tsx: ygr - yangarrayangarra.ca/documents/ygr-corporatepresentation-may2019.pdf · 2019. 9. 11. ·...
TRANSCRIPT
CORPORATE PRESENTATION
MAY 2019
TSX: YGR
YGR 1-26 PAD
MAY 2019| PG 2yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
Q1 Production boe/d 11,956 2019E Range boe/d 13,000-14,000
Q1 CAPEX $mm 59.0 2019E Capital $mm 100
Q1 Cash Flow $mm 27.7 2019E CF Range $mm 95-105
# of wells planned 24
Additional Information
Basic Shares mm 85.4 14% Insider Ownership
Options mm 8.3 $4.36 Weighted Average Ex. Price
Fully Diluted mm 93.7 22% Total Insider Ownership
Market Capitalization $mm $238.2 $2.79 Share Price at 07-May-19
Plus Q1 2019 Net Debt $mm $188.1 $225.0 Total Credit Facility
Enterprise Value $mm $426.2
2018 2017 2018 2017
% Change % Change
Proved Dev. (PDP) 23.4 12.0 95.1% 393 204 92.7%
Total Proved 75.5 55.9 35.1% 1119 722 55.0%
Proved + Probable 126.3 87.9 43.7% 1686 1027 64.2%
(mmboe) ($mm)
CORPORATE SNAPSHOTWELL CAPITALIZED, STRONG INSIDER OWNERSHIP & A DEFINED RESOURCE BASE
CONCENTRATED HALO CARDIUM PLAYER
➢ Fracking in bioturbated zone driving higher recoveries across entire Cardium package
➢ >65 wells drilled since August 2016 fully delineating the entire land base
➢ LMR of 12.6 and discounted ARO of $13.3MM
CARDIUM LAND POSITIONCAPITALIZATION SUMMARY
2019E BUDGET
YE 2018 RESERVES UPDATE
MAY 2019| PG 3yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
➢ Yangarra continues to grow reserves at compelling F&D costs, including top quartile recycle ratios:
• PDP recycle ratio of 2.7x
• Proved recycle ratio of 4.1x
• 2P recycle ratio of 5.6x
➢ Quality of reserves booking validating type curve sustainability
• PDP+PNP reserves as a percent of total proved reserves improved from 22.6% to 33.5%
➢ In 2018, Yangarra not only converted reserves from probable and PUDs but new area additions increased 2P reserves by 44%
RESERVES GROWTH MOMENTUMRESERVES CONTINUE TO GROW AT REASONABLE F&D METRICS
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
-
15
30
45
60
75
90
105
120
135
150
2011 2012 2013 2014 2015 2016 2017 2018
Res
erve
s p
er s
ha
re (m
mb
oe/
sha
re)
Res
erve
s (m
mb
oe)
Proved 2P Proved Per Share 2P Per Share $-
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
2011 2012 2013 2014 2015 2016 2017 2018
F&D
Co
sts
($/b
oe)
2P Proved
YEARLY RESERVES GROWTH (MMBOE & PER SHARE) F&D COSTS
MAY 2019| PG 4yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
PRUDENT LEVERAGE BALANCED AGAINST LONG-TERM RETURN ON CAPITALIMPROVING BUSINESS MODEL DRIVING LONG-TERM RETURN ON CAPITAL EMPLOYED
BALANCE SHEET EFFICIENCY RETURN ON CAPITAL EMPLOYED VS. FDC
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
4.0x
4.5x
5,000
7,000
9,000
11,000
13,000
15,000
17,000
19,000
21,000
23,000
25,000
2015 2016 2017 2018 2019E
Debt/BOED YE Debt/ Trailing CF YE Debt/ Forward CF
CAPITAL EFFICIENCY DRIVING DOWN LEVERAGE
➢ Yangarra’s ability to add production at efficient per flowing boed metrics resulted in lower relative balance sheet leverage
➢ Absolute net debt increased from 2017 to 2018 but efficient use of capital improved leverage ratios
RETURN ON CAPITAL EMPLOYED DRIVING DECISIONS
➢ Yangarra’s ROCE competes with the best Canadian plays and U.S. plays such as the Permian
➢ Reserve bookings increasingly aligned with cash flow, balance sheet, and capital spending
• Proved FDC changed by $1.9mm in 2018 to $392mm
• 2P FDC changed by $54.2mm in to $606.7mm as a result of additional lands
• 2018 Proved FDC now less than 5.0X 2018 cash flow
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
0.0x
5.0x
10.0x
15.0x
20.0x
2015 2016 2017 2018
Proved FDC/CF 2P FDC/CF ROCE
MAY 2019| PG 5yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
$18.00
2015 2016 2017 2018
Per
Sh
are
PDP/PNP NAV10 per share Proved NAV10 per share
2P NAV10 per share YGR Share Price
NAV GROWTH OUTSTRIPPING SHARE PERFORMANCEPDP NAV GROWTH WHILE SOLIDIFYING 2P NAV
➢ Sustainable NAV per share growth in volatile macro environment highlights Yangarra’s prudent approach on focusing on the best play with the best full-cycle economics
