Good morning, everyone. Thank you for joining the Chariot Limited webcast regarding the partnering agreement signed with Energean plc today. Your speakers will be Adonis Pouroulis, CEO, Julian Maurice-Williams, CFO, and Duncan Wallace, Technical Director. Once the presentation is concluded, there will be a question and answer session. If you would like to ask a question, please submit it via the platform, and we will do our best to answer it within the allotted time. I will now hand over to Adonis Pouroulis. Please take it away.
Thank you, Jimmy. Welcome to this webcast, and thank you for joining us this morning. As Jimmy said, I'm Adonis Pouroulis, Chariot's Chief Executive Officer. We are very pleased to have announced our partnership agreement with Energean on our offshore Lixus and Rissana licenses in Morocco today. Over the next few slides, we will take you through the key points of this transaction and the next steps in delivering the Anchois development project, as well as providing a brief reminder of the near-term drilling plans on our onshore Loukos license. As BRR have noted, after this presentation, myself, Duncan, and Julian will open it up for question and answers, and we welcome your questions. Moving on to the next slide, just a quick Chariot snapshot. So as an overview, Chariot is an African-focused transitional energy company with three pillars: transitional gas, renewable power, and green hydrogen.
Today, we are focusing on our gas business, where we will outline how partnering with Energean is a key step forward in developing and delivering the Anchois project, while looking to open up new basin-scale opportunities in Lixus and Rissana. On the next slide, just a brief overview on our Moroccan journey. I want to recap on what Chariot has delivered since we shifted our focus to natural gas in 2019. Over the past four years, we have made a significant discovery and built up an extensive, diversified footprint in an emerging gas province. We have also established excellent relationships in Morocco with our partners, ONHYM, the government, and other key stakeholders.
Having secured the Lixus license with our regional offshore expertise, we worked up a highly prospective drilling inventory within this acreage and successfully drilled the Anchois-2 well, which we announced in early 2022. This well discovered 155 meters of net pay in seven distinct gas-bearing sands, and our resources were subsequently independently verified and materially increased to a total recoverable estimate of over 1.4 trillion cubic feet in the Anchois gas field. Since then, we have further matured the Anchois development through to sanction, while concurrently undertaking an extensive partnering process. We were also recently awarded the Loukos onshore license, which we will be drilling in early 2024.
The partnering we have signed today on our offshore assets, which includes the wider Rissana license, where we see giant potential and significant running room, will now be key to financing and taking them into the next phase of development. Moving on to the next slide. Why partner? Well, we partnered to de-risk and deliver the Anchois gas field development, which we felt had more upside than previously recognized. And in order to maximize this asset, we realized that we needed a bigger company to partner with us. We received a range of offers throughout the partnering process, which in itself was conducted through a macro environment that was shifting across the E&P industry. These dynamics included the geopolitical landscape, commodity prices, market-wide price increases, and a volatile stock market. And each of the offers we received differed in approach and in investment timeframes.
What we as Chariot needed to do was to find a partner that was aligned with our core vision, and one that we felt had the best chance of commercializing this project in the most efficient manner. This is why we're very glad and proud to have chosen Energean. Energean is a FTSE 250 company with a proven track record of delivering offshore gas projects. Karish, one of their flagship assets, is a standout example of this. This was brought on stream in October 2022 and has a full production capacity of 800 million cubic feet a day. They also have a great track record with drilling success. Their expertise will be critical in taking this project through construction into production, and we have complementary skill sets with our exploration expertise and knowledge of working in Morocco.
Importantly, Energean are aligned with us on our development plans for Anchois. We are both focused on getting the project to first gas, and they also see material upside potential that this project and the wider Lixus and Rissana acreage offers. Energean and Chariot have one common goal: to deliver the development of Anchois in a safe, cost-efficient, and expedited manner, and with this agreement, we have secured an experienced, proactive, and committed partner. I'm now going to hand over to Julian, who will run through the transaction summary.
Thank you, Adonis. So we can turn to the next slide.
... So this deal provides funding for both Chariot and the project through upfront consideration, deferred consideration, potentially a full carry to first gas, with further significant upsides, including through a royalty, while retaining a material stake in a very economic project. A project which, after the next well, could have even more impressive returns. To go through the deal details, Energean will acquire 45% and 37.5% interest in the Lixus and Rissana licenses, respectively, and take operatorship of both licenses. Chariot will retain 30% and 37.5% interest in Lixus and Rissana licenses, respectively, with ONHYM maintaining a 25% stake in each license.
