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Aurelian Corporate Presentation 010212
Aurelian Corporate Presentation 010212
Aurelian Corporate Presentation 010212
Disclaimer
The content of this presentation has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000. Reliance on this presentation for the purpose of engaging in any investment activity may expose an individual to a significant risk of losing all of the property or other assets invested.
This presentation has been issued by Aurelian Oil & Gas PLC (the Company). This presentation does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for or otherwise acquire, any securities of the Company or of any subsidiary or subsidiary undertaking of the Company, nor does this presentation constitute or form part of any invitation or inducement to engage in investment activity under section 21 of the Financial Services and Markets Act 2000, nor does it constitute a recommendation regarding securities of the Company, nor shall it or any part of it form the basis of or be relied on in connection with any contract or investment decision. Nothing contained herein should be construed as constituting any form of investment advice, recommendation, guidance or proposal of a financial nature in respect of any investment issued by the Company or any transaction in relation to the Company. If you are considering engaging in any investment activity, you should seek appropriate independent financial advice and make your own assessment. Within the United Kingdom this presentation is being solely issued to and directed at persons who are reasonably believed to be of a kind described in Article 19 (Persons having professional experience in matters relating to investments) or Article 49 (High net worth companies) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended), and persons who are otherwise permitted by law to receive it (together relevant persons). This presentation must not be acted on or relied on by persons who are not relevant persons. If you have received this presentation and you are not a relevant person you must return it immediately to the Company.The information contained in this presentation is not for publication or distribution into the United States of America (the United States). Neither this presentation nor any copy of it may be taken or distributed or published, directly or indirectly, in the United States. The material set out in this presentation is for information purposes only and is not intended, and should not be construed, as an offer for securities for sale in the United States or any other jurisdiction. The securities of the Company described in this presentation have not been and will not be registered under the U.S. Securities Act of 1933 (as amended) (the Securities Act), or the laws of any state, and may not be offered or sold within the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state laws. There will be no public offer of securities in the United States.This presentation does not constitute an offer to sell or a solicitation of an offer to purchase any securities in any jurisdiction in which such offer or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of any jurisdiction. The information contained in this presentation is not for publication, release or distribution in Australia, Canada, Japan, the Republic of Ireland, New Zealand or the Republic of South Africa.Recipients in jurisdictions outside the United Kingdom should inform themselves about and observe any applicable legal or regulatory requirements in relation to the distribution or possession of this presentation to or in that jurisdiction. In this respect, neither the Company nor any of its connected persons, accepts any liability to any person in relation to the distribution or possession of this presentation to or in any such jurisdiction. The information contained in this presentation are provided as at the date hereof and are subject to change without notice and the Company is under no obligation to update or keep current the information contained in this presentation. No reliance may be placed for any purpose whatsoever on the information contained in this presentation or any assumptions made as to its completeness and no warranty or representation, express or implied, is given by or on behalf of the Company or of any subsidiary company or subsidiary undertaking, or any of their respective directors, employees, agents or advisors as to the accuracy or completeness of the information contained in this presentation and no responsibility or liability is accepted by any of them for any such information, provided that nothing in this document shall exclude liability for any representation or warranty made fraudulently. Certain measures of performance referred to in this presentation, including but not limited to F&D Costs", Risked F&D Costs, Risked Cash Margin", Recycle Ratio, Risked EMV, Unrisked Resources, EMV, ECoS and Unrisked Net NPV" are not measures of performance under IFRS or US GAAP and may not be comparable to other similarly titled measures of financial performance by other companies. Estimates of resource depend significantly on the interpretation of geological data obtained from drilling and other sampling techniques, which is extrapolated to estimate size, shape, depth and quality of resources. In addition, to calculate resources, the Company makes estimates and assumptions regarding a number of economic and technical factors, such as production rates, grades, production and transport costs and prices. These estimates and assumptions may change in the future in a way that affects the quantity and quality of the Company's resources. No assurance is given that the resources will be recovered in the quantity estimated or at all. The disclosure of resources in this presentation is based