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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
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HIGHLIGHTS
2016 Half Year Results Slide 3
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
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A resource exploration and monetisation company
OUR STRATEGY
2016 Half Year Results Slide 4
To create value for shareholders through having an industry leading exploration success rate and monetising this success to grow NAV per share.
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EXPLORATION AND MONETISATION
2016 Half Year Results Slide 5
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
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Asset quality and fiscal terms are key
MARGIN IS EVERYTHING (NOT PRICE)
2016 Half Year Results Slide 6
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
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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
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OPHIR’S DRIVERS OF NAV GROWTH
2016 Half Year Results Slide 8
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
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MONETISATION
2016 Half Year Results Slide 10
Monetise resource in one of three ways:
MONETISATION WILL GENERATE RETURNS TO SHAREHOLDERS
Sell discovered resource
Farm down
Maximise production
margins
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Monetisation of 2P Reserves
BUALUANG – CREATING VALUE TODAY
2016 Half Year Results Slide 11
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
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Monetising contingent resource
BUALUANG – ADDITIONAL VALUE TOMORROW
2016 Half Year Results Slide 12
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
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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
2016 Half Year Results Slide 13
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
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Monetising 122 Bcf of 2P, focus now on monetisation of additional 320 Bcf of net 2C
KERENDAN FIRST GAS
2016 Half Year Results Slide 14
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
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Bookends of the value chain in place
FORTUNA FLNG
2016 Half Year Results Slide 15
• 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
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• 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
2016 Half Year Results Slide 16
FUNDING & BALANCE SHEET
Tony Rouse CFO
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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
2016 Half Year Results Slide 18
*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)
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1H 2016 FUNDS FLOW
2016 Half Year Results Slide 19
$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
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USES OF FUNDS
2016 Half Year Results Slide 20
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
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Reduced running costs
Deleveraged the business to lower negative cash
carry
Under-geared asset base has unutilised debt
capacity
FINANCE OUTLOOK
2016 Half Year Results Slide 21
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
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Strategy to consistently deliver risked returns
SUSTAINABLE EXPLORATION TO DELIVER RISKED RETURNS
2016 Half Year Results Slide 23
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
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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
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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
2016 Half Year Results Slide 25
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1st well in operated campaign, high impact oil exploration
COTE D’IVOIRE
2016 Half Year Results Slide 26
• 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
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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
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EG EXPLORATION
2016 Half Year Results Slide 28
• 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
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Conjugate margin becoming better understood
GABON – NEW OUTBOARD PLAY
2016 Half Year Results Slide 29
• 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
OPTION FOR 2017 DRILLING
Prospect B – Reservoir Attribute
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Intense Industry Activity in 2015-2016
MYANMAR – BLOCK AD-03
2016 Half Year Results Slide 30
• 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
OPTION FOR 2017 DRILLING
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Trepang 3D seismic acquisition in 2016
EAST INDONESIA ARU BASIN
2016 Half Year Results Slide 31
• 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
OPTION FOR 2017 DRILLING
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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
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EXPLORATION AND MONETISATION PRINCIPLES
2016 Half Year Results Slide 33
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
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CORPORATE PRIORITIES 2016-2017
2016 Half Year Results Slide 34
ALL LINKED TO MAKING SHAREHOLDER RETURNS
Continue journey to
sustainability
Achieve a monetisation
solution for Fortuna
Maintain balance sheet
strength
Recommence exploration
drilling
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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