INVESTOR UPDATE SEPTEMBER 2017

Transcription

1 A SUSTAINABLE FREE CASH FLOW BUSINESS INVESTOR UPDATE SEPTEMBER 2017 TSX: PNE

2 CAUTIONARY STATEMENTS 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. In particular, this presentation contains statements regarding: the potential growth opportunities and benefits on Pine Cliff Energy Ltd. s ( Pine Cliff of the Company ) assets; information regarding Pine Cliff on a pro forma basis; expected decline rates; the strategy of the Company and the ability of the Company to execute on this strategy; expected cash/funds flow provided by operations; future returns on share price; future capital expenditures, including the amount, timing and nature thereof; oil and natural gas prices and demand; cash flow / funds flow leverage to natural gas prices; corporate netbacks and break even price and its ability to provide protection from volatile commodity prices; expected operating expenses, royalty rates, general and administrative expenses and interest expenses; expected free cash flow (defined herein); expected maintenance capital (defined herein); expansion and other development trends of the oil and gas industry; reserve and resource volumes; estimated ultimate recoveries ( EUR ); estimated capital per well; business strategy and outlook; expansion and growth of the business and operations; maintenance of existing customer, supplier and partner relationships; future acquisition opportunities including the amount, timing, success and nature thereof; the ability of the Company to raise capital; the ability of the Company to deliver cash flow back to shareholders; the ability of the Company to grow production, repay debt, repurchase shares; supply channels; accounting policies; credit risks; availability and number of drilling or recompletion locations, including the timing and success thereof; expected internal rates of return (defined herein); expected IP365 (defined herein); the potential growth opportunities on the assets; change in Pine Cliff s LLR; timing of asset retirement obligations; the 2017 production guidance; the 2017 capital guidance, including the allocation of the capital budget; and other such matters. As such, many factors could cause the performance or achievement of Pine Cliff to be materially different from any future results, performance or achievements that may be expressed or implied by such forwardlooking statements. Because of the risks, uncertainties and assumptions contained herein, readers should not place undue reliance on these forward-looking statements. Any data, graphs or information in this presentation compiled by a third party has been credited to that third party and Pine Cliff does not take responsibility for the accuracy of such information. In addition, statements relating to "reserves" are by their nature forward-looking information, as they involve the implied assessment, based on certain estimates and assumptions that the reserves described can be profitably produced in the future. The recovery and reserves estimates provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Pine Cliff cautions that its future oil, natural gas and natural gas liquids production, revenues, cash flows, liquidity, plans for future operations, expenses, outlook for oil and natural gas prices, timing and amount of future capital expenditures, and other forward-looking information is subject to all of the risks and uncertainties normally incident to the exploration for and development and production and sale of oil and gas. 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 therefrom. Except as required by law, Pine Cliff 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 annual audit of our consolidated financial statements is not yet complete and accordingly all financial and production amounts represent management's estimates which are unaudited and subject to revision. The forward-looking information contained herein is expressly qualified by this cautionary statement. This presentation contains the term barrels of oil equivalent ( boe ) which has been calculated on the basis of six thousand cubic feet equivalent ( mcfe ) of gas to one barrel of oil. This conversion ratio is based on energy equivalence primarily at the burner tip and does not represent a value equivalency at the wellhead. The term boe may be misleading, particularly if used in isolation. This presentation contains a number of oil and gas metrics, including free cash flow, maintenance capital, initial production rates for the first 365 days ( IP365 ) and the first 90 days ( IP90 ), capital efficiencies and internal rate of return ( IRR ) which do not have standardized meanings or standard methods of calculation and many not be comparable to similar measures used by other companies. Such metrics have been included herein to provide readers with additional measures to evaluate the Company. Expected free cash flow is estimated funds flow from operations less maintenance capital and facility and plant turnaround capital. Maintenance capital is the estimated capital required to hold production flat. IRR is calculated by taking expected capital costs to drill, complete, equip and tie-in wells against future net revenue and management estimates of operating costs, royalties, production rates and reserves. IP365 is the expected initial production rates for the first 365 days of production of a well and IP90 is the initial production rates for the first 90 days of production of a well. Capital efficiencies are calculated by dividing the IP90 production rates by the capital cost. -1-