on the Petroleum Resources Management System standards and that such disclosure standards differ from those under US regulations. In particular, US Regulations do not recognize classification systems other than proven, probable and possible reserves and such resources are not synonymous with the term "resources" as it is used in this presentation. This presentation (and any subsequent discussions arising thereon) may contain forward-looking statements relating to the Companys expected operations that are based on managements current expectations, estimates and projections. Words such as expects, intends, plans, projects, believes, estimates and similar expressions are used to identify such forward-looking statements. These statements are not warranties or guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. Although the Company believes the expectations reflected in such statements are reasonable, no assurance can be given that such expectations will prove to be correct. There are a number of factors, many of which are beyond the control of the Company, which could cause actual results and developments to differ materially from those expressed or implied by forward-looking statements. These factors include, but are not limited to, factors such as: future revenues being lower than expected; increasing competitive pressures in the industry; and/or general economic conditions or conditions affecting the relevant industry, both domestically and internationally, being less favourable than expected. We do not intend to publicly debate or revise these projections or other forward-looking statements to reflect events or circumstances after the date hereof, and we do not assume any responsibility for doing so. This presentation and its contents are confidential and must not be copied, published, reproduced, distributed in whole or in part to others, whether or not they are relevant persons, at any time by recipients without prior written consent of the Company. This presentation is being provided to recipients on the basis that they keep confidential any information contained herein or otherwise made available, whether oral or in writing, in connection with the Company. The recipients of this presentation should not base any behaviour in relation to qualifying investments or relevant products (as defined in the Financial Services and Markets Act 2000 (FSMA) and the Code of Market Conduct made pursuant to FSMA) which would amount to market abuse for the purposes of FSMA on the information in this presentation until after the information has been made generally available. Nor should the recipient use the information in this presentation in any way which would constitute "market abuse". This presentation is being provided to recipients on the basis that they keep confidential any information contained herein or otherwise made available, whether oral or in writing, in connection with the Company. By accepting this presentation, you agree to be bound by the above conditions and limitations.
Contents
Strategic Review
Siekierki Project Update and Strategic Review Over the past four months the Company has conducted a comprehensive review of its assets Key conclusions:
Siekierki is an attractive project(1). The initial problems are now well understood and
a clear plan forward has been developed The funded exploration portfolio offers significant upside The cash position at the year-end 2011 was 63mm which allows the Company to carry out its planned exploration and appraisal activities for the next 18 months However, unlocking the full upside within the Company is likely to require additional technical and financial resources The Board believes that the value of the Company, its skills and its future opportunities are not fully reflected in the current share price The Board has therefore appointed Greenhill & Co to review the Companys strategic options This review will assess a wide range of options for the company including the sale of assets, or the merger or sale of the Company The Company will provide further updates in due course
due in March/April 2012
(1) This is based on the Boards current view and is supported by AGR-TRACS. The value calculated on an EMV basis will be included in the Competent Persons Report (CPR)
Strategic Review
Siekierki Update A Large Gas Resource Play With Significant Upside The well tests on Siekierki have been completed and incorporated in a comprehensive technical and commercial review led by independent consultants AGR-TRACS. Key conclusions: Substantial gas initially in place (GIIP) is present. A base case GIIP of 1.1Tcf(1) is now estimated in Block 207. This does not include gas potentially in Blocks 206 and 208 or the Krzesinki discovery. However, forecast production rates and recoveries have been lowered relative to the 2009 Gaffney, Cline & Associates CPR The data acquired during the appraisal phase has significantly improved our characterisation of the Siekierki reservoir and a new reservoir model has now been established The layered Rotliegendes sandstone sequence in Siekierki has a wide range of ambient porosity and permeability properties ranging from 6-18% and 0.0230mD. The higher permeability layers will dominate well performance The Krzesinki-1 well test result supports the new reservoir model, in terms of the presence of higher porosity zones within the gas legs of the Krzesinki and Siekierki fields, with an un-fracced well test producing 0.2mmscf/day (the first successful un-stimulated gas well flow test on Block 207 to date) The reservoir is not pervasively fractured and therefore the water production observed during each of the well tests is formation water from the matrix caused by relative permeability effects above the free water level
(1) This estimate is based on the current Boards view and is supported by AGR-TRACS.
