Providing Responsibly Developed Energy to the World - March 2020 TSX: VII 2020 Seven Generations Energy Ltd
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Providing Responsibly Developed
Energy to the World
March 2020
TSX: VII
www.7genergy.com
©2020 Seven Generations Energy Ltd 1
OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
CANADA’S LARGEST
PRODUCER OF
CONDENSATE
• Canada’s most valuable hydrocarbon
• Structurally short market drives
price premium
• $4.0B Enterprise Value (1)(2)(3)
• $1.8B market cap, $2.2B net debt(3)
• 335 million shares outstanding
• 208 thousand boe/d(4)
(36% condensate, 22% other NGLs, 42% gas)
• A business model focused on responsible
development and growing free cash flow
1) February 28, 2020 share price & shares outstanding as of December 31, 2019.
2) US$1.575B in senior unsecured notes converted at $1.3407 CAD/USD plus adjusted net working capital deficiency and long-term lease liabilities as of December 31, 2019 of $54 MM.
3) For additional information see “Non-GAAP Measures Advisory” in the “Important Notice” that appears at the end of the presentation.
4) For additional information see “Note Regarding Product Types” in the “Important Notice” that appears at the end of this presentation.
©2020 Seven Generations Energy Ltd 2
OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
SEVEN GENERATIONS ENERGY
Positioned to add value through:
Culture Best in class assets Operational excellence
Entrepreneurial, engaged Largest producer of condensate – Continuous improvement, cost
& responsible Canada’s premiere product mindfulness and efficiency
Returns focused Deep inventory life Optionality
Thinking like an owner Nearly 20 years of core development From market access, operatorship,
with emerging lower Montney commodity mix, free cash flow
©2020 Seven Generations Energy Ltd 3
OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
OPERATIONAL EXCELLENCE
Pursuing innovations that drive long-term improvements to the business and free cash flow
Drilling Costs Completion Costs Operating Costs
($MM per well) ($MM per well) ($ per boe)
$4.0 $8 $6.00
$7
$3.5 $5.50
$6
$3.0 $5 $5.00
$4
$2.5 $4.50
$3
$2.0 $2 $4.00
2017 2018 2019 2020E 2017 2018 2019 2020E 2017 2018 2019 2020E
1) For additional information see “Forward-Looking Information Advisory” and “Non-GAAP Measures Advisory” in the “Important Notice” that appears at the end of the presentation.
©2020 Seven Generations Energy Ltd 4
OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
FOCUSED ON THE SHAREHOLDER
Prioritizing per-share value creation over volume creation
Funds Flow Per Share(1)(2) Production Per Share(2)(3)
Boe/d per million diluted shares
$6.00 800
600
$4.00
400
$2.00
200
$0.00 0
2014 2015 2016 2017 2018 2019 2020E 2014 2015 2016 2017 2018 2019 2020E
Cumulative Share Buyback(2) Adjusted Net Income Per Diluted Share(4)
$MM of Buybacks
$300 $2.00
$200
$1.00
$100
$0 $0.00
Q4/2018 Q1/2019 Q2/2019 Q3/2019 Q4/2019 2014 2015 2016 2017 2018 2019
1) Ranges in “Funds Flow Per Share” are based on 2020 budget assumptions of US$50/bbl of WTI and US$2.50 Henry Hub, with an assumption of $60/bbl in the upside sensitivity case.
2) For projected for 2020 additional information see “Forward-Looking Information Advisory” in the “Important Notice” that appears at the end of the presentation.
3) For additional information see “Note Regarding Product Types” in the “Important Notice” that appears at the end of the presentation. Assumes that the company will repurchase the maximum number of shares permitted to be repurchased under the company’s current normal course issuer bid
4) For additional information see “Non-GAAP Measures Advisory” in the “Important Notice” at the end of the presentation.
©2020 Seven Generations Energy Ltd 5
OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
LEVERAGING PAST INVESTMENTS
Driving free cash flow and optionality
Capital Investments(1) Free Cash Flow(1)(2)
As a percentage of funds flow ($MM)
400% $400
350% $200
300%
$0
250%
-$200
200%
-$400
150%
Total Capital -$600
100%
Facilities Capital -$800
50%
0% -$1,000
2014 2015 2016 2017 2018 2019 2020E 2014 2015 2016 2017 2018 2019 2020E
1) 2020 full-year budgeted assumptions include US$50/bbl WTI, US$2.50/MMbtu Henry Hub, US$5/bbl condensate differentials. Funds flow and free cash flow shown above use the same assumptions with $60/bbl WTI price. For additional information see “Forward-Looking Information Advisory”
in the “Important Notice” that appears at the end of this presentation.
2) For additional information see “Non-GAAP Measures Advisory” in the “Important Notice” that appears at the end of the presentation.
©2020 Seven Generations Energy Ltd 6
OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
DRIVING FUTURE SHAREHOLDER RETURNS
Expanding free cash optionality
$1,800
Value Enhancing
$1,600 $70 WTI
Substantial
Delineation
$1,400 Major Infra
Annual free cash flow potential $60 WTI
Growth Value Enhancing at $55-$70 WTI by 2022
$1,200
Delineation Value Enhancing With a long inventory runway
Delineation $50 WTI
$1,000
$800
$40 WTI
Sustaining
$600 Sustaining
Capital Sustaining
Capital Capital
$400
$200 91Wells 83Wells 75-80Wells
On Production On Production On Production
$0
2018 Actual 2019 Actual 2020 Budget 2021 Budget 2022 Budget Adjusted Funds Flow
Sensitivity
364Million 349Million 324Million
Shares Outstanding(3) Shares Outstanding(3) Shares Outstanding(3)
1) Funds flow reflects US$2.50/MMbtu Henry Hub, US$5/bbl condensate differentials.
2) Sustaining capital refers to capital expenditures including drilling, completions, equipping, tie-in and other expenditures required to maintain production from existing facilities at current levels.
3) Share counts reflect diluted weighted average shares outstanding for each respective year, with 2020 assuming the repurchase of the maximum number of common shares the company is authorized to repurchase under the company’s current normal course issuer bid.
4) For additional information, see “Forward-Looking Information Advisory” and “Non-GAAP Measures Advisory” in the “Important Notice” at the end of this presentation.
