Osum Oil Sands Corp. Annual General Meeting. Metropolitan Centre, Calgary

Transcription

1 Osum Oil Sands Corp. Annual General Meeting Metropolitan Centre, Calgary June 1, 2016

2 Disclaimer Forward Looking Statements This presenta,on contains statements that may cons,tute "forward-looking statements within the meaning of applicable securi,es legisla,on. These statements include, among others, statements regarding business strategy, beliefs, plans, goals, objec,ves, assump,ons or statements about future events or performance. By their nature, forward looking statements are subject to numerous risks and uncertain,es, some of which are beyond the Company's control, including the impact of general economic condi,ons, industry condi,ons, vola,lity of commodity prices, currency fluctua,ons, environmental risks, compe,,on from other industry par,cipants, lack of availability of qualified personnel or management, stock market vola,lity and ability to access sufficient capital from internal and external sources. Readers are cau,oned that the assump,ons used in the prepara,on of such informa,on, although considered reasonable at the,me of prepara,on, 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 presenta,on, and accordingly, no assurance can be given that any of the events an,cipated 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 inten,on or obliga,on to update or revise any forward-looking statements, whether as a result of new informa,on, future events or otherwise. Reserves and Resource Except where noted to be from another source, the reserve es,mates herein were extracted from reports prepared by GLJ Petroleum Consultants Ltd. (GLJ), an independent professional petroleum engineering firm, in accordance with Canadian Securi,es Administrators Na,onal Instrument (NI ) and the Canadian Oil and Gas Evalua,on Handbook (COGEH). Under NI , proved reserves are those reserves which can be es,mated with a high degree of certainty to be recoverable. It is 90 percent likely that actual remaining quan,,es will exceed es,mated proved reserves. Probable reserves are those addi,onal reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quan,,es recovered will be greater or less than the sum of proved plus probable reserves. Possible reserves are those addi,onal reserves that are less certain to be recovered than probable reserves. There is only a 10 percent probability that the quan,,es actually recovered will equal or exceed the sum of proved plus probable plus possible reserves. The prepara,on of an evalua,on requires the use of judgement in applying the standards and defini,ons contained in COGEH and NI As the Company s independent reserve evaluator, GLJ applies those standards and defini,ons based on its experience and knowledge of industry prac,ce. However, because the applica,on of the standards and defini,ons contained in COGEH and NI require the use of judgement there is no assurance that governing securi,es regulator(s) will not take a different view than GLJ as to some of the determina,ons in an evalua,on. Resource es,mates herein are those of the Company s management and are not in accordance with NI or COGEH. Presenta7on of Financial Informa7on Unless otherwise stated, all figures presented are in Canadian Dollars.

3 2015 Corporate Highlights Production and Cashflow 7,736 bbl per day of commercial production from Cold Lake Positive field-level netbacks below US$40 WTI - significant structural advantages compared to Athabasca thermal producers Solid Financial Position (1) $199mm in net working capital (2), US$15mm undrawn revolver $284mm term loan (3) maturing in 2020 Active commodity hedging program covering about 50% of production Prudently managing spending within context of current environment Positioned for Growth High quality assets with defined and approved growth projects in the Cold Lake region that allow for staged expansions to over 50,000 bpd, when commodity prices allow Significant long-term upside in the bitumen carbonate resource play (Saleski) Leadership & Support Strong shareholder group including Blackstone Capital, Warburg Pincus, Azimuth Capital, GIC, KIC and two Canadian pension funds Experienced Management & Board of Directors 1. As at December 31, Excludes net unrealized hedging assets. Includes $100 million from proceeds of callable warrants. 3. Long term portion of principal outstanding on US$210 million term loan converted at December 31, 2015 foreign exchange rate. 3

4 Core Areas Cold Lake Profitable production and growth Grosmont Carbonates (Saleski) An enormous opportunity in the bitumen carbonate resource play 4

5 Cold Lake Portfolio Orion Taiga Mbpd Average Produc,on (2015) Nameplate Capacity Regulatory Approval 5

6 Cold Lake Advantages Advantages Impact the Bottom Line Premium heavy oil - Well established Cold Lake Blend with lower diluent blending requirement and quality differential discount Location - Access, infrastructure, closer to Edmonton and U.S. markets Community - Well established, rural, multi-industry community with a resident skilled labour force 6

