(CSE: OIL)(OTCQB:OILCF) - Permex Petroleum Corp · 2020-03-27 · LEGAL DISCLAIMER Presentation and...

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 CorporationActual production may not be as projected

LEGAL DISCLAIMERPresentation and Reader Advisory

Readers are cautioned that this list of risk factors should not be construed asexhaustive. Although Permex believes the expectations expressed in such forward -looking statements are based on reasonable assumptions, such statements are notguarantees of future performance and actual results or developments may differmaterially from those in the forward - looking statements. Investors should not placeundue reliance on these forward - looking statements, which speak only as of the dateof t his presentation. Other than as required under applicable securities laws, Permexdoes not assume a duty to update these forward - looking statements.

This presentation and, in particular the information in respect of the Corporation'sprospective future net income and operating netback, may contain informationdeemed to be "future-oriented financial information" or a "financial outlook"(collectively, "FOFI") within the meaning of applicable securities laws. The FOFI hasbeen prepared by management to provide an outlook of the Corporation's activitiesand results and may not be appropriate for other purposes. The FOFI has beenprepared based on a number of assumptions including the assumptions discussedabove. The actual results of operations of the Corporation and the resulting financialresults may vary from the amounts set forth herein, and such variations may bematerial. The Corporation and management believe that the FOFI has been preparedon a reasonable basis, reflecting management's best estimates and judgments. FOFIcontained in this presentation was made as of the date of this presentation and theCorporation disclaims any intention or obligations to update or revise any FOFIcontained in this presentation, whether as a result of new information, future eventsor otherwise, unless required pursuant to applicable law.

Information and facts included in this presentation have been obtained from publiclyavailable and published sources and where appropriate those sources have been citedin this presentation. Permex does not assume a duty to independently verify publiclyavailable an d published sources of information provided by arms length third parties.

This presentation includes certain statements that may be deemed forward - lookingstatements under applicable securities laws. All statements in this presentation , otherthan statements of historical facts, that address future events or developments thatPermex Petroleum Corporation (“Permex” or the “Corporation”) expects are forward -looking statements. Forward - looking statements are frequently characterized bywords 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 anddevelopment program on its oil and gas leases, the anticipated stock exchange listingand initial public offering of the Corporation, reserves estimates and values, enterprisevalue, 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 ofmanagement at the date the statements are made, and are subject to a variety of risksand uncertainties and other factors that could cause actual events or results to differmaterially from those anticipated in the forward - looking statements. Some of therisks and other factors could cause results to differ materially from those expressed inthe forward - looking statements include, but are not limited to: general economicconditions in Canada, the United States and globally; industry conditions, includingfluctuations 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 rigsand other services; the availability of capital on acceptable terms; the need to obtainrequired approvals from regulatory authorities; stock market volatility; volatility inmarket prices for commodities; liabilities inherent in oil and gas exploration,development and production, marketing and transportation; changes in tax laws andincentive programs relating to the oil and gas exploration industry; loss of markets;currency fluctuations; imprecision of reserve estimates; unexpected decline rates inwells; and wells not performing as expected.

CSE: OIL OTCQB: OILCF |Confidential – Do not duplicate or distribute without written permission from Permex Petroleum CorporationFor 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

2

VALUE PROPOSITION

3Confidential – Do not duplicate or distribute without written permission from Permex Petroleum CorporationFor 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)

o Permian Basin of West Texas & South East New Mexico

o Formations include the San Andres, BoneSpring, and Wolfcamp

o ~40M shares outstanding

o Approximately 13% Management & Insider Ownership

o Zero debt on balance sheet

o Acquired over 6,500+ acres at a

discount during downcycle (2015 –

2018)

o Paid approximately $2,000/acre

o Currently land values in this area as high as $95,000/acre

CSE: OIL OTCQB: OILCF |

PORTFOLIO OF HIGH QUALITY ASSETS

GEOGRAPHIC LOCATION SUMMARY OF OIL & GAS ASSETS

Over 6,500 net acres of held by production oil and gas assets in Texas & New Mexico

50 shut-in opportunities to be brought back online (“PDNP”)(1)

6,500+ 50 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

143+ 32

59 producing Oil & Natural Gas wells (“PDP”)(2)

2 Water Supply Wells (“WSW”)(4) allowing for waterflood secondary recovery (“EOR”)

59 2(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.


