Cardinal Energy Ltd. · TSX:CJ
Cardinal Energy — Investor Presentation (May 2018)
40 slides from Cardinal Energy's investor presentation, May 2018
Slide 1: Sustainable Dividend & Growth
SUSTAINABLE DIVIDEND & GROWTH May 2018
Slide 2: Cardinal Profile
Cardinal Profile Shares Outstanding TSX: CJ Basic(1) 110.8 MM Fully Diluted (excluding debentures) 114.0 MM 2018 Annual Dividend ($/share) $0.42 2018 Average Production Guidance (boe/d) 21,000-21,500 Light oil & NGL’s (bbls/d) 9,775 (46%) WCS medium quality oil (bbls/d) 8,700 (41%) Natural gas (boe/
Slide 3: 2018 Outlook
2018 Outlook Sustainable Business Model Growth and Income funded thru cash flow, at less than 100% payout ratio Focus Areas: Reduce Net Bank Debt to 1x cash flow Maintaining best in class 10% decline Improve netback Begin long lead time operating cost reduction projects Maintain divi
Slide 4: Cardinal 3 Year Strategic Plan
Cardinal 3 Year Strategic Plan Decrease bank debt to historical levels of <0.5x cash flow Reduce operating costs to $18 – 19/bbl Increase light oil weighting Deliver modest growth of 2–5%/per year Dividend growth 4
Slide 5: 2018 Budget
2018 Budget Unhedged Funds Flow $132,000,000 Adjusted Funds Flow (Post Hedging) $125,000,000 Capital Program $55,500,000 Free Cash Flow $69,500,000 Dividend Debt Repayment Share Buyback Growth Price Assumptions: WTI (USD) $55.00 AECO $ 1.75 US/CDN FX $ 0.78 WCS differential ($CAD) $18.00 5
Slide 6: Capital Spending
Capital Spending Low decline results in low sustaining Capex Flat production profile achieved with 40-45% of adjusted funds flow 6
Slide 7: ARO Expenditures
ARO Expenditures ARO Expenditures > Regulatory Obligations Additional abandonments and reclamation are done annually to stay ahead of requirements. Reactivations and recompletions continue to be part of our area optimization plans. 20% of Cardinal’s ARO liability is associated with facilities,
Slide 8: Hedging
Risk Management Hedging 1. Natural gas – 7,333 gj/d at $2.37 for 2018 and 1,000 gj/d at $2.12 for Q1 2019. 2. WCS differential - 4,167 bbl/d for H1 2018 at ~$19 and 1,500 bbl/d for H2 2018 at ~$20.12. 3. Includes Collars for: Q2 2018 – 4,000 bbl/d $65 X $75 Q3/4 2018 – 3,500 bbl/d $68 x $79 H1 2019
Slide 9: 2018 Production Profile
2018 Production Profile Hedging 9
Slide 10: Capital Budget
Capital Budget in ENERGY LTD. Capital by Area Capital by Type Ce =North =Central "South =Sask #=Sk - Acq = New Drills = Pipe and Facility Optimization = Well Optimization = Acquisitions Total development capital’) $56MM + $18MM Midale acquisition (closed Jan 12, 2018) : Includes Midale CO, purchases
Slide 11: Reserve Summary
Reserve Summary Total Company Reserves MBOE Prov & PDP Proved Probable 3,300Probable boed 31-Dec-16 45,469 49,505 18,037 67,542 South Additions net of Revisions 3,682 7,037 (322) 6,713 Central Acquisitions net of Dispositions 28,663 29,031 8,219 37,250 WI Production (6,791) (6,791) 4,825 boed - (6,7
Slide 12: Reserve Comparison
Reserve Comparison Proved Developed Producing Proved Undeveloped Probable 4,825 boed CJ’s FDC is 1.3 x 2018 forecast adjusted funds flow Proved 1,525 and 1,525boed boed (1) Probable Producing Reserves are 89% of Total Reserves 1,085/boed(1) 1,525 boed(1) Peer’s FDC is 4 x 2018 forecast adjusted fund
Slide 13: FD&A costs
FD&A costs 2017 F&D / FD&A Costs (1) Incl ∆ FDC ( $/BOE) 3,300 boed F&D 12.67 Transition to Lighter Bbls FD&A 10.76 4,825 boed 4,825 boed(1) FD&A Operating Recycle Ratio 2.1 x 13.7 year 2P RLI 54% year over year reserve growth 1,525 1,525boed boed(1) Replaced 6.3 x 2017 production 1,085/boed(1
Slide 14: 2P Reserves Product Split
Increasing Higher API Reserve Mix 2P Reserves - Product Split 120000 100000 13% 2P Reserves, mboe 80000 54% 11% 60000 9% 40% 40000 38% 33% 20000 49% 52% 0 ye2015 ye2016 ye2017 WCS Pricing Light & NGL Gas 14
