Investor Presentation July 2014

Transcription

1 Investor Presentation July 2014

2 Disclaimer This presentation and the information contained in it does not constitute a prospectus or product disclosure statement, disclosure document, offering memorandum or other offer document relating to Shale Energy, under Australian law or under any other law. This presentation is not and does not constitute an offer, invitation, or recommendation to subscribe for, or purchase any securities in Shale Energy in any jurisdiction, nor does it form the basis of any contract or commitment. The information in this presentation is provided for informational purpose only in relation to marketing to institutional and professional investors. The information in this presentation is subject to change without notice.

3 Shale Energy Overview Well Positioned to Take Advantage of Current Phase of Development in the Williston Basin (Bakken). With no further acquisitions net production to Shale is expected to rise from 25 bbl/d currently to over 250 bbl/d by mid 2016.* The first well operated by EOG Resources completed on May 18 th 2013 and to May 2014 Shale Energy s share of production is over 11,000 barrels before royalties. The second well operated by Sinclair Oil & Gas was completed on 28 th June 2014 and came in at over 1500 bbl/d, a third well is undergoing completion with SM Energy. Shale Energy has a revolving line of credit with Bancfirst of Oklahoma currently set at US$2,000,000 for expansion purposes. * Subject to third party operator risks including, legal, technical, operational and scheduling (timing) risks, and the financial ability of SEL to participate for its share of the costs.

4 History of the Williston Basin (Bakken) Phase 1: Land Grab, Leasing of mineral rights for as little as $500/acre on 3-5 year terms High returns in core area overshadowed mediocre performance outside core area Phase 2 : HBP (Held By Production) Drilling, 2010 Present Scramble to get first well drilled to avoid lease expiration Drilling / Completion capex and lease costs increase Result: basin-wide IRR% reduction Phase 3 : Infill Drilling, Present Day Majority of core leases are now Held By Production Operators begin to develop the remaining inventory Pad drilling reducing capex costs Improved completion designs are increasing EURs IRR% increasing across the basin

5 North Dakota What's driving the Boom? New Oil and Gas Boom driven by Technology 1. Up to 5 economic formations proven. 2. Constant improvements in fracturing practices by leaders EOG and Continental. 3. Front end directional drilling. 4. Down spacing -16 and now up to 32 wells are occurring on individual units 5. Economic Reserve Increasing to over 3.7 Billion BOE. First Full Pattern 160-Acre Development Pilot and 32 wells now commonplace 14 wells drilled in one 1280 (Mar 2013-Mar 2014) 4MB, 3 TF1, 4 TF2, 3 TF3 660 inter-well spacing between same-zone wells

6 The US Shale Play s Shale Energy s projects are in the Bakken, Williston Basin, North Dakota NIOBRARA BAKKEN WOODFORD MARCELLUS Shale Energy s holdings are within 3 separate units containing 3 producing Bakken/Three Forks wells, 14 permitted wells, 14 application wells, and at least a further 6 wells based on engineering reserves (37). BARNETT HAYNESVILLE EAGLE FORD

7 Participating with Major Oil and Gas Developers is a key consideration EOG is a $32billion Market Cap NYSE Company which produces over 100,000 Bopd and 180,000 Mcf of Natural Gas mainly on mainland USA. SM Energy is a $5b NYSE listed company with extensive experience in the Bakken. Sinclair Energy is a 100 year old oil and gas developer, refiner, and distributor. All are Innovators in Horizontal drilling and tight formation spacing. EOG s freight terminal at Stanley, ND Access to Market

8 Shale Energy s Acreage Positions SM Energy: Dorothy Well EOG: Hawkeye Well Sinclair: Yauch Well EOG County: McKenzie Section Size: Well Investment: $260m Shale Energy Share: 3% WI EOG s Est. ROI = 2.57 SM Energy County: Divide Section Size: 1280 Shale Energy: 1.5% WI Sinclair County: McKenzie Section Size: 1280 Shale Energy: 2% WI EOG Resources have 15 additional wells permitted in the Hawkeye unit of Antelope field but have now applied to increase that to 28. SM Energy & Sinclair will typically make application for infill permits 6-12 months after initial production.

9 Shale Energy s Bakken Project Locations SM Energy Core Project Locations Shared with: EOG Resources SM Energy Sinclair Oil & Gas Continental Resources Whiting Hess Baytex Energy Brigham Oil & Gas Sinclair EOG Discovery Wells: Meridian Oil ( first horizontal discovery well #33-11 MOI 1987 produced 350Mbo in 5 years) EOG Resources (Discovery well - Parshall #1-36H, in 2006) Stanolind Oil & Gas (first vertical discovery well 1953, Antelope Field)

10 Current Production and Revenue First Well Current Production of Hawkeye 003 #1 2413H Gross Shale Energy's Gross Share Net Revenue (after Royalty) Production Oil (bbl) * Gas Oil (bbl) (USD) May & June (29 days) 38, , , $81, July (31 days) 49, , , $104, August (31 Days) 45, , , $96, September (30 Days) 43, , , $92, October (31 Days) 40, , , $85, November (30 Days) 32, , $67, December 27, , $57, January(31days) 24, , $53, February(21 days) 16, , $47, March (0 days) $0.00 April(24 days) 24, , $31, May(31 days) 31, , $61, Sum 373, , , $778, *Gas Revenues began in April. Revenue shown net of Royalties, State Tax, and Transport Costs. ** Well Cost $490,000 **(50% increase in well cost due to equipment failure)

