Company Interview / “We’re out there beating the drum…”

David Prentice, CEO of Brookside Energy (ASX: BRK), discusses the second quarter report for the company with a diverse forward strategy. Speaking on the company's recent numbers, David mentions cash receipts of $8.7 million and a cash balance of 21.4 million at the end of quarter two, achieved through production and careful business decisions. This financial outlook renders Brookside Energy (ASX: BRK) right on the verge of a significant growth phase, driven by an upcoming drilling campaign on the FMP project.

David reveals plans to double production in the second half of the year as they complete the new wells. This bold move is expected to beget a significant upsurge in production and cash flow in the fourth quarter, prefacing a trajectory that could see another 300% production growth over the years to come. He speaks optimistically of a pathway to hitting the lofty heights of 4.5 to 5000 barrels of oil equivalent per day, without requiring any additional capital from shareholders. With strong balance sheets, low operating costs, and high liquid content, David foresees the company's profitability maintaining momentum.

The CEO also hints at the potential for delivering returns to shareholders in the foreseeable future. With a promising cash balance of 21 million, and plans for another 16 or so wells in the resource-rich swish area, Brookside Energy (ASX: BRK) could be extremely busy until mid-2028. He also touches on the oil prices and plans to keep an eye on pricing. David acknowledges the volatility and risks tied to geopolitical events, but underscores that the company manages to keep its numbers in check. Despite being a small company in the market, David stresses the promising potential of Brookside and speaks of the positive reception of its disciplined approach in the industry.

Full unedited transcript below:

0:00

We've been looking at Brookside Energy reporting second quarter numbers with $8.7 million in cash receipts and an end of quarter cash balance of 21.4 million. David Prentice, CEO of Brookside Energy, joins me now to discuss. David, thanks for staying up late for us in the US. Just talk us through these numbers.

0:17

Yeah. So look, another great quarter for us over here in the US. So some some posted some solid numbers where we're right on the cusp of a major, um, kind of growth phase here. Um, with this drilling that we're doing out in our FMP project. So, you know, we're seeing production probably approaching its low point for us here for the, for for the, for the significant, uh, getting ready for this significant uplift that's going to come from bringing these new four new wells online. Yeah. Okay. So what's the outlook then in terms of bringing those online. Because you're at sort of a pivotal point here.

0:55

Yeah. So look we're going to double production here in the in in the second half of the year. So we're right at the point now where we're completing these wells and bringing them online. So big, big uplift in production and cash flow in the in the fourth quarter. And really sort of sets us up for what will be a trajectory that will see us another 300% sort of production growth over over the coming years from those increased levels that we're that we're talking about achieving here in the fourth quarter. So, um, pathway to for four and a half to 5000 boe per day. Um, and, uh, you know, pleasingly not not having to come back to shareholders for any additional capital, got a very strong balance sheet, um, you know, high liquids content, low operating costs and all those things basically driving, uh, driving the profitability and giving us the ability to be able to roll out this development out of cash flow. So a further tripling then of net production you're expecting for early 2025

1:53

that. That's right. So kicking off the full field development in the early part of 2025 and then rolling that out over the next 2 or 3 years. So super exciting time. You know we're we're the company is trading on basically 1.5 times next year's earnings or sorry, next year's net income of about 40 million that we're forecasting. And if you look across our peers, you know they would be trading anywhere sort of between 4 and 8 times forward earnings. So so you know, we're a pretty compelling investment proposition at this at this point. Now when it comes to, as you say, your cash balance, which I believe is something like 21 million, and you say you're not going to have to tap the market at the moment. What do you plan to do with that? What sort of further, um, I guess, spending plans do you have in terms of trying to grow your company? Yeah. So we've got a we've got another 16 odd wells to drill in this in this swish area where we've got these fantastic reserves, uh, identified. So that'll keep us busy out until the middle of 2028. Uh, and then at that

2:53

point, you know, we're going to have accumulated a large amount of cash and, and have good visibility on a significant sort of forward cash flow from there. So then, you know, then it's a matter of looking at the mix of capital allocation to say, you know, do we return some capital to shareholders? Do we look for growth opportunities? You know, how do we how do we sort of, you know, plan out from there, out to sort of, you know, into the early 2030s. So when do you think you could potentially start to return to shareholders?

3:23

So look, I think, you know, we did a 5% buyback last year. Uh, you know, I think if we see sustained higher oil prices here over the next, you know, the next 2 or 3 years, that would free up additional cash flow beyond what we've got, uh, set aside for, for this CapEx program that would enable us to reinstate the buyback. Um, but ultimately, you know, it's looking at that sort of, you know, middle of 2028 and beyond where we'll be able to really look at returning meaningful amounts of capital to shareholders. Now, when you say as well, in terms of the oil price, as I mentioned before, I mean, it's always volatile. It's always moving on geopolitical risks as well. How are you sort of hedged where oil is trading. So we're we're unhedged at the moment. But look we're keeping an eye on, on on pricing very closely as you can imagine. You know, we've run all of our numbers at sort of $75 WTI and $2.50 gas, which is sort of where prices are. Now, I think, you know, the supply side of

4:23

the oil equation is pretty well understood. You've seen you're seeing capital discipline from all of the US drillers. So, you know, there's there's not a lot of growth in production coming from, from the US. OPEC sort of firmly have their hands on the on the levers there in terms of controlling prices. So what are we looking at. We're looking at the demand side you know how's China traveling. You know are we going to get a demand shock sort of out of China. And then ultimately, you know, in the short term we've got this geopolitical risk that we've seen sort of in the last 24 hours where we've seen the price sort of rally on the back of some of that tension in the Middle East. So lots of moving parts. Um, and I guess as well, when you look at where your share price is, you're very, very small company. And I know that you can't control or talk about market dynamics, but when you look at where you trade and what you're doing, would you say that you've got further to run and that investors could be seeing some more upside here?

5:17

Yeah. Look, it's enormously frustrating I think across the whole sector, you know as I said, you know, you look at the multiples that some of these tech companies trade on. Then you look at the multiples that, that, that the energy sector trades on. And then you look at the multiple that we trade on, which is, you know, sort of, you know, 4 or 5 times less than than the sector average. And it's frustrating. So, you know, we're I guess we're out there, um, beating the drum, explaining to people, you know, that that. Look, you know, this business, we've de-risked it. We're now just rolling out this, this CapEx program and building building production in a very disciplined way. We've seen the low point in, in, in, in, in our production profile. And it's now just building on, you know, building as we roll out the roll out this CapEx program. So it's an exciting time for the business. And hopefully at some point we start to see that recognized in the market capitalization.