Announcement PDF ASX Announcement 3 March 2016 The Company Announcement Officer ASX Ltd via electronic lodgement AUSTRALIAN RESOURCES INVESTMENT CONFERENCE Please find attached a presentation to be given by Mr David Wrench at the Australian Resources Investment Conference sponsored by Schroeder Equities to be held in Zurich Switzerland on Friday 4 March, 2016. Yours faithfully Sean McGuinness Chief Financial Officer & Company Secretary Strike Energy Limited ABN 59 078 012 745 www.strikeenergy.com.au P: +61 2 9397 1420 E: strike@strikeenergy.com.au 120B Underwood Street, Paddington NSW 2021 STRIKE ENERGY LIMITED SCHROEDER EQUITIES AUSTRALIAN RESOURCES CONFERENCE Zurich, March 2016 Strike Energy Limited – Schroeder Equities – Australian Resources Conference 1 Strike Energy Limited Overview Strike Energy Limited (ASX : STX) is an Australian based, independent oil and gas exploration and production company. The company is focused on the development of a substantial gas resource in the Southern Cooper Basin to meet Eastern Australian gas market demand. Listing ASX (ticker STX) Issued Shares 833,330,946 Options/Performance Rights 40,150,000 Market Capitalisation Cash at 31 December 2015 $91.6 million (26 February 2015) $6.4 million Strike Energy Limited – Schroeder Equities – Australian Resources Conference 2 Executive Summary Tightening gas market driving Eastern Australian gas price increases Strike controls the only new, large scale gas project with the essential pre-requisites for successful development Southern Cooper Basin Gas Project (SCBGP) targeting early cashflow generation Strike Energy Limited – Schroeder Equities – Australian Resources Conference 3 Eastern Australian Gas Market: Supply tightness emerging Australia’s east coast gas demand has historically been supplied from conventional reserves in the Cooper Basin (SA) and the Gippsland Basin in Bass Strait. These reserves are in decline. Substantial new CSG resources have been developed in Queensland, however they and the majority of existing Cooper Basin reserves have been committed to export markets. The domestic market is still ‘short’ gas and new supply options are needed to meet forecast demand. Gas production – last 40 years Reserves Export demand Developed Mount Isa Gladstone Moomba Demand – next 20 years Brisbane 6 Tcf +30 Tcf Undeveloped ~30 Tcf Moomba 1 Tcf Eastern Australia domestic demand Sydney Adelaide Melbourne 9 Tcf 6 Tcf 10 Tcf Hobart ~15 Tcf produced Strike Energy Limited – Schroeder Equities – Australian Resources Conference ~7 Tcf conventional resources; +30 Tcf CSG reserves 40 Tcf required 4 Eastern Australian gas market: Gas price trending higher Eastern Australian gas prices are trending up – the only energy market in the world to be experiencing price increases. Eastern Australian gas prices are responding to market tightness Strike Energy Limited – Schroeder Equities – Australian Resources Conference 5 Eastern Australian Gas Market: Substantial opportunity for Strike 2C Prospective Resource + Contingent Resource PEL 94 2,702 Bcf^ PEL 95 3,817 Bcf^ PEL 96 4,492 Bcf* Total 11,011 Bcf PEL 96 Phase One Area 1,123 Bcf* Moomba Marsden 1 104 Bcf* Davenport 1 PEL 94 STX 35% PEL 95 STX 50% Mount Isa Gladstone Le Chiffre 1 Klebb production testing area Moomba PELA 640 STX 100% Brisbane PEL 96 STX 66.67% Sydney Adelaide 0 20 Kilometers Melbourne PEL 96 Phase One Area Strike Phase One Area wells drilled Gas Pipeline Strike Wells Drilled Oil Pipeline PEL 96 Offset Wells Strzelecki Track PEL 96 and PELA – STX Operated * Mean estimate (net to Strike determined on a probalistic basis) per ASX announcement dated 19 Feb 2014 and adjusted for announced contingent resource estimate per ASX announcement dated 27 April 2015. ^ Mean estimate (net to Strike determined on a probalistic basis) per ASX announcement dated 19 September 2012. + The estimated quantities of petroleum that may potentially be recovered by the application of a future development project relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially movable hydrocarbons. Hobart PEL Net STX Acres PEL 94 77,925 PEL 95 160,248 PEL 96 443,880 PELA 640 850,786 Total 1,532,839 Strike has an ideally positioned long-life multi-Tcf resource to supply into ~40 Tcf Eastern Australian gas demand over the next twenty years Strike Energy Limited – Schroeder Equities – Australian Resources Conference 6 Eastern Australian Gas Market: Substantial opportunity for Strike Strike’s multi-Tcf gas resource, directly connected