Investor Presentation October 2017 Gold Creek Montney 11 02 Battery - PowerPoint PPT Presentation

Investor Presentation October 2017 Gold Creek Montney 11 ‐ 02 Battery “Full cycle, fully engaged”

ADVISORY REGARDING FORWARD ‐ LOOKING STATEMENTS This presentation contains certain forward ‐ looking information and statements with respect to Velvet Energy Ltd. (“Velvet” or the “Company”), including expectations, beliefs, plans, goals, objectives, assumptions, information and statements about future events, conditions, results of operations, performance, Velvet’s planned capital expenditure program and the nature of the expenditures, drilling plans, expected drilling and completion costs, expected average production, the expected splits among crude oil, NGLs and natural gas, forecasted commodity prices and factors affecting natural gas prices, forecasted general and administrative expenses, interest expenses, revenue, operating income, operating netbacks, funds from operations and year ‐ end bank debt, management’s assessment of future potential, including years of drilling inventory and expectations with respect to natural gas demand and supply in North America.. These forward ‐ looking statements are based on assumptions and are subject to numerous risks and uncertainties, certain of which are beyond the Company’s control, including the impact of general economic conditions; industry conditions; volatility of commodity prices; currency exchange rates; imprecision of reserve estimates; environmental risks; competition from other explorers; stock market volatility; oil and natural gas development and transportation; actions by governmental authorities, including changes in government regulation, royalties and taxation; dependence upon compressors, gathering lines, pipelines and other facilities, certain of which the Company does not control; shortage or lack of available of pipeline capacity or other transportation facilities; weather conditions, natural disasters and fires; and ability to access sufficient capital. We caution that the foregoing list of risks and uncertainties is not exhaustive. The use of any of the words “anticipate”, “continue”, “estimate”, “expect”, “may”, “will”, “should”, “believe”, “plans”, and similar expressions are intended to identify forward ‐ looking information or statements Statements relating to “reserves” or “resources” are deemed to be forward ‐ looking statements as they involve the implied assessment, based on current estimates and assumptions that the reserves and resources can be profitably produced in the future. Readers are cautioned that disclosure of any well test results is not necessarily indicative of long ‐ term performance. Velvet’s actual results, performance or achievement could differ materially from those expressed or implied by these forward ‐ looking statements. No assurance can be given that any events anticipated herein will transpire or occur and such forward ‐ looking statements included in this presentation should not be unduly relied upon. In addition, the reader is cautioned that historical results are not necessarily indicative of future performance. The forward ‐ looking statements contained herein are made as of the date of this presentation and the Company does not intend, and does not assume any obligation, to update or revise any forward ‐ looking statements, whether as a result of new information, future events or otherwise, unless expressly required by applicable securities laws. Certain information set out herein may be considered as “financial outlook” within the meaning of applicable securities laws. The purpose of this financial outlook is to provide readers with disclosure regarding Velvet’s reasonable expectations as to the anticipated results of its proposed business activities for the periods indicated. Readers are cautioned that the financial outlook may not be appropriate for other purposes. 2

VELVET ENERGY LTD. – A GEOSCIENCE DRIVEN, ORGANIC GROWTH COMPANY “Velvet is an organic growth company. We Gold Creek apply best ‐ in ‐ class geoscience and Montney 245 net sections commercial skill to build large and contiguous tracts of land in, and adjacent to, oil ‐ window source rocks. State ‐ of ‐ the ‐ art prospecting, drilling, completions, and Velvet Edson Core production methods allow us to generate top 550 net sections decile economic returns” 3

VELVET DIFFERENTIATORS  Highly technical, geoscience driven team People  Accountable and engaged in decision making process  Dominant player in the oil and liquids window of the Deep Basin Assets  Rigorous application of technology for continuous improvement  Strong track record of top decile returns and organic growth Returns  Risk management central to full cycle return philosophy  Solid foundation of PE support Access to Capital  Strategic relationship with term debt providers 4

TRACK RECORD OF ORGANIC GROWTH Daily Production 25,000  Over 90% of current production has been added via the drill bit 20,000 Corporate Production (BOED)  Disciplined acquisition strategy that targets hurdle rate of return on Multiple 15,000 on Invested Capital (MOIC) 10,000  Vero 2011  Lightstream 2014  Bonavista 2017 5,000  Continue to improve Edson full cycle 0 E&D capex efficiency with objective to reduce to below $14k/boe/d Vero Acq 2012 2013 LTS Acq 2014 2015 2016 2017 Dev Montney 2011 2012 2013 2014 2015 2016 Capex ($mm) $39.5 $242.8 $110.7 $245.4 $108.3 $150.2 EBITDA ($mm) $24.4 $37.3 $87.3 $85.4 $84.6 Edson Wells drilled (G / N) 5 / 4.7 11 / 7.1 26 / 20.1 33 / 26.3 19 / 12.5 25/17.9 Success rate* (%) 79 80 92 82 92 94 2P FD&A cost ($/boe)** $33.51 $15.73 $13.22 $14.52 $14.33 $9.85 Note on acquisitions: 2012 capex included $195mm net acquisitions; $85mm in 2014 5 * Success rate is post completion ** FD&A includes change in FDC

