primeline corporate presentation - october 2014
DESCRIPTION
Primeline Energy Holdings Inc. (TSXV: PEH) is an independent oil and gas exploration and production company focusing exclusively on upstream opportunities in China, aiming to become a major supplier of gas and oil to the East China market, starting production in 2014. Primeline has a 75% Contractor's interest in and is the operator of the petroleum contract with CNOOC for Block 33/07 (5,877 sq km) in the East China Sea and a 36.75% interest in the LS36-1 gas field in Block 25/34 which is being developed by CNOOC Limited (acting as Operator for the development) together with Primeline and Primeline Petroleum Corp. (PPC). Shares of the Company are listed for trading on the TSX Venture Exchange under the symbol "PEH".TRANSCRIPT
1
Primeline Corporate Presentation
October 2014
Corporate Presentation
October 2014
2
Primeline Corporate Presentation
October 2014
Platform for growth, proven track record, strong cash flow
• TSX Venture listed (PEH:TSXV) oil and gas exploration and production company
• Strong management and proven technical team with significant international and
Chinese energy expertise
• Exclusively focused on China energy opportunities for the past 20 years in joint
venture with China National Offshore Oil Corporation (“CNOOC”)
• Gas production since July 2014 in East China Sea. One of the very few offshore gas
developments in China
• A strategic supplier to high growth East China energy market
• High gas price
• Expected annualised EBITDA ~US$50m net to PEH; higher initially with exploration cost
recovery
• McDaniel’s 3P estimated NPV10 of $1.16/share for the producing reservoir alone,
excluding upside infield and exploration
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Primeline Corporate Presentation
October 2014
TCF scale upside in prospects which can share infrastructure
• Additional possible reserves and prospective resources (gross risked 72bcf 2C) in the
field itself, through “phase 2 development drilling”
• High potential exploration in the nearby area to increase reserves, in a block of 5,877
km2 (1.45 million acres) - supported by existing 2D seismic evaluation along the trend
to north adds 2-4 times more gas potential in same play type.
• Significant potential (gross risked 128 bcf 2C) in nearby prospects that have been
defined by 3D seismic data. First well in this play resulted in new discovery in June
2010
• 600 km2 of additional 3D seismic has been shot across this play fairway, data is being
processed, available in November 2014
• Two additional exploration wells to be drilled in 2015
• Additional hydrocarbon potential McDaniel’s net risked 2C worth ~$200m at $12/boe
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Primeline Corporate Presentation
October 2014
East China Sea becoming a significant production basin
• Adjacent to the most populous/ well
developed part of China with growing
gas requirement
• Proven petroleum province, defined
exploration targets
• New E&P focus in Xihu Trough (Basin) in
northern East China Sea, anchored on
two existing fields:
– Pinghu Field: onstream in 1998, 386
km 14” pipeline to Shanghai terminal
– Chunxiao Field: onstream in 2006, 360
km 28” pipeline to Ningbo and 4
production platforms. Expansion
development underway
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Primeline Corporate Presentation
October 2014
Block 25/34(85 km2) & Block 33/07 (5,877 km2)
• Development completed for LS36-1 gas field,
secured market access and built regional production infrastructure hub
• High impact exploration to add additional resources in the immediate vicinity and the rest of the Block anchored around the producing LS36-1 facility
737 km2 of
existing 3D
seismic data
Newly acquired 600
km2 of 3D seismic
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Primeline Corporate Presentation
October 2014
Petroleum Contracts (25/34 & 33/07)
• Block 25/34: development and production of the LS36-1 gas field (85 km2); Operator: CNOOC
• Block 33/07: seven year exploration period of three phases (3, 2, 2 years) from Nov 2012. the minimum work program in phase 1: 600 km2 of 3D and 2 wells; Operator: PEH
• Contractor: Primeline (PEH) 75% and Primeline Petroleum Corporation (“PPC”) 25% of Contractors’ Rights
