Obsidian Energy. Corporate Presentation. January 2018

Transcription

1 Obsidian Energy Corporate Presentation January 2018

2 Important Notices to the Readers This presentation should be read in conjunction with the Company's audited consolidated financial statements, management's discussion and analysis ("MD&A") for the three and nine months ended September 30, All dollar amounts contained in this presentation are expressed in millions of Canadian dollars unless otherwise indicated. Certain financial measures included in this presentation do not have a standardized meaning prescribed by International Financial Reporting Standards ( IFRS ) and therefore are considered non-generally accepted accounting practice ("non-gaap") measures; accordingly, they may not be comparable to similar measures provided by other issuers. This presentation also contains oil and gas disclosures, various industry terms, and forward-looking statements, including various assumptions on which such forward-looking statements are based and related risk factors. Please see the Company's disclosures located in the Appendix at the end of this presentation for further details regarding these matters. ObsidianEnergy.com TSX/NYSE: OBE 2

3 Obsidian Energy Corporate Profile Peace River 4,823 boe/d Net Sections: 235 Share Price Dec. 31 st, 2017 OBE-TSX Daily Volume % of shares outstanding Corporate Metrics $/share $1.56 MM % OBE -NYSE Daily Volume % of shares outstanding MM % Cardium 18,876 boe/d Net Sections: 450 Deep Basin New Wells on Q Net Sections: 700 Market Capitalization $MM $787 Net Debt $MM $410 Enterprise Value $MM $1,197 Q Operating Metrics Production boe/d 30,166 % Liquids % 62% Index Map Legacy Asset Production of 4,701 boe/d Alberta Viking 1,766 boe/d Net Sections: 170 Operating Costs $/boe $12.26 Netback $/boe $ Capital Budget $MM $160 Operating cost are net of carry and netbacks include hedging ObsidianEnergy.com TSX/NYSE: OBE See end notes 3

4 A Balanced Portfolio with Significant Optionality Cardium Meaningful Free Cash Flow Generation LOW DECLINE BASE PRODUCTION & STABLE CASH FLOW BALANCED SHORT & INTERMEDIATE CYCLE DEVELOPMENT LIQUIDS WEIGHTED, SUSTAINABLE GROWTH Waterflood Approach with Primary Optionality Peace River Manufactured Cold Flow, High Rate & Low Cost Multiple Egress Options Alberta Viking Short Cycle Investment to Toggle Growth Industry Leading Initial Production Rates Deep Basin Multi Horizon Potential Focus Highly Economic Mannville Development 4

5 On Track to Meet all 2017 Guidance Metrics Q4 A&D Adj. Production boe/d FY 2017 Production boe/d Total Expenditures $MM Operating Expenses $/boe 34,000 Reiterating Double Digit Growth 32,000 On Track For High End of Guidance $180 $160 Total Capital On Track for Guidance $ ,500 31,500 $140 $120 $13.50 Operating Costs on track for Guidance 27,000 31,000 $100 $80 23,500 30,500 Production Guidance 30,500-31,500 $60 $40 $20 Total Expenditures Guidance $160 $13.00 Operating Cost Guidance $ $ ,000 Q Q ,000 $0 Total Expenditures Guidance $12.50 *Net of Peace River Guidance Carry ObsidianEnergy.com TSX/NYSE: OBE See end notes See end notes 5

6 (boe/d) Low Decline Rate Underpins Growth 16% Corporate Base Production Decline Rate Cardium Asset Under Historical Waterflood Capital Efficiencies of $6,500/boe/d on 2017 Optimization Projects Optimization of existing base wellbores Corporate Base Production boe/d 35,000 30,000 25,000 22% Base Development Decline Rate 20,000 15,000 16% Base Decline Rate 2017 Base Production & 2017 Development Declines 16% in ,000 Q Q Q Q Base Production 2017 Development 2018 Development ObsidianEnergy.com TSX/NYSE: OBE See end notes 6

