october 22nd 2015 - proactiveinvestors na€¦ · october 22nd 2015 . 2 capital structure market...
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October 22nd 2015
2
Capital structure
Market Cap £1.63million*
Notes:
* Market Cap as at 20/10/2015
** Warrants have an average volume weighted exercise price of 1.47p/share
*** Options have an average volume weighted exercise price of 2.93p/share
Major Shareholders
Management 16.9%
Legal and General 4.6%
AXA Investment
Managers 4.1%
Key Data
Market AIM
Ticker IRG
Capital Structure
Current Shares 203mm
Warrants 52.7mm**
Options 5.5mm***
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Management team: Biographies
Roberto Bencini Feilim McCole Owain Franks Brian Hepp
Feilim McCole Financial Director
Owain Franks Commercial Director
Brian Hepp COO
Kevin Dean Technical Director
Greg Coleman has over 35 years of experience in the oil and gas industry, 20 of which were gained
at BP where he was Group Vice President. He worked as Managing Director for BP Norway
following the merger of BP and Amoco. He then led BP's Investor Relations team and was Group
Vice President for Health, Safety, Security and Environment. He then founded Canamens Ltd (a
private equity backed company). In 2007 which successfully appraised the Kraken field in the North
Sea as well as building a portfolio of interests in North Africa and Central Asia.
Feilim McCole is a Chartered Accountant with significant quoted company and corporate finance
experience. He spent six years in the corporate finance teams at Andersen and Deloitte, leading
AIM IPOs and acting as Nomad and financial adviser to AIM and Main Market companies, before
spending three years focused on private equity advisory. Before joining IRG he was the interim
Finance Director of a £35m turnover support services company and prior to this, Finance Director of
a quoted property company with a £125m portfolio. He qualified with EY.
Kevin Dean has over 35 years of upstream experience around the globe including East and
Northern Africa, Russia and the North Sea. He led the effort to evaluate and drill the Rabeh East
Field in the Egyptian Eastern Desert which proved c.40mmb of reserves, led assessment of a
corporate acquisition in Colombia and the redevelopment of several multi million barrel fields in
Azerbaijan.
Owain Franks is a former PricewaterhouseCoopers partner and was on the PwC UK Management
Board for 7 years. He is by background a legal and tax advisor with 25 years of M&A and
performance improvement experience and has over 15 years of specialisation in the Oil and Gas
Industry and over 30 years experience in the commercial financial sector.
Brian Hepp has over 31 years of upstream oil and gas operations in North America, Russian
Federation, Europe, North Africa and South America. His record and experience encompasses all
aspects of field operations and asset management and optimisation, and he was instrumental in
increasing production on a development in the West Esh El Mallaha ("WEEM") field in the Gulf of
Suez in Egypt from 450 to 6,000 bopd, in less than 18 months from initial involvement.
Greg Coleman CEO
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Strategy
Acquire initial cornerstone production assets with scope for
application of modern technology, operational excellence and
development upside
• Innovative investment approach and structures
• Seek synergies between assets
Investments
• Production enhancement through operational improvement and
appraisal / development of identified structures
• Execute two to three complementary transactions (number of MoUs
being negotiated) to give additional production / cash flow
• Identify further acquisitions with opportunities for production
enhancement
• Cash flow and debt financing to fund acquisitions and Capex
Growth of Production
Portfolio
• Mix of acquisitions and organic growth to drive production up to
25Mboepd
Organic & Inorganic
Growth
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Egypt: Current Situation
• Political situation is stabilising
• The government is determined to attract new foreign
investment- New investors/operators will be welcomed with
open arms.
• Fuel subsidies have been reduced and further moves in that
direction are on the table to reduce the fiscal deficit
• The country is now a net importer of oil and oil products.
Hence the need to move to competitive international pricing.
Due to local shortages, premium prices for imports are
being realised.
• EGPC reduced outstanding receivables to oil companies by
$2.1bn at year end 2014 and continuing…
• 2 licence rounds have been completed in the last year with
EGPC expected to announce a further western desert
acreage round.