• Contractors are responsible for 100% of all exploration costs (PEH: 75% of the costs)
• CNOOC has right to participate in up to 51% of any commercial development by paying pro rata development and operation costs
• Petroleum Contracts granted on very favourable fiscal terms
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Primeline Corporate Presentation
October 2014
Zhejiang Gas Grid
Planned
Throughput of circa 8 bcmpa in 2015
• LS36-1 gas field is an important strategic resource close to Zhejiang Province
• Supply to Zhejiang gas grid which has a planned throughput of ~8 bcmpa in 2015
Ningbo
LNG
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Primeline Corporate Presentation
October 2014
Gas Sales Agreement
• Primeline and CNOOC have agreed to sell LS36-1 gas to Zhejiang Provincial Gas grid (Zhejiang Gas)
• The Province has a population of 50 million and is the 4th largest economy in China with gas utilisation of only about 2.8% of total energy mix
• Zhejiang Gas and CNOOC signed Agreement in Principle for Gas Sale in 2008 and Framework Agreement in 2010, confirming general terms including quality of the gas, take-or-pay principles, base price and annual quantity
• Final gas sales contract has been agreed with signing expected imminently
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Primeline Corporate Presentation
October 2014
LS36-1: Reserves
• Two discovery wells, DST tested at 9.8 MMcfd and 12.6 MMcfd
• Phase 1 four producers drilled and completed in April 2013
• Flow test finished in May 2014, production since July 2014
• McDaniel and Associates’ reserves estimate as follows:
• Proved + Probable (2P) Gas: 68.1 bcf, Liquids: 3.6 MMbbl;
• Total 2P BOE: 14.9 MMbboe
Property Company Company
Gross Gross Net
Reserve Category MMcf MMcf MMcf
Total Proved Reserves 52,148 19,164 20,611
Probable Reserves 15,940 5,858 5,813
Proved Plus Probable Reserves 68,088 25,022 26,424
Possible Reserves 19,430 7,141 7,095
Proved + Prob. + Poss. Reserves 87,518 32,163 33,519
(2) Company Net reserves are based on Company share of total Cost and Profit Oil and, due to repayment of
past costs, are greater than Company Gross.(3) Based on gas/boe conversion of 6 to 1 and LPG/boe conversion of 1 to 1
Natural Gas Reserves
(1) Company Gross reserves are based on Company working interest share of the reserves.
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Primeline Corporate Presentation
October 2014
LS36-1: Infrastructure Hub
Platform facility:
Completed -
Development wells:
4 Completed -
Subsea pipeline:
126.9km
Completed,
Onshore terminal:
Completed
Sale gas pipeline
and terminal to grid:
32km Completed
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Primeline Corporate Presentation
October 2014
LS36-1: Development Schedule
2009 2010 2011 2012 20139 # 11 # 1 2 3 4 5 6 7 8 9 # 11 # 1 2 3 4 5 6 7 8 9 # 11 # 1 2 3 4 5 6 7 8 9 # 11 # 1 2 3 4 5 6 7 8 9 # 11 # 1 2 3 4 5 6 7 8 9 # 11 # 1 2 3 4 5 6 7 8 9
Gas Sales Agreement
Compilation of ODP
Development Agreements & Execution
Revisions of the ODP & EIA approval
Basic Design
Fabrication & installation of Jacket
Fabrication & installation of Topsides
Fabrication & laying of Subsea Pipeline
Laying of Gas Sales Pipeline
Construction of Terminal
Drilling & completion
Joint commissioning
First Gas
Development Activity
Milestone
Development Programme
2008
Critical Path
First production date
2014Activity
Agreement in principle Framework Agreement
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Primeline Corporate Presentation
October 2014
LS36-1: Development Milestones
Commercial Agreements
Oct 2008Gas Sale Agreement-in-principle signed, subsequent Framework and
Amendment Agreements signed in 2011 and 2012
End 2009 Overall Development Program completed
March 2010 Development Agreements signed
Design and Construction
Nov 2010 Engineering design commenced
Jul 2011 Procurement and fabrication commenced
March 2012 Site installation commenced
June 2013 Mechanical Completion of platform, terminal & offshore pipeline
July 2014 Development completed and production commenced
Project Finance
May 2010 Loan Memorandum signed
Nov 2012 Revised Loan Memorandum signed
Jan 2013 CDB Credit Committee Approval
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Primeline Corporate Presentation
October 2014
ODP and Government Approval
