Perpetual Energy Inc. 2010 Q4 and Annual Results March 8, 2011
Year End Results 1. Q4 and 2010 financial and operating results 2. Reserves and F&D update 3. Operational update 4. Natural gas markets 5. Balance sheet and high yield financing 6. 2011 capital program Business plan targets a…
2010 Q4 and Annual Results
2010 Annual Financial Highlights Funds flow increased 3% to 237 million in 2010 from 231 million in 2009 Net bank debt decreased 21% from 271 million at December 31, 2009 to 215 million at December 31, 2010 Total net debt…
2010 Production Highlights Actual and deemed production was flat year over year at 177.4 MMcfe/d vs 177.6 MMcfe/d in 2009 Production decreased 3% to 152 MMcfe/d as a result of asset dispositions, the full year effect of the Legend…
2010 Capital Activities Spent 115.2 million on exploration and development compared to 57.4 million in 2009 Drilled 70 gross wells (63.9 net) vs. 52 gross (42.2 net) in 2009 with a 98% net success rate. Drilling activity included 48…
Capital Expenditures Capital Expenditures As asset base transition takes shape increasingly more capital to liquids rich gas and oil resource plays 7
2010 Acquisitions and Dispositions Reconciliation 2010 Acquisitions 2010 Dispositions(1) Net Cold Lake Legend Shut-in GOB Liege Shut-in GOB Edson Leismer Shut-in GOB Properties Wostock/Ukalta Grande Prairie East Warwick…
2010 Operating Results Three Months Ended December 31 Year Ended December 31 2010 2009 % Change 2010 2009 % Change Production Daily Natural Gas 135.9 139.8 (3) 145.1 153.4 (5) (MMcf/d) Daily Oil and NGL 1,535 1,014 51 1,245 721 73…
2010 Financial Results Three Months Ended Year Ended December 31 December 31 ( Millions except per 2010 2009 % Change 2010 2009 % Change Common Share amounts) Revenue 111.2 78.9 41 417.1 418.3 - Funds Flow 71.0 39.4 79 237.2 231.3…
Reserves and F&D Update
2010 Year End Reserves Added 72.1 Bcfe of proved and probable reserves, replacing 129% of production (111% total proved) After dispositions of 53.1 Bcfe and production of 55.7 Bcfe, P+P reserves increased 3% to 488 Bcfe and proved…
2010 Year End Reserves % Bcfe 2010 2009 Change Proved Producing 201 203 (1) Proved Non-Producing 22 8 175 Proved Undeveloped 27 33 (18) Total Proved 250 244 2 Probable Producing 68 67 1 Total Probable 169 161 5 Total Proved and…
Elmworth Montney Reserves and Contingent Resource McDaniel recognized 1.0 Tcf OGIP on 42 gross sections of Perpetuals Elmworth Montney acreage 14.5 Bcfe (2.4 MMboe) of proved and 32.1 Bcfe (5.3 MMboe) of P+P reserves booked at…
2010 Year end Reserves Reserves By Category (487.7 Bcfe - Company Interest) Gas over Bitumen Proved Undeveloped, 27.4, 6% Shut-in, 27.2, 6% Proved Developed Non-producing, 21.6, 4% Probable Undeveloped, 108.1, 22% Proved…
Reserve Characteristics Proved Reserves by Play (in Bcfe,% of total) 8, 3% 15, 6% 2, 1% 11, 4% 48, 19% 167, 67% Conventional West Central Viking GOB Cardium Wilrich Montney 67% of proved reserves from Conventional…
Reserve Characteristics Proved and Probable Reserves by Play (in Bcfe, % of total) 32, 7% 16, 3% 3, 1% 27, 6% 233, 47% 105, 21% 71, 15% Conventional West Central Viking GOB Cardium Wilrich Montney 52% of proved and…
Operational Update
Entrepreneurial Approach to Value Creation CONVENTIONAL ASSETS RESOURCE PLAYS OPTION VALUE Cash Flow Growth, Exposure to Generators Diversification and Emerging Legacy Conventional shallow Value Technologies gas in northeast &…
Asset Overview Conventional Projects Cash Flow Generators Conventional Shallow Gas Conventional Heavy Oil 86% of production in 2010 to 75% in Q1 2011 Resource Projects - Growth Deep Basin Liquids Rich Gas Wilrich liquids rich gas…
Conventional Projects Shallow Gas Inventory East Central and Northeast Alberta Cretaceous and Devonian sweet shallow gas Base declines < 20% Belly River Multiple stacked zones and play types 1,000+ uphole recompletions awaiting…
Conventional Projects Heavy Oil 2010 Capital Drilled 9 wells Booked 300 Mbbls of reserves Avg. IP 20 bbl/d Q1 2011 Capital 2 Hz wells at Mannville (Lloyd and Sparky target) Q2-Q4 2011 Plan Drill up to 32 wells 1 Hz and 1…
Resource Projects Deep Basin Liquids Rich Gas Establishing operational excellence in vertical and horizontal development 23
Resource Projects - Edson Wilrich 2010 Capital Program Drilled 5 (4.5 net) Hz wells IPs 3.5 - 5.0 MMcf/d; 40 bbl/MMcf of NGLs (50% condensate) 16-10 Compressor expansion added capacity of 20 MMcf/d with 800 bbl/d of NGLs for…