3 CAUTIONARY STATEMENTS Undeveloped locations consist of drilling and recompletion locations booked in the independent reserve report dated February 13, 2017 prepared by McDaniel & Associates Consultants Limited (the 2016 Reserve Report ) and unbooked drilling and recompletion locations. Booked locations are proposed proved and probable locations identified in the 2016 Reserve Report. Unbooked drilling and recompletion locations are internal estimates based on an evaluation of geology, volumetrics and analogs evaluation of geologic, reserves and spacing based on industry practice. Pine Cliff has identified 1,334 gross (860 net) undeveloped locations of which 10 gross (2.6 net) are proved drilling locations, 84 gross (76.3 net) are probable drilling locations, 2 gross (1 net) are proved recompletions and 1,238 gross (780.0 net) are unbooked drilling and recompletion locations. There is no guarantee that Pine Cliff will drill any or all of the undrilled locations and there is no certainty that the drilling of these locations will result in additional reserves or production or achieve expected rates of return. Pine Cliff s drilling activity depends on availability of capital, regulatory approvals, commodity prices, drilling costs and other factors. As such, Pine Cliff s actual drilling activities may materially differ from those presently identified, which could adversely affect Pine Cliff s business. This presentation uses the terms funds flow from operations, operating netbacks, corporate netbacks and net debt which are not recognized under IFRS and may not be comparable to similar measures presented by other companies. The Company uses these measures to evaluate its performance, leverage and liquidity. Funds flow from operations is a non-ifrs measure that represents the total of funds provided by operating activities, before adjusting for changes in non-cash working capital, and decommissioning obligations settled. Net debt is a non-ifrs measure calculated as the sum of bank debt, subordinated promissory notes at the principal amount, amounts due to related party, and trade and other payables less trade and other receivables, cash, prepaid expenses and deposits, commodity contracts and investments. Operating netback is a non-ifrs measure calculated as the Company s total revenue, less operating expenses, divided by the boe production of the Company. Corporate netback is a non-ifrs measure calculated as the Company s operating netback, less general and administrative expenses, interest and bank charges plus finance and dividend income, divided by the boe production of the Company. -2-

4 CORPORATE PROFILE A UNIQUE SUSTAINABLE FREE CASH FLOW MODEL Listing Market Capitalization (1) Average Daily Volume (2) TSX: PNE $206 MM 0.7 MM 52-Week Trading Range $0.65 to $1.22 Shares Issued (3) Directors and Officers Ownership - Basic - Fully Diluted MM 10.3% 12.7% 2017 Production Guidance - % natural gas 2017 Capital Expenditure Guidance Corporate Base Production Decline 10% Bank Debt (4) Other Debt (5) Reserves (PDP/2P) (6) Tax Pools (7) 21,250 21,750 boe/d 94% $17.0 MM $10.7 MM $41 MM 53.8/70.9 mmboe ~$394 MM (1) Reflects September 26, 2017 closing price of $0.67 per share (2) Average daily trading volumes for September 26, 2016 to September 26, 2017 (3) As of June 30, In addition, as of June 30, 2017 there were 23.3 MM stock options issued (7.6% of outstanding shares) and 4.5 MM common share purchase warrants issued (4) As of June 30, 2017 and excludes working capital accounts and investments. Bank line of $45 million: $35 MM revolving syndicated credit facility and $10 MM operating facility as of April 12, 2017, interest at prime plus 1.0% to 3.5% or the bankers acceptance rate plus 2.0% to 4.5% based on the trailing 12 months debt to EBITDA (5) As of June 30, 2017: $11 MM of insider subordinated debt that matures on July 29, 2018 and bears interest at 0.25% less than the monthly average interest rate paid to the banking syndicate and $30 MM in promissory notes to Alberta Investment Management Company ( AIMCo ) that mature on September 30, 2020 and bear interest at 6.75% annually (6) Based on an independent reserve report prepared by McDaniel & Associates Consultants Limited dated February 13, 2017 (7) As of June 30,

5 FOCUS ON PER SHARE VALUE CREATION Predictable Free Cash Flow Model Low decline, low cost and low capital efficiencies form the foundation for a sustainable free cash flow model, even at lower commodity prices FINANCIAL FLEXIBILITY Significant Insider Ownership Interests aligned with shareholders to build per share value Access to Capital Six financings completed since Nov. 2012, the most recent being the AIMCo and insider debt in Q CAPITAL DISCIPLINE INCREASING VALUE PER SHARE PRUDENT GROWTH Disciplined Growth Track Record Decades of transaction execution experience has guided the team through nine acquisitions and growth from 100 boe/d to over 21,000 boe/d EXPERIENCED MANAGEMENT TEAM -4-

6 A UNIQUE, COUNTER-CYCLICAL STRATEGY BUILDING A FREE CASH FLOW MODEL IN A VOLATILE COMMODITY PRICE ENVIRONMENT PNE has been uniquely focused on a low-risk, natural gas asset consolidation strategy in Western Canada with nine accretive acquisitions since 2012 (see Appendix for acquisition metrics) Weaker commodity prices have reduced industry cash flow and stimulated non-core asset sales to fund debt repayment, capital expenditures and dividends Capital markets are rewarding companies for strong balance sheets and focused asset portfolios; sales of non-core properties expected to continue Being a low cost operator with a strong balance sheet provides protection from volatile commodity prices and flexibility for acquisitions Ultimate goal is to deliver sustainable cash flow back to shareholders Pine Cliff provides shareholders with exposure to natural gas prices while delivering cash flow to generate long-term shareholder value -5-

7 WHAT WE HAVE BUILT THREE MAJOR OPERATED CORE AREAS 2017 Production Guidance of 21,250 21,750 boe/d Weighted 94% towards natural gas One of the Lowest Decline Rates in the Sector Corporate decline rate on base production of 10% High Working Interest and Operatorship Production is 85% operated 80% average working interest on land Extensive Land Position 2.3 MM gross acres (1.8 MM net acres) Significant Undrilled or Recompletion Locations Internally estimated at over 800 gross locations, economic at less than $3.00/mcf AECO Significant Operated Infrastructure Includes export pipelines to the U.S. Pacific Northwest and to Saskatchewan See Appendix for further details on Core Areas and for details on undrilled and recompletion locations -6-

