The Company is pleased to announce its interim results for the six months ended 31 December 2023. The report is available on the Company's website: tlouenergy.com/reports.
The Company has made excellent progress over recent months and remains on track to get gas fired power into the grid in Botswana later this year.
Highlights:
- Lesedi production wells continue to flare gas as dewatering progresses
- The 100km 66kV transmission line, connecting Tlou's Lesedi project directly to both Botswana's power grid and the Southern African Power Pool is complete
- Connection to Serowe substation achieved, Lesedi no longer isolated from primary Botswana electricity market
- Lesedi substation which will connect Tlou's power generators to the transmission line is approximately 38% complete
- Generation and sale of power remains on track for later this year
Tlou's Managing Director, Mr Tony Gilby commented, "The Company has made excellent progress over recent months and we are getting very close to first revenue. Having direct access to the power grid opens up our gas field to a huge market. It has taken hard work and significant investment over many years to get to this point and we look forward to delivering power and earning first revenue for the Company as soon as possible."
Lesedi Power Project
Tlou is developing a 10MW power generation facility at its Lesedi operations base in central Botswana. The Company plans to sell electricity into the power grid later this year and then expand rapidly.
Tlou is flowing gas and has a fully functional operations base about 100km west of Serowe. The operations base is located on Tlou's own 4,000-hectare property. The recently constructed 100km 66kV power line allows direct access into the regional power grid.
Key remaining items to completed prior to first power sales include finishing the substation at the Lesedi site, installation of generators, completing the short gas gathering line (from the gas wells to the generators), energising the power line and sale of first electricity. Minor finishing works on the transmission line and the addition of switchgear at Serowe will also be completed prior to first power.
The initial target is ~2MW of power, followed by rapid expansion to 10MW, generating approximately $10m in revenue per annum (i.e. approx. $1m per MW p.a.)
All key approvals are in place including environmental assessments, production licence, power generation licence and the Power Purchase Agreement.
Electricity will be generated using gas from Tlou's gas field. Tlou has a significant gas resource which has been certified by independent experts SRK Consulting (Australasia) Pty Ltd.
Tlou holds a 100% interest over approximately 9,000km2 of exploration permits including a 900km2 production licence. There are two main coal seams that Tlou are focused on, the Lower Morupule and the Serowe play - each covering about 1,800km2 within Tlou's 100% owned acreage. The Company is currently concentrating on the Lower Morupule play. Tlou has an extensive geological database including well data, seismic data and reprocessed aeromagnetic data.
The Government of Botswana remains very supportive and Tlou's power can help to reduce reliance on expensive imported power. In addition to supplying power in Botswana, the Company may sell electricity regionally via the Southern African Power Pool, opening up an even bigger market for Tlou's electricity.
Tlou is aiming to be a vertically integrated gas to power company owning 100% of both the upstream (gas production) and downstream (generation) sides of the operation.
Post period end the Company raised $1,139,403 via an entitlement offer. In addition, the Company is in discussions with several strategic parties to secure the remaining funds required for project completion.
The information contained within this announcement is deemed to constitute inside information as stipulated under the retained EU law version of the Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK law by virtue of the European Union (withdrawal) Act 2018. The information is disclosed in accordance with the Company's obligations under Article 17 of the UK MAR. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
Directors' report
The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity' or the 'Group') consisting of Tlou Energy Limited (referred to hereafter as the 'Company' or "Tlou") and the entities it controlled at 31 December 2023.
Directors
The names of the directors who held office at any time during the half-year and up to the date of this report are:
Martin McIver
Non-Executive Chairman
Anthony Gilby
Managing Director & Chief Executive Officer
Gabaake Gabaake
Executive Director
Colm Cloonan
Finance Director
Hugh Swire
Non-Executive Director
Directors have been in office since the start of the half-year to the date of this report unless otherwise stated.
Principal Activities
The principal activity of the consolidated entity is to explore and evaluate power solutions in Sub-Saharan Africa through Coalbed Methane (CBM) gas-fired power. No revenue from these activities has been earned to date, as the consolidated entity is still in the exploration and evaluation or pre-development stage.
There have been no significant changes in the nature of the group's principal activities during the half-year.
Review and results of operations
The loss for the half-year after income tax amounted to $1,821,374 (December 2022 loss $2,245,259). Information on operations and results during the period are set out below.
Lesedi Project
The Lesedi Project consists of four Prospecting Licences (PL) and a Production Licence. The first stage of development is a 10MW power generation facility which will be located in the Company's Production Licence area.
PL renewal applications are submitted three months prior to expiration. Renewal applications were submitted for PL001/2004 and PL003/2004 in June 2023. The Company has been informed that following a processing delay at the relevant department the renewed licences are expected to be issued in March 2024.
Lesedi Gas-to-Power project
The Lesedi project is Tlou's most advanced. At Lesedi the Company is developing a proposed 10MW gas-to-power project. The first electricity to be generated at Lesedi is planned to go towards satisfying the 10MW Power Purchase Agreement (PPA) with Botswana Power Corporation (BPC), the national power utility. The Lesedi project has several components of the development process either completed or ongoing including the construction of transmission lines, substations, a field operations facility and generation site as well as production wells.
