Baron Oil’s new CEO on having “a key product, in a key market, at the right time” (LON:BOIL)

Baron Oil plc (LON:BOIL) Chief Executive Officer Dr Andy Butler caught up with DirectorsTalk for an exclusive interview to discuss his background, progress on the Chuditch Project, additional funding, regular updates, and the exciting times ahead.

Q1: Andy, you’ve recently been appointed as the new CEO. Now, having been appointed as a director last year, could you just remind our listeners of your background and how you came to join Baron Oil?

A1: Well, briefly, I guess I’m a geologist by training, I’ve been in the business for about 30 years, roughly half of that career in technical roles in the western hemisphere. I started in the North Sea working in the UK, Norwegian, Danish sectors for a company called HES and later on in Libya, and then subsequently in Brazil spent a lot of time working and living in Brazil.

I’ve now been in Asia for about 14 years, principally in commercial business development roles, I came down here I joined a company called Mitra Energy which was a gas exploration company, a rather successful one. We found quite a lot of gas in the Philippines and in Vietnam and did a lot of deals, a lot of work on bringing in additional partners in farm-outs, acquired some assets and ultimately floated that company on the TSX Venture Exchange in Canada in 2015.

I stepped out from that set up a company here called SundaGas in 2016, and the idea with that company was to really pursue large, discovered gas resources in this part of the world of which there are a number and take those forward. So, non-exploration but really maturing gas assets that had already been found.

Through that period, I had good relationships with the group, I knew some of the former directors pretty well and we agreed together to support each other in some of these new ventures that I was pursuing in this region. Ultimately, that led to them backing into the Chuditch PSC when that was signed in late 2019.

Subsequently, in the couple of years that followed, we took the decision to vend the assets, and SundaGas, into Baron progressively through 2021, through the Covid period, and so as a result of that I became a significant shareholder and working this project within the company.

I became a director last year, as you say, and now stepping up as CEO, that progression I think really reflects the evolution the strategy and the increasing focus that we have now on this regional gas and in particular on the Chuditch PSC in Timor-Leste.

Q2: Now, the company’s strategic focus is obviously on the Chuditch gas project offshore Timor-Leste and the planned drill-in of the appraisal well in Q4 this year. Could you just give us a brief overview of the Chuditch Project, the stage it’s reached now and your partnership with the Timor-Leste state oil and gas company?

A2: So, Chuditch is a large gas field, offshore in the Timor Sea, in Timor-Leste waters, that’s north of Australia and south of the island of Timor, in relatively shallow water. That’s an area with a lot of gas within it, that is now moving forward to development, and that area will increasingly become a key area of focus in Asia Pacific as a gas production centre.

Chuditch itself was discovered by Shell about 25 years ago in, as I say,  relatively shallow waters. They discovered gas at a time when there were really no markets for gas in this part of the world, no LNG infrastructure, no pipeline infrastructure, and really with data that made it very difficult to image the field. So, they thought they found something interesting, about 700 billion cubic feet of gas, but were unable to do anything with it.

Roll the clock forward, we’ve now worked the asset considerably, obviously the gas markets in this part of the world have evolved but also technologies have evolved, and so we’ve been able to really throw the book technically at the challenge of imaging the field in the subsurface in which we have successfully done. So, we now can for the first time really image the structure and that leads us to a view of the resource potential for the discovery of about 1.2 trillion cubic feet of gas so that’d be more than 50% increase on the resource that Shell thought that they had when they left. We also see a lot of upside in undrilled features immediately adjacent to the Chuditch field so really a pretty material asset.

Going forward, our plan, as you say, is to drill a critical appraisal well later this year, that will be a milestone well in which we will be looking to drill to prove the larger resources that we see. It’ll be a significant step out so a significant distance from the original discovery well, around about five kilometres, and that talks to the size of the field, it’s roughly 20 kilometres in length but also the quality of the data and confidence that we have to step out such a long way from the original discovery. Key objective will be to test the producibility of the well through a flow test, which is known as a DST, and that will open the pathway to development of the  asset going forward so really the critical milestone that we’ve got in front of us.

