CORPORATE PRESENTATION - August 14, 2019 - Criterion Research
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FORWARD-LOOKING INFORMATION: Certain statements contained in this presentation constitute forward-looking statements and information (collectively referred to as “forward-looking information”) within the meaning of applicable Canadian securities laws. Such forward-looking information relates to future events or Birchcliff’s future performance. All information other than historical fact may be forward-looking information. Such forward-looking information is often, but not always, identified by the use of words such as “seek”, “plan”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate”, “estimated”, “forecast”, “potential”, “proposed”, “predict”, “budget”, “continue”, “targeting”, “may”, “will”, “could”, “might”, “should” and other similar words and expressions. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on such forward-looking statements. Although Birchcliff believes that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct and Birchcliff makes no representation that actual results achieved will be the same in whole or in part as those set out in the forward-looking statements. In particular, this presentation contains forward-looking statements relating to the following: Birchcliff’s plans and other aspects of its anticipated future financial performance, operations, focus, objectives, strategies, opportunities, priorities and goals; Birchcliff’s expectation that it would have achieved the mid-point of its previous 2019 annual average production guidance range of 76,000 to 78,000 boe/d; Birchcliff’s guidance regarding its 2019 Capital Program and its proposed exploration and development activities and the timing thereof (including: estimates of capital expenditures and capital allocation; the number and types of wells to be drilled and brought on production and the timing thereof; and the focus of, the objectives of and the anticipated results from and the expected benefits of the expanded 2019 Capital Program); Birchcliff’s market diversification and hedging activities, strategies and use of risk management techniques (including statements that Birchcliff maintains an ongoing hedging program and engages in various risk management activities to reduce its exposure to volatility in commodity prices and utilizes various financial instruments and physical delivery contracts); Birchcliff’s marketing and transportation arrangements (including that effective November 1, 2019, Birchcliff’s level of firm service on TCPL’s Canadian Mainline to Dawn will increase by 25,000 GJ/d, bringing the total level of firm service to 175,000 GJ/d); the performance and other characteristics of Birchcliff’s oil and natural gas properties and expected results from its assets (including statements regarding the potential or prospectivity of Birchcliff’s properties); that Birchcliff is focused on continuous improvements in all aspects of its business and the use of, and expected benefits from, new technologies; statements regarding the planned inlet liquids-handling facility at the Pouce Coupe Gas Plant (including the capacity of the facility, the anticipated timing for the completion of the facility and that the facility will give Birchcliff the ability to grow its condensate production to 10,000 bbls/d in Pouce Coupe); that Birchcliff’s capital expenditures in 2019 are still expected to be significantly less than its forecast of 2019 adjusted funds flow; that Birchcliff will generate significant free funds flow in 2019; that Birchcliff is committed to maintaining financial flexibility and a strong balance sheet and will allocate remaining free funds flow based on what Birchcliff believes will provide the most value to its shareholders; that effectively 88% of Birchcliff’s total revenue in 2019, representing 74% of its total production, is expected to be based on non-AECO benchmark prices; Birchcliff’s expectation that its natural gas market diversification together with its financial risk management contracts will help to further strengthen Birchcliff’s balance sheet and protect its cash flow and project economics; and the expected impact of changes in commodity prices and the CDN/US exchange rate on Birchcliff’s estimate of adjusted funds flow); and Birchcliff’s views on future commodity prices, including that higher natural gas prices are typically seen at AECO in the winter. With respect to the forward-looking statements contained in this presentation, assumptions have been made regarding, among other things: prevailing and future commodity prices and differentials, currency exchange rates, interest rates, inflation rates, royalty rates and tax rates; the state of the economy, financial markets and the exploration, development and production business; the political environment in which Birchcliff operates; the regulatory framework regarding royalties, taxes and environmental laws; the Corporation’s ability to comply with existing and future environmental, climate change and other laws; future cash flow, debt and dividend levels; future operating, transportation, marketing, G&A and other expenses; Birchcliff’s ability to access capital and obtain financing on acceptable terms; the timing and amount of capital expenditures and the sources of funding for capital expenditures and other activities; the sufficiency of budgeted capital expenditures to carry out planned operations; the successful and timely implementation of capital projects; results of future operations; Birchcliff’s ability to continue to develop its assets and obtain the anticipated benefits therefrom; the performance of existing and future wells, well production rates and well decline rates; success rates for future drilling; reserves and resource volumes and Birchcliff’s ability to replace and expand reserves through acquisition, development or exploration; the impact of competition on Birchcliff; the availability of, demand for and cost of labour, services and materials; the ability to obtain any necessary regulatory or other approvals in a timely manner; the satisfaction by third parties of their obligations to Birchcliff; the ability of Birchcliff to secure adequate processing and transportation for its products; Birchcliff’s ability to market oil and gas; the availability of hedges on terms acceptable to Birchcliff; and natural gas market exposure. In addition to the foregoing assumptions, Birchcliff has made the following assumptions with respect to certain forward-looking statements contained in this presentation: • With respect to estimates of 2019 capital expenditures and Birchcliff’s spending plans for 2019, such estimates and plans assume that