The Outliers. January 2015

Transcription

1 The Outliers January 215

2 Finding Triple Digit IRRs in the Unconventional Montney Fairway Liquids (Thermal Maturity) Set in Stone Outlier >1% IRR Deliverability - IP (Depth, Pressure, Completion) Capital - $ (Depth, Pressure, Execution) Unconventional Montney fairway spans an estimated 37, sq. km Source: Modified after EIA (US Energy Information Administration)

3 $/bbl $/GJ Catching the Falling Knife CANADIAN COMMODITIES (SINCE JAN. 1, 214) Edmonton Light WCS AECO Edm. Light -48.3% WCS -49.2% AECO -32% 3 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2 Source: Bloomberg, all prices in CAD As of January 9, 215

4 It All Begins with the Rock Thick and Brittle MONTNEY LITHOLOGICAL MAP Unconventional BRITISH COLUMBIA ALBERTA Conventional Kobes Representative a-86-k/94-h-15, m CSPG Bulletin, Year: 21, Issue: June Karr Representative A W5, 7,572 ft CSPG Bulletin, Year: 1997, Issue: December Source: BMO Capital Markets, WCSB Atlas fig 16.24, Sherwin GeoEDGES, GeoSCOUT

5 Over-pressured Reservoir Increases Deliverability, Storage and Capture TOTAL VERTICAL DEPTH TO TOP OF MONTNEY BC ALBERTA Normal Pressure Line North Montney South Montney Conventional C.I. = 25 m Source: BMO Capital Markets, GeoSCOUT, geoedges, BC OGC

6 Only Entry Point is to Buy an Existing Position MONTNEY CROWN HOLDINGS Nov. 5, 214 Crown sale: ~3, acres in 2 parcels, Bonus $19MM via brokers *Halfway River First Nations Area of Cultural Significance **Peace Moberly Tract City of Dawson Creek Unconventional Conventional Lands are tightly held across the fairway and have been for sometime Source: GeoSCOUT, BMO Capital Markets *The Halfway River First Nations Oil and Gas Consultation Agreement. Retrieved from **The Peace Moberly Tract Sustainable Resource Management Plan. Retrieved from

7 Producing Day Gas Rate (MMcf/d) The Play is Mature Enough to Start Identifying Outliers UNCONVENTIONAL HORIZONTAL MONTNEY GAS UNCONVENTIONAL HORIZONTAL MONTNEY GAS PRODUCTION 4, 3, Encana Corp Progress Enrg Cda Ltd Shell Cda Ltd ARC Rsrcs Ltd Cdn Nat Rsrcs Ltd Other 2, 1, Production from the fairway is quickly approaching 4 Bcf/d Montney, in general, is known for its high heat content gas Due to the dilbit demand in Western Canada, condensate is the most desirable hydrocarbon stream Source: GeoSCOUT, GeoEDGES, BMO Capital Markets

8 Where is the Money? Following the C 5+ is Key OUTLIER LIQUIDS FAIRWAY MAP Jedney Nig Sub 1% IRR Areas Blueberry/Inga Conventional Outlier Areas Altares Attachie Septimus Normal Pressure Gradient 1. kpa/m (.43 psi/ft) Pouce Coupe Emerging Areas Sunrise bbl/mmcf Knopcik BC Drill Credit Line Elmworth Wapiti Outlier Areas Kakwa Areas: 4 Outlier, 2 Emerging, 3 Potential Source: GeoEDGES, GeoSCOUT, BMO Capital Markets, BC OGC Note: Liquid Yields used in the type curve economics were assumed to be flat over the life of the curve. Rather than model a declining yield curve, C 5+ values are estimated at approximately 6% of the values shown on the Outlier Liquids Fairway map

