Birchcliff Energy Ltd. · TSX:BIR
Birchcliff Energy — Investor Presentation (May 2015)
64 slides from Birchcliff Energy's investor presentation, May 2015
Slide 1: Corporate Presentation May 2015
CORPORATE PRESENTATION May 2015
Slide 2: People, Focus & Execution
PEOPLE, FOCUS & EXECUTION Unconventional Natural Gas Resource Player Unconventional Light Oil Resource Player 2
Slide 3: Investment Highlights
INVESTMENT HIGHLIGHTS • 2014 average production of 33,734 boe/d, $300 million cash flow and $114 million net income. • 2015 average production forecast 38,000 – 40,000 boe/d (13% – 19% Y/Y average production growth). • Focused assets in the Peace River Arch Area of Alberta (centered N.W. of Grande P
Slide 4: Corporate Snapshot
CORPORATE SNAPSHOT Production 2014 Average Production (boe/d) 33,734 (84% gas) Q1 2015 Average Production (boe/d) 38,416 (85% gas) 2014 Year End Reserves 2P Reserves 465 MMboe (18% PDP) 2P FD&A Cost (Including FDC) $10.45/boe 2P Recycle Ratio (Operating Netback) 2.7x Balance Sheet - Mar 31, 2015 Lon
Slide 5: Credit Facility Summary
CREDIT FACILITY SUMMARY Effective May 11, 2015: • Credit capacity has been increased to $800 million based on year end 2014 reserves which includes PDP reserves of 84.7 MMboe. • In conjunction with expanded credit capacity, Birchcliff has consolidated all previously outstanding bank facilities into
Slide 6: Birchcliff History
BIRCHCLIFF HISTORY A Track Record of Execution
Slide 7: Keys to Success
KEYS TO SUCCESS Executives with proven track record, continuity since inception and significant ownership. Management Highly experienced Management Team with excellent technical knowledge and a long history with the company. Over 170 Montney/Doig horizontal natural gas wells and over 70 Charli
Slide 8: Production History
PRODUCTION HISTORY 45,000 40,000 38,000 – 40,000 Compound annual growth of 32% per year since 2005 35,000 33,734 Average Production (boe/d) 30,000 25,829 25,000 22,802 20,000 18,136 15,000 13,079 11,216 10,148 10,000 6,711 5,368 5,000 2,793 - 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 8
Slide 9: Corporate Reserves Summary
CORPORATE RESERVES SUMMARY 500,000 450,000 400,000 PDP, 1P and 2P compound annual growth of 16%, 26% 350,000 and 27% per year since 2005 Reserves (Mboe) 300,000 250,000 PDP 200,000 TP 150,000 2P 100,000 50,000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 PDP 8,651 8,856 15,228 19,066 20,615 3
Slide 10: Corporate NPV10 (BT)
CORPORATE NPV10 (BT) $4,000 $3,500 2014 year end 2P NPV10 (BT) was $3.8 billion $3,000 NPV10 ($million) $2,500 PDP $2,000 TP $1,500 2P $1,000 $500 $0 YE 2005 YE 2006 YE 2007 YE 2008 YE 2009 YE 2010 YE 2011 YE 2012 YE 2013 YE 2014 PDP $234 $208 $395 $497 $495 $647 $806 $830 $972 $1,316 TP $324 $265 $
Slide 11: Proven Track Record as a Low Cost Producer
PROVEN TRACK RECORD AS A LOW COST PRODUCER Even in 2012, the lowest natural gas price in 10 years, Birchcliff was still able to generate profit. 3 Year Profitability Breakdown: 2012 2013 2014 Average Average AECO (CAD$/GJ) $2.27 $2.99 $4.27 $3.18 Average WTI (USD$/bbl) $94.21 $97.97 $92.99 $95.06 P&
Slide 12: Proven Track Record as a Low Cost Finder
