Annual General Meeting May 5, 2016

Transcription

1 Annual General Meeting May 5, 2016

2 Advisory FORWARD-LOOKING STATEMENTS: This presentation contains certain forward-looking statements and forward-looking information (collectively referred to as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements typically contain words such as "anticipate", "believe", "plan", "continuous", "estimate", "expect", "may", "will", "project", predict, targeting, seek, intend, could, potential, scheduled, "should", outlook or similar words suggesting future outcomes. In particular, this presentation contains forward-looking statements pertaining to our business plans and strategies; estimated production potential of 80,000+ barrels of oil per day, potential commerciality of the Blackrod SAGD project, estimated quantities of oil and gas reserves and contingent resources as well as the net present values of future net revenues from the reserves and contingent resources; the potential to increase production 10X from our existing project inventory; estimated initial production rates, capital costs and oil recovery volumes for a typical Onion Lake primary well; estimated number of future primary drilling locations at Onion Lake; estimated oil prices required to justify development at Onion Lake; expected project life and steam oil ratio for the Onion Lake thermal project as well as the timing to reach peak production; indicative economics of the Onion Lake thermal project included on page 10 of this presentation; estimated production potential of 80,000+ for the Blackrod SAGD project, estimated project life of the Blackrod SAGD oil sands project; estimated capital costs of the first phase of commercial development at Blackrod; sources and timing of financing our capital expenditure programs including potential joint venture arrangements to develop Blackrod; expected oil recovery rates for the Mooney ASP project as well as the estimated project life; anticipated oil prices before we would re-initiate development of phase 1 of the ASP flood; timing to expand the ASP flood to phase 2 and 3 lands; estimated 2016 operating costs, G&A expenses and royalties on page 38 of the presentation; and the 2016 guidance included on page 40 and 41 of this presentation. The forward-looking statements in this presentation reflect certain assumptions and expectations by management. The key assumptions that have been made in connection with these forward-looking statements include the continuation of current or, where applicable, assumed industry conditions, the continuation of existing tax, royalty and regulatory regimes, commodity price and cost assumptions, the continued availability of cash flow or financing on acceptable terms to fund the Company s capital programs, the accuracy of the estimate of the Company s reserves and resource volumes and that BlackPearl will conduct its operations in a manner consistent with past operations. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. By their very nature, forward-looking statements involve inherent risks and uncertainties which could cause actual results to differ materially from those contained in forward-looking statements. These factors include, but are not limited to, risks associated with fluctuations in market prices for crude oil, natural gas and diluent; risks related to the exploration, development and production of crude oil, natural gas and NGLs reserves; general economic, market and business conditions; substantial capital requirements; uncertainties inherent in estimating quantities of reserves and resources; extent of, and cost of compliance with, government laws and regulations and the effect of changes in such laws and regulations from time to time; the need to obtain regulatory approvals on projects before development commences; environmental risks and hazards and the cost of compliance with environmental regulations; aboriginal claims; inherent risks and hazards with operations such as fire, explosion, blowouts, mechanical or pipe failure, cratering, oil spills, vandalism and other dangerous conditions; potential cost overruns; variations in foreign exchange rates; diluent supply shortages; competition for capital, equipment, new leases, pipeline capacity and skilled personnel; uncertainties inherent in the SAGD bitumen and ASP recovery processes; credit risks associated with counterparties; the failure of the Company or the holder of licenses, leases and permits to meet requirements of such licenses, leases and permits; reliance on third parties for pipelines and other infrastructure; changes in royalty regimes; failure to accurately estimate abandonment and reclamation costs; inaccurate estimates and assumptions by management; effectiveness of internal controls; the potential lack of available drilling equipment and other restrictions; failure to obtain or keep key personnel; title deficiencies with the Company s assets; geo-political risks; risks that the Company does not have adequate insurance coverage; risk of litigation and risks arising from future acquisition activities. Further information regarding these risk factors and others may be found under "Risk Factors" in the Annual Information Form. Undue reliance should not be placed on these forward-looking statements. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will be realized. Actual results will differ, and the differences may be material and adverse to the Company and its shareholders. Furthermore, the forward-looking statements contained herein are made as of the date hereof, and the Company does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained herein are expressly qualified by this cautionary statement. CONTINGENT RESOURCES: Contingent resources are defined in the COGE Handbook as 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 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. There is no certainty that it will be commercially viable to produce any of the contingent resources. These volumes when totalled are the arithmetic sums of the Best Estimate Resources for Blackrod, Mooney and Onion Lake. Best estimate (P50) is a classification of estimated resources described in the COGE Handbook as being considered to be the best estimate of the quantity that will be actually recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50% probability that the quantities actually recovered will equal or exceed the best estimate. Please refer to our Annual Information Form for a more detailed discussion of our contingent resources and the contingencies for each property. BOE s: All references to BOEs are based on a 6 to 1 conversion ratio. BOEs may be misleading, particularly if used in isolation. A BOE conversion of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. NON-GAAP MEASURES: This presentation uses the terms Funds flow from operations and funds flow which represent cash flow from operating activities (a GAAP measure) before asset abandonment costs and working capital adjustments. The presentation also uses the term Operating income which represents revenues less royalties, transportation expenses and operating costs.. 2

