Corporate Presentation
BUILT TO LAST
AGM May 12, 2015
Cardinal Energy Ltd. - Profile
Shares Outstanding (1):
TSX: CJ
•
Basic
57,333,919
•
Fully Diluted
59,834,096
Annual dividend ($/share):
2015 forecast average production (boe/d):
Q1 2015 average production
•
% oil and NGLs
$0.84/share
11,200
11,023
92%
Reserves (Mboe) (2)(3)
•
Total Proved
32,078
•
Total P&P
43,030
•
RLI Total P&P (years)
Net Debt(1):
1.
2.
3.
11
$46MM
As at March 31, 2015
See Advisory
As at December 31, 2014
2
Cardinal Energy Ltd.
Built to be a Sustainable Business
Low Decline
Low Debt
Low Risk
3
3
Cardinal Asset Base
Solid Base of Oil Production from 2
Core Areas
Wainwright
Bantry
Approximately 5,675 boe/d
production for Q1 2015
Approximately 5,350 boe/d
production for Q1 2015
Both areas have extensive
development drilling, consolidation
and growth potential
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4
Low Decline
1. Source cite: FirstEnergy Capital (February 2015)
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Wainwright
Dominant land position with over 55
sections of land
Oil production under waterflood with
less than 10% decline
98% operated, average 95% working
interest
Multiyear drilling inventory in excess
of 40 unbooked locations
Control key infrastructure
By pass uphole drilling targets
Consolidation and growth
opportunities
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6
Bantry
Dominant land position with over
246 sections of land
The majority of base production is
currently under waterflood with less
than a 12% decline
97% operated, average 94%
working interest oil production
Solid Glauc drilling results to date
with over 80 unbooked locations
identified
Control key infrastructure resulting
in ½ cycle drilling program
Opportunities to expand area
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7
Bantry Glauc Type Curve Economics
Type
Curve
SAL*
Drilled
results to
date*
D&C ($MM)
$2.1
$2.1
Production, IP30 (boepd)
240
350
Production IP365 (boepd) estimate
140
200
Total P&P Reserves (Mboe) *
150
185
Year 1 Oil & NGLs (%)
92%
92%
NPV BT10(1) ($MM)
2.2
3.3
Rate of Return (%)
78%
189%
1.4
0.8
14.00
11.35
Production Efficiency ($/boed IP
365)
15,000
10,500
Netback Year 1
$31.00
$31.00
2.2
2.7
Payout (Years)
Reserve Cost ($/boe)
Recycle Ratio
Sproule escalated December 31, 2014 price forecast
*Based on TPP reserves assigned by Sproule at year end 2014
1. Net present value before tax discounted at 10%, see Advisory.
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8
2015 so far
Expansion of play concepts, acquisitions and geological ideas outside of
current land holdings in the Bantry area to expand drilling inventory.
Detailed technical evaluation of newly acquired Wainwright assets further
clarifying drilling locations, recompletion opportunities and potential
acquisitions.
Risk Mitigation on all drilling locations utilizing Cardinal’s extensive 3D
seismic coverage in both areas.
Kicked off a 4 well drilling program in Q2 2015, currently drilling well # 3.
Further understanding of our productive reservoirs in an effort to maintain and
implement water floods and improve recovery factors on OOIP.
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9
H2 2015
Cardinal has budgeted the drilling and completion of 3 more wells for the
second half of 2015.
Plans to shoot 3D seismic to evaluate land that we own as well as land that
we deem prospective.
Continue to identify new acquisition opportunities for Cardinal and monitor
industry A&D activity.
Work closely with all disciplines of our company to maintain and enhance our
production base.
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10
Land Update
Complete integration of all 2014 acquisitions
Strategic corporate acquisition, land swap and minor non-core
disposition
M&A activity and land sale trends
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11
AB Plains – Land Sale Statistics
450
120,000
400
100,000
300
80,000
250
60,000
200
150
HECTARES
AVERAGE $/HA
350
40,000
100
20,000
50
0
0
Hectares
Average $/Ha
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2015 Objectives
Target accretive tuck-in acquisitions to expand core areas
Pursue new core area with development drilling upside
Aggressive freehold royalty acquisition plan and Crown land posting
strategy
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13
2015 Q1 Results
2015
2014
% change
Operational
Average production (boe/d)
Percentage of liquids
Development capital ($MM)(1)
11,023
93%
$2.7
6,235
88%
$9.9
77%
6%
‐72%
Financial
Cashflow from operations ($MM)
‐per share (basic)
Total dividend ($MM)
‐per share (basic)
Total payout ratio
Net debt/cashflow from operations
$21.9
$0.38
$12.0
$0.21
68%
0.5X
$19.2
$0.53
$6.0
$0.16
83%
0.1X
14%
‐27%
101%
29%
‐18%
n/m(2)
1. Development capital includes land and seismic.
2. Not meaningful (greater than 300%).
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14
2015 Guidance
2015e
2014
% change
Operational
Average production (boe/d)
Development capital ($MM)(1)
11,200
$30
7,815
$36
43%
‐17%
Financial
Cashflow from operations ($MM)(2)
‐per share (basic)
Total dividend ($MM)
‐per share (basic)
Total payout ratio
Net debt/cashflow from operations
$95
$1.67
$48
$0.84
82%
0.6X
$95
$2.18
$33
$0.71
73%
0.5X
‐%
‐23%
45%
18%
12%
20%
1. Development capital includes land and seismic.
2. 2015 WTI $US55 per bbl , FX rate of 0.8 $USD/CAD and differential to WCS of $15.75.
