PROPOSED ARRANGEMENT AND VOTING INFORMATION FEBRUARY 2016 INVESTOR PRESENTATION 1
BACKGROUND Long Run s capital structure is challenged as a result of the significant decline in commodity prices that has occurred subsequent to the Deep Basin acquisitions in 2014 Price of oil has declined from WTI ~US$95/Bbl in August 2014 to ~US$30/Bbl in January 2016 The Company was faced with $350 million in mandatory credit facilities repayments in 2016 Our ability to generate sufficient cash flow to fund future capital expenditures is extremely challenging in this low commodity price environment Without continued development of the assets, Long Run s reserves value will decline Long Run s Board of Directors and management team have extensively reviewed strategic and financial alternatives available to improve the financial position of the Company Alternatives included a strategic asset rationalization process, a private placement proposal and various debt refinancing options 2
Funds Flow ($MM) WTI (US$) Net debt/funds Flow Ratio WTI (US$) FINANCIAL CHALLENGES Funds Flow vs. WTI Net Debt to Funds Flow vs. WTI $90 $110 7.00 $110 $80 $100 6.00 $100 $70 $60 $50 $40 $30 $20 $90 $80 $70 $60 $50 5.00 4.00 3.00 2.00 $90 $80 $70 $60 $50 $10 $40 1.00 $40 $0 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 $30 0.00 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 $30 Funds Flow ($MM) Funds Flow excl. hedging ($MM) WTI (US$) Net debt/ff Net debt/ff excl. hedging WTI (US$) The decline in commodity prices has materially reduced Long Run s funds flow and weakened the Company s financial position 3
THE PROPOSED SOLUTION Long Run entered into an arrangement agreement on December 20, 2015 (the Arrangement ) with Calgary Sinoenergy Investment Corp. (the Purchaser ), who has proposed to acquire: i. All of the outstanding common shares of Long Run for cash consideration of $0.52 per common share ii. All of the outstanding 6.40% convertible unsecured subordinated debentures of Long Run due January 31, 2019 for $750 per $1,000 principal amount of debentures plus accrued and unpaid interest up to close THE BOARD OF DIRECTORS AND MANAGEMENT BELIEVE THAT PURSUING THE ARRANGEMENT IS IN THE BEST INTEREST OF LONG RUN AND ITS STAKEHOLDERS 4
PROPOSED OFFER IS AT SIGNIFICANT PREMIUM LRE Common Shares LRE Convertible Debentures $0.80 $80.00 $0.70 $70.00 $0.60 $60.00 $0.50 $50.00 $0.40 $40.00 $0.30 $30.00 $0.20 $20.00 $0.10 $10.00 $0.00 7/01/15 8/27/15 10/23/15 12/21/15 $0.00 7/01/15 8/27/15 10/23/15 12/21/15 "LRE Trading Price" "LRE Offer Price" "LRE.DB Trading Price" "LRE.DB Offer Price" The cash offer represents a 215% premium to the closing price of the common shares and a 257% premium to the closing price of the debentures on the TSX on the last trading day prior to the initial announcement of the Arrangement 5
WHY VOTE FOR THE ARRANGEMENT? Significant premium to both shareholders and debentureholders Provides certainty of value and near-term liquidity to shareholders and debentureholders in a challenging commodity price environment In the event that shareholders and debentureholders do not approve the Arrangement, the Purchaser has the right to terminate the Arrangement, which would trigger an event of default under Long Run s credit facilities Event of default under the credit facilities would allow the bank syndicate to accelerate the repayment of Long Run s outstanding bank debt of approximately $580 million If the Arrangement is not completed, Long Run will be significantly challenged to continue as a going concern 6
BOARD OF DIRECTORS RECOMMENDATION Long Run s Board of Directors has unanimously determined that: i. The Arrangement is in the best interests of Long Run, Long Run shareholders and Long Run debentureholders ii. The consideration to be received by shareholders and debentureholders is fair to the Long Run shareholders and Long Run debentureholders, respectively Directors and executive officers of Long Run and certain other shareholders have agreed to vote an aggregate of approximately 11% of the outstanding shares in favor of the Arrangement LONG RUN S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS AND DEBENTUREHOLDERS VOTE IN FAVOR OF THE ARRANGEMENT 7
MACQUARIE FAIRNESS OPINION Long Run retained Macquarie Capital as lead financial advisor in connection with the Arrangement Macquarie Capital provided the Long Run Board with a fairness opinion The fairness opinion states that, in the opinion of Macquarie Capital: i. The consideration to be received by Long Run shareholders pursuant to the Arrangement is fair, from a financial point of view, to Long Run shareholders ii. The consideration to be received by Long Run debentureholders pursuant to the Arrangement is fair, from a financial point of view, to Long Run debentureholders Full text of the fairness opinion can be found in Long Run s Information Circular dated January 29, 2016 8
WHAT HAPPENS NEXT? Timeline 2015 December 21 December 24 2016 January 29 February 8 February 29 April Arrangement announced Long Run s lending syndicate agreed to a forbearance to allow Long Run, the Purchaser and the bank syndicate to work towards mutually acceptable credit facilities terms Long Run entered into an amending credit agreement with its bank syndicate which allowed Long Run and the Purchaser to move forward with the completion of the Arrangement Long Run notice of meeting, Information Circular and proxy statement was mailed to shareholders and debentureholders and filed on SEDAR Long Run Special Meeting to be held, where shareholders and debentureholders will vote on the Arrangement Long Run expects the Arrangement to close by the end of April, following the receipt of all required approvals 9
