PRESENTATION REGARDING A LIGHT OIL CORPORATE ACQUISITION OPPORTUNITY
June 2014
KINGSMERE RESOURCES LTD.
Focused Cardium and Belly River Light Oil Asset Base
FirstEnergy has been engaged by Kingsmere Resources Ltd. (“Kingsmere” or the “Company”) to undertake a broad strategic alternatives process.
Kingsmere (former Sifton
Energy team) is a tightly‐
held private oil and gas producer with assets focused in the East Pembina area.
The Company has successfully grown through the drill bit, with 12 horizontal Cardium wells and 8 horizontal Belly River wells drilled to date.
Corporate reported production averaged 1,005 BOE/d (93% liquids) in April 2014; operating netbacks averaged $60.50/BOE in Q1 2014.
Kingsmere ‐ Land Summary (Acres)
Area
Corporate Total
Developed Land
Total Undeveloped Land
Gross
Net
Gross
Net
Gross
Net
7,195
5,817
18,281
11,432
25,476
17,248
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KINGSMERE RESOURCES LTD.
Corporate Information
Officers & Senior Management
Stanley W. Odut
Dennis W. Miller
Jeff M. Boissonneault
Darwyn R. Miles
Ruth A. Cross
Position
President & CEO
VP Production & Operations
VP Exploration & Development
VP Engineering & Business Development
VP Land
Directors
Stanley W. Odut
Jack C. Donald
Derrick Armstrong
Jeff Boissonneault
Richard N. Gateman
Stanley A. Owerko
Dale R. Renz
Other Positions
President & CEO, Kingsmere Resources Ltd.
President & CEO, Parkland Properties Limited
Senior Counsel, Borden Ladner Gervais LLP
VP Exploration & Development, Kingsmere Resources Ltd.
VP Bus. Development, TransCanada Pipelines Ltd.
President, Petrogas Marketing Ltd.
VP Finance, Sabre Energy Ltd.
Position
Director
Director
Director
Director
Director
Director
Director
Capitalization
Basic Shares Outstanding
Options Outstanding
Warrants Outstanding
Fully Diluted Shares Outstanding
Dilutive Instruments
Stock Options
Performance Warrants
Number (M)
17,772
1,660
2,000
21,432
Balance Sheet ($M) ‐ Unaudited
Assets
Cash and Cash Equivalents
Accounts Receivable
Prepaid Expenses & Inventory
Property, Plant and Equipment (net)
Liabilities
Accounts Payable and Accrued Liabilites
Bank Indebtedness
Asset Retirment Obligations
Future Income Tax Liability
Officers and Board Fully Diluted Advisors
Legal Counsel:
Banker:
Auditor:
Engineering Consultant:
Estimated Tax Pools as at March 31, 2014
Canadian Oil and Gas Property Expense (COGPE)
Canadian Development Expense (CDE)
Canadian Exploration Expense (CEE)
Undepreciated Capital Cost (UCC)
Total
Number (M)
1,660
2,000
Exercise Price
($/Share)
2.00
2.00
March 31, 2014
150
3,992
317
4,459
71,251
75,710
9,050
15,770
24,820
6,127
2,662
33,609
53.4%
Shareholders Equity
Share Capital
Contributed Surplus
Retained Earnings
Borden Ladner Gervais LLP
ATB Financial
MNP LLP
Sproule Associates Limited
($M)
12,327
34,959
0
7,242
54,528
34,276
485
7,340
42,101
75,710
Estimated Net Debt as at March 31, 2014
20,362
Credit Facilities
Line of Credit
Available Credit Capacity (Estimated at May 31, 2014)
Commitment ($M)
30,000
9,900
2
KINGSMERE RESOURCES LTD.
Strong Production, Reserves and Cash Flow Growth
Quarterly Operating Cash Flow Profile
Quarterly Production Profile
7.0
1,200
6.0
1,000
5.0
Operating Cash Flow ($MM)
Production (BOE/d)
800
36% CAGR
600
400
200
37% CAGR
4.0
3.0
2.0
1.0
0
0.0
Oil
NGL
Gas
* Estimates based on annualized March 2014 lease operating statements, shown as quarterly average.
* Estimates based on annualized March 2014 lease operating statements.
