Investor Presentation                            August 20111
DisclaimerThis announcement contains “forward-looking statements”. Such forward-looking statements include, withoutlimitat...
Corporate Overview                                                                                       Shares on Issue: ...
Strategy    Identify, acquire and appraise material upstream oil and gas exploration opportunities:        Utilising netwo...
Why Unconventional Gas?    Can test large play concepts cheaply    Attractive acquisition targets for major Oil & Gas Comp...
Asset Portfolio    Mercury Stetson Shale Gas Prospect        Barnett Shale        Woodford Shale    Triple Crown        Hy...
Mercury Stetson    Two proven shale formations – Barnett and                         Oklahoma                          Woo...
Expected Stratigraphy & Thickness                  Note: TOC results are from cuttings – Actual TOC expected to be ~ 100% ...
Elements of successful shale playElement                                             Mercury Stetson ProspectKerogen Type ...
Proven ShalesBarnett Shale    First recognised shale gas project in US with more    than 14,000 wells now drilled    Wells...
Mercury Stetson - Go Forward Plan 2011                          2012                                2013 and beyond      F...
Triple Crown Prospect                                                Existing Ellenburger Fields                          ...
Triple Crown Prospect- Texas 45,000 Acres in Edwards County Texas                Well Options over ~ 6,500 acres acquired ...
Ellenburger     Fracture and     high porosity     zone                     Drilling results confirmed a significant gas c...
Triple Crown – Canyon Hybrid Play Very strong gas shows over an 1150 ft                                                   ...
Triple Crown - Go Forward Plan              2011                                2012                          2013  Core &...
Karoo Basin – International gas focus     Shale Gas within the Karoo Basin is now a major focus for international E&P comp...
Cranemere Well (CR 1/68) Located in the centre of the Application Area Drilled 1968 Well blowout at around 8,300 ft Peak f...
Summary Challenger Energy’s strategy is to identify, acquire and appraise material upstream oil and gas exploration opport...
Appendices     Supporting Mercury Stetson Slides                                August 201120
Prospect ScopeProperty                             Range         Average                RisksOGIP / Section (Square Mile) ...
Joint Venture Agreement Governs relationship between the parties until no leases held by any party. Provides for Challenge...
Scoping EconomicsSingle Well Case      Well IP      Capex       EUR                     NPV(10)                           ...
Barnett / Woodford drilling activity                 Oklahoma                                                             ...
NW-SE Ardmore Basin X-Section A-A NW                                                                                      ...
NE-SW Texas/Oklahoma X-section B-B                            Stetson / Mercury Area                            10 miles e...
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Challenger August Investor Presentation 290811

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Challenger Energy’s strategy is to identify, acquire and appraise material upstream oil and gas
exploration opportunities
􀁠 Mercury Stetson Prospect in North Texas, US
􀁠 Two proven shale formations – Barnett and Woodford
􀁠 Massive potential gas in place with OGIP estimated at 360 BCF/sq mile
􀁠 Large prospect area – potentially up to 55,000 acres (86 sq miles)
􀁠 Prospect is close to existing infrastructure
􀁠 Contiguous land position of ~ 26,000 acres with a short term target of 35,000 acres.
􀁠 Triple Crown Prospect in Texas, US
􀁠 Significant acreage – 45,000 acres with options over a further 6,500 acres.
􀁠 Large gas charged zones, Ellenburger (dolomite) and an unconventional Hybrid play which is geologically analogous to
Montney Hybrid Play in Western Canada with an estimated OGIP of 9 TCF.
􀁠 Testing to commence shortly on both the Ellenburger and Hyprid Play
􀁠 Karoo Basin in South Africa
􀁠 Shale gas in Karoo Basin now a major focus for international E&P companies (eg Shell, Cheasapeake, Statoil and Sasol)
􀁠 Challenger Energy’s permit of approx. 800,000 acres centred on only well within basin to flow significant gas to surface to
date, awaiting approval.
􀁠 Independent US Energy Information Agency report suggests Risked Recoverable Resource of more than 7 TCF in
application area.
