Corporate Presentation September 2016

Transcription

Corporate Presentation
September 2016
Important Notices to the Readers
This presentation should be read in conjunction with the Company's unaudited interim consolidated financial statements,
management's discussion and analysis ("MD&A") for the three and six months ended June 30, 2016. All dollar amounts contained in
this presentation are expressed in millions of Canadian dollars unless otherwise indicated.
Certain financial measures included in this presentation do not have a standardized meaning prescribed by International Financial
Reporting Standards (“IFRS”) and therefore are considered non-generally accepted accounting practice ("non-GAAP") measures;
accordingly, they may not be comparable to similar measures provided by other issuers. This presentation also contains oil and gas
disclosures, various industry terms, and forward-looking statements, including various assumptions on which such forward-looking
statements are based and related risk factors. Please see the Company's disclosures located in the Appendix at the end of this
presentation for further details regarding these matters.
pennwest.com | TSX: PWT NYSE: PWE
2
Second Quarter Highlights
Strong Operational &
Financial Results
Repaired the Balance
Sheet
Progress on Last Stage
of Transformation

Strong Q2 production due to continued well outperformance and
base production reliability

Funds Flow from Operations ahead of consensus estimates

Operating costs meaningfully lower than expectations

Closed approximately $1.3 billion of asset dispositions in the
second quarter

Reduced pro forma Net Debt to approximately $491 million from
$2.1 billion at year-end 2015 resulting in compliance with all debt
covenants for the foreseeable future

Removed going concern notice from financial statements

On track to sell remaining non-core assets by year-end for
proceeds of $100 - $200 million

Signed agreements for $75 million in further dispositions

Getting back to organic production growth with increased second
half capital program
3
Continue to Transact on Assets Dispositions
~$2.1B
~$491M
~$1.6B of debt reduction
year to date
Q4 2015 Net Debt
$2,122
Q2 2016 Pro Forma Net Debt
$33
$148
$975
Dispositions evidence the quality of our asset
base, our ongoing commitment to reduce our debt,
and our ability to successfully execute meaningful
transactions in a challenging commodity price
environment
$164
$236
Q4 2015 Net Debt
Q1 Dispositions
Slave Point
Disposition
Saskatchewan
Disposition
Remaining Q2
Dispositions
Free Cash Flow
and Other
$566
$75
Q2 2016 Net Debt
Subsequent
Dispositions
Proceeds
$491
Q2 2016 Pro
Forma Net Debt
See “Endnotes”
4
Senior Debt Compliance
 Fully compliant with all our financial covenants at June 30, including the Senior Debt to
EBITDA covenant of 3.9 times, relative to a 5.0 times limit
• $374 million cash available for debt prepayment; pro-forma Senior Debt to EBITDA of
2.3 times
 Expect to remain in compliance with all financial covenants in foreseeable future
• Going concern notice removed from financial statements
2016 - 2017 Senior Debt to EBITDA Compliance
5.0x Limit
Expected to remain compliant with all
financial covenants
4.5x Limit
4.0x Limit
4.4x
3.9x
3.0x Limit
Forecast
2.3x Pro-Forma Remaining
Cash for Debt Prepayment
Q1
Q2
Q3
2016
Q4
Q1
Q2
Q3
Q4
2017
See “Endnotes”
5
Strong Metrics Received for Saskatchewan
Saskatchewan Transaction Overview
Proceeds
$MM
$975
Production
boe/d
13,650
Liquids Weighting
%
91%
Operating Costs
$/boe
$14.75
Field Netback
$/boe
$12.75
2P Reserves
MMboe
53
Implied Production Multiple
$/boe/d
$71,400
Implied NOI Multiple
x
Implied 2P Reserves
$/boe
Raging River / Anegada
(December 10, 2015)
$125 MM
2,750 boe/d (58% Liquids)
Raging River / Rock
(May 31, 2016)
$109 MM
$42,800/boe/d
$45,600/boe/d
15x
$18.40

Gross proceeds of $975 million

Saskatchewan assets transacted
meaningfully above recent Precedents

Production split approximately evenly
between medium/heavy oil and
Dodsland Viking light oil

