Birchcliff Energy Ltd. · TSX:BIR
Birchcliff Energy — Investor Presentation (May 2017)
68 slides from Birchcliff Energy's investor presentation, May 2017
Slide 1: Corporate Presentation May 2017
CORPORATE PRESENTATION May 2017
Slide 2: Forward-Looking Information
FORWARD-LOOKING INFORMATION: Certain statements contained in this presentation constitute forward-looking statements and information (collectively referred to as “forward-looking information”) within the meaning of applicable Canadian securities laws. Such forward-looking information relates to futu
Slide 3: People, Focus & Execution
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Slide 4: Corporate Snapshot & Select Guidance
Corporate Snapshot & Select Guidance Q1 2017 average production 61,662 boe/d Estimated 2017 annual average production 70,000 – 74,000 boe/d % oil and NGL 23% Estimated Q4 2017 annual average production 80,000 – 82,000 boe/d % oil and NGL 21% Estimated 2017 net capital expenditures (millions) $355 To
Slide 5: Q1 2017 Highlights
Q1 2017 HIGHLIGHTS • Record quarterly average production of 61,662 boe/d, a 47% increase from 41,958 boe/d in Q1 2016 • Cash flow of $67.6 million ($0.26/basic common share), a 227% increase from $20.7 million ($0.14/basic common share) in Q1 2016 • Net income to common shareholders of $28.9 million
Slide 6: Investment Highlights
INVESTMENT HIGHLIGHTS • Focused assets in the Peace River Arch Area of Alberta (the Montney/Doig Resource Play and the Charlie Lake Light Oil Resource Play) • Essentially 100% working interest; 99% of production is operated • Large, contiguous undeveloped land base with an average 93% W.I. • Signifi
Slide 7: Five Year Plan
FIVE YEAR PLAN(1) 140,000 125,000 Approximate Annual Average 120,000 110,000 105,000 Production (boe/d) 100,000 91,000 80,000 72,000(2) 60,000 40,000 20,000 0 2017E 2018E 2019E 2020E 2021E Approximate Annual Average 72,000 boe/d(2) 91,000 boe/d 105,000 boe/d 110,000 boe/d 125,000 boe/d Production (b
Slide 8: Hedging Summary
HEDGING SUMMARY 2017 Natural Gas Hedging Summary 2017 Crude Oil Hedging Summary MMcf/d(1) $CDN/Mcf(1) bbl/d $CDN/bbl Q1 2017 157.0 $3.44 Q1 2017 1,500 $69.90 Q2 2017 157.0 $3.44 Q2 2017 1,500 $69.90 Q3 2017 157.0 $3.44 Q3 2017 1,500 $69.90 Q4 2017 183.2 $3.50 Q4 2017 1,500 $69.90 Approximately 50% o
Slide 9: Birchcliff's History
BIRCHCLIFF’S HISTORY A Track Record of Execution
Slide 10: Keys to Success
KEYS TO SUCCESS ▪ Executives with proven track record, continuity since inception and significant ownership Management ▪ Highly experienced Management Team with excellent technical knowledge and a long history with the company ▪ 316 (310.7 net) Montney/Doig horizontal wells and 61 Charlie Lake horiz
Slide 11: Production History
PRODUCTION HISTORY 80,000 70,000 – 74,000 70,000 Average Production (boe/d) 60,000 Compound annual growth of 30% per year since 2005 49,236 50,000 38,950 40,000 33,734 30,000 25,829 22,802 20,000 18,136 13,079 10,148 11,216 10,000 6,711 5,368 2,793 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Slide 12: Corporate Reserves
CORPORATE RESERVES 1,000,000 PDP TP 880 MMboe 900,000 2P 800,000 On a per share basis PDP, 1P and 2P 700,000 reserves have increased at a compound annual growth rate of 14%, 22% and 23% Reserves (Mboe)(1) 600,000 per year since 2005, respectively 549 MMboe 500,000 400,000 300,000 200,000 166 MMboe 1
Slide 13: Corporate NPV10 (BT)
