sent through. Any questions from anybody? Well, thank you very much for your time. I'll hand back to Jon.

Thank you, Ian. So we do have -- as I referred to earlier, we do have some questions from shareholder, [ Mr. Kirk Barrel ], which we'll now seek to answer where we're able to. The first question is, "Please provide details on the significant losses on recent hedges." So Ian has touched on hedges to some degree, but I've got some specific comments to make there. So we have a requirement to hedge a specific volume of our production pursuant to certain debt covenants and have at times hedged additional quantities above that minimum up to a Board stipulated maximum. This position stood us in very good stead during the last year's very poor oil price environment. Of course, that's why we have them. More recent improvements in oil price are well received overall but can mean hedging losses on contracts that were entered into during lower price periods. Unfortunately, you can't necessarily have it both ways. The hedge losses and gains incurred during 2020 were detailed in our annual accounts, and the losses in 2021 have been reported in the recent first quarter results announcement and will be included in all future quarterly accounts and our midyear and full year account as and when released. It is important to note that Australis produces and first receives full market rate for the volumes hedged. Then we make a payment relating to the difference between the hedged and market prices on the hedged volumes. Furthermore, as the market conditions and oil price had improved, Australis has been layering on costless caps and collars, which still protect the downside but provide additional exposure to upside pricing. This form of hedging is an increasing part of our hedge book going forward, but was not an efficient nor effective instrument during the poor oil price period. It allows us to continue to be cautious and protect downside scenarios whilst participating in oil price upside. Further, our hedge book position summarized in our corporate presentations, which you've just seen. The second question is please provide the names of the top 5 candidates for partnering or joint venture and the status of those discussions. Incomplete price-sensitive discussions are, of course, confidential. If and when a price-sensitive agreement is executed, it will be announced to the ASX. I can understand that this information would be very useful to competitors, but Australis is not in a position to answer this question, but shareholders can rest assured that I will remain informed in a manner consistent with the ASX rules. I am willing to talk in a general sense about the type of partners we have held discussions with, and there are a number. Firstly, there are financial type partners in that scenario, we would operate moderate development activity using their financial input. Second is smaller operators. We -- in those circumstances, we retain a nonoperated position in the development activity that they undertake within a ring-fenced, smaller area out of our total large position. And the third scenario is larger operators and typically in those circumstances, in those discussions, you're looking at a scenario where that incoming party would take a majority interest across a larger portion of the play and operate that interest. So quite a cross-section in our discussions. Third question. Please provide a quarterly lease exploration calendar through 2025 or in brackets acres expiring per quarter. Again, we can understand why this level of detail would be of interest to competitors, particularly those focused in land, but believe that Australis is in compliance with its continuous disclosure operations. Our obligations having to provide an annual breakdown in each quarterly market's release. Question 4, please confirm the number of wells required to be drilled on all active acreage to secure held by production status. Please provide the associated capital for drilling, completion and lease operating expenses for those wells. The non-held by production acreage sits at approximately 70,000 acres. Ian went through land to some degree. The majority is in Mississippi, where the unit size at 1,920 acres is large relative to other states in the U.S.A. Our strategy to develop this acreage has always been to bring in a partner or partners. There are several potential deal structures that may be applied and would substantially contribute to the residual held by production CapEx required with cash flow contributing to the remainder. The AGM presentation made by Ian has provided detail on operating expenses for these wells. Question 5, what is the total cost for the Perth office on an annual basis? Brackets, all costs, including staff, what is the cost for Houston. Australis -- the answer is Australis reports its costs in his financial statements. And I point out that G&A costs were in 2020 reduced by over 50% from 2019 as a result of numerous steps taken by management and the Board that are detailed in our annual report released in February this year. Question 6, at the end of '21, how many drillable, 1,920 acre units remain that have at least 80% of the unit leased. We -- the answer is we have over 20 units in which we own over 80% working interest. Question 7. If there is no budget for drilling the next year, why are technical staff still on the payroll? Technical staff have been reduced to those essential to running and optimizing the existing production that we have and those necessary to retain the knowledge and experience of development activities in the TMS for the company in the future and when interacting with potential partners. The other questions we received by [ Mr. Barrell ] were answered during the presentation or during the AGM, with dealing with specific resolutions. I'd like now to announce the results of the poll. Bear with me. Okay, the votes have been counted on resolutions 1 to 15, and I now declare the resolutions 1 to 14 have been passed by the requisite majorities and Resolution 15 has not been passed. The results will be released to the ASX immediately following this meeting. Thank you very much for your interest and for your attendance today. Goodbye.