Obsidian Energy Ltd · TSX:OBE
Obsidian Energy — Q1 2023 Earnings Presentation
40 slides from Obsidian Energy's earnings presentation, May 4, 2023
Slide 1: Q1 Corporate Presentation
Obsidian Energy Ltd. Q1 Corporate Presentation May 4, 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 months ended March 31, 2023. All dollar amounts contained in this presentation are expressed in mil
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 oil significant und
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 Q1 2023 Production 2023E ~32,750 boe/d Shares outstanding 82.5 million 33,153 boe/d YoY production growth* 7% Market c
Slide 5: Obsidian Energy Strategy
OBSIDIAN ENERGY STRATEGY STRATEGY We focus on superior execution throughout to deliver results Drive per share growth Use FCF from Increase scale and Target Net Debt Provide return via asset development Cardium asset to invest manage cost of $225 million of capital with and debt reduction in Peace R
Slide 6: Our Corporate Performance
OUR CORPORATE PERFORMANCE STRATEGY Growth in free cash flow allocated to modest production growth, debt reduction and return of capital to shareholders PRODUCTION OUTLOOK (boe/d) 2023 guidance reflects higher production WTI US$68/bbl US$94/bbl US80.00/bbl AECO $3.45/GJ $5.04/GJ $3.00/GJ FFO $218 mil
Slide 7: Focusing on 2023
FOCUSING ON 2023 STRATEGY Balanced strategy and plans with optionality to adjust in the year 2023 plans expected to deliver 7% production growth, solid FCF, debt reduction and return of capital to shareholders to maximize value OPERATIONS FINANCIAL ‣ Capital investment focused on $240 million in bas
Slide 8: Delivering Results – Q1 2023
DELIVERING RESULTS – Q1 2023 RESULTS Strategy and execution create momentum for long-term value Q3 2022 Q4 2022 Q1 2023 Production 29,985 boe/d 31,742 boe/d 33,153 boe/d Net operating costs1 $14.57/boe $14.63 /boe $14.57 /boe Netback1, 2 $44.18/boe $41.21 /boe $35.55 /boe General & administrative2 $
Slide 9: 2023 Development Program
2023 DEVELOPMENT PROGRAM ASSETS First half drilling program completed across all areas PEACE RIVER 49 (48.2 NET) WELL DRILLING PROGRAM ‣ Expected average production of ~32,750 boe/d, a 7% annualized production growth from 2022 ‣ Ability to alter program quickly in response to commodity prices ‣ Firs
Slide 10: Peace River – Growth Asset
PEACE RIVER – GROWTH ASSET ASSETS Ownership in high-quality heavy oil resource with resource with Bluesky and Clearwater upside Q1 2023 Peace River production 6,885 boe/d ‣ Cold-flow heavy oil resource developed with multi-leg horizontal wells ‣ Large, contiguous, long-term land base of ~500 section
Slide 11: Peace River Bluesky Growth – New Walrus Field
PEACE RIVER BLUESKY GROWTH – NEW WALRUS FIELD ASSETS Solid growth upside through applying expertise and technology to the field ‣ 2023 program: 13 (13.0 net) wells, 2 (2.0 net) wells targeting Walrus field ‣ Rig released in 2022: ‣ Pad 6-04 (2 wells) – IP30 133 boe/d (100% oil) ‣ Pad 2-05* (1 well)
Slide 12: Peace River Clearwater Potential
PEACE RIVER CLEARWATER POTENTIAL ASSETS 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 ‣ Evaluate Clearwater potential while drilling
Slide 13: Leading Cardium Play Areas
LEADING CARDIUM PLAY AREAS ASSETS Our core foundation with ~25 years of drilling opportunities for future development FIELD HISTORY Q1 2023 Cardium production 24,496 boe/d ‣ One of North America’s most significant light oil fields ‣ Development since the 1950’s; various phases have kept field produc
Slide 14: Viking – Significant Development Upside
VIKING – SIGNIFICANT DEVELOPMENT UPSIDE ASSETS Revitalizing light oil asset that provides highly economic returns ‣ Sweet, light oil development play with associated natural gas Q1 2023 Viking production 1,267 boe/d ‣ Significant drilling inventory, including both low risk infill and de-risked step-
Slide 15: 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; published inaugural ESG report Environment Social Governance 40% REDUCTION IN GHG >10,500 WORKER 86% INDEPENDENT EMISSIONS SAFETY INIT
Slide 16: 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 – 2022: STRATEGY 989 Wells abandoned ‣ Committed to reducing environmental footprint 2,735 km Pipelines discontin
Slide 17: Considerable Future Value from Tax Pools
CONSIDERABLE FUTURE VALUE FROM TAX POOLS SUMMARY $2.5 billion of tax pools in unrecognized value Amount of Pools Illustrative Value of Tax Pools Utilized by Year1 @ 8% Discount Rate2 $200 million $352 million $4.19/share $300 million $404 million $4.81/share $400 million $434 million $5.17/share $50
Slide 18: Hedging Production to Preserve Cash Flow
HEDGING PRODUCTION TO PRESERVE CASH FLOW SUMMARY Continuing to build on our hedge position at constructive levels OIL HEDGES ‣ WTI: 1,900 bbl/d for April 2023 @ $111.33/bbl (US$82.96/bbl) ‣ WCS differentials: 1,000 bbl/d for July – December 2023 @ $21.72/bbl (US$16.19/bbl) HEDGED AECO GAS (2023 – 20
Slide 19: 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 US$70 WTI US$80 WTI Proved developed Total Total proved producing (PDP) proved (1P) plus probable (2P) Light and medium crude oil 31 MMbbl 57
Slide 20: Why Invest in Obsidian Energy?
