(Click image to play video)
Looking for an international exploration energy play with ultra-high potential impact and equally high revenue production?
Enter Calgary-based
Bengal Energy Ltd. (
TSX.BNG,
OTCMKTS: BNGLF,
Forum) is an Australian-focused oil and gas exploration and production company with producing and prospective light oil-weighted onshore assets in the Cooper Basin – a region that contains the most important on-shore petroleum and natural gas deposits in Australia.
Bengal offers unique exposure to high potential impact exploration projects underpinned by lower risk current production and cash flow. The Company’s production stream consists predominantly of ultra light, sweet crude oil out of Australia, which commands a premium price to the Brent benchmark.
In this must-see video podcast, Stockhouse Media’s Dave Jackson met up with CEO Chayan Chakrabarty and CFO Jerrad Blanchard to get investors up-to-date with all things Bengal Energy.
TRANSCRIPT BELOW:
SH: To start off with, gentlemen, can you tell us a little bit about yourselves and the history of the company?
BE: Bengal Energy’s predecessor company was listed on the TSX and had projects in Australia. Some 12 years ago, the company went through a rebrand and renamed to Bengal Energy Ltd. I have been the President & CEO for the last ten years or so. Since then, we have grown our asset size significantly in the Cooper Basin of Australia, all of it in Queensland where we have top tier fiscal terms and commodity pricing, with multiple potential egress opportunities for produced hydrocarbons.
Regarding my own background, I have been in the upstream energy business for 25 years both domestically here in Canada and internationally. I am a petroleum reservoir engineer with specialist skills in hydrocarbon reservoir management and converting resources to reserves and cash flow. I am a significant shareholder in the company.
Jerrad?
As for me, I’ve been working in junior oil and gas space for 15 years in various capacities with a specific focus on Canadian based small cap producers with international operations. I am a chartered accountant or CPA by profession and articled at Price Waterhouse Coopers before moving into the energy sector.
SH: Chayan, can you update our investor audience and your Bengal shareholders on any new company developments, especially in the wake of COVID-19?
CC: The world as a whole has faced significant challenges due to Covid-19. As a business, we recognized the opportunity to make some significant changes to the company. First, we refinanced our reserves based loan facility, by taking out our debt at 80 cents to the dollar; this was done by way of a private placement at a premium to our then market value. Both of these benefited all our shareholders. The investor who backed this equity injection of just over $16.5 million Cdn was and is our largest shareholder, who saw value in this investment opportunity. For the company, this transaction allowed us to become debt free, and with $4 million cash in our balance sheet and positive operating cash flow, we are now ready to kickstart our projects in Australia. The second thing we did was to put together a workplan – a schedule of cascading project events with a portfolio that is balanced, distributed across multiple permits, and has a mix that is carefully selected so that over the course of the next 12-18 months the results from this initial phase of our workplan should be transformative for the company. After struggling for the past few years trying to capitalize on our many development opportunities under the weight of our secured credit facility, I can’t overstate how excited we are to now have the financial flexibility to get to work on growing the Company.
SH: Chayan, why is the Cooper Deposit such a good energy opportunity for investors?
CC: By Cooper Basin we mean the Cooper-Eromanga Basin. The Cooper Basin covers an area of approximately 127,000 sqkm and extends across the northeast of South Australia and southwest of Queensland. The Eromanga Basin covers an area of approximately 1,000,000 sqkm and extends over South Australia, Northern Territory, Queensland, and New South Wales. The Cooper-Eromanga basin contains onshore Australia’s largest oil and gas field development, and this prolific basin continues to yield new hydrocarbon discoveries to this day. The basin houses well understood petroleum systems. In Queensland, the basin is underexplored and under-developed as opposed to South Australia giving rise to tremendous access to sizeable permit areas rich in resource-potential to a company like us. Crude oil pricing is very strong here because of the quality of oil in general, and relative proximity to the export markets in Asia. Since 2015, the development of Queensland's LNG export capacity has led to a significant increase in natural gas demand, with these export projects accounting for almost three-quarters of total demand for gas on the east coast in recent years, giving rise to strong pricing fundamentals. All of this make the Cooper-Eromanga Basin truly a world class region for a company like us to operate, explore, produce, and market hydrocarbons. We appreciate the business friendly fiscal terms and are supported by a mature and robust regulatory framework allowing Bengal and its partners to operate in a safe, responsible, and sustainable manner. We are also looking with interest at the CO2 emission reduction efforts ongoing in the Australian upstream energy sector. For example, our partner Santos is engaged in Carbon Capture & Storage in mature fields. We are reviewing similar strategies, including using solar power and batteries to reduce diesel power as another initiative.
SH: Jerrad, can you tell us about your strategic partnership with Santos – Australia’s second-largest independent oil and gas producer?