Incremental value to Gross Overriding
Royalty previously sold on Dodsland
Viking

Reflects asset quality and scale of
disposition
Teine / Penn West
$975 MM
2016E: 13,650 boe/d (91% Liquids)
$71,400/boe/d
Whitecap / Husky
(May 10, 2016)
$595 MM
$51,300/boe/d
See “Endnotes”
6
Operating Costs
 Second quarter operating costs of $12.70 per boe, net of carry, a result of improved
operating efficiencies and cost savings, and deferrals of discretionary expenses
•
2016 marks a step change improvement in cost structure from 2015
 Full year corporate operating costs guidance of $13.50 - $14.50 per boe
 Operating costs in Core Areas expected to average $10 - $12 per boe going forward
2015 – 2016 Operating Cost Trend ($/boe)
$20.51
$18.15
$18.61
$17.01
Full year operating cost guidance of $13.50 - $14.50 per boe
$13.02
$12.70
Step change improvement in
cost structure
Core area operating cost run rate of $10 - $12 per boe
Q1
Q2
Q3
2015
Q4
Q1
Q2
Q3
Q4
2016
7
Penn West Transformation Plan
Phase 1
Fix Balance Sheet
COMPLETED IN Q2
Phase 2
High-Grade Assets
COMPLETE BY YEAR-END
 Sold approximately $1.3 billion of assets
since the beginning of 2016 at attractive
multiples, including core Slave Point
and Saskatchewan properties
 Streamline Alberta operations to three
areas of focus and reduce debt by
further $100 - $200 million
 Reduced Net Debt to approximately
$566 million in Q2 2016, from $2.1
billion at year-end 2015
 Core area operating costs of $10 - 12
per boe in-line with top tier operators
 Competitive and sustainable go-forward
leverage metrics
• Agreements for $75 million in asset
sales subsequent to the quarter
 Long-term organic production growth
profile of 10% annually at current
commodity prices
 Capacity to generate funds flow from
operations in excess of capital spending
at current commodity prices
8
Phase 2 Asset Sales Remaining
Well Count
12,300
Expect Value Range of $100 - $200 MM
and Total Production of ~20,000 boe/d
•
Signed agreements for ~$75 MM additional dispositions
with associated production of ~6,000 boe/d
3,300
Q1 2016
Phase 1
Phase 2
Asset Retirement Liability ($MM)
$369
Step Change in Future Liability
and Cost Structure
$100
See “Endnotes”
Q1 2016
Phase 1
Phase 2
9
Peer Comparison and Competitiveness
Net Debt/FFO (x)
2P NAV/Net Debt (x)
15x
Phase 1 is complete and largely fixes the debt problem
Company leverage competitive with peers
Opex ($/boe)
Phase 2
Phase 1
Prior
Phase 2
Prior
Phase 1
2x
Netback ($/boe)
Phase 2 anticipated to be complete by year-end and
results in high-grading of costs and netbacks
$17.50
Phase 2
Phase 1
See “Endnotes”
Prior
Phase 2
Phase 1
Prior
$10
10
New Penn West at a Glance
Penn West
H1 2016
Post Phase 2
Total Core Areas
Production
24,500 boe/d
Liquids
73% %
Opex
$7.00 $/boe
Netback
Core Development
with Multi-Horizon
Potential
Peace River
90 kms
56 miles
$19.00 $/boe
Cardium
Production
Opex
18,500 boe/d
$8.50 $/boe
Netback
$24.00 $/boe
90 kms
56 miles
Prospective Light
Oil Fairway
Cardium
Alberta Viking
Production
Opex
150 kms
95 miles
Netback
Alberta Viking
125 kms
80 miles
39 kms
24 miles
87 kms
54 miles
Stable Cash Flow
& Production
1,000 boe/d
$10.50 $/boe
$5.50 $/boe
Peace River
Production
5,000 boe/d
Opex*
$1.00 $/boe
Netback*
$13.50 $/boe
*Net of carried operating costs
Penn West land
See “Endnotes”
11
Updated 2016 Capital Budget & Guidance
 Capitalizing on improved financial flexibility by
increasing capital budget by $40 million
•
Budget Increase by Area
Expected to add ~3,000 boe/d of exit production
 Demonstrating ability to grow profitably and
sustainably