Chariot will receive $10 million upfront on completion, $15 million payable on final investment decision, an $85 million gross carry, including all Lixus costs, up to final investment decision, including the Anchois well and a gas flow test, and planned Rissana seismic acquisition costs, separately capped at $7 million. Following completion of the Anchois well, Energean will have the right to acquire a further 10% of Chariot's equity in the Lixus license for an $850 million gross development carry to first gas, a $50 million convertible loan note, or 3 million Energean shares at Chariot's option at FID. It's worth noting that the shares come with a not insignificant dividend stream, as well as a 7% royalty payment on Energean's gas production revenues in excess of a base hurdle on the realized gas price.
Now, Energean's carry of Chariot's cost is non-recourse, has a coupon of 7% over the one-year secured overnight financing rate, and is repayable from 50% of Chariot's future net sales revenues from the Lixus license. And this is really important because this means we get significant free cash flow from first gas that we can look to potentially return to our shareholders. Completion of the transaction is subject only to standard Moroccan regulatory approvals, and the announcement that went out this morning, you can see the levels of support, both from the ministry and ONHYM, by their quotes in that announcement. And while we drill this next well, we plan for this next well, the intention is to work closely with Energean to co-develop this project, finalizing project finance.
So whether Energean exercise their further option or not, we could potentially get to first gas without any further material equity raise. I'll now hand over to Duncan Wallace.
Thanks, Jules. So on, on slide seven, this shows you what the impact of the new joint venture partnership, it will have on our Moroccan project. And it starts, obviously, with the 2024 drilling and testing campaign, which represents a significant investment and commitment from Energean to the project. Now, this program will target the Anchois East well location, which really is the Swiss Army knife of wells, with a multiple set of objectives from production through appraisal and exploration, along with, importantly, a gas flow test. Now, this well is a future producer well for the, for the development. So in effect, we're accelerating part of the development work now, which will also have the benefit of reducing the remaining development CapEx to be financed post-FID.
Importantly, by drilling this well, early and conducting a flow test, we can optimize, various elements of the development, including the completion design of this well and other producer wells, which is very important in, stacked gas reservoirs. Now, that will reduce development uncertainty and risk and could potentially decrease the cost for the development in the long run. The well is also an appraisal well of the new sands that Chariot discovered in Anchois-2, shown in orange on the figure on the left. This is to demonstrate the lateral extent of those reservoirs, which were, you know, obviously found for the first time in that well. Now, this extra data point is expected to significantly increase the bankable P90 resources by providing, a greater understanding of those, gas sands.
The final two objectives of the well are perhaps the most exciting, and these are the drilling of two significant undrilled gas sands, in effect, throwing 2 exploration wells also into the mix. The first of these is the Anchois Footwall prospect, and that is to be drilled via an initial pilot hole, shown in purple on the diagram. The second is through the deepening of the main wellbore into the Anchois North Flank target. Both of these are within the O Sands reservoir that was also found by Chariot in Anchois-2, thick and good quality, though it wasn't a primary objective in that well.
Together, these prospects have an additional 383 Bcf of resource potential with high chances of success, and if successful, could unlock a one TCF development project, a 62% increase over the current 2C resources, and with an important read-through to other tieback opportunities at Anchois and in the surrounding area. Now, drilling planning for this campaign is significantly advanced, with an EIA in place, long lead items nearly ready for delivery, and rig contract negotiations at an advanced stage. The Chariot and Energean drilling teams both have track records of best-in-basin drilling performance, and they're already working collaboratively on preparations for this program. Moving on to Slide eight, we can see how the increased resource base might impact upon the Anchois development scheme.
Firstly, a reminder that the project is already very mature through the work that Chariot has done, with FEED and ESIA having been completed and awarded, and the advanced status of gas sales, negotiations, and financing plans. The important thing here is that any expanded development will utilize exactly the same development scheme, so all of this foundation work is directly applicable to any expanded project. Now, to facilitate an expansion from the current 105 million cubic feet a day to, you know, higher rates, potentially of an additional 50% plus, the changes to the scheme will largely require resizing of the offshore flow line, connecting the subsea wells to the Central Processing Facility, and an expansion of that CPF itself.