JB: Yes, you are right – Santos is Australia’s second largest independent oil and gas producer, with a market cap of some $14 billion. We have been extremely fortunate to be partnered with Santos in our existing production permit for over 12 years, where we produce ultralight oil, have initiated a water injection pilot for reservoir management purposes, and have other initiatives in the planning stage. We also have a second Joint Venture with Santos on a different permit in Queensland, where Santos, who is the largest natural gas producer and explorer in onshore Australia, approached us to farm-in on a 103,000 acre block called southern ATP 934. According to recent publications from Beach Energy, who partner with Santos in the fields immediately south and west of ATP 934, their 2020 drilling program achieved 100% exploration success over a 9 well campaign resulting in flow-rates between 6 to 13 mcf per day per well on initial production. On our second joint venture lands, Santos will carry the drilling costs of one well in the second half of 2021 to earn a 60% operated interest in the ATP 934 southern farm-out block as shown on the map. If successful Bengal would be excited for the opportunity to participate in any large scale development program led by Santos to follow up on the success of their recent exploration activities. Our relationship with Santos goes beyond the two joint ventures. We also acquired a number of strategic assets from Santos recently – these include production-ready permits, permits with hydrocarbon discoveries that we will test, appraise, and develop.
SH: Jerrad, I briefly mentioned the significance of Brent oil prices to the company. Can you expand on this for our investor audience?
JB: Sure. For a number of macro reasons related to market demands and transportation logistics, Brent benchmark prices have typically traded for 5 to 10% above WTI benchmark pricing for the past five years and fortunately for Bengal, the quality of crude we produce realizes a more than 5% premium to Brent pricing. This is a stark contrast to pricing structures in Western Canada, which typically see a significant discount compared to WTI pricing. For example, today WTI is close to US$67 per barrel of oil; the corresponding Canadian heavy crude oil blend Western Canadian Select price is US$51.60/bbl. Compared to that, Brent is US$69.30/bbl, and our average Australian realized price at this point in time is close to US$73/barrel – a premium today of over US$20/barrel compared to Western Canadian Select pricing.
SH: Chayan, the company has reported that this region of the Cooper Basin largely underdeveloped and underexplored. What kind of proved and probable reserves are we talking about here?
CC: We can add more to what we said earlier about why Cooper-Eromanga Basin is such an attractive hydrocarbon jurisdiction for investors. For a basin close to the size of the Western Canadian Sedimentary Basin, Cooper Basin has far fewer wells drilled – the number is just 1/200th the number of wells drilled in Alberta alone. This relative sparseness of drilling density is attractive to us. On a proved plus probable and contingent basis, the Cooper has 6.5 TCF of natural gas reserves and resources. But more importantly, according to recent publications, recent drilling by Santos and a joint venture partner in the fields immediately neighbouring our natural gas focused exploration lands achieved 100% exploration success over a 9 well campaign resulting in flow-rates between 6 to 13 mcf per day per well on initial production. This proximity to sizeable liquids-rich natural gas resources close to our permits which in turn are proximal to existing natural gas infrastructure and egress opportunities is why we are so excited about our landholdings in Queensland.
SH: Jerrad, Bengal is currently, debt free with fixed oil contracts and your exploration asset is permitted and proximal to existing infrastructure. Can you unpack the benefits of this?
JB: First, this allows us the flexibility to invest our working capital and free cashflow exclusively into new growth projects. Secondly, these projects, on success can immediately add incremental cashflows contributing to a cycle of development poised for rapid and sustainable growth.
SH: Jerrad, speaking of being debt-free, you recently announced the closing of a16.5-million-dollar private placement and debt settlement agreement. Can you expand on this initiative for our investor audience?
JB: Yes. Thank you. The investor who backed this equity injection of just over $16.5 million Cdn was and is our largest shareholder, who saw value in this investment opportunity. For the company, this transaction allowed us to become debt free, and with $4 million cash in our balance sheet and positive operating cash flow, we are now ready to kickstart our projects in Australia.
SH: Chayan, the Company looks set for strong growth in 2021. How are you placed to expand operations to meet this demand?
CC: The company today has 492,000 net acres of a balanced mix of transformational assets to target near term growth and longer term upside. We are excited to commence work on the immediate projects which have been de-risked by previous activity including actual long-term production, successful post-drill test, and post-drill hydrocarbon pays on logs that indicate significant commercial and economic potential to add production and reserves.
The Wareena Field was a successful natural gas producer tied into a 26-km long pipeline into a nearby compression station. We own 100% of all wells and pipeline infrastructure in this field. Our immediate activity here will be to recommission the pipeline and restart production after working over the wells. The wells produced up to 10 MMscf/d before they started to water out against a high back pressure. In 2019, Santos installed a compression station at our tie-in point in Coonaberry which provides us with a much larger operating envelope to produce the wells. Therefore Wareena has the potential to immediately contribute to the cashflow upon start-up.
