REG - Longboat Energy PLC - Strategic Pivot to focus on Southeast Asia

Longboat EnergyAnnouncement

17/06/2024 07:15

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RNS Number : 5983S  Longboat Energy PLC  17 June 2024

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
REGULATION 596/2014 AS AMENDED AND TRANSPOSED INTO UK LAW IN ACCORDANCE WITH
THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("UK MAR").

 

17 June 2024

 

Longboat Energy plc

(the "Company", "Longboat Energy" or "Longboat")

 

Strategic Pivot to focus on Southeast Asia

 

Longboat Energy, an emerging E&P company, announces the strategic pivot of
the business to focus on Southeast Asia following the sale of its 50.1%
holding in Longboat JAPEX Norge AS ("LJN"), announced separately today.

 

Highlights

 

·  Longboat to pivot its strategy to build its business in Southeast Asia

·  Significant industry interest in Malaysian Block 2A, farm-out process to
be launched H2-24

·  Provisional award of a cluster of material, undeveloped gas fields
capable of near-term development offshore Sarawak

·  LJN sale proceeds to provide working capital to run the Company through
the end of Q1-25

·  Cost savings in excess of $1.25 million achieved with a streamlined
board and management team

 

Rationale

 

Following a detailed review of its areas of geographic operation, the board
and management of Longboat Energy have made the decision to exit Norway and to
focus on building a full-cycle E&P business in Southeast Asia, where it
sees significantly more potential for a small company than Norway and believes
its existing positioning and access to opportunities provide excellent
value-creation potential for the Company.

 

Recent structural changes to the Norwegian upstream industry have favoured an
increasingly small group of very large companies with long-term investment
horizons and access to low cost of capital. This has left the Company at a
significant competitive disadvantage and, despite enormous effort and attempts
to secure opportunities with shareholder value upside, Longboat has been
unable to establish a meaningful growth platform in Norway.

 

In contrast, Longboat's entry into Malaysia last year coincided with a
proliferation of opportunities across Southeast Asia and a positive and
supportive attitude of the host governments towards small-and-medium sized
companies which are now viewed as crucial to maximizing value from their
maturing basins. Further, this positive industry sentiment is set against a
macro backdrop of growing economies with increasing energy demands, benign
operating environments, a structurally lower cost base and an opportunity to
help reduce carbon emissions through the development of indigenous gas
resources to displace coal fired power generation.

 

Longboat has competitive advantages in the region, including an experienced
team with excellent long-term relationships and networks established across
Southeast Asia. In addition, its growing portfolio already includes
sought-after acreage and operatorship in one of the most exciting basins in
the region, as well as visibility on accessing many additional opportunities
to diversify and grow materially its asset position.

 

Norway Exit and Cost Reductions

 

As announced separately today, Longboat has agreed the sale of its interest in
LJN to JAPEX for $2.5 million in cash, providing working capital to allow
Longboat to progress with its near-term plans in Southeast Asia without
shareholder dilution. In addition, JAPEX will assume all future financial
obligations associated with LJN, including $8.5 million of debt net to
Longboat in the LJN subsidiary.

 

The strategic pivot also allows Longboat the opportunity to streamline and
reduce its cost base, including a smaller and lower cost board. The cost
reduction measures taken will result in annual savings in excess of $1.25
million from the start of 2025. These savings, together with the cash proceeds
from the LJN sale, are forecast to provide sufficient capital through to the
end of Q1-25.

 

With its smaller organisation after exiting Norway, Longboat will continue to
ensure its cost base is streamlined to maximise the capital directed towards
value-accretive growth opportunities.

 

Longboat Board

 

Subject to confirmation at its upcoming AGM, Longboat has reduced the
Company's board to four members made up of:

 

·    Chief Executive:
                                Nick Ingrassia

·    Executive Chairman:
                                James Menzies

·    Non-Executive
Director:
                Graham Stewart

·    Independent Non-Executive Director:   Geraldine Murphy

 

The reshaped board has been designed to reduce costs whilst adding deep
regional relationships and bringing strong transactional experience to the
Company.

 

Graham Stewart, a founder of Longboat and its current Chairman and previous
founder/CEO of Faroe Petroleum, will continue to play a crucial role as a
Non-Executive Director providing continuity and support to the new directors.

 

Southeast Asia: Near-term Focus

 

Longboat's focus in the near-term will remain on its Malaysian activities,
offshore Sarawak, including:

 

·    Block 2A (52.5%, op) located offshore Sarawak in eastern Malaysia
which contains the giant Kertang prospect.

 

The Company has recently commissioned ERCE to undertake a competent persons
report ("CPR") to confirm the potential size and risk associated with Kertang,
believed to be one of the largest undrilled structures in Malaysia. It is
anticipated the CPR will be published at the end of June.

 

Following recent increased interest levels in exploration for world-scale
fields, multiple large companies have approached Longboat regarding Block 2A.
Having consulted with PETRONAS, the Company now intends to run a farm-out
process during H2-24 to identify a suitable partner.

 

·    An Area of Mutual Interest ("AMI") in Shallow Water Sarawak was
signed earlier this year, between Longboat and another international E&P
company active in Malaysia to pursue discovered resource opportunities
("DROs") being offered by PETRONAS.

 

Longboat is pleased to announce that it has provisionally been granted an
award, subject to the successful negotiation of certain key contractual terms,
for acreage in shallow water offshore Sarawak containing several material,
undeveloped gas fields capable of near-term development. These resources are
an important addition to Longboat's growing Asian portfolio.

 

Investor Meet Company

 

Immediately following its AGM, Nick Ingrassia (CEO) and James Menzies
(Executive Chairman) will host a live presentation for investors via Investor
Meet Company on 27 June 2024, 11:30 BST.

 

Investors can sign up to the presentation via:
https://www.investormeetcompany.com/longboat-energy-plc/register-investor

 

Investors who follow Longboat on the Investor Meet Company platform will
automatically be invited.

 

Nick Ingrassia, CEO of Longboat, commented:

 

"In Southeast Asia we are finding co-operative and welcoming governments plus
a supportive regulatory environment which in combination is creating lots of
interesting opportunities. The reshaped board and management team have been
active in the region for many years and, importantly, we understand what is
expected of us by our hosts.

 

We have a small but exciting initial portfolio and now have the chance to
showcase what independents do best; find, develop, produce and bring
hydrocarbons to market for the benefit of all stakeholders.

 

It was a tough decision for the Board and management to exit Norway, but
Western Europe is proving to be an increasingly difficult region to thrive for
independent E&P companies.

 

I'm grateful to the Longboat shareholders for their continuing support as we
make this material change of focus and look forward to taking full advantage
of the great opportunity in front of us."

Ends

 Enquiries:
 Longboat Energy                                   via FTI
 Nick Ingrassia (Chief Executive)

 Stifel (Nomad and Joint Broker)                   Tel: +44 20 7710 7600
 Callum Stewart                                    SNELLongboatEnergy@Stifel.com

 Jason Grossman

 Ashton Clanfield

 Cavendish Capital Markets Limited (Joint Broker)  Tel: +44 20 7397 8900
 Neil McDonald

 Pete Lynch

 Leif Powis

 FTI Consulting (PR adviser)                       Tel: +44 20 3727 1000
 Ben Brewerton                                     longboatenergy@fticonsulting.com (mailto:longboatenergy@fticonsulting.com)

 Rosie Corbett

 Catrin Trudgill

 

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