CAPITAL MARKETS DAY 2016 DET NORSKE OLJESELSKAP January 18, 2016
CAPITAL MARKETS DAY 2016 Agenda Session 1: 09:00 10:30 Corporate Strategy Karl Johnny Hersvik, Chief Executive Officer Finance Alexander Krane, Chief Financial Officer Exploration Gro Gunleiksrud Haatvedt, SVP Exploration Q&A…
CAPITAL MARKETS DAY 2016 Todays speakers Karl Johnny Hersvik, Chief Executive Officer Olav Henriksen, SVP Projects Karl Johnny Hersvik (born 1972) has been CEO of Det norske since May 2014. Prior to joining Det norske, he served Olav…
CAPITAL MARKETS DAY 2016 Investment case Well positioned in a lower for longer oil price environment Strong production base: 60 mboepd* with production cost below 7 USD/boe* Purely operating on the NCS: Low political risk and…
Corporate strategy Karl Johnny Hersvik Chief Executive Officer 6
THE BIG PICTURE A challenging environment that provides opportunities NCS continues to be one of the most attractive Upstream costs have nearly tripled over the last 10 years hydrocarbon regions globally years, similar to oil prices…
CORPORATE AMBITION Utilise current environment to strengthen long-term competitiveness Goal to sanction new standalone projects at break-even price below USD 40/bbl 50% reduction in Exploration Maximize the effectiveness of the…
CORPORATE STRATEGY Three building blocks for future success Execute Improve Grow Be opportunistic and exploit market Ivar Aasen project and drilling Deliver on improvement agenda opportunities Production, projects and drilling…
CORPORATE STRATEGY Continue the trend in execution from 2015 Execute Improve Grow OCT 14 JAN 15 APR 15 JUL 15 SEP 15 DEC 15 10
CORPORATE STRATEGY Key improvement themes Execute Improve Grow Enable G&G process efficiency Exploration Effectiveness Optimize Exploration well drilling methodology Project Develop the next Project delivery model Delivery…
CORPORATE STRATEGY Visible organic growth from existing portfolio Execute Improve Grow Indicative production profile (mboepd) net to DETNOR Strong asset base for further growth 160 Sanctioned Unsanctioned Thousands High…
CORPORATE STRATEGY Building longer-term investment options Execute Improve Grow Demonstrated ability to acquire NCS assets at attractive prices Svenska and Premier Norge acquisitions < USD 1/boe Added flexibility to project…
COMPANY OVERVIEW Year-end 2015 certified* P50 reserves of 498 mmboe Development in P50 reserves (mmboe) Proven & probable reserves (P50), end 2015 500 Other; 1 450 Alvheim; 79 400 Vilje; 8 350 Volund; 19 300 61% CAGR from 498 Byla;…
COMPANY OVERVIEW Reserves development since Marathon Oil Norge AS acquisition Development P50 reserves (mmboe) 2013 - 2015 Reserve replacement of 7.5x since the acquisition of Marathon 303 498 Oil Norge AS Johan Sverdrup Alvheim…
COMPANY OVERVIEW Year-end 2015 mean contingent resources* 326 mmboe Garantiana Alvheim area 34 25 Krafla/Askja 90 326 97 North of Alvheim** mmboe 27 52 Gohta Vette/Mackrel Includes categories 4 and 5 according to…
Finance Alexander Krane Chief Financial Officer 17
FINANCE Det norskes financial strengths Prudent hedging policies to High margin production with protect downside low operating costs Financial risk Operating management cash flow USD 1.3 billion in undrawn Liquidity Taxes Tax…
FINANCE High margin production with low operating cost Pro-forma (unaudited) DETNOR and Marathon Oil Norge AS Excellent uptime and reliability record on Alvheim FPSO Production efficiency of 94.2 percent in 2015 Production 87 93 84…
FINANCE Fiscal regime supportive of growth Field development example Estimated tax for 2015 (NOKbn) 2,2 Year 1 2 3 4 5 6 SUM Estimated tax receivable of NOK 1.6 bn Investment -100.0 Q216 0,7 Tax depreciation (6 yrs) +13.0 +13.0 +13.0…
FINANCE Strong banking relationships and long-term debt maturities Cost efficient, long-term diversified capital structure with no debt 2016 2017 2018 2019 2020 2021 2022 maturities until after expected first oil at Johan Sverdrup USD…
FINANCE Strong liquidity position and diversified capital structure USD 3,000* million RBL 1 000 (Secured, 1st lien) 2 170 730 uncommitted Total bank facilities and bonds accordion option USD 550 million RCF 550 (Secured, 2nd…
FINANCE Financial covenants Historical covenant calculation Debt instrument Main covenants 4,0x 3,5x Reserve-based lending facility 3,0x Leverage ratio < 3.5x Revolving credit facility Leverage Interest cover ratio 3.5x DETNOR02…
FINANCE Prudent financial risk management policies Hedging Overview of current hedges Various hedging agreements for commodities and FX to mitigate 2016 2017 2018 2019 financial risk when pricing and levels are viewed as attractive…
