TSX.V : PRD
Corporate Overview
October 2012
New Technology
In Mature European Basins
www.prdenergy.ca
Advisory Statements
Forward looking information. This presentation contains forward-looking information relating to future plans and operations, including business plan, strategies
relating to the use of reservoir stimulation techniques, protection of the environment and communities in which we operate, the farm-in transaction relating to the
Boerger field (including estimates for the commencement of production and completion of the seismic program), the addition of reserves, and other statements that
are not historical facts. Such forward-looking information is subject to important risks, uncertainties and assumptions. The results or events predicated in this
forward-looking information may differ materially from actual results or events. As a result, you are cautioned not to place undue reliance on this forward-looking
information.
Forward-looking information is based on certain assumptions and subject to certain risks regarding, among other things, the impact of increasing competition;
environmental risks, the general stability of the economic and political environments in which the Company operates or owns interests; the timely receipt of any
required regulatory approvals, permits and licences; the ability of the Company to obtain qualified staff, equipment and services in a timely and cost efficient
manner; drilling results; the ability to operate in a safe, efficient and effective manner; the ability of the Company to obtain financing on acceptable terms; field
production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development of exploration; the timing and
costs of pipeline, storage and facility construction and expansion and the ability of the Company 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 the
Company operates; and the ability of the Company to successfully market its oil and natural gas products, and other similar matters. While the Company considers
these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While the Company may elect
to, the Company is under no obligation and does not undertake to update this information at any particular time, except as required by law.
Barrels of oil equivalent. The term "BOE" or "barrels of oil equivalent" may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand
cubic feet of natural gas to one barrel of oil equivalent (6 Mcf: 1 bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and
does not represent a value equivalency at the wellhead. Additionally, given that the value ratio based on the current price of crude oil, as compared to natural gas,
may be significantly different from the energy equivalency of 6:1; utilizing a conversion ratio of 6:1 may be misleading as an indication of value.
Industry and market data. This presentation includes certain industry and market data (including reserve estimates, cost estimates, forecasts and other
forward-looking information) obtained from, among others, reports of government agencies, industry publications and surveys, and internal surveys. Such reports,
industry publications and surveys generally state that the data contained therein has been obtained from sources believed to be reliable, but we cannot assure you
that such data is complete or accurate. Such data has not been independently verified by us and we make no representations as to the accuracy or completeness of
such data or any assumptions relied upon therein.
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Corporate Overview (as at Sep 30/12)
PRD is a Canadian publicly listed company
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TSX symbol
Shares outstanding
Recent share price
Insider holdings:
– Basic
– Fully diluted
Cash
Debt
Market capitalization
Offices
PRD
114.5 million
$0.50
23%
30%
~ $16 million
$0
~ $57.3 million
Calgary, AB and Berlin, DE
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PRD Business Model
• Nominal land acquisition costs
• Explore in regions with production history
Attractive
exploration
opportunities
Shareholder
Value
High
netbacks
• Competitive royalties
• Low transportation costs
• Positive oil and gas price spread
• Capture higher value of Brent pricing
Repeatable
processes
Inventory to
continue
development
• Significant acreage position
• Established oil and gas pools
• Boerger est. production 2013 Q1
• Additional farm-in opportunities
• Innovative cost solutions
• Team history of efficient, continuous operations
• Target shallower fields (less than 2,500 m)
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Three Year Strategy
Further
development in
existing reservoirs
Today
Land
acquisition
and farm-in
Data
acquisition
on licensed
land
2012
Drilling and
production
from farm-in
Conventional
production
from licensed
areas
2014 onward
Early 2013
Late 2012
Mid 2013 to
2014
PRD is poised to build a significant oil and gas
company with assets in Germany.
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Why Germany? Why Now?
