Longboat Energy has announced the strategic pivot of the business to focus on Southeast Asia following the sale of its 50.1% holding in Longboat JAPEX Norge, 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.'
Source: Longboat Energy
