Pantheon Resources Plc (PTHRF) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to the Pantheon Resources Investor Update. [Operator Instructions] Before we begin, we'd like to submit the following poll, and I'm sure the company would be most grateful for your participation. I'd now like to hand over to CEO, Max Easley. Max, good afternoon.

Good afternoon. Thank you, Mark. I hope you all enjoyed that movie. It's really an exciting time to be part of this company and certainly an exciting time to be a shareholder. Before we move on into the presentation today, I would draw your attention to this disclaimer. I'm obviously not going to read all of those words today, but I would encourage everyone to do so. This will be posted on our website and the reason being we will be making forward-looking statements today. So please do be reading this at your leisure. To get us started, yesterday, we issued a press release pertaining to Dubhe-1, a very, very important activity for us, and it was a great result. So the purpose of today, and I'll introduce you with me in a moment, is quite simple. What does all that mean? And what's next? So to do that, first of all, we'll go through what was the objective of this well. And joining me today is David Hobbs to go through that element of the event today. And what you're really after is what were the results and implications get into the technical weeds, what did we find and what does it mean? And with me today is Erich Krumanocker, our Chief Development Officer, will walk you through that. And lastly, as a company, what does that mean going forward? And introducing today is our new CFO, Tralisa Maraj, and I'll introduce her properly later. But to get us started here is a reference point from Friday. So before we announced the Dubhe result. As everyone knows, Pantheon is a very resource-rich Alaskan pure-play company, and we're on the path to commerciality. You can see on the right, the tabulation of those resources adding up to 2.6 billion barrels. Notably, the one in the middle, which is the topic of today, which is Ahpun, reference point being 282 million barrels of liquid. The market did respond positively to that announcement. So that is updated. We're hovering just over $500 million market cap. But the really important part of this slide are the targeted catalysts, which is a complicated way of saying the path to commerciality. And the first thing on it is the bold one, drill and test Dubhe-1. When I joined the company 6 months ago, and people said, what should we expect out of you? The answer was, we do the right activities, we execute very well, and we get good results. And that's what today is all about. But before we get into the results, and Erich will take us through that, I'm going to hand over to David, just to remind everyone, what was the objective of this well in context? Why do we drill this well and what are we looking for? So I'll hand over to you, David.

Thanks, Max. I'm going to start really with a bit of a refresher for everybody because it seems such a long time ago. A lot of this, what I'm going to present was in place either in the middle of 2024 or in fact, some of it earlier than that, November 2023 after the strategy reset. And so just to remind you that Ahpun, the Topset reservoir is the area of focus for today's discussion. It was the area that we anticipated first to development and first to production. And the resource that we anticipated recoverable from the Topset was just short of 285 million barrels, so 282 million total there. And at the time, the Cawley, Gillespie report was very specific that it didn't incorporate any potential for infill drilling for wine racking that, that was expressly excluded. You'll see that the valuation numbers were based -- both Netherland, Sewell and Cawley, Gillespie used $80 a barrel. Today, you'd probably bring those numbers down slightly in terms of the oil price outlook. But nonetheless, those are the numbers as were reported by the independent consultants at the time. So we presented back in November of 2023, an assessment of the start-up ramp-up-type profiles. And in fact, the Cawley, Gillespie profiles that what you see on the left-hand side is very much what defines our reference case for what I'll present next, which is that look back to 2023. That was based on developing Ahpun Topset with 187 production wells, each well averaging about 1.5 million barrels in the south of the field, probably slightly higher in the north of the field, probably slightly less, but that resulted in 282 million barrels of ANS crude to put down the top line. And what wasn't included, as I said, was the wine racking, but also we've encountered in all the wells drilled so far, we'd encountered the -- another Topset shelf margin Deltaic zone just above the main SMD-B. And you'll recall in the Talitha well, we encountered some slope fans, which we flow tested and brought oil to surface. At the same time, we had Schlumberger building their big sort of digital model, a layer cake model based on the logs and the cores calibrated. And that came out with rather higher numbers. Now it's not an apples-to-apples comparison because what SLB was modeling was if we put one well into a block that is a mile by 2 miles and allow it to produce from the entirety forever, how much will it produce? And so that eliminates the effects of interference between wells that are closer together. It is necessarily a simplification of the reservoir in terms of its -- the