©2020 Seven Generations Energy Ltd 7
OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
CLICK TO EDIT MASTER TITLE STYLE Values
Alignment from
supply chain,
focused on safety
Environment Social
and local providers
85,000 10,000+
Truckloads of reduced water
80% FOCUSED ON
$2.7Billion
Hours of employee
transportation in 2018
SUSTAINABILITY
volunteerism from ~250
staff in 2019
Lower per-boe GHGe
3.2x footprint than Total economic
industry average(2) What Gets Measured, contribution to Western
Canada in 2019(4)
Better than industry Gets Managed
average Liability
Management Rating
(LMR)
Independent
Board Chair
57%
90%
A-
Best-ranked carbon Drop in Total Recorded
disclosure within Incident Frequency
Independent
Canadian oil & gas (TRIF) in 2019
Board Members(1)
100%
Board and Committee
Governance
Meeting Attendance
1) Marty Proctor, Chief Executive Officer, is the only non-independent director.
2) Based upon 2018 data. For additional information regarding the company’s estimated carbon intensity, please refer to “Note Regarding Industry Metrics” in the “Important Notice” at the end of this presentation. Peers include ARX, BTE, CPG, HSE, PEY, SU, VET, WC
3) The peer companies in the Liability Management Rating chart include ARX, BIR, CNQ, CVE, CPG, ECA, ERF, HSE, MEG, PEY, TOU, VET, WCP.
4) Total economic contribution is the sum of capital investment, operating expenditures, transportation expenditures, royalties, general & administrative expenditures and other expenditures during 2019
©2020 Seven Generations Energy Ltd 8
OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
2020 BUDGET DETAILS Completions
Organically funded at $50 WTI / $2.50 Henry Hub
2020 Capital Budget & Guidance
Production & Supporting Infrastructure $1.0 billion Nest 2
Value Enhancement Projects & Delineation $0.1 billion
Total Capital Investment $1.1 billion
$1.1B
H1/20 Production 190 - 200 Mboe/d
H2/20 Production 205 - 215 Mboe/d
Average Production 200 – 205 Mboe/d
Equip
Development Wells On Stream (#) 75 – 80
Nest 3 & Tie
Drilling Nest 1
Percent Liquids 56 - 60%
Percent Condensate 34 - 38%
Pads
Royalty Rate at US$50 WTI 5 - 7%
& Pipes
Royalty Rate at US$60 WTI 7 - 9%
Operating Expenses ($/boe) $4.75 - $5.25 Other
Transportation ($/boe) $6.75 - $7.25
G&A ($/boe) $0.85 - $0.95 Value
Enhancing
Interest ($/boe) $1.80 - $1.90 Delineation
1) For additional information, see “Forward-Looking Information Advisory” and “Note Regarding Product Types” in the “Important Notice” at the end of this presentation.
©2020 Seven Generations Energy Ltd 9
OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
OPERATING OUR BUSINESS
A world-class asset on which we’ve built the company
• Nest 2
Primary Liquids-Rich Region
• Nest 3
New High-Deliverability Region Alliance
• Nest 1
Ultra-Rich Condensate Region
Infrastructure Footprint
Natural Gas Processing: NGTL
• ~1 Bcf/d capacity
• 760 MMcf/d owned & operated at Cutbank/Lator/Gold Creek
• 250 MMcf/d of 3rd party capacity access
Condensate Stabilization:
• >80 Mbbl/d capacity
• >60 Mbbl/d owned & operated
• Access 3rd party capacity of up to 20 Mbbl/d
1) For additional information, see “Forward-Looking Information Advisory” in the “Important Notice” at the end of this presentation.
©2020 Seven Generations Energy Ltd 10OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
2019 RESERVES
(1)
Highly efficient conversion of barrels into cash flow
Future Development Costs Improving Decline moderation on track
$940Million
(2P FDC $/boe)
Better vintage mix = lower decline rates
$8.50
Low-40% decline rates entering 2020
Reduced 2P future
$8.00 development capital vs
2018 reserve report Y4+
$7.50
Y4+
$7.00 Y3 1.5Years 2.0Years Y1
Weighted average Weighted average
$6.50
2015 2016 2017 2018 2019
production age Y3 production age
at year-end 2018 at year-end 2019
$12.6Billion 1.6Billion
Y2 Y1
2P reserve value(2) Barrels of oil equivalent 2P Y2
reserves as at Dec 31, 2019
$13.06per boe 1.6x
PDP FD&A cost PDP recycle ratio
1) For additional information, see “Forward-Looking Information Advisory”, “Presentation of Oil and Gas Information” and “Note Regarding Oil and Gas Metrics” in the “Important Notice” at the end of this presentation.
2) Represents the before tax net present value of future net revenue discounted at a rate of 10%, estimated by McDaniel, as at December 31, 2019.
©2020 Seven Generations Energy Ltd 11OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
ECONOMICS AND INVENTORY 504
Nearly 20 years of core inventory, plus future upside >250 Montney
Rich Gas Drilled to Date
Core Development Areas
(Upper/Middle Montney Only)
Total /
>160
Nest 1 Nest 2 Nest 3
Average Wapiti
IP30 (boe/d) 1,400 1,900 2,000 1,700
Well Attributes
IP365 (boe/d) 750 1,000 1,400 950
Cost (DCET) $9.25 MM $9.25 MM $9.25 MM $9.25 MM >256
CGR (IP365) 300 170 55 210 Lower
(bbl/mmcf)
% Condensate Montney
64% 50% 25% 53%
(IP365) Typical 1-Year
NPV $8.1 MM $9.3 MM $9.3 MM $8.8 MM Drilling Program
Single
IRR 81% 106% 101% 95%
Economics at
Well(1)
$50/$2.50
PIR 0.9x 1.0x 1.0x 1.0x
NPV $4.2 MM $4.6 MM $4.6 MM $4.4 MM Emerging Development Areas
Full
Cycle(2)
IRR 38% 44% 53% 43% Lower Rich 1,316
Wapiti Cretaceous
PIR 0.4x 0.5x 0.5x 0.5x Montney Gas
Upper/Middle
Undeveloped 2P 386 452 128 966 6 0 0 0 Nest Montney
Locations
Contingent 2C 152 168 30 350 >250 >160 >250 >60
Total Locations 538 620 158 1,316 >256 >160 >250 >60
2020 Wells
~9 ~50 ~13 ~72 ~6-8 - - -
Planned
1) Economic assumptions above reflect budgeted price assumptions, which include US$50/bbl WTI, -$5/bbl Edmonton condensate differentials, US$2.50/Mmbtu Henry Hub.
