Aurelian Corporate Presentation 010212

Aurelian Oil & Gas PLC

Siekierki Project Update &

Strategic Options Review

Corporate Presentation

February 2012

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Contents

3

Page

1. Strategic Options Review 3

2. Siekierki Project Update 11

3. Exploration Portfolio 23

Over the past four months the Company has conducted a comprehensive

review of its assets

Key conclusions:

Siekierki is an attractive project(1). The initial problems are now well understood and

a clear plan forward has been developed

The funded exploration portfolio offers significant upside

The cash position at the year-end 2011 was €63mm which allows the Company

to carry out its planned exploration and appraisal activities for the next 18

months

However, unlocking the full upside within the Company is likely to require additional

technical and financial resources

The Board believes that the value of the Company, its skills and its future

opportunities are not fully reflected in the current share price

The Board has therefore appointed Greenhill & Co to review the Company‟s

strategic options

This review will assess a wide range of options for the company including the

sale of assets, or the merger or sale of the Company

The Company will provide further updates in due course

Strategic Review Siekierki Project Update and Strategic Review

4 (1) This is based on the Board’s current view and is supported by AGR-TRACS. The value calculated on an EMV basis will be included in the Competent Person’s Report (“CPR”)

due in March/April 2012

The well tests on Siekierki have been completed and incorporated in a

comprehensive technical and commercial review led by independent consultants

AGR-TRACS.

Key conclusions:

Substantial gas initially in place (“GIIP”) is present. A base case GIIP of 1.1Tcf(1) is now

estimated in Block 207. This does not include gas potentially in Blocks 206 and 208

or the Krzesinki discovery. However, forecast production rates and recoveries have

been lowered relative to the 2009 Gaffney, Cline & Associates CPR

The data acquired during the appraisal phase has significantly improved our

characterisation of the Siekierki reservoir and a new reservoir model has now been

established

The layered Rotliegendes sandstone sequence in Siekierki has a wide range of

ambient porosity and permeability properties ranging from 6-18% and 0.02-

30mD. The higher permeability layers will dominate well performance

The Krzesinki-1 well test result supports the new reservoir model, in terms of the

presence of higher porosity zones within the gas legs of the Krzesinki and

Siekierki fields, with an un-fracced well test producing 0.2mmscf/day (the first

successful un-stimulated gas well flow test on Block 207 to date)

The reservoir is not pervasively fractured and therefore the water production

observed during each of the well tests is formation water from the matrix caused

by relative permeability effects above the free water level

Strategic Review Siekierki Update – A Large Gas Resource Play With Significant Upside

5 (1) This estimate is based on the current Board’s view and is supported by AGR-TRACS.


6

The Trzek-2 multi-fracced horizontal well had mechanical problems with the

completion which reduced fracture effectiveness as had previously been released

The Trzek-3 multi-fracced horizontal well was mechanically well executed with a good

completion. However, the hydraulic fractures are not fully effective and the well bore is

not contacting the high permeability zone encountered in the pilot hole

The combination of the reservoir’s permeability to gas and water and the poor frac

effectiveness explains why the Trzek-2 and Trzek-3 gas flow rates previously reported

of 3mmscf/day and 3.2mmscf/day were significantly lower than had been expected

However, the multi-fracced horizontal wells utilised are the correct technology

application for the field and significant operational lessons and insights have been

learned

Multiple opportunities for significant improvement in initial well rates and recoveries

have been identified for future wells

A revised development plan has been designed, comprising 32 wells recovering

296Bcf of gas, an average recovery of 9.25Bcf/well1. The value of Siekierki

calculated on an EMV basis will be included in Aurelian‟s CPR covering both

appraisal and exploration assets due in March/April 2012. However, following the

comprehensive technical and commercial review supported by independent

consultants AGR-TRACS and on the basis of the new reservoir model described

above, the Board has determined that Siekierki is an attractive project.

