Buru Energy Limited ($BRU)

My name is Thomas Nador, I'm the Chief Executive Officer of Buru Energy, and I'm joined here today by David Maxwell, the current non-executive Chair of the company. Thank you very much for your participation. I look forward to sharing with you an update on the Rafael Gas Project. And in particular, have an opportunity to answer some of the questions or all of the questions that have come through our Investor Hub portal prior to the webinar. I will also make sure that any questions that arise from the webinar get appropriately answered post the webinar via the Investor Hub portal. Before I commence, I would like to draw your attention to our disclaimer. I will be making statements, forward-looking statements about the project and about the company. As far as the ASX announcements that we have made in the past that relate to information I will be sharing today. They are listed on this disclaimer as well for your future reference. For those of you that are new to the company or for those of you that are looking at investing in the company, Buru has been in the Canning Basin of Western Australia for some 18 years. We have been the most prolific explorer and developer in the basin since we listed in 2008. We've had various exploration successes and in particular, today, I will be focusing on the most recent exploration success in Rafael. The Rafael accumulation is a significant conventional gas and liquids accumulation that was discovered by the company in 2021 and flow tested in 2022. I joined the company in September 2022 with a very clear mandate to commercialize that resource for the benefit of our shareholders and for the benefit of the community and the benefit of the government so that we have an autonomous energy source up in the Kimberley for the next 20 years and that there's a wide range of benefits that comes out of that project. So what is the Rafael Gas Project all about? And I'll try to cover it in 6 points, and I will be doing a deep dive in each of those 6 points during the webinar. First and foremost, it is a high-value business. It is a high-value business not only through gas in the form of liquefied natural gas, but also through condensate or liquids as well as LPGs. I will spend more time on that later as there have been some recent insights on that front over the last 2 months. It is based on a proven resource. The Rafael accumulation has been tested the Rafael accumulation has been dimensioned on 3D seismic survey, and we've got a very good understanding of that accumulation and a very good understanding of the field development that will need to take place to support the project. It is developed via a simple project design. Initially, we looked at various options. Unanimously, we have agreed with our engineers and our economists that the best way to exploit these resources via a small-scale 250 to 300 tonnes per day LNG facility located on the site of the Rafael discovery. It allows us to remove the need for the pipeline. It allows us for quicker, more expedient approvals, and it is what I would call an approvable project. Thirdly, there is an existing market there, and the market is growing the existing market between 6 and 13 terajoules of gas is for retail up in the Kimberley, which currently and for the last 18 years, has relied on long-distance trucking to meet its requirements. Trucking of LNG has been taking place for the last 18 years from Karratha at some great cost, but also more recently, as highlighted by the energy and security issues at some risk as far as the transportation of that is concerned. It is now going to be developed with -- in partnership with CEFA. So we do have an established partnership with Clean Energy Fuels Australia who are an incumbent in the West Australian energy market. And we will be speaking more about that agreement and what it means for the project. And lastly, as I alluded to earlier, we have been optimizing the project, and we now have a much better understanding of the economics and the intrinsic value of the project. through additional condensate and LPG product. And the economics or the impact on economics is quite profound. So in order of these points, I will now launch into some detail. It is a high-value business. As we communicated to the market in 2025, and at that time without the recent understanding of the impact of condensate and LPG. It was already a high-value business, generating some $70 million of average pretax operating cash flow per year, which is multiples of where our market capitalization is today. Since then, we have done some more work, and we've identified that additional condensate streams add roughly $500 million per year to the economics, new LPG stream at an additional $120 million to the annual economics which gives us an annual cash flow of just over $100 million per year projected. Now it's important to note that all of these assumptions are based on a P90 outcomes. What that really means is a high certainty that comes in terms of resource size, but also in terms of our CapEx and OpEx numbers. Now those 2025 and 2026 comparisons are on a like-for-like basis. However, what we have been doing with Clean Energy Fuels Australia during the course of last year and early this year is agreed what a tariff model or what an OpEx model would actually look like. So this is a model whereby Clean Energy Fuels Australia would be deploying their own capital to build, own and operate the LNG facility and recover the cost of that capital via an ongoing tariff. So you can actually see the impact of that on economics. And as you would expect, the internal rate of return almost doubled to some 80% or doubles to 80%, which is very, very attractive. And it's also a -- it gives it gives a lot of option