investor update presentation - new standard energy ltd€¦ · investment in elixir petroleum...
TRANSCRIPT
Investor update presentation
Phil Thick, Managing Director June 2014
Company overview
2
New Standard Energy ASX:NSE
Ordinary shares 386.2m
Options and performance shares 22.1m
Market capitalisation
(at $0.135c per share) ~ $52m
Cash position 31 March, 2014 ~ $13.8m
Investment in Elixir Petroleum
(121.7m shares at 0.6c per share) ~ $0.61m
Debt Facility US$45m drawn to
US$9m
NSE share performance over past six months
Applicable as at 3 June 2014
Corporate overview
Applicable as at 3 June 2014
Magnum Hunter Resources Corp 17.0%
Acorn Capital 4.1%
Buru Energy Limited 3.4%
Major shareholders
Experienced Board and Management
3
NSE Board NSE Management
Arthur Dixon AM – Chairman
• 40 years with Shell in LNG, gas marketing and project development
Phil Thick – Managing Director
• 20 year career with Shell, including four years on the Board of Shell Australia and former CEO of Coogee Chemicals
Sam Willis – Executive Director
• Joint founder of NSE and previous MD - corporate finance and resources background with over 10 years corporate advisory and capital markets experience
• Focus on business development and corporate
Kip Ferguson III – Non-Executive Director
• 24 years of onshore exploration and development experience in several major United States oil and gas basins.
• Currently the Executive Vice President of Exploration at Magnum Hunter Resources Corporation (NYSE:MHR)
Chris Sadler – Non-Executive Director
• Experience in corporate finance and energy sectors - 20 years experience in investment banking with Deutsche Bank, JP Morgan and Salomon Brothers
• Served on Eastern Star Gas board prior to takeover by Santos
Greg Carlsen – Exploration Manager
• Geologist and geoscientist with extensive onshore exploration experience, including the Canning Basin
Marcus Gracey – Business Development Manager
• Extensive legal experience in the oil and gas area
• Expertise in new business development, corporate transactions, native title and traditional owner negotiations and agreements
David Hansen – Chief Financial Officer
• Broad experience as Finance Director, Financial Consultant and CFO prior to joining NSE
Pierre Achour – HSEQ Manager
• Previous HSEQ roles with the DMP (Department of Mines and Petroleum – the WA regulator) and BHP
Business Strategy and Focus
4
The recent acquisitions have restructured the business, created a unique portfolio and delivered
a strong alliance with Magnum Hunter Resources Corporation, resulting in a new focus.
• Execute on current drilling inventory (50-60 well locations)
• Focus on production and reserves growth
• Reduce costs and deliver IRRs
• Selective additional acreage acquisitions (initial target 8,000 – 10,000 total net acres)
Eagle Ford – Grow the Business
• Tailor and revise work program for BCG play
• Retain operatorship alongside Magnum Hunter
• Assess opportunities to mitigate commitments over next 6-12 months
Cooper Basin – Seek Growth and Manage
Commitments • Continue to engage on stakeholder issues
• Retain longer term upside, minimise financial commitments
• Explore opportunities for funding partners over next 12 months
WA Portfolio – Protect the Upside
Diversified Portfolio
5
• Growing production delivering immediate cashflow
• Low risk appraisal and development opportunities providing production/reserves growth
• Manageable costs (~US$7 million/well), experienced partner in MHR
• Debt facility in place with Credit Suisse (US$45 million)
• Future drilling funded from cashflow plus additional debt draws
• Potential upside from Pearsall Shale and Austin Chalk
• Potential upside from additional down-spacing of wells
Eagle Ford acreage, Texas
5,182 net acres
Volatile oil/oil windows
7 producing wells
50-60 additional well locations
• NSE has assumed a 52.5% operated interest in PEL 570
• Farm-in commitment over 5 years ($42.5 million total)
• Work program being revisited and tailored for BCG play
• DLS/AQO takeover confirms value & provides new JV partner
• Strong interest in acreage providing opportunities to mitigate financial commitments
Cooper Basin Assets
Acquired 52.5% in PEL 570
Focus on basin centred gas (BCG) and wet gas plays
Exposure to east coast gas market and LNG export opportunities
• High risk, high reward asset portfolio
• Early stage exploration, challenging infrastructure environment
• Long-term exploration plays with massive upside
• World class partners on SCJV (ConocoPhillips and PetroChina)
• High equities to farm-out Laurel and Merlinleigh projects
• All activity on hold until 2015 – retain all upside, minimise financial commitments
West Australian Portfolio
25% operated interest in Southern Canning Joint Venture
100% operated interest in Laurel
100% operated interest in Merlinleigh
Immediate
cashflow and
development
Short to mid term
exploration,
appraisal and
development
Long term
exploration
upside