WHY INVEST IN OBSIDIAN ENERGY? SUMMARY Obsidian Energy offers upside potential for shareholders ‣ Compelling ~500 section Peace River area with established Bluesky production, owned infrastructure and significant Clearwater potential for future growth ‣ Dominant Cardium land position and deep opport
Slide 21: Appendix
Appendix TSX:/NYSE American: OBE
Slide 22: 2023 Guidance
2023 GUIDANCE APPENDIX Balancing production growth, exploration/appraisal, debt reduction from FCF generation and returning capital to shareholders 2023E Average production 32,000 – 33,500 boe/d Capital expenditures $260 – $270 million Decommissioning expenditures $26 – $28 million Net operating exp
Slide 23: 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 CRIMSON LAKE ‣ Foundational asset providing highest IP rates in our Cardium portfolio ‣ Able to manage inventory to capitalize on commodity prices ‣ Flex
Slide 24: 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 25: Top Cardium Driller and Operator
TOP CARDIUM DRILLER AND OPERATOR APPENDIX Our development program produces leading Cardium well performance compared to peers Obsidian (71) Bonterra (15) Entrada (25) Yangarra (4) InPlay (25) * Numbers in brackets represent total # of Cardium wells; as of April 25, 2023 ‣ Substantial identified Card
Slide 26: Viking – Exceptional Results from Western Wells
VIKING – EXCEPTIONAL RESULTS FROM WESTERN WELLS APPENDIX Developing western acreage following up 2022 step-out well that effectively delineated area ‣ High economic return wells ‣ Pad 4-22 step-out well delineated western 08-28 IP30 acreage in 2022 200 boe/d ‣ Well showed exceptional rates without s
Slide 27: Well Economics
WELL ECONOMICS APPENDIX Strong returns across areas despite pressure in the current commodity price environment Half Cycle Type Curve Economics1 Willesden Green Pembina Viking Peace River Formation Cardium Cardium W. Viking (Esther) Bluesky (Seal) Well Length 2.0 mile 1.75 mile 1.25 mile 10 leg DCET
Slide 28: Strong Reserve Growth Provides Drilling for Years
STRONG RESERVE GROWTH PROVIDES DRILLING FOR YEARS APPENDIX Lowest valuation compared to peers despite increase in reserves ‣ 311 net 2P locations: 236 net Cardium locations 49 net Viking locations 22 net Bluesky locations 1 net Devonian location Sixth Year 2 net Clearwater locations 1 net Mannville
Slide 29: 2022 Reserve Performance
2022 RESERVE PERFORMANCE APPENDIX Peer leading reserve adds at attractive economics ‣ Positioned in the top quartile of our peer group with respect to overall performance (comparing peer leading additions at an 2022 Additions vs Value attractive cost) 5.0 Weak Additions YGR Strong Additions ‣ Strong
Slide 30: 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 31: Endnotes
Endnotes TSX:/NYSE American: OBE
Slide 32: Endnotes
ENDNOTES ENDNOTES Slide 4: Corporate Overview Slide 8: Delivering Results – Q1 2023 Market capitalization and enterprise value was determined with share price on the close of business on Source of graph data: Obsidian Energy, company public filings. May 2, 2023. Common shares outstanding was determi
Slide 33: Endnotes (Cont.)
ENDNOTES (CONT.) ENDNOTES Slide 16: Industry Leader in Asset Retirement Management Slide 19: Reserves Underpin our Current and Future Value 2019 – 2022 ARO stats are for the period from January 1, 2019, to December 31, 2022, inclusively. Reserves evaluation excludes inactive ARO. Our YE2022 reserves
Slide 34: Endnotes (Cont.)
ENDNOTES (CONT.) ENDNOTES Slide 22: 2023 Guidance, cont. Slide 28: Strong Reserve Growth Provide Drilling for Years Pricing assumptions outlined are forecasted for the full year of 2023 and includes risk management Drilling opportunities include both booked locations per NI 51-101 standards and our
Slide 35: Definitions and Industry Terms
DEFINITIONS AND INDUSTRY TERMS ENDNOTES 2023E means the expected 2023 results, based on internal Debt is bank debt and senior notes. NYSE American means the New York Stock Exchange, American assumptions and estimates Decommissioning means decommissioning expenditures Oil IP365 means total barrels of
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: 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 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 that the borrowing base under our credit facility is reduced, that the Company is unable to renew or refinance our contained in this document