Investor Presentation January 2011
Contents • Corporate strategy • Overview • Management team • Ukraine • Sorochynska • Chernetska • Summary • Contact information 2
Corporate strategy Aim to become a leading independent Central and Eastern European E&P company Development Acquisitions Exploration • Fields that have • Producing assets with • Conventional produced previously significant upside • Unconventional • Leveraging technical • Undeveloped discoveries expertise Short Term Achieve production • Bring Well #201 on stream – on track for Jan 2011 • Commence Well #1 on Chernetska - on track for Apr 2011 Medium Term Medium term – increase reserve base • Commence second Well at Sorochynska – mid 2011 • Progress one or more current acquisition targets 3
Hawkley Oil & Gas – at a glance • Oil and gas development and exploration company with assets in Ukraine’s prolific Dnieper Donets Basin • Extensive operating experience in Ukraine – over 100 years combined • 2 licenses – Both 100% owned with multiple targets – A number of new targets identified • 120m* barrels (unrisked recoverable) in current licences • Successful well #201 – A producer – One of the best wells drilled in Ukraine in years – Gas plant connection complete – Production imminent • Next well site preparation underway – To be funded from cash flow • Extensive deal flow pipeline * Source: Independent Technical Specialist’s Report, Moyes & Co 4
E&P in Ukraine Strategic focus on de-risking E&P ASX Code HOG Shares on Issue 211.7M Risk Mitigation � Assets with discovery/production history Subsurface risk Market Cap (Fully Diluted) AU$125 � 100% ownership through state auctions Title risk Cash (as at end Q4 2010) AU$650k � Operational control Operational risk Debt US$1m � Close to infrastructure Route to market � Long term contract prices, net-back parity Commodity Price Major Shareholders Founders 33.55% Ballure (seed) 5.84% J.P Morgan Nominees 2.65% Citicorp Nominees 2.51% 5
Board and Management Team Experienced Management Team Paul Morgan - 35 years public company experience - 14 years with Chevron Oil Company, qualified geologist Chairman - Former Chairman/CEO Regal Petroleum Plc Goldbelt Resources Co-founder Richard Reavley - Over 10 years experience working in the London capital markets - Growth capital focus Chief Executive Officer - Former director Goldbelt resources Co-founder David Riekie - Currently MD of Avonlea Minerals Non-Executive Director - More than 14 years experience as an Executive Director - Experience in the resource sector at the exploration and production level John Hopkins - Corporate Lawyer with 20 years public company experience in Australia and Canada - Currently Chairman of ASX listed Wolf Minerals Non-Executive Director - Significant major resource project experience Viktor Dmitriyev - 25 years in the Oil Industry. - Chief Engineer of Ukranafta (Ukrainian State Oil and Gas Company). President Ukrainian operations - Former President of Regal Petroleum (Ukraine) Limited. Co-founder - 25 years in the Petroleum Industry in Ukraine. Sergey Galchenko - Graduate in Geophysics from the University of Kiev. Chief Geologist - Former Chief Geologists of Chernigivnaftagasgeology. John Garden - Founder and Director of Deadeye Engineering - Drilled in excess of 600 wells In Central and Eastern Europe Drilling and Completions - Drilled in excess of 500 horizontal wells 6
Ukraine Huge potential 24tcf undiscovered resources in the basin Strong domestic demand 2.6tcf/year – Europe’s 4 th largest gas market 700 bcf/year produced in Ukraine Rising prices Currently US$9.20 gross/ US$7.70 net per mcf Parity pricing with Europe approaching Extensive infrastructure One of the world’s largest gas transportation networks Attractive fiscal terms A modern European country with a Typical EBITDA margins 55 - 65% clear policy to attract foreign oil and Typical NOPAT margin 38 – 45% gas investment and expertise 7