lateral contributions, et cetera. So it really provides what we call an aspirational upside. We don't expect any well to actually produce the amounts modeled, but it tells us what the scope to move up from a conservative estimate that you would expect from an independent expert report up to what can we achieve through good operational practice. And as I say, what you'll know is that we had a number of risks that had to be addressed. Lateral continuity was one of the biggest risks when we started the whole appraisal program, and that was partly answered by the Alkaid-2 well. Let's remember, the Alkaid-2 well produced over an extended period and at an IP30 of 500 barrels per day. So it was a pretty fair test of lateral continuity. But the Dubhe well is designed to show that we can map across from pipeline state and Talitha across into this easterly portion of the field. It was designed to confirm and tell us what the oil saturations were in the rocks to tell us what drilling parameters we would expect in order to be able to drill these long lateral wells, tell us about the thickness and whether or not there's the scope for wine racking. And as we said, to gather better data in the 2 additional zones, the SMD-C and the slope fans. And Erich is going to talk much more about that. So so far, so good. All of those things or objectives that we've had the opportunity to check off, we have. But the final 2 can't be checked off until we've flowed oil to surface, gathered samples and seen the production performance over time. So that's what is yet to be confirmed by the Dubhe well. But what's surprise if we do confirm all of those things, then what we presented back in November 2023 was the ramp-up start-up model for the field to show how it gets to a point at which it is net cash flow generative. And I'm not going to go through the specific numbers in any great depth other than to say these are estimates consistent with the Cawley, Gillespie report. As it turns out, our own conservative in-house case was consistent with what Cawley, Gillespie ultimately supported. And this is what we need to update with the actual performance from Dubhe. So this is, if you like, the prize is making this profile less risky, more certain and allowing us to have the confidence to move forward with full development. So with that, I'm going to pass it on to Erich to talk about the specifics of the well result.

Fantastic. Thank you, David, and hello, everyone. So I'm going to kick off my section with an update on Dubhe-1. First, looking at the title there, first and most importantly, I'm pleased to say that the well has been drilled without a safety incident or a reportable spill. I'd really like to thank the whole team for successfully executing these complex operations in such a safe manner. So look at this map, I just want to remind ourselves, orient ourselves around the Dubhe pad. It's right next to the Dalton Highway. You can see the direction generally where the Dubhe well was headed, the orientation. The good thing about the pads that we have along the highway, it enables year-round access and it provides flexibility for upcoming completion and the ongoing testing and also allows future potential for development activity. On the upper left, you can see the rig there, and you can actually see the highway right behind it with the road leading up to it. So let's go ahead and dive into some of the detailed objectives here. So before I get into the results of the pilot, I wanted to revisit these objectives. So priority #1 was assessing the Ahpun Topset SMD reservoir and progressing the resources towards development. This wasn't only about the liquid resources, which is obviously the monetization piece, but it's also around confirming the associated gas volumes and quality for the LNG gas project. The well was designed to penetrate additional zones. And those additional zones were very much of interest in this space because they could be developed or codeveloped even along with the rest of the Ahpun area program. So what did we find? Well, we confirmed some upside. We have a thicker Topset SMD-B zone with 565 feet you can see on the picture. And I also want to note on this, the picture here, it's very much vertically exaggerated. So the dip isn't quite as steep as it looks on there. And number two, we confirmed and we logged pay above and below. So the SMD-C, the section above, you see a tick mark, and we see -- you have 2 tick marks there in the slope fan section. So we confirmed logged pay there. So that has obvious resource implications. I'll come back to those in a little bit. But first, what I wanted to do is dive into the results of the pilot. We made press statements about it, but I wanted to bring this to life a bit with some of the pictures. So first of all, I want to draw your attention to the right side. This is a simplified set of logs. The first 2 are the gamma ray and resistivity. And so just looking down that, where it gets wider, you can get a sense of where we have good pay, both good sand and indications of our hydrocarbons. And so you see kind of the bottom middle, the SMD-B, a big chunky section that I referred to earlier. We see the SMD-C above and the slope fan below. And on the right side, we have what's called a mud log. So that gives a sense, the more yellow it is, just confirms we get cuttings back. This is the nice sand that we want to target. And I'll come back a little bit later, but on the right side, you can see that target