For personal use only Petsec Energy Ltd Annual General Meeting 20 May 2009 Terry Fern Chairman & CEO
PETSEC ENERGY LTD For personal use only FORWARD LOOKING STATEMENT DISCLAIMER This presentation contains predictions, estimates and other forward looking statements that are subject to risk factors associated with the oil and gas industry. Although the company believes that the expectations reflected in these statements are reasonable, it can give no assurance that its expectations and goals will be achieved. Important factors that could cause actual results to differ materially from those included in the forward looking statements include, but are not limited to, commodity prices for oil and gas, currency fluctuations, the need to develop and replace reserves, environmental risks, drilling and operating risks, risks related to exploration and development, uncertainties about reserve estimates, competition, loss of market, government regulation, economic and financial conditions in various countries, political risks, project delay or advancement, and approvals and cost estimates. All references to dollars in this presentation are to US currency, unless otherwise stated.
PETSEC ENERGY BOARD OF DIRECTORS For personal use only Terry Fern, Chairman & CEO Over 30 years experience in petroleum & minerals exploration, development and financing Bachelor of Science Degree, University of Sydney David Mortimer AO, Non-Executive Director Over 35 years experience in corporate finance Bachelor of Economics Degree (First Class Honours), University of Sydney Dr Peter Power, Non-Executive Director Over 45 years experience in petroleum exploration worldwide Bachelor of Science Degree, University of Sydney Doctorate at the University of Colorado Michael Harvey, Non-Executive Director Over 30 years experience in the establishment and successful growth of E&P companies in South East Asia and the Gulf of Mexico, USA Bachelor of Business Administration in Finance Degree, Texas A&M
PETSEC ENERGY MANAGEMENT For personal use only USA Ross Keogh, President of Petsec Energy Inc. John Thibeaux, Vice President Business Development Frank Steele, Vice President Land Nick Repar, Exploration Manager Denis Swords, General Counsel & Secretary Australia Fiona Robertson, Chief Financial Officer Paul Gahdmar, Group Financial Controller & Company Secretary
2008 OVERVIEW – ACHIEVEMENTS For personal use only Financial � Net revenues: US$105.3 million – Up 65% on 2007 � EBITDAX: US$79.6 million (US$6.58/Mcfe) – Up 73% on 2007 � Debt repayment: US$53.5 million � Total debt outstanding: US$50.5 million – Down 51% on 2007 � Net debt: US$36.8 million – Down 52% on 2007 USA Operations � Production: 12.1 Bcfe – Up 50% on 2007 � Successful integration of Gulf of Mexico (GOM) Gas fields acquired in 2007 � Acquired five new exploration Leases in the GOM China � Granted development areas over 5 oil fields: 6-12, 6-12S,12-8W & E, & 12-3-1 � Progressed feasibility studies & ODP for the 6-12, 6-12S, & 12-8W oil fields
2008 OVERVIEW – DISAPPOINTMENTS For personal use only USA Operations � Four wells drilled – two Moonshine wells completed for reserve additions of 1.3 Bcfe (E. Laurent and Miles Timber); West Cameron 379 and CL&F #30-1 (Triple Play prospect, Terrebonne Parish) wells were expensed as dry holes � Net reserve write-downs of 6.6 Bcfe (PEI 2P) at Mobile Bay, South Sunrise, Main Pass 20 and Vermilion 258 slightly offset by increase at Chandeleur 31/32 � Downgraded prospectivity of Moonshine & relinquished number of GOM leases China Operations � Two wells drilled and expensed as dry holes (6-12 W-1 & 6-12 E-1A) Financial � Net loss after tax: US$44.5 million after exploration write-offs of US$13.8 million and impairments of US$58.1 million � Reserve write-downs & fall in gas prices contributed to size of impairments
2008 SCORECARD For personal use only 2008 Production by Quarter & % Contribution Key Financial Data – US$M unless otherwise stated 2007 2008 Change Production (Bcfe) 8.1 12.1 + 50% Net Revenues After Royalties $64.0 $105.3 + 65% EBITDAX $45.9 $79.6 + 73% Net Operating Cashflow $35.1 $85.2 + 143% Capital Expenditure $145.9 $43.3 – 70% F&D Cost (US$/Mcfe) 1 $4.10 $6.20 + 51% 1 Three year average 2P 2008 Operating Performance by Quarter – US$M � Strong operating results � Major reduction in capital expenditure � Substantial increase in F&D cost reflecting very high service costs
