FOCUSED ON VALUE CREATION - Ophir Energy · FID on Fortuna FLNG project First gas on Kerendan gas...

FOCUSED ON VALUE CREATION

10 March 2016

2015 Full Year Results

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About lack of value creation as much as oil price

SECTOR CHALLENGES

2015 Full Year Results Slide 2

High finding costs and very few examples of prompt and profitable monetisation

Increased level of commitments as governments increased their ask

Indiscipline amongst exploration companies in terms of capital allocation

Haste, part driven by equity markets, to chase catalysts and drill new plays early rather than build collective understanding as play de-risks over time

Growth was prioritised over value

Causes

1.

2.

3.

4.

5. 0

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40

60

80

100

120

140

Jul-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15

Pri

ce r

eb

ase

d t

o 1

00

Production Peers - Aggregated, (76%)

Exploration Peers - Aggregated, (53%)

Brent, (59%)

Source: Bloomberg as of 8th March 2016 Note: Prices are adjusted to reflect stock splits, rights offerings, stock dividends and abnormal cash dividends Production peers: Genel, Soco, Tullow, Premier, Enquest, Gulf Keystone, Seplat, Maurel et Prom Exploration peers: Ophir, Cairn, Kosmos, Cobalt, Africa Oil, FAR, Faroe

Lack of value creation Explorers hit hardest

Oil price fall Producers hit

hardest




Responding to the ‘New Normal’

HOW TO CREATE VALUE IN CURRENT MARKET


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Bre

akev

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($

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0 1,500 3,000 4,500 6,000 7,500 9,000 10,500 12,000

Cumulative Peak Production (kbls/d)

DEEPWATER

HEAVY OIL

TRADITIONAL ULTRA DEEPWATER

“SHALE OIL”

Source: Goldman Sachs Global Investment Research

Continue to find low cost resource and monetise at a higher price

Exiting plays/assets that don’t work at low cost and entering assets/plays that do

Only high quality assets below the shale threshold with: transformational potential; minimal commitments; and fiscal terms that enable value creation

Pacing our exploration and high-grading the plays. We will not rush to drill

NAV/share growth is our key metric and we will benchmark against this more explicitly going forward

Brent break-even of non-producing (pre-sanction and under development) oil assets

High quality assets

with preferential

fiscal terms

Exit , re-engineer

or renegotiate

fiscal terms

Our response to create value

1.

2.

3.

4.

5.




Track record of monetising success

MONETISING DISCOVERED RESOURCE

Slide 4 2015 Full Year Results

Ophir 40% 2P Reserves Booking

in 2016

500

mmboe

Tanzania

Future monetisation

20%

200

mmboe

Eq. Guinea

3 Bnboe

Discovered Gross

1.5

bnboe

Tanzania

500

mmboe

Tanzania

BG

60% Farm-out

Pavilion 20%

$1.3 bn

Schlumberger 40%

Farm-out

Covered Capex through to Pavilion

Repositioned balance sheet & Share buyback

Funded EG to 1st gas

without leverage

200

mmboe

Eq. Guinea




2015 Achievements

Delivered material G&A savings and synergies……..…

Integrated production assets……………………………..…...

Delivered forecast cash flow……………………..…………....

Signed HoTs with midstream partner,………….……..…... gas off-takers and upstream partner on Fortuna FLNG project

Completed Kerendan gas facilities……………………...…..

Agreed contractual start date for Kerendan field…….

Complete gas price renegotiation………………………..….

Refinanced debt portfolio……………………………………….

High-graded exploration portfolio……………..…………...

DELIVERING ON KEY OBJECTIVES


2016 Objectives

Reduce G&A cost by further 15%

Deliver cash from operations of $70-100 MM

FID on Fortuna FLNG project

First gas on Kerendan gas field

Complete Kerendan gas price renegotiation

Mature Myanmar, CDI and Aru Trough prospects to drill ready status

Refinance/restructure debt portfolio

Continue high-grading exploration portfolio




How do we allocate capital

OUR BUSINESS MODEL

• Exploration is focus for creation of shareholder value

• Unique position to deliver high graded portfolio due to strong balance sheet and minimal well commitments

• Self-funded development activity

• Minimal existing capital will be deployed to developments

• Production is a financing stream for E&A activity

• Reserves replacement and production growth are not key metrics

• Assets must break even at low oil price

EXPLORATION DEVELOPMENT

RETURN TO SHAREHOLDERS

PRODUCTION

CASH

A SELF-SUSTAINING EXPLORER DELIVERING SUPERIOR RETURNS TO SHAREHOLDERS


PLACE TO WIN THE GAME HARD TO BEAT COST OF

CAPITAL POSSIBLE TO BEAT COST OF CAPITAL

Capital Allocation Minimal Selective High




How we have tightened our model

Tightened the way we manage our assets, capital and people:

Assets • High grading the exploration portfolio

• Value driven Asset Development Plans

• Emphasis on transformational assets that can compete below the ‘shale ceiling’

Capital

• IRR & scale drive all investment decisions

• Internal competition for capital

• We will not be prioritise growth over value

People

• People are key resource, deploy where they create most value

• Closely align organisational behaviour with shareholders interests


NAV PER SHARE GROWTH IS OUR OBJECTIVE

Create Value for Shareholders

Assets

People Capital

Governance




2015 FINANCIAL HIGHLIGHTS


DESCRIPTION FY15 $’MM FY14 $’MM COMMENT

Income Statement:

Revenue 161.1 - Ten months production from Bualuang at 10.4 Mbopd realising $56.32/bbl

Impairment of P&D assets (168.9) - Pre-tax fair values assessed against lower oil price environment (post-tax $106m)

Exploration write-offs & impairments (183.1) (333.8) Exit low value opportunities

Profit/(loss) after tax (329.3) 54.9 Includes non-cash charges of $370m for amortisation, impairments and deferred tax

Balance Sheet:

Acquisitions 1,126.1 - Pre-tax fair value for acquisition of Salamander

Capital Expenditure 176.5 590.0 Fortuna FEED; Myanmar and Indonesia G&G ; and Thailand drilling

Net Cash 354.9 1,172.8 Debt of $260m and cash of $615m

Cash Flow Statement:

Operating cash flow (pre-tax) 106.2 (5.8) Pre-tax cash flow from Bualuang not of Corporate G&A

Cash and funds 614.6 1,172.8 Fully funded through to 2019




2015 FUNDS FLOW


$981m

$570m

$192m

$111m $210m

$270m

$0m

$200m

$400m

$600m

$800m

$1,000m

$1,200m

$1,400m

Cash Brought Forward Producing Assets Capex Finance Other Cash Carried Forward

CASH BALANCE $1,173M

CASH BALANCE

$614M

Includes Salamander assets on a full year proforma basis




Strong balance sheet relative to sector

CAPACITY TO GROW

EMEA E&Ps Leverage

Source: Capital IQ as at March 1, 2016 (1) Africa Oil and Cairn Energy have negative CFFO and no debt


(6.0)

(4.0)

(2.0)

--

2.0

4.0

6.0

8.0

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

16

E N

et

De

bt

(Cas

h)

/ 1

6E

CFF

O (

x)

16E Debt / (Market Cap. 16E Debt)

Highly levered with equity value

Ophir

IOCs

Independents

Highly levered business models

Under levered with equity value

European Independents(1)

European IOCs




FINANCIAL OUTLOOK TO FORTUNA FIRST GAS


$0m

$20m

$40m

$60m

$80m

$100m

$120m

2016 2017 2018 2019

Other Firm Spend

Commitment expenditure

EG First Gas

Cash Balance at 1 Jan: $614m Firm + Commitment spend (2016-19): $210m

Driving down capex

• 2015 capex was 70% down on 2014

• Reduced 2016 forecast $150-200 MM

Reduced G&A cost base by 37%

• Underlying costs reduced by $60 MM

• Targeting a further 15% saving in 2016

High degree of financial flexibility

• $100 MM of commitment spend

• Fortuna FLNG funded to first gas

• Tanzania low value option to monetise

• 2016 cash flow from production $75-100 MM

Fully funded to EG first gas

• Commitment spend significantly less than cash balances

• Additional spend used to accelerate exploration drilling

• Estimated year end 2016 cash $525-575 MM

• Not necessary to incur additional debt to fund devex




Portfolio delivering as expected

MODEL PERFORMING TO PLAN


• Self-fund development activity

• Minimal existing capital will be deployed to developments



PRODUCTION

CASH

PREDICTABLE PRODUCTION PERFORMANCE

High Capital

Allocation Minimal Selective

• Production of 13,000 boepd for FY 2015

• Outperformed expectations

• Assets break even at $15 per bbl

• 2P reserves robust of 54.9 MMbo

• Exploration is focus for creation of shareholder value

• Unique position to deliver high graded portfolio due to strong balance sheet and minimal well commitments




• Established a regional production and project management hub

• Strong HSE and operational reliability enabled us to out-perform on production metrics

• Reservoirs continue to perform as expected – no reserves surprises

• Focus on cash flow generation and returns on future investments for this low break-even and mixed (oil/gas) portfolio