Now, those cost increases are relatively modest and certainly not a straight line versus production rate or resource volume, so we anticipate a significant reduction in the CapEx per unit volume resource in any expanded development. Obviously, with an impact upon the economics of the project. Now, in addition to this initial development, success at those additional reservoirs at Anchois East will have important read-through to the other undrilled tieback targets in the Anchois area. Some of these are shown on the figure in yellow. Now, the Anchois East drilling success would increase the chance of success in these prospects from a geological perspective, but also an expanded development would create room within the facilities to facilitate the early commercialization of any additional resource in those tiebacks. So the value from the total near-field resources of over two TCF becomes really tangible.
Moving to Slide nine, this is to show you two aspects of our Moroccan project, which we think have really made the difference in attracting such strong industry interest in the process. These have been the gas market access and also the exploration upsides that we've matured within our offshore portfolio. Firstly, in terms of the gas sales, Chariot and Energean are entirely aligned on the Moroccan domestic market in terms of its potential and also our commitment to meet local demand first. Morocco currently imports all of its 100 million cubic feet a day requirement from Spain via the GME pipeline, but this demand is set to grow significantly. We believe that a domestic gas development can help to stimulate that growth, create energy security, and transition Morocco away from its reliance on coal for baseload power.
GSA negotiations with local off-takers are anticipated to accelerate under this new joint venture partnership. Now, regarding the exploration upsides, we have over four TCF of gas identified across Anchois and the other high-graded prospects within the same play, and we have the advantage of significant infrastructure right on our doorstep to access the European market, to deliver any gas we find in surplus to domestic requirements, which, you know, obviously unlocks that exploration potential. This map shows the route to both the domestic power and European markets via the GME, which will be the priority route for the offshore gas commercialization. This map also shows the location of Chariot's Loukos block, immediately onshore from Lixus and Anchois.
Now, this area falls outside of the partnership deal announced today, and the route for market here is either via piped gas or virtual pipeline gas, predominantly for industrial off-takers in country. So on Slide 10, I'm stepping away from the offshore transaction for a slide to give you an update on Chariot's plans and touch on the potential of this Loukos onshore license. Now, this is a new license. It was announced in the summer, but we've had access to the data for some time, and we've already developed a portfolio of low-risk, high-graded prospects on existing 3D seismic data. This has given us the opportunity to accelerate our drilling plans, and we're on track for a campaign to commence early in the new year.
Though the resource figures you see may be more modest than those of the offshore, the lower costs, the shortened development cycle, and attractive gas prices means that this project still has materiality. This value is enhanced by the geological similarities between certain prospects, and the right-hand side shows one of our priority prospects to be drilled, called Gofret. Now, this prospect is low risk. The reservoir and the gas is already de-risked by the LNB-1 well, drilled down dip of the Gofret prospect. Drilling costs are low, anticipated to be around $3 million for a well. So with success at that prospect, we see unlocking 26 Bcf of gas in the Gofret area, comprising four prospects, which would be materially de-risked by that first well.
With historic gas prices to industry of $11-$12, that could result in gross revenues of around $300 million, supporting a very attractive project, especially with the low development costs and such good fiscal terms in country and the 10-year tax holiday. With that, I shall hand back to Adonis to summarize the attractive outlook for Chariot's gas business following today's announcement.
Thank you, Duncan, and moving on to the next slide, and in conclusion, looking forward, we remain fully focused on moving towards first gas. At Anchois, the plan is to drill this well as quickly as possible. As mentioned, well planning is underway, with rig negotiations well advanced, and the partnership is looking to test the upside, upscale the development, and to reach an FID. Other key elements, such as gas sales agreements, which are being progressed concurrently to partnering, will be finalized within this timeframe. Seismic planning, targeting that material upside we see in Rissana, is also advanced, and an acquisition program will be instigated next year. As we have outlined, we will be drilling on the Loukos license in early 2024, and we look forward to providing updates on our progress with this. Loukos is a near-term production opportunity with access to an immediate industrial market.
Importantly, as well as getting the Anchois project financed and developed, this agreement enables us to continue with what we do best: create value through exploration, and we will renew our focus on this. I would like to take this opportunity to thank the Moroccan authorities for their continued and unwavering support of Chariot and all of the endeavors we undertake in Morocco. I'd also like to thank all the staff at Chariot for making this happen, and the Energean team for the collaborative and fruitful discussions we have had to get to this point. Finally, and fundamentally, we are focused on unlocking value for shareholders in delivering this basin-scale opportunity alongside our partners, Energean, and of course, ONHYM. We look forward to the future.
