Q2 2026 Pantheon Resources PLC Earnings Call
Speaker #2: I'll make a very brief introduction and then hand over to you, Nathan. Thank you. Good afternoon, ladies and gentlemen, and welcome to the Pantheon Resources investor presentation.
Speaker #2: Throughout today's recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen.
Speaker #2: Given the significant attendance on today's call, the company may not be in a position to answer every question it receives during the meeting itself.
Speaker #2: However, the company can review all questions and will publish those where it's appropriate to do so. Before we begin, we'd like to submit the following poll, and I'm sure the company will be most grateful for your participation.
Speaker #2: I'd now like to hand over to Senior Vice President of Investor Relations, Nathan Cherry. Nathan, good afternoon.
Speaker #3: Good morning from Houston, and good afternoon to those in the UK and elsewhere. Thank you for joining us today. Here at Pantheon, we're very excited to discuss our Q2 2026 interim results and corporate updates.
Speaker #3: I'm Nathan Cherry, Pantheon's SVP of Investor Relations, and I'll kick things off with our agenda today. First, I'll be handing it over to our Chairman, Michael Spencer, for his remarks and message.
Speaker #3: Then you'll hear from our CEO, Max Easley, about Alaska's importance in a globally connected energy market, and recent developments as they pertain to Alaska.
Speaker #3: Eric Kremenocher, our Chief Development Officer, will walk us through today's announcement on the recently completed seismic reprocessing effort and the implications for Kodiak and its resource base. You'll hear again from Max on Pantheon's farm-out process, with an update and details there.
Speaker #3: And finally, we'll close our prepared remarks with Tralissa Mirage, Pantheon's Chief Financial Officer, who will cover Pantheon's mid-year results as announced this morning. We'll then close with a question-and-answer session, and you heard about those logistics from Mark at the top of the call.
Speaker #3: And before we dig in, I'll orient you to our disclaimer page, shown here at the front of the presentation. Please review it and familiarize yourself with the concept of forward-looking statements and the like.
Speaker #3: We will be posting a replay of this webinar online, including the Q&A portion. And with that, I will hand it over to Pantheon's Chairman, Michael Spencer.
Speaker #2: Nathan, thank you. Thank you very much. And a genuine welcome to all of you who are joining this call today, whether you are in Europe or the United States.
Speaker #2: You are most welcome. As many of you know, I joined Pantheon as Chairman—I'm only in the job for six months—and it has been an exciting, challenging, and very fulfilling role.
Speaker #2: And I've enjoyed it. And one of the things I want to share with you is I'm after this period, I'm absolutely convinced as to the core value of the underlying assets we have.
Speaker #2: Indeed, this has been confirmed by the detailed seismic work that we've undertaken and mentioned in our results since the spring of this year.
Speaker #2: And this gives me considerable confidence going forward in representing to you all the good position that Pantheon is in, the value of our business, and what we ought to be able to achieve going forward.
Speaker #2: And I see my role as Chairman very much as leading our farm-out negotiations to get a really good deal for our shareholders, many of whom I know have been long-suffering, if I might put it that way.
Speaker #2: Of which, by the way, has been the seismic program itself. Obviously, all the many institute companies in our data room have quite sensibly been keen to see the final results of our seismic program before fully committing.
Speaker #2: Why would they do otherwise to negotiations with us? And also, of course, the debate as to where we stand on the gas pipeline which we expect will happen, by the way, and we are confident will happen but has been delayed rather unfortunately for us because that would be a very significant bonus to our project on the Kodiak field and others.
Speaker #2: The history from Pantheon, I know, has been a volatile one. But I genuinely now believe we're coming to a pivotal and positive moment and I urge all of you shareholders absolutely, this is the time to stay with this project and not to lose faith and confidence in it.
Speaker #2: I now will hand on. Thank you.
Speaker #3: Thank you, Michael. So, this is Max, the CEO. As an Alaskan myself, native born and in and out of Alaska for 30 years now, I think I would say—and agree with the world—that Alaska has never been more important or active than it is right now, which is playing obviously to our benefit.
Speaker #3: So I'll quote the current governor, Governor Mike Dunleavy, friend of the firm. 2026, Alaska is back on the map. And why do we say that?
Speaker #3: So on the left, you see NPRA, but even before that, November a little less than a year ago, there was a state lease sale.
Speaker #3: And all the acreage around us was picked up by competitors. So notably, Repsol to the west of Kodiak, and a company called Surprise Valley took a very large position to our east—175,000 acres.
Speaker #3: Within the National Petroleum Reserve, Alaska, the federal lease sale that occurred in March of this year was record-setting. So, 11 companies bid there—430 bids in total.
Speaker #3: 187 awards and 164 million to the state. An absolutely outstanding lease sale for the state of Alaska. What perfect timing for us. This is what's called a land grab.
Speaker #3: So, there's a land grab happening right when we're trying to farm down our assets. Couldn't be better. In the middle, LNG. A little bit of complexity over the summer.
Speaker #3: On the last stage of legislative approval, associated with property tax. But when we look at the project, and we talk to the developer and the state about this a lot, gas contracts are largely in place, permits in place, contractors largely in place, labor agreements in place.
Speaker #3: This is an 80 to 90 percent approval issue in the state of Alaska. We see this as a quick win for the new governor. The new governor will be elected in November.
Speaker #3: The current governor is term-limited. But we see this as a very, very positive catalyst as we enter the new year to advance this project and a timetable that makes imminent sense for us.
Speaker #3: The one on the right, PICA, this is a big deal for the state of Alaska. The reason I say that is there are two things Alaskans have wanted for 30 years.
Speaker #3: One, the gas line, and one is competition on the North Slope. We represent both of those, by the way, because we're a competitor and likely the first shipper in that pipeline.
Speaker #3: And competition is good. Competition creates tension among the operators to make them better. It makes suppliers better and, ultimately, the state better. So in this case, this is Santos and Repsol, or PICA's, first time in over a decade that we've had a major development in the state of Alaska.
Speaker #3: It's 80,000 barrels a day. And guess who's right behind them? Likely us. So that's the context. Astoundingly good year for Alaska. Don't read too much into the LNG delay.
Speaker #3: I think that will be quickly resolved by the new legislature, and the Governor, to our benefit. But what you guys really want to hear about—and Michael alluded to it—is that a year ago, Eric and I stared at this area sitting on top of Kodiak.
