primeline corporate presentation - october 2014

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Primeline Corporate Presentation

October 2014

Corporate Presentation

October 2014

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October 2014

Platform for growth, proven track record, strong cash flow

• TSX Venture listed (PEH:TSXV) oil and gas exploration and production company

• Strong management and proven technical team with significant international and

Chinese energy expertise

• Exclusively focused on China energy opportunities for the past 20 years in joint

venture with China National Offshore Oil Corporation (“CNOOC”)

• Gas production since July 2014 in East China Sea. One of the very few offshore gas

developments in China

• A strategic supplier to high growth East China energy market

• High gas price

• Expected annualised EBITDA ~US$50m net to PEH; higher initially with exploration cost

recovery

• McDaniel’s 3P estimated NPV10 of $1.16/share for the producing reservoir alone,

excluding upside infield and exploration

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October 2014

TCF scale upside in prospects which can share infrastructure

• Additional possible reserves and prospective resources (gross risked 72bcf 2C) in the

field itself, through “phase 2 development drilling”

• High potential exploration in the nearby area to increase reserves, in a block of 5,877

km2 (1.45 million acres) - supported by existing 2D seismic evaluation along the trend

to north adds 2-4 times more gas potential in same play type.

• Significant potential (gross risked 128 bcf 2C) in nearby prospects that have been

defined by 3D seismic data. First well in this play resulted in new discovery in June

2010

• 600 km2 of additional 3D seismic has been shot across this play fairway, data is being

processed, available in November 2014

• Two additional exploration wells to be drilled in 2015

• Additional hydrocarbon potential McDaniel’s net risked 2C worth ~$200m at $12/boe

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October 2014

East China Sea becoming a significant production basin

• Adjacent to the most populous/ well

developed part of China with growing

gas requirement

• Proven petroleum province, defined

exploration targets

• New E&P focus in Xihu Trough (Basin) in

northern East China Sea, anchored on

two existing fields:

– Pinghu Field: onstream in 1998, 386

km 14” pipeline to Shanghai terminal

– Chunxiao Field: onstream in 2006, 360

km 28” pipeline to Ningbo and 4

production platforms. Expansion

development underway

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October 2014

Block 25/34(85 km2) & Block 33/07 (5,877 km2)

• Development completed for LS36-1 gas field,

secured market access and built regional production infrastructure hub

• High impact exploration to add additional resources in the immediate vicinity and the rest of the Block anchored around the producing LS36-1 facility

737 km2 of

existing 3D

seismic data

Newly acquired 600

km2 of 3D seismic

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October 2014

Petroleum Contracts (25/34 & 33/07)

• Block 25/34: development and production of the LS36-1 gas field (85 km2); Operator: CNOOC

• Block 33/07: seven year exploration period of three phases (3, 2, 2 years) from Nov 2012. the minimum work program in phase 1: 600 km2 of 3D and 2 wells; Operator: PEH

• Contractor: Primeline (PEH) 75% and Primeline Petroleum Corporation (“PPC”) 25% of Contractors’ Rights

• Contractors are responsible for 100% of all exploration costs (PEH: 75% of the costs)

• CNOOC has right to participate in up to 51% of any commercial development by paying pro rata development and operation costs

• Petroleum Contracts granted on very favourable fiscal terms

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October 2014

Zhejiang Gas Grid

Planned

Throughput of circa 8 bcmpa in 2015

• LS36-1 gas field is an important strategic resource close to Zhejiang Province

• Supply to Zhejiang gas grid which has a planned throughput of ~8 bcmpa in 2015

Ningbo

LNG

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October 2014

Gas Sales Agreement

• Primeline and CNOOC have agreed to sell LS36-1 gas to Zhejiang Provincial Gas grid (Zhejiang Gas)

• The Province has a population of 50 million and is the 4th largest economy in China with gas utilisation of only about 2.8% of total energy mix

• Zhejiang Gas and CNOOC signed Agreement in Principle for Gas Sale in 2008 and Framework Agreement in 2010, confirming general terms including quality of the gas, take-or-pay principles, base price and annual quantity

• Final gas sales contract has been agreed with signing expected imminently

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October 2014

LS36-1: Reserves

• Two discovery wells, DST tested at 9.8 MMcfd and 12.6 MMcfd

• Phase 1 four producers drilled and completed in April 2013

• Flow test finished in May 2014, production since July 2014

• McDaniel and Associates’ reserves estimate as follows:

• Proved + Probable (2P) Gas: 68.1 bcf, Liquids: 3.6 MMbbl;