Safely completed operations

99%

Production Uptime

PRODUCTION: DELIVERING FREE CASH FLOW


0

Lost Time Incidents

5%

Production Outperformance

$15

Per Boe Breakeven oil price

54.9

MMbo of 2P reserves




Portfolio delivering as expected



DEVELOPMENT PRODUCTION

CASH

2 FULLY FUNDED DEVELOPMENTS

EXPLORATION


Capital Allocation High Minimal Selective

• Fortuna FLNG on track to make FID in mid-2016

• Used project equity as source of funding

• Kerendan development completed and ready for start up




• 2P reserves robust of 54.9 MMbo

• Added five new plays

• Exiting five plays




Development 1: Fortuna FLNG Overview

DELIVERING 2 FULLY FUNDED DEVELOPMENTS


Midstream Development

• Leased FLNG vessel

- Day rate-based charter agreement

• 2.2mmtpa LNG capacity per vessel

- One vessel at start-up 2019

- Second vessel on site by 2025

• Black & Veatch liquefaction process

- Proven, simple process

Upstream Development

• JUST 4 development wells for first gas

- Includes contingency of 2wells

• Standard subsea infrastructure

- Manifold, Flowlines, Risers

• Four phase development with a total of 17 wells

• 440 mmscfd design flowrate

• Water depth ~ 1800m

• Reservoir depth ~ 800 - 1000m

Daily Production, mmcf/d (100% Basis)

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Vessel 1 Vessel 2

Downstream Activity

• Gas Sales Agreements

- Signed HoTs with 7 buyers in 2015

- Variety of offtake structures

- Shortlisted 3 off-takers in 1Q 2016

- New interested parties still emerging




Development 1: Fortuna FLNG

DELIVERING 2 FULLY FUNDED DEVELOPMENTS


Milestones to FID

• Close Schlumberger

transaction

• Sign Umbrella agreement

• Sign Chartering agreement

• Sign final GSAs

• Presidential ratification

Why FLNG works

• Pure gas stream

• Low capex to 1st gas

• Competitive into Europe and Asia

On Track to FID in Mid-2016




Development 2: Kerendan

DELIVERING 2 FULLY FUNDED DEVELOPMENT PROJECTS


Phase 1

• Mechanically completed facilities

• Agreed official start date (11.1.16)

• Sending commissioning gas to PLN

Further value creation

• Complete 3D seismic survey

• Renegotiate gas price

• Commercial negotiation on additional offtake

• Reserves booking

• Incremental production and cash flow

• Incremental gas-to-power and potential micro LNG project

On Track to deliver first commercial production 2H 2016






EXPLORATION


CASH

A SELF-SUSTAINING EXPLORER DELIVERING SUPERIOR RETURNS TO SHAREHOLDERS

PRODUCTION

Capital Allocation High Minimal Low

DEVELOPMENT

• Added five new plays

• Exiting five plays

• Shot c. 11,000 sq km of 3D seismic

• Fortuna FLNG on track to make FID in mid-2016

• Used project equity as source of funding

• Kerendan development completed and ready for start up







Assets have to come in below US shale

THE NEW BREAKEVEN LANDSCAPE


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50

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20

Bre

akev

en

($

/bb

l)

0 1,500 3,000 4,500 6,000 7,500 9,000 10,500 12,000

Cumulative Peak Production (kbls/d)

Source: Goldman Sachs Global Investment Research

DEEPWATER

HEAVY OIL

TRADITIONAL

ULTRA DEEPWATER

“SHALE OIL”

Gabon pre-salt Gabon post-salt

Seychelles Kenya

Western Birds Head

Aru Trough Cote D’Ivoire

Sarawak Basin Myanmar




2015/16 EXPLORATION PORTFOLIO HIGH GRADED EXPLORATION PORTFOLIO

Prioritising valuable plays

EXPLORATION PORTFOLIO HIGH-GRADED


Aru Trough (oil)

Kerendan (gas)

EG (oil)

G4/50 (oil)

Myanmar (gas)

Gabon pre-salt (oil)

Seychelles (oil)

Gabon post-salt (oil)

Western Birds Head (oil)

Makassar Straights (oil/gas)

Gabon Conjugate

Margin (oil)

PLAYS EXITED

NEW PLAY ENTRIES

Kenya (oil)

Kenya (oil), Gabon post-salt (oil), Gabon pre-salt (oil), Seychelles (oil), Western Birds Head (oil)

Cote D’Ivoire (oil)

Deepwater Sarawak (gas)




Intense Industry Activity in 2015-2016

MYANMAR – BLOCK AD-03


• Underexplored frontier deepwater basin with stratigraphic traps expected within the Bengal Fan deepwater channels

• Petroleum system biogenic charge proven by the Schwe field

• Intense industry activity - ongoing acquisition of approximately 50,000km2

of 3D seismic surveys

- two recent gas discoveries at the margins of the play

• Ophir acquired the block wide 10,000km2 Mrauk 3D in Q3 2015

- Final processed data due in April 2016

- 6-12 months ahead of the other deepwater operators

• Flexible operational approach to leverage early acquisition programme and deliver value through commercialisation options.

