Sino Gas & Energy Holdings Limited Sam Snyder – Chairman / Stephen Lyons – Managing Director October 2009
Australian gas exploraEon and producEon company
PorGolio of gas assets in China
Extensive exploraEon and appraisal acEvity undertaken on gas assets over the past four years
CompleEng appraisal program with the aim of moving to development
Responding to the growth opportuniEes and structural changes in China as the country focuses on clean energy
Addressing the growing demand for clean energy in China
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ASX listing Sep 09
ASX code SEH
Price on 7 Oct 09 $0.20 Market cap (incl listed options @ exercise price) $53.6m
Shares on issue 149.2m
Options on issue 86.5m
Cash at 30 Sep 09 $7.6m
Debt at 30 Sep 09 $14.5m
Texaco China pursued a strategy of developing CBM assets – onshore basin appraisal found the Ordos Basin to be the most prospecEve
Over several years Texaco China built a posiEon of approx. 12,500 km2
Following Chevron’s acquisiEon of Texaco in 2001, a global review of the combined assets deemed the Ordos CBM assets to be non-‐core
SEH was established in mid-‐2005 and soon aWer took the opportunity to acquire the most prospecEve of Texaco’s CBM assets
Considerable funds were spent by Texaco on the Ordos CBM assets – they were “drill ready” when SEH acquired them
SEH now has 3,700 km2 of acreage where work done over the last four years has idenEfied 2.7Tcf (100%) of recoverable resources
Historical background
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Sam Snyder – Chairman: 30+ year Chevron/Texaco. Former MD Chevron China, and prior to that MD Texaco China
Gavin Harper – Non Exec Director: 30+ years Chevron. MD Chevron’s gas business in Korea
John Chandler – Non Exec Director: 30+ years O&G lawyer
Bernie Ridgeway – Non Exec Director: Chartered Accountant. Extensive ASX experience
Stephen Lyons – Managing Director: FoundaEon shareholder in SEH. Chartered Accountant with broad internaEonal experience
Simon Marsden – Technical Manager: Petroleum engineer, 30+ years worldwide Shell, last 10 years onshore China in Ordos basin
Supported by mulEfuncEonal staff group
Board & management has extensive operaEng experience in Chinese gas projects
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Large acreage posiEon in the Ordos Basin
Ordos Basin is the second largest gas basin in China
Ordos Basin producing 1.4Bcf/day
SEH has two PSC’s over approx. 3,700km2, with Government partners in both PSC’s (including PetroChina)
Acreage located in the second largest gas basin in China
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Close proximity to major ciEes Tiayuan and Yulin
Expanding gas pipeline network and other paths to market
Technical risk substanEally reduced – adjacent to Mizhi gas field developed by PetroChina (SEH’s partner on Sanjiaobei PSC)
Mizhi gas field has the same sand intervals currently producing average flow rate range between 350-‐1MMscf/day
Acreage is close to markets and infrastructure
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Large recoverable gas resource
7 (1) Source: RISC Technical Report July 2009, included in the company’s Prospectus dated 29 July 2009, Resources classification as per Society of Petroleum Engineers (SPE) guidelines, P90 - low case, P50 - mid case, P10 - high case. (2) SGE has 100% of the gross working interest in the Linxing PSC and is formalising the take-up Chevrons 50% interest in the Sanjiaobei PSC’s. Figures represent SEH’s share of recoverable resources (C + P) after completion of take-up.
