BONTERRA ENERGY CORP. AGM EFFICIENT SUSTAINABLE DISCIPLINED

Transcription

1 BONTERRA ENERGY CORP. AGM EFFICIENT SUSTAINABLE DISCIPLINED

2 FORWARD LOOKING INFORMATION Certain statements contained in this Presentation include statements which contain words such as anticipate, could, should, expect, seek, may, intend, likely, will, believe and similar expressions, statements relating to matters that are not historical facts, and such statements of our beliefs, intentions and expectations about development, results and events which will or may occur in the future, constitute forward-looking information within the meaning of applicable Canadian securities legislation and are based on certain assumptions and analysis made by us derived from our experience and perceptions. Forward-looking information in this Presentation includes, but is not limited to: expected cash provided by continuing operations; future capital expenditures, including the amount and nature thereof; oil and natural gas prices and demand; expansion and other development trends of the oil and gas industry; business strategy and outlook; expansion and growth of our combined business and operations; and maintenance of existing supplier and partner relationships; supply channels; accounting policies; credit risks; and other such matters. Forwardlooking information in this Presentation also includes, but is not limited to, the timing and amount of future dividend payments by Bonterra. All such forward-looking information is based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. The risks, uncertainties, and assumptions are difficult to predict and may affect operations, and may include, without limitation: foreign exchange fluctuations; equipment and labour shortages and inflationary costs; general economic conditions; industry conditions; changes in applicable environmental, taxation and other laws and regulations as well as how such laws and regulations are interpreted and enforced; the ability of oil and natural gas companies to raise capital; the effect of weather conditions on operations and facilities; the existence of operating risks; volatility of oil and natural gas prices; oil and gas product supply and demand; risks inherent in the ability to generate sufficient cash flow from operations to meet current and future obligations; increased competition; stock market volatility; opportunities available to or pursued by us; and other factors, many of which are beyond our control. The foregoing factors are not exhaustive. Actual results, performance or achievements could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits will be derived there from. Except as required by law, Bonterra disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise. The term barrels of oil equivalent (BOE) may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet per barrel (6mcf/bbl) of natural gas to barrels of oil equivalence is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All BOE conversions in the report are derived from converting gas to oil in the ratio mix of six thousand cubic feet of gas to one barrel of oil. The forward-looking information contained herein is expressly qualified by this cautionary statement. 1

3 CURRENT SNAPSHOT Common shares outstanding 33.3 mm Insider ownership 12% Current monthly dividend $0.10 per share Current annualized yield (1) 6.7% Oil and liquids weighting 71% Oil & Liquids Reserve life index (2P) 20 years Tax pools $502 mm Tax horizon Exit Net Debt $354 mm Bank Line $380mm (drawn ~$329mm at 2016 exit) Significant Oil and Liquids weighting with no hedging provides substantial torque to rising oil prices (1) Based on May 16, 2017 price of $

4 CRUDE OIL MARKET IEA suggests that in 1Q17 the oil market was almost balanced (0.1 mmb/d build) IEA 2017 oil demand growth forecasted to be 1.3 mmb/d Assuming OPEC status quo, IEA forecasts 2H-17 Demand > Supply by over 1.0 mmb/d Source: IEA Oil Market Report 3

5 SUSTAINABILITY Run Rate Production Assumption = 13,500 boepd WTI (USD) $/bbl Differential (USD) $/bbl (3.00) (3.00) (3.50) (3.50) (4.00) (4.00) Foreign Exchange $USD/CAD Quality Adjustment (CAD) $/bbl (3.25) (3.25) (3.25) (3.25) (3.25) (3.25) Edm Lt (CAD) $/bbl Capital Efficiency (1) $/boepd 17,500 19,600 20,700 20,700 20,700 22,700 Production Replacement boepd 2,705 2,705 2,705 2,705 2,705 2,705 5% Production Growth boepd Run Rate Funds Flow $mm Per Share Funds Flow (2) $/share Maintenance Capital $mm Free Funds Flow $mm % Growth Capital $mm Dividend ($0.10/month) $mm Cash Surplus $mm Sustainability Ratio 90% 82% 75% 66% 60% 58% (1) All-in Capital Efficiency is based on the budgeted 2017 capital schedule and is calculated over the calendar year. (2) Fully Diluted 4

6 5 FREE FUNDS FLOW FREE FUNDS FLOW ALLOCATION OPTIONS 1. Dividend 2017 Guidance Free Funds Flow Allocation ($91M) 2. Debt Reduction Growth $14M 3. Increase Capex 4. Buy-Back Shares Debt Reduction $37M Dividend $40M 5. Acquisitions Present focus is to allocate Cash Surplus to reduce indebtedness

