Information Memorandum in Relation to an $8.5m Equity ... · Information Memorandum in Relation to an $8.5m Equity Capital Raising for Enerdrill Pty Ltd (ACN 147 416 215) May 2012

Information Memorandum in Relation to an $8.5m Equity

Capital Raising for Enerdrill Pty Ltd (ACN 147 416 215)

May 2012 | Private & Confidential

www.enerdrill.com.au

2

Disclaimer

This Information Memorandum (IM) is being distributed through Argonaut Capital Limited (ABN 18 099 761 547) (Argonaut),in its capacity as corporate and financial advisor to Enerdrill Pty Ltd (Enerdrill or the Company), solely to selected parties (Recipients) who have expressed an interest in considering an investment in Enerdrill, and who fall within the disclosure exclusions under sections 708(8), 708(10), 708(11) or 708(12) of the Corporations Act 2001(Cth) (the Act).

The IM is confidential. It is not intended for, and should not be distributed to, any person other than as permitted herein. By its acceptance, the Recipients agree that they will not transmit, reproduce or make available the IM to anyone other than their professional advisers without the prior consent of Enerdrill. Any disclosure to the advisers of the Recipients must be on a confidential basis, for the purpose only of assessing the IM as adviser to the Recipients.

The information contained in this IM or subsequently provided to the Recipients whether orally, electronically or in writing by or on behalf of Enerdrill or its respective employees, agents, advisers and consultants (Information) is provided on the terms and conditions of this notice.

The purpose of this IM is to provide the Recipients with summary information regarding the investment opportunity described in this IM and is not an offer. Any offers made will only be on the basis that the investor comes under an exclusion provided by section 708 of the Act.

Enerdrill, with the assistance of Argonaut, has prepared the IM and each Recipient must make its own independent assessment and investigation of the business opportunity and should not rely on any statement or the adequacy and accuracy of any information. Recipients should not treat the contents of this IM as advice relating to legal, taxation, valuation or investment matters and should consult its own advisers. Enerdrill and its advisers take no responsibility for the contents of the IM.

The IM contains forward looking statements that are based on assumptions made in good faith by Enerdrill in light of current circumstances. Neither Enerdrill, Argonaut nor any other party gives any assurance that any such assumption or projection will prove to be correct or that Enerdrill will not be affected in any substantial manner by other factors that are not known or foreseeable by Enerdrill, or are beyond its control.

The IM does not purport to contain all the information that a prospective lender or investor may require about any potential investment in Enerdrill or its underlying business. In all cases, before acting in reliance on any Information, the Recipient should conduct its own investigation and analysis in relation to the opportunity and should check the accuracy, reliability and completeness of the information and obtain independent and specific advice from appropriate professional advisers.

Enerdrill and Argonaut make no representation or warranty, express or implied, as to the accuracy, reliability, or completeness of the IM. Enerdrill and its respective directors, employees, agents, advisers and consultants shall have no liability (including liability to any person by reason of negligence or negligent misstatement) for any statements, opinions, information, or matters, express or implied arising out of, contained in or derived from, or any omissions from the IM, except liability under statute that cannot be excluded. By accepting this IM, you expressly agree to be bound by this disclaimer. If you do not accept the terms of this disclaimer, please return the IM to the person from whom it was received and take no further action in relation to its contents.

All financial figures referred to within this IM are in Australian dollars unless expressly stated otherwise.

All prices as at 9 May 2012

Table of Contents

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I. Executive Summary

II. Sector Overview

III. Enerdrill Overview

IV. Financial Projections

V. Timeline

VI. Risks

VII. Appendices

A. Rig Locations

B. Potential On-shore Wells

C. Mechanical Rig Overview

D. Unconventional Drilling

E. WA Domestic Gas Demand & Supply

F. Unconventional News Paper Article

G. Enerdrill Directory

Table of Contents

4


II. Sector Overview



V. Timeline

VI. Risks

VII. Appendices


The Opportunity

5

I. Australia is entering a new era of onshore exploration driven by high O&G prices and advancements in production technologies

Increasing activity from over 25 local and foreign petroleum permit operators who invested c. $500m in exploration drilling during 2011, with strong growth forecast to continue

The Australian industry has been buoyed by the recent entry of multi-nationals like ConocoPhillips, BG, CNOOC, HESS and Mitsubishi

Australian unconventional projects are considered to lag the US by approximately a decade

― The number of active drilling rigs in North America has increased from <500 rigs in 1999 to approximately 2,000 today

II. The founders of Enerdrill identified a significant shortage of large onshore rigs (i.e. capable of drilling +3000m) in Australia

Rig scarcity is one of the primary bottlenecks constraining Australian onshore exploration

Only two permanent drilling rigs1 are currently operating in WA/NT, with waiting periods of c. 1 year for additional rigs

The shortage is likely to continue with high barriers to entry due to the significant up-front costs, local capability and the difficulty of sourcing rigs

III. Enerdrill boasts an industry leading & proven management team, which has collectively been involved with every onshore well drilled in WA since 2000

The team possesses a unique combination of skills and experience, including rig design & building, drilling operations & associated logistics, well design & engineering, and corporate & financial expertise

A preferred partner agreement with Bonnie Rock Transport (the industry leader in the provision of O&G logistics) has been entered into

1Ensign’s Rig-32 & Rig-7 used by Buru

Argonaut is selectively seeking investors for Enerdrill, a WA based start-up onshore Oil & Gas (“O&G”) drilling company with an initial focus in WA, NT and SA


The Opportunity (Continued)

6

IV. Enerdrill currently owns 3 rigs - two mechanical drilling rigs & one workover rig

Rig-1 is a mobile self-propelled workover rig suited to performing remedial & restoration operations and can be easily upgraded to enable the drilling of CSG & CBM wells

Rigs 2 & 3 are heavy duty Mechanical Rigs capable of drilling to 4,000m & 5,200m respectively

― Rig-2 consists of a derrick & base with Rig-3 ancillary equipment being shared between the two rigs as required for the first year of operations

The rigs are pre-used and require refurbishment & fit-out of ancillary equipment prior to commencing operations

Rig-1 (workover rig) is expected to be operational by October 2012, and rigs 2 & 31 are planned to be drill ready by the end of 2012

Discussions for multi-well contracts are underway with potential clients

An independent valuation firm has assessed the current (ie: pre-debt and equity capital raising) fair value of the three rigs as being $7.2m

– This fair value assessment compares with the pre-money value of Enerdrill (based on the capital raising price) of $7.25m

V. Directors estimate the market value of Enerdrill’s rigs post refurbishment (December 2012) will be in the range of $18m to $20m

This is in line with Enerdrill’s projected enterprise value at that time (based on the capital raising price) of $18.5m ($16m equity and $2.5m net debt excluding working capital)

VI. The Base Case Financial Model projects attractive economics, with 4 year IRR of 45% and ROI of 321%2

The shortage of available rigs in Australia continues to support high daily rig rates & utilisation

VII. Enerdrill is now selectively seeking investors to participate in an $8.5 million3 equity raising to fund the refurbishment and fit-out of the Rigs, the acquisition of a mini-camp, and the provision of working capital through to the establishment of commercial operations

The financial model is available upon request

An online data-room has been prepared for potential investors

1Rigs 2 & 3 will share equipment during the first year of operations

2Using Base Case assumptions, see page 26 for key assumptions 3Dermot O’Keefe has an option to acquire 250,000 shares at the capital raising price of $1 per share

