salamander energy full year results march 2012. © salamander | 2012 | 2 agenda introduction &...

SALAMANDER ENERGY

Full Year Results March 2012

© SALAMANDER | 2012 | 2

AGENDA

Introduction & Overview

Financial Review

Operational Review

Summary & Outlook

James Menzies, CEO

Jonathan Copus, CFO

Mike Buck, COO

James Menzies, CEO


2011 FULL YEAR RESULTSHIGHLIGHTS

• Operational Progress– Full year average production rate of 18,600 boepd (2010: 20,300 boepd)

– Proved reserves increased by 37% to 48 MMboe (2010: 35 MMboe)

– Proved & probable reserves increased by 14% to 75.3 MMboe (2010: 66.3 MMboe)

– Successful drilling resulting in East Terrace oil discovery, South Sebuku and Dong Mung gas appraisals

– Independent CPR for North Kutei acreage giving gross mean prospective resource of c. 2.5 Tcf of gas and 260 MMbo of oil in top four ranked prospects

• Financial Highlights– Record post-tax operating cash flow increased by 82% to $193.9 MM (2010: $106.5 MM)

– Record pre-tax profit of $112.6 MM (2010: loss of $113.7 MM)

– Year end cash position of $85.8 MM

• Strategic Realignment of Portfolio– Expanded Greater Bualuang position through farm-in to G4/50

– Deepened interest in Greater Kerendan Area

– Disposal of low margin, non-core interests in ONWJ/SES PSCs


FOCUS ON 3 REGIONAL PLAYS WITH GROWTH POTENTIAL

• Core Area Characteristics– Operated positions with large equity

participation– Anchor asset with reserves &/or resources,

exploration & appraisal upside– Room for expansion – Competitive advantage through

data/knowledge

• Building Around Anchor Assets– Additional equity in Kerendan field,

Salamander now 80%– NE Bangkanai and W Bangkanai Joint Studies

– options for expansion– Farm-in to G4/50 in Greater Bualuang Area

• Managing Exit / Harvesting Non Core Areas– ONWJ/SES divestment– Opex reduction initiative in Kambuna– Withdrawal from Vietnam

* Moecor etains a 50% back-in right

Greater Kerendan, IndonesiaBangkanai PSC (80%), operatorNE Bangkanai Joint Study (100%)W Bangkanai Joint Study (100%)

Gas Development & Exploration

Greater Kerendan, IndonesiaBangkanai PSC (80%), operatorNE Bangkanai Joint Study (100%)W Bangkanai Joint Study (100%)

Gas Development & Exploration

North Kutei, IndonesiaBontang PSC (100%), operatorSE Sangatta PSC (75%), operator

Gas Appraisal & Exploration

North Kutei, IndonesiaBontang PSC (100%), operatorSE Sangatta PSC (75%), operator

Gas Appraisal & Exploration

Greater Bualuang, ThailandB8/38 (100%), operatorG4/50 (100%*), operator

Oil Production, Development & Exploration

Greater Bualuang, ThailandB8/38 (100%), operatorG4/50 (100%*), operator

Oil Production, Development & Exploration


TRANSFORMATIONAL POTENTIAL ACROSS 3 LOW / MID RISK PLAYS

North Kutei

Greater Bualuang

Greater Kerendan

G4/50


STRENGTHENING THE MANAGEMENT TEAM & BOARD

• Dr John Bell, Group Technical Director (member of Executive Committee)

• Graham Balchin, GM Thailand, ex-BG Operations Director Trinidad & Tobago

• Craig Stewart, GM Indonesia, ex-President & CEO VICO Indonesia

• Jerry Smart, Exploration Manager Indonesia, ex-ENI, Exploration Manager (Ghana & Americas)

• Technical Advisory Committee to the Board

– Dr Richard Hardman

– Prof Howard Johnson

– Dr Alastair Sharp

• Dr Carol Bell, Non-Exec Director

– Non-Exec DNO

– Non-exec PGS

– Advisory Board Gemini Oil & Gas

Executive Management Appointments Non-Executive Appointments


ORGANISATION RE-STRUCTURED

HR

CP&L

HSE

Accts.

