Josef Schachter Presents

BLACK GOLD WEBINAR

March 19, 2020

• Bear Market History Review

• Overview Of Energy Markets – Why We Issued Our Action Alert BUY

• Q & A – Overview Only

• The Good, The Bad And The Ugly Of Energy And Energy Service Companies

• Final Q & A

Please send in your Questions through the Chat window

JOSEF SCHACHTER PRESENTS

WEBINAR PROCESS1. All attendees’ microphones have been muted. Please send in your questions via the

Chat Window on the right side of your screen. You can also send me a message ifyou are having difficulties with the audio.

2. We have had a huge number of questions sent in and Josef has spent the last 48hours putting together the answers in a presentation format to cover most of thesequestions.

3. For that reason, tonight’s webinar will exceed the 90 minute format by an additional30 minutes to accommodate any additional questions that are not covered in hisprepared response.

4. This webinar is being recorded and will be posted online tomorrow in the earlyafternoon.

5. Securities Laws prevent us from providing individual advice to individual investors.

AGENDA FOR MARCH 19, 2020 WEBINAR

Bear Market History Review - Overview Of Energy Markets – Why We

Issued Our Action Alert BUY

(30 minutes)

Q & A – Overview Only (10 minutes)

The Good, The Bad And The Ugly Of Energy & Energy Service Companies

Second Q & A

Time

(35 minutes)

(15 minutes)

90 Minutes

Extended Q&A Record Number of Questions 30 Minutes

BEAR MARKET HISTORY REVIEW

Market Crashes Review

The Event Dow Jones When Crash Started

Dow Jones at Crash Bottom

Percent Decline Duration of Crash, Days Start to End

1929 352 199 - 43% 19

1987 2,528 1,116 - 36% 5

9-11 10,400 8,062 - 22% 14

2008 - 2009 10,833 7,774 - 29% 7

Feb 19, 2020 29,250 18,917 (March 18) - 35% 19

Source: SER

Source: stockcharts.com March 18, 2020

Market Crash 2020 – Dow Jones Industrials – The Trump Term

35%

Source: Wall Street Journal – Daily Shots Wednesday January 3, 2020

CNN Index At Extreme Greed – Contrarian Indicator

Source: money.cnn.com March 17, 2020

Market Now Running On Fear Not Greed


Market Crash 2020 – TSX – The Trump Term

37%

History Of Market Crashes

Source: Wall Street Journal Daily Shots March 13, 2020

Source: CNBC March 16, 2020

Biggest Dow Jones Down Days

Volatility Worst Since Great Depression -1929


The Crash of 1929

48 % in

19 days

294.07

198.69

381.17

Source: Adapted from original hard copy and website news.goldseek.com

Source: stockcharts.com June 9, 1989

Dow Jones Industrial – Crash of 1987

Down 41 %

Crash – 5 days

Source: stockcharts.com February 8, 2002

9/11 Impact On Dow Jones Industrials

Crash – 14 days

Down 29 %

Source: stockcharts.com November 11, 2009

The Dow Jones Industrials Got Smacked Down 2008 Financial Crisis

Crash – 7 days

Down 45 %


US 3-Month Treasury Yield % - Financial Crisis 2008-2009


US 3-Month Treasury Yield % - Coronavirus 2020


Potential Downside Levels For S&P500

S&P 500 200 Day Moving Average Needs One More Crackto fall below 20% and generate a BUY Signal

OVER BOUGHT SELL >75%

OVER SOLD by < 20%


% Of Stocks Above 200-Day Moving Average



S&P 500 Percent of Stocks Above 200 Day Moving Average 2008-2009


S&P 500 Percent of Stocks Above 200 Day Moving Average 2020


Extreme Bearishness Now Seen


$VIX Through History

High

Volatility

-

Markets

Fearful

Low

Volatility

-

Markets

Greedy


$VIX Financial Crisis 2008-2009

39 days


$VIX Financial Crisis During Coronavirus And Oil Price War 2020

31 days so far

New Cases Of Covid-19 Slowing In China

Source: Wall Street Journal – Daily Shots March 5, 2020

China Beginning To Recover Economically


China Recovering Economically - Keys: Self Quarantining Still When Not Working And Temperature Testing Everyone Entering Workplaces And Transportation etc.