9 PDGR (MMcf/d) PDGR (MMcf/d) PDGR (MMcf/d) PDGR (MMcf/d) How Best to Model Condensate Yields Declining Yields vs Constant Ratios ELMWORTH TYPE CURVE WITH CONSTANT YIELD (CASE 1) ELMWORTH TYPE CURVE WITH DECLINING YIELD (CASE 2) 6. IRR 224% 69%*** Gas Profile Constant Yield 6 6. IRR 212% 63%*** Gas Profile Declining Yield Payout 8 months 18 months*** 5% of BT-NPV@1% 33 months 45 months*** 45 3 Condensate Rate (bbl/d) Payout 8 months 17 months*** 5% of BT-NPV@1% 31 months 45 months*** 45 3 Condensate Rate (bbl/d) 1.5 BT-NPV@1% $21.1MM $9.2MM*** Constant Yield 75 bbl/mmcf BT-NPV@1% $17.4MM $7.9MM*** Initial Yield 1 bbl/mmcf ELMWORTH TYPE CURVE WITH FLAT THEN DECLINING YIELD (CASE 3) ELMWORTH TYPE CURVE WITH ALL YIELD CURVES IRR 224% 69%*** Payout 8 months 18 months*** Gas Profile Flat for 4 yrs then decline at 25%/yr 5% of BT-NPV@1% 3 months 42 months*** Condensate Rate (bbl/d) Gas Profile Constant Yield Declining Yield Payout on constant yield Payout on declining yield Payout on flat then declining yield Condensate Rate (bbl/d) 1.5 BT-NPV@1% $19.5MM $8.7MM*** NOTE: the yield profiles shown in cases 1 and 2 are identical since the yield is flat for 48 months in both cases. The IRRs are also identical, but the time to 5% of NPV is lower in case 3. This is because the NPV in case 3 is lower but the BT cash flow is the same as in case 1 ***Updated price deck $C4/GJ (AECO) and $US44.5/bbl (WTI) or $C5./bbl realized condensate pricing

10 PDGR (MMcf/d) PDGR* (MMcf/d) The Outliers Karr/Kakwa IRR 35% (66%)*** LOCATOR MAP TYPE WELL FORECAST Normal Pressure Gradient 1. kpa/m (.43 psi/ft) Active Operators: Seven Generations Paramount NuVista CNRL Harvest XTO IP MMcf/d C 5+ Yield 15 bbl/mmcf BT-NPV@1% $28.3MM $1.2MM*** IRR 35% IRR 66%*** Payout.5 yrs Payout 1.3 yrs*** Drill Credit $3.3MM BC Drill Credit Line Exposure: Kicking Horse 4. Drill Credit $3.3MM*** (Donnycreek + Contact) Kakwa/Karr * Normalised on Peak IP 3 AREA PRODUCTION BY OPERATOR INPUT SENSITIVITY TO THE BASE VALUE IRR 75 Seven Generations 75 Base Value**: BT-NPV@1% = $28.3MM, IRR > 35% 5 Paramount XTO Well Count 5 Condensate Price Capital $76.97/bbl $13.2MM $96.21/bbl $11.MM $115.45/bbl $8.8MM Well Count Condensate Yield 3 Day IP 12 bbl/mmcf 4.5 MMcf/d 15 bbl/mmcf 5.4 MMcf/d 18 bbl/mmcf 6.3 MMcf/d $4.1/Mcf Gas Price $3.21/Mcf $4.81/Mcf EUR 4.4 Bcf 5.5 Bcf 6.6 Bcf Change in IRR from base value (%) Source: GeoSCOUT, BMO Capital Markets, BC OGC **Flat pricing with $C4/GJ (AECO) and $US9/bbl (WTI) ***Updated price deck $C4/GJ (AECO) and $US44.5/bbl (WTI) or $C5./bbl realized condensate pricing

