I NVESTOR U PDATE J ANUARY 2016 TSX-V: PNE A LOW COST NATURAL GAS CONSOLIDATOR.
-
Upload
buddy-cross -
Category
Documents
-
view
219 -
download
0
description
Transcript of I NVESTOR U PDATE J ANUARY 2016 TSX-V: PNE A LOW COST NATURAL GAS CONSOLIDATOR.
INVESTOR UPDATEJANUARY 2016
TSX-V: PNE
A LOW COST NATURAL GAS CONSOLIDATOR
-2-
Certain statements contained in this presentation include statements which contain words such as “anticipate”, “could”, “should”, “expect”, “seek”, “may”, “intend”, “likely”, “will”, “believe” and similar expressions, statements relating to matters that are not historical facts, and such statements of our beliefs, intentions and expectations about development, results and events which will or may occur in the future, constitute “forward-looking information” within the meaning of applicable Canadian securities legislation and are based on certain assumptions and analysis made by us derived from our experience and perceptions. In particular, this presentation contains statements regarding: the potential growth opportunities and benefits on Pine Cliff Energy Ltd.’s (“Pine Cliff” of the “Company”) assets; information regarding Pine Cliff on a pro forma basis; the amount drawn on Pine Cliff's syndicated credit facility; net debt levels; current and pro forma production values; expected decline rates; the strategy of the Company and the ability of the Company to execute on this strategy; expected cash provided by operations; future returns on share price; future capital expenditures, including the amount, timing and nature thereof; oil and natural gas prices and demand; Pine Cliff’s share price multiple and the correlation to natural gas pricing; net debt to funds flow from operations; cash flow / funds flow leverage to natural gas prices; corporate netbacks and break even prices; expected operating expenses, royalty rates, general and administrative expenses and interest expenses; expected cash / funds provided by operations; free cash flow; expansion and other development trends of the oil and gas industry; reserve and resource volumes; business strategy and outlook; expansion and growth of the business and operations; maintenance of existing customer, supplier and partner relationships; future acquisition opportunities including the amount, timing, success and nature thereof; the ability of the Company to raise capital; supply channels; accounting policies; credit risks; availability of drilling or recompletion locations, including the timing and success thereof; the operational, economic and financial impacts of the acquisition of assets in Pine Cliff’s core areas that closed on May 29, 2015 (the “May 2015 Acquisition”) to Pine Cliff; the potential growth opportunities on the assets; the operational, economic and financial impacts of the acquisition that closed on December 11, 2015 (the “December 2015 Acquisition”) on Pine Cliff; ability to reduce operating costs on the Ghost Pine and Viking assets; change in Pine Cliff’s LLR; future consolidation opportunities around the Ghost Pine and Viking assets, including the timing and nature thereof; reserve life index; other anticipated benefits to Pine Cliff of the December 2015 Acquisition; guarantee that it will be listed on the TSX or, if listed, how long the application process will be; and other such matters. As such, many factors could cause the performance or achievement of Pine Cliff to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. Because of the risks, uncertainties and assumptions contained herein, readers should not place undue reliance on these forward-looking statements. Any data, graphs or information in this presentation that have been compiled by a third party has been credited to that third party and Pine Cliff does not take responsibility for the accuracy of such information.
In addition, statements relating to "reserves" are by their nature forward-looking information, as they involve the implied assessment, based on certain estimates and assumptions that the reserves described can be profitably produced in the future. The recovery and reserves estimates provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Pine Cliff cautions that its future oil, natural gas and natural gas liquids production, revenues, cash flows, liquidity, plans for future operations, expenses, outlook for oil and natural gas prices, timing and amount of future capital expenditures, and other forward-looking information is subject to all of the risks and uncertainties normally incident to the exploration for and development and production and sale of oil and gas.
All such forward-looking information is based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. The risks, uncertainties, and assumptions are difficult to predict and may affect operations, and may include, without limitation: foreign exchange fluctuations; equipment and labour shortages and inflationary costs; general economic conditions; industry conditions; changes in applicable environmental, taxation and other laws and regulations as well as how such laws and regulations are interpreted and enforced; the ability of oil and natural gas companies to raise capital; the effect of weather conditions on operations and facilities; the existence of operating risks; volatility of oil and natural gas prices; oil and gas product supply and demand; risks inherent in the ability to generate sufficient cash flow from operations to meet current and future obligations; increased competition; stock market volatility; opportunities available to or pursued by us; and other factors, many of which are beyond our control. The foregoing factors are not exhaustive.
