Q3 2008 Financial and Operational Results 2009 Capital

Q3 2008 Financial and Operational Results & 2009 Capital Budget November 10, 2008 Disclaimer Certain statements in this presentation constitute forward-looking statements under applicable securities legislation. Such statements are generally identifiable by the terminology used, such as “may”, “will”, “could”, “should”, “would”, “anticipate'', “believe'', “intend”, “expect”, “plan”, “estimate”, “budget'', “outlook'' or other similar wording. Forward-looking information includes, but is not limited to, reference to business strategy and goals, future capital and other expenditures, reserves and resources estimates, drilling plans, construction and repair activities, the submission of development plans, seismic activity, production levels and the sources of growth thereof, project development schedules and results, results of exploration activities and dates by which certain areas may be developed or may come on-stream, royalties payable, financing and capital activities, contingent liabilities, environmental matters, government approvals and completion of current negotiations. By its very nature, such forward-looking information requires Addax Petroleum to make assumptions that may not materialize or that may not be accurate. This forward-looking information is subject to known and unknown risks and uncertainties and other factors, which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such information. Such factors include, but are not limited to: imprecision of reserves and resources estimates, ultimate recovery of reserves, prices of oil and natural gas, general economic, market and business conditions; industry capacity; competitive action by other companies; fluctuations in oil prices; refining and marketing margins; the ability to produce and transport crude oil and natural gas to markets; the ability to market and sell natural gas under its production sharing contracts; the effects of weather and climate conditions; the results of exploration and development drilling and related activities; fluctuations in interest rates and foreign currency exchange rates; the ability of suppliers to meet commitments; actions by governmental authorities, including increases in taxes; decisions or approvals of administrative tribunals; changes in environmental and other regulations; risks attendant with oil and gas operations, both domestic and international; international political events; expected rates of return; and other factors, many of which are beyond the control of Addax Petroleum. More specifically, production may be affected by such factors as exploration success, production start-up timing and success, facility reliability, reservoir performance and natural decline rates, water handling, and drilling progress. Capital expenditures may be affected by cost pressures associated with new capital projects, including labour and material supply, project management, drilling rig rates and availability, and seismic costs. These factors are discussed in greater detail in filings made by Addax Petroleum with the Canadian provincial securities commissions. Readers are cautioned that the foregoing list of important factors affecting forward-looking information is not exhaustive. Furthermore, the forwardlooking information contained in this presentation is made as of the date of this presentation and, except as required by applicable law, Addax Petroleum does not undertake any obligation to update publicly or to revise any of the included forward-looking information, whether as a result of new information, future events or otherwise. The forward-looking information contained in this presentation is expressly qualified by this cautionary statement. 