enCore Energy Corp. ($EU)

Good morning, everybody, and thank you for joining us for the enCore Energy web call. First meeting this morning with the recent news release on some changes at the company. I have today with us William Sheriff, Executive Chairman; and Rich Little, CEO. Just an introduction to Bill and specifically Rich and ask Bill Sheriff to take it away. Please, if you're asking questions, type them in, and we will review the questions at the end. Thank you very much.

Hopefully, there are some familiar faces out there. Bill Sheriff, the Executive Chairman. I just want to give you a little bit of background on what I think is really a team consolidating and leading move that the Board has instituted here at enCore Energy. A few weeks back, I was contacted and asked for my advice on where management should go, and I provided that to the Board and the Board had already decided to go in a direction. I wholeheartedly recommended Mr. Rich Little, who they -- in a series of conversations moved to connect with and had what I'd considered an ideal background and the Board agreed. And so the negotiations were underway and Rich agreed to join. I want to thank both Rich and the Board of Directors for both of them asking me to return as well. And I think we've put together a really solid team and had a good team below and ready to move forward. So I think this will be a very short transition period. And we've got a number of goals that we will work towards. But before we get to that, I want to hand it over to Rich and let him say a few words about himself and his philosophy on management.

Yes. Thanks, Bill. I appreciate it, and thanks for all the investors that are on the call. So I really appreciate your interest. The news right now, I came to the office on Monday, really digging into a lot of the details of the business plan, looking for efficiencies, ways that we can be more focused on mostly on high-return assets and get a handle on what I think the future looks like. So as far as any questions and concerns on any of that, I'd ask we hold off. What I thought might be of interest is more about my background since I am coming from an oil and gas background because to me, when I was first approached about the opportunity, I was curious what I could actually bring to uranium mining. But then when I started understanding what's involved in In-Situ Recovery, I think there's a ton of similarities between the two industries. So if you'll allow me 5 minutes or so, basically to give you my background, I think it will help. So I am trained in petroleum engineering. I graduated A&M in '95. I got out of school and with work for Halliburton Energy Services, focused mostly on what we call completions, which involves hydraulic fracturing. I did that for a few years and then was picked up by one of the consulting companies, Hold & Associates, which was led or bought by Schlumberger. But I got a lot of experience doing domestic and global just around the world with working with different international oil and gas companies, basically teaching them how to frack wells and how to measure their reserves. One of my clients was a private equity group called Sierra Minerals. They had asked me to come in and help develop a field. It was a greenfield that they were just starting. So we needed to prove up resources and then put together a development plan that made economic sense. And we did that. And within a couple of years, we sold those -- that field to a company called Peoples Energy, which was a utility out of Chicago. They were looking to get into the non-reg business with their cash and they want to get into oil and gas. They didn't have anybody working for them at the time that knew how to operate a field. And so when they purchased this field, they'd asked me to come over full time. And so I did that. So Peoples, we grew an existing field that I started with. We tested different zones, expanded. And within about 5 years, Peoples Energy had grown through organic growth through the drill bit and also through acquisitions. And we were bought then by a company called El Paso. El Paso, you guys may know, is a midstream or oil and gas transportation company, but they also have oil and gas. I went over there as Reservoir Engineering Manager, then became business unit manager. And then all that was putting a P&L under me, and that was for South Texas, Texas Gulf Coast. And at that time, it's interesting because a lot of those assets are where we're developing now or extracting uranium. So I'm very familiar with the area. Ironically, 5 years later, we were acquired by Kinder Morgan. They spun off the oil and gas company to a private equity firm that we later listed on the New York Stock Exchange under EP Energy. So we continue to develop that. I left EP Energy after roughly 5 years. I know there was a theme of 5 years. But when I was at EP Energy, I was the VP of the Southern U.S., and that included the Gulf of Mexico and Texas Gulf Coast and South Texas and the Permian we began to focus specifically on unconventional resource plays. And that's probably where we were best at. So we sold off our Texas Gulf Coast and our South Texas and the Gulf of Mexico to other operators. And then I became solely focused on developing a 180,000-acre position in the Permian. I would call the acreage may be challenged at best. It was on the