INVESTOR UPDATE JULY 2016

Transcription

1 A LOW COST NATURAL GAS CONSOLIDATOR INVESTOR UPDATE JULY 2016 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; the amount drawn on Pine Cliff's syndicated credit facility; net debt levels; current and pro forma production values; expected decline rates; the strategy of the Company and the ability of the Company to execute on this strategy; expected cash 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; Pine Cliff s share price multiple and the correlation to natural gas pricing; net debt to funds flow from operations; cash flow / funds flow leverage to natural gas prices; corporate netbacks and break even prices; expected operating expenses, royalty rates, general and administrative expenses and interest expenses; expected cash / funds provided by operations; free cash flow; expansion and other development trends of the oil and gas industry; reserve and resource volumes; 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; supply channels; accounting policies; credit risks; availability of drilling or recompletion locations, including the timing and success thereof; 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 royalty assets that closed on June 29, 2016 (the Royalty Disposition ), including the impact break even point; 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 forward-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 that have been 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. -1-

3 CORPORATE PROFILE POSITIONED FOR PROFITABLE AND SUSTAINABLE LOW RISK NATURAL GAS GROWTH Listing TSX: PNE Market Capitalization (1) $273 MM Average Daily Volume (2) 0.7 MM 52-Week Trading Range $0.61 to $1.46 Shares Issued (3) MM Directors and Officer s Ownership 13.6% fully diluted (12.4% basic) 2016 Production Guidance 22,500-23,000 boe/d Natural Gas Weighting ~92% Corporate Base Production Decline ~10% 2016 Capital Guidance $10.0 MM Net debt at March 31, 2016 (4) $143.6 MM Bank Line (5) $185 MM Tax Pools (6) >$480 MM LLR Rating (7) 1.53 AB / 1.22 SK Reserves (PDP/2P) (8) 57.4/78.7 mmboe (73%) (1) Reflects July 8, 2016 closing price of $0.89 per share (2) Average daily trading volumes for July 1, 2015 to July 8, 2016 (includes subscription receipts volumes) (3) As of July 8, In addition, as of July 8, 2016 there were 13.6 MM stock options issued (4.4% of outstanding shares) (4) Does not include the Royalty Disposition of $25 million (before adjustments) (5) $165 MM revolving syndicated credit facility and $20 MM operating facility. Upon closing of the Royalty Disposition the $165 MM revolving syndicated facility was reduced to ~$140 MM (6) As of March 31, 2016 (7) Licensee liability rating as of June 1, see Appendix for further discussion on LLR (8) Based on an independent reserve report prepared by McDaniel & Associates Consultants Limited -2-

4 SUSTAINABLE SHAREHOLDER VALUE CREATION Acquisition Priorities Focused on Value Accretive acquisitions of high-quality natural gas assets offering low operating costs, low decline production, and increasing drilling inventories; nine acquisitions completed since 2012 FINANCIAL FLEXIBILITY Low Cost Operator With an all-in break even point of approximately $1.74/mcfe AECO (before capital spending) Access to Capital Five financings completed since Nov. 2012, the most recent in Q CAPITAL DISCIPLINE INCREASING VALUE PER SHARE PRUDENT GROWTH Exceptional Track Record Consistent delivery of superior long-term results supported by decades of transaction execution experience EXPERIENCED MANAGEMENT TEAM High Insider Ownership Interests aligned with shareholders -3-

5 A UNIQUE, COUNTER-CYCLICAL STRATEGY CAPITALIZING ON A LOW COMMODITY PRICE ENVIRONMENT PNE uniquely focused on a low-risk, natural gas asset consolidation strategy in Western Canada Weak commodity prices have reduced industry cash flow and stimulated non-core asset sales to fund debt repayment, capital expenditures and dividends Market is rewarding companies for strong balance sheets and focused asset portfolios; sales of non-core properties expected to continue Being a low cost operator provides protection from volatile commodity prices Pine Cliff is well-positioned to increase long-term shareholder value and provide shareholders with increased exposure to a rising natural gas price environment -4-

