Unlocking our energy future: the potential value of the Canning Basin Phil Thick, Managing Director August 2013
Contents 1. New Standard Energy company overview 2. Global shale gas position 3. Onshore Australia 4. Canning Basin 5. WA energy market 6. The opportunity, the challenges and the road to market 2
Company overview Positioned for growth in the emerging shale sector Corporate overview NSE share performance over past two years New Standard Energy ASX:NSE Ordinary shares 305.3m Unlisted rights 2.12m Market capitalisation (at $0.16c per share) Cash (net) June 2013 Investment in Elixir Petroleum (121.8m shares at 1.7c per share) $48.8m $41.5m $2.07m Applicable as at 23 August 2013 Applicable as at 23 August 2013 3
Company overview Strategically positioned for WA energy market Large Acreage Position in Strong, Growing Market Merlinleigh Project, onshore Carnarvon Basin 100% equity & operator 5,800km 2 (1.4m acres) with conventional and shale/tight gas potential located on major gas infrastructure Southern Canning Project, Canning Basin 25% equity and operator, US$119m farm-out to ConocoPhillips (46%) & PetroChina (29%) 48,000km 2 (11m acres) with shale/tight gas & wet gas potential 3 wells in Phase 1 program Laurel Project, Canning Basin 65% equity and operator of EP417 (with Buru 35%) and 100% of Seven Lakes STP-EPA-109 5,800km 2 (1.4m acres) with conventional and shale/tight gas potential Growing infrastructure in Kimberley region with large players positioning and Buru State Agreement provides certainty on infrastructure and path to market for gas in the Canning 4
Planned drilling program Data acquisition focus New Standard recently secured Enerdrill Rig #3 for a multi well program over the next 18 months Contract is for two firm wells plus two options One firm well in late 2013 (Merlinleigh Project in Carnarvon Basin farm-out process currently underway) 1 3 well program proposed for Canning Basin from mid 2014 (potentially covering both of our Canning Basin projects) All wells are initial exploration wells gathering data and information to further define and quantify structures and potential resources in the respective basins Enerdrill is a WA company, competent operator with remote drilling experience in Australia and a strong technical and operational background 5
Global shale gas Huge global potential for shale gas 95 major shale basins in 41 countries Source: US Energy Information Administration 6
Global shale gas Comparison of 2011 EIA/ARI Study and Current EIA/ARI Study of Assessed World Shale Gas Resources Continent North America (Ex. U.S.) 2011 2013 Technically Recoverable (Tcf) Technically Recoverable (Tcf) 1,069 1,118 Australia 396 437 South America 1,225 1,431 Europe 624 883 Africa 1,042 1,361 Asia 1,404 1,403 Total 5,760 6,634 Source: US Energy Information Administration 7
The rise of US shale Game Changing Results + Global Impact US Energy Information Agency predictions: US to overtake Saudi Arabia as world s largest oil producer by 2020 North America to become net oil exporter around 2030 US set to become a net exporter of natural gas by 2020 US to be almost energy self-sufficient by 2035 Lessons learned: Shale gas, shale oil and tight gas are a significant, game changer that is impacting global energy markets 8
Onshore Australia: a rapidly emerging sector International majors continue to increase their presence in the Australian unconventional sector 30 Sep 2011: ConocoPhillips - $119.5m 15 June 2010: Mitsubishi - $150m Carnarvon Perth 21 Feb 2013 14 Apr 2012: Hess - undisclosed 22 February 2011: Hess - $55m PetroChina 20 June 2012: Corporate activity significant in Statoil - $210m past two years Browse Canning Beetaloo Amadeus Georgina Cooper / Eromanga 17 Feb 2011: CNOOC - $50m Galilee Deals continuing to be concluded Majority of transactions at the asset level via farm-in Latest major deal: Chevron farming into BPT acreage for up to $349m Significant interest from global and international companies Australian companies also active 2 Oct 2012: Santos - $150m 6 Nov 2012: Total - $190m Otway 25 Feb 2013: Chevron up to $349m 27 July 2011: BG Group - $130m 9
Putting the Canning Basin into perspective Independent assessments of Goldwyer shale formation in the Canning Basin provide strong support for Industry player s focus: Canning Basin: Canning Basin Risked Gas In Place: 1,227Tcf Technically recoverable: 235Tcf Canning Basin Risked Oil In Place: 244bbl Technically recoverable: 9.7bbl Size of Assessed Shale Gas and Shale Oil Resources, at Basin and Formation Levels Country Basin Risked Gas In- Place (Tcf) Technically Recoverable (Tcf) Risked Oil In- Place (Billion bbl) Technically Recoverable (Billion bbl) Cooper 325 93 29 1.5 Maryborough 64 19 0 0.0 Australia Perth 168 44 14 0.5 Canning (Goldwyer) 1,227 235 244 9.7 Georgina 68 13 25 1.0 Beetaloo 194 44 93 4.7 Source: US Energy Information Administration 10
Acreage grab in the Canning Basin Most prospective acreage already locked up 11
TJ/day 1600 1400 1200 1000 800 600 400 200 0 WA energy market Attractive exploration environment WA Onshore Gas Demand-Supply Equation Shale and Tight Gas Opportunity Favourable Onshore Outlook Sustained upward pressure on WA gas prices Limited existing supply side alternatives Declining North-West Shelf domestic gas availability Increasing costs of incremental supply especially offshore Large offshore fields need scale economy of LNG, petrochemicals High value as LNG Existing domgas New offshore domgas Demand Prices likely to remain high Source: ACIL Tasman, Morgan Stanley Shale Conference Presentation, April 2012 A clear opportunity for shale gas and tight gas resources is emerging in WA 12