8 CENTRAL ALBERTA ACQUISITION UPDATE PNE S LARGEST ACQUISITION TO DATE PNE s last significant acquisition closed in December 2015 where PNE acquired its Central Alberta core area in the Viking, Camrose and Ghost Pine areas 11,730 boe/day (as of July 1, 2015 effective date) Acquisition was strategic and material to PNE in multiple ways including: Corporate production nearly doubled Development inventory increased significantly Since assuming control PNE has achieved a significant reduction in decline rate and operating expenses on the assets Annual Decline 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Production Decline (1) Operating Expenses (1) 12.0% Before PNE 32.5% Reduction $12.00 $ % 2016 w/pne Operating Expenses ($/boe) $ % Reduction $10.00 $8.96 $8.00 $6.00 $4.00 $2.00 $0.00 Before PNE 2016 w/pne (1) Represents decline rates and operating expenses of the Central Alberta area as estimated by PNE prior to the acquisition. The 2016 w/ PNE are actual results but exclude the assets that were disposed of in

9 2017 CAPITAL PROGRAM CONSERVATIVE CAPITAL SPENDING TO REPLACE PRODUCTION DECLINE 2017 Capital Budget Allocation ($MM) Major Maintenance $3.3 Facility and other $1.7 Viking Recompletions Ghost Pine $1.1 Recompletions $1.3 Viking Colorado Drilling $2.8 Edson Drilling $ capital guidance of $17.0 MM 29 gross (26.3 net) recompletions completed YTD for $1.1MM net capital spend Participated in 1.1 net wells in Edson Area which have added 450 boe/day of production YTD for $4.8mm net capital spend Four Viking Area Colorado Shale wells are licenced and drill ready; waiting on final investment decision 2017 production guidance remains at 21,250 to 21,750 boe/day -8-

10 RECOMPLETION PROGRAMS UPDATE Net Raw PNE Production* boe/day 2,000 1,750 1,500 1,250 1, Recompletion Uplift Camrose/Viking Q3, 2017 Ghost Pine Q2, 2017 Ghost Pine Q4, 2016 Ghost Pine Reactivations *Production is a 30 day rolling average for all areas except Camrose Q3, 2017 which is a 5 day rolling average since Camrose/Viking recompletion production only started in August, 2017 Total Wells Wellcount Previous Standing Previous Producing Net Capital Cost IP 120 Capital Efficiency Based on IP 120 Ghost Pine Reactivations $100, boe/day $1,000/boe/d Ghost Pine Q4, $950, boe/day $4,320/boe/d Ghost Pine Q2, $450, boe/day $2,500/boe/d Camrose/Viking, Q3, $650,000 1,250 boe/day** $520/boe/d Total $2,150,000 1,750 boe/day $1,225/boe/d **Camrose/Viking Q3, 2017 are 15 day IP since they only started producing in August,

11 LOW DECLINE + LOW COST = PREDICTABLE ASSETS PREDICTABLE ASSET BASE IS THE FOUNDATION OF THE PNE MODEL 50% Decline 45% Corporate Decline Rate [%] 40% 35% 30% 25% 20% 15% 10% 5% Average: 28% With one of the lowest production declines in the industry, low overhead and low operating expenses, PNE is well positioned to generate free cash flow 0% RRX TOU DEE RMP PEY PMT POU VII BXE NVA BTE CR KEL SPE ATH AAV ECA TET CPG BNE VET BIR ERF PWT ARX TOG PPY SGY NBZ HSE PXX CNQ WCP PGF EGL PNE CVE G&A ($/boe) $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 Source: Scotiabank Statsbook June 2016 Note: ATH, CNQ, CVE, and HSE are Canadian production only and exclude oil sands production G&A per boe Opex ($/boe) $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $ Opex (incl. transport) per boe Source: Canaccord Genuity Corp., March 2017 Source: Canaccord Genuity Corp., March

12 FREE CASH FLOW IS THE FOCUS OF THE PNE MODEL SUSTAINABLE FREE CASH FLOW = SUSTAINABLE BUSINESS 2017 FCF/ Market cap (%) 14% 12% 10% 8% 6% 4% 2% 0% Relative Sustainability 2017 FCF/Market cap 2017 D/CF 3.5x 3.0x 2.5x 2.0x 1.5x 1.0x 0.5x 0.0x 2017E D/CF Of 49 companies analyzed in the industry, PNE currently generates the strongest free cash flow yield, while maintaining one of the lowest debt to cash flow ratios Source: Canaccord Genuity Corp., August 10, 2017 Annual free cash flow ($MM) 60 Free Cash Flow Yield (1) Free cash flow yield (2) 25% % 15% 10% 5% PNE Stock Price $0.75 $0.90 $1.05 $1.25 With its strong sensitivity to natural gas prices and low cash flow break even point, PNE generates a compelling free cash flow yield at current and higher share prices - $2.25 $2.50 $2.75 $3.00 $3.25 $3.50 AECO ($/Mcf) 0% (1) Free cash flow is estimated based on estimated cash flow from operations less the $17.0 million capital expenditures for 2017 and estimated abandonment expenditures, refer to slide 12 for cash flow assumptions (2) Free cash flow yield is calculated as the free cash flow per outstanding basic share divided by the stock price -11-

