pace november presentation
DESCRIPTION
TRANSCRIPT
An Intermediate-SizedOil-Weighted Company
Matziwin Resource Play
Inve
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BUILDING A TOP TIER ENERGY COMPANY,SOLID RESULTS, GREAT EXECUTION, EXCELLENT POTENTIAL
2PACE OIL & GAS | NOVEMBER 2012 UPDATE
Forward Looking StatementsForward-Looking Statements: This presentation contains certain forward-looking statements and forward-lookinginformation (collectively referred to herein as "forward-looking statements") within the meaning of applicable Canadiansecurities laws. All statements other than statements of present or historical fact are forward-looking statements. In somecases, forward-looking statements can be identified by terminology such as "may", "will", "should", "believes", "expects","intends", "projects", "plans", "anticipates", “positions”, “potential”, “objective”, “continuous”, “ongoing”, "estimates" or"contains" or similar words or the negative thereof. In particular, this presentation contains forward-looking statementsrelating to: the estimated production of Pace Oil & Gas Ltd. (“Pace”), the estimated reserves of Pace Oil & Gas Ltd., theestimated pro-forma funds from operation of Pace Oil & Gas Ltd., the expected credit facility available to Pace Oil & GasLtd., the anticipated number of wells and completions to be carried out, the anticipated replacement production from ournew completions, the expected reserve additions, future plans and expenditures of Pace Oil & Gas Ltd., the forecastedcommodity prices.
These statements represent management's expectations or beliefs concerning, among other things, future capitalexpenditures and future operating results and various components thereof or the economic performance of Pace andinclude, without limitation, statements with respect to the future financial position, business strategy, budgets, projectedcosts and plans, objectives of or involving Pace or any of its respective affiliates; access to credit facilities; capital taxes;income taxes; commodity prices; administration costs; commodity price risk management activities; expectation of futureproduction rates and components of cash flow and earnings. Actual events or results may differ materially. Theprojections, estimates and beliefs contained in such forward-looking statements are based on management's estimates,opinions and assumptions at the time the statements were made including assumptions relating to the productionperformance of Pace’s oil and gas assets, the cost and competition for services throughout the oil and gas industry in2012 and beyond and the continuation of the current regulatory and tax regime in Canada, and necessarily involve knownand unknown risks and uncertainties which may cause actual performance and financial results in future periods to differmaterially from any projections of future performance or results expressed or implied by such forward-looking statements.Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from thosepredicted. Pace does not undertake to update any forward-looking information contained in this presentation whether asto new information, future events or otherwise except as required by securities rules and regulations. Barrels of OilEquivalency: Barrels of oil equivalent (BOE's) may be misleading, particularly if used in isolation. In accordance with NI51-101, a BOE conversion ratio for natural gas of 6 Mcf:1 bbl has been used, which is based on an energy equivalencyconversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
PACE OIL & GAS | NOVEMBER 2012 UPDATE 3
Corporate HighlightsCurrent – September 30, 2012
Basic Shares Outstanding (mm) 46.9
FD Shares Outstanding (mm) 50.2
Bank Debt (mm) $215
Net Debt (mm) $210
Credit Facility (mm) (1) $300
Proved Reserves (mmboe) (2) 44.4
2P Reserves (mmboe) (2) ~50% Oil 69.6
Q3 YTD2012
Outlook Oil & NGLs (bbls/d) 6,519 ~ 6,500Natural Gas (mmcf/d) 42.9 ~ 42
CapEx 2012 (mm) 68.3 ~ $801. Banking syndicate - CIBC, NBF, BMO, BNS, HSBC, ATB – renewed June 20122. Reserves December 31, 2011 evaluated by McDaniel & Associates Consultants Ltd.
