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6th February 2014
CAPITAL MARKETS PRESENTATION
IF YOU DISCOVER A FIRE:
• Operate the fire alarm by breaking the glass of the nearest call point. Call points are located at each exit door.
• Leave the building by the nearest available Fire Exit and proceed to the assembly point on ELIZABETH BRIDGE.
ON HEARING THE ALARM:
• The Evacuation signal is a continuous high-pitched siren.
• Close windows in your immediate vicinity.
• Leave the building by the nearest available fire exit closing fire doors behind you.
• Proceed to the assembly area at ELIZABETH BRIDGE.
• DO NOT ATTEMPT TO USE THE LIFTS (FOR SAFETY THESE ARE NOT AVAILABLE FOR NORMAL USE WHEN THE ALARM OPERATES).
• DO NOT STOP TO COLLECT PERSONAL BELONGINGS.
• DO NOT RE-ENTER THE BUILDING UNTIL INSTRUCTED BY THE EMERGENCY SERVICESVIA THE CO-ORDINATING FIRE MARSHAL.
Falkland Islands’ office fire evacuation
6th February 2014 // Page 2
Forward looking statements
This presentation may contain forward-looking statements and information that both represents management's current expectations or beliefs concerning future
events and are subject to known and unknown risks and uncertainties.
A number of factors could cause actual results, performance or events to differ materially from those expressed or implied by these forward-looking statements.
6th February 2014 // Page 3
Introduction
Premier Today
• Robust cash flow and profitability
• 800 mmboe reserves and resources
• Production of 66 kboepd (January 2014)
• Key exploration campaigns in Indonesia, Norway and Falklands
• NAV >£5 per share (broker consensus)
Going Forward
The Board will:
• Give priority to balance sheet strength
• Focus investments on our highest return projects
• Reduce capital exposure to the Sea Lion project
“...our strategy is to invest in high-quality developments whilst maintaining balance sheet strength...”
6th February 2014 // Page 4
Balance Sheet Strength and Flexibility
• Current net debt of $1.45 bn
– Gearing of 41%, well within Board guidelines
• Significant headroom on financial covenants today and going forward
– Cash flow cover at 2x (covenant of <3x)
– Interest cover at 8x (covenant of >4x)
• Excellent access to debt markets
– $700 m raised in Q4 2013 on competitive terms
– Maturities extended (2017 – 2022)
– Zero drawings on existing principal bank facility
• Continuing strong market appetite from debt investors
– Anticipate attractive terms for re-financing during 2014
– Reverse enquiry from investors on MTN programme
– Initial favourable indications from export credit funding markets
Robust balance sheetand funding position
6th February 2014 // Page 6
Financial Outlook
• 2014 guidance 58-63 kboepd– Positive start to 2014 production– Changing mix generates higher
cash flows
• Solan, Catcher fields– Add up to 30,000 bopd of valuable
UK barrels– Value per barrel continues to rise
• UK production growth monetises high value UK tax loss position
– Unlikely to pay UK CT until end of decade
Cash Flows (Current Oil Prices)
2013 2014 Post Solan Post Catcher
Averag
e CAGR of
17%
Significant cash flow growth
6th February 2014 // Page 7
Prudent Financial Management
• Planning case $85/bbl
• Active disposal programme
• Will seek partner for Sea Lion
• Production base line of 75 kboepd
• Future discretion on exploration and unsanctioned projects (eg Bream)
• >US$1 bn covenant headroom
• Gearing in line with current levels
Portfolio optionality
Significant Flexibility
• Current oil price $105/bbl
• Active disposal programme continues
• Will seek partner for Sea Lion
• Substantial capacity for:
– Debt reduction, or
– Enhanced shareholder distributions, or
– Incremental investment in quality projects
6th February 2014 // Page 8
Catcher Development
• Project Sanction – Pre-tax IRR >20% based on $85/bbl
• Gross reserves (2P) of 92 mmboe within initial development– Upside of 140 mmboe
• Excellent reservoir qualities– 35% porosity and very high permeabilities
• Fully defined development scheme– Leased Floating Production Storage and Offloading (FPSO) model – Subsea tie-backs of the Catcher, Varadero and Burgman fields to FPSO– Expected to produce at peak ~50,000 bopd (~6% of the entire UKCS production)– $2.2 bn gross Capex including ~30% of allowances and contingencies– Development drilling of 14 producing wells and 8 water injector wells commencing 2015
