Spring Oil Sands Differently

Transcription

1 Spring 2015 Oil Sands Differently

2 Disclaimer Forward Looking Statements This presentation contains statements that may constitute "forward-looking statements within the meaning of applicable securities legislation. These statements include, among others, statements regarding business strategy, beliefs, plans, goals, objectives, assumptions or statements about future events or performance. By their nature, forward looking statements are subject to numerous risks and uncertainties, some of which are beyond the Company's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, environmental risks, competition from other industry participants, lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect and, as such, undue reliance should not be placed on forward-looking statements. Actual results, performance or achievement could differ materially from those expressed in, or implied by any forward looking statements in this presentation, and accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits the Company will derive therefrom. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Reserves and Resources Except where noted to be from another source, the reserve and resource estimates herein were extracted from reports prepared by GLJ Petroleum Consultants Ltd. (GLJ), an independent professional petroleum engineering firm, in accordance with Canadian Securities Administrators National Instrument (NI ) and the Canadian Oil and Gas Evaluation Handbook (COGEH). Under NI , proved reserves are those reserves which can be estimated with a high degree of certainty to be recoverable. It is 90 percent likely that actual remaining quantities will exceed estimated proved reserves. Probable reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of proved plus probable reserves. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is only a 10 percent probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves. Contingent Resources are those quantities of petroleum estimated, as of a given date, 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. Contingencies may include factors such as economic, legal, environmental, political, and regulatory matters, or a lack of markets. Contingent Resources are further classified in accordance with the level of certainty associated with the estimates and may be sub-classified based on project maturity and/or characterized by their economic status. Resource estimates are described as follows: Best Estimate This is considered to be the best estimate of the quantity that will actually be recovered from the accumulation. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.; High Estimate This is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate. Low Estimate this is considered to be a conservative estimate of the quantity that will actually be recovered from the accumulation. If probabilistic methods were used, the term reflects a P90 confidence level. The preparation of an evaluation requires the use of judgement in applying the standards and definitions contained in COGEH and NI As the Company s independent reserve evaluator, GLJ applies those standards and definitions based on its experience and knowledge of industry practice. However, because the application of the standards and definitions contained in COGEH and NI require the use of judgement there is no assurance that governing securities regulator(s) will not take a different view than GLJ as to some of the determinations in an evaluation. In that regard on May 29, 2013 the Alberta Securities Commission (ASC) issued Staff Notice (Staff Notice) in respect of the certainty levels associated with the estimation and classification of oil and gas reserves and resources based on the ASC staff s interpretation of COGEH. As the Company understands the Staff Notice, if followed the ASC staff s interpretation as set out in the Staff Notice would result in the reclassification of the probable reserves assigned to the Saleski Joint Venture in the December 31, 2014 GLJ report to Best Estimate Contingent Resources. While GLJ has stated it believes that the reserves and resources data set forth in the report were, in all material respects, determined and are in accordance with COGEH, given the different interpretation by the ASC, the Company has elected not to report reserves at the Saleski Joint Venture at this time, and instead has included the volumes and values with Best Estimate Contingent Resources. Unless otherwise stated, all figures presented are in Canadian Dollars. 2

3 Osum Oil Sands Corp. Building a sustainable oil sands business Balanced portfolio of proven & developing plays Production base established in the Cold Lake region Near term focus on production optimization and maximizing operating margin Positioned for manageable, staged growth replicating proven operations Significant long term growth potential across our portfolio Spring 2015 Osum Oil Sands Corp. 3

4 Financial Overview Privately held Solid balance sheet supported by strong shareholder group, including Blackstone Capital, Warburg Pincus, KERN, GIC, KIC and two Canadian pension funds Well-capitalized with approximately $210 million in net working capital1 and $260 million of debt2 Good liquidity - Cash flow is sufficient to cover debt service and sustaining capital at current oil price Experienced Management and Board of Directors 1. As at Dec 31, Includes $100 million from proceeds of callable warrants. 2. US$210 million term loan converted at $0.80 US$/C$. Spring 2015 Osum Oil Sands Corp. 4

5 Project Portfolio Two core areas of operations - Cold Lake and Saleski Cold Lake Orion is producing ~8,000 bpd Robust operation generating positive field netbacks at prices below US $40.00/bbl range (WTI) Combined with the Taiga project, regulatory approval for production expansions to over 50,000 bpd in the Cold Lake area Saleski projects targeting Grosmont carbonate bitumen reservoirs are at a piloting stage Ultimate production potential in excess of 465,000 bpd (net) with over 4 billion bbl of Best Estimate Contingent Resources (net) 1 1. GLJ Petroleum Consultants as at December 31, See Reserves and Resources Disclaimer on page 2. Spring 2015 Osum Oil Sands Corp. 5