GEOGRAPHIC LOCATION SUMMARY OF OIL & GAS ASSETS


2019 RESERVES SUMMARY

$ 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 CorporationFor 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


RESERVES – GROWTH ORIENTED


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


$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

DELIVERABLES SINCE IPO (MAY 2018)

7

80

240

0

50

100

150

200

Pre IPO July 2018

(Boe

pd)

Gross Production (boepd)

Permex completed the acquisition of the ODC San Andres unitand the W.J A Taylor unit located in Gaines County, Texas in July2018. The other major working interest partner on the field withPermex is Occidental Petroleum Corp (NYSE: OXY), aninternational oil and gas exploration and production companywith operations in the United States, Middle East and LatinAmerica. Occidental Petroleum has a market capitalization ofapproximately $USD 46.8 billion as of January 3rd, 2019.

Partnership

January 2020

Since going public in May of 2018, Permex has achieved the following:


Source: Corporation Disclosure

$115

$145

$0

$50

$100

$150

$USD

(M)

PV of 2P Reserves Discounted at 10% (US $M)

5,2006,500

0

2,000

4,000

6,000

8,000

Pre IPO July 2018

(Acr

es)

Land Scale (acres)

January 2020Pre IPO


January 2020Pre IPO

Pre IPO

INVESTOR CONSIDERATIONS

(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.

8

o Acreage: Owns over 6,500+ acres (100% HBP(1)) of producing oil and gas assets

▪ Paid approximately $2,000 per acre - current direct offset land value ranges from $10,000 - $95,000 per acre

o Current Gross Field Production: 240 boepd (90% Oil)

▪ Light sweet oil with average American Petroleum Institute (“API”)(2) gravity of between 39º to 49º

o Production Growth:

▪ H2 2020 Target: 500 – 1,000 boepd

o Reserves: 2P reserves of ~9.8M barrel of oil equivalents (“BOE’s”)

▪ Present Value (10%) valued at USD$145M (MKM Engineering)

o Balance sheet: No Debt

o Horizontal Scale: ODC San Andres asset provides vertical to horizontal conversions

o Operating Netbacks(3): Approximately USD$23.16 at $45 WTI (low cost environment)

o Capital Structure: No drawn debt & tightly held share structure at ~40M shares outstanding

KEY HIGHLIGHTS:



ASSET ACQUISITION CRITERIA


Management actively assesses deal flow in targeted plays to find attractive acquisition opportunities with the objective of generating thehighest IRR with the lowest geologic risk

Key PointsConsidered:

o Go where you know

▪ Stick to areas where Management has prior operating history and expertise

▪ Focus on Permian and Delaware

o Target smaller “bite-size” acquisitions

▪ Operators no longer require a large acreage position to be successful

▪ Better full cycle economics typically achievable on acquisitions of smaller, less publicized assets

o Look for attractive base-case returns

▪ Project must be profitable in a low commodity price environment

▪ Run acquisition and project level rate of return analysis at current strip pricing

o “Not all rock is the same”

▪ 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

o Fully developed infrastructure with service deployment

▪ Existing market infrastructure and deployed service companies are essential for operational success

