Iteration Energy Ltd.

August 15, 2008
August 15, 2008
Forward-Looking Statements
Certain information included in this presentation is forward-looking. Forward-looking statements regarding
possible events, conditions or results are based on assumptions about future economic conditions and
courses of action and include future orientated financial information with respect to prospective results of
operations, financial position and cash flows of Iteration. Forward-looking statements may include, without
limitation, statements relating to the future financial position, business strategy, budgets, projected costs,
capital expenditures, financial results, taxes and plans and objectives of or involving Iteration and, in
certain circumstances, potential acquisitions. Many of these statements can be identified by looking for
words such as “believe”, “expects”, “expected”, “will”, “intends”, “projects”, “anticipates”, “estimates”,
“continues”, or similar words.
Although Iteration believes the expectations reflected in such forward-looking statements are reasonable,
no assurance can be given that these expectations will prove to be correct and such forward-looking
statements should not be unduly relied upon. Forward-looking statements are not guarantees of future
performance and involve a number of risks and uncertainties some of which are described in Iterations'
annual information form and other continuous disclosure documents. Such forward-looking statements
necessarily involve known and unknown risks and uncertainties, which may cause Iterations' actual
performance and financial results in future periods to differ materially from any conclusion, forecast,
projection of future performance or results of operations expressed or implied by such forward-looking
statements. Any forward-looking statements are made as of the date hereof and Iteration does not
undertake any obligation, except as required under applicable law, to publicly update or revise such
statements to reflect new information, subsequent or otherwise.
Canadian dollars unless stated otherwise.
Gas converted at a ratio of 6mcf = 1 boe.
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August 15, 2008
Corporate Profile
Recent Events
Acquired Cyries Energy Inc. on March 7, 2008.
Capital Structure
166 million shares, 0.1 million warrants, 8.5 million options.
Management and Directors: 6.7%, 9.2% d.
Production (70% gas)
Q2 2008
18,150 boed average.
This includes the impact of the McMahon plant turnaround
(3,500 boed down through most of June).
Q2 2008 Funds from Operations
$52.8 million, $0.31 per weighted average basic share.
$71.8 million ($0.43/share) before unusual reductions
for stock options being exercised and provision for potential
loss resulting from the SemGroup insolvency.
July 31, 2008 Net Debt
$222 million.
Credit facility of $275 million with RBC, BNS, CIBC, TD.
March 7, 2008 Tax Pools
Iteration - $220 million, plus Cyries - $270 million.
3
August 15, 2008
Reserves and Land Base
December 31, 2007 Reserves(1)
mmboe
34.8 Proved, 49.9 Proved plus Probable.
NAV PV10 Proved plus Probable
$809 million based on December 31, 2007 pricing.
$1,323 million based on May 9, 2008 pricing.
Land (net acres)
(1)
Undeveloped 750,000; Developed 310,000;
Total 1,060,000.
McDaniel & Associates Consultants Ltd. reserves evaluation of Iteration, GLJ Petroleum Consultants Ltd. reserves evaluation of Cyries.
4
August 15, 2008
British
Columbia
Focus Areas
Alberta
4
Q2 2008 Average Production (boed)
3
1
Grande
Prairie
2
5
6
Edmonton
1. BC(1)
2,850
2. PRA/Deep Basin
9,100
3. Hotchkiss
600
4. Rainbow
700
5. Judy Creek
350
6. East Central Alberta
Lloydminster
7. Willesden Green
8. South Alberta
7
2,600
950
1,000
18,150
Calgary
Medicine Hat
(1)
8
Approximately 3,500 boed shut-in for most of June due to the McMahon plant
turnaround.
5
August 15, 2008
Production Profile
4.5 year RLI
(P+P)
97% Gas
20,000
nd
mpou
o
c
33%
BOED
15,000
64
10,000
86
85
100
84
78
5,000
2,540
10,890
64
2,830
7,990
3,180
3,750
3,900
4,680
5,210
5,850
6,310
6,300
40
20
0
20
08
Q
2
20
08
Q
1
20
07
Q
4
20
07
Q
3
20
07
Q
2
20
07
Q
1
20
06
Q
4
20
06
Q
3
20
06
Q
2
20
06
Q
1
20
05
Q
4
20
05
Q
3
20
05
80
60
0
Q
2
120
104
102
97
54
48
140
18,150
th
grow
e
r
a
h
per s
71
43
160
6.3 year RLI
(P+P)
73% Gas
BOED/MM Shares Fully Diluted
25,000
NOTE: Q2 2008 Production was impacted by several temporary gas plant maintenance shut downs.
