PA Resources AGM 2012 Annual General Meeting Bo Askvik, President & CEO Stockholm, 22 May 2012
PA Resources where we are today 2010 Today» No value in the North Sea asset portfolio» New play discoveries in Denmark as operator» Marginal value recognised in Block I, Equatorial Guinea» Aseng investments recovered after 9 months - strong future cashflow» High investment level, capex/produced barrel equal to 80 USD» Significantly lower investment level, capex/produced barrel equal to 6 USD in Q1 2012 2
Focusing on Africa and North Sea KEY FACTS: Oil and gas company with operations and assets in nine countries Exploration, development and production portfolio - key infrastructure assets in Africa 25 oil and gas licences 6 producing fields 9 potential commercial discoveries Operator of 12 licences Oil production in Equatorial Guinea, Republic of Congo (Brazzaville) and Tunisia Average production of 8,700 bopd in Q1 2012 60.2 million mmboe in 2P reserves and 145 mmboe in contingent resources* 130 employees in Tunisia, the UK and Sweden Production Development Exploration * Million barrels of oil equivalents, Working Interest figures per 31 Dec. 2011 Infrastructure hub 3
Shareholder structure per March 2012 Number of shares Capital/votes AVANZA PENSION 53,990,324 8.5% NORDNET PENSIONSFÖRSÄKRING 21,657,208 3.4% LÄNSFÖRSÄKRINGAR FONDER AB 17,270,874 2.7% CBNY-DFA-INT SML CAP V 15,454,377 2.4% ROBUR FÖRSÄKRING 10,883,241 1.7% AB TRACTION 10,778,014 1.7% VOB & T HOLDING AB 10,000,000 1.6% SEB S.A., W8IMY 9,378,446 1.5% JP MORGAN BANK 7,765,220 1.2% JPM CHASE NA 7,724,045 1.2% Total - 10 largest shareholders 164,901,749 25.9% Total - other shareholders 472,575,144 74.1% Total number of shares 637,476,893 100% The share listed on NASDAQ OMX Stockholm (Mid Cap) Market capitalization of approx. SEK 920 million Enterprise value of approx. SEK 4.3 billion and Nomination committee in 2011: Länsförsäkringar AB Traction Folksam 4
Financial Review Q1
Macro perspective 160 140 120 100 80 60 40 20 0 Brent price trend 2006-2012 (USD per barrel) 2006 2007 2008 2009 2010 2011 2012 Geopolitical uncertainty continues European debt crisis and outlook of global economy coming year uncertain Lack of extra production capacity Demand still driven by growth economies such as China and India Transport sector increasing in pace with population and GDP It is getting more difficult to find oil Existing producing fields have a natural decline rate of 4% a year +40 million barrels per day needed from new producing fields by 2030 6
Production trend and update Average production per country/bopd 12 000 10 000 Congo: Azurite EG: Aseng Tunisia: Didon & Onshore 8 000 6 000 4 000 2 000 0 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 CONGO: Azurite Marked decline in one well since February 2012, well flowing at minimal rate Technical and economic analysis of remedial options ongoing One week shutdown for annual field maintenance planned for in late May 2012 EG: Aseng Higher target level of around 60,000 boepd reached in early March 2012 Fifth production well on stream - all wells contributing fully, gas re-injection fully commissioned Frequent liftings EG: Alen Delopment project on plan for production start 2013, significant cost synergies reducing opex 7
Production and sales 12 000 10 000 Average quarterly production/bopd bopd Full Year 2011 Q1 2012 APRIL 2012 West Africa 5,300 6,200 5,700 8 000 6 000 4 000 2 000 North Africa 3,300 2,500 2,700 Group Total 8,600 8,700 8,400 0 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Average sales price USD/bbl LIFTINGS IN 2012: Q1 - EARLY APRIL 140 120 100 80 60 PA Resources Brent 85 77 79 78 78 82 71 72 106 97 117 113 109 109 106 104 119 120 546,000 bbls from Aseng and Tunisia in Q1 520,000 bbls from Azurite on 4 April (Q2 2012) 40 20 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 8
Earnings and key ratios Q1 2012 Q4 2011 FY 2011 FY 2010 Production (bopd) 8,700 8,400 8,600 10,700 Oil price (USD/barrel) 120 104 103 76 Revenue (SEK million) 650 535 2,154 2,227 EBITDA (SEK million) 395 306 1,295 1,276 EBITDA margin 60.8% 57.2% 60.1% 57.3% Profit before tax (SEK million)* 68 11 158 179 Profit for the period (SEK million)* -31-96 -326-316 Earnings per share (SEK) -0.05-2.91-3.27-0.61 * Figures for 2011 exclude non-cash, one-off costs of SEK 2,035 million before tax and SEK 1,758 million after tax. 9
SEK million Significantly lower capex in 2012 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0 Capex 2011-2012 Actual Forecasted 1,613 240-375 32 2011 2012 KEY COMMENTS 2012 forecast of SEK 240-375 million Capex of SEK 32 million in Q1 Continued low investment activity in 2012 Drilling program/planned wells 2012-2013 Tunisia: Zarat Elyssa Q4 2012/2013 Appraisal/1 Tunisia: Makthar 2013 Exploration/1 EG: Block H Aleta Q4 2012/2013 Exploration/1 DK: 12/06 Lille John 2013 Appraisal/1 10
