Petsec Energy Ltd Annual General Meeting 20 May 2009 Terry Fern - - PowerPoint PPT Presentation

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Petsec Energy Ltd Annual General Meeting 20 May 2009 Terry Fern - - PowerPoint PPT Presentation

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For personal use only Petsec Energy Ltd Annual General Meeting 20 May 2009 Terry Fern Chairman & CEO PETSEC ENERGY LTD For personal use only FORWARD LOOKING STATEMENT DISCLAIMER This presentation contains predictions, estimates and

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Petsec Energy Ltd

Annual General Meeting 20 May 2009

Terry Fern Chairman & CEO

For personal use only

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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.

PETSEC ENERGY LTD

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PETSEC ENERGY BOARD OF DIRECTORS

Terry Fern, Chairman & CEO

Over 30 years experience in petroleum & minerals exploration, development and financing Bachelor of Science Degree, University of Sydney

David Mortimer AO, Non-Executive Director

Over 35 years experience in corporate finance Bachelor of Economics Degree (First Class Honours), University of Sydney

Dr Peter Power, Non-Executive Director

Over 45 years experience in petroleum exploration worldwide Bachelor of Science Degree, University of Sydney Doctorate at the University of Colorado

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

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PETSEC ENERGY MANAGEMENT

USA

Ross Keogh, President of Petsec Energy Inc. John Thibeaux, Vice President Business Development Frank Steele, Vice President Land Nick Repar, Exploration Manager Denis Swords, General Counsel & Secretary

Australia

Fiona Robertson, Chief Financial Officer Paul Gahdmar, Group Financial Controller & Company Secretary

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2008 OVERVIEW – ACHIEVEMENTS

Financial

  • Net revenues: US$105.3 million – Up 65% on 2007
  • EBITDAX: US$79.6 million (US$6.58/Mcfe) – Up 73% on 2007
  • Debt repayment: US$53.5 million
  • Total debt outstanding: US$50.5 million – Down 51% on 2007
  • Net debt: US$36.8 million – Down 52% on 2007

USA Operations

  • Production: 12.1 Bcfe – Up 50% on 2007
  • Successful integration of Gulf of Mexico (GOM) Gas fields acquired in 2007
  • Acquired five new exploration Leases in the GOM

China

  • Granted development areas over 5 oil fields: 6-12, 6-12S,12-8W & E, & 12-3-1
  • Progressed feasibility studies & ODP for the 6-12, 6-12S, & 12-8W oil fields

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2008 OVERVIEW – DISAPPOINTMENTS

USA Operations Four wells drilled – two Moonshine wells completed for reserve additions of 1.3 Bcfe (E. Laurent and Miles Timber); West Cameron 379 and CL&F #30-1 (Triple Play prospect, Terrebonne Parish) wells were expensed as dry holes Net reserve write-downs of 6.6 Bcfe (PEI 2P) at Mobile Bay, South Sunrise, Main Pass 20 and Vermilion 258 slightly offset by increase at Chandeleur 31/32 Downgraded prospectivity of Moonshine & relinquished number of GOM leases China Operations Two wells drilled and expensed as dry holes (6-12 W-1 & 6-12 E-1A) Financial Net loss after tax: US$44.5 million after exploration write-offs of US$13.8 million and impairments of US$58.1 million Reserve write-downs & fall in gas prices contributed to size of impairments

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2008 SCORECARD

2008 Production by Quarter & % Contribution 2008 Operating Performance by Quarter – US$M Key Financial Data – US$M unless otherwise stated

2007 2008 Change

Production (Bcfe) 8.1 12.1 + 50% Net Revenues After Royalties $64.0 $105.3 + 65% EBITDAX $45.9 $79.6 + 73% Net Operating Cashflow $35.1 $85.2 + 143% Capital Expenditure $145.9 $43.3 – 70% F&D Cost (US$/Mcfe) 1 $4.10 $6.20 + 51%

1 Three year average 2P

Strong operating results Major reduction in capital expenditure Substantial increase in F&D cost reflecting very high service costs

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GLOBAL FINANCIAL CRISIS & E&P INDUSTRY

Global Financial Crisis Impact on E&P Industry & Petsec Energy

  • Collapse of oil & gas prices
  • Reduction in fair values of oil & gas assets –> lower share price & impairments
  • E&P share prices in the USA reflect US$2/Mcfe or less for 1P reserves
  • Tightening of debt & equity markets
  • Increase in number of distressed companies & asset sales
  • Increase in counterparty risk

