Delivering on a Focused Strategy

Transcription

1 Delivering on a Focused Strategy

2 Investment Proposition 2 Active EXPLORATION program Growing OIL production First WET GAS production Huge UNCONVENTIONAL gas resource potential FULLY FUNDED work program Delivering GROWTH in reserves, production and cashflow TRANSITIONING to significant oil and gas producer

3 Drillsearch Snapshot 3 Cooper Basin focus Significant acreage position Operator with high JV interests Oil producer with significant new discoveries New wet gas production High leverage to liquids Huge unconventional gas potential Key Data Share Price (2 March ) $1.50 Shares on Issue 337M Market Cap $505M Cash (31 December 2011) $33.7M Debt Nil 2P Total Reserves 11.3 mmboe 2P + 2C Reserves and Resources 17.5 mmboe Relative Performance DLS / ASX Energy 200 DLS $48m Capital Raising XEJ

4 Three Growth Platforms 4 Unconventional WET GAS Wet Gas OIL Oil Short, medium and long-term growth opportunities Short, medium and long-term growth opportunities

5 Cooper Basin Play Fairways by Business Unit 5 UNCONVENTIONAL WET GAS OIL Short, medium and long-term growth opportunities

6 Why the Cooper Basin - Australia s Petroleum Heartland 6 Australia s largest onshore oil and gas basin Underexplored - low exploration drilling density Multiple conventional & unconventional resource plays Major production hub serving Eastern Australia DLS has established access to oil and gas infrastructure Minimal community impact - few landholders in permits Land used for seasonal cattle grazing not crops Aerial photo of Cooper Basin ATP 940 Shale Gas Permit Area Oct 2011 Fiberspar installation PEL 106B Oct 2011 Cooper Basin ATP 539 Nov 2011

7 Reserve Growth 7 YTD Financial Year : 2P Reserves of 11.3 mmboe 33% uplift in total 2P Reserves 60% uplift in 2P liquids Reserves Reserves 58% weighted to liquids New oil discoveries driving increase Further Reserve increases expected Financial Year 2011 delivered: 2P Reserves of 8.5 mmboe 887% increase in total 2P Reserves Reserve increase driven by Wet Gas Drillsearch Reserve Growth Commercialisation of Wet Gas discoveries New PEL 91 discoveries Source: Independent Reserves auditor, Gaffney Cline & Associates Reserves and Resources Reports

8 Delivering Production A Forward Look 8 Financial year production forecast of 320,000 bbls Increase driven by development of new oil discoveries and wet gas pilot project Oil production expected to rapidly increase to ~3,000+ BOPD Crude oil pipeline planned to ensure oil production reliability Note: All forecast production is in non operated permits by Drillsearch. As such the company is dependant on Operator production forecasts when providing this guidance

9 Oil Business 9 Key Data Production FY11 ~330 BOPD Reserves (2P) Contingent Resources (2C) Unrisked Prospective Resources (Best) 3.7 mmbbls 2.7 mmbbls Western Flank = 15.8 mmbbls Inland Fairway = 31.6 mmbbls Background High profit oil Low well cost (~$2m) Low development cost (~$2m) Low operating cost = ~$25/bbl Oil sales linked to Brent oil price High net back =>$75/bbl High success rates over 50% on 3D seismic Short cycle times from discovery to first oil All costs quoted on a 100% JV gross basis.operating costs are field plus transportation costs. Net back assuming USD$100 oil price Based upon Western Flank oil

10 Western Flank Oil Fairway - Exploration and development 10 Highlights DLS interest 60% Highly prospective - multiple 2D/3D seismically defined prospects Construction of production facilities underway New exploration campaign to commence mid Production forecast to increase to ~3,000+ BOPD (DLS net) Crude oil transportation shifting from trucking to export pipeline Key Activity Mar Q Jun Q Sept Q Dec Q Well completion/production facilities Oil export pipeline FY12 Total Expenditure $23M Drilling development/exploration

