2016 half year results - cdn-ophir … · 2016 half year results 15 september 2016 . ... materials...

2016 HALF YEAR RESULTS 15 September 2016

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DISCLAIMER

THIS DOCUMENT IS CONFIDENTIAL This document has been prepared and issued by and is the sole responsibility of Ophir Energy plc (the “Company”) and its subsidiaries for selected recipients. It comprises the written materials for a presentation to investors and/or industry professionals concerning the Company’s business activities. By attending this presentation and/or accepting a copy of this document, you agree to be bound by the following conditions and will be taken to have represented, warranted and undertaken that you have agreed to the following conditions. This presentation is strictly confidential and may not be copied, published, distributed or transmitted. If you do not accept these conditions, you should immediately destroy, delete or return this document. The document is being supplied to you solely for your information and for use at the Company’s presentation to investors and/or industry professionals concerning the Company’s business activities. 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As a result, you are cautioned not to place any undue reliance on such forward-looking statements. Certain data in this presentation was obtained from various external data sources, and the Company has not verified such data with independent sources. Accordingly, no representation or warranty, express or implied, is made and no reliance should be placed, on the fairness, accuracy, correctness, completeness or reliability of that data, and such data involves risks and uncertainties and is subject to change based on various factors. No reliance may be placed for any purposes whatsoever on the information contained in this presentation or on its completeness. 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2016 Half Year Results Slide 2




HIGHLIGHTS


KERENDAN First gas

achieved in line with guidance

BUALUANG Water debottlenecking completed leading to

4x ROI

FORTUNA Upstream and off-take solved, progress being

made on financing solution

EXPLORATIONImminent return to high

impact exploration drilling

CASH MANAGEMENT

Deleveraged, under-geared and reduced

running costs

CASH $408M of cash, scope to

invest across the portfolio




A resource exploration and monetisation company

OUR STRATEGY


To create value for shareholders through having an industry leading exploration success rate and monetising this success to grow NAV per share.




EXPLORATION AND MONETISATION


NAV per share growth

Core Value Growth

$ returns to shareholders

=

+

CAPITAL DISCIPLINE THROUGHOUT THE CYCLE

• Building a self sustaining explorer

• Delivering $200M-$300M p.a. in free cash flow

• Excess free cash flow returned to shareholders

• One-off returns linked to monetisation events




Asset quality and fiscal terms are key

MARGIN IS EVERYTHING (NOT PRICE)


80

70

60

50

40

30

20

10

0

Bre

akev

en (

$/b

bl)

0 1,500 3,000 4,500 6,000 7,500 9,000 10,500 12,000

Cumulative Peak Production (kbls/d)

DEEPWATER HEAVY OIL

TRADITIONAL ULTRA DEEPWATER

“SHALE OIL”

Source: Goldman Sachs Global Investment Research

Continue to find low cost resource and monetise at a higher price

Exiting plays/assets that don’t work at low cost and entering assets/plays that do

Only high quality assets below the shale threshold with: transformational potential; minimal commitments; and fiscal terms that enable value creation

Re-engineering value chains where appropriate to improve margins

Pacing our exploration and high-grading the plays. We will not rush to drill

NAV/share growth is our key metric and we will benchmark against this more explicitly going forward

High quality assets

with preferential

fiscal terms

Positive margins

Exit, re-engineer or renegotiate fiscal terms

Negative margins

Our response to create value

1.

2.

3.

4.

6.

Equatorial Guinea

Tanzania

5.

