Rocksource ASA Swedbank First Securities 2013 Nordic Energy Summit - - PowerPoint PPT Presentation

Rocksource ASA

Swedbank First Securities’ 2013 Nordic Energy Summit

21 March 2013 CEO Chris Spencer

Disclaimer

This presentation contains information provided by the management of Rocksource ASA with respect to historical and expected performance of the business as well as the historical and expected performance of its industry. Information related to expected performance in this presentation reflects assumptions, made by the management on the basis of concluded information available, many of which will not be within the control of the company and its management. These assumptions may or may not prove to be correct, and thus there can be no certainty that the projections will materialise in the manner in which the management has assumed. No representations or warranties are or will be made by Rocksource ASA concerning the anticipated performance of the company related to this presentation. This presentation may not be used for the purpose of, and does not constitute, an offer to sell, issue or subscribe for, shares

• r
• ther

securities in Rocksource ASA. Any person who, willing or unwilling, gains possession of the whole or parts of this presentation is explicitly made aware of this restriction and is required by Rocksource ASA to make themselves aware of this fact. Any dispute that might arise regarding this presentation shall be governed by Norwegian law and the sole jurisdiction of the Norwegian courts, with Oslo District Court as legal venue.

Slide: 2

Table of contents

• Introduction to Rocksource
• Exploration programme update
• Summary and outlook
• Appendix

Slide: 3

Rocksource at a glance

• Rocksource is an oil and gas exploration company

focusing on the Norwegian Continental Shelf (NCS)

• Exploration model: Combining solid geological

expertise with advanced seismic and EM data analysis

• 14 licenses on the NCS, including the Norvarg

discovery

• 12 leases in the Gulf of Mexico, 1 in the UK
• Five NCS wells expected over the next two years,

with net unrisked potential of 15ommboe

• Company repositioned in 2012: New drill queue

established; 2012/13 exploration cost carried; bond debt paid‐off and G&A level reduced

Slide: 4

Rocksource’s NCS licenses

Five year portfolio (~20 wells) Rocksource strategy*: One year snap‐shot

Targeting 3-4 value driven wells per year

Mix of “premium” and “bread and butter” exploration

• COS 30% ‐ 40%
• Prospect size: 40 –

100 mmboe (P50)

• Mature areas, close

to infrastructure

3 to 4 wells per year

10‐15% stake at time of drilling

“Bread & butter”

Low/med risk & volumes 2 or 3 wells per year

“Premium”

Higher risk & volumes 1 or 2 wells per year

• COS 15 – 30%
• Prospect size: 100+

mmboe (P50)

• Potential for stand‐

alone development

Slide: 5

High Medium Low High Medium Low Prospect risk Value in case of discovery

“Premium” “Bread & butter”

X

50mmboe**

X

100mmboe*

30% 20%

** Volumes indicative only. Real measure is financial value. For example, oil near infrastructure can be smaller than gas away from infrastructure * Activity level dependent on access to wells with attractive commercial potential

Firm wells provide good mix of risk and potential

Illustration of risk and value potential from upcoming wells; Estimated volumes are mean unrisked, net to Rocksource

PL 535 Norvarg

32 mmboe

High Medium Low High Medium Low Prospect risk Value potential PL 659 Langlitinden

13 mmboe

PL586* Pil & Bue

5 mmboe

PL 528 Ivory

42 mmboe

PL 506S Storbarden

60 mmboe *Farm‐in September 2012, subject to positive drill decision. Drill or drop expected in 2Q 2013.

Slide: 6

Working capital incl. carry of NOK ~190 million

• The Company is financed for its committed activity set through 2013, including three sanctioned wells
• With an ambition to increase the activity set beyond the committed activities, the Company is continuously

evaluating appropriate measures to strengthen its financial base in support of further growth

89 149 190 122 57 96 142 41 150

• 50

100 150 200 250 300 350 400

Cash and cash equivalents 31.12.2012 Refund of deferred tax assets, Dec. 2013 Refund of 2012 exploration cost, Dec 2013 Repayment of 2012 expl. credit facility,

• Dec. 2013

Other working capital Working capital 31.12.2012 Net Valiant carry fund, after tax and financing * Working capital

