INVESTOR UPDATE FEBRUARY 2017

Transcription

1 A SUSTAINABLE FREE CASH FLOW BUSINESS INVESTOR UPDATE FEBRUARY 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 ofthe 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 operational, economic and financial impacts of the disposition of oil assets that closed on December 7, 2016 (the Oil Disposition ), including the impact on the break even point; 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 expressedorimpliedbysuchforward-looking 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 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. IP 365 is the expected initial production rates for the first 365 days of production of a well. -1-

3 CORPORATE PROFILE A UNIQUE SUSTAINABLE FREE CASH FLOW MODEL Listing TSX: PNE Market Capitalization (1) $246 MM Average Daily Volume (2) 0.9 MM 52-Week Trading Range $0.61 to $1.22 Shares Issued (3) MM Bank Line (4) $60 MM Bank Debt (5) $30.9 MM Other Debt (6) $41 MM 2017 Production Guidance - % natural gas 2017 Capital Guidance $18.5 MM 21,250 21,750 boe/d 94% Directors and Officers Ownership -Basic - Fully Diluted 10.7% 12.7% Corporate Base Production Decline 10% Reserves (PDP/2P) (7) 53.8/70.9 mmboe Tax Pools (8) ~$440 MM (1) Reflects February 17, 2017 closing price of $0.80 per share (2) Average daily trading volumes for February 17, 2016 to February 17, 2017 (3) As of September 30, In addition, as of February 17, 2017 there were 21.6 MM stock options issued (7.0% of outstanding shares) and 4.5 MM common share purchase warrants issued (4) $50 MM revolving syndicated credit facility and $10 MM operating facility as of December 7, 2016, 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) Unaudited as at December 31, 2016 and excludes working capital accounts and investments (6) As of September 30, 2016: $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 (7) Based on an independent reserve report prepared by McDaniel & Associates Consultants Limited dated February 13, 2017 (8) As of September 30,

4 FOCUS ON PER SHARE VALUE CREATION Significant Insider Ownership Interests aligned with shareholders to build per share value Predictable Business Model Low decline, low cost and low capital efficiencies form the foundation for a sustainable free cash flow model FINANCIAL FLEXIBILITY Free Cash Flow Business is built to generate sustainable free cash flow Access to Capital Six financings completed since Nov. 2012, the most recent being the AIMCo and insider debt in Q CAPITAL DISCIPLINE Exceptional Track Record Consistent delivery of superior long-term results supported by decades of transaction execution experience INCREASING VALUE PER SHARE EXPERIENCED MANAGEMENT TEAM PRUDENT GROWTH -3-

5 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 be able to deliver sustainable cash flow back to shareholders Pine Cliff is well-positioned to provide shareholders with increased exposure to a rising natural gas price environment and increased long-term shareholder value -4-

6 WHAT WE HAVE BUILT THREE MAJOR OPERATED CORE AREAS 2017 production guidance of 21,250 21,750 boe/d Weighted 94% towards natural gas Low Decline Rate 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 900 gross locations, economic at less than $3.50/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 slide 12 for details on undrilled and recompletion locations -5-

7 PREDICTABLE ASSET BASE LOW COST + LOW DECLINE = SUSTAINABLE + PREDICTABLE ASSETS G&A ($/boe) G&A per boe Opex ($/boe) Opex (inc. transport) per boe Source: Canaccord Genuity Corp., May 2016 Source: Canaccord Genuity Corp., May % Decline With one of the lowest production declines in the industry, low operating expenses and low overhead, PNE is well positioned to Corporate Decline Rate [%] 45% 40% 35% 30% 25% 20% 15% 10% 5% Average: 28% 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 Source: Scotiabank Statsbook June 2016 Note: ATH, CNQ, CVE, and HSE are Canadian production only and exclude oil sands production. -6-

8 LOW CORPORATE BREAK EVEN KEY TO CASH FLOW BUILT FOR SUSTAINABILITY IN A VOLATILE COMMODITY PRICE ENVIRONMENT At $1.77/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 $ 1.77 $ 2.00 $ 2.50 $ 3.00 $ 3.50 Royalties (2) 7% (0.10) (0.13) (0.14) (0.18) (0.22) (0.25) Operating Costs (3) $9.50/boe (1.58) (1.58) (1.58) (1.58) (1.58) (1.58) Field Netback (0.18) Oil & NGL Contribution (WTI US$50/bbl) (4) G&A, Interest and Dividends (5) $1.52/boe (0.25) (0.25) (0.25) (0.25) (0.25) (0.25) Corporate Netback (0.24) Corporate Netback ($/boe) (1.44) (1) Before capital expenditures (2) Three months ended September 30, 2016 reported (3) 2016 guidance as disclosed in the third quarter 2016 Management s Discussion and Analysis less the estimated impact of the Oil Disposition (4) Using US$50/bbl WTI, US$/C$, adjusted for PNE estimated differentials for oil and NGLs and oil and NGL weighting adjusted for Oil Disposition every US$5/bbl movement in WTI changes the break even gas price by ~$0.03/mcf (5) Nine months ended September 30, 2016 reported adjusted for one time fees with respect to the borrowing base redetermination and the AIMCo debt and adjusted for the estimated impact of the interest savings and dividend income related to the Oil Disposition -7-