2) Full cycle development reflects the scheduling of a hypothetical 72-well development program over time, including the cost of super-pads, satellite pads, water infrastructure, and other go-forward costs in excess of single-well costs, including the effects of downtime, other factors and
associated G&A costs. Full cycle development excludes the investment in natural gas plant construction which has already been materially completed by the company.
3) For additional information, see “Forward-Looking Information Advisory” and “Note Regarding Potential Drilling Opportunities”, “Note Regarding Development Area Forecast Economics and Type-Curves” and “Note Regarding Product Types” in the “Important Notice” at the end of this
presentation. Inventory counts and economics are based on year-end 2019 estimates.
4) PIRs reflect the NPVs divided by the DCET Costs (taken as the midpoint where ranges are provided).
©2020 Seven Generations Energy Ltd 12TSX: VII
www.7genergy.com
©2020 Seven Generations Energy Ltd 13OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
GUIDING PRINCIPLE
Stakeholder Differentiation
We believe that companies have only the rights given to them by society. While people have a natural entitlement to basic rights, corporations are an instrument created by society to
provide its needs and ought to have no expectation of basic entitlements other than equitable rights with other corporations, including those wholly owned by a person. We
recognize that rights, sufficient to build and operate an energy project, can be granted and taken away by society. Over the longer term, companies can only expect to thrive if they
serve the legitimate needs of society in which they exist. To thrive, companies must differentiate, rise above the pack, standout as being among the best with all of their stakeholders.
At Seven Generations Energy Ltd., we acknowledge this granted entitlement and accept from our stakeholders a duty to thrive and an understanding of the need to differentiate.
Specifically, in acceptance of this challenge to differentiate with all stakeholders, we acknowledge:
The need of society for us to conduct our business in a way that protects the
The need of our business partners and infrastructure customers to be treated
natural beauty of the environment and preserves the capacity of the earth to
fairly and attentively;
meet the needs of present and future generations;
The need of Canada and Alberta for us to obey all regulations and to proactively The need of our suppliers and service providers to be treated fairly and paid
assist with the formulation of new policy that enables our company and our promptly for equipment and services provided to us and to receive feedback
industry to better serve society; from us that can help them to be competitive and thrive in their businesses;
The need of the communities where we operate to be engaged in the planning
The need of our employees to be compensated fairly and provided a safe, healthy
of our projects and to participate in the benefits arising from them as they
and happy work environment including a healthy work life – outside life balance;
are built and operated;
The need of our shareholders and capital providers to have their investment managed responsibly and ethically and to earn strong returns.
We see ourselves as being in the service business, serving the needs of our stakeholders. We seek satisfaction for all stakeholders. Differentiation is imperative. We support an open
and competitive business environment, recognizing in the competitive world that we envision, only those who best serve their stakeholders can expect the support required to survive
for the longer term.
©2020 Seven Generations Energy Ltd 14OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
CANADIAN CONDENSATE FUNDAMENTALS Forecast Condensate Supply &
Condensate is Canada’s premium liquids product Demand
(Mbbl/d)(3)(4)
• Total demand of ~650 Mbbl/d exceeds local supply 800 250 Mbbl/d+
by ~250 Mbbl/d gap between
supply & demand
• Canadian condensate continues to price in a range
similar to US WTI and Midland streams 600 Demand
Edmonton Condensate vs. Crude Oil Prices
$70 (US$/bbl)(2) 400
$50
WCSB Supply
200
$30
$10
2015 2016 2017 2018 2019
0
WTI Oil Edm. Light Midland Oil WCS Heavy Oil Edm. Condensate
2018 2019 2020E 2021E 2022E
1) Source: Bloomberg, COLC, NEB and 7G internal forecasts.
2) Source: Bloomberg.
3) For additional information, see “Forward-Looking Information Advisory” in the “Important Notice” at the end of this presentation.
4) Forecast includes the impact of GEI/USD Diluent Recovery Unit assuming 2021 on-stream date
©2020 Seven Generations Energy Ltd 15OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
NATURAL GAS MARKETING
SOLUTIONS
TCPL
• Nearly 700 MMcf/d of take-away 77 MMcf/d
outside of Alberta
• Diversified premium markets GTN Alliance
includes US LNG optionality 90 MMcf/d 500 MMcf/d
2020 Revenue Mix 2019 Benchmark Prices 7G Gas Market Sales Points
(US$/MMbtu)
AECO 10% AECO 5% AECO 5%
Condensate Dawn 14%
NGPL
Dawn 15%
$3.00 Dawn 15%
Malin 13% Malin 18%
155 MMcf/d
Gulf 24%
$2.00 Gulf 26%
Gulf 24%
NGLs
$1.00 Chicago
49% Chicago Chicago
41% 38%
Natural Gas
$0.00
Chicago Gulf Malin Dawn AECO 2019 2020 2021
1) 2019 average benchmark prices sourced from Bloomberg.
©2020 Seven Generations Energy Ltd 16OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
NEST 1
Flowtest IP20 (7 Hz) IP60 (2 Hz)
1,068 – 1,972 boe/d 1,413 – 1,963 boe/d
~64% Condensate
~63% Condensate
Ultra-rich condensate region
IP96 2,030 boe/d
55% Condensate
IP80 1,203 boe/d
• Emerging development area with 52% Condensate
high condensate weighting
• Q4/19 land swap enabled optimized IP90 1,464 boe/d
development plant 68% Condensate
• Offsetting industry activity validates IP94 1,730 boe/d
significant productivity
44% Condensate
• H2/20+ to see increased activity levels
7G IP60 (Restricted Rates)
~1,898 boe/d
72% condensate
Competitor
Well Rates
1) For additional information, see “Forward-Looking Information Advisory”, “Note Regarding Development Area Forecast Economics and Type Curves” and “Note Regarding Potential Drilling Opportunities” in the “Important Notice” at the end of this presentation.
©2020 Seven Generations Energy Ltd 17OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
NEST 2 2019 year-end expansion
Primary liquids-rich region of Nest 2 boundaries
• 7G’s first major development area
• Geological model refined in 2018 to
de-risk development planning
• Regional nuances in condensate/gas mix
better understood
• Favorable trends in condensate recoveries
• Recent expansion of boundaries west
• 100 Hz upper/middle Montney locations
• Validated as sweet, liquids-rich condensate
locations analogous to North-West Nest 2
1) For additional information, see “Forward-Looking Information Advisory”, “Note Regarding Development Area Forecast Economics and Type Curves” and “Note Regarding Potential Drilling Opportunities” in the “Important Notice” at the end of this presentation.