➢ Past 3-year track record of reserve adds and per share NAV growth validates Yangarra philosophy: risk of converting PUDs and probables into PDP reserves lies in financial and operational risks NOT geological risks
• Strategic long-term plan requires no new equity capital
• At current commodity price levels, Yangarra expects to generate free cash flow over next five years
• Successful drilling of 65 halo bioturbated Cardium wells highlights ongoing operational focus
➢ Market disconnect between long-term 2P NAV per share and share price creates opportunity
• Only 217 locations booked on internal estimate of >800 locations
YEARLY RESERVES GROWTH & SHARE PRICE PERFORMANCE
MAY 2019| PG 6yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
CORE PRINCIPLESDISCIPLINED GROWTH THROUGHOUT ENTIRE DEVELOPMENT CYCLE
DISCIPLINED CAPITAL
STEWARDS
➢ Focused on full-cycle rates of return
➢ Prudent balance sheet management provides considerable flexibility
➢ Belief in a budget that builds a sustainable growth model
ORGANIC GROWTH
➢ Excellent per share growth in 2018 without materially increasing relative leverage:
• >59% on production with D/CF going from 1.8X in 2017 to 1.9X in 2018
• >51% on cash flow, including a 65% increase in 2018 EPS relative to 2017
➢ Street consensus for 2019E highlights ongoing growth expectations
➢ Competitive first-mover advantage allows Yangarra to grow economic inventory
OPERATIONAL
FOCUS
➢ Focus on halo, bioturbated Cardium provides Yangarra with a proprietary knowledge base AND operational synergies
➢ Continuous improvement approach to drilling & completions
➢ Yangarra’s investment in infrastructure drives economic success
LOW-COST
OPERATOR
➢ Low op costs a result of corporate structure
➢ Low G&A costs; strongly aligned management comp structure
➢ Average D&C costs per well equivalent to peers but frac intensity & stages should drive higher recovery factors
YANGARRA IS FOCUSED ON BUILDING A LONG-TERM SUSTAINABLE BUSINESS MODEL THAT GROWS ECONOMICALLY REGARDLESS OF THE
MACRO ENVIRONMENT
MAY 2019| PG 7yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
PRODUCTION POTENTIAL WITH 2 RIGS (YEAR-ROUND) (1)
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Year 1 Year 2 Year 3 Year 4 Year 5
Pro
du
ctio
n (b
oe/
d)
REMAIN CONCENTRATED
➢ Geographically & geologically concentration in the prolific Cardium sands
➢ Focus drives multiple synergies from geology, to drilling, to production (leading exploiter of bioturbated zone)
SHAREHOLDER VALUE THROUGH FULL CYCLE ECONOMICS
➢ Achieve consistent top quartile “program drilling” results
➢ Focus on return on capital employed (ROCE)
➢ Be the lowest cost producer to maximize netbacks
• Op costs of $6-7 per boe (all-in, including transportation)
• G&A costs of <$1.00 per boe
ORGANIC GROWTH
➢ Grow on a per share basis
➢ Fund within cash flow
➢ Disciplined use of debt capital to finance program
• Long-term target of ~1.0x Debt/Annualized YE CF
STRATEGIC OUTLOOKSUSTAINABLE ORGANIC GROWTH & INTERNALLY FINANCED
TRANSITION FROM DELINEATION TO MANUFACTURING
➢ Yangarra believes running a 2-rig program year-round (accounting for break-up) will optimize operations
➢ Using static/current D&C costs and current commodity prices, Yangarra can internally finance a 2-rig program for the foreseeable future and continue to grow inventory
Assumes 30 locations/year (45-one mile) & ~500 net
locations remaining at Year 5
MAY 2019| PG 8yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
LEADERSHIPEXPERIENCED & GEARED FOR DEVELOPMENT
INSIDER OWNERSHIP BOTH AT THE MANAGEMENT LEVEL AND THE BOARD LEVEL PROVIDES STRONG ALIGNMENT WITH SHAREHOLDERS
MANAGEMENT TEAM BOARD OF DIRECTORS
Gordon Bowerman - President of Cove Resources Ltd.
Chairman - 50+ years of oil & gas experience
Neil Mackenzie - Director at various public companies
- Partner at Blackstone Fluids
Robert Weir - President of Weir Resource Management Ltd.
Ted Morton
(Audit)
- Former Albertan & Canadian politician; Held
Energy, Finance, Enterprise, and Sustainable
Resources Minister positions
Jim Evaskevich - See bio in management team.
