Corporate Presentation April 2016 TSX: YGR TSX: YGR
Corporate Snapshot Capitalization Reserves and Locations (2) mmboe NPV10 ($mm) Ticker TSX: YGR Proved Developed 5.6 $97.9 Shares Outstanding (mm) Basic 67.7 Total Proved 24.7 $315.9 2P 40.6 $499.5 Options (weighted avg. price $1.48) 6.7 Fully Diluted 74.4 Total Cardium Locations 462 Gross (270 Net) Market Cap ($mm) (at $0.91 / share) (1) Booked Cardium Locations 140 Gross (87 Net) $62 Q4 Net Debt ($mm) $61 NAV (3) / Share (Excl. land) ($80mm credit facility with ATB) Enterprise Value ($mm) $123 Proved Developed $0.56 Insider Ownership Total Proved $3.78 Basic 14% Total Proved + Probable $6.59 Fully Diluted 21% 2) Reserves effective as at December 31, 2015 based on the reserve report prepared by Deloitte LLP, independent petroleum engineers (the “Reserves Report”) 3) NAV = NPV10 Reserve Value less Net Debt 1) Price as at April 22, 2016 • Highly motivated management and board with insiders owning 14% of the basic shares and 21% of the fully diluted shares 2 TSX: YGR
Corporate Strategy • Establish Sustainability • Target and maintain 2,750 – 3,000 boe/d and continue building deep inventory for when commodity prices turn • Prepare for future growth • Acquire Cardium land at the low-end of the cycle • Consolidate partner interests • Secure infrastructure capacity • Prepare and drill (one-well) pad-drilling sites; leaving significant torque to add 3 wells on existing pads • Future growth opportunity • Current inventory supports an ability to increase pace of development when justified by full cycle returns • Will ramp up to 2 or 3 rigs as commodity price improve • Multi-well pads with one well now ready for a quick ramp-up to a 4-5 well pad Low commodity prices Recovering commodity prices Build inventory, avoid eroding well Accelerate drilling and add lower-cost • • economics production on half-cycle economics 3 TSX: YGR
People Management Team Randall Faminow, VP, Land Jim Evaskevich, President & CEO • 30+ years of experience in all aspects of oil and gas land work, • 30+ years extensive executive experience with strong including negotiation, acquisitions and divestments, contracts operations background and mergers James Glessing, CA, CFO Lorne Simpson B.Sc., C.E.T., VP, Operations • 15+ years oil and gas accounting experience • 30+ years experience in the industry • Executive and financial experience as CFO with North Peace • Supervisor, Drilling Ops with PetroBakken Energy Ltd. Energy Corp • Engineered, drilled or completed 250 HZ Cardium • Controller at BlackRock Ventures, wells, 200 HZ Bakken wells, 2 HZ Duvernay wells, 25 • Canadian Natural Resources, Shell and Deloitte HZ Montney wells, and dozens of Blue Sky, Viking, SWS, Glauc, and Rock Creek HZ wells Board of Directors Gordon Bowerman Neil Mackenzie • • Chairman Director of various public companies, including Canyon • Technical Services President of Cove Resources Ltd • • Currently a partner in Blackstone Fluids, an oil and gas Founder of several successful private and public oil drilling fluids company and gas companies Ted Morton Robert Weir • • A former Canadian politician and cabinet minister in President of Weir Resource Management Ltd the Alberta government • Jim Evaskevich Has held various positions in the Alberta Government included Minister of Energy (2011-2012), Minister of • President and CEO of Yangarra Resources Ltd Finance and Enterprise (2010-2011), and Minster of Sustainable Resources (2006-2010) 4 TSX: YGR
Why Own Yangarra? • Top Decile Full Cycle rates of return • Low-cost operator, high netbacks • Low-cost philosophy, not just a result of current low commodity prices • Central Alberta Cardium formation focus • Large future drilling inventory • Consistent, low risk Cardium economics 5 TSX: YGR
What does a Recovery look like? Source: Pe ter Tertzakian, Arc Energy Charts • Meaningful cash will start to trickle back into the system once oil prices pop above $50/bbl • First dollars will be headed to banks • Next, producing companies will have to take time to restock their wallets and heal their balance sheets • Capital investment will concentrated on a narrower set of plays, projects, companies and jurisdictions • The first meaningful dollars will go back into North American tight oil plays in the US and Canada, where capital can be minimally exposed before returns are realized • Market will not support long term projects such as off-shore or oil sands Yangarra’s Cardium asset base is ideally positioned to be a first mover in a recovery 6 TSX: YGR