©2020 Seven Generations Energy Ltd 18OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
NEST 3
High-deliverability region
• 2019 saw large-scale development
• Initial infrastructure and river crossing
completed
• Single Super-Pad / Hub & spoke style build-
out
• Sub-$8,000/boe/d drill, complete,
equip and tie-in capital efficiency
• Potential to expand boundaries to the
south into Rich Gas region
1) For additional information, see “Forward-Looking Information Advisory”, “Note Regarding Development Area Forecast Economics and Type Curves” and “Note Regarding Potential Drilling Opportunities” in the “Important Notice” at the end of this presentation.
©2020 Seven Generations Energy Ltd 19OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
LOWER MONTNEY
Emerging resource expansion across all Nest regions
• Successful Q3/18 to Q4/19 delineation efforts
2,800-3,000 meters
• Validated productivity and reservoir characteristics
• 6 successful Hz wells with varying completions
intensity and design
• Triple-stack development model pilot
• Stacked development layer expands resource
& improves surface infrastructure utilization Upper Montney
metres
200
Middle Montney
• Up to 50% more inventory per section(2)
Lower Montney
• 30% increased NPV per section(2)
• Similar full-cycle capital efficiency(2) Illustration not to scale
800 metres
1) For additional information, see “Forward-Looking Information Advisory”, “Further Economic Assumptions”, “Note Regarding Development Area Forecast Economics and Type Curves” and “Note Regarding Potential Drilling Opportunities” in the “Important Notice” at the end of this presentation.
2) Assumes 3 lower Montney locations are developed in tandem with the company’s standard 6-well upper/middle Montney development profile
©2020 Seven Generations Energy Ltd 20OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
RISK MANAGEMENT
Financial leverage & liquidity
Long Term Maturities, Fixed Coupon Senior Unsecured Notes
$1,000
$800 3.5Years US$450MM
$600 To first maturity 6.875%
Call premiums step down mid-2020
$400 US$700MM
US$425MM 5.375%
$200
6.75%
$0
2020 2021 2022 2023 2024 2025
Favorable Leverage
2020E net debt to trailing 12-month adjusted EBITDA
$1.9Billion
2.0x
1.5x
Total liquidity
- $1.4B available on $1.4B facility 1.0x
- $0.5B accordion
- 2024 maturity 0.5x
0.0x
$50 WTI $60 WTI $70 WTI
For additional information, see “Forward-Looking Information Advisory” and “Non-GAAP Measures Advisory” in the “Important Notice” at the end of this presentation.
©2020 Seven Generations Energy Ltd 21OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
RISK MANAGEMENT Reduce Protect
Capital investment
Preserve
Balance sheet
Revenue volatility
Commodity hedging
2020E Condensate 2020E Natural Gas
Rolling 3-Year Targets(1)
Hedged
35%-65% Hedged
Year 1
55% 39%
10%-35% At US$52-57/bbl At US$2.65/MMBtu
WTI Henry Hub
Year 2
0%-20% Un-hedged
Un-hedged
Year 3
1) Targeted percentages are based on total production net of royalties
2) For additional information, see “Forward-Looking Information Advisory” and “Note Regarding Product Types” in the “Important Notice” at the end of this presentation.
©2020 Seven Generations Energy Ltd 22OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX CURRENT HEDGE POSITIONS As at December 31, 2019 ©2020 Seven Generations Energy Ltd 23
OVERVIEW STRATEGY FINANCIAL HIGHLIGHTS SUSTAINABILITY BUDGET DETAILS ASSET OVERVIEW APPENDIX
SELECTED FINANCIAL & OPERATIONAL INFORMATION
VII - Recent Quarterly Results
OPERATING RESULTS Q4 2019 Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017 Q1 2017 YE 2019 YE 2018 YE 2017
Average daily production (1)
Condensate (2) (mbbl/d) 75.0 75.5 75.9 72.7 81.8 87.3 69.0 67.3 70.0 64.5 59.0 51.6 74.8 76.4 61.3
Natural gas (MMcf/d) 523.1 515.3 489.6 483.6 515.4 511.3 461.3 473.3 493.4 453.2 409.6 384.5 503.0 490.5 435.5
Other NGLs (2) (mbbl/d) 45.9 43.2 44.3 44.1 47.4 47.3 41.2 41.5 45.1 43.9 37.9 37.4 44.4 44.4 41.1
Total (mboe/d) 208.1 204.6 201.8 197.4 215.1 219.8 187.1 187.7 197.3 183.9 165.2 153.1 203.0 202.6 175.0
CGR Ratio 143 147 155 150 155 175 150 142 142 142 144 134 149 156 141
LGR Ratio 88 84 90 91 92 93 89 88 91 97 93 97 88 91 94
Realized Prices
Condensate (2) ($/bbl) 66.39 65.59 71.91 63.00 53.57 79.26 81.67 73.39 67.95 54.95 58.28 63.84 66.76 71.63 61.28
Natural gas ($/Mcf) 3.25 2.85 3.29 4.32 4.77 3.65 3.79 3.54 3.53 3.46 4.09 4.36 3.41 3.98 3.84
Other NGLs (2) ($/bbl) 10.75 2.74 4.19 7.46 8.44 14.02 13.39 13.33 18.30 15.18 11.45 12.45 6.34 12.21 14.56
34.48 31.97 35.95 35.44 33.66 42.99 42.42 38.19 37.13 31.43 33.58 35.52 34.44 39.33 34.45
Netbacks (4)
Liquids and natural gas sales ($/boe) 34.48 31.97 35.95 35.44 33.66 42.99 42.42 38.19 37.13 31.43 33.58 35.52 34.44 39.33 34.45
Royalties ($/boe) (2.62) (1.99) (2.19) (2.30) (0.99) (2.20) (0.96) (1.12) (1.18) (0.86) (0.62) (1.22) (2.28) (1.34) (0.97)