PROVEN TRACK RECORD AS A LOW COST FINDER $20 PDP FD&A 1P FD&A 2P FD&A Cash flow netback recycle FD&A Cost ($/boe) 0.9x $15 1.2x ratios 1.4x 1.5x 1.6x 1.2x 1.5x 1.9x $10 1.9x 1.3x 1.2x 2.1x 2.3x 2.5x 2.2x 2.2x 2.3x $5 3.1x $0 2009 2010 2011 2012 2013 2014 Corporate FD&A Costs Including Future Develop
Slide 13: Proven Track Record of Per Share Growth
PROVEN TRACK RECORD OF PER SHARE GROWTH 40,000 240 600 4,000 Annual Production (boe/d) P+P Reserves per Share (boe/1,000 35,000 210 525 3,500 Annual Production (boe/d) Production per Share Proved (boe/d/million shares) Production per Share 30,000 180 450 3,000 Reserves (MMboe) PDP Compound annual 25
Slide 14: Decline & Capital Efficiency
DECLINE & CAPITAL EFFICIENCY AVERAGE DECEMBER TO DECEMBER PRODUCTION; NOT IP’S Dec Avg. 45,000 40,454 Additions boe/d 40,000 Dec Avg. Base 28,749 35,000 Dec Avg. boe/d Production (boe/d) Total Production 27,142 30,000 boe/d Dec Avg. Dec Avg. 21,076 25,000 19,102 boe/d Dec Avg. boe/d 20,000 13,043 De
Slide 15: 2014 Accomplishments
2014 ACCOMPLISHMENTS • Drilled 57 (56.0 net) horizontal wells including 41 (41.0 net) Montney/Doig horizontal natural gas wells and 12 (12.0 net) Charlie Lake horizontal light oil wells. • Four successful exploration wells drilled in 2014: • Pouce Coupe Area Montney D4 Interval • Pouce Coupe Area Mo
Slide 16: Looking Forward
LOOKING FORWARD 2015 Plans & Beyond
Slide 17: Long Term Growth Profile
LONG TERM GROWTH PROFILE 120,000 100,000* 100,000 Production (boe/d) 80,000 Last common share equity offering 60,000 14.2 million shares April 2012. 38,000 - 40,000 40,000 33,734 25,829 22,802 18,136 20,000 13,079 - 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E Average Average Average Avera
Slide 18: 2015 Goals
2015 GOALS • Deliver annual average production of 38,000 – 40,000 boe/d (13% – 19% Y/Y average production growth). • Deliver reserve growth in all categories while progressing strategic exploration projects. • Maintain financial flexibility. • Fund key infrastructure required for future growth. • Co
Slide 19: 2015 Budget
2015 BUDGET 2015 CAPITAL BUDGET: $266.7 MILLION Gross Wells Net Wells Net Capital ($million) (1) Drilling & Development Montney D1 Horizontal Gas Wells 14.0 14.0 90.8 Montney D4 Horizontal Gas Wells 4.0 4.0 25.4 Basal Doig/Upper Montney Horizontal Gas Wells 3.0 3.0 19.2 Montney C Horizontal Gas Well
Slide 20: Montney/Doig Natural Gas Resource Play
MONTNEY/DOIG NATURAL GAS RESOURCE PLAY A Significant Position in a World Class Play
Slide 21: Montney/Doig - A World Class Resource Play
MONTNEY/DOIG - A WORLD CLASS RESOURCE PLAY Resource density. Stacked resource up to 300 meters thick. Large areal extent. Extends over 50,000 square miles. Exceptional “fracability”. Low clay content, Birchcliff Montney/Doig low Poisson’s Ratio and high Young’s Modulus. Exceptional fracture stabilit
Slide 22: Birchcliff Montney/Doig
BIRCHCLIFF MONTNEY/DOIG • Large contiguous land base with 876.3 net sections prospective for the Montney/Doig over our current intervals. • Stacked resource in some of the thickest Montney with 3,346.3 net potential locations identified. • Low cost structure through ownership of PCS Gas Plant & surr
Slide 23: Pouce Coupe Area
