Corporate Presentation

Transcription

1 Corporate Presentation January 2016 David J. Wilson, President & Chief Executive Officer Sadiq H. Lalani, Vice President, Finance & Chief Financial Officer

2 Advisory Regarding Forward-Looking Statements 1 Certain information with respect to Kelt Exploration Ltd. ( Kelt or the Company ) contained herein, including expectations, beliefs, plans, goals, objectives, assumptions, information and statements about future events, conditions, results of operations, performance, financial position, average daily production and land holdings, Kelt s planned capital expenditure program and the nature of the expenditures, drilling plans, expected drilling and completion costs, expected average production, the expected splits among crude oil, NGLs and gas and forecasted commodity prices and factors affecting natural gas prices, forecasted general and administrative expenses, interest expenses, revenue, operating income, operating netbacks, funds from operations and year-end bank debt, management s assessment of future potential, including numerous years of drilling inventory and expectations with respect to natural gas supply in the Unites States of America, contain forward-looking statements. These forward-looking statements are based on assumptions and are subject to numerous risks and uncertainties, certain of which are beyond the Company s control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency exchange rate fluctuations, imprecision of reserve estimates, environmental risks, competition from other explorers, stock market volatility, ability to access sufficient capital and receipt of necessary regulatory and shareholder approvals. We caution that the foregoing list of risks and uncertainties is not exhaustive. Statements relating to reserves or resources are deemed to be forward-looking statements as they involve the implied assessment, based on current estimates and assumptions that the reserves and resources can be profitably produced in the future. Readers are cautioned that disclosure of any well test results are not necessarily indicative of long-term performance. Kelt s actual results, performance or achievement could differ materially from those expressed or implied by, these forward-looking statements and, accordingly, no assurance can be given that any events anticipated by the forward-looking statements will transpire or occur. As a result, undue reliance should not be placed on forward-looking statements. In addition, the reader is cautioned that historical results are not necessarily indicative of future performance. The forward-looking statements contained herein are made as of the date hereof and the Company does not intend, and does not assume any obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise unless expressly required by applicable securities laws. Certain information set out herein may be considered as financial outlook within the meaning of applicable securities laws. The purpose of this financial outlook is to provide readers with disclosure regarding Kelt s reasonable expectations as to the anticipated results of its proposed business activities for the periods indicated. Readers are cautioned that the financial outlook may not be appropriate for other purposes.

3 Why Invest in Kelt? 2 TRACK RECORD/EXPERIENCE: the Kelt management team has a track record of creating shareholder value, previously with Celtic Exploration Ltd., sold in February 2013 for $3.2 billion. GROWTH ORIENTED: Kelt maintains financial flexibility during periods of opportunistic market conditions, providing the Company with the ability to act on new opportunities quickly and effectively. OBJECTIVE: Kelt aims to deliver profitable future growth targeting an inception to date production per share CAGR of 20% to 25%; generating an inception to date recycle ratio of 2.0 times or better based on proved plus probable reserves; and at the same time, continuing to add future drilling locations to its inventory.

4 Common Share Information 3 Stock Exchange listing TSX Trading symbol KEL Market capitalization Jan / 4 / 2016 ) $ 750 million 52-week trading range $ 3.29 $ 9.95 Common shares issued million Stock options (6.7 MM) & RSUs (1.2 MM) 7.9 million ( 4.7% ) average exercise price of stock options is $ 7.40 / share Total diluted common shares million Directors & Officers ownership 17% ( 18% diluted ) D&O s have participated in all eight equity offerings completed to date (for aggregate gross proceeds of $593 MM) investing a total of $100 MM

5 Capital Expenditures 4 ( $ millions ) Forecast 2016 Budget 2016/15 Change Drilling & Completions % Facilities, Equipment & Pipeline Infrastructure Land, Seismic & Asset Acquisitions [1] % % Sub-total % Corporate Acquisitions [2] [3] - - Total Capital Expenditures [4] - 78% Notes: [1] Asset acquisitions are net of property dispositions. [2] Acquisition of Capio Exploration Ltd. (private company), including value of debt assumed. [3] Acquisition of Artek Exploration Ltd. (public company), including value of debt assumed. [4] First half 2016 capital spending expected to be $40.0 to $45.0 million.

