Cardinal Energy Ltd. · TSX:CJ
Cardinal Energy — Investor Presentation (August 2019)
25 slides from Cardinal Energy's investor presentation, August 2019
Slide 1: Cardinal Energy Ltd. – August 2019
CARDINAL ENERGY LTD.
Slide 2: Current Snapshot
Current Snapshot Production: 20,500(1) Boepd 44% Light oil and NGL’s 44% WCS oil 12% Natural gas Debt: $45 mm – Convertible Debentures 5.5% interest rate $204.6 mm – Bank debt + Working capital ($325 mm bank line (~ 4% interest rate)) $249.6 mm(1) ARO Budget: $5 mm Capital Budget: $52 mm Adjus
Slide 3: Decline Rates
Decline Rates Cardinal ± 10% Source: Scotiabank, Statsbook, May 2019 3
Slide 4: Cardinal Goals
Cardinal Goals 1. Sustainability Long term dividends with modest growth 2. Low Risk Confidence in dividend and corporate sustainability 4
Slide 5: Q2 2019 Results
Q2 2019 Q2 2019 Q1 2019 Q4 2018 Adjusted Funds Flow 35,736 29,639 548% ($000’s) increase Production (Boed) 20,587 20,407 1.0% increase Net debt ($000’s) 249,627 257,880 7.4% decrease Netback ($/boe) 26.93 21.02 329% increase *Average WTI price in Q2 2019 $59.81 5
Slide 6: Production Curtailments
Production Curtailments Good or Bad? Cardinal Specific: Best in Class Decline Rate Minimal drilling to maintain curtailment volume Add in Normalized pricing Lots of free cash flow What do we do with it? Increase Reduce Risk Sustainability 6
Slide 7: Go Forward
Go Forward Increase Reduce Risk Sustainability 1. Firm up our ability to replace 1. Pay down our debt production 2. Reduce our ARO exposure 2. Lower our operating costs 3. Reduce our reliance on third 3. Increase our netbacks parties and variable costs 7
Slide 8: Increasing Sustainability
Increasing Sustainability 1. Production Replacement: Inventory Bantry farmin/drilling program Southern Alberta - Strat well program Saskatchewan - Midale drilling Wainwright - Viking/Rex drilling 8
Slide 9: Drilling Inventory
Drilling Inventory Multi-year inventory Cardinal (>500 identified locations/69 booked) North (136/18) Light and medium oil Light and medium oil Conventional play types Horizontal multifrac and Horizontal multifrac, multilateral and vertical multilateral inventory Dunvegan bars inventory Extens
Slide 10: 2019 Activity Focus
2019 Activity Focus Mitsue‐Nipisi Continue water flood optimization North Prepare Clearwater for 2020 development Dunvegan Cardinal 2019 Alberta development pace subject to Continue EOR planning House Mountain Continue to proactively manage decline rates current curtailment 2020 drilling Pipeline
Slide 11: Cardinal Production Trend
Cardinal Production Trend Daily Field Net Production (BOEPD) 2019 Recovery South AB Turnaround (Scots House Mountain Lake) and Jenner Power Turnaround (October) Outages South AB New Drills Midale Turnaround on Production (September) Self‐Curtail (late‐Nov/Dec.) 11
Slide 12: Southern Alberta Drilling 2019
Southern Alberta Drilling 2019 Torxen – Kininvie farm‐in Kininvie Torxen farm-in commitment – 5 wells drilled to date – current combined production ~700 boepd 3 Ellerslie hz multilaterals o 2 poor (35-40 boepd), 1 fair 135 boepd o Poor reservoir quality at 16-22 and high Tide Lk water cut at 6-3
Slide 13: Increasing Sustainability: Lower Operating Costs
Increasing Sustainability 2. Lower our operating costs: Independent power generation Facility consolidation and third party processing Economies of scale 13
Slide 14: Unplugging from the Grid
Unplugging from the Grid Cardinal’s goal is to UNPLUG as much power as we can from the Grid 14
Slide 15: Unplugging from the Grid
Unplugging from the Grid Cardinal 2018 Power Bill Total Electricity $37.6 mm Costs: $/Boe: $4.94 Average Alberta $50.19 Price ($/Mwh): YTD 2019 Power Price $/Boe: $5.40 Average Alberta $63.55 Price ($/Mwh): 15
Slide 16: Unplugging from the Grid
Unplugging from the Grid Objective: To reduce large pad level power bills by unplugging from the grid using solution gas as fuel source for power. Project Economics: Pad Site Power Generation 4 projects completed to date Based on 2019 power costs payout will be to 2 years 16
Slide 17: Economies of Scale
Economies of Scale Forestburg Viking Forestburg Viking Current: 60 Bopd $40/boe Drill 2 140 Bopd $8/boe wells Total 200 Bopd $17.60/boe (average) * Wells currently drilling, production expected late Q3 Cardinal’s entire production base can benefit from economies of scale 17
Slide 18: Reducing Risk: Less Debt
Reducing Risk 1. Less Debt Less Risk Dec 31, 2018 Q2 2019 Cost/Year ($000’s) ($000’s) ($000’s) Net debt 269,689 249,627 11, 500 Bank debt 211,443 195,468 9,000 Convertible Debentures 50,000 45,000 2,500 *$0.10/share in interest payments Our target is 1X debt to cash flow 18
Slide 19: Reducing Risk: ARO Expenditures
Reducing Risk 2. ARO Expenditures New area based closure program $5 million required spend Regulatory changes over the last 4 years focus industry on cleaning up 100+ years of development Cardinal continues to exceed required spending 19
Slide 20: ARO – Area Based Closure Program
ARO – Area Based Closure Program 06-34 Facility Site 06-34 Facility Site March 2019 June 2019 Under the new area based closure program, Cardinal is able to go into shut-in or suspended facilities and remove surface and underground wells and facilities leaving a clean environmental footprint. 20
Slide 21: Reducing Risk: Third Party Risk
Reducing Risk 3. Reducing third party risk Power Pipeline Pipeline apportionment Maximize crude pricing Gas take away Hedging Short Term: 0-6 months Three Prong Strategy: Medium Term: 6-12 months Longer Term: 12-18 months Focus on protecting downside without capping upside 21
Slide 22: Our Strategy: Increase Free Cash Flow
Our Strategy Reduce operating costs/increase netbacks Reduce debt to 1X ARO impact spend Increase Free Cash Flow 22
Slide 23: Free Cash Flow
Free Cash Flow Free Cash Flow to Shareholders Dividends NCIB 23
Slide 24: Advisory: Forward Looking Statements
Advisory Note Regarding Forward Looking Statements This presentation contains forward-looking statements and forward-looking information (collectively "forward-looking information") within the meaning of applicable securities laws relating to Cardinal's plans and other aspects of Cardinal's anticipa
Slide 25: Advisory: Oil and Gas Advisories
Advisory Oil and Gas Advisories The term "boe" or barrels of oil equivalent may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 Mcf: 1 bbl) is based on an energy equivalency conversion method primar
Cardinal Energy — Investor Presentation (August 2019) on 6ix