For personal use only N N PETSEC ENERGY PRESENTATION AT THE - - PDF document

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PETSEC ENERGY LTD ACN 000 602 700 A A N N 1 March 2011 For personal use only N N PETSEC ENERGY PRESENTATION AT THE EXCELLENCE IN OIL AND GAS CONFERENCE O O SYDNEY U U Attached is a copy of the presentation to be delivered today by

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Level 13, Gold Fields House, 1 Alfred Street, Sydney NSW 2000, Australia PO Box R204, Royal Exchange NSW 1225, Australia Telephone (61 2) 9247 4605 Facsimile (61 2) 9251 2410 Company information is available on: petsec.com.au

A A N N N N O O U U N N C C E E M M E E N N T T

PETSEC ENERGY LTD

ACN 000 602 700

1 March 2011 PETSEC ENERGY PRESENTATION AT THE EXCELLENCE IN OIL AND GAS CONFERENCE SYDNEY Attached is a copy of the presentation to be delivered today by Petsec Energy Ltd’s (ASX: PSA) CEO Mr. Terry Fern at the Excellence in Oil and Gas Conference, held at the Sydney Convention & Exhibition Centre in Darling Harbour on Tuesday 1st March to Wednesday 2nd March 2011, inclusive. A copy of the presentation will also be made available on the company’s website, www.petsec.com.au. Paul Gahdmar Company Secretary and Group Financial Controller Petsec Energy Ltd Ph: (02) 9247-4605

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2011 BUSINESS PLAN: FOCUS SHIFTS TO OIL

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PETSEC ENERGY LTD

FORWARD LOOKING STATEMENT DISCLAIMER

This presentation contains predictions, estimates and other forward looking statements that are subject to risk factors associated with the oil and gas industry. Although the company believes that the expectations reflected in these statements are reasonable, it can give no assurance that its expectations and goals will be achieved. Important factors that could cause actual results to differ materially from those included in the forward looking statements include, but are not limited to, commodity prices for oil and gas, currency fluctuations, the need to develop and replace reserves, environmental risks, drilling and operating risks, risks related to exploration and development, uncertainties about reserve estimates, competition, loss of market, government regulation, economic and financial conditions in various countries, political risks, project delay or advancement, and approvals and cost estimates. All references to dollars in this presentation are to US currency, unless otherwise stated.

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CORPORATE PROFILE

Petsec Energy is an independent exploration & production company with

  • perations in the Gulf of Mexico, USA and in the Beibu Gulf, China

USA OPERATIONS

Operated in USA, Gulf of Mexico, since 1991 Drilling success: 95 wells / 74 successful / 78% success Discovered reserves: ~ 500 Bcfe gross reserves As of 31 Dec 10: 8 fields / 16.9 Bcfe 2P reserves Prospect inventory: 10 prospects / 400 - 750 Bcfe (67 – 125 MMboe) 2011 estimated production: 3 Bcfe / Revenue US$15 m 2011 Exploration: target 3-5 wells / 10 - 30 Bcfe gas & 15 - 150 MMbbl oil net

CHINA OPERATIONS

Block 22/12 Beibu: partners with Roc Oil, Horizon, FAR since 2002 5 oil fields: 5 - 15 MMbbl net to Petsec 2011 development 6.12/12.8W fields / Petsec Net: 2.94 MMbbl Plus additional exploration prospects identified

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MARKET INFORMATION

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LISTING Australia ASX: Ticker PSA US OTC Pink Sheets: Ticker PSJEY.PK MARKET CAPITALISATION $39.3 million Shares on issue: 231.3m; Unlisted Options: 5.3m Share price: 17 cents (28 Feb 2011)

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EXPERIENCED BOARD OF DIRECTORS

Terry Fern, Chairman & CEO

Over 35 years experience in petroleum & minerals exploration, development and financing Bachelor of Science Degree, University of Sydney Director, OceanaGold Corporation

David Mortimer AO, Non-Executive Director

Over 35 years experience in corporate finance Bachelor of Economics Degree (First Class Honours), University of Sydney Ex CEO of TNT Limited Group. Current Chairman of Leighton Holdings and Australia Post

Michael Harvey, Non-Executive Director

Over 30 years experience in the establishment and successful growth of E&P companies in South East Asia and the Gulf of Mexico, USA Bachelor of Business Administration in Finance Degree, Texas A&M Ex Shell, Huffington, CEO Gryphon Exploration Inc. Current CEO of Stonegate Production Company.

