GIANT HEAVY OIL PROJECT IN ARGENTINA - LARGE GAS DEVELOPMENT IN COLOMBIA - CruzSur Energy
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LARGE GAS DEVELOPMENT GIANT HEAVY OIL PROJECT
IN COLOMBIA IN ARGENTINA
1
DISCLAIMER
This document is a presentation of general background information about PentaNova Energy Corp., (“PentaNova” or the “Company”). The information contained herein has been prepared by the Company solely for information purposes and does not purport to be all-inclusive or to contain all the information
that the recipient may desire or that may be required in order to properly evaluate the business, prospects or value of the Company.
This material has been prepared solely for informational purposes and is not to be construed as a solicitation, an invitation, or an offer to buy or sell any securities and should not be treated as giving investment advice. Neither this material nor anything contained herein shall form the basis of any contract or
commitment whatsoever. It is information in a summary form and does not purport to be complete. This presentation contains statements based on information from third-party sources, which has not been independently verified. It is not intended to be relied upon as advice to investors or potential investors
and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice, when deciding if an investment is appropriate.
No representation or warranty either express or implied is made as to, and no reliance should be placed on future financial performance, or the fairness, validity, accuracy, or completeness of the information, statements or opinions contained herein including in relation to, statistical data, predictions, estimates
or projections contained in this presentation, which are used for informational purposes only. It should not be regarded by recipients as a substitute for the exercise of their own judgment.
This presentation contains forward-looking information within the meaning of applicable securities laws, including Canadian securities laws and Section 27A of the U.S. Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. Forward-
looking information may relate to PentaNova’s future outlook and anticipated events or results and may include statements regarding the future financial position, production targets, sales projections, business strategy, budgets, projected costs, financial results and plans and objectives of PentaNova and the
future condition of the oil and natural gas industry and regulatory environment in Colombia and Argentina, as well as other countries in Latin America, in general. In some cases, forward-looking information can be identified by terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”,
“intend”, “estimate”, “predict”, “potential”, “continue”, “upside” or other similar expressions concerning matters that are not historical facts. Any “financial outlook” or “future oriented financial information” in this presentation, as defined by applicable securities laws, has been approved by management of the
Company. Such financial outlook or future oriented financial information is 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 circumstances.
Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of PentaNova to be materially different from any future results, performance or achievements expressed or implied by the forward-looking
statements. Although the Company believes that the expectations and assumptions reflected in the forward-looking statements are reasonable based on information currently available to the Company’s management, the Company cannot guarantee future results or events. There can be no assurance that (i)
the Company has correctly measured or identified all of the factors affecting its business or the extent of their likely impact, (ii) the publicly available information with respect to these factors on which the Company’s analysis is based is complete or accurate, (iii) the Company’s analysis is correct or (iv) the
Company’s strategy, which is based in part on this analysis, will be successful.
The forward-looking statements contained herein should not be relied upon as representing PentaNova’s views as of any date subsequent to the date of this Presentation. Except as required by law, PentaNova will not update this information at any particular time and the Company, the placement agents and
their respective affiliates, agents, directors, partners and employees assume no obligation to update or revise forward-looking statements should circumstances or management’s estimates or opinions change and accept no liability whatsoever for any loss or damage of any kind arising out of the use of all or
any part of this presentation or the content contained herein.
All references to “$” herein means the currency of the United States, unless otherwise stated.
Oil and Gas Reserves and Resources Information
Information and statements in this presentation relating to reserves and resources are deemed to be forward-looking statements which are subject to certain risks and uncertainties, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described
exist in the quantities predicted or estimated, and that the reserves and resources described can be profitably produced in the future.
Certain information in this presentation may constitute “analogous information” as defined in National Instrument 51-101 (“NI 51-101”), including, but not limited to, information relating to areas with similar geological characteristics to the lands held by the Company. Such information is derived from a variety
of publicly available information from government sources, regulatory agencies, public databases or other industry participants (as at the date stated therein) that the Company believes are predominantly independent in nature. The Company believes this information is relevant as it helps to define the
reservoir characteristics in which the Company may hold an interest. The Company is unable to confirm that the analogous information was prepared by a qualified reserves evaluator or auditor and in accordance with the the Canadian Oil and Gas Evaluation (“COGE”) Handbook. Such information is not an
estimate of the reserves or resources attributable to lands held or to be held by the Company and there is no certainty that the reservoir data and economics information for the lands held by the Company will be similar to the information presented therein. The reader is cautioned that the data relied upon by
the Company may be in error and/or may not be analogous to the Company’s land holdings.