PACE OIL & GAS | NOVEMBER 2012 UPDATE 4
Corporate Strategy
Near Term (1-2 years)Oil Focused – maintain Gas option
Mid Term (2-4 years)Advance Oil add Gas/Liquids
Long Term (5+ years)Balanced Oil & Gas/Liquids
Exploit and develop existing oil resource inventory Divest non-core assets, reduce leverage & generate free
cash flow Identify new oil resource plays/concepts
Engineered oil enhancements – Waterflood/ASP Acquire strategic synergetic opportunities Expand resource opportunity base
Full scale development of resource assets Apply technology to enhance recovery and production Monitor and identify the key innovative technologies
PACE OIL & GAS | NOVEMBER 2012 UPDATE 5
Low Finding Costs with Strong Oil Additions
AAV
NGL
ARXBXEBIR
PXX
BNE
CLT
CKE
CPG
LEG
NVA
PCE
POU
PGF
PBN
PRQ
TT
TET
WFE
BTE
TOUCQE
0
10
20
30
40
50
60
70
80
90
0% 20% 40% 60% 80% 100%
TP F
&D
($/b
oe)
% TP Oil & NGL Additions
2011 2010
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0
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60
70
80
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0% 20% 40% 60% 80% 100%TP
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D ($
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)
% TP Oil & NGL Additions
Below line = high recycle ratios Oil weighted adds delivered “Best in Class” recycle ratios
* Data from Canoils
PACE OIL & GAS | NOVEMBER 2012 UPDATE 6
Top Quality Reserves – Oil Weighted
- 5
10 15 20 25 30
PDP Oil & NGLs
mm
bbls
Large and growing oil reserves are low risk Proved Developed Producing
Large Proved Developed Producing is increasingly oil weighted
Large legacy oil pools -existing waterflood & EOR potential are platform for low base decline now and future
* Data from Canoils
0%20%40%60%80%
100%Value Oil % of TP
0%
10%
20%
30%
40%
50% Base Decline %
PACE OIL & GAS | NOVEMBER 2012 UPDATE 7
Key Attributes
Play Type Project Capital
MM$
Gross Operated
Wells
Net Wells
Southern Alberta
PekiskoGlauconite
Lithic Waterflood
$35 11 10.4
Dixonville Montney C Waterflood
$15 - -
Red Earth Slave Point $2.5 - -
NorthwestAlberta
Pekisko $15 4 4
Total Oil $67.5 15 14.4
Deep Basin $2.5 - -
Land, Seismic, G&A other
$10 - -
Grand Total $80 15 14.4
Large and growing oil opportunity base Matziwin - new resource development area
Balance of 2012 CapEx funded by Cash Flow 2012 CapEx directed towards oil program
Matziwin
Significant Upside & Visible Long Term Growth Areas
PACE OIL & GAS | NOVEMBER 2012 UPDATE 8
Pace Land
Pace Matziwin
Pace Matziwin
Southern Alberta Multi-Zone Oil Potential
361,000 net acres land
Multiple prospective oil zones
Extensive oil drilling inventory
- Matziwin 60-100 locations - SAB Glauc/Lithic 50 locations
Well cost: $1.5 to $2.5 MM
EUR per well: 80 to 150Mboe
Oil gravity: 15 – 30 API
Current Pace Key Oil Zones
Pace SAB Glauc/Lithic
Pace SAB Glauc/Lithic
PACE OIL & GAS | NOVEMBER 2012 UPDATE 9
Resource
69,000 net acres – 100% working interest
20-28º API oil gravity
60 – 100 net well locations
160 acre well spacing – may be downspaced
Limited regional aquifer identified at Matziwin
Current Activity/Future Plans
5 Hz wells drilled to date
20 – 25 wells planned for 2012 – 2013
Step out delineation & reservoir characterization
Design and install oil handling facilitiesIndustry Pekisko WellsPace Land
Pace Wells
Matziwin Pekisko – New Resource Development Area
PACE OIL & GAS | NOVEMBER 2012 UPDATE 10
Matziwin Inventory
Type Well Recovery Factor 5-10%
OOIP 8-10 MMbbl/Section
Well control in area – 38 vertical producers Pekisko and Mannville targets at 160 acre spacing
Conduct township step out delineation to de-risk inventory
Well performance and recoveries will vary well density requirements
14-12-23-14W4M
02/2-13-23-14W4 Horizontal target
Low Risk 38 LocLow / Medium Risk 49Medium / High Risk 51
PACE OIL & GAS | NOVEMBER 2012 UPDATE 11
Matziwin Pekisko – 8 to 26 m thick
GR = Gamma RayDen = Density PorosityRes = Resistivity
Pekisko
Banff
Limestone