Jim Evaskevich - 30+ years of extensive executive experience
President & CEO - Strong field & drilling operational background
Lorne Simpson, B.Sc., C.E.T. - 30+ years of experience in oil & gas
VP Operations - Drilling operations
Randall Faminow - 30+ years of experience in oil & gas
VP Land - Negotiations in acquisitions and divestments
James Glessing, CA - 18+ years of oil & gas accounting experience
Chief Financial Officer - Ex-controller & CFO at various energy firms
- Articled at Deloitte
Gurdeep Gill, CFA
VP Business Development
- 18+ years of experience in capital markets
VP Business Development - Head of investment banking at AltaCorp
Capital Inc.
Trish Olynyk - 20+ years of experience in oil & gas
VP Finance - Controller at Yangarra since 2005
MAY 2019| PG 9yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
➢ Pursued multiple plays using MSF technology (Glauconite, Rock Creek, Second White Specks, Viking)
➢ Very low Cardium inventory
FULL CYCLE FOCUSNOT JUST A SAYING, KEY DRIVER IN ALL DECISION MAKING
49% Half Cycle26% Full Cycle
2010 -2013
56% Half Cycle29% Full Cycle
2014 -2015
105% Half Cycle83% Full Cycle
2016-2017
157% Half Cycle107% Full Cycle
2018
TRANSITION TO FULL CYCLE Stopped pursuing multiple play types; focused on Cardium
➢ With a focus on the Cardium, Yangarra started deploying sliding sleeves & cemented liners to improve MSF approach to longer well lengths
➢ During commodity downturn, focused on acquiring land at reasonable prices
➢ Success of bioturbated drilling resulted in a first-mover advantage as Yangarra led peers in drilling & acquiring lands
➢ Continuous improvements in technology (per each 10-well program) drove further operational & economic success
➢ Competitive advantage of operational and geological knowledge, combined with owned infrastructure allowing Yangarra to compete in acquiring additional lands
➢ Go-forward focus on operations (2 rigs); established infrastructure and pad drilling should continue to drive above average returns
BIOTURBATED ZONE Initial bioturbated well changed Yangarra’s approach to the Cardium
INFRASTRUCTURE Yangarra’s 2018 infrastructure spending to drive full-field development
HA
LOC
AR
DIU
MIN
VEN
TOR
YA
CC
UM
ULA
TIO
N
MAY 2019| PG 10yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
INITIA
LT
ECH
NO
LOG
ICA
LS
HIFT
2009 TO 2014/15
➢ Renaissance in Cardium until 2014 oil crash; capex dropped dramatically
➢ Technology continues to progress in other plays across North America
➢ End of Cardium story?
CARDIUM EVOLUTIONCONVENTIONAL CARDIUM TO TIGHTER HALO CARDIUM
1950’S TO 2009
➢ Prolific Cardium sands exploited by vertical wells
CONVENTIONAL CARDIUM
➢ Cardium potential expands dramatically with the introduction of new technology initiatives to the Halo Cardium
➢ Early approaches include:
• Horizontal wells
• Multi-stage fracs
• Gel-oil fracs
➢ Capital intensive; highly dependent on high-commodity prices
HALO CARDIUM
MAY 2019| PG 11yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
UPPER CARDIUM OOIP TARGET/SECTION
~2-5 mmbbl OOIP~6-20 mmboe OBOEIP
PLUS BIOTURBATED
~4.5-6 mmbbl OOIP~12-18 mmboe OBOEIP
TOTAL OOIP~7.5-10 mmbbl OOIP~18-38 mmboe OBOEIP
YGR BIOTURBATED VIEW
Actual core analysis (by YGR & Weatherford) shows porosity increases to 4-6%
Materially increasing OOIP/OBOEIP
CARDIUM REVOLUTIONCONGLOMERATE TO BIOTURBATED
ORIGINAL LOG & BIOTURBATED CORE EXAMPLE
➢ Shift by Yangarra to:• Cemented liners• Sliding sleeves• Extended reach wells
➢ Fracking into bioturbated zone allows frac to vertically propagate in both directions
Upper2.5-4.0m
Lower1.5-3.0m
Bioturb.3.0-7.0m
Net Pay
NEW FRAC PLANE
New Well Path
IT’S ALL ABOUT OOIP/OBOEIP
Willesden Green T41-R6W/5
Upper SandCore analysis
Porosity 10-15%
BioturbatedLog Porosity 3%
TEC
HN
OLO
GY
PR
OG
RESSIO
N
Old Well Path
➢ Deeper well path allows YGR to access significantly more OBOEIP
➢ Gas-charge drives higher oil and NGLs recoveries (see type curve)
MAY 2019| PG 12yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
➢ Since 2016, Halo Cardium has been the focus
➢ Land acquisition strategy has been driven by OOIP at reasonable prices
➢ A major portion of the drill program has been to earn farm-ins and push the boundaries of the Cardium• Improvements in technology & step-out wells have
significantly increased opportunity for additional acquisitions
➢ Evolution of Yangarra’s initial ten-well program to most recent program in 2018• Initial wells had 30 stages and 450 tons (per mile)• Current program is 80 stages per mile & 1,200 tons
