july 2018 3rd anniversary of kern bluff...
TRANSCRIPT
July 2018 – 3rd Anniversary of Kern Bluff Acquisition
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Forward Looking Statements
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This presentation contains forward-looking statements, including without limitation those statements regarding Citadel’s ability to exploit mining concessions. The statements and discussions
contained in this presentation that are not historical facts constitute forward-looking statements, which can be identified by the use of forward-looking words such as "believes," "expects,"
"may," "intends," "anticipates," "plans," "estimates" and analogous or similar expressions intended to identify forward-looking statements. Citadel wishes to caution the reader of this
presentation that these forward-looking statements and estimates as to future performance, estimates as to future valuations and other statements contained herein regarding matters that are
not historical facts, are only predictions, and that actual events or results may differ materially. Citadel cannot assure or guarantee you that any future results described in this presentation will be
achieved, and actual results could vary materially from those reflected in such forward-looking statements. We assume no obligation to update any forward-looking statements in order to reflect
any event or circumstance that may arise after the date of this presentation, other than as may be required by applicable law or regulation. Reserve and Resource Disclosure: Securities and
Exchange Commission (“SEC”) rules prohibit a publicly-reporting oil and gas company from including oil and gas resource estimates in its filings with the SEC, except proved, probable and possible
reserves that meet the SEC’s definition of such terms. Estimates of non-proved and non-probable reserves included herein are not based on SEC definitions and guidelines and may not meet
specific definitions of reserves or resource categories within the meaning of the SPE/SPEE/WPC Petroleum Resource Management System.
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Kern County California: Heart of California Oil
Yowlumne Area –2,800 acres
Kern Bluff Area –1,100 acres
Largest Producing County in the United States ~ 400,000 BOPD
Citadel currently has 3,900 acres in Kern County under lease
Kern County is the Heart of California Oil Production with four of the top ten oil fields in the U.S.
Midway Sunset - 3.4 Billion BarrelsKern River - 2.5 Billion BarrelsSouth Belridge - 2.0 Billion BarrelsElk Hills - 1.5 Billion Barrels
Strong service industry and infrastructure to support redevelopment opportunities
Business & Oil friendly environment
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Executive Summary
Capital Structure▪ (OTCQB: COIL) 45MM shares issued (60MM fully diluted including options & restricted shares)▪ $8.0 MM in Series A Convertible Participating Preferred Stock (Convertible at $0.20/40MM shares)▪ $1,750,000 drawn on $3MM Senior Secured Debt Facility.
Founder & CEO: Armen Nahabedian – 4th Generation Oilman▪ Extensive database & knowledge provide first-mover advantage▪ Experienced operator with boots on the ground advantage▪ United States Marine 1999 – 2003; Infantry veteran of Iraq war
CFO: Phil McPherson – 11 Years as a Small Cap E&P Analyst▪ Noted expert on California E&P companies▪ Wall Street Journal “Best on the Street” in 2011 ▪ East Carolina University 97’ – B.A. Economics
Core Asset Under Development: Kern Bluff Oil Field▪ 25MM BTU Steam Generator – Currently Steaming 10 wells▪ Producing ~100 Barrels of Oil per day. ▪ 3 Well Drilling Program Completed in 1Q18▪ Inventory of 20 Recompletions & 400 potential development locations.
The Next Great California Independent
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Kern Bluff Oil Field: Discovered in 1944 by Shell
▪ Acquired Kern Bluff in July 2015 for $2MM in cash & 6MM shares of Common Stocko 1,100 acres & One producing well - #324 Horizontal producing ~5 BOPD
o 29 idle well bores – all candidates to be returned to production
▪ Field Estimated to hold over 100 Million Barrels of oil in place (OOIP) o 169 Vertical Wells drilled from 1950’s to 1980’s have recovered ~ 12 Million barrels or 20% of OOIP
o Similar fields in this area have achieved recovery levels exceeding 60% of OOIP
o Current well spacing equates to ~2.5 to 5.0 acres. Analogous fields down spaced to ~1.25 acre
o Over 300 New Vertical locations & 20 Horizontal locations identified
▪ August 2015 to June 2018 Spent $8.0MM in CAPEX
o Major facility Upgrade Completed in July of 2016 – Production capacity of ~500 BOPD
o Reworked 10 vertical wells and drilled 3 new vertical wells in 2016.
o Purchased and Installed 25MM BTU Steam Generator in 2018 – 1,500 Barrels of Steam per day capacity.
o Currently producing ~100 Barrels of oil per day.
o 2 Well Drilling Joint Venture in 1Q18 – JV Partner has 90% working interest until payout, 20% after.
o 1 new well 100% owned by Citadel drilled in 1Q18.
