Pine Cliff Energy Ltd. · TSX:PNE
Pine Cliff Energy — Investor Presentation (November 2021)
42 slides from Pine Cliff Energy's investor presentation, November 2021
Slide 1: Corporate Update - A Dynamic Cash Flow Business
A DYNAMIC CASH FLOW BUSINESS CORPORATE UPDATE NOVEMBER 2021 TSX: PNE
Slide 2: Three Reasons to Buy Pine Cliff Energy Stock
THREE REASONS TO BUY PINE CLIFF ENERGY STOCK Global gas fundamentals have highlighted the tightness in 1 global gas/LNG markets. North American natural gas prices have surpassed multi-year highs leading into winter. 2 Pine Cliff Energy has tremendous exposure to the increase in Canadian natural gas
Slide 3: Strong Natural Gas Fundamentals
STRONG NATURAL GAS FUNDAMENTALS • North American 2015-2019 Average Rig Count: 1,038. North American Rig Count Continues to • October 29, 2021 North American Rig Count: 710 (32% below 2015-2019 Lag Historical Averages average).(1) • With added egress to the NGTL, the price difference between Canadian
Slide 4: Natural Gas Outlook – North American Demand
NATURAL GAS OUTLOOK – NORTH AMERICAN DEMAND U.S. Total Natural Gas Demand (Bcf/d)(1) U.S. Electricity Demand by Energy Source(2) 100% U.S. demand 24% 25% 28% The 31% 28% 34% 35% 33% 36% fluctuates in 80% 40% 42% composition of the summer U.S. electricity and during the 60% 46% 43% 40% production has
Slide 5: Natural Gas Outlook – North American Supply
NATURAL GAS OUTLOOK – NORTH AMERICAN SUPPLY Western Canada Natural Gas Supply(1) North American Natural Gas Rig Count (# of Active Rigs)(2) 600 Strong AECO 5-Yr Range 5-Yr Avg 2020 2021 Active natural prices have 500 gas drilling rigs encouraged in North 400 producers to America increase 300 continu
Slide 6: Natural Gas Outlook – Storage Is the Scorecard
NATURAL GAS OUTLOOK – STORAGE IS THE SCORECARD Western Canadian Natural Gas Storage (Bcf)(1) U.S. Natural Gas Storage (Bcf)(2) Western U.S. natural Canadian gas storage natural gas levels are 4% storage is below the 5-yr currently 5% average, and below the 5-yr 10% below average, and storage levels
Slide 7: Natural Gas Outlook – Global Supply and Demand
NATURAL GAS OUTLOOK – GLOBAL SUPPLY AND DEMAND Global Natural Gas Demand (Billion Cubic Meters)(1) Global LNG Demand (Billion Cubic Meters)(2) With the Demand for exception of LNG continues Europe, to climb, natural gas specifically in consumption is Asia, with over forecasted to 43 countries materi
Slide 8: 2022 Cash Flow Torque to Natural Gas Pricing (AECO)
2022 CASH FLOW TORQUE TO NATURAL GAS PRICING 2022 Cash Flow* Torque to AECO(1) 20% 18% + C$0.50/Mcf AECO + C$0.25/Mcf AECO 18% 16% 14% % Change in CF from Strip 13% 12% 10% 10% 9% 9% 9% 9% 8% 7% 7% 6% 6% 6% 6% 5% 5% 5% 4% 5% 4% 4% 3% 3% 3% 2% 2% 0% PNE Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer
Slide 9: 2022 Cash Flow Torque to Natural Gas Pricing (NYMEX)
2022 CASH FLOW TORQUE TO NATURAL GAS PRICING 2022 Cash Flow* Torque to NYMEX(1) PNE AAV LXE TOU CR ARX TPZ PEY NVA SDE FRU ERF VET WCP CNQ TVE CPG HWX CVE IMO SU MEG ATH -100% -50% 0% 50% 100% US$3/mmbtu NYMEX US$6/mmbtu NYMEX *Cash flow is synonymous with adjusted funds flow as seen in other parts
Slide 10: Demonstrated Ability to Generate Funds Flow
