Sunda Energy PLC (AIM:SNDA, FRA:GHA0) chief executive Andy Butler talked with Proactive about the company's latest update regarding the Chuditch Production Sharing Contract (PSC) in Timor-Leste and the implications for its development plans.
Butler explained that the current phase of the Chuditch PSC expired and that Sunda Energy had been seeking an extension to move into the next phase and conduct drilling operations. The company received a notice of termination rather than the extension it had anticipated, creating uncertainty around the project despite ongoing efforts to secure drilling capacity and advance development plans.
During the interview, Butler outlined the challenges that prevented drilling from taking place last year, noting that the company had been fully prepared to proceed before logistical and local content issues ultimately created health and safety concerns that halted operations. Reflecting on the situation, he said: "We were ready to do it last year and it was out of our control."
The discussion also covered Sunda Energy's efforts to secure alternative drilling arrangements, including its collaboration with Finder Energy, as well as the company's broader strategy to diversify its portfolio. Butler highlighted progress in New Zealand, where the company is advancing an acquisition process and working through regulatory approvals, and discussed encouraging developments in the Philippines, where technical studies and seismic processing activities are underway.
He said the company plans to engage constructively with Timor-Leste's regulator to clarify its position and identify a path forward while continuing to build value through its other assets and opportunities.
Proactive: Andy, very good to speak with you today. Could you explain this morning's announcement and what it means for your involvement in the Chuditch Production Sharing Contract?
Andy Butler: What we announced this morning was the current status of the production sharing contract in Timor-Leste. The current phase of the PSC expired yesterday and we have been applying for an extension to move into the next phase to enable drilling operations.
We applied back in March and have held discussions with the regulator throughout that period. Yesterday we received a notice of termination on the PSC. We had expected an extension, albeit with conditions around securing a rig and drilling timelines, so this outcome is stronger than we were hoping for and is disappointing.
Just over a year ago we were ready to drill the well. We had the team together and a rig contract ready to go. Unfortunately, logistical issues and local content requirements developed into health and safety concerns, leaving us unable to proceed. That postponement was a major disappointment and a significant value destruction event for the company.
After that setback we focused on two objectives. First, we pursued a new pathway to drilling. Securing a rig for a relatively remote location proved challenging and despite several opportunities we were unable to finalise one. We then aligned with Finder Energy, announcing an arrangement in April that would allow a longer operational campaign and make it easier to attract a rig into the area.
We have now been given a 120-day window to secure a rig. The PSC was not extended on the basis that the work programme obligation to drill the well was not fulfilled. We were ready to do that last year but circumstances beyond our control prevented it.
We have meetings planned with the Autoridade Nacional do Petróleo (ANP) to clarify its position and determine how we can move forward. At the same time, we feel vindicated in our decision to diversify the portfolio to mitigate this type of risk. Thankfully, we now have additional opportunities that allow us to continue creating value elsewhere.
Proactive: So Andy, tell us how it is going with your other interests, New Zealand and the Philippines.
Andy Butler: The New Zealand acquisition is progressing well. Several members of our team recently attended transition and integration meetings. The team on the ground is excellent and the assets offer strong growth potential. The assets are producing well and current commodity prices support the attractiveness of the acquisition.
We also had productive meetings with government authorities in Wellington. The consent process relating to the change of control appears to be progressing well and I am confident the transaction will close within the timeframe we have previously indicated, during Q3.
We are also working through the funding aspects of the transaction, including the potential use of additional convertible loan note tranches and understanding the cash flow profile of the business.
In the Philippines, we are very encouraged by progress. The assets are non-operated and Tetragon is doing a strong job as operator. Technical studies are underway and seismic processing is beginning. The regional gas story is particularly compelling given the current geopolitical environment.
The acreage sits between areas where significant discoveries have recently been made in Malaysia and Indonesia, with similar geology. We are seeing strong industry interest and remain hopeful that our strategy will create value, particularly if larger industry participants become involved.
Overall, New Zealand is progressing well, the Philippines opportunity is developing positively, and we hope to find a constructive path forward for the Timor-Leste project. However, today's news is disappointing and difficult for shareholders, including myself, but we intend to engage constructively to move the project forward.
Proactive: Andy, I hope you continue to keep us updated on progress on all of those fronts. Thank you very much for your time today.
