Birley/Umbach Area - Montney

November 2014
Reader Advisory
Barrels of Oil Equivalent
Barrels of oil equivalent (boe) is calculated using the conversion factor of 6 Mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. Boe may be misleading,
particularly if used in isolation. A boe conversion ratio of 6 Mcf:1 bbl (barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the
energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
Reserve Life Index
The reader is also cautioned that this corporate presentation contains the term reserve life index ("RLI"), which is not a recognized measure under IFRS. Management believes
that this measure is a useful supplemental measure of the length of time the reserves would be produced over at the rate used in the calculation. Readers are cautioned,
however, that this measure should not be construed as an alternative to other terms such as net income determined in accordance with IFRS as a measure of performance.
Chinook's method of calculating this measure may differ from other companies, and accordingly, they may not be comparable to measures used by other companies.
Discovered Petroleum Initially-In-Place
The Canadian Oil and Gas Evaluation Handbook defines this term as that quantity of petroleum that is estimated, as of a given date, to be contained in know accumulations prior
to production. The recoverable portion of discovered petroleum initially-in-place includes production, reserves, and contingent resources; the remainder is unrecoverable.
“Contingent Resources” are defined in the COGE Handbook as those quantities of petroleum estimated to be potentially recoverable from known accumulations using established
technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies include
factors such as economic, legal, environmental, political, and regulatory matters, or a lack of markets. It is also appropriate to classify as contingent resources the estimated
discovered recoverable quantities associated with a project in the early evaluation stage. The Contingent Resources estimate and the DPIIP estimates are estimates only and the
actual results may be greater than or less than the estimates provided herein. There is no certainty that it will be commercially viable to produce any portion of the resources
except to the extent identified as proved or probable reserves. Best Case Estimate is considered to be the best estimate of the quantity that will actually be recovered. It is equally
likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods were used, there should be at least a 50 percent
probability (P50) that the quantities actually recovered will equal or exceed the best estimate.
Possible Reserves
Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10 percent probability that the quantities actually
recovered will equal or exceed the sum of proved plus probable plus possible reserves.
Analogous Information
Certain information on the production profile and estimates of increased productivity rates on properties adjacent to Chinook’s properties, which is “analogous information” as
defined by applicable securities laws. This analogous information is derived from publicly available information sources which Chinook believes are predominantly independent in
nature. Some of this data may not have been prepared by qualified reserves evaluators or auditors and the preparation of any estimates may not be in strict accordance with
Canadian Oil & Gas Evaluation Handbook. Regardless, estimates by engineers and geotechnical practitioners may vary and the differences may be significant. Chinook believes
that the provision of this analogous information is relevant to Chinook’s activities and forecasting, given its property ownership in the area(s); however readers are cautioned that
there is no certainty that the forecasts provided herein based on analogous information will be accurate.
Reader Advisory (cont’d)
Forward-Looking Statements
In the interest of providing potential investors with information regarding Chinook Energy Inc. ("Chinook"), including management's assessment of the future plans and operations
of Chinook, certain statements contained in this corporate presentation constitute forward-looking statements or information (collectively "forward-looking statements") within the
meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as “anticipate”, "continue", "estimate", "expect", "forecast", "may",
"will", "project", "could", "plan", "intend", "should", "believe", "outlook", "potential", "target" and similar words suggesting future events or future performance. In addition,
statements relating to "reserves" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the
reserves described exist in the quantities predicted or estimated and can be profitably produced in the future. In particular, this corporate presentation contains, without limitation,
forward-looking statements pertaining to the following: budgeted amounts in fiscal 2015 and the expectations that such amounts will be spent in the manner, location and
timeframes set forth; the volume and product mix of Chinook’s oil and natural gas production on certain newly drilled wells; projected well costs; the operations to be conducted,
wells to be drilled and/or completed and the timing thereof on certain of Chinook’s properties, in certain cases, the expected increase in production volumes resulting therefrom;
and future development, exploration, acquisition and development activities (including drilling plans) and the timing thereof and related production expectations; as well as
management’s future expectations regarding production, cash flow, capital expenditures, net debt and credit facilities.