US Recession In 2020

OVERVIEW OF ENERGY MARKETSWHY WE ISSUED OUR ACTION ALERT BUY

World Demand For Crude – Balance Of Supply/Demand

Source: EIA Short Term Energy Report March 11, 2020

Source: Baker Hughes, March 2020

Target

Q3/20

Source: Baytex Annual Report 2019

US Shale Production Falling

Source: EIA Productivity Report March 16, 2020

Oil Price War – Build In Inventories

Source: EIA Short Term Energy Report March 11, 2020

1

2

3

World Oil Consumption 1965 Onward

Volcker

Financial Crisis 2008-2009

Recession

Source: WTRG.com 2013

Long Term Demand - Sets Up Bull Case For US$100/b Crude Oil

Source: JPM Morgan Chase March 2020

Update: Canada Oil Patch Cuts Up to $2.5 Billion from Budgets Amid Rout

Source: Energy Now Media, March 17, 2020

Source: David Stockman’s Contra Corner - March 12, 2020

Energy Industry Under Duress

Prior SER Crude Forecast – March 6, 2020

Source: SER forecasts – March 6, 2020

Q2 Q3 Q4Q1 Actual

Range to

date

Q1 Forecast Q2 Forecast Q3 Forecast Q4 Forecast

WTI

US $/B

85

80

75

70

65

60

55

50

45

40

35

SER 2020

WTI QUARTERLY CRUDE OIL FORECAST 2020

Q1

CORONAVIRUS PANDEMIC SITUATION

6764

52

827876

66

2020 yearaverage US$ 70/b

41.05

65.65

40

Revised Saudi / RussiaOil Price War

Source: SER forecasts – March 19, 2020

Q2 Q3 Q4Q1 Actual

Range to

date

Q1 Forecast Q2 Forecast Q3 Forecast Q4 Forecast

WTI

US $/B

85

80

75

70

65

60

55

50454035

30

25

20

15

45 45 45 60 70

SER 2020

WTI QUARTERLY CRUDE OIL FORECAST

Q1

Quarterly Average

6764

40

827876

66

20.12

65.65

20

2020 yearaverage US$ 55/b


Average Price AECO $/MCF

2019 $1.62

2018 $1.53

2017 $2.25

2016 $2.21

2015 $2.70

2014 $4.48

Gold/Oil Ratio – Oil Cheap


S&P Energy Bullish Percent Index – Monthly


Energy Market Cheap BUY

Energy Market Expensive SELL

S&P Energy Bullish Percent BUY Signal In 2014


5 days < 5%

Source: stockcharts.com December 31, 2018


15 days < 5%5 days 10 days


8 days so far < 5%


MARKET CONCLUSION

WTI Crude Oil – Monthly


OVER BOUGHT

OVER SOLD

OVER BOUGHT

?

?OVER SOLD

OVER BOUGHT

OVER SOLD

OVER SOLD

OVER BOUGHT

?

?


S&P/TSX Energy Index – Monthly

SER Ownership Disclosure – March 18, 2020

QUESTIONS?

We will now answer questions regarding the Overview section

Up to 10 minutes

THE GOOD, THE BAD AND THE UGLY OF ENERGY AND ENERGY SERVICE COMPANIES

RISING DEBT LOADS

Market Cap: 73.0M share x $0.27 = $19.7M

Debt 27%

Book Value

$22.38/share

Forbearance

for Obsidian

Market Cap: 260.6M share x $0.155 = $40M

Debt 69% - $805M

Book Value

$4.41/share

Poker Game: Banks vs Unsecured Note Holders

The Problem


Debt 166%

Book Value

$2.53/share


Debt 108%

Book Value

$8.97/share


Debt 65%

Book Value

$10.38/share


Debt 78%

Book Value

$19.72/share


Debt 85%

Book Value

$2.89/share


Debt 63%

Book Value

$3.56/share

Declining Debt Loads


Debt 51%

Book Value

$10.09/share

Source: Stockcharts.com, March 18, 2020

12-month Target $7.00


Debt 38%

Book Value

$9.85/share

Debt

$348M$355M

THEY HAVE TIME!!


