heritage oil plc · oml 30 • major interest in oml 30 through shoreline natural resources. gross...
TRANSCRIPT
Heritage Oil Plc
Activity Update
June 2013
1
Disclaimer – Important Notice
1
Certain information in this presentation is based on management estimates. Such estimates have been made in good faith and represent the genuine belief of applicable members of management. Those management members believe that such estimates are founded on reasonable grounds. However, by their nature, estimates may not be correct or complete. Accordingly, no representation or warranty (express or implied) is given that such estimates are correct or complete. No representation or warranty (express or implied) is given that such estimates are so founded. Neither the Company nor J.P. Morgan Cazenove or Standard Bank undertake any obligation to correct or complete any estimate whether as a result of being aware of information (new or otherwise), future events or otherwise. Overseas shareholders This presentation has been prepared for the purposes of complying with English law and the Listing Rules of the FSA and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England. Persons who are not resident in the United Kingdom may be affected by the laws of jurisdictions other than the United Kingdom. Such persons should inform themselves about and observe any applicable requirements of such jurisdictions. Any failure by such persons to comply with any applicable restrictions may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the companies involved in the proposed Divestment, J.P. Morgan Cazenove and Standard Bank disclaim any responsibility or liability for the violation of such restrictions by any person. Copies of this presentation are not being, and must not be, mailed or otherwise forwarded, distributed or sent in, into or from any jurisdiction where to do so would constitute a breach of securities laws in that jurisdiction. Persons receiving this presentation (including custodians, nominees and trustees) should observe these restrictions and should not send or distribute this presentation in, into or from any such jurisdictions. CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION: This presentation includes statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements include, but are not limited to, statements with regard to the outcome of the exercise of the Shoreline Option, proposed Divestment, Loan, future production and grades, projections for sales growth, estimated revenues, reserves and resources, targets for cost savings, the construction cost of new projects, the timing and outcome of exploration projects and drilling programmes, projected capital expenditures, the timing of new projects, future cash flow and debt levels, the outlook for the prices of hydrocarbons, the integration of acquisitions, the outlook for economic recovery and trends in the trading environment, statements about strategies, cost synergies, revenue benefits or integration costs and production capacity and future production levels and timing, and may be (but are not necessarily) identified by the use of words such as “believes”, “estimates”, “plans”, “projects”, “anticipates”, “expects”, “intends”, “may”, “aims”, “plans”, “predicts”, “continues”, “assumes”, “positioned”, “will”, or “should” and other similar expressions that are predictions of or indicate future events and future trends or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include matters that are not historical facts and include statements regarding the Company’s intentions, beliefs or current expectations. An investor should not place undue reliance on forward-looking statements because, by their nature, they involve known and unknown risks, uncertainties and other factors and relate to events and depend on circumstances that may or may not occur in the future that are in many cases beyond the control of the Company. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements. In particular, there is no assurance that the conditions precedent to completion of the proposed Divestment will be satisfied or waived and the Company may not realise the anticipated benefits, operational and other synergies and/or cost savings from the proposed Divestment or the Loan repayment. Any forward-looking statements in this presentation reflect the Company’s view with respect to future events as at the date of this presentation and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company’s operations, results of operations, growth strategy and liquidity. None of the Company, J.P. Morgan Cazenove or Standard Bank undertake any obligation publicly to release the results of any revisions or up-dates to any forward-looking statements in this presentation that may occur due to any change in its expectations or to reflect events or circumstances after the date of this presentation. Subject to certain exceptions, neither this presentation nor any copy of it may be taken or transmitted into the United States, its territories or possessions or distributed, directly or indirectly, in or into the United States, its territories or possessions. Neither this presentation nor any copy of it may be taken or transmitted into any other jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction or to any securities analyst or other person in any of those jurisdictions. Any failure to comply with this restriction may constitute a violation of United States or other applicable securities law. The distribution of this presentation in other jurisdictions may be restricted by law and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. This presentation does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States. The securities referred to herein have not been and will not be registered under the US Securities Act of 1933 (the “Securities Act”), and may not be offered or sold in the United States absent an exemption from, or in a transaction not subject to the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. There will be no public offer of any securities of Heritage in the United States. The securities referred to herein have not been and will not be registered under the applicable securities laws of any other restricted jurisdiction and, subject to certain exceptions, may not be offered or sold within any jurisdiction where to do so would constitute a violation of the relevant laws or to any national, resident or citizen of such jurisdiction. This presentation constitutes an advertisement within the meaning of the Prospectus Rules of the FSA and is not a prospectus and has been prepared solely in connection with the proposed Divestment. Copies of certain corporate documents relating to certain matters discussed herein are/will be available from the Company’s registered office and from 34 Park Street, London, W1K 2JD and are/will be available for viewing on the Company’s website at www.heritageoilplc.com. Important Information This presentation does not constitute an offer to sell, or the solicitation of an offer to buy, exchange, or transfer any securities of Heritage. The value of ordinary shares of Heritage and exchangeable shares of Heritage Oil Corporation exchangeable into ordinary shares of Heritage can go down as well as up and past performance cannot be relied on as a guide to future performance. .
