oil and gas exploration and production - agm 26th june 2013 · • a four well follow up...

NORTHERN PETROLEUM PLC

AGM

26th June 2013

DISCLAIMER

These presentation materials (the "Presentation Materials") are being solely issued to and directed at persons having professional experience in matters relating to investments and who are investment professionals as specified in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Financial Promotions Order") or to persons who are high net worth companies, unincorporated associations or high value trusts as specified in Article 49(2) of the Financial Promotions Order (“Exempt Persons”).

The Presentation Materials are exempt from the general restriction on the communication of invitations or inducements to enter into investment activity on the basis that they are only being made to Exempt Persons and have therefore not been approved by an authorised person as would otherwise be required by section 21 of the Financial Services and Markets Act 2000 (“FSMA”). Any investment to which this document relates is available to (and any investment activity to which it relates will be engaged with) Exempt Persons. In consideration of receipt of the Presentation Materials each recipient warrants and represents that he or it is an Exempt Person.

The Presentation Materials do not constitute or form any part of any offer or invitation to sell or issue or purchase or subscribe for any shares in Northern Petroleum PLC (“Northern Petroleum”) nor shall they or any part of them, or the fact of their distribution, form the basis of, or be relied on in connection with, any contract with Northern Petroleum relating to any securities. Any decision regarding any proposed purchase of shares in Northern Petroleum must be made solely on the basis of the information issued by Northern Petroleum at the relevant time. Past performance cannot be relied upon as a guide to future performance. The Presentation Materials are being provided to recipients on the basis that they keep confidential any information contained within them or otherwise made available, whether orally or in writing in connection with Northern Petroleum or otherwise. The Presentation Materials are not intended to be distributed or passed on, directly or indirectly, whether to Exempt Persons or to any other class of persons. They are being supplied to you solely for your information and may not be reproduced, forwarded to any other person or published, in whole or in part, for any other purpose. In particular they, directly or indirectly, must not be distributed to persons in the United States of America, its territories or possessions or Australia or Canada or Japan or the Republic of Ireland or South Africa. Any such distribution could result in a violation of law in those territories.

The Presentation Materials do not constitute or form part of a prospectus prepared in accordance with the Prospectus Rules (being the rules produced and implemented by the Financial Services Authority (“FSA”) by virtue of the Prospectus Rules Instrument 2005) and have not been approved as a prospectus by the FSA (as the competent authority in the UK). The Presentation Materials do not contain any offer of transferable securities to the public as such expression is defined in section 102(b) FSMA or otherwise and do not constitute or form part of any offer or invitation to subscribe for, underwrite or purchase securities nor shall they, or any part of them, form the basis of, or be relied upon in connection with, any contract with Northern Petroleum relating to any securities.

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2012 REVENUE AND CAPITAL EXPENDITURE

GEOGRAPHICAL SPLIT

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Revenue

• Hydrocarbon sales from The Netherlands dominated top line revenue

– additional €1.7m in tariff and P12 compensation income

– part of which is recognised as Other operating income

Capital expenditure

• Capital expenditure in French Guiana again represents the biggest investment by the Group

– a theme which will continue in 2013 with the current drilling programme

2012 FULL YEAR RESULTS SUMMARY

Results Summary

Year ended Year ended 31 December 2012 31 December 2011 €000 €000 Revenue 12,407 24,531

Gross profit 5,604 12,117

EBITDA(i) 2,835 18,251

(Loss) / profit from operations for the year (315) 10,964

Capital expenditure(ii) 8,824 9,966

Cash and cash equivalents 22,473 29,794

Current net assets 23,688 31,303

(i) Earnings before interest (and other finance income and costs), tax, depreciation, depletion , amortisation. (ii) Includes increase in investment in Northpet Investments Limited (i.e. Financing French Guiana) during the year.

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• Majority of top line revenue reduction is due to gas production decline

• Reduced overhead allocation to third parties has affected profit from operations and additional costs in a drive in new business, partly resulting in Canadian new country entry

– prior year also includes a one-off profit from asset disposal

• Company’s cost base being brought into line with forecast revenue

NORTHERN’S SHARE PRICE PERFORMANCE

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March 2012:Total bid £70 million for Wessex 1.25% stake in the French Guiana discoveries. Subsequently rejected by the Wessex Board of Directors

BlackRock sold shares to below 5%. Share price: 57p

Shale oil licence in South Australia awarded. Share price: 36p

French Guiana GM-ES-3 well completed operations with no significant hydrocarbon shows. Share price: 32.5p

French Guiana GM-ES-2 appraisal well completed operations – not connected to Zaeduys-1 well. Share price: 54p

