CONSERVATIVE PLAN AGGRESSIVE APPROACH Confidential Do not duplicate - - PowerPoint PPT Presentation
(CSE: OIL)(OTCQB:OILCF) Q1 2020 ASSETS A portfolio of low-cost producing oil assets in Texas and New Mexico SCALE UPSIDE Horizontal leg conversion and lateral drilling programs in the San Andres formation SUSTAINABLE UPSIDE Low cost infill
ASSETS A portfolio of low-cost producing oil assets in Texas and New Mexico SCALE UPSIDE Horizontal leg conversion and lateral drilling programs in the San Andres formation SUSTAINABLE UPSIDE Low cost infill drilling and secondary recovery
CONSERVATIVE PLAN – AGGRESSIVE APPROACH
Q1 2020
(CSE: OIL)(OTCQB:OILCF)
Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation Actual production may not be as projected
Presentation and Reader Advisory
Readers are cautioned that this list of risk factors should not be construed as
looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward - looking statements. Investors should not place undue reliance on these forward - looking statements, which speak only as of the date
does not assume a duty to update these forward - looking statements. This presentation and, in particular the information in respect of the Corporation's prospective future net income and operating netback, may contain information deemed to be "future-oriented financial information" or a "financial outlook" (collectively, "FOFI") within the meaning of applicable securities laws. The FOFI has been prepared by management to provide an outlook of the Corporation's activities and results and may not be appropriate for other purposes. The FOFI has been prepared based on a number of assumptions including the assumptions discussed
results may vary from the amounts set forth herein, and such variations may be
contained in this presentation was made as of the date of this presentation and the Corporation disclaims any intention or obligations to update or revise any FOFI contained in this presentation, whether as a result of new information, future events
Information and facts included in this presentation have been obtained from publicly available and published sources and where appropriate those sources have been cited in this presentation. Permex does not assume a duty to independently verify publicly available an d published sources of information provided by arms length third parties. This presentation includes certain statements that may be deemed forward - looking statements under applicable securities laws. All statements in this presentation , other than statements of historical facts, that address future events or developments that Permex Petroleum Corporation (“Permex” or the “Corporation”) expects are forward - looking statements. Forward - looking statements are frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. In particular, forward looking statements in this presentation include, but are not limited to, statements with respect to the Corporation’s exploration and development program on its oil and gas leases, the anticipated stock exchange listing and initial public offering of the Corporation, reserves estimates and values, enterprise value, operating netback, pricing assumptions, future income, expected production, expected development costs, future acquisitions and future capital expenditures. Forward - looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward - looking statements. Some of the risks and other factors could cause results to differ materially from those expressed in the forward - looking statements include, but are not limited to: general economic conditions in Canada, the United States and globally; industry conditions, including fluctuations in commodity prices; governmental regulation of the oil and gas industry, including environmental regulation; geological, technical and drilling problems; unanticipated operating events; competition for and/or inability to retain drilling rigs and other services; the availability of capital on acceptable terms; the need to obtain required approvals from regulatory authorities; stock market volatility; volatility in market prices for commodities; liabilities inherent in oil and gas exploration, development and production, marketing and transportation; changes in tax laws and incentive programs relating to the oil and gas exploration industry; loss of markets; currency fluctuations; imprecision of reserve estimates; unexpected decline rates in wells; and wells not performing as expected.
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Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
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Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
TIMING GEOGRAPHY & GEOLOGY STRUCTURE PERMEX IS A JUNIOR OIL & GAS COMPANY AT AN INFLECTION POINT OF GROWTH
(Owns & Operates on Private, State & Federal Land in Texas & New Mexico)
South East New Mexico
BoneSpring, and Wolfcamp
& Insider Ownership
discount during downcycle (2015 – 2018)
high as $95,000/acre
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GEOGRAPHIC LOCATION SUMMARY OF OIL & GAS ASSETS
Over 6,500 net acres
Texas & New Mexico
50 shut-in opportunities to be brought back
Over 145 oil and gas wells owned and operated by corporation 32 Salt water Disposal (“SWD”)(3) wells eliminating water disposal fees and decreasing OPEX
59 producing Oil & Natural Gas wells (“PDP”)(2) 2 Water Supply Wells (“WSW”)(4) allowing for waterflood secondary recovery (“EOR”)
(1) PDNP stands for Proved Developed Non-Producing reserves. (2) PDP stands for Proved Developed Producing reserves. 3. A salt water disposal well is a disposal site for water collected as a by-product of oil and gas production. 4. A hole in the ground drilled to obtain water for the purpose of injecting water into an underground formation in connection with the production of petroleum or natural gas.