6 Drilling Program Gross Wells Net Wells Average WI % Alberta [1] % British Columbia [2] % Total % 2016 Gross Wells Net Wells Average WI % Alberta [1] % British Columbia [2] % Total % Notes: [1] Alberta drilling prospects include: (a) Grande Prairie ( Pouce Coupe / Progress / Spirit River / La Glace ): - Montney - Doig - Charlie Lake - Halfway (b) Karr: - Montney - Dunvegan (c) Grande Cache: - Cretaceous [2] B.C. drilling prospects include: (a) Inga / Fireweed / Stoddart: - Montney - Doig - Baldonnel

7 Production Outlook Actual (average) 2015 Forecast Range (average) 2016 Budget (average) 2016 Split Oil ( bbls/d ) 3,413 5,000 5,250 5,800 26% NGLs ( bbls/d ) [1] 924 1,650 1,750 2,200 10% Gas ( mcf/d ) 50,516 71,100 72,000 84,000 64% Combined ( BOE/d ) 12,756 18,500 19,000 22,000 Per MM Shares ( BOE/d ) Note: [1] The 2016 forecasted NGLs production mix is as follows: pentane (35%), butane (30%), propane (30%) and ethane (5%).

8 Production Growth ( since inception ) 7 PRODUCTION ( BOE / d ) PRODUCTION PER MM SHARES ( BOE / d ) 28,000 CAGR since 2013 = 77% 160 CAGR since 2013 = 35% 24,000 20,000 18,500 22, ,000 12,000 12,756 11,850 14, ,000 4, ,961 3, ,419 4,337 6,650 8, [E] 2016 [E] [E] 2016 [E] Oil / NGLs Gas

9 Commodity Prices 8 ( CA $, unless otherwise specified ) (E) 2016 (E) 2016/15 Change WTI Crude Oil ( USD/bbl ) [1] US $ US $ US $ % WTI Crude Oil ( CAD/bbl ) $ $ $ % NYMEX Natural Gas ( USD/mmBtu ) US $ 4.37 US $ 2.67 US $ % AECO 5A Natural Gas ( CAD/GJ ) [2] $ 4.27 $ 2.56 $ % Exchange Rate ( CAD/USD ) Exchange Rate ( USD/CAD ) $ US $ $ US $ $ US $ % - 9% Kelt realized Oil price ( $/bbl ) Percent of WTI CAD $ % $ % $ % + 18% Kelt realized NGLs price ( $/bbl ) Percent of WTI CAD $ % $ % $ % + 15% Kelt realized Gas price ( $/mcf ) $ 4.75 $ 2.77 $ % Kelt realized Combined price ( $/BOE ) $ $ $ % Notes: [1] As at January 4, 2016, the forward strip price for WTI crude oil for Feb-Dec 2016 was US $41.66/bbl (19% below 2016 forecast). [2] As at January 4, 2016, the forward strip price for AECO natural gas for Feb-Dec 2016 was $2.43/GJ (18% below 2016 forecast).

10 Gas Marketing / Transportation Contracts 9 Firm Service ( mmbtu / d ) NIT AECO Spectra Station 2 Alliance Chicago TOTAL ALBERTA Current to Nov/30/15 Dec/1/15 to Oct/31/16 Nov/1/16 to Oct/31/17 38,000 38,000 38, ,100 8,100 38,000 46,100 46,100 BRITISH COLUMBIA Current to Nov/30/15 Dec/1/15 to Oct/31/16 Nov/1/16 to Oct/31/17 6, ,500 5,500 5,500-17,200 17,200 11,600 22,700 22,700 Note: [1] Kelt also has interruptible service on TCPL (AECO pricing), Spectra (Station 2 pricing) and Alliance priority interruptible (Chicago pricing).

11 Netbacks 10 ( $ / BOE ) (E) 2016 (E) 2016/15 Change Oil & gas revenue % Realized hedging gain ( loss ) ( 0.08 ) ( 0.05 ) - Royalties ( % of revenue ) ( 13.3% ) ( 10.0% ) ( 10.7% ) + 7% Transportation expense ( 2.30 ) ( 2.25 ) ( 2.17 ) - 4% Production expense ( ) ( ) ( ) - 4% Operating netback [1] % G&A expense ( 0.78 ) ( 0.78 ) ( 0.78 ) Interest expense ( 0.18 ) ( 0.95 ) ( 0.96 ) Other income ( costs ) Funds from operations [1] % Note: [1] See Financial Advisories