for optimization as well as we continue to negotiate with CEFA. So the economic screening does demonstrate significant value. All of these numbers are based on 200 tonnes per day of LNG, recognizing that we are aiming to build a plant up to 250 to 300 tonnes a day. So we are taking into account very conservative assumptions. As far as the Rafael accumulation is concerned, there's no new information really since our last announcement. Having said that, we do have very high confidence in our plans to drill Rafael 2 or 2H which will be drilled from the initial -- from the existing well pad. That saves on approvals, it saves on clearing, and it's the most expedient way of doing it. We are basing all of the project economics on our 1C contingent resource levels. But as a result of the 3D seismic survey, we have also identified a deeper Nullara target, which is some 470 meters below Rafael which we may very well target when we are drilling Rafael 2H in 2027. Talking about the deeper targets, we are calling it Flying Fox. And as you would see, as far as its potential based on a 45% chance of success, it could effectively double the size of the resource of the total accumulation. Why is this important for the project? Well, it could very well be the third well for the project. The third well for the project is not required until years 8 to 10 but it will guarantee a nice steady plateau for some 20 years for the project itself and it will be at the most expedient way of drilling the third well. So Point number three, I think it's a very important point initially when we had the contingent resource assessment back in 2022, we had quite a wide range. And you would expect that before shooting 3D seismic. And that wide range provided some optionalities for the project. We've done a case mapping exercise. We've done some preliminary engineering, and it showed that on a very high case, which at the time was over 1 trillion cubic feet of gas. Yes, you could have contemplated a methanol or an ammonia or even a larger-scale LNG development. But as we mature those concepts as we understood the resource better and especially after we did the 3D seismic survey, we come to realize that the best and the most optimum and the most value-accretive project to pursue is a small-scale project that is based on our 1C resource, which has been revised to 85 Bcf of gas and 1.8 million barrels of liquids. And that project is such that it requires or it will involve easier approvals. There's no pipeline infrastructure associated with it. It more or less fits on the existing well pads. So there's no clearance, additional clearance of significant amount involved. And it is what I would call a very approvable project. And that's been reverberated to us from regulators as well. It is a small footprint project with significant value. So we've been doing more work on that. We have recently been also working with a Tier 1 engineering contractor firm to understand what that scheme would look like so that we optimize the upstream as much as we can, which still very much sits in Buru, swim lane under an agreement with Clean Energy Fuels Australia. All of this is nice in theory, but you need a market. And we are very pleased to say that there is a very, very strong market. up in the Kimberley. The Kimberley is an energy island for a better word. It imports all of its gas and all of its diesel into the Kimberley by long distances. Gas is trucked, diesel is mostly shipped. And it does come at a great cost and it does come at some energy security risk. The current demand, the retail demand is some 6 to 13 terajoules a day. And that's seasonal. The landed cost of LNG has seen widely reported as some $22 a gigajoule. So we are able to compete very, very favorably with that by virtue of being local. The demand centers of Broome, Derby, Looma/Camballin, Fitzroy Crossing and Halls Creek are within a very close distance. So the distance from Karratha, for example, to Halls Creek is some 1,400 kilometers. So a truck needs to do 2,800 kilometers return just to deliver LNG bullets from Karratha to the gas-fired power station at Halls Creek. So by being local, it means that we are able to compete very attractively on distance, but also our lifting costs are very attractive. So we are able to compete on that basis as well. We've got Kimberley Mineral Sands Mine just to our North, for example, we also rely on that fragile and costly supply arrangement. So I think we are a very logical part of any energy system up there. As a bit of additional context, the state government is on the record of looking to refresh the energy system recognizing the cost and energy security issues associated with it. And as far as that is concerned, I think the state government is looking for an overhaul by in the 2020 to 2030 window. So the Rafael project responds to that very well. even with a shift and a very deliberate shift in our drilling program from 2026 to 2027, which would see us deliver gas into that system by late 2028, early 2029. Outside of the retail arrangement, there's also a growing demand in the mining sector, both in the Kimberley but also in the north of the Pilbara and you can see what that opportunity set looks like, and this is just a sample of it. There are mines here looking at moving from diesel to gas to save on cost. The mines here looking at making final investment decision pending certainty on where energy will be coming from. And this I'm talking about predominantly thermal energy in the form of liquefied natural gas as per their approvals documentation with the state. There are also contracts rolling off, LNG contracts rolling off that will be open for us to pursue. And these are all trucked LNG contracts. So there's a growing demand, there's a