(1) This is based on the Board’s current view and is supported by AGR-TRACS. The value calculated on an EMV basis will be included in the Competent Person’s Report (“CPR”)


Aurelian will now seek to implement the next phase of the development plan,

which is likely to involve (subject to necessary approvals):

Identifying and bringing in a farm-in partner

Putting Trzek-2 and 3 on longer term tests

Commercialising gas from these two wells via low pressure low methane tie-in

and a “gas to wire” option as a smaller pilot development, with first gas expected

at the end of 2013, requiring capital expenditure of approximately €12mm net to

Aurelian

A fourth “proof of concept” well incorporating all of the learning to date, in an up

dip area of the field is planned in 2013. A successful appraisal result will support

the full field development plan for first gas in 2016

We have also identified further potential upside for Siekierki from a regional

development as well as additional gas volumes once the prospect inventories on

Blocks 206 and 208 have been delivered


7

Niebieszczany-1 well has discovered 50Bcf gross GIIP in two horizons and identified

a 200Bcf gross GIIP resource play in the Krosno Formation. Two gas/condensate

zones in the Krosno Formation, above the original primary target, were well tested

with gas rates of 0.6 and 0.2mmscf/day plus condensate. A commercialisation plan is

now being developed by the operator PGNiG

Planned well Sosna-1 within the Torzym reef oil play, targeting a prospect with

35mmbbls gross in-place, to be spud in March 2012

Further geological and geophysical surveys planned to de-risk prospects identified on

2011 seismic data including Cybinka-Torzym, Slovakia and Romania (Brodina)

High impact Carpathian well drilling string deferred to Q4 2012. Karpaty East holds

significant upside, although now believed to be gas rather than oil. Company

estimates mid-case 170Bcf gross recoverable resources across two prospects

Further wells pushed back to preserve capital, optionality and value in line with the

strategic options review

All play-unlocking wells are being progressed for drilling

Licences with high working interests will be farmed out in the coming year, where

appropriate, for example: Karpaty East and West, Slovakia and Romania

Commercialisation decision for the Krzesinki-1 discovery made on Poznan Block 207

will be made once the well tests have been completed in Q1 2012

8

Strategic Review - Exploration Exploration Program Sharpened Further

All volumes are aggregated Company mid case estimates

9

Strategic Review - Exploration Exploration Drilling and Testing Schedule until 2013

In addition to the above seven wells, either currently being tested or planned to be

drilled, four contingent wells are also being considered for 2013

Some wells pushed back to preserve capital, optionality and value during Strategic

Options Review

Schedule based on current best estimate and is subject to ongoing review as we

constantly high grade prospects and defer others to try and de-risk them

Sosna-1, the first well to spud in 2012, is targeting 35 MMbbl STOIIP in the Zechstein

Farm outs planned – candidates include high equity exploration and Siekierki

10

Current market capitalisation is approx €100 million

Proforma cash and cash equivalents of €63 million

Current share price 16.5 pence per share* of which 11 pence per share is cash

Key assets are Siekierki and Exploration potential

Organisational capability – relationships built, first mover advantage in Poland,

concluded large program of seismic acquisition, in house expertise

Strategic Review Maximising Shareholder Value

CASH

• SIEKIERKI

• EXPLORATION

• CAPABILITY Share price at

31 January 2012

16.5 pence per

share

Value of Cash

11 pence per

share

* Share price as at 31 January 2012

Capital, time and technology required to unlock value

Appointed to

help

maximise

shareholder

value

Contents

11

Page




12

Siekierki Project Update Overview

Ownership • Aurelian 90% (Operator); Avobone 10%

History

• Trzek-1 Vertical Well in 2007, Trzek-2 MFHW in 2010,

Trzek-3 MFHW in 2011, Krzesinki Vertical well in 2011

• 300km of 2D seismic in 2007

• 300km2 3D seismic across Block 207 in 2008

• 120km2 3D seismic across Blocks 206 & 207 in 2011

• 200 km 2D across Block 208 in 2011

• Siekierki – Base case GIIP 1.1 Tcf gross

• Krzesinki – GIIP10-20 Bcf gross

• Block 207 licence renewed for 3 yrs to Feb 2015

• Block 208 licence extension application submitted

• Plawce-2 drilled by PGNiG/FX Energy Q3 2011

Vertical Frac planned H1 2012

Pre-drill Concept:

