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© Copyright 2014
Petralon Energy
Confidential. Not for further reproduction or distribution.
DAWES ISLAND Investor Presentation October 2014
Outline
2
• Introduction
• Petralon Energy
• Country Overview
• Asset Overview
• Economics
• Appendices
1. Comparable Companies
2. Sponsor Profile
3
Introduction
Introduction
4
• Petralon Energy (“Petralon”) is considering a farm-in into the Dawes Island Field in OPL’s
2005 & 2006 (“the Asset”), in partnership with Tako E&P Solutions Ltd. / Accelerated
Compact Energy Solutions Ltd. (“ACES”).
• Previously owned by Chevron (formerly OML 54), the field is currently owned by Eurafric
Energy Limited (“Eurafric”).
• The field has an existing well, with development plans including re-entering this well, and
drilling a subsequent twin well.
• Of the immediate development CAPEX requirement of $13 million (Thirteen Million
Dollars), Petralon’s contribution will be $10 million (Ten Million Dollars), for which it will
own:
• 35% prior to cost recovery (with Tako E&P Solutions owning 14%)
• 21% post cost recovery (with Tako E&P Solutions owning 28%)
5
Petralon Energy
Petralon Energy
• Petralon is an African Exploration & Production company, set up to acquire, develop, and
operate assets, primarily in the Nigerian oil and gas sector.
• Its business focus is focused primarily in Nigeria, where its founders have extensive industry
experience, strong local contacts among various industry stakeholders and the technical and
financial capacity necessary to quickly originate and execute Nigerian oil and gas transactions
and then also subsequently in other African countries, that have rapidly evolving oil and gas
sectors, including Angola, Ghana, Kenya, Namibia & Uganda.
• Petralon has a strong Management team with solid financial and technical/operating
competencies and experience in the local and international oil & gas sectors, who have
successfully managed medium to large-sized private & public companies.
• The company is well positioned for growth through further increases in the Dawes Island field
reserves, gaining access to proven marginal fields to be awarded by the Nigerian government,
and fields available via future IOC divestments, and also by farming into assets in Africa.
6
7
Country Overview
Country Overview: Nigeria
8
• Nigeria has the largest oil & gas reserve base in Sub-
Saharan Africa with an estimated 30+ billion bbls of oil
and 180 Tcf of Gas. Oil production averages 2.6 million
bbls per day with ongoing government initiatives to
increase to 4 million
• There are over 1,000 fields discovered, with only 35% of
these producing
• The long standing presence of major Oil and
Independent Companies provides industry stability
• The country has an attractive risk/reward profile, with:
• Numerous proven/undeveloped field opportunities
• An attractive Fiscal Regime
• High quality crude oil
• Established infrastructure for transportation and
export
Country Overview: Nigeria’s Marginal Field Program
• A Marginal Field refers to:
• Fields owned by major international oil companies
and the state oil company (NNPC) which have
remained non-producing for over 10 years
• Fields not under development due to marginal
economics for major oil operators and high fiscal
terms
• Fields with exploration discoveries but no
appraisal activities
• Nigeria’s program was initiated in 2001, to fuel the growth of Independent Nigerian E&P
companies. Over 24 marginal fields were allocated to indigenous companies in 2003
• It is characterized by considerably improved fiscal terms (from historical 20% royalty and 85%
profit tax) and reduced royalty, based on a sliding scale and lower profit tax, i.e.:
• Sliding-scale royalties to government
• Sliding-scale royalties to original field owners
9
10
Asset Overview
Dawes Island
Asset Overview: Dawes Island
• The Dawes Island Marginal Field is located in OPLs 2005 & 2006 (formerly OML 54), in Swamp
Terrain, about 15km SW of Port Harcourt, 7km West of the Onne Free Trade Zone, and 35km
North of Bonny Terminal, and with a Field Coverage Area of 40km2
• It was previously held by Chevron, which drilled on it an oil and gas discovery well in 1979.
• The field was subsequently covered by 3D
seismic surveys, and in 2004, was awarded to
Eurafric.
• The one discovery well that was drilled did not
progress beyond a depth of 10,355ft.
• Various prospectivity studies and evaluations
have been carried out on the field, indicating the
presence of hydrocarbons (mainly oil).
11
Asset Overview: Development Plan
12
• A Phase 1 Development Plan has been proposed, which will involve the re-entry of Dawes
Island-1 well, and the drilling of a Twin well
• The anticipated base case production from the field is 2,000 bopd, at an average of 1,000 bopd
from each of the two sands
• The well stream will be processed using a Barged Early Production Facility, with crude
evacuated to nearby Crude Gathering Terminals
Asset Overview: Field Production Profile
13
High Case 3,000 bopd in Year 1
Base Case 2,000 bopd in Year 1
Low Case 1,200 bopd in Year 1
0.00
0.50
1.00
1.50
2.00
2.50
2014 2015 2016 2017 2018 2019 2020
High Case
Base Case
Low Case
Asset Overview: Work Program (DI-1 Well)
14
Activity Days Activity Days
1. Position Equipment at Well Location and
Rig Up 3.4 9. Carry out wellbore cleaning 4.6
2.
