salamander energy full year results march 2012. © salamander | 2012 | 2 agenda introduction &...
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SALAMANDER ENERGY
Full Year Results March 2012
© SALAMANDER | 2012 | 2
AGENDA
Introduction & Overview
Financial Review
Operational Review
Summary & Outlook
James Menzies, CEO
Jonathan Copus, CFO
Mike Buck, COO
James Menzies, CEO
© SALAMANDER | 2012 | 3
2011 FULL YEAR RESULTSHIGHLIGHTS
• Operational Progress– Full year average production rate of 18,600 boepd (2010: 20,300 boepd)
– Proved reserves increased by 37% to 48 MMboe (2010: 35 MMboe)
– Proved & probable reserves increased by 14% to 75.3 MMboe (2010: 66.3 MMboe)
– Successful drilling resulting in East Terrace oil discovery, South Sebuku and Dong Mung gas appraisals
– Independent CPR for North Kutei acreage giving gross mean prospective resource of c. 2.5 Tcf of gas and 260 MMbo of oil in top four ranked prospects
• Financial Highlights– Record post-tax operating cash flow increased by 82% to $193.9 MM (2010: $106.5 MM)
– Record pre-tax profit of $112.6 MM (2010: loss of $113.7 MM)
– Year end cash position of $85.8 MM
• Strategic Realignment of Portfolio– Expanded Greater Bualuang position through farm-in to G4/50
– Deepened interest in Greater Kerendan Area
– Disposal of low margin, non-core interests in ONWJ/SES PSCs
© SALAMANDER | 2012 | 4
FOCUS ON 3 REGIONAL PLAYS WITH GROWTH POTENTIAL
• Core Area Characteristics– Operated positions with large equity
participation– Anchor asset with reserves &/or resources,
exploration & appraisal upside– Room for expansion – Competitive advantage through
data/knowledge
• Building Around Anchor Assets– Additional equity in Kerendan field,
Salamander now 80%– NE Bangkanai and W Bangkanai Joint Studies
– options for expansion– Farm-in to G4/50 in Greater Bualuang Area
• Managing Exit / Harvesting Non Core Areas– ONWJ/SES divestment– Opex reduction initiative in Kambuna– Withdrawal from Vietnam
* Moecor etains a 50% back-in right
Greater Kerendan, IndonesiaBangkanai PSC (80%), operatorNE Bangkanai Joint Study (100%)W Bangkanai Joint Study (100%)
Gas Development & Exploration
Greater Kerendan, IndonesiaBangkanai PSC (80%), operatorNE Bangkanai Joint Study (100%)W Bangkanai Joint Study (100%)
Gas Development & Exploration
North Kutei, IndonesiaBontang PSC (100%), operatorSE Sangatta PSC (75%), operator
Gas Appraisal & Exploration
North Kutei, IndonesiaBontang PSC (100%), operatorSE Sangatta PSC (75%), operator
Gas Appraisal & Exploration
Greater Bualuang, ThailandB8/38 (100%), operatorG4/50 (100%*), operator
Oil Production, Development & Exploration
Greater Bualuang, ThailandB8/38 (100%), operatorG4/50 (100%*), operator
Oil Production, Development & Exploration
© SALAMANDER | 2012 | 5
TRANSFORMATIONAL POTENTIAL ACROSS 3 LOW / MID RISK PLAYS
North Kutei
Greater Bualuang
Greater Kerendan
G4/50
© SALAMANDER | 2012 | 6
STRENGTHENING THE MANAGEMENT TEAM & BOARD
• Dr John Bell, Group Technical Director (member of Executive Committee)
• Graham Balchin, GM Thailand, ex-BG Operations Director Trinidad & Tobago
• Craig Stewart, GM Indonesia, ex-President & CEO VICO Indonesia
• Jerry Smart, Exploration Manager Indonesia, ex-ENI, Exploration Manager (Ghana & Americas)
• Technical Advisory Committee to the Board
– Dr Richard Hardman
– Prof Howard Johnson
– Dr Alastair Sharp
• Dr Carol Bell, Non-Exec Director
– Non-Exec DNO
– Non-exec PGS
– Advisory Board Gemini Oil & Gas
Executive Management Appointments Non-Executive Appointments
© SALAMANDER | 2012 | 7
ORGANISATION RE-STRUCTURED
HR
CP&L
HSE
Accts.