This is no longer a dream, this is a reality, and we are excited about the drilling activities that we have for our Moroccan assets over the coming months. Thank you very much. We'll now open the floor for questions and answers.
Thank you, Adonis. Does the board have any comment on a muted reaction to this morning's fantastic news?
Well, we think that the deal we've done is an excellent deal, a value-creating deal for shareholders, and eventually, shareholders will realize the value that's been created over time. I cannot comment on the share price this morning and the volume of shares sold or bought, but we believe that there's huge value in what we've achieved thus far. And this deal today brings forward the reality of developing the Anchois development, and that can only be a good thing. The project is real, and we're moving towards, as Julian said earlier on, cash flows both onshore and offshore. So we think it's a great value-creative deal, and I think that will eventually be reflected in the share price.
What was the differential that Energean brought to the table that saw them selected as the preferred partner?
Well, I think there's a lot of, lot of commonality between the, the two companies. We're highly entrepreneurial. We both get after it, make quick decisions with care, with due care. But the big thing about Energean is, is they've got the experience. They've just built a, a bigger, but very similar project in the Eastern Mediterranean. As we said, a capacity of up to 800 million cubic feet at Karish, and they've done it, and so they bring that experience with them. And I think that, is something that we can learn from them, and also it's a complementary skill set with what we bring in terms of our exploration expertise.
What happens if Energean doesn't exercise its options?
Well, it's not a binary outcome. I mean, the reason we are working together over here is to drill a well, and drilling that well, as Duncan said, has many purposes. It's not only a future development well and an appraisal well, but it's an explorational one, and so there's huge upside that we can see. But it doesn't mean that you don't have a project on our base case of 105 million cubic feet, which is what we planned for originally. There's a viable project, we believe, there anyway. But I think this partnership and why we like it so much is looking possibly to upscale and to look for, is there possibility to really make the project bigger?
And just to add to that, as I said earlier, while we planned this well, and we drilled this well, we're gonna work with Energean to co-develop this project. We're gonna look to finalize our project finance. So whether Energean exercise their option or no, or we have a solution to fund this project with, but avoiding any potential material equity raise. And that's really important for us, and that's one of the core reasons we've done this partnering.
Will gas from Lixus require a processing facility?
So, on the Loukos license area, there have been two successful gas discoveries drilled previously. So we do have some insights into the gas compositions at Loukos already. It's a good quality gas without important impurities and has very similar characteristics, actually, to the offshore gas at Anchois. It depends upon the final development scheme, whether it's a virtual pipeline or fixed pipeline, but the gas treatment required is entirely normal and is not unduly expensive. So we expect minimal treatment, and gas to industry doesn't require such high specification of gas compositions as deliveries through the GME, for example, as required at the Anchois project. So it's expected to be light.
Thank you. Are you able to give more specific timelines for the completion date of the deal, drilling of Anchois East, when FID might occur, and a date for first gas from Anchois?
...Well, as Duncan said, rig negotiations are well underway, and so we're hoping to drill the well as soon as possible, and certainly within 2024. There's no doubt about that. FID will follow shortly after that, and as we've said previously, and depending on how we look at the project thereafter, but also with Energean's experience, once we've reached FID, we always historically said it would take two years to build out the project. I think one of the great things about having a partner like Energean is they could possibly change those timelines and speed things up. So there's a lot of activity in 2024, drilling, but... And I'll, Jules, you want to add something?
Yeah, just, just to add, I mean, one of, one of the specific points was around when the deal is gonna complete as well. As I said before, it's subject to only standard Moroccan regulatory approvals. And as I said before, you can see the level of support within Morocco, with the quotes from the minister and from the head of oil. So we don't have any concerns about that.
When is onshore drilling planned to commence? Do we have a rig contract signed, and are we fully funded for these wells?
So, as you'll be aware, we did an equity fundraise earlier this year, specifically to raise the proceeds for drilling on Loukos. So, we're funded for that initial campaign. The final timing of that campaign is yet to be decided, but, you know, again, rig negotiations and finalizing the timing of drilling slots is being worked on at the moment. So when we're able to announce further details, we will, but it will be early in the new year.