Cygnus prospect well data announced. Share price: 50p

Damille Investments II purchased shares to 5.57%. Share price:54p

Canadian lease position announced. Share price: 48p

The Netherlands reserve downgrade . Share price: 48p

SHARE PRICE PERFORMANCE

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MEDITERRANEAN

SOUND CIRCLE JKX NORTHERN WESSEX

EXAMINING THE BUSINESS VALUE PROPOSITION

Our production costs and our other admin expenses year to date are below budget

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Shares in issue as of 25th June 2013 95,365,660

Share price at close 25th June 2013 33p

Market capitalisation £31.2 million

Cash balance as at 31 December 2012 £18.4 million

Enterprise Value £12.8 million

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Northern is an established Operating oil company with an in-house team acquiring and managing projects and trading assets in the full cycle of the phases of the industry;

• Exploration,

• Development and

• Production and tariff income

More recently shale oil projects have been examined and added to the business potential.

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Production Projects:

• Five producing Netherlands gas fields managed by Northern.

• Interests in two producing oil fields in the UK.

• Tariff income from P12 facilities offshore The Netherlands.

Development:

• Further field development opportunities in The Netherlands at Papekop and Ottoland.

• New production development project in Canada being evaluated this summer prior to possible larger winter 2013/14 programme.

• Low cost development of the oil at Markwells Wood being considered.

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Exploration:

• Planned 3D seismic over Cygnus resource up to 790 million recoverable barrels resource, Corvus an up to 467 million barrel potential prospect and the Rovesti and Giove discoveries of 53 million barrels.

• Identified prospects in The Netherlands of which two, Diever West and Vlist are progressing to drilling.

• Prospect offshore the Isle of Wight, to be reached from the onshore. Similar in type to two discoveries to the west.

• Third well of a four well exploration drilling programme in French Guiana operated by Shell with Total and Tullow as partners in a new province oil discovery yet to be appraised.

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Unconventional:

• A high quality shale oil position in the southwest Netherlands.

• Licensed positions in the south of England under study.

• A 100% Northern licence of 5,800 km² in South Australia with shale oil prospectivity identified from a lengthy study with further possible Australian shale oil plays identified.

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New exploration projects declared:

• The Company, being involved in the successful Zaedyus deep-water oil discovery in 2011, rapidly absorbed the expertise of its partners, Shell, Total and Tullow in this type of play and has identified three licensing opportunities which it is progressing.

• One application has been submitted on a 100% basis and another is actively being advanced with the assistance of two partners. The third awaits the area being made open for offers.

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ASSET SUMMARY

Development,

Production &

Shale

The Netherlands

Exploration

Italy

Development to Production

Canada

French Guiana

Exploration

United Kingdom

Production

South Australia

Exploration & Shale

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2012 HIGHLIGHTS

Production:

• Average daily production 886 barrels of oil equivalent, (an annual total of 0.32 million) including compensation for shut-in production from eight fields in The Netherlands and the UK.

Finance:

• Revenue and tariff payments of €12.4 million, to which P12 production compensation payments of €1.0 million were added.

• Cash on the balance sheet year end was €22.5 million and with no debt. Net current assets were €23.7 million.

• The average volume-weighted gas sales price achieved in The Netherlands was €0.29 per normal cubic metre or almost $10 per thousand standard cubic feet.

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2012/13 HIGHLIGHTS

Production:

Well intervention and facilities optimisation programmes were successfully undertaken in The Netherlands.

• Adding tubing extensions in conjunction with foam injection increased production at Wijk en Aalburg.

• Foundations and supports for a re-deployable compressor along

with tubing extension works increased the production at Brakel by up to 15%.

• Twin parallel compressor configurations at Waalwijk allowed wellhead pressures to be lowered thereby increasing production.

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2012/13 HIGHLIGHTS

• A four well follow up exploration drilling programme to the 2011 Zaedyus oil discovery started in French Guiana in July 2012.

• The assessed prospectivity of the Southern Adriatic greatly increased following the release of Eni’s Aquila oil field well data when integrated with the interpretation of 2D seismic acquired in 2011.

• The Cygnus prospect has a reported prospective resource of 979 million barrels with 790 million barrels of recoverable oil in the 100% owned Northern permit.

• Awarded part blocks 98/13 and 98/14 offshore the Isle of Wight.

• Extended well test of the Markwells Wood-1 discovery well successfully produced oil.

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LEARNING FROM EXPERIENCES

• The slow progress in realising asset potential has been addressed.

• Northern’s screening factors includes ease of government authorisation of approvals, business ethics, culture and stability of existing petroleum legislation.

• Both Canada and South Australia meet such requirements as do the unnamed countries where exploration licensing is planned.

