Argos Resources General Meeting 4 th May 2015
Important Notice This company presentation (the “Presentation”) has been prepared by Argos Resources Limited (“Argos” or the “Company”) . The Presentation has not been reviewed or registered with, or approved by, any public authority, stock exchange or regulated market place. The Company makes no representation or warranty (whether express or implied) as to the correctness or completeness of the information contained herein, and neither the Company nor any of its subsidiaries, directors, employees or advisors assume any liability connected to the Presentation and/or the statements set out herein. This presentation is not and does not purport to be complete in any way. The information included in this Presentation may contain certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words “believes”, expects”, “predicts”, “intends”, “projects”, “plans”, “estimates”, “aims”, “foresees”, “anticipates”, “targets”, and similar expressions. The forward-looking statements contained in this Presentation, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. For a description of such risks, uncertainties and other factors; please see the Company's prospectus dated 27 July 2010. None of the Company or its advisors or any of their parent or subsidiary undertakings or any such person’s affiliates, officers or employees provides any assurance that the assumptions underlying such forward-looking statements are free from errors nor does any of them accept any responsibility for the future accuracy of the opinions expressed in this Presentation or the actual occurrence of the forecasted developments. The Company and its advisors assume no obligation to update any forward-looking statements or to conform these forward-looking statements to the Company’s actual results. Investors are advised, however, to inform themselves about any further public disclosures made by the Company, such as filings made with the London Stock Exchange or press releases. This Presentation has been prepared for information purposes only. This Presentation does not constitute any solicitation for any offer to purchase or subscribe any securities and is not an offer or invitation to sell or issue securities for sale in any jurisdiction, including the United States. Distribution of the Presentation in or into any jurisdiction where such distribution may be unlawful, is prohibited. This Presentation relates to matters up to 1 May 2015, and there may have been changes in matters which affect the Company subsequent to the date of this Presentation. Neither the issue nor delivery of this Presentation shall under any circumstance create any implication that the information contained herein is correct as of any time subsequent to the date hereof or that the affairs of the Company have not since changed, and the Company does not intend, and does not assume any obligation, to update or correct any information included in this Presentation. This Presentation is subject to English law, and any dispute arising in respect of this Presentation is subject to the exclusive jurisdiction of English courts. By receiving this Presentation, you accept to be bound by the terms above. 2
Agenda • The Farm Out Agreement • An Overriding Royalty Interest vs a Working Interest • The Rhea Prospect • Illustrative Economics of a Rhea Development • Further Prospectivity • What are the Options for Shareholders • Summary 3
Farm Out Agreement • Argos to receive: • a 5% Overriding Royalty Interest (ORRI) on gross proceeds from all sales of oil & gas from all fields developed in PL001 for the life of the licence • $2.75m for certain historic costs • $800k per annum until first Royalty receipt • Argos not liable for any further exploration, appraisal, development or operating costs on the licence • Noble to become Operator • Noble Energy and Edison to receive 75% and 25% working interest • Minimum of one exploration well to be drilled in current drilling campaign 4
