Karoon Energy Ltd · ASX:KAR
Karoon Energy — Investor Day (October 2021)
58 slides from Karoon Energy's investor day presentation, Oct 28, 2021
Slide 1: 2021 Karoon Strategy Refresh Presentation
28 October 2021 Company Announcements Office ASX Limited Dear Sir / Madam 2021 Karoon Strategy Refresh Presentation Attached is a presentation to be given at 9:30am today as part of Karoon Energy’s Strategy Seminar, which will be hosted by CEO and Managing Director, Julian Fowles, and Karoon’s senio
Slide 2: Strategy Refresh Investor Briefing
Strategy Refresh Investor Briefing 28 October 2021
Slide 3: Disclaimer / Definitions
Disclaimer / Definitions Disclaimer This presentation has been prepared by Karoon Energy Ltd. The information contained in this presentation is for information purposes only and does not constitute an offer to issue, or arrange to issue, securities or other financial products. The information contai
Slide 4: Welcome
Welcome Ann Diamant SVP Communications and Investor Relations 3
Slide 5: Welcome
Welcome During the Q&A sessions, to ask questions: ▪ Via teleconference, press the star key (*) followed by the number one (1) on your telephone keypad. ▪ Via webcast, please enter question into the ‘Ask A Question’ box on your screen and click submit. Click here to submit questions via the webcast
Slide 6: Agenda
Agenda Topic Presenter Title Time Senior Vice President Communications and Investor Welcome & Speakers Ann Diamant 9:30 Relations Introductory Remarks Bruce Phillips Chairman of the Board 9:35 Building Karoon’s Future Julian Fowles Managing Director and CEO 9:40 Karoon in Brazil Antonio Guimarães Ex
Slide 7: Speakers
Speakers Bruce Phillips Julian Fowles Antonio Guimarães Ray Church Chairman of the Board Managing Director Executive Vice President Executive Vice and CEO and President Brazil President and CFO Ricardo Abi-Ramia John Steel Martin Austgulen Jo Hynes Senior Vice President Team Lead Asset Development,
Slide 8: Introduction
Introduction Bruce Phillips Chairman of the Board 7
Slide 9: Karoon’s strategic evolution
Karoon’s strategic evolution The Board’s perspective Seamless transition from explorer to producer and developer Refreshed Board and executive leadership team ▪ Address Karoon's transformation and meet challenges of our new business model ▪ All non-executive directors, including the Chairman, are in
Slide 10: Building Karoon’s Future
Building Karoon’s Future Julian Fowles Managing Director and CEO 9
Slide 11: Overview of Karoon Energy
Overview of Karoon Energy Karoon today ▪ ASX-listed and Melbourne headquartered, Brazil- focused oil production and development company ▪ Pure oil play, directly exposed to Brent oil price ▪ Independent Board and Chairman, strong ew ork Bethlehem a leton governance and assurance processes arlsbad ol
Slide 12: Karoon has entered a new era
Karoon has entered a new era Key strategic milestones achieved since Q4 2020 Fundamental change from Explorer to Producer – Karoon has delivered Highlights of Q1 FY22 Report Operational delivery Revenue from ▪ Executed transition of Baúna operations from previous operator US$71m two cargoes ▪ Delive
Slide 13: Strategic Context
Strategic Context Karoon well positioned to capture emerging oil opportunities Oil industry dynamics Liquid fuels consumption (Mb/d)1 ▪ Crude oil demand supported to at least 2035 ~20Mb/d ▪ Many years of underinvestment have led to structural undersupply, supporting uncertainty range a long term con
Slide 14: In control of our Destiny
In control of our Destiny Progressive evolution of a production company Our History Our Transformation Our Future Exploration focused Production focused Build Scale & Relevance ▪ Gas exploration company ▪ Growing oil production and ▪ Established, oil-based producer & ▪ Resource discovery focused dev
Slide 15: Karoon’s focus today
Karoon’s focus today Deliver operations and sanctioned projects to create foundation for growth Delivering our Transformation Safely execute base Baúna business ▪ Deliver production on target quarter by quarter, safely and reliably ▪ Optimise and enhance operations with financial discipline to grow
Slide 16: Build scale and relevance