9 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) 2017E CFPS Estimate Sensitivities to WTI and AECO Price Changes 55% 2x AECO Sensitivity 50% 2017E CFPS Sensitivity to C$0.50/mcf change to AECO 45% 40% 35% 30% 25% 20% 15% 10% AAV TOU BNP PNE PPY BXE BIR NVA CR TET ERF ARX VII DEE PGF BNE PWT 5% PEY BTE PSK EGL FRU CPG CJ SPE TOG PXX VET NBZ RRX WCP SGY 0% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% KEL POU 2017E CFPS Sensitivity to US$10/bbl change to WTI 2x WTI Sensitivity Source: Scotiabank, September 2016 (1) Using 21,500 boe/d (mid point of 2017 guidance) and royalty rates of 8% -8-

10 FINANCIAL FLEXIBILITY 2016 FOCUS ON STRENGTHENING BALANCE SHEET 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 $125 Million ($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 (1) Estimated, excess funds from operations includes funds flow from operations, capital expenditures and changes in non-cash working capital accounts (2) Unaudited and does not include non-cash working capital accounts and investments. In addition to the bank debt, at December 31, 2016, 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,

11 CAPITAL ALLOCATION IS KEY IN 2017 PNE 2017 FOCUS ON OPTIMAL ALLOCATION OF FREE CASH FLOW Debt Repayment Free Cash Flow Acquisitions Internal Production Growth Dividend/Share Repurchases -10-

12 FREE CASH FLOW SENSITIVITY (1) LOW MAINTENANCE CAPITAL YIELDS HIGH FREE CASH FLOW With annual maintenance capital averaging $24.5 MM over the next five years (3), PNE expects to maintain its production base Average annual estimated capital efficiency of approximately $11,000/boe/d Corporate free cash flow ( FCF ) (1) is estimated to occur above $2.45/mcf AECO 100 Average Annual Funds Flow Allocation (1)(2) Cumulative 5 year FCF (1)(2) $ MM $ per basic share $MM $ per basic share AECO ($/mcf) AECO ($/mcf) - Maintenance Capital Facility and Plant Capital FCF FCF per share Cumulative 5 year FCF 5 year FCF per share (1) FCF is funds flow from operations less the capital require to keep PNE s production flat ( maintenance capital ) and facility and plant turnaround capital (2) Funds flow from operations is calculated before income taxes and assumes royalty rates of 8% for all pricing scenarios, operating expenses of $9.55/boe, G&A expenses of $1.17/boe and interest of 5%. Funds flow analysis assumes $53/bbl WTI; exchange rate of 1.3 US$/C$ and adjusted for PNE estimated oil and NGL differentials (3) Maintenance capital is the average estimated capital to hold production flat at approximately 21,700 boe/d over a five year period and will vary on an annual basis -11-

13 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 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 Summary of Undrilled Locations (1) 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 - Crown Three Hills Creek CBM - Freehold Willrich , Carrot Creek Rock Creek , Ghost Pine - Crown Total 1, (1) Undrilled locations consist of drilling and recompletion locations booked in the independent reserve report dated February 13, 2017 prepared by McDaniel & Associates Consultants Limited and unbooked drilling and recompletion locations. Unbooked drilling and recompletion locations are internal estimates based on evaluation of geologic, reserves and spacing based on industry practice. There is no guarantee that the PNE will drill all 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. PNE drilling activity depend on availability of capital, regulatory approvals, commodity prices, drilling costs and other factors. 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 -12-

14 2017 CAPITAL PROGRAM CONSERVATIVE CAPITAL SPENDING 2017 Capital Budget Allocation ($MM) Major Maintenance $3.3 Facility and other $1.7 Edson Drilling $ capital budget of $18.5 MM $13.5 MM directed to drilling at Edson and Viking and recompletions 13 gross (5.9 net) planned drills 9 gross (1.9 net) at Edson 4 gross (4.0 net) at Viking Viking Recompletions $1.3 Ghost Pine Recompletions $2.6 Viking Colorado Drilling $ gross (39 net) planned recompletions 2017 production guidance of 21,250-21,750 boe/d -13-

