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An Emerging Oil & Gas ProducerASX:AOK
AOKO
Investor UpdateDecember 2010
Investor Update
2
December 2010
Disclaimer
This presentation is not a Prospectus by AusTex Oil Limited A.C.N. 118 585 649 (AusTex) nor an offer for securities in any jurisdiction nor a securities recommendation.
The information in this presentation is an overview and does not contain all information necessary for investment decisions. In making investment decisions investors
should rely on their own examination of AusTex and consult with their own legal, tax, business and/or financial advisers in connection with any acquisition of
securities.
The information contain in this presentation has been prepared in good faith by AusTex. However, no representation or warranty expressed or implied is made as to
the accuracy, correctness, completeness or adequacy of any statements, estimates, opinions or other information contained in this presentation by AusTex, its
directors, employees and advisors. To the maximum extent permitted by law, AusTex, its directors officers, employees and advisors disclaim liability for any loss or
damage which may be suffered by any person through the use or reliance on anything contained in or omitted in this presentation.
Certain information in this presentation refers to the intentions of AusTex, but these are not intended to be forecasts, forward looking statements or statements
about future matters for the purposes of the Corporations Act or any other applicable law. The occurrence of events in the future are subject to risks, uncertainties and
other factors that may cause AusTex's actual results, performance or achievements to differ from those referred to in this presentation. Accordingly, AusTex, its
directors officers, employees and advisors do not give any assurance or guarantee that the occurrence of the events referred to in this presentation will actually occur
as contemplated.
DISCLAIMER
2
Investor Update
3
December 2010
Operational Headquarters Tulsa, Oklahoma US Acreage ~70,000 acres in two States – Oklahoma and Kansas Oil focused Producer and Explorer - Cash flow Positive Two Distinct Asset Types – Development and Exploration
Oklahoma - Development Owner/Operator – 100% Working Interest - >80% Net Revenue Interest Multiple Development well opportunity – 50 + locations on existing leases Multiple Pay Zones – (field on field) New opportunities with horizontal completions Established business model with preferred suppliers and contractors
Kansas - Exploration Large acreage position – multiple projects New Discovery – Clark #1 – Cooper Project Potential for further new discoveries – 3D Seismic Targets identified
Operations Overview
3
Investor Update
4
December 2010
Politically stable environment to conduct business
Multiple oil and gas leases available – cyclical historical development – fragmented mineral ownership
Multiple stacked formations at depths to 6,000 feet (Field on Field) Historically 5-15% Original Oil in Place (OOIP) recovered – Modern techniques and technology 20-30% recoverable
Attractive terms of business – High Net Revenue Interests
Easy access to infrastructure oil and gas gathering systems – refineries
Qualified and capable people
30 days sales cycle on production
GFC restricted local debt and equity finance – opportunity for well managed capital deployment
AusTex turnkey solution
Background – Mid-Continent
4
Investor Update
5
December 2010
Oklahoma
One of USA’s oldest and richest oil producing provinces Home of the Phillips Petroleum Company, Continental Oil Company (Conoco Phillips) (amongst others)
First “Gusher” 250 BOPD drilled by Frank and L.E. Phillips in 1905
> 20,000 producing oil wells shut in 1990s - $13 oil price
Many still with existing economic reserves and identified infill locations
Ready access experienced labour force and sub-contractors
Primary exploration between 1920 to 1940 target shallow Pennsylvanian Formations to 3,000 feet
Overturn “conventional” wisdom - exploit deeper pays to 6,000 feet e.g. Mississippian and Ordovician Formations Vertical Drilling and completion costs - $200,000 on production at 2500 feet - $500,000 on production 6000 feet
Recent Horizontal Completions in Mississippi Lime completion costs $1.5million producing 300-800 BOPD - (Range Resources – RRC:NYSE)
Kansas
Significant historical and ongoing oil producer
Still under new development in north west
Ready access to infrastructure and labour
Additional acreage and development opportunities
Why do business in USA?
5
Investor Update
6
December 2010
THE OPPORTUNITY FOR AOK
6
Investment in new development impacted by historical Oil Price fluctuations
Major Oil Companies moved offshore in 1970s
Mineral Rights are privately held (not government controlled) Fragmented ownership – traded for over 100 yrs
Advantages to small operators – low cost – flexible operations
New Technology changing recovery factors- Air rigs capable of 3500 feet vertical wells
Rotary rigs with
Horizontal Drilling with multi stage fracs
Advances in Chemicals - higher recovery percentages
Targeting High Net Revenue Interest – 80% plus
Operator controls cost – Own operator – no middle man.
