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TRANSCRIPT
Slide 1 Citi and GS conferences – March 2012
Beach Energy Limited
Citi conference – London, 5-6 March 2012
Goldman Sachs conference – New York, 7-8 March 2012
Slide 2 Citi and GS conferences – March 2012
Compliance statements
Disclaimer
• This presentation contains forward looking statements that are subject to risk factors associated with oil, gas, geothermal and related businesses. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a variety of variables and changes in underlying assumptions which could cause actual results or trends to differ materially, including, but not limited to: price fluctuations, actual demand, currency fluctuations, drilling and production results, reserve estimates, loss of market, industry competition, environmental risks, physical risks, legislative, fiscal and regulatory developments, economic and financial market conditions in various countries and regions, political risks, project delays or advancements, approvals and cost estimates.
• All references to dollars, cents or $ in this presentation are to Australian currency, unless otherwise stated. References to “Beach” may be references to Beach Energy Limited or its applicable subsidiaries.
• Unless otherwise noted, all references to reserves and resources figures are as at 30 June 2011 and represent Beach’s share.
Competent Persons Statement
• This presentation contains information on Beach’s Reserves and Resources which have been compiled by Mr Gordon Moseby, who is a full time employee of Beach, is qualified in accordance with ASX listing rule 5.11 and has consented to the inclusion of this information in the form and context in which it appears.
Slide 3 Citi and GS conferences – March 2012
Strategic and operational overview
Slide 4 Citi and GS conferences – March 2012
A unique value proposition
Slide 5 Citi and GS conferences – March 2012
Safety a priority
Safety takes precedence in all operations
• Low Supervision Classification for Production Operations (SA) by South Australian Government regulator
• HSE Strategic Planning – three year plan
• Continued support for APPEA Stand Together for Safety campaign
• 2010 and 2011 without a recordable injury across all operated sites, with highest work hour exposure to date
• Leadership and Mentoring Program
• Winner of 2011 APPEA Safety Performance Award
Slide 6 Citi and GS conferences – March 2012
Cooper / Eromanga Other
Large Resource base to build Reserves
2P Reserves 77 MMboe*
2P Reserves increase of 17% and contingent Resource increase of 96% on FY10
Cooper / Eromanga 2P Other
2P Reserves are a fraction
of the total resource base
2P Reserves and 2C Contingent Resources
660 MMboe*
97% gas & gas liquids
3% oil
73% gas & gas liquids
27% oil
* Volumes quoted are as at 30 June 2011
Slide 7 Citi and GS conferences – March 2012
Reserves expected to increase for FY12
2P Reserves for FY12 likely to increase by over 20%
* Estimates only
• SACB JV completed a highly successful infill drilling program in 2011
• Resource to reserve conversion exceeded expectations
• Advances through multi-well pad drilling
• Potential for significant unconventional Resource addition from up to eight vertical exploration wells in 2012
2P Reserves
1. Additions to be confirmed as part of Beach’s annual reserves statement, and do not
include international and unconventional
0
10
20
30
40
50
60
70
80
90
100
FY10 FY11 FY12*
66 MMboe 77 MMboe 95 MMboe
Slide 8 Citi and GS conferences – March 2012
FY12 production guidance of 7.5 MMboe
0
1
2
3
4
5
6
7
8
Act FY11 Fcst FY12
Oil 2.7 MMbbl Oil
2.1 MMbbl
Gas* 4.8 MMboe
(28 PJe)
Gas* 4.5 MMboe
(26 PJe)
* Gas and gas liquids
Beach actual and forecast production
Near-term production uplift potential
7.5 MMboe
6.6 MMboe
• Production guidance for FY12 expected to be primarily driven by:
– Better access for activities following Cooper Basin floods
– Enhanced exploration and development drilling campaigns
– Successful infill drilling in the SACB JV acreage