Thailand &

Indonesia




How we have tightened our model

How we manage our resources:

Assets • High grading the exploration portfolio

• Value driven Asset Development Plans

• Emphasis on transformational assets that can compete below the ‘shale ceiling’

Capital

• IRR & scale drive all investment decisions

• Internal competition for capital

• We will not prioritise growth over value

People

• People are key resource, deploy where they create most value

• Closely align organisational behaviour with shareholders interests; NAV comp scheme

Slide 7 2016 Half Year Results

NAV PER SHARE GROWTH IS OUR OBJECTIVE

Create Value for Shareholders

Assets

People Capital

Governance




OPHIR’S DRIVERS OF NAV GROWTH


Resource Monetisation

Exploration

Funding

• c. 11,000 boepd, $75M p.a. of cash from operations

• 996 MMboe of 2C resource being progressed to monetisation

• Further upside potential identified in Bualuang

• Entered new plays in Myanmar, Malaysia, Indonesia, CDI and Gabon

• Maturing low cost, high impact exploration opportunities

• Expect to drill 3-5 frontier operated plays in 2017-2018

• $408M of cash ($207M of net cash) on balance sheet (as at 30 June 2016)

• Forecast $200M of cash from production 2016-2018

• Only $93M of future commitment spend across portfolio

RESOURCE MONETISATION

Bill Higgs COO




MONETISATION


Monetise resource in one of three ways:

MONETISATION WILL GENERATE RETURNS TO SHAREHOLDERS

Sell discovered resource

Farm down

Maximise production

margins




Monetisation of 2P Reserves

BUALUANG – CREATING VALUE TODAY


Water debottlenecking project completed

• Water disposal capacity increased to > 75,000 bwpd

• Water handling capacity increased 50% to 75,000 bwpd

• Production over 10,000 bopd - still ramping up

• Increased by 2,000 bopd since end August

Activities on water debottlenecking project

Water Debottlenecking – Key Metrics

Objective Increase core value

Cost $20 million

Payback 12-18 months

ROI 4 X

Project IRR > 35%

KEY METRICS FY 2016

14.9

13.6

3.5

2.7

Cash flow per bbl:

Opex per bbl:

Capex per bbl: Tax per bbl:

At an oil price of $43 per bbl




Monetising contingent resource

BUALUANG – ADDITIONAL VALUE TOMORROW


Phase 4 development

• Ocean bottom 3D highlighted potential additional 2P, 2C and prospective resources

• Identified 10-15 potential commercial opportunities for drilling

• FID of optimised development in 2017

Bualuang Ocean Bottom Seismic – T2 Reservoir level 0

2

4

6

8

10

12

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

20

31

20

32

20

33

20

34

20

35

'00

0b

bl/

day

Phase 4 Base

Production forecast 12

0




Monetisation of 1P reserves

SINPHUHORM

Mature and stable gas producing asset

• Net production of 2,000 boepd

• Gas price has some indexation to oil

• Expect higher level of cash generation in 2H

1. Held through 27.2% shareholding in APICO, a company owning 35% of the Sinphuhorm asset


KEY METRICS FY 2016

Cash flow per boe:

Opex per bbl:

Capex per bbl:

Tax per bbl:

At an oil price of $43 per bbl

2.0

1.6

6.1

9.0




Monetising 122 Bcf of 2P, focus now on monetisation of additional 320 Bcf of net 2C

KERENDAN FIRST GAS


Phase 1 on-stream 3Q 2016

• Initial volumes c. 5 MMscfd; ramp up to 20 MMscfd around year end when last towers are hooked up

• Take or pay since 11 January 2016, $8M accrual in 1H (at current gas price)

• Improved gas price expected to be agreed before year end

Unlocking upside

• NAV growth driven by commercialising contingent resource

• Commercialisation of West Kerendan-1

• Complete onshore 3D survey in 2H 2016 to secure additional State resource booking and improve field definition

Kerendan gas processing facilities

KEY METRICS FY 2017

14.7

Cash flow per boe:

Opex per boe:

15.7

At a contract price of $4.79 per mmbtu




Bookends of the value chain in place

FORTUNA FLNG


• Fixed price EPCIC bids received and locked in until mid-2017

• Cost estimate c. $450M v $900M in 2014 (same development concept)