WHAT HAPPENS IF THE ARRANGEMENT CLOSES? On closing of the Arrangement: 1) Long Run will become a wholly-owned subsidiary of Calgary Sinoenergy Investment Corp. 2) Long Run s common shares and debentures will be delisted from the Toronto Stock Exchange approximately 2-3 business days following closing of the Arrangement 3) Long Run shareholders and debentureholders will receive the cash consideration offered in exchange for their common shares or debentures: $0.52 per common share $750 per $1,000 principal amount of debentures plus accrued and unpaid interest up to close 10
SPECIAL MEETING & VOTING INFORMATION 11
THE LONG RUN SPECIAL MEETING The special meeting of Long Run securityholders is being held to consider and approve the Arrangement The details of the Arrangement can be found in Long Run s Information Circular dated January 29, 2016 (filed on SEDAR on February 8, 2016) LONG RUN SHAREHOLDER APPROVAL AND LONG RUN DEBENTUREHOLDER APPROVAL ARE BOTH REQUIRED FOR THE ARRANGEMENT TO PROCEED The Arrangement requires the approval of 66 2/3% of the shareholder votes cast AND approval of 66 2/3% of the principal amount of debentures held by Long Run debentureholders, present in person or by proxy at the meeting 12
WHEN AND WHERE IS THE MEETING? Date: February 29, 2016 Time: 2:00pm Calgary time (Mountain time) Location: Livingston Place Conference Centre 2 nd Floor 222 3 rd Avenue SW Calgary, Alberta T2P 0B4 Proxy Cut-off: February 25, 2016; 2:00pm Calgary time 13
HOW DO I VOTE? Registered Shareholder or Debentureholder If your shares/debentures are registered in your name (i.e. you hold paper share or debenture certificates) you can vote your securities in person at the meeting or vote your shares via the form of proxy You can use the form of proxy enclosed with the Long Run Information Circular to appoint a proxyholder and have such proxyholder vote your shares/debentures at the meeting on your behalf To vote your shares using the form of proxy, you must indicate your voting preference on the form and return the form as per the instructions provided Whether or not you attend the meeting, you can appoint someone else to vote for you, in person at the meeting, as your proxyholder The persons named in the form of proxy are directors and/or officers of Long Run. However, you can choose another person to be your proxyholder, including someone who is not a Long Run securityholder. You may do so by crossing out the names printed on the applicable form of proxy and inserting another person's name in the blank space provided 14
HOW DO I VOTE? Beneficial Shareholder or Debentureholder If your securities are not registered in your own name, they will be held in the name of a "nominee", which is usually a trust company, securities broker or other financial institution Your nominee is required to seek your instructions as to how to vote your securities. For that reason, you have received the Information Circular from your nominee together with a Voting Instruction Form (VIF) Each nominee has its own signing and return instructions for the VIF which you should follow carefully to ensure your securities will be voted If you are a non-registered Long Run shareholder or debentureholder who has voted and you want to change your mind and vote in person, contact your nominee to discuss whether this is possible and what procedure to follow 15
HOW DO I VOTE? Help with Voting Your Shares or Debentures Please contact Long Run s proxy solicitation agent: D.F. King 1-800-833-2158 Banks, brokers and collect calls: 201-806-7301 Email: inquiries@dfking.com 16
WHO CAN ATTEND AND VOTE AT THE MEETING? Registered shareholders and debentureholders of Long Run as of the January 15, 2016 record date are able to attend and vote their shares or debentures in person at the meeting on February 29, 2016 Beneficial Long Run shareholders or debentureholders receiving a VIF cannot, without following the instructions and procedures of their broker or other nominee, vote shares or debentures directly at the meeting A beneficial Long Run securityholder must submit voting instructions in accordance with the instructions in the VIF Alternatively, a beneficial Long Run securityholder may attend the meeting as proxyholder for the registered Long Run securityholder and vote the shares or debentures in that capacity, provided the instructions and procedures of the broker or other nominee are followed 17
EXCHANGING YOUR SHARES OR DEBENTURES 18
HOW DO I EXCHANGE MY SHARES OR DEBENTURES FOR CASH? Registered shareholders/debentureholders: 1. Complete the Letter of Transmittal that was included with the Information Circular and attach your share/debenture certificates and any other required documentation 2. Submit the Letter of Transmittal to the Depositary, CST Trust Company, according to the instructions provided Non-Registered or Beneficial shareholders/debentureholders: Contact your broker, financial institution or intermediary with whom you hold your shares/debentures for instructions and assistance in depositing certificates representing your Long Run shares/debentures in order to receive the cash consideration in exchange The cash consideration will be distributed promptly after the Arrangement is completed 19