7 Cold Lake Orion Orion SAGD asset was acquired from Shell in July % WI in a production facility, 5,440 acres of land, and 22 well pairs on 6 well pads Regulatory approval for expansion to 20,000 bbl per day Production: 7,736 bbl per day (2015 Average) Reserves: Proven (1P) 47 MMbbl, Proven plus Probable (2P) 127 MMbbl 1 1. GLJ Petroleum Consultants. Reserves and resources as at Dec. 31,

8 Cold Lake Taiga Taiga Project Thermal in-situ project to be developed through staged expansions Regulatory approval in place for 35,000 bpd and the potential to reach 45,000 bpd at full development 100% W.I. in 22,422 acres located 10 miles from Orion Two proven commercial high quality, laterally predictable shoreface reservoir zones Producing Analogs Clearwater Osum Orion Lower Grand Rapids Pengrowth Lindbergh & CNRL Wolf Lake B10 Reserves: Proven plus Probable (2P) 376 MMbbl 1 1. GLJ Petroleum Consultants. Reserves and resources as at Dec. 31,

9 Grosmont Carbonates Portfolio Saleski & Liege Projects High quality resource position in world scale play Over 4 billion bbl (net) recoverable resources1 Thick, laterally extensive oil columns in stacked target zones Established commercial potential through pilot project (shut-in in Q3 2015) Leveraging knowledge gained to date to refine our plans with a focus on Osum s Grosmont C position 1. Management es,mate. See Reserves and Resources Disclaimer on page 2. 9

10 2015 Review

11 Responsible management In a low price environment Optimized Orion Operations Managed Commodity Risk Disciplined Capital Allocation Reduced Costs Record oil volumes in Q1 15, but with poor steam reliability. Lower oil volumes in 2H 15. Increased boiler uptime & reliability following June plant turnaround (25+% gain) Increased steam output by adding reverse osmosis water treatment unit Installed artificial lift on four additional wells in Q4 15 with positive results Realized hedging gains of $18.8 million in 2015 significantly enhancing liquidity position Hedges are being rolled forward and reviewed at least quarterly Discretionary capital spending restricted to projects that add incremental production or reduce operating costs Low sustaining capital and decline rates allow for stable production with limited immediate investment Renegotiated key contracts to reduce operating expenses Reduced G&A primarily through decreased head office staffing levels (Completed in Q2 16) Suspended Pilot operations terminated on completion of ~5 years of operations Saleski Commercial demonstration phase suspended Maintained HSE Performanc e Health, Safety, and Environmental performance was not sacrificed No recordable incidents in 2015 (327,000 manhours) Environment: 1 reportable incident 11

12 Grosmont Carbonates 2015 The Saleski Pilot project (Joint Venture) was completed and the facility was shut-in in September 2015 (~5 years in operation) 40% non-operated interest in 1,800 bpd pilot facility Reservoir performance was proven using a variant of the established CSS process Both the Grosmont C & D reservoirs were shown to be productive The Grosmont C wells were progressed furthest in the pilot, showing the potential for high recovery factors and thermal efficiency (SOR) near the commercial range Commercial Demonstration Phase planning was suspended We adopted a low-cost hold strategy to preserve knowledge and future value of these assets 12

13 Orion Production and Injection Steam Reliability >95% Steam Reliability <70% Turnaround 2015 production averaged 7,736 bpd Lower steam injection rates early in year resulted in reduced production in Q

14 Cold Lake Netbacks Cold Lake advantages resulted in positive netbacks $15.75/bbl netback in 2015 when oil averaged below US$50/bbl WTI (without hedging) Operating breakeven is below US$40/bbl WTI $100 $90 $80 $70 $94.54 Orion Netbacks - Since Acquisition $73.15 Hedging Gains Field Netback C$/bbl Royalties C$/bbl Operating Costs C$/bbl WTI US$/bbl $60 $50 $40 $30 $20 $48.03 $33.24 $48.56 $14.76 $25.80 $57.96 $10.76 $13.80 $46.44 $14.36 $8.43 $42.17 $10 $- Q Q Q Q Q Q