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August 15, 2008
2007 Reserve Additions
Dec. 31, 2007
Dec. 31, 2006
% Change
Total Proved Reserves (mmboe)
12.7
7.0
81
Proved plus Probable Reserves (mmboe)
19.1
10.9
75
Capital Expenditures
144
114
27
Annual Average Production
6,620
4,420
50
Exit Production
8,250
6,050
36
7
August 15, 2008
2007 Finding and Development Costs
Dec. 31, 2007
Dec. 31, 2006
% Change
Proved plus Probable F&D costs without future
capital ($/boe)
12.49
15.00
(17)
Proved plus Probable F&D costs with future
capital ($/boe)
15.22
18.39
(17)
Proved plus Probable F,D&A costs with future
capital ($/boe)
15.45
19.92
(22)
Proved plus Probable Reserves per thousand
debt adjusted shares (boe/thousand shares)
205
151
34
Liquids content of Proved plus Probable
Reserves (%)
38
6
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August 15, 2008
Expected Netbacks
Q1 2008
Q2 2008
$/boe
$/boe
Blended Commodity Revenue(1)
56.10
77.00
Royalty at approximately 21%
11.80
16.50
Operating Cost
10.30
12.30
Transportation
1.50
1.20
G&A(2)
Netback
2.30
1.90
30.20
45.10
Oil Hedge: 200 b/d for Dec. 1, 2007 to Nov. 30, 2008 with a WTI US $75.00 floor and a US $90.20 ceiling.
There are no gas hedges in place.
Notes:
(1) The blended oil and gas revenue reflects revenue realized from all commodity streams.
(2) Not including the impact of 3.6 million warrants and 1.6 million options that were exercised for cash in lieu at a total cost of approximately $30 million.
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August 15, 2008
2008 Second Quarter Results
Iteration
Average Production
18,150 boed
Capital Program
$31 million
Funds Flow
$52.8 million(1)
Estimated July 31, 2008 Net Debt
$220 million
Net wells drilled
Oil
Gas
D&A
Total
Success
4.0
2.1
-
6.1
100%
(1)
Includes the negative impact of the provision for $9.3 million of losses due to the SemCanada group and the payment of $9.7 million for stock options
exercised for cash in lieu during the quarter. Without these unusual events Funds Flow would have been $71.8 million.
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August 15, 2008
2008 Base Budget Guidance
Estimates
Iteration
Iteration/Cyries Pro Forma(1)
Average Production (boed)
17,500
19,500
22,000 to 24,000
22,000 to 24,000
Capital Program ($million)(2)
244
253
Funds Flow ($million)(3)(4)
196
233
December 31, 2008 Net Debt ($million)(5)
265
265
Debt to annualized Q4 Funds Flow
1:1
1:1
Net Wells
115
127
2008 Exit (boed)
(1)
Includes Cyries for all of 2008 instead of just March 8 to December 31, 2008.
(2)
Includes $38 million of property acquisitions year to date. We continue to evaluate further acquisitions and are licensing additional wells to be able to
expand the drilling program if appropriate.
(3)
Includes a reduction of $16 million for potential non-recovery due to the SemGroup and $9.7 million due to exercise of stock options for cash in lieu.
(4)
Based on the August 7, 2008 commodity strip of $8.35 Cdn/GJ AECO gas and $112.00 Cdn/bbl average for 2008.
A $1.00/GJ price change impacts funds flow for the rest of 2008 by $12 million dollars; a $5.00/bbl change makes a $2 million impact.
(5)
Iteration has bought back 3.6 million warrants at a cost of approximately $21 million.
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August 15, 2008
Expected Impact of the Proposed Alberta Royalty Changes
Current Corporate Royalty rate of approximately 21%. The chart below shows our interpretation of
the effect the proposed January 1, 2009 Alberta royalty structure would have if it was imposed
today on the combined Iteration/Cyries December 2007 production profile.
