Fairborne Energy Ltd. Corporate Presentation

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Fairborne Energy Ltd. Corporate Presentation

  1. 1. Fairborne Energy Ltd. Corporate PresentationPlease  refer to Forward‐Looking Statements, Advisory and Resource Disclosure at end of presentation.
  2. 2. Fairborne History2002 2012• Grew Company from startup to 16,000 BOE/D• Organic exploration successes • Wild River – 60 BCF Nisku Pool, 20 mmcf/D • Vertical multizone wells at Harlech • Drilled first Hz. Wilrich well in Basin • Continued to improve with drilling costs down 20-25% and IP’s increasing from 4 mmcf/D to max 10 mmcf/D • Early success in Cardium resource at Harlech (2 Hz with second well at 1,000 boe/D IP)NEW FAIRBORNE• Divestiture of dry natural gas assets to close Oct 1, 2012 ($189 MM Proceeds)• Transformed Fairborne into pure Deep Basin focused company with: • 75/25 Gas/Oil mix with Netbacks proforma of > $15.00/boe • Initial production of 4,500 boe/D • 312 Gross (201 Net) sections in the Harlech area • Nominal Debt• Management & technical team remains intact.
  3. 3. Post Divestiture Snapshot• Production (Oct 1, 2012) 4,500 boe/D (25% oil & liquids) • Harlech Area 13.5 mmcf/D Gas 470 bbls/D Condensate/Light Oil 280 bbls/D NGL’s 3,000 boe/D TOTAL • Clive 500 bbls/D Light Oil/Liquids • Wild River/Tower Creek 1,000 boe/D (100% Gas)• Bank line $ 80 MM• Shares outstanding (basic/FD) 102.6 MM/110.0 MM• Management & Insiders (FD) 5% (8%)
  4. 4. Proforma Value Future Development Reserves Net Asset Value * Capital ** 40 $5 100 90 Bank $4 80 Lines 30 68 $3.21 70 23.1 $3 60mm boe $ MM $/sh 20 $2.35 50 45 15.4 $2 $1.75 40 Current 10.6 Share 30 10 Price $1 20 10 1 0 $- 0 PDP Proven P+P PDP Proven P+P PDP Proven P+P Horizontal Horizontal Multizone Cardium Wilrich/Falher Vertical Gross Unbooked Locations 330 201/182 55 PV10 - Debt * Net Asset Value = GLJ Resource Report Shares OS Cardium 131 MM boe’s * PV10 YE 2011 Reserves & Pricing Economic Contingent ** FDC on a Discounted Basis Resource
  5. 5. Position for Co’s ‹10,000 boe/d Size (BOE/D) Opex ($/BOE)10000 $30 9000 $27 8000 $24 7000 $21 6000 $18 5000 $15 4000 $12 3000 $9 2000 $6 1000 $3 0 $0 Fairborne Fairborne FEL Proforma Production = 4,500 BOE/D OPEX = $10.50/BOE Debt to Cash Flow = 0.2 x G&A = $3.80/BOE Debt to Cash Flow G&A ($/BOE)5.0 $10.00 $9.004.0 $8.003.0 $7.00 $6.002.0 $5.00 $4.001.0 $3.000.0 $2.00 $1.00 Fairborne‐1.0 $0.00 Fairborne‐2.0
  6. 6. Operating Focus – Deep Basin 312 Gross (201 Net) Sections• FEL operates 100% of production• High working interest• Reservoir depth up to 3,800 m Multizone 12 producing horizons• Rich gas, light oil & NGL’s
  7. 7. Harlech Area – Infrastructure & Activity
  8. 8. Regional Cardium GeologyCardium Ram Barrier Trend 225 Miles long 30 Miles wide 2,562 Vertical production 163 Hz. Production13,350 Total wells through cardium sand
  9. 9. Harlech – Cardium Ram Barrier
  10. 10. Harlech Cardium Cardium Type Log Theoretical Volumetric Calculation Gamma Depth 15 Porosity 0 Resistivity Mud Gas Low Med High AREA (acres): 640 640 640 2850 NET PAY (m): 6 7 8 POROSITY (%): 12 11 10CARDIUM TOP SW (%): 20 15 10 RESERVOIR TEMPERATURE (deg F) 184 184 184 2860 RESERVOIR PRESSURE (psia): 4,700 4,700 4,700 COMPRESSIBILITY FACTOR: 0.95 0.95 0.95 RECOVERY FACTOR (%): 75% 75% 75%CARDIUM BASE GIP PER SECTION (BCF) 14.4 16.3 17.9 2870 RGIP PER SECTION (BCF) 10.8 12.2 13.4 LIQUIDS mmbbls 0.54 0.61 0.67 Rock - Porosity Types MM BOE/SECTION 2.34 2.64 2.90 Open Fracture Fairborne owns 102 net sections Porosity Conglomerate Sandstone Fracture + Intergranular Porosity Fracture + Intergranular Porosity
  11. 11. Cardium Resource Economic Contingent Resource – GLJ Evaluated LOW (P90) BEST (P50) HIGH (P10) TOTAL RECOVERABLE GAS (BCF) 790 1,056 1,389 CONDENSATE/NGL (MMBBLs) 45 60 79 TOTAL (MMBOE) 176 236 310 WORKING INTEREST GAS (BCF) 436 588 757 CONDENSATE/NGL (MMBBLs) 25 33 43 TOTAL (MMBOE) 97 131 169 WELLS (GROSS) 298 330 387 TYPE WELL GAS (BCF) 2.9 3.5 4.0 CONDENSATE/NGL (MBBLs) 150 180 2001. Based on an independent resource study (the "Resource Study") prepared by GLJ for a portion of Fairbornes  Cardium land holdings in the greater Harlech area effective March 31, 2012.2. "Total Interest" means a 100% working interest in the lands in which Fairborne has an interest in the area (which  includes Fairbornes interest in the area as well as all other working interests in such lands held by third parties). Liquids 0% C23. "Working Interest" means Fairbornes working interest (operated or non‐operated) share before deduction of  royalties and without including any royalty interests of Fairborne. 33% C3 – C44. All volumes in the table are sales volumes.5. The liquid yields are based on average yield over the producing life of the property. 67% C5 +6. Numbers in the table may not add due to rounding.7. Reflects contingent resources which have been sub‐classified by GLJ as economic based on GLJ forecast pricing as  at April 1, 2012.8. See "Information Regarding Disclosure on Contingent Resources and Resource Study"