Acquired Rig-1

Located at BRT’s site in Dampier, WA

Acquired Rig-2

Located at BRT’s site in Dongara, WA

Acquired Rig-3

Presently located in Edmonton, Alberta

Secured premises in Mandurah for rig rebuilds

Arranged $3.5 million senior secured debt facility

c.$1.6m presently drawn to fund recent acquisition of Caterpillar generator sets and pumps package

Balance available upon Enerdrill securing drilling contracts

Assembled highly experienced Board of Directors

Appointed Managing Director

Appointed key advisers

Entered into preferred partner agreement with Bonnie Rock Transport

Commenced discussions with various potential clients across multiple basins

Responses submitted to formal request for tenders

In bilateral discussions with other operators

Identified and commenced discussions with key team members

Verbal commitment given in relation to several key roles


Achievements To Date

7

Key Upcoming Activities

TJ/d

Enerdrill Key Achievements to Date

Raise $8.5m via the current equity capital raising

Acquire balance of equipment

Move rigs and equipment to Enerdrill’s Mandurah base

Rigs 1 & 2 to be transported via truck

Rig-3 and other equipment to be shipped (via Enerdrill chartered vessel from Tacoma USA to Bunbury in August/September 2012)

Secure drilling contracts

Formally appoint key team members

Balance of team to be recruited following key appointments

Complete the refurbishment of rigs

Put back-end systems (billing, inventory, accounting etc) in place

Secure permanent head office and yard

Commence drilling operations

Table of Contents

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II. Sector Overview



V. Timeline

VI. Risks

VII. Appendices

Global O&G prices have risen substantially since 2003, driven by:

Continually increasing global demand for both oil and gas

The decline in production from many of the world’s large conventional fields

A lack of discoveries of large new conventional fields

A resulting focus on lower quality and/or more expensive conventional fields such as those found offshore in deep water

A large increase in exploration for, and production of unconventional fields, which have higher associated production costs

In Australia, domestic gas prices have increased markedly in recent years

In WA, gas prices increased from c. $2 per Gigajoule (“Gj”) in 2006, to c. $8/Gj today

On the east coast, prices have increased from c.$3/Gj to c. $6/Gj

Domgas price increases have largely been driven by the increase in exports of domestically produced gas to international LNG markets (primarily Japan)

LNG prices are currently c. $15/Gj

Domgas prices have effectively become linked to global energy prices due to the alternative of exporting Australian gas at higher prices

US gas prices have declined steeply since September 2008 ($12/Gj to $2/Gj), largely because of the enormous increase in shale gas production

Gas is not currently exported from US, resulting in substantial domestic oversupply

Various US LNG export terminals are now in planning, and are expected to reduce domestic oversupply (and result in a higher Henry Hub price)

US LNG exports (which are still >3 years from meaningful volumes) are expected to reduce global gas prices somewhat, although Asian demand is projected to absorb new supply until at least 20181

Drilling activity has increased as a result of higher O&G prices and the trend towards unconventional fields, which require far more wells

II. Sector overview

Higher Oil & Gas Prices Driving Drilling Activity

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The continued increase in global demand for oil & gas has seen a supply side response involving the development of higher cost fields (deep water offshore and unconventional onshore), which has seen the marginal cost of production and prices increase

0

4

8

12

16

20

1999 2001 2003 2005 2007 2009 2011

1 Morgan Stanley report, “Australia Oil & Gas”, 2 May 2012 – available in Dataroom

0

20

40

60

80

100

120

140

1998 2000 2002 2004 2006 2008 2010 2012

LNG Price (Japan / Aus contracts)

Oil Price (Brent Crude)

$A

$US

The unconventional industry has revolutionised the North American energy sector with the search for prospective acreage now a global one

Inspired by the US shale & tight gas boom in recent years, Australian companies and an increasing number of international O&G operators have commenced the evaluation process of Australian unconventional fields

― Mitsubishi’s commitment of $152m to earn 50% of Buru’s Canning Basin permits

― ConocoPhillips US$110m commitment to New Standard to farm-in to a 75% share of the Goldwyer shale project

― BG’s1 $130m commitment to Drillsearch for a 60% interest in one of Drillsearch’s tenements in the Cooper Basin plus an option over shares equivalent to 9.9% of the company

400 Tcf of recoverable gas with the focus of the local industry over the next decade determining how much can be commercially produced

Cooper & Perth basins are best understood and have existing conventional production infrastructure and pipelines

Other prospective basin’s include Canning, Georgina & Beetaloo, but less is known about rock quality, and infrastructure is virtually absent

It is hoped that Australian shales can be successfully fracced using the same technologies employed in the US

II. Sector Overview

Australian Unconventional Oil & Gas Snapshot

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Players in Australian Basins With Shale & Tight Gas Potential2

Basin Locations

1 QGC through its wholly owned subsidiary BG 2 US Energy Information Agency & Geoscience Australia

Cooper Basin Canning Basin Perth Basin Beetaloo

Beach Energy (BPT) New Standard (NSE) AWE (AWE)/Origin (ORG) HESS

Drillsearch (DLS) Buru Energy (BRU) Norwest Energy (NWE) Falcon O&G

Icon Energy (ICN) Emerald (EMR) Transerv (TSV)

Senex Energy (SXY) Oil Basins (OBL) Empire O&G (EGO)

Santos (STO) Mitsubishi Bharat

Strike Energy (STX) ConocoPhillips

Permian age Ordovician age Permian / Triassic Cambrian

3.7m acres 30m acres 1.4m acres 6.2m acres

2000-4000m depth 1000-5000m depth 1000-5200m depth 2000-4500

Moderate overpressure Normal pressure Normal pressure Normal pressure

Risked gas 85Tcf Risked gas 230 Tcf Risked gas 60 Tcf Risked gas 64 Tcf

Basin

Play extent

Overview

Enerdrill’s Initial Area of Focus

The rig capacity shortage is expected to continue amidst escalating exploration and development. With only 2 rigs permanently located in WA/NT and 10 Australia wide capable of drilling +3,000m wells, operators are being forced to try and source rigs internationally (a slow and expensive process)

New Standard Energy - from New Guinea3

ICON Energy - from North America

Full field development of unconventional projects requires continuous drilling to offset high initial per well decline rates

Multiple rigs (potentially between 4 & 8) may be required on a full-time basis for +20 years to develop a single field

Development of one or more unconventional fields in WA or NT would result in a step change in rig demand

II. Sector Overview

Rig & Company Locations

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B

C

E F

G

D

I

Note: Only 3,000m+ rigs shown 1Sourced from Ensign Energy Services 2Please refer to Appendix A for further details 3Currently in transit (Darwin)

A

Rig scarcity continues to be the primary bottleneck to exploration growth

Current +3,000m Rig Locations1,2

Canning Basin

Carnarvon Basin

Perth Basin

Otway Basin

Cooper Basin

Beetaloo Basin

Officer Basin

J

Bowen Basin

H

# = Current Rig Location

http://www.qgc.com.au/default.asp

21 23 25

12

17 18 4

10 9

8

8 8

5

3 5 3

3

2012 2013 2014

Cooper Basin Canning Basin Perth Basin MacArthur Basin Georgina Basin Beetaloo Basin

Forecast demand of c. 9-10 rigs required in WA & NT during 2013-14

Enerdrill currently expects only 44 rigs (Including Enerdrill’s Rig-2 & 3 sharing equipment) to be available for use in WA & NT by 2013

