Cluff Natural Resources webcast with CEO Graham Swindells, London South East E&P Investor Briefing

Cluff Natural Resources webcast with CEO Graham Swindells, London South East E&P Investor Briefing



[Applause] okay so just a quick background to our natural resources we are an oil and gas investing company primary focus on the UK North Sea on exploration an appraisal which is where we see the most amount of value being potentially created in the value curve we have seven licenses spread across the southern and central North Sea both for oil and gas this has been relatively transformational year for the for the company earlier the year in the year we formed out two of our licenses to tishell previously we had we were awarded an additional six licenses in the last year's licensing round and as Nigel just mentioned we've recently completed a fairly substantial equity raise which means that we are fully funded for a share of those two wells with with shell so we're very excited about that we're fully funded for the for the foreseeable future and total portfolio I amounts to just over 2.4 TCF of gas or in in oil terms that's the equivalent of about 400 million barrels of oil and we're also looking to to grow that port for the next licensing room which is due to to open up literally within the next couple of weeks I just in terms of board mark lapin has recently joined our board as as chairman marks got a huge amount of experience in the oil and gas industry most recently with Cuadrilla and in centrica but he's worked for all a number of sort of major oil and gas companies including Philips and an excellent brings a huge amount of experience to the board the other key executive is Andrew nan who's our chief operating officer and geologist and who leads our technical team and he's responsible for identifying all the the overlooked in less well understood prospects which we've successfully brought forward over the last few years just following on from our from our recent raise we've really started transformed our our share register previously it was almost entirely so retail we brought in a number of of key institutions as a result of of that raise Canaccord know being our largest shareholder followed by IP GL which is my Spencer's investment vehicle I should actually be 16.8% following his participation in the last fundraising longboard audio 8.1 henderson 6.2 and after that Fiske and James Caird asset asset management all of whom have supported us over a long period of time and most recently in that race so they strongly backed know so why focus on on on gas and in particularly UK which is our primary focus we believe this is of strategic importance to to the UK it's a proven gas gas basin which extends from the northeast of England right through to the to the Dutch sector the the UK is facing a fairly major gas crisis in our opinion it was only a decade ago that we were entirely self-sufficient in gas no we are importing more than 50% of our gas by 2030 for that's going to be 75% of our gas requirements are going to be could be imported which creates a fairly major issue for for the country as a whole and something which we believe will need to be to be addressed as far as the basin and the UK as a whole as concerns the industry has restructured itself quite quite dramatically we're known environment we're obviously with with with higher and more stable commodity prices coupled with a restructuring of the industry with costs having come down quite quite dramatically and a far more attractive regulatory and fiscal fiscal regime mean that the the North Sea is an extremely attractive place to be to be truly know and on that basis you know we believe there's no better time to be drilling in the okay than no so just a quick overview as to where we operate until recently we were were confined to what we call a core area of the southern North Sea which is in in the middle area there our licenses are in the blue but as a result of the success that we achieved in last year's licensing round we've expanded the portfolio to the south we picked up a couple of additional licenses in the in the southern North Sea but also to the north up into the central North Sea where we picked up a couple of licenses and what that's also done is added an element of oil prospectivity to our portfolio which will come on to Lisa so southern North Sea this is what we call Artyom's our core core area this is where the majority of the prospectivity lies our licenses there again in the in the blue but you can see all the the the the red splotches on that are the existing you know discovered and producing producing gas fields so you can start you can see instead of very much established play fairway see this is where the majority of our resource sits or see the majority that 2.4 TCF of gas or you know 400 million barrels of oil equivalent are located there's still huge amount of prospectivity in in this area and we're focusing on the relatively under explored areas where we see significant upside it's all relatively shallow water so jack up rig territory which is much much cheaper and a significant amount of existing infrastructure in this area which means that things can be can be brought online and commercialized relatively quickly and straightforwardly so moving on to the first of the format's and the first well that we anticipate drilling with shale you can see on this map where that where that star is that is the Saline a prospect and you can see why this has been of particular interest to shale all those red squares are our existing fields and infrastructure which is operated by by shale as a joint venture with Exxon and all that few feeds into the Backson terminal which you can see there in Norfolk so having canonical exited this area of the of the other North Sea through the through the downturn shell is very much focused on investing back in into this this infrastructure they've invested heavily in in backed in or no looking for additional fields to to get further supply and into into that system where has significant capacity particularly you know Provost this is the first farm oh the shell has done in the southern North Sea and best part of the ten ten years and we don't necessarily anticipate them stopping stopping here but we're very very excited and proud about that in terms of the prospectus itself it's just under 300 BC f of of gas associated with it terms the former of such that shale are taking a 50% stake in this license and return for that they're paying us six hundred thousand dollars of cash up front and they're also we be paying seventy five percent of the course of the first well up to a total of twenty five twenty five million dollars saw a significant carry on that on that well and we're fully funded for a share of the of the costs on on that but in effect shale are paying for half of our course on that we're currently working with shale to get to that well investment decision and if we can get that secured in the second half of this of this year and then we could be drilling that well in the second half of next year I so the second of the two far moats with with shale is in relation to our license to – five – which includes the Pensacola a prospect this is as Eckstein reef play of slightly different – to the geology