Market Context

The commercial and political environment for market entry across the focus area is highly favourable for gas developments:

• The fiscal terms currently on offer are extremely attractive at a global level, especially given that low-risk stable political environment.
• Governments are keen to encourage new entrants and are actively developing policy to incentivise new investment towards smaller reserves.
• For new entrants there is no barrier to accessing extensive, modern, high quality, data at minimal cost through government data banks in the Netherlands and UK. 
• The focus area lies at the heart of industrialized Western Europe, where demand can no longer be satisfied by domestic gas.  Energy security concerns create a favourable political environment for developing Europe’s remaining indigenous gas. 
• Western European gas prices are becoming increasingly liberalised and are increasingly linked to the global commodity market.  The Western European market is experiencing unprecedented high prices that can be accessed directly by producers and traded out 5 years ahead.  These will remain high value markets that will be required to pay for expensive pipeline gas imports from Norway, West Siberia,  North Africa and in the form of LNG from Africa and Middle East. 
• Despite the current pressures on the supply and service sector, in relative terms development costs remain low.  The offshore areas within the focus area are in shallow water depths of less than 40m, requiring jack-up rigs and generally will benefit from low-cost tie-backs to nearby existing infrastructure with available ullage.  Onshore there is less pressure on land rigs and similarly benefits from extensive field and transportation infrastructure.
• Production can be rapidly connected into infrastructure operating increasingly at below capacity and brought directly to market.  Europe’s energy policy with respect to unbundling of the gas chain has made it easier and more transparent for new non-vertically integrated producers to access the transportation network to directly access market prices.  

Business Model

Our business model is about recognising value in previously over-looked undeveloped discoveries where current incumbents either fail to recognise commercial opportunity and/or lack internal funding due to:

• Conventional approaches to decision-making across the industry remain  fundamentally deterministic and therefore fail to appreciate the true inherent worth of an asset and contingent upside; 
• A perceived lack of materiality for resource-constrained majors across the Permian Basin; 
• A high cost base for the major companies that erodes margins for smaller projects.
  With the exploration risk removed, we believe this model offers high reward for moderate risk as the minimum reserve threshold required for commercial development is low yet reserve upside can be high.  There remains significant opportunity to influence value through applying knowledge to the appraisal and commercialisation phases at moderate levels of risk capital. 

Hansa Hydrocarbons will compete against other junior players for opportunities who enjoy a similar low cost base.  The four key strengths that differentiate Hansa Hydrocarbons:

1. Leading-edge Work Processes:  The integration of modern geo-science with risked-based development planning is key to our assessment of value.  Applying the latest technologies to the sub-surface challenges and capturing the full optionality of an asset through probabilistic methodology leads to a superior understanding of value and better decisions.
2. Business Development: The executive management team’s strength is ideally suited for business development.  Business opportunity will be created from pursuing innovative commercial and financial solutions, leveraging both experience and lateral thinking stimulated from integrated working.
3. Strategic Management Focus:  The management team hold a strong conviction that there is the opportunity to build a material high value E&P company from the Northern European Permian Basin.  Discipline with respect to the business model will create value by capitalising upon regional knowledge and relationships.
4. Financial Resources:   The $100 million funding package gives the flexibility and financial headroom to aggressively pursue a portfolio of opportunities across our focus area.  Our financial strength enables us to fund further drilling and development programmes beyond any initial farm-in commitment and gives the financial liquidity to fund overruns on wells and other unforeseen costs that can occur in the E&P business.   

The combination of these core strengths provides a competitive edge which will allow us favourable access to opportunities, make better decisions and capture more value than through traditional approaches.