Syntroleum Analyst Day. June 2006

Transcription

1 Syntroleum Analyst Day June 2006

2 Forward Looking Statements This presentation includes forward-looking statements as well as historical information. These forward-looking statements may include statements relating to the Syntroleum Process and related technologies, liquefied natural gas development, the GTL Barge and other gas-to-liquids plants based on the Syntroleum Process, anticipated costs to design, construct and operate these plants, anticipated costs to make products from these plants, the timing of commencement and completion of the design and construction of these plants, obtaining required financing for these plants, the economic construction and operation of gas-to-liquids plants, the value and markets for plant products, testing, certification, characteristics and use of plant products, the continued development of the Syntroleum Process (alone or with partners), anticipated capital expenditures, anticipated revenues and any other statements regarding future growth, cash needs, operations, business plans and financial results. When used in this presentation, the words anticipate, believe, estimate, expect, intend, may, plan, project, should and similar expressions are intended to be among the statements that identify forward-looking statements. Although we believe that expectations reflected in these forward-looking statements are reasonable, these kinds of statements involve risks and uncertainties. Actual results may not be consistent with these forwardlooking statements. For discussion of these risks and uncertainties we refer you to the risks described under Risk Factors in our Annual Report on Form 10-K. 2

3 Agenda Opening remarks, FT overview Jack Holmes, President/CEO Business Development Review Spreetal CTL Project Greg Jenkins, EVP Business Development and Finance/CFO Technology overview/update Ken Agee, Chairman/Chief Research Officer Engineering and Construction Gary Roth, EVP Engineering and Technology GTL Economics Ron Stinebaugh, Sr. VP Finance and Acquisitions Summary and Q&A 3

4 FT overview Jack Holmes President and CEO 4

5 Opening Remarks Welcome Key takeaways for today Syntroleum s unique competitive position Integrity of Syntroleum Technology and analysis Major upside potential to Syntroleum 5

6 Recent Developments Sustec Joint Development Agreement for a CTL Project 3,000 bpd FT unit for the first phase Possible expansion up to 20,000 bpd Recent media reports on Syntroleum fuel testing in B-52 Coal-Based Liquid Fuel Draws Interest of Military, Companies May 13, 2006 Military Plans Tests in Search for an Alternative to Oil-Based Fuel 6

7 Company Overview Leading independent provider of Gas to Liquids (GTL) and Coal to Liquids (CTL) technology 20+ years of comprehensive technology development 127 US and foreign patents pending and issued Operate only fully integrated FT fuels plant in North America Over $250 million invested in technology development Own and operate all facilities required for Fischer-Tropsch Bench scale FT reactors over 1,000,000 hours runtime Pilot plant demonstration with over 36,000 hours of runtime Fully integrated demonstration plant 7

8 Syntroleum FT Reactors is Indifferent to Source of Syngas (GTL or CTL) Syngas Normal Paraffin F-T Wax CO+2H 2 H H H H H C C C C H H H H + O H H Clean Up Gasification Fischer-Tropsch Synthesis Refining Clean Up H H C H H 8

9 Clean Fuels, Easily Sold Property Current ASTM D975 Diesel October 2006 EPA Diesel Current E.U.-EN590 Diesel Syntroleum FT Diesel Sulfur (PPM) Aromatics (%) N/A 0 Cetane Number Performs better than conventional diesel Valuable blending stock to meet new guidelines with lower emissions Compatible with existing engines and infrastructure (pipelines, storage terminals, pumps) Non-toxic and Bio-degradable Producible from many raw materials Natural Gas Coal/Petroleum Coke Biomass / Land Fill Waste CARB CEC: A 1/3 blend of F-T with 2/3 conventional diesel has net positive benefit to society 9

10 Syntroleum Fuels Have Achieved Widespread Acceptance Worldwide technical validation of fuel quality Southwest Research Institute Japan Automotive Research Institute Department of Energy Department of Defense MIT, Univ. of Alaska, Univ. of West Virginia DaimlerChrysler Volkswagen Toyota Ongoing road and aircraft testing: Washington DC metro buses Denali National Park vehicles Tulsa metro transit Air Force jet engines Single battlefield fuels Results could lead to off-take agreements for future CTL/GTL plants 10