Finance

Tax

Commercial

Legal

Audit

Jonathan CopusGroup Finance Director

Mike Buck Chief Operating Officer

James MenziesChief Executive Officer

GM Indonesia

GM Vietnam

GM Thailand

ASSETS

John BellGroup Technical Director


PROVED & PROBABLE RESERVES UP 14% TO 75.3 MMBOE

• 28 MMboe added to 2P reserves• Proved reserves up 37% to 48 MMboe• Reserves replacement 235%, excluding disposals 436%

Proved 53%

Proved 64%


LARGE PROSPECTIVE RESOURCE BASE UNDERPINS RESERVES & CONTINGENTS

• Major Prospective Resource

– Over 900 MMboe of prospective resources identified in high-graded 15 prospects within three core areas

– Average risk 1 in 4

– >100 MMboe in 2 large prospects in Greater Kerendan

– 110 MMbo in deep water North Kutei prospect excluded from these figures

– For drilling in next 2 – 3 years

• Near-Term Reserve Additions From Resources

– Further Kerendan volumes targeted

– Tutung appraisal drilling

– Bualuang resources below & above main reservoir unit

Top 15 Prospects Unrisked Mean Prospective Resources

2C Contingent Resources

925 MMboe(12 x 2P reserves)

88 MMboe

75.3 MMboe

2P Reserves

Oil & liquids

Gas

FINANCIALS


Record cash generation

2011 2010

Production (Mboepd) 18.6 20.3

Realisation Oil ($ per bbl) $104.5 $73.2 Gas ($ per Mscf) $5.5 $5.1

Revenue ($MM) $408.0 $323.4

Pre-tax Profit/(Loss) ($MM) $112.6 ($113.7)

Operating cash flow ($MM) $293.6 $174.4

Post tax operating cash flow ($MM) $193.9 $106.5

Net debt ($MM) $210.1 $190.2

2011 FINANCIAL OVERVIEWKEY FINANCIAL METRICS

Production approx. flat ex sale of ONWJ/SES

68% Y-o-Y growth

82% Y-o-Y growth

Buoyant commodity markets, strong gasrealisations, Dubai discount narrowed further

Borrowings $195.8 millionConvertible bond $100 millionCash and funds $85.8 million


$113 million pre-tax profit

$MM 2011 2010

Revenue 408.0 323.4

Cost of sales

Other (205.5) (272.2)

Impairment 0 (48.6)

Gross Profit 202.5 2.6

Exploration expense (57.8) (95.9)

Admin (14.6) (12.7)

Profit on asset disposal 6.8 0.0

Operating profit/(loss) 136.9 (106.0)

Net financial (24.3) (7.7)

Profit/(loss) before tax 112.6 (113.7)

Tax (158.1) (55.9)

Loss for year (45.5) (169.5)

2011 FINANCIAL OVERVIEWPROFIT AND LOSS

Book profit on disposal of ONWJ/SES

Kambuna exploration (historic)Dao Ruang 2 and 3Cat Ba

Year-on-year comparisons are complicated by 2010 impairments. 2011 direct operating costs totalled $104m, broadly flat on 2010 ($103m)

First full year of SRB 2011 2010Income tax $63m $51mSRB $58m $21mDeferred tax $37m ($16m)

$158m $56m

One cargo of crude held in tanks at year-end c.$35 million. Sold in 2012 at $1.10/bbl discount


2011 FINANCIAL OVERVIEWINCOME STATEMENT TAX… TAKING A CLOSER LOOK

• FY-11 income statement tax equalled $158 million (cash tax of $102 million)

• Weighting applicable tax rates for production assets against their PBT, Salamander’s FY-11 effective tax rate was 48% (50% Thailand, 44% Indonesia)

• FY-11 tax is impacted by various non-deductible items. Some will unwind or be more efficiently managed through the group’s refocused strategy:

In 2011 virtually none of Salamander's exploration spend expensed could be taken as an allowance against tax. Moving forward, as spend rises in core areas such as the Greater Bualuang area, this will change.

FY-11 is the first full year where SRB is paid. As capital investment rises across the Bualuang field and B8/38 block, this figure should fall.

Accelerated depreciation and tax timing differences for corporate acquisition costs, which can not be taken as an allowance against current year tax. Figure will be amortized with production and will be diluted as more boe are added through reserve additions

2011 tax… yet to reflect the new strategy

2011

Profit / (loss) before tax $112.6

Adjustments:

Exploration expense $57.5Acquisition costs and accelerated depreciation $74.4

SRB $57.9

Other $27.1

$216.9

Adjusted PBT $329.5

Effective tax rate 48%

Tax charge $158.1


2011 FINANCIAL OVERVIEWCASH FLOW EVOLUTION

$86 million closing cash balance

Capex $249m, including c.$21m bank guarantee for G4/50 3D seismic; (completed Q1 2012) and $30.4m of Angklung costs

invoiced in 2011

Capex $249m, including c.$21m bank guarantee for G4/50 3D seismic; (completed Q1 2012) and $30.4m of Angklung costs

invoiced in 2011

Sale of ONWJ/SES

Sale of ONWJ/SES

Closing cash balance $86m ($25m restricted, including G4/50 3D seismic guarantee; funds now released)

