10-Q: Tamboran Advances Beetaloo Project with FID, Secures Capital

Tamboran Resources Corporation reported increased net losses and cash burn for Q3 2025 but achieved a Final Investment Decision for its Shenandoah South Pilot Project and secured significant capital through recent offerings and a syndicated facility.

Summary

• Tamboran Resources Corporation is an early-stage natural gas company focused on exploration and appraisal in Australia's Beetaloo sub-basin, with no revenues from gas operations as of September 30, 2025.
• The company reported a net loss of $9.061 million for the three months ended September 30, 2025, an increase from $6.756 million in the prior year period.
• Net cash used in operating activities significantly increased to $13.799 million for Q3 2025, up from $4.154 million in Q3 2024.
• Net cash used in investing activities also rose to $28.434 million for Q3 2025, compared to $14.496 million in Q3 2024, reflecting increased exploration and SPCF construction spend.
• The company's accumulated deficit grew to $175.464 million as of September 30, 2025, and it had a working capital deficit of $3.9 million.
• A Final Investment Decision (FID) was made for the Shenandoah South Pilot Project in EP 98 and EP 117 on September 30, 2025.
• Tamboran entered into an Arrangement Agreement to acquire Falcon Oil & Gas Australia Limited and other Falcon entities for 6,537,503 shares of common stock and $22.7 million in cash, announced September 30, 2025, subject to approvals.
• A binding agreement was signed with Daly Waters Energy (DWE) to finalize the checkerboard of joint acreage across EPs 76, 98, and 117, with specific deadlines for retention license applications.
• The Sturt Plateau Compression Facility (SPCF) construction has commenced, with essential plant components delivered, aiming for 40 TJ/d (39 MMcf/d) capacity.
• Subsequent to the quarter, Tamboran closed a public offering raising $53.0 million net, opened a Share Purchase Plan targeting A$46.0 million, and entered into subscription agreements (PIPE) for up to $32.0 million.
• A syndicated facility agreement for up to A$179.8 million was secured on September 29, 2025, with no borrowings drawn as of the quarter-end.
• Joel Riddle, former CEO, was terminated and resigned from the board on July 28, 2025, and Richard Stoneburner was appointed Interim CEO effective July 27, 2025.

Sentiment

Score: 4

Explanation: While the company made significant strategic progress with the FID for Shenandoah South, the Falcon acquisition agreement, and substantial capital raises post-quarter, the financial results for the quarter show increased losses and cash burn. The explicit 'going concern' warning and identified material weakness in internal controls are significant negatives, indicating high operational and financial risk despite strategic advancements.

Positives

• Achieved Final Investment Decision (FID) for the Shenandoah South Pilot Project in EP 98 and EP 117, marking a significant step towards production.
• Entered into an Arrangement Agreement to acquire Falcon Oil & Gas Australia Limited, which will increase Tamboran's operating interest in key acreage to 77.5% post-acquisition.
• Secured substantial post-quarter-end funding, including $53.0 million net from a public offering, a Share Purchase Plan targeting A$46.0 million, and a PIPE investment of up to $32.0 million.
• Established a syndicated facility agreement for up to A$179.8 million, providing significant debt funding capacity for the Sturt Plateau Compression Facility (SPCF).
• Construction of the SPCF has commenced, with essential plant components delivered, progressing towards connecting to the Amadeus Gas Pipeline.
• Successfully resolved the NTCAT Merits Review legal proceeding, with the Environment Centre Northern Territory (ECNT) withdrawing its application.
• Exploration expense decreased by $0.3 million due to a focus on drilling activities, leading to a larger portion of costs being capitalized.
• Foreign currency translation resulted in a gain of $1.7 million for the quarter, benefiting from a strengthening Australian Dollar.

