Corporate Overview
Cheal E site with Mount Taranaki in the background
February 2016
Notice regarding forward looking statements This presentation contains certain forward-looking statements (forecasts) under applicable securities laws relating to future events or future performance. Forwardlooking statements are necessarily based upon assumptions and judgements with respect to the future including, but not limited to, the outlook for commodity markets and capital markets, the performance of producing wells and reservoirs, well development and operating performance, general economic and business conditions, weather, the regulatory and legal environment and other risks associated with oil and gas operations. In some cases, forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “expect”, “projects”, “plans”, “anticipates” and similar expressions. These statements represent management’s expectations or beliefs concerning, among other things, future operating results and various components thereof affecting the economic performance of East West Petroleum. (“East West” or the “Company”). Undue reliance should not be placed on these forward-looking statements which are based upon management’s assumptions and are subject to known and unknown risks and uncertainties, including the business risks discussed above, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted. In the interest of providing East West shareholders and potential investors with information regarding the Company and its subsidiaries, including management’s assessment of East West's future plans and operation, certain statements throughout this presentation constitute forward looking statements. All forward-looking statements are based on the Company’s beliefs and assumptions based on information available at the time the assumption was made. The use of any of the words “anticipate”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “should”, “believe” and similar expressions are intended to identify forward looking statements. By its nature, such forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward looking statements. East West believes the expectations reflected in those forward looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward looking statements contained throughout this presentation should not be unduly relied upon. These statements speak only as of the date specified in the statements. In particular, this presentation contains forward looking statements pertaining to the following: •
the performance characteristics of the Company’s oil and natural gas properties;
•
oil and natural gas production levels;
•
capital expenditure programs;
•
the quantity of the Company’s oil and natural gas reserves and anticipated future cash flows from such reserves;
•
projections of commodity prices and costs;
•
supply and demand for oil and natural gas;
•
expectations regarding the ability to raise capital and to continually add to reserves through acquisitions and development;
•
treatment under governmental regulatory regimes.
The material assumptions in making these forward-looking statements include certain assumptions disclosed in the Company’s most recent management’s discussion and analysis included in the material available on this presentation.
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Corporate overview
East West Petroleum is a Canadian-based E&P firm listed on the TSX-Venture Exchange (symbol EW) focused on international oil & gas opportunities
Founded in 2010, first production achieved in December 2013 and has continued uninterrupted since – –
current production of ~190 boepd (net to EW, approx. 60% oil) Cheal E-site ongoing drilling program with 11 wells drilled in New Zealand to date
2016 capex is fully funded from operating cash flow and cash balance − up to two wells to be drilled with Tag Oil in 2015 (est.$2 million net cost to EW)
Fully carried 15% interest in Romania with first well scheduled for Q2/2016 – – –
two to three wells scheduled for 2016 EW carried for 12 wells in next two years NIS to pay 100% (estimated at ~€60 million) to earn 85%
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Corporate Overview
Production Costs
C$0.10
250,000
C$0.08
200,000
C$0.06
150,000
C$0.04
100,000
C$0.02
50,000
C$0.00
0
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
190 BOEPD
* Closing price as of Jan 6, 2015 ** As of September 30, 2014 Operating Netback
300,000
Aug-15
Daily production
C$0.12
Jul-15
-(C$ 0.9) M
350,000
Jun-15
Enterprise value
C$0.14
May-15
C$8.6 M
400,000
Apr-15
Working capital**
C$7.7 M
C$0.16
Mar-15
Market capitalisation
C$0.08
450,000
Feb-15
Current share price *
96.6 M
C$0.18
Jan-15
Fully Diluted shares outstanding
6.8 M
500,000
Daily Volume ( 30-d avg vol)
Stock Options
89.8 M
EW share price ( ) Relative Brent oil price US$ (
Basic shares outstanding
C$0.20
)
Quick sheet (as of May 19, 2015)
~US$11 @ $40 Brent ~US$20 per BOE
Shareholder summary Management / Directors / Insiders
15.0%
Institutional
15.0%
Retail
70.0%
Total
100%
* As of Feb 1, 2016 ** As of Sept 30, 2015
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Investment Highlights Operations are profitable at current oil prices with low cost of production De-risked, low cost, shallow drilling Oil sent directly to facility for refining and shipment Over $8 million in working capital provides safety net and ability to review additional opportunities Operations in stable countries with attractive fiscal terms Pipeline connecting Cheal E site gas to Cheal A site facility completed in May 2015, gas production now sold rather than flared FY 2015 revenue increased 54% to a record $6.5 M
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Board and management David Sidoo – President and CEO Mr. David Sidoo is a successful businessman based in Vancouver where he oversees a successful private investment banking and financial management firm. David previously was a broker with Yorkton Securities where he quickly became one of the company's top revenue generators. He went on to become Partner and Advisory Board Member at Yorkton Securities. In 1999, he left Yorkton to pursue private investment banking. He was founding shareholder of American Oil & Gas Inc. (NYSE - AEZ) which was sold to Hess Corporation in Dec 2010 for over US$600 million.