• New pipeline infrastructure, connecting Western Flank oil tenements to Moomba, to drive oil production from FY13
Slide 9 Citi and GS conferences – March 2012
Underlying NPAT increased significantly for 1H12
Beach historical underlying NPAT
Significant uplift in 1H12 underlying NPAT expected to improve further in 2H12
• Six months to December 2011 (1H12) underlying net profit after tax (NPAT) has increased, year on year, by 179%
• Improvement mainly due to:
– Renegotiation of Delhi – Esso confidential royalty
– Improved oil prices
– Increased production activity as a result of abating floodwaters
– Reinstatement of the Tantanna pipeline
• Second half profit expected to improve due to:
– Access to all operating areas for the whole period
– New fields coming online
– Trucking of oil on top of pipeline flow
0
10
20
30
40
50
60
70
FY10 FY11 FY12
1H 2H
A$
mill
ion
Slide 10 Citi and GS conferences – March 2012
Renegotiation of the Delhi – Esso royalty
The renegotiated royalty aligns Beach and EARL and has a positive ongoing impact on Beach’s cash flow and profitability
• Legacy royalty from the acquisition of Delhi Petroleum Pty Ltd in 2006
• Original royalty agreement required Delhi to pay Esso Resources Australia Pty Ltd (EARL) a percentage of revenue from certain products
• Renegotiated with EARL in January 2012, effective 1 July 2011 and expiring 31 December 2030
• Renegotiated royalty takes the form of an annual payment to EARL of a % of the net cash flow (before corporate tax) of Delhi’s business:
– Subject to a minimum of $40 million in total to be paid in the first five years
– An additional one-off payment of $8 million has also been made
* Includes Delhi, State Government and all other royalties payable by the Beach Group of companies
0
5
10
15
20
25
30
35
1H11 1H12
Beach Group Royalties*
A$
mill
ion
Slide 11 Citi and GS conferences – March 2012
FY12 Capital guidance
Higher capex due to enhanced FY12 program with no flooding forecast
Slide 12 Citi and GS conferences – March 2012
Unlocking the Cooper Basin gas potential
Slide 13 Citi and GS conferences – March 2012
Beach is well placed strategically and geographically, with the necessary infrastructure in place to supply gas to the market for generations to come
Prolific acreage position strategically located
Slide 14 Citi and GS conferences – March 2012
Eastern Australian gas markets are growing
• Strong predicted growth in Eastern Australian gas and Asian LNG demand
• Cooper Basin has excellent channels to markets
• Gladstone based LNG projects add a new dimension to gas market dynamics
• Independent producers with material reserves/resources are well placed to supply LNG and domestic markets
• The ‘clean energy future’ is likely to incorporate a larger role for natural gas
Beach assets are proximal to key markets
Slide 15 Citi and GS conferences – March 2012
Excellent prospects to increase Cooper Basin supply
• Current domestic gas demand ~ 715 petajoules (PJ) per annum:
– ~ 100 PJ from Cooper Basin
• Domestic and LNG project gas demand expected to grow to ~ 3,000 PJ by 2025*
• 2015+ opens up various domestic and export linked opportunities
• Cooper Basin gas does not have the potential challenges that may impact long-term coal seam gas (CSG) development in Queensland and New South Wales
*Source: Core Energy Group 2011
Uncontracted demand
Industry commentators suggesting gas prices trending
toward $6-9/GJ
Uncontracted demand
Slide 16 Citi and GS conferences – March 2012
Cooper Basin a potential supply option for LNG
Benefits of non-CSG supply to LNG proponents include:
• Flexibility, security and base load supply
• Field sequencing optimisation, delivering enhanced project economics
• Different risk profile in terms of environmental and/or land access
• Established infrastructure accessing a large reserves and resource base
Cooper Basin gas supply has multiple potential benefits to LNG projects
Gladstone based LNG projects
Slide 17 Citi and GS conferences – March 2012
• Discussions ongoing between Beach and Santos for the supply of gas to Santos’ GLNG Project:
– 15 year contract proposed to commence around 2014
– Oil-linked gas pricing
• Joint Venture discussions regarding the development size being progressed
• Beach’s entitlement for supply could now be up to ~ 230 PJ
• Beach also in discussions with other large scale customers for this supply
LNG supply opportunity
Highlights strategic importance of the Cooper Basin asset base
Slide 18 Citi and GS conferences – March 2012
Australian East Coast 2P Reserves*
The impact of eastern Australian LNG projects
• Three LNG projects in Gladstone, Queensland, have achieved FID, committing > 20 mtpa capacity
• LNG proponents are seeking more gas for expansion
• LNG markets provide access to oil-linked gas pricing – a paradigm shift from traditional domestic pricing
• Corporate and asset consolidation in train ahead of LNG production (eg. BG/Drillsearch, Santos/Eastern Star Gas, Arrow/Bow Energy)
~ 80% of East Coast 2P reserves are owned by parties developing LNG projects or with LNG aspirations
* Adapted from Energy Quest, November 2011
East Coast 2P Reserves held by LNG proponents
~ 35k PJ
Non-LNG ~ 11k PJ
Slide 19 Citi and GS conferences – March 2012
SACB/SWQ JV – Significant long-term resource potential
Slide 20 Citi and GS conferences – March 2012
SACB/SWQ JV
• Santos operated
• Equity interests of approximately 20% for the SACB JV and 23% for the SWQ JV
• A significant land holding of 26,800 km2 (gross)
• Situated in a proven and prolific basin
• Cooper Basin cumulative gross production to date of approximately 6 Tcf
• Provides access to a large onshore hydrocarbon province with:
– A proven reserve base
– A large booked contingent resource
– Significant upside from technological development and cracking the ‘codes’
Slide 21 Citi and GS conferences – March 2012
SACB/SWQ JV
• A diversified product stream delivering gas, gas liquids and oil to multiple markets
• Synergies with other Beach operational areas
• Significant infrastructure made up of:
– Wells accessing Permian strata
– Gathering systems across the tenement area
– Gas and oil processing plants – Moomba, Ballera, Jackson
– Gas storage – Moomba & Ballera
– Gas market access
Gross unrisked resource potential of over 4 billion boe is estimated within
the acreage* * Source: Santos
Slide 22 Citi and GS conferences – March 2012
Resources conversion drivers
Resources to reserves conversion driven by:
• Infill drilling with denser well spacing moving towards 40 acres
• More focused fracture stimulation of individual zones
• Pad drilling at the Tindilpie field delivering lower unit costs
• More efficient wellbore hydraulics, resulting in lower abandonment pressures and improved recovery
• Shale and deep coals accessible via existing wellbores
• Expectation of approx. 10 MMboe resource to reserve conversion per annum for coming years
Resources to reserves conversion of 20 MMboe (net to Beach) recently
announced by Santos* * Additions to be confirmed as part of Beach’s annual reserves statement
Infill drilling – 40 vs 200 acre spacing
Slide 23 Citi and GS conferences – March 2012
Unconventional Cooper Basin gas potential
Slide 24 Citi and GS conferences – March 2012
PEL 218 ~1,600 km2
• Beach 100% (Permian)
• 2 Tcf of contingent resource booked in the Permian
ATP 855P ~1,670 km2
• Beach 60% (operator), Icon Energy 40%
• First dedicated shale well in 2012
SACB JV ~7,100 km2
• Beach 20.21%, Santos 66.6% (operator), Origin Energy 13.19%
• 0.7 Tcf (net) of unconventional contingent resource booked to date
• Dedicated shale well recently fracture stimulated
Commanding acreage position
Multiple targets to be addressed by operated and non-operated
drilling programs
Slide 25 Citi and GS conferences – March 2012
Program highlights to date
• Results from Encounter-1 and Holdfast-1 exceeded expectations due to:
– Shale thickness
– Gas saturated sands outside structural closure
– 700 metres of gas saturated section encountered
– ~2 MMscfd maximum flow rate from Holdfast-1 post fracture stimulation