MFHW(1) would produce dry gas if

fracced above FWL(2)

Tight reservoir with moderate

variation in porosity

GIIP 1.6 TCF mid case

Post-drill concept:

Tight reservoir which contains zones

of significantly higher permeability

Gas is produced with water as

relative permeability effects are

important

GIIP 1.1 TCF base case

Siekierki Project Update Change in understanding of the reservoir

13 (1) Multi Frac Horizontal Well (2) Free Water Level

14

Siekierki Project Update Trzek-2 MFHW diagnosis Illustrative

Siekierki Project Update Trzek-3 MFHW diagnosis Illustrative

Cemented liner allowed far greater control of frac placement compared with Trzek-2

6 fracs pumped, all contributing, but frac efficiency believed to be low (effective half-length around

27m compared with design of 85m)

Data indicates that fracs have not effectively contacted the better permeability zone

15

Siekierki Project Update Krzesinki-1

16

Siekierki Project Update New Hypothesis

17

Hypothesis

Siekierki is very different geologically from our original assumption. That

assumption had only moderate variation in porosity and permeability in the

tight aeolian sandstone matrix

We now believe the reservoir to have streaks of higher permeability (yellow in

the diagram) within that tight matrix, which will dominate well performance

Significantly increased well productivity and gas recovery should be achievable

by combining improved fracs with intersection of better porosity zones

Ongoing studies will also attempt direct detection of improved porosity

zones using existing high-quality 3D seismic

Improved understanding of relative permeability effects, help explain levels of

gas and water production

Evidence

Of the four wells and two pilot holes drilled by Aurelian, two-thirds have had an

occurrence of a zone of permeability significantly higher than the tight matrix.

Neither Trzek-2 nor Trzek-3 was able to exploit such features properly due to

completion and frac performance issues

Various operational and logging evidence points to sub-optimal fracs

Siekierki Project Update New 32 Well Base Case Concept, subject to successful appraisal

18

New Base Case Development Concept

1.1 TCF of GIIP

296 BCF recoverable (average 9.25 BCF per well)

32 well development

First production using 50 mmscf/day facility from 2016

Long term well cost to fall to €8.4mm based on MFHW

Assumes tight rock + better perm streaks (trial direct seismic detection)

Assumes better frac implementation and/or execution

Partial analogue with Leer Field & comparable with Plawce (PGNiG / FX

Energy) to south-east of Siekierki

Subject to any necessary approvals

Upside case

High Case GIIP (greater gas column above FWL away from well control, Block

206 exploration, regional story)

Better recoveries per well

Lower well costs (own rigs, shale gas economics etc.)

FWL – Free Water Level

Siekierki Project Update MFHW Orientation may improve recovery

T-2 and T-3 were drilled

approximately longitudinally.

There were few fractures and

no drilling problems in

reservoir

Future wells drilled in a

transverse direction to

intersect more fractures,

and maximise frac face area

(as per various Rotliegendes

analogues)

19

Siekierki Project Update Next Steps / New Base Case Model

Recommended 3 Stage Appraisal Plan to capture Base Case project

1) Identifying and bringing in a farm-in partner

2) Continued long term testing of Trzek-2 & Trzek-3

3) Commercialising gas from these two wells via low pressure low methane tie-

in and a “gas to wire” option as a smaller pilot development, with first gas

expected at the end of 2013, requiring capital expenditure of approximately

€12mm net to Aurelian.