 2016 capital program to be entirely paid for by full
year funds flow from operations
Alberta Viking
37%
 Second half 2016 Peace River development
planned in original budget
Cardium
61%
Updated 2016 Guidance
Average Corporate Production1
55,000 – 57,000 boe/d
Average Core Area Production
22,000 – 24,000 boe/d
E&D Capital Expenditures
$90 MM
Decommissioning Expenditures
$15 MM
Corporate Operating Expenses1
$13.50 - $14.50/boe
Peace River
2%
Drill 5 Cardium wells
Drill 11 Alberta Viking wells
Running 2 rigs at Peace River as per original budget
Corporate G&A Expenses1
1
$2.50 - $2.90/boe
Prior to the effect of dispositions subsequent to June 30, 2016
12
2017 Preliminary Look
 Anticipate spending up to $150 million in total expenditures next year targeting
development in core areas
 Capital program will be fully funded by funds from operations; flexibility to adjust
spending based on realized commodity prices
 Expect to grow Core Area production by 10% from Q4 2016 to Q4 2017 through
the drill bit
Illustrative Core Area Production Growth
Illustrative Sustainability – Total Expenditures and FFO
Total expenditures to be fully
funded by FFO
Q4
Q1
2016
Q2
Q3
Q4
FFO
Total Expenditures
10% Q4 to Q4 Growth
2016
2017
2017
13
Updated Long-Term Plan Metrics
Exit Production (boe/d)
Sustainability – Total Expenditures and FFO ($MM)
~22,000 – 24,000 boe/d
YE 2016
2017
2018
2019
2020
2021
FFO
~10% CAGR at
Current Prices
Total Expenditures
Payout <100% at Current Prices
2017
Senior Debt and Leverage Metrics ($MM, x)
Meaningfully
Reduced Leverage
at Current Prices
2019
2020
2021
Illustrative FFO Build Up ($MM)
Accretive to Funds Flow
from Operations
Total Senior Debt
~2-3x Senior
Debt to EBITDA
2018
2017
2018
2019
See “Endnotes”
2020
2021
FY 2016
FFO
NOI
Interest
G&A
Pro
Forma
Phase 1
NOI
G&A
Interest
Pro
Forma
Phase 2
14
Penn West Enters A New Chapter
Bold Action on
Debt
Strong Focus
on Light Oil
Core
New development options available
Asset quality combined with operating capability
Measured and sustainable growth at current commodity prices
15
Asset Overview
Inventory Life Cycle Changes
 PWT currently has an attractive asset pipeline
•
•
Cardium potential remains in early stages as we move into waterflood and EOR activity
Alberta Viking still in early stages with potential to become another cornerstone asset for the company
Production, Reserves, Value
Position & Prove
Commerciality
Initial
Development
Full
Development
Harvest
P
Cardium
P
Very large resource and high
EOR potential translates into
slow move along lifecycle
despite capital intensity
C
C
AV
P
PROP
PROP thermal
development is in an
earlier stage
C
AV
AV
Alberta Viking
Very promising results from offsetting
wells and competitor activity.
Potentially over 500 locations
Deplete or Exit
Now
3 Years
5 Years
Time / Capital
17
Cardium Area – Strong Development Foundation
Cardium Area Details
T54
Production
boe/d
18,500
Locations
#
1,500
Land
net sections
700
1P Reserves
MMboe
72
2P Reserves
MMboe
99
Easyford
Pembina
T50
PCU #11
J Lease
PCU #9
Cardium Area Value Proposition
T45
Lodgepole
Secondary
Recovery
Upside
Willesden
Green
Penn West land
Unit boundary
15 kms
T40
Faraway
Crimson Lake
10 miles
R15W5
R10
Secondary
Horizon
Development
- Waterflood Revitalization
- Low decline base
production
- Develop material Mannville
and Belly River position
- Utilize Existing
Infrastructure
- Leverage Cardium
formation expertise
R5
See “Endnotes”
18
Multi-Horizon Potential in Cardium Area
FORMATION
Cardium
BELLY RIVER
Prospective Zone
COLORADO SHALE
Current Core
Development

