Lion Energy Secures 88% Funding for Bula Karang-1 Well, Targets September Spud

Bula Karang-1 Well Set for September Spud After Funding Secured

Lion Energy Limited (ASX:LIO) has cleared a major hurdle for its East Seram PSC project with final Indonesian government approval for a 15% farm-out to OPIC East Seram Corporation. This deal unlocks partner funding that covers 88% of the Bula Karang-1 exploration well drilling costs, capped at US$5.6 million, substantially reducing Lion’s financial exposure while retaining a 45% stake and operatorship through its subsidiary Balam Energy.

The company has signed a drilling contract with Silver City Drilling for the SCD-20 rig, a Schramm Rotadrill TXD200 hydraulic unit mobilised from East Java. The rig is tailored for the planned deviated well design, which will spud from an onshore location and deviate roughly 1,000 metres offshore to test a carbonate reef target about 550 metres below sea level. Site construction at the Bula Karang-1 location is nearing completion, with the spud now prudently targeted for September 2026, allowing time for logistics and regulatory formalities.

Prospective Resource and Exploration Upside

The Bula Karang prospect holds a best-estimate (P50) prospective resource of 12 million barrels of oil equivalent and a geological chance of success of 38%. The well targets Plio-Pleistocene carbonate and clastic formations in the Bula Bay area, close to existing Bula and Oseil field infrastructure, which could facilitate early monetisation if a discovery is made. Success here could catalyse a new producing oil hub within the East Seram PSC, with multiple follow-up prospects nearby capable of leveraging regional infrastructure.

Strategic Exit from Hydrogen Business

In a decisive pivot, Lion Energy has exited its green hydrogen business, ceasing lease obligations at the Port of Brisbane and selling its hydrogen production and refuelling equipment for gross proceeds of approximately A$400,000. This move follows a strategic review prompted by changing market conditions and the decision of development partners to not proceed with the project's next phase. Lion is now fully focused on advancing its upstream oil and gas portfolio, concentrating capital and management resources on the Bula Karang-1 well and related opportunities.

Cash Position and Funding Outlook

At quarter-end, Lion held cash and cash equivalents of A$889,000, down from A$1.12 million the previous quarter. The company recorded a net cash outflow from operating activities of A$582,000 and net investing inflows of A$373,000, the latter boosted by joint venture cash from the East Seram farm-out completion. Lion’s convertible note facility remains at A$1.6 million, unsecured and interest-free, maturing on 31 December 2026.

Based on current outgoings, the company’s cash runway covers just under one quarter. However, Lion expects to bolster its funding position through the completion of the sale of its 2.5% interest in the Seram (Non-Bula) PSC for approximately US$1.2 million, pending government approval expected in the second half of 2026, as well as proceeds from the hydrogen project exit. These measures underpin Lion’s confidence in continuing operations through the near term.

Governance and Related Party Payments

During the quarter, Lion made payments totaling A$190,000 to related parties and their associates, reflecting existing remuneration agreements for its executive and non-executive directors. The company continues to operate under a disciplined capital allocation framework, prioritising upstream oil and gas exploration over non-core ventures.