(per mile)
➢ Yangarra continues to experiment with well lengths, frac stages, tons and spacing with a goal of full-field development with pad drilling• Savings on initial pad for drill & completion costs should
continue to drive future IRR performance
OPERATIONS OVERVIEWENTIRETY OF YANGARRA’S FOCUS ON OPERATIONS IN THE CARDIUM
MAY 2019| PG 13yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
0
100
200
300
400
500
600
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57
Pro
du
ctio
n P
er D
ay (b
oe
/d)
Months
Total (boe/d)
Oil (bbl/d)
Total NGLs (bbls/d)
EURs will range across land base depending upon OBOEIP & gas-rates
ECONOMICSEXCELLENT IRRS WILL CONTINUE TO DRIVE FUTURE PER SHARE GROWTH
➢ Yangarra reviews each individual area & specific targets and assigns type curves based on detailed geological reviews and rigorous reservoir parameters (i.e. differing net pays per zone, porosities and GORs)
➢ For competitive reasons, Yangarra has provided an average type curve that encompasses our results across our inventory, which is in turn weighted using our inventory from each area
UNRISKED WEIGHTED-AVERAGE TYPE CURVE PRODUCTION PROFILE
CUMULATIVE PRODUCTION
UNRISKED WEIGHTED-AVERAGE TYPE CURVE ASSUMPTIONS
Year 1 BOE Decline: 39%
Average NGLs Yield
55 bbl/mmcf (life of well)
Avg. Type
DCET $mm $3.75
IP30 - Oil bbl/d 313
IP30 - BOE boe/d 493
IP90 - Oil bbl/d 261
IP90 - BOE boe/d 480
IP365 - BOE boe/d 442
Capital Eff. (1st year) $/boe/d $8,484
EUR mboe 522
F&D (Half Cycle) $/boe $7.61
Price Sensitivity: WTI (USD/bbl) $50.00 $60.00 $70.00 $80.00
IRR % 109% 198% 308% 458%
NPV10% $mm $5.4 $7.8 $10.0 $12.0
Payback years 1.0 0.7 0.6 0.5
Recycle Ratio x 3.7x 4.5x 5.3x 6.0x*Above is a weighted average type curve encompassing 1-mile & 2-mile wells.
The above EUR will not match the "Section Analysis" on the Inventory slide.
Average Weighted Type Curve
0
50
100
150
200
250
300
350
400
450
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57
Cu
mu
lati
ve P
rod
ucti
on
(mb
oe)
Months
Cumulative (mboe)
Cumulative Oil (mbbl)
Cumulative NGLs
MAY 2019| PG 14yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
Gross Net WI
Total Sections 125.0 106.0
Total Acres 80,000 67,840 85%
Locations 910 >800
Per section drilling will vary with GOR levels. Low GOR areas will have higher drilling density; high
GOR areas will have lower drilling density
OOIP/Section~18-38 mmboe(~7.5-10 mmbl
OOIP)
Well Recovery Factor
~15-16%
Section Recovery Factor~12%
GEOLOGICAL MAPPING, RESERVOIR PARAMETERS & ECONOMIC TYPE CURVE KEY TO INVENTORY COUNT
➢ Recoveries from tight, unconventional horizontal wells materially different from conventional Cardium
• Yangarra and its third-party reserve engineers forecast a horizontal well will drain up to ~64 acres due to tight reservoir parameters
• Well drilling & frac design are optimized to minimize horizontal fracturing & maximize vertical fracturing
• Empirical evidence from 65+ wells drilled highlights minimal communication between horizontal wells at 150m (490 feet) spacing
• Current inventory estimate based on 200m (656 feet) spacing (average throughout land base)
➢ Yangarra’s inventory count evolves based on well performance, technological progress and the acquisition of additional targeted lands
CARDIUM INVENTORYDISCIPLINED APPROACH DRIVES LAND ACQUISITION STRATEGY
ONE WELL
OBOEIP/Section~18-38 mmboe(~7.5-10 mmbl
OOIP)
Well Recovery Factor
~15-16%
Section RecoveryFactor~1.5%
4 WELLS / SECTION
OOIP/Section~18-38 mmboe(~7.5-10 mmbl
OOIP)
Well Recovery Factor
~15-16%
Section Recovery Factor~6%
8 WELLS / SECTION
LAND & INVENTORY SUMMARY SAMPLE ONE-SECTION EXPLOITATION STRATEGY INVENTORY STRATEGY
➢ Yangarra divides Cardium operations into six areas with each area having an individual type curve
➢ Where the type curve does not meet internal economic thresholds, Yangarra does not include those lands in the inventory count
➢ Locations are an internal management estimate based on a 1-mile basis (includes 2-mile locations converted to 1-mile equivalents for ease of use)
MAY 2019| PG 15yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
CONVENTIONAL THINKING
➢ Build massive contiguous land base
➢ Drive down costs by overcapitalizing infrastructure (oil pipelines & gas-processing)
YANGARRA: LOOK FORWARD NOT BACKWARDS
➢ Create flexible production environment to target top-tier acreage
➢ Handle all gas
➢ Truck emulsion
RESULTS!