stable demand, and there is no competition to Rafael in the region to meet that demand. I think it's also important to note that irrespective of the West Australian state government aspirations for renewable penetration into the region. Renewables need firming. And as part of that, gas is the most logical and dispatchable source of thermal energy. And once again, with no competition in the region, Rafael sits in a very good position to provide that firming power for some and be the primary source of power for others. Point number five is still very, very, very important. And in April 2025, we announced to the market that we have struck a strategic development agreement with Clean Energy Fuels Australia. The market reaction to that was a bit variable. I think there was potentially a lack of understanding of what that means, and that's really down to me. That's to me to explain how important this relationship is in helping to unlock the development itself. Clean Energy Fuels Australia, a private company, that have been around for as long as Buru has quietly building up what I would call a virtual pipeline network up and down the coast of the state in Western Australia. By virtual pipeline network, I mean taking gas currently from the Dampier to Bunbury Natural Gas Pipeline or from Pluto liquefying that gas, putting it into trucks and distributing that while LNG to various demand centers and operators. We have been searching for the ideal partner to accompany us on this journey and Clean Energy Fuels Australia ticked a lot of the boxes. They are owned by, currently owned by I Squared Capital, the world's fifth or sixth largest infrastructure fund out of the United States, and they've got a very clear mandate, and that is to be part and parcel of that virtual pipeline network in the state, but also help the state decarbonize as and where because gas is a very good partner for renewables. So we did this agreement, which would see CEFA deploy $150-or-so million to build on and operate an LNG facility on the site of Rafael provided Buru does 1 of 4 or all of 4 things. We call them conditions precedent and condition precedent, #1, is environmental approvals. So we are accountable for those approvals. And to that end, we are making good progress with our EPA referral, and we are looking at submitting the EPA referral in the next couple of months. That will cover the whole project, the whole project development. And once again, because of the size, the scale, the limited impact of this development, we do see an expedited approval process. Whilst I'm talking about approvals, there are no federal approvals for these projects. So this clearly stays with the state, and it is a significant and strategically important project. Secondly, Buru is accountable for traditional negotiations for an agreement. We have been working with Nyikina Mangala friends up in the Kimberley as part of the Walalakoo body corporate. And we are making very good progress with them. We've got negotiations, live negotiations and discussions with the group, and we are aiming to have an agreement for the development certainly by the mid of this year and Q3, the latest of this year. So that's condition number two. Number three is we are working in cooperation with CEFA to build the market, not only for gas, but also for condensate and LPG. In this day and age of energy insecurity, there's a lot of attention on liquids and what you can do with liquids. And you will see in a few slides that we do have significant amounts of condensate or liquids as well as LPG coming off this project. So we are also speaking with the state government on where we would be placing this. And obviously, a large number of communities do rely on liquids or in the form of currently diesel to meet their stationary power generation requirements in the Kimberley. There's over 100 communities that rely on that and case in point, the West Australian state government just prepurchased or purchased some 4 million liters of diesel at $2.50 a liter to be stored in one of the tanks that we actually used up at Wyndham for that very purpose. We are local, and we are able to do exactly the same thing going forward. So that's 4. And the fifth one is we need to convert Rafael resource to reserves. To do that, we would need to drill an additional well. We call that Rafael 2H. We would need to extend the flow test that well and we are planning on doing both of those in 2027. And and we are very much in the process of securing funding to allow us to do exactly that. Whilst we are on site in April 2027, we will also be looking at recompleting the Rafael 1 well. Which is the discovery well and turn it into a producing well. So that will become a production well, and it will be part of the parcel of an initial 2-well development with a third well sometime in year 8 to 10. The other benefit of the relationship with Clean Energy Fuels Australia is that they do have an existing fleet of LNG tankers. In fact, they have the largest fleet of LNG tankers in Australia and ISO containers. So they are currently a natural partner to look after the distribution of that product, and we are in discussions with them as to what that will look like. So what have we been doing over the last couple of months? Before I get to the commercials, and we've received some really good questions from our shareholders and interested parties on what's been going on, on the commercial front. Let me just take you through some of the design win insights that we've arrived at over especially the last 6 or so weeks. The process that we are looking at deploying and CEFA is looking at deploying it Rafael is a well-proven technology proven concept. It's a single mixed refrigerant process. And what that process does is it takes