EUREKA ENERGY LTD (ASX: EKA, Company or Eureka) ASX RELEASE 1 MARCH 2011 PRESENTATION MATERIALS Eureka attaches updated corporate presentation materials for release to the market. EUREKA ENERGY LIMITED Alex Neuling Secretary Technical Information contained in this presentation has been reviewed by Mr C. C. Hodge M.Sc, a consultant to Eureka who has had more than 30 years experience in petroleum geology and has consented to the inclusion of the information in the form and context in which it appears. EUREKA ENERGY LIMITED LEVEL 3, 3 ORD STREET TELEPHONE: +61 8 9321 9337 ABN 46 116 829 139 WEST PERTH WA 6005 FAX: +61 8 6314 1557 www.eurekaenergy.com.au
An Eagle Ford Oil and Gas Producer......with a long-term future Excellence in Oil & Gas Conference Sydney March 1st 2011 1
Introduction Oil and Gas producer and explorer Focussed on Eagle Ford resource play 3P reserves of 5mmbbls + 30 BCF 80% of forecast revenue from liquids Management strategy for growth Reserve and production increase on existing acreage Further land acquisition...and if you think you ve missed the Eagle Ford boat listen up! 2
About Eureka (EKA) Shares on Issue: 207 million Market Capitalisation: $83mm (at $0.40) Debt: Nil Cash: $6.5million (at 31 Dec) Board of Directors Ian McCubbing (Chairman) Mark Wilson (Non-Executive) Peter Mills (Technical Non- Executive) Share Ownership Share Price Performance $0.40 Hugh Wallace-Smith 9.8% 5.6% 3.9% Mr David Neate Directors Other Top 20 All Others 53.1% 27.6% 3
Single Play Focus Single Play Focus ~2,250 net Eagle Ford Shale acres in south Texas Sugarloaf AMI (24,150 gross, ~1,500 net acres 6.25% Working Interest with Av. NRI 75%) Located in the condensate rich window of the Eagle Ford shale Production commenced in mid-2010 now producing from 10 wells 13 new wells being drilled 2011 Net 3P Reserves 5mmbbls + 30BCF Sugarloaf AMI Azucar Pan de Azucar (675 gross acres - 100% working interest + 916 gross acres 9.6% working Interest with Av. NRI 73%) Located in the Eagle Ford oil or condensate-rich fairway First well planned for 2Q 2011 The Eagle Ford trend in south Texas
Eagle Ford Shale Play (map from EIA Oct 2010) 9 th largest field in the world Largest field in the USA since Prudhoe Bay WoodMac rate it #1 in IRR terms of all shale plays Pan de Azucar Sugarloaf AMI 5
Eagle Ford Shale Play (EFS) A A A The EFS is special because it extends >500km laterally, is geologically predictable, and has an EXCEPTIONALLY HIGH LIQUIDS CONTENT. Although gaseous in the reservoir, the EFS is really an oil field at Sugarloaf, 80% of our revenue comes from liquids. A A Oil Wilcox / e.g.coy City Gas / Cond. A The Oil, Gas / Condensate and Gas Fairways depend on the degree of thermal maturity of the EFS which is also a source rock Austin Chalk can also from a part of the overall EFS reservoir e.g.fashing e.g.pawnee Gas The EFS has high organic content and acts as a source rock. Where it is buried >~12,500 it is more likely to yield gas. 6
Fraccing and Production Profiles Conventional vertical wells will not produce from the EFS therefore ~5,000 horizontal wells are drilled into the shale and fracture stimulated 15 25 stages with water and sand to rubble-ize the zone surrounding the well bore The sand ( proppant ) holds the fractures open and allows hydrocarbon to flow freely to surface where it is produced directly to sales Diagram of an 8 stage multi-stage frac. Production from EFS is characterised by high initial decline rates and hyperbolic decline over many years (30 years ++) - no water. These initial high production rates mean that wells pay out very quickly ~6 months in the SL area Indicative curve only from Petrohaw k 2009 presentation Years 7
Pan de Azucar Sugarloaf AMI 8
Sugarloaf AMI (6.25%) Area: 24,150 acres Operated by Hilcorp; an accomplished, technically able, Houston-based operator Eagle Ford at 12,500 / 5,000 laterals up to 23 stage multi-stage fracs Well costs ~US$8 million In practice, wells hold 700-1000ac...therefore 25-30 wells needed to hold AMI by production Conoco Acreage 10 Producing Wells 5 Wells Drilled or Drilling Condensate (bbls/mmcfg) Rancho Kennedy Kowalik Weston PMT (2.32%) Morgan Easley Other Hilcorp Acreage Jordon Direct Assets Buehring Hollman Luna Gilley May Urrutia Schematic of Sugarloaf AMI ~3 km 9
Net Reserves to EKA Total 3P Reserves 5mmbbls + (30BCF) NPV $187mm* = $0.90/share Reserves Report in Progress Jun 30 2010 Proved Dec 31 2010 3.4 (19) 0.5 (4) 1.1 (7) Probable Possible To be released within a few weeks 100% Sugarloaf reserves = 100mmbbls + 1/2TCF gas 288 locations: each well has 80 acres gives 7 Proved locations (1 PD, 6PUD) + 12 Probable locations (288/19 = 15 wells to covert to 2P) Expect significant increase in Proved and 2P Reserves (because 9 wells on production at 31 Dec vs 5 wells at 30 Jun) EUR s / well unlikely to change significantly due to limited additional production history * From NSAI reserves report 1/7/2010 using 10% discount rate. For economic assumptions, see Appendix. 10
Sugarloaf AMI production and reserves ramp up... 10 wells currently on production 22 estimated by 2011 year end 2P reserves anticipated to substantially increase in next reserves report Likely that 3P reserves will be converted to 2P by year end AMI to be Held By Production ~mid-2012 11
Pan de Azucar (Fayette County) Gonzales County Penn Virginia announced 1 st well Gardner #1 IP 1,100 BOPD + 1mmcgpd. Program of 29 wells / 3 rigs / $165mm Gonzales County EOG numerous completions IP 700 2000 bopd Sugarloaf AMI Flatonia well currently being drilled by GeoResources (~10km to the SW of PdA) Excellent production results now being achieved along trend to the NE away from the Sugarloaf area Newly drilled wells by Magnum Hunter 362 and 500k BOE EUR. The latter reported as a 1,335 boepd gusher it has substantially de-risked the play towards the NE. Several wells planned for 2011 12
