Exploration Analysts Afternoon 8 December 2011 Forward looking - - PowerPoint PPT Presentation

Exploration Analysts Afternoon

8 December 2011

December 2011

Forward looking statements

This presentation may contain forward-looking statements and information that both represents management's current expectations or beliefs concerning future events and are subject to known and unknown risks and uncertainties. A number of factors could cause actual results, performance or events to differ materially from those expressed or implied by these forward-looking statements.

December 2011

• Focus on geologies we know well
• Target best plays in basins of choice

– Play master approach

• Invest ~30% of annual cash flows in

exploration

North Sea Asia

MEAP & Exploration New Business

Exploration strategy

RIFT setting - below present day deep water passive margins Longer term aspiration East & North Africa & New areas RIFT setting SE Asia & North Sea FOLD-BELT/FORELAND setting Pakistan & new Areas

December 2011

Progress towards 200 mmboe of discoveries

200 100 50 2010 2011 150 2012 2013 2014 250

Target cumulative risked additions Actual cumulative proved and probable discovered resources Actual cumulative plus possible resources

Global exploration: Forecast resource additions (mmboe)

2009 Exploration and appraisal drilling-2011

• Discoveries at Burgman & Erne in the UK, K27 in Pakistan

North West of Chim Sáo and Chim Sao deep in Vietnam

• Grosbeak and Cá Rồng Đo appraisal wells successfully

completed

• Net estimated resource additions 22 to 34 mmboe
• Overall exploration success rate 54%

New ventures

• PSCs signed for exploration blocks L10A and L10B in Kenya
• New acreage secured in the North Sea

– Farm-ins to Fyne area – Nexen acreage in Norway

• Actively pursing new venture opportunities in focus areas and

themes – Norway: bids submitted for 3 new licenses – UK: 27th Round preparation (2012) – Egypt: EGPC bid round evaluation (2012) – Iraq: Qualified for Exploration Round – East Med: Preparation for 2012 bid round(s) – Asia: Joint Study agreements in Indonesia

December 2011

Exploration organisation

2 Geoscientists 1 Geoscientist 3 Geoscientists 3 Geoscientists 3 Geoscientists 2 Geoscientists 2 Geoscientists 4 Geoscientists 2 Geoscientists 3 Geoscientists 3 Geoscientists Exploration Director

• A. Lodge

Chief Geoscientist (Asia)

• S. Carney

Chief Geophysicist

• N. Oates

Chief Development Geologist

• R. Alexander

Operations Manager Consultant Chief Geoscientist

• C. Johns

Co-ordinator

• B. Anderson
• Expl. Manager

North Sea

• T. Davies
• Expl. New

Business Mgr.

• S. Bottomley
• Expl. Manager

MEA Vacant

• Expl. Manager

Pakistan

• S. Zahidi

Exploration Asia Team Leader UK

• A. Robson

Team Leader Norway

• V. Friestad

Team Leader New Ventures

• D. Mellere

Team Leader

• A. Belopolsky

Team Leader Vacant

• Expl. Manager

Vietnam

• A. Van-Lennep
• Expl. Manager

Indonesia

• B. Boslaugh

NV Manager Asia

• W. Spencer

Operated Ventures Non-Operated/ New Ventures Senior Advisor Vacant

Excluding Technical and Administrative Assistants: Exploration Headcount = 44 Exploration Management = 9

Geophysical Advisor

December 2011

Exploration organisation – building for the future

• 25% increase in Premier geoscientists
• Longer term consultants replaced by

Premier personnel

• Recruitment primarily from majors and

large independents – Play fairway knowledge – 10 to 20 years experience

• Basin specific or technology experts

sourced from consultancies or smaller independents

• Continuing to build
• In house training schemes introduced

Premier Oil recruitment since 2009 Origin of recruits

Consultancy, 4 25% Small Independent, 3 19% Large Independent, 3 19% Major, 6 37%

December 2011

Premier Oil: Explorer network

• Community linking experienced

explorers in offices around the globe

• Knowledge capture and transfer

within and between business units

• Mentoring and coaching by the

experienced staff

• Network leader: Andrei

Belopolsky

December 2011 Unrisked Resource Portfolio Risked Resource Portfolio

Discovered resource under appraisal 38 mmboe Leads 1,500 mmboe Prospects 500 mmboe Total 2,038 mmboe Leads 180 mmboe Prospects 140 mmboe Total 358 mmboe

