CORPORATE PRESENTATION OCTOBER 2012 UPDATE

Transcription

1 CORPORATE PRESENTATION OCTOBER 2012 UPDATE

2 Introduction BlackPearl is a Canadian heavy oil / oil sands producer with a combination of investment attributes that make it a unique opportunity: 1. Experienced management team that has successfully built, operated and sold significant heavy oil / oil sands operations before 2. Currently producing close to 10,000 bbl/d 1. (primarily conventional heavy) and generating meaningful cashflow ($75 $100 million annually) 3. 3 core project areas each currently producing and each with significant thermal / secondary expansions underway or planned in the next 2 or 3 years. 4. ~800 mmbbl of high quality 2P Reserves + 2C Resources with a NPV10 (BT) in excess of $4 billion Plan to reach 30,000 bbl/d by 2016 and potential to reach 100,000 bbl/d over the next decade from proven, well delineated reservoirs 6. Clean balance sheet with no debt outstanding 1. Note: All amounts herein are BlackPearl s net working interest before royalties unless otherwise noted 2. Source: Sproule Unconventional Limited ( Sproule ) reserve and resource evaluation (best estimate) reports dated December 31, 2011 (reports updated to May 31, 2012 for the Blackrod project). 2

3 Corporate Snapshot Market Capitalization: Current market capitalization: $1.1 billion (TSX: PXX $ /5/12) Shares outstanding: Basic: 285 million Fully Diluted: 305 million Reserves & Resources 1 : Management ownership 7% (12% fully diluted) Volume (mmboe) NPV 10 (BT) ($mm) 2P Reserves 215 $1,355 Contingent Resources (2C) 580 $2,719 Production: Current production ~9,500 boe/d (99.5% oil weighted) Potential production 100,000+ boe/d using existing technologies Financial: 2012E cash flow of ~$75 mm $9.6 million in working capital (6/30/12) No debt, undrawn $115 million bank facility Self funded for the next 18 months Core Assets: Onion Lake: Current heavy oil production with 12,000 bbl/d (gross) SAGD expansion Mooney: Current heavy oil production ramping-up with ASP flood, with potential expansion Blackrod: 80,000 bbl/d Grand Rapids SAGD project with pilot operating for over a year 1. Source: Sproule Unconventional Limited ( Sproule ) reserve and resource evaluation (best estimate) reports dated December 31, 2011 (reports updated to May 31, 2012 for the Blackrod project). 3

4 Company Strengths Established Heavy Oil / Oil Sands Resource Base: Proven Management: Strong Financial Position: Near-Term Catalysts: Attractive Economics: Operate in established and well understood reservoirs Oil production from all three core areas Use existing proven technology to exploit Potential to use new emerging technologies to further enhance recovery Technical team has worked together successfully since 1992 Developed and sold over 25,000 bbl/d of heavy oil at Koch Exploration Increased BlackRock Ventures production from zero to 16,000 bbl/d between April 1999 and Q1/06; sold to Shell for $2.4 billion in May 2006 With no debt, BlackPearl has flexibility in developing a financing strategy for its large thermal projects Existing production provides a significant source of cash flow to fund development Management has a track record of raising capital 12,000 bbl/d (gross) Onion Lake SAGD project approval expected in Q4/12 Significant production ramp-up with ASP ( Alkali Surfactant Polymer ) flooding at Mooney over next 12 months Regulatory approval and start of construction of the first phase (20,000 bbl/d) at Blackrod in the next months Top quartile reservoir quality dictates economic performance Projects are economic at WTI oil prices of US$50 US$70/bbl Current economics expected to generate netbacks of >C$25/bbl in

