(TSX ‐ V: SOG) Corporate Presentation April 2018
Advi Advisor sory This presentation should be read in conjunction with the Company’s Annual Information Form and the Consolidated Financial Statements and Management’s Discussion and Analysis as filed on SEDAR. FORWARD LOOKING STATEMENTS: This presentation includes projections that are derived from certain assumptions with respect to (i) wells drilled and drilling success; (ii)production; (iii) future capital expenditures; (iv) future reserves ; (v) cash flow and (vi) operating costs. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. Certain information regarding the Company set forth in this document, including management’s assessment of the Company’s future plans and operations, the planning and development of certain prospects, production estimates, reserve estimates, undeveloped land holdings, capital expenditures and the timing thereof and the total future capital required to bring undeveloped proved and probable reserves onto production, and expanded production growth may constitute forward ‐ looking statements under applicable securities laws and necessarily involve substantial known and unknown risks and uncertainties. These forward ‐ looking statements are subject to numerous risks and uncertainties, many of which are beyond the Company’s control, including without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, environmental risks, competition, the lack of availability of qualified personnel or management, inability to obtain drilling rigs or other services, increasing capital expenditure costs, including drilling, completion and facility costs, unexpected decline rates in wells, wells not performing as expected, stock market volatility, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition and fluctuations in foreign exchange or interest rates. Readers are cautioned that the foregoing list of factors is not exhaustive. The Company’s actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward ‐ looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward ‐ looking statements will transpire or occur, or if any of them do so, what benefits that the Company will derive therefrom. The foregoing and all subsequent forward ‐ looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Additional information of these and other factors that could affect the Company’s operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) or the Company’s website (www.sogoil.com). The forward ‐ looking statements contained in this document are made as of the date on the front page and the Company assumes no obligation to update publicly or to revise any of the included forward ‐ looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws. TEST AND INITIAL PRODUCTION RESULTS: Any references in this presentation to initial or test production rates are useful in confirming the presence of hydrocarbons, however such rates are not determinative of the rates at which such wells will continue production. While encouraging, readers are cautioned not to place reliance on such rates in calculating aggregate production. Initial production or test rates are not necessarily indicative of long ‐ term performance of the relevant well or fields or of ultimate recovery of hydrocarbons. Test volumes are quoted on a raw basis before shrinkage on natural gas volumes. Total corporate production volumes include natural gas shrinkage. DRILLING LOCATIONS: This presentation discloses drilling locations in three categories: (i) locations assigned proved reserves, (ii) locations assigned probable reserves and (iii) unbooked locations. Locations assigned reserves are derived from the Company’s independent reserves evaluation as of December 31, 2017. Unbooked locations are internal estimates based on the Company’s existing prospective acreage, current well lengths and an estimated number of wells drilled per section. Unbooked locations do not have reserves assigned. Of the 600 drilling locations identified by the Company’s growth plan, 21 were assigned proved reserves, 27 were assigned probable reserves, and the remainder are unbooked locations. Unbooked locations have been identified by management based on application of industry