12 Facility Spending to result in Cost Savings 11 In each of its core areas, Kelt embarked on projects that were expected to reduce corporate operating and transportation expenses: KARR: Pembina Pipeline Corporation announced the construction of a 30,000 bbl/d Karr Lateral pipeline and LACT Unit as part of its Phase III pipeline expansion. Upon completion in early-2016, Kelt will have all of its oil pipeline connected, eliminating trucking requirements. Water injection was implemented in Q2-15. POUCE COUPE/PROGRESS: Kelt is installing a LACT Unit at its 6-19 Progress battery and at the same time will run a liner through an existing pipeline to connect its Pouce Coupe oil and condensate to the Progress LACT Unit, eliminating oil trucking and third party terminal fees. In addition, several water injectors have been activated eliminating water trucking fees. VAHALLA/LA GLACE: a LACT Unit has been installed and water injection has been activated, eliminating higher costs to truck oil and fluids. BRITISH COLUMBIA: Kelt converted an existing pipeline acquired in the Stoddart acquisition into an oil sales line that, starting in Dec-15, delivers clean oil from Inga to a Company owned Pembina Terminal. A water injector was activated in Q2-15. Note: The Lease Automatic Custody Transfer or LACT Unit is the critical system in measuring the volume of crude oil and petroleum products when it is being transferred from the production site to trucks, pipelines or storage tanks.

13 Financial Outlook Forecast Range 2016 Budget Revenue, before royalties ( $ MM ) Funds from operations ( $ MM ) [1] Per share diluted ( $/share ) Capital expenditures ( $ MM ) [2] Net debt, at year-end ( $ MM ) [3] Debt to funds flow ratio [4] 1.9 x Notes: [1] See Financial Advisories [2] Capital expenditures are net of dispositions, if any. [3] Current availability under Kelt s credit facility is $275.0 million, with additional funds available up to the total credit facility commitment of $300.0 million subject to approval of the lending syndicate, leaving sufficient unused credit capacity and providing financial flexibility. Kelt has entered into an interest rate swap fixing the B/A rate at 0.925% for two years ending June 30, Using current stamping fees of 3.0%, this provides the Company with an all-in fixed borrowing rate of 3.925% on $100.0 million of bank debt. [4] Debt to funds flow ratio is calculated using estimated bank debt net of working capital ( net debt ), at December 31, 2016 divided by estimated 2016 funds from operations, calculated using estimated commodity prices.

14 Commodity Price Sensitivities Funds from Operations Forecasted 2016 Funds from Operations - Sensitivities to varying Commodity Prices ( $ millions ) WTI Oil AECO Gas US $ US $ US $ US $ $ $ $ $ Notes: [1] Sensitivities to WTI are based on increments of US $10.50/bbl, representing 20% of the forecasted US $51.50/bbl price. [2] Sensitivities to AECO are based on increments of $0.75/GJ, representing 20% of the forecasted $2.95/GJ price. [3] The USD/CAD exchange rate is forecasted as follows: at WTI US $41.00/bbl, the exchange rate is US $0.690 (or CA $1.448); at WTI US $51.50/bbl, the exchange rate is US $0.710 (or CA $1.408); at WTI US $62.00/bbl, the exchange rate is US $0.731 (or CA $1.368); at WTI US $72.50/bbl, the exchange rate is US $0.753 (or CA $1.328). [4] Forecasted 2016 funds from operations based on forward strip prices as at January 4, 2016 of US$41.66/bbl (WTI crude oil) and $2.43/GJ (AECO gas) would be approximately $72.0 million.

15 Recycle Ratio ( since inception ) 14 As at December 31, 2014 Recycle Ratio ( since inception ) Proved Proved + Probable Capital expenditures plus future development capital expenditures ( $MM ) 1, ,400.3 Reserve additions, net ( MMBOE ) Finding, Development & Acquisition ( FD&A ) cost ( $/BOE ) Average corporate operating netback ( $/BOE ) Recycle ratio 1.2 x 1.8 x

16 Core Areas 15 Inga / Fireweed / Stoddart Grande Prairie Karr Grande Cache Grande Prairie ( includes Pouce Coupe, Progress, Spirit River & La Glace ) : Montney/Doig gas development Montney light oil development Charlie Lake light oil development Halfway light oil development Karr: Montney/Dunvegan light oil exploration/development Grande Cache: Cretaceous gas development Cretaceous oil/gas exploration Inga / Fireweed / Stoddart ( B.C. ) : Montney/Doig condensate rich gas exploration/development Baldonnel oil exploration/development