How we have responded

  • Dedication of free cash flow to debt reduction
  • Conservation of capital
  • Deferred exploration drilling activity
  • Focused efforts on preparing best prospects to drill-ready state
  • Emphasis on acquisition of producing fields

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E&P INDUSTRY ENVIRONMENT

Financial

  • Lower oil & gas prices
  • Reduced margins
  • Tight lending conditions
  • Downward revisions of bank borrowing bases
  • Higher cost of insurance – Gulf of Mexico

Operational

  • Falling service costs – particularly in the US

(Reduction in operating land rigs – 995 in Apr 09 vs. 1831 in Apr 08)

  • Reduced gas demand in US – Higher levels of gas in storage

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US E&P INDUSTRY ENVIRONMENT

US Drilling Rig Activity

500 1000 1500 2000 2500 2004 2005 2006 2007 2008 2009 Year # of rigs Source: Baker Hughes

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US E&P INDUSTRY ENVIRONMENT

Gas Prices Gulf of Mexico USA 2006 - 2010

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OUTLOOK 2009

Petsec Energy Operations

  • Production forecast of 7 Bcfe
  • Debt repayments: US$21.1 million – expected debt 31.12.09: US$30 Million
  • Hedge swaps: 3,161,100 MMBtu @ WAP of US$7.48/MMBtu (Apr 09 – Dec 09)
  • Hedge puts: 844,000 MMBtu @ WAP of US$6.33/MMBtu (Aug 09 – Dec 09)
  • Anticipated cashflow ~ US$32 Million

US E&P Industry

  • Lower service costs
  • Restoration of historical margins
  • Reduced gas demand – softer prices
  • Tight lending and equity environment
  • Expectations of abundant sensibly priced acquisition and exploration opportunities

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OUTLOOK 2009

Gulf of Mexico Gas Prices 2009 / 2010 – Petsec Hedging

Outstanding Natural Gas Price Hedges Vs Reference Price As at 14 May 2009

0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 M a y

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Hedge Expiry Date US$/MMBtu

Current reference price Swaps Average Fixed Price Puts Average Strike Price

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HISTORICAL FINANCIAL SNAPSHOT

Financial Year Ended 31 December 2004 2005 2006 2007 2008 Financial Performance Production (Bcfe) 5.7 6.5 8.2 8.1 12.1 Average Sales Price (US$) $5.77 $7.04 $7.24 $7.93 $8.70 Net Revenues After Royalties (US$m) $32.8 $45.5 $59.2 $64.0 $105.3 EBITDAX 1 (US$m) $25.8 $33.7 $45.3 45.9 79.6 Underlying Net Profit (US$m) 12.7 18.1 24.7 16.6 12.1 Net Profit/(Loss) After Tax (US$m) 18.9 9.5 5.1 (2.0) (44.5) EBITDAX Margin (US$/Mcfe) 4.53 5.94 5.54 5.69 6.58 Gross Margins 2 (%) 78.5% 84.4% 76.5% 71.8% 75.6% Balance Sheet Total Assets (US$m) $65.1 $91.2 $132.9 $254.7 $161.7 Cash (US$m) 9.5 10.1 26.5 27.2 13.7 Debt (US$m) 1.2

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48.8 Shareholders Equity (US$m) 52.5 58.2 115.1 123.3 85.9 Gearing 3 (%) 2.1% 2.7% 3.4% 75.6% 68.4%

1 ) EBITDAX = Earnings before interest, tax, depreciation, depletion, amortisation, and exploration costs. 2 ) EBITDAX margin as a percentage of the average sales price. 3 ) Long-term liabilities as a percentage of total shareholders equity.

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PERFORMANCE 2004 – 2008

Five Year Compound Annual Growth Rate (CAGR) - %

Production + 21% Net Revenues After Royalties + 34% EBITDAX + 33% Proved & Probable Reserves (PEI 2P) + 15%

Exploration Success & Reserve Position

Exploration Success Rate – 5 yr Average 61% PEI 2P Reserves as at 31 Dec 08 51.9 Bcfe

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Modest increase in gas price versus oil price

OPERATING MARGINS

Good control of operating costs Strong operating margins

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RESERVES REPLACEMENT

  • Exploration success rate 2002-2006: 25 of 30 wells drilled (83%)
  • Exploration success rate 2007-2008: 4 of 12 wells drilled (33%)
  • Finding and development costs 2002-2006: US$1.58/Mcfe
  • Finding and development costs 2007: US$4.10/Mcfe
  • Finding and development costs 2008: US$6.20/Mcfe

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  • Strong growth 2002 – 2007
  • High cost regime

