Production - Gear Energy

June 2011
Corporate Presentation
Corporate Overview
Common Shares:
Fully Diluted Shares:
Management Ownership (basic):
Management Ownership (diluted):
49.5 million
53.1 million
15%
20%
Net Debt (Q1 2011):
Debt Capacity:
$10 million
$40 million
Production (Q1 2011):
Oil / NGL Weighting:
2,000 boe/d
78%
Net Undeveloped Acres:
89,255
Tax Pools:
$178 million
Note: All numbers are estimates or approximations.
-2-
Corporate Objectives
A return-driven company that is focused on delivering per share growth,
The Gear team pursues assets with the following characteristics:






Geographically focused
Definable resource base with low risk production
Repeatable projects that are statistically economic
Multiple producing horizons
Easy surface access and existing infrastructure
High operatorship
The Gear team enhances returns of acquired assets by:





Drilling and developing on acquired lands
Focusing on operational and cost efficiencies
Continually improving operations through innovation and imitation
Adopting and refining advanced drilling and completing techniques
Pursuing strategic acquisitions with significant potential synergies
-3-
2010 Highlights
2010 progress includes:
 Significant year over year growth in production, cash flow, reserves
and reserves value per debt adjusted share
 Acquisition of a first class heavy oil pool with significant untapped
value
 Built a high quality experienced team
 Defined a highly economic oil drilling inventory of more than 100
locations
 Initiated research and engineering targeting implementation of an
enhanced oil recovery pilot by next year
-4-
The Team
Senior Management


Executive and Position Held
Relevant Previous Experience
Don T. Gray
Executive Chairman
Founder, former President & CEO of Peyto Energy Trust
Ingram B. Gillmore
President & Chief Executive Officer
VP Engineering - ARC Energy Trust, Talisman Energy, Gulf Canada
David Hwang
Vice President Finance & Chief Financial Officer
Controller - ARC Energy Trust, EnCana
Jason Kaluski
Vice President Operations
Manager Operations - Questerre, Richmount, ARC Energy Trust, Beau Canada
Tom Everest
Vice President Engineering
Senior Engineer - Petro-Canada , Navigo Energy Inc., Sound Energy Trust, Enerplus Resources
Yvan Chretien
Vice President Land
VP Land - ARC Energy Trust, Startech Energy, Canadian Natural Resources
James Lord
Vice President Business Development
Senior Business Development Engineer - NAL Resources, Alberta Clipper, ARC Energy Trust
Kelly McDonald
Vice President Exploration
Senior Geologist - Peyto Energy Trust
David Hwang joins the team as the new Vice President, Finance and Chief Financial Officer (Effective June 2011)
Jason Kaluski appointed the new Vice President, Operations. Jason was brought up in the Lloydminster area and has a strong foundation of
heavy oil expertise.
New to the Gear team since July 2010
-5-
The Team
Board of Directors


Directors
Current Roles and Prior Companies
Don T. Gray
Peyto Energy Trust (Chairman), Gray Capital Partners (President)
Rick Braund
Peyto Energy Trust (Director), Black Mountain Energy Corporation
Ingram B. Gillmore
Gear Energy Ltd. (President & CEO), ARC Energy Trust, Talisman Energy Inc., Gulf Canada
Scott Inglis
WindRiver Power Corporation (Chairman), FirstEnergy Capital Corp.
Herb Pinder Jr.
ARC Energy Trust (Director), Viterra (Director), Fraser Institute (Trustee)
Peter Verburg
Gray Capital Partners (Managing Director), GMP Securities L.P.
New addition Herb Pinder Jr., a long-time director of public companies, brings an experienced independent perspective to the Gear board.
Management and directors directly or indirectly own 15% of shares outstanding, 20% fully diluted
Our Board is
comprised of
individuals with
independent minds
and significant
shareholder alignment
New to the Gear team since July 2010
-6-
Capital Investment

2010 capital expenditures of
approximately $150MM

Acquired Black Mountain in
January, providing
diversified resource assets
and high quality tax pools

Acquired Daylight Wildmere
in July, providing a large oilfocused resource with over
100 drilling locations and
significant enhanced
recovery potential

13 well Q4 drilling program
was 100% successful

3 well Q1 – 2011 vertical
drilling program was 100%
successful
-7-
Production
Production growth from
drilling was temporarily
offset by seasonal declines
and third party gas shut-ins
0.050
Production
0.045
Production/share
(Debt Adjusted)
2000
0.040
0.035
1500
We significantly
increased production
per share from 2009
to 2010 and set the
stage for long-term
growth by acquiring
a large resource base.
0.030
0.025
1000