• Unrisked prospective resource portfolio 2000 mmboe

– 500 mmboe in prospects – 1,500 mmboe in leads

• Portfolio increased from 2010

– Increased lead inventory in Kenya and Norway – Prospect inventory adjusted post 2011 drilling

• Risked prospective resource portfolio – 290 mmboe

– 140 mmboe in prospects – 150 mmboe in leads – Greater focus to lead maturation in 2012

• Discovered resource under appraisal – 38 mmboe

– Ca Rong Do transferred to Pre-Developments

• Encore portfolio not included

Prospective resource portfolio

On track to deliver 200 mmboe

• f 2P reserves by 2015

Discovered resource under appraisal 38 mmboe

December 2011

• RISC evaluated prospects & leads in Premier’s

portfolio planned to be drilled in the next 3 years – Evaluation excluded Kenya, South Darag in Egypt, West of Orkney acreage the UK and dependent leads in Asia

• On a like for like basis RISC estimated the total net

un-risked inventory at 915 mmboe – Premier estimate: 900 mmboe

• On a risked basis RISC’s total is 215 mmboe

versus Premier’s estimate of 249 mmboe

• In Asia, RISC assess the Nam Con Son Basin

prospect inventory as higher potential

• In the North Sea RISC assess the portfolio as lower

potential at slightly higher risk (2% to 5% per prospect/lead)

Prospective resource portfolio – RISC’s view

December 2011

Norway PL378: Grosbeak UK P077: East Fyne

.

Norway PL374S: Blabaer Vietnam Block 12W: CS NW

Leads

Total Unrisked: 1500 Total Risked :180

Prospects

Total Unrisked: 370 Total Risked: 90

Mature Prospects

Total Unrisked: 130 Total Risked: 50

Appraisal

Total: 38

Appraise Drill Evaluate

Acquire Licence Gate Drill Decision Gate Appraisal Approval Gate Project Extension Gate

MEAP North Sea Asia

<10 10-25 25-50 >50 Prospect potential resource mmboe (net unrisked): Risked

Pre- Development

Value ranges to be provided in 2012

Progress towards 200 mmboe of discoveries

December 2011

Norway PL378: Grosbeak UK P077: East Fyne

.

Norway PL374S: Blabaer

P1430: Cougar P1430: Rapide P1430: Bonneville P1430: Carnaby

Vietnam Block 12W: CS NW

Leads

Total Unrisked: 1345 Total Risked :153

Prospects

Total Unrisked: 420 Total Risked: 90

Mature Prospects

Total Unrisked: 160 Total Risked: 50

Appraisal

Total: 38

Appraise Drill Evaluate

Acquire Licence gate Drill Decision gate Appraisal Approval Gate Project Extension Gate

MEAP North Sea Asia

Prospect potential resource mmboe (net unrisked):

Pre- Development

Encore portfolio adds (near term drilling targets only):

• ~ 150 mmboe of net un-risked prospective resource
• ~ 25 mmboe on a risked basis

Tudor Rose Spaniards Buffalo Coaster

Encore acquisition adds to the overall porfolio

December 2011

Norway PL378: Grosbeak UK P077: East Fyne

.

Norway PL374S: Blabaer Vietnam Block 12W: CS NW

Leads

Total Unrisked: >1500 Total Risked :>180

Prospects

Total Unrisked: 420 Total Risked: 90

Mature Prospects

Total Unrisked: 160 Total Risked: 50

Appraisal

Total: 38

Appraise Drill Evaluate

Acquire Licence gate Drill Decision gate Appraisal Approval Gate Project Extension Gate

MEAP North Sea Asia

Prospect potential resource mmboe (net unrisked):

Pre- Development

Nexen portfolio adds:

• ~ 165 mmboe of net unrisked prospective resource
• ~ 33 mmboe on a risked basis

Tarnfalk Vandretost Myrhauk

Nexen Norge acquisition impacts Premier’s lead portfolio

December 2011

Exploration drilling Q4 2011 to Q2 2012

• > 250 mmboe net

unrisked resource

• 2012 full year

exploration forecast ~ $210 million pre tax 12 to 16 exploration and appraisal wells planned over next six months

Contingent Wells Firm Wells: Rig Contracted Firm Wells: Rig TBC Seismic Programme All well timings are subject to revision for operational reasons Encore well

