Corporate Presentation January 2017 TSX: YGR TSX: YGR
Corporate Snapshot Capitalization Reserves and Locations (2) December 31, 2015 mmboe NPV10 ($mm) Ticker TSX: YGR Proved Developed 5.6 $97.9 Shares Outstanding (mm) Basic 79.8 Total Proved 24.7 $315.9 2P 40.6 $499.5 Options (weighted avg. price $1.50) 7.9 Fully Diluted 87.7 Total Cardium Locations 690 Gross (430 Net) Market Cap ($mm) (at $2.65 / share) (1) Booked Cardium Locations 140 Gross (87 Net) $211 Estimated 2016 Year-End Net Debt ($mm) $65 NAV (3) / Share (Excl. land) ($80mm credit facility with ATB) December 31, 2015 Enterprise Value ($mm) $276 Proved Developed $0.58 Insider Ownership Total Proved $3.33 Basic 13% Total Proved + Probable $5.65 Fully Diluted 21% 2) Reserves effective as at December 31, 2015 based on the reserve report prepared by Deloitte LLP, independent petroleum engineers (the “Reserves Report”) 3) NAV = NPV10 Reserve Value less Net Debt 1) Price as at February 3, 2017 • Highly motivated management and board with insiders owning 13% of the basic shares and 21% of the fully diluted shares 2 TSX: YGR
Corporate Strategy 2016 – Prepare for future growth Acquire land at the low-end of the cycle Consolidate partner interests Secure infrastructure capacity Prepare and drill (one-well) pad-drilling sites; leaving significant torque to add 3 wells on existing pads 2017 – Focus on Growth • Current inventory and full cycle returns now supports an increased pace of development • Now utilizing 2 rigs • Will ramp up to 3 rigs as commodity prices improve • Multi-well pads with one well now ready for a quick ramp-up to a 4-5 well pad Low commodity prices Recovering commodity prices • Build inventory, avoid eroding well • Accelerate drilling and add lower-cost economics production on half-cycle economics 3 TSX: YGR
People Management Team Randall Faminow, VP, Land Jim Evaskevich, President & CEO • 30+ years of experience in all aspects of oil and gas land work, • 30+ years extensive executive experience with strong including negotiation, acquisitions and divestments, contracts operations background and mergers James Glessing, CA, CFO Lorne Simpson B.Sc., C.E.T., VP, Operations • 17+ years oil and gas accounting experience • 30+ years experience in the industry • Executive and financial experience as CFO with North Peace • Supervisor, Drilling Ops with PetroBakken Energy Ltd. Energy Corp • Engineered, drilled or completed 250 HZ Cardium • Controller at BlackRock Ventures, wells, 200 HZ Bakken wells, 2 HZ Duvernay wells, 25 • Canadian Natural Resources, Shell and Deloitte HZ Montney wells, and dozens of Blue Sky, Viking, SWS, Glauc, and Rock Creek HZ wells Board of Directors Gordon Bowerman Neil Mackenzie • • Chairman Director of various public companies, including Canyon • Technical Services President of Cove Resources Ltd • • Currently a partner in Blackstone Fluids, an oil and gas Founder of several successful private and public oil drilling fluids company and gas companies Ted Morton Robert Weir • • A former Canadian politician and cabinet minister in President of Weir Resource Management Ltd the Alberta government • Jim Evaskevich Has held various positions in the Alberta Government included Minister of Energy (2011-2012), Minister of • President and CEO of Yangarra Resources Ltd Finance and Enterprise (2010-2011), and Minster of Sustainable Resources (2006-2010) 4 TSX: YGR
Why Own Yangarra? • Top Decile Full Cycle rates of return • Low-cost operator, high netbacks • Cash costs totaled $12.71/boe • Operating costs of $6.97boe • Transportation costs of $1.17/boe • Royalties of $1.14/boe (4% of revenue) • G&A costs of $1.58/boe • Finance and interest costs of $1.85/boe • Low-cost philosophy, not just a result of current low commodity prices • Central Alberta Cardium formation focus • Large future drilling inventory • Consistent, low risk Cardium economics • Potential Duvernay upside 5 TSX: YGR
Full Cycle Returns • Capital allocation is determined based on narrowing the gap between half cycle and full cycle returns Half Cycle IRR ⁽ ¹ ⁾ Full Cycle IRR ⁽ ² ⁾ Full Cycle with Duvernay 90% 80% 70% 60% 50% IRR 40% 79% 67% 65% 30% 44% 20% 41% 34% 33% 31% 31% 27% 26% 24% 10% 12% 0% 2010 2011 2012 2013 2014 2015 1. Half cycle IRR is based on actual drilling and completion costs, production to date and P+P reserves 2. Full cycle IRR allocates all other capital costs to the wells (i.e. land, G&G, infrastructure) 6 TSX: YGR