Germany – A Perfect Fit
Germany
High quality reservoirs
Long life reserves
Political stability
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– Many pools suspended prior to mid-1990’s
– Multiple and bypassed pay zones
– Historical cutoffs of 3 to 5 mD
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Depths less than 2,500 m
History of production
Historic oil discoveries mostly < 2,000 m depths
Attractive entry features
– Geologic potential not fully realized
– Brent crude oil price premium to WTI
– Mineral rights available at reasonable cost
Competitive royalty structure
Multi zone potential
Apply PRD expertise in new technologies
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Strong domestic pricing
Marketing infrastructure in place
Three large, proven conventional basins
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Infrastructure in place to readily market
production
Broad spectrum of opportunities do not
require fracturing
Land base at nominal cost
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Areas of Interest – Germany
Focus Basin
Source: US Geological Survey
Activities focused where significant reserves of
oil and gas have been discovered.
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Northwest Germany – Finding Oil Where Oil Is
Ostrohe
North Sea
PRD Licences (518,300 acres)
Pending Licences
Oil Fields
Natural Gas Fields
Dogger Trends
Bramstedt
Schwarzenbek
Hamburg
Netherlands
Wittmund
Sittensen
Volkensen
Uelzen
Steinhorst
Boerger
farm in
Hanover
Mölme
Germany
Oberg
Broistedt
Hohenassel
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Northwest German Basin Overview
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PRD currently has 518,300 acres under license in the Northwest German Basin at minimal cost
Northwest German Basin occurs primarily in Lower Saxony and Schleswig-Holstein
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93% of current German oil production comes from these two states
More than 1 billion boe of remaining reserves in the Northwest German Basin
Reserves may be significantly higher as high costs and permeability cut-offs have impeded development
Percentage of Daily Production by State
4% 3%
39%
Crude Oil
0.2% 3%
54%
Schleswig-Holstein
Lower Saxony
Rheinland-Pfalz
Other
Recent drilling and production technology
developments have potential to unlock significant
re-development opportunities in Germany.
Natural Gas
97%
Source: LBEG 2010 Report
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Representative Geology – NW Germany
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Geologic formations
– Ideal horizontal well
candidates
Oil deposit
Gas deposit
– Multiple pay zones
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Fields in NW Germany
– Historically developed
using directional or
vertical well
configurations
Horizontal drilling provides access to far greater
area than traditional drilling methods.
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Industry Characteristics – Germany and Alberta
Germany
Alberta
3-5 millidarcy
0.01 millidarcy
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12,000
1859
1902
~50,000 boe/d
~500,000 boe/d
0-18% after all costs recovered
1-35% before costs recovered
~$9 per mcf
~$3 per mcf
~$110 per bbl
~$90 per bbl
Oil permeability cut-off
2011 wells drilled
Year of first production
Light oil production
Royalties
Nat gas price
Oil price
200
Reserves / acre (boe)
Higher Commodity Prices
Lower Royalties
Lower Transportation Costs
150
100
50
Higher Netbacks
0
Germany
Alberta *
NW Germany
* Excludes bitumen
Sources: EUB, CAPP and LBEG
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Germany – Basins With More Potential
• Land
– Regulatory authorities issue licences
– Primarily held by small group of majors
• Data
– Data tightly held by operators with no public access
– Juniors have difficulty establishing credibility to acquire licences directly
• Costs
– Operations frequently conducted using offshore pricing and practices
– Costs substantially higher in central Europe due to low activity
– PRD has either overcome, or developed strategies to mitigate, these issues
PRD has successfully negotiated a farm-in and
secured licences for both land and their data.
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The European Cost Structure
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Service costs high due to low activity
– Increased risk aversion a result of high costs
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Offshore practices applied onshore
Cost efficiencies encourage economic development of new zones and oil pools
Delayed adoption of new technologies
PRD has focused on oil targets, as shallower depths allow greater cost control and
repeatability
Costs
Additional
Cost
Reductions
More
Activity
Conventional
Lower Quality
Conventional
Unconventional /
Other Zones
More
Activity
Costs
Reduced
Cost reductions/technologies
increase project viability
PRD’s strategy is to walk before we run.
