Investor Presentation August 2018 - Cub Energy Inc.
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Investor Presentation August 2018
Forward Looking Statement
Certain statements included in this presentation constitute forward-looking statements or forward-looking information under applicable
securities legislation. Such forward looking statements or information are provided for the purpose of providing information about
management’s current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be
appropriate for other purposes, such as making investment decisions. Forward-looking statements or information typically contain statements
with words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “estimate”, “propose”, “project”, or similar words suggesting future outcomes
or statements. Forward-looking statements or information in this presentation include, but are not limited to, statements or information with
respect to: business strategy and objectives; and development and exploration plans. See also Risk Factors and Forward-Looking Information
disclosed in the Company’s Annual Information Form found on www.sedar.com.
Forward-looking statements or information are based on a number of factors and assumptions which may prove to be incorrect. Although the
Company believes that the expectations reflected in such forward looking statements or information are reasonable, undue reliance should not
be placed on forward-looking statements because the Company can give no assurances that such expectations will prove to be correct.
Forward-looking statements or information are based on current expectations, estimates and projections that involved a number of risks and
uncertainties which could cause actual results to differ materially from those anticipated by the Company and described in the forward-looking
statements or information. These risks and uncertainties include, among other things: the ability of management to execute its business plan;
general economic and business conditions; the risks of the gas industry and fluctuations in commodity prices; risks and uncertainties involving
geology of gas deposits; the uncertainty of development and exploration activities; the uncertainty of estimates and projections relating to
production, costs and expenses; the uncertainty of obtaining regulatory, including environmental approvals and uncertainties as to the
availability and cost of financing. The foregoing list is not exhaustive of all possible risks and uncertainties.
The forward-looking statements or information contained in this presentation are made as of the date hereof and the Company undertakes no
obligation to update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise
unless required by applicable securities laws.
This presentation is for general background information purposes only and does not constitute an offer to sell or a solicitation to buy the
securities referred to herein.
Test results are not necessarily indicative of long-term performance or of ultimate recovery. The test data contained herein is considered preliminary until
full pressure transient analysis is complete.
2
Ukraine – Recent Developments
▪ Recompleted the O-9 well to a “behind pipe
pay” zone. During a standard multi-rate test,
the zone was tested up to 2.5 MMcf/d and
was put into production at a stable rate of 1.9
MMcf/d since June. Multiple other
recompletion opportunities exist.
▪ Royalty rates were reduced from 29% to 12%
for new wells drilled after January 1, 2018 for
a period of five years.
▪ On March 1, 2018, a new law was passed that
considerably simplifies the regulatory
procedures for oil and gas exploration.
▪ Cub was opportunistic in acquiring three key
20-year production licence
3
Ukraine - Regional pricing dynamics are excellent
▪ 2018 average sales price of $7.34/Mcf and a corporate netback of $4.41/Mcfe(1)
▪ 2017 average sales price of $6.50/Mcf and a corporate netback of $4.20/Mcfe(1)
▪ Royalty rate reduced from 55% to 29% effective January 1, 2016
