Beach Energy Limited · ASX:BPT
Beach Energy — Shareholder Meeting (November 2010)
80 slides from Beach Energy's shareholder meeting presentation, Nov 25, 2010
Slide 1: Beach Energy Limited 2010 Annual General Meeting
BEACH IENERGY Beach Energy Limited 2010 Annual General Meeting 4 “Substantial upside does exist to our valuation (multiples of our valuation) if BPT commercialises its shale gas acreage ...” Euroz 23 November2010 “Out to Impress in the Cooper ” “BPT continue to re-focus on the resource upside in the
Slide 2: Compliance statements
For personal use only Please take a moment to read our compliance statements in relation to today’s presentation. 2
Slide 3: Chairman's and Managing Director's addresses
Chairman’s address * Performing in a challenging environment ¢ Our corporate responsibilities Managing Director’s address ° The Beach strategy ° Highlights of the year * Positioned for growth ° Key catalysts for FY11 2010 AGM - 25 November 2010 Slide 3 FOr personal use only
Slide 4: Chairman's welcome
For personal use only Good Morning, Ladies and Gentlemen. I am delighted to present this report at this, the Company’s 49th Annual General Meeting, and the first as Beach Energy Limited, following the shareholder’s approval to change the company’s name at our AGM last year. We would like to acknowle
Slide 5: Strong financial position in 2010
For personal use only Beach finished the 2010 financial year in a strong financial position. Our balance sheet was not burdened by debt, we continued to pay a partially franked dividend consistent with the last nine years, and we had $170 million in cash, which subsequently rose to over $200 million
Slide 6: Shareholder returns and growth outlook
For personal use only If you bought a Beach share in 2002 for 30 cents and sold it today for [68] cents you would not only have made a 38 cent capital gain, you would have earned a further 15 cents in dividends along the way giving you a 177% return or 22% per year. In the last two years, we have ha
Slide 7: Cooper Basin flooding response
For personal use only Every forty years or so, in eastern central Australia, the Cooper Creek and surrounding regions experience extensive flooding. Although we can never predict the exact years, we know to expect it, and plan accordingly. There is usually some forewarning, as mostly the flooding is
Slide 8: Resources tax uncertainty
For personal use only As outlined in my Chairman’s Report contained in the Annual Report, the energy industry has been affected by the uncertainty caused by the proposed introduction of a Resources Super Profits Tax (RSPT), and its subsequent proposed replacement with the extension of the Petroleum
Slide 9: Shift toward gas
For personal use only Part of our name change from Beach Petroleum to Beach Energy last year was to reflect our move from being predominantly an oil producer to a significant gas producer. Beach is focusing on increasing gas production from the Cooper Basin via both our operated shale gas exploratio
Slide 10: Safety
For personal use only Beach is committed to making safety our number one priority. From 2011, PIRSA will classify Beach as a low supervision operator for our production operations. Low supervision is achieved when PIRSA have confidence in the operating capabilities of a company with a significant we
Slide 11: Community support
For personal use only Recently Beach announced that it will be a major partner of the Julian Burton Burns Trust for the next three years to assist the trust in expanding its Aboriginal Communities Prevention Strategy through the APY Lands. With Beach’s assistance the Burns Trust aims to engage and e
Slide 12: International community efforts
For personal use only In addition to our local initiatives, we have started making efforts in a small way to support communities in other countries in which we may one day operate – we presented 22,000 mosquito nets to the Moravian mission who have health clinics in the local villages along Lake Tan
Slide 13: Thanks and farewell
For personal use only A special thanks and farewell to Hector Gordon. Hector has been with Beach for the past 14 years and has helped steer the company through a period of significant activity. During his time Beach has grown from being a small joint venture partner in two non-operated fields in the
Slide 14: Managing Director's address
For personal use only Good Morning, Ladies and Gentlemen. I am delighted to present this report at this, the 49th Annual General Meeting of our company, Beach Energy Limited. As I said last year, our new name is a change that is more in keeping with a world where clean, low carbon energy will be in
Slide 15: Global energy scene: Ask JOE
For personal use only Before I review the year’s highlights – and challenges – I think it’s worth discussing the global energy scene. The invitation on the slide says, “Ask JOE.” So who is JOE and why should we consult him? JOE stands for the Joint Operating Environment report put out by the United
Slide 16: Oil supply crunch warnings
For personal use only They are not alone. A study commissioned by Lloyds of London on sustainable energy security and published a few months ago states (again among other cautionary statements) that: • The next five years are critical as Asian-Pacific countries demand more oil in total than the Midd
Slide 17: Oil price estimates for 2015
For personal use only Whichever way you look at it, the range of estimates for oil prices in 2015 from the various sources cited indicate a substantial increase from today’s prices. The mid range is certainly around USD140 to 160 per barrel, around double today’s pricing. The author of the Lloyds/Ch