Jul 2011CNOOC Investment Committee and PEH Board approved the
development
Jun 2011 Safe assessment approved
Dec. 2011 Occupational hazard assessment approved
Feb. 2012 Pipeline route approved
May 2012 Environmental Impact Assessment (EIA) approved
Jun 2012ODP filed with National Development and Reform Commission (NDRC)
Aug 2012ODP passed the review by Expert Committee appointed by NDRC
Feb 2013Preliminary ocean area usage approval was granted by SOA
Nov 2013 Final land use consent on the terminal land
May 2014 NDRC Approval of ODP
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Primeline Corporate Presentation
October 2014
LS36-1: Current Status
• Platform Jacket installed in July 2012, topside and living quarters installation completed in
June 2013
• 127 km of subsea pipeline & 12 km of sales gas pipeline laid by Oct 2012, 17 km of sales gas pipeline laid by April 2013
• Initial Development drilling & completion finished in April 2013, open well flow test in Dec-May 2014
• Terminal engineering construction completed in June 2013
• The final 3 km of sales gas pipeline laid by June 2014
• Joint Commissioning started in early July 2014
• First gas production commenced on 16th July 2014
• Development is on budget
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Primeline Corporate Presentation
October 2014
Jacket Installation
July 2012
Development Drilling
completed April 2013Topside lifted April 2013,
installation completed
June 2013
Development in Images
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Primeline Corporate Presentation
October 2014
LS36-1: Wells
LS36-1-2LS36-1-1
A3
A1M
A5
M1-0
Mapped Area
Proposed Horizontal Well
A2H
A4P
P
Top M1-2 / M1-1 Merged & M1-0 (Patch) Contoured to GWC (5m CI)
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Primeline Corporate Presentation
October 2014
• Horizontal and Multi-Lateral Gas Production wells increase Potential Gas Rates, especially in tight gas reservoirs, and increase effective Drainage Area
• A3 drilled as a Vertical Well to allow evaluation of deeper intervals. Completed over M1-2 interval
• A1M drilled as 3 branch Multi-Lateral well in M1-1
• A2H drilled as 2 branch Multi-Lateral well in M1-2
• A5 drilled as Deviated Well to M1-1 reservoir
Lateral
LS36-1: Production Well Design
A3
A5
A2H
A1M
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Primeline Corporate Presentation
October 2014
Onshore Processing Terminal
Storage
CO2
Processing
Gas
ProcessingSlug
Catcher
Operation &
Fire-fighting
Central
Control
Burner
Loading
Zone
Office &
Living
Lab
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Primeline Corporate Presentation
October 2014
LS36-1: Development Budget and Loan
• China Development Bank (CDB) agreed to provide project finance for PEH and PPC’s
share of LS36-1 development costs
• Revised Loan Memorandum signed on 2nd Nov 2012 and approved in principle by CDB Credit Committee on 29th Jan 2013
• Following NDRC approval of the ODP, Primeline and CDB are working closely to finalise the loan arrangement
• Total Investment Budget circa US$ 727M including Development Capex circa US$ 608M,
some will be spent after production:
– Primeline (PEH+PPC)’s share of Capex (49%): US$ 297M
– PEH share of Capex (36.75%): US$ 223M
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Primeline Corporate Presentation
October 2014
Additional Gas Resources – Step-out and Exploration
• Additional possible reserves and prospective resources in the field itself, through “phase 2 development drilling”
• Significant potential in nearby prospects that have been defined by 3D seismic data. First well in this play resulted in new discovery in June 2010; additional wells to be drilled
• Additional hydrocarbon potential supported by existing 2D seismic evaluation along the trend to north adds 2-4 times more gas potential in same play type. 600 sq. km of additional 3D seismic has been shot across this play fairway, data is being processed,
available in November 2014
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Primeline Corporate Presentation
October 2014
Prospective Resources By McDaniel
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Primeline Corporate Presentation
October 2014
Additional Resources in Lower Zones
• Current Producers are in M1-1 an M1-2 sands