• Total 2P BOE: 14.9 MMbboe

Property Company Company

Gross Gross Net

Reserve Category MMcf MMcf MMcf

Total Proved Reserves 52,148 19,164 20,611

Probable Reserves 15,940 5,858 5,813

Proved Plus Probable Reserves 68,088 25,022 26,424

Possible Reserves 19,430 7,141 7,095

Proved + Prob. + Poss. Reserves 87,518 32,163 33,519

(2) Company Net reserves are based on Company share of total Cost and Profit Oil and, due to repayment of

past costs, are greater than Company Gross.(3) Based on gas/boe conversion of 6 to 1 and LPG/boe conversion of 1 to 1

Natural Gas Reserves

(1) Company Gross reserves are based on Company working interest share of the reserves.

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October 2014

LS36-1: Infrastructure Hub

Platform facility:

Completed -

Development wells:

4 Completed -

Subsea pipeline:

126.9km

Completed,

Onshore terminal:

Completed

Sale gas pipeline

and terminal to grid:

32km Completed

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October 2014

LS36-1: Development Schedule

2009 2010 2011 2012 20139 # 11 # 1 2 3 4 5 6 7 8 9 # 11 # 1 2 3 4 5 6 7 8 9 # 11 # 1 2 3 4 5 6 7 8 9 # 11 # 1 2 3 4 5 6 7 8 9 # 11 # 1 2 3 4 5 6 7 8 9 # 11 # 1 2 3 4 5 6 7 8 9

Gas Sales Agreement

Compilation of ODP

Development Agreements & Execution

Revisions of the ODP & EIA approval

Basic Design

Fabrication & installation of Jacket

Fabrication & installation of Topsides

Fabrication & laying of Subsea Pipeline

Laying of Gas Sales Pipeline

Construction of Terminal

Drilling & completion

Joint commissioning

First Gas

Development Activity

Milestone

Development Programme

2008

Critical Path

First production date

2014Activity

Agreement in principle Framework Agreement

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October 2014

LS36-1: Development Milestones

Commercial Agreements

Oct 2008Gas Sale Agreement-in-principle signed, subsequent Framework and

Amendment Agreements signed in 2011 and 2012

End 2009 Overall Development Program completed

March 2010 Development Agreements signed

Design and Construction

Nov 2010 Engineering design commenced

Jul 2011 Procurement and fabrication commenced

March 2012 Site installation commenced

June 2013 Mechanical Completion of platform, terminal & offshore pipeline

July 2014 Development completed and production commenced

Project Finance

May 2010 Loan Memorandum signed

Nov 2012 Revised Loan Memorandum signed

Jan 2013 CDB Credit Committee Approval

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October 2014

ODP and Government Approval

Jul 2011CNOOC Investment Committee and PEH Board approved the

development

Jun 2011 Safe assessment approved

Dec. 2011 Occupational hazard assessment approved

Feb. 2012 Pipeline route approved

May 2012 Environmental Impact Assessment (EIA) approved

Jun 2012ODP filed with National Development and Reform Commission (NDRC)

Aug 2012ODP passed the review by Expert Committee appointed by NDRC

Feb 2013Preliminary ocean area usage approval was granted by SOA

Nov 2013 Final land use consent on the terminal land

May 2014 NDRC Approval of ODP

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October 2014

LS36-1: Current Status

• Platform Jacket installed in July 2012, topside and living quarters installation completed in

June 2013

• 127 km of subsea pipeline & 12 km of sales gas pipeline laid by Oct 2012, 17 km of sales gas pipeline laid by April 2013

• Initial Development drilling & completion finished in April 2013, open well flow test in Dec-May 2014

• Terminal engineering construction completed in June 2013

• The final 3 km of sales gas pipeline laid by June 2014

• Joint Commissioning started in early July 2014

• First gas production commenced on 16th July 2014

• Development is on budget

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October 2014

Jacket Installation

July 2012

Development Drilling

completed April 2013Topside lifted April 2013,

installation completed

June 2013

Development in Images

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October 2014

LS36-1: Wells

LS36-1-2LS36-1-1

A3

A1M

A5

M1-0

Mapped Area

Proposed Horizontal Well

A2H

A4P

P

Top M1-2 / M1-1 Merged & M1-0 (Patch) Contoured to GWC (5m CI)

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October 2014

• Horizontal and Multi-Lateral Gas Production wells increase Potential Gas Rates, especially in tight gas reservoirs, and increase effective Drainage Area

