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Buru Energy Ltd: DEEP DIVE
OVERVIEW

Buru Energy to restart drilling efforts in June quarter

Buru’s chairman Eric Streitberg will speak at an energy and minerals conference in Brisbane next Wednesday.
A map of Buru tenure in the Kimberley region of Western Australia's northwest
OVERVIEW: BRU The Big Picture
Buru's tenure is onshore in the Canning Basin of Western Australia
  • Buru is well funded with $64 million of cash reserves at the end of the December quarter of 2018
  • The company has an active exploration program at Ungani oilfield in WA’s Kimberley region, expecting to spend $2.2 million on exploration and evaluation in the March quarter of 2019
  • Buru grossed an interim $3 million from partner Trafigura’s loading of 70,278 barrels (gross) on March 12, 2019, at Wyndham port
  • Trafigura’s previous lift at the port on January 1, 2019, of 69,686 barrels (gross) was of a similar size

What does Buru Energy do?

Buru Energy Limited (ASX:BRU) (FRA:BUD)(OTCMKTS:BRNGF) is an energy company that specialises in exploring and developing oil and gas projects onshore in the Canning Basin of Western Australia. It is run by founding shareholder Eric Streitberg, a geologist and geophysicist with more than 40 years experience in the petroleum and oil & gas industry. The executive chairman is also a director and former chairman of the Australian Petroleum Production & Exploration Association (APPEA) and a former chairman of the Marine Parks and Reserves Authority of Western Australia.

Streitberg previously headed up ARC Energy Limited (then ARC:ARQ) as a managing director, growing the then junior oil & gas explorer into a mid-size Australian producer before its $508 million takeover by Australian Worldwide Exploration Limited (then ASX:AWE). AWE was later bought by Mitsui & Co Ltd (TYO:8031) (FRA:MTS1) (OTCMKTS:MITSY) (OTCMKTS: MITSF) for about $580 million.

What does Buru Energy own?

The key assets are Buru’s Canning Basin exploration permits in the southwest Kimberley region about 2,300 kilometres north of Perth.

Buru dominates the basin’s onshore energy activities and picked up 100% ownership of Ungani oilfield from Mitsubishi Corp (TYO:8058) (FRA:MBI) (OTCMKTS:MSBHY) (OTCMKTS:MSBHF) in a May 2017 asset swap.

The company then started farming in Roc Oil (Canning) Pty Limited to the field in May 2018.

Roc bought a 50% interest in Ungani Oilfield for $64 million cash, agreeing to farm into its exploration permits EP 391, EP 428 and EP 436 by paying $20 million of a $25 million exploration program for up to four wells.

Partner Roc now has a 50% equity interest in Ungani 4ST1 well and in production licence L20 which it is located upon.

The exploration program is a key focus for Buru, which is engaged in an active exploration program at Ungani.

Buru has a speculative buy recommendation from Taylor Collison and has set accelerated development of Ungani oilfield and exploration of the company’s portfolio of prospects as its strategic focus.

The drilling program is due to start up again in May 2019, with Taylor Collison believing success could deliver upside beyond the value of any oil discoveries.

Two wells will be drilled on Ungani trend in the upcoming drilling program to start in the June quarter, as the company draws on its exploration budget primarily made up of Roc funds.

Taylor Collison believes the carry through of $20 million of exploration spend puts the company in a “strong financing position”.

The four-plus-two exploration and production well drilling program will feature drilling at production support wells at Ungani-6 and Ungani-7 and Yakka Munga 1 exploration well1.

Support well Ungani-6 may be drilled as a horizontal well or alternatively in a high-angle deviated configuration.

The decision comes after Buru and Roc joint venture reviewed the Ungani operation and made the call to horizontally drill two development wells on the oilfield, Ungani-6 and Ungani-7, one after the other.

Ungani 6 well is expected to be drilled from an area adjacent to Ungani Production Facility with a pad expected to be completed in April 2019 when drill rig components start arriving for a well spudding tipped for early May well spud.

The third well in the program, wildcat exploration well Yakka Munga 1, will be drilled to about 2,400 metres below surface, in the regionally significant Yakka Munga structure.

Emerging play, the Reeves Formation, is expected to be about 700-metres wide at Yakka Munga.

Buru will target the formation with drilling after its sandstones proved oil-bearing at Ungani Far West-1.

The Rafael, Hotdog and Butler prospects may be targeted this field season. Due diligence work is underway at Rafael this month, as the potential fourth exploration well in Buru’s program, along with Hotdog and Emanuel prospects.

Hotdog and Emanuel are at Buru’s wholly-owned Blina Field, in the Lennard Shelf area, where the company has production-tested potential bypassed oil zones in Yellowdrum Formation.

Buru holds assets with hydraulic fracturing potential in WA, where a State Government moratorium on fraccing was lifted in November 2018.

The assets have a major accumulation of tight gas and condensate that could be evaluated and developed as a major resource once regulatory reform is fully implemented.

Buru’s licences are within the small portion of WA land that would be able to be fracced following the reform.

What is Buru Energy’s capital backing?

Buru is bringing in revenues by actively selling oil.

The company’s buying partner Trafigura shipped 70,278 barrels of oil out of the Wyndham port on March 12, 2019. This steady production lift followed an earlier shipment of 69,686 barrels of Buru oil out of the port about six weeks earlier on January 1, 2019.

Trafigura stores Buru’s oil at the port and buys it free-on-board at the port town at the time of shipping at a fixed discount to Brent oil prices, allowing it to account for the shipping costs of visiting regional refineries.

In March its payment brought in an interim figure of about $3 million to Buru net of shipping cost allowance cost.

The company is well funded, having $64 million of cash reserves at the end of the December quarter of 2018.

Buru expected to spend $2.2 million on exploration and evaluation in the March quarter of 2019, tipping $3.1 million of cash outflows for the period.

Its March quarterly report is expected by late April 2019.

Inflection points

  • Ungani and Blina field successes

  • Majority discoveries and milestones

  • Ongoing oil sales revenue

  • Future horizons for fraccing in the now-welcoming jurisdiction of Western Australia

Executive chairman Eric Streitberg highlights value onshore in Canning Basin

Executive chairman Eric Streitberg said last year the Canning Basin “was not a complicated oilfield to produce.”

He told the September 2018 GoodOilConference Perth: “Very recently we’d begun to share the basin with a number of other people coming in,

“Finder, focused on unconventional oil on the Broome platform and the Squadron Offshore Group, which is backed by Mindaroo, Andrew Forrest’s company, … put a big footprint on the basin outside the Fitzroy trough.

“That’s been a great outcome for us because there are no operators on the basin, we’re starting to have a bit more synergy and activity.”

Buru executive chairman Eric Streitberg will deliver a 10am address next Wednesday on day 1 of the March 27-28 Australian Energy & Minerals Investor Conference at Royal on the Park Brisbane.

 

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