Ability%20Drilling%20ASA

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Ability Drilling ASA Pareto Conference 28
August 2007
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Table of contents

1. Investment summary
2. Market overview status
3. Organization
4. Rig description
5. Financials

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Investment summary

• Shortage of land rigs in the Middle East and
  North Africa (MENA)
• MENA with 73 of global onshore oil reserves but
  only 10 of global land rig fleet
• Significant increase in drilling needed in order
  to meet production target
• Increasing need for new drilling technology
• State of the art land rigs from Sense EDM (TTS
  Marine Group)
• Ability Drilling with the option to order 42
  drilling rigs 42 work-over rigs
• 4 drilling rigs 2 work-over rigs under
  construction with first delivery late 2007
• Transfer of offshore drilling technology to land
  rigs
• Creating the preferred onshore drilling
  contractor in the MENA regions
• Focus on technologically advanced solutions and
  effective operations
• High quality management team in place and
  established network with influential local
  partners
• Attracting high quality drilling crew with
  advanced technology and strong incentive scheme
• Listing on Oslo Axess in 2nd half 2007
• New equity of approx. NOK 400 mill to fund
  investments in additional rigs

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Table of contents

1. Investment summary
2. Market overview status
3. Organization
4. Rig description
5. Financials

5
MENA with 73 of world onshore oil reserves- But
only 10 of land rig fleet
Current land rig supply by region
Conventional oil resources (2005)
Source ExxonMobil
Source Baker Hughes

• The Middle East continues to be the worlds
  largest expected source of oil
• But only accounts for about 10 of the worldwide
  land rig fleet

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Global trend 1- Increasing need for drilling in
order to meet production targets
Rig intensity USA
Rig intensity Middle East
Source Baker Hughes, EIA
Source Baker Hughes, EIA

• of US oil rigs doubled last 8 years. Oil
  production has declined
• of Middle East oil rigs increased 45 last 8
  years. Oil production flat
• Drilling operations more rig intensive

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Global trend 2- Increasing need for new
drilling technology
The oil field pyramid
Growth in complex drilling1)
Source Simmons Co
1) Graph showing development of drilling types in
the US
Source Baker Hughes

• Underbalanced drilling - critical for improving
  declining production
• Enabling improved production from
• Existing fields with depleting reservoir pressure
  
• Complex reservoirs

• From giants to marginal fields
• From vertical to directional and horizontal
  drilling
• Most of the current land rig fleet not suitable
  for modern requirements

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Marketing strategy status

• Strategy
• Local influential partners network in MENA
• Targeting long-term drilling contracts
• Status
• LOI for 3 rigs 5 years with growth potential
• 3 outstanding tenders for drilling rigs and
  work-over rigs
• Direct negotiations for 2 rigs

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Table of contents

1. Investment summary
2. Market overview status
3. Organisation
4. Rig description
5. Financials

10
First class management

• Board of Directors
• Geir Nordahl-Pedersen, Chairman
• Founded and managed Ability Group ASA (AGR) from
  1987-2001 and 2003-2006
• Petter H. Tomren, Vice Chairman (CEO of Awilco
  Offshore Semi ASA)
• Trygve Arnesen (CEO of Ocean Rig ASA)
• Maj Elisabeth Vangsnes (Man. Operation Support,
  Odfjell Drilling ASA)
• Elin S. Vasstrand (Supply Chain Manager, FMC
  Kongsberg Subsea AS)
• Management
• Hans Petter Eikeland, President CEO
• Over 25 years experience from the petroleum
  industry in the North Sea and North Africa
  (Smedvig Offshore and Odfjell Drilling)
• Trond Løkke, Executive VP Rig Development
• Over 30 years of international onshore and
  offshore drilling experience (RGM, Transocean,
  Aker Drilling, Neddril and more)
• Eivind Wiik, Executive VP Operation
• More than 20 years of experience in the drilling
  industry (Aker Drilling, Transocean, Baker Hughes
  Inteq and Odfjell Drilling)
• Geir Gorm Olsen, Executive VP QHSE
• Over 25 years experience from the petroleum
  industry in the North Sea, Middle East and North
  Africa (Smedvig Offshore and Norsk Hydro)
• Erik Simonsen, Executive VP Finance
• 10 years exp. from operational and financial
  positions in the petroleum industry (MD Offshore
  Research AS and Seateam Technology)

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Table of contents

1. Investment summary
2. Market overview status
3. Organisation
4. Rig description
5. Financials

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The new generation of land rigs

• Enhanced drilling capabilities
• Push Pull technology
• Underbalanced drilling
• Horizontal/directional drilling
• Faster drilling operations
• Dual operations incl. remote pipe handling
• Implemented North Sea drilling practice
• Online monitoring of rig and reservoir
• Faster mob./demob.
• Specialized design
• Competitive opex and improved HSE
• Fully automated drilling operations
• Operating crew of 13 people vs. 36 for best
  traditional land rigs
• Incentive program to secure the best human
  resources

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Faster drilling operations

• Field proven at offshore north sea rigs
• Safer and easier to operate.
• Two complete working stations in drillers cabin,
  perfect for crew training and maintenance.

