May 2014 - Teine Energy

TEINE ENERGY LTD.
AGM May 2014
Disclaimer Page
2
Forward Looking Statements
This document contains statements that constitute “forward-looking information” within the meaning of applicable securities legislation as to Teine Energy
internal projections, expectations and beliefs relating to future events or future performance. This forward-looking information includes, among others,
statements regarding: Teine’s strategic focus, business strategy and plans and budgets; business plans for drilling, exploration and development, including
drilling locations; estimates of production and operations performance; forecasted commodity price estimates of future sales; estimated amounts, allocation
and timing of capital expenditures; estimates of operating costs and unit operating costs; the estimated timing and results of new development programs;
estimates of anticipated funds from operations, cash flow, netbacks, dividends, working capital and debt levels; estimated rates of return; Teine’s prospect
inventory; and other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of
operations or performance.
Various assumptions were used in drawing the conclusions or making the forecasts and projections contained in the forward-looking information contained in
this presentation including, without limitation, with respect to commodity prices, interest rates, exchange rates, royalty rates, general and administrative
expenses, the success of Teine's drilling programs and the production profile of Teine's oil and natural gas reserves. Forward-looking information is based on
current expectations, estimates and projections that involve a number of risks, which could cause actual results to vary and in some instances to differ
materially from those anticipated by Teine and described in the forward-looking information contained in this document. Undue reliance should not be placed
on forward-looking information. The material risk factors include, but are not limited to: the risks of the oil and gas industry, such as operational risks in
exploring for, developing and producing oil and natural gas, market demand and unpredictable facilities outages; risks and uncertainties involving the
geology of oil and gas deposits; the uncertainty of estimates and projections relating to production, costs and expenses; potential delays or changes in plans
with respect to exploration or development projects or capital expenditures; risk that adequate pipeline capacity to transport oil and natural gas to market
may not be available; fluctuations in oil and gas prices, foreign currency exchange rates and interest rates; the outcome and effects of any future
acquisitions and dispositions; safety and environmental risks; uncertainties as to the availability and cost of financing and changes in capital markets;
competitive actions of other industry participants; changes in general economic and business conditions; the possibility that government policies or laws may
change or governmental approvals may be delayed or withheld; changes in tax laws; changes in royalty rates; the results of Teine’s risk mitigation
strategies, including insurance; and Teine’s ability to implement its business strategy. Readers are cautioned that the foregoing list of risk factors is not
exhaustive.
Forward-looking information is based on the estimates and opinions of Teine’s management at the time the information is released.
Boe Conversion
Throughout this document, the calculation of barrels of oil equivalent (boe) is based on the widely recognized conversion rate of six thousand cubic feet (mcf)
of natural gas for one barrel (bbl) of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an
energy equivalence conversion method primarily applicable at the burner tip and does not represent a value equivalence at the wellhead.
The Company
3
100% Viking Light Oil Focused
Largest Producer in the Viking Light oil Play with Q1 Peak production of 13,000 BOE/D
Largest Saskatchewan Viking Landholder
100% Operated
Owned and controlled infrastructure
85% of associated gas is conserved
Top tier development and operating costs
Largest Shareholder is Canada Pension Plan Investment Board(~78%) FD
10 years of drilling inventory
Self funding
Current Snapshot
4
Fully Diluted Shares
~165 million
Non-CPP Ownership FD
~22%
Reserve Value (2P)
$2.1 billion(1)
Reserve Volume (2P)
87 MMBOE(1)
Q1 2014 Production
11,173 BOE/D
2014 Forecast Exit Production
~15,000 BOE per day
Oil and liquids weighting
~90%
Second lien debt (at March 31, 2014)
$316 million(2)
Unused Operating Line
$210 million(3)
(1) Reserves valued at Net Present Value – (NPV10 Before Tax) at Dec 31, 2013
(2) Second lien term loan of US $300 million.
(3) Total Operating line of CDN $250. Approximately CDN $40 million was drawn on the operating line as at March 31, 2014..
Teine Strategy
5
Goal is to Build for Long Term Growth
Acquire High Quality Low Risk Assets
Target large resource in place
Add new life to old assets through technology
Consolidate contiguous land positions
Utilize our Strengths
Technical excellence through experience
Control Infrastructure
Cost control, manufacturing approach
Leverage access to capital
Look for Great People and Work to Retain Them
Equal assets will show different outcomes within a play…Teine’s results are people driven
Remain Value Focused
Drive decisions by value add analysis, not production growth alone
Mitigate and Manage downside risk
2013 Review
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
Yearly Average Production of 7,791 BOE/D
YOY increase of 211%

