1. WORKBOOK
WWW.LCC.ASIA | Strictly Confidential10 March, 2016
10thMarch2016
Page | 1
M & A Opportunities in
Oil & Gas
Euromoney : 8th Annual
Distressed Investing
and Financial
Restructuring In
Australia Conference
Nicholas Assef LLB (Hons) LLM MBA
2. WORKBOOK
WWW.LCC.ASIA | Strictly Confidential10 March, 2016
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Work Book Index
1. Macro Picture
i. Long Term Oil Price
ii. Futures Curve : Brent Crude Out To 2018
iii. Deal Activity by Number & Value
2. Observations Of Current Market
3. Validation of M & A Opportunity
Keep your face toward the
sunshine, and the shadows
will fall behind you
Walt Whitman
Thanks to Simon Koay from LCC
who has helped with research on this
presentation
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Brent (NYMEX) Historic & Futures
Historic from 1983 (Monthly) Futures out to 2018 (2015/16)
• Flat forward Curve –
expectation under
USD $60 a barrel
• Challenge of changing cost
base against free falling
commodity price
• Highlights issues when long
dated hedges roll off
Source: S & P, LCC research
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WWW.LCC.ASIA | Strictly Confidential10 March, 2016
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Recent Deal Activity : Trend Down But By Value ?
Data By Transaction Count (Global) Data By Transaction Value (Global)
Typically One
Off Deals such
as BG Group
acquired by
Shell for
US$80bln
North America
continues to
dominate deal
activity
Source: S & P, LCC research
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Deal Count In Last 5 Days
Announced Date Target Buyer/Investors Size ($mm)
Mar-07-2016 Beijing YilongHengye Oil Technical Engineering Co., Ltd. Tong Oil Tools Co., Ltd.
(SZSE:300164)
76.75
Mar-07-2016 Hydrodec (UK) Limited and Hydrodec Re-Refining (UK)
Ltd.
1.71
Mar-07-2016 Mariner Project Siccar Point Energy Limited -
Mar-07-2016 Mesteña Uranium, LLC Energy Fuels Inc. (TSX:EFR) 12.69
Mar-07-2016 Petrus Resources Ltd. (TSX:PRQ) Waters Club Worldw ide Inc. -
Mar-07-2016 Quicksilver Resources Canada, Oil and Gas Assets in
Horseshoe Canyon area of Alberta, Canada
CPC Resources ULC 79.0
Mar-05-2016 40% Stake in Henan Yongyin Chemical Industry Co.,Ltd.
and Unknow n Stake in Zhongyuan Bank Co., Ltd.
Yongcheng Coal & Electricity
Holding Group Co.,Ltd.
-
Mar-05-2016 Emir-Oil, LLC Reach Energy Berhad
(KLSE:REACH)
175.89
Mar-04-2016 PT Cahaya Lembusuana Geo Energy Resources
Limited (SGX:RE4)
13.0
Mar-04-2016 Roca Honda Project Energy Fuels Inc. (TSX:EFR) 7.0
Mar-04-2016 Vertical Services Pty. Ltd. Aecor Pty Ltd. -
Mar-03-2016 800 Commerce, Inc. (OTCPK:ETHG) Petrogres Co. Limited -
Mar-03-2016 Azarga Uranium Corp., Redundant Assets 0.32
Mar-03-2016 Stream Oil & Gas Ltd. GBC Oil Company Ltd. 31.5
Mar-03-2016 Viking Services B.V. -
Mar-02-2016 Altinex Oil Norw ay AS Det Norske Oljeselskap ASA
(OB:DETNOR)
-
Mar-02-2016 Forestar Group Inc., Oil and Gas Assets in Kansas and
Nebraska
21.0
Mar-02-2016 Gas Processing Plant in The Carseland Area Manitok Energy Inc.
(TSXV:MEI)
3.54
Mar-02-2016 NOVA-Brit, OOO Gazpromneft Bitumen
Materials LLC
-
Mar-02-2016 Perpetual Energy Inc., 37 Sections of 425 Net Sections of
Oil sands Leases in Northeast Alberta
4.53
Mar-02-2016 Pryme Energy Limited, Capitola Project in Texas 2.2
Still a reasonable
level of activity –
but last 5 days is an
interesting sample
given the size of
Energy sector
Source: S & P, LCC research
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Observations of Current MarketUpstreamMidstream
Current Observations Core Opportunity
Producers focussed organic transformation
• Cost cutting in field and corporate
• Renegotiate better terms Services contracts
• Optimising rigs in field (dropping)
• Targeted vs general drilling
• Defer / “Modularising” large CAPEX
Inorganic initiatives activated
• Divest sub scale “near core” assets
• Equity capital raisings before distress
• Debt refinancing early before problems
• Creative initiatives : Joint Ventures
Phase1Phase2
Improve assets in portfolios
Stock based deals attractive as
preserve upside (for Target)
Can target small players with cash +
assets (can be cheaper than ECM)
Streamlined Targets where much of
the integration cost savings have
been already conducted – as such
acquiring higher quality
organisations
Near Core assets which are of good
value may be disposed – non core
poor quality will not be dealt
Macro Catalysts ?
Debt providers become
more aggressive
Hedge contracts roll off
Explorers under pressure number angles
• Raising debt or equity difficult / expensive
• Illiquidity in stock trading
• Cutting costs takes money – caught in trap
• Belief of “under valued” blocks deals
Long term current oil
price which will continue
to constrain capital
raising potential
Midstream doing ok
• Plenty of refining through put
• Pipelines still in demand
• Infrastructure spend continuing
• Cutting costs takes money – caught in trap
• Belief of “under valued”
Continued rationalisation assets
Assets well bid (yields can be quite
low) so need to be highly selective
• BG Group sale of 543km
Qld Pipeline to APA for 13x
2016 EBITDA (deal struck
Dec 2014)
2
Slowdown in debt /
equity capital available
for projects
Asset owners under
pressure elsewhere
1
1
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Validation of M & A Opportunity
Mar-13 Mar-14 Mar-15
Mar-13 Mar-14 Mar-15 Mar-16
Mar-13 Mar-14 Mar-15
Beach Energy Limited
Drillsearch Energy Limited
Post-merger
Mar-13 Mar-14
Mar-13 Mar-14
Mar-13 Mar-14 Mar-15 Mar-16
Eco (Atlantic) Oil & Gas Ltd
Pan African Oil Ltd.
Post-merger
Large Company Small Company
POST DEAL
Beach Energy Limited (ASX BPT)
POST DEAL
Eco (Atlantic) Oil & Gas Ltd (TSXV EOG)
c. $8m
c. $4m
c. $19m
1. Both hold licenses offshore Namibia –
so increased portfolio
2. Cash reserves increased as a result
3. Able to strip out cost / duplication
4. Higher relevance for investors & brokers
• 58% uplift from simple
“merged Market Caps”
c. $678m
c. $319m
1. More reserves, production & revenue
2. Significant cost savings
3. Becomes Australia’s largest onshore
oil producer
4. Index rating / Institutional relevance
• 45% uplift from simple
“merged Market Caps”
c. $1,442m
Deal Highlights Deal Highlights
Source: S & P, LCC research, Company data
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Contact us
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