11 Inland Cook Oil Fairway - Exploration 11 Highlights DLS interest % Large operated position covering 10,264km 2 (gross) North-eastern extension of Western Flank Oil Fairway Initial prospects and leads defined 2D/3D seismic acquisition scheduled for June quarter Exploration drilling planned for late / early 2013 Key Activity 2D/3D Seismic acquisition Exploration drilling Mar Q Jun Q Sept Q Dec Q FY12 Total Expenditure $5M

12 Wet Gas Business 12 Key Data Production Reserves (2P) Raw Gas 25mmcf /d (gross) Liquids 1,200+ BOPD (gross) 30-40boe/mmcf raw gas 7.6 mmboe Contingent Resources (2C) Unrisked Prospective Resources (Best) Background 3.4 mmboe 41.0 mmboe 12 existing wet gas discoveries 2 wet gas fields in production Low well cost (~$2.5m) Low development cost ($2.5m) Significant condensate and LPG production Economics driven by liquids production Only independent to successfully secure gas sales and access to SACBJV gas network * All costs quoted on a 100% JV gross basis.developmental costs based on connection into SACBJV system.

13 Wet Gas Exploration and Development 13 Highlights DLS interest % Liquids-rich = 40 to 200+ bbls/mmscf raw gas Initial production commenced January Interruptible supply to Santos operated SACBJV International pricing for liquids + contract price for sales gas Currently producing 25 mmscf/d raw gas + 1,250 BOPD liquids Drilling underway to prove up additional reserves Also exploring unconventional sands, coals and shales Targeting additional gas sales from other existing discoveries New wet gas discovery at Coolawang-1 high liquids content Key Activity Mar Q Jun Q Sept Q Dec Q PEL 106B* exploration drilling PEL 107* exploration drilling PEL 106A* production testing FY12 Total Expenditure $23M * PEL 106B permit area DLS 50% / Beach 50% - PEL 107 permit area DLS 60% / Beach 40% - PEL 106A and PELA 513 permit area DLS 100%

14 Unconventional Business 14 Key Data Production Nil Reserves (2P) Nil Contingent Resources (2C) Unrisked Prospective Resources (Best) Background Under evaluation Deep CSG = 8-17 TCF Shale Gas = Under evaluation Greatest leverage to Cooper Basin Shale Gas play relative to company size Strategic alliance with BG Group BG Group substantially funding exploration program Pathway to commercialisation in place with BG Group Significant potential for liquids rich gas Open access to multiple sales gas pipelines

15 Central Cooper Unconventional 15 Highlights DLS interest 40% & Operator Strategic alliance with BG Group ~2,000km 2 (500,000 acres) in shale gas fairway Thick REM shale present with offset well control Evidence of significant regional over pressuring Rich, thermally mature wet and dry shale gas plays Near offset wells show clear presence of gas & liquids EIA* estimates risked gas-in-place of 24 BCF/km2 JV area shale gas potential of 48TCF gas-in-place* Beach has booked 2C Resources of 2 TCF sales gas Conventional gas prospectivity as well Key Activity 3D Seismic Exploration Drilling Stage Appraisal & production pilot Stage Stage DLS Total Spend $22M Total cumulative spend = $130m for the whole program * Source: EIA World Shale Gas Resources: An Initial Assessment (Feb 2011). ATP 940P JV shale gas potential based on EIA estimate.