Quarterly Operating Netbacks
Proved and Probable Reserves
6,000
100.00
90.00
5,000
80.00
19.82
24.51
18.17
70.00
21.76
14.09
14.09
60.00
16.84
15.27
18.36
9.19
1.20
18.94
16.50
3.22
0.71
1.00
10.17
18.07
9.44
10.03
18.39
7.17
8.90
7.86
7.87
40.00
63.56
61.49
55.85
55.18
54.47
54.48
49.22
20.00
47.21
44.32
43.62
54.47
60.50
59.11
45.89
4,000
8.49
8.51
8.09
10.33
50.00
30.00
46% CAGR
18.51
Reserves (MBOE)
Operating Netback ($/BOE)
22.55
13.92
61.17
3,000
2,000
50.61
1,000
10.00
0.00
0
Operating Netback
Royalties
Operating & Transportation Expense
* Estimates based on annualized March 2014 lease operating statements.
* As per Sproule Petroleum Consultants.
Proved
Probable
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KINGSMERE RESOURCES LTD.
Corporate Overview and Highlights
Corporate Background & Overview
• Kingsmere was formed as a subsidiary of Sifton Energy Inc. (“Sifton”) in June 2010 and was subsequently spun out, along with a portion of the Pendryl assets, in conjunction with the sale of Sifton in December of 2010 to Penn West.
• The Company is undertaking a full value maximization process targeting a corporate sale encompassing its entire asset suite. It is contemplated that the team will continue on with a new start‐up and as such, there are no severance costs or office lease agreement liabilities.
• Kingsmere has an LLR of 3.27 as of May 2014.
Financial & Operational Highlights
• Management has grown Kingsmere from less than 20 BOE/d with 2P reserves of 109 MBOE to over 1,000 BOE/d with 2P reserves of 5.5 MMBOE (35% PDP). • Since inception Kingsmere has maintained an average operating netback of $53.92/BOE, currently at $60.50/BOE (Q1 2014).
• Bank line of $30.0 million is approximately 32% undrawn (ATB line recently expanded from $20 million).
• Public company level financial governance and disclosure. Fully audited and IFRS compliant financial statements. Q1 2014 (quarter ending March 31) financial reporting completed on May 28, 2014.
• Kingsmere has contracts with two marketers for its gas volumes and two marketers for its oil volumes, with no hedges in place. The Company does not contemplate adding hedges during this process.
• FDC from 2014 to 2017 is estimated to be $45.6 million (Sproule P+P forecast) and will generate free operating cash flow of over $55.0 million in the same time frame, with $23.0 million in free cash flow forecast for 2018.
• There are no material outstanding lawsuits or litigation involving the Company. Details can be found in the confidential information.
Management & Ownership
• Kingsmere is run by a small management team and group of employees, comprising 5 executives, 1 controller and 2 administrative staff.
• In the field, Kingsmere has seven contract operators (none are full time) and one production foreman. All field staff are contractors.
• Management and insiders hold or control 53.4% of the outstanding shares. There are 120 total shareholders with no institutions.
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KINGSMERE RESOURCES LTD.
Reserves Summary – May 31, 2014 Sproule Report (Mechanical Update of December 31, 2013)
• Proved Developed Producing reserves comprise 58% of Total Proved (3.3 MMBOE) and 35% of Proved plus Probable reserves (5.5 MMBOE).
• Top decile Netbacks ($60.50/BOE) and forecast PDP production decline (25%) drive strong economics and self‐funding FDC.
• Forecast Proved plus Probable net operating income significantly exceeds future development capital in all years of the forecast.
Kingsmere ‐ Reserves Volumes and Values
Company Interest Reserves
Kingsmere ‐ Financial Summary
Production Rates
Oil
NGL
Gas
Total
(bbl/d)
(bbl/d)
(Mcf/d)
(BOE/d)
Actual
2013
Annualized
2014
Forecast
2015
Forecast
2016
Forecast
2017
Forecast
2018
614
18
407
700
903
38
947
1,098
922
41
1,175
1,159
1,035
39
1,153
1,266
1,046
48
1,277
1,306
878
43
1,200
1,122
Reserves Category
Pre‐tax NPV discounted @
Oil
(Mbbl)
NGL
(Mbbl)
Gas
(MMcf)
Total
(MBOE)
Liquids Split
5%
(M$)
10%
(M$)
15%
(M$)
Proved Producing
Proved Non‐Producing
Proved Undeveloped
1,554
52
983
73
0
56
1,865
0
1,777
1,938
52
1,335
84%
100%
78%
74,788
2,145
31,363
60,729
1,988
20,856
51,662
1,854
14,477
Total Proved
Probable
Proved plus Probable
2,589
1,718
4,307
129
86
215
3,642
2,277
5,919
3,325
2,184
5,509
82%
83%
82%
108,296
56,026
164,322
83,573
33,981
117,554
67,993
22,874
90,867
Res erves a s a t Ma y 31, 2014 a s per Sproul e Petrol eum Cons ul ta nts a nd compl i a nt wi th NI 51‐101.
