DEVELOPING MICHICHI. Corporate P R E S E N T A T I O N. Light Oil Focused Experienced Management Team

Transcription

1 Corporate P R E S E N T A T I O N DEVELOPING MICHICHI Light Oil Focused Experienced Management Team 2016 CAPP Scotiabank Investment Symposium April 13, 2016

2 Forward Looking Statements This presentation is for information purposes only and is not intended to, and should not be construed to, constitute an offer to sell or the solicitation of an offer to buy securities of Marquee Energy Ltd. ( Marquee ). Certain disclosures set forth in this presentation constitute forward-looking information within the meaning of applicable securities laws. Any information contained herein that is not a statement of historical facts is forward-looking information. Forward-looking information is often, but not always, identified by the use of words such as anticipate, "expect", believes, budget, continue, could, estimate, forecast, intends, may, plan, predicts, projects, should, will and other similar expressions. All estimates and information that describe Marquee's future, goals, or objectives, including management s assessment of future plans and operations, constitute forward-looking information under applicable securities laws. In particular, this presentation includes without limitation forward-looking information pertaining, directly or indirectly, to the following: Marquee's anticipated production and cash flows in 2016; business strategy; the future benefits of the proposed acquisition of assets from Paramount Resources (the "Transaction"), including: the number and quality of future potential drilling opportunities, the expectation of reduced operating and capital costs, anticipated production levels, anticipated debt levels, anticipated reserves, anticipated cash flow, anticipated cash flow per share, anticipated net debt, borrowings under credit facility, operating netbacks, anticipated capital expenditures, 2016 exit production, 2015 exit debt to 2016 cash flow and 2016 capital budget, receipt of TSXV approval for the Transaction. 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. The estimated future net revenue from the production of the disclosed oil and natural gas reserves does not represent the fair market value of these reserves. Forward-looking information relates to future events and/or performance and, may prove to be incorrect. Actual results may differ materially from those anticipated in the information provided. Undue reliance should not be placed on forward-looking information because Marquee can give no assurance that such expectations will prove to be correct. The forward-looking information contained in this presentation is given as of the date hereof and Marquee does not undertake any obligation to update forward-looking information except as required by applicable securities laws. Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six Mcf to one bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and do not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalency conversion ratio of six to one, utilizing a boe conversion ratio of six Mcf to one bbl may be misleading as an indication of value. 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 Marquee believes that the expectations reflected in such forward-looking information are reasonable, undue reliance should not be placed on forward-looking information because Marquee cannot give assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this presentation, assumptions have been made regarding and are implicit in, among other things: cash flow projections and netbacks; that Marquee will be able to successfully implement its planned capital expenditure program; bank debt levels; field production rates and decline rates; the ability of Marquee to secure adequate product transportation, and secure such transportation in a timely and cost efficient manner; the ability to obtain qualified staff, equipment and services in a timely and cost efficient manner to develop its business; the ability to operate its properties in a safe, efficient and effective manner; the ability to obtain financing on acceptable terms; the ability to replace and expand oil and natural gas reserves through acquisition, development of exploration; the timing and costs of pipeline, storage and facility construction and expansion; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters; and the ability to successfully market its oil and natural gas products. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used. Forward-looking information involves known and unknown risks and uncertainties that could cause actual results to differ materially from those anticipated and described in the forward-looking information, which include, but are not limited to: exploration, development and production risks; assessments of acquisitions; anticipated success of resource prospects and the expected characteristics of resource prospects; the validity of analogues to other properties and projects; the effectiveness of the application of certain drilling and completion technologies; reserve measurements; availability of drilling equipment; access restrictions; permits and licenses; aboriginal claims; title defects; commodity prices; commodity markets, transportation and marketing of crude oil, liquids and natural gas; reliance on operators and key personnel; competition; lack of diversification; corporate matters; funding requirements; access to credit and capital markets; market volatility; cost inflation; foreign exchanges rates; general economic and industry conditions; health, safety and environmental risks; climate control legislation; failure to obtain regulatory approvals; government regulation and taxation; and those other risks described in Marquee s Annual Information form dated March 20, 2014 filed under Marquee s profile on Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used. The forward-looking information contained in this presentation is given as of the date hereof and Marquee does not undertake any obligation to update forward-looking information except as required by applicable securities laws. Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six Mcf to one bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and do not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalency conversion ratio of six to one, utilizing a boe conversion ratio of six Mcf to one bbl may be misleading as an indication of value. 2

