Primeline Energy Holdings Inc. December 2015 Primeline Corporate Presentation 1 December 2015
Building a leading China focused oil and gas company 1. TSX-V listed E&P China gas play with clean balance sheet and strong management team. 2. Production since July 2014 from $700m+ regional production infrastructure hub in East China Sea in partnership with CNOOC. 3. Access to the high price eastern China gas market. China’s dynamic economic growth in the past 30 years has created the world’s 2 nd largest energy market, but gas at just 5.5% of total energy mix. Increased gas utilisation has become a focus of Chinese government energy policy. 4. TCF+ high margin hydrocarbon upside in the field and in our 5,877 km 2 exploration concession. 5. 2015 two exploration well as the first step of rolling exploration programme. Although no commercial hydrocarbons found, technical discovery provides vital information for future exploration. Primeline Corporate Presentation 2 December 2015
Access to Zhejiang gas grid LS36-1 is a strategic • gas field close to Zhejiang Province - population of 50 Ningbo million. LNG 4th largest • economy in China. Rapid growth in • past 10 years to ~6.6 bcmpa. Slow down in 2015. Gas is only 2.8% of • total energy mix. Primeline Corporate Presentation 3 December 2015
East China Sea becoming a significant gas production basin Proven petroleum province. • New E&P focus in Xihu Trough • (Basin) in northern East China Sea, anchored on two existing fields: Pinghu Field: onstream in 1998, – 386 km 14” pipeline to Shanghai terminal; and Chunxiao Field: onstream in 2006, – 360 km 28” pipeline to Ningbo and 4 production platforms. Expansion development underway. LS36-1 Gas Field: onstream in – 2014. Primeline Corporate Presentation 4 December 2015
2 Petroleum Contracts in the East China Sea Block 25/34 Block 33/07 LS36-1 gas field producing since 2014. 7.5 year exploration period of three • • 15 years’ production period phases (3.5 + 2 + 2 years) thru May 2020. 85 km 2. 5,877 km 2 . • • Operator: CNOOC (51%), Primeline Operator: Primeline (100%). • • (49%). Monetise high margin hydrocarbon • 2015 McDaniel Proved + Probable (2P) upside prospects that have been defined • reserves estimates of 13.2 MMboe by 1300 sq. km plus of 3D seismic data. (Gas: 61.3 bcf, Liquids: 3.0 MMbbl). Contractor responsible for 100% of • Substantial possible reserves and exploration costs. CNOOC right to • prospective resources in the field participate up to 51% in any commercial through phase 2 development drilling. development by paying pro rata development/operation costs. Primeline Corporate Presentation 5 December 2015
Strategy leverages infrastructure hub to monetize upside LS36-1 gas field in • production, accessing market Newly acquired through the regional 600 km 2 of 3D production seismic infrastructure hub. High impact • exploration in the development and exploration blocks - 737 km 2 of anchored on the existing 3D seismic data producing LS36-1 facility. Primeline Corporate Presentation 6 December 2015
LS36-1: Infrastructure hub is completed • Platform facility. • 4 development wells. • Subsea pipeline: 126.9km to onshore terminal. • Sale gas pipeline: 32 km - to grid. Primeline Corporate Presentation 7 December 2015
Prospective resources of ~700BCF (McDaniel) Prospective Resources - Natural Gas Risked (2) Prospective Resources - Unrisked (1) Chance of Resources Success (3) Prospect Low Medium Mean High Mean MMcf MMcf MMcf MMcf MMcf % LS36-1 Paleocene-M1-0 2,745 5,568 6,370 11,101 4,644 73 LS36-1 Paleocene-M1-1 South 1,738 3,963 4,779 8,923 3,484 73 LS36-1 Paleocene-M2 4,858 14,463 19,028 38,761 11,417 60 LS36-1 Paleocene-M3 14,647 31,255 37,104 67,329 25,973 70 LS36-1 Paleocene-L1 8,340 24,177 32,739 67,556 16369 50 LS36-1 Paleocene-L2 2,354 5,321 6,452 11,928 2,581 40 LS30-8 Paleocene-M2 9,375 27,118 35,859 73,134 7,530 21 LS36-1 Development Area (Sub total) 44,055 111,865 142,330 278,733 71,997 LS29-2 Paleocene-M1-2 18,922 47,291 60,768 118,341 14,584 24 LS29-2 Paleocene-M1-2 7,200 22,516 32,884 71,453 7,103 22 LS35-1 Total 20,340 63,044 97,379 210,657 13,284 25 Block 33/07 3D Seismic Area(after 2015 46,462 132,851 191,031 400,451 34,971 