PETSEC ENERGY An Exploration and Production Company USA and CHINA Asia Upstream Conference - Singapore February 2008 1
Forward Statement Disclaimer The information presented herein contains predictions, estimates and other forward looking statements that are subject to risk factors that are associated with the oil and gas business. Although the company believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved. Important factors that could cause actual results to differ materially from those included in the forward-looking statements include the timing and extent of changes in commodity prices for oil and gas, the need to develop and replace reserves, environmental risks, drilling and operating risks, risks related to exploration and development, uncertainties about the estimates of reserves, competition, government regulation and the ability of the company to meet its stated business goals. All references to dollars in this presentation are to US currency, unless otherwise stated. 2
Petsec Energy A growth exploration & production company Operations in Gulf of Mexico / Gulf Coast, USA and Beibu Gulf, CHINA USA - Current production: ~48 MMcfe/d gas - Estimated 2008 Production: ~15 Bcfe gas - Estimated 2008 cashflow: ~US$85 million ($5.70/Mcfe margin) - Estimated reserves: ~48 Bcfe gas (proved & probable) - Prospect inventory: ~330 Bcfe gas risked CHINA - Estimated 2P reserves: 3.6-4.6 MMbbl oil - Prospect inventory: 5-8 MMbbl oil Australian Stock Exchange listed: Symbol: PSA USA. OTC Pink Sheets ADR s: Symbol: PSJEY.PK Market capitalisation (Feb 26, 2008): US $165 million 3
Market Capitalisation US$ 165 million Share Price A$1.17 (27/02/08) 52 week High $2.10 Low $1.03 Placement 15 million shares @ $2 Main Pass 19 #2&3 wells success Vermilion production resumes Main Pass 19 commences 6.12 South Oil Discovery Placement 11.5 million shares @ $2.40 A$ 3.50 3.00 2.50 Hurricanes Katrina & Rita 2.00 Main Pass 19 #1 success Main Pass 18 G-6 success 1.50 1 st Half Production Main Pass 19 G-7, G-4, G-5 success Vermilion 257 Dry Hole Mobile Bay 6 Successes 1.00 0.50 0.00 M ay-05 A ug-05 Nov-05 Feb-06 M ay-06 A ug-06 Nov-06 Feb-07 M ay-07 A ug-07 Nov-07 Feb-08 Issued shares: 154,059,341 Options unlisted: 6.1 million ASX Symbol: PSA OTC Symbol: PSJEY.PK 1 ADR: 5 Ordinary Shares 4
Directors & Australian Management Terry Fern Chairman & CEO Over 30 years in international petroleum & minerals exploration, development & financing Bachelor of Science degree Exploration Geophysics & Natural Resource Investment experience Director of Oceana Gold Inc David Mortimer AO - Non Executive Director, Chairman of Audit Committee & Remuneration Committee Over 35 years of corporate finance experience Bachelor of Economics degree, FCPA Chairman of Leighton Holdings, Australia Post, Crescent Capital Limited, Defence Procurement Advisory Board. Director of Macquarie Infrastructure Investment Management Ltd. Peter Power - Non Executive Director Chairman Technical Review Committee, Member of Audit Committee & Remuneration Committee Over 40 years experience in international oil and gas industry Bachelor of Science, PhD Chairman of Metgasco Limited, Elk Petroleum, Austex Oil Limited Former Managing Director of Ampolex Ltd Former Chairman Australian Petroleum Production & Exploration Association Fiona Robertson CFO Over 25 yrs experience in resource finance & banking Craig Jones GM Corporate & Company Secretary Over 25 yrs corporate finance experience, FCPA 5
Growth Achieved 2002-2007 2002-2007 Exploration 37 wells 28 successes Reserves 69.6 Bcfe 31% CAGR Production 8.1 Bcfe 16% CAGR Gas Price received US$7.24/Mcf Operating Margins US$5.59/Mcf 72% Net cash flows US$46 million 23% CAGR 6
Consistent Growth of Reserves 2002 2007 Wells Drilled/Successful USA Number of wells 12 10 8 25 successes from 32 drilled - 78% success 6 4 2 0 2002 2003 2004 2005 2006 2007 CHINA Successful Unsuccessful Proved and Probable Reserves - Year End 3 (+2 sidetracks) successes from 5 wells drilled - 60% success Consistent Reserves Growth CAGR 31% 80 60 40 20 0 69.6 2002 2003 2004 2005 2006 2007 7