􀁠 Attractive assets have exciting potential to grow significant shareholder value

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Challenger August Investor Presentation 290811

  1. 1. Investor Presentation August 20111
  2. 2. DisclaimerThis announcement contains “forward-looking statements”. Such forward-looking statements include, withoutlimitation: estimates of future earnings, the sensitivity of earnings to oil & gas prices and foreign exchange ratemovements; estimates of future oil & gas production and sales; estimates of future cash flows, the sensitivity of cashflows to oil & gas prices and foreign exchange rate movements; statements regarding future debt repayments;estimates of future capital expenditures; estimates of reserves and statements regarding future exploration resultsand the replacement of reserves; and where the Company expresses or implies an expectation or belief as to futureevents or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis.However, forward looking statements are subject to risks, uncertainties and other factors, which could cause actualresults to differ materially from future results expressed, projected or implied by such forward-looking statements.Such risks include, but are not limited to oil and gas price volatility, currency fluctuations, increased production costsand variances in reserves or recovery rates from those assumed in the company’s plans, as well as political andoperational risks in the countries and states in which we operate or sell product to, and governmental regulation andjudicial outcomes. For a more detailed discussion of such risks and other factors, see the Company’s Annual Reports,as well as the Company’s other filings. The Company does not undertake any obligation to release publicly anyrevisions to any “forward looking statement” to reflect events or circumstances after the date of this release, or toreflect the occurrence of unanticipated events, except as may be required under applicable securities laws.2
  3. 3. Corporate Overview Shares on Issue: 214,021,000Non Executive Chairman - Michael FryMichael holds a Bachelor of Commerce degree from the University of Western Listed Options 105,222,171 1Australia, is a Fellow of Financial Services Institute of Australasia, and is a pastmember of the ASX. Michael has extensive experience in capital markets andcorporate treasury management specialising in the identification of commodity, Unlisted Options: 11,500,000currency and interest rate risk and the implementation of risk managementstrategies. Share Price: 0.12 as of 25/08/2011 Market Cap: $25.68MManaging Director - Paul Bilston Shareholders: 796Paul Bilston has a Bachelor of Mechanical engineering and a PhD in Structuralengineering, with 15 yrs experience in all aspects of the oil & gas sector. He Top 20 Holding: 50.11%has worked in a number of senior technical, commercial and management Cash ~$5.9Mroles for companies including Worley, GHD, AGL Energy and AJ Lucas. Inrecent years his focus has been on the unconventional hydrocarbon space inAustralia and overseas, and most recently managed the Gloucester Gas project Note 11: 20c Options - 30 June 2012in NSW which was sold in December 2008 for $370M by AJL & MPO.Executive Director - David PrenticeDavid Prentice’s career includes 21 years experience in commercialmanagement and business development within the natural resources sector,working for some of Australia’s leading resource companies. This has includedhigh-level commercial and operational roles with a number of listed andunlisted resource companies.Chief Operating Officer – David WoodleyDavid Woodley holds a Bachelor of Chemical Engineering degree, with over 22years experience in the oil and gas sector gained in Australia, North America,UK and Europe. He has considerable experience in drilling and completion,field development planning and asset management and evaluation.Company Secretary – Adrien WingMr Adrien Wing is CPA qualified. He practised in the audit and corporatedivisions of a chartered accounting firm before working with a number of publiccompanies listed on the Australian Stock Exchange as a corporate/accountingconsultant and company secretary. 3
