BUILDING MOMENTUM IN TURKEY CANACCORD GENUITY GLOBAL ENERGY CONFERENCE OCTOBER 12, 2011 MIAMI

Transcription

1 A GLOBAL ENERGY COMPANY FOCUSED ON EXCEPTIONAL VALUE CREATION BUILDING MOMENTUM IN TURKEY CANACCORD GENUITY GLOBAL ENERGY CONFERENCE OCTOBER 12, 2011 MIAMI

2 DISCLAIMER/FORWARD LOOKING INFORMATION Certain information contained herein constitutes forward-looking information under applicable securities legislation. Such forwardlooking information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "target", "goal", "propose", "project" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this presentation may include, but is not limited to, information with respect to: the Corporation's growth strategy, including its targeted NAV growth rate of 20-25% per annum; and future production levels, targeted to be 20,000 BOE/d. Additional forward looking information is contained in this presentation in respect of: the ability of the Corporation to obtain GDPA approval for the transfer of working interests in leases and licences to Valeura and the timing thereof; planned work programs on lands associated with TBNG-PTI acquisition, Otto acquisition, AME-GYP farm-in, Marhat farm-in and TransAtlantic farm-in; technical decision-making; the extent and timing of the frac program on the TBNG-PTI lands, timing for tying in production and expected production rates, timing for completion of the 3D seismic program and drilling of the first locations thereafter; the resumption of drilling to a deeper target in the Altinakar-1 well on Licence 2674; the extent of Valeura investment and earning under the AME-GYP farm-in and the agreement of all parties to effect the licence transfers; the extent of the Corporation s investment and earning under the AME-GYP farm-in; anticipated operational plans and the timing associated therewith; and, the estimated costs of such studies, seismic, drilling and operations in Turkey and expected capital expenditures. Further, forward-looking information is contained in this presentation with respect to the ability to obtain necessary government and stock exchange approvals; and, ability to execute work programs (and the nature and extent of such work programs) in respect of all of the assets. Statements related to "reserves" or "resources" are deemed forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources can be profitably produced in the future. Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect. Although the Corporation believes that the expectations reflected in such forward-looking information are reasonable, undue reliance should not be placed on forward-looking information because the Corporation can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding and are implicit in, among other things: the ability of the Corporation to execute its strategy, and identify and close on acquisitions; the ability of the Corporation to replace and expand oil and natural gas reserves through acquisition, exploitation, development and step-out exploration; 2

3 DISCLAIMER/FORWARD LOOKING INFORMATION (CONT D) the ability to reach agreement with partners; the ability of the Corporation to successfully manage the political and economic risks inherent in pursuing oil and gas opportunities in foreign countries; the state of the capital markets; the ability of the Corporation to obtain financing on acceptable terms; the ability of the Corporation to obtain qualified staff, equipment and services in a timely and cost efficient manner to develop its business and execute work programs; and, field production rates and decline rates. Forward looking information is based on management s current expectations regarding future growth, results of operations, production, future commodity prices and foreign exchange rates, future capital and other expenditures (including the amount, nature and sources of funding thereof), plans for and results of drilling activity, environmental matters, business prospects and opportunities and future economic conditions. Forward looking information with respect to the Corporation's farm-in with AME-GYP, its working interest in the Edirne Licence #3839 and the TBNG-PTI assets, and farm-ins with Marhat and TransAtlantic in the Thrace Basin is also based on management's assumptions that the oil and gas regulatory framework and political situation in Turkey will continue to be stable and operate in its current state and that the Corporation will obtain all necessary third party and regulatory approvals to complete the activities described herein. Forward looking information involves significant known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated. The material risk factors affecting the Corporation and its business are similar to those of other companies engaged in the business of exploring for and producing oil and gas, both domestically and in foreign countries, and include, but are not limited to: risks in identifying and acquiring oil and gas interests on acceptable terms, financing risks, oil and gas industry operational risks in development, exploration and production, the ability to attract and retain key personnel, the risks associated with international activity (including the uncertainty associated with negotiating with foreign governments and third parties located in foreign jurisdictions), delays or changes in plans with respect to exploration or development projects or capital expenditures, the uncertainty of geological interpretations, the uncertainty of estimates and projections relating to reserves, production, costs and expenses, the uncertainty regarding the sustainability of initial production rates and decline rates thereafter, the risk of commodity price and foreign exchange rate fluctuations, the risk of partners having different views on work programs and potential disputes, the uncertainty associated with the outcome of a disagreement with AME-GYP with respect to earning under the AME-GYP farm-in agreement and the ability to reach an amicable resolution, and the risk that the required regulatory approvals will not be obtained for the acquisitions and transfers of working interests and for the Corporation's proposed future activities. Accordingly, there can be no assurance that the actions to be undertaken by the Corporation described herein will be completed as contemplated. The forward-looking information contained herein is made as of the date hereof and the Corporation undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless required by applicable securities laws. The forward looking information contained herein is expressly qualified by this cautionary statement. 3