• New assets must be capable of being traded at even an early stage.

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• Revisions of reported reserves suggest that the initial plans greatly relied on the independent consultants judgment and a stronger in-house team at the time might have been better. This team is now in place.

• Higher than expected production decline rates were experienced on newly commissioned gas fields. It was important that prompt actions were taken to identify causes and immediate corrective works and adjust plans. This was achieved as a core competent and an experienced team was in place to undertake the required actions.

• The Northern financing strategy has provided protection for the Company in current adverse junior market circumstances around the world. The markets seem predominantly closed for raising new equity funding on reasonable terms, if at all. Northern will continue on its existing strategy of looking to industry for money to finance major projects and those assets need to be appealing to the bigger industry players.

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• Our strategy is fit to survive in this kind of market. We are mindful that in seeking new projects, they should have a low entry cost enabling the bulk of expenditures to be deployed in adding material value. This is based upon a competent in-house available technical team.

• The current size of the Board of Directors larger than the normal for a company Northern’s size. This is temporary and changes have and will take place, but the need is for a gradual handover of experience and valuable relationships with both government and industry. That will be the case so as to achieve the changes with a minimal adverse impact upon the Company’s projects.

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BUSINESS MODEL

Northern generates cash from all phases of its business cycle; farm outs, trading after asset-enhancing exploration and development, and cash from production.

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THE FUTURE PLAN

• To gradually increase production to 3500 boepd.

• To be involved in three or more exploration wells per annum, a success in which would be material for the Company.

• To continue to identify low entry cost opportunities which the Company may at an early stage trade, at least in part for cash. This includes “Unconventional” opportunities which are of interest whilst good quality opportunities remain at low entry cost.

• To maintain a team with the technical competence and management with the entrepreneurial vision and commercial competence to achieve our objectives.

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“UNCONVENTIONAL” PROJECTS

The Netherlands

• NuTech Energy Alliance report on the southwest Netherlands concludes:

* Good TOC * Good porosity * Good permeability • An estimated gross reserves potential of up to 30 billion barrels of oil in place with Expressions of Interest received for this high quality shale potential.

South Australia

• Licence PEL629 in the Otway Basin covers 5,800 km²of shale oil prospectivity in which only 5 stratigraphically deep exploration wells have been drilled. Elsewhere in the Basin, a number of deep wells have encountered the Sawpit or Casterton formations. There are 4,468 line kilometres of 2D seismic on this licence in active gas and condensate producing basin.

• Northern is the 100% licensee and will focus on detailed geochemical analysis, seismic reprocessing and state of the art wireline log processing to be undertaken to evaluate the potential of unconventional shale sequences for light oil, condensate and gas. Discussions with possible partners have started.

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ACTIVITIES – 2013/14

• Ongoing reservoir evaluations to establish potential for extending Waalwijk field

life.

• Furthering the permit applications submitted for further development for Diever West, Lheebroek and Vlist.

• Reviewing Ottoland development options.

• Designing of high deviated or near horizontal well trajectories and hydraulic fracs in the Geesbrug field.

• 3D seismic survey targeting the Cygnus prospect in the Southern Adriatic Sea and to progress the development of the Rovesti and Giove discoveries (subject to approval of planning consents). Cygnus has a reported prospective resource of up to 790 million barrels of recoverable oil within Northern’s permit.

• Development planning for the Canadian winter work programme following completion of the summer testing.

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THE CANADIAN ENTRY

Corporate strategy • Acquisition requires low cost entry to projects with material

upside • Further cash flow from production needed to sustain the

Company and fund growth

Production growth • Can be achieved faster than in the Netherlands • With a low entry cost, intend to spend funds on adding value,

not buying production • Upside potential required

Why Canada? • Exposure to an area with a low cost of entry, low political risk

and a well regulated industry • Local market is currently very capital constrained providing

good acquisition opportunities • Low proof of concept cost with significant opportunity for

growth • Prolific historic oil production with accessible existing

infrastructure

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PLAY CONCEPT

Geological setting

• Carbonate reefs formed

in a shallow sea 400 million years ago

• Sealing anhydrites

• Oil sourced locally from similar aged shales

• Over 1000 individual reefs present in the local area

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PLAY CONCEPT

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Opportunity

• High quality proven reservoirs, 56 million bbls of oil originally in place

• Proven production from many wells • Low initial recovery factor to date of c.20% • Multiple targets in close proximity • Scope for additional primary recovery

through to EOR and new wells

Lower Keg River Carbonate Platform

Edge reef

Core

WORK PROGRAMME

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Redevelopment project

• Project split into 2 phases, with phase 1 having 2 parts

• Summer 2013 – “proof of concept” – further work is dependent on the results

• Expected cost approximately €2 million

• Winter 2013-14 – initial development – production up to 500 boepd

• Winter 2014-15 – second phase development – production up to 1000 boepd

Northwest Alberta Redevelopment Project Phase 1 & 2 Schedule

Phase

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Phase 1A

Intervention planning

Intervention execution

Phase 1B

Development planning

Development execution

Phase 2

Development planning

Development execution

2013 20152014

Firm plan Contingent plan

FURTHER UPSIDE POTENTIAL

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Possible future plans • Existing leases held 56 million bbls of oil

in place (Alberta Energy Regulator estimate)