The Company has adopted the standard of 6 Mcf:1 bbl when converting natural gas to oil equivalent. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf:1 bbl is based roughly on an energy equivalency conversion method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead.
Reserves
The oil and natural gas reserves of the Llancanelo properties in Argentina described herein and the related future net revenue attributable to such reserves were evaluated by Gaffney, Cline & Associates, Patagonia Oil Corp.’s independent reserves evaluator, in accordance with the requirements of NI 51-101 and
the COGE Handbook, effective as of December 31, 2016. The oil and natural gas reserves of the Maria Conchita properties in Colombia described herein and the related future net revenue attributable to such reserves were evaluated by Petrotech, PentaNova’s independent reserves evaluator, in accordance with
the requirements of NI 51-101 and the COGE Handbook, effective as of December 31, 2016.
The determination of oil and gas reserves involves the preparation of estimates that have an inherent degree of associated uncertainty. Categories of proved, probable and possible reserves have been established to reflect the level of these uncertainties and to provide an indication of the probability of
recovery. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves. The reserves and associated cash flow information
set forth in this presentation are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquid reserves may be greater than or less than the estimates provided in this presentation. The discounted and undiscounted net present value
of future net revenues attributable to reserves do not represent the fair market value of reserves. The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of
aggregation.
Resources
This presentation includes certain evaluations of resources for the Llancanelo and Sur Rio Deseado Este properties in Argentina and the SN-9 Block in Colombia prepared by an internal qualified reserves evaluator. These evaluations were not prepared by a person “independent” of the Company as that term is
defined under NI 51-101. These estimates were prepared in accordance with definitions and guidelines in the COGE Handbook and NI 51-101. The product types reasonably expected are shale gas and heavy crude oil resources. Contingent resources are those quantities of petroleum estimated, as of a given
date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies affecting the classification as reserves versus resources
relate to the following issues as detailed in the COGE Handbook: ownership considerations, drilling requirements, testing requirements, regulatory considerations, infrastructure and market considerations, timing of production and development, and economic requirements. Contingencies may include factors
such as economic, legal, environmental, political and regulatory matters or a lack of markets. It is also appropriate to classify as contingent resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage. Not all technically feasible development plans will be
commercial. The commercial viability of a development project is dependent on the forecast of fiscal conditions over the life of the project. For contingent resources, the risk component relating to the likelihood that an accumulation will be commercially developed is referred to as the “chance of development.”
For contingent resources the chance of commerciality is equal to the chance of development. Prospective resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. The economic
status of the resources is undetermined. Not all exploration projects will result in discoveries. The chance that an exploration project will result in the discovery of petroleum is referred to as the “chance of discovery.” Thus, for an undiscovered accumulation the chance of commerciality is the product of two risk
components: the chance of discovery and the chance of development. With respect to discovered resources (including contingent resources), there is uncertainty that it will be commercially viable to produce any portion of the resources. With respect to undiscovered resources (including prospective resources),
there is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. The estimates of the resources provided in this presentation are estimates only and there is no guarantee that the estimated
resources will be recovered. Actual shale gas and heavy crude oil resources may be greater or less than the estimates provided in this presentation, and the difference may be material.
2
Introduction
Industry Overview
Asset Overview
Appendix
3
INTRODUCTION
EXECUTIVE MANAGEMENT
Serafino Iacono Luciano Biondi
Executive Chairman CEO
Over 30 years of experience developing oil Over 40 years of experience in South
and mineral resource projects, raising American oil and gas operations from
