Questerre Energy Corporation Class A · TSX:QEC
Questerre Energy Corporation Class A — Investor Presentation (May 2010)
38 slides from Questerre Energy Corporation Class A's investor presentation, May 2010
Slide 1: Corporate Presentation
Corporate Presentation May 2010 Questerre Energy Corporation 1
Slide 2: Presentation outline
Presentation outline • Company overview • Natural gas market • Shale gas – Environmental considerations • St. Lawrence Lowlands, Quebec • Investment summary • Appendix 2
Slide 3: Commercializing the Quebec shale gas discovery
Commercializing the Quebec shale gas discovery • First mover in Quebec with one million acre land position taken in 1998 • 17.99 Tcf (3 billion boe) recoverable resource discovery in the Quebec Utica shale on Questerre lands • Excellent fiscal environment enhances economics • Strong balance sheet, e
Slide 4: Asset overview
Asset overview St. Lawrence Lowlands, Quebec • Giant Utica shale gas discovery being commercialized with partners • Lorraine shale upside Northeast British Columbia • Recently acquired acreage prospective for Horn River shale gas including Jean Marie resource play • Evaluating Besa River shale gas p
Slide 5: Operating and financial results
Operating and financial results Three Months Ended March 31 2010 2009 Cash Flow $0.52 million $1.06 million Production Crude Oil and Natural Gas Liquids (bbls/d) 295 (50%) 463 (44%) Natural Gas (mcf/d) 1,828 (50%) 3,514 (56%) Total (boe/d) 600 1,049 Revenue ($/boe) 55.10 39.46 Royalties ($/boe) 7.43
Slide 6: Capitalization & liquidity
Capitalization & liquidity Insiders 21,579,517 9% Free Float 212,183,461 91% Total 233,762,978 Options (Average exercise price $1.11) 20,516,253 Average 3 month daily trading volume 4,607,901 (OSE plus TSX) Research Coverage 6
Slide 7: Natural gas market
Natural gas market • Utica shale gas development a match to the long term price of gas • Shale gas to replace rapidly declining conventional gas North American Natural Gas Production Source: EIA, NEB, EnCana Source: EnCana Corp March 2010 Investor Days • Over‐investment and recession have created $7
Slide 8: Natural gas market
Natural gas market • LNG imports to North America expected to stay low • New LNG regas terminals have been cancelled or deferred (e.g. Rabaska) • Canada expected to become LNG exporter by 2014 (e.g. Kitimat) • Dramatic change in only two years has consumers in ‘wait and see’ mode 8
Slide 9: Natural gas market
Natural gas market • Gas at over 60% discount to oil on energy equivalent basis – Competitive with coal • Clean, abundant, reliable, cost‐effective and efficient supply of energy – Natural gas produces 30% less emissions than gasoline Source: Encana Corp. presentation January 26, 2010 by Kevin Smith
Slide 10: Shale gas basins in North America
Shale gas basins in North America Dramatic advances in completion technology and improvements in commodity prices are the driving forces behind shale gas development Source: Regional Geochemical Evaluation of the Ordovician Utica Shale Gas Play in Québec by Robert Thériault 10
Slide 11: How is shale different
How is shale different • Gas is extracted from the rock, not drained from it • Shale gas molecules move five meters in five years so the rock must be shattered underground by hydraulic fracturing • The objective is to maximize recovery and minimize the cost per frac Source: EnCana Corp Jan 10 Corpor
Slide 12: Fracture stimulation
Fracture stimulation • Hydraulic fracturing allows previously unrecoverable natural gas to be produced from shale formations • Frac fluids are comprised of Source: Chesapeake Energy “Hydraulic Fracturing Fact Sheet 2009” more than 99% water and sand. – Remaining additives include compounds found St.
Slide 13: Fracture stimulation additives
Fracture stimulation additives Additives commonly used by Questerre 13 Source: Chesapeake Energy “Hydraulic Fracturing Fact Sheet 2009”
Slide 14: Water usage
Water usage • Strict regulatory standards under development in Quebec for withdrawal, usage and disposal of water for shale gas development • Ample supply of water from St. Lawrence River watershed will result in no meaningful impact on fresh water supply for the province How much is 20 thousand cub
Slide 15: Natural gas emissions
Natural gas emissions • Cleanest‐burning fuel – Burns twice as clean as coal and is 60% more efficient – Lower CO2 emissions and fewer pollutants than coal or oil when burned • Natural gas industry accounts for only 3.2% of total greenhouse gas emissions on a CO2 equivalent basis • Using natural gas
Slide 16: St. Lawrence Lowlands, Quebec
St. Lawrence Lowlands, Quebec “All Hail the Triumphant” Copyright 2008 Daedalus Designs Inc. Courtesy Kinsman Robinson Galleries, Toronto in association with Master’s Gallery Ltd., Calgary 16
Slide 17: Shale gas in Quebec
Shale gas in Quebec • Favorable fiscal terms • Geologically well‐defined deep fairway • Large land position with drilling inventory measured in decades • “IGIP” (incredible gas in place) with proven rock properties 17
Slide 18: Favorable fiscal environment
Favorable fiscal environment • Robust economics – Crown royalties of 10‐12½% – Realized prices of NYMEX + $0.50 premium • Minimal investment to connect to local market of 0.5 Bcf/d and larger regional markets Pipeline infrastructure in Lowlands • Reduced capital investment and operating expenses due
