Buru Energy Limited (BRU) Earnings Call Transcript & Summary

All right. Ladies and gentlemen, it's 10:30, I'm reliably informed. So I'd like to welcome everybody to the AGM. My name is Eric Streitberg, I think, probably well known to most of you. I'm now the Nonexecutive Chair of Buru Energy. So this is my first AGM as Nonexecutive Chair. And in that role, I'd really like to welcome everybody here. I note the welcoming committee at the front. And hopefully, everybody was happy to listen to their message, exercising the democratic right to express their opinion. So a good opportunity for people to put an alternative view to what's happening in the industry. So I'd just like to note our Buru attendees. We have our 2 Nonexecutive Directors here in person, together with our Chief Executive Officer; Thomas Nador, and our Company Secretary, Paul Bird. And hopefully, we have Rob Willes virtually. And he's unfortunately unable to join us today. He's traveling. We also have a number of staff in attendance. And if you could just identify yourself. Thank you. So as shareholders and attendees, please feel free to mingle with the Buru staff and ask them any questions that might be on your mind. You'll have seen from the Notice of Meeting that again, we have a hybrid meeting this year, which is something that people are doing pretty regularly now. So we have shareholders attending physically, and thank you for that. And then virtually online as well. It's a relatively complex process, and I'll explain it. So I'd like to welcome all our online attendees. I don't -- do we have any way of knowing whether we have any? Okay. Welcome. Thank you. So the shareholders who are listening to the webcast should be able to view the slides and vote on the resolutions, ask questions, basically as if they are in attendance. And I'll explain all that process a little bit further into the meeting. But all those detailed instructions were set out in the guide that was attached to the Notice of Meeting. After the formal part of the meeting, Thomas will provide a presentation on the operations of the company. And there will be an opportunity at that point for people who ask general questions. And shareholders who are attending virtually that wish to ask any general questions, they should just select general business through the virtual system and we'll attempt to answer as many of those questions as we can. I'd also note that Thomas' presentation will actually address a lot of the general questions that we've received from shareholders either as part of the meeting or just generally with our interactions with them. So his presentation and his remarks have been released to ASX, and that's in conjunction with the meeting. So you'll be able to look at those after the meeting as well. So I've been advised by the Company Secretary, Paul Bird, that a quorum is present, both at The Celtic Club and online. So I now declare the AGM open, and we'll proceed with the business of the meeting. So I will then now introduce formally our directors, Ms. Joanne Kendrick, and Malcolm King, and Rob Willes attending virtually. Rob's had to travel overseas on family matters. But appreciate the fact that it's very early in the morning for Rob, that he's still able to join us. And of course, Thomas Nador, who's our CEO. This is his first AGM, and our Company Secretary, Paul Bird. Now in regard to the conduct of the meeting, KPMG, the company's auditor is represented here by Jane Bayly, welcome Jon. Thank you for coming. You should have all received the Notice of Meeting, and I'll therefore take that notice of meeting and the resolutions as read. The Notice of Meeting and the accompanying explanatory notes outline the business that can be considered at the meeting. In regard to voting on resolutions, the ASX requires that all ASX listing rule resolutions put to shareholders are voted on by a poll rather than by show of hands and the ASX Corporate Governance Council recommends that all substantive resolution is not just under the listing rules should also be decided by a poll rather than a show of hands. We'll do the poll at the end of the meeting, and the results of the poll will be released to the ASX later today and post it on the website. I note that you've already submitted a proxy or voted, of course, you don't have to vote again, but you may do so. And any votes that are made during the poll or super side -- supersede any online or proxy votes. The details of the poll on how to participate, both those physically present and those online are as follows. I'm required to explain how this poll works. So for the shareholders who have attended the meeting at The Celtic Club at the time you registered at the registration desk as a shareholder, a proxy or a corporate rep, you're given a yellow voting card. So hopefully, those shareholders who fall in that category, to get a yellow card. And you'll use that yellow card to complete any of the polls. Any shareholder attending in person, who has already lodged a proxy will have received a blue nonvoting card and therefore, doesn't need to complete the poll. Online shareholders can register to vote by clicking on the Get a Voting Card, which is at the top and bottom of your screen and follow those instructions. If you are physically attending the meeting as a visitor, you've received a red card. As a visitor, you're welcome, but only as an observer. And because this is a shareholder meeting, you're not entitled to participate in the meeting, including speaking or voting. Online attendees that are not shareholders are also not able to ask questions or vote during the meeting. Now I will remind shareholders that any questions during the meeting have to be specifically addressing the resolutions. So also when you ask a question, can you please stand up, state your name and show your yellow or blue card. For those online, click on Ask a Question and submit your questions for the relevant resolution. I also note that the online questions will be referenced by the name of the shareholder submitting the questions. For those asking a question via the telephone, you all have contacted link prior to the meeting to obtain a PIN as per the instructions on the Notice of Meeting, and you will have received those instructions and a phone moderator who will introduce you at the appropriate time. If we have numerous questions on a particular resolution, we will attempt to answer those as best we can, we might have to consolidate some of those. So I'll now move on to the formal business of the meeting. And that is the consideration of the reports. So I refer shareholders, the Annual Report of the company, the directors report and the auditor's report for the year ending 31 December 2022. Each of those reports are included in the company's 2022 annual report, which has been tabled and of course, is available online. There's no vote to be taken on the reports, but the auditor is present to answer any questions on the audit report or the conduct of the audit. So questions at this point should be specifically on the actual report and really should be for the auditor. The remuneration report is to be voted on a Resolution 1. So if you have any questions on the remuneration report, please wait until we get to that resolution. So are there any questions for the auditors or the directors in relation to those reports. Paul, are there any questions online? Okay. Thank you. Obviously, the voting on this will be done by poll at the end of the meeting for any of the resolutions that need to vote. So I'll now move to Resolution 1, which results relates to the adoption of the remuneration report for the year ending 31 December 2022. The resolution should be set out in full on the screen. Fairly straightforward. And the number of valid proxies received for this resolution are also on the screen. You'll note the proxies are 96% in favor at this point. We will wait for the results of the poll to see what the final votes are. This vote is advisory-only and doesn't bind the directors. However, if the company's remuneration report receives an against vote of 25% or more in 2 consecutive annual general meetings, the Corporations Act requires that a resolution must be put at the second AGM. That another meeting will be held within 90 days at which all directors who are in the office on the date. The directors approved the remuneration report must stand for reelection. So do we have any questions on the remuneration report? Do we have anything online? Thank you. And as I mentioned earlier, that resolution will be cited by poll at the end of the meeting. The next resolution is my election as a Director. So the resolution again should be set out on the screen together with the proxies. And my resume and experience was set out in the notice of meeting. This may seem somewhat anomalous and I'm standing for election, but because I've transitioned from executive to nonexecutive, I thought it was appropriate that I allow shareholders vote to confirm me as a director. I've got an interest in the resolution, so I'll hand over to Malcolm to call for the vote.

