Tamboran Resources Corporation (TBN) Earnings Call Transcript & Summary

Good day, everyone, and thank you for joining us for Tamboran Resources' Fourth Quarter and Fiscal — Full Year 2024 Earnings Release. <<operator_script>> Please note that this conference is being recorded. At this point, I'm happy to hand things over to our Managing Director and CEO, Joel Riddle. Sir, the floor is yours.

Thanks, and welcome to the Tamboran Resources Full Year 2024 Earnings Call. I'm Joel Riddle, Managing Director and Chief Executive Officer of Tamboran Resources. Eric Dyer, our Chief Financial Officer, is with me today. Before we get into the material, I'd like to direct everyone to Slide 2 and the associated disclosure statements tied to forward-looking statements. Beginning with Slide 3. The past 12 months have been very exciting for Tamboran Resources. We've hit 6 major milestones, including delivering the largest normalized flow rate from any well drilled in the basin to date, with the results of our Shenandoah South 1 well. Second, we secured $82 million to advance our 2024 drilling program. That was part of a successful IPO the company completed in late June as part of our new, New York Stock Exchange listing. Third, we entered into a strategic agreement with Liberty Energy. This will bring a modern frac fleet from the U.S. into Australia this year, and we will be using that frac fleet for the 6 pilot wells that we have just started drilling. Fourth, we signed a 15.5-year binding gas sales agreement with the Northern Territory government.

That's going to be the foundation for our Shenandoah South pilot project, and we're aiming to bring initial cash flow and production online as soon as the first quarter of 2026. Number five, we've signed LOIs with 6 of the biggest gas retailers on the East Coast, and that will serve as the foundation for Phase 2 of our development plan. And six, lastly, we signed 2 MOUs with bp and Shell covering 2.2 million tons of LNG over 20 years each. Those will be linked to Tamboran's operated NTLNG project. On top of that, we've just awarded pre-FEED studies to Bechtel Corporation. And once again, this will be part of the progress we make over the next 12 months on our NTLNG project, which is what we refer to as Phase 3. Before I move into the company update on Slide 4, I want to give you an update on the current dynamics of the East Coast gas market in Australia. The Australian Competition and Customer Commission, also known as the ACCC, which carries out triannual studies of the East Coast gas market, recently issued an update in June of this year. The main findings from that study brought out 3 themes. First, the shortfall that has been expected for a number of years is now projected to arrive a full year sooner than the prior forecast.

Second, the contracted gas prices for 2024 came in at roughly $8.50 per MMBtu. That's nearly triple what Henry Hub commanded over the same stretch, from 2024 through today. And third, the expected East Coast deficit is projected to reach 1 Bcf per day by 2030, then widen to 1.5 Bcf per day by 2035. Such market conditions send the right price signal to spur a very sizable new development from the Beetaloo, where we'd aim to bring at least 1 Bcf per day into that market as soon as 2028. We see this as a highly supportive macro environment for speeding up Phase 2 of our development plan. Turning to Slide 5. Here's our corporate strategy, centered on achieving 2 Bcf per day by 2030 across 3 primary phases. Phase one involves delivering 40 million cubic feet per day from a pilot development, with a goal of getting that 40 million a day to the local NT gas market as early as Q1 2026. Building on that pilot, we'll scale up to this 1 Bcf per day and aim at the domestic East Coast Australia market, with delivery targeted as early as 2028.

So once we’ve got a Northern Territory gas market that’s well supplied, along with a well-supplied domestic market over on the East Coast, then we’ll move forward with our LNG strategy, where the focus is on delivering at least 1 Bcf a day to NTLNG by 2030. In Phase 4 and beyond, we’d envision building additional trains at NTLNG, with those trains supplied by extra gas from our development area in the Beetaloo Basin. Turning to Slide 6. A key part of delivering this strategy is bringing in U.S. technology that was developed through the shale revolution over the next -- the last 15 years. That’s what brought us to partner with H&P roughly 24 months ago. We agreed with H&P to bring as many as another 5 modern FlexRigs into the Beetaloo Basin from the U.S. The first rig came in around 12 months ago, and that rig is on location right now, drilling the first series of wells on our pilot development. Last year, we also partnered with Liberty Energy to bring in modern frac equipment. That frac equipment has now arrived at the Port of Darwin, and we’ll be mobilizing that fleet down to site, and that’s the frac fleet we’ll use for the upcoming 2 wells this year.

On top of that, we have formed a partnership with APA, which is the biggest pipeline operator in Australia, and together with APA we are busy advancing plans for a fresh pipeline running from the Beetaloo to the East Coast market, with a goal of achieving first gas there as early as 2028. Then, lastly, Bechtel was recently selected as our pre-FEED partner. And we are actively — across the coming 12 months, we will be moving pre-FEED forward alongside Bechtel to underpin the initial designs for our NTLNG project. Moving to Slide 7. Another crucial piece in delivering our 2 Bcf strategy is the top-tier, world-class resource located within the deepest sections of the Beetaloo Basin. That world-class resource came to light through a well drilled in the prior year, named Shenandoah South 1H. On Slide 7, in the middle of the page, you can view the log, where we recorded 480 feet of high-quality shale — as you can observe from the spider diagram on the right side, set against the Marcellus Shale. The rock properties observed in the deepest parts of the Beetaloo are not merely thick; they also show very high-quality reservoir characteristics. Furthermore, the gas in place, when compared with Marcellus Shale properties, is approximately 40% larger in this Shenandoah South area.