Recent transaction with Magnum Hunter Resources Corporation (NYSE: MHR) has diversified the
asset portfolio and altered the risk associated with NSE’s business and investment profile
Magnum Hunter Resources Corporation
• Magnum Hunter is an independent oil and gas company with experienced operating credentials
• Currently active in three shale resource plays in North America (Marcellus Shale, Utica Shale and the
Williston Basin/Bakken Shale)
• Also engaged in midstream and oilfield services operations, primarily in West Virginia, Ohio and Texas
• Magnum Hunter has grown from start-up in 2009 to market cap of approximately US$1.4 billion today
6
Magnum Hunter partnership is key to Eagle Ford success
2009
MHR started with 2,000 acres
in the Eagle Ford
2010
Drilled first well in the Eagle
Ford
2011 (Q4)
Producing 3,050 BOEPD (gross) from the Eagle
Ford
2012
Producing 9,770 BOEPD (gross) from the Eagle
Ford
April 2013
After drilling approx. 60 Eagle Ford wells,
MHR sold 19,000 Eagle Ford acres to Penn Virginia Corp for US$401 million*
2014
MHR retained 5,128 net acres in Eagle Ford which was
purchased by New Standard for
US$24.5million
*Based on this price and net investments to date this implied two times return on capital and IRR > 80%
Magnum Hunter – Proven Eagle Ford success
A unique operating model - Eagle Ford
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Building the foundations of a positive business alliance
NSE retains Operator status and control of the program – contracting Magnum
Hunter (MHR) under a Services Agreement
Eagle Ford wells managed and drilled by the same Magnum Hunter team that
drilled its own Eagle Ford wells, overseen by NSE Director Kip Ferguson III
NSE able to take advantage of existing relationships, contracts and lower costs
associated with MHR’s existing US position and large scale operations
Eliminating the risks associated with entering a new jurisdiction via strategic
business partnership
NSE plan to transition key technical staff from MHR to NSE to take over
operations directly
MHR able to introduce new opportunities and acreage that will complement
NSE’s current portfolio
MHR alignment as major shareholder (17%) and via NSE Board position
Magnum Hunter - successful execution
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Drilling
• Pad Drilling
• Top Hole Spud Rigs
• Modern Skidable Rigs
• Drill “on target”
Completion
• Longer Laterals and More
Stages
• Optimise Frac Design
• Service Company Consistency
Production
• Planning and Inventory for
Locations, Surface Equipment,
Pumping Units
• Artificial Lift Strategy
Prepare and plan for a successful
execution
TEAMWORK AND COMMUNICATION
Maintain high quality
and # of stages
Review and
Analysis
Consistency
Repeatable and
Predictable
MHR execution provides repeatable and predictable business
Magnum Hunter alliance delivering
9
Successful execution delivering on the objectives
Secure debt funding for current and future drilling operations
• Debt facility negotiated with Credit Suisse for up to US$45 million with first draw of US$9 million already made (Canaccord Genuity lead debt arranger)
• Facility based on reserves related to five existing wells and future draws to be subject to increasing reserves as more wells drilled
• 2 ½ year term with base rate of 13% due to relatively small initial reserves to be renegotiated over time as reserves grow and risk reduces
Drill, complete and produce first two wells inside four months
• Peeler Ranch-5H and 6H completed in May and brought into production
• Wells produced 24hr IP’s of 705 and 758 Boepd
• With 93% and 94% oil respectively, initial oil production from each well is higher than the previous Peeler Ranch wells, mainly due to the effectiveness of the zipper frac process
Eagle Ford – key economic drivers
10
Key drivers – well costs and effectiveness of completions
• Peeler Ranch-4H total cost approx. US$8.5 million (drilled 2013)
• Peeler Ranch-5H and 6H approx. cost US$6.8 million each, same lengths, same stages, 9 months later (drilled 2014)
• Costs continue to come down and expected to reduce further
• More pad drilling as it reduces well costs and increases potential recovery
• Looking for longer laterals and more frac stages (reduces cost per stage)
• Effective treatment of laterals and fracture stimulation remains critical
Target ranges for Eagle Ford well economics
• Wells with 24hr IP’s above 700 Boepd and with high oil percentage
• EUR’s in excess of 350,000 BOE
• Total well costs below US$6.5 million (drilled and completed)
• Total long term LOE below US$5,000 per well/month
• IRR’s in the 25 - 40% range for all wells
Well improvements over time
0
20000
40000
60000
80000
100000
120000
1
16
31
46
61
76
91
10
6
12
1
13
6
15
1
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6
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1
19
6
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1
22
6
24
1
25
6
27
1
28
6
30
1
31
6
33
1
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6
