bow energy ltd (asx:bow)the reserve statement has been compiled by mr timothy l hower chairman of...

Investor presentation May 2011

Bow Energy Ltd (ASX:BOW)


Developing substantial energy resources


Disclaimer and Competent Expert

This document has been prepared by Bow Energy Limited (“Bow”) to provide a summary of the company’s activities as at the date this document was finalised, being 16 May 2011. None of Bow, nor any of its related bodies corporate, their respective directors, partners, employees or advisers or any other person (“Relevant Parties”) makes any representations or warranty to, or takes responsibility for, the accuracy, reliability or completeness of the information contained in this document, to the recipient of this document (“Recipient”), and nothing contained in it is, or may be relied upon as, a promise or representation, whether as to the past or future. The information in this document does not purport to be complete nor does it contain all the information that would be required in a disclosure statement or prospectus prepared in accordance with the Corporations Act 2001 (Commonwealth). It should be read in conjunction with Bow’s other periodic and continuous disclosure announcements lodged with the Australian Securities Exchange, which are available at www.asx.com.au. This document is not a recommendation to acquire Bow shares and has been prepared without taking into account the objectives, financial situation or needs of individuals. Before making an investment decision prospective investors should consider the appropriateness of the information having regard to their own objectives, financial situation and needs and seek appropriate advice, including financial, legal and taxation advice appropriate to their jurisdiction. Except to the extent prohibited by law, the Relevant Parties disclaim all liability that may otherwise arise due to any of this information being inaccurate or incomplete. By obtaining this document, the Recipient releases the Relevant Parties from liability to the Recipient for any loss or damage that it may suffer or incur arising directly or indirectly out of or in connection with any use of or reliance on any of this information, whether such liability arises in contract, tort (including negligence) or otherwise. This document contains certain “forward-looking statements”. The words “forecast”, “estimate”, “like”, “anticipate”, “project”, “opinion”, “should”, “could”, “may”, “target” and other similar expressions are intended to identify forward looking statements. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements. You are cautioned not to place undue reliance on forward looking statements. Although due care and attention has been used in the preparation of forward looking statements, such statements, opinions and estimates are based on assumptions and contingencies that are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Forward looking statements including projections, guidance on future earnings and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. Recipients of the document must make their own independent investigations, consideration and evaluation. By accepting this document, the Recipient agrees that if it proceeds further with its investigations, consideration or evaluation of investing in the company it will make and rely solely upon its own investigations and inquiries and will not in any way rely upon this document. This document is not and should not be considered to form any offer or an invitation to acquire Bow shares or any other financial products, and neither this document nor any of its contents will form the basis of any contract or commitment. Offers of shares will only be made in places in which, or to persons to whom, it would be lawful to make such offers. Competent Person Statements MHA ‐ The estimates of gas reserve and resources for the Comet Block (ATP 1025P) and Don Juan CSG Field (ATP 771P) has been prepared by MHA Petroleum Consultants, LLC (MHA) in accordance with the definitions and guidelines set forth in the 2007 Petroleum Resources Management System approved by the Society of Petroleum Engineers. The reserve statement has been compiled by Mr Timothy L Hower Chairman of MHA, together with personnel under his supervision. Mr Hower, who has over 28 years industry experience, and MHA have consented to the inclusion of the technical information contained in this announcement in the form and context in which it appears. MBA – The estimates of gas in place estimates for the Norwich Park (ATP 1031P), Gunyah Block (ATP 1053P) and Bandanna Project (ATP 805P) has been prepared by Mr Doug Barrenger of MBA Petroleum Consultants Pty Ltd (MBA). Mr Barrenger has more than 25 years of experience in the petroleum industry and 10 years of experience in the coal seam gas industry. Bow – Other technical information contained herein is based on information compiled by the Company’s Chief Operating Officer, Vic Palanyk, who has more than 15 years experience in coal seam gas.

