8-K: Tamboran Resources Achieves Drilling Milestone in Beetaloo Basin, Eyes 2025 Flow Rates

Tamboran Resources has successfully drilled the longest horizontal well in the Beetaloo Basin to date and is on track to deliver IP30 flow rates in early 2025.

Summary

• Tamboran Resources completed the drilling of the SS-2H well, which included a ~10,000 foot horizontal section, the longest in the Beetaloo Basin to date.
• A downhole mechanical issue required the SS-2H well to be sidetracked, resulting in the SS-2H ST1 well, which has achieved record drilling rates.
• The company is progressing towards delivering IP30 flow rates from the SS-2H ST1 and SS-3H wells in the first quarter of 2025.
• Liberty Energy's frac fleet has been mobilized to the site for a 120-stage stimulation campaign across the SS-2H ST1 and SS-3H wells.
• Tamboran is developing a local sand mine in the Beetaloo Basin to reduce completion costs, with a target of less than US$0.10/lb.
• The company's cash balance is US$81.6 million as of September 30, 2024, which includes US$7.6 million from the sale of a US drilling rig.
• Tamboran is targeting first gas from the proposed Shenandoah South Pilot Project in the first half of 2026, with a production target of ~40 MMcf/d gross (~19 MMcf/d net).

Sentiment

Score: 7

Explanation: The document is generally positive, highlighting operational achievements and progress towards key milestones. However, there are some risks and challenges mentioned, such as the need for additional capital and the potential for operational issues. The overall sentiment is cautiously optimistic.

Positives

• The successful drilling of the longest horizontal well in the Beetaloo Basin demonstrates Tamboran's operational capabilities.
• The rapid drilling rates achieved with the SS-2H ST1 well show significant improvements in efficiency.
• The mobilization of Liberty Energy's frac fleet indicates a commitment to large-scale development.
• The development of a local sand mine has the potential to significantly reduce completion costs.
• The company is fully funded to deliver IP30 flow rates in 1Q 2025.
• The company is progressing towards first gas production in 1H 2026.

Negatives

• A downhole mechanical issue required the SS-2H well to be sidetracked, resulting in additional costs of approximately US$5 million.
• The company is still in the early stages of development with no material revenue expected until 2026.
• The company is reliant on securing additional pipeline capacity to deliver natural gas to the Australian East Coast and select Asian markets.
• The company has a history of recurring operational losses, negative cash flows, and cumulative net losses.

Risks

• The company's early stage of development and limited operating history pose risks.
• The company requires substantial additional capital, which may not be raised on acceptable terms.
• The company's strategy is contingent on constructing additional pipeline capacity.
• There is a risk that drilling may not yield natural gas in commercial quantities or quality.
• The company faces challenges associated with importing U.S. practices and technology to the Northern Territory.
• The company is susceptible to region-specific risks due to the concentration of all assets and operations in the Beetaloo.
• The company faces potential legal disputes, operational disruptions, and reputational damage due to native title and heritage issues.
• The company is required to produce natural gas on a Scope 1 net zero basis, which may increase production costs.

Future Outlook

Tamboran is focused on delivering IP30 flow rates in 1Q 2025 and achieving first gas production from the Shenandoah South Pilot Project in 1H 2026. The company is also working on securing final stakeholder and regulatory approvals for the pilot project and progressing the development of a local sand mine.

Management Comments

• The first quarter of FY25 was another busy period for Tamboran as we commenced our 2024 Beetaloo drilling operations.
• The SS-2H ST1 well has achieved the fastest drilling rates from the bottom of the Moroak Sandstone (~7,500 feet below surface) to date.
• Importantly, we remain on track to deliver IP30 flow rates during 1Q 2025, which is in line with guidance.
• The higher costs associated with drilling the SS-2H sidetrack well (~US$5 million) has been more than offset by the cash received for selling our US drilling rig (~US$8.5 million, pre-costs) meaning we are funded to deliver flow results from the SS-2H ST1 and SS-3H wells.

Industry Context

This announcement highlights Tamboran's progress in the Beetaloo Basin, a region with significant potential for natural gas production. The company's focus on efficiency and cost reduction aligns with industry trends, and the use of advanced drilling and completion technologies is consistent with best practices in the sector. The development of a local sand mine is a strategic move to reduce reliance on external suppliers and lower costs.

Comparison to Industry Standards

• The drilling of a ~10,000 foot horizontal section is comparable to leading shale operators in the US, demonstrating Tamboran's ability to apply advanced techniques.
• The use of Liberty Energy's frac fleet, a major US service provider, indicates a commitment to high-quality completion operations.
• The target of less than US$0.10/lb for sand costs is competitive with the lowest cost producers in the US shale basins.
• The company's focus on reducing drilling days and improving efficiency is in line with industry best practices for cost optimization.

Stakeholder Impact

• Shareholders can expect updates on drilling progress and flow test results.
• Employees are involved in the ongoing drilling and development activities.
• Customers can anticipate future natural gas supply from the Beetaloo Basin.
• Suppliers are involved in providing equipment and services for the drilling and completion operations.
• Creditors are impacted by the company's financial performance and ability to secure funding.

Next Steps

• Complete drilling of the SS-2H ST1 and SS-3H wells.
• Commence stimulation activities of the SS-2H ST1 and SS-3H wells.
• Announce IP30 flow test results from SS-2H ST1 and SS-3H wells in 1Q 2025.
• Secure final stakeholder and regulatory approvals for the proposed Shenandoah South Pilot Project.
• Commence construction of facility and pipeline infrastructure in 2H 2025.
• Target first gas from the proposed Shenandoah South Pilot Project in 1H 2026.

Key Dates

Keywords

Beetaloo Basin, Natural Gas, Drilling, Horizontal Well, Stimulation, Frac Fleet, IP30 Flow Rates, Sand Mine, Pilot Project, Tamboran Resources