the expanded 2019 Capital Program will be carried out as currently contemplated. • Birchcliff makes acquisitions and dispositions in the ordinary course of business. Any acquisitions and dispositions completed could have an impact on Birchcliff’s capital expenditures, production, adjusted funds flow, free funds flow, costs and total debt, which impact could be material. • The amount and allocation of capital expenditures for exploration and development activities by area and the number and types of wells to be drilled and brought on production is dependent upon results achieved and is subject to review and modification by management on an ongoing basis throughout the year. Actual spending may vary due to a variety of factors, including commodity prices, economic conditions, results of operations and costs of labour, services and materials. Birchcliff will monitor economic conditions and commodity prices and, where deemed prudent, will adjust its capital program to respond to changes in commodity prices and other material changes in the assumptions underlying such program. • With respect to Birchcliff’s production guidance for 2019, such guidance assumes that: the expanded 2019 Capital Program will be carried out as currently contemplated; no unexpected outages occur in the infrastructure that Birchcliff relies on to produce its wells and that any transportation service curtailments or unplanned outages that occur will be short in duration or otherwise insignificant; the construction of new infrastructure meets timing and operational expectations; existing wells continue to meet production expectations; and future wells scheduled to come on production meet timing, production and capital expenditure expectations. Birchcliff’s production guidance may be affected by acquisition and disposition activity and acquisitions and dispositions could occur that may impact expected production. • With respect to Birchcliff’s estimates of adjusted and free funds flow for 2019 and statements that Birchcliff will generate significant free funds flow during 2019, such estimates and statements assume that: the expanded 2019 Capital Program will be carried out as currently contemplated and the level of capital spending for 2019 set forth herein will be achieved; and the production targets, commodity mix, natural gas market exposure and commodity price assumptions set forth herein are met. In addition, Birchcliff’s estimate of adjusted funds flow takes into account the settlement of financial and commodity risk management contracts outstanding as at August 13, 2019. • With respect to statements of future wells to be drilled and brought on production, the key assumptions are: the continuing validity of the geological and other technical interpretations performed by Birchcliff’s technical staff, which indicate that commercially economic volumes can be recovered from Birchcliff’s lands as a result of drilling future wells; and that commodity prices and general economic conditions will warrant proceeding with the drilling of such wells. • With respect to statements regarding the future potential and prospectivity of properties and assets, such statements assume: the continuing validity of the geological and other technical interpretations determined by Birchcliff’s technical staff with respect to such properties; and that, over the long-term, commodity prices and general economic conditions will warrant proceeding with the exploration and development of such properties. Birchcliff’s actual results, performance or achievements could differ materially from those anticipated in the forward-looking statements as a result of both known and unknown risks and uncertainties including, but not limited to: general economic, market and business conditions which will, among other things, impact the demand for and market prices of Birchcliff’s products and Birchcliff’s access to capital; volatility of crude oil and natural gas prices; fluctuations in currency and interest rates; stock market volatility; loss of market demand; an inability to access sufficient capital from internal and external sources; fluctuations in the costs of borrowing; operational risks and liabilities inherent in oil and natural gas operations; the occurrence of unexpected events such as fires, equipment failures and other similar events affecting Birchcliff or other parties whose operations or assets directly or indirectly affect Birchcliff; uncertainty that development activities in connection with its assets will be economical; uncertainties associated with estimating oil and natural gas reserves and resources; the accuracy of oil and natural gas reserves estimates and estimated production levels; geological, technical, drilling, construction and processing problems; uncertainty of geological and technical data; horizontal drilling and completions techniques and the failure of drilling results to meet expectations for reserves or production; uncertainties related to Birchcliff’s future potential drilling locations; potential delays or changes in plans with respect to exploration or development projects or capital expenditures, including delays in the completion of gas plants and other facilities; the accuracy of cost estimates and variances in Birchcliff’s actual costs and economic returns from those anticipated; incorrect assessments of the value of acquisitions and exploration and development programs; changes in tax laws, Crown royalty rates, environmental laws, carbon tax regimes, incentive programs and other regulations that affect the oil and natural gas industry and other actions by government authorities; an inability of the Corporation to comply with existing and future environmental, climate change and other laws; the cost of compliance with current and future environmental laws; political uncertainty and uncertainty associated with government policy changes; uncertainties and risks associated with pipeline restrictions and outages to third-party infrastructure that could cause disruptions to production; the lack of available pipeline capacity and an inability to secure adequate processing and transportation for Birchcliff’s products; an inability to satisfy obligations under Birchcliff’s firm marketing and transportation arrangements or other agreements; shortages in equipment and skilled personnel; the absence or loss of key employees; competition for, among other things, capital, acquisitions of reserves, undeveloped lands, equipment and skilled personnel; management of Birchcliff’s growth; environmental risks, claims and liabilities; uncertainties associated with the outcome of litigation or other proceedings involving Birchcliff; unforeseen title defects; uncertainties