HERITAGE OVERVIEW
2
3
Transformational Growth
2P Reserves
1999: 2.5 million barrels
2013: 412 million barrels
Production
1999: 367 bopd
2013: 11,583 bopd
Market Capitalisation
1999: US$13 million
2013: US$848 million
TSR Versus Peers Since TSX Listing to January 2013, %
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Jan 99 Jan 01 Jan 03 Jan 05 Jan 07 Jan 09 Jan 11 Jan 13
Heritage Tullow Oil Premier Oil Soco International Afren Salamander Energy
Source: Factset and Datastream as of January 2013
Cash raised from equity markets: US$370m
Cash raised through sale of assets: US$2bn
Dividend of c.US$500m paid in 2010
Ability to Deliver and Provide Substantial Growth
4
•Acquisition of a world class asset providing a step change in production, reserves and cash flow
•Creates a platform upon which to build within Nigeria OML 30 Acquisition
•Attractive valuation secured for a development asset with a significant future capital expenditure requirement
•Proceeds used to partially fund entry into Nigeria and also to continue exploration and development of the existing portfolio
Miran Disposal
•Strong balance sheet with cash position of $184.1 million as at 31 March 2013 •Excess cash led to a debt repayment of $52.5 million in April 2013 •Potential to develop and strengthen the portfolio through further acquisitions
Financial Flexibility
•Exceptional record of generating value and monetising assets •Raised US$2bn in asset sales with the current management team
Value Generation
•Look to acquire assets that are underdeveloped or overlooked •Early mover advantage
Strategic Advantage
•Discovered four of the five largest onshore discoveries in sub-Saharan Africa (excluding Nigeria) in the last ten years
•Depth and breadth of industry experience Technical Skillset
•Ability to mitigate risk associated with political and security issues through local partners, on-the-ground experience and engagement with local communities
•Balanced portfolio of exploration and production assets
Management of Risk
Production
Exploration
Russia
95% Zapadno
Chumpasskoye
Produced 441 bopd in Q1 2013.
Tanzania
100% Rukwa North Basin
100% Rukwa South Basin
100% Kyela
29.9% Latham
Work programmes on Rukwa and
Kyela have commenced.
2D seismic acquisition on Rukwa has
been completed and processed.
Kyela gravity and seismic data
confirms prospectivity. Infill 2D
seismic and micro seep study to
commence H2 2013.
Malta
100% Area 2
100% Area 7
Well planning ongoing.
Pakistan
54% Sanjawi Block
48% Zamzama North Block
Interpretation of existing
seismic has identified several
prospects and leads.
Libya
Sahara Oil Services
51% equity interest and control
of Sahara Oil Services which
will provide access to the
Libyan oil industry.
Nigeria
OML 30
• Major interest in OML 30
through Shoreline Natural
Resources. Gross production
for 2013 expected to average
35,000 bopd.
5
Diversified Portfolio Across Core Areas
Production
Exploration
Papua New Guinea
80% PPL 319
80% PRL 13
2D seismic programme
recently completed over
Tuyuwopi structure.
Planning has commenced for a
well in 2014.