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Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
GEOGRAPHIC LOCATION SUMMARY OF OIL & GAS ASSETS
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$ Amounts in USD OIL (MBBL) GAS (MMCF) FUTURE NET INCOME(1) PRE-TAX PRESENT VALUE (10%) Proved Developing Producing 637 76 $33,366,420 $12,228,960 Developed Non-Producing 272 17 $12,712,270 $6,553,770 Undeveloped 3,855 395 $162,692,200 $55,876,030 Total Proved 4,779 500 $209,224,520 $74,921,900 Total Probable 3,702 7,506 $160,046.340 $69,663,260 Total Proved + Probable 8,481 8,006 $369,270,860 $144,585,160 FINDING & DEVELOPMENT COST (per bbl) OPERATING NET BACK @ $45 WTI prices (per bbl) RECYCLE RATIO $8.95 $23.16 2.6x 5
(1) Future net income is estimated using forecast prices and costs. Future net income has been presented on a before tax basis. Estimated values of future net income disclosed herein do not represent fair market value. Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
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Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
1.3 7.2 9.0 9.8
0.0 2.0 4.0 6.0 8.0 10.0 12.0 2016 2017 2018 2019 (M)
2P Reserves (MBOE)
Source: Corporation Disclosure
2P Reserves (BOE) 7.5x Reserve Growth
CSE: OIL OTCQB: OILCF | $34 $115 $142 $145
$- $20 $40 $60 $80 $100 $120 $140 $160 $180 2016 2017 2018 2019 USD $mm
Present Value of 2P Reserves discounted at 10%
PV of 2P Reserves discounted at 10% 4.4x Reserves Value Growth
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80 240
50 100 150 200 Pre IPO July 2018
(Boepd)
Gross Production (boepd) Permex completed the acquisition of the ODC San Andres unit and the W.J A Taylor unit located in Gaines County, Texas in July
Permex is Occidental Petroleum Corp (NYSE: OXY), an international oil and gas exploration and production company with operations in the United States, Middle East and Latin
approximately $USD 46.8 billion as of January 3rd, 2019.
Partnership
January 2020
Since going public in May of 2018, Permex has achieved the following:
Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected Source: Corporation Disclosure
$115 $145 $0 $50 $100 $150
$USD (M)
PV of 2P Reserves Discounted at 10% (US $M)
5,200 6,500 2,000 4,000 6,000 8,000 Pre IPO July 2018
(Acres)
Land Scale (acres)
January 2020 Pre IPO
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January 2020 Pre IPO Pre IPO
(1) 'Held By Production’ A provision in an oil or natural gas property lease that allows the lessee to continue drilling activities on the property as long as it is producing a minimum paying amount of oil or gas. (2)The American Petroleum Institute gravity measures how heavy or light a petroleum liquid is compared to water. An API above 10 indicates it is lighter than water. (3) Operating Netback is calculated by adding oil and gas sales with realized gains and losses on derivatives and subtracting royalty expense, operating expense and transportation expense.