POUCE COUPE AREA • Proven asset in development phase. Wells in the area show Montney C high initial deliverability, low Exploration Horizontal terminal decline and stable long term production. • Recent exploration success in the Montney D4 and Montney C intervals is expected to add significant reser
Slide 24: Elmworth Development
ELMWORTH DEVELOPMENT Second Exploration • Birchcliff has drilled two Horizontal successful exploration horizontal wells into the Montney D4 interval, both of which are expected to result in follow up First Exploration drilling and significant future Horizontal reserve additions. The first well Acid
Slide 25: Stacked Resource Provides Substantial Future Upside
STACKED RESOURCE PROVIDES SUBSTANTIAL FUTURE UPSIDE Birchcliff Montney/Doig Natural Gas Resource Play Full Development Plan: Hexastack Basal Doig / Upper Montney (D5) 305.1 (288.4 net) sections 2P reserves booked on 28% of land Montney D4 288.6 (281.7 net) sections 2P reserves booked on 2.5% of land
Slide 26: PCS Gas Plant
PCS GAS PLANT The Engine for Future Growth
Slide 27: Production Processed through the PCS Gas Plant
Production Processed through 2012 2013 2014 Q1 2015 the PCS Gas Plant Average daily production, net to Birchcliff: Natural gas (Mcf) 59,327 91,666 132,808 153,633 Oil & NGLs (bbls) 204 527 1,065 1,284 Total boe (6:1) 10,092 15,805 23,200 26,890 Percentage of corporate natural gas production 56% 73%
Slide 28: Key Strategic Advantages of PCS Gas Plant
Corporate Operating Costs vs. % of Natural Gas Sales Volumes Processed at the PCS Gas Plant KEY STRATEGIC $10.00 100% Volume Through PCS Gas Plant Corporate Operating Cost ($/boe) ADVANTAGES $8.00 $6.00 80% 60% • Generates operating cost savings $4.00 40% of approximately $1.00/Mcf vs. $2.00 20% thi
Slide 29: Montney/Doig Reserves
MONTNEY/DOIG RESERVES Drilled 41 HZ M/D wells 450,000 159 (158.9 net) Montney/Doig Drilled 25 HZ M/D wells 400,000 horizontal natural gas wells Drilled 22 HZ drilled as of Dec 31, 2014 M/D wells 350,000 Drilled 23 HZ Reserves (Mboe) 300,000 M/D wells Drilled 23 HZ 250,000 M/D wells 200,000 Drilled 8
Slide 30: 2014 Montney/Doig Resource Assessment
2014 MONTNEY/DOIG RESOURCE ASSESSMENT Summary of Birchcliff Reserves and Resources(1)(2)(3) Reserves and Resource Volumes (Bcfe) Resource Class Low Estimate Case Best Estimate Case High Estimate Case Cumulative Production(4) 216.3 216.3 216.3 Remaining Reserves(4)(5) 1,535.70 2,481.10 3,573.00 Surfa
Slide 31: Low Decline Production
LOW DECLINE PRODUCTION • All wells are choked initially for better operational efficiency, higher ultimate recovery and reservoir management. This leads to lower declines and subsequently less wells required to maintain production base. • Our Montney/Doig base decline through 2014 was roughly 24%; p
Slide 32: Montney/Doig Represents 81% of Production and 89% of 2P Reserves
MONTNEY/DOIG REPRESENTS 81% OF PRODUCTION AND 89% OF 2P RESERVES Production (boe/d) 2P Reserves (MMboe) 40,000 500 Corporate Production Corporate Reserves Montney/Doig Production Montney/Doig Reserves 400 30,000 300 20,000 200 89% 81% 86% 10,000 75% 84% 100 83% 70% 65% 79% 58% 0 0 2010 2011 2012 201
