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Dart’s UK Shale Plays – Developing Unconventional Value
Presentation to Proactive Investor ConferenceLondon, February 2013
Eytan Uliel – Chief Commercial Officer, DEI
Dart Energy Limited
www.dartenergy.com.au
2
UNCONVENTIONAL GAS ‐ TRANSFORMATIONAL AND GLOBAL.
CBM and shale have transformed the energy landscape in North America and AustraliaEurope and Asia have significant untapped unconventional gas resources, rising demand and increased dependence on imported gasThe long‐term sector dynamics are favourable –Dart well placed
Proven natural gas reserves
37
CanadaNatural gas reserves: 70 TcfCBM resources: 1,660 TcfShale resources: 385 Tcf
USANatural gas reserves: 300 Tcf
CBM resources: 740 TcfShale resources: 850 Tcf
RussiaNatural gas reserves: 1,575 TcfCBM resources: 1,730 Tcf
ChinaNatural gas reserves: 110 TcfCBM resources: 1,300 TcfShale resources: 1,260 Tcf
AustraliaNatural gas reserves: 135 TcfCBM resources: 350 TcfShale resources: >400 Tcf
IndonesiaNatural gas reserves: 105 Tcf
CBM resources: 450 TcfShale resources: 575 Tcf
IndiaNatural gas reserves: 42 Tcf
CBM resources: 282 TcfShale resources: 60 Tcf
United KingdomNatural gas reserves: 7 TcfCBM resources: 71 TcfShale resources: 21 Tcf
PolandNatural gas reserves: 3.5 TcfCBM resources: 106 TcfShale resources: 180 Tcf
GermanyNatural gas reserves: 3.5 Tcf
CBM resources: 106 TcfShale resources: 7 Tcf
Source: EIA, Datafusion
3
Dart summary as at 31/1/13 (independently certified)1
Net CBM OGIP (Tcf) 48Net CBM Prospective (Tcf) 14Net CBM Contingent (Tcf) 5.4Net CBM 3P Reserve (Bcf) 139.9Net shale OGIP (Tcf)2 78
(Europe 76 / Asia 2)
Cash (Dec 2012, est) US$30mHSBC Debt Facility Up to US$100m
CBM resource estimates for India, Indonesia, Europe and Australia (PEL458) are per Netherland, Sewell and Associates Inc, China per MHA Petroleum Consultants and Australia (PEL456, PEL459, PEL460, PEL461, PEL 463, PEL464) per MBA Petroleum Consultants
Shale OGIP potential best estimates based on NSAI’s independent assessment (May 2012)
DART – A GLOBAL UNCONVENTIONAL PLAYER
Airth, PEDL133
United Kingdom / Europe
Coal Mine Methane
India
Tanjung Enim
Liulin
Sangatta West
Fullerton Cove
China
Indonesia
Australia
Unconventional gas business with a global portfolio approach ‐ CBM and shale gas assetsProjects in each geography progressing to production / monetisation
4
DART INTERNATIONAL CBM PORTFOLIO – SCHEMATIC OVERVIEW
0
50
100
150
200
250
300
350
400
450
500
0 100 200 300 400 500 600EXPLORATION CORE DRILLING &TESTING PILOT TESTING INITIALDEVELOPMENT
EARLYPRODUCTION
PEDL 133
Liulin
Sangatta West
Tanjung Enim
PEDL 159
USCBPEDL161 & 163
Satpura
Assam
East Midlands
Staffordshire
Milejow
OGIPProspective2C3P2P
FULLPRODUCTION
6,000 Bcf4,000 Bcf2,000 Bcf1,000 Bcf500 Bcf250 Bcf100 Bcf25 Bcf
Cheshire
Muralim
RISK
Decreasin
gIncreasin
g
Global portfolio of CBM assets – 50 licences; 8 countries; biggest onshore licence holder in UK
Key CBM focus is PEDL133 in Scotland – moving into development / production within 12 months; GSA in place
5
DART INTERNATIONAL SHALE PORTFOLIO – SCHEMATIC OVERVIEW
0
50
100
150
200
250
0 50 100 150 200 250EXPLORATION CORE DRILLING &TESTING
PILOT TESTING INITIALDEVELOPMENT
PRODUCTION
Midland Valley
Gainsborough Trough
(East Midlands)
Milejow
Cheshire Basin
Saxon I West & Saxon II
OGIPProspective
40,000 Bcf30,000 Bcf20,000 Bcf10,000 Bcf5,000 Bcf2,000 Bcf1,000 Bcf200 Bcf
Xiushan*
* Dart internal estimates
RISK
Decreasin