11 Long Standing Successful Collaboration with U.S. Government Total U.S. Government Awards: $31.6 million Efforts initiated in the timeframe Focus - 3 primary areas - DOD (Barge, FPSO, Conversion of LPG/Naphtha, Small footprint plants) - DOE (CDF construction / operation, Coal-to-Liquids technology evaluation) - DOT (FT fuel demonstration programs) Benefits - Capital for Extension of Technology/Fuel testing and acceptance as FT provider Current Focus - Position for major financial project support - Response to DOD RFP for Fischer Tropsch fuel - Meet jet fuel certification requirements - Extend lead against competition 11

12 Syntroleum Relations with U.S. Government Provide Competitive Advantage Syntroleum Providing Fuel for DOD FT Certification Program Syntroleum is the first company to provide FT product for the DOD certification program Providing 100,000 gallons of FT product (S-8) Media reports Air Force scheduled to perform a B-52 flight demo at Edwards, CA AFB later this year using Syntroleum fuel Additional research & development on FT products for fuel certification process will need additional supply 12

13 y Reduced Particulate Emissions with FT Fuel Relative to JP-8 0% % Change in Particle Number Density -25% -50% -75% -100% -12% -13% -25% -30% -33% Cruise Idle -50% -41% -61% -51% -75% -57% -86% -68% -78% -92% -96% % Volume of FT Fuel in JP-8 Even moderate fractions of FT fuel blended in JP-8 significantly reduce exhaust emission particulates in T63 turbine engine testing. 96% reduction* in particulate emissions at idle conditions. * Note: Results are highly dependent on engine model/year and composition of baseline fuel.

14 Business Development Review Greg Jenkins EVP/Business Development/CFO 14

15 Business Development Review Presentation Content Gas to Liquids and Coal to Liquids Describe key competitive advantages Review GTL and CTL Project Focus Spreetal CTL Project Review announcement of planned commercial plant Upstream Review Oil and gas strategy including upstream projects with near term impact potential to company 15

16 GTL and CTL Review 16

17 Syntroleum GTL and CTL Business Development Focus Seize the opportunity presented by current energy markets leverage company s competitive advantages Rigorous screening process employed Combination of entrepreneurial flexibility with corporate discipline Use equity judiciously to fund participation in key strategic projects Three (3) principal categories of projects are our focus Marine based GTL plants Land based GTL plants Moderate size Coal to Liquids plants Activity level of licensees increasing; new licenses being negotiated 17

18 Marine Based Plants GTL/Oil FPSO Major Offshore Technology Advancement Key Advantages of GTL Production Offshore World s first FPSO (Floating, Production, Storage and Offloading) vessel equipped with Gas to Liquids (GTL) production capability Introduced this advancement to the industry at the Offshore Technology Conference in Houston Enables production of stranded offshore gas Replaces capital cost of re-injecting gas produced in oil operations with capital producing ultra clean fuel Alternative to flaring gas which is no longer acceptable A significant step in meeting demand for additional energy resources and liquid fuels 18

19 x y Current Industry Practice: Offshore FPSO Gas Recycling 19

20 GTL FPSO: Harvests Value from Gas Previously Reinjected Market Crude Oil & Condensate Oil Tanker Crude Oil Crude Oil and Wet Gas GTL FPSO Floating Production Storage Offloading Synthetic Crude Heated Products Tanker Syncrude & Wax Oil and Gas Field 20

21 Land Based GTL Plants Air based design economic at smaller scale than oxygen based plants Expandable to 6+ trains (100,000 bpd) Single train reduces cost of entry into land based GTL market Target opportunities where existing industrial / energy infrastructure is in place brown field projects Currently in negotiations on multiple projects that fit this profile Market Gas Syntroleum Gas to Liquids Plant [Single Train 17,000 BPD] GTL Products Storage To Market Clean Diesel & Naphtha Potential: Multiple Trains 21

