Linc Energy ltd – UCG in Southern Africa

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UCG in Southern Africa April 2013

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Dr Jannie Lourens, Commercial Manager Clean Energy, from Linc Energy Ltd has presented at the Botswana Coal and Energy Conference. If you would like more information about the conference, please visit the website: http://bit.ly/13MkVsy

Transcript of Linc Energy ltd – UCG in Southern Africa

Page 1: Linc Energy ltd – UCG in Southern Africa

UCG in Southern Africa

April 2013

Page 2: Linc Energy ltd – UCG in Southern Africa

Linc Internal Reserve Report Summary

Assumptions

• Effective date of 1/1/2012

• Includes Wyoming Powder River Basin reserves only

• 7/1/2011 Ryder Scott report was used as a starting point. Database was quality-checked, production volumes were rolled forward, and curves were refit, if necessary

• Pricing

– Base price deck of $96.19/bbl and $4.12/mcf held flat for the life of the properties

– Price deck determined using SEC methodology of averaging prices on the first day of each month for the previous 12 months

– A negative differential of $0.06/bbl was applied to the base price deck

• Lease Operating Expense

– LOE was increased from the Ryder Scott report to reflect actual operating costs based on trailing 9 month data

– The higher LOE is a result of the previous operator not adequately maintaining the properties during the last months of its ownership, thus requiring Linc to perform additional work in order to get the property back in order. This level of rehabilitation work is not expected continue in 2012

– Average LOE is ~$215,000/month

Oil Gas Equiv. PV-10

Category (Mbbl) (MMcf) (Mboe) % Oil ($M)

PDP 730,296 730,296 100% $11,294

PSI

PNP

PUD

Total 730,296 0 730,296 100% $11,294This presentation contains forward looking statements that are subject to risk factors associated with the US Oil and Gas business. It is believed that the expectations

reflected in these statements are reasonable, but they may be affected by a range of variables and changes in underlying assumptions which could cause actual results or

trends to differ materially, including but not limited to price fluctuations, actual demand, currency fluctuations, geotechnical factors, drilling and production results, gas

commercialisation, reserve estimates, loss of market, industry competition, environmental risks, physical risks, legislative, fiscal and regulatory developments, economic and

financial market conditions in various countries and regions, political risks, project delay or advancement, approvals and cost estimates.

The oil resource estimates for the Alaska Region in the announcement were compiled by Scott J. Wilson of Ryder Scott Company LP who is qualified in accordance with ASX

listing rule 5.11 and who has consented to the form and content in which this statement appears.

The oil resource estimates for the Wyoming Region in this announcement were compiled by James L. Baird of Ryder Scott Company LP who is qualified in accordance with

ASX listing rule 5.11 and who has consented to the form and content in which this statement appears.

The oil resource estimates for the Gulf Coast Region in the announcement were compiled by Robert L. Walker of Haas Petroleum Engineering Services, Inc. who is qualified

in accordance with ASX listing rule 5.11 and who has consented to the form and content in which this statement appears.

The Valuations for the Alaska Region and Wyoming Region were compiled by Wood Mackenzie. Wood Mackenzie does not warrant or represent that the information is

appropriate or sufficient and has not taken into account the purposes for which the information is used and you acknowledge and agree that if you use or reply upon the

information for any purpose then you do so entirely at your own risk.

The Prospective Resources estimates presented in these reports have been prepared in accordance with the Petroleum Resources Management System (PRMS) approved

in March 2007 by the Society of Petroleum Engineers, the World Petroleum Council, the American Association of Petroleum Geologists, and the Society of Petroleum

Evaluation Engineers by DeGolyer and MacNaughton by John W. Wallace (consultant) and Gustavson Associates by Michele Gregg Bishop, each of whom is qualified in

accordance with ASX listing rule 5.11 and has consented to the form and content in which their respective prospective resource estimate appears. Prospective Resources are

those quantities that are estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects.

Application of any geological or economic chance factor does not equate prospective resources to contingent resources or reserves. Pg, the probability of discovering

reservoirs that flow petroleum at a measurable rate, has been applied to the Risked Mean volumes. Low, best, and high estimates in this table are P90, P50, and P10,

respectively. There is no certainty that any portion of the prospective resources estimated herein will be discovered. If discovered, there is no certainty that it will be

commercially viable to produce any portion of the prospective resources evaluated.