gIncreasin
g
17UK / Europe licences are prospective for shale
No specific shale commitments; licences preserved through CBM activity
6
DART’S KEY UK SHALE PLAY – THE BOWLAND SHALE, WEST AND EAST
Eastern UK
Western UK
The most exciting shale play outside of North America
Flow‐rate established –sizeable and potentiallycommercial
Dart has one of the largestacreage positions: • 15 licences• Independently assessed shale prospect: 76 ‐143 Tcf
• 100% WI in all but 3 licences
7
BOWLAND SHALE PLAY (WEST) ‐MAJOR PLAYERS LICENCE POSITIONS
Cuadrilla IGas DartArea (km²) 1185 1363 1041No. of Licences 4 14 11
Western Bowland Shale play most active, with ongoing exploration activityDart has one of the largest acreage positions
8
BOWLAND SHALE PLAY (WEST) – REGIONAL SETTING
Organic‐rich, Lower Carboniferous shales present
Shale generally thicker in basins than on platforms
World‐class source rocks
9
BOWLAND SHALE PLAY (EAST) – MAJOR PLAYERS LICENCE POSITIONS
e‐Corp Farm‐inShale core & lateral required to be drilled by Sept 2014
Eastern Bowland Shale – little data within Gainsborough Trough, but indications of hydrocarbon potential, both dry and liquids rich shale gas possibleDart has the largest acreage position
Cuadrilla IGas DartArea (km²) 0 388 1235No. of Licences 0 9 13
e‐Corp Farm‐inShale core & lateral required to be drilled by Sept 2014
10
BOWLAND SHALE PLAY (EAST) – REGIONAL SETTING
PEDLs 200 &140
PEDL210
Bowland Shale Deposition
Normanby 1 and Grove 3 drilled as conventional exploration wells
Represent a basinal and platform setting in the Eastern UK areas
Gamma Active shales present in both wells
SW
SW
NE
Scaftworth B2TOC – 2.07-3.63%Maturity – 1.26% @ 2246m
11
Licences with shale prospect
Shale OGIP (Tcf)
Gross Participating Interest
Low Best High Low Best High
Bowland Shale ‐West (PEDLs 147, 186, 187, 185, 188, 189) 11.0 30.5 52.5 11.0 30.5 52.9
Bowland Shale ‐ East(EXL288, PEDLs 012, 139, 140, 200, 207, 210)
19.2 47.6 83.4 13.2 32.4 57.1
Total Shale GIP ‐ NSAI Estimate 30.2 78.1 135.9 24.2 62.9 110.0
BOWLAND SHALE PLAY – DART RESOURCE POTENTIAL
OGIP independently assessed by NSAI , October 2012Substantial Resource potential: up to 110 Tcf, net to DartIndicates substantial prospectivity in both West and East Bowland Shale plays
12
DART’S UK SHALE PORTFOLIO ‐ KEY MESSAGES
Unconventional gas is an exciting sector to invest in Gas is a primary fuel of the future ‐ share of energy mix to catch up with oil by 20401,2 Unconventional gas resources are larger than conventional natural gas resources1 Unconventional gas ‐ both shale and CBM ‐ as a business and investment is proven,
not theory, having changed the energy balance in North America / Australia already
1
2
Notes:1 DataFusion Associates2 ExxonMobil report: 2012 The Outlook for Energy: A View to 2040
3 Dart provides unique exposure to the most exciting UK shale play Large asset base in all the right play‐zones – comparable with other companies Company underpinned by near‐term CBM revenues and lower work obligations Managed by an experienced team with a demonstrated track record Attractive value proposition
Shale gas in UK (and Europe) is poised to take off Large resource – and will be key bridge fuel in Europe UK Government policy now clear and supportive, and leading Europe in support /
regulation for unconventional gas Exploration activity / licencing ramping up across UK / Europe
CHINA / INDIA / INDONESIA / UNITED KINGDOM / POLAND / BELGIUM / GERMANY
END. THANK YOU.