Actual results, performance or achievements could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits will be derived therefrom. Except as required by law, Pine Cliff disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise. The annual audit of our consolidated financial statements is not yet complete and accordingly all financial and production amounts represent management's estimates which are unaudited and subject to revision.
The forward-looking information contained herein is expressly qualified by this cautionary statement.
This presentation contains the term barrels of oil equivalent (“boe”) which has been calculated on the basis of six thousand cubic feet equivalent (“mcfe”) of gas to one barrel of oil. This conversion ratio is based on energy equivalence primarily at the burner tip and does not represent a value equivalency at the wellhead. The term boe may be misleading, particularly if used in isolation.
CAUTIONARY STATEMENTS
-3-
POSITIONED FOR PROFITABLE AND SUSTAINABLE LOW RISK NATURAL GAS GROWTHListing (1) TSX-V: PNE
Market Capitalization(2) $290 MM
Average Daily Volume(3) 0.7 MM
52-Week Trading Range $0.86 to $1.90
Shares Issued(4) 305.2 MM
Directors and Officer’s Ownership(5) 13.9%
2015 Production Guidance 11,800-12,300 boe/d
2016 Production Guidance 22,500-23,000 boe/d
2016 Natural Gas Weighting ~92%
Corporate Base Production Decline <12%
2016 Capital Guidance $10.0 MM
2015 Year-end Net debt ~$146 MM
Bank Line (6) $185 MM
Tax Pools(7) >$480 MM
CORPORATE PROFILE
(1) Applied to be listed on the TSX in December 2015(2) Reflects January 4, 2016 closing price of $0.95 per share(3) Average daily trading volumes for July 1, 2015 to January 4, 2016 (includes subscription receipts volumes)(4) As of January 4, 2016. In addition, as of January 4, 2016 there were 17.2 MM stock options issued (5.6% of outstanding shares) (5) Fully diluted(6) $165 MM revolving syndicated credit facility and $20 MM operating facility, interest at prime plus1.0% to 2.5% or the bankers’ acceptance rate plus 2.0% to 3.5% based on the trailing 12 months debt to EBITDA(7) As of September 30, 2015 and after taking into effect the December 2015 Acquisition
INCREASING VALUE
PER SHAR
E
FINANCIAL FLEXIBILIT
Y
PRUDENT
GROWTH
EXPERIENCED
MANAGEMENT TEAM
CAPITAL DISCIPLI
NE
-4-
SUSTAINABLE SHAREHOLDER VALUE CREATIONAcquisition Priorities Focused on Value
Accretive acquisitions of high-quality natural gas assets offering low operating costs, low decline production, and increasing drilling inventories; nine acquisitions completed since 2012
Free Cash Flow Continued debt reduction, supports balance sheet and allows flexibility for future transactions
Exceptional Track RecordConsistent delivery of superior long-term results supported by decades of transaction execution experience
High Insider Ownership Interests aligned with shareholders
Access to CapitalFive financings completed since Nov. 2012
-5-
CAPITALIZING ON A LOW COMMODITY PRICE ENVIRONMENT
• PNE uniquely focused on a low-risk, natural gas asset consolidation strategy in Western Canada
• Weak commodity prices have reduced industry cash flow and stimulated non-core asset sales to fund debt repayment, capital expenditures and dividends
• Market is rewarding companies for strong balance sheets and focused asset portfolios; sales of “non-core properties” expected to continue
• Cash flow positive gas properties + conservative capital program enable PNE to use excess cash flow for debt repayment, strengthening balance sheet for future potential acquisitions
A UNIQUE, COUNTER-CYCLICAL STRATEGY
Pine Cliff is well-positioned to capitalize on its growth strategy and is poised to
provide shareholders with increased long-term value and returns
$8,000,000
$48,000,000
$88,000,000
$128,000,000
$168,000,000
$208,000,000
$248,000,000
$288,000,000
$328,000,000
$368,000,000
$408,000,000
$448,000,000
$488,000,000
$0.17
$0.67
$1.17
$1.67
$2.17
$2.67 Share Price Share Price
Closed $185M acqui-sition of new Core Area in Central AB and $72M share of -fering at $1.08/share
TRACK RECORD SINCE JANUARY 2012
SUCCESSFUL EXECUTION
$23.5M Carrot Creek acquisition
$2.9M rights offering and private placement
Closed acquisition of Geomark Exploration Ltd.
