Obsidian Energy Ltd · TSX:OBE
Obsidian Energy — Q3 2023 Earnings Presentation
41 slides from Obsidian Energy's earnings presentation, Nov 9, 2023
Slide 1: Obsidian Energy Ltd. Q3 Corporate Presentation
Obsidian Energy Ltd. Q3 Corporate Presentation November 9, 2023 TSX:/NYSE American: OBE
Slide 2: Advisory
ADVISORY OVERVIEW This presentation should be read in conjunction with the Company’s unaudited consolidated interim financial statements and Management’s Discussion and Analysis (“MD&A”) for the three and nine months ended September 30, 2023, and audited consolidated annual financial statements and
Slide 3: Corporate Overview
CORPORATE OVERVIEW OVERVIEW World class assets and experienced team delivering value People, assets, discipline, return-focus and execution strength CORPORATE SUMMARY MARKET SUMMARY Q3 2023 Production 2023E 32,250 boe/d Shares outstanding 79.2 million 32,937 boe/d YoY production growth* 5% Market ca
Slide 4: Obsidian Energy Value Proposition
OBSIDIAN ENERGY VALUE PROPOSITION OVERVIEW We focus on superior execution throughout to deliver results SUPERIOR SHAREHOLDER RETURN Drive per share growth Use FCF from Grow production to Target Net Debt/FFO: via production growth, light oil assets to invest 50,000 boe/d in 2026, 1x @ US$50/bbl WTI d
Slide 5: Strategic Overview
STRATEGIC OVERVIEW OVERVIEW Reshaped the Company and ready to unlock the value of Obsidian Energy’s assets 2020 – 2022: RESHAPED COMPANY AND BUSINESS ‣ Refinanced reserve-based loan and completed successful high-yield debenture offering ‣ Renegotiated other liabilities including office lease ‣ Purch
Slide 6: Why Peace River Growth
WHY PEACE RIVER GROWTH OVERVIEW Underdeveloped land base supports increased capital investment, strong returns and value creation Peace River asset significantly under-exploited (only 34 sections developed out of 500); recent technical work and PROVIDES SUBSTANTIAL UPSIDE drilling success led to cre
Slide 7: Focus During 2023
FOCUS DURING 2023 RESULTS Balanced strategy with strong focus on accessing Peace River potential and optionality to adjust with commodity prices 2023 plans expected to deliver 5% production growth, solid FCF, debt reduction and return of capital to shareholders to maximize value OPERATIONS FINANCIAL
Slide 8: Delivering Results – Q3 2023
DELIVERING RESULTS – Q3 2023 RESULTS Strategy and execution create momentum for long-term value Q1 2023 Q2 2023 Q3 2023 Q2 2023 NETBACK ($/boe) Production 33,153 boe/d 31,042 boe/d 32,937 boe/d Q3 2023: $41.03 Net operating costs1 $14.57/boe $15.06/boe $13.60/boe $33.29 Norm. average Netback1 $35.55
Slide 9: 2023 Development Program
2023 DEVELOPMENT PROGRAM RESULTS Second half drilling program expanded and underway across all areas 60 (59.5 NET) WELL OPERATED DRILLING PROGRAM ‣ Expected average production of ~32,250 boe/d, a 5% annualized production growth from 2022 ‣ Ability to alter program quickly in response to commodity pr
Slide 10: Revised 2023 Guidance
REVISED 2023 GUIDANCE RESULTS Balancing production growth, debt reduction and return of capital to shareholders 2022 SEPTEMBER 2023E REVISED 2023E Revised Guidance: Average production 30,682 boe/d 31,750 – 32,500 boe/d 32,000 – 32,500 boe/d ‣ 2023E commodity price Capital expenditures $319 million $
Slide 11: Sustainability Highlights
SUSTAINABILITY HIGHLIGHTS OVERVIEW Striving to make a difference to the environment, the community and for all stakeholders Environment Social Governance 40% REDUCTION IN GHG >10,500 WORKER 86% INDEPENDENT EMISSIONS SAFETY INITIATIVES BOARD MEMBERS (2018 – 2021 ) (2021) (6.2-year average tenure) 40%
Slide 12: Peace River Growth Asset
PEACE RIVER GROWTH ASSET HEAVY OIL ASSETS (PEACE RIVER) Ownership in high-quality heavy oil resource with Bluesky and Clearwater upside Q3 2023 Peace River production 6,810 boe/d ‣ Cold-flow heavy oil resource developed with multi-leg horizontal wells ‣ Large, contiguous, long-term land base of ~500
Slide 13: Peace River Three-Year Growth Plan Summary
PEACE RIVER THREE-YEAR GROWTH PLAN SUMMARY HEAVY OIL ASSETS (PEACE RIVER) Considerable growth and upside potential for Bluesky and Clearwater development ‣ Three-year production growth to average 24,000 boe/d in PEACE RIVER PRODUCTION GROWTH 2026 25,000 boe/d ‣ Weighted towards de-risked Bluesky dev
Slide 14: Bluesky Area Overview