Negatives

• Reported an increased net loss of $9.061 million for the quarter, up from $6.756 million in the prior year.
• Experienced a significant increase in net cash used in operating activities, rising to $13.799 million from $4.154 million year-over-year.
• Net cash used in investing activities more than doubled to $28.434 million, indicating higher capital expenditure without immediate revenue generation.
• The accumulated deficit increased to $175.464 million, and the company had a working capital deficit of $3.9 million as of September 30, 2025.
• Management identified substantial doubt regarding the company's ability to continue as a going concern for the next 12 months due to lack of revenue, working capital deficit, accumulated deficit, and significant planned expenditures.
• Interest income (expense), net, swung from a $0.796 million income in Q3 2024 to a $0.305 million expense in Q3 2025, primarily due to lower cash balances and increased interest expense from the Macquarie Facility.
• Identified a material weakness in internal control over financial reporting, including insufficient evidence of control performance, inadequate segregation of duties, and lack of IT general controls.
• Incurred new operating costs related to camp expense recoveries ($1.629 million) and LNG feasibility study expense ($0.191 million).

Risks

• The company is in an early stage of development with no material revenue expected until late 2026 at the earliest, and has a limited operating history.
• Substantial additional capital is required for the business plan, which may not be raised on acceptable terms or at all, potentially leading to significant curtailment of planned activities or relinquishing asset rights.
• Risks related to the Falcon Acquisition include failure to realize expected benefits, reduced ownership for existing stockholders, failure to consummate the acquisition, integration difficulties, potential litigation, and synergies varying from expectations.
• The strategy to deliver natural gas to the Australian East Coast and select Asian markets is contingent upon constructing additional pipeline capacity, which may not be secured.
• There is an absence of proved reserves, and drilling may not yield natural gas in commercial quantities or quality.
• Drilling activities are speculative, involve significant costs, and may not result in discoveries or additions to future production or reserves.
• Challenges are associated with importing U.S. practices and technology to the Northern Territory due to limited local experience, which could affect operations and growth.
• Timely access to appropriate equipment and infrastructure is critical, and any delays could impact market access and business plan execution.
• Operational complexities and inherent risks of drilling, completions, workover, and hydraulic fracturing operations could adversely affect the business.
• The volatility of natural gas prices could have an adverse effect on financial condition and operations.
• Midstream projects are subject to risks of construction delays, cost overruns, and negative effects on financial and operational performance.
• Assessments of the Beetaloo sub-basin may be materially inaccurate, fundamentally impacting the business.
• Concentration of all assets and operations in the Beetaloo makes the company susceptible to region-specific risks.
• Inability to make accretive acquisitions or successfully integrate acquired businesses or assets, including the Falcon Acquisition.
• Recurring operational losses, negative cash flows, and cumulative net losses raise substantial doubt about the ability to continue as a going concern.
• Complex laws and regulations could affect operational costs and feasibility or lead to significant liabilities.
• Community opposition could result in costly delays and impede the ability to obtain necessary government approvals.
• Exploration and development activities in the Beetaloo may lead to legal disputes, operational disruptions, and reputational damage due to native title and heritage issues.
• The requirement to produce natural gas on a Scope 1 net zero basis upon commencement of commercial production, with internal goals for operational net zero, may increase production costs.
• Increased attention to environmental, social, and governance (ESG) matters and environmental conservation measures could adversely impact business operations.
• Risks related to the company's corporate structure, common stock, and CDIs.

Future Outlook

Tamboran Resources expects to incur substantial expenses and generate significant operating losses as it continues to develop its natural gas prospects, with no revenue from production anticipated until late 2026 at the earliest. Future financial condition and liquidity are dependent on successful drilling, timely capital funding, commercial agreements, and infrastructure access. The company estimates needing approximately $43.4 million for development plans for the remainder of fiscal year 2026, with recent capital raises expected to fund current drilling and stimulation activities. Management is actively pursuing additional funding avenues and R&D tax incentives to mitigate going concern uncertainty. The company plans to focus development on supplying gas into Australia's East Coast domestic gas market from its Phase 2 Development Area and has engaged RBC Capital Markets for a formal farm-down of this area.