With respect to forward-looking statements contained in this corporate presentation, Chinook has made assumptions regarding, among other things: future capital expenditure
levels; future oil and natural gas prices; future oil and natural gas production levels; ability to obtain equipment in a timely manner to carry out exploration and development
activities; the ability of the operator of the projects of which Chinook has interest in to operate in the field in a safe, efficient and effective manner; the impact of increasing
competition; and the ability to add production and reserves through exploration and development activities; the continued availability of adequate debt financing and cash flow to
funds planned expenditures. Although Chinook believes that the expectations reflected in the forward-looking statements contained in this corporate presentation, and the
assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are
cautioned not to place undue reliance on forward-looking statements included in this corporate presentation, as there can be no assurance that the plans, intentions or
expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown
risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause Chinook's
actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such
forward-looking statements. These risks and uncertainties include, among other things, the following: volatility in market prices for oil and natural gas; the Board of Directors of
Chinook may amend the 2015 budget based on discretion; imprecision of reserve and resource estimates; failure to complete planned operational activities; unexpected decline
rates in wells; inability to retain drilling rigs and other services; delays in projects and/or operations resulting from surface conditions; general economic conditions in Canada, the
U.S. and globally; and the other factors described under "Risk Factors" in Chinook’s Annual Information Form dated March 27, 2014 available at or on Chinook’s
website at Readers are cautioned that this list of risk factors is not exhaustive. Furthermore, the forward-looking statements contained in this
presentation are made as of this date and Chinook does not undertake any obligation to update publicly or to revise any of the forward-looking statements, whether as a result of
new information, future events or otherwise, except as may be required by applicable securities laws.
Any financial outlook or future oriented financial information in this corporate presentation, as defined by applicable securities legislation, has been approved by management of
Chinook. Such financial outlook or future oriented financial information is provided for the purpose of providing information about management’s current expectations and plans
relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes. The forward-looking statements contained in this
corporate presentation speak only as of the date of this corporate presentation. Except as expressly required by applicable securities laws, Chinook does not undertake any
obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements
contained in this corporate presentation are expressly qualified by this cautionary statement. The information contained in this corporate presentation does not purport to be allinclusive or to contain all information that a prospective investor may require. Prospective investors are encouraged to conduct their own analysis and reviews of Chinook and of
the information contained in this corporate presentation. Without limitation, prospective investors should consider the advice of their financial, legal, accounting, tax and other
advisors and such other factors they consider appropriate in investigating and analyzing Chinook.
Chinook at a Glance – Quality and Scale
Projected 37% Year over Year Average Production Increase in 2015
2015 - $135 Million Capital Program
$93mm - Drilling, Completion, Equip & Tie-In
$23mm - Facilities & Infrastructure
$11mm - Land & Seismic
$8mm - Optimizations/Turnarounds/Abex
2 Gold Creek Wells in 2014
3 Birley/Umbach Wells in 2014
1 Gold Creek Well in 2015
12 Birley/Umbach Wells in 2015
5 Albright Wells in 2014
4 Albright Wells in 2015
5 Karr Wells in 2014
6 Karr Wells in 2015
 Production added at $16,000/flowing BOE
 2 of 6 CKE Dunvegan oil pools currently being developed at Albright & Karr
Birley/Umbach 1st Well: 1,300 boe/d discovery (May/2014)
Gold Creek 1st Well: 1,500 boe/d discovery (April/2014)
Birley/Umbach 2nd Well: Drilled & Completed (Sept/2014) – Confidential
Gold Creek 2nd Well: Currently Drilling (October/2014)
Capitalization & Market Value
As at November 12, 2014 and for Canadian operations only, unless noted
Share price
Shares outstanding
215.1 million
Market capitalization
$385.0 million
Net Debt/(Surplus) (Sept
$35.9 million
Enterprise Value (1)
$349.1 million
Net Debt/2014 CF (Fcst)
Management and Directors (7.7% FD)
Alberta Investment Management Corp.