Finance
Tax
Commercial
Legal
Audit
Jonathan CopusGroup Finance Director
Mike Buck Chief Operating Officer
James MenziesChief Executive Officer
GM Indonesia
GM Vietnam
GM Thailand
ASSETS
John BellGroup Technical Director
© SALAMANDER | 2012 | 8
PROVED & PROBABLE RESERVES UP 14% TO 75.3 MMBOE
• 28 MMboe added to 2P reserves• Proved reserves up 37% to 48 MMboe• Reserves replacement 235%, excluding disposals 436%
Proved 53%
Proved 64%
© SALAMANDER | 2012 | 9
LARGE PROSPECTIVE RESOURCE BASE UNDERPINS RESERVES & CONTINGENTS
• Major Prospective Resource
– Over 900 MMboe of prospective resources identified in high-graded 15 prospects within three core areas
– Average risk 1 in 4
– >100 MMboe in 2 large prospects in Greater Kerendan
– 110 MMbo in deep water North Kutei prospect excluded from these figures
– For drilling in next 2 – 3 years
• Near-Term Reserve Additions From Resources
– Further Kerendan volumes targeted
– Tutung appraisal drilling
– Bualuang resources below & above main reservoir unit
Top 15 Prospects Unrisked Mean Prospective Resources
2C Contingent Resources
925 MMboe(12 x 2P reserves)
88 MMboe
75.3 MMboe
2P Reserves
Oil & liquids
Gas
FINANCIALS
© SALAMANDER | 2012 | 11
Record cash generation
2011 2010
Production (Mboepd) 18.6 20.3
Realisation Oil ($ per bbl) $104.5 $73.2 Gas ($ per Mscf) $5.5 $5.1
Revenue ($MM) $408.0 $323.4
Pre-tax Profit/(Loss) ($MM) $112.6 ($113.7)
Operating cash flow ($MM) $293.6 $174.4
Post tax operating cash flow ($MM) $193.9 $106.5
Net debt ($MM) $210.1 $190.2
2011 FINANCIAL OVERVIEWKEY FINANCIAL METRICS
Production approx. flat ex sale of ONWJ/SES
68% Y-o-Y growth
82% Y-o-Y growth
Buoyant commodity markets, strong gasrealisations, Dubai discount narrowed further
Borrowings $195.8 millionConvertible bond $100 millionCash and funds $85.8 million
© SALAMANDER | 2012 | 12
$113 million pre-tax profit
$MM 2011 2010
Revenue 408.0 323.4
Cost of sales
Other (205.5) (272.2)
Impairment 0 (48.6)
Gross Profit 202.5 2.6
Exploration expense (57.8) (95.9)
Admin (14.6) (12.7)
Profit on asset disposal 6.8 0.0
Operating profit/(loss) 136.9 (106.0)
Net financial (24.3) (7.7)
Profit/(loss) before tax 112.6 (113.7)
Tax (158.1) (55.9)
Loss for year (45.5) (169.5)
2011 FINANCIAL OVERVIEWPROFIT AND LOSS
Book profit on disposal of ONWJ/SES
Kambuna exploration (historic)Dao Ruang 2 and 3Cat Ba
Year-on-year comparisons are complicated by 2010 impairments. 2011 direct operating costs totalled $104m, broadly flat on 2010 ($103m)
First full year of SRB 2011 2010Income tax $63m $51mSRB $58m $21mDeferred tax $37m ($16m)
$158m $56m
One cargo of crude held in tanks at year-end c.$35 million. Sold in 2012 at $1.10/bbl discount
© SALAMANDER | 2012 | 13
2011 FINANCIAL OVERVIEWINCOME STATEMENT TAX… TAKING A CLOSER LOOK
• FY-11 income statement tax equalled $158 million (cash tax of $102 million)
• Weighting applicable tax rates for production assets against their PBT, Salamander’s FY-11 effective tax rate was 48% (50% Thailand, 44% Indonesia)
• FY-11 tax is impacted by various non-deductible items. Some will unwind or be more efficiently managed through the group’s refocused strategy:
In 2011 virtually none of Salamander's exploration spend expensed could be taken as an allowance against tax. Moving forward, as spend rises in core areas such as the Greater Bualuang area, this will change.