Speaker #3: And we looked at the quality of a seismic, like what? And so it’s been a big year to really interrogate this seismic information right over the best reservoir we have.
Speaker #3: So Eric, take it away.
Speaker #2: Excellent, thank you, Max. And hello, everyone. I'm Eric Kremenocher, Chief Development Officer, and today I'm pleased to be able to share some significant progress the company has made on the technical front, particularly with the seismics.
Speaker #2: As Max has just mentioned, let's dive into it. We had previously shared the importance of proving the seismic data in the uptake area.
Speaker #2: And we now have the data set, and the results are tremendous. We have selected one of the most reputable seismic firms in the world.
Speaker #2: And we work with them closely as one team to deliver the project. It was on time and on schedule. Despite the challenges typically presented by the geology of the North Slope of Alaska, the new data is even better than everybody expected.
Speaker #2: We have a clear 3D image of the Kodiak reservoir, and can also see additional prospects in the Kaparik Formation below, as well as some interesting anomalies in the shallow intervals above.
Speaker #2: In addition, the amplitude versus offset analysis, called ABO for short, is providing strong hydrocarbon indicators updip of the area, updip of the Fado S1 well.
Speaker #2: And I'll show some images in a bit to bring this a bit more to life. The results of the recent technical work have significantly increased the company's confidence in the extent and continuity of the Kodiak resource.
Speaker #2: Such that an increase of at least 25 percent of the company's existing 2C estimate of recoverable resources for the Kodiak asset is expected. So, what does the company's liquid hydrocarbon resources picture look like?
Speaker #2: Over the past few years, the resources have grown significantly. The journey started with the allocated discovery, which flowed oil to surface in the Apune assets, starting there on the left.
Speaker #2: Then came along the Litha A and Theta West 1 wells in 2022. They were discovered and flow tested in the Kodiak basin floor fan.
Speaker #2: That basin floor fan, this was described by Wood Mack as the largest onshore discovery of the world that year in the world that year.
Speaker #2: An independent assessment in 2023 established a substantial resource number for Kodiak. That same year, the allocated two wells successfully tested the shallower shelf margin deltaic interval in Apune, adding to the resource base there.
Speaker #2: In response to that tremendous success, the company then acquired additional acreage in the Kodiak asset area to the west. The follow-on assessment resulted in additional resources, growing the picture further.
Speaker #2: Last year, the W1 well logged additional pay across multiple intervals and confirmed things like the slope fan system, which we have management estimates for down in the downdip of Apune.
Speaker #2: And today, I'm going to show you some images from the new seismic data, improving our confidence in the northwest updip area of the Kodiak asset.
Speaker #2: In the coming winters, we plan to drill and test the Kodiak updip area, supporting possible additional resources. The Netherland Sewell 3C best estimate of 2.8 billion barrels for Kodiak shows how substantial this resource base could be. So now, let's look at the Kodiak area in a little bit more detail.
Speaker #2: So, first of all, the Kodiak reservoir is just massive—it's absolutely massive. It has been penetrated multiple times in the downdip of the fields and was successfully flow tested in both Talitha A and Theta West 1.
Speaker #2: And with each penetration in the Kodiak Basin Floor Fan Formation, increasing reservoir quality has been observed as you move up-dip. This is consistent with the geological models, and it's consistent with regional data that we've collected and others have collected.
Speaker #2: And this is consistent with the burial depth and the depth of the reservoir. This improving reservoir quality includes higher porosity, which, simply stated, means more space in the rock to hold the hydrocarbons.
Speaker #2: And perhaps even more importantly, higher permeability, which is the ability for the fluids to move through the rock to the wells. That all enables the wells to produce at higher rates and deliver large ultimate recoveries.
Speaker #2: The overall objective of drilling updip is to identify the best area where we can commence our development. The data acquisition program is being designed to provide the key technical inputs to underpin investment in the first phase of development.
Speaker #2: So with all this, why is the seismic so important? The new seismic is really transforming our ability to target the right areas.
Speaker #2: So, this slide shows a comparison between the old seismic and the new seismic. This is a cross section starting from the far up-dip in the northwest of the Kodiak area, down past the Theta West-1 well in the southeast, which you can see labeled on the right side of the two pictures.
Speaker #2: So let's start by looking at the old seismic image from 2016 data on the left. First of all, in the very shallow area, there's absolutely no data.
Speaker #2: It was likely so bad that it was removed from the data sets by the processing company. And even where you start to see the data below that, it's essentially uninterpretable.
Speaker #2: Any sort of mapping would be nearly impossible or require a lot of guessing to get something. Now, just compare that to the right. Compare the shallower section of the new data.
Speaker #2: The new data shows clear reservoir intervals and structural shapes of the formations. This detail provides important information for drilling operations, making sure there are no surprises, and early analysis is also showing additional prospects in the shallow zones, which could be similar to fields being developed to the west of our area.
Speaker #2: There's more work to be done, but it offers some potentially exciting upside. Now, let's look specifically at the basin floor fan, where we right now have all our resources in Kodiak.
Speaker #2: The area that's highlighted in the blue box at the bottom shows this. The new data clearly shows the structure and formation intervals. In particular, we're able to see contiguous intervals updip from where the Theta West #1 successfully flowed oil.
Speaker #2: Updip drilling can now target better reservoir properties while still maintaining that calibration with the successful test down dip. And finally, below the target zones in the basin floor fan, we are also seeing multiple Caparic prospects.
Speaker #2: This formation is very productive in other areas of the North Slope. And the data we have from the penetrations down-dip at Litha A and Pipeline State 1 indicate super exciting potential.
Speaker #2: So, how does this look on a map rather than just a cross section? This image shows what is called AVO lithology. It has been used by our company for quite some time.
Speaker #2: But it's also been used successfully on the North Slope to identify hydrocarbon reservoirs, some of which are in development and producing today. This image shows the top of the basin floor fan interval in the updip area of the Kodiak.
Speaker #2: And the red essentially is consistent with a hydrocarbon field reservoir. You can see the kind of scale on the bottom there. So what we're looking for is the red.
Speaker #2: And this is the old 2016 data. It shows the location of where Theta West 1 well is—there, kind of on the lower right.