Check Wellhead Pressures, Carry Out
Casing Integrity Test, Install and Test
BOPs
3.4 10. Gauge Ring Run + Log CBL 4.1
3. Drill Out Cement below shoe, set cement,
tag and dress of to tag hard cement 7.7 11. Run Gun + Perforate G Sand 4.1
4. Sidetrack + drill to 12-1/4" hole section
TD 9.4 12. Run Gun + Perforate E Sand 3.8
5. Run + cement 9-5/8" Liner 4.6 13. Install Pre-Pack Screen across C4 Sand 4.3
6. Drill Out shoe track + drill 8-1/2" hole 11.1 14. Install Pre-Pack Screen across B4 Sand 3.9
7. Run + cement 7" Liner 6.0 15. Complete Well as Two Strings Dual
Completion 10.3
8. Run 7" liner tie-back to surface 4.6 16. Install Xmas Tree & make Well Ready for
Hookup and Production 4.6
Sub-Total 90.0
Contingency (15%) 13.5
Total 103.0
Asset Overview: Development Strategy (Phase 1)
15
I. Phase 1 (De-risk)
• De-risk the field in a cost-effective manner to execute well re-entry, sidetracking,
completion and well testing activities to enhance the value of the field
o Re-enter Dawes Island-1 with with the dedicated Jack-Up rig owned by JV partner
o Carry out integrity checks
o Drill out all cement plugs, sidetrack well and drill, set casings and complete well as
dual string producer on E & G sands
o Carry out extended well test on the sands using Early Production Facility, EPF (6
months to 1 Year)
o Use performance data and fluid samples to reduce uncertainty, minimize risks and
optimize the full-field development
o Carry out flow test on F and H sands which look like high radioactive sands, which
are common in the area
Asset Overview: Development Strategy (Phases 2&3)
16
II. Phase 2 (Consolidate)
• Use the results from Phase 1 to plan full-field integrated oil and gas development
o Work on expanding the processing, storage and evacuation facility or constructing
pipeline to a nearby processing / gathering facility if the upside is proven
o Work with other Partners for Gas Commercialization and distribution
o Prepare exploration / appraisal program to test prospects
III. Phase 3 (Expand)
• Build on Phase 1 and 2 results to target field upside potential
o Infill drilling (2 – 20 wells depending on upside)
• Great Potential Resources,
with 1 well already drilled
(but to be re-entered)
• Attractive Fiscal Terms
• Comparatively modest
CAPEX requirement
Asset Overview: Attractions & Challenges
• Accessibility of Dawes Island-1
well location
• Subsurface Uncertainties
• Crude Evacuation Options and
Challenges
• Personnel & Rig Availability
17
Risks Mitigants
Over/Under Payment
• Ensure robust evaluation and due diligence
• Seek equity partners
Capital Cost Over-run
• Extensive review of CAPEX requirements, scope and cash calls
Change in fiscal regime
• Carry out sensitivity analysis on various scenarios
Community Challenges
• Robust community engagement strategy, with active community
involvement – This process has already begun with MOU signed with the
community & the hiring of community youths for various initial activities on
the field
Asset Overview: Risks & Mitigants
18
19
Economics
Marginal Fields
o Royalty: 2.5%
o PPT: 55%
o NDDC Levy: 3%
o Education Tax: 2%
o Abandonment Cost: 5%
o Production Scenarios:
o Low Case = 1,200 bopd
o Base Case = 2,000 bopd
o High Case = 3,000 bopd
o YoY Production Decline of 10%
o CAPEX: $13m (Petralon = $10m; Co-Farmee = $3m)
o OPEX: $18/bbl (YoY rise of 5%)
Producing
Assets
Crude Oil
o Case Scenarios from $50/bbl - $100/bbl, with $60 base case
o YoY increments from 1% – 20%
o WACC: 10%
o EV/EBITDA Multiple: 12.98*
Fiscal Regime
Commodity
Price
Economics: Key Assumptions
Financing
* Refer to Appendix 1
20
Economics: Profit Share
21
• Under the terms of the Farm-in
Agreement, Petralon will fund 63%
of all capital expenditure, and is
entitled to 35% of distributable
funds as Cost Oil until it has fully
recovered the capital spend
• After full recovery of capital costs,
Petralon is entitled to 21% of
distributable funds.