2 Q3 2008 Highlights • • • Strong quarterly performance, operationally and financially Production performance on track to meet guidance of 136 to 140 Mbbl/d for 2008 Active new ventures program to expand property portfolio Preparation for an active exploration program in Q4 2008 • • • Continued capacity development in Kurdistan Initiation of integrated gas utilization project in Nigeria Prudent financial and operational management in challenging oil price environment • • Confident and aggressive outlook for 2009 3 Q3 2008 Operating Performance Production & Development Production: Q3 2008 Q3 2007 Change Exploration & Appraisal Shallow Water Gulf Of Guinea (Nigeria & Cameroon) • Nigeria Gabon Total 103.6 27.7 131.3 104.5 23.7 128.2 -1% +17% +2% • • • • • • Successful appraisal wells at Adanga North Horst and Adanga South (OML123) Preparation work for Okaka exploration well (OML124) Initiated integrated gas utlilisation project • • • Oron West South remains shut-in pending tie-in completion (partial production commenced early Q4) Commenced gas lift and gas injection at Tsengui field Gabon Completed onshore 2D seismic acquisition at Maghena Ongoing onshore 2D seismic acquisition at Epaemeno Preparation work for Andok exploration well (Maghena) Development: Seven primarily focused drilling rigs New production wells in Q3 2008 Drilled Nigeria Gabon Total 3 6 9 Put on production 2 6 8 Acquired 50% interest in offshore Gryphon Marin exploration license area Deepwater Gulf Of Guinea (Nigeria & JDZ) • • • • Increased interest in JDZ Block 4 to 45.5% Kurdistan Region of Iraq Commissioned first phase of early production facilities and commenced construction of second phase Spudded TT-11 and TT-10 appraisal wells Acquired 33.33% interest in Sangaw North license area • Extensive workover activity in OML124 (3 wells) Ongoing facilities construction offshore Nigeria and onshore and offshore Gabon 4 Q3 2008 Financial Performance $ million Financial Highlights Petroleum sales before royalties Q3 2008 1,335 Q3 2007 925 $ / share, basic Q3 2008 Q3 2007 - Funds Flow From Operations Net income 539 248 335 122 3.45 1.55 2.15 0.78 Capital Expenditure (excl. acquisitions) 536 359 - - $ / bbl Operating netbacks Average realized sales price Royalties Operating expense Q3 2008 110.32 (19.77) (8.12) Q3 2007 74.31 (13.08) (6.29) Pre-Tax Operating Netback Current Tax After-Tax Operating Netback 82.43 (36.72) 45.71 54.94 (25.24) 29.70 5 Q3 2008 Financial Position Capital Management Objectives: • • • To safeguard Addax Petroleum’s financial capability and liquidity for future earnings in order to continue to provide an appropriate return to shareholders and other stakeholders; To maintain a flexible capital structure which optimizes the cost of capital at an acceptable risk; and To enable Addax Petroleum to maximize growth by meeting its capital expenditure budget and to expend its budget to accelerate projects, and take advantage of acquisition opportunities. Credit Facilities: Facility Description Total Drawn @ September 30, 2008 $925 million ($129 million LCs) $1.6 Billion Senior Secured Reducing Revolving Facility • Consists of $1.3 Billion reserve based facility + $0.3 Billion letter of credit facility • Entered into January 2007, due January 2012 • Credit availability reduces effectively straight line commencing 2010 • Financial covenant: Total debt (including letter of credit) / EBITDA $500 million Senior Unsecured Revolving Facility • Entered into May 2008, due April 2010 (extendible by one year with banks’ agreement) • Financial covenant: Total debt (excluding letters of credit) / EBIDA • Technical covenant: Total debt (excluding letters of credit) / 2P reserves from Nigeria and Gabon $300 million Convertible Debentures • Entered into May 2007, due May 2012 Working Capital $100 million $300 million $201 million • Includes cash of $88 million and crude oil inventories of $193 million 6 2009 Investment Outlook Addax Petroleum’s 2009 investment outlook is driven by: • • • • • • • • • prudent operational and