Realising Project Potential in 2010

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1 Realising Project Potential in 2010 Macquarie 3rd Australia/New Zealand Corporate Day Singapore and Hong Kong September 2010 David Casey, CEO & Managing Director

2 Corporate Overview Realising Project Potential in 2010 September 2010

3 Corporate Overview Company Overview Operated CSG Acreage Comparison NSW based ASX top 200 company (ASX: ESG) Largest east-coast CSG operator World-scale resource NSW s most advanced project World class management and technical team Clear commercialisation strategy Strategic partner in Santos Limited (ASX:STO) Market Cap. (31 August 2010) $860 million Cash (30 June 2010) plus net proceeds of placement $128 million Debt Daily Volume (52 week average) nil 3.6 million ESG s vision is to be NSW s leading supplier of natural gas 3

4 Investment Highlights Large, proven resource base with continued reserves growth More than fourfold increase in certified 2P reserves since September 2008 Material increase in certified reserves expected for end calendar year 2010 Well articulated commercialisation strategy Near term revenue via gas sales to Wilga Park power station and power sales to Country Energy Strategic location for domestic gas sales in NSW, with MoUs in place for up to 1,700PJ of demand LNG opportunities in NSW and Queensland represent significant upside, with MoU in place for future LNG export project at Newcastle Experienced management team World class technical team and management team with more than 60 years experience in CSG Experienced Board which is well balanced between technical and commercial skill sets Strong capital position to fund development Pro forma cash position of ~$128m and nil drawn debt as at 30 June 2010 Key corporate shareholders include: Santos (~19%), TRUenergy (~4%), Directors / Employees / related parties (~13%) 4

5 Successful A$100M Institutional Placement Recently completed underwritten placement supported by cornerstone investor and broadened register with the introduction of new high quality institutional investors. Funding provides support to ongoing field development and a foundation for an export LNG project. Port of Newcastle land acquisition Agreement signed to acquire 24 hectares of land on Kooragang Island, Newcastle (1) Site for proposed Newcastle LNG project ( NLNG ) Demonstrating progress towards becoming a meaningful CSG-LNG exporter via Newcastle and provides ESG with numerous competitive advantages: Site is sufficient to support initial 1 Mtpa LNG project, with potential to expand to at least 4 Mtpa Secures site to move to FEED early next year Strengthens ESG s ability to further key initiatives Ongoing exploration, evaluation and development spending to support reserve growth Funding to support ongoing exploration, evaluation and development of CSG fields across all permits, including: Drilling completion and gathering for new multi-seam stacked pilots Ongoing workovers and recompletion of existing non-producing wells Drilling of exploration core holes and acquisition of seismic data Expansion of Wilga Park Power Station from 7MW to 16MW in first quarter 2011 Advance commercialisation options Complete Narrabri field development feasibility study and commence FEED activities Complete NLNG project feasibility study and commence FEED activities (1) Acquisition expected to be completed by February If ESG does not receive the necessary approvals for the purchase to proceed under the acquisition agreement, ESG has the option to terminate the agreement until 14 January

6 Narrabri CSG Project Realising Project Potential in 2010 September 2010

7 Prerequisites for a Successful Gas Business 7

8 Strategic Location in New South Wales Largest Operator of CSG Acreage NSW is Dependent upon Imported Gas Considerable NSW Gas Demand Growth Likely Derived from ABARE data PEL 238 currently has 65% of NSW s certified 2P reserves 8

9 Certified Gas Reserves and Resources Certified Gas Reserves & Resources Current Potential Exceeds 9,000 PJ PEL 238 Certified Gas Reserves 1P 2P 3P 115 PJ 1,520 PJ 2,797 PJ 3,000 PJ 2P Reserves 3P Reserves 2,797 2,500 2,000 1,500 1,300 1,300 1,959 1,520 1, Sep-07 Dec-07 Sep-08 Jun-09 Dec-09 PEL 238 Certified Contingent Resources 1C 2C 3C 1,243 PJ 3,515 PJ 6,215 PJ Progressive reserves upgrades achieved, with significant upside for reserves growth from all 3 seams 9

10 Technical Success Has Unlocked a Major Resource Lateral Pilot Programme Outstanding Flow Rates Strong water flow rates confirm permeability & reservoir connectivity precursor to high gas flow rates Bibblewindi West tri-lateral pilot targets Namoi coal seam achieved > 2 MMscfd production after 1 month Bibblewindi multi-lateral pilot targets thick Bohena coal seam flow rates increasing as per modeled outlook Dewhurst pilot targets Bohena coal seam Tintsfield pilot targets Hoskissons coal seam Ongoing optimisation will lead to further improvements in production and cost efficiencies 10

11 Role of Lateral Wells ~1,000 m ~1,000 m Lateral wells are drilled perpendicular to the natural fracturing system of the target coal 11

12 Next development - Multi-seam Stacked Laterals This design will maximise gas production and significantly reduce unit cost of production 12