associated with credit facilities and counterparty credit risk; non-performance or default by counterparties; risks associated with Birchcliff’s risk management program and the risk that hedges on terms acceptable to Birchcliff may not be available; risks associated with the declaration and payment of future dividends, including the discretion of Birchcliff’s board of directors to declare dividends and change the Corporation’s dividend policy; the failure to obtain any required approvals in a timely manner or at all; the failure to realize the anticipated benefits of acquisitions and dispositions and the risk of unforeseen difficulties in integrating acquired assets into Birchcliff’s operations; negative public perception of the oil and natural gas industry and fossil fuels, including transportation and hydraulic fracturing involving fossil fuels; the Corporation’s reliance on hydraulic fracturing; the availability of insurance and the risk that certain losses may not be insured; and breaches or failure of information systems and security (including risks associated with cyber-attacks). Readers are cautioned that the foregoing lists of factors are not exhaustive. Additional information on these and other risk factors that could affect results of operations, financial performance or financial results are included in Birchcliff’s most recent Annual Information Form and in other reports filed with Canadian securities regulatory authorities. This presentation contains information that may constitute future-orientated financial information or financial outlook information (collectively, “FOFI”) about Birchcliff’s prospective results of operations including, without limitation, adjusted funds flow and free funds flow, all of which is subject to the same assumptions, risk factors, limitations and qualifications as set forth above. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise or inaccurate and, as such, undue reliance should not be placed on FOFI. Birchcliff’s actual results, performance and achievements could differ materially from those expressed in, or implied by, FOFI. Birchcliff has included FOFI in order to provide readers with a more complete perspective on Birchcliff’s future operations and management’s current expectations relating to Birchcliff’s future performance. Readers are cautioned that such information may not be appropriate for other purposes. FOFI contained herein was made as of the date of this presentation. Unless required by applicable laws, Birchcliff does not undertake any obligation to publicly update or revise any FOFI statements, whether as a result of new information, future events or otherwise. Management has included the above summary of assumptions and risks related to forward-looking statements provided in this presentation in order to provide readers with a more complete perspective on Birchcliff’s future operations and management’s current expectations relating to Birchcliff’s future performance. Readers are cautioned that this information may not be appropriate for other purposes. The forward-looking statements contained in this presentation are expressly qualified by the foregoing cautionary statements. The forward-looking statements contained herein are made as of the date of this presentation. Unless required by applicable laws, Birchcliff does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. SELECTED DEFINITIONS: “2018 Deloitte Reserves Report” means the evaluation by Deloitte LLP effective December 31, 2018 as contained in the report of Deloitte dated February 13, 2019. “2018 McDaniel Reserves Report” means evaluation by McDaniel with an effective date of December 31, 2018 as contained in the report of McDaniel dated February 13, 2019. “2018 Consolidated Reserves Report” means the consolidated report of Deloitte with an effective date of December 31, 2018 prepared by consolidating the properties evaluated by Deloitte in the 2018 Deloitte Reserves Report with the properties evaluated by McDaniel in the 2018 McDaniel Reserves Report, in each case using Deloitte’s forecast price and cost assumptions effective December 31, 2018 “Deloitte” means Deloitte LLP, independent qualified reserves evaluator to the Corporation. “McDaniel” means McDaniel & Associates Consultants Ltd., independent qualified reserves evaluator to the Corporation. “PC Gas Plant” refers to Birchcliff’s 100% owned and operated natural gas plant located in the Pouce Coupe area of Alberta. August 14, 2019 2
Corporate Snapshot & Select Guidance Q2 2019 average production 78,453 boe/d Q2 2019 adjusted funds flow (millions / per share) $74.0 / $0.28 per share Estimated 2019 annual average production 77,000 – 79,000 boe/d % oil and NGL 22% Estimated 2019 adjusted funds flow (millions) (1) $335 Estimated 2019 F&D capital expenditures (millions) $242 Estimated 2019 free funds flow (millions) (2) $93 Total debt as at June 30, 2019 (millions) (3) $654.7 Credit facilities limit as at June 30, 2019 (billions) $1.0 Common shares (basic) as at June 30, 2019 (millions) 265.9 Market capitalization as at August 13, 2019 (billions) - $2.29/sh $0.7 Enterprise value as at August 13, 2019 (billions) - $2.29/sh (4) $1.4 Montney/Doig land position as at December 31, 2018 (gross sections) 367.4 Montney/Doig potential net future horizontal drilling locations as at December 31, 2018 (5) 6,365.8 Gross proved developed producing reserves as at December 31, 2018 (6) 203,631 Mboe Gross proved plus probable reserves as at December 31, 2018 (6) 1,002,070 Mboe PDP Adjusted Funds Flow Recycle Ratio (including change in FDC) – 2018 (6) 1.3x TSX 300 BIR, BIR.PR.A, BIR.PR.C Quarterly dividend to common shareholders $0.02625/sh (1) 2019 commodity assumptions: WTI price of US$57.50/bbl; WTI-MSW differential of $7.50; AECO price of $1.50/GJ; Dawn price of $3.05/GJ; NYMEX-Henry Hub price of US$2.70/MMBtu; and 1.32 USD/CAD FX. (2) Free funds flow is calculated as adjusted funds flow less F&D capital expenditures and is prior to administrative assets, acquisitions, dispositions, dividend payments and abandonment and reclamation obligations. See “Non-GAAP Measures”. Free funds flow may be used by Birchcliff to reduce debt, pursue additional growth, pay dividends and/or to fund share buybacks under its normal course issuer bid. Any prolonged or significant decrease in commodity prices may leave insufficient free funds flow for debt reduction or the other foregoing purposes. (3) Total debt excludes capital securities of $49.7 million related to Series C preferred shares. (4) Enterprise value is calculated by multiplying the closing price of the common shares on the TSX by the total number of common shares outstanding and adding total debt, including the face value of the Series A Preferred Shares and Series C Preferred Shares. (5) See “Advisories – Drilling Locations”. (6) See appendix at the end of this presentation for disclosures on oil & gas reserves and related metrics August 14, 2019 4