16 Prospectivity of Cooper Basin Shale Plays 16 North American Shale Plays Cooper Basin Shale Plays Shale Play Parameters Barnett Fayetteville Haynesville Cana Woodford Eagle Ford Nappamerri REM East Nappamerri REM West Patchawarra REM SW Depth (metres) Net Thickness (metres) Target Zone Temp (C o ) Reservoir Characteristics Total Porosity% Gas Content, scf/ton To be determined To be determined To be determined Other Fractured High silica Hot, High Pressure Complex Layered Fracturing High carbonate Brittle To be determined To be determined To be determined Shale Mineralogy Total Organic Content % Thermal Maturity (Ro%) Quartz% Clay% Carbonate% Kerogen% Varies Varies Varies Production Characteristics IP, Mmcfe/d To be determined To be determined To be determined EUR, Bcfe/well To be determined To be determined To be determined Gas & Liquids High Liquids & Dry Gas windows Dry Gas Dry Gas High Liquids & Dry Gas windows Dry Gas, High Liquids & Oil windows??? Cooper Basin Shale compares favourably with North American Shale Plays

17 17 REM Indications of Wet Gas Elevated Total Gas (Red Shading) and C4 Butane (Blue Line) Wet Gas reading in REM Sequence Two ATP 940P Near Offset Control Wells Displaying Elevated Gas Readings through the REM Sequence

18 Western Cooper Unconventional 18 Highlights DLS interest % Mixed lithology - conventional wet gas & unconventional zones Liquid-rich shales, tight oil and gas sands & Deep Coal 40 TCF Gas-in-Place with up to 20 TCF Prospective Resource Current coring program targeting coal & shale zones Coring & production pilot targeting contingent resources Multiple production pilot project areas identified Multiple Santos projects targeting REM Shale, Tight Sands & Deep Coals in adjacent permits Santos already booked 2 TCF+ of independently audited 2C Contingent Resources Key Activity Mar Q Jun Q Sept Q Dec Q PEL 106B* coal & shale coring PEL 107* shale coring PEL 106A* production testing * PEL 106B permit area DLS 50% / Beach 50% - PEL 107 permit area DLS 60% / Beach 40% - PEL 106A and PELA 513 permit area DLS 100%

19 Our next steps 19 Oil Development drilling targeting further reserves upgrade Bringing new discoveries into production Construct oil pipeline to improve production reliability Significant growth in production and cash flow generation Exploration drilling on new 3D seismic in Western Flank 3D Seismic Acquisition Inland Cook Wet Gas Expand Wet Gas pilot project Complete and test other wet gas discoveries Convert existing Wet Gas discoveries to 2P Reserves Drill and test five new wet gas wells Unconventional Western Cooper coring program commenced Central Cooper 3D seismic program Drill, core, test and complete first shale and tight gas wells Commence production testing Book unconventional Resources and Reserves

20 Investment Proposition 20 Active EXPLORATION program Growing OIL production First WET GAS production Huge UNCONVENTIONAL gas resource potential FULLY FUNDED work program Delivering GROWTH in reserves, production and cashflow TRANSITIONING to significant oil and gas producer

21 Disclaimer and Important Notice 21 This presentation does not constitute investment advice. Neither this presentation nor the information contained in it constitutes an offer, invitation, solicitation or recommendation in relation to the purchase or sale of shares in any jurisdiction. Shareholders should not rely on this presentation. This presentation does not take into account any person's particular investment objectives, financial resources or other relevant circumstances and the opinions and recommendations in this presentation are not intended to represent recommendations of particular investments to particular persons. All securities transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments. The information set out in this presentation does not purport to be all inclusive or to contain all the information which its recipients may require in order to make an informed assessment of Drillsearch. You should conduct your own investigations and perform your own analysis in order to satisfy yourself as to the accuracy and completeness of the information, statements and opinions contained in this presentation. To the fullest extent permitted by law, the Company does not make any representation or warranty, express or implied, as to the accuracy or completeness of any information, statements, opinions, estimates, forecasts or other representations contained in this presentation. No responsibility for any errors or omissions from this presentation arising out of negligence or otherwise is accepted. This presentation may include forward looking statements. Forward looking statements are only predictions and are subject to risks, uncertainties and assumptions which are outside the control of Drillsearch. These risks, uncertainties and assumptions include commodity prices, currency fluctuations, economic and financial market conditions in various countries and regions, environmental risks and legislative, fiscal or regulatory developments, political risks, project delay or advancement, approvals and cost estimates. Actual values, results or events may be materially different to those expressed or implied in this presentation. Given these uncertainties, readers are cautioned not to place reliance on forward looking statements. Any forward looking statements in this presentation speak only at the date of issue of this presentation. Subject to any continuing obligations under applicable law and the ASX Listing Rules, Drillsearch does not undertake any obligation to update or revise any information or any of the forward looking statements in this presentation or any changes in events, conditions or circumstances on which any such forward looking statement is based. The Reserves and Resources assessment follows guidelines set forth by the Society of Petroleum Engineers - Petroleum Resource Management System (SPE-PRMS). The Reserves estimates used in this presentation were compiled by Mr David Evans, Chief Technical Officer of Drillsearch Energy Ltd, who is a qualified person as defined under ASX Listing Rule 5.11 and has consented to the use of the Reserves figures in the form and context in which they appear in this presentation.