5 Asset Highlights MOONEY BLACKROD ONION LAKE The three core areas have common characteristics BlackPearl operated High working interests Resource exploitable with proven technology Significant amount of reserves and resources Development plans supported by successful actively producing analogues Reserves and Resource Summary 1. Working Original Oil Recovery Current Potential 2P Reserves 2C Resources Interest In Place Factor Production Production NPV 10 (BT) 2 Technology (%) (mmbbl) (%) (mmbbl) (mmbbl) (bbl/d) (bbl/d) ($mm) Onion Lake 87.5% % ,100 15,000 $1,156 Conventional Wells, SAGD Mooney 100% % ~2,400 10,000 $529 Horizontal Wells, ASP Flood Blackrod 100% 1,395 47% ~300 80,000 $2,375 SAGD Other 100% ,000 $14 Conventional Wells Total 1, , ,000 $4, Source: Sproule reserve and resource evaluation (best estimate) reports dated Dec. 31, 2011 (reports updated May 31, 2012 for Blackrod) 2. NPV 10 (AT) = $3.1 billion 5

6 Corporate Production Profile 100,000 80,000 Production Profile 1. Full development of existing properties could see production reach 100,000 bbl/d Plan to reach 30,000 bbl/d by 2016 Production (boe/d) 60,000 40,000 20, Mooney Onion Lake Onion Lake (SAGD) Blackrod 1. As per the Sproule reserves and best estimate contingent resource reports dated December 31, 2011 (report updated May 31, 2012 for Blackrod) 6

7 Onion Lake Conventional Development Key Onion Lake Conventional Metrics Onion Lake Area Map Oil Qualty Stage of Regulatory Approval Current Production Potential Production 2P Reserves 1. 2C Resources 1. [ API] [bbl/d] [bbl/d] [mmbbl] [mmbbl] 11 Approved 6,100 8, Current conventional production is from the Cummings Formation Current conventional production (using CHOPS 2. ) can be sustained until 2016 based on Sproule s forecast Over 150 future drilling locations assigned by Sproule in the 2P and 2C cases Potential to increase locations with future delineation drilling Typical well IP bbl/d Estimated capex of $0.6 million per well Plan to continue development over the next 3 to 5 years wells planned in 2012 Primary production in the thermal area expected to enhance the effectiveness of the SAGD process Onion Lake generated netbacks of $29.46/boe in 2011 and $26.48/boe in 1H As per the Sproule reserves and best estimate contingent resource reports dated December 31, 2011 (report updated May 31, 2012 for Blackrod) 2. Cold Heavy Oil Production with Sand 3. For the period ending June 30,

8 Onion Lake SAGD Development Key Onion Lake SAGD Metrics Oil Qualty Stage of Regulatory Approval Current Production Potential Production 1. 2P Reserves 2. 2C Resources 2. [ API ] [bbl/d] [bbl/d] [mmbbl] [mmbbl] 11 Filed 10, Onion Lake Regional Analogue Map Net pay in the Cummings Formation on a portion of the Onion Lake lands is 10 m 24 m, making it suitable for thermal development Other analogue thermal projects in Saskatchewan include CNRL s Tangleflags, Husky s Pikes Peak and Southern Pacific s Senlac The Lower Cummings at Onion Lake is geologically equivalent to Alberta s McMurray Formation Submitted a 12,000 bbl/d (gross) SAGD commercial development application in 2011; approval expected in Q The Company estimates approval will result in the reclassification of mmbbl of Contingent Resources into Probable Reserves Recovery rates in excess of 50% anticipated, with an CSOR of Production Facility Steam Generator 650m Steam Injector 1. Cumulative peak ultimate conventional and SAGD production at Onion Lake expected to be 12,000-15,000 bbl/d (less than combined individual segments due to timing differences) net to BlackPearl s working interest 2. As per Sproule s reserves and best estimate contingent resource reports dated December 31, Source: Sproule / Management 8

9 Onion Lake Key Take-Aways 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - Production Forecast 1 Primary production is providing near term cash flow to fund development projects Property will transition from primary production in the thermal development over the next 3 to 5 years Very economical midsize thermal project that will produce at relatively flat rates for 15+ years Reserves (Primary) Resources (Primary) Resources (Thermal) 1. As per the Sproule reserves and best estimate contingent resource reports dated December 31, 2011 (report updated May 31, 2012 for Blackrod) 9