COLORADO SHALE
High netback oil-weighted production base
Long and successful history as top
operator in the Cardium
Foundation for profitable and sustainable
growth
NOTIKEWIN
SPIRIT
RIVER
MANNVILLE
CRETACEOUS
CARDIUM


FALHER
WILRICH
GLAUCONITIC
SANDSTONE
OSTRACOD BEDS
Prospective Zones
Prospective Zones
JURASSIC
ELLERSLIE
FERNIE SHALE

ROCK CREEK

FERNIE SHALE

NORDEGG

FERNIE SHALE
~500 net sections in Belly River and
Mannville formations
Additional exposure to deeper zones in
Rock Creek and Nordegg
High-impact liquids-weighted production
potential
Expected to form part of development
strategy over next several years
See “Endnotes”
19
Peace River Area – Stable Cash Generation
Penn West land
R20W5
Peace River Area Details
R15
Production
T85
15 kms
10 miles
Peace River
boe/d
5,000
Oil Weighting
%
98%
1P Reserves
MMboe
7
2P Reserves
MMboe
37
Peace River Area Value Proposition
T80
JV Partner
Carry until
~2018
- $112MM at June 30, 2016
- Multi-year inventory
- Capital and opex both
carried at 90%
Thermal
Upside
- Short term cold primary
- 2 successful pilots
highlight commercial
thermal project potential
Peace River 2016 NOI Sensitivity ($MM)
$81
$63
$46
$28
$10
Netback
(C$/bbl)
C$40/bbl
C$50/bbl
C$60/bbl
C$70/bbl
C$80/bbl
US$35/bbl
$5.75
US$42/bbl
$15.75
US$50/bbl
$25.50
US$58/bbl
$35.50
US$66/bbl
$45.50
Continued
Operating
Efficiencies
- Meaningful cost
reductions in 2015/16
- Additional savings
projected resulting from
offsetting power revenue
in 2017
See “Endnotes”
20
Alberta Viking Area – Prospective Light Oil Fairway
Alberta Viking Area Details
T35
Production
boe/d
Locations
#
500
net sections
174
Land
Alberta Viking
1,000
Alberta Viking Area Well Economics
NPV ($K)
$1,949
T30
$1,569
15 kms
R10
Penn West land
10 miles
R1W4
$1,193
$797
Alberta Viking Value Proposition
Low Risk,
Profitable
Acreage
- Offset competitor activity derisks the play
- Resource style management
- Low operating costs
C$50/bbl
C$60/bbl
C$70/bbl
C$80/bbl
US$42/bbl
US$50/bbl
US$58/bbl
US$66/bbl
124%
IRR (%)
93%
67%
Leverage SK
Viking Success
- Learnings from SK Viking
transferrable to AB Viking
- Expect similar cost per
meter and cost per stage
See “Endnotes”
44%
C$50/bbl
C$60/bbl
C$70/bbl
C$80/bbl
US$42/bbl
US$50/bbl
US$58/bbl
US$66/bbl
21
Appendix
Senior Debt Maturity Profile
 Subsequent to June 30, will pay down C$630M of Senior Notes from Q2 A&D
proceeds
Date
2016
2017
2018
2019
2020
2021
2022
2025
Matuirty Profile (C$MM)
$354
$248
Q2 2016
(millions)
$
32
$
223
$
354
$
181
$
248
$
69
$
53
$
46
$
1,206
Q2 2016 Post
Pay Down
(millions)
$
19
$
110
$
172
$
76
$
119
$
33
$
25
$
22
$
575
$223
$172
$181
$119
$110
$76
$69
$53
$33
$32
$19
2016
2017
2018
2019
Q2 2016
2020
2021
$46
$25
2022
$22
2025
Q2 2016 Post pay down
23
Endnotes
All slides should be read in conjunction with “Definitions and Industry Terms” and “Forward-Looking Advisory”
Slide 5
Senior Debt nets cash and includes letters of credit that are classified as financial in accordance with Penn West’s lending agreements. EBITDA nets contributions from assets that have been
disposed of in the prior 12 months in accordance with Penn West’s lending agreements.
Slide 6
Production, Liquids Weighting, Operating Costs, Field Netback, Implied Production Multiple, and Implied NOI Multiple are based on internal full year 2016 forecast. Field Netback and Implied
NOI Multiple are based on actual achieved commodity prices through May 2016 and C$60/bbl Edmonton Par for the balance of 2016. Precedent transaction metrics and map were sourced
from RBC Capital Markets. Proceeds, subject to closing adjustments
Slide 9
Pro Forma Asset Retirement Obligations use present value of 10% , assume a 2% inflation rate and a 7.5% discount rate.
Slide 10
Net Debt/FFO, 2P NAV/Senior Debt, Opex, and Netback peer data was sourced from RBC Capital Markets and public disclosure. Peer group includes: BTE, BNE, CPG, PGF, RRX, WCP,
ERF, VET, BNP, TVE, SGY, SPE and CJ and is based on July 29, 2016 strip prices. Penn West data is sourced from internal estimates and is based on full year 2016 forecast and on actual
achieved commodity prices through May 2016 and C$60/bbl Edmonton Par for the balance of 2016. “Phase 1” pro-forma metrics assume proceeds of $975 million, prior to closing adjustments
of the sale of Saskatchewan Assets and proceeds from other non-core dispositions. “Phase 2” pro-forma metrics assume the number of remaining non-core properties outlined in the June 10
2016 press release are divested and closed by the end of 2016.
Slide 11
Production, Liquids %, Opex, and Netback metrics are based on operating lease statements for Q1 2016 with play boundaries defined as per internal standards. Penn West land position is as
at March 31, 2016 and adjusted for the Slave Point disposition. Total opex and netbacks for Peace River are gross of PROP carried capital and operating costs.
Slide 13
Exit Production, Sustainability, Senior Debt and Leverage Metrics assume internal long term assumptions and the completion of “Phase 2” by the end of 2016.