zone. So this is where we're planning on targeting the lateral. But let me come back and work through some of the key points here. So first of all, we successfully completed the pilot, drilled that, drilled, logged and we did get a section of core to a major depth of 12,833 feet. So not an insignificant depth. Basically, we got the 565 vertical feet on the SMD-B, which exceeded our predrill expectations. I think we set up to 500 feet, and we've hit 565. So a great outcome. We also encountered the 2 saturated zones above and below that I referred to. And we also identified some shallower Maastrichtian intervals that have hydrocarbons in those. Those are not a priority now and require further technical evaluation, but we did, again, basically intersect those hydrocarbon zones. So based on the results of the pilot, we proceeded along with the lateral, which I'll come back to in a second. On the bottom, you can see the table that shows the thickness of these zones where we logged pay. So I think one thing to take from this is it indicates good target zones for future wells. And as shown in the green text there in the SMD-C section, further analysis and interpretation of our logs, we've actually concluded that about 127 feet is our thickness there that previously, we'd announced 60 feet. So I referred to it earlier over back on the log side in the SMD-B section, you see a landing target that's mentioned there, the little yellow highlighted text and the line that goes through there. So once we got the results of the pilot, we decided we wanted to land the well in that zone right there. You can see the red on the right of the 2 logs. So that kind of gives us an indication of really going for an area to access some of the best reservoir, but also make sure that we're not too deep so that the frac can access that big red spike that we can see at the very top of the SMD-B. So now what I'd like to do is move in to look at the horizontal section. So this picture is overlaid over seismic. You can see the pilot hole in the lateral. In our last webinar, I suggested or shared our expectation, our predrill targeted length we had for the lateral was 3,000 to 4,000 feet. Well, following the pilot hole results, we modified the trajectory. We optimized the trajectory and combine that with good drilling performance, we drilled well over 5,000 feet, all within the Ahpun Topset reservoir, SMD-B reservoir. This is a fantastic outcome. In fact, the resistivity log shown on there, you can see the reds and yellows shows really good reservoir we drilled throughout that lateral. So not only do we stay within the reservoir, we penetrated great reservoir. And this picture also shows the pilot hole with the seismic behind it. And I think it's important here, if you look at the pilot hole, you can kind of get a sense of that big chunky SMD-B reservoir with the log. So it's all good quality on there. You do notice perhaps on the seismic there, a little bit of gray in the middle, and that is just due to the significant thickness of the section and what -- the way the seismic displays. The reservoir is actually thick enough, and David mentioned it earlier, that it has potential for additional infill wells deeper in that section. This is common practice in the unconventional developments around the world. And the diagram on the lower right shows what's called a wine rack pattern, which David mentioned as well. So you can imagine those circles or the wellbores coming out of you out of the screen towards you and the little kind of fracs that are going up and down from those. And so you do essentially the way you'd stack wine bottles. What you can essentially do then is get multiple layers of wells, you stagger them so the fracs don't intersect with each other and you don't end up with competition between the wells. So that extra infill potential on the bottom we see does provide additional upgraded resources. I'll come back to the implications of that in a bit more detail shortly. So what I'd like to do now is zoom back out, and I shared this picture on the previous webinar, but essentially allows you to get a sense across the south part of our Ahpun reservoir, all the well penetrations. And particularly, it shows where we've logged pay and successfully tested oil. The inset picture on the lower left shows the bottle of oil that were produced at Talitha. Those came from not only the SMD-B, our target reservoir, but also the slope fan horizons as well deeper. So combine the historical data with the new data from Dubhe-1, we are upgrading or have upgraded our resource estimates and that's specifically in 3 areas. So first of all is the thicker SMD-B with the infill potential from wine racking. Number two, the slope fan system, which we referred to underneath the SMD-B and the SMD-C, which is just above our target reservoir. So now what I'm going to do is dive in through a bit of trying to see where these all sit, these various horizons sit on a map. So on this map, you could see the Dalton Highway in the yellow line that runs from the top to the bottom. You can see the Trans-Alaska pipeline system in green running very close by. And also the square shows our lease blocks, yellow squares. We already have pads with the year-round access at the Alkaid, the Megrez and the Dubhe location. And what I'm going to do over the next set of animation, the map will stay in the same in the background. But what I'll do is I'll put some polygons across here to give you an extent of our