7 Edmonton Light ($/bbl) DIVIDEND HISTORY Dividend EDM Light $ $0.30 $ $ Dividend ($/month) $0.20 $0.10 $ $80.00 $60.00 $40.00 Cumulative Dividends Paid Per Share ( ) : $41.28 $20.00 $- $0.00 Month Dividend is supported by a low-risk, low-decline asset base that offers high torque to oil prices 6

8 SHAREHOLDER VALUE Production per Share (boe per share) Production Profile 30% Natural Gas % Oil/NGLs ,190 13,195 12,656 12,650 Gross Production (boe per day) Oil/Liquids Natural Gas 3,179 3,194 3,655 4,042 4,218 4,346 3,118 4,994 5,628 6,322 6, % - 4.1% 8.2% 81.2% 6.4% 12.3% 12.7% 14.9% 3.0% 4.3% 10.6% 14.4% 2.4% - 1.9%

9 8 SHAREHOLDER VALUE Reserves per Share (boe per share) (Proved plus Probable) Reserves Profile (Proved plus Probable) 29% Natural Gas % Oil/NGLs 90,621 94,905 80, Gross Reserves (MBOE - Proved plus Probable year over year growth) 74,981 14,899 Proved Probable 19,711 16,529 23,870 26,476 27,321 31,241 35,824 39,371 41,149 45, % 12.9% 7.0% 66.5% 9.4% 4.6% 9.9% 14.7% 14.3% 3.2% 10.9% 21.1% 19.3% 10.9% 81.7%

10 BOE/d 9 PRODUCTION FORECAST 16,000 Vertical Base Horizontal Base 2017 Capital Program 14,000 12,000 10,000 8,000 6,000 ~20% Corporate Base Decline Rate 4,000 2,000 0 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Month Less capital is required to maintain production, contributing to free cash flow growth over time Note: 2018 Capital expenditures are not included in this chart

11 PEMBINA CARDIUM OVERVIEW Majority of Bonterra land covers areas with large original-oil-in-place, offering significant potential to increase recovery factors resulting in sizable increases in reserves and production. ORIGINAL OIL IN PLACE PER SECTION RECOVERY FACTOR 0 to 5,000 Mbbl 5,000 to 10,000 Mbbl 10,000 to 20,000 Mbbl 20,000 to 25,000 Mbbl 25,000+ Mbbl 0% 5% 10% 15% 20% 25% Pembina is the largest conventional oilfield in Canada with large oil-in-place, low recovery to date, long-term stable production, high-quality oil and attractive netbacks. 10

12 11 CONCENTRATED ASSET BASE CARDIUM LANDS Average working interest 76% Cynthia West Pembina Keystone Bonterra operates 88.5% of its total production Reserve life index (P+P) 20 years Carnwood Blue Rapids Rose Creek Reserves (P+P) 94.9 MBOE Land position 311 gross (206 net) sections Booked locations 292 gross (250 net) wells Willesden Green Total Cardium Locations 1,076 gross (760 net) wells

13 BOE/D AVERAGE BNE CARDIUM ECONOMICS BNE TYPE CURVE PREDICTABLE AND REPEATABLE Month Reserves per well (MBOE) 165 IP (1 month) (boe/d) 255 IP (12 months) (boe/d) 125 BNE TYPE CURVE PRICE AND CAPITAL SENSITIVITIES WTI (USD) $ $ $ $ $ $ $ Diff (USD) $ 2.00 $ 2.50 $ 3.50 $ 3.50 $ 3.50 $ 4.00 $ 4.50 FX $ 0.74 $ 0.74 $ 0.74 $ 0.74 $ 0.74 $ 0.74 $ 0.74 Quality (CAD) $ (3.24) $ (3.24) $ (3.24) $ (3.24) $ (3.24) $ (3.24) $ (3.24) BNE Realized Price ($/bbl) (1) $ $ $ $ $ $ $ Capital (M$C) (2) $ 1,500 $ 1,700 $ 1,900 $ 2,000 $ 2,000 $ 2,200 $ 2,200 BT Payout (Yrs) BT NPV 0 (M$C) $ 944 $ 1,830 $ 2,728 $ 3,170 $ 3,688 $ 4,442 $ 5,325 BT NPV 10 (M$C) $ 524 $ 1,100 $ 1,707 $ 1,997 $ 2,365 $ 2,834 $ 3,447 Capital Efficiency ($/boepd) $12,000 $13,600 $15,200 $16,000 $16,000 $17,600 $17,600 Recycle Ratio (1) Flat Oil & Liq. Pricing Oil and Liquid Prices are not escalated over time; Gas Forecast = Sproule 2017 Q1 (2) Drill, Complete, Equip, Tie-In 12