Q2 2019 HIGHLIGHTS • Quarterly average production of 78,453 boe/d, a 3% increase from 76,296 boe/d in Q2 2018 • Quarterly adjusted funds flow of $74.0 million ($0.28/basic common share), a 2% increase from $72.4 million ($0.27/basic common share) in Q2 2018 • Record low quarterly operating costs of $3.17/boe, a 6% decrease from $3.36/boe in Q2 2018 • Drilled 5 (5.0 net) wells in Q2 2019, consisting of 3 (3.0 net) Montney/Doig horizontal oil wells in the Gordondale area and 2 (2.0 net) Montney/Doig horizontal condensate-rich natural gas wells in the Pouce Coupe area • Two new pads (a six well pad in Pouce Coupe and a five well pad in Gordondale) produced strong aggregate average IP rates of 6,350 boe/d and 4,446 boe/d, respectively, during the initial 30 days of production • As a result of Birchcliff’s achievements year-to-date and continued strong quarterly results and balance sheet, subsequent to Q2/19, Birchcliff expanded its 2019 Capital Program to include the drilling of an additional 7 (7.0 net) horizontal wells in 2019 which are targeting condensate-rich natural gas in Pouce Coupe and oil in Gordondale. It is anticipated that all of these wells will be brought on production by November 1, 2019 • As a result of the strong results and expanded Capital Program, Birchcliff has increased its 2019 Guidance to 77,000-79,000 boe/d (previously 76,000-78,000 boe/d) August 14, 2019 5
INVESTMENT HIGHLIGHTS • Focused assets in the Peace River Arch Area of Alberta on the Montney/Doig Resource Play • Essentially 100% working interest; 99% of production is operated • Large, contiguous undeveloped land base with an average 89% W.I. • Significant control of infrastructure including the 100% owned and operated 340 MMcf/d Pouce Coupe Gas Plant (“PC Gas Plant”) • Top tier cost structure driving peer leading profitability • Low decline production base (est. 20% in 2019) • 2P reserve life index (RLI)(1)(2) of approximately 35.6 years as at December 31, 2018 • 385 (380.6 net) Montney/Doig horizontal wells drilled as at December 31, 2018 • 6,365.8 net future potential Montney/Doig horizontal drilling locations as at December 31, 2018(3) (1) See appendix at the end of this presentation for disclosures on oil & gas reserves and related metrics. (2) Reserves life index is calculated by dividing reserves estimated by Deloitte at December 31, 2018 by 77,000 boe/d. (3) See “Advisories – Drilling Locations”. August 14, 2019 6
KEYS TO SUCCESS Executives with proven track record, continuity since inception and significant ownership Management Highly experienced Management Team with excellent technical knowledge and a long history with the company 385 (380.6 net) Montney/Doig horizontal wells drilled to December 31, 2018 all utilizing multi-stage Operational fracture stimulated technology Execution Construction of the 340 MMcf/d PC Gas Plant in six separate phases on time and on budget Own, control or have access to infrastructure and operate 99% of production Significant in-house technical expertise and experience on the Peace River Arch Technical Supports continual improvements in high grading portfolio for the decision making process Expertise Continued improvements in estimated reserve recovery per well, drilling & completion practices and operating costs Scale & Consistent, repeatable, predictable growth and results Repeatability 6,365.8 potential Montney/Doig horizontal locations and as at December 31, 2018(1) Full cycle profitability with top tier F&D costs and netbacks through 2018 and prior years Financial Accurate and reliable real time forecasts supported by a detailed capital management and production Execution forecasting process which is fully integrated into our financial reporting systems (1) See “Advisories – Drilling Locations” August 14, 2019 8
PRODUCTION HISTORY 90,000 77,000 - 79,000 80,000 77,096 Compound per-share production growth of 12% per year since 2005. 70,000 67,963 (14% since PC Gas Plant Phase I Average Production (boe/d) Completion) 60,000 49,236 50,000 38,950 40,000 33,734 30,000 25,829 22,802 20,000 18,136 13,079 10,148 11,216 10,000 5,368 6,711 2,793 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E August 14, 2019 9
CORPORATE RESERVES 1,200,000 $7,000 PDP - Reserves 1,100,000 TP - Reserves 2P - Reserves $6,000 1,000,000 PDP - NPV10 On a per share basis PDP, 1P and 2P 900,000 TP - NPV10 reserves have increased at a compound $5,000 2P - NPV10 annual growth rate of 13%, 21% and 20% 800,000 per year since 2005, respectively NPV10 - Btax ($MM) Reserves (Mboe) 700,000 $4,000 600,000 500,000 $3,000 400,000 $2,000 300,000 200,000 $1,000 100,000 0 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (1) See appendix at the end of this presentation for disclosures on oil & gas reserves and related metrics. August 14, 2019 10
PROVEN TRACK RECORD AS A LOW COST PRODUCER 5 Year Profitability Breakdown: 2014 2015 2016 2017 2018 Average Average AECO (CAD$/GJ) $4.27 $2.55 $2.05 $2.04 $1.42 $2.47 Average WTI (USD$/bbl) $92.99 $48.80 $43.32 $50.95 $64.77 $60.17 P&NG Revenue ($/Mcfe) (1) $6.40 $3.72 $3.12 $3.74 $3.68 $4.13 PDP F&D ($/Mcfe)(2) ($2.23) ($1.35) ($1.07) ($1.05) ($1.46) ($1.43) Total Cash Costs(3) ($/Mcfe) ($2.34) ($1.83) ($1.77) ($1.78) ($1.74) ($1.89) Profit ($/Mcfe)(4)(5) $1.83 $0.53 $0.29 $0.91 $0.48 $0.81 Profit Margin (%)(4) 29% 14% 9% 24% 13% 18% (1) Excludes the effects of hedges using financial instruments but includes the effects of fixed price physical delivery contracts and higher average realized pricing for a portion of natural gas sold at Dawn. (2) Cost to find and develop proved developed producing (PDP) reserves based on finding and development (“F&D”) costs. (3) Comprised of royalty, operating, transportation and marketing, general and administrative and interest expenses. (4) Profit measures the amount, if any, during the relevant period by which revenues resulting from production exceed the sum of: (i) PDP F&D (i.e. the costs of replacing production excluding acquisitions and dispositions), (ii) royalty, operating and transportation and marketing expenses and, in the case of Birchcliff at the business-entity level, (iii) general and administrative expense, and (iv) interest expense. This measure is not intended to represent net income or net income to common shareholders as presented in accordance with IFRS. Profit margin is calculated by dividing profit before non-cash items for the period by petroleum and natural gas revenue for the period. We believe that profit and profit margin are useful measures as they assist management and investors in assessing our ability during a period of declining commodity prices to bear all of our total cash costs and the costs of replacing our production during the relevant period. See “Non- GAAP Measures” in this presentation. (5) Numbers may not add due to rounding August 14, 2019 11
