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Salamander Energy

Salamander Energy. Full Year Results March 2012. Agenda. Introduction & Overview. James Menzies , CEO. Financial Review. Jonathan Copus , CFO. Operational Review. Mike Buck, COO. Summary & Outlook. James Menzies , CEO. 2011 Full Year Results Highlights. Operational Progress

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Salamander Energy

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  1. Salamander Energy Full Year Results March 2012

  2. Agenda Introduction & Overview James Menzies, CEO Financial Review Jonathan Copus, CFO Operational Review Mike Buck, COO Summary & Outlook James Menzies, CEO

  3. 2011 Full Year ResultsHighlights • Operational Progress • Full year average production rate of 18,600 boepd (2010: 20,300 boepd) • Proved reserves increased by 37% to 48 MMboe (2010: 35 MMboe) • Proved & probable reserves increased by 14% to 75.3 MMboe (2010: 66.3 MMboe) • Successful drilling resulting in East Terrace oil discovery, South Sebuku and Dong Mung gas appraisals • Independent CPR for North Kutei acreage giving gross mean prospective resource of c. 2.5 Tcf of gas and 260 MMbo of oil in top four ranked prospects • Financial Highlights • Record post-tax operating cash flow increased by 82% to $193.9 MM (2010: $106.5 MM) • Record pre-tax profit of $112.6 MM (2010: loss of $113.7 MM) • Year end cash position of $85.8 MM • Strategic Realignment of Portfolio • Expanded Greater Bualuang position through farm-in to G4/50 • Deepened interest in Greater Kerendan Area • Disposal of low margin, non-core interests in ONWJ/SES PSCs

  4. Focus on 3 Regional Plays with Growth Potential Greater Bualuang, Thailand B8/38 (100%), operator G4/50 (100%*), operator Oil Production, Development & Exploration • Core Area Characteristics • Operated positions with large equity participation • Anchor asset with reserves &/or resources, exploration & appraisal upside • Room for expansion • Competitive advantage through data/knowledge • Building Around Anchor Assets • Additional equity in Kerendan field, Salamander now 80% • NE Bangkanai and W Bangkanai Joint Studies – options for expansion • Farm-in to G4/50 in Greater Bualuang Area • Managing Exit / Harvesting Non Core Areas • ONWJ/SES divestment • Opex reduction initiative in Kambuna • Withdrawal from Vietnam * Moecoretains a 50% back-in right North Kutei, Indonesia Bontang PSC (100%), operator SE Sangatta PSC (75%), operator Gas Appraisal & Exploration Greater Kerendan, Indonesia Bangkanai PSC (80%), operator NE Bangkanai Joint Study (100%) W Bangkanai Joint Study (100%) Gas Development & Exploration

  5. Transformational Potential Across 3 Low / Mid Risk Plays G4/50 North Kutei Greater Kerendan Greater Bualuang

  6. Strengthening the Management Team & BOARD Executive Management Appointments Non-Executive Appointments • Dr John Bell, Group Technical Director (member of Executive Committee) • Graham Balchin, GM Thailand, ex-BG Operations Director Trinidad & Tobago • Craig Stewart, GM Indonesia, ex-President & CEO VICO Indonesia • Jerry Smart, Exploration Manager Indonesia, ex-ENI, Exploration Manager (Ghana & Americas) • Technical Advisory Committee to the Board • Dr Richard Hardman • Prof Howard Johnson • Dr Alastair Sharp • Dr Carol Bell, Non-Exec Director • Non-Exec DNO • Non-exec PGS • Advisory Board Gemini Oil & Gas

  7. ORGANISATION RE-STRUCTURED James Menzies Chief Executive Officer John Bell Group Technical Director Mike Buck Chief Operating Officer Jonathan Copus Group Finance Director G&G Res./Prod Eng. ASSETS Legal Finance BD Services Drilling GM Indonesia HSE Commercial Accts. Facilities CP&L GM Thailand Tax IT GM Vietnam HR Audit

  8. Proved & Probable Reserves Up 14% to 75.3 MMboe • 28 MMboe added to 2P reserves • Proved reserves up 37% to 48 MMboe • Reserves replacement 235%, excluding disposals 436% Proved 64% Proved 53%