Dr. Marc Bustin – Director and Senior Technical Advisor Dr. R. Marc Bustin (Ph.D., P. Geol., FRSC) is Professor of petroleum and coal geology in the Department of Earth and Ocean Sciences at the University of British Columbia and president of RMB Earth Science Consultants, former president of CBM Solutions Ltd., and a founding share holder of Cuadrilla Resources Ltd. Dr. Bustin has over 30 years experience in gas exploration and exploitation in industry, research and consultancy. Dr. Bustin has designed and managed gas shale and coalbed methane evaluation and development projects world wide, including China, Botswana, Europe, Australia, SE Asia, India and basins throughout North America. He is member of the ICCP, AAPG, TSOP and GSA. Dr. Bustin was awarded the 2013 CSPG Stanley Slipper Gold Medal, the CSPG’s most prestigious award which recognizes outstanding contributions to petroleum exploration in Canada.
Nick DeMare – CFO and Director Mr. DeMare is the President and principal of Chase Management Ltd., a private company providing a broad range of administrative, management and financial services to private and public companies involved in mineral exploration and development, gold and silver production, oil and gas exploration and production and venture capital. For over 20 years, Mr. DeMare has assisted numerous companies in making the transition from the private to public stage and arranging and participating in equity and debt financing.
Herb Dhaliwal - Director The Honourable Herb Dhaliwal was a senior Minister for Western Canada in the federal Cabinet of Prime Minister Jean Chretien. Between 1997 and 2004 he successively held the portfolios of National Revenue, Fisheries & Oceans and Natural Resources in Ottawa. Prior to entering national politics, Herb was and since retiring from public life continues to be - an entrepreneur, business owner, corporate director and advisor, with interests in transportation, building maintenance, housing construction and real estate development.
Chris Beltgens – Corporate Development Manager Mr. Beltgens joined East West in 2013 as Corporate Development Manager. Mr. Beltgens previously spent six years in London working in investment banking covering international oil & gas exploration and production companies and brings extensive contacts within the international E&P sector. He has worked on a number of mandates for international E&P companies, including IPOs, secondary financings, and strategic advice at both the corporate and asset level.
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New Zealand Taranaki Basin
Awarded permits 54876, 54877, 54879 in New Zealand’s 2012 Block Offer with partner TAG Oil –
–
primary oil & gas basin in New Zealand relatively underexplored with less than 500 wells drilled since 1950 in an area over 100,000 km2 oil sold at a Brent Crude prices
Nearby infrastructure and export facilities in New Plymouth allow for rapid and economic commercialization of discoveries
Source: NZPAM
E-site production facility complete and operational –
50% WI in permits 54876 and 54879, 30% WI in 54877
The blocks lie in the production fairway of the Taranaki Basin – –
2012 Bid Round Taranaki Basin Award Blocks
artificial lift capacity of 1,000 b/d (can be expanded) at E-site
Current production c. 190 boepd (net) from wells on permanent production and on test –
additional production of approximately 100 boepd behind pipe awaiting workovers 7
New Zealand Work programs Tariki – Ahuroa Gas Condensate Field
Southern Cross (PEP 54876)
– – –
Tariki – Ahuroa gas condensate field Cheal North (PEP 54877)
11 wells have been drilled since 2013with partner TAG in the Taranaki Basin
East West carried TAG on the drilling of four wells to earn its interest in the three permits –
Cheal field
Source: TAG Oil
significantly extended the known oil saturation area of Cheal
Oil is now being sold –
EW will receive 100% of revenue until costs to drill carried wells is matched for each license
Wells appraised the greater Cheal acreage –
Cheal South (PEP 54879)
six wells at Cheal North (PEP 54877) – 30% EW three wells at Cheal South (PEP 54879) – 50% EW two wells at Southern Cross (PEP 54876) – 50% EW