14
This presentation has been prepared by Dart Energy International Limited (“Dart” or the "Company"). By viewing all or part of this presentation, you agree tomaintain confidentiality regarding the information disclosed in this presentation, unless such information is otherwise publicly available. Any failure tocomply with these restrictions may constitute a violation of applicable securities laws.This presentation is for information purposes only and does not constitute or form part of an offer, solicitation or invitation of any offer, to buy or subscribefor any securities, nor should it or any part of it form the basis of, or be relied in any connection with, any contract or commitment whatsoever.The information contained in this presentation has not been independently verified. No representation or warranty expressed or implied is made as to, andno reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained in this presentation. None ofthe Company, Dart Energy Limited or any of their respective affiliates, advisers or representatives accept any liability whatsoever (in negligence or otherwise)for any loss howsoever arising, whether directly or indirectly, from any use, reliance or distribution of this presentation or its contents or otherwise arising inconnection with this presentation.This presentation includes forward‐looking statements. These statements contain the words "anticipate", "believe", "intend", "estimate", "expect“, “plan”and words of similar meaning. All statements other than statements of historical facts included in this presentation, including, without limitation, thoseregarding the Company’s financial position, business strategy, plans and objectives of management for future operations (including development plans andobjectives relating to the Company's business and services) are forward‐looking statements. Such forward‐looking statements involve known and unknownrisks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company to be materially differentfrom results, performance or achievements expressed or implied by such forward‐looking statements. These forward‐looking statements speak only as at thedate of this presentation. Predictions, projections or forecasts of the economy or economic trends of the markets are not necessarily indicative of the futureor likely performance of the Company. Past performance is not necessarily indicative of future performance. The forecast financial performance of theCompany is not guaranteed. You are cautioned not to place undue reliance on these forward‐looking statements, which are based on the current views of theCompany on future events. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions, except as required bylaw, to any forward‐looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events,conditions or circumstances on which any such statement is based.Neither this presentation nor any copy or portion of it may be sent or taken, transmitted or distributed, directly or indirectly, into the United States, Japan,Australia, Canada or any other jurisdiction which prohibits the same. The securities have not been, and will not be, registered under the U.S. Securities Act of1933, as amended (the "Securities Act"), or the securities laws of any state or other jurisdiction of the United States or elsewhere, and the securities may notbe offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of theSecurities Act and applicable state or local securities laws. This presentation is not for distribution in, nor does it constitute an offer for sale of securities inthe United States. The Company does not intend to conduct a public offering of its securities in the United States.This presentation may not be forwarded or distributed to any other person and may not be copied or reproduced in any manner. Failure to comply with thisdirective may violate applicable laws.
IMPORTANT NOTICE.
CHINA / INDIA / INDONESIA / UNITED KINGDOM / POLAND / BELGIUM / GERMANY
APPENDIX:UNCONVENTIONAL GAS PRIMER.
16
CBM and shale gas is the same end product as conventional natural gasDifference is source rock from which natural gas is producedDrilling techniques and principles of well completions are similar to those used in the conventional oil and gas industryAdvances in horizontal drilling and hydraulic fracturing make CBM and shale gas economically competitive
Coal Bed Methane Shale gas Tight gas
Gas is adsorbed onto thesurface of the coal
Gas is “trapped” withinthe shale rock
Gas trapped in impermeable hard rocks or sands
WHAT ARE “UNCONVENTIONALS”?
