Questerre Energy Corporation Class A · TSX:QEC
Questerre Energy Corporation Class A — Investor Presentation (April 2014)
38 slides from Questerre Energy Corporation Class A's investor presentation, April 2014
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Slide 2: Agenda
1. Company Strategy 2. Light Oil Bakken/Torquay, Antler, Saskatchewan 3. Liquids-Rich Montney, Kakwa-Resthaven, Alberta 4. Oil Shale 5. St. Lawrence Lowlands, Quebec 6. Outlook 2
Slide 3: Leverage tight rock/shale expertise to acquire tight resources early
Leverage extensive tight rock/shale rock expertise to acquire tight resources early and develop reserves • First mover in shale gas –acquired acreage in Quebec almost 5 years ahead of industry • Invited speakers at domestic and international conferences and authors of technical papers • All Questerr
Slide 4: Portfolio to create value in the short, medium, and long term
Portfolio to create value in the short, medium, and long term 4
Slide 5: Asset portfolio overview
Southeast Saskatchewan Proven Bakken/Torquay tight oil production with strong netbacks Western Alberta Liquids-rich Montney natural gas resource play with exceptional economics Utah & Wyoming Oil shale commercialization project in Utah with Total S.A. and Red Leaf Early stage oil shale project in Wy
Slide 6: Operating and Financial Results, Capitalization and Liquidity
Operating and Financial Results Capitalization and Liquidity For the 12 months ended December 31, 2013 $31.9 million (April 1, 2014) 336 million Nil $13.2 million 23,385,617 10% 241,271,674 90% 885 264,657,291 77% $75.41 (average exercise price $2.02/share) 18,188,000 $54.59 655,264 Current producti
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Slide 8: Established tight oil asset targeting Bakken/Torquay resource play
Established tight oil asset targeting Bakken/Torquay resource play High value reserves Sweet Spot NPV-10/bbl of $38.48/bbl based on 2P reserves of 1.8 million barrels and $69 million NPV-10 as at December 31, 2013(1) 2013 netbacks of ~$72/bbl based on $94/bbl realized oil prices • Average royalties
Slide 9: Waterflood potential at Tundra
Questerre Pool Secondary recovery scheme has been successfully applied in adjacent Bakken/Torquay pool in Manitoba with a projected increase in recovery from Adjacent Pool 9% to between 16% - 24% • Low energy reservoir (very limited gas/water drive) at Antler makes it an ideal candidate for waterflo
Slide 10: Waterflood potential at Antler
Questerre Pool Secondary recovery scheme has been successfully applied in adjacent Bakken/Torquay pool in Manitoba with a projected increase in recovery from Adjacent Pool 9% to between 16% - 24% • Low energy reservoir (very limited gas/water drive) at Antler makes it an ideal candidate for waterflo
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Slide 12: 2,500 boe/d discovery well creates new core area in west central Alberta
2,500 boe/d discovery well in 2012 creates new core area in west central Alberta • Montney play is approximately 500 km long by 90 km wide • One of the largest oil and gas fields in world • Gas, oil and liquids- rich windows similar to Eagleford shale in Texas • Development has historically focused
Slide 13: Sweet spot of the play is overpressured, liquids-rich area
Sweet spot of the play is overpressured, liquids-rich area • High liquids, particularly condensate key to robust play economics Questerre has built a significant land position in the sweet spot of this fairway • Acquired 72 gross sections with a ~83% working interest (59 net sections) • Good tenure-
Slide 14: Montney well test rates
27 26 28 1. Paramount (Karr-Gold Creek) 19. QEC (5-23) 13.4MMcf/d + 670 bbl/d 3.7 MMcf/d + 815 bbl/d 2. NuVista (02-01) 20. Paramount (8-17) 4.4MMcf/d + 231 bbl/d 6MMcf/d + NGL’s 3. 7G & Celtic (01-29) 21. QEC (09-01) 29 4.7MMcf/d + 1,209 bbl/d suspended 4. Celtic (03-28) 22. QEC (03-19) 31 1 2.5MMc
Slide 15: Industry activity
cen INDUSTRY ACTIVITY “ony 9 ExonMobil Shallow-cut Gas Plant Average Liquids @ £0 bbisimmet 75% 054) Range i 4 (Jayar to 60 (Kakwa) balsimmef] ques Retest ExxonMobil Buying Celtic For $3.1 Billion In Rare Western Canada Acquisition nteg Meakin oy Pst Roche Shallow-cut Gas Plant Average Liquids @ 33
Slide 16: Industry activity: Paramount expanding capacity
INDUSTRY ACTIVITY Paramount Expanding Capacity To Handle Three Times Current Company Output Dy Pat acne 7 By PatRoche Paramount Resources Ltd's processing capacity will total 73,000 bow a day once projects at its Musreau and Resthaven propertvs in northavwst Alberta are completed This would be a hug
Slide 17: Industry activity: NuVista and drilling growth
INDUSTRY ACTIVITY y ney Economics A\\ Hoong . : South Block Certainty and Facility Capacity inf, Nu\ista Daily Oil Bulletin mena] Sey 2014: Drill Away NuVista Increases Reserves, Reports Record 1 8 Block nresed | Ful Fie Dew. Montney Well onay gow ypcims Ue NuVista Increases Reserves, Reports Record
Slide 18: Contingent and prospective resources assigned to two intervals
Best estimates of 31.7 million boe of contingent resources and 99.7 million boe of prospective resources have been assigned to two intervals on approximately one third of Questerre’s total acreage • NPV-10 for best estimate of economic contingent resources estimated at ~$8.40 per barrel • Contingent
Slide 19: Access to customers a critical path item