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▪ Paid approximately $2,000 per acre - current direct offset land value ranges from $10,000 - $95,000 per acre
▪ Light sweet oil with average American Petroleum Institute (“API”)(2) gravity of between 39º to 49º
▪ H2 2020 Target: 500 – 1,000 boepd
▪ Present Value (10%) valued at USD$145M (MKM Engineering)
KEY HIGHLIGHTS:
Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
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Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
Management actively assesses deal flow in targeted plays to find attractive acquisition opportunities with the objective of generating the highest IRR with the lowest geologic risk Key PointsConsidered:
▪ Stick to areas where Management has prior operating history and expertise ▪ Focus on Permian and Delaware
▪ Operators no longer require a large acreage position to be successful ▪ Better full cycle economics typically achievable on acquisitions of smaller, less publicized assets
▪ Project must be profitable in a low commodity price environment ▪ Run acquisition and project level rate of return analysis at current strip pricing
▪ Even within well-known unconventional plays, there’s significant differentiation in rock/reservoir quality ▪ Look for assets in areas near the end of the development cycle with significant offsetting data
▪ Existing market infrastructure and deployed service companies are essential for operational success
GOAL: TO ACQUIRE PROVEN ASSETS AT AN ATTRACTIVE PRICE
CSE: OIL OTCQB: OILCF |
highlights the value proposition that Permex presents when compared to the industry average based on either a reserve or production basis
average on a reserve basis
production basis
Source: Corporation Disclosure, Gravitas Securities Inc, and Thomson Reuters Note: As at January 1st, 2019
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Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
CSE: OIL OTCQB: OILCF |
Peer Average: $7.35 Peer Average: $38,062
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Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
CSE: OIL OTCQB: OILCF |
(Horizontal well conversion candidate)
and covers 1,226 acres HBP. Currently there are 35 active wells, 2 shut in wells and 13 water injection wells
property including conversion of vertical leg to horizontal within the wells
includes the highly sought after Wolfcamp, which can also be leased out for ancillary income
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Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
CSE: OIL OTCQB: OILCF |
$0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00
Sources: December19, 2016 CreditSuisse report titled:Energy in2017; March22, 2017 Forbes articletitled:UpsideSurprise: OilSuperstarPermian Keeps Delivering Note:Assumes $3.00/MMBtu GasPrice;12m avg.NYMEX asof10/5/2017
“San Andres wellscan achievebreakeven whenoil is as lowas $29 perbarrel” David Williamson – Founding Partner, MonadnockResources
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Break-even Oil Prices (WTI, $/bbl): U.S. Onshore Resource Plays
Permex’s target areas (Permian - San Andres) have some of the lowest break-evens of all US resource and conventional plays
Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
CSE: OIL OTCQB: OILCF |
140 120 100 80 60 40 20 Mack Energy Nemo Fund Redmon Crownquest E ROperating N&GPermian Henry Enduring Merit Oxy Texlad Parallel PPCOperating Silver Creek Trey Walsh Sandridge ElkMeadows Element Pacesetter Wishbone Apache Sheridan Riley Ring Energy Steward ForgeEnergy KinderMorgan 30 25 20 15 10 5 Steward Riley Wishbone Element PPC Operating Henry E R Operating WindyCove Verdugo-Pablo SilverCreek Apache Custer &Wright
Source:Drilling Infoas ofSeptember12, 2017 (1) Datafilteredtoshow companiesthathave morethantwoactivehorizontalwellpermitsintheSan Andresreservoir,withthe status ofAtTotalDepth, Drilling,Permitted (2) Graph excludes operators with a single activepermit
Regional Map of San Andres Horizontal Drilling Permits (1) San Andres HorizontalDrillingPermits (Yoakum and Cochran) Since 2016
Total Measured Depth
Less than 6,000ft. More than 6,000ft. 30 29 28 75 76 77
90 89 88
PERMEX PETROLEUM CORPORATION Element Petroleum Op III,LLC Elk Meadows Resources LLC Forge Energy, LLC Riley Exploration OPG Co, LLC Ring Energy Inc. Steward Energy II,LLC Wishbone Texas OperatingCo, LLC All Other Drilling Permits: Operator Apache Corporation E R OperatingCompany
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San Andres Horizontal Drilling Permits (Permian Wide) since 2012(2)
CSE: OIL OTCQB: OILCF |
Source:1 DerrickandFactsetas ofOctober5,2017 Note: Midland Focused Group includes: CPE, FANG, LPI, PE, and RSPP; Delaware Focused Group includes: CDEV, CXO, MTDR, REN, and WPX; Mid-Con Focused Group includes: CLR, GST, JONE, NFX, andSD;Rockies Focused Groupincludes: BBG,BCEI,SRCI,and XOG; BakkenFocused Groupincludes: HK,NOG, OAS,QEP,andWLL;EagleFordFocused Groupincludes: CRZO,LNR,PVAC, SBOW, SEA,andSN;AppalachiaFocused Groupincludes: AR,COG,ECR,EQT,GPOR,REXX,RICE,andRRC (1) REIandbasinindexsharepricesperFactsetas ofOctober5,2017 (2) Adjusted for $132.2 million PDP value and $12million infrastructure value (3)RepresentsREI’simplied EV/undevelopedSan Andresacreagevalue.Assumes REIproveddevelopedPV10valueof$225mm as ofYE2016.