CORPORATE NPV10 (BT) $7,000 PDP TP $5.8 Billion $6,000 2P PDP and 2P NPV10 (BT) increased by $5,000 66% and 50% year over year, respectively $4.1 Billion NPV10 ($million) $4,000 $3,000 $1.9 Billion $2,000 $1,000 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (1) See appendix at the e
Slide 14: Proven Track Record as a Low Cost Producer
PROVEN TRACK RECORD AS A LOW COST PRODUCER 5 Year Profitability Breakdown: 2012 2013 2014 2015 2016 Average Average AECO (CAD$/GJ) $2.27 $2.99 $4.27 $2.55 $2.05 $2.83 Average WTI (USD$/bbl) $94.21 $97.97 $92.99 $48.80 $43.32 $75.46 P&NG Revenue ($/Mcfe) $5.13 $5.60 $6.40 $3.72 $3.12 $4.55 PDP F&D ($
Slide 15: Proven Track Record as a Low Cost Finder
PROVEN TRACK RECORD AS A LOW COST FINDER $16 PDP F&D 1P F&D 2P F&D 1.2x 1.8x 1.8x Cash flow $12 1.9x netback recycle F&D Cost ($/boe) 1.2x 1.2x 1.3x ratios $8 2.0x 2.0x 2.3x 1.4x 2.6x 1.3x $4 3.7x 1.7x 1.8x 4.7x 7.3x $0 2011 2012 2013 2014 2015 2016 Corporate F&D Costs (incl. FDC) & Cash Flow Recycl
Slide 16: 2016 Accomplishments
2016 ACCOMPLISHMENTS ✓ Completed the acquisition of significant petroleum and natural gas properties and related assets located in the Gordondale area of Alberta for a purchase price of $613.5 million, after final adjustments (the “Gordondale Acquisition”) ✓ In connection with the Gordondale Acquisi
Slide 17: Looking Forward: 2017 Plans & Beyond
LOOKING FORWARD 2017 Plans & Beyond
Slide 18: 2017 Capital Program
2017 CAPITAL PROGRAM 2017 CAPITAL BUDGET: $355.0 MILLION Net Capital Gross Wells Net Wells ($millions) Drilling & Development Pouce Coupe - Montney D1 HZ Gas Wells 22.0 22.0 86.1 Pouce Coupe - Basal Doig/Upper Montney HZ Gas Wells 7.0 7.0 30.2 Pouce Coupe - Montney D4 HZ Gas Wells 3.0 3.0 12.9 Gordo
Slide 19: 2017 Capital Program
2017 CAPITAL PROGRAM • The 2017 Capital Program reflects Birchcliff’s long-term plan of the continued exploration and development of Birchcliff’s low-cost natural gas, crude oil and liquids-rich assets on the Montney/Doig Resource Play and achieving controlled growth, maintaining balance sheet stren
Slide 20: Borrowing Base Details
BORROWING BASE DETAILS • Birchcliff has extendible revolving credit facilities in the aggregate principal amount of $950 million, which are comprised of an extendible revolving syndicated term credit facility of $900 million and an extendible revolving working capital facility of $50 million • Birch
Slide 21: Montney/Doig Resource Play
MONTNEY/DOIG RESOURCE PLAY A Significant Position in a World Class Play
Slide 22: Montney/Doig - A World Class Resource Play
MONTNEY/DOIG - A WORLD CLASS RESOURCE PLAY Resource density. Stacked resource up to 300 metres thick. Large areal extent. Extends over 50,000 square miles. Exceptional “fracability”. Low clay Birchcliff Montney/Doig content, low Poisson’s Ratio and high Young’s Modulus. Exceptional fracture stabilit
Slide 23: Montney/Doig Mineralogy Leads to Excellent Fracability
MONTNEY/DOIG MINEROLOGY LEADS TO EXCELLENT “FRACABILITY” The Montney/Doig Resource Play rock type is composed of a Some other Resource Plays have a high percentage of clays high percentage of hard minerals, and a low percentage of and soft minerals. When fractured this results in the rock clays and
Slide 24: Birchcliff Montney/Doig
BIRCHCLIFF MONTNEY/DOIG • The Gordondale Acquisition adds a fourth commercial development interval in the Montney D2 • Large contiguous land base with 441 sections prospective for the Montney/Doig as at December 31, 2016 • Birchcliff has contiguous land block at Pouce Coupe and Gordondale of approxi