Proven + Probable Reserves of 87MM BOE
YOY increase of 43%

Wells drilled: 182
Success rate of 100%

Funds flow from Operations of $136MM
YOY increase of 275%

Teine Safety Record “TRIF” of 0.55
YOY decrease of 60%

Operating Netback of $55.98
YOY increase of 19%

Undeveloped land of 140,958 acres
YOY increase of 31%
Teine Saskatchewan Viking Asset Map
7
Total Net Sections…..
~500
Total Net Oil Sections….
~170
Net Oil Drilling Locations..
~2,700
Hz Wells Drilled……..
Plato
Gas Plant
Oil Batteries…
18,000 B/D
Gas Plants….
15 MMCF/D
~400
Building Value
8
Financial Performance
Accretive Acquisitions
1,400
Bank debt
Senior secured term loan
Net Debt
Debt/EBITDA
49
49
2.2
107
107
3.1
8
304
312
2.4
(1) Presented before royalties and includes realized gains (losses) on commodity risk management contracts.
20
319
339
1.4
1,200
1,000
$ Millions
Petroleum and natural gas revenue (1)
EBITDA (2)
Margin
Year ending December 31,
2011
2012
2013 2014 F
44
69
218
350
22
35
131
240
50%
51%
60%
69%
1,236
800
600
400
313
200
0
Purchase Cost
Current Booked Value 2P
(2) Adjusted for one-time expenses.

Top Tier Return on Capital





$365MM total equity raised to date
$319MM total debt raised to date
Increasing margins
Decreasing debt ratios
Self funding

To date, Teine has demonstrated a ~4x
return on acquisition capital
Teine Horizontal Inventory
9
Teine Net Drilling Inventory (Jan 2014)
4000
Number of Net Locations
3500
3000
2,784
2,421
2500
2,421
2,186
2000
355% ROR
1,088
1,088
Tier 4
Tier 3
1,088
1000
54% ROR
25% ROR
49% ROR
78% ROR
$40
$50
93% ROR
116% ROR
59% ROR
74% ROR
27% ROR
35% ROR
72% ROR
37% ROR
33% ROR
0
Tier 7+
Tier 5
211% ROR
114% ROR
1500
500
Total
275% ROR
158% ROR
2,784
45% ROR
$60
$70
$80
$90
$100
Realized Oil Flat Price ($/bbl) To Achieve Minimum 25% ROR (Btax)
$110
Operational Performance
10
Drilling / Completions / Equip
Operational Performance Commentary




Teine is the leader within the Viking play in operational
efficiency and field execution
Teine has consistently improved its completion design while
maintaining or reducing costs resulting in increased production
and reduced well payouts
Teine is focused on owning and controlling infrastructure to
maximize netbacks and reduce downtime
First to pilot 16 wells per section
$1,200,000
$1,000,000
$800,000
$600,000
400 Wells
$400,000
$200,000
$0
2013 Netback Analysis(1)
Current Teine Well Costs
Drill
Complete
Equip
Infrastructure
Total
1.
2013 year-end, includes hedging program
$270K
$390K
$145K
$ 50K
$855K
Pricing
Crude Oil
Gas
Nat gas Liquids
BOE
Royalties
Operating Expenses
Transportation Costs
Operating Netback
Oil Only Netback
86.36
3.57
80.35
76.77
-9.58
-10.67
-3.93
52.59
62.18
Corporate Track Record
11
Teine Reserve Life Index
Teine 2P Reserve Volume Growth (1)
MMboe
100
60
80
50
56
74
40
50
20
1
2007
0
0
8
2008
2
8
2009
5
6
2010
Gas
13
4
2011
Years
40
60
30
24
16
20
11
13
10
2012
YE 2013
0
13
19
17
6
2007
2008
2009
2010
2011
2012
2013
Oil
Teine Production Growth (2)
Proved + Probable BT NPV10 Growth
boe/d
13,000
14,000
12,000
NPV10 ($ Millions)
$2,145
$2,500
$2,000
10,000
Proved
7,800
8,000
Probable
$716
$1,500
6,000
4,000
2,000
485
1,346
2,148
1,776
1,957
$1,429
1.
2.
2008
2009
2010
$145
$500
0
2007
$517
$1,000
2,979
2011
2012
2013
2014
Peak
$0
$5
$11
$34
$83
$53
$70
$87
$72
$206
2007
2008
2009
2010
2011
Sproule Associates Reserve estimate as at Dec 31, 2013. Sproule price forecast at Dec 31, 2013. Totals may not add up due to rounding differences.
Teine Production using field estimates for the month of Nov & Dec 2013
$805
2012
2013
Plato
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
Purchased in Dec 2012