trucked to New Plymouth where it is sold to Shell
Gas sold through the Cheal E to Cheal A pipeline –
approximately NZ$4.50 / mscf
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New Zealand Results to date 1 Well
Six wells now drilled from E-pad –
SC-pad
all six wells encountered hydrocarbons in the Urenui and/or Mt. Messenger sandstones and were completed as producers
Southern Cross
54876 54877 Cheal North
– –
5 Wells
D-pad
Three wells drilled on Cheal South from G-pad
One well at Southern Cross –
E-pad
G-1 test flowed ~120 boepd during 11-day test G-2 and G-3 were dry
plugged and abandoned following sidetrack
G-pad
3 wells Cheal South 54879
Source: TAG Oil / EW internal estimates. (1): Dry hole cost only
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New Zealand Production established achieved
Total production from E-site is currently approximately 190 boepd (net), ~60% oil
G-1 well recovered oil and gas to surface at ~ 120 boepd
Completed as producer
Flow tested
G-1
G-2
G-3
SX-1
SX-1ST
Permit 54877
Well E-1
54877
E-2 E-3 E-4 E-5 E-6
54879
54876
Placed on production
Tight sands
Feas. study
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New Zealand Attractive fiscal terms – Illustrative Example
–
–
Single well economics (oil only) - $60/b oil
New Zealand fiscal terms are very favorable greater of 5% ad valorem royalty (AVR) or 20% accounting profits royalty (APR) • only AVR until field declared commercial 28% corporation tax for oil producers
400
$5.0
350
$4.0
300
$3.0
250
$2.0
200
$1.0
150
$0.0
100
-$1.0
50
-$2.0
0
-$3.0 Year 2
Year 3
Year 4
Year 5
Cumulative AT Cash flow (US$ M)
Production (bbl/d)
Single well economics – 100% working interest
Year 1
$2.5 M
Estimated Ultimate Recovery per well (EUR)*
300,000
IP rate
250 b/d
Decline rate
Single well breakeven oil price ~US$35/b
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Drilling and completion costs (US$ mm)
20% first year 15% thereafter
IRR (%)
~94%
ROI (x)
1.6x
Payout (months) NPV10 (after tax, gross, US$ mm)
~9 months $3.9 mm
NPV10/b (US$/b)
$13/b
Cashflow netback (pre-tax, US$/b)
~$30/b
Cash flow netback (post tax, US$/b)
~$20/b
Recycle ratio (x)
1.8x
Based on $60 Brent price * Management estimate based on historical wells in the basin and for illustrative purposes and not indicative of reserves or resources * Figures based on 100% interest in the well; EW’s interests in New Zealand range from 30% to 50%
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Romania Fully carried interest in four blocks
East West was awarded four blocks in Romania in the 2010 licensing round –
total gross acres of c. 1 million
All blocks are now ratified – –
EW completed a farm out agreement with Naftna Industrija Srbije (NIS) in October 2011
NIS to fully carry EW through Phase 1 work programs of three wells per block –
Tria (EX-2) Baile Felix (EX-3)
Tria ratified December 2012 remaining blocks ratified November 2013
Hungary
plus an additional three wells per block should the partners elect to proceed to Phase 2 which would include an additional of three wells on each block
Periam (EX-7) Biled (EX-8)
Serbia
First well scheduled for Q2/2016 on EX-7 (Permiam) –
up to two additional wells scheduled for later in the year 12
Romania NIS – EW partnership
NIS has established a full time office in Romania in anticipation the upcoming Phase 1 work program
Total estimated minimum spend to meet work commitments over Phase 1 across all blocks is US$56.6 million –
Ex-2 Tria
Phase 2 (optional for each block) could see up to 12 additional wells drilled and a further €60 M spent –
Ex-3 Baile Felix
actual spend is estimated at €60 M Ex-7 Periam
EW would fully carried through all Phase 2 work
Minimum Phase 1 work commitments Block
2D (km)
3D
(km2)
Ex-8 Biled
Wells
Min. Cost (US$ M)
EX-2 Tria
200
120
3
$14.3
EX-3 Baile Felix
220
160
3
$10.3
EX-7 Periam
260
180
3
$15.5
EX-8 Biled
200
140
3
$16.5
Total
880
600
12
$56.6
C A R P A T H I A N S
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Summary 2015 Operational activity Country New Zealand
Block Cheal North
