Commercial E&P Aspects in the Far East

Transcription

1 19th Asia Oil Week, Singapore September 2014 Ian Cross Commercial E&P Aspects in the Far East Moyes & Co.

2 Global Issues Serious capital constraints limit E&P activity with costs out of control Operations cash flow below capital needs E&P companies fallen out of favour in the financial community Large companies and projects drawing out the cash Lack of consensus between buyers and sellers Non-technical is now recognised as a critical issue Contract disputes and complexities constraining investment Government bureaucracy slowing activity 2

3 What Excites the Markets in 2014? East Africa Frontier rift (eg Kenya, Ethiopia) and offshore oil West Africa Emerging pre-salt (eg Angola, Gabon), rebalancing of Nigeria North America GoM Lower Tertiary plays, unconventionals with liquid content South America Unconventionals (eg Colombia, Argentina), Mexico 3

4 Global Acquisition Prices, P Reserves, US$/boe Deepwater and unconventionals dominate transaction values since 2008 US$/boe 4

5 Energy Intelligence View of Country Risk v Reward Above-ground risk relative to commercial potential 5 Data Source: EI, SPE London, June 2014

6 Project Time Lines and Leverage 6

7 The Far East General lack of high-profile successes Markets not seeing return on investment Capital a challenge, and increased farmout activity Constraints on small pool of buyers to evaluate projects High availability of deals for those with cash Private Equity key source of cash, but cautious Myanmar and Malaysia attracting most investor interest 7

8 Far East Players Makes Things Happen Early Entrants & Producers - Caltex (Sumatra) - Chevron/Unocal/Union (Thailand, Kalimantan) - ExxonMobil/Mobil/Stanvac (Sumatra) - ExxonMobil/Esso (Malaysia) - Shell (Brunei, Malaysia) - Total (Kalimantan) Modern Explorers - Pearl/Mubadala - Murphy - Premier - Santos - Talisman Niche Explorers - Coastal - KrisEnergy - Nido - Roc - Soco National Oil Companies - CNOOC - ONGC - Petronas - PTTEP - PetroVietnam 8

9 Withdrawal of North American Giants Anadarko (Indonesia, China) Hess (Indonesia, Thailand) Newfield (Malaysia) Murphy (Malaysia) Noble (China) Talisman (Vietnam, Malaysia, Indonesia) reviewing situation 9

10 Disclosed Farmin & Asset Acq. Opportunities (Global) September ~1,900 global opportunities, by block Strong competition to find partners Data and contractual arrangement challenges Limited staff resources to complete valuations Number of blocks Data Source: DrillingInfo 10

11 Disclosed Farmin & Asset Acq. Opportunities (Far East) September ~270 deals in region Little change over past 12 months Some too small to move the needle Local firms make up large number in Indonesia Number of blocks Data Source: DrillingInfo 11

12 Transactions v Opportunities (Far East) September 2014 Number of blocks Malaysia and Thailand healthy Myanmar should become more active Data Source: DrillingInfo and Moyes & Co database 12

13 Selection of Transactions 2014 PTTEP: purchase of Hess stakes in Thailand Loyz: KrisEnergy: purchase of part Cambodia of Carnarvon s Thai purchase assets from Chevron SONA: purchase equity in two Thai concessions off Salamander Brightoil: purchase of Anadarko s China assets SapuraKencana: purchase of Newfield s Malaysia assets Risco: purchase of Galoc Field from Otto BCP Energy: Nido takeover CEPSA: Coastal takeover Risco: purchase of stake in Lemang from Ramba 13 Source: Moyes & Co

14 CEPSA Takeover of Coastal Energy Completed January 2014 US$2.2 billion deal ~22,000 BOEPD 28% premium to share value Malaysia, Thai assets Coastal share price 14

15 Mitra Energy and Petra Petroleum Tie Up Petra share price LOI entered 28 August 2014 on proposed business combination Options being investigated for takeover or merger Petra on Toronto Venture Exchange (PTL) Canadian fund cornerstone investor in Mitra 15

16 SapuraKencana Energy Purchase of Newfield Malaysia Closed February 2014 US$898 million deal ~23,000 BOPD and 5 MMCFGD Includes SK-310 gas discovery at B-14 16

17 Brightoil Purchase of Anadarko China Completed in August 2014 US$1.05 billion Bohai Bay blocks 11,000 BOPD Britoil share price 17

18 Selection of Bid Rounds & Opportunities Seems more success with direct tender than regular tender China North Korea India Sri Lanka Bangladesh Myanmar Thailand Malaysia Philippines Indonesia 18

19 Public Equity Performance Far East : Big Years Trading at a premium, priced on substantial exploration upside : Bubble Bursts Surface risk, production misses, reserve right downs High-profile dry wells, some costly, no value on technical success Shares dumped in favour of new regions (eg East Africa, Iraq) 2014: Still in the Doldrums Market wise to early exploration hype Lack of high-impact wells Ongoing disconnect between industry and market valuations General drought in M&A activity, but movement 19

20 Public Equity Performance Since September 2012 Companies with all or large part of assets in the Far East (at September 2014) Oil Price Mainly companies subject to M&A discussions, or jump on other news Steady producers Bigger names broadly track oil price Largely juniors, no production, and failure to farm-down 20

21 Malaysian SPAC Companies Special Purpose Acquisition Companies Shell company, no operations or income IPO funds to takeover a business, in 36 months Management must have 10% ownership and relevant experience Company CLIQ Energy Hibiscus SONA Petroleum Reach Energy Region of Interest Asia-Pacific and Caspian focus Australia, Timor Leste, Oman, UAE, Norway Thailand Asia-Pacific focus 21

22 Successful Themes in the Far East Early With Large Positions - Caltex (Sumatra) - Chevron/Unocal/Union (Thailand, Kalimantan) - ExxonMobil/Mobil/Stanvac (Sumatra) - ExxonMobil/Esso (Malaysia) - Shell (Brunei, Malaysia) - Total (Kalimantan) M&A - BP in Indonesia (Arco) - Chevron in Thailand (Unocal, RM) - Chevron in Indonesia (Unocal) - Repsol-YPF in Indonesia (Maxus) - ConocoPhillips in Indonesia (Gulf Canada) Relationships - Asian NOCs (Various) - Japex/Inpex (Indonesia) - Lundin (Malaysia) - Mitsui (Thailand) - Russians (Vietnam) Gas Market Development - BP (Indonesia) - Chevron (Indonesia, Myanmar, Thailand) - Premier (Singapore, Indonesia) - Shell (Brunei, Philippines, Malaysia) - Talisman (Indonesia, Malaysia) - Total (Indonesia, Myanmar, Thailand) 22

23 Opportunities in Far East Technically Prospective & Entry Possible - India - Indonesia - Malaysia - Myanmar - Vietnam Limited Tecchnical Prospectivity - Cambodia - Japan - Laos - Mongolia - Philippines - South Korea - Sri Lanka - Taiwan Political Risk - Afghanistan - North Korea - Pakistan Technically Prospective Acreage Tightly Held - Brunei - China - Thailand Market Challenges - Bangladesh Boundary Issues - Cambodia/Thai - China/Vietnam - China/Philippines 23

24 Summary Far East Companies have serious funding concerns after current programme Renegotiation of contract terms, obligations, periods and terms M&A - to create companies of critical mass - attain significant production volumes - take advantage of suppressed share prices Opportunities on the table which will increase into 2015 High Net-worth Investors moving from property into oil 24