BLUESKY AREA OVERVIEW HEAVY OIL ASSETS (PEACE RIVER) Strong technical work provides foundation for increased development opportunities and future growth NAMPA WALRUS ‣ 36 inventory locations ‣ Recent appraisal/exploration ‣ 12 locations proposed in three-year success unlocked new field growth plan ‣
Slide 15: Clearwater Area Overview
CLEARWATER AREA OVERVIEW HEAVY OIL ASSETS (PEACE RIVER) Strong technical work provides foundation for increased development opportunities and future growth NAMPA SEAL MAIN ‣ Recent OSE drilling success (2023) ‣ 80 inventory locations identified ‣ Mapping indicates large ‣ 12 locations proposed in th
Slide 16: Light Oil Assets
LIGHT OIL ASSETS LIGHT OIL ASSETS History of highly economic returns with years of low-risk inventory Q3 2023 Cardium production 23,403 boe/d Cardium (Willesden Green/Pembina) ‣ One of North America’s most significant light oil fields with the dominant land position among peers ‣ Significant reserve
Slide 17: Light Oil Asset Three-Year Growth Plan Strategy
LIGHT OIL ASSET THREE-YEAR GROWTH PLAN STRATEGY LIGHT OIL ASSETS Foundational assets with established track record of high IP rates, strong returns and quick payouts STRATEGY STABLE LIGHT OIL PRODUCTION ‣ Accelerate activity in Q4 2023 then maintain production levels throughout three-year plan to pr
Slide 18: Three-Year Growth Plan Financials
THREE-YEAR GROWTH PLAN FINANCIALS SUMMARY Compelling value proposition with accelerated production, and both free cash flow and funds flow growth for strong /share metrics 2024F 2025F 2026F Peace River (heavy oil) 8,500 boe/d 15,500 boe/d 24,000 boe/d PRODUCTION GROWTH TO 50,000 BOE/D WG, Pembina, V
Slide 19: Considerable Future Value from Tax Pools
CONSIDERABLE FUTURE VALUE FROM TAX POOLS SUMMARY $2.4 billion of tax pools in unrecognized value to be leveraged in our three-year growth plan Amount of Pools Illustrative Value of Tax Pools TAX POOL COMPOSITION Utilized by Year1 @ 8% Discount Rate2 (September 30, 2023) $200 million $344 million $4.
Slide 20: Why Invest in Obsidian Energy
WHY INVEST IN OBSIDIAN ENERGY SUMMARY Peace River growth area combined with established light oil production offers upside potential for shareholders GROWTH STRATEGY ‣ Strategy focused on growing Peace River production and per share metrics, with option to return capital to shareholders and/or furth
Slide 21: Appendix
Appendix TSX:/NYSE American: OBE
Slide 22: Hedging Production to Preserve Cash Flow
HEDGING PRODUCTION TO PRESERVE CASH FLOW APPENDIX Continuing to build on our hedge position at constructive levels OIL HEDGES AECO GAS HEDGES ‣ WTI swaps: ($, mcf/d) ‣ 1,781 bbl/d for Oct. 2023 @ $119.80/bbl (US$87.96/bbl) $3.47 50% hedge level ‣ 1,083 bbl/d for Nov. 2023 @ $110.54/bbl (US$80.77/bbl
Slide 23: Reserves Underpin Our Current and Future Value
RESERVES UNDERPIN OUR CURRENT AND FUTURE VALUE SUMMARY Obsidian Energy trading at substantial discount on booked reserves basis YEAR-END 2022 RESERVES SUMMARY N E T A S S E T V A L U E ( N A V ) P E R S H A R E (1) (C$ per share) US$65 WTI US$75 WTI US$85 WTI PROVED TOTAL TOTAL PROVED DEVELOPED PROV
Slide 24: Peace River Depth of Inventory
PEACE RIVER DEPTH OF INVENTORY APPENDIX Internal technical analysis and delineation identified un-risked inventory, opening new plays for future production and reserves BLUESKY BLUESKY Updated location inventory supported by: CLEARWATER (WALRUS SOUTH, PRE-CTF**) (WALRUS SOUTH, POST-CTF**) ‣ A rebuil
Slide 25: Bluesky Area Growth / New Walrus Field
BLUESKY AREA GROWTH / NEW WALRUS FIELD APPENDIX New development area established at Walrus field through expertise and technology ‣ 2023 program: 12 (12.0 net) wells, including 5 (5.0 net) Follow Up on Successful Field Delineation wells targeting Walrus field (rig released) ‣ H1: 6 Bluesky (6.0 net)
Slide 26: Clearwater Area Potential
CLEARWATER AREA POTENTIAL APPENDIX Industry activity continues over emerging Clearwater formation play ‣ Leverage Bluesky operational experience ‣ Clearwater formation just above Bluesky ‣ Ability to use Bluesky infrastructure to reduce well costs ‣ Recent exploratory/appraisal ‣ Evaluate Clearwater
Slide 27: Willesden Green – Crimson Lake and East Crimson
WILLESDEN GREEN – CRIMSON LAKE AND EAST CRIMSON APPENDIX Foundational asset with horizontal development providing strong returns and quick payouts ‣ Foundational asset providing highest IP rates in our Cardium CRIMSON LAKE portfolio ‣ Flexible, operated infrastructure allows ability to maximize prod
Slide 28: Pembina