11 EOG s 1 st Well Valuation and Actual Production Comparison Assumptions Hawkeye Well Daily Production Compared to Standard Decline Curve over 12 Years Monthly Production attributable to Shale Energy (Barrels) Actual Production Monthly Production Discounted Cumulative Revenue Simple Interest rate 10% Net Oil Price 90 SEA's Share Net Revenue Interest 2.24% Initial Daily Oil Production rate 1400 Bancfirst valuation confirmed value for security purposes YEARS Cost to Shale Energy of each new well US$330,000 Discounted Cumulative Revenue (US$) NPV $2,000, $1,800, $1,600, $1,400, $1,200, $1,000, $800, $600, $400, $200, $-

12 5/1/2014 8/9/ /17/2014 2/25/2015 6/5/2015 9/13/ /22/2015 3/31/2016 7/9/2016 EOG 1 EOG 2 EOG 3 EOG 4 EOG 5 EOG 6 EOG 7 EOG 8 EOG 9 EOG 10 EOG 11 EOG 12 EOG 13 EOG 14 SME 1 SME 2 SME 3 Sinc 1 Sinc 2 Sinc 3 Sinc 4 Well Development Timeframe Existing Permits Only (21 Wells) Well Development Gannt Chart Drilling Period Production Period bbl/d The estimates provided above are based on discussions with the operators, publicly available statements, and observed development practices, the actual timing is subject to change out of Shale Energy s control, and other variables may change the outcomes.

13 Recent Market Acquisitions and Divestitures Kodiak Resources June 2013 Halcón Resources July 2013 Natural Resource Partner June 2013 Undisclosed March 2013 Seller Liberty Resources LLC Seller Resolute Energy Seller Abraxas Petroleum Seller Paramount Resources Ltd Value 660 million Value 75 million Value 35.3 million Value 22.5 million bbl/day 5700 bbl/day 946 bbl/day 343 bbl/day 200 Value per/bbl (US$) $115,789 Value per/bbl (US$) $79,280 Value per/bbl (US$) $ Value per/bbl (US$) $112,500 Region McKenzie County, ND Region North Dakota Region North Dakota Region North Dakota

14 Production Estimation Permitted Producing (18) Net Production (mbbl) Production Estimation Permitted Producing and Application Wells (30) Net Production (mbbl) EOG MIDDLE BAKKEN EOG THREE FORKS 1 st BENCH EOG THREE FORKS 2 nd BENCH EOG THREE FORKS 3 rd BENCH SM ENERGY DOROTHY WELL (THREE FORKS 1 st BENCH) SINCLAIR YAUCH WELL (MIDDLE BAKKEN) Further potential upgrade from infill drilling within SM Energy and Sinclair units

15 Why The Non-Operator Business Model Shale Energy has a Compelling Business Plan Ability to selectively invest in quality near term production acreage as non operator. Window of opportunity to acquire small lease holdings due to multiple well AFE distress. Fragmented nature of non-operator leaseholds will continue to provide growth opportunity as the play matures.

16 Market Listing Shale Energy is looking to a Market Listing Access to capital is essential, good opportunities need quick action. Must utilise greater resources now to capture several years growth certainty. Existing impressive upside over next 18 months but growth continuation needs action. Acquisition or merger may in future be primary goal to improve further on the reserves and valuation.

17 Management 60+ yrs Oil & Gas Experience Richard Pritchard Civil Engineer Graduate, 17 Years experience in Engineering Project Management, and Asset Management, 8 years in the finance industry. Mr. Pritchard has been involved with ASX listed Energy and Industrial companies as CEO, Chairman, and Director as well as successful management of IPO and Reverse listings processes. Mr Pritchard founded Shale Energy in 2007 and has been actively involved in US Shale plays since Mr Pritchard is a member of the Society of Petroleum Engineers (International), and Engineers Australia. Dr. Richard Haren Geologist and Geophysicist with PhD in the latter, over 30 years experience in the resource industry. Dr. Haren has led some of the most challenging and profitable Gold, Copper, Diamond, and Natural Gas exploration studies in the World. Dr. Haren has been CEO, Chairman, and Director of Several ASX listed companies and was General Manager of Planet Gas (ASX:PGS), a US focused CBM developer as well as Technical Director of Molopo Energy Limited (ASX:MPO). Declan Pritchard Margaret Prestidge Graeme Hogan Geophysicist, 30 years experience in the oil and gas exploration industry as a geophysicist has worked in most of the world's major oil & gas provinces and has been involved in a number of significant discoveries. Mr. Pritchard has also been recognised for his development of Energy Storage Technologies by the British Institute of Electrical Engineers. Mr Pritchard has developed a number of patents relating to seismic studies and energy storage. Graduate Lawyer and member of Bar in Oklahoma, USA. Ms. Prestidge has 30 years experience in the US oil and gas industry having worked in many oil and gas companies as General Counsel, including 8 years with EOG Resources. Ms. Prestidge currently runs her own law firm providing expertise within the oil and gas industry which include title examination, Corporation Commission matters, oil and gas litigation. CFO, Mr. Hogan has over 30 years post graduate experience in accounting, finance, treasury and company secretarial roles, including 10 years as the Chief Financial Officer of ASX listed companies including 3 years with ASX listed AGL. Mr. Hogan is a Certified Practicing Accountant and a Fellow of the Governance Institute of Australia.

18 Why Invest? Good inventory of high quality assets. Resource upgrades and acquisitions will continue. Positioned for rapid growth in Rare opportunity to participate in the US Shale Revolution. Low valuation as compared to opportunity. Experienced management.