➢ Blending: higher product pricing
➢ Trucking: Maximize revenue per bbl by exercising optionality to multiple egress points (Central AB to SK to USA)
➢ Lower op costs (<$7.00 per boe)
PRODUCTION LOGISTICSMOVE FORWARDS NOT BACKWARDS ON PRODUCTION PRACTICES
YANGARRA INFRASTRUCTURE
Yangarra Facilities
➢ Operate >90% of production
➢ Maximize gas handling, minimize 3rd party handling
➢ Maximize trucking efforts, minimize oil pipelines
➢ 15 trucks in Yangarra fleet
MAY 2019| PG 16yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
OPERATIONAL FOCUS DRIVES COSTS AND NETBACKSSTRATEGY ALLOWS YANGARRA TO EXCEL IN HALO SANDBOX
LOW OP COST PRODUCER HIGH NETBACKS (CONSENSUS)
LOWEST OP COSTS AMONGST PEER GROUP
➢ Yangarra approach works
➢ Scalable to higher production base
➢ Proper infrastructure spend drives full-cycle economics
NETBACKS COMPARABLE TO HIGHER OIL-WEIGHTED PEERS
➢ Driven by higher revenue per bbl & low op costs
➢ Gas production provides energy to maximize IPs and recovery factors
Source: AltaCorp Capital Inc., March 6, 2019
PPR IPO
JOYYGR
SGY
BNE
OBE
POU
GXEDEE
TVETOGKEL
NVA
ERF
WCP
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
$3.00 $6.00 $9.00 $12.00 $15.00 $18.00
LQA
Pro
du
cito
n (b
oe/
d)
LQA Operating Cost ($/boe)
Reported Q4 2018
Awaiting Q4 2018 Reporting
Reported Q4 2018
Awaiting Q4 2018 Reporting
PPR
IPO
JOY
YGR
SGY
BNE
OBE
GXEDEE
TVE
TOG
KELNVA
ERF
WCPVET
VII
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
40% 50% 60% 70% 80% 90% 100%
20
18
E N
etb
ack
2018E %Liquids
MAY 2019| PG 17yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
PEER-LEADING SUSTAINABLE GROWTHINTERNALLY FINANCED AND DELEVERAGING SCENARIO PROVIDES GREAT PROTECTION FOR INVESTORS (>$50 ED. PAR)
ONGOING GROWTH EXPECTATIONS (CONSENSUS) INTERNALLY FINANCED (CONSENSUS)
GROWTH TRAJECTORY CONTINUES
➢ Although the past doesn’t necessarily help predict the future; the Street continues to believe in Yangarra growth story
➢ Zero equity issued and no M&A since 2016
FREE CASH FLOW POTENTIAL WITH MATERIAL GROWTH
➢ Growth expectations into 2019E spending less than cash flow will drive optionality
Source: AltaCorp Capital Inc., March 6, 2019
Reported Q4 2018
Awaiting Q4 2018 Reporting
Reported Q4 2018
Awaiting Q4 2018 Reporting
PPR
IPO
JOY
YGR
SGY
BNEOBE
POU
GXE
DEE
TVE TOG KEL
NVA
ERF
WCP VET
VII
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-10% 0% 10% 20% 30% 40% 50%
20
18
E /
20
17
Pro
du
ctio
n G
row
th
2019E / 2018E Production Growth
PPR
IPO
JOY
YGR
SGY
BNEOBE
POU
GXEDEE
TVE
TOG
KEL
NVA
ERF
WCP
VET
VII
-10%
0%
10%
20%
30%
40%
50%
60% 80% 100% 120% 140%
20
19
E /
20
18
E P
rod
uct
ion
Gro
wth
2019E Sustainability
MAY 2019| PG 18yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
OUTLIER IN EVERY PERFORMANCE METRIC EXCEPT VALUATIONLACK OF REQUIREMENT FOR EXTERNAL FINANCING ALLOWS INVESTORS TO FOCUS ON SHARE UPSIDE
ROBUST BALANCE SHEET (CONSENSUS) 2019 CONSENSUS VALUATION
FINANCIAL FLEXIBILITY
➢ Consensus expectations highlight strong relative balance sheet
➢ Generate free cash flow in normalized macro environment (using Street averages for CAPEX and cash flow)
DISCONNECT ON VALUATION
➢ Market continues to underestimate Yangarra’s ability to deliver results
➢ Management continues to increase ownership
IPO
YGR
POU
GXETVETOG
KEL
NVA
ERF
WCPVET
VII
60.0%
70.0%
80.0%
90.0%
100.0%
110.0%
120.0%
130.0%
140.0%
0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x
20
19
E Su
sta
ina
bili
ty
2018E Net Debt / 2019E Cash Flow
YGR
$0
$12,000
$24,000
$36,000
$48,000
$60,000
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
EV /
20
19
E P
rod
uct
ion
EV /
20
19
E D
AC
FEV / 2019E DACF EV / 2019E Production
Source: AltaCorp Capital Inc., March 6, 2019
Reported Q4 2018
Awaiting Q4 2018 Reporting
Reported Q4 2018
Awaiting Q4 2018 Reporting
MAY 2019| PG 19yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
15+ yearsInventory
Yangarra is a prolific, organic growth producer with an excellent, focused runway of inventory
➢ During the past two years, Yangarra unlocked the previously unexploitable bioturbated zone, fully unlocking the total Cardium pay package, maximizing the recoverable resource
➢ Capitalized on first-mover advantage to acquire acreage in key Cardium lands in target areas at reasonable acquisition prices