13 Project Commercialisation Realising Project Potential in 2010 September 2010

14 Putting Reserves & Resources into Context World Scale Potential Realising Project Potential 10,000 9,000 9,012 PJ 8mpta LNG Project Narrabri CSG Project already has potential to: Supply gas into existing NSW gas market Support new power station developments P E T A J O U L E S 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, ,035 PJ 2P + 2C 3P + 3C 4mpta LNG Project 1.5mpta LNG Project 1,500 MW Generation (20yrs) 20% NSW Gas Market (20yrs) See NSW self-sufficient in gas supply Multiple MoU s in place to realise this potential: ERM power station - 20 PJ/a from 2013 LNG Export - ramp from 50 PJ/a in 2014 Other power gen - 70 PJ/a Total MoU s will double NSW gas market Ongoing reserve and resource upgrades mean: New frontier initiatives can be supported NSW can become a net gas exporter Clear Commercialisation Strategy Delivering Into World Scale Resource Potential 14

15 Project Commercialisation Project Strengths Stage 1 - Wilga Park Power Station Most advanced project in NSW and uniquely positioned to capitalise on gas market development Domestic and Export Opportunities Significant domestic market growth forecast NSW Short Term Trading Market imminent Pilot production gas utilised Electricity sold to Country Energy / market Progressive expansion from current 7 MW Further 3 x 3MW units now committed Future spark-spread opportunities NSW and Queensland export opportunities Market opportunities ideally suited for CSG Easy management of gas ramp up Proximity to pipeline infrastructure Easy access to any east coast gas market 15

16 Project Commercialisation Stage 2 & 3 - NSW Gas Market Pipeline connection accesses entire East Coast Supply to NSW Short Term Trading Market Multiple gas-fired power station opportunities Project / pipeline expansions to match growth Stage 4 - New Frontiers Large-scale, value-adding opportunities LNG export has technical and financial appeal Newcastle - established port close to Narrabri Optionality for supply into Qld LNG projects Approvals processes under way 16

17 Project Commercialisation Export LNG Newcastle LNG Project Newcastle LNG Project MoU with Hitachi and Toyo Engineering: World-class parties Electric motor driven, mid-scale Chart technology: Modular design - low cost, quick delivery Suited to site - low noise, small footprint Early commercialisation, easy ramp-up Timing: Feasibility Study complete by end 2010 Progress FEED to allow 2012 commitment Gas reserves already support 1 Mtpa 1 st stage Approvals processes initiated Potential to achieve first LNG export by

18 Port of Newcastle Land Acquisition Key Points Newcastle Port Land Location Ideally located 24 ha Kooragang Island Demonstrates progress towards becoming a significant CSG-LNG exporter via Newcastle and provides ESG with numerous competitive advantages: Site is sufficient to support expansion to at least a 4 Mtpa LNG project from an initial 1 Mtpa LNG project Secures site to move to FEED early next year Strengthens ESG s ability to further key initiatives Eastern Star Gas Acquisition of land removes major hurdle to progression to FEED 18

19 The Way Forward... Realising Project Potential in 2010 September 2010

20 Realising Project Potential in 2010 Infrastructure Secured strategic site for NLNG project in Newcastle Continued expansion of Wilga Park to monetise increasing production pilot gas Complete installation of gas gathering systems from all four production pilots Secure approvals for project and pipeline development Reserves Programme Exploration, evaluation and development of CSG fields across all permits Ongoing production test of Bibblewindi & Bibblewindi West pilots Complete and commence production test of Dewhurst & Tintsfield pilots Ongoing reserves and contingent resource upgrades from all three target seams Gas Marketing Formalise gas sale agreement with ERM Power Complete NLNG feasibility and commence FEED activities Complete Narrabri field development feasibility study and commence FEED activities Ongoing review of other high margin markets Progress project development approvals with NSW Govt. 20

21 Timing Commercialisation Stages Market Development ESG Regional Realising Project Potential beyond 2010 Illustrative Gas Supply and Allocation Domestic (NSW) Market Existing Market Greenfields New Frontiers Tariff Market Contract Market Stage 1 Create regional market at Wilga Park Stage 2 Connect to east coast gas network HoA in place APA Group) Stage 3 Domestic market growth 3 MoUs in place totaling 1,700 PJ gas supply for power generation Stage 4 Newcastle Export LNG MoU with Hitachi & Toyo Engineering to undertake 1 mtpa export LNG project Scalable modules up to 4 mtpa Approvals processes underway Already Underway: Wilga Park Power Station (up to about 3.5 PJ/a) ~ 2011: NSW Regional and Contract (6.5+ PJ/a) APA Group ~ 2013: ERM Power ~20 PJ/a ~2014: Newcastle export LNG initially~50 PJ/a 21

22 Disclaimer This presentation may contain forward looking statements that are subject to risk factors associated with oil and gas businesses. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a variety of variables and changes in underlying assumptions which could cause actual results or trends to differ materially, including but not limited to: price fluctuations, actual demand, currency fluctuations, drilling and production results, reserve estimates, loss of market, industry competition, environmental risks, physical risks, legislative, fiscal and regulatory developments, economic and financial market conditions in various countries and regions, political risks, project delay or advancement, approvals and cost estimates. Investors should undertake their own analysis and obtain independent advice before investing in ESG shares. All references to dollars, cents or $ in this presentation are to Australian currency, unless otherwise stated. More information on ESG can be found at 22