Europa Oil & Gas (Holdings) (LSE:EOG) — Full Year Results

0:01 Good afternoon, and welcome to the EUROPA OIL and GAS PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated on the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. I hope the company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you to William Holland, CEO. Good afternoon, sir. Yes. Good afternoon. It's a it's a pleasure to be here. I'm joined here today, for those who haven't met Alison before, by Alison Stewart, our COO. Afternoon. So we'll we'll be presenting together. The the the main objective of this presentation is to is to allow sort of retail and shareholders of both retail and institutional shareholders to ask us questions in a in a live format.

0:59 So although we have a presentation, we're gonna

1:02 go through this very quickly. The presentation will be on the website, so it's available for everybody to look at. But the main objective here is to be able to answer investors' questions, which is what we're gonna spend the majority of the time doing. So quickly, let's just go to our financial year end performance. These were published on the October 23, so very recent. A couple of things to point out. Our revenue remains stable, slightly up despite lower oil prices and despite a weak pound, and that's basically because of the performance that we've received from Russell, the production performance of Russell. The other thing to point out is that our cash balance for the previous year was 8.3.

1:50 Of that, 6,900,000 was in restricted cash that we used for the serenity drilling. So our cash balance is actually from unrestricted cash significantly better than it was better than it was last year. So this is our our UK onshore portfolio. The the licenses with the green dot next to them now are producing assets. All those, we we operate Crosby Warwick, and we operate with Spursby. But the majority of the value and the production comes from wrestle. And we work very closely with the part the operator at wrestle and our partner, Egdon, on the on the asset. And we're we're very pleased that it's it's come back online, and it's it's back into production and producing well. The other thing we'll touch on a little bit today is Cloughton.

2:40 Cloughton is a discovered gas field in The UK, very close to existing infrastructure, which we hope to be able to progress quickly. So that's wrestle. I guess the thing about wrestle, there is a there is a competent person's report that's coming out. We've been messaging this for some time that this competent person's report is coming out. We're now much more confident that it's gonna come out imminently. And when it does come out and that CPR is is released, there'll be more news on the back of that about the rest of development. So standby for that. For Cloughton, I mean, the main message here is it's a simple four way structure. It's for sculpted gas. It's a 192 BCF of gas in place.

3:28 We are engaging with with with stakeholders to to progress this asset, and we hope to be able to update the market as we do make progress with those various stakeholders. Serenity, similar to similar to Russell, we work very closely with the operator there, in this case, I three Energy on progressing that. Tain has become available as a block canal, which is adjacent to Serenity, and and we're very interested in that. We again, we hope to be able to update the market as we make progress with that energy course. And then the the real blue sky here is our gas asset offshore island adjacent to Corrid. Again, like a lot of our our assets, it's it's near existing infrastructure, same as is.

4:16 So it's infrastructure led, but sort of tremendous opportunity. We've we've requested an extension to that, and and we were confident that we'll get that extension in due course,

4:31 and we'll update the market once we do. And this is the board. I think it's a good balance balanced board, good complementary skill sets, very engaged. We we are set up to grow. We've been saying that we've been we are our ambition is to grow for for for several years now. That continues to be the case, and this is a board with the right skill set to to allow the company to do that. With growth in mind,

4:58 we are we're very we're very disciplined about what we look at. We are very actively looking at new opportunities at the moment, but we're very disciplined on the ones in which we we are which we want to pick up, and they've got to be assets which we have an advantage either a good good very good knowledge of the geology or the geography and and experience in those areas that we're looking at. So so we are very disciplined in our in our approach to new opportunities.

5:26 So that was a whistle stop presentation. I think we'd like to now open it up to q and a, mister q and a. Perfect. Thank you very much. That's great. I'll just bring your camera up to full screen. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab, which is situated on the top right hand corner of your screen. Will, Alastair, we did we did obviously receive a number of pre submitted questions, so I thought I'd start the q and a session off with these. The first one here reads as follows. When is RESL going to start producing again?