Build scale and relevance Capture opportunities to build long term value Our Future Karoon operates a high quality producing asset at Baúna ▪ Mid-life with attractive, highly value-accretive near term growth, albeit production will revert to decline following project delivery ▪ Exploit near field li
Slide 17: Four priorities to deliver value
Four priorities to deliver value Supported by four enablers Operational Excellence Intervention & Patola Sustainability Project Delivery Deliver Base Business Neon Area Brazil M&A Funding Development Develop Growth Opportunities Subsurface Organisation /Capability Strategic Enablers 16
Slide 18: Indicative production profile
Indicative production profile* Production to more than double by FY2023, sustained thereafter by growth opportunities Deliver BM-S-40 base business: Deliver growth opportunities: • Operational Excellence • Interventions & Patola • Offset natural decline post FY2023 through active management of Baúna
Slide 19: Karoon in Brazil
Karoon in Brazil Antonio Guimarães Executive Vice President and President Karoon Brazil 18
Slide 20: Brazil – a major global economy
Brazil – a major global economy Oil and gas generates ~10% of GDP ▪ Globally significant economy (eighth largest), sixth largest population, fifth largest land area ▪ Well-known destination for foreign investment: ◦ Sixth largest host country in the world for foreign direct investment ▪ Population:
Slide 21: Globally significant oil and gas industry
Globally significant oil and gas industry Prospectivity and favourable fiscal terms make Brazil attractive place to invest ▪ Oil and gas industry well established with stable regulator and long tradition of respecting contracts already in place ▪ Favourable tax-royalty contract terms for post-salt l
Slide 22: Brazil oil industry attractive
Brazil oil industry attractive Since opening of market, most major international oil companies present in Brazil 23 years after market opening, Brazilian upstream sector now has diverse set of international and domestic players Campos and Santos Basin: Round Zero Campos and Santos basin: After relau
Slide 23: Majors and independents continue to invest
Majors and independents continue to invest Supported by deep and mature service industry of international and local suppliers International companies forecast to grow production … with forecast investment of >US$20 billion per year by 1 MMbpd by 20251 through to 2030 Brazil Oil Production Outlook by
Slide 24: Karoon has long and successful history in Brazil
Karoon has long and successful history in Brazil Since entering Brazil in 2007, Karoon has developed strong operational organisation Karoon has become significant player in Brazilian O&G market 2007 2012–2014 2018 Q2 2019 Q4 2020 Q2 2021 FID on Baúna Entered Brazil Drilled six Declaration of Assumed
Slide 25: Operating and Delivery Excellence
Operating and Delivery Excellence Ricardo Abi-Ramia Senior Vice President Operations, Karoon Brazil 24
Slide 26: Baúna: Karoon’s anchor asset in Brazil
Baúna: Karoon’s anchor asset in Brazil High quality producing field with excellent sub-surface characteristics ▪ Baúna came onstream in 2013 Seismic derived 3D models used for field management and development planning ▪ Production peaked at 70,000 bopd, >135 MMbbl produced to date ▪ Karoon acquired
Slide 27: HSSE core to all Karoon activities
HSSE core to all Karoon activities Focus on setting strong safety culture throughout Baúna operations ▪ Fully integrated operating management system developed Achievement Target ◦ Ensures comprehensive and robust risk management ▪ One LTI on supply vessel training, pre-operatorship, with no signific
Slide 28: Maximising production through high operational uptime
Maximising production through high operational uptime Focus on operational excellence to support facilities availability Focus on process safety, facility integrity & preventive maintenance ▪ Maximising production requires facilities to have physical integrity: ○ Minimising unplanned shutdowns ○ Red
Slide 29: Sustaining production through active management