• A3 drilled as a Vertical Well to allow evaluation of deeper intervals. Completed over M1-2 interval

• A1M drilled as 3 branch Multi-Lateral well in M1-1

• A2H drilled as 2 branch Multi-Lateral well in M1-2

• A5 drilled as Deviated Well to M1-1 reservoir

Lateral

LS36-1: Production Well Design

A3

A5

A2H

A1M

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October 2014

Onshore Processing Terminal

Storage

CO2

Processing

Gas

ProcessingSlug

Catcher

Operation &

Fire-fighting

Central

Control

Burner

Loading

Zone

Office &

Living

Lab

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October 2014

LS36-1: Development Budget and Loan

• China Development Bank (CDB) agreed to provide project finance for PEH and PPC’s

share of LS36-1 development costs

• Revised Loan Memorandum signed on 2nd Nov 2012 and approved in principle by CDB Credit Committee on 29th Jan 2013

• Following NDRC approval of the ODP, Primeline and CDB are working closely to finalise the loan arrangement

• Total Investment Budget circa US$ 727M including Development Capex circa US$ 608M,

some will be spent after production:

– Primeline (PEH+PPC)’s share of Capex (49%): US$ 297M

– PEH share of Capex (36.75%): US$ 223M

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October 2014

Additional Gas Resources – Step-out and Exploration

• Additional possible reserves and prospective resources in the field itself, through “phase 2 development drilling”

• Significant potential in nearby prospects that have been defined by 3D seismic data. First well in this play resulted in new discovery in June 2010; additional wells to be drilled

• Additional hydrocarbon potential supported by existing 2D seismic evaluation along the trend to north adds 2-4 times more gas potential in same play type. 600 sq. km of additional 3D seismic has been shot across this play fairway, data is being processed,

available in November 2014

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October 2014

Prospective Resources By McDaniel

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October 2014

Additional Resources in Lower Zones

• Current Producers are in M1-1 an M1-2 sands

• Additional gas in other sands and in lower tight reservoir

M11M12

M2

M31M32

L1

L2

Cross-section of LS36-1

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October 2014

Reserve Additions for Phase 2 Drilling from Platform

Existing wells shown in black

30-8 Exploration Prospect Wells

LS36-1 M2 & M3 wells

LS36-1 M10 well

LS36-1 M11 Sth well

LS36-1 M11 SW well

8 locations and well tracks selected as candidates for reserves additions

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October 2014

M10 Untested Sand

• Designed as deviated well targeted to thick M10 section

• Well penetrates entire M10

stratigraphic section

• M10 GIIP calculates with Prospect Range of:P90: 6.8 P50: 13.3 P10: 26.0 Bcf

LS36-1 M10

Top M10 3D Horizon

Shaded to show M10 Isochore

Isochore Thickness

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October 2014

M1-1 South Structure

• Designed as deviated well targeted to thick M11

Southern Fault Block

• GIIP calculate with GIIP range of:

P90: 4.4

P50: 9.5

P10: 20.8 Bcf

Far Stack: Sum of Negative Values above M1-2 (-60+0 ms)

C.I. = 5 mBase = -2300 m

LS36-1 M11

South Fault Block

Contact @ 2300m TVDSS

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October 2014

LS36-1 Field & Nearby Prospects

• Several prospects near discovery, with TCF Prospective Resources

• Prospects and discovery have similar geological and

geophysical features

• 3D seismic data interpretation leads to the selection of optimal well locations in identified prospects

LS35-3-1

Discovery

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October 2014

Lishui Gas Play

LS35-1

LS30-3

LS29-2

LS35-3

LS30-3-1

LS35-3-1

Discovery

LS36-1 Platform

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October 2014

LS36-1: Nearby Prospects

• New 600 sq. km 3D seismic to expand coverage in the gas play –acquisition completed in May 2014, processing in progress

• Future 3D work will cover the oil play prospects

• Exploration drilling in 2015 after LS36-1 production

LS35-3-1 Discovery

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October 2014

Development Led Exploration

• Covers majority of the Lishui Basin which has:

two commercial flow wells (Primeline’s)

new discovery

seven regional wells in and around the basin have hydrocarbon shows or flows

only two wells inside the Lishuibasin are completely dry

Through interpretation of reprocessed 2D seismic data, several very interesting prospects/leads have been mapped out. 3D seismic survey is planned before finalising exploration drilling programme.