• Utilized geologic and operational “know-how” to pin point strategic land opportunities with an eye on full-cycle economics
➢ Executed on a successful and diverse 65+ well program that de-risked Yangarra’s resource base
• Successfully ran a year-round two-rig program for the past 18 months
➢ Laid the groundwork for continued, peer leading per share growth for the foreseeable future by building out infrastructure to handle higher volumes
CONCLUSION – TRANSLATING IRR INTO EXCEPTIONAL GROWTHCOMPETITIVE ADVANTAGE IN HALO CARDIUM KEY TO YANGARRA INVESTORS
Accumulated 30+ sections in 2018
Avg IP 365: >400 boe/d
EV/DACF (2019 Consensus): 3.6X
>45% CFPS Growth(2019E/2018)
EV/BOED (2019 Consensus):
~$28,000
YANGARRA’S COMPELLING VALUATION, STRONG BALANCE SHEET AND CONTINUED GROWTH PROFILE MAKES YANGARRA A KEY CORE HOLDING
FOR INVESTORS LOOKING TO ADD EXPOSURE TO CANADIAN ENERGY
MAY 2019| PG 20yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
APPENDIX
RISK MANAGEMENT, ANALYST COVERAGE, PRESENTATION FOOTNOTES & FORWARD LOOKING STATEMENTS
MAY 2019| PG 21yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
ANALYST COVERAGESTREET COVERAGE CONTINUES TO GAIN MOMENTUM
Acumen Capital Finance Partners Ltd.Trevor [email protected](403) 410-6842
AltaCorp Capital Inc.Thomas Matthews, P.Eng, [email protected](403) 539-8621
Canaccord GenuityAnthony [email protected](403) 691-7807
CIBC World MarketsScott Reid, [email protected] (403) 216-3402
Cormark Securities Inc. Amir Arif, [email protected](403) 750-7200
Industrial Alliance Securities Inc.Michael Charlton [email protected](403) 705-4978
Laurentian Bank SecuritiesTodd Kepler, [email protected](403) 453-2909
Paradigm Capital Inc.Ken Lin, [email protected](403) 513-1042
Peters & CoDan [email protected](403) 261-2215
Raymond James Ltd.Jeremy McCrea, [email protected](403) 509-0518
Recently Added Coverage:
TD Securities Ltd.Sean [email protected](403) 299-3272
National Bank FinancialJohn [email protected](403) 441-0955
MAY 2019| PG 22yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
➢ Slide 2: 2019E: 24 locations; 2019E C$65 Ed. Par, AECO C$1.75/GJ; Reserves effective as at December 31, 2018 based on the reserve report prepared by Deloitte LLP, independent petroleum engineers (the “Reserves Report”). NAV = NPV10 Reserve Value less Net Debt and excludes undeveloped land value
➢ Slide 6: Assumes $120MM capital program each year and 2-rigs year-round with break-up resulting in 30 locations a year (based off of type curve provided in presentation)
➢ Slide 8: Half cycle IRR is based on actual drilling and completion costs, production to date and P+P reserves; Full cycle IRR allocates all other capital costs to the wells (i.e. land, G&G, infrastructure)
➢ Slide 12: Flat commodity price assumptions: Ed. Par differential US$5.00, F/X 0.75-0.80, AECO C$1.75/GJ; Operating cost of $7.00/boe including transportation; Type curves are based off of a inventory weighted average type curve for each area using both 1.0 mile and 2.0 mile data
➢ Slide 13: Inventory is an internal management estimate
➢ Slides 15-17: Based off of Consensus data as at March 2019
Additional Information/Terminology:
➢ Gas converted at 6 mcf : 1 barrel of equivalent basis (BOE)
➢ OOIP: original oil in place; OBOEIP: original barrels of equivalent in place
PRESENTATION FOOTNOTESJANUARY 2019
MAY 2019| PG 23yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
This presentation contains a summary of management's assessment of results and should be read in conjunction with the Consolidated Financial Statements andrelated Management's Discussion and Analysis for the year ended December 31, 2018, as filed on the SEDAR profile of Yangarra Resources Ltd. (the "Company").This presentation contains certain forward-looking statements, which include assumptions with respect to (i) drilling success; (ii) commodity prices; (iii)production; (iv) reserves; (v) future capital expenditures; (vi) future operating costs; (vii) cash flow; and (viii) potential markets for the Company's production. Thereader is cautioned that assumptions used in the preparation of such information may prove to be incorrect.
