Falcon Oil & Gas (LSE:FOG) — Investor Q&A

0:00 Good afternoon, and welcome to the FALCON OIL and GAS LTD investor update. Throughout this recorded update, investors will be in listen only mode. Questions are encouraged and could be submitted anytime by the q and a tab situated on the right hand corner of your screen. Simply type in your questions and press send. If you could please hold off submitting your questions until Philip has addressed the presubmitted questions just to avoid duplication, that would be most appreciated. Before we begin, I'd like to submit the following poll. And, Philip, if we may just get straight into the questions, the first one here reads as follows. What what is the deal that was announced on the 09/30/2025? Thanks, Lily, and welcome, everybody. Good morning to some and afternoon to others. Yeah. The deal we announced on the September 30 was Tamarin Resources, our JV partner in the Beadaloo, are going to acquire all of FALCON subsidiaries.

0:47 And this is a deal which is a combination of mostly shares and a small bit of cash. The total number of shares that Tamarin is going to be issuing, for this transaction is 6,537,000 shares, and then the cash element is 23,700,000. That's great. Just turning to the next question. So will I be receiving cash and town brand shares for my shareholding in FALCON? Yeah. I think there was a little bit of confusion when people saw a cash amount. There's gonna be an element of cash and share, but no. I mean, every shareholder, bar one, will only receive town brand shares. The cash element of 23,700,000, that's a cash element for a one single shareholder, a sanctioned shareholder. But, no, every other shareholder would just be receiving Tamper shares. Perfect. So how many Tamper shares will I be receiving for my Falcon shares?

1:33 Yeah. So about the time when we negotiated the deal with Tamper back in through August into September, we looked at the relative values of each company. We agreed the exchange ratio between the two based on our relative values back then of 0.00687 Tamron shares for every FALCON share you have. So if you're a shareholder with, let's say, a 100,000 FALCON shares, you will receive 687 Tamron shares. Perfect. Thank you. Is this a good deal for FALCON shareholders? Absolutely. You know, your board wouldn't have recommended this if we didn't believe it was a really good deal. But let me let me maybe explain, you know, a couple of reasons why. At the time of announcing the transaction, you know, our share price, yeah, it was up high at at at higher than a previous of 18 Canadian cents, roughly about 10p.

2:21 But if you go back, you know, the previous month, two months, so you look at the VWAP, the the volume weighted average price over the last twenty days was close to, like, $14.15 cent. So that put a value of FALCON of, you know, around about a 160,000,000 Canadian. You know, when we negotiated the deal and the exchange ratio of this point zero zero six eight seven, that implied, an offer price from Tamborn of 21.54 Canadian cent. And that at the time we we agreed that deal increased the value of FALCON up to 240,000,000 Canadian dollars in value. Our share price today is now 25¢. And that reflects, I believe, you know, the market's appreciation of this deal. And that further increases the value of FALCON, the overall value of FALCON up to about 280,000,000.

3:07 Then if you look at, for example, Tamron's current share price, which is what you're going to be receiving, is Tamron shares. And their share price today, I think, is around about 28.5 US dollars. You take the conversion ratio of point zero zero six eight seven, and that equates to, you know, $27.28 cents per FALCON share, thereby looking at a a value increase of up to $300,000,000 of for FALCON. So that that's the value side of thing. But the other thing reason, I guess, it's worth mentioning as to why we believe this is a great deal. You know, your board of management, we really believe in the beetle loop. Our strategy was always to find a way, to extract as much value from the beetle loop by sticking with this project for as long as possible. And maybe until such time as developments with regard to production, pharma, partner deals were better recognized by the market, and therefore then reflected in your company's share price.

4:02 What this deal is done because it's a share for share deal with Tambern, you know, whose only other asset is the beetleu, this allows FALCON shareholders to continue the participation in the beetleu. And, you know, we'll hopefully enjoy all of us enjoy in a future enormous potential over the next few years. You for example, if I came to you last September with, you know, the value then of 160,000,000, and I said, hey. We got a great deal. Somebody wants to buy the company for $300,000,000 in cash, not shares, in cash. We would have struggled to recommend that deal to the shareholders even though that would have been a significant uplift in value. You know, what this deal has done for FALCON shareholders, it's we've already now captured the near term upside since we've announced the deal.