6 SUCCESSFUL EXECUTION OF THE STRATEGY TRACK 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 Executive Chairman and announced $2.9M rights offering and private placement 8. July 17/13 announced $13.3 acquisition of additional Southern Alberta assets and operatorship 2. Feb 10/12 announced 23.5M Carrot Creek/Edson acquisition 9. Oct 2/13 announced $20.0M common share offering at $1.10/sh 3. Aug 23/12- announced acquisition of Geomark Exploration Ltd. 10. July 17/14 announced $100M Southern Alberta/Saskatchewan asset acquisition 4. Nov 20/12 announced purchase of debt and security of Scope Energy and $5.4M private placement 11. July 29/14 announced $33.3M Carrot Creek/Edson asset acquisition 5. Feb 20/13 - realized security became sole shareholder of Scope Energy 12. Sept 2/14 announced $60.1M equity offering at $2.05/sh 6. May 27/13 announced $34M acquisition of additional 52% working interest in the Monogram Unit 13. April 20/15 announced $14.1M acquisition of additional assets in Edson 7. June 4/13 announced $25M common share offering at $0.88/share 14. Nov 9/15 announced $185M acquisition of new Core Area in Central AB and $72M common share offering at $1.08/sh -5-

7 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 23,000 boe/d over boe/d in 4 years (1) Transaction metrics are calculated as of the acquisition announcement date -6-

8 WHAT WE HAVE BUILT THREE MAJOR OPERATED CORE AREAS Base Production of over 23,000 boe/d Weighted ~92% 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 ~2,300,000 gross acres (1,800,000 net acres) Recent Acquisition Significant Undrilled or Recompletion Locations Internally estimated at over 1,500 gross locations Significant Operated Infrastructure Includes U.S. export pipeline to the Pacific Northwest -7-

9 CENTRAL ASSETS AREA OVERVIEW PINE CLIFF S NEWEST AND LARGEST CORE AREA -DEC Gas weighted, low decline assets in the Ghost Pine and Viking areas of Central Alberta Acquisition was accretive on cash flow, production and reserves per share Q production of 11,047 boe/d (88% natural gas), 47% 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% 85% Net working interest acres 244, ,722 % Operated 65% 85% -8-

10 SOUTHERN ASSETS AREA OVERVIEW LOW DECLINE, LOW COST PRODUCTION Q production of 9,935 boe/d (mostly natural gas), 43% of Pine Cliff s production 100% Ownership of a key international NEB regulated pipeline from Alberta to Montana allows premium to AECO pricing 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) High 82% Working Interest -9-

11 EDSON AREA OVERVIEW PINE CLIFF S FIRST CORE AREA, ACQUIRED IN Q Q production of 1,979 boe/d (77% natural gas), 8.5% of Pine Cliff s production Drilled 3 gross (1.0 net wells) in Q1 2016, all of which are performing at or above expectations Over 40 net, high quality locations targeting the Wilrich, Bluesky, Ellerslie and Rock Creek High ownership in key pipelines and facilities Significant source of third party fee revenue 42% working interest, production is 43% operated 40 High Quality Net Locations -10-

12 SUSTAINABILITY OUR KEY FOCUS STRONG EMPHASIS ON GROWTH OF SUSTAINABLE NATURAL GAS ASSETS EV/PDP Reserves PNE s valuation is attractive from a PDP reserves perspective EV/PDP ($/boe) With one of the lowest production declines in the industry, low operating expenses and low overhead, Pine Cliff is positioned to withstand and exploit low commodity price environment Corporate Decline Rate [%] 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0 VII RRX VET TOG CPG POU ARX WCP TOU BNE NVA KEL LTS AAV PEY PGF CR SGY PPY RMP CJ TET NBZ BIR BXE TBE PWT ERF BNP JOY PNE Source: Canaccord Genuity Corp., May 2016 Decline Average: 28% 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. -11-

13 HIGHLY LEVERAGED TO NAT GAS PRICING BUILT FOR SUSTAINABILITY IN A VOLATILE COMMODITY PRICE ENVIRONMENT PNE offers one of the highest exposures to movements in natural gas pricing given low operating expenses and overhead, low decline, no hedging and minimal capital spending Every $0.10 / mcf increase in AECO adds approximately $4.3 million to PNE funds flow annually (or ~$0.015 per share) (1) 2016E CFPS Sensitivity to C$0.50/mcf change in AECO 2016E CFPS Estimate Sensitivities to WTI and AECO Price Changes 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% AAV PNE (AECO 167%) NVA DEE PPY BIR CQE CR POU RMP RRX 2x AECO Sensitivity BXE SPE KEL SGY 0% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 2016E CFPS Sensitivity to US$10/bbl change in WTI 2x WTI Sensitivity Source: Scotiabank, May 2016 (1) Using 22,750 boe/d (mid point of 2016 guidance) and Q royalty rates of 7% -12-

