Company Interview / Laser focused on partnering after Timor-Leste acquisition

Key Topics discussed:

Transformation of Finder Energy from an explorer to a developer and producer of oilThe favourable conditions in the Petro state, Timor-LesteThe impending partnership with an industry player to fund the significant costs of the CapEx development phase

Damon Neaves of Finder Energy (ASX: FDR) unveils the company's plans to acquire a 76% stake in four oil fields off the northern coast of Australia, currently owned by Japan's Inpex and Italy's Eni. Highlighting the attractive nature of the assets located in Timor-Leste waters, Damon perceives this shift as a transformative step for Finder Energy, transitioning from being an explorer to a developer and producer of oil. Damon says there are favourable conditions and support enjoyed in Timor-Leste, a Petro state that heavily depends on the development of gas and oil resources.

As plans progress, Finder Energy has already begun the requisite seismic reprocessing and pre-feed engineering as part of their forward work program, focusing on the development of the Northern fields. Damon also clarifies how controlling costs is vital, anticipating expenditure of hundreds of millions during the CapEx development phase.

To offset the significant costs, Finder Energy plans to partner with another industry player willing to fund the CapEx development phase. On garnering financial support, Damon acknowledges Long Range Capital's commitment to take up their entitlements, forming a substantial part of the $6 million in funds being raised. Going forward, the company will concentrate on attracting the right partner for the next 6-9 months to optimise the project's value.

Full unedited transcript:

0:00

Let's put the spotlight on a small cap, shall we? And South Perth based energy company Finder Energy is set to acquire a 76% stake in four oil fields in Australia's northern coast the Timor Sea, in fact, which are currently owned by Japan's Inpex and Italy's Eni. Let's get the details on the acquisition and a little bit more besides that. Finder's MD. Damien Neaves joins me now. Damien, welcome to overseas. Thanks for joining us. So what is so attractive about these assets up off the north coast of Australia?

0:33

Yeah. Good afternoon, Nadine, and thanks for having me on the show. Um, look, in your introduction, you said we're off Australian waters. We're actually in Timor-Leste waters. Um, look, one of the things that's attractive for us is this is a big shift, a transformation, uh, from an explorer into a developer and ultimately a producer of oil. Uh, so it's a big change in direction. Um, and we think there's a lot of value in these barrels. Uh, net to us. It's around 35 million barrels of oil. And we see Timor-Leste as a very attractive place to invest, uh, in the sector. Uh, we see a lot of resistance, actually, in, uh, other jurisdictions we work in. Um, the UK and Australia. Um, you know, where, you know, aggressive, uh, net zero targets are hindering, uh, the industry and the development investment in fossil fuels. Yeah. Well, I was going to ask that because Timor-Leste, from what I

1:33

understand, actually owns the remaining shares. That's about 24%. So you've been engaging with officials there already, have you?

1:42

Look, we have, um. So this transaction's been quite a while in the making, which has given us the opportunity to spend time in country. Uh, we've met the minister, uh, the regulator, ANP and, uh, Timor Gap, the national oil company. That's our 24% joint venture partner.

2:02

Um, and what we're seeing is just overwhelming support. Um, Timor-Leste, um, is a Petro state. Um, you know, their future is dependent on the development of their, their resources, uh, specifically that gas and oil resources. Um, and for us, uh, it's an honor to play, uh, what we hope will be an important role in getting, uh, the next field, the next oil field into production in Timor-Leste. So just explain it further to me. So you've got your acquiring discovery. So they are already, um, you know, discovered significant fields. Is there a works program in place or what do you still have to do to bring this all to fruition? Sure. Uh, look, so there's four discoveries, four separate oil fields in the permit, uh, in the north of the of the permit or PSC, I should say, uh, a two fields called courtesy and Joel. And they were discovered in the early 2000. Um, there's five wells. So these these fields have been

3:02

discovered, uh, appraised and flow tested in both cases, um, you know, indicating very high flow rates, economic flow rates from the field. Um, so we've designed a work program here in consultation with the regulator, uh, to really go in and prioritize the development of those fields in the North, could it. And

3:23

so the forward work program, uh, includes some, some seismic reprocessing of the existing 3D seismic, which helps us to place the development wells and also helps us to evaluate some of the near field exploration opportunities we see in the PSC.

3:41

Um, but we'll be mobilizing straight away on engineering. So pre feed uh engineering concepts select um and getting on with the path towards FID in first oil. Okay. Um you have your final investment decisions still to come. How do you control costs. Like give me some sort of a picture as to how much it might cost to develop these fields and how you keep that under control.

4:07

Yeah. So the development CapEx is is significant. Um, fields like this. Um, probably the preferred development concept would be, uh, what we call an FPSo, which is essentially a tanker with topside production facilities and subsea flow lines and, well, heads. Uh, and you produce the oil, uh, straight into the hull of the tanker. Um, an export tanker comes alongside and you pump the oil across. And that that export tanker goes away to markets elsewhere in Asia.

4:39

Um, so the development CapEx there is, is hundreds of millions. Um, funders plan in that regard. Uh, is we've gone in at height 76% equity. So we'll be looking to bring on, uh, an industry partner, uh, to help fund that development CapEx to get us through the, um, the construction and development phase. What kind of like what does that industry partner look like? Where would they be from?

5:06

Yeah. Look, I think in this case, uh, you know, what you're seeing with the, uh, the sale from, uh, majors in AI and, uh, you know, large lng, lng producer impacts, uh, is, uh, you know, this asset fits into the hands of a smaller, sort of cost effective, uh, nimble developer and producer. And I think that's really what our partner will look like. Yeah, we're looking at at mid-caps, um, that, um, can cost effectively, uh, bring, you know, fields of this size into, into production, um, profitably. How's the cash balance? Because I do know that you've put out an entitlement offer as well. I think you're raising $6 million. So, you know, obviously we know what the the funds are being raised for, one would imagine. Um, do you have support of your current shareholders?

5:59

Yeah, we do. Look, funders, um, Register is a majority owned by a group called Long Range Capital. They own just over 50% of the stock. Um, so they've they've committed to take up their full entitlements. So that's, uh, I think 3.2 million of the, the 6 million, um, and the balance, uh, will go, um, across the spread of shareholders. Look, this is very well priced. It's, um, priced at 4.8 cents. Uh, we closed yesterday at 5.9 cents. Um, so it's priced at a discount to our last close. Um, but really, I would say it's price pre transaction. So, you know, today we book, uh, 34 million barrels net of oil resources and that's not yet priced into the stock. So you know we expect very strong support, uh, from our shareholder base. Okay.

6:52

What what's the next sort of key catalyst, as far as you can tell right now for, for shareholders for the share price.

7:00

But there's a whole heap of project based milestones that will come out in the ensuing months as we, um, you know, put out information on, uh, you know, concept, select, um, you know, economics and resource estimates and the like in relation to the project. I think we will see a big rewrite in the stock is, uh, when we bring on that partner and, um, you know, solve the question around our forward CapEx requirements. Yeah, I think, you know, until until we're successful, uh, partnering up here, uh, the market, uh, won't fully, uh, reflect the value of, of, of this development. So I think for me, the focus, uh, the focus over the next 6 to 9 months, um, is is getting the right partner on board to to take this project forward.