Buccaneer Energy plc. (BUCE) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Nostra Terra Oil & Gas Company Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received during today's meeting. However, the company can review all questions submitted today and will provide responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. If you can give that your kind attention, I'm sure the company would be most grateful. I'd now like to hand over to CEO, Paul Welch. Good morning.

Good morning, and thanks for the opportunity. So good morning everyone. I'm here to talk about kind of a change in direction for Nostra Terra. About a month ago, we made a change in leadership. The previous leader stepped down after 15 years. And at that time, we also added a new Board member, and we significantly trimmed the G&A. That's commensurate with changing the direction of the company. So in years past, the company focused on U.S. oil and gas and things further afield and they had a wide spread of assets, part in East Texas, part in South Texas and some in the Permian and West Texas. And so what we've done since we've come on board is we've gone through and done a review of all the assets, determined where we were generating the best return for the company. And then those assets that didn't deliver, we decided to divest. So what that meant is that we've focused now primarily on our biggest asset, which is Pine Mills in East Texas. It has a lot of potential. It was generating the most cash. And from years past, we've seen significant upside, which we'll talk about here in a minute. And that meant that we started to divest other assets. So we had assets in West Texas and South Texas. Two of the West Texas assets have been sold already. The third is in auction process. It will likely be sold by the end of July. And then the South Texas assets are in a negotiation phase at the moment, where we expect by the end of the summer that we will have divested all of those. So by the end of the summer, we think we will be completely focused on Pine Mills. And with that cash that we generate from asset sales, we are then focused on putting it back into Pine Mills. Pine Mills was a large field, which we'll talk about in a minute, discovered quite some time ago, had a number of wells drilled in it. But we currently have a number of idle wells, and we can see the potential to return those to production. And we also have modern 3D seismic over all of the field. And from that, we are looking and have discovered some new prospects, new structures, and there are also 4 primary horizons. So within that 3D, we can also look at things beyond the sub-Clarksville, which has been the main producer. So at the moment, we've found 2 structures we think are interesting, and there are probably 2 to 3 others that we expect to find something in. But there's lots of potential that still needs to be developed in our mind. If we look at where Pine Mills is located, for those who don't know, again, it's in East Texas, about 100 miles from Dallas. Again, discovered in 1949. It's produced to date about 12.5 million barrels. The thing about it is that it's very shallow. It's cheap to develop. We're averaging about 75 barrels a day at the moment from 9 producers and 4 injectors. But again, we see a lot of potential in just returning wells to production, about 80 barrels a day plus. We can see there are infill drilling opportunities that we'll talk about here in a second. We drilled 2 in the last 2 years, and they came on at over 100 barrels a day. And then we see, again, some optimization that can be deployed here and putting water into areas of the field that haven't had it in the past and improving the recovery. So there's a lot of potential in these large fields. So on the right-hand side of the slide, you'll see it's a very long structure. It's about 13 miles long. We'll give dimensions here in a second. Let's go back to the next slide here. So again, discovered -- this is just looking at Pine Mills. So, on the left, what we have is a structure map. The points in black are the wells that have been drilled. The brownish red lines represent the faults. And so what you have is you have oil migrating from essentially west to east. It gets trapped along those faults, and then you drill wells as close as you can to that fault to get as high up on the structure as possible. Now, what's not shown here -- this is an old version of this map. And what's not shown is the new version of the map, which we'll show in a second, that has many more of these faults that show it's a much more complex picture. And as a result of that, a field that was discovered more than 60 years ago still has a lot of undrained potential. And if people that have followed the story know the Fouke wells in the southern portion of the field were drilled 2 years ago and came in essentially at original reservoir conditions. So it's very interesting opportunity. Some stats on the field. It's about 4 miles long, 0.6 miles wide. It's got great quality rock. Average porosity is 24%. The average permeability is over Darcy, but you can see it's very shallow. So to drill wells here, you're looking at sub-million dollars in cost. So it's a -- when we look at future potential, it's very easy to access. Now, it's a large field, 38 million barrels originally in place. But to date, we've only produced 12.5. So that's a recovery efficiency of around 33%. For a reservoir of this quality that's under active waterflood, we should expect something closer to 50%. And so the remaining potential is shown there about 6.5 billion barrels. So there's a lot of running room. And this doesn't include some of the undeveloped fault blocks like we've seen in Fouke. If we go to the next slide, this is a cross-section of what we see. So the faults are shown in these lines that slice through the rock, and then the reservoirs are shown in this yellow greenish color. And there are 4 primary horizons out here, and each of them is filled to spill. So the interesting thing about wells that were drilled in the '50s and '60s, when the majority of the wells were drilled here is that if they didn't produce at high rates, and