• incl. Valiant

carry fund, after tax and financing NOK 150m Exploration credit facility with SEB

MNOK

* As of year‐end 2012 the unused part of the NOK 200 million Valiant carry fund is NOK 164 million pre tax, equal to approximately NOK 41 million after tax and financing

Slide: 7

Corporate restructuring completed 31 Dec. 2012

New structure Current structure

Rocksource ASA

UK subsidiary GoM subsidiary Rocksource Geotech Other subsidiaries

Rocksource ASA

UK subsidiary GoM subsidiary Rocksource Geotech Other subsidiaries NCS operations NCS operations NCS subsidiary

• Reorganisation has created an entity more aligned with the operations and jurisdictions
• Transaction will release tax loss carried forward in Rocksource ASA in December 2013*

* The reorganisation will have the effect that the parent company, Rocksource ASA, will discontinue its direct petroleum activities

• n the NCS. As a consequence of the restructuring, Rocksource will claim payment from the Norwegian government of the tax

value of its uncovered losses pursuant to the Norwegian Petroleum Taxation Act section 3(c)(4). The Company has received the details of the tax assessment for 2011 from the Oil Taxation Office. Based on the details, which covers tax years up to and including 2011, and preliminary calculations for 2012, the expected payment amounts to approximately NOK 96 million.

Slide: 8

A new and experienced management team

Slide: 9

Chris Spencer

CEO

Tommy Sundt

CFO

Annelin N. Haaland

Exploration Manager NCS

Per Anders Muri

VP Commercial & Communication

Morten Haukebø

VP HSSE&Q

Skills / Experience

Experience & achievements

• 20 years of

industry experience with Shell & BP

• Charterred

engineer

• 17 years work

experience with Hydro & Statoil

• Cand Scient

degree in Reservoir Geophysics

• CFO since start‐up
• f Rocksource
• Former bus.dev.,

portfolio manager and auditor. 17 years finance & economics experience

• 25 years of

industry experience, most recently with Odfjell Drilling

• Previously with

Revus Energy (Wintershall)

• 18 years

experience within communications

x

Sub‐surface

xx x xx

HSSE&Q

xx xx

Commercial

xx x xx x x

Finance

xx xx

• +20 years working

production and exploration for Statoil , North Sea and international Rolf Monsen

CTO

Personnel by profession

Exploration focused organisation

Work force:

• Employing a total of 35 oil and gas professionals
• Offices in Bergen (HQ, technical) and Oslo (finance, IR,

commercial and accounting)

Qualifications:

• Highly competent and skilled workforce with a focus
• n exploration and with complimentary competences

throughout the value chain

• NCS focused exploration strategy with preference for

prospects with DHI* support (seismic and/or EM)

• Subsurface organisation restructured and lessons learned

incorporated

• Qualified as operator on the NCS
• Passed PSA pre‐drill audit as operator with no exceptions
• Drilling operations completed without any incidents
• On average each Rocksource employee has 15 years
• f experience, mainly from NCS

Average no. of years experience by profession

5 10 15 20 25

Management G&G Commercial & engineering Finance HSE & support

Slide: 10

5 10 15 20 25 30

Management G&G Commercial & Engineering Finance HSE & Support

• No. of awards in last two numbered round on the NCS

2 4 6 8

Rocksource Noreco North Energy Spring Energy Front Exploration Det norske * Direct Hydrocarbon Indicator

A proven NCS operator

• Rocksource is a proven operator on the NCS
• Passed PSA pre‐drill audit as operator with no exceptions
• First operated well drilled in 2011 and completed without any

incidents

• The Company’s second operated well is estimated to spud in

March/April

• Successful operator experience in the North Sea a

prerequisite for operating in the Norwegian Sea and the Barents Sea

• Increased opportunity set for proven operators
• In house capabilities include:
• Well Construction Team, licenses competence, G&G

competence, HSSE&Q (including emergency preparedness)

Slide: 11

The semi‐submersible drilling rig Borgland Dolphin. Rocksource will operate the Borgland Dolphin in 1Q 2013, drilling the Storbarden prospect in PL 506 in the Stord Basin AMI = Areas of Mutual Interest

Table of contents

• Introduction to Rocksource
• Exploration programme update
• Summary and outlook
• Appendix

Slide: 12

Embarking on a new drilling campaign

*Farm‐in September 2012, subject to positive drill decision. Drill or drop by expected in 2Q 2013.