Activity Well workovers and artificial lift Waterflood feasibility Drilling 7th E-site well Drilling 8th E-site well
Cheal South
Romania
EX-2 Tria
3D seismic acquisition
2D seismic acquisition (47 km) 3D seismic acquisition (350 km2)
EX-3 Baile Felix 3D seismic acquisition (180 km2)
Firm
3D seismic acquisition (128 km2) Drilling of one well to 2,400 m Drilling of one well to 3,500 m
EX-8 Biled
Drilling of one well to 2,200 m
October November December 2 2 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Contingent
Current production from E-site is ~190 boepd (net), ~60% oil, with further wells undergoing testing – –
EX-7 Periam
January February March April May June July August September 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1
Low costs of production and Brent pricing results in positive cash flow from operations, even at $40/b Cheal E to main Cheal gas pipeline construction complete and gas now being sold
In Romania, preparations for drilling are underway – –
additional wells scheduled for late 2016 and 2017 NIS targeting drilling of first well(s) in the second half of 2015
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Summary 2015 committed exploration program and capital costs Project
Event
Location
Working Interest
Expected Start Date
Est. Gross Cost (C$ mm)(3)
Cost to East West (C$ mm)
New Zealand(1)
E8 Well
Cheal North
30%
Q4
$3.3
$1.0
E9 Well
Cheal North
30%
Q4
$3.3
$1.0
3D Seismic
Cheal South
50%
Q1
$1.6
$0.8
Other works
Taranaki
30% - 50%
Q1
$0.8
$0.3
2D & 3D Seismic
EX-2 Tria
15%
Q1
$6.0
$0.0(2)
3D Seismic
EX-3 Baile Felix
15%
Q1
$2.5
$0.0
Periam-1 well
EX-7 Periam
15%
Q2
$5.0
$0.0
Periam-2 well
EX-7 Periam
15%
Q4
$8.5
$0.0
3D Seismic
EX-7 Periam
15%
Q1
$2.0
$0.0
Biled-1 well
EX-8 Biled
15%
Q4
$4.5
$0.0
Romania
G&A
$1.2 Total
$37.5
$4.3
(1) Additional wells may be added depending on drill results and oil price (2) EW carried through to commerciality in Romania (3) Includes completion and testing costs
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Contact
East West Petroleum
Engineering
1210 – 1095 West Pender Street.
AJM Petroleum Consultants
Vancouver, British Columbia, Canada
Bank Bank of Montreal
V6E 2M6 Legal Advisors Phone: Fax:
+1 (604) 682-1558 +1 (604) 682-1568
Investor Relations | Max Sali
McCullough O’Connor Irwin LLP Auditors Davidson & Company, LLP
[email protected] www.eastwestpetroleum.ca
Transfer Agent Computershare Trust Co of Canada 16
Management & Board of Directors David Sidoo – President, CEO and Director David Sidoo is a successful businessman based in Vancouver, where he oversees a private investment banking and financial management firm. Upon graduating from The University of British Columbia in 1982, where he held a four year scholarship with the UBC Thunderbirds, he was drafted to play professional football with the Canadian Football League. David retired from football in 1988 and was introduced to the brokerage business, quickly becoming one of Yorkton Securities’ top revenue generators. He went on to become Partner and Advisory Board Member at Yorkton Securities, consistently generating commissions that ranked in the top five nationally. In 1999, David left Yorkton to pursue private investment banking. He was founding shareholder of American Oil & Gas Inc, which was sold to Hess Corporation in December 2010 for over US$600 million. David has been recognized extensively as part of Vancouver’s “Power 50″, and as one of the top 100 South Asians of Canada. David has actively been involved in the community for the betterment of families and children of all ages from supporting kid’s breakfast programs, arts programs for youth, teenage sports programs, and community scholarships. In 2013, he was honoured by the Government of Canada with a Queen Elizabeth II Diamond Jubilee Medal for his extensive humanitarian outreach, and by the Non-Resident Indian Institute in India with the Pride of India Award for community philanthropy. He currently sits on the Board of Governors for the University of British Columbia and is one of the select few of UBC football players to be inducted into both the UBC and BC Football Hall of Fame.
