Investor Presentation 29 th November 2011
Disclaimer This presentation contains certain “forward-looking statements.” All statements, other than statements of historical fact, that address activities, events or developments that Hawkley Oil and Gas Ltd believes, expects or anticipates will or may occur in the future are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “believe”, “plan”, “estimate”, “expect”, and “intend” and statements that an event or result “may”, “will”, “can”, “should”, “could”, or “might” occur or be achieved and other similar expressions. These forward-looking statements reflect the current internal projections, expectations or beliefs of Hawkley Oil and Gas Ltd based on information currently available to Hawkley Oil and Gas Ltd. Forward-looking statements are subject to a number of risks and uncertainties, including those detailed from time to time in filings made by Hawkley Oil and Gas Ltd with securities regulatory authorities, that may cause the actual results of Hawkley Oil and Gas Ltd to differ materially from those discussed in the forward-looking statements, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on Hawkley Oil and Gas Ltd. Hawkley Oil and Gas Ltd expressly disclaims any obligation to update or revise any such forward-looking statements. Not for distribution to United States newswire services and not for dissemination in the United States. COMPETENT PERSONS STATEMENT The hydrocarbon reserves estimates of Sorochynska are based on the information compiled by Mr P.D. Patterson, BS, MBA. Mr Patterson is a registered professional engineer with 30 years of relevant experience and is qualified in accordance with the ASX listing rules. Mr Patterson is Managing Directors of Moyes & Co Inc. and has consented to the inclusion of the information in the format and context in which it appears. Hawkley Oil & Gas 2
Presentation Outline Overview 1 Share Price History 2 Business Model 3 Work Programme Concluding Remarks Hawkley Oil & Gas 3
Milestones ASX Listing via RTO raises $5.5 million Jun 2010 [27.5 million shares @ $0.20ea] Sorochynska-201 proved commercial Nov 2010 Production & first revenue Feb 2011 May 2011 Spud of Chernetska-1 well Placement raised $15.1 million May-Jun 2011 [40.86 million shares @ $0.37ea] Oct 2011 Sorochynska B18b Reserves Upgrade Dec 2011 Chernetska-1 ? Hawkley Oil & Gas 4
Snapshot Producing 1,200 BOE/d RESERVES & PRODUCTION � 40 BCF + 1 MM bbl 2P reserves � Producing 6.2 MMCF/d gas plus 210 bbl/d condensate Limitations at the processing plant Hawkley to build own plant in 2012 SALES FINANCIALS � US$12/MCF gas � Revenue >US$25 million/yr � US$87/bbl condensate � EBITDA averaging 40-45% Royalties c25% combined � Earnings averaging 30-35% � Aus$17 million cash-at-bank � No debt 2011-12 work programme funded Hawkley Oil & Gas 5
Production & Revenue Hawkley Oil & Gas 6
Financials: Comparison with previous AGM Hawkley has been transformed Quarter ending: 30-Sep-10 30-Dec-10 31-Mar-11 30-Jun-11 30-Sep-11 Sales Receipts - - $4,067,000 $7,678,000 $8,545,000 Net Operating Cash Flows -$2,364,000 -$3,031,000 -$348,000 $523,000 $2,017,000 Total Operating and -$3,864,000 -$7,083,000 -$5,687,000 -$4,100,000 $1,881,000 Investing Cash Flows Cash at end of Quarter $2,773,000 $576,000 $1,973,000 $15,231,000 $17,112,000 Trading profitably this fiscal year Hawkley Oil & Gas 7
Share Price Drivers Shareholders’ primary focus is on risk and return Dividend External factors affecting share Share Price price are not controllable Strategy, Work Programme Reserves, Production BUT Revenue, Profit � Business is also underpinned by Prospects/upside New projects internal factors Manpower/skills IR & PR SO Policies � What is Hawkley doing ‘below Processes Systems water’ to buoy the share price? ICT Hawkley Oil & Gas 8
1 Share Price History HOG vs. A XSO down 25% Small Ord's Hawkley down with market since April B 12 months daily to 25Nov11 Hawkley Oil & Gas 9
1 HOG vs. Energy Index A Hawkley XEJ down 30% down with market since April B 12 months daily to 25Nov11 Hawkley Oil & Gas 10
1 HOG vs. Metals & Mining A Hawkley XMM down 30% down with market since April But contra- market tendencies since September? B 12 months daily to 25Nov11 Hawkley Oil & Gas 11