Transmission Line Construction
The Lesedi project was approximately 100km from the nearest BPC substation connection in Serowe. To connect to the national grid, the Company had to construct a 100km 66kV transmission line. This, together with associated infrastructure and gas production wells should enable the Company to connect and provide electricity into Botswana's power network. Construction of the 66kV transmission line has been completed by the contractor Zismo Engineering Pty Ltd (Zismo). Minor finishing works and the addition of switchgear at the Serowe substation will be done prior to the line being energised. The line is planned to remain under care and maintenance until energisation, which is expected around mid-2024.
Substation Construction
In addition to the transmission line, an electrical substation is required at the Lesedi end of the transmission line whereas at the opposite end the line has been connected to the existing BPC substation at Serowe. The substation at Lesedi was initially designed for the first 5MW of power, however during the half year the Company changed the design to facilitate expansion beyond 10MW. This will be beneficial as the projects grows. The connection at Serowe is complete and the Lesedi substation is approximately 38% complete. It is currently anticipated that the work will be completed around mid-2024.
Future gas production
The Company has two gas production pods, Lesedi 4 and Lesedi 6 currently flaring gas. During the reporting period, the Company completed a redrill of both lateral wells of the Lesedi 4 production pod. The aim of redrilling the lateral wells was to provide straighter lateral sections using a specialist rotary steerable system (RSS). The lateral sections were drilled for approximately 700m and successfully intersected with the Lesedi 4P vertical production well. These straighter laterals are expected to assist with removing water from the reservoir to more efficiently dewater and flow gas. Also during the period a new production pod, Lesedi 6, was completed. The RSS was also used for the lateral sections of this production pod. Post drilling, both Lesedi 4 and Lesedi 6 pods had production equipment installed to commence dewatering ahead of gas production.
Lesedi 6 experienced a rapid increase in casing pressure in both lateral wells with first gas production to surface occurring soon thereafter. The rapid build-up of casing pressure and production of first gas to surface in a relatively short time was very encouraging. This was the fastest gas to surface in the Lesedi field to date.
Lesedi 4 and Lesedi 6 continue to flow gas as the water level is being gradually lowered to just above the coal. Once the wells stabilise and stop surging (gas and water), gas flow rates will be measured. Tlou is confident that with the in-house knowledge gained from previous drilling efforts, extracting more and more gas out of the coal reservoir will become progressively simpler and more cost effective due to economies of scale.
Mamba Project
The Mamba project is in the exploration and evaluation phase with further operations required on the licences. It consists of five Prospecting Licences covering an area of approximately 4,500 Km2. The Mamba area is situated adjacent to Lesedi. In the event of successful drilling results at Mamba, it is envisioned that this area would be developed as a separate project from Lesedi. The Mamba area provides the Company with flexibility and optionality.
PL renewal applications are submitted three months prior to expiration. A renewal application for PL 241/2014 was submitted in June 2023. The Company has been informed that following a processing delay at the relevant department the renewed licence is expected to be issued in March 2024. Further work on the Mamba project is proposed once the Lesedi project is in production. The next stage of operations is likely to include a seismic survey and the drilling of core-holes.
Boomslang Project
Prospecting Licence, PL011/2019 designated "Boomslang", is approximately 1,000 Km2 and is situated adjacent to the Company's existing licences. To date, the Company has not carried out ground operations in the Boomslang area. Like the Mamba project the first stage of operations is likely to include a seismic survey following by core-hole drilling.
PL renewal applications are submitted three months prior to expiration.
Significant changes in the state of affairs
During the half-year ended 31 December 2023, there were no other significant changes to the state of affairs of the consolidated entity other than those stated above and disclosed in the financial report and notes thereof.
Matters subsequent to the end of the half-year
In February 2024, the Company issued 32,554,360 ordinary shares at $0.035 per share, raising $1,139,403. The total number of issued shares following this capital raising is 1,076,536,717. Also, on 31 January 2024, 2,275,000 performance rights lapsed.
Other than the matters discussed in this report, there has not arisen in the interval between the end of the half-year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors, to affect significantly the operations of the group, the results of those operations or the state of affairs of the group in subsequent financial periods.
Likely developments and expected results of operations
The Company has drilled two wells in the Lesedi project area which have produced CBM gas. These wells are planned to be the first two gas producing wells that will be used to generate power at the Lesedi project. These wells were designed to achieve enhanced gas flow rates in the area proposed for the Company's initial project development. The gas flow rates from these wells are vitally important to assess the viability of the Lesedi project and the Company is yet to confirm commercial gas flow rates and there is no guarantee that the required rates can or will be achieved. In addition, further wells flowing commercial gas volumes will be required to produce sufficient gas for the planned Lesedi project.
The Company is advancing plans to develop ancillary projects in addition to the gas-fired power project. These projects may be subject to regulatory approvals. No guarantee can be given in relation to the results of the Company's operations, gas flow rates, regulatory approvals being granted or the ability to secure the funds required to progress all or any of the Company's existing or planned operations.
The Company is subject to risks which may have a material adverse effect on operating and financial performance. Tlou's Risk Management Policy can be found on the Company's website. It is not possible to identify every risk that could affect the business or shareholders. Any actions taken to mitigate these risks cannot provide complete assurance that a risk will not materialise or have a material adverse effect on the business, strategies, assets or performance of the Company. A list of risks currently considered material and mitigation strategies are set out below. This is not an exhaustive list and risks are outlined in no particular order.