22 Moderate sized CTL Plants Combine Syntroleum FT plants with existing gasification facilities 70-75% of capital cost is the gasification, syngas clean-up, utilities Sharing cost of infrastructure improves integrated economics Smaller FT plant sizes economically attractive in this combination Fast-track to commercial FT operation Co-locating FT with IGCC enables product switching Produce maximum power during peak demand Shift majority of syngas to FT unit during low power demand Store naphtha for turbine fuel during peak demand Co-locating FT at refinery to produce value-added products Gasification of low-value or waste refinery products (pet-coke, resid) Low-sulfur, high cetane blend stocks for upgrading refinery diesel 22

23 Spreetal CTL Plant Schwarze Pumpe Complex, Germany 23

24 Spreetal CTL Project Location 24

25 Schwarze Pumpe Industrial Area 25

26 First Syntroleum Commercial FT Plant Spreetal CTL Project Syntroleum and Sustec have entered into agreement to jointly develop a 3,000 bpd FT plant Spreetal Project Project is expected to be the first commercial Syntroleum Fischer Tropsch plant. This is phase one of a planned 20,000 bpd FT installation at the Schwarze Pumpe Complex in Germany Spreetal is the first project under the Sustec-Syntroleum JV announced earlier this year The pre-feed engineering work is to be commenced by mid-summer Final investment decision is expected by first quarter

27 Spreetal CTL Project Announced JV with Sustec in January 2006 Advised market that value of JV would soon become apparent May 15 Sustec and Siemens announced transaction Siemens acquired technology with aggressive plans to advance it Sustec retains right to technology and improvements Agreement allow Sustec to pursue FT only with Syntroleum Siemens balance sheet and R&D will enhance Sustec-Syntroleum JV 3,000 BPD Phase I at Spreetal does not require Siemens Faster track to construction and operation 27

28 Spreetal CTL Project Sustec owns and operates existing gasification plant Current gasification fueled by lignite, coal tars, municipal wastes, biomass Currently operating Methanol plant (with Rectisol unit) 75 MW Power Plant 3,000 b/d Syntroleum FT unit proposed to be added to existing gasification plant Expansion to 20,000 bpd expected 28

29 Spreetal CTL Project Plant will be integrated with Sustec gasification plant The Fischer Tropsch unit will be a slurry reactor utilizing cobalt catalyst Existing Rectisol process and carbon adsorption units will be used for syngas clean-up Syngas will be produced from lignite coal, biomass and municipal waste which will demonstrate the flexibility of the Sustec gasification and the Syntroleum cobalt based FT process 29

30 Spreetal CTL Project Key Economic Advantages Located in existing major industrial complex Existing industrial infrastructure = lower overall capex Gasification plant and Rectisol process in place and operating Shorter time to commercial operation Lower CTL capex requirements Plant located in premium value product market Large diesel market requiring clean fuel Strong diesel and naphtha markets Pre-qualified for major German government cash grant ($125m+) Long standing industrial finance program (began in 1999) 30

31 Spreetal CTL Project Potential economic variables and impact Plant production volume ~3,000 BPD To be expanded to ~20,000 BPD Product types; naphtha and ultra clean diesel Based up $55 crude oil price Product price: naphtha $60/bbl; diesel $75/bbl Potential annual gross revenue $70+ MM Preliminary estimate of capital requirements $ MM Saxony Government Grant should reduce this by $125+ M Final capital requirements depend on FEED and final Government grant 31

32 Project Funding Spreetal CTL Project Project has been pre-qualified and is eligible for over 100 million (US$ ~125 million) grant from the Saxony government application made jointly by Sustec and Syntroleum earlier this year In addition to the grant, Sustec has pledged significant equity to the FT project final amount pending FEED and amount and terms of the grant Capital structure to be determined after pre-feed 32

33 Additional Similar CTL Opportunities Syntroleum experience in refining and electric power industry is revealing additional project opportunities similar to Spreetal Detailed analysis of other existing facilities is underway to confirm merits of combining FT with currently operating and planned gasification plants Discussions with asset owners for similar JV s are occurring Syntroleum expects to be able to replicate this success 33

