Offering of Senior Unsecured Notes Susan Riddell Rose President and CEO Cam Sebastian VP Finance and CFO
Summary Terms of Offering Issuer Perpetual Energy Inc. Amount 100MM Currency CAD Maturity 5 years Rank Senior Unsecured Guarantees All material wholly-owned subsidiaries Optional Redemption NC2 Change of Control Put at…
Key investment highlights Asset base repositioning for resource-style & diversification successful Mannville heavy oil delivering strong cash flow with material secondary recovery growth potential Edson Wilrich liquids-rich gas…
Company Overview
Perpetual Energy Inc. DIVERSIFIED RESOURCE STYLE GROWTH ORIENTED Conventional ENTREPRENEURIAL Shallow Gas EXPLORER, PRODUCER & MARKETER Distributing Trust BUILT TO GROW BUILT TO PROSPER BUILT TO LAST 6
70% 62% OF RESERVE VALUE 59% OF REVENUE 52% OF RESERVES OF PRODUCTION
Perpetual Energy TSX:PMT Common shares outstanding 149.5 million Management ownership 25.4% Share price(1) 2.09 Trading volume(2) 270,000 shares/day Market capitalization 312 million Net debt(3) 258 million Net bank debt(4) 18 million…
Operating profile Conventional Shallow Gas Mannville Heavy Oil Eastern Alberta Bitumen Warwick Gas Storage Viking/Colorado Shallow Shale Gas Edson Wilrich Deep Basin Multi-Zone Liquids-Rich Gas Tight Oil and Gas…
Diversified portfolio Built to prosper SHALLOW GAS LIQUIDS-RICH HEAVY OIL BITUMEN OTHER GAS Eastern Edson Wilrich Mannville Panny Warwick Gas Alberta Greater Edson Mannville Bluesky Storage Conventional Multi-zone EOR Liege GOB…
Portfolio management strategy PROVEN MEDIUM AND CASH FLOW DIVERSIFYING LONG TERM GENERATORS GROWTH STRATEGIES VALUE STRATEGIES Maximize cash flow Invest for growth Optimize and Advance Conventional shallow gas Eastern Alberta…
Production by Core Area Three months ended March 31, 2014 2013 Natural Gas (MMcf/d) Eastern - North 34.9 39.3 Eastern South 22.7 27.2 West Central 34.5 22.1 Total natural gas 92.1 88.6 Crude Oil (bbl/d) Eastern North 5 3 Eastern…
2014 Top five strategic priorities 1. Reduce Debt and Manage Downside Risk 2. Grow Edson Liquids-Rich Gas Production, Reserves, Cash Flow, Inventory and Value 3. Maximize Value of Mannville Heavy Oil 4. Maximize Cash Flow from…
1. Key priority Reduce debt and manage downside risk 14
Debt reduction 100 Million Target Set in November 2013 Closed 2014 West Central AB undeveloped land 3 million Gas over Bitumen Monetization 20.5 million East Edson JV Net Proceeds 120 million D Producing Royalty sale 50 million…
East Edson JV transaction details Sale of a 50 percent royalty interest on current production (Producing Royalty) Proceeds: 50 million Gross 50 percent royalty on existing production, less deductions for transportation Initially 6.2…
East Edson JV production profile D ec 3 1, Fixed First-out Wedge Production GORR 5.6 MMcf/d plus associated liquids until 2022 Declining at 10% per year from Jan 2023 through December 2034 85% gas / 15% NGLs (43% C5+)…
East Edson JV transaction rationale Significant cash flow growth Capital infusion allows for technically recognized reserves to become eligible for NI 51- 101 booking based on defined capital funding profile Increases Reserve-based…
Gas over Bitumen Monetization Gas over Bitumen Monetization for proceeds of 20.5 million Payment monthly equal to Crown royalty credit earned on GOB financial solution for shut-in Legend property 0.5 x [(Shut-in Deemed Production of…
Balance sheet Net Bank Debt: 29 million Borrowing base on credit facility 120 million (100 million pro forma Notes issuance) Next semi-annual redetermination October 2014 30 million of funds restricted for 2015 Perpetual East Edson…