  9. Large Prospective Resource Base Underpins Reserves & Contingents • Major Prospective Resource • Over 900 MMboe of prospective resources identified in high-graded 15 prospects within three core areas • Average risk 1 in 4 • >100 MMboe in 2 large prospects in Greater Kerendan • 110 MMbo in deep water North Kutei prospect excluded from these figures • For drilling in next 2 – 3 years • Near-Term Reserve Additions From Resources • Further Kerendan volumes targeted • Tutung appraisal drilling • Bualuang resources below & above main reservoir unit Top 15 Prospects Unrisked Mean Prospective Resources 925 MMboe (12 x 2P reserves) 2C Contingent Resources 88 MMboe 2P Reserves Gas 75.3 MMboe Oil & liquids

  10. Financials

  11. 2011 financial overviewKey financial metrics Production approx. flat ex sale of ONWJ/SES Buoyant commodity markets, strong gas realisations, Dubai discount narrowed further 68% Y-o-Y growth 82% Y-o-Y growth Borrowings $195.8 million Convertible bond $100 million Cash and funds $85.8 million Record cash generation

  12. 2011 financial overviewProfit and loss One cargo of crude held in tanks at year-end c.$35 million. Sold in 2012 at $1.10/bbl discount Year-on-year comparisons are complicated by 2010 impairments. 2011 direct operating costs totalled $104m, broadly flat on 2010 ($103m) Kambuna exploration (historic) Dao Ruang 2 and 3 Cat Ba Book profit on disposal of ONWJ/SES First full year of SRB 2011 2010 Income tax $63m $51m SRB $58m $21m Deferred tax $37m ($16m) $158m $56m $113 million pre-tax profit

  13. 2011 financial overviewIncome Statement tax… taking a closer look • FY-11 income statement tax equalled $158 million (cash tax of $102 million) • Weighting applicable tax rates for production assets against their PBT, Salamander’s FY-11 effective tax rate was 48% (50% Thailand, 44% Indonesia) • FY-11 tax is impacted by various non-deductible items. Some will unwind or be more efficiently managed through the group’s refocused strategy: In 2011 virtually none of Salamander's exploration spend expensed could be taken as an allowance against tax. Moving forward, as spend rises in core areas such as the Greater Bualuang area, this will change. Accelerated depreciation and tax timing differences for corporate acquisition costs, which can not be taken as an allowance against current year tax. Figure will be amortized with production and will be diluted as more boe are added through reserve additions FY-11 is the first full year where SRB is paid. As capital investment rises across the Bualuang field and B8/38 block, this figure should fall. 2011 tax… yet to reflect the new strategy

  14. 2011 financial overviewCash flow evolution Production 18,600 boe/d Oil and Liquids $104.4/bbl Gas $5.5/mscf 2012 outlook: Production12,000–13,000 boe/d Capex$225 million Cash flow per barrel a key focus Corporate tax $37m SRB $65m Capex $249m, including c.$21m bank guarantee for G4/50 3D seismic; (completed Q1 2012) and $30.4m of Angklung costs invoiced in 2011 RBL refinanced May-11 Facility size: $325m Drawn: $196m Closing cash balance $86m ($25m restricted, including G4/50 3D seismic guarantee; funds now released) Sale of ONWJ/SES Opening cash balance $90m $86 million closing cash balance

  15. 2011 financial overviewHigh grading cash flow • Sale of ONWJ/SES will lower 2012 production Y-o-Y by c.33% (to 12–13k boe/d) • Boe’s sold were low margin, high tax, high cost, fields in long-term decline • Significant maintenance capex on ONWJ/SES… but no growth • Higher margin Bualuang barrels rising to c. 70% of group production (2010: 42%) Evolution of production (boepd) 2011 post tax cash flow per WI boe (US$ per boe) Sold High margin barrels underpin cash flow

  16. 2011 financial overviewIntegrated Gulf of Thailand Strategy FY-11 Brent • Discount to Dubai reduced, Dubai trading at parity to Brent • October 2008: Dubai minus $17.00/bbl • 2011: Dubai minus $1.97/bbl • 2012/2013: Dubai minus $1.10/bbl • Costs: Opex reductions targeted • Bravo Platform on track for September 2012 • Field optimisation review to target opex reductions • Government take:SRB expected to fall • SRB = SRB Rate x Petroleum Profit • SRB rate between 0-75%, function of adjusted petroleum revenue/metre drilled (currently 40-50%) • Petroleum Profit = Revenue less royalty, capex, opex and carried forward losses • Capex expensed in year incurred • SRB is deductible for Petroleum Income Tax • 2012 capex on B8/38 67% higher than in 2011 (post uplift) • C.$30 MM spent on G4/50 to utilise 1 1 Discount 2 Opex 2 G&A 3 Royalty Income tax 3 SRB Pre capex Cash margin Significant opportunity to improve cash flow margins

