Obsidian Energy Ltd · TSX:OBE
Obsidian Energy — Q3 2022 Earnings Presentation
40 slides from Obsidian Energy's earnings presentation, Nov 8, 2022
Slide 1: Q3 Corporate Presentation
Obsidian Energy Ltd. Q3 Corporate Presentation November 8, 2022 TSX:/NYSE American: OBE
Slide 2: Advisory
ADVISORY OVERVIEW This presentation should be read in conjunction with the Company’s unaudited consolidated financial statements, Management’s Discussion and Analysis (“MD&A”) for the three and nine months ended September 30, 2022. All dollar amounts contained in this presentation are expressed in m
Slide 3: Investment Highlights
INVESTMENT HIGHLIGHTS OVERVIEW An efficient producer with operational strength, providing growth potential PRODUCTION WILLESDEN GREEN & PEMBINA PEACE RIVER Low decline, oil-weighted asset base with Largest acreage holder in a world class, High-quality cold-flow, low decline heavy significant underly
Slide 4: 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 2022 Q1 – Q3 2022 Production 2022E ~31,000 boe/d Shares outstanding 82.4 million 29,985 boe/d 30,324 boe/d YoY prod
Slide 5: Delivering Results – Q3 2022
DELIVERING RESULTS – Q3 2022 OVERVIEW Strategy and focus continue momentum for long-term growth Q1 2022 Q2 2022 Q3 2022 Q2 2022 NETBACK ($/boe) Production 29,407 boe/d 31,575 boe/d 29,985 boe/d Q2 2022: $58.94 Net operating expenses1 $13.93/boe $14.02/boe $14.57/boe $58.52 Netback1, 2 $42.45/boe $58
Slide 6: Obsidian Energy Strategy
OBSIDIAN ENERGY STRATEGY STRATEGY We focus on superior execution throughout to deliver results SUPERIOR SHAREHOLDER RETURN Increase scale and Target total debt of Drive per share growth Use FCF from Cardium manage cost ≤1.0x Net Debt to FFO via asset development asset to invest in structure through
Slide 7: Considerable Future Value from Tax Pools
CONSIDERABLE FUTURE VALUE FROM TAX POOLS OVERVIEW $2.4 billion of tax pools in unrecognized value Amount of Pools Illustrative Value of Tax Pools TA X P O O L C O M P O S I T I O N Utilized by Year1 @ 8% Discount Rate2 (September 30, 2022) $200 million $350 million $4.15/share $0.2 billion $300 mill
Slide 8: Updated 2022 Guidance
UPDATED 2022 GUIDANCE STRATEGY 2023 guidance to be provided in mid-December 2022 % Change ‣ 2022E guidance updated to reflect 2021 Actual Previous 2022E Updated 2022E from 2021* strategic decisions Average production 24,605 boe/d 31,500 – 32,500 boe/d 30,800 – 31,200 boe/d 26% ‣ Production lowered 3
Slide 9: 2022 Development Program
2022 DEVELOPMENT PROGRAM ASSETS Second half drilling program in progress across all areas, producing robust production rates PEACE RIVER 65 (63.4 NET) WELLS DRILLING PROGRAM ‣ Forecasted average production of ~31,000 boe/d, a ~26% annualized production 43 (42.3 net) wells drilled growth from 2021 fr
Slide 10: Leading Cardium Play Areas
LEADING CARDIUM PLAY AREAS ASSETS Our core foundation with ~25 years of drilling opportunities for future development FIELD HISTORY CARDIUM PRODUCTION (Q3 2022) Q3 2022 Cardium production 21,853 boe/d ‣ One of North America’s most significant light oil fields 46% ‣ Development since the 1950’s; vari
Slide 11: Willesden Green – Crimson Lake and East Crimson
WILLESDEN GREEN – CRIMSON LAKE AND EAST CRIMSON ASSETS Foundational asset with horizontal development proving strong returns and quick payouts CRIMSON LAKE ‣ Foundational asset providing highest initial IP rates in our Cardium portfolio ‣ Able to manage inventory to capitalize on commodity prices ‣