13 LOW CORPORATE BREAK EVEN KEY TO PNE CASH FLOW BUILT FOR SUSTAINABILITY IN A VOLATILE COMMODITY PRICE ENVIRONMENT At $1.70/mcf, PNE has one of the lowest all-in corporate break even gas prices in the industry (1) 82% of PNE s production has positive cash flow at the field level at $1.50/mcf and 95% of PNE s production has positive cash flow at the field level at $2.00/mcf Break Even Analysis (1) $/mcfe Gas Price ($/mcf) $ 1.50 $ 1.70 $ 2.00 $ 2.50 $ 3.00 $ 3.50 Royalties (2) 9% (0.14) (0.15) (0.18) (0.23) (0.27) (0.32) Operating Costs (2) $9.40/boe (1.57) (1.57) (1.57) (1.57) (1.57) (1.57) Field Netback (0.21) (0.02) Oil & NGL Contribution (WTI US$48/bbl) (3) G&A, Interest and Dividends (4) $1.50/boe (0.25) (0.25) (0.25) (0.25) (0.25) (0.25) Corporate Netback (0.19) Corporate Netback ($/boe) (1.14) Annual Cash Flow ($mm) (5) (8.4) Per Basic Share (0.03) (1) Before capital expenditures (2) 2017 guidance as disclosed in the June, Management s Discussion and Analysis (3) Using US$48//bbl WTI, 1.27 US$/C$, adjusted for PNE estimated differentials and weighting for oil and NGLs every US$5/bbl movement in WTI changes the break even gas price by ~$0.03/mcf (4) 2017 guidance as disclosed in the June 30, 2017 Management s Discussion and Analysis and internal estimates (5) Using the mid point of the 2017 production guidance -12-

14 CAPITAL ALLOCATION OPTIONS FOR 2017 PNE 2017 FOCUS ON OPTIMAL ALLOCATION OF FREE CASH FLOW Debt Repayment Free Cash Flow Acquisitions Internal Production Growth Dividend/Share Repurchases -13-

15 NATURAL GAS OUTLOOK - SUPPLY Marketed U.S. Natural Gas Production U.S. Natural Gas End-of March Working Inventories U.S. Natural gas supply growth declined in 2016 for the first time in 15 years Bcf/d $/Mmbtu North Dakota West Virginia Ohio Louisiana Oklahoma Pennsylvania Texas Rest Of United States Bcf 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Start of winter Total withdrawals End of winter Despite record back-to-back warm winters, winter storage exited 2016 almost 500 Bcf less than the prior year Henry Hub Monthly Average ($US/mmbtu) Source: EIA (August 2017) Source: EIA Natural Gas Weekly Update (April 13, 2017) U.S. Natural Gas Supply Growth U.S. Natural Gas Rig Count Difficult to incent natural gas supply growth without an increase in natural gas prices bcf/d 100 Forecast Source: FirstEnergy Capital Corp., U.S. DOE/EIA (July 2017) August 2, 2017 Operating natural gas drilling rigs in the U.S. are still at historic lows, despite Henry Hub natural gas price recovery hovering around U.S.$3.00 per MMBtu -14-

16 NATURAL GAS OUTLOOK - DEMAND U.S. Annual LNG Export Capacity (Year End) Alberta Natural Gas Demand Committed LNG export capacity forecast to rise over seven bcf/d by 2018 and over 10 bcf/d by the end of Forecast Corpus Christi T1&2 Sabine Pass T5&6 Elba Island T7-T10 Cameron T3 Elba Island T1-T6 Cameron T1&2 Freeport T1&2 Cove Point T1 Sabine Pass T3&4 Sabine Pass T1&2 bcf/d TA Conversions AER Power Oilsands Other Sectors Forecast Alberta natural gas demand is forecast to increase by 1.7 bcf/d by 2023 Source GMP FirstEnergy, HIS, U.S. DOE/EIA (July 2017) U.S. Net Exports of Natural Gas to Mexico Source GMP FirstEnergy, AER (May 2017) U.S. Gas Demand Growth + Exports bcf/d Mexico exports are now exceeding four bcf/d bcf/d Forecast Mexico Exports Forecast LNG Exports Domestic Demand Demand for natural gas continues to accelerate in North America, with LNG exports leading the way Source: GMP FirstEnergy, U.S. DOE/EIA (July 2017) Source: GMP FirstEnergy, US DOE/EIA (July 2017) -15-

