GTL: Exploiting Remote Gas Discoveries

IPAA London Oil and Gas Investment Symposium

Ron Stinebaugh

Senior Vice President, Finance

July 2005

2

Forward Looking Statements

This presentation includes forward-looking statements as well as historical information. These forward-looking statements may include statements relating to the Syntroleum Process and related technologies, liquefied natural gas development, the GTL Barge and other gas-to-liquids plants based on the Syntroleum Process, anticipated costs to design, construct and operate these plants, anticipated costs to make products from these plants, the timing of commencement and completion of the design and construction of these plants, obtaining required financing for these plants, the economic construction and operation of gas-to-liquids plants, the value and markets for plant products, testing, certification, characteristics and use of plant products, the continued development of the Syntroleum Process (alone or with partners), anticipated capital expenditures, anticipated revenues and any other statements regarding future growth, cash needs, operations, business plans and financial results. When used in this presentation, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “should” and similar expressions are intended to be among the statements that identify forward-looking statements. Although we believe that expectations reflected in these forward-looking statements are reasonable, these kinds of statements involve risks and uncertainties. Actual results may not be consistent with these forward-looking statements. For discussion of these risks and uncertainties we refer you to the risks described under “Risk Factors” in our Annual Report on Form 10-K.

3

Syntroleum Investment Profile

• NASDAQ: SYNM (Common) SYNMW (Warrants)

SYNMZ (Warrants)

• Shares O/S (Mil): 55.2• Warrants O/S (Mil): 3.5

• Market Cap (Mil $): 559.7– Date: 6/21/2005

• Float (Mil): 41.7

• Equity Research: – Foresight Research (Bernie Picchi)– Jefferies (Frank Bracken)– Merrill Lynch (Andrew Fairbanks)

• Management & Insiders: 25% • Institutional (1) : 40%• Retail: 35%• Top Institutional Holders:

– PEAK Investments LLC(2)

– Legg Mason Opportunity Trust– Wellington Management – Merrill Lynch Investment Managers– Southern Fiduciary Group– Dimensional Fund Advisors– Security Management Company– Barclays Bank Plc

(1) Excludes PEAK Investments(2) Sits on the Board of Directors, owns 13.2%

Investor Relations Contact:

Mel Scott, Director of Communications

(918) 592-7900

4

Syntroleum HistoryMeeting the Requirements for GTL Commercialization

• 20 years of comprehensive technology development

• 127 US and foreign patents pending and issued

• Over $200 million invested in development

• Ready for commercial deployment

5

The Syntroleum Process is Air Blown

• Unique air-based design eliminates costly oxygen plant to make syngas

• Air offers several key competitive advantages:– Safe to operate in marine environment – Ability to compress footprint – “mobility”– Scales down to capture smaller accumulations

Air

Steam

Natural Gas

Syngas

CO+2H2

Normal ParaffinF-T Wax

C H

H

H

H

Reformer Fischer-TropschSynthesis

Diesel

Naphtha

LPG

Refining

CH C C C

H H H H

H H H H

CH C C C

H H H HH H H H

H H H HH H H H H

H+ O

H

H+ O

6

Technology Development Facilities:Twenty Year Evolution

1985 1986 19881987 2000199919981997 2004200320022001 2005

Refining Pilot Unit (RPU )Tulsa Pilot Plant (TPP ) Advanced Reactor Unit (ARU )

Catoosa Demonstration Facility (CDF)The Shed Cherry Point

7

Catoosa Plant Demonstratesall Three Process Technologies

• 70 bpd demonstration plant• Fully integrated operation with all 3 steps commercially scalable:

Syngas, F-T, and Product Upgrading• Commercial catalyst with regeneration, wax separation, full heat

transfer internals in FT reactors• Plant will train operators for commercial plants

Syntroleum Catoosa Demonstration Facility - A Fully Integrated GTL Plant

8

Significant Technology Barriers To Entry

• Requires significant time and capital– Invested greater than $200 million over 20 years

• Requires three process technologies• New entrants must navigate patents of others• Limited club of companies have GTL technology

– Syntroleum– Sasol– Shell– ExxonMobil– ConocoPhillips– BP

9

Abundant Stranded Gas Presents Significant Business Opportunity

TOTAL Gas Reserves = 6,200 Trillion cubic feet (Tcf)1 Stranded Gas = 3,000 Tcf2

North America 258 TcfEurope & CIS 2199 Tcf

S. & Cent. America 253 Tcf

Middle East 2531 Tcf

Africa 486 TcfAsia Pacific 475 Tcf

1 Trillion Cubic Feet of Gas = 100 Million Barrels of GTL Fuels 1 BP Statistical Review of World Energy June 20042 EIA (DOE) International Energy Outlook 2004

10

Plenty of Gas for Both GTL & LNG

11

Market for GTL Liquids is Much BiggerThan the LNG Market

• Middle distillate demand growing at 2.5% per year worldwide – 4 years growth equals the entire size of the LNG market

• In 3 years, announced GTL capacity in Qatar is 1/3rd of current LNG market – which took 3 decades to develop

