Desire Petroleum plc Presentation to OilBarrel

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Desire Petroleum plcPresentation to OilBarrel
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Agenda

• Strategy and Mission
• Management
• Company history
• Background to the Falklands
• Desire Petroleum Licences
• 1998 drilling campaign
• Lesson learned
• 1998-2006
• Drilling options
• Summary

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Strategy

• Desire Petroleums mission is to explore and
  identify commercial hydrocarbon reserves in the
  North Falklands basin where a known working
  hydrocarbon system exists.

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Profile

• North Falkland Basin exploration play
• Large equity in 5 tranches (C, D, F, I, L)
• Circa. 4,000 km2 equivalent to 14 North Sea
  Blocks
• 1998 drilling established world-class source rock
  
• Prospects ready to drill

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Business Model

• Clear Strategy
• Focussed on commercial hydrocarbons in North
  Falklands basin
• Attractive fiscal and political environment
• Concentrate on what you know expertise and
  experience
• High risk-High reward maximum bang for buck
• Low costs and minimal corporate infrastructure
  giving optimum choice of exit or continuation
• Professional Team
• People-right knowledge, experience (over 100
  years in oil industry)
• Virtual company concept
• Outsourcing to high-calibre, experienced
  contractors (e.g. Peak, RPS, PGL)
• Core competencies amongst Executive Team
  exploration project management, accountancy,
  legal and finance

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Management

• Dr Colin Barry Phipps - ChairmanAged 71, he is a
  petroleum geologist with over 30 years experience
  in oil exploration and production. From 1974-79
  he was a Labour MP for Dudley West. He has wide
  industrial experience within the international
  natural-resources sector. He was, for ten years,
  Chairman of Clyde Petroleum plc.
• Dr Ian Gordon Duncan - Chief Executive
  DirectorAged 56, he is a petroleum geologist
  with over 25 years experience in the oil
  exploration industry. He began his career with
  Esso before joining Clyde Petroleum plc where he
  was appointed a director in 1991 from 1990 to
  1997 he was the Managing Director of Clyde's
  subsidiary in the Netherlands. He was appointed
  as an executive director of the company on 14
  March 2005.
• Stephen Lawrey Phipps - Non-Executive
  DirectorAged 47, he is a non-executive director
  of Scarborough Minerals plc and is also a
  director of Phipps Company Limited. He worked
  for over 20 years as a stockbroker in London and
  New York.
• Darwin Lewis Clifton OBE - Non-Executive
  DirectorAged 50, he is a Falkland Islander, and
  a founding director of Desire Petroleum. From
  1987-90 he was the Falkland Islands Government
  London Representative and he was twice elected to
  the Legislative and Executive Councils (1985-87
  and 1997-2001). Currently he is managing director
  of Byron Marine Limited, a Falkland Islands
  incorporated, ship owning and ship-managing
  company. In 2006 he was elected Speaker of the
  Falkland Islands Legislative Council.
• Andrew Guy Windham - Non-Executive DirectorAged
  56, he is a solicitor with over 20 years
  experience in the oil exploration industry. He
  began his career in the City before moving to
  Westland and then to Clyde Petroleum plc in 1983
  where he was appointed a director in 1996. He
  joined Energy Africa Ltd. in 1998 and was
  appointed to its Board in 2001 as Commercial
  Director. He is also a non-executive director of
  Aminex plc
• Edward Wisniewski - Non-Executive DirectorAged
  45, he is a Chartered Accountant with 12 years
  experience in the oil exploration and production
  industry. After training with Touche Ross Co he
  joined Clyde Petroleum plc in 1988 from 1995 to
  2000 he was the Finance Manager of Clyde
  Petroleum's subsidiary in the Netherlands. He
  joined Alstec Ltd as Financial Controller in 2000.

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History

• Formed in 1996 to participate in 1st Falklands
  Licensing Round
• Floated on the AIM in 1998 after raising 15
  million
• Participated in 6 well drilling campaign in 1998
  alongside Shell, Amerada Hess Desire had
  interests in 2 wells
• 6 wells drilled back to back 5 of the 6 had
  hydrocarbon shows
• Company maintaining commitment to region and
  development of a new play model
• 2004 4 million raised to shoot 800 sq km 3D
  seismic
• 2005 Data interpretation confirmed new model
• 2005 25 million raised for new 3 well drilling
  programme

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Corporate Profile

• LSE code DES
• 221 million shares in issue (18 million
  management options outstanding)
• 12,500 shareholders
• 26 million cash
• Market Capitalisation 73 million (_at_33p/share)

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The Attraction of the North Falklands Basin

• Shallow water
• Recoverable potential of gt2 billion barrels
• 10 prospects identified (8 on 3D seismic)
• Established working hydrocarbon system
• Attractive fiscal rates 9 royalty 25
  corporate tax rate

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What was found in 1998?

• Wells drilled back to back no time to evaluate
  each well
• 5 of 6 wells had hydrocarbon shows
• 14/10-1 had live oil at surface 27API
• 14/5 32 gas at surface
• Last well a throw-away
• Further analysis revealed why each well failed

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Mapping the 1998 wells
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Lessons learned in 1998

• Mature oil source rock, large volumes
• Working hydrocarbon system
• Source rock regional seal preventing upward
  migration of hydrocarbons
• Needed high quality seismic to define traps at
  deeper levels

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Desire Petroleum Interests

• Tranches C D - Desire 92.5, Rockhopper 7.5
• (to fund 15 of 3 wells)
• 2nd exploration phase 2006-2013
• 2 well commitment
• Tranches F, I L Desire 100
• Tranche A Argos Evergreen 100
• PL032/033 Rockhopper 100

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3D Seismic Data

• 800 km2 high quality data
• First time good data acquired at the level of
  the mature oil source rock
• Multi delta and fan plays established
  hydrocarbon trapping mechanisms
• Proven world class oil source rock
• BGS estimates 60 billion barrels
• Look for prospectivity near base mature source
  rock

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Untested play concepts
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Well 1 Liz Prospect
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Liz Prospect amplitude map
LIZ FAN
Inline 3000
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Wells 2 3 Rachel and Ninky prospects
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Summary of prospectivity
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Exploration Economics
Economic threshold
NPV _at_9 vs Recoverable reserves -based on
constant 50/bbl
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Summary

• Well placed AIM exploration investment play
• Proven working hydrocarbon system
• Potential to become major hydrocarbon province
• 3D seismic data confirms prospectivity ready to
  drill
• 10 prospects identified Large equity position
• 3 well programme in place
• Awaiting rig availability