34 Upstream Project Review 34

35 Upstream Projects with Near Term Impact Potential Offshore Nigeria In two (2) years Syntroleum has captured projects with significant oil and gas reserve potential OML 113 Aje Field OML 90 Ajapa Field Appraisal drilling expected to occur in the near term with potential for early production Current oil price environment presents much greater potential Industry appetite for participation in projects of this type is very high Additional opportunities under evaluation Projects with oil and GTL potential are our focus 35

36 Upstream Project Review OML 113, Aje Field 36

37 OML 113 Vicinity and Aje Field James Aje Field 37 Benin Nigeria YFP OML-113 Nigeria Benin New Gas Pipeline

38 Aje Field: Top Cenomanian Depth 7600 ft Radius of Investigation by DST: IP Reserves 22 MMBO Cenomanian Reserve Estimates P90 37 MMBO P MMBO P MMBO 38

39 Aje Field: Top Turonian Depth 3 Layer Velocity Model Turonian Resource Estimates P90 21 MMBOC, 700 BCF P50 41 MMBOC, 1077 BCF P10 66 MMBOC, 1675 BCF (Bathymetry in Blue) 39

40 OML 113, Aje Field Recoverable Reserve and Resource Estimate Combined proven undeveloped reserves (P-99) based upon DST s, log analysis & 3D seismic Reserves/Resources P-99 P-90 P-50 P-10 Oil, MMBbls Condensate, MMBbls Oil & Condensate Gross, MMBbls Syntroleum Net, MMBbls Gas Gross, Bcf ,077 1,645 Syntroleum Net, Bcf

41 OML 113, Aje Field Near Term Actions Participants to make election on next well by September 2006 Syntroleum expects participants will commit to next well in order to earn an interest in the Aje field and OML-113 Participants are required to pay 90% of well cost to earn 67.5% interest Syntroleum pays 10% to earn 32.5% interest Subject to rig availability, Syntroleum expects participants to drill Aje-4 well by mid year

42 Upstream Project Review OML 90, Ajapa Field 42

43 OML 90 Ajapa Field Offshore Nigeria NIGERIA AJAPA FIELD 43

44 OML 90 Ajapa Field Overview Chevron drilled the discovery well Ajapa-1 in 1987, utilizing 2-D seismic data, which flowed at combined stabilized rates of 6,047 bopd of high gravity sweet crude (49 API) and 12.7 MMscf/d of gas Ajapa-1 was suspended following testing The structural crest of Ajapa is 450 ft. high to the discovery well perforations, giving a potential hydrocarbon column above the oil/water contacts in excess of 1,100 ft. Chevron was forced to release the block due to their lack of development of the discovery Brittania-U Nigeria Ltd was awarded in March 18, 2004 Syntroleum has acquired rights to develop the Ajapa field and to the balance of OML 90 on behalf of Syntroleum and Britania-U 44

45 OML 90, Ajapa Field Elasa Lead Top G Sand Time Structure, P10 & P90 Extents Ajapa Field Area P10 Elasa lead 1,876 Acres 68 MMBO P90 Elasa lead 225 Acres 12 MMBO 45

46 OML 90, Ajapa Field Recoverable Reserve and Resource Estimate Proven undeveloped reserves (P-99) based upon DST s, log analysis and 3D seismic Reserves, Oil P-99 P-90 P-50 P-10 Gross, MMBbls Syntroleum Net, MMBbls

47 Technology Overview/Update Ken Agee, Chairman/Chief Research Officer 47

48 Syntroleum Technology Development Syntroleum has committed significant resources to technology development People Capital Facilities Syntroleum technology development is comprehensive Syngas Generation (ATR) Synthesis (FT) Product Upgrading Syntroleum (air blown) technology is unique Patent Position Marine Application Syntroleum technology is commercial ready 48

49 Fischer Tropsch Development Facilities 49

50 Lab Bench Scale Reactors Resources 11 CSTR (Continuous Stirred Tank Reactor) and 4 fixed beds, 4 fluid bed reactors Computer controlled operation Automated analytical Uses Develop commercial catalyst formula Establish procedures, ie activation, regeneration, start-up Catalyst kinetics evaluation Qualify commercial catalyst vendors Accomplishments Over 1,000,000 hrs of run time Tested over 1000 variations in catalyst formula Individual runs in excess 6000 hours Developed patented regeneration procedure 50

