Cequence Energy Ltd. November 15, 2019 TSX:CQE 1
Summary of Forward-Looking Statements or 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 FORWARD- 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 LOOKING is expressly qualified by this and other cautionary statements set forth in the continuous disclosure record of the Company. INFORMATION The reporting and the measurement currency is the Canadian dollar. For the purpose of calculating unit costs, natural gas is converted to a barrel of oil equivalent (“ boe ”) using 6,000 cubic feet of natural gas as equal to one barrel of oil unless otherwise stated. The term barrel of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio for gas of 6 AND NON-IFRS Mcf:1 boe is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. This value ratio is significantly different from the energy equivalency ratio of 6:1 and using a 6:1 MEASURES ratio would be misleading as an indication of value. See slide 20 for additional advisories. Non-IFRS Measures References in this presentation are made to terms commonly used in the oil and gas industry, including net debt and funds flow from (used in) operations which are not measures recognized by International Financial Reporting Standards (“IFRS”) . Net debt is a measure that provides Cequence’s total indebtedness. It is calculated as working capital deficiency (excluding commodity contracts and lease liability) plus amounts outstanding in the Company’s Credit Facility plus the principal value of the Term Loan. Cequence uses net debt as an estimate of the Company’s assets and obligations expected to be settled in cash. Funds flow from operations is calculated as cash flow from operating activities before adjustments for decommissioning costs incurred and net change in non-cash working capital. The Company uses this measure to analyze operating performance and leverage and considers it a key measure as it demonstrates the Company’s ability to generate the cash flow necessary to fund future growth through capital investment and to repay debt. Reconciliations of net debt and funds flow from operations to the nearest IFRS measure, can be found in Cequence’s Management Discussion & Analysis, which may be accessed through the SEDAR website (www.sedar.com). These measures may not be consistent with the calculation of other companies. 2
$10.0 million pre-payment of the $60.0 million Repaid Term Loan RECAPITALIZE Amended the Term Loan AND • Extend maturity by 1 year to Oct 3, 2023 IMPROVED • Fix interest rate at 5% eliminating escalation to Improve 10% when funds flow from operations is equal BALANCE to or greater than $40.0 million SHEET • Cancel 1.8 million warrants Issued 17.2 million common shares • $11.2 million private placement at $0.65/share Invest (Premium to June 27 closing price of $0.34/share) • Canadian Development Expense on a “flow through basis” by December 2020 • June 30, 2019 net debt to TTM funds flow from operations 4.1x compared to 4.8x before the Benefit transaction • $0.5 million in annual interest savings or $2.1 million over the term of the Term Loan 3
(000’s, except per share, ratios, production and per unit references) Common shares outstanding at September 30, 2019 41,784 Closing share price November 15, 2019 $0.18 CORPORATE 52 week share price trading range - September 30, 2019 $0.17 to $1.00 SUMMARY September 30, 2019, net debt (1) $64,653 Funds flow from operations - 2019 Guidance $13,000 Net Debt (1) /Trailing twelve month funds flow from operations 5.8x 2019 Forecast 2019 production (2) 5,800 GUIDANCE Reserves P + P, December 31, 2018 (3) 129 MMBoe WITHIN CASH Net asset value per share (4) $9.10 FLOW Tax Pools at December 31, 2018 $616,400 Non-Capital Losses (included above) $289,200 1. Net debt is calculated as working capital deficiency (excluding commodity contracts and lease liability) plus the aggregate principal amount of the Term Loan. 2. 2019 average production estimates on a per BOE basis are comprised of 75% natural gas and 25% oil and natural gas liquids. 2019 commodity prices included above average $56.75 WTI US/bbl and AECO price of $1.68 CAD/GJ. 3. Reserves evaluation by GLJ Petroleum Consultants Ltd. effective December 31, 2018. 4. Net asset value per share is the before tax discounted 10% reserve value using Jan 1, 2019 GLJ prices, net debt at September 30, 2019, and common shares outstanding as at September 30, 2019. 4