89
67
44
21 16 14 12
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25
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75
100
412 380
296
185
130
75 62
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100
200
300
400
500
Heritage Relative to Peer Group
6
2P Reserves, MMboe Market Capitalisation, US$ million
2013E Production, ‘000 boed
16,966
2,849
2,157 1,952
653 574 572
0
1,000
2,000
3,000
4,000
5,000
Source: Factset as of June 2013, company reports, and Woodmac for Soco and Salamander Energy 2013E production estimates
FV/2P Reserves, US$/boe
39.8
12.6 13.5 13.4 11.6 6.4
2.5
0
10
20
30
40
50
OML 30 – DRIVING GROWTH
7
Nigeria, OML 30
8
45% interest in OML 301 acquired by Shoreline Natural Resources (“Shoreline”)2
Onshore Nigeria, located less than 50 kilometres east of Warri
Lease covers 1,097 square kilometres with eight producing fields; Afiesere, Eriemu, Evwreni, Kokori, Oroni, Oweh, Olomoro-Oleh, Uzere West
850,000 bpd pipeline to export terminal
Gross average production of c.35,000 bopd expected for the full year 2013 with the potential to significantly increase to c.100,000 bopd in the medium term and c.300,000 bopd in the long term, according to RPS evaluation
¹ OML 30 is 55% owned by Nigerian Petroleum Development Corporation (“NPDC”) 2 Shoreline equity split is 45% Heritage, 55% Shoreline Power Company
Local partner Shoreline Power is an indigenous pan-African energy and infrastructure business with an existing
network of strong and respected relationships within Nigeria
Heritage has a strong technical team with relevant geographic experience
Exposure to Nigeria
Proved reserves of 37.2 Bbbls2, the largest in sub-Saharan Africa, 2nd largest in Africa and 10th largest in the world
Largest African producer with 2.5 MMbbls per day, with well-established infrastructure from over 50 years of oil
production
Step change in net production to Heritage, increasing from 605 bopd in Q1 2012 to 7,373 bopd in Q1 2013
2P crude reserves net to Heritage increase from 65 MMbbls to 412 MMbbls
Combining Nigerian relationships with technical expertise
Acquisition of world class asset
Completed in November 2012, 45% interest in OML 30, located onshore Nigeria, acquired by Shoreline
Since the acquisition, production has been as high as 42,825 bopd
Revenues since acquisition of $234.5 million have been generated
Largest upstream asset transaction in sub-Saharan Africa on a 2P basis1
OML 30 - A Transformational Acquisition
Diversification in core areas
Balancing exploration with production, within core geographic areas
Oil focused producing lease
1 Herold, based on publicly sourced data 2 BP Statistical Review 2012
9
Step change in production and
reserves
Recent Divestments
10
OML 30 is one of a number of licences that have been divested in the Niger Delta recently
OML 30 has been referred to as the premier asset due to location, reserves, current production, availability of facilities and proved development capability
Attractive acquisition cost of US$1.7/2P reserves versus average of US$5.9 for precedent transactions
Significant discount compared to similar recent onshore transactions in Nigeria
US$ per 2P Reserves of Precedent Transactions1
0
2
4
6
8
10
OML 30 OML 60 -63
OML 40 OML 42 OML 26 OML 4, 38,41
Average of precedents
Base Income Tax
Scenario1
($million)
Alternative Income
Tax Scenario2
($million)
Post–tax NPV (10%) Post–tax NPV (10%)
Proved Reserves (1P) 1,189 1,410
Proved & Probable
Reserves (2P) 2,162 2,652
Proved & Probable &
Possible Reserves (3P) 3,129 3,820
OML 30 Post-tax Valuation Net to Heritage
¹ Based on 2P reserves at announcement. No “2P case” published for OML 42, RPS “mid-case” used as proxy
OML 30 – The Opportunity
11
Over 200 wells have been drilled on the licence since 1961 with most drilling completed prior to 1992
All wells are producers as the reservoirs are underlain by a strong aquifer
Sporadic drilling as the licence was not considered core and therefore over-looked and under developed
Production from the licence commenced in 1963 and peaked in 1971 at c. 280,000 bopd
Over the period 2006 to 2009 production was severely impacted by both security and funding issues
These issues are less relevant for Shoreline and will make it easier to bring production back on
Historical Oil Production, ‘000 bopd
Historical Drilling
0
50
100
150
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250
300
0
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Cu
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Wells Drilled Annually
Cumulative Wells
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Mb
op
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Positioning Shoreline within Nigeria’s Indigenous Oil Sector