17 HIGHLY LEVERAGED TO NAT GAS PRICING ONE OF THE STRONGEST EXPOSURES TO NATURAL GAS PRICES IN THE INDUSTRY Every $0.10 per mcf increase in AECO adds approximately $4.1 million to PNE funds flow annually (or approximately $0.013 per basic share) (1) 120% 2018E CFPS Estimate Sensitivities to WTI and AECO Price Changes 2018E CFPS Sensitivity to C$0.50/mcf change to NYMEX 100% 80% 60% PNE 40% PONY BXE BIR LXE 20% PEY CR ECA CNE NVA RMP ERF GTE JOY YGR TVE WCP MQX PSK FRU BNE VET IPO CNQ RRX CVE TOG CPG BTE IMO SGY TGL 0% HSE 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 2018E CFPS Sensitivity to US$10/bbl change to WTI PXT Source: Canaccord Genuity Corp., May 2017 (1) Using Q reported production, annualized for twelve months -16-

18 DEMONSTRATED PER SHARE VALUE GROWTH Production (boe/d) Reserves (Mboe) (1) Daily Production (BOE/D) 25,000 20,000 15,000 10,000 5, BOE/D per million shares 66% Production per basic share CAGR (1) from (2) 4,775 7,888 12,854 22, Daily Production per million shares Reserves (MBOE) 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000-74% CAGR P+P Reserves per basic share (2) PDP Total Proved P+P PDP/mm shares Proved/mm shares P+P/mm shares 300, , , , ,000 50,000 - BOE per million shares Funds Flow From Operaitons Funds Flow From Operations ($000s) $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 AECO ($/mcf) $2,401 $3,721 $3,014 $5,564 $10,089 $9,180 $8,104 $11,615 $6,182 $5,555 $7,507 $6,550 $1,398 -$3,655 $6,972 $11,233 $10,834 $0 $1.00 ($2,000) $15,026 $6.00 $5.00 $4.00 $3.00 $2.00 AECO ($/mcf) 350, , , , , ,000 50,000 0 NPV 10% ($000 s) (1) PDP Total Proved Total P+P 71% CAGR P+P NPV 10% (2) ($4,000) (1) Definitions: PDP proved developed producing, P+P proved and probable, NPV10% - net present value of future net revenue discounted at 10%, CAGR compounded annual growth rate (2) From December 31, 2012 to December 31, 2016 $

19 COMPELLING VALUATION THE KEY TO VALUING THE BUSINESS MODEL IS THE ABILITY TO GENERATE FREE CASH FLOW PNE generates one of the highest free cash flow yields (1) in the industry with one of the lowest debt to cash flow ratios PNE s valuation is attractive from a PDP reserves perspective BXE BTE EV/ 2016 PDP Reserves (2) 2017 D/CF PONY RMP CR PGF CJ BNE OBE JOY PEY BIR CPG YGR SGY GXE PSK IPO WCP TOG NVA RRX ERF PNE EV/PDP ($/boe) % -30% -20% -10% 0% 10% 2017 free cash flow yield 20% 30% 40% PXX JOY CJ GXE NVA OBE IPO YGR RMP PNE PONY CR PEY CPG BNE LXE TOG WCP SGY RRX 0 RRX VII VET KEL TOG ARX WCP NVA CPG BNE TOU SGY TVE PEY TET ERF CR CJ PONY RMP PGF BIR BNP BXE JOY PNE Source: Canaccord Genuity Corp., August 2017 (1) 2017 FCF is based on Canaccord Genuity Corp. estimates and includes Canaccord estimated capital expenditures for FCF yield is FCF/market capitalization. Source: Canaccord Genuity Corp., August 2017 (2) Consensus numbers used for unconvered companies, Canaccord Genuity Corp. estimates for covered companies -18-

20 WHY INVEST IN PINE CLIFF Long life predictable natural gas assets with industry leading operating costs and decline rate create one of the lowest free cash flow break even points Strong balance sheet to manage volatility in natural gas prices and capitalize on acquisition opportunities Executing on a vision to assemble an asset base to deliver sustainable cash flow back to its shareholders One of the strongest per share sensitivities to natural gas price improvements Significant management team and board stock ownership creates strong alignment with shareholder interests -19-

21 APPENDIX -20-

22 BUILDING A FAMILIAR MODEL A CLEAR VISION FOR LONG-TERM GROWTH WITH PROVEN EXPERIENCE Pine Cliff management has a long-term view of value creation, with a counter-cyclical focus to acquire natural gas assets that are non-core to their owners at good valuations Similar to Bonterra s origin with oil assets in 1998 Despite natural gas pricing fluctuations in the past four years, our approach to acquiring assets has remained disciplined and consistent Pine Cliff s Chairman and largest shareholder, George Fink, served the same roles with both Bonterra Energy and Comaplex Minerals Three out of five of Pine Cliff s board of directors also served on the boards and management teams of Bonterra and Comaplex Bonterra (TSX: BNE) has gone from $0.20 per share in 1998 to $16.90 per share on September 26, 2017, while paying over $37.00 of dividends per share. A $20,000 investment in 1998 would equate to almost $5.3 million today (including dividends and share appreciation) Comaplex went from $0.60 per share in 1994 to $10.32 per share in 2010 when it was sold Share Price Pine Cliff Return (1) Combined Share Price Cum Dividend Bonterra Return $54.58 Share Price Comaplex Return $10.32 $0.67 $37.68 $ (1) Pine Cliff return is presented since the change in strategic focus of the company and management appointment on December 21, 2011 Note: The Pine Cliff and Bonterra share prices are to closing on September 26, $16.90 $