6 Cold Lake - Business Advantages Realized Bitumen Price by Region 1,2 $60 Cold Lake Orion Athabasca Pipeline Athabasca Rail $50 $40 $30 ~$34 ~$27 $20 ~$20 $10 $0 Bitumen Blend Price (WCS ) Transportation Realized Bitumen Price Quality Differential vs. WCS Maya Premium to WCS C ost of Diluent Well established sales stream Cold Lake Blend Higher quality, less viscous bitumen leads to a lower diluent blending requirement, and lower quality differential discount than Athabasca bitumen shipped by pipeline Extensive infrastructure provides access to markets, commodities and services Geographic position closer to Edmonton and U.S. markets makes for lower product transport costs and materials import charges Strong, well established, multi-industry community with a resident skilled labour force Mature oil sands area with few new planned large projects moving into construction over the next 5+ years, making it less susceptible to cost inflation and labour challenges than Athabasca region 1. Source: Company Analysis. 2. Assumes US$50/bbl WTI and 28% (US$14.00/bbl) heavy/light differential. Spring 2015 Osum Oil Sands Corp. 6

7 Cold Lake - Orion Orion SAGD project acquired from Shell in July 2014 Assets include a production facility, 5,120 acres of land, and 22 well pairs Production averaged 8,000 bpd over the last 5 months of 2014, up more than 18% under Osum operatorship Plan for 2015 is to maintain average production at 8,000 bpd, allowing for a planned facility turnaround in June Goal is to progressively move production up towards 10,000 bpd through continuous improvement with capital funded from cash flow Low capital intensity, brownfield expansion to double capacity within existing regulatory approvals will be progressed in 2015/16 with FID subject to financing Spring 2015 Osum Oil Sands Corp. 7

8 Cold Lake - Production Growth Plans Strong base of profitable commercial production at Orion Opportunity to significantly increase production through manageable, staged growth replicating proven operations Existing infrastructure and operational expertise reduce risk and create synergies BPD 70,000 60,000 50,000 40,000 30,000 20,000 10,000 - Orion Potential R egulatory Approval Producing Orion Expansion Taiga Phase 1 Taiga Phases 2-3 Taiga Phase 4 Spring 2015 Osum Oil Sands Corp. 8

9 Saleski - Significant Opportunity Grosmont carbonates Over 4 Billion bbl (net) Best Estimate Contingent Resources (per GLJ) 1 Thick, laterally extensive oil columns Stacked target zones Material first mover position Partnered in pilot (40% WI) to share costs of de-risking. Have seen encouraging results to date Leveraging knowledge gained from pilot to advance projects on adjacent 100% WI acreage Move to demonstration phase when the market supports 1. GLJ Petroleum Consultants. Saleski properties as at December 31, See Reserves and Resources Disclaimer on page 2. Spring 2015 Osum Oil Sands Corp. 9

10 Focus Moving Forward Expand our commercial production base at Cold Lake Orion production optimization to approach 10,000 bpd nameplate capacity Orion Phase 2 (10,000 bpd) and Taiga Project Phase 1 Facility (12,500 bpd) are near term options, when conditions are right Taiga Phases 2-4 provide longer term growth Staged growth potential in excess of 50,000 bpd Demonstrate the potential of our Saleski Carbonates Saleski JV Phase 1 commercial project approved (10,700 bpd gross) Osum-operated Sepiko Kesik project is on track for receipt of regulatory approval in 2015 Saleski West & Liege delineation and assessment, as required Spring 2015 Osum Oil Sands Corp. 10

11 Short Term Capital Requirements Operating cash flow and cash on hand will fund current operations and corporate costs, including debt service Orion Phase 2 will be funded with an appropriate level of debt and equity but once on stream, the need for additional equity should be sharply reduced Timing Funding Source Corporate G&A Ongoing Cash Flow and Cash on Hand Orion Production Optimization Ongoing Cash Flow Orion Phase TBD Equity, Debt and Cash Flow Taiga Phase TBD Debt and Cash Flow Saleski Demonstration TBD Equity and Cash Flow Spring 2015 Osum Oil Sands Corp. 11

12 Summary Building a sustainable oil sands business Well-capitalized with a solid balance sheet supported by strong shareholder group, including Blackstone Capital, Warburg Pincus, KERN, GIC, KIC and two Canadian pension funds Good liquidity - Cash flow is sufficient to cover debt service and sustaining capital at current oil price Balanced portfolio of proven & developing plays Production base established in Cold Lake region with near term focus on production optimization and margins Positioned for manageable staged growth replicating proven operations Significant growth potential for the long term across our portfolio Experienced Management and Board of Directors Spring 2015 Osum Oil Sands Corp. 12