12
0
100
200
300
400
500
600
2P Reserves, MMbbls 2012 Production, bopd
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Nigeria’s indigenous oil sector is being strengthened by asset
divestments from IOCs over the past 3 years
Shoreline’s acquisition of OML 30 positions it as one of the
largest indigenous oil companies in Nigeria
Establishes Shoreline with critical mass of reserves and
production to be leading player in the Nigerian oil sector
Employment creation: in the past five years, over 65,000 direct employment and 250,000 non-direct employment
positions have been created in the oil industry alone2
Educated youth: literacy rate for the 15-24 age group was 78% in 2009, up from 64% in 20003
Annual growth rates that average over 7% in official data during the last decade place Nigeria among the fastest
growing economies in the world
Supportive Government
Experiencing the longest period of democratic rule in its history with reforms positively impacting the economy
NNPC encouraging indigenisation to ensure optimal production is restored through divestment programmes
Federal Government local content and the passage of the Petroleum Industry Bill (“PIB”) will create opportunities and
investments in the oil sector and remove fiscal regime uncertainty
IOCs focused on large scale projects (>500 MMbbls), offshore assets and other African jurisdictions
Periods of shut-in or below capacity production due to security issues and under-investment
High reserves/production ratio, production at 2.4MMbbls/day versus 2.0 MMbbls/day first reached 40 years ago
Educated, large workforce
Large, well defined hydrocarbon base
Large, prolific delta system of c. 300,000 square kilometres with very good reservoir quality (high porosities and permeabilities)
First discovery made in 1956 with production commencing two years later, exploration success c. 80%
37.2 Bbbls1 proven crude reserves, the largest in sub-Saharan Africa, the 2nd largest in Africa after Libya and the 10th largest in the world
The Opportunity in Nigeria
1 BP Statistical Review 2013 2 International Labour Office, 2005 statistics 3 National Bureau of Statistics
13
Under-investment in last four decades
Transaction Details and Structure
14
15
Combining Nigerian Relationships with Technical Expertise
Heritage Oil Plc
Shoreline Power
Financial strength
Technical and operational expertise
Experienced African operator and investor
Local knowledge and expertise
Operations throughout Nigeria and West Africa
Energy and infrastructure operating expertise
Network of contacts in the Nigerian oil and gas community
Acquisition Structure
OML 30 Oil mining lease in Nigeria
Vendors
US$850m
45% of OML 30
30%
55%
Leading auction
(indigenous Nigerian Company)
45%
10% 5%
Buyer
NPDC (Operator)
Capital Structure
16
Shoreline Shareholder Arrangement & Debt Funding
55% equity interest 45% equity interest
OML 30
Shoreline Natural Resources is an indigenous company based on equity split; Shoreline Power holds 55%
Economic interest takes into account equity capital funded by each shareholder and profit share
Shoreline Power entitled to 2.5% profit share
Consideration for Shoreline Power Call Option is 30% of equity funding into Shoreline Natural Resources at time of exercise
Equity funding is through shareholder loans
Relationship between Heritage and Shoreline Power governed by shareholder agreement
Acquisition was funded through 18 month bridge loan facility of US$550 million into Shoreline Natural Resources from Standard Bank
Bridge facility has been syndicated to Nigerian banks and China Development Bank
Refinancing of the bridge facility by way of a $550 million senior secured revolving reserve based facility is expected to be completed in June 2013
45%
US$550 million bridge facility
The Operating Framework and Relationship
17
Shoreline owns a 45% interest in OML 30, NPDC own 55% and is operator
The two companies work under the terms of a Joint Operating Agreement which is typical within industry
Additionally, NPDC have solely entered into an agreement with Atlantic Energy, a Nigerian company, to provide financial and technical assistance for their 55% interest. Atlantic Energy provides technical services, preparing drilling plans as an example, supplies any cash shortfalls and is paid from the NPDC 55% share of revenues according to the terms of their agreement
Shoreline
OML 30
NPDC
SHELL OML 30 Operating Staff
Atlantic Energy
OML 30 is managed along the lines of most JOA agreements
NPDC and Shoreline have established the OML 30
OPCOM to provide recommendations on
programmes, budgets and asset management.