23 AN ACTIVE FIVE YEARS OF ACQUISITIONS TRANSACTION RECORD SINCE JANUARY 2012 $488,000,000 $448,000,000 $408,000,000 $368,000,000 Market Cap Share Price $2.70 $2.20 $328,000, $288,000,000 $1.70 $248,000,000 $208,000,000 $168,000, $1.20 $128,000,000 $88,000,000 $0.70 $48,000,000 $8,000,000 $ Dec 21/11 - Phil Hodge appointed President and CEO, George Fink appointed Chairman and announced $2.9MM rights offering and private placement 2. Feb 10/12 announced $23.5MM Carrot Creek/Edson acquisition 3. Aug 23/12- announced acquisition of Geomark Exploration Ltd. 4. Nov 20/12 announced purchase of debt and security of Scope Energy and $5.4MM private placement at $0.70/share 5. May 27/13 announced $34MM acquisition of additional 52% working interest in the Monogram Unit 6. June 4/13 announced $25MM common share offering at $0.88/share 7. July 17/13 announced $13.3MM acquisition of additional Southern Alberta assets and operatorship 8. Oct 2/13 announced $20.0MM common share offering at $1.10/sh 9. July 17/14 announced $100MM Southern Alberta/Saskatchewan asset acquisition 10. July 29/14 announced $33.3MM Carrot Creek/Edson asset acquisition 11. Sept 2/14 announced $60.1MM equity offering at $2.05/sh 12. April 20/15 announced $14.1MM acquisition of additional assets in Edson 13. Nov 9/15 announced $185MM acquisition of new core area in Central AB and $72MM common share offering at $1.08/sh 14. Aug 10/16 issued $30MM promissory note and 4.5MM share purchase warrants at $1.38/sh to AIMCo and $11MM in promissory notes to insiders (July 29, 2016) -22-

24 HISTORY OF ACCRETIVE ACQUISITIONS ACQUISITION METRICS REFLECT DISCIPLINED VALUE FOCUSED STRATEGY Transaction Metrics (1) Announcement Transaction Value Production P+P Reserves Flowing Barrel P+P Reserves P+P Reserves Transaction Date ($million) (boe/d) (mmboe) ($/boe/d) ($/boe) ($/mcfe) Central AB Assets Acquisition 9-Nov-15 $ , $15,772 $2.35 $0.39 Carrot Creek/Edson and Southern AB Asset Acquisition Carrot Creek/Edson Asset Acquisition Southern AB & SK Asset Acquisition Southern AB & SK Asset Acquisition 20-Apr-15 $14.1 1, $13,699 $2.93 $ Jul-14 $ $34,278 $8.31 $ Jul-14 $ , $18,868 $6.45 $ Jul-13 $ $15,588 $5.62 $0.94 Monogram Unit WI Acquisition 27-May-13 $33.7 1, $21,063 $4.39 $0.73 Skope Energy Inc. Acquisition 20-Nov-12 $28.0 3, $8,000 $2.98 $0.50 Carrot Creek/Edson Asset Acquisition 10-Feb-12 $ $24,737 $7.58 $1.26 $16,614 $3.43 $ to 22,000 boe/d boe/d in 5 years (1) Transaction metrics are calculated as of the acquisition announcement date -23-

25 2016 FOCUS - REBUILDING FINANCIAL FLEXIBILITY In less than six months and without equity dilution, PNE paid down $125 MM in bank debt, reducing it to $30.9 MM at December 31, 2016 from $155.9 MM a year earlier In the first half of 2017, PNE paid down another $20.2 MM in bank debt, further reducing it to 10.7 MM at June 30, 2017 $125 Million ($MM) Bank Debt, December 31, 2015 $155.9 Royalty Asset Disposition ($24.7) Oil Asset Dispositions ($32.0) AIMCo Debt Financing (September 30, 2020) ($30.0) Insider Debt Financing (July 29, 2018) ($11.0) Sale of Investments ($5.6) Excess Funds From Operations (1) ($21.7) Bank Debt, December 31, 2016 (2) $30.9 Net Debt, December 31, 2016 $64.2 (1) Excess funds from operations includes funds flow from operations, capital expenditures and changes in non-cash working capital accounts (2) In addition to the bank debt, at December 31, 2016 and June 30, 2017, PNE had $11 MM of insider subordinated debt that matures on July 29, 2018 and a $30 MM promissory note to AIMCo that matures on September 30,

