Building an Indigenous Upstream Champion Notice First Hydrocarbon - - PowerPoint PPT Presentation

Building an Indigenous Upstream Champion

June 2012

Notice

Slide 2 First Hydrocarbon Nigeria Company Limited (“FHN” or “Company”) is a private company within the meaning of the Companies and Allied Matters Act 2004 of the Federal Republic of Nigeria and regulated by the Corporate Affairs Commission. The content of this presentation has not been approved by an authorised person outside of the management of the Company. Reliance on the information contained in this presentation for the purposes of engaging in any investment activity may expose the investor to a significant risk of losing all of the property or assets invested. Any person who is in any doubt about the investment to which this presentation relates should consult an independent financial adviser/solicitor who specialises in the acquisition of shares and other securities. The information in this presentation is subject to updating, revision and amendment. The information in this presentation, which includes certain information drawn from public sources does not purport to be comprehensive and has not been independently verified. This presentation does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase or subscribe for or otherwise acquire any securities in the Company. No reliance may be placed for any purpose whatsoever on the information contained in this presentation or any assumptions made as to its completeness. No representation or warranty, express or implied, is given by the Company, any of its subsidiaries or any of its advisers, officers, employees or agents, as to the accuracy, reliability or completeness of the information or opinions contained in this presentation or in any revision of the presentation or of any other written or oral information made or to be made available to any interested party or its advisers and, save in the case of fraud, no responsibility

• r liability is accepted (and all such liability is hereby excluded for any such information or opinions).

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Agenda

• Introduction
• About FHN – an indigenous upstream champion
• OML 26 – a new partnership model
• Conclusions

Slide 3

Introduction

Slide 5

Nigeria – a world of opportunity for medium size players

Nigerian proved undeveloped fields – original reserve size distribution Licence interests

(No. of blocks)

Distribution of resource ownership

(mmboe)

International Integrated /large cap 4%

Indigenous E&P 37%

State owned 15% Major IOC 35% International E&P 4% International NOC 5%

Indigenous E&P - 3%

State

• wned

43% Major IOC 47% International Integrated /large cap 1% International E&P 1% International NOC 5% 45 60 30 15

Unknown 0-1 1-5 5-10 10-25 25-50 50-100 100-250 250-500 500-1,000 1,000, 2,500 2,500-5,000 > 5,000

No of Fields

Oil Gas

Over 150 fields in the

• pportunity set

Reserves size (mmboe)

• Indigenous independents well

represented in terms of license interests held…

• …but under represented today

in terms of commercial reserves and production

• Resource ownership and

production dominated by the five major IOC’s

• Large number of discovered but

undeveloped fields with significant upside potential

• Opportunities exist for aligned

local players with technical and financial capacity

Source: IHS Energy, Company data

Nigeria’s vast untapped resource - oil

Slide 6

Growing economy hinged on natural resource Oil reserves (billion bbl) Reserves Growth Comparison, billion bbls

• Nigeria, with a GDP growth rate of 8.7% in

2010 has been regarded as one of the fastest growing economies of the emerging market

• With oil reserves of ca. 37 billion bbls,

Nigeria ranks as the nation with the 10th largest proven reserves and in the world

• Recent uncertainties in the regulatory

environment have however hindered investment in upstream oil and gas, thus slowing the growth of reserves replacement

• Oil and Gas industry reform underway
• Petroleum Industry Bill
• Government’s push for increased local

participation will see an increased number of locals playing in the sector

• Expectation of some favour for Indigenous companies

12.2 13.5 1.5 1.9 4.5 1.7 3.7 46.4 37.2 6.7 0.4 2.3

Oil Reserves, billion bbl

25.0 30.0 35.0 40.0 45.0 50.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 Lybia Nigeria Other Africa

Source: BP Statistical Review of World Energy, 2011 Source: BP Statistical Review of World Energy, 2011

• Nigeria has the world’s 9th largest proven gas

reserves at ca. 187 Tcf

• As there has been no exploration for gas in Nigeria,

the 186.9Tcf of proven reserves is bound to increase dramatically as a result of the various gas commercialization opportunities being developed

• Major gas developments have been geared

towards export

• NLNG, Brass LNG and OK LNG
• Local consumption has been hampered by sales

price constraints, regulatory environment and infrastructure

• Nigeria Gas Master Plan to change the face of local

gas supply in the country

• Improved pricing – willing buyer willing seller
• Gas Infrastructure Development
• Investment friendly regulations
• Demand growth for natural gas largely driven by

new power plant capacity

• Current installed capacity of 8.6GW with an ambition to add ca.