Strategic Review
Siekierki Update A Large Gas Resource Play With Significant Upside The Trzek-2 multi-fracced horizontal well had mechanical problems with the completion which reduced fracture effectiveness as had previously been released The Trzek-3 multi-fracced horizontal well was mechanically well executed with a good completion. However, the hydraulic fractures are not fully effective and the well bore is not contacting the high permeability zone encountered in the pilot hole The combination of the reservoirs permeability to gas and water and the poor frac effectiveness explains why the Trzek-2 and Trzek-3 gas flow rates previously reported of 3mmscf/day and 3.2mmscf/day were significantly lower than had been expected However, the multi-fracced horizontal wells utilised are the correct technology application for the field and significant operational lessons and insights have been learned Multiple opportunities for significant improvement in initial well rates and recoveries have been identified for future wells A revised development plan has been designed, comprising 32 wells recovering 296Bcf of gas, an average recovery of 9.25Bcf/well1. The value of Siekierki calculated on an EMV basis will be included in Aurelians CPR covering both appraisal and exploration assets due in March/April 2012. However, following the comprehensive technical and commercial review supported by independent consultants AGR-TRACS and on the basis of the new reservoir model described above, the Board has determined that Siekierki is an attractive project.
(1) This is based on the Boards current view and is supported by AGR-TRACS. The value calculated on an EMV basis will be included in the Competent Persons Report (CPR) due in March/April 2012
Strategic Review
Siekierki Update A Large Gas Resource Play With Significant Upside Aurelian will now seek to implement the next phase of the development plan, which is likely to involve (subject to necessary approvals):
We have also identified further potential upside for Siekierki from a regional development as well as additional gas volumes once the prospect inventories on Blocks 206 and 208 have been delivered
Schedule based on current best estimate and is subject to ongoing review as we constantly high grade prospects and defer others to try and de-risk them
In addition to the above seven wells, either currently being tested or planned to be drilled, four contingent wells are also being considered for 2013
Some wells pushed back to preserve capital, optionality and value during Strategic Options Review Sosna-1, the first well to spud in 2012, is targeting 35 MMbbl STOIIP in the Zechstein Farm outs planned candidates include high equity exploration and Siekierki
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Strategic Review
Maximising Shareholder Value Current market capitalisation is approx 100 million Proforma cash and cash equivalents of 63 million Current share price 16.5 pence per share* of which 11 pence per share is cash Key assets are Siekierki and Exploration potential Organisational capability relationships built, first mover advantage in Poland, concluded large program of seismic acquisition, in house expertise
CASH
Value of Cash 11 pence per share
Contents
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Trzek-3 MFHW in 2011, Krzesinki Vertical well in 2011 300km of 2D seismic in 2007 300km2 3D seismic across Block 207 in 2008 120km2 3D seismic across Blocks 206 & 207 in 2011 200 km 2D across Block 208 in 2011
Siekierki Base case GIIP 1.1 Tcf gross Krzesinki GIIP10-20 Bcf gross Block 207 licence renewed for 3 yrs to Feb 2015 Block 208 licence extension application submitted Plawce-2 drilled by PGNiG/FX Energy Q3 2011 Vertical Frac planned H1 2012
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Post-drill concept:
Tight reservoir which contains zones of significantly higher permeability Gas is produced with water as relative permeability effects are important
(1) Multi Frac Horizontal Well (2) Free Water Level
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Cemented liner allowed far greater control of frac placement compared with Trzek-2 6 fracs pumped, all contributing, but frac efficiency believed to be low (effective half-length around 27m compared with design of 85m) Data indicates that fracs have not effectively contacted the better permeability zone
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Partial analogue with Leer Field & comparable with Plawce (PGNiG / FX Energy) to south-east of Siekierki
Subject to any necessary approvals Upside case High Case GIIP (greater gas column above FWL away from well control, Block 206 exploration, regional story) Better recoveries per well Lower well costs (own rigs, shale gas economics etc.)
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T-2 and T-3 were drilled approximately longitudinally. There were few fractures and no drilling problems in reservoir Future wells drilled in a transverse direction to intersect more fractures, and maximise frac face area (as per various Rotliegendes analogues)
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Recommended 3 Stage Appraisal Plan to capture Base Case project 1) Identifying and bringing in a farm-in partner 2) Continued long term testing of Trzek-2 & Trzek-3 3) Commercialising gas from these two wells via low pressure low methane tiein and a gas to wire option as a smaller pilot development, with first gas expected at the end of 2013, requiring capital expenditure of approximately 12mm net to Aurelian.