  17. Operations

  18. Highlights • Greater Bualuang • East Terrace oil discovery • Reserves upgrade • Bravo Platform on schedule • Expanded acreage position through G4/50 • Greater Kerendan • Booked 19.0 MMboe of 2P reserves • DrillCo-1 rig mobilising to location • Options over surrounding acreage • North Kutei • Completed technical review applying lessons learnt from play opening Angklung-1 well • Four initial targets chasing 676 MMboe (unrisked) / 144 MMboe (risked) • More than 20 prospects and leads mapped all with multiple reservoir targets

  19. Greater Bualuang10 MMbbls reserves additions, exploration creating value • East Terrace Oil Discovery & main field upgrade • 35 m net pay in three zones, 50 MMbo STOIIP • 8 MMbo booked as 2P reserves • Booked additional 2 MMbo on main field • Additional recoverable resource of c. 14 MMbo in the T2, T5 and East Terrace • Phase 5 development complete • 3 new producers, 2 existing wells side tracked • Two of the longer reach wells drilled to flanks of field have proven to be good producers • 2012 Development Plans • Ensco-53 rig mobilising to location • 2 production wells prioritised to exploit high prevailing oil prices • Phase 6 development drilling – Bravo Platform • 16 slot bridge linked platform, 60% complete • On schedule for installation in August 2012 • 10 wells on main field and 6 on East Terrace starting 2H 2012

  20. Near Term ExplorationNW Terrace/Far East Prospect 2Q 2012 North East • Ensco-53 rig delayed due to overruns in previous operator’s programme • Far East and Northwest Terrace back to back drilling starting May 2012 NW Fault Terrace Cluster • Typical GoT style traps ~5 MMbo per compartment, 35% CoS • Moderate fault throw, help trap integrity • Cluster development potential Far East Prospect • Large Miocene structure with deeper Permian Ratburi potential • 20 MMbo Miocene potential, 35% CoS • Migration key risk, East Terrace success reduces risk High Prospect Density • More than 20 defined drillable prospects in 376sq km block B8/38-2 North Central Prospect North West Ratburi Lead Miocene Lead 3D Area Oil Field NW Fault Terrace Cluster B7/32-2 B8/38-1 B8/38-5 B8/38-3 Platform Bualuang Far East B8/38

  21. G4/50 Providing Further Running Room • Farmed in to G4/50 • 5,000 sq km surrounding Bualuang and sharing the same petroleum system • One of the most sought after blocks in the last licencing round • Salamander has extensive knowledge of the play systems through B8/38 activities • 2,000 sq km of existing 3D acquired by Chevron • 3,000 sq km 3D survey completed Feb 2012 • Fast track processed cube in house, Interpretation in progress • Full processing on-going • 3D seismic is key in defining traps and locating wells in Gulf of Thailand • Drilling 2 exploration wells in Greater Bualuang area in 2H 2012

  22. Forward ProgrammeRig on long term contract to ensure delivery • Tight rig market and rig delays have repeatedly caused drilling plans to slip • Expanded acreage position with large portfolio of targets provides continuity of work to commit to rig on long term contract • Signed contract to take Atwood Mako jack-up rig from 12 month term with options to extend • New build, to be delivered in 3Q 2012 • Continual programme of development, exploration and appraisal drilling • Phase 6 development from Bravo platform • East terrace development • B8/38 and G4/50 exploration • Early appraisal of exploration success

  23. Greater Kerendan19.0 Mmboe of 2P booked, further resource to commercialise • Kerendan Field • Booked 19.0 MMboe of 2P reserves • Further 23.4 MMboe (net) of contingent resource • Price $4.79/MMbtu, 3% inflator per 3 years • 20.3 Bnbtu/day, 20 year contract • Development Plan • PLN buyer, gas for local power generation • 320 MW plant to be built capable of taking over three times volumes in current GSA • Kerendan currently the only viable supply source • Power by wire into East Kalimantan grid • Delivery point at PLN power plant 3 km from field • DrillCo-1 mobilising: 3 development wells from June • Kerendanready to deliver gas late 2013/early 2014 • PLN progress • Power plant tender in preparation • Transmission lines under construction • Significant exploration upside • West Kerendan has 1Tcf potential in two targets • Prove up resources and negotiate GSA for local sale or pipe gas to East Kalimantan markets Kerendan Field Undrilled West Kerendan Prospect A modern day equivalent of the Kerendan reef