▪ Next 12 Month CAPEX $5.0 MM
o Drill 1 Horizontal Well ~$1MM ~ 200 BOPD
o Drill 10 New Vertical Wells ~$3MM ~300 BOPD
o Facility Expansion~ $1MM
o Target 20-30 producing wells and ~600+ BOPD – self fund future growth from cash flow at $60.00 oil.
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Facility Upgrade Complete:
Capable of processing 500 barrels of oil per day
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Installation of Steam Generator:
25MM BTU Generator – Steam 50 wells per Year
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Thermal Recovery Methods
• Cyclic Steaming also called Huff & Puff (Method to be deployed by Citadel)• Phase I inject 5,000 to 10,000 barrels of steam into reservoir (5 – 10 days)• Let steam soak and permeate the rock (5-10 days)
• Phase II – Return pump and begin production• Continue production for 180+ days then repeat
as reservoir cools.
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Kern Bluff Geology: Five Stacked Oil Zones
Chanac – Transition - 1st, 2nd & 3rd Benches of the Santa Margarita
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Field Development Program
Map of Kern Bluff proper ~ 320 acres - location of current development
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Return to Production (RTP) Production Profile
Average EUR of 29,000 BOE
5,000 - 10,000 Barrels of Steam
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New Vertical Well Production Profile:
Average EUR of 70,000 BOE
5,000 to 10,000 Barrels of Steam
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Economic Profile: 400% ROI
Economics for Vertical, Horizontal & RTP’s at $65.00 Oil Deck
Cost Assumptions Cost Assumptions Cost Assumptions
Net Well Cost $250,000 Net Well Cost $1,000,000 Net Well Cost $75,000
LOE per Boe $25.00 LOE per Boe $25.00 LOE per Boe $25.00
Working Interest 100% Working Interest 100.0% Working Interest 100%
Royalty 21% Royalty 21% Royalty 21%
Severence Tax 2% Severence Tax 2% Severence Tax 2%
Performance Assumptions Performance Assumptions Performance Assumptions
30-Day IP Rate (Boepd) 50 30-Day IP Rate (Boepd) 150 30-Day IP Rate (Boepd) 20
10,000 BOS Annualy 25,000$ 30,000 BOS Annualy 75,000$ 5,000 BOS Twice a Year 25,000$
1st Year Production 9,354 1st Year Production 25,510 1st Year Production 4,622
Economics Economics Economics
Payout (Months) 11.0 Payout (Months) 12.0 Payout (Months) 6.0
EUR (Bbls) 55,310 EUR (Bbls) 229,882 EUR (Bbls) 23,214
PV-10 PUD Well $1,024,198 PV-10 PUD Well $3,855,138 PV-10 PUD Well $444,419
PV-10 PUD Well per Bbl $18.52 PV-10 PUD Well per Bbl $16.77 PV-10 PUD Well per Bbl $19.14
Full Field Potential ~300 wells Full Field Potential ~100 wells Full Field Potential ~28 wells
Kern Bluff Vertical Kern Bluff Horizontal Kern Bluff - Recomplete
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Investment Summary: Don’t Miss a Good Downturn
Commodity Price Cycle Has Bottomed▪ Citadel able to buy a distressed asset while other companies forced to sell
▪ Low Risk Exploitation
▪ Potentially 20MM to 40MM Barrels Recoverable
▪ Full Field Potential of ~5,000 BOPD
▪ Phase I Facility Upgrade Complete
▪ Purchased/Installed Steam Generator - Steam capacity to grow to over 50 producing wells ~ 1,000 BOPD in production
▪ Pure play on California Oil & Higher Oil Prices
▪ California Oil Currently Trading at a $2.00 -$3.00 per Barrel Premium to WTI
▪ Significant Backing from Private Equity Energy Investor – Long Term View
The Best Place to Find Oil – Is where it has already been found
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Don’t Miss a Good Downturn
World Headquarters:417 31st St. Unit ANewport Beach, CA 92663949-612-8040Phil McPherson, [email protected]: COIL
Kern Bluff Field Office:8850 Paladino Dr. Bakersfield, CA 93308805-910-5369Armen Nahabedian, President / [email protected]