Merrion%20Capital%20June2011

Reuters PCI.L / Bloomberg PCI LN
Petroceltic International
Muna Muleya CFA
+353 1 240 4137
muna.muleya@merrion-capital.com
Rating
Target price
Buy 18.0p
Date 22 nd June 2011 IRELAND Oil & Gas Exploration and Production
Addressing its challenges
We initiate coverage of Petroceltic International with a Buy recommendation
and target price of 18.0p share, representing 76% upside from current levels.
With Petroceltic trading at 43% discount to its core NAV, which is very well
underpinned by farm out transactions, we see limited downside and
significant upside. However, the company faces challenges to realise its full
potential valuation
Deep discount to core NAV, limited downside
Petroceltic is one of the value plays in the oil and gas sector. It is trading at a 43%
discount to its core NAV. The core NAV is underpinned by the recent ENEL farm out
transaction which values the share between a minimum of 13.8p and maximum of
20.7p. With a further farm out expected to be concluded at a later stage on terms we
expect to be more favourable than the ENEL transaction, we see limited downside and
significant upside potential from these levels.
Duration and timing of appraisal more certain
The appraisal programme was expanded and accelerated following the farm out
agreement with ENEL. As a result, the duration and timing of the appraisal programme is
more certain. We believe that the completion of the appraisal programme will be positive
for Petroceltic. It will better define the recoverable reserves which should, in turn,
improve the valuation, accelerate the project to development stage and attract bigger
operators requiring large long term gas assets, as well as improving the frequency of
news flow.
Opportunity to pursue exploration projects
Advancing the Algerian project to development stage and the possible transfer of
operatorship to a major player should give management the time and resources to pursue
exploration projects both within the existing portfolio and through acquisitions and
green field projects. We believe that management has the expertise to identify and
evaluate these opportunities.
Key challenges
The company faces a number of regulatory and other challenges in its Algerian
operations. Bureaucratic delays meant the recent farm out agreement with ENEL took
months to approve and may take months more to ratify. With further regulatory approval
required for the final discovery report and possible further farm out, the timing of these
is uncertain and, therefore, poses operational challenges to the company. The equity
structure and funding for gas development in Algeria also poses a challenge. The
Production Sharing Contract (PSC) requiring that Petroceltic holds at least 51% of its
original holding to first gas may make it unattractive to bigger operators which are
necessary to fund and operate the potentially large gas development. Although the
company is confident of addressing these issues, it may create uncertainty and delay the
attainment of Petroceltic’s full valuation.
Target price points to 76% upside
We value Petroceltic on core NAV basis with a target price of 18.0p, implying 76% upside
from the current level. 25% of this is currently represented by cash or near cash and the
rest by the key Algerian operation.
Market Cap
£211.2m
Published By: Merrion Stockbrokers
This report is subject to important disclosures and disclaimers which can be found at the end of this report and which form an integral part of it.
Current Price
10.25p
YTD abs perf (%) (13.5)
12 mth abs per (%) 0.0
52 week high/low (p) 15.5/7.9
Shares outstanding 2,365.36
Year ended Dec 10 11f 12f
Revenue (US$m) 0.3 0.3 0.3
EBITDA (US$m) (6.1) (6.6) (7.4)
EBITDA Margin N/A N/A N/A
Net profit (US$m) (12.6) (11.8) (13.7)
EPS (dil)(USc) (0.69) (0.56) (0.65)
Source: Company data, Merrion estimates
and Bloomberg
Source: Bloomberg
Merrion Stockbrokers
3 rd Floor, Block C, The Sweepstakes Centre
Ballsbridge, Dublin 4, Ireland
Tel: +353 1 240 4100
Fax: +353 1 240 4101

Contents
Investment case ------------------------------------------------------------ 3
Offering clear value at current levels ------------------------------------ 3
At a discount to core NAV ---------------------------------------------- 3
Enel farm out strategically important and underpins valuation --------- 4
Expanded and accelerated appraisal programme ------------------------- 4
Better reserve definition ----------------------------------------- 5
Accelerate project to development stage -------------------------- 6
Improved newsflow ---------------------------------------------- 6
Opportunities beyond Algeria ------------------------------------------- 8
Key challenges -------------------------------------------------------------- 8
Bureaucratic delays in Algeria ------------------------------------------ 8
Funding structure for gas development ---------------------------------- 8
Lack of exploration pipeline -------------------------------------------- 9
Funding -------------------------------------------------------------------- 9
Valuation and target price -------------------------------------------------- 10
Company overview --------------------------------------------------------- 11
Algeria -------------------------------------------------------------- 11
Po Valley ------------------------------------------------------------ 12
Central Adriatic ------------------------------------------------------ 13
Management -------------------------------------------------------------- 13
Financial forecasts --------------------------------------------------------- 15