DEMONSTRATED ABILITY TO GENERATE FUNDS FLOW $20.0 $7.00 $2.00 PNE AFFO (LHS) AECO Indexed Price (RHS) PNE Indexed Price (RHS) $1.80 $15.0 $6.00 $13.3 $15.0 $11.6 $1.60 Adjusted Funds Flow ($mm) $11.2 $5.00 $10.8 $1.40 $10.1 PNE Stock Price ($/sh) $10.0 $8.1 $7.5 $9.5 $9.2 $7.0 $10.0 $1.20 AECO ($/mc
Slide 11: 2022 Adjusted Funds Flow Sensitivities
2022 ADJUSTED FUNDS FLOW SENSITIVITIES AECO 5A(1) $/mcf $3.00 $3.50 $4.00 $4.50 $5.00 $5.50 Realized Price(2)(3) $/mcfe $3.43 $3.89 $4.34 $4.80 $5.26 $5.71 Royalties(4) $/mcfe ($0.20) ($0.28) ($0.37) ($0.48) ($0.59) ($0.71) (4) Operating Expenses $/mcfe ($1.78) ($1.78) ($1.78) ($1.78) ($1.78) ($1.78
Slide 12: What We Have Built
WHAT WE HAVE BUILT THREE MAJOR OPERATED CORE AREAS • 2021 Production Guidance of 18,000 – 18,500 boe/d. • Weighted 91% towards natural gas. • High Working Interest and Operatorship. • Production and infrastructure is 85% operated. • 80% average working interest on land. • Extensive Land and Seismic
Slide 13: One of the Lowest Base Production Declines
ONE OF THE LOWEST BASE PRODUCTION DECLINES Base Decline • Pine Cliff’s asset base has one of the lowest base declines of any Western Canada producer. • This provides PNE the ability to maintain production or grow with minimal capital. • The average junior Canadian oil and gas producer has a producti
Slide 14: A Counter-Cyclical Strategy
A COUNTER-CYCLICAL STRATEGY BUILDING A FREE CASH FLOW MODEL IN A VOLATILE COMMODITY PRICE ENVIRONMENT • PNE has been uniquely focused on a low-risk, low decline, primarily natural gas asset consolidation strategy in Western Canada with nine acquisitions since 2012 (See Appendix for list of acquisiti
Slide 15: Corporate Profile
CORPORATE PROFILE A UNIQUE SUSTAINABLE CASH FLOW MODEL • Listing TSX: PNE • 2021 Production Guidance 18,000 – 18,500 boe/d • - % natural gas 91% • Market Capitalization(1)(3) $264.4mm • 2021 Capital Guidance $21.5mm • Average Daily Volume(2) 0.562mm • Corporate Base Production ~7% • 52-Week Trading
Slide 16: A Strong Balance Sheet and Shareholder Base
A STRONG BALANCE SHEET AND SHAREHOLDER BASE % of PNE Shareholder and Relationship Shares Held Date and Source Outstanding Robert Disbrow November 3, 2021 – 39,809,500 10.86% (Reporting Insider and Long Term Debt Holder) SEDI Alberta Investment Management Company – AIMCo 36,056,954 10.64% October 7,
Slide 17: Why Invest in Pine Cliff
WHY INVEST IN PINE CLIFF • Long life predictable natural gas assets with an industry leading decline rate creates stable, predictable funds flow. • One of the strongest per share sensitivities among Canadian energy companies to natural gas price improvements. • Demonstrated ability to generate posit
Slide 18: Analyst Coverage
ANALYST COVERAGE Company Analyst Canaccord Genuity Anthony Petrucci Desjardins Capital Markets Chris MacCulloch Haywood Securities Inc. Christopher Jones Paradigm Capital Adam Gill Peters & Co. Dan Grager Stifel FirstEnergy Cody Kwong By posting this list, Pine Cliff does not imply endorsement of or
Slide 19: Appendix
APPENDIX 18
Slide 20: Experienced Board and Management
EXPERIENCED BOARD AND MANAGEMENT BOARD OF DIRECTORS George F. Fink (Chairman of the Board) Mr. Fink is the Chairman of the Board of Pine Cliff Energy Ltd. (“Pine Cliff” , “PNE”, or the “Company”) and is also the Chief Executive Officer and Chairman of the Board of Bonterra Energy Corp. Mr. Fink sits
Slide 21: Experienced Board and Management – Cont.
