Dear Shareholders,
I am pleased to present Buru Energy’s Annual Report for 2023.
2023 was another successful year for Buru as we continued to make material progress on our strategy to find, enable and develop gas and oil resources safely and competitively, whilst evolving our complementary new energy businesses that support a structured transition to a low carbon economy.
It has also been an eventful year for Buru, bookended by both opportunities that the Company was able to seize due to its agile and entrepreneurial culture, and challenges which have tested its ability to adapt, persevere, and demonstrate resilience.
Gas and Oil Exploration, Development and Production
In our core gas and oil focused business, the year has seen Buru regain full ownership of Rafael, the first significant conventional gas and condensate discovery in the onshore Canning Basin of Western Australia, following the acquisition earlier in the year of Origin Energy’s joint venture interests in our assets in the Canning Basin.
The Rafael resource has been independently assessed to have the potential to hold gross recoverable volumes of over one TCF of gas and 20 million barrels of condensate, creating optionality for project development. Commercialising this resource is the Company’s strategic priority, with significant progress made over the past 12 months as evidenced by the appraisal and development milestones achieved, which are aimed at de-risking the Rafael resource appraisal and development activity and creating stakeholder value.
In relation to Rafael commercialisation activities, the year has seen Buru:
- receive government approval of a Declaration of Location for the Rafael discovery
- complete a 3D seismic survey over the Rafael structure on schedule and on budget. Preliminary results from this survey have shown a significant data quality uplift over the vintage 2D seismic survey. The survey was majority funded by Origin Energy as part of their exit,
- commit to long lead well equipment items to support planned Rafael appraisal drilling in the second half of 2024,
- confirm a two-phased project delivery strategy that aims to generate early cashflows, accelerated benefits to shareholders and the Kimberley, and the ability to optimise a larger scale development based on Rafael resource appraisal outcomes,
- commence pre-Front End Engineering Design (FEED) for Phase 1 of the Rafael development based on the already defined ‘low-case’ volume estimate of the Rafael contingent resource. This project is aimed at displacing imported diesel and Liquified Natural Gas (LNG) to the Kimberley with a local source of natural gas and condensate, importantly catalysing emissions reduction by providing firming for 50-125MW of additional renewable energy generation capacity for the region, and
- initiate a strategic appraisal/development partner selection process for Buru’s Canning Basin acreage, including the Rafael discovery, which was underway at that date of this report.
These achievements are designed to drive the certainty of outcome for the Rafael development, with the potential to transform Buru from an explorer to a developer and producer of natural gas by 2027, coinciding with a period of projected supply deficits in the domestic market in Western Australia and increased global gas demand internationally.
In our oil business, the unprecedented record flooding in the Kimberley early in the year that resulted in widespread damage to communities and regional infrastructure, including Buru’s road transportation export route for Ungani crude oil, challenged our business and tested our resilience.
After a period of production between May 2023 and July 2023, Buru was able to successfully export one shipment of crude oil from Wyndham to the SE Asian market in August 2023 after which the Ungani Oilfield production was suspended. This suspension also coincided with the withdrawal of Roc Oil from the Ungani Joint Venture, with Buru regaining 100% of the Ungani assets on 30 September 2023 following the assignment of Roc Oil’s 50% interests in the field to Buru.
The full ownership of the Ungani Oilfield provides Buru with the opportunity to revisit its operating model for the field, and to this end, Buru is testing the market for potential partnerships to extract maximum value from this late life asset.
Finally, and in line with the priorities of the business, the year has seen the divestment of non-operated joint venture interests in the onshore Carnarvon Basin to Mineral Resources for a cash payment, thereby strengthening Buru’s balance sheet to advance Rafael commercialisation activities.
Integrated New Energy Business
Although a significant share of the Company’s focus and resources is allocated to the commercialisation of the Rafael resource, Buru’s integrated energy subsidiaries continued to make good progress during the year to build the value of these energy expansion and energy transition initiatives.
Our 2H Resources subsidiary, focused on natural hydrogen and helium exploration and development has expanded its footprint beyond South Australia, via the application of six Special Prospecting Authorities with Acreage Option (SPA-AO) adjacent to the Perth Basin, and in the Goldfield area in Western Australia, prospective for helium and associated gases. Together with the seven Petroleum Exploration Licence application areas and two Gas Storage Exploration Licence application areas that 2H Resources already has in South Australia, the combined area under application is some 65,000 sq kms, or approximately the area of Tasmania.