4:47 You know, with the valuation increasing from 160 to 300,000,000. But better still, FALCON shareholders, you know, assuming you stay with your Tambrin shares, you know, you'll own shares in a bigger, a more liquid company whose only asset is the same asset we're selling. And on top of that, you know, you're going to own shares in a company that now is, you know, and has been the operator of the. So you get you're basically getting your cake. You and eating it. And in fact, you're gonna have a cherry on top of that cake by staying with Tamarind for the foreseeable as they as they manage their way through the farm outs and going into production and so on. That's great. And a similar question here. Is this a good deal for Tamron shareholders? Well, I guess that's a question for Tamburun shareholders, to answer. They've got their meeting coming up in early March.

5:34 You know, I know and it stated in their press release. I know the board of Tamburun, they've fully recommended the deal, because they clearly believe this is a a good deal for Tamburun. You know, what it does for them in the in the near term for Tamburun, it, you know, clearly, it gives them a greater interest in the block they're looking to farm out, because they're gonna increase rates in that block from 58% to 81%. This will allow them to execute a better farm out deal. That's not just to the benefit of Tamron. That's now gonna be also to the benefit of FALCON because we're gonna get you know, our shares in Tamron will be, you know will will will increase in value once they execute this better pharma deal. So it's one of the real reasons I believe that Tamron wanted to do this deal with us was they could actually, you know, maximize out on a much better deal in terms of farming out at this block. Longer term, you look at Tamron, they now own 22 and a half percent interest in these blocks that were created as part of the checker boarding process, where Daily Waters owns remaining 77 and a half percent.

6:28 So this, you know, increases Tamron's exposure to the entire. So they got kind of a a good upside from doing the deal in the short term and then again in the long term. So, yeah, I mean, it's it's for their shareholders to decide, but, yeah, definitely, I believe this is a very good deal for Tamarin shareholders. Perfect. Thank you. Do you see further near term increase in the value of the enlarged Tamarin share price post this deal? Yeah. Look. There's been a good increase, from back in September. They announced a big financing package the same day as they announced the merger. There's been a lot of activity going on. If anybody tuned into the webinar yesterday with the new CEO on board, there's a lot of stuff going on, fracking, drilling, going into production. You know, on the operation side of things, we are you know, they are advancing towards commercial production.

7:15 We fracked one well at the end of last year. They'll be fracking three more wells in q two this year. And, you know, Tamber will be selling gas, commercial gas by the second half, end of the second half of twenty twenty six. I believe, you know, this will change everyone's view on the beetleu as it moves from exploration play to production development. The market certainly has not yet valued the beetleu as a production play. So there's enormous upside in the value of Tamburin just in in the in the short to medium term alone. And then, of course, there's the farm out process that's currently ongoing that Tamburin talk about a lot. They've been actively working on a farm out deal. Who knows? Maybe Maybe they're getting closer. I think the question was posed to them at the meeting yesterday because they talk about q one or is it q two, but they say everything is on track.

8:02 And just to be clear, I have no knowledge whatsoever on the pharma process other than what's publicly stated and what they said last night in terms of any deal or the timing of any deal or who the partners might be. But I'm pretty hopeful that the deal will be announced before, let's say, before the end of June, maybe even sooner. And if this is the case, I'm certainly, I think this will be a transformative effect on the value of of Tamber. And then, of course, there's also a chance of Daily Waters, the other joint venture player in the. They might also be looking at farm out opportunities. You know, when you have a JV partner, you know, engaging in a farm out process on a play as big as this, there's a strong possibility that those looking to farm in will, you know, contact the other players to see what options might be available. And for example, FALCON, you know, I received a couple of such queries from major national oil companies last year. So I got a good feeling of how active the pharma process really is. You know, the the interest from the NOCs in FALCON, it was you know, unfortunately, it was limited mainly due to the fact that we couldn't offer them operatorship, but that wouldn't be the case with Daily Waters. So maybe we could see more than one farm out in 2026.

9:10 And, again, you know, just to be absolutely clear, I have no knowledge whatsoever of Daily Waters' intentions even regarding any farm out or whether they're in a in a process to farm out. This is pure speculation on my part. Perfect. Just turning to the next question. Why do this deal now, and why not wait until after the beta loop goes into production and time for an has done a farm out? Yeah. That's a that's a good question in that well, it's a question I get asked quite a bit. But I think, you know, people who ask that question, I think, fail to understand that it this is a share for share exchange. Maybe they failed to understand that this is not a selling out of a company. It's a merger. Maybe they don't fully understand that there you know, you know, there is no cash in this that would crystallize the value back at a 160,000,000 back at September.

