Investor Presentation • Sep 22, 2020
Investor Presentation
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This Presentation contains summary information about the Company and its subsidiaries (Company Group) and their activities. The information in this Presentation does not purport to be complete or comprehensive, and does not purport to summarise all information that an investor should consider when making an investment decision. It should be read in conjunction with the Company's other periodic and continuous disclosure announcements lodged with Oslo Axess, which are available at www.oslobors.no
This Presentation is for information purposes only and is not a prospectus, product disclosure statement or other offer document under Australian law or the law of any other jurisdiction. This Presentation is not financial advice, a recommendation to acquire Company shares or accounting, legal or tax advice. It has been prepared without taking into account the objectives, financial or tax 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 and tax situation and needs and seek such legal, financial and/or taxation advice as they deem necessary or appropriate to their jurisdiction. The Company is not licensed to provide financial product advice in respect of Company shares.
This Presentation contains certain forward looking statements. The words anticipated, expected, projections, forecast, estimates, could, may, target, consider and will and other similar expressions are intended to identify forward looking statements. Forward looking statements, opinions and estimates provided in this Presentation are based on assumptions and contingencies which 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, indications or guidance on future earnings or financial position and estimates are provided as a general guide only and should not be relied on as an indication or guarantee of future performance. There can be no assurance that actual outcomes will not differ materially from these statements. This difference may be due to various factors, including, among others: general business, economic, competitive, political and social uncertainties; the actual results of current exploration activities; actual results of reclamation activities; the outcome of negotiations, conclusions of economic evaluations and studies; changes in project parameters and returns as plans continue to be refined; future price of oil and gas; drilling risks; political instability; insurrection or war; arbitrary changes in law; delays in obtaining governmental approvals or financing or in the completion of development activities. The forward looking statements in this Presentation speak only as of the date of this Presentation. To the full extent permitted by law, the Company and its directors, officers, employees, advisers, agents and intermediaries disclaim any obligation or undertaking to release any updates or revisions to the information to reflect any change in expectations or assumptions. Nothing in this Presentation will under any circumstances create an implication that there has been no change in the affairs of Company Group since the date of this Presentation.
An investment in the Company shares is subject to investment and other known and unknown risks, some of which are beyond the control of the Company Group. The Company does not guarantee the performance of the Company or any particular rate of return on the performance on the Company Group, nor does it guarantee the repayment of capital from the Company or any particular tax treatment. Due to the widespread Covid-19 virus, the situation is highly volatile implying significant risk on forward looking statements.
This Presentation is not and should not be considered an offer or an invitation to acquire Company shares or any other financial products and does not and will not form any part of any contract for the acquisition of the Company shares. This Presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States. Company shares have not been, and will not be, registered under the US Securities Act of 1933 and may not be offered or sold in the United States except in a transaction exempt from, or not subject to, the registration requirements of the US Securities Act and applicable US state securities laws.
The information in this Presentation relating to hydrocarbon resource estimates for Gambia and Senegal includes information compiled by Dr Adam Law, Geoscience Director of ERC Equipoise Ltd. Dr Law, is a post-graduate in Geology, a Fellow of the Geological Society and a member of the Society of Petroleum Evaluation Engineers. He has 18 years relevant experience in the evaluation of oil and gas fields and exploration acreage, preparation of development plans and assessment of reserves and resources. Dr Law has consented to the inclusion in this Presentation of the matters based on the information in the form and context in which it appears. The information in this Presentation relating to hydrocarbon resource estimates for Congo-Brazzaville includes information compiled by AGR Petroleum Services AS ("AGR"). AGR has consented to the inclusion in this Presentation of the matters based on the information in the form and context in which it appears.
The Company's advisers have not authorised, permitted or caused the issue, lodgement, submission, despatch or provision of this Presentation and do not make or purport to make any statement in this Presentation and there is no statement in this Presentation which is based on any statement by the advisers. To the maximum extent permitted by law, the Company, its representatives, advisers and their respective officers, directors, employees, agents or controlling persons (collectively, the Representatives) expressly disclaim all liabilities in respect of, and make no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this Presentation or in any other documents furnished by the foregoing persons.
Statements made in this Presentation are made only at the date of this Presentation. The information in this Presentation remains subject to change without notice.