Slide 12: Pembina
PEMBINA ASSETS 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 location
Slide 13: Peace River – Growth Asset
PEACE RIVER – GROWTH ASSET ASSETS Full ownership in high-quality cold-flow heavy oil Bluesky resource with Clearwater upside Q3 2022 Peace River production 6,623 boe/d ‣ Cold-flow heavy oil resource developed with multi-leg horizontal wells ‣ Large, contiguous 497 sections with established Bluesky a
Slide 14: Peace River Bluesky Growth
PEACE RIVER BLUESKY GROWTH ASSETS Solid growth upside through applying expertise and technology to field ‣ Reliable and steady Bluesky production with shallow declines ‣ Shallow drilling ~660 metres sub-surface ‣ Long history of Bluesky development ‣ Established expertise in multi-leg heavy oil hori
Slide 15: Peace River Clearwater Potential
PEACE RIVER CLEARWATER POTENTIAL ASSETS Market excitement over emerging Clearwater formation play ‣ 497 sections with Bluesky and Clearwater heavy oil rights ‣ Leverage Bluesky operational experience ‣ Clearwater formation just above Bluesky at ~450 metres sub- surface ‣ Competitive royalty structur
Slide 16: Viking – Significant Development Upside
VIKING – SIGNIFICANT DEVELOPMENT UPSIDE ASSETS Revitalizing light oil asset that provides highly economic returns ‣ Sweet, light oil development play with material degree of Q3 2022 Viking production 1,034 boe/d associated natural gas ‣ Significant drilling inventory, including both low risk infill
Slide 17: Viking – Step-Out Well Provides Future Potential
VIKING – STEP-OUT WELL PROVIDES FUTURE POTENTIAL ASSETS Step-out well effectively delineates area STEP-OUT WELL VERSUS AVERAGE AREA PRODUCING WELL ‣ Viking wells drilled to date performed within expectations 200 boe/d ‣ 8-well program exceeded ~1,000 boe/d in October Producing Day Normalized Product
Slide 18: Sustainability Highlights Over the Past Five Years
SUSTAINABILITY HIGHLIGHTS OVER THE PAST FIVE YEARS CORPORATE RESPONSIBILITY Striving to make a difference to the environment, the community and for all stakeholders Environment Social Governance 40% REDUCTION IN GHG >10,500 WORKER SAFETY 86% INDEPENDENT BOARD EMISSIONS INITIATIVES MEMBERS (2018 – 20
Slide 19: Industry Leader in Asset Retirement Management
INDUSTRY LEADER IN ASSET RETIREMENT MANAGEMENT CORPORATE RESPONSIBILITY Our commitment to stakeholders includes responsible asset retirement as part of the full cycle of development 2019 – 2022E: STRATEGY 1,003 Wells abandoned ‣ Committed to reducing environmental footprint 2,650 km Pipelines discon
Slide 20: Hedging Production to Preserve Cash Flow
HEDGING PRODUCTION TO PRESERVE CASH FLOW SUMMARY Continuing to build on our hedge position at constructive levels HEDGED OIL (2022) HEDGED AECO GAS (2022& 2023) ($, WTI/bbl) ($, mcf/d) Oil Swaps Oil Collars 2 O… $H E$Q3 0Q2 Q1 D$Q4 6$ 1G E 6 1D1 1 5 $116.75 - 50% hedge level 0O 3I L1 $132.26 4( 2006
Slide 21: Reserves Underpin Our Current and Future Value
RESERVES UNDERPIN OUR CURRENT AND FUTURE VALUE SUMMARY Obsidian Energy trading at substantial discount on booked reserves basis YEAR-END 2021 RESERVES SUMMARY N E T A S S E T V A L U E ( N A V ) P E R S H A R E (1) (C$ per share) Proved developed Total Total proved US$75 WTI US$85 WTI producing (PDP
Slide 22: Why Invest in Obsidian Energy?
