SMALL CAP IDEA: Baron Oil looks to go big with the Chuditch gas field

Baron Oilwhich will be rebranded as Sunda Energy later this month, is gaining momentum behind the scenes as Andy Butler continues to make his mark on the junior energy company as it prepares to seize an exciting opportunity.

According to the 2024 plan, the company could achieve a major value catalyst by the end of the year.

Baron is currently carrying out preparatory work: completing site investigations, contracting drilling rigs and licensing the Chuditch gas discovery in East Timor.

Chuditch, first identified in 1998 by Shell, has the potential to become an important and valuable project, not least for the State of Timor-Leste, as the project promises to provide a new and important input to its economy are.

Its importance for the country is underlined by the state’s active participation in the project through its national energy company Timor Gap EP (TGEP).

Baron has a 60 percent stake in Chuditch, while TGEP owns the remaining 40 percent.

TGEP’s stake was increased earlier this year through an earn-up deal in February, acquiring a 15 percent “paying interest” on top of the original 25 percent carried stake. It will net the project about $7.5 million by 2024 — while Baron received $1 million in cash for back costs.

In March, not long after the TGEP deal, Butler was promoted to group CEO, taking over his previous role leading the business in Asia Pacific.

With the new financial support and with Butler at the helm, Baron is now laying the remaining foundation for an assessment program that aims not only to confirm the scale of opportunity at Chuditch, but also to provide insights that the company and Timor-Leste can use to develop and commercialize the field.

The key to unlocking the field has been using contemporary technology and analysis to better model the discovery.

“The problem in that area tends to be that due to very shallow geology and some complications in the seafloor, seismic imaging at depth has proven to be a major challenge in the past,” Butler explained to Proactive.

‘You can see (in the data) where the well was drilled by Shell when they discovered this field 25 years ago, but before you couldn’t really see the extent of the field, until the parts that go up from the well to the bottom . top of the field, it was just invisible in the data.

“In the past, you would really guess how big (the resource) was. And of course you can’t really invest on that basis.

‘So we have managed to use modern algorithms and seismic reprocessing, and a very complicated and intense process is to understand in detail the whole geology above the field.’

Baron’s approach ensures that the company can now properly portray the field for the first time. And the picture Baron sees is encouraging in terms of the positive aspects of the project.

According to Butler, the data indicates that the original Shell well was drilled “at the very edge” of the field and that the rest of the field could be much larger.

“It’s a long, elongated structure that was created by a fault,” he said of geology. ‘So it is more than twenty kilometers long.

“And the main site where we plan to drill will have about 500 feet of gas column, while the original well only had 100 feet.”

“We have what we originally thought was about 700 billion cubic feet of gas.”

“The work we’ve done has shown that in our middle scenario the resource for the discovery is about 1.2 trillion cubic feet of gas. So that’s an increase of more than 50 percent of the resources we thought were in place.”

Baron, with his desktop work to date, has taken Chuditch from a higher risk and largely undefined opportunity to a lower risk and investable opportunity that should be tested with the drill in a few months.

Importantly, it is not just the project that has made progress since Shell drilled in 1998.

The Asian gas market has developed considerably since then.

Regionally it is now a very robust market, and locally Chuditch is close to infrastructure meaning the project could potentially be delivered commercially without huge capital costs.

But first, the company’s focus will be on the assessment program. The next major item on Baron’s to-do list will be the signing of a drilling rig contract to secure the timeline for drilling – all the usual planning and permitting items will also need to be ticked off.

“We’re also very much looking ahead to what will happen next, and how quickly we can move forward with future activities,” Butler added.

‘We are moving forward with accelerated development thinking.’

Clearly, 2024 and early 2025 promises to be an exciting time for Baron (currently worth £18m) and its shareholders.

Investors will understandably be watching closely as the project progresses.

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