On the ground relationships – all important
Deal flow from established Networks
Crude Oil Price - USA
Investor Update
7
December 2010
CORPORATE OVERVIEW
Become a significant US-based on-shore oil and gas producer
Grow production – Target >1200 BOE/day within 12 months
Unlock full potential of current assets
Grow 2P Reserves and increase acreage
Continually develop a strong investor relations program
Focused on USA mid-continent oil fields Total ~76,000 acres
Current producer – Oklahoma and Kansas
7.4m BOE 2P oil reserves Potential reserve upgrades from Kansas discovery
New discovery and acquisitions in Oklahoma
New Independent Report commissioned –
CAPITAL STRUCTURE
AUSTEX OIL OBJECTIVES
BACKGROUND
ASX code AOKOrdinary Shares on Issue (m) 203.3Options on issue (m)
Listed - Dec 11 – 25 cents – ASX:AOKO
Unlisted – Sep 11 – 19 cents
Unlisted – Dec 11 – 25 cents
Unlisted – Mar 12 – 25 cents
Unlisted – Jun 13 – 40 cents
21.9
4.4
5.0
2.5
3.0
Market Cap. ($0.13 per share) (A$m) $26.5Debt (A$m) .8Cash (A$m) – Sep 10 $3.4
Top Shareholdings (>5%):
Richard Adrey (Executive Director)
(Board Members hold 13% of capital)
1800+ Shareholders
5.1%
7
Investor Update
8
December 2010
Company Structure
AusTex Oil Limited(ASX Code – AOK)
International Energy Corp (Oklahoma)
Oil and Gas AssetsTulsa Area
Well Enhancement Services LLC
Radial Jet Enhancement Operator
International Energy Corp(Kansas)
Oil and Gas AssetsNorthwest Kansas
International Energy Corp (Northern Oklahoma)
Oil and Gas AssetsKay County
8
Investor Update
9
December 2010
GROSS SALES
9
0.356
0.84
2.1
0
0.4
0.8
1.2
1.6
2
2.4
Half Yr Sep 2009 Half Yr Mar 2010 Half Yr Sep 2010
Investor Update
10
December 2010
USA Technical Team
USA Technical Team
10
Richard AdreyPresident International Energy Corporation
Former Wall Street investment banker specialising in M&A.
Involvement in numerous public companies in the USA to-date, including Piper Aircraft, Cynocom Corp., Medisys, Versatech, Energy Capital Group.
Holds a B.S. in finance.
Ron LinkPetroleum EngineerTulsa
Over 35 years’ USA oil and gas experience.
Consulted in virtually all oil producing states in the USA.
Previously with Arco Petroleum.
Martin BlackGeologist/GeoscientistTulsa
Over 20 years’ experience with Kansas and Oklahoma geology.
Experienced well side geologist
3rd Generation mid-continent oil and gas
Jerry GreenGeologistKansas
Over 20 years’ experience in Kansas oil and gas operations.
Private oil and gas company – Castle Resources Inc.
Operator of Well Enhancement Services (Kansas).
4th generation mid continent oil and gas.
