grant willis global head of natural resources the australian oil & gas industry january 2014
TRANSCRIPT
Grant WillisGlobal Head of Natural Resources
The Australian Oil & Gas Industry
January 2014
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This presentation does not constitute an offer to provide finance on any terms. The provision of any such offer is subject to formal review and credit approval, satisfactory due diligence, sign off by legal, tax, accounting and other professional advisers and execution of satisfactory documentation. The Commonwealth Bank shall not be bound unless and until final terms are agreed and formal documentation is signed. That final documentation may not necessarily mirror the contents of this presentation and any actions you may choose to take should not be taken in reliance on this presentation.
The information contained herein is confidential and is the proprietary structure of the Commonwealth Bank. It is provided on the basis that you will not disclose its contents to any persons other than directors, employees and advisors without the written consent of the Commonwealth Bank. It is not to be discussed either directly or indirectly with any other financier. This obligation will not apply if the information is available to the public generally (except as a result of a previous breach of this confidentiality obligation) or you are required to disclose it by law.
© Copyright Commonwealth Bank Australia
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The Commonwealth Bank of Australia
Australia’s largest bank by market capitalisation
Statutory NPAT A$7,677mCash NPAT A$7,819mReturn on equity 18.4%Total assets A$754bCash earnings per share A$4.86Dividend per share A$3.64
Basel III CET1 (International) 11.0%
$101b
June 2011
$135b
June 2012
$137b
June 2013
S&P Moody’s Fitch
CREDIT RATING KEY FINANCIALS
GLOBAL COMPARISON LIQUIDITY (AUD)
Market Capitalisation
(US$bn)
Global Market Capitalisation
Ranking
Senior Debt Rating
Moody’s S&P
268.02 1 A2 A+
243.52 2 A3 A
232.44 4 Aa3 A+
198.11 6 Baa2 A-
183.81 7 Baa2 A-
124.01 10 Aa2 AA-
104.29 15 Aa3 AA-
92.91 18 Baa1 A-
Industry specialisation and understanding make the Bank an ideal partner providing balance sheet strength and broad product capability
Oil & Gas industry teams placed in key commercial and financing hubs. CBA is a Bank that actively deploys balance sheet into our client’s businesses
Broad range of debt products spanning project, corporate and acquisition finance
Strong global financial markets capabilities across commodities, foreign currency and interest rates
The only domestic Australian bank with a full in-house equity business, focused on retail and institutional clients
Source: Bloomberg. As at 13 January 2014. Credit rating: S&P
14.6m Customers
3,000 Institutional Clients
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The Bank provides Natural Resources and product specialists across the globe
The Growing Commonwealth Bank of Australia
New York officeHouston officeUnited StatesCanada
Singapore officeHong Kong officeEast & SE Asia
Sydney officeAustraliaNew ZealandEast & SE Asia
London officeUKNorwayThe NetherlandsEastern EuropeAfrica
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Commonwealth Bank of Australia – Products and Clients
Financial Markets
Transaction Banking
Capital Raising
Cash & Treasury ManagementPayables & Procurement
Foreign Currency AccountsTrade Finance
CommBizTerm Deposits
Working CapitalAcquisition & Bridge Finance
Project & Development FinanceCorporate & Structured Asset Finance
Equity & Debt Capital Markets
Commodities Sales & TradingStructured Commodity FinanceStructured InvestmentsInterest RatesFX
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CBA’s Global Outlook
2010 (a) 2011 (a) 2012 (a) 2013 (a) 2014 (f) 2015 (f)
GDP Growth (% YoY)
FX
AUD/USD 0.94 0.91 0.90
EUR/USD 1.34 1.32 1.305
GBP/USD 1.63 1.62 1.54
Base Interest Rate
Reserve Bank of Australia (RBA) 2.50% 2.56% 3.00%
US Federal Reserve (Fed) 0.25% 0.25% 0.75%
European Central Bank (ECB) 0.25% 0.25% 0.25%
People's Bank of China - Benchmark 1 Year Lending Rate 6.00% 6.00% 6.00%
Oil (USD/bbl)WTI 98.00 91.00 94.00
Brent 109.00 99.00 97.00
-2
0
2
4
6
8
10Global
Australia
USA
China
Eurozone Gro
wth
Rat
e (%
)
Australian Economy – Outlook
7
0.00
0.20
0.40
0.60
0.80
1.00
1.20
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
USDAUD / USD EXCHANGE RATE
Natural Resources Economic Data
Source: CBA
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Global Listed E&P StocksWhere does Australia stand?