Beyond that, we believe this well has materially de-risked 1 million acres, and in our view that gives us a substantial runway for the 2 Bcf a day development plan. Now turning to Slide 8, where we go into somewhat greater detail on the activities we have launched in the Shenandoah South pilot project area. Looking at the map in the center of the page, Shenandoah South 1, which was drilled last year, appears as this small black stick. Three miles directly north of that well location, we have built a new 6-well pad, and on it we have started drilling the first 2 wells of this year, Shenandoah South 2 and Shenandoah South 3. Both of those are planned with 10,000-foot horizontal lateral lengths, and in each of these 10,000-foot horizontal wells we will be pumping 60 stages. Once Shenandoah South 2 and Shenandoah South 3 have been drilled, our intention is to take what we learn from these 2 wells and apply it to 4 follow-up wells that we plan to drill in 2025, at which point we intend to take all 6 wells, commission a facility, connect that facility to the local Amadeus Gas Pipeline, and produce initial volumes of up to 40 million cubic feet a day by early 2026.

Once more, this project rests on a gas sales agreement spanning 15.5 years that we've executed with the Northern Territory government, and that gives us considerable de-risking for delivering this first phase of our development plan. Moving to Slide 9. Through the image on the right, you're able to see the work currently underway across this site of roughly 20 acres. You can observe the well pad, where we will drill 6 of our pilot wells, along with our main camp and our Sturt Plateau Compression Facility, which is going to sit on the pad's northwest corner. Once more, we'll be targeting IP30 flow rates from each of these 2 wells as early as the first quarter of 2025. So we're incredibly excited about the chance to deliver the Beetaloo Basin's first 10,000-foot horizontal wells and to pump up to 120 stages in each of these 2 wells. This stands as the biggest single campaign in the Beetaloo Basin so far. Onto Slide 10. Once more, the Liberty frac spread reached the Port of Darwin roughly 30 days ago, and we're actively moving this new frac spread down to the site right now. That frac spread ought to be on site by late October, and we expect to pump our first frac at around November 1.

Along with that equipment, there were 400 sandboxes, which will greatly lower costs as well as boost the efficiency of pumping at every frac stage we operate. On the most recent well we drilled, Shenandoah South 1H, we averaged one frac stage per day. With this new frac spread from Liberty Energy, we think efficiency will improve considerably, letting the company pump as many as 5 to 7 stages daily using the new equipment. Moving to Slide 11, here we give a bit more detail on the well design for each of the 6 pilot wells we have planned. Once again, the 2 wells to be drilled this year will take in what we learned from Shenandoah South 1H. This optimized completion design will be pumped across the 60 stages of each well we have drilled. Once again, we'll carry over the lessons from our first 2 wells and apply further learnings to the 4 follow-up wells that we'll be drilling, completing and flow testing in 2025. Now to Slide 12, where you can see how our Shenandoah South 1H well performed, extrapolated out to a 10,000-foot horizontal. You can see the productivity from this initial well tracking fairly closely with top quartile type curves in the Marcellus Shale regions, especially in Northeast Pennsylvania.

We aim to reproduce that same curve across the entire 10,000-foot horizontal section at Shenandoah South 2 and 3, and once more, seek additional optimization and possibly improved productivity as we progress from well 1 through well 6 in our pilot project over the coming 18 months. Turning to Slide 13. What is truly exciting about the chance to further derisk this 1 million gross acres located in the western portion of the Beetaloo Basin is the prospect of substantial runway. So when you set that 1 million acres in our development area in the Beetaloo alongside the same 1 million acres in Northeast Pennsylvania, the 1 million acres in the Marcellus has been delivering 14 Bcf a day, and they have maintained that level for the past 10 years. Thus we are discussing developing the initial 2 Bcf a day, and we believe substantial runway exists beyond 2 Bcf a day as we move forward in 2030 and beyond. Turning to Slide 14. You can observe part of the -- somewhat more detail regarding Phase 2 and Phase 3 of our business plan. Once again, we are actively collaborating with our partner, APA, on route selection design as well as the engineering for a new pipeline that will link our assets in the Beetaloo Basin to the East Coast gas market.

In this market, we've taken a proactive stance, and we've signed letters of intent with 6 of the biggest gas retailers, covering as much as 875 million cubic feet per day. Our intention is to turn those letters of intent into a binding gas sales agreement within the coming 24 months. That will help underpin sanctioning of the new pipeline we'll be developing together with APA. And alongside that effort, we've launched our pre-FEED studies for Phase 3 and for the Tamboran-operated NTLNG project. Once again, we handed that pre-FEED work to Bechtel, and our excitement about proceeding with one of the world's premier LNG EPC contractors couldn't be greater. We've also signed MOUs with bp and Shell covering 2.2 million tons of LNG, for 20 years each. During the next 12 months, we'll be engaged in talks with other parties about potential additional MOUs to build out Phase 3 of our business plan. With a bit more detail on Slide 15, you can see a bird's-eye view of the Port of Darwin. This is an established LNG hub. Australia's largest LNG plant -- one of the largest LNG plants in Australia -- is Ichthys, which INPEX operates.