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Jul16’
1H 2017 2016 2H 2015 1H 2015 2012-2014
Aug13’ Jan15’ Feb15’ Aug15’ Sept.15’ Sept 15’ Oct15’ Nov 15’ Oct15’ Nov 15’ Dec 15’ Dec 16’ Dec 15’ Dec 15’ Dec 15’ Feb16’ Mar 16’ Mar 16’ Apr16’ May 16’ May 16’ Jun16’ Jul16’ Oct16’ Sept 16’ Sept 16’ Jun16’ Oct16’ Oct16’ Dec 16’ Dec 16’ Dec 16’ Dec 15’ Jan17’ Apr17’ May 15’ Jun16’ Dec 14’ May 12’ Apr17’ Jun17’ Feb17’ Jul16’ Sept 16’ Feb17’ Nov ‘16 Apr16’
Sophisticated Investors Accumulating Acreage Positions in the San Andres - Trend is Accelerating
Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 100 50 150 Indexed Prices 25.2% 2.8% (3.6)% (11.3)% (18.6)% (28.5)% (40.6)% (54.4)%
REI Bakken Index Eagle FordIndex Midcon Index RockiesIndex Appalachia Index Midland Index Delaware Index
Ring Energy Current Implied Market Value $/Undeveloped Acre: $6,250(1)(3) Steward Energy/Manzano Aug.2016 $/Undeveloped Acre: $4,766(2) Riley Permian Summer2016 $/Undeveloped Acre: N/A Windy Cove/Monadnock Resources July2017 $/Undeveloped Acre: N/A 3 2 2 0 9 8 7 7 7 5 6 7 9 8 8 0 9 8 Energy Hunter Resources,Inc. Monadnock Resources Riley Exploration Group Ring Energy Inc. Steward Energy IILLC PERMEX PETROLEUM CORPORATION Steward Energy II LLC Riley Exploration Group Monadnock Resources Ring EnergyInc.
as of October 05, 2017 price indexed to 100 on (10/5/16)(1)
Ring Energy (REI) has Outperformed Delaware Basin Peers by ~25%
Recent Activity in the Region: Transacted and Implied San Andres Acreage Value
CSE: OIL OTCQB: OILCF |
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500 IP
CSE: OIL OTCQB: OILCF |
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Target Acquisition Areas
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Single Well Economics Forecast Results
Initial Rate of Return 200% Net Present Value $4,852,000 EBITDA $7,940,000 Payout (months) 10 Oil Breakeven $31.070
Decline Assumptions
IP Rate BOPD 572 Initial Decline 34.5% B Factor 1.29 Oil EUR MSTB 419
Economic Analysis Input Parameters
Oil Price $60.00/Barrel Discount Rate 10% Well Cost $2,500,000 Working Interest 100% Net Revenue Interest 85% Monthly Operating $5,000 Operating Cost/Barrel Oil $10.00/Barrel
Source:Management estimates
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BLUE SKY UPSIDE
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Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
CSE: OIL OTCQB: OILCF |
acres
productive or potentially productive horizons including the Grayburg, Bone Springs and the highly sought after Wolfcamp
treatments are currently on the agenda
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shallow Yates sand of the Permian which has a 50 – 60 feet thick payzone.
