20100916 aj lucas investement presentation

8/8/2019 20100916 AJ LUCAS Investement Presentation

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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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20100916 aj lucas investement presentation

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