# of Stocks % of Stocks
Mkt. Cap (USDbn)
% of Total Mkt Cap
Median (USDm)
Global Revenue(USDm)
% of Global Revenue
Global 1052 100% 1231 100% 34 471 100%
US 335 32% 608 49% 34 240 51%
Canada 347 33% 185 15% 17 58 12%
Europe (incl UK) 139 13% 136 11% 80 28 6%
Asia Pac (ex AU) 55 5% 226 18% 297 121 26%
Australia 136 13% 67 5% 20 13 3%
Market Capitalisation of Global E&P Stocks
Source: CBA and Bloomberg
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Australian E&Ps by Market Capitalisation (AUDm)
Source: CBA and Bloomberg
ASIA ASIA ASIA
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000 $13,515
$10,895
$1,796
$1,266 $913 $767$687 $618 $575 $482 $436 $307 $220 $153
$31,514
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Are attracting a roll call of international majors
/
Amount $156m
Acres 7.7m
EV / Acre 20.3
Date Dec-2011
/
Amount $70m
Acres 4.0m
EV / Acre 17.6
Date May-2011
Amount $12m
Acres 1.9m
EV / Acre 6.2
Date May-2012
/
Amount $111m
Acres 7.7m
EV / Acre 14.4
Date Sep-2011
/
Amount $152m
Acres 4.1m
EV / Acre 37.3
Date Nov-2012
/
Amount $210m
Acres 9.1m
EV / Acre 22.9
Date Jun-2012
APLNG, Arrow LNG, GLNG and QCLNG,
/
Amount $50m
Acres 3.3m
EV / Acre 15.0
Date Dec-2010
/
Amount $101m
Acres 0.4m
EV / Acre 268.6
Date Jul-2011
Source: Relevant company announcements
/
Amount $32.2m
Acres 5.5m
EV / Acre 5.9
Date Nov-2013
Recent Unconventional Gas Farm-ins
Uncovered natural gas pipelinesFull regulation pipelines
Browse LNG
Prelude FLNG
Canning
Perth
Gippsland
Amadeus
Georgina
Officer
Galilee
Arckaringa
Otway
Beetaloo
Darwin LNG
Ichthys
CooperMaryborough
Gunnedah/Sydney
Wheatstone
NW Shelf LNG
Pluto
Gorgon
Light regulation pipelines
/
Amount $349m
Acres 0.4m
EV / Acre 904.1
Date Feb-2013
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Putting the Australian opportunity in context
United States of America Australia
Land Area3.79 million mi2 2.97 million mi2
Natural Gas Demand24.37 Tcf/yr(Net Imports 1.94 Tcf/yr)
2.09 Tcf/yr(Net Exports 1.0 Tcf/yr)
2,203 Tcf1 Gas Resource Potential 820 Tcf2
Gas Prices (US$/MMBtu)$10 $3 $5 $9
Ability to Deliver
1. Technically recoverable resources2. Total demonstrated gas resources3. Number of plantsSource : EIA Independent Statistics & Analysis, EIA Annual Energy Review 2011 , BREE 2012 Gas Resource Assessment, Energy Quest and Santos analysis
US AUSRigs 1,800 50Wells 37,000 1,200Processing(3) 600 25Pipelines (mi) 350,000 20,000
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Australian Exploration Activity and Expenditure
Source: APPEA
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
20
40
60
80
100
120
140
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Wells Spudded Onshore (LHS) Wells Spudded Offshore (LHS) Expenditure (RHS)
No
. of
Wel
ls S
pu
dd
ed /
Met
res
Dri
lled
(00
0's)
AU
D m
illlo
n
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Historical Oil & Gas Production
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012150
200
250
300
Liquids
Liq
uid
Pro
uc
tio
n
(mm
bb
l)
0
500
1,000
1,500
2,000
Historical Australian Oil & Gas Production
LNG Domestic Conventional Gas Domestic CSG
Ga
s P
rod
uc
tio
n (
bc
f)
Source: APPEA
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Australian LNG Exports to Exceed 78 mtpa by 2020
LNG Exports – by country
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20200 Mtpa
50 Mtpa
100 Mtpa
150 Mtpa
200 Mtpa
250 Mtpa
300 Mtpa
350 Mtpa
400 Mtpa Qatar Malaysia Australia Indonesia NigeriaUnited States Canada Mozambique Other
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Australian & Papua New Guinean LNG Projects
Offshore Conventional Gas to LNG Projects