PROVEN TRACK RECORD AS A LOW COST FINDER $16 PDP F&D 1P F&D 2P F&D 1.8x 1.8x Adjusted Funds Flow $12 1.9x netback recycle F&D Cost ($/boe) ratios $8 1.3x 1.4x 1.6x 1.6x 1.8x 1.3x 2.0x 2.1x $4 2.4x 1.7x 1.8x 8.8x 4.7x 7.3x 17.4x $0 2014 2015 2016 2017 2018 5 Yr Wtd. Avg Corporate F&D Costs (incl. FDC) & Cash Flow Recycle Ratios 2014 2015 2016 2017 2018 5 Yr Wtd. Avg PDP F&D ($/boe) $13.40 $8.11 $6.42 $6.29 $8.75 $8.59 1P F&D ($/boe) $13.51 $2.41 $4.89 $8.14 $0.64 $5.92 2P F&D ($/boe) $12.57 $1.55 $4.43 $7.27 $1.27 $5.42 PDP Recycle Ratio 1.8x 1.4x 1.3x 2.0x 1.3x 1.6x 1P Recycle Ratio 1.8x 4.7x 1.7x 1.6x 17.4x 2.1x 2P Recycle Ratio 1.9x 7.3x 1.8x 1.8x 8.8x 2.4x August 14, 2019 12
CORPORATE RESPONSIBILITY • Environmental, Social & Governance • Waste heat recovery units on phases V & VI of the PC Gas Plant and additional emission reduction initiatives take the equivalent of >5,000 cars off the road annually • Peer-leading water storage and infrastructure has taken the equivalent of over 20,000 large water handling trucks off the road since 2017 • Birchcliff wellsites are designed to have zero vented emissions, taking the equivalent of 142 cars per wellsite off the road annually • Birchcliff recovers 99.1% of our permitted flare volumes during completions, this takes the equivalent of >3,000 cars off the road annually • Birchcliff exceeds industry safety standards by conducting an Emergency Response Preparedness exercise every year, compared the requirement of every 3 years • Regulatory Compliance • Birchcliff has an LMR rating of 18.8 (as of August 3, 2019) compared to the industry average of 4.8, highlighting our success in addressing abandonment and reclamation obligations August 14, 2019 13
CORPORATE RESPONSIBILITY • Community Involvement • Over $3 million donated to more than 100 local community groups and organizations in the last 3 years • Continued partnerships with local communities through educational, cultural, and economic development initiatives • Annual open-house to meet with and receive feedback from local land owners • Strong supporter of STARS Air Ambulance and the United Way of Calgary, surpassing the $1 million mark in donations to both organizations • Significant Indigenous engagement • Employees • Birchcliff has a strong record of success built on the belief that outstanding people combined with a great culture creates a winning environment • Strong internal mentoring program encourages senior employees to develop our junior staff • Employee education funds and scholarships promote continued knowledge enhancement View our 2018 Corporate Responsibility Report at birchcliffenergy.com August 14, 2019 14
LOOKING FORWARD 2019 Plans & Beyond
EXPANDED 2019 CAPITAL PROGRAM THEMES • As a result of Birchcliff’s achievements year-to-date and its strong quarterly results and balance sheet, Birchcliff has expanded the 2019 Capital Program to include the drilling of an additional 7 (7.0 net) horizontal wells in 2019 which are targeting condensate-rich natural gas in Pouce Coupe and oil in Gordondale • It is anticipated that all of these wells will be brought on production by November 1, 2019 • The expanded 2019 F&D capital program of $242 MM includes drilling a total of 24 (24.0 net) wells and the completion and bringing on production of 33 (33.0 net) wells • Birchcliff continues to target its total capital expenditures to be less than its adjusted funds flow in 2019. Free funds flow is estimated to be $93 MM in 2019(1)(2) • 2019 annual average production guidance is for 77,000 to 79,000 boe/d (1) 2019 commodity assumptions: WTI price of US$57.50/bbl; WTI-MSW differential of $7.50; AECO price of $1.50/GJ; Dawn price of $3.05/GJ; NYMEX-Henry Hub price of US$2.70/MMBtu; and 1.32 USD/CAD FX. (2) Free funds flow is calculated as adjusted funds flow less F&D capital expenditures and is prior to administrative assets, acquisitions, dispositions, dividend payments and abandonment and reclamation obligations. See “Non-GAAP Measures”. Free funds flow may be used by Birchcliff to reduce debt, pursue additional growth, pay dividends and/or to fund share buybacks under its normal course issuer bid. Any prolonged or significant decrease in commodity prices may leave insufficient free funds flow for debt reduction or the other foregoing purposes. August 14, 2019 16
EXPANDED 2019 CAPITAL PROGRAM DETAILS 2019 F&D CAPITAL PROGRAM Drilling & Development Gross Wells Net Wells Capital ($MM) Previous(1) Revised Previous(1) Revised Previous(1) Revised (2)(3) Pouce Coupe Montney D1 Horizontal Natural Gas Wells 6 9 6.0 9.0 $34.8 $49.3 Montney D2 Horizontal Natural Gas Wells 2 2 2.0 2.0 $11.4 $12.3 Montney C Horizontal Natural Gas Wells 1 1 1.0 1.0 $6.2 $6.0 Gordondale(2)(3) Montney D2 Horizontal Oil Wells 5 7 5.0 7.0 $27.4 $38.2 Montney D1 Horizontal Oil Wells 3 5 3.0 5.0 $16.2 $26.3 (4) Additional Well Completions Capital - - - - $26.2 $25.3 Total Drilling and Development 17 24 17.0 24.0 $122.2 $157.4 (5) Facilities and Infrastructure $33.9 $35.1 Maintenance and Optimization $22.8 $24.7 Land & Seismic(6) $8.4 $8.6 Other $16.7 $16.2 2019 F&D Capital Program(7)(8) $204.0 $242.0 (1) As previously disclosed on February 13, 2019. (2) On a DCCET basis, the average well cost in 2019 is estimated to be $5.7 million for Pouce Coupe and $5.6 million (previously $5.8 million) for Gordondale. These costs can vary depending on factors such as the size of the associated multi-well pads, the costs of construction, the existence of pipelines and other infrastructure and the distance to existing or planned pipelines and other infrastructure. (3) On a DCCET basis. (4) The amount disclosed in the “Previous” column represented the estimated completion, equipping and tie-in costs associated with the 9 (9.0 net) wells that were drilled and rig released in Q4 2018, as the amount of the actual costs was not yet known when the previous 2019 Capital Program was disclosed on February 13, 2019. The amount disclosed in the “Revised” column represents the actual completion, equipping and tie-in costs associated with such wells. (5) Includes capital for the inlet liquids-handling facility at the Pouce Coupe Gas Plant and other infrastructure enhancement projects, pipeline twinning and replacements and water storage. Birchcliff plans on spending approximately $9.5 million on the associated engineering and long-lead equipment