Majority of +3000m rigs are situated in the Cooper basin and will not be available to service other basins due to long term contracts already underway

The opportunity for Enerdrill is to provide rigs to satisfy some of the unmet demand

With increasing levels of activity, demand is expected to continue to significantly outstrip supply of available rigs

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II. Sector Overview

Potential Onshore Wells 2012 - 2014

Potential Wells To Be Drilled In Enerdrill’s Areas of Initial Focus1,2

WA 16

SA 21

NT 13

WA 27

SA 23

NT 14 NT 16

WA 27

SA 25

50

64

68

1Based on publicly available information and Argonaut & Enerdrill estimates. 2Refer to appendix B for more details

3 Assumes the average rig drills 6 wells per year and has 75% utilisation (e.g.WA 2013, (27/6)/75%=6) 4 Ensign Rig-32 & 7, Old Century 14 and Enerdrill Rig-2 & 3 (sharing equipment)

Estimated Required Rigs3 NT 3 3 4

WA 4 6 6

SA 4 5 6

Total 11 14 16

Table of Contents

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II. Sector Overview



V. Timeline

VI. Risks

VII. Appendices

Highly respected team, with strong industry relationships & over 100 years combined relevant experience. Collectively, one or more Directors has been involved in all onshore O&G wells drilled in WA since 2000


Enerdrill Board

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John has worked at all levels of rig operations, including overseeing full rig design & assembly and refurbishing pre-used rigs

Over 25 years hands-on experience in the O&G industry, with extensive experience managing drilling operations

Previously Drilling Manager for Buru Energy where his role included:

Developing the drilling campaign including well / casing designs for future frac programs

Tender for and select all third party services

Setting up all internal systems for logistics, personnel movements, stock ordering & control

Managing rig operation for the drilling campaigns including DST’s, well tests, MWD and LWD

Prior to Buru, roles included Re-fit Supervisor at OPC, Semi-sub at Kan Tan IV, Company Man at Chartwell NZ, Operations Managers at Greymouth and Rig Manager at NRG Drilling

Skills and qualifications include rig design & building, mechanical fitter, diesel mechanic, ASME IX welding qualifications and certified HSE supervisor & rigger

Co-Founder of Enerdrill

Prominent and highly respected figure in the onshore oil & gas transportation and logistics industry, with over 35 years experience

Founder and Managing Director of Bonnie Rock Transport (“BRT”)

BRT is an oilfield trucking and logistics company employing around 120 staff with bases in Perth, Dongara, Dampier, Derby, Broome and Chinchilla (QLD).

BRT provides oilfield trucking, camp manufacture and catering, rental services and bulk transportation services

BRT has a preferred supplier agreement in place with Enerdrill

Founding partner of Energy Trucking, which provided O&G logistics infrastructure such as supply bases in Northern WA, and specialized transport services to the energy sector

Co-Founder of Enerdrill

Jim Currie Director

John Wells Managing Director


Enerdrill Board

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Managing Director of Add IPS, a Perth based O&G well engineering and consultancy business. Add IPS has been involved with the drilling of many onshore O&G wells in WA over the last 15 years

Add IPS was formed from the acquisition of IPServices (Australasia) Pty Ltd (“IPS”) - a company founded by Dermot - by Add Energy in 2010

Dermot has over 20 years of drilling and completion experience gained internationally with a number of large operators

Previously worked for WAPET and Woodside in senior technical and offshore supervisory positions, and Premier Oil as Global drilling manager responsible for well engineering in 8 countries

Dermot has been issued with 250,000 options over shares in Enerdrill, exercisable at $1 each, on or before 07/11/2012

Co-founded Argonaut in 2002 and has over 20 years experience in capital markets

Managing Director & CEO of Argonaut, a Perth and Hong Kong based investment bank with expertise in the resources & resource services sectors

Previously a Director of IPS, an Oil & Gas services company

Significant experience and expertise in the arrangement and execution of transactions in the O&G sector

Co-founder of Latent Petroleum, the operator of the Warro Gas Field (Perth Basin). Negotiated Alcoa’s involvement with Latent

Working in corporate finance and principal investments at Argonaut, Jon’s focus is on the energy & energy services sectors

With Eddie Rigg, responsible for the management of Argonaut’s principal investment portfolio (>70% energy exposure)

Acted as corporate advisor to various energy related companies, including Transerv Energy, Latent Petroleum, IPS, Merredin Energy and Pacific Energy

Alternate Director to Eddie Rigg

Dermot O'Keeffe Chairman

Eddie Rigg Director

Jon Biesse Alternate Director

It is anticipated that another Director will be appointed to the Enerdrill Board as a representative of new shareholders

Highly respected team, with strong industry relationships & over 100 years combined relevant experience. Collectively, one or more Directors has been involved in all onshore O&G wells drilled in WA since 2000

Model DSI M-760-21 ($6.3m to be spent on refurb & fit-out)

Draw-works1 Rigmaster 1,200 Hp, powered by C27 Caterpillar

Mud Pumps2 MP-1000 – 3 x 1000hp, with maximum of 651 gallons per minute (gpm)

Derrick / Mast DSI-M760, 142ft high and static hook load of 760,000lbs with 12 lines

Depth 5,200m (Slim hole 5,500m)

Transportation The client will be liable for all transportation costs (provided by BRT) Truckloads to mobilise; Rig 25, tubulars 6 and campsite 12

Personnel3,4

Estimated Day Rates

• Drilling – $57,500 • Standby – $51,750 Contracts based on a schedule of day rates , ensuring that Enerdrill is not exposed to operator underperformance, technical failure or down time

Capabilities Conventional & Unconventional Drilling 5

Directional drilling - Allows for the alteration of the drill bits dip and orientation to maximize the ability to cut across pay zones

Multi lateral drilling - Allows for more than one borehole to be drilled from a single well

Horizontal drilling - Higher productivity as it provides numerous access points to targeted pay zones

Slim hole technology - Results in fewer materials being used reducing costs, slim holes leave a smaller economic footprint

Fast rig up/down - Cost savings in mob/demob to operators

Sling shot sub base - Aids in efficient and safer rig up/down

Top drive capable - Tesco hydraulic unit

Easily upgraded if required


Rig-3 Snapshot

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Enerdrill Rig-3 Overview

1Primary hoisting machinery 2Device designed to circulate drilling fluid under high pressure down the drill string 3Represents all those Individuals operating the rig during a single shift. There are typically two shifts per rig 4Total employees from both shifts and admin total 65 5Whilst capable, other (smaller) rigs are better suited to Coal Seam Gas drilling

• 1 Mechanic

• 1 Electrician

• 4 Derrickman

• 4 Lead Floorman

• 2 Safety Man

• 8 Roughneck

• 4 Leasehand

• 1 Toolpusher

• 1 Nightpusher

• 2 Driller

• 2 Assistant Driller

• Suspension - $0

Enerdrill Rig-3

Suitable for deep well drilling, capable of depths of up to 5,200m, with greater depths attracting higher day rates

With the capability to drill to 5,200m, Rig-3 will likely spend a large portion of the time in the Perth Basin where greater drilling depths are required

Greater depth capabilities attract higher day rates

Model Dreco Slingshot sub base

Draw-works1 CAT 3406 – C diesel engines 2 x 400hp

Mud Pumps2 To be shared with Rig-3 for the first year of operations

Depth 4,000m (Slim hole 4,500m)