On Ramses, where we have a Permian gas discovery, our immediate focus will be on the found and tested oil zone in the shallower Jurassic Poolowanna Formation. Here we will workover one well, add fit for purpose crude oil storage and load-out infrastructure, and commence production. We are encouraged by the test results from the identified oil zone, which may be indicative of a de-risk addition that could meaningfully impact the Company’s oil production.
On Ghina, we will complete an existing well where a gas discovery was made in the Permian upon drilling. We will then proceed to test the zone of interest to determine deliverability, and keep it suspended for a future pipeline based on a future drilling campaign and exploration in this area. Depending on the success of the adjacent exploration drilling campaign, gas export would be well on track to go South rather than a longer connection North to the Wareena field.
One of the most exciting events for us this year will be the drilling of the Legbar well in the farm-out portion of the ATP 934, which is the southern area of the block comprising 103,000 acres. ATP 934 in total gives us access to over 178,000 acres of wet gas fairway opportunities. This will be the Company’s first exploration well targeting the high-impact liquids-rich natural gas play in the Cooper Basin, which has become increasing prolific in recent years following exploration success by Beach Energy and Santos directly offset to our targets. Equally important, the drilling cost of this well will be paid for 100% by Santos Ltd, to earn a 60% interest and become operator of this southern block.
In Cuisinier, we continue to focus on low-risk development work to enhance recovery and increase production, with higher impact activities expected to commence in the longer term as we will discuss shortly.
In our 100% owned Karnak, we plan to twin an existing well that showed significant gas pay zone in the Permian, with the permit located close to existing gas infrastructure. We believe that with the advance and application of underbalanced drilling in the Cooper Basin the new well will be successful and connect the behind pipe gas resources. Gas infrastructure is readily available to ensure near term cashflow generation.
SH: Chayan, for company shareholders and potential investors, what kind of future development and progress can we expect at your Cooper Basin operations?
CC: Our plan is to cascade through the near-term balanced growth projects immediately. Beyond that, we are excited about the opportunity to follow up development success and further strengthen our production, reserves and cash flow base while offering our shareholders access to potentially transformative exploration acreage. Contingent on Legbar success, we expect to see additional exploration and appraisal activities followed by a potentially large-scale development program on the 103,000 acre southern ATP 934 block. In addition, we have identified four high-graded Permian exploration prospects on our 100% WI, 75,400 acre northern ATP 934 block that we will want to evaluate through a combination of drilling and 3D seismic. These prospects are all defined by reprocessed 2D seismic and exhibit structural closure and other characteristics similar to the seismic expression seen over the surrounding natural gas discoveries. A success on any of these features can be quickly brought to market through a connection to our 100% owned pipeline connecting to a natural gas custody transfer point.
SH: Jerrad, Can you tell our audience a little bit about your corporate management and board teams, along with the experience and innovative ideas they bring to the oil & gas exploration space?
JB: The company’s executive team and board have substantial Canadian and international oil and gas technical, operational, commercial, business and investing experience, and many years of experience producing and exploring for commercial hydrocarbons in Australia specifically. Management brings significant technical expertise to the table, with skillsets ranging from innovative reservoir management to geological evaluation and field operations management. Many of our non-executive directors have direct experience in building junior energy companies domestically and internationally into successful profitable ventures. Each director brings a unique experience and skillset bench strength to provide technical, commercial, and business guidance to the management team while providing a strong governance oversight. Our board members have technical and business contacts globally that also provide a unique support to management in a broad array of situations. To us, our board is one of our biggest corporate strengths.
SH: And finally, gentlemen, if there’s anything I’ve overlooked please feel free to elaborate.
CC: Maybe I'll jump in Dave. Thanks for that. Yes, one of our key assets we wanted to bring to the viewers’ attention, and that is our only non-Queensland asset. This asset is called the AC/RL10 permit, that we own together with the Thailand National Oil Company, PTTEP. AC/RL is located in shallow water, in offshore western Australia. AC/RL 10 is on trend with two mature oil pools (Jabiru and Challis) with combined cumulative oil production of 171 mm bbls. of light oil; this is oil that was actually produced by these two fields. To our northeast, Australia’s Carnarvon Petroleum has the Buffalo Field and are focussing on pool stepout drilling and have successfully attracted a farm in partner to drill a structural feature similar to what we see at Katandra with a down dip oil show and structural closure updip. There is potentially a large prize here, which could all by itself be transformative for a small company such as us.
For regular updates, visit
bengalenergy.ca.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.