Buccaneer Energy Plc (AIM:BUCE) CEO Paul Welch spoke with Proactive about the company's latest developments in East Texas, including the upcoming Allar #1 well, low-cost production plans, and future monetisation of associated gas through Bitcoin mining.
Here, we take a closer look.
Proactive: Paul, very good to speak with you. Maybe start us off just with a refresher on your operations in Texas and your overall growth strategy?
Paul Welch: Okay. So thanks. So, as we've discussed in the past, Buccaneer is focused on Texas. We have assets in East Texas, West Texas and South Texas. Our primary focus since I came on board as CEO has been in East Texas, the Pine Mills Field. And in part of that field, the Plains, we have one area called the Fouke area.
The Fouke area was discovered in 2021. They had reinterpreted a 3D seismic program that was shot in 2018. So in that part of the field — and again, the field of Pine Mills was discovered in 1947–49 — it's been around for quite a while. But in 2021, they drilled a well on Fouke 1, which encountered the reservoir section at essentially original reservoir conditions.
So, you know, 75-plus years after the original discovery, they found a part of the field that hadn't been tapped. They drilled Fouke 1 and Fouke 2, and both those wells came in at the field allowable rate, which is the maximum rate that the Railroad Commission — just the overall authority here — will let you produce at, at 124 barrels.
They actually produced at 140 for a while, then stepped it back down to 124, which is the maximum. So it's in that part of the field that we're focusing development activity. And we announced today that we just picked up a rig to drill the next well in that area, which was originally going to be called Fouke 3 but now is going to be called Allar number 1 based on the lease that we picked up.
So today we’ve got the rig, and we're going to start location construction here in the next couple of days, with the idea to spud this well at the end of October or early part of November.
Proactive: What makes this location particularly promising, Paul?
Paul Welch: What makes it interesting is that we think we have another location to the north of Fouke 1 that will also be at original reservoir conditions. What that means is that we're going to drill a well that'll come in at 124 barrels a day, and we have a third of that well, so our net will be 40 barrels a day.
We're currently producing about 150 to 160 barrels a day in total at the company. So that'll take us up over 200 barrels a day. It's a substantial increase in production.
Secondly, this is a part of the field that produces very little water. And so our operating costs in Texas are generally low, but in this area they're about less than $5 a barrel. So when we look at 40 barrels a day at $60 a barrel, which is the royalty, we're going to make about between $55,000 and $60,000 a month in revenue. So, I mean, it's a substantial increase in revenue.
The internal rate of return of this is over 300%. Our payout is less than six months. And as we've said in the past, we're always trying to close this gap between our NPV10 and our market cap. This will add another $1.75 to $2 million of NPV10 to that story. So again, that gap closes.
And I think most importantly, given success here, you then have the opportunity to drill another well to the north — which we nominally call Fouke 4 — which will further open up another 300,000 barrels of reserve.
There are a lot of interesting things that can happen with success here. And as we've also discussed in the past, this is an area that’s producing associated gas, whereas your field doesn't do that. And so, given that associated gas, and it's been increasing, we expect that we will also be able to monetise that. Our monetisation strategy — its primary role is to put in a Bitcoin mining facility.
So we will use that gas that would be flared or otherwise burned and not net any value, to generate additional revenue — just another revenue stream here. So there's a lot of interesting things that can happen as well in success.
Proactive: So what are the upcoming milestones that your investors should be looking out for, Paul?
Paul Welch: In the short term, we've got the rig sitting on our contract rate. We'll build the location over the next couple of weeks and spud the well. The well will take about two weeks to drill and evaluate. Then we’ll put it on production in November.
If this well works out, we'll add another 40 barrels a day net to our revenue stream in November. After that, we’ll look at the results of the well and determine if we have enough gas volume here with the existing three wells to start the Bitcoin mining facility. That process will get underway, given success, to start up in the first quarter of 2026.
So there's a lot of activity. A lot of things hinge on this well. We've been trying to get this well drilled for quite a while now, so we're excited to finally get here. It's taken a while. I have a great partner who owns two-thirds of this well — they finally came around.
So we're in really good shape. And we are looking forward to seeing the results of this well.
Proactive: It sounds like a busy time for the company. Thanks for keeping us abreast of your developments.
Paul Welch: Thank you very much. I look forward to coming back and telling you how successful this well is.