Thanks, Eric. The Board, with the exception of Eric, who does not make a recommendation due to his interest in the resolution, recommends Eric's election as a Director. Are there any questions on this resolution? Nothing online?

Okay. Thank you, Malcolm. I've obviously retained my directorship until the poll. And hopefully, I've still got a job at that point. So I'll now move to Resolution 3, which is the additional 10% placement capacity. I will explain this, but that takes some length to make sure everybody completely understands what we're trying to do here. This is under ASX Listing Rule 7.1A. Listing rule allows ASX listed companies that are not included in the ASX 300, which obviously Buru isn't at the moment and with a market cap of equal less than $300 million, which again painfully, we are not. To seek advanced approval from shareholders by way of a special resolution to provide a further 10% placement capacity in addition to the 15% placement capacity, which is permitted under 7.1 without having to go back to shareholders for that approval. We've previously obtained this approval as a matter of routine, basically at every AGM and it's always been approved. As set out in the Notice of Meeting the company is seeking approval set out in Resolution 3 because as a Board, we consider it's prudent to have that ability to take advantage to be able to issue some additional shares in circumstances where the Board considers it's the best interest of the company to do so. This is a special resolution. It has to be approved by 75% of the total votes cast. And the resolution is set out in form of the screen together with the proxies. And again, the proxies are strongly in favor. Are there any questions on this resolution? Anything online? Okay. Thank you. Well, again, this will be decided by poll at the end of the meeting. So that concludes the consideration of the resolutions, and we'll now conduct the poll. So Paul you can proceed with that, while I explain the poll process. The votes that have already been lodged by proxy was set out on the slides for each resolutions. If you're an online shareholder, and if you've not already voted or submitted a proxy in which wish to submit a vote follow the instructions on your screen. Once you finish voting on the resolutions for the online shareholders, scroll down at the bottom of the box and click on the Submit Vote or Submit Partial Vote button. For shareholders here at The Celtic Club, please complete your votes on the yellow card. And the instructions on the cards are pretty straightforward. If anybody's got any questions, please ask to auditors. So hope we collected all the votes. Thank you, Paul. Polls completed online as well. I think there's another 5 minutes left to go on the online poll. So that process will take place while we are discussing the business of the company. So thank you, ladies and gentlemen. That basically concludes the formal business of the meeting, and I declare the meeting closed. So I'll now hand over to Thomas, who will provide a presentation on the operations of the company. And as I said, at the end of that presentation, there will be an opportunity for shareholders to ask questions both online and physically in the meeting. Thomas?