Slide 25: Stacked Resource Provides Substantial Future Upside
STACKED RESOURCE PROVIDES SUBSTANTIAL FUTURE UPSIDE 25
Slide 26: Montney/Doig Multi Layer Opportunity
MONTNEY/DOIG MULTI LAYER OPPORTUNITY 3 2 1 4 5 6 5 6 4 3 2 1 26
Slide 27: Proximal to Infrastructure with Long Term Exposure to LNG Export
PROXIMAL TO INFRASTRUCTURE WITH LONG TERM EXPOSURE TO LNG EXPORT Montney/Doig Birchcliff Pouce Coupe Production Montney/Doig & PC Gas Plant Owned Infrastructure PC Gas Plant Nova Pipeline System North American Market LNG Export Source: RBC Energy Insights: The Montney – Tracking an Elephant August 1
Slide 28: Pouce Coupe Overview
POUCE COUPE OVERVIEW • Proven asset in development phase • Wells show high initial deliverability, low terminal decline and stable long 2017 February 8th Montney D1 Test Results term production • Predictable results with improving rates & liquids yields • 100% owned and operated • Expect to drill 32
Slide 29: 2017 February 8th Pouce Coupe Test Results
2017 FEBRUARY 8TH POUCE COUPE TEST RESULTS • The table below sets forth the recent test results from Birchcliff’s two Montney horizontal natural gas wells drilled in the Pouce Coupe area as a part of our budget expansion in Q4 2016 • These wells were completed utilizing Birchcliff’s latest engineere
Slide 30: Pouce Coupe Lower Montney (D1) Performance vs. Type Curve
POUCE COUPE LOWER MONTNEY (D1) PERFORMANCE VS. TYPE CURVE 7,000 6,000 Deloitte Tier 0 Type Curve IP (un-choked): 6.9 MMcf/d 5,000 IP (choked): 4.0 MMcf/d 2P Reserves: 8.2 Bcfe(1) Gas Rate (Mcf/d) 4,000 3,000 2,000 Tier 0 Tier 1 Tier 2 1,000 Tier 3 Tier 4 0 0 4 8 12 16 20 24 Normalized Flowing Time (
Slide 31: Gordondale Acquisition Highlights
GORDONDALE ACQUISITION HIGHLIGHTS ✓ Completed the Gordondale Acquisition on July 28, 2016 for a purchase price of $613.5 million, after final adjustments ✓ Consolidated a sizeable and contiguous land base within Birchcliff’s existing Gordondale/Pouce Coupe area on the Montney/Doig Resource Play ✓ Si
Slide 32: Gordondale Base Production History
GORDONDALE BASE PRODUCTION HISTORY Montney D2 40,000 discovery well 2015 2014 Last well drilled in 2014 (on-stream 2015) 2013 2012 with peak production of ~35,000 boe/d 35,000 2011 2010 2009 2008 and Earlier 30,000 AltaGas Deep Cut Plant on stream Production (boe/d) October 2012 and Montney oil pool
Slide 33: Gordondale Overview
GORDONDALE OVERVIEW • Drilled 6 (6.0 net) Montney horizontal oil and natural gas wells in 2016 including three Montney D2 oil wells 2017 February 8th Montney D1 Test Results and three Montney D1 natural gas wells • Early results from all 6 wells are meeting or exceeding expectations • The 2017 progr
Slide 34: 2017 February 8th Gordondale Test Results
2017 FEBRUARY 8TH GORDONDALE TEST RESULTS • The table below sets forth the recent test results from Birchcliff’s first six Montney horizontal wells drilled on the Gordondale Assets in Q4 2016 • Preliminary results are meeting or exceeding Birchcliff’s expectations, and support an optimistic view of
Slide 35: Gordondale Key Infrastructure
GORDONDALE KEY INFRASTRUCTURE Key Natural Gas Processing Infrastructure • Existing infrastructure has already AltaGas Gordondale CNRL Progress Sour Deep Cut Gas Plant Sour Shallow Cut Gas Plant supported peak production of 16-31-078-11W6 Licensed Capacity: ~135 MMcf/d 01-01-078-10W6 Acquired W.I.: ~