737 km2 of

existing 3D

seismic data

Newly acquired

600 km2 of 3D

seismic

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October 2014

• Long term close relationship with CNOOC

• Management with proven track record & operational expertise

• One of the very few offshore gas developments in China

• Market access to one of the most dynamic but energy starved province in China, high gas price region

• Phase 1 development generating annualised PEH EBITDA of circa US$50m once we are in full production ($75m in first year including exploration cost recovery)

• TCF scale upside in prospects in the immediate vicinity to share infrastructure

• 5,877 km2 concession with several TCF of upside potential

Summary

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October 2014

Appendix

Board of Directors

Corporate Structure

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October 2014

Board of Directors

Victor Hwang | Chairman and PresidentMr. Hwang is Executive Director of the publicly listed Hong Kong Parkview Group Ltd., a division of the family

controlled Chyau Fwu Corporation. Parkview's core business includes property development, shipping/transportation

and hospitality. He is also President of Parkview International London Ltd - the company that sold the Battersea

Power Station site in Central London for £400M (US$780M) in late 2006. Mr. Hwang holds a BSc in Business

Administration and has significant business and political relationships in China.

Ming Wang | Director and CEO(see Management and Technical Team slide)

Brian Chan | DirectorMr. Chan has extensive experience in international banking and commerce. His responsibilities include the

formulation and implementation of corporate and business strategies with respect to the Company's East China Sea

Project. In addition, Mr. Chan is General Manager and Director of the Hong Kong Parkview Group Ltd. He is a

Certified Accountant.

Alan Johnson | Non-Executive DirectorMr. Johnson has over 30 years’ oil industry experience with various companies particularly in management and

operations in Africa, Russia and China. He was Chief Operation Officer for the Cluff Group of Companies 1996-2000.

He joined Glencore in 2000 as senior upstream oil manager for Glencore worldwide, looking after projects including

a 280,000 bblpd production venture and exploration involvement in Africa and South America.

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October 2014

Board of Directors

Peter Kelty | Non-Executive DirectorMr. Kelty has extensive experience in restructuring and financing major Asian regional corporations as well as

advisory work for European and US multi-nationals. Mr. Kelty is a Certified Public Accountant and a member of the

Illinois State Bar. He holds a Masters degree in Business Administration with a major in Accounting and is a Doctor

Of Jurisprudence.

Yunshi Cao | Non-Executive DirectorMr. Cao has over 30 years oil industry experience in China. He recently retired from CNOOC where he was General

Counsel, Company Secretary and Senior Vice President of CNOOC Ltd. (NYSE:CEO). Mr. Cao was closely involved

In the listing of CNOOC Ltd., its subsequent operations and fund raisings. Mr. Cao was in charge of CNOOC legal

Department and negotiated all the petroleum contracts with international companies since 1982.

Vincent Lien | Non-Executive DirectorMr. Lien has over 20 years’ of experience in the banking industry, specializing in corporate finance and capital

management in Hong Kong, the PRC, Singapore and South-east Asia. Mr. Lien held various senior positions at

several major multinational banking institutions including Swiss Bank Corporation and Bankers Trust & Company.

He was the managing director in the financial institutions & public sector division of ABN AMRO Bank. Mr. Lien is

currently a director of various Company; including the Maritime & Port Authority of Singapore, Up Energy

Development Group Limited; and Focus Media Network Limited; both listed on the Hong Kong Stock Exchange.

Mr.Lien obtained a Bachelor degree in Business Administration from the University of New Brunswick in 1986.

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October 2014

Management & Technical Team

Ming Wang | Director and CEODr. Wang holds a PhD in Geology from Imperial College, London. He joined Primeline in January 1994 and was

appointed as Vice President of Exploration in December 1996. Since then he has been responsible for all technical

and commercial operations for Primeline, including the successful drilling operation of the LS36-1-1 discovery well.

Dr. Wang was appointed CEO in 2006. He has extensive knowledge of, and contacts within, China's petroleum

industry.

Stuart Joyner | Chief Financial Officer (Elect)Mr. Joyner joined from Sound Oil where he was CFO since 2013 and has 20 years' experience in the oil and gas

sector. Prior to industry, he spent 18 years in investment banking for Investec and Credit Suisse, where he headed

sector coverage and previously Morgan Stanley, Dresdner Kleinwort and NatWest Securities. He was highly ranked

as an analyst and specialist salesperson in the Extel and Institutional Investor surveys. Subject to regulatory and other

approvals, he is expected to assume responsibilities at the November 2014 AGM.