26 RESERVE REPORT (1) Summary of Remaining Oil and Gas Reserves as of December 31, 2016 Reserve Category: Proved Light and Medium Oil Gross (Mbbl) Natural Gas (Nonassociated, associated and coal bed methane) Natural Gas Liquids Total Oil Equivalent NPV 10% Developed Producing , , , ,462.4 Developed Non-Producing Undeveloped , , ,648.1 Total Proved , , , ,572.4 Probable , , ,359.3 Total Proved plus Probable , , , ,931.7 Gross (MMcf) Gross (Mbbl) Gross (Mboe) ($MM) By Classification By Category 5% 1% 2% 24% 74% PDP PDN/PUD Probable Natural Gas NGLs Oil 94% (1) Based on an independent reserve report prepared by McDaniel & Associates Consultants Limited. Please read in conjunction with Pine Cliff s press release dated February 13, 2017, which can be found on and is subject to the same cautionary statements as set out therein -25-

27 FUTURE DRILLING OPPORTUNITIES EXTENSIVE INVENTORY OF LOCATIONS TO SUPPLY LONG TERM MODEL # Gross Locations 1,600 1,400 1,200 1, Gross Undrilled Locations (1) 1, <$2.25/mcf AECO <$3.00/mcf AECO <$3.50/mcf AECO <$4.50/mcf AECO Summary of Undrilled Locations (1) Approximately 62% of PNE s undrilled locations are economic at lower than $3.00/Mcf AECO (1) PNE currently has over 900 gross drilling and recompletion locations, economic at less than $3.50/mcf (1) Five years of maintaining production uses only 34% of PNE s estimated drilling and recompletion locations Total Locations (1) Booked Locations (1) Total Capital per Gross Net Gross Net well ($000's) (2) EUR (mboe) (1) Carrot Creek Ellerslie (100 bbl/mmcf) , Pine Creek/McLeod Ellerslie (10 bbl/mmcf) , Pine Creek Bluesky , Recompletions (Viking, Mannville, Belly River, CBM) Viking Colorado Three Hills Creek CBM - Crow n Three Hills Creek CBM - Freehold Willrich , Carrot Creek Rock Creek , Ghost Pine - Crow n Total 1, (1) As at December 31, Undrilled locations pricing cutoffs assume a 10% internal rate of return ( IRR ) using an oil price of US$45.00/bbl and an exchange rate of and PNE estimated differentials for oil and NGLs. (2) Capital per well is based on internal estimates using current cost assumptions -26-

28 CENTRAL ASSETS AREA OVERVIEW PINE CLIFF S NEWEST AND LARGEST CORE AREA ACQUIRED DECEMBER 2015 Gas weighted, low decline assets in the Ghost Pine and Viking areas of Central Alberta Q production of 9,664 boe/d (95% natural gas), 46% of Pine Cliff s production Ownership in key strategic infrastructure, including four gas plants with third party revenue Significant drilling and recompletion inventory in the Horseshoe Canyon Coal Bed Methane infill drilling plus potential for conventional Ghost Pine Viking Natural gas weighting 92% 98% Net working interest acres 244, ,722 % Operated 65% 85% -27-

29 SOUTHERN ASSETS AREA OVERVIEW LOW DECLINE, LOW COST PRODUCTION Q production of 9,095 boe/d (mostly natural gas), 43% of Pine Cliff s production 100% ownership of NEB regulated pipelines delivering gas to Montana and Saskatchewan Gas sales into Saskatchewan at a premium to AECO pricing. Multi-zone area with production from Cretaceous Milk River, Medicine Hat and Second White Specks Extensive land position of over 1,000,000 gross acres (800,000 net acres) with recompletion and infill drilling upside High 82% Working Interest -28-

30 EDSON AREA OVERVIEW PINE CLIFF S FIRST CORE AREA, ACQUIRED IN Q Q production of 2,318 boe/d (74% natural gas), 11% of Pine Cliff s production Drilled six gross (1.1 net) wells in in the first half of 2017 Over 30 net, high quality locations targeting the Wilrich, Bluesky, Ellerslie and Rock Creek High ownership in key pipelines and facilities Source of third party fee revenue 42% working interest, production is 43% operated 30 High Quality Net Locations -29-

31 HIGH QUALITY EDSON AREA LOCATIONS MULTI ZONE, LIQUIDS RICH LOCATIONS (1) Attractive and predictable high liquids yield production 91 gross (32.4 net) multi-zone undrilled locations of which 22 gross (6.9 net) are booked locations at December 31, 2016 Carrot Creek Ellerslie locations are expected to generate IRRs of approximately 50% (IP365 approximately 300 boe/d and approximately 105 bbl/mmcf C5+) Pine Creek Ellerslie locations are expected to generate IRRs of approximately 70% (IP365 approximately 500 boe/d and approximately 15 bbl/mmcf C5+) Pine Creek Bluesky locations are expected to generate IRRs of approximately 50% (IP 365 approximately 350 boe/d and approximately 25 bbl/mmcf C5+) Large operated infrastructure Ability to align firm service transportation with production (1) IRRs are estimated using a $3.00/mcf gas price, an oil price of US$45.00/bbl, exchange rate of and PNE estimated differentials for oil and NGLs -30-