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15
Finance
Liquidity
- $125 MM credit facility – 60% undrawn
Tax Horizon
- $60 WTI / $70 WTI / $80 WTI
Sustainability
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16
Hedge Position
Cardinal has the following crude oil hedges in place:
7,000
$100.00
$93.71 $90.00
$86.67 $86.67 BBL/D Hedged
5,000
$78.60 $77.15 $74.70 4,000
$75.80 $78.60 $78.60 $77.15 $80.00
$78.60 $70.00
3,000
$60.00
2,000
C$ WTI ‐ Average Floor Price
6,000
$50.00
1,000
‐
$40.00
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
1. Collars are expressed using the floor price
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17
Advisory
Forward-looking Statements
Certain information in this document contains forward-looking statements. These statements relate to future events or the Company's future performance. All information and statements contained herein that are not
clearly historical in nature constitute forward looking statements, and the words "may", "will", "should", "could", "expect", "plan", "intend", "anticipate", "believe", "estimate", "propose", "predict", "potential", "continue", or
the negative of these terms or other comparable terminology are generally intended to identify forward looking statements. Specifically, this presentation contains forward-looking statements relating to: Cardinal’s
business plans and model; drilling and development plans, costs and focus; acquisition and disposition plans; the development drilling, consolidation and growth opportunities associated with our asset base; 2015
guidance including average production, development capital, cash flow from operations; dividends, total payout ratio and net debt; anticipated tax horizon; hedging and other risk management plans and strategies;
expectations relating to the success of exploration and development efforts; forecast production and targeted production growth; anticipated capital requirements and capital expenditure plans and the results therefrom;
drilling inventory;; decline rates; the performance of existing and future wells; Cardinal’s dividend projections and policy and anticipated reserves. Statements relating to "reserves" are deemed to be forward-looking
statements, as they involve the implied assessment, based on certain estimates and assumptions that the reserves described can be profitably produced in the future. The reader is cautioned that assumptions used in
the preparation of this information, although considered reasonable by Cardinal at the time of preparation, may prove to be incorrect. Actual results achieved will vary from the information provided herein as a result of
certain risks and assumptions made by Cardinal and numerous known and unknown risks and uncertainties and other factors. Should one or more of these risks or uncertainties materialize, or should assumptions
underlying the forward-looking information prove incorrect, actual results, performance or achievements could vary materially from those expressed or implied by the forward-looking information. Accordingly,
prospective investors should not place undue reliance on these forward-looking statements.
The forward‐looking information is based on certain key expectations and assumptions made by Cardinal's management, including expectations and assumptions concerning prevailing commodity prices, exchange
rates, interest rates, applicable royalty rates and tax laws; capital efficiencies; decline rates; future production rates and estimates of operating costs; the ability to produce and transport crude oil and natural gas to
market; performance of existing and future wells; reserve estimates and production level estimates; anticipated timing and results of capital expenditures; the success obtained in drilling new wells; the sufficiency of
budgeted capital expenditures in carrying out planned activities; the timing, location and extent of future drilling operations; the state of the economy and the exploration and production business; assessments of the
value of acquisitions; integrating acquisitions; the decisions or approvals of administrative tribunals; environmental and other regulations, results of operations; performance; business prospects and opportunities; the
availability and cost of financing, labor and services; the impact of increasing competition; and Cardinal's ability to access capital and such information may not be appropriate for other purposes. Readers are cautioned
that the foregoing lists of assumptions and risks are not exhaustive. Additional information on these and other factors that could affect Cardinal's operations or financial results are included in reports on file with
applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).
The forward-looking information includes forward-looking financial information or financial outlook, within the meaning of securities laws, such as projected net debt, cash flows and capital expenditures. The forwardlooking financial information is based on assumptions which management of Cardinal considers reasonable as of May 11, 2015 however such information may prove to be incorrect. Cardinal is providing the forwardlooking financial information set out in this presentation for the purposes of providing readers with some context for the base cases presented herein; such information may not be appropriate for other purposes other
than as described herein. These forward-looking statements are made as of the date of this presentation and, other than as required by applicable securities laws, Cardinal does not assume any obligation to update or
revise them to reflect new events or circumstances.
Other Advisories
Cash dividends are not guaranteed. Although Cardinal intends to make dividends in the amounts indicated to shareholders, cash dividends may be reduced or suspended. The actual amount distributed, if any, will
depend on numerous factors and conditions existing from time to time.
