Investor Presentation - CHALLENGER ENERGY LIMITED ?· Investor Presentation ... ` Attractive acquisition…

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    Investor Presentation

    August 2011

  • Disclaimer

    This announcement contains forward-looking statements. Such forward-looking statements include, without limitation: estimates of future earnings, the sensitivity of earnings to oil & gas prices and foreign exchange rate movements; estimates of future oil & gas production and sales; estimates of future cash flows, the sensitivity of cash flows to oil & gas prices and foreign exchange rate movements; statements regarding future debt repayments; estimates of future capital expenditures; estimates of reserves and statements regarding future exploration results and the replacement of reserves; and where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, forward looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements. Such risks include, but are not limited to oil and gas price volatility, currency fluctuations, increased production costs and variances in reserves or recovery rates from those assumed in the companys plans, as well as political and operational risks in the countries and states in which we operate or sell product to, and governmental regulation and judicial outcomes. For a more detailed discussion of such risks and other factors, see the Companys Annual Reports, as well as the Companys other filings. The Company does not undertake any obligation to release publicly any revisions to any forward looking statement to reflect events or circumstances after the date of this release, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.

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  • Corporate Overview

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    Non Executive Chairman - Michael FryMichael holds a Bachelor of Commerce degree from the University of Western Australia, is a Fellow of Financial Services Institute of Australasia, and is a past member of the ASX. Michael has extensive experience in capital markets and corporate treasury management specialising in the identification of commodity, currency and interest rate risk and the implementation of risk management strategies.

    Managing Director - Paul BilstonPaul Bilston has a Bachelor of Mechanical engineering and a PhD in Structural engineering, with 15 yrs experience in all aspects of the oil & gas sector. He has worked in a number of senior technical, commercial and management roles for companies including Worley, GHD, AGL Energy and AJ Lucas. In recent years his focus has been on the unconventional hydrocarbon space in Australia and overseas, and most recently managed the Gloucester Gas project in NSW which was sold in December 2008 for $370M by AJL & MPO.

    Executive Director - David PrenticeDavid Prentices career includes 21 years experience in commercial management and business development within the natural resources sector, working for some of Australias leading resource companies. This has included high-level commercial and operational roles with a number of listed and unlisted resource companies.

    Chief Operating Officer David WoodleyDavid Woodley holds a Bachelor of Chemical Engineering degree, with over 22 years experience in the oil and gas sector gained in Australia, North America, UK and Europe. He has considerable experience in drilling and completion, field development planning and asset management and evaluation.

    Company Secretary Adrien WingMr Adrien Wing is CPA qualified. He practised in the audit and corporate divisions of a chartered accounting firm before working with a number of public companies listed on the Australian Stock Exchange as a corporate/accounting consultant and company secretary.

    Shares on Issue: 214,021,000Listed Options 105,222,171 1

    Unlisted Options: 11,500,000Share Price: 0.12 as of 25/08/2011Market Cap: $25.68MShareholders: 796Top 20 Holding: 50.11%Cash ~$5.9M

    Note 11: 20c Options - 30 June 2012

  • Strategy

    Identify, acquire and appraise material upstream oil and gas exploration opportunities:

    Utilising network of global contactsPrimarily unconventional hydrocarbons, CBM, Shale Gas, Shale Oil.Low cost of entry, with primary expenditure on the drill bitHigh materiality (> 1 TCF Gas, or >10 Million bbl Oil)Projects where Challenger will act as operator

    Evaluate and high grade exploration projects to ensure efficient expenditure of shareholders funds

    Implement staged and cost effect exploration and appraisal programs to evaluate projects with an eye on the best development or exit strategy

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  • Why Unconventional Gas?

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    Deal Location Date Net Acres Value

    BHP - Petrohawk Eagleford (SA) July 11 1,000,000 US$12.0b

    BHP-Chesapeake Fayettteville (USA) Feb 11 487,000 US$4.75b

    PetroChina - Encana Cut Ridge (Canada) Feb 11 317,500 C$5.4 b

    Talisman-Sasol Montney (Canada) Dec 10 25,500 C$1.05 b

    Ev EP/Enervest Barnett (USA) Nov 10 20,200 Gross US$967M

    ChevronAtlas Marcellus (USA) Nov 10 1,209,000 US$3.2 b

    Mitsui-Anardarko Marcellus (USA) Feb 10 100,000 US$1.4 b

    Total-Chesapeake Barnett (USA) Jan 10 270,000 US$2.5 b

    ExxonMobil-XTO Energy Various (USA) Dec 09 US $41 b

    Can test large play concepts cheaply

    Attractive acquisition targets for major Oil & Gas Companies

    Historical transactions for unconventional fields indicate

    LAND: Typical range is $9,500 to $15,000 per acre, though some much higher.