wellhead gas from Rafael. There's some inlet separation and dehydration associated with that gas to remove the water to separate out some of the liquids and then it goes into effectively a cryogenic, a deep cryogenic process, a liquefaction process. As part of that, there will be additional liquids removed from the process. And also, we always knew we will have additional or we will have LPGs. We now know how much LPGs we will have at the end of the process. So what we've been doing some work with this Tier 1 contractor. CEFA have also done their work that very much validates this. It's still -- it reconfirmed a very strong value proposition for the gas itself but it has identified a significant increase in our liquids in the form of condensate, and it has identified some 15 tonnes of LPGs also coming out of the process. The additional liquids and the additional and the new source of LPGs were never modeled in the past. So the economic models have not taken that into account. And as a result, the world is changing. As a result, it gives us a reason to pause to understand what not only the economic impact is, but what it means in terms of partnering, what it means in terms of funding structures. What it means in terms of marketing. So to that end, we are taking a pause. And I think the Buru Board has very diligently recommended that we do take a pause to see what it means in terms of the process that we've been running since last November to secure funding for the drilling itself. Coming to the schedule. It means that we will be shifting quite deliberately shifting our drilling from September this year to April next year. Does that actually cause an issue with CEFA? No, we have confirmed with Clean Energy Fuels Australia that this schedule still very much fits. And it fits because the state government themselves has also moved to the right in terms of their aspirations to renew this legacy trucking system that's been in place for 18 years. It means that we still have to maintain the pressure on the environmental approvals, which are to be received in the third quarter of this year. It means the pressure is still very much on the traditional agreement-making process. It also means that the business development work for gas, for liquids and LPGs needs to continue, but it needs to continue with a wider set of potential partners who are interested and are looking for a more fungible source of hydrocarbons in the form of liquid. The gas marketing process is still very much ongoing, and that won't change because the volumes won't change, but certainly, the liquids and the LPG has introduced some optionality for the project to pursue. So what that means in terms of first gas in late 2028, early 2029, which still very much captures where we see a shortfall in the West Australian gas market. And it also creates an opportunity for us to work with the state on other kind of options regarding our liquids. Coming back to our funding and optionality update, we received a fair few questions around how that's been going. So these are commercial discussions. We started these discussions back in November last year with the help of Carlingford out of the United Kingdom, we specialized in helping companies like us to secure funding for pre-reserves in the pre-reserve space. So we have cast a very wide net, and it was very good to see some unusual parties come into the data room. We've had a good conversion rate from those that we have contacted to getting into the data room. We've also had multiple parties do deep due diligence as part of the data room process. And we had face-to-face meetings with parties as well here in Perth and online as well. So there's a range of options that are available, and they are being discussed. Now the parties that have come through the data room have not been made aware of the recent update in value that we announced to the market last Friday. So this changes the game as well as far as that process is concerned. So we are working with Carlingford to refresh some of the what we call the syndicate list to reengage with parties that have asked to take a pause citing the Middle East conflict and the uncertainties associated with that. But we're also seeing new parties expressing interest on the back of what's going on globally. And also something quite interesting is that we are seeing some domestic Australian companies coming in, expressing an interest, whereas they were not there as part of the November process. So the world is changing. We are going to leverage the current macro and Australian environment to get the right audience and also to get the right parties in the room again. We do have active discussions by Carlingford with parties today. And to that end, I would be very pleased to have more updates to give you over the next couple of months as to how that process is going. Clearly, our recent capital raise that we concluded on Friday supports us in this endeavor as well as maintaining the schedule on approvals, maintaining schedule on traditional agreements and all the business development work as well as the upstream engineering work and the integration work that we need to do with Clean Energy Fuels Australia for one integrated facility on Rafael. So we are concentrating on a short list but we are exploring other options. As I mentioned before, the energy climate today is palpably different to what it was 6 months ago. And we do see the role of gas and liquids more on the front page of the news. Now would it wouldn't be me if I didn't have a bit of a crack at what's going on in Queensland and Northern Territory in particular. There is a lot of government support visible support for those projects there. In the case of Northern Territory, you even have the Territorian government