Investor Update
11
December 2010
OKLAHOMA REVENUE MODEL
11
18.75%
7%
9%62.25%
Oil Revenue Split
Mineral Owner RoyaltyState Tax
Lifting Costs
AOK
AOK holds high Net Revenue Interest
Investor Update
12
December 2010
TULSA OPERATIONS
12
Holding Yard and Work Over rig and Crew in Action
Tulsa Office Staff•Harry Elrod•Carolyn Fulkerson•Ron Link•Martin Black•Hollie Williams•Richard Adrey
Oklahoma Field Staff onsite Lancaster #8 Well
Investor Update
13
December 2010
Project Locations
13
3
2
1
USA OPERATIONS
Tulsa Office1801 East 71st StreetSouthern HillsTULSA OK
IEC – Oklahoma
Lancaster LeaseSweet LeaseCleveland LeaseGypsy LeaseCrisler LeaseBlueHawk Lease
IEC – Northern Oklahoma
Tonkawa East Unit
IEC – Kansas
Cooper ProjectMcCracken ProjectJewel ProjectBeltz Project
1
2
3
Investor Update
14
December 2010
OKLAHOMA SNAPSHOT
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1
2
3
1
2
3
Lancaster Lease Group
Sweet Lease
East Tonkawa Unit
Investor Update
15
December 2010
Engineering Review Red Fork/Tanaha Formations (Pennsylvanian) – 10 wells drilled to date
Encountered Virgin Reservoirs
IP 80 BOPD +
Gas Drive Reservoir
Reservoir Management Plan
Water injection – Pressure Maintenance
Maintain reservoir energy – Target production 30-50 BOPD each well
Maximise productive life of wells
Simpson Series Formations (Ordovician) – 2 wells drilled to date 100 feet Oil bearing Formation – Lancaster #8 and Lancaster #9 Water Drive Reservoirs – Structural High with Closure – Additional well sites on structure Historical IP 85-500 BOPD
Future Production - Cleveland, Big Lime, Wilcox, Woodford Shale formations
LANCASTER LEASE GROUP – DEVELOPMENT
15
Investor Update
16
December 2010
AERIAL OF LANCASTER LEASE GROUP
16
Investor Update
17
December 2010
LANCASTER STRATIGRAPHIC SECTION
17
ConventionalZones
Total Depth ~2500 feet
Depth ~1650 feet
Depth ~2200 feet
Investor Update
18
December 2010
** Completed Final Week of January
LANCASTER LEASE GROUP OVERVIEW
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Well Name Formation Type Status
Mayo Moore #1 Red Fork Oil/Gas Producing
Mayo Moore #2 Red Fork Oil/Gas Producing
Mayo Moore #3 Red Fork Injector Operating
Mayo Moore #4 Red Fork Oil/Gas Producing
Mayo Moore #5 Red Fork Oil/Gas Producing
Mayo Moore #6 Red Fork Oil/Gas Producing
Mayo Moore #7 Big Lime Oil/Gas Producing
Mayo Moore #8 Red Fork Injector Operating
Baggett #1-33 Red Fork Oil Producing
Baggett #2-33 Red Fork Oil/Gas Producing
Baggett #3-33 Skinner / Tanaha Oil Producing
Baggett #4-33 Red Fork Oil/Gas Producing
Lancaster #8 Simpson Series Oil/Gas Production Testing
Lancaster #9 Arbuckle/Simpson Oil/Gas Under Completion
Hollie #1 Red Fork Permitted
Hollie #2 Red Fork Oil/Gas Producing
Investor Update
19
December 2010
LANCASTER #8 LOG
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Investor Update
20
December 2010
LANCASTER #8 LOG
20
Investor Update
21
December 2010
Drilling program commenced September 2008 with two wells completed for production
Multiple zones behind pipe Acreage pooling underway 20 Additional infill locations identified – 10 acre spacing 4000 feet targeting Bartlesville, Red Fork, Skinner, Wilcox
and Mississippi Lime formations Estimated cost per well - $US300,000 completed 20+ BOPD well – 12 month pay back - $70/bbl Held by production Development Plan – After Lancaster Lease
Oklahoma Sweet Lease Group
21
PAWNEE COUNTY – 400 ACRES (WI = 100%, NRI = 84%)
Investor Update
22
December 2010
OKLAHOMA - TONKAWA EAST UNIT
22
KAY COUNTY –~2000 ACRES (WI = 100%, NRI = 81.25%)
907 acres – Held by Production
Identified infill development vertical and well locations
Laterally extensive reservoirs
Multiple Horizontal completion opportunities 100 feet Tonkawa Sand 340 feet Mississippi Lime formation Regional drilling precedents – 350-800 BOPD – Range Resources (NYSE:RRC) AFE $1.75 m – payback in 1 Year
Additional acreage under review
Investor Update
23
December 2010
TONKOWA REGIONAL HORIZONTAL ACTIVITY
23
Investor Update
24
December 2010
TONKAWA CROSS SECTION
24
4400’ (-3400’)
4100’ (-3200’)
3800’ (-2800’)
3200’ (-2300’)
2700’ (-1600’)
Miss Chat
RedForkSkinner
Cleveland
Layton
Perry
Tonkowa