  24. Kutei BasinA new play in a prolific basin • Modern data and technology driven new geological model • Ex BG team working data have experience on play from Egypt • Angklung-1 gas discovery is play opener & has calibrated data sets • Play extends across Bontang & SE Sangatta PSC’s • >20 leads and prospects mapped to date all with stacked reservoir potential Phase III: Explore for Giant discoveries 2012-13 benefiting from new geological insights SE Sangatta PSC Bontang PSC W.Seno Merah Besar Attaka Phase I: Mahakam Delta Giant Fields Nilam Tunu Phase II: Major Fields as play extensions around Mahakam Delta Peciko Jangkrik Distribution & Evolution of Kutei Basin Discoveries

  25. North KuteiTransformational resource potential – TOP 4 PROSPECTS Pmeans similar to P50s ISIS Petroleum Consultants independent resource estimates: Over 500 MMboeunrisked Chance of Success: Gas 25% / Oil 15% Over 20 leads & prospects on the acreage offering material upside

  26. An example of the Pliocene Channel Sand PlayKecapi Prospect • Multiple Stacked Canyon Fairways – strong amplitude support for hydrocarbon presence • Sidetrack leg to penetrate ‘downthrown’ continuation of Angklung discovery Ë Ë BT18_CYN02 (A,B&C) BT25-C Angklung DST 24 Mmcfgpd Angklung BT45_CYN04 (A,B &C) ‘Downthrown’ extension of Angklung proven gas BT50

  27. EAST KALIMANTAN GAS MARKET Spare capacity of approximately 1200 MMSCFD Source: Energy Advisors Group Source: LNG Japan/BPMigas

  28. Aggregated work programme Exploration & appraisal Development

  29. Summary • Renewed Focus on 3 Core Areas • Hub areas with growth opportunities around anchor assets • Looking to maximise value for non-core assets • Strengthened the Management and Technical functions • Core Value Growth: Upgrade to the Scale & Quality of the Reserve Base • Reserves replacement 235% • Proved reserves up 37% to 48 MMboe • Proved & Probable reserves up 14% to 75.3 MMboe • Low margin barrels divested, high margin barrels added • Continuing to Deliver Increasing Revenue, Cash Flow & Profit • Record levels of revenue $408 MM • Record Post-tax operating cash flow up 82% to $193.9 MM • Record Pre-tax profit of $112.6 MM

  30. 2012 Outlook • Operational Activity Has Stepped Up A Gear • Continuing to Develop & Enhance Value of Flagship Production Asset • Long-term Drilling Contracts – A Significant Advantage • North Kutei – A Huge Resource Potential • Anticipate Improved Drill-Bit Strike Rate To Come

  31. APPENDIX

  32. Appendix – Special Remuneratory Benefit • Special Remuneratory Benefit (SRB) • SRB = SRB Rate x Petroleum Profit • SRB Rate • Function of Petroleum Revenue per metre drilled • Petroleum Revenue adjusted for inflation and exchange rate movements since award of concession in 1996 • Allowance (“geological constant”) of 150,000 m* added to cumulative depth of wells drilled • 0% to 75% • Petroleum Profit • Petroleum Revenue less royalty, capital expenditures, operating expenses and losses carried forward • Capital expenditure includes uplift (“special reduction”) of 25%* on production facilities • SRB deductible for Petroleum Income Tax * B8/38. On G4/50, allowance = 600,000 m & uplift = 35% SRB Rate Baht / m Significant opportunity to improve cash flow margins

  33. Kerendan Power Station – PLN activity Exploration success will support gas export by pipeline to the East Kalimantan gas markets Kerendan power plant: Tender in preparation. PLN estimate on line 4Q’13 Buntok to MuaraTeweh transmission lines: Contract awarded, land acquired, surveying in progress Tanjung to Buntok transmission lines: Construction in progress Kalimantan Connector: Transmission lines complete from Banjarmasin to Tanjung. Construction in progress from Tanjung to Balikpapan

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