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1
37
6
39
1
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6
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1
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6
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1
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1
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1
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1
64
6
CU
MU
LA
TIV
E P
RO
DU
CT
ION
DAYS PRODUCED
Atascosa County Cumulative Production vs Days Produced Comparison to CG&A* Standard Type Curves
Peeler Ranch #3H
Peeler Ranch #4H
Lagunillas #1H
Lagunillas #2H
McCarty Unit A 1H
365 MBOE TypeCurve
300MBOE TypeCurve
CG&A's 365 MBOE
type curve
*Daily production as of: 2/18/14
$96.78/BO $3.67/MMBtu
CG&A's 300 MBOE
type curve
Note: BOE includes all produced gas
* CG&A refers to Cawley, Gillespie & Associates who are independent reserves certifiers
11
Peeler Ranch-5H & 6H
12
Comparison of IP24’s for oil production across the last four Peeler Ranch wells
400
450
500
550
600
650
700
750
800
Bo
pd
IP2
4
Peeler Ranch Wells
Peeler Ranch #3H
Peeler Ranch #4H
Peeler Ranch #5H
Peeler Ranch #6H
Peeler Ranch Area Production Analysis and IP
PR#3 PR#4 PR#5 PR#6
2013 Single Well Frac
2014 Zipper Fracs
2012 Single Well Frac
Peeler Ranch Area Production Analysis and IP
PR#3 PR#4 PR#5 PR#6
2013 Single Well Frac
2014 Zipper Fracs
2012 Single Well Frac
All wells - 20 stages - 215' spacing - 200k # sand/stage
Peeler Ranch Area Production Analysis and IP
PR#3 PR#4 PR#5 PR#6
2013 Single Well Frac
2014 Zipper Fracs
2012 Single Well Frac
Peeler Ranch Area Production Analysis and IP
PR#3 PR#4 PR#5 PR#6
2013 Single Well Frac
2014 Zipper Fracs
2012 Single Well Frac
All wells - 20 stages - 215' spacing - 200k # sand/stage
Eagle Ford growth platform
• Aim to fund future drilling program through combination of cashflow from production
and additional debt drawdown
• New reserves report within three months based on 7 wells
• Reserves growth to underpin next debt draw-down to fund most of next two wells
• Strong focus on growth from additional drilling
• existing drilling inventory of 50-60 additional well locations
• 2 additional wells planned for late 2014 with 4 to 6 wells planned for 2015
• New ventures team (Houston) actively seeking additional acreage to increase our
current acreage position:
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Continue drilling program and look for expansion opportunities
Adjacent to existing permits
to increase potential wells
and/or lateral lengths
Selective new acreage
identified in attractive areas
on right terms
Targeting a total of 8,000
– 10,000 net acres
initially
MHR and NSE have established an alliance and combined team that have
the execution capabilities to deliver on growth
Cooper Basin – South Australia
14
Planning for the exploration and development of PEL570
Cooper Basin snapshot
• Activity over the past six months has reconfirmed that NSE position in PEL570 is in the heart of the Patchawarra Trough and is one of the prime locations within the Cooper Basin
• This is strongly supported by Origin’s farm-in to Senex’s PEL514 adjacent to PEL570 and the recent friendly takeover offer by Drillsearch for Ambassador Oil & Gas
• Operated acreage is valuable – MHR alliance
PEL570 way forward
• Work with MHR and our partner (AQO or DLS) to develop a true unconventional work program for PEL570, targeting the Patchawarra tight sands and BCG play
• Work with this plan and the Regulator to agree a revised work program that is appropriate for unconventional development
• Seek opportunities to mitigate our balance sheet exposure on the capital commitments for PEL570 over the next 6-12 months
• Plan and prepare for drilling first well in 2H 2015
New Standard has secured a prime operated acreage position within the rapidly
emerging Cooper Basin with proven prospectivity
Western Australian assets
The WA assets remain highly prospective and offer substantial potential
upside to NSE and our partners, however:
• Early stage, high risk and subject to infrastructure and stakeholder issues
• Costs remain disproportionately high relative to other areas due to remoteness, lack of
infrastructure, lack of service providers and the time it takes to get all the necessary
stakeholder approvals to allow operations to commence
• If successful, connection to market is relatively long-term
New Standard’s aim is to:
• Continue to engage with key stakeholders with support from ConocoPhillips and
PetroChina and DMP to deliver an aligned and attractive outcome over the longer term
• Protect the upside, hold onto our acreage and keep our holding costs as low as
possible
• Seek partners for our WA assets to share the risk and reduce our capital exposure
15
Manage capital and retain upside
Important notice
This document has been prepared by New Standard Energy Limited ABN 20 119 323 385 (“New Standard").