7 Waterflood Performance is Impressive Cardium Decline Rate lowered from approximately 20% to 5% Pembina Waterflood Activity Drilled 8 new injectors in 2017 OBE Operated Cardium unit OBE Cardium land Waterflood activity since Q Actively managed inj OBE well Waterflood and base optimization projects initiated in 2016 R10 R9W5 T48 Cardium Base Production Decline boe/d 20,000 Optimized Waterflood T47 17,500 Decline 20% Actual Decline 5% 10 kms 5 miles Converted and reactivated 37 wells in PCU #9 since Q ,000 Drilled 8 new injectors to support 2017 new drills 12,500 Decline 10% Decline 20% Actively managing more than 120 existing injectors 10,000 Jan-16 Jul-16 Jan-17 Jul-17 Base with No Waterflood Support Base with Waterflood Support Actual Base Production with Waterflood and Optimization Support ObsidianEnergy.com TSX/NYSE: OBE See end notes 7

8 Early Cardium Rates Above Type Curve R10W5 R5 T50 PCU #9 Program is >100 boe/d above type curve PEMBINA WILLESDEN GREEN W5 Pad R8W5 T43 Crimson (Willesden Green) wells on production by year end PCU# W5 Pad R10W5 T48 WILLESDEN GREEN 5 kms 3 miles W5 CARDIUM 4 well Hz pad Expected on production by YE 2017 T45 15 kms 5 kms T47 3 miles 10 miles INDEX MAP OBE land OBE producing well Industry HZ well 100/ W5 On Production: 10/8/2017 Initial Stabilized Rate: 195 boe/d 102/ W5 On Production: 10/8/2017 Initial Stabilized Rate: 140 boe/d 103/ W5 On Production: 10/8/2017 Initial Stabilized Rate: 205 boe/d T40 ObsidianEnergy.com TSX/NYSE: OBE 8

9 AB Viking Program Continues to Exceed Expectations Continuing to evolve development strategy to enhance economics and maximize capital efficiency R10 100/ W4 On Production: 9/15/2017 IP30: 118 boe/d Percent Liquids: 39% 102/ W4 On Production: 8/30/2017 IP30: 248 boe/d Percent Liquids: 29% Misty GP 103/ W4 On Production: 9/27/2017 IP30: 296 boe/d Percent Liquids: 46% R5 Monitor West GP R1W4 102/ W4 On Production: 9/5/2017 IP30: 218 boe/d Percent Liquids: 57% 100/ W4 On Production: 8/28/2017 IP30: 295 boe/d Percent Liquids: 50% Compeer GP Esther GP 102/ W4 On Production: 10/3/2017 IP30: 237 boe/d Percent Liquids: 73% T35 T30 102/ W4 On Production: 9/26/2017 IP30: 227 boe/d Percent Liquids: 46% 100/ W4 On Production: 10/13/2017 IP30: 212 boe/d Percent Liquids: 76% INDEX MAP 15 kms 10 miles OBE gas plant OBE land 102/ W4 On Production: 10/7/2017 IP30: 179 boe/d Percent Liquids: 66% 100/ W4 On Production: 10/11/2017 IP30: 188 boe/d Percent Liquids: 76% T25 ObsidianEnergy.com TSX/NYSE: OBE 9

10 PROP Program Returned to the Heart of Harmon Valley South Economics still attractive post carry Well costs dropped 17% in H2 versus H1 due to optimized well length and cheaper cost per meter INDEX MAP R20W5 100/ W5 On Production: 10/9/2017 IP25: 47 bopd Drill Cost: $74/m 103/ W5 On Production: 9/20/2017 IP30: 201 bopd Drill Cost: $69/m 102/ W5 On Production: 9/21/2017 IP29: 79 bopd Drill Cost: $62/m 100/ W5 On Production: 8/31/2017 IP30: 288 bopd Drill Cost: $65/m 100/ W5 On Production: 8/31/2017 IP30: 78 bopd Drill Cost: $51/m Harmon Valley Harmon Valley South R15 104/ W5 On Production: 10/14/2017 IP22: 236 bopd Drill Cost: $79/m W5 Surface 2 Wells TD Wells: 11/7/ / W5 On Production: 10/29/2017 First Oil: 11/6/2017 Drill Cost: $84/m 100/ W5 On Production: 10/3/2017 Last 30 Days: 215 bopd Drill Cost: $120/m Seal 102/ W5 On Production: 9/20/2017 Last 30 Days: 302 bopd Drill Cost: $107/m 102/ W5 On Production: 8/12/2017 Last 30 Days: 216 bopd Drill Cost: $120/m T85 T80 OBE land Acquired land in 2017 PROP 15 kms 10 miles Obsidian Energy 55% Ownership In the Peace River Oil Partnership ObsidianEnergy.com TSX/NYSE: OBE See end notes 10