3 Company Overview THE BASICS o Our focus is heavy oil and oil sands o Exposure to long life low decline reserves o Significant management ownership o Fiscally disciplined with a strong balance sheet o Independent reserve and resource assessments support 80,000+ b/d potential OWNERSHIP 18% Burgundy Asset Management Franklin Templeton Shares Outstanding (MM) (1) : Basic Fully Diluted Current Share Price ($/share) 0.95 Market Capitalization ($MM) 315 Management ownership 9%/11% Exchanges TSX, OMX Financial (2) : Working Capital ($MM) 9 Debt ($MM) 86 Credit facilities ($MM) 150 Operational: Current Production (boe/day) 9,500 2P Reserves (MMbbl) (3) 294 2C Risked Resource (MMbbl) (3) % 15% Lundin Family Management 9% 12% Other (1) As at April 29, 2016 (2) As at March 31, 2016 (3) Source: Sproule reserve and risked contingent resource (best estimate) reports effective December 31, 2015 (see Cautionary Statement on Contingent Resources in the Disclaimer section of the presentation) 3

4 2015 Highlights EXECUTION OPERATING EFFICIENCIES FINANCIAL DISCIPLINE o Completed the first phase of the Onion Lake thermal project on time and on budget; production ramp-up in-line with expectations o More than doubled PDP reserves by bringing on the Onion Lake thermal project o Blackrod SAGD pilot continues to demonstrate commerciality of our large oil sands resource o Lowered operating costs 21% year over year on a boe basis o Lowered G & A costs 8% year over year o Maintained a strong balance sheet with significant liquidity o Capital spending 63% lower year over year; no new drilling planned in current oil price environment o Uneconomic production has been shut-in 4

5 2015 Reserve and Contingent Resource - Summary o PDP reserves increased 127% o Onion Lake thermal is on production o 2P Reserve value is equivalent to $6/sh o 2C risked Contingent Resource value is equivalent to $4/sh Volume BT PV10% (MMboe) ($ million) 2P Reserves (1) 294 2,215 Contingent Resources (1) 494 1,370 2P RESERVES BREAKDOWN (1) Onion Lake Thermal, 29% Other, 1% Onion Lake Primary, 3% Mooney, 6% Blackrod, 61% Onion Lake Thermal 51% Other, 2% Blackrod, 32% Mooney, 11% Onion Lake Primary, 4% VOLUME BT PV10% (1) Source: Sproule reserve and risked contingent resource (best estimate) reports effective December 31, 2015 (see Cautionary Statement on Contingent Resources in the Disclaimer section of the presentation) 5

6 Three Core Properties CORE PROPERTIES o All are in heavy oil and oil sands regions o Employing primary ( CHOPS ), tertiary (polymer flood) and thermal recovery methods o All projects have been delineated and piloted; Mooney and Onion Lake have commenced commercial development o Our three core properties provide for our short, mid and long-term growth o Potential to increase production 10x from existing project inventory Peace River Mooney (ASP flood) Athabasca Cold Lake Blackrod (SAGD) Onion Lake (primary, thermal) ALBERTA SASKATCHEWAN Oil Sands Areas 6

7 Operations Overview 7

8 Onion Lake - Primary THE BASICS o Active in the region since 2006 o Cummings reservoir at depth of 600 m o Over 300 wells drilled o Expect initial production of b/d o Expect 40,000 80,000 bbls per well o Capex of $0.5mm per well CURRENT STATUS o Producing 2,000 b/d from 37 wells o >1,200 b/d shut-in due to low oil prices o 2P reserves of 8.4 mmbbl; 2C risked contingent resource of 1.7 mmbbl (1) POTENTIAL o 114 future drilling locations (1) o Need WTI US$45/bbl to justify development Company Lands Existing Wells Future Locations (1) Source: Sproule reserve and risked contingent resource (best estimate) reports effective December 31, 2015 (see Cautionary Statement on Contingent Resources in the Disclaimer section of the presentation) 8

