PA Resources – Q4 Report

Q4 Presentation

26 February 2015

Q4 Impairments

• Impairment charges with net impact of SEK 2,100 million

» using forward curve of January 9th.

• Breach of financial covenants for both SEK and NOK bond loans.

• Balance sheet for liquidation purposes prepared.

• Equity well below 50% of the registered share capital.

• Decision to continue operations or not at EGM February 27th .

• Provided EGM votes to continue operations equity must be restored within 8 months

2

EnQuest termination

• Two transactions agreed and SPA signed in May 2013

» Sale of 70% of producing Didon Field for $23 million

» Farm-down of 70% of Zarat Permit for carry on Zarat development

• Zarat deal was conditional on Didon completion and approval of Avenant 5

• In September 2013, Didonshares transferred to EnQuest

• EnQuest began to pay cash calls and lift oil associated with a 70% interest

• $23 million was placed in escrow awaiting a letter of non-objection from DGE

• This letter had not arrived by the January 31st backstop date

• In the new oil price environment, EnQuest had no desire to complete on Didon

• The transaction has now been unwound and the $23 million returned to EnQuest

• Didon is cash negative at current oil prices and a major Opex reduction

programme is underway

3

Refinancing Process

• Planned refinancing Q3/Q4 2014 postponed due to delay in Tunisian approvals

• Deferral of interest payment from early October 2014 to early February 2015 approved by lenders in October

• Termination of the EnQuest transaction at end January led to a more challenging

short term financing situation

• Oil prices down from $100+ to $45 and currently at $60 per barrel

• Lenders yesterday approved further deferral of interest payments to March 31st 2015

• The company will present a proposal to the lenders in the next few days

• Aim to have an agreement in place before March 31st

4

Asset Update

5

• Tunisia

» ESP on Didon well failed due to breakdown of electrical insulation downhole

» Didon currently producing around 950 bopd from two wells.

» Major Opex reduction programme underway

» Remaining parties in Zarat are PA, ETAP and Joint Oil, following termination of EnQuest deal and liquidation of Sonde

» All three parties are committed to submitting UPOD and agreeing UUOA by March 31st

» ETAP and DGE advise that approval of Avenant is a priority for new Parliament

• Denmark

» Lille John 2 encountered oil with thicker reservoir column than in discovery well

» A number of well tests were performed with a maximum rate of 1,400bopd

» A sidetrack well was drilled to establish the location of the oil water contact

» PA Resources to be fully carried through this appraisal drilling by Dana

» Revised oil in place and recoverable volumes will be calculated following detailed

analysis of the well cores taken

UKCS 28th Licensing Round

• Rationale for PA Activity

» Utilise subsurface team knowledge and experience to provide growth options

» Balance of material exploration targets and existing discovered resources

» Minimise commitment levels and maximise ‘optionality’

• Central North Sea focus

» Target areas containing sunder-explored plays in the Central North Sea

» Utilising PA long-standing UK CNS knowledge and UK relationships

» Leveraging continuing improvements in 3D seismic quality

6

Ekland prospect (22/18c,19d)

• History

» Block 22/18c is a prior PAR-operated licence dropped in

2012 owing to JV flux.

» Re-bid by PAR/First Oil with solid new partnership

» Operatorship to transfer to E.On on formal licence award

• Licence Group

» E.On (40%, Op), Cairn (25%), PA (25%), First Oil (10%)

• Prospectivity

» PAR as operator fully reprocessed 3D in 2012

» Ekland prospect – ready-to-drill, non-HPHT, mid-case

prospective resources 750 bcf and 75 mmbo

» On trend with the analogous Marnock Field (600 bcf and

50 mmbo), 15km south

» Interesting wells nearby in 2015/16: 22/16 Dalziel (GdF,

drilling now), 22/13 Manhattan (Nexen, 2015), 22/19

Rowallan (ENI, 2016)

• Commitment

» One firm well in first 4 yrs, likely 2017 or 2018

7

West Teal discovery (21/24b)

