fall 2011 presentation - cequence energy€¦ · fall 2011 presentation . a deep basin stronghold...
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Fall 2011 Presentation
A Deep Basin Stronghold
Deep Basin specialists
500+ Deep Basin drilling locations on 200 gross sections
Multiple zone, stacked resource
plays
Liquids-rich gas production –economic at <$3.00/GJ
Forecast 2011 exit production:
11,000 boe/d Committed team
Focused on Simonette
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Capitalization
Trading Symbol TSX: CQE
52-week trading range $1.53-$4.24
Shares outstanding FD 174 million
Insider ownership 11% FD
Market capitalization (1) $620 million
June 30, 2011 net debt ($65) million
Pro forma June 30, 2011 positive working capital (2) $14 million
Bank line $110 million
(1) Based on Cequence recent equity issue price of $3.85 (2) Pro forma June 30, 2011 positive working capital is calculated as cash, net working capital less commodity contract asset and
demand credit facilities with pro forma adjustments for the following transactions: net proceeds of $63 million from the common and flow-through shares issued in August 2011 and $16.4 million related to property dispositions expected to close in Q3 2011.
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PEACE RIVER
EDMONTON
GRANDE PRAIRIE
BRITISH
COLUMBIA
ALBERTA
Focused on the Deep Basin
ALBERTA
Peace River Arch/NE BC
2011 Estimate: 3,500 boe/d
Deep Basin: Simonette-Kaybob
2011 Estimate: 5,800 boe/d
Other Areas
2011 Estimate: 100 boe/d
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Simonette-Resthaven: A Great Postal Code
CQE land
Montney wells
Wilrich-Falher wells
Horizontal Well Activity
Resthaven
Celtic / Paramount
Montney
Karr
Paramount
Falher
Resthaven
Paramount
Dunvegan
Resthaven
Encana
Wilrich
Leland
Encana
Falher
Kakwa / Chime
Encana / Tourmaline
Falher / Wilrich
Dunvegan wells
North Simonette
Apache-AOSC
Montney
Simonette
CNRL
Dunvegan
Simonette
COP
Dunvegan
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Trilogy Plant
CQE WI = 25%
Capacity 10 MMcf/d
Keyera Processing Facility
Capacity 153 MMcf/d
Available Capacity 90 MMcf/d
Simonette: A Concentrated Land Base
• Simonette land
• 150 net sections (avg. 75% W.I.)
• Low operating costs –
average of <$7.00/boe
Existing 3D seismic
Proposed 2012 3D seismic
CQE land
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CQE well
CQE field compressor
CQE Gathering system
CQE Planned gathering system
12” Keyera gathering system
Stacked Zones Expose Significant Resources
Cequence land
5-10 bcf
5-10 bcf
5-24 bcf
5-25 bcf
30-60 bcf
Dunvegan
Falher
Wilrich
Gething
Montney
Zone Total Resource Potential/Sec
2,200m
2,950m
3,100m
2,700m
2,500m
2,800m
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Simonette Montney Liquids-Rich Resource Play
CQE land
CQE Montney rights
Bypass pay wells
CQE Montney test well
CQE Montney Hz well
Planned thru Q1 2012 Montney locations
Montney inventory
• Delineation drilling to further de-risk land base
• 200 potential locations @ 4 wells/section
• 25 of 70 net sections de-risked
• 30-60 metres net pay
Fall 2011
Plan to Spring 2012
Full Development Plan (50 sections)
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0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
0 1 2 3 4 5 6 7 8 9 10 11 12
Montney Scorecard CQE Working Model vs. Well Results
Pro
du
cin
g D
aily
Gas
Rat
e (m
cf/d
)
Months on Production
Montney
23% NGL
77% Gas
58% Gas
42% NGL
Volume
Revenue
1-31
1-22
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Simonette Wilrich Liquids-Rich Resource Play
CQE land
CQE Wilrich rights
Bypass pay wells
CQE Wilrich Hz well
Wilrich locations planned thru Q1 2012
Wilrich inventory
Fall 2011
• Delineation drilling to further de-risk land base
• 60-120 locations @ 1.5-3 wells/section
• 60+ net sections of total potential
• 20 sections de-risked through initial drilling