Financial Performance 2003 2007 Compound Annual Growth Rate Production Bcfe 10 8 8.2 8.1 6 4 year average 2003-2007 Production 8.1 Bcfe 16% 4 2 0 2003 2004 2005 2006 2007 Net Revenue US$ Million 75 60 59.2 64 45 Revenue US$64m 26% 30 15 0 2003 2004 2005 2006 2007 EBITDAX US$ Million 50 45.3 46 EBITDAX US$46m 23% 40 30 20 10 0 2003 2004 2005 2006 2007 8
USA Gulf of Mexico, Gulf Coast 6 ONSHORE PROPERTIES 4 producing 59 OFFSHORE LEASES 18 held by production 9
Gulf of Mexico Vast Infrastructure High oil & gas prices - ready market for discoveries Highly productive area - leases readily available Extensive Infrastructure: one land owner - Regulator, 1,141 oil & gas fields, 14,000 miles pipeline Majors moving to deep water leaving opportunities for proven shelf acreage e.g. W&T Acquisition of KERR-McGEE SHELF 150 MMCFe/D & 330 BCFe MMS ESTIMATE GOM SHELF Remaining Proved Reserves 4,870 MMBO & 21.5 TCF 777 MMBO & 15.4 TCF Unproved Reserves 3,361 MMBO & 9.0 TCF 201 MMBO & 3.1 TCF 10
Gulf of Mexico - Lease Turnover 11
Current US Gas Prices Petsec av. price received 2007: US$7.93/Mcfe Nymex: Spot Price - US$9.14/Mcf (at 26 Feb 08) 12 month forward strip gas price: US$9.64/Mcf (at 26 Feb 08) 24 month forward strip gas price: US$9.39/Mcf (at 26 Feb 08) US$/Mcf $16.00 $14.00 $12.00 $10.00 $8.00 12mth strip, 3 year average $8.38 $6.00 $4.00 $2.00 $0.00 Feb-2005 May-2005 Aug-2005 Nov-2005 Feb-2006 May-2006 Aug-2006 Nov-2006 Feb-2007 May-2007 Aug-2007 Nov-2007 Feb-2008 12
US Natural Gas Production, Consumption, and Imports History 30 Projections 26.1 Tcf (trillion cubic feet) 25 Consumption Net Imports 21% 16% 20 20.5 Tcf Production Natural Gas Net Imports, 2005 and 2030 (trillion cubic feet) 7 15 6 10 5 4 3 2005 2030 4.5 3.0 2 5 1 0.9 0.6 0 Pipeline 0 1960 1970 1980 Source: EIA Annual Energy Outlook 2007 Liquefied Natural Gas 1990 2000 2010 2020 2030 13
2007 Production 2007 Production: 8.1 Bcfe 2007 Operating Cashflow: US$46 million (margin of $5.71/Mcfe) Producing fields: Main Pass 18/19 Vermilion 244/258 Mobile Bay (Production started November 2007) Main Pass 20/270, Chandeleur 31/32, 4 onshore fields. (Acquired and producing from 8 November 2007) Vermilion 258 Main Pass 19 Mobile Bay 952A 14
2008 Production Estimated 2008 Production: ~ 15 Bcfe Estimated 2008 operating cashflow: ~ US$85 million @ US$5.70/Mcfe margin Producing fields - Vermilion 258 - Main Pass 18/19 - Mobile Bay Fields - Fields Acquired November 2007 3 Offshore*, 4 Onshore* Vermilion 258 Main Pass 19 Main Pass 20* Main Pass 270* Mobile Bay 952A Chandeleur 31* 4 Onshore Fields* Onshore Humphreys South Sunrise South Thornwell Lapeyrouse NEW NEW ORLEANS ORLEANS VR / SMI Area VR 272/SMI 102 VR 171/SMI 15 MP / CA Area MP 20 CA 31 MP 270 15 EI/SS Area EI 110
Acquisition of 7 gas fields Gulf of Mexico and Gulf Coast, USA Acquisition completed 8 November - consideration US$104 million 7 gas fields acquired - Offshore: - Onshore: Main Pass 20, Main Pass 270 & Chandeleur 31/32 Four Louisiana fields Impact on US Reserves & Production - Acquired 1P reserves of 23.9 Bcfe Purchase price equates to US$4.35/Mcfe for 1P reserves Acquired assets expected to produce 8-9 Bcfe in 2008 Lease Operating Expenses, Capex & P&A forecast at US$1.25/Mcfe Current EBITDAX margin: US$5.71/Mcfe Current 12 month gas strip: US$9.39/Mcfe 16
Funding Fully debt funded by US$135 million facility US$105 million Senior Debt Facility 3 year revolving debt facility of US$75 million Short term facility of US$30 million to be repaid from cashflow within 5 months US$30 million Subordinated Debt repayable in 2011 Gas pricing risk reduced by hedging 15 Bcfe, approximately 50% of next 2 years production, over which time majority of debt will be repaid No new equity was required to complete transaction 17
Mobile Bay Development Gulf of Mexico, USA Six gas discoveries made late 2006/early 2007 at Mobile Bay 873, 993, 994, 950, 951 & Viosca Knoll 26 Two facilities set at Mobile Bay 952A and 953 Mobile Bay wells commenced production in November 2007 Current production rate ~9 MMcf/day 18