5:57 I'll I'll answer that. And I think well, hopefully, everybody's read the announcement this morning. I'm sure a lot of people have with the response of the share price, which has been very positive. But the Russell has restarted production following the installation of the artificial lift system, which is a a jet pump system.

6:22 In fact, it was commissioned about six or seven days ago. It went through initial testing and is now fully operational. And I'm glad to say it's functioning as designed, and it it should, going forward, be a very, very reliable system. The well is still cleaning up.

6:51 You know, we lost fluid to it during the workover and the installation of the pump. But we have recorded a a rates of over a thousand barrels a day. We reported a six hourly average in the release, but on the whole, it's looking around 25% higher than before the jet pump installation, which is very encouraging.

7:24 Perfect. Thank you very much, Alastair. Next question here asks, what's the likelihood of an extension to the current license of Inishkia?

7:31 Also, how much, if any, progress has been made on a potential farm out agreement? Is there a possibility of losing their license early next year or not? Well, we we we paused the farm out process earlier on a year, and that was basically because we've the work that we've done on that, the work during this last period has been seismic reprocessing, and this seismic reprocessing has been cutting edge stuff. It's originally, when we started it, we expected it to take sort of six to eight weeks. It ended up taking us nine months to to to complete the work. And during that process, we found out there was actually more that we could do. There was further reprocessing that we could do, but we've run out of time. So we have spoken to the the Irish regulator about this. We've talked to them about what we've done. We've presented what we've done, and we've presented what we would like to do going forward and made a case for for for having an extension.

8:31 We satisfy all of the the the the the criteria to justify an extension. And as a result of that, we're confident that we will receive one, and, hopefully, that will happen before the end of January. Once that does happen, we will then reinitiate the farming process and reengage with interested parties and then hopefully close out the the the process during during the the next year. So we're we're quietly confident, but, you know, we won't know until we receive formal notification from the Irish government.

9:06 Perfect. Thank you very much, William. The next question reads as follows. EUROPA now the operator for the Cloughton Gas Field Site. So when could we expect some positive progress with this site and potential income for the company? What are the timelines expected for drilling and then processing and then to input that into the national grid? Yeah. You know, when you say Clinton Gasfield site, there's actually no gas field site in existence. There is a an old drill site, which the discovery well was was drilled from. Unfortunately, lies two kilometers within the national park, and that particular site is no longer accessible to us under current permitting law.

10:06 Anyway, aside, a cloud itself is a gas field.

10:16 It's historically being viewed as a marginal asset, but, of course, under current and projected gas price, it's a material asset.

10:31 Licensed partners agreed that EUROPA was best resource to deliver on the potential value, and we secured operatorship formally in August. The appraisal and ultimate development of the assets complicated environmentally and from a planning perspective as the gas, as I'm sure a lot of you are aware, lies beneath a national park and national heritage land.

11:05 That aside and the fact that we have already determined that we will not be able to use the original Discovery Well site. We have had positive discussions with a number of the local authorities and the National Park Authority itself, and we and are continuing discussions with landowners with respect to the potential drill site. We expect by the end of the year to have concluded those discussions, and we'll be then reporting on EUROPA's development concept and I which will not involve us doing any work in the park and the appraisal and development program.

11:59 And along with that, the the timing to to first gas sales. Perfect. Thank you very much, Alister. Turning to the next question. Could you address directly the shareholder concerns I see regarding board remuneration, in particular, the link to performance of the share price and the low level of investment by board members in EUROPA OIL and GAS shares, which combined is less than holdings of many private investors? If you could provide some color on that. Yes. Of course. So the the the EUROPA has a a remuneration committee, which is made up of the nonexecutive board members who who assess compensation of executive and and board as a whole. And in order to to guide them in that assessment, the company has has has acquires a a report that's produced that looks at our sector and looks at our our compensation and compares it to our peers.