Operating expense ($/boe) (4.43) (4.81) (5.00) (4.93) (5.25) (5.22) (6.00) (5.73) (5.69) (5.43) (6.24) (4.99) (4.79) (5.52) (5.60)
Transportation, processing and other expense ($/boe) (7.01) (6.46) (6.64) (6.65) (7.07) (6.14) (6.93) (6.24) (6.43) (6.47) (5.88) (5.39) (6.69) (6.65) (6.09)
Operating netback before the following (4) ($/boe) 20.42 18.71 22.12 21.56 20.35 29.43 28.53 25.10 23.83 18.67 20.84 23.92 20.68 25.82 21.79
Realized hedging gain (loss) ($/boe) 0.55 1.63 0.04 (0.34) (1.58) (1.79) (1.04) (0.78) 0.38 0.84 0.12 (0.52) 0.48 (1.33) 0.25
Marketing Income (4)(5) ($/boe) 0.18 0.19 0.07 0.77 0.20 0.28 0.53 0.62 0.65 0.27 0.43 0.17 0.30 0.39 0.39
Operating netback (4) ($/boe) 21.15 20.53 22.23 21.99 18.97 27.92 28.02 24.94 24.86 19.78 21.39 23.57 21.46 24.88 22.43
General and administrative expense ($/boe) (0.83) (0.84) (0.85) (0.94) (0.91) (0.66) (0.82) (0.65) (0.65) (0.65) (0.82) (0.79) (0.86) (0.76) (0.72)
Finance expense and other ($/boe) (1.87) (1.60) (2.03) (1.98) (1.07) (1.42) (1.71) (1.83) (2.06) (2.09) (4.30) (3.01) (1.87) (1.51) (2.81)
Funds flow per boe (4) ($/boe) 18.45 18.09 19.35 19.07 16.99 25.84 25.49 22.46 22.15 17.04 16.27 19.77 18.73 22.61 18.90
FINANCIAL RESULTS (4)
Condensate (2) ($MM) 458.1 455.6 496.7 412.2 403.2 636.6 512.8 444.5 437.6 326.1 312.9 296.5 1,822.6 1,997.3 1,373.1
Natural gas ($MM) 156.6 135.3 146.6 187.9 225.7 171.8 159.2 156.1 160.3 144.2 152.4 150.8 626.4 712.6 607.7
Other NGLs (2) ($MM) 45.4 10.9 16.9 29.6 36.8 61.0 50.2 49.8 76.0 61.3 39.5 42.1 102.8 197.8 218.9
Liquids and natural gas sales (3) ($MM) 660.1 601.8 660.2 629.7 665.7 869.4 722.2 650.4 673.9 531.6 504.8 489.4 2,551.8 2,907.7 2,199.7
Royalties ($MM) (50.2) (37.5) (40.2) (40.9) (19.5) (44.4) (16.4) (18.9) (21.5) (14.5) (9.3) (16.8) (168.8) (99.2) (62.1)
Operating expense ($MM) (84.9) (90.6) (91.8) (87.5) (103.8) (105.5) (102.2) (96.8) (103.3) (91.8) (93.9) (68.8) (354.8) (408.3) (357.8)
Transportation, processing and other expense ($MM) (134.3) (121.6) (121.9) (118.1) (139.9) (124.2) (118.0) (109.7) (116.8) (109.4) (88.3) (74.3) (495.9) (491.8) (388.8)
Operating netback before the following (4) ($MM) 390.7 352.1 406.3 383.2 402.5 595.3 485.6 425.0 432.3 315.9 313.3 329.5 1,532.3 1,908.4 1,391.0
Realized hedging gain (loss) ($MM) 10.5 30.6 0.8 (6.0) (31.2) (36.2) (17.7) (13.1) 6.9 14.2 1.8 (7.2) 35.9 (98.2) 15.7
Marketing Income (4)(5) ($MM) 3.4 3.6 1.3 13.6 3.9 5.7 9.1 10.0 11.8 4.6 6.3 2.3 21.9 28.7 25.0
Operating netback (4) ($MM) 404.6 386.3 408.4 390.8 375.2 564.8 477.0 421.9 451.0 334.7 321.4 324.6 1,590.1 1,838.9 1,431.7
Revenue (6) ($MM) 669.6 718.0 795.5 546.3 1,146.8 809.0 560.4 653.7 652.3 563.7 608.8 629.8 2,729.4 3,169.9 2,454.6
Funds flow (4) ($MM) 353.2 340.5 355.3 338.8 336.2 522.5 434.0 379.5 402.0 288.3 244.6 272.4 1,387.8 1,672.2 1,207.3
Net Income (loss) ($MM) 82.6 85.1 295.3 10.8 245.4 196.4 (24.6) 22.7 83.1 85.7 178.1 215.6 473.8 439.9 562.5
Adjusted net income ($MM) 89.7 78.5 96.8 84.0 66.3 208.3 169.6 129.4 128.6 63.4 59.5 74.8 349.0 573.6 326.3
Free cash flow (4) ($MM) 120.3 55.9 44.2 (62.1) 73.9 164.3 (128.6) (203.1) 80.0 (166.0) (267.9) (90.2) 158.3 (93.5) (444.1)
Capital investments
Drilling and completions ($MM) 132.5 171.0 172.9 231.4 148.9 232.6 335.9 319.6 167.4 252.8 342.3 259.4 707.8 1,037.0 1,021.9
Facilities and infrastructure ($MM) 59.0 76.9 119.5 132.2 67.7 90.8 179.3 207.0 115.0 176.5 153.9 85.2 387.6 544.8 530.6
Land and other ($MM) 41.4 36.7 18.7 37.3 45.7 34.8 47.4 56.0 39.9 25.0 16.3 17.7 134.1 183.9 98.9
Total capital investments ($MM) 232.9 284.6 311.1 400.9 262.3 358.2 562.6 582.6 322.3 454.3 512.5 362.3 1,229.5 1,765.7 1,651.4
1) See "Note Regarding Product Types" in the Important Notice.
2) Starting in 2018, 7G began presenting C5+ in the NGL mix as a condensate volume (previously reported as an NGL volume). 2017 figures have been adjusted to conform to this current period presentation.
3) Excludes the purchase and resale of liquids and natural gas in respect of transportation commitment optimization and marketing activities. Refer to the Q4 2019 MD&A as filed on SEDAR for additional information.
4) Refer to the "Important Notice" section at the end of this presentation for additional information regarding the Company's non-GAAP and additional GAAP measures. Certain prior period figures have been re-classified to conform with current period presentation.
5) The marketing income of the purchase and resale of liquids and natural gas, net of applicable pipeline tariffs, represent the margins earned in respect of the Company's transportation optimization and marketing activities.
6) Represents the total of liquids and natural gas sales, net of royalties, gains (losses) on risk management contracts and other income.