8

• History

» Originally four parties but DECC would not award to Endeavour

• Licence group

» First Oil (Operator), PAR, Dyas (Each 33.3%)

• Prospectivity

» Licence contains the West Teal discovery and a number of analogous prospects, last well drilled 20 years ago

» West Teal – 1991 well with untested 80’ – 250’ oil column in Jurassic Fulmar sandstone

» New 2013 multi-client 3D data available for a re-evaluation of the block/discovery

• Commitment

» One contingent well in 4 year license period

2014 Close Out

Exploration

West Africa

• Close farm-out to SOCO

• Confirm MPS drilling target

• Secure rig for MPS well

• Acquire Block I 3D seismic

Tunisia Onshore

• Plan seismic programme

• Execute seismic programme

North Sea

• Evaluate Danish 7th round

• Apply in UK 28th round

9

Appraisal & Development

Block I

• Submit Diega POD

Zarat

• Close EnQuest farm-out

• Complete UUOA

• Submit Zarat POD

Elyssa

• Plan appraisal well

• Secure rig for appraisal well

Lille John

• Close Dana farm-out

• Develop drilling plan

• Drill appraisal well

Broder Tuck

• Pre-Development evaluation

Birgitta

• Investigate export options

• Initiate development planning if justified

Production

Didon

• Close EnQuest farm-out

• Install ESP

• Install additional ESP or drill well

Tunisian Onshore

• Review DST fields

• Identify enhancement opportunities

West Africa

• Drill Alen production well

Financial highlights

Q1

11

Production and prices in Q4

• ASENG: Continued natural decline.

• TUNISIA: Newly installed ESP failed,

production loss compensated by well D7.

100% Didon will be included from January

2015, 70% contribution in Q4, 800 boepd

• AZURITE: Production ceased November 2013.

• PRICE: Significant oil price drop.

• CURRENCY: Continued strong USD.

5 6

00

4 8

00

4 2

00

3 6

00

3 4

00

3 2

00

3 1

00

2 9

00

1 2

00

600

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14

Average production (boepd)

PAR Production 70% Didon

113

103

108106

109 108

100

72

113

102

110 109 108110

102

77

65

70

75

80

85

90

95

100

105

110

115

120

Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14

Average Sales Price (USD/bbl)

PA Sales Brent

6,52 6,716,43 6,51 6,51

6,747,24

7,81

4,08 4,04 3,90 3,94 4,10 4,02 4,03 4,19

1,11 1,11 1,07 1,06 1,08 1,10 1,12 1,05

31/3-13 30/6-13 30/9-13 31/12-13 31/3-14 30/6-14 30/9-14 31/12-14

Closing Day F/X Rates

USD/SEK TND/SEK NOK/SEK

Income statement

12

SEK million Q4 2014 Q3 2014 Jan-Dec

2014

Jan-Dec

2013

Revenue 88 155 603 1,049

Production costs -53 -49 -187 -490

Depletion O&G -57 -56 -195 -197

Gross profit -21 51 222 362

Other income and

G&A-17 - -71 -124

Termination farm-out

agreement-826 - -826

-

WD, Capital loss &

Decommissioning

costs

-1,991 - -1,991 -1,473

Operating profit -2,856 51 -2,667 -1,234

Financial items -65 -124 -365 -205

Profit before tax -2,921 -73 -3,032 -1,439

Income tax 175 -64 74 220

Profit for the period -2,745 -138 -2,957 -1,219

Q4 vs Q3

• Revenue decline due to lower sales price and

lower production.

• Other income and G&A included reversed

Azurite provision of SEK 31m in Q3.

• Terminated farm-out agreement Didon and

Zarat of SEK -826 million.

• Impairment charges of SEK -1,991 million

mainly from annual impairment tests.

• Financial items impacted by SEK 10m in

exchange gains vs. SEK -56m in Q3.

• Income tax positively impacted by reversed

deferred taxes of SEK 137 million with respect

to made impairment charges.

2014 vs 2013

• Significant impairments, capital loss,

decommissioning costs and termination farm-out

agreement for both years.

• Financial items excluding exchange gains /

losses amounted to SEK -278 (-305) million.