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Technical specifications- Drilling rigs
Key specifications of the SENSE EDM state of the art drilling rigs Key specifications of the SENSE EDM state of the art drilling rigs
Constant Pull load (hoisting) 500,000 lbs
Push load (snubbing) 130,000 lbs
Mast height 38 m
Hoisting speed 1.2 m/sec
Drill pipe 2x30 ft
Setback capacity 200x5 DP
Setback capacity 5x8 DC
Max casing size 24 OD
Top drive speed 180 rpm
TD torque (Drilling Torque) 25,000 ft-lbs
Mud pumps 2x1,600 hp
Mud system volume 1,890 bbl
Generator power 6,000 hp
Well Control 5,000 / 10,000 psi
BOP 13 5/8 10,000 psi
Diverter Diverter Spool 21 ¼ x 2,000 psi
UBD Rotation Head 13 5/8 x 3,000 psi
Note Subject to change
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Technical specifications- Work-over rigs
Key specifications of the SENSE EDM state of the art work-over rigs Key specifications of the SENSE EDM state of the art work-over rigs
Pull load (hoisting) 300,000 lbs
Push load (snubbing) 125,000 lbs
Mast height 22 m
Hoisting speed 1.0 m/sec
Drill pipe Single, 30 ft
Traveling Rotary speed 120 rpm
Setback Traveling Rotary Torque 12,000 ft-lbs
Optional Top drive 25,000 ft-lbs
Note Subject to change
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Earnings objectives

• Ability Drilling targeting USD 36 - 40,000 day
  rate
• Reflecting enhanced drilling capabilities
• Automated pipe handling equipment
• Dual operations
• Integrated top drive
• Snubbing and well intervention capabilities
• Including extra equipment
• Drill pipes
• Blow out preventor (BOP)
• Comparable with USD 26 - 30,000 for standard unit

Dayrate breakdown
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Increased value creation for oil companies
Client focus has changed from cheap rigs labor
to how fast can wells be delivered due to lack of
production capacity
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Table of contents

1. Investment summary
2. Market overview status
3. Organisation
4. Rig description
5. Financials

19
Key financial assumptions

• Dayrates
• 36,000/day for drilling rigs
• 20,000/day for work-over rigs
• Opex
• 15,000/day for drilling rigs
• 10,000/day for work-over rigs
• Cost per rig
• 23m per drilling rig ? Payback 3.6
  years
• 8.6m per work-over rig ? Payback 3 years
• Utilization 90

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Financial accounts

• Funding
• NOK 280 mill. of equity in 2006
• NOK 450 mill. unsecured bond loan in February 2007

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Share price performance and ownership structure
Share price and liquidity
Ownership structure

• Strong share price performance and liquidity
  159 since OTC-listing in October 2006
• Ability Drilling currently has 276 shareholders
• Management and key employees own 18 of the
  companys shares
• 7,000,000 outstanding warrants and 1,700,000
  outstanding options issue to key employees

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Investment summary

• Shortage of land rigs in the Middle East and
  North Africa (MENA)
• MENA with 73 of global onshore oil reserves but
  only 10 of global land rig fleet
• Significant increase in drilling needed in order
  to meet production target
• Increasing need for new drilling technology
• State of the art land rigs from Sense EDM (TTS
  Marine Group)
• Ability Drilling with the option to order 42
  drilling rigs 42 work-over rigs
• 4 drilling rigs 2 work-over rigs under
  construction with first delivery late 2007
• Transfer of offshore drilling technology to land
  rigs
• Creating the preferred onshore drilling
  contractor in the MENA regions
• Focus on technologically advanced solutions and
  effective operations
• High quality management team in place and
  established network with influential local
  partners
• Attracting high quality drilling crew with
  advanced technology and strong incentive scheme
• Listing on Oslo Axess in 2nd half 2007
• New equity of approx. NOK 400 mill to fund
  investments in additional rigs