Sustaining production through active management Aim to mitigate decline rate to <15% and find new oil Continuously assessing production enhancing opportunities Indicative Production Profile (MMbbl)* ▪ Focus on extracting maximum value and resource from Baúna asset 8 - 10 ▪ Multidisciplinary focus on
Slide 30: Lowering unit operating cost
Lowering unit operating cost Project delivery and production enhancements adds scale, drives down unit operating cost ▪ Goal is to maintain low cost structure, ensuring field commerciality 3% 6% and sustainability by extending end of field life and maximising 5% FPSO – Charter Costs margin FPSO – Op
Slide 31: Baúna interventions and Patola development on track
Baúna interventions and Patola development on track* Forecast to more than double current production, to >30,000 bopd in early CY2023 Baúna well intervention project Patola Development ▪ Targeting 5,000 – 10,000 bopd incremental production ▪ Targeting first Patola production in early CY2023 ▪ Expect
Slide 32: Intervention and Patola project execution and governance
Intervention and Patola project execution and governance Comprehensive approach in place to deliver projects Governance processes tailored to each specific project Project delivery team managing execution Risk management processes to anticipate and mitigate possible risks to safety, schedule, cost o
Slide 33: Neon Area Hub Development & Subsurface
Neon Area Hub Development & Subsurface John Steel Team Lead Asset Development, New Business & Exploration 32
Slide 34: Neon hub development
Neon hub development Within Karoon’s Southern Santos heartland Great address Karoon portfolio Subsurface Characteristics Goiá Neon Baúna 50km 50km Clorita Brazilian offshore oil basin schematic cross-section ▪ Bra ilian offshore basins world renowned for “Super Basin” scale prospectivity ▪ Karoon fo
Slide 35: Neon Oil Field
Neon Oil Field Alternative development concepts being explored, to maximise value ▪ Neon oil field discovered by Echidna-1 exploration well in 2015 Echidna-1 ▪ Located 60km NE of Baúna in ~300m water depth ▪ Targeted reservoirs encountered <2km burial depth ▪ Contains high quality 39º API light oil
Slide 36: Pathway to drive Neon value
Pathway to drive Neon value Revised Neon development concept could drive significant value upside Achieved Under Evaluation Opportunity Potential 2 2 value Field Contingent Resources1 full potential 1C 2C 3C (MMbbl) (MMbbl) (MMbbl) Value to realise Neon 30 55 92 Illustrative Goiá 16 27 46 Pathway Ex
Slide 37: Neon area hub development optionality
Neon area hub development optionality Resource expansion beyond Neon and development optionality being evaluated Incremental Resources ▪ Potential for increased recovery from Development Optionality Neon field Neon West ▪ Production rates of >30,000 bopd modelled (100%) Neon West ▪ Goiá field subsur
Slide 38: Possible Neon control drilling to meet multiple objectives
Possible Neon control drilling to meet multiple objectives Focus on removing subsurface uncertainty and derisking resource base ▪ Potential control well to assess remaining subsurface uncertainties, subject to meeting internal business case ▪ Drilling strategy will be defined based on key risks and
Slide 39: Revised concept process and timeline
Revised concept process and timeline Disciplined approach to ensure project robustness ▪ Maersk drilling rig being evaluated as potentially cost-effective opportunity to progress Neon Subject to success development ▪ Successful control well will: Q2 2023 Enter Concept Select Phase ◦ Validate resourc
Slide 40: Nearfield opportunities in Karoon’s heartland
Nearfield opportunities in Karoon’s heartland Leverage >10 years experience to maximise value in Santos Basin heartland ▪ Refreshed Strategy to focus on: ◦ Near field exploitation around Baúna Neon West São Paulo Brazil ◦ Build resource base to improve Neon project Emu-1 Echidna-1 scale and robustne
Slide 41: Brazil M&A
Brazil M&A Martin Austgulen New Business and Reservoir Manager, Brazil 40
Slide 42: Brazil M&A potentially a key driver of growth
Brazil M&A potentially a key driver of growth Unique opportunity with Petrobras and majors restructuring their portfolios ▪ Brazil to see significant production growth, driven by Petrobras and Majors’ investment plans in world class pre-salt fields ▪ Legacy assets in conventional shallow water and d