Speaker #2: And updip to the northwest, the old data was not very compelling. You see lots of green and yellow, which in this case are kind of more of the shaly-type intervals.
Speaker #2: But geological models suggested that we should see better properties updip, and the seismic just wasn't supporting it that strongly—particularly for picking a future well.
Speaker #2: And you can see a future well, nominally labeled in the middle of that chart. But remember the cross section I showed earlier? And now, to the new data.
Speaker #2: So, this is 2026 data. It is completely different. You can see a possible location for an updip well in an area in the red.
Speaker #2: It's consistent with a hydrocarbon field reservoir, like that found at Theta West 1, and not only there but most of that updip area. So, now what I'm going to do is toggle back and forth between this image and the original image, just so you can kind of see it very, very—jump to life right on the screen.
Speaker #2: So, 2016 before, 2026 after. Look for the red. The red is where we want to target. So, 2016 before, 2026 after. As you can see, the difference is stark.
Speaker #2: They're side by side here. We've had this new data for just a short period of time, but the insights and confidence and excitement that it's generating are absolutely tremendous.
Speaker #2: And that's internally as well as some of the folks that are in our data rooms. Right now, we have more work to do, but we have an incredible foundation to build upon.
Speaker #2: And with possible access to the significant upside I alluded to earlier, I’ll hand back to you, Max.
Speaker #1: Yeah, thanks, Eric. Everyone, you can see why Eric and I were champing at the bit to do that. We have seismic across the top of what you think is your best reservoir.
Speaker #1: And that's been certainly confirmed. Now, onto the farming itself. Given the Alaska context I shared and what you've read about, I'm sure you can appreciate this has been quite a busy period.
Speaker #1: One thing I'll say up front is this is not a commoditized asset. So, if this was 10,000 acres in the Permian, you auction that because everyone knows exactly what 10,000 acres in the Permian is worth.
Speaker #1: So, you just have an auction. You take the highest price. This asset is unique. It's very, very large. It's at the crossroads of all infrastructure strategies—be they pipelines, data farms, egress from the National Petroleum Reserve—anywhere mid-appraisal.
Speaker #1: And so, being very careful with this as we farm it down, to make sure we get the best deal for everyone, and not jump to something.
Speaker #1: So there's been a huge amount of interest—majors, mid-caps, independents. Within that data set, some are incumbents on the North Slope; some people want to enter Alaska because that's where the large resources are.
Speaker #1: Large resources are getting hard to find in the Lower 48 these days. Some are upstream, some are midstream. Because of the location—location, location—again, we sit right at the crossroads of all the infrastructure strategies as well.
Speaker #1: A bit of a pause over the summer, as Michael alluded to. There was a lot of interest in what happened in the state of Alaska associated with the gas pipeline.
Speaker #1: Many, many people are glued to KTOO, watching the testimony and debate there. Everyone has sort of come to the same conclusion now about what's going to happen there.
Speaker #1: But really, the closer we got to August, the more people said, we have to see that seismic. And that will confirm to us if this is good, bad, or indifferent.
Speaker #1: And so that slowed down until now it was available. And as you can imagine, it's gotten very busy again. So, we did have one offer earlier in the year.
Speaker #1: The Board and I thought we could do a lot better than that. Note, that was pre-new seismic, so we certainly want to take advantage of our own appraisal work and all this as well.
Speaker #1: So, we moved on, and we have 10 companies shortlisted in the data room right now, as we disclosed this morning. Again: majors, mid-caps, independents, incumbents, nones, new entrants—the whole list.
Speaker #1: And everyone is taking a very, very active interest in this. But at the end of the day, for all of this, one of the best outcomes is for our shareholders.
Speaker #1: To achieve the least dilution, the best execution capability, and the right pace for us. And as we do this, we need to be very careful with our liquidity.
Speaker #1: As we mentioned in our release, this is an interim update. But you should take away that all the context you read in Alaska about the land grab—Alaska is back on the map—all of that applies here.
Speaker #1: But we need to be very, very cautious because we're playing with a very large, very valuable asset that our shareholders own. And we want to make sure we get the right deal in the end.
Speaker #1: So, an interim update—but a very positive one, I think. So now, before we close, Chalisa, we issued our mid-year results as well today, in addition to ridiculously good seismic and other things.
Speaker #1: So, let's take everyone through our results.
Speaker #3: Thank you. Good afternoon, everyone. As Max mentioned, we took the approach at the start of the year to ensure that we were preserving all liquidity.
Speaker #3: While supporting the FOMO process and also development planning, those results for the year—or for the six-month period that we just published—are in line with that approach that we took to manage the business during the last six months.
Speaker #3: We undertook a huge exercise in terms of reviewing our cost structure. We did that exercise by looking at it function by function and ensuring that we were being lean, and that we were, in fact, supporting the FOMO process.
Speaker #3: We're trying to find that balance. As a result of that, you would see that our operating loss for the period was actually reduced by $1.8 million.
Speaker #3: Of the $1.8 million, $1.5 million relates to a reduction in SG&A, and those are coming from a couple of functions—one, essentially, being accounting and legal services.
Speaker #3: Have been reduced. Third-party technical services have also been reduced. And just in general, our employee costs also. So, finding the balance between cost and the right fit for the organization to continue to support all the processes was really key for us in the last six months.
Speaker #3: I think also, including that $1.8 million is a $300,000 decrease in stock-based compensation. This is non-cash, and so reflects—next slide, please. Sorry.
Speaker #1: Too far.
Speaker #3: Okay. I do want to talk a little bit about our balance sheet in general, because there are a couple of things that I think are key to us as we go into the next six months.
Speaker #3: Our E&E assets increased by $1.7 million from December to 30th of June. And I wanted to just talk that through for a second, because we did say in prior guidance that we were not going to have any field activities.
Speaker #3: That increase actually relates largely to the cost of maintaining our leases. Overall, for any 12-month period, our cost to maintain our leases in good standing is $2.2 million.
Speaker #3: So what you're seeing in that $1.7 million is an amount related to our lease cost, and also costs related to keeping the optionality of the neighbor's rig for future drilling.
Speaker #3: And just our general maintenance costs around the existing assets. So, no genuine field activities during the period. The big item on our balance sheet that we are looking at right now is the convertible bond.
Speaker #3: As you would notice, the convertible bond currently sits in the long-term liabilities. This will become a current liability for us in March 2027.
