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Winter 2011 Presentation
A Deep Basin Stronghold
Deep Basin specialists
500+ Deep Basin drilling locations on 200 gross sections
Multiple zone, stacked resource
plays
Liquids-rich gas production –economic at <$3.00/GJ
Forecast 2011 exit production:
11,000 boe/d Committed team
Focused on Simonette
2
Capitalization
Trading Symbol TSX: CQE
52-week trading range $1.89-$4.70
Shares outstanding FD 177 million
Insider ownership 11% FD
Market capitalization (1) $566 million
September 30, 2011 net debt (2) ($7.7) million
Bank line $110 million
(1) Based on Cequence stock price of $3.50 (2) September 30, 2011 net debt is calculated as cash, net working capital less commodity contract asset and demand credit
facilities and excluding obligations on flow-through shares included with accounts payable and accrued liabilities in the consolidated balance sheet.
3
PEACE RIVER
EDMONTON
GRANDE PRAIRIE
BRITISH
COLUMBIA
ALBERTA
Focused on the Deep Basin
ALBERTA
Peace River Arch/NE BC
2011 Estimate: 3,450 boe/d
Deep Basin: Simonette-Kaybob
2011 Estimate: 5,500 boe/d
Other Areas
2011 Estimate: 100 boe/d
4
Simonette-Resthaven: A Great Postal Code
CQE land
Montney wells
Wilrich-Falher wells
Horizontal Well Activity
Resthaven
Celtic / Paramount
Montney
Karr
Paramount
Falher
Resthaven
Paramount
Dunvegan
Resthaven
Encana
Wilrich
Leland
Encana
Falher
Kakwa / Chime
Encana / Tourmaline
Falher / Wilrich
Dunvegan wells
North Simonette
Apache-AOSC
Montney
Simonette
CNRL
Dunvegan
Simonette
COP
Dunvegan
5
Trilogy Plant
CQE WI = 25%
Capacity 10 MMcf/d
Keyera Processing Facility
Capacity 153 MMcf/d
Available Capacity 90 MMcf/d
Cequence Alliance
Meter Station
Capacity 120 MMcf/d
To Aux Sable
Deep Cut Plant
Chicago, Illinois
Simonette: A Concentrated Land Base
• Simonette land
• 150 net sections (avg. 75% W.I.)
• Low operating and
transportation costs –
average of <$7.50/boe
• Aux Sable Rich Gas Premium Agreement expected to commence April, 2012 and projected to provide:
• Increase in realized product price • Reduction in processing fees • Increase to current netbacks of
approximately 15% • Additional take away capacity ~
120 MMcf/d
Existing 3D seismic
Proposed 2012 3D seismic
CQE land
6
CQE well
CQE field compressor
CQE Gathering system
CQE Planned gathering system
12” Keyera gathering system
Alliance pipeline
Stacked Zones Expose Significant Resources
Cequence land
5-10 bcf
5-10 bcf
5-24 bcf
5-25 bcf
30-60 bcf
Dunvegan
Falher
Wilrich
Gething
Montney
Zone Total Resource Potential/Sec
2,200m
2,950m
3,100m
2,700m
2,500m
2,800m
7
Simonette Montney Liquids-Rich Resource Play
CQE land
CQE Montney rights
Bypass pay wells
CQE Montney test well
CQE Montney Hz well
Planned thru Q1 2012 Montney locations
Montney inventory
• Delineation drilling to further de-risk land base
• 200 potential locations @ 4 wells/section
• 25 of 70 net sections de-risked
• 30-60 metres net pay
Fall 2011
Plan to Spring 2012
Full Development Plan (50 sections)
8
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
0 1 2 3 4 5 6 7 8 9 10 11 12
Montney Scorecard CQE Working Model vs. Well Results
Pro
du
cin
g D
aily
Gas
Rat
e (m
cf/d
)
Months on Production
Montney
23% NGL
77% Gas
58% Gas
42% NGL
Volume
Revenue