Derrick / Mast R&H-ST 133, 133 ft high and static hook load of 390,000lbs with 10 lines

Estimated Day Rates

• Drilling – $47,500 • Mobilisation – $45,500

Personnel As per Rig-3

Transportation As per Rig-3

Capabilities As per Rig-3


Rig-2 Snapshot

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Fit for purpose Mechanical Drilling Rig – specifically designed & equipped to operate in Australia’s remote onshore O&G basins

Enerdrill Rig-2 Overview

1Primary hoisting machinery 2Device designed to circulate drilling fluid under high pressure down the drill string 3Currently being used by Buru in the Canning Basin

Typical Onshore Rig Operation

• Suspension - $0

Ensign Rig-32 (equivalent to Enerdrill Rig-2)

Enerdrill Rig-2 has similar specification to Ensign’s Rig-323, albeit Rig-2 will be newer and better fit for purpose

Rig-32 has operated almost continually for the past 9 years

Note: Only the Base and Derrick have been bought. Rig 2 & 3 will share ancillary equipment over the first year of operations


Rig-1 & Mini-Camp Snapshot

Fully integrated offering with multiple drilling services and capabilities

Generator & Mini-Camp Accommodation

Rig Site Mini-Camp Overview

Camp Building1

∎ Toolpusher shack

∎ Safety office

∎ 4 Man Sleeper (ensuite) Mechanic, Electrician, Tesco, Spare

∎ 4 Man Sleeper (ensuite) Co Man, Geologist, Engineer,

Toolpusher

∎ Dual office – Mud Engineer & well site Geologist

∎ Generator

∎ Waste treatment

Service Building

∎ Mechanic workshop

∎ Electrician workshop

∎ Tool-house

∎ Spare parts storage

∎ Boilermakers workshop

Work-over Rig-1 Overview

Enerdrill Work-over Rig-1

Model Ideco BIR 300 series H35-KD 350hp Detroit , to be upgraded for drilling capability

Description The work-over rig is a mobile self-propelled rig suited to drilling CSG & CBM wells and performing remedial & restoration operations including;

Deepening

Plugging and abandoning

Clean outs

Pulling and resetting liners

Restoring or increasing production rates of producing wells

Once upgraded capable of drilling to 1,500m

No additional employees needed as staff will be sourced from those that are rostered off Rig-2 & 3

1Those Trades that do not stay on-site will reside at the operators main base camp at the operators expense. All expenses such as food & water supplied to the mini-camp will also be at the cost of the operator

Note: CSG = Coal Seam Gas CBM = Coal Bed Methane


Bonnie Rock Transport Overview

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Rig Transportation BRT Locations

Enerdrill has a preferred partner agreement with BRT, and will work closely with BRT to deliver outstanding customer service

Perth

Dongara

Dampier

Derby

Broome

Chinchilla

Bonnie Rock Transport was founded by Enerdrill Director Jim Currie in 1994, and is a leading provider of heavy duty transportation and logistics to the energy and mining industry throughout Australia

Provides oilfield trucking, camp manufacture & catering, rental and bulk transportation services

— Fully integrated service offering including heavy chiller / freezer haulage, the design, construction & catering of temporary and permanent on-site accommodation, building of road access to new sites and mobilising / demobilising of drill rigs

— 10 O&G exploration accommodation camps

Facilities to carry out repairs & modifications

Employing around 120 staff with bases in Perth, Dongara, Dampier, Derby, Broome and Chinchilla

Revenue > $50m per annum

BRT is an approved supplier to most participants in the onshore WA O&G sector

All costs and liabilities of transportation are at the expense of the oil & gas operator


Bonnie Rock Transport Overview

20

BRT offers a fully integrated transportation & logistics service to the onshore O&G industry

Accommodation Camp Road Train

BRT Mobilisation Of Weatherford Rig 826 Rig Transportation

Operations

It is expected that during the first year of operations Rig-2 & Rig-3 will share ancillary equipment (mud tanks, mini-camp etc). Only one of the two rigs will operate at any point in time, with equipment to be moved between rigs as required

Rig-3 is expected to spend extensive time in the Perth Basin where a greater drilling depth is required. Rig-2 likely to be primarily used in Northern Australia (i.e. Canning and Beetaloo Basins)

Rig-1 expected to be in full operation by October 2012

It is anticipated that an additional set of equipment for Rig-3 will be purchased early 2014 for c.$5m. This is likely to be funded from a combination of retained earnings and debt

― Following the purchase of equipment, Rig-2 & Rig-3 will have their own equipment and will be operating independent of each other

Growth

It is expected that any future purchase(s) of rigs would be funded from debt and a mixture of retained earnings & an equity raising

21

Rig-1 is expected to be operational by October, with Rigs 2 and 3 targeted to be drill ready in December 2012

Indicative Timeline of Rig Operations


Operations Timeline

Operations Quarter ending 30-Jun-12 30-Sep-12 31-Dec-12 31-Mar-13 30-Jun-13 30-Sep-13 31-Dec-13 31-Mar-14 30-Jun-14 30-Sep-14 31-Dec-14 31-Mar-15 30-Jun-15

Rig-2 & Rig-3 Order and Delivery

Rig-2 & Rig-3 Operations - Shared Equipment

Rig-2 Operations continue

Rig-3 Equipment added

Rig-3 Available for Operations

Rig-1 (Work-over Rig) Available for Operations

Growth Rig Order & Delivery

Growth Rig(s) Available for Operations

The Directors expect to secure key staff from their extensive industry network and contacts

Discussions are underway with key operational staff

Hiring to commence in Q3 2012

Rig-2 and Rig-3 workers to be shared initially

Once Rig-3 is operating with its own equipment, the Company’s crew and day rate workers will be doubled

Rig-1 staff to be sourced from Rig-2 / 3 pool where possible

3 Administration staff can typically manage up to 5 rigs

Additional admin resource required as the number of rigs (and associated headcount) increases beyond 5

Admin staff typically perform multiple roles, such as:

MD also responsible for Health, Safety & Environment, and compliance

CFO also manages payroll and accounts functions, and performs Company Secretary role

Administrative staff assists with payroll and accounts, and acts as receptionist and PA to MD


Staffing Requirements

22

Enerdrill Personnel Requirements

Administration Total # Required

Managing Director 1

CFO / Company Secretary 1

Admin / PA 1

Total Administration 3

Enerdrill Rig- 2 / 3 # Per Shift Total # Required

Crew

Derrickman 4 8

Lead Floorman 4 8

Roughneck 8 16

Leasehand 4 8

Safety man 2 4

Total Crew 22 44

Dayrate Workers

Toolpusher 1 2

Night Pusher 1 2

Driller 2 4

Assistant Driller 2 4

Electrician 1 2

Mechanic 1 2

Welder 1 2

Total Dayrate 9 18

Total Rig - 2 / 3 31 62

Enerdrill Rig-1 (Work-over) # Per Shift Total # Required

Crew

Derrickman 2 4

Lead Floorman 2 4

Roughneck 2 4

Leasehand 2 4

Total Crew 8 16

Dayrate Workers

Toolpusher 1 2

Driller 1 2

Total Dayrate workers 2 4

Total Rig-2 10 20

Enerdrill Total 31 65


Enerdrill Competitors

23

Company

Overview

Ensign is a Canadian based fully integrated, world leading onshore drilling and well servicing provider for crude oil, natural gas and geothermal wells

Since inception in 1987, Ensign has accumulated an extensive equipment fleet of 344 rigs 1 (168 Canada, 117 US, 59 International) and c. 8,800 employees

Services include contract drilling, directional drilling, underbalanced drilling2, rental equipment, well servicing and production & manufacturing

MB Century is a ‘one stop shop’ drilling contractor providing oil, gas & geothermal services to Australia, New Zealand and South East Asia

MB Century is a division of privately owned MB Petroleum based in Oman. MBPS is an international drilling company and the largest oilfield service provider in the Middle East.

