pa resources q4 2012 presentation_6 february 2013
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TRANSCRIPT
Fourth Quarter 2012
Bo Askvik, President & CEO
Nicolas Adlercreutz, CFO
Stockholm, 6 February 2013
Today’s three topics
2
Q4
>> FOURTH QUARTER 2012
Financial highlights
>> STRENGTHENED FINANCIALS
Recapitalisation completed
>> PA RESOURCES WAY FORWARD
Strategy and investment focus
3
Tomas Hedström appointed as new CFO
BRIEF
• Broad international experience in accounting and finance
from listed companies
• Most recently CFO at Rottneros AB (publ)
• Several positions at SCA (publ), with sales of more than
SEK 100 billlion and 50,000 employees, most recently as
Senior Vice President Finance
• M.Sc. Business and Economics
• Assumes position as CFO by 1 August 2013 or earlier
Financial highlights
Q1
Earnings and key ratios
5
Q4
2012
Q3
2012
Q4
2011
FY
2012
FY
2011
Production (bopd) 7,100 7,700 8,400 7,900 8,600
Oil price (USD/barrel) 106 109 104 111 103
Revenue (SEK million) 467 525 535 2,184 2,154
EBITDA (SEK million) 266 292 306 1,255 1,295
EBITDA margin 56.9% 55.7% 57.2% 57.5% 60.1%
Profit before tax
(SEK million) *
-16 64 11 85 158
Profit for the period
(SEK million)
-340 -1,385 -1,855 -1,966 -2,084
Earnings per share
(SEK)
-0.24 -2.17 -2.91 -2.36 -3.27
* Figures for Q4 and full-year 2012, exclude non-cash, one-off costs of SEK 169 million respectively
SEK 1,748 million and for Q3 2012 of SEK 1,495 million. Figures for Q4 and full year 2011, exclude SEK
2,035 million in one-off costs
KEY COMMENTS Q4 vs Q3
• Lower production and realised price
lowered revenue
• Stable costs, to a large extent fixed.
• EBITDA margin improved to 56.9%
• Relinquishment of P1342 and
P1802 of SEK 18 million and Azurite
direct costs of SEK 151 million
presented as one-off costs
• Financial net impacted by non-cash
item related to set-off issue of SEK
70 million
• New assessment of deductible
costs in EG increased income taxes
with approx. SEK 75 million.
Q4 - after one-offs and set-off issue
6
SEK million Q4
2012
Q4
One-offs
Tax and
FX effects
Set-off
effects
Q4
adjusted
Revenue 466,801 466,801
Cost of sales & other
expenses -201,046 -201,046
Depreciation & WD -256,752 169,226 -87,526
Operating profit 9,003 169,226 178,229
Financial revenue 1,908 1,908
Financial expenses -195,697 22,000 84,762 -88,935
Total financial items -193,789 0 22,000 84,762 -87,027
Profit before income
tax -184,786 169,226 22,000 84,762 91,202
Income tax -154,797 75,000 -79,797
Profit for the period -339,583 169,226 97,000 84,764 11,405
KEY COMMENTS
• Relinquishment of UK licences
amounted to SEK 18 million.
• After total Azurite impairment in Q3,
all additional investments has been
treated as direct costs, amounting
to SEK 151 million in Q4
• Q4 fx effects in financial net SEK
-22 million mainly related to NOK
• New assessment on deductible
costs in Equatorial Guinea increa-
sed income taxes with approx. SEK
75 million.
