Sunda Energy PLC (AIM:SNDA) this week announced it had secured funding for drilling at its Chuditch gas field project.
It will retain a 30% working interest in the project after a farm-out to TIMOR GAP, with a cost exposure of 28% on the upcoming well.
CEO Andy Butler told Proactive the funding marks a significant step for the company.
He joined us in the studio to tell us more about the project.
Proactive: Andy, very good to speak with you today.
Could you tell us more about today's announcement and its impact on Sunda operations at the Chuditch Field?
Andy Butler: We've been working very hard behind the scenes to pull together a lot of aspects around drilling the well, but particularly the funding. And that's what this morning's announcement was all about.
So, thanks to everyone for their patience whilst we've been working on all these aspects.
The first thing I'd say is about the materiality of the Chuditch field.
This is a significant asset. We have gone from a position of seeking funding and having uncertainty around that asset, to having the funding in place to drill the well. With a 30% position going forward, that's a very material piece of a large gas field.
The engineering work we're doing, based on the feasibility studies announced after the MOU with the Ministry and TIMOR GAP, has clearly demonstrated we can do what we said — about 300 million cubic feet of gas per day in the future, which is around 50 million barrels of oil equivalent.
Net to the new equity position, that equates to about 15,000 barrels a day of oil equivalent. So, really material.
This funding enables us to build on that asset, strengthen the company’s position, and progress the asset quickly in strong alignment with the government, which is a great aspect of it.
There are several aspects to the funding. First is the farm-out to TIMOR GAP. We’re happy with that it's a strong relationship with a government partner who is aligned with us.
They want to develop the asset quickly, just as we do. Others had different development timelines, but this alignment with Timor-Leste is very strong.
Second, we announced a $9 million convertible loan note with three institutional investors.
Some people are wary of these structures, but this one is different. It’s designed to drive growth, not to keep the company running day-to-day.
We're close to drilling, about three months away, and expect to enter a period of excitement and momentum. That trajectory should help mitigate dilution.
The institutional investors are quality, long-view participants.
There are strong anti-shorting and forward-selling protections in the agreements, which should ease common concerns.
Proactive: Andy, how does this change Sunda’s interest in Chuditch?
Andy Butler: Our current working interest is 60% and we’re paying 80% of costs.
That will reduce to a 30% interest, and we’ll pay just 28% of the well costs through year-end.
That includes a previous carry for the state.
So, we retain a material stake in the asset. The net present value models show this is still highly significant for us.
Proactive: Can you expand on the convertible loan agreement?
Andy Butler: Yes, it’s a $9 million facility across six monthly tranches. The first is available after our general meeting on May 12, for which a circular will be issued shortly. That circular will also be posted on our website.
There’s a 10% financing fee and a 15% discount to a 20-day VWAP price.
There are drawdown restrictions related to minimum volume, price, and market capitalization. Full details are in the circular. We see this as a positive instrument.
Proactive: What approvals are required for the notes and when do drawdowns begin?
Andy Butler: After the general meeting on May 12. We have limited headroom currently, so we committed early on to giving shareholders a vote.
Once we have approval to issue shares behind the convertibles, we’ll start the drawdowns — monthly, starting mid-May.
Proactive: What are the next steps for the project?
Andy Butler: Now it gets exciting. We’ve been preparing for drilling. We had targeted late Q2, but it’s moved into Q3, likely late July, due to the rig schedule. Environmental permitting is progressing well and has been recently announced.
The rig contract is very advanced and should be finalized soon.
All aspects of logistics and operations are progressing quickly. Three months isn’t far — we’re getting very close.
So yes, it's exciting from here, and you’ll be hearing a lot from us.
Proactive: Andy, I hope you'll keep us updated.