Services include workover & well services, well testing, coiled tubing, nitrogen & pumping services, drilling fluids, mud logging, wireline services, steam-field design & construction and project management

Australian Rig Locations

Key Metrics

Market Capitalisation $2.1b Market Capitalisation n/a

Net Debt $0.4b Net Cash n/a

Enterprise Value $2.5m Enterprise Value n/a

P/E P/E

Location Type Canning 1x +3000m Rig Cooper 4x +3000m Rig

1x Workover Rig Bowen 1x +3000m Rig

6x CSG Rig Other 2x CSG Rig

1x Workover Rig

Total 6x +3000m Rig 8x CSG Rig 2x Workover Rig

Location Type Canning (or en route) 2x +3000m Rig3 Cooper 1x +3000m Rig

Other Asia Pacific Countries 6x +3000m Rig 1x CSG rig

Total 9x +3000m Rig 1x CSG Rig

FY12 FY13

8.7x 8.0x

FY12 FY13

n/a n/a

1Excludes workover rigs 2Underbalanced drilling involves maintaining a downhole pressure that is less than the reservoir pressure, thus allowing formation fluids to flow into the wellbore during drilling operations. 3 Century Rig 14 is currently located in Darwin and is in transit to Buru’s Canning Basin project


Enerdrill Peers

24

Company

Overview

Weatherford is one of the largest oilfield service companies operating in more than 100 countries and employs more than 50,000 people world wide

Services include drilling evaluation completion, production and intervention cycles of oil & natural gas for both onshore and offshore wells

Weatherford is listed on both the New York Stock Exchange (NYSE) and Swiss Exchange (SIX)

Established in 1996, Hunt Energy is a South Australian based O&G drilling company

Hunt Energy has completed projects for Central Petroleum, Beach, Eastern Star Gas, Linc Energy, Adelaide Energy and Karoon Gas ,amongst others

Australian Rig Locations

Key Metrics

Market Capitalisation $10.4b Market Capitalisation n/a

Net Debt $7.5b Net Cash n/a

Enterprise Value $17.9b Enterprise Value n/a

P/E P/E

Location Type Bowen 1x +3000m Rig

Total 1x +3000m Rig

Location Type Stacked in Adelaide 1x <3000m Rig Cooper 1x <3000m Rig

Total 2x <3000m Rig

FY12 FY13

11.3x 8.2x

FY12 FY13

n/a n/a

Table of Contents

25


II. Sector Overview



V. Timeline

VI. Risks

VII. Appendices

Rig-2 Charges

Drilling - $47,500 per day

Standby - $42,500 per day

Suspension - $0 per day

Rig-2 Utilisation

Drilling – 60%

Standby – 15%

Suspension – 25%

Rig-3 Charges




Rig-3 Utilisation

Drilling – 60%

Standby – 15%

Suspension – 25%

Depreciation based on straight line method over 10 years

Post-capital raising equity value of $16.0m (fully diluted)

Dividend payout ratio 100%1

$1m minimum cash balance

35% drilling utilisation for Rig 2 & 40% utilisation for Rig 3 during first 12 months of operations (due to shared equipment)3

1

2

5

6

7

3

4

8

9

26


Base Case Financial Projections

The Base Case assumes only existing rigs are operated (no new rig acquisitions) and surplus cash is paid as dividends

Key Assumptions

1Reinvestment of surplus cash for growth is probable – refer to Growth case 2Includes interest income 3Total drilling utilisation of 75% and Standby rate of 10%= 85% total utilisation

Income Statement (FY) Cashflow Statement (FY)

2013 2014 2015

Revenue2 $m 10.4 17.4 30.1

Operating Costs $m (7.5) (11.1) (18.0)

Capex $m (10.8) (5.0) -

Cashflow Before Funding $m (7.9) 1.4 12.1

Funding $m 12.3 5.0 -

CFADS $m 3.4 4.8 9.1

Debt Service $m (0.7) (1.7) (2.8)

Cash Flow Available to Equity $m 2.7 3.2 6.3

Dividends $m (1.6) (3.1) (6.2)

Profit & Loss (FY) 2013 2014 2015

Revenue $m 10.4 17.4 30.1

Operating costs $m 7.5 11.1 18.0

EBITDA $m 2.8 6.3 12.1

EBITDA Margin % 27.4% 36.2% 40.1%

EBIT $m 2.2 5.3 10.4

EBIT Margin % 21.5% 30.2% 34.5%

NPAT $m 1.1 3.5 7.0

NPAT Margin % 11.1% 20.1% 23.2%

(15.0)

(10.0)

(5.0)

-

5.0

10.0

15.0

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Net Operating Cashflow Principal Repayment Interest Expense

Maintenance & Growth Capex Initial Capex Cashflow Available to Equity


Base Case Financial Projections

Cashflow is projected to be strong and debt levels low, resulting in considerable cash available for dividends or reinvestment

Cash Flow Available For Debt Service3

Cashflow Profile ($m)1,2

Earnings Multiples Based On Capital Raising Price

$m

1Net operating cashflow = Revenue minus operating costs (pre-tax cashflow) 2Cashflow available to equity takes into account funding and tax (post-tax cashflow) 3Projected DSCR (Debt Service Coverage Ratio) is at 30th June for each year

27

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

-

2.0

4.0

6.0

8.0

10.0

12.0

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Ratio $m

Cash flow available for debt service (CFADS)

Interest

Principal

DSCR3.4x

4.1x 4.6x

1.6x 1.9x

2.3x

EV/EBITDA EV/EBIT P/E

2014 2015

59% 52%

45%

46%

80% 70% 60% 50%

452%

365%

278%

191%

80% 70% 60% 50%

55% 48%

41%

32%

80% 70% 60% 50%

51% 44%

37%

28%

80% 70% 60% 50%


Sensitivity Analysis – Base Case

28

The key sensitivities are the day rate and utilisation achieved

The Base Case assumes 60% (plus 15% standby)1 utilisation and day rates of $47,500 (Rig-2) and $57,500 (Rig-3)

IRR (4 Year)2,3

Return On Investment (4 Year)2,3

Drilling Utilisation

Rig-3 $52,500 Rig-2 $43,370

Daily Rate

Drilling Utilisation Drilling Utilisation Drilling Utilisation

Daily Rate

1Drilling Utilisation 60% + standby of 15% = 75%

2Drilling utilisation does not include standby utilisation which is fixed at 15% and has a day rate of 90% of the selected drilling utilisation rate 3Pre tax basis