Slide 18: IEA oil forecasts
For personal use only If we refer to forecasts by the International Energy Agency, the points are again driven home. Look at the graph on this slide carefully. A lot will depend on oil fields “yet to be found.” The IEA says that: • Oil will remain the dominant fuel for primary energy to 2035; • The
Slide 19: Eastern Australian gas contracts expiring
For personal use only So natural gas will have a very large role to play over the next century and beyond. It is a cleaner burning fuel because it has inherent in its molecular structure a high proportion of hydrogen. I call it – unashamedly – a “high hydrogen fuel.” What will drive demand for this
Slide 20: Asian LNG demand
For personal use only Of course, the eastern Australian gas demand is small relative to the emerging demand from Asia. Uncontracted demand could reach more than 80 million tonnes of LNG per annum by 2020, with the largest market opportunity being Japan. The Japanese market is a particular niche that
Slide 21: Beach strategy to expand and grow
For personal use only Against this domestic and global backdrop, it’s time to reiterate Beach’s strategy to expand and grow. As shareholders, you will know that this strategy has been in place for a number of years. To set the Company in a position to take advantage of the trends we see has required
Slide 22: Develop booked gas and unlock shale gas
• develop our existing booked gas resources in the Cooper and Gippsland; and • unlock the large shale gas opportunities we see, not just in the Cooper Basin, but elsewhere. For personal use only 21
Slide 23: Growth options and analyst targets
For personal use only As mentioned, I am disappointed that the underlying potential of our company is not reflected in the current share price. Our growth options are diverse and each opportunity has the potential to make a material contribution to the underlying value of our business. This potentia
Slide 24: Growth pathways and catalyst points
For personal use only This diagram shows our timeline and our expectations for these parallel pathways for growth. The real catalyst points to achieve validation in the eyes of the market (and, with hope, a re-rating in share price) are flagged: • In the case of shale gas, when credible partners wit
Slide 25: Finding more oil
For personal use only But where should we look to find more oil? Our knowledge of Australian basins to date suggests that the country is more prospective for gas than oil. Yes, Bass Strait has proved prolific in its lifetime and so has the northwest offshore part of the continent. But getting a posi
Slide 26: Highlights and challenges of the year
For personal use only Now that I’ve provided the background, it’s time to review the highlights – and challenges – of the year. The overriding challenge has been to maintain production from the Cooper during a flooding event that hasn’t been seem there for nearly forty years. It does happen. I am ol
Slide 27: Year achievements
For personal use only It’s a credit to our team that they have had the foresight to build pipelines and other mitigating measures that have enabled us to keep pumping oil where others have been shut in. It’s a credit to Beach’s teams in the field, who have faced severe challenges with patience and h
Slide 28: Production and sales
For personal use only Production was certainly down, largely due to the flooding in the Cooper, but those fields in production have performed consistently, in some cases above expectations. Oil from the Western Flank continues to be a strong performer, so that, even though oil production was limited
Slide 29: Reserves and contingent resources
For personal use only Even though we produced 7.3 MMboe and exploration and development activities were cut back drastically because of the flooding, Beach’s Proved and Probable (2P) reserves position was maintained at 66 MMboe. But at this point, I should note that behind this solid reserves base i
Slide 30: Cooper Western Flank success
For personal use only I’ve mentioned the success story of the Cooper Western Flank, an area that Beach identified ahead of the pack ten years ago. Our pioneering discoveries have allowed us to build an extensive system of roads, pipelines and other infrastructure in the region. We have, so to speak,
Slide 31: Egypt and Gippsland projects
For personal use only Our position in Egypt continues to build, although we are in the hands of the operator of the North Shadwan project when it comes to bringing oil from our first development to market. The initial oil production phase (which we have known as “the BMG Project”) of our offshore Gi
Slide 32: Positioned for growth: Finding more oil
Positioned for growth FINDING MORE OIL BEACHENERGY FOr personal use only 31
Slide 33: Building oil production in Australia
For personal use only Despite what I have said, we continue to see good opportunities to build Beach’s profitable oil production in Australia. The Cooper Western Flank remains as a primary focus, but our experience and success in the Bakken oil play of North Dakota in the USA leads us to believe tha
Slide 34: Proposed Impress Energy merger
For personal use only We have an extensive program of exploration and development ready to start in our existing tenements along the Western Flank, comprising a total of 15 wells. If Beach’s proposal to merge with Impress Energy Limited is successful, I would expect that this program of drilling wil