14 CARDIUM LOCATIONS SIGNIFICANT CARDIUM INVENTORY Total Inventory * Booked Locations 2017 Program Area Name Avg WI% Gross Net Gross Net Gross Net ROSE CREEK 97.20% KEYSTONE 94.80% CARNWOOD 88.80% WEST PEMBINA 95.00% BLUE RAPIDS 83.80% WILLESDEN GREEN % TOTAL OPERATED 93.40% TOTAL NON-OPERATED 16.40% GRAND TOTAL 70.70% * Estimates based on BNE s current internal development plan This significant inventory of identified, undrilled locations supports Bonterra s continued development for over 20 years based on the 2017 capital budget 13

15 D&C COST $MM 14 DRILLING & COMPLETION INNOVATION 3,000 Total Drill & Complete Cost Per Well 1 mile horizontal 2,500 2,000 1,500 Forecast 1, Drill Complete MONOBORE DESIGN CEMENTED COMPLETIONS SERVICE COST REDUCTIONS

16 HIGH QUALITY RESERVE BASE Grand Total Reserves 95 Million boe 10% NPV Total $1.36 billion Probable 22% Proved Undeveloped 35% Proved Developed Producing 43% Probable 23% Proved Undeveloped 23% Proved Developed Producing 54% Percent Proved to Total Reserves Proved Probable 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% BNE BNE RRX SRX CJ WCP AAV BXE GXO BNP TOG SGY SPE JOY CPG BIR PEY BTE VET YGR RMP TVE ARX KEL NVA VII TOU CR Bonterra leads the peer group with 78% of its reserves classified as Proved Bonterra s high Proved to Total Reserve Ratio is related to its Cardium assets repeatability and predictability Source: CanOils. Peer Group Includes: AAV, ARX, BIR, BNP, BTE, BXE, CJ, CPG, CR, GXO, JOY, KEL, NVA, PEY, RMP, RRX, SGY, SPE, SRX, TOG, TOU, TVE, VET, VII, WCP, YGR 15

17 $/boe 16 LOW-COST RESERVE ADDITIONS IMPROVING CAPITAL EFFICIENCIES FD&A Costs per BOE, Incl. FDC 1P FD&A 2P FD&A $ Year over Year, Bonterra is more efficient at replacing its reserve base $ $ % reduction in 1P FD&A from 2014 to 2016 $ % reduction in 2P FD&A from 2014 to 2016 $5.00 $

18 $/BOE COMMITMENT TO COST CONTROL DECLINING ALL-IN COSTS PER BOE $30.00 $27.01 All-In costs less than $20.00 per boe $25.00 $25.24 $25.21 $20.00 $19.00 $ % reduction in All-In costs from 2012 to 2016 $ % reduction in Operating Costs from 2012 to 2016 $10.00 $ % reduction in General & Administration costs from 2012 to 2016 $ Royalties Operating Costs General & Administration Total Interest Expense 17

19 CARNWOOD AREA Drilled Potential Drilling locations Sections: 41 gross (37 net); Locations (6 to 8 wells per section): ~206 gross (190 net) 18

20 PEMBINA CARDIUM DEVELOPMENT R6W5 CONVENTIONAL VERTICAL DEVELOPMENT Estimated ultimate oil recovery: 196,000 Bbl Recovery factor: ~4% HORIZONTAL DEVELOPMENT: PRIMARY DEPLETION Estimated horizontal ultimate oil recovery: 264,000 Bbl (~90 Mbbl/ hz well) T48 T48 Recovery factor: ~9% (including verticals) Number of wells per section on primary is dictated by quality of the reservoir. SECONDARY AND ENHANCED RECOVERY UPSIDE Possible Recovery factor: 20+% Number of wells on secondary recovery is dictated by number of injectors required Horizontal waterflood pilot commenced in 2014 Horizontal Waterflood Pilot: 102/ W5/0 Estimated Original Oil in Place: 5,260,000 Bbl 19

21 BOPD 20 PEMBINA CARDIUM DEVELOPMENT HORIZONTAL WATERFLOOD PILOT Primary vs. Waterflood 1000 Horizontal Production Horizontal Primary Horizontal Waterflood Start of injection 100 Based on production and numerical reservoir simulation RF = 15% 10 RF = 9% 1 Recovery Factor = 3.2% 6% Recovery Factor increase equates to an additional 337 Mbbl of recoverable oil from waterflood

22 FOCUS ON FUNDAMENTALS SUSTAINABLE YIELD Low Corporate Decline ~20% Corporate Base Decline Rate Low Cost Producer All-in costs (royalties, operating costs, G&A, and interest expense) of less than $20 per boe (US$15 per boe) DISCIPLINED GROWTH Concentrated Asset Base Significant Low Risk Drilling Inventory Established and Controlled Infrastructure Light Oil focused. Pembina and Willesden Green Areas account for 97% of Bonterra s production Total Cardium locations 1,076 gross (760 net) wells Booked locations 292 gross (250 net) wells Minimal facility capital required to scale up production Bonterra operates 88.5% of its production FOCUS ON BALANCE SHEET Free Cash Flow Generation The Company is targeting to reduce its Debt to Funds Flow ratio 21