Slide 18, 19, 20, 21
Production is based on operating lease statements for Q1 2016 with play boundaries defined as per internal standards. Locations based on internal identified inventory. NOI sensitivities and
Viking Area well economics are based on internal assumptions . Peace River details are net of carried capital and operating cost.
24
Definitions and Industry Terms
1P means proved reserves as per Oil and Gas Disclosures Advisory.
2P means proved plus probable reserves as per Oil and Gas Disclosures Advisory.
ARO means asset retirement obligation.
A&D means oil and natural gas property acquisitions and divestitures.
bbl means barrel or barrels.
boe and boe/d mean barrels of oil equivalent and barrels of oil equivalent per day, respectively.
CAGR means compound annual growth rate. CAGR is calculated determining an annual average rate of growth over a period of time.
Capex means Total Capital as defined below.
Capital Expenditures includes all direct costs related to our operated and non-operated development programs including drilling, completions, tie-in, development of and expansions to existing facilities and major
infrastructure, optimization and EOR activities.
Core Area means Penn West’s assets in the Cardium, Alberta Viking, and Peace River areas.
Dispositions means oil and natural gas property divestitures.
EBITDA is calculated in accordance with Penn West’s lending agreements, detailed in the Non-GAAP measures advisory.
Ed Par means Edmonton Par, the Canadian light oil price based on West Texas Intermediate (WTI) crude oil, the US/Canadian foreign exchange rate, and the Net Energy Canadian Daily Index for Edmonton Sweet
Oil.
Enviro means decommissioning expenditures.
EOR means Enhanced Oil Recovery.
FX means foreign exchange rate, in our case typically refers to C$ to US$ exchange rates.
FFO means Funds Flow from Operations, detailed in the Non-GAAP measure advisory.
G&A means general and administrative expenses.
IRR means Internal Rate of Return which is the interest rate at which the NPV equals zero.
K means thousands.
Liquids % means the percentage of crude oil and NGLs from the total barrels of oil equivalent of production.
Mmcf means million cubic feet.
MMboe means million barrels of oil equivalent.
MM means millions.
NAV means Net Asset Value.
Net Debt means Senior Debt plus Bank Debt plus non-cash working capital deficit, detailed in the Non-GAAP measure advisory.
NGL means natural gas liquids which includes hydrocarbon not marketed as natural gas (methane) or various classes of oil.
NOI refers to Net Operating Income which means revenue net or royalties less operating costs.
NPV means Net Present Value which is the sum of the present values of income and outgoing cash flows over a period of time.
Opex means operating costs.
Operated development costs is calculated as Penn West’s capital spend on spuds divided by the working interest portion of estimated ultimate recoverable (EUR) volumes, where EUR is the total recoverable
volume assigned before the effects of production and economics.
PDP means Developed producing reserves as per Oil and Gas Disclosures Advisory.
PDNP means Developed non-producing reserves as per Oil and Gas Disclosures Advisory.
PUD means Undeveloped reserves as per Oil and Gas Disclosures Advisory.
Senior Debt means the total of Senior Notes, Bank Debt and Letters of Credit.
Total Capital includes all direct costs related to our operated and non-operated development and base programs including drilling, completions, tie-in, facilities and major infrastructure capital, optimization, EOR,
corporate and other capital.
25
Non-GAAP Measures Advisory
Non-GAAP Measures Advisory
In this presentation, we refer to certain financial measures that are not determined in accordance with IFRS. These measures as presented do not have any standardized meaning
prescribed by IFRS and therefore they may not be comparable with calculations of similar measures for other companies. We believe that, in conjunction with results presented in
accordance with IFRS, these measures assist in providing a more complete understanding of certain aspects of our results of operations and financial performance. You are
cautioned, however, that these measures should not be construed as an alternative to measures determined in accordance with IFRS as an indication of our performance. These
measures include the following:
EBITDA is Funds Flow excluding the impact of financing expenses, realized gains/losses on foreign exchange hedges on prepayments, realized foreign exchange gains/losses on
debt prepayments and restructuring expenses. EBITDA as defined by Penn West’s debt agreements excludes the EBITDA contribution from assets sold in the prior 12 months and is
used within Penn West’s covenant calculations related to its syndicated bank facility and senior notes;
Funds Flow is cash flow from operating activities before changes in non-cash working capital and decommissioning expenditures. Funds flow is used to assess our ability to fund
