SEH Investor Presentation 8 Oct 09 - Sino Gas & Energy · Linxing: China United Coal Bed Methane Company (‘CUCBM’) Sanjiaobei: Petrochina Coal Bed Methane (‘Petrochina CBM’)

Sino Gas & Energy Holdings Limited Sam Snyder – Chairman / Stephen Lyons – Managing Director October 2009

  Australian gas exploraEon and producEon company

  PorGolio of gas assets in China

  Extensive exploraEon and appraisal acEvity undertaken on gas assets over the past four years

  CompleEng appraisal program with the aim of moving to development

  Responding to the growth opportuniEes and structural changes in China as the country focuses on clean energy

Addressing the growing demand for clean energy in China

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ASX listing Sep 09

ASX code SEH

Price on 7 Oct 09 $0.20 Market cap (incl listed options @ exercise price) $53.6m

Shares on issue 149.2m

Options on issue 86.5m

Cash at 30 Sep 09 $7.6m

Debt at 30 Sep 09 $14.5m

  Texaco China pursued a strategy of developing CBM assets – onshore basin appraisal found the Ordos Basin to be the most prospecEve

  Over several years Texaco China built a posiEon of approx. 12,500 km2

  Following Chevron’s acquisiEon of Texaco in 2001, a global review of the combined assets deemed the Ordos CBM assets to be non-‐core

  SEH was established in mid-‐2005 and soon aWer took the opportunity to acquire the most prospecEve of Texaco’s CBM assets

  Considerable funds were spent by Texaco on the Ordos CBM assets – they were “drill ready” when SEH acquired them

  SEH now has 3,700 km2 of acreage where work done over the last four years has idenEfied 2.7Tcf (100%) of recoverable resources

Historical background

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  Sam Snyder – Chairman: 30+ year Chevron/Texaco. Former MD Chevron China, and prior to that MD Texaco China

  Gavin Harper – Non Exec Director: 30+ years Chevron. MD Chevron’s gas business in Korea

  John Chandler – Non Exec Director: 30+ years O&G lawyer

  Bernie Ridgeway – Non Exec Director: Chartered Accountant. Extensive ASX experience

  Stephen Lyons – Managing Director: FoundaEon shareholder in SEH. Chartered Accountant with broad internaEonal experience

  Simon Marsden – Technical Manager: Petroleum engineer, 30+ years worldwide Shell, last 10 years onshore China in Ordos basin

  Supported by mulEfuncEonal staff group

Board & management has extensive operaEng experience in Chinese gas projects

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  Large acreage posiEon in the Ordos Basin

  Ordos Basin is the second largest gas basin in China

  Ordos Basin producing 1.4Bcf/day

  SEH has two PSC’s over approx. 3,700km2, with Government partners in both PSC’s (including PetroChina)

Acreage located in the second largest gas basin in China

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  Close proximity to major ciEes Tiayuan and Yulin

  Expanding gas pipeline network and other paths to market

  Technical risk substanEally reduced – adjacent to Mizhi gas field developed by PetroChina (SEH’s partner on Sanjiaobei PSC)

  Mizhi gas field has the same sand intervals currently producing average flow rate range between 350-‐1MMscf/day

Acreage is close to markets and infrastructure

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Large recoverable gas resource

7 (1) Source: RISC Technical Report July 2009, included in the company’s Prospectus dated 29 July 2009, Resources classification as per Society of Petroleum Engineers (SPE) guidelines, P90 - low case, P50 - mid case, P10 - high case. (2) SGE has 100% of the gross working interest in the Linxing PSC and is formalising the take-up Chevrons 50% interest in the Sanjiaobei PSC’s. Figures represent SEH’s share of recoverable resources (C + P) after completion of take-up.