Thank you, Eric, and good morning, ladies and gentlemen. I'm very pleased to be delivering my first Chief Executive Officer's address to you, the shareholders of Buru Energy. It is a great privilege to have been appointed the CEO of the company in September last year, and time does fly. I recognized the proud history of Buru Energy and thank the support of our dedicated staff, first and foremost, and our shareholders, many of whom have been with us through thick and thin over the past 15 years. I'm passionate about the team and the future of Buru Energy. I believe we have all the right ingredients to deliver exceptional value for our shareholders, the traditional owners, the government and the communities where we operate through responsible exploration and development. Respect is 1 of our core values at Buru Energy. And before I deliver my address, I would like to pay my respects to the traditional custodians across Australia. I would like to acknowledge the Whadjuk people of the Noongar nation as the traditional owners of the land on which we meet today and pay my respects to elders past, present and emerging. I also recognize the many traditional custodians that protect the rich cultural heritage in the areas where Buru currently operates being in the Kimberley, in the Pilbara and now in South Australia. Our compliance statement is set out for those that wish to review later. Perhaps I could start with some introductory comments. It's almost impossible to read or listen to the media today without references to energy, the role of gas and oil in both energy security, energy supply, energy pricing and the energy transition itself. The sheer volume of commentary on these topics can be at times overwhelming and very confusing and there are many who take extreme positions. As an ASX-listed energy company with a proud history of gas and oil exploration in Western Australia, Buru is not immune to this debate. However, there are 2 fundamentals that you as shareholders of Buru should hold on to. Not everyone may agree with them, but for Buru, they do guide our strategy. First, what we produce today and what we plan to produce in the future remains and will remain important valuable and in demand, in particular, natural gas acting as a balance of energy transition and energy security is going to play a critical role in Australia's energy mix for decades to come. And within the foreseeable future, there are real risks of shortfalls both here in Western Australia and the Eastern states. This view has been consistently accrued by the Australian federal government, the Australian Competition and Consumer Commission, the Australian Energy Market Operator, as well as the Australian Petroleum Production and Exploration Association, just to name a few. We are also expecting a rise in demand for LNG in Asia, requiring new investment. We believe Buru is well positioned to respond to this via Rafael conventional gas and condensate discovery as well as the prospective Canning and onshore Carnarvon Basin interest. Secondly, as far as the fundamental is concerned, the world will decarbonize. We agree that it should. However, the details of exactly how and over what period of time is a topic of great debate. And it is unclear. We at Buru believe that it may be unclear for years. If you need evidence, I refer you to the latest International World Energy Outlook. In response, Buru has been carefully observing latest industry trends, the evolving government policies, shifting customer preferences and the investor sentiment to guide a disciplined approach to new energy opportunities to make sure it remains relevant and viable in the longer term and also to provide shareholder value through active participation in the new energy economy. At Buru, we have significant expertise and intellectual property to deploy to what I would call adjacent new energy opportunities. To this end, we have been building the value of our subsidiary companies focused on carbon capture and storage, natural hydrogen and helium exploration and battery minerals exploration, 3 more commonly accepted elements of a future energy ecosystem. We recognize that we must balance these 2 fundamentals very carefully and deploy our capital and resources prudently for maximum shareholder and stakeholder benefit. Our primary focus speaks to fundamental 1 that is with gas playing a critical role in Australia's energy mix for decades. We aim to supply domestic gas to the West Australian gas markets and create value-added products to gas like methanol or ammonia or liquefied natural gas to the domestic or export markets. We plan to do this by developing a flagship 100% owned and operated Rafael conventional gas and condensate discovery in the Canning Basin. In addition to holding 22,000 square kilometers of operated acreage in the Canning Basin, 2022 was also the first year the company forayed out of the basin for gas and oil exploration. We are very excited with the potential of the underexplored onshore Carnarvon Basin, prospective for both gas and oil and look forward to a program of 2 exploration wells next year fully funded by our joint venture partner and operator, Mineral Resources. While still on the core gas and oil business, I'm pleased to report that the 50% owned and operated Ungani Oilfield is now back producing after a 4-month suspension due to the damage caused by ex-tropical