Investing in Oil and Gas: West Africa Growth IP Week, London 2013 Austin Avuru MD / CEO SEPLAT Petroleum Development Company Disclaimer This presentation contains forward-looking statements, particularly those regarding global and regional energy growth and sources of energy supply. Forward-looking statements involve risks and uncertainties because they relate to events, and depend on circumstances, that will or may occur in the future. Actual results may differ depending on a variety of factors, including product supply, demand and pricing; political stability; general economic conditions; legal and regulatory developments; availability of new technologies; natural disasters and adverse weather conditions; wars and acts of terrorism or sabotage; and other factors discussed elsewhere in this presentation. 1 Introduction Estimated 2.8% of world oil (68 bn barrels) is in Sub-Saharan Africa 44 bn barrels in the Gulf of Guinea Oil and gas play strategic role in economies of West African countries giving them power and influence on world stage Africa's contribution to world reserves has increased from ~7.0 per cent in 1995 to ~ 8 per cent in 2011 Growing reserves in Libya, Nigeria and Angola Trend likely to continue with new discoveries announced in Ghana, Africa is on an upward growth curve. This growth is underpinned by a longer-term process of economic and regulatory reform that has occurred across much of the continent. Ernst and Young Egypt, Algeria, Libya, Tunisia, Mozambique, and Uganda in 2011 West Africa is new petroleum province with multi billion barrel potential The majors are there, and so are many smaller players Source: BP statistical review of world energy 2012 2 West African Resources Reserves, 1/1/2012 Country Commercial Discovery First prod Oil, Bbbls Gas, Tcf 1 NIGERIA 1956 1958 37.2 180.5 2 GHANA 2007 2010 0.7 5 3 MAURITANIA 2001 2006 0.1 1.0 4 COTE D’IVOIRE 1977 1980 0.1 1.0 5 CAMEROON 1972 1977 0.2 4.7 6 EQUATORIAL GUINEA 1984 1991 1.7 1.3 7 GABON 1962 1967 3.7 1.0 3 MAURITANIA CHAD GHANA 8 CHAD 1972 2003 1.5 0 9 CONGO 1984 1957 1.9 3.2 10 ANGOLA 1955 1956 13.5 10.9 COTE D’IVOIRE 4 2 8 NIGERIA 1 CAMEROON 5 EQUATORIAL GUINEA 6 GABON CONGO 7 9 10 ANGOLA Sources: BP Statistical Review 2012 / US EIA 3 Significant Reserves Growth Three broad bands of Club Membership 1955 - 1975 Angola, Nigeria, Gabon, Cameroon, Chad 1975 - 1995 Cote d’Ivoire, Equatorial Guinea, Congo RECENT Mauritania, Ghana Sources: BP Statistical Review 2012 / US EIA 4 Significant Reserves Growth Oil and gas activity in West Africa West Africa Reserves (1995 - 2011) 95 100 Nigeria and Angola have largest 86 Billion Boe 80 60 extends from Mauritania to Angola reserves, ~ 86% of the total subregion’s reserves as of January 2012 67 New production countries - Chad, 50 Ghana, Côte d’Ivoire and Mauritania have joined Nigeria, Angola, Cameroon in sub-region 40 20 Chad, Côte d’Ivoire, Liberia and 0 1995 2000 2005 2011 Mauritania have all discovered oil in commercial quantities Sub-Saharan African countries Mauritania Eq. Guinea Cote d'Ivoire Ghana Nigeria Chad Cameroun Gabon Congo Angola compete with each other to attract investment Sources: BP Statistical Review 2012 / US EIA 5 Where Will Future Growth Come From? Since 2007, West Africa has seen more success in exploration than other regions of the world – making it attractive for investment West Africa Transform Margin, deepwater West Africa, and offshore East Africa are the areas currently attracting most exploration interest Since Jubilee discovery in 2007, companies are exploring others parts of region (Ghana to Mauritania), looking for analogous Cretaceous turbidite prospects Offshore explorations in Sierra Leone and the Cote D’Ivoire look promising, making them high potential areas for investment beyond Nigeria and Angola In Sub-Saharan Africa an estimated 40 bn plus barrels of oil equivalent exist in technical reserves – most of it in Niger Delta Basin An estimated additional 55 bn barrels oil equivalent in yet-to-find resources, the second biggest region in the world after Latin America Source: Wood Mackenzie 6 Oil and Gas Future Growth Mid-sized companies hold about 46,000 sq km of acreage in the West African transform margin Deepwater activities in West Africa mostly carried out by majors; circa 80,000 sq km acreage in their possession Sources: Wood Mackenzie 7 Opportunities For Investment Opportunities exist for mid-sized companies to enter a market at the beginning of its growth story and therefore maximize returns Companies with position in frontier regions stand to gain as plays mature. Opportunity for divestment is expected over the coming years as larger companies give way to smaller independents and indigenous companies due to local content policies We expect to see more M&A activity in future, driven by majors ►As opportunities are further squeezed, consolidation across the sector will accelerate ►Competition will continue to intensify ►With dwindling opportunities and stronger players, the market will tighten Sources: Wood Mackenzie / Petroleum Africa 8 Challenges Investment Mix ►Bid rounds still cheapest entry into West African market. ►Conventional assets are in decline in mature basins, e.g. Niger Delta, and come with fiscal tightening ►Focus increasingly on exploration in frontier plays where fiscal terms are less onerous ►Discoveries and existing resources are more expensive limited by financial conservatism ►M&A appetite not too strong and most expensive Security risks, war and political tensions are some of the issues preventing growth in the sector Business environment ►Market price constraints ►Lack of enabling business infrastructure for investment to thrive ►Threat of cost inflation Sources: Wood Mackenzie 9 Summary Africa’s place as a significant producer and net exporter of oil in the world is forecast to grow to ~ 15% by 2020 due to new discoveries in West Africa and East Africa Significant growth potential exists in West African sub-region According to Wood Mackenzie, there are ~ 40 bn barrels of discovered but undeveloped reserves plus 55 bn barrels of yet-to-find Clear opportunities for investment as exploration activities in offshore deepwater West Africa recorded highest success rate in the world during 2007 – 2012 Investment opportunities exist in sub-region from exploration in frontier areas to the acquisition of mature assets, where secondary discoveries (deeper plays and bypassed plays) have recorded high success rate Investment mix of exploration, DROs and M&As are available Sources: Wood Mackenzie 10 Questions?