411

1747

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206

956

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500

1000

1500

2000

2500

3000

3500

4000

4500

P90(low) P50(mid) P10(high) TG

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esou

rces

- B

cf

Contingent Resources Prospective Resources

Independently Verified TGS Resource (100%) 1,2   ExploraEon success has established substanEal independently verified conEngent and prospecEve resources – 2.7Tcf (100%) at P50 (mid)

  Progressively upgrading ConEngent Resources to Reserves

  Expected monetary value (independently verified) of A$512m 1,2

  China’s long term energy shortage is driving ambiEous plans

  Focus on clean sources of energy

  The 11th Five Year Plan (2006 to 2010) calls for 10 BCM of CBM producEon by 2010, doubling by 2020

  Gas prices around US$5.46/Mscf and expected to rise further also support industry growth

The Chinese Government is supporEng aggressive plans to develop the domesEc gas industry

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5

10

15

20

25

30

35

40

45

50

Pro

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Source: Research Centre of the Oil and Gas Resources, Ministry of Land & Resources (MOLAR). Asia Pacific UnconvenConal Gas Summit, Beijing China, April 2009

USA

CHINA

  2006 to 2008 – US$34m spent

  8 TGS wells and 2 CBM wells drilled

  Tested 3 wells

  Extensive sub-‐surface studies   Demonstrated commerciality on

Tuban Prospect

SEH has already undertaken substanEal acEvity

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CBM potenEal a catalyst for value

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  Building on CBM drilling and tesEng undertaken in 1990’s, SEH drilled 2 CBM exploraEon wells in 2006 (one in each PSC)

  Principal targets were coal seams 4/5 and 8/9

  Evidence from previous core hole data demonstrates laterally conEnuous coal seams across large areas and coal of adequate quality to provide an apracEve CBM target

  To the south of acreage, Orion reported to be having success with horizontal CBM wells

CSG is a strategically valuable asset

11 Source: Company announcements and Independent Experts Reports

  AcEve work program in place for the balance of 2009

  IdenEfying a 50 km2 area ‘sweet spot’ within Tuban Discovered Area to take through to commercial development and reserves cerEficaEon

  MulEple well producEon pilot program at commencement of field development

  TargeEng 100-‐150 Bcf 2P reserves by late 2010/early 2011   Commercial gas producEon expected in 2012

2009/2010 – exploraEon and appraisal acEviEes to grow reserves

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  SEH is focused on addressing the growing demand for clean energy in China

  Experienced Board and Beijing based management team

  PorGolio of gas assets in the second largest gas basin in China

  Large recoverable gas resource – 2.7Tcf (100%) at P50 (mid)   Established gas markets with major ciEes in close proximity

  ExisEng paths to commercialisaEon

  ExploraEon and appraisal acEviEes focused on upgrading resources to reserves and moving to producEon

  Well posiEoned to create significant shareholder value

In summary

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Realising project potenEal – a staged approach

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SEH acreage adjacent to Mizhi CNPC TGS Field

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  SEH acreage is adjacent to Mizhi

gas field developed by PetroChina

(SEH’s partner on Sanjiaobei PSC)

  Mizhi gas field commenced

development in 2005

  Approx. 200 wells now producing   Average flow rate range between

350Mscf/d to 1MMscf/d

  Similar producing sands as SEH’s Tuban Prospect

  PotenEal for SEH to share faciliEes in development

Tuban TGS Prospect 2.7Tcf

Recoverable Resources (P50,100%)

Tuban TGS Discovered

Area 420km2 900Bcf

(P50,100%)

Linxing

Sanjiaobei

TB05

Mizhi CNPC TGS Field

Existing wells Proposed new wells

10km

Phase 1 development concept

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  IdenEfy a 50 km2 area ‘sweet spot’ within Tuban Discovered Area to take through to commercial development and reserves cerEficaEon

  Similar sand intervals as CNPC’s Mizhi field

  Provides foundaEon for mulEple well producEon pilot program at commencement of field development

  TargeEng 100-‐150 Bcf 2P (100%) reserves late 2010/early 2011




Area 420km2 900Bcf

(P50,100%)

Linxing

Sanjiaobei

TB05

Mizhi CNPC TGS Field

Phase 1 Concept


10km

2009/2010 appraisal program

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  Fracc and test exisEng wells to demonstrate commerciality