12:56 And this is a an independent report which which which we we access, and that's that's provided as a guide for the RemCom to to set the remuneration levels within the business. That that report shows that we are in the bottom quartile of of directors and executives compensation. In addition to that, at the beginning of this this year, we we commissioned an independent a separate independent report to look at the the compensation package as a whole, and that that includes the long term incentive package to specifically to ensure that that there was an alignment with with shareholders and stakeholders in the business with how their management were compensated and directors were compensated.

13:42 That that report looked at not only salary, it looked at bonus levels, it looked at how bonus levels were achieved, it looked at the long term incentive program that was in place. And that that concluded that we were along with the other report, concluded the bottom end of the of the of the spectrum for our peers with regards to director's compensation. It also concluded that the bonuses were were were were well defined, and the KPIs were well defined, and they were also very reasonable and not not not not out of whack at all. And it concluded that the the the the the package as a whole was was low end. So we are we are modest. We're we're we're not a we don't compare to our peers. We we are do not have high high salaries.

14:36 And when you look at our g and a as a whole, we this year, we just reported g and a of £1,800,000. That is also at the bottom end of of of the spectrum. But I've had our brokers assess the market generally and say, well, where do we sit compared to to our peers, and we are at bottom end. Do we have a growth ambition? I talked about that. And we want to have a growth ambition. We need to have the staff to to execute on that growth ambition. We've been talking about that for some time now, and we are actively doing that. So so there's a minimum amount that we need to operate. We operate assets. It's a minimum number of staff. There's a minimum number of of technical experts you need. And with all with all of that in mind, I think we are good custodian of shareholder cash.

15:26 Perfect. Thanks very much, William. Moving back onto Russell. Why has there been so many delays above the original time frame of about three weeks to get this site producing oil again? Is it realistic that this current well is ever going to produce an income from the gas currently being flared off? And the final part is what is a realistic time scale to get the next well sorted and produce an income from the Penniston Flags area? A few parts to that. Okay. Well, as as we have reported, the the rest of the world is now back on stream. It's taken longer than expected simply due to the availability and lead times of certain equipment. And that's not the the jet pump itself, which, you know, EUROPA could have supplied to Eidin.

16:25 We have a spare one. What what I actually took much longer than anticipated was accessing the elements of the surface equipment in in primarily, the the actual power fluid triplex pump, which actually drives the whole system and its associated control systems and and tying it into the existing emergency shutdown system. Anyway, it's back on production now and we believe the installation will be reliable.

17:13 With respect to the current well producing can well, we've taken some of the gas and we're using it to generate electricity locally on-site, but the realistically, the gas associated from that single well is too small to justify a connection to the grid in itself. And so monetization of the gas will require further wells and gas production. And the first Peniston well, according to Eggen's current schedule, that will be drilling in q three two thousand and four, And and the time to I should emphasize that the the Peniston is principally, primarily a gas development.

18:15 So we are looking to tie in and are committed to a a gas export scheduled for first gas sales in early two thousand twenty five, back end of two thousand twenty four. And at that time, all the associated gas from the vessel one well and any further infill wells and the Peniston development wells will will be monetized through the through sale into the national group. Perfect. Thanks very much, Alastair. The next question reads as follows. A October 4 article by Energy Voice indicated that Repsol had allowed the 10 license to lapse due to concerns over recovery rates and the potential remaining lifespan of nearby infrastructure.

19:14 IE three and EUROPA have highlighted both expected recovery rates of up to 50% and the availability of nearby infrastructure as key reasons why development would be commercially viable. With the operator of Tain now casting doubts on both of these key points, can you please comment on why I three and EUROPA are still planning to move forward with Serenity slash Tain? Yeah. So the the Tain asset was originally operated by Rexel Sinopec, which is a rather unhappy joint venture, which when we drilled the appraisal well on Serenity and it looked like that we've actually got a unitized opportunity with Serenity and Tain, we started discussing with reps of Sinopec.