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SKILLED MANAGEMENT TEAM

AUSTRALIA UNITED STATES

Denis Swords

General Counsel & Secretary

  • Over 25 years of experience in the oil & gas industry
  • Master of Science Degree, University of New Orleans.

Juris Doctor Degree, Paul M. Herbert Law Centre.

  • Ex Gordon, Arata, McCollam, Duplantis & Eagan, LLP,

Sanderfer Oil Company & Tenneco

Nick Repar

Exploration Manager

  • Over 29 years of experience in the oil & gas industry
  • Bachelor of Applied Geophysics, Michigan Technology
  • Ex Tenneco & Stone Energy

Paul Gahdmar

Company Secretary & Group Financial Controller

  • Over 15 years of experience working in corporate

accounting and finance in the oil & gas industry

  • Master of Business and Technology Degree, University of

New South Wales

  • Ex Australian Oil and Gas Corporation & Rothmans of Pall

Mall

Fiona Robertson

Chief Financial Officer

  • Over 30 years of corporate finance experience
  • Master of Arts Degree, Oxford University
  • Ex Chase Manhattan Bank & Delta Gold Ltd. Current

director Drill Search Energy

Ron Krenzke

Executive Vice President Exploration

  • Over 35 years of experience in the oil & gas industry
  • Bachelor of Science Degree, Texas A&M University
  • Ex Mobil, Amerada Hess, VP Exploration Gryphon

Exploration Company.

Ross Keogh

President of Petsec Energy Inc.

  • Over 30 years of experience in the oil & gas industry
  • Bachelor of Economics Degree, Macquarie

University

  • Ex Total Oil Company & Bridge Oil Limited

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Prolific oil and gas producing region 1,094 fields, 34.5 billion barrels, 437 trillion cubic feet gas High drilling success – 53% successful; 41,892 wells drilled with 22,322 productive

New Orleans Lafayette

Texas, USA Louisiana, USA Mississippi, USA

South Thornwell Moonshine South Sunrise

Gulf of Mexico

North Padre Island 929. 934 West Cameron 462 Main Pass 18, 19 Breton Sound 39, 42 Main Pass 270,273,274 Chandeleur 31, 32 Main Pass 132 Ship Shoal 74 Ship Shoal 36

Petsec Leases/Prospects Petsec Producing Fields

Marathon Prospect

Pipelines

PETSEC GULF COAST AND GULF OF MEXICO ASSETS

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  • Reserves: 16.9 Bcfe (Ryder Scott 31 Dec 2010)
  • Producing Fields: Eight
  • Net Production: 10 Mcfd gas, 140 bopd oil
  • 2011 Production:
  • 3 Bcfe / Est. Revenue ~ US$15 m
  • Prospect inventory:
  • 18 leases
  • 10 prospects:

400 – 750 Bcfe

  • Target sizes: 20 – 200 Bcfe

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PETSEC GULF COAST & GULF OF MEXICO ASSETS

Main Pass 270 Main Pass 18/19 Chandeleur 31/32 Marathon

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PETSEC CHINA ASSETS

RESERVES

  • 5 oil fields in two granted development areas covering

82.1 km2

  • Petsec 5.2 to 15.2 MMbbl if CNOOC backs‐in for 51%

and Petsec recovers past costs (currently US$28m)

  • 2011‐2012 Develop 6.12/6.12S/12.8W fields. Petsec

2.94 MMbbl. PROSPECTS

  • 8 undrilled prospects/leads
  • 100 MMbbl gross potential
  • 12.25 MMbbl net after CNOOC back‐in
  • 2012: 3‐4 wells 20‐40 MMbbl, net 2.5‐5.0

MMbbl.