underwriting loans for developers to drill because of energy security concerns. We are not there yet with the state government here, but we are working with the state government to make sure that they, number one, understand the value proposition of Rafael. But number two, to actually come up with maybe some constructs that allow more tangible support that helps us unlock funding for the next phase. Remember, listeners that this recent capital raise that we did on Friday is really to help unlock the funding for the drill. But that funding for the drilling actually unlocks a very significant funding package for the downstream. So it is a domino, I've always spoken about the dominos, the only funding that's required between now and first significant cash flows for Buru is drilling. That is our only real exposure there. There will be some money associated with the upstream stripping, but that might actually be a part and parcel of a tariff arrangement with CEFA . So the capital might not actually sit on our side of the ledger. There is an experienced team to deliver. And I have to talk a little bit about yours truly here. It was a very difficult decision for me to resign from the company I'm acutely aware of the timing associated with it and how difficult the timing is. There's been a bit of speculation about my departure. I want to be on the record to say I am -- I have been struggling with my health. I managed to play whack-a-mole for about a year. I've managed to clear 2 of 3 significant things. And you might have noticed my body language and body on various videos ebbing and flowing and changing. There is one more hurdle I need to deal with, which will require ongoing attention, which means that I will be hanging up our boots very regrettably. I came on board to deliver Rafael and I won't be here to do that. But I'm leaving the ship in very good hands with David, a very experienced executive stepping into an Executive Chair role on a temporary basis, but also with Joe Williams, who is a very strong technical director, not only executive experience, but also MD experience like David coming in and with the support of Malcolm as well who is a strong technical director. I'm leaving the ship in really good hands. There will be a little bit more on that later because it has come up in the questions, and I will allow or ask David to actually respond to that himself. Well, that takes us to the questions. And firstly, thank you for the candor. We have not narrated this or we have not changed it. This is exactly how it came in.

The first three of these questions really relate to the share purchase plan and why we did what we did and why the company did what we did. First and foremost, we would love to have offered a share purchase plan to our existing shareholders. The reason we were not able to is because we've done one within the past 12 months. So that immediately is a barrier for us to do that. We could have done a rights issue. But the rights issue would have taken a lot of time. It would have taken weeks to get up and we simply did not have the time. The momentum needs to be maintained. Our cash balance needs to be maintained. And for that reason, the Board has weighed up all the options and a rather the share placement has been the most expedient way to raise the fund. We were able to do that in a 24-hour period. And with the help of the top end of the register, we were able to raise some $5.3 million in that day. The dilutionary effect of that is not lost on the Board. And it's certainly not lost on me. But one needs to kind of look at different forms of dilution. You can dilute via the asset. So what we didn't want to do is be wedged into a corner where we give away too much of shareholder value and give away too much of Rafael for too little. So you can definitely be diluted on that side. We are conscious that there is a dilutionary effect on our existing shareholders that were not able to participate. But we also very strongly believe that there is such a disconnect between where we are trading right now and the intrinsic value of the project. And as we deliver these milestones, there will be a correction. There will be a correction that will actually be beneficial to all shareholders on our register. And for that reason, we ask for some patience. We also ask that next time we do a share purchase plan. We have good participation in the share purchase plan. We have not had a good participation in the last share purchase plan. So we ask that we maintain the rate and back strategy, which is not a hand-to-mouth strategy. It is a longer-term strategy. It might look like it's hand-to-mouth, but it is a longer-term strategy to deliver something within 3 years, that will be potentially transformational, and it will give us, as a company and the right to grow further from that base. So that's on the share purchase plan. And by the way, there was a question about when information was made available. And I want to be on the record to say that we have not -- firstly, we maintain focus on our disclosure obligations very closely. Secondly, the basis of the value uplift was made available to us on the 15th of April. It was made available to us on the 15th of April. I ran into David's office and we now have a disclosable event. We need to actually use this as part of the fundraising events. So there was no information asymmetry at that time. And yes, we had directionally. We had directionally some incomplete information that gave us confidence that there's something around the corner. But we certainly did not have that confirmed and complete until the eve of the 15th. So that's really the first 3 questions there relating to SPPs. What are the funding partnering options being considered was another question? I