Operating in Ukraine Assuming Earnings Analysis 800boepd, of which � 80% gas, � 20% condensate Typical breakdown at current prices 1 boe : 6mcf 60 US$ / boe 40 20 0 Gross VAT Net Rent Geological Subsurface Operating Overheads EBIT Corp tax Earnings Revenue Revenue Survey Tax Tax Costs Successful Ukrainian Operators JKX Oil and Gas � Operational control A good example of what is achievable in Ukraine � Clean title Market Cap Production Earnings � 100% ownership of assets Market US$ millions boepd multiple � Strong Ukrainian team on the ground LSE 750 12,500 8.7 � Blend of local and western expertise 8
License 1 - Sorochynska Close to major trunkline, Licence Interest 100% multiple targets, production history Acquired August 2007 Licence Duration 5 Years Licence Area 104.6 km 2 Wells Drilled 9 Production Wells 2 Production Market Local Pipeline Reserves * 13.6 bcf gas** 400,000 bbls condensate** Resources * 203.4 bcf gas 5.2 million bbls condensate * Source: Independent Technical Specialist’s Report, Moyes & Co * *Subject to revision following well #201 completion 9
License 1 - Sorochynska B17, 19, 20 horizons B24/25 horizon Limestone New prospect identified 2 faulted blocks Productive in nearby fields Drilled and flowed gas Production profile – Well #469 Production profile – Well #110 B18 horizon 7.6bcf gas 248,000 bbls condensate Up to 12.8mmcfgpd (well #469) 10
Sorochynska – Production Well #469 Well #110 Previous production (1983-88) Previous production (1989-91) Gas - 3.1 bcf Gas - 4.5 bcf Condensate - 130,000 bbl Condensate - 118,000 bbl Up to 4.5mmcfgpd Up to 12.5mmcfgpd Well #201 – Commercial test results Choke Size Gas Condensate Total thousands Barrels of Oil mm cubic feet Barrels Equivalent* 8 10,389 296 2,028 9 12,570 392 2,488 10 15,003 616 3,117 11 17,678 836 3,782 12 19,284 878 4,092 Expected Gross Revenue Outcomes of Various Production Scenarios Sales Gas/ millions of cubic feet per day 8.0 10.0 12.0 15.0 Condensate barrels per day 200.0 300.0 400.0 600.0 Gross Revenue US$ per annum 32.2 41.9 51.6 67.8 11
Project Schedule - Sorochynska 2011 2012 Cost Sorochynska Well #202 Permitting Mobilisation Drilling $7.5m Testing Demobilisation Completion Connection Production Sorochynska $2.0m Gas Plant Further Well(s) to be drilled this year at Sorochynska subject to realised revenue from Well #201 12
License 2: Chernetska Licence Interest 100% Trunkline intersects the property, Acquired July 2007 discovery history, multiple targets Licence Duration 5 Years Licence Area 51.7km2 Wells Drilled 6 3 tested at Production wells commercial rates Production Local Pipeline Market Resources * 378.8 bcf gas 15.1 million bbls condensate * Source: Independent Technical Specialist’s Report, Moyes & Co 13
Chernetska Surrounding fields producing from B21/22, B24/25, B26 horizons B24/25 3 wells tested for gas B-20 1 well flowed oil – 640bbls per day Well #1 commencing Q1 2011: 4 Conventional Horizons B20, B21, B26 - Oil B24/25 - Gas 1 Unconventional Horizon High pressure gas in carbonaceous shale 14
Project Schedule - Chernetska Plans to spud Well #1 in Q1 2011 ― Well plan – approved ― Environmental approval - granted ― Land access - granted ― Drilling contract – completed ― Pipe, casing, mud, additives, drilling bits etc, contracts and supply – in progress ― Site preparation – commenced Chernetska Well #1 to be funded from cash flow from the production of Sorochynska Well #201 Cost 2011 2012 Chernetska Well #1 Mobilisation Drilling $10.0m Testing Demobilisation Completion Production 15
Summary • A clear strategy to become a leading independent E&P company – Development – Acquisition – Exploration • Imminent production • Development wells planned • Next well targeting multiple zones • Further growth targets identified 16
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