New Alberta Royalties For wells with TVD shallower than or equal to 2,000 metres C* ($) = 1,170*(TVD-249) + 800*TLL + 0.6*TVD*TPP For wells with TVD deeper than 2,000 metres C* ($) = 1,170*(TVD-249) + 3,120*(TVD-2,000) + 800*TLL + 0.6*TVD*TPP Cardium 1.0-Mile 1.5 Mile 2.0 Mile Duvernay TVD 2,150 2,150 2,150 3,420 TLL 1,609 2,414 3,217 1,825 Tonne per stage 15 15 15 137 # Fracs 40 60 80 27 Total Propant 600 900 1,200 3,699 C* $ 4,753,370 $ 5,784,370 $ 6,813,770 $ 17,190,818 Well Cost $ 2,500,000 $ 3,000,000 $ 3,500,000 $ 8,000,000 Potentail IRR Increase +10% +15% +20% 7 TSX: YGR
Full Cycle Returns • Capital allocation is determined based on narrowing the gap between half cycle and full cycle returns Half Cycle IRR ⁽ ¹ ⁾ Full Cycle IRR ⁽ ² ⁾ Full Cycle with Duvernay 90% 80% 70% 60% 50% IRR 40% 79% 67% 65% 30% 44% 20% 41% 34% 33% 31% 31% 27% 26% 24% 10% 12% 0% 2010 2011 2012 2013 2014 2015 1. Half cycle IRR is based on actual drilling and completion costs, production to date and P+P reserves 2. Full cycle IRR allocates all other capital costs to the wells (i.e. land, G&G, infrastructure) 8 TSX: YGR
Creating Shareholder Value 500 450 400 350 300 250 200 150 100 50 0 2010 2011 2012 2013 2014 2015 Share Capital 2P NPV10 (less debt) 9 TSX: YGR
F&D and Recycle Ratios Finding and Development Recycle Ratios 7.0x $40.00 $35.00 6.0x $30.00 5.0x $25.00 4.0x $/boe $20.00 3.0x $15.00 2.0x $10.00 1.0x $5.00 $- 0.0x 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 Proven F&D P+P F&D Proven Recycle P+P Recycle • Consistent improvement in, and Reserves (1) continued focus on, F&D costs and NPV10 BT Volumes recycle ratios • In Yangarra’s view Probable and PDP PDP 14% 2P 19% 2P proven Cardium locations have a 37% 39% similar chance of success • Reserve Life Index (“RLI”) 1P 1P 47% • 44% 37 years with one rig • 18 years with two rigs 2P NPV10: $499.5 million 2P Reserves: 40.6 mmboe • 12 years with three rigs 1) Reserves effective as at December 31, 2015 based on the Reserves Report 10 TSX: YGR
Low-Cost Driller • Experienced drilling team • Pad drilling from existing locations • Long-term relationship with service providers • Cemented liners and sliding sleeves reduce costs significantly • Coil fracs without nitrogen require less horsepower on location resulting in reduced completion costs Cost per Meter Drilled vs. Drilling Cost per Well $800 $7,000 691 $700 $6,000 Cost per Meter Drilled $600 Cost Per Well ($’000) $5,000 524 486 474 $500 $4,000 369 $400 $3,000 $300 $2,000 $200 $1,000 $100 $0 $0 2011 2012 2013 2014 2015 $ / Meter Drilled Drilling Cost per Well 11 TSX: YGR
Low-Cost Producer • Company founded on a low cost operations philosophy • Consistent low cost mentality in high and low commodity price environments • We own and operate our facilities resulting in lower operating costs (no hidden fees for financial engineering) • Centralized field operations with Company owned equipment and experienced field staff • Building our own separator packages • 13 employees/contractors in head office; 6 field employees/contractors Netback Analysis ($/boe) $60.00 $50.00 $40.00 Realized Price ⁽ ¹ ⁾ $30.00 $20.00 $10.00 $0.00 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Corp. Netback Interest G&A Transportation Op. Costs Royalties 1) Including derivative contracts and royalty income 12 TSX: YGR
Updated Completion Technology Sand Concentration • Cemented liners and sliding sleeve 1,000 • Tighter well frac spacing 900 • Increased ability to target fracs KG of Sand/M3 800 700 • Better frac isolation 600 • No longer losing energy to packers 500 400 • Improved initial rates 300 200 100 0 18 Stages 30 Stages 45 Stages Completion Stages and Costs 30 $250,000 25 $200,000 Number Of Stages 20 Cost per Stage $150,000 15 $100,000 10 $50,000 5 0 $0 2010 2011 2012 2013 2014 2015 Average number of stages per well Cost per stage 13 TSX: YGR
Impact of More Stages 350 Cumulative Production 300 05-17 10.30 Mbbl 12-17 12.52 Mbbl 250 Daily Oil Rate (bbl/d) 200 20% Improvement in IRR 150 100 50 0 0 20 40 60 80 100 120 140 160 180 200 Days on Production 00/05-17-041-07W5 (1-mile, sleeves, 18 stage, 360T) 02/12-17-041-07W5 (1-mile, sleeves, 30 stages, 540 T) 14 TSX: YGR
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