August 14, 2013 EnerCom’s The Oil & Gas Conference®
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August 14, 2013
EnerCom’s The Oil & Gas Conference®
1
Forward Looking Statements
Statements in this presentation including forecasts or projections that are not historical in nature are intended to be, and are hereby identified as,
forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. The words “anticipate”, “assume”, “believe”, “budget”,
“estimate”, “expect”, “forecast”, “initial”, “plan”, “project”, and similar expressions are intended to identify forward looking statements. These statements
about Magellan Petroleum Corporation and Magellan Petroleum Australia (collectively “the Company”) may relate to their businesses and prospects,
planned capital expenditures, increases or decreases in oil and gas production, revenues, expenses, operating cash flows and borrowings, and other
matters that involve a number of uncertainties that may cause actual results to differ materially from expectations. Among these risks and
uncertainties are the following: our ability to acquire long term CO2 supply for our Poplar CO2-EOR project; our ability to enter into satisfactory
agreements for the sale of natural gas from our Dingo field in Australia; the likelihood of success of a water shut-off program at Poplar; government
regulation and oversight of drilling and completion activity in the United Kingdom; the uncertain nature of oil and gas prices in the United States,
Australia, and the United Kingdom; uncertainties inherent in projecting future rates of production from drilling activities; the uncertainty of drilling and
completion conditions and results; the availability of drilling, completion, and operating equipment and services; the results of 2D and 3D seismic
related to the NT-P82 interest offshore Australia; and other matters discussed in the “Risk Factors” section of The Company’s most recent Annual
Report on Form 10K. Any forward-looking information provided in this report should be considered with these factors in mind. The Company assumes
no obligation to update any forward-looking statements contained in this report, whether as a result of new information, future events or otherwise.
Proved reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable
certainty to be economically producible – from a given date forward, from known reservoirs, and under existing economic conditions, operating
methods, and government regulations – prior to the time at which contracts providing the right to operate expire, unless evidence indicates that
renewal is reasonably certain. In this presentation, the Company uses the terms “probable,” “possible,” “3P,” and “resources.” Probable reserves are
those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to
be recovered. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. Reserves are estimated
remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of
development projects to known accumulations (subject to other conditions). Resources are quantities of oil and gas and related substances estimated
to exist in naturally occurring accumulations. The Company also uses the term “EUR” (estimated ultimate recovery), which is the sum of reserves
remaining as of a given date and cumulative production as of that date. Estimates of probable and possible reserves included in 3P reserves and
resources which may potentially be recoverable through additional drilling or recovery techniques are by their nature more uncertain than estimates of
proved reserves and accordingly are subject to substantially greater risk of not actually being realized by the Company.
2
The Company
Independent upstream oil
and gas company
Publicly listed – traded on
the NASDAQ since 1972
(ticker MPET)
Headquartered in Denver,
Colorado
37 employees globally
Under new management
since 2011
Oil production (~250 bopd)
CO2-EOR project at pilot
stage
Potential of exploration of
deep formations (Bakken /
Three Forks)
Onshore gas production
Offshore exploration license
(NT/P82)
200 k net acres onshore with
unconventional exploration
potential
125 k net acres over core
Weald Basin shale play
Montana - USA Australia UK
3
The Company Continued…
Market Cap(1) $47 m PV-10(3) proved reserves $130 m
Cash(2) $38 m
Enterprise value $34 m Production(4) 301 boepd
EV/BOE of proved reserves(3) $3 Proved reserves(5) 10.8 MMboe
EV/BOE of production(4) $112 k % Oil 82%
% Proved developed 33%
Shares outstanding 45.4 m % Operated 100%
Institutional(5) 22%
Insider(5) 11%
1. Based on basic shares outstanding and closing price on August 6, 2013.
2. Equal to cash as of March 31, 2013, plus the proceeds of the Convertible Preferred Offering on May 13, 2013.
3. Reserves as of June 30, 2012.
4. Production equal to average boepd for quarter ending March 31, 2013.
5. Per NASDAQ.
4
Proved Reserves1
27.3
15.6
87.2
PDP PDNP PUD
130.1 m
82%
18%
US Australia
10.8 MMboe
82%
18%
Oil Gas
10.8 MMboe
21%
12%
67%
PDP PDNP PUD
10.8 MMboe
PV-10 ($ m)