• 480 metres of core recovered assisting technical analysis
• Encounter-1 to be fracture stimulated in Q1 2012
• Accelerated appraisal of shale and basin centred gas play in 2012 300+ Tcf of gas in place estimated for PEL 218
Slide 26 Citi and GS conferences – March 2012
Shale and basin centred gas play
Gas saturation across a continuous shale and basin centred gas play
Source: Amended from Schenk and Pollastro, 2002
Slide 27 Citi and GS conferences – March 2012
• REM thickness exceeded expectations at 350-400 metres
• Core and log analysis indicates REM, Toolachee, Daralingie and Patchawarra Formations all gas saturated
• Fracture stimulation confirmed gas flows from Roseneath shale to top of the Patchawarra Formation
• Potential for a further 600 metres of gas saturation in the Patchawarra Formation
• Moonta-1 well to drill to the base of the Patchawarra Formation
• Fracture stimulation of Moonta-1 expected in Q2 2012 to target the Patchawarra
PEL 218 drilling - massive gas saturated zone
Gas saturated section has the potential to be in excess of 1,000 metres
Slide 28 Citi and GS conferences – March 2012
• Good working relationship with pastoral owners and other stakeholders
• Co-operative not competitive land use
• Semi-desert country
• Relatively flat topography
• Well established oil and gas infrastructure
• Raw and sales gas pipelines cross PEL 218 and ATP 855P
• Multiple commercialisation options
Advantages of Beach’s Cooper Basin acreage
Good relationships and well established infrastructure
Slide 29 Citi and GS conferences – March 2012
• Three cemented casing strings in the first 1,000 metres isolate surface aquifer
• Two cemented casing strings between 1,000 and 2,000 metres isolate the Eromanga aquifers
• Eromanga aquifers well above the target zone
• The Triassic zone provides a thick protective seal from target intervals
• Over 700 wells fracture stimulated in the Cooper Basin to date
Shale and sands isolated from aquifers
Significant distance and mechanical isolation ensures
aquifer protection
Slide 30 Citi and GS conferences – March 2012
The next steps
Encounter-1 well site
• Fracture stimulate Encounter-1 with sequential stimulation and testing
• Independent certification of all reserves and resources
• Drill vertical delineation wells to appraise significant basin centred gas accumulation
• Design and drill three horizontal wells targeting highest gas yield zones
• Expand drilling program with up to six horizontal wells around Holdfast-1 and Encounter-1 to further characterise production potential of shale and basin centred gas targets
• Seek to monetise early production via existing facilities
Slide 31 Citi and GS conferences – March 2012
Things you can find in your own backyard…
A relatively under-explored part of the Cooper Basin with enormous potential
Slide 32 Citi and GS conferences – March 2012
Other unconventional opportunities
Slide 33 Citi and GS conferences – March 2012
• Established significant acreage positions in other prospective basins
• Focusing on under-explored basins with infrastructure access close to markets:
– High grading acreage in parallel
• Further potential for gas and liquids
• Complimentary to conventional potential:
– Eastern Otway gas – Eastwing area
– Penola Trough Sawpit sandstone play
Other unconventional opportunities
Identified new opportunities to unlock the potential of lightly explored basins
Slide 34 Citi and GS conferences – March 2012
Otway and Gippsland basins
Otway gas and liquids
• Beach 35-67%
• Conventional plays proven – gas, condensate and oil discoveries
• Casterton main source rock and most attractive unconventional target
– Moderate to high TOC’s
– Gas and liquids prone
– Thick and areally extensive
– Mature and overpressured
Gippsland gas
• Beach earning up to 33.3%
• Wombat gas project
• Two wells to be fracture stimulated in the first half of 2012
Map with troughs shown and
permits outlines
Significant onshore acreage positions well located to access growing markets
Note: PEP 150 and PEP 171 are subject to Native Title Agreement