27 GW in the next 10 years Slide 7

7.8 46.6 117.2 132 334.6 Nigeria Algeria South Africa Lybia USA

Per capital energy consumption, million Btu

Huge upside potential

Source: Energy Information Administration (2006) Source: BMI Nigeria Oil and Gas Report (Q1, 2012)

7.2 12.0 13.8 15.2 17.2 19.3 21.9 24.4 2009 2010 2011F 2012F 2013F 2014F 2015F 2016F

Nigeria Gas Consumption, bcm

159.1 78.0 54.7 186.9* 41.4 Algeria Egypt Libya Nigeria Other Africa

Gas Reserves, Tcf

Source: BP Statistical Review of World Energy, 2011

Nigeria’s vast untapped resource - gas

Indigenous companies and the current opportunities

• Ability to raise substantial level of funds (Equity and Debt)

− Indications were that some recent IOC divestments were valued in the

range of $150 million up to over $1 billion

− The above do not include redevelopment Capex

• Establish/acquire and grow operational capabilities

− Indigenous players have typically been involved in the redevelopment of

marginal fields or relatively “easy” to mature fields

− Current opportunities are on larger scales and complexities

• Seek and foster the right partnership

− Entities with complementing attributes − Entities with similar ambitious goals − Willingness to make the relationship work

Slide 8

Indigenous companies require the following attributes for success:

About FHN

• Established in 2009 to create an indigenous independent

E&P champion

• Target opportunities available to local E&P companies
• Enhance indigenous representation in terms of commercial reserves

and production through acquisition of mid size assets

Key steps in achieving the strategic vision

• Target significant scale of reserves and resource base

through low risk acquisition

• Current production with major redevelopment plan in place in OML 26
• In discussion to acquire two near term development assets
• Managing oil and gas foot print in Nigeria
• Strong board and proven management
• Deep industry knowledge
• Proven and well respected individuals that cut across all facets of the

Nigerian economy

• Broad ownership by Nigerian institutions and individuals
• Planned listing on an exchange that will enhance access to capital
• Re-enforces Government's push for increased local participation in the

upstream sector

• Leverage on Afren’s oil and gas expertise
• Proven Track Record
• Leading Partner to Nigerian indigenous partners

Slide 10 Strong Board and

Management Significant

• pportunity

set and access Strong board and proven management Proven fundraising ability Afren Plc – independent international partner of choice

A new breed of indigenous company

Strong Board and Management team

Slide 11

BOARD MANAGEMENT TEAM

Egbert Imomoh Chairman Chairman

Ahonsi Unuigbe

Chief Financial Officer

‘Labi Ogunbiyi

Chief Executive

Faiz Imam

Director

Osman Shahenshah

Director

Tosin Runsewe

Director

Magaji Inuwa

Director

Senator Udoma

Director

Bert Cooper

Director

Natalie Dickson

Director of Legal & Corporate Affairs

Jonathan Long

Director

Patrick Ogunjimi

Technical Director

Adeola Akinrinmade

Finance Manager

Adolphus Afemari

Technical Manager

Yemi Ajao

Commercial Manager

Peter Agodo

Community Affairs Mgr.

Blessyn Okpowo

• Govt. Relations Manager

Kelechi Ojukwu

Asset Manager

Chief Oladele Fajemirokun

Director

Femi Bajomo

Chief Operating Officer

Charles Kwosah

Deputy Asset Manager

Benjamin Ogbadu

HR & Admin Manager

Broad Ownership Structure

55% held by Nigerian Institutions & Investors

• FHN was created in June 2009
• FHN is 45% owned by Afren Nigeria Holdings Limited, an Afren Plc owned subsidiary
• FHN is 55% held by Nigerian institutions and investors such as African Capital Alliance, CBO

managed funds, other Nigerian funds and the Board and Management team

• 80% of Board members and the entire management team are Nigerians
• Ongoing discussions to list on the Nigerian Stock Exchange within 12 months

45% ownership Afren

Slide 12

Further Portfolio Rationalisation by Major IOCs

• Focus on large scale projects (>500 mmbbls)

and deepwater frontiers

• Strict internal capital allocation process

impedes investment in small to medium size assets - Materiality thresholds

• Indigenisation; accelerated by “use it or lose it”

and IOC divestment programmes Apparent Opportunities

• Acquire near term development assets
• Participate in relevant licensing rounds
• Become a consolidator in the M&A space

Re-activation of Shut In Production

• Several instances where production

is shut in or producing below capacity (no value being created)

• Ability to be nimble and take quick

decisions

• Indigenous solutions required to

ensure optimal production is restored – community relations, etc.