John Li| Chief Financial Officer (Interim)Mr. Li has over 30 years’ experience working in various financial capacities for public and private companies. Mr. Li is

a Certified Public Accountant qualified in Hong Kong and Australia, and graduated with a Masters in Practicing

Accounting from Monash University in Australia. Mr. Li is the CFO (China) of Beijing Chyau Fwu Properties Company

Limited, which is part of the Parkview Group.

Andrew Biggs | Senior Vice President and General CounselMr. Biggs is qualified as a solicitor in England and in Hong Kong. Between 1981 and 1998, he was a partner with

international law firm Richards Butler, both in Hong Kong and London. Mr. Biggs specialised in corporate finance

transactions and was involved in many of the early H-share listings of mainland Chinese Companies on the HK Stock

Exchange. In 1998, Mr. Biggs joined Parkview Group as the Corporate Affairs Director and in 2007 was appointed

general counsel of Primeline and in such capacity he has overseen all legal aspects of Primeline’s operations.

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October 2014

Management & Technical Team

Alan Soulsby | Technical DirectorMr. Soulsby graduated from Oxford University with a degree in Physics in 1970 followed by a Masters in Geophysics.

He has had a wide and varied career in the petroleum industry with over 35 years’ international exploration

experience, including managing Exploration Consultants Ltd. (ECL) for a number of years, managing many large

integrated exploration and evaluation projects. He has acted as Technical Director for Primeline since 1994 and was

responsible for the initial block selection and the exploration programme which led to the LS36-1 discovery and

ongoing evaluation work.

Brian Thurley | E & P CoordinatorMr. Thurley graduated from Imperial College and has over 35 years’ G&G experience in international oil and gas

exploration and production projects. He was Exploration Manager (international) for Monumental Oil and Gas,

technical director for Burren Energy, and technical advisor for Bayfield Energy. Mr. Thurley joined Primeline in April

2014 to work with Alan Soulsby to manage the exploration programme and development and production of LS36-1

gas field.

Mark Norman | Project Director and General Manager, China OfficeMr. Norman has over 25 years’ experience in project management. He spent 15 years as a commercial manager

for contracting organisations in the UK before moving to work on the development of a series of major international

projects. He has overseen the successful delivery of a number of projects worldwide and has expertise in the delivery

of complex projects. In June 2012, Mr Norman was appointed Project Director for Primeline’s Shanghai office and

Vice President in the Lishui Operating Company - the operator of the LS36-1 development and in May 2014, General

manager of Primeline Shanghai Office.

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October 2014

Corporate Structure

Trading Symbols

Outstanding Shares

Fully Diluted Shares

Fully Diluted Proceeds

Corporate Debt

Auditor

PEH - TSX Venture Exchange

112,791,018

123,016,068

7.2M (C$) C$0.67 average strike price

8.0M (C$) Interest free from Chairman at end June

Price Waterhouse Coopers LLP

Contact

Dr Ming Wang

Chief Executive Officer

[email protected]

Andrew Biggs

Senior Vice President

[email protected]

Stuart Joyner

Chief Financial Officer (Elect)

[email protected]

mailto:[email protected]



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October 2014

Disclaimer

This information contains certain forward-looking statements within the meaning of applicable securities

laws. Forward-looking statements are often characterized by words such as “plan”, “expect”, “project”,

“intend”, “believe”, “anticipate”, “estimate” and other similar words, or statements that certain events

“may” or “will” occur, including without limitation statements related to intended work programs and

associated timelines. Forward-looking statements are based on the opinions and estimates of

management at the date the statements are made and are subject to a variety of risks and uncertainties

and other factors that could cause actual events or results to differ materially from those projected or

anticipated in the forward-looking statements. Such risks and uncertainties include the inherent risks

involved in the exploration for and development of crude oil and natural gas offshore, the uncertainties

involved in interpreting drilling results and other geological and geophysical data, fluctuating energy prices,

the possibility of cost overruns or other unanticipated costs or delays, the risks associated with negotiating

with foreign governments and country risk associated with conducting operations in the People’s Republic

of China and other factors, many of which are beyond the control of Primeline Energy Holdings Inc.

(“Primeline”, or the “Company”). Primeline cannot and does not assure that actual results will be consistent

with such forward-looking statements. Forward-looking statements are made as at the date of preparation

of this presentation and are subject to change. Primeline assumes no obligation to revise or update them

to reflect new circumstances, except as required by law. Prospective investors should not place undue

reliance on forward-looking statements.

primeline corporate presentation - october 2014

Investor Relations

gas exploration

gas potential

gas sales agreement

primeline peh

probable reserves

company net reserves

total energy mix zhejiang

km2 block