Slide 15: Asset Base
Asset Base Oil Prod to OOIP(1) Area Nov 2017 EOR MMbbls MMbbls(2) North Cardinal 21000‐21500 boepd (1) Water flood 8150 boepd (Mitsue, House 68% light oil 46% light oil + ngls North >1,300 >530 GP Mtn, GP in 7% ngls Mitsue 41% medium oil 2019) 25% nat gas 13% nat gas House Central >300 >129 Water fl
Slide 16: Production Profile
Production Profile 25000 20000 • Low decline 15000 • Predictable Apache GP Acquisition • Sustainable 10000 Acquisition Turnaround 5000 2018 Guidance 21-21,500 boepd 0 Turnaround South Central North Sask 16
Slide 17: North Operating Area
North Operating Area 1,000-2,200m TVD GP Conventional development Light oil focus Multi-zone potential Hz development Vertical development Well developed House Mtn Mitsue infrastructure footprint Half cycle future development 17
Slide 18: North Operating Area
North Operating Area >1.3 billion barrels OOIP(1) Weekly Field Estimated Production Low base decline 9000 Legacy production under secondary 8000 recovery 7000 Recent drilling success at Grande 6000 Prairie (“GP”) boe/d 5000 4000 2018 Focus 3000 2000 Operating cost optimization 1000 Water
Slide 19: Mitsue
Mitsue High quality light crude (38-40o API) ~1,800m TVD Stable base, under water flood Low decline production (~10%) Large remaining OOIP(1) Facility optimization projects complete in Q2 2018 Infrastructure/pipeline optimization ongoing Future development potential Water flood opt
Slide 20: House Mountain
House Mountain High quality light crude (38-40o API) ~2,200m TVD Low decline (<15%) Large remaining OOIP(1) Offsetting recent horizontal success Future development potential Water flood optimization Horizontal re-entries Vertical and horizontal development drilling Operating cost
Slide 21: GP - Dunvegan
GP - Dunvegan Summer 2017 drills (2) exceeding expectation Completed 5 well Q4 17/ Q1 18 drilling program Average performance above expectation EOR (water flood) currently anticipated to be in place in 2019 Q4 2017/Q1 2018 New Drills 21
Slide 22: North - Upside
North - Upside Type Curve (1) GP Mitsue Mitsue House House Expectations Dunvegan Verticals Hz Reentry Hz Potential Locations 15 40 70 32 45 GP Mitsue Capex per well $2.0 $1.5 $3.0 $1.6 $3.2 ($MM) (D,C,E,T) IP365 (boed) 116 78 150 56 114 EUR (Mboe) 200 150 205 157 130 House Mtn ROR 76% 80% 46% 43% 30
Slide 23: Central Operating Area
Central Operating Area Weekly Field Estimated Production ‐ Central >300 million barrels OOIP(1) 6000 Very low decline ~5% 5000 No recent drilling activity 4000 Majority of production under secondary recovery 3000 2000 2018 Focus 1000 Operating cost optimization 0 Water flood optimization
Slide 24: Central - Wainwright
Central - Wainwright Shallow <750m TVD Concentrated asset Conventional oil development Multi-zone potential Recompletion Hz development Open crown opportunities Well developed infrastructure footprint Half cycle future development 24
Slide 25: Central – Multilateral Drilling Upside
Central – Multilateral Drilling Upside Waseca/Rex Waseca trend Type Curve Expectations(1) Multilaterals Existing single leg hzs Up to 20m thick Potential Locations 20 Capex per well ($MM) (D,C,E,T) $1.0 IP365 (boed) 92 EUR (Mboe) 90 ROR >100% Rex channel Payout (Yrs) 0.6 targets 400m wide, 10- NPV B
Slide 26: South – Bantry Area
South – Bantry Area Shallow <1,100m TVD Infrastructure in place Majority of production under EOR Conventional oil development 2014-17 drilling area focus Multi-zone Hz potential Inventory defined by: Existing verticals Stratigraphic test wells 3D seismic 2018 Focus Operating co
Slide 27: South – Upside