Speaker #3: With the principal, notional amount of $20.5 million being due in March of 2028, we are looking at options around settlement of this bond when it becomes due.
Speaker #3: It's an ongoing process at this time. Just wanted to acknowledge that it is at the forefront of our mind: cash and cash runway.
Speaker #3: We ended the six months ended June 30th with $10.2 million. Our current cash balance as of Friday is $5.5 million. We expect that cash will be enough to support the company through the end of the year.
Speaker #3: We are still trying to maintain and ensure that we manage our cash runway, and that the cash is actually supporting the FOMO process that's going on.
Speaker #3: We want to make sure that we use that cash to ensure that we've got financial flexibility to allow that process to continue, and to make progress on the right turn.
Speaker #3: With that, I will hand it back to Max. Oh, sorry—to Nathan. Sorry.
Speaker #2: Thanks, Chalisa. So that concludes our prepared remarks. Now, we will compile the questions that have been coming in. Many were pre-submitted, and we have all those in hand.
Speaker #2: I also see, on our live question portal, we have a lot—that’s great, thank you. We've also received some from the research analyst community.
Speaker #2: Much appreciate those as well. So, as we're getting all those lined up, I will hand the mic back over to Max to lead the Q&A.
Speaker #2: Thank you.
Speaker #1: Thanks, Nathan. And thanks, everyone, for the presentation. Hopefully everyone's as excited as we are. We're in a good spot here. But I think the first question is a good one.
Speaker #1: Which is, why didn’t you—why didn’t the board accept a firm offer you mentioned? Wouldn’t that have been a big positive for the company?
Speaker #1: Well, we happen to have the Chairman of the Board on today. So, Michael, why didn't we accept that deal?
Speaker #4: Max, we were obviously grateful to receive an offer—of course we were. And thank you to the company, unnamed of course, who made the offer.
Speaker #4: But—and I respect them, and I have a very high regard for the people involved. And I—we owe them every degree of gratitude.
Speaker #4: But the reality is that we believe our asset is worth more than what they were offering. And I think rushing into the first deal is not necessarily the right thing to do.
Speaker #4: It would have made our lives a little bit easier, perhaps. But I don't think it was the right deal for us to do.
Speaker #4: And I said that then. You and I agreed on it. And, by the way, we still have the same view today. Of course, if they would like to re-engage at a different level, then we would be very open-minded to that.
Speaker #4: But that's another matter. But we've got lots of lots and obviously, as I mentioned earlier, quite rationally, a large not a large, everybody in our data room were wanted to see the full results of our seismic data.
Speaker #4: Before they made a, put down a firm offer. And why would you not? That would be illogical, to make an offer before they'd seen all the information.
Speaker #4: And obviously, that's taken several months, which is one of the reasons our aspirations or our initial hopes to have a deal discussed and concluded by the end of the summer proved to be over-optimistic.
Speaker #4: All the other participants there wanted to see all the seismic data, and they have now pretty much done so. So I think the tempo of our dialogue is going to increase significantly going forward.
Speaker #4: And let us hope also that we get clarification on the gas pipeline. If that comes through as we expect, we're positive that would be a dramatic boost to our negotiating opportunities.
Speaker #1: Yeah, I agree with everything you said, Michael. Love that. The next one is probably a combination from myself and Eric. So the question is: Following completion of the seismic reprocessing, does Pantheon currently expect both Kodiak and Duby production testing to form part of the 2026 winter program, subject to funding?
Speaker #1: I'm sure you've noticed that there's been quite a shift in emphasis from what I call the satellites—Appun and Alkaid—to Kodiak. There's a reason for that.
Speaker #1: In oil and gas, you always develop your best reservoir first. That's where your capital efficiency is going to be, and that's where your greatest volume is going to be.
Speaker #1: And once you build the infrastructure, you can tie in—and tie in—satellites. I believe that Kodiak is our best asset by a mile.
Speaker #1: And Eric and I had a strong view that the update was going to prove to be the best within the best. And now we've reprocessed the data.
Speaker #1: That certainly has underlined that the updated Kodiak is the best asset we have, and so you want to develop that first. And so our first activities will be Kodiak.
Speaker #1: We haven't forgotten about Apun and Alcade. Those satellites will be important in the future. But the real value creation for our shareholders starts with Kodiak.
Speaker #1: But Eric, do you want to add to that?
Speaker #2: Yeah, just to reinforce a couple of points and provide maybe a little bit of detail. As Max said, every good oil company drills the best rocks first.
Speaker #2: And Kodiak is that. Kodiak is our priority. And I showed on the seismic, I showed that future well. We'll be doing a bit of refinement.
Speaker #2: But I think the seismic gives us every confidence that we have line of sight to a perfect target—or at least the next target.
Speaker #2: For Kodiak, kind of bringing the conversation and the question to Dubby, we still have the rig. The rig is still sitting on the Dubby pad right now.
Speaker #2: So whether you can look on the Apple Maps, which might be a little bit out of date, but you can actually see it's still sitting on Dubby pad today.
Speaker #2: Dubby, we still have work to do. I think there are some questions coming in live around the pressure buildup. The pressure buildup has definitely reached a point where we've gotten the information we need.
Speaker #2: We just need to get in there and recover the data. It's memory data, so we'll get that pressure data back. That'll be incredibly useful to understand the performance of that reservoir.
Speaker #2: And then we definitely intend to move forward with a flowback at the right time. We want to probably re-complete the well to get the right lift to recover some of the fluids that we put in there from the stimulation.
Speaker #2: And we just need to coordinate the right time for that. The other piece I will—this is on the back of the seismic.
Speaker #2: The story I will recover, or come back to, is the seismic pictures I show—if you remember, they are in the update part of the Kodiak field.
Speaker #2: So, the northwest — we do have a program that will repeat similar technology over into the Dubby area, and that will provide additional ability to really understand the whole area.
Speaker #2: And its potential as well. And there's also additional work to do around understanding the stimulation techniques. We could actually, potentially, go in and re-stimulate a new part of that well.
Speaker #2: So anyway, a lot of really exciting stuff—a lot of interesting things—that we've talked about with our potential joint venture investors. So definitely, in neither case is it something we've given up on.