FY-11 is the first full year where SRB is paid. As capital investment rises across the Bualuang field and B8/38 block, this figure should fall.
Accelerated depreciation and tax timing differences for corporate acquisition costs, which can not be taken as an allowance against current year tax. Figure will be amortized with production and will be diluted as more boe are added through reserve additions
2011 tax… yet to reflect the new strategy
2011
Profit / (loss) before tax $112.6
Adjustments:
Exploration expense $57.5Acquisition costs and accelerated depreciation $74.4
SRB $57.9
Other $27.1
$216.9
Adjusted PBT $329.5
Effective tax rate 48%
Tax charge $158.1
© SALAMANDER | 2012 | 14
2011 FINANCIAL OVERVIEWCASH FLOW EVOLUTION
$86 million closing cash balance
Capex $249m, including c.$21m bank guarantee for G4/50 3D seismic; (completed Q1 2012) and $30.4m of Angklung costs
invoiced in 2011
Capex $249m, including c.$21m bank guarantee for G4/50 3D seismic; (completed Q1 2012) and $30.4m of Angklung costs
invoiced in 2011
Sale of ONWJ/SES
Sale of ONWJ/SES
Closing cash balance $86m ($25m restricted, including G4/50 3D seismic guarantee; funds now released)
Corporate tax $37mSRB $65m
Corporate tax $37mSRB $65m
Opening cash balance $90m
RBL refinanced May-11Facility size: $325mDrawn: $196m
RBL refinanced May-11Facility size: $325mDrawn: $196m
Production 18,600 boe/dOil and Liquids $104.4/bblGas $5.5/mscf
Production 18,600 boe/dOil and Liquids $104.4/bblGas $5.5/mscf 2012 outlook:
Production 12,000–13,000 boe/d
Capex $225 million
Cash flow per barrel a key focus
© SALAMANDER | 2012 | 15
High margin barrels underpin cash flow
2011 FINANCIAL OVERVIEWHIGH GRADING CASH FLOW
• Sale of ONWJ/SES will lower 2012 production Y-o-Y by c.33% (to 12–13k boe/d)• Boe’s sold were low margin, high tax, high cost, fields in long-term decline• Significant maintenance capex on ONWJ/SES… but no growth• Higher margin Bualuang barrels rising to c. 70% of group production (2010: 42%)
2011 post tax cash flow per WI boe (US$ per boe)Evolution of production (boepd)
Sold
© SALAMANDER | 2012 | 16
Significant opportunity to improve cash flow margins
2011 FINANCIAL OVERVIEWINTEGRATED GULF OF THAILAND STRATEGY
• Discount to Dubai reduced, Dubai trading at parity to Brent– October 2008: Dubai minus $17.00/bbl– 2011: Dubai minus $1.97/bbl– 2012/2013: Dubai minus $1.10/bbl
• Costs: Opex reductions targeted– Bravo Platform on track for September 2012– Field optimisation review to target opex reductions
• Government take:SRB expected to fall– SRB = SRB Rate x Petroleum Profit– SRB rate between 0-75%, function of adjusted petroleum revenue/metre
drilled (currently 40-50%)– Petroleum Profit = Revenue less royalty, capex, opex and carried
forward losses– Capex expensed in year incurred– SRB is deductible for Petroleum Income Tax
– 2012 capex on B8/38 67% higher than in 2011 (post uplift)– C.$30 MM spent on G4/50 to utilise
Pre capexCash margin
Discount
FY-11 Brent
Opex
G&A
Royalty
Income tax
SRB
Production capex uplift
Drilling allowance Drilled to date
B8/38 25% 150k m 46k mG4/50 35% 600k m -
1
2
3
1
2
3
OPERATIONS
© SALAMANDER | 2012 | 18
HIGHLIGHTS