Operating Income
Revenue
Oil Revenue
NGL Revenue
Gas Revenue
Other Revenue
Total Revenue
Res erves us i ng Sproule Ma y 2014 foreca s t pri ci ng. NPV's s hown a re before ta x.
(M$)
(M$)
(M$)
(M$)
(M$)
19,783
387
481
57
20,708
31,636
1,025
1,650
18
34,329
31,018
925
1,965
0
33,908
34,568
873
1,890
0
37,331
36,953
1,129
2,403
0
40,485
Sproule Forecast Production by Category
32,813
1,070
2,405
0
36,288
1,400
Probable
1,200
(M$)
(M$)
(M$)
2,160
4,679
0
3,491
5,714
0
4,327
5,962
30
6,080
6,385
35
6,414
6,660
36
6,959
6,331
8
Total Expenses
(M$)
6,839
9,205
10,319
12,500
13,110
13,298
Net Operating Income
Capital Requirements
(M$)
(M$)
13,870
0
25,124
13,175
23,589
13,577
24,831
6,755
27,375
12,106
22,990
0
($/bbl)
88.30
96.00
92.18
91.26
96.81
102.35
($/bbl)
($/Mcf)
($/BOE)
58.31
3.24
81.08
74.63
4.77
85.63
61.67
4.58
80.16
61.05
4.48
80.55
64.51
5.16
84.90
67.72
5.49
88.64
($/BOE)
($/BOE)
10%
18.29
54.34
10%
14.25
62.67
13%
14.17
55.77
16%
13.85
53.58
16%
14.04
57.41
19%
15.48
56.16
Calculated Values
Average Oil Price
Average NGL Price
Average Gas Price
Average Price
Royalty Rate
Operating Cost
Netback
PUD/PDNP
PDP
1,000
800
(BOE/d)
Expenses
Royalties & Min Tax
Operating Costs
Other Costs
600
400
200
0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Notes:
Reserves as at May 31, 2014 as per Sproule Petroleum Consultants using Sproule May 2014 forecast pricing.
Actuals are from March Lease Operating Statements. Forecasts are based on Sproule Proved plus Probable Category.
Numbers may not match summaries or add due to rounding.
5
KINGSMERE RESOURCES LTD.
Highly Focused Cardium and Belly River Development in East Pembina
Kingsmere is very focused with 80% of production and 78% of the P+P value concentrated in East Pembina area (including the Knobhill, Keystone and Pendryl properties).
Reserves Volumes by Property
Reserves Values by Property
Production by Property
Production by Zone
90% of Kingsmere’s production consists of light oil from the Cardium and Belly River zones.
Consistent, low‐decline, production from legacy fields at Acheson (Mannville) and Twining (Pekisko) totals an additional ~72 BOE/d.
Early stage development at Wizard Lake is not fully recognized in the current reserves booking. The Genesee Property is a high impact prospect that is currently unbooked.
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KINGSMERE RESOURCES LTD.
Key Producing Wells (Production from April Actuals) • Kingsmere has a good distribution of production across multiple wells, with the largest well only comprising <10% of total production.
• In total, Kingsmere has 61 producing wells (54 operated); 25 of the top 26 highest rate producers are light oil wells.
• The non‐op 104/01‐30‐046‐01W5 (Cardium) well came online in May and the operated 102/16‐21‐048‐27W4 (Nisku) well will be online in July.