EXPERIENCED BOARD AND MANAGEMENT – CONT. Jacqueline R. Ricci Ms. Ricci joined the Board of Directors of Pine Cliff in May, 2020 and is Chair of its Audit Committee. Ms. Ricci has been a Vice President and Director at J. Zechner Associates, Toronto, Ontario, since 1997, where she is responsible for s
Slide 22: PNE Historical EV/DACF Multiples
PNE HISTORICAL EV/DACF MULTIPLES 22.0x Current Avg Avg +1 std dev Avg -1 std dev 20.0x Consensus EV/Forward 12 months DACF 18.0x 16.0x 14.0x 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x May-21 May-13 Sep-13 May-14 May-15 May-16 May-17 May-18 May-19 May-20 Jan-13 Jan-14 Sep-14 Jan-15 Sep-15 Jan-16 Sep-16 Jan-17 S
Slide 23: Focus on Per Share Value
FOCUS ON PER SHARE VALUE Predictable Funds Flow Model Low decline and low capital efficiencies form the foundation for a sustainable “funds flow” model. EXPERIENCED MANAGEMENT Significant Insider Ownership TEAM Interests aligned with shareholders to build per share value. Access to Capital LOWEST Ei
Slide 24: An Active Eight Years of Acquisitions
AN ACTIVE EIGHT YEARS OF ACQUISITIONS TRANSACTION RECORD SINCE JANUARY 2012 $500,000,000 11 Market Cap $450,000,000 Share Price 10 $2.50 9 12 $400,000,000 13 14 $2.00 $350,000,000 PNE Share Price Market Cap $300,000,000 8 4 7 15 $1.50 $250,000,000 6 5 3 $200,000,000 1 2 $1.00 16 $150,000,000 17 18 $
Slide 25: Flexible Natural Gas Price Exposure
FLEXIBLE NATURAL GAS PRICE EXPOSURE UNIQUE INFRASTRUCTURE OPTIONALITY • Sales volumes can be physically diverted to Saskatchewan and the United States by utilizing three PNE owned CER regulated pipelines. • Preserves capability of PNE to optimize physical flows based on market pricing. • Avoids long
Slide 26: Natural Gas Review – Hedging Update
NATURAL GAS REVIEW – HEDGING UPDATE PHYSICAL PRICE HEDGING Fixed Price Contracts Physical Delivery Fixed Sale Price Contractual Term Delivery Point Quantity (GJ/day) (C$/GJ) Nov 1, 2021 – Dec 31, 2021 AECO 2,500 $3.54 Nov 1, 2021 – Dec 31, 2021 AECO 5,000 $4.00 Nov 1, 2021 – Mar 31, 2022 AECO 7,500
Slide 27: Central Assets Area Overview
CENTRAL ASSETS AREA OVERVIEW PINE CLIFF’S LARGEST CORE AREA • Gas weighted, low decline assets in the Ghost Pine and Viking areas of Central Alberta. • Extensive land position of 1.3mm gross (0.95mm net) acres. • Q3/21 production of 9,702 boe/d (86% natural gas), 53% of Pine Cliff’s production. • PN
Slide 28: Twining Pekisko Oil
TWINING PEKISKO OIL • Oil and gas are trapped in the reservoir close to the subcrop edge (pinch-out). The Pekisko oil pool in Twining, is estimated to have over one billion barrels of original oil in place and is the single largest Pekisko oil accumulation in The Western Canadian Sedimentary Basing
Slide 29: Twining Pekisko Inventory
TWINING PEKISKO INVENTORY • Drilled five horizontal wells to date: • One in 2018, two in 2019, and two in 2021. • 2021 wells achieved a drill, complete, equip and tie- in (DCET) cost of $2.8 MM. • PNE has an acquired an extensive 3D and 2D seismic library over the play. • PNE has two operated multi-
Slide 30: Twining Pekisko Economics
TWINING PEKISKO ECONOMICS Pekisko (3 Hz): Rate-time (bbl/d) Twining Pekisko Economics Type Well 250 Assumptions: * $2.8mm DCE&T Capital IP 365 = 188 boe/d Calendar Day Oil Rate (bbl/d) 200 * $4.00/GJ AECO (less $0.16/GJ Transport) (60% oil and ngl's) * 1.25 C$/US$ 150 * $US (5.25)/bbl Oil Differenti
Slide 31: Edson Area Overview
EDSON AREA OVERVIEW HIGH IMPACT INVENTORY • Q3/21 production of 1,429 boe/d (73% natural gas), 8% of Pine Cliff’s production. • PNE currently estimates high quality locations targeting the Bluesky, Ellerslie, Rock Creek, Wilrich, and Ostracod areas with approximately 51 gross (13.3 net) locations in
Slide 32: High Quality Edson Area Locations