• First oil in 2017 and an expected life of field of 10+ years
Catcher development overview
6th February 2014 // Page 10
New North Sea hub
• Location: Block 28/9 • Water depth: 300 feet• 3 fields as part of initial development • 22 wells to be drilled
Catcher area discoveries: • Catcher August 2010• Varadero January 2011• Burgman March 2011• Carnaby June 2012• Bonneville April 2013
Block 28/9
Premier (Op.) 50.0%
Wintershall 20.0%
Cairn Energy 30.0%
6th February 2014 // Page 11
• All exploration and appraisal wells encountered hydrocarbon bearing sands:
– Tay sands in 28/9-1Z, -3, -2,-4, -4Z, -5A, -6 and -6Z (all fields)
– Cromarty sands in 28/9-1,-1Y and -3 (Catcher only)
Catcher
Licence
Oil
Gas
P1430
NB Bonneville extends further south,map limited by HD data extent
Varadero
Burgman
Carnaby
Bonneville
FieldDetermination
Area
Field STOIIPOil
ReservesRF%
Catcher 129 38.6 30
Varadero 77 21.7 28
Burgman 86 23.3 27
Catcher Area 289 83.6 29
Exploration and appraisal success
6th February 2014 // Page 12
Joseph C. DeVay et al, 2000, AAPG Memoir 72 / SEPM Special Publication No. 68
Tay
Cromarty
Good understanding of the rocks
Region of deposition of original Cromarty and Tay sands
• Late Palaeocene/early Eocene turbidite sand systems
• High porosity (~35%) and permeability (Darcy permeabilities) sands deposited in Cromarty andTay intervals
• Post depositional re-mobilisation and injection of sands, leading to high degree of vertical connectivity
6th February 2014 // Page 13
• Excellent quality seismic imaging at the reservoir level due to shallow depths and simple overburden
• High quality, fine line spacing (high density) seismic was shot in 2011
• Oil-filled sands in the Tay and Cromarty have AVO response and are clearly identifiable
Catcher Cromarty Catcher East (Tay)
GOC
OWC
Polarcus HD seismic (far stack coloured inversion)
Chalk
Balder
CatcherEast (Tay)Catcher
Cromarty
Seismic will assist with well placement
6th February 2014 // Page 14
Catcher development overview
6th February 2014 // Page 15
Catcher area development scheme
• 22 well development including 14 producers and 8 injectors
• Wells target thickest oil sands to maximise rate and recovery
• Wells positioned to alloweffective sweep
• Two phases of drilling on eachfield allows:– Optimisation of production
profile– Learnings from drilling shorter
wells to be applied to later longer wells
Producers
Injectors
Oil pore volume thickness map
VI3
VP2
VP1
VI1
VP4
VP3
VI2
CCP5
CCI2
CCP6
CTP1
CCP3
CTI1
CTP7
BP1
BP2
BI3
BP4
BP3
BI1
BI2
BP5
Reservoir depletion optimised
6th February 2014 // Page 17
6th February 2014 // Page 18
Rig and well systems contracts awarded
• Wells drilled over six - 4 slot templates from a Heavy Duty Jack-Up
• Subsea well system with HP riser
• Subsea trees run from Jack-Up (similar to Huntington development)
• Ability to workover wells with an intervention vessel, Jack-Up or Semi-Submersible
• Concluded a highly competitive tender process– 3 international companies– Re-fit versus new build
• Formal announcement of preferred bidder imminent
• 750,000 bbls oil storage • Designed for Functional Spec• 125,000 bpd liquids
– Oil – 60,000 bopd– Gas – 60 mmscfd– Sea water injection 75,000 bpd– Future tie-ins
– Spare risers included in current design
FPSO build
6th February 2014 // Page 19
Production profile
6th February 2014 // Page 20
Catcher
Licence
Oil
Gas
P1430
NB Bonneville extends further south,map limited by HD data extent
Varadero
Burgman
Carnaby
Bonneville
Exploration (Laverda)• 25 mmbbls STOIIP• Low cost tie-back to Catcher development
Catcher North (CTP2 well)• 2-4 mmbbls reserves• Possible subsea tie-back or
ERD from Catcher drill centre
Carnaby (Burgman extension)• Discovered August 2012 by 28/9-5A• 28 mmbbls STOIIP
Bonneville• Discovered April 2013 by 28/9a-6 and -6Z wells
– Drilled at >70° as a “test” for Catcher• 30 mmbbls STOIIP
Area synergies• Capacity of the vessel could support other
area discoveries
Upside – near fielddiscoveries and exploration
6th February 2014 // Page 21
Laverda
CatcherNorth(CTP2)
Cost parameters