Plan to Spring 2012
Full Development Plan (40 sections)
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0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
0 1 2 3 4 5 6 7 8 9 10 11 12
Wilrich
Wilrich Scorecard CQE Horizontal Working Model vs. Well Results
Pro
du
cin
g D
aily
Gas
Rat
e (m
cf/d
)
Months on Production
12% NGL
88% Gas
76% Gas
24% NGL
Volume
Revenue
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Montney and Wilrich Model Economics
Wilrich
Montney
Production Potential Gas Liquids ORGIP
Capital Cost/ Well ROR NPV
Model Payout
Breakeven Gas Price
4.5 mmcf/d
20
bbls/mmcf
4.0
BCF
$5.0 MM
75% $4.4 MM
17 months
$2.25/ mmbtu
4.5
mmcf/d
45
bbls/mmcf
4.5
BCF
$5.5
MM 90%+ $8.0
MM
14 months
<$2.00/ mmbtu
CQE Working Model @ $4.00/mmbtu
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Other Stacked Cretaceous Potential
• 200 potential
Gething locations (two wells per section)
• Dunvegan and Falher activity in nearby pool indicates encouraging exploration potential
Dunvegan
Falher
Bluesky / Gething
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Dunvegan
Falher
Wilrich
Gething
Montney
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One drilling
pad could add
$100 MM of NPV to
Cequence
Single Well NPV ($mm)
Emerging
Emerging
4.4
2.6
8.0
Stacked Development Adds Significant Value
Potential Locations
60-120
200
150-200
?
?
Cequence Energy Results and Guidance
2010 2011 Guidance
Production (boe/d Average full year) (1)
Exit rate
4,451 7,485
9,400
11,000
Capital expenditures $64.1 MM $150 MM
Net acquisitions/(dispositions) (2) $216.6 MM ($24.0) MM
Equity issued (3) $113 MM
Operating costs per boe $10.90 $9.00
Royalties (% of revenue) 12 13
Crude oil – WTI (Cdn$/bbl) $79.38 $97.50
Natural gas – AECO (Cdn$/GJ) $3.79 $3.63
Funds flow (4) Per share ($/basic share)
$19.1 MM $0.27
$45-$50 MM $0.32
December 31 net debt $73.1 MM $50-$55 MM
Basic shares outstanding: December 31 128.8 MM 161.2 MM
(1) 87% natural gas
(2) Includes the dispositions of three properties in 2011 with combined production as of December 31, 2010 of approximately 990 boe/d and the acquisition of properties in Q2, 2011 with production of approximately 1,000 boe/d.
(3) Equity issues include proceeds of $9.8 million from the exercise of 2.25 million CDE flow-through Warrants in August 2011, proceeds from the bought- deal financing which closed on March 17, 2011 pursuant to which the Company issued 13.4 million common shares and 2.1 million CEE flow-through common shares for total gross proceeds of approximately $45.5 million, proceeds from the issuance of 0.6 million shares pursuant to the exercise of stock options for proceeds of $1.2 million and proceeds from the bought-deal financing which closed on August 18, 2011 pursuant to which the Company issued 12.0 million common shares and 2.1 million CEE flow-through common shares for total gross proceeds of approximately $56.1 million.
(4) Funds flow sensitivity: +/- $1 AECO is $16 million.
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Decades of Deep Basin experience
Stacked zone potential with >500
drilling locations
Financial capacity
Economic at <$3.00/GJ
Cequence Energy: Worth Discovering
CQE
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Forward-Looking Information
Certain information included in this presentation constitutes forward-looking information under applicable securities legislation. This information relates to future events or future performance of the Company. Investors are cautioned that reliance on such information may not be appropriate for making investment decisions. Many factors could cause the Company’s actual results, performance or achievements to vary from those described herein. The forward-looking information contained in this presentation is expressly qualified by this and other cautionary statements set forth in the continuous disclosure record of the Company.