Production remains stable
into Q2 and provides the
foundation for an
aggressive horizontal
drilling program initiated in
late May 2011
0.020
0.015
500
0.010
0.005
0
0.000
2009
2010 Q1
2010 Q2
2010 Q3
2010 Q4
2011 Q1
*per share numbers calculated using quarter end share count
-8-
boe/d/share (DA)

2500
Horizontal heavy oil wells
drilled in Q4 2010 have
delivered positive results to
date and have defined the
drilling program for 2011
and beyond
Boe/d

Cash Flow

2011 cash flow will be
invested towards a large
drilling program focused
on the inventory of over
90 horizontal oil wells
(+ 20 verticals)
4000
0.10
Cash Flow
3500
0.08
Cash Flow/share
(debt adjusted)
3000
0.06

Q2 realized oil prices to
date have increased by
more than $10 from Q1,
resulting in a 50%
increase in operating
netbacks
Gear is focused on
generating strong longterm growth in
production, reserves and
cash flow on a per share
basis by making smart
investment decisions.
2500
2000
0.04
0.02
1500
0.00
1000
-0.02
500
-0.04
0
-0.06
-500
Further investment is
planned for op cost
reduction initiatives and to
advance our EOR project
at Wildmere
-1000
-0.08
2009
2010 Q1
2010 Q2
2010 Q3
2010 Q4
2011 Q1
*per share numbers calculated using quarter end share count
-9-
Cash Flow/share (DA)

Q1 cash flow was
temporarily impacted by
widened differentials due
to third party restrictions
and by lower volumes
Cash Flow ($k)

Reserves
2500
150
2000
100
1500
1000
50
500
0
0
2009

2010
200
200
3000
TP Reserves
TP BT10% Value
2500
150
2000
100
1500
1000
50
500
0
0
2009
2010
Reserves Value per share($000's/mmshares)
3000
PDP Reserves
PDP BT10% Value
Reserves per share (mboe/mmshares)
200
3000
P+P Reserves
P+P BT10% Value
2500
150
2000
100
1500
1000
50
500
0
0
2009
2010
2010 Reserves and reserves value realized significant year over year growth on a per share basis
(Debt Adjusted)
Gear has been
successful to date in
building a portfolio
of large resource
assets that will
provide the
foundation for future
growth


9,608 mboe – 2010 Proved plus probable reserves closing balance.
$15.29/boe – 2010 P+P FD&A ($19.15 with FDC).


5,911 mboe – 2010 Total proved reserves closing balance
$23.42/boe - 2010 TP FD&A ($27.24 with FDC).

Reserves life of 7.2 years Proved and 11.7 years P+P implies significant long term growth potential
*per share numbers calculated using year end share count
-10-
Potential Asset Value
700
Corporate Value @ Dec 31, 2010 ($88US WTI)
Proved
P+P
Reserve Value BT10%
$85.3MM
$123.9MM
Seismic
$9.0MM
$9.0MM
Undeveloped Land
$13.5MM
$13.5MM
Income Tax Asset
$7.3MM
$7.3MM
($7.4MM)
($7.4MM)
500
400
EOR
$ Million
Net Debt
600
Op Cost Reductions
Drilling Inventory
300
TOTAL
$107.7MM
$146.3MM
SHARES
48.7MM
48.7MM
$2.21/share
$3.00/share
Base Net asset Value
200
*GLJ P+P includes a total of $45MM in future costs
$27MM: 15Hz and 7 Vt wells in the Wildmere area
$18MM: 4Hz in the Northern Gas Assets (2013)
$3.00/share
100
0
PAV Low
PAV High
Potential Asset Value
Low
Proved plus Probable
75 Hz + 13 Vt wells, high low capital and productivity
Gas gathering and water disposal initiatives
Incremental 5% - 25%, flat to doubled production
Base Net asset Value
Drilling Inventory
Op Cost Reductions
EOR
Total
-11-
High
$MM
$/share
$MM
$/share
146.3
80
5
75
3.00
1.64
0.10
1.54
146.3
125
10
300
3.00
2.57
0.21
6.16
306
6.29
581
11.94
Core Areas
Wildmere
1,900 boe/d (80+% Oil)
25,000 net undeveloped acres
110 drilling locations
North
100 boe/d (90+% Gas)
65,000 net undeveloped acres
70 future drilling locations
500 boe/d gas behind pipe
Edmonton,
Alberta
Gear Corporate
2,000 boe/d (78% Oil/NGLs)
90,000 net undeveloped acres
180 drilling locations
Note: Sales production for Q1, 2011
-12-
Wildmere Resource Play
Wildmere Horizontal Well production type curve
80
70
60
Boe/d
50
40
30
20
Gear Energy 2010 Well Actuals (2 wells)
10
Production Forecast (1P)
Historical normalized production (9 wells)
0
0
2
4
6
8
10
12
Months
-13-
14
16
18
20
22
24
Wildmere Resource Play
Heavy Oil Drilling Inventory