Rig-3 $55,000 Rig-2 $45,450

Rig-3 $57,500 Rig-2 $47,500

Rig-3 $52,500 Rig-2 $43,370

Rig-3 $55,000 Rig-2 $45,450

Rig-3 $57,500 Rig-2 $47,500

396%

315%

234%

153%

80% 70% 60% 50%

507%

414%

321%

229%

80% 70% 60% 50%



Case 1 Case 2 Case 3- Base Case


4.1x 4.5x

5.0x 5.6x

80% 70% 60% 50%

3.1x 3.4x

3.7x 4.1x

80% 70% 60% 50%

3.4x 3.7x

4.0x 4.4x

80% 70% 60% 50%

3.7x 4.1x

4.6x 5.1x

80% 70% 60% 50%


Sensitivity Analysis – Base Case

29

Attractive valuation metrics with capital raising priced at 3.4x FY14 EV/EBITDA & 4.6x FY14 P/E

FY15 multiples are projected to be substantially improved again, at 1.6x EV/EBITDA and 2.3x P/E

EV / EBITDA (FY14F)1

P/E (FY14F)1


Day Rate


$50,000 Day Rate

1Drilling utilisation does not include standby utilisation which is fixed at 15% and has a day rate of 90% of the selected drilling utilisation rate



2.9x 3.2x 3.4x

3.8x

80% 70% 60% 50%

Rig-3 $52,500 Rig-2 $43,370

Rig-3 $55,000 Rig-2 $45,450

Rig-3 $57,500 Rig-2 $47,500

Rig-3 $52,500 Rig-2 $43,370

Rig-3 $55,000 Rig-2 $45,450

Rig-3 $57,500 Rig-2 $47,500

4.5x 5.0x

5.6x 6.3x

80% 70% 60% 50%





Acquisition of 2 Rigs for $25m each with operations commencing in Jan 15 Each rig funded via $15m debt

and $10m cash from placement at $2 per share

Dividend payout ratio 0%

2013 2014 2015

Revenue $m 10.4 17.4 45.4

Operating costs $m 7.5 11.1 23.4

EBITDA $m 2.8 6.3 22.0

EBITDA Margin % 27.4% 36.2% 48.4%

EBIT $m 2.2 5.3 17.8

EBIT Margin % 21.5% 30.2% 39.2%

Tax $m 1.0 1.4 4.7

NPAT $m 1.1 3.2 10.9

NPAT Margin % 11.1% 17.9% 23.3%

Growth Rig Day Rates




Growth Rig Utilisation

Drilling – 60%

Standby – 15%

Suspension – 25%

30


Growth Case Financial Projections

The Growth Case assumes 2 new rigs1 are purchased for $25m each in March Q 2014, and begin full operation a year later

Key Assumptions

3 1

2

Income Statement (FY)

Cashflow Graph ($m)

4

1Option of 1 to 3 ‘growth’ rigs in model available from Argonaut

(80.0)

(60.0)

(40.0)

(20.0)

-

20.0

40.0

60.0

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Net Operating Cashflow Principal RepaymentInterest Expense Maintenance & Growth CapexInitial Capex Cashflow Available to Equity

$m

Key Debt Metrics

2013 2014 2015

Net Debt / (cash) $m 1.8 31.7 22.1

Interest Cover x 27.2x 1.28x 11.7x

429% 382%

335% 287%

80% 70% 60% 50%

49% 46%

42% 38%

80% 70% 60% 50%

459% 408%

358% 308%

80% 70% 60% 50%

54% 50%

46% 42%

80% 70% 60% 50%

52% 48%

44% 40%

80% 70% 60% 50%


Sensitivity Analysis – Growth Case

31

Growth Case also projects attractive returns, with 4 year IRR of 46% and ROI of 358%

IRR (4 Year)1,2

Return On Investment (4 Year)1,2


Rig-3 $52,500 Rig-2 $43,370

Daily Rate

Drilling Utilisation Drilling Utilisation

Daily Rate

1Drilling utilisation does not include standby utilisation which is fixed at 15% and has a day rate of 90% of the selected drilling utilisation rate 2Pre tax basis


Rig-3 $55,000 Rig-2 $45,450

Rig-3 $57,500 Rig-2 $47,500

Rig-3 $52,500 Rig-2 $43,370

Rig-3 $55,000 Rig-2 $45,450

Rig-3 $57,500 Rig-2 $47,500

399% 355%

311% 267%

80% 70% 60% 50%





The capital raising is to be completed via a placement of 8.5 million ordinary shares in Enerdrill to institutional and sophisticated investors, at a price of $1 per share to raise $8.5 million

3.4x FY14F EV/EBITDA & 4.6x FY14F P/E

1.6x FY15F EV/EBITDA & 2.3x FY14F P/E

The purpose of the capital raising is to fund the refurbishment of Rigs 2 & 3, acquire additional equipment including a mini-camp, repay existing debt, establish operations, and provide working capital

A $3.5 million working capital debt facility has been established with NAB. NAB has been be granted first ranking security over all of Enerdrill’s assets

Argonaut’s capital raising fee is equivalent to 6% of the total raising Includes 12 months corporate advisory fees

Argonaut intends to reinvest 100% of its capital raising fee plus up to an additional $250,000 as part of the capital raising

Post the capital raising, Argonaut will own 2 million shares, equivalent to 12.5% of the issued capital

Argonaut’s mandate is available for review in the online data-room

18.8%

18.8%

12.5%

50.0%

Jim Currie

John Wells

Argonaut

New Shareholders

Argonaut owns 1.25m ordinary shares prior to the capital raising (issued @ $0.20 per share)

John Wells and Jim Currie each own 3 million ordinary share prior to capital raising

c.$2.1m of loans ($1.6m NAB & $463k BRT, Wells & Currie) to be repaid from capital raising proceeds

Costs of the issue of $550,000 are netted off against fully paid shares on the balance sheet


Capital Raising

32

Enerdrill is now selectively seeking investors to raise $8.5 million via a placement of equity at $1 per share

Sources & Uses of Funds

Capital Structure

Key Shareholders1

Existing shares on issue4 7.25m

Shares offered @ $1 per share 8.50m

Dermot O’Keeffe Options ex @ $1 on or before 07 Nov 2012 0.25m

Pro-forma shares on issue 16.00m

Post money, diluted equity value ( @ $1 per share) $16.00m

Sources Uses

Capital Raising (including options)3 $8.75m Rig Refurbishment $7.20m

Working Capital Facility $3.50m Mini camp $1.00m

Loan repayment $2.06m

Costs of the issue $0.55m

Working Capital $1.44m

Total Sources $12.25m Total Uses $12.25m 1Post capital raising 2Assets held at cost (have not been re-valued) 3Dermot O’Keeffe has the option to acquire 250,000 shares at the capital raising price of $1, on or before 7 November 2012 4An independent valuation has determined the current (pre-money) fair value of Enerdrill’s rigs to be $7.2m, or equivalent $0.993 per share

Capital Raising Overview

Argonaut Disclosure

Balance Sheet 10 May 2012 Pro-Forma

Assets

Cash $4,700 $5,891,700

Other Current Assets $40,620 $40,620

Non Current Assets $2,930,369 $2,930,369

Liabilities

Debt $2,063,000 -

Net Assets $912,689 $8,862,689

Share Capital And Reserves

Fully Paid Shares $877,602 $8,827,602

Retained earnings $35,087 $35,087

Total Share Capital and Reserves $912,689 $8,862,689

Table of Contents

33


II. Sector Overview



V. Timeline

VI. Risks

VII. Appendices

V. Timeline

Indicative Timing

34

Indicative Timing

The Board of Enerdrill anticipates a timeline of approximately 6 months from completing the raising to full operational status