Sources: 2001- American Methanol Association, Fertecon Ltd., 2004 BP Statistical Review of World Energy

Methanol Ammonia LNG Middle Distillates

27 Million Bpd

2.9 Million BOE/d

1.5 Million BOE/d

0.5 Million BOE/d

‘01 2001 20032003

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Clean Fuels, Easily Sold

Syntroleum GTL Diesel –– Can be sold in existing markets – Compatible with existing infrastructure

(pipelines, storage terminals, retail pumps)– No sulfur or aromatics – Biodegradable and non-toxic– Performs better than conventional diesel– Valuable blending stock to meet new

guidelines

2006EPA

Diesel

Sulfur (PPM) 350 10 50 0

Aromatics (%) 30 30 N/ A 0

Cetane Number 45 45 49 74+

Property

Current EPA

Diesel

Syntroleum GTL Diesel

Current E.U.

Diesel

Syntroleum Diesel Burns Cleaner Than

Regular Diesel

13

Syntroleum Strategy Targets 1-3 TCF Gas Fields

200+ non producing fields world wide with reserves of 1 to 3 TCF

Syntroleum GTL targets many smaller fields.

LNG and World scale GTL projects target a few larger fields

1) Gas fields outside of North America

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Syntroleum’s Niche is Potentially Huge

Billion Barrels ≈ 6.3 1.4

CountryLon

No. of Attractive

Fields

GasReserves

(Tcf)*

Oil & Condensate

(Mmbbls)

Africa 13 12 457Australasia 13 31 221Latin America 5 7 390Middle East 9 13 317Total 40 63 1,385

Total Proved Reserves

0

5

10

15

20

25

ExxonMobil Shell BP ChevronTexaco

Bil

lio

n B

OE

Potential from 40 fields ≈ 8 Billion Barrels

High-graded 40 locations in 15 countries

• Uncontracted gas• Proximity to shore• Low delivery cost

15

Air Based Technology Enables Access to Target Fields

Barge for swamp and coastal locations

Modular plants for onshore

Ship-based plants for offshore

16

Syntroleum’s First Project:Aje Field Offshore Nigeria

• Previously discovered oil and gas field offshore Nigeria– Two wells successfully tested

oil and gas

• GTL Technology was enabling factor in acquiring the block

• Acquired rights to develop Aje field (September 2004)

• Re-processed and mapped geophysical data

• Current status:– Drilling permit granted– Assignment of interest

approved by the Nigerian Government

– Aje-3 to spud in 3Q05

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Aje Field: Potential ReservesOil – 201 MMBO and Gas – 1.6 TCF

ProposedAJE 3

AJE 2X: 489962Y: 680716W.D.: 310’ Surf. Loc.

AJE 1

Depth (ft.)

SW NE

☼

X: 488848Y: 674325W.D.: 3,110’PTD -8250

Arb. Line ‘D’ 1997 3D, 2004 PSDM Processing

Turonian: 154 ft. net gas cond pay 37 ft. net oil payDST #4: 3,866 bopd + 6.7 MMcfg/d

Cenomanian: 29 ft. net oil payDST #3: 3,473 bopd + 1.4 MMcfg/d

TD 16189 ft MD (11601 TVD)

T/Cenomanian 450 ft. high to Aje-2Max Hydrocarbon column height 450 ft.

Hyd

roca

rbon

Pay

Fla

g

Per

mea

bilit

y Fl

ag

T/Turonian

T/Cenomanian

T/Albian

Aje-2 Turonian + Cenomanian hasadditional 480 ft. net wet reservoir sands that could be productive at Aje-3 location

T/Turonian 400 ft. high to Aje-2Max Hydrocarbon column height 662 ft.

☼

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Aje Field – Participant Group

• Syntroleum acquired 100% working interest and developed the integrated field development concept

• Participant group farmed in and pays 90% of first two wells to earn 67.5% cost bearing interest

• Syntroleum pays 10% of the cost of the first two wells to earn a 32.5% cost bearing interest in the project

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Early Oil Supports GTL Development

2005 2006 2007 2008 2009 2010 2011

EARLY OIL

“A”

GAS FIELD DEVELOPMENT

“B”

GTL Barge / FPSO

Drill Aje-3

Develop Oil Field

Production

Develop Gas Field

PDP / FEED

New Build GTL Bargeor OIL / GTL FPSO

Production

Leased OIL FPSO

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AJE Production Profile

-

20

40

60

80

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

2033

2035

KB

PD

GTL

CondensatesOil

Production Profile

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AJE: Syntroleum Cash Flows

$(100)

$(50)

$-

$50

$100

$150

$200

Pro

jec

t N

et

Ca

sh

Flo

w,

Mil

$

$(1.0)

$(0.5)

$-

$0.5

$1.0

$1.5

$2.0

Cu

mu

lati

ve

, B

il $

Syntroleum Net Cash Flow

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($ in thousands)