14 LOW CORPORATE BREAK EVEN BUILT FOR SUSTAINABILITY IN A VOLATILE COMMODITY PRICE ENVIRONMENT At $1.74 per mcfe, PNE has one of the lowest all-in corporate break even points in the industry (1) Every $0.10 / mcf increase in AECO adds approximately $4.3 million to PNE funds flow annually (4) Every US$5/bbl movement in WTI changes the break even point by $0.05/mcfe For every $0.30/Boe decrease in operating costs, PNE s break even point decreases by $0.05/mcfe Break Even Analysis (1) $/mcfe Funds Flow Sensitivity to AECO Gas Price $ 1.50 $ 1.74 $ 2.00 $ 2.50 $ 3.00 Royalties (2) 8% (0.13) (0.14) (0.17) (0.21) (0.25) Operating Costs (3) $9.75/boe (1.63) (1.63) (1.63) (1.63) (1.63) Field Netback (0.25) (0.03) Oil Contribution (WTI US$48/bbl) (2)(3) G&A, Interest and Dividends (2) $1.77/boe (0.30) (0.30) (0.30) (0.30) (0.30) Corporate Netback (0.22) Corporate Netback ($/boe) (1.29) Corporate Netback ($/Boe) (1.00) (2.00) $1.50 $1.74 $2.00 $2.50 $ Annualized Funds Flow ($MM) Annual Cash Flow ($mm) (4)(5) (9.9) AECO ($/mcf) Per Basic Share (0.03) Corporate Netback Annualized Funds Flow (1) Before capital expenditures and after taking into effect the estimated impact of the Royalty Disposition (2) First quarter 2016 reported plus estimated impact of the Royalty Disposition (3) 2016 guidance as disclosed in the first quarter 2016 Management s Discussion and Analysis (4) Using 22,750 boe/d (mid point of 2016 production guidance) (5) Using US$48/bbl WTI -13-

15 FIELD BREAK EVEN GAS PRICE The break even gas price was calculated using each producing properties specific OPEX, royalty, third party fee revenue and downstream pipeline tariff 100.0% Pine Cliff Break Even Gas Price by Property Percent of Corporate Production 80.0% 60.0% 40.0% 20.0% Includes OPEX, Royalties and Gas Transportation 0.0% Field Level Break Even Gas Price ($/mcfe) 82% of PNE's Production has Positive Cash Flow at $1.50/mcfe 95% of PNE's Production has Positive Cash Flow at $2.00/mcfe 17.9% 4.7% 82.1% 95.3% -14-

16 LOW COST OPERATOR PINE CLIFF HAS ONE OF THE LOWEST COST STRUCTURES IN THE INDUSTRY Ongoing focus on reducing operating expenses and G&A Current cost reduction initiatives include deferring non-essential maintenance and swabbing in the field, shutting in uneconomic production and continuing to minimize G&A Despite doubling production, only hired eight additional office staff for a total of 31 and remained in the same offices 2015 Opex (inc. transport) per boe 2015 G&A per boe Opex ($/boe) G&A ($/boe) Source: Canaccord Genuity Corp., May 2016 Source: Canaccord Genuity Corp., May

17 2014 SHALLOW GAS ACQUISITION UPDATE In the first 19 months following the 2014 Acquisition: OPEX was reduced by 14% to $7.37/boe (1.22/mcfe) from $8.54/Boe ($1.42/mcfe) Only $650,000 in capital was spent in low cost reactivations resulting in approximately 250 boe/d (1,500 mcfe/d) for capital efficiencies of approximately $2,600 boe/d ($435 mcfe/d) Net production has remained over 5,000 boe/d (30,000 mcfe/d) with an effective annual decline of less than 3% Base decline for the field remains under 8% Sales Volumes (boepd) 6,000 5,000 4,000 3,000 2,000 1,000 Many Islands Long Valley Hatton East Hatton CBM TCPL Outage 0 Arresting Decline And Reducing OPEX -16-