▪ Royalty rate reduced from 29% to 12% for new wells drilled after January 1, 2018
▪ Ukraine has one of the most energy intensive economies in the world with unmet demand
▪ Cub has 9 licenses in Ukraine representing 311,000 gross acres (142,000 net)
Ukraine Gas Price ($/mcf)
$9
$7.34
$8
$7
$6
$5
$4
$3
$2
$1
$-
Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18
(1) Average net gas price and netback for the respective periods from all fields
4
Ukraine Production
Net Production (boe/d)
977 boe/d
819 boe/d
2018 average 2017 average
5
Board of Directors
Mikhail Afendikov ▪ Founder & CEO of Gastek LLC. and former CEO of KUB-Gas
Chairman & CEO ▪ Over 20 years of experience in oil and gas, mining, shipping and financial markets
▪ Founder and partner in several resource business in Ukraine
J. Frank Mermoud ▪ President of Orpheus International
Director ▪ More than 30 years of experience in public and private international business
▪ Senior international, economic and commercial policy positions within the United
States Government
Dr.Timothy R. ▪ 30 years of petroleum experience in Canadian and international exploration,
Marchant development, production and business development
Director ▪ Prior senior executive positions with BP and Amoco
▪ Director of Vermilion Energy and Valeura Energy
John Booth ▪ Qualified lawyer (Ontario, NY and DC), 25 years experience as banker, broker
Director and fund manager in global capital markets
▪ Previously worked for firms including Merrill Lynch International, ICAP, CEDEF,
ABN AMRO Bank, World Bank and Climate Change Capital
6
Experienced In-Country Leadership
Mikhail Afendikov ▪ Founder & CEO of Gastek LLC. and former CEO of KUB-Gas
Chairman & CEO ▪ Over 20 years of experience in oil and gas, mining, shipping and financial markets
▪ Founder and partner in several resource businesses in Ukraine
Kerry Kendrick ▪ 30 years of experience as a petroleum engineer
COO ▪ Former COO of Urals Energy, an independent oil and gas producer in Russia
▪ Former General Director of Occidental’s Russian Operations
▪ Extensive experience in project management, facilities and infrastructure
Patrick McGrath ▪ Over 15 years experience, including 10 years in senior management positions, in
CFO international oil and gas and mineral exploration and development
▪ Recently CFO of Anatolia Energy, focused on shale oil development in Turkey
▪ Served as CFO of Porto Energy Corp and VP Finance Adriana Resources
Rebecca Gottsegen ▪ 20 years of legal experience representing private and public companies as inside
General Counsel, and outside counsel
Corporate Secretary & ▪ Worked in a variety of areas, including labor and employment legal compliance,
Chief Compliance Officer risk management, corporate governance, compensation, due diligence and talent
acquisition and succession planning
7Capital Structure
Capital Structure (Million)
Shares Outstanding 314.2
Stock Options 17.5
Fully Diluted Shares Outstanding 331.7
Major Shareholders % Shares (Million)
Pelicourt Ltd. (1) 39.6 124.3
Fergava Finance 14.1 44.4
(1) The CEO of Cub Energy Inc., Mikhail Afendikov, owns approximately 72.4% of Pelicourt Ltd.
8Ukraine Assets
1
3
Transcarpathian Sedimentary Basin (West) Dnieper-Donets Sedimentary Basin (East)
▪ 3 licenses 100% and 50% owned by Cub ▪ 6 licenses 35% owned by Cub
▪ 108,000 gross acres (70,500 net) ▪ 203,000 gross acres (71,000 net acres)
9Uzhgorod Field – Western Ukraine
Transcarpathian Sedimentary Basin
U Field: Asset Overview
W.I. 50% owned by Cub
U Field
Operator Joint
RK Field
Contract 20 year special production permit (expires 2036) S Field
Status No current production
Area 75,000 acres
Highlights
▪ The Company partnered with a Slovakian based company with
extensive experience in E&P
▪ The partnership included a sale of 50% ownership in Uzhgorod.
Pursuant to the agreement, the partner is to:
– Pay Cub €1.5 million (paid)
– Fund a 100 square kilometer 3D seismic survey (completed)
– Fund the drilling and tie-in of the first three wells (2019)
▪ The licence is on the border with Slovakia, Hungary and Romania.
