Challenger August Investor Presentation 290811

  • Published on
    13-May-2015

  • View
    744

  • Download
    0

Embed Size (px)

DESCRIPTION

Challenger Energys strategy is to identify, acquire and appraise material upstream oil and gas exploration opportunities Mercury Stetson Prospect in North Texas, US Two proven shale formations Barnett and Woodford Massive potential gas in place with OGIP estimated at 360 BCF/sq mile Large prospect area potentially up to 55,000 acres (86 sq miles) Prospect is close to existing infrastructure Contiguous land position of ~ 26,000 acres with a short term target of 35,000 acres. Triple Crown Prospect in Texas, US Significant acreage 45,000 acres with options over a further 6,500 acres. Large gas charged zones, Ellenburger (dolomite) and an unconventional Hybrid play which is geologically analogous to Montney Hybrid Play in Western Canada with an estimated OGIP of 9 TCF. Testing to commence shortly on both the Ellenburger and Hyprid Play Karoo Basin in South Africa Shale gas in Karoo Basin now a major focus for international E&P companies (eg Shell, Cheasapeake, Statoil and Sasol) Challenger Energys permit of approx. 800,000 acres centred on only well within basin to flow significant gas to surface to date, awaiting approval. Independent US Energy Information Agency report suggests Risked Recoverable Resource of more than 7 TCF in application area. Attractive assets have exciting potential to grow significant shareholder value