Management Comments

• Management believes all adjustments necessary to present fairly the financial information for the periods and at the dates indicated have been reflected in the unaudited condensed consolidated financial statements.
• Management is actively pursuing several plans to mitigate the substantial doubt regarding the Group's ability to continue as a going concern, including assessment of farm-in partners, continuation of SPCF construction, additional funding through Share Purchase Plan and PIPE, and Research & Development tax incentives.
• Management has determined that it is more likely than not that the company will not earn income sufficient to realize deferred tax assets during a foreseeable future period, leading to a full valuation allowance on net deferred tax assets.
• Our principal executive officer and principal financial officer concluded that we did not maintain effective internal control over financial reporting due to a material weakness.

Industry Context

Tamboran operates in the highly capital-intensive and speculative natural gas exploration and appraisal sector, specifically targeting unconventional gas resources in Australia's Beetaloo sub-basin. The industry is characterized by significant upfront investment, long development cycles, and exposure to volatile commodity prices. Tamboran's strategy to develop low CO2 unconventional gas resources aligns with the broader energy transition narrative, aiming to support net zero CO2 energy in Australia and Asia-Pacific. The company's focus on securing pipeline capacity and an LNG facility indicates a move towards integrated midstream capabilities, a common strategy for upstream players seeking to de-risk market access. The acquisition of Falcon Oil & Gas Australia Limited is a consolidation play, aiming to increase Tamboran's operating interest and scale within the Beetaloo, a trend seen in mature basins to optimize operations and achieve economies of scale. The ongoing legal challenges from environmental groups reflect increasing scrutiny and community opposition faced by fossil fuel projects globally, particularly those involving hydraulic fracturing.

Comparison to Industry Standards

• Tamboran's status as an early-stage exploration and appraisal company with no current revenue from gas operations is typical for companies in this phase, but it contrasts sharply with established producers like Santos Limited (operator of EP 161) or Origin Energy, which have diversified revenue streams and proved reserves.
• The company's substantial accumulated deficit of $175.5 million and recurring operational losses are common for exploration-focused entities, similar to other junior explorers globally, but highlight the high-risk nature compared to mature, cash-flow positive energy companies.
• The capital commitments for drilling, hydraulic fracturing, and midstream infrastructure (e.g., SPCF) are in line with the significant investment required for unconventional gas development projects, comparable to initial development phases undertaken by major players in basins like the Permian in the US or Montney in Canada.
• The identified material weakness in internal control over financial reporting is a governance concern that would typically be flagged by institutional investors and is below the standard expected of a mature public company, though remediation efforts are underway.
• The successful Final Investment Decision (FID) for the Shenandoah South Pilot Project is a critical milestone, moving the project closer to commercialization, a stage that many exploration companies struggle to reach without significant external funding or farm-down partners.
• The acquisition of Falcon Oil & Gas Australia Limited, if completed, would increase Tamboran's operated interest, a strategic move to gain greater control and potentially accelerate development, mirroring consolidation trends seen in other resource plays where operators seek to optimize their acreage positions.

Management Changes

Corporate Governance

Legal Proceedings

• The Environment Centre Northern Territory (ECNT) lodged an Originating Application in the Northern Territory Civil and Administrative Appeals Tribunal (NTCAT) for a merits review of the Minister's approval of TB1 Operator's Shenandoah South Exploration & Appraisal Program EP98 and EP117 Environment Management Plan (Shenandoah EMP). This proceeding was withdrawn by the ECNT on August 25, 2025.
• Lock the Gate Alliance Ltd lodged an Originating Application in the Federal Court of Australia seeking an injunction to restrain TB1 Operator from conducting the Shenandoah South Pilot Project and a declaration that the project is likely to have a significant impact on a water resource. The application was heard from June 23-26, 2025, and August 14, 2025, with judgment reserved.