Cyclone Ellie to regional roads and the bridge at Fitzroy Crossing, which we do rely on for the transportation of Ungani crude to Wyndham. With the roads reopened, we recommenced production on the 15th of May. We will continue to extract maximum value from the field, whilst providing regional benefits by employment, procurement, community support and royalties. Our efforts across the new energy businesses speak to fundamental 2, that is the world will decarbonize. Buru has committed to net 0 carbon emissions from its current and future gas and oil operations, including Rafael by 2050. To achieve this, Buru via its GeoVault subsidiary has been actively progressing carbon capture and storage, technical and commercial activities, focusing on CO2 storage in the onshore Canning and Carnarvon basins of Western Australia. This work will not only provide a potential pathway for our low emissions Rafael development but an opportunity for third-party industrial emitters to access Buru's future greenhouse gas storage capacity. Recognizing that all energy sources and technologies will be needed to satisfy the world's growing energy needs, Buru via its 2H Resources subsidiary is also making good progress on natural hydrogen and helium exploration, and has been confirmed as the preferred applicant of 30,000 square kilometers of petroleum exploration licenses in South Australia that are on trend with legacy hydrogen discoveries. A recently completed independent third-party hydrogen resource assessment of these areas validates Buru's belief of the significant natural hydrogen potential of this acreage and we are working very hard on land tenure, exploration planning and commercialization activities. Finally, the minerals required for energy storage, in particular, are critical to supporting the energy transition. As such, Buru is also applying its geological knowledge of the Canning Basin to battery minerals exploration via its Battmin subsidiary. Now none of the above would be possible without our highly capable and committed people, our rightsized and risk-focused business processes, good governance and compliance and a culture built on strong values. So let's take a look at last year. Safety and the care and protection of the environment are key values at Buru, and I'm pleased that we have not incurred any lost time injuries, nor any reportable environmental incidents during the year. This does not happen by accident, part in the plan, and I would like to acknowledge our team for their commitment to the vision of Zero Harm. In line with our priorities, the key highlights for the year involved declaration of the Rafael 1 gas and condensate discovery, the subsequent production test and the independent assessment of the Rafael resource by ERCE, which confirmed the potential for Rafael to hold recoverable volumes of over 1 trillion cubic feet of gas and 20 million barrels of condensate. This is a game changer of Buru, its shareholders and the Kimberley. There's simply no other way to describe it. It's what attracted me to the organization. Although the planned field activities on Rafael were interrupted due to Origin's strategic decision to exit upstream exploration altogether, including the joint venture permits in the Canning Basin. We maintain momentum whilst minimizing our cost to move Rafael forward. The team reprocessed existing seismic, identified new leads and reranked the Canning Basin prospect and leads portfolio based on the extension of the Ungani dolomite play. Of note, the work confirmed that the gas and condensate discovered at Rafael is from the same petroleum source rocks as the Ungani oil. And thus, has potentially increased the aerial extent of the play fairway. In addition, the team progressed the interpretation of new 2D seismic data recorded in 2021. In the onshore Carnarvon Basin, Buru farmed down 25% of L21 to mineral resources for operatorship and a 2-well carry. This permit was subsequently awarded to the Buru/MinRes joint venture as EP510. We are very excited about the prospectivity of this permit. It's very close to infrastructure, and we look forward to MinRes's target of drilling next year. We also continued with safe and reliable operations at Ungani, with shipments in February, in July and in November contributing some $6.5 million Buru share of profit before inventory adjustments and amortization charges. On the new energy front, our GeoVault subsidiary worked hard to apply for and was subsequently offered a $7 million Commonwealth government grant to support our work in CCS. Unfortunately, the grant program was later canceled by the federal government. But notwithstanding, we are progressing the work as we do see carbon capture and storage, not only a key component of any credible pass to Net Zero but a profitable business. During the year, a 2H Resources subsidiary was also named as the preferred applicant for 6 petroleum exploration license areas for hydrogen and 2 gas storage exploration license areas by the South Australian government. The formal granting of these licenses is subject to securing valid land access or land use agreements under the Native Title Act, which we are working on. 2H Resources also kicked off an independent prospective resource assessment for the hydrogen potential of these application areas, which in the new year revealed the true potential of this venture. In joint venture