Public Float
Enterprise Value = Outstanding Shares x Current Share Price +/- Net Debt/(Surplus)
2014 & 2015 Guidance
Production (boe/d)
YTD Sept 30,
2014 Results
2014 Guidance (1)
2015 Guidance (2)
YE Exit (boe/d)
Cash flow
$42.1 million
$54-56 million
$62-66 million
$56.9 million
$93 million(3)
$135 million
Period End Net Debt (surplus)
$(35.9) million
($8) million(4)
$60-65 million
Debt Facility
$125.0 million
$125.0 million
$125.0 million
CF/Share (weighted avg)3
$0.20 /share
$0.25 /share
$0.31 /share
2014 Estimated Production:
2015 Estimated Production:
26% oil
10% NGLs
64% natural gas
21% oil
11% NGLs
68% natural gas
2015 Cash Flow Sensitivities:
+/- $1/bbl oil:
+/- $726,000
+/- $1/bbl NGL:
+/- $361,000
+/- $0.10/mcf gas: +/- $1,402,000
Natural gas: $4.79/mcf Cdn; Cdn oil: $92.95/bbl
Natural gas: $4.08/mcf Cdn; Cdn oil: $84.49/bbl
Includes net acquisitions/dispositions
Positive working capital and no drawn bank debt
214.4mm weighted average shares
Canadian Focus Area – Grande Prairie/PRA
Canadian growth and development
Montney and Dunvegan opportunities
23 wells planned for 2015
• 13 Hz Montney locations (all operated)
12 (11 net) at Umbach/Birley (liquids rich gas)
1 (0.37 net) at Gold Creek (oil/gas)
5 wells drilled in 2014
• 10 Hz Dunvegan oil locations (4 operated)
4 (4.0 net) at Albright
6 (2.0 net) at Karr
10 wells drilled in 2014
• Large undeveloped land base
over 300 net sections
multi-year drilling inventory
Birley/Umbach Area - Montney
CKE holds 54 sections (45 net) of Montney rights
1st Hz Upper Montney well drilled and tested in Q1/14, on prod in April at 4
mmcf/d (restricted)
2nd Hz well tested in Q4/14, facility expansion to 10mmcf/d underway
6 well program planned for winter 2014-15, along with facility expansion to 35
mmcf/d, 6 additional wells in second half of 2015
216 Hz locations on CKE acreage (not including mid and lower Montney)
Recent offsetting Hz wells have tested the Middle and Lower Montney
intervals, with encouraging results
1st Well
Hz wells in Mid
and Lwr Montney
Assumes type curve well results (IP 4.5 mmcf/d)
and constant gas price
2nd Well
Q1 2015 Activities
-Expand Compressor to 35 mmcf/d
-Upgrade main access road to allow
summer access to southern pads
Build 12” P/L from compressor to Pad 3
Prepare pads for future loc’s
Birley/Umbach Area – Montney Economics
Single Well Economics. Future program D&C
costs should improve with pad drilling (as per
other area operators)
First well has been on production for over 3
months, and is exceeding the new type curve
Recently acquired lands and infrastructure
provide Chinook flexibility with respect to its
gas processing and transportation options
A-60-K Test Rate
A-60-K Operating Day Prod Rate
Grande Prairie Area - Montney
Gold Creek and Knopcik areas within Montney oil
and/or very high liquids window
Recent offsetting wells reported
Oil rates up to 1,500 bopd, 3,500 BOE/D
Condensate ratios up to 200 bbl/mmcf
Recent land sale prices up to $15,000/Ha
Over 50 gross sections (35 net) of
prospective Montney acreage in the Gold Creek area,
with Upper and Middle Montney intervals prospective
34 gross sections (15 net) in the Knopcik area
First Montney Hz well (CKE operated, 37.3% WI)
drilled in Q1/14
Tested rates up to 500 BOPD and 6 mmcf/d
(1,500 BOE/D)
