September Quarter Update Pateke workover completed Adelphi: takeover completed with strong reserves reported Board renewal process completed Yemen drilling continued, with encouragement Shale gas upside now understood AWE net production of 1.56 million boe Sales revenue of $63 million $75 million cash, no debt
Perth Basin connected by under utilised pipeline to Perth gas market Strong predicted demand growth in WA gas market Key Australian gas market Price will support shale gas development
Predicted WA gas demand and supply capacity the chart shows 2009 950 Mill scf/d by 2025 gas demand expected to be 1,800 Million scf/d
AWE Forward Strategy
slide 43 In the long term, the conventional oil & gas E&P company is under pressure on several fronts: (a) Profitability Fewer discoveries Smaller fields Increased development costs Offset by increasing oil and gas prices (b) Environmental performance Montara & Gulf of Mexico oil spills are unacceptable (c) Emerging technologies eroding our markets CSG, shale gas Electrification of transport, particularly motor vehicles Renewable technologies (geothermal, solar, wind, tidal, etc) replacing gas in homes and in power generation facilities To grow, AWE needs to strategically reposition itself as an upstream energy company
slide 44 1. Grow our conventional upstream activities Oil & gas E&P (eg BassGas, Tui, Casino, Cliff Head, etc) Will continue as our core activity for at least the next decade Currently 80-90% of company value, but may reduce over time as we 2. Move selectively into unconventional energy Primarily shale gas & liquids (but not excluding CSG, geothermal, etc where we can use our core competencies) Currently 10-20% of company value, but potential to increase significantly over time AWE already positioned as Australias pre-eminent shale gas & liquids co. 3. Monitor emerging energy technologies for opportunities Emerging transportation fuels, renewable power generation, CO2 sequestration, etc Currently no company value, with only small steps in the future to understand the threats & be in a position to exploit any opportunities
Conclusion; The outlook is steady as she goes. Not hugely bullish like a junior explorer. Pluses They are established in the WA gas market Exploring for shale gas $75 million cash, no debt Market Cap ($M): 903 Equiv. Shares (M): 522
AWE has competition from other emerging energy sources..
Emerging technologies eroding our markets CSG, shale gas Electrification of transport, particularly motor vehicles Renewable technologies (geothermal, solar, wind, tidal, etc) replacing gas in homes and in power generation facilities
Dividend: No Divi paid at present
" so need price growth instead to repay patient shareholders" Share price $1.70 "could be 17% upside in 6 months i hope" "So not a 10 bagger at this point"