GLOBAL FINANCIAL CRISIS & E&P INDUSTRY For personal use only Global Financial Crisis Impact on E&P Industry & Petsec Energy � Collapse of oil & gas prices � Reduction in fair values of oil & gas assets –> lower share price & impairments � E&P share prices in the USA reflect US$2/Mcfe or less for 1P reserves � Tightening of debt & equity markets � Increase in number of distressed companies & asset sales � Increase in counterparty risk How we have responded � Dedication of free cash flow to debt reduction � Conservation of capital � Deferred exploration drilling activity � Focused efforts on preparing best prospects to drill-ready state � Emphasis on acquisition of producing fields
E&P INDUSTRY ENVIRONMENT For personal use only Financial � Lower oil & gas prices � Reduced margins � Tight lending conditions � Downward revisions of bank borrowing bases � Higher cost of insurance – Gulf of Mexico Operational � Falling service costs – particularly in the US (Reduction in operating land rigs – 995 in Apr 09 vs. 1831 in Apr 08) � Reduced gas demand in US – Higher levels of gas in storage
US E&P INDUSTRY ENVIRONMENT For personal use only US Drilling Rig Activity 2500 2000 1500 # of rigs 1000 500 0 2004 2005 2006 2007 2008 2009 Year Source: Baker Hughes
US E&P INDUSTRY ENVIRONMENT For personal use only Gas Prices Gulf of Mexico USA 2006 - 2010
OUTLOOK 2009 For personal use only Petsec Energy Operations � Production forecast of 7 Bcfe � Debt repayments: US$21.1 million – expected debt 31.12.09: US$30 Million � Hedge swaps: 3,161,100 MMBtu @ WAP of US$7.48/MMBtu (Apr 09 – Dec 09) � Hedge puts: 844,000 MMBtu @ WAP of US$6.33/MMBtu (Aug 09 – Dec 09) � Anticipated cashflow ~ US$32 Million US E&P Industry � Lower service costs � Restoration of historical margins � Reduced gas demand – softer prices � Tight lending and equity environment � Expectations of abundant sensibly priced acquisition and exploration opportunities
OUTLOOK 2009 For personal use only Gulf of Mexico Gas Prices 2009 / 2010 – Petsec Hedging Outstanding Natural Gas Price Hedges Vs Reference Price As at 14 May 2009 10.00 9.00 8.00 7.00 US$/MMBtu 6.00 5.00 4.00 3.00 2.00 1.00 0.00 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 0 0 9 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 0 1 - - - - - - - - - - - - - - - - - - - v - v y n l g p c n b r r y n l g p c u t u t a p a u c o a e a u c o u e e u e e J J O N M A O N M J D J F M J D A S A S Hedge Expiry Date Current reference price Swaps Average Fixed Price Puts Average Strike Price
HISTORICAL FINANCIAL SNAPSHOT For personal use only Financial Year Ended 31 December 2004 2005 2006 2007 2008 Financial Performance Production (Bcfe) 5.7 6.5 8.2 8.1 12.1 Average Sales Price (US$) $5.77 $7.04 $7.24 $7.93 $8.70 Net Revenues After Royalties (US$m) $32.8 $45.5 $59.2 $64.0 $105.3 EBITDAX 1 (US$m) $25.8 $33.7 $45.3 45.9 79.6 Underlying Net Profit (US$m) 12.7 18.1 24.7 16.6 12.1 Net Profit/(Loss) After Tax (US$m) 18.9 9.5 5.1 (2.0) (44.5) EBITDAX Margin (US$/Mcfe) 4.53 5.94 5.54 5.69 6.58 Gross Margins 2 (%) 78.5% 84.4% 76.5% 71.8% 75.6% Balance Sheet Total Assets (US$m) $65.1 $91.2 $132.9 $254.7 $161.7 Cash (US$m) 9.5 10.1 26.5 27.2 13.7 Debt (US$m) 1.2 - - 101.8 48.8 Shareholders Equity (US$m) 52.5 58.2 115.1 123.3 85.9 Gearing 3 (%) 2.1% 2.7% 3.4% 75.6% 68.4% 1 ) EBITDAX = Earnings before interest, tax, depreciation, depletion, amortisation, and exploration costs. 2 ) EBITDAX margin as a percentage of the average sales price. 3 ) Long-term liabilities as a percentage of total shareholders equity.
PERFORMANCE 2004 – 2008 For personal use only Five Year Compound Annual Growth Rate (CAGR) - % Production + 21% Net Revenues After Royalties + 34% EBITDAX + 33% Proved & Probable Reserves (PEI 2P) + 15% Exploration Success & Reserve Position Exploration Success Rate – 5 yr Average 61% PEI 2P Reserves as at 31 Dec 08 51.9 Bcfe
OPERATING MARGINS For personal use only Modest increase in gas price versus oil price Good control of operating costs Strong operating margins
RESERVES REPLACEMENT For personal use only � Exploration success rate 2002-2006: 25 of 30 wells drilled (83%) � Exploration success rate 2007-2008: 4 of 12 wells drilled (33%) � Finding and development costs 2002-2006: US$1.58/Mcfe � Finding and development costs 2007: US$4.10/Mcfe � Finding and development costs 2008: US$6.20/Mcfe
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