Onshore Area - Four fields Humphreys 2 wells, Petsec Operated South Sunrise 2 wells, Badger Operated South Thornwell 1 well, Manti Operated Lapeyrouse 1 well, Petsec Operated Reserves 94% natural gas Onshore Humphreys South Sunrise South Thornwell Lapeyrouse NEW ORLEANS MP / CA Area MP 20 CA 31 MP 270 VR / SMI Area VR 272/SMI 102 VR 171/SMI 15 EI/SS Area EI 110 Acquired 8 November 2007 South Sunrise Humphries 19
Consistent Growth of Reserves 2002 2007 Wells Drilled/Successful Number of wells 12 USA 10 8 6 25 successes from 32 drilled 78% success 4 2 0 2002 2003 Successful CHINA 3 (+2 sidetracks) successes from 5 wells drilled - 60% success 2004 2005 2006 2007 Unsuccessful Proved and Probable Reserves - Year End 69.6 80 60 40 Consistent Reserves Growth CAGR 31% 20 0 2002 2003 2004 2005 2006 2007 20
Significant Exploration Portfolio USA USA Prospect inventory of 330 Bcfe risked - 59 Offshore Gulf of Mexico Leases - 2 Onshore Exploration Projects 21
Gulf of Mexico Exploration West Cameron 379 8 Bcfe High Island 252 15 Bcfe Main Pass 256 4 MMbbl Viosca Knoll 740 13 MMbbl 22
Gulf Coast - Moonshine Exploration 36-37.5% NRI Petsec Operated West bank of Mississippi River, 50 miles west of New Orleans 94 square mile area, only 25% cover with 2D seismic, no previous 3D seismic Known productive area 340 Bcfe gas, 7.3 MMbbl oil 3D seismic programme completed in August 2005 * * First well April 2007* Second well spud Feb 2008* 23
Moonshine Drilling Bowie Lumber #1 well encountered tight gas and not completed Rig released and seismic to be reprocessed 24
Moonshine Dickel Prospect Currently Drilling Test target 5-6 Bcfe net 25
Terrebonne Parish Hollywood AVO Prospects A A 26
CHINA Beibu Gulf, Block 22/12 Six oil field discoveries: MMbbl Oil in Place: 300-400 Recoverable oil: 32.5-65 Petsec Energy net oil: 4-8 Development 2008/2009 6-12/6-12 South/12-8 West: 29-37 MMbbl oil Petsec net: 3.5-4.5 MMbbl 25% working interest (12.25% NRI, if CNOOC backs in for 51%) Exploration Commenced January 2008 3 wells: to test 30-40 MMbbl Petsec net: 3.7-4.9 MMbbl 27
Block 22/12 Beibu Gulf, China 28
6-12 South 29
CHINA 6-12 South Oil Discovery 270 feet net oil, 50 feet net gas Oil extends downdip beyond structural closure Appraisal flow-test 5,750 boe/day Estimated reserves 6-12/6-12 South oil fields: 19-27 MMbbl Petsec net oil: 2.3-3.3 MMbbl 30
CHINA 6-12/6-12 South/12-8 West Oil Development Development 6-12 S Well Head Platform & FPSO Production capacity 25,000-30,000 bopd Estimated capex US$100-120 million gross Capacity to tie in 12-8 W/E & 12-2/12-3 oil fields Petsec net reserves 6-12/6-12S/12-8W: 3.5-4.5 MMbbl Petsec net reserves 6 oil fields: ~8 MMbbl Timing Feasibility Study: 1st Quarter 2007 Overall Development Plan: 1st Quarter 2008 Final Investment Decision: 2nd Quarter 2008 Development commencing: mid 2008 Production late 2009 31
CHINA 6-12 South WHP/FPSO & 12-8 West WHP tie-back 32
CHINA 6-12 East 33
CHINA 6-12 East 34
Exploration and Development 2008 March/June Quarters CHINA: Exploration: 3 wells to test 2.7-4.9 MMbbl net to Petsec Energy Development: 6.12 South Oil Field Overall Development Plan / FID US: Exploration: 2-3 wells onshore Louisiana & Gulf of Mexico Development: Main Pass 19 oil storage platform and facilities Wells Net Potential 2007 Reserves USA 2008 (Bcfe) Moonshine Project Exploration 1-2 DRILLING PRODUCTION GOM GOM Exploration 1 Development Oil Storage DRILLING WC 379 MP19 China 6-12 / 6-12 South 6-12 / 6-12 South (MMbbl) FID/Development 2.3-3.3 Exploration 3 2.7-4.9 PRODUCTION DEVELOP FEASIBILITY / FID DEVELOPMENT DRILLING DEVELOPMENT 35
Broker Valuations Share Price A$1.17 (Feb 26, 2008) Share Price vs Broker Values Broker Valuations: $4.00 Commsec BUY valuation A$3.07 (13 Nov 07) Wilson HTM BUY valuation A$1.80 (Feb 08) BBY BUY valuation A$3.01 (14 Nov 07) Austock BUY valuation A$2.20 (13 Nov 07) $3.00 $2.00 $1.15 $1.00 Opportunity to buy at deep discount to broker $0.00 valuation 36
Conclusion Experienced management team with successful track record of exploration, development, production Consistent growth in reserves/production/cashflow High profit margin reserves Large prospect inventory provides basis for continuing growth in the USA and China Opportunity to buy Petsec Energy shares at current deep discount to broker valuation 37