Release Date: August 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cooper Energy Ltd (COPJF, Financial) achieved record production rates, with a notable 11% increase in the second half of FY24 compared to the same period in FY23.
- The company successfully completed the decommissioning of the BMG wells, realizing $10.5 million in annualized net savings through its transformation program.
- The East Coast supply project remains on track, with the drilling rig expected to arrive in mid-2025 and commence drilling in FY26.
- Cooper Energy Ltd (COPJF) maintained exemplary environmental performance with no reportable incidents and retained its carbon-neutral certification.
- The company reported record financial results, including a 17% increase in underlying EBITDAX and a 20% rise in adjusted cash generated from operations.
Negative Points
- Despite improvements, the company still faces challenges with plant reliability, having experienced a 27% production loss last year.
- The total recordable injury frequency rate, although slightly improved, still recorded one lost-time injury in FY24.
- The company's 2P reserves reduced by 33 million barrels of oil equivalent, mainly due to FY24 production.
- Cooper Energy Ltd (COPJF) continues to face legal challenges, including a Supreme Court claim against Pertamina for a share of the BMG decommissioning costs.
- The company anticipates additional nonrecurring costs of up to $12 million for general visual inspections of offshore pipelines in FY25.
Q & A Highlights
Q: Morning, Jane. Just wondering in terms of the production outlook and the 30-day record of 65 TJs a day for Orbost. Are we thinking that production guidance for FY25 is really sort of the right level for the next few years before any production starts up or is there a total downside risk to that number?
A: Thanks, Dale. The production over the last four to six weeks has been very strong, and we are obviously aiming at keeping that level of production going. What we have seen with the plans is there have been surprises in the plot pause and reliability has not been strong. We had 27% production loss last year. So we are being rightly conservative in the production guidance. But the production we've seen in recent weeks is consistent with the upper end of that range.
Q: And in terms of some, I guess, sustainability, right. So for all those, you've previously spoken about something that would average on an annual basis in the low 60s, is that still how you're thinking about a midterm outlook?
A: Sure, I'll hand to Chad to answer that.
Chad Wilson - Cooper Energy Ltd - Chief Operating Officer: Yes. No, that's correct. So that low 60s is still our long-term target, and that's average for the year, including all planned maintenance and plant shutdowns.
Q: Just in terms of how should we be thinking about the remaining decommissioning costs that exist for the business?
A: Yes. So the slide I talk through is really designed to answer the question of what's likely to come through the cash flow statement over the next five years. And really, the vast majority of that is, firstly, our 10% share in the Minerva activity over the next 18 months or so. And then the second piece is our 90% share in the BMG Phase II equipment pickup. Everything else is really 10 to 15 years at least away. We feel like there's a reasonable basis for everything we have in the balance sheet today.
Q: Is there any material planned maintenance in FY25 we should be thinking about in the planned pipeline inspection? Does that interrupt production in any way?
A: Hi, Nick. Chad here. The plant has a planned seven-day shutdown later on in the year. And in terms of any planned pipeline work, it's not expected to impact production.
Q: Could you please provide us with some more details around the MOU with SGH Energy in relation to exploring the development pathways for the Longtom gas field?
A: Yes, sure. We have an MOU in place with Seven Group to look at whether the system that Longtom plugs into can be restarted. The work will cover the cost for repairing the umbilical, the condition of the pipeline, and any plant modifications required to take that gas into the Orbost plant. On the back of the assessment, we can determine jointly whether it's economically attractive to restart that asset and produce the Longtom gas through the Orbost plant into the East Coast market.
Q: Just on the East Coast supply project, what are the steps over the next 12 or so months that we should wait for that you will be able to then provide some guidance on the capital cost estimates?
A: The next trigger is firming up the option slots that we have provisioned on the rig and then waiting for the rig to arrive. We expect it to arrive into the Otway Basin sometime in the middle of next calendar year. Our drilling should be towards the end of that year and into early calendar year '26. We'll provide more details on this, but the next step is effectively locking in the drilling program for those three wells with a partner.
Q: I was just wondering about the spend on the OGPP improvement CapEx of about $10 million from FY25. Can you go over what that is sort of looking at the expected uplift in production?
A: About half of that is for things on the Orbost improvement plan that were already in the works, such as a change in our packing and a few other items. The other half is focused on bringing up the plant reliability to get to that 2% reliability loss by FY26. We are currently assessing the top priorities for reducing that reliability loss and will be executing that through the year.
Q: Could you elaborate on your latest thinking for the Gippsland growth portfolio from a CapEx sequencing perspective? Should we be thinking about it exclusively as backfill for Orbost?
A: We are about to kick off a farm-down process for the exploration acreage, which includes Manta and other assets. The plan would be for that gas to backfill for Orbost once the Sole field completes, likely well into the 2030s. In terms of capital and phasing, we see that work and any capital expenditure taking place after the East Coast supply projects and the Otway Basin growth project are online.
Q: Just a follow-up on the East Coast supply project. Are you expecting an outcome for the sell-down anytime soon?
A: We are continuing our discussions with government to ensure that recommendation six of the Callaghan review gets adopted. The government has said it plans to adopt all the recommendations, and we are reinforcing the importance of delivering on that promise.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