Phil Hodge appointed President and CEO; George Fink appointed Executive Chairman
Purchased debt & security of Skope Energy
$5.4M private placement at $0.70
/share
Realized security - became sole shareholder of
Skope Energy
$34MAcquisition of
additional 52% WI in the Monogram unit
$25.1M common share offering at
$0.88 /sh
$13.3M acquisition of additional Southern AB
assets and operatorship
$20.0M common share offering at $1.10/sh
-6-
Oct 1: $100M Shallow Gas asset acquisitionSept 23: $60.1M equity offering at $2.05/shAug 7: $33.3M Carrot Creek / Edson asset acquisition
$14.1M acquisition of additional assets in Carrot
Creek / Edson & S. AB
THREE MAJOR OPERATED CORE AREAS • Base Production of ~142,800 mcfe/d or
23,800 boe/d• Weighted ~92% towards natural gas
• Low Decline Rate• Corporate decline rate on base production of
<12%
• High Working Interest and Operatorship • Production is ~85% operated
• 80% working interest
• Extensive Land Position• ~2,200,000 gross acres (1,800,000 net acres)
• Significant Undrilled or Recompletion Locations
• Internally estimated at over 1,500 gross locations
• Significant Operated Infrastructure• Includes U.S. export pipeline to the Pacific
Northwest -7-
WHAT WE HAVE BUILT
Recent Acquisition
-8-
HISTORY OF ACCRETIVE ACQUISITIONS ACQUISITION METRICS REFLECT VALUE FOCUSED STRATEGY Transaction Metrics
Announcement Transaction Value Production P+P Reserves Flowing Barrel P+P Reserves P+P Reserves
Transaction Date ($million) (boe/d) (mmboe) ($/boe/d) ($/boe) ($/mcfe)
Central AB Assets Acquisition 9-Nov-15 $185.0 11,730 78.6 $15,772 $2.35 $0.39
Carrot Creek/Edson and Southern AB Asset Acquisition 20-Apr-15 $14.1 1,030 4.8 $13,699 $2.93 $0.49
Carrot Creek/Edson Asset Acquisition 29-Jul-14 $33.3 970 4.0 $34,278 $8.31 $1.39
Southern AB & SK Asset Acquisition 17-Jul-14 $100.0 5,300 15.5 $18,868 $6.45 $1.08
Southern AB & SK Asset Acquisition 17-Jul-13 $13.3 850 2.4 $15,588 $5.62 $0.94
Monogram Unit WI Acquisition 27-May-13 $33.7 1,600 7.7 $21,063 $4.39 $0.73
Skope Energy Inc. Acquisition 20-Nov-12 $28.0 3,500 9.4 $8,000 $2.98 $0.50
Carrot Creek Asset Acquisition 10-Feb-12 $23.5 950 3.1 $24,737 $7.58 $1.26
$16,614 $3.43 $0.57
3.523,800100Boe/d Boe/dto
yearsin
-9-
ACQUISITION OF NEW CORE AREA (DEC 11’15)GROWS PRODUCTION BY 90% AND RESERVES LIFE INDEX BY
55%
• $185 million accretive acquisition of natural gas weighted, low decline assets in the Viking and Ghost Pine areas of Central Alberta
• Adds new core area and creates opportunities for further consolidation across PNE’s focal areas to support long-term growth
• Increases reserve life index by 55% to ~13 years from ~9 years by offering long-term, attractive inventory for drilling, recompletions and optimization of existing production
•Significantly accretive per share on cash flow and reserves
•Decreases corporate break-even point to less than $2.00/mcf
•Significantly increases Pine Cliff’s limited liability ratio (“LLR”) from 1.04 to 1.29(1)
• Ownership in key strategic infrastructure, including four gas plants with third party revenue
• Opportunities to reduce operating costs
(1) Based in internal estimates on August 1, 2015
-10-
STRONG ACQUISITION METRICS (1)ACCRETIVE ACQUISITION WITH STRONG EXPOSURE TO NATURAL GAS PRICESProduction (July 2015 average) (1) 11,730 boe/d
Natural gas weighting 89%
Operating costs $11.20 per boe
Royalty rate(2) 11% of revenue
Low decline rate 12%
Booked drilling and recompletion locations(3) ~520 gross (~420 net)
Proved producing reserves(3) 37.5 MMboe
Proved reserves(3) 47.5 MMboe
Proved and probable reserves(3) 78.6 MMboe
TRANSACTION METRICS Production $15,772 per flowing boe
Proved Reserves(3) $3.90 per boe or $0.65 per mcfe
Proved and Probable Reserves(3) $2.35 per boe or $0.39 per mcfe