• Licence extended until end 2017

• Discussions with Golar on track

• Progressing funding solutions

• FEED complete

• Working towards being in position to FID in 4Q

• 4 HoA signed with significant players in global LNG market

• Credit ratings from AA to BBB

• Variety of off-take structures, which include Brent indexation

Upstream Midstream Offtake

tbc




• New Government has awarded the land for the site of the LNG plant

• Strategic project for President

• New operator (Shell) to re-commence exploration drilling in 4Q 2016

• Evaluating lower cost solution

Government Engagement

Activity

TANZANIA REGAINING MOMENTUM

• Costs c. $20M per annum (net) to hold until FID

• Sold 20% to Pavilion Energy for $1.3 bn (March 2014)

• Remaining holding of 20%

Prior Transaction

Low Holding Cost


FUNDING & BALANCE SHEET

Tony Rouse CFO




FINANCIAL SUMMARY

UNITS 1H 2016 1H 2015* FY 2015 COMMENTS

NET SOURCES OF FUNDS:

Revenue $’millions 52.1 86.5 161.1

Cost of production (operating expenses, royalty and taxation)

$’millions (30.1) (49.5) (72.5)

Total net sources of funds from production $’millions 22.0 37.0 88.6

NET USES OF FUNDS:

Capex $’millions 96.4 105.4 208.8

Net Administration $’millions 9.3 19.4 31.3

Net Interest Cost $’millions 7.5 7.3 17.0

Total Net Uses of Funds $’millions 113.2 132.1 257.1

FINANCING

Closing Net Cash $’millions 206.9 392.0 354.9

Closing Debt $’millions 200.3 316.2 259.7

Closing Cash $’millions 407.2 708.2 614.6


*1H 2015 numbers only include four month contribution from ex-Salamander assets

Bualuang realisation $34.17/bbl

Net return of $15/bbl and low break-even of $15/bbl

Reducing admin cost - 65% in period 2015/16

Negative cash carry

Deleveraging of debt portfolio Gearing of 11% (D/D+E)




1H 2016 FUNDS FLOW


$517.4m

$383.0m

$97.2m

$22.0m

$96.4m

$59.4m $16.2m $24.3m

$0m

$100m

$200m

$300m

$400m

$500m

$600m

$700m

Operating Cash/Funds

Cash Flow from

Production Capex

Admin Cost

Net Interest

Cost

Debt Repayment

Other Closing

Cash/Funds

Cash Flow Statement 614.6 (17.6) (112.5) (9.3) (8.5) (59.4) 0.0 407.3

Working Capital (97.2) 39.6 16.1 0.0 1.0 - 16.2 (24.3)

Funds Flow 517.4 22.0 (96.4) (9.3) (7.5) (59.4) 16.2 383.0

FY 2016 outlook:

• Revenue $130M - $150 M

• Cash flow from production $50M -$70M

• Capex $140M - $170M

• Net cash $175M - $225M

• Cash $400M - $450M

Cost reduction initiatives:

• Gross G&A reduced by 53% since March 2015

Fortuna: • Will be monetised in a way

that protects our balance sheet, manages our risk exposure and maximises NAV/share

$9.3m $7.5m




USES OF FUNDS


E&A spend 1H $38M • CDI – contribution to back costs (3D seismic)

• Myanmar – well planning and EIA

• Malaysia – entry costs for Block 2A

Resource monetisation spend 1H $42M • Tanzania – Blocks 1 and 4

• EG –Fortuna FEED

• Thailand – Bualuang water debottlenecking

Material areas of spend in 2H 2016 • Thailand – completion of water debottlenecking ($11M)

• Indonesia – West Papua / Aru seismic ($11M)

• Tanzania – 2 well programme on Blocks 1 & 4 ($20M)