51 Pilot Plant Resources Nominal 3 BPD capacity Integrated syngas generation and FT reactors Extensive (scaleable) syngas clean-up with state of the art analytical tools Uses Smallest scale to operate FT slurry catalyst in a commercial environment Real world syngas Churn turbulent slurry operation Demonstrate long term catalyst activity maintenance Accomplishments 36,000 hrs of runtime Demonstrated both fixed bed and slurry bed catalyst systems Demonstrated low FT catalyst deactivation rates 51

52 Demonstration Plant Commercial Design Resources Fully integrated 70 BPD operation: 2 Slurry reactors Internal/External filters Multiple heat transfer coils 2 different feed distributors Catalyst regeneration system Uses Produce products Develop design basis for ATR and FT internals Accomplishments Over 18,000 hrs of runtime Over 500,000 gallons of FT products Over 300,000 gallons of FT Fuels Demonstrated ATR and FT reactor design principles Detailed mechanical design of FT reactor underway 52

53 Key FT Technology Questions 1. Is your FT catalyst physically stable? 2. Have you successfully filtered FT wax? 3. Can you rejuvenate and/or regenerate the FT catalyst? 4. Do you have certified commercial FT catalyst vendors? 5. Do you have FT facilities that have demonstrated: Integrated syngas generation, FT reaction, Product upgrading? 6. How much money have you spent on FT R&D? 7. Who has tested and endorsed your fuel? 8. How much on-spec product have you delivered? 53

54 Catalyst Management Gary Roth EVP of Engineering and Technology 54

55 Catalyst Management 1. Syngas Cleanup 2. Catalyst Regeneration and Rejeuvenation Catalyst Management 3. Reactor Operating Conditions 4. Catalyst Formulation and Manufacturing 55

56 Syngas Cleanup 56

57 Synthesis Gas Clean-up Rectisol Rectisol process dominates synthesis gas cleanup processes: 1 ~90% of non-igcc syngas is purified by the Rectisol process ~75% of all synthesis gas cleanup uses the Rectisol Process Currently, 7.5 billion BCFD of synthesis gas is purified via the Rectisol Since 1960, almost 100 plants have been installed 2 The Rectisol process is highly reliable: Eastman Chemical reports >98% on-stream factor Dakota Gasification Company (Beulah, North Dakota) reports 90% to 92% on-stream factor of Rectisol 4 1. GTC 2005-Lurgi Presentation (2005 Gasification Technologies San Francisco 10-9/ ) 2. Lurgi website 3. Eastman Gasification Overview March 22 nd, CO2 Recovery and Sequestration at Dakota Gasification Company (2004 Gasification Technology Conference Washington, D.C. 10-3/6 2004) 57

58 How does the Rectisol Work? Methanol is chilled to very low temperatures (<-92 F) via Clean Syngas The synthesis gas is contacted with the chilled methanol Methanol is regenerated Pre-wash Syngas Absorption Lean MeOH Acid Gases Hot Regeneration Sulfur and CO 2 (Acid Gases) are sent to secondary processing Raw Syngas Pre-Wash Rich MeOH Rich MeOH Pre-wash MeOH Simplified Rectisol Process 58

59 Why Use Refrigerated Methanol? Colder the better for contaminant removal For Syntroleum, we are interested in sulfur removal, but other components are removed as well such as: Mercury Arsenic Nitrogen compounds Ammonia, hydrogen cyanide and mercaptan sulfur are removed in the pre-wash section of the Rectisol process 1 solubility factor [kmol/m3/bar] Effect of Temperature on Contaminant Solubility in Methanol H2S COS CO Temperature (F) 1 Lurgi Oel-Gas-Chemie brochure The Rectisol Process for Gas Purification 59

60 Catalyst Regeneration Process Regeneration process proprietary Syntroleum technology Four full regeneration cycles demonstrated in the laboratory Four full regeneration cycles demonstrated at the CDF Four additional cycles in process at the CDF Regenerated catalyst performance consistent with new catalyst Regenerated Catalyst Slurry No significant attrition associated with the regeneration process 60