UWI
WI Property
Area
Zone
Type
Spud (Hz/Vt)
100/16‐12‐048‐05W5/00
102/08‐35‐053‐14W5/00
102/04‐09‐048‐05W5/00
100/01‐17‐047‐03W5/00
100/04‐32‐047‐05W5/00
100/08‐11‐047‐02W5/00
100/11‐03‐048‐05W5/00
100/04‐36‐047‐02W5/00
100/02‐01‐053‐26W4/00
100/13‐10‐046‐02W5/00
100/13‐09‐048‐05W5/00
100/13‐28‐047‐05W5/00
100/14‐28‐047‐05W5/00
102/16‐11‐047‐02W5/00
100/13‐20‐051‐11W5/00
100/16‐25‐046‐02W5/00
100/05‐15‐047‐03W5/00
102/06‐10‐047‐03W5/00
100/14‐02‐047‐03W5/02
102/06‐34‐052‐26W4/00
100/07‐06‐048‐04W5/02
100/05‐16‐047‐05W5/00
102/13‐22‐048‐27W4/00
100/11‐21‐047‐03W5/00
100/04‐02‐047‐03W5/00
100/12‐09‐032‐24W4/00
Remaining 35 Wells
100%
100%
100%
84%
100%
100%
100%
89%
75%
75%
100%
50%
50%
100%
25%
100%
70%
70%
100%
100%
68%
50%
50%
100%
100%
100%
~85%
East Pembina
Carrot Creek
East Pembina
East Pembina
East Pembina
East Pembina
East Pembina
East Pembina
Other East Pembina
East Pembina
East Pembina
East Pembina
East Pembina
Carrot Creek
East Pembina
East Pembina
East Pembina
East Pembina
Other East Pembina
East Pembina
Wizard Lake
East Pembina
East Pembina
Other Various
Pendryl
Carrot Creek
Pendryl
Keystone/BR U South Unit
Pendryl
Keystone/BR U South Unit
Pendryl
Keystone/BR U South Unit
Acheson
Knobhill
Pendryl
Pendryl
Pendryl
Keystone/BR U South Unit
Cynthia
Knobhill
Keystone/BR U South Unit
Keystone/BR U South Unit
Keystone/BR U South Unit
Acheson
Pendryl
Pendryl
Wizard Lake
Keystone/BR U South Unit
Keystone/BR U South Unit
Twining
‐
Cardium
Cardium
Cardium
Belly River
Cardium
Belly River
Cardium
Belly River
Ellerslie
Cardium
Cardium
Cardium
Cardium
Belly River
Cardium
Belly River
Belly River
Belly River
Belly River
Ellerslie
Viking
Cardium
Nisku
Belly River
Belly River
Pekisko
Various
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Oil
Gas
Oil
Oil
Oil
Oil
Oil
Oil
02/11/2014
30/12/2013
23/02/2014
31/07/2013
16/08/2013
21/07/2013
04/02/2013
06/03/2013
30/10/1980
28/06/2013
12/06/2011
26/10/2012
17/10/2012
04/10/2012
25/07/2013
12/07/2013
20/02/2013
11/01/1984
30/08/2011
20/11/1987
08/12/2001
11/02/2012
11/01/2013
04/12/2011
07/10/1973
14/03/1985
‐
Hz
Hz
Hz
Hz
Hz
Hz
Hz
Hz
Vt
Hz
Hz
Hz
Hz
Hz
Hz
Hz
Hz
Vt
Hz
Vt
Vt
Hz
Hz
Hz
Vt
Vt
Hz/Vt
*Sales Volume based upon estimated 67% shrink & NGL yield of 45 bbl/MMcf sales gas
April 2014 Working Interest Production
NGL's Oil Gas Total Cum Oil (bbl/d) (bbl/d) (Mcf/d)
(BOE/d)
(Mbbl)
0
119
0
119
‐
0
94
0
94
2
0
82
14
84
‐
0
83
0
83
13
0
59
0
59
17
0
42
0
42
4
1
32
25
37
24
0
35
0
35
14
0
33
0
33
463
0
29
28
33
19
2
15
56
27
17
1
20
27
25
38
1
16
33
22
37
0
19
0
19
18
0
17
7
18
19
2
12
17
16
4
0
16
1
16
16
0
15
1
15
246
1
11
10
14
31
0
12
6
13
254
0
0
77
13
2
1
9
16
13
33
0
13
0
13
26
0
12
0
12
25
0
10
0
10
235
1
5
25
10
88
4
111
82
128
3085
14
919
426
1,005
4,731
7
KINGSMERE RESOURCES LTD.
Cardium Overview Kingsmere has 16.25 gross sections (10.9 net) of Cardium rights along the greater Pembina trend and production from the zone accounts for 564 BOE/d from 21 oil wells.
• Although the majority of Kingsmere’s Cardium production and land is focused in East Pembina, production and drilling opportunities are also located in the Carrot Creek and Cynthia properties at West Pembina.
Kingsmere has drilled 12 Cardium horizontal wells since 2011, primarily targeting the Pendryl area.
Recently, the Company has begun to step out their development, de‐risking some of the peripheral sections at Cynthia, Carrot Creek and Knobhill.
Kingsmere has identified an additional 41 locations for future development (13 recognized by Sproule).
Unbooked waterflood
potential exists on Kingsmere’s acreage to ultimately increase recoveries and is supported by offsetting development.
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KINGSMERE RESOURCES LTD.