FINANCE 2016 guidance Item Guidance 2016 CAPEX USD 925 975 million 2016 EXPEX USD 160 170 million 2016 Production cost USD 8 9 per boe* 2016 production 55 60 mboepd Based on USD/NOK 8.8 * From 2016, production cost…
FINANCE 2016 Investment budget of USD 925 975 million Ivar Aasen Drilling of production wells and water injector wells Johan Sverdrup Construction and installation of topside 40% Alvheim area Other Drilling activities BoaKamNorth,…
FINANCE Ivar Aasen CAPEX guidance (life of field) Project progressing well and within budget USD billion (gross) 0,1 At constant FX, current full field CAPEX estimate is in line with the PDO estimate 0,8 Full field CAPEX has come…
EXPLORATION AMBITION By 2020: A leading explorer on the Norwegian Continental Shelf Ensure long term reserve replacement and value creation Establish new core areas Discover 150 mmboe net to Det norske in 2016 - 2020 2016-2020…
Barents Sea EXPLORATION STRATEGY SE Barents Loppa North Strategic direction Loppa South Oil primary target, secondary wet gas with large volume potential Timely ILX within core areas Regional projects for identifying new growth…
Barents Sea EXPLORATION Drilling schedule 2016 Filicudi North Sea: Core area development Drill ILX prospect near Ivar Aasen field Confirm volumes in Askja/Krafla area Explore upsides near Garantiana discovery Barents Sea: From…
PL626 (50%, OPERATOR) NORTH SEA Rovarkula Rovarkula Extending the Utsira core area Operated exploration well close to infrastructure Upside potential, side track if positive results Alvheim Possible tie-in of Rovarkula to Ivar Aasen…
PL035C AND PL272 (50%, PARTNER) NORTH SEA Askja/Krafla a potential new core area Drilling campaign 2016 4 vertical wells Several optional side tracks Aiming at proving up the main resource potential in the area Gross proven…
PL554 (30%, PARTNER) / PL748 (30%, OPERATOR) / PL790 (30%, OPERATOR) NORTH SEA Tampen: Unlocking the potential Segmented area Uptonia exploration well currently drilling Zeta Raudsen Beta Knarr Snorre Proven Garantiana volumes:…
PL533 (20%, PARTNER) BARENTS SEA Loppa South building core area Filicudi prospect to be drilled in 2016 Testing the prospective trend, analogue to Johan Castberg Opening for more opportunities if successful Filicudi…
FROM R&D TO EXPLORATION TO PRODUCTION Frigg Greater Alvheim area ILX: High equity tie-in to Alvheim Technical limit seismic reprocessing Massive 3D reprocessing project with improved resolution Fry and imaging Consistent seismic data…
EXCLUSIVE R&D ON BARENTS SEA PETROLEUM SYSTEM The HydroKARBON project Direct influence on Exploration decisions Extensive field work on the source rock potential of the Paleozoic succession on Svalbard Tested oil sample in one well…
KEY IMPROVEMENT INITIATIVES Reduce exploration costs and increase quality Exploration G&G process Enable G&G process efficiency through multiple initiatives: Effectiveness efficiency - Improving formal and informal exploration…
Development projects Olav Henriksen SVP Projects 41
DEVELOPMENT PROJECTS Project inventory provides flexibility Plateau DETNOR Gross Estimated Project production Equity mmboe first oil (gross) BoaKamNorth 62.4% 10 9 mboepd 2016 Ivar Aasen 34.8% 186 67 mboepd 2016 Viper-Kobra 65.0% 8…
GREATER ALVHEIM AREA Asset profile Operated, 65%* working interest Production from the Alvheim field started in June 2008 Oil is transported from the field with a shuttle tanker, and associated gas is exported to Scotland Additional…
GREATER ALVHEIM AREA Next projects in the Alvheim area Planning for the next projects Illustrative timing of new wells in the Alvheim area Secured rig capacity for wells after Viper/Kobra 2016 2017 2018 2019 Transocean Artic with…
IVAR AASEN AND HANZ Asset profile Operated, 35%* working interest Area map PDO for Ivar Aasen was approved on May 21, 2013 Gross P50 reserves of 204 mmboe Production of 67,000 boepd at plateau Final processing and export of oil and…
IVAR AASEN Health, safety and the environment comes first Our commitment and that of our partners: Zero HSE incidents Engaged and committed leadership Work actively with HSE Open and honest culture The right to stop unsafe work…
IVAR AASEN On track to secure first oil Q4 2016 JAN 15 APR 15 MAY 15 JUN 15 JUL 15 AUG 15 SEP 15 OCT 15 NOV 15 DEC 15 47
IVAR AASEN Upcoming milestones Safe Zephyrus JAN 16 MAR 16 MAY 16 JUL 16 SEP 16 NOV 16 DEC 16 48
IVAR AASEN Jacket installed on the field last summer The steel jacket was constructed by Saipem on Sardinia, Italy The jacket was lifted in place on the seabed 112 meters below sea level on 10 June Piling and grouting activities…
IVAR AASEN Subsea, Umbilical, Riser and Flowline (SURF) SURF scope on track 2015 scope completed Installation of three pipelines between Ivar Aasen and Edvard Gried were completed in September Rock dumping on pipeline for Ivar…
