20100916 aj lucas investement presentation
TRANSCRIPT
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AJ Lucas Group Limited
September 2010
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Diversified mining services, building, construction and infrastructure group
Focus on technical, innovative, environmental, engineering solutions
Ongoing focus on continuous improvement in safety & quality
Sector focus: energy, water & waste water, public infrastructure, resources
Leader/dominant position in each service offered
Integrated full service offering for coal seam gas Upstream: drilling, gathering systems and field infrastructure
Midstream: trunklines, compressors
Downstream: construction and civil engineering, mechanical engineering
Interesting portfolio of investments in unconventional hydrocarbons
Europe (Cuadrilla Resources)
USA
Australia
Well positioned in relevant sectors as Australian economy strengthens
Overview
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Activities
Drilling Services Building, Construction &
Infrastructure
Operations & Maintenance
Underground
Exploration
Production
Geotechnical
Well services/completions
Workovers Engineering services
Water & waste water
Gathering systems
Pipelines/hydrotesting
Trenchless technologies/HDD
Specialist civil engineering/M&E
Non-residential construction EPC contracts
BOOT projects
Project management/EPCM
Facilities management
Asset management
oil & gas
water & waste water
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Oil & Gas
Engineering andConstruction Water & Waste water Coal CSG Civil & Building
APA Group Queensland Government BMA-BHP Billiton
Mitsubishi Alliance
Arrow Energy Hyundai
Santos Sydney Water Anglo Coal AGL Sydney City Council
Epic Energy Hunter Water Corporation BHP Santos Sydney Aquarium
Shell Victoria Water Companies Centennial Eastern Star Gas Aldi
Sinopec/CPP Water Corporation, WA Xstrata Origin Water Corporation,
WA
Jemena Regional water authorities Donaldson QGC Telstra
BP Australia Brisbane Water Rio Tinto
Origin
Goro Nickel
Woodside
Chevron
Caltex
High Calibre Clients
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Drilling Division
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Acknowledged industry leader coal and CSG only
Integrated, full service offering
# of Rigs Exploration 56
SIS 6
Production 4
Underground 8
Workovers 4
Strong technical focus emphasis on engineering,
innovation and productivity
Very strong client base only the majors
Wide geographical presence operations
throughout NSW and QLD
Political and economic uncertainty improving
Investment in plant improving rig utilisation
Management team & new systems now in place
Drilling Services
9.2 1419.1 20.6
67.6
88.4
204.3 203.2
2003 2004 2005 2006 2007 2008 2009 2010
DRILLING DIVISION REVENUE
($M)To 30 June
Balanced fleet =
stability and strength
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Dual Purpose Rigs (Coil and Pipe)
50/50 JV with Xtreme Coil Drilling Corp
Drilling cost savings estimated at 50% of
conventional methods
Well drill time reduced to 2 days
(vs 3-5 days)
Features: Continuous coiled tubing with zero
connections
Minimal risk of spillage or blowout as
reduced number of joints
Constant fluid circulation reduces risk of
drill bit getting stuck
Improved safety as automated pipe
handling system
Minimal environmental foot print
Rig up and move time considerably
reduced
Lucas-Xtreme: Next Generation Rigs
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Domestic Customers - Drilling Services
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Industry leader in each activity
Water and gas pipelines
Specialist civil engineering
Mechanical & electrical
Building
Water & waste water projects
C, D&C, EPC and EPCM
World leader in trenchless technologies (incl.