4) Additional proof of concept well, Trzek-4

Incremental risked appraisal capex of €12mm net to Aurelian

Appraisal plan subject to any necessary approvals

Staged appraisal minimises capital exposure in the early stages

20

Siekierki Project Update Commercialisation

3 Trzek 2

Kostrzyn

Kleszczewo

Trzek 3

Trzek 1

Tie in substation ENEA

Transport HP pipeline

16 kV cable

Flowlines

Wells

Facilities

Export pipeline

Tie in HP pipeline

Long term Appraisal : Electricity Tie in via 16kV cable

Low pressure Low Methane pipeline to local utilisation

Full Development : High Methane High Pressure tie in to High Pressure pipeline

Long term

appraisal

Full

Development

Transport LP pipeline

Krzesinki-1

Tie in LP pipeline

21

Reservoir Crests

Siekierki Project Update Appraisal Plan

22

Staged appraisal plan provides minimum capex exposure

Contents

23

Page




Exploration Portfolio

Focusing on 4 distinctive plays

in Central Europe

Exploration Projects

Poland

23 licences / 3.0 million acres

Slovakia


Romania


Bulgaria – considering divestment


Core Area 1: Permian Basin

Zechstein Reef Oil

Rotliegendes Exploration

Core Area 2: Carpathian Basin

Carpathian Fold Belt

Carpathian Foredeep

Source: Company websites

24

Rotliegendes

Gas

Zechstein

Reef Oil

Carpathian Deep

Fold Belt

Aurelian

Carpathian

Foredeep

Poland Licence Acreage Excluding PGNiG

25

Exploration Portfolio Focus

Niebieszczany-1 well has discovered 50Bcf gross GIIP in two horizons and identified

a 200Bcf gross GIIP resource play in the Krosno Formation. Two gas/condensate

zones in the Krosno Formation, above the original primary target, were well tested

with gas rates of 0.6 and 0.2mmscf/day plus condensate. A commercialisation plan is

now being developed by the operator PGNiG

Planned well Sosna-1 within the Torzym reef oil play, targeting a prospect with

35mmbbls gross in-place, to be spud in March 2012

Further geological and geophysical surveys planned to de-risk prospects identified on

2011 seismic data including Cybinka-Torzym, Slovakia and Romania (Brodina)

High impact Carpathian well drilling string deferred to Q4 2012. Karpaty East holds

significant upside, although now believed to be gas rather than oil. Company

estimates mid-case 170Bcf gross recoverable resources across two prospects

Further wells pushed back to preserve capital, optionality and value in line with the

strategic options review

All play-unlocking wells are being progressed for drilling

Licences with high working interests will be farmed out in the coming year, where

appropriate, for example: Karpaty East and West, Slovakia and Romania

Commercialisation decision for the Krzesinki-1 discovery made on Poznan Block 207

will be made once the well tests have been completed in Q1 2012

All volumes are aggregated Company mid case estimates

26

Exploration Drilling and Testing Schedule until

2013 Schedule based on current best estimate and is subject to ongoing review as we

constantly high grade prospects and defer others to try and de-risk them

(1) Company mid case estimate based on the Board’s current view. The value calculated on an EMV basis will be included in the Competent Person’s Report

(“CPR”) due in March/April 2012

In addition to the above seven wells, either currently being tested or planned to be

drilled, four contingent wells are also being considered for 2013

Some wells pushed back to preserve capital, optionality and value during Strategic

Options Review

Sosna-1, the first well to spud in 2012, is targeting 35 MMbbl STOIIP in the Zechstein

Farm outs planned – candidates include high equity exploration and Siekierki

Niebieszczany-1 Summary

TD - 4219m

Depth MD RT

500m

1000m

1500m

2000m

2500m

3000m

3500m

4000m

4500m

0m

Stratigraphy

(Aurelian)

475m

2040m

2960m

2795m

1900m

3175m

3500m

Krosno

Krosno

Transition/Menilite

Transition

Krosno

Transition/Menilite

Transition/Menilite

Transition/Menilite

Lithology Gas

Shows

Co

red

In

terv

als

DrillStem Tests

Oil Shows

3848m 3845m

Oil observed in the pits

Niebieszczany-1 well

Operator PGNiG

TD at 4219m due to increasing pressure

Primary targets of Eocene & Paleocene not reached

Gas/Condensate discovery in Oligocene Krosno Formation

Four Drill Stem Tests completed during drilling

Two zones well tested with modest fracs completed

Rates of 0.6MMscf/d plus 126 bbl/d condensate and

0.2MMscf/d plus 18 bbl/d condensate achieved

50 BCF Gross GIIP estimated (1)

Oil & Gas shows over much of Krosno Formation & Transition

Beds

Krosno Formation Resource Play:

additional 200 BCF GIIP Gross estimated (1)