  4. 4. Strategy Identify, acquire and appraise material upstream oil and gas exploration opportunities: Utilising network of global contacts Primarily unconventional hydrocarbons, CBM, Shale Gas, Shale Oil. Low cost of entry, with primary expenditure on the drill bit High materiality (> 1 TCF Gas, or >10 Million bbl Oil) Projects where Challenger will act as operator Evaluate and high grade exploration projects to ensure efficient expenditure of shareholders funds Implement staged and cost effect exploration and appraisal programs to evaluate projects with an eye on the best development or exit strategy4
  5. 5. Why Unconventional Gas? Can test large play concepts cheaply Attractive acquisition targets for major Oil & Gas Companies Deal Location Date Net Acres Value BHP - Petrohawk Eagleford (SA) July 11 1,000,000 US$12.0b Historical transactions for BHP-Chesapeake Fayettteville (USA) Feb 11 487,000 US$4.75b unconventional fields indicate PetroChina - Encana Cut Ridge (Canada) Feb 11 317,500 C$5.4 b LAND: Talisman-Sasol Montney (Canada) Dec 10 25,500 C$1.05 b Typical range is $9,500 to Ev EP/Enervest Barnett (USA) Nov 10 20,200 Gross US$967M $15,000 per acre, though some much higher. Chevron–Atlas Marcellus (USA) Nov 10 1,209,000 US$3.2 b Mitsui-Anardarko Marcellus (USA) Feb 10 100,000 US$1.4 b RESOURCE: $0.4/mcf to $0.6/mcf Total-Chesapeake Barnett (USA) Jan 10 270,000 US$2.5 b ExxonMobil-XTO Energy Various (USA) Dec 09 US $41 b5
  6. 6. Asset Portfolio Mercury Stetson Shale Gas Prospect Barnett Shale Woodford Shale Triple Crown Hybrid Gas Play Ellenburger South Africa Fort Brown Shales6
  7. 7. Mercury Stetson Two proven shale formations – Barnett and Oklahoma Woodford Woodford Anadarko Arkoma Large prospect area – Basin Basin potentially up to 55,000 acres (86 sq miles) Hollis Basin Properties consistent with core areas of current Newark Field Core Barnett shale plays. Significant contiguous lease position Ft. Worth Basin ~ 26,000 acres Prospect target ~ 35,000 acres (55 sq miles) Massive OGIP estimated at 360 BCF/sq mile Republic of Mexico Potentially > 1.5 TCF net resource to CEL GoM Close to existing infrastructure & services Recent Barnett (only) transaction (EV Energy Partners) paid $47,700/acre for Core area Prospect offers an entry position into proven shales with HUGE UPSIDE POTENTIAL7
  8. 8. Expected Stratigraphy & Thickness Note: TOC results are from cuttings – Actual TOC expected to be ~ 100% higher based on experience with analysis of results in the Barnett shale.8
  9. 9. Elements of successful shale playElement Mercury Stetson ProspectKerogen Type - Target: Amorphous Kerogen Amorphous KerogenOrganic Richness (TOC) - Target: 2% to 6% Range: 2% to 5% Avg: Barnett 3.2%, Woodford 3.1%Gas in Place - Target: >100 BCF/Section (sq Mile) 360 BCF+ estimateThermal Maturity - Target: 1.0 – 1.8% Ro 1.5% Barnett (dry gas window) 1.5% Woodford (dry gas window)Uplift = Free Gas - Target 5,000’ to 10,000’ 5,000’ to 7,000’ of upliftSilica (Quartz) Content - Target 30% to 80% 43% Barnett 50% WoodfordThickness - Target: >150’ 415’ Barnett - 185’ Woodford Could thicken significantly off structureFracturing Evidence of fractured Sycamore between shales (“considerable LCM”) 9
  10. 10. Proven ShalesBarnett Shale First recognised shale gas project in US with more than 14,000 wells now drilled Wells in core area recovering ~ 3 BCF Producing 1.8 TCF/yrWoodford Shale More recently developed Wells in core area recovering ~ 4 BCF Over 1,000 wells drilled Producing 240 BCF/yrMuch lower risk than shale plays in frontier areas. 10
  11. 11. Mercury Stetson - Go Forward Plan 2011 2012 2013 and beyond First BOOK BOOK vertical GAS Drill Well BOOK ndCore 2 Vertical Drill 2 GAS GAS Analysis Well RESERVES additional RESERVES HZ wells RESOURCE & Vertical or PROOF Delineation Seismic Target HZ Target OF Wells Program 600 BCF 3P Delineation 3 TCF 3P CONCEPT (100%) Wells (100%)Land Acquisition & Lease Management11
  12. 12. Triple Crown Prospect Existing Ellenburger Fields Existing Canyon Sands FieldsDe ve lop me n t HP Pipeline Dallas Triple Crown Houston San Antonio Edwards County 50 km 12
  13. 13. Triple Crown Prospect- Texas 45,000 Acres in Edwards County Texas Well Options over ~ 6,500 acres acquired Challenger has 80% WI (100% before payout) Two Targets Ellenburger Hybrid (Sand/Unconventional) First appraisal well successfully drilled Dec/Jan 2011. Strong gas shows whilst drilling over a number of zones. A total of 2,300 ft of gas charged zones were intersected13