Related Party Transactions

• H&P (shareholder and strategic alliance partner): Incurred $3.0 million in drilling, labor, and rig move costs during Q3 2025, with $1.2 million remaining unpaid. John Bell, an H&P appointee, resigned as a director during the quarter.
• Daly Waters Energy, LP (DWE) and Daly Waters Infrastructure, LP (DWI) (wholly owned by Formentera Australia Fund, LP, managed by Mr. Bryan Sheffield, a shareholder): DWE's share of Beetaloo Joint Venture expenditure due was $14.8 million, with Tamboran having a $1.4 million receivable from DWE. DWI's share of SPCF expenditure due was $8.5 million, with Tamboran having $1.9 million in advances against joint interest billings owing to DWI. Bryan Sheffield and Scott Sheffield (director) are also PIPE investors in a subsequent capital raise.

Stakeholder Impact

• Shareholders: Potential for dilution from recent and planned equity raises (public offering, SPP, PIPE). Reduced ownership in the combined company post-Falcon Acquisition. Exposure to significant operational and financial risks, including the 'going concern' uncertainty, but also potential upside from successful project development and increased scale.
• Employees: Changes in management (CEO termination, interim CEO appointment). Granting of Restricted Stock Units (RSUs) as retention and IPO awards, providing incentives tied to company performance and service.
• Customers (future): Progress towards the Shenandoah South Pilot Project and SPCF construction aims to establish first gas production, which would eventually supply gas to Australia's East Coast domestic market and potentially Asian markets.
• Suppliers/Creditors: Increased accounts payable and accrued expenses reflect higher operational activity. The syndicated facility agreement provides security for creditors involved in the SPCF project. The 'going concern' warning could raise concerns for unsecured creditors.
• Regulatory Authorities: Ongoing legal proceedings and the identified material weakness in internal controls highlight areas of regulatory scrutiny and compliance requirements.

Next Steps

• Complete the remaining drilling costs for SS-4H, SS-5H, and SS-6H pilot wells.
• Carry out stimulation activities and flow testing of SS-5H.
• Continue SPCF construction during the wet season in the Northern Territory.
• Obtain shareholder approval for the Falcon Acquisition and the PIPE investment.
• Finalize the checkerboard of joint acreage position across EPs 76, 98, and 117, including applying for retention licenses for North and South FSDAs by December 14, 2025.
• Complete the grants and transfers of Tranche 1 retention licenses by December 31, 2025.
• Apply for retention licenses over the Dev A++ and Dev B areas by March 31, 2026, with grants and transfers completed by September 30, 2026.
• Continue the formal farm-down process for the Phase 2 Development Area, led by RBC Capital Markets, LLC.
• Remediate the identified material weakness in internal control over financial reporting by hiring accounting and finance personnel and engaging an internal audit firm.
• Await judgment from the Federal Court of Australia regarding Lock the Gate Alliance Ltd's application for an injunction against the Shenandoah South Pilot Project.

Key Dates

Recommendation

Tamboran Resources is a high-risk, high-reward exploration and development company. While the Q3 2025 financial results show increased losses and cash burn, and the 'going concern' warning is a significant red flag, the company has made substantial strategic progress. The Final Investment Decision (FID) for the Shenandoah South Pilot Project, the agreement to acquire Falcon Oil & Gas Australia, and the successful securing of significant capital (public offering, PIPE, syndicated facility) post-quarter-end demonstrate a clear path forward and a strong commitment to funding its development plans. For existing investors, these strategic advancements and capital injections provide a basis to 'hold' as the company progresses towards production. However, for new investors, the inherent risks of an early-stage company, the ongoing losses, and the material weakness in internal controls suggest caution, making it a speculative investment. The reserved judgment in the Federal Court case also presents an unresolved risk. The recent capital raises significantly de-risk the immediate liquidity concerns, but the long-term success remains contingent on operational execution and market conditions.

Keywords

Natural Gas, Beetaloo Basin, Exploration, Appraisal, SEC Filing, 10-Q, Tamboran Resources, Energy Transition, Australia, Northern Territory, Shenandoah South Pilot Project, Falcon Acquisition, Sturt Plateau Compression Facility, Capital Raise, Oil & Gas, Unconventional Gas