for the inlet liquids-handling facility in 2019. (6) Includes capital for crown sales and rental payments but does not include other property acquisitions and dispositions. (7) The estimate of capital set forth in the table above represents F&D capital expenditures and does not take into account the purchase price for the $39 million asset acquisition in Pouce Coupe completed by Birchcliff in Q1 2019. After taking into account the purchase price for the Acquisition, Birchcliff’s revised estimate of total capital expenditures in 2019 is $283 million. Net property acquisitions and dispositions have not been included in the table above as these amounts are generally unbudgeted. Birchcliff makes acquisitions and dispositions in the ordinary course of business and any acquisitions and dispositions completed during 2019 could have an impact on Birchcliff’s capital expenditures, production, adjusted funds flow, costs and total debt, which impact could be material. (8) Approximately 51% of Birchcliff’s F&D capital expenditures are directed towards its Pouce Coupe area (previously 50%) and approximately 45% towards its Gordondale area (previously 40%). Birchcliff expects that its F&D capital investment in 2019 will now be approximately $122 million in Pouce Coupe (previously $100 million) and $109 million in Gordondale (previously $84 million). August 14, 2019 17
2019E NATURAL GAS MARKETING AECO $1.50 $0.03 $0.34 $1.13 142,000 GJ/d 34% 38% 3% 163,000 GJ/d Dawn $3.05 13,000 GJ/d $0.15 Alliance $1.21 25% $1.69 $2.47 $0.03 $0.58 105,000 GJ/d $1.86 Note: All Birchcliff gas realizes a Henry Hub 9% heat premium(1) Dif.(6) US$2.70/MMBTU $3.38 Pricing Hub US$1.28/MMBTU $1.60 Forecasted Sales Price at Hub (C$/GJ)(2) $0.03 Hedged Differential (C$/GJ)(2) $0.34 Estimated Fuel Cost From Field to Sales Point (C$/GJ)(3) $1.41 Estimated Transportation Cost From Field to Sales Point (C$/GJ)(4) Estimated Sales Netback (C$/GJ)(5) (1) Birchcliff receives premium pricing for its natural gas production due to its high heat content. The conversion from $/Gj to $/Mcf is approximately 1.155 for Birchcliff compared to the standard 1.055 (2) Volume assumptions based on 2019 guidance; Pricing based on internal forecasts and 1.32 USD/CAD FX (3) Recorded net of extraction income (4) Recorded as transportation expense for: AECO & Dawn service. Transportation expense recorded net of realized wellhead price for Alliance service (5) Estimated sales netback = realized sales price net of transportation back to wellhead, fuel, income sources and net of any hedge differential (6) Excludes the effects of AECO basis swap financial derivative contracts - buy *Pie charts indicate % of volumes forecast to be sold at the respective hub/contract based on 2019 production guidance August 14, 2019 18
Q2/19 REALIZED NATURAL GAS PRICING – PHYSICAL SALES $3.50 In Q2/19, Birchcliff $3.32 realized a 76% premium to $3.00 AECO spot pricing for its natural gas $2.50 $2.00 $1.95 $1.94 $1.49 $/Mcf $1.50 $1.24 $1.11 $1.00 $0.79 $0.50 $0.00 BIR Corporate AECO Dawn Alliance (1) % of Q2/19 corporate = 100% 59% 37% 4% Natural gas volumes Q2/19 Sales Netback Q2/19 Sales Price (1) Birchcliff has sales agreements with a third party marketer to sell and deliver into the Alliance pipeline system for a contract price, net of transportation. Birchcliff receives a sales price net of all transportation costs. August 14, 2019 19
RISK MANAGEMENT, HEDGING & DIVERSIFICATION(3) • In 2019, approximately 66% of Birchcliff’s natural gas production will effectively be sold at prices that are not based on AECO (based on 2019 production guidance of 77,000 - 79,000 BOE/d) (1) Product Type of Contract Notional Quantity Term Fixed/Floating Price Financial Derivative Contracts – Sell Natural gas AECO basis swap 30,000 MMBtu/d Jan. 1, 2019 – Dec. 31, 2023 NYMEX Henry Hub less US$1.298/MMBtu Natural gas AECO basis swap 10,000 MMBtu/d Jan. 1, 2019 – Dec. 31, 2023 NYMEX Henry Hub less US$1.32/MMBtu Natural gas AECO basis swap 30,000 MMBtu/d Jan. 1, 2019 – Dec. 31, 2023 NYMEX Henry Hub less US$1.33/MMBtu Natural gas AECO basis swap 15,000 MMBtu/d Jan. 1, 2019 – Dec. 31, 2024 NYMEX Henry Hub less US$1.185/MMBtu Natural gas AECO basis swap 5,000 MMBtu/d Jan. 1, 2019 – Dec. 31, 2024 NYMEX Henry Hub less US$1.20/MMBtu Natural gas AECO basis swap 5,000 MMBtu/d Jan. 1, 2019 – Dec. 31, 2024 NYMEX Henry Hub less US$1.20/MMBtu Financial Derivative Contracts – Buy Natural gas AECO basis swap 10,000 MMBtu/d Jan. 1, 2019 – Mar. 31, 2019 NYMEX Henry Hub less US$3.10/MMBtu Natural gas AECO basis swap 10,000 MMBtu/d Jan. 1, 2019 – Mar. 31, 2019 NYMEX Henry Hub less US$3.15/MMBtu Natural gas AECO basis swap 30,000 MMBtu/d Jan. 1, 2019 – Mar. 31, 2019 NYMEX Henry Hub less US$3.16/MMBtu Physical Delivery Sales Contracts – Sell Natural Gas AECO basis swap 5,000 MMBtu/d Jan. 1, 2019 – Dec. 31, 2023 NYMEX Henry Hub less US$1.205/MMBtu Natural Gas Dawn(2) 5,000 MMBtu/d Jan. 1, 2019 – Mar. 31, 2019 US$5.100/MMBtu Natural Gas Dawn(2) 10,000 MMBtu/d Jan. 1, 2019 – Mar. 31, 2019 US$5.000/MMBtu Natural Gas Dawn(2) 10,000 MMBtu/d Jan. 1, 2019 – Mar. 31, 2019 US$5.005/MMBtu (2) Natural Gas Dawn 10,000 MMBtu/d Jan. 1, 2019 – Mar. 31, 2019 US$5.020/MMBtu Natural Gas Dawn(2) 15,000 MMBtu/d Jan. 1, 2019 – Mar. 31, 2019 US$5.103/MMBtu Dawn Firm Egress – Transportation Natural Gas Dawn firm service 120,000 GJ/d Nov. 1, 2017 – Nov. 31, 2027 Natural Gas Dawn firm service 30,000 GJ/d Nov. 1, 2018 – Nov. 31, 2027 Natural Gas Dawn firm service 25,000 GJ/d Nov. 1, 2019 – Nov. 31, 2027 (1) Transactions with common terms and the same counterparty have been aggregated and presented at the weighted average price. (2) Birchcliff entered into 4-month physical natural gas Dawn sales arrangements commencing December 1, 2018. (3) Chart only includes contracts effective 2019/2020. See MD&A for full risk management program. August 14, 2019 20
INCREASING WCSB NATURAL GAS EGRESS Additional 5.2 Bcf/d coming online 2019-2024 • Intra-Alberta +1.5 Bcf/d • East Gate +1.3 Bcf/d LNG 2.0 Bcf/d Intra-AB Demand • West Gate +0.4 Bcf/d 1.5 Bcf/d • West Coast LNG +2.0 CANADA Bcf/d East Gate 1.3 Bcf/d CALGARY Total AB Demand/Egress West Gate Expansion: 0.4 Bcf/d • +5.2 Bcf/d 2019-2024 August 14, 2019 21
BORROWING BASE DETAILS • During Q2/19, Birchcliff’s syndicate of lenders completed their semi-annual review and have agreed to an extension of the maturity dates from May 10, 2021 to May 10, 2022 and to increasing the borrowing base to $1.0 billion • Birchcliff has extendible revolving credit facilities in the aggregate principal amount of $1.0 billion, which are comprised of an extendible revolving syndicated term credit facility of $900 million and an extendible revolving working capital facility of $100 million • The credit facilities contain no financial maintenance covenants • At June 30, 2019, Birchcliff’s long-term bank debt was $622.3 million, leaving $357.6 million of unutilized credit capacity after adjusting for outstanding letters of credit and unamortized interest and fees, based on the $1.0 billion of credit facilities at June 30, 2019 August 14, 2019 22