MANAGEMENT & DIRECTORS MANAGEMENT Ken Woolner, P.Eng, President & CEO George Gervais, P. Eng., MBA, Executive Vice President Geoff MacDonald, P. Geol, Vice President, Exploration Chris Theal, CFA, CIM, Chief Financial Officer Jeremy Kwasnecha, P.Eng, Vice President, Operations Peter Henry, CA, Vice President, Finance BOARD OF DIRECTORS Ken Woolner, P.Eng, President & CEO Harvey Doerr, Independent Businessman John Brussa, Partner, Burnet, Duckworth & Palmer LLP Roger Smith, Independent Businessman Vincent Chahley, Independent Businessman Christopher R. Manning, Trilantic Capital Partners Robert E. Hougie, 1901 Partners LP David B. Krieger, Warburg Pincus Jacob Strauss, Warburg Pincus 6

EMPLOYEE ENGAGEMENT IN VALUE CREATION  Grassroots play generation  Target hurdle rate IRRs  Data intensive analysis  Margin maximization vs. price  Constant refining & integration of taker G&G model TECHNICAL HEDGING STRATEGY DIFFERENTIATION RATE OF RETURN INVESTING MARKET ACCESS COST CONTROL  Firm ‐ service & long ‐ term  Focus on controllables through planning the entire value chain  Innovative risk ‐ sharing midstream  Scale affords cost savings and partnerships leverages technology gains “PROFITABLY converting undeveloped land to PDP provides greatest opportunity for value creation” 7

VELVET EXPLORATION & DEVELOPMENT PORTFOLIO Velvet Exploration & Development Portfolio  Our base business in the Ellerslie has been recognized as the low supply cost play in the Edson Ellerslie Deep Basin by third parties Edson stack  While we continue to grow the Ellerslie, we are also adding and advancing prospects across the Gold Creek Montney Relative Technical Risk risk/entry cost spectrum:  Strong results from stack drilling in 1H2017 RPC  First oil in the Montney at Gold Creek  New areas being acquired & evaluated  Low cost capture of higher risk prospects RPC RPC Conceptual Exploratory Development Exploitation Play Maturity 8 RPC = Resource Play Concept

Edson Ellerslie Hybrid Resource Play – High Return Base Business 9

VELVET’S DEEP BASIN FAIRWAY 1. Abundant Data  Thousands of feet thick  Thousands of penetrations since 1950’s 2. No Water  Basin ‐ centered Petroleum System  Relative over ‐ pressure 3. Condensate/Volatile Oil Prone  Local oil ‐ mature sources  Gas via migration 4. High IP and EUR  Porosity and Permeability preserved  Water Saturations misleading 10

ELLERSLIE: THE DISCOVERY CONVENTIONAL APPROACH: UNCONVENTIONAL APPROACH: 11 ‐ 14 ‐ 50 ‐ 13W5 (vt): 16 years, 396 Mmcf 16 ‐ 14 ‐ 50 ‐ 13W5 (hz): 55 months: 3.5 Bcf, 195 mstb NGL, 214 mstb Oil 990 MBOE 1000 Boe/d 100mcf/d 500 Bbl/d 16 years 55 months 11

AN EXTENSIVE FAIRWAY VEL 3D Seismic 4 ‐ 33 ‐ 55 ‐ 17W5 VEL Lower Mannville Porosity: 9%; Perm: 2.5 mD Images on right A Offset Vt in 7 yrs: Shallow marine sand fairway 0.137 bcf, 11 mstb Offset Hz in 36months: 371 MBOE (1.6 BCF, 69 MStb) 500 um 4 ‐ 33 ‐ 55 ‐ 17W5 2 ‐ 3 ‐ 53 ‐ 14W5 2 ‐ 3 ‐ 53 ‐ 14W5 Porosity: 7.8%; Perm: 0.4 mD 11 ‐ 14 ‐ 50 ‐ 13W5 A’ Offset Vt in 16 yrs: 0.98 bcf, 30 mstb oil Offset Hz in 41 months: 655 MBOE ( 2.7Bcf, 131MStb) 500 um Core from hundreds of wells were analyzed 11 ‐ 14 ‐ 50 ‐ 13W5  Consistent preservation of porosity and Porosity: 14.2%; Perm: 1.0 mD permeability along the fairway = repeatable results Offset Vt in 16 yrs: 0.39 bcf Production on hundreds of vertical wells was analyzed Offset Hz in 44 months:  Horizontal wells demonstrate a significant multiple 990 MBOE (3.5 Bcf, 214 MStb) of vertical well performance 500 um 12