Corporate tax $37mSRB $65m

Corporate tax $37mSRB $65m

Opening cash balance $90m

RBL refinanced May-11Facility size: $325mDrawn: $196m

RBL refinanced May-11Facility size: $325mDrawn: $196m

Production 18,600 boe/dOil and Liquids $104.4/bblGas $5.5/mscf

Production 18,600 boe/dOil and Liquids $104.4/bblGas $5.5/mscf 2012 outlook:

Production 12,000–13,000 boe/d

Capex $225 million

Cash flow per barrel a key focus


High margin barrels underpin cash flow

2011 FINANCIAL OVERVIEWHIGH GRADING CASH FLOW

• Sale of ONWJ/SES will lower 2012 production Y-o-Y by c.33% (to 12–13k boe/d)• Boe’s sold were low margin, high tax, high cost, fields in long-term decline• Significant maintenance capex on ONWJ/SES… but no growth• Higher margin Bualuang barrels rising to c. 70% of group production (2010: 42%)

2011 post tax cash flow per WI boe (US$ per boe)Evolution of production (boepd)

Sold


Significant opportunity to improve cash flow margins

2011 FINANCIAL OVERVIEWINTEGRATED GULF OF THAILAND STRATEGY

• Discount to Dubai reduced, Dubai trading at parity to Brent– October 2008: Dubai minus $17.00/bbl– 2011: Dubai minus $1.97/bbl– 2012/2013: Dubai minus $1.10/bbl

• Costs: Opex reductions targeted– Bravo Platform on track for September 2012– Field optimisation review to target opex reductions

• Government take:SRB expected to fall– SRB = SRB Rate x Petroleum Profit– SRB rate between 0-75%, function of adjusted petroleum revenue/metre

drilled (currently 40-50%)– Petroleum Profit = Revenue less royalty, capex, opex and carried

forward losses– Capex expensed in year incurred– SRB is deductible for Petroleum Income Tax

– 2012 capex on B8/38 67% higher than in 2011 (post uplift)– C.$30 MM spent on G4/50 to utilise

Pre capexCash margin

Discount

FY-11 Brent

Opex

G&A

Royalty

Income tax

SRB

Production capex uplift

Drilling allowance Drilled to date

B8/38 25% 150k m 46k mG4/50 35% 600k m -

1

2

3

1

2

3

OPERATIONS


HIGHLIGHTS

• Greater Bualuang– East Terrace oil discovery– Reserves upgrade– Bravo Platform on schedule– Expanded acreage position through G4/50

• Greater Kerendan– Booked 19.0 MMboe of 2P reserves– DrillCo-1 rig mobilising to location– Options over surrounding acreage

• North Kutei– Completed technical review applying lessons learnt from play

opening Angklung-1 well– Four initial targets chasing 676 MMboe (unrisked) / 144 MMboe

(risked)– More than 20 prospects and leads mapped all with multiple

reservoir targets


GREATER BUALUANG10 MMBBLS RESERVES ADDITIONS, EXPLORATION CREATING VALUE

• East Terrace Oil Discovery & main field upgrade– 35 m net pay in three zones, 50 MMbo STOIIP– 8 MMbo booked as 2P reserves– Booked additional 2 MMbo on main field– Additional recoverable resource of c. 14 MMbo in the T2,

T5 and East Terrace

• Phase 5 development complete– 3 new producers, 2 existing wells side tracked– Two of the longer reach wells drilled to flanks of field

have proven to be good producers

• 2012 Development Plans – Ensco-53 rig mobilising to location– 2 production wells prioritised to exploit high prevailing oil

prices

• Phase 6 development drilling – Bravo Platform– 16 slot bridge linked platform, 60% complete– On schedule for installation in August 2012– 10 wells on main field and 6 on East Terrace starting 2H

2012


NEAR TERM EXPLORATIONNW TERRACE/FAR EAST PROSPECT 2Q 2012

• Ensco-53 rig delayed due to overruns in previous operator’s programme

• Far East and Northwest Terrace back to back drilling starting May 2012

NW Fault Terrace Cluster• Typical GoT style traps ~5 MMbo per

compartment, 35% CoS• Moderate fault throw, help trap integrity• Cluster development potential