1 Comments on HOG Reserves Upgrade Market-driven Market-driven Sorochynska-201 Success First Gas Chernetska-1 Spud Placement Resistance Closes Change of at circa 20c Executives 12 months daily to 25Nov11 Hawkley Oil & Gas 12
2 Business Model Context of investment � Mitigate geological risk Assets with discoveries Appraise first, explore later � Mitigate partner risk Control of assets and operations � Mitigate ‘learning curve’ operational risk In-country operating subsidiary with experienced nationals Contracts with local companies (e.g. drilling) Focus is on Hawkley’s first well is in production generating Appraisal well drilling in second licence revenue Production infill well is rigging-up Hawkley Oil & Gas 13
2 Consequences � Not to share risk Fund 100% of projects & overheads Dividend Fewer projects can be supported Share Price � Use cash to fund development PRESENTATION TOPICS: Work Programme Less cash available for exploration Reserves and new projects Upside New projects Manpower/skills � Appraise first, explore later IR & PR Relatively low risk use of CapEx But valued as production company No glamour of exploration upside Hawkley Oil & Gas 14
2 Constraints Trading profitably Cash-at-bank Programme funded BUT � Only 1 well producing � Caution/prudence required until 2 nd well is on-stream � Licence tenure must be extended to provide conditions for long term investment � Major shareholders do not want to dilute Hawkley Oil & Gas 15
3 Work Programme In progress Resources evaluation (CP) Chernetska-1 appraisal well Drill & tie-in 2 nd production well Gas plant design New licences (Ukraine) Development Obtain Production Licence Build Sorochynska gas plant Exploration Sorochynska 3D (winter 2012) Chernetska well: B24/25 potential New Ventures Aim to diversify beyond Ukraine Hawkley Oil & Gas 16
3 Development 3P is 52bcf 5 wells 11 years Sorochynska B18b, Block 110 Condensate 1,000 BBL/D 30 MMCF/D 100 BBL/D 10 MMCF/D #201 well #202 & #203 wells YEAR Hawkley Oil & Gas 17
3 Appraisal Chernetska-1 Well � Drilling ahead @4,273m (midnight on 28 Nov) � B20 reservoir target expected at 4,330m (+57m) � Expecting to reach B20 end-November � Deeper targets: B21, B24/25, B26 Chernetska-1 2011 2012 Mobilisation Drilling ? Testing & Comp. Connection Production ? ? B20 oil Gas Hawkley Oil & Gas 18
3 Appraisal Chernetska-1 structure: Possibility of a further appraisal well or a development well Hawkley Oil & Gas 19
3 Reserves Sorochynska Licence � Competent Person statement on B18b pool in Block 110 � 2P reserves increased 3-fold by the investment in Sorochynska-201 � 13bcf increased to 29bcf, with 3P upside of 52bcf � 2P could generate $430 million in entitlement revenue � Field development underway: development well rigging-up Chernetska Licence � Resources, not reserves � Drilling Cherneska-1 to turn resources into reserves � Additional potential in B21, B24/25 and B26 reservoirs Note: entitlement revenue is sales revenue net of state taxes on production (resource rent) Hawkley Oil & Gas 20
3 Upside Reserves & resources as follows: 80% Gas (158bcf) 55% Chernetska By Licence By Type 15% Condensate 45% Sorochynska 05% Oil By Resource Category By Host Reservoir Carbonates Sandstones Unrisked Unrisked Source: RISC (Hawkley Prospectus, 2010) with Moyes update on B18 (Oct 2011) Hawkley Oil & Gas 21
3 Sorochynska Upside Multiple targets. 3D seismic will mature prospects B17, 19, 20 sandstones Leads identified. Productive in nearby fields B18b sandstone Block 469 B24/B25 carbonate section Flowed gas at non-commercial rates in 4 wells in the area Hawkley Oil & Gas 22
3 Chernetska Upside: B24/25 carbonates Lak-2 flowed at 2 MMCF/d Lak-7 flowed at 1.5 MMCF/d Hawkley Oil & Gas 23
3 B24/25 Expression on Seismic Data Many leads to evaluate Legacy seismic data, reprocessed 2008 Hawkley Oil & Gas 24
3 New Projects � Applications for 2 exploration licences in Ukraine Work in progress � Opportunities proposed to BOD Egypt, North Sea, Czech Republic Focus region is Europe and Mediterranean rim countries � Have engaged consultants to identify distressed assets and companies on AIM in London Work in progress Hawkley Oil & Gas 25
3 Manpower & Skills � Recruited CFO � Recruiting Exploration & New Ventures Manager Shortlisted candidates to be interviewed in December � Using consultants to identify distressed assets & companies Hawkley Oil & Gas 26
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