Southern Basin edge. It was primarily a gas producing area in a time when oil commodities were trading better than natural gas. So we had to be -- we had to learn how to be efficient and focus on how to develop this acreage to be able to compete with the oilier assets, which I felt like we did a really good job on. This was back in 2012, and we started to do the development -- we drilled over 350 wells. We had central production facilities. We had multiple well pad drilling sites. We had to highly focus our drilling targets, we did our own water recycle. I mean, all the things are becoming more efficient. And this was -- everybody does this now, but this was cutting edge at the time on how to drive down costs. And it may not mean anything to this group, but we were drilling 10,000-foot laterals in less than 5 days, which was just unheard of. But that all comes from being really focused on our program and just executing at the top level. I left EP Energy to take the position of CEO at Ajax Resources. Ironically, I was the third CEO there in less than 2 years. What they needed was somebody to come in and basically do what it is I did at El Paso and EP Energy, and that's just driving down costs, focusing on high-return assets, delineating the acreage. And in doing that, Diamondback was one of the working interest parties, and they saw what we were doing. They saw we were driving down well costs and improving overall efficiencies to a point where our acreage that was considered at one time out of the basin, it was on the northern edge to now compete with Tier 1 assets that were in the center of the basin. They were very interested in that, and they needed the inventory -- needed Tier 1 inventory. So they made an unsolicited bid to buy that acreage and that was in 2018. So Ajax basically bought the assets from W&T Offshore for $376 million. And in 3 years, we sold it to Diamondback for $1.24 billion, mainly because driving efficiencies, focused on the high-return assets, but we also proved up 2 additional zones that they weren't producing in and they weren't aware of. So that was a great deal for Ajax. After we sold it, I looked to set out to do Ajax -- and I didn't tie myself up with any seed money or any private equity because I just wanted to chase value. And the asset that I really came back to was a company called Halcon Resources, very similar size, I guess, at the time, another around 40,000 acres solely in the Permian. Very similar story. They bought it on a single bench thesis. There's multiple benches there to test. There was a challenge in that the assets produce poisonous gas called hydrogen sulfide. So we had to come up with a solution for that, and we did. One of the few operators that had their own ability to be able to strip out H2S. And then we put in -- and that was still a costly system, but it helped us to produce the oil and the wells were economic. We -- the second part of that solution was getting our own acid gas injection facility. And there's no need to understand all those details other than the cost went from, call it, $3.50 to $4 an Mcf to treat gas to about $1.38 in Mcf to treat gas. So really just trying to, again, drive down and focus on efficiencies. I left that company in April of 2023 and for various reasons, but it was mostly just a misalignment on the next steps, whether it's through acquisitions, whether it's through organic growth. Either way, it was time for me to go. So I left in April of 2023. And within 10 days, I was contacted by investors in New York that were wanting to buy Battalion and take it private. And of course, I had my view on how that worked and how it would be successful, and we were aligned. So I signed a merger agreement basically with Fury Resources to buy Battalion and just about a month shy of closing on the asset, one of our major investors was unable to come through on the equity, and so that deal fell apart. I kept Fury Resources as an acquisition show and continue to look for different oil and gas assets. So that became challenging with a number of things. Prices were moving around and liberation day caused a lot of concerns on what that was going to do to well cost and things like that. So it has been a challenging environment, but open my eyes up to other opportunities. And so when I got this call, it made me really think through it and look to see what was going on here, and I was really excited about the assets that enCore Energy has. There's a tremendous amount of growth here. And more importantly, what I cared about is what can I do? What can I bring to the table to help with enCore. And I think my ability to focus on efficient operations, my focus on high-return assets and just my experience on getting wells through permitting. We've had to work with permitting, dealing with contracts, long-term contracts. A lot of those things, my experience, I think, bodes well at enCore . So I felt like there's a lot I could do here that could help and there's some synergies between the two industries. So I'm excited about it, and I appreciate the opportunity. I'm glad that Bill also saw that opportunity. And yes, I'm just happy to be here. So sorry to be so lengthy, but I felt like that context was important to understand what an oil and gas guy is doing in the uranium industry. I actually think there's quite a bit of similarities between the two.