1-31
1-22
9
Simonette Wilrich Liquids-Rich Resource Play
CQE land
CQE Wilrich rights
Bypass pay wells
CQE Wilrich Hz well
Wilrich locations planned thru Q1 2012
Wilrich inventory
Fall 2011
• Delineation drilling to further de-risk land base
• 60-120 locations @ 1.5-3 wells/section
• 60+ net sections of total potential
• 20 sections de-risked through initial drilling
Plan to Spring 2012
Full Development Plan (40 sections)
10
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
0 1 2 3 4 5 6 7 8 9 10 11 12
Wilrich
Wilrich Scorecard CQE Horizontal Working Model vs. Well Results
Pro
du
cin
g D
aily
Gas
Rat
e (m
cf/d
)
Months on Production
12% NGL
88% Gas
76% Gas
24% NGL
Volume
Revenue
11
Montney and Wilrich Model Economics
Wilrich
Montney
Production Potential Gas Liquids ORGIP
Capital Cost/ Well ROR NPV
Model Payout
Breakeven Gas Price
4.5 mmcf/d
20
bbls/mmcf
4.0
BCF
$5.0 MM
75% $4.4 MM
17 months
$2.25/ mmbtu
4.5
mmcf/d
45
bbls/mmcf
4.5
BCF
$5.5
MM 90%+ $8.0
MM
14 months
<$2.00/ mmbtu
CQE Working Model @ $4.00/mmbtu
12
Other Stacked Cretaceous Potential
• 200 potential
Gething locations (two wells per section)
• Dunvegan and Falher activity in nearby pool indicates encouraging exploration potential
Dunvegan
Falher
Bluesky / Gething
13
Dunvegan
Falher
Wilrich
Gething
Montney
14
One drilling
pad could add
$100 MM of NPV to
Cequence
Single Well NPV ($mm)
Emerging
Emerging
4.4
2.6
8.0
Stacked Development Adds Significant Value
Potential Locations
60-120
200
150-200
?
?
Cequence Energy Results and Guidance
2010 2011 Guidance
Production (boe/d) Average (full year) (1)
Exit rate
4,451 7,485
9,050
11,000
Capital expenditures $64.1 MM $150 MM
Net acquisitions/(dispositions) (2) $216.6 MM ($24.0) MM
Equity issued (3) $65 MM $116 MM
Operating costs per boe $10.90 $9.00
Royalties (% of revenue) 12 13
Crude oil – WTI (Cdn$/bbl) $79.38 $97.50
Natural gas – AECO (Cdn$/GJ) $3.79 $3.63
Funds flow (4) Per share ($/basic share)
$19.1 MM $0.27
$45-$50 MM $0.32
December 31 net debt $73.1 MM $50-$55 MM
Basic shares outstanding, December 31 128.8 MM 161.9 MM
(1) 87% natural gas
(2) Includes the disposition of three properties in 2011 with combined production as of December 31, 2010 of approximately 990 boe/d and the acquisition of properties in Q2, 2011 with production of approximately 1,000 boe/d.
(3) Equity issued includes proceeds of $9.8 million from the exercise of 2.25 million CDE flow-through Warrants in August 2011, proceeds from the bought- deal financing which closed on March 17, 2011 pursuant to which the Company issued 13.4 million common shares and 2.1 million CEE flow-through common shares for total gross proceeds of approximately $45.5 million, proceeds from the issuance of 0.6 million shares pursuant to the exercise of stock options for proceeds of $1.2 million, proceeds from the bought-deal financing which closed on August 18, 2011 pursuant to which the Company issued 12.0 million common shares and 2.1 million CEE flow-through common shares for total gross proceeds of approximately $56.1 million, and proceeds from the sale of 0.7 million CEE flow-through common shares for total gross proceeds of approximately $3.0 million in October, 2011.
(4) Funds flow sensitivity: +/- $1 AECO is $16 million.