We’re making good progress in terms of our preparations, we’ve assembled an excellent drilling team, we are presently acquiring a site survey which we’ve announced previously, which is a physical investigation of the of the location where we plan to drill, to make sure that it’s safe and environmentally okay to do so at that location. So, we’re talking to drilling contractors and making good plans and good progress towards it.

You asked about the relationships with our partner Timor-Gap, and indeed I’d comment that all our relationships in Timor-Leste are very strong, we have an excellent collaboration with ministry, with the regulator known as ANP, and indeed with Timor-Gap, our partner.

What is notable with Timor-Gap that as the state oil energy company they’ve had a full carry, they’ve had a 25% interest in the project from the start, that’s pretty material interest. They’ve had a full carry on that interest which means we pay their costs all the way to production so there’s no cost exposure from their point of view which is obviously a nice place to be.

What we’ve recently announced and closed is a transaction where they’ve taken an enhanced participation in the project so they’ve taken a further 15% and that’s a paying interest so they now have skin in the game. So, a government partner with a carried interest is common, one that steps up and actually takes a paying interest, exposes itself to the cost is very uncommon, it’s almost unique. So, we’re very pleased with that deal and it brings strong validation for the project technically, it’s what we are seeing with respect to this asset commercially, they believe it’s a good investment and particularly as validation for what we’re trying to achieve with this project, validation of us as the operating company but speak strongly for the support that they are trying to give to the sector in general and to us in particular in taking the Chuditch asset forward.

So, we’re very pleased with that deal we’re very grateful for Timor-Gap for their continued support and it gives us a very good strong springboard from which we’re moving forward with the asset.

Q3: Now, I understand that you’re seeking an additional funding partner for the project, are you happy with the way discussions with potential partners are progressing, and is it true to say that the focus is on funding at the project level rather than through the issue of additional equity in the company?

A3: Well that’s correct, yes, we are very interested to bring in additional partners to participate in the project, to bring additional funding, and a number of discussions going on. Those discussions are in an interesting phase, I obviously can’t say too much in terms of the detail but that’s the situation at the moment and I’m very confident around it.

Am I happy? Yes, I am, I will obviously be truly happy once we’ve concluded some of those discussions, but we are most definitely making good progress at the present time.

With respect to bringing additional equity funds into the group at the corporate level, the plc level, to pay for the funding of the well, I can say unequivocally that that is not the intention and what we are looking to do is bring in funding at the asset level.

So, there isn’t a plan to bring in additional equity money anytime soon, it’s definitely project level investments that we’re looking at.

Q4: This is obviously your first interview with DirectorsTalk, can we expect to see you on here regularly and engaging with other investor relations activities as the Chuditch project progresses?

A4: Yes, thank you for the invitation and yes, most definitely.

Investor relations is a very important part of what we want to do, I will most happily come back for further interviews and this and other platforms, participating in Q&A sessions I think are important, give presentations provide, further information to the website. Fundamentally, investor relations is a very important part of what we want to do, I want to make sure that the company is very open and transparent in terms of our progress and our plans but also articulating the project, the value that we see in the project, and how we see ourselves taking it forward. So, to the extent that we can, I intend to be a communicative CEO, communicating well with shareholders and all our stakeholders.

Q5: These are obviously exciting times for Baron Oil and it appears you’ve got a world-class asset in Chuditch, is there anything else that you’d like to add to that though?

A5: Obviously, I believe it is an excellent asset. I’d also say that I believe we have a world-class team working with me who are very capable indeed of executing on that asset, technically and drillers and commercially and I’m very proud of them and how that’s going. As I mentioned, also very strong relationships in country are a very important part of our ability to take the business forward.

I would maybe reflect again a little bit more on the value of gas in this region, the importance of gas, being based down in Southeast Asia, I see it all the time, this is a region that is growing very fast as energy demand growth in this region is extremely strong, growth in LNG markets is really focused on this region. So, we’ve got a key product, in a key market, at the right time and that’s a great place to be. Also, gas is very important in this region because it effectively has a role to displace coal and oil in electrification so as part of the transition, it’s also a key role.

I think just also final remark, I’d like to say thanks again for inviting me here, to all our stakeholders and particularly to our shareholders who have been very supportive over a long time as we try to take this business forward and particularly the Chuditch asset forward. As I was saying just now, I’m looking forward to communicating effectively with them as we progress through this exciting year.

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