MONTNEY/DOIG RESOURCE PLAY A Significant Position in a World Class Play
MONTNEY/DOIG - A WORLD CLASS RESOURCE PLAY Resource density. Stacked resource up to 300 metres thick. Large areal extent. Extends over 50,000 square miles. Exceptional “fracability”. Low clay Birchcliff Montney/Doig content, low Poisson’s Ratio and high Young’s Modulus. Exceptional fracture stability. Fractures stay open due to very low proppant embedment. High permeability. Formation is dominated by siltstones allowing natural fluid flow. Over pressured. Indicative of high gas in place. Repeatability. Widespread “blanket” style deposit provides for more repeatable results. Source: Canadian Discovery, RBC Rundle August 14, 2019 24
MONTNEY/DOIG MINEROLOGY LEADS TO EXCELLENT “FRACABILITY” The Montney/Doig Resource Play rock type is composed of a Some other Resource Plays have a high percentage of clays high percentage of hard minerals, and a low percentage of and soft minerals. When fractured this results in the rock clays and soft minerals. When fractured this results in a breaking similar to concrete, in a simple bi-wing fracture complex fracture system similar to shattering glass. This system. This simple bi-wing fracture system can lead to less complex fracture system enhances stimulated rock volume stimulated rock volume, which in tight shale reservoirs can and allows hydrocarbons to flow at greater quantities into the lead to less effective long term hydrocarbon production rates horizontal wellbore leading to enhanced production rates and and EUR’s. EUR’s. August 14, 2019 25
BIRCHCLIFF MONTNEY/DOIG RESOURCE PLAY • The Gordondale Acquisition in 2016 added a fourth commercial development interval in the Montney D2 • Large contiguous land base with 367.4 sections prospective for the Montney/Doig as at December 31, 2018 • Birchcliff has contiguous land block at Pouce Coupe and Gordondale of approximately 206 net sections • Stacked resource in some of the thickest Montney (~300m of consistent thickness) with 6,365.8(1) net potential future horizontal locations identified • Low cost structure through ownership of PC Gas Plant & surrounding field infrastructure • Low decline production (1) See “Advisories – Drilling Locations” August 14, 2019 26
STACKED RESOURCE PROVIDES SUBSTANTIAL FUTURE UPSIDE August 14, 2019 27
MONTNEY/DOIG MULTI LAYER OPPORTUNITY 3 2 1 4 5 6 5 6 4 3 2 1 August 14, 2019 28
BIRCHCLIFF MONTNEY/DOIG INVENTORY August 14, 2019 29
FOCUSED ASSETS FOCUSED INFRASTRUCTURE POUCE COUPE GORDONDALE Key Natural Gas Processing Infrastructure Key Natural Gas Processing Infrastructure Pouce Coupe Natural Gas Plant AltaGas Gordondale 3-22-078-12W6 Sour Deep Cut Gas Plant Licensed Capacity: ~340 MMcf/d 16-31-078-11W6 Current BIR Rate: ~260 MMcf/d Licensed Capacity: ~135 MMcf/d Current BIR Rate: ~100 MMcf/d Key Wells Multi-Well Pad Key Light Oil Handling Infrastructure 14-06-079-12W6 Oil Battery Q3- 2019 02-06-079-11W6 Multi-Well Pad Capacity: ~10,000 bbl/d 10-31-078-12W6 Oil Battery Flow Splitter/Multi-Well Pad 07-29-078-11W6 06-32-078-12W6 Capacity: ~10,000 bbl/d Q2-2019 Condensate connection to Gordondale Key Compressor Stations Sour Compressor Station Key Compressor Stations 02-05-079-11W6 Capacity: ~12 MMcf/d Sour Compressor Station 16-28-079-13W6 Sour Compressor Station Capacity: ~12 MMcf/d 05-27-078-11W6 Capacity: ~32 MMcf/d Sour Compressor Station 07-25-077-12W6 Sour Compressor Station Capacity: ~25 MMcf/d 16-19-077-10W6 Capacity: ~21 MMcf/d Sour Compressor Station 02-10-077-12W6 Capacity: ~18 MMcf/d August 14, 2019 30
WATER STORAGE INFRASTRUCTURE • Birchcliff has extensive water storage infrastructure in place to support its completion operations • 920,000 m3 of water storage at 10 strategically located sites • This volume provides Birchcliff with the ability to complete over 60 wells per year August 14, 2019 31
POUCE COUPE OVERVIEW • Proven asset in development phase • Wells show high initial deliverability, low terminal decline and stable long term production • Predictable results with improving gas rates & liquids yields • 100% owned and operated • The 2019 drilling program includes 12 (12.0 net) Montney/Doig horizontal condensate-rich natural gas wells including 9 Montney D1 gas wells, 2 Montney D2 gas wells and 1 Montney C gas well • No land expiry issues August 14, 2019 32
CONTINUED NATURAL GAS RATE IMPROVEMENT Continued significant gas rates notwithstanding increased condensate production # OF WELLS ONSTREAM: 2016 – 14 2017 – 37 2018 – 15 2019 – 14 Deloitte Tier 0 Type Curve 2018 Wells choked due to PC Gas Plant being full August 14, 2019 33
CONTINUED CONDENSATE RATE IMPROVEMENT Birchcliff continues to target condensate-rich natural gas wells in Pouce Coupe, which has materially impacted the amount of liquids (primarily condensate) being produced at the Pouce Coupe Gas Plant (3,272 bbls/d in 1H/19, a 52% increase from 1H/18). # OF WELLS ONSTREAM: 2016 – 14 2017 – 37 2018 – 15 2019 – 14 August 14, 2019 34
POUCE COUPE 2019 LIQUIDS TYPE CURVE 4500 Rate of Return (%) 4000 WTI ($US/bbl) $55/bbl $60/bbl $65/bbl 3500 Sales Gas Rate (Mcf/d) $1.50/GJ 36% 41% 45% AECO $2.00/GJ 53% 58% 63% 3000 $2.50/GJ 72% 77% 83% 2500 NPV 10% ($MM) 2000 WTI ($US/bbl) $55/bbl $60/bbl $65/bbl 1500 $1.50/GJ $4.1 $4.6 $5.1 AECO $2.00/GJ $6.3 $6.8 $7.3 1000 $2.50/GJ $8.5 $9.0 $9.5 500 Payout (Years) WTI ($US/bbl) 0 $55/bbl $60/bbl $65/bbl 0 20 40 60 80 100 120 $1.50/GJ 2.5 2.3 2.1 AECO $2.00/GJ 1.9 1.7 1.6 Producing Time (Months) $2.50/GJ 1.5 1.4 1.3 Tier 0 Production Summary Tier 0 Type Curve Inputs Sales Gas C5+ Total Sales Raw Gas EUR Bcf 8.2 mcf/d bbl/d boe/d Sales EUR Mboe 1,499 IP30 3,870 90 735 Capped Rate (Sales) MMcf/d 3.9 IP90 3,870 90 735 CGR (C5+) bbl/MMcf 23.3 IP180 3,748 87 712 DCCET Capital $MM $4.70 IP360 3,230 75 614 *Assumptions: Fx 1.30 CAD/USD *All economics are before tax; reference date is January 1, 2019 August 14, 2019 35
SCIENCE & TECHNOLOGY PAD August 14, 2019 36
GORDONDALE OVERVIEW • Acquired in 2016, Gordondale consolidated a sizeable and contiguous land base within Birchcliff’s existing core area • High oil & NGLs weighting • Strategic infrastructure • Low base decline production • High quality development opportunities including the addition of a fourth commercial development interval in the Montney D2 • The 2019 drilling program includes 12 (12.0 net) horizontal oil wells including 7 Montney D2 oil wells and 5 Montney D1 oil wells August 14, 2019 37