more than $5Bn in Latin America and exploration through to production
abroad
Warren Levy
Gregg Vernon
President, Argentina Operations
President
Over 20 years of experience in upstream
Professional engineer with over 38 years
and downstream projects from Latin
of experience in the petroleum industry
4 America to Vietnam
managing operations from Colombia to
China
ACHIEVEMENTS
IN THE FIRST SIX MONTHS OF 2017
ü Established operations in Colombia and Argentina
ü We have the have the Right Board and a proven Management Team
ü Llancanelo heavy oil field is a world class development project
ü Gas growth platform in Colombia, drilling in September
ü Closed two financings in six months for a total value of +US$70 million
ü Partnerships with the right players – YPF joint venture in Llancanelo
5
INTRODUCTION
OVERVIEW
Our Company
An Energy company with immediate production and significant upside in Colombia and Argentina
Significant Heavy Oil Gas Development
& Light Oil & Exploration
Acquired four Argentine Heavy and Light Acquired three Colombian gas blocks
oil and gas blocks in July 2017 in January 2017
■ Llancanelo Heavy Oil Block ■ Maria Conchita
■ Km8 Light Oil Property, ■ Sinu 9, and
■ La Mariposa Gas Area, and ■ Tiburon
■ Sur Rio Deseado Heavy Oil Block
■ Development Area
■ Exploration Area
6
INTRODUCTION
COMPANY TIMELINE
Fast Paced Execution, Establishing a First Class Growth Platform
Acquisition of Colombian assets Successfully closed a $35MM
§ Maria Conchita
financing, $12.2MM cash &
§ Sinu 9
$22.8MM equivalent in shares,
§ Tiburon
to acquire the Argentina assets
Completion of RTO process
of PentaNova Resources
December 2016 January 2017 February March April May June July
Agreement to acquire Argentinean
Successfully closed a $34MM capital assets
raise to finance the acquisition of the ü Llancanelo
Colombian assets ü KM8
ü Sur Rio Deseado Este
7
INTRODUCTION
QUALITY BOARD MEMBERS
Blue Chip Board with a Strong Track Record of Overseeing High Growth Companies and Creating Value for Shareholders
■ Involved in the financing and ■ External Relations Director for LNG
Serafino Iacono development of oil, mining and other Susannah Pierce
Canada, a joint venture of Shell,
resource projects in Latin America, PetroChina, Mitsubishi and Korea
Chairman & Executive the United States and Europe raising Gas, which proposes to build BC's
Director more than $5 billion for numerous Director largest LNG export facility
natural resource projects
■ Mr. Keep has extensive business ■ Mr. Scott has decades worth of deep
Gordon Keep experience in investment banking Jeffrey Scott energy related management and
and creating public natural resource operating experience and currently
companies and is currently the CEO serves as the President at Postell
of Fiore Management & Advisory Director Energy, and Executive Chairman at
Director
Corp., a private financial advisory Sulvaris. He is also the founder of
firm. Gran Tierra.
Frank Giustra ■ Canadian businessman and Francisco Sole ■ Currently a member of the board of
philanthropist with an established directors of Mapfre Seguros
track record of building natural Generales de Colombia and the
Director resource companies through access Chairman of the board of Editorial
to capital and creative deal-making Director Planeta Colombiana and the
Chamber of Commerce Hispano-
Colombian
Hernan Martinez ■ Served as Minister of Mines in Jaime Perez ■ Managing Director of Next Ventures
Colombia from July 2006 to August Branger Corp. since 2006 and Executive
2010 and previously a Director of Chairman of PetroMagdalena
Pacific Exploration and Production Energy Corp. from June 2011 to July
Director since 2011 Director 27, 2012
8
INTRODUCTION
PROFESSIONAL MANAGEMENT TEAM
Technical Expertise with Proven Track Record Building Companies and Creating Value
■ Involved in the financing and development of oil, mining and other resource projects in Latin America, the United States and
Serafino Iacono Europe raising more than $5 billion for numerous natural resource projects
■ Currently serving as a director and Executive Co-Chairman of Colombia’s largest gold producer, Gran Colombia Gold (TSX:
Chairman GCM), and as a director of US Oil Sands (TSXV: USO)
30+ Years of Experience ■ Served as Executive Co-Chairman of the Board and co-founder of Pacific E&P (TSX: PEN), and was a director and Co-
Chairman of CGX Energy (TSXV: OYL) and PetroMagdalena Energy (TSXV: PMD)
Luciano Biondi ■ Petroleum Engineer who began his career with Shell de Venezuela, and who has held a number of increasingly senior
managerial positions across various oil and gas companies in South America
■ Served as CEO of PetroMagdalena Energy, a public company with operations in Colombia, and as a member of the board
Chief Executive Officer
and Vice President of Operations for CPVEN, an oil well cementing and services company operating in Venezuela