• Norvarg appraisal to firm up volume estimates with potential for further resource increase
• Storbarden prospect a potential play opener, net unrisked mean estimate refers to potential from first well
• Ivory is a gas prospect with substantial follow up potential
• Two other exploration wells in more mature areas with lower risk

PL 506S Storbarden PL 535 Norvarg PL 659 Langlitinden PL 586* Pil & Bue PL 528 Ivory Location North Sea Barents Sea Barents Sea Norwegian Sea Norwegian Well‐type Exploration Appraisal Exploration Exploration Exploration Assumed risk High Low Medium Low/medium Medium Rocksource % 25 % 7 % 5 % 15 % 25% Cost structure Fully carried Fully carried Fully carried Farm‐in Ground floor Operator Rocksource Total Det norske VNG Centrica Estimated drilling start 1Q 2013 2Q 2013 4Q 2013 1Q 2014 4Q 2014/1Q 2015 Gross unrisked volume estimate 100‐1,800 mmboe 250‐660 mmboe 160‐360 mmboe 20‐53 mmboe 55‐306mmboe Net unrisked volume estimate 25‐450 mmboe 18‐46 mmboe 8‐18 mmboe 3‐8 mmboe 14‐77 mmboe Net unrisked mean estimate 60 mmboe 32 mmboe 13 mmboe 5 mmboe 42 mmboe

Slide: 13

2013 well: PL 506S Storbarden – potential play opener

• High risk/high reward oil prospect in the Stord

Basin

• Gross unrisked resources of 100‐1,800

mmboe, first well to test unrisked resources of 100‐340 mmboe

• Key risks: seal and source/migration
• High geological risk with seismic and EM DHI*

uplift

• Well cost carried
• Drill start in 1Q 2013 (Borgland Dolphin)
• Rocksource 25% (op), Petrolia 30%, Valiant

25%, Petoro 20%

* Direct Hydrocarbon Indicator

Slide: 14

2013 well: PL 535, Norvarg – Barents Sea gas discovery

• 2011 gas discovery
• Current Rocksource mean resource estimate

290 mmboe (net 21 mmboe), wide resource range necessitates appraisal

• First appraisal to mitigate low side of estimates

and increase Kobbe formation resource

• Success case net resources: 5 billion Sm3 gas

(32 mmboe)

• Well cost carried
• Drill start estimated to 2Q 2013 (Leiv Eiriksson )
• Rocksource 7%, Total 40% (op), North

Energy 20%, Det norske 20%, Valiant 13%

Slide: 15

2013 well: PL 659, Langlitinden (previously “Matrosen”) – in the Barents Sea sweet spot

• Proven play with multiple follow up prospects,

includes the 2008 Caurus gas discovery (gross ~190 mmboe)

• Oil prospect with a potential gas cap; updip

part of a formation

• Gross unrisked resources of 160‐360 mmboe
• Medium risk prospect with seismic DHI
• Key risks: reservoir quality and phase
• Well cost carried
• Drill start estimated to 4Q 2013
• Rocksource 5%, Det norske 30% (op), Petoro

30%, Lundin 20%, Spring 10%, Valiant 5%

Slide: 16

2014 candidate: PL 586 Pil & Bue – A potential fast track development

• Rocksource farmed into the PL 586 licence

located in the Norwegian Sea in 2012

• 1Q 14 drilling candidate – drill or drop

expected in 2Q 2013

• Low/medium risk oil prospect with potential

for short cycle time development

• Moderate geological risk with seismic DHI

uplift

• Gross unrisked resources (mapped by

Rocksource) of 20–53 mmboe

• Key risks: seal and phase
• Rocksource 15%
• The operator VNG Norge is currently

forming a new partnership

Slide: 17

2014/2015 well: PL 528, Ivory (Rocksource 25%)

• Awarded in 20th & 21st Round
• Partners: Centrica, (Op 40%) and Statoil (35%)
• Key attributes: Multi‐prospect licence with DHI
• support. Adjacent to the Aasta Hansteen field

development.

