Portfolio Management
A SYSTEMATIC AND COMMERCIAL APPROACH TO THE VALUE CHAIN
Spring Energy believes that each part of the value chain requires a distinct approach to value creation.
General category considerations:
- Commercial (asset quality, liquidity, size and WI)
- Value add potential (de-risking)
- Economics (ROI, break-even oil price, cash exposure, timing, funding)
- Prospectivity, technical risk profile and probability of success
- Aligned operators and partners
Exploration Assets:
Spring Energy recognises that the exploration and appraisal part of the value chain offers the greatest gearing to value creation. For this reason it is the intention ofthe Company to aggressively add to its license portfolio and through active exploration and appraisal increase its prospective as well as contingent resources, its reserves and in due course production. As a part of this process of building value, Spring Energy utilises the strength of its commercially driven technical team to actively build and manage the portfolio of assets.
In the exploration and appraisal phase, it is critical to adopt an asset by asset approach using value driven investment criteria consistent with the Company`s key objectives and strategies. It is also believed that it is important to recognise the potential value realisation points prior to entering into a license. Value realisation strategies are also assigned for each asset prior to entry. This is a dynamic process designed to ensure that capital is allocated to the most attractive opportunities thereby maximising value.
The employment of geological and geophysical expertise combined with financial and commercial analysis all contribute to the de-risking of these activities. Utilising the latest technology and seismic processing and basin modelling tools, the prospects are then ranked according to a number of criteria which include the chance of success and size of prospect. All prospects are economically screened and examined in the context of the overall portfolio of the Company. The last step is crucial as it helps the Company allocate its resources appropriately and also assists in the active management of the portfolio.
Development and Production Assets:
In the event of exploration and appraisal success, Spring Energy may increasingly consider creating further value through investment in production opportunities, preferably through asset swaps. The Company recognises that producing assets reduce the cost of capital and the dependency on financial markets. Having established a production base, the Company will adopt a value accretive approach to developing discoveries in line with its key objectives. This will depend on several factors including the ability to balance capital requirements, opportunity cost and execution risk.