• Effect from set-off issue (convertible
bond) amounting to SEK 85 million
Improved cash flow
7
SEK million
Q4
2012
Q3
2012
Q4
2011
FY
2012
FY
2011
Operating cash flow 175 64 -106 838 812
of which income
taxes paid
0 0 -7 -5 -45
CAPEX -186 -16 -135 -255 -1,613
Financing activities 65 -51 36 -568 -408
Net cash flow 54 -2 -204 15 -1,209
KEY COMMENTS
• Improved operating cash flow
• SEK 838 million for the full year 2012
• SEK 175 million in Q4
• Higher capex spending in Q4 mainly
relating to Azurite sidetrack preparations
• Amortisations of SEK 568 million for full
year
• Full year net cash flow of SEK 15 million
Strengthened financial position
Q1
» Offer to convertible bondholders to set-off their convertible bonds against newly
issued shares at SEK 0.15
» Approx. 90 percent of the nominal amount was converted into newly issued shares
» Equity increased with SEK 968 million and nominal debt decreased with SEK 890
million (net debt reduced by 819 MSEK)
Recapitalisation completed
Completed two-step transaction strengthens equity with approx. SEK 1.570 billion
Set-off issue
9
1
» Fully underwritten rights issue at SEK 0.10 (~50% directed to old share holders and
~50% to convertible bondholders)
» 51% of shares (3,570 million) were subscribed with preferential right
» Additionally, 226 million shares were subscribed for with subsidiary preferential right
and without preferential right agreements
» The remaining 3,256 million shares were allocated to guarantors pro rata in relation to
total undertaking
» Total number of shares amounts to 14,146 million
» Increases equity by SEK 604 million after transaction related costs and reduces net
debt by SEK 602 million
» Outcome of transactions to result in significant changes in shareholder structure
Fully underwritten rights issue
2
Strengthened financial position
10
RECAPITALISATION COMPLETED
• Equity significantly strengthened with
SEK 1 570 million after transactions
related costs
• Cash and cash equivalents after rights
issue of SEK 569 million
• Net debt reduced by SEK 1 421 million
Equity and Net debt before and after transactions (SEK million)
Pro forma Q4 2012 Q3 2012 Q2 2012 Covenants
Book Equity (SEK million) 2, 194 1 590 956 2,608 >2,000
Book Equity to
Capital Employed 46% 37% 22% 43% >40%
Net debt (SEK million) 2 028 2 630 3,410 3,503 N/A
Covenants and Net Debt development
956 334
968 ,1 590
604 ,2 194
3 410 3 450
2 630 2 630
2 028
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
0
500
1 000
1 500
2 000
2 500
30 Sept.2012
Q4, excl.set-offissue
Set-offissue
31 Dec.2012
ProForma
After newShareIssue
Net d
eb
t Eq
uit
y
Equity Net Debt (RHS)
Strategy & focus
Q1
PA Resources way forward
12
2013 - 2018
Development of
prioritised projects
with reduced risk
>> LONG TERM GROWTH
Development of ~ 32 mmboe for
long-term production growth
>> BALANCED INVESTMENTS
Farm-out of assets reducing invest-
ments and risk, financing from
production and debt financing at lower
level
Business plan – development for future growth
13
Operating cash flow and
strengthened liquidity enables
maintenance, financing and
amortisations
» Cash flow from producing assets to finance maintenance investments
in Aseng and Didon fields
» Strengthened balance sheet, in combination with new debt financing,
enables planned amortizations of bond loans and credit facilities
Lower interest reduces both
investments and risk
» Farm-out processes ongoing to reduce interest in certain prioritized assets
• Zarat license in Tunisia (Elyssa, Zarat and Didon)
• 12/06 in Denmark (Broder Tuck and Lille John)
» Reduced risk exposure to individual projects and share of investment
» Strengthened balance sheet improves position for future transactions
Development of
prioritized assets for
long-term production growth
» Cash flow from producing fields combined with new debt financing
enables development of ~32 mmboe to production
» Net debt to remain in line with the level following the transactions
Selective exploration to increase
the resource base
» Selective exploration and appraisal in Equatorial Guinea, Tunisia and
the Netherlands, a few scheduled commitment wells coming two years
2016
Elyssa & Lille John 2017
Broder Tuck
2018
Zarat
Investments and key assumptions
14
KEY ASSUMPTIONS:
Development is not progressed until farm-out
successful
• Maintenance investments on producing fields
• Farm-out of prioritised assets to reach
preferred working interest level and reduce
risk on individual assets
• Zarat licence from 100% to 20%
• Didon field from 100%% to 50%
• 12/06 from 64% to 15%
• Present operatorship in farm-out assets
secures development planning
• Oil price of 110 USD/bbl and USD/SEK of
6.53
Capex forecast 2013-2018 before and
after farm out transactions (SEK million)
1,613
255 170 270
540 590
230
520
680
970
300
0 0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2011 2012 2013E 2014E 2015E 2016E 2017E 2018E
PA Resources' share of investments Partners' share of investments
Expected outcome of planned development
15
KEY ASSUMPTIONS:
• Development of existing
reserves adding after farm-out
30 MMBOE for long-term