61 Advantages of Regeneration $3.25 $3.00 Catalyst Cost ($/Bbl FT Liquids Produced) $2.75 $2.50 $2.25 $ Relative Dectivation Rate (1 = base case design) 61

62 We Choose Cobalt for CTL Because Item Iron Catalyst Cobalt Catalyst Activity Lower Higher (~40%) Catalyst Life 2-3 months years Regeneration No Yes Catalyst Mechanical Strength Lower Higher Filterability More Difficult Easier Contaminants Tolerance Higher (0.1 ppm) Lower (20 ppb) Reactor Volume Larger (~40%) Smaller Cost - $/lb Lower ($4.5 - $6.5/lb) Higher ($25 - $30/lb) Cost - $/bbl Higher Lower Comparative Catalyst Cost Analysis Weight - lb Relative Cost 1x 5x Iron Productivity Iron Cost Productivity Adjusted x Iron Deactivation/Attrition x Iron Adjusted Cost Comparison based on slurry bubble column design 1 million bpd of FT capacity = 5% of the cobalt market world wide 62

63 GTL/Oil FPSO Engineering and Construction 63

64 Project Overview Scope of Study AMEC Bluewater Syntroleum To assess technical and economic feasibility of a combined GTL FPSO with oil/gas processing FPSO/GTL engineering expertise; project management FPSO design, management, and operations expertise; project management GTL technology, operations and process design expertise Schedule Complete assessment by End of 3Q

65 GTL/Oil FPSO Project Partners Amec - 45,000 people across 40 countries Global EPC experience FPSO design specialists Syntroleum Tier 1 contractor Bluewater - 10 FPSO and 4 FSO Installations Bonga Ayer Biru Acqua Blu Uisge Gorm Glas Dowr Bleo Holm 65

66 GTL Overall Simplified Flow Diagram Syngas CO+2H 2 Normal Paraffin F-T Wax Water H H H H H C C C C H H H H + O H H Sequenced Study Option Fischer-Tropsch Synthesis Refining Primary Separation Section 66

67 Design Principles Simple Process Scheme Primary oil & gas/condensate processing in parallel and separate trains GTL feed gas supplied by gas/condensate processing unit and associated gas from crude No gas re-injection required (Gas used by GTL process) No gas compression No gas injection wells No associated flow lines and subsea controls Well-head LPG converted into syngas in GTL process No oxygen plant Two stages of Fischer-Tropsch reactors (91% Total CO Conversion) No Onboard Catalyst regeneration On-line addition/removal of F-T Catalyst No product upgrading (pending) Production of four liquid products Crude Condensate Light Fischer-Trospch Liquid (LFTL) FT wax 67

68 GTL FPSO Overall Material Balance 68

69 Preliminary FPSO Layout 69

70 FPSO Design Preliminary dimensions: Length 310 m Breadth 65 m Depth 29 m Preliminary Weight of Topsides 43,000 Metric Tonnes New Equipment for FPSOs 30.8 Wt % Typical Equipment for FPSOs 69.2 Wt % Liquid Storage million Barrels Crude/condensate/GTL Liquids Unloading to VLCCs 70

71 FPSO Layout Typical FPSO Equipment vs. New 71

72 GTL Economics Ron Stinebaugh, Sr. VP Finance and Acquisitions 72

73 Introduction Key economic drivers GTL offshore plants: Oil/GTL FPSO GTL land based plants 73

74 Key Economic Drivers GTL economics are driven mainly by Oil price and middle distillate spread to oil price Plant capital and operating cost Tax regime Feedstock cost or upstream development cost General Modeling Assumptions Plant capital costs 2005 cost basis 30% contingency on capital costs First of a kind ( 2 nd will likely be less expensive) Steady state annual on-stream days Unlevered Tax Rate of 30% 20 Year project life 10 year straight line depreciation Residual value of 8x EBITDA 74

75 Oil Industry Costs Have Increased Sharply GOM Semi-submersible Rig Rates West Africa Semi-submersible Rig Rates K$/Day $450 $400 $350 $300 $250 $200 $150 $100 4th Generation 3rd Generation K$/Day $400 $350 $300 $250 $200 $150 $100 4th Generation 3rd Generation $50 $- Jan-02 Feb-03 Mar-04 Apr-05 May-06 Jun-07 $50 $- Jan-02 Feb-03 Mar-04 Apr-05 May-06 Jun-07 Source: Jefferies & Company 75