Certain information regarding the Company set forth in this presentation, including statements regarding management's assessment of the Company's futureplans and operations, the planning and development of certain prospects, the 2019 Capital Program and the Company's proposed exploration and developmentactivities and the timing thereof, including the amount and allocation of capital expenditures, the number and types of wells to be drilled and brought onproduction and the timing thereof, estimates of total and net capital expenditures, and the focus of, the objectives of and the anticipated results from the 2019Capital Program, production estimates, reserve estimates, productive capacity and economics of new wells, undeveloped land holdings and values, capitalexpenditures and the timing and allocation thereof (including the number, location and costs of planned wells), the total future capital required to bringundeveloped proved and probable reserves onto production, and expected production growth, may constitute forward-looking statements under applicablesecurities laws and necessarily involve substantial known and unknown risks and uncertainties. With respect to the Company's 2019 production guidance, the keyassumptions are that: the 2019 Capital Program will be carried out as currently contemplated; no unexpected outages occur in the infrastructure that theCompany relies on to produce its wells and that any transportation service curtailments or unplanned outages that occur will be short in duration or otherwiseinsignificant; existing wells continue to meet production expectations; and future wells scheduled to come on production meet timing, production and capitalexpenditure expectations. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the Company's control,including without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets,failure of foreign markets to become accessible, the impact of general economic conditions, industry conditions, volatility of commodity prices, currencyfluctuations, environmental risks, competition, the lack of availability of qualified personnel or management, inability to obtain drilling rigs or other services,capital expenditure costs, including drilling, completion and facility costs, unexpected decline rates in wells, wells not performing as expected, stock marketvolatility, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, theimpact of general economic conditions in Canada, the United States and overseas, industry conditions, changes in laws and regulations (including the adoption ofnew environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, fluctuations in foreign exchange orinterest rates and market valuations of companies with respect to announced transactions and the final valuations thereof. Readers are cautioned that theforegoing list of factors is not exhaustive. The Company's actual results, performance or achievement could differ materially from those expressed in, or impliedby, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements willtranspire or occur, or if any of them do so, what benefits the Company will derive therefrom. All subsequent forward-looking statements, whether written or oral,attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Additional information onthese and other factors that could affect the Company's operations and financial results are included in reports on file with Canadian securities regulatoryauthorities and may be accessed through the SEDAR website (www.sedar.com) or the Company's website (www.yangarra.ca), including the Company's MD&A forthe year ended December 31, 2018.
FORWARD LOOKING STATEMENTS
MAY 2019| PG 24yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
The forward-looking statements contained in this presentation are made as of the date on the front page and the Company assumes no obligation to updatepublicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may berequired by applicable securities laws. Certain information contained herein is based on, or derived from, information provided by independent third-partysources. The Company believes that such information is accurate and that the sources from which it has been obtained are reliable. The Company cannotguarantee the accuracy of such information, however, and has not independently verified the assumptions on which such information is based. The Companydoes not assume any responsibility for the accuracy or completeness of such information.
This presentation also contains future-oriented financial information and financial outlook information (collectively, "FOFI") about prospective results ofoperations, cash flow, capital expenditures, net debt and components thereof, all of which are subject to the same assumptions, risk factors, limitations, andqualifications as set forth in the above paragraphs. FOFI contained in this presentation was made as of the date of this presentation and was provided for thepurpose of providing information about management's current expectations and plans relating to the future, including with respect to the Company's ability tofund its expenditures. The Company disclaims any intention or obligation to update or revise any forward-looking statements or FOFI contained in thispresentation, whether as a result of new information, future events or otherwise, unless required pursuant to applicable securities law. Readers are cautionedthat the forward-looking statements and FOFI contained in this presentation should not be used for purposes other than for which it is disclosed herein. Theforward-looking statements and FOFI contained in this presentation are expressly qualified by this cautionary statement.
FORWARD LOOKING STATEMENTS(CONT.)