production growth
• Debt stays around current
level
• Expected net cash position in
2018
Estimated development of net debt
and average production
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
-1,0
0,0
1,0
2,0
3,0
4,0
5,0
2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E
ba
rrels
pe
r da
y
SE
K b
illi
on
Net debt actual Production Net debt estimate
Operations & Outlook
Q1
Changes in Reserves and Resources 2012
17
Working
Interest
Net
Entitlement
End 2011:
Proven and probable reserves*
Production
Revision
1P/P90 2P/P50 1P/P90 2P/P50
39.1 60.2
-2.9
+1.9
-2.9
-1.6
-2.1
+1.3
-2.1
-1.4
25.9 40.4
End 2012: 38.1 55.7 25.1 36.9
* Reserves are classified accordingly to the SPE-PRMS 2007 guideline
KEY COMMENTS:
• Improved 1P to 2P ratio from 65 to 68%
• 1P reserves impacted by;
• Increase of 1P volume for the Aseng field
(1.03 mmboe) and the Tunisian fields (1.0
mmboe) based on production performance
• Reduction for Azurite of 0.15 mmboe
• 2P reserves impacted primarily by;
• Downwards revision of Azurite reserves by
2.9 mmboe on a working interest based
• Upwards revision of the Tunisian fields
(1 mmboe)
• Resources approximately unchanged
• Contingent resources of 142 mmboe (145)
• Risked prospective resources of 406 mmboe
(409) at a mid-case level
1,613
255 250-380
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2011 2012 2013
Capex 2012 and forecast 2013
Actual Forecasted
Capex development and forecast (SEK million) KEY COMMENTS
• Capex in Q4 amounted to SEK 186 million
• Azurite investments of SEK 151 million fully
expensed in Q4
• 2012 full year capex of SEK 255 million, at
the lower end of the forecast range of SEK
240 – 275 million
• 2013 forecast of SEK 250 – 380 million,
presuming maintained interest (no farm-outs)
18
Capex forecast 2013/2014 – drilling programme
DK: 12/06 Lille John 2013/2014 Appraisal/
Exploration/1-2
EG: Block I Block I 2013 Appraisal/
Exploration/2
EG: Block H Aleta 2013 Exploration/1
NL: Q7/10a Q7-FA Q4
2013/2014
Appraisal/
Development/1
Tunisia: Zarat Elyssa 2013/2014 Appraisal/1
Tunisia: Makthar 2014 Exploration/1
Drilling programme/planned wells 2013-2014 Capex forecast 2013 includes:
• Drilling campaign on 12/06 high priority
• Drilling on 12/06, Block H and Q7/10a
dependent on rig availability
• Drilling campaign ín Block I in EG
• Maintenance investments on producing
fields
• Elyssa well assumes successful farm-out
of Zara tlicence
• The drilling programme is revised
continuously based on the capex budget
and prioritised commitments
19
20
Production and sales
bopd Full-year
2012
Q4
2012
January
2013
West Africa 5,600 4,900 5,000
North Africa 2,300 2,200 2,100
Group Total 7,900 7,100 7,100
• ASENG: Average production level increased of
60,500 boepd in Q4 (3,400 net to PA Resources)
• AZURITE: Production slightly lower than
expected in Q4 due to several short production
interruptions on the FDPSO
• TUNISIA: Stable production
• PRICE: PA Resources realised price slightly
under Brent average for the quarter due to local
discount in Tunisia
Average production per country (bopd)
Average sales price (USD/bbl)
0
2 000
4 000
6 000
8 000
10 000
12 000
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
Q32012
Q42012
Congo: Azurite EG: Aseng Tunisia: Didon & Onshore
97
109 106 104
120
109 109 106
106
117 113 109
119
108 109 110
20
40
60
80
100
120
140
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
Q32012
Q42012
PA Resources Brent
21
Recent development
HIGHLIGHTS
• Azurite workover operation suffered mechanical
downhole problem preventing sidetrack from the
existing wellbore. Ongoing evaluation of future options
for the field – awaiting operator’s proposal
• Alen field development progressing according to plan
and below budget, targeting first production in Q3
2013
• Following detailed studies, two licences in UK
were relinquished
• German licence farm-out to Danoil (10%, pending
approval)
• Tentative Unitization agreement of the Zarat field
• Tunisian farm-out process ongoing
EG Block I - Plateau continues at foundation asset PA Resources 5.7%
• First oil from Aseng in November 2011, plateau level of
around 60,000 bopd sustained since March 2012
• Total field production since start in November 2011 of
~27 mmbo + 1.5 million barrels to PA Resources
• Average production of 60,500 bopd in Q4,
3,400 net to PA Resources
• 1P reserves upgrade substantially replaces 2012 production
• Profitable barrels
• Investments of SEK 500 million recovered in 2012
• Opex per barrel will reduce after Alen commencement
• 6-9 liftings per quarter generate frequent cash flow
• Alen field development – first oil expected in Q3 2013
22
Licence Group: Operator Noble Energy (38%),
Atlas Petroleum Int. (27.55%), Glencore (23.75%),
PA Resources (5.7%), GEPetrol (5%)
EG Block I - Exciting near term drilling program PA Resources 5.7%
• Firm 2013 drilling programme with Atwood Hunter rig
• Progressing two exciting fields towards development
• Carla North and South
• 2011 discovery in adjacent Block O (’Carla North’)
currently being appraised in Block O, where operator
has announced additional oil reservoir found.