9 Onion Lake - Thermal THE BASICS - PHASE 1 (6,000 b/d) o Cummings reservoir at depth of 600 m o Utilizing a modified SAGD process o Built on time and on budget $225mm o First steam June 2015; First oil Sept o Long Life assets 25+ year project life CURRENT STATUS o Producing 5,000 b/d; expect to reach design capacity by mid year o Current ISOR of 3.1, expected to drop to sub 3 o 90 mmbbls 2P reserves; 32 mmbbls 2C risked contingent resource (1) POTENTIAL o Total of 15,000 b/d (2 additional phases) o Regulatory approval for expansion to 12,000 b/d o 1 year from sanctioning to first steam o Construct sales pipeline 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Aug-15 Onion Lake Thermal EOR Project Sep-15 Oct-15 LEGEND Injection Wells Production Wells Nov-15 Dec-15 Jan-16 Feb-16 Calendar Oil Prod (b/d) Mar-16 Apr-16 May-16 Jun-16 Jul-16 isor (bw/bo) (1) Source: Sproule reserve and risked contingent resource (best estimate) reports effective December 31, 2015 (see Cautionary Statement on Contingent Resources in the Disclaimer section of the presentation) 9

10 Onion Lake - Thermal ECONOMICS o Royalties of 10% (pre-payout) o Operating costs of $15/bbl o Sustaining capital of $4-6/bbl o Break-even wellhead price of $25/bbl (3) ESTIMATED OPERATING INCOME (1)(2) $100 $80 ($mm/yr) Thermal production will be our lowest cost production and will partially fund our Phase 2 expansion $60 $40 $20 $0 $40 WTI $50 WTI $60 WTI $70 WTI (1) Operating income is a non-gaap measure. It represents revenues less royalties, transportation and operating costs (2) Estimated operating income is based on production of 6,000 b/d, 25% WCS heavy differential, FX of 0.75 and natural gas prices of $3/mcf (3) Includes a provision for G & A and interest charges 10

11 Blackrod SAGD - Overview THE BASICS o Located in the Athabasca oil sands o 100% owned and operated o Grand Rapids reservoir at a depth of 300 m CURRENT STATUS o Successful pilot operated since 2012 o WP2 producing 600 b/d; ISOR of 2.7 o Commercial development application filed POTENTIAL o 80, ,000 b/d (several phases) o Long life asset 30+ year project life o 2P reserves 180 mmbbl (1) o 2C risked contingent resource 453 mmbbl (1) SAGD Pilot 1 mile Company Lands Application Area Bitumen Pay > 10 m Shale Channels (1) Source: Sproule reserve and risked contingent resource (best estimate) reports effective December 31, 2015 (see Cautionary Statement on Contingent Resources in the Disclaimer section of the presentation) 11

12 Blackrod SAGD Successful Pilot FIRST WELL PAIR o Production peak rates of 400 b/d; ISOR of 3 o Produced > 250,000 bbls o Confirmed the SAGD process appropriate for the reservoir SECOND WELL PAIR o Refined operating strategies based on learnings from the first well o Produced 500+ b/d over last 12 months o Cumulative production of 300,000 bbls o Currently producing 600 b/d; ISOR Nov-13 Second Well Pair Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 Calendar Oil Prod (b/d) May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 isor (bw/bo) May

13 Blackrod Commercial Development COMMERCIAL o 80,000 b/d commercial development application filed in Q o Approval has been slower than expected but no major hurdles o Approval expected in 2016 o Project to be built in phases, with the first phase planned for 20,000 b/d; two additional phases of 30,000 b/d each to follow o Phase 1 capital cost estimate of $800 million ($37,500 to $42,500/b/d) o May seek a JV arrangement to accelerate development o May develop project in smaller stages similar to Onion Lake development 1 mile Application Area Thermal Pay (>10 m) Phase 1 Wells Phase 2 and 3 Wells Central Processing Facility Shale Channels 13

14 Mooney - ASP Flood THE BASICS o Bluesky reservoir at a depth of 900 m Phases 3 & 4 Phase 2 o Drilled over 90 horizontal wells o Phase 1 of the ASP flood initiated in 2011; production increased from 300 to >2,000 b/d o Recoveries should increase from 5% to 25-30% o 40+ year project life Phase 1 Phase 2 1 mile CURRENT STATUS o Producing 800 b/d o Majority of phase 1 ASP flood recently shut-in due to low prices o Need WTI US$45-50/bbl to re-initiate flood Area Wells o Phase 2 and 3 lands are currently producing on primary production o 2P reserves of 17 mmbbl (1) o 2C risked contingent resource of 11 mmbbl (1) POTENTIAL o 35 HZ wells drilled on phase 2; plan to expand ASP flood to phase 2 in 2017 o 6 wells drilled on phase 3; ASP flood will expand to phase 3 to keep facilities at capacity Company Lands Company Wells (1) Source: Sproule reserve and risked contingent resource (best estimate) reports effective December 31, 2015 (see Cautionary Statement on Contingent Resources in the Disclaimer section of the presentation) 14