3 Marquee Energy Ltd. Capitalization $ / Shares (millions) Common shares 14.7% Basic Insiders 17.8% $50.3 Insiders (fully diluted) Net Debt (Dec. 31, 2015) Operations Current avg. production 1 Corporate decline 22% ~4,300 boed Op. costs 2016 Forecast $15.00/boe G&A costs 2016 Forecast $2.50/boe TSX-V: MQL OTCQX: MQL $220 Tax Pools 1P reserves 2 Dec. 31, P reserves 2 Dec. 31, mmboe 22.6 mmboe 1 Based on field estimates,~600 boe/d shut in 2 Schedule A in footnotes 3

4 Building Value Why Marquee Energy Consolidation phase completed Low cost structure: Opex, G&A and Capex costs to meet the realities of a prolonged low price environment Investment Opportunity Producing ~4,300 boe/d (47% oil and liquids) A dominant land position of operated and high working interest lands An attractive, de-risked development play 300 horizontal oil locations 1 Own or control infrastructure that meets today s needs with the capacity to expand Year round drilling access in a friendly operating environment Exceptional Management and Board experience 370+ million 1 barrels of oil in place plus natural gas in our target zones Schedule A in footnotes

5 MBOE Reserves Growth 25,000 20,000 Reserves Category December 31, 2015 Light Crude Oil (Mbbl) Heavy Crude Oil (Mbbl) Conventional Natural Gas (MMcf) Natural Gas Liquids (Mbbl) Total (Mboe) BT NPV10 1 ($M) Proved Producing 2, , ,128 $67,030 Total Proved 6,685 1,081 41, ,252 $153,645 15,000 Total Proved plus Probable 10,058 1,730 60, ,552 $258,738 10, Finding, Development & Acquisition Costs Description ,000 Total Proved FD&A costs FDC 9.45/boe $113 million $14.76/boe $74 million Total Proved plus Probable FD&A costs FDC 3.99 /boe $166 million $14.12/boe $152 million Proved Producing Total Proved Total Proved Plus Probable Notes: (1) Based on Sproule December 31, 2015 forecast prices. (2) Gross Company reserves are the Company s total working interest share before the deduction of royalties (3) Totals may not add due to rounding. 5

6 The Michichi Advantage Extensive Light Oil Potential >10 million barrels of oil in place per section Waterflood upside (potential to double recovery) Dominant Land Base Crown land, >90% avg. working interest Extensive Inventory 300 oil-focused horizontal drilling locations 1 Operational Strength Gas sales capacity (~38 mmcf/d total capacity) 2,000 bbl/d oil battery and terminal Four multi-well batteries Top-Tier Resource Play Extensive multi-zone light oil play delineated through vertical well control and extensive 3D seismic 1 Schedule A in footnotes 6

7 Marquee Play Size Comparisons Boulder Belly River RMP Waskahigan Marquee Multizone Oil Pay Fairway Surge Shaunavon Peer Plays Granite Oil Alberta Bakken 10km 10km (to scale, from recent presentations) 7

8 Calendar Day Rate, BOE/D Michichi Marquee Type Curve IP30 (boe/d) 187 IP60 (boe/d) 175 IP90 (boe/d) 167 IP365 (boe/d) 117 Year 1 Decline 58% EUR (mboe) Months on Production Expected IP30 Rate (186 BOE/D) 2014 Average 2015 Average Pre 2014 Well Average (excl. unstimulated) All Marquee Wells (excludes unstimulated) 8

9 Thousands Michichi $900 $800 $700 $600 $500 $400 $300 Short Lateral Drilling Cost Per Meter Motor Issues Well Count Advancements to Marquee s drilling design and operations process have successfully decreased drilling costs over time. >45% reduction in drilling cost per meter $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 9 Completion Cost Per Stage Well Count 1. MQL Dual Leg horizontal wells excluded from analysis 2. Gaps in data on completion chart represent open hole, unstimulated wells Completion design and efficiency have effectively reduced costs, while increasing well productivity. >80% reduction in completion cost per stage