standard geological, geophysical, engineering, production and reservoir information. There is no certainty that all unbooked locations will be drilled or that, if drilled, these locations will result in additional production and reserves for the Company. While certain unbooked locations are in close proximity to existing production, the majority are not in close proximity to existing producing wells and there is uncertainty as to the quality of the potential reserves and production to be obtained by drilling these locations. GROWTH PLANS: Growth plans presented in this presentation are based on an internal conceptual development plan. The actual number of wells drilled and development undertaken in future periods will depend on capital availability, regulatory issues, seasonal restrictions, commodity prices, actual drilling results, cash flows, accessibility of equipment and qualified personnel and other factors. BOE MEASUREMENT: "Boe“ means barrel of oil equivalent on the basis of 6 mcf of natural gas to 1 bbl of oil . Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. ORIGINAL OIL IN PLACE: Original Oil in Place(“OOIP”) are the equivalent to Total Petroleum Initially In Place(“TPIIP") as defined by the COGEH Guidelines and are not reserves. There is no certainty that it will be commercially viable to produce any portion of OOIP except to the extent they are subsequently classified as proved or probable reserves. TYPE CURVES: Production type curves are based on average proved and probable reserves assigned to undeveloped drilling locations in west Marlowe by the Company’s external reserves evaluators, McDaniel & Associates (“McDaniel”) at the Company’s year ‐ end reserves evaluation effective December 31, 2017. Strategic Oil & Gas 2 April 2018
CO CORPORATE SNAPSHO SNAPSHOT ENTERPRISE VALUE IS A SMALL FRACTION OF RESOURCE POTENTIAL ENTERPRISE VALUE IS A SMALL FRACTION OF RESOURCE POTENTIAL No bank debt Trading Symbol TSX ‐ V: SOG • Tightly held ownership group • Shares (basic) 1 46.4MM Reserves booked on only 15% of Muskeg acreage • $500+ million in tax pools Working capital 1 $13MM • Convertible debt 1,2 $106MM Share price (March 7, 2018) $1.01/sh 52 ‐ week range $0.59 ‐ $3.80 Enterprise value (March 7, 2018) $140MM Insider ownership (basic) 67% Corporate production 3 2,400 boe/d Reserves (P+P, Dec 31/17) 16.0 MMBoe Oil Hedging (WTI price, US$/bbl): Feb ‐ Sep 2018: 500 bbl/d @ $62.00 Mar ‐ Aug 2018: 100 bbl/d @ $64.20 1. As at December 31, 2017 2. 8% coupon, 90% convertible at $1.80/share 3. Average for Q4 2017 Strategic Oil & Gas 3 April 2018
Q1/2018 Q1/2018 GO GOALS ALS & RE RESUL SULTS First ‐ Quarter 2018 Goals • Restore / Improve Muskeg Well • Productivity Improve Well Cost Profile • Test Well Design Changes for a Future • Goal of $3.1MM/well First ‐ Quarter 2018 Results • 2 Wells Successfully Drilled, • Completed, & On ‐ Production Ahead of Schedule Revised Well Targeting • Drilling: Monobore Well Design • Completion: NCS System with Alternate • Frac Fluid 01 ‐ 02 Exceeding Type Curve; • 05 ‐ 01 Continues to Clean ‐ Up • Strategic Oil & Gas 4 April 2018
WEST WEST RI RIM MUS MUSKEG EG TYPE TYPE CUR CURVE AND AND ECO ECONOMICS West West West Inboard Rim Rim (BOED) West Outboard Inboard * Outboard * 500 450 Capital Cost ($MM/well) $3.1 $3.1 400 Reserves/well (MBOE) 330 250 350 Reserves/well ‐ Oil (MBbl) 185 158 300 Reserves /well ‐ Gas (MMCF) Sales 870 560 250 200 NPV10 BTAX ($MM) 2.9 1.7 150 ROR (%) 72 39 100 50 F&D ($/BOE) 9.4 12.3 0 Payout (yrs) 1.3 2.2 0 6 12 18 24 30 36 Months on Production * Reserves, commodity prices and costs from McDaniel YE ‐ 2017 Reserves Report. See “Advisory” slide in this presentation. Strategic Oil & Gas 5 April 2018
MARLOWE: MAR E: PREM PREMIER IER NOR NORTHERN HERN LIGH LIGHT OI OIL ASSET ASSET 2 BILLION BARRELS OF LIGHT OIL IN MUSKEG ZONE ON STRATEGIC LAND BASE 2 BILLION BARRELS OF LIGHT OIL IN MUSKEG ZONE ON STRATEGIC LAND BASE 100% working interest • All petroleum & natural gas rights • Connected via pipeline, highway & rail • High quality conventional reservoir • 440,000 net acres of land • HIGHWAY & RAIL Strategic Lands Strategic Oil & Gas 6 April 2018
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