Far East Prospect• Large Miocene structure with deeper Permian

Ratburi potential• 20 MMbo Miocene potential, 35% CoS• Migration key risk, East Terrace success

reduces risk

High Prospect Density• More than 20 defined drillable prospects in

376sq km block B8/38

North East

North Central

B8/38-1

B7/32-2

B8/38-5

B8/38-2

B8/38-3

Platform

North West

Prospect

Ratburi Lead

3D Area

Oil Field

Miocene Lead

Bualuang

Far East

NW Fault Terrace Cluster


G4/50 PROVIDING FURTHER RUNNING ROOM

• Farmed in to G4/50

• 5,000 sq km surrounding Bualuang and sharing the same petroleum system

– One of the most sought after blocks in the last licencing round

• Salamander has extensive knowledge of the play systems through B8/38 activities

• 2,000 sq km of existing 3D acquired by Chevron

• 3,000 sq km 3D survey completed Feb 2012

– Fast track processed cube in house, Interpretation in progress

– Full processing on-going

• 3D seismic is key in defining traps and locating wells in Gulf of Thailand

• Drilling 2 exploration wells in Greater Bualuang area in 2H 2012


FORWARD PROGRAMMERIG ON LONG TERM CONTRACT TO ENSURE DELIVERY

• Tight rig market and rig delays have repeatedly caused drilling plans to slip

• Expanded acreage position with large portfolio of targets provides continuity of work to commit to rig on long term contract

• Signed contract to take Atwood Mako jack-up rig from 12 month term with options to extend

– New build, to be delivered in 3Q 2012• Continual programme of development, exploration and

appraisal drilling– Phase 6 development from Bravo platform– East terrace development – B8/38 and G4/50 exploration – Early appraisal of exploration success


GREATER KERENDAN19.0 MMBOE OF 2P BOOKED, FURTHER RESOURCE TO COMMERCIALISE

• Kerendan Field

– Booked 19.0 MMboe of 2P reserves

– Further 23.4 MMboe (net) of contingent resource

– Price $4.79/MMbtu, 3% inflator per 3 years

– 20.3 Bnbtu/day, 20 year contract

• Development Plan

– PLN buyer, gas for local power generation• 320 MW plant to be built capable of taking over three times volumes

in current GSA

• Kerendan currently the only viable supply source

– Power by wire into East Kalimantan grid

– Delivery point at PLN power plant 3 km from field

– DrillCo-1 mobilising: 3 development wells from June

– Kerendan ready to deliver gas late 2013/early 2014

• PLN progress

– Power plant tender in preparation

– Transmission lines under construction

• Significant exploration upside

– West Kerendan has 1Tcf potential in two targets

– Prove up resources and negotiate GSA for local sale or pipe gas to East Kalimantan markets

23

Kerendan Field

Undrilled West

Kerendan Prospect

A modern day equivalent of the Kerendan reef


KUTEI BASINA NEW PLAY IN A PROLIFIC BASIN

SE Sangatta PSCBontang

PSC

Tunu

Jangkrik

Nilam

Peciko

Attaka

W.Seno

Merah Besar

Phase I: Mahakam

Delta Giant Fields

Distribution & Evolution of Kutei Basin Discoveries

Phase II: Major Fields as play

extensions around

Mahakam Delta

Phase III: Explore for Giant discoveries 2012-13

benefiting from new geological insights

• Modern data and technology driven new geological model

• Ex BG team working data have experience on play from Egypt

• Angklung-1 gas discovery is play opener & has calibrated data sets

• Play extends across Bontang & SE Sangatta PSC’s

• >20 leads and prospects mapped to date all with stacked reservoir potential


Over 20 leads & prospects on the acreage offering material upside

NORTH KUTEITRANSFORMATIONAL RESOURCE POTENTIAL – TOP 4 PROSPECTS

Prospect Licence HC-Type

Mean Unrisked

Prospective Resource

P90 Unrisked


P50 Unrisked


P10 Unrisked


Gas (Bcf) 245 119 233 389Oil (MMbo) 3 0.1 3 6Gas (Bcf) 293 124 268 491Oil (MMbo) 15 2 12 30Gas (Bcf) 1190 579 1063 1953Oil (MMbo) 108 37 102 188Gas (Bcf) 766 353 708 1239Oil (MMbo) 134 65 125 208

