GTL: Exploiting Remote Gas Discoveries

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GTL Exploiting Remote Gas Discoveries
Jack Holmes IPAA Oil Gas Investment
Symposium April 19, 2004

Nasdaq SYNM
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Forward Looking Statements

• This presentation includes forward-looking
  statements as well as historical information.
  These forward-looking statements may include
  statements relating to the Syntroleum Process and
  related technologies, liquefied natural gas
  development, the GTL Barge and other
  gas-to-liquids plants based on the Syntroleum
  Process, anticipated costs to design, construct
  and operate these plants, anticipated costs to
  make products from these plants, the timing of
  commencement and completion of the design and
  construction of these plants, obtaining required
  financing for these plants, the economic
  construction and operation of gas-to-liquids
  plants, the value and markets for plant products,
  testing, certification, characteristics and use
  of plant products, the continued development of
  the Syntroleum Process (alone or with partners),
  anticipated capital expenditures, anticipated
  revenues and any other statements regarding
  future growth, cash needs, operations, business
  plans and financial results. When used in this
  presentation, the words anticipate, believe,
  estimate, expect, intend, may, plan,
  project, should and similar expressions are
  intended to be among the statements that identify
  forward-looking statements. Although we believe
  that expectations reflected in these
  forward-looking statements are reasonable, these
  kinds of statements involve risks and
  uncertainties. Actual results may not be
  consistent with these forward-looking statements.
  For discussion of these risks and uncertainties
  we refer you to the risks described under Risk
  Factors in our Annual Report on Form 10-K.

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Syntroleum Investment Profile

• NASDAQ SYNM (Common)
• SYNMW (Warrants)
• Shares O/S (Mil) 39.4
• Warrants O/S (Mil) 2.6
• Market Cap (Mil ) 250
• Float (Mil) 24.0
• Research Merrill Lynch

• Management Insiders 39
• Institutional (1) 36
• Retail 25
• Top Institutional Holders
• Oakmont Corporation (2)
• Wellington Management
• Southern Fiduciary Group
• Strong Capital Management
• Sterling Johnston Capital
• Excludes Oakmont Corporation
• Sits on the Board of Directors, owns 18

Investor Relations Contact Ron Stinebaugh, VP
Corp Finance [phone] or [phone]
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History of GTL Synthetic Fuels
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Syntroleum Gas To Liquids Process
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GTL Product Distributions
FT REACTOR OUTPUT
Raw Products from the FT Reactor Raw Products from the FT Reactor
Light FT Syncrude Liquid at Room Temp.
Heavy FT Syncrude Solid at Room Temp.
Refined Products from Light and Heavy FT Syncrude after upgrading Refined Products from Light and Heavy FT Syncrude after upgrading
LPG C3 C4
Naphtha C5 C9
Middle Distillate Refinery output consisting of jet fuel/kerosene, diesel.
Jet/Kerosene C8 C15
Diesel C10 C20
Volume
Light FT Syncrude
Heavy FT Syncrude
C20
C5
C1
C60
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Syntroleum Technology Advantage

• Unique air-based design eliminates costly oxygen
  plant to make syngas
• Air offers safety advantages and is scalable to
  small plant sizes
• Over 100 patents - issued and pending
• 20 years of RD and over 100 million invested

Simplified Syntroleum Process
Shaded areas show eliminated oxygen-based
equipment
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Syntroleum Experience
Pilot Scale
Demonstration Scale
Syntroleums 2 Bpd Pilot Plant Tulsa, Oklahoma,
USA
Syntroleum 60 million Catoosa GTL Demonstration
Plant, 70 Bpd Tulsa, Oklahoma, USA
Diesel fuel being shipped in 6,000 gal
iso-container

• Over 3,000 hrs of pilot plant data at plant
  design conditions

• Co-funded by Syntroleum, U.S. DOE and Marathon
• Clean fuels for testing
• Train operators for commercial plants
• First fuels shipped March 2004