reservoirs at the Ahpun area and how these reservoirs could be codeveloped from common pads and processed from common facilities. And the following polygons are based on integration of our data, including seismic mapping. They're tied to data from our wells that have been drilled and tested in the area. So first of all, I want to start with our overall SMD-B. So this is our target horizon that we've talked about. This is what was covered in Cawley, Gillespie. And what I'm going to do is I'm going to leave this throughout the rest of these pictures just to get a sense of where this sits relative to the other horizons. This is where, obviously, Dubhe-1 lateral has been landed, and it is the foundation for the Ahpun development. So let me move on to the first step, which is to go deeper into the SMD-B. So this polygon shows essentially a cutoff where our SMD-B thickness is greater than 450 feet. So Dubhe-1 was our first time we confirmed this extra thickness, the Dubhe-1 confirmed that. And the 450 feet was chosen as a bit of a conservative minimum thickness for infill. It defines the boundary of the polygon here. And in some basins, the thickness could support maybe 3 layers of wells. But here, we're only assuming we can get a second layer. Based on analog well spacing used in the Cawley, Gillespie independent report, this would support an additional 25 to 30 additional wells below our top horizon, and that results in a resources of 40 million barrels of marketable liquids. So this is in addition to the 282 million barrels of marketable liquids that David reminded us of us earlier. So just for completeness, before I get into the additional zones, I wanted to show Alkaid. So this is the Alkaid zone that underlies the Topset SMD-B up to the north. These resources are included in our previous resource estimates and are the subject of the independent expert report from Lee Keeling. So our estimates remain unchanged in the area at 79 million barrels of marketable liquids. So now we're going to move into the slope fan. So as a reminder, the slope fan is deeper underneath the SMD-B target reservoir in the south of Ahpun. As I mentioned earlier, we successfully produced oil from this zone in Talitha, and we have now logged pay in the Dubhe-1 pilot hole. For our resource estimates in these, and I'll do this for both the slope fan and for SMD-C, we've defined 3 distinct cases. This picture shows our base case. So this is our best estimate of the aerial extent. This is using the seismic data and our various well penetrations. What you can see, I'll point out before I page through the next couple of cases is it overlays much of the SMD-B in the south of the field and also well within our lease areas. So this next case is the low case. This is kind of our minimum super conservative view of what the area looks like in this. I'd say it's pretty conservative as well because it shows Talitha is outside of this low case where we have actually tested oil. So it's very much on the low side and very much a conservative case. And then I'm adding on now the high side. So this shows the high side, the extent of the slope fan, how far it could go. So these volumes form the 3 areas that run and we run essentially into a Monte-Carlo simulation. So we consider the ranges not only of the extent of the reservoir that are shown in this low base and high case, but also many of the key variables that will determine the oil and the hydrocarbons in place as well as the recovery factor we expected. So this results in a best estimate or a P50 estimate resource of an additional 126 million barrels of marketable liquids. And a particular note, we have also used a more conservative natural gas liquid yield than any of the estimates we have from our independent expert reports. So let's move up hole. We go -- this is the SMD-C. This is above our target reservoir at SMD-B. As I showed earlier, we have successfully logged pay in the offset wells, and now we have logged pay in the Dubhe-1 pilot. We also did logged pay in the lateral. So it demonstrates its continuity, particularly around the south. And for our estimate resource in this area, we've again defined 3 distinct cases. This picture shows the base case. Now I'm adding on the low side case and then again, the high side case. So these 3 areas, as before, were run in a Monte-Carlo model and included key variables that were collected based on our wells to date and resulted in a P50 estimate or a best estimate, as we call it, of resources for the SMD-C. That estimate was 62 million barrels of marketable liquids. And again, we've used the conservative NGL yield relative to the estimates from the independent expert reports. So I'll run through those very, very quickly. But what does it all mean? So let me bring it all back together here. This is an overall summary of our resources within the Ahpun area. The new resource estimate upgrades are shown in the shaded green, and they sum to additional 228 million barrels of marketable liquids. This brings the total resource in the Ahpun area just under 600 million barrels or more than 60% increase. These resources as a reminder, all lie right near the Dalton Highway and the Trans-Alaska pipeline system. The horizons are stacked, which could allow co-development of multiple reservoirs from each pad. This offers significant capital efficiency advantages for our full field development. And speaking of development plans, I'll now hand back to Max to talk about our next steps on Dubhe-1.