2014 Capital Spending Total Capital: 87 million + 85 million East Edson JV Q1 2014 Q2-Q4 2014 Total Wells Capital Wells Capital Wells Capital (1) 2 gross 10 gross 12 gross West Edson 13 MM 33 MM 46 MM (1.0 net) (5 net) (6.0…
2014 funds flow 2014 Capital Spending of 172 million Production of 20,100 boe/d (19,500 boe/d net of East Edson JV Royalty) 2014 Funds Flow AECO (/GJ) 4.00 4.50 5.00 5.50 6.00 85 83 87 90 94 98 WTI (US/BBL) 90 86 89 93 97…
2015 funds flow 2015 Capital Spending of 120 million Production of 24,500 boe/d (23,400 boe/d net of East Edson JV Royalty) 2015 Funds Flow AECO (/GJ) 4.00 4.50 5.00 5.50 6.00 85 108 129 151 172 193 WTI (US/BBL) 90 114 135…
Projected borrowing base and credit Q2 Pro Q2 Pro H2 2014 Proforma 2015 Proforma Q1 Q2 forma East forma High ( Millions) East Edson JV and East Edson JV 2014 2014 Edson JV Yield HY and HY July 16 Financing East Edson Escrow Funds…
2. Key Priority Grow Edson liquids-rich gas production, reserves, cash flow, inventory and value 28
Edson Wilrich LiquidsRich Gas To Rosevear Plant (15% WI) Sales Pipeline to Alliance Constructed 2013 Pipeline To Edson Deep Cut Plant 10-3 Gas Plant 1-34 Gas Plant (2015 Construction) 16-10 Compressor Capacity 60 MMcf/d…
Edson Wilrich Type Curves Three type curves define reserves and inventory 30
Wilrich value potential West Edson Projected Economics per Drilling Location Capital (D,C & T) 6.4 MM gross NPV 10 % 10.7 MM BT gross ROR 168% BT F&D 6.83/boe Capital Efficiency 8,300 boe/d (first 12 months) Payout 0.8…
East Edson JV type curve economics Projected Economics per South West Projected Economics per North East Drilling Location (McDaniel April 2014 Price) Drilling Location (McDaniel April 2014 Price) Capital (D,C & T) 5.1 MM Capital (D,C &…
Greater Edson liquids-rich gas play performance 40% net production 12,000 14,000 growth expected in 2014 Driven by West Edson capacity 12,000 expansion in 2014 10,000 Flatproduction forecast at Edson net to Perpetual as Royalty…
3. Key Priority Maximize value of Mannville heavy oil 34
Eastern Alberta Conventional heavy oil Discovered 14 Mannville pools 8 Lloyd, 5 Sparky, 1 Basal Quartz 200 MMbbl Original Oil in Place 10 MMbbl 5% recovery factor Current Production 3,100 bbl/d Low cost HZ development 1.1 MM…
Upper Mannville A pool Lloyd Channel OOIP = 30.5 MMbbl Cumulative production to date 1.0 MMbbl ( 3% RF) Booked Reserves (year end 2013) 1.4 MMbbl (7% RF) 24 wells drilled to date 4 additional multi-laterals in inventory 100m…
Mannville heavy oil value potential Projected Economics Per Well Assumptions Lloyd Sparky (McDaniel Year End 2013) Capital (D,C & T) 1.2 MM 1.2 MM 68.90/bbl Wellhead heavy price 2014 Pricing WTI US95/bbl, WCS US23.5/bbl, offset…
Waterflood and enhanced oil recovery Working Interest 66.7% Mannville I2I OOIP: 53 MMbbl Waterflood Pilot Pool Cum Prodn + McDaniel P+P: 1.7 MMbbl (3.1% recovery) 17 Horizontals to date (100 m spacing) Sparky Mid Type Log 3…
Waterflood and enhanced oil recovery scope Select Pools OOIP Cumulative P+P Implied Expected Potential with production Reserves Recovery Primary Secondary to YE 2013 booked at Factor Recovery Recovery and EOR YE 2013 (5-8% (10-15%)…
Mannville heavy oil play performance 60 180 50 Transitioning from Cumulative Capital 130 growth to Capital (MM) 40 (MM) 30 80 sustaining 20 30 production in 2014 10 Drilling capital reduced 0 -20 2009 2010…
4. Key Priority Maximize cash flow from shallow gas 41
Conventional shallow gas East Central and Northeast Alberta Cretaceous and Devonian sweet shallow gas Current production: 60 - 65 MMcf/d Belly River Base declines < 15% Multiple stacked zones and play types Viking Extensive…