Speaker #1: Excellent. So, the next one—this is a pre-submitted question, and we've covered some of it—but it's to do with the current state of farm-out discussions.
Speaker #1: So, are you progressing talks with more than one party? Yes. 10. Is the deal achievable in time to progress the intended winter drill? That's a great question.
Speaker #1: As Eric said, you can see over my shoulder—the big blue rig is sitting patiently on the pad. We have a location to drill.
Speaker #1: But we can't really predict when a deal will ultimately be transacted. But if we can drill a well, we will. I would say that.
Speaker #1: Next question is one for you, Thalesa. I think you covered most of this. What's our financial situation?
Speaker #4: Actually, Max, if I could interrupt for a moment there—just saying, to refresh what we said in our data release: we will not drill a well this winter season on our own.
Speaker #4: We would only do it in the event we achieve a farm-out and that the farm-out partners can provide the financing, so we can do it this winter, which is possible.
Speaker #4: It certainly is possible, but it's by no means obvious—we don't know the outcome.
Speaker #1: Yes, and we believe that's the best outcome for shareholder value creation. That's why we're doing that. So, we have three questions from analysts that cover us.
Speaker #1: Let's answer those. Charlie Sharp from Canaccord Genuity. So, I've got a three-part question. The first one's for you, Eric. Can you provide more detail on why this technical confidence has increased in light of the seismic results?
Speaker #1: Why do you think it's better?
Speaker #2: Yeah, I think I hopefully during the presentation showed just two pictures. The first one, which was the cross-section, it just—it does a few elements.
Speaker #2: That cross section one—first of all, where we’re looking for, in the rock itself, the target zone—we can easily map what's there.
Speaker #2: And we can not only map what's there because we see it, but also because we can calibrate it to the Theta West 1 well.
Speaker #2: And even if you look further down-dip, we can try to infer what the seismic might look like further down-dip. So, we can see the rock.
Speaker #2: The other thing, when we look at the—if you remember the red picture that we showed earlier—we actually now have evidence consistent with our geological views and all the data we collected previously that says updip.
Speaker #2: We're likely to find it's all consistent with hydrocarbon-filled. So, for the most part, we can really target where we want to in the reservoir itself.
Speaker #2: I think the other piece as well, that shallow section—if you remember that cross-section I showed—we didn't know what we were going to go through.
Speaker #2: And there are two pieces to that. One element is around drilling hazards. Sometimes you go through some tricky formations, and you want to be prepared for those.
Speaker #2: So, it actually helps mitigate some of the risk in terms of our drilling operations, first of all. But second of all, and more importantly, as I alluded to, there's some pretty interesting stuff there.
Speaker #2: We're seeing some anomalies that could be additional resources. So anyway, it gives us a chance to plan ahead, avoid the downside operational risks, but also design our program so that we can really appraise and test potentially some other zones.
Speaker #2: So, pretty exciting to look forward.
Speaker #1: Yeah, I love the second part of this—economic conditions. This is one of the primary things that attracted the new management team to Pantheon.
Speaker #1: I spent the last decade in the unconventional world, so in the Permian and the Montney. Everyone's running out of inventory, and a huge amount of the reserves are sitting in areas that are running out of inventory.
Speaker #1: So the question is, where's the capital going to flow? It really has two choices: international or Alaska. I think people are learning that geopolitical risk is as difficult, or more difficult, than technical risk.
Speaker #1: Depending where you go around the world, Alaska is a safe haven. So again, the governor—Alaska is back on the map. So, capital is flowing to Alaska.
Speaker #1: Massively. Not only for upstream operators, but also consumers, because egress from Alaska is coming through a safe corridor to the Asian markets. So again, right up our alley.
Speaker #1: And its part three is similar. Can you expand upon your view of the gas pipeline issues? Well, there's really a singular issue there. I think Glenn Farn and the Alaska Gas Development Corporation are in great shape for this project.
Speaker #1: It appears to be very commercial, and everything is ready to go. It satisfies domestic issues in Alaska, as well as access to international markets.
Speaker #1: It's going to run its course, politically. But again, this is an 80% to 90% positive issue in the state. There aren't very many people who say, "Don't do a pipeline."
Speaker #1: They just want to make sure that the ultimate terms are in the best interest of the citizens. So we're very bullish on it. Michael, did you have any comment on that yourself, from your perspective?
Speaker #4: I'm personally not. I mean, obviously, we all agree, and we've agreed for a long time that Alaska is in a particularly unique position, particularly given what's happened, obviously, in the Middle East recently.
Speaker #4: And yes, as and when we get approval for the Alaskan gas pipeline, that will absolutely underline, more strongly than we could have reasonably hoped, the value of our asset.
Speaker #1: OK. And here's one for you and me, Eric, actually. Does the potential 25%—this is from Dan Slater, Zeus Capital—does the potential 25% resource upgrade change our development approach to Kodiak?
Speaker #1: I'll start that one. It reinforces our hypothesis, which is you always start with the best reservoir first. And we've just unveiled our best reservoir.
Speaker #1: But Eric, is there anything you want to add to that?
Speaker #2: Yeah, just a little bit. I don't want to repeat some of the comments I made earlier because a lot of those do answer the question in some way.
Speaker #2: But I think we have reasonable confidence. Even with the older seismic, we know where to target. The new seismic is just—it's lighting up.
Speaker #2: It's blowing up the story, kind of like we hoped, and it allows us to get to that next fine level of detail. I think the upside resource, particularly, we can see—it's just a pretty stark picture of that red map I showed.
Speaker #2: But also, just the other upside potential we see around — maybe we design the well slightly differently, not compromising our real objective on Kodiak, but to target those shallower zones.
Speaker #2: That we're seeing. Potentially appraise some Kaparuk. Those could be some fascinating upside. They're definitely not at the scale of Kodiak, so we won't lose sight of that number one priority.
Speaker #2: But at the same time, there would be tremendous upside to add to our portfolio, particularly because they may be very high-rate wells. So it wouldn't necessarily put all of our focus on those because the scale is not big.
Speaker #2: But the rate would be fantastic for early development, particularly as we're just getting the infrastructure paid for at the front end.
Speaker #1: OK. So the last one from the analyst was pre-prepared. Then we'll go to the live ones. Brendan Long from Oak Security. He has a very interesting question.