Investing in higher return commodities • Dunvegan oil – 100% CQE inventory Oil • Encouraging third party oil activity in other Montney benches WHY INVEST IN CEQUENCE Large gas reserve with significant upside • 112 MMboe of proved plus probable Montney reserves (1) with torque to improving gas price Gas DUNVEGAN OIL • Dawn contract for 40% of current production – GROWTH diversification from AECO PRESERVE MONTNEY Major facilities and firm egress in place Facilities • UPSIDE 120 MMcf/d processing built and • 35,000 mcf/d – Simonette NGTL transport transport • 10,850 GJ/d Empress to Dawn transport 2019 SPEND • 600 bbl/d firm liquids transport WITHIN CASHFLOW • Term Loan Oct 2023 maturity - 5% interest rate • Improving funds flow with lower interest, Financial improved realized gas price, higher oil weighting, and lower operating costs (1) Reserves evaluation by GLJ Petroleum Consultants Ltd. effective December 31, 2018. 5
All 3 Pools have similar OOIP/section ranges of 6-15 MMBOE Simonette & Karr on primary solution gas drive Kaybob South operator has initiated a pilot secondary recovery waterflood scheme 1 st Hz producer converted to injector late 2015 • 06-06 2 nd and 3 rd converted late 2017 • SIMONETTE • Positive early response on oil rates and GORs DUNVEGAN OIL PLAY 10-09 16-08 16 gross (14.5 net) sections identified with oil development ˃ 40 o API oil ˃ Internal estimate of ~80 MMbbls OOIP (1) net to Cequence ˃ 26.0 gross, 24.5 net locations remaining (2) ˃ Solution gas gathered to Cequence/KANATA 13-11 gas plant ˃ Infrastructure synergy with Montney development ˃ Expect 8-10% recovery on primary and up to 20% recovery on waterflood 1. Original oil in place (OOIP) is equivalent to DPIIP for purposes of this presentation. See page 16. 2. Remaining locations are internal company estimates at YE 2018 based on current development plans and subject to change. 6
Dunvegan 2018 YE Bookings (1) (2) PUD Probable Unbooked Locations Q4 2018 Rig Releases Drill Ready Locations 04-08 vertical 50% CQE 100% WI lands IP30: 45 BOPD 5-7 facility 2,000 bbls/d 740 Hp 15-04 Compressor 16-02 10-04 SIMONETTE DUNVEGAN 100% CQE LIGHT OIL 05-06 vertical INVENTORY delineation 9m gross interval Progress to Date: Q4 2018 - 2.0 (2.0 net) wells: IP 90 flowing average rate per well: 406 boe/d, 60% oil ˃ 15-04 (100% CQE): 164 mstb in first 12 months January 1, 2019 Reserves: ˃ TP: 2.9 MMboe 5.5 net locations $42 MM NPV10% ˃ 2P: 5.3 MMboe 10.5 net locations $75 MM NPV10% ˃ 14 Unbooked locations (2) - 100% Cequence working interest with anticipated lower gas oil ratios (1) Reserves evaluation by GLJ Petroleum Consultants Ltd. effective December 31, 2018. (2) Proved undeveloped and probable locations are derived from the Company’s December 31, 2018 reserves evaluation as prepared by GLJ Petroleum Consultants. Unbooked locations are internal estimates based on the Company’s prospective acreage. Unbooked locations do not have attributed reserves and there is no certainty that if drilled these locations would result in additional oil and gas reserves or production. 7
SIMONETTE DUNVEGAN Strong Well Results LIGHT OIL ˃ Actual well costs $4-4.5 MM/well: Target >2,000 m laterals, 40-50 frac stages (Tighter frac spacing) ˃ 09-11, 15-04, 12-14 each paid out in under one year PERFORMANCE ˃ Oil moving through 50% CQE owned 13-11 facility reducing 3 rd party processing & METRICS Dunvegan Oil Type Wells $60 US WTI, $1.50/GJ CDN, $5USD diff flat 250 mbbl 160 mbbl Costs (Drill, Complete, Equip) ($MM) $4.0 $4.0 Drilling Results IP365 Production Rate (boe/d) 440 310 Reserves (MBBL) 250 160 Reserves (MBOE) 550 350 Economic Indicators F&D ($/BOE) $7.27 $11.43 1st Yr Netback ($/boe) $26.37 $28.01 Recycle Ratio 3.6 2.5 ROR (%) 98% 40% Payout (years) 1.1 1.8 NPV10% ($MM) $4.3 $1.6 Production Efficiency ($/boe-365) $9,100 $12,900 8
Capit Cap ital l Sen Sensit itiv ivit ity ˃ Internal CQE 2,000 m well model ˃ $60 WTI US/bbl, ˃ $5 US/Edmonton differential, $0.75 CAD/US exchange ˃ $1.50 CAD/GJ AECO ˃ MRF Alberta Crown Royalties DUNVEGAN OIL SENSITIVITIES TO CAPITAL AND COMMODITY PRICE Pric rice Sens Sensit itiv ivit ity ˃ Internal CQE 2,000 m well model ˃ $5 US/Edmonton differential, $0.75 CAD/US exchange ˃ $4 million well cost ˃ MRF Alberta Crown Royalties 9
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