HIGH QUALITY EDSON AREA LOCATIONS MULTI ZONE, LIQUIDS RICH LOCATIONS • Attractive and predictable high liquids yield production. • 55 gross (13.9 net) multi-zoned undrilled locations including 35 gross (8.7 net) unbooked locations and 16 gross (4.6 net) booked locations in the 2020 Reserve Report. •
Slide 33: Southern Assets Area Overview
SOUTHERN ASSETS AREA OVERVIEW LOW DECLINE, LOW COST PRODUCTION • Q3/21 production of 7,185 boe/d (99.9% natural gas), 39% of Pine Cliff’s production. • 100% ownership of three CER regulated pipelines delivering gas to Montana and Saskatchewan. • Gas sales into Saskatchewan at TEP pricing. • Multi-zo
Slide 34: Asset Retirement Obligations
ASSET RETIREMENT OBLIGATIONS • 85.7% of Pine Cliff’s wells are producing Pine Cliff(1) Province of Alberta(2) which is considerably higher than the latest Gross % of Total Gross % of Total Alberta average of 62.1%. Active Wells 7,993 88.7% 157,000 62.1% Inactive Wells 1,019 11.3% 97,000 37.9% • So f
Slide 35: Actively Managing Environmental Footprint
ACTIVELY MANAGING ENVIRONMENTAL FOOTPRINT • As at September 30, 2021, PNE recorded an asset retirement obligation (“ARO”) of $231.0mm (inflated at 2.00% and discounted at 2.30%) on its balance sheet ($240.6mm undiscounted, uninflated). • As of September 30, 2021, PNE’s discounted ARO at 15% was $47.
Slide 36: Actively Managing Environmental Footprint
ACTIVELY MANAGING ENVIRONMENTAL FOOTPRINT Pine Cliff’s Annual Well Abandonment and Reclamation Expenditures Year Gross Net 2017 $2.5 million $2.4 million 2018 $3.0 million $2.7 million 2019 $2.1 million $1.9 million 2020 $1.7 million $1.5 million (1) Totals $8.8 million $8.5 million (1) Includes dat
Slide 37: Methane Emissions Reduction Program
METHANE EMISSIONS REDUCTION PROGRAM • Pine Cliff Energy Ltd. is proud to have been an early action leader in reducing methane emissions from its operations. Starting in March 2018, Pine Cliff has worked with a third party to inventory all pneumatic devices and pumps, and replace all eligible high-bl
Slide 38: Reserve Report
RESERVE REPORT(1) Summary of Remaining Working Interest Reserves, as of December 31, 2020(1) Light, Medium and Natural Gas Natural Gas and Heavy Oil Liquids Coal Bed Methane Oil Equivalent Reserve Category (mbbl) (mbbl) (mmcf) (mboe) Proved Developed Producing 848.6 2,763.8 220,889.7 40,427.4 Develo
Slide 39: Future Drilling Opportunities
FUTURE DRILLING OPPORTUNITIES EXTENSIVE INVENTORY OF OIL AND GAS LOCATIONS TO SUPPLY LONG TERM MODEL Unbooked Locations Booked Locations(1) Total Locations Location Gross Net Gross Net Gross Net Camrose Mannville Recomplete 3.0 2.9 - - 3.0 2.9 Carrot Creek Ellerslie 14.0 4.0 3.0 1.3 17.0 5.3 Carrot
Slide 40: Cautionary Statements
CAUTIONARY STATEMENTS Certain statements contained in this presentation include statements which contain words such as “anticipate”, “could”, “should”, “expect”, “seek”, “may”, “intend”, “likely”, “will”, “believe” and similar expressions, statements relating to matters that are not historical facts
Slide 41: Cautionary Statements
CAUTIONARY STATEMENTS This presentation contains a number of oil and gas metrics, including funds flow, maintenance capital, initial production rates (“IP”), capital efficiencies and internal rate of return (“IRR”) which do not have standardized meanings or standard methods of calculation and many n
Slide 42: Corporate Information
CORPORATE INFORMATION BOARD OF DIRECTORS HEAD OFFICE WEBSITE George F. Fink (Chairman) 850, 1015 – 4th Street SW www.pinecliffenergy.com Philip B. Hodge Calgary, Alberta T2R 1J4 Phone: (403) 269-2289 INVESTOR CONTACT Robert B. Fryk Fax: (587) 393-1693 [email protected] Jacqueline R. Ricci Wil
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