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Tlou Energy to significantly reduce costs and focus on power purchase agreement efforts

Senior management have agreed a pay cut, production operations may be suspended and the company intends to focus on the negotiation of a long term power purchase agreement

Tlou Energy Limited - Tlou Energy to significantly reduce costs and focus on PPA efforts

Tlou Energy Ltd (LON:TLOU) has decided to significantly reduce costs in response to the difficult prevailing market conditions, triggered by the coronavirus (Covid-19) pandemic and lower oil and gas prices.

The aim, the company said in a statement, is to make current funds last longer so that more time is available to conclude ongoing commercial and project finance negotiations.

It told investors that managing director Anthony Gilby will receive reduced pay (50% backed to 1 January, then 25% from 1 April). Finance director Colm Cloonan, executive director Gabaake Gabaake and general manager Solomon Rowland have also agreed to a pay cut.

READ: Tlou Energy advancing towards PPA negotiations in Botswana

The lost income won’t accrue and won’t be payable at a later, Tlou noted.

Operationally, the company told investors that more wells would be needed at the Lesedi coal bed methane project in Botswana, to deliver increased sustained gas rates from the Lesedi coal bed methane project, facilitating dewatering.

Whilst such a decision is being weighed, the company also said it is intending to shut-in one or both of the existing Lesedi production wells whilst a power-purchase agreement is being secured - because to date they have gathered sufficient data to indicate the presence of commercial gas.

The company said that shutting in wells would reduce unnecessary expenditure and avoid the flaring of gas which would otherwise by used for power generation.

It noted that it may continue the dewatering of the Lesedi-4 well – described by Tlou as the “most promising” of the two - as it could be hooked up to the company’s gas-powered generators, albeit this would be subject to the availability of key personnel and therefore may be impacted by coronavirus related restrictions.

Tlou added that its near term focus would now be on bringing the existing interim power purchase agreement, which is temporary, into a full agreement.

This would facilitate grid connection, and, open-up opportunities to drill additional wells in order to lift production capacity.

Quick facts: Tlou Energy Limited

Price: 3.755 GBX

Market: AIM
Market Cap: £19.72 m

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