48+ Years of Experience
■ Professional engineer with vast experience in the petroleum industry across various international operations, reservoir
Gregg Vernon characterization, negotiations, and project management in China, Colombia, Argentina, and Canada
■ Served as the founding president of Petro Andina Resources Inc and as a founder and Chairman of Prospero
President Hydrocarbons, private companies which operated in Argentina and Colombia, as well as serving as interim CEO and COO
38+ Years of Experience of PetroMagdalena Energy
Christopher Reid ■ Chartered Accountant of the institute of Alberta, as well as a CPA, with significant experience in the domestic and
international oil and gas industry
■ Served as the President and CEO of Petrodorado Energy, a petroleum company with operations in Colombia, where he led
CFO & Corporate Secretary the turnaround of the company through a divesture program resulting in a market capitalization increase of approximately
10+ Years of Experience 400% in 2015
Warren Levy ■ Involved in the operations of various upstream and downstream companies from Argentina to Vietnam and Thailand
■ Served as the founder and CEO of Estrella International Energy Services, a public oilfield services company in Argentina, as
President, Argentina well as the founder and CEO of Frontier Hydrocarbons, where he was actively involved in raising over $800 million in capital,
Operations and also held a variety of operational and senior management positions at Schlumberger
20+ Years of Experience
Francisco Bustillos ■ Currently Director and Founder of F&B Consultores Asociados, a Financial and Strategy Consulting Firm, incorporated in
February 2003, that advises on an extensive range of financial and strategic services
VP, Corporate Development ■ Served as Vice President of Administration & Performance for Petrominerales Ltd. from November 2013 until October 2015
and Administration ■ Served at Pacific Stratus Energy as Vice President of Finance from May 2011 until May 2012 and then Vice President of
30+ Years of Experience Administration & Performance from May 2012 until November 2013
9
Introduction
Industry Overview
Asset Overview
Appendix
10INDUSTRY OVERVIEW
EARLY MOVER ADVANTAGE IN ARGENTINA HEAVY OIL AND GAS
Why Argentina? Argentina Is Investment Ready
■ Exceptional opportunities in the oil and gas ■ Focus on Vaca Muerta shale has left the large
sector due to 16 years of underinvestment heavy oil opportunities in the country
■ Constructive pricing framework above unattended and ripe for the taking
international markets ■ In January 2017, President Macri announced
■ Extension of concessions for 10 years companies engaged in Vaca Muerta
available committed to invest ~US$5.0Bn to develop
the play during 2017
■ The new Macri government has shifted toward
market friendly government policies: Over US$8 Bn+ in Vaca Muerta Multiyear Commitments
● Raised US$29Bn in sovereign debt
● Lifted foreign currency restrictions
● Pushing tax and labor reforms
● Tackling union issues
● Clear movement to international price
parity for oil and gas
High quality heavy oil resource position while the industry has focused on light oil development at Vaca Muerta
11INDUSTRY OVERVIEW
ATTRACTIVE HYDROCARBON PRICING – ARGENTINA
Developing Pricing Environment
■ Gas Pricing
● Government plans to eliminate end-user natural gas tariff subsidies by 2019
Ø Strategy will be implemented via gradual increase in end-user tariffs until 2019 which contemplates an increase in gas
prices for upstream producers
● In January 2017, President Macri announced an extension of the Plan Gas program from 2017 to 2020 for companies investing
in E&P projects in the Vaca Muerta, guaranteeing minimum gas prices
● Gas prices have increased to over US$7/MMbtu from US$0.15/MMbtu over the past 10 years
■ Oil Pricing
● The current administration seeks to deregulate prices in an effort to converge to free competition international prices in 2017
Price Dynamics Leading to Argentina’s O&G Industry Normalization
Domestic Gas Price Dynamics (US$/MMbtu) Domestic Oil Price Dynamics (US$/boe)
2017 LNG Import Price: US$6.8/MMbtu 125.0
12%
31% 23% 100.0
45% 38%
50%
81%
6.8 75.0
6.0
4.7 5.3
3.8 4.2
3.4
1.3 50.0 50.8
45.8
Mar-16 Oct-16 Mar-17 Oct-17 Mar-18 Oct-18 Mar-19 Oct-19
25.0
Weighted Average Price for Residential and Commercial Consumers Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16
% Government Subsidy
WTI Domestic Average Price
LNG Import Price for 2017
12 ____________________
Source: El Cronista, Wall Street Research and Ministry of Energy and Mining.INDUSTRY OVERVIEW
GAS IN COLOMBIA UNDERPINNED BY ROBUST DEMAND FUNDAMENTALS
Why Colombia? New Gas Production Is Necessary
■ Economic stability with a solid and predictable ■ Gas demand in Colombia is heavily outpacing
