Northern Petroleum Plc - Analyst Presentation May 2017
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Northern Petroleum PLC's May 2017 presentation highlights production growth from light oil in Alberta, Canada, alongside significant exploration initiatives in Italy, aided by partnerships. The company demonstrates a strong financial position with $7.2 million in cash and an experienced board. Future strategies include expanding production capacity and exploring new areas while maintaining a low-cost structure.
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Northern Petroleum Plc - Analyst Presentation May 2017
- 1. Northern Petroleum Plc Analyst Presentation May 2017
- 2. Northern Petroleum Northern Petroleum ▪ Production led growth from conventional light oil in Alberta, Canada ➢ low risk, low cost production growth across existing substantial facilities ▪ High impact exploration through Italian appraisal and exploration ➢ up to $69m of work programme carry from two partners ▪ Well funded ▪ Lean organisation with low G&A ▪ Technically driven board with necessary experience ▪ Institutionally backed ▪ New strategic partner to pursue production acquisitions in Canada Production led growth High impact upside May 2017 2 Key stats ▪ Shares in issue: 314.7m – 323.0 fully diluted ▪ Market Cap: £13m ▪ $7.2m in cash – further $0.7m on deposit – $0.4m in debt ▪ Key shareholders (61%) – High Power Petroleum – Cavendish Asset Management – City Financial
- 3. Northern PetroleumThe Board May 2017 3 ▪ Skill set – Geologist – Reservoir Engineer – Production Engineer – Mergers & Acquisitions – Chartered Accountants – Equity Capital Markets – FTSE 250 ▪ Experience – Venture Production – Faroe Petroleum – Lasmo – Hess – E.ON – BP – Tristone Capital – HSBC Investment Bank – National Nuclear Laboratory – FirstGroup Plc – Schlumberger Nick Morgan Jon Murphy Iain Lanaghan Campbell Airlie Keith Bush
- 4. Northern PetroleumRainbow, Virgo, Zama – north west Alberta May 2017 4 ▪ Originally developed in the 60s and 70s ▪ Light conventional oil production from carbonate reefs Amber Virgo Sousa Rainbow Zama Larne Shekilie Shekilie West Kotcho Black Rainbow South Land position ▪ 58,000 acres ▪ 170 mmbbls STOOIP ▪ Low recovery to date – 19% ▪ 1.9 mmbbls 2P (100%) – NOP have 75% WI
- 5. Northern PetroleumGood infrastructure / access May 2017 5 ▪ Well served by Plains Pipeline System ▪ Industry service companies based locally in industry evolved towns (High Level, Zama City) ▪ Good access except during ‘Break up’ ➢ annual wet season during spring thaw ➢ heavy truck movements banned ➢ four to eight weeks during April and May Northern acreage Legend Gas Oil
- 6. Northern PetroleumLow risk production growth May 2017 6 ▪ Established operating platform with substantial facilities, infrastructure and operating capacity ➢ minimal facilities capex required as production grows ➢ incremental production barrels decrease fixed opex per barrel ▪ Production increase: ➢ well workovers / recompletions ➢ well side-tracks ➢ new wells into existing reefs Facilities ▪ Substantial tank storage ▪ Fluid separators ▪ Produced water disposal ▪ Tie-in sales point to national pipeline infrastructure Capacity ▪ 10k to 15kb/d of fluid
- 7. Northern PetroleumWinter work programme May 2017 7 ▪ Rainbow well workover programme ▪ 23 wells worked over including ➢ four wells from recent production acquisition ➢ three ‘opex wells’ – maintenance on existing producers ▪ Cost of programme below budgeted $2.5m (100%) ▪ 300 b/d production increase achieved (100%) ▪ Current production restricted ➢ Break Up ➢ pipeline re-certification approvals ▪ Full Production – 500 to 700 b/d – expected towards end of Q2 (100%)
- 8. Northern PetroleumFuture production potential May 2017 8 ▪ Current well programme targets Keg River in Rainbow and Virgo ▪ Quantification project for area potential underway ➢ mapping of all reservoir intervals in Zama, Virgo and Rainbow areas ➢ current land position had original oil in place of 180 mmbbls in Keg River – average 19% recovery factor ➢ 5% improvement in recovery factor is 9 mmbbls reserves ➢ further upside from other hydrocarbon prone horizons – Zama, Sulphur Point, Slave Point Orange – OP land position Red – 3D seismic coverage Seismic coverage over 30% of land position Oil Gas
- 9. Northern PetroleumSummer 2017 May 2017 9 ▪ Expanded summer programme being planned ▪ Targeting ➢ one to two recompletions, incl. Virgo wells ➢ one to two side-tracks ➢ remaining well workover candidates ▪ Initial budgetary estimates $3m (gross) ▪ Increase production by 300 b/d (gross) 2018 ▪ New wells into existing reefs ➢ mainly Virgo ▪ Evaluation of other producing horizons
- 10. Northern PetroleumItaly May 2017 10 Cascina Alberto ▪ 300 mmbbls onshore exploration prospect ▪ Analogous to Villafortuna-Trecate 25km southeast ▪ Farmed out to Shell for cash, seismic acquisition and exploration well carry ▪ Seismic acquisition consultation underway ▪ Company changing exploration and appraisal portfolio ▪ Large onshore exploration project carried by Shell ▪ Strategic position offshore in the southern Adriatic ➢ discovery requiring flow test to proceed to development ➢ large prospect to be drilled ▪ Environmental approval received for seismic ➢ commencing tendering process ➢ Q4 / Q1 acquisition timetable ➢ permit application awards expected in Q2 ➢ initiate approval process on Giove appraisal well Cascina Alberto Cygnus & Giove