Slide 35: Egypt opportunities
For personal use only As I’ve already stated, there are bigger opportunities in countries such as Egypt, for what we believe are similar levels of risk compared with the Cooper and elsewhere in Australia. 34
Slide 36: Egypt: North Shadwan, Abu Sennan, Mesaha Graben
For personal use only Egypt has an oil and gas industry that is well established, that has attracted and continues to attract major companies, and that is backed by a stable regulatory and fiscal system. We have already been involved in developing our first North Shadwan near- shore oil field. Note
Slide 37: Abu Sennan concession
For personal use only Abu Sennan is noteworthy, because, like the Cooper Western Flank, it is in a region of numerous oil and gas discoveries, established infrastructure and with multiple, stacked target horizons. Much of the concession area is undrilled, because it has only recently been cleared fo
Slide 38: East African rift systems and Mesaha Graben
For personal use only I note again the emergence of the rift systems in East Africa as promising areas for oil exploration, with the potential to host fields of 100 million barrels, or greater. To put the Mesaha Graben concession in context, note its size in relation to the Gulf of Suez, stretching
Slide 39: Expanding the African portfolio: Tanzania
Expanding the African portfolio: * Tanzania 2010 AGM - 25 November 2010 Slide 38 FOr personal use only 38
Slide 40: Tanzania PSA and Lake Tanganyika South
For personal use only We were delighted to sign our Petroleum Sharing Agreement (PSA) with the Tanzanian Government in June this year. The PSA has been the subject of long and patient negotiations with the Tanzanian authorities, but with a lot of goodwill on both sides. The Lake Tanganyika South con
Slide 41: Natural oil seeps on Lake Tanganyika
For personal use only A quick glance at an image on the Google Earth site certainly shows a large black zone at the top end of the lake. This has been correlated in the field with oil slicks that have been noted on the lake’s surface over many years. Laboratory tests have confirmed that the samples
Slide 42: Interest from major oil companies
For personal use only Even at this early stage of exploration, Beach has fielded enquiries from major oil companies in relation to this project. 41
Slide 43: Majors active in the region
For personal use only And the Majors have certainly descended on the region in droves. 42
Slide 44: Unconventional approach
For personal use only Part of our approach is to be unconventional. This means more than our stated ambition to stay ahead of the pack. It also means that we fully understand and have first hand experience of the “unconventional” oil and gas revolution that has taken the USA and other countries by s
Slide 45: Otway, Gippsland and Bakken positions
For personal use only I have spent much of this year talking about the shale gas potential of the Cooper Basin. Now it’s time to say that we have also been quietly amassing “real estate” in other attractive areas, notably the onshore Otway Basin and the onshore Gippsland Basin. Our entry into the Ba
Slide 46: Bakken play snapshot
For personal use only Here’s a quick snapshot of the Bakken play and the location of Beach’s wells. But, in particular, note how rapidly oil production from the Bakken has accelerated over the last few years as a result of new developments in “unconventional” technologies. 45
Slide 47: Emerging gas demand and prices
For personal use only I reiterate the importance of emerging gas demand and the higher prices that I and others believe will result. 46
Slide 48: Gas demand and pricing signals
For personal use only The flags on demand and pricing are there for anyone willing to take off their blinkers and look closely. 47
Slide 49: Santos GLNG gas supply approach
For personal use only Firstly, the approach by Santos to the South Australian Cooper Basin Joint Venture for the supply of 750 PJ of gas to Santos’ GLNG Project signals the strategic importance of the Cooper Basin asset base. Secondly, that pricing will be oil-linked sends a strong message for futur
Slide 50: Shale gas versus coal seam gas
For personal use only This slide explains what we mean when we talk about “shale gas,” and how it differs from coal seam gas. Because most of the intensive development of the resource is at depth, through the drilling of long horizontal wells, its surface expression is very much smaller than that of
Slide 51: Unconventional gas production trends
For personal use only As far as eastern Australia is concerned, predictions are that unconventional gas production will overtake production from conventional sources within the next few decades. Will all of this come from coal seam gas, particularly when large scale dewatering in areas of good agric
Slide 52: Resource plays as real estate
For personal use only All these so-called “resource plays”, whether shale gas or coal seam gas are effectively investments in real estate. They tend to be bought and sold by the area of land (per acre in the USA ). Sales as high as $10,000 to $15,000 per acre have been recorded in the USA. If you an
Slide 53: Nappamerri Trough shale position
For personal use only We identified the possibilities of shale gas nearly four years ago and moved quietly to secure an extensive position in what we considered, after, lengthy analysis, to be the prime region – the Nappamerri Trough of the Cooper Basin, adjacent to Moomba and major gas trunklines.
