Presentation on theme: "Sydney Gas Presentation 2004 (ASX Code: SGL) Domenic Martino, Executive Chairman & Steve McNally, Chief Operating Officer."— Presentation transcript:
Sydney Gas Presentation 2004 (ASX Code: SGL) Domenic Martino, Executive Chairman & Steve McNally, Chief Operating Officer
What is Coal Seam Methane? Natural gas is found in most coal deposits Process by which plant material is converted to coal over millions of years Methane contained within the coal seam where it is absorbed or attached to the coal
What is Coal Seam Methane? Clean burning fuel more environmentally friendly than oil, coal or even conventional natural gas Contains few, if any, impurities and therefore requires minimal processing Coal seam methane (also known as coalbed methane) is natural gas extracted from coal
CSM – High Growth Industry Worldwide Proven technology CSM represents +10% of US gas consumption CSM represents +25% of Queenslands gas consumption SGL has arguably worlds largest CSM acreage controlled by single company
The Growth of US Coalbed Gas Production Current coalbed gas production represents approx 10% of annual US natural gas production (2002) Over 18,000 producing coalbed methane wells in 12 states across the US Source: GTI Gas Resource Database, GTI-01/0136, EIA, Various Public Records
Sydney Gas at a Glance NSWs first commercial gas producer from 6 million acre province in the Sydney Basin NSW project of State Significance Long-term sales contracts with AGL for sales in excess of $450 million $100 million in funding raised in past 12 months or so via equity, convertible notes and project finance Opportunity to become a major gas producer with unrivalled proximity to Australias largest energy markets
Sydney Gas Stock Snapshot Ordinary shares on issue236m Convertible notes53m SGLG exp April 2006 SGLGA exp June 2006 12 month trading range$0.23-$0.99 Current market cap (undiluted)$200m approx. Board Members Domenic Martino, Chairman; Dr Bruce Butcher, CEO and MD; Bob Carroll (ex-Woodside CFO); John Castleman; Artur Birkner; Bruce McKay (ex-Production Manager (Aust) Esso, Chairman AWE).
World-class Resource Estimates of gas in place: Amoco – 214 TCF University of Sydney – 130 TCF SGL – 107 TCF Potentially 44 TCF in Sydney Basin By comparison, the North-West Shelf has reserves of 33 TCF SGL is working to prove up 1 – 2 TCF from each of three project areas Camden, Wyong and Hunter over the next 5–10 years
Reserve Categories Proved Reserves – 90% probability will produce amount equal to or more than predicted. Probable – 50% probability will produce amount equal to or more than predicted. Possible – 10% probability will produce amount equal to or more than predicted.
PELs 2, 4, 5, 267 and 441, and acreage position Sydney Gas has a dominant acreage position over Sydney Basin Hundreds of millions of dollars spent on exploration in Sydney Basin. That data is being accessed by SGL for reprocessing, thus reducing expenditure and lead times
AGL-Research program Core holes BP Amoco-US$30 million research program Core holes and production wells CSM prospect delineation Coal Companies ---- Thousands of core holes giving data on coal thickness, gas content and composition and permeability Seismic data for reinterpretation Sydney Gas-Reprocessing of data acquired Geological surveys Delineation of high production fairways Core holes Production wells and pilot treatment plant Identified enhancements to geological assessment by previous operators Coal Seam Methane Exploration on SGLs Licences
Developing the High Production Fairway US experience - Powder River Basin Big George Anderson/Canyon Cook/Wall-Phase 2 Development Buffalo Sheridan 10 miles MONTANA WYOMING Anderson/Canyon & Equivalents WYOMING Area of Intense Phase 1 CBM Development Wyodak Basin Syncline Douglas Gillette Similar size to Sydney Basin, but numerous operators and working interest owners Developed 5 High Production Fairways Source: NSAI
High Production Fairway High production fairway delineated in Camden gives confidence of high drilling success rates Wells already drilled within high production fairway at Camden are producing at rates above business model rates and industry expectation High production fairways being established in Wyong and Hunter Valley Production wells currently being drilled in Wyong for this purpose Future expansion within Sydney Basin driven by high production fairway approach and the out-performance it has delivered to date
Camden Rapidly expanding production, based on delineation of the high production fairway Producing and selling gas to AGL since May 2001 Operations adjacent to major pipelines linking the Eastern States of Australia First 100 wells should produce initial gas sales of $30-$35 million pa 300 well project should produce initial gas sales of $100 million pa
Typical Bulli Production Profile Water bbl/day Gas mcf/day
Wyong Completed Geological modeling Core hole drilling Full suit geophysical logging and geological log Gas desorption test and geochemical analyses on gas and coal samples In-situ permeability and stress testing Field geology Preliminary fracture distribution analysis
Hunter Valley NSW Government funded feasibility study complete for 100 km 2 (24,980 acres) area Resource of 673 BCF identified, including 424 BCF of gas recoverable Five coal seams to be targeted for the commercial production of gas High demand for gas in the Singleton - Muswellbrook and Newcastle regions. Region is currently significantly undersupplied with gas Pilot project to commence calendar 2004 Electricity generation option being modeled
Risk Management Potential Risks Mitigation – Camden Gas Project Exploration / Reserve Risk An independent reserve report by Cawley, Gillespie & Associates over part of the Stage II Camden Gas Project area estimates gross reserves of 61.34 bcf, and assigned a proved (IP) classification to 83% of these reserves and a probable classification to 17% of these reserves. Production over the last two years has demonstrated reserve and production levels. Development Risk Project subcontractors have the expertise and resources necessary to complete the project, Sydney Gas has experienced management on staff. Straightforward development (drilling, laying polyethylene pipes and constructing a simple processing plant) and experienced fraccing specialists. Technology Risk Management has extensive CSM industry experience Technology and processing requirements are straightforward and proven in the field.
Risk Management Potential Risks Mitigation – Camden Gas Project Production Risk The company has over 3 years production and sales experience from existing wells. The wells currently being developed have confirmed the geological model of the area. Production rates for the high producing wells have exceeded previous expectations. Market Risk Sydney Gas has gas sales contracts with AGL in excess of $450 million. Economic Risk Sydney Gas will mitigate economic risk through:- - establishing, wherever feasible, long-term vendor contracts for goods and services; and - obtaining long-term sales contracts.
Risk Management Potential Risks Mitigation – Camden Gas Project Environment Gas is an ecologically acceptable fuel with lower carbon emissions than coal. Drilling operations disrupt the land for a minimal period, but once completed and land rehabilitated, the well head is located in a fenced enclosure approximately 32m 2 in area with minimal visual impact. The Camden area produces little water from the coal seams. Regulatory Risk Leases – Sydney Gas holds several Production Leases and is well versed in the approval process. Access - Sydney Gas has a right to explore under PEL 2 and negotiates land access with the owners, with an agreed compensation arrangement. Native Title – Based on a 1999 search of the NSW National Parks and Wildlife Native Titles Claims register, Sydney Gas does not believe that any Native Title claims exist within any of its PEL areas. Management An experienced team with local and international CSM experience has been appointed to the company to oversee the project.
Financial Perspectives Strong focus on shareholder returns Operationally cash flow positive from current Camden 100 well program at full production First 100 wells – should produce initial revenues of $30-$35 million pa Each 300 well project – should produce initial revenues of around $100 million pa Costs per gigajoule for Camden Gas Project around $1.50 including amortisation of capital costs and finance expenses A targeted capital management program to fund ramp up of gas production via mix of equity, debt and hybrid funding New opportunities to include Wyong and Hunter Valley projects