• Operator has announced plans for fast-track
development tied back to Aseng vessel.
• Atwood Hunter rig will shortly move to Block I to drill
Carla South exploration well on same trend as Carla
North
• Diega
• Expect appraisal well and 3 to 4 week production test
in Block I later in 2013
• Operator estimates Diega P75-P25 gross resource
range of 65-116 mmboe
23
Licence Group: Operator Noble Energy (38%), Atlas
Petroleum Int. (27.55%), Glencore (23.75%), PA Resources
(5.7%), GEPetrol (5%)
Block I
Carla South
240 241 250 244 248280 297
329
54 59 61 63 68
7471
72
63 70 6845 50
4849
47
2325 29
5868
7586
96
380396
408 410435
477502
544
-
100
200
300
400
500
600
2003 2004 2005 2006 2007 2008 2009 2010
Gas C
on
su
mp
tio
n (
mm
cfd
)
STEG IPP Industries (HP) Other (MP & BP)
~5% CAGR
Tunisia Zarat & Elyssa - Gas market pull on development
Historic Gas Demand
Source: STEG 2012
-
100
200
300
400
500
600
700
800
900
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Natu
ral G
as (
mm
cfd
)
Demand Supply
Demand
outstrips
Supply
from
2012
onwards
Historic & Forecasted Gas Supply
~3% CAGR
-
100
200
300
400
500
600
700
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Pro
du
cti
on
(m
mcfd
)
Algerian Gas Miskar Hasdrubal El Franig BaguelChergui Adam Fields Oued Zar Maamoura and BarakaJbel Grouz Chouech Es Saida South Tunisia Gas Project Other
Demand - Supply Shortfall
Note: Forecast supply does not include production from Zarat and Elyssa
fields
24
Tunisia Zarat & Elyssa - Beneficial economic environment
Source: Wood Mackenzie, Bloomberg, Factset
~58% ~60% ~60% ~62% ~64%
~75% ~77%
Americas Tunisia OECD Middle
East
Asia-
Pacific
North
Africa
Sub-
Saharan
Africa
• Full recovery of exploration and development
expenditure
• Partial recovery of financing costs
• One of the most attractive E&P fiscal regimes in
North Africa
11.00
11.90
9.63
2.24
10.83
4.22
~6.00
9.18
-
2
4
6
8
10
12
14
Tunisia Asia TTF NBP Henry
Hub
Libya
(EPSA)
Israel Egypt
US
$ / m
cf
International Gas Prices Regional Gas Prices
• Gas price enshrined in Tunisian Law
• Formula is tied to 85% of Mediterranean high
sulphur fuel oil (HSFO) price
• Assuming USD 90/bbl long term oil price, resultant
Tunisian gas price is c. USD 11/mcf
• Assuming USD 100/bbl long term oil price, resultant
Tunisian gas price is c. USD 12/mcf
…generates strong gas price for the project
…results in Government share of profit comparable to OECD Fiscal Incentives….
25
2.4
Linkage of domestic gas price to oil price...