  14. 14. Ellenburger Fracture and high porosity zone Drilling results confirmed a significant gas charged structure – potentially multi TCF gas in place Fractures and high porosity intersected at the top of the Ellenburger, however zone cemented during setting of casing, which likely limited gas production Upper zone at the top of formation is the initial target for horizontal well Original Gas in Place (OGIP) 1.6 TCF14
  15. 15. Triple Crown – Canyon Hybrid Play Very strong gas shows over an 1150 ft Sand Challenger believe this to be a hybrid play that Sand consists of a number of sands interbedded within a large unconventional gas zone 1,150 FT Gas Column Strong Gas Preliminary analysis suggests this play has a very Shows large gas in place, with analysis of known wells Unconventional Zone with 2.5 - 10% suggesting Original Gas in place (OGIP) interbedded equivalent to 7.4 TCF over existing acreage sand stringers As expected by the depositional environment, analysis of logs of previously drilled wells in the Sand/Siltstone area suggest the potential for this play improves moving down dip off structure15
  16. 16. Triple Crown - Go Forward Plan 2011 2012 2013 Core & Stimulate Petro- & BOOK BOOK Drill Core Pilot physical production test GAS Delineation Analysis production GAS GAS Analysis RESOURCE Wells RESERVESas well as testing SALES regional PROOF mapping OF CONCEPT Land AcquisitionDrilling expected to commence shortly to side track into the Ellenburger with a short(500 ft) Horizontal well. Unless the Ellenburger is completed as a producer, a fracturestimulation of the Hybrid will be completed as a “Proof of Concept” 16
  17. 17. Karoo Basin – International gas focus Shale Gas within the Karoo Basin is now a major focus for international E&P companies seeking to put their foot on new resources Following initial 12 month Technical Co-Operation permits, both Shell and Falcon have moved to the next step of formally applying for Exploration Permits Challenger permit of ~ 800,000 acres centred on only well (CR 1/68) within the basin to flow significant gas to surface Very well positioned having already reached agreement Sasol/Statoil/Cheasapeake with Black Empowerment Partners (BEE), and first company to submit its application EMP submitted in September Shell 2010 – awaiting approval. Currently a fraccing moratorium in place until March 2012. Falcon Challenger(Bundu)17
  18. 18. Cranemere Well (CR 1/68) Located in the centre of the Application Area Drilled 1968 Well blowout at around 8,300 ft Peak flow of 16 mmcfd during DST Fort Brown Shales dark grey to black and carbonaceous with occasional siltstone stringers. Strong gas shows in a number of intervals across the 5,000 ft section. US Energy Information Administration Report on Shale gas potential around the world identified the following: Karoo Basin large potential “Risked Recoverable Resource” averaged across basin ~ 6.8 BCF / square mile. Equivalent to more than 7 TCF of Risked Recoverable Resource within Challengers Application Area18
  19. 19. Summary Challenger Energy’s strategy is to identify, acquire and appraise material upstream oil and gas exploration opportunities Mercury Stetson Prospect in North Texas, US Two proven shale formations – Barnett and Woodford Massive potential gas in place with OGIP estimated at 360 BCF/sq mile Large prospect area – potentially up to 55,000 acres (86 sq miles) Prospect is close to existing infrastructure Contiguous land position of ~ 26,000 acres with a short term target of 35,000 acres. Triple Crown Prospect in Texas, US Significant acreage – 45,000 acres with options over a further 6,500 acres. Large gas charged zones, Ellenburger (dolomite) and an unconventional Hybrid play which is geologically analogous to Montney Hybrid Play in Western Canada with an estimated OGIP of 9 TCF. Testing to commence shortly on both the Ellenburger and Hyprid Play Karoo Basin in South Africa Shale gas in Karoo Basin now a major focus for international E&P companies (eg Shell, Cheasapeake, Statoil and Sasol) Challenger Energy’s permit of approx. 800,000 acres centred on only well within basin to flow significant gas to surface to date, awaiting approval. Independent US Energy Information Agency report suggests Risked Recoverable Resource of more than 7 TCF in application area. Attractive assets have exciting potential to grow significant shareholder value19