17 Land Holdings 16 Gross Acres Net Acres Average WI Net Sections Developed 387, ,866 53% 321 Undeveloped 666, ,318 81% 840 Total 1,053, ,184 71% 1,161 Note: Growth in net land holdings since March 31, 2013: Date Net Acres Net Sections % Growth since Mar/31/2013 Mar/31/ , Dec/31/ , % Dec/31/ , % Sep/30/ ,184 1, %

18 Kelt Land Fairway 17 Fireweed Inga Stoddart Fort St. John Pouce Coupe Progress Spirit River Valhalla / La Glace Grande Prairie Kelt Lands British Columbia Alberta Karr

19 Grande Prairie 18 Pouce Coupe Progress Spirit River LAND Gross: 308,908 acres ( 483 sections ) Net: 195,017 acres ( 305 sections ) OPERATIONS Valhalla / La Glace Top five IP30 wells ( gross sales, BOE/d ): Kelt Lands (1) Pouce Coupe W6 Montney ( 95% gas ) 1,401 (2) Progress W6 Halfway ( 83% oil ) 1,187 (3) La Glace W6 Montney ( 88% oil ) 1,089 (4) Pouce Coupe W6 Montney ( 83% oil ) 1,047 (5) Pouce Coupe W6 Montney ( 82% oil ) 975 Note: % oil above includes crude oil and natural gas liquids.

20 Pouce Coupe LM Kelt Lands UM UM+LM 8-18 Unit Outline 13-8 Pouce Coupe South Boundary B Unit #2 67.9% WI Operated 14-9 Progress Halfway O Pool Unit 7.8% WI Pouce Coupe South Boundary A Unit 32.0% WI Kelt Pouce Coupe Compressor Facility (100% WI) Progress Gas Plant (20% WI) Targeting Montney (upper and middle/lower) and Doig formations. Ownership in pipeline infrastructure, gas compression and a 20% interest in the CNRL Progress 140 MMcf/d Gas Plant. Montney drilling to date has been successful for both oil and gas.

21 Progress / Spirit River PROGRESS: Targeting Montney and Halfway formations. SPIRIT RIVER: 20 to 25 vertical up-hole re-completion candidates in the Charlie Lake. Gamma Ray Density Porosity Worsley (O) 20 Progress Halfway Gas Unit #1 15.9% WI (50%) Montney Y J (Upper) J (Lower) H2O Disposal 15-5 Charlie Lake R 2-12 (25%) Halfway Kelt Lands Unit Outline Spirit River Charlie Lake E & M Unit 100% WI Operated F D M E

22 Valhalla / La Glace 21 Kelt Valhalla/La Glace 3,500 bopd MMcf/d Facility (100% WI) Sexsmith Gas Plant (0.3% WI) Targeting the Montney formation. Ownership in pipeline infrastructure, oil battery and gas compression. Ownership interest (0.3%) in the Encana Sexsmith 200 MMcf/d Gas Plant. Kelt Lands

23 Karr MM 2015 drill drill 16-8 (75%) Kelt Lands OS H2O Disposal OS OS (75%) MM 4-2 OS 2015 MM Middle Montney H2O water OS on-stream LAND Montney Rights: 37.0 sections ( gross ) 35.8 sections ( net ) OPERATIONS Top four IP30 wells ( gross sales, BOE/d ): (1) Karr 102/ W6 ( 78% oil ) 1,360 (2) Karr 100/ W6 ( 57% oil ) 1,022 (3) Karr 100/ W6 ( 49% oil ) 495 (4) Karr 100/ W6 ( 66% oil ) 452 Note: % oil above includes crude oil and natural gas liquids.