Yes. I might just add on to that. For those of you who have been with the company for a while, that was exactly what we had long been searching for in the company is someone with that direct oil and gas comparison because there are quite a few features that overlap. The gas production, you're constantly drilling and need to do so efficiently. Obviously, there's a get it done quality with Rich that we really appreciate and obviously, an efficiency factor in there where you're operating a number of different areas and really consolidating and bringing down your cost, which is an always present factor that oftentimes is overlooked in the mining and minerals industry. So we're very happy to have him and that reservoir engineering experience, all the soft rock geology and engineering that you see in oil and gas fields, especially in the operator or skills that cross over into uranium exploration and development in the Roll-front terrain. So we're very happy to have him aboard. I'd also like to give you a brief update I was going to say, I'd like to give you a very brief update on some of the factors dealing with the company. This is not intended as a corporate update, but I know there's curiosity out there. And so I will touch on them. One of our major objectives going forward is to increase our investor communication and cost centers and permitting and communications, I guess, if you were going to pick three.Our projects are, as I hope you're all well aware, very good projects. And with concentration on these three major efforts, I think you'll see a realization of that potential in a fairly short order. Will mentioned that active drilling has been going on, on Alta Mesa East project, if you recall, that was picked up prior to my departure a few months ago. And so we're looking forward to updating you on that in the near future, updating you as well on the permitting on a number of assets here in the near future. And as always, I guess we've reinvigorated our M&A approach with my return. As you all know, I'm a big fan of M&A, and I think Rich shares that. So I think you've got a pretty exciting next few months ahead where you'll be kept very well informed. And as for a lot of our investors out there once we get settled here over the course of the next couple of weeks and get Rich up to speed and get myself back up to speed, we'll be visiting a number of the big cities and the investors in those big cities. And we'll certainly announce that ahead of time, keep those investors notified. So hopefully, we'll be able to meet face-to-face and more importantly, have a meet Rich and get comfortable with that going forward. So for those of us that -- or for those of you rather that will be attending the Canaccord conference in early to mid-May, we will be there and look forward to meeting some of our investors both long term and some of the newer ones at that conference. So that's really kind of all we had to bring up today. Certainly, the company has not been sitting idly around and been making advances. We're just going to make sure you're aware of them in a very timely manner going forward and do everything we can to cut costs and move the stock back up towards its highs and beyond ultimately.

Thank you, Bill and Rich. There's a number of questions that have come in. I think, Bill, you touched on several of them. I don't know how much you can say at this early stage, Rich, or Bill, on Q1 production, contracts. There's a number of questions along those lines. I'm not sure if you want to handle them at a later date or touch on them right now.

Well, I'm going to put off on production. We really haven't had time to delve into that. It is still underway, obviously. As for contracting, I think everyone is pretty well aware of the fact that we had slowed down on contracting last year, and that continues. We are, I would say, fully contracted and in fact, the permitting situation over contracted this year. But prior to my exit, the Board had seen that coming and was able to secure some contracts at favorable prices. So I don't think it's going to be a big adverse event for the company. When management sees issues coming forward and reacts, it's a completely different outcome, even though it may not be what you ideally want. Obviously, you prefer production to fill every bit of those contracts. The heads-up proactive approach puts you where you don't get offsides on those contracts. The contracting issue, while we aren't taking any more now, I can report that there's still quite a bit of activity in the contracting market. So once we get through some permitting, we'll be looking at additional contracting.

And the only thing I'd like to add to that, if you don't mind, Bill, is that there was a question about what I might focus on and what objectives. And again, I'm getting my hands around everything. So I'll be careful to not speak specifically to the company, but anybody can look at my track record and see what I do focus on is responsible growth, not growth at all costs. So I like accretive M&A transactions and I like responsible growth. And when I talk about responsible growth, I'm thinking from an economic standpoint. So in my opinion, economics is going to drive everything. I think that's in the shareholders' best value. It's what's best for the company. And so that will be my focus here as well.

There is a further question, I would assume for Bill on any color you can provide on what you are focused on M&A opportunities. I know you've spoken often about the need for consolidation in the sector.

Yes. Well, and quite frankly, Rich had spent some time on our operations down south before he joined us, trying to get acclimated. And as he pointed out, seeing how put in and really value add here. And indeed, he and I spent a fair amount of time before the final announcement as well. And I'd say we're aligned completely in terms of the M&A outlook. We want to stay domestic. We obviously have a long track history of being the acquirer, but certainly, we aren't above and beyond being acquired at the same time. prefer to -- we think we've got the team and the staff all the way down through operations and throughout the company to accomplish it and benefit from it because certainly a track history of it. But at the same time, we certainly aren't taking ourselves off the market either. Whatever makes sense, I think, is the bottom line and the best for the industry, the best for the companies and the best for the country, quite frankly. These companies that have initial production such as ourselves and several others in the industry in the U.S. in particular and in other friendly countries, just not quite enough to get the real leverage you need. You need to see a way to get bigger. There's going to be room for 2 or 3 of these ISR companies eventually, not a half a dozen of them or 8 or 10. And so size does matter. It matters in terms of your contracting. It matters in terms of your financial strength of the company. Your access to capital certainly is cheaper when you're a bigger company with better cash flow. At the same time, we don't have to live and die on that. We've got the assets and the team to build generically. So I guess I'd say a renewed focus on M&A, while at the same time, really digging down and tightening the belt and moving the operations forward as well and developing our own pipeline. And of course, permitting is a big issue with that.