6th February 2014 // Page 22
Catcher tax attributes
Bare-boat Charter
• Industry-wide discussions are ongoing with HMT regarding the possible introduction of taxation on bare-boat charter income
Small Field Allowances
• The Small Field Allowance shelters £150 m taxable profits from the Supplementary Charge (SCT) saving tax at 32% for each qualifying field with P50 reserves <45 mmbbls
• The Catcher, Burgman and Varadero fields will separately qualify for the Small Field Allowance, resulting in total gross allowance for the development of £450 m
Tax synergies
• Premier has CT/SCT losses and allowances of $2.4 bn at 31 December 2013
• No UK CT expected to be payable until at least 2019
6th February 2014 // Page 23
Major milestones
• Premier’s Board has approved the project– Formal Sanction on completion of the contracts and receipt of
JV and Government approvals
• The FDP will be submitted to DECC next week– Environmental Statement already submitted
• All major contracts are near to completion – In final stages with acceptable Ts&Cs
• Targets and plans in place to deliver upside potential– Reservoir recovery rates and future tie-backs
• Project team in place and will deliver first oil in the summer of 2017
6th February 2014 // Page 24
Falklands Projects
Falkland Islands
Mid Atlantic Ridge
Antarctic Peninsula
Drake Passage
Falkland PlateauFalklandIslands
NFB
SFB
South American Plate
Antarctic Plate
Scotia Plate
Antarctic Plate
Nazca Plate
Weddell Sea
Borders & Southern
Premier OilFOGLArgos
Falkland Oil and GasNoble Energy
Location• Situated on the southern part of the
South American Plate on the Falkland Plateau
• 220km from the Falkland Islands in the North Falkland Basin
• Water depth 450m
Regulatory environment• Petroleum legislation modelled on UK• Falkland Islands Government is
responsible for regulation and has advice from UK DECC, HSE, BGS
Fiscal terms• Attractive fiscal terms:
– 26% corporation tax– 9% royalty
6th February 2014 // Page 26
Premier’s Falkland Islands portfolio
Licence PL032• Premier 60%, operator; Rockhopper 40%• Contains Sea Lion discovery made in 2010, extensively
appraised in 2011• Chatham exploration prospect
Licence PL004• Premier 36%, operator; FOGL 40%; Rockhopper 24%• Contains Casper, Casper South, Beverley• Exploration includes Zebedee (PL004b), Jayne East (PL004c)
and Isobel/Elaine (PL004a)
Phased Development• Phase 1 – Sea Lion (PL032)• Phase 2 – Satellite fields and southern extent of Sea Lion
Exploration Upside• Four well programme scheduled for 2015
6th February 2014 // Page 27
PL004b
PL004a
PL004c
PL032
Sea Lion structural anddepositional setting
Syncline Axis
Zebedee
CasperCasper SouthBeverley
SL10SL20SL30
Jayne E
Stratigraphically trapped in overlapping deep water lacustrine fans - younger to the south
6th February 2014 // Page 28
PL004b PL004c
PL032
Key appraisal wells
6th February 2014 // Page 29
Extensive appraisal dataset• Discovered by well 14/10-2 and appraised by 8 wells (plus 2 sidetracks to core)• 3D data full stack reflectivity seismic (2007 and 2010, merged in 2011/12)• Well data
– Extensive suite of high quality well data– ~500 MDT pressures and samples from all wells (gas, oil and water)– Extensive core inventory: 455m core– 2 DSTs: 14/10-5 & 14/10-2; 13 Mini DST’s (IPTT): 14/10-4, 14/10-5, 14/10-6, 14/10-7, 14/10-9, 14/15-
4a
Dataset and key reservoirand fluid parameters
Key Parameters
Oil gravity 28° API
Wax content 23% - 35%
Gas/oil ratio 270 – 420 scf/stb
Reservoir oil viscosity 5 – 6 cP
Average porosity 21%
Average permeability 160 mD
Oil-water contact 2476 mSS
Gas-oil contact (seen in Casper & Casper South fans) 2402 mSS
Discovered oil in place (with/without SL20 gas cap) 1.2 / 1.4 billion stb
Discovered free gas in place (with/without SL20 gas cap) 1.9 / 1.6 Tscf
6th February 2014 // Page 30
Tension Leg Platform
Floating Storage& Offloading
OfftakeTanker
Gas Disposal Wells
Concept Selection Highlights
Permanent Drilling Rig
Minimal Subsea Infrastructure
Phased Development
Improved Economics
Sea Lion Phase 1 development – TLP
6th February 2014 // Page 31
• Active waterflood with multiple pore volumes of water injection over field life (~5 bbl per bbl of oil recoverable)
• 32 development wells