Improved cash flow SEK million Q1 2012 Q4 2011 FY 2011 FY 2010 Operating cash flow 175-106 812 416 of which income taxes paid -3-7 -45-230 CAPEX -32-135 -1,613 1,585 AZURITE LIFTING Q2 2012 Azurite lifting on 4 April adds SEK 400 million cash flow, and reduces net debt PA Resources next planned lifting from Azurite in early 2013 Financing activities -13 36-408 2,321 Net cash flow 131-204 -1,209 1,152 11
Refinancing activities 1200 1000 800 600 400 200 0 May - Dec. 2012 Maturity structure Bonds and convertibels (SEK million) 2013 2014 2015 2016 Bond (NOK 900 million) Convertible Bond Bond (SEK 850 million) 5 year senior unsecured NOK 900 million bond loan issued in March 2011 to refinance maturing loans in 2011 and 2012 Total amortizations of net SEK 408 million in 2011 As per 25 April net debt reduced by SEK 580 million since year end amounting to SEK 3.4 billion Next maturity in October 2013 12
Reduced debt Balance Sheet (SEK million) 2011 2010 Non-current assets 7 910 8 952 Current assets 981 1 946 Total assets 8 892 10 898 Equity attributable to owners of the parent 3 270 5 250 Non-current liabilities 4 031 3 606 Current liabilities 1 592 2 042 KEY COMMENTS Q4 2011 Substantial reduction in 2P reserves on Azurite field resulted in impairment of SEK 1,436 million Write-down of SEK 599 million related to Didon North and divestment of El Bibane and Ezzaouia fields in Tunisia Total equity and liabilities 8 892 10 898 25 April* Q1 2012 Q4 2011 Covenant Book Equity (SEK million) 2,994 2,994 3,270 >2,000 Book Equity to Capital Employed Covenants and net debt 46% 43% 45% >40% Net debt (SEK million) 3,400 3,803 3,982 N/A * Assuming fixed closing rate per 31 March 13
Operational update Q1
Highlights 2011: West Africa 70 60 50 40 30 20 10 0 West Africa Reserves and resources (mmboe) 12.2 2P Reserves 20 Contingent Resources SEK 780 million in investments 62 Risked Prospective Resources SEK 3,304 million in non-current assets 5,300 barrels/day in average production IMPORTANT EVENTS Equatorial Guinea: Early production start at the Aseng field in November 2011, adding frequent cash flow from Q1 2012 Alen development in progress adding significant cost synergies to PAR, production start in 2013 New operator for Block H Congo: Azurite development completed with lower production than expected, booked 2P reserves written down by 6 mmboe Exploration well on Marine XIV found non-commercial hydrocarbons 15
Highlights 2011: North Africa 100 80 60 40 20 0 North Africa: Reserves and resources (mmboe) 48 2P Reserves SEK 486 million in investments SEK 3,848 million in non-current assets 91 Contingent Resources 48 Risked Prospective Resources IMPORTANT EVENTS Allocation of reserves and development planning of Zarat field in progress Production well on the satellite field Didon North failed No commercial discoveries found on Jelma Disposal of two small producing fields - El Bibane and Ezzaouia Political situation resulting in social instability affecting activities in the country 3,300 barrels/day in average production 16
Highlights 2011: North Sea and Greenland 350 300 250 200 150 100 50 0 North Sea and Greenland: Reserves and resources (mmboe) 2P Reserves 34 Contingent Resources 299 Risked Prospective Resources IMPORTANT EVENTS Discovery of gas and condensate on Broder Tuck in Danish licence 12/06 Oil discovery in the Miocene structure on Lille John in Danish licence 12/06 Seismic analysis completed in Greenland resulting in a number of sizable prospects and leads Awarded new licence in Germany, adjacent to Danish 12/06 SEK 347 million in investments SEK 758 million in non-current assets 17
Successful drilling campaign on 12/06 in Denmark PA Resources 64% (Operator) Background 12/06 licence located in the Danish part of North Sea Adjacent to existing oil and gas infrastructure Exploration well drilled in 1975 (Broder Tuck field today), encountered a gas column Awarded adjacent German licence in January 2011, before successful drilling 18
Denmark 12/06: Thorough geoscience analysis PA Resources 64% (Operator) Pre-drill perceptions 1975 well with small gas column in Middle Jurassic Industry perception of Chalk as only target in area, with high risk on oil charge Our perceptions Structures drilled historically on 2D data 3D acquired in past but no subsequent exploration drilling Lies in Danish Central Graben large fields nearby What we did Use of 3D to define Lille John as multi-target prospect (Miocene, Chalk, Middle Jurassic) Evaluated historic well and recognised upside 19