Speaker #1: In the context of our farming process, can you provide your thinking in relation to the strategic value of retaining operatorship? That's a great question.
Speaker #1: Really, economically, you want the best operator operating. I'll start by saying that. Usually, the majority owner is the one who operates, but in our case, there are lots of options around that.
Speaker #1: When you operate, you control the activity. And as a company, you also develop your capability by operating. But we haven’t considered one or the other here.
Speaker #1: It really depends on the nature of the counterparty. We have many, but we'll get to that in the course. It's something we are thinking about hard, obviously, as we go through this.
Speaker #4: Can I just see one of the questions that's come through from Jonathan G.? The macroenvironment could not be better for Pantheon, which is true. I assume with seismic in hand, we drive a deal and demand urgency from interested parties.
Speaker #4: When is the deadline for bids to be submitted? I mean, this is a difficult issue. As you mentioned earlier, Max, we have 10 participants in the data center at the moment.
Speaker #4: They all move at different speeds. Some of them are big; some of them are smaller. Some are more agile, and some of them are less agile.
Speaker #4: And that's not a criticism; it's merely an observation. So, Jonathan, it's not practical for us to say, here is a deadline. We have to make our judgment, which we have exercised already.
Speaker #4: Obviously, as to what is a good and fair deal, we have our own parameters for that and our own confidence in that. When any of those parties in our data room come up with a proposition that genuinely and realistically represents the value that we believe we have, and we feel comfortable that we can work with them, then we will do it.
Speaker #4: And it would be unwise if we were to embark upon that. And I think it would be ill-advised if we gave deadlines.
Speaker #4: Because we would be cutting out many—not many, actually, but a small number of potential parties.
Speaker #1: Yeah, I agree completely. My remarks earlier — we can't auction this asset. It's too large, too unique. And so every counterparty we work with will push the schedule, obviously.
Speaker #1: But we have to work within their constraints to get the best deal for our shareholders here. We do not want to artificially curtail this and get a bad deal.
Speaker #4: Also, I think another thing that's worth saying, if I might, is that we have put aside the prospect of doing a drill on our own balance sheet this year.
Speaker #1: Yes.
Speaker #4: So and we will need to do a modest fundraising. Not a large one. 10 to 15 million dollars, which given our market cap is over 200 million dollars, is not overly challenging.
Speaker #4: I have, by the way, said that IPGL, my vehicle, as the largest shareholder, I will stand by and support that pro rata. So my confidence remains completely there.
Speaker #4: So, we will get funding through till next year, till the end of next year. And I don't—I think we are—and I share this with all of you shareholders out there.
Speaker #4: I know it is frustrating that we are not here today sharing with you great news that we've got a wonderful partner as a farming partner.
Speaker #4: But you do not want us to undersell this asset. You really don't. We've got a gem here, and if we rush to sell it cheaply, I think we will all regret it, ultimately.
Speaker #4: So, if we can, we will be able to raise those funds, and that will give us time on our side. That doesn't mean to say we are not pursuing every avenue with urgency and energy.
Speaker #4: But it means we are not going to accept the first, well, the second proposal we will make, unless it is a good one.
Speaker #1: Yeah. And that's related to Julian—yeah, your question. Clearly, all farming partners now know our cash position. Can that be used against us in negotiations?
Speaker #1: It will, possibly. And that's why we're being very, very careful with our liquidity position. So, please—and so we live within our means. But we're also looking at what is required to sustain us to a position of strength through this process.
Speaker #1: This one requires a little bit of an Alaskan story. How did the 2016 seismic get it so badly wrong? So the Alaska story here is, a tax system went in around 2010 called the Alaska Clear and Equitable Share.
Speaker #1: That was basically designed to promote exploration. And the predecessor private company called Great Bear lived off of that. A new governor came in and basically chose not to pay those tax credits anymore.
Speaker #1: That was 2016, and that's the exact year that 2016 would have been reprocessed. So the bare minimum was done, presumably because the contractor wasn't being paid.
Speaker #1: And that's what got Eric Semi's attention when we arrived. It was like, oh my God, we have to process this data. And that is not what the data should be saying.
Speaker #1: So, it’s really an Alaska story. But we’ve overcome that. I haven’t answered this one, but I’ll defer it to the Chairman. Are you considering full buyout as opposed to farm out?
Speaker #4: No, we will consider any proposal that's made to us, by the way. And if we're presented with a full buyout that we really think is unrefusable, we would consider it.
Speaker #4: I mean, at the end of the day, there comes a price at which you have to accept it. Then, of course, we'll contemplate it.
Speaker #4: But that's not what we're seeking at the moment. By the way, there's an email—one of the messages here. You mentioned 'farm out,' and then you mentioned 'farm down.'
Speaker #4: I'm sorry if I said 'farm down.' They're all the same thing to me. Sorry if I was clumsy. We are seeking a partner to develop our fields, and that is our primary objective.
Speaker #4: We are not seeking to sell the business. Having said that, if somebody makes us an unrefusable offer—an unrefusable offer is an unrefusable offer.
Speaker #4: There's another question here: Can you raise $10 to $15 million at the market price, rather than offering at a discount? Have a gem. I mean, listen.
Speaker #4: We are not rushing into the raise, OK? So we've made it clear that for our fundraise, we've got the liquidity to keep us going for several more months, as you know.
Speaker #4: This is not an emergency fundraise. It is merely that we need to raise funds at some point between now and the end of this year.
Speaker #4: And I have said as I have already mentioned that my company and as the largest shareholder I will support pro rata that fundraise. And we will do it when we feel the time is right.
Speaker #4: We don't want to rush into it, as happened in the past. We're here to raise it on the best terms. We want to see how our share price reacts to the statements we've made today.
Speaker #4: We believe they're positive. We believe they're encouraging. We believe they should give confidence to our investors. And indeed, our share price has gone up modestly today, which I think is a very nice, confident, and appropriate response.
Speaker #4: I would like to believe it'll continue to go up anyway over the next weeks and months, and we will raise some more funds. It will be a good investment, in my opinion.
Speaker #4: Of course, I wouldn't do it myself if I didn't believe that. And that will give us time on our side, so that we are not in any sense pushed or concertinaed by our liquidity to make a rushed judgment.
Speaker #1: OK. And Lax, thank you for your accolade. That's very nice—one for you. Eric, I know a little bit about myself. Are you still confident in Kapara, given the oil-wet characteristic found at Talitha?
