Todd Energy Mangahewa Growth Project

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100% New Zealand owned company – wholly owned subsidiary of Todd Corporation

Active in developing and producing oil and gas for over 50 years

Has an interest in NZ’s major oil and gas fields :

o Maui – 6%

o Pohokura – 26%

o Maari – 16%

o McKee – 100%

o Kapuni – 50%

o Mangahewa – 100%

Who are Todd Energy?

Maui A 6 producing wells 2 water injection wells Todd = 6.25%

Maui B 5 producing wells Todd = 6.25%

Maari 7 producing wells 3 water injection wells Todd = 16%

McKee 6 producing wells 2 water injection wells Todd = 100%

Pohokura 5 offshore wells 3 onshore wells Todd = 26%

Kapuni 9 producing wells 1 water injection well Todd = 50%

Mangahewa 3 producing wells Todd = 100%

McKee Production Station

Maui Production Station

Tank Farm

MPA to MPS Pipelines

B to A Pipeline

MPS to New Plymouth Pipelines

Todd Assets

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McKee Production Station

Export Vessel

2km

Turangi Field

Methanex

Pohokura Field

Todd Methanex Deal

Mangahewa Field

McKee Field

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1961 - first drilled by Shell BP Todd

1997 - second well drilled which demonstrated field commerciality

2001 - adjacent McKee Production Station was modified to process Mangahewa product

2002 - Todd purchased 100% of McKee and Mangahewa from Shell

2003+ - Todd investments include:

o drilling additional 4 wells

o installation of 11MW power generation

o new build LPG plant commissioned in September 2011

o new 100 MW peaker power plant

Todd Mangahewa Gas Field

Top reservoir map along the Mangahewa-Pohokura play trend

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Mangahewa field on trend with the Turangi and Pohokura field

Relatively deep stacked sand reservoirs characterised by tight gas with potential “sweet spots” i.e. reservoir sands with higher productivity

20-30 wells 5200-6000m+ required over 3-5 years

Current base case wells require multi-stage hydraulic fracturing

Pohokura

Turangi

Mangahewa

Wells location map

Planning ~8 wells/site Well drilled directionally from site

pads to minimise impact on surface environment

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Pohokura

Turangi

Mangahewa

Mangahewa 05 Wellpath

The New Zealand Paradigm

Well construction projects at Todd Energy (and often in NZ in general) have been short duration (1-3 wells) resulting in:

• High proportion of lump sum campaign costs incurred due to the one-off nature of the activity

• A lack of activity sequencing to allow batch operation economies

• Difficulty achieving a “learning curve” to optimise well designs and operations

• Short duration contracts commonly resulting in sole sourcing of the NZ incumbent supplier base and associated lack of competitive pricing

• A contract Drilling & Completions (D&C) function not empowered to undertake long term planning & strategy development

• Transient rig and service company crews being increasingly attracted across “the ditch” to Australia due to the “boom”

21 June 2012

Driving a Paradigm Shift

We are using the Methanex deal to underpin a larger scale Mangahewa activity commitment and create our own economy of scale

Longer term sequence planning underpins durations to allow longer term commitments for people, systems, services and materials providing:

• Leverage in sourcing from supplier markets, negotiations and agreements

• Ability to explore execution models such as equipment acquisition (rigs, frac equipment etc), limited market preferred supplier, competitive market tension

• Ability to offer career focused staff jobs to quality personnel to build a business aligned staff model

• Justification for investment in fit for purpose management systems, financial controls and supply chain management systems, support and training

21 June 2012

Drilling & Completions activity to date

Mangahewa-11 Fracturing & testing complete (3 zones)

Mangahewa-05

Drilled & completed

14 days under budget

Frac design ongoing

Mangahewa -07

Drilling upper part of well

Mangahewa -08

Planning under-way

Ensign Rig 931

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1,000.

2,000.

3,000.

4,000.

5,000.

0 10 20 30 40 50 60 70

Mea

sure

d D

epth

, m

Rig Acceptance to Release, days

Mangahewa-07 Target 42 days

Mangahewa-05 Actual 56 days

Mangahewa-11 Actual 65 days

2011/12 Mangahewa Drilling Performance Ensign Rig 931

Near Term Performance Initiatives

• Deeper surface casing shoe to help combat downtime associated with losses

• Minimise losses of SBM

• Isolate CO2 bearing Mt Messenger Fm. behind 9-5/8” casing

• Benefit of cheaper cement job on 7” casing

• Rig skidding capability to enable batch drilling strategy, estimate 10-15% well cost saving

• Completion concept trials required through Q3 & Q4 2012

• Swell packer open hole completion to maximise probability of accessing high permeability streaks and reduce well costs

• Packers would allow effective fracture stimulation if still required

• High angle reservoir penetration to maximise inflow performance

• Elimination of coil tubing in base case fracturing

21 June 2012

Sequence Planning

Identifying batch operation opportunities to impact well construction durations and costs. Examples being examined include:

• Use of a lower spec mobile rig to drill top-holes in a batch campaign thereby targeting economies of scale and scope

• Use of site layout and rig skidding capability to batch drill back-to-back hole sections - focussing on delivering continuous utilisation, thereby mitigating standby impacts.

• Consolidating hydraulic fracturing operations to build an economy of scale through maximising equipment utilisation

Identifying SIMOPS opportunities to effect schedule flexibility

Combine batching with SIMOPs opportunities to feed into the contracting & procurement strategies.

21 June 2012

The activity brings its own challenges..

• Activities are located in a semi-rural environment with many stakeholders:

• Local farmers with high yielding dairy country

• Local residents seeking a rural lifestyle

• Various Maori land trusts and local Iwi (Maori groups)

• Local & Regional Council and Central Government Regulators

• The project is the largest onshore development project undertaken in NZ in this setting

• A sustainable approach is key:

• Traffic Management

• Noise Management

• Health, Safety & Environmental performance

• Community engagement & communication

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In a larger context

• New Zealand is particularly proud of its “clean & green” image

• The industry is under increasing pressure to demonstrate transparency in its activities

• The hydraulic fracturing debate has gained significant focus:

• A Parliamentary Committee of Enquiry (PCE) has been established to investigate the practise of hydraulic fracturing in New Zealand

• Todd is working with the enquiry and PEPANZ (The NZ equivalent of APPEA) to promote a balanced and open view of the practise.

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We are just getting started…watch this space

Mangahewa appraisal and development:

3 wells in to the program the learning is already coming

Challenging wells…can we get to “factory mode”?

Building the sustainable skills base

Building the sustainable operation as part of the local community

Questions?

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