Slide 43: Major divestment program underway
Major divestment program underway High quality opportunities becoming available ▪ More than US$40 billion in O&G transactions since 2015 ▪ Petrobras has stated target of US$25-35 billion* still to be divested across Upstream, Midstream and Downstream ▪ Petrobras divestment process well-established w
Slide 44: Applying Karoon’s technical and commercial skills
Applying Karoon’s technical and commercial skills Actively assessing inorganic growth options through a disciplined process ▪ Karoon actively screening for inorganic growth opportunities ▪ Several high-quality assets expected to be marketed over next 24 months ▪ Karoon well placed to take advantage
Slide 45: Sustainability
Sustainability Jo Hynes HSSE & Sustainability Manager 44
Slide 46: Karoon’s five pillars of sustainability
Karoon’s five pillars of sustainability Underpinned by oversight from Board Sustainability and Operational Risk Committee ▪ Safety is our first priority HSE ▪ Working closely with FPSO operator to improve already strong safety record, >3.5 years without a Lost Time Incident ▪ arbon management core f
Slide 47: Carbon Neutral FY 2022
Carbon management action plan – carbon neutral in FY2022 As a new oil producer, Karoon has opportunity to achieve meaningful emissions targets Carbon Neutral on Baúna-Patola* now Carbon Carbon Neutral on new assets within Net Zero Neutral five years of purchase* 2035 FY 2022 Internal carbon pricing
Slide 48: Carbon Management Action Plan to achieve emissions targets
Carbon Management Action Plan to achieve emissions targets First priority is to reduce emissions where possible Assess investments Purchase additional Internal carbon Avoid and Reduce in high quality offsets if needed pricing First priority is to avoid or Assessing investment in Until generating own
Slide 49: Funding and capital priorities
Funding and capital priorities Ray Church Executive Vice President and CFO 48
Slide 50: Strong and improving cash position
Strong and improving cash position Consistent Baúna production delivering strong cash flow foundation ▪ Current Baúna production provides solid foundation for Quarterly Revenue v Realised Oil Price per bbl growth. In FY21, generated oil revenues of US$171 million 1 cargo 2 cargoes 3 cargoes 2 cargoe
Slide 51: Broadening funding sources
Broadening funding sources First debt facility secured, substantial borrowing base ▪ New US$160 million reserve-based, non-recourse facility to fund Facility amount during period – US$ million Patola development an important step in diversifying funding mix to include debt finance 180 ▪ Cost-competi
Slide 52: Priority uses of capital
Priority uses of capital Deliver safe and reliable operations ▪ Deliver production from on-going operations ▪ Investment in long term maintenance to maximise life of facilities Build and maintain strong, flexible ▪ Meet debt obligations and covenants Order of Priority balance sheet ▪ Develop new sou
Slide 53: CFO priorities
CFO priorities Strengthening governance processes around Scalable, clear & high-impact internal Capex and Opex, systems simplification, disciplines, mature & optimal debt broadening growth-funding sources funding sources Capital spend – Baúna interventions and Patola delivery Capital allocation fram
Slide 54: FY2022 guidance unchanged
FY2022 guidance unchanged1 Will be reviewed with H1 2022 results Low High Production (MMbbl) 4.2 4.6 Costs ▪ Unit Production Costs (US$/bbl)2 28 32 ▪ Other Operating Costs (US$ million)3 15 17 ▪ Unit DD&A (US$/bbl)4 12 13 Investment Expenditure ▪ Intervention and Patola Projects (US$ million)5 100 1
Slide 55: Summary
Summary Julian Fowles Managing Director and CEO 54
Slide 56: Karoon well positioned to deliver significant growth in value
Karoon well positioned to deliver significant growth in value Transformation from explorer to producer with clear growth path Successful transition from explorer to oil producer following acquisition of Baúna ▪ One of the only companies with pure oil exposure listed on the ASX ▪ 100% owner/operator
Slide 57: Q&A
Q&A 56
Slide 58: Karoon Energy