WHY INVEST IN OBSIDIAN ENERGY? SUMMARY Obsidian Energy offers upside potential for shareholders ‣ Dominant Cardium land position and deep opportunity inventory of high-return wells that can be used to maintain strong FCF generation ‣ Compelling 497 section Peace River area with established Bluesky p
Slide 23: Appendix
Appendix TSX:/NYSE American: OBE
Slide 24: Debt Recapitalization Completed
DEBT RECAPITALIZATION COMPLETED APPENDIX More favourable debt structure as we decrease our debt levels and meet our leverage targets ‣ Refinanced all existing debt facilities with combination of new senior and SOURCES OF FUNDS unsecured debt: ‣ Syndicated Credit Facilities: $175 million New Credit F
Slide 25: 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 ‣ ~250 employees EMPLOYEES FINANCIAL AND COMMERCIAL ‣ Management team: Deeply experienced with long track Strong financial, commercial and capital record,
Slide 26: Top Cardium Driller and Operator
TOP CARDIUM DRILLER AND OPERATOR APPENDIX Our development program produces leading Cardium well performance compared to peers LEADING CARDIUM WELL PERFORMANCE: WILLESDEN GREEN FIELD Cumulative production per well (bbl/well) Obsidian (78) Yangarra (18) Entrada (28) Bonterra (10) InPlay (34) * Numbers
Slide 27: Optimization Program Results in Strong Returns
OPTIMIZATION PROGRAM RESULTS IN STRONG RETURNS ASSETS Modest capital spend results in improved existing well performance, maintaining production across our asset portfolio ‣ Low-cost, high value growth opportunities with minimal capital expenditures ‣ Significant potential with >2,000 active wells t
Slide 28: 2022 Development Program – Peak Rates
2022 DEVELOPMENT PROGRAM – PEAK RATES ASSETS Peak 30-day pad production rates show strength of team in core areas Willesden Green Willesden Green Crimson Lake East Crimson Pembina Pad 8-19 (2 wells) 565 boe/d (75% oil) Pad 8-03 (3 wells) 528 boe/d (88% oil) Pad 2-15 (2 wells) 556 boe/d (79% oil) Pad
Slide 29: Strong Reserve Growth Provides Drilling for Years
STRONG RESERVE GROWTH PROVIDES DRILLING FOR YEARS APPENDIX Lowest valuation compared to peers despite increase in reserves ‣ 231 net PDP locations including 170 net locations in the YE 2021 Cardium, 26 net locations in the Bluesky and 1.5 net locations in the Clearwater $1.8 billion ‣ Our booked und
Slide 30: 2021 Reserves Highlights
2021 RESERVES HIGHLIGHTS APPENDIX Strong growth in reserves values and volumes generating >200% reserve replacement and >2.4x recycle ratios YEAR-END 2021 RESERVES SUMMARY Proved developed Total proved Total proved producing (PDP) (1P) plus probable (2P) Reserves volume 71.3 MMboe 113.7 MMboe 147.8
Slide 31: Endnotes
Endnotes TSX:/NYSE American: OBE
Slide 32: Endnotes
ENDNOTES ENDNOTES Slide 4: Corporate Overview Slide 8: Updated 2022 Guidance Market capitalization and enterprise value was determined with share price on the close of business on Mid-point of 2022E updated guidance range: 11,715 bbl/d light oil, 6,065 bbl/d heavy oil, 2,475 bbl/d NGLs November 4, 2
Slide 33: Endnotes (Cont.)
ENDNOTES (CONT.) ENDNOTES Slide 13: Peace River – Growth Asset Slide 20: Hedging Production to Preserve Cash Flow Drilling opportunities include both booked locations per NI 51-101 standards and our internal, un-risked Current Hedge Position and the weighted average price, or the “Exercise Price” is
Slide 34: Endnotes (Cont.)
ENDNOTES (CONT.) ENDNOTES Slide 26: Top Cardium Driller and Operator Slide 29: Strong Reserve Growth Provide Drilling Opportunities for Years Cumulative Light Oil since Rig Release. Shown on a gross basis. Not adjusted for well length. Drilling opportunities include both booked locations per NI 51-1
Slide 35: Definitions and Industry Terms
DEFINITIONS AND INDUSTRY TERMS ENDNOTES 2022E meant the expected 2022 results, based on internal Debt is bank debt and senior notes. Oil IP365 means total barrels of oil produced over the first 365 days assumptions and estimates of well production, excluding any required cleanup time Decommissioning
Slide 36: 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 37: 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 Test Results and Initial Production Rates ratio of six thousand cubic feet of natural gas to one barrel of crude oil is based on an energy Readers are ca
Slide 38: 2021 Reserves Disclosure and Definitions
2021 RESERVES DISCLOSURE AND DEFINITIONS ENDNOTES Unless otherwise noted, any reference to 2021 reserves in this presentation are based on the report (“Sproule Reserve Definitions, cont. Report”) prepared by Sproule Associates Limited dated January 28, 2022, where they evaluated one hundred percent
Slide 39: Forward-Looking Information Advisory
FORWARD-LOOKING INFORMATION ADVISORY ENDNOTES Certain statements contained in this document constitute forward-looking statements or information (collectively With respect to forward-looking statements and FOFI contained in this document, the Company has made "forward-looking statements") within the
Slide 40: 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 terms or at all and/or obtain debt and/or equity financing to replace one or all of our credit facilities and notes; the contained in this do