You touched on the permitting side, and I did think that, that was another item that was pretty key between the two organizations. I will say that just from my quick review, it looks like on oil and gas that the state is much more in tune with doing oil and gas permitting. It's significantly faster than uranium permitting from what I can tell. So in my mind, we've got some educating to do that will hopefully help speed up the process. But right now, I just think that there's a lot of unfamiliarity on the permitting. That's probably one of the biggest unknowns we're dealing with right now, but nothing that can't be solved. I just feel like we're just a few years behind oil and gas on the efficiencies that we're permitting.

Absolutely. And that is incumbent on the company to help work with the regulators and bring them along and bring them up to speed. We certainly have had far more industry experience in oil and gas in Texas than uranium over the years and especially over the last 40. So we're quite active in Austin and will continue to be so.

Thank you. I'm going to ask one last question, and I'll have both of you an opportunity. It's sort of a merge of several questions. What are you seeing in contract pricing? Where is that headed? Domestic uranium and the recent developments with the Defense Production Act, where do you see things going? And I'll allow both of you a chance to answer that.

So Bill, if you'll let me answer first because I think you'll give a more fulsome answer on the commodity side of things. But when we talk about contracts, the first place I go is more on the operations side. That is exactly what I'm looking for as far as efficiencies on the drill side on production facilities. I think that there's some synergies that we could bring from oil and gas into this that could result in better contracting on the ops side. I don't think I was getting exactly where you want to -- what your question is. But for the uranium, I feel much more comfortable having Bill answer that question than me. But I do see a number of efficiencies that can be created on the operating side. I think there are several service companies that would like a chance at doing this because there's been a ton of consolidating in the oil and gas industry and without an increase or even holding flat of the overall activity, which means overall, there's more service companies available than might have been in the past. So I think that translates into better cost for the upside you can take away from the commodities.

I agreed. And I would say one thing, obviously, even during my hiatus here, I've been actively watching and monitoring the uranium market and what you can gather publicly from contracting. And I think it could sum it up by saying it's healthy, it's steady. It's got a slight positive bias. It's not frothy in any way. Consistent might be the one word I would tag on to it. It's not buoyant or runaway or really even any indications that's going to happen imminently. At the same time, the long-term supply-demand metrics for it just continue to build. And the progress in all aspects of the nuclear fuel cycle continue to build as well. Again, we're seeing a major emphasis in terms of funding and government assistance and that sort of thing on the enrichment on the downstream, the enrichment and conversion end of things. And quite frankly, that's where it needs to be. There's far more uranium out there than there are -- than there is available enrichment and conversion capacity. So these bottlenecks for the Western world in the U.S., in particular, are key, and that's where the money is going and welcome, at least from my viewpoint. Our time will come in terms of that. And you touched on the DPA Defense Production Act. I know there's quite a bit of activity there. There's subgroups set up to go after that largely at the request of the Department of Water as well as the Department of Energy and a lot of collaboration going on there. I'm not going to get into any details because I'm a little behind the curve on that. So I'd rather bring you with a firmer update. But I can tell you that many government agencies are indeed moving as quickly as government agencies can and maybe even more so than anyone is accustomed to, to make sure that they do secure domestic U.S. production. And certainly, the utilities, our customers are supporting that in every way they can. So I think the -- I still maintain we're in the batting practice. The real game, if you will, hasn't begun. good time for course corrections if you have to have them. And certainly, we're going to take advantage of that. So we got a good sound foundation. I don't think we could have any better leadership right now and we got a great team. So I look forward to bringing further updates, and I'm sure Rich will as well and getting out on the road and seeing everybody and telling them exactly what we're doing and when we're doing it as best as we can with disclosure rights. So with that, I think we'll sum it up and look forward to seeing you all.

Yes. Thanks again for your time and interest.

Thank you.

Thank you, both, and thank you, everyone, for joining us today. This has been recorded, and it will be available on the enCore website. If you have any further questions, please reach out to [email protected]. I thank you, Bill and Rich, for your time and for all the attendees, thank you as well. Time is valuable, and we appreciate yours. Have a wonderful day.

Thank you.