This presentation contains certain statements which may constitute "forward-looking statements". It is believed that the
expectations reflected in these statements are reasonable but they may be affected by a variety of variables and changes in
underlying assumptions which could cause actual results or trends to differ materially, including, but not limited to: price
fluctuations, actual demand, currency fluctuations, drilling and production results, reserve and resource estimates, loss of
market, industry competition, environmental risks, physical risks, legislative, fiscal and regulatory developments, economic
and financial market conditions in various countries and regions, political risks, project delays or advancements, approvals
and cost estimates.
All of New Standard’s operations and activities are subject to joint venture, regulatory and other approvals and their timing
and order may also be affected by weather, availability of equipment and materials and land access arrangements, including
native title arrangements. Although New Standard believes that the expectations raised in this presentation are reasonable
there can be no certainty that the events or operations described in this presentation will occur in the timeframe or order
presented or at all.
No representation or warranty, expressed or implied, is made by New Standard or any other person that the material
contained in this presentation will be achieved or prove to be correct. Except for statutory liability which cannot be excluded,
each of New Standard, its officers, employees and advisers expressly disclaims any responsibility for the accuracy or
completeness of the material contained in this presentation and excludes all liability whatsoever (including in negligence) for
any loss or damage which may be suffered by any person as a consequence if any information in this presentation or any
error or omission there from. Neither New Standard nor any other person accepts any responsibility to update any person
regarding any inaccuracy, omission or change in information in this presentation or any other information made available to a
person nor any obligation to furnish the person with any further information.
It is not intended as an offer, solicitation or recommendation with respect to the purchase or sale of any securities.
Prospective investors should make their own independent evaluation of an investment in New Standard including without
limitation, seeking professional advice. 16
Additional Information
Eagle Ford – asset summary
19
• 5,182 net acres in the prime Eagle Ford play in Atascosa County, Texas, US
• Includes seven producing wells with existing cashflow
• Wells are predominantly oil and natural gas liquids (NGL) production
• 95%+ revenue from oil and NGLs, attractive oil price contracts at $6 premium to WTI
• Approximately 50-60 additional Eagle Ford well locations identified for low risk
appraisal and development opportunities
• Eagle Ford formation on the Alright and Peeler Ranch Prospects is the main target
with underlying Pearsall formation an attractive upside
• Acreage can be valued on a per acre basis based on comparative deals
• NSE headline purchase price: US$5,300 per acre (including production)
US$1,500 per acre (undeveloped equivalent)
• Compares very favourably with previous and most recent Eagle Ford transactions
Acreage snapshot and valuation
Eagle Ford reserves
* Net
Reserves
Proved
Developed
Producing
Proved
Undeveloped
Total 1 P
Reserves Probable
Total 2 P
Reserves Possible
Total 3 P
Reserves
Oil Mbbl** 282.8 798.4 1,081.1 798.4 1,879.5 7,850.0 9,729.4
Gas MMcf*** 345.6 1,077.8 1,423.4 1,077.8 2,501.2 5,042.8 7,544.0
NGL Mbbl 52.5 163.8 216.4 163.8 380.2 1,022.4 1,402.6
20
Refer ASX announcement 10 January, 2014 for full details
The information in this presentation relating to petroleum reserves and resources is based on and fairly represents information
and supporting documentation prepared by Matthew K. Regan who is a Partner and Reservoir Engineer (License #113228) at
petroleum consulting firm, Cawley Gillespie & Associates. CG&A is highly experienced in evaluating the Eagle Ford Shale and
has undertaken more than 40 valuations per year of all sizes in relation to this specific shale formation.