– 19 producers and 11 water injectors
– 2 subsea gas injection wells
– 12 wells pre-drilled
• Recovers 293 mmstb over 25 years
• Assumes a gas cap is presentin the west
– Well scheme will be adjustedif absent
– 60 mmbbls upside
• Surplus gas will be injectedinto gas caps
Phase 1 reservoir development plan
6th February 2014 // Page 32
TLP oil producer well design
• Conventional Gas Lift
• Horizontal up to 1500 m• Cemented Liner• Cased and Perforated
• Downhole Wax Inhibitor• Electrical Tubing Heating
Water Injection Wells• Inclined trajectories• Cased and perforated• Hydraulically fractured• Heated water
6th February 2014 // Page 33
TLP analogues
Development NameSea Lion
(Pre-FEED)Olympus(MARS B)
Operator Premier Shell
Region S. Atlantic GoM
WD (ft) 1,372 3,000
Oil (mbpd) 120 100
Gas (mmscfd) 165 180
Manning Level 175-200 192
Slots 32-36 24
Date Installed TBA 2013
Benchmark Payload (short tons)
45,000 42,200
Displacement (short tons) 118,000 109,000
Hull Weight (short tons) 28,400 35,800
Deck Dimensions (ft) 300 x 300 300 x 400Other Analogue TLPs• Snorre 1992• Ursa 1998• Big Foot 2014
6th February 2014 // Page 34
Project organisation
6th February 2014 // Page 35
TLP build
Living Quarters
Utility Module
Drilling Module
Flare Boom
Process Module
Survival CraftSupport Structure
Topsides Fabricationand Integration• U.S.• Korea• Singapore• Dubai
Hull Fabrication• Korea• China• Singapore• Japan
Hull
6th February 2014 // Page 36
TLP transportation
6th February 2014 // Page 37
Exploration drilling support model• Drilling base in Stanley from which supply boats and helicopters support the rig • Regular freighter supplies from the UK to the drilling base • Fortnightly charter flight from the UK for personnel on 28/28 rota• Maximum of circa 100 people offshore
1. Pre-drilling• Similar model to exploration drilling• More personnel, more equipment and a bigger onshore drilling base • Maximum of circa 120 people offshore
2. Production and TLP drilling• Production base is a relatively small increment to the drilling base• Maximum of circa 200 people offshore• Premier will be Duty Holder but supported by two major contractors:
– Production operations contractor; – Drilling operations contractor
3. Production only• Much lower level of supply boat activity • Normally circa 120 people offshore• Activity peaks during planned maintenance shutdowns• Revert to Phase 2 during infill drilling and workovers
Planning status• Discussions underway with potential logistics providers• Modelling of materials and personnel requirements is under way• Working operations and logistics cost model has been developed
Operations and logistics
6th February 2014 // Page 38
Design phase milestones
18 month “Design” phase
• Concept Selection to the start of execution (award of the EPC contract(s))
• Award of FEED Contracts in Q2 2014
• Shortlisting of EPC bidders in Q4 2014
– Updated cost estimates available
• Q4 2014 onwards – formalised financing and farm down process
• Submit draft FDP at end 2014
• EPC tenders in Q1 2015
• Sanction in Q2 2015
6th February 2014 // Page 39
Phase 1 development costs
Indicative costs subject to FEED
• Surface Facilities Capex $3.5 bn– TLP $2.4 bn– Subsea and risers $0.45 bn– Project management and other costs $0.65 bn
• Drilling Capex $1.7 bn
• Total Phase 1 Capex $5.2 bn
• Spend to first oil $3.8 bn
• 25 year annual Opex $260m per year – Includes FSU rental and well interventions
All numbers are un-escalated $ 2013
6th February 2014 // Page 40
Economics and financing
Economics
• Discount of $6.50 to Brent is assumed to account for oil quality and transportation
• Sea Lion Phase 1 yields an IRR of around 20% at an oil price of $85/bbl (real)
Project Funding Strategy
• Corporate funding remains an option
• Given attractive terms, base case assumes construction-related project financing
for 60% of TLP cost
• Reduces pre first oil “equity” requirement to approx. $2.5 bn (gross)
– Illustratively a 30% farm down would reduce Premier’s share to
approx. $1.8 bn
6th February 2014 // Page 41
• Development of Casper, Casper South– Plus the southern extent of Sea Lion
• Single manifold subsea tie-back to the TLP• More detailed development studies underway• Development plan will incorporate results from exploration