11 Deep Basin Results are Liquids Rich Foray into Deep Basin executed on schedule and on budget 100/ W5 R8W5 MNVL On Production: 10/26/2017 Initial Rate: 3.9 MMCFD, 33 bbl/mmcf free condensate 30 bbl/mmcf other liquids Currently choked for liquids 100/ W5 MNVL On Production: 8/30/2017 Initial Rate: 3.2 MMCFD, 8 bbl/mmcf free condensate 31 bbl/mmcf other liquids WILLESDEN GREEN T44 Tested different upper Mannville targets with variable pressure and reservoir quality 2 of 3 wells are flow rate restricted to optimize liquids rates INDEX MAP 10 kms 5 miles 100/ W5 MNVL On Production: 10/12/2017 Initial Rate: 3.4 MMCFD, 38 bbl/mmcf free condensate 24 bbl/mmcf other liquids Currently choked for liquids T41 OBE land OBE operated Cardium unit Obsidian Energy 80% Working Interest ObsidianEnergy.com TSX/NYSE: OBE See end notes 11

12 Strong Hedge Position Protects Capital Program Clear downside protection through our hedge book with ~65% of Net Liquids Volumes Hedged for FY 2018 Oil Volumes Hedged (bbl/d) ~65% of Net Liquids Volumes Hedged for FY 2018 Gas Volumes Hedged (Mcf/d) 40% of Net Gas Volumes Hedged for FY ,900 12,000 12,000 12,000 12,000 7,000 29,000 29,000 35,900 7,500 28,400 30,200 7,500 22,700 7,500 mcf/d of gas production is hedged at Ventura pricing, realizing a significant premium to AECO in Q ,600 7,500 22,700 7,500 17,100 15,200 2, US$/bbl US$/bbl US$/bbl US$/bbl US$/bbl US$/bbl US$/bbl 3.00 C$/Mcf 2.83 C$/Mcf 2.75 C$/Mcf 2.73 C$/Mcf 2.73 C$/Mcf Q4 Q1 Q2 Q3 Q4 Q1 Q Q4 Q1 Q2 Q3 Q ObsidianEnergy.com TSX/NYSE: OBE See end notes 12

13 Focused 2018 Plan Predictable & Liquids Weighted Growth Profile Development Capital is 64% of Total Expenditures Flexibility to expand capital program in H2 and extend growth rate 2018 Production (boe/d) 2018 Production 31,000 32,000 boe per day Capital Spend ($MM) 2018 $135MM Capital Expenditures 34,000 32,000 30,000 5% A&D Adjusted Production Growth Regulatory $14 Enviro 10% $10 8% Base & Infrastructure Capital $25 18% 28,000 26,000 24,000 22, Development $86 64% 20, E A&D Adjusted FY 2018E ObsidianEnergy.com TSX/NYSE: OBE See end notes 13

14 Vast Portfolio Optionality on Display Employing a quicker payout program that balances primary drilling with targeted low capital integrated waterflood opportunities 2018 Development Allocations ($MM) 2018 Operated Spuds 22 Operated spuds planned in % Av. IRR 80% Av. IRR % Av. IRR PROP $8 10% Deep Basin $11 13% 100% Av. IRR 20 AB Viking 6 AB Viking $9 10% Optimization $14 16% 15 PROP 5 10 Deep Basin 3 Cardium $44 51% 50% Av. IRR 5 0 Cardium Wells Spud ObsidianEnergy.com TSX/NYSE: OBE See end notes 14