11 PDGR (MMcf/d) PDGR* (MMcf/d) The Outliers Elmworth/Wapiti IRR >22% (69%)*** LOCATOR MAP TYPE WELL FORECAST Normal Pressure Gradient 1. kpa/m (.43 psi/ft) Active Operators: Encana SINOPEC-Daylight NuVista Paramount IP MMcf/d C 5+ Yield 75 bbl/mmcf BT-NPV@1% $21.1MM $9.2MM*** IRR 224% IRR 69%*** Payout.7 yrs Shell Payout 1.5 yrs*** CNRL 4. Drill Credit $2.6MM Drill Credit $2.6MM*** BC Drill Credit Line Elmworth/Wapiti Exposure: Chinook Birchcliff * Normalised on Peak IP 3 AREA PRODUCTION BY OPERATOR INPUT SENSITIVITY TO THE BASE VALUE IRR 15 Nuvista Enrg Ltd Sinopec Daylight Enrg Ltd 15 Capital Base Value**: BT-NPV@1% = $21.1MM, IRR > 224% $9.MM $1.8MM $7.2MM Encana Corp $96.21/bbl 1 5 Paramount Rsrcs Ltd Other Well Count 1 5 Well Count Condensate Price Condensate Yield Gas Price $76.97/bbl 6 bbl/mmcf $3.21/Mcf 75 bbl/mmcf $4.1/Mcf 5.8 MMcf/d $115.45/bbl 9 bbl/mmcf $4.81/Mcf 3 Day IP 5.1 MMcf/d 6.4 MMcf/d 5.5 Bcf EUR 4.4 Bcf 6.7 Bcf Change in IRR from base value (%) Source: GeoSCOUT, BMO Capital Markets, BC OGC **Flat pricing with $C4/GJ (AECO) and $US9/bbl (WTI) ***Updated price deck $C4/GJ (AECO) and $US44.5/bbl (WTI) or $C5./bbl realized condensate pricing

12 PDGR (MMcf/d) PDGR* (MMcf/d) The Outliers Septimus IRR >44% (95%)*** LOCATOR MAP TYPE WELL FORECAST Normal Pressure Gradient 1. kpa/m (.43 psi/ft) Active Operators: Canadian Natural Crew IP MMcf/d BT-NPV@1% $18.1MM $7.4MM*** Septimus 9. C 5+ Yield 1 bbl/mmcf IRR 444% IRR 95%*** Payout.5 yrs Payout 1.2 yrs*** 6. Drill Credit $.8MM Drill Credit $.8MM*** BC Drill Credit Line * Normalised on Peak IP 3 AREA PRODUCTION BY OPERATOR INPUT SENSITIVITY TO THE BASE VALUE IRR 15 Cdn Nat Rsrcs Ltd 15 Base Value**: BT-NPV@1% = $18.1MM, IRR > 444% $4.7MM Crew Enrg Inc Capital $5.6MM $3.8MM Well Count $94.21/bbl 1 1 Condensate Price $75.37/bbl $113.5/bbl Well Count Condensate Yield 3 Day IP 8 bbl/mmcf 3.4 MMcf/d 1 bbl/mmcf 3.9 MMcf/d 12 bbl/mmcf 4.4 MMcf/d 5 5 $4.1/Mcf Gas Price $3.21/Mcf $4.81/Mcf EUR 3.4 Bcf 4.2 Bcf 5.1 Bcf Change in IRR from base value (%) Source: GeoSCOUT, BMO Capital Markets, BC OGC **Flat pricing with $C4/GJ (AECO) and $US9/bbl (WTI) ***Updated price deck $C4/GJ (AECO) and $US44.5/bbl (WTI) or $C5./bbl realized condensate pricing

13 PDGR (MMcf/d) PDGR* (MMcf/d) The Outliers Altares Approaching 1% IRR (34%)*** LOCATOR MAP TYPE WELL FORECAST Altares Normal Pressure Gradient 1. kpa/m (.43 psi/ft) Active Operators: Canbriam Progress Suncor IP MMcf/d C 5+ Yield 42 bbl/mmcf BT-NPV@1% $13.6MM $5.2MM*** IRR 98% IRR 34%*** Payout 1.1 yrs Payout 2.2 yrs*** 6. Drill Credit $2.6MM Drill Credit $2.6MM*** BC Drill Credit Line *Normalised on Peak IP 3 AREA PRODUCTION BY OPERATOR INPUT SENSITIVITY TO THE BASE VALUE IRR 1 1 Base Value**: BT-NPV@1% = $13.6MM, IRR > 98% Canbriam Enrg Inc $1.MM Capital $12.MM $8.MM 75 Progress Enrg Cda Ltd Suncor Enrg Inc 75 3 Day IP 4.3 MMcf/d 5.4 MMcf/d $94.21/bbl 6.5 MMcf/d 5 Well Count 5 Condensate Price $75.37/bbl $4.1/Mcf $113.5/bbl Gas Price $3.21/Mcf $4.81/Mcf 42 bbl/mmcf Condensate Yield 34 bbl/mmcf 5 bbl/mmcf 6.2 Bcf EUR 5.4 Bcf 7.1 Bcf Change in IRR from base value (%) Source: GeoSCOUT, BMO Capital Markets, BC OGC **Flat pricing with $C4/GJ (AECO) and $US9/bbl (WTI) ***Updated price deck $C4/GJ (AECO) and $US44.5/bbl (WTI) or $C5./bbl realized condensate pricing