• Oil recovery on our leases to date has been relatively low

• Additional primary recovery provides material cash flow

• Further concepts include: • drilling of currently unproduced reefs • targeting lower quality rock • enhanced oil recovery methods

Summary • Low entry and “proof of concept” costs • Significant scope for growth in both

owned and additional acreage • Proven oil in place with low primary

recovery and good production data to utilise

Oil

Exp

ort

Time

Northwest Alberta Redevelopment Oil Export vs Time


26 June 2013 Annual General Meeting Resolutions

Resolution 1 - Ordinary

“To re-appoint KPMG Audit Plc as auditors and to authorise the Directors to fix their remuneration”

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“To re-elect CJ Foss (who retires from office in accordance with Article 108 of the Company’s Articles) as a Director of the Company”

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“To re-elect JM White (who retires from office in accordance with Article 108 of the Company’s Articles) as a Director of the Company”

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“To re-elect KR Bush (who retires from office in accordance with Article 113 of the Company’s Articles) as a Director of the Company”

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“To re-elect NT Morgan (who retires from office in accordance with Article 113 of the Company’s Articles) as a Director of the Company”

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“To authorise the Directors, pursuant to and in accordance with section 551 of the Companies Act 2006 (the “Act”) to exercise all powers of the Company to allot ordinary shares in the capital of the Company and grant rights to subscribe for or convert any security into ordinary shares up to a maximum aggregate nominal value of £1,192,075 (being approximately 25% of the Company’s issues share capital as at the date of this notice), provided that such authority shall expire at the conclusion of the next Annual General Meeting of the Company, except that the Directors may, before such expiry, make offers or agreements which would or might require ordinary shares to be allotted or rights to be granted after such expiry and allot ordinary shares or grant rights in pursuance of such offers or agreements ”

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Resolution 7 – Special Resolutions

“To authorise the Directors, pursuant to and in accordance with section 570 and 573 of the Act, to allot equity securities (as defined in section 560 of the Act) for cash as if sub-section 561 of the Act did not apply to the allotment of equity securities pursuant to the authority conferred on them under section 551 of the Act up to the aggregate nominal value of £476,830 (being approximately 10% of the Company’s issued share capital as at the date of this notice), such power to expire on the earlier of the conclusion of the next Annual General Meeting of the Company and 15 months after the date of the resolution (but so as to enable the Company, before the expiry of such power, to make offers or agreements which would or might require equity securities to be allotted after such expiry and to enable them to allot equity securities for cash pursuant to such offers or agreements as if the power conferred thereby had not expired).”

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Resolution 8 – Special Resolutions

“To authorise the Company, generally and unconditionally, to make market purchases (within the meaning of section 693(4) of the Act) pursuant to and in accordance with section 701 of the Act of fully paid ordinary shares in the capital of the Company upon and subject to the following conditions but otherwise unconditionally:

a) the maximum number of ordinary shares hereby authorised to be purchased is 4,768,300,

which is approximately 5% of the ordinary share capital of the Company as at the date of this notice;

b) the maximum price which may be paid for each such ordinary share shall be an amount no more

than 105% of the average of the middle market quotations for an ordinary share as derived from the Alternative Investment Market of the London Stock Exchange for the five business days immediately preceding the day on which such ordinary share is contracted to be purchased (excluding expenses) and the minimum price which may be paid for such ordinary share shall be the nominal value of such ordinary share at the time of such purchase (excluding expenses); and

c) unless previously varied, revoked or renewed, the authority conferred by this resolution shall

expire on the earlier of the date 15 months after the passing of this resolution and at the conclusion of the next Annual general Meeting o the Company after the date on which this resolution is passed, provided that the Company may before such expiry date enter into a contract to purchase ordinary shares under this authority which will or may be completed or executed wholly or partly after the expiration of such authority and may make a purchase of ordinary shares in pursuance of such contract

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The AGM is now closed

oil and gas exploration and production - agm 26th june 2013 · • a four well follow up...

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