GOAL: TO ACQUIRE PROVEN ASSETS AT AN ATTRACTIVE PRICE


o A relative valuation analysis highlights the value proposition that Permexpresents when compared to the industry average based on either a reserve or production basis

o Permex’s valuation represents only 4.22% of the industry average on a reserve basis

o Permex’s valuation is ~30.1% of the industry average on a production basis

JUNIOR OIL & GAS PEER COMPARISON

Source: Corporation Disclosure, Gravitas Securities Inc, and Thomson ReutersNote: As at January 1st, 2019 10Confidential – 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 projectedCSE: OIL OTCQB: OILCF |

Peer Average:$7.35

Peer Average:$38,062

TEXAS PROPERTIES


• Low cost re-entries• Acid stimulations• Refracturing• Secondary Recovery (Waterflooding)• In-fill drilling• Horizontal Leg Conversions • Target Horizontal formation is San Andres


ODC SAN ANDRES UNIT & TAYLOR PROPERTY(Horizontal well conversion candidate)

• The ODC San Andres & Taylor property are located in Gaines County, Texas in the Midland basin and covers 1,226 acres HBP. Currently there are 35 active wells, 2 shut in wells and 13 water injection wells

• Permex plans to re-stimulate the producing wells, frac the wells that have low fluid entry, bring online the shut-in wells, as well as consider additional vertical and horizontal wells on the property including conversion of vertical leg to horizontal within the wells

• Since there are no depth restrictions, Permex owns all basement rights on this property which includes the highly sought after Wolfcamp, which can also be leased out for ancillary income



$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

Sources: December19, 2016 Credit Suisse report titled:Energy in 2017; March 22, 2017 Forbes articletitled:Upside Surprise: OilSuperstar Permian Keeps DeliveringNote:Assumes $3.00 /MMBtu Gas Price; 12m avg.NYMEX as of10/5/2017

12mavg. NYMEX: $58.41/bbl

“San Andres wells can achieve breakevenwhen oil is as lowas $29 perbarrel” David

Williamson – Founding Partner, Monadnock Resources

13

PROVEN RESERVOIRPERMEX – BASIN ECONOMICS COMPARISON

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



140

120

100

80

60

40

20

0 Ma

ck En

ergy N

emo

Fun

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Cro

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Perm

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eritO

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exladP

arallelP

PC

Op

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Silver Creek

TreyW

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San

drid

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lkM

ead

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ent

Pacesetter

Wish

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Ap

ache

Sh

eridan

R

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ing En

ergy Stew

ard

Forge

Energy

Kin

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org

an

30

25

20

15

10

5

0

Steward

Riley

Wish

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Elemen

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Ap

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t

Source: Drilling Info as ofSeptember 12, 2017

(1) Data filtered to show companies thathave morethan twoactive horizontal wellpermits in the San Andres reservoir, with the status ofAtTotalDepth, Drilling,Permitted

(2) Graph excludes operators with a single activepermit

Regional Map of San Andres Horizontal Drilling Permits (1) San Andres Horizontal DrillingPermits (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

14

SAN ANDRES – PERMITTING & HISTORICAL ACTIVITY

San Andres Horizontal Drilling Permits (Permian Wide) since 2012(2)


Source: 1 Derrick and Factset as ofOctober5, 2017Note: 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, and SD; RockiesFocused Group includes: BBG, BCEI, SRCI, and XOG; Bakken Focused Group includes: HK,NOG, OAS, QEP, and WLL;EagleFord Focused Group includes: CRZO, LNR, PVAC, SBOW,SEA,and SN; Appalachia Focused Group includes: AR,COG,ECR, EQT,GPOR, REXX,RICE, and RRC(1) REI and basin index share prices per Factset as of October5, 2017(2) Adjusted for $132.2 million PDP value and $12million infrastructure value(3) Represents REI’s implied EV /undeveloped San Andres acreage value. Assumes REI proved developed PV10 value of $225mm as of YE2016.