associated with the the Saline prospect in terms of size it's not dissimilar just over 300 BC f of of gas so on net based just under a hundred BCF – cloth the terms of this former such that shale are going to pay a hundred percent the course of our what program through to the earlier of the end of next year the point which are a well investment decision has made and that what program is going to involve the the shooting of new 3d seismic over that prospect that's going to be new 3d broadband 3d seismic which has already been contracted we know that that seismic is going to be short in the second half of August this this year this is a slightly shallower player well costs associated with with this with this well are in the region of thirteen to eighteen million dollars so we will be retaining a thirty percent stake in in that and again as a result of our recent raise we're no fully funded for for that and Phil anticipate that will will be drilled on this license the year after next this slide really just gives an indication of the level of interest and activity that's going on in our area I don't force to go into detail on this but we've seen a number of major players investing heavily in this in this area in the last few years in particular any us spirits and Neptune for invested heavily at a corporate level and the this are like green boxes indicate a number of key wells that are going to be drilled in in the course of this year in acreage which is adjacent to ours I was just to put things in perspective they were all the eight exploration wells drilled in the whole of the UK say to the North Sea last year so it's very encouraging to see at least four wells being being drilled in our core area and success in any one of these wells will will be a very strong read across for our prospectivity already we've had just in the last month rebuild drilling there well that's a Yuson which which discovered gas it's already a very pause to control read across four hours in the basis it's a similar similar plea so this is the third of the of the prospects which we anticipate being drilled over the next over the next couple of years this is our license two three five two which includes the dura prospect which you can see in orange in the middle of that of that map there this was a license that was awarded to us just last year in the xxx licensing rounds we hold it 100% and we have done a significant amount of technical work on this license which has significantly enhance our understanding of the prospectivity volumes and risking of this of this license we hauled it for a four year period and what's a particular interest here just in terms of oftaking potential potential formats is it's very close proximity to be piece e type infrastructure which is just immediately to to the west but also a number of other fields which are being developed Kaleem which has been developed by by total merganser which is shell operated infrastructure and we've also got the siegel field which is kind of being developed by niche in so a significant amount of of work and activity in this in this area which provides off seek opportunities for the company and also natural former former partners so we have we have just commenced a formal process on on that on that license and we're very excited about the prospects associated with that just a little bit further for the detail on the on the geology it's forty sandstone it's a relatively straightforward play unlike some of the more expensive the h ph t''i type plays that we see in this in this area in terms of the the prospect size we've got our p 9 2 p 10 range of just over 10 to 80 million barrels and a p50 recoverable of just under 40 million moving barrels we've also just completed an economic study on this which is demonstrating very favorable economics with poor tax NPV of 555 million pounds sterling chances of success are 41 percent or so relatively low risk for for exploration and that coupled with seismic data that we have full coverage over means that we believe this is very much drill ready and we're very excited about the prospects for for this and in the formal process that we're we're just commencing at the moment and then the was the final two prospects which we have in our portfolio in the in the core area are the Cortez and Burbank prospects on license to four to four and Cupertino on to four to eight we're currently undergoing reprocessing exercise on each of those two licenses and we will we anticipate a commencing a formal process on both of those licenses read about the turn of the year again much of the drilling activity that we are seeing in this on the southern North Sea is in adjacent areas spirits and one D s I could be drilling the Andromeda and Derek and Aurora wells and as I mentioned if successful it come up any of those those wells will be of very significant value to to our company in terms of the read across yes finally just well it's been a very productive and transformational year year today we've achieved we achieved an awful lot we believe there is significant activity and catalyst for the company and the VAR in particular the value of the company going forward both in terms of new and long-term I guess in order of of importance we've got the the saline well where we are currently working with Michelle to get to a well investment decision and if we see if we can get that's done by our certainly the second half of this year that well could be drilled in the second half of next year on Pensacola the the seismic is going to be acquired and shot all over that prospect in the course of this summer and falling a period of processing an evaluation we should be in a position to make that contingent world commitment firm in the course of next year and a will to be drilled the following year we just mentioned juror we've completed all the work in relation to that or no running will no be running that pharmo process over the the second half of of this year and so we're very excited about that if we can get a successful outcome on that before the end of the year again a well could be drilled on that license as soon as the end of next year we just mentioned Cupertino and Cortez which will be the next two licenses off the block in terms of for modes for my process and I guess in the bet in the background to to all that we've got a 30-second licensing round which is due to be opening up any time in the next couple of weeks and we will certainly be looking to replicate the success that we had in the last licensing Roman we picked up six additional licenses in this licensing round as part of our plan to to grow and diversify our portfolio and create multiple drilling opportunities going forward so guess just to just to sum up the the partnership with shell has been really transformational for us and a major endorsement of the company and the technical team's ability to identify and work up less well understood or overlooked or opportunities we've really been able to take advantage of the other work that they have they have done as we've come out of the downturn we've got these two formats with with shell which gives a light line of sight over the drilling of at least two wells and as a result of our funding we're fully funded for for our share of the costs associated with with