20:02 During that process, reps sort bought Sinopec's interest. So there's a bit of shuffling of people, and then and then there was more shuffling of people thereafter. So it's been quite difficult to get proper engagement with them. When they dropped the license, we're actually very happy that they did that because we think it's a great opportunity, which they reps or specifically now have been looking to exit the The UK for some time. They're actively looking to exit the North Sea. Maybe not all of their their their assets, but the vast majority of them. So having a partner who's in that sort of mode is not necessarily the best part to have. Now the license is is is available and is open. We we have engaged with the NSTA on that, and we have received a favorable initial feedback. So we are now actually putting together working closely with I three Energy, what's needed in order for us to to successfully pick up the tame asset. And then from there, we'll we'll we'll we'll look at development.

21:06 So watch this space. Still still a fair bit to go, but we are although it doesn't look like much is happening, there's a lot going on behind the scenes. Perfect. Thank you very much. The next question again on Wrestle, some point you might have covered, but just just for more clarity. Please, could you confirm that there are no problems at Wrestle and that it is flowing? If there was a problem, will you assume you would RNS? When will we know the revised flow rates? Well, we've we've we've issued the RNS, but it's not because of the problem. It's because it's back on and flowing. So that's all great, and I'm sure everybody's pleased to to see that. I mean, we will be issuing a further update once the well has has cleaned up and we've settled down.

21:55 I mean, the the the jet pump has a huge capacity to pump the well. We we've got to to find a sweet spot, which is is good for the the reservoir and the facilities. Yep. But we'll issue an update in terms of stabilized rates and and probably within the next two or three weeks. Yep. Perfect. That's great, Alastair. The next question is really around directors and ask if it's necessary to have so many directors. Well, as I mentioned before, I think our board is is is actually quite a balanced board, and everybody that sits on the board brings a different element, a different skill set to to the board and the the decision making of the board.

22:46 There is definitely a balance between skills, cost, and also governance. The the more directors you have, the better governance you you also have with the with the business. With two executive directors and three nonexecutive directors, I think that's a pretty good balance. And as I said, we we they all contribute. They they all bring something to the table. And it's worth it's worth pointing out that one of those directors, nonexecutive director, Simon Ollie, who was who was originally when he came came on to join the company, nonexecutive chairman. He only went to to CEO because an in on an interim basis. And then COVID hit, and and that interim basis lasted much longer than expected.

23:34 So he does provide some continuity there, but but, you know, his his original role, he he effectively came out of retirement to be to become the full time CEO. And now he's gone back into sort of nonexecutive role, which he's he's much happier with and does a very good job in in in questioning and challenging us. So it is it's about that right balance. I don't think that it's excessive for a company of our size. I think it's the right size. Perfect. Thank you for clarifying that. Another one on directors. Why don't the directors buy more shares? This will show that they're fully committed to the company and will send out a clear message. Yeah. So, I mean, as as directors, there are there are only certain times that we are allowed to buy shares. You you have to wait open periods. I actually bought shares at one of the few open periods that we've had, which is when we we announced our year end results a few few weeks ago.

24:28 I I bought just under a million shares. And prior to that, earlier in the year in March, I bought just just over 1,000,000 shares. So so I'm I'm very dedicated to the company, and I and when I have the opportunity and I have available cash, I I will continue to buy shares in Europe. That's great. Thank you very much, William. How much progress has been made with the NSTA with regards to the Blake Tain Serenity area? How likely is it that this area is going to be developed by the I three EUROPA partnership, and what realistic time scales could this be? I sort of mentioned that earlier on the previous question, but we, you know, we are engaged. I've been working very closely with I three. We are engaged with the NSTA on this. We have been told people will probably not be aware that there's a thirty third licensing round going on. And of all the licenses that were up that were available, a a proportion of those have been awarded.

25:30 The rest of them are expected to be awarded in the in the coming months. Once that happens, then the NSCA will have the capacity required to look at out of round applications. We are we are actively working with I three to prepare for that as we speak. So it'll be next year. Great. Thanks very much. Would you consider a bid of 2.6 p per share for the company? No. We we we it's not it's not appropriate for us to comment on on on that at all. I'm afraid to pass. No worries at all. If you look back over many years, half and full year reports, which speak of solid achievement and great prospects, mirror that against the company share price price and the two don't tally.