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2008-2010 MAJOR CHANGES IN US / GULF OF MEXICO ECONOMIC & OPERATING ENVIRONMENT

Global Financial Crisis Failures and weakness of US banking Lack of credit for small players Weak industrial gas demand Shale Gas Overly successful Major oversupply of natural gas Gas price volatility 2003 – 2008: $5 to $10+/mcf, Avg. $7.20/mcf 2009 – 2010: <$4/mcf BP Macondo Oil Well Blowout Shut down of Gulf of Mexico drilling 2010 Unlikely to recover until 2012 Significantly increased regulation Significant delays and uncertainty in drilling approvals

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SHARE PRICE HISTORY & EVENTS

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2002‐2007 Higher gas prices $5/mcf ‐ $10+/mcf 2008‐2010 Gas price <$4/mcf

2007 -2011 Falling gas prices GFC causes lack of bank credit Hurricane Ike in GoM BP oil spill 2002 – 2006 Drilling success leads to cash flow generation

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Problems Solutions Oversupply and low natural gas prices, likely to remain until 2014 Target gas condensate & oil Current 1:25 oil/gas price ratio should return to better energy equivalent ratio over time Small reserve targets uneconomic (<5-10 Bcfe) Big targets >20-200 Bcfe Difficult GoM operating environment, improving but likely to continue until 2012/13 Focus operations on Gulf Coast and onshore Louisiana and Texas

2008 – 2010 ISSUES: PROBLEMS AND SOLUTIONS

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USA: NEW BUSINESS PLAN - TRANSITION TO OIL AND BIG TARGETS

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Big Targets: Gas/condensate >20-200 Bcfe Oil >10 – 100 MMbbl Geologic Setting: Conventional Deep Section 12,000’ – 20,000’ Gas/condensate Oil Sub salt Unconventional Shale oil Areas: Gulf of Mexico Shelf <300’ water / Gulf Coast / Onshore Louisiana & Texas

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Big Prospects, Drill-ready Deep section 10 mapped prospects Prospect potential: >20-200 Bcfe each Programme: 400–750 Bcfe (67-125 MMboe) Subsalt Areas identified Prospect generation progressing Shale Oil JV with experienced “resource play” partner Regional work completed Local work nearing completion Land acquisition in 6 months

STATUS OF NEW PLAN

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DEEPER SECTION: SHIP WRECK PROSPECT

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Ship Wreck

Structure Map A A

Working Interest: Petsec 75% Water Depth: 15 feet Target /Depths: Big Hum/Cib Op @ 18,000 – 19,500 feet Gross Well Cost: ~US$13 MM Reserve Potential: 63 BCF plus 1.9 MMBO – 121 BCF plus 3.6 MMBO Distance to nearest facilities: 5 miles

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DEEPER RESERVOIRS AND SUBSALT

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COMET Target Interval Onshore / Shallow Water 15,000 to 25,000’ Drilling Depths

Sub-salt play onshore and in shallow water areas where prolific production already exists above the salt Targets – moderate depth, high quality, Miocene age reservoirs Conventional land based, shallow water, and barge rigs Lower drilling and operating costs ~US$20 MM vs >US$ 100 MM in deep water Reserve potential > 100 MMBOE/prospect

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SUBSALT PLAY

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Identified high potential prospects onshore or in shallow water beneath floating salt bodies. Identified areas with reserve potentials >100 MMboe

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US SHALE OIL & GAS PLAYS

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Bakken Niobrara

Oil and Gas Resource Plays, USA

Basins Gas Plays Oil Plays

Resource plays, or “shale plays”, are very active in the USA. Major deals have taken place in which acreage was acquired at low cost and later sold at >10 – 20 times initial cost per acre. Success in shale gas now redirecting activity to shale oil