(1) Certain information herein is provided to Pine Cliff by the vendor, and has not been verified by any independent sources. Pine Cliff believes such information to be accurate & reliable but does not make any representations as to the accuracy of any estimates
(2) Prior to gas cost allowance adjustments(3) Based on reserves evaluated by an independent third party with an effective date of July 1, 2015. The proved producing, proved and proved and probable reserves as presented, include 1.2
MMBoe, 1.2 Mmboe and 1.5 MMboe of royalty interest reserves, respectively. The booked drilling and recompletion locations, as presented, are based on the proved and probable reserves
-11-
NEW CORE AREA ASSET OVERVIEW
Ghost Pine VikingProduction (July Average) 5,400 boe/d 6,330 boe/d
Natural gas weighting 92% 85%
Annual decline rate 9% 14%
Net working interest acres 244,699 583,722
Fee title acres 10,699 89,231
% Operated 65% 85%
Gross (net) booked locations(2) 369 (247) 107 (107)
(1) Certain information herein is provided to Pine Cliff by the vendor, and has not been verified by any independent sources. Pine Cliff believes such information to be accurate & reliable but does not make any representations as to the accuracy of any estimates
(2) Based on reserves evaluated by an independent third party with an effective date of July 1, 2015. Pine Cliff does not guarantee that it will be booking all of these locations in the December 31, 2015 reserve report
LOW RISK, LOW DECLINE ASSETS WITH SIGNIFICANT UPSIDE(1)
12%Blended decline rate
Very low
-12-
SIGNIFICANT LOW RISK DEVELOPMENT
(1) Certain information herein is provided to Pine Cliff by the vendor, and has not been verified by any independent sources. Pine Cliff believes such information to be accurate & reliable but does not make any representations as to the accuracy of any estimates
(2) Based on reserves evaluated by an independent third party with an effective date of July 1, 2015. Pine Cliff does not guarantee that it will be booking all of these locations in the December 31, 2015 reserve report
• Attractive and predictable low-cost production with long reserve life
• Over 1,000 gross upside opportunities identified
• ~490 gross (272 net) have been identified as Tier 1 locations that return 25-30% at $3.50/GJ AECO
• CBM infill drilling opportunities plus potential for conventional drilling
• 369 gross (247 net) booked locations(2)
• Infrastructure is operated, segregated from conventional production, and has low operating cost requirements
SIGNIFICANT UPSIDE POTENTIAL GHOST PINE HORSESHOE CANYON COAL BED METHANE (1)
-13-
EMERGING COLORADO SHALE PLAY(1)
(1) Certain information herein is provided to Pine Cliff by the vendor, and has not been verified by any independent sources. Pine Cliff believes such information to be accurate & reliable but does not make any representations as to the accuracy of any estimates
(2) Based on Pine Cliff internal estimates(3) Based on reserves evaluated by an independent third party with an effective date of July 1, 2015. Pine Cliff does not guarantee that it will be booking all of these locations in the December 31, 2015
reserve report
• Industry was drilling this area using horizontal drilling technology in 2014
• 144 Tier 1 locations with over 4m of net pay with a 25-30% rate of return at $3.50/GJ AECO (2)
• ~70% recovery factor at 3 horizontal wells/section = 700 MMcf/well (2)
• Typical EURs on vertical wells range from 200 – 300 MMcf (2)
• 107 wells booked at 2 wells/section (3)
SIGNIFICANT UPSIDE POTENTIAL COLORADO SHALE(1)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
BXE
RM
PC
QE
TOU
POU
RR
XPP
Y VII
PMT
DEE
PEY
KEL CR
NVA
LEG
TET
BTE VE
TEC
AC
PG TBE
BIR
BN
PA
AV
WC
PB
NE
LRE
SPE
LTS
AR
XPW
TA
THTO
GER
FA
ETH
SEC
NQ
SGY
PXX
SGL
PGF
NB
ZO
ILEG
LZA
R CJ
PNE
CVE PL
T