OPCOM is composed of equal numbers from the two
owners
OPCOM decides on items that will be accepted or
require further study
Studies are carried out under the direction of
SUBCOMs. Those studies include all aspects of
managing OML 30
SUBCOM recommendations are in turn passed to
TECOM for technical approval
When approved at OPCOM the issue is presented to
NPDC and Shoreline for approval
Shoreline sells its 45% of production through a five year
marketing contract with Shell and receives funds direct
OPCOM
TECOM
SUBCOM
The Assets
18
The Niger Delta
19
OML 30 lies within the Niger Delta, located in the Gulf of Guinea, one of the most prolific oil and gas provinces in the world
From the Eocene to the present, the delta has prograded south-westward, forming depobelts that represent the most active portion of the delta at each stage of its development
These depobelts form one of the largest regressive deltas in the world covering approximately 75,000 square kilometres with a source rock thickness of up to 7,000 metres
OML 30
20
45% interest in OML 301 acquired by Shoreline
Onshore Nigeria, located less than 50 kilometres east of Warri, benefits from being on solid high ground
Lease covers 1,097 square kilometres with eight producing fields
In addition, there is one field not currently in production
850,000 bpd pipeline to export terminal
Infrastructure includes ullage to handle three times current production which is sufficient for near and medium term opportunities and the Trans Forcados Pipeline segment which will provide tariff income
Gross average production of 35,000 bopd expected for 2013 with the potential to significantly increase to c.100,000 bopd in the medium term and c.300,000 bopd in the long term, according to the RPS evaluation
Contains nine flow stations with a combined capacity in excess of c.395,000 bpd
Associated gas facilities can handle c.42 mmscf/day collected from six flow stations
¹ OML 30 is 55% owned by Nigerian Petroleum Development Corporation (“NPDC”)
Summary of Major Fields in OML 30
21
Major Fields Afiesere Eriemu Evwreni Kokori Olomoro-
Oleh Oroni Oweh
Uzere West
OML 30 Total
STOIIP (MMbbls)
897 1,003 412 1426 1,592 395 412 647 6,784
Production to date
(MMbbls) 189 76 52 383 383 40 40 122 1,285
Remaining Technical Resource
(MMbbls)1
368 49 170 260 78 65 130 1,120
Current production
(Mbopd) 7 1 1 6 15 4 1 - 35
Discovered 1966 1961 1967 1960 1962 1965 1964 1963 -
First Production
1968 1964 1969 1966 1963 1970 1966 1965 -
Number of wells
41 20 14 40 40 8 11 16 190
¹ Based on RPS evaluation. Afiesere and Eriemu combined in RPS’s production forecast analysis
Infrastructure Overview
22
The licence benefits from all infrastructure being in place
The licence includes 190 production wells, most are dual string. Injection wells and water injection facilities are unnecessary due to the strong aquifers
Well production is collected at one of nine flow stations. The flow stations have the capacity to handle 395,000 bpd, three times current production levels and will handle several years of projected production growth
The facilities are robustly designed and constructed and benefit from following a standard design so equipment can be easily replaced
The facilities have been maintained by Shell and therefore benefit from their worldwide experience and standards
Licence includes ownership of the Trans Forcados Pipeline that transports crude 95 kilometres to the Forcados Terminal
Trans Forcados Pipeline
23
OML 30 owns and operates the TFP
Several other operators currently use the TFP to transport crude to Forcados for dewatering and export. Capacity of the line is 850,000 bpd. Current use is c. 315,000 bpd
These operators pay OML 30 a ‘Capacity tariff’ ranging from $0.11 to $0.87/bbl and a ‘Production charge’ of $0.17 to $0.44/bbl. The tariffs are based largely on the length of the line that is used
OML 30 does not pay a tariff
TFP projected tariff revenues total $57.4m. The 2012 actual Opex was $4.4m. Advice received from PWC is that the pipeline revenues will be taxed at a corporate income tax rate of 30%
Production and Development
24
Production
25
OML 30 production since 1 July 2010 to 31 December 2012 is illustrated.
Production has been impacted by a manifold issues and strikes by local workers – both of which have been resolved
Gross Q1 2013 production from OML 30 averaged 15,800 bopd
Production for 2013 expected to average 35,000 bopd gross from OML 30
0
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30
40
50
60O
il R
ate
('0
00
bo
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)
OML30 Licence Production: 01-07-2010 to 31-12-2012
UZRE OWEH ORNI OLOM
KOKR EVWR ERMU AFIE
Realising Existing Potential and Future Upside
26
Short term
Medium term
Long term
Increase production through:
Improved gas lift by refurbishing existing system
Complete repairs to flow and gas lines and tie-in wells
Prevent downtime through improved community relations and share in profits to reduce vandalism
Invest in facilities to increase uptime
Modernise facility control equipment to increase efficiency
Workover existing shut-in wells to improve completions and to install gas lift in wells without artificial lift
Large stock of proved drilling locations determined from 3D seismic
Upside potential through focused management of the field and employing techniques such as multiple completions and horizontal drilling
Future exploration of deeper targets identified on 3D seismic
Future gas prices may lead to developing gas reserves
Lease extension past 2019; expected to be renewed thereafter as legislation provides for extension
Production Profile
27
OML 30 Projected Gross Production, bopd1
¹ RPS estimates of OML 30 gross Proved plus Probable Reserves (2P) production profile