Speaker #1: We've never included Kapara in our resource estimates, although we know it's there. It's deep, and it's highly overpressured—very difficult to drill. But we know it's oil bearing.
Speaker #1: So the question is, when do we get to that? We'll see. Yeah, we're very confident in Kapara. It may or may not be the thing we do first, because it's deep and tricky.
Speaker #1: But it's just another addition to an already vast resource inventory that we're sitting on. Eric, anything else?
Speaker #2: Yeah. The only thing I would say is the operations are not well, and the way that it was tested just left a question mark, really, more than anything else.
Speaker #2: I think there are some big lessons to be learned. If we go back and test it—which I think we ultimately will, given the potential—we're going to do some things differently.
Speaker #2: I think right now it’s inconclusive. As I dig into that—as Max says, there was oil there. We know there was oil there. When we did the flow test, we’re not sure what we tested.
Speaker #2: So, there's just a lot more to do and a lot of potential. So I think we definitely want to go back at the right time.
Speaker #1: There are a couple of questions here. I was going to answer: What's the latest deal that can be done for winter drill on Kodiak?
Speaker #1: From Mick. Mick, that's a perfectly fair question. We discussed it internally. We kind of, we kind of—if we're going to drill this winter, we need to do a deal pretty damn quickly.
Speaker #1: And at this moment, I cannot represent to you that that is likely. Our internal assumption is there will not—there will not be a drill this year.
Speaker #1: By the way, it's possible it may change. But bear in mind, just so we know, whether we drill this year or not, of course, may be exciting and exhilarating for you as a shareholder.
Speaker #1: But it's only worth doing if it is on the right terms for us. We have got a genuine, genuine first-class asset here. I don't—and by the way, I'm a pretty big shareholder too.
Speaker #1: I don't want to be rushed into doing a deal, because we can drill sooner if we've got a much better deal, even if we're a bit more patient.
Speaker #1: There's another question here. Is there a possibility of rare earth minerals? By the way, we haven't thought about that. That's not on our agenda.
Speaker #1: Maybe it should be. But our main agenda is to find a partner so we can prove that we've got a huge prospect in oil and gas here.
Speaker #1: There's another one I think we should complete—the W. Kodiak is our biggest, best field. We've done the seismic on it. We can now approach drilling Kodiak.
Speaker #1: We don't want to go anywhere else for our next big drill. Whether it's us alone, unlikely. But who knows? But with our with our farm out partners.
Speaker #1: OK, here's one that's useful—from Mario. Thanks, Mario. The old management team used to tell shareholders that they were targeting a $5/barrel market recognition.
Speaker #1: Is this still valid? That was really done to demonstrate the asymmetry of the portfolio. So if you multiply a couple of billion barrels by $5, that's a very, very large number.
Speaker #1: The new management team is thinking, let's make our first development as commercial as possible. And $5 is probably a modest number, actually—it really depends what the oil price is at the time.
Speaker #1: But we're not trying to sort of FID all of Kodiak at once. We're going to prove it up, do a development, and generate free cash flow for our shareholders.
Speaker #1: That's what we're trying to do.
Speaker #4: And can I just cut a couple of questions? Kevin B, can you please confirm again that a farm in partner, farm in, farm out for winter drill is first priority?
Speaker #4: Now, our first priority is to find the right farm-out partner. We haven't set a time horizon on it. Yes, if it happened quickly, we'd be thrilled.
Speaker #4: But we're not going to do the quickie deal if it turns up tomorrow if we don't think it's the right deal. As I said earlier, we'd love to drill this winter.
Speaker #4: We believe it would be a successful drill. We really do. And we really know where we think we should go. We have it pinpointed on our map.
Speaker #4: But I know it's difficult in the financial world to be patient. But believe me, this is a moment where patience is the right thing to do, rather than to rush into doing something prematurely.
Speaker #4: There's another question here. Thank you for your hard work. Nicholas K.: When was the seismic preprocessing completed? So far as I'm aware, Eric, is the seismic process completely completed or not completely completed?
Speaker #2: Yes, so this is what we might describe as the phase one seismic, which was very much focused on the updip of Kodiak. And for those geophysicists out there, it's in time rather than depth.
Speaker #2: There's an alternative. And what the Phase Two program is, as I alluded to earlier, around the W area—and any of the rest of the Apune area as well—is down to Kodiak. There's a Phase Two, which would repeat that process using all of the learning and new technology that's been applied to do that in time.
Speaker #2: And then you can convert the whole thing into depth as well. So there is more to do. I don't think it influences our ability necessarily to pick the right spot in Kodiak.
Speaker #2: But it's absolutely important as we develop these fields moving forward, and having the right portfolio—just, it's really, you know, you can imagine, our newest data set was from 2016.
Speaker #2: Imagine the way digital has changed over the last 10 years. The technology has transformed, so just getting that in one piece, you know, all integrated, is going to be transformational.
Speaker #2: So, anyway, it's kind of as part of a big program. But you know, one thing that's good is this phase program has proved that we have the right underlying data and the technology out there. Working with the right partner, working closely with the right partner on a day-by-day basis, is going to provide huge, huge dividends.
Speaker #1: And for the non-geophysicists on the call, there's a seismic data set that they give us, which has been calibrated and is ready for interpretation. Then they hand us to a geophysicist to interpret.
Speaker #1: And that's what our guys will be doing for some time here. But that's why we gave it to the firm in East so quickly.
Speaker #1: We wanted them to have the raw data so they could come to their own conclusions, because we think their conclusions will be our conclusions, which would accelerate the transaction.
Speaker #4: Just a couple of other quick questions here. Can we drill outside winter? So far as I'm aware, we can't drill outside winter.
Speaker #1: Well, we can only drill outside of winter on gravel pads. So if we have a gravel pad—we have three of them—so we can drill there.
Speaker #1: But for Kodiak, that's restricted to the winter.
Speaker #4: Another question. I don't fully understand. Are you doing sufficient research in interested companies to be able to make an informed decision when cash becomes low towards the end of this year?
Speaker #4: I mean, it's in the public domain that we have the cash that takes us to the end of this year—maybe into the early part of the new year.
Speaker #4: We were not rushing into a cash raise because we've been doing a lot of investor meetings recently. Max has done a lot of those.