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World Gas Overview
TOTAL 5,500 Tcf Stranded Gas gt 2,500 Tcf
CIS Europe 2156 Tcf
N. America 252 Tcf
Middle East 1980 Tcf
Asia Australia 445 Tcf
Africa 418 Tcf
S. America 250 Tcf
1 Tcf of Natural Gas 100 Million Barrels of GTL
Fuels
Source BP Statistical Review of World Energy 2003
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Plenty of Gas for Both GTL LNG
2010 LNG Plant Capacity(1)
Million Tonnes/yr
20 Yr. Gas Reserves, Tcf
of 2,500 Tcf

• Current 136
• Firm New Commitments 65 72
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• Planned 200 220 9

of 2,500 Tcf
20 Yr. Gas Reserves, Tcf
Million Barrels/d
GTL Plant Capacity (2)
Planned 1 73 3

• Source CERA
• (2) Source BP

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Markets for Stranded Gas
25 Million Bpd
Million BOE/d
1.5 Million BOE/d
0.5 Million BOE/d
Methanol
Ammonia
Middle Distillates
LNG
Sources 2001- American Methanol Association,
Fertecon Ltd., 2003 - BP Statistical Review of
World Energy
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Clean Fuels, Easily Sold

• Syntroleum GTL Diesel
• Can be sold in existing markets
• Compatible with existing infrastructure
  (pipelines, storage terminals, retail pumps)
• No sulfur or aromatics
• Performs better than conventional diesel
• Valuable blending stock to meet new guidelines

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Integrated GTL Projects Include Full Wellstream
Liquefied Petroleum Gas (LPGs) Propane, Butane
etc Stripped from natural gas stream 2 - 5
gallons per mcf (gpm) 800 to 1,200 capital
cost per daily barrel 48 110 million barrels
per Tcf
Methane CH4 Converted to GTL
Fuels 13 to 1 - 10 to 1 conversion
ratios 33,000 to 20,000 capital cost per
barrel 75 - 100 million barrels per Tcf
Well Head
Natural Gas
Condensate (API gt50o) Produced at well
head 5 20 barrels per Mmscf Minimal capital
cost per daily barrel 5 20 million barrels per
Tcf
10 to 1 conversion indicates that 10 mcf of gas
converts to 1 barrel of GTL fuel

• GTL Plants with access to only Methane need to
  be large and efficient to be economic
• With LPGs and condensates, smaller GTL plants
  provide great economic returns

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Range Of Current Capital And Gas Reserves For GTL
Smaller plants have a higher chance to access
full wellhead gas stream
GTL Barge (Only GTLs)
GTL Barge (w/ LPGs)
10
2
4
6
8
0
20-year Reserves, Tcf
Based on AMEC engineering cost estimates on
Syntroleum plant designs
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GTL Niche Is Easier To Enter Requires Less
Capital And Less Gas
LNG
Liquefaction Shipping Regas
Liquefaction Shipping
Liquefaction Only
LNG Cost Basis - Liquefaction Shipping(Qatar to
U.S.) - Greenfield - 225/Tonne, Brownfield -
200/Tonne Regas - 40/Tonne
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GTL Barge Based on DoD Project Experience

• GTL Barge design utilizes experience from
  Syntroleums Department of Defense Barge project
• 3.5 million project cost funded by the U.S.
  Department of Defense
• Engineering work performed by , Bath
  Iron Works (General Dynamics) and American Bureau
  of Shipping

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GTL Barge Details
Natural Gas 177 Mmscf/d
Barge Statistics Barge Size
250 x 450 x 11 draft Barge Weight
35,000 Dwt Barge Costs
Capital 400 Million Operating
Cost 72,000/ day
Naphtha 7,300 Bpd
LPG Plant GTL Plant Diesel 0
8,700 Naptha 4,100 3,100 LPG
4,000 400 Total 8,200 12,200
Total GTL Barge Products 20,400 Bpd 20 Year
Production 140 Million Barrels
Ultra Clean Diesel 8,700 Bpd
LPG 4,400 Bpd
Barge produces into a moored FSO or to a loading
buoy
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Typical Syntroleum GTL Barge Project
Far East
Barge Construction
W. Africa
Installed Barge
Barge Dry Haul
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GTL Barge Targets 1-3 Tcf Gas Fields
LNG and World scale GTL projects only target
larger fields
Syntroleum GTL Barges niche opportunity is
smaller fields.
Worlds Gas Fields by Size (Outside N. America)
Source IHS Energy Group, 1998
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Initial Sample of Gas Fields Show 8 Billion Bbl
Opportunity