at that time, high rates were over 100 barrels a day, a lot of them were immediately plugged. So we can come back today and look for opportunities that come in at 50, 60 barrels a day that are very economic today, that weren't economic back then. So there's a lot of potential, a lot of reentry, and the majority of the focus was on the sub-Clarksville. But as you can see, there are a number of other reservoirs here that haven't really been fully developed. And so our potential or our opportunity is to use the 3D that we have now and to go and look for these newer horizons that have not been fully exploited, put wells in them or recomplete into them, and then produce oil almost out of original reservoir conditions. So it's a tremendous opportunity. So we'll see a result of that on the next slide here. But there are a lot of great opportunities, we think. Go to the next slide. So here's one. This is the Fouke area. So we're looking in the southern portion of the field, the areas in red. The red dots are the wells that have been drilled. And then the 2 wells you see right here are the Fouke 1 and the Fouke 2. And they were drilled 2 years ago. And the production from those wells is shown on the left-hand side. That's daily production, so it's a little erratic, but you can see that these wells came in at over 100 barrels a day each in a field. Again, discovered in the '40s where the average well to date is making 10 barrels a day. These wells came in, produced clean oil at 100-plus barrels a day and they're in these tiny sliver fault blocks that couldn't be seen until we started to look at modern 3D. Now, within the Fouke area, we have identified one new prospect. We're calling it the Fouke 3. And because the field rules have changed from the minute this well is drilled and if it's successful, that well can start producing at over 100 barrels a day. So the field allowable is now 124 barrels a day. And so from the sub-Clarksville in this area, we can produce 124 barrels a day. So this is one opportunity and one horizon. But as you can see, as we've started to map this field with the new 3D, we see other faults that are very interesting. And also the placement of these faults has moved. So in the old days, when we had 2D seismic, we couldn't pinpoint exactly where they are. And so some of this attic oil is left behind. So, as you can see in the Fouke area, because we knew precisely where the fault sat, we could truly as well snug up against it and pick up all the oil that was potentially there. That same opportunity exists in other parts of the field today because we have good quality seismic, we can pinpoint these wells much more accurately and we can pick up some opportunities that we believe we have missed. So that's why we have continued to focus on Pine Mills, because in an area where we have existing infrastructure, adding new volumes is incredibly cheap. And when they come in at over 100-plus barrels a day, it's the best place to spend the cash that we've generated through the asset sales and other parts of our business. Go to the next slide. So to kind of sum up, I know it was brief. What we're doing here is we're -- Nostra Terra is still focused along that conventional U.S. production. We are going to fully develop our Pine Mills field, which is located in East Texas. It's a shallow field, low decline, has very low operating development costs, and in our view, it has significant upside potential. There has not been a dedicated workover campaign in the field since 2019 when the field was originally purchased. And so what we're doing in the next couple of months to 6 months is to kind of fill in or take care of issues that should have been addressed years ago and that are incredibly profitable, because wells that were just shut down, for instance, a pumping unit failed and they decided to spend the money in West Texas rather returning that well to production. You spend $15,000 and you can get back on 8 to 10 barrels a day. So it's a very, very profitable set of opportunities. I came on board about a month ago to kind of change the direction of the company. Last week, we also added a new Board member by the name of Jim Newman. He's also the current largest shareholder. He is from the Permian. He comes from a domestically focused E&P background. He has been working for 35-plus years in the mature well space. And we think through his hindsight, his insight and his experience, we can bring these wells back to production not only cheaply but quickly, and perhaps most importantly, most efficiently. So it's a combination of team -- things that have changed, that are changing the team up that we think will make us successful here. The review of the assets has now been completed. And as I said, we decided to dedicate our resources to the part of the business that we think is going to generate the most production. West and South Texas assets are being sold, and those sales will be complete by the end of the year. By selling those assets, we've reduced not only our operating costs but our G&A. And the cash that we've generated is going to be put back into Pine Mills to turn these wells on. And not only to do that, but also to improve the infrastructure. So we're investing in the facility to keep the uptime of the wells improved from where it was and just doing the basic work that hasn't been done for the last 6 years to kind of maintain what we think is an incredible asset. On the left-hand side of the slide, it shows some of the statistics for the company. I think the most important thing here is the current market cap of the company is about GBP 1 million. The current NPV 10 is about 9.1. That's before we make all these changes. So the focus of the new management, the Board is to close this gap, this kind of a yawning gap between what the market thinks the company is worth and what the assets are really worth. And so we're dedicated to essentially closing that gap and then also increasing that NPV 10 because through the efforts of the workovers, the technical work on the 3D seismic, we see a tremendous amount of opportunities here. And with that, I will open it up for questions. So, thank you.