East Pembina Property ‐ Pendryl Area (Cardium Formation)
• Pendryl is Kingsmere’s primary Cardium development with 17 gross producing wells (14.5 net) including 8 (6.5 net) horizontal oil wells.
• April 2014 production averaged 384 bbl/d of oil/NGLs and 263 Mcf/d of gas (428 BOE/d, 90% liquids).
• Sproule has attributed Proved plus Probable reserves of 2.5 MMBOE (NPV10 $44.6 million) to Pendryl, including 6 PUD and 2 Probable
Cardium locations; Kingsmere has identified an additional 9 unbooked horizontal locations (7 net) at the current 4‐6 well/section spacing.
Pendryl Cardium Net Pay Contours
Pendryl Cardium Opportunities
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KINGSMERE RESOURCES LTD.
East Pembina Property ‐ Pendryl Area (Cardium Formation)
Kingsmere holds 89% W.I. in 4.75 sections of land (100% Cardium W.I. in 3.75 sections). Partners include Lightstream and Whitecap.
• The Cardium reservoir at Pendryl exhibits 6‐8 metres of average net pay thickness, porosity of 9‐14%, and pay permeability >0.11 mD with streaks up to 60.0 mD over the Kingsmere acreage.
• Initial production rates exceed 100 bbl/d of oil before declining to a sustained 20‐30 bbl/d of oil.
• Drill, complete and tie‐in costs of $2.8 million, targeting reserves of 150‐250 MBOE per well (~70% liquids).
Kingsmere’s 11‐03, 04‐09, 10‐09 and 13‐09 Cardium
wells are tied‐in to a central battery at 10‐9‐48‐5W5 (100% Kingsmere), all other wells are SWB except for the Lightstream and Whitecap‐
operated wells which flow to their respective operated batteries. Kingsmere’s liquids are trucked to third party facilities at Breton and solution gas is pipeline connected to Bonterra’s 5‐
35‐48‐4W4 gas plant.
The Pendryl area remains very active with offsetting operators commonly downspacing to 7 wells per section. Additionally, several operators are using 2‐mile long horizontals that provide improved economics.
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KINGSMERE RESOURCES LTD.
East Pembina Property – Knobhill Area (Cardium Formation)
• At Knobhill, Kingsmere holds 3.5 sections of Cardium rights with working interests ranging from 25% to 50%. Cardium Conglomerate Trend
• Scollard operates section 30‐46‐1W5 (Kingsmere 25% W.I.).
• Targeting step‐out Cardium conglomeratic trend with horizontal development. Average net pay of 3‐6 metres with a thin capping conglomerate and porosity of 10‐14%.
• Only producing well is at 100/13‐10‐046‐02W5 (75% BPO W.I.); on production in September 2013 with peak rates of 178 bbl/d of oil. • The well is currently producing at 40 gross bbl/d of oil.
• In March 2014, Scollard drilled the 104/01‐30‐046‐01W5 well (25% W.I.) with a lateral length of 1,355 metres. The well was brought on production in May 2014.
• Sproule has recognized 1 PUD (25% W.I.) and 1 Probable (25% W.I.) Cardium locations at Knobhill offsetting the producing 100/13‐10 well.
• Gross Proved plus Probable reserves of 154 MBOE and 117 MBOE/location respectively.
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KINGSMERE RESOURCES LTD.
Carrot Creek Property – Carrot Creek Area Cardium
Carrot Creek Cardium Net Pay
• Kingsmere’s Carrot Creek acreage sits along a Cardium shoreface trend, with legacy vertical production offsetting to the southwest.
• Net pay averages 5 metres with porosity reaching 20%.
• Kingsmere holds a 100% working interest in section 35‐53‐14W5. • The 102/08‐35‐053‐14W5 Cardium horizontal (100% W.I.) was drilled in December 2013 and came online in March 2014 with first month average production of 79 bbl/d of oil. • April 2014 production averaged 94 bbl/d oil.
• Solution gas is not currently conserved but a pipeline connecting the gas to a third‐
party facility (Centrica) is currently being licensed with construction expected in June.
• Kingsmere has identified 3 unbooked horizontal locations within the 100% W.I. section and expects similar rates and recoveries.
Carrot Creek Property – Cynthia Area Cardium
• Kingsmere owns a 100% interest in E19‐51‐11W5 and a 25% interest in W20‐51‐11W5; which is Vermilion‐operated.
Cynthia Cardium Net Pay
• The Cardium at Cynthia reaches a thickness of 12 metres and has an average porosity of 9%, and permeabilities ranging from 0.1‐5.0 mD.