9:55 You know, this deal is you know, the shareholders in in FALCON, you're getting shares in TEMBER. You know, company has a a larger interest in the same asset and is also the operator. You know, you know, by agreeing this deal in September, as I said earlier, we've already captured all the increase in the in the value of the Bitadu. We've reflected in Tambron's increased share price since we announced the deal, and that's translated into a near doubling of FALCON's share price. You know, should Tambron execute a farm out post a merger, you it's know, very likely that Tambourine share price will increase significantly. What this merger does, you know, it ensures that FALCON shareholders are gonna benefit from such increase. Had we not done the deal, have we sat on the sidelines? Yeah. We might get some increase, but now we're gonna capture all the current uplift in Tamron, but we're gonna capture any future uplift in Tamron by being a being a Tamron shareholder.

10:44 And then you look at when the beetlew goes into production by the end of the year. You know, a beetlew production driven by Tamron being the operator, we wouldn't have had a huge amount in that production. Being a Tamron shareholder, FALCON shareholders would benefit significantly from this. So like I said, Tamron share price, $28.5, you know, exchange ratio of point zero zero six eight seven, twenty eight cents, and we have not seen that share price today. You know, we certainly wouldn't be at 28¢ or 25¢ today had we decided to hold out from every year. That's great. You negotiated one of the best deals ever for FALCON back in October 2022, which allowed FALCON to go nonconsent on each drill spacing unit, which meant that FALCON could choose just to stay in the BCLU at 22.5% and pay nothing and just lose out on a few acres when these DSUs were created.

11:35 Why sell now rather than just sticking with the strategy of sitting on the sidelines? Let your JV partners pay for everything and then sell in three to five years' time. Yeah. Great question in fairness. And, you know, firstly, thanks for recognizing what I think is one of the best deals we ever negotiated for FALCON. But despite being such a good deal and having this option of going non consent, which we have exercised, we went from 22 and a half percent down to five initially. We went from five down to zero more recently. But you gotta bear in mind, there's a lot of other general bill loo costs that we would still be on the hook to pay 22 and a half percent off. So even at 0% during this current, you know, drilling fracking phase, there are a lot of additional costs. You know, I can give you an example. Since we announced the deal in September last up to now, we've had cash calls of close to $2,000,000.

12:27 That's despite going on consent on the current drilling program. And, fortunately, one of the terms of the deal we negotiated with Tamron back in September as part of this merger that they would pay for all our cash calls from that date up until closing. So despite the fact there's $2,000,000 called on us, we haven't had to pay that. But, you know, sitting in sitting on the sidelines, sitting in with our hands in our pockets, we don't really get to keep our hands in the pockets. We would have been writing checks for, as I said, $2,000,000 for the last several months. And more importantly, of course, you know, there was the APA pipeline where FALCON where we want to participate in this pipeline, you know, up toward 22 and a half percent, we'd have to pay our share of the collateral to APA to build the pipeline, you you know, know, to take the gas from the to Northern Territory. I think that total collateral required by APA was in in the order of, you know, 50,000,000.

13:18 So our share would have been something around about 10,000,000. We could, of course, have gone zero consent in the pipeline. But what would that mean? You know, we wouldn't we wouldn't be able to participate in future DSUs around the pilot area or drill production wells in DSUs even where we already have an interest because if we did, we'd have no place to put the gas. So I hope, you know, shareholders, you know, you know, appreciate that by agreeing this deal back in September, you know, we not only captured the increase in the value of our operating partner, Tamber, but more importantly, you know, we've avoided the need to continuously go back to the market to raise more money, something that would have always put downward pressure on FALCON share price. And yet what we've seen is a huge increase in in FALCON share price over the last four, five, and six months. That's great. Are there any tax implications on the share for share exchange?

14:06 Well, first of all, I'm not a tax expert. And secondly, I guess it depends on where you are a tax resident. For example, the rules in Ireland, and I think the same probably apply to The UK, where there's a full share for share exchange as is the case here. And regardless of the jurisdiction of the companies merging, there is no deemed disposal for CGT purposes. But, you know, you need to seek your own tax advice on that. I don't believe the situation in Canada or USA is the same. I think if a Canadian company was acquiring FALCON, which is also, by the way, a Canadian company, there would be no deemed disposal because both companies are are of the same jurisdiction. But since Stanford is a US company, the rules in Canada are different, and revenue will regard this merger as a deemed disposal.

