Investor Presentation September 2019 6-35 pad completion, Gold - PowerPoint PPT Presentation

Investor Presentation September 2019 6-35 pad completion, Gold Creek, June 2019 “Full cycle, fully engaged”

ADVISORIES THESE MATERIALS CONTAIN CONFIDENTIAL INFORMATION AND ARE BEING FURNISHED ON A CONFIDENTIAL BASIS SOLELY FOR INFORMATION PURPOSES TO ASSIST RECIPIENTS IN MAKING THEIR OWN EVALUATION OF VELVET ENERGY LTD. ("VELVET" OR THE "COMCPANY") AND ITS BUSINESS AND ASSETS. BY ACCEPTING THESE MATERIALS, THE RECIPIENT AGREES WITH VELVET THAT NEITHER IT NOR ITS AGENTS, REPRESENTATIVES, DIRECTORS OR EMPLOYEES WILL COPY, REPRODUCE OR DISTRIBUTE TO OTHERS THESE MATERIALS, IN WHOLE OR IN PART, AT ANY TIME WITHOUT THE PRIOR WRITTEN CONSENT OF VELVET AND WILL KEEP CONFIDENTIAL ALL INFORMATION CONTAINED HEREIN. Velvet has included in these materials information which it believes to be reliable for the purpose of describing Velvet and its business and assets. The document is based on information available when the materials were prepared. No representation or warranty, express or implied, is given by Velvet, its affiliates, directors, employees, shareholders, or advisors or any other person as to the accuracy or completeness of such information and no responsibility or liability is accepted for any errors, omissions or misstatements, negligent or otherwise, in such information. Velvet disclaims liability for any reliance upon any information or representation contained in these materials, for any omissions from the materials, and for any written or oral communications made by Velvet or its representatives. The materials are provided as a matter of convenience and any reliance or use of such information is done at the recipient's sole risk. Accordingly, none of Velvet, or its affiliates, directors, employees, shareholders or advisors shall be liable for any direct, indirect, or consequential loss or damage suffered by any person as a result of relying on any statement or omission in this document or any other information or communication received as a part of the due diligence process. This document does not contain all of the information available with respect to Velvet. Its sole purpose is to assist the recipient in deciding whether to proceed with a further analysis of Velvet and it is assumed, and expected, that the recipient will conduct its own investigation and analysis of Velvet's operations, financial condition and prospects. The information contained herein is for informational purposes only, and this document is not be construed under any circumstances to be an offering or solicitation for the sale of securities; a recommendation to purchase, sell, or hold any securities; an offering memorandum as contemplated by applicable securities laws. Forward Looking Information and Future Oriented Financial Information advisory, Non-GAAP Measures and Oil and Gas Information can be found on pages 25 and 26. 2

VELVET ENERGY LTD. – KEY MESSAGES  Dominant land owner in the Montney oil window in Alberta / NEBC  Converted raw land into 21,500 boe/d of light oil production in just over two years  Replicating our full cycle approach at Gold Creek / Karr, Pouce and Flatrock  CROCI has consistently driven investment decisions  Cumulative CROCI of 12.8%, despite backwardated oil and two organic basin opening projects  Assured market access for products  Egress for current and future oil and natural gas production from the WCSB  Historically 95% of our growth has been via the drill bit, but actively pursuing large scale Montney oil consolidation given generational lows in asset values 3

VELVET ENERGY LTD. OVERVIEW Largest Holder of Montney Light Oil Acreage in FLATROCK Alberta 53,000 acres  29,500 boe/d (47% liquids) POUCE  Repeatable organic growth model COUPE  Egress from Canada a differentiator 62,000 acres Montney Light Oil Growth  21,500 boe/d (54% liquids) focused in MONTNEY GOLD Gold Creek / Karr CREEK  New development areas at Pouce and 237,000 acres Flatrock  352,000 net Montney acres KARR / Harvesting Deep Basin Ellerslie base SIMONETTE  8,000 boe/d (30% liquids) today McLEOD  PINE Harvest asset while growing Montney oil CREEK NOTINE  397,000 net acres DEEP BASIN EPG  80 Full time employees in Calgary head 397,000 acres office  10 Full time employees in various field offices 4