dividends and planned capital programs. For additional information relating to funds flow, including a reconciliation of our funds flow to our cash flow from operating activities, see our
latest management's discussion and analysis which is available in Canada at www.sedar.com and in the United States at www.sec.gov;
Funds Flow from Operations excludes the effects of financing related transactions from foreign exchange contracts and debt repayments/ pre-payments and is more representative
of cash related to continuing operations. Funds flow and Funds flow from operations are used to assess the Company’s ability to fund dividend and planned capital programs. For
additional information relating to funds flow from operations, including a reconciliation of our funds flow from operations to our funds flow, see our latest management's discussion and
analysis which is available in Canada at www.sedar.com and in the United States at www.sec.gov;
Netback is a measure of cash operating margin on an absolute or per-unit-of-production basis and is calculated as the absolute or per-unit-of-production amount of revenue less
royalties, operating costs and transportation. The measure is used to assess the operational profitability of the company as well as relative profitability of individual assets. For
additional information relating to netbacks, including a detailed calculation of our netbacks, see our latest management's discussion and analysis which is available in Canada at
www.sedar.com and in the United States at www.sec.gov;
Net debt is the amount of long-term debt, comprised of long-term notes and bank debt, plus net working capital (surplus)/deficit. Net debt is a measure of leverage and liquidity; and
Net working capital (surplus)/deficit is accounts payable and accrued liabilities plus dividends payable less the sum of accounts receivable and other current assets. Also includes
the net working capital portion of assets held for sale. We use this as a measure of net cash obligations to be settled in the near-term under the course of normal business operations.
26
Oil and Gas Disclosures Advisory
Reserves Disclosures and Definitions
Any reference to reserves in this presentation are based on the report ("Sproule Report") prepared by Sproule Associates Limited dated February 3, 2016 where they evaluated one
hundred percent of the crude oil, natural gas and natural gas liquids reserves of Penn West and the net present value of future net revenue attributable to those reserves effective as
at December 31, 2015. For further information regarding the Sproule Report, see Appendix A to our Annual Information Form dated March 10, 2016 ("AIF"). It should not be assumed
that the estimates of future net revenues presented herein represent the fair market value of the reserves. There is no assurance that the forecast price and cost assumptions will be
attained and variances could be material. The recovery and reserves estimates of crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there
is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquid reserves may be greater than or less than the estimates provided
herein. The estimates of reserves for individual properties may not reflect the same confidence level as estimates of reserves for all properties, due to the effects of aggregation.
Production and Reserves
The use of the word "gross" in this presentation (i) in relation to our interest in production and reserves, means our working interest (operating or non-operating) share before
deduction of royalties and without including our royalty interests, (ii) in relation to wells, means the total number of wells in which we have an interest, and (iii) in relation to properties,
means the total area of properties in which we have an interest. The use of the word "net" in this presentation (i) in relation to our interest in production and reserves, means our
working interest (operating or non-operating) share after deduction of royalty obligations, plus our royalty interests, (ii) in relation to our interest in wells, means the number of wells
obtained by aggregating our working interest in each of our gross wells, and (iii) in relation to our interest in a property, means the total area in which we have an interest multiplied by
the working interest owned by us. Unless otherwise stated, production volumes and reserves estimates in this presentation are stated on a gross basis. All references to well counts
are net to the Company, unless otherwise indicated.
Reserve Definitions
reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on the
analysis of drilling, geological, geophysical, and engineering data; the use of established technology; and specified economic conditions, which are generally accepted as being
reasonable. Reserves are classified according to the degree of certainty associated with the estimates.
probable reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be
greater or less than the sum of the estimated proved plus probable reserves.
