Cardinal Energy Ltd. · TSX:CJ
Cardinal Energy — Investor Presentation (July 2018)
32 slides from Cardinal Energy's investor presentation, July 2018
Slide 1: Sustainable Dividend & Growth
SUSTAINABLE DIVIDEND & GROWTH July 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) $0.42 2018 Average Production Guidance (boe/d) 21,000-21,500 Light oil & NGL’s (bbls/d) 9,775 (46%) WCS medium quality oil (bbls/d) 8,700 (41%) Natural gas (boe/
Slide 3: 2017 in Review
2017 in Review Mandate: Increase light oil exposure Increase netbacks Reduce operating Costs Maintain dividend 3
Slide 4: Grande Prairie Acquisition
Grande Prairie Acquisition (March 2017) Grande Prairie Acquisition MM$ Acquisition Consideration 31 2017 Capital Expenditures 12 Total Capital 43 2017 Cash Flow from Assets 6 Net Capital Outlay 2017 37 Grande Prairie Acquisition – YE 2017 PV10, MM$ PDP TP TPP YE 2017 Closing 63 84 100 Reserves , Mmb
Slide 5: Midale/House Mountain Acquisition (July 2017)
Midale/House Mountain Acquisition (July 2017) MM$ Acquisition Consideration 296 2017 Capital Expenditures 3 Total Capital 299 Midale/House Mountain Historical Production 6,000 2017 Cash Flow from Assets 31 5,000 Net Capital Outlay 2017 268 SE Sask (Midale) 4,000 boe/d 3,000 Midale/House Mtn Acq YE 2
Slide 6: 2017 Results
2017 Results House Mountain Grande Prairie and Midale % Increase Acquisition Acquisition over Q4 2016 At Q2 2017 At Q3 2017 Q1 2018 Q4 2016 Light oil (bbl/d) 2,677 3,040 8,112 8,987 236% WCS Priced oil (bbl/d) 9,596 10,074 9,531 8,845 -8% NGL (bbl/d) 313 703 712 660 111% Nat Gas (mcf/d) 12,178 20,02
Slide 7: 2017 in Review
2017 in Review Dec 31/16 Jan/2018 Mandate: Increase light oil exposure 22% 50% Increase netbacks $14.86 $20.20 Reduce operating Costs $23.24 $20.93 Maintain dividend ✔ 7
Slide 8: 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 9: Decline Rates
Decline Rates o CARDINAL ENERGY LTD 50% 45% 40% 35% Average: 30% 30% 25% 20% 15% 10% 5% sad WwreuWwre x OoDdwWWorerYuUdgGke x RO SGERESESE RECEP ESS Corporate Decline Rate [%] IBR DEE RRX NVA ATH vil BXE PONY
Slide 10: Year to Year change in Decline Rates
Year to Year change in Decline Rates 10
Slide 11: Cardinal Production By Area
Cardinal Production By Area 11
Slide 12: Mitsue / House Mountain
Mitsue / House Mountain Mitsue House Mtn Focus: Capital projects to improve netbacks and decrease op costs Build out drilling inventory 12
Slide 13: Grande Prairie
Grande Prairie 7 well Hz program (2017-2018) Average well performance above expectation Additional drilling 2018 2H + 2019 EOR (water flood) currently anticipated (2019) Q4 2017/Q1 2018 New Drills Dunvegan Bar sand - ~1350m TVD High quality light oil (~75% liquids) 13
Slide 14: Central Operating Area
Central Operating Area 8% yoy reserves growth with water flood optimization Low predictable decline of ~ 5%/year >300 million barrels OOIP Majority of production is under secondary recovery Drill inventory developing 14
Slide 15: South - Bantry Strat Program
South - Bantry Strat Program Initial success (2014-2016) focused in areas supported by abundant vertical well control 10 location strat program drilled (Jan- Feb 2018) to increase confidence in next round of horizontal drills 2018 Focus Operating cost optimization Primary area of 2H drilling
Slide 16: Midale – Long term potential
Midale – Long term potential Recovery Factors Directly offsets the Weyburn Unit 50% 46% Analogous reservoir to Weyburn, 45% world class miscible flood 40% Long term potential reservoir 35% 33% 30% Underdeveloped relative to 25% 24% Weyburn with minimal 20% 20% development since 2009 15% 2018 –
Slide 17: Drilling Inventory
Drilling Inventory Based on maximum 24 month payout on D/C/C. 17
Slide 18: Balance of 2018
Balance of 2018 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Total Production 21,200 20,500 21,250 21,500+ Bank Debt $213 M $200 M Payout 98% Less than 100% Less than 100% Less than 100% Dividend $0.035/month $0.035/month $0.035/month $0.035/month 18
Slide 19: Look Forward to 2019
Look Forward to 2019 Cash Flows +/- $175 million Sustaining Capital +/- $50 million Dividend +/- $50 Million Excess Funds Flow $ 75 Million Debt Repayment Growth Capital Dividend Increase 19
Slide 20: Debt Adjusted Free Cash Flow
Debt Adjusted Free Cash Flow 20
Slide 21: Cash Flow Growth - Peers
Cash Flow Growth - Peers e CARDINAL ENERGY LTD. Cash Flow Growth - Current Strip Pricing i 2018e CFPS Growth (Y/Y) DDA - dil. - % © 2019e CFPS Growth (¥/¥) DDA - dil. -% § g : : : CFPS (DDA) Y/Y (%) 3 -10% BNE VET TOG ERF ARX SGY WCP ia] BNP PEY CPG BIR TOU Source: GMP FirstEnergy, Company Reports C
Slide 22: Free Cash Flow - Peers
Free Cash Flow - Peers f ENERGY LTD. EGMP| FirstEnergy Junior E&P 2019e Free Cash Flow - Current Strip Pricing (June 2018) 20:19e Current strip pricing: WT!USSS62.95/bbl, Ed. Light C$$70.94/Bbl, Condersate C$SELS3/bL WES CSS52_20/EbL, NYMEX USS$2 78/mmibtu, AEC C$51.71/mef, Px $0.76 USD/CAD 10.0x 9.
Slide 23: 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 23
Slide 24: 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 25: Capital Spending
Capital Spending Low decline results in low sustaining Capex Flat production profile achieved with 40-45% of adjusted funds flow 25
Slide 26: 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 27: 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 28: 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 29: 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 30: 2P Reserves, mboe
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 30
Slide 31: Advisory
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 32: Advisory
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