Transcript

<ul><li>1.Investor PresentationAugust 20111</li></ul><p>2. DisclaimerThis announcement contains forward-looking statements. Such forward-looking statements include, withoutlimitation: estimates of future earnings, the sensitivity of earnings to oil &amp; gas prices and foreign exchange ratemovements; estimates of future oil &amp; gas production and sales; estimates of future cash flows, the sensitivity of cashflows to oil &amp; gas prices and foreign exchange rate movements; statements regarding future debt repayments;estimates of future capital expenditures; estimates of reserves and statements regarding future exploration resultsand the replacement of reserves; and where the Company expresses or implies an expectation or belief as to futureevents or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis.However, forward looking statements are subject to risks, uncertainties and other factors, which could cause actualresults to differ materially from future results expressed, projected or implied by such forward-looking statements.Such risks include, but are not limited to oil and gas price volatility, currency fluctuations, increased production costsand variances in reserves or recovery rates from those assumed in the companys plans, as well as political andoperational risks in the countries and states in which we operate or sell product to, and governmental regulation andjudicial outcomes. For a more detailed discussion of such risks and other factors, see the Companys Annual Reports,as well as the Companys other filings. The Company does not undertake any obligation to release publicly anyrevisions to any forward looking statement to reflect events or circumstances after the date of this release, or toreflect the occurrence of unanticipated events, except as may be required under applicable securities laws.2 3. Corporate Overview Shares on Issue:214,021,000Non Executive Chairman - Michael FryMichael holds a Bachelor of Commerce degree from the University of Western Listed Options105,222,171 1Australia, is a Fellow of Financial Services Institute of Australasia, and is a pastmember of the ASX. Michael has extensive experience in capital markets andcorporate treasury management specialising in the identification of commodity, Unlisted Options: 11,500,000currency and interest rate risk and the implementation of risk managementstrategies. Share Price:0.12 as of 25/08/2011 Market Cap: $25.68MManaging Director - Paul Bilston Shareholders: 796Paul Bilston has a Bachelor of Mechanical engineering and a PhD in Structuralengineering, with 15 yrs experience in all aspects of the oil &amp; gas sector. He Top 20 Holding: 50.11%has worked in a number of senior technical, commercial and managementCash~$5.9Mroles for companies including Worley, GHD, AGL Energy and AJ Lucas. Inrecent years his focus has been on the unconventional hydrocarbon space inAustralia and overseas, and most recently managed the Gloucester Gas project Note 11: 20c Options - 30 June 2012in NSW which was sold in December 2008 for $370M by AJL &amp; MPO.Executive Director - David PrenticeDavid Prentices career includes 21 years experience in commercialmanagement and business development within the natural resources sector,working for some of Australias leading resource companies. This has includedhigh-level commercial and operational roles with a number of listed andunlisted resource companies.Chief Operating Officer David WoodleyDavid Woodley holds a Bachelor of Chemical Engineering degree, with over 22years experience in the oil and gas sector gained in Australia, North America,UK and Europe. He has considerable experience in drilling and completion,field development planning and asset management and evaluation.Company Secretary Adrien WingMr Adrien Wing is CPA qualified. He practised in the audit and corporatedivisions of a chartered accounting firm before working with a number of publiccompanies listed on the Australian Stock Exchange as a corporate/accountingconsultant and company secretary. 3 4. StrategyIdentify, acquire and appraise material upstream oil and gas exploration opportunities:Utilising network of global contactsPrimarily unconventional hydrocarbons, CBM, Shale Gas, Shale Oil.Low cost of entry, with primary expenditure on the drill bitHigh materiality (&gt; 1 TCF Gas, or &gt;10 Million bbl Oil)Projects where Challenger will act as operatorEvaluate and high grade exploration projects to ensure efficient expenditure of shareholdersfundsImplement staged and cost effect exploration and appraisal programs to evaluate projectswith an eye on the best development or exit strategy4 5. Why Unconventional Gas?Can test large play concepts cheaplyAttractive acquisition targets for major Oil &amp; Gas CompaniesDealLocationDate Net AcresValueBHP - Petrohawk Eagleford (SA)July 111,000,000 US$12.0bHistorical transactions forBHP-ChesapeakeFayettteville (USA) Feb 11487,000US$4.75b unconventional fields indicatePetroChina - Encana Cut Ridge (Canada)Feb 