business environment supply
● Colombia’s steadfast economic policies have ■ Increasing use of gas in Colombia (e.g. mandate
allowed it to maintain investment grade credit to use gas power in towns with population
ratings (BBB/Baa2/BBB) while other >5,000)
hydrocarbon dependent economies in the ■ Chuchupa, Colombia’s largest gas field, is in
region have faltered decline at a rate that requires more than
● Legal system also guarantees equal rights to 86MMscf to come on stream every year to
national and international investors, as well replace produced molecules
as the free flow of capital ■ Superior natural gas prices to Henry Hub ($5.00 -
■ Continued improvements in security with the $6.00/MMbtu)
execution of the peace accord and
demobilization CHEVRON GUAJIRA GAS PRODUCTION NORTHERN COLOMBIA
600,000
500,000
Gas Production (MSCFPD)
400,000
El Niño
generates 300,000
increased gas Chuchupa has declined at
demand 200,000
86MMcfpd per year for the past
100,000
two years
0
Jan/12 Jan/13 Jan/14 Jan/15 Jan/16 Jan/17
BALLENA CHUCHUPA TOTAL Linear (CHUCHUPA)
13INDUSTRY OVERVIEW
ATTRACTIVE HYDROCARBON PRICING – COLOMBIA
Strong Regional Pricing Dynamics Driven by High Demand and Lack of Infrastructure
■ Gas Pricing
● Northern Colombia gas price will be affected by the gas supply
shortfall and the LNG regasification plant pricing at Cartagena
● Gas price expected to rise from current level of US$5.00/MMbtu
● For each US$1.00 increase in the gas price, the value of gas
reserves in Colombia is expected to increase by ~25%
● Lack of regional pipeline integration results in localized markets
that experience upside potential during surges of high demand
Ø Gas prices reached ~US$15-$18/Mcf during the last La Niña
■ Oil Pricing
● Colombia’s oil price is not subsidized by the government and as
a result, it is affected by global petroleum market movements
Hydrocarbon Prices are Supported by a History of Stable Energy Demand Growth and Use of O&G as the Primary Energy Source
Domestic Oil Price Dynamics (US$/boe)
CAGR
60% 62% 56% 56% 53% 57% 58% 57% 58% 59% 60% 59% (‘04-‘15)
852
852 4.1%
780
780 782
782 819
819
733 7 12.1%
702 702
702 733 7
628 629 653 6 6 203 1.4%
629 3 5 6 203
549
549 553
553 4 216 202
3 3 210 184 220 11.4%
2 3 186 120 141
193 201 103 116
174 178 116 108 87
82 71 91 161 175 170 4.8%
43 27 147 143 158
108 113 120 122 140
102
277 297 297 314 331 3.4%
228 237 237 234 251 232 258
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Oil Gas Coal Hydro Renewables % O&G
14 Note: Canacol reports that it is receiving an average sales price of ~US$5.16/Mcf for 76 MMscf/d production for first 3 months of 2017
____________________
Source: Source: ACP, ANH, Ministry of Mining and Energy and BP Statistical Review 2016.Introduction
Industry Overview
Asset Overview
Appendix
15ASSET OVERVIEW
COLOMBIA PROFILE
Overview Asset Locations
■ PentaNova owns working interests and is the operator of
one development and two exploratory blocks in Northern
Colombia
1
Maria Conchita (24,312 hectares)
Ø Drill ready development block
3
Ø Located next to Chuchupa, Colombia’s largest gas
field with +900 MMboe in reserves accounting for 1
40% of Colombia’s natural gas output
2
2
Sinu 9 (126,925 hectares)
Ø Low-risk exploration play with gas test
Ø Adjacent to Canacol’s Esperanza block, a major
producing asset
3
Tiburon (99,492 hectares)
Ø High impact exploration block
Ø In close proximity to recent multi-TCF discoveries,
Perla and Orca
16ASSET OVERVIEW
MARIA CONCHITA
Overview 2P Reserves (W.I.) 15.1 MMboe
Operational Highlights
■ Natural gas block (60,076 acres) in the 2P Reserves (W.I.)
Management Target Recovery 15.1 MMboe
44.6
Guajira basin with 3D seismic and a beneficial
Management
Current Target(100%
Production Recovery
) 44.6 MMboe
0 bopd
80% W.I. .
CurrentProduction
2018E Production(WI%
(100%
) ) 0 bopd
1,929 bopd
■ Drill ready with a 24 year production license .
8.0% Oil Royalties
2018E Production (WI% )
Royalty 6.4%1,929 bopd
Gas Royalties
.. 5.4% Overriding Royalties
■ Very attractive prospectivity, given adjacency 8.0% Oil Royalties
Royalty US$5.0M
6.4% Gas Drill & Case
Royalties
Well Cost
US$7.8 Total Capex
to the largest gas field in Colombia ..
5.4% Overriding Royalties
(Chuchupa) Well Cost End Date
Concession
US$5.0M Drill & Case
US$7.82041
Total Capex
..
■ Close proximity (+/- 20 km) to both gas trunk Concession End Date
Operator 2041 - 80.0% W.I.
PentaNova
..
lines Former partners of -
Operator
Partners BochicaPentaNova
Investment - 20.0%
80.0% W.I.
W.I.
. Holdings -
Former partners of -
Partners Bochica Investment 20.0% W.I.
Holdings -
17ASSET OVERVIEW
MARIA CONCHITA
Development Ready Block with 3D Seismic Close to Colombia’s Largest Gas Producing Field and its Infrastructure
Chuchupa
3D Maria
Conchita
Seismic
EIA permit area area
18ASSET OVERVIEW
SINU 9
Overview Operational Highlights
2P Reserves N/A
h .