Pan de Azucar (100% / 9.6%) (previously Fayette or Magueyitos) EKA originally held 761 acres 100% Since then, activity has increased significantly on trend with rates as good as Sugarloaf EKA now holds 1,591 gross acres and done a deal with GeoResources which allows EKA to participate in a well for just $0.8mm Success from this well will de-risk EKA s adjacent 100% acres (675 acres) Currently little or no market recognition for EKA s 761 net Pan de Azucar acres factored into the share price Blackjack Springs Unit EKA 9.6% 916 acres EKA 100% 675 acres First BSU well to be drilled 2Q 2011 For location, see previous slide 13
Timing of Operations* Year 2010 2011 Quarter Ending Dec Mar Jun Sep Dec Sugarloaf Wells 6 7 Pan de Azucar Well 1 Expected no. of Producing Wells (cumulative) 9 15 16 23 23 * Current best estimate. In practice, timing of operations is subject to change at short notice depending on factors such as Operator changes in priority, leasing practicalities, weather, availability of drilling and frac equipment etc. 14
Outlook Sugarloaf The 2011 program is to drill and put onto production up to 13 new wells We will continue to focus on securing acreage by production and converting remaining Possible reserves to 2P Revenue: January $95,000, February $289,000...hereafter will depend on timing of new wells Maximum annual EKA cashflow $65mm in 2017 (Sugarloaf alone - based on NSAI reserves report) Once acreage is secured, Hilcorp operator will focus on efficiencies and cost reduction Pan de Azucar Nearby GeoResources Flatonia well currently drilling results expected soon First EKA well 2Q 2011 With success, a reserves report could be commissioned before year end 15
Summary Eureka has a single play focus in the Eagle Ford Shale the best in the world due to its extraordinary liquids content We will drill 13 new wells and can expect to have up to 23 producing wells by year end... We will therefore accumulate solid production revenue during the year At least 80% of that revenue will come from oil With 288 well locations at Sugarloaf alone and a field life of 35+ years the company has a long term future We have booked 3P reserves of 5mmbbls oil + 30BCF gas at Sugarloaf plus significant prospective resources at Pan de Azucar Independent (pre-tax) NPV of Sugarloaf alone at ~US$187mm represents a massive option value on a stock trading at a market cap of ~A$83mm 16
Disclaimer This document has been prepared by Eureka Energy Limited ( Eureka ) in connection with providing an overview to interested analysts and investors. This presentation is being provided for the sole purpose of providing preliminary background financial and other information to enable recipients to review the business activities of Eureka. This presentation is thus by its nature limited in scope and is not intended to provide all available information regarding Eureka. This presentation is not intended as an offer, invitation, solicitation, or recommendation with respect to the purchase or sale of any securities. This presentation should not be relied upon as a representation of any matter that a potential investor should consider in evaluating Eureka. Eureka and its affiliates, subsidiaries, directors, agents, officers, advisers or employees do not make any representation or warranty, express or implied, as to or endorsement of, the accuracy or completeness of any information, statements, representations or forecasts contained in this presentation, and they do not accept any liability or responsibility for any statement made in, or omitted from, this presentation. Eureka accepts no obligation to correct or update anything in this presentation. No responsibility or liability is accepted and any and all responsibility and liability is expressly disclaimed by Eureka and its affiliates, subsidiaries, directors, agents, officers, advisers and employees for any errors, misstatements, misrepresentations in or omissions from this presentation. Any statements, estimates, forecasts or projections with respect to the future performance of Eureka and/or its subsidiaries contained in this presentation are based on subjective assumptions made by Eureka's management and about circumstances and events that have not yet taken place. Such statements, estimates, forecasts and projections involve significant elements of subjective judgement and analysis which, whilst reasonably formulated, cannot be guaranteed to occur. Accordingly, no representations are made by Eureka or its affiliates, subsidiaries, directors, officers, agents, advisers or employees as to the accuracy of such information; such statements, estimates, forecasts and projections should not be relied upon as indicative of future value or as a guarantee of value or future results; and there can be no assurance that the projected results will be achieved. Prospective investors should make their own independent evaluation of an investment in Eureka. Nothing in this presentation should be construed as financial product advice, whether personal or general, for the purposes of section 766B of the Corporations Act 2001 (Cth). This presentation consists purely of factual information and does not involve or imply a recommendation or a statement of opinion in respect of whether to buy, sell or hold a financial product. This presentation does not take into account the objectives, financial situation or needs of any person, and independent personal advice should be obtained. This presentation and its contents have been made available in confidence and may not be reproduced or disclosed to third parties or made public in any way without the express written permission of Eureka. 17
Appendix 1 NPV10 Assumptions Applied by NSAI for valuation purposes. NSAI are a group of leading USA based petroleum engineering consultants. 18 NPV is calculated in Real terms, after State taxes, future Capital Costs and Operating Costs but before Company Tax