Conventional natural gas
Gas exists in a free state in the spaces between the sands
17
HOW IS IT EXTRACTED?
CBM EXTRACTION
Water is removed from the coalbeds (“dewatering”),
lowering the pressure in the coals and the gas is “desorbed”
SHALE GAS EXTRACTION
Water, sand and chemicals are injected into the rock at high pressures (“fraccing”) to crack the rock and liberate the gas
18
BASIC CBM WELL TYPES.
Vertical Lateral Multi‐lateral
Lowest cost
Fastest completion time
Effective for thick coal seams
Used when coal seams are thin
Horizontal drilling techniques
High precision required
Minimise surface footprint
Fastest gas drainage
Most ‘hole in coal’
Well design decision to optimise economics
COAL SEAM
COAL SEAM
Cross-Section View
Radius Bend
Vertical Collars
Lateral Collars Typical CBM rig• Conventional mineral rig• Truck mounted• In‐seam steering technology
Typical wellhead• Fully automated pump and
reservoir control• Optimises production; reduces
field maintenance
60m
45m to 175m
19
Source: Chesapeake Energy
A TYPICAL SHALE WELL.
Deep vertical well with one or more lateralsMain difference is “fraccing” ‐ pumping water and sand (>98%) and additives (<2%) down the wellbore at high pressureThe fluid injected at pressure fractures the shale rock, and the sand (proppant) holds the cracks openProcess is repeated multiple times along the lateral wellbore to cover the maximum areaFluids are carried up the wellbore for disposal or treatment and re‐use ; sand prop open the cracks, allowing gas to flow outHighly regulated, technologically advanced process which was developed in the USA
Source: Baker HughesSource: Canadian Society for Unconventional Gas
20
AN UNCONVENTIONAL GAS WELL PRODUCTION PROFILE.
Nature of the source rock results in a fundamentally different production profile
Significant technical and commercial impact
21
UNCONVENTIONAL GAS PROJECT LIFE CYCLE.
2 ‐ 3 yrs
1 ‐ 3 yrs1 ‐ 3 yrs
20+ yrs 1 ‐ 2 yrs
Explore
Appraise1
Initial Development1
Full Scale Development1
Identification
Note:1 Once a well has been drilled and is of no further use, it will be abandoned. The
process includes safely sealing the well and rehabilitating the surrounding area, in accordance with licence terms and applicable local regulations providing for rehabilitation and industry best practice
22
RESPONSIBLE ENVIRONMENTAL MANAGEMENT.
LAND USE
Wells occupy large surface area? Land cannot be used for other uses? Unsightly and disrupts wildlife habitats?
1CONCERNS INDUSTRY FACTS
“Nuisance” / drilling period typically <30 days Horizontal drilling requires up to 10X less space A well in production requires very little space
allowing land use for other purposes Site restoration / remediation stringently
regulated
WATER
Drilling “additives” affect groundwater aquifers? Water produced is not fit for other uses? Water produced affects the soil?
2 ~80% initial water recovered to potable
standards(1); remaining treated for safe disposal Shale formations are typically several thousand
meters below aquifers No clear examples of ground water contamination
since 1982(2) Multiple safeguards: steel casings, cementing, etc
FRACCING
New technology? Chemicals used are dangerous? Gas can migrate to surface? Causes earthquakes?
3 Safe “fraccing” dates back to 1950s, over tens of
thousands of wells globally >98% water; < 2% “additives” (common in
household products) Used for shale; limited use in CBM Strictly regulated
Notes1. Marcellus Shale – Water Treatment Options Worth Considering, www.ventureengr.com2.. Department of Energy & Climate Change (U.K.) Report “Shale gas, NW England earthquakes and UK regulation”, 8 May 2012