Reduced FY 2016 forecast from $150M - $200M to $140M - $170M

E&A $38M

Monetisation $42M

Other $28M

CAPEX – 1H 2016

E&A 40%

Monetisation 43%

Other 17%

CAPEX – FY 2016




Reduced running costs

Deleveraged the business to lower negative cash

carry

Under-geared asset base has unutilised debt

capacity

FINANCE OUTLOOK


Cash Management

Sufficient liquidity

to invest for value creation

Sustainability

Bualuang development funded from

cash flow & debt

Provision up to $150M for investment in Fortuna

Sufficient liquidity to re-commence exploration

drilling

Objective is to live within our means

Fortuna cash flow from 2020

Opportunities to accelerate business plan

EXPLORATION

Bill Higgs COO




Strategy to consistently deliver risked returns

SUSTAINABLE EXPLORATION TO DELIVER RISKED RETURNS


We have a proven track record

Disciplined in capital allocation

Disciplined in exploration practice

• 66% commercial success rate

• Drilled 7 play opening wells, 2 successes

• Involved in discovery of 3 Bnboe

• Excellent HSE record

• Invest consistently through the cycle

• Viable at $50 per bbl and below

• Material positions with running room

• Clear line of sight on monetisation

• Drill 2-3 play opening wells per annum, offering our investors c. 15-30% of annual independent wild cats

• Play-based analysis to focus asset capture and portfolio high-grading

• A portfolio to deliver risked returns




Prioritising valuable plays

EXPLORATION PORTFOLIO HIGH-GRADED

Slide 24

Aru Trough (oil)

Kerendan (gas)

EG (oil)

Gabon post-salt

(oil)

Myanmar (gas)

Gabon pre-salt (oil)

Seychelles (oil)

G4/50 (oil)

Western Birds Head (oil)

Makassar Straights (oil/gas)

Gabon Conjugate Margin (oil)

Kenya (oil)

Cote D’Ivoire (oil)

Sarawak (gas)

High Graded

Retained but still working

Exited

Ophir has reviewed c. 150 data rooms in the past 3 years

This provides benchmarking and calibration of existing portfolio plus selective new entries

2016 Half Year Results




Two Wells in 4Q 2016/1Q 2017

TANZANIA EXPLORATION DRILLING

• Planned Wells:

- Block 1 – Kitatange, CoS - 40%, Mean recoverable volume 1.1 Tcf

- Block 4 – Bunju, CoS – 36%, MSV 1.4 Tcf

Highlights

INCREASING DEVELOPMENT OPTIONS REDUCING DEVELOPMENT COST

Targets > 1 Tcf

Net cost: c. $20 million

PROBABLE 2017 DRILLING





1st well in operated campaign, high impact oil exploration

COTE D’IVOIRE


• Extensive regional play fairway evaluation has been conducted over past 18 months

• Entry into an extension of a proven petroleum system in adjacent block CI-514

• CI-513

- Ophir 45% (op.) African Pet. 45%, PetroCI 10%

- 1,446km2, 1000-3000m water depth

- 1 well drilling commitment by Q1 2018

• Worked closely with the CDI government to agree fiscal terms for a new PSC that enables deepwater exploration in the current oil price environment

Highlights

HIGH QUALITY ROCKS, EXCELLENT FISCAL TERMS

Play potential Multi-Hundred Million barrels

Prospect size Mean 240 MMbo

Forward committed spend: c. $15 million

PROBABLE 2017 DRILLING




COTE D’IVOIRE - AYAME PROSPECT

Slide 27

High graded, high impact oil exploration

AYAME WEST LOWER FAN ISOPACH

Pre-stack depth migration in depth and AVO reconnaissance volume

2016 Half Year Results

A

Volumetrics Prospective Resources MMbo COS%

Prospect P90 P50 P10 Pmean

Lower Reservoir 5 112 697 241 28

A A’