Slide 33: PCS Gas Plant Highlights
PCS GAS PLANT HIGHLIGHTS • 100% owned & operated. • Current processing capacity of 180 MMcf/d. • Fabrication of Phase V expansion 22% underway; will add 80 MMcf/d bringing total processing capacity to 260 MMcf/d. • Started planning for Phase VI 78% expansion which will add an additional 60 MMcf/d. •
Slide 34: Drilling & Completion Initiatives
DRILLING & 2015 Montney/Doig Wells COMPLETION 2014 Montney/Doig Wells INITIATIVES • Achieved steady reduction in both drilling time & costs. Continue to monitor and refine current drilling & completion practices to improve efficiencies and integrate new technologies. • Super pad & simultaneous opera
Slide 35: New Completion Techniques Improving Well Results
NEW COMPLETION TECHNIQUES IMPROVING WELL RESULTS 2014 Well Results vs. Deloitte Type Curves Year End 2014 Deloitte Tier 1 Type Curve IP: 5.2 MMcf/d 2P EUR: 6.0 Bcfe Avg. Cost: $5.5 million 35
Slide 36: One of the Largest Montney Land Holders
ONE OF THE LARGEST MONTNEY LAND HOLDERS 1,400 1,200 Birchcliff has one of the largest land positons in the entire Montney/Doig Montney Acres (000's) 1,000 Natural Gas Resource Play 800 600 400 200 0 CNQ BIR Black Swan MUR RMP SGY BBI UGR TET PETRONAS ARX ECA VII CIOC POU KCK RDS TOU APA LRE PPY NVA
Slide 37: PCS Gas Plant Scenario Analysis
PCS GAS PLANT Scenario Analysis
Slide 38: Illustrative 60 MMcf/d PCS Gas Plant Build & Fill Scenario
ILLUSTRATIVE 60 MMcf/d PCS GAS PLANT BUILD & FILL SCENARIO • The chart to the right depicts the Montney/Doig Wells to keep 60 MMcf/d Gas estimated Montney/Doig wells Plant Full for 30+ Years(1) required to keep 60 MMcf/d plant 25 80 22.3 full for 30+ years. 70 Cumulative Montney/Doig wells 20 Annual
Slide 39: 60 MMcf/d PCS Gas Plant Cash Flow and Free Cash Flow
• The table below presents on an annual basis the internally estimated (1) facilities and DCCET capital requirements, (2) cash flow and (3) free cash flow (“FCF”) from a 60 MMcf/d PCS Gas Plant under various AECO natural gas pricing assumptions for a 30 year period. Year 1 Year 2 Year 3 Year 4 Avg.
Slide 40: Proximal to Infrastructure with Long Term Exposure to LNG Export
PROXIMAL TO INFRASTRUCTURE WITH LONG TERM EXPOSURE TO LNG EXPORT Montney/Doig Birchcliff Pouce Coupe Production Montney/Doig & PCS Gas Plant Owned Infrastructure PCS Gas Plant Nova Pipeline System North American Market LNG Export Source: RBC Energy Insights: The Montney – Tracking an Elephant August
Slide 41: Enough Resource to Fill a One Bcf/d LNG Train
ENOUGH RESOURCE TO FILL A ONE Bcf/d LNG TRAIN FOR OVER 20 YEARS! = 1 Bcf/d LNG Train X 365 Days X 20 Years 7.3 Tcf BIR Remaining BIR Contingent Reserves Resource + / = 1 Bcf/d LNG 2.5 Tcf 7.9 Tcf 28 Years Train Birchcliff 2014 Montney/Doig Natural Gas Resources Assessment 25,000 Reserves & Resource
Slide 42: Charlie Lake Light Oil Resource Play
CHARLIE LAKE LIGHT OIL RESOURCE PLAY Dependable Light Oil Production
Slide 43: Worsley Charlie Lake Light Oil
WORSLEY CHARLIE LAKE LIGHT OIL • Essentially 100% W.I. with operatorship and control of wells, pipelines and facilities. • Own over 190 net sections with 200+ horizontal locations currently identified. • Mature, predictable, long life production base. • The pool is characterized by high original oil