• Conglomerate stringers are mapped in offsetting wells and result in excellent productivity when encountered.
• 100/13‐20 horizontal (25% W.I.) drilled July 2013 with peak production of 159 bbl/d of oil; April 2014 net production of 17 bbl/d oil (68 bbl/d gross) and cumulative oil >19 Mbbl.
• Sproule has recognized 3 PUD (two 100% W.I. and one 25% W.I.) locations. • PUD’s have P+P gross reserves of 148 MBOE/well with $2.8 million of FDC/well.
• Neighboring sections reduced spacing to 5 wells/section, with extended reach horizontal application utilized on contiguous sections for improved economics.
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KINGSMERE RESOURCES LTD.
East Pembina Property – Keystone/Knobhill Areas (Belly River Formation)
Belly River lands and production focused in the Keystone & Knobhill areas in East Pembina.
Basal Belly River Total Net Pay Isopach
33 gross oil wells (28.4 net) contributed 331 bbl/d of oil and NGL and 71 Mcf/d of solution gas (342 BOE/d, 97% liquids) in April 2014.
Kingsmere has drilled 8 horizontal Belly River wells.
There are 22 additional horizontal locations identified, 6 of which are recognized by Sproule (2 PUD and 4 Probable, 84% to 100% W.I.).
Additional unbooked waterflood potential exists for portions of Kingsmere’s Belly River lands.
13
KINGSMERE RESOURCES LTD.
East Pembina Property – Keystone/Knobhill Areas (Belly River Formation)
• The East Pembina Belly River consists of stacked basal shoreface sands overlain and cut by estuarine channel sands, with hydrocarbons trapped through a combination of structure and stratigraphy; the sands have been segmented into A, B and C events, all of which are prospective.
• The Belly River is encountered at depths of 950‐1,050 metres, with good well control across Kingsmere’s Keystone/Knobhill acreage.
• Total net pay thickness on Kingsmere lands for the full Belly River sequence can reach over 10 metres, with variable porosity reaching up to 20%; corresponding permeabilities are range from 0.1 mD to >100 mD within the estuarine channel sands.
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KINGSMERE RESOURCES LTD.
East Pembina Property – Keystone/Knobhill Areas (Belly River Formation)
Sproule recognizes 2 PUD and 4 Probable locations within the Belly River at Keystone/Knobhill, allocated total Proved plus Probable reserves of 664 MBOE, (629 Mbbl of oil and NGLs, 208 MMcf of solution gas; 95% liquids).
Individual gross Proved plus Probable reserves range from 90‐200 MBOE/well.
Forecasted drill, complete and tie‐in costs for new Belly River horizontal wells are $2.6 million.
Kingsmere has also identified an additional 16 unbooked horizontal Belly River locations.
15
KINGSMERE RESOURCES LTD.
Wizard Lake Property (Nisku Formation)
• Emerging light oil development; infill horizontal drilling targeting the structurally high Nisku draped above Leduc pinnacle reefs.
Nisku Structure Contours
• Platform dolomite reservoir with 5 zones totaling up to 21 metres of net oil pay (>0.1 mD permeability), at an average depth of 1,700 metres.
• Since 1961, ~735 Mbbl of oil produced from legacy vertical Nisku wells.
• First horizontal producing well, 102/13‐22‐48‐27W4 (50% W.I.) began production in February 2013 with peak production of 111 bbl/d of oil, operational issues resulted in a drop recent production from the estimated capability of ~80 bbl/d.
• Second horizontal well, 102/16‐21‐048‐27W4 (50% W.I.) is expected to be on production in July 2014, with similar rates to 102/13‐22 (booked as PDNP).
• 1 PDNP and 1 Probable Location recognized by Sproule, with attributed Proved plus Probable reserves of 163 MBOE.
Wizard Lake Booked Opportunity List
W.I.
W.I. Proved plus Probable
W.I.
Capital
Reserves
Gas
Oil/NGL
Total
(M$)
Category
(MMcf)
(Mbbl)
(MBOE)
Opportunity
Reserve Property
Zone
Timing
(%)
102/16‐21‐048‐27W4/HZ/NSKU
Wizard Lake
Nisku A
2014
50%
200
PDNP
130
84
106
103/14‐22‐048‐27W4/HZ/NSKU
Wizard Lake
Nisku A
2014
50%
1,850
Probable
73
45
57
16
KINGSMERE RESOURCES LTD.
Genesee Property (Banff Formation)
• Non‐operated Banff prospect with exploration potential; Kingsmere holds 27.5% working interest in 6 sections of land with Banff rights, operated by New Star.