Current production of ~2,650 bopd (H1 2020) targeting a ten-fold increase by YE-2023
Strong ambitions of further regional growth with focus on Sub-Saharan Africa
Experienced management team with proven track record of industry leading value creation
Listed on Oslo Axess with market cap. of NOK ~1bn / USD ~100m4
Robust financial position with limited debt
Supportive strategic shareholder in Petromal (38%), part of National Holding (Abu Dhabi)
❑ Grow PetroNor into a leading E&P independent through M&A – target 30,000 boepd net production by 2023
30 years' E&P experience (executive and technical) and focused on FSU, Africa and ME since 2000, including Nigeria and Angola.
Operational management experience on Snorre Field
Mgt buy-out of PGS Reservoir in 2005 and merger into AGR in 2006. Co-Founder of Hemla in 2009 and Pangea LNG in 2012
MSc in Petroleum from The Institute of Technology in Trondheim
30 years' E&P experience (technical & management) Operator experience incl. Phillips Petroleum, Norsk Hydro & Hess Co-founder of Ener Petroleum, subsequently acquired by Dana/KNOC BSc in Petroleum Engineering from Texas A&M University and an MSc from The Institute of Technology in Trondheim
30+ years global exploration experience incl. Chevron and Addax
Specialised in Play and Prospect risk assessment, volumetric analysis, commercial evaluation and portfolio management
Background in quantitative geophysics, stratigraphic interpretation workflows and 3D visualisation
Founder of several companies in Norway and internationally within oil & gas and other ventures
Instrumental in establishing Pangea LNG
Strong network in the international E&P industry with extensive experience in deal sourcing
15 years of financial and corporate experience from roles in public practice, oil & gas and mining spread over Africa, Asia and Europe. Has been responsible for all financial reporting obligations for the listed Company and E&P licences held by the group since 2010 Qualified Chartered Accountant & BSc in Physics from Uni. of
Chris Butler: Group Financial Controller
20 years E&P International experience
Held multiple operation and marketing management with major international Oil Field Services companies
Held multiple technical, contracting and strategy management with major oil and gas operator
BSc Mechanical Engineering from University of Washington
20+ years international E&P experience (full-cycle), including several years with Schlumberger
Currently the CEO of Petromal - part of National Holding Group
20 years of experience in the financial services industry, covering asset management, private equity, portfolio management, financial restructuring, research, banking, and audit
Currently Director of Private Equity at EIIC – part of the National Holding Group
Warwick
30 years at BP, and heritage company Amoco, gaining E&P leadership experience in Africa, Europe and Russia. Managed an active exploration portfolio for BP in North Africa. Additional experience in the areas of field development and as commercial manager
On-ground presence: A team of ~10 people active in West Africa, based in Congo, Nigeria, The Gambia and Senegal
Entered license with 10.5% nonoperated interest in 2017 with new partnership following Total's exit in 2016
Operational improvement program to increase production and reduce costs initiated in cooperation with Perenco (PNGF Sud operator)
Strong results seen to date with significant increase in production and reserves combined with material reduction in costs
High-in-place oil volumes create significant potential for further production and reserve growth for several years to come
Targeting +10x reserves and production growth in three years
Utilise competitive edge to access exclusive opportunities:
More than 20 transactions screened in 2020
Access to capital and largely unencumbered balance sheet a strong competitive edge in the current market environment
Numerous financially stranded assets have been considered
Working with larger Tier 1 strategic and financial consortium partners on potential transformative acquisitions
Core: Offshore Sub-Saharan Africa
Assess other African plays
Plan to eliminate existing gas flaring on Aje
Aje gas development displacing gasoline used for power generation in Lagos
Continuously strive to minimize any adverse environmental impact
Undertake and report Environmental Social Impact Assessments (ESIA) prior to all major activities