– Could change the scheme to be a second TLP
Phase 2
Phase 2 development
6th February 2014 // Page 42
• High quality dataset
• Size of exploration prize:– 1,000 mmbbls prospective
resources– 250 mmbbls risked
• Four E&A wells to be complete by end of 2015:
– Upside in Sea Lion west flank/Chatham
– Development-changing potential in Zebedee and Jayne East
– Large fan complex – Elaine/Isobel area
• Rig tenders being evaluated– Follow-up exploration and appraisal
wells possible through options
Lower F2 amplitude extraction F3G amplitude extraction
JayneEast
Elaine- Isobel
Orinoco
Zebedee
Sea Lionfan outline
30km
Further Sea Lion scale opportunities
6th February 2014 // Page 43
Zebedee – high impact near field
• Zebedee prospect– Onlaps the Sea Lion field– Onlapped by the Casper South discovery
• Extends the proven SLMC (F2 sequence) play• Gross prospective resource (F2)
– 28-46-150 mmboe (low risk)• Multiple reservoir (F1 & F3) also targeted• Gross prospective resource (F1, F2, F3)
– 28-165-400 mmboe
Casper Southdiscovery Zebedee
prospect (F2 fan)
Fan input
3D visualisation of Casper South and Zebedee sands
Casper Southdiscovery
14/15-4a 14/15-2Zebedee(proposed location)
F3
F2
F2
F3
F3
F1
2 km
Sea Liondiscovery
6th February 2014 // Page 44
Jayne East – high impact near field
• Equity increased to 36%, partner equity interests now aligned and fully funded
• Well to test five potential reservoirs levels across the F2 and F3 sequences– Beverly, Casper SE and Zebedee East (F2)– Jayne East and Ida (F3)
• Gross prospective reserves:– 14-37-87 mmboe
• Overall risk assessment – moderate– Key risk: updip seal
Zebedee
Jayne East
Jayne East(proposed location)
F2
F3
Amplitude extraction – F2 lower fan
6th February 2014 // Page 45
Isobel/Elaine – another Sea Lion?
• Equity increased to 36%, partner equity interests now aligned and fully funded
• Stacked targets exclusively within F3 sequence• Gross prospective resources:
– 7-44-226 mmboe• Overall risk assessment - moderate
– Key risks: reservoir and updip seal
Irene
Isobel
Elaine
2 km
A
A BPL 03
PL 04aPL 05
Isobel Deep
Isobel Deep
B
5km
Single stratigraphic layer within Elaine/Isobel complex
6th February 2014 // Page 46
Key Messages
Key messages
• Balance sheet strength, financial flexibility supported by asset disposals
• Catcher: high quality project, attractive returns
• Sea Lion: high quality project, will seek partner before sanction
“...our strategy is to invest in high-quality developments whilst maintaining balance sheet strength...”
6th February 2014 // Page 48
Q&A
Appendix
Subsea – In-field manifolds (3-off)
• Common design for each manifold structure
• 9-slot assemblies (6x production + 3x water injection)
• Slab sided structures with piled foundations (estimated 230 tonnes)
• Fishing friendly
• Incorporates production test header c/wsubsea multiphase flow meter
• All production and water injectionpiping fabricated from super duplex
Field Production Slots
Water InjectSlots
Catcher 5 2
Varadero 4 3
Burgman 5 3
6th February 2014 // Page 51
Subsea – riser base structures (3-off)
• Similar design for each riser base tie-in structure
• Open sided (estimated weight 100 tonnes)
• Dropped object protection only (i.e. all structures are located within FPSOs 500m safety zone so not exposed to fishing)
• Gravity base foundations
• Include SSIVs for production,gas lift & gas exportriser systems
6th February 2014 // Page 52
• Three similar bundle systems planned for tie-back of the developments
• Each bundle circa 3.5km in length, comprising a 38” outer carrier pipe designed to house the 12” production, 10” water injection and 4” gas lift flow-lines plus steel tubed E/H control and chemical injection lines
• Manifolds and riser-base tie-in structures integrated into the bundle towheads
Subsea – bundle option
6th February 2014 // Page 53
Subsea – gas export structure
• Slope sided to resist trawl gear snagging loads and promote over trawl-ability
• Approximate weight of 110 tonnes
• Supports connection of a temporary subsea pig receiver c/w DB&B isolation
• Supports entry of a future tie-in c/w DB&B
• All valves diver / ROV actuated
6th February 2014 // Page 54
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