22 Investor Presentation Appendix MARCH

23 Comparative share price performance to peers FY 23 DLS BRU SXY BPT AWE COE ROC STO HZN AUT

24 Comparative Cooper Basin Net Exploration Acreage Holdings 24 Source: GPinfo Petroleum Permits of Australia 2011, Company websites and Annual Reports

25 Delivering Production Growth A Forward Look 25 Note: The above graph illustrates the expected increase in the daily production rate capacity over 5 successive periods to provide an indication of near term targeted production rate growth trends. These periods may be considered rough but not exact approximations for quarterly periods to allow for potential time slipages The graph is intended to illustrate the step increases in daily production rate capacity expected to be achieved and the source of such new increases (or decreases). Actual average daily production realized in each of the Periods may exceed or be below the actual potential rate that the Company s producing assets may be capable of. As such in generating the formal production guidance provided elsewhere in this presentation, the Company has applied this production rate with certain contingencies relating to possible weather interruptions or production start delays. The above graph is not to be taken as a definitive forecast of the expected average daily production applicable to that period or strictly applied to a financial quarter. Similarly, all forecast production is in non-operated permits. As such the Company is dependant on the relevant Operator executing each individual project within the time frame provided to the Company to achieve production forecasts used in providing the production guidance provided elsewhere in this presentation.

26 Our approach to Cooper Basin Unconventional 26 Drillsearch s approach to unconventional resources is based on 5 key principles: Activity & investment targeted to EAD Life Cycle Focus on activity to establish the 3 P s for the resource The 3 L s Look, Listen & Learn Combine unconventional activities into conventional exploration and appraisal Measure twice, Cut once - Use Best Available Technologies Strategic partnering with BG Group to further development & commercialisation

27 Drillsearch Unconventional Position by play 27 Approx Top of Oil Window Moomba Gas Field Challum Gas Field Approx Top of Gas Window REM Shale Gas Target Patchawarra Formation Basin-Centered, Tight Gas & Deep CSG PEL ATP 940P

28 Nappamerri Trough REM Shale Thickness 28 REM Shale remains thick across ATP 940P providing a thick unconventional target zone

29 Nappamerri Trough REM Shale Depth Map 29 REM Shale is shallower in ATP 940P in a setting with more wet gas potential

30 Commercialisation - The Changing Market Landscape 30 Current Cooper & Southern Basins gas reserves already fully contracted Eastern Australia Gas Supply-Demand FID of major CSG-to-LNG Projects takes the highquality CSG out of the domestic market CBJV moves to commit remaining 2P reserves to GLNG to capture oil-linked pricing tightening supplies Cooper Basin historical domestic gas supply contracts begin rolling off in through 2015 Cooper Basin historical markets will compete with LNG export projects & oil-linked LNG pricing for gas supply Eastern Australia domestic market supply merit order Incremental Cooper Basin Conventional Cooper Basin Unconventional Marginal Queensland & NSW CSG Projects Result - domestic gas prices likely to partially converge with oil-linked LNG export-parity levels Source: Core Energy Group