11317,500C$5.4 bLAND:Talisman-SasolMontney (Canada)Dec 1025,500 C$1.05 b Typical range is $9,500 toEv EP/EnervestBarnett (USA) Nov 1020,200 Gross US$967M$15,000 per acre, thoughsome much higher.ChevronAtlasMarcellus (USA)Nov 10 1,209,000 US$3.2 bMitsui-Anardarko Marcellus (USA)Feb 10100,000US$1.4 bRESOURCE:$0.4/mcf to $0.6/mcfTotal-ChesapeakeBarnett (USA) Jan 10270,000US$2.5 bExxonMobil-XTO Energy Various (USA) Dec 09 US $41 b5 6. Asset PortfolioMercury Stetson Shale Gas ProspectBarnett ShaleWoodford ShaleTriple CrownHybrid Gas PlayEllenburgerSouth AfricaFort Brown Shales6 7. Mercury StetsonTwo proven shale formations Barnett and OklahomaWoodfordWoodfordAnadarkoArkomaLarge prospect area Basin Basinpotentially up to 55,000 acres (86 sq miles)HollisBasinProperties consistent with core areas of current Newark Field Core Barnettshale plays.Significant contiguous lease positionFt. Worth Basin~ 26,000 acresProspecttarget ~ 35,000 acres (55 sq miles)Massive OGIP estimated at 360 BCF/sq mileRepublic of MexicoPotentially &gt; 1.5 TCF net resource to CELGoMClose to existing infrastructure &amp; servicesRecent Barnett (only) transaction (EV EnergyPartners) paid $47,700/acre for Core area Prospect offers an entry position into proven shales withHUGE UPSIDE POTENTIAL7 8. Expected Stratigraphy &amp; ThicknessNote: TOC results are from cuttings Actual TOC expected to be ~ 100% higherbased on experience with analysis of results in the Barnett shale.8 9. Elements of successful shale playElement Mercury Stetson ProspectKerogen Type - Target: Amorphous KerogenAmorphous KerogenOrganic Richness (TOC) - Target: 2% to 6% Range: 2% to 5%Avg: Barnett 3.2%, Woodford 3.1%Gas in Place - Target: &gt;100 BCF/Section (sq Mile) 360 BCF+ estimateThermal Maturity - Target: 1.0 1.8% Ro1.5% Barnett (dry gas window)1.5% Woodford (dry gas window)Uplift = Free Gas - Target 5,000 to 10,0005,000 to 7,000 of upliftSilica (Quartz) Content - Target 30% to 80% 43% Barnett50% WoodfordThickness - Target: &gt;150 415 Barnett - 185 WoodfordCould thicken significantly off structureFracturingEvidence of fractured Sycamore between shales(considerable LCM) 9 10. Proven ShalesBarnett ShaleFirst recognised shale gas project in US with morethan 14,000 wells now drilledWells in core area recovering ~ 3 BCFProducing 1.8 TCF/yrWoodford ShaleMore recently developedWells in core area recovering ~ 4 BCFOver 1,000 wells drilledProducing 240 BCF/yrMuch lower risk than shale plays in frontier areas.10 11. Mercury Stetson - Go Forward Plan 201120122013 and beyondFirst BOOKBOOK verticalGASDrillWellBOOK ndCore 2 Vertical Drill 2GAS GASAnalysis Well RESERVES additional RESERVES HZ wellsRESOURCE&amp; Vertical orPROOF Delineation Seismic Target HZ TargetOFWells Program600 BCF 3PDelineation 3 TCF 3P CONCEPT(100%) Wells(100%)Land Acquisition &amp; Lease Management11 12. Triple Crown ProspectExisting Ellenburger FieldsExisting Canyon Sands FieldsDeve lopmen t HP PipelineDallasTriple CrownHouston San Antonio Edwards County50 km 12 13. Triple Crown Prospect- Texas 45,000 Acres in Edwards County TexasWell Options over ~ 6,500 acres acquired Challenger has 80% WI (100% before payout) Two TargetsEllenburgerHybrid (Sand/Unconventional) First appraisal well successfully drilled Dec/Jan 2011. Strong gas shows whilst drilling over a number of zones. A total of 2,300 ft of gas charged zones were intersected13 14. Ellenburger Fracture and high porosity zone Drilling results confirmed a significant gas charged structure potentially multi TCF gas in place Fractures and high porosity intersected at the top of the Ellenburger, however zone cemented during setting of casing, which likely limited gas production Upper zone at the top of formation is the initial target for horizontal well Original Gas in Place (OGIP) 1.6 TCF14 15. Triple Crown Canyon Hybrid Play Very strong gas shows over an 1150 ft Sand Challenger believe this to be a hybrid play that Sand consists of a number of sands interbedded within a large unconventional gas zone 1,150 FTGas ColumnStrong Gas Preliminary analysis suggests this play has a veryShows large gas in place, with analysis of known wellsUnconventional Zone with2.5 - 10% suggesting Original Gas in place (OGIP) interbedded equivalent to 7.4 TCF over existing acreage sand stringers As expected by the depositional environment, analysis of logs of previously drilled wells in the Sand/Siltstone area suggest the potential for this play improves moving down dip off structure15 16. Triple Crown - Go Forward Plan201120122013Core &amp;StimulatePetro-&amp;BOOKBOOKDrill CorePilot physical production testGAS Delineation Analysis productionGASGAS AnalysisRESOURCE WellsRESERVESas well astesting SALES regional PROOF mappingOF CONCEPT Land AcquisitionDrilling expected to commence shortly to side track into the Ellenburger with a short(500 ft) Horizontal well. Unless the Ellenburger is completed as a producer, a fracturestimulation of the Hybrid will be completed as a Proof of Concept 16 17. Karoo Basin