Mr Regan meets the requirements of a qualified petroleum reserve and resource evaluator under Chapter 5 of the ASX Listing
Rules and consents to the inclusion of the information contained in this announcement in the form and context in which it
appears.
CG&A certified SPE-PRMS compliant reserves (net) in the Atascosa Project acreage acquired by New Standard
* Net Reserves are based on the Company’s net revenue interests
** 1 Mbbl = 1,000 barrels (1 Mbbl = 1,000 BOE)
*** 1 MMcf = 1 million cubic feet. (6 MMcf = 1,000 BOE)
Eagle Ford – oil window in Atascosa
21
Oil Window
GOR < 750
Volatile Oil &
Condensate Window
Dry Gas Window
EOG
Newfield Chesapeake
Anadarko
SM-Energy
Cabot Goodrich
Chesapeake
Chesapeake
Talisman
Talis
man
BHP -Petrohawk
Chesapeake
New Standard
acreage
(5,182 net acres)
Eagle Ford acreage – Peeler Ranch
22
Peeler-5H & 6H
• Lease is in secondary term and subject to
continuous drilling clauses (one well every
six months)
• 10 potential additional Eagle Ford well
locations
• New Standard has just completed two wells
Peeler-5H & 6H with a further two wells
planned for second half 2014
• Two wells to be drilled from the same pad
where possible and fracced together (zipper
frac), flowed back and tied in
simultaneously. This provides cost
efficiencies to stand-alone wells
• Zipper fracs have potential to achieve 15%-
20% more stimulated rock volume per well
and therefore greater productivity and EUR
NSE
Eagle Ford acreage – Alright Prospect
23
• Lease is in primary term until
2015
• Secondary term; retain all
mineral rights through
continuous drilling (one well
each six months)
• 50+ potential Eagle Ford well
locations on 650’ spacing
• Planning underway for EF
drilling in early 2015
• Can HBP (hold by production)
with five to six wells
• Pearsall shale being pursued in
vicinity by other operators
NSE
NSE
Cooper Basin – PEL 570 summary
24
• NSE has secured a 52.5% operated equity stake in
PEL570 (2,400km2)
• Farm-in spend of $42.5m by NSE (100%) over 5
years, any spend above this in line with equity
• Work program to be tailored and revised with
partners and regulator
• PEL570 consists of five parts; two in the core of
the Patchawarra trough and three located to the
north
• The Patchawarra trough is the source for the oil
and liquids rich gas fields such as Tirrawarra, Fly
Lake and Moorari fields, owned and operated by
the Cooper Basin Joint Venture
• PEL 570 acreage value validated by adjacent deals
between SXY and ORG as well as friendly takeover of
AQO by DLS
• NSE is operator and majority owner of one the few
remaining substantial opportunities in the Cooper
• Strong interest provides opportunities to mitigate
expenditure commitments over next 6-12 months PEL 570 acreage areas within the Cooper
Basin
Cooper Basin – asset overview
25
Positive pressure cell whereby generation and expulsion of HC is
greater than migration
Over-pressured by definition
Cuttapirrie
Pondrinnie
Wimma
Napowie
?
PEL570
Cooper PEL570 – adjacent positions
26
Surrounded by major
players with acreage in
proven hydrocarbon
bearing formations,
with ability to access
East Coast gas market
using existing
infrastructure already
in place within the
Cooper Basin
Canning & Carnarvon – asset summary
27
• Western Australian assets remain integral to the overall
portfolio but now form part of a broader group of assets
• A diversified portfolio of attractive exploration assets in
WA across three different geological plays in two
separate basins
• Large, ground floor equity positions with longer
dated upside(early mover)
• Diversified exposure (geology, state of
development, access to infrastructure)
• New Standard currently operates all WA assets
• Gross acreage in excess of 14 million acres across
Western Australia
• Dominant acreage positions in onshore Canning
Basin and Carnarvon Basin
• Global leaders in oil & gas, ConocoPhillips and
PetroChina, secured to fund and progress Southern
Canning Project
• Engagement with key stakeholders ongoing to ensure
longer term outcomes are aligned and attractive
• Partners and regulators supportive of process
• Upside to be retained and opportunities to introduce
additional funding to be assessed over next 12 months