Corp
orat
e De
clin
e Ra
te
Average: 29%
-14-
SUSTAINABILITY OUR KEY FOCUSSTRONG EMPHASIS ON GROWTH OF SUSTAINABLE NATURAL GAS ASSETS
Decline
Source: Scotiabank Statsbook May 2015Note: CNQ, CVE and HSE are Canadian production only and exclude oil sands production
• With one of the lowest production declines in the industry, low operating expenses and low overhead, Pine Cliff is positioned to withstand & exploit low commodity price environment
CFPS Growth Debt-Adj 2016E vs. Debt-Adj PPS Growth 2016E
Source: Desjardins Capital Markets, December 2015
• PNE continues to grow production per share through accretive acquisitions while maintaining balance sheet strength
2012 2013 2014 First Nine Months 2015
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00$4.60
$1.83$1.67
$1.35
per b
oe
2012 2013 2014 First Nine Months 2015
$6.00
$6.50
$7.00
$7.50
$8.00
$8.50
$9.00
$9.50
$10.00
$9.42 $9.39$9.18
$8.75
per b
oe
COMMITTED TO COST REDUCTIONS AND INCREASING EFFICIENCIES IN THE FIELD• Realized a 7% decrease in operating expenses per boe since 2012 and a 5% decrease in
operating expenses per boe since 2014 alone• In addition to reducing costs in the field, a strong focus is put on minimizing head office
costs and eliminating discretionary spending
SUCCESSFUL COST REDUCTIONS IN 2015
-15-
7%Operating Expenses per Boe G&A Expenses per Boe
71%
Note: G&A expenses excludes transaction costs and overhead recoveries
UPDATE: SHALLOW GAS ACQUISITION
-16-
01-Oct-14 01-Dec-14 01-Feb-15 01-Apr-15 01-Jun-15 01-Aug-150
1000
2000
3000
4000
5000
6000
CBMHatton EastHattonMany IslandsLong Valley
Sale
s V
olum
es (b
oe/d
)
Reactivated75 Wells
Curtailment Ends
Acquisition Closed Oct. 1 Pipeline
Curtailment
DEMONSTRATING SUCCESS BY ARRESTING DECLINE + REDUCING OPERATING COSTS
• Shallow gas asset package acquired October 2014
• At acquisition, production was ~5,000 boe/d (30,000 mcfe/d) and operating expenses averaged ~$8.54 / boe (~$1.42 / mcfe)
• Less than one year after assets transferred, production maintained at ~5,000 boe/d while operating expenses were reduced by ~13% to ~$7.40 / boe (~$1.23 / mcfe)
• During 2015 to September 30, ~80 wells were reactivated for capex of $0.41 MM, adding ~450 boe/d – resulting in a capital efficiency of $900 per flowing boe
Offsetting Production Declines Through Reactivation
-17-
HIGHLY LEVERAGED TO NAT GAS PRICING
Source: December 1, 2015 Canaccord Genuity Corp.
2016E Funds Flow per Share Sensitivity to Natural Gas Pricing
Source: September 7, 2015 CIBC World Markets Inc.
2016E Free Cash Flow YieldSensitivity to Natural Gas Pricing
-125%
-100%
-75%
-50%
-25%
0%
25%
50%
75%
100%
125%
Varia
nce
from
bas
e
Scen
ario
(%)
AAV BXE BIR PPY PNE SRX CQE
ONE OF THE HIGHEST FREE FUNDS FLOWS PER SHARE IN THE INDUSTRY
• Offers one of the highest exposures to movements in natural gas pricing given low operating expenses and overhead, low decline, no hedging and minimal capital spending
• $0.10 / mcf increase in AECO adds approximately $4.4 million of funds flow annually (or ~$0.015 per share)(1)
(1) Using the production on closing of the December 2015 Acquisition and estimated royalty rates
-18-
2016 FOCUS ON FREE FUNDS FLOWONE OF THE HIGHEST FREE FUNDS FLOWS PER SHARE IN THE INDUSTRY• Pine Cliff generates some of the highest free cash flow yield in the industry
Source: Dundee Capital Markets, November 2015
Source: Canaccord Genuity Corp, November 2015
LXEPPY
ATHQECMEI
RMPBIR
NVAKCKRRXBXE
MQLJOYLREBTETBE
TOGVETSGYSKXCPG
REPXXPNE
-50.0%-40.0%-30.0%-20.0%-10.0% 0.0% 10.0% 20.0%
FCF/EV (%)
2016 Free Cash Yield % to Debt to Cash Flow 2016 Free Cash flow as a % of Enterprise Value Excluding Dividend Obligations
-19-
FOCUS ON PER SHARE VALUE INCREASES
47% increase in daily production per basic share(1)
50% increase in funds flow from operations per basic share(2)