Denmark 12/06: Discoveries and way forward PA Resources 64% (Operator) Broder Tuck 360m+ gas and condensate column proved by wells High quality Middle Jurassic reservoir Mid to high case assessment of c. 25-50 mmboe gross of contingent resources including liquids 2012 work programme to progress development planning towards commercialisation 12/06 Broder Tuck - 2 Lille John Wells established 35 API oil in Miocene sandstone at c. 900m exceptionally light oil for shallow depth Obvious seismic anomaly at Miocene Recognition of shallow light oil re-focussed work on developing a Miocene prospect inventory Likely to be remaining deeper potential Chalk remains and well result upgrades Middle Jurassic 2012 work programme to reprocess 3D to determine prospect inventory and appraisal well location, drilling project management tendered B20008-73 Lille John-1 Licence Group: Operator PA Resources (64%), Danish North Sea Fund (20%), Spyker Energy (8%), Danoil (8%) 20
PA Resources operator with focus on HSE Objective - safe drilling campaign with minimal impact Total working hours; 184,149 or 7,673 man days with an average of 72 personnel on board during operation Reportable incidents; 0 environmental incidents, 3 reportable incidents, 0 lost time incidents, 1 first aid case HSE audits; > 100 audits by PA Resources rig-based HSE supervisor Transportations; 6,698 tonnes of equipment moved to/from rig in 68 supply boat sailings Use of chemicals; 238.8 tonnes of chemicals discharged being 96.3% designated Green substances which pose little or no risk to environment Use of environmentally harmful substances; usage of only 15.6 tonnes of 221 tonnes in total that PA Resources was permitted to use, of which, zero tonnes discharged to the environment Disposal; 76.9 tonnes of waste shipped from the rig for safe disposal 21
Success factors and the 12/06 team Key success factors Careful, diligent work and formed own evidence-based views on prospectivity Conducted a safe drilling campaign with minimal impact to highest standards High degree transparency to joint venture partners and DEA Professional team and good communication PA Resources UK the 12/06 team Graham Goffey Regional Director Fiona Goodfellow Geoscience Project Leader Dave Mackertich Senior Geoscientist Jon Lucas Geotechn. & HSE Manager Mark Attree Exploration Manager William Tyrell Geologist 22
Reserves and valuation Q1
2011 Reserves and resources 450 400 350 300 250 200 150 100 50 0 2011 2010 60.2 72.5 2P Reserves 145 141 Contingent Resources 409 297 Risked Prospective Resources 2P Reserves Aseng derisked 6 months in production Alen production start in 2013 Contingent Resources Danish discoveries on 12/06 added 32 mmboe Risked Prospective Resources Seismic analys of Greenland licence added significant volumes Danish 12/06 exploration potential 24
Overview: Assets per classification 409 mmboe 60.2 mmboe 2P Reserves 145 mmboe Contingent Resources Risked Prospective Resources Azurite Didon Tunisia onshore Zarat liquids Block I: Aseng Alen Didon Zarat gas Elyssa Zarat permit Didon North Denmark 12/06 Block I (other) Mer Profonde Sud Marine XIV Netherlands Tunisia: Jelma, Makthar, Jenein Centre, Zarat permit UK Mer Profonde Sud (Miocene & Sendji) Marine XIV Block I and Block H Netherlands: Schagen, Q7 Denmark: 12/06, Gita/Maja Greenland, Block 8 Producing assets Under development Priority development 25
Current valuation of 2P reserves Peer group 2012* PAR AGM 2012 PAR AGM 2011 Market capitalisation 920 2,665 Net debt 3,400 3,280 Enterprise value SEK million 4,320 5,945 Enterprise value USD million 1,124 640 950 2P boe million 77 60.2 72.5 Value/2P boe (USD) 14.60 10.60 13.10 PAR oil price (USD) 120 103 * Peer group includes 15 E&P companies per April 2012 26
Indicative valuation of selected assets 145 mmboe 60.2 mmboe 2P Reserves Contingent Resources Value range (USD/boe) Indicative value (MUSD) Producing: 17.2 18-28 310-482 North Africa: Tunisia West Africa: Congo (Azurite) EG (Aseng) To be developed: 43.0 37.8 4.5 8.5 364-686 Tunisia: Zarat field EG: Block I Denmark: Broder Tuck Total 674 1,168 Net debt -500 (Market) value 174-668 SEK/share *equivalent 1.85 7.00 * USD/SEK 6.75 27
Strategic focus update Development of prioritised assets in Africa Azurite and Aseng completed Alen production start in 2013 Increase reserves and resources Develop prioritised assets Strengthen capital structure Increase value from existing assets Selective exploration activities Discoveries on 12/06 in Denmark Strengthen captital structure Refinancing activities in 2011 Net debt reduced by SEK 600 million in Jan. April 2012 Low capex positive cash flow in 2012 28
Outlook and focus 2012 Technical and economic analysis of remedial options for Azurite well Appraisal drilling and development planning of Danish discoveries towards commercialisation Selective appraisal and exploration activity in EG: Block I and Block H Progressing the Zarat field and Block I development projects Positive cash flow and reduction of debt 29
Thank you! Q1