18 DEMONSTRATED PER SHARE VALUE GROWTH Daily Production (boe/d) 25,000 20,000 15,000 10,000 5,000 Production (boe/d) 39% increase in daily production per basic share (1) 775 BOE/D per million shares 4,775 7,888 12,854 Mid-point of 2016 Guidance 22, (est) Daily Production per million shares Reserves (MBoe) 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 Reserves (Mboe) (2) 72% increase in P+P per basic share (3) PDP Total Proved P+P 300, , , , ,000 50,000 PDP/mm shares Proved/mm shares P+P/mm shares 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 ($2,000) AECO ($/mcf) $55 $35 $520 $442 $775 $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 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 AECO ($/mcf) 350, , , , , ,000 50,000 0 NPV 10% ($000 s) PDP Total Proved Total P+P 42% increase in NPV 10% (3) (1) Mid point of 2016 guidance as compared to 2015 (2) Definitions: PDP proved developed producing, P+P proved and probable, NPV10% - net present value of future net revenue discounted at 10% (3) As at December 31, 2015 as compared to December 31,

19 MINIMAL CAPEX INA LOW PRICE ENVIRONMENT 2016 capital budget of $10 million, before acquisitions ( $7.3 million on $25.8 million cash flow; $11.1 million on $39.0 million cash flow) 2016 production guidance of 22,500 to 23,000 boe/d despite low capital expenditures Ongoing focus on optimizing production, minimizing overhead and reducing operating expenses -18-

20 NATURAL GAS OUTLOOK -DEMAND U.S. Annual LNG Exports U.S. Natural Gas Demand Growth in Electric Power Sector LNG started shipping from Gulf of Mexico in Q bcf/d Forecast bcf/d (1.0) (2.0) (3.0) Forecast Coal to gas shifting continues to drive natural gas base demand Source: FirstEnergy Capital Corp., U.S. DOE/EIA (May 2016) Source: FirstEnergy Capital Corp., US DOE/EIA (May 2016) U.S. Net Exports of Natural Gas to Mexico U.S. Gas Demand Growth + Exports Mexico exports are already 1 bcf/d higher than one year ago bcf/d Forecast bcf/d Mexico Exports LNG Exports Domestic Demand Forecast Demand for natural gas continues to accelerate in North America Source: FirstEnergy Capital Corp., U.S. DOE/EIA (May 2016) Source: FirstEnergy Capital Corp., US DOE/EIA (May 2016) -19-

21 NATURAL GAS OUTLOOK -SUPPLY Monthly Dry Shale Gas Production U.S. December HDDs Natural gas supply growth declining for the first time in 15 years bcf/d 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' HDDs 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, /16 Short term pessimism on natural gas is due to one of the warmest winters ever in North America Source: EIA Natural Gas Weekly Update (June 22, 2016) Source: FirstEnergy Capital Corp., U.S. NOAA (May 2016) Natural gas supply growth unlikely to continue without an increase in natural gas prices bcf/d U.S. Natural Gas Supply Growth Source: FirstEnergy Capital Corp., U.S. DOE/EIA (May 2016) Forecast Rigs U.S. Natural Gas Rig Count Jan 2 Mar 27 Jun 19 Sep 11 Dec 4 Source: FirstEnergy Capital Corp., Baker Hughes. Operating natural gas drilling rigs in the U.S. drop below 100 for the first time in 30 years -20-

22 WHY INVEST IN PINE CLIFF High-quality assets with one of the lowest operating costs and lowest decline rates One of the strongest exposures to natural gas price improvements Proven track record of delivering superior long-term results for shareholders Strengthened balance sheet with Royalty Disposition for $25 million (before closing adjustments) and sale of investments for $5.5 million Management team and the board stock ownership creates high alignment with shareholder interests -21-

23 APPENDIX -22-

24 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 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 $25.44 per share on July 8, 2016, while paying over $35.00 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 $61.62 $0.89 $36.18 $ $ Jul-16 $ (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 July 8,

25 RESERVE REPORT (1) Summary of Remaining Oil and Gas Reserves as of December 31, 2015 Light, Medium and Heavy Oil Natural Gas and Coal Bed Methane Natural Gas Liquids Total Oil Equivalent Reserve Category: Gross (Mbbl) Gross (MMcf) Gross (Mbbl) Gross (Mboe) Proved Developed Producing 2, , , ,415.9 Developed Non-Producing 0.8 2, Undeveloped , ,618.6 Total Proved 2, , , ,452.3 Probable , , ,248.9 Total Proved plus Probable 3, , , ,701.3 By Classification By Category 5% 4% 24% PDP Natural Gas 3% PDN/PUD NGLs 73% Probable 91% Oil (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 11, 2016, and Pine Cliff s Annual Information Form dated March 17, 2016, which can be found on and is subject to the same cautionary statements as set out therein -24-