15 Short Cycle Focused Cardium Program Taking advantage of existing injectors in Pembina for low cost integrated waterflood Primary drilling in Willesden Green accessing clean sand and bioturbated intervals 2018 Cardium Development Allocations ($MM) Land & Seismic $4 Pembina 9% Waterflood Optimization $5 11% Non-Operated Primary Drilling $12 27% Cardium Hz Drills $23 53% PCU# Development 4 Well Pad with 3 Injection Conversions R10 10 kms 10 kms 5 miles miles R10 10 kms 5 miles OBE operated Cardium unit R9W5 OBE Cardium land Water injector 2017 OBE well 2018 OBE well T48 T48 Willesden Green 2018 Development 2 Well Primary Pad R9 Drilling 4 well pad and converting 3 injectors. Also utilizing existing injectors Non-Operated partner well OBE (40% WI) OBE operated R7W5 Cardium unit OBE Cardium land Water injector Hz injector conversion OBE Recent Activity 2018 OBE well 2 Operated primary wells for 2018 T43 T47 T47 15 kms ObsidianEnergy.com TSX/NYSE: OBE miles

16 Capital Efficiencies ($/boe/d) 2018 Capital Efficiency Buildup Program leverages the short cycle opportunity set in our portfolio Development Capital efficiencies of <$15,000/boe/d Total Capital efficiencies of <$25,000/boe/d Total 2018 Corporate Capital Efficiencies $/boe/d $30,000 $25,000 $86MM Development Capital <$25,000 $20,000 $20,000 $15,000 $14,000 $16,000 <$15,000 $10,000 $7,000 $8,000 $5,000 $0 Deep Basin Optimization PROP AB Viking Cardium Total 2018 Total 2018 Development Capital ObsidianEnergy.com TSX/NYSE: OBE See end notes 16

17 2018 Guidance Production Units FY 2018 Guidance Average Production boe/d 31,000 32,000 Growth 2018 Production Growth % 5% Capital Expenditures Capital Expenditures $MM $125 Decommissioning Expenditures $MM $10 Expenses Operating Expense $/boe $ $14.00 General & Administrative Expense $/boe $2.00 $2.50 ObsidianEnergy.com TSX/NYSE: OBE

18 Appendix ObsidianEnergy.com TSX/NYSE: OBE

19 End Notes All slides should be read in conjunction with Definitions and Industry Terms, Non-GAAP Measure Advisory and Forward-Looking Advisory Slide 3. Obsidian Corporate Profile Daily Volume (shares) is the 30 day average share volume traded on Canadian and US Exchanges per Bloomberg. Production, % Liquids, Operating Costs, and Netback and Net Debt are based on Q results. Operating costs are net of carry from the Peace River Oil Partnership and netbacks include hedging. The net sections for Deep Basin are approximate numbers and are internal estimates Slide 5. On track to meet all 2017 guidance metrics Production, capital expenditures and operating costs are all internal estimates for year end Operating costs include the benefit of the operating cost carry as per the Peace River Oil Partnership Slide 6. Low Decline Rate Underpins Growth Corporate base production and decline is based on actual data. Lines have been smoothed for illustrative effect to adjust for volatility inherent in day to day oil and gas operations. Capital efficiencies on optimization projects are internal estimates and rounded Slide 7. Waterflood Performance is Impressive Cardium base production and decline is based on actual data. Lines have been smoothed for illustrative effect to adjust for volatility inherent in day to day oil and gas operations. Capital efficiencies on optimization projects are internal estimates and rounded. The number of actively managing existing injectors is an internal estimate Slide 10. Program Returned to the Heart of Harmon Valley South Peace River Oil Partnership carry is expected to end in 2017 Slide 11. Deep Basin Results are Liquids Rich Choked is an industry term that refers to device that is used to control fluid flow rate or downstream system pressure Slide 12. Strong Hedge Position Protects Capital Program All crude oil and gas hedges have been converted into US$ or $CAD price implied price using foreign exchange rate CAD/USD on Nov 8th, Ventura Gas Hedges include $0.55 per mcf of transportation deductions to bring product to the Ventura market Slide 13. A Nimble & Focused 2018 Plan Production, capital expenditures are based on internal estimates for 2018 Slide 14. Vast Portfolio Optionality on Display Internal Rates of Returns are rounded and based on a blended Sep 30, 2017 strip price and 3rd party reserve evaluator deck Slide Capital Efficiency Buildup Capital efficiencies for each core area are based on capital spent in that area on new production adds, 12 month forward production average, on an capital weighted average basis and rounded. Corporate Capital efficiencies includes all capital spent, 12 month forward production average, on an capital weighted average basis and rounded ObsidianEnergy.com TSX/NYSE: OBE 19