Adjoining producing or past producing fields
Work Plan
▪ Plan is to drill up to three exploratory wells in the first half of
2019
10RK Field – Western Ukraine
Transcarpathian Sedimentary Basin
RK Field: Asset Overview
W.I. 100% owned by Cub
U Field
Operator Cub
RK Field
Contract 20 year special production permit (expires 2030) S Field
Status 2.6 MMcf/d in Q1 2016 (suspended on April 1, 2016)
Area 2,000 acres
Highlights
▪ Purchase and installation of new Nitrogen Rejection Unit
▪ Goal of resuming production in early 2019
▪ During Q2 2018, the Company began selling a nominal amount of
rich gas from a deep well to evaluate the Mesozoic formation
▪ Adjacent to producing fields in Hungary, Romania and Slovakia
11Stanivske Field – Western Ukraine
Transcarpathian Sedimentary Basin
S Field: Asset Overview
W.I. 100% owned by Cub
U Field
Operator Cub
RK Field
Contract 20 year special production permit (expires 2036) S Field
Status No current production
Area 31,000 acres
Highlights
▪ Recently granted 20 year production licence
▪ A 45 square kilometer 3D seismic survey was acquired by the
company in 2013
▪ Gas was discovered on the field in 1990 by a prior operator
Work Plan
▪ The company is currently evaluating its 2018/2019 work program
12West O Field – Eastern Ukraine
WO Field: Asset Overview West Olgovskoye
W.I. 35% owned by Cub
Operator KUB-Gas
North
Contract 20 year special production permit (expires 2035) Makeevskoye
Status No current production
Area 111,000 acres gross
111,000
Net acres Olgovskoye
Highlights
▪ The licence immediately offsets the O and NM licences
22,000 Makeevskoye
Net acres
▪ It surrounds (but does not include) the existing Druzhelyubovskoe gas/condensate field,
which has produced gas from the same zones that produce in the O and M fields.
▪ Completed 26 km of 2D seismic in 2016; Completed150 km 2D seismic survey in 2017.
Interpreting results to identify drill targets.
Work Plan
▪ 2018/2019 work plan to include 3D seismic survey and evaluate new drill targets
13M Field – Eastern Ukraine
M Field: Asset Overview
W.I. 35% owned by Cub
Operator KUB-Gas
Contract 20 year special production permit (expires 2032)
Status Producing
Area 18,000 acres gross
Highlights
▪ Upgraded processing facility brought on line and boosts throughput
capacity
Work Plan
▪ 2018 work plan is currently being evaluated and may include
recompletions, workovers or fracture stimulations.
▪ One new wells on either M or O field in 2018/2019
14O Field – Eastern Ukraine
O Field: Asset Overview
W.I. 35% owned by Cub 1
Operator KUB-Gas
1
Contract 20 year special production permit (expires 2032)
Status Producing
Area 22,000 acres gross
Highlights
▪ Recompleted the O-9 well to a “behind pipe pay” zone in Q2 2018.
During a standard multi-rate test, the zone was tested up to 2.5
MMcf/d and was put into production at a stable rate of 1.9 MMcf/d
since June. Multiple other recompletion opportunities exist.
▪ 100% success rate on five O wells prior to 2107
– All five wells tied in for commercial production
▪ Successful fracture stimulations performed in prior years
Work Plan
▪ 2018 work plan is currently being evaluated and may include
recompletions, workovers or fracture stimulations.
▪ One new wells on either M or O field in 2018/2019
15Past Hydraulic Fracturing Results
• Fracture stimulation services are available locally (Belarus providers)
• Two wells performed well after fracture stimulation (see O-4 & O-5 below)
• Performed fracture stimulation of M-22, O-11 and O-15 in 2015
• Inventory of other fracture stimulation candidates
O-4 and O-6 Before and After Frac
3500
3000
2500
2000
Mcf/d
1500
1000
500
O-4 O-5
0
Temporary
Fracs government
decrees
15O-6 Vertical Well in Ukraine - Hydraulic Frac, Single Stage, 25 Tonnes Proppant
The Blender: M-60 capable of 8 m3/min
06 Well Head
3 x 2250 bhp Belarus pump unit - 2250 bhp
17Asset Description
Field W.I. Stage Product Royalty Income Tax
Ukraine – Dneiper-Donets Basin
O 35% Production Gas 29%-12% 18%
M 35% Production Gas
K 35% Exploration Gas
V 35% Exploration Gas
NM 35% Exploration Gas
West O 35% Exploration Gas
Ukraine – Transcarpathian Sedimentary Basin
U 50% Exploration Gas 29%-12% 18%
RK 100% Production Gas
S 100% Exploration Gas
18Cub Energy Inc. 5120 Woodway Drive Suite 10010 Houston, Texas 77056 Patrick McGrath Chief Financial Officer Tel: +1.713.577.1948 Email: patrick.mcgrath@cubenergyinc.com Mikhail Afendikov Chief Executive Officer TSX-V: KUB Tel: +1.713.677.0439 Email: mikhail.afendikov@cubenergyinc.com
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