Oil Prices $Cdn./bbl
Natural Gas Price $Cdn./GJ
5.00
6.00
7.00
8.00
9.00
10.00
11.00
12.00
85.00
24.2%
26.3%
28.3%
29.7%
30.8%
31.6%
32.3%
32.5%
90.00
24.4%
26.5%
28.5%
30.0%
31.0%
31.8%
32.5%
32.8%
95.00
24.7%
26.8%
28.8%
30.3%
31.3%
32.1%
32.8%
33.1%
100.00+
25.0%
27.0%
29.0%
30.5%
31.5%
32.3%
33.1%
33.3%
Alberta land sale prices initially fell dramatically as a result of these proposed changes. There is
ongoing potential for good quality asset acquisitions.
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August 15, 2008
Plans for Future Growth
•
•
•
•
•
•
•
•
•
Continued exploration, acquisition and exploitation in our focus areas.
Work in multi-zone areas to minimize risk.
Strive to maintain high working interest and operatorship.
Focus on cost control.
Maintain a strong balance sheet.
Potential for further strategic and accretive acquisitions.
Exploit the upside of the emerging horizontal well frac technology.
Investigate opportunities in other fiscal regimes due to the proposed Alberta 2009 royalties.
Continue to maintain a high quality team that strives for technical excellence.
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August 15, 2008
Typical Play Types of Main Focus Areas
BC/PRA
Western AB
South Eastern AB
East Central AB
Dunvegan
Belly River/Card.
Belly River
Viking
Cadotte
Dunvegan
Milk River
Colony
Notikewan
Cadotte
Medicine Hat
McLaren
Falher
Notikewan
2WS
Waseca
Bluesky
Falher
Bow Island
Sparky
Gething
Bluesky
Bsl. Colorado
Clearwater
Dunlevy
Gething
Glauconite
Wabiskaw
Baldonnel
Cadomin
Sunburst
Glauconite
Charlie Lake
Nikanassin
Swift
Ostracod
Halfway/Doig
Baldonnel
Sawtooth
Ellerslie
Montney
Charlie Lake
Mississipian
Devonian
Halfway/Doig
Montney
Approximately 1,300m
Approximately 2,200m
Approximately 1,000m
Approximately 700m
D&C $600K
D&C $1.0MM
D&C $350K
D&C $350K
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August 15, 2008
Potential Multi-Frac Horizontal Prospects
5m
Bluesky Sand
Cretaceous
Depth
(m)
Rate
(boed)
Res.
(mboe)
1000
Un-Risked Values
500
300
D&C
($MM)
2.0
Gething Channel
20m
50m
Cadomin Channel Sand
1100
500
650
2.0
1200
500
600
2.0
1600
500
500
3.0
1700
400
500
3.0
1750
800
800
5.0
Triassic
Halfway Sand
Doig Channel Sand
60m
50m
Montney Siltstone/Sand
100m
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August 15, 2008
Management and Directors
The current management team started leading the Company (then Hawker Resources) in April 2005. Almost all of the
management and technical staff had previously worked together in lead roles at a senior Canadian Oil & Gas
Company.
Management
Directors
Brian Illing
Mark Ariss
Sean Johnson
Jane Mactaggart
Carmen McKay-Illing
Myron Rak
Tony Sabelli
Kevin Stromquist
President & CEO
VP Exploration East
CFO
VP Exploitation
VP Corporate Affairs
VP Production
VP Drilling and Completions
VP Exploration West
Don Archibald, Chairman
Jim Grenon, Lead Director
Pat Breen
Howard Crone
Dallas Droppo
Michael Hibberd
Brian Illing
Gary Peddle
Rob Waters
Past Chairman & CEO - Cyries Energy Inc.
President - Tom Capital Associates Inc.
President - Foremost Income Fund
Past Director - Cyries Energy Inc.
Partner - Blake, Cassels & Graydon LLP
President & CEO - MJH Services Inc.
President & CEO - Iteration Energy Ltd.
Past Director & VP Corporate - Cyries Energy Inc.
Sr. VP & CFO - Enerplus Resources Fund
16