20 Definitions and Industry Terms A&D means oil and natural gas property acquisitions and divestitures. A&D Adj. means oil and natural gas property acquisitions and divestitures. Base means production with no additional production from new drilling bbl means barrel or barrels. boe and boe/d mean barrels of oil equivalent and barrels of oil equivalent per day, respectively. Capital Expenditures includes all direct costs related to our operated and non-operated development programs including drilling, completions, tie-in, development of and expansions to existing facilities and major infrastructure, optimization and EOR activities. Company or OBE means Obsidian Energy Ltd, as applicable. Enviro means decommissioning expenditures. E means estimate FX means foreign exchange rate, in our case typically refers to C$ to US$ exchange rates. Free Cash Flow, which is Funds Flow from Operations less Total Capital Expenditures FY means fiscal year G&A means general and administrative expenses. H2 mean second half of the year Hz means horizontal well. IP means initial production, which is the average production over a specified time period. IRR means Internal Rate of Return which is the interest rate at which the NPV equals zero. Liquids % means the percentage of crude oil and NGLs from the total barrels of oil equivalent of production. Liquids means crude oil and NGLs Mmcf means million cubic feet. Mmcf/dmeans million cubic feet per day M means meters MM means millions Net Debt means Senior Debt plus bank debt plus non-cash working capital deficit, detailed in the Non-GAAP measure advisory. NGL means natural gas liquids which includes hydrocarbon not marketed as natural gas (methane) or various classes of oil. PCU #9 Means Pembina Cardium Unit number 9 PROP means Peace River Oil Partnership TD means total depth where drilling has stopped Q3 means the third quarter Q4 means the fourth quarter Spud mean the process of beginning to drill a well ObsidianEnergy.com TSX/NYSE: OBE 20

21 Non-GAAP Measures Advisory Non-GAAP measures advisory In this presentation, we refer to certain financial measures that are not determined in accordance with IFRS. These measures as presented do not have any standardized meaning prescribed by IFRS and therefore they may not be comparable with calculations of similar measures for other companies. We believe that, in conjunction with results presented in accordance with IFRS, these measures assist in providing a more complete understanding of certain aspects of our results of operations and financial performance. You are cautioned, however, that these measures should not be construed as an alternative to measures determined in accordance with IFRS as an indication of our performance. These measures include the following: Netback is a measure of cash operating margin on an absolute or per-unit-of-production basis and is calculated as the absolute or per-unit-ofproduction amount of revenue less royalties, operating costs and transportation. The measure is used to assess the operational profitability of the company as well as relative profitability of individual assets. For additional information relating to netbacks, including a detailed calculation of our netbacks, see our latest management's discussion and analysis which is available in Canada at and in the United States at and Net debt is the amount of long-term debt, comprised of long-term notes and bank debt, plus net working capital (surplus)/deficit. Net debt is a measure of leverage and liquidity ObsidianEnergy.com TSX/NYSE: OBE 21