Further work on well to lead to development in discussion with

Operator

DST #1

DST #2

DST #3

DST #4

Fo

rma

tio

n

To

ps

Core #1

Core #2

Core #3&4

Core #5

Core #6

Well Tests

Test #2

Test #1

Niebieszczany-1 Test #1

Open Hole DST #1 3231-3247m Estimated Gas flow – 0.05 mmscf/d Subhydrostatic pressure

Open Hole DST #2 3483-3535m Estimated Gas flow – 0.71 mmscf/d ~2,700 psi Overpressured Test was aborted before cleaned up

Open Hole DST #3 3656-3698m AOF calc Gas flow – 7.9 mmscf/d ~4,000 psi O/P Cased hole Test #2 3677-3683m Fracced (24t, screened out) Flow 1 mmscf/d reducing to 0.2 mmscf/d over 48 hrs

Open Hole DST #4 3827-3858m Estimated Gas flow – 0.4 mmscf/d ~4,000 psi Overpressured Open Hole Test #1 3825-3857m Fracced (30t), Stabilised rate 0.6mmscf/d + 126 bpd condensate, WHP 4100psi (1) Aggregated Company mid case estimates

Core Area 1: Zechstein Reef Oil Play Exploration assets: Significant additional gas and oil volumes targeted

Ownership • Aurelian 45% (Operator); Romgaz 30%; Sceptre Oil & Gas 25%

Resources (1)

• 176 MMbbl gross STOIIP on blocks (79 MMbbl net) over mapped leads

• 48 MMbbl gross recoverable resource (22 MMbbl net) over mapped leads

• Further ~50 MMbbl gross recoverable potential in areas of low data coverage

Current / Planned Activity

• Acquisition of 10% interest from Avobone in October 2011

• Funded to drill one well in H1 2012 and one well 2013

• First well on Torzym targeting gross 35 MMbbl STOIIP (16 MMbbl net)

Other

• Unexplored Zechstein oil play adjacent to recent oil discoveries to the north requiring 3D seismic to unlock potential

• 100 MMboe fields discovered nearby prolific BMB Area. May contain analogues to one of the largest oilfields in the Central Lowlands of Poland, the Lubiatow complex, with reserves of 54 MMbbl of oil and 194 Bcf of gas

• Basin extends from the prolific UK North Sea

New Reef Oil potential in Cybinka and Torzym licences

Unexplored

„‟Reef and

Slope Play”

BMB

107

MMBOE

LUBIATOW

COMPLEX

104 MMBOE

28 (1) Aggregated Company mid case estimates; Prospects & Leads - based on the Board’s current view. The value calculated on an EMV basis will be

included in the Competent Person’s Report (“CPR”) due in March/April 2012

Poland : Torzym-Cybinka Zechstein Main Dolomite Play Concept

Na3

Na4

Na2

Lower Permian

(Rotliegendes + Volcanics)

Z4

Z3

Z2

Z1

1,000m

Lower Triassic

After Gorska et al. 2003

Ca2

An1 Platform

An2

3,000m

2,500m

2,000m

MIGRATION Oil & Gas within Ca2

Toe of Slope Platform Reefs Isolated Atoll Reefs

<1% H2S

Carboniferous

Zechstein

TVDSS (m)

Oil Gas Condensate Debris/Talus HC Generation

*Organic rich Ca2 carbonates (TOC 0.5-7.0 wt %) are considered to be mature and generating at the present day

TRAP & SEAL Robust Halite & Anyhydrite

(Top and bottom seal)

In situ Ca2 Atolls

(e.g. Gryzyna) Ca2 Toe of Slope Fans

(e.g. Lubiatow) SOURCE* Organic rich Ca2

(Basinal facies)