Genesee Offsetting Activity
• The Banff is an active target of offsetting industry development to the north helping to de‐risk the play.
• The Clarks member of the Banff is prospective with net pay thicknesses reaching 10 metres; porosity is in the order of 15‐30% with 1‐50 mD permeability
• Potential for 12 horizontal locations to be drilled, with expected IP30 of 333 BOE/d (60% oil) and reserves of ~145 MBOE/well.
• Lower Mannville rights exist in section 8‐50‐3W5 and may be prospective with many offsetting wells producing from the Ostracod and Ellerslie zones.
17
KINGSMERE RESOURCES LTD.
Sproule Recognized Development Opportunities
• Sproule recognizes 21 horizontal locations across Kingsmere’s acreage (13 Cardium, 6 Belly River and 2 Nisku), for a total of 2.8 MMBOE (81% liquids). The Wizard Lake Nisku, 102/16‐21‐048‐27W4, PDNP to be brought on production in July 2014.
• In its 2014 budget Kingsmere plans to drill unbooked locations at Knobhill (CRDM) Keystone (BLRV), Wizard Lake and Genesee.
• The first Genesee well is planned for spud in June 2014; full corporate budget details are available in Virtual Data Room.
Kingsmere Booked Opportunity List
Opportunity
Reserve Property
Pool
Timing
W.I.
W.I.
Capital
Reserves
(%)
(M$)
Category
W.I. Proved plus Probable
Gas
Oil/NGL
Total
(MMcf)
(Mbbl)
(MBOE)
101/05‐09‐048‐05W5/HZ/CRDM
Pendryl
Cardium
2014
100%
2,800
PUD
544
162
253
101/08‐12‐048‐05W5/HZ/CRDM
Pendryl
Cardium
2014
100%
2,800
PUD
450
134
209
101/05‐32‐047‐05W5/HZ/CRDM
Pendryl
Cardium
2015
100%
2,821
PUD
98
148
164
101/12‐09‐048‐05W5/HZ/CRDM
Pendryl
Cardium
2015
100%
2,828
PUD
450
134
209
101/04‐16‐047‐05W5/HZ/CRDM
Pendryl
Cardium
2017
50%
1,446
PUD
75
69
81
101/09‐12‐048‐05W5/HZ/CRDM
Pendryl
Cardium
2017
100%
2,903
PUD
450
134
209
101/16‐06‐048‐04W5/HZ/CRDM
Pendryl
Cardium
2017
68%
1,952
Probable
215
64
100
101/01‐12‐048‐05W5/HZ/CRDM
Pendryl
Cardium
2017
100%
2,903
Probable
319
95
148
101/16‐19‐051‐11W5/HZ/CRDM
Carrot Creek
Cardium
2015
100%
2,828
PUD
94
132
148
101/14‐20‐051‐11W5/HZ/CRDM
Carrot Creek
Cardium
2015
25%
707
PUD
23
33
37
101/15‐19‐051‐11W5/HZ/CRDM
Carrot Creek
Cardium
2017
100%
2,903
PUD
93
132
148
101/14‐10‐046‐02W5/HZ/CRDM
Knobhill
Cardium
2016
25%
712
PUD
7
37
38
102/15‐10‐046‐02W5/HZ/CRDM
Knobhill
Cardium
2016
25%
712
Probable
5
28
29
101/16‐10‐047‐02W5/HZ/BLRV‐A Sand
Knobhill
Belly River
2014
100%
2,600
PUD
46
191
199
101/15‐10‐047‐02W5/HZ/BLRV‐A Sand
Knobhill
Belly River
2014
100%
2,600
Probable
46
191
198
101/13‐11‐047‐02W5/HZ/BLRV‐A Sand
Knobhill
Belly River
2016
100%
2,665
Probable
46
191
198
101/02‐17‐047‐03W5/HZ/BLRV
Pembina Keystone
Belly River
2015
84%
2,197
PUD
0
76
76
101/13‐17‐047‐03W5/HZ/BLRV
Pembina Keystone
Belly River
101/13‐03‐047‐03W5/HZ/BLRV
Pembina Keystone Basal Belly River B
2015
84%
2,231
Probable
0
76
76
2016
100%
2,619
Probable
70
106
117
102/16‐21‐048‐27W4/HZ/NSKU
Wizard Lake
Nisku A
2014
50%
200
PDNP
130
84
106
103/14‐22‐048‐27W4/HZ/NSKU
Wizard Lake
Nisku A
2014
50%
Total
1,850
45,278
Probable
‐
73
3,234
45
2,261
57
2,800
18
KINGSMERE RESOURCES LTD.