4 PROFILE Valeura Energy Inc. (VLE TSX) Canada-based oil and gas E&P company with assets in Turkey and Western Canada Executed agreements for five transactions in Turkey since Sept 2010 (1) : AME-GYP farm-in (minimum US$8.8MM): oil in SE Anatolian Basin Otto asset acquisition ($1.9MM): natural gas in Thrace Basin TBNG-PTI asset acquisition ($53.7MM): natural gas in Thrace Basin Two other farm-ins in Thrace Basin: Licence 4201 (100%); Licences 4094 & 4532 (50%) Transactions boosted estimated 3 rd quarter 2011 production to 1,630 BOE/d (2) Closed $86.25MM subscription receipts financing on Feb 28, 2011; funds released from escrow on June 8 at closing of TBNG-PTI acquisition $37.1MM working capital surplus at June 30, 2011; no debt; $2.9MM undrawn credit facilities Graduation to TSX listing & 10:1 share consolidation completed effective Sept 15, 2011: 46.4MM shares outstanding (64.8MM FD) post consolidation Management & directors hold 7.2% of shares outstanding (11.6% FD) (1) Licence and lease transfers to Valeura subject to General Directorate of Petroleum Affairs of the Republic of Turkey ("GDPA") approval. (2) BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6.0 Mcf to 1.0 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. 4

5 WHY TURKEY? Otto asset purchase & Licence 4201, 4094, 4532 farm-ins - Thrace Basin (natural gas) TBNG-PTI TBNG-PTI acquisition Acquisition (natural gas & light/heavy oil) opportunity AME-GYP farm-in - SE Anatolian Basin (light & heavy oil) Prospective Proven petroleum systems Under-explored & under-exploited conventional & unconventional plays Opportunity to deploy modern technology Anatolian Basin main oil producing region in Zagros fold belt (contains world class oil fields in Iran, Iraq & Syria) Thrace Basin main gas producing region Positive Business Environment G-20 country, NATO member and democracy with moderate Islamic party in power Attractive royalty (12.5%) & corporate tax (20%) Heavily reliant on imports of oil & natural gas Strong product pricing linked to world oil prices & Russian gas prices Energy corridor to Europe from Middle East, Russia and neighbouring countries Limited competition 5

6 VALEURA LANDS IN TURKEY TRANSACTION PETROLEUM DISTRICT LEASES & LICENCES (#) GROSS AREA (acres) VALEURA NET AREA (acres) (1) THRACE BASIN TBNG-PTI Onshore (2) I (MARMARA) 9 507, ,140 TBNG-PTI Offshore (2) I (MARMARA) 5 715, ,024 Marhat/TransAtlantic (3) I (MARMARA) 3 364, ,000 Otto (4) I (MARMARA) 1 100,080 35,028 SUB TOTAL 18 1,687, ,192 SE ANATOLIAN BASIN TBNG-PTI (2) XII (GAZIANTEP) 5 609, ,555 AME-GYP (5) XI (DIYARBAKIR) 2 242,865 60,716 TOTAL 25 2,539, ,463 (1) Licence and lease transfers subject to GDPA approvals (anticipated 3-6 months process). Transfer of interest in Edirne Licence 3839 (Otto) approved Sept 10, (2) Transaction closed June 8, (3) Farm-in on Marhat Licence 4201 (100%) closed May 4, Farm-in on TransAtlantic Licences 4094 & 4532 closed June 13, (4) Transaction closed March 24, (5) Assuming Phase I earning of 25% under farm-in agreement. 6

7 THRACE BASIN LANDS Bulgaria Greece 3839 Otto asset purchase (35% WI) Turkey TBNG-PTI asset purchase (40% onshore; 15-35% offshore) Marhat farm-in (100% WI) Istanbul TransAtlantic farm-in (50% WI) km