drilling) Total Remaining after 2015 Driling 90,519 244,716 333,362 679,183 106,969 (1) There is no certainty that any portion of the prospective resources will be discovered. If discovered, there is no certainty that it will be economically viable or technically feasible to produce any portion of the resources. Total based on an arithmetic aggregation of all the Prospect/Zones and as such there is >90 % chance of exceeding the overall Low Total and <10 % chance of exceeding the overall High Total. (2) These are partially risked prospective resources that have been risked for chance of discovery, but have not been risked for chance of development. (3) L23-1, L23-2N &S and LS30-3 total prospect chance of success takes into account the inter-dependency between zones. Primeline Corporate Presentation 8 December 2015
Additional resources in lower zones • Current Producers are in M1-1 and M1-2 sands. • Additional gas in other sands and in lower tight reservoirs. Cross-section of LS36-1 M11 M12 M2 M31 M32 L1 L2 Primeline Corporate Presentation 9 December 2015
Reserve additions via Phase 2 drilling from platform Existing wells shown in black LS36-1 M1 1 Sth well LS36-1 M1 0 well 30-8 Exploration Prospect Wells LS36-1 M2 & M3 LS36-1 M1 1 SW well wells 8 locations and well tracks selected as candidates for reserve additions. • Primeline Corporate Presentation 10 December 2015
LS36-1 gas field – prospects nearby 2014 600 sq km 3D • seismic expanded 3D seismic coverage to 1,300 sq km in the gas play. Exploration drilling to • tap into prospects in the vicinity of LS36-1 producing field. Future 3D work will • cover the oil play prospects. LS35-3-1 Discovery Primeline Corporate Presentation 11 December 2015
Exploration drilling programme 2015 Block 33/07 showing well locations and LS36-1 Gas Field Western Margin Fault Block Zone LS23-1-1 LS30-3-1 First well: LS23-1-1 TD 2666m Second well LS30-3-1 TD 2000m Primeline Corporate Presentation 12 December 2015
Seismic Correlation A’ A LS35-3-1 LS23-1 Gas LS36-1 Field Prospect LS30-3 Gas Flow Shows T42 Horizon T50 Horizon A’ A Primeline Corporate Presentation 13 December 2015
LS23-1-1 Oct 2015 – Lower MYF and Lingfeng Primary targets LS23-1-1 Zone of gas shows Primeline Corporate Presentation 14 December 2015
LS30-3 Prospects 1C amplitude anomaly with AVO Minimum Amplitude Extraction ± 5ms window on Fullstack Strongest AVO Weaker AVO P50 Area P10 Area Primeline Corporate Presentation 15 December 2015
Proposed well location LS30-3-1 LS30-3-1 1A 1C 1B T42 Primeline Corporate Presentation 16 December 2015
2015 Drilling Results • Cost effective and smooth drilling operation. • Both LS23-1-1 and LS30-3-1 well encountered very good sandstone reservoir as predicted. • LS23-1-1 well has gas shows in 3 zones, and has several thin reservoir with pay quality with a total 14m cumulative thickness. Other reservoir are water bearing. • LS30-3-1 provided the good channel sand geometry in the LS36-1 Gas Field reservoir level, but water bearing. • No commercial discovery and migration remains the key risk. • Primeline is currently conducting a post well evaluation to better understand the potential and risk of the remainder of 5,877sq km exploration area. Primeline Corporate Presentation 17 December 2015
Valuation reflects neither progress to date nor upside potential • Phase 1 of LS36-1 Gas Field is in cash flow. • Selling into one of the key provincial economies in China – despite slower demand recently this remains one of the highest gas price regions in the world. • Long term close relationship with CNOOC. • Management with proven track record & operational expertise. • One of the very few offshore gas developments in China - with a world class $700m+ infrastructure hub. • Rolling development in this 5,877 km 2 concession with ~1.5TCF of upside potential to share infrastructure. • The east sub basin with oil potential to be explored in the Block. Primeline Corporate Presentation 18 December 2015
Appendices Supplementary Technical and Operational Data Board of Directors Management and Technical Team Corporate Structure Primeline Corporate Presentation 19 December 2015
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