Key developments to drive increase in production;
Gas lift
Uphole potential and flowline repairs
Workovers
Further drilling
Exploration potential
Upsides to the base case include development of the asset’s 2.5 TCF of gas and deeper exploration potential
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
28
Gross CAPEX Projection
Facilities CAPEX investments, scheduled to be completed during 2013 to 2015 include;
compressor maintenance and expansion or refurbishment of the gas lift system - US$67m
installation of temporary and custody transfer metering - US$33m
modification to the Ughelli Pumping Station to provide water separation and additional facilities modernisation - US$65m
flowline repairs for existing wells - US$17m
workovers on existing wells to restore production - US$85m
CAPEX totals $3.5 billion (Gross 100%) US$1.6 billion Net Shoreline
Includes drilling of 218 new, primarily horizontal, wells
Cost of horizontal well US$15m
Drilling commences with first rig in 2014 and then one new rig added every six months
Maximum of six rigs peaks at end of 2016
Drilling ramps down in 2020 and ends in 2025
$0
$100
$200
$300
$400
$500
$600
$700OML 30 Gross 100% CAPEX (US$m)
Netback per Barrel
29
Shoreline’s per barrel netback is US$26.75
The calculation follows the current fiscal assumptions
Royalty levied at a rate of 20% oil
Education Tax, levied as 2% * (revenue - royalty - Opex)
NDDC levy, levied as 3% * (total Capex + total Opex)
Annual licence rental payable at the rate of MOD US$1.1million
Petroleum Investment Allowance, 5% of annual tangible Capex
Income tax scenario
Oil Base Case, 65.75% for 5 years and 85% thereafter
Alternate case 65.75% for 5 years and 70% - 80% thereafter
Assumptions could change with new PIB regulations
Capex intangible/tangible split of approximately 30%/70% - depreciation 20% in years 1 to 4 and 19% in fifth year
Forcados crude receives c.3% premium to Brent
$26.75
$51.35
$5.00 $7.00 $1.70
$23.00
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
$110
$120
$130
BARREL
OML 30 Net Back
Royalty NDDC LevyEducation Tax OpexCapex Petroleum Profits TaxNet Back
$115.00/bbl
The Work Programme – Exploration of Deeper Targets
30
In Place Volumes
Prospect Oil MMbbls
Condensate MMbbls
Gas MMboe
Total MMboe
Uzere SP 26 88 1,128 308
Oroni DP 12 75 720 210
Oweh DP 7 60 497 153
Omogon Bik B 44 18 449 137
Eriemu N 11 30 433 114
Oweh NW 25 1 406 96
ODHE Lyede 3 7 492 95
Ofum E 28 1 337 87
Urhure 19 13 256 76
Isoko W 22 9 218 68
Oroni E 10 9 218 68
Ekiugbo 4 14 193 51
Ekiugbo N 1 4 50 13
Olomoro N 4 1 38 11
TOTAL 215 331 5,505 1,485
To date the extensive seismic information base has identified many prospects and leads
Development of the shallower producing reservoirs will provide opportunities to drill deeper and explore structures that have not yet been penetrated
As an example, the Omogon prospect, located southeast of Kokori, is illustrated below:
REMAINING ASSETS
31
32
Russia
95% equity interest in Zapadno Chumpasskoye Licence1
Licence located in Western Siberia (region accounts for >60% of Russia’s oil production)
Production in Q1 2013 averaged 441 bopd
RPS certified 65 mmboe and $336 million NPV10
Work in 2009/10 included installation of artificial lift and commencement of water injection
FDP approved by the Central Committee on Resource Development (TSKR) at end of December 2009
Infrastructure development includes tie-in to Transneft export pipeline
Successful completion of a horizontal well in August 2011
The horizontal well is the first such well drilled in the immediate area and presents a more effective and efficient method to develop the field
Based on the excellent horizontal drilling results, further horizontal wells are planned
¹ Acquired 95% ownership stake in Russian company ChumpassNefteDobycha Limited, 100% owner of the licence
Production
33
Tanzania
Awarded Rukwa PSA in November 2011 and Kyela PSA in January 2012
Operations have commenced and the initial work programme comprises;
Rukwa - 2,300 kilometres of legacy 2D seismic data reprocessed. Acquisition and processing of an additional 600 kilometres of 2D seismic data to infill this legacy data has completed. Initial studies are encouraging and drilling studies have started with a view to commencing drilling in 2014
Kyela - full tensor gravity survey acquired, which has now been interpreted, In conjunction with 100 kilometres of new 2D seismic data. The presence of tilted fault blocks and structural features has been confirmed
Heritage considers these blocks as sharing geological similarities with the Albert Basin of Uganda where the Company had considerable exploration success
The offshore Latham block is on trend with the recent major deep-water gas discoveries in Tanzania waters. Clear gas indicators are present within the block
1 Petrodel 70.1% 2 All expenditures relating to Latham have been written-off following a technical review in 2012
Rukwa North 10,175 sq km 100%, operator Rukwa South 8,745 sq km 100%, operator Kyela 1,934 sq km 100%, operator Latham1,2 5,056 sq km 29.9%, operator
Exploration
34
Papua New Guinea
Two licences, Petroleum Prospecting Licence No:319 (“PPL 319”) and Petroleum Retention Licence No:13 (“PRL 13”), have gross areas of approximately 2,025 and 160 square kilometres respectively
Heritage will earn an 80% working interest in each licence and be appointed operator
The licences are located in a known hydrocarbon bearing region that includes the multi-TCF Triceratops and Elk/Antelope discoveries
The licences are close to current and under-construction infrastructure with the Kutubu oil export pipeline and the PNG Liquefied Natural Gas pipeline crossing the acreage
The licences also benefit from the Kikori River providing a link to the open sea thereby increasing transport options.
