ifrs conference amsterdam 2008 1
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IFRS Conference Amsterdam 2008
1
global energy sector specialists
IFRS Extractive Industry - Investors’ Perspectives Oil & GasJune 25, 2008
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IFRS Conference Amsterdam 2008
connected, responsive, insightful
LONDON5 Investment Banking Professionals5 Acquisitions & Divestitures Professionals13 Global Equity Capital Markets Professionals
BUENOS AIRES1 Investment Banking Professional1 Acquisitions & Divestitures ProfessionalCALGARY
12 Investment Banking Professionals22 Acquisitions & Divestitures Professionals22 Global Equity Capital Markets Professionals
HOUSTON4 Investment Banking Professionals27 Acquisitions & Divestitures Professionals
DENVER14 Global Equity Capital Markets Professionals
INVESTMENT BANKINGMergers & AcquisitionsStrategic AdvisoryEquity UnderwritingFairness Opinions
ACQUISITIONS & DIVESTITURESNegotiated Sale
GLOBAL EQUITY CAPITAL MARKETSInstitutional ResearchInstitutional Sales Institutional Trading
A Global Energy Advisory Firm
Core Services
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IFRS Conference Amsterdam 2008
ENERGY EQUITY FINANCINGS WITH PROCEEDS OVER36
7$17 billion8
8CORPORATE ENERGY M&A TRANSACTIONS VALUED OVER
$22 billion356
ENERGY ASSET PACKAGES VALUED OVER
$15.9 billion
$15.9 billion in asset transactions356 Asset Packages
Over $22 billion in M&A transactions
88 Corporate M&A assignments53 Fairness Opinions
Research Coverage of 160 companies24 sales & trading professionals in North America and Europe
[ Follow on Private Equity ]
[ Follow-on Public Equity Financings ]
[ Asset A&D ]
[ Corporate M&A / Reorganization ]
[ Global Sales, Trading and Research ]
[ Grey Market Trading “Private Liquidity” ]
Over $675 million raised through blind pool financings
Over $1.4 billion raised in follow on private financings
Over $14.8 BillionOver 269 Financings
Market maker for numerous private companies
Over $650 million through IPOsOver $448 million through going public RTOs
[ Start-up Equity Financing ]
[ IPO/ RTO ]
Corporate Life Cycle: Complete Services
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Global Experience
Over $40bn of transactions and financings in the
Western Canada Sedimentary Basin
Offshore transactional experience in the Gulf of Mexico
Recent A&D and financing experience. Over 80% of advised South American transactions in the last four years A&D expertise in North
and West Africa. E&P experience throughout
the continent
Advised on regional divestitures, global acquisitions and equity financings for numerous SE Asian players
Experience evaluating prospects
A&D execution of approx. $2bn in transactions in the
North Sea
Asset and corporate advisory experience in Oman, Syria and
Qatar. E&P Experience throughout the Middle East
Transactional and operational experience in Continental Europe (France, Germany, Ireland, Norway, Italy, Portugal)
Privatizations and financing in FSU and Eastern Europe. E&P experience in Russia and the Baltic states.
Completed more North American asset transactions
than any other dealer in 2004, 2005 & 2006
12 retained AIM E&P clientsAnd $430mm in North Sea
Financings in last two years
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IFRS Conference Amsterdam 2008
What do investors want?
• Information• Shareholders are the business owners• Performance measurement
• Relative and absolute
• Debt and equity investors have different priorities• Return of capital v return on capital• Different risk profiles• Debt providers want capital repayment with return• Equity investors seek growth and have higher but differing
risk profiles• Different preferences for reserves distributions
• P90 v P50• P50 v P10
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IFRS Conference Amsterdam 2008
BP Share Price Performance
1
BP Share (GBp)
300.00
400.00
500.00
600.00
700.00
800.00Ja
n-0
0
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BP Sha re (USD)
30
35
40
45
50
55
60
65
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80
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n-0
0
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00
Jan
-01
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2
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-0
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Ju
l-0
4
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-0
5
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-06
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l-0
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-0
7
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Jan
-08
BP vs. S& P 5 0 0
4 0 .0
6 0 .0
8 0 .0
1 0 0 .0
1 2 0 .0
1 4 0 .0
1 6 0 .0
Ja
n-0
0
Ju
l-0
0
Ja
n-0
1
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7
Ja
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8
BP vs. FTSE
40.0
60.0
80.0
100.0
120.0
Jan
-00
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IFRS Conference Amsterdam 2008Royal Dutch Shell Share Price Performance
1
RDSA Share (EUR)
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00Ja
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RDSA vs. S&P 500
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
110.0
120.0
130.0
140.0
150.0
Jan
-00
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RDSA Share (USD)
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00
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-00
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RDSA vs. FTSEurofirst 300
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
Jan
-00
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-08
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IFRS Conference Amsterdam 2008
Top 5 Oil Companies vs. S&P 500
1
0
50
100
150
200
250
300
Jan-0
0
Jul-0
0
Jan-01
Jul-0
1
Jan-0
2
Jul-0
2
Jan-03
Jul-0
3
Jan-04
Jul-0
4
Jan-05
Jul-0
5
Jan-0
6
Jul-0
6
Jan-07
Jul-0
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Jan-0
8
FP
CVX
XOM
RDSA
BP
S&P 500
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IFRS Conference Amsterdam 2008Equity Valuation Drivers and Users
• Oil Prices• Costs • Fiscal systems
• Exchange Rates
• Interest Rates
• Company Growth Rates
• Profitability/Cost of Capital • Barriers to entry• Fade rates
• Asset Allocation• Debt/equity/alternative asset
classes/commodities
• Equity sectors relative performance
• Energy v financials?