Lovell Sand
Indicott
Mississippi Lime
Investor Update
25
December 2010
KAY COUNTY – STRATIGRAPHICAL COLUMN
25
Investor Update
26
December 2010
KANSAS SNAPSHOT
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1
2
3
Cooper Project
Ellsworth Project
Jewel Project
McCracken Project
1
2
3
4
4
Investor Update
27
December 2010
Completed Lease Acquisitions during 2008
3D Seismic 2H 2008
20 plus prospects identified
Multiple well sites if oil bearing
Investment of $US1.5 million for land and seismic
Clark #1 Well – Dec 09 New Discovery – IP 200 BOPD
Water Disposal well completed
Cooper #5 Well – under completion now
Dry Hole Data to recalibrate seismic – Nov 2009
Lease acreage offsets 200 BOPD new oil wells
Other operators active in the area Murfin Drilling Company
John O’Farmer
Kansas – Cooper Project
27
COOPER LEASE, SHERIDAN COUNTY - 26,500 ACRES (53% WI, 46% NRI)
Investor Update
28
December 2010
STRATAGRAPHIC COLUMN - KANSAS
28
Investor Update
29
December 2010
Austex’s oil and gas footprint has increased from around 1,000 to approximately 70,000 acres
LEASE HOLDING SUMMARY
29
LEASE NAME ACREAGE WI NRI COUNTYLancaster Group 890 100% >81.25% Tulsa, OK
Sweet 400 100% 84.0% Pawnee, OK
Crisler 80 100% 84.375% Creek, OK
Gypsy-Walker Project 80 100% 81.25% Creek, OK
BlueHawk Project 160 50% 42.5% Osage, OK
Cleveland Project 160 100% 82.5% Creek, OK
Jewel Project 37,000 35% 28.8% Jewel and Mitchell, KS
Cooper Project 26,500 53% 46% Sheridan, KS
McCracken Project 3,200 50% 42.25% Ness, KS
Beltz Project 160 40% 33.8% Ness, KS
Tonkowa Unit ~2,000 100% 81.25% Kay, OK
Investor Update
30
December 2010
2011 - WORK PLAN
30
Lease Depth No. of Wells Target Cost per well
BOPD per well
Lancaster 2,000 ft 12 Red Fork / Tanaha $200,000 15-30
2,500 ft 8 Simpson $250,000 50-100
Tonkawa Recompletions 6 Cleveland / Layton / Miss. Chat $90,000 25-60
5,000 ft 8 Mississippi Lime $500,000 40-70
Horizontal 1 Mississippi Lime $1.75m 300-500
Kansas 4,500 ft 4 Lansing Kansas City / Toronto $450,000 50-250
Investor Update
31
December 2010
2011 WORK PLAN
31
BOPD $80Oil price 300 500 750 1200 2250
MONTHLY GROSS REVENUE $ 720,000 $ 1,200,000 $ 1,800,000 $ 2,880,000 $ 5,400,000
NET REVENUE (ROYALTIES, TAX, LIFTING COSTS) $ 532,800 $ 888,000 $ 1,332,000 $ 2,131,200 $ 3,996,000
OPERATING EXPENSE $ 350,000 $ 400,000 $ 400,000 $ 600,000 $ 600,000
CONTRIBUTION TOWARDS CAPEX $ 182,800 $ 488,000 $ 932,000 $ 1,531,200 $ 3,396,000
LOW MID
12 MONTH PRODUCTION TARGET BOPD 1000 2250
Investor Update
32
December 2010
NEXT STEPS – GROW SHAREHOLDER VALUE
TSX Listing – Calendar Year 2011
Engaged TSX Advisor/Sponsor Kingsdale Capital - Toronto
Mature Oil and Gas Investor base
Fully understand USA value proposition
Reserve position recognised NPV 10 $10-15 per barrel 2P
32
Friendly dual listing process
Nominal Listing Application Fee
Audit and Reserve Report (Target March 2010)
5-7 week process from application
Introduce AOK to Investor Community -Underway
Investor Update
33
December 2010
On track to becoming an independent oil and gas producer – 2 years young
Simple business model – ready access to oil and gas market
Demonstrated Revenue Growth
$A3.4m Cash as at 30 September 2010
Commissioned Independent Reserve update
Development and drilling program upside complimenting established production
Focus short term on Lancaster and Tonkawa production increase
Long term strategic acreage position
Technological advantage and leverage
Experienced Technical Team and Contractors in place to deliver
Summary
33
Investor Update
34
December 2010
34
APPENDICES
Investor Update
35
December 2010
Board and Management Team
Board and Management Team
35
Dr Peter PowerNon Executive Chairman Australia
40 years’ experience in hydrocarbon exploration worldwide.
Senior management positions with majors including MD of Ampolex Ltd prior to its acquisition by Mobil.
Current Non-Executive Chairman of Metgasco and Elk Petroleum
Founding Head of Geology at the Western Australian Institute of Technology (now Curtin University).
Former President, Australian Geoscience Council, Honorary Life Member, Australian Petroleum Production and Exploration Association (“APPEA”).