those we do still have the opportunities we still got fairly significant equity stakes and those licenses in the majority of our other licenses are held 100% so we've got significant flexibility from which to to farm down and as I mentioned we will be looking to significantly expand and draw the portfolio and follow de-risk the portfolio creating the farm mode and and drilling opportunities of the future through the next licensing round the company remains debt-free relatively I gel low-cost we maintain very strict cost discipline and we're operating in what we consider to be a very attractive regulatory and fiscal regime so in summary you know we we believe this is a great time to be to be drilling in the North Sea there's plenty of life left yet in the basin and we're looking to continue to to grow the company through partnership and ultimately through exploration success [Applause] these of us first of our companies a lot of detail there on the process and what's going on questions who wants to ask a question of grain there's one over here thanks the presentation very interesting your father was shown your relationship with them they've got I think a 70% of saline is that right they've got 70% of Pensacola 50% of saline okay and you're presumably at the moment you're talking with them you'll now funded for drilling so you're probably having detailed discussions with them about the process yes certainly in relation to saline oxygen Pensacola were committed to the acquisition of the new the new seismic but certainly in relation to saline the primary focus is getting to that well investment decision so that we can start moving towards towards drilling and I mean Shell's a huge company in your a minnow how do you make sure they follow through and drill because sometimes they get distracted and you know you might become a marginal interest to them how do you make them follow through I mean it's a very good question I mean clearly the respective difference in size is not lost on us on the other hand the very professionally and respectfully towards towards us you wouldn't necessarily know or feel the size difference when we when we have our our discussions in relation to the the saline well we remain operator until such time as the the well investment decision is made so we are to some extent in the in the driving seat in terms of that of that process ultimately can we can we make shell and that organization move any faster or slower than it would do otherwise you know that is a very very good very good question but one thing we do know is that they are very much committed know to to the basin and particularly the the southern North Sea and in particular the the saline prospect given its implications for the existing infrastructure that they have the nearest fields to them as the bark field which is coming off production quite quite rapidly so they need to get more supply into that into that system and that that infrastructure and also to some extent it delays decommissioning liabilities for them so they're very strong strategic economic and commercial drivers for them to drill that well as soon as as soon as possible okay thank you all questions one just here Thanks and given shelves interest in the southern North Sea and your technical expertise in finding expression blocks in licensing rounds can you see them working with you on future licence round applications absolutely and we're already talking to them about that prospect and that possibility shell despite their size and and might and also technical capability you know have not invested heavily in in exploration you can even see that in their and their most recent results were they point to reserve replacement as being a major area they need to they need to address this scene where our team is it's capable of in terms of C identifying and you know uncovering and progressing prospects which have previously been been overlooked or less well understood and I think they recognize that that capability that we that we have so to that end you know we're already talking to them about the possibility of collaborating in the next licensing round and the same time we were also where we believe as competitive advantage to do so we are also talking to and we'll also talk to two other operators in the area we have one of our licenses were partnered with that with with Park meet clear there are a number of other major players in the area and where we believe there is a advantage to begin from from partnering role and going 100 percent ourselves then we will do can you just say a little bit more about your style as a company in your own as chief because with all these projects you're in the hands of geologists all kinds of people saying this is gonna be fantastic and this has been overlooked I know you were in restructuring in the past so how do you make it happen for shareholders how do you sort of move out of something that isn't working and then capitalize with this low-cost way of working to actually deliver for investors yeah well I mean there's a lot of trust involved I've got complete faith in the technical team who have done a fantastic job yes of course we've had to be patient through the through the downturn and there were times when you might have thought well you know as any of us necessarily going to come to fruition but we've we've remained patient with kids we continue to invest carefully through the downturn and you know I always believed that we would come we become goods in the end and we've seen that no naturally exploration is one of the first things to go off for major companies through the downturn and for small companies like like ourselves who have continued to invest through that don't earn we've now been able to put ourselves in a position we were able to capitalize on you're on the you know you know the change in market conditions and the work that we've done over the over the last like the last few years certainly attracting your the likes of the likes of shale world world-class partner has been has been a key part of that again you know we're looking to to build build on that and you know the team is all we've obviously we've had to maintain very strict course discipline as an exploration company through that through the don't earn per se that's beginning to you know to pay dividends no okay time for one more question I think over there this is a quick question on the Pensacola one yeah and relationship you're looking to do a tie back or access another pipeline to the T side yes gas processing what was the timetable for that well I mean the timetable will ultimately fall from from you know the whale investment decision you're right certainly this is this is an area where shell doesn't have existing infrastructure so we would be looking at either a tie back to the NE also operated Bria an infrastructure or equally we could we could pipe it straight to shore from from that field so we do have multiple multiple options and those will be will be addressed through that through that will planning your fees there are there are multiple options options there and we just need to walk through what we believe will be the most commercially sense sensible for us hey thank you very much [Applause]

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