wells are continuously evaluated
treatments, clean-out of the wellbores, and downhole pump replacements
Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
(Shallow Infill Drilling - Waterflood EOR candidate) (Horizontal Drilling - Waterflood EOR candidate)
CSE: OIL OTCQB: OILCF |
Mehran Ehsan – President, Chief Executive Officer & Director
Scott Kelly – Chief Financial Officer, Corporate Secretary & Director
renowned industry expert in oil and gas
Barry Whelan – Chief Operating Officer & Director
Connie Hang – Controller
Dale Lee – Petroleum Engineer
Earl Tobin – Geologist
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Justin Kates – General Counsel & Advisor
22 Doug Urch- Director
Edward A. Odishaw – Barrister, Solicitor & Director
Leslie M. Thomas – Geologist & Advisor
Kit H. Maddox – Petroleum Landman & Advisor
Wayne Schoen – Petroleum Engineer & Advisor Technical Advisors
Peter Dorrins – Geologist, Advisor Diana Goldstein – Engineer, Advisor
CSE: OIL OTCQB: OILCF |
Midstream and Enbridge Energy Partners.
Greg Montgomery – General Counsel & Director
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(1) The options outstanding at March 31, 2018 have an exercise price in the range of $0.40 to $0.50 and a weighted average remaining contractual life of 9.68 years. (2) Each warrant entitles the holder to acquire one common share at a price of $0.50, expiring on May 16, 2021, or $0.25, expiring on May 8, 2021
Note: All $ amounts in CAD
Note: $0.20 shareholders have all been voluntarily locked up for 1 year from the date of issuance, and certain of such shareholders have also voluntarily entered into 36-month lock-up agreements with timed release dates. Certain $0.40 shareholders have been voluntarily locked up for 1 year from the listing of the IPO.
Management Shares have all been voluntarily locked up for 3 years from the listing of the IPO (May 18, 2018):
On listing date: No release 6 months after listing date: 1/4 of the escrow securities 12 months after listing date: 1/5 of the remaining escrow securities 18 months after listing date: 1/4 of the remaining escrow securities 24 months after listing date: 1/3 of the remaining escrow securities 30 months after listing date: 1/2 of the remaining escrow securities 36 months after listing date: The remaining escrow securities Share Price $0.05 52 Week High – Low* $0.185 - $0.025 Basic Shares Outstanding 40.02M Options 3.24M
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Warrants 4.81M
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Fully Diluted Shares Outstanding 48.07M Market Cap. Basic $2.00M Market Cap. FD $2.40M Cash Balance / AR $190,000 Enterprise Value 2.15M Management % Ownership ~%15 *52 Week High - Low is based on closing price
Trading Symbol CSE: OIL
Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
CSE: OIL OTCQB: OILCF |
Oil Reserves All estimates of reserves and future net income contained in this presentation with respect to the Corporation's properties are derived from reserves reports prepared by MKM Engineering, an independent qualified reserves evaluator, effective December 31, 2016. MKM Engineering's evaluation was carried out in accordance with standards set out in the Canadian Oil and Gas Evaluation Handbook, prepared jointly by the Society of Petroleum Evaluation Engineers (Calgary Chapter) and the Canadian Institute of Mining, Metallurgy & Petroleum (Petroleum Society). It should not be assumed that the present value of estimated future net income presented represents the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. The recovery and reserve estimates of the Corporations crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein. All future net income is estimated using forecast prices and costs. Future net income has been presented on a before tax basis. Estimated values of future net income disclosed herein do not represent fair market value. The estimates of reserves and future net income for individual properties may not reflect the same confidence level as estimates of reserves and future net income for all properties, due to the effects of aggregation. Barrels of Oil Equivalent Barrel of oil equivalents or BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 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. Given that the value ratio based on the current price of crude
utilizing the 6:1 conversion ratio may be misleading as an indication of value. Drilling Locations This presentation discloses drilling locations in two categories: (i) proved locations; and (ii) potential drilling
from the Corporation’s most recent independent reserves evaluation as of December 31, 2016 and account for drilling locations that have associated proven reserves, as applicable. Potential drilling opportunities are internal estimates based on the Corporation’s prospective acreage and an assumption as to the number of wells that can be drilled per section based on industry practice and internal review. Potential drilling opportunities do not have attributed reserves or resources. The Corporation has, based on the December 31, 2016 reserve report and management's current internal estimate, net proved locations and identified potential drilling opportunities. Potential drilling opportunities have specifically been identified by management as an estimation of our experience in drilling activities based on evaluation of applicable geologic, seismic, engineering, production and reserves data on prospective acreage and geologic formations. The drilling locations on which the Corporation will actually drill wells will ultimately depend upon the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results and other factors. While certain of the potential drilling opportunities have been de-risked by drilling of wells by the Corporation or other