The information in this report, where indicated, relating to coal resources is based on information compiled by Troy Turner, who is a member of the Australian Institute of

Mining and Metallurgy who is employed by Xenith Consulting Pty Ltd. Mr Turner has sufficient experience which is relevant to the style of mineralisation and type of deposit

under consideration and to the activity which they are undertaking to qualify as a competent person as defined in the 2004 Edition of the ”Australasian Code for Reporting

Exploration Results, Mineral Resources and Oil Reserves”. Mr Turner consents to the inclusion of the report of the matters based on their information in the form and context

in which it appears.

The information in this announcement relating to coal resources is based on information compiled by Jeremy Busfield, who is a member of the Australian Institute of Mining

and Metallurgy and who is employed by Minecraft Consulting Pty Ltd. Jeremy Busfield has sufficient experience which is relevant to the style of mineralisation and type of

deposit under consideration and to the activity which they are undertaking to qualify as competent persons as defined in the 2004 Edition of the ‘Australian Code for Reporting

Exploration Results, Mineral Resources and Ore Reserves’. Jeremy Busfield consents to the inclusion in the announcement of the matters based on their information in the

form and context in which it appears.

All $ are presented in US$, unless otherwise specified.

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About Linc Energy

o Diversified global energy company

o Global headquarters in Brisbane, Australia o Regional offices: Europe North America Australia - London - Houston - Chinchilla - Krakow - Denver - Adelaide - Anchorage - Casper o Listed on the Australian Securities Exchange (ASX) and in

the US (OTCQX)

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Linc Energy Summary

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World-leader in UCG.

The only company in the world to have produced diesel and jet fuel from UCG syngas.

Target of 6,000 bopd for year end was achieved in 2012.

Targeting 8,000-9,000 bopd by end 2013.

Winter drilling program at Umait, Alaska has commenced

Wyoming EOR project

Major holder of coal resources in QLD, SA, Wyoming and Poland.

Carmichael Royalty – Linc Energy will receive $2 per tonne of coal produced for the first 20 years of production at Adani’s Carmichael Coal Project.

Extensive Arckaringa Basin acreage position in South Australia.

Two independently commissioned technical reports from DeGolyer & MacNaughton and Gustavson Associates confirm the high potential for shale oil of this acreage.

Linc Energy is focused on

conventional and unconventional

oil and gas production

UCG Oil & Gas Coal Shale Oil

Conventional Unconventional

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UCG commercialisation a priority with Exxaro and D.Tek announcements in Q4 2012. Further progress expected on UCG commercialisation activities in 2013. Oil Production exceeded targeted goal of 6,000 BOPD (gross) by 31 Dec 2012, having doubled production in one year. Further production and reserve growth expected in 2013. Umiat Oil Field (2P Reserves of 155 MMBOE) appraisal program has commenced with flow test results expected by Apr-2013. Investment within UCG, shale and coal has now brought these assets to the point of commercialisation. 2013 capex will be focused on oil production on the Gulf Coast and appraisal of the Umiat oil field in Alaska. Technical reports for Arckaringa Basin shale assets suggest significant potential. Barclays Bank appointed to advise on strategic options. Adani’s Carmichael project on track to first coal. Linc Energy holds $2 per tonne (indexed to CPI) royalty over the Carmichael coal project. Adani expects to mine 60Mtpa at full production. Non-core coal assets to be divested to ensure focus on core business.

Linc Energy – Key Messages

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Underground Coal Gasification

UCG to GTL Demonstration Facility in Chinchilla

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Linc Energy’s UCG Commercialisation

• Linc Energy has invested ~A$200M developing its proprietary UCG technology over the past 9 years. In 2012 it reached the point of commercialisation without the need for additional capital investment.

• Linc Energy’s business model consists of commercialising our world leading position comprising of the following: Licensing fee, Royalty, Consulting fee, and/or a Carried Equity participation in the project.

• Targeting strategic licence agreements and/or joint venture arrangements in four key focus areas: China/Mongolia, North America, Southern Africa, Russia/Eastern Europe

• Agreements announced in Q4 2012 with Exxaro (Sub-Saharan Africa) and DTEK (Ukraine). Further announcements expected in Q2 2013.

• Linc Energy operates the only UCG to GTL facility in the world.