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Tie in HP pipeline
Tie in LP pipeline
Tie in substation ENEA Export pipeline Transport HP pipeline Transport LP pipeline 16 kV cable Flowlines Wells Facilities Reservoir Crests
Full Development
Trzek 1 Kostrzyn
3Trzek 2
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Contents
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Exploration Portfolio
Focusing on 4 distinctive plays in Central Europe Core Area 1: Permian Basin Zechstein Reef Oil Rotliegendes Exploration Core Area 2: Carpathian Basin Carpathian Fold Belt Carpathian Foredeep
Exploration Projects
Carpathian Deep Fold Belt Zechstein Reef Oil Rotliegendes Gas
Carpathian Foredeep
Poland 23 licences / 3.0 million acres Slovakia 3 licences / 0.6 million acres
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Exploration Portfolio
Focus Niebieszczany-1 well has discovered 50Bcf gross GIIP in two horizons and identified a 200Bcf gross GIIP resource play in the Krosno Formation. Two gas/condensate zones in the Krosno Formation, above the original primary target, were well tested with gas rates of 0.6 and 0.2mmscf/day plus condensate. A commercialisation plan is now being developed by the operator PGNiG Planned well Sosna-1 within the Torzym reef oil play, targeting a prospect with 35mmbbls gross in-place, to be spud in March 2012 Further geological and geophysical surveys planned to de-risk prospects identified on 2011 seismic data including Cybinka-Torzym, Slovakia and Romania (Brodina) High impact Carpathian well drilling string deferred to Q4 2012. Karpaty East holds significant upside, although now believed to be gas rather than oil. Company estimates mid-case 170Bcf gross recoverable resources across two prospects Further wells pushed back to preserve capital, optionality and value in line with the strategic options review All play-unlocking wells are being progressed for drilling Licences with high working interests will be farmed out in the coming year, where appropriate, for example: Karpaty East and West, Slovakia and Romania Commercialisation decision for the Krzesinki-1 discovery made on Poznan Block 207 will be made once the well tests have been completed in Q1 2012
All volumes are aggregated Company mid case estimates
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In addition to the above seven wells, either currently being tested or planned to be drilled, four contingent wells are also being considered for 2013
Some wells pushed back to preserve capital, optionality and value during Strategic Options Review Sosna-1, the first well to spud in 2012, is targeting 35 MMbbl STOIIP in the Zechstein Farm outs planned candidates include high equity exploration and Siekierki
(1) Company mid case estimate based on the Boards current view. The value calculated on an EMV basis will be included in the Competent Persons Report (CPR) due in March/April 2012
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Niebieszczany-1 Summary
Formation Tops
Stratigraphy (Aurelian)
Cored Intervals
Depth MD RT 0m
Lithology
Well Tests
Niebieszczany-1 well
Transition
500m
475m
1000m
Krosno
1500m
Core #1
2000m
1900m Transition/Menili 2040m te
Operator PGNiG TD at 4219m due to increasing pressure Primary targets of Eocene & Paleocene not reached Gas/Condensate discovery in Oligocene Krosno Formation Four Drill Stem Tests completed during drilling Two zones well tested with modest fracs completed Rates of 0.6MMscf/d plus 126 bbl/d condensate and 0.2MMscf/d plus 18 bbl/d condensate achieved 50 BCF Gross GIIP estimated (1) Oil & Gas shows over much of Krosno Formation & Transition Beds Krosno Formation Resource Play: additional 200 BCF GIIP Gross estimated (1) Further work on well to lead to development in discussion with Operator
Open Hole DST #1 3231-3247m
Oil observed in the pits
2500m
Krosno
#2
Estimated Gas flow 0.71 mmscf/d ~2,700 psi Overpressured Test was aborted before cleaned up
3845m
3848m
3000m
Core #5
3500m
Krosno
4000m
Core #6
TD - 4219m
4500m (1) Aggregated Company mid case estimates
Estimated Gas flow 0.4 mmscf/d ~4,000 psi Overpressured Open Hole Test #1 3825-3857m Fracced (30t), Stabilised rate 0.6mmscf/d + 126 bpd condensate, WHP 4100psi
Niebieszczany-1 Test #1
Aurelian 45% (Operator); Romgaz 30%; Sceptre Oil & Gas 25%