Accomplishments in 14 months

6X Production increase to over 6,000
bbl/d

Construction of 10,000bbl/d Oil
battery

Installation of trunk and gathering lines
eliminating emulsion trucking

Construction of 5 mmcf/d Gas plant

Gas conservation

65% Reduction of operating cost per
bbl
Plato Production Growth
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7,000
2,000
Net Oil (bbls)
6,000
1,800
Net Gas (mcf)
1,600
1,400
1,200
4,000
1,000
Teine Gas
Plant
Online
3,000
800
600
2,000
400
1,000
200
0
18-Oct-12
26-Jan-13
6-May-13
14-Aug-13
22-Nov-13
2-Mar-14
10-Jun-14
0
18-Sep-14
Gas Rate (Mcf/d)
Oil Rate (BBL/D)
5,000
Continuous Improvement
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Teine 30 Day IP by Well Vintage
90
83
80
Oil Rate (BBL/D)
70
68
60
46
50
56
49
40
30
20
10
0
2010
2011
2012
2013
YTD 2014
Teine Oil Egress
15
IPF Line

Teine 13-12
Dodsland Battery



Plato Battery


Teine’s goal is to eliminate
90% of its clean oil trucking
by 2015
Target year-end cost
reduction in oil transportation
of 40%
IPF tie-in to be completed by
Q3 2014
Plato tie-in to be completed
by Q4 2014
Eliminate weather impacts on
clean oil shipping
Teine has joint ventured with
an infrastructure partner to
build the Plato clean oil line.
Build to begin in July, online
late Q4 2014
2014 Focus
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




Grow production
Further Reduce Capital and Operating Costs
Aggressively Pursue focused Acquisitions
Complete Infrastructure Projects
Explore for new “Core” area
2014 Guidance
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Average production (88% liquids)
~12,000 BOE per day (45% YOY Growth)
Exit Production
~15,000 BOE per day (50% YOY Growth)
Oil Operating Netback(1)
~$65.81
Oil & Gas Operating netbacks
~$59.00 per BOE
Corporate EBITDA
~$240 million (50% YOY Growth)
Capital expenditures in 2013(2)
~$250 - $260 million
per Bbl
Hedges
Costless Collars

H1
1,000 bpd at (C$90.00-C$98.30)

Full Year
1,000 bpd at (C$90.00-C$99.12)

Full Year
1,500 bpd at (C$90.00-C$101.80)

Full Year
1,000 bpd at (C$90.00-C$104.35)

Full Year
500 bpd at (C$95.00-C$101.85 )
Swaps

(1)
(2)
Full Year
1,000 bpd at (C$95.00) per barrel
Assumes an averaged realized liquids price of $89.05 per Bbl; royalties of $9.89 per BOE and operating costs of $9.55 per BOE; transport costs of
$3.80 per BOE
Excludes acquisition capital. Includes $35MM of non-Viking drilling capital.
Teine Summary
18
Largest Producer &
Landholder in the Low-Risk
Viking Light Oil Play in
Saskatchewan
Top Tier Operating and
Capital Costs
Large Light Sweet
Oil-Focused Reserve
Base with Significant
Production Growth
Potential
Strong Financial
Backing
Top Quartile Organic
Growth, Significant Unbooked Reserve Growth
Continually Improving
Play Economics
Corporate Information
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Board of Directors
Bankers
Dennis Chorney – Chair
Jim Howe
National Bank of Canada, Syndicate head
Mark Jenkins
Adam Vigna
Barclays Bank PLC, Second Lien Lead
Jeff Donahue
Nicholas Zelenczuk
David Tuer
Officers
Head Office
David Tuer -CEO
Ray Cej - President
Jason Denney -COO
Ken Hillier - CFO
Suite 2300, 520 – 3 Avenue SW, Calgary, Alberta
Jane Johnson – Chief Admin Officer
Willey Wong – VP Finance , Dwayne Romansky – VP Engineering
Jim Thomson – VP Land, Doug Dent – VP Production,
Melanie Pedersen – VP Exploration
Registrar and Transfer Agent
Olympia Trust Company
Auditors
Deloitte LLP
Website
www.teine-energy.com
Solicitors
Bennett Jones LLP
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