Shona Corporate presentation, January 2012


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Shona Corporate presentation, January 2012

  1. 1. corporate presentation 2012
  2. 2. Forward Looking StatementsIn the interest of providing potential investors with information regarding Shona Energy Company, Inc. (“Shona"), including managements assessment of the future plans and operations of Shona,certain statements contained in this corporate presentation constitute forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable securitieslegislation. Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "project", "could", "plan", "intend", "should","believe", "outlook", "potential", "target" and similar words suggesting future events or future performance. In addition, statements relating to "reserves" are deemed to be forward-looking statementsas they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and can be profitably produced in the y p , p , q p p ypfuture. Forward looking statements or information in this presentation include, but are not limited to, statements or information with respect to: the expected closing date and use of proceeds from thefinancing; potential reserves and future production with respect to current assets business strategy and objectives; development plans; exploration and drilling plans; reserve quantities and thediscounted present value of future net cash flows from such reserves; future production levels; wells drilled (gross and net); capital expenditures; cash flow; debt levels; operating and other costs;royalty rates and taxes.With respect to forward-looking statements contained in this corporate presentation, Shona has made assumptions regarding, among other things: future capital expenditure levels; future oil andnatural gas prices; future oil and natural gas production levels; future exchange rates and interest rates; ability to obtain equipment in a timely manner to carry out development activities; ability tomarket oil and natural gas successfully to current and new customers; the impact of increasing competition; the ability to obtain financing on acceptable terms; and ability to add production andreserves through development and exploitation activities. Although Shona believes that the expectations reflected in the forward looking statements contained in this corporate presentation, and theassumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place p g , , p p pundue reliance on forward-looking statements included in this corporate presentation, as there can be no assurance that the plans, intentions or expectations upon which the forward-lookingstatements are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that thepredictions, forecasts, projections and other forward-looking statements will not occur, which may cause Shonas actual performance and financial results in future periods to differ materially from anyestimates or projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the ability ofmanagement to execute its business plan; general economic and business conditions; the risk of instability affecting the jurisdictions in which Shona operates; the risks of the oil and natural gasindustry, such as operational risks in exploring for, developing and producing crude oil and natural gas and market demand; the possibility that government policies or laws may change orgovernmental approvals may be delayed or withheld; risks and uncertainties involving geology of oil and natural gas deposits; the uncertainty of reserves estimates and reserves life; the ability ofShona to add production and reserves through acquisition, development and exploration activities; Shonas ability to enter into or renew leases; potential delays or changes in plans with respect toexploration or development projects or capital expenditures; the uncertainty of estimates and projections relating to production (including decline rates), costs and expenses; fluctuations in oil andnatural gas prices, foreign currency exchange rates and interest rates; risks inherent in Shonas marketing operations, including credit risk; uncertainty in amounts and timing of royalty payments;health, safety and environmental risks; risks associated with existing and potential future law suits and regulatory actions against Shona; uncertainties as to the availability and cost of financing; andfinancial risks affecting the value of Shona’s investments. Readers are cautioned that the foregoing list is not exhaustive of all possible risks and uncertainties.Any financial outlook or future oriented financial information in this corporate presentation, as defined by applicable securities legislation, has been approved by management of Shona. Such financialoutlook or future oriented financial information is provided for the purpose of providing information about managements current expectations and plans relating to the future. Readers are cautionedthat reliance on such information may not be appropriate for other purposes.The forward-looking statements contained in this corporate presentation speak only as of the date of this corporate presentation. Except as expressly required by applicable securities laws, Shonadoes not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. The forward-looking statementscontained in this corporate presentation are expressly qualified by this cautionary statement. p p p yq y yThe information contained in this corporate presentation does not purport to be all-inclusive or to contain all information that a prospective investor may require. Prospective investors are encouragedto conduct their own analysis and reviews of Shona, and of the information contained in this corporate presentation. Without limitation, prospective investors should consider the advice of theirfinancial, legal, accounting, tax and other advisors and such other factors they consider appropriate in investigating and analyzing Shona.Barrels of Oil Equivalent•Barrels of oil equivalent (boe) is calculated using the conversion factor of 6 Mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. Boes may be misleading, particularly if used inisolation. A boe conversion ratio of 6 Mcf:1 bbl (barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at thewellhead.Analogous Information•Certain noted drilling and completion data provided in this document may constitute "analogous information", such as mapping information obtained in geographical proximity to prospectiveexploratory lands to be held by Shona. Such information has been obtained from government sources, regulatory agencies or other industry participants. Management of Shona believes theinformation is relevant as it helps to define the reservoir characteristics in which Shona may hold an interest. Shona is unable to confirm that the analogous information was prepared by a qualifiedreserves evaluator or auditor or in accordance with the COGE Handbook and therefore, the reader is cautioned that the data relied upon by Shona may be in error and/or may not be analogous tosuch lands to be held by Shona.