©2020 Seven Generations Energy Ltd 24IMPORTANT NOTICE
General Advisory please see “Advisories and Guidance – Additional GAAP measures” in Management’s Discussion and Analysis February 26, 2020, for the years ended
The information contained in this presentation does not purport to be all-inclusive or contain all information that readers may require. Prospective investors December 31, 2019 and 2018.
are encouraged to conduct their own analysis and review of Seven Generations Energy Ltd. (“Seven Generations”, “7G”, “VII”, the “company” or the “Company”)
and of the information contained in this presentation. Without limitation, prospective investors should read the record of publicly filed documents relating Forward-Looking Information Advisory
to the Company, consider the advice of their financial, legal, accounting, tax and other professional advisors and such other factors they consider This presentation contains certain forward-looking information and statements that involve various risks, uncertainties and other factors. The use of any of
appropriate in investigating and analyzing the Company. An investor should rely only on the information provided by the Company and is not entitled to the words “anticipate”, “continue”, “estimate”, “expect”, “may”, “will”, “should”, “believe”, “plans”, “outlook”, “forecast” and similar expressions are intended to
rely on parts of that information to the exclusion of others. The Company has not authorized anyone to provide investors with additional or different identify forward-looking information or statements. In particular, but without limiting the foregoing, this presentation contains forward-looking information
information, and any such information, including statements in the media about Seven Generations, should not be relied upon. In this presentation, unless and statements pertaining to the following: the Company’s strategies, strategic pursuits, priorities, goals, strategic objectives and competitive strengths,
otherwise indicated, all dollar amounts are expressed in Canadian dollars, and per share amounts are presented on a diluted basis. including its focus on responsible development, innovation, continual cost improvement, improved capital and operating efficiencies, value creation, free
An investment in the securities of Seven Generations is speculative and involves a high degree of risk that should be considered by potential investors. cash flow generation, and plans to prioritize per share value creation over volume creation; expected drilling inventory/ potential drilling opportunities;
Seven Generations’ business is subject to the risks normally encountered in the oil and gas industry and, more specifically, the shale and tight liquids-rich expected number of years to develop drilling inventory/potential drilling opportunities; upside potential of the company’s properties; details and forecasts
natural gas sector of the oil and natural gas industry, and certain other risks that are associated with Seven Generations’ stage of development. An related to the 2020 budget, including those contained on the slide titled “2020 Budget Details”, and among them: expected production and supporting
investment in the Company’s securities is suitable only for those purchasers who are willing to risk a loss of some or all of their investment and who can infrastructure capital investments, expected capital investments in value enhancing projects and delineation and total capital investments in 2020, capital
afford to lose some or all of their investment. investment as a percentage of funds flow and free cash flow in 2020, average daily production for the first half, second half and full-year in 2020, the
number of development wells to be brought on-stream, liquids and condensate yields, the percentage of 2020 condensate and natural gas production that
Non-GAAP Measures Advisory has been hedged, royalty rates, operating expenses, drilling and completions costs, transportation expenses, G&A expenses, interest expenses, expected
In addition to using financial measures prescribed by International Financial Reporting Standards (“IFRS”), references are made in this presentation to funds flow per share and expected production per share; the product composition, productivity and deliverability of various current and future
certain terms or performance measures commonly used in the oil and natural gas industry that are not defined under IFRS, including “enterprise value”, development areas; the ultra-rich condensate production expected from the Nest 1 region; transportation and processing capacity; forecast net debt to
“adjusted net income”, “adjusted net income per diluted share”, “marketing income”, “marketing income per boe”, “operating netback”, “operating netback trailing 12-month adjusted EBITDA at different commodity price scenarios; forecast supply and demand of condensate; forecast full-cycle and half-cycle
before realized hedging gains and marketing income”, “funds flow per boe” and “free cash flow”. economics, including single well economics, IRRs, break-even costs, NPVs and PIRs; expectation that the area recently added to Nest 2 will have sweet,
liquids rich condensate production and will be analogous (in terms of production) to locations in North-West Nest 2; hedge targets; objectives of hedging
The data presented is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance program; access to sales points; expected future sales points; potential to expand the boundary of the Nest 3 area; potential to expand the inventory per
prepared in accordance with IFRS. Such non-GAAP measures should be read in conjunction with the company’s consolidated financial statements for the section and forecast NPV per section with the potential addition of Lower Montney locations; future capital efficiencies; delineation potential and planned
years ended December 31, 2019 and 2018 and the accompanying notes. Readers are cautioned that the non-GAAP measures do not have any standardized delineation; and the references to development area forecasts and type-curve estimates. In addition, information and statements in this presentation
meaning and should not be used to make comparisons between the company and other companies without also taking into account any differences in relating to reserves, related future development costs, related net present value of future net revenue, and contingent resources are deemed to be forward-
the way the calculations were prepared. For additional information about these measures, please see “Advisories and Guidance – Non-GAAP financial looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and/or resources described exist
measures” in Management’s Discussion and Analysis February 26, 2020, for the years ended December 31, 2019 and 2018. in the quantities predicted or estimated, and that the they can be profitably produced in the future .