• Additional gas in other sands and in lower tight reservoir
M11M12
M2
M31M32
L1
L2
Cross-section of LS36-1
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Primeline Corporate Presentation
October 2014
Reserve Additions for Phase 2 Drilling from Platform
Existing wells shown in black
30-8 Exploration Prospect Wells
LS36-1 M2 & M3 wells
LS36-1 M10 well
LS36-1 M11 Sth well
LS36-1 M11 SW well
8 locations and well tracks selected as candidates for reserves additions
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Primeline Corporate Presentation
October 2014
M10 Untested Sand
• Designed as deviated well targeted to thick M10 section
• Well penetrates entire M10
stratigraphic section
• M10 GIIP calculates with Prospect Range of:P90: 6.8 P50: 13.3 P10: 26.0 Bcf
LS36-1 M10
Top M10 3D Horizon
Shaded to show M10 Isochore
Isochore Thickness
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Primeline Corporate Presentation
October 2014
M1-1 South Structure
• Designed as deviated well targeted to thick M11
Southern Fault Block
• GIIP calculate with GIIP range of:
P90: 4.4
P50: 9.5
P10: 20.8 Bcf
Far Stack: Sum of Negative Values above M1-2 (-60+0 ms)
C.I. = 5 mBase = -2300 m
LS36-1 M11
South Fault Block
Contact @ 2300m TVDSS
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Primeline Corporate Presentation
October 2014
LS36-1 Field & Nearby Prospects
• Several prospects near discovery, with TCF Prospective Resources
• Prospects and discovery have similar geological and
geophysical features
• 3D seismic data interpretation leads to the selection of optimal well locations in identified prospects
LS35-3-1
Discovery
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Primeline Corporate Presentation
October 2014
Lishui Gas Play
LS35-1
LS30-3
LS29-2
LS35-3
LS30-3-1
LS35-3-1
Discovery
LS36-1 Platform
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Primeline Corporate Presentation
October 2014
LS36-1: Nearby Prospects
• New 600 sq. km 3D seismic to expand coverage in the gas play –acquisition completed in May 2014, processing in progress
• Future 3D work will cover the oil play prospects
• Exploration drilling in 2015 after LS36-1 production
LS35-3-1 Discovery
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Primeline Corporate Presentation
October 2014
Development Led Exploration
• Covers majority of the Lishui Basin which has:
two commercial flow wells (Primeline’s)
new discovery
seven regional wells in and around the basin have hydrocarbon shows or flows
only two wells inside the Lishuibasin are completely dry
Through interpretation of reprocessed 2D seismic data, several very interesting prospects/leads have been mapped out. 3D seismic survey is planned before finalising exploration drilling programme.
737 km2 of
existing 3D
seismic data
Newly acquired
600 km2 of 3D
seismic
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Primeline Corporate Presentation
October 2014
• Long term close relationship with CNOOC
• Management with proven track record & operational expertise
• One of the very few offshore gas developments in China
• Market access to one of the most dynamic but energy starved province in China, high gas price region
• Phase 1 development generating annualised PEH EBITDA of circa US$50m once we are in full production ($75m in first year including exploration cost recovery)
• TCF scale upside in prospects in the immediate vicinity to share infrastructure
• 5,877 km2 concession with several TCF of upside potential
Summary
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Primeline Corporate Presentation
October 2014
Appendix
Board of Directors
Corporate Structure
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Primeline Corporate Presentation
October 2014
Board of Directors
Victor Hwang | Chairman and PresidentMr. Hwang is Executive Director of the publicly listed Hong Kong Parkview Group Ltd., a division of the family
controlled Chyau Fwu Corporation. Parkview's core business includes property development, shipping/transportation
and hospitality. He is also President of Parkview International London Ltd - the company that sold the Battersea
Power Station site in Central London for £400M (US$780M) in late 2006. Mr. Hwang holds a BSc in Business
Administration and has significant business and political relationships in China.