Slide 44: Worsley Charlie Lake Light Oil Accomplishments
WORSLEY CHARLIE LAKE LIGHT OIL ACCOMPLISHMENTS SINCE SEPTEMBER 2007 ACQUISITION • 2P reserves have increased over 160% to 40.2 MMboe from 15.1 MMboe. • Production increased over 45% to 4,991 boe/d in 2014 from 3,400 boe/d. • 2014 year end 2P NPV was $643 million versus purchase price of $270 million
Slide 45: Worsley Area Reserves
WORSLEY AREA RESERVES 45,000 40,000 35,000 30,000 Reserves (Mboe) 25,000 PDP 20,000 TP 15,000 2P 10,000 5,000 0 YE 2007 YE 2008 YE 2009 YE 2010 YE 2011 YE 2012 YE 2013 YE 2014 PDP 6,018 6,395 6,008 6,757 7,102 7,659 7,837 7,904 TP 15,043 17,516 18,309 18,825 18,802 19,569 19,622 20,511 2P 21,189 24,
Slide 46: Worsley Area NPV10 (BT) vs. Deloitte Oil Price Forecast
WORSLEY AREA NPV10 (BT) VS. DELOITTE OIL PRICE FORECAST $1,200 $120 $1,000 $100 5 Year WTI Average $/bbl $800 $80 NPV ($million) $600 $60 $400 $40 $200 $20 $0 YE 2007 YE 2008 YE 2009 YE 2010 YE 2011 YE 2012 YE 2013 YE 2014 $0 PDP $196 $206 $201 $239 $269 $225 $247 $198 TP $411 $459 $456 $562 $621 $4
Slide 47: Progress Charlie Lake Light Oil
PROGRESS Birchcliff Non-Confidential Land CHARLIE LAKE Birchcliff Exploration Horizontal Wells Charlie Lake Producing Wells LIGHT OIL • Successfully drilled first Charlie Lake light oil exploration horizontal at Progress in Q4 2014. The well was brought on 3D Seismic production in December 2014 and
Slide 48: 10 Year Highlights
10 YEAR HIGHLIGHTS Celebrating 10 Years of Success
Slide 49: 10 Year Production Growth and Milestones
Birchcliff’s average daily production was 33,734 boe/d in 33,734 boe/d 2014 compared to 2,793 boe/d in 2005, a compounded annual growth rate of 32% per year during those 10 years. 2,793 boe/d 1 2 3 4 5 6 7 8 9 10 11 12 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2004 2010 2015 1 July 6, 2
Slide 50: Production Growth and Operating & Cash Costs
Production Growth boe/d/million wtd. avg. shares 40,000 300 30,000 225 Birchcliff has increased production at a compound annual growth rate of boe/day 20,000 150 32% over the past 10 years. 10,000 75 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Average Daily Production (boe/day) Production
Slide 51: Cash Flow and Net Income
Cash Flow from Operations $300 $3.00 $250 $2.50 $200 $2.00 On average, cash flow and cash flow $ millions $/share $150 $1.50 per common share have increased $100 $1.00 by 35% and 29%, respectively, over $50 $0.50 the past five years. $- $0.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Cash Fl
Slide 52: Reserves Growth
Reserves Growth 500 3,500 400 2,800 Birchcliff has added significant low cost reserves boe/1,000 shares over the last 10 years of operations. On a per 300 2,100 common share basis, PDP, 1P and MMboe 200 1,400 2P reserves grew 16% per year, 26% per year and 27% per year, 100 700 respectively. 0 0 200
Slide 53: Thank You Team Birchcliff
THANK YOU TEAM BIRCHCLIFF Jeffrey Akeroyd, Karen Allen, Camille Ashton, Rainer Augsten, Gates Aurigemma, Al Basnett, Angela Belbeck, Charmaine Belley, Tyrus Bender, Tim Berg, Perry Billard, Myles Bosman, Jeff Boswell, Robyn Bourgeois, David Boyle, Wayne Brown, Nicola Buckner, James Burke, Madison Bu