HDD)
Key alliances and partnerships: Leverages skill
base and enhances project delivery
Group reorganisation and management
restructuring Systems overhaul and upgrade
Challenging market but outlook improving,
well placed
BCI Divisional Overview
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BCI Recent Projects
Australian focused
Offices in Sydney,
Melbourne,
Brisbane and Perth
Key local
relationships
Project managementand self performance
Tier 1 quality projects
Specialist engineering
expertise
Existing
Projects(Not
including
water)
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Internationally renowned HDD capability
Ma Wan Island, Hong Kong. Lucas HDD brought water, waste water, power and
telecoms across the harbour
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Australias largest resource
project - $50 billion
Key features:
Sub-sea pipelines
Shore approach to land gas
Cross island and mainland
pipeline
LNG plant
Wharf facilities
Accommodation
CO2 re-injection
The Gorgon Project a case study
Source: Chevron
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Alliance design, construction and
operation of WAs second
desalination plant for Water
Corporation
2 Stage project each capable of
delivering 50GL per year
Major component of the total
project value $955 million (Stage 1)
World class experienced Alliance
partners:
Water Corporation
AJ Lucas
Tecnicas Reunidas
Valoriza Agua
WorleyParsons
Southern SeaWater Desalination Plant
30 June 2010
Environmentally sensitive construction solution microtunnelling rather than trenching
Alliance setting new world standards for energy efficiency in seawater desalination using
combination of high rejection and high production membranes
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Investments
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Cuadrilla Resources (40.93%) E&P junior
in shale gas and liquids space in selectedareas of Western Europe
Riverstone investment of $US58m in February 2010
Fully funded 10 well programme
Only fully integrated unconventional player in
Europe
Proven management team with largest acreage
position outside of majors
25% of Bowland shale and Kimmeridge oil
shale plays in UK with Cuadrilla (75%)
10% net profit interest in Monument
Prospect, Trinity County East Texas oil and
liquids play
Other including acreage in Canning Basin,
WA
Investments Oil & Gas
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Philosophy with oil and gas plays revolves around world
demand for transportable liquids
Hence all plays relate to either oil, liquids or elephant
shale gas plays
Unconventional plays with view to prove science,
demonstrate methodology and early exit
High risk, high return. Demonstrable track record in
Australia
Total amount invested: Australia $0.8M, USA $87.5M
and Europe $60.8M
Looking to commence realising/unlocking value
Investments Oil & Gas
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Cuadrilla Resources
Search for unconventional hydrocarbons (principally shale gas and liquids) in Europe Amongst the largest land holdings in Europe outside majors (net 1.12m acres awarded, a
further 1.3m acres pending)
Proven management team and highest quality technical team, multiple decades of
experience
Vertically integrated to control all aspects of its drilling and development programme
No reliance on third party service providers world class equipment
All equipment components are designed for European specifications (noise, roads, etc)
and certified to both American and European standards 2009
Riverstone
: one of the largest private equity firms in the energy and power sector withover US$17bn of assets under management
AJ Lucas: Leader in gas extraction technologies and horizontal drilling with proven track
record in Australia
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Cuadrilla European Plays
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Cuadrilla Preese Hall Site
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Chris Cornelius (CEO and Founder), over 20 years international experience well service and E&P sectors. FormerEngineering Manager of NOWSCO Well Service Inc. and Technical Director of Evergreen Resources, founded Cuadrilla asa standalone European TGS and Shale Gas exploration company in 2007. Formed DESC Resources (2004) to evaluateglobal unconventional resource plays. Holds B.Sc. from Manchester University and a PhD from Aston University.
Dennis Carlton (Executive Director), founder, COO and Director of Evergreen Resources prior to its $2.1B acquisitionby Pioneer Natural Resources in 2004. Over 30 years experience, worked on CBM, TGS and Shale reservoirs throughoutNorth America and Europe. Widely credited with leading successful development of Raton Basin CBM field in SEColorado. Holds a B.Sc. and M.Sc. in geology.
Marc Bustin (General Manager Technology), is Professor of Petroleum Geology and Organic Petrology at the Universityof British Columbia. Widely recognised as industrys leading unconventional resource technologist, he was a founder ofCBM Solutions prior to its sale to Trican Well Service in 2005. The recipient of numerous prestigious international awardsand the author of over 170 publications, he holds a B.Sc and PhD in geology, and is an elected Fellow of the RoyalSociety of Canada.
Peter Turner (VP Exploration) was a Reader in Sedimentology and former head of the Petroleum Geosciences Unit at
the University of Birmingham. Worked extensively in petroleum industry, specifically on clastic reservoirs of the Rotliegend,and the Permo-Trias of Europe, North Africa and the Middle East. Author of over 150 publications, past winner of theWollaston Fund of the Geological Society of London, holds a B.Sc and PhD in Geology, awarded honorary D.Sc. byUniversity of Wales.
Cuadrilla Resources ManagementTeam
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Mark Miller (General Manager and VP Operations) was the President of Eastern Reservoir Service (ERS), a leading UStesting company prior to it acquisition by UTI Inc in 2005. Prior to forming ERS he was a regional manager forSchlumberger working throughout Europe and the Middle East. He is widely recognized as one of industries leadingunconventional well test analysts and has worked extensively on many of the Shale Gas and TGS plays of North America.He holds a B.Sc. in Engineering from Penn State University.
Eric Vaughan (VP Well Services Group) over 25 years experience, former US and European regional manager forNOWSCO Wells Service Inc managing some of the worlds largest onshore oilfield service operations. He established
Evergreen Well Services Inc as a flag ship for internal service provision, building a seamless vertically integrated drillingand completion service subsidiary into the parent operating company.