10 Payout (Years) IRR Michichi Current Strip (Mar.18, 2016) Payout (yrs.) 1.8 IRR 46% 45% 40% 35% % % 20% 15% 10% 0.5 5% Payout ROR 0.0 US $35/bbl WTI FX $1.37 USD/CAD US $40/bbl WTI FX $1.35 USD/CAD US $45/bbl WTI FX $1.33 USD/CAD 0% 1 $1.7 MM capital and constant dollar pricing used for all cases 2 Realized Canadian price includes 5% WTI/Cdn Light Differential USD WTI Price / BBL $2.50/MMBTU AECO Gas $4.50/bbl Quality Offset Applied 10

11 Production (boe/d) Michichi Well Performance Light Oil Peer Type Curve Summary 1 Michichi at a Glance Light Oil (API) 32 Oil & Liquids Weighting 65% Capital ($C) (Drill, Complete Equip, Tie-in) Reserves IP30 IP Source: NBF, Company Reports 2. Source: Dundee Capital Markets, Company Reports $1.7 MM 187 MBOE 186 BOED 117 BOED Play Oil Resource Play F&D Cost Analysis 2 Capex ($M) IP30 (boed) Months $/boed IP365 2P reserves (mmboe) F&D ($/boe) MQL- Banff $1, $14, $ GXO - Bakken / Banff $2, $33, $ SGY - Shaunavon $1, $14, $ SPE - SE Sask. - OH $ $11, $ TVE - Cardium $2, $17, $ BXO - Belly River $4, $27, $ TOG - Cardium $3, $30, $ RRX - Viking $ $20, $ SKX- Belly River $1, $23, $ Rank by F&D 11

12 Production (BOE/D) $C, Millions 10,000 8,000 Michichi $300 $240 Assumptions Sproule Michichi Banff Type Curve (156 mboe) - Represents approx. 85% of Marquee Type Curve December 31, 2015 Strip Price Forecast 6,000 $180 $1.7 MM / well DCCET Capital 4,000 2,000 - ($8.53) -2,000 ($38.87) ($58.90) ($54.17) ($56.14) ($54.17) -$ Base Production Production From New Drilling Annual Cash Flow TOTAL Capital Undiscounted Cum Free Cash Flow Strip AECO Gas Forecast CAD/GJ Strip WTI Prices USD/bbl $5.00 $50 $49.11 $48.30 $47.31 $4.00 $48 $46.33 $2.51 $2.64 $2.76 $2.91 $3.00 $46 $2.00 $1.77 $44 $43.63 $1.00 $42 $0.00 $ $67 $76 $74 $55 $45 $35 $33 $27 $22 $14 $120 $60 $0 $6.0 MM Infrastructure Capital 82 Wells currently booked at Michichi (57 PUDs) - Internal estimate of 215 Wells within Fairway - Internal estimate of 322 total Hz Banff Locations in Michichi Average of 30 wells/year; 148 wells total = 46% of current inventory Current Michichi Banff Netback of C$24/bbl at US$38/bbl WTI Project IRR = 32% Project BT NPV 8% = $100 MM

13 Well Positioned for Price Recovery Drilling Inventory 300 mapped locations 1 Attractive payouts and rate of returns One of the best oil plays in North America Water flood upside Ability to Grow Assembled core Banff/Detrital oil play Multi year inventory of low risk locations Double production at Michichi with 40 horizontal wells Control over pace of growth 215 Drill Ready Locations at $42.00 WTI 1 Schedule A in footnotes 13

14 Appendix 14

15 MQL HEDGES Term Hedge Type Counterparty Volume Pricing April 1, 2016 to June 30, 2016 WTI fixed price National Bank 1,110 bbls/d Cdn $58.32/bbl July 1, 2016 to September 30, 2016 WTI fixed price National Bank 500 bbls/d Cdn $53.77/bbl October 1, 2016 to December 31, 2016 WTI fixed price National Bank 300 bbls/d Cdn $55.17/bbl 15

16 LLOYDMINSTER Lloydminster current production = 400 bopd Low risk drilling inventory 65 locations 1 (20 proven, 5 probable booked, 40 unbooked) Drilled one vertical well in Q Well cost: $0.45 million (vertical), $.75 million (HZ) 1 Schedule A in footnotes 16