characteristics of the reservoir and therefore there is more uncertainty whether wells will be drilled in such locations and, if drilled, there is more uncertainty that such wells will result in additional oil and gas reserves, resources or production. Oil and Gas Metrics This presentation contains metrics commonly used in the oil and natural gas industry. Each of these metrics is determined by the Corporation as set out below. These metrics are "F&D Cost", "Operating Netback" and "Recycle Ratio". These metrics do not have standardized meanings and may not be comparable to similar measures presented by other companies. As such, they should not be used to make comparisons. Management uses these oil and gas metrics for its own performance measurements and to provide shareholders with measures to compare the Corporation's performance over a period of time, however, such measures are not reliable indicators of the Corporation's future performance and future performance may not compare to the performance in previous periods. "Finding and development costs" or "F&D costs" are calculated by dividing the sum of the total capital expenditures for the year [inclusive of the net acquisition costs and disposition proceeds] (in dollars) by the change in reserves within the applicable reserves category [inclusive of changes due to acquisitions and dispositions] (in boe). F&D costs includes all capital expenditures in the year [inclusive of the net acquisition costs and disposition proceeds] as well as the change in future development costs required to bring the reserves within the specified reserves category on production. Management uses F&D as a measure of the Corporation's ability to execute its capital programs (and success in doing so) and of its asset quality. "Operating netback" is calculated by adding oil and gas sales with realized gains and losses on derivatives and subtracting royalty expense, operating expense and transportation expense. "Recycle ratio" is calculated by dividing the operating netback (in dollars per boe) by the F&D costs (in dollars per boe) for the year. The Corporation uses recycle ratio as an indicator of profitability of its oil and gas activities.
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Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
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Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
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CANADIAN OFFICE: Suite 2300 1066 West Hastings Street Vancouver, BC, V6E 3X2 U.S. TEXAS OFFICE: Suite 3100 325 North Saint Paul Street Dallas, TX 75201 U.S. NEW MEXICO OFFICE:
500 4th St. NW, Albuquerque, NM 87102 admin@permexpetroleum.com
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Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
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Q2 2017 http://www.rrc.state.tx.us/oil-gas/major-oil-gas-formations/permian-basin/
Investor takeaway
The Permian Basin has long been one of America's most vital energy producing regions. However, its importance is growing now that producers discovered how to unlock the oil and gas trapped in the tight rocks stacked below the surface. These companies are just starting to scratch the surface, which suggests that this legacy oil basin's best days could very well be ahead of it.
Arabia's Ghawar field.
country's oil production.
the U.S. oil rigs and 22% of Global rigs.
since 1921.
tight rock resources alone.
BRE A K E VE N CO ST S U.S. $ PER BARREL WEST TEXAS INTERMEDIATE *Price neede to cover operating on existing wells SOURCES: CANADIAN ENERGY RESEARCH INSTITUTE; CIBC WORLD MARKETS; FEDERAL RESERVE BANK OF DALLAS, WOOD MACKENZIE, OXFORD INSTITUTE FOR ENERGY STUDIES, COMPANY ESTIMATES
U.S. SHALE VS. OILSANDS
Oilsands breakeven costs are now comparible to some of the most prolific U.S. shale basins
NATIONAL POST
$38 $35 $33 $33 $29 $24
O ther U .S . (non-shale) O ther U .S . (shale) P ermian (D elaw are) P ermian (C entral) E agle F
P ermian (Midland)
U.S . LIG HT O IL*
$37 $40 $45 $49 $57 $60
S uncor E nergy Inc. C enovus E nergy Inc. ME G E nergy Inc. S A G D (solvents only) S A G D (w ith solvents) S A G D
O ILS AN DS
*Price needed to cover operating on existing wells
comparable
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Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
CSE: OIL OTCQB: OILCF |
DELAWARE BASIN The Delaware Basin constitutes roughly 10,000 square miles, or 6.4 M acres, extending from the southern New Mexico counties of Eddy and Lea southward into the west Texas counties of Reeves, Loving, Ward and Pecos. Given drilling and completion costs that generally range from $4 M to $8 M per well, depending on lateral length, expected pre-tax internal rates of return exceed 50%, at $50 to $55 per barrel of oil. Few, if any, oil and gas plays in the U.S. offered comparable returns in early 2017.