176 MMbbl gross STOIIP on blocks (79 MMbbl net) over mapped leads 48 MMbbl gross recoverable resource (22 MMbbl net) over mapped leads Further ~50 MMbbl gross recoverable potential in areas of low data coverage Acquisition of 10% interest from Avobone in October 2011 Funded to drill one well in H1 2012 and one well 2013 First well on Torzym targeting gross 35 MMbbl STOIIP (16 MMbbl net)
Other
Unexplored Zechstein oil play adjacent to recent oil discoveries to the north requiring 3D seismic to unlock potential 100 MMboe fields discovered nearby prolific BMB Area. May contain analogues to one of the largest oilfields in the Central Lowlands of Poland, the Lubiatow complex, with reserves of 54 MMbbl of oil and 194 Bcf of gas Basin extends from the prolific UK North Sea
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Poland : Torzym-Cybinka
Zechstein Main Dolomite Play Concept
Toe of Slope Isolated Atoll Reefs Platform Reefs
TVDSS (m)
Lower Triassic
Z4 Z3
2,000m
Na4 Na3
TRAP & SEAL
Robust Halite & Anyhydrite (Top and bottom seal) In situ Ca2 Atolls (e.g. Gryzyna)
RESERVOIR
Ca2 Reefs (e.g. BMB, Grotow & Miedzychod)
Zechstein
Z2
An2 Ca2
MIGRATION
Oil & Gas within Ca2
2,500m
Na2
SOURCE*
Organic rich Ca2 (Basinal facies)
An1 Platform
Z1
3,000m
Carboniferous
*Organic rich Ca2 carbonates (TOC 0.5-7.0 wt %) are considered to be mature and generating at the present day
1,000m
Gas
Condensate
Debris/Talus
HC Generation
Oil
After Gorska et al. 2003
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Polish Carpathians
East Karpaty
2 Well Programme Planned
Ownership Resources
(1)
Current Activity
2 wells planned to target the 2 large prospects 136km 2D seismic survey covering approx 25% of Block complete Further 95km 2D seismic acquired in 2011 to firm up two drilling prospects and identify further
drilling targets Believed to be gas rather than oil
Planned Activity
Reviewing farm out strategy Drill Karpaty East-1 Q4 2012; Drill Karpaty East-2 2013
(1)
Aggregated Company mid case estimates; Prospects & Leads - based on the Boards current view. The value calculated on an EMV basis will be included in the Competent Persons Report (CPR) due in March/April 2012
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Slovakian Carpathians
Svidnik / Medzilaborce / Snina Blocks
Ownership
across blocks 1.1 Tcfe gross recoverable resource (550 Bcfe net) across multiple prospects
Zborov B prospect
Planned Activity
(1)
Aggregated Company mid case estimates; Prospects & Leads - based on the Boards current view. The value calculated on an EMV basis will be included in the Competent Persons Report (CPR) due in March/April 2012
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Conclusions
Key conclusions:
Siekierki is an attractive project(1). The initial problems are now well understood and
a clear plan forward has been developed
However, unlocking the full upside within the Company is likely to require additional technical and financial resources
The Board believes that the value of the Company, its skills and its future opportunities are not fully reflected in the current share price The Board has therefore appointed Greenhill & Co to review the Companys strategic options This review will assess a wide range of options for the company including the sale of assets, or the merger or sale of the Company
(1) This is based on the Boards current view and is supported by AGR-TRACS. The value calculated on an EMV basis will be included in the Competent Persons Report (CPR) due in March/April 2012
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Contact Us
Aurelian
Rowen Bainbridge Aurelian Oil & Gas PLC 4th Floor, 4 Grosvenor Place London SW1X 7HJ Phone: +44 (0) 20 7245 4999 Email: aurelian@aurelianoil.com
Financial Advisor
Brian Cassin or Mark Bentley Greenhill & Co. LLP Lansdowne House, 57 Berkeley Square London W1J 6ER Phone: +44 (0) 20 7198 7400
Public Relations
Nick Elwes or Catherine Maitland College Hill The Registry, Royal Mint Court London EC3N 4QN Phone: +44 (0) 20 7457 2020 Email: nick.elwes@collegehill.com
Nominated Advisor
Richard Morrison or Jen Boorer Ambrian Partners Limited Old Change House, 128 Queen Victoria Street London EC4V 4BJ Phone: +44 (0) 20 7634 4700 Email: richard.morrison@ambrian.com