Chariot Limited (CHAR) Earnings Call Transcript & Summary

Welcome to this webcast presentation released in anticipation of Chariot's first onshore drilling campaign in Morocco. This presentation will cover an overview of Chariot's Moroccan portfolio, the exploration potential of the Loukos Onshore license and how this has been evaluated using the company's experience gained through success offshore and will provide further detail specific to this important first drilling program. Now Chariot's portfolio in Morocco has been compiled through over a decade of experience and activity in the country. Today, the company is focused on the growth and commercialization of the natural gas resources of the Rharb basin located on the country's North Atlantic coastal region covering both onshore and offshore sectors, and Chariot's license position captures the bulk of the remaining potential of the area. We're extremely excited about our planned investments in Morocco this year, which comprise pivotal drilling campaigns, both onshore and offshore. With success, these could lead to the sanction of multiple new development projects expected to deliver material revenue streams for the company. In the offshore Rissana and Lixus licenses, we recently announced our partnering agreement with Energean, and the parties are working together on a highly anticipated drilling and testing program on the Anchois field, with the objective to further refine and rightsize the development and progress Anchois to an FID. In the onshore, in just 9 months since license award, we are fast track to drilling project which is due to start in the near term. The plan is to drill 2 initial wells, which offer the possibility to open a low-risk gas play and early commercialization opportunity with significant upsides. Just like in the offshore, we believe that the potential of this area has previously been underestimated by the industry. Now Chariot's recent work on the Anchois field offshore has demonstrated how our team has been able to create value out of underappreciated assets. Through multiple phases of seismic interpretation and reprocessing and the important drilling of Anchois-2 in 2022, we've demonstrated our ability to identify and prove additional gas sands and resources. The gas resources estimated at the Anchois field have grown by over 10x versus the previous operator's assessment to 1.4 Tcf today of combined contingent and prospective resources. Loukos has previously also been overlooked and we see important similarities between the 2 regions. The gas composition is shown to be the same offshore and onshore, being a high-quality dry gas with no important impurities. That's supported by multiple gas samples in both areas. We also see similar intervals of reservoir development. The example here shows a thick section of sands in the LNB-1 well onshore located downdip of the Gaufrette prospect, including interpreted gas pays and a gas-water contact. This is shown compared to the B sands of the original Anchois discovery well shown at the same scale. Another key advantage we have is from the understanding of the seismic attributes which we used successfully to identify additional gas in the Anchois-2 well offshore. The same attributes have been used in the evaluation of drilling opportunities in the Loukos license on existing 3D seismic data, all within the same age reservoir systems. So looking at the existing Loukos 3D seismic in more detail, we've identified a portfolio of seismic attribute-supported prospects in the same age reservoir to Anchois in a play which has typically not been targeted by legacy wells. Where this reservoir has been penetrated, however, there is a very strong correlation between those positive seismic attributes and the drilling outcome. The 3 relevant well penetrations with a corresponding positive seismic anomaly were actually gas discoveries. But outside of these strong anomalies, wells have either been dry holes or recorded gas shows. The first wells to be drilled by Chariot at the Gaufrette and Dartois prospects are shown on the map, both in areas of positive seismic anomalies shown by the red color. If successful, this will then further calibrate seismic data and improve our confidence in the other amplitude-supported anomalies located on the 3D seismic data outlined in blue, but also the potential of the upside areas outside of the 3D where only 2D seismic is currently present. The RJB-3 discovery to the north of Dartois already proves the presence of gas and the reservoir productivity of the Dartois sand system as well as the extension of the play beyond the boundaries of the existing 3D seismic. There is, therefore, significant potential to be evaluated in the rest of the license area over the longer term. Concentrating now on the first 2 wells to be drilled, this slide summarizes the targets of the Gaufrette and Dartois wells. Gaufrette is located just updip from the gas-bearing LNB-1 well. The main objective is estimated at around 10 Bcf of gas, but recently reprocessed seismic data has also allowed the identification of additional deeper targets, which are now planned to be penetrated by this first well and which could add further volumes. The map shows that surrounding Gaufrette, there are a number of prospects within the same reservoir system. So with success, this well could unlock a P50 resource totaling around 26 Bcf across those prospects. Now these resource estimates were made on the legacy data, and the impact of any improvements in the quality of seismic through our recently reprocessed data set could allow the identification of further upside volumes. That's work we'll look to complete after the drilling of this first campaign. Now the likely second well in the campaign called Dartois is located long-trend from that previous gas discovery, RJB-3. Dartois itself has a P50 resource estimate of 12 Bcf, again with around 20 Bcf of gas currently estimated across the trend. Importantly here, the early products of the reprocessed seismic have really improved the imaging in a deeper reservoir inter-bullet Dartois called Navette, which is equivalent to the corresponding prospect adjacent to Dartois. This strengthens the link between prospect and the potential for positive read-through from any drilling success. Now importantly, in Loukos, we have all the ingredients for a low-risk gas play on which rapid commercialization can be envisaged following any drilling success. Firstly, we have modern 3D seismic data to support the use of these calibrated seismic anomalies. Secondly, we've already got multiple gas samples and compositional data from legacy wells, so we understand the amount of processing that will be required for any development. And finally, there are several well tests which already support the productive potential of this reservoir interval. Now in terms of commercialization, we see multiple market access routes available for the Loukos gas with very strong future growth in market capacity. The initial market for any gas found at Loukos will naturally be the undersupplied industrial market at Kenitra, which currently attracts very high gas prices indeed. This market can be accessed most rapidly through a virtual pipeline such as compressed natural gas, or CNG, and discussions with potential partners and vendors is already underway for the development of such a scheme, which could be used to fast track gas sales from Gaufrette and/or Dartois. The Kenitra market can also be accessed via our fixed pipeline connecting to the existing network shown on the map. This would be a slightly higher CapEx option, but if this is developed after an initial CNG scheme, it would then liberate that CNG infrastructure to then serve gas to more distant industrial hubs such as Tangier or Casablanca, thus accelerating natural gas supply to a diversified set of domestic industries. Now longer term, the Anchois gas field infrastructure, once in place, could open up much larger power and potentially export markets via the GME pipeline connection. The proposed Anchois process plant and pipelines are located within the Loukos license area, giving us the opportunity to rapidly commercialize any further gas volumes discovered at Loukos. So in summary, though the Loukos license was awarded only last year, we've made very rapid progress in preparation for this first campaign. These first wells offer the opportunity to unlock a low-risk seismic attribute-supported gas play with material volumes across a portfolio of prospects. Additionally, the proximity to attractive undersupplied markets presents a really valuable early commercialization opportunity for which we've started proprietary work, and the lower capital cost and shorter payback times gives us flexibility in our development funding options. Thanks in part to the high gas prices and very favorable fiscal terms, this onshore gas is potentially very high value with net present value per Bcf estimates in the range of $3 million to $5 million across a range of short- and long-term development scenarios. Longer term, this first campaign will just scratch the surface of the block potential. Total resources on the 3D in a single play currently total around 100 Bcf, but we see upsides in both the mapped extension display outside of the 3D, which covers approximately 10% of the license area but also in additional plays which can be better developed on improved imaging from the reprocessed seismic, the final products of which are due imminently. As mentioned before, Chariot's acreage in Morocco is ideally located to rapidly access gas markets at scale. So thank you very much for your time and interest in this webcast. I'd like to take the opportunity to thank our joint venture partners, ONHYM, and our shareholders for all of their support for the project. And we look forward to updating the market on the progress of our operations and, of course, ultimately, on the results of those wells. Thank you.