DELAWARE BASIN GEOGRAPHY DELAWARE BASIN, MULTI – STACKED PLAY
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Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
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Pumpjack at Permex’s ODC San Andres Unit #70
The San Andres is the gift that keeps on giving. The formation has produced billions of barrels of oil over several decades and it is not finished yet.
CSE: OIL OTCQB: OILCF |
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approximately 12 bbl and two Trillion Cubic Feet from the San Andres
that traditionally produced from vertical wells across much of the Permian Basin
Central Basin Platform and the Norwest Shelf in the past 12 months (as of 03/30/2019)
Permex’s current assets have the capacity for exceptional infill drilling or lateral conversion within the 70 foot thick San Andres formation, the company is already producing from this zone.
Source: US Department of Energy & Drilling Info
Permian Basin Geology
Confidential – Do not duplicate or distribute without written permission from Permex Petroleum Corporation For discussion purposes only and does not constitute an offer to sell – Past performance is not indicative of future results – Actual production may not be as projected
CSE: OIL OTCQB: OILCF |
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Central Basin Platform
Yates Grayburg San Andres Clear Fork Wichita - Albany Bone Spring Wolfcamp
Delaware Basin Midland Basin
Wolfberry
2,000’ 3,000’ 4,000’ 5,000’ 6,000’ 7,000’ 8,000’ 9,000’ 10,000’
CSE: OIL OTCQB: OILCF |
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San Andres 1 Mile Horizontal Multistage (12 stage) Hydraulic Fracturing
KEY PLAY DRIVERS
HORIZONTAL SAN ANDRES
Extensive play area between Legacy fields Stratigraphic trapping Connect to entire pay zone via hydraulic fracturing Efficient SWD
Potential anywhere verticals produced Laterally discontinuous porosity zones Vertical heterogeneity (avg 2’ facies changes) Horizontals effectively exploit laterally bound vertical facies 200’ to 400’ in most areas High water cuts can challenge economics
CSE: OIL OTCQB: OILCF |
CSE: OIL | 33 CSE: OIL | 33 CSE: OIL | 33
Option 1: Horizontal San Andres Dolomites (Unconventional Oil Play):
Option 2: Vertical Down-space and implement Waterflood (Conventional Oil Play):
20 acre spacings
(1) Million barrels of oil equivalent
CSE: OIL | 34 CSE: OIL | 34 CSE: OIL | 34
San Andres (1.0 mile lateral) San Andres (1.5 mile lateral)
Average Well Cost $2.2MM $2.6MM Cost per DSU $640k (1) $960k (2) Locations per DSU 6 (1 Bench) 6 (1 Bench) Acreage Cost per Location $107k $160k Well Cost + Acreage Cost per Location (3) $2.3MM $2.8MM Net EUR at 75% NRI (MBoe) 258 400 F&D ($/Boe) $8.94 $6.89 LOE ($/Boe) 4 $9.23 $5.95 F&D + LOE ($/Boe) $18.17 $12.84 Net Returns (5) Fully Loaded Net Returns (6) Net Returns (5) Fully Loaded Net Returns (6) Discounted Net ROI 2.8x 2.3x 3.9x 3.6x Undiscounted Net ROI 4.1x 3.9x 5.7x 5.4x Net IRR 134% 119% 262% 244%
(1) $1,000 / acre times 640 acres (2) $1,000 / acre times 960 acres (3) Includes infrastructure cost (4) LOE assumes $15k per month for the first year and $10k per month thereafter (5) Excludes location acreage cost (6) Includes location acreage cost Note: Assumes $50/bbl