26:15 Could how do you measure your success? So, I mean, we we we're quite, if you look at our annual report, we're quite open with what we're trying to do and what we're trying to achieve and and what is success. I mean, we've we we work very closely with with Egton, as as we said, and bringing wrestle online is is is a is success. You know, there are share price performance is is is one aspect of it, and hope it's a very, very important aspect of that for for shareholders and investors. But we we are trying to be good custodians of hydrocarbons, so we're trying to do things in the right way, in a responsible way, in an environmentally sensitive way. Unfortunately, the sector as a whole has suffered from this this general ESG investing sentiment that a lot of institutional investors have adopted recently.

27:11 And I would argue that if you're if you're a money manager, and I used to be one at one point, you have a you have a responsibility to invest in in hydrocarbon kind of oil and gas companies that are responsible oil and gas companies and do things properly and do things in the right way and think about their other stakeholders. And we we certainly do that. And now if you if you if you if you are an ESG investor, you should be investing in oil and gas in in companies that do that because, you know, as a world as a globe, we're we're we're consuming a 103,000,000 barrels a day, more than we've ever produced before. So if you're a money manager and you don't invest in companies that that that that do that, then you'll allow companies that are less responsible to flourish.

27:58 So that's a separate argument that I have with fund fund managers on a regular basis. But look at other sort of success things. We we did bring the you know, we we are we've been very open about the fact that we're looking to build a business. And we brought Serenity, and we invested in Serenity. Now it's a it's a it's a great shame. I bought shares just before we started Serenity because I I really didn't believe in it. It wasn't a success, but that's the nature of the oil and gas game. We some things work, some things don't. If Cerenity had worked, we'd be 10 times the size that we are today, and everyone will be going brilliant. The fact is it didn't, but we brought the opportunity to to the investors. We gave the investors the opportunity to to bid, have exposure to that. And if you look at the share price performance on the lead up to that, it went from a penny up to over 3p at one point in anticipation of success.

28:54 Some people point out that high point, that 3p high point as where we were to where we are now. That's absolutely incorrect. We only hit that high point because serenity was on the table, because we'd invested in serenity at the beginning and brought that opportunity, that that potential exposure to shareholders. And we're gonna continue to do that because that's fundamentally what we think our our our job is is to use the skills that we have to to identify really good risk risk reward opportunities and give our shareholders the exposure to to to one of those will come in, and then we'll all do very well, and we'll be very happy. Perfect. Thank you very much for that. What can you commit to doing to help Egdon provide more realistic project time scales and updates on progress on this when RESL projects overrun?

29:44 Well, we are working very hard on that. In fact, it it it takes up a, you know, a an a degree of resource from us which we feel is important because of the importance of the asset to us. And and and myself, personally, I I've been working directly alongside the the Egdon Egdon team to to increase their their resource and and help them to move things forward. Their their project time skills are a you know, a have have changed and a we're doing our our best to to to make them as as realistic and aggressive as as they can be. I on, you know, direct issue there for the industry is the the permitting side.

31:01 We need permits. We need planning permissions to to drill. And certainly, the environment agency is proving to to be a a huge problem not just for a a ourselves onshore, but but offshore as well. It's taking us in the order of eight months to to get permits through. The EA is aware of this, and and we're working with them to to to try and alleviate the situation. But a lot of the time, the it's the authorities that that are are driving our our projects' time scales now rather than the the the companies themselves.

31:58 Perfect. Thank you very much, Alastair. Can you provide an update on any plans to improve production from the non wrestle wells? Well, we're we're continually looking at managing our our well stock. The the well stock that we have outside Russell is, as I'm sure many people here are aware, very mature. I we are producing those wells as reliably as well stock will do, and we're pushing them as hard as they will produce.

32:46 I must say most of our focus apart from keeping the production reliable and and stable is on on on these particular assets, minimizing the the operating expenditure on them to an order to to extend field life. And and that's where we will continue to to to work in that area. We we don't see much opportunity for or or commercial return in spending money on trying to improve production from these wells. We we think they're they're giving the the best that they possibly can.