Slide 36: Elmworth Development
ELMWORTH DEVELOPMENT • Received regulatory approval for an acid gas injection well in August 2016 • Preliminary planning underway for a Second Exploration 100% owned and operated 40 Horizontal MMcf/d natural gas processing plant; currently expected to be operational in the fall of 2021 • Drilled two
Slide 37: Conceptual Montney/Doig Field Development Model
CONCEPTUAL MONTNEY/DOIG FIELD DEVELOPMENT MODEL STATUS OF MODEL CALLIBRATION AND DERISKING FACIES & PETROPHYSICAL GEOLOGICAL, GEOPHYSICAL, GEOMECHANCAL HYDRAULIC FRAC & MICRO SEIS. RESERVOIR MODEL OPTIMIZED DCC & PRODUCTION BASAL DOIG / D5 T1 D4 T2 D3 D2 >T0 D1 >T0 C >T4 37
Slide 38: Pouce Coupe Drilling Performance
POUCE COUPE DRILLING PERFORMANCE Drill Cost Efficiency Yearly Average Drill Speed ( Spud – Rig Release) $700 300 $650 250 $600 $550 mD/Day $/mD 200 $500 $450 150 $400 35% decrease in $/mD from 2007 Drilling twice as fast as 2007 $350 100 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2007 2008 20
Slide 39: Pouce Coupe Lower Montney (D1) Core Area Completion Evolution
POUCE COUPE LOWER MONTNEY (D1) CORE AREA COMPLETION EVOLUTION Completion Cost per Stage vs. Number of Stages Proppant Intensity $300 30 1.00 200 Completion Cost Per Stage ($000's) Average Proppant Intensity (t/m) Average Number of Stages (#) Average Interfrac Spacing (m) $250 25 0.80 160 $200 20 0.6
Slide 40: Engineered Completions for Montney/Doig Full Field Development
ENGINEERED COMPLETIONS FOR MONTNEY/DOIG FULL FIELD DEVELOPMENT Industry Range Birchcliff Best Practices Oil Birchcliff Best Practices Gas Liner type Openhole or Cemented Openhole Openhole Inter-well spacing 100 – 400 m (300 – 1,200 ft) 200 m (600 ft) 300 m (900 ft) Inter-frac spacing 20 – 150 m (60
Slide 41: Terminal Decline Changes
TERMINAL DECLINE CHANGES • Due to strong historical performance from both Birchcliff and industry Montney/Doig wells, Deloitte has reduced their forecast TP and 2P terminal declines to 11% and 9%, respectively • Deloitte’s Tier 0 type curve has increased from 7.7 Bcfe sales to 8.2 Bcfe sales, a 6% i
Slide 42: Montney Normalized Vintage Plot
MONTNEY NORMALIZED VINTAGE PLOT Historical Pouce Coupe Montney D1 Performance(1) 8,000 7,000 2016 Engineered completions and improved drill placement have led 6,000 to substantial year over year 2015 increases in well results 5,000 Gas Rate (Mcf/d) 4,000 2012 2013 3,000 Tier 0 2011 2014 2,000 2010 2
Slide 43: PC Gas Plant: The Engine for Future Growth
PC GAS PLANT The Engine for Future Growth
Slide 44: Production Processed through the PC Gas Plant
Production Processed through the PC Gas 2012 2013 2014 2015 2016 Q1 2017 Plant Average daily production, net to Birchcliff: Natural gas (Mcf) 59,327 91,666 132,808 163,641 168,444 171,605 Oil & NGLs (bbls) 204 527 1,065 1,287 960 1,052 Total boe (6:1) 10,092 15,805 23,200 28,560 29,034 29,653 % of c
Slide 45: Key Strategic Advantages of PC Gas Plant
Corporate Operating Costs vs. % of Natural Gas Sales Volumes Processed at the PC Gas Plant KEY STRATEGIC $10.00 100% Corporate Operating Cost ($/boe) Volume Through PC Gas Plant ADVANTAGES $8.00 $6.00 80% 60% • 100% owned and operated $4.00 40% • Generates operating cost savings of $2.00 20% approxi
Slide 46: PC Gas Plant Highlights