• Service costs are coming down
6
Recent Egypt Oil & Gas Transactions
Buyer Seller Deal Type Date Country Transaction Value ($MM) $/1P bbl $/2P bbl
Sea Dragon Energy Madison Petrogas Corporate Aug-15 Egypt 20.9 - 4.5-6.8*
Rockhopper Beach Energy Asset Aug-15 Egypt 22.0 - 4.5
Sacoil MENA Hydrocarbons Asset Sep-14 Egypt 14.1 - 2.3
Undisclosed Sea Dragon Asset Sep-13 Egypt 6.0 - 9.2
SINOPEC Apache Asset Aug-13 Egypt 3100.0 34.1 7.3
Sea Dragon Energy National Petroleum Company Corporate Dec-12 Egypt 3.3 1.4 1.2
Petroceltic Melrose Resources Corporate Aug-12 Egypt 492.3 8.6 6.0
Transglobe Cepsa Egypt Asset Jul-12 Egypt 4.7 - -
Transglobe EP Energy Asset Jun-12 Egypt 21.7 - -
Sea Dragon Energy National Petroleum Company S.A. Corporate Jan-12 Egypt 80.9 14.7 8.6
MENA Hydrocarbons Hess Asset May-11 Egypt 7.5 - -
Transglobe Egyptian Petroleum Development Asset Mar-11 Egypt 60.0 8.1 6.8
Average 307.95 13.23 5.63
Independent Resources Transglobe Inc. Corporate Sep-15 Egypt 1.75 11.40 3.47
Company Market Cap (US$MM) EV/2P bbl (US$/bbl) * Based on IRG estimated value of net cash of Madison
Transglobe 204.5 3.94** ** Based on EV as of 19 Oct 2015, debt, cash & reserves from 2014 Annual Report
SDX Energy 27.6 5.62*** *** Based on EV as of 19 Oct 2015, debt & cash from 2014 Annual Report. Reserves from Operations page on web site (19/10/2015)
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Nostra Terra partnership
Strategic agreement to explore Egyptian investments
- 50:50 investments
- Cost sharing approach
NTOG:
- Producing company – Texas, Oklahoma, Kansas, Colorado and Wyoming
- AIM quoted
Experienced in field development techniques relevant for Egypt
Key personnel
- Ewen Ainsworth – Chairman
- Matt Lofgran – CEO
- Alden McCall - COO
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East Ghazalat
Acquisition
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East Ghazalat Acquisition
Transaction
Acquire 25% working interest in producing East Ghazalat licence in the Egyptian Western
Desert
US$0.5M cash payment upon purchase, US$1.25M loan note repayable in 2 years with 10%
pa coupon
Rationale For Transaction
Immediate net production to IRG of circa 220bopd
Generate c.US$2.0m pa of operating cash flow (pre-investment capex) from 2017 even at
current low oil prices
Significant upside can be recognised immediately on any further oil price recovery
Significant cost recovery potential based on historic investments made by the Vendor in the
JV to the Operator
Further Upside
IRG share of 2P Reserves of approximately 0.5mm bbls
Management expects to more than double net production through low risk workovers and
development drilling
Significant undeveloped gas resource of 140,000 Boe (2C resources)
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East Ghazalat Asset
Degolyer& McNaughton CPR (Prepared as of 30 June 2015)
25% WI 1P 153,000 bbls 1P+ 2P 500,000 bbls 1P+2P+3P 632,000 bbls
2C contingent: 140,000 BOE
Mgmt Case 1,900,000 bbls (plus upside in gas development
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East Ghazalat Wells & Facilities
Sabbar NW-1 well Sabbar 1X well
Manifold
Production
Storage
Tanks
12
East Ghazalat Structure
13
East Ghazalat - Revenue per bbl Analysis at US$50/bbl
$45.98 Net
per bbl
$4.02
$11.49 Cost Oil
$27.59 EGPC
Profit Oil Includes Egyptian
Tax & Royalty
$50.00 Gross
per bbl $6.90
Profit Oil
At US$50 per bbl the Contractor receives $18.39 per bbl to meet all costs and G&A
Western Desert Discount Fixed $2.15 per bbl + 3.75% Remainder
25% Net 20% Profit (15% Net)
80% Profit (60% Net)
Production Sharing Contract – Approved by Egyptian Parliament 25% cost recovery
20% profit share of remaining revenue Opex recovered in current year
Capex recoverable over 5 years
No further corporation tax or Government royalties due
At 880 bbl per day revenue available to the Contractor is
$5,906,868 per year
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East Ghazalat - Single Well Economics
Production: 636,000 bbls
Even at $50 per BBL the returns from new well investment are excellent.
Payback is less than 2 years
15
Tunisian Assets
16
Ksar Hadada
Permit
Overview
Onshore exploration licence on Tunisia’s eastern
border. Main prospects on the licence are Sidi Toui
and an Acacus play. Sidi Toui has three wells
showing hydrocarbons but not tested. IRG is
operator with 86.345% working interest
Upcoming work programme involves acquisition of
200km2 of 3D seismic, re-entry of one existing well
and the drilling of a new well to the Ordovician.
IRG plans to farm down their working interest to
reduce capital commitment on the licence
Analogue: Bir Ben Tartar (Medco)
Production (2014) 2,800 bopd
Gross 2P remaining 10.5MMboe †
Cumulative production 3.4 MMboe †
IRG interest in permit 86.345%
Gross Recoverable Resources (Unrisked)
Oil 98.3 MM BBLs Pmean
Gas 57.6 BCF Pmean
NPV10 of IRG interest ($75 per BBL)
Unrisked US$590m
Risked US$186m
Implied Valuation per IRG Ord Share
Unrisked 189p
Risked 59p
Work Programme (2 years)
Cost (est.) $18MM
Access cost / boe $0.17
* - Based on 202.6m shares currently in issue
† - Most recently available as at 30 September
2014
Oil price sensitivity
Revised economic analysis
confirms project remains
viable at prices approaching
$30 per BBL
Tunisia: Ksar Hadada
Additional prospects identified by Scotforth RSDD-H survey
17
Map of the Ksar Hadada block
NE boundary of the
prolific Ghadames Basin
Located on the
Talemzane Arch – focus
for Oil & Gas along its
length
Under Explored
• Nine wells 1958 – 2010
• One well per 250 km2
• No 3D led exploration
Offset Ordovician fields
• Bir Ben Tartar 50 km
SW
• Sabria and El Franig on
Talemzane Arch NW
along strike
18
Ksar Hadada Work Programme - Updated
Farm-out marketing continues with Envoi
Refined appraisal of subsurface prospectivity
has highlighted Acacus opportunity
19
East Ghazalat
• Brings immediate production of 220bopd into IRG
• Potential to significantly increase revenues and profits with recovery in oil price
• Further increased profitability on intended production expansion through workovers and
additional wells
Newsflow
• Production uplift at East Ghazalat
• through workovers
• drilling in 2H 2016
• Updated CPR for East Ghazalat
• Further acquisitions of producing assets
• Farm-out of Ksar Hadada
• Drilling activity at Ksar Hadada - 1H 2016
• Development approval of North Dabaa
Summary
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