All right. Thanks, Erich. So as you all gathered, this has been a very successful well. The safety point of view, we're very proud of this, no injuries. Environment, no spills. And this is a technically challenging well to drill to 15,800 feet. And all the credit to the team exceeded expectations there and ended up with 15,800 feet or 5,200 feet of lateral. And Erich just walked you through a very excellent summary of the resources and results that came out of that. So thus far, we do activities and measure us against our ability to execute those. This has been a staggering achievement. But what's next? Well, the next step is obviously to complete it. So on this graphic here, you can see the steps required to get to that point. In essence, the major operation here is a hydraulic fracture stimulation. For this particular well, and I'll go into details in a moment, it's 10 million pounds of sand and a couple of hundred thousand barrels of water pumped at high rate into this wellbore to prop open the reservoir and allow oil to flow in. But to get to that point, there's a number of steps we have to undertake. What we're undertaking as we speak, is running casing into that lateral. Then we have to relocate the rig because it takes up a lot of space. We have to mobilize a frac crew, we have to execute the stimulation itself, then we have to drill out the plugs we left behind when we stimulated it, install production tubing and ultimately flow test the well. As you can see in the upper right corner, this is a major operation with a lot of logistics and a lot of vendors. On the bottom, you can see the companies we've chosen to work with, very carefully chosen to work with. This is a unique operation to the North Slope. There are no unconventional developments on the North Slope. And so we have chosen to bring in a party from Alberta, who does this all of the time. They brought enormous expertise to bear on this called Element Technical Services. But given the whole spread of logistics and activities and equipment, we can't give an exact dates when we're going to execute the stimulation given we're mobilizing equipment from as far away as Alberta. But once we have a definitive timetable, we'll endeavor to share that. But you should have confidence we're already starting this. So there's no flat spot in between drilling this lateral and moving forward into this activity set. Just how it plays out over coming weeks, we'll get back to you on the specifics of that. But for the completion itself, this is the wellbore that we drilled in simple terms. So we have a 4,200-foot vertical section, quite a long tangent. So 62-degree tangent for 6,400 feet. Remember that blue line that Erich showed, this is to get out to the reservoir location. And then we have our 5,200 foot of lateral. This is all 8.5-inch hole below the casing shoe at 4,200 feet. So we'll be installing 5.5-inch casing into that here directly. Now the completion design itself, the slice of standard unconventional design, and that's really what it is. This is very similar to the hundreds, if not thousands, of completions that are performed in the Permian and very similar to the Montney as well. We don't want to introduce any novel concepts here. So this is a standard plug and perforate completion, 200 stage lengths. And you can see the slick water volumes and sand concentrations I mentioned before. This would not be unusual for any presentation for any unconventional operator in the world. It's very carefully chosen to balance not only initial rate, but also EUR, which includes the proppant. So the proppant we're using here is a combination of 100 mesh and 40/70 which is a traditional combination that does balance that initial production rate with EUR to enable a very high-quality representative well for the future. So looking -- stepping back from it, we've shown this slide before, and everyone focuses on all those colors to the right. This well is extremely important to set this in motion. So in that red ring, production rates, gas-oil ratio, et cetera, all of that is required for the rest to occur. In the green is all the regulatory approvals, like where you put your pads, how many pads. Well, we have to understand how our wells will perform before we do that, including the co-developments that Erich mentioned. So that's a precursor to that. The blues are midstream and facilities. So the production rates, the compositions that we get from those flow tests will be the last thing required to do the engineering and design on these things. It becomes an exercise in process engineering, and we need the results of the well to do that with specificity. And lastly, we ultimately get to the