Wilrich Value Potential Economics per Drilling Location Assumptions Capital (D,C & T) 4.9 MM Pricing 4/Mcf; 75/bbl WTI = 53.20/bbl NGLs (4/Mcf; 95/bbl WTI=66.30/bbl NGLs) NPV 10 % 2.7 MM BT (3.5 MM) (excluding drilling credits)…
Resource Projects Pembina Cardium 2010 delineation program met type curve expectations Move to development stage 26
Resource Projects Carrot Creek Cardium 2010 Capital Program Drilled 5 HZ (2.9 net) wells Type curve achieved 4-16-52-13W5 top decile producer (333 boe/d avg first 110 days) Q1 2011 Capital Section 16-52-13W5 development…
Carrot Creek/Cardium Value Potential Economics per Drilling Location Assumptions Capital (D,C & T) 2.9 MM Oil / Gas Pricing 75/bbl; 4/Mcf (95/bbl; 4/Mcf) (multi-well program estimate) NPV 10 % 3.1 MM BT (4.6 MM) Operating Costs…
Resource Projects Elmworth Montney Liquids Rich Gas 1 TCF original gas in place (gross) Resource potential established Working towards area development plan 29
Resource Projects Bitumen/Heavy Oil Perpetual OS Leases Primary Projects SAGD Projects Fireflood Projects CSS Projects Electric Heaters Oil Pipelines 521 net sections (333,000 net acres) of oil sand leases 7 unique project…
Resource Projects Viking/Colorado Tight Shallow Gas Extensive core testing to establish preferred drilling and fracture stimulation program for pilot 31
Warwick Gas Storage 2010 Capital Program Drilled 6 Hz injection wells Began Injection on Test Cycle in May 2010 Constructed facility capable of 200 MMcf/d withdrawal rate Total WGSI Cost 68 million Q1 2011 Capital Gas…
Asset Base Repositioning Progress and Next Steps Timing to Establish Future Capital Game Changer Progress and Next Steps Requirements Edson Wilrich Type curve established as expected Current plan established Moved to development…
Natural Gas Markets
Natural Gas Market Highlights Producer sentiment has shifted Rigs and capital are being diverted to oil and liquids plays Cold winter has significantly eroded storage surplus Likely to exit withdrawal season 1.5 Tcf vs 1.9-2.2 Tcf…
US Natural Gas Storage Cold winter = gas storage trending below 2010 and five year average 36
US Coal Demand Rising coal costs create a backstop for natural gas prices 37
US Gas Rig Count Horizontal rig count down 3% quarter over quarter 38
Balance Sheet and High Yield Financing
Balance Sheet Net bank debt at Dec 31, 2010: 215 million Borrowing base on credit facility: 300 million (confirmed to May 10, 2011) Convertible debentures: 235 million Effectively represents long term debt with the maturities from…
High Yield Financing Perpetual announced offering of 150MM Senior Unsecured Notes on March 1st Closing expected March 15, 2011 Proceeds will be initially used to reduce bank debt and to manage repayment of 6.50% debentures due June…
Balance Sheet Debt Reduction Total debt reduced 28% since Q2 2007, including an additional 10% in 2010 42
2011 Capital Programs
Q1 2011 Capital Budget Q1 2011 Capital Budget: 49.5 MM Heavily weighted to oil and liquids-rich gas Drill, Complete and Tie-ins: 35.5 MM Cardium 3 gross (2.75 Net) HZ wells Wilrich 2 gross (2.0 Net) new wells 2 gross (1.5 Net)…
2011 Full Year Capital Scenario Total Capital: 90 MM Indicative Play Specific Game Changer Activity Objective 2011 Capex F&D (/Boe) Establish Carrot Creek type curve, add oil focused Cardium Drill 4 gross Cardium wells 11 16.50…
Maximizing Shareholder Value
Sustainable Growth Plus Income Strategy DIVIDENDS: Target a Sustainable Dividend BASE CASH FLOW GENERATORS: Target to Minimize Production Declines and Maximize Free Cash Flow HIGH IMPACT RESOURCE PLAYS : Target Growth And…
Opportunity Inventory - Unrisked Reserve Report Current Recorded Prospect Inventory 2010 Year End P + P R eserves = 487.7 Bcfe Unrisk ed Additional R eserve P otential = 1,471 Bcfe UnConventional Tight Gas Resource UnConventional…
Investment Thesis Asset base repositioning to add high impact, resource-style, liquids-focused opportunities successful Edson Wilrich and Carrot Creek Cardium entering development phase Elmworth Montney resource identified and scoping…
3200, 605 5 Avenue SW Calgary, Alberta CANADA T2P 3H5 800.811.5522 TOLL FREE 403.269.4400 PHONE 403.269.4444 FAX infoperpetualenergyinc.com EMAIL www.perpetualenergyinc.com WEB FOR ADDITIONAL INFORMATION: Sue Riddell Rose…
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