The work programme has begun with the acquisition of 62 kilometres of seismic over the Tuyuwopi structure. This has confirmed a drilling location and plans are underway to drill a well in early 2014. Seismic acquisition over the remaining leads identified is expected to resume after the rainy season in Q4 2013
Heritage management believe there is additional exploration potential within both of the licences
Exploration
35
Libya – Strategically Well Placed
Heritage established a base in Benghazi in April 2011
Extremely well placed to benefit in the future development of the oil industry in Libya
Heritage Oil acquired a 51% equity interest and control of Sahara Oil Services Holdings Limited (“Sahara Oil”), an established oil field service provider
Sahara Oil owns the entire share capital of Sahara Oil Services Limited (“Sahara”)
Sahara has the necessary long term permits and licences to provide onshore and offshore oil field services in Libya as well as the rights to own and operate oil and gas licences
Through this acquisition Heritage is exploring ways to gain access to key producing fields and other licence opportunities in Libya
Exploration
36
Malta
Heritage Oil 100% working interest and operator
Two areas; c.18,000 sq km
Structures identified on Areas 2 & 7 could be analogous to the giant Bouri Field where IHS estimate reserves of 630 MMbbls and in excess of 8 TCF of gas
Number of producing fields offshore Libya and Tunisia
Oil and gas shows close to Area 7
Water depths of 250-300 metres
1,023 kilometres of legacy 2D seismic reprocessed
1,400 kilometres of 2D seismic acquired processed and interpreted
High-impact exploration well planned which will target approximately 500 mmboe. Well planning ongoing
Exploration
SUMMARY AND OUTLOOK
37
Summary
38
Corporate Highlights
Total revenues of $236.2 million in Q1 2013 ($2.3 million, Q1 2012)
Production for Q1 2013 net to Heritage averaged 7,373 bopd (605 bopd, Q1 2012), gross production has returned to 35,000 bopd
2013 gross production from OML 30 expected to average 35,000 bopd
Cash position of $184.1 million as at 31 March 2013, excluding monies related to the Ugandan Tax dispute of approximately $405 million and $101 million used as part security in OML 30 financing
Operational Highlights
Expanded the portfolio with the farm in to two licences in Papua New
Guinea
Acquisition of 2D seismic across the Tuyuwopi structure in PPL 319 has
completed and a drilling location identified
Active work programme across licences in Tanzania have continued
with encouraging results from newly acquired 2D seismic data
Catalysts
More regular newsflow to be expected from OML 30, Nigeria, where production is expected to increase
Initial exploration programmes in Tanzania and PNG ongoing with drilling expected to commence in 2014
Potential for developing and strengthening the portfolio further through acquisitions
Step Change in Production, bopd
0
2,000
4,000
6,000
8,000
10,000
12,000
Heritage preacquisition
OML 30 Heritage postacquisition
Entry into Nigeria
Acquisition of a world class asset
Combines Shoreline Power’s local knowledge and relationships with Heritage’s technical expertise
Provides a step change in production, reserves and cash flow
APPENDICES
39
40
Appendices
Heritage Oil Plc Board
Shoreline Natural Resources Board
CSR
Contact Details
41
Heritage Oil Plc Board
Anthony Buckingham – CEO, Director
Active oil sector businessman since 1970s; founded Heritage in 1992
Former advisor to Premier Oil (introduced them to Pakistan) Sonangol and Ranger Oil; architect behind Sonangol E&P
Paul Atherton – CFO, Director
Chartered accountant, degree in geology, corporate finance background
Joined Heritage in 2000
Michael Hibberd – Chairman, Non-Executive Director
Extensive background in international energy, planning & capital markets. Former Director of Scotia McLeod
On the board of a number of public and private companies
Joined Heritage in 2006
General Sir Michael Wilkes – Non-Executive Director, Senior Independent Director
Retired from the British Army as the most senior administrative officer
