June 2012 Building an Indigenous Upstream Champion
Notice First Hydrocarbon Nigeria Company Limited (“FHN” or “Company”) is a private company within the meaning of the Companies and Allied Matters Act 2004 of the Federal Republic of Nigeria and regulated by the Corporate Affairs Commission. The content of this presentation has not been approved by an authorised person outside of the management of the Company. Reliance on the information contained in this presentation for the purposes of engaging in any investment activity may expose the investor to a significant risk of losing all of the property or assets invested. Any person who is in any doubt about the investment to which this presentation relates should consult an independent financial adviser/solicitor who specialises in the acquisition of shares and other securities. The information in this presentation is subject to updating, revision and amendment. The information in this presentation, which includes certain information drawn from public sources does not purport to be comprehensive and has not been independently verified. This presentation does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase or subscribe for or otherwise acquire any securities in the Company. No reliance may be placed for any purpose whatsoever on the information contained in this presentation or any assumptions made as to its completeness. No representation or warranty, express or implied, is given by the Company, any of its subsidiaries or any of its advisers, officers, employees or agents, as to the accuracy, reliability or completeness of the information or opinions contained in this presentation or in any revision of the presentation or of any other written or oral information made or to be made available to any interested party or its advisers and, save in the case of fraud, no responsibility or liability is accepted (and all such liability is hereby excluded for any such information or opinions). No liability is accepted by any of them for any such information or opinions (which should not be relied upon) and no responsibility is accepted for any errors, misstatements in or omissions from this presentation or for any loss howsoever arising, directly or indirectly, from any use of this presentation or its contents. The information and opinions contained in this presentation are provided as at the date of this presentation and are subject to change without notice. Any financial projection and other statements of anticipated future performance that are included in this presentation or otherwise furnished are for illustrative purposes only and are based on assumption by the Company's management that are subject to significant risks and uncertainties and may prove to be incomplete or inaccurate. Actual results achieved may vary from the projections and the variations may be material. Variations in the assumptions underlying the projections may also significantly affect projected results. This presentation has not been examined, reviewed or compiled by the Company's independent certified accountants. No representation or warranty of any kind is made with respect to the accuracy or completeness of the financial projections or other forward-looking statements, any assumptions underling them, the future operations or the amount of any future income or loss. By attending / reading the presentation you agree to be bound by these provisions. Slide 2
Agenda • Introduction • About FHN – an indigenous upstream champion • OML 26 – a new partnership model • Conclusions Slide 3
Introduction
Nigeria – a world of opportunity for medium size players Distribution of resource ownership Licence interests (No. of blocks) (mmboe) • Indigenous independents well Indigenous Major IOC E&P - 3% represented in terms of license State 35% owned interests held… 43% Major IOC 47% International NOC 5% • …but under represented today International E&P 4% in terms of commercial reserves International Integrated /large cap 4% and production International Integrated Indigenous E&P State owned /large cap 1% International NOC 5% • Resource ownership and 37% 15% International E&P 1% production dominated by the Nigerian proved undeveloped fields – original reserve size distribution five major IOC’s 60 • Large number of discovered but Oil Over 150 fields in the undeveloped fields with Gas opportunity set 45 significant upside potential No of Fields • Opportunities exist for aligned 30 local players with technical and 15 financial capacity 0 Unknown 1-5 10-25 50-100 250-500 1,000, 2,500 > 5,000 0-1 5-10 25-50 100-250 500-1,000 2,500-5,000 Reserves size (mmboe) Source: IHS Energy, Company data Slide 5
Nigeria’s vast untapped resource - oil Oil reserves (billion bbl) Growing economy hinged on natural resource Oil Reserves, billion bbl • Nigeria, with a GDP growth rate of 8.7% in 46.4 2010 has been regarded as one of the fastest 37.2 growing economies of the emerging market 12.2 13.5 6.7 • 4.5 3.7 With oil reserves of ca. 37 billion bbls, 2.3 1.5 1.9 1.7 0.4 Nigeria ranks as the nation with the 10 th largest proven reserves and in the world • Recent uncertainties in the regulatory Source: BP Statistical Review of World Energy, 2011 environment have however hindered investment in upstream oil and gas, thus Reserves Growth Comparison, billion bbls slowing the growth of reserves replacement 50.0 • Oil and Gas industry reform underway 45.0 • Petroleum Industry Bill 40.0 • Government’s push for increased local 35.0 participation will see an increased number of 30.0 locals playing in the sector 25.0 • Expectation of some favour for Indigenous companies 2002 2003 2004 2005 2006 2007 2008 2009 2010 Lybia Nigeria Other Africa Source: BP Statistical Review of World Energy, 2011 Slide 6
Nigeria’s vast untapped resource - gas • Nigeria has the world’s 9 th largest proven gas Per capital energy consumption, million Btu reserves at ca. 187 Tcf 334.6 Huge upside potential • As there has been no exploration for gas in Nigeria, 132 117.2 the 186.9Tcf of proven reserves is bound to 46.6 7.8 increase dramatically as a result of the various gas commercialization opportunities being developed Nigeria Algeria South Africa Lybia USA Source: Energy Information Administration (2006) • Major gas developments have been geared towards export Nigeria Gas Consumption, bcm - NLNG, Brass LNG and OK LNG 24.4 21.9 19.3 • 17.2 Local consumption has been hampered by sales 15.2 13.8 12.0 price constraints, regulatory environment and 7.2 infrastructure 2009 2010 2011F 2012F 2013F 2014F 2015F 2016F • Nigeria Gas Master Plan to change the face of local Source: BMI Nigeria Oil and Gas Report (Q1, 2012) gas supply in the country • Improved pricing – willing buyer willing seller Gas Reserves, Tcf • Gas Infrastructure Development 186.9* • Investment friendly regulations 159.1 • Demand growth for natural gas largely driven by 78.0 new power plant capacity 54.7 41.4 • Current installed capacity of 8.6GW with an ambition to add ca. 27 GW in the next 10 years Algeria Egypt Libya Nigeria Other Africa Source: BP Statistical Review of World Energy, 2011 Slide 7
Indigenous companies and the current opportunities Indigenous companies require the following attributes for success: • Ability to raise substantial level of funds (Equity and Debt) − Indications were that some recent IOC divestments were valued in the range of $150 million up to over $1 billion − The above do not include redevelopment Capex • Establish/acquire and grow operational capabilities − Indigenous players have typically been involved in the redevelopment of marginal fields or relatively “easy” to mature fields − Current opportunities are on larger scales and complexities • Seek and foster the right partnership − Entities with complementing attributes − Entities with similar ambitious goals − Willingness to make the relationship work Slide 8
About FHN
A new breed of indigenous company • Established in 2009 to create an indigenous independent E&P champion - Target opportunities available to local E&P companies - Enhance indigenous representation in terms of commercial reserves and production through acquisition of mid size assets Significant opportunity Key steps in achieving the strategic vision set and access • Target significant scale of reserves and resource base through low risk acquisition - Current production with major redevelopment plan in place in OML 26 - In discussion to acquire two near term development assets Afren Plc – - Managing oil and gas foot print in Nigeria independent Strong Board Strong board international and and proven • Strong board and proven management partner of Management management - Deep industry knowledge choice - Proven and well respected individuals that cut across all facets of the Nigerian economy • Broad ownership by Nigerian institutions and individuals - Planned listing on an exchange that will enhance access to capital Proven - Re-enforces Government's push for increased local participation in the upstream sector fundraising ability • Leverage on Afren’s oil and gas expertise - Proven Track Record - Leading Partner to Nigerian indigenous partners Slide 10
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