Well is on production Nov/14
Second Montney Hz well drilled in Q4/14
Gold Creek Area - Montney
Active Montney area, with several
operators currently drilling Hz wells
Results to date have been highly
variable, with some outstanding early
test and production rates
Chinook’s ownership position in Gold
Creek gas plant provides a
competitive advantage
Currently one (0.37 net) well budgeted
for 2015, with plan and ability to
increase activity with success
Gold Creek
Gas Plant
Grande Prairie Area – Dunvegan and Doe Creek Oil Pools
• Ownership in 6 established
Dunvegan/Doe Creek oil pools, only 2
have seen activity in the last 2 years
• Hz drilling is:
• Developing new oil pools
• Extending mature oil pools
• Drilled 22 gross Hz Dunvegan wells in the
past 24 months
• Average IP30 rate of 255 BOE/D
• (105 to 621 BOE/D)
• 79 additional Hz locations (48 net)
identified on Chinook lands
• 10 wells (6.1 net) budgeted for 2015, 10
wells (6.1 net) drilled in 2014
Karr and Albright Areas - Dunvegan
Current production from these 2 properties is 2,000
BOE/D net (78% oil), with two (2 net) new Albright
wells on in September
Production being added for $16,000/boe/d (using
New battery recently constructed at Karr, reduction in
op costs
4 (1.6 net) more Hz wells planned for Q4/2014
10 (6.1 net ) Hz wells budgeted for 2015
Hz wells continue to outperform type curves
40+ Hz loc’s remaining
Future waterflood potential in both areas could further
increase recovery factors
Transformational 2014 & Strong Growth Catalysts For 2015
3 Key Growth Catalysts
 Montney discovery at Gold Creek
 Montney discovery at Birley/Umbach
 Dunvegan program(s) in full scale development
 No debt with projected cash flow and undrawn bank line of
$125mm to fully fund the next growth phase of CKE
Walter Vrataric, President & CEO
Chinook Energy Inc.
Suite 1000, 517 – 10th Ave SW
Calgary, Alberta, Canada T2R 0A8
T: 403.261.6883
F: 403.266.1814
[email protected]
Experienced Leadership
Board of Directors
Walter Vrataric
President & CEO
Donald Archibald
Tim Halpen
COO Canada
Jill T. Angevine
Jason Dranchuk
Vice President, Finance &
Matthew J. Brister
Darrel Zacharias
Vice President, Exploration
Ryan White
Vice President, Drilling &
Brent Dube
Vice President, Production
Chad Lerner
Vice President, Land
Stuart G. Clark
Robert C. Cook
Robert Herdman
P. Grant Wierzba
Analyst Coverage
National Bank Financial
Dan Payne
Macquarie Equities Research
Ray Kwan
Peters & Co.
Dan Grager
FirstEnergy Capital
Robert Fitzmartyn
Cormark Securities
Garrett Ursu
GMP Securities
Grant Daunheimer
Dundee Capital Markets
Geoff Ready
AltaCorp Capital Inc.
Patrick O’Rourke
Raymond James
Kurt Molnar
Chinook Canadian Reserves (1)
Canada Reserves
Net Present Value,
Proved - developed
12.7 mmboe
$179.4 million
Proved - undeveloped
1.5 mmboe
$44.0 million
Total 1P reserves
16.0 mmboe
$223.4 million
9.1 mmboe
$88.9 million
Total 2P reserves
25.1 mmboe
$312.3 million
December 31, 2013
Commodity mix
37% liquids
63% natural gas
As independently evaluated effective December 31, 2013.
2014 Hedging Positions
Notional Volumes
Received Price
5,000 GJ/d
$3.25/GJ to $3.50/GJ
Jan 1/14 to
Dec 31/14
5,000 GJ/d
Jan 1/14 to
Dec 31/14
500 bbl/d
Jan 1/14 to
Dec 31/14
Indexed Price

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