8 TBNG-PTI SHALLOW GAS BUSINESS Kazanci/ Hayrabolu Tatarli Osmanli Kayi Kilavuzlu/ Karaevli Bekirler Yagci/ Nustratli Gazi 10 km Evrenbey-1 (planned spud late Oct 11) 10 km Aydede Tekirdag Field Cumulative Production (Bcf - gross) Proved + Probable Reserves (1) (Bcf - gross) Tekirdag/TB Kayi Yagci DT & DTD Kazanci/Hayrabolu Tatarli Aydede Karaevli Gazi/Gaziouglu Osmanli & other Estimated sales 19.4 MMcf/d (gross) or 7.8 MMcf/d (net) in 3 rd quarter 2011 Active program on TBNG-PTI lands in 2Q & 3Q 2011: Spudded 13 wells (2 D&A); 6 drilled into Mezardere 3 new wells on production (3.0 MMcf/d aggregate initial rate) Completed 35 workovers (11.9 MMcf/d aggregate initial rate) Nearing completion of two 3D seismic surveys (461 km 2 ) in Tekirdag & Hayrabolu areas (US$4.7MM net) Plan to spud Evrenbey-1 earning well in Licence 4094 late Oct 2011 (1) W.D. Von Gonten & Co. Petroleum Engineering reserves report effective Oct 1, 2010 and dated Feb 10, The report was prepared in accordance with NI guidelines and COGE Handbook. 8

9 SOUTHERN THRACE BASIN MEZARDERE X-SECTION FORMATION PARAMETER MEZARDERE LOW HIGH Depth (m) 1,000 3,500 Gross H (m) 500 2,500 A A Aydede-1 Yagci-8 BTD-1 BTD-2 DTD-7 DTD-9 DTD-3 Kuzey Kayi-1 Gross sand H (m) Net pay H (m) Ф (%) 3 15 K (md) 0 2 TOC (%) 1 7 Pressure Gradient (psi/ft) Potential area on TBNG-PTI lands (gross) (km 2 ) Potential bulk rock volume ("BRV") on TBNG- PTI lands (gross) (km 3 ) ,854 3,902 Mezardere Perforations DTD-7,9 Frac d Source: TransAtlantic Petroleum January 2011 & Valeura Energy Inc. May

10 TIGHT GAS - PROOF-OF-CONCEPT PROGRAM PHASES 1. RECOMPLETION FRACS (750-2,000 m DEPTH) Identify zones which are gas bearing in Mezardere that require fracs to achieve commercial rates focusing initially on areas within structural closure Up to six well re-entries with at least a single-stage frac in Mezardere: Yazir-2 frac completed: 1 st stage produced some gas with frac fluids; 2 nd stage intersected water zone; well being tied-in to clean-up well & establish productivity from 1 st stage frac Kayi-15 frac completed: recovering frac fluids and gas; well flowing naturally BTD-2 frac completed: 2.3 MMcf/d on 32/64 choke at 700 psig flowing wellhead pressure 2. DRILL & FRACS (1,500-3,000 m DEPTH) Deeper drilling on existing structures to prove up continuity of Mezardere sands Up to eight new drills with fracs 3. MULTI-STAGE FRACS IN VERTICAL WELLS 4. MULTI-STAGE FRACS IN HORIZONTAL WELLS 5. POTENTIAL PERVASIVE GAS OUTSIDE STRUCTURES AND DEEPER FORMATION TESTS 10

11 BTD-2 FRAC SUCCESS Frac Design and Results Third well in proof-of-concept frac program Single-stage frac completed on Oct 3, metre gross interval in Teslimkoy sands in Mezardere formation at depth of 980 metres Interpreted 9.0 metres net pay and 16% porosity Limited frac size to 22,000 pounds of sand proppant to contain calculated frac height within targeted gross sand interval Six hour flow test completed Stabilized post-frac rate of 2.3 MMcf/d on 32/64 choke at 700 psig flowing wellhead pressure Well already tied-in to gathering system (50 psig or less line pressure) and will be placed on production for further testing by mid-oct 11

12 AME-GYP FARM-IN - KARAKILISE LICENCES 2674 & 2677 Karakilise-1 recompletion (currently producing bopd) TPAO Kastel field EUR: 15 MMbbl Mardin Play Fairway Valeura Farm-in Lands Altinakar-1 drill well (Mardin oil discovery) Bedinan Play Fairway AME Arpatepe field (currently producing bopd) Calik Caliktepe-1 (indicated oil discovery) Source: Estimated ultimate recovery ("EUR") for Kastel field from IHS Energy Group September