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18
Advisory
Non-GAAP Measures
Throughout this presentation the Company uses the terms “cash flow from operations”, “netback”, “net debt”, “free cash flow”, “simple payout ratio” and “total payout ratio”. These terms do not have a standardized
prescribed meaning under GAAP and these measurements may not be comparable with the calculation of similar measurements of other entities.
“Cash flow from operations” is calculated based on cash flow from operating activities before the change in non-cash working capital and decommissioning expenditures. Cardinal believes the timing of collection,
payment or incurrence of these items involves a high degree of discretion and as such may not be useful for evaluating Cardinal’s operating performance. Management utilizes cash flow from operations as a key
measure to assess the ability of the Company to finance dividends, operating activities and capital expenditures. Cash flow from operations should not be construed as an alternative to net earnings or cash flow from
operating activities determined in accordance with GAAP as an indication of Cardinal’s performance. A reconciliation of cash flow from operating activities to cash flow from operations is available in Cardinal’s
management, discussion and analysis available on SEDAR.
The term “net debt” is calculated as total bank debt (long term bank debt plus the current portion of bank debt) plus other current liabilities less current assets adjusted for the fair value of financial instruments. Net debt
is used by management to analyze the financial position and leverage of Cardinal.
“Free cash flow" represents cash flow from operations less cash dividends declared and less development capital expenditures necessary to maintain the Company's base production. "Total payout ratio" represents the
ratio of the sum of cash dividends declared plus development capital expenditures necessary to maintain the Company's base production divided by cash flow from operations. "Simple payout ratio" represents the ratio
of the amount of dividends declared, divided by cash flow from operations. Free cash flow and total payout ratio are other key measures to assess Cardinal's ability to finance dividends, operating activities and capital
expenditures.
“Netback” is calculated on a per boe basis and is determined by deducting royalties and operating expenses from petroleum and natural gas revenue. Netback is utilized by Cardinal to better analyze the operating
performance of its petroleum and natural gas assets against prior periods.
Advisory Regarding Oil and Gas Information
The crude oil, natural gas and natural gas liquid reserves and related future net revenue of Cardinal presented herein were evaluated by Sproule Associates Limited ("Sproule") and GLJ Petroleum Consultants (“GLJ“),
Cardinal's independent reserves evaluators, in accordance with the requirements of National Instrument 51-101 (“NI 51-101”) and the Canadian Oil and Gas Evaluation Handbook effective as of December 31, 2014
and using Sproule's December 31, 2014 forecast product prices
Where applicable, oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. BOEs may be misleading, particularly if used in isolation. A boe
conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at
the wellhead. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1 Bbl, utilizing a conversion ratio at 6 Mcf: 1 Bbl may
be misleading as an indication of value.
This presentation contains estimates of the net present value of our future net revenue from our reserves. Such amounts do not represent the fair market value of our reserves. There is no assurance that the forecast
prices and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of our crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and
there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein. Reserves included
herein are stated on a company gross basis (working interest before deduction of royalties without including any royalty interests) unless noted otherwise. The estimates of reserves for individual properties may not
reflect the same confidence level as estimates of reserves for all properties due to the effects of aggregation.
References herein to short-term production rates are useful in confirming the presence of hydrocarbons, however such rates are not determinative of the rates at which such wells will commence production and decline
thereafter and are not indicative of long term performance or of ultimate recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating aggregate production for us. A pressure
transient analysis or well-test interpretation has not been carried out in respect of all wells. Accordingly, we caution that the test results should be considered to be preliminary.
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19
Advisory
Drilling Locations
This presentation discloses drilling locations in three categories: (i) proved locations; (ii) probable locations; and (iii) unbooked locations. Proved locations and probable locations are derived from the Company’s most
recent independent reserves evaluation as prepared by Sproule or GLJ as of December 31, 2014 and account for drilling locations that have associated proved and/or probable reserves, as applicable. Unbooked
locations are internal estimates based on the Company’s prospective acreage and an assumption as to the number of wells that can be drilled per section based on industry practice and internal review. Unbooked
locations do not have attributed reserves or resources. Of the drilling locations identified herein, are proved locations, are probable locations and are unbooked locations. Unbooked locations have been identified by
management as an estimation of our multi-year drilling activities based on evaluation of applicable geologic, seismic, engineering, production and reserves information. There is no certainty that the Company will drill
all unbooked drilling locations and if drilled there is no certainty that such locations will result in additional oil and gas reserves, resources or production. The drilling locations on which we actually drill wells will
ultimately depend upon the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results, additional reservoir information that is obtained and other factors.
While certain of the unbooked drilling locations have been derisked by drilling existing wells in relative close proximity to such unbooked drilling locations, the majority of other unbooked drilling locations are farther
away from existing wells where management has less information about the characteristics of the reservoir and therefore there is more uncertainty whether wells will be drilled in such locations and if drilled there is
more uncertainty that such wells will result in additional oil and gas reserves, resources or production.
“OOIP” is the Original Oil in Place as determined internally by Cardinal Energy Ltd. The estimates of OOIP have been prepared internally by a qualified reserves evaluator in accordance with NI 51-101 and the
COGEH handbook.
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