15
Decades of Deep Basin experience
Stacked zone potential with >500
drilling locations
Financial capacity
Economic at <$3.00/GJ
Cequence Energy: Worth Discovering
CQE
16
Forward-Looking Information
Certain information included in this presentation constitutes forward-looking information under applicable securities legislation. This information relates to future events or future performance of the Company. Investors are cautioned that reliance on such information may not be appropriate for making investment decisions. Many factors could cause the Company’s actual results, performance or achievements to vary from those described herein. The forward-looking information contained in this presentation is expressly qualified by this and other cautionary statements set forth in the continuous disclosure record of the Company.
17
Appendix
18
Simonette Gething Development
CQE land
CQE Gething rights
Gething gas wells
CQE location • 100 sections with Gething potential
• Typical Gething well drains 250 acres
• 200 plus potential locations
19
Simonette: The Basis of an Intermediate-Sized Inventory
Deep Basin Gething
Vertical Model
Wilrich HZ Working Model
Montney HZ Working Model
GAS PRICE cdn$/mmbtu $4.00
Reserves per well mboe 340 700 900
Model well costs – drill, case, complete and tie-in
$ millions $2.25 $5.00 $5.50
IP rate (1 month) Boe/d 320 700 800
Average first year rate Boe/d 220 450 500
Natural gas liquids Bbls/mmcf 15 20 45
IRR 78% 75% 90%+
NPV (10% BT) $ millions 2.6 4.4 8.0
F&D $/boe 6.62 7.14 6.11
POTENTIAL LOCATIONS 200 90-180 200+ 20
AECO Wilrich
$4.00/mmbtu Montney
$4.00/mmbtu
NGL Yield 20 bbls/mmcf 45 bbls/mmcf
Per boe Per boe
Plant Gate Price $31.17 $35.86
Royalty (5%) $1.56 $1.79
Operating Cost + Transportation $7.00 $7.00
Operating Netback $22.61 $27.06
F&D (per boe) $7.14 $6.11
Recycle Ratio 3.30 times 4.43 times
Simonette – Model Horizontal Gas Netbacks
Assumes no GORR
21 (1) Utilizing pricing of $4.00/mmbtu AECO and $90/bbl WTI.
Excellent Economics
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
$3.00 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00
Simonette – Half-Cycle Economic Models
22
NP
V1
0 (
$M
)
Gas Price ($/mmbtu)
Financial Highlights
23
Q3 2011 Q2 2011 % Change
Average Daily Production 9,833 9,125 8
Funds flow from operations (1) $10,438 $12,042 (13)
Per share, basic and diluted $0.07 $0.08 (13)
Operating costs per boe $9.36 $8.96 4
G&A per boe $2.10 $2.37 (11)
Capital expenditures $31,222 $16,470 90
Net debt and working capital (deficiency) (2) $7,745 $65,147 (88)
Weighted average shares outstanding (basic and diluted)
152,549 144,314 6
(1) Funds flow from operations is calculated as cash flow from operating activities before adjustments for decommissioning liabilities and net changes in non-cash working capital.
(2) Net debt and working capital (deficiency) is calculated as cash, net working capital less commodity contract asset and demand credit facilities and excluding obligations on flow-through shares included with accounts payable and accrued liabilities in the consolidated balance sheet.
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4, Est Q1, Est Q2, Est
30.22
23.98
19.97
18.63
16.45 15.68
14.06 13.60 13.52
Corporate Production and Cash Costs
1,317
2,089 2,445
3,197
4,619
7,400
8,185
9,125 9,040
11,000
2009 2010 2011
0
5
10
15
20
25
30
35
$/b
oe
bo
e/d
Natural Gas Oil & NGL Opex, Transport and G&A Expense
24
9,833
13,000
2012
Contacts: Paul Wanklyn President & CEO [email protected] David Gillis
Vice President, Finance & CFO [email protected]
www.cequence-energy.com
3100, 525 - 8th Avenue SW Calgary AB T2P 1G1
Phone: 403-229-3050 Fax: 403-229-0603