Brookside Energy Limited (BRK) Earnings Call Transcript & Summary

Hello, and welcome to MarketOpen Direct Connect, a webinar series for companies to tell their story, why it's compelling and why it's an opportunity to invest. I'm your host, Stewart Walters, and we're joined here today by David Prentice, the Managing Director of Brookside Energy, ASX code BRK. David will run through Q1 2025 results and will also participate in a Q&A post presentation. Attendees can ask questions through the webinar, and you need to submit those via the Investor Centre, and that will be answered in due course. I would like to introduce our guest, David. Welcome to Direct Connect, and over to you.

Thanks, Stu, and good to be back doing the quarterly webinar. And thank you to everybody joining us today. Look, it's been another very strong quarter for the business. But we know that it's been another tough quarter for shareholders, and we don't take that lightly. The team feels that pressure, and we're working hard to adjust to the changing macro picture and to protect what we've built and always obviously keep looking for ways to translate the value that we've built into share price appreciation. The business we've built is resilient in times like these. And operationally, it's holding up really well. But to be frank, no one expected the sentiment in our sector to stay this weak for this long. What's encouraging, though, is that while some shareholders are understandably reaching a point of peak frustration and moving on, we're also seeing new investors come in, backing the fundamentals and the long-term story. That does give us some reason to be optimistic, but we know we need to do more, and we're determined to reward our long-term shareholders. And so with this in mind, we're hopeful that this is the start of a more constructive chapter. So Stu, with that, I'll get you to put up the disclaimer. Everybody have a chance to have a look at that. And then now on to Slide 3. Thanks, Stu. So just starting out with a quick review. Obviously, we continue to build our strong position in the Anadarko Basin, and our SWISH Play acreage is the cornerstone of our portfolio. Since 2020, we've produced more than 2.75 million barrels of oil equivalent from this acreage, clearly demonstrating the strength of our assets and our ability to execute. In Q1, we achieved the following key milestones: a 50% increase in PDP reserves, net production of in excess of 170,000 BOE, operating cash flow of $4.5 million and obviously, increased cash quarter-on-quarter, leaving us with a cash position at the end of March of $12.7 million. Turning to operations. We successfully drilled the Bruins Well, our ninth operated well in the SWISH Play. And drilling was completed ahead of schedule in just 30 days and with the well reaching its target depth of just a little over 16,000 feet. Completion operations are now underway, and the flowback and sales are expected in the second quarter. So obviously, very exciting that the crews are out there on location now getting ready to do the multistage fracture stimulation. And then moving on to our non-operated properties. The Gapstow Wells also delivered strong results during the quarter. Those 8 wells have produced 1.65 million barrels of oil equivalent gross in their first 90 days. And Brookside's net share of that was 27,500 BOE. Importantly, 73% of that was liquids, and revenue from these wells will be recognized in Q2. On to Slide 4. Thanks, Stu. So our reserve report was a standout this quarter with our PDP reserves increasing by 50%, and we replaced more than double of our FY 2024 production. So a fantastic result in terms of our independently certified reserves. On to Slide 5. Thanks, Stu. And again, looking at our production, gross operated production averaged a little over 3,000 BOE per day for the quarter. Net to Brookside, that's in excess of 1,900 BOE per day. And the SWISH reserve definition wells continue to perform in line with forecast, and our FMDP multi-well pad wells are also doing very nicely with early production slightly outperforming compared to the parent well. On to Slide 6. So we remain financially in a very strong position. We recorded $18.1 million in cash receipts for the quarter, closed the quarter with $12.7 million in cash, a 12% increase quarter-on-quarter. Cash outflows for investments totaled $5.6 million, primarily directed at the Bruins and SWISH development, and these outflows were partially offset by $2.5 million in partner contributions. We continue to follow a balanced capital strategy, focusing on cash flow efficiency and development pacing. We also implemented a limited hedging program during the quarter. We sold gas forward at $4.25 per MMBtu and oil at an average of just under $63 per barrel. This is a limited hedging strategy designed to protect the Bruins Well flush production from near-term price volatility while leaving future development and production exposed to potentially higher prices. On to Slide 7. Thanks, Stu. So on the corporate front, we made strong progress towards our planned U.S. listing during the quarter. Our PCAOB audits are almost complete, and we're now set to begin working on our SEC registration statement. And once that's submitted and approved, we plan to proceed with the listing of our ADRs on the NYSE. Obviously, we'll provide more detail on the timetable as we get further along in the process. In terms of the market-facing stuff, trading volumes improved modestly during the quarter. Average daily volumes rose to around 92,000 shares per day, and the top 20 remained stable with about 31% of the company. Interestingly, we're now starting to see growing interest from both domestic and international investors, including some small institutional investors, and we really welcome this renewed attention in the sector. And as I said in the introduction, we hope it's the beginning of a new more positive chapter. On to Slide 8, please, Stu. So to close, we continue to execute our strategy, growing production, improving cash flows and advancing our strategic objectives. We remain focused on capital discipline, on creating and protecting long-term value in the business and on translating that value into sustained share price appreciation and most importantly, rewarding our long-term shareholders. We want to thank you for your support. We know it's been tough and a long journey for many of you, and we look forward to updating you again next quarter. So Stu, I'm happy to take some questions now if there's any that got sent through.

Yes. Thanks, Dave. Fantastic presentation there. Company is obviously in a great position despite market conditions. But we do have a couple here that have come through. Can you give us an update on the CapEx guidance, please?

Yes. So look, there's been no material change to the full field development CapEx guidance. For the 16 wells that we have in the reserve base, we're still looking at that sort of USD 170 million gross number, which will be -- translate to about $126 million net to Brookside. But of course, these prices are obviously subject to oilfield inflation fluctuations, varying lateral lengths and completions design. So there's always some opportunity for us to modify those -- that outlook. But at the moment, no material change.

Secondly here, lateral length decision framework.

Yes. So I think this question was directed particularly around the reasoning behind drilling the 1-mile laterals in the FMDP development. And really, quite simply, that was just a function of the shape of that drilling spacing unit. So we were limited in terms of the length of lateral we could drill on those 2 most Northwesterly wells. Obviously, where we can, our preference is to drill 1.5 or 2-mile laterals because obviously, we get larger EURs and we get cost efficiencies on a per foot basis. So where the geometry of the DSUs allows, we obviously would like to do those longer laterals.

Dave, thank you. Fantastic presentation. And as mentioned earlier, questions can come through and directed through to the investor hub page. For more information about Brookside Energy, you can refer to the website, www.brookside.energy.com.au (sic) [ brookside-energy.com.au ] or follow the company's social media channels as per instructed. Dave, thank you for joining us today. I wish you all the best, and we'll speak again soon.

Thanks very much, Stu.