Merrion Stockbrokers 3
Investment case
Petroceltic is an international oil and gas exploration and production company founded
in 2003 and quoted on the AIM and ESM exchanges. Its focus area is the Mediterranean
and North Africa regions (MENA). It currently has exploration assets in Algeria and Italy.
Petroceltic’s main operating asset is the gas find in the Isarene permit area in Algeria,
with additional assets in Italy’s Adriatic Sea and Po Valley. The share price has
underperformed the AIM Oil and Gas Index by 22.5% over the last 12 months as the
company encountered several setbacks. These include disappointing exploration results
in Tunisia leading to the relinquishment of its licence, the suspension of exploration
activity in the Adriatic Sea due to changes in environmental regulations and
bureaucratic delays in obtaining approval for a farm out agreement in Algeria. The
recent unrest in North Africa and the Middle East has not helped either.
Offering clear value at current levels
We believe that Petroceltic’s share price does not fully reflect the company’s value at
these levels:
The share is trading at a 43% discount to our core NAV valuation, 25% of which
is cash or near cash. This is underpinned by the implied valuation from the
recently completed farm down, with a further farm out expected by Q2 of 2012.
The Isarene permit area appraisal programme has been expanded and accelerated
following farm out to ENEL, with certainty on the duration and timing of its
completion.
Following farm, out management will have the resources to address what we
believe is one of Petroceltc’s shortcomings: the lack of a near term exploration
pipeline.
Trading at a discount to Core NAV
Exhibit 1 is a summary of our valuation of core NAV. The core NAV includes the P50
estimate of Isarene permit area’s reserves in Algeria, cash and part of the outstanding
ENEL consideration for hydrocarbons. The ENEL farm out transaction includes a
maximum of $75m payment determined by the level of hydrocarbon reserves approved
by the Algerian authorities. We have included 50% of this amount in our valuation.
Exhibit 1 – Petroceltic - Core NAV
Risked Valuation Value per share
US$m p
Isarene permit area - Algeria 463 13.6
Further Enel cash receipt (50%) 38 1.2
Cash 110 3.2
Source: Merrion estimates
620 18.0
The share is currently trading at a 43% discount to our estimate of its Core NAV
valuation of 18.0p per share. This does not include additional upside potential from
Petroceltic’s P10 resources from the Isarene permit area, the potential upside from the
suspended Elsa prospect in the Adriatic sea or the highly prospective Rovasenda
prospect in Italy’s Po Valley. Including these prospects, our NAV valuation would be
23p/share.
Given its deep discount to its core NAV, we believe the share price offers value with
limited downside and significant upside potential.

Merrion Stockbrokers 4
Enel farm out strategically important and underpins valuation
The recently completed farm out agreement with ENEL was a good strategic deal for
Petroceltic. It secured ENEL, one of Europe’s largest utilities, as an important strategic
partner. It is a major buyer of Algerian gas and may give it a higher profile when dealing
with the Algerian government.
The transaction also underpins the valuation for Petroceltic’s Isarene permit area asset.
Exhibit 2 is a summary of the ENEL transaction (refer to page 9 for details of the
transaction). $101m refers to both past and future costs exploration cost. Of this, $101m is
effectively committed and is the minimum payment to be received when the deal is ratified
by the Algerian government. It therefore represents a floor for the valuation of the
transaction. An extra $75m may be paid depending on the level of hydrocarbons approved
by the Algerian authorities following the submission of a final discovery report.
The transaction implies a value for the Isarene assets ranging from 9.5p to a maximum of
16.1p per share, compared to our valuation for the Isarene asset of 13.6p per share
(including cash or near cash, the implied valuation for Petroceltic from the transaction is
between 13.8p and 20.7p per share).
Exhibit 2 – Petroceltic - Implied valuation from ENEL farm out
Amount
% ENEL
Holding
Implied
Value
Value per
share
Value per
share
$m
$m USc p
Back costs and future
exploration costs
Additional for
108 18.375% 333 15.9 9.7
hydrocarbons 75 18.375% 231 11.1 6.8
183
Source: Company data and Merrion estimates
564 27.0 16.5
Petroceltic is planning a further farm out of 18.375% of the Isarene asset. The second farm
out is likely to be to an operator already currently active in Algeria. As this is likely to be
concluded after the appraisal period has been completed, we expect it to be on better
terms than the ENEL transaction, further underpinning the share’s valuation. Were it to be
concluded on the same terms as the ENEL transaction, the core NAV would increase to
18.9p per share, of which more than 50% would be cash or near cash.
Expanded and accelerated appraisal programme
Following gas discoveries from its Isarene drilling programme in Algeria (five wells, four gas
discoveries), Petroceltic embarked on a four well appraisal and testing programme in
October 2010. The objective of the programme is to supply technical data to support the
monetisation of the discovery by gaining increased certainty on the distribution of the gas
initially in place (GIIP) and confirming well productivity. Following the farm out to ENEL,
this programme was expanded and accelerated to include two additional wells, possibly a
third, to bring the total programme to six or seven wells, with the submission of a final
discovery report to the Algerian government scheduled for early 2012. An additional rig
was contracted on 17 May 2011 to expand exploration drilling and meet these targets.
Petroceltic released a revised timetable for the appraisal programme incorporating two
additional wells (AT8 and AT9). As a result, the appraisal programme is not only expanded
and accelerated but the duration and timing is more certain.