Slide 35 Citi and GS conferences – March 2012
Bonaparte basin
• Beach earning up to 90%* of onshore and up to 55%* of offshore areas
• Underexplored to date due to lack of quality modern seismic
• Conventional and deep unconventional targets
• Highly prospective as a result of:
– Working petroleum systems identified in the few wells to date
– Oil seeps identified at surface
– Oil staining in mineral cores
– Weaber gas field adjacent to acreage
• Beach commitment of $5 - $36 million dependent on various options
A potential supplier to Northern Australian markets * Equity interest dependant on Somerton Energy farm in option: 18% of onshore and 8.25% of offshore tenements
Slide 36 Citi and GS conferences – March 2012
Dominant Western Flank acreage position
Slide 37 Citi and GS conferences – March 2012
Cooper Basin – Western Flank oil
Strong cash generating area with significant exploration upside
Western Flank oil is a core contributor to Beach due to:
• Sales in Brent, considerably stronger than WTI
• High net back per barrel of approx. A$75* (incl. Opex, royalties and transportation costs)
• Strong equity positions
• Quick drill and tie-in periods
• High flow rates from wells
• Excellent understanding of the geology resulting in high success rates
• Multiple play types
• Established and proposed pipeline infrastructure to increase production rates
*Assumes Brent oil price of A$105 per barrel
Slide 38 Citi and GS conferences – March 2012
3D and 2D seismic recently acquired
Newly acquired seismic data to deliver new Western Flank targets
PEL 91
• Beach 40% (operator), Drillsearch 60%
• 336 km2 Aquillus 3D and 151 km2 Limbatus 3D seismic surveys completed and currently being processed
• Targeting Birkhead channel plays in line with PEL 104 in addition to Namur plays
• Interpretation expected in Q2 2012
• 249 km Undatus 2D seismic being processed
PEL 92
• Beach 75% (operator), Cooper Energy 25%
• 197 km2 Rincon 3D seismic has commenced, targeting delineation of the Rincon discovery
• 55 km Fusinus 2D seismic being processed
Slide 39 Citi and GS conferences – March 2012
Western Flank oil production
Production target of 10,000 bopd (net) from Western Flank by 2013
PEL 91
• Bauer oil field expected to produce at up to 1,000 bopd (net) in April 2012
• JV pipeline construction discussion ongoing
PEL 92
• Current net production 4,500 bopd
• Lycium to Moomba trunkline to increase production capacity to 6,000 bopd (net)
PEL 104 and PEL 111
• Beach 40%, Senex 60% (operator)
• Current net production 560 bopd, expected to increase to around 1,500 bopd (net) by June 2012
• Snatcher expected back on-line this financial year at around 300 bopd (net)
Slide 40 Citi and GS conferences – March 2012
FY12 Western Flank drilling program
PEL 91 • FY12 drilling program complete
• FY12 success of 1.4 MMbbl (net) to date, which has exceeded expectations
PEL 92 • JV in discussions for up to three exploration
wells and three development wells
• FY12 success of 0.5 MMbbl (net) to date
PEL 104 and PEL 111 • JV approval for a 6 well exploration drilling
campaign. Two wells completed to date
• JV considering program expansion
• Targeting further reserve additions of 1.0 MMbbl (net) for FY12
Total Beach estimated risked reserves addition for FY12 of ~3 MMbbl (net)
Slide 41 Citi and GS conferences – March 2012
New pipelines proposed
New pipeline infrastructure to deliver increased Western Flank oil production and protection against flooding
• Lycium to Moomba trunkline (Beach 60%):
– Capacity of 15,000 bopd
– 8 inch pipeline
– Expected completion first half 2012
• Growler to Lycium flowline (Beach 40%):
– Capacity of 8,000 bopd
– 6 inch pipeline
– Expected completion second half 2012
• Beach to construct and operate both pipelines
• Net cost of $23 million
Slide 42 Citi and GS conferences – March 2012
Western Flank gas and gas liquids production
The first operated gas and gas liquids production for Beach
• Beach 50% (operator), Drillsearch 50%
• First production from the Middleton Brownlow production licence