with Sipa Resources, Buru also completed drilling for zinc and lead as part of the Barbwire Terrace project, which validated the geological concept that carbonate sections in the Canning Basin are fertile grants for zinc and lead mineralization and do warrant further investigation. And in parallel with all these achievements, we remain galvanized to protect the value of Rafael and worked hard with Origin Energy to ensure their timely exit from the Canning Basin joint venture on favorable terms. The momentum is clearly building, and Buru had a very active start to the year as evidenced by the progress across the portfolio. Looking at the year ahead, Buru is focused on driving the certainty of outcome for its flagship Rafael development and extract maximum value from its dominant position in the Canning Basin. Early in February, we announced that Buru acquired Origin Energy's Canning Basin joint venture interests for a future, capped reimbursement of costs linked to Rafael development and gas production success. The deal will add Buru to reset the appraisal and development process for the commercialization strategy for this regionally significant development. The deal removed the ongoing uncertainty associated with Origin's exit especially considering their own corporate M&A activity. The deal also provided Buru with up to $4 million to conduct a 3D seismic survey over the Rafael structure, which is on track for the second half of this year. With now 100% ownership of the Rafael resource, Buru moved quickly and submitted a declaration of location application for the discovery to government as the next step towards the granting of a production license. We also announced the outcome of the first in a series of development studies to commercialize Rafael gas and condensate. The study gave us confidence that we have a feasible project option for the Rafael 3C contingent resource via localized floating LNG concept. Buru is working up several other project concepts with the help of third-party engineering firms based on lower volume realizations than our 3C contingent resource, and we will be advising the market in due course on the outcome of these. And when I talk lower volume realizations, these are still on the same order of magnitude as the larger Perth Basin discoveries, which are getting a lot of attention. The latter half of this year's activity is focused on 3D seismic field work, data processing and fast-track interpretation, planning for appraisal, concept maturation and concept development and commercial work. We are targeting a 1 to 2-well appraisal campaign in the second half of 2024. We are not planning to recomplete or retest Rafael 1 prior to appraisal, but may consider it coincident with or after appraisal. Regarding our new energy opportunities, we had an equally exciting start to the year. RISC, a third-party certifier completed their independent prospective resource assessment of the 2H Resources hydrogen exploration areas in South Australia, indicating the enormous potential of this venture. We are now working to secure tenure, which will be granted after native title negotiations are completed. So we can physically explore on country, prepare our exploration plans for when we have tenure and establish strategic partnerships to drive the development. We are, of course, reviewing the capital structure associated with 2H Resources to make sure our existing Buru shareholders can benefit from these activities whilst being able to attract new investment into this vehicle. On the GeoVault front, the work we are doing is focused on technical studies across Buru's Canning and Carnarvon Basin acreage as well as commercial work to define the future operating model for this enterprise. GeoVault is effectively front-end loading all the work in anticipation of new legislation for onshore greenhouse gas storage in Western Australia, which we hope to see go before Parliament by year-end. Again, strategic partnership will apply a key role in the development of this new business, and we are reviewing the capital structure for GeoVault to ensure it is value accretive for our shareholders today and is attractive for new investment. To conclude the message I want you to take away is that your company is delivering the foundations for growth through disciplined strategy execution and capital management. We are debt-free with $13.9 million in cash as at last quarter. We are aggressively targeting the commercialization of Rafael, and we are also leveraging a dominant position in the Canning Basin for both Rafael backfill and CCS or carbon capture and storage opportunities. For the first time in history, Buru is also now an active participant in the prospective and underexplored onshore Carnarvon Basin. Whilst working its hydrocarbon assets hard, Buru is also laying the foundations for growth through carefully selected new energy opportunities that create new points of value for our shareholders. I'm excited about the future of your company, and I'm fortunate to have a great team at Buru, supported by a very experienced Board of Directors. I would also like to thank the Chair for a seamless transition to his Nonexecutive role and his continued involvement and support. To our shareholders, I thank you for your ongoing support, and I look forward to updating you on the exciting developments in due course. Thank you very much.