14 The New World Order - $5 Condensate????? Sweet Spot Areas C 5+ EUR % Liquids Capital Drill Credit BT-NPV@1 IRR PI@1% Payout (MMcf/d) (bbl/mmcf) (Bcfe) (%) ($MM) ($MM) ($MM) (%) (x) (years) Karr/Kakwa Elmworth/Wapiti Septimus Altares Liquids-Rich Montney Can Withstand Tremendous Pressure on Pricing ***Updated price deck $C4/GJ (AECO) and $US44.5/bbl (WTI) or $C5./bbl realized condensate pricing

15 PDGR (MMcf/d) Close But Not There Yet Nig/Jedney/Blueberry/Inga IRR 29-91% (8-33%)*** LOCATOR MAP TYPE WELL FORECAST Blueberry/Inga BC Drill Credit Line Jedney Nig Normal Pressure Gradient 1. kpa/m (.43 psi/ft) Active Operators: Artek Black Swan Bonavista Carmel Bay CNRL ConocoPhillips Painted Pony Paramount Progress Shell Storm UGR 6. Jedney Nig Blueberry-Inga ECONOMIC SUMMARY - SUB 1% AREAS IP 3 C 5+ EUR % Liquids Capital Drill Credit BT-NPV@1 IRR PI@1% Payout (MMcf/d) (bbl/mmcf) (Bcfe) (%) ($MM) ($MM) ($MM) (%) (x) (years) Jedney (.2) 8 (.1) 6.5 Nig ??? Blueberry/Inga Source: GeoSCOUT, BMO Capital Markets, Corporate Presentations ***Updated price deck $C4/GJ (AECO) and $US44.5/bbl (WTI) or $C5./bbl realized condensate pricing

16 PDGR (MMcf/d) Emerging Areas Sunrise and Attachie The First Indicators are There LOCATOR MAP TYPE WELL FORECAST Attachie Normal Pressure Gradient 1. kpa/m (.43 psi/ft) Attachie Operators: ARC Crew Sunrise Operators: ARC Tourmaline Sunrise Attachie Sunrise 1.5 BC Drill Credit Line ECONOMIC SUMMARY EMERGING AREAS IP 3 C 5+ EUR % Liquids Capital Drill Credit BT-NPV@1 IRR PI@1% Payout (MMcf/d) (bbl/mmcf) (Bcfe) (%) ($MM) ($MM) ($MM) (%) (x) (years) Sunrise Attachie Increasing IP to 4. MMcf/d provides a 41% IRR Source: GeoSCOUT, BMO Capital Markets, Corporate Presentations ***Updated price deck $C4/GJ (AECO) and $US44.5/bbl (WTI) or $C5./bbl realized condensate pricing

17 What to Watch For OUTLIER LIQUIDS FAIRWAY MAP Jedney Nig Blueberry-Inga Attachie Altares Septimus Conventional Normal Pressure Gradient 1. kpa/m (.43 psi/ft) OUTLIER AREAS Focus on continued well performance in the ranges observed to date For the outliers, control over infrastructure solutions will be key to success Continued improvements in capital efficiencies will we see declining cost structure? EMERGING AREAS Here the focus will be on consistent C 5+ results from appraisal wells bbl/mmcf Sunrise Pouce Coupe Knopcik Continued improvements in deliverability as completion practices are refined Lay the groundwork for thoughtful development of infrastructure particularly liquids SUB 1% IRR AREAS Elmworth Movement of the drill credit line east will materially and positively impact the economics at Nig and Jedney BC Drill Credit Line Wapiti Changes in well completion techniques that could improve the co-production of C 5+ (slow back, larger fracs etc.) and IPs Kakwa Source: GeoEDGES, GeoSCOUT, BMO Capital Markets, BC OGC Note: Liquid Yields used in the type curve economics were assumed to be flat over the life of the curve. Rather than model a declining yield curve, C 5+ values are estimated at approximately 6% of the values shown on the Outlier Liquids Fairway map

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