PEMBINA APPENDIX Low decline rate supports primary horizontal drilling and future growth through waterfloods ‣ Low decline, pressure-maintained development ‣ Existing wells and infrastructure allow growth in scale with reduced capital cost ‣ Ability to de-risk opportunities and add additional locati
Slide 29: Viking – Significant Development Upside
VIKING – SIGNIFICANT DEVELOPMENT UPSIDE APPENDIX Revitalizing light oil asset that provides highly economic returns ‣ Sweet, light oil development play with associated natural gas ‣ Significant drilling inventory, including both low risk infill and de-risked step-out development ‣ Superior netbacks
Slide 30: Light Oil Well Economics
LIGHT OIL WELL ECONOMICS APPENDIX Strong returns across areas despite pressure in the current commodity price environment HALF CYCLE TYPE CURVE ECONOMICS1 WILLESDEN GREEN PEMBINA VIKING Formation Cardium Cardium W. Viking (Esther) Well Length 2.0 mile 1.75 mile 1.25 mile DCET Capex $4.4 million $3.6
Slide 31: Experienced Team with Strong Technical Skills
EXPERIENCED TEAM WITH STRONG TECHNICAL SKILLS APPENDIX Working together to build a top tier developer that provides solid returns to stakeholders ‣ ~270 employees EMPLOYEES FINANCIAL AND COMMERCIAL ‣ Management team: Deep experience in professions, Strong financial, commercial and capital representi
Slide 32: Endnotes
Endnotes TSX:/NYSE American: OBE
Slide 33: Endnotes
ENDNOTES ENDNOTES Slide 3: Corporate Overview Slide 10: Revised 2023 Guidance, cont. Market capitalization and enterprise value was determined with share price on the close of business on Capital expenditures include approximately $25 million for exploration/appraisal activity, which is expected Nov
Slide 34: Endnotes, cont.
ENDNOTES, CONT. ENDNOTES Slide 11: Sustainability Highlights Slide 13: Peace River Three-Year Growth Plan Summary GHG emission reduction is measured in tCO2e/year as a total of all emission including flared, fugitive, Total inventory locations include both booked locations per NI 51-101 standards an
Slide 35: Endnotes, cont.
ENDNOTES, CONT. ENDNOTES Slide 22: Hedging Production to Preserve Cash Flow Slide 23: Reserves Underpin our Current and Future Value In accordance with policies approved by our Board of Directors, the Company may, from time to time, Reserves evaluation excludes inactive ARO. Our YE2022 reserves eval
Slide 36: Definitions and Industry Terms
DEFINITIONS AND INDUSTRY TERMS ENDNOTES 2023E means the expected 2023 results, based on internal DCET stands for Drilling, Case, Equip and Tie-in capital, and MSW means Peace Sweet crude oil assumptions and estimates represents all necessary capital to drill and produce a well into the existing fiel
Slide 37: Non-GAAP Measures Advisory
NON-GAAP MEASURES ADVISORY ENDNOTES Throughout this presentation and in other materials disclosed by the Company, we employ certain measures to analyze financial performance, financial position and cash flow. These non-GAAP and other financial measures do not have any standardized meaning prescribed
Slide 38: Oil and Gas Information Advisory
OIL AND GAS INFORMATION ADVISORY ENDNOTES Barrels of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A boe conversion The Company has an aggregate of 284 (233 net) booked proved locations and 372 (311 net) booked ratio of six thousand cubic feet of natural gas to one bar
Slide 39: 2022 Reserves Disclosure and Definitions
2022 RESERVES DISCLOSURE AND DEFINITIONS ENDNOTES Unless otherwise noted, any reference to 2022 reserves in this presentation are based on the report (the “2022 Each of the reserves categories (proved and probable) may be divided into developed and undeveloped categories: Reserves Report”) prepared
Slide 40: Forward-Looking Information Advisory
FORWARD-LOOKING INFORMATION ADVISORY ENDNOTES Certain statements contained in this document constitute forward-looking statements or information (collectively estimates of our 2023 to 2026 capital expenditures, production levels, FFO, FFO per share, FCF, FCF per share, net "forward-looking statement
Slide 41: Forward-Looking Information Advisory (cont.)
FORWARD-LOOKING INFORMATION ADVISORY (CONT.) ENDNOTES Although the Company believes that the expectations reflected in the forward-looking statements and FOFI the holders of our senior unsecured notes; the possibility that we are forced to shut-in production; the risk that contained in this document