- 11. Northern PetroleumItaly – Southern Adriatic 11 Oil discovery Gas discovery Awarded Exploration Permit Exploration Permit Application Giove discovery ▪ Offshore discovery, contingent resource of 26 mmbbls ▪ Requires appraisal well with flow test ▪ Well being planned for 2019 Cygnus prospect ▪ Offshore target, 446 mmbbls prospective resource ▪ 12 kms from producing Aquila oil field ▪ If connected to Aquila, volumes are much larger Southern Adriatic Medusa deep prospect ▪ Offshore target, analogous to Giove, 47 mmbbls prospective resource ▪ Oil discovered with original well – not able to test due to well issues ▪ If Giove works, possible well in same campaign
- 12. Northern PetroleumProduction economics / Balance sheet May 2017 12 Fixed opex Variable opex Discount /tariff Royalty / GORR 2016 actual 2017 illustrative $9 $12 $10 $4 $8 $9 $5 $10 $5 $24 Operating netback 2016 actual ▪ 106,000 bbls produced ▪ 290 bbls/d ▪ WTI averaged $43 2017 illustrative ▪ WTI average $53 – $52 year to date ▪ Average 700 bbls/d Further opex incurred in 2016 ▪ $1 per barrel ongoing repairs and maintenance ▪ $5 per barrel workover repairs – pipeline reinstatement repairs ▪ $7.2 million in cash as at 31 March 2017 ➢ excluding $0.7m on deposit with Alberta Energy Regulator ➢ excluding $0.5m subject to Italian regulatory approval of farm out
- 13. Northern PetroleumStrategic partner – High Power Petroleum May 2017 13 ▪ H2P is part of I-Pulse Inc. ➢ large private technology company commercialising high pulse power solutions across industries, incl. E&P and mining ▪ Farmed in / acquired an interest in each group asset ➢ option to increase WI further cash consideration / work carry ▪ Three year AMI with H2P ➢ Alberta or Saskatchewan ➢ 50/50 investment ➢ Conventional light oil ▪ Large E&P companies still divesting non-core assets ▪ Significant opportunity to acquire new production assets and leverage off existing Calgary based team
- 14. Northern PetroleumInvestment opportunity May 2017 14 ▪ Northern is building economic production and cashflow ➢ relatively low levels of capital required ➢ relatively low risk ▪ Minimum overhead and small central team ▪ Well funded and supported ▪ Existing asset base can support significant production growth ➢ 4,000 - 5,000 b/d ▪ Alongside low risk core value growth ➢ high impact upside will be matured over medium to long term
- 15. Northern Petroleum These presentation materials (the "Presentation Materials") are being solely issued to and directed at persons having professional experience in matters relating to investments and who are investment professionals as specified in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Financial Promotions Order") or to persons who are high net worth companies, unincorporated associations or high value trusts as specified in Article 49(2) of the Financial Promotions Order (“Exempt Persons”). The Presentation Materials are exempt from the general restriction on the communication of invitations or inducements to enter into investment activity on the basis that they are only being made to Exempt Persons and have therefore not been approved by an authorised person as would otherwise be required by section 21 of the Financial Services and Markets Act 2000 (“FSMA”). Any investment to which this document relates is available to (and any investment activity to which it relates will be engaged with) Exempt Persons. In consideration of receipt of the Presentation Materials each recipient warrants and represents that he or it is an Exempt Person. The Presentation Materials do not constitute or form any part of any offer or invitation to sell or issue or purchase or subscribe for any shares in Northern Petroleum PLC (“Northern Petroleum”) nor shall they or any part of them, or the fact of their distribution, form the basis of, or be relied on in connection with, any contract with Northern Petroleum relating to any securities. Any decision regarding any proposed purchase of shares in Northern Petroleum must be made solely on the basis of the information issued by Northern Petroleum at the relevant time. Past performance cannot be relied upon as a guide to future performance. The Presentation Materials are being provided to recipients on the basis that they keep confidential any information contained within them or otherwise made available, whether orally or in writing in connection with Northern Petroleum or otherwise. The Presentation Materials are not intended to be distributed or passed on, directly or indirectly, whether to Exempt Persons or to any other class of persons. They are being supplied to you solely for your information and may not be reproduced, forwarded to any other person or published, in whole or in part, for any other purpose. In particular they, directly or indirectly, must not be distributed to persons in the United States of America, its territories or possessions or Australia or Canada or Japan or the Republic of Ireland or South Africa. Any such distribution could result in a violation of law in those territories. The Presentation Materials do not constitute or form part of a prospectus prepared in accordance with the Prospectus Rules (being the rules produced and implemented by the Financial Conduct Authority (“FCA”) by virtue of the Prospectus Rules Instrument 2005) and have not been approved as a prospectus by the FCA (as the competent authority in the UK). The Presentation Materials do not contain any offer of transferable securities to the public as such expression is defined in section 102(b) FSMA or otherwise and do not constitute or form part of any offer or invitation to subscribe for, underwrite or purchase securities nor shall they, or any part of them, form the basis of, or be relied upon in connection with, any contract with Northern Petroleum relating to any securities. Disclaimer May 2017 15