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UCG Benefits

• Small footprint

• Increases available energy resources cost effectively

• Compatible with many other land users

• Less infrastructure

• No fugitive methane release

• Less water intensive

• Minimal waste

• CO2 Sequestration friendly

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UCG Video Presentation

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Clean Energy Division

Focus: o Commercialisation of UCG using world leading proprietary

technology

o Identification of UCG suitable coal resources and partnering on global coal and downstream opportunities

o Integration of syngas with downstream applications o CO2 Captured and Sequestered

o Enhanced Oil Recovery (EOR) o Geo-sequestration

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Versatility of Syngas

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Linc Energy’s UCG Heritage

Angren, Uzbekistan: 51 years operating experience

92% owned by Linc Energy

UCG to electric power

Chinchilla, Australia: 12 years operating experience

100% owned by Linc Energy

Development of commercial UCG technology

World’s only UCG to GTL operation

Uzbekistan, 51 years

Chinchilla, 12 years

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UCG Highlights

UCG Gasifiers:

o 4th Generation Gasifier (G4):

Continuous operation over project design life (+2 years)

o 5th Generation Gasifier (G5):

Continuous operation since start up (October 2011)

Producing GTL quality syngas within one hour of start-up

o Independently asserted as “World’s Best Practice” in UCG

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UCG to GTL Integration

Unique UCG to GTL capabilities:

o Integration of upstream and downstream (technical & operations)

o Stable syngas composition at large flow rates

o Prediction and management of syngas composition for optimal GTL operations

o GTL production from:

Syngas produced from multi-gasifier operations

Oxygen enrichment in gasifiers 4 & 5

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Corporate Responsibility

Linc Energy’s Chinchilla UCG to GTL Facility

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Safety Performance o Comprehensive systems for safe design and operation of

upstream UCG gasifiers and downstream facilities

o Excellent safety record over 12 years of operation at Chinchilla:

No major injuries

No site emergencies

UCG removes the need to send miners underground

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Groundwater Protection Chinchilla 12 Year Performance:

o Over 150 monitoring wells; 10x beyond regulatory requirements

o Over 45,000 groundwater samples have been taken and analyzed

o No groundwater non-compliance incidents resulting from UCG operations

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Environmental Performance

o Australia enforces very stringent environmental regulations

o Linc Energy has passed extensive scrutiny by government and the community

o Chinchilla has the most extensive UCG environmental dataset internationally

o Low impact above ground (relative to conventional mining)

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Environmental Performance CO2 Abatement

o CO2 stripping occurs during gas processing

“ Carbon Capture & Storage (CCS) Ready ”

o Enhanced Oil Recovery (EOR)

o Carbon Capture and Storage (CCS)

- Gasifier cavity

- Onshore and offshore storage options

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• Dec 2012: Signed comprehensive Term Sheet with Exxaro Resources for the joint development of UCG projects in Sub-Sahara Africa

• Exxaro granted a non-exclusive licence to utilize Linc’s UCG IP

• Linc Energy has the option to obtain up to 49% of equity in all UCG projects

• Exxaro has operatorship of all projects

• Initial Consideration for the joint conceptual study and licence agreement

UCG Commercialisation in South Africa: Business Model

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• The Exxaro partnership will enable UCG and Downstream opportunities to be developed for licence fee and royalty considerations

• Market opportunities are electricity in the medium term, and liquid fuels in the longer term

• Completion of the formal agreements is targeted for end of April 2013

• Early works on site characterisation, drilling and exploration and the preparation for the Concept phase has already started

UCG Commercialisation in South Africa: Opportunities

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• Linc is regarding Botswana as a key area for commercialising our UCG technology

• Since early 2011 Linc Energy has evaluated several coal resource opportunities with the aim to develop UCG and downstream businesses

• In early 2012 Linc Energy applied for a number of coal Prospecting Licences

• Linc Energy is evaluating several potential smaller scale energy opportunities

UCG Commercialisation in Botswana

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• Linc Energy is establishing a Regional office to:

• Manage the Exxaro partnership’s interests locally

• Major focus on stakeholder management

• Development of other opportunities in Sub-Sahara Africa

UCG Commercialisation in the Region

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Dr Jannie Lourens

Commercial Manager

[email protected]

+61 8 8405 8700

+61 7 3229 0800

www.lincenergy.com.au

Thank You

Page 25: Linc Energy ltd – UCG in Southern Africa