Impairment tests & Terminated farm-out agreement

13

Other write-downs pertain to Q7/Q10a disposal and

ESP failure

Equity impact calculated by using year-end rate of

USDSEK 7.81

Average rate for the year USDSEK 6.86

2014

Impairment losses (Gross) MUSD MSEK Equity MSEK

North Africa 155.8 1,068 1,217

West Africa 119.4 819 933

North Sea 10.1 70 79

Total 285.3 1,957 2,229

Other write-downs 5.0 34 39

Total Impairment losses 290.3 1,991 2,268

Reversal Deferred tax -19.9 -137 -156

Net impact 265.4 1,820 2,073

Reversal deferred taxes Other WD -1.1 -8 -9

Total net impact of impairment losses 269.3 1,846 2,103

Termination farm-out agreement MSEK

Upfront payment expensed -180

Adjustment abandonment cost -259

Adjusted deferred taxes -372

Other -15

Total -826

Terminated farm-out agreement of 70% interest in

each of the Didon field and Zarat license. PA now

holder of 100% in each asset.

Upfront payment of USD 23 million held in escrow

returned to EnQuest.

Didon valued to zero in impairment tests

Cash flow statement

14

SEK million Q4

2014

Q3

2014

Jan-Dec

2014

Jan-Dec

2013

CF from operations 17 -118 -108 -379

Proceeds from farm out - - 65 -

CAPEX -28 -54 -166 -271

Rights issue - - - 1,413

Loans raised - 53 182 764

Amortisation of debt - - -237 -1,182

CF from financing - 53 -55 995

Net cash flow -11 -119 -264 345

Q4 - 2014

• CF from operations SEK 17m:

• Tax payments SEK -15m in North

Africa.

No interest payments in fourth

quarter.

2014

• Azurite abandonment costs to

Murphy of c. SEK 170m in

operations

• Capex SEK -166m:

Mainpart from Makthar seismic

acquisition and Block I (Diega)

• Loans raised Gunvor WCF $ 28m

• Amortized net NOK -127m and

CB SEK -94m

Balance sheet

15

SEK million 31 Dec 2014 31 Dec 2013

Non-current assets 3,162 4,599

Current assets 399 861

Whereof cash 148 403

Total assets 3,561 5,460

Equity -810 1,795

Total Interest bearing debt 2,468 2,194

Other Non-current liabilities 1,235 593

Other Current liabilities 667 877

Total Equity and Liabilities 3,561 5,460

KEY COMMENTS

• Non-current assets mainly decreased due

to impairment charges.

• Current assets decreased mainly due to

returned upfront payment held in escrow

• Equity negatively impacted by annual

impairment tests of net SEK -2,073 million

as well as terminated farm-out agreement

of SEK -918 million (equity effect

corresponding to SEK -826m in P&L).

• Other non-current liabilities increased with

adjusted abandonment provision and

deferred taxes from the terminated farm-

out agreement

Balance sheet for liquidation purposes

16

• 1) 20 January: Equity effect in PA Resources AB after impairment tests on group level SEK -1,814.

• 2) 23 January: Board approves Balance sheet for liquidation purposes in which Equity amounts to SEK 50m, still

below 50% of registered share capital. Board called for EGM in press release 30 January.

• 3) 31 January: Farm-out agreement Didon & Zarat terminated, press released 2 February. Equity effect in PA

Resources AB SEK -878 million.

• 4) Updated balance sheet post termination including adjustments further weakened. Equity amounts to SEK -828

million.

1) Positive headroom after impairment tests of the value of shares in subsidiaries.

31 Dec 2014

(Version 23 Jan)Adjustments 1)

Balance sheet for

liquidation purposes

Termination

farm-out

agreement

Updated balance sheet

including adjustments1)SEK 000,000s

Total assets 2,035 300 2,335 -894 1,441

Total shareholders' equity -250 300 50 -878 -828

Total liabilities 2,285 - 2,285 -15 2,270

Total shareholder's equity

and liabilities2,035 300 2,335 -894 1,441

Thank you