THE VELVET MONTNEY OIL OPPORTUNITY POUCE COUPE GOLD CREEK KARR / SIMONETTE FLATROCK Gold Creek D23 Gold Creek LSW Karr/Simonette Pouce Coupe Flatrock TOTAL OOIP (BnBBLS) 5.9 2.6 2.5 1.9 2.5 15.4 Inventory Locations (#) 634 402 138 238 229 1641 Oil EUR/well (mmbls) 350 350 711 350 350 380 Recoverable Oil (MMbbls) 222 141 98 83 80 624 Recovery Factor (%) 3.8% 5.4% 3.9% 4.4% 3.2% 4.1% Booked 2P Locations (#) 146 9 23 37 0 215 5 % Booked (%) 23% 2% 17% 16% 0% 13% * Company estimates

DIFFERENTIATED AS AN ORGANIC GROWTH COMPANY  Velvet’s commercial approach secures large contiguous land blocks, advances an integrated geological model, including 3D seismic and geoscience to high grade prospects Velvet Energy Ltd. Production Growth  Strong track record of converting raw land into 35,000 production and cash flow  Have repeated this organic cycle at Edson, 30,000 Corporate Production (BOED) Gold Creek/Karr and Pouce 25,000  Over 95% of our production has been added via 20,000 the drill bit Edson asset sale mid-2019 15,000  Recent Edson disposition proceeds were re- invested into oil-weighted Montney 10,000  The disposed gas-weighted Edson production has been replaced with oil- 5,000 weighted Montney production - May-15 Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 Oct-15 Mar-16 Aug-16 Jan-17 Jun-17 Nov-17 Apr-18 Sep-18 Feb-19 Jul-19  Historical capital efficiency of $13-16/mboe/d and industry leading CROCI 2011 2012 2013 2014  Our growth to 29,500 boe/d has been funded with 2015 2016 2017 2018 PSS equity, term debt, bank debt and funds flow 2019 2017 - Montney 2018 - Montney 2019 - Montney 6

ORGANIC GROWTH YIELDS COMPETITIVE FULL CYCLE RATES OF RETURN  12.8% average CROCI since inception  Consistently generate top decile CROCI, even in years where we capitalize resource plays as we shift from exploration to development  Montney at Gold Creek in 2017  Ellerslie at Edson in 2013  In 2020, Velvet achieves 50% liquids and generates 14.5% CROCI on strip pricing CROCI 20.0% ~US$100/bbl oil Converting Gold Creek 2014 price environment Hedging program 2015 land into PDP 15.0% sustained returns 2020E 2012 2016 Discovered CROCI(%) liquids-rich 2013 2019E 10.0% 2018 Ellerslie 2017 Shale sets marginal First oil at cost of production 5.0% Gold Creek 0.0% $- $20 $40 $60 $80 $100 $120 WTI Oil ($US/bbl) 7 CROCI = Adjusted EBITDA / Average (Gross PP&E + Gross E&E)

DIFFERENTIATED BY PROACTIVELY ASSURING ACCESS TO MARKET FOR OUR PRODUCTS  Basis positions on 100,000 mmbtu/d via NYMEX-AECO Synthetic Pipe to the Gulf financial hedges through 2023  Represents current wedge of net PDP gas sales  Combined AECO/NYMEX swaps and basis hedges are $40mm in-the-money  Strategy:  Synthetic pipe to highly liquid North American demand New gas pipe to GoM centre at Henry Hub VEL 5-year synthietic US$1.85/mmbtu pipe to GoM at  Avoid illiquid and less transparent hubs that may serve to US$1.19/mmbtu shift basis risk on regional S/D dynamics (Dawn, Sumas) N.A. Gas Demand Centre Physical Oil Takeaway  Velvet awarded 7,500 bbl/d of capacity on Spearhead pipeline for 7-year term commencing May 1, 2019  Strategy:  Physical egress at tolls inside forward MSW prices ENB main line  Marketing Agreement with third party allows VEL to toll of $5-7/bbl optimize revenue amongst selected grades of Canadian crude VEL physical market access to Cushing at costs inside MSW Spearhead toll forward market US$2.67/bbl 8 8

CONFLUENCE OF FACTORS DRIVE M&A STRATEGY  Confluence of factors create value enhancing M&A scenario  Dislocation in private / public multiples EV / Forward DACF(x) 12.0x  Historic low energy weight in market 11.0x indices  Stranded balance sheets and banking 10.0x relationships  9.0x Made in Canada egress risks and ongoing uncertainty 8.0x  Strategic advantage for private companies 7.0x to transact vs. visceral public market responses 6.0x 5.0x  Velvet M&A focus has historically been on land Senior Integrated capture 4.0x Mid Cap  Iron Bridge hostile takeover in 2018 Small Cap 3.0x consolidated land footprint at Gold Creek  Current environment supports consolidation of PDP and land in the Montney oil window of Alberta and BC Source: Peters & Co 9