*

2011 Q4 Q1 Q2 Q3 Q4

Vietnam Block 07/03 Silver Sillago CRD NE Appraisal Block 12W Chim Sao NW Appraisal Indonesia Buton Benteng-1 Natuna Sea Block A Anoa Deep Biawak Besar Block A Aceh Matang Norway PL359 Luno II UK P1463 Tudor Rose* P077 East Fyne Appraisal P1466 Bluebell P1430 Carnaby P1812 Coaster* P1430 Bonneville Deep P1212/P1771 Stingray P1784 Cyclone P1875 Erne P1804 Ronan, Cringletie, Glengorm P1181 Lacewing P1655 Spaniards* Pakistan Kadanwari K-28 K-30 K-32 Bhit-Badhra Badhra-6 Parh Badhra-7 Mauritania PSC A&B 3D Seismic Commitment Well Kenya Block 10A & 10B 2D & 3D Seismic

Asia 2012 North Sea Middle East - Africa - Pakistan

PRA 01 West Callisto Antareja-8 ENSCO 107 West Callisto Sedco 704 Sedco 711 WilPhoenix Weatherford 812 Weatherford 812 Sedco 704 Sedco 704 Weatherford 812

Internal Processes and Risk Management

December 2011

Functional management: aiming for technical excellence and consistency in our prospect evaluations

• Uncertainty and Risk
• Play Fairway Analysis and Risking
• Prospect Analysis and Risking
• Volumetric Uncertainties
• Premier’s Gateway Process

Internal processes and risk management

December 2011

Uncertainty and risk management

December 2011

P90 P50 P10

This figure shows the current SPE definitions, which Premier uses for its resource and reserves assessments

Prospect Lead Play Mature Prospect - drill-ready Prospect - being matured

SPE resource classifications

December 2011

As explorers we need to estimate the likely hydrocarbon volumes in

• ur prospects and the risk on finding such volumes.
• There is Uncertainty in estimating the pre-drill Volumetric range: what

magnitude could a successful outcome be? We use our knowledge and experience to estimate a prospect’s expected range in STOIIP and prospective resource, and its mean volume.

• Risk: the exploration well has two outcomes - success or failure.

Again we use our knowledge and experience to estimate the probability (Ph) of finding a minimum recoverable volume of hydrocarbons in our prospect. We also estimate the probability of

• ur discovery volume being commercial (Pc).

Our exploration investment decisions are based on these two parameters and the subsequent valuation.

Uncertainty and Risk

December 2011

S

C S R

Play Fairway Analysis

S R R R R R S

C C C C

Play Fairway: the regional distribution of a target reservoir and seal pair that can access migrating hydrocarbons

December 2011

• Geological evaluation is from plate and basin scale to

play fairway to prospect level

• Exploration risk reduction is through evaluation of all

petroleum system elements to determine a basin’s ‘sweet spots’

• We build a solid geological understanding of the basin

and the plays; we’re not just looking for ‘bumps’

Play fairway exploration approach

December 2011

Risk evaluation – estimating prospect Ph

Trap Source Reservoir Ph

NW SE

TD

Biawak Besar (TD ~5950ft) Iguana-1

metres 0 500 1000

Biawak Besar-1 Biawak Besar-1 Top Mid Arang CA-3B C.I.=100 feet 1 Km

Iguana-1

Our Prospect Risk (Ph) is derived by combining the Play Risk, from our CRS mapping, with the risk that’s specific to our prospect.

>35% 20-35% <20% Low Risk Moderate Risk High Risk

90% 95% 65% 56%

December 2011

• In prospects where we have an apparent DHI (Direct Hydrocarbon Indicator)

Premier uses the SAAM (Systematic Amplitude Analysis Module) software.

• In this software all the factors contributing

to the amplitude/AVO anomaly (e.g. data quality, modelled and observed behaviour) are analysed and weighted according to their strength and ultimately combined to produce a DHI index adjustment which is then applied to the original Ph.

• The final risk value is then compared with

a library of previously drilled similar prospects to further adjust the Ph.

Risk modification for DHIs

December 2011

Trap Source Reservoir Ph

NW SE

TD

Biawak Besar (TD ~5950ft) Iguana-1

metres 0 500 1000

Biawak Besar-1 Biawak Besar-1 Top Mid Arang CA-3B C.I.=100 feet 1 Km

Iguana-1

Our Prospect Risk (Ph) is derived by combining the Play Risk, from our CRS mapping, with the risk that’s specific to our prospect.