Debt 140%

Book Value

$4.37/share

$150m $167M


12-month Target UNDER REVIEW


Debt 93%

Book Value

$9.53/share

Winners Long Term


Debt 36%

Book Value

$8.37/share

Market Cap: 1228.7M share x $2.19 = $2,691M

Debt 35%

Book Value

$15.62/share


Debt 57%

Book Value

$2.00/share

$447M$385M

Market Cap: 271.0M share x $7.88 = $2,139M

Debt 20%

Book Value

$29.39/share


Debt 6%

Book Value

$2.73/share


Debt 40%

Book Value

$7.15/share

WCP: 0.78$

Revenue $M 815.7 622.3 635.3 1,031.2 1,525.3 1,418.5 1,550.0 3,000.0

Production

Oil & Liquids b/d 23,392 30,932 35,566 47,004 61,728 59,916 57,120 102,000

Natural Gas Mmcf/d 54.4 60.1 61.7 62.7 68.7 72.4 68.0 112.5

Total 6:1 32,458 40,953 45,841 57,450 74,415 71,050 68,000 120,000

Volume Growth 64% 26% 12% 25% 29% -5% -4% n/a

Per Million Shares 128 136 124 138 182 174 169 288

Gross Wells Drilled 169 125 104 227 261 193 125 330

Volumes Mix %

Oil & Liquids 72% 76% 78% 82% 85% 84% 84% 85%

Natural Gas 28% 24% 22% 18% 15% 16% 16% 15%

Financials

Operating Netback ($/boe) 44.95 36.11 26.46 27.47 29.33 30.34 32.00 44.00

Cash Flow/Share $2.08 $1.69 $1.13 $1.37 $1.69 $1.64 $1.47 $4.08

Price/Cash Flow 0.38 x 0.46 x 0.69 x 0.57 x 0.46 x 0.48 x 0.53 x 0.19 x

Net Capital Expenditure $M 1,604.4 1,040.7 660.5 1,296.0 518.0 407.0 210.0 1,400

Cash Flow $M 486.8 482.7 384.7 508.6 704.4 675.0 600.0 1,700

Book Value/Share $10.00 $8.34 $8.50 $7.97 $7.89 $7.13 $7.18

Cap Expenditure/Cash Flow 3.3 x 2.2 x 1.7 x 2.5 x 0.7 x 0.6 x 0.4 x 0.8 x

Dividends $M 169.6 212.9 116.5 104.9 133.0 140.0 70.0

Dividends $ per share 0.73 0.75 0.35 0.28 0.32 0.342 0.171

Dividend/Cash flow payout 35% 44% 30% 21% 19% 21% 20%

Commodity Prices Actual Actual Actual Actual Actual Actual SER Est. SER Est.

US$ WTI $92.92 $48.80 $43.46 $50.80 $64.70 $57.03 $55.00 $100.00

C$ AECO $4.48 $2.70 $2.21 $2.25 $1.53 $1.62 $2.00 $4.00

Forecast

2025

Actual Actual Actual Actual Actual Actual Forecast

Whitecap Resources Inc. Annual Financials

Bull Market

PeakMarch 18, 20202014 2015 2016 2017 2018 2019 2020

SUBSCRIBER ISSUES

What Are The Safest Energy Dividend Paying Companies

Source: Data March 18, 2020

Company Stock Price Dividend Yield

Canacol Energy CNE-T $2.81 $0.20 7.2%

Imperial Oil IMO-T $10.92 $0.88 8.1%

Suncor Energy SU-T $15.41 $1.68 10.9%

Tourmaline Oil TOU-T $7.56 $0.48 6.3%

INFRASTRUCTURE IDEAS

What Are The Safest Energy Infrastructure Companies

Source: Data March 18, 2020

Company Stock Price Dividend Yield

Enbridge Inc. ENB-T $34.64 $3.24 9.4%

Pembina Pipeline PPL-T $18.61 $2.52 13.5%

TC Energy TRP-T $50.45 $3.24 6.4%

COLOMBIA ENERGY STOCKS

What Are The Best Colombian Energy Stocks

We chose one each from the oil and natural gas sectors:

• Canacol for natural gas

• Gran Tierra for oil

There are two others to consider:

• Frontera Energy

• Parex Resources (very strong balance sheet – but historically expensive)

We chose the ones we cover as we see them as cheap, have lots of growth

upside and most importantly access to management. For the other two it is not

easy access. All these stocks have been hit hard during the crash in oil prices

BEST CANADIAN NATURAL GAS STOCKS

What Are The Best And Safest Canadian Natural Gas Stocks

We like the following ideas that we cover:

• Birchcliff Energy

• Tourmaline Oil

There is one other to consider that we do not officially cover:

• Arc Resources

QUESTIONS?

We will now answer questions regarding

any items of interest to our subscribers

Up to 45 minutes

CONCLUSION:

Thank you for attending our first quarterly Black Gold Webinar of 2020!

If you enjoy your subscription,

please refer our website to people that you know

who would benefit from our energy & energy services research product.

Josef Schachter

www.SchachterEnergyReport.ca

Josef Schachter Presents

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