to the ~40 Tcf Eastern Australian gas market, is ideally placed to be a competitive supply solution. In the short term, Strike plans to develop an initial project targeting domestic gas customers and early cashflow. The establishment of a world-scale, low cost resource then provides a future opportunity to supply cost competitive gas for export. Strategic objectives Mount Isa Gladstone Brisbane Moomba Short term New source of affordable gas supply for east coast domestic customers >1 Tcf over 20 years Sydney Adelaide SCBGP (11 Tcf) Supply targets Melbourne Medium term Hobart Cost competitive third party gas supply for LNG exporters up to 5 Tcf over 20 years Strike has positioned the Southern Cooper Basin Gas Project as a long-life resource for domestic and export gas supply Strike Energy Limited – Schroeder Equities – Australian Resources Conference 7 Southern Cooper Basin Gas Project: Key activities/milestones 2013-2016 In less than three years Strike has used a disciplined approach to rapidly progress from a large multi-Tcf resource discovery, to technical feasibility and towards commercial feasibility. Funding Building to commercial gas flows Key activities/milestones 2013 – 2016 $38 million Dec 2013 Orica 250 PJ GSA Gas Offtake $17 million 1 Orora 45 PJ GSA Dec 2014 Dec 2015 Orica prepayment Brickworks 12.5 PJ Termsheet Demonstration FLOW Facility Design 4.5 Tcf Prospective Resource Sustained gas flows 155 Bcf 2C Certification Flow Testing – Gas Rates Building R&D Funding2 $17 million Klebb 2/3 Frac Le Chiffre 1 Klebb 1 frac Strike Shareholder Funds $4 million Klebb 1 140+m net coal Le Chiffre 1 100+m net coal Klebb 1 Workover Klebb 3 Drill, complete Klebb 2 Drill, complete Klebb 4 Drill 1 Includes a combination of funding from Strike gas buyers. 2 Includes R&D funds received or advanced to date. Strike has successfully developed an innovative mix of funding sources Strike Energy Limited – Schroeder Equities – Australian Resources Conference 8 Southern Cooper Basin Gas Project: Essential pre-requisites for development A successful gas resource development needs to deliver on all of the essential pre-requisites below Scale Location Strike Energy Limited – Schroeder Equities – Australian Resources Conference Low Supply Cost Capital-lite Industry Support 9 Southern Cooper Basin Gas Project: Essential pre-requisites for development Scale Location Low Supply Cost PEL 94 STX 35% Industry Support PEL 95 STX 50% PEL 96 STX 66.67% PELA 640 STX 100% Drives low-cost outcomes Capital-lite Materiality that encourages industry support and collaboration 11 Tcf Potential for domestic and ultimately export supply solution The project has the scale to provide substantial new gas supply for Eastern Australian customers Strike Energy Limited – Schroeder Equities – Australian Resources Conference 10 Southern Cooper Basin Gas Project: Essential pre-requisites for development Scale Location Low Supply Cost Capital-lite Industry Support Cooper Basin – key hub for Eastern Australian gas markets Gladstone SCBGP is directly connected to Eastern Australian gas pipeline network ~$1/GJ Moomba Roma (Wallumbilla hub) ~$1/GJ pipeline tariff to all major markets Brisbane SCBGP Access to well established oil field services in Moomba Strike has developed positive relationships with key community and government stakeholders ~$1/GJ <$1/GJ Adelaide Sydney Melbourne Cooper Basin is the ideal location for new supply to all major demand centres Strike Energy Limited – Schroeder Equities – Australian Resources Conference 11 Southern Cooper Basin Gas Project: Essential pre-requisites for development Scale Low Supply Cost Location Well type curve Capital-lite Industry Support PEL 96 well full cycle costs (undiscounted) Cumlative production(PJ) Stable production phase 5 10 Years 15 Well capex (drill/complete/connect) Other capex (gathering/processing) + Opex $3.5m $13.5m Total $17.0m 20 Ex-field gas costs Ex-field gas costs ($/GJ) 5.50 Target ex-field cost Higher EURs drive lower unit costs 3.50 3 4 5 EUR/well (PJ) Strike is targeting low cost Cooper Basin gas supply Strike Energy Limited – Schroeder Equities – Australian Resources Conference 12 Southern Cooper Basin Gas Project: Essential pre-requisites for development Scale Low Supply Cost Location Capital-lite Industry Support Strike’s analysis highlights the steepness of the Eastern Australian gas supply cost curve. Strike’s Southern Cooper Basin Gas Project has the potential to be a low cost producer. Eastern