13 N LICENCE 2674 BEDINAN PROSPECTS & LEADS ,265 gross acres 10+ Bedinan prospects & leads identified with new 2D seismic (tilted fault blocks) Altinakar-1 discovered heavy oil in Mardin Bedinan prospects & leads Altinakar-1 drill well (Mardin oil discovery) GDPA on Sept 18, 2011 approved 3-year extension of Licence 2674 to May 30, 2014 Plan to deepen Altinakar-1 to Bedinan subject to resolution of earning expenditures and earned interest with AME-GYP N Mardin 5 km Bedinan Time Structure - New 2D Seismic Bedinan 13

14 TURKEY INDICATIVE WELL ECONOMICS PHYSICAL PARAMETERS PER WELL PROGRAM RESERVES (1) (Bcf or Mbbl) IP (2) (MMcf/d or bbl/d) CAPEX (3) ($MM) ATAX Netback (4) ($/BOE) F&D COST (5) ($/BOE) PV 10 ATAX (6) ($MM) RECYCLE RATIO (7) Thrace Basin Gas Shallow Gas Drilling Tight Gas Drilling & Single Frac with Tie-in to existing Facilities Tight Gas Drilling & Single Frac with Tie-in and New Facilities SE Anatolia Basin Oil Bedinan Light Oil Drilling Mardin Heavy Oil Drilling (1) Assume 80 acre drainage area. (2) Initial production rate. (3) Capital cost to drill, complete and equip a well at following depths: shallow gas 1,200 metres; tight gas 2,000 metres; light and heavy oil 2,500 metres. (4) First year ATAX Netback 2011 (Revenue Royalty OPEX Tax); Thrace Basin Royalty 12.5% + 1% GORR & SE Anatolia Basin Royalty 12.5%; OPEX : Shallow gas $1.25/Mcf + $2,500/well month; tight gas - $1.50/Mcf + $4,000/ well month; light and heavy oil - $12.00/Bbl + $5,000/well month (including transportation). (5) Front end capital only. (6) Utilizing the following price decks. Natural gas: US $7.50/Mcf in 2011, escalated 2%/yr thereafter. Oil: Light Oil and Heavy Oil 10% and 15% discount to GLJ July 1, 2011 Brent price forecast, respectively. (7) First year ATAX Netback divided by F&D cost. (8) BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6.0 Mcf to 1.0 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. 14

15 TURKEY INDICATIVE BUDGET 2011 (1) DRILLING NON DRILLING TOTAL BUSINESS SEGMENT GROSS WELLS (#) NET WELLS (#) WI AMOUNT (US$MM) WI AMOUNT (US$MM) WI AMOUNT (US$MM) TBNG-PTI Acquisition Otto Acquisition Marhat/TransAtlantic Farm-in AME-GYP Farm-in (2) GRAND TOTAL TURKEY (1) These work programs include firm and contingent items and are indicative only. The actual work programs will be subject to a variety of factors, and the ability to execute the work programs will be subject to a number of risks. See Forward Looking Information discussed below. The indicative capital budget for 2011 of approximately $20 million excludes capital expenditures on the Edirne and TBNG-PTI lands prior to the closing date of these acquisitions, which amounts were included in purchase price adjustments. (2) Expenditures shown would satisfy Phase I of AME-GYP farm-in. Ultimate expenditures and associated earning subject to resolution of earning expenditures and earned interest with AME-GYP. 15

16 SUMMARY Closing of TBNG-PTI acquisition in Turkey has transformed Valeura: - Boosted estimated production to 1,630 BOE/d in 3 rd quarter Acquired an established shallow gas production & marketing business currently realizing wellhead prices of approximately US$7.00/Mcf - Increased exposure to potential significant tight gas resource play $37.1MM working capital surplus at June 30, 2011; no debt; $2.9MM undrawn credit facilities 2011/2012 work program in Turkey designed to: - Sustain the shallow gas business in the Thrace Basin with a program of workovers and drilling, supported by new 3D seismic - Prove-up the potential of the tight gas play in the Thrace Basin with proof-of-concept frac program - Fulfill exploration-focused work programs on high potential farm-in acreage in the Thrace Basin (gas) and in the Anatolian Basin (oil) Additional joint venture proposals in Turkey under active discussion Other countries in region are of interest to build portfolio (particularly oil) Graduation to TSX listing & 10:1 share consolidation completed effective Sept 15,

17 A GLOBAL ENERGY COMPANY FOCUSED ON EXCEPTIONAL VALUE CREATION BUILDING MOMENTUM IN TURKEY CANACCORD GENUITY GLOBAL ENERGY CONFERENCE OCTOBER 12, 2011 MIAMI