32 EMERGING COLORADO SHALE PLAY SIGNIFICANT UPSIDE POTENTIAL COLORADO SHALE (1) Industry started drilling this area using horizontal drilling technology in gross (138 net) locations have been identified as economic (IRR>10%) locations at $3.00 / mcf gas price Approximately 70% recovery factor at three horizontal wells/section = 600 MMcf/well (1) 24 booked locations (1) (1) IRR calculations assume a $3.00/mcf gas price and an oil price of US$45.00/bbl and an exchange rate of and PNE estimated differentials for oil and NGLs. -31-

33 SIGNIFICANT LOW RISK CBM DEVELOPMENT SIGNIFICANT UPSIDE POTENTIAL IN GHOST PINE HORSESHOE CANYON COAL BED METHANE (1) Attractive and predictable low-cost production with long reserve life CBM infill drilling opportunities plus potential for conventional drilling Approximately 416 gross (207 net) have been identified as economic (IRR>10%) locations at $3.00 / mcf gas price (1) 48 booked locations (1) Infrastructure is operated, segregated from conventional production, and has low operating cost requirements (1) IRR calculations assume a $3.00/mcf gas price and an oil price of US$45.00/bbl and an exchange rate of and PNE estimated differentials for oil and NGLs. -32-

34 ACTIVELY MANAGING LIABILITY MANAGEMENT RATING ( LMR ) LMR is a monthly updated government regulatory ratio of deemed asset value to deemed abandonment and reclamation liability value Asset value is based on company gross operated production and assigned industry average netbacks multiplied by three years Liability value is based on company gross operated wells, facilities, and pipelines at values assigned by the provincial regulator LMR < 1.0 requires a security deposit with the regulator and a ratio of <2.0 currently requires Alberta Energy Regulator approval to transfer operated assets in Alberta As of September 1, 2017, PNE had an Alberta LMR rating of 1.44 and a Saskatchewan LMR rating of 1.27 PNE has been actively working with the regulators to reduce the liability portion of our LMR In the past two years, PNE has submitted 12 regulatory appeals resulting in a reduction of PNE LMR liabilities of over $100 MM In 2017 PNE has submitted 22 reclamation certificates and is planning to submit and additional 50 to 60 this year, which is expected to reduce our LMR liabilities by another $2 MM and reduce annual operating expenses by over $300,000 LMR system is currently undergoing government review and is expected to be modified in the future -33-

35 ACTIVELY MANAGING ASSET RETIREMENT OBLIGATIONS ( ARO ) ARO is PNE s future abandonment and reclamation liabilities for our working interest ownership share of wells, facilities, and pipelines Costs are based on audited company estimates Timing, inflation, and discount rate are important considerations when comparing ARO calculations from different companies PNE has reduced ARO by over $75 MM since December 31, 2015 through dispositions and updated liability estimates based on work performed in 2016 As at June 30, 2017, PNE recorded an ARO of $205.3 MM on its balance sheet ($246.4 MM liability inflated at 1.70% and discounted at 2.44%) June 30, 2017, ARO discounted at 10%, is $35.9 MM PNE estimated abandonment and reclamation spending is $1.5 MM in 2017 Gross (1) Net (1) Producing Wells 7,642 5,674 Standing Wells 1,468 1,087 9,110 6,761 (1) Well count as at December 31, 2016 and excludes wells that are abandoned and not yet reclaimed Over 90% of PNE s currently producing wells are projected to continue to be producing in

36 ANALYST COVERAGE The following analysts provide research report coverage on Pine Cliff: COMPANY AltaCorp Capital Canaccord Genuity CIBC World Markets Clarus Securities Inc. Cormark Securities Inc. Desjardins Capital Markets GMP/FirstEnergy Haywood Securities Inc. Industrial Alliance Securities Inc. National Bank Financial Inc. Paradigm Capital Peters & Co. TD Securities Inc. ANALYST Patrick O Rourke Anthony Petrucci Dave Popowich Robert Paré Amir Arif TBD Stacey McDonald Darrell Bishop Michael Charlton Dan Payne Ken Lin Dale Lewko Aaron Bilkoski By posting this list, Pine Cliff does not imply endorsement of or agreement with the information, conclusions or recommendations provided in the reports. Pine Cliff does not distribute electronic copies of analyst reports. -35-

37 CORPORATE INFORMATION BOARD OF DIRECTORS Gary J. Drummond George F. Fink (Chairman) Philip B. Hodge Randy M. Jarock William S. Rice OFFICERS Philip B. Hodge President and Chief Executive Officer Alan MacDonald Interim Chief Financial Officer and Corporate Secretary Cheryne A. Lowe Chief Financial Officer and Corporate Secretary Terry L. McNeill Chief Operating Officer Heather A. Isidoro Vice President, Business Development HEAD OFFICE 850, th Street SW Calgary, Alberta T2R 1J4 Phone: (403) Fax: (587) REGISTRAR AND TRANSFER AGENT Computershare Trust Company of Canada AUDITORS Deloitte LLP BANKERS Toronto-Dominion Bank National Bank of Canada Canadian Western Bank Business Development Bank of Canada STOCK EXCHANGE LISTING TSX Exchange Trading Symbol: PNE WEBSITE INVESTOR CONTACT info@pinecliffenergy.com -36-