GORDONDALE BASE PRODUCTION HISTORY Last well drilled in 2014 (on-stream Birchcliff Scheduled 40,000 2015) with peak production of Acquisition AltaGas Plant ~35,000 boe/d (~22,000 BOE/d) Turnaround 35,000 2018 AltaGas Deep Cut Plant on 2017 30,000 stream October 2012 and Montney oil pool development 2016 commenced Production (boe/d) 25,000 2015 2014 Montney oil pool 20,000 discovered in 2010 2013 15,000 Horizontal gas 2012 development in late 2000s 2011 10,000 2010 2009 5,000 2008 & Earlier 0 August 14, 2019 38
GORDONDALE 2019 D1 & D2 OIL TYPE CURVES D1 Tier 1 Type Curve D2 Tier 1 Type Curve D2 Tier 1 - Rate of Return (%) WTI ($US/bbl) 450 $55/bbl $60/bbl $65/bbl $1.50/GJ 69% 87% 106% 400 AECO $2.00/GJ 81% 99% 119% 350 $2.50/GJ 93% 113% 134% Oil Rate (bbl/d) 300 D2 Tier 1 - NPV 10% ($MM) 250 WTI ($US/bbl) $55/bbl $60/bbl $65/bbl 200 $1.50/GJ $5.2 $6.3 $7.3 AECO 150 $2.00/GJ $6.1 $7.1 $8.1 $2.50/GJ $6.9 $8.0 $8.9 100 50 D2 Tier 1 - Payout (Years) WTI ($US/bbl) 0 $55/bbl $60/bbl $65/bbl 0 20 40 60 80 100 120 $1.50/GJ 1.3 1.1 1.0 AECO $2.00/GJ 1.2 1.0 0.9 Producing Time (Months) $2.50/GJ 1.1 0.9 0.8 D2 Tier 1 - Production Summary D1 & D2 Tier 1 Type Curve Inputs Oil Sales Gas C2+ Total Sales D1 Tier 1 D2 Tier 1 bbl/d mcf/d bbl/d boe/d Raw Gas EUR Bcf 4.3 3.3 IP30 419 3,731 313 1354 Oil EUR Mbbl 279 240 IP90 328 3,115 262 1109 Sales EUR Mboe 1,175 918 IP180 259 2,568 216 902 CGR (C2+) bbl/MMcf 84.0 84.0 IP360 191 1,980 166 687 DCCET Capital $MM $5.50 $5.50 *Assumptions: Fx 1.30 CAD/USD *All economics are before tax; reference date is January 1, 2019 August 14, 2019 39
2017 LIQUIDS SUMMARY 2017 Well Rates (IP60 Avg. Per Well) BUILDING ON THE GORDONDALE ACQUISITION GORDONDALE: CRUDE OIL • Excellent Lower Montney oil inventory in D1 and D2 intervals • Engineered completions drive recovery factor improvements • EOR scheme under evaluation POUCE COUPE: CONDENSATE (C5+) • 2017 well results demonstrate condensate rich multi-zone potential with excellent economics (IP60) • Montney D1: 120-240 bbls/d • Montney D4: 180 bbls/d • Basil Doig/Upper Montney: 110-140 bbls/d • 2018 program is expected to extend condensate rich fairways and improve individual well CGRs through Engineered Completions August 14, 2019 40
2018 LIQUIDS SUMMARY 2018 Well Rates (IP60 Avg. Per Well) FURTHER REFINING OUR LIQUIDS STRATEGY GORDONDALE: CRUDE OIL • Strong Montney D2 oil and total boe test rates • Strong Montney D1 oil and total boe test rates • Further refinements of engineered completions having positive results POUCE COUPE: CONDENSATE (C5+) • Strong Montney D1 gas condensate and total boe test rates • Successfully delineating the Montney D1 condensate fairway • Montney D1 well economics attractive at current strip gas prices due to high rate gas, high value condensate POUCE COUPE: SCIENCE & TECHNOLOGY PAD • Vertical well evaluation and learnings • Exploration success Montney D2, 49 bbls/MMcf CGR • New Engineered Completion success Montney C • Continued delineation of the Montney D1 condensate fairway August 14, 2019 41
2019 LIQUIDS SUMMARY 2019 Well Rates (Rates are IP60 or noted by pad) CONTINUED PURSUIT OF INCREASED LIQUIDS GORDONDALE: CRUDE OIL • Successful delineation of the Montney D1 and D2 oil trends to the south • Significant Montney D1 and D2 results offsetting recent land acquisition • Lower GOR areas identified, which will yield higher oil recovery POUCE COUPE: CONDENSATE (C5+) • Successful delineation of the Montney D1 condensate rich trend to the south • Initial productivity was choked to manage liquids production • Step change in CGR compared to offsetting wells, utilizing Birchcliff’s most recent completion design POUCE COUPE GAS PLANT • Birchcliff has commenced the engineering and planning of a 20,000 bbls/d liquids handling hub at the PC Plant (anticipated completion in Q3/2020). This will allow Birchcliff to grow its condensate production in Pouce Coupe to 10,000 bbls/d August 14, 2019 42
ELMWORTH DEVELOPMENT • Received regulatory approval for an Second Exploration acid gas injection well in August 2016 Horizontal • Preliminary planning underway for a 100% owned and operated 40 MMcf/d natural gas processing plant; currently expected to be operational in the fall of 2022 First • Drilled two successful exploration Exploration Approved Acid Horizontal horizontal wells into the Montney D4 Gas Injection interval, both of which are expected Well to result in follow up drilling and significant future reserve additions • Will leverage over 14 years of Montney experience August 14, 2019 43
CONCEPTUAL MONTNEY/DOIG FIELD DEVELOPMENT MODEL STATUS OF MODEL CALIBRATION AND DERISKING FACIES & PETROPHYSICAL GEOLOGICAL, GEOPHYSICAL, GEOMECHANCAL HYDRAULIC FRAC & MICRO SEIS. RESERVOIR MODEL OPTIMIZED DCC & PRODUCTION BASAL DOIG / D5 T1 D4 T2 D3 D2 >T0 D1 >T0 C >T4 August 14, 2019 44
POUCE COUPE DRILLING PERFORMANCE 2018 2018 2017 2017 2016 2016 August 14, 2019 45
POUCE COUPE LOWER MONTNEY (D1) CORE AREA COMPLETION EVOLUTION Completion Parameter 2013 2014 2015 2016 2017 2018 Completion Fluid (# of Wells) X-linked/MVP (24) X-linked/MVP (37) SLW (30) SLW (14) SLW (59) SLW (28) Lateral Length (m) 1,700 1,929 1,983 2,074 2,276 2,154 Number of Stages (#) 14 17 17 19 35 39 Interfrac Spacing (m) 127 121 123 117 79 59 Technology Open Hole Ball Drop Open Hole Ball Drop Open Hole Ball Drop Open Hole Ball Drop Open Hole Ball Drop Open Hole Ball Drop Tonnage (t) 74 68 75 75 65 67 Proppant Intensity (t/m) 0.61 0.59 0.63 0.68 0.92 1.24 August 14, 2019 46
ENGINEERED COMPLETIONS FOR MONTNEY/DOIG FULL FIELD DEVELOPMENT Industry Range Birchcliff Best Practices Oil Birchcliff Best Practices Gas Liner type Openhole or Cemented Openhole or Cemented Openhole or Cemented Inter-well spacing 100 – 400 m (300 – 1,200 ft) 200 m (600 ft) 300 m (900 ft) Inter-frac spacing 20 – 150 m (60 – 450 ft) 50 – 100 m (150 – 300 ft) 50 m (150 ft) Stages 20 – 120 25 – 50 45 Proppant 0.5 – 6.0 tonne/m (335 – 4,023 lb/ft) 1.0 – 1.5 tonne/m (670 – 1,005 lb/ft) 1.0 tonne/m (670 lb/ft) Fluid CO2, N2, Hybrid, Slickwater Slickwater Slickwater Pump Rate 2 – 12 m3/min (12 – 75 b/m) 6 – 10 m3/min (37 – 62 b/m) 6 – 10 m3/min (37 – 62 b/m) Avg. Lateral Length 1,500 – 4,000 m (4,500 – 12,000 ft) 2,500 m (8,200 ft) 2,300 m (7,500 ft) Estimated DCCET $4.0 - $13.0 million $5.5 million(1) $4.7 million(2) C* - Approximately $8.0 million Approximately $7.8 million (1) Estimated by McDaniel. Based on actual costs incurred in 2018 and go forward DCCET costs. (2) Estimated by Deloitte. Up slightly compared to 2017 due to increased frac intensity in completions. August 14, 2019 47
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