• Greater Bualuang– East Terrace oil discovery– Reserves upgrade– Bravo Platform on schedule– Expanded acreage position through G4/50
• Greater Kerendan– Booked 19.0 MMboe of 2P reserves– DrillCo-1 rig mobilising to location– Options over surrounding acreage
• North Kutei– Completed technical review applying lessons learnt from play
opening Angklung-1 well– Four initial targets chasing 676 MMboe (unrisked) / 144 MMboe
(risked)– More than 20 prospects and leads mapped all with multiple
reservoir targets
© SALAMANDER | 2012 | 19
GREATER BUALUANG10 MMBBLS RESERVES ADDITIONS, EXPLORATION CREATING VALUE
• East Terrace Oil Discovery & main field upgrade– 35 m net pay in three zones, 50 MMbo STOIIP– 8 MMbo booked as 2P reserves– Booked additional 2 MMbo on main field– Additional recoverable resource of c. 14 MMbo in the T2,
T5 and East Terrace
• Phase 5 development complete– 3 new producers, 2 existing wells side tracked– Two of the longer reach wells drilled to flanks of field
have proven to be good producers
• 2012 Development Plans – Ensco-53 rig mobilising to location– 2 production wells prioritised to exploit high prevailing oil
prices
• Phase 6 development drilling – Bravo Platform– 16 slot bridge linked platform, 60% complete– On schedule for installation in August 2012– 10 wells on main field and 6 on East Terrace starting 2H
2012
© SALAMANDER | 2012 | 20
NEAR TERM EXPLORATIONNW TERRACE/FAR EAST PROSPECT 2Q 2012
• Ensco-53 rig delayed due to overruns in previous operator’s programme
• Far East and Northwest Terrace back to back drilling starting May 2012
NW Fault Terrace Cluster• Typical GoT style traps ~5 MMbo per
compartment, 35% CoS• Moderate fault throw, help trap integrity• Cluster development potential
Far East Prospect• Large Miocene structure with deeper Permian
Ratburi potential• 20 MMbo Miocene potential, 35% CoS• Migration key risk, East Terrace success
reduces risk
High Prospect Density• More than 20 defined drillable prospects in
376sq km block B8/38
North East
North Central
B8/38-1
B7/32-2
B8/38-5
B8/38-2
B8/38-3
Platform
North West
Prospect
Ratburi Lead
3D Area
Oil Field
Miocene Lead
Bualuang
Far East
NW Fault Terrace Cluster
© SALAMANDER | 2012 | 21
G4/50 PROVIDING FURTHER RUNNING ROOM
• Farmed in to G4/50
• 5,000 sq km surrounding Bualuang and sharing the same petroleum system
– One of the most sought after blocks in the last licencing round
• Salamander has extensive knowledge of the play systems through B8/38 activities
• 2,000 sq km of existing 3D acquired by Chevron
• 3,000 sq km 3D survey completed Feb 2012
– Fast track processed cube in house, Interpretation in progress
– Full processing on-going
• 3D seismic is key in defining traps and locating wells in Gulf of Thailand
• Drilling 2 exploration wells in Greater Bualuang area in 2H 2012
© SALAMANDER | 2012 | 22
FORWARD PROGRAMMERIG ON LONG TERM CONTRACT TO ENSURE DELIVERY
• Tight rig market and rig delays have repeatedly caused drilling plans to slip
• Expanded acreage position with large portfolio of targets provides continuity of work to commit to rig on long term contract
• Signed contract to take Atwood Mako jack-up rig from 12 month term with options to extend