2017 Capital Plan CAPEX budget for 2017 $50.0 million Budget focused on Cardium Wells -5 wells in the first quarter and 10 wells in the second half Funded with cash flow and the existing credit facilities 2017 Guidance Production (boe/d) Annual Average 4,500 – 5,000 boe/d Cash flow from operations $45 – 50 million Year end net debt $65 – 70 million Annual debt to cash flow 1.3 – 1.6 : 1 Pricing Assumptions (annual average) WTI (USD/bbl) $55.00 Edmonton Par (CDN/bbl) $68.71 AECO (CDN/GJ) $3.00 7 TSX: YGR
Free Cash Flow Sensitivity 2017 Free Cash Flow 2017 Free Cash Flow ($2.50/mcf Gas) ($3.00/mcf Gas) $30,000,000 $35,000,000 $30,000,000 $25,000,000 $25,000,000 $20,000,000 $20,000,000 $15,000,000 $15,000,000 $10,000,000 $10,000,000 $5,000,000 $5,000,000 $0 $0 $40.00 $50.00 $60.00 $40.00 $50.00 $60.00 WTI Prices ($US/bbl) WTI Prices ($US/bbl) 3,500 boe/d 3,000 boe/d Assumptions: Sustaining Capital $1.30 FX Rate, 20% corporate decline, 20,000 capital efficiency • 3,000 boe/d = $12,000,000 8 TSX: YGR Liquids prices move proportionately with WTI price increases • 3,500 boe/d = $14,000,000
Production Potential 10,000 9,000 8,000 7,000 6,000 Boe/d 5,000 4,000 3,000 2,000 1,000 0 Year 1 Year 2 Year 3 1-Rig 2-Rigs 3-Rigs 9 TSX: YGR
Cardium Formation 108 (78 net) Sections of Cardium 10 TSX: YGR TSX: YGR
Cardium 2016 Initial Production Well Rate (liquids) (Stages 103/04-07-41-5W5 (1.5 mile) IP 90 480 boe/d 82% liquids (71 stages & 1,070 tons of sand) 100/01-14-41-6W5 (2.0 mile) IP 60 120 boe/d 94% liquids (74 stages & 1,120 tons of sand) 104/14-19-41-5W5 (1.5 mile) IP 60 506 boe/d 82% liquids (69 stages & 1,056 tons of sand) 100/01-26-37-8w5 (2.0 mile) IP 30 395 boe/d 76% liquids (101 stages & 1,520 tons of sand) • Well 2 drilled using old well path (higher in formation similar to older drill programs) and therefore needed artificial lift (larger pumpjack to be installed once second well on pad is complete). • Well 4 restricted more than previous wells with current flow rate higher than its IP 30 rate. 11 TSX: YGR
Cardium Drilling Inventory (1) Drilling Locations (1-mile laterals) Proportionate (gross locations) 800 700 130 North Willesden 600 Green 236 Ferrier Locations Locations 500 Locations 400 300 324 Willesden 200 Green Locations 100 0 2010 2011 2012 2013 2014 2015 2016 Net Gross • 690 gross (430 net) future 1-mile Cardium future drilling locations (1) • Opportunity to drill extended reach wells • Willesden Green rock is generally tighter then Ferrier and North Willesden green 1) Management estimate is based on an estimate prepared by a non-independent qualified reserves evaluator of the Company in 12 TSX: YGR accordance with National Instrument 51-101 and the COGE Handbook, with an effective date of October 15, 2015.
2015 F&D and Recycle Ratios Finding and Development Recycle Ratios 7.0x $40.00 $35.00 6.0x $30.00 5.0x $25.00 4.0x $/boe $20.00 3.0x $15.00 2.0x $10.00 1.0x $5.00 $- 0.0x 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 Proven F&D P+P F&D Proven Recycle P+P Recycle • Consistent improvement in, and Reserves (1) continued focus on, F&D costs and NPV10 BT Volumes recycle ratios • In Yangarra’s view Probable and PDP PDP 14% 2P 19% 2P proven Cardium locations have a 37% 39% similar chance of success • Reserve Life Index (“RLI”) 1P 1P 47% • 44% 37 years with one rig • 18 years with two rigs 2P NPV10: $499.5 million 2P Reserves: 40.6 mmboe • 12 years with three rigs 1) Reserves effective as at December 31, 2015 based on the Reserves Report 13 TSX: YGR
Deeper Drill Path Bioturbated Upper Cardium Conglomerate/Upper Cardium New Well Path Old Well Path Upper Cardium Bioturbated Zone Lower Cardium Old Frac Plane New Frac Plane Upper Cardium (5-15% Porosity) 2.5-4.0m Bioturbated Zone (20-80% Sand) 3.0-7.0m 14
Impact of Deeper Drill Path 600 Drilling into the Bioturbated Zone/Lower Cardium 500 400 Production Rate (boe/d) 300 200 100 0 30 60 90 120 150 180 100/1-26-41-8W5 (30% Liquids) 103/04-07-41-5w5 (82% Liquids) 104/14-19-41-5w5 (82% Liquids) 15 TSX: YGR
Impact of More Stages 350 Cumulative Production 300 05-17 10.30 Mbbl 12-17 12.52 Mbbl 250 Daily Oil Rate (bbl/d) 200 20% Improvement in IRR 150 100 50 0 0 20 40 60 80 100 120 140 160 180 200 Days on Production 00/05-17-041-07W5 (1-mile, sleeves, 18 stage, 360T) 02/12-17-041-07W5 (1-mile, sleeves, 30 stages, 540 T) 16 TSX: YGR
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