No LTI2 on PNGS Sud since the acquisition in January 2017
5% of net profits in Congo-B are invested in local community education initiatives
The Power to Educate initiative is focused on improving conditions for families in areas with no access to electricity
Other projects include human capacity development and access to quality health care
Our commitment to operating responsibly is evidenced by a long history of social projects undertaken by PetroNor management
Embrace the UN Sustainable Development Goals
Responsible behavior to our stakeholders
Partnering with local players reduces country / political risk
Careful selection of local leadership and strong representation on subsidiary boards
Actively working to improve diversity of Board of Directors
Intention to move to main list and clear commitment to follow governance guidelines
Partnership with Aragon on Gas Technology
Prequalified together with Aragon for the ongoing flare-gas tender in Nigeria
Maintained positive EBITDA in Q2 2020, despite challenging market conditions
No reduction or stoppage in oil production at PNGF Sud, despite Covid-19 challenges
Strong focus on cost efficiency
Successfully refinanced the USD 12.9m short-term debt facility with Rasmala with a new USD 15m facility due October 2022
Actively pursued multiple business development opportunities
Salary expenses were reduced with immediate effect in mid-March
Streamlined organization while maintaining core technical competence and African experience
Renegotiated terms with legal & professional firms
G&A expenses are expected at USD 4m in 2021 and onwards
Total revenue USD 30.3m (H1 2019: USD 48.1m)
EBITDA USD 13.6m (H1 2019: USD 30.4m)
Net profit/ (loss) USD 2.9m (H1 2019: USD 11.3m) Cash and bank balances USD 11.1m (Dec 2019: USD 27.9m)
Operating cash flow2 USD 12.9m
Average selling price USD 37/bbl
Positive working capital USD 21.0m (Dec 2019: USD 8.4m)
Interest bearing debt USD 15.0m (Dec 2019: USD 12.9m)
1– The company has changed to quarterly reporting as part of the revised investor policy after the reverse take-over by PetroNor late 2019
2 – Operating cash flow before working capital changes
| Robust capital structure |
> Healthy balance sheet > PetroNor aims to maintain a low financial leverage and conservative capital structure |
|---|---|
| Substantial cash flow to be invested in further growth |
> Cash flow from producing fields forms back-bone of the company > Estimated operating cash flow of USD +40m next 2 years1 to be recycled into further organic growth and M&A |
| Listed in Oslo with strong and supportive shareholders |
> Supportive strategic shareholder in Petromal (38%), part of National Holding (Abu Dhabi), providing access to further growth capital if the right accretive opportunities are identified |
| M&A growth pursued with Tier 1 strategic and financial partners |
> In discussions with several RBL banks and debt providers regarding the Aje field development > Active discussions with numerous Tier 1 parties, including off-take counterparties, strategic co-investors and financial sponsors |
Positions PetroNor with the financial capacity and flexibility to:
Execute its organic growth strategy
Execute transformational accretive M&A deals
Whilst maintaining a conservative risk profile
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1Average Oil price 2021: \$ 53/bbl and 2022: \$ 59/bbl
Average 2020 production 2,390 bopd – a 4% increase above 2019 average
Low cost and high margin production with significant organic growth potential
Operated by Perenco, a world-class operator of mature assets in emerging markets
2
Entered the Aje field late 2019
Producing asset with significant upside potential, acquired at a low entry cost
Preparing a revised development plan to increase field production to 25kboepd
1) Congo: PNGF Bis constitutes 4.3 mmbbls of 2C resources in Congo. PetroNor has the right to enter into the PNGF Sud license with net working interest of 14.7% with Perenco as operator. Nigeria: Estimates according to independent competent person's report prepared by AGR, volumes as of 1 Jan 2019 adjusted to 1 Jan 2020 by subtracting 2019 production and excluding gas on PNGF Sud;
2) Nigeria: Resources are subject to completion of the Aje transaction (initial net working economic interest of 13.08%, 17.4% within three years based on project payout phases).