My understanding is that initial revenues will come from local market as opposed to the international market. How would you describe the value and risk parameters attached to this?
Well, I think they... The revenues for Anchois will come from both. So they will come from local markets and potentially international markets as well. And what makes this development very unusual is that you have a point-to-point style gas sales agreement, but we also have access to international spot market as well. So it's a very unusual type of development, which is why this project has attracted so many potential partners and why we've concluded the deal with Energean.
I think just, just to add to that, and as Duncan has said, I mean, the Moroccan market is a growing market, and it's a, as industry grows, the demand for energy will grow. So our priority will always be to supply Morocco its needs first, both from onshore and offshore.
When can investors expect to hear an update on the other two business pillars?
In the beginning of the new year, we'd be glad to update the shareholders. I think today is focused on this deal, and we want to keep the attention on this deal. I think it's a milestone. It's a seminal point in Chariot's history, and I think we want to focus on this today and have a dedicated session for the other two pillars early in the new year. Which, by the way, are progressing very, very well, I might add.
In the past, you worked closely with the Subsea Integration Alliance for the development of Anchois, as reflected in previous presentations. Does the partnership with Energean change your commitment in working with them?
Well, as we said, Energean are now gonna be the operators. They're obviously very familiar with SIA. And the work we've done with SIA is very valuable, and the groups together are gonna work together to see how best we can develop this project forward. But we're building on all of the work that we have achieved with SIA, and it's very relevant and very valuable.
If drilling an onshore well costs $3 million within the Loukos... Sorry, within the Loukos license, how much would it cost to develop each well to production?
So, you know, obviously, with drilling experience, you are able to find efficiencies, especially when you know the targets that you're looking to develop. You can adapt your well design and your completions to, you know, for any producer wells. So, you know, a $3 million well cost, I think, is a suitable number for the moment, but we're already looking at options to, you know, make any future drilling as efficient as possible. And obviously, with success, it opens up with the development, more wells, more experience, and we go along that learning curve and get more and more efficient as we go. So $3 million, I think, is an appropriate number to use at the moment for exploration and development.
Will Chariot consider selling a further share in Anchois?
Let's drill the well first, get the results. We're not gonna speculate about what we will do in the future. We think we've got a valuable asset, and obviously, trying to keep as much of it as possible for the, for the Chariot shareholder is important.
Did Chariot receive any indicative offers for the whole company?
Yes, but, we felt that, there was more value, staying in the asset and developing it ourselves with partners like Energean.
What does the company believe the NPV10 of Chariot's Anchois share is, post the Energean transaction?
I think the analyst notes are out this morning. You can read the analyst notes out, and they'll give you what the NPV10 is. We think the company is significantly undervalued where it sits today, just on the gas business, irrelevant of the other two pillars.
It's worth noting that the target price, the four notes that have come out this morning, are all a multiple of Chariot's current share price.
Based on the NPV calculations.
What is the potential upside planned for the onshore development? Is this now over 105 million scfs a day?
... Yeah, I mean, the 105 million cubic feet a day target or plateau was set by the resources that we found in Anchois-2. And as Chariot was looking to leverage the project as much as possible through external finance, that plateau production and that target rate is set by a combination of factors. First of all, the resource. Now, importantly, for financing, that's the P90 or 1C resource number, which is obviously much smaller than the best estimate 2C number. You need to look at an appropriate debt tenure and to ensure that your plateau production more than covers the tenure of the debt, but also that your committed offtake, that also underpins financing, is over a suitable duration. So once you put all of those factors together, it has the effect of constraining where your plateau production can go.
So what we see now with the drilling of an additional well is an expectation that the P90 resource on the existing reservoirs will naturally increase as we put more data points into the project and we reduce the uncertainty. With any additional gas resources that we find from new sands, they'll also have a big impact upon the resources for the development. And I think importantly, things like, you know, the new partner coming in, the flow test, all the confidence in the project, and also potentially sort of new financing routes available through the joint venture, will also mean that we can change those factors that restrict the plateau production.
So I think, you know, as I indicated in the presentation, you know, a material uplift from 105 million cubic feet a day could be possible, and a significant increase, you know, if we find additional gas in those deeper reservoirs.
Given the nature of today's deal, are there any regrets for not completing a flow test at the time of the initial Anchois campaign?