International gas focus Shale Gas within the Karoo Basin is now a major focus for international E&amp;P companies seeking to put their foot on new resources Following initial 12 month Technical Co-Operation permits, both Shell and Falcon have moved to the next step of formally applying for Exploration Permits Challenger permit of ~ 800,000 acres centred on only well (CR 1/68) within the basin to flow significant gas to surface Very well positioned having already reached agreementSasol/Statoil/Cheasapeake with Black Empowerment Partners (BEE), and first company to submit its application EMP submitted in September Shell 2010 awaiting approval. Currently a fraccing moratorium in place until March 2012. Falcon Challenger(Bundu)17 18. Cranemere Well (CR 1/68) Located in the centre of the Application Area Drilled 1968 Well blowout at around 8,300 ft Peak flow of 16 mmcfd during DST Fort Brown Shales dark grey to black and carbonaceous with occasional siltstone stringers. Strong gas shows in a number of intervals across the 5,000 ft section. US Energy Information Administration Report on Shale gas potential around the world identified the following: Karoo Basin large potential Risked Recoverable Resource averaged across basin ~ 6.8 BCF / square mile. Equivalent to more than 7 TCF of Risked Recoverable Resource within Challengers Application Area18 19. Summary Challenger Energys strategy is to identify, acquire and appraise material upstream oil and gas exploration opportunities Mercury Stetson Prospect in North Texas, US Two proven shale formations Barnett and Woodford Massive potential gas in place with OGIP estimated at 360 BCF/sq mile Large prospect area potentially up to 55,000 acres (86 sq miles) Prospect is close to existing infrastructure Contiguous land position of ~ 26,000 acres with a short term target of 35,000 acres. Triple Crown Prospect in Texas, US Significant acreage 45,000 acres with options over a further 6,500 acres. Large gas charged zones, Ellenburger (dolomite) and an unconventional Hybrid play which is geologically analogous to Montney Hybrid Play in Western Canada with an estimated OGIP of 9 TCF. Testing to commence shortly on both the Ellenburger and Hyprid Play Karoo Basin in South Africa Shale gas in Karoo Basin now a major focus for international E&amp;P companies (eg Shell, Cheasapeake, Statoil and Sasol) Challenger Energys permit of approx. 800,000 acres centred on only well within basin to flow significant gas to surface to date, awaiting approval. Independent US Energy Information Agency report suggests Risked Recoverable Resource of more than 7 TCF in application area. Attractive assets have exciting potential to grow significant shareholder value19 20. Appendices Supporting Mercury Stetson SlidesAugust 201120 21. Prospect ScopeProperty Range AverageRisksOGIP / Section (Square Mile) (BCF)280 420360Based on analog data and comparisonof shale properties to existing playsEstimated Recovery Factor (%) 10 40% 15% BarnettDependent on well spacing 30% WoodfordProspect area (Acres)20 55,000 35,000 Further seismic required to fully define (55 sq miles)prospect area.Initial Production (IP) MMSCFD263.0 HZ Barnett Dependent on well type and frac 5.0 HZ Woodfordstages, based on equivalent areas,vertical may be an effective option inthis area.Reserves per well (BCF)2.5 6 3.0 HZ Barnett Based on equivalent areas 4.0 HZ WoodfordCost per well (BCF)$2.5 $5.0 $3.5 M HZDrilling through the Oauchita Thrustmay increase CostsDrilling Locations ~ 875 each Barnett &amp; Based on 80 acre spacing Woodford 21 22. Joint Venture Agreement Governs relationship between the parties until no leases held by any party. Provides for Challenger to earn 50% interest in Phase 1, by the following:Payment of up to $2.2 million as and when required for the renewal and extension of existing leases plus the acquisition ofadditional leasesDrill, fracture stimulate, complete and test TWO vertical wells. The parties anticipate that the first well will incorporated there-entry and completion of the existing well on the property, however in the event that is unsuccessful, a new well will bedrilled and the value of the seismic program adjusted to keep Challenger whole.Conduct a seismic program funded partially by revenue from first well to fully define the extend of the shales in theprospect areaConnect the two wells to the nearby sales pipelineChallenger is required to pay the balance of the $2.2 M if it does not drill and complete the first well. Phase 2Subject to the terms of the agreement, provides for the parties to enter into a Phase 2 program including two horizontalwells in each of the Barnett and Woodford shales.Parties to fund their share, or in the absence of all parties agreeing to fund their share, a mechanism exists for the fundingparties to earn additional interest 23. Scoping EconomicsSingle Well CaseWell IPCapex EUR NPV(10) @ US$/mscf FlatMMSCFDUS$MBCF $4.5 $6$7.512.0 2.6 2.51.82.4 3.423.0 2.6 3.02.13.4 4.834.0 4.0 4.02.13.8...</p>