Merrion Stockbrokers 5
Exhibit 3 – Revised appraisal and testing programme
Source: Petroceltic
We believe that the completion of the revised appraisal programme will be positive for
Petrocletic as it will lead to better reserve definition, accelerate the project towards
development stage and provide better and more frequent news flow over the next 6 to 12
months.
Better reserve definition
Exhibit 4 below shows Petroceltic’s estimated resources for the Isarene permit area as at
September 2010. On a P50 basis, the total estimated hydrocarbons in place is estimated at
6.3tcf.
Exhibit 4 – Estimate of reserves and resources - September 2010
Field
Hydrocarbon
Type
Gross discovered Hydrocarbons in place,
Estimates September 2010
Low (p90) Medium (p50)
High
(p10)
Ain Tsila Gas (BCF) 2,900 6,341 13,700
Isarene North East Gas (BCF) 32 54 80
Isarene North East Oils
(MMbbls)
17 64 139
Isarene North
West
Gas (BCF) 13 36 82
Hassi Tab Tab Gas (BCF) 35 151 421
Totals Gas (BCF) 2,980 6,341 14,283
Source: Petroceltic
Oils
(MMbbls)
Cond.
(MMbbls)
Total
(MMboe)
17 64 139
60 127 286
573 1,248 2,805

Merrion Stockbrokers 6
The expanded drilling programme should be positive for Petroceltic:
It will move a large amount of resources into the P90 and P50 categories. As the
size of reserves is important for the valuation of exploration companies, it will add
to Petroceltic’s valuation.
It will maximise the amount receivable from the ENEL farm out. $75m of the
consideration from the farm out agreement depends on the extent of certified
recoverable reserves. We have applied a 50% risk factor on our valuation of
Petroceltic. The inclusion of 100% of this amount will add 1.1p per share (6.0%) to
our valuation.
Accelerate project to development stage
Following the appraisal programme, a final discovery report is to be submitted to
Sonatrach, the government owned Algerian partner in Q1 2012 and possibly approved by
Q2 of 2012.
The final discovery report will include the following:
Description of all studies undertaken on the licence
Description of the reservoir(s) and how much hydrocarbons it(they) contain
Description of how the reservoir(s) will perform during production defining the
number of wells, the plateau production rate and the reserves.
Description of the facilities required to gather, process and export the produced
hydrocarbons
The economics of the project.
We believe that the completion of the final discovery report will be value enhancing to
Petroceltic as it will advance the project from exploration to development stage and hence
monetisation. A clearly defined project will enable the completion of marketing
arrangements for the final gas (with discussions already underway) and make it more
attractive for a larger player. The most likely potential partner would be a current operator
in Algeria. Total SA, Repsol, BP, Statoil and BHP Billiton are some of the operators in nearby
gas fields and could all be potential suitors.
Improved news flow
The expansion and acceleration of the gas appraisal programme should improve company
news flow during the second half of the year. The main exploration newsflow in the current
year was the appraisal result for the AT 4 well. The result was mixed. While gas was
encountered but, due to fracture design issues, the achieved gas flow rate on testing was
disappointing at 1.35mmcf/day and associated with 250 bwpd. The company believed that
it is likely the induced fractures in the well extended below the current field gas-water
contact into an underlying aquifer resulting in the volumes of produced water seen.
A second appraisal well, AT5, is taking a different approach. It will involve the drilling of
both a vertical pilot hole, AT-5 followed by a horizontal section AT-5z. The horizontal
section is intended to test a major “pop up” in the north of the field. The “pop-up” feature
is one of many such structures typical of the northern part of the field anticipated to be
associated with high natural fracture density and thus potentially enhanced un-stimulated
gas productivity. The results of this approach will be crucial in determining whether it can
be applied to the other structures indentified on the field. Drilling of AT 5 has been
completed and test results are expected in early July.

Merrion Stockbrokers 7
Exhibit 5 – AT5 - Pilot and horizontal well tracks
Source: Petroceltic
Four more appraisal wells are to be drilled and tested in the current year. Drill and test
results will provide a clear indication of the extent of gas initially in place (GIIP) and
associated gas flows and hence the extent of recoverable reserves. An expanded and
accelerated drilling programme should increase the frequency of exploration updates.

