Buru Energy Limited (ASX:BRU) is well-placed to weather the storm presented by COVID-19 and volatile market conditions as it has a strong balance sheet, is continuing oil production and is attracting strong interest in the farm-out of its Canning Basin exploration areas.
Continuing production
Production from the Ungani Oilfield for the March quarter totalled about 88,000 barrels (gross) of oil with current daily field production capacity around 1,600 barrels of oil.
The turbulent market conditions are being closely watched with the next lifting of about 75,000 barrels of oil from CGL Tank 10 in Wyndham due in mid-May.
In the meantime, field operational costs are also being carefully reviewed to ensure Buru is able to maintain cash flow positive production operations in the current low oil price environment for as long as possible.
Strong balance sheet
The company is well-funded to weather the oil price and COVID-19 storm with about $30.1 million in cash as at March 31, 2020.
Buru has also quickly responded at corporate and operational levels to the current unprecedented global situation of a combination of an oil oversupply by OPEC+ producers and demand destruction from the shutdown of the global economy by the COVID-19 virus.
As an initial measure, corporate and office staff have reduced their salaries by between 20% and 75% with overall personnel costs down 50%.
The company has no material exploration permit obligations and has deferred all discretionary expenditure including non-essential capital expenditure on the Ungani Oilfield.
Exploration upside
Buru’s recent review of its Canning Basin exploration portfolio has confirmed its outstanding prospect portfolio and identified several new exploration play areas with the potential for large conventional oil discoveries.
A farm-out process incorporating the results of the review has commenced.
Buru has some 22,000 square kilometres of exploration permits under licence in the most prospective areas of the Canning Basin containing a large inventory of drill-ready conventional oil exploration targets as well as a very large liquids rich tight gas accumulation.
The company has been conducting a detailed regional technical review to identify leads and prospects additional to the currently defined prospect portfolio and this was completed during the March quarter.
This review has not only confirmed Buru’s extensive and high potential prospect portfolio but has also identified several new exploration play areas with the potential for large-scale conventional oil discoveries including:
- Confirmation of a major new oil source area in the vicinity of the world scale Rafael prospect;
- The identification of untested potential in the very large structural closures in the basin centre, and
- A previously unrecognised Devonian aged salt section with mapped large-scale presalt structures and overlying potential for pinnacle reef development.
Ocean Reach Advisory has been engaged to assist with the farm-out process incorporating the results of the review. Ocean Reach had advised Buru on the sale of a 50% interest in the Ungani Oilfield in 2018.
Despite challenging market conditions, strong interest has been shown for the farm-out from several parties and technical due diligence material is being made available through a virtual data room.
Solar project potential
Buru is undertaking feasibility studies for the establishment of a major solar power precinct with ‘gas firming’ at its Yulleroo Gasfield.
Yulleroo Gasfield includes four wells that have defined a substantial gas accumulation with multiple zones identified that have the potential for conventional gas production.
The company’s objective is to finalise a pre-feed study later in 2020.