90+ horizontal drilling opportunities identified to date in Wildmere core area
20 vertical drills and 50 recompletions throughout our other heavy oil assets
Wildmere Hz
Husky 2010
Drilling
Gear 2011
hz. drilling
kicked off
May 25
2010 Drills
Inventory
-14-
Initial Production
60 boe/d
Reserves est.
60 mboe (GLJ-1P)
Capital
$940,000
NPV (BT10)
$780,000
ROR
80%
Payout
1.3 years
F&D
$16.00/boe (1P)
Well Field Netback
$40/boe
Well Recycle Ratio
2.5x
Production Cost
$16,000/boe/d
Wildmere Resource Play
Enhanced Recovery Potential


Current estimated Gear Wildmere
P+P primary reserves account for
less than 6% recovery factor of
172 MMbbls DOIIP
Analogous pool doubled production
under water flood and will realize
14-19% recoveries
Wildmere Lloyd A Pool Production
6000
60000
5000
50000
Analogue
pool
Oil Production
Water Injection
40000
3000
30000
2000
20000
1000
10000
0
Jan-90
Water Injected bbl/d
Oil bbl/d
4000
Analogue
Polymer Pilot
initiated 2011
0
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
-15-
Wildmere Resource Play
Enhanced Oil Recovery Development




New Wildmere core obtained during 2010 drilling program
Core is in the lab being flooded with water, polymer, alkali and surfactant combinations
Lab results will be used to drive the simulation process
Pilot design and applications should be submitted in the second half of this year
EOR Draft Timeline
Obtain new Wildmere core
Perform coreflood lab work
Pilot simulation
Source water approval
ERCB Pilot flood application
Drill Source water well(s)
Facility design & installation
Initiate pilot flood
2010
N
D
2011
J
F
M
A
M
J
J
-16-
A
S
O
N
D
2012
J
F
M
A
M
J
J
A
North
Worsley, Ft. St. John and Ekwan Areas