10 Mooney ASP 1. Flood Key Mooney Metrics Reservoir is in the Bluesky Formation Oil Qualty Stage of Regulatory Approval Current Production Potential Production 2P Reserves 2. 2C Resources 2. [ API ] [bbl/d] [bbl/d] [mmbbl] [mmbbl] 16 Approved 3. ~2,400 8,000-10, Mooney Field Calendar Day Production (bopd) Current production of 2,400 bbl/d (exceeds Sproule P+P 2012 forecast) Phase 1 flood area ~700 bbl/d Non-Flooded areas ~1,700 bbl/d Phase 1 ASP flood initiated in Q3/11 Initial response from repressurization seen in Q2/12 Peak production of 3,000 4,000 bbl/d anticipated in 2013 ASP application is key to enhancing value of this property; recovery factors are expected to increase from 4% to 30% Previous polymer pilot resulted in recovery factors greater than 18% before being shutdown to initiate commercial development 4. Closest analogue is Wabiskaw reservoir at Cenovus Pelican Lake (depositional setting and development method) Both Cenovus and BlackPearl have developed pools on 200 m inter well spacing Cenovus currently estimates a recovery factor of 32% Mooney generated netbacks of $34.83/boe in 2011 and $39.48/boe in YTD Alkali Surfactant Polymer 2. As per the Sproule reserves and best estimate contingent resource reports dated December 31, 2011 (report updated May 31, 2012 for Blackrod) 3. ERCB approval was received for Phase 1 of commercial ASP flood development 4. Three well polymer pilot operated for 24 months, starting in Oct For the period ending June 30,

11 Mooney ASP 1. Flood (Cont d) Mooney Detailed Area Map Current Activities Multi-well battery recently commissioned to handle full field development Drill additional horizontal wells on Phase 2 lands Drill first Phase 3 well in Q Expected response time of ASP flood is months from start of injection Future Operations Continue Phase 2 and 3 drilling, convert to ASP flood, potential for additional 4,000 6,000 bbl/d Extend road and pipeline infrastructure to Phase 3 lands 1. Alkali Surfactant Polymer 11

12 Mooney - Key Take-Aways Mooney Production Profile 1 10,000 8,000 6,000 4,000 2, Reserves Resources Mooney Area Map ASP is a proven technology that overcomes the challenge of waterflooding viscous heavy oil, enhancing oil recovery Mooney has achieved initial success from response to Phase 1 of its ASP flood Mooney is a long-life project 40+ years project life Similar to other EOR projects with significant long-life oil pools (Swan Hills, Midale). These types of projects have typically increased recoverable reserves over the long term 1. As per the Sproule reserves and best estimate contingent resource reports dated December 31, 2011 (report updated May 31, 2012 for Blackrod) 12

13 Blackrod SAGD Oil Sands Project Key Blackrod Metrics Stage of Oil Reg. Current Potential 2P 2C Qualty Approval Prod. Prod. Reserves 1. Resources 1. [ API ] [bbl/d] [bbl/d] [mmbbl] [mmbbl] 9 Filed ~300 80, Located in the Athabasca Oil Sands region Lower Grand Rapids Formation at a depth of approximately 300 metres 8 28 metres of continuous net pay Blackrod is to be developed in three phases with total production potential of 80,000 bbl/d The Grand Rapids Formation is generating a lot of interest from industry planned projects have the potential to produce over 500,000 bbl/d 1 Laricina s 155,000 bbl/d Germain project (Phase 1 under construction) 2 Cenovus 180,000 bbl/d Grand Rapids project (pilot operating since Q4 2010) 3 Koch s 40,000 bbl/d Muskwa project (Phase 1 awaiting regulatory approval) 4 Cavalier s 80,000 bbl/d Hoole project As per the Sproule reserves and best estimate contingent resource reports dated December 31, 2011 (report updated May 31, 2012 for Blackrod) 2. Agreement reached to acquire pipeline, transaction expected to close in Q