May 2012 June 2012

S M T W T F S S M T W T F S

1 2 3 4 5 1 2

6 7 8 9 10 11 12 3 4 5 6 7 8 9

13 14 15 16 17 18 19 10 11 12 13 14 15 16

20 21 22 23 24 25 26 17 18 19 20 21 22 23

27 28 29 30 31 24 25 26 27 28 29 30

July 2012 August 2012 S M T W T F S S M T W T F S

1 2 3 4 5 6 7 1 2 3 4

8 9 10 11 12 13 14 5 6 7 8 9 10 11

15 16 17 18 19 20 21 12 13 14 15 16 17 18

22 23 24 25 26 27 28 19 20 21 22 23 24 25

29 30 31 26 27 28 29 30 31

September 2012 October 2012 S M T W T F S S M T W T F S

1 1 2 3 4 5 6

2 3 4 5 6 7 8 7 8 9 10 11 12 13

9 10 11 12 13 14 15 14 15 16 17 18 19 20

16 17 18 19 20 21 22 21 22 23 24 25 26 27

23 24 25 26 27 28 29 28 29 30 31

30 30

November 2012 December 2012 S M T W T F S S M T W T F S

1 2 3 4 5 6 1

7 8 9 10 11 12 13 2 3 4 5 6 7 8

14 15 16 17 18 19 20 9 10 11 12 13 14 15

21 22 23 24 25 26 27 16 17 18 19 20 21 22

28 29 30 31 23 24 25 26 27 28 29

30 30 31

Work Stream Indicative Date

Working capital debt facility established 10 May

IM and Model released 15 May

Due Diligence / Online Dataroom Available

16 May - 24 May

Submission of offers to participate in equity raising 25 May

Execution of shareholder agreement and subscription agreement 29 May

Raising completed 31 May

Rig-1 Work-over rig ready for operations 3 September

All trades sourced 31 October

Rig-2 / Rig-3 ready for operations 31 December

Note: Timetable is subject to change without notice. The Capital Raising may be closed early, pending receipt of sufficient commitments

The Dataroom contains, amongst other things, key contracts and agreements including draft Shareholder Agreement & Subscription Agreement, key service provider contracts and consulting agreements

New investors will be required to execute both the Shareholder Agreement and Subscription Agreement

It is anticipated that an additional Director will be appointed to the Enerdrill Board to represent new shareholders

Table of Contents

35


II. Sector Overview



V. Timeline

VI. Risks

VII. Appendices

VI. Risks

Key Risks

36

Volatility of oil & gas prices

O&G supply/demand dynamics may change, which can materially impact prices, and therefore the level of drilling activity

Cost Inflation

Escalation of costs (in excess of prices) may erode the financial viability of operations. This is particularly relevant in WA and NT, where the resources boom is putting pressure on the supply and prices of labour and equipment

Movements in foreign exchange rates

Currency fluctuations can impact capital costs, operating costs and revenue (indirectly via movements in AUD O&G prices), therefore impacting on Enerdrill’s financial performance

Environmental regulations

O&G drilling activity is subject to stringent environmental regulations. Further tightening of these regulations may reduce the future demand for drilling rigs

Native title and heritage issues

Subject to extensive Native Title and heritage approvals. Receipt of such approvals can significantly delay project timelines

Natural disasters

Drilling often occurs in harsh environments such as the desert and the tropics. Natural disasters such as fires, cyclones and floods may adversely impact operations

General Risk Factors

VI. Risks

Key Risks (cont.)

37

Rigs are unable to be made drill ready on budget or on time

Achievement of the targeted timeline to operations will require capable management of the various work streams and costs. Material over-runs could impact Enerdrill’s financial performance and industry reputation

Operational underperformance

Enerdrill has not yet proven the ability of its rigs to operate to the standard required. An inability to deliver the expected level of performance could adversely affect Enerdrill’s reputation and financial performance

Reduction in demand for Drilling Rigs

Industry-wide constraints are creating project delays, cost pressures and staffing challenges. These issues may cause drilling programs to be delayed or even cancelled, resulting in reduced demand (utilisation) and ultimately in reduced revenue

Increase in rig supply of drilling rigs (competition)

Enerdrill may face increased competition from other drilling companies entering the Australian market , or from existing operators redeploying underutilised rigs from their international operations (such as North America, where gas prices are depressed) . This may result in reduced utilisation and or day rates

Enerdrill believes this is not an issue in the short to medium term as the Australian market currently doesn’t have the depth or long term contracts required for international drillers to justify the high costs of importing equipment, building a local team, and certifying rigs to Australian standard

Uneven revenues driven by progress of projects and funding capability of clients

The majority of expected future drilling programs are yet to be committed, and the scale and timing of drilling activity remains uncertain and subject to change

Ability to attract and retain high quality staff & contractors

There is currently a shortage of skilled labour in the oil and gas sector. There is a risk that Enerdrill may find it difficult to attract staff with the requisite skills

Shale gas is ultimately not commercially successful in Australia

The shale gas industry is still unproven in Australia, with only two shale specific wells having been drilled to date. If Australian shales are unable to be produced commercially on a meaningful scale, exploration expenditure, and associated drilling activity, may reduce significantly

Key person risk

Enerdrill’s success relies on certain key people, initially being John Wells and Jim Currie. If one of more key people cease association with the Company, Enerdrill’s operational performance could be materially impacted

Health, Safety & Environment incidents

O&D drilling is an inherently risky activity, both in terms of human safety, and the potential for environmental catastrophes. Negative outcomes can include the loss of life and/or uncontrolled oil spills in environmentally sensitive environments, resulting in significant costs and reputational damage.

Risks Specific to Enerdrill

Contact Details

38

If you are interested in pursuing this opportunity and receiving additional information in relation to the capital raising, please contact Jon Biesse or Eddie Rigg of Argonaut

Eddie Rigg

Managing Director & CEO

direct line +61 8 9224 6804

mobile +61 (0) 418 942 304

email [email protected]

Jon Biesse

Director, Corporate Finance

direct line +61 8 9224 6815

mobile +61 (0) 402 100 450


Logan Robertson

Analyst, Corporate Finance

direct line +61 8 9224 6837

mobile +61 (0) 409 209 025


Table of Contents

39


II. Sector Overview



V. Timeline

VI. Risks

VII. Appendices

0m

1,000m

2,000m

3,000m

4,000m

5,000m

6,000m

Perth Canning Beetaloo Cooper Georgina MacArthur Galilee

Appendices A

Current Location of Rigs Capable of Drilling +3,000m

40

Name Type Depth (m) Location

A Rig #7 Telescopic Double 3,660 Canning Basin

B Australia 932 Telescopic Double 3,660 Canning Basin

C Australia 965 ADR Triple 5,490 Cooper

D Australia 1005 Workover 4,580 Cooper

E Australia 916 Electric Triple 4,270 Cooper

F Australia 930 ADR Triple 3,660 Cooper

G Australia 918 Mechanical Double 3,050 Cooper

H Rig # 3 Century 3,000 Cooper

I Rig 826 Weatherford 5,000 Bowen Basin

J Rig #14 Century 5,000 Darwin1

Maximum Basin Depth

Enerdrill Rig-2 Max Depth

Majority of +3000m rigs are situated in the Cooper Basin and will not be available to service other basins due to long term contracts