Ming Wang | Director and CEO(see Management and Technical Team slide)
Brian Chan | DirectorMr. Chan has extensive experience in international banking and commerce. His responsibilities include the
formulation and implementation of corporate and business strategies with respect to the Company's East China Sea
Project. In addition, Mr. Chan is General Manager and Director of the Hong Kong Parkview Group Ltd. He is a
Certified Accountant.
Alan Johnson | Non-Executive DirectorMr. Johnson has over 30 years’ oil industry experience with various companies particularly in management and
operations in Africa, Russia and China. He was Chief Operation Officer for the Cluff Group of Companies 1996-2000.
He joined Glencore in 2000 as senior upstream oil manager for Glencore worldwide, looking after projects including
a 280,000 bblpd production venture and exploration involvement in Africa and South America.
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Primeline Corporate Presentation
October 2014
Board of Directors
Peter Kelty | Non-Executive DirectorMr. Kelty has extensive experience in restructuring and financing major Asian regional corporations as well as
advisory work for European and US multi-nationals. Mr. Kelty is a Certified Public Accountant and a member of the
Illinois State Bar. He holds a Masters degree in Business Administration with a major in Accounting and is a Doctor
Of Jurisprudence.
Yunshi Cao | Non-Executive DirectorMr. Cao has over 30 years oil industry experience in China. He recently retired from CNOOC where he was General
Counsel, Company Secretary and Senior Vice President of CNOOC Ltd. (NYSE:CEO). Mr. Cao was closely involved
In the listing of CNOOC Ltd., its subsequent operations and fund raisings. Mr. Cao was in charge of CNOOC legal
Department and negotiated all the petroleum contracts with international companies since 1982.
Vincent Lien | Non-Executive DirectorMr. Lien has over 20 years’ of experience in the banking industry, specializing in corporate finance and capital
management in Hong Kong, the PRC, Singapore and South-east Asia. Mr. Lien held various senior positions at
several major multinational banking institutions including Swiss Bank Corporation and Bankers Trust & Company.
He was the managing director in the financial institutions & public sector division of ABN AMRO Bank. Mr. Lien is
currently a director of various Company; including the Maritime & Port Authority of Singapore, Up Energy
Development Group Limited; and Focus Media Network Limited; both listed on the Hong Kong Stock Exchange.
Mr.Lien obtained a Bachelor degree in Business Administration from the University of New Brunswick in 1986.
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Primeline Corporate Presentation
October 2014
Management & Technical Team
Ming Wang | Director and CEODr. Wang holds a PhD in Geology from Imperial College, London. He joined Primeline in January 1994 and was
appointed as Vice President of Exploration in December 1996. Since then he has been responsible for all technical
and commercial operations for Primeline, including the successful drilling operation of the LS36-1-1 discovery well.
Dr. Wang was appointed CEO in 2006. He has extensive knowledge of, and contacts within, China's petroleum
industry.
Stuart Joyner | Chief Financial Officer (Elect)Mr. Joyner joined from Sound Oil where he was CFO since 2013 and has 20 years' experience in the oil and gas
sector. Prior to industry, he spent 18 years in investment banking for Investec and Credit Suisse, where he headed
sector coverage and previously Morgan Stanley, Dresdner Kleinwort and NatWest Securities. He was highly ranked
as an analyst and specialist salesperson in the Extel and Institutional Investor surveys. Subject to regulatory and other
approvals, he is expected to assume responsibilities at the November 2014 AGM.
John Li| Chief Financial Officer (Interim)Mr. Li has over 30 years’ experience working in various financial capacities for public and private companies. Mr. Li is
a Certified Public Accountant qualified in Hong Kong and Australia, and graduated with a Masters in Practicing
Accounting from Monash University in Australia. Mr. Li is the CFO (China) of Beijing Chyau Fwu Properties Company
Limited, which is part of the Parkview Group.