3) Exploration: Based on ERC Equipoise, net unrisked mean prospective resources, Senegal assets in dispute
4) Net Unrisked Mean Case Prospective Recoverable Resources
15
Mature oil asset which came on stream in 1987 and holds a significant remaining potential
Located in shallow waters (80-100m) with significant infrastructure in place
New partnership established in Jan. 2017 operated by Perenco2 , a world leading operator of mature assets in emerging markets
Asset revamped with new partnership with further potential to increase production through workovers and infill drilling
Strong IRR from incremental low-effort measures
1) Consisting of three Production sharing Agreements: Tchibouela II, Tchibeli–Litanzi II and Tchendo II
1 2 3
Infill drilling targeting proven undeveloped reserves in un-swept fault terraces
Drilling of 4 new wells (2 producers + 2 injectors)
Includes re-purposing of jack-up rig as a low-cost wellhead platform
Capex: USD 107m (gross) corresponding to USD 11.5/bbl, of which USD 49m spent in 2019
19 producing wells and one water injector currently
2019: New workover unit installed allows fast & cheap workovers
2020: New wellhead platform w/ 12 new slots & drilling rig to be installed
2021: Initial 6 infill wells production from ~4,500 to 6,500 bopd (gross)
Capex: USD 84m (gross) corresponding to USD 8/bbl
1 2 3
| Production profile (Gross field) |
2.5 2.0 1.5 1.0 0.5 0.0 |
||
|---|---|---|---|
| Reserve basis (Gross field) |
> | RF : 31% | |
| Key economic indicators |
Incr. infill NPV (gross) (mUSD) |
||
| Project IRR |
|||
| Payback |
STOOIP Albien 74 mmbo
P50 reserves: 9.3 mmbo1
P10 reserves: 12.3 mmbo
| Oil price (USD/bbl) | 40 | 50 | 60 | |
|---|---|---|---|---|
| NPV (USDm) | 26 | 42 | 58 | |
| Oil price (USD/bbl) | 40 | 50 | 60 | |
| IRR | 18% | 24% | 29% | |
1 2 3
STOOIP Senonien 641/ Turonien 138 mmbo
RF : Senonien 5%/ Turonien 42%
P50 reserves: 11.0 mmbo1
P10 reserves: 17.0 mmbo
| Oil price (USD/bbl) | 40 | 50 | 60 |
|---|---|---|---|
| NPV (USDm) | 27 | 44 | 56 |
| Oil price (USD/bbl) | 40 | 50 | 60 |
| IRR | 19% | 25% | 31% |
time > Payback 2 years , plus potential for further infill at lower per barrel cost > Payback 2 years
Located ~11km from existing PNGF Sud fields, containing the Louissima discoveries – gross 2C contingent resources of 29 mmbbl
PetroNor has right to enter the license (14.7% indirect WI) together with Perenco (operator), negotiations expected to conclude late 2020 or early 2021
Early production scheme planned prior to decision to proceed with full development, expected to commence in 2021
Field planned developed using low cost jack-up with minimum topside upgrading and catenary pipeline to Tchibouela
Less than USD 10/bbl development capex
1 2 3
Producing asset1 with significant upside potential to be unlocked through new partnership and different technical approach
During Q4 2019, PetroNor acquired an interest in OML 113 through two separate transactions:
Field redevelopment being planned with replacement of FPSO, increased liquids production and extraction of large gas resources
1 2 3
1) Assumed 2020 production of 260 bopd (net)
2) 6.502% participating interest, with 16.255% cost bearing interest, representing an economic interest of 12.1913% in OML 113. Option to pay partly in cash should the PetroNor share price fall below USD 0.13 per share; Future consideration of up to USD 25M based on gas production royalty in a success case
Improve operational efficiencies and provide sufficient gas processing capacity
Three suitable replacements have been identified; two vessels have been inspected
Drilling of three new wells for oil and gas production
Offshore condensate stripping and export of wet-gas to shore
Onshore gas plant (land identified)
Gas to be sold to nearby WAGP and Lagos/Lekki gas-to-power market
Power production through a barge solution
Produced LPGs and propane to be sold in the domestic market
2021: Drilling of two new gas producers and one oil producer (in addition to the existing two wells)
1 2 3
2021: Bring in a cost effective FPSO with + 110 mmscfd gas capacity
2024: Expand gas production capacity to 110 mmscfd through drilling of additional two gas wells
Project planned split in upstream and midstream parts to maximize access to non-dilutive capital
Prospect map
1 2 3
PetroNor has an 90% interest in the A4 block (30 years license)
Net unrisked mean prospective recoverable resources > 1.5 bn bbl
The success in Sangomar at SNE and FAN-1 is anticipated to extend southwards along the trend both in the basin and platform play
Exploration wells are expected in both A1 and A5 in 2021
Basin play has high potential due to expected improved reservoir properties compared to FAN-1 well in the Sangomar block
PetroNor has an interest (suspended arbitration) in two exploration blocks in Senegal (90% WI)1
Net unrisked mean prospective recoverable resources in order of 1,8 bn bbls2
Status of dispute
PetroNor has reached a mutual agreement with the Government of Senegal to suspend the Arbitration related to the Rufisque Offshore Profond (ROP) and Senegal Offshore Sud Profond (SOSP) licence areas
180 days standstill until 26th October 2020 with a view to reach a satisfactory outcome for all parties
1 2 3
Sub-Saharan Africa focused E&P independent with proven track record
Full-cycle platform: Sizeable production with significant growth potential from existing assets
Strong operational experience combined with strong partnerships and local network in Africa
Targeting transformational growth through focused M&A
Well positioned to deliver near-term growth and shareholder value
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