  3. 3. Investment HighlightsProduction with stable cash flow Gas assets in early production phase 24 million cubic feet per day (MCFPD) currently under contract (14 MMCFPD firm)Diverse portfolio of oil and gas assets Oil exploration program with 3 blocks in Colombia and 1 block in Peru Existing gas production in northwest Colombia’s Magdalena BasinFully funded development program with favourable economics Relatively low development costs, attractive termsAssets on tA t trend or i proximity to existing production d in i it t i ti d ti Multiple oil targets with growth potential on all blocks
  4. 4. Corporate StrategyIncrease value of existing blocks Increase cash flow with additional gas sales contracts from Esperanza Block Complete evaluation of unexplored area of Esperanza Block Confirm potential of heavy oil potential in Caguan Basin in 1st Qtr 2013 Further evaluate the potential of Boa Prospect on Block 102 with long term testingIdentify and evaluate additional opportunities utilizing current cash flow Seek assets on trend or in proximity to existing production, with low development costs and attractive fiscal terms Consider higher-risk exploration opportunities that would allow later “sell downs”Evaluate merger and acquisition opportunities Combination of Equals Liquidity Event
  5. 5. Value Proposition Exploration targets with significant upside u de p ed underpinned by existing gas p oduct o contracts e st g production co t acts Experienced management team providing increased exposure to additional opportunities over time
  6. 6. Overview of Assets Esperanza Block VENEZUELA SHONA GROSS NET Serrania COLOMBIA PROPERTY OPERATOR W.I. ACRES ACRES Block Los Pi L Picachos h Esperanza Block Shona Block (Colombia) (Geoproduction) 100% 60,002 60,002 Macaya ECUADOR Serrania Block Block (Colombia) Hupecol 37.5% 110,769 41,538 PERU Los Picachos Block (Colombia) Hupecol 37.5% 52,771 19,789 Block 102 BRAZIL Macaya Block (Colombia) Hupecol 37.5% 195,254 73,220 Block 102 (Peru) Pluspetrol 36.5% 313,023 114,253 TOTAL 731,819 308,803 BOLIVIA
  7. 7. Esperanza Location & Infrastructure Promigas Gran Tierra (Porquero discovery) Pacific Rubiales (La Creciente fi ld (L C i field 60 MMCFPD) OGX (Recently awarded block w/ $24 MM work program); Surrounding Esperanza Esperanza Block (Nelson discovery)7 Cerro Matoso
  8. 8. Esperanza Block Esperanza Block 45 sq km Program (2007)100% owned and operated by Canaflecha FieldGeoproduction (wholly-owned 120 sq km Arianna Field Programsubsidiary of Shona) (2010) Katana Field K t Fi ldSignificant gas discovery at Nelson:164 billion cubic feet* (BCF) (gross) StewartHigh value gas delivery contracts Prospectnegotiated with productionincreasing over the next three years 103 sq km Additional Program leads (2009)Additional 30,000 acres to beexplored with 3D seismic in Q1 2012 Palmer Prospects Leads Prospects Nelson Field to commence Production areas production in December 2011 Retained area 3D seismic programs *Gross reserves as per Collarini Associates NI 51-101 compliant reserves report effective January 1, 2011
  9. 9. Colombia – Gas Transportation SystemCerro Matoso Contract(1): Total of 19 MMCFPD for ten year term effective January 1, 2012 as follows: 11.0 MMCFPD firm for 2012 and 2013 12.5 MMCFPD firm from January 2014 for the remainder of the 10 year termCerro Matoso Options: During period of July 1, 2013 to Sept. 30, 2013 to elect to purchase up to and additional 3.5 MMCFPD firm effective January 1, 2014. y During period of Sept. 1, 2011 to June 30, 2013, Cerro Matoso has the option to take up to an additional 27 MMCFPD Cerro Matoso has two months to commit to purchase the additional volumes, if they fail to do so, Shona is free to market the additional volumes to third partiesE2 Contract: Sell 3 MMCFPD firm, 2 MMCFPD interruptible for total 5 MMCFPD 7 year term 1The balance of the 19 MMCFPD is classified as interruptible for each of these periods.