  Drill and test TGS wells to idenEfy a ‘sweet spot’ to take the project

through to reserves cerEficaEon and

development

  Validate conEngent and recoverable resources as commercial gas

discovery

  ConEnue to update and validate the extent of TGS reservoir fairway




Area 420km2 900Bcf

(P50,100%)

Linxing

Sanjiaobei

TB05


10km Mizhi CNPC TGS Field

Appraisal Program

Appendix

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Bcf -‐ Billion (109) cubic feet/ Tcf -‐ Trillion (1012) cubic feet CBM/CSG – Coal Bed Methane, Coal Seam Gas Mscf – Thousands of standard cubic feet of gas Mscf / day – Thousands of standard cubic feet of gas per day – a measure of the rate of flow GJ – gigajoule / PJ – petajoule P90, P50, P10 – 90%, 50% & 10% probabiliEes respecEvely that the stated quanEEes will be equalled or exceeded Reserves – Reserves are those quanEEes of petroleum anEcipated to be commercially recoverable by applicaEon of development projects to known accumulaEons from a given date forward under defined condiEons. Reserves must further saEsfy four criteria: they must be discovered, recoverable, commercial, and remaining (as of a given date) based on the development project(s) applied as defined in the SPE-‐PRMS. ProspecBve Resources – Those quanEEes of petroleum that are esEmated, as of a given date, to be potenEally recoverable from undiscovered accumulaEons as defined in the SPE-‐PRMS POS – Probability of Success SPE-‐PRMS – Society of Petroleum Engineers, American AssociaEon of Petroleum Geologists, World Petroleum Council and Society of Petroleum EvaluaEon Engineers Petroleum Resources Management System TGS – Tight Gas Sandstone (typically permeability less than 1 mD)

Conversion factors: Coal seam gas -‐ 1 Bcf = 1.045PJ; 1TCF = 10,450PJ, 1m3 of gas = 35.3 scf of gas

Glossary

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SEH capital structure

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Shares (m)

Options (m)

Converting Notes ($m)

On issue 149.2 1.3 (1) -

Rights issue 2010 options @$0.25 - 31.6 (2) -

Rights issue 2011 options @$0.50 - 31.6 (2) -

Sub-underwriting Options 17.5 (3) -

Underwriter Options - 4.4 (4) -

Secured Convertible Loan expiring on 30 Sep 10 12.5

Unsecured Convertible Loan expiring on 30 Jun 10 2.0

Total 149.2 86.5 14.5

Substantial shareholder %

Imdex Limited 15

China Opportunity SA SICAR 9

Wear Services Pty Ltd 7

Notes:

(1)  OpEons exercisable at various dates at $0.50 under a ESOP scheme

(2)  OpEons exercisable at $0.25/share on or before 30 June 2010 (2010 opEons) and $0.50/share on or before 31 December 2011 (2011 opEons)

(3)  OpEons exercisable at $0.25/share on or before 15 Sep 11. Escrow for 24 mths

(4)  OpEons exercisable at $0.50/share on or before 15 Sep 11. Escrow for 24 mths

(5)  Secured $12.5m ConverEble Loan expiring 30/09/2010 at greater of $0.20 or 30 day VWAP. OpEons expiring 30 June 2010 expected to be used to parEally reEre this loan

(6)  Unsecured $2m ConverEble Loan expiring 30/06/2010 at $0.50, plus bonus shares

Note: Total shares held by Board and Management = 8%

Tight Gas Sandstone (TGS)

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  TGS refers to gas extracted from low permeability sandstone, limestone or

other rock formations

  The pore space in the conventional reservoir are interconnected so that gas can flow more readily from the rock. In comparison, the pores in the tight gas

reservoir are irregularly distributed and the porosity is much less than in the

conventional reservoir

  Very narrow capillaries connect the pores resulting in very low permeability

and lower gas flow rates   Special methods of stimulating the wells such as fracturing and acidising, are

necessary to stimulate the wells and extract gas

  SGE’s well stimulations to date has used hydraulic fracturing methods

depicted in the figure below

Cross Section of a Normal Reservoir and a Tight Gas Sands Reservoir. Source: United States Geological Survey

Conventional Reservoir

Tight Gas Reservoir

Overview of Chinese ProducEon Sharing Contracts (PSC’s)