Each year, this facility generates 8.9 million tons of LNG, which accounts for 10% of the LNG consumed annually in Japan. Directly to the east of INPEX's Ichthys facility lies our 420-acre parcel, granted to us by the NT government in May of last year. This is an exciting location known as Middle Arm, where our 420-acre site is situated within Middle Arm. Additional projects are in the planning stages, among them 2 hydrogen initiatives. There is a battery mineral project as well as 2 CCS projects. As a result, a region-wide environmental approval process has been launched and is expected to be finished by the end of 2025, and the Australian federal government has allocated $1 billion toward common user infrastructure that will support our NTLNG project. We anticipate sharing further updates as we complete pre-FEED over the next 12 months and aim to enter FEED as early as the second half of 2025. Lastly, Slide 16 covers the upcoming catalysts. As I noted earlier, we are currently drilling and stimulating, and we will begin flow testing for Shenandoah South 2 and 3 by the end of this year. Alongside that effort, we will be obtaining our final stakeholder and regulatory approvals to execute our pilot project.

Looking ahead to the first quarter of next year, our plan is to announce the results of the IP30 flow test at Shenandoah South 2 and 3. Then, before the second quarter of next year is over, we expect to finish the pre-FEED studies on NTLNG together with Bechtel. As we move through the rest of the year, we intend to commission the pilot project, aiming for first gas initially from the Shenandoah South pilot project during the first half of 2026. Last, Tamboran is grateful for the backing of the Northern Territory government, along with every person living in the Northern Territory and the Traditional Owners across the regions in which we operate. We also look forward to close collaboration with all our stakeholders, including each of our shareholders who are listening today, throughout what will be an exciting and transformative next 24 months for this company as we work toward delivering 2 Bcf a day by 2030. With that said, I would like to return the call to the operator so we can begin the question-and-answer session. Thank you very much.

<<operator_script>> The first question today comes from Scott Hanold at RBC Capital Markets.

And look, Joel, I realize it's quite early still. The bit has only been in the ground for a couple of weeks, but if you could share some color on any early things you're seeing in the drilling, and just some sense of how far along you are? Are you into the — I'd assume you're starting to get pretty well into that horizontal lateral at this point?

Yeah. Yeah, drilling’s coming along nicely. Like I said, we spudded Shenandoah South 2 in late August. We’re still drilling ahead. We’ll be into the horizontal section before long. But honestly, everything’s on track so far. Both wells ought to reach TD during the fourth quarter. And we’ll be — as I said in my opening remarks, we’ll move the Liberty frac spread to the site and get that completion crew set up to pump our first frac on about November 1. But we’ll keep everyone updated on the drilling and the performance as things develop.

All right, that's excellent — really good to hear. So my follow-up is this: it seems like many of your strategies are already laid out quite well, and it's encouraging to see that agreement with Bechtel now in the mix — or in the fray at this point. But clearly, once drilling is done, part of the next step will involve seeing those results. And then, to move things forward, how are you thinking about funding the pilot project even further? And maybe this one's for Eric — what options do you see out there as the most palatable or top of mind when it comes to financing the next stage of your journey?

Yes, and thank you, Scott, for asking. So here's where we stand: we brought in $75 million through the IPO. Then, following the IPO, the greenshoe option got exercised for an additional $7.5 million. Those proceeds carry us through finishing these 2 wells and securing long-lead infrastructure items, and we also have further plans and a strategy underway that should give us adequate liquidity for the remainder of the financial year. How much capital we deploy for the 2025 program really hinges on how these 2 wells turn out. As things stand, our working assumption is 4 wells drilled during 2025. That would call for as much as roughly $100 million, and once we have results from the current program, we'll assess whether that capital is needed.

Understood. And when you consider the various funding alternatives out there—I realize you've discussed this—is there a particular one you're leaning toward? Or do you truly need to see how the well performs first before deciding what the next best move is?

Yes. I mean, look, we went public so we could access capital and deeper capital pools in the United States. Since that process, we've found a lot of traction with banks and potential debt funding backed by our gas sales agreement with the NT government. Remember, that's a 15-year gas sales agreement linked to CPI with an investment-grade customer. We've also been in discussions about prepays. And then we're always cognizant — we're all big shareholders here around this table. We're always cognizant of dilution. And so we're running all these options down in parallel with our current program.

The next question today comes from Charles Meade with Johnson Rice.

There's one small detail from your answer to Scott's question that I want to confirm I understood correctly — my understanding is that you intend to begin fracing Shenandoah South 2 on November 1. Is that accurate?

Yeah, you've got that right.