TOTAL (MMboe) 676TOTAL Net Salamander (MMboe) 534

Conversion factor 6 Bscf/Mmboe

All prospecive resource figures are gross unless otherwise stated

Salamander has 100% working interest in Bontang PSC and 75% in SE Sangatta PSC

North Kendang SE Sangatta PSC

Kecapi Bontang PSC

Bedug Bontang PSC

South Kendang SE Sangatta PSC

Chance of Success: Gas 25% / Oil 15%

ISIS Petroleum Consultants independent resource estimates:Pmeans similar to P50sPmeans similar to P50s

Over 500 MMboe unrisked

Over 500 MMboe unrisked


AN EXAMPLE OF THE PLIOCENE CHANNEL SAND PLAYKECAPI PROSPECT

• Multiple Stacked Canyon Fairways – strong amplitude support for hydrocarbon presence• Sidetrack leg to penetrate ‘downthrown’ continuation of Angklung discovery

Ë

BT45_CYN04 (A,B &C)

BT45_CYN04 (A,B &C)

BT50BT50

BT18_CYN02 (A,B&C)

BT18_CYN02 (A,B&C)

AngklungAngklung

BT25-CBT25-C

AngklungDST 24 Mmcfgpd

AngklungDST 24 Mmcfgpd

‘Downthrown’ extension of Angklung

proven gas

‘Downthrown’ extension of Angklung

proven gas

Ë


EAST KALIMANTAN GAS MARKET

Spare capacityof approximately1200 MMSCFD

Market SectorPrice Range per

mmbtu

Export LNG $10 to $16, linked to JCC

Domestic LNG $10, linked to ICP

Power Generator $ 5 to $ 5.7 with annual escalation

Refinery Fuel 82% HSFO ($9-$10/mmbtu)

LNG Plant Fuel Around $ 7/mmbtu

Ammonia $4.85 to $ 5.15

Source: Energy Advisors Group Source: LNG Japan/BPMigas


AGGREGATED WORK PROGRAMME

2012

Q2 Q3 Q4

Greater BualuangExploration

Development

Greater KerendanExploration

Development

North KuteiExploration

Development

OtherAppraisal

Development

Exploration & appraisal Development


SUMMARY

• Renewed Focus on 3 Core Areas– Hub areas with growth opportunities around anchor assets– Looking to maximise value for non-core assets– Strengthened the Management and Technical functions

• Core Value Growth: Upgrade to the Scale & Quality of the Reserve Base– Reserves replacement 235%– Proved reserves up 37% to 48 MMboe– Proved & Probable reserves up 14% to 75.3 MMboe– Low margin barrels divested, high margin barrels added

• Continuing to Deliver Increasing Revenue, Cash Flow & Profit– Record levels of revenue $408 MM– Record Post-tax operating cash flow up 82% to $193.9 MM– Record Pre-tax profit of $112.6 MM


2012 OUTLOOK

• Operational Activity Has Stepped Up A Gear

• Continuing to Develop & Enhance Value of Flagship Production Asset

• Long-term Drilling Contracts – A Significant Advantage

• North Kutei – A Huge Resource Potential

• Anticipate Improved Drill-Bit Strike Rate To Come

APPENDIX


APPENDIX – SPECIAL REMUNERATORY BENEFIT

• Special Remuneratory Benefit (SRB)• SRB = SRB Rate x Petroleum Profit• SRB Rate

– Function of Petroleum Revenue per metre drilled– Petroleum Revenue adjusted for inflation and exchange rate

movements since award of concession in 1996– Allowance (“geological constant”) of 150,000 m* added to

cumulative depth of wells drilled– 0% to 75%

• Petroleum Profit– Petroleum Revenue less royalty, capital expenditures,

operating expenses and losses carried forward– Capital expenditure includes uplift (“special reduction”) of 25%*

on production facilities• SRB deductible for Petroleum Income Tax

* B8/38. On G4/50, allowance = 600,000 m & uplift = 35%

SRB Rate

Baht / m

Significant opportunity to improve cash flow margins


KERENDAN POWER STATION – PLN ACTIVITY

Buntok to Muara Teweh transmission lines: Contract awarded, land acquired, surveying in progress

Kerendan power plant: Tender in preparation. PLN estimate on line 4Q’13

Tanjung to Buntok transmission lines: Construction in progress

Kalimantan Connector: Transmission lines complete from Banjarmasin to Tanjung. Construction in progress from Tanjung to Balikpapan

Exploration success will support gas export by pipeline to the East Kalimantan gas markets

salamander energy full year results march 2012. © salamander | 2012 | 2 agenda introduction &...

Documents

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