Merrion Stockbrokers 8
Opportunities beyond Algeria
Besides Algeria, Petroceltic’s other significant assets are the Rovasenda prospect in Italy’s
Po Valley and the Elsa project off the Adriatic Coast.
Rovasenda is a Triassic exploration prospect estimated to have unrisked gross resources of
270MMbbls. It is located close to the Villafortuna oil field which has been in production for
decades. Petroceltic initially owned 95% of the prospect but it farmed out 47.5% of this,
with operatorship, to ENI in exchange for 2D seismic data for the Carisio permit area as
well as the adjacent Ronscecco permit area of which Petroceltic owns 100%.
Exploration drilling is expected to commence in the first half of 2012. Should initial
hydrocarbon estimates be confirmed, the prospect would add significant value to
Petroceltic. We believe that Petroceltic is likely to announce a farm out prior to the
commencement of the drilling programme. This may include a cash payment to Petroceltic
as well as funding its share of the exploration cost.
The Elsa prospect in the Adriatic coast is estimated at 34 – 187MMBoe. It was initially
drilled in 1992 and encountered an oil column of 65 meters in the Lower Cretaceous at a
depth of approximately 4500 meters. But ENI then decided it uneconomical to proceed.
Peteroceltic’s reinterpretation of 3D seismic is that it may contain light oil. Drlling was
scheduled for September 2010 but was suspended due to changes in Italy’s environmental
regulations. Petroceltic and other Enegry producers are seeking ways of resolving this.
Advancing the Algerian project to development stage and possible surrender of
operatorship to a major player should give management the time and resources to address
what we believe to be Petroceltic’s major weakness: the lack of a defined exploration
project pipeline. The hiring of Tom Hickey, ex CFO at Tullow Oil, as director suggests that
the company is trying to address this issue. We believe that management has the expertise
to identify and evaluate these opportunities. Initial focus will be on the Mediterranean and
North Africa (MENA) region. However, opportunities elsewhere may be pursued.
Key Challenges
Petroceltic faces regulatory and other challenges that may prevent near term attainment of
its full valuation. These include bureaucratic delays in obtaining approvals in Algeria, the
funding structure for its gas development in Algeria and the lack of an exploration project
pipeline.
Bureaucratic delays in Algeria
The timing of official approvals from Algerian authorities is highly uncertain, posing
operational challenges for the company. The ENEL transaction took months to approve and
may take months more to be ratified. Over the next year, further official approval will be
required for:
the final discovery report prior to commencement of gas development
a further farm out agreement
The uncertainty with the timing of these regulatory approvals is uncertain and may affect
the company’s operations.
Funding Structure for gas development
In terms of is PSC agreement with the Algerian government, Petroceltic is not permitted to
decrease its holding below 51% of its original holding before first gas. As such, it must
carry its working interest through the development stage. Following further farm out,
Petroceltic will be responsible for approximately 38% of the development expenditure,
estimated at $1.5bn to $2bn in total.
We believe that Petroceltic does not have the operational capability or financial capacity to
undertake the development. As such, the issue of funding for the development must be
addressed. A possible solution could be to enter into an agreement with a more
experienced operator to acquire a majority interest at first gas, similar to the transaction
between Anadarko and Lasmo. Another possible solution is a takeover of Petroceltic itself.

Merrion Stockbrokers 9
Both would require authorisation from Algerian authorities. There is no indication that this
approval will be granted. This lack of clarity may create uncertainty in the
commercialisation of the gas field.
Lack of exploration pipeline
Following changes to environmental regulations in Italy, hence, Petroceltic’s inability to
appraise the Elsa discovery in the Adriatic Sea and its withdrawal from Tunisia, Petroceltic’s
only exploration project is the Rovasenda prospect in Italy’s Po Valley where exploration
drilling is scheduled for H1 of 2012. Management is yet to address the issue of an
exploration pipeline but as we stated above, following farm out agreements in Algeria, they
will have the resources to address it.
Funding
Petroceltic raised capital twice over the last year or so. In April 2010, $118m net was
raised to fund its four well appraisal programme. Due to the uncertainty in the timing of
the receipt from the ENEL transaction, a further $60m was raised in May 2011 to fund the
expanded appraisal programme and the completion of the final discovery report. Both
capital raising were strongly subscribed.
We estimate that Petroceltic will have net cash of $110m as at the end of 2011. It had $66
million as at April 2011. It then raised $60m from a share placement. We expect the
company to receive about $100m for past and future exploration costs from the ENEL farm
out agreement and that roughly the same amount ($100m) will be spent on exploration
and operating costs, leaving a net cash balance of $120m by year end. This excludes any
future receipts from ENEL for the level of approved hydrocarbons in Algeria (maximum
$75m).
Exhibit 5 – Petroceltic estimated cash flow
$m
Cash as at April 2011 (Merrion Estimate) 66
Capital raising 60
Estimated proceeds - ENEL transaction 100
Exploration and other costs -116
Net cash at end 2011 110
Source: Merrion estimates
With the development stage of the Isarene gas field yet to start, the company will have
significant cash resources that it can use for acquisitions within the sector, or to pursue
other exploration prospects.