That's great, Paul. Thank you very much, indeed, for updating investors. [Operator Instructions] I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A will be accessed via your Investor Meet Company dashboard. Paul, as you can see, you've had a number of questions from investors throughout your presentation. So thank you to everybody for your engagement. If I may, Paul, just hand back to you. If I could ask you to read out the questions and then I'll pick up from you at the end.

Sure. Okay. So will the new management give serious consideration about changing the name? Yes, we will. That's something that we've been discussing. We haven't come to a landing on that, but if people have some ideas, feel free to submit them, and we'll consider them. But it's something we're definitely considering. Okay. What are the expected timelines and fund requirements for developing the new locations in the Pine Mills field? So that's a great question. So the timeline is essentially now. We've identified the first 9. As I said, we have 10 wells. We identified the first 9. The costs range from simple as $15,000 to changing the pumping unit out to $200,000 to run new casing in a well. We are looking -- the funding will come from a combination of increased prices. So we're getting good price, good value at the moment. So we're generating cash and the asset sales. Something like a new Fouke well or 2 or 3 fault blocks, where we see new potential, that will require some sort of partnership to develop because we don't have the resources in-house. But again, we see the next 6 months to 12 months as being the time in which we want to implement most of these changes, particularly the 80 barrels a day that we see in the workover program. Okay. Next one. What are your immediate priorities and long-term vision for Nostra Terra? So the immediate priorities are, again, returning these wells to production, essentially doubling production from where we are and more than doubling our cash flow. And then after that, what we see is we see kind of an organic growth from the Pine Mills area. So there are a number of opportunities in East Texas that we see as potential farm in, farm out opportunities, acquisitions perhaps. But what we'd like to do is we have an existing facility there that's underutilized. We have staff, pumpers, everyone available. So we want to maximize the use of that facility. So it's going to be kind of an organic growth story that's going to emanate from East Texas and focus solely there. We really want to operate in areas where we can generate positive cash flow. And so that's the plan. There's a question here about the previous CEO, which I think the best way to describe is that he's no longer part of the discussion. And so there's anything that he did is not going to be germane enough how we move this forward. The question is why -- another question is why hasn't basic work, as you stated, not been done in the past 6 years? I think it was just a matter of priorities for the previous management team. They were more focused on expanding the footprint of the company, going into the Permian, looking for opportunities that they didn't see. The skill set of that team was different from the skill set of the current team, where we're more focused on petroleum engineering and essentially understanding what we have as assets. So it's just a complete different focus. And they did what they did because that was what they wanted to do. We have changed the direction of the company. We don't intend to pursue that path any further. And so that's why you're seeing this shift to focusing on our biggest asset that we feel hasn't been invested in properly for the last 6 years. What is the -- next question is what is the current debt and what are the plans to tackle it? The current debt is around $4 million. The plan is to pay it down. That's what we would like to do. We are focused on paying it down. The debt is very stable. It's got a very reasonable coupon rate. And so we're not in any great hurry to do that. But we feel we're a little too much there, and we like to reduce it as much as possible.

That's great, Paul. You're very kindly taking all the questions from investors. If any further questions, Paul, do come through, we'll make those available to you post today's meeting and we can add those responses, if appropriate to do so. Paul, I know investor feedback will be particularly important to you. I'll shortly redirect those joining us on today's call for their thoughts and their expectations. But if I may do so, just ask you for a couple of closing comments and then I'll send investors for their feedback.

Okay. Well, listen, thank you very much and I appreciate everyone taking the time to listen to the story, the change in direction. We're currently producing around 100 barrels a day. We think through these workovers, we can add another 80 with redirection in the water flow, probably another 30. So we can see doubling in the production in the near term. We're excited about that because it allows us to generate more than 2x our cash flow and then prioritize investing into Pine Mills and reducing our debt and improving shareholder value. And so that's what we're focused on. So again, any questions, anything, any ideas on the name change, please let me know. But again, thank you so much for your attention, and I look forward to updating you as we progress through this journey. Appreciate your time.

That's great, Paul. Thank you once again for updating investors. If I could please ask investors not to close the session as we'll now automatically redirect you for the opportunity to provide your feedback in order the company can better understand your views and expectations. On behalf of the management team of Nostra Terra Oil & Gas, we'd like to thank you for attending today's presentation and wish all a good rest of your day.