(1) Mid point of 2016 guidance as compared to the mid point of 2015 guidance(2) For the quarter ended September 30, 2015 as compared to June 30, 2015
Production (boe/d)Mid-point of
2016 Guidance
2012 2013 2014 2015 2016 (est) -
5,000
10,000
15,000
20,000
25,000 7
75
4,7
75 7,8
88 1
2,05
0
22,
750
Mid-point of2015 Guidance
Q1-20
12
Q2-20
12
Q3-20
12
Q4-20
12
Q1-20
13
Q2-20
13
Q3-20
13
Q4-20
13
Q1-20
14
Q2-20
14
Q3-20
14
Q4-20
14
Q1-20
15
Q2-20
15
Q3-20
15 $(2,000)
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$-
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$(3
5)
$52
0
$44
2
$77
5 $2,
401
$3,
721
$3,
014 $
5,56
4
$10
,089
$9,
180
$8,
104
$11
,615
$6,
182
$5,
555 $7,
507
Funds Flow Fr...Funds Flow From Operations (000s)
-20-
CAPITAL BUDGET IS SUBSTANTIALLY LOWER THAN PROJECTED FUNDS FLOW• 2016 capital budget of $10 million, before acquisitions (2015 - $7.5 million, before
acquisitions)
• 2016 production volumes of 22,500 to 23,000 boe/d (2015 – 11,800 to 12,300 boe/d)
• Use monthly funds flow to repay debt drawn for acquisitions
• Ongoing focus on optimizing production, minimizing overhead and reducing operating expenses
• Sustainable cost structure and corporate break even (before capital spending) of less than $2.00/Mcf
SUSTAINABLE COST STRUCTURE
-21-
WHY INVEST IN PINE CLIFF• High-quality assets with low operating costs and one of the lowest decline rates in the
industry
• Free cash flow allows for debt repayment in depressed commodity environment
• Entirely unhedged production allows for high leverage to increases in natural gas prices
• Current depressed commodity price environment is anticipated to provide additional accretive acquisition opportunities (sales processes have been announced by Bellatrix, Centrica, Encana, Enerplus, Pengrowth, Pennwest, Quicksilver, Husky, Cequence, Long Run, Spyglass etc…)
• Proven track record of delivering superior long-term results for shareholders
• Proven access to capital to take advantage of opportunities in a depressed commodity price environment
• Management team and the board stock ownership creates high alignment with shareholder interests
-22-
APPENDIX
Note: Pine Cliff Energy Ltd. was recognized on Alberta Venture magazine’s 2015 Fast Growth 50 List. Pine Cliff was recognized in June 2015 as one of The 200 companies by Alberta Oil magazine. Pine Cliff Energy Ltd. was recognized as a TSX Venture 50® company in 2015. TSX Venture 50 is a trade-mark of TSX Inc. and is used under license.
-23-
A CLEAR VISION FOR LONG-TERM GROWTH WITH PROVEN EXPERIENCE• Pine Cliff management has a long-term view of value creation, with a counter-cyclical
focus to acquire natural gas assets that are non-core to their owners at good valuations• Similar to Bonterra’s origin with oil assets in 1998• Despite natural gas pricing fluctuations in the past four years, our approach to acquiring assets has remained
disciplined
• Pine Cliff’s Chairman and largest shareholder, George Fink, served the same roles with both Bonterra Energy and Comaplex Minerals
• Four out of five of Pine Cliff’s board of directors also served on the boards and management teams of Bonterra and Comaplex
• Bonterra (TSX: BNE) has gone from $0.20 per share in 1998 to $17.21 per share on January 4, 2016, while paying over $35.00 of dividends per share. A $20,000 investment in 1998 would equate to almost $5.3 million today (including dividends and share appreciation)
• Comaplex went from $0.60 per share in 1994 to $10.32 per share in 2010 when it was sold
BUILDING A FAMILIAR MODEL
(1) Pine Cliff return is presented since the change in strategic focus of the company and management appointment on December 21, 2011Note: The Pine Cliff and Bonterra share prices are to closing on January 4, 2016.
