Transcription of Finance News Network Interview with Larus Energy Managing Director, David WilliamsJoel Spreadborough: This is Joel Spreadborough from the Finance News Network and joining me from Larus Energy is its Managing Director, David Williams. David, thanks for being with us.
David Williams: Thanks very much and thanks for giving us the time to have a chat.
Joel Spreadborough: David, could you start by introducing us to Larus Energy. What’s your focus and where are your operations located?
David Williams: OK, well it’s a new company; we’ve only really been in operation since about the beginning of 2010. Set up to primarily focus on the Papua New Guinea tenement initially, since then we’ve added the offshore Gippsland tenements. That remains our focus, frontier exploration going back to where people have looked at decades ago, with the aid of modern data, modern techniques, revisiting it and seeing what they’ve missed. We’re unlisted, but we’ve set ourselves up as if we were ASX compliant, big spread of shareholders with 460 shareholders. And you know, we’ve actually gone a long way with both of those tenements in Papua New Guinea and Gippsland.
Joel Spreadborough: Can you give us a bit of an overview of your management’s experience?
David Williams: We run pretty lean and mean. So of the management staff there’s myself as Managing Director and Mike Swift as our Exploration Manager. I’ve been in upstream/downstream exploration production side of the energy sector for getting close to 20 years now. Mike’s a geologist and a geophysicist, an unusual combination, of well over 25 years’ experience. He’s been everywhere and a lot of that experience he’s had, such as in Albania with an over thrust environment, is what has helped unlock the secrets of Papua New Guinea. Otherwise then we just bring in experienced consultants that help us on a job by job basis, like Chris Cardy and John Netherson.
Joel Spreadborough: You’ve mentioned Larus is an unlisted company, do you have any plans to list on the ASX?
David Williams: I suppose our objective always was to list at the appropriate time and initially it was sooner rather than later. The capital markets haven’t been kind over the last few years and so while we keep being ready to, and you know we could IPO tomorrow for example, we’re that prepared. We’re really waiting for the best time that will provide the best value for existing shareholders. Given that we are frontier exploration and that’s our focus, we don’t have production, we don’t have appraisal areas and so on, it really is getting the right window.
Joel Spreadborough: Your primary focus is on the PPL 326 tenement south of Port Moresby in PNG. When did you acquire the tenement and how much had it been explored previously?
David Williams: It’s the first time it’s ever been under licence. It’s the first time there’s been any oil and gas exploration in the area and in fact, there’s even been very little hard rock exploration in the area. So it really is truly frontier in that sense. Now, there has been some seismic acquired in the region in the past, but not specifically looking at this area. In 1981 the Germans shot a regional survey in the Coral Sea, some of those lines come up to our tenement and that has been very important to us to be able to unlock what’s gone on from a geological history sense.
In 2006 Fugro Searcher shot a 2D seismic, which was in the Gulf of Papua and also came down to the area. There was a spec survey - wasn’t again specifically targeted at our area, but that actually provided some seismic lines which Mike Swift saw when he was in a different role. And that’s what led the excitement about getting into this area.
Joel Spreadborough: What is the PPL 326 tenement prospective for and what has your exploration uncovered?
David Williams: Really what we’ve seen is, this is a very high land, so effectively the same as the highlands brought down and reproduced down in this area, but with a plate that’s come over the top, it’s covered. So it’s thrown a mantle of rubbish over the top, so that when people have looked at the surface they’ve said, ‘not prospective you know this is like a volcanic area, you won’t find oil and gas down here’. Now since we’ve got the more modern seismic and the more targeted seismic that we’ve shot, we’ve confirmed that yes that is the case. In fact it was once joined to the Queensland Plateau. Queensland Plateau was the Great Barrier Reef, which we all know is highly prospective but will never get drilled.
So we’ve seen similar sorts of structures as to what you get in the highlands, but they are huge. And we’ve also now seen other structures closer to the surface which are smaller, very similar to what you see in the highlands as well. And to put it into scale, hides which is the main field that sits behind the PNG LNG project being built by ExxonMobil and Oil Search Limited
(ASX:OSH) is about 8tcf of gas in place, about 5.5tcf recoverable. When you use the same parameters in our Sunday Prospect for example, that’s 13.5tcf of gas in place and about 9.5tcf recoverable. And you need about 10tcf to start an LNG project, so that’s in just one structure and there are many of them.
So our un-risked gas in place inventory now is about, a bit over 90tcf and a bit over 1.5 billion barrels of condensate. So we’re sitting 100 per cent on a basin, on you know, an equivalent to a Carnarvon Basin or equivalent to the highlands.