So, I think that flow testing is a question that we've been asked a lot in the lead-up to Anchois-2 and actually post-drilling the well also. So if we can move to an appendix slide, slide 15, if we can show that on screen, perhaps I can use this to summarize really the view for sort of well testing. Now, firstly, to confirm, there has not been a surface production flow test or DST on the field to date. When planning for the Anchois-2 well, after having analyzed the original Anchois-1 discovery data, we had very high confidence in the reservoir quality and the productivity potential of the A and B gas sands that were discovered in the original Anchois-1 well, that you can see depicted on the slide there.
So in preparation for Anchois-2, we didn't consider that a flow test was required technically because of that, you know, high confidence in the reservoir from our analysis at the time, nor as we approached the drilling of Anchois-2, did we find that funding an expensive flow test was really an appropriate use of Chariot and Chariot shareholders' funds. So when we approached Anchois-2, our strategy there was to acquire as much downhole reservoir and reservoir mobility data through wireline logging as we could, and really importantly, to focus on acquiring gas samples to ensure that we were confident in the high quality of the gas at Anchois.
Now, that work confirmed both the high-quality reservoir, the high mobilities, and also that we had a very dry gas without any important impurities, and importantly, that gas quality and composition was entirely consistent throughout all of the reservoir sands that we found. Now, Anchois-2 was an important gas discovery, and you can see that depicted there. We found a significant thickness of new gas sands in deeper reservoirs, such as the C and M Sands. Again, we've got confidence in the data that we acquired in Anchois-2, that those sands will produce at high rates, and our simulations for the initial development plan from the base case have initial productivities of 100-200 million cubic feet a day in those initial producer wells. So we have a high confidence. We can look at analogs to support this.
For example, you can see one field from offshore Spain and an example from onshore Morocco, shown on the page. Now, from similar reservoir thicknesses compared against the Anchois logs, you can see that these wells tested at 40 million cubic feet a day from an 8-meter perforation interval and 15 million cubic feet a day from a 5-meter perforation interval, respectively. So that demonstrates those productivities, and for comparison, at Anchois, we have approximately 150 meters of gas sand, so a lot more than was tested in those offset wells. So why test, you know, now, if we have such high confidence in the productivity? Well, it is a key objective of the 2024 operations.
And for us, the difference here was the success in Anchois-2 in discovering a multiple set of stacked gas sands. So to develop these and to develop them efficiently and keep the well count down, we need to look at using multi-zone completions in our producer wells. This is there to optimize the design of those completions, and having accurate data will allow us to mature those final well designs, reduce uncertainties and risks, and optimize the costs of those developments and completions. Now, naturally, having empirical well test data will also provide other benefits in terms of confidence in the project with a, you know, a wide range of stakeholders in the project.
... Could you please flesh out and provide some detail on the $850 million carry amount? Where does this number come from, and what work does it cover?
So it covers all costs up to final investment decision. Sorry, the $850 million. The $850 million is a gross development carry up to first gas. It includes the $85 million gross carry up to FID.
What size of potential gas volumes are identified in the Sub-Nappe prospect below Anchois, and will this be drilled as part of the Anchois-3 well?
As an explorer, I love the question, so thanks. On slide 9, if we just go back to that, it shows the offshore portfolio. Now, the Sub-Nappe play is a play that we see in deeper Mesozoic reservoirs, probably the Cretaceous or Jurassic. With the reprocessed seismic data we did previously, we started to see very large structures at depth below Anchois, but also in other areas on the Lixus 3D. We know that the Anchois gas is thermogenic, and it must be coming from deeply buried source rocks, so it must be passing through those potential structures in the Sub-Nappe. Now, in the Sub-Nappe, our internal resource estimates on our high-graded targets in the Sub-Nappe are approaching five TCF. Now, this is a much higher risk, higher reward play, sits deeper, and, you know, obviously, yet to be drilled.
There is one target which sits directly beneath Anchois, but we do not plan to do that in this drilling campaign. This is fully focused on the commercialization of the Anchois field and increases the near-term resource base. But obviously, along with our new partners, we will look at all of the exploration prospectivity across the offshore licenses and develop a plan to see how we can mature what we think is a basin-scale opportunity.
Do we still expect to use debt for the Anchois development, or is the plan that Energean will cover all CapEx costs? And what impact does this have with relation to the company's relationship with SocGen?