14 Blackrod SAGD Pilot Progress Production Rate Blackrod Lower Grand Rapids Pilot SAGD Pair Installed downhole pump Reached commercial production rates Off production for regular maintenance and facility inspection Production anticipated to increase to 500 bbl/d in the next 6 months Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Oil Prod (bopd) Cum SOR (bw/bo) Inst SOR (bw/bo) Steam Oil Ratio Achieved over 400 bbl/d after 10 months of steam injection; instantaneous SOR under 3 Well has produced over 100,000 barrels of oil to date Target production of 500+ bbl/d in the next six months Pilot well pair is only 700 m long, the commercial project wells are expected to be 900 1,200 m in length, which will positively impact production rates Currently experimenting with the well to find best operating parameters, and production rates are expected to be bbl/d during this period Performance has confirmed project s commerciality and is exceeding model expectations Pilot to be expanded with an additional well pair and minor expansion of steam and water handling facilities The second well pair will be longer (950 m) and placed deeper in the reservoir to confirm the expected reservoir performance 14

15 Blackrod vs. Other Reservoirs (Scale & Predictability) The Blackrod Grand Rapids development is within a relatively homogeneous and predictable shoreface sand reservoir in contrast to those in the more common, but much less homogeneous and predictable, McMurray estuarine / fluvial channel systems Lower productivity in the Grand Rapids is more than compensated by scale and homogeneity Project scale / predictability has led to the CNRL Primrose project being very profitable even though its reservoir is inferior to best in class McMurray channel sands such as Cenovus Foster Creek Foster Creek is unique in Western Canada and the number of similar large and continuous McMurray channel sands projects is very limited Many future projects in the McMurray may have similar results to the Connacher Great Divide project due to heterogeneous sands The successful results from the first pilot well pair and the CNRL Wolf Lake analogue project can be easily projected to over 500 more well pairs at Blackrod Connacher: Great Divide BlackPearl: Blackrod Cenovus: Foster Creek CNRL: Primrose 15

16 Blackrod Commercial Development 80,000 bbl/d commercial development application filed in May 2012 Resulted in conversion of 180 mmbbl of 2C resource to 2P reserves by an independent reservoir engineering firm Project to be built in phases, with the first phase planned for 20,000 bbl/d; two additional phases of 30,000 bbl/d each to follow Application approval expected in months Phase 1 capital cost estimate of $35,000 $40,000 /bbl/d Shown on the right is an illustration of the layout of phases of Blackrod development Phases of Blackrod Area Map Activity Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Environmental Data Gathering Facilities Engineering Regulatory Review Facilities Construction Operations Start 16

17 Blackrod SAGD Project - Summary Production Forecast 1 Environmental Impact Assessment complete for full development of 80,000 bbl/day Phase 1 start-up expected in Q All three phases of development expected to be completed within the next ten years Stable oil production for 20+ years 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, Reserves (Commercial Phase 1) Resources (Commercial Phase 2 & 3) Project Timeline Potential to further enhance recoveries with new/emerging technologies and operating practices Infill wells Solvents Phase 1 Project application approval process Expected regulatory approval Facilities construction Start-up of SAGD operations Phase 2 Project application approval process Expected regulatory approval Facilities construction Start-up of SAGD operations Phase 3A Project application approval process Expected regulatory approval Facilities construction Start-up of SAGD operations Phase 3B Project application approval process Expected regulatory approval Facilities construction Start-up of SAGD operations Based on Sproule s May 31, 2012 reserves and best estimate contingent resources evaluations 17