RESERVOIR Ca2 Reefs

(e.g. BMB, Grotow & Miedzychod)

29

Ownership • Aurelian 80% (Operator); PGNiG 20%

Resources (1)

• 545 Bcf gross GIIP (488 Bcf net) on block

• 172 Bcf gross recoverable resource (138 Bcf net) for 2 large prospects with additional

106 Bcf gross GIIP (85 Bcf net) identified in other leads

Current Activity

• 2 wells planned to target the 2 large prospects

• 136km 2D seismic survey covering approx 25% of Block complete

• Further 95km 2D seismic acquired in 2011 to firm up two drilling prospects and identify further

drilling targets

• Believed to be gas rather than oil

Planned Activity • Reviewing farm out strategy

• Drill Karpaty East-1 Q4 2012; Drill Karpaty East-2 2013

Polish Carpathians

30

East Karpaty 2 Well Programme Planned

(1) Aggregated Company mid case estimates; Prospects & Leads - based on the Board’s current view. The value calculated on an EMV basis will be


Slovakian Carpathians

31

Ownership • Aurelian 50% (Operator); JKX 25%;

Romgaz 25%

Resources (1)

• 2.0 Tcfe gross GIIP (1.0 Tcfe net)

across blocks

• 1.1 Tcfe gross recoverable resource

(550 Bcfe net) across multiple

prospects

Current

Activity

• Zborov B (Cierne-1) well in 2012

targeting 401 Bcf gross GIIP (200 Bcf

net) and 233 Bcf gross recoverable

resource (116 bcf net)

• Success on Zborov B would de-risk

the regional play

• Additional 300km of 2D seismic

acquired 2011

Planned

Activity

• 2 further exploration wells planned for

2013/2014

Other

• Highly prospective area with surface

oil seeps

• Shallow oil prospect identified on

Medzilaborce licence

• Borders high potential Bieszczady

licence

• Significant exploration potential

Svidnik / Medzilaborce / Snina Blocks

Zborov B

prospect

(1) Aggregated Company mid case estimates; Prospects & Leads - based on the Board’s current view. The value calculated on an EMV basis will be


32

International Players in Poland Macro-economic picture and resource potential is attracting increasing

number of IOCs to Poland

33

Conclusions Key conclusions:

Siekierki is an attractive project(1). The initial problems are now well understood and

a clear plan forward has been developed

The funded exploration portfolio offers significant upside

The cash position at the year-end 2011 was €63mm which allows the Company

to carry out its planned exploration and appraisal activities for the next 18

months

However, unlocking the full upside within the Company is likely to require additional

technical and financial resources

The Board believes that the value of the Company, its skills and its

future opportunities are not fully reflected in the current share price

The Board has therefore appointed Greenhill & Co to review the

Company‟s strategic options

This review will assess a wide range of options for the company

including the sale of assets, or the merger or sale of the Company

The Company will provide further updates in due course

(1) This is based on the Board’s current view and is supported by AGR-TRACS. The value calculated on an EMV basis will be included in the Competent Person’s Report (“CPR”)


Contact Us

Aurelian Financial Advisor Rowen Bainbridge Brian Cassin or Mark Bentley

Aurelian Oil & Gas PLC Greenhill & Co. LLP

4th Floor, 4 Grosvenor Place Lansdowne House, 57 Berkeley Square

London SW1X 7HJ London W1J 6ER

Phone: +44 (0) 20 7245 4999 Phone: +44 (0) 20 7198 7400

Email: [email protected]

Public Relations Nominated Advisor Nick Elwes or Catherine Maitland Richard Morrison or Jen Boorer

College Hill Ambrian Partners Limited

The Registry, Royal Mint Court Old Change House, 128 Queen Victoria Street

London EC3N 4QN London EC4V 4BJ

Phone: +44 (0) 20 7457 2020 Phone: +44 (0) 20 7634 4700

Email: [email protected] Email: [email protected]

Aurelian Corporate Presentation 010212

Documents

Transcript of Aurelian Corporate Presentation 010212