Merrion Stockbrokers 10
Exhibit 6 – Petroceltic NAV
Cash and Farmout
Cash
ENEL further cash payment
Total cash and farmout
Isarene asset
Ain Tsila
Isarene Northeast
Isarene Northwest
Hassi Tab Tab
Total Isarene asset
Core NAV
Exploration Projects
Valuation and price target
We value Petroceltic on the sum of the parts risk basis, with cash and the
Algerian Isarene permit area assets forming its core NAV. We believe that core
NAV provides a benchmark for the company’s valuation, with upside from
exploration projects.
We set our target price 18.0p, equal to its core NAV, or 76% upside to the current
share price.
We do not include a valuation higher than its core NAV because of:
The lack of near term catalysts outside of its Algerian operations
The uncertainty regarding options for the development of the Algerian asset
and hence its monetisation. Bureaucratic delays in Algeria means the timing of
any development work is highly uncertain.
Total
MMboe % Holding
NAV
unrisked
Risk
Factor
Risked
NAV £m
US$ US$ @$1.61/£
Risked
p/sh
Unrisked
p/sh
110 100 120 74 3.2 3.2
75 50 37.5 23 1.2 2.2
195
158 97 4.4 5.4
1,043 56.75% 1,184 38 450 276 13.2 34.7
1,073
22 56.75% 26 38 10 6 0.3 0.7
2 56.75% 3 38 1 1 0.0 0.1
6 56.75% 7 38 3 2 0.1 0.2
1,218
1,413
152 463
284
13.6
35.7
620 380 18.0 41.1
Italy - Elsa 250 55.00% 825 10 83 51 2.4 24
Italy - Rovasenda 270 47.50% 770 10 77 47 2.3 23
Total Exploration
1,595
159 98 4.7 47
Total 3,008 780 478 22.7 88.1
Source: Company data and Merrion estimates

Merrion Stockbrokers 11
Source:Petroceltic
Company overview
Petroceltic is an international oil and gas exploration and production company founded in
2003 and quoted on the AIM and ESM exchanges. Its focus area is the Mediterranean and
North Africa regions (MENA). It currently has exploration assets in Algeria and Italy.
Algeria
Algeria supplies approximately 10% of Europe's natural gas via existing pipelines to Italy
and Spain and to LNG projects. This supply capacity is set to expand with further gas
pipelines currently under development.
Petroceltic's Isarene permit area, awarded to the company in 2004, is located in the south
of the Illizi Basin in South Eastern Algeria. Petroceltic is focused on four prospective areas
on the Isarene permit area being Ain Tsila, Isarene Northeast, Isarene Northwest and Hassi
Tab Tab. The Ain Tsila prospect is by far the largest and is the focus of the current appraisal
programme.
Petroceltic holds a 56.626% working interest and is the operator of the project with ENEL
holding 18.375% and Sonatrach 25%.
Exhibit 7 – Algeria overview Exhibit 8 – Isarene permit area
Petroceltic undertook a successful drilling programme on the Isarene permit area,
completed in January 2010. Five wells were drilled, with four gas discoveries. A two year
extension was then obtained to undertake an appraisal programme of the four discoveries.
The aim of the appraisal programme is to provide technical data to support
commercialisation of the discovery. Following the farm out agreement with ENEL, the
appraisal programme was expanded and accelerated.
Farm out to ENEL
On 28 April 2011, Petroceltic announced a farm out of 24.5% of its working interest (or
18.375% of the total) to ENEL, the Italian utility and one of Europe's largest.
Under the terms of the agreement ENEL:
Agreed to pay up to US$ 36.75 million to Petroceltic, which equates to 24.5% of all
back costs incurred from signing of the PSC in 2005 until the end of the exploration
period in April 2010.

Merrion Stockbrokers 12
Committed to fund 49% of the cost of the first six appraisal wells in an enlarged
Isarene appraisal campaign (including AT-4 which has been completed and the
second well of the campaign, AT-5, currently drilling the horizontal section) and of a
contingent additional well, which costs are capped, in aggregate, at US$ 145
million.
Agreed to pay Petroceltic a contingent cash consideration, up to a maximum of US
$75 million, determined by the level of recoverable hydrocarbon reserves approved
by the Algerian Authorities in the Final Discovery Report, which is expected to be
submitted by the parties in early 2012.
The agreement is still subject to approval of the Amendment by Executive Decree in Algeria
and subsequent publication of this decree in the Official Gazette. Management estimate
that it will take 3 to 5 months for that approval to be obtained. Payments from ENEL,
excluding the $75million contingent on the level of hydrocarbons, will be due 30 days
following the gazette publication.
Following the completion of the current appraisal programme, Petroceltic will complete a
final discovery report and submit it by early 2012 to the Algerian authorities for approval.
Po Valley
Petroceltic operates four permits in the Western Po Valley in Italy. The Ronsecco permit
was awarded in November 2010 and in March 2011 Petroceltic signed an agreement for
the transfer of operatorship in the Carisio permit to ENI in exchange for seismic data in
both the Ronsecco and Carisio permit areas. Drilling in the Carisio permit (Petroceltic
47,5%, ENI 47,5%, Costruzioni Condotte 5%) is planned for the first half of 2012. The
gross un-risked prospective recoverable resource is estimated at 270 MMbls.
Exhibit 9 – Pol Valley