Slide 54: Shale gas testing program
For personal use only Now we have embarked on a major program of testing this proposition. Our experience in the USA leads us to believe that the most efficient way to proceed to early commercial development – and to mitigate risk – is to do our homework thoroughly. This program is designed to evalu
Slide 55: Gippsland gas and LNG offtake
For personal use only I mentioned that Beach is looking at possibilities beyond the Cooper. As I have mentioned, the tenements which were the focus of the BMG oil project are now under consideration for gas development, with Beach and ITOCHU expressing an interest in gas offtake for the proposed new
Slide 56: Wombat field unconventional testing
For personal use only This could be a ready fit in the event that Beach’s intended testing of unconventional gas in the Wombat field, onshore, near the Longford gas hub, is successful. This is scheduled for early next year. It will address a considerable amount of gas in place (of around 293 billion
Slide 57: Commercialising unconventional gas
For personal use only So, Beach is now becoming active on a number of fronts as it strives for the unconventional. In fact we believe, along with ExxonMobil, that the unconventional will become the conventional. ExxonMobil has stated its belief that unconventional gas will be 70% of US supply by 203
Slide 58: Accelerated timeline
For personal use only And we are now doubling our efforts to accelerate even the timeline shown. 57
Slide 59: Active year ahead
For personal use only I really do expect that the coming year will be one of the most active in Beach's history. We have an exploration team champing at the bit while they’ve waited for the flooding to abate and for concessions to be awarded. 58
Slide 60: Key catalysts for FY11
For personal use only Assuming we are successful in merging with Impress Energy, you may expect to see the Cooper Western Flank program step up considerably. Once we have obtained approval for a further ten wells in the Abu Sennan concession of the Western Desert in Egypt, a solid program of drillin
Slide 61: Closing remarks
For personal use only Finally, let us remember this. We share the Cooper with many others. A year ago, after many years of drought, it looked like a Martian landscape. To see it like this, revitalised and blooming, is a wonderful thing. This is not a time to complain about lost production, because w
Slide 62: Resolutions for voting
Beach Energy Limited Annual General Meeting 25 November 2010 Resolutions for voting FOr personal use only 61
Slide 63: Proxy votes received
* Beach has received 2,359 valid proxy votes * This represents 45.7% of the Votes 2010 AGM - 25 November 2010 FOr personal use only 62
Slide 64: Remuneration report resolution
* To consider and put to a non-binding vote the following resolution: “That the remuneration report for the financial year ended 30 June 2010 be adopted.” 2010 AGM - 25 November 2010 Slide 63 FOr personal use only 63
Slide 65: Remuneration report voting results
For Against Open Total Valid Abstain Total (Usable) Available number of At Discretion Votes valid proxy of Proxy votes 441,926,678 | 49,158,318 10,975,699 | 502,060,695 | 51,039,634 | 553,100,329 Adoption of Remuneration Report 88.02% 9.79% 2.19% 100% 2010 AGM - 25 November 2010 Slide 64 64
Slide 66: Re-election of Mr Moretti
Resolution 2 — Re-election of Mr Moretti as a director a BEACH ENERGY ¢ Mr Franco Giacomo Moretti 2010 AGM - 25 November 2010 Slide 65 65
Slide 67: Moretti re-election resolution
* To consider and, if thought fit, pass the following resolution as an ordinary resolution: “That Mr Franco Giacomo Moretti, who retires by rotation pursuant to the constitution of Beach and who, being eligible, offers himself for re-election is re-elected as a director of Beach.” 2010 AGM - 25 Nove
Slide 68: Moretti voting results