■ Natural gas block in the Department of Cordoba
2P Reserves Target Recovery
Management 33.9 N/A
MMboe
with a beneficial 80% W.I. in low-risk exploratory h ..
gas block with “in-situ” gas accumulations Management
Current Target(100%
Production Recovery
) 33.9 MMboe
0 boepd
..
(313,638 acres)
Current
2018E Production(W.I.%
Production (100% ) ) 0 boepd
0 boepd
■ Additional upside in mapped structures on trend ..
with gas test 8.0% Oil Royalties
2018E Production (W.I.% ) 0 boepd
6.4% Gas Royalties
Royalty
. 12% x-factor
■ 18,000 acres of structural closure mapped with 4%8.0%
Overriding Royalties
Oil Royalties
.
6.4% Gas Royalties
2D seismic Royalty
12% x-factor
Well Cost $5.0MM
4% Overriding Royalties
■ Hydrocarbon potential on adjacent Canacol ..
Well Cost End Date
Concession $5.0MM
2041
Esperanza Block with 411 BCF of 2P reserves
..
■ Gas trunk lines close (+/- 20 km) to the block with Concession End Date 2041 - 80.0% W.I.
Operator PentaNova
spare capacity ..
Desarrolladora Oleum - 15.0% W.I.
■ Additional oil & gas upside from unconventional Operator
Partners
PentaNova
Clean Energy - 80.0% W.I.
. Resources - 5.0% W.I.
resource potential Desarrolladora Oleum - 15.0% W.I.
Clean Energy
Partners
Resources - 5.0% W.I.
19ASSET OVERVIEW
SINU 9
Exploration on trend with gas discovery, shoot 3D Seismic and drill, adjacent to Canacol gas block and 16 km to gas trunk line
Creciente Gas Field
Sinu 9 Gas
Exploration Block Hechizo-1 Gas Discovery
drilled in 1992
tested 10 MMscfpd
Gas Water Contacts?
Chuchupa
Maria
Conchita
Canacol Gas Block
Sinu 9 structure is over 20 km long with the Hechizo-1
Producing ≈ 80MMscfpd
20 gas discovery on the north endASSET OVERVIEW
TIBURON
Overview 2P Reserves Operational Highlights N/A
h .
■ High-impact exploratory gas block with 2D 2P Reserves
Additional Upside 161.5N/A
MMboe
h .
seismic coverage showing several leads with
Additional
Current Upside (100% )
Production 161.5 MMboe
0 boepd
closure and bright spot gas indicators .
(245,850 acres) with a beneficial 60% W.I. CurrentProduction
2018E Production(W.I.%
(100% )) 0 boepd
.
8.0% Oil Royalties
■ Located between three giant gas fields 2018E Production (W.I.% )
Royalty 0 boepd
6.4% Gas Royalties
. 6.0% Overriding Royalties
collectively holding 28+ TCF: Chuchupa, Perla 8.0% Oil Royalties
Royalty
Well Cost $5.5MM
6.4% Gas Royalties
6.0% Overriding Royalties
and Orca .
Well Cost End Date
Concession $5.5MM
2039
.
Concession End Date
Operator 2039
PentaNova - 60.0% W.I
.
Operator
Partners PentaNova
Colpan - 60.0%
Oil & Gas W.IW.I.
- 40.0%
.
Partners Colpan Oil & Gas - 40.0% W.I.
21ASSET OVERVIEW
ARGENTINA PROFILE
Overview1 Asset Locations
PentaNova has a portfolio of assets in Argentina
comprised of 125,415 gross acres
1
Llancanelo (23,697 acres)
Ø Discovered in 1937, operated by YPF
Ø Average production of 1,366 bopd in June 2017
2 1
KM8 (4,571 acres)
Ø Redevelopment of historic field with +38MMbbl
produced to date
Ø Current production of 88 boepd
3
Estancia La Mariposa (21,780 acres)
Ø Fully carried working interest in a stable producing 2
block that will generate ~US$1.0 – US$1.5 million in
3
free cash flow per annum
4
4
Sur Rio Deseado Este (75,367 acres)
Ø Heavy oil blocks on southern flank of San Jorge
basin
Ø Proven presence of heavy oil (+2.0 Bnbbl OOIP)
22ASSET OVERVIEW
LLANCANELO 2P Reserves (W.I.) 3.3 MMbbl
h .
Overview Management Operational
Target Recovery
2P Reserves (W.I.) (W.I.) Highlights
62.7 MMbbl
3.3 MMbbl
h .