Limestone
Sandstone
Sandstone
7.9m
26m
13m
10m
GR DEN RES GR DEN RES GR DEN RES GR DEN RES
100/06-12-023-15W4/00 100/12-10-023-14W4/00 100/14-12-023-14W4/00 102/14-18-023-13W4/00
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PACE OIL & GAS | NOVEMBER 2012 UPDATE 12
Matziwin Pekisko Production Profile
*$83 Wellhead Price
Single Well Economics*D,C, Equip $2.1mm
Production, bbl/d (IP 30 day) 100
Reserves (Mbbl/Mboe) 125/134
NPV 10%($mm/well) $2.2
Profit to Investment 1.1
Rate of Return 87%
Reserve Cost ($/boe) $15.70
Netback (1st year) ($/boe) $66.50
38 producing vertical wells
02/4-13 Hz acid wash only
New wells exceeding type curve early time
03/4-13-23-14W4 shut in to test 2-13 capability
0
50
100
150
200
250
0 10 20 30 40 50 60
Oil
Rat
e, b
bl/d
Months
Average Verticals Wells
Verticals
100 Mbbl
125 Mbbl
Vertical X 3
02/02-13-23-14W4
03/04-13-23-14W4
02/04-13-23-14W4
04/06-13-23-14W4
0
50
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200
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0 20 40 60 80 100 120 140 160 180 200 220 240 260 280 300 320 340
Oil
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Oil Cumulative, Mbbl
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125 Mbbl
02/02-13-23-14W4
03/04-13-23-14W4
02/04-13-23-14W4
04/06-13-23-14W4
PACE OIL & GAS | NOVEMBER 2012 UPDATE 13
Completions drive performanceFirst 150 days production
102/2-13-23-14WM
1,169 m lateral
20 frac stages/250+ T sand
~3,000 to 4,000+ m3/well
Actual Well cost: $2.5-2.8MM DCE*
Expected well cost: $2.0 to $2.2 MM
Early in completion optimization
IP30 day ~ 250 bopd
*First wells had one time costs of $300K for micro seismic & frac stringAll other tied in Matziwin wells shut-in while 2-13 was sped up
PACE OIL & GAS | NOVEMBER 2012 UPDATE 14
Matziwin Completion Improvements
PACE OIL & GAS | NOVEMBER 2012 UPDATE 15
Matziwin Cost Drivers - Pads
Target D,C,& E well cost from $2.8 MM/well to $2.0 - $2.2 MM/well
Drilling Costs Initiatives Complete and Equip Cost Initiatives
1.71.5
0.1 0.2
0.1
1.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
$MM
1.3
0.2
0.20.1
0.10.1
0.8
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
$MM
PACE OIL & GAS | NOVEMBER 2012 UPDATE 16
Costs expectations of $2.0 to $2.2 MM/well in 2013 including tie-ins
Returns approaching 90%
Upside for early time performance improvement
Break even BT PV10% price of ~$40/bbl wellhead
$2.1 MM/well D,C,E capital
Matziwin Price/Capital Sensitivity
Matziwin – Wellhead Oil Price Sensitivity
0
20
40
60
80
100
120
2000 2500 3000
RR,%
Capital $M/well
Matziwin ‐ Capital Sensitivity
‐
20
40
60
80
100
120
140
160
40 60 80 100
RR,%
Wellhead Price, $/bbl
Oil Price Sensitivity
175 Mbbl125 Mbbl100 Mbbl
Hardisty Bow River 25API (AB) ‐ 20$/bbl offset$2,1MM Capital
PACE OIL & GAS | NOVEMBER 2012 UPDATE 17
Matziwin Field Oil Production
Field production over 600 bbl/d with 3 new horizontals
Facility equipment sourced internally.
Single well batteries will allow further production growth with new drills
Good year round access for trucking
PACE OIL & GAS | NOVEMBER 2012 UPDATE 18
Hardisty Bow River 25API (AB) - 20$/bbl offsetFirst year netback $60-$70/bbl with Royalty incentive
Oil ReservesMbbl
ReservesMboe
Capital$MM
RR,%
Cost of Reserve
$/boeMatziwin 5 Year Full Cycle (excld land) 14,100 15,100 ~300 44 ~19.80
Single Well 125 134 2.1 87 15.70
Type Curve IP/EUR 100 bbl/day IP & 125
Mbbl EUR
Upside with performance improvements
15% oil growth exit 2013
Economics include major facility capital & pipelines
Surplus 100% Pace battery located in Southern Alberta
Matziwin 5 Year Development24 Well/Year Scenario – 1 Rig
PACE OIL & GAS | NOVEMBER 2012 UPDATE 19
Matziwin Summary
Large Captured Resource 8-10 mmbbls/section
100% Pace working interest
Excellent year round access
Strong economics - >50% IRR
Upside to current type curve with completion evolution
Significant oil growth potential
*Early Resource play – a range of outcomes are expected