Mike Much (VP Engineering & Completions) over 30 years in drilling, completion and production operations as well aswell services management. Former Regional Engineer for BJ Services (USA), Operations Manager for Evergreen WellServices, Division Engineering Manager for Pioneer Natural Resources, and Vice President of Exploration and Productionfor Lucas. Holds a B.Sc. in Petroleum Technology from Oklahoma State University.
Cuadrilla Resources ManagementTeam (contd)
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Monument Prospect Location
Gulf of Mexico
Acreage notpreviously drilled
Highly
prospective
Successful wells
drilled recently in
close proximity
Drilling permits
obtained plan
to drill in
October
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Financial Review
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Margin erosion
R&M, weather, provisions
Revenue - timing
Project delays $22M (recovered FY11)
Improved Q4 performance EBITDA $16.7M
Financial Performance
$M FY10 FY09 Change
Revenue 358.5 499.2 (28%)
EBITDA (before
minorities)58.0 201.6 (71%)
EBIT (before
minorities)30.2 177.7 (83%)
EBIT Margin 8.4% 35.6%
Interest (net) (16.3) (13.5)
Minority Interest (5.7) 0
Tax (15.3) (61.0)
Net profit after tax (7.1) 103.2 (107%)
Earnings per share (11.0) 156.1 (93)%
Dividend per share 5.5 10.5 -
$M FY10 FY09
Reported EBITDA (before minority interest) 58.0 201.6
Profit on sale of ATP651/Gloucester Basin (93.0) (221.1)
Fair value remeasurements - Cuadrilla (8.7) -
Impairment of intangible assets - Texas Oil 30.8 56.6
Other impairments 8.3 -
Underlying EBITDA (4.6) 37.1
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Divisional Overview
$M FY10 FY09 Change
Sales 203.2 204.3 1%
EBITDA 23.7 34.5 (32%)
EBITDA / Sales 11.6% 16.9%
Order Book 149.2 170.1 (12%)
6.5
14.6
18.1
34.5
23.7
FY06 FY07 FY08 FY09 FY10
EBITDA $M
Drilling
$M FY10 FY09 Change
Sales 155.3 287.4 (46%)
EBITDA (19.5) 10.1 (293%)
EBITDA / Sales (12.6%) 3.5%
Order Book 180.5 166.5 8%
5.4 4.9
23.2
10.1
(19.5)
FY06 FY07 FY08 FY09 FY10
EBITDA $M
BC&I
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Cash Flow Movement
0
50
100
150
200
250
$M
FY2010 Cashflow
96.3
98.5 (4.6)
(11.6)4.3
(59.5)
(19.4)
(29.4)(6.0)8.4
6.9(3.6)
(14.1)
(52.4)
Operations ($2.2)M Investing Outflows ($104.0)M Financing ($81.7)M
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Balance Sheet
$M FY10 FY09
Cash 9.3 96.3
Total assets (1) 452.1 515.0
Borrowings 101.3 168.6
Total liabilities 258.9 315.2
Equity 193.2 199.8
Net debt 92.0 72.3
Gearing (Net debt/Net debt + Equity) 32% 27%
Net debt/EBITDA 1.6x 0.4x
Finance Debt analysis $M Bank debt 11.4
Leases (P&E) 32.6
Property 11.2
RCPS 43.6
Def purchase consideration 2.5
TOTAL 101.3
Debt maturity profile $M
FY11 11.7
FY12 20.6
FY13 20.4
FY14 (2) 48.6
TOTAL 101.3
(1)Total assets include an Impairment provision 87.5 56.5on NPI in gas and leasehold interest as required
by accounting standards.
(2)Includes $43.6M RCPS which mature Nov 2013.
Reported as a current liability.
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Outlook
O tl k O ti
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Prospects for drilling very good oil and
gas, CSG and coal
Demand from oil and gas, mining and water
expected to increase substantially in 2011
and continue increasing thereafter
New management in BC&I already
impacting positively plus impact of stable
management/improved systems across the
Group
ERP/BPR commenced go live Q2 2011
Outlook - Operations
Uncertainty still remains across the market place expect difficult trading conditions topersist in short term
Skills shortage and available manpower when economy turns are real issues
O tl k I t t
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UK investments have commenced
drilling first indications of prospects
expected Q1 2011
East Texas to commence drilling
Strong partners introduced/being
introduced in all the plays
Expect to commence to realise on
investments by end 2010
Outlook - Investments
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