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Contents

• Company overview • Strategy • Work program and activities • Gas reserves • Gas marketing • Summary and valuation

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Company overview


Company Overview

BOW IS: • an S&P ASX200 Index company,

• with 13 Tcf of gas potential on 100% owned located CSG tenements near domestic and export gas markets

BOW HAS: • 3P gas reserves of 2,576 PJ and 2P gas reserves of 114 PJ

• >$100 million to deliver reserves targets

BOW TO: • prove commercial gas flows from trialling several well completion

techniques

• deliver 1,250PJ of 2P reserves and 6,200PJ of 3P reserves

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Board and Management

Howard Stack Chairman

Ron Prefontaine Executive Director

Nick Mather Non-Exec Director

Stephen Bizzell Non-Exec Director

John De Stefani CEO

Peter Harbison CFO

Vic Palanyk COO

Duncan Cornish Company Secretary

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Shareholders

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Strategy


Bow’s substantial gas reserves are well located

• Significant favourably located reserves position already defined

• 6 LNG projects committed or proposed for Gladstone

• Export and domestic market opportunities identified

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Project (all 100% unless stated otherwise)

Current Certified

Reserves/Resources

Current Funding to

Deliver Reserve Targets

2C Resources (PJ net to Bow)

3P Reserves (PJ net to

Bow)


Bow)


Bow)


Bow)

Blackwater and Comet CSG Fields (ATP1025P) 612 2,467 59 2,467 535

Norwich Park (3 projects within ATP1031P) 1,402 - - 3,000 660

Gunyah Project (ATP 1053) - - - 600 -

Bandanna Project (ATP 805) - - - - -

Don Juan Project (Bow 55%) - 109 55 133 55

Total Reserves (net PJ to Bow) 2,014 2,576 114 6,200 1,250


Bow development strategy

UPSTREAM DEVELOPMENT

• Planning 250 km pipeline from Blackwater to Gladstone (absent any joint pipeline arrangements)

• Pipeline to link Norwich Park gas field to Blackwater

• Pipeline size targeting over 100PJ pa

MIDSTREAM DEVELOPMENT

DOWNSTREAM MARKETING

• 100% of Bowen Basin tenements

• Current funding to deliver reserve targets: – 1,250 PJ 2P – 6,200 PJ 3P

• Proving commercial gas flows trialling several well completion techniques

Export LNG

Electricity

Domestic Gas

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CSG Development Roadmap

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Key Milestone Indicative Timing

• Trialling various completion methods to prove commercial gas flows Underway and ongoing

• Reserves growth and gas production • Gas field and Gladstone pipeline approvals • Identify and agree terms with partner(s) for

domestic/export project • Commissioning Blackwater Power Project

2011-12

• FID for either domestic/export project Late 2012 onwards

• Gas sales: Additional power generation, domestic supply and/or LNG sales Late 2014 / early 2015


Work Program and Activities


Focused drilling program

• Trialling various well completion techniques across Norwich Park and Blackwater CSG Fields

• Planned 2011/12 program

– Pilots consisting of fracced vertical and single lateral well completions

– New seismic providing optimal well locations

• Bowen Basin data sharing arrangements (including data from Arrow and BG) has the potential to substantially reduce drilling program required to deliver 2P reserves

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Multiple pilots in progress at Blackwater

Comet 100% Bow

3P of 871PJ 2C of 439PJ

Certified in Rangal and

Burngrove Coal Seams

Blackwater – 100% Bow

2P of 59PJ 3P of 1,596PJ 2C of 173PJ Certified in Rangal and

Burngrove Coal Seams

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Arrow well


Norwich Park tenement with 6.6 Tcf Gas in Place (2C of 1,402PJ certified)

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Norwich Park – 100% Bow Gas in Place of

over 6.6 Tcf To date 2C of

1,402PJ 2P with reserves

certification expected to commence second half Arrow well


Northern Bowen Basin – development positives

• Tenements do not overlie the Great Artesian Basin

• Typically <10% water production of Surat Basin = lower water treatment costs

• Bigger properties – fewer landowners

• Mostly coal mining and grazing land

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Gas Reserves


Current CSG reserves positions in Queensland

Bow is well on the way to its 3P reserves target of 6,200 PJ

18 Source: Energy Quest, 1. APLNG includes Origin’s non-APLNG 3P reserves of approximately 1,000PJ 2. Assumes AGL share of Bowen Basin gas reserves are delivered to Shell LNG project

Company Reserves / Resources as at May 2011 (PJ)

1P 2P 3P 2C

APLNG (Origin / ConocoPhillips) 1 1,527 11,218 15,561 4,495

QCLNG (BG led JV) 2,120 8,480 9,804 9,275

Shell LNG (Shell / PetroChina) 697 6,639 10,3802 -

GLNG (Santos led JV) 1,432 5,638 7,720 3,898

Bow Energy - 114 2,576 2,014

Molopo 24 349 836 602

Mitsui 21 272 604 286

Westside 11 114 432 0

Senex 0 79 248 0

CS Energy 23 82 153 -

Toyota Tsusho 4 42 128 33

Icon Energy - - - 558

Stanwell - - - 558

Blue Energy - - - 454

Comet Ridge - - - 288

Other - 8 10 -

Total Queensland 5,860 33.036 48,451 22,460


Reserves conversion – from a significant existing 3P reserve base

• Bow is targeting 2P reserves of 1,250 PJ. This could be achieved by converting 27% of current combined 3P/2C position (4,590PJ)