Australian demand (PJ) 10,000 1 20,000 New STX target supply Estimated unit cost of supply $/GJ 1 Strike Southern Cooper PEL 96 30,000 Average supply cost 40,000 50,000 Current 20 years demand forecast Gippsland Basin JV Queensland JV CSG ‘equity’ gas sweet spots Other Victorian Strike’s Southern Cooper Basin Gas Project Cooper Basin conventional Queensland JV CSG ‘equity’ gas – Tier 2 Queensland JV CSG ‘equity’ gas – Tier 3 Queensland CSG third party The lower the unit cost the larger the market opportunity Strike Energy Limited – Schroeder Equities – Australian Resources Conference 13 Southern Cooper Basin Gas Project: Essential pre-requisites for development Scale Location Low Supply Cost Typical ‘greenfields’ development upfront capital Downstream Infrastructure Industry Support SCBGP upfront capital X Export facilities Gas Transport (pipelines) X Pipelines Gas storage Upfront capital Gas Processing and Compression Upstream Capital-lite Field processing/ compression facilities Drilling and completion X Export infrastructure already built PEL 96 connected to network 3rd party gas processing and compression Innnovative well design High EURs (i wells) Staged development Upfront capital Strike’s capital-lite development model is an agile solution allowing Strike to focus its capital and expertise on upstream production Strike Energy Limited – Schroeder Equities – Australian Resources Conference 14 Southern Cooper Basin Gas Project: Essential pre-requisites for development Scale Location Low Supply Cost Signed GSA’s evidence the collective industry intent to facilitate new gas supply into the Eastern Australian gas market. Additional stakeholders recognise the emerging significance of the SCBGP. Industry Support Capital-lite Mount Isa Gladstone Moomba Brisbane Roma (Wallumbilla hub) 3rd party gas processing and compression Sydney Adelaide Melbourne Hobart pipelines Strike’s strategic domestic objective is rapidly gaining industry support and momentum Strike Energy Limited – Schroeder Equities – Australian Resources Conference 15 Southern Cooper Basin Gas Project: Essential pre-requisites for development Over the past few years Strike has been able to demonstrate the SCBGP is the only project of scale that can deliver on the essential pre-requisites for successful development Scale Location Low Supply Cost Capital-lite Industry Support Well costs Building to commercial gas flows Strike Energy Limited – Schroeder Equities – Australian Resources Conference 16 Southern Cooper Basin Gas Project: Status update Operations Update Record gas volumes produced in February 2016 with increases in peak and average gas flow rates at Klebb 2 and Klebb 3. A series of tests at both wells have confirmed that gas flows build in line with a consistent type curve while water production is maintained above the minimum threshold rate. Gas flows are then only constrained by the current jet pumps’ capacity to simultaneously handle water and the increasing gas volumes. Extrapolation of these gas production type curves give confidence that commercial gas flows will be achieved as production constraints are removed. Strike Energy Limited – Schroeder Equities – Australian Resources Conference 17 Southern Cooper Basin Gas Project: Targeting cashflow generation Sales Gas sales Processing and compression Cashflow Demonstration Project Klebb 1, 2, 3 & 4 Production Wells Production NEXT STEPS Klebb 2 and Klebb 3 pump Klebb 4 frac and completion - upgrade in March - substantially increase gas production capacity. submersible pump to deliver an unconstrained production test. Demonstration project engineering design. Modest incremental investment will enable the project to generate cashflow Strike Energy Limited – Schroeder Equities – Australian Resources Conference 18 Southern Cooper Basin Gas Project: Potential scale San Juan Basin, New Mexico Southern Cooper Basin Gas Project PEL 95 PEL 94 Fruitland Coal Fairway PEL 96 PELA 640 San Juan Basin Outline PEL 96 Fruitland Coal Fairway Productive acres 300,000 Acres (8/8) 665,820 Cumulative production 16 Tcf Prospective Resource 1 4.5 Tcf Wells 7,800 Wells 5 1 Prospective resources net to STX, inferred permit resource 6.75 Tcf The San Juan Basin, New Mexico is an indicator of the commercial scalability of Strike’s gas resource Strike Energy Limited – Schroeder Equities – Australian Resources Conference 19 Southern Cooper Basin Gas Project: Potential value The graph below highlights the revenue potential of fully developed