• Key prospect: Ivory (168 mmboe, mean)
• Oil/gas: Gas
• Key characteristics of prospect risk: Top seal and charge
• Water depth: 990‐1,650 m
• Status: Drill decision taken, expected well in

2014/2015

Slide: 18

US Gulf of Mexico – An overview

• 12 leases with 20+ identified prospects

and discoveries

• Initiatives to farm down / attract

partners ongoing

• Several drill ready prospects with DHIs

and additional prospects under maturation

• 130 mmboe discovered resource in

Trident (Rocksource 100%), mostly light oil

10 leases in the Western GoM, 2 in Mississippi Canyon

Slide: 19

Encouraging developments in the Trident area

• Renewed interest in the area following recent

Pemex discoveries and encouraging production rates at Perdido

• Pemex has reported two large oil discoveries

south west of Trident, in same play

• Production rates at Perdido in similar reservoirs as

in Trident

• Significant potential combined resource base

in AC855 (Rocksource 65%) and Trident

• 130 mmboe discovered at Trident with additional

exploration potential

• Potential extension of Great White field into

AC855

• Exploration potential with seismic and EM DHIs

Shell operated Perdido development includes Great White, Tobago and Silvertip.

Slide: 20

Table of contents

• Introduction to Rocksource
• Exploration programme update
• Summary and outlook
• Appendix

Slide: 21

PL 535 Norvarg PL586 Pil & Bue 50 100 150 200 250 300 Value RGT equity March 2013 Value of 10 mmbbl @ $4/bbl

NOK million

Attractive near-term value potential

Illustration of value potential with commercial discovery*

NOK million

Risk and value potential from the expected wells next 2 years

* For illustrative purposes. $4/bbl and USDNOK 6.0 applied

Slide: 22

High Medium Low High Medium Low Prospect risk Value potential PL 659 Matrosen PL 528 Ivory PL 506 Storbarden

A reset Rocksource entering a new phase

• Returning to drilling imminently with 5 wells

expected the next 2 years

• Pursuing farm‐ins to add to NCS opportunity set
• Goal to drill 3‐4 exploration wells per year remains
• An experienced team the backbone to our Company
• Core G&G expertise combined with seismic & EM DHI work
• Proven NCS operator
• Focus on capital discipline to continue
• Current exploration programme for 2013 fully carried
• Cost cutting efforts from 2012 in full effect from 2013

Slide: 23 Leiv Eiriksson rig to drill Norvarg in 2Q 13

Table of contents

• Introduction to Rocksource
• Exploration programme update
• Summary and outlook
• Appendix

Slide: 24

Rocksource Board of Directors

Slide: 25

Henrik A. Christensen Chairman Eva von Hirsch Nick Johnson Ole Wiborg Sue Graham Marianne E. Johnsen Helge Ringdal

4Q key figures

NOK '000

Q4 2012 Q4 2011 2012 2011 Total operating income 3 640 16 478 55 579 186 034 Exploration expenses, external (1) (17 670) (25 033) (144 539) (95 242) Total G&A before reclassification (2) (25 928) (23 729) (87 632) (99 601) EBITDA (3) (44 186) (165 367) (189 113) (480 251) Income tax 78 402 101 300 147 057 372 193 Net profit/(loss) 30 829 (103 417) (201 711) (178 333) Cash and cash equivalents 88 800 247 169 88 800 247 169 Expected tax refunds (4) 238 588 563 994 238 588 563 994 Total cumulative NCS exploration credit facility drawdown (121 500) (555 000) (121 500) (555 000) Bond loan ‐ (128 982) ‐ (128 982) Net 205 888 127 181 205 888 127 181 Undrawn carry‐fund 163 367 ‐ 163 367 ‐ Number of employees 34 44 34 44 Number of licenses 32 38 32 38

(1) See note 4 in the financial statements (2) See note 5 in the financial statements (3) Earnings before interest, taxes, depreciation, amortisation and impairment (4) See note 3 in the financial statements