Oil / Gas Proved Reserves Ratio Proved Reserves by Geography
Proved Reserves
1. As of June 30, 2012.
EV / BOE: $3 / PV-10: $130 m
5
Experienced Leadership
Antoine Lafargue (38) – CFO
Former CFO of Falcon Gas Storage based in
Houston, TX
Previously, a principal with Arcapita, a private
equity fund focused on the energy and
infrastructure sectors
Previously held investment banking positions with
DLJ/Credit Suisse and Bank of America
Mark Brannum (46) – General Counsel &
Secretary
Former Deputy General Counsel of SM Energy
Company
Previously, a shareholder with Winstead P.C., a
large business law firm based in Dallas, TX
Over 17 years of in-house and outside counsel
legal experience
Tom Wilson (61) – CEO
Former President of KMOC and Anderman
International
Former First Vice President and director of Young
Energy Prize
Previously, led new international strategy for
Apache and served as a Project Manager for Shell
Oil
Robin West (66) – Chairman
Founder, CEO of PFC Energy
Former Reagan Administration Assistant
Secretary of the Interior (1981-83), responsible for
U.S. offshore oil policy
Member of National Petroleum Council and
Council on Foreign Relations
Director of Key Energy Services and formerly of
Cheniere Energy
6
On May 10, 2013, Magellan issued $23.5 m of convertible preferred stock to One Stone Energy Partners, a
NY based private equity fund
One Stone Convertible Preferred
Allows to increase net asset value per share
Rationale
Allows Magellan to pursue strategy from position of
financial strength, including:
– CO2-EOR pilot
– UK exploratory well(s)
Most appropriate financing option on attractive terms
– Conversion price at 20% premium to 10-day avg
– No warrants
– No underwriting or capital advisory fees
– Non-core assets not ready for divestiture
New financial and strategic partner in One Stone
– Extensive industry expertise
– Will appoint two industry veterans to board
Key Terms(1)
Conversion premium: Conversion price of $1.22
– 20% over 10 day moving average
– 22% over Sopak repurchase price in Jan 2013
Dividend: 7.0% per annum paid in cash or PIK
Conversion/Redemption: After three years MPET
can force conversion at $2.42 / share or repurchase
in cash at 20% IRR
Board: 2 board members not subject to shareholder
vote
Minority rights: One Stone to hold veto rights with
respect to capex outside of budget, related party
transactions, and certain changes to board size
1. Full discussion of terms is available in the 8-K released by MPET on May 13, 2013.
7
Poplar
22,000 net unitized acres
Covers Poplar Dome, the
largest geologic structure
in the western Williston
Basin
Substantially all of the
acreage held by
production
CO2 Enhanced Oil
Recovery project in
progress
ANALOGOUS CO2-EOR PROJECTS(1)
CO2 Enhanced Oil Recovery project in progress
1. Analogous CO2-EOR projects are generally based upon formation, source rock type, and depth.
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CO2-EOR Development Milestones
Step 1: Lab tests (completed Aug 2012)
● Confirmed miscibility of CO2 and Poplar oil
● Conducted by Core Laboratories
Step 2: Pilot
● 5 well pilot project to start Aug 2013
– Drilling between Aug-Nov 2013
– 1st CO2 injection Oct 2013
– Testing for 2 years from 1st CO2 injection
● Pilot CO2 source: Air Liquide
● Objectives: Prove concept; estimate recoverable
reserves; establish CO2 sweep efficiency; acquire
data for full-field optimization
Step 3: Full field development
● Develop field in multiple phases
Image source: Australian Government’s Cooperative Research Centre’s Program; CRC
for Greenhouse Gas Technologies
Potential additional proved reserves of 50 MMbbls
9
CO2-EOR Analogs
Poplar is analogous to Midale and
Weyburn, two oil fields with highly
successful CO2-EOR projects in Williston
Basin
Poplar produced ~52 MMboe since
1950’s and with no production from a
water flood(1)