26 SIGNIFICANT LOW RISK DEVELOPMENT SIGNIFICANT UPSIDE POTENTIAL GHOST PINE HORSESHOE CANYON COAL BED METHANE (1) Attractive and predictable low-cost production with long reserve life Over 1,000 gross upside opportunities identified ~515 gross (253 net) have been identified as Tier 1 locations CBM infill drilling opportunities plus potential for conventional drilling 48 booked locations (2) Infrastructure is operated, segregated from conventional production, and has low operating cost requirements (1) Based on Pine Cliff internal estimates (2) Based on an independent reserve report prepared by McDaniel & Associates Consultants Limited. Please read in conjunction with Pine Cliff s Annual Information Form dated March 17, 2016, which can be found on

27 EMERGING COLORADO SHALE PLAY SIGNIFICANT UPSIDE POTENTIAL COLORADO SHALE (1) Industry was drilling this area using horizontal drilling technology in Tier 1 locations with over 4m of net pay ~70% recovery factor at 3 horizontal wells/section = 600 MMcf/well (2) EURs on vertical wells range from MMcf (1) 24 booked locations (2) (1) Based on Pine Cliff internal estimates (2) Based on an independent reserve report prepared by McDaniel & Associates Consultants Limited. Please read in conjunction with Pine Cliff s Annual Information form dated March 17, 2016, which can be found on

28 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 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 Values assigned by the provincial regulator LLR < 1.0 require a security deposit with the regulator Rating is a present day snapshot and is updated monthly -27-

29 PNE LIABILITY PROFILE Over 85% of PNE Well Count Are Producing Wells Gross Net Producing Wells 8,871 6,281 Standing Wells 1,492 1,102 10,363 7,383 Over 80% of our producing wells are shallow gas or CBM wells characterized by: Low water or free liquid production (typically less than 5 bbls/mm) Less than 800 meters deep with no production tubing or coil Tight surface footprint (no tankage or on-site separation) The abandonment and reclamation of these wells can be done as a large area wide program in a cost effective manner Every potential acquisition is scrutinized for impact on PNE s future liability profile, including: Net increment to ARO Profile of economic life of assets and timing of future abandonment Impact on LLR Rating Risk profile of assets Net PNE Producing Wells Producing Well Count By Year* 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Producing Year * Estimate based on Pine Cliff Internal ARO Model 120% 100% 80% 60% 40% 20% 0% Percent of Producing Wells -28-

30 PNE s LLR and ARO As of June 1, 2016, PNE had an Alberta LLR Rating of 1.53 and a Saskatchewan LLR rating of % of licensees have a lower Alberta LLR rating than PNE As at March 31, 2016, PNE recorded an ARO of $277.0 million on its balance sheet ($316.1 million liability inflated at 1.75% and discounted at 2.2%) March 31, 2016 ARO discounted at 10% is $32.9 million $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 ARO Spending Estimate By Year (1) Pine Cliff s low standing net well count and long life and low decline portfolio results in no annual budgeted AROs exceeding $3 Million until (1) Uninflated and timing based on internal estimates -29-

31 ANALYST COVERAGE The following analysts provide research report coverage on Pine Cliff: COMPANY AltaCorp Capital Canaccord Genuity CIBC World Markets Clarus Securities Inc. Desjardins Capital Markets Dundee Capital Markets FirstEnergy Capital GMP Securities Haywood Securities Inc. Industrial Alliance Securities Inc. National Bank Financial Inc. Paradigm Capital Scotia Capital Inc. TD Securities Inc. ANALYST Patrick O Rourke Anthony Petrucci Dave Popowich Robert Paré Jamie Kubik Chad Ellison Michael Hearn Aaron Swanson Darrell Bishop Michael Charlton Dan Payne Ken Lin 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. -30-

32 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 Executive Chairman of the Board Philip B. Hodge President and Chief Executive Officer Kristi L. Kunec Chief Financial Officer and Secretary Cheryne A. Lowe Interim Chief Financial Officer Terry L. McNeill Chief Operating Officer HEAD OFFICE 850, th Street SW Calgary, Alberta T2R 1J4 Phone: (403) Fax: (403) REGISTRAR AND TRANSFER AGENT Computershare Trust Company of Canada AUDITORS Deloitte LLP BANKERS Toronto-Dominion Bank Alberta Treasury Branches National Bank of Canada Western Canadian Bank Business Development Bank of Canada STOCK EXCHANGE LISTING TSX Exchange Trading Symbol: PNE WEBSITE INVESTOR CONTACT info@pinecliffenergy.com -31-