AYAME WEST LOWER FAN

AYAME WEST UPPER CHANNEL




EG EXPLORATION


• Area of Mutual Interest (AMI) agreed with Exxon

• Extension of Niger Delta oil play into an area previously unexplored

• Acquisition of 3D over western part of the block completed and being processed

• Drill/drop decision in 2017

AMI Area

Full fold data

Image area

Highlights

EXTENSION OF PROVEN PLAY INTO UNEXPLORED ACREAGE

Play potential: Multi-hundred Million barrels

Forward committed spend:

c. nil

OPTION FOR 2017 DRILLING




Conjugate margin becoming better understood

GABON – NEW OUTBOARD PLAY


• Underexplored frontier deepwater basin with stratigraphic traps

Focus Area

Highlights

EMERGING OIL PLAY

Play potential: Multi-billion barrel

Prospect B Mean 1.8 Bnbo (CoS 16.2%)

Forward committed spend: Nil


Prospect B – Reservoir Attribute




Intense Industry Activity in 2015-2016

MYANMAR – BLOCK AD-03


• Underexplored frontier deepwater basin with stratigraphic traps expected within the Bengal Fan deepwater channels

• Petroleum system biogenic charge proven by the Schwe field

• Intense industry activity - Ongoing acquisition of approximately 50,000km2 of 3D seismic surveys

- Two recent gas discoveries at the margins of the play

• Early mover advantage within untested play fairway

• Ophir acquired the block wide 10,000km2 Mrauk 3D in Q2 2015

• Opportunity to test stacked pay with single well

Highlights

FIRST WELL BE TO DRILLED IN DEEP-WATER PLAY

Play potential: Multi - TCF

Prospect A: Mean 2.5TCF (CoS 19%)

Prospect B: Mean 1.5TCF (CoS 21%)

Forward committed spend: Nil





Trepang 3D seismic acquisition in 2016

EAST INDONESIA ARU BASIN


• Material position in a underexplored deepwater exploration play

- Potential for large, multi-hundred million barrel resources

- in the success case multiple follow-on potential

• West Papua

- Ophir (op) 49.9%, Statoil 40%, Tately 10.1%

• Aru

- Ophir (op) 60%, Statoil 40%

• All work programme commitments for the existing periods have been fulfilled

• Acquisition of the ~3,400km2 Trepang 3D in 2016 will give full modern 3D coverage across the play

- Allow high grading of the portfolio to support the decision to move into the next permit term and drill exploration wells

Highlights

Play potential: Multi-hundred Million barrels

Forward committed spend: c. $12 million





New PSDM reprocessing provides greater prospect clarity

WEST PAPUA/ARU - OMAH PROSPECT

Slide 32 2016 Half Year Results

X

X’

Depth Struct Map at Near Mid Mio Carb

CI 100m

• Unsmoothed surface and depocentres

• Structure top at 4020m; Leak point at 4810m

• Omah remains a robust, clearly defined prospect

• Recent FIS data from Cikar-1 interprets oil

• 2016/2017 focus on assessing the best play test of available prospects

X X’

Near Mid Mio Carb

Omah Prospect

2km

6km

5.0km




EXPLORATION AND MONETISATION PRINCIPLES


Sustainable through the cycle

Disciplined Exploration

Shareholder Returns

• Sufficient, stable cash flow to support annual drilling programme and reserves monetisation

• Maintain top-quartile exploration performance

• Internal competition for capital

• Drilling 2-3 high-graded wildcat wells per annum

• Dividend from commodity price windfalls

• Special dividends on monetisation of exploration success




CORPORATE PRIORITIES 2016-2017


ALL LINKED TO MAKING SHAREHOLDER RETURNS

Continue journey to

sustainability

Achieve a monetisation

solution for Fortuna

Maintain balance sheet

strength

Recommence exploration

drilling




Geoff Callow [email protected]

For further information contact:

Head of IR and Corporate Communications [email protected]

Geoff Callow

Level 4 123 Victoria Street London SW1E 6DE UNITED KINGDOM

Tel: +44 (0)29 7811 2400 Fax: +44 (0)20 7811 2421

2016 half year results - cdn-ophir … · 2016 half year results 15 september 2016 . ... materials...

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