24 Grande Cache 23 Copton 25 MMcf/d Gas Plant (30% WI) Narraway 135 MMcf/d Gas Plant (7% WI) Cretaceous dry-gas producing area. Stable and low-decline production. Ownership in pipeline infrastructure, gas compression and gas plants. Land held by production. Future upside potential at +$3.50/mcf gas prices. Kelt Lands

25 British Columbia DOIG Lands Fireweed 3-33 Doig Slick-water Completion Inga Doig Slick-water Completion Kelt Lands Fireweed 16 MMcf/d Compressor/ Facility (100% WI) Inga 28 MMcf/d Compressor/ Facility (100% WI) Stoddart Stoddart 10 MMcf/d + 2,500 bopd Facility (100% WI) CNRL West Stoddart 120 MMcf/d Gas Plant LAND Doig Rights: Gross: 175 sections Net: 168 sections OPERATIONS Recent Doig wells completed using slick-water fractures have shown very encouraging results. In about eight months, raw production from the Inga Doig well was approximately 297,000 BOE (43% field condensate). Top five IP30 wells ( gross sales, BOE/d ): (1) Inga 100/ W6 ( 26% gas ) * 1,980 (2) Inga 100/ W6 ( 41% gas ) 1,800 (3) Inga 100/ W6 ( 43% gas ) 1,624 (4) Fireweed 200/A-085-I/094-A-12 ( 74% gas ) 1,550 (5) Inga 100/ W6 ( 57% gas ) 1,549 * Slick-water completion 24

26 BC Wells: DOIG Slick Water Completions 25 ( BOE / d ) 2,500 2,000 1,500 1, ( BBLs / MMCF ) Cumulative Raw Gas: 869 MMcf Condensate: 107 Mbbls W W Month 3-33 Initial CGR: 395 bbl/mmcf Initial CGR: 576 bbl/mmcf PRODUCTION Cumulative Raw Gas: 1,406 MMcf Condensate: 146 Mbbls CONDENSATE TO GAS RATIO W W Month

27 British Columbia MONTNEY Lands 26 Fireweed Inga 8-31 Montney (Sfc: B7-29) Gross IP30 = 1,245 BOE/d of which 857 bbls/d (69%) was condensate Kelt Lands C-26-A Montney (Sfc: A-6-A) Gross IP30 = 1,147 BOE/d of which 696 bbls/d (60%) was condensate C-85-I Montney (Sfc: A-65-I) Gross IP30 = 903 BOE/d of which 512 bbls/d (57%) was condensate Stoddart CNRL West Stoddart 120 MMcf/d Gas Plant LAND Montney Rights: Gross: 163 sections Net: 162 sections OPERATIONS recent Montney wells completed using slick-water fractures have shown very encouraging results with high IP30 rates comprised 57% to 69% condensate Montney wells qualify for BC royalty incentives of approximately $900,000 per well Drilling to date has been in the upper- Montney The upper-montney reservoir is up to 40 metres thick and porosities are up to 9%

28 BC Wells: MONTNEY Slick Water Completions 27 ( BOE / d ) 1,400 1,200 1, ( BBLs / MMCF ) Cumulative Raw Gas: 414 MMcf Condensate: 75 Mbbls C-85-I Cumulative Raw Gas: 398 MMcf Condensate: 68 Mbbls PRODUCTION C-26-A Cumulative Raw Gas: 623 MMcf Condensate: 57 Mbbls W6 C-26-A/94-A-13 C-85-I/94-A Month CONDENSATE TO GAS RATIO W6 C-85-I/94-A-12 C-26-A/94-A Month

29 British Columbia BALDONNEL Lands 28 LAND Baldonnel Rights: Gross: 149 sections Net: 138 sections OPERATIONS Oil exploration activity with plans to drill initial well in 2016/2017. Competitor activity offsetting Kelt lands has been successful in the Baldonnel formation. Kelt Lands

30 Future Considerations 29 DRILLING INVENTORY: Kelt estimates that it has numerous years of drilling inventory on its existing lands to continue to grow the Company. BALANCE SHEET: Kelt maintains financial flexibility so that it can persevere during periods of declining commodity prices and pursue new opportunities as they arise. CRUDE OIL PRICES: the number of rigs drilling for crude oil in the U.S. declined to 536 in late December 2015, after peaking at about 1,600 in November With low current oil prices, we believe that global oil supply will eventually be negatively affected as a result of significant reductions in capital investment. We believe this will lead to higher crude oil prices in the second half of NATURAL GAS PRICES: the number of rigs drilling for natural gas in the U.S. declined to 162 in late December 2015, after peaking at about 1,600 in September Despite record high gas supply in the U.S. primarily due to higher productive shale wells, we expect U.S. supply will be negatively affected as declines on new production sets in. In addition, with a declining crude oil rig count in the U.S., associated gas production will also be negatively affected. Barring a mild North American winter, we believe these factors bode well for natural gas prices in 2016.