Eastern Australian onshore gas resources. Est. ex-field revenue $ Billions $75B @ $5/GJ 1 Tcf = 1,000 Bcf 1 Bcf ~1 PJ 1 PJ = 1,000,000 GJ @ $7/GJ 1 Tcf ~ 1,000,000,000 GJ $50B $25B $5B 1 Tcf 5 Tcf 10 Tcf Notional gas field size Successful development of a large scale resource has the potential to create substantial value Strike Energy Limited – Schroeder Equities – Australian Resources Conference 20 Opportunity summary Tightening gas market driving Eastern Australian gas price increases Strike controls the only new, large scale gas project with the essential pre-requisites for successful development Southern Cooper Basin Gas Project (SCBGP) targeting early cashflow generation Strike Energy Limited – Schroeder Equities – Australian Resources Conference 21 Important Notice This presentation does not constitute an offer, invitation or recommendation to subscribe for, or purchase any security and neither this presentation nor anything contained in it shall form the basis of any contract or commitment. Reliance should not be placed on the information or opinions contained in this presentation. This presentation does not take into consideration the investment objectives, financial situation or particular needs of any particular investor. Any decision to purchase or subscribe for any shares in Strike Energy Limited should only be made after making independent enquiries and seeking appropriate financial advice. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, Strike Energy Limited and its affiliates and related bodies corporate, and their respective officers, directors, employees and agents disclaim liability (including without limitation, any liability arising from fault or negligence) for any loss arising from any use of or reliance on this presentation or its contents or otherwise arising in connection with it. Statements contained in this presentation, including but not limited to those regarding the possible or assumed future costs, performance, dividends, returns, production levels or rates, oil and gas prices, reserves, potential growth of Strike Energy Limited, industry growth or other projections and any estimated company earnings are or may be forward looking statements. Contingent Resource Estimate DeGolyer and MacNaughton was engaged by Strike to undertake an Independent Review of the gas resource in PEL 96 based on the data and information acquired to date by Strike from the drilling and flow testing programs carried out at the Le Chiffre 1 and Klebb 1, Klebb 2 and Klebb 3 wells. DeGolyer and MacNaughton has estimated a contingent gas resource on a probalistic basis for the initial zones that have been flow tested within the Le Chiffre 1 and Klebb 1 wells. As these zones only represent a portion of the net coal encountered at these locations, successful flow testing of additional zones will enable an increased contingent resource to be booked. The table below summarises the Contingent Resource Estimates. Contingent Gas Resource Estimates – PEL 961 Well 1C2 2C2 3C2 Productive area (acres) 2,171 2,938 3,931 Le Chiffre 1 – Patchawarra Vu Upper and Vu Lower zones (bcf) 62.9 93.2 132.4 Klebb 1 – Patchawarra Vu Upper zone 9 (bcf) 42.1 62.2 93.3 Total Gross Contingent Resource (bcf) 105.00 155.4 225.7 Such statements relate to future events and expectations and as such involve known and unknown risk and uncertainties, many of which are outside the control of Strike Energy Limited. Actual results, actions and developments may differ materially from those expressed or implied by the statements in this presentation. 1. Subject to any continuing obligations under applicable law and the Listing Rules of ASX Limited, Strike Energy Limited does not undertake any obligation to publicly update or revise any of the forward looking statements in this presentation or any changes in events, conditions or circumstances on which any such statement is based. Contingent Resource Estimates have been prepared in accordance with the Petroleum Resources Management System “PRMS”. Contingent Resource Estimates are those quantities of gas (produced gas less carbon dioxide and fuel gas) that are recoverable from known accumulations but which are not yet considered commercially recoverable. 2. 