18 2012 Guidance 2012 Estimates Capex Program ($mm) Production (2012 avg.) [boe/d] 9,500-10,000 Production (2012 exit) [boe/d] 10,000-11,000 Capital expenditures [$mm] $115 - $120 Cash flow from operations [$mm] $72 - $75 Per share [$] $ $0.26 Y/E working capital [$mm] $5 - $10 Y/E debt [$mm] - Net earnings [$mm] $0 - ($5) Onion Lake $30 Non-Core $10 Blackrod $25 Mooney $ Avg. Production Forecast (boe/d) Other 50 John Lake 614 Blackrod 362 Onion Lake 6,119 Mooney 2, Pricing assumptions used for 2012 include WTI oil price of $92/bbl, light/heavy differential of $22/bbl and CAD/US exchange rate of $

19 Funding Requirements Funding Requirements The ongoing development of conventional reserves at Onion Lake and Mooney will be funded from cash flow Source of Funding Capital Expenditures Funding Gap $0 $200 $400 $600 $800 $1,000 $1,200 BlackPearl is developing a financing strategy to add 20,000 bbl/d of thermal production by 2016 No additional funding required for the next 18 months Credit facility recently expanded to $115 mm The funding requirements in 2014 and 2015 expected to be satisfied by a combination of: Non-core asset sales Term debt Equity Potential sale of one or more of the core properties Estimated Cash Flow Working Capital & Existing Credit Facility 1. Figures expressed in C$ mm, based on Management estimates 19

20 Marketing/Hedging Strategy Heavy Oil (WCS) 1 Differential % of WTI ) Heavy oil prices have been volatile Rail exports from Canada have improved recent heavy oil differentials 2) Currently, we are unhedged 15 20% of BlackPearl s production is on rail 3) Likely to hedge during the construction phase of our larger projects Western Canadian Select 20

21 BlackPearl Shares NAVPS Net Asset Value NAVPS Recent Share Price $3.51 $15.00 FD Shares O/S (mm) 305 Market Cap ($mm) $1,071 Net Debt ($mm) 1 ($30) Enterprise Value $1,042 Share Price $10.00 Current Share Price 2P Reserves NPV 10 (AT) 2 $1,099 $5.00 Best Estimate Contingent Resources NPV 10 (AT) 2 $1,946 Resource Evaluator NPV $3,045 Less: Net Debt ($mm) ($30) Resource Evaluator NAV $3,075 Resource Evaluator NAVPS $ % 10% 8% Various Discount Rates (AT) Price / NAVPS 35% At current share prices, BlackPearl is trading at just under 35% of unrisked NAV (PV10% After-Tax) Key to enhanced value recognition convert further contingent resource into reserves 1. Net debt includes ~$20.0 mm of option proceeds from the exercise of in-the-money options 2. Source: Sproule reserve and resource evaluation reports dated Dec. 31, 2011 and Blackrod as of December 31, 2011 proforma for 2P reserves recognized at May 31, 2012, discounted at 10% After-Tax 21

22 BlackPearl Key Take-Aways 2P Reserves (mmbbl) 1. Identify Potential 2. Validate (drilling, pilots) 3. Commercialize People Regulatory Finance Production (bbl/d) 2 12,000 10,000 8,000 6,000 4,000 2, Average for the six months ended June 30, Source: Sproule Unconventional Limited ( Sproule ) reserve evaluation reports dated December 31, 2011 (reports updated to May 31, 2012 for the Blackrod project). 22