Joel Spreadborough: So David, what is the next milestone that you’re aiming to reach?
David Williams: What we’ve been doing is we’ve been trying to demonstrate or get the information that can demonstrate that the entire tenement is prospective. We’ve done the deeper water to the south of the Ribbon Reef; we’ve done a section in the shallower water to the north of the Ribbon Reef. That clearly demonstrates to us, not only that we’ve got an active hydrocarbon system, but that the onshore area just immediately to the west of it is also going to be prospective.
So we’ve lined up as our next work, is an onshore seismic program. We’ve cleared the land with the landholders; we’re now starting to cut lines. That will be the precursor to an onshore drilling campaign, which would be the first drilling in this area. Now our intention is to do that with a partner and that in itself will be a precursor to the big farm-out, which given the scale of what we’re dealing with, it’s going to involve a major oil and gas company. And that we would look to get into in the early part of next year.
Joel Spreadborough: You’ve mentioned interests in the Gippsland Basin offshore in coastal Victorian waters, over what area are those permits?
David Williams: Those permits are about 8,300 square kilometres, so quite large but its split in three permits. And it’s what they call the southern flanks of the offshore Gippsland Basin. So it’s the area just to the east of the Bassian Rise which runs between Wilsons Promontory and Flinders Island, that’s where it all sort of comes up from bottom. And we’re looking at the oil that has fuelled the Kingfish field coming the other way and migrating through. It’s an area that was looked at in the sixties and seventies reasonably extensively; a number of wells were drilled. They all came up with no shows and then people just dismissed and said no, don’t bother looking there.
Now we’ve got hold of that old data, had it reprocessed, that led to a targeted seismic acquisition in 2010 – a bit over 1,500 kilometres. And around about the same time GeoScience Victoria did an 8,000 kilometre acquisition, which put the blanket grid over our permits and they’ve provided that to us for nothing. We’ve completed that work and what I’ll be announcing today at the Good Oil Conference is the results of the first stage of that work. And that’s a number of structures ranging from a few million barrels, right through to the largest one at 3.8 billion barrels of oil in place. Now I appreciate un-risked but - and they’ll change a bit when we shoot 3D seismic over it, but what it is there’re a number of commercial sized targets that we can now identify in our tenements.
Joel Spreadborough: So what’s the next phase of your exploration program?
David Williams: The next phase is - I mean you’ve got to go and drill it, but you need some 3D seismic over it. So we are now about to go down a process of finding a joint venture partner that will come and shoot 3D seismic with us over the key areas. And then if it’s still looking good, to go and drill some of those targets.
Joel Spreadborough: Do you have any plans for expanding your footprint in the Gippsland Basin?
David Williams: Not at the moment. Again it’s like with PNG, we want to remain focused on what we’re doing, too many companies you know, spread their wings too far. So we want to remain focused, get through, prove the concept, drill some wells and demonstrate it’s there. Frankly if we’re right and we believe we are, then there will be more than enough for us to deal with in those three tenements. Again 8,300 square kilometres, it’s a lot of turf to cover.
Joel Spreadborough: David let’s turn now briefly to financials, how long is Larus funded to continue with your exploration?
David Williams: Well if we go down to a pure low burn, we’re covered pretty much through to the end of next year. So we can batten down the hatches if we have to. However, the exploration programs that we want to do are large sums of money. So in the case of PNG to do the onshore seismic program that we want to do, that’s about a $9 million program. So we’re going through the process of sorting out the funding for that at the moment.
In the case of Gippsland if we wanted to fund that 3D seismic ourselves, that’s going to be several million dollars as well. In both cases we’d like to be doing it with a partner anyway. I mean we hold the tenements 100 per cent, we’ve always recognised that we’d ultimately farm-down. So our objective is to try and do the equity raising required through a farm-out. If not, if we don’t find a partner that’s fine, we’ll go off and raise the capital and do it ourselves.
Joel Spreadborough: David last question. What are your main priorities in the current financial year?
David Williams: Within the next 12 months, our priorities are to get organised and set in place the onshore seismic in PNG. And find a partner to do the onshore seismic and the onshore drilling campaign with us. In the case of Gippsland, it’s to get a joint venture partner in to do the 3D seismic with us. We know that there’s capacity to do that in the quarter one/quarter two of next year – there’s a syndicate around, so we could hook in on that. So they’re our immediate targets in the next 12 months. And then depending upon how they go and depending upon what the markets do, get listed.
Joel Spreadborough: David Williams thank you very much for introducing us to Larus Energy.
David Williams: Thank you very much for your time and the opportunity to tell you all about the excitement of Larus Energy.
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