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PRD Cost Strategy: Examples
Activity
Portion
of AFE
Estimated
Reduction1
Reduction to
Overall AFE
Reduction
Strategy
Site prep
15%
60%
9%
Approval to build gravel leases vs. concrete
Drilling
35%
40%
14%
Reduce drilling days and non productive time
Directional drilling
10%
40%
4%
Negotiated North American pricing and performance
Mud
10%
50%
5%
Mud sourced in Europe at North American pricing
Tubulars
15%
30%
6%
Negotiated Canadian prices on European plant
pickup
Costs
Facilities
15%
30%
4%
Minimize facility costs
Total
100%
42%
1 – Management’s estimated cost reductions based on historic well costs in Germany
Focus
Discipline
Skill
Success
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Landscape in Germany
• Germany supports the development of safe
oil and gas activities
– ~30,000 wells drilled in Germany since 1850
– Fracture stimulation used in development
• Most oilfields are in rural regions
• Currently reviewing fracturing
– Expect clear rules in place by mid 2013
– PRD fields examined do not require fracture stimulation to be economic
Germany supports oil and gas activities using
environmentally safe practices.
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PRD Community Considerations
• Environment
– Protect ground water through multiple casings and cement
– Use water efficiently
• Pump from well pad and recycle
– Use environmentally safe fluids
• Community
– Multi-well pads minimize surface impact
– Low noise impact from modern rigs and other surface equipment
– Engage at multiple levels throughout development process
• Open communication
– Arrange forums and venues to provide information, answer questions
– Active engagement with media, regulators and political representatives
– Take into account community specific issues for development
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Boerger Field Farm-in
• Agreement with GDF Suez (“GDF”) to farm into Boerger field
– GDF one of largest operators in Germany and one of largest utilities in Europe
• Under agreement PRD earns 50 percent of field by
– Drilling and completing a productive well
• €2.5 mm estimated cost of re-entry with horizontal extension
– Funding of 3D seismic program to be started in November 2012
• Capped at maximum €800,000
• Value of 50 percent interest in Boerger field
– Field produced 950,000 bbls of oil prior to being suspended in 2003
– Significant reserves additions likely with application of new technologies
– 3D seismic expected to define 4 to 12 additional horizontal drilling locations
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Benefits of Boerger Farm-In
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Opportunity to work with strong local partners
Sound economics
Potential for multiple zones
Expand PRD regional geological knowledge
Opportunity to prove cost model
German operations and regulatory experience
Opportunity for additional farm-ins
PRD has a large land base to
leverage this experience.
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Boerger 7 Well Site
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Boerger Field Farm-in Well Profile
By targeting the Malm formation, PRD expects to drill an
economic well while testing other prospective zones.
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Licences Received
Production
Licences
Acreage
Primary Recovery Before
Abandonment (bbls)*
Agreement to
Acquire Data
Year of
Abandonment
Oberg
20,000
2,600,000
Yes
1992
Mölme
3,400
2,200,000
Yes
1995
Volkensen
2,800
900,000
Yes
1993
Broistedt
1,100
1,400,000
Yes
1994
Hohenassel
1,000
3,500,000
Yes
1992
Total
28,300
10,600,000
Exploration
Licences
Acreage
Recovery to Date Within
Boundary (bbls)* & **
Agreement to
Acquire Data
Steinhorst
169,000
62,100,000
Yes
Sittensen
73,000
900,000
Yes
Wittmund
248,000
375,000
Discussions
Total
490,000
63,375,000
* Source: European Association of Geoscientists and Engineers
** Some fields within the exploration licences are still producing and carved out of PRD’s licenced area
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Appendices
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Licence Overview – Oberg
Acres: 19,770
Cumulative oil production: 2.6 mmbbl
Produced: 1919-1992
Wells: 650 drilled
Zones: Wealden and Dogger
Data arrangement: Exxon may participate up to
50 percent, PRD obtains data at no cash cost
• Potential: in-fill horizontal pad drilling on
abandoned well sites in proven productive
zones
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Wealden