Andrew Biggs | Senior Vice President and General CounselMr. Biggs is qualified as a solicitor in England and in Hong Kong. Between 1981 and 1998, he was a partner with
international law firm Richards Butler, both in Hong Kong and London. Mr. Biggs specialised in corporate finance
transactions and was involved in many of the early H-share listings of mainland Chinese Companies on the HK Stock
Exchange. In 1998, Mr. Biggs joined Parkview Group as the Corporate Affairs Director and in 2007 was appointed
general counsel of Primeline and in such capacity he has overseen all legal aspects of Primeline’s operations.
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Primeline Corporate Presentation
October 2014
Management & Technical Team
Alan Soulsby | Technical DirectorMr. Soulsby graduated from Oxford University with a degree in Physics in 1970 followed by a Masters in Geophysics.
He has had a wide and varied career in the petroleum industry with over 35 years’ international exploration
experience, including managing Exploration Consultants Ltd. (ECL) for a number of years, managing many large
integrated exploration and evaluation projects. He has acted as Technical Director for Primeline since 1994 and was
responsible for the initial block selection and the exploration programme which led to the LS36-1 discovery and
ongoing evaluation work.
Brian Thurley | E & P CoordinatorMr. Thurley graduated from Imperial College and has over 35 years’ G&G experience in international oil and gas
exploration and production projects. He was Exploration Manager (international) for Monumental Oil and Gas,
technical director for Burren Energy, and technical advisor for Bayfield Energy. Mr. Thurley joined Primeline in April
2014 to work with Alan Soulsby to manage the exploration programme and development and production of LS36-1
gas field.
Mark Norman | Project Director and General Manager, China OfficeMr. Norman has over 25 years’ experience in project management. He spent 15 years as a commercial manager
for contracting organisations in the UK before moving to work on the development of a series of major international
projects. He has overseen the successful delivery of a number of projects worldwide and has expertise in the delivery
of complex projects. In June 2012, Mr Norman was appointed Project Director for Primeline’s Shanghai office and
Vice President in the Lishui Operating Company - the operator of the LS36-1 development and in May 2014, General
manager of Primeline Shanghai Office.
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Primeline Corporate Presentation
October 2014
Corporate Structure
Trading Symbols
Outstanding Shares
Fully Diluted Shares
Fully Diluted Proceeds
Corporate Debt
Auditor
PEH - TSX Venture Exchange
112,791,018
123,016,068
7.2M (C$) C$0.67 average strike price
8.0M (C$) Interest free from Chairman at end June
Price Waterhouse Coopers LLP
Contact
Dr Ming Wang
Chief Executive Officer
Andrew Biggs
Senior Vice President
Stuart Joyner
Chief Financial Officer (Elect)
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Primeline Corporate Presentation
October 2014
Disclaimer
This information contains certain forward-looking statements within the meaning of applicable securities
laws. Forward-looking statements are often characterized by words such as “plan”, “expect”, “project”,
“intend”, “believe”, “anticipate”, “estimate” and other similar words, or statements that certain events
“may” or “will” occur, including without limitation statements related to intended work programs and
associated timelines. Forward-looking statements are based on the opinions and estimates of
management at the date the statements are made and are subject to a variety of risks and uncertainties
and other factors that could cause actual events or results to differ materially from those projected or
anticipated in the forward-looking statements. Such risks and uncertainties include the inherent risks
involved in the exploration for and development of crude oil and natural gas offshore, the uncertainties
involved in interpreting drilling results and other geological and geophysical data, fluctuating energy prices,
the possibility of cost overruns or other unanticipated costs or delays, the risks associated with negotiating
with foreign governments and country risk associated with conducting operations in the People’s Republic
of China and other factors, many of which are beyond the control of Primeline Energy Holdings Inc.
(“Primeline”, or the “Company”). Primeline cannot and does not assure that actual results will be consistent
with such forward-looking statements. Forward-looking statements are made as at the date of preparation
of this presentation and are subject to change. Primeline assumes no obligation to revise or update them
to reflect new circumstances, except as required by law. Prospective investors should not place undue
reliance on forward-looking statements.