“Operating netback before realized hedging gains and marketing income” is calculated on a per boe basis and is determined by deducting royalties, With respect to forward-looking information contained in this presentation, assumptions have been made regarding, among other things: future oil, NGLs
operating, transportation, processing and other expenses from oil and natural gas sales, before taking into account marketing income and excluding and natural gas prices being consistent with current commodity price forecasts after factoring in quality adjustments at the company’s points of sale; the
realized hedging gains or losses. For the year ended December 31, 2019, operating netback before realized hedging gains and marketing income was repurchase of the maximum number of common shares authorized to be repurchased under the company’s current normal course issuer bid program; the
calculated by subtracting royalties of $2.28, operating expenses of $4.79 and transportation, processing and other costs of $6.69, from revenues per boe of company’s continued ability to obtain qualified staff and equipment in a timely and cost-efficient manner; third party transportation and processing
$34.44. Operating netback before realized hedging gains and marketing income is utilized by Seven Generations and others to assess the profitability of the facilities will be operated in an efficient and reliable manner; drilling and completions techniques and infrastructure and facility design concepts that have
Company's liquids and natural gas assets at the field level and to compare results to prior periods by isolating for the impact of changes in production been successfully applied by the Company elsewhere in its Kakwa River Project may be successfully applied to other properties; that wells drilled in the
volumes. same fashion in the same formations in proximity to the type-wells that were used in 7G’s type-curve forecasts will deliver similar production results,
including liquids yields; geology and reservoir quality being relatively consistent within each of the Company’s separate asset areas; well results from future
“Adjusted net income” is defined as “net income, excluding unrealized gains and losses on financial instruments, realized foreign exchange gains and losses wells to be drilled in the Company’s asset areas being similar to wells that have been drilled in those areas to date, as well as the type-curve estimates for
on debt repayments, deferred income tax impacts from changes in tax rates, accrued redemption premiums on senior notes, gains and losses on those areas; the consistency of the current regulatory regime and legal framework, including the laws and regulations governing the company’s oil and gas
disposition of assets, transaction costs, net losses on investments in associates and the respective income tax impact of those adjustments”. Adjusted net operations, royalties, taxes and environmental matters in the jurisdictions in which the Company conducts its business and any other jurisdictions in which
income per diluted share reflects adjusted net income on a per share basis, which is calculated by dividing adjusted net income by the Company's the Company may conduct its business in the future; the company’s ability to market production of oil, NGLs and natural gas successfully to customers; that
weighted average shares outstanding and the dilutive effect of outstanding equity compensation units during the period. Adjusted net income is used by the company’s future production levels, amount of future investment, costs, royalties, unabsorbed demand charges, facilities downtime and development
Seven Generations and others as a performance measure that provides comparability of financial results between periods by excluding highly variable and timing will be consistent with the company’s current development plans and budget; the pace of development will be consistent with the company’s
non-operating related items such as unrealized gains or losses on financial instruments. current plans; the applicability of new technologies for recovery and production of the company’s reserves and resources may improve capital and
operational efficiencies in the future; the recoverability of the company’s reserves and resources; sustained future capital investment by the company; future
“Enterprise value” is calculated as the market capitalization of the company plus net debt, where market capitalization is defined as the total number of cash flows from production; the Company’s future sources of funding; the Company’s future debt levels; geological and engineering estimates in respect of
shares outstanding multiplied by the price per share at a given point in time. “Net debt” is calculated as current and non-current portions of senior the Company’s reserves and resources; the geography of the areas in which the Company is conducting exploration and development activities, and the
unsecured notes, plus adjusted working capital deficiency (surplus) and long-term lease liabilities. Enterprise value differs from total capitalization, as access, economic, regulatory and physical limitations to which the Company may be subject from time to time; the impact of competition on the
defined in the additional GAAP measures in the MD&A, because of the usage of market value of equity, as opposed to the book value of equity. Company; and the Company’s ability to obtain financing on acceptable terms.
“Net debt”, “Adjusted EBITDA” and “total capitalization” have been included in Note 15 - Capital Management in the company’s consolidated financial
statements for the years ended December 31, 2019 and 2018 and funds flow has been presented in the consolidated cash flow statement. Accordingly,
these performance measures are additional GAAP measures and are not considered non-GAAP measures. Readers are cautioned that these additional
GAAP measures do not have any standardized meaning and should not be used to make comparisons between Seven Generations and other companies
without also taking into account any differences in the methods by which the calculations are prepared. For additional information about these measures,
©2020 Seven Generations Energy Ltd 25IMPORTANT NOTICE
Except where otherwise indicated, the funds flow, free cash flow and adjusted EBITDA forecasts referenced in this presentation were calculated based calculations of non-IFRS measures; breach of and potential enforceability issues in contracts; impact of expansion into new activities on risk exposure;
upon the assumptions outlined on the slide titled “2020 Budget Details” and the following commodity pricing assumptions: US$50.00/bbl WTI, inability of the Company to respond quickly to competitive pressures; and the risks related to the common shares that are publicly traded and the
US$2.50/MMbtu NYMEX/HH and 0.75 USD/CAD FX. NGLs as % of WTI: C3 26%, C4 30%, C5 – $5 USD/bbl differential. AECO Basis US$1.15/MMbtu. Operating Company’s senior notes and other indebtedness.
cost assumptions reflect recent actual cost trends with adjustments to address planned activity levels. Royalty rate assumptions were calculated using a Any financial outlook and future-oriented financial information contained in this document regarding prospective financial performance, financial position
price range of US$50-US$60/bbl WTI, net of credits as of December 31, 2019 and projected C* for new wells to be drilled in 2020. Royalty rate assumptions or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action based on management’s
are net of expected gas cost allowance investments in gas plants. G&A cost assumptions reflect recent actuals and expectations for a staff count and assessment of the relevant information that is currently available. Projected operational information contains forward-looking information and is based on a
information technology investments in 2020. number of material assumptions and factors, as are set out above. These projections may also be considered to contain future oriented financial
information or a financial outlook. The actual results of the Company’s operations for any period will likely vary from the amounts set forth in these
Net debt forecasts were calculated by adding the principal of the unsecured notes to the forecasted principal of the Company’s credit facility, less forecast projections and such variations may be material. Actual results will vary from projected results. Readers are cautioned that any such financial outlook and
adjusted net working capital. future-oriented financial information contained herein should not be used for purposes other than those for which it is disclosed herein. The forward-
looking information and statements contained in this document speak only as of the date hereof and the Company does not assume any obligation to
Assumptions made in the calculations of forecasted economics, including forecasted NPVs, IRRs, price sensitivities, commodity prices and recovery factors publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws.
reflect cost assumptions that are based upon recent actual cost trends with adjustments to address planned activity levels. Royalty rates were calculated
using a price range of US$50-US$65/bbl, net of credits as of Dec.31/19 and projected C* for new wells drilled or to be drilled in 2020. Royalty rates were Presentation of Oil and Gas Information
calculated net of expected gas cost allowance investments in gas plants. G&A costs used in the forecasts reflect recent actuals. Estimates of the Company’s reserves, the related future development costs, the net present value of future net revenue attributable to the company’s
An assumption has also been made that further well delineation activities will confirm management’s estimates regarding reservoir quality of its properties reserves and the Company’s contingent resources that are contained herein are based upon reports prepared by McDaniel & Associates Consultants Ltd.
that fall outside of the Company’s core development areas. With respect to the estimated number of drilling locations or potential drilling opportunities (“McDaniel”), the Company’s independent qualified reserves evaluator, as at December 31, 2018 and/or December 31, 2019 (the “McDaniel Reports”). The
that are referenced herein, various assumptions have been made. These assumptions are described under the heading “Note Regarding Potential Drilling estimates of reserves and contingent resources provided in this presentation are estimates only and there is no guarantee that the estimated reserves and
Opportunities” below. contingent resources will be recovered. Actual reserves and contingent resources may be greater than or less than the estimates provided in this in this
presentation and the differences may be material. There is no assurance that the forecast price and cost assumptions applied by McDaniel in evaluating
Actual results could differ materially from those anticipated in the forward-looking information that is contained herein as a result of the risks and risk Seven Generations’ reserves and contingent resources will be attained and variances could be material. There is uncertainty that it will be commercially
factors that are set forth in the annual information form dated February 26, 2020 for the year ended December 31, 2019 (the “AIF”), which is available on the viable to produce any part of the contingent resources.