– New build, to be delivered in 3Q 2012• Continual programme of development, exploration and
appraisal drilling– Phase 6 development from Bravo platform– East terrace development – B8/38 and G4/50 exploration – Early appraisal of exploration success
© SALAMANDER | 2012 | 23
GREATER KERENDAN19.0 MMBOE OF 2P BOOKED, FURTHER RESOURCE TO COMMERCIALISE
• Kerendan Field
– Booked 19.0 MMboe of 2P reserves
– Further 23.4 MMboe (net) of contingent resource
– Price $4.79/MMbtu, 3% inflator per 3 years
– 20.3 Bnbtu/day, 20 year contract
• Development Plan
– PLN buyer, gas for local power generation• 320 MW plant to be built capable of taking over three times volumes
in current GSA
• Kerendan currently the only viable supply source
– Power by wire into East Kalimantan grid
– Delivery point at PLN power plant 3 km from field
– DrillCo-1 mobilising: 3 development wells from June
– Kerendan ready to deliver gas late 2013/early 2014
• PLN progress
– Power plant tender in preparation
– Transmission lines under construction
• Significant exploration upside
– West Kerendan has 1Tcf potential in two targets
– Prove up resources and negotiate GSA for local sale or pipe gas to East Kalimantan markets
23
Kerendan Field
Undrilled West
Kerendan Prospect
A modern day equivalent of the Kerendan reef
© SALAMANDER | 2012 | 24
KUTEI BASINA NEW PLAY IN A PROLIFIC BASIN
SE Sangatta PSCBontang
PSC
Tunu
Jangkrik
Nilam
Peciko
Attaka
W.Seno
Merah Besar
Phase I: Mahakam
Delta Giant Fields
Distribution & Evolution of Kutei Basin Discoveries
Phase II: Major Fields as play
extensions around
Mahakam Delta
Phase III: Explore for Giant discoveries 2012-13
benefiting from new geological insights
• Modern data and technology driven new geological model
• Ex BG team working data have experience on play from Egypt
• Angklung-1 gas discovery is play opener & has calibrated data sets
• Play extends across Bontang & SE Sangatta PSC’s
• >20 leads and prospects mapped to date all with stacked reservoir potential
© SALAMANDER | 2012 | 25
Over 20 leads & prospects on the acreage offering material upside
NORTH KUTEITRANSFORMATIONAL RESOURCE POTENTIAL – TOP 4 PROSPECTS
Prospect Licence HC-Type
Mean Unrisked
Prospective Resource
P90 Unrisked
Prospective Resource
P50 Unrisked
Prospective Resource
P10 Unrisked
Prospective Resource
Gas (Bcf) 245 119 233 389Oil (MMbo) 3 0.1 3 6Gas (Bcf) 293 124 268 491Oil (MMbo) 15 2 12 30Gas (Bcf) 1190 579 1063 1953Oil (MMbo) 108 37 102 188Gas (Bcf) 766 353 708 1239Oil (MMbo) 134 65 125 208
TOTAL (MMboe) 676TOTAL Net Salamander (MMboe) 534
Conversion factor 6 Bscf/Mmboe
All prospecive resource figures are gross unless otherwise stated
Salamander has 100% working interest in Bontang PSC and 75% in SE Sangatta PSC
North Kendang SE Sangatta PSC
Kecapi Bontang PSC
Bedug Bontang PSC
South Kendang SE Sangatta PSC
Chance of Success: Gas 25% / Oil 15%
ISIS Petroleum Consultants independent resource estimates:Pmeans similar to P50sPmeans similar to P50s
Over 500 MMboe unrisked
Over 500 MMboe unrisked
© SALAMANDER | 2012 | 26
AN EXAMPLE OF THE PLIOCENE CHANNEL SAND PLAYKECAPI PROSPECT
• Multiple Stacked Canyon Fairways – strong amplitude support for hydrocarbon presence• Sidetrack leg to penetrate ‘downthrown’ continuation of Angklung discovery