Merrion Stockbrokers 13
Central Adriatic
Petroceltic has a 55% operator working interest in the Elsa project of off Italy’s Adriatic
cost. Following the Macondo well disaster, amendments were introduced to the Italian
Environmental code prohibiting drilling within 5 nautical miles of the coastline and within
12 miles of the perimeter of protected marine parks. The Elsa project lies within the
prohibited zone. Petroceltic has obtained a decree suspending the timing obligations under
the license until the issue is resolved.
Exhibit 10 – Adriatic
Other assets
Petroceltic holds 4 permit application in the Sicily Chanel area and in the gulf of Taranto.
Management
Brian O'Cathain - Chief Executive
Brian O'Cathain is a geologist and petroleum engineer with over 25 years experience in
senior technical and commercial roles in upstream oil and gas exploration and production
companies. Brian previously held the positions of Managing Director of Tullow Oil’s
international business and Chief Executive of Afren plc. He has experience in working in
West Africa, The North Sea, The Gulf of Mexico and South Asia. Brian served as Petroceltic
Company Chairman for almost two years prior to his appointment as Chief Executive in
February 2009.
Alan McGettigan - Group Finance Director
Alan McGettigan has over twenty years of experience in oil and gas exploration and
production. Prior to joining Petroceltic, Alan worked for BG International where he held
senior roles in Commercial and Group Business Development. His other experience includes
roles at Shell International and BP as well as four years as a management consultant at
McKinsey & Company. Alan holds B.Sc. and M.Sc. degrees in Engineering and a Master in
Business Administration with distinction from the Harvard Business School.
Tom Hickey - Corporate Development Director
Tom is a qualified Chartered Accountant who has in excess of 10 years of experience in oil
and gas exploration and production. Prior to joining Petroceltic, Tom was Chief Financial
Officer and a director of Tullow Oil plc. Prior to this, he was an Associate Director of ABN
AMRO Corporate Finance (Ireland) Limited. Tom is a commerce graduate of University
College Dublin and a Fellow of the Irish Institute of Chartered Accountants. He is also a
non-executive Director of PetroNeft Resources Plc.

Merrion Stockbrokers 14
Dermot Corcoran - Head of Exploration
Dermot Corcoran is a petroleum geologist/geophysicist with over 25 years’ experience in
technical and managerial roles in upstream oil and gas exploration companies, including
Exxon, Fina, Amerada Hess & Statoil. He has experience working in the North Sea, West
Africa, North Africa, Chad, Syria, Pakistan, Norway and the U.S. As Head of Exploration,
Dermot is responsible for technical leadership and coordination of the company’s
exploration program. He also contributes to the identification and assessment of new
business opportunities and to the development of the company’s strategy.
Dave Scott - Head of Operations & Engineering
Dave Scott is a mechanical engineer with 29 years experience in senior operations and
management positions in upstream oil and gas exploration and production companies
including Conoco, Enterprise, Hardy and Burlington Resources. He has experience of
working in the UK, Algeria, Italy, Ukraine, India, Romania, and Australia. More recently he
was Chief Operating officer of AIM listed Regal Petroleum and new start up Vanguard
Energy. Reporting to the Chief Executive Officer, Dave is responsible for all aspects of
Petroceltic’s operations including drilling, production and development projects. He will
ensure that the company has the necessary expertise, systems and resources at its disposal
to conduct operations safely and efficiently.
David Slaven - General Manager Algeria
David began his career in the oil and gas business in the late 70s in financial positions with
El Paso Natural Gas in Paris and Algeria. This was followed by spells with Pennzoil in
Tunisia and Morocco and Anadarko in Algeria as Finance and Administration Manager.
David served as Country Manager with Burlington Resources in Algeria for nine years. David
joined Petroceltic in November 2008 as Country Manager, Algeria.
Pasquale Quattrone - General Manager Italy
Pasquale is a Petroleum Engineer with 40 years experience in the Upstream Oil & Gas
industry with Geophysicist, Senior Exploration Management and General Manager positions
in Major and Independent companies such as ENI and JKX. His has experience working in
Onshore and Offshore Italy, Libya and Tunisia and has participated in major oil and gas
discoveries in these areas. As General Manager of Petroceltic Italy, Pasquale is responsible
for the management of the daily business in Italy in accordance with Board’s objectives. He
is also responsible for maintaining relations with the Italian Authorities in order to ensure
that the Company complies with Italian regulation and for keeping the Board Members
informed of Italian legislation. Due to his long experience in evaluating hydrocarbon
potential in Mediterranean exploration areas, Pasquale contributes to the development of
new business opportunities in Italy.