Current Location of Rigs Capable of Drilling +3,000m

Enerdrill Rig-3 Max Depth

1In transit to Canning Basin

41

Appendices B

List Of Potential Onshore Wells (Non-CSG) in WA, NT & SA from 2012 to 2014

Note: P&A’s = Plug & Abandons 1Market capitalisation as at 1-May-12

Operator Mkt Cap ($m)1 Cash ($m) Basin State Depth (m) Well's 2012 Well's 2013 Well's 2014 Comments

Oil Basins Limited 22.5 0.3 Canning Basin WA 1200 1 2 2 Currently after Rig # 7 - will lose permit if not drilled

Grant Oil n/a n/a Canning Basin WA 2500 0 2 3

New Standard (Conoco) 138.8 22.9 Canning Basin WA 3500 3 5 5 Contracted MBC Rig #14 coming in from New Guinea

Buru 604.5 29.7 Canning Basin WA 3600 8 8 8 Using Rig #32 and Rig #7 at present

AWE / Origin 850.6 166.5 Perth Basin WA 3800 3 4 4 Negotiations underway with Enerdrill, also ~30 P&A's over 3 years

Empire Oil & Gas 75.9 10.2 Perth Basin WA 4000 1 2 2 Used Rig #826 for it's two wells in 2011

Transerv (Alcoa) 37.8 1.7 Perth Basin WA 4200 0 3 2 In discussions with Enerdrill. Argonaut is a 9% shareholder

Warrego n/a n/a Perth Basin WA 4200 0 1 1

Norwest Energy 52.4 4.6 Perth Basin WA 4000 n/a n/a n/a Awaiting approval for further exploration

Armour Energy 77.3 4.3 MacArthur Basin NT 2000 8 8 8 Arrangement with AJ Lucas. Recently listed on ASX after $75m raising

Hess (Falcon) 19,900.0 351.0 Beetaloo Basin NT 3600 0 3 3 Discussions underway with Enerdrill

Central Petroleum 114.8 7.7 Georgina Basin NT 2500 3 2 3 Looking at engaging Hunt Rig #2 for drilling of its 3 wells in 2012 /13

Baraka 31.1 10.6 Georgina Basin NT 1500 2 1 2 Joint venture with Petro Frontier

Santos 12,300 3300.0 Cooper Basin SA 2600 4 5 6 Currently using Ensign Rig #930 & #916

Strike Energy 104.4 3.6 Cooper Basin SA 2600 0 1 1 Drilling more wells (2,3,3 respectively) however Beach is operating

Cooper Energy 144.9 64.3 Cooper Basin SA 2600 2 5 4 Drilling to start June quarter in 2012

Beach 1,619.5 58.5 Cooper Basin SA 3200 6 6 6 Currently using Ensign Rig #930 & #916

Drillsearch 408.3 33.6 Cooper Basin SA 3200 5 2 4 In 2011 secured the BG/QGC $130m shale & tight gas JV farm-in

Senex 812.9 90.5 Cooper Basin SA 3200 3 5 5 Previously used Ensign Rig # 48 for its 2011 drilling program

Icon Energy 100.8 14.0 Cooper Basin SA 3200 1 n/a n/a Secured the Ensign # 65 rig from North America for June 2012

Total / Average 3,060 50 64 68

Appendices C

Mechanical Rig Overview

# PARTS

1 Mud tank

2 Shale shakers

3 Suction line (mud pump)

4 Mud pump

5 Motor or power source

6 Vibrating hose

7 Draw-works (winch)

8 Standpipe

9 Kelly hose

10 Goose-neck

11 Traveling block

12 Drill line

13 Crown block

14 Derrick

15 Monkey board

16 Stand (of drill pipe)

17 Pipe rack (floor)

18 Swivel

19 Kelly drive

20 Rotary table

21 Drill floor

22 Bell nipple

23 Blowout preventer (BOP) Annular

24 Blowout preventers (BOPs)

25 Drill string

26 Drill bit

27 Casing head

28 Flow line

Rig-3 & Accommodation Camp Mechanical Rig Diagram

Drilling Operations

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14

Drill vertical well & core

Assess core, mobilise frac gear

Frac vertical wells

Observe & test gas flows

Book contingent resource

Evaluate results, design pilot

Drill horizontal well

Multi-stage fraccing & flow test

Appendices D

Unconventional Drilling Overview

43

Shale & tight gas production can be described as more akin to a mining operation due to the almost continual drilling required to offset declining production rates

Hydraulic Fraccing stages

Wellhead

Wellbore Protective Steel Casing

Target Formation

Avg. D

ep

th: 2

,00

0 m

– 4,5

00

m

Vertically Stimulated zones

Unconventional Exploration To Production Typical Shale / Tight Sands Well

Evaluation phase: It is typical for a number of wells to be drilled, employing different completion and fracturing techniques to see which works best

Production phase: The rapid decay rates require that in order to meet a baseload production profile numerous wells are required with continual drilling of replacement wells

30-40 Days

Trade-off Between Costs & Flow Rates Against Scale

Total potential reserve size

Cost per unit of gas

Volume of gas per volume of rock

1,0000 10 1 0.1 0.00001 Permeability (md)

Conventional Tight Shale

+40 Days

Demand growth will depend on prices both for the gas and the commodities being produced. Gas consumption in Western Australia is dominated by mineral processing, mine site and electricity generation. All sectors expect significant growth over the next ten years

Carbon tax from July 2012 is expected to stimulate further demand for gas fired power generation

Demand and supply forecasts indicate a potential gas shortfall of 400 to 600 TJ/day by 2015 in WA alone

The combination of growth and replacement production indicate a need to source at least 1,100 TJ/day of new domestic production by 2020

Appendices E

Domestic Gas Demand & Supply

44

WA’s Domestic Gas Demand & Supply Outlook

TJ/d

Demand

Supply

Source: Beach Energy investor presentation

Appendices F

WA Onshore Gas News Paper Article

45

Onshore Gas Article By Western Australian Business News ( 3 May 2012 )

Appendices F

WA Onshore Gas News Paper Article

46

Onshore Gas Article By Western Australian Business News (Cont.)

Appendices G

Enerdrill Directory

Registered Office: L3, 1 Outridge Cres

Subiaco East WA 6008

Postal Address: PO Box 1335

Midland WA 6936

Board of Directors Role Phone Email

Dermot O'Keeffe Chairman +61 407 072 738 [email protected]

John Wells Managing Director +61 458 567 001 [email protected]

Jim Currie Director +61 418 950 921 [email protected]

Eddie Rigg Director +61 418 942 304 [email protected]

Jon Biesse Alternate Director +61 402 100 450 [email protected]

Legal Advisor Banker Corporate Advisor Company Secretary & Accountant

Hardy Bowen National Australia Bank Argonaut Capital Limited Montague Partners

Level 1, 28 Ord Street 100 St Georges Terrace Level 30, Allendale Square L3, 1 Outridge Cres

West Perth WA 6005 Perth WA 6000 77 St Georges Terrace Subiaco East WA 6008

Phone: 08 9211 3600 Phone: 0 8 9212 7766 Perth WA 6000 Phone: 08 9489 3399

Note: Enerdrill is currently looking for a permanent head office, and is operating out of BRT in the meantime

mailto:[email protected]





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Documents

Information Memorandum in Relation to an $8.5m Equity ... · Information Memorandum in Relation to an $8.5m Equity Capital Raising for Enerdrill Pty Ltd (ACN 147 416 215) May 2012