33:37 Perfect. Thank you very much. That actually concludes the pre submitted questions. As you can see, received questions throughout today's live presentation, and thank you to the investors for submitting those. Could I just ask you to read out those questions and give responses where it's appropriate to do so? And then I'll pick up from you both at the end. Okay. And will the next wrestle production well be drilled? Well, I think we've already answered that. I mean, it it is scheduled a to q three two thousand and twenty four next year, we, of course, will be trying to accelerate that. Yeah. Another question from Richard s. It says, Paul William, HEICO, Tokyo, the Eggdon Resources, a good move.

34:23 What extra can they bring to the table, and how are you finding them to deal with so far? So for those of you not aware, HEICO is a is an American company run by a gentleman called George Yates. George Yates has been very active in The UK sector. He's been he's he's a big believer in in the the the Shell story. He's still he's still very active. He's he obviously acquired he was already a shareholder in Eggton, and he acquired the remaining shares and took them private. He's an old man. He's from Midland, West Texas. For those of you that know The US industry, that's the heart of the Permian Basin. It's a very active area. He's a he's a good guy. He's a very he's a very decent person.

35:11 He brings with him with with the rest of HAYCO more depth and resources. So Egdon has now got more people they can call on as and when they need to in order to help develop their their the skill sets that that they need to to support the operation. So I'm I'm I'm I'm optimistic that it'll help them. I'm optimistic it'll speed things up. And I know that George and his team and the the board of are enthusiastic about The UK generally and and want to be supportive. So I see it as a as a good thing. The next one, Steve. How important is health and safety at rest of, and what protocols are in place? Well, it it's actually very important. And I would say from from our perspective as a non operated joint venture partner, I've been very impressed with the the health and safety and and environmental record that that Egdon Egdon historically had been more of an exploration than than a production company, but they've put a huge effort into meeting their health, safety, and environmental permits and have all the necessary protocols in place. I I think that's part

36:42 and parcel because, you know, the the operations management is actually led by an ex health and and a manager himself. So if if Egg didn't have a strength, it is very much in in terms of health, safety, and environmental management. Yes. Perfect. Well, Alastair, thank you very much for that. I think you actually addressed all those questions you can from investors. And, of course, the company will review all the questions submitted today, and we'll publish those responses on the investor meet company platform. But just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Will, could I just ask you for a few closing comments?

37:27 Yes. Thank you very much. It's it's been I believe it's the first time that we've done one of these platforms. I think it's It is the way it is for me as well. So it's it's first time doing doing these. I I've actually done one before, but not not on camera. It was more typing back. I think it's part of our commitment to engage with our shower base and be as open and as transparent as possible. There's obviously a balance between responding to to to shareholders and actually getting on with the day to day job. So if you do have any further questions, please be happy to submit them. Right? If you don't have chances to submit through this platform. We have our our our mail at europrol dot com email address. You're very free and welcome to submit questions on that. But I I will remind everybody that, you know, we are trying to actually work on on progressing opportunities.

38:24 So if we don't always respond, it either means that it's because we are it's something which is in the public domain already, and we think it's it's it's it's all already addressed. And but, yeah, hopefully, we are doing a better job of communicating than we have done in the past. We both also, I both think it's a great opportunity. It's a great story for a really good platform. We've got the right team in place now. We're looking at some very interesting opportunities, and I hope everybody will continue to be supportive of the of the business. It is our AGM coming coming up on the November 23. Hopefully, we'll see some shareholders there, get to to to meet you in person. And and, yes, I look forward to meeting some some of you then. Perfect. Well well, Alastair, thank you once again for updating investors today.

39:13 Could I please ask investors not to close this session as you now be automatically redirected to provide your feedback in order that management team can better understand your views and expectations. This will only take a few moments to complete, but some should be greatly valued by the company. On behalf of management team of EUROPA OIL and GAS PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all. Bye.