Buru Energy Limited (BRU) Earnings Call Transcript & Summary

Welcome back to the Proactive studio. I'm here with Buru Energy CEO, Thomas Nador. Thanks for joining me, Thomas.

Good morning, Megan.

From the outside, Buru has been quieter this year than last, recognizing that 2023 was a big year of positive years for the company. Can you update us on what's been going on so far this year?

Yes, sure. I can assure your viewers that we haven't been idle. In fact, quite the opposite. The lion share of technical and commercial activities so far this year has been associated with 4 farm-out processes that we have been running in parallel. The first one relates to the partner selection process for our 100% owned and operated Rafael gas and condensate discovery in EP 428. Although this process is currently delayed, due to additional technical work underway to confirm the upside volumes at Rafael, we are very confident in the 1C contingent resource volumes and that this is adequate to support an initial smaller scale, local gas and condensate development into Kimberly as a first step to revenues. Secondly, we have been working with several parties to form a new joint venture for our Ungani asset in production licenses, L20 and L21 with a view to restart production and get back to the exploration job with us as soon as possible, targeting life extension of our operations at Ungani beyond its current runway. Thirdly, we have been in discussions with parties on a Farm-in deal to drill the exciting high-potential Rafael shell oil prospect, which we identified on the Rafael 3D seismic survey earlier this year. I can't overemphasize the potential impact of exploration success this may have on our business with a range of groups, unrisked prospective resources of between 3 million and 80 million barrels of oil. Discovery has the potential not only to support material near-term cash flows, but act as an enabler for development of our Rafael gas and condensate discovery. And finally, we have been talking to various multinational companies through our early-stage assets in South Australia and Western Australia that target hydrogen and helium exploration to establish strategic partnerships and potentially create a liquidity event for a 2H Resources subsidiary.

And today, you announced a Farm-in Agreement with Sabre Energy for the Ungani Oilfield. Can you outline the key takeaways?

Sure. Look, the deal involves Buru farming at 70% of the oilfield to Sabre Energy in exchange for a structured transition of operatorship to Sabre. $1 million from Sabre towards the restart of operations, $5 million from Sabre towards the drilling of near-field prospect called Mars, and at least $2.8 million from Sabre towards the future abandonment liabilities associated with the fields. The deal, which is subject to West Australian government regulatory approvals is aimed at getting back to production and exploration this year. With near term and potentially enduring cash flows that go beyond the field's current expected decline. On the exploration front, we've had the mass prospects sitting on [ SEMA ] since 2019 due to other competing priorities, including the drilling of Rafael in 2021. But now the right time to get after it with planning underway to potentially drill it this year. The prospect as defined on 3D as unrisk gross prospective resources of between 3.25 million and 6.2 million barrels of recoverable oil. We had the best estimate of just under 3 million barrels. With the geological probability of success of 40%, it makes it a very compelling and durable target, which is an order of magnitude larger than what we have produced from Ungani to date. We are planning to drill it during the current operating season this year, pending rig availability and approvals. As for our new joint venture partner, Sabre Energy, and for those viewers not familiar with them, they are a private new entrant to the Australian upstream landscape. They have a cracking team of experienced oil and gas professionals and an entrepreneurial attitude to exploration, development and production that appears to be a rare breed in this day and age. That focused capital deployment strategy is well suited to the type of activities we are contemplating in the Canning, and I very much look forward to working together with them.

And you're also chasing a high-impact oil prospect called Rafael Shallow. Can you talk about the size of the potential price here and various forward plans?

As I mentioned earlier, Megan, this prospect situated some 3 kilometers above and potentially overlying the Rafael gas and condensate discovery was a somewhat unexpected gift from the Rafael 3D seismic survey. With a target depth of approximately 1,200 meters, it has a large, robust 3D-defined trip with a good sale and multiple source intervals that can charge the prospect. It's shallow nature means we can drill it cost effectively, and we are planning to do that this year, potentially in campaign with Mars. The format of this prospect is well underway, and we are in exclusive discussions with third parties to fund the well. We have completed the Flora and Fauna surveys, the Heritage survey and have launched the drilling environmental plan with the regulator. We have all the drilling materials in place and are well advanced in discussions with rig providers to support their plans to spud the well as early as the third quarter of this year.

And I guess further on that, how does it all fit with your plans to commercialize the Rafael gas and condensate discovery?

Look, I must admit it's a bit like tetris but the pieces are falling into place. Let's not forget, we have a gas and condensate discovery at Rafael. The molecules are there, but we can only sell them once. So we need to do more, we have to dimension the resource, so we can value it with a higher certainty and in turn, and as a base case, do a good deal with a third party to get it fully approached and developed. Our work to date shows that a staged approach to development is the way to go to commercialize Rafael deep with the first phase by a local Kimberley based gas and power project underpinned by the 1C contingent resource volume providing a platform for future groups. We have done all the engineering and commercial studies that we need to do for now to inform this view, and we will reengage the market later in the year to get parties back to the table. Let's not forget that success at Rafael Shallow later in the year could be a game changer for the Rafael gas and condensate department. As an option and obviously, based on the successful discovery, our cash flow projections for a P50 Rafael Shallow resource of 19 million barrels could effectively underwrite the first phase of Rafael deep. We must remain very live to this possibility. Finally, getting back to the deal that we have just struck with Sabre Energy, we see production from Ungani and the potential subset at Mars as key supportive elements for our future plans for the Canning Basin.

Thomas, and thanks for your time today. And I'm looking forward to hearing more updates.

Thank you so much, Megan. Take care.