An Overriding Royalty vs a Working Interest An ORRI entitles the owner of the override to a specified share of the oil and gas produced under the lease [licence], free and clear of drilling, completing and operating costs. Mouledoux 2010 Overriding Royalty Interest ORRI WI × √ No Exposure to Exploration/Appraisal Expenditure & Fundraising × √ No Exposure to Development Expenditure & Fundraising × √ No Exposure to Project Overspend × √ No Exposure to Operational or Decommissioning Liability 5
What the Farmout Agreement Achieves • Fulfils drilling commitment on Phase 2 of Licence • Paves the way to negotiate 10 year Phase 3 of Licence • Introduces strong partners, both operationally and financially • No cost exposure for Argos • Cash elements of deal meet ongoing working capital requirements • No material fundraising required • No shareholder dilution uncertainty 6
Rhea Stack Rhea Stack Rhea Stack Location BIG SELENE MAIA RHEA A+B POSEIDON A,B&C ATTIS A ANTHEIA Prospective Recoverable Resources (MMBO) Prospect: Reservoir P90 P50 P10 Post Rift Selene 33 127 456 Maia 11 40 116 Rhea 46 133 374 Poseidon A, B, C 20 81 294 Post Rift Total 110 381 1,240 Syn Rift Attis A 8 31 114 Anthea A 8 31 113 Syn Rift Total 16 62 227 TOTAL STACK 126 443 1,467 Prospective recoverable resource of 443 MMBO 7
Rhea Prospect Rhea Well Location 8
Proposed First Well on Rhea Stack W E Rhea Well Location Tyche Selene Rhea Poseidon 9
Success Case Assumptions for Rhea Development Post-Rift 381mmbo Case Pre-Development Costs, $620 million gross • 7 appraisal wells, $420 million • Front End Engineering & Design (FEED), $200 million • In WI Case, appraisal and FEED financed by equity raise Development Costs, $4.24 billion gross • 100,000 bopd plateau production rate • Purchased FPSO • Development cost excludes E&A and FEED spend • In WI Case, development financed by 50% equity raise and 50% debt Financial Assumptions • FI 26% Corporation Tax • FI 9% Royalty • Discount rate of 10% applied to both WI and ORRI valuations • Oil Price $85 per barrel • USD/GBP $1.55 Based on Senergy 2013 10
Illustrative Value of Rhea Post-Rift 381mmbo Case 5% ORRI 40% Working Implied Market Millions Net to Argos Interest Cap ($m) Current Shares in Issue 229 $ 21 229 Appraisal & FEED Equity Cost $ 248 - Shares issued @ 20p 800 - Total shares in Issue 1,029 $ 319 229 Development Equity cost $ 847 - Shares issued @ 40p 1,366 - Total shares in Issue 2,395 $ 1,485 229 NPV10 Post Tax $ 2,756 $ 368 NPV per Share £ 0.74 £ 1.04 In-house assumptions based upon economic evaluation prepared by Senergy, Oct 2013 11
Beyond Rhea - A Licence Rich in Prospects Best estimate resources of 3.1 billion bbl – High case of 10.4 billion bbl Prospect Overview Resource Potential • Competent Person's Report issued by Senergy in Unrisked Net Recoverable July 2013 describes 52 oil prospects and 40 leads Resources (MMboe) • Prospect: Reservoir Low Best High Best Estimate of net unrisked resources is 3.1 billion bbl, with 10.4 billion bbl in the high case Eastern Graben 352 1,201 3,881 Rhea Stack 126 443 1,467 Kratos Stack Kratos Stack 66 229 776 Poseidon Channel 55 204 696 Sequence Rhea Stack Other prospects 105 325 942 Western Graben 248 916 3,167 Helios Stack Helios Stack 174 666 2344 Other prospects 74 250 823 Structural Prospects 95 599 2,008 Apollo 24 216 765 Zeus 34 194 642 Other prospects 37 189 601 Syn-Rift 95 367 1,356 Johnson 0 0 2,389 Map Displaying Larger Prospect Stacks only Resource Total 885 3,083 10,412 (ex-Johnson) Success at Rhea de-risks a large prospect inventory 12
What are Shareholder Options? • A variety of options are available to shareholders in the event of success: • ARL shares remain freely tradable • Royalty income would: • allow the Company to pay dividends • allow the Company to buy back shares • be attractive to certain Finance Houses and Industry players 13
Summary • Argos is joining the 2015 drilling campaign • Success will de-risk other drilling opportunities • Argos has attracted high quality partners in a difficult climate who have the strength to take discoveries to production in a timely manner • Innovative deal structure delivers: • Operating cash every year until first oil revenues • No exposure to cost • No exposure to operational liability • Financing assurance • Material Shareholder value for all discoveries taken to development No requirement for material shareholder dilution in the short or long term 14
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