Slide: 26

Profit and loss statement

NOK '000 Q4 2012 Q3 2012 Q2 2012 Q1 2012 Q4 2011 2012 2011 Operating income 3 640 2 870 44 443 4 627 16 478 55 579 186 034 Total operating income 3 640 2 870 44 443 4 627 16 478 55 579 186 034 Other general and administrative expenses 2 380 (3 006) (3 850) (4 458) (5 646) (8 934) (22 047) EBITDA before exploration expenses 6 020 (136) 40 593 169 10 831 46 645 163 986 Exploration expenses (50 207) (37 079) (114 182) (34 290) (176 199) (235 758) (644 238) EBITDA (44 187) (37 215) (73 589) (34 121) (165 367) (189 113) (480 251) Depreciation and amortisation (442) (393) (397) (407) (427) (1 638) (2 728) Impairment loss

• (93 000)
• (51 563)

(93 000) (51 563) Total financial income/(expenses) (2 944) (36 023) (4 607) (21 442) 12 640 (65 017) (15 307) Profit/(loss) before taxes (47 573) (166 631) (78 594) (55 971) (204 717) (348 767) (549 849) Income tax 78 402 23 470 69 839 (24 654) 101 300 147 057 372 193 Net profit/(loss) from continued operations 30 829 (143 161) (8 754) (80 625) (103 417) (201 711) (177 656) Net profit/(loss) from discontinued operations

• (676)

Net profit/(loss) 30 829 (143 161) (8 754) (80 625) (103 417) (201 711) (178 333) Slide: 27

Balance sheet

NOK '000 31.12.2012 30.9.2012 30.6.2012 30.3.2012 31.12.2011 Goodwill 10 000 10 000 103 000 103 000 103 000 Capitalised exploration and acquisition costs 116 710 121 728 132 120 289 906 290 925 Total intangible assets 126 710 131 728 235 120 392 906 393 925 Furniture, fixtures and office machines 2 771 2 389 2 789 3 222 3 646 Investments in associates

• 22 702

23 388 27 174 Tax receivable NCS, long-term

• 109 836

90 140 21 485

• Total tangible assets

2 771 112 225 115 631 48 095 30 820 Total non-current assets 129 481 243 953 350 751 441 001 424 745 Total receivables 8 754 4 545 15 035 12 082 23 412 Tax receivable NCS, short-term 238 588 563 994 563 994 563 994 563 994 Cash and cash equivalents 88 800 82 360 185 347 164 089 247 169 Total current assets 336 142 650 899 764 377 740 165 834 575 TOTAL ASSETS 465 623 894 853 1 115 128 1 181 165 1 259 320 Total equity 212 478 179 046 315 975 329 745 408 210 Total non-current liabilities 66 019 110 217 103 991 145 537 147 723 Total current liabilities 187 127 605 590 695 162 705 884 703 388 TOTAL EQUITY AND LIABILITIES 465 623 894 853 1 115 128 1 181 165 1 259 320

Slide: 28

Cash flow

NOK '000 Q4 2012 Q3 2012 Q2 2012 Q1 2012 Q4 2011 2012 2011 Net cash flow from: Operating activities 518 116 (113 106) (29 656) (41 161) (26 002) 334 193 (339 083) Investing activities (2 961)

• 76 320

(1 277) (12 220) 72 082 (224 438) Financing activities (508 500) 10 000 (25 600) (39 770) (56 303) (563 870) 588 690 Exchange rate changes (215) 119 194 (872) 998 (774) (2 870) Net change in cash and cash equivalents 6 440 (102 988) 21 258 (83 080) (93 527) (158 369) 22 298 Cash and cash equivalents at start of period 82 360 185 347 164 089 247 169 340 696 247 169 224 870 Cash and cash equivalents at end of period 88 800 82 360 185 347 164 089 247 169 88 800 247 169 Slide: 29

Investor contacts

Per Anders Muri, VP Commercial & Communication

• Tel: +47 91 11 61 21
• per.anders.muri@rocksource.com

Tommy Sundt, CFO

• Tel: +47 90 85 50 00
• tommy.sundt@rocksource.com

Slide: 30

www.rocksource.com