■ Heavy oil exploration & development
Current Production
2P Reserves
Management (W.I.)
Target Recovery (W.I.) 1,736 bopd
3.3 MMbbl
62.7 MMbbl
concession (23,697 gross acres) h
.
Current Production
Management Target(W.I.)
Recovery (W.I.) 868 MMbbl
62.7
1,736
1,366 bopd
bopd
■ Current 39% working interest in this giant .
heavy oil field and will enter into a joint 2018E
CurrentProduction
Production(W.I.)
(W.I.) 1,442
1,736 bopd
868 bopd
683
.
venture with YPF, and hold an option to farm-
CurrentProduction
2018E Production(W.I.)
(W.I.) 868 bopd
1,442
15.45% bopd
Royalty
in to an additional 11% working interest Royalty
. [2.00%] GORR
.
■ Primary cold multilateral well development for 2018E Production (W.I.) 1,442 Royalty
15.45% bopd
Royalty
Well Cost . [2.00%] GORR
$4.1MM
low cost production growth .
15.45% Royalty
Royalty
■ Option for thermal enhanced recovery for Concession
Well Cost End Date [2.00%]
May 28,GORR
$4.1MM2036
.
incremental recovery PentaNova - 50.0% W.I
Well Cost End Date
Concession
Operator May
YPF (Operator $4.1MM
of 28, 2036 - 50.0% W.I.
Record)
■ Close access to underutilized infrastructure . Joint Operations Team
PentaNova - 50.0% W.I
Concession End Date May 28, 2036
(pipelines and refinery) Operator
.
YPF (Operator of Record) - 50.0% W.I.
Joint Operations Team
PentaNova - 50.0% W.I
■ Ability to triple area with proven oil resource Operator YPF (Operator of Record) - 50.0% W.I.
potential from rights in the Llancanelo “R” Joint Operations Team
surrounding acreage
23ASSET OVERVIEW
LLANCANELO
Application of Proven Heavy Oil Development Technology to Unlock the Potential of a Massive Oil Accumulation
Horizontal wells have been drilled and are on production proving the
economic viability of full field cold horizontal well development.
Llancanelo Block
Llancanleo R Block surrounds the Llancanelo Block
24ASSET OVERVIEW
KM8
2P Reserves (W.I.) N/A
h .
Overview Management Operational
Target Recovery
2P Reserves (W.I.) (W.I.) Highlights5.0 MMboe
N/A
h .
■ 100% W.I. in a shallow light oil development 2P Reserves
Current (W.I.)
Production
Management Target Recovery (W.I.) N/A
88 MMboe
5.0 boepd
h .
concession (4,571 acres) with a 100% W.I.
Management
Current Target(W.I.)
Production Recovery (W.I.) 46
88boepd
5.0 MMboe
boepd
■ Shallow, low cost workover and drilling to .
target light oil CurrentProduction
2018E Production(W.I.)
(W.I.) 88boepd
46
1,428boepd
boepd
.
■ Close proximity to operating center for the Current
Royalty Production(W.I.)
2018E Production (W.I.) 88 boepd
9%
1,428Royalty
boepd
.
basin ensures low cost
2018E
Well Production (W.I.)
Cost
Royalty 1,428 boepd
$1.1MM
9% Royalty
■ Additional production potential from the D-129 .
productive formation, which is undrilled to date Royalty
Concession
Well Cost End Date 9% Royalty
In Perpetuity
$1.1MM- No Expiry
.
on the block
Well Cost End Date
Operator
Concession $1.1MM
PentaNova - 100.0%
In Perpetuity W.I
- No Expiry
.
■ Concession exists in perpetuity and comes
Concession
Partners
Operator End Date In Perpetuity
PentaNova - No Expiry
- 100.0%
N/A W.I
with an environmental waiver for prior activity .
■ YPF has proven the ability to redevelop Operator
Partners PentaNovaN/A
- 100.0% W.I
.
shallower formations by drilling wells in 2015-
Partners N/A
2016 within meters of the edge of the block
25ASSET OVERVIEW
KM8
Shallow, Mature Field Reactivation with Additional Development in Formations Producing within Meters of the Block Edge
660
Wells
69
Wells
0
Wells
26ASSET OVERVIEW
SUR RIO DESEADO ESTE
2P Reserves N/A
Overview Operational Highlights
h .
■ Heavy oil asset on the southern flank of the San 2P Reserves
Additional Upside 125.0N/A
MMbbl
h .
Jorge basin with a 54.1% W.I. in Sur Rio Deseado
Additional
Current Upside (100% )
Production 125.0 MMbbl
30 bopd
Este production area and 7.92% W.I. in Sur Rio .