14:54 So you may have a CGT to pay depending on the cost of your FALCON shares. But I I strongly urge you to take your own tax advice wherever you live, whatever jurisdiction you're in. And it's also worth noting, and again, subject to, you know, getting your advice, but the price of the Tambourine shares being exchanged, I believe, from a tax perspective, on this deemed disposal is the price of Tamron shares at the time the deal was agreed between FALCON and Tamron. So that price was $21.94, not the $28.50 today. But, you know, I urge anyone who's who's looking at this and looking at your holding and looking at your your historic cost of carrying FALCON shares to take full tax advice as to what will be deemed. First of all, is it deemed a disposal? And two, then what is the relative price of that deemed disposal? Is it $21.94, which I believe it is? But, you know, I strongly urge you to take your own tax advice.

15:45 Thank you. What do I need to ensure my shares are voted? Mostly, it's quite straightforward. In fact, I just got mine through my my online platform just prior to this meeting, but an hour prior to this meeting. If your shares are registered in your name, you will receive a form of proxy, which you just need to complete as per the instructions set out in the proxy form. In the more likely event that you're nonregistered beneficial holder of FALCON shares, and typically your shares are registered in the name of your brokerage firm, your bank trust company, or other intermediary, then, you know, if you don't hear from them as will be the norm anyway, you should contact that intermediary and make sure that they vote your shares in accordance with your instructions. You may have done this in the past when voting your shares at the company AGM, and, you know, the process here is absolutely no different whatsoever. And, of course, I would encourage every shareholder to ensure your shares are voted in accordance with your instructions and needless to say, I would encourage every shareholder to vote for this deal.

16:41 That's great. And the last question we've got here reads, I saw a filing on which refers to a letter of transmittal and eligibility form. Can you explain what this document is and what I may have to do? Yeah. This is a document. It's literally again, it's only to be used for registered shareholders of FALCON, not for any of you, and most of you will be nonregistered beneficial holders of FALCON. So for the most part, nonregistered shareholders, you just need to contact your brokerage firm or whatever intermediate firm you use who handle the exchange of tampering shares, just make sure that that form is completed and the letter is submitted to Computershare. So the transfer of and exchange of tampering shares for Falcon shares happens seamlessly in the background. And when you look at your account, whether it be online or whatever, you'll see your your tampering shares arrive there post the deal, post the closing of this transaction.

17:30 Philip, thank you for answering those questions. Just before redirecting investors to provide you with their feedback, which is particularly important to yourself and the company, can I please just ask you for a few closing comments? Yeah. Look. I think this is my last I'm meeting. And apart from the upcoming shareholder meeting, which will take place on the March 11, yeah, it's my last opportunity to address FALCON shareholders. So first of all, I'd like to take this opportunity to thank my CFO, Anne Flynn, who's been with FALCON for over ten years. Her commitment and work ethic at all times have been nothing short of brilliant. The closing of this transaction, the start, by the way, which coincided with Han going on maternity leave, wouldn't have even been possible without her daily dedication to getting this job done. So we all owe our enormous amount of gratitude. So thank you, ma'am. And to you, the shareholders, you know, thank you for your continued support over so many years.

18:26 I've got to know a lot of you, a lot of you long surfing shareholders, some of you before I even joined this company back in 2012. And one of the greatest aspects of my job over the past fourteen years and the bit I truly enjoy the most was getting to know so many of you. You know, even as recently as this week, I had a call with a wonderful couple from Alberta, Canada, who have been significant shoulders in FALCON since 2009. So this is the part of the job that I will you know, I'll definitely miss the most. You know? And finally, to the many and well informed bloggers on the bulletin boards, thank you for your support over the years. You've managed to keep shareholders very well informed by generously sharing your industry expertise and knowledge of the market. So thank you all very much. Philip, thank you for updating investors today. Can I please ask investors not to close the session and should now be automatically redirected to provide your feedback in order that the management team could better understand your views and expectations?

19:17 This will only take few moments to complete, and I'm sure it'll be greatly valued by the company. On behalf of the management team of FALCON OIL and GAS LTD, we'd like to thank you for attending today's presentation, and good afternoon to you all.