15 Orion Operating Results (2) Change - $ Change - % Bitumen Produc,on (1) bbl/d 7,736 7,996 (260) (3%) WTI US$/bbl (32.94) (40%) Cold Lake Blend US$/bbl (30.00) (47%) Differen,al US$/bbl (2.94) (16%) Differen,al % 30.6% 21.90% 8.70% 40% Foreign Exchange Rate US$/C$ (0.110) (12%) AECO Gas Price C$/mcf (1.24) (31%) Bitumen Field Price C$/bbl (26.15) (43%) Royal,es C$/bbl (3.98) (85%) Opera,ng Costs C$/bbl % Field Netback Before Hedging C$/bbl (23.07) (59%) Realized Hedging Gains C$/bbl Cash Opera,ng Netback Amer Hedging C$/bbl (16.97) (44%) Field Netback Before Hedging C$000 44,446 Realized Hedging Gains (3) C$000 17,223 Cash Opera,ng Netback Amer Hedging C$000 61,669 1 Volumes from the Saleski pilot are not included represents the period following the Orion acquisi,on only 3 Financial hedging gains only. Physical hedging gains are included in bitumen revenue 15

16 Balance Sheet 31-Dec Dec-14 Cash and Cash Equivalents (1) C$ MM Working Capital Surplus (2) C$ MM Long Term Debt Outstanding (3) C$ MM Basic Shares Outstanding (4) MM (1) (2) (3) (4) Includes restricted cash Excludes net unrealized hedging assets. Includes $100MM proceeds from callable common share purchase warrants Consists of the outstanding non-current portion of the term loan translated to C$ at the period-end exchange rate. The current portion is included in the working capital surplus. The term loan bears a floating interest rate based on the greater of LIBOR or 1%, plus 5.5%. Includes 8.0 million callable common share purchase warrants with an exercise price of $12.50/share 16

17 Reserves Cold Lake Saleski 1 Other Total Reserves (MMbbls) Proven Reserves Proven + Probable Reserves Present Value Before Tax 10% ($MM) Proven Reserves 2 $275 $275 Proven + Probable Reserves 2 $1,343 $1,343 Potential Production Capacity (net) 65,000 bpd 465,000 bpd 40,000 bpd 570,000 bpd Net Acreage 26,000 ac 164,300 ac 5,700 ac 196,000 ac 1. Includes Osum s 40% interest in the Saleski JV, and 100% of the remaining Saleski projects, Management view 2. GLJ Petroleum Consultants as at December 31, See Reserves and Resources Disclaimer on page 2. 17

18 Future Capital Requirements Timing Cash Flow Cash on Hand Maintenance Capital Ongoing ü ü Corporate G&A and debt service Ongoing ü ü Orion Op,miza,on Ongoing ü ü Debt Equity Orion Expansion ü ü ü ü Taiga (Phase 1) TBD ü ü ü Saleski (Demonstra,on) TBD ü ü 18

19 2016 Focus Manage our finances prudently to protect the business through the downturn Focus on our Cold Lake assets in the near term, adding production and reducing structural costs Pursue small production enhancement projects at Orion that are profitable in today s business conditions, and make the business more robust (e.g. debottlenecking, well stimulations) Larger expansions will be considered as oil prices recover to a point that provides the confidence to move forward Deliver superior safety and environmental performance 19

20 Summary 2015 was a challenging year characterized by declining oil prices and production swings We achieved positive operating netbacks through the year, which were further uplifted by a successful hedging program Our liquidity remains strong We have positioned the business to weather the downturn and will continue to manage our finances prudently Our operational priorities for 2016 are to stabilize production, and further reduce costs Our near term discretionary capital expenditures are focused on small production enhancement projects at Orion that are profitable in today s business conditions We are well positioned for the long term with a portfolio of significant growth opportunities 20

21 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 Explora,on (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 Explora,on, 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 Execu,ve 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 Explora,on and Vine 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, Azimuth Capital Management Director of Aduro Resources, Altex Energy, Cobalt Interna,onal Energy (US), Fairfield Energy (UK), Magma Global Ltd., and Seven Genera,ons Energy Steve Spence President & CEO of Osum 21

22 Thank You