  20. 20. Appendices Supporting Mercury Stetson Slides August 201120
  21. 21. Prospect ScopeProperty Range Average RisksOGIP / Section (Square Mile) (BCF) 280 – 420 360 Based on analog data and comparison of shale properties to existing playsEstimated Recovery Factor (%) 10 – 40% 15% Barnett Dependent on well spacing 30% WoodfordProspect area (Acres) 20 – 55,000 35,000 Further seismic required to fully define (55 sq miles) prospect area.Initial Production (IP) MMSCFD 2–6 3.0 HZ Barnett Dependent on well type and frac 5.0 HZ Woodford stages, based on equivalent areas, vertical may be an effective option in this area.Reserves per well (BCF) 2.5 – 6 3.0 HZ Barnett Based on equivalent areas 4.0 HZ WoodfordCost per well (BCF) $2.5 – $5.0 $3.5 M HZ Drilling through the Oauchita Thrust may increase CostsDrilling Locations ~ 875 each Barnett & Based on 80 acre spacing Woodford 21
  22. 22. Joint Venture Agreement Governs relationship between the parties until no leases held by any party. Provides for Challenger to earn 50% interest in Phase 1, by the following: Payment of up to $2.2 million as and when required for the renewal and extension of existing leases plus the acquisition of additional leases Drill, fracture stimulate, complete and test TWO vertical wells. The parties anticipate that the first well will incorporated the re-entry and completion of the existing well on the property, however in the event that is unsuccessful, a new well will be drilled and the value of the seismic program adjusted to keep Challenger whole. Conduct a seismic program funded partially by revenue from first well to fully define the extend of the shales in the prospect area Connect the two wells to the nearby sales pipeline Challenger is required to pay the balance of the $2.2 M if it does not drill and complete the first well. Phase 2 Subject to the terms of the agreement, provides for the parties to enter into a Phase 2 program including two horizontal wells in each of the Barnett and Woodford shales. Parties to fund their share, or in the absence of all parties agreeing to fund their share, a mechanism exists for the funding parties to earn additional interest
  23. 23. Scoping EconomicsSingle Well Case Well IP Capex EUR NPV(10) @ US$/mscf Flat MMSCFD US$M BCF $4.5 $6 $7.5 1 2.0 2.6 2.5 1.8 2.4 3.4 2 3.0 2.6 3.0 2.1 3.4 4.8 3 4.0 4.0 4.0 2.1 3.8 5.5 4 5.0 4.0 5.0 3.0 5.2 7.2Notes Based on current operators in the sector, the Expected Ultimate recovery (EUR) Barnett Core ~ 3 BCF/well with well costs ~ $2.6 M/well Expected Ultimate recovery (EUR) Woodford Core ~ 4 – 5 BCF/well with well costs ~ $ 4M These Economics are conceptual and unrisked, and are calculated are based on a set of assumptions derived by comparison with existing Barnett and Woodford production 23
  24. 24. Barnett / Woodford drilling activity Oklahoma Map showing Barnett and Woodford remnant basins (purple) with 2000-2011 shale Arnansas Anadarko Arkoma Basin Basin gas drilling areas (yellow Ar A circles) bu B c kl e Ar d M Ba mo Mt Hollis ar si re .U Basin ie n pli M tta ue ft B ns as te i rU n pl ift B A Prospect lt Fau Louisiana New Mexico rust Texas Ft. Worth Basin a Th chit Exploration for Barnett Shale Oau (called Caney Shale in OK) and Woodford targets under the Quachita Thrust Sheet is now Republic underway in Oklahomaof Mexico GoM Source: adapted from Gale, J.F. , et.al., 2010, AAPG Search & Discovery Article # 10226 24
  25. 25. NW-SE Ardmore Basin X-Section A-A NW SE Stetson Oklahoma Red River Texas /Mercury Area Cretaceous Pennsylvanian Ouachita Caney Barnett Shale Thrust Sheet Shale Devonian Ordovician Woodford Shale 100 miles25
  26. 26. NE-SW Texas/Oklahoma X-section B-B Stetson / Mercury Area 10 miles east of section S N Muenster Arch Arbuckle Mtns. Ft. Worth Basin Ardmore Basin Arkoma Basin Cretaceous Woodford Shale Pennsylvanian Barnett Shale Devonian Ordovician 120 miles26

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