Aspenleaf Energy Proposal Securityholder Presentation August 2014 www.arcanresources.com
The Reality of the Situation Hard Truths Despite improved operational performance, Arcan is burdened with massive debt and is challenged to fund future development After a lengthy process to solicit strategic alternatives, only 1…
Situation Overview www.arcanresources.com
An Untenable Wall of Debt Net Debt to 2014 Cash Flow Interest Coverage (LTM Cashflow / Interest Expense) 10.0x 150.0x Debt levels far in excess of peers Lowest interest coverage ratio of Even if Debentures are converted light oil…
Market Recognized Funding Constraints 900 800 700 600 (mln) 500 Market 400 Cap 300 200 Debentures 100 Bank Debt 0 Jan 2010 Jul 2010 Jan 2011 Jul 2011 Jan 2012 Jul 2012 Jan 2013 Jul 2013 Jan 2014…
Debentures Traded Below Face Value Both Debentures were trading at less than 2/3rds of face value prior to announcement From inception 91% of the trades have occurred below face value For over a year it has been clear that…
Between Good Rock and a Hard Place Reserves Net Present Value Before Enterprise Value Tax 10% (mln) (mln) 600 600 500 Probable Reserves Theoretical 500 Value 400 Arcan can't fund 400 development to access Proven this value…
Status Quo is NOT a Viable Alternative Bank line reductions and restrictions Bank line reduced from 200 million to 190 million, and recently to 180 million A further borrowing base redetermination will take place in October 2014 and…
Unable to Fund Development GLJ Capital Forecast Net Capital (mln) 300 Arcan would need to drill Net Capital Expenditures an average of 18 Thousands Proved + Probable FDC wells/year over the next 4 250 Operating Cash Flow…
A Downward Trajectory Net Wells Drilled Arcan will not be able to fund drilling and drive production 30 Generated cash flow only sufficient for debt 25 service and a limited capital program Substantial hedges prevent meaningful 20…
Production Declines Based on the GLJ report, Arcans base production will continue to decline if significant capital investments are not made Falling production = falling cash flow Arresting declines is likely not possible without…
The Situation is Unsustainable for Debentureholders and Shareholders The value of Arcans asset base will likely decline over time without additional development capital in the immediate term Removing the Debentures is not a solution,…
What are the Options Recommended by ISS and Glass Lewis (1) FOR Accept Aspenleaf Arcan ran a lengthy proposal and process with 2 move forward Investment Banks 22 Confidentiality Agreements signed Aspenleaf Sold minor Virginia…
The Aspenleaf Solution www.arcanresources.com
Deal Structure Drivers Arcan is not in default under the Debentures Any sale of the company or a significant portion of the assets would require shareholder approval Debentures cannot be converted prior to maturity other than at a…
Aspenleaf's Proposal A Creative and Orderly Solution The Aspenleaf proposal is designed to fix the capital structure It offers a creative and orderly solution to a difficult and unusual situation Debentureholders will receive a…
Miura Non-Cash Consideration Offers Upside Provides opportunity for shareholders to participate for the longer term in the Swan Hills play Warrants provide additional participation opportunity for debentureholders and shareholders…
Future Operational Success Required to Unlock Value In addition to capital, specialized skills and experience are necessary to surface the value potential of the assets Arcan is breaking new ground by combining horizontal wells and…
Status Quo or Proposal Experienced team with track record and skills to unlock value potential Shareholders . Debentureholders Bank Development Liquidity Value Liquidity Value Debt Capital FOR Accept Aspenleaf's proposal Orderly…
VOTE FOR THE PROPOSAL Status quo is unsustainable Very high debt burden, lack of financial flexibility and limited access to incremental capital No production growth Uncertainty and value erosion persist Fresh capital to knock…
WHY NOW, WHY NOT WAIT Status quo is fragile and unsustainable Investors would have to hope and believe a better bid or liquidity opportunity will surface soon Comprehensive sales process undertaken by Scotia Waterous and RBC…
The securityholders choice For a while, Arcan might survive BUT will not realize reserve value Arcan faces WALL OF DEBT moving closer daily Arcan CANNOT grow Arcan has tried to: Sell the Company x no solution Sell Assets x no…
We ask you to vote FOR and join us in moving forward together www.arcanresources.com 23
Contact Information & Deadline Any questions and requests for assistance may be directed to Arcan's Proxy Solicitation Agent: North American Toll Free Number: 1 800 239 6513 Outside North America, Banks and Brokers Call…
Appendix 1 Aspenleaf Energy www.arcanresources.com
Deal Provides Exposure to Aspenleaf Team Experience 28 years with Royal Dutch Shell/Shell Canada and over three years with Athabasca Oil Corp. Bryan Gould Completed over 25 bln in transactions, including corporate/asset acquisitions,…
Bryan Gould: President & CEO Shell Shell VP Bus Dev Shell General Mgr North America Progressive Management Roles Shell Peace River Shell Unconventionals Athabasca Senior Advisor General Mgr VP Corporate ARC Corporate Strategy Bus…
David Todd: VP Operations Shell Shell Shell Shell Shell Development Operations Mgr GM Wells, Shell VP General Petroleum Engineering & Mgr Waterton & Jumping Approvals, & VP Production Unconventionals Individual Contributor Roles…
Brian Fischer: VP Exploration Shell Shell Shell Shell Shell Shell Senior Geologist Senior Staff Geologist Operations GM Exploration Mgr Summerland Geologist NEBC Foothills AB Foothills Mgr Tech & North American COO & Shell Cdn…
Doug Ostertag: VP Development Shell Shell Summerland Shell Shell Sable Sr. Staff Reservoir Subsurface Lead VP Shell Sr. Reservoir Eng Shell Staff Prod Eng Offshore Eng Shell Peace River Engineering Reservoir Eng Peace River Staff…
Gerald Ince: CFO Co-enerco TransCanada TransCanada Coordinator Sr. Analyst Director Fin Planning & Evaluations & Corporate PanCanadian National Bank EnCana EnCana Econ Plan. Treasury Asst. Treasurer Acct. Mgr TransCanada TransCanada…
Appendix 2 Case Study: Repayment of Convertible Debentures for Equity www.arcanresources.com
Debenture Repayment with Shares Conversion Prior to Maturity Not an Option Illustrative Dilution Resulting from Any amendment to the Debentures to permit early redemption Share Redemption of 2016 at a lower common share price would…
Case Study: Arctic Glacier Income Fund Equitization of Convertible Debentures Unit Performance Unable to refinance its convertible debentures, Arctic 2.00 5.0 Glacier on June 30, 2011 announced plans to issue units to 17-Sep-10 -…
Offer Summary Aspenleaf assumes an estimated 140 million of the bank debt Aspenleaf pays 141 million to redeem and cancel the convertible debentures 825.11 per debenture, which equals a 25% 33% premium on pre- announcement debenture…
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