South – Upside Type Curve(1) Glauc Ellerslie Arcs Expectations Channels Potential Locations 70 30 20 Capex per well ($MM) $1.8 $1.8 $- (D,C,E,T) IP365 (boed) 132 130 TBD EUR (Mboe) 160 150 TBD ROR 47% 108% TBD Payout (Yrs) 1.9 1.1 TBD NPV BT10 ($MM) 1.1 2.1 TBD Mannville Producers Competitor drillin
Slide 28: Saskatchewan - Midale
Saskatchewan - Midale 77.2% working interest and operatorship in the Midale Unit 0.01% working interest in the Weyburn unit Various GORs on both the Midale Midale and Weyburn Units Weyburn Fee title lands in the Weyburn unit Non-unit lands and production in the Midale area 28
Slide 29: Saskatchewan
Saskatchewan >0.75 billion barrels OOIP(1) (Midale) Low base decline Under CO2 and water flood 2018 Focus Acquisitions Increase working interest Increase C02 injection Build long term integrated development plan First drills planned in Q4/18 Vintage Production (mbbls/d) 20 15 10 5 0 Ap
Slide 30: Midale – Underperformance = Opportunity
Midale – Underperformance = Opportunity (1) Underperformance to date 1. Inefficient Injection Hz Injection in “Vuggy” Hz production in “Marly” Poor vertical permeability 2. Low well density 34 acres/well vs 20 acres/well at Weyburn Weyburn (1) Current recovery ~38% Current forecast recov
Slide 31: Midale – CO2 and Reservoir
Midale – CO2 and Reservoir Material incremental recovery Marly and Vuggy are segregated reservoirs through CO2 injection Poor vertical permeability Stable long term CO2 source The Weyburn field is an excellent analog 31
Slide 32: 1. Inefficient & Insufficient Injection
1. Inefficient & Insufficient Injection 32
Slide 33: 2. Low Well Density
2. Low Well Density Inefficiently exploited compared to Weyburn 33
Slide 34: Saskatchewan - Upside
Saskatchewan - Upside Type Curve Midale Hz Expectations(1) Potential Locations 200+ Capex per well ($MM) $1.2 (D,C,E,T) IP365 (boed) 53 EUR (Mboe) 210 Midale ROR 71% Weyburn Payout (Yrs) 1.6 NPV BT10 ($MM) 2.2 Material long term inventory, more technical work ongoing, significant long term prize (1)
Slide 35: Potential Inventory Summary
Potential Inventory Summary North Multi-zone potential Cardinal Water flood optimization and 450+ potential locations initiation Light and medium oil targets GP Mitsue Material base optimization Potential Sk - North Central South Total House opportunities Inventory Midale Potential Locations(1) 150+
Slide 36: Corporate Information
Corporate Information Corporate Headquarters Cardinal Energy Ltd. 600, 400 – 3rd Avenue S.W. Calgary, AB T2P 4H2 Bankers ATB Financial CIBC World Markets Inc. RBC Dominion Securities Inc. Scotia Capital Inc. National Bank of Canada Auditors KPMG LLP Legal Burnet Duckworth & Palmer LLP Reserves Sprou
Slide 37: Advisory
Advisory 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 the Cardinal's plans and other aspects of Cardinal's anticipated future
Slide 38: Advisory
Advisory This presentation contains future-oriented financial information and financial outlook information (collectively, "FOFI") about our prospective results of operations, cash flows, payout ratio and components thereof, all of which are subject to the same assumptions, risk factors, limitations
Slide 39: Advisory
Advisory Non-GAAP Measures This presentation contains the terms "adjusted funds flow", “free cash flow”, "total payout ratio", "netback", "net bank debt", "net bank debt" and "net bank debt to adjusted funds flow" which do not have a standardized meaning prescribed by International Financial Reporti
Slide 40: Advisory
Advisory Drilling Locations This presentation discloses drilling locations in three categories: (i) proved locations; (ii) probable locations; and (iii) unbooked locations. Proved locations and probable locations are derived from the Company’s most recent independent reserves evaluation as prepared