Merrion Stockbrokers 15
Financial forecasts
Income Statement
December 2009 2010 2011f 2012f 2013f
$'000 $'000 $'000 $'000 $'000
Revenue 210 270 300 310 350
Administrative expenses -5,522 -6,330 -6,900 -7,695 -8,570
EBITDA -5,312 -6,060 -6,600 -7,385 -8,220
Exploration expenses written off -1,321 -6,998 -5,521 -6,374 -7,355
Depreciation and impairment -156 -312 -561 -620 -700
Other expenses -1183 -1105 -1200 -1200 -1200
Operating profit/(loss) -7,972 -14,475 -13,882 -15,579 -17,475
Finance income and other income 1,856 1,914 2,105 1,890 1,560
Profit before tax -6,116 -12,561 -11,777 -13,689 -15,915
Taxation 0 0 0 0 1
Profit for the year -6,116 -12,561 -11,777 -13,689 -15,914
Earnings per share
No of shares - diluted 1207.34 1817.926 2091.84 2091.84 2091.84
EPS diluted ( c ) -0.51 -0.69 -0.56 -0.65 -0.76
Cashflow statement
December 2009 2010 2011f 2012f 2013f
Operating cash flow
$'000 $'000 $'000 $'000 $'000
Profit/(loss) before tax -6,116 -12,561 -11,777 -13,689 -15,915
Interest and other income -1,856 -1,914 -2,105 -1,890 -1,560
Depreciation and impairment 156 312 561 620 700
Exploration expenses written off 1,321 6,998 5,521 6,374 7,355
Working capital adjustment 24,643 -20,496 1,160 1,287 1,426
Other adjustment 1,183 1,130 1200 1200 1200
Capital expenditure
19,331 -26,531 -5,440 -6,098 -6,793
Exploration -79,861 -45,811 -110,000 -50,000 -50,000
Divestments 7,330 0 108,000
Financing cashflows
-72,531 -45,811 -2,000 -50,000 -50,000
Capital raising 41,642 118,945 57000 0 0
Interest and other income 760 1,034 2,105 1,890 1,560
42,402 119,979 59,105 1,890 1,560
Net cash flow -10,798 47,637 51,665 -54,208 -55,233
Cash at the beginning of the year 43,429 33,727 82,244 133,909 79,701
Forex adjustment 1096 880 0 0 0
Cash at the end of the year 33,727 82,244 133,909 79,701 24,468

Merrion Stockbrokers 16
Financial forecasts
Balance Sheet
December 2009 2010 2011f 2012f 2013f
Non current assets
$'000 $'000 $'000 $'000 $'000
Intangible assets 156,724 194,539 189,818 231,624 272,370
Other assets 435 745 184 184 184
Current assets
Trade and other receivables 1,037 4,223 4,434 4,656 4,889
Cash and cash equivalents 33,727 82,244 133,909 79,701 24,468
Total Assets 191,923 281,751 328,345 316,165 301,910
Equity
Share capital and premium 234,733 353,495 410,495 410,495 410,495
Other reserves 8,007 7,252 7,252 7,252 7,252
Retained earnings -83,903 -94,699 -106,476 -120,165 -136,079
Attributable to equity shareholders 158,837 266,048 311,271 297,582 281,668
Liabilities
Trade and other payables 31,514 13,713 15,084 16,593 18,252
Provisions 1,572 1,990 1,990 1,990 1,990
Total liabilities 33,086 15,703 17,074 18,583 20,242
Total equity and liabilities 191,923 281,751 328,345 316,165 301,910