$0.60
$10.32
1994 1996 1998 2000 2002 2004 2006 2008 2010
Comaplex ReturnShare Price
2011 2012 2013 2014 42349
0.17
$0.95
Pine Cliff Return(1)Share Price
$52.79
$17.21
$35.58
1998 2000 2002 2004 2006 2008 2010 2012 2014
Bonterra ReturnCombined
Share Price
Cum Dividend
39%
27%
19%
6%7%
2%
Coal Natural GasNuclear HydropowerOther renewables Other
0.1
1.1
2.2
4.6
7.2
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
1.82.0
2.8
3.33.6
4.04.4
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
(2.6)
(0.0)
3.5
1.3 1.3 1.0 1.0
(4.0)
(3.0)
(2.0)
(1.0)
-
1.0
2.0
3.0
4.0
5.0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
-24-
NATURAL GAS OUTLOOK - DEMAND
U.S. Natural Gas Demand Growth (indexed to 2014 demand)
Source: SG Commodities Research, Bentek (March 2015)
U.S. Natural Gas Demand Growth in Electric Power Sector
Source: September 28, 2015 First Energy; EIA
U.S. Net Exports of Natural Gas to Mexico
Source: September 28, 2015 First Energy; EIA
U.S. Gross LNG Exports
Source: September 28, 2015 First Energy; EIA
bcf/d
bcf/d
Forecast
Forecast
bcf/d
Forecast
-2
0
2
4
6
8
10
12
14
2014 2015 2016 2017 2018 2019
Bcf/d R/C P ower Industrial Mexico LNG
Source: September 2015, Canaccord Genuity
U.S. Power Sources
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
-4,000
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016
Deviation from average Storage level
Note: Colored band around storage levels represents the range between the minimum and maximum from Jan. 2010 - Dec. 2014.
200
400
600
800
1,000
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
2015 2014 2013 2012 2011
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
1.0
3.84.0
2.5
3.6
4.4 4.4
0.0
1.0
2.0
3.0
4.0
5.0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
-25-
NATURAL GAS OUTLOOK - SUPPLY
U.S. Natural Gas Supply Growth
Source: September 28, 2015 FirstEnergy; EIA
bcf/d
Forecast
bcf
Source: EIA Short-Term Energy Outlook, September 2015
U.S. Working Natural Gas in Storage
Source: Baker Hughes
U.S. Natural Gas Rig Count
Forecast
COMPANY ANALYSTAltaCorp Capital Patrick O’Rourke
Canaccord Genuity Anthony Petrucci
CIBC World Markets Dave Popowich
Clarus Securities Inc. Robert Paré
Desjardins Capital Markets Jamie Kubik
FirstEnergy Capital Michael Hearn
GMP Securities Aaron Swanson
Haywood Securities Inc. Darrell Bishop
Industrial Alliance Securities Inc. Michael Charlton
National Bank Financial Inc. Dan Payne
Paradigm Capital Ken Lin
Scotia Capital Inc. Cameron Bean
TD Securities Inc. Aaron Bilkoski
-26-
The following analysts provide research report coverage on Pine Cliff:
By posting this list, Pine Cliff does not imply endorsement of or agreement with the information, conclusions or recommendations provided in the reports. Pine Cliff does not distribute electronic copies of analyst reports.
ANALYST COVERAGE
-27-
CORPORATE INFORMATIONBOARD OF DIRECTORSGary J. Drummond George F. Fink Philip B. Hodge Randy M. JarockCarl R. Jonsson OFFICERSGeorge F. Fink Executive Chairman of the BoardPhilip B. Hodge President and Chief Executive OfficerKristi L. Kunec Chief Financial Officer and SecretaryCheryne A. Lowe Interim Chief Financial OfficerTerry L. McNeill Chief Operating Officer
HEAD OFFICE850, 1015 – 4th Street SWCalgary, Alberta T2R 1J4Phone: (403) 269-2289Fax: (403) 265-7488
REGISTRAR AND TRANSFER AGENTComputershare Trust Company of Canada AUDITORSDeloitte LLP
BANKERSToronto-Dominion BankAlberta Treasury BranchesNational Bank of Canada
STOCK EXCHANGE LISTINGTSX Venture Exchange Trading Symbol: PNE WEBSITEwww.pinecliffenergy.com
INVESTOR [email protected]