IMO s Gas Statement of Opportunities The rise of shale & tight gas There are several medium to long-term challenges confronting the WA LNG industry, these include: potential changes to international LNG supply; the potential end of premium LNG pricing in the Asia Pacific region; the high cost of LNG production in WA; and the emergence of unconventional gas as a source of supply The emergence of unconventional gas as a new source of gas supply is also a potential game changer. In the last decade, unconventional gas has transformed the US from a net importer into a net exporter of gas. Unconventional gas is also transforming gas markets in eastern Australia and there are indications that WA is well endowed with unconventional gas resources. While its production is still in its early stages in WA and around the world, unconventional gas has the potential to transform gas markets internationally. The impact of unconventional gas on LNG exports is still not clear and will need to be monitored closely by WA LNG exporters, market regulators and governments. Source: IMO Gas Statement of Opportunities, July 2013 13
Balancing the expectations Domestic Gas vs. Robust Export Market Western Australia is already supported by a healthy domestic gas market coming from the North West Shelf Domestic gas prices are high relative to the east coast due to global export prices New sources of domestic gas should reduce prices, but not to eastern states levels or US levels Shale gas could be seen as a source of domestic gas for the future and could support the North West Shelf energy hub There is enough shale gas potential in the Canning Basin alone to meet Australia s energy needs without support from any other reserves In terms of the Western Australian domestic market, the Canning Basin gas potential will quickly and easily meet the gap, with substantial potential for export to global markets Time frame remains the biggest question mark in terms of getting Canning Basin gas into the domestic market, and this is driven by remoteness, cost of infrastructure and cost of drilling and future production 14
Domestic gas price outlook Prices likely to remain high until forecasted 2022 15
The road to development Challenges of exploring in the Canning Basin Remoteness Most prospective shale gas prospects are in remote, frontier locations Challenges include Lack of infrastructure Limited geological understanding Availability of water Large operating costs Support industry is still maturing Access to rigs very limited Market for experienced operators and technicians remains tight Stakeholder engagement Native title and TO agreements remain a challenge The anti campaign continues to grow and our response continues to be reactive 16
How do we unlock the potential value? De-risk the project Opening the frontier Invest now in infrastructure Building the crew Partner with experience global operators Building the knowledge base Understand your acreage Informing the stakeholders Don t leave communities in the dark inform early and often Two-way communication WA legislation has mandatory reporting of all materials used during drilling process Be accountable 17
Important notice This document has been prepared by New Standard Energy Limited ABN 20 119 323 385 ( New Standard") This presentation contains certain statements which may constitute "forward-looking statements". It is believed that the expectations reflected in these statements are reasonable but they may be affected by a variety of variables and changes in underlying assumptions which could cause actual results or trends to differ materially, including, but not limited to: price fluctuations, actual demand, currency fluctuations, drilling and production results, reserve and resource estimates, loss of market, industry competition, environmental risks, physical risks, legislative, fiscal and regulatory developments, economic and financial market conditions in various countries and regions, political risks, project delays or advancements, approvals and cost estimates. All of New Standard s operations and activities are subject to joint venture, regulatory and other approvals and their timing and order may also be affected by weather, availability of equipment and materials and land access arrangements, including native title arrangements. Although New Standard believes that the expectations raised in this presentation are reasonable there can be no certainty that the events or operations described in this presentation will occur in the timeframe or order presented or at all. No representation or warranty, expressed or implied, is made by New Standard or any other person that the material contained in this presentation will be achieved or prove to be correct. Except for statutory liability which cannot be excluded, each of New Standard, its officers, employees and advisers expressly disclaims any responsibility for the accuracy or completeness of the material contained in this presentation and excludes all liability whatsoever (including in negligence) for any loss or damage which may be suffered by any person as a consequence if any information in this presentation or any error or omission there from. Neither New Standard nor any other person accepts any responsibility to update any person regarding any inaccuracy, omission or change in information in this presentation or any other information made available to a person nor any obligation to furnish the person with any further information. It is not intended as an offer, solicitation or recommendation with respect to the purchase or sale of any securities. Prospective investors should make their own independent evaluation of an investment in New Standard including without limitation, seeking professional advice. Competent Person: The information in this presentation has been reviewed by Dr Mark Hagan (BSc Hons, PhD) who is a Petroleum Geologist and Geophysicist with more than 35 years experience in the industry. Dr Hagan is Technical Director of New Standard Energy and consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. 18
For more information contact: Phil Thick, Managing Director +61 8 9481 7477 info@newstandard.com.au