2007 / 2008 significant reduction in exploration / acquisition economics

  • 2009 / 2010

Lower costs Healthy operating margins return Acquisitions attractive Exploration attractive late 2009

GROWTH OF RESERVES 2009 & BEYOND

Production History by Field

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 2004 2005 2006 2007 2008 2009 MMcf

West Cameron 343/352 Vermilion 258 Main Pass 19/18 Mobile Bay Area Chandeler 31/32 Main Pass 20 Main Pass 270 Onshore Forecast 2009

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Net Reserves Acquired (PEI 2P) 24.4 Bcfe Acquisition Cost US$103.3 Million Production / Sales to 31.12.08 9.2 Bcfe Net Cashflow to 31.12.08 US$76 Million Reserves Remaining at 31.12.08 16.3 Bcfe

A SUCCESSFUL ACQUISITION ACQUISITION GULF OF MEXICO PRODUCTION ASSETS NOVEMBER 2007

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Reserves

  • Five fields in two granted development

areas covering 82.1 km2

  • STOIIP of 185 to 262 MMbbl (P50-P10)
  • Estimated recoverable reserves of 43 to

124 MMbbl (P50-P10)

  • Petsec estimated reserves 10.7 to 31

MMbbl (P50-P10); 5.2 to 15.2 MMbbl if CNOOC backs in for 51%

CHINA, BEIBU GULF BLOCK 22/12

PETSEC 25% W.I ROC Oil 40% W.I. (OPER.) HORIZON OIL 30% W.I. OIL AUSTRALIA 5% W.I.

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Development

  • Three fields 6-12, 6-12S, 12-8W proposed development expected to begin 4th Qtr 2009
  • Gross reserves range from 27 to 52 MMbbl (P50 - P10)
  • Two unmanned wellhead platforms at 6-12S & 12-8W oil fields
  • Pipeline connection to send all produced volumes back to new CNOOC operated processing

platform located at 12-1

  • Petsec estimated gross development costs ~ US$150-200 MM
  • CNOOC feasibility study completed, ODP expected to be lodged in June 2009 and approved in

September 2009 with start of development 4th Qtr 2009

  • First production expected early 2011 at gross rate 14,500 bopd
  • Development of 12-8E and 12-3-1 fields anticipated in 2011 (est. gross recoverable reserves of

15 to 72 MMbbl, P50 - P10)

Exploration

  • Eight undrilled prospects/leads > 100 MMbbl potential

CHINA, BEIBU GULF BLOCK 22/12

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KEY OBJECTIVE & STRATEGY FOR 2009

Key Objective

Increase shareholder value through significant growth in profitable oil and gas reserves and production

Strategy

Preserve balance sheet

Reduce debt Protect margins through effective hedging Delay capital expenditure till service costs have stabilised at lower levels

Increase production

Start development of China oilfields

Increase reserves

Acquisition of producing assets – Distressed sales Exploration of significantly large high quality prospects when costs are lower – late 2009

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CAPACITY TO MEET OBJECTIVE

Management

All senior management have greater than 30 years experience each in E&P and the Gulf of Mexico Successful operators, acquirers and explorers

Balance Sheet

Cash at 31.03.08: US$12 Million Unused bank facilities at 31.03.08: US$25 Million US developed reserves 31.12.08: 30.4 Bcfe (PEI 2P) China undeveloped reserves 31.12.08: 10.2 – 31 MMbbl

Acquisitions

Demonstrated capacity to acquire > US$100 Million in assets profitably

Exploration

High exploration success rate 2002 – 2006 Prospect inventory – Drill ready – Capacity to deliver significant growth

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CONCLUSION

  • Experienced Board of Directors & Senior Management team
  • Robust growth in production / cashflow / reserves. 2002 - 2007
  • Record operating results in 2008
  • Tough economic & industry environment 2008 / 2009
  • Focus on debt reduction & conservation of capital
  • In USA: Look to acquire producing assets in GOM & recommence exploration drilling

activities once industry conditions improve

  • In China: Start development of 3 of 5 fields in late 2009 while service costs are low.

Production early 2011

CAPITAL STRUCTURE – AS AT 7 MAY 2009 Australia Exchange ASX Ticker PSA Shares on issue 154.2 million Options on issue 6.1 million Share price A$0.34 Market capitalisation A$52.4 million USA Exchange OTC Pink Sheets Ticker PSJEY

Source: ASX

SHARE PRICE PERFORMANCE – 2004 to 5/09

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Petsec Energy Ltd

Annual General Meeting 20 May 2009

Terry Fern Chairman & CEO

For personal use only