Slide 19: Well defined geological fairway
Well defined geological fairway Utica Structure Map Questerre/Terrenex prospect map 1999 Schematic cross section of Lowlands Play Fairway Unstructured Structured • Potential for different play styles in structured and unstructured areas of play fairway 19
Slide 20: Dominant land position in fairway - 1999
Dominant land position in fairway ‐ 1999 20
Slide 21: Dominant land position in fairway - 2010
Dominant land position in fairway ‐ 2010 Quebec City Montreal Acreage Interest Gross Net Questerre ‐Talisman 25%+4.25% GORR 719,788 206,746 Yamaska – Forest Oil/Gastem 20% 113,453 22,691 St. Jean – Gastem 59% 181,255 107,003 Total Acres 1,014,496 336,440 21
Slide 22: Multi-tcf potential independently validated
Multi‐tcf potential independently validated • Resource assessment of Utica completed by Netherland, Sewell & Associates in November 2009 • Does not include 4¼% overriding royalty payable by Talisman nor Lorraine formation with estimated OGIP of 120 Bcf/section One trillion cubic feet (Tcf) of natura
Slide 23: Measuring up to a proven shale play
Measuring up to a proven shale play Quebec shale compared to SWN Fayetville shale 7 6 Daily Gas Rate (mmcf/d) 5 4 3 2 1 0 Year 1 Year 2 Year 3 Year 4 an an an an an an an an -J -J -J -J -J -J -J -J 01 01 01 01 01 01 01 01 Questerre Southwestern Trend Line Trend Line Results are moving in to third ye
Slide 24: St. Edouard No. 1A
St. Edouard No. 1A • St. Edouard horizontal well “simply excellent” initial result of 6mmcf/d – Questerre interprets that initial production data may point to Haynesville type curve • Potential for substantially better results in structured area with improved frac efficiency and longer length horizo
Slide 25: Establishing recovery rates
Establishing recovery rates • Initial program of up to four horizontal wells ongoing with testing thereafter • Gentilly drilled and frac completion planed for this summer • Currently drilling Fortierville • Leclercville well offsetting Questerre acreage to be completed this summer • Evaluating drill
Slide 26: Increasing confidence
Increasing confidence • Drill and complete additional wells this year to delineate different play styles and identify core acreage • Calendar for Hydrocarbon Act to streamline regulatory approval process for fall session Drilling operations on Gentilly horizontal well • Pipeline construction targeti
Slide 27: Expected timeline
Expected timeline 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Optimization Commercial Development Pilot Project Rock Properties Investigation Resource Identification 27
Slide 28: Investment summary
Investment summary • Mega discovery in Utica shale Strong • Extensive land position in Quebec with multiple opportunities portfolio • New shale gas plays in Horn River and Liard basin • Light oil development at Antler in Saskatchewan • Large retained interest and running room in Utica discovery Larg
Slide 29: Management & Board
Management & Board Management Board Michael Binnion, President & Chief Executive Les Beddoes, Jr. Officer International explorationist John Brodylo, VP Exploration (Nexen) Former VP Exploration, Bow Valley Energy Inc.; Victoria, BC Peter Coldham, VP Engineering & Operations Michael Binnion, Presiden
Slide 30: Forward looking information
Forward looking information This presentation contains certain forward–looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" an
Slide 31: Appendix
Appendix 31
Slide 32: What is shale
What is shale • Organic shale is typically a source rock that charges conventional reservoirs over geologic time – Shale must be source, seal and reservoir – Gas/oil is in pore spaces (free) and on surface of particles (adsorbed) – Gas can be generated by biogenic or thermogenic means Lorraine Shale
Slide 33: Harnessing the learning curve
Harnessing the learning curve Barnett Shale (Texas) • Every shale play has its own 7,000 F ir st Y e a r A v g G a s R a te (M C F P D ) 6,000 learning curve and requires 5,000 unique, innovative solutions 4,000 3,000 2,000 1,000 • Acquire a statistically - significant set of results and 5/7/1990 1/
Slide 34: Extensive technical database
Extensive technical database Utica and Lorraine unstimulated DSTs • Over 5,000 km of seismic data • Over 275 wells drilled in basin with core, logs or production tests in Utica and Lorraine • Bow Valley/Terrenex study in early 1990s Source: Molopo Australia Limited 2008 Corporate Presentation valida
Slide 35: Slide 35
Slide 36: Utica Depth Structure
Utica Depth Structure usher CY ME Shallow: 0-800m (©) Medium: 800-1700m Deep tested: 1700-3000m 8) Deep overthrust: > 3000m Deep tested unknown: 1700-3000m {> Deep unknown thermal maturity a Ny RN 0 6 2 8 2m 30 ry S — — o 0 2 30 40 50 KM 77; /, 36
Slide 37: Utica well test summaries
1. Farnham No 1 (2009) 6. St-Francois du Lac No 1 (2008) 12. Gentilly No 1 (2008) 15. St-Augustin de Desmaures No 1 (2008) Operator: Canbriam Operator: Forest Oil Operator: Talisman Operator: Junex Spud Date: July 9, 2009 Spud Date: August 6, 2008 Spud Date: July 18, 2008 Spud Date: June 16, 2008 De
Slide 38: Contact details
1650 AMEC Place 801 Sixth Avenue SW Calgary, Alberta T2P 3W2 Canada Tel: (403) 777 1185 Fax: (403) 777 1578 www.questerre.com info@questerre.com 38