Slide 13

The Ongoing Opportunity Set

Slide 14

FHN Growth Portfolio

Opportunity A 25% economic interest in a marginal field January 2013 target for first oil Opportunity B

• Ca. 17% economic

interest in an OML under development Potential to add ca. 400mmboe to FHN reserves M&A Opportunities Potential Mergers Acquired & Producing

Finalizing Acquisition

Field Development Concept Studies

• ngoing

2 identified FHN Value

Up to US$230 million syndicated debt facility

• Facility to fund OML 26
• Fully financed by Nigerian Banks reflecting the increasing capacity
• f, and appetite for the local banking system to finance upstream
• il & gas transactions

US$50 million mezzanine facility

• Strong international endorsement of the FHN business model by

Kingdom Zephyr Africa Management.

Up to US$75 million of equity raised since inception

• Nigerian individuals and institutions including the Board of

Directors and African Capital Alliance

Access to additional international funds

• Leveraging on Afren’s international credentials

Slide 15

FHN today - FHN’s Proven Fundraising Ability

US$mm 50 100 150 200 250 300 350 400 May-11 Aug-11 Nov-11

The Afren – FHN Advantage

Slide 16 Established track record Differentiated strategy Consistent delivery Portfolio growth and diversification Solid financial position and proven capital raising ability Production and reserves growth

• A FTSE 250 independent with 31 assets in

12 countries

• 2P+2C = 1,026 mmboe
• Well balanced portfolio of assets
• Producing assets in Nigeria & Cote d’Ivoire
• Near term development in the Kurdistan region of

Iraq

• Exploration assets in Ghana, East Africa, South

Africa and Nigeria

• Partnership with 6 indigenous players in

Nigeria on 9 assets

• Nigerian track record at Okoro and Ebok

projects – fast track development to production

• Safety records of highest international

standards

• Success linked to proactive approach to CSR

initiatives

OML 26 – A new partnership model

Significant Portfolio acquired Onshore Nigeria

* Independently estimated by Energy Resource Consultants (ERC) as at 1 January 2010

>>500 mmboe total gross reserves and resources

• Acquisition by FHN of a 45% interest in

OML 26

• Large scale re-development opportunity

at Ogini and Isoko

• Existing infrastructure in place
• Appraisal upside at Aboh, Ovo and

Ozoro

• Multiple low risk exploration
• pportunities
• Production target of 50,000 bopd in

5years

Slide 18

Currently producing * 2% Ogini and Isoko Phases 1,2 & 3 re-development* 18% Aboh, Ovo, Ozoro 2C 15% Prospective Resources 65%

First to establish a viable partnership model with NPDC (as operator) to redevelop one of the recent SPDC joint venture divestments and attain high growth in output and revenues.

A new partnership model

Slide 19

OML 26 FHN (non Operator) NPDC (Operator)

Conclusions

FHN – Upstream Growth Oriented Strategy

Slide 21

Best of breed partnership with Afren Established to adapt to changing regulatory framework and

• pportunity set

Existing major

• nshore portfolio,

with growing production, as well as significant appraisal and exploration upside Near term capital markets strategy Successful fundraising track record and sound financial position

FHN - creating value through growth:

• Focus on our competitive advantage

− Leverage Afren’s track record and expertise − Capital raising capabilities − Local partnership and relationship

• Access and monetisation of Nigerian

upstream oil and gas opportunities

− IOCs’ divestment opportunities − Material other near term development

assets

− M & A Opportunities

• Exploration to prove up upsides in well

known basins

− significant exploration potential in OML 26

with over 20 identified prospects

• Disciplined approach to capital

structure and valuation

− Avoid excessive leverage − Financial discipline