Thank you, ladies and gentlemen. Hopefully, that gave you a pretty good overview of where we are. Now I'd ask for any questions from either the audience or online.

All the areas that the company has been exploring, if you like, in its business mix, I've been particularly interested in your -- in an update about the -- what you referred to as the [ rollback ] energy precinct. In the words, is that still on the agenda? And what would be your sort of outlook for that precinct?

I'll get Thomas to answer that. You're okay. Yes.

Thank you very much, and thank you for your question. As part of the commercialization studies that we are currently conducting, we have what we call a case map, a case map of options that actually talk to various volume realizations for Rafael. This case map is currently being developed. Part of that case map involves various hubs. We look forward to advising and updating the market on the results of that work, which is expected over the coming quarter.

Tim Clifford here. Just a question in regards to the Rafael floating project. In the recently completed floating LNG prefeasibility study with transporters, Buru Energy says, it is assuming a floating LNG development in the Shire of Derby-West Kimberley, given that a location in the Shire of Derby-West Kimberley, can only mean King Sound, is that the location you're assuming? And I asked this because the average water depth in the sand is 18 meters. The floating LNG prefeasibility study commissioned by your company has assumed a water depth of 60 to 80 meters for the floating vessel, King Sound is not deep enough for the floating LNG facility. So where do you propose the facility could actually be located?

Thank you very much, Tim. A very, very good question. And just to put the pre-feasibility study into context for our shareholders. It is 1 of the first caps off the rank when we cast a wide net to look at commercialization options for Rafael. Following prefeasibility study, if it passes muster at a very high level technical economic and commercial hurdles, then we make a decision whether to invest further funds to see if it's actually feasible and then to do basis of design, to do some select phase, engineering, et cetera. So it's very, very early days. However, the consortia that we have worked with, which actually include Technip Energies out of Paris, who are very familiar with the building of small-scale floating LNG facilities around the world, have actually conducted a very high-level mathematic survey and assessment and have come to the conclusion that a facility, but the size and capacity that we are talking about is compatible with shallow water, provided it is beyond the title zone. So at this very early stage of development, we do feel confident that there's a technical solution for it. However, I don't want to actually specify exactly where in King Sound because we haven't landed on it, but there's plenty of engineering to be done to actually improve full feasibility.

Any other questions from the audience? Paul, do we have any online questions or phone? Okay. All right. Well, I think Thomas gave a fairly comprehensive update on where the company is. And added a bit of granularity around where we're going, which I think shareholders are looking for. So again, thank you very much for that. So if there's no more questions, I'll draw the meeting to a close. Very welcome to stay for a cup of tea and talk to the Buru staff. I'm sure you'll find very happy -- happy to chat. And thank you all for your attendance. And those online and for Rob, go and have some breakfast, and watch this space. We've got a lot of good things that we're doing at the moment, and you'll see plenty of activity coming out over the next few months. Thank you again.