    RESOURCE:$0.4/mcf to $0.6/mcf

  • Asset Portfolio

    Mercury Stetson Shale Gas ProspectBarnett ShaleWoodford Shale

    Triple CrownHybrid Gas PlayEllenburger

    South AfricaFort Brown Shales

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  • Mercury StetsonTwo proven shale formations Barnett and Woodford

    Large prospect area

    potentially up to 55,000 acres (86 sq miles)

    Properties consistent with core areas of current shale plays.

    Significant contiguous lease position

    ~ 26,000 acres

    target ~ 35,000 acres (55 sq miles)

    Massive OGIP estimated at 360 BCF/sq mile

    Potentially > 1.5 TCF net resource to CEL

    Close to existing infrastructure & services

    Recent Barnett (only) transaction (EV Energy Partners) paid $47,700/acre for Core area

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    Prospect

    Oklahoma

    Arkoma Basin

    Ft. Worth Basin

    Hollis Basin

    Anadarko Basin

    Republic of Mexico

    G o M

    Newark Field Core Barnett

    Woodford

    Prospect offers an entry position into proven shales with HUGE UPSIDE POTENTIAL

  • Expected Stratigraphy & Thickness

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    Note: TOC results are from cuttings Actual TOC expected to be ~ 100% higher based on experience with analysis of results in the Barnett shale.

  • Elements of successful shale play

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    Element Mercury Stetson Prospect

    Kerogen Type - Target: Amorphous Kerogen Amorphous Kerogen

    Organic Richness (TOC) - Target: 2% to 6% Range: 2% to 5% Avg: Barnett 3.2%, Woodford 3.1%

    Gas in Place - Target: >100 BCF/Section (sq Mile) 360 BCF+ estimate

    Thermal Maturity - Target: 1.0 1.8% Ro 1.5% Barnett (dry gas window)1.5% Woodford (dry gas window)

    Uplift = Free Gas - Target 5,000 to 10,000 5,000 to 7,000 of uplift

    Silica (Quartz) Content - Target 30% to 80% 43% Barnett50% Woodford

    Thickness - Target: >150 415 Barnett - 185 WoodfordCould thicken significantly off structure

    Fracturing Evidence of fractured Sycamore between shales (considerable LCM)

  • Proven Shales

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    Much lower risk than shale plays in frontier areas.

    Barnett Shale

    First recognised shale gas project in US with more than 14,000 wells now drilled

    Wells in core area recovering ~ 3 BCF

    Producing 1.8 TCF/yr

    Woodford Shale

    More recently developed

    Wells in core area recovering ~ 4 BCF

    Over 1,000 wells drilled

    Producing 240 BCF/yr

  • Mercury Stetson - Go Forward Plan

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    BOOK GAS

    RESOURCE

    First vertical

    Well

    PROOF OF

    CONCEPT

    Drill 2HZ wells

    Delineation Wells

    Drill additionalVertical or

    HZ Delineation

    Wells

    Core Analysis

    BOOK GAS

    RESERVES

    Target 600 BCF 3P

    (100%)

    2nd Vertical Well

    &Seismic Program

    BOOK GAS

    RESERVES

    Target 3 TCF 3P (100%)

    BOOK GAS

    RESERVES

    Target 3 TCF 3P (100%)

    20122011 2013 and beyond

    Land Acquisition & Lease Management

  • Triple Crown Prospect

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    Dallas

    San Antonio

    Houston

    Existing Canyon Sands Fields

    Existing Ellenburger Fields

    HP PipelineHP Pipeline

    Triple CrownTriple Crown

    50 km50 km

    Development

    Edwards CountyEdwards County

  • Triple Crown Prospect- Texas

    45,000 Acres in Edwards County Texas

    Options over ~ 6,500 acres acquired

    Challenger has 80% WI (100% before payout)

    Two Targets

    Ellenburger

    Hybrid (Sand/Unconventional)

    First appraisal well successfully drilled Dec/Jan

    2011.

    Strong gas shows whilst drilling over a number

    of zones. A total of 2,300 ft of gas charged

    zones were intersected

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    Well

  • Ellenburger

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    Drilling results confirmed a significant gas charged structure potentially multi TCF gas in place

    Fractures and high porosity intersected at the top of the Ellenburger, however zone cemented during setting of casing, which likely limited gas product