proved reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed
the estimated proved reserves.
Each of the reserves categories (proved and probable) may be divided into developed and undeveloped categories:
Developed reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low
expenditure (for example, when compared to the cost of drilling a well) to put the reserves on production. The developed category may be subdivided into producing and nonproducing.
Developed producing reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently
producing or, if shut-in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.
Developed non-producing reserves are those reserves that either have not been on production, or have previously been on production, but are shut-in, and the date of
resumption of production is unknown.
Undeveloped reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling
a well) is required to render them capable of production. They must fully meet the requirements of the reserves category (proved, probable) to which they are assigned.
For additional reserve definitions, see "Notes to Reserves Data Tables" in our AIF.
27
Forward-Looking Information Advisory
Certain statements contained in this presentation constitute forward-looking statements or information (collectively "forward-looking statements") within the meaning of the "safe
harbour" provisions of applicable securities legislation. In particular, this presentation contains, without limitation, forward-looking statements pertaining to the following: a) under
“Second Quarter Highlights”, that we will be in compliance with all debt covenants for foreseeable future, that on we are track to sell remaining non-core assets by year-end for
proceeds of $100-$200 million, that we are getting back to organic production growth with increased second half capital program; b) under “Senior Debt Compliance”, that we have
$374 million cash available for debt prepayment which would translate into pro-forma Senior Debt to EBITDA of 2.3 times going forward, the expectation to be comfortably in
compliance with all financial covenants in foreseeable future; c) under “Strong Metrics Received for Saskatchewan”, the implied production , NOI multiples and 2P Reserves; d)
under “Penn West Transformation Plan”, that there are competitive and sustainable go-forward leverage metrics, and to be completed by year end: (i) streamline Alberta operations to
three areas of focus and reduce debt by further $100 - $200 million; (ii) operating costs of $10 - 12 per boe in-line with top tier operators; (iii) long-term organic production growth
profile of 10% annually at current commodity prices; and (iv) capacity to generate funds flow from operations in excess of capital spending at current commodity prices; e) under
“Phase 2 Asset Sales Remaining”, the pro forma well count and ARO based on completion of Phase 2 and the expected sales range of $100 to $200 million and total production of
approximately 20,000 boe/d for the Phase 2 sales; f) under “Peer Comparison and Competitiveness”, that Phase 1 largely fixes the debt problem and that Phase 2 will be complete
by year-end and result in high-grading of costs and netbacks, and the anticipated impact to Net Debt/FFO, 2P NAV/Net Debt, Opex and netbacks based on completion of Phase 1
and 2, respectively; g) under “New Penn West at a Glance”, the production, Opex and Field Netback metrics for the full year 2016 assuming that Phase 2 has been completed; h)
under “Updated 2016 Capital Budget & Guidance”, that we are capitalizing on improved financial flexibility by increasing capital budget by $40 million which is expected to add
approximately 3,000 boe/d of exit production, that we are demonstrating ability to grow profitably and sustainably, that the capital program to be entirely paid for by funds flow from
operations, how the budget will be increased by area, that we will drill 5 Cardium wells, 11 Alberta Viking wells, running 2 rigs at PROP as per original budget, the updated 2016
guidance (including average corporate and core production range, capital and decommission expenditures and corporate operating and G&A expense ranges); i) under “2017
Preliminary Look”, anticipating to spend up to $150 million in total expenditures next year targeting development in core areas, expecting to grow production by 10% from Q4 2016 to
Q4 2017 through the drill bit, and that the Capital program will be fully funded by funds from operations; j) under “Updated Long-Term Plan Metrics”, the predicted impact of
completing phases 1 and 2 on exit production, sustainability (total expenditures and FFO), senior debt and leverage metrics and FFO build up; k) under “Penn West Enters a New
Chapter”, that there will be new development options available, that our asset quality and operating capability will improve and that there will be measured and sustainable growth at
current commodity prices; l) under “Inventory Life Cycle Changes”, that Penn West currently has an attractive asset pipeline, that we will move into waterflood and EOR activating in