PC GAS PLANT HIGHLIGHTS • Current processing capacity of 180 MMcf/d • Expect Phase V expansion will be completed in October 2017, adding 80 MMcf/d bringing total processing capacity to 260 MMcf/d 41% 59% • Expect Phase VI expansion will be completed in October 2018, adding 80 MMcf/d bringing total p
Slide 47: Pouce Coupe Service Overview
POUCE COUPE SERVICE OVERVIEW • Virtually all of our natural gas production is transported on TransCanada’s NGTL System in Alberta pursuant to both firm and interruptible service agreements • Birchcliff recently entered into sales agreements with a third party to sell ~40 MMcf/d of natural gas under
Slide 48: Charlie Lake Light Oil Resource Play
CHARLIE LAKE LIGHT OIL RESOURCE PLAY Dependable Light Oil Production
Slide 49: Worsley Charlie Lake Light Oil
WORSLEY CHARLIE LAKE LIGHT OIL • Essentially 100% W.I. with operatorship and control of wells, pipelines and facilities • Own over 190 net sections with 200+ horizontal locations currently identified • Mature, predictable, long life production base • The pool is characterized by high original oil in
Slide 50: Worsley Charlie Lake Light Oil Accomplishments
WORSLEY CHARLIE LAKE LIGHT OIL ACCOMPLISHMENTS SINCE SEPTEMBER 2007 ACQUISITION • 2P reserves have increased over 150% to 38.9 MMboe from 15.1 MMboe • 2016 year end 2P NPV10 (BT) was $537 million versus purchase price of $270 million • Birchcliff has drilled over 100 wells and is using the latest ho
Slide 51: Worsley Area Reserves
45,000 WORSLEY AREA RESERVES PDP 38.9 MMboe 40,000 TP PDP reserves increased 15% as 2P success with the waterfood scheme 35,000 advanced proved reserves to PDP 30,000 Reserves(1) (Mboe) 25,000 20.4 MMboe 20,000 15,000 10,000 7.6 MMboe 5,000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (1) See
Slide 52: Worsley Area NPV10 (BT)
WORSLEY AREA NPV10 (BT) $1,200 2016 PDP NPV10 (BT) of $172 million, $1,000 a increase of 29% from year end 2015 $800 NPV10(1) ($million) $600 $537 Million $400 $341 Million $172 Million $200 $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 PDP ($million) TP ($million) 2P ($million) (1) See appen
Slide 53: Building on Our Past
BUILDING ON OUR PAST Over 10 Years of Success
Slide 54: Birchcliff Timeline
Record annual average Birchcliff’s average daily production was 49,236 boe/d in production of 49,236 2016 compared to 2,793 boe/d in 2005, a compounded boe/d in 2016 annual growth rate of 30% per year over that span. 2,793 boe/d 1 2 3 4 5 6 7 8 9 10 11 12 13 14 2004 2017 July 6, 2004: Birchcliff inc
Slide 55: Production Growth and Operating & Cash Costs
Production Growth 60,000 300 boe/d/million wtd. avg. shares 50,000 250 Birchcliff has increased production at a 40,000 200 compound annual growth rate of boe/d 30,000 150 20,000 100 30% since 2005. 10,000 50 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Average Production (boe/d) P
Slide 56: Reserves Growth
Reserves Growth 1000 4,000 800 3,200 Birchcliff has added significant low cost reserves boe/1,000shares 600 2,400 since commencing operations in 2005. On a per MMboe 400 1,600 common share basis, PDP, 1P and 200 800 2P reserves grew 14% per year, 22% per year and 23% per year, 0 0 2005 2006 2007 200
Slide 57: Appendix
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Slide 58: 2016 Montney/Doig Resource Assessment
2016 MONTNEY/DOIG RESOURCE ASSESSMENT Reserves and Resource Volumes (Bcfe)(1)(2) Resource Class Raw/Sales Low Estimate Case Best Estimate Case High Estimate Case Cumulative Production(3) Sales 696.7 696.7 696.7 Remaining Reserves(3)(4) Sales 3,142.4 4,993.6 6,384.5 Total Commercial Recoverable Sales