Richard Adrey Founder Oklahoma
Former Wall Street investment banker specialising in M&A.
Involvement in numerous public companies in the USA to-date, including Piper Aircraft, Cynocom Corp., Medisys, Versatech and Energy Capital Group.
Holds a B.S. in finance.
Dan LanskeyManaging Director & Founder
Over 10 years’ senior management experience for a number of ventures in Asia, Europe and the USA.
Post-Graduate business degree from Griffiths University, Qld.
Member of the Petroleum Exploration Society of Australia (PESA).
Investor Update
36
December 2010
Board and Management Team (CONT’D)
36
Kay PhilipNon Executive Director Australia
Geophysicist with extensive experience in project acquisition and financial analysis of resources projects.
Honorary Associate at the School of Physics, University of Sydney.
Awarded the Chevalier de l’Ordre National du Merite by the French Government for facilitating collaborations between Australian and French scientists.
Senior Fellow of the Financial Services Institute of Australia (“FINSIA”), Member Australian Institute of Physics (“AIP”), Member Australian Society of Exploration Geophysicists (“M.ASEG”)and Secretary of the Australian-French Association of Science and Technology (“AFAS”)
Trevor Sykes Non Executive DirectorAustralia
Well known resources journalist with extensive contacts throughout industry.
Previously Editor of the Bulletin, Assistant Editor of the Australian Financial Review.
Member of the SA Mining & Petroleum Expert Group.
Patron of the Sydney Mining Club.
Investor Update
37
December 2010
RESERVE POSITION - MARCH 2009
37
CLASSIFICATION OIL (BO) GAS (Mcf) BOE
1P 5,596,580 111,120 5,607,692
2P 7,388,682 276,833 7,416,365
3P 13,657,538 4,313,935 14,088,930
Petroleum Resources Management System (PRMS) – SPE – 2007
Competent Person Statement: - The estimates of oil and gas reserves have been prepared by Bruce A. Foster, an independent consulting Petroleum Engineer, registered with the State of Oklahoma in accordance with definitions and guidelines set forth in the 2007 Petroleum Resources Management System approved by the Society of Petroleum Engineers. Mr Foster, who has over 30 year’s industry experience, has consented to the inclusion of the technical information contained in this announcement.
New Reserve Report commissioned – Finalised September
Investor Update
38
December 2010
Patented, proven, commercialized
(SPE 68504 March 2001) Texas, Kentucky, Louisiana, Kansas, Oklahoma
Key features One inch diameter hole -horizontally up to 300 feet
Greatly increases connectivity into reservoir
Limestone, sandstone and coal seam gas reservoirs
Integrated component of well completions
Additional revenue stream.
Recent success Beltz Project – increased output to 35 BO per day
Coal Bed Methane
10 Year License Oklahoma – Other States if 25% WI Owned
Leverage to participation in additional acreage for WI and NRI
Radial Jetting Technology
38
Investor Update
39
December 2010
Competent Person Statement: - The estimates of oil and gas reserves have been prepared by Bruce A. Foster, an independent consulting Petroleum Engineer, registered with the State of Oklahoma in accordance with definitions and guidelines set forth in the 2007 Petroleum Resources Management System approved by the Society of Petroleum Engineers. Mr Foster, who has over 30 year’s industry experience, has consented to the inclusion of the technical information contained in this announcement.
COMPETENT PERSONS STATEMENT
39
Investor Update
40
December 2010
Oklahoma Geology
40
Investor Update
41
December 2010
Kansas Geology
41
Investor Update
42
December 2010
Coal Bed Methane Basins
42
Investor Update
43
December 2010
PUMP OVERVIEW
43
Investor Update
44
December 2010
WATER FLOOD BASICS
44
Source: Dept of Energy US
Investor Update
45
December 2010
AusTex Oil Limited - Australia
Level 56, MLC Centre,
19 Martin Place,
SYDNEY NSW 2000
Tel. 02 9238 2363
Fax 02 8088 7280
www.austexoil.com
Managing Director
Daniel Lanskey
Public Relations
FCR 02 8264 1003
Corporate and Contact Details
International Energy Corporation - USA
1801 East 71st Street,
TULSA
OKLAHOMA 74136
Tel. +1 918 743 7300
Fax +1 918 743 0099
www.ienergycorp.com
President
Richard A. Adrey
Investor Relations – Novus Capital Limited Russell Krause - 03 8602 1703
Robert Swarbrick – 03 8602 1706
45