15 Financial Review

16 Lowering our cost structure OPEX o Lowered service provider costs o Improved processes o Shut-in high cost production (Mooney, primary at Onion Lake) o Ramped-up lower cost production(onion Lake thermal) G & A o Salary reductions and reduced work schedules o Cut consultant costs ROYALTIES o Ramped-up thermal production at Onion Lake which has lower pre-payout royalty rates $30.00 $20.00 $10.00 $0.00 $8.5 $8.0 $7.5 $7.0 $6.5 20% 15% 10% 5% 0% Operating Costs - $/boe 21% $ % $19.94 $ e G & A Costs - $mm 9% $8.4 8% $7.7 $ e Royalty Rates - % 10% 19% 17% 18% 14% e 16

17 2015 Capital Spending Other Onion Primary Mooney o $69mm spent in 2015 o The focus of our capital spending was the completion of the first phase of the Onion Lake Thermal project o No new drilling in 2015 Blackrod 62.4 Onion Thermal $mm Capital Spending by Quarter ($mm) Q Q Q Q

18 Credit Facility Review BANK CREDIT FACILITIES o Bank credit facilities are $150 million o Borrowing base review in May 2016 o Reserve based loan, with one financial covenant (working capital ratio) o Current interest rate is 3.5% Utilized (1) $88 million Available (1) $62 million Strong financial position in a challenging oil price environment (1) As at December 31,

19 Hedging Position o For 2016, we have 3,000 b/d hedged at a WCS price of C$48.75/bbl o Represents 30% of our 2016 production volumes o In 2015, we realized $37mm from our hedging program o No hedges currently in place for would look to put hedges in place if forward prices are US$50/bbl CASHFLOW IMPACT OF OUR HEDGES (1) ($mm) $30 WTI $35 WTI $40 WTI $50 WTI Our hedging program has cushioned the impact of the 70% drop in crude oil prices (1) Assumes a WCS differential of US$14 and FX of

20 2016 Updated Guidance o Capital spending will be curtailed until we see a sustained price recovery o We will continue to operate the Blackrod pilot o Managing the balance sheet is our priority in this price environment o Excess cash flow will be used to pay down debt o Production will grow 10 to 20% in 2016 despite shutting in uneconomic production o Reflects the continued ramp-up of the Onion Lake thermal project 2016E Average production (boe/d) 9,000 10,000 Capital expenditures ($MM) Funds flow from Operations ($MM) Bank debt ($MM) Pricing Assumptions (1) : Crude oil WTI US$38.36 Light/heavy differential US$14.06 Foreign exchange 0.76 (1) For the remaining 9 months of 2016 we are assuming a WTI price of US$40, a WCS differential of US$14, FX of 0.77 and a natural gas price of $1.75/mcf 20

21 2016 Updated Guidance cont d Funds flow sensitivities - $mm (1) o Every $1/bbl change in WTI prices impacts our cash flow from operations by $2.5mm o We are cash flow neutral at WTI prices of US$33/bbl (includes capex spending) o At US$60/bbl cash flow is close to $80mm for the year 0 $30 WTI $35 WTI $40 WTI $50 WTI $60 WTI o Minimal capital spending planned if prices are <US$40/bbl o Capital spending of $12mm in 2016 o Spending primarily on maintenance capital, preliminary planning for phase 2 of the Onion thermal project and operating the Blackrod SAGD pilot Capital Spending - $mm Other Onion Primary Mooney 0.8 Blackrod 5.5 Onion Thermal (1) WTI prices are averages for the year. We are also assuming a WCS differential of US$14, FX of 0.76 and a natural gas price of $1.75/mcf 21

22 Key Takeaways o Estimated $6/share of reserve value and $4/share of risked contingent resource value (1) o All of our projects have been delineated, piloted, in development or ready for development o Our solid balance sheet allows us to survive low oil prices o Our reduced cost structure enables us to adapt to a lower price environment (1) Source: Sproule reserve and risked contingent resource (best estimate) reports effective December 31, 2015 (see Cautionary Statement on Contingent Resources in the Disclaimer section of the presentation) 22