Slide 59: 2016 Year End Montney/Doig Reserves
2016 YEAR END MONTNEY/DOIG 900,000 RESERVES Drilled 20 HZ M/D wells and acquired 87 (82.5 net) HZ M/D wells 295 (289.7 net) Montney/Doig horizontal 800,000 Drilled 29 HZ wells drilled as of Dec 31, 2016 including M/D wells 87 (82.5 net) wells acquired in the 700,000 Drilled 41 HZ Gordondale Acquisit
Slide 60: Series A Perpetual Preferred Shares
SERIES A PERPETUAL PREFERRED SHARES Preferred Share Details Series A Number of Shares 2 million Issue Date August 8, 2012 TSX Trading Symbol BIR.PR.A Issue / Par Price $25.00 per share Quarterly Dividend $0.5000 per share Yield at Issue 8.0% Redeemable by Holder No 2016 2017 2018 2019 2020 2021 2022
Slide 61: Series C Preferred Shares
SERIES C PREFERRED SHARES Preferred Share Details Series C Number of Shares 2 million Issue Date June 14, 2013 TSX Trading Symbol BIR.PR.C Issue / Par Price $25.00 per share Quarterly Dividend $0.4375 per share Yield at Issue 7.0% June 30, 2020 and each Redeemable by Holder quarter thereafter 2016 2
Slide 62: Executive Officers
EXECUTIVE OFFICERS A. Jeffery Mr. Tonken is a director and the President and Chief Executive Officer of Birchcliff. He has more than 36 years of experience in the oil and natural gas industry and is one of the Corporation’s founders. Prior to creating Birchcliff, Mr. Tonken founded Tonken and served
Slide 63: Executive Officers
EXECUTIVE OFFICERS Mr. Carlsen is the Vice-President, Engineering of Birchcliff and is a Professional Engineer. He previously served as Asset Christopher A. Team Lead and Senior Exploitation Engineer with Birchcliff. Mr. Carlsen is a Professional Engineer with more than 16 years of experience in the
Slide 64: Board of Directors
BOARD OF DIRECTORS Mr. Shaw is a director of Birchcliff and has more than 29 years of experience in the oil and natural gas industry and is one of Larry A. Shaw the Corporation’s founders. Prior to joining Birchcliff, Mr. Shaw served as Chairman of the Board of Case Resources Inc., Big Independent D
Slide 65: Presentation of Oil and Gas Reserves and Resources
PRESENTATION OF OIL AND GAS RESERVES AND RESOURCES: Deloitte prepared the 2016 Consolidated Reserves Report, the 2016 Deloitte Reserves Report, the 2015 Deloitte Reserves Report and the 2016 Resource Assessment. McDaniel prepared the 2016 McDaniel Reserves Report. Such evaluations were prepared in a
Slide 66: Advisories
Uncertainty Ranges for Resources Estimates of resource volumes can be categorized according to the range of uncertainty associated with the estimates. Uncertainty ranges are described in the COGE Handbook as low, best and high estimates as follows: • A “low estimate” (1C) is considered to be a conse
Slide 67: Non-GAAP Measures
With respect to disclosure of F&D costs disclosed in this presentation: F&D costs including FDC have been presented herein. F&D costs for each reserves category in a particular period are calculated by taking the sum of: (i) exploration and development costs incurred in the period; and (ii) the chan
Slide 68: Thank You Team Birchcliff
THANK YOU TEAM BIRCHCLIFF Jeffrey Akeroyd, Bradley Alexander, Karen Allen, Laura Armstrong, Camille Ashton, Rainer Augsten, Gates Aurigemma, Bryce Baloun, Alan Basnett, Angela Belbeck, Charmaine Belley, Tyrus Bender, Tim Berg, Perry Billard, Daniel Blattler, Angela Boire, Deborah Borthwick, Myles Bo