76 Construction Costs Have Increased As Well Syntroleum Analysis Assumes 2005 Construction Costs % WTI vs Construction Costs ( ) % % Change in WTI Oil Price % % 50.00% y = x R 2 = % 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% % Change in Index Average *Composite of Nelson Farrar Refinery Construction index and Chemical Engineering Plant Cost Index * 76

77 Ultra Clean GTL Diesel Should Sell at a Premium to Conventional Diesel Syntroleum Analysis Assumes No Premium for Ultra Clean GTL Diesel $100 NY No2 Low Sulfur Diesel ( ) vs WTI Implies Multiple of 1.2x $90 $80 $70 y = x R 2 = NY Low Sulfur Diesel, $/Bbl $60 $50 $40 $30 $20 $10 $- $- $10 $20 $30 $40 $50 $60 $70 $80 WTI, $/Bbl 77

78 Syntroleum GTL/Oil FPSO 78

79 Current GTL FPSO Schematic Economics are on a fully integrated project basis Market Crude Oil & Condensate Oil Tanker Crude Oil Crude Oil and Wet Gas GTL FPSO Floating Production Storage Offloading Synthetic Crude Heated Products Tanker Syncrude & Wax Oil and Gas Field 79

80 Future GTL FPSO with Refining Unit Market Crude Oil & Condensate Oil Tanker Crude Oil Crude Oil and Wet Gas GTL FPSO Floating Production Storage Offloading Diesel Naphtha Products Tanker Clean Diesel & Naphtha Oil and Gas Field 80

81 GTL FPSO Design Basis Current FPSO design produces: 40,000 Bpd of crude oil (expandable to 120,000 Bpd) 10,000 Bpd of condensate 16,300 Bpd of GTL products 2 MM Bbl Crude and Product storage 1 MM Bpd Stabilized crude offload capacity 350 K Bpd of FT liquid offload capacity Capital cost $1.3 Billion* Next phase of study to include product upgrading unit on board * Syntroleum internal estimate. Being confirmed as part of Bluewater/Syntroleum feasibility study. 81

82 Integrated Project Assumptions Oil and Syncrude Price Condensate Yield Gross Liquid Volume* Oil Condensate GTL Daily Production, Bpd Oil Condensate GTL Total Capital Cost Upstream GTL FPSO $55 per Bbl 62.5 Bbl/MMscf 374 MMBbls 200 MMBbls 66 MMBbls 108 MMBbls 66,300 Bpd 40,000 Bpd (Peak) 10,000 Bpd 16,300 Bpd $2.6 Billion $1.3 Billion $1.3 Billion Oil/Condensate Royalty 20 % Tax Rate 30 % *Gross liquids include 100% of all hydrocarbons produced, including GTL 82

83 FPSO Production Peaks at 66,000 Bpd Integrated Pro Forma Production Profile GTL Production, MBPD Cond Production, MBPD Oil Production, MBPD Gas Production, MMCFD 83

84 Cumulative Integrated Project Cash Flow of $8 Billion Integrated Pro Forma Cash Flow 800 8, ,000 Annual Sponsor Cash Flow (200) (400) (600) Right Scale 4,000 2,000 - (2,000) (4,000) (6,000) Cum Sponsor Cash Flow (800) (8,000) (1,000) (10,000) 84

85 Integrated Project Per Barrel Margin Analysis Product Crude Price $ Oil & Condensate Royalties (7.83) Shipping (2.00) Net Product Price $ Upstream Development Capital Cost 3.51 Plant Capital Cost 3.48 Upstream Operating Expense 3.99 Plant Operating Expense 3.25 Total Pre-Tax Margin $ NPV ($ millions, after tax, unlevered) $ 1,704 IRR (after tax, unlevered) 19% 85

86 IRR Sensitivity to Integrated Project Capital Cost and Oil Price 30.0% IRR 25.0% 20.0% Capex Sensitivity, % 15.0% 80% 10.0% 5.0% 100% 120% 0.0% Crude Oil Price, $ / Bbl 86