  12. 12. Cardium - Resource CRDM HZ Estimated Type Well Curve 3.5 BCF GAS 50 bbls/MMscf liquid YieldEstimated Daily Production Rate (BOE/d) 1,200 Well #2 1,200 m Hz Harlech Total Revenue 1,000 20 Fracs 11-21 Well 5.6 MMscf/D IP Revenue Stream per MCF (Sales) 02-15 Well 2.4 MMScf/D IP at $2.50/MCFE 800 GLJ TYPE CURVE $8 600 Well #1 850 m Hz $7 10 Fracs 400 Gas $6 37% 200 $5 N $/MCFE 0 $4 1 Year 2 Years NGLs $3 63% $2 Liquid Pricing : C3 = $34.00/bbl $1 C4 = $66.00/bbl $0 C5+=$95.00/bbl Cost Per Well ($000) Capital Efficiency $3,900 Drill $10.00 F & D (per boe) $2,800 Complete $8,705 On Stream Cost (per boe/D) $ 700 Tie-In & Equip $7,400 TOTAL
  13. 13. Cardium Economics CRDM HZ IRR vs Gas Prices 100% 90% 80% Cardium Type Well 4.0 MMscfd IP GLJ Type Well 70% Drill & Complete Tie-in 7.4 MM IP 4.0 mmscf/D 60% 50% Reserves 3.5 BcfIRR Liquids Yield 50 bbls/mmscf 40% IRR 20% + 30% Locations (Gross/Net) 330/183 20% Resource – Net 131 MMboe 10% 0% $1.50 $2.50 $3.50 $4.50 $5.50 $6.50 GAS PRICES AECO $/MCF Liquid Pricing /Breakdown: C3 = $34.00/bbl ‐ 20.5%  C4 = $66.00/bbl ‐ 14.5% C5+=$95.00/bbl ‐ 65.0%
  14. 14. Harlech Wilrich SummaryHz Drilled 0Land 102.5 Gross Sections 44 Net SectionsDrilling inventory 354 (152 Net) HzDepth 3,400 mLiquids content in gas 10+ bbls/mmcf
  15. 15. Harlech Wilrich WilrichType Log 7-35-46-15W5 Theoretical Volumetric Calculation Gamma Depth 20 Porosity 0 Resistivity Mud Gas Low Med High Coal AREA (acres): 640 640 640Wilrich Top 3010 NET PAY (m): 8 9 10 Gas kick  bypassed  POROSITY (%): 12 10 8 shaker SW (%): 25 20 15 Conglomerate  3020 RESERVOIR TEMPERATURE (deg F) 203 203 203 Zone RESERVOIR PRESSURE (psia): 5,200 5,200 5,200 COMPRESSIBILITY FACTOR: 0.99 0.99 0.99Wilrich Base 3030 RECOVERY FACTOR (%): 70% 70% 70% GIP PER SECTION (BCF) 12.2 18.8 27.4 RGIP PER SECTION (BCF) 8.5 13.1 19.1 LIQUIDS mmbbls .10 .16 .23 Rock – Porosity Types MM BOE/SECTION 1.95 3.00 4.39 Porosity Fairborne owns 102.5 gross sections Conglomerate  Sandstone  Intergranular Porosity Intergranular Porosity
  16. 16. FEL – The Investment Opportunity1. Value Trading @ PDP NAV2. Strong proforma netbacks at bottom of gas cycle $15.00 +3. Resource play success Hz Cardium tests @ 1,100 boe/D Best Estimate Ec. Cont. Res. 130 MMBOE
  17. 17. Corporate InformationTSX Listings Reserve AuditorsTrading Symbol: FEL GLJ Petroleum Consultants Ltd.Corporate Office Banking3400, 450 1st St. S.W. Royal Bank of CanadaCalgary, Alberta, T2P 5H1 Alberta Treasury BranchTelephone: 403-290-7750 National Bank of CanadaFax: 403-290-7724 Union BankWebsite: www.fairborne-energy.comE-mail: info@fairborne-energy.com Legal Counsel Burnet, Duckworth & Palmer LLPContactsS. R. VanSickle, President & CEO AuditorsA. G. Grandberg, CFO KPMG LLP Aug ‘12
  18. 18. Forward-Looking Statements & AdvisoriesCertain information set forth in this document, contains forward‐looking statements including managements assessment of future plans and operations of Fairborne EnergyLtd. ("Fairborne"), the inventory of drilling prospects and potential drilling locations, future or anticipated production levels, the risk/reward potential of the portfolio of plays,drilling plans, debt levels, capital expenditures and the nature of the expenditures, commodity and revenue mix, estimated netbacks, and estimated well costs and the resultingcapital efficiencies. By their nature, forward‐looking statements are subject to numerous risks and uncertainties, some of which are beyond Fairbornes control, including theimpact of general economic conditions, industry conditions, volatility of commodity prices, risks associated with oil and gas exploration, development, exploitation, production,marketing and transportation, loss of markets, delays resulting from or the inability to obtain required regulatory approvals, inability to retain and delays in retaining drillingrigs and other services, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the lack of availability ofqualified personnel or management, stock market volatility, incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions andability to access sufficient capital from internal and external sources. The foregoing list is not exhaustive. The estimates of reserves and future net income for individualproperties may not reflect the same confidence level as estimates of reserves and future net income for all properties, due to the effects of aggregation. Reserve informationincluded herein is as at December 31, 2011 unless otherwise stated. Type curves are provided for illustration purposes and may not necessarily be indicative of future well orproduction results. Test rates and initial production rates disclosed may not necessarily be indicative of long‐term performance or of ultimate recovery. Netbacks are calculatedby subtracting royalties, operating costs and transportation costs from revenues. Additional information on these and other risks that could affect Fairbornes operations andfinancial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), or atFairbornes website (www.fairborne‐energy.com). Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable atthe time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward‐looking statements. The actual results, performance orachievement of Fairborne could differ materially from those expressed in, or implied by, these forward‐looking statements and, accordingly, no assurance can be given that anyof the events anticipated by the forward‐looking statements will transpire or occur, or if any of them do so, what benefits that Fairborne will derive therefrom. Fairbornedisclaims any intention or obligation to update or revise any forward‐looking statements, whether as a result of new information, future events or otherwise, except as requiredby applicable securities laws. BOE disclosure may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf to 1 Bbl is based on an energy equivalencyconversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Natural gas volumes are converted to barrels of oilequivalent (boe) on the basis of 6,000 cubic feet (mcf) of gas for 1 barrel (bbl) of oil. The terms "barrels of oil equivalent" may be misleading, particularly if used in isolation. Aboe conversion ratio of 6 mcf to 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency atthe wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizinga conversion on a 6:1 basis may be misleading as an indication of value.
  19. 19. Information Regarding Disclosure on ContinegentResources and Resource StudyThe Resource Study is effective March 31, 2012 and was prepared in accordance with National Instrument 51‐101 – Standards of Disclosure for Oil and Gas Activities ("NI 51‐101") of the Canadian Securities Administrators based on the definitions and guidelines contained in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook").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 may not currently be considered commercially recoverable due to one or more contingencies.  Contingent resources are in additions to reserves booked as proved, probable and possible.Uncertainty ranges are described by the COGE Handbook as low, best and high estimates for resources as follows:Low Estimate: This is considered to be a conservative estimate of the quantity that will actually be recovered.  It is likely that the actual remaining quantities recovered will exceed the low estimate.  If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate.Best Estimate: This is considered to be the best estimate of the quantity that will actually be recovered.  It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate.  If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.High Estimate: This is considered to be an optimistic estimate of the quantity that will actually be recovered.  It is unlikely that the actual remaining quantities recovered will exceed the high estimate.  If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate.The most significant positive factors with respect to estimates of contingent resources are that Cardium formation is extensive in the Harlech region and there is extensive vertical well data.  Negative factors include that there is limited horizontal well tests and history in the immediate area.  Both resource‐in‐place and productivity may be higher or lower than current estimates.  The principal risk that will influence the recovery of the contingent resources relate to the potential for variations in the quality of the Cardiumformation where minimal well data currently exists.  There is no certainty that it will be commercially viable to produce any portion of the resources.In the Companys year‐end independent reserves evaluation, effective as at December 31, 2011, prepared by GLJ, gross proved plus probable reserves of 2.2 MMboe were assigned to seven gross (4.9 net) horizontal Cardium well locations attributable to the Fairbornes interest evaluated in the Resource Study, which resources are incremented to economic contingent resource identified in the Resource Study.  The year‐end independent reserve evaluation did not incorporate Fairbornes most recent Cardium well (75% WI) that, as previously announced, had an initial 30 day gross production rate of 1,000 boe per day.

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