have spoken as part of the presentation on those work streams. My intuition that I had at the beginning of the process still very much remains that it will be a combination of these work streams. So for example, if we go then a debt route, there will need to be an equity component to that route. If we are looking at a strategic partnership that might actually look quite different. It might not be a very straightforward boiler plate farming. It might be strategic, it might be with a partner that is not taking an interest in the project itself, but there might be some other form of commercial arrangement. And once again, the additional liquids and LPGs does bring some new potential target into the mix. For example, trading houses that are looking for liquid offtake, we have good relationship with those and with the volumes that we are contemplating which is in the well and truly over 50,000 liters a day of liquids. That gives us optionality to speak with those parties. Before I hand over to David to answer the second last question on this slide. What about government funding for Rafael? We've been speaking with the government and different departments for some time. And if you live in Western Australia, you can't help but see how there's -- that the government is trading at a very fine line to manage the expectations of the community here and the electric. So we are a fossil fuel, a dirty fossil fuel company, right? But there is a reality that's emerging more so today than ever. And the reality is around that gas is not going away. That we will continue to rely on diesel and liquid for our power generation needs and that the renewable penetration aspirations of the state are going to take time to be realized. So the thematic is changing also. We are meeting -- David and I, now we are meeting with government officials as early as this week. I think it is, it's not next week to go through and really hammer home the importance of this project, if not for the Kimberley, but then for the, Pilbara, the engine house of Australia by providing safe, reliable, dispatchable power to that engine room makes a lot of sense makes a lot of sense. There aren't too many onshore providers with those kind of credentials that we have that part of the world. And CEFA could see that. CEFA are looking at building a Northern hub. They have a hub near Kwinana, they have a hub near Mt Magnet. They have hub near Karratha where they're taking gas off. There's no hub north of the pipeline and there are no pipelines. So with that, I'm going to move to the last question. And the last question is more to do with Ungani than anything. Firstly, Ungani, we have impaired it in 2022. We would love to restart Ungani, but we need Mars to actually help us do that. And secondly, as far as the shareholder shareholders are concerned and the dilution is concerned. We are very much looking at longer-term value. And whilst we issued new shares at the current share price may be seen as initially dilutive those that disconnect between the current underlying share price and the intrinsic value, and we are hoping that we will correct that by meeting some milestones. So with that, there's just one quick one on the CEO transition, and then we will wrap it up.

Okay. Thanks very much, Thomas. And look, it's appropriate that I make some comments about Thomas' own situation. He, as he mentioned, has been looking after his health for some time now, and he has been keeping the Board informed. And as regrettable as it is and it's unfortunate as it is, he has made the right decision for himself and for his family. The Board respects that, regrets it, but respect the decision he's making. The Board was also very conscious of the importance of continuity and in fact, upping momentum. And that's the reason why we had the plan in place and myself stepping in as Executive Chairman, together with the support, in particular, Joe Williams on the technical side and Mel King. And our intention is to drive the momentum towards funding to complete funding as soon as possible, effectively going as full time as required in order to do that. Myself, the Rafael Gas Project is the reason why I got interested and involved with Buru simply. I've been involved in commercializing, developing gas projects in Asia and Australia in leadership roles. This for me was an opportunity, which was too good to walk past in the sense of an opportunity there waiting to happen, waiting to be captured. And personally, there's an element of satisfaction in that. In terms of recruitment for the new CEO, what's most important here is that we get the right person. So what we're doing is we are maintaining and upping the momentum on the leadership side to drive through the -- to get the funding to deliver the front-end drilling for the Rafael Project. And at the right time, when the right person appears and is available, we'll be announcing a new CEO appointment, but I don't expect that to be for a couple of months at least. So on that, I'll hand back to Thomas for a few final words.

Thank you. Thank you, David. Well, thank you very much for tuning in. I know these updates are very important for all of our shareholders. We've managed to answer all of the questions that we have received today. But I do encourage you to post your questions on our Investor Hub website, and we will get back to you. If you would like those answers to be made public, please tick the public box so that other shareholders can also, or interested parties can also see those responses so that we've maintained a very transparent communication channel between the company and our investors. With that, I would like to wrap up the webinar. Thank you for your participation again, and I hope you have a good rest of the day.

Thank you.