For Against Open Total Valid Abstain Total (Usable) Available number of At Discretion Votes valid proxy of Proxy votes 487,765,024 4,252,839 10,917,754 | 502,935,617 | 50,164,712 | 553,100,329 Re-election of Mr Moretti 96.98% 0.85% 2.17% 100% 2010 AGM - 25 November 2010 Slide 67 67
Slide 69: Re-election of Dr Alley
Resolution 3 — Re-election of Dr Alley as a director (tae CH ENERGY 2010 AGM - 25 November 2010 * Dr Neville Foster Alley Slide 68 68
Slide 70: Alley re-election resolution
* To consider and, if thought fit, pass the following resolution as an ordinary resolution: That Dr Neville Foster Alley, who retires by rotation pursuant to the constitution of Beach and who, being eligible, offers himself for re-election is re-elected as a director of Beach. 2010 AGM - 25 November
Slide 71: Alley voting results
Resolution 3 — Re-election of Dr Alley as a director CH ENERGY Glos For Against Open Total Valid Abstain Total (Usable) Available number of At Digeretian Votes valid proxy of Proxy poe received 472,713,683 | 19,263,453 10,936,533 | 502,913,669 | 50,186,660 | 553,100,329 Re-election of Dr Alley 94.0%
Slide 72: Executive Incentive Plan resolution
* To consider and if thought fit pass the following resolution as an ordinary resolution: “That the issues of shares by Beach under the new Beach Executive Incentive Plan, the key terms of which are set out in the Explanatory Statement, be approved as an exception to listing rule 7.1.” 2010 AGM - 25
Slide 73: Executive Incentive Plan voting results
For Against Open Total Valid Abstain Total (Usable) Available number of At Discretion Votes valid proxy of Proxy votes received Approval of | 418,948,136 | 118,973,918 | 11,159,803 | 549,081,857 | 1,430,646 | 550,512,503 Beach Executive Incentive Plan 76.30% 21.67% 2.03% 100% 2010 AGM - 25 November
Slide 74: Short Term Incentive Offer resolution
* To consider and, if thought fit, pass the following resolution as an ordinary resolution: “That Beach approve the acquisition of performance rights in Beach by Mr R G Nelson, the Managing Director, under the Beach Energy Limited Short Term Incentive Offer upon the terms set out in the Explanatory
Slide 75: Short Term Incentive voting results
For Against Open Total Valid Abstain Total (Usable) Available number of At Discretion Votes valid proxy of Proxy votes received Resolution 5 - Approvalof | 493,150,527 | 116,829,546 | 11,175,667 | 549,155,740 | 1,408,864 | 550,564,604 participation of MrRG Nelson in the Beach 2010 Short Term 76.69%
Slide 76: Long Term Incentive Offer resolution
* To consider and, if thought fit, pass the following resolution as an ordinary resolution: “That Beach approve the acquisition of performance rights in Beach by Mr R G Nelson, the Managing Director, under the Beach Energy Limited Long Term Incentive Offer upon the terms set out in the Explanatory S
Slide 77: Long Term Incentive voting results
For Against Open Total Valid Abstain Total (Usable) Available number of At Votes valid proxy Discretion of votes Proxy received Resolution 6 - Approval of | 419,444,181 | 118,591,004 | 11,170,343 | 549,205,528 | 1,359,076 | 550,564,604 participation of MrRG Nelson in the Beach 2010 Long Term 76.38%
Slide 78: Constitution amendment resolution
* To consider and if thought fit, pass the following resolution as a special resolution: “That the constitution of Beach be amended by deleting clause 22.4.” 2010 AGM - 25 November 2010 Slide 77 FOr personal use only 77
Slide 79: Constitution amendment voting results
For Against Open Total Valid Abstain Total (Usable) Available number of At Votes valid proxy Discretion of votes Proxy received Amendment 487,002,239 3,379,032 11,520,322 | 501,901,593 | 51,196,164 | 553,097,757 to the constitution 97.03% 0.67% 2.30% 100% 2010 AGM - 25 November 2010 Slide 78 78
Slide 80: Questions and meeting close
Questions and meeting close BEACH ENERGY Please join us for lunch after the meeting in the foyer 2010 AGM - 25 November 2010 Slide 79 79