Dogger
(Lower Cretaceous)
(Middle Jurassic)
Heavy Oil
Light Oil
Reservoir: Sandstone
Depth: 130-140 m
Thickness: 12 m
API: 20o
Reservoir: Sandstone
Depth: 600 m
Thickness: 6 m
API: 27o
Licence boundary
1990-2010 Seismic lines
1980-1990 Seismic lines
1970-1980 Seismic lines
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Licence Overview – Mölme
Acres: 3,400
Cumulative oil production: 2.2 mmbbl
Produced: 1934-1995
Wells: 258 drilled
Zones: Lower Malm (Upper Jurassic) and Middle
Rhaetian (Upper Triassic)
• Data arrangement: Exxon may participate up to
50 percent, PRD obtains data at no cash cost
• Potential: in-fill horizontal pad drilling on
abandoned well sites in proven productive zones
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Lower Malm
Middle Rhaetian
(Upper Jurassic)
(Upper Triassic)
Reservoir: Oolithic Limestone
Depth: 360-500 m
Thickness: 13 m
Porosity: 22%
API: 36o
Reservoir: Sandstone
Depth: 1,150-1,220 m
Thickness: 4-6 m
Porosity: 15-20%
API: 31o
Licence boundary
1990-2010 Seismic lines
1980-1990 Seismic lines
1970-1980 Seismic lines
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Licence Overview – Volkensen
Acres: 2,883
Cumulative oil production: 0.9 mmbbl
Produced: 1919-1993
Wells: 8 drilled
Zones: Dogger and Lias
Data arrangement: Exxon may participate
up to 50 percent, PRD obtains data at no
cash cost
• Potential: in-fill horizontal pad drilling on
abandoned well sites in proven productive
zones
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Dogger
Lias
(Middle Jurassic)
(Lower Jurassic)
Reservoir: Sandstone
Depth: 2,115- 2,240 m
Thickness: 6 m
Porosity: 20
API: 24o
Reservoir: Posidonia
Depth: 2,400-2,440 m
Porosity: 14
API: 22o
Licence boundary
1990-2010 Seismic lines
1980-1990 Seismic lines
1970-1980 Seismic lines
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Licence Overview – Hohenassel
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Acres: 1,084
Cumulative oil production: 3.5 mmbbl
Produced: 1943-1992
Wells: 79 drilled
Zones: Lower Malm
Data arrangement: PRD to pay Exxon for data and maintains 100 percent ownership
Potential: in-fill horizontal pad drilling on abandoned well sites in proven productive zones
Licence boundary
1990-2010 Seismic lines
Lower Malm
(Upper Jurassic)
Reservoir: Oolithic Limestone
Depth: 375-665 m
Thickness: 10-50 m
Porosity: 10-20%
API: 30o
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Licence Overview – Broistedt
Acres: 1,131
Cumulative oil production: 1.4 mmbbl
Produced: 1937-1994
Wells: 35
Zones: Valangian and Wealden
Data arrangement: PRD to pay Exxon for
data and maintains 100 percent ownership
• Potential: in-fill horizontal pad drilling on
abandoned well sites in proven productive
zones
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Valangian & Wealden
Licence boundary
1990-2010 Seismic lines
(Lower Cretaceous )
Reservoir: Siltstone
Depth: 700-1,040 m
Thickness: 6-11 m
Porosity: 20
API: 35o
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Exploration Licence – Steinhorst
• Located in Lower Saxony in Northwest Germany
on a proven oil trend
• PRD’s 169,00 acres encompass four producing oil
fields not part of the PRD concession and include
six abandoned oil fields
• PRD intends to investigate potential to place
abandoned oil fields back on production while
evaluating other geological opportunities
discovered from well logs and seismic data
• Lands have multi-zone potential with shallowest
production from the Cretaceous at 400 m and
deepest from the Triassic at 2,000 m; other zones
are productive from 1,200 - 1,700 m
• Although this concession is called an exploration
licence, there are several development
opportunities characterised as “small e”
exploration plays as well as opportunity for ‘big
E” exploration plays in future years
Licence boundary
28
Exploration Licence – Sittensen
• Located in Lower Saxony in Northwest
Germany on a proven oil trend
• PRD’s 73,000 acres encompasses the existing
Volkensen Production Licence
• PRD intends to investigate potential to place
the abandoned oil field back on production
while evaluating other geological opportunities
discovered from well logs and seismic data
• Lands have multi-zone potential with the main
zones being the Lower Cretaceous and
Jurassic at 2,100 - 2,200 m
• Although this concession is called an
exploration licence, the opportunity to redevelop the Volkensen field is characterised as
a “small e” exploration play with the additional
opportunity for ‘big E” exploration plays in
future years
Exploration licence boundary