411
1747
2809
206
956
1643
0
500
1000
1500
2000
2500
3000
3500
4000
4500
P90(low) P50(mid) P10(high) TG
S R
esou
rces
- B
cf
Contingent Resources Prospective Resources
Independently Verified TGS Resource (100%) 1,2 ExploraEon success has established substanEal independently verified conEngent and prospecEve resources – 2.7Tcf (100%) at P50 (mid)
Progressively upgrading ConEngent Resources to Reserves
Expected monetary value (independently verified) of A$512m 1,2
China’s long term energy shortage is driving ambiEous plans
Focus on clean sources of energy
The 11th Five Year Plan (2006 to 2010) calls for 10 BCM of CBM producEon by 2010, doubling by 2020
Gas prices around US$5.46/Mscf and expected to rise further also support industry growth
The Chinese Government is supporEng aggressive plans to develop the domesEc gas industry
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0
5
10
15
20
25
30
35
40
45
50
Pro
duct
ion
BC
M
Source: Research Centre of the Oil and Gas Resources, Ministry of Land & Resources (MOLAR). Asia Pacific UnconvenConal Gas Summit, Beijing China, April 2009
USA
CHINA
2006 to 2008 – US$34m spent
8 TGS wells and 2 CBM wells drilled
Tested 3 wells
Extensive sub-‐surface studies Demonstrated commerciality on
Tuban Prospect
SEH has already undertaken substanEal acEvity
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CBM potenEal a catalyst for value
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Building on CBM drilling and tesEng undertaken in 1990’s, SEH drilled 2 CBM exploraEon wells in 2006 (one in each PSC)
Principal targets were coal seams 4/5 and 8/9
Evidence from previous core hole data demonstrates laterally conEnuous coal seams across large areas and coal of adequate quality to provide an apracEve CBM target
To the south of acreage, Orion reported to be having success with horizontal CBM wells
CSG is a strategically valuable asset
11 Source: Company announcements and Independent Experts Reports
AcEve work program in place for the balance of 2009
IdenEfying a 50 km2 area ‘sweet spot’ within Tuban Discovered Area to take through to commercial development and reserves cerEficaEon
MulEple well producEon pilot program at commencement of field development
TargeEng 100-‐150 Bcf 2P reserves by late 2010/early 2011 Commercial gas producEon expected in 2012
2009/2010 – exploraEon and appraisal acEviEes to grow reserves
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SEH is focused on addressing the growing demand for clean energy in China
Experienced Board and Beijing based management team
PorGolio of gas assets in the second largest gas basin in China
Large recoverable gas resource – 2.7Tcf (100%) at P50 (mid) Established gas markets with major ciEes in close proximity
ExisEng paths to commercialisaEon
ExploraEon and appraisal acEviEes focused on upgrading resources to reserves and moving to producEon
Well posiEoned to create significant shareholder value
In summary
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Realising project potenEal – a staged approach
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SEH acreage adjacent to Mizhi CNPC TGS Field
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SEH acreage is adjacent to Mizhi
gas field developed by PetroChina
(SEH’s partner on Sanjiaobei PSC)
Mizhi gas field commenced
development in 2005
Approx. 200 wells now producing Average flow rate range between
350Mscf/d to 1MMscf/d
Similar producing sands as SEH’s Tuban Prospect
PotenEal for SEH to share faciliEes in development
Tuban TGS Prospect 2.7Tcf
Recoverable Resources (P50,100%)
Tuban TGS Discovered
Area 420km2 900Bcf
(P50,100%)
Linxing
Sanjiaobei
TB05
Mizhi CNPC TGS Field
Existing wells Proposed new wells
10km
Phase 1 development concept
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IdenEfy a 50 km2 area ‘sweet spot’ within Tuban Discovered Area to take through to commercial development and reserves cerEficaEon
Similar sand intervals as CNPC’s Mizhi field
Provides foundaEon for mulEple well producEon pilot program at commencement of field development
TargeEng 100-‐150 Bcf 2P (100%) reserves late 2010/early 2011
Tuban TGS Prospect 2.7Tcf
Recoverable Resources (P50,100%)
Tuban TGS Discovered
Area 420km2 900Bcf
(P50,100%)
Linxing
Sanjiaobei
TB05
Mizhi CNPC TGS Field
Phase 1 Concept
Existing wells Proposed new wells
10km
2009/2010 appraisal program
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Fracc and test exisEng wells to demonstrate commerciality
Drill and test TGS wells to idenEfy a ‘sweet spot’ to take the project
through to reserves cerEficaEon and
development
Validate conEngent and recoverable resources as commercial gas
discovery
ConEnue to update and validate the extent of TGS reservoir fairway
Tuban TGS Prospect 2.7Tcf
Recoverable Resources (P50,100%)