Merrion Stockbrokers 17
Disclosures
Merrion Stockbrokers Limited ('Merrion') is a member firm of the Irish Stock Exchange and the London Stock Exchange and is regulated by the Central Bank of Ireland.
For further information relating to research recommendations and conflict of interest management please refer to www.merrion-capital.com.
The information contained in this publication was obtained from various sources believed to be reliable, but has not been independently verified by Merrion. Merrion does not warrant the completeness or accuracy of such
information and does not accept any liability with respect to the accuracy or completeness of such information, except to the extent required by applicable law.
This publication is a brief summary and does not purport to contain all available information on the subjects covered. Further information may be available on request. This report may not be reproduced for further publication
unless the source is quoted.
This publication is for information purposes only and shall not be construed as an offer or solicitation for the subscription or purchase or sale of any securities, or as an invitation, inducement or intermediation for the sale,
subscription or purchase of any securities, or for engaging in any other transaction.
Any opinions, projections, forecasts or estimates in this report are those of the author only, who has acted with a high degree of expertise. They reflect only the current views of the author at the date of this report and are
subject to change without notice. Merrion has no obligation to update, modify or amend this publication or to otherwise notify a reader or recipient of this publication in the event that any matter, opinion, projection, forecast
or estimate contained herein, changes or subsequently becomes inaccurate, or if research on the subject company is withdrawn. The analysis, opinions, projections, forecasts and estimates expressed in this report were in no
way affected or influenced by the issuer. The author of this publication benefits financially from the overall success of Merrion.
The investments referred to in this publication may not be suitable for all recipients. Recipients are urged to base their investment decisions upon their own appropriate investigations that they deem necessary. Any loss or
other consequence arising from the use of the material contained in this publication shall be the sole and exclusive responsibility of the investor and Merrion accepts no liability for any such loss or consequence. In the event of
any doubt about any investment, recipients should contact their own investment, legal and/or tax advisers to seek advice regarding the appropriateness of investing. Some of the investments mentioned in this publication may
not be readily liquid investments. Consequently it may be difficult to sell or realize such investments. The past is not necessarily a guide to future performance of an investment. The value of investments and the income derived
from them may fall as well as rise and investors may not get back the amount invested. Some investments discussed in this publication may have a high level of volatility. High volatility investments may experience sudden and
large falls in their value which may cause losses. International investing includes risks related to political and economic uncertainties of foreign countries, as well as currency risk.
To the extent permitted by applicable law, no liability whatsoever is accepted for any direct or consequential loss, damages, costs or prejudices whatsoever arising from the use of this publication or its contents.
Merrion has written procedures designed to identify and manage potential conflicts of interest that arise in connection with its research business.
United States: This report is only distributed in the US to major institutional investors as defined by S15a-6 of the Securities Exchange Act, 1934 as amended. By accepting this report, a US recipient warrants that it is a
major institutional investor as defined and shall not distribute or provide this report or any part thereof, to any other person.
Further details are available on our website http://www.merrion-capital.com/disclaimer.html and/or by contacting our Compliance Officer.
Other countries: Laws and regulations of other countries may also restrict the distribution of this report. Persons in possession of this document should inform themselves about possible legal
restrictions and observe them accordingly.

Merrion Stockbrokers 18
Legal information
The information contained in this publication was obtained from various sources believed to be reliable, but has not been independently verified by Merrion. Merrion does not warrant the completeness or accuracy of such
information and does not accept any liability with respect to the accuracy or completeness of such information, except to the extent required by applicable law.
This publication is a brief summary and does not purport to contain all available information on the subjects covered. Further information may be available on request. This report may not be reproduced for further publication
unless the source is quoted.
This publication is for information purposes only and shall not be construed as an offer or solicitation for the subscription or purchase or sale of any securities, or as an invitation, inducement or intermediation for the sale,
subscription or purchase of any securities, or for engaging in any other transaction.
Any opinions, projections, forecasts or estimates in this report are those of the author only, who has acted with a high degree of expertise. They reflect only the current views of the author at the date of this report and are
subject to change without notice. Merrion has no obligation to update, modify or amend this publication or to otherwise notify a reader or recipient of this publication in the event that any matter, opinion, projection, forecast
or estimate contained herein, changes or subsequently becomes inaccurate, or if research on the subject company is withdrawn. The analysis, opinions, projections, forecasts and estimates expressed in this report were in no
way affected or influenced by the issuer. The author of this publication benefits financially from the overall success of Merrion.
The investments referred to in this publication may not be suitable for all recipients. Recipients are urged to base their investment decisions upon their own appropriate investigations that they deem necessary. Any loss or
other consequence arising from the use of the material contained in this publication shall be the sole and exclusive responsibility of the investor and Merrion accepts no liability for any such loss or consequence. In the event of
any doubt about any investment, recipients should contact their own investment, legal and/or tax advisers to seek advice regarding the appropriateness of investing. Some of the investments mentioned in this publication may
not be readily liquid investments. Consequently it may be difficult to sell or realize such investments. The past is not necessarily a guide to future performance of an investment. The value of investments and the income derived
from them may fall as well as rise and investors may not get back the amount invested. Some investments discussed in this publication may have a high level of volatility. High volatility investments may experience sudden and
large falls in their value which may cause losses. International investing includes risks related to political and economic uncertainties of foreign countries, as well as currency risk.
To the extent permitted by applicable law, no liability whatsoever is accepted for any direct or consequential loss, damages, costs or prejudices whatsoever arising from the use of this publication or its contents.
Merrion has written procedures designed to identify and manage potential conflicts of interest that arise in connection with its research business. Merrion’s research analysts and other
staff involved in issuing and disseminating research reports operate independently to other areas of the business. Chinese Wall procedures are in place between the research analysts and
staff involved in securities trading for the account of Merrion or clients to ensure that price sensitive information is handled according to applicable laws and regulations.
United States: This report is only distributed in the US to major institutional investors as defined by S15a-6 of the Securities Exchange Act, 1934 as amended. By accepting this report, a US recipient warrants that it is a
major institutional investor as defined and shall not distribute or provide this report or any part thereof, to any other person.
Other countries: Persons in possession of this document should inform themselves about possible legal restrictions and observe them accordingly.
Further details are available on our website http://www.merrion-capital.com/disclaimer.html and/or by contacting our Compliance Officer.
Other countries: Laws and regulations of other countries may also restrict the distribution of this report. Persons in possession of this document should inform themselves about possible legal
restrictions and observe them accordingly.

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