Production licence boundary
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Exploration Licence – Wittmund
• Located in Lower Saxony in Northwest Germany on a
proven oil trend
• PRD’s 248,000 acres encompass one abandoned oil
field within the licence boundary
• PRD intends to investigate potential to place the
abandoned oil field back on production while
evaluating other geological opportunities discovered
from well logs and seismic data
• The licence lies along the Permian Zechstein trend
with the large Gronigen gas pool just across the
Netherlands border
• Lands have multi-zone potential with main zones of
interest being the Jurassic at 2,000 m and the
Zechstein at 4,000 m
• Although this concession is called an exploration
licence, the opportunity to re-develop the abandoned
field is characterized as a “small e” exploration play
with the additional opportunity for ‘big E” exploration
plays in future years
Licence boundary
30
Unlocking the Resource Play: Bakken Case Study
Unlocking the Bakken
• The Bakken was discovered in 1951
– Largest oil discovery in western Canada in 50 years
– Not developed commercially due to low permeability and high development costs
• PRD technical experts were active in successful Bakken development
– Introduced material cost reductions
– Advanced application of stimulation technology
– Advanced use of horizontal drilling technology
– Significantly increased recovery factors
• Production increased from 500 to 35,000 boe/d between 2004 - 2009
PRD analysis suggests Northwest Germany may
contain several under developed opportunities.
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Unlocking the Resource Play: Bakken Case Study
Bakken Development History
• Current Bakken production is
approximately 50,000 boe/d
Costs reduction increased development
opportunities exponentially.
Source: Saskatchewan Energy Ministry and
management experience
32
Unlocking the Resource Play: Bakken Case Study
Bakken – Pre and Post Development
• PRD licences cover several abandoned oil pools with characteristics
similar to the pre-development Bakken
• Known oil in place
– Historically high cost structures impede development
– Minimal introduction of new production technologies
Pre Development (2004)
Post Development (2009)
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Management Team
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Michael G. Greenwood, Chairman, CEO and Director
– 13 yrs as President and COO, Canaccord Capital
– More than 20 yrs as investment banker
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Mark Hornett, President, COO and Director
– 30 yrs Canadian and international oil and gas operations
– Previous companies: Mission Oil & Gas and Burlington Resources
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Doug Crawford, Vice President, Production
– 30 yrs oil and gas experience; professional engineer
– Previous companies: Mission Oil & Gas and Burlington Resources
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Ted Watchuk, Vice President, Exploration
– 35 yrs oil and gas exploration; professional geologist
– Previous companies: Nuvista Energy and Burlington Resources
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Jeff Scott, Vice President, Finance and CFO
– Chartered Accountant, serving Canadian public companies
– Most recently at Ernst & Young Orenda Corporate Finance
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Board of Directors
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Michael G. Greenwood, Chairman, CEO and Director
Mark Hornett, President, COO and Director
Grant B. Fagerheim, Director
O&G industry: 25 yrs
– President, CEO, Director, Whitecap Resources Inc.
– Previous Companies: Cadence Energy Inc. and Ketch Resources Ltd.
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Daryl Gilbert, P.Eng.,Director
O&G industry: 35 yrs
– Managing Director, JOG Capital Inc., a private equity investment management firm
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James (Terry) McCoy, P. Geol., Director
O&G industry: 40 yrs
– CEO of Arcan Resources
– Previous senior executive positions at Burlington Resources and Poco Petroleums
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William Shupe, CFA, M.Sc., LLB, Director
Legal/Financial: 30 yrs
– President and Chief Investment Advisor to W. Shupe and Company Investment
Advisory Services, a private firm
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TSX.V : PRD
Corporate Overview
October 2012
New Technology
In Mature European Basins
www.prdenergy.ca