HOW DO I CONTACT THE DEPOSITARY? Registered Shareholders and Debentureholders If your shares or debentures are registered in your name (i.e. you hold a share/debenture certificate) please contact: CST Trust Company (416) 682-3860 1-800-387-0825 Email: inquiries@canstockta.com 20
CORPORATE INFORMATION TSX:LRE Contacts Bill Andrew Dale Miller Corine Bushfield Dale Orton Lauren Kimak Chair & CEO President & COO Senior Vice President & CFO Senior Vice President, Development Manager, Investor Relations (403) 716-3222 1-888-598-1330 Long Run Main Line: (403) 261-6012 Long Run Toll-Free Investor Line: 1-888-598-1330 Email: information@longrunexploration.com Web: www.longrunexploration.com Long Run s Proxy Solicitor: D.F. King at 1-800-833-2158 or inquiries@dfking.com 21
ADVISORIES Forward Looking Statements: This document contains forward-looking statements and forward-looking information (collectively "forward-looking information") within the meaning of applicable securities laws relating to the anticipated closing date of the Arrangement, the timing of the delisting of the shares and debentures of Long Run and the anticipated timing for the distribution of the cash consideration payable under the Arrangement. Forward-looking information typically uses words such as "anticipate", "believe", "project", "expect", "goal", "plan", "intend" or similar words suggesting future outcomes, statements that actions, events or conditions "may", "would", "could" or "will" be taken or occur in the future. The forward-looking information is based on certain key expectations and assumptions made by Long Run's management, including: (i) in the case of the anticipated closing date of the Arrangement, that all conditions precedent to completion of the Arrangement, including the receipt of all required regulatory approvals, will be satisfied on or before April 30, 2016; (ii) in the case of the timing of the delisting of the shares and debentures of Long Run, that the Arrangement will be completed, that the debentures will be acquired pursuant to the Arrangement and that timely notice will be made to the TSX advising of the completion of the Arrangement; and (iii) in the case of the timing for distribution of the cash consideration payable under the Arrangement, that the Arrangement will be completed and based on advice from the depositary for the Arrangement. Although the Company believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Long Run can give no assurance that they will prove to be correct. Since forward-looking information addresses future events and conditions, by its very nature they involve inherent risks and uncertainties. The Company's actual results, performance or achievement could differ materially from those expressed in, or implied by, the forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits that the Company will derive there from. Completion of the Arrangement is subject to a number of conditions. Failure to satisfy any of these conditions, the emergence of a superior proposal or the failure to obtain approval of Long Run's shareholders, optionholders or debentureholders may result in the termination of the Arrangement. Management has included the above summary of assumptions and risks related to forward-looking information provided in this presentation in order to provide securityholders and potential investors with a more complete perspective on Long Run's current financial state and the Arrangement and such information may not be appropriate for other purposes. Readers are cautioned that the foregoing lists of risks and factors are not exhaustive. Additional information on these and other factors that could affect our operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). These forward-looking statements are made as of the date of this document and Long Run disclaims any intent or obligation to update publicly any forwardlooking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws. 22
ADVISORIES Non-GAAP Measures: This presentation contains terms commonly used in the oil and gas industry, such as funds flow from operations and net debt. These terms are not defined by International Financial Reporting Standards ("IFRS") and should not be considered an alternative to, or more meaningful than, cash provided by operating activities as determined in accordance with IFRS as an indicator of Long Run's performance. These measures are commonly used in the oil and gas industry and by Long Run to provide securityholders and potential investors with additional information regarding the Company's liquidity and its ability to generate funds to finance its operations. Long Run's determination of these measures may not be comparable to that reported by other companies. Funds flow from operations is calculated as cash flow from operating activities before changes in non-cash working capital and abandonment expenditures. Net debt is calculated as bank debt plus working capital deficiency and principal amount of outstanding convertible debentures. Long Run has provided information on how these measures are calculated in the management's discussion and analysis for the year ended December 31, 2014 and the third quarter ended September 30, 2015, which are available under the Company's SEDAR profile at www.sedar.com. 23