NYMEX Strip Mar 29, 2005

Year 1 2 3 4 5 6 Total2005 2006 2007 2008 2009 2010 Project

Net Revenue* 5,700$ -$ 212,076$ 250,163$ 247,928$ 357,352$ 3,898,711

Operating Expenses 1,625$ 3,250$ 21,353$ 17,794$ 17,498$ 47,130$ 922,100

Nigerian Taxes -$ -$ 84,149$ 110,718$ 104,434$ 137,577$ 1,334,038

Operating Cash Flow 4,075$ (3,250)$ 106,575$ 121,651$ 125,996$ 172,645$ 1,642,574

Capital Expenditures 5,400$ 43,614$ 19,374$ 10,400$ 49,400$ 10,400$ 274,533

Free Cash Flow (1,325)$ (46,864)$ 87,201$ 111,251$ 76,596$ 162,245$ 1,368,041

NPV-10 594,393$ IRR 187%

Syntroleum’s Aje Economics

* Gross Revenues less royalties plus bonuses and overriding royalty

100+%

NYMEX Strip June 28, 2005

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AJE: Sensitivity to Crude PricesNet to Syntroleum’s Interest

$181

$280

$377

$474

$571

$667

$448

$717

$982

$1,243

$1,504

$1,765

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

25 30 35 40 45 50

WTI Price $/Bbl

$ M

il NPV

Net Cash

24

F&D$5.72 F&D

$3.31

F&D $5.82

Prod.$4.98

Prod.$4.50

Prod.$5.70

$-

$2

$4

$6

$8

$10

$12

$14

Conventional E&P Aje Oil Only Aje Gas Dev.

$/B

OE

Aje Compared to ConventionalE&P Projects

1Source: 2003 John S. Herold, Inc. , Herold Global Upstream Performance Review

2 Aje Oil Only - Costs assume $666 Million oil field development cost to produce 200 million bbl of oil reserves, $2.00/Bbl oil field operations cost and $100,000/day oil FPSO lease rate for an oil production rate of 40,000 Bpd.

3 Aje Gas Dev.- Costs assume $186 Million gas field development cost, $900 million capital cost for a GTL/Oil FPSO, $15,000/day gas field operations cost and FPSO operations cost of $120,000/Day. It is assumed that Aje contains 74 million bbls of condensate and can produce 116 million bbls of GTL fuels. Assumes production of 10,000 Bpd of condensate and 17,000 Bpd of syncrude from GTL.

$11.52

$7.81

$10.70

12 3

25

Accelerate Stranded Gas Acquisition Strategy:Securing Multiple Gas Fields

• Expand upstream partner’s commitment to Syntroleum– Increase from 1 team to 6 teams seeking stranded gas

• Areas of interest:– West Africa– Middle East– South East Asia

• Funding the expanded opportunities– $50 million Stranded Gas Venture – Seed money for project acquisition – 80% Syntroleum, 20% investors

26

Multiple Opportunities in Nigeria

• Existing independent Nigerian field owners– Currently pursuing nine (9) opportunities

• Nigerian National Petroleum Company (NNPC)Equity Gas GTL Venture– Negotiations underway– 41 potential GTL Barge sites – Excess barge energy provides needed electric power source

• Open blocks with proven gas discoveries – Participating in bid round – 11 blocks of interest – Have formed three bidding consortiums for specific areas

27

Niger Delta Joint NNPC GTL Barge Study

Flare

S3A83.9 tcf

GTLBarge69,70

Distance to Coastal Waters

12 mi (19 km)

Approx.500 yd

Nembe

Creek3.0 tcf

Elpa.9 tcf

GTLBarge

71

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Robust Business Development Pipeline

• Participating in Algeria Tinhert tender– Proposals must include a 34,000 barrels per day GTL plant– Consortium is formed

• Actively negotiating MOU for an Asian GTL project

• Six additional opportunities being developed in the Middle East, Asia and South America

29

Emerging Coal to Liquids Opportunity

• United States Government priority– Energy security– $4.5 million technology Research and Development grant from

Department of Defense

• Abundant U.S. coal reserves– 270 billion tons recoverable reserves– World’s largest coal reserves

• Technology components exist – integration of proven gasification technologies and Syntroleum Fischer-Tropsch required

• Numerous unsolicited project opportunities from credible sponsors

• New focus on Coal to Liquids• Comprehensive evaluation of opportunities underway

30

Recent Financings Strategy

• Raised $80 million via private offerings to Legg Mason Opportunity Trust and Dorset Group Corporation– Limited equity raise in anticipation of future key events– New investors aligned with long term strategy

• $89 million cash position at March 31st

• Anticipate less dilutive future capital raises

31

Summary

• Syntroleum has developed the three phase process for converting natural gas into ultra-clean transportation fuels

• Major opportunity to directly develop stranded gas using Gas to Liquids

• Aje project remains on schedule • Increasing traction on multiple specific projects• 2005 financings enabling acceleration of business plan • Emerging Coal to Liquids strategy

GTL: Exploiting Remote Gas Discoveries

IPAA London Oil and Gas Investment Symposium

Ron Stinebaugh

Senior Vice President, Finance

July 2005