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Appendix
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Simonette Gething Development
CQE land
CQE Gething rights
Gething gas wells
CQE location • 100 sections with Gething potential
• Typical Gething well drains 250 acres
• 200 plus potential locations
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Simonette Emerging Nordegg Oil Play
CQE Nordegg rights September 2011
171 gross sections
106 net sections
Land sold at >$1,000.00 per Ha
Organic rich shale with interbeds of phosphatic carbonate and siltstone
Depth: 2,200 – 3,100 metres TOC: 0.55 – 28% (avg. 5%)
Thickness: 21 – 27 metres Pressure: 4,160 psi (0.52 psi/ft)
Log porosity: 5 – 18% Oil gravity: 17 to 41
API
EOG
16 stage completion
11 BOPD (no hours)
AOSC
30 days 78 BOPD
4-11
197 MBO
185 BOPD
PetroBakken
AOSC
AOSC
AOSC
20
AOSC
Apache
19 days 29 BOPD
256 BWPD
Canadian
Coastal
AOSC
AOSC
5 days 500 BOED
Anglo
Canadian
Simonette: The Basis of an Intermediate-Sized Inventory
Deep Basin Gething
Vertical Model
Wilrich HZ Working Model
Montney HZ Working Model
GAS PRICE cdn$/mmbtu $4.00
Reserves per well mboe 340 700 900
Model well costs – drill, case, complete and tie-in
$ millions $2.25 $5.00 $5.50
IP rate (1 month) Boe/d 320 700 800
Average first year rate Boe/d 220 450 500
Natural gas liquids Bbls/mmcf 15 20 45
IRR 78% 75% 90%+
NPV (10% BT) $ millions 2.6 4.4 8.0
F&D $/boe 6.62 7.14 6.11
POTENTIAL LOCATIONS 200 90-180 200+ 21
AECO Wilrich
$4.00/mmbtu Montney
$4.00/mmbtu
NGL Yield 20 bbls/mmcf 45 bbls/mmcf
Per boe Per boe
Plant Gate Price $31.17 $35.86
Royalty (5%) $1.56 $1.79
Operating Cost + Transportation $7.00 $7.00
Operating Netback $22.61 $27.06
F&D (per boe) $7.14 $6.11
Recycle Ratio 3.30 times 4.43 times
Simonette – Model Horizontal Gas Netbacks
Assumes no GORR
22 (1) Utilizing pricing of $4.00/mmbtu AECO and $90/bbl WTI.
Excellent Economics
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
$3.00 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00
Simonette – Half-Cycle Economic Models
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NP
V1
0 (
$M
)
Gas Price ($/mmbtu)
Financial Highlights
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Q2 2011 Q1 2011 % Change
Average Daily Production 9,125 8,185 11
Funds flow from operations (1) $12,042 $9,780 23
Per share basic and diluted $0.08 $0.07 14
Operating costs per boe $8.96 $9.15 (2)
G&A per boe $2.37 $2.43 (2)
Capital expenditures $30,604 $23,930 28
Net debt and working capital deficiency (2) $65,147 $44,059 48
Weighted average shares outstanding (basic and diluted)
144,314 131,161 10
(1) Funds flow from operations is calculated as cash flow from operating activities before adjustments for decommissioning liabilities and net changes in non-cash working capital.
(2) Net debt and working capital (deficiency) is calculated as cash, net working capital less commodity contract asset and demand credit facilities and excluding obligations on flow-through shares included with accounts payable and accrued liabilities in the consolidated balance sheet.
0
2,000
4,000
6,000
8,000
10,000
12,000
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 Est 2011 Exit
30.22
23.98
19.97
18.63
16.45 15.68
14.06 13.60 13.28 13.28
Corporate Production and Cash Costs
1,317
2,089 2,445
3,197
4,619
7,400
8,185
9,125 9,400
11,000
2009 2010 2011
0
5
10
15
20
25
30
35
$/b
oe
bo
e/d
Natural Gas Oil & NGL Opex, Transport and G&A Expense
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Contacts: Paul Wanklyn President & CEO [email protected] David Gillis
Vice President, Finance & CFO [email protected]
www.cequence-energy.com
700, 326 11th Avenue SW Calgary AB T2R 0C5
Phone: 403-229-3050 Fax: 403-229-0603