17 Experienced Management Team MORE THAN 170 YEARS OF COMBINED E&P EXPERIENCE, OVER HALF IN THE JUNIOR SECTOR Richard Thompson, President & CEO (since 2011) Former Executive Vice President/ Director of Cequence Energy Ltd. from 2008 to 2010 Former Vice President of Exploration at Cyries Energy Inc. from 2004 to 2008 Geophysicist from the University of Manitoba, graduated with a BSc in Geophysics (with Honours) Dan Toews, CA, CFO (since 2015) Former Controller and Treasurer of Crescent Point, followed by executive roles as CFO and VP Finance with Peerless Energy and Pinecrest Energy Commerce graduate of the University of Calgary and a registered Chartered Accountant Dave Washenfelder, P. Geol, VP Exploration (since 2012) Former Manager of Exploration at Tamarack Valley Energy Ltd. and prior to, Saskoil, Wascana Energy and Apache Canada Professional Geologist with more than 34 years of related experience, graduated from the University of Manitoba with a BSc in Geology (Honours) Has worked with Richard Thompson for more than 17 years including: Saskoil, Wascana, Samson Canada and Marquee Sam Yip, P. Eng., VP Engineering (since 2012) Former founder, Director and Vice President of Production at Teague Exploration Inc. from 2003 until 2012, previously with Atco Gas, Webex and Mark Resources. Mr. Yip is a Professional Engineer with more than 30 years related experience, graduated from the University of Calgary with a degree in Chemical Engineering Rob Lemermeyer, VP Production (since 2011) Former Vice President of Production for Canadian Coyote Resources from January 2011 to December 2011 and Manager of Production Operations of Base Resources Inc. from October 2007 to December 2010 Steve Bradford, VP Land (since 2012) Former VP of Land at Milestone Exploration Inc. from May 2010, and previously served in progressively senior roles in Land at West Energy Ltd., Encana Corporation, and Twin Butte Energy Ltd. 17

18 Board of Directors Glenn Carley, BA, LLB., MBA, ICD.D Mr. Carley is the President of Selinger Capital Inc., a private investment company and has served as a Director of Marquee since December 5, 2011, and Chairman since May Mr. Carley currently serves as the Chairman of Painted Pony Petroleum Ltd. Mr. Carley had been Executive Chairman of Galleon Energy until August, 2011, and Chairman of Culane Energy Corp. until February, Mr. Carley also serves as Chair of Marquee s Compensation and Governance Committee. Robert Waters, BBA MBA, CA Mr. Waters has more than 20 years of executive financial experience, having served as Senior Vice President and Chief Financial Officer for Enerplus Corporation and as Vice President and Chief Financial Officer for Pengrowth Energy Trust. He received his Bachelor of Business Administration from York University, Toronto (1981), Master of Business Administration from York University, Toronto (1984) and holds a Chartered Accountant designation (1986). Mr. Waters serves as Chair of Marquee s Audit Committee. Dr. William Roach, B.Sc, Ph.D, C.Eng, MIM, PEng Will Roach joined Marquee Energy as Director in December of Since January 2012 Will Roach has served as the President and CEO of Cavalier Energy Inc., a privately held Oil Sands company. From October 2010 to December 2011 he served as the CEO of Calera, a green energy start-up, in Los Gatos, California. Between 2004 and 2010 he served as the President and CEO of UTS Energy. Prior thereto, he managed Husky Energy s operations on the East coast of Canada, British Borneo s projects in Houston and worked internationally for Shell. In addition to Marquee, Dr. Roach also serves on the Board of Directors for Sonde Resources, Tervita, Calera and SeaNG. Dr. Roach Serves as Chair of Marquee s Reserves Committee. Jim Riddell, B.Sc, M.Sc (Geology) Mr. James Riddell joined Marquee Energy as a Director in December of Mr. Riddell is the President and COO of Paramount Resources Ltd. and has held the position since June Mr. Riddell has been the CEO of Trilogy Energy Corp. since February He serves as Executive Chairman for Cavalier Energy Inc. and as a Director for Great Prairie Energy Services Inc., MGM Energy Corp., Strategic Oil and Gas Ltd., Big Rock Brewery, DevCorp Capital Inc. (now Great Prairie Energy) and Paxton Corporation. Greg Turnbull, QC, BA, LLB Mr. Gregory Turnbull joined Marquee Energy as a Director in December Mr. Turnbull is a partner with McCarthy Tetrault LLP Calgary, which he joined in 2002 following his position as partner of Donahue Ernst and Young LLP. Mr. Turnbull is also a Director of Crescent Point Energy, Storm Resources Ltd., Hyperion Exploration Corp. and Oyster Oil and Gas Ltd. Mr. Turnbull also currently serves as a Director for a number of private companies. Mr. Turnbull is also currently a Director of a number of private companies. He previously served as a member of the Securities Advisory Committee to the Alberta Securities Commission and he currently belongs to the Law Society of Alberta, the Canadian Bar Association and the Calgary Bar Association. Paul E. Moynihan, BASc, MBA Mr. Moynihan is the President of Cardinal Financial Advisors Inc., an investment banking firm that he founded in 2014 and focused on providing strategic and M&A advice to family-owned businesses. In his early career, Paul was a Reservoir Engineer with Imperial Oil and since 1992, has worked as an investment banker focused principally on M&A and Capital Markets in the oil & gas sector. He was a Managing Director with TD Securities, Co-Founder of Mustang Capital Partners and most recently was Head of Oil & Gas for Canada with Rothschild. To-date in his 24- year investment banking career, Mr. Moynihan has completed 60 M&A transactions for a combined $13 billion and raised over $2 billion of debt and equity capital in 24 offerings. Richard Thompson, B.Sc Honours (Geophysics) See management page 18