Low Risk 38 LocLow / Medium Risk 49Medium / High Risk 51
PACE OIL & GAS | NOVEMBER 2012 UPDATE 20
Total Acreage (Excluding Matziwin)
Net 260,000 – 406 sections
Repeatable Drilling & EOR potential
50 well inventory and growing
Execution efficiency gains drive lower D,C & costs
90 MMbbls DPIIP and growing
2012 Plan
Implement waterflood in NNN/BBB – commenced Q1 2012
Other pool waterflood
optimization
Southern Alberta – Glauconite Oil Play
Pace LandPace Locations
PACE OIL & GAS | NOVEMBER 2012 UPDATE 21
Southern Alberta Waterflood Management Opportunities
Implement waterflood in NNN/BBB May 2012. $5 MM capital 24 MMbbl OOIP 52% IRR, 1.5 mmbbls PDP
additions
Good early response with decreasing GOR and stable oil rate
Infill horizontals when pool pressures restored
Feb-April 2012 – 10 producers converted to water disposal
R17W4R18W4
T13
T12
2012 Activity
Decreasing GOR
PACE OIL & GAS | NOVEMBER 2012 UPDATE 22
Pace Dixonville
Pace Whitelaw
Pace Leddy
Triassic SubcropEdge
Montney Coquina
Montney Shoreface
Dixonville Asset Overview Resource
> 180 MMbbls in place
31 API Oil
Waterflood & EOR Potential
Strategy/Execution Finish waterflood expansion & pool
management plan
EOR study started/plan pilot area
Test Worsley potential
Explore for analog Montney pools
Continue reservoir characterization
Evaluate stimulation potential
PACE OIL & GAS | NOVEMBER 2012 UPDATE 23
Dixonville: Montney C Reservoir Simulation
Waterflood response exceeds base case (booked reserves) and current model
3,100 bbls/d
Prod, 5.7 Prod, 5.7 Prod, 5.7
1P, 16.2 1P, 16.2 1P, 16.2
2P, 7.0 2P, 7.0 2P, 7.0
Upside, 9.4 Upside, 9.4
Tertiary, 28.2
15%
20%
35%
‐
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0
10
20
30
40
50
60
70
Base Case WaterfloodOptimization
EUR (SP)
ULTIM
ATE RE
COVE
RY OF OOIP (%
)
REMAINING REC
OVE
RABLE OIL (M
MBB
L)
DIXONVILLE: MONTNEY C
Prod 1P 2P Upside Total OOIP Rec.
PACE OIL & GAS | NOVEMBER 2012 UPDATE 24
Key Investment Highlights Solid Program delivers Solid Results
Oil focused program drives cash flow
New Repeatable Resource Play at Matziwin
Great Execution - Performance Metrics
Operating results – Increased oil weighting – Op costs reduced
Execution Efficiency – Low finding costs – Top tier recycle
Excellent Potential - Significant Upside
Portfolio of oil resource plays – Large OOIP
Multiple valued-added visible growth opportunities
Clear Path to Sustained Visible Oil Growth
PACE OIL & GAS | NOVEMBER 2012 UPDATE 25
Hedging
Commodity Term Type Volume Price
(CDN$)
Oil 2012 fiscal Collar 500 bbl/d $95.00 to $117.75
Oil 2012 fiscal Collar 500 bbl/d $100.00 to 108.70
Oil 2012 fiscal Swap 1,500 bbl/d $97.07
Oil 2013 fiscal Swap 500 bbl/d $97.00
Natural Gas Jun - Dec 2012 Swap 4,740 mcf/d $2.37/mcf
Natural Gas 2013 fiscal Swap 4,740 mcf/d $3.23/mcf
Natural Gas 2013 fiscal Collar 4,740 mcf/d $2.90 to $3.56/mcf
Interest Rate Swap
July 2012 – July 2014
Swap $75 MM 1.145% (CAD-BA-CDOR)
26PACE OIL & GAS | NOVEMBER 2012 UPDATE
Pace Corporate InformationManagement
Fred WoodsPresident & CEO
Todd BrownVice President & COO
Chad KalmakoffVice President, Finance & CFO
Volker BraunVice President, Exploration
Colin MerrickVice President, HR, IR & Administration
Darrell OsinchukVice President, Exploitation
Martin SaizewVice President, Engineering
Andrew WeldonVice President, Business Development
Directors
Fred Woods Tom SimonsTom Buchanan Jeff SmithPeter Harrison Jay SquiersMike Shaikh David Tuer
Banking Syndicate
CIBCNational BankBank of MontrealBank of Nova ScotiaAlberta Treasury BranchesHSBC Bank of Canada
AuditorsPriceWaterhouse Coopers LLP
Legal CounselHeenan Blaikie LLP
Evaluation EngineersMcDaniel & Associates Consultants Ltd.
Registrar & Transfer AgentComputershare Trust Company of Canada
TSX Listing Symbol OTC Pinks SymbolPCE PACEF
Address
Livingston Place, West TowerSuite 1700, 250 – 2nd Avenue SWCalgary, Alberta, Canada T2P 0C1Ph: 403-303-8500Investor Relations Email: [email protected]: www.paceoil.ca