orange bit, which is development. And so the balance of the year following this flow test, this is going to be our focus. So given the results of Dubhe-1, how do we translate that rapidly into an engineered solution that we can take to development and FID as quickly as possible. But again, this -- I can understand how important this well is to give us the data to do this in the most capital-efficient manner and indeed a co-developed manner, as Erich set out. So that's where we are. So once testing is complete, we will pounce on the schedule. But to wrap it up for today, I'd like to introduce Tralisa. So she's our new Chief Financial Officer. She joined us just a few months ago, and she's been a fabulous addition to the team. And so this is your debut, Tralisa, introduce yourself to the world.

Good afternoon, everyone, and thank you, Max. And also, thank you all for joining us today. As we close, I want to take a few minutes to highlight the key pillars that continue to guide our strategy and our commitment to creating sustainable shareholder value. First, we talk about operational efficiency. We remain focused on disciplined execution of our drilling activities. As both Max and Erich mentioned, we have been successful in the Dubhe-1 well without incident, and that is a holding achievement for us as a team here at Pantheon. Our goal is to deliver on these activities, our drilling activities safely, on time and within available resources while minimizing risk every step of the way. Secondly, as we continue to focus on prudent financial management and funding strategy, efficient use of our capital is always at the top of our mind every day. We take a disciplined approach, making sure every dollar invested drives meaningful progress towards our goals. At the same time, we are actively exploring several options that support development and bring funding while ensuring, one, readiness; two, maintaining flexibility; and three, managing costs. As you can imagine, funding and other options that bring investment into our company can be quite costly, and we've got to find the appropriate balance for all our stakeholders. Third, as we move forward and think of sustainable growth, our strategy is to grow responsibly. That means carefully balancing operational, financial and regulatory considerations. We believe this measured approach positions us for long-term success and long-term value creation for our shareholders. Fourth, investor transparency and reporting. This is very important to us as a team at Pantheon. Transparency is central to how we operate, and we plan to continue to share regular updates as required and as Max had mentioned, on technical results, milestones and key developments so that our shareholders remain fully informed of our progress. And finally, the team that has been built. It's quite an experienced team. Our management and technical teams bring experience, expertise and track record needed to navigate challenges and execute our strategy effectively. To summarize, by focusing on financial discipline, efficiencies and leveraging our team's experience, we work towards delivering long-term value to all our stakeholders. With that in mind, hopefully, today's webinar had been both helpful and informative. And we look forward to speaking to you guys in the future here with further updates. With that, I'll hand it back to Mark for close.

Mark, before we close, Mark, 2 things from me. First of all, thanks for your time, everyone. I know everyone had lots of questions. And with that in mind, we had lots and lots of questions that were issued before the presentation today. I read every single one of them I had this morning. They're really high quality. We also had quite live. What we found is it gets a bit clunky to cherry pick them in a formal setting like this. So like last time, my intention here is to summarize all of these. We tried our best to answer the ones we had before the session in the session. For those we did not do, we'll be posting here shortly rather than cherry picking them live today. So again, thank you very much for your time today, and I'll hand back to you, Mark.

That's great. Thanks ever so much, Max, and we'll notify all the investors once you've had a chance to review those questions. So once again, thank you very much indeed for your time. If I could please ask those on the call not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order that the team can really understand your views and expectations. It may take a couple of moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Pantheon Resources Plc, we'd like to thank you for your time this afternoon and wish you all a good rest of your day. Thank you.