Tuban TGS Discovered
Area 420km2 900Bcf
(P50,100%)
Linxing
Sanjiaobei
TB05
Existing wells Proposed new wells
10km Mizhi CNPC TGS Field
Appraisal Program
Appendix
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Bcf -‐ Billion (109) cubic feet/ Tcf -‐ Trillion (1012) cubic feet CBM/CSG – Coal Bed Methane, Coal Seam Gas Mscf – Thousands of standard cubic feet of gas Mscf / day – Thousands of standard cubic feet of gas per day – a measure of the rate of flow GJ – gigajoule / PJ – petajoule P90, P50, P10 – 90%, 50% & 10% probabiliEes respecEvely that the stated quanEEes will be equalled or exceeded Reserves – Reserves are those quanEEes of petroleum anEcipated to be commercially recoverable by applicaEon of development projects to known accumulaEons from a given date forward under defined condiEons. Reserves must further saEsfy four criteria: they must be discovered, recoverable, commercial, and remaining (as of a given date) based on the development project(s) applied as defined in the SPE-‐PRMS. ProspecBve Resources – Those quanEEes of petroleum that are esEmated, as of a given date, to be potenEally recoverable from undiscovered accumulaEons as defined in the SPE-‐PRMS POS – Probability of Success SPE-‐PRMS – Society of Petroleum Engineers, American AssociaEon of Petroleum Geologists, World Petroleum Council and Society of Petroleum EvaluaEon Engineers Petroleum Resources Management System TGS – Tight Gas Sandstone (typically permeability less than 1 mD)
Conversion factors: Coal seam gas -‐ 1 Bcf = 1.045PJ; 1TCF = 10,450PJ, 1m3 of gas = 35.3 scf of gas
Glossary
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SEH capital structure
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Shares (m)
Options (m)
Converting Notes ($m)
On issue 149.2 1.3 (1) -
Rights issue 2010 options @$0.25 - 31.6 (2) -
Rights issue 2011 options @$0.50 - 31.6 (2) -
Sub-underwriting Options 17.5 (3) -
Underwriter Options - 4.4 (4) -
Secured Convertible Loan expiring on 30 Sep 10 12.5
Unsecured Convertible Loan expiring on 30 Jun 10 2.0
Total 149.2 86.5 14.5
Substantial shareholder %
Imdex Limited 15
China Opportunity SA SICAR 9
Wear Services Pty Ltd 7
Notes:
(1) OpEons exercisable at various dates at $0.50 under a ESOP scheme
(2) OpEons exercisable at $0.25/share on or before 30 June 2010 (2010 opEons) and $0.50/share on or before 31 December 2011 (2011 opEons)
(3) OpEons exercisable at $0.25/share on or before 15 Sep 11. Escrow for 24 mths
(4) OpEons exercisable at $0.50/share on or before 15 Sep 11. Escrow for 24 mths
(5) Secured $12.5m ConverEble Loan expiring 30/09/2010 at greater of $0.20 or 30 day VWAP. OpEons expiring 30 June 2010 expected to be used to parEally reEre this loan
(6) Unsecured $2m ConverEble Loan expiring 30/06/2010 at $0.50, plus bonus shares
Note: Total shares held by Board and Management = 8%
Tight Gas Sandstone (TGS)
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TGS refers to gas extracted from low permeability sandstone, limestone or
other rock formations
The pore space in the conventional reservoir are interconnected so that gas can flow more readily from the rock. In comparison, the pores in the tight gas
reservoir are irregularly distributed and the porosity is much less than in the
conventional reservoir
Very narrow capillaries connect the pores resulting in very low permeability
and lower gas flow rates Special methods of stimulating the wells such as fracturing and acidising, are
necessary to stimulate the wells and extract gas
SGE’s well stimulations to date has used hydraulic fracturing methods
depicted in the figure below
Cross Section of a Normal Reservoir and a Tight Gas Sands Reservoir. Source: United States Geological Survey
Conventional Reservoir
Tight Gas Reservoir
Overview of Chinese ProducEon Sharing Contracts (PSC’s)
Interests held under international standard PSC’s approved at the highest level of Chinese Government
PSC’s valid for a period of 30-35 years and comprise a
Exploration Period, Development Period and Production
Period
SGE’s PSC’s all currently in their Exploration Period, with
Exploration costs borne by the Operator
Government partner for each PSC:
Linxing: China United Coal Bed Methane Company (‘CUCBM’)
Sanjiaobei: Petrochina Coal Bed Methane (‘Petrochina CBM’)
Provide the right to Government partner to join the project at
the start of the Development Period, paying their proportionate share of the costs
Production revenue distributed to PSC participants in
accordance with a Cost Recovery Model
Requirement to operate according to international practices
for safety, health and the environment
PSC
Working Interest
(Exploration)1
Net Interests (Production)
(1) Current Status
Linxing SGE 100%
SEH 64.75% CUCBM 30.0% CBM Energy
5.25% (2)
Exploration Period extended to 31 Aug 11.