100 boe/d (90+% Gas)
Buick and Laprise wells were recently
shut-in due to third parties
65,000 net undeveloped acres
70 future drilling locations
500 boe/d gas behind pipe
Long tenure assets will be retained.
Short tenure assets are being
monetized
Ekwan
Defined Jean Marie Gas
Resource with land tenure
Ft. St. John
Buick, Cache & Laprise Gas and
liquids production. Multi-zone
follow up potential
“.”
Worsley
Oil and Gas production.
Multi-zone follow up potential
-17-
2011 Plans
2011 Capital Investment Framework
Investment will be flexible and opportunistic throughout the year
Organic projects
$13 - 33MM+
$0.5MM
$1.8MM
$1.9MM
$2.4MM
$20 - $40MM+
Drilling (focus on Hz Wildmere inventory)
Recompletions (target multiple bypass pay opportunities)
Operating cost reductions (gas gathering projects)
EOR, land and maintenance
Pump optimization (maintain base decline)
TOTAL
Acquisition projects
Variable
Targeting accretive reserves, production and cash flow
Liquidity event
Plan to be publicly traded in 2011
-18-
Contact Information
Gear Energy Ltd.
1600, 202- 6th Avenue SW
Calgary, AB, Canada
T2P 2R9
T (403) 538-8435
F (403) 705-2660
www.gearenergy.com
For more information please contact:
Ingram B. Gillmore, President & CEO
(403) 538-8463
-19-
[email protected]
Reader Advisory
Certain statements included in this presentation constitute forward looking statements or forward looking information under applicable securities legislation. Such
forward looking statements or information are 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, such as making investment decisions. Forward looking
statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project", "should",
"target", "will", "may" or similar words suggesting future outcomes or statements regarding an outlook. Forward looking statements or information in this
presentation include, but are not limited to, statements or information with respect to: potential reserves and future production with respect to current assets
business strategy and objectives; development plans; exploration and drilling plans; reserve quantities and the discounted present value of future net cash flows
from such reserves; future production levels; wells drilled (gross and net); capital expenditures; cash flow; debt levels; operating and other costs; royalty rates and
taxes.
Forward looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information
but which may prove to be incorrect. Although Gear Energy Ltd. ("Gear or the "Company") believes that the expectations reflected in such forward looking
statements or information are reasonable, undue reliance should not be placed on forward looking statements because Gear can give no assurance that such
expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this presentation, assumptions have been made
regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which Gear operates; the
timely receipt of any required regulatory approvals; the ability of Gear to obtain qualified staff, equipment and services in a timely and cost efficient manner; the
ability of the operator of the projects which Gear has an interest in to operate the field in a safe, efficient and effective manner; field production rates and decline
rates; the ability to replace and expand oil and natural gas reserves through acquisition, development or exploration; the timing and costs of pipeline, storage and
facility construction and expansion and the ability of Gear to secure adequate product transportation; future oil and natural gas prices; currency, exchange and
interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Gear operates; and the ability of Gear to
successfully market its oil and natural gas products. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been
used.
Forward looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which
could cause actual results to differ materially from those anticipated by Gear and described in the forward looking statements or information. These risks and
uncertainties which may cause actual results to differ materially from the forward looking statements or information include, among other things: the ability of
management to execute its business plan; general economic and business conditions; the risk of instability affecting the jurisdictions in which Gear operates; the
risks of the oil and natural gas industry, such as operational risks in exploring for, developing and producing crude oil and natural gas and market demand; the
possibility that government policies or laws may change or governmental approvals may be delayed or withheld; risks and uncertainties involving geology of oil and
natural gas deposits; the uncertainty of reserves estimates and reserves life; the ability of Gear to add production and reserves through acquisition, development
and exploration activities; Gear's ability to enter into or renew leases; potential delays or changes in plans with respect to exploration or development projects or
capital expenditures; the uncertainty of estimates and projections relating to production (including decline rates), costs and expenses; fluctuations in oil and natural
gas prices, foreign currency exchange rates and interest rates; risks inherent in Gear's marketing operations, including credit risk; uncertainty in amounts and timing
of royalty payments; health, safety and environmental risks; risks associated with existing and potential future law suits and regulatory actions against Gear;
uncertainties as to the availability and cost of financing; and financial risks affecting the value of Gear’s investments. Readers are cautioned that the foregoing list is
not exhaustive of all possible risks and uncertainties.
The forward looking statements or information contained in this presentation are made as of the date hereof and Gear undertakes no obligation to update publicly or
revise any forward looking statements or information, whether as a result of new information, future events or otherwise unless expressly required by applicable
securities laws. The forward looking statements or information contained in this presentation are expressly qualified by this cautionary statement.
-20-
Reader Advisory
Any financial outlook or future oriented financial information in this presentation, as defined by applicable securities legislation, has been
approved by management of Gear. 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.
This presentation includes non-GAAP measures not defined under generally accepted accounting principles ("GAAP"), including cash flow. NonGAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures
presented by other issuers. Such terms are used in this presentation as indicators of financial performance as such terms are often utilized by
investors to evaluate companies in the oil and gas sector. In relation to the disclosure of net asset value ("NAV"), the NAV figures referenced in
this presentation are internally generated and such a value represents a snapshot in time and is based on various assumptions including
commodity prices and foreign exchange rates that vary over time. It should not be assumed that the future net revenues estimated by Gear's
independent resource evaluators represent the fair market value of the reserves, nor should it be assumed that Gear's internally estimated value
of its undeveloped land holdings represent the fair market value of the lands.
The information contained in this presentation does not purport to be all-inclusive or to contain all information that prospective investors may
require. Prospective investors are encouraged to conduct their own analysis and reviews of the Company and of the information contained in this
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 the Company.
Certain crude oil and natural gas liquids ("NGLs") volumes that have been converted to millions of cubic feet equivalent ("mmcfe") or thousands
of cubic feet equivalent ("mcfe") on the basis of one barrel ("bbl") to six thousand cubic feet ("mcf"). Also, certain natural gas volumes have been
converted to barrels of oil equivalent ("boe"), thousands of boe ("mboe") or millions of BOE ("mmboe") on the same basis. mmcfe, mcfe, boe,
mboe and mmboe may be misleading, particularly if used in isolation. A conversion ratio of one bbl to six mcf is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not necessarily represent value equivalency at the well head.
Certain information contained herein is considered "analogous information" as defined National Instrument 51-101. Such analogous information
has not been prepared in accordance with NI 51-101 and the Canadian Oil and Gas Evaluation Handbook and Gear is unable to confirm whether
such estimates have been prepared by a qualified reserves evaluator. The ERCB estimates have been derived from recent reports of the ERCB
dated. The information has been provided to show the potential improved recovery factors of the Enhanced Oil Recovery Scheme intended to
implemented by Gear.
Definitions
Boe = barrel of oil equivalent (6:1)
Boe/d = Boe per day
Mmcf/d = MM cubic feet per day
WI = working interest
MM = million
-21-
Appendix
Gear Staff
Calgary
Field
Full time
Part time (Consultants)
Full time
Contract Operators
Tax Pool Detail
Non-Capital Losses:
CEE:
CDE:
COGPE:
UCC:
Share Issue Costs:
Total:
14
4
3
20
$17.6 million
$13.7 million
$11.7 million
$98.6 million
$31.3 million
$4.9 million
$178 million
-22-