the Cardium and the very large resource and high EOR will potentially translate into slow-movement along the life-cycle despite capital intensity and the very large resource and high
EOR will potentially translate into slow movement along the life cycle despite capital intensity, the AB Viking has the potential to become another cornerstone asset for the Company,
projections on the life cycle in the next 3 and 5 years for the Cardium, Alberta Viking and PROP; m) under “Cardium Area – Strong Development Foundation”, that there is a
secondary recovery upside based on waterflood revitalization and low decline base production, that we will develop a material Mannville and Belly River position, will utilize existing
infrastructure and leverage Cardium formation expertise; n) under “Multi-Horizon Potential in Cardium Area”, that in the Caridum there is the foundation for profitable and sustainable
growth and that in the prospective zones there is the possibly for drilling with high-impact liquids-weighted production potential and that it will form part of the development strategy
over the next several years; o) under “Peace River Area – Stable Cash Generation”, that there is a thermal upside, the NOI sensitivities and estimating approximately $0.50 opex per
boe net of carry in 2017 resulting from offsetting power revenue; and p) under “Alberta Viking – Prospective Light Oil Fairway”, that the offset competitor activity derisks the play, that
the learnings from SK Viking is transferrable to AB Viking and the expectation of similar cost per meter and cost per stage.
28
Forward-Looking Information Advisory (cont’d)
The key metrics and implied transaction multiples for the Saskatchewan assets set forth in this corporate presentation may be considered to be future-oriented financial information or
a financial outlook for the purposes of applicable Canadian securities laws. Financial outlook and future-oriented financial information contained in this corporate presentation are
based on assumptions about future events based on management's assessment of the relevant information currently available. In particular, this corporate presentation contains
projected operational and financial information for 2016 for the Saskatchewan assets. The future-oriented financial information and financial outlooks contained in this corporate
presentation have been approved by management as of the date of this corporate presentation. Readers are cautioned that any such financial outlook and future-oriented financial
information contained herein should not be used for purposes other than those for which it is disclosed herein.
With respect to forward-looking statements contained in this document, we have made assumptions regarding, among other things: our ability to complete asset sales and the terms
and timing of any such sales; the economic returns that we anticipate realizing from expenditures made on our assets; future crude oil, natural gas liquids and natural gas prices and
differentials between light, medium and heavy oil prices and Canadian, WTI and world oil and natural gas prices; future capital expenditure levels; future crude oil, natural gas liquids
and natural gas production levels; drilling results; future exchange rates and interest rates; future taxes and royalties; the continued suspension of our dividend; our ability to execute
our capital programs as planned without significant adverse impacts from various factors beyond our control, including weather, infrastructure access and delays in obtaining
regulatory approvals and third party consents; our ability to obtain equipment in a timely manner to carry out development activities and the costs thereof; our ability to market our oil
and natural gas successfully; our ability to obtain financing on acceptable terms, including our ability to renew or replace our syndicated bank facility; our ability to finance the
repayment of our senior unsecured notes on maturity; and our ability to add production and reserves through our development and exploitation activities. In addition, many of the
forward-looking statements contained in this document are located proximate to assumptions that are specific to those forward-looking statements, and such assumptions should be
taken into account when reading such forward-looking statements.
29
STOCK EXCHANGE
Toronto:
PWT
New York:
PWE.BC
INDEPENDENT RESERVES EVALUATOR
Sproule Associates Limited
TRANSFER AGENT
CST Trust Company
Toll Free:
1-800-387-0825
Email:
[email protected]
Website:
www.canstockta.com
INVESTOR RELATIONS
Toll Free:
1-888-770-2633
Email:
[email protected]
Website:
www.pennwest.com
PENN WEST
Suite 200, Penn West Plaza
207 – 9th Avenue SW
Calgary, Alberta, Canada T2P 1K3
Telephone:
(403) 777-2707
Toll Free:
1-866-693-2707
Facsimile:
(403) 777-2699
Website:
www.pennwest.com

Corporate Presentation September 2016

Transcription

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