Ë
BT45_CYN04 (A,B &C)
BT45_CYN04 (A,B &C)
BT50BT50
BT18_CYN02 (A,B&C)
BT18_CYN02 (A,B&C)
AngklungAngklung
BT25-CBT25-C
AngklungDST 24 Mmcfgpd
AngklungDST 24 Mmcfgpd
‘Downthrown’ extension of Angklung
proven gas
‘Downthrown’ extension of Angklung
proven gas
Ë
© SALAMANDER | 2012 | 27
EAST KALIMANTAN GAS MARKET
Spare capacityof approximately1200 MMSCFD
Market SectorPrice Range per
mmbtu
Export LNG $10 to $16, linked to JCC
Domestic LNG $10, linked to ICP
Power Generator $ 5 to $ 5.7 with annual escalation
Refinery Fuel 82% HSFO ($9-$10/mmbtu)
LNG Plant Fuel Around $ 7/mmbtu
Ammonia $4.85 to $ 5.15
Source: Energy Advisors Group Source: LNG Japan/BPMigas
© SALAMANDER | 2012 | 28
AGGREGATED WORK PROGRAMME
2012
Q2 Q3 Q4
Greater BualuangExploration
Development
Greater KerendanExploration
Development
North KuteiExploration
Development
OtherAppraisal
Development
Exploration & appraisal Development
© SALAMANDER | 2012 | 29
SUMMARY
• Renewed Focus on 3 Core Areas– Hub areas with growth opportunities around anchor assets– Looking to maximise value for non-core assets– Strengthened the Management and Technical functions
• Core Value Growth: Upgrade to the Scale & Quality of the Reserve Base– Reserves replacement 235%– Proved reserves up 37% to 48 MMboe– Proved & Probable reserves up 14% to 75.3 MMboe– Low margin barrels divested, high margin barrels added
• Continuing to Deliver Increasing Revenue, Cash Flow & Profit– Record levels of revenue $408 MM– Record Post-tax operating cash flow up 82% to $193.9 MM– Record Pre-tax profit of $112.6 MM
© SALAMANDER | 2012 | 30
2012 OUTLOOK
• Operational Activity Has Stepped Up A Gear
• Continuing to Develop & Enhance Value of Flagship Production Asset
• Long-term Drilling Contracts – A Significant Advantage
• North Kutei – A Huge Resource Potential
• Anticipate Improved Drill-Bit Strike Rate To Come
APPENDIX
© SALAMANDER | 2012 | 32
APPENDIX – SPECIAL REMUNERATORY BENEFIT
• Special Remuneratory Benefit (SRB)• SRB = SRB Rate x Petroleum Profit• SRB Rate
– Function of Petroleum Revenue per metre drilled– Petroleum Revenue adjusted for inflation and exchange rate
movements since award of concession in 1996– Allowance (“geological constant”) of 150,000 m* added to
cumulative depth of wells drilled– 0% to 75%
• Petroleum Profit– Petroleum Revenue less royalty, capital expenditures,
operating expenses and losses carried forward– Capital expenditure includes uplift (“special reduction”) of 25%*
on production facilities• SRB deductible for Petroleum Income Tax
* B8/38. On G4/50, allowance = 600,000 m & uplift = 35%
SRB Rate
Baht / m
Significant opportunity to improve cash flow margins
© SALAMANDER | 2012 | 33
KERENDAN POWER STATION – PLN ACTIVITY
Buntok to Muara Teweh transmission lines: Contract awarded, land acquired, surveying in progress
Kerendan power plant: Tender in preparation. PLN estimate on line 4Q’13
Tanjung to Buntok transmission lines: Construction in progress
Kalimantan Connector: Transmission lines complete from Banjarmasin to Tanjung. Construction in progress from Tanjung to Balikpapan
Exploration success will support gas export by pipeline to the East Kalimantan gas markets