15 NATURAL GAS OUTLOOK -SUPPLY Natural gas supply growth declined in 2016 for the first time in 15 years bcf/d Monthly Dry Shale Gas Production Marcellus (PA,WV,OH & NY) Haynesville (LA & TX) Eagle Ford (TX) Fayetteville (AR) Barnett (TX) Woodford (OK) Bakken (ND) Antrim (MI, IN, & OH) Utica (OH, PA & WV) Rest of US 'shale' Source: EIA Natural Gas Weekly Update (January 25, 2017) U.S. Natural Gas Supply Growth bcf 500 U.S Weekly Cumulative Storage Withdrawals / / Year Average Week Source: GMP First Energy, U.S. DOE/EIA (February 3, 2017) U.S. Natural Gas Rig Count After a record warm 2015/2016 winter, U.S. storage is now less than the five year average Natural gas supply growth unlikely to materially grow without an increase in natural gas prices bcf/d 100 Forecast Source: GMP FirstEnergy, U.S. DOE/EIA (January 2017) January 25, 2017 Operating natural gas drilling rigs in the U.S. still at historic lows, despite Henry Hub natural gas price recovery to over U.S.$3.00 per MMBtu -14-

16 NATURAL GAS OUTLOOK -DEMAND LNG export capacity forecast to be over 10 bcf/d by the end of 2020 U.S. Annual LNG Export Capacity (Year End) bcf/d Corpus Christi T1&2 Sabine Pass T5&6 Cameron T1&2 Freeport T1&2 Cove Point T1 Sabine Pass T3&4 Sabine Pass T1&2 Existing Re Export Forecast HDDs 4,500 4,000 3,500 3,000 2,500 2,000 1,500 U.S. Winter Cumulative HDDs 2015/ /2017 Normal The last two winters have been substantially below normal 2 1, Source: GMP FirstEnergy, Reuters (January 2017) U.S. Net Exports of Natural Gas to Mexico Source GMP FirstEnergy, U.S. NOAA (January 2017) U.S. Gas Demand Growth + Exports Mexico exports are now exceeding four bcf/d bcf/d Forecast bcf/d Mexico Exports LNG Exports Forecast 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 (January 2017) Source: GMP FirstEnergy, US DOE/EIA (January 2017) -15-

17 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 ,775 7,888 12,854 22, (unaudited) 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) $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 ($2,000) ($4,000) $2,401 $3,721 AECO ($/mcf) $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 NPV 10% ($000 s) (1) (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 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 AECO ($/mcf) 350, , , , , ,000 50,000 0 PDP Total Proved Total P+P 71% CAGR P+P NPV 10% (2)

18 COMPELLING VALUATION STRONG EMPHASIS ON GROWTH OF SUSTAINABLE NATURAL GAS ASSETS PNE generates one of the highest free cash flow yields (1) in the industry PNE s valuation is attractive from a PDP reserves perspective QEC (3.0x) PGF (5.8x) EV/2015 PDP Reserves 2017 D/CF BNE PPY CR NVA MQX TVE PXX GXE RRX PEYCPG VET WCP BIR SGY CJ ERF TOG JOY PNE 0.0 FRU 30% 20% 10% 0% 10% 20% 30% 2017 free cash flow yield LXE PPY GXE WCP RRX BIR CR PEY NVA TVE JOY VET TVL CJ SGY TOG PNE ERF QEC ATH EV/PDP ($/boe) VII RRX VET WCP TOG KEL ARX TOU CPG AAV BNE NVA PPY PEY BIR CR SGY TET CJ ERF PGF NBZ BNP BXE JOY PWT RMP PNE Source: Canaccord Genuity Corp., February 2017 Source: Canaccord Genuity Corp., January 2017 (1) 2017 FCF is based on Canaccord Genuity Corp. estimates and includes Canaccord estimated capital expenditures for FCF yield is FCF/market capitalization. -17-

19 WHY INVEST IN PINE CLIFF Long life predictable natural gas assets with industry leading operating costs and decline rate Strong balance sheet to manage volatility in natural gas prices 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 -18-

20 APPENDIX -19-

21 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 Four out of six 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 $25.08 per share on February 17, 2017, while paying over $36.50 of dividends per share. A $20,000 investment in 1998 would equate to almost $6.2 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 Pine Cliff Return (1) Share Price Combined Share Price Bonterra Return Share Price Comaplex Return $10.32 Cum Dividend $61.96 $0.80 $36.88 $ (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 February 17, $25.08 $