Key wells and seismic surveys

Play potential: Multi-TCF

Forward committed spend: Nil

OPTION FOR 1H 2017 DRILLING




Technical lead entry facilitated by new PSC terms

COTE D’IVOIRE

Slide 22

• Extensive regional play fairway evaluation has been conducted over past 18 months

• Entry into an extension of a proven petroleum system in the adjacent block CI-514

• CI-513 - Ophir 45% (op.) African Pet. 45%, PetroCI 10%

- 1,446km2, 1000-3000m water depth

- 1 well drilling commitment by Q1 2018

• Worked closely with the CDI government to agree fiscal terms for a new PSC that enables deepwater exploration in the current oil price environment

Play potential: Multi-Hundred Million Barrels

Forward committed spend: c. $15 million


2015 Full Year Results




Trepang 3D seismic acquisition in 2016

EAST INDONESIA WEST PAPUA IV / ARU


• Material position in a underexplored deepwater exploration play

- potential for large, multi-hundred million barrel resources

- in the success case multiple follow-on potential

• West Papua - Ophir (op) 49.9%, Statoil 40%, Tately 10.1%

• Aru - Ophir (op) 60%, Statoil 40%

• All work program commitments for the existing periods have been fulfilled

• Acquisition of the ~3400km2 Trepang 3D in 2016 will give full modern 3D coverage across the play

- allow high grading of the portfolio to support the decision to move into the next permit term and drill exploration wells

Play potential: Multi-Hundred Million Barrels

Forward committed spend: c. $12 million





Ophir Entry into Deep Water Sarawak

MALAYSIA – OFFSHORE SARAWAK


• Extensive regional play fairway evaluation has been conducted over past 18 months to high-grade blocks

• Entry into extension of known petroleum system.

• SK-2A - Murphy 40% (op.) Ophir 40%, Petronas

20%

- 2,400km2, 800-1500m water depth

- 3D Seismic only commitment in current period which has been completed.

- Potential 1 well drilling commitment in subsequent period Q4 2016 – Q4 2018

• Multiple opportunities exist for commercialisation through tie-back to existing infrastructure with access to domestic and export markets.

Play potential: Multi-TCF

Forward committed spend: Nil





Base business plan will transform Ophir, other opportunities to grow further

THE SELF SUSTAINING BUSINESS MODEL

• Possibly test one play (G4/50)

• Continue to high-grade portfolio

• Kerendan on stream

• Fortuna FID

• Production c. 11,000 boepd

• 2P ~ 54 MMbo

• Cashflow c. $70 million


SHAREHOLDER RETURNS

PRODUCTION

CASH


• Production c. 30,000 boepd

• 2P ~ 250 MMbo

• Cashflow c. $200 million

• Options to have tested plays in Myanmar, CDI, Sarawak and Aru Trough

• Continue to high-grade and add new plays/more acreage in existing high-graded plays

• Complete Fortuna development

• FID second vessel at Fortuna

• FID Bualuang/Kerendan expansions

• Tanzania disposal

2016

Bas

ecas

e 2

01

6 t

o 2

02

0

Forecast 2020

c. 30,000

boepd of production

c. 250

MMboe of 2P Reserves

c. $200

million of cash flow

$$’s

Potential cash from monetisation of

exploration success




Relentless focus on Value Creation

2016 OUTLOOK

• VALUE can be created in a low commodity price environment

• STRONG FINANCIAL position

• DELIVERING TO PLAN operationally in production, development and exploration

• Base plan will see material production, reserves and cash flow GROWTH by 2020

• Financial and operational delivery means we can take advantage of additional growth OPPORTUNITIES in what is a strong buyers market


A BUSINESS ALIGNED WITH SHAREHOLDERS’ INTERESTS




For further information contact:

Head of IR and Corporate Communications [email protected]

Geoff Callow

Level 4 123 Victoria Street London SW1E 6DE UNITED KINGDOM

Tel: +44 (0)29 7811 2400 Fax: +44 (0)20 7811 2421

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FOCUSED ON VALUE CREATION - Ophir Energy · FID on Fortuna FLNG project First gas on Kerendan gas...

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