Slide 54: Appendix
ERAT AV SWRA APPENDIX
Slide 55: Peer Comparisons
PEER COMPARISONS 2014 PDP FD&A Summary ($/boe) – Top 15 $50.00 5.0 PDP FD&A Recycle on 2014 CF/BOE (Right Axis) $40.00 4.0 $30.00 3.0 $20.00 2.0 $10.00 1.0 $0.00 0.0 CQE PPY BIR PEY RMP SGY WCP CPG TOU TOG TBE ARX BXE LRE TET Three-Year PDP FD&A Summary ($/boe) – Top 15 $50.00 2.5 PDP FD&A Recycle o
Slide 56: Peer Comparisons
PEER COMPARISONS Historical FD&A Costs – 2P ($/boe) $20.00 2014 3-Year Average $16.00 $12.00 $8.00 $4.00 $0.00 TOU ARX VII KEL PEY NVA CR BIR SRX AAV PPY Source: Cormark Securities Inc., Company Reports, Bloomberg 56
Slide 57: Executive Officers
EXECUTIVE OFFICERS Mr. Tonken is a Director and the President and CEO of Birchcliff. He has more than 34 years of A. Jeffery experience in the oil and gas industry and is one of the Corporation’s founders. Prior to creating Birchcliff, Mr. Tonken founded and served as President and CEO of Case Resou
Slide 58: Executive Officers
EXECUTIVE OFFICERS Mr. Carlsen was appointed Vice-President, Engineering on July 22, 2013. He previously served as Christopher A. Asset Team Lead and Senior Exploitation Engineer with Birchcliff. Mr. Carlsen is a Professional Engineer with more than 14 years of experience in the oil and gas industry
Slide 59: Board of Directors
BOARD OF DIRECTORS Mr. Shaw is a Director of Birchcliff and has more than 27 years of experience in the oil and gas industry Larry A. Shaw and is one of the Corporation’s founders. Prior to joining Birchcliff, Mr. Shaw served as Chairman of the Independent Director & Board of Case Resources Inc., Bi
Slide 60: Disclosure of Oil and Gas Reserves and Resources
DISCLOSURE OF OIL AND GAS RESERVES AND RESOURCES: RESERVE CATEGORIES Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on the analysis of drilling, geological, geophysical and en
Slide 61: Resources and Production (Continued)
RESOURCES AND PRODUCTION (CONTINUED) Prospective resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Unrecoverable is that portion of discovered and undiscovered PI
Slide 62: Advisories and Forward Looking Information
ADVISORIES AND FORWARD LOOKING INFORMATION: NON-GAAP MEASURES This Presentation uses “cash flow”, “cash flow from operations”, “cash flow per common share”, “netback”, “operating netback”, “estimated operating netback”, “cash flow netback”, “operating margin”, “total cash costs”, “cash costs”, “adju
Slide 63: Reserve Life Index and Recycle Ratios
RESERVE LIFE INDEX AND RECYCLE RATIOS Reserve life index is calculated by dividing reserves estimated by Deloitte at December 31, 2014 by the average production in the applicable period (i.e. annualized fourth quarter average production for the year ended Dec 31, 2014). Recycle ratios are calculated
Slide 64: Forward-Looking Statement Assumptions
With respect to statements regarding the Corporation’s capital budget, the key assumption is that Birchcliff realizes the average annual production target of 38,000 to 40,000 boe/d and the commodity prices upon which the Corporation’s 2015 capital budget is based, being a forecast average WTI pric