New energy paradigm makes access to 140 bbl @ ~$100/bbl customers a critical path item (90%-100%+ of WTI/bbl) 5 bbl @ ~$100/bbl Questerre strategy is to secure access (90%-100%+ of WTI/bbl) to all aspects of value chain • Processing facilities for natural gas, pipelines for 15 bbl @ ~$60/bbl natural
Slide 20: First three wells tested at 2,500 to 1,400 boe/d
Wellhead Condensate Rate – bbls/MMcf First three wells have tested at rates of 2,500 to 1,400 boe/d with over 40% condensate Liquids rates from first wells have averaged 140-190 bbls/MMcf over 2013 Economic Sensitivities • Gas production has been constrained by lack of facilities – compression and l
Slide 21: Questerre wells targeted upper two prospective Montney intervals
Questerre wells have targeted upper two prospective intervals in the Montney • Industry reported results from other interval indicates they are just as productive • Partners reported offsetting well tested at 100 bbls/MMcf from upper interval in Montney • Further potential exists in lower Montney •
Slide 22: Illustrative development scenario at 20 MMcf/d plus liquids
Production and cumulative cash flow Illustrative development scenario based on 20 MMcf/d + liquids of firm processing capacity Initial capital investment of $80 million-$100 million required in 2014/2015; NPV-10 ~$390 million with Production and net wells drilled production of ~6,000 boe/d 22
Slide 23: Illustrative development scenario at 40 MMcf/d plus liquids
Production and cumulative cash flow Illustrative development scenario based on 40 MMcf/d + liquids of capacity • 20 MMcf/d firm capacity and 20 MMcf/d on interruptible basis Initial capital investment of $120 million-$140 million Production and net wells drilled required in 2014/2015; NPV-10 ~$620 m
Slide 24: Realizing benefits of learning curve earlier than expected
Realizing benefits of learning curve earlier than originally expected Drilling and completion costs reduced from $10 million to about $8 million Further improvements expected with pad drilling and other efficiencies 24
Slide 25: Drill five wells on 100% acreage in Kakwa in 2014
Drill five wells on 100% acreage in Kakwa North and South in 2014 First well spud in February on Kakwa South and next expected to spud in Kakwa North after breakup in June Drill up to seven additional wells in 2014 (1.75 net) with partners Move up learning curve to improve drilling and completion te
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Slide 27: Oil shale: major resource on cusp of commercial development
Major resource on cusp of commercial development • Estimated 2.8-3.1 trillion barrels in place worldwide with 2.1 trillion located in the United States(1) Questerre has an indirect interest in a US$400 million joint venture with Total S.A. and Red Leaf Resources, a private company, to unlock this re
Slide 28: Innovative approach moving the process to the rocks
Innovative approach that moves the process to the rocks instead of moving the rocks to the process • Incorporates benefits and avoids challenges of both surface and subsurface processes Dramatically improves economics • Modeling indicates economics are better than oil sands projects with similar sca
Slide 29: Pasquia Hills, Saskatchewan and Wyoming
Pasquia Hills, Saskatchewan • 100% interest in ~39,000 high-graded acres at Pasquia Hills • Commissioning resource report to be released this summer Wyoming SASKATCHEWAN • 20% interest in 5,120 acre farm-in with Red Leaf holding an 80% interest Drilled 16 wells in 2012 • Working with Red Leaf to sec
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Slide 31: Prospective resource on Quebec acreage
• Best estimate of 18 Tcf of prospective resource on acreage – 4.4 Tcf net to Questerre(1) • Approximately 50% shallower than Montney formation • Premium gas market - realized prices 2-3X prices in Western Canada • Tenure recently extended to 2021 • Public consultations for environmental assessment
Slide 32: Debate shifting from "if" to "how"
• Debate is rapidly shifting from “if” to “how” oil and gas development could happen • Initial focus is on oil with government investing over $100 million in oil exploration • Energy strategy advocates local production of hydrocarbons, particularly natural gas • Strategic Environmental Assessment re
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Slide 34: Implement first phase of two-year plan to ~6,000 boe/d from Kakwa
Implement first phase of two-year plan to achieve ~6,000 boe/d from Kakwa by mid-late 2015 • Drill up to 5 wells on 100% acreage – first well currently drilling with results expected early summer • Drill up to 7 (1.75 net) wells on joint venture acreage Red Leaf to begin capsule construction in Utah
Slide 35: Board and Management
Board Management Les Beddoes, Jr. Michael Binnion, President & Chief Executive Officer International explorationist Former VP Exploration, Bow Valley Energy Inc.; Victoria, BC Conventional Management Team Michael Binnion, President & Chief Executive Officer Frank Walsh, Chief Operating Officer (Huro
Slide 36: 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" and similar expressions are in
Slide 37: Forward-looking information risks
The forward-looking information and statements included in this presentation are not guarantees of future performance and should not be unduly relied upon. Such information and statements; including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other fac
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