SEDAR website at www.sedar.com, including, but not limited to: volatility in market prices and demand for oil, NGLs and natural gas and hedging activities
related thereto; general economic, business and industry conditions; variance of the Company’s actual capital costs, operating costs and economic returns This presentation includes estimates of contingent resources, as at December 31, 2019, that have been risked by McDaniel for the probability of loss or
from those anticipated; the ability to find, develop or acquire additional reserves and the availability of the capital or financing necessary to do so on failure in accordance with the COGE Handbook. For contingent resources, the risk component relating to the likelihood that an accumulation will be
satisfactory terms; risks related to the exploration, development and production of oil and natural gas reserves and resources; negative public perception of commercially developed is referred to as the chance of development. Contingent resources in the “development pending” project maturity subclass have
oil sands development, oil and natural gas development and transportation, hydraulic fracturing and fossil fuels; actions by governmental authorities, been assigned by McDaniel, as at December 31, 2019, in the upper, middle and lower intervals of the Montney formation in certain parts of the Nest 1, Nest 2,
including changes in government regulation, royalties and taxation; political changes; potential legislative and regulatory changes; the rescission, or Nest 3, Rich Gas and Wapiti areas within the Project. The COGE Handbook indicates that it is appropriate to categorize contingent resources in the
amendment to the conditions, of groundwater licenses of the Company; management of the Company’s growth; the ability to successfully identify and development pending project maturity subclass where resolution of the final conditions for development are being actively pursued and there is a high
make attractive acquisitions, joint ventures or investments, or successfully integrate future acquisitions or businesses; the availability, cost or shortage of rigs, chance of development. Approximately 98% of the contingent resources attributed to the Company’s properties by McDaniel, as at December 31, 2019,
equipment, raw materials, supplies or qualified personnel; the adoption or modification of climate change legislation by governments; potential impacts of have been classified as “development pending” and the balance of the contingent resources have been classified as “development unclarified”. The primary
climate change on the Company’s operations; uncertainty associated with estimates of oil, NGLs and natural gas reserves and resources and the variance of contingency for “development pending” contingent resources is that the Company’s current timeframe for development falls outside of the development
such estimates from actual future production; dependence upon compressors, gathering lines, pipelines and other facilities, certain of which the Company horizon permitted by the COGE Handbook for booking undeveloped reserves. If the Company’s development plans were to change to accelerate the pace
does not control; the ability to satisfy obligations under the Company’s firm commitment transportation and processing arrangements; the export and sale of development, then contingent resources may be converted to undeveloped reserves once sufficient processing capacity has been secured for the
of natural gas to the United States; the uncertainties related to the Company’s identified drilling locations; the high-risk nature of successfully stimulating incremental volumes and plans are in place to develop the resources within the timeframe permitted for undeveloped reserves. Contingent resources in
well productivity and drilling for and producing oil, NGLs and natural gas; operating hazards and uninsured risks; the risks of fires, floods and natural the “development unclarified” project maturity subclass have been assigned by McDaniel, as at December 31, 2019, in the Wilrich formation within the
disasters, which could become more frequent or of a greater magnitude as a result of climate change; the possibility that the Company’s drilling activities Cretaceous stack across the Project area. The COGE Handbook indicates that it is appropriate to categorize contingent resources in the “development
may encounter sour gas; execution risks associated with the Company’s business plan; failure to acquire or develop replacement reserves; the concentration unclarified” project maturity subclass when the evaluation is incomplete and there is ongoing activity to resolve any risks or uncertainties. These resource
of the Company’s assets in the Kakwa area; unforeseen title defects; Indigenous claims; failure to accurately estimate abandonment and reclamation costs; estimates are not classified as reserves at this time, pending further reservoir delineation, project application, facility and reservoir design work.
development and exploratory drilling efforts and well operations may not be profitable or achieve the targeted return; horizontal drilling and completion
technique risks and failure of drilling results to meet expectations for reserves or production; limited intellectual property protection for operating practices The reserves and contingent resources estimates contained in this presentation should be reviewed in connection with the AIF and the annual information
and dependence on employees and contractors; third-party claims regarding the Company’s right to use technology and equipment; expiry of certain form dated February 27, 2019 for the year ended December 31, 2018, which are available on the SEDAR website at www.sedar.com, and contain important
leases for the undeveloped leasehold acreage in the near future; failure to realize the anticipated benefits of acquisitions or dispositions; failure of properties additional information regarding the independent reserves and contingent resource evaluations that were conducted by McDaniel, as presented in the
acquired now or in the future to produce as projected and inability to determine reserve and resource potential, identify liabilities associated with acquired McDaniel Reports, and a description of, and important information about, the reserves and resources terms used in this presentation.
properties or obtain protection from sellers against such liabilities; government regulations; changes in the application, interpretation and enforcement of
applicable laws and regulations; environmental, health and safety requirements; restrictions on development intended to protect certain species of wildlife;
potential conflicts of interests; actual results differing materially from management estimates and assumptions; seasonality of the Company’s activities and
the Canadian oil and gas industry; alternatives to and changing demand for petroleum products; extensive competition in the Company’s industry; changes
in the Company’s credit ratings; third party credit risk; dependence upon a limited number of customers; lower oil, NGLs and natural gas prices and higher
costs; failure of seismic data used by the Company to accurately identify the presence of oil and natural gas; risks relating to commodity price hedging
instruments; terrorist attacks or armed conflict; cyber security risks, loss of information and computer systems; inability to dispose of non-strategic assets on
attractive terms; the potential for security deposits to be required under provincial liability management programs; reassessment by taxing and royalty
authorities of the Company’s prior transactions and filings; variations in foreign exchange rates and interest rates; risks associated with counterparties in risk
management activities related to commodity prices and foreign exchange rates; sufficiency of insurance policies; potential for litigation; variation in future
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