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Merger with Petrel EnergyNew direction…Proven plays…Wise heads
November 2011
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Proposed Transaction
Scrip takeover of private Petrel Energy Pty Ltd
First project in proven Barnett Shale underway
Range of new conventional & unconventional opportunities already identified
Petrel team bring extensive US experience plus first class technical contacts
Issue ca 115m new shares, subject to shareholder approval
Orion retains ASX listing, renamed ….Petrel Energy LtdFor
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Overview of Petrel Energy
Established mid 2011 to pursue international opportunities
Initial focus onshore USA leveraging off principals’ successful track record in North America
First project in Erath County TX located in emerging play in proven Barnett Shale project area
6,600 acres leased in JV with proven local operator
4 well development drilling program underway
Several followup projects (conventional & unconventional) under negotiation and/or assessment
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The Shale Gale – “a Gamechanger”
The attraction of shale gas:
• Limited-no finding risk• Onshore long-life assets• Repeatable drilling opportunities• Stable regimes
Driven by technology:
• Horizontal wells• Multi-stage fracs• Pad drilling
“Resource Plays”
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The US Shale Basins
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Why the Barnett Shale
Most advanced proven shale gas province in the USA
Only recently overtaken by Haynesville as biggest gas producing area
Over 15,300 development wells drilled to date, another 3,200 permitted
Produced in excess of 10 Tcf gas plus 27 MMbbl condensate/oil
Producing area expanded from 3 counties initially to now 25 counties across North Texas
Issues such as land access, fraccing and water successfully managed for more than 30 years
Much lower risk than frontier shale gas plays
Petrel’s US associates provide unequalled experience in the areaFor
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Full-Cycle Shale Gas Economics
It’s about being at the right end of the cost curve
Many plays uneconomic at current gas pricesSource: Wood Mackenzie, August 2011F
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New technology drives activity growth
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Fort Worth Basin – Barnett Shale Isopach Map
Productive area has expanded from thicker shales in basin centre westwards to shallower more oil-prone counties
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Erath County – Gas tending to Oil
From Dan Steward, Republic Energy, Dallas TX
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Cross Section of Fort Worth Basin
Barnett Shale typically 150-200’ thick in single unit in Erath County
versus 400-450’ thick in two units further east
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Shale Gas Development in Urban Areas
Producing wells overlapping the
greater Dallas-Forth Worth area
Petrel Energy JV focussed in Erath
County
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Erath County Barnett Shale Project
Rationale:
• Footprint of prime Barnett Shale area expanding westwards
• Newer areas host more liquids plus high energy gas (ca 1,300 MMBtu/Mcf)
• Thinner shallower BS offset by much lower well costs ($750k-$1.2m)
• Operator The Cumming Co Inc. has successful record in county
Status:
• 4 well program commenced on leased 6,600 acres (Petrel 25% WI)
• Rapid commercialisation through existing pipeline network
• AMI to pursue additional 10,000 acresFor
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Barnett Shale Well Completions
Vertical fracced wells have been preferred in Erath Co due to thinner shale and proximity to Ellenberger water
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Drilling a horizontal fracced well
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Other Opportunities
Petrel’s principals and advisers have identified number of high potential projects in conventional and unconventional oil & gas
Most advanced is multi-objective onshore play in Louisiana under negotiation
Key to all Petrel’s focus and activities:
Access to experienced technical expertise provided by project originators combined with inhouse expertise
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Details of Merger
Orion to make share and option offer for all Petrel shares and options
Issue 115.1m new OIP shares at price of 4 cps plus 9.3m replacement options valuing Petrel at $4.6m
Requires OIP shareholder approval under LR 7.1(issue shares > 15%)
OIP shareholders to represent 57% of enlarged entity
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New Board & Management
Proposed Board:
Stephen Mitchell (Non-executive Chairman) (former Molopo MD)
Russell Langusch (Managing Director) (current Orion CEO)
David Hobday (Non-executive Director) (former Molopo NED)
Alex Sundich (Non-executive Director)
Andrew Bursill (Non-executive Director)
Shareholder Meeting (expected January 2012) to approve:
1. Issue of shares
2. Name change to Petrel Energy LtdFor
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Concluding Summary
Petrel merger represents exciting new venture for Orion shareholders
Provides ideal risk and geographical diversification pursued for more than two years
Critical feature is technical expertise, experience and success record of board, management and advisory team
Initial activity fundable from existing cash of ca $7.8m in enlarged group
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