2P reserves are a subset of 3P such that: 3P = 2P + possible reserves

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JV 2P

Proven + Probable

Possible

3P Proven +

Probable + Possible

% 3P converted to 2P

Origin 11,218 4,343 15,561 72%

BG 8,480 1,324 9,804 86%

Shell 6,639 4,191 10,830 64%

Santos 5,638 2,082 7,720 73%

Total 31,975 11,940 43,915 73%

BOW 114 2,462 2,576 4%


Bow’s reserve target – a meaningful position

BG, Shell, APLNG 3P reserve numbers sourced from Energy Quest Quarterly, May 2011 Report

Bow 3P reserve numbers represent the company’s target

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Target


Gas Marketing


Bow believes there are significant reserves shortfalls for major LNG projects

• GLNG, QCLNG and Shell relying on converting significantly more 3P to 2P

• Surat Basin gas for initial trains, later trains from Bowen Basin. Bow’s reserves are in the Bowen Basin – providing supply diversity

• Bow has the most significant 3P reserves uncontracted and 100% interest in its key tenements

Note: Estimated Reserves required assumes a 20 year LNG project life and a gas requirements of approximately 60 PJ pa for each 1Mtpa LNG capacity. Shortfall calculated based on required 2P reserves less 2P reserve estimates from Energy Quest. Source: Energy Quest, Company estimates

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Operator Group Initial

Capacity (mtpa)

Estimated Reserves

(2P)

Estimated Shortfall

(2P)

QCLNG (BG led JV)

8.5 (2 x 4.25) ~8,500 PJ ~1,700 PJ

Shell-Arrow 8.0 (2 x 4.0) ~6,600 PJ ~3,000 PJ

GLNG (Santos led JV)

7.2 (2 x 3.6) ~5,600 PJ ~3,000 PJ

APLNG (Origin-Conoco)

9.0 (2 x 4.5) ~11,200 PJ Nil

LNG Limited 1.5 (1 x 1.5) Nil ~1,800 PJ

Sojitz 1.0 (2 x 0.5) Nil ~1,200 PJ


Bow domestic market opportunities

• Australian Energy Market Operator (AEMO) 20 year QLD domestic demand growth forecast is 5.4% per annum (~10+ PJ pa new domestic demand each year)

Note The above table represents Bow’s estimate of the Queensland domestic gas opportunities (PJ per annum) from 2014 onwards where supply would commence prior to 2017. For comparison a 1 Mtpa LNG train would have gas requirements of approximately 60 PJ per annum.

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Region Current Market Near Term Existing

Customers Uncontracted (p.a.)

Potential New Projects (p.a.)

Gladstone - Townsville 70 PJ 13 PJ 66 PJ

South East Queensland 130 PJ 27 PJ 40 PJ

North West Queensland 30 PJ 24 PJ 9 PJ

TOTAL 230 PJ pa 64 PJ pa 115 PJ pa


Summary and Evaluation


Bow current valuation of 3P is 6c/GJ

Catalysts for re-rating: • CSG pilot production wells demonstrate path

to commercial gas flows • Convert 3P => 2P reserves • Define new 3P reserves • Obtain commercial agreements with

strategic partner

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Bow valuation calculation: Price (13 May 2011) $0.76

Shares (13 May 2011) 349m Market Cap $265m Less cash (Mar qtr) ($107m) Enterprise Value $158m Divided by 3P (2,576PJ) $0.06/GJ

Source: Merrill Lynch

3P Average $0.70/GJ

2P Average $1.62/GJ


Bow’s Strategic Highlights

1. 100% ownership of key CSG tenements 2. One of the largest independent holder’s of uncontracted

gas reserves on Australian east coast 3. Trialling several well completions with multiple pilots in

progress to prove commercial gas flows 4. Development positives in northern Bowen Basin given lower

water rates and fewer land owners 5. Significant gas reserves shortfalls for major LNG projects

combined with stronger domestic prices

Current valuation of 3P is $0.06/GJ – significantly below recent Origin deal priced at over $0.60/GJ of 3P

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[email protected] +61 7 3238 6300

Contact John de Stefani

CEO

bow energy ltd (asx:bow)the reserve statement has been compiled by mr timothy l hower chairman of...

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