Coal Seam Gas to LNG Projects
Onshore Conventional Gas to LNG Projects
(P) Proposed
(C) Construction
(O) Operating
GLNG (C)GLNG Santos / Petronas / Total
QCLNG (C)BG Group
Scarborough FLNG (P)ExxonMobil / BHP
Gorgon (C)Chevron
Darwin LNG (O)ConocoPhillips
PNG LNG (C)ExxonMobil / Oil Search/ Santos
Liquid Niugini Gas (Elk 1&2) (P)InterOil / Total
Pluto (O)Woodside
Browse (P)Woodside
NWSV Trains 1-5 (O)Woodside
Sunrise (P)Woodside
Wheatstone (C)Chevron / Apache
Prelude (C)Shell
Ichthys (C)INPEX / Total
APLNG (C)Australia Pacific LNGConocoPhillips / Origin Energy / Sinopec
Bonaparte FLNG (P)Santos / GDF SUEZ
Arrow LNG (P)Shell / Petro China
Source: WorleyParsons, CBA
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Case Study: Ichthys LNG Project
Principal Project Components• USD34bn capex budget • The upstream facilities comprise around 50 subsea production wells and
subsea production systems connected to a Semi-sub central processing facility and FPSO
• Gas will be transported to the LNG plant at Darwin via an 889km, 42” sub-sea pipeline
• Once transported to Darwin the gas will be processed at the onshore LNG Facilities.
• The project is designed to produce approximately 8.4mtpa of LNG from two trains, up to 100,000 bpd of field and plant condensate and up to 1.6mtpa of LPG at peak, with First LNG is scheduled for 2016
Conclusions The future of Australian oil & gas is bright.
CBA remains committed to the sector.
Oil prices remain high against historical, domestic gas prices are rising – the economic settings are stable.
The conventional gas fields in central Australia are enjoying a renaissance.
7 LNG projects will shortly begin producing in 2014 and ramp up into 2017.
International players continue to invest and support the Australian oil & gas industry.
We could do with finding some more oil though.
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Largest ever project financing transaction
Ichthys LNG Project – Project Financing
Inpex (Japan) and Total SA (France) are the major partners in the Ichthys LNG
project which raised USD20bn of project financing and reached financial close in
January 2013
CBA is the largest non-Japanese lender CBA is the Intercreditor Agent and
Uncovered Sub-Facility Agent
Largest Project Finance Deal
Project sponsor engagement with Export Credit Agencies (ECA) commenced during 2010
– over two years ahead of financial close
The financing process commenced in November 2011 when lenders provided preliminary
RFPs. Banks provided final credit approvals in June 2012 and Financial Close was
reached in January 2013, eight months after receipt of the formal RFP
Significant debt amount – USD20bn the largest ever project financing
Multi-lender engagement strategy (ECAs, banks and sponsor debt, and provision for
bonds)
Banks lent USD10.2bn to the project (USD4.8bn Uncovered (47%) and $5.4bn (53%)
Covered)
3 ECAs directly lent USD5.8bn, and Sponsors provided loans of USD4bn
The project has a number of attractions and some challenges to lenders:
Strategically aligned Sponsors group (Inpex 66%, Total 30%), with Total being a well
credentialed LNG developer and operator
The liquids rich conventional gas resource delivers strong project economics
Committed off-take arrangements from ten buyers, 68% going to Japanese buyers,
Sponsors buying 21%
Robust project finance structure with contracted senior sponsor support in various forms
Ichthys LNG ProjectUSD20bn
Intercreditor & Uncovered Sub-Facility Agent
December 2012
Asia Pacific Deal of the
Year
Ichthys LNG ProjectUSD20bn
MLAB Commercial Bank Facility
December 2012
Global Deal of the Year
Asia-Pacific Multi-sourced Deal of
the Year