  10. 10. Esperanza Block: Monetization ASSET SUPPLY   CAPABILITY ECONOMIC   IMPACT Current Development $16MM annual after-tax with existing firm contracts cash flow for 10 yrs 14 MMCFPD Increase in current contracts $6MM incremental annual 5 MMCFPD after-tax cash flow for 8 yrs Colombia Further Nelson Field Esperanza Development $23MM incremental Block (with $10MM CAPEX) annual after-tax cash flow 21 MMCFPD Potential $30MM incremental + 100 BCF Possible Reserves P ibl R annual after-tax cash flow Defined prospects 30,000 Acres to be Evaluated TBD
  11. 11. Prolific Andean Foreland BasinShona’s oil prospects are located within VENEZUELAthe Andean Foreland Basin – a region ofsignificant oil discovery Serrania, Serrania COLOMBIA Efficient oil generation and migration Los Picachos, & Macaya Llanos Basin systems Blocks Excellent quality reservoirs Putumayo Basin Low relief structures trap oil L li f t t t il Oriente Basin Over 3 billion barrels of recoverable oil ECUADOR have been found in these basins Block 102 All these basins continue to be actively explored Maranon Basin PERU BRAZIL Existing Oilfields
  12. 12. Southern Colombian Heavy Oil Belt Llanos Basin Macaya Block Serrania Rubiales Field Block 167,343 bopd Heavy Oil Belt Los Picachos Block Caguan Basin Orito Field > 230 MMBLS Capella Field produced; 2.5 billion bbl 1,919 bopd 1 919 b d OOIP Exploration Blocks Production Area Serrania Block Heavy Oil Belt Natural Reserves Putumayo Basin
  13. 13. Serrania, Los Picachos & Macaya Los Picachos Serrania Shona – Shona – Capella Field Hupecol - HAE Hupecol - HAEWorking interests: Ombu Shona 37.5% Sinochem - Canacol Hupecol (operator) 50% Houston American Portofino Monterrico Energy 12.5% 12 5%358,794 gross acres, 134,547 net Cedrela Macaya Canacol Shona-Hupecol-acres HAE CAG 6Licenses: 6 years of exploration, 24 Metapetroleum - p Durilloyears of production f Talisman Los Emerald Serrania licensed in 2008 Picachos Macaya and Los Picachos Ceiba Emerald licensed in 2011Royalties: Tamarin Canacol 0 to 5,000 BOPD 8% 5,001 to 125,000 BOPD 8-20% CAG 5 Heavy Oil Belt Metapetroleum - Macaya Talisman
  14. 14. Serrania Targets In management’s opinion acreage contains one of management s opinion, largest undrilled 4-way closure structures in northern South America – 150 MMBO recoverable potential Serrania Block Two fault trap prospects on Los Picachos and Macaya concessions Serrania targets Mirador formation; production potential should be similar to the Capella Field (located 7 miles south with potential recoverable reserves of 200 MMBLS of 10°-12° oil Exploration drilling now expected to commence in Q1 2013
  15. 15. Block 102Located in prolific Peruvian MaranonBasin Carmen 30 MMBOWorking Interests: Forestal Shona 36.5% Boa 65 MMBO Pluspetrol (operator) 51% Andean Oil and Gas 12.5% Anaconda Macusari313,023 gross acres, 114,253 net acres TrendLicensed in 2006: 7 year explorationterm and 30 year oil production termRoyalties: Capahuari Huayuri Sur 0 to 5,000 BOPD 5% Trend 50 MMBO Capahuari Norte 5,001 to 100,000 BOPD 5-20% 24 MMBO Andoas NorteProspects: Capahuari Sur Dorissa 175 MMBO 80 MMBO Boa, Anaconda, Andoas NorteRequest f 6 month extension onR t for th t icurrent work phase in conjunctionwith a 6 month long-term productiontest
  16. 16. Block 102 Targets Carmen 30 MMBO MacusariCapahuari and Macusari Trends Trend Boa Anaconda3 Prospects Boa: 3D seismic with possibility Capahuari Huayuri Sur 50 MMBO similar to Carmen. Currently Trend evaluating Boa Oeste-1X Capahuari Norte 24 MMBO Anaconda: 2007 2D seismic data closure; 50± MMBO potential Capahuari Sur Andoas Norte: 2007 2D seismic data 175 MMBO closure; 20± MMBO potential light oil Dorissa 80 MMBO target Andoas Norte
  17. 17. Peru Block 102: Macusari Trend SW Macusari T d M i TrendMQUEST Inter.— tem
  18. 18. Shona Assets: Monetization ASSET SUPPLY   CAPABILITY ECONOMIC   IMPACT Current Development $16MM annual after-tax with existing firm contracts cash flow for 10 yrs 14 MMCFPD Increase in current contracts $6MM incremental annual 5 MMCFPD after-tax Colombia Further N l F th Nelson Fi ld Field cash flow for 8 yrs Esperanza Development $23MM incremental Block (with $10MM CAPEX) annual after-tax cash flow 21 MMCFPD + 100 BCF Possible Reserves Potential $ $30MM incremental Defined prospects annual after-tax cash flow 30,000 Acres to be Evaluated TBD Boa, Anaconda, Andoas Norte Peru Block 102 and other leads TBD – Moderate Potential Colombia: Serrania Anticline, Serrania Serrania, L S i Los fault Trap, Los Picachos fault TBD – Significant Potential Picachos and Trap and other Leads Macaya Blocks