23 Cautionary Statements FORWARD-LOOKING STATEMENTS: This presentation contains certain forward-looking statements and forward-looking information (collectively referred to as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements typically contain words such as "anticipate", "believe", "plan", "continuous", "estimate", "expect", "may", "will", "project", predict, targeting, seek, intend, could, potential, scheduled, "should", outlook or similar words suggesting future outcomes. In particular, this presentation contains forward-looking statements pertaining to our business plans and strategies; anticipated oil and gas production levels; capital expenditure and drilling programs; the amount of the funding gap between the Company s planned capital expenditures and estimated internal cashflows and the estimated value of 2P reserves and 2C resources; estimated oil and gas recovery factors and steam oil ratios; expected response time of the ASP Flood at Mooney; timing of completion of the first phase of the SAGD project at Blackrod; methods, ability and timing to finance capital expenditure programs; future oil and gas prices and their impact on BlackPearl, anticipated timing of regulatory approvals; future costs including operating and administrative costs and royalty rates; future netbacks, cash flows and net income; future asset dispositions, corporate guidance for 2012; net asset value calculations; and estimated volumes of reserves that could be converted to reserves in In addition, statements relating to "reserves" or resources are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated and can be profitably produced in the future. The forward-looking statements in this presentation reflect certain assumptions and expectations by management. The key assumptions that have been made in connection with these forward-looking statements include the continuation of current or, where applicable, assumed industry conditions, the continuation of existing tax, royalty and regulatory regimes, commodity price and cost assumptions, the continued availability of cash flow or financing on acceptable terms to fund the Company s capital programs, the accuracy of the estimate of the Company s reserves and resource volumes and that BlackPearl will conduct its operations in a manner consistent with past operations. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. By their very nature, forward-looking statements involve inherent risks and uncertainties which could cause actual results to differ materially from those contained in forward-looking statements. These factors include, but are not limited to, risks associated with fluctuations in market prices for crude oil, natural gas and diluent; general economic, market and business conditions; substantial capital requirements; uncertainties inherent in estimating quantities of reserves and resources; extent of, and cost of compliance with, government laws and regulations and the effect of changes in such laws and regulations from time to time; the need to obtain regulatory approvals on projects before development commences; environmental risks and hazards and the cost of compliance with environmental regulations; aboriginal claims; inherent risks and hazards with operations such as fire, explosion, blowouts, mechanical or pipe failure, cratering, oil spills, vandalism and other dangerous conditions; potential cost overruns; variations in foreign exchange rates; diluent supply shortages; competition for capital, equipment, new leases, pipeline capacity and skilled personnel; uncertainties inherent in the SAGD bitumen and ASP recovery processes; credit risks associated with counterparties; the failure of the Company or the holder of licenses, leases and permits to meet requirements of such licenses, leases and permits; reliance on third parties for pipelines and other infrastructure; changes in royalty regimes; failure to accurately estimate abandonment and reclamation costs; inaccurate estimates and assumptions by management; effectiveness of internal controls; the potential lack of available drilling equipment and other restrictions; failure to obtain or keep key personnel; title deficiencies with the Company s assets; geo-political risks; risks that the Company does not have adequate insurance coverage; risk of litigation and risks arising from future acquisition activities. Further information regarding these risk factors and others may be found under Risk Factors in the Corporation s Annual Information Form. Undue reliance should not be placed on these forward-looking statements. Readers are cautioned that the actual results achieved will vary from the information provided herein and the variations could be material. Readers are also cautioned that the foregoing list of assumptions, risks and factors is not exhaustive. Consequently, there is no assurance by the Company that actual results achieved will be the same in whole or in part as those set out in the forward-looking statements. Furthermore, the forward-looking statements contained in this presentation are made as of the date hereof, and the Company does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained herein are expressly qualified by this cautionary statement. RESOURCES: There are significant differences in the criteria associated with the classification of reserves and contingent resources. Contingent resource estimates involve additional risk, specifically the risk of not achieving commerciality, not applicable to reserves estimates. Contingencies may include factors such as economic, legal environmental, political and regulatory matters and lack of markets. There is no certainty that it will be commercially viable to produce any portion of the resources. No adjustments for these risks have been made in the groupings of reserves and recoverable resources. The estimates of reserves and resources and future net revenue from individual properties may not reflect the same confidence level as estimates of reserves and resources and future net revenues for all properties, due to the effects of aggregation. BOE s: All references to BOEs are based on a 6 to 1 conversion ratio. BOEs may be misleading, particularly if used in isolation. A BOE conversion of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. NON-GAAP MEASURES: This presentation uses the terms Cash flow from operations and cash flow which represent cash flow from operating activities before working capital adjustments. 23