Chairman and non-executive director of a number of public and private companies
Joined Heritage in March 2008
42
Heritage Oil Plc Board (cont’d)
John McLeod – Non-Executive Director
Professional engineer with over 36 years of varied resources extraction experience
Joined Heritage in 1996
Gregory Turnbull – Non-Executive Director
Regional Managing Partner of McCarthy Tétrault LLP
Extensive knowledge of corporate governance issues and has acted for many boards of directors
Joined Heritage in 1996
Carmen Rodriguez – Non-Executive Director
Recently held the position of Chairperson and CEO (2007-2012) of Sociedad Estatal Espanola P4R, S.A., a Spanish owned
consultancy firm specialising in foreign trade, investment and co-operation
Joined Heritage in March 2012
Colonel Mark Erwin (Retd.) – Non-Executive Director
Mr. Erwin served in the United States Army for over 25 years culminating his career as the Chief of Staff of the United States
Army Special Operations Command
Joined Heritage in May 2012
43
Shoreline Board
Dr Ladi Bada – CEO
Dr. Bada has been working in the Nigerian oil and gas sector for the last 14 years with 10 of those years in directorial roles
He is presently a director in Linetrale Oil and a consultant to Oriental Energy
Paul Atherton – CFO
Chartered accountant, degree in geology, corporate finance background
Joined Heritage in 2000
Kola Karim – Chairman
Group CEO and Managing Director of Shoreline Energy and Shoreline Power
Mr. Karim holds an MBA from the University of Leicester and degree in Business Management from City University. He is
also an alumni member of the Harvard Business School for the Executive Management Programme and the Harvard
Kennedy School for the Leadership and Public Policy programme. He was awarded Young Global Leader Award in 2008
Tunde Karim
Mr. Karim also serves on the board of Shoreline Energy, April Travels Ltd, Nigerian Ropes Plc, Fortis Construction Co. Ltd
Shoreline Electrical Systems Ltd, L.D Alberto Company Ltd and Askar Paints Ltd
Mr. Karim is a member of the Institute of Directors Nigeria and holds a degree in Biochemical Engineering from University
College of Wales, U.K
44
Shoreline Board (cont’d)
Philip Blows
Mr. Blows is a chartered accountant and has been an adviser to Heritage for 20 years
Holds a degree in Business Law
Set policies
Devise and maintain systems
Measure and monitor
performance
Communicate and report to stakeholders
Apply stakeholder
feedback
CSR is a Key Component of Enhancing Performance
45
Heritage Approach to CSR
Engage and work with stakeholders towards a shared future and to be viewed as a partner of choice
Committed to a programme of pro-active engagement to create lasting legacies for local communities
CSR policy framework is integrated in our business model, setting out our essential core values
Strong track record for health and safety
Employment of local personnel
Maximise local content of all contracts
Heritage Approach in Nigeria
Shoreline is structured as an indigenous company to incentivise local support
Profit share to support local communities and implement long-term sustainable development initiatives
Over 50 communities in the lease area
Internationally recognised environmental agency commissioned to review the lease
No identified legacy issues for Shoreline
OML 30 operational staff will be drawn from local communities
Growth in production will result in growth in employment
Advisory Group
Group already established
Consists of senior leaders from local communities
Regular dialogue with local communities
Focusing on education and healthcare
46
Contact Details
Heritage Oil Plc
Tony Buckingham / Paul Atherton
Tel: +44 (0)1534 835 400
Email: [email protected]
Website: www.heritageoilplc.com
Investor Relations – Heritage Oil Plc
Tanya Clarke
Tel: +44 (0)20 7518 0838
Email: [email protected]
Media Enquiries
Ben Brewerton / Natalia Erikssen
Tel: +44 (0) 20 7831 3113
Email: [email protected]
Canada
Cathy Hume / Jeanny So
Tel: +1 416 868 1079 x231 / x225
Email: [email protected] / [email protected]
Stock symbols
London Toronto
HOIL HOC (Exchangeable)
HOX (Exchangeable)