13 Orion SAGD Oil Sands Project - Cold Lake, Alberta

14 Operating Results Actual Actual Q Q Change Bitumen Production 2 bbl/d 7,560 8,286 10% WTI US$/bbl $94.54 $ % Cold Lake Blend US$/bbl $73.01 $ % Differential % 23% 21% Differential US$/bbl $21.53 $ % Foreign Exchange Rate US$/C$ $0.91 $0.88-3% AECO Gas Price C$/mcf $4.02 $4.01 0% Bitumen Field Price C$/bbl $69.93 $ % Royalties C$/bbl ($5.50) ($4.17) - 24% Operating Costs C$/bbl ($16.40) ($17.80) 9% Field Netback C$/bbl $48.03 $ % 1 Q3 results and metrics are calculated using 61 days of Orion operations subsequent to it acquisition on July 31, Volumes from the Saleski pilot are not included Spring 2015 Osum Oil Sands Corp. 14

15 Balance Sheet A ctual Aug- Sept A ctual C$ Million 2014 Q Change Cash Operating Netback $22.2 $ % Working Capital Surplus 1 $205.5 $ % Long Term Debt Outstanding 2 $232.3 $ % Basic Shares Outstanding % 1 Includes $100 million from proceeds of callable warrants 2 Consists of the non- current portion of the US$210 million term loan translated to C$ at the period end exchange rate. Amount has not been reduced by unamortized transaction costs. The current portion is accounted for in working capital. Term loan matures on July 31, 2020 and bears a floating interest rate based on the greater of LIBOR or 1%, plus 5.5%. 3 Includes 8.0 million callable common share purchase warrants with a $12.50/share exercise price Spring 2015 Osum Oil Sands Corp. 15

16 Reserves Reserves and Resources (MMbbls) Cold Lake Saleski 1 Other Total Proven Reserves Proven + Probable Reserves Best Estimate Contingent Resources (net) , ,289 Before Tax Present Value 10% ($MM) Proven Reserves 2 $399 $399 Proven + Probable Reserves 2 $1,531 $1,531 Best Estimate Contingent Resources (net) 2 $494 $6,675 $328 $7,497 Potential Production Capacity (net) 65,000 bpd 465,000 bpd 40,000 bpd 570,000 bpd Net Acreage 26,000 acres 164,300 acres 5,700 acres 196,000 acres 1. Includes Osum s 40% interest in the Saleski JV,100% of the remaining Saleski projects 2. GLJ Petroleum Consultants as at December 31, See Reserves and Resources Disclaimer on page 2. Spring 2015 Osum Oil Sands Corp. 16

17 Board of Directors Name / Title Richard (Rick) George, OC Chairman Relevant Prior Experience Former CEO & Director of Suncor Energy Director of the Royal Bank of Canada, Anadarko Petroleum, and Penn West Exploration (Chairman) Partner, Novo Investment Group Angelo Acconcia Senior Managing Director, Blackstone Capital Partners and Blackstone Energy Partners Director of Alta Energy, Hunter Oil & Gas, LLOG Exploration, and Royal Resources Vincent Chahley Independent Businessman Former Managing Director of Corporate Finance at FirstEnergy Capital George Crookshank Independent Businessman Former Vice President of Finance and Chief Financial Officer of OPTI Canada Inc. (2002 to 2007) William A. Friley Independent Businessman President and Chief Executive Officer of Telluride Oil and Gas and President of Skyeland Oils David Krieger Managing Director, Warburg Pincus LLC Director of Black Swan Energy, Canbriam Energy, Ceres, Endurance Energy, First Green Partners, Kosmos Energy, MEG Energy, Velvet Energy and West Valley Energy Gary Levin Principal, Blackstone Capital Partners and Blackstone Energy Partners Director of LLOG Exploration and Vince Oil & Gas Cameron McVeigh President, Camcor Partners Inc. Director of Tangle Creek Energy Brian Reinsborough Founder, President & CEO, Venari Resources LLC Former President of Nexen Petroleum U.S.A. Jeff van Steenbergen Managing Partner, KERN Energy Partners Director of Aduro Resources, Altex Energy, Cobalt International Energy (US), Fairfield Energy (UK), Magma Global Ltd., and Seven Generations Energy Steve Spence President & CEO of Osum Spring 2015 Osum Oil Sands Corp. 17