fiscal management in a volatile commodity price environment capital investment program funded from internally generated cash flow (assuming $60/bbl Brent oil price plus receipt in early 2009 of certain expected year-end working capital items) reducing drilling, service and operating costs (although for budget purposes minimal reduction assumed) economic re-investment balanced between production and exploration retaining financial flexibility to expand or contract the portfolio as necessary, inventory of $850 million in contingent projects 2009 Production and Development investment focus: in Nigeria, building and maintaining production to high levels through intensive drilling campaign and upgrading of infrastructure in Gabon, continued production growth, in particular through ongoing development of our onshore fields in the Kurdistan Region of Iraq, continuing early production development at Taq Taq maintaining and growing robust cash flow generation capability to invest in reserves additions – in particular from exploration and appraisal on the existing portfolio 2009 Exploration and Appraisal investment focus: • • continue to pursue accelerated reserves and resources growth throughout exploration portfolio 12 E&A wells planned in 2009, including four in Nigeria, one in Cameroon, five in Gabon, one in Deepwater GOG and two in Kurdistan Region of Iraq 7 2008 / 2009 Summary & Highlights Full Year 2008 (estimate) Average Production 136 to 140 Mbbl/d expected - first 9 months: 134.4 Mbbl/d - strong Q4 production growth expected - October 2008 average > 140 Mbbl/d $1,602 mm estimate - excludes acquisitions ($71 mm) - first nine months spent: $1,174 mm - accelerated spend in Q4 expected Full Year 2009 (budget) 140 to 145 Mbbl/d guidance - Nigeria: 108 to 112 Mbbl/d - Gabon: 31 to 34 Mbbl/d - excludes potential production from Kurdistan $1,600 mm budgeted - $1,028 mm for Nigeria / Cameroon - $425 mm for Gabon - $50 mm for Deepwater (OPL291 & JDZ) - $93 mm for Kurdistan Region of Iraq $1,251 mm budgeted - approximately 50 new oil production wells - expected to increase production year-on-year to 140 to 145 Mbbl/d - establish productive capacity in years beyond 2009 $345 mm budgeted - seismic surveys onshore Gabon, shallow water & Deepwater Nigeria - 12 exploration and appraisal wells, including Kurdistan and Deepwater Gulf of Guinea Capital Expenditure Development Capex $1,294 mm estimate - approximately 40 new oil production wells - expected to increase production from 125.9 Mbbl/d (2007 avg) to between 136 and 140 Mbbl/d, 10% increase $302 mm estimate - extensive seismic programs building resources base - four discoveries to date in 2008, 44% success - highly successful Taq Taq appraisal - six E&A wells to spud before year-end Exploration & Appraisal Capex 8 Investor Relations Contacts Mr Craig Kelly Investor Relations Tel +41 (0) 22 702 95 68 craig.kelly@addaxpetroleum.com Mr Chad O’Hare Investor Relations Tel +41 (0) 22 702 94 10 chad.o’hare@addaxpetroleum.com www.addaxpetroleum.com 9 Appendices 2009 Capital Budget Breakdown • • 2009 capital budget of $1,600 million consistent with expected 2008 capital investment Drilling (development, exploration and appraisal) remains the largest investment item, over 67%, through the utilisation of up to 11 drilling rigs 2008 Capex Forecast Development US$ millions, excludes acquisitions Nigeria / Cameroon OML123 OML124 OML126 OML137 Other Nigeria (Okwok & OPL227) Cameroon (Ngosso / Iroko) Sub-total Gabon 337 81 207 625 224 12 95 331 4 8 2 59 4 68 145 565 101 304 59 4 68 1,101 Drilling Facilities Explo & Appraisal Total 2009 Capex Budget Development Drilling 327 222 549 Facilities 131 11 160 4 306 Explo & Appraisal 18 5 54 58 2 36 173 Total 476 16 436 58 6 36 1,028 Onshore Offshore Sub-total Deepwater Gulf of Guinea JDZ OPL 291 Sub-total Kurdistan Region of Iraq Taq Taq Sangaw North Sub-total 158 7 165 - 157 16 173 - 17 33 50 25 26 51 56 56 332 56 388 25 26 51 56 56 172 13 185 - 151 3 154 57 57 42 44 86 35 15 50 9 27 36 365 60 425 35 15 50 66 27 93 Corporate TOTAL 790 504 302 6 1,602 734 517 345 4 1,600 11 Exploration & Appraisal Outlook Onshore Nigeria 2008 : 1 well 2008 & 2009 Budgeted (+Contingent) Wells Kurdistan 2008 : 4 wells • • Okaka : 0 wells (+1) Jam Jam 2009  • • • Taq Taq 8, 9 & 11 Taq Taq TT-10 : 2 wells Kewa Chirmila Sangaw North 2009 Shallow Water Nigeria 2008 : 5 wells Kita Marine Ofrima N. 3 & 3A • Adanga North Graben • Okwori East 2009 : 3 wells (+5) Offshore Cameroon 2008 X : 4 wells Odiong, Tali & Iroko 1 Odiong 4 ST : 1 well (+1) Oongue (Ngosso) Bilobo (Iroko) • • • • Inhaga West  NE Okwori Ofrima N-4 Nkoro, Asanga, Oron East, Efiat, Ofrima N-5 2009 • • Joint Development Zone 2009 : 1 well (+2) • • • Kina (Block 4) Tome (Block 2) Lemba (Block 3) Offshore Gabon 2008 : 4 wells X Admiral & Charlie Ebouri N, Etame N : 3 wells (+6) • Onshore Gabon 2008 : 1 well 2009 • • • • Andok : 2 wells (+1) Maghena-1X 2009 Total E&A Portfolio: 2008 : 19 wells 2009 (+Contingent) : 12 wells (+16) • • • • • • SE Etame Pompano N Ajomba N Kiarsenny-1X & 2X Tango Pompano S, Ajoma S, Crevalle Epaemeno-1X Alpha Long term exploration strategy and continuous drilling campaign 12 2009 Nigeria, Cameroon & JDZ Production & Development Exploration – Shallow Water/Onshore • Production guidance for Nigeria: 108 to 112 Mbbl/d Mbbl/d Q4 OML123 OML126 OML124 60 – 62 42 – 44 8–9 • • E&A budget of $173 mm Four E&A wells (three remaining in 2008): 2008 Q4 OML123 ADNG Q1 Q2 2009 Q3 Inhaga W Q4 2008E Year 58 – 61 40 – 43 7–8 2009E Year 61 – 64 38 – 41 7–9 OML124 OML126 OML137 Okaka Okwori E NE Okwori Ofrima N-4 Oongue Nigeria 111 – 114 106 – 111 108 – 112 • OML123 & OML124 Development projects ($469 mm): Ngosso - Adanga North Horst (11 wells + water injection + facilities) Oron West (2 wells + facilities) Adanga South (2 wells + facilities) Ebughu (2 wells + facilities) Exploration – Deepwater North Oron (1 well) development planning for Kita Marine and Antan • • • • E&A budget of $50 mm One 3-D seismic survey - OPL291 1 E&A well - JDZ Block 4 (Kina) in late 2009 OML126 & OML137 Development projects ($382 mm): 13 Okwori/Nda Phase 3 (5 wells + gas injection + facilities) FPSO topside modifications Integrated gas utilisation project studies 2009 Gabon (Onshore & Offshore) Production & Development Exploration • Production guidance for Gabon: 31 to 34 Mbbl/d Mbbl/d Q4 2008E Year 2009E Year • • • E&A budget of $86 mm 2-D seismic survey over Epaemeno (onshore) Five E&A wells (three remaining in 2008): 2008 2009 Onshore Offshore Gabon 23 – 25 6–8 30 – 32 21 – 25 6–7 28 – 31 24 – 28 6–7 31 – 34 Onshore: - Maghena - Epaemeno Q4 Q1 Q2 Q3 Q4 • Onshore Development projects ($323 mm): Andok Maghena-1X Epaemeno-1X - Obangue field (17 wells + water injection + facilities) Tsiengui field (1 well + gas/water injection + facilities) Tsiengui West field (4 wells) Offshore: - Gryphon - Etame Ajomba & Pompano Ebouri N & Etame N SE Etame Autour field (1 development / appraisal well + facilities) Koula field (facilities) Completion of Coucal-Rabi export pipeline • Offshore Development projects ($16 mm): - Etame and Ebouri fields (2 wells + facilities) 14 2009 Kurdistan Region of Iraq Production & Development Exploration • Taq Taq Early Production Plan ($57 mm): - complete second stage of early production system, including trunkline to new truckloading facility, for capacity up to 30 Mbbl/d complete third stage, including expansion of onsite processing facilities, for capacity up to 60 Mbbl/d one development well • • E&A budget of $36 mm Two exploration wells: 2008 Q4 Q1 Q2 2009 Q3 Q4 Taq Taq Sangaw North Kewa Chirmila Sangaw North • Taq Taq full field development planning ongoing: - completion of export pipeline studies (Kirkuk) 15 Building a Leading International E&P Company 16