• Hedge funds• Absolute return strategies• Long/short• Sector neutral
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IFRS Conference Amsterdam 2008
Why Reserves?
• Balance Sheet• A balance sheet provides an overview of a company’s
financial position at the given time• financial report showing the status of a companies assets,
liabilities and equity on a given date.• Shows costs not value• Fair Value – complex calculations
• Oil price volatility• Obsfucate the operating results?
• 70% of the market value is determined by the reserves• Source Dr. Bala Dharan Rice University submission to US House Committee on
Financial Services July 2004
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IFRS Conference Amsterdam 2008
Which Reserves?
• Proved Reserves - (SEC Disclosure)• Major oil companies – comparability & benchmarking• US capital market listing
• US companies• North American• Europeans• Chinese
• Smaller E&Ps• Toronto• London AIM Market• Oslo
• NI 51-101• Competent Person Reports (CPRs)
• 1P, 2P reserves• 3P • Contingent resources• Prospective resources
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IFRS Conference Amsterdam 2008Reserves replacement and growth
• Importance of replacing production and growing reserves• Growth = (reserve replacement less 100%)/reserve life
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
80% 90% 100% 110% 120% 130% 140% 150% 160% 170% 180% 190% 200% 210%
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IFRS Conference Amsterdam 2008
Reserve disclosure – Norsk Hydro
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IFRS Conference Amsterdam 2008
Pemex Reserves Disclosure 20F
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IFRS Conference Amsterdam 2008Pemex Reserves Disclosure Webcast
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IFRS Conference Amsterdam 2008Pemex Reserves Disclosure Webcast
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IFRS Conference Amsterdam 2008
Revus Prospective Resources Disclosure
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IFRS Conference Amsterdam 2008
Revus Prospective Resources Disclosure
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IFRS Conference Amsterdam 2008
Revus Prospective Resources DisclosureRevus Prospective Resources Disclosure
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IFRS Conference Amsterdam 2008
Revus Share Price Performance, 3 July 2006 – 29 September 2006
7
Revus Energy (NOK)
0
10
20
30
40
50
60
70
80
90
100
03
-Jul-0
6
17
-Jul-0
6
31
-Jul-0
6
14
-Aug
-06
28
-Aug
-06
11
-Sep
-06
25
-Sep
-06
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Daily V
olum
e (00
0's)
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78
104
122
0
20
40
60
80
100
120
140
1985-89 1990-94 1995-1999
Source : Tristone Capital
Reserve replacement 1985-1999
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IFRS Conference Amsterdam 20085 Sisters Reserve Replacement – Organic vs. All Sources
5 Sisters Reserve Replacement – Organic vs. All Sources
0%
20%
40%
60%
80%
100%
120%
140%
160%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Organic All Sources
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IFRS Conference Amsterdam 2008
5 Sisters Reserve Replacement – Oil vs. Gas
5 Sisters Reserves Replacement Oil vs. Gas
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
200%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Oil Gas Total
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IFRS Conference Amsterdam 20085 Sisters Exploration & Development Spend
5 Sisters Exploration & Development Spend
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Development Exploration
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IFRS Conference Amsterdam 20085 Sisters Finding and Development Costs
5 Sisters Finding and Development Costs
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
1999 2000 2001 2002 2003 2004 2005 2006 2007
Finding Costs F&D Costs
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IFRS Conference Amsterdam 2008
5 Sisters SEC NPV 10
5 Sisters NPV 10
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
1999 2000 2001 2002 2003 2004 2005 2006 2007
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IFRS Conference Amsterdam 2008
5 Sisters SEC NPV 10, Future Cash Inflows & Costs
5 Sisters NPV 10, Future Cash Inflows & Future Costs
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
1999 2000 2001 2002 2003 2004 2005 2006 2007
Future Cash Inflows NPV 10 Future Costs
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IFRS Conference Amsterdam 2008
5 Sisters Capex per boe/d
5 Sisters Capex per boe/d
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
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IFRS Conference Amsterdam 2008
Selected Capex per boe/d
Selected Capex per boe/d
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IFRS Conference Amsterdam 2008
Which Reserves?
• Ormen Lange
• A red herring• No one conservative in SEC reserve booking• Overstates costs• Reality an $11bn investment (400 cu metres 2.4bn boe)
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IFRS Conference Amsterdam 2008
Conclusions
• More information on reserve and value• What is conventional/non conventional
• Oil Sands• GTL/LNG• Shale gas/shale oil
• Reserves• PRMS provides framework – reserves/resources• Economic reality
• onshore US and P50 or PD• Offshore P50
• Significant or all reserve disclosure• Top 5 reserves – top x%?• Independent reserve reports up to X size
• Increase DCF/Future cost disclosure• Aggregates or major project disclosure• Reserve booking should reflect costs to production• Costs – important in a high inflation environment