• Jelma-Makthar permits surround producing Douleb,
Semmama and Tamesmida (DST) fields onshore
Tunisia
• Both permits cover areas of 7,216 km² and 3,828 km²
• Jelma extended until 2016 and Makthar until 2014
• Makthar permit contains several onshore exploration
prospects
• Detailed analysis and modelling of 2D seismic over
Makthar finalised
• Evalutaion of Jelma permit potential completed
• Regional mapping of reservoirs, seals and source rock
formations over both permits completed
• Awarded open acreage around Douleb (189km2) as
integrated into Makthar permit
• New seismic to be acquired over Makthar’s most
promising prospects and leads in 2013 to mature
prospect for commitment well in 2014
Licence Group: Operator PA Resouces 100%
ETAP has a back-in right of up to 55%
Tunisia - Makthar and Jelma permits’ potential PA Resources 100%
26
NW Maiza
Boughanem
Friha
Jelma permit
Makthar permit
Douleb & Semmama
Denmark 12/06 - Progressing discoveries PA Resources Operator with 64%
• High quality Middle Jurassic reservoir proved by wells
• Mid to high case assessment of c. 25-50 mmboe gross
of contingent resources including liquids
• Technical and commercial studies continuing with focus
on eliminating need for further appraisal drilling
• Ongoing discussions with Maersk (DUC) for infrastructure
tie back as one of range of possible development
concepts
• Assumed production start in 2017
• Wells established 35 API oil in Miocene sandstone
at c. 900m – exceptionally light oil for shallow depth
• Remaining deeper potential likely – Chalk and Middle
Jurassic
• Efforts to locate available rig for appraisal drilling continue
in tight rig market
• Development options dependent on appraisal results –
successful appraisal could lead to tieback to nearby
infrastructure or standalone development
• Assumed production start in 2016/17
27
Licence Group: Operator PA Resources (64%),
Nordsøfonden (20%), Spyker Energy (8%), Danoil (8%)
B20008-73
12/06 Broder Tuck-2
Lille John-1
Broder Tuck
Lille John
Denmark 12/06 - Exploration and appraisal potential
28
PA Resources Operator with 64%
• Prospects at Miocene,
Chalk & Middle
Jurassic levels
• Commitments fulfilled,
2 year extension to
2014
• Follow-on potential in
German licence
B20008-73
12/06 Prospectivity
29
Germany B20008-73 - Farm-out
Hanze
Regnar
Vagn
Tove
Broder Tuck
Lille John
PA Resources Operator with 90%
• Danish and Dutch sector prospectivity extends
onto B20008/73
• Danoil farming in for 10% (subject to regulatory
approvals)
• PA Resources’ 2011 Danish discoveries are seen
to upgrade prospectivity of B20008/73
• Currently evaluating existing 3D over block and
adjacent areas
• Decision to drill or drop at year end 2013
Licence B20008/73
Licence Group: Operator PA Resources (90%),
Danoil (10% subject to regulatory approvals)
• Application group PA Resources 50% (Operator),
First Oil & Gas Limited 50%, notified that award
will be made.
• 22/19-1 Fiddich Triassic gas condensate discovery
(1984) flowed 15 mmcfg/d and ~1500 bcpd
• Fiddich discovery and low risk Fiddich East
segment – several 10’s mmboe combined
• Key issue – minimum economic reserve size and
availability of options for tieback
• Decision to drill well or drop after 2 years
UK 22/19a - Undeveloped field in Central North Sea
30
PA Resources Operator with 50%
Application group: PA Resources 50% (Operator),
First Oil & Gas Limited 50%.
Discovered resources on 22/19a
Summary and outlook
31
>> STRENGTHENED FINANCIAL POSITION
Capacity to finance development capex and planned amortisations
and well positioned for future transactions
>> EXPLORATION AND APPRAISAL WITH UPSIDE POTENTIAL
Drilling activites on prioritised assets - Block I campaign in 2013
and 12/06 campaign possibly in 2013 or 2014
>> FOCUS ON ADDING LONG TERM PRODUCTION GROWTH
Focus on development of prioritised assets and increased farm out –
32 MMBOE with lower participation - expected net cash position in 2018
>> OPERATING CASH FLOW FROM PRODUCING FIELDS
Important cash flow with profitable barrels from the Aseng field
– foundation for growth
Thank you! Q1
Q1 Report on 24 April 2013