  Interests held under international standard PSC’s approved at the highest level of Chinese Government

  PSC’s valid for a period of 30-35 years and comprise a

Exploration Period, Development Period and Production

Period

  SGE’s PSC’s all currently in their Exploration Period, with

Exploration costs borne by the Operator

  Government partner for each PSC:

Linxing: China United Coal Bed Methane Company (‘CUCBM’)

Sanjiaobei: Petrochina Coal Bed Methane (‘Petrochina CBM’)

  Provide the right to Government partner to join the project at

the start of the Development Period, paying their proportionate share of the costs

  Production revenue distributed to PSC participants in

accordance with a Cost Recovery Model

  Requirement to operate according to international practices

for safety, health and the environment

PSC

Working Interest

(Exploration)1

Net Interests (Production)

(1) Current Status

Linxing SGE 100%

SEH 64.75% CUCBM 30.0% CBM Energy

5.25% (2)

Exploration Period extended to 31 Aug 11.

Sanjiaobei SGE 100% SEH 49.0%

PCBM 51.0%

Exploration Period expired 31 Aug 08.

Extension has been on hold due to ownership

restructure of CUCBM / PCBM. SGE negotiating

for further 1 year extension with

PetroChina CBM.

(1) Chevron is in the process of transferring its 50% working

interest in the Sanjiaobei PSC to SGE. Documentation now

underway for final approval from Chinese Ministry of Commerce

(2) CBM Energy hold an option to gain an interest of 5.25% at Development at a cost of 7.5% of the historical costs and

expenses

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This presentaEon is being provided for the sole purpose of providing the recipients with background informaEon about Sino Gas & Energy Holdings Limited (SEH). No representaEon, express or implied, is made as to the fairness, accuracy, completeness or correctness of informaEon contained in this presentaEon, including the accuracy, likelihood of achievement or reasonableness of any forecasts, prospects, returns or statements in relaEon to future mapers contained in the presentaEon (“forward-‐looking statements”). Such forward-‐looking statements are by their nature subject to significant uncertainEes and conEngencies and are based on a number of esEmates and assumpEons that are subject to change (and in many cases are outside the control of SEH, its Directors and Officers) which may cause the actual results or performance of SEH to be materially different from any future results or performance expressed or implied by such forward-‐looking statements. This presentaEon provides informaEon in summary form only and is not intended to be complete. It is not intended to be relied upon as advice to investors or potenEal investors and does not take into account the investment objecEves, financial situaEon or needs of any parEcular investor. Due care and consideraEon should be undertaken when considering and analysing SEH’s financial performance. All references to dollars are to Australian Dollars unless otherwise stated.

To the maximum extent permiped by law, neither SEH nor its related corporaEons, Directors, employees or agents, nor any other person, accepts any liability, including, without limitaEon, any liability arising from fault or negligence, for any loss arising from the use of this presentaEon or its contents or otherwise arising in connecEon with it.

This presentaEon should be read in conjuncEon with other publicly available material. Further informaEon including historical results and a descripEon of the acEviEes of SEH is available on our website, hpp://www.sino-‐gas-‐energy.cn. The statements of resources in this presentaEon are based on esEmates in the Technical Report prepared by RISC Pty Ltd and included in full in the Company's Prospectus dated 29 July 2009. The Report was prepared by RISC Pty Ltd, in accordance with the Society of Petroleum Engineers (SPE) Petroleum Resource Management Systems standard.

Disclaimer

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Stephen Lyons

Managing Director

Sino Gas & Energy Holdings

P: +86-‐10 6530 9260 M: +86-‐139 1148 1669

E: slyons@sino-‐gas-‐energy.cn

Ronn Bechler

Managing Director

Market Eye

P: +61-‐3 9595 3857 M: +61-‐400 009 774

E: [email protected]

For further informaEon please contact…

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Documents

SEH Investor Presentation 8 Oct 09 - Sino Gas & Energy · Linxing: China United Coal Bed Methane Company (‘CUCBM’) Sanjiaobei: Petrochina Coal Bed Methane (‘Petrochina CBM’)