1C, 2C and 3C estimates in this table are P90, P50 and P10 respectively for each well and have been summed arithmetically 3. Net to Strike’s 66.7% interest in PEL 96 Strike Energy Limited – Schroeder Equities – Australian Resources Conference 22 ���ortant �otice� continue� Important Notice: continued Competent Persons Statement Competent Persons Statement The information in this presentation that relates to the PEL 96, PEL 95 and PEL 94 contingent resources has in been from thethat independent reports as prepared byPEL DeGolyer Theestimate information thistaken presentation relates to the PEL 96, PEL 95 and 94 contingent and MacNaughton, a leading independent international petroleum industry consultancy firm, resources estimate has been taken from the independent reports as prepared by DeGolyer and hasand been reviewed by Mr Chris Thompson (Chief Operating Officer of the Company). All firm, MacNaughton, a leading independent international petroleum industry consultancy other reported resource and orbyreserves in thisOperating presentation is based and fairlyAll and has been reviewed Mr Chrisinformation Thompson (Chief Officer of theon, Company). represents, prepared under information the supervision of Mr Thompson. otherinformation reported resource andby, or or reserves in this presentation is based on, and fairly represents, information prepared by, or under the supervision of Mr Thompson. Mr Thompson holds a Graduate Diploma in Reservoir Evaluation and Management and Bachelor of Science Degree in Geology. He is a member SocietyEvaluation of Petroleum andand has Mr Thompson holds a Graduate Diplomaof inthe Reservoir and Engineers Management workedBachelor in the petroleum a practicing engineer for overof20Petroleum years. MrEngineers of Scienceindustry Degree as in Geology. He isreservoir a member of the Society Thompson a qualified reserves and as resources evaluator within the meaning and is has worked inpetroleum the petroleum industry a practicing reservoir engineer for overof 20the years. ASX Listing Rules andisconsents to the inclusion in this release of the resource or reserves Mr Thompson a qualified petroleum reserves and resources evaluatorand within the meaning information theListing form and in whichtothat information is presented. of theinASX Rulescontext and consents the inclusion in this release of the resource and or reserves information in the form and context in which that information is presented. About DeGolyer and MacNaughton About DeGolyer and MacNaughton The information contained in this release pertaining to the PEL 96 contingent resources Theis information contained in this release pertaining to the PEL 96 contingent resources estimate based on, and fairly represents, information prepared under the supervision of Mr estimate isSenior basedVice on, and fairly represents, prepared Mr under the supervision Paul Szatkowski, President of DeGolyerinformation and MacNaughton. Szatkowski holds aof Mr Paul Senior Vice President of DeGolyer and MacNaughton. Szatkowski holds Bachelor of Szatkowski, Science degree in Petroleum Engineering from Texas A&M, has inMr excess of 40 years a Bachelor of Science in Petroleum Engineering from Texas A&M, and has in of 40 of relevant experience in thedegree estimation of reserves and contingent resources, is excess a member years of relevant experience in the estimation of reserves and contingent resources, and is a of the International Society of Petroleum Engineers and the American Association of Petroleum member of the International Society of Petroleum Engineers and the American of Geologists. Mr Szatkowski is a qualified petroleum reserves and resources evaluator Association within Petroleum Geologists. MrRules Szatkowski is a qualified reserves and resources evaluator the meaning of the ASX Listing and consents to thepetroleum inclusion of the contingent resource within the information meaning of the ASXform Listing andinconsents to the inclusion ofis the contingent estimate related in the andRules context which that information presented. resource estimate related information in the form and context in which that information is presented. �hi�e not �et co��ercia�, these resu�ts con�r� that the coa�s �i�� �e ca�a��e o� su�stantia� �as �ro�uction rates an� hi�h�� econo�ic �er �e�� reco�eries as the reser�oir �ressure is re�uce� at While not yet �ro� commercial, these results confirm that the coals will be capable of substantial increasin� �istances the �e��s� gas production rates and highly economic per well recoveries as the reservoir pressure is reduced at increasing distances from the wells. Strike Energy Limited – Zurich Presentation, March 2016 Strike Energy Limited – Schroeder Equities – Australian Resources Conference 2323