87 x y Current Industry Practice: Offshore FPSO Gas Re-injection 87

88 GTL FPSO: Harvests Value from Gas Previously Re-injected Market Crude Oil & Condensate Oil Tanker Crude Oil Crude Oil and Wet Gas GTL FPSO Floating Production Storage Offloading Synthetic Crude Heated Products Tanker Syncrude & Wax Oil and Gas Field 88

89 GTL vs Re-Injection Incremental Economics Gas Feed 160 MMscfd Reinjection Compression Capex $135 MM Reinjection Wells (4 x $50MM/well) $200 MM Flowlines, Risers, Subsea Injection, Methanol Unit $115 MM Total Re-Injection Capital Cost $450 MM GTL Topsides $900 MM Incremental Capital Cost for GTL Project $450 MM Incremental Products from GTL 16.3 KBpd 89

90 GTL vs. Re-injection Sensitivity to Oil Price and Capital Cost IRR. 40% 35% 30% 25% Incremental Capex, $MM % 15% Oil Price, $/BBL 90

91 Syntroleum Land Based Plant 91

92 Single Train Land Based GTL Plant Single train of 17,000 Bpd (1-6 Trains) Produces finished fuels: Middle Distillate 75% Naphtha 23% LPG 2% Market Gas Syntroleum Gas to Liquids Plant [Single Train 17,000 BPD] GTL Products Storage To Market Clean Diesel & Naphtha Potential: Multiple Trains 92

93 Project Assumptions Feed Stock Gas Price Oil Price Diesel Price Naphtha Price $ 1 per MMBTU $55 per Bbl $66 per Bbl $55 per Bbl GTL Daily Production GTL Gross Liquid Volume 17,000 Bpd 112 MMBbls GTL Facility Capital Cost $850 Million 93

94 Worldwide Land Based GTL Plant Capital Costs Per Stream Day Barrel GTL Land Based Facility Cost Summary Costs Technically Normalized to Bring to Similar Design Basis and Adjusted for Inflation After Contingency Adjustments* Legend y=68670x Poor local Infrastructure Syntroleum land based plant example Plants with poor access and local infrastructure Plants with excellent access and local infrastructure y=67542x Excellent local infrastructure *Cost curve developed by Syntroleum based upon plant costs disclosed from public sources and from internal Syntroleum data. 94

95 Land Based Per Barrel Margin Analysis $/Bbl Crude Oil Price $ Wtd. Average Crack Spread 8.08 Shipping (2.00) Net Product Price $ Plant Capital Cost 7.57 Feedstock Expense Plant Operating Expense 9.41 Total Pre-Tax Margin $ NPV ($ millions, after tax, unlevered) $ 467 IRR (after tax, unlevered) 16% Economies of Scale Resulting from 6 Trains NPV ($ millions, after tax, unlevered) $ 3,774 IRR (after tax, unlevered) 19% 95

96 GTL Land Based Plants Cash Flows Single Train 17,000 Bpd 300 3,000 Annual Sponsor Cash Flow (100) (200) Right Scale 2,000 1,000 - (1,000) (2,000) Cum Sponsor Cash Flow (300) (3,000) 96

97 Sensitivity to Capital Cost and Oil Price 30.0% IRR 25.0% 20.0% Capex Sensitivity, % 15.0% 80% 10.0% 100% 5.0% 120% 0.0% Crude Oil Price, $ / Bbl 97

98 Economic Summary Robust project economics, both onshore and offshore Economics based on crude oil price 20% below current Capital cost based on current oil price ($70/Bbl) No premium assumed for Ultra Clean FT diesel No tax holidays assumed No government subsidies assumed for products Syntroleum s air-based technology has significant economic competitive advantages Unique marine FPSO application Positive economics of single train land based design 98

99 Presentation Summary 99

100 Syntroleum Summary First commercial plant is underway Fundamentals present compelling opportunity Unique position of having demonstrated technology on fully integrated basis Disciplined focus on major opportunities utilizing competitive advantages Potential transformation of deep water oil and gas development Economics present attractive development options Tested technology ready for deployment 100

101 Questions and Answers 101