• Gas sale agreement with the SACB JV for the sale of a minimum of 3 Bcf of raw gas
• Fiberspar flexible pipeline reduced capital cost and accelerated pipe laying time
• Initial flow rates of 25 MMsfd, made up of 15 TJ/d sales gas and 1,250 bbls per day of LPG and condensate
• Five well exploration program – four wells in PEL 106B (Beach 50%, Drillsearch 50%) and one in adjacent PEL 107 (Beach 40%, Drillsearch 60%)
• Two wells completed to date, one C&S for further evaluation, one P&A
Slide 43 Citi and GS conferences – March 2012
‘Big oil’ potential, Tanzania
Slide 44 Citi and GS conferences – March 2012
• Beach 100%
• Permit 7,200 km2 (Lake Albert 5,300 km2)
• Underexplored area with high potential
• Natural oil seeps on Lake Tanganyika, as with Lake Albert, indicate a working petroleum system
• Total S.A. and CNOOC invested US$2.9 billion for 67% of Lake Albert acreage
• Lake Tanganyika has the potential for large (> 200 MMbbl) discoveries
• Airborne gravity and hi-resolution aeromag data acquired in 2010
• 1,800 kilometres of new 2D seismic data to be acquired in Q1 2012
• Total S.A. recently awarded the Lake Tanganyika North Block
Rift systems - Lake Tanganyika South Block, Tanzania
Prospect and leads generation in 2012
Slide 45 Citi and GS conferences – March 2012
Egypt – Established and growing portfolio
Slide 46 Citi and GS conferences – March 2012
Egypt overview
• Beach interests range 15 – 22%
• An established and growing portfolio of production, development & exploration opportunities
• Abu Sennan - six well appraisal/ exploration program – three consecutive discoveries
• North Shadwan - first oil imminent from near shore fields, development of Burtocal expected 2012/13
• Mesaha - recent acquisition of 2D seismic, potential oil targets of 100 MMbbl+
Slide 47 Citi and GS conferences – March 2012
Gulf of Suez – North Shadwan
• Beach 20%, BP 50% (operator), Tri Ocean 30%
NS 377 and NS 385
• Near shore field NS 377 initially to produce approx. 1,000 bopd (gross) via pipeline to Ras Ghara facility
• NS 385 development well expected to spud in May/June 2012
• Total oil flow expected to build to around 5,000 bopd (gross) by Q1 2013
NS 394 (Burtocal)
• Monopod development expected to commence in 2013
• NS 394-1A C&S in 2008, 200ft net pay
• Production anticipated in 2014, flow rate potential of 7,000 bopd (gross)
Oil production to commence soon with short term development
opportunities
Slide 48 Citi and GS conferences – March 2012
Abu Sennan concession – exploration success
• Beach 22%, Kuwait Energy 50% (operator), Dover Investments 28%
• Oil, gas and condensate discoveries from the first three wells drilled
ZZ-4
• Gas and condensate, total flow rate of approx. 2,400 boepd (gross)
Al Ahmadi-1 • Gas and condensate, total flow rate of
approx. 3,100 boepd (gross)
Al Jahraa-1 • Oil, total flow rate of approx. 800 bopd
(gross)
El Salmiya-1 • Testing program currently underway
• Encouraging initial results
100% success to date in the highly prospective Western Desert
Slide 49 Citi and GS conferences – March 2012
• Beach 15%, Melrose 40% (operator), Hellenic 30%, Kuwait Energy 15%
• The largest concession area in Egypt at 42,700 km2
• Possible rift basin similar to Gulf of Suez
• Potential for very large oil fields (>100 MMbbl+)
• ~2,500 km of regional and infill 2D seismic acquired and interpreted
• First exploration well planned for 2H 2012
Mesaha concession
Wildcat acreage with rift graben potential
Slide 50 Citi and GS conferences – March 2012
Summary – multiple near term catalysts
Slide 51 Citi and GS conferences – March 2012
Multiple near term catalysts for FY12
Additional re-rating potential through portfolio optimisation and other opportunities
Slide 52 Citi and GS conferences – March 2012
Beach Energy Limited – Head office 25 Conyngham Street Glenside SA 5065 Tel: +61 8 8338 2833 Fax: +61 8 8338 2336 Website: www.beachenergy.com.au
Chris Jamieson Investor Relations Manager Tel: +61 8 8338 2833 Mob: +61 8 (0)487 173 244 Email: [email protected]
Contact information