Opportunity Summary
Kingsmere has identified a number of opportunities for future horizontal drilling in the Cardium, Belly River, Nisku and Banff Clarks Member.
Kingsmere ‐ Opportunity Summary
Proved plus Probable
Reserve Category
PUD
PDNP
Probable
Total Booked
Unbooked
Total Opportunities
# of Opportunities
3
0
0
3
3
6
(MMcf)
(Mbbl)
(MBOE)
210
0
0
210
‐
210
297
0
0
297
‐
297
332
0
0
332
‐
332
PUD
PDNP
Probable
Total Booked
Unbooked
Total Opportunities
2
0
3
5
19
24
53
0
97
150
‐
150
228
0
409
637
‐
637
237
0
425
662
‐
662
PUD
PDNP
Probable
Total Booked
Unbooked
1
0
2
3
13
16
0
0
70
70
‐
70
76
0
181
257
‐
257
76
0
193
269
‐
269
Pendryl Property
PUD
PDNP
Probable
Total Booked
Unbooked
Total Opportunities
6
0
2
8
9
17
2,067
0
534
2,601
‐
2,601
781
0
159
940
‐
940
1,126
0
248
1,374
‐
1,374
Wizard Lake Property
PUD
PDNP
Probable
Total Booked
Unbooked
Total Opportunities
0
1
1
2
11
13
0
130
73
203
‐
203
0
84
45
129
‐
129
0
106
0
106
‐
163
Genesee Property
PUD
PDNP
Probable
Total Booked
Unbooked
Total Opportunities
0
0
0
0
12
12
0
0
0
0
‐
0
0
0
0
0
‐
0
0
0
0
0
‐
0
Total Company
PUD
PDNP
Probable
Total Booked
Total Unbooked
Total Opportunities
12
0
7
19
67
86
2330
130
774
3,234
‐
3,234
1,382
84
794
2,260
‐
2,260
1,770
106
866
2,799
‐
2,799
Area
Carrot Creek Property
Knobhill Property
East Pembina accounts for 93% of the locations, with a continued focus on the Cardium and Belly River.
Only 25% of the proposed locations are currently recognized by Sproule, the majority of which are PUD locations.
Increased downspacing, the potential for waterflood
implementation and other scenarios could increase the possible (unbooked) location count.
Pembina Keystone Proper
Gas Oil/NGL Total Reserves 19
KINGSMERE RESOURCES LTD.
Process & Timing
• Kingsmere has engaged FirstEnergy as its exclusive financial advisor to run a broad process to explore strategic alternatives.
For more information please contact:
• The strategic alternatives process will include a public marketing period to identify potential purchasers or merger candidates.
Richard J. Matthews
Managing Director, A&D
403‐262‐0677
rjmatthews@firstenergy.com
Acquisitions & Divestitures
• Confidentiality Agreements (“CA”) are available for interested parties. A CA is required for access to:
• Virtual Data Room (opening week of June 2, 2014).
Peter C. Lundberg, P.Eng.
Director, A&D
403‐444‐4892
pclundberg@firstenergy.com
• Management/technical presentations (starting week of June 9, 2014).
• Proposals are due 12:00 PM (MDT) on Tuesday, July 15, 2014.
Andrea M. Ewing, P.Geo.
Associate, A&D
403‐262‐0613
amewing@firstenergy.com
• Detailed bidding instructions will be circulated in advance of the bid deadline.
• Kingsmere reserves the exclusive right to alter the process, close the data rooms and/or change the date for proposals.
• Kingsmere reserves the right to decline any or all potential offers.
June 2014
Corporate Finance
July 2014
Sun
Mon
Tues
Wed
Thur
Fri
Sat
Sun
Mon
1
8
15
22
29
2
9
16
23
30
3
10
17
24
4
11
18
25
5
12
19
26
6
13
20
27
7
14
21
28
6
13
20
27
7
14
21
28
Tues
1
8
15
22
29
Wed
2
9
16
23
30
Thur
3
10
17
24
31
Fri
4
11
18
25
Overview Presentation Available
Management Presentations Start
Virtual Data Room Open
Bid Deadline
Sat
5
12
19
26
Dean M. Willner
Director, Corporate Finance
403‐444‐8275
dmwillner@firstenergy.com
Nathan M. Trainor (CA Contact)
Associate, Corporate Finance
403‐262‐0611
nmtrainor@firstenergy.com
20