IVAR AASEN Excellent Drilling Performance Meters/dry hole day (ex. core&log) by well* Initiated drilling of production wells through jacket in mid-July Development wells between 2010 and 2015 on the NCS, targeting conventional Batch…
IVAR AASEN Topside at 92.5% completion Minimizing offshore hook-up & commissioning scope Integrated Design Review to verify the design Timely delivery of EICT inputs to Construction and Commissioning Close cooperation in integrated…
IVAR AASEN Make platform ready for first oil Completion Aibel hired and mobilized as hook-up contractor Integrated team Det norske, Aibel people in Singapore 450 bed Floatel to accommodate offshore work force Ivar Aasen readiness…
JOHAN SVERDRUP Asset profile Partner, 11.5733 % working interest Johan Sverdrup is one of the largest fields on the NCS PDO for Johan Sverdrup phase 1 was approved on August 21 Recoverable reserves of 1.7-3.0 billion boe 80% to be…
JOHAN SVERDRUP Project progressing as planned Most major contracts have been awarded Cost estimates continue to come down Phase 1 CAPEX (Operators latest estimate) reduced from NOK 123 billion (nom.) at PDO to NOK 108.5 billion…
JOHAN SVERDRUP Full field development Planned milestones Concept selection / DG2 Q4 2016 Development plan Q4 2017 Production start-up 2022 Developing the periphery of the field Additional wells Additional subsea installations…
GINA KROG Asset profile Partner, 3.3% working interest Area map Located about 30km northwest of Slepiner, and will be developed to the Sleipner field PDO approved in 2013, first oil expected in 2017 Field is developed with a platform…
VETTE Asset profile Operated, 50% working interest Area map Discovered in 1972 and appraised in 2009 Three development concepts being evaluated: Use of jack up drilling rig with production facilies Subsea wells connected up to a…
KEY IMPROVEMENT INITIATIVES Developing a new project delivery model Exploration Effectiveness Project delivery Establish a new project delivery model including: Project model - Developing a new project model covering tie-back,…
Producing assets Geir Solli SVP Operations 60
GREATER ALVHEIM AREA Strong HSE performance There were no serious incidents in 2015: No serious personnel injuries No acute spills to the environment No incidents with high potential Experienced personnel and a mature organization…
GREATER ALVHEIM AREA The Alvheim story - exploration Area consolidation 2001-2002 Known hydrocarbon presence but complex mixture of licenses and owners Resource potential commercial only with an area development approach Boa…
GREATER ALVHEIM AREA The Alvheim story - development Fast track development of an Area Oil Hub Q4 2003 Concept Selection based on converting the MST Odin to an FPSO Q3 2004 Alvheim and Vilje PDOs submitted 2005 Hull conversion at…
GREATER ALVHEIM AREA The Alvheim FPSO 64
Status January 2016 Sanctioned 65
GREATER ALVHEIM AREA The Alvheim FPSO production and Alvheim area reserves Alvheim FPSO historical production (mboepd gross) Reserves vs. PDO (P50 gross), mmboe 400 160 350 140 Remaining reserves 300 120 Arresting Produced to end…
GREATER ALVHEIM AREA Excellent uptime and reliability record Alvheim Area Alvheim FPSO Mid-life Detnorske operated FPSO currently producing 100 mboepd (gross) 310 million barrels of oil (gross) produced to date Strong operational…
GREATER ALVHEIM AREA Way forward Secure continuous development to fill the FPSO Further area infill drilling Development of further small discoveries in the area e.g. Caterpillar, Storklakken, Gekko Near infrastructure exploration…
IVAR AASEN Operational readiness Status update Ivar Aasen and Edvard Grieg Ivar Aasen readiness team established One overall integrated team securing effective planning, execution and start-up Q4 2016 Asset based operation and fully…
KEY IMPROVEMENT INITIATIVES Optimize Alvheim and transfer knowledge to Ivar Aasen Alvheim & Ivar Capture synergies across assets by: Exploration Aasen integration - Implementing common work processes Effectiveness - Sharing technical…
Concluding remarks Karl Johnny Hersvik Chief Executive Officer 71
CORPORATE STRATEGY Three building blocks for future success Execute Improve Grow Be opportunistic and exploit market Ivar Aasen project and drilling Deliver on improvement agenda opportunities Production, projects and drilling…
CAPITAL MARKETS DAY 2016 Concluding remarks Strong current production base and operational cash flow World-class project portfolio with low break even oil price levels Identified potential within the portfolio to lift oil & gas…
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