19 ANALYST COVERAGE Peters & Co. Dale Lewko E: P: Canaccord Genuity Corp. Anthony Petrucci E: P: Haywood Securities Inc. Darrell Bishop E: P: Gmp Securities Aaron Swanson E: P: National Bank Financial Dan Payne E: P: Acumen Capital Trevor Reynolds E: P: Dundee Capital Markets Chad Ellison E: P: Cormark Securities Inc. Garett Ursu E: P: Firstenergy Capital Corp. Robert Fitzmartyn E: P:

20 Schedule A,B SCHEDULE A: DRILLING LOCATIONS This presentation discloses drilling locations in three categories: (i) proved locations; (ii) probable locations; and (iii) unbooked locations. Proved locations and probable locations are derived from the Company's most recent independent reserves report prepared by Sproule as at December 31, 2015 and account for drilling locations that have associated proved and/or probable reserves, as applicable. Unbooked locations are internal estimates based on the Company s prospective acreage and assumptions as to the number of wells that can be drilled per section based on industry practice and internal review. Unbooked locations do not have attributed reserves. Of the approximately 365 (net) total Company drilling locations identified herein, 77 are proved locations, 30 are probable locations and the remaining are unbooked locations. Of the 300 (net) Michichi drilling locations identified herein, 57 are proved locations, 25 are probable locations and the remaining 218 are unbooked locations. Of the 65 (net) Lloydminster drilling locations identified herein, 20 are proved locations, 5 are probable locations and the remaining 40 are unbooked locations. Unbooked locations have been identified by management as an estimation of our multi-year drilling activities based on evaluation of applicable geologic, seismic, engineering, production and reserves information. There is no certainty that the Company will drill all unbooked drilling locations and if drilled there is no certainty that such locations will result in additional oil and gas reserves or production. The drilling locations on which the Company will actually drill wells will ultimately depend upon the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results, additional reservoir information that is obtained and other factors. While certain of the unbooked drilling locations have been de-risked by drilling existing wells in relative close proximity to such unbooked drilling locations, other unbooked drilling locations are farther away from existing wells where management has less information about the characteristics of the reservoir and therefore there is more uncertainty whether wells will be drilled in such locations and if drilled there is more uncertainty that such wells will result in additional oil and gas reserves or production. SCHEDULE B: CONTINGENT RESOURCE ASSESSMENT 1) Contingent resources are those quantities of petroleum estimated to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies 2) Contingent resources have been risked for chance of commerciality. A 10 percent chance of development risk factor has been applied. 3) Contingent resources have been sub-classified as Development Pending. 4) There is no certainty that it will be commercially viable to produce any portion of the resources 5) The resource NPV estimates are economic using Sproule price forecast at August 31, Economics were run based on a development schedule ($2.0 MM per well), and values were discounted back to August 31, ) Ultimate Reserves include produced oil volumes and booked oil reserves, as reported in the December 31, 2015 reserves report 20