10% recovery from CO2-EOR is in line
with analogous fields
1. Poplar recovery factor of 10% includes primary recovery methods only.
Source: Public documents and presentations issued or contributed to by Cenovus Energy (Weyburn) and Apache Corporation (Midale)
Recovery potential(1)
Analogous to successful CO2-EOR projects
30% 26%
10%
17%
11%
10%
53% 63%
80%
MidaleOOIP: 515
WeyburnOOIP: 1,400
PoplarOOIP: 570
RemainingOOIP
Tertiary
Primary +secondary
10
Poplar
Charles
Approximately 250 bbls/day
CO2 EOR: pilot project in 2013
Bakken / Three Forks / Nisku
Prospective for oil production
Other development opportunities
Amsden: new oil pool discovery Jan ‘12
Nisku: produced 200k bbls from 1 well
between 1970 and 1990
Tyler: 4 current wells with additional
potential
Greenhorn: formation is similar to Eagle
Ford shale
Judith River: shallow gas opportunity
Several reserve development opportunities
CO
2 Flo
od
11
Australian Onshore Assets
Palm Valley
11 Bcf of proved gas reserves and 14 Bcf of
probable gas reserves
Proved reserves PV-10: $10 m
100% owner / operator
Currently producing
Ramp up to 1.2 and 1.5 Bcf / yr in FY14 and
FY15, respectively
Dingo
Similar resource to Palm Valley
3 appraisal wells (’84 and ’90)
100% owner / operator
Ongoing marketing efforts
No reserves recorded
Requires building 50 km pipeline connection
Mereenie
Potential A$17.5 m bonus based on
production milestones following asset swap
with Santos (May ‘12)
A$100 m appraisal and development
program beginning Summer 2013 by Santos
Continued gas marketing efforts for Palm Valley and Dingo
12
Australia Offshore – Bonaparte Basin
NT/P82
Long term development
opportunity
2 potential prospects
Potential reserves of 1 to 3
Tcf
100% working interest
3D seismic survey results
expected end of Summer ’13
1 exploration well required by
2015
Shallow water – jack-up rig
territory
3D seismic results expected Summer 2013
13
UK Shale
200,000 net acres – 11 licenses
In Dec 2012, England lifted its moratorium on fracking,
which had prevented the development of shale resources in
the country
Farm-out potential
Celtique operated (50%)
Acquired 175 km 2D seismic in July
2011
Conventional plays: shallow oil and
deep gas
Unconventional plays: oil and gas
potential in Liassic and Kimmeridge
shales
Northern operated (22.5% – 40%)
Conventional oil plays
PEDL 240 (Isle of Wight) – Wytch
Farm extension play
Magellan operated (100%)
Conventional play: deep gas potential
at Horse Hill
Magellan operated : 2 licenses, 100% WI
Celtique operated : 4 licenses, 50% WI
Northern operated : 5 licenses, 22.5%-40% WI
High potential from unconventional prospects
14
Asset Overview
Asset Value Potential Capex
Cash $38 m(1)
US
Poplar (current) P1 reserves PV-10 $120 m(2) Ongoing work-overs
Poplar CO2 Pilot +50 MMbbls(3) $20 m(4)
Poplar – Three Forks
Au
str
ali
a
Offshore: NTP/82 Potential for 1-3 Tcf Incurred(5)
Onshore: Palm Valley P-1: 11 Bcf / P-2: 14 Bcf(2)
Onshore: Dingo Similar to resources at PV Pipeline
UK
Weald/Wessex Basin Net acres: 125 k(6) $5 m(7)
Several transformational assets with clear development timeline
Sept-13 Dec-13 Mar-14 Jun-14 Sept-14 Dec-14
US: CO2 Pilot
begins
AU: Offshore
3D seismic
results
AU: On-
shore gas
contracts
UK: 1st
exploratory well
US: CO2 pilot
prelim. results
1. As of March 31, 2013.
2. As of June 30, 2012.
3. Total potential reserves.
4. Estimated cost of pilot over next two years.
5. 3D seismic cost already incurred.
6. Total UK acreage is 200K net acres; 125k net acres with Celtique which contains
unconventional potential.
7. Cost for drilling one exploratory well; excludes completion.
US: Secured
CO2 supply
AU: Contract ramp
up for gas sales at
Palm Valley
15
Favorable market dynamics
– Strong oil pricing in the US
– Australian gas market – robust pricing
– OECD countries only
Attractive Company economics
– Stable base level of production
– Reserves in US and Australia
– Significant valuation upside from
development of assets
– Long-term contracts in Australia
Control of core assets
– 100% ownership Poplar CO2-EOR
– 100% ownership of Australian assets
Focused organization under new
management
– Emerging from an 18-month
turnaround
– Streamlined portfolio of projects poised
for growth
– Newly hired staff in US with decades
of O&G experience
Investment Considerations
Existing production and three high-growth assets
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