5. Key Priority Advance and broaden portfolio of high impact opportunities with risk-managed investment Viking/Colorado Shallow Shale Gas Bitumen Exploration 43
Viking/Colorado shallow shale gas Viking Belly River Play Fairway Booked Reserves Cardium/ Colorado Wells Perpetual Lands 12 Bcf PNP booked in recompletions Viking Proved Undeveloped Historical 2P reserves of 100+ Bcf Viking…
Colorado technical advancement Colorado group free gas in place Total Resource in Place 130 Tcf OGIP estimated to average 16 Bcf/section Proven recovery from Cardium equivalent Potential in up to 6 zones within 290m shale group…
Bitumen 527net sections (329,000 net acres) of oil sand leases Variousformation targets and ultimate recovery methods 7potential project areas with varying potential Over 3 Billion bbls OBIP independently recognized at Liege…
Bitumen Panny Bluesky Low rate cold flow without 8 m Bitumen 10 m Bitumen solvent or thermal assistance Average pay thickness 11 m Low viscosity bitumen 15,000 cp 25oC 50,000 cp at 11oC reservoir temp Highly mobile at 70oC…
LEAD process technology pilot Low pressure electro-thermally assisted drive Pilot planned for 2015 Approvals pending 18.2 million expected capital and operating costs over pilot life (3 years) IETP funding (30%) 5.5 million Modelled…
Bitumen Liege carbonates AOC Shell Excellent reservoir quality vuggy porosity in Grosmont 3 Grosmont carbonate / Leduc OV wells drilled Combined with legacy gas wells to evaluate and map resource Stacking of 3 Grosmont…
Investment Thesis
Strong annual growth forecast 2014 Key diversifying plays production growth of 22% Growth focused at West Edson Disposition of royalty on developed lands in exchange for 50 million and 70 MM farm-in funding Funds flow and funds flow…
Sum of the parts NAV Per Share (1) WGS LP valued at prorata 2013 buyback acquisition value in all scenarios Trading at
Future growth and value creation 2016 - 2020 Edson expansion for additional inventory development West and/or East Edson additional downspacing LIQUIDS-RICH Development of secondary targets including Belly River, Cardium, Second…
Future production growth potential Illustrative Production Inventory captured and risk assessment on track for future production growth 55 Growth trajectory depends on commodity prices, capital and play performance
FOR ADDITIONAL INFORMATION Additional Susan L. Riddell Rose Information President & CEO Cameron R. Sebastian Vice President, Finance & CFO 3200, 605 5 Avenue SW Calgary, Alberta Canada T2P 3H5 800.811.5522 TOLL FREE 403.269.4400 PHONE…
Appendix
Diversification Warwick Gas Storage 40 Bcf Storage Reservoir Commercial Park and Loan Delta Pressure to 47 Bcf business 10 Bcf base reserves cushion gas in place 30 to 50 year life Up to 25 Bcf potential working Grass Roots…
Commodity price risk management strategy Enhance or protect funds flow and balance sheet Enhance or protect the economics of an acquisition Enhance or protect capital program economics Capitalize on perceived market anomalies 200…
Gas price risk management Volumes Fixed Price Futures Price(1) % of 2014 Type of Contract Term (GJ/d) (/GJ) (/GJ) Natural Gas Production(2) AECO Fixed Price Jul 2014 7,914 4.32 4.38 6% Financial AECO Fixed Price Jul Oct 2014…
Oil price risk management Fixed or Floor Ceiling Price Futures % of 2014 Type of Volumes Term Price (/GJ) Price(1) Oil & NGL Contract (bbl/d) (/bbl) (/bbl) (/bbl) Production(2) WTI collars Jul Dec 2014 1,500 US 86.67 US 95.15 US…
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