22 Forward-Looking Information Advisory Certain statements contained in this presentation constitute forward-looking statements or information (collectively "forward-looking statements. Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "budget", "may", "will", "project", "could", "plan", "intend", "should", "believe", "outlook", "objective", "aim", "potential", "target" and similar words suggesting future events or future performance. 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. In particular, this presentation contains, without limitation, forward-looking statements pertaining to the following: that we are on track to meet all 2017 guidance metrics including Q4 A&D adjusted production growth, 2017 total production per day, total capital expenditures for the year and operating expenses within the guidance range; our expected base decline rates for production in 2018 and 2019; our expectation for when certain wells will come on production; that we will continue to evolve our development strategy to enhance economics and maximize capital efficiencies; that the economics in Peace River will continue to be attractive post the carry ending; that there is clear downside protection to our capital program through our current hedge book; our expected approach to development including the area-specific asset development plans; the timing and our expectations of such development activities; that there could be flexibility to expand the 2018 capital program in H2 2018, which in turn would drive more growth; our capital spending plans in 2018; our expected percentage production growth rate for 2018; the expected average internal rates of return at the various locations; the expectation that short cycle development drives strong capital efficiencies; the expected 2018 corporate capital efficiencies by location and the Company as a whole; our expectation for the average 2018 production range per day; and our expectations for operating costs and G&A costs for 2018 and the associated target ranges for those costs. The key metrics for the Company set forth in this presentation may be considered to be future-oriented financial information or a financial outlook for the purposes of applicable Canadian securities laws. Financial outlook and future-oriented financial information contained in this presentation are based on assumptions about future events based on management's assessment of the relevant information currently available. In particular, this presentation contains projected operational and financial information for end of 2017, 2018 and beyond for the Company. The future-oriented financial information and financial outlooks contained in this presentation have been approved by management as of the date of this presentation. Readers are cautioned that any such financial outlook and future-oriented financial information contained herein should not be used for purposes other than those for which it is disclosed herein. With respect to forward-looking statements contained in this document, we have made assumptions regarding, among other things: our ability to complete asset sales and the terms and timing of any such sales; the economic returns that we anticipate realizing from expenditures made on our assets; future crude oil, natural gas liquids and natural gas prices and differentials between light, medium and heavy oil prices and Canadian, WTI and world oil and natural gas prices; future capital expenditure levels; future crude oil, natural gas liquids and natural gas production levels; drilling results; future exchange rates and interest rates; future taxes and royalties; the continued suspension of our dividend; our ability to execute our capital programs as planned without significant adverse impacts from various factors beyond our control, including weather, infrastructure access and delays in obtaining regulatory approvals and third party consents; our ability to obtain equipment in a timely manner to carry out development activities and the costs thereof; our ability to market our oil and natural gas successfully; our ability to obtain financing on acceptable terms, including our ability to renew or replace our reserve based loan; our ability to finance the repayment of our senior secured notes on maturity; and our ability to add production and reserves through our development and exploitation activities. In addition, many of the forward-looking statements contained in this document are located proximate to assumptions that are specific to those forward-looking statements, and such assumptions should be taken into account when reading such forward-looking statements. Please note that illustrative examples are not to be construed as guidance for the Company and further details on assumptions can be found in the Endnotes section of the presentation. Although Obsidian Energy believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Obsidian Energy can give no assurances that they will prove to be correct. Since forward-looking information addresses future events and conditions, by its very nature it involves inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to: the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production; the possibility that the semi-annual borrowing base re-determination under our of our reserve-based loan is not acceptable to the Company or that we breach one or more of the financial covenants pursuant to our amending agreements with holders of our senior, secured notes; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of estimates and projections relating to reserves, production, costs and expenses; health, safety and environmental risks; commodity price and exchange rate fluctuations; interest rate fluctuations; marketing and transportation; loss of markets; environmental risks; competition; incorrect assessment of the value of acquisitions; failure to complete or realize the anticipated benefits of acquisitions or dispositions; ability to access sufficient capital from internal and external sources; failure to obtain required regulatory and other approvals; reliance on third parties; and changes in legislation, including but not limited to tax laws, royalties and environmental regulations. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect Obsidian Energy, or its operations or financial results, are included in the Company's most recently filed Management's Discussion and Analysis (See "Forward-Looking Statements" therein)), Annual Information Form (See "Risk Factors" and "Forward-Looking Statements" therein) and other reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website ( EDGAR website ( or Obsidian Energy's website. Unless otherwise specified, the forward-looking statements contained in this document speak only as of January 5, Except as expressly required by applicable securities laws, we do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary statement. ObsidianEnergy.com TSX/NYSE: OBE 22