Speaker #4: And we have seen considerable offers of support. We wanted to handle this in a courteous, professional, and timely fashion—not some rushed, shotgun job.
Speaker #4: We clearly wanted the minimal discount to the current share price, and hopefully the share price might go up—in my opinion, it should go up.
Speaker #4: But that's a different opinion. As I said, I will support it personally. Obviously, we wanted our fundraise in a timely fashion—this is not a sprint.
Speaker #4: We will do it. My—we will do it. And I'm confident we'll get it done at the right price, at the right time.
Speaker #1: And you know, the other half of that question is, you know, the team we've assembled here—these are people that have worked all over the world and know all these companies.
Speaker #1: So it's not like we just fell off the back of a watermelon truck. We know all these companies in our data room. We know all about them.
Speaker #1: So we've done a lot of research, but we actually know them very well and have worked with most of them before. There's one last one.
Speaker #1: Then we should probably have a closing comment. This is actually a big positive for us this year, which we didn't talk about. So, Eric, any plans for the Megrez well?
Speaker #2: Oh, yeah. Yeah. So, kind of back to the question around where you can drill from in our pads. You know, for those that have kind of been with us and know our infrastructure, we have the three pads.
Speaker #2: We have an allocate pad to the north, Megrez is in the middle, and then we have W in the south. One of the things that really would challenge us on the W flowback, though, was around water disposal.
Speaker #2: And so, one thing we wanted to do was to become self-sufficient on water disposal. So, when we produced the Megrez, the shallowest zone on Megrez, we didn't stimulate that.
Speaker #2: So we didn't have this confusing story of stimulation fluids coming back. We just produced it. It's extremely prolific. The formation produced thousands of barrels a day equivalent with minimal effort.
Speaker #2: And so what we said is, well, let's repurpose that shallow bit for water disposal. And so we've more recently gone to public hearing with the regulator in Alaska. We think we've closed out all the actions.
Speaker #2: And so, we're in the process of going through approval to be able to repurpose that well for disposal, as well. So anyway, a huge financial lever for us to make things more productive.
Speaker #2: And probably the underlying question, you know, is what about the reservoirs—the deeper reservoirs—which were the target reservoirs? They're good potential; you know, they could be a future satellite.
Speaker #2: We did get core. We did see oil shows there. When we have the infrastructure in place, this could be an additional satellite. We haven't written it off fully.
Speaker #2: But at the moment, it definitely does not compete with the other assets, particularly what we're seeing in Kodiak.
Speaker #1: OK.
Speaker #4: Steven, there's an interesting question here that's been sent to me, actually. Julian, very courteous. With all due respect, wouldn't any potential partners just wait out to put the screws on us?
Speaker #4: I think your whole team overestimates the market's ability to wait Pantheon out. I don't think this all depends on a fundamental thesis, whether we have a great asset here or not.
Speaker #4: If you don't think it's a great asset, we're in trouble. Everything I have seen and even learned in the past six months underscores the fact that this is a considerably valuable asset.
Speaker #4: We would not have the number of parties in our data room today—and still in our data room today, still looking through our seismic—if this was a waste of time.
Speaker #4: I'm sure they've got better things to do. Obviously, they've got better things to do, too. So, this is not a valueless asset. Admittedly, what you're saying—there is a component of a game of poker here.
Speaker #4: Of course there is. You know we have a valuable asset. They want to buy it cheaply; we want to sell it expensively. But we will raise the cash to keep us liquid for the next 12 months.
Speaker #4: The quantum is not dramatic. We've cut our cash flow down significantly again, so we can stay at the poker table for quite a while.
Speaker #4: And Julian, you can always try shorting the stock if you want, and we'll see if you want to give that a go. But my view is that we're unlikely to drill this year, as we've said.
Speaker #4: It's impossible we do a wonderful deal in the next couple of months, and we drill. That's not what we're expecting. What we believe is the seismic has really illuminated, very considerably, the value of our asset.
Speaker #4: All of the participants in the data room now have that data. And we believe that we will find one or more among them who are prepared to have a very commercial discussion with us.
Speaker #4: Why not? The prize is a big one. There is a hell of a lot of oil out there—a hell of a lot of oil. Why would they not want it?
Speaker #4: And not only that, gas. And there's a gas pipeline that is very highly likely to be built there. I mean, this is if our estimates of our beliefs are right, sorry, our beliefs are accurate, this is a big opportunity for an organization that has the capital to see it through.
Speaker #4: I'll leave that thought with you.
Speaker #1: Yeah, I would agree with your thesis there, Michael. Remember when I said competition is good? If the only two people in our data room were the two incumbents on North Slope Alaska, I would be intensely worried about that statement.
Speaker #1: There are 10 people in a data room, and so there's competition amongst them. All 10 of them are not going to collude and wait us out, because there's no honor among thieves—you know, who gets it?
Speaker #1: So I don't worry about that at all. But just to close this out—we're a little over time—thanks for your time, everyone. I hope you heard today pretty massive momentum for Pantheon.
Speaker #1: Based on our own work, but also enabled by Alaska being firmly on the map for upstream operators and access to markets. And we've told you repeatedly today that patience is important.
Speaker #1: This is a very valuable asset. Prudence and discipline are required. No shooting from the hip—those days are over. So we're going to take our time and do what's right for the shareholders.
Speaker #1: And keep you abreast along the way. So I'll close with that. And Michael, as chairman, you get the last word, of course. So close this out.
Speaker #4: Thank you, all of you, for joining today. We really appreciate it. We really appreciate your support. And I am fully sympathetic with all those shareholders who, like me—I might add—have been there for a long time.
Speaker #4: And seeing the stock price go up and then down again and then down again. And let me tell you, I share your sympathies and I am with you.
Speaker #4: But as the biggest shareholder, I can tell you, sitting on the inside here, I believe this story is one you should stay with. This is still deliverable.
Speaker #4: It will be delivered. We'll get there. Have faith. Don't lose your nerve now. OK? Cheers, guys. Have a good day.
Speaker #1: All right. Thank you everyone. Back to you, Mark.
Speaker #2: Thank you, Max, Michael, the rest of the team. Thank you for updating investors, ladies and gentlemen. Please don't close this session as we're now redirect you for your feedback in order that the management team can really better understand your views and expectations.