• Distributable funds are defined in as
revenue less royalties, abandonment
operating costs, NDDC, G&A and
taxes.
35%
14%
51%
Before Cost Recovery
Field Owner
Other Farmee
Petralon
21%
28%
51%
After Cost Recovery
Field Owner
Other Farmee
Petralon
Economics: Petralon Revenue & OPEX Profile
Using the Assumption of 2,000 bopd at $70/bbl
22
OPEX REVENUE
0.00
0.50
1.00
1.50
2.00
2.50
3.00
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
2014 2015 2016 2017 2018 2019 2020
$'m
illi
on
$'m
illi
on
Revenue OPEX
Economics: Net Cashflow Profile
23
Using the Assumption of 2,000 bopd at $70/bbl
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
2014 2015 2016 2017 2018 2019 2020
$'m
illi
on
585
Economics: NPV Sensitivity Analysis
24
-10 -5 0 5 10 15 20 25 30
Crude Oil Price ($50 - $100/bbl)
Volume (+/- 400bbls)
OPEX (+/- $2/bbl)
CAPEX (+/- $1m)
$'million
25
Appendices
• In order to deduce the transaction multiple to use for the valuation, the average EV/EBITDA ratio
of similar companies was used. The companies used are similar mid-size E&P companies, with an
average EV/EBITDA ratio of 12.98, some of which include:
Company Country
1. Abby Inc. Canada
2. Afren Plc. UK
3. Armada Oil Inc. US
4. Dragon Oil Plc. UAE
5. Frontier Energy Corp. US
6. Glen Rose Petroleum Corp US
7. Legacy Oil & Gas Canada
8. MPI Société Anonyme France
9. Oasis Petroleum Inc. US
10. Sterling Oil & Gas Company US
11. Titan Oil & Gas Inc. US
Appendix 1: Comparable Companies
26
• Ahonsi is a seasoned oil and gas professional, with over 15 years of industry
experience. He was a founding Executive of First Hydrocarbon Nigeria from
January 2011 to December 2013, where he served as the company’s CFO &
Executive Director, with primary overall responsibility for the day-to-day
management of FHN’s finance function. Following the company’s sale to
Afren Plc., he successfully oversaw the integration of the company’s finance
function into the Afren Plc. Group. He was a consultant to Afren Plc., right
Appendix 2: Sponsor Profile – Ahonsi Unuigbe
27
up to his founding of Petralon Energy and remains on the board of FHN till date.
• He was previously Budget & Planning Commissioner for Edo State, as the pioneer Commissioner for
that Ministry, where he also served as Chairman of the International Donor Financing and Vice
Chairman of the State Economic and Strategy Committees. He has also previously served as a Special
Assistant to the Minister of Finance, supporting Nigeria’s successful exit from the London club of
creditors.
• He has held positions at Citigroup Corporate & Investment Bank (as Manager, Project & Corporate
Finance), Ocean & Oil Holdings Ltd (as Vice President, Investments and Financial Advisory) and
Standard Bank (as Head of the Project Finance and Government and International Organization
Departments).
Appendix 2: Sponsor Profile – Ahonsi Unuigbe (cont’d)
28
• He has had over 15 years of extensive experience in oil & gas project finance, and sectors spanning the
energy & petrochemicals, power, telecoms & manufacturing sectors, regional governments, as well as
Citibank & Standard Bank clients.
• He successfully raised $450m in debt, equity and project finance, within a 3 year period at FHN (2011
to Q1 2014), to support its expansion plans and led the completion of multiple project and structured
finance deals with Citibank, Ocean & Oil Holdings, and Standard Bank. As Vice President with Ocean
& Oil Holdings, during which he was a core member of the team that incubated Oando’s exploration
and production company, and analysed the company’s initial asset investments.
• Ahonsi has also applied his capital raising skills to the Public Sector and development of his home
State, having successfully secured World Bank funding (to the tune of $150m) for the previously
blacklisted (Edo) State Government, during his Public Sector stint as Edo State’s pioneer
Commissioner for Budget, Planning and Economic Development.
• In addition, he was a part of the core team that successfully acquired 45% interest from Shell, Total,
and Agip, in Oil Mining Lease 26 in Delta State, and led the first reserve based-lending for onshore
Niger-Delta oil block, raising $230m from a consortium of banks (led by Standard Bank Plc. & FCMB)
despite the very difficult economic climate at the time.
CONTACT INFORMATION
o Ahonsi Unuigbe (Founder & CEO)
207 – 209 Canton Concourse
12, Landbridge Avenue
Oniru Estate, Lekki
Lagos Nigeria
T: +234 (0) 803 301 8888
THANK YOU