22 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) -21-

23 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 -22-

24 RESERVE REPORT (1) Summary of Remaining Oil and Gas Reserves as of December 31, 2016 Light and Medium Oil Natural Gas (Nonassociated, associated and coal bed methane) Natural Gas Liquids Total Oil Equivalent NPV 10% Reserve Category: Gross (Mbbl) Gross (MMcf) Gross (Mbbl) Gross (Mboe) ($MM) Proved Developed Producing , , , ,462.4 Developed Non-Producing Undeveloped , , ,648.1 Total Proved , , , ,572.4 Probable , , ,359.3 Total Proved plus Probable , , , ,931.7 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 -23-

25 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 10,733 boe/d (88% natural gas), 48% 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% -24-

26 SOUTHERN ASSETS AREA OVERVIEW LOW DECLINE, LOW COST PRODUCTION Q production of 9,350 boe/d (mostly natural gas), 42% 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 -25-

27 EDSON AREA OVERVIEW PINE CLIFF S FIRST CORE AREA, ACQUIRED IN Q Q production of 2,220 boe/d (74% natural gas), 10% of Pine Cliff s production Drilled three gross (one net well) in Q1 2016, all of which are performing at or above expectations 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 -26-

28 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 20 gross (6.1 net) are booked locations 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) Undrilled locations consist of locations booked in the independent reserve report dated February 13, 2017 prepared by McDaniel & Associates Consultants Limited and unbooked locations. Unbooked locations are internal estimates based on evaluation of geologic, reserves and spacing based on industry practice. There is no guarantee that the PNE will drill all undrilled locations and there is no certainty that the drilling of these locations will result in additional reserves or production or achieve expected internal rates of return. PNE drilling activity will depend on availability of capital, regulatory approvals, commodity prices, drilling costs and other factors. 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 -27-

29 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) Undrilled locations consist of locations booked in the independent reserve report dated February 13, 2017 prepared by McDaniel & Associates Consultants Limited and unbooked locations. Unbooked locations are internal estimates based on evaluation of geologic, reserves and spacing based on industry practice. There is no guarantee that the PNE will drill all undrilled locations and there is no certainty that the drilling of these locations will result in additional reserves or production or achieve expected internal rates of return. PNE drilling activity will depend on availability of capital, regulatory approvals, commodity prices, drilling costs and other factors. 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. -28-

30 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) Undrilled locations consist of locations booked in the independent reserve report dated February 13, 2017 prepared by McDaniel & Associates Consultants Limited and unbooked locations. Unbooked locations are internal estimates based on evaluation of geologic, reserves and spacing based on industry practice. There is no guarantee that the PNE will drill all undrilled locations and there is no certainty that the drilling of these locations will result in additional reserves or production or achieve expected internal rates of return. PNE drilling activity will depend on availability of capital, regulatory approvals, commodity prices, drilling costs and other factors. 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. -29-

31 UNDERSTANDING ARO AND LLR With increasing attention on future abandonment liabilities in the oil and gas industry, it is important for investors to know how companies intend to manage their future asset retirement obligations. Two key acronyms to understand are ARO and LLR. ARO = Asset Retirement Obligations = Decommissioning Liabilities Company s future abandonment and reclamation liability of working interest share of wells, facilities, and pipelines Costs based on audited company estimates Timing, inflation, and discount rate are important considerations when comparing AROs in different companies As at September 30, 2016, PNE recorded an ARO of $307.0 million on its balance sheet ($310.9 million liability inflated at 1.78% and discounted at 1.82%) September 30, 2016 ARO discounted at 10% is $34.3 million LLR = Licensee Liability Rating Ratio of deemed asset value to deemed abandonment and reclamation liability value Asset value based on gross company operated production and industry average netback multiplied by three years Liability value based on gross company operated wells, facilities, and pipelines as assigned by the provincial regulator ( AER ) LLR < 1.0 require a security deposit with the AER and <2.0 currently requires AER approval to purchase operated assets Rating is a present day snapshot and is updated monthly As of January 1, 2017, PNE had an Alberta LLR rating of 1.46 and a Saskatchewan LLR rating of

32 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. Scotia Capital Inc. TD Securities Inc. ANALYST Patrick O Rourke Anthony Petrucci Dave Popowich Robert Paré Amir Arif Jamie Kubik Stacey McDonald Darrell Bishop Michael Charlton Dan Payne Ken Lin Dale Lewko Cameron Bean 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. -31-

33 CORPORATE INFORMATION BOARD OF DIRECTORS Gary J. Drummond George F. Fink Philip B. Hodge Randy M. Jarock Carl R. Jonsson William S. Rice OFFICERS George F. Fink Chairman of the Board Philip B. Hodge President and Chief Executive Officer 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 Alberta Treasury Branches 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 -32-