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RECENT SHALE TRANSACTIONS

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2010 US$238bn of transactions mainly shale gas

Buyer Shale $billion $/acre CNOOC Eagle Ford 2.5 12,000 BHP Fayetteville 4.75 12,000 Reliance Eagle Ford 1.15 14,000 Mitsubishi Cordova 0.85 1,500 Reliance Marcellus 1.7 14,500 Mitsui Marcellus 1.4 14,000 Total Barnett 2.25 33,000 BG Group Haynesville 1.0 17,000 Statoil Marcellus 3.37 5,500

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OIL SHALE OBJECTIVES

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Working with our petrophysical technology partner, identify areas with appropriate resource play characteristics Focus on historic producing areas that are relatively inactive and where the source rocks are oil-prone, thick, rich and at appropriate drilling depths (<7000 feet) Utilise existing well log data and geological data to recognize and quantify the potential of source rocks as resource play targets Determine the core area of the new play and acquire key acreage at low royalty level and cost per acre Drill test wells to calibrate logs to geology and for “proof of concept” Expand acreage position to significant position that is attractive to a large E&P (35 – 700 MMboe) Farm-out or sell all or a portion of the acreage to a large E&P with the financial capacity and drilling technology capability to fully exploit the play Receive cash and/or retain carried interest and/or ORRI and/or retain WI

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PROGRESS IN 2010

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Gulf of Mexico Jenny Lake Prospect TD May 100’ tight gas pay P&A 16,000’ Gulf Coast Marathon Prospect TD Oct Est reserves Producing: 22 MMcpd +125 bopd Further exploration potential 18,800’ >20-78 Bcfe December 2010

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2011 PROGRAMME

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CORPORATE: RESTRUCTURE PEI $29.2M TERM DEBT DEBT FINANCE CHINA DEVELOPMENT $37M USA: EXPLORATION 2011 Capex (US$M) CONVENTIONAL GULF COAST: 2‐3 WELLS Net Target: 2‐10 Bcfe 2 ‐ 5 GULF OF MEXICO: 1‐2 WELLS Net Target: 8‐20 Bcfe 3 ‐ 6 UNCONVENTIONAL SHALE OIL: ONSHORE TEXAS Net Target: 15‐150 MMbbl oil ~50,000 net acres 5 ‐ 10 USA Total: Capex 2011 10 ‐ 21 CHINA: BEIBU GULF 2010‐2012 6.12/12.8W Development CHINA Total: Capex 2011‐2013 37

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NPV 10 A$M2 A$/share3 US : 8 fields 16.9 Bcfe1 51 0.22 China: 3 fields 2.94 MMbbl1 65 0.28 116 0.50 Cash 23 0.10 Debt (29) (0.13) Total indicative net asset valuation 110 0.47

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INDICATIVE VALUE (31.12.10)

1 US PV10 based on 31 December 2010 strip pricing plus hedging: China PV10 based on 12.25% W.I. @ US$100/bbl. 2 Exchange rate of 1 for 1 US$/A$ 3 Based on current number of shares outstanding of 231,283,622.

The internally estimated indicative DCF net asset valuation of the Company based on Petsec Energy estimates of 2P reserves as at 31 December 2010. Does not include any value for exploration prospects.

Assets and Liabilities

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  • Experienced Board and skilled Management team
  • Historical success
  • US Gulf of Mexico

>500 Bcfe gross

  • China

5-15 MMbbl

  • Large Growth Potential
  • US prospects

400-750 Bcfe

  • China

12.25 MMbbl

  • 2011 Programme:

USA

  • Exploration - Conventional

10 - 30 Bcfe

  • Exploration - Unconventional

15 - 150 MMbbl China

  • Development

2.94 MMbbl

  • Discount to NPV10 of reserves
  • Market capitalisation $39 million

NPV10 reserves $110 million Plus exploration potential

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CONCLUSION: WHY INVEST IN PETSEC ENERGY?

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SLIDE 26

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