Other notable developments in our 2H Resources business include the completion of an independent hydrogen Prospective Resource assessment for the South Australian application areas, and the execution of a research agreement with the CSIRO for the deployment of autonomous monitoring instruments to detect natural hydrogen and other gases in soil.
With natural hydrogen and helium exploration gaining significant momentum internationally and in Australia, 2H Resources is well placed to participate in this nascent area of resource development for the benefit of the environment and our shareholders.
Our GeoVault subsidiary, focused on Carbon Capture and Storage (CCS), continued to define the Greenhouse Gas (GHG) storage potential of Buru Energy’s onshore Canning Basin holdings, and has completed an independently validated GHG storage potential assessment for areas in and around Buru’s petroleum permits and licenses in the basin during the year.
This work confirmed material hub scale potential that well exceeds the estimated source CO2 emissions from a larger-scale Rafael project, thus providing a pathway to potentially significant reductions in Scope 1 and Scope 2 emissions from the planned Rafael project, as well as the opportunity to provide CO2 storage capacity for third party emitters seeking to reduce their own emissions.
Sustainability
I want to comment on Buru’s commitment to continual improvement in Environmental, Social and Governance (ESG) practices, as documented in detail in our 2023 Sustainability Report.
I am pleased to report that during the year we made robust progress in enhancing our ESG disclosures and aligning them with Global Reporting Initiative (GRI) standards and the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD), thus demonstrating our dedication to transparency and accountability in all aspects of our operations.
On our environmental performance and practices, we finished the year strongly, having recorded no Tier 1 and or Tier 2 incidents. We also continued to refine our goals related to Greenhouse Gas Emissions, climate adaptation, resilience, and transition as part of our sustainability framework.
On our social performance, I am pleased to report that we have successfully maintained a track record of no lost time injuries during the year across our operations, reflecting our commitment to ensuring the well-being of our workforce and achieving Zero Harm. This accomplishment is a testament to the dedication and vigilance of our people.
Connected to the care and respect for people and the environment, we continued to maintain our strong commitment and positive engagement with local and Indigenous communities, relationships that we have nurtured over 15 years of operating in the Kimberley. We are strong believers of supporting communities at a local level and are pleased with our ongoing sponsorship of the Kimberley Art and Photographic Prize, the Young Indigenous Women’s Pathway Program – Kimberley Girl, the Kimberley Economic Forum, and our ongoing collaboration with the Shire of Derby/West Kimberley and the Broome Chamber of Commerce and Industry.
Financial and Corporate
With the high levels of operational activity across the business, disciplined capital and resource allocation remains a key focus for management.
As at year end, the Company remains debt free with approximately $18 million in cash.
Thanks to the support of our existing shareholders and new investors, funds were raised via a successful share placement and share purchase plan during the year, with the funds allocated to the placement of critical drilling long lead item orders for the planned 2024 appraisal drilling program, and progressing regulatory approvals, native title negotiations and project development activities in support of taking a Final Investment Decision (FID) in 2025 and delivering first gas and condensate from a Phase 1 Rafael project in late 2027.
2024 Outlook
We enter 2024 focused on building on the momentum that we’ve generated over the past 12 months.
Our key planned activities for our gas and oil business include the processing and interpretation of the Rafael 3D seismic survey data, the completion of the Canning Basin/Rafael strategic appraisal and development partner selection process, resource appraisal drilling and the maturation of the Rafael Phase 1 development toward Final Investment Decision in 2025. Together with the completion of the strategic review of our Ungani Oilfield assets, these core activities are recognised as key value drivers for the Company.
For our new energy businesses, we aim to continue and build the value of these assets by securing tenure for exploration, and leveraging our quality technical work completed to date to enable early partnering and commercialisation opportunities.
In closing, I would like to extend my appreciation to our shareholders, the Chair and the Board, my executive team, our talented staff and wide-ranging stakeholders, for their support of our Company, and our vision to be a premier Australian diversified energy company, committed to business and financial success that has a positive impact on society and the environment.
I look forward to another year of performance and achievement in 2024.
Thomas Z Nador
Chief Executive Officer
27 March 2023