  19. 19. 2012 GoalsComplete resource e al ation of the Esperanza block with 3D seismic of the remaining reso rce evaluation Esperan a ith30,000 acres. Expected to start field work by the end of JanuaryAccelerate monetization of the Esperanza concession through additional gas salesAddress security issues at Serrania to allow drilling to begin no later than Q1 2013Define ongoing program for Peru Block 102Create additional exploration opportunitiesEvaluate participation in potential sector consolidation activities
  20. 20. Capitalization & Financial Highlights Common Shares 234,767,840 Voting 180,594,389 Non-voting 54,173,451 F/D Shares Outstanding 305,248,082 Cash at December 31, 2011 $21,143,000 Insider ownership 41% (46% F.D.) Share price at December 31, 2011 $0.61 52 week range at December 31, 2011 $0.40 - $1.25 Market cap at December 31 2011 31, $143.2 $143 2 million
  21. 21. ManagementJames L. Payne, Chairman, Chief Executive Officer & Co-Founder, MBA, Geophysical Engineer Ex-Chairman, President and CEO of Nuevo Energy Company, October 2001 to May 2004 Ex-Vice Chairman of Devon Energy Corporation, September 2000 to January 2001 Ex-Chairman, President and CEO of Santa Fe Energy and successors, 1989 to 1999 International and Domestic Exploration and Operating career of 23 years with Chevron Currently a director of Nabors Industries, Inc.John R. Womack, President & Co-Founder Ex-Director of Land and Worldwide Negotiations at Nuevo Energy Company Ex President Ex-President of Petrolera Santa Fe Energy, Santa Fe’s wholly-owned subsidiary operating in Argentina Fe s wholly owned Ex-Vice President of Land and Business Development at Santa Fe EnergyLarry D. Leavell, Chief Operating Officer Ex-President of Devon Energy – Indonesia; Ex-Officer on the Indonesia Petroleum Association Board of Directors Ex-Corporate Ex Corporate Manager (HSE Heavy Oil Upgrading Marketing International Production Manager) for Santa Fe Energy over (HSE, Upgrading, Marketing, Energy, 30-year careerMichael S. Wilkes, Chief Financial Officer and Controller Served as Controller of Shona Energy Company since 2008 Ex controllers of Nuevo Energy and Santa Fe Energy and successors
  22. 22. Management (continued)Shetal Mentlewski, Vice-President of Administration and Legal, Corporate Secretary Serves Director of Corporate Development / Environmental Affairs in addition to above mentioned roles Ex-Engineer for Halliburton Kellogg Brown & Root and Marathon Oil Company Received J.D. from South Texas College of Law and B.S. in Chemical Engineering from Texas A&M UniversityDavid K. Gian, Treasurer Ex-Business Development and Sales Manager, Oil States Industries Received MBA from Acton MBA in 2006 and B.S. in International Business from Baylor UniversityRicardo Mendieta, Vice–President, Colombia Ex- Ex Operations Vice - President for Latin America of Halliburton (Technology and consulting Div) Ex Vice – President for Latin America of ION Geophysical Corporation Previously worked in different international positions with Ecopetrol, Baker, Shell - TNO and Occidental Served as Shona Energy (Colombia) Limited’s Country Manager in Colombia since July 2007
  23. 23. Board of DirectorsJames L. Payne, Chairman See managementJordan R Smith Director R. Smith, Former President and CEO, Ramshorn Investments, Ltd., the exploration and production subsidiary of Nabors International, Ltd. Former exploration executive for Chevron, Forest Oil Corporation, Wolf Oil and Energetics Inc. Former Director of Clayton Williams Energy and Delta Petroleum Corp.Gary R Petersen Director R. Petersen, On the Board of Directors of several EnCap portfolio companies and is a member of the board of Plains All American, Inc. and EV Energy Partners Member of the Independent Petroleum Association of America and the Houston Producers’ ForumEdgar G. Hotard, Director General Partner of HAO Capital and Chairman of the Monitor Group China and Senior Advisor to the Monitor Group Former President & COO of Praxair Industries On the Board of Directors of Global Industries and Albany International Corp.Gregory D. Elliott, Director g y , Manager of Geoproduction and President of Workstrings, LLC and Superior Inspection Services Petroleum engineer with 15 years experience working with Chevron prior to founding Workstrings in 1997.Ted M. Anthony, Director Managing partner of Babineaux, Poche’, Anthony & Slavich, LLC, as well as General Counsel of Geoproduction Poche , Former managing partner of Perret Doise, APLC, as well as a petroleum engineer for Marathon Oil Company, Inc. On the Board of Directors of Louisiana Reserve Development Corporation
  24. 24. Questions?