Risk evaluation – estimating prospect Ph

>35% 20-35% <20% Low Risk Moderate Risk High Risk

90% 95% 65% 56%

December 2011

Volumetrics – mapping uncertainties

December 2011

Interpreted well log showing proportions of sandstone reservoir section (yellow), non- reservoir shales (grey) and porosity (blue) Microscope thin- section showing mineral grains and intervening pore space (blue)

Volumetrics – uncertainties in net:gross and porosity

December 2011 GRV x conversion factor x n:g x ø x (1-Sw) Bo

Distributions for the various input parameters are described by the exploration team. The simulation software (e.g. REP, Crystal Ball) takes a random value from each distribution and enters it into the volumetric formula. It does this, running the formula thousands of times, building a histogram of the results and hence creating a frequency distribution of possible outcomes.

Frequency Chart

MMstb .000 .006 .012 .019 .025 18.5 37 55.5 74 175 350 525 700

3,000 Trials 20 Outliers Forecast: STOIIP Reverse Cumulative

MMstb .000 .250 .500 .750 1.000 750 3000 175 350 525 700

3,000 Trials 20 Outliers Forecast: STOIIP

STOIIP - Frequency Distribution STOIIP - Reverse Cumulative Frequency

Frequency Chart

MMstb .000 .006 .012 .019 .025 18.5 37 55.5 74 175 350 525 700

3,000 Trials 20 Outliers Forecast: STOIIP Frequency Chart

MMstb .000 .006 .012 .019 .025 18.5 37 55.5 74 175 350 525 700

3,000 Trials 20 Outliers Forecast: STOIIP Reverse Cumulative

MMstb .000 .250 .500 .750 1.000 750 3000 175 350 525 700

3,000 Trials 20 Outliers Forecast: STOIIP Reverse Cumulative

MMstb .000 .250 .500 .750 1.000 750 3000 175 350 525 700

3,000 Trials 20 Outliers Forecast: STOIIP

STOIIP - Frequency Distribution STOIIP - Reverse Cumulative Frequency

GRV N:G Ø Sw FVF (Bo)

Volumetrics – Monte Carlo methodology

December 2011

From this the probability of a particular volume can be read and the mean outcome, used as our base case, is calculated

Volumetrics – volume range

Reverse Cumulative Frequency Distribution

5000 30.00 40.00 50.00 60.00 70.00 0% 25% 50% 75% 100%

mmbbl P90 P50 P10 Mean

December 2011

Exploration processes and guidelines

December 2011

• The EMS, a subset of Premier’s Business Management System, sets
• ut procedures and guidelines for Premier’s Exploration teams to follow.

These have become familiar to the teams - deliverables are being fed back into the system.

• It has resulted in improvements in standardisation and consistency of

process / documentation - the process continues to evolve.

• Response from the technical teams has been positive, with users

welcoming the structured approach and the provision of guidelines and templates.

• Co-operation has increased between the Exploration and Development

teams on the asset handover process.

Exploration Management System

DRILL APPRAISE PORTFOLIO DECISION EVALUATE IDENTIFY

The Exploration Process

December 2011

Exploration guidelines

General Peer Reviews G&G

Exploration Management System Peer Review Guidelines Prospect Volumetrics Guidelines Corporate Investment Guidelines Peer Review Process Flow Diagram Play Risk Assessment Key Considerations for All Projects Prospect Risk Assessment Exploration Process Guidelines Guidelines - Coloured Inversion and Well Ties ENV Process Value Estimations EMS -Sanction Gate Process Economics Scenarios Investment Paper/AIP Post Drill Analysis Lead and Prospect Definitions

December 2011

• To ensure high quality technical work leading to continued

advancement of our portfolio

Norway PL378: Grosbeak UK P077: East Fyne

.

Norway PL374S: Blabaer Vietnam Block 12W: CS NW

Leads Prospects Mature Prospects Appraisal

Appraise Drill Evaluate

Drill Decision Gate Appraisal Approval Gate Project Extension Gate

Pre- Development & Project Sanction New Ventures

Licence Rounds Acquisition Farm-in Negotiation

Acquire Licence Gate

Identify

MEAP North Sea Asia

Functional management

December 2011

www.premier-oil.com December 2011