Dr. Marc Bustin – Director and Senior Technical Advisor Dr. R. Marc Bustin (Ph.D., P. Geol., FRSC) is Professor of petroleum and coal geology in the Department of Earth and Ocean Sciences at the University of British Columbia and president of RMB Earth Science Consultants and former president of CBM Solutions Ltd. and a founding share holder of Cuadrilla Resources Ltd. Bustin has over 30 years experience in gas exploration and exploitation in industry, research and consultancy. Professional experience includes employment by Mobil Oil Canada, Gulf Canada Resources prior to joining The University of British Columbia and subsequently with Elf-Aquitaine (France), CSIRO (France) and CNRS (Australia). Dr. Bustin has consulted in the area of fossil fuel resource evaluation and functioned as director and technical advisor for a variety of small through large petroleum companies in Europe, Africa, North America and Asia. Dr. Bustin has published over 180 reviewed scientific articles on fossil fuels. Dr. Bustin has designed and managed gas shale and coalbed methane evaluation and development projects world wide, including China, Botswana, Europe, Australia, SE Asia, India and basins throughout North America. Dr. Bustin received his PhD in geology in 1980 from the University of British Columbia and is a registered Professional Geoscientist in the province of British Columbia. He is or has been an associate editor of the Canadian Society of Petroleum Geology Bulletin, Sedimentary Geology, International Journal of Coal Geology and the Canadian Journal of Earth Sciences. He is member of the ICCP, AAPG, TSOP and GSA.
Dr. Bustin is the recipient of the A. L. Leverson memorial award from the AAPG, received the Thiesson Medal from the International Committee for Coal Petrography for his contributions to coal sciences/organic petrology, the Sproule Award in 2003 for contributions to the study of unconventional gas resources and the Gilbert H. Cady Award (2009) from the Geological Society of America for his contributions to coal science and the Medal of Merit from the Canadian Society of Petroleum Geology (2009). Bustin is an elected Fellow of the Royal Society of Canada. Bustin is a registered professional geologist in the province of British Columbia. Dr. Bustin was awarded the 2013 Canadian Society of Petroleum Geologists (CSPG) Stanley Slipper Gold Medal. The Stanley Slipper Gold Meal was established in 1989 and is the CSPG’s most prestigious award and recognizes outstanding contributions to petroleum exploration in Canada.
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Management & Board of Directors Nick DeMare – CFO and Director Mr. DeMare (CPA, CA) is the President and principal of Chase Management Ltd., a private company providing a broad range of administrative, management and financial services to private and public companies involved in mineral exploration and development, gold and silver production, oil and gas exploration and production and venture capital. For over 20 years, Mr. DeMare has assisted numerous companies in making the transition from the private to public stage and arranging and participating in equity and debt financing. Prior thereto, Mr. DeMare was employed as a General Practice Manager with Coopers & Lybrand, Chartered Accountants. Mr. DeMare is currently a director and/or officer of a number of public companies listed on either the Toronto Stock Exchange , NYSE, Amex, or TSX Venture Exchange.
Herb Dhaliwal - Director Herb Dhaliwal is a graduate in commerce of the University of British Columbia (1977). He was a senior Minister for Western Canada in the federal Cabinet of Prime Minister Jean Chretien. Between 1997 and 2004 he successively held the portfolios of National Revenue, Fisheries & Oceans and Natural Resources in Ottawa. Prior to entering national politics, Herb was - and since retiring from public life continues to be - an entrepreneur, business owner, corporate director and advisor, with interests in transportation, building maintenance, housing construction and real estate development. Before sitting in the Parliament of Canada as M.P. for Vancouver- South/Burnaby constituency from 1993 to 2004, Mr. Dhaliwal had been appointed by the B.C. Government as Vice-Chair of the B.C. Hydro and Power Authority board of directors, where he chaired the budget and audit committees. In 2000 the Vancouver Sun called him one of the Top 100 most influential British Columbians in the last century.
Chris Beltgens – Corporate Development Manager Mr. Beltgens joined East West in 2013 as Corporate Development Manager. Mr. Beltgens previously spent six years in London working in investment banking covering international oil & gas exploration and production companies and brings extensive contacts within the international E&P sector. In 2007, Mr. Beltgens joined the London office of Tristone Capital, and energy-focused investment banking boutique based in Calgary. Following the acquisition of Tristone by Macquarie Bank in 2009, Mr. Beltgens joined GMP Securities in their London office as part of the newly formed energy team. He has worked on a number of mandates for international E&P companies, including IPOs, secondary financings, and strategic advice at both the corporate and asset level. Mr. Beltgens has completed the CFA program.
Dr. Amanda Bustin – Technical Advisor Dr. Bustin holds a BASC in geological engineering from the University of British Columbia and a PhD in geophysics from the University of Victoria. She has worked as a post-doctoral fellow and research associate at the University of British Columba on a variety of gas projects with the main focus on reservoir assessment and exploitation including projects throughout North America, Europe and India. Her expertise includes petrophysics, reservoir modeling, geophysical analyses and interpretation, geomechanics, laboratory analyses, and general applied organic geochemistry and petrology.
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