Deseado Este exploration area (75,367 acres) Current Production (100%
(W.I.% ) 30
14 bopd
.
■ Multi billion barrel low sulfur (< 0.5%) heavy oil 12% Royalty
Current Production (W.I.% )
Royalty 14 bopd
[2.00%] GORR
trend on southern flank of San Jorge Basin .
12% Royalty
■ Area has enormous heavy oil potential, every well Royalty
Well Cost $0.6MM
[2.00%] GORR (1)
.
drilled on the block has encountered heavy oil
Well Cost End Date
Concession $0.6MM
March 27, 2021
■ Natural gas available on the block to support .
thermal oil production Concession
Operator End Date/ Expl.)
(Production March
PentaNova 27, 2021
- 58.1% / 52.4% W.I
.
■ Option on open acreage (>1 MM acres) on trend Pluspetrol
Operator
SRDE (Production
Production / Expl.)
Partners PentaNova - 58.1%-/ 52.4%
16.9% W.I
W.I.
San Enrique Petrolera - 24.9% W.I.
under negotiation with the Province of Santa Cruz .
Production Partners Pluspetrol - 44.0%
16.9% W.I.
SRDE Exploration Partners
San Enrique Petrolera - 24.9% W.I.
3.6% W.I.
.
Pluspetrol - 44.0% W.I.
SRDE Exploration Partners
San Enrique Petrolera - 3.6% W.I.
27ASSET OVERVIEW
SUR RIO DESEADO ESTE
Controlling the Southern Flank of the Basin with Heavy Oil Resources
Heavy Oil Province on the Southern
Flank of the San Jorge Basin
• Very large heavy oil accumulation
• Low sulfur heavy oil, less than
0.5%
• Up-hole gas present for thermal
recovery of gas development
140 MILES (≈ 220 KM) • Drilled and testing oil and gas in
the early ’90s
• Infrastructure in place, allowing
oil to be loaded on the water for
Bridas’s Basin Edge Drilling
Program, 1991-1993 sale, gas trunk line goes through
block
SDR: 1,000,000 acres SDRE R: 250,000 acres SDRE: 76,000 acres
28
28Introduction
Industry Overview
Asset Overview
Appendix
29APPENDIX
KM8
Production Type Curves
Concession End Date In Perpetuity - No Expiry ■ IP rate of 157 bopd with a 11.5% monthly decline and
IP Rate (bopd) 157 B=0.6385 and cumulative production of 94,000 bbl
EUR per well (Mbbl) 61
Hydro-carbon Mix 100% Liquids (28-31° API)
Operating Costs Other
Lifting Cost $6.79/bbl Discovery date 1914
Other Opex $2.35/bbl # of wells drilled 729
# of wells on current prod. 11
Capital Expenditures 9% Concession Licence
Royalty rates
Terms
Total Cost Per Well $1.1MM
# Days / Well 30
Well Spacing Variable
# of New Wells to Develop Est.
51
Recoverable Reserves
30APPENDIX
MARIA CONCHITA
Production Infrastructure
Concession End Date 2041 ■ Assumes $11MM to be spent on pipelines and facilities in
2018
IP Rate (Mcfpd) Mid-Miocene 6,500
EUR per well (MMcf) 24.9
Hydro-carbon Mix 100% Gas
Operating Costs Type Curves
Fixed opex of $500,000 plus Mid-Miocene
Lifting Cost
$360,000/well/year Initial Rate (Mcfpd) Decline
Other Opex $0.28/Mcf Aruchara M. Miocene 6,500 0.50%
Offset #1 6,500 0.50%
Capital Expenditures Offset #2 6,500 0.50%
OffSet #3 6,500 0.50%
$5.0MM Drill & Case
Total Cost Per Well Total Production 26,000
$7.8MM Total Capex
# Days / Well 50
Well Spacing 250 acres
Upper Miocene
# of New Wells to Develop 2P 3
Initial Rate (Mcfpd) Decline
Aruchara M. Miocene 4,000 0.50%
Other Offset #2 4,000 0.50%
Offset #3 4,000 0.50%
# of wells drilled 2
# of wells on current prod. 0
8.0% Oil Royalties
Royalty rates 6.4% Gas Royalties
5.4% Overriding Royalties
31INVESTOR RELATIONS
PentaNova Energy Corp.
Phone +1 604 609 6110
HEAD OFFICE
ADDRESS
Suite 3123 – 595 Burrard Street
Vancouver, BC V7X 1J1, Canada
PHONE
+1 604 609 6110
EMAIL
investorrelations@pentanovaenergy.com
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