• Screening criteria
• Uncontracted gas, 1-3 Tcf range, proximity to
  shore, low delivery cost
• 40 locations in 15 countries
• GTL Barge only GTL process capable of monetizing
  these fields

1 Tcf 100 million barrels 63 Tcf 6.3 billion
barrels Plus 1.4 billion barrels of oil and
condensate ? 8 billion barrels of liquids
Wet gas that includes LPGs
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Exploiting Discovered Gas With GTL Competes With
Typical EP

• The Syntroleum GTL Barge monetizes stranded gas
  reserves at finding, development and production
  costs of 12.52 per barrel of finished fuels.
• This compares to the 2002 average finding,
  development production costs of 11.52 per
  barrel of crude oil.
• The cost to refine this crude oil into fuels is
  another 5.00 per barrel.

Source 2003 John S. Herold, Inc. , Herold
Global Upstream Performance Review
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GTL Barge Can Help Improve Costs

1. 90 companies - large and mid size
2. 18 (20) companies plot off the chart

1. 90 companies - large and mid size
2. 18 (20) companies plot off the chart

GTL Barge
Source John S. Herold, Inc. Global Upstream
Performance Review 2003 Data
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GTL Barge Produces Steady, Long Term Cash Flow
Barge Capital Cost 400 mil Gas Cost
0.70/MCF Operating Cost 72,000/day LPG
Content 2 GPM WTI 25/Bbl (Unescalated) Pre-Ta
x Annual Cash Flow 110 million/year

GPM stands for gallons of Liquefied Petroleum
Gas per 1000 cubic feet of gas.
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GTL Barge Economics
Economic Sensitivity to WTI Price vs. LPG Content
at 0.70/MCF Gas Cost to Plant NPV and IRR are
on a Pre-Tax and Unlevered Basis
Base Case
Base Case
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GTL Barge Business Models

• Tolling arrangement GTL Barge converts gas to
  liquids for a fee
• Purchased gas GTL Barge purchases gas from
  producer for GTL conversion. Fields that are
  currently flaring gas are ideal for this model.
• Integrated Field Development GTL Barge acquires
  gas reserves to develop an integrated field/GTL
  Barge project, which includes both gas production
  and GTL conversion

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GTL Barge Development Team
TI Capital
Financing arm of Middle-East crude shipping co.
Developer and owner of GTL technology

• Contribute technology license
• GTL Barge design
• Invest equity

• Product transport and marketing
• Equity investment

GTL Barge
Sub of ACS, one of the largest European EPC Co
Successful track record worldwide with focus on
W. Africa

• Cost verification
• Engineering construction
• Equity investment

• Acquire natural gas reserves exclusively for
  Syntroleum

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Qatar Leads In GTL Project Activity
Marathon 120,000 Bpd GTL Plant to be located at
Ras Laffan and use gas from the North Dome Field
Project financing by Royal Bank of
Scotland Uses Syntroleum FT under license
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Russia Syntroleum and Partners
Partners Gazprom, Lukoil Status Studies
underway Project Scope Gazprom GTL on 12
fields with potential for 30,000 - 230,000 bpd
Lukoil Associated gas processing
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Syntroleum Well Positioned In Emerging GTL
Industry

• GTL is a game changing technology
• Huge stranded gas reserves with little geologic
  risk
• U.S. gas shortage focusing attention on these
  reserves
• Enormous fuel market
• Increasing environmental pressure for clean fuels
• Improving GTL economics evidenced by Qatar
  projects
• Shell, SasolChevron, ConocoPhillips, Marathon
• Syntroleums air blown process provides high
  barriers to entry
• Management focused on project implementation
• Syntroleum is a pure play on emerging GTL
  industry