Just to be clear, as Julian mentioned earlier on, should Energean exercise the option, there's a full carry to first gas on a CapEx of $850 million. Post that, if there's more funding required, then each party will need to bring additional funding to the table. However, we feel that the $850 million gross CapEx is the right number to bring this project into production.
And just to add to that, we are working very closely with SocGen, with almost daily calls, and we will continue working very closely with SocGen going forward. We've continued to co-develop this project with Energean and look at project finance so that we have that optionality there.
I think it's also worth stressing, as we've said before, we've done various roadshow trips through Morocco itself, and the financial institutions in Morocco, the local banks, are very supportive of this project and are very keen to participate, should we need them in the future for financing this project, for both Energean and for Chariot.
Does the company still plan on undertaking a gas/investor roadshow after this announcement?
I think we're coming towards the end of the year. We definitely will be presenting the business in the beginning of the new year, not just the gas business, but, you know, the new developments that have taken place in the second and third pillar, which are not insignificant. So we'll be updating shareholders on a broader roadshow, definitely in the Q1 of next year.
Does Chariot have initial forecasts for what revenues from Anchois might look like following the partnership?
We can't put out specific forecasts at this moment, but clearly, what we're looking to do here with the partner, with Energean, is drill this well, get first gas as quickly as possible, and potentially scale up this development, which will be, you know, a significant plus for Chariot and for Chariot shareholders.
Where are we with the gas sales agreements? Is there a timeline to getting them signed?
As we said, we're well advanced with the gas sales agreements, and now that we have brought in a partner as well, we will jointly be working on this together. And we expect to conclude that, obviously long before FID, and as we said earlier on, it should definitely be within the coming months that we can conclude something over there. But I think our focus has been on bringing in a partner as well, and parallel to that, continue the gas sales discussions.
I think just to add to that, what's also been one of the reasons why we chose Energean is we're aligned across all the different layers of the project, including with gas sales. So as Adonis previously said, it's Morocco first with the gas, and then we look to any surplus for export.
And I just think, just adding to that point, just so people get context of Morocco, I mean, you know, the gas sales market and the local market in Morocco is pegged to international benchmarks, both and for LPG as well. Potential for industrial gas locally is huge because you've got international players like the car manufacturers and the aerospace industry there. And so the local market as well doesn't bear high risks, and I think it's worth it for shareholders to remember that the petroleum and energy price industry in Morocco was deregulated in the 1990s. So it's a free market, right? Starts to resemble international pricing as well.
Please, could you talk about Anchois South Flank? I understand that a success in either Footwall or North Flank will de-risk this bit. Would this mean that another 370 BCF would become contingent and be produced through the first producer well of the development?
... Thanks. So if we put slide 14 of the appendix onto the screen. This shows a little bit more technical detail around the Anchois East well, and its relation to the gas sands that were found in the offset well. So on the left-hand side, you can see the gross intervals of sand in the A and the B Sands, the key initial sands for the development, and the C and M Sands discovered in Anchois-2. Each of those gross packages, we've removed a lot of the intervening shales, but, you know, two times 150 meters of gross sand-bearing packages across those two units, which are depicted in green and blue on the seismic display on the right.
At the bottom of Anchois-2, you can see on the lower left of the page, we found a gross 75-meter interval in the O Sands reservoirs, with around 43 meters of net reservoir, with good porosities, with some gas at the top and water-bearing towards the base. Now, that was not a primary objective in Anchois-2, but a really important control point to show the continued potential of additional gas sands underneath the discovered gas within Anchois. So those O Sands targets are really what we're looking at, depicted on the seismic section on the right. So on Anchois East, we will drill the first well as a pilot hole to the right into the Anchois Footwall target, depicted as number 4 in red, 170 Bcf of gas.
We will then plug back and then drill the main well through the, you know, the main development reservoirs, the appraisal of the C and M Sands, and then down into the Anchois North Flank targets with 213 Bcf of gas. So that's the 383 of prospective resources to be tested by this well. Well, you can also see directly beneath the Anchois-1 original discovery well, are the 372 Bcf of estimated gas resources of the Anchois South Flank prospect. I think you can get a feel for the geophysical similarities between the footwall, the north flank, and the south flank target. So there'll be a really strong read-through via calibration of the seismic data, further understanding those deep reservoirs to de-risk that south flank prospect, which is a very large opportunity at 372 Bcf.