Sanjiaobei SGE 100% SEH 49.0%
PCBM 51.0%
Exploration Period expired 31 Aug 08.
Extension has been on hold due to ownership
restructure of CUCBM / PCBM. SGE negotiating
for further 1 year extension with
PetroChina CBM.
(1) Chevron is in the process of transferring its 50% working
interest in the Sanjiaobei PSC to SGE. Documentation now
underway for final approval from Chinese Ministry of Commerce
(2) CBM Energy hold an option to gain an interest of 5.25% at Development at a cost of 7.5% of the historical costs and
expenses
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This presentaEon is being provided for the sole purpose of providing the recipients with background informaEon about Sino Gas & Energy Holdings Limited (SEH). No representaEon, express or implied, is made as to the fairness, accuracy, completeness or correctness of informaEon contained in this presentaEon, including the accuracy, likelihood of achievement or reasonableness of any forecasts, prospects, returns or statements in relaEon to future mapers contained in the presentaEon (“forward-‐looking statements”). Such forward-‐looking statements are by their nature subject to significant uncertainEes and conEngencies and are based on a number of esEmates and assumpEons that are subject to change (and in many cases are outside the control of SEH, its Directors and Officers) which may cause the actual results or performance of SEH to be materially different from any future results or performance expressed or implied by such forward-‐looking statements. This presentaEon provides informaEon in summary form only and is not intended to be complete. It is not intended to be relied upon as advice to investors or potenEal investors and does not take into account the investment objecEves, financial situaEon or needs of any parEcular investor. Due care and consideraEon should be undertaken when considering and analysing SEH’s financial performance. All references to dollars are to Australian Dollars unless otherwise stated.
To the maximum extent permiped by law, neither SEH nor its related corporaEons, Directors, employees or agents, nor any other person, accepts any liability, including, without limitaEon, any liability arising from fault or negligence, for any loss arising from the use of this presentaEon or its contents or otherwise arising in connecEon with it.
This presentaEon should be read in conjuncEon with other publicly available material. Further informaEon including historical results and a descripEon of the acEviEes of SEH is available on our website, hpp://www.sino-‐gas-‐energy.cn. The statements of resources in this presentaEon are based on esEmates in the Technical Report prepared by RISC Pty Ltd and included in full in the Company's Prospectus dated 29 July 2009. The Report was prepared by RISC Pty Ltd, in accordance with the Society of Petroleum Engineers (SPE) Petroleum Resource Management Systems standard.
Disclaimer
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Stephen Lyons
Managing Director
Sino Gas & Energy Holdings
P: +86-‐10 6530 9260 M: +86-‐139 1148 1669
E: slyons@sino-‐gas-‐energy.cn
Ronn Bechler
Managing Director
Market Eye
P: +61-‐3 9595 3857 M: +61-‐400 009 774
For further informaEon please contact…
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