MAY 2019| PG 25yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
This presentation contains references to measures used in the oil and natural gas industry such as “netback”, “net debt” and “cash flow”. These measures do nothave standardized meanings prescribed by International Financial Reporting Standards (“IFRS”) and therefore should not be considered in isolation. Thesereported amounts and their underlying calculations are not necessarily comparable or calculated in an identical manner to a similarly titled measure of othercompanies where similar terminology is used. Where these measures are used they should be given careful consideration by the reader. These measures havebeen described and presented in this presentation in order to provide shareholders and potential investors with additional information regarding the Company'sliquidity and its ability to generate funds to finance its operations. Netback denotes petroleum and natural gas revenue and realized gains or losses on financialinstruments less royalty expenses, operating expenses and transportation and marketing expenses calculated on a per boe basis. Cash flow should not beconsidered an alternative to, or more meaningful than, cash provided by operating, investing and financing activities or net earnings as determined in accordancewith IFRS, as an indicator of the Company's performance or liquidity. Cash flow is used by the Company to evaluate operating results and the Company's ability togenerate cash flow to fund capital expenditures and repay debt. Included in this presentation are estimates of the Company's 2019 cash flow which are based onvarious assumptions as to production levels, commodity prices and other assumptions, are provided for illustration only and are based on budgets and forecaststhat have not been finalized and are subject to a variety of contingencies including prior years' results. To the extent such estimates constitute a financial outlook,they were approved by management of the Company and are included to provide readers with an understanding of the Company's anticipated cash flow basedon the capital expenditures and other assumptions described and readers are cautioned that the information may not be appropriate for other purposes. TheCompany uses net debt as a measure to assess its financial position. Net debt includes current liabilities (including the Company's credit facility and excluding thecurrent portion of decommissioning obligations) less current assets (excluding property, plant and equipment, held for sale and risk management contracts).
Certain information provided in this news release may constitute "analogous information" under applicable securities legislation, such as reserve and resourceestimates or the reserves and resources present on the Company's lands, and nearby lands, total production and production-rates from wells drilled by theCompany or other industry participants located in geographical proximity to lands held by the Company. This information is derived from publicly availableinformation sources (as at the date of this news release) that the Company believes are predominantly independent in nature. The Company believes thisinformation is relevant as it helps to define the reservoir characteristics in which the Company may have an interest. The Company is unable to confirm that theanalogous information was prepared by a qualified reserves evaluator or auditor or in accordance with the Canadian Oil and Gas Evaluation Handbook andtherefore, the reader is cautioned that the data relied upon by the Company may be in error, may not be analogous to the Company's land holdings and/or maynot be representative of actual results of wells anticipated to be drilled or completed by the Company in the future.
FORWARD LOOKING STATEMENTSNON-GAAP MEASURES & ANALOGOUS INFORMATION
MAY 2019| PG 26yangarra resources ltd. (Refer to end of presentation for slide notes & advisories)
Natural gas has been converted to a barrel of oil equivalent (Boe) using 6,000 cubic feet (6 Mcf) of natural gas equal to one barrel of oil (6:1), unless otherwisestated. The Boe conversion ratio of 6 Mcf to 1 Bbl is based on an energy equivalency conversion method and does not represent a value equivalency; thereforeBoe's may be misleading if used in isolation. References to natural gas liquids ("NGLs") in this presentation include condensate, propane, butane and ethane andone barrel of NGLs is considered to be equivalent to one barrel of crude oil equivalent (Boe). One ("BCF") equals one billion cubic feet of natural gas. One("Mmcf") equals one million cubic feet of natural gas.
Reserve Definitions:"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 quantitiesrecovered will exceed the estimated proved reserves."Probable" reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remainingquantities recovered will be greater or less than the sum of the estimated proved plus probable reserves."Developed" reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, thatwould involve a low expenditure (e.g. when compared to the cost of drilling a well) to put the reserves on production."Developed Producing" reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. Thesereserves 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 withreasonable 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, andthe 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 comparedto the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved,probable, possible) to which they are assigned.The Net Present Value (NPV) is based on Deloitte AJM Forecast Pricing and costs. The estimated NPV does not necessarily represent the fair market value of ourreserves. There is no assurance that forecast prices and costs assumed in the Deloitte AJM evaluations will be attained, and variances could be material.
This presentation contains references to measures used in the oil and natural gas industry such as “netback”. These measures do not have standardized meaningsprescribed by GAAP and therefore should not be considered in isolation. These reported amounts and their underlying calculations are not necessarilycomparable or calculated in an identical manner to a similarly titled measure of other companies where similar terminology is used. Where these measures areused they should be given careful consideration by the reader. These measures have been described and presented in this presentation in order to provideshareholders and potential investors with additional information regarding the Corporation's liquidity and its ability to generate funds to finance its operations.Netback denotes petroleum and natural gas revenue and realized gains or losses on financial instruments less royalty expenses, operating expenses andtransportation and marketing expenses calculated on a per boe basis.
FORWARD LOOKING STATEMENTSRESERVE DEFINITIONS