31 Management 30 David J. Wilson, President & CEO Sadiq H. Lalani, Vice President, Finance & CFO Douglas J. Errico, Vice President, Land Alan G. Franks, Vice President, Production Douglas O. MacArthur, Vice President, Operations Patrick Miles, Vice President, Exploration William C. Guinan, Corporate Secretary

32 Board of Directors 31 Robert J. Dales William C. Guinan Eldon A. McIntyre Neil G. Sinclair David J. Wilson Compensation (Chair), Nominating, Audit, Reserves Chairman, Nominating (Chair), HSE Reserves (Chair), Nominating, Audit, Compensation Audit (Chair), Compensation, HSE, Reserves HSE (Chair)

33 Oil and Gas Advisories 32 Barrel of oil equivalent ( BOE ) amounts may be misleading, particularly if used in isolation. A BOE conversion ratio has been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel. This conversion ratio of six thousand cubic feet of natural gas to one barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, if applicable, sulphur volumes have been converted to oil equivalence at 0.6 long tons per barrel. References to oil in this presentation include crude oil and field condensate. References to natural gas liquids ( NGLs ) include pentane, butane, propane and ethane. References to gas in this discussion include natural gas and sulphur. In this presentation, reference may be made to OOIP or OGIP, meaning original oil in place and original gas in place, respectively, which are hereinafter collectively will be called discovered petroleum initially-in-place. Discovered petroleum initially-in-place is the quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of discovered petroleum-in-place includes production, reserves and contingent resources; the remainder is unrecoverable. References to IP30 means initial production from a well for the first 720 hours (30 days) based on operating/producing hours. Test results and initial production rates disclosed herein may not necessarily be indicative of long-term performance or of ultimate hydrocarbon recovery. Estimates of the net present value of the future net revenue from Kelt s reserves do not represent the fair market value of the Company s reserves. The estimates of reserves and future net revenue from individual properties or wells may not reflect the same confidence level as estimates of reserves and future net revenue for all properties and wells, due to the effects of aggregation. Where discussed herein "NPV" represents the net present value of cash flow (after capital expenditures) discounted at the percentage indicated, with cash flow reflecting the indicated oil, liquids and natural gas prices, less internal estimates of operating costs and royalties.

34 Financial Advisories 33 All dollar amounts are referenced in Canadian dollars, except when noted otherwise. This presentation contains the terms funds from operations, operating income, operating netback, production per million shares, finding, development and acquisition cost and recycle ratio which do not have a standardized meaning prescribed by GAAP and therefore may not be comparable with the calculation of similar measures by other companies. Funds from operations, operating income and operating netbacks are used by Kelt as key measures of performance. Funds from operations, operating income and operating netbacks are not intended to represent corporate profits nor should they be viewed as an alternative to cash provided by operating activities, profit or other measures of financial performance calculated in accordance with GAAP. Operating income is determined by deducting royalties, production expenses and transportation expenses from oil and gas revenue, after realized financial instruments and cash premiums. Operating netbacks are calculated by dividing operating income by aggregate production. Funds from operations is determined by adding back transaction costs associated with acquisitions and dispositions, settlement of decommissioning obligations and the change in non-cash operating working capital to cash provided by operating activities. The Company calculates funds from operations per share using the same method and shares outstanding which are used in the determination of profit per share. Production per share is calculated by dividing total production by the basic weighted average number of common shares outstanding, as determined in accordance with GAAP. The Company uses the debt to funds flow ratio as a benchmark by which management monitors the Company s capital structure and short-term financing requirements. The debt to funds flow ratio is calculated by dividing bank debt, net of working capital, at a period end, by funds from operations for that period. Finding, development and acquisition ( FD&A ) cost is the sum of capital expenditures incurred in the period and the change in future development capital ( FDC ) required to develop reserves. FD&A cost per BOE is determined by dividing current period net reserve additions into the corresponding period s FD&A cost. Readers are cautioned that the aggregate of capital expenditures incurred in the year, comprised of exploration and development costs and acquisition costs, and the change in estimated FDC generally will not reflect total FD&A costs related to reserves additions in the year. Recycle ratio is a measure for evaluating the effectiveness of a company s re-investment program. The ratio measures the efficiency of capital investment by comparing the operating netback per BOE to FD&A cost per BOE.

35 Corporate Presentation January 2016 Suite 300, th Avenue SW Calgary, Alberta, Canada T2P 3H2