Now, importantly, that can be explored and tested for very low incremental cost from a planned development producer well located close to the Anchois-1, original location. So that would be a producer well in the A and the B sands that you can see, but then we would simply deepen that well down into the south flank prospect testing, that exploration objective at low cost. Clearly, success in Anchois East, in those O sand targets, will make that south flank target even more attractive and exciting.
What is the hurdle rate in the deal? Sorry, the hurdle as in the royalties.
We can't put that price out because of confidentiality reasons. However, what that royalty provides is if gas prices go high again, a significant revenue stream to Chariot.
Will directors be buying additional shares in the company, and is the company still actively looking to attract institutional investors onto the register?
Yes, we always look to attract institutional investors onto our register, and I'm glad to say in the last two raises we did, we managed to bring new institutional shareholders in. And provided the directors are not inside and can trade, I suspect many will add to their position.
The LMB-1 well was reported to have encountered 300 meters of reservoir with elevated gas in a deeper horizon. Will this reservoir be drilled by Chariot?
Yeah. So that's back on slide 10, if that wants to be put on screen. Yeah, so the original target of that well was a much deeper reservoir unit, which reported several hundred meters of thermogenic gas shows. Now, this reservoir we show on the slide here, and what is the target for Gofret, was a shallow reservoir drilled on the way down. So it's a shallower play. The age of this sand and the reservoir system we see as being connected to the Anchois sands offshore. So we've really leveraged from our success and our knowledge of the offshore to understand the potential of this shallow play in the onshore area, which we think was overlooked in preference for looking for some of those large-scale, deeper resources.
So, so yeah, but this did have very strong gas shows, as you can see, up to 57% on mud gas, and we interpret high resistivities and a potential gas water contact. So we see very strong evidence for gas, good quality reservoir, directly down dip from the Gofret prospect.
Can the company elaborate on what the $50 million term loan actually means for Energean, which is a constituent of the partnering agreement?
Well, at the stage of reaching FID, Chariot has an option to either take 3 million Energean shares, ordinary shares, or has the option to take a $50 million convertible loan note. And that's what it is. In effect, a $50 million note owing to Chariot. It is very similar to other notes that have been issued in the market, and in particular, I think something similar to this has been done by Energean with one of the institutions in the past. And as part of the consideration for exercising the option to acquire an additional 10% of Anchois. Jules, you wanna add to that?
Yeah, so just, just in case, it's a five-year convertible loan note. The strike price is GBP 20. It's adjusted down for dividends. As Adonis said, there is, it is an option of either the convertible loan note or 3 million Energean shares. We'll make that decision at FID, depending on which option we think is the best. It's worth noting, as I previously said, that the shares obviously come with a dividend flow, which is, you know, could be a key plus, for a business like Chariot.
Exactly how much of the cash flow spent and accrued on our Moroccan offshore licenses will be reimbursed back to us?
So we are getting $10 million on completion of this transaction, a further $15 million on final investment decision, and then the further consideration, which is the shares, or the convertible loan note, as, as we mentioned, plus the 7% royalty.
And the carry, of course.
Plus the carry, yeah.
And final question: With today's announcement, can investors expect more news flow in the future?
When we have news that we feel is material to the shareholders, we'll always announce it, and we have a pretty active schedule for 2024. I know there's been some frustration from shareholders. We've been a bit quiet in the last few months. I think our focus has been on delivering a partner in a dynamic and changing environment. We've done that, and we will engage regularly with our shareholders.
Thank you. I'll now hand back to Adonis for closing remarks.
Well, thank you all for attending this presentation. We're very excited about what we've achieved today. We now feel that there's huge embedded value in Chariot, and in the, particularly in the gas pillar of the business. Today's announcement for us is a serious de-risking of the Anchois field, and it leads us definitively towards a development of that field. We believe we've chosen the right partner to assist us in getting there. And I think when you combine this with Loukos, and then when we update you on the renewable energy business and the green hydrogen business, and I've just returned from COP 28, which was very exciting for Chariot.
I realized how relevant our business is in this transitional energy world, and how, maybe through a bit of luck, we've landed ourselves in the perfect transitional energy space, and we're playing in all the arenas that are required to transform this energy market moving forward into the 21st century. It's a very exciting business, and as we have a lot of activity on the gas side, expect the same on the renewable side and the same on the hydrogen side. We're not stopping. We're pushing all pillars forward at pace. Thank you very much. We look forward to meeting you all in the future again.