15

Jul16’

1H 201720162H 20151H 20152012-2014

Aug13’

Jan15’

Feb15’

Aug15’

Sept.15’

Sept 15’

Oct15’ Nov 15’

Oct15’Nov 15’

Dec15’

Dec16’

Dec15’

Dec15’

Dec15’

Feb16’

Mar 16’

Mar 16’

Apr16’

May 16’

May 16’

Jun16’

Jul16’

Oct16’

Sept 16’

Sept 16’Jun16’

Oct16’

Oct16’

Dec16’

Dec 16’

Dec16’

Dec15’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

0

150

Ind

ex

ed

Pri

ces

25.2%

2.8%

(3.6)%

(11.3)%

(18.6)%

(28.5)%

(40.6)%

(54.4)%

REI

Bakken Index

Eagle Ford Index

Midcon Index RockiesIndex

Appalachia Index Midland Index

Delaware IndexRing 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

July 2017

$/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%

SAN ANDRES – MARKET RECEPTION

Recent Activity in the Region: Transacted and Implied San Andres Acreage Value


16

TEXAS – GAINES COUNTY ASSET

500 IP


TEXAS – GAINES COUNTY ASSET (CONT’D)

17

Target AcquisitionAreas


18

SAN ANDRES WELL ECONOMICS (TYPE CURVE)

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 CSE: OIL OTCQB: OILCF |

NEW MEXICO PROPERTIESBLUE SKY UPSIDE


• Bone Springs – Wolfcamp formations• In fill spot drilling of Yates formations• Horizontal 1 – 1.5 mile drilling


HENSHAW PROPERTY

• The Henshaw property sits on 1,880 net acres

• The Henshaw lease contains multiple productive or potentially productive horizons including the Grayburg, Bone Springs and the highly sought after Wolfcamp

• Restoration of producing wells and acid treatments are currently on the agenda

20

OXY YATES PROPERTY

• The Oxy Yates property sits on 680 net acres

• The Oxy Yates lease is producing from the shallow Yates sand of the Permian which has a 50 – 60 feet thick payzone.

• Opportunities to drill proved undeveloped wells are continuously evaluated

• Production will be optimized through acid treatments, clean-out of the wellbores, and downhole pump replacements


(Shallow Infill Drilling - Waterflood EOR candidate)(Horizontal Drilling - Waterflood EOR candidate)


MANAGEMENT TEAM

• Mehran Ehsan has an impactful 12 years of experience in the oil & gas industry, by leading numerous teams in the successful creation of multiple upstream oil and gas companies• Mehran was engaged as owner of O&G Draft Proposed Program, manager in mergers, acquisitions & divestitures, personally facilitating over $87M in capital syndication and injection

• Mehran has authored various articles, with presence as a guest speaker and judge in both the oil and gas industry and academia related events

Mehran Ehsan – President, Chief Executive Officer & Director

• Scott Kelly has over 15 years of experience acting as a senior officer and/or director of various private and public companies with large scale resource assets in North and South America• Mr. Kelly obtained his Bachelor of Commerce degree from Royal Roads University in 2001 and has since helped manage companies through all stages of their life cycle

Scott Kelly – Chief Financial Officer, Corporate Secretary & Director

• Barry Whelan has more than 40 years of experience as a geologist and engineer, initiating his career in the oil and gas industry with Gulf Oil’s international operations, quickly becoming a renowned industry expert in oil and gas

• Represented a diverse array of energy market participants including oil, gas and other resources based companies with clients ranging from global energy concerns to start-up companies

Barry Whelan – Chief Operating Officer & Director

• Connie Hang has over 17 years of finance, accounting and management experience in a variety of industries, including the energy sector• Acted as an independent financial consultant since 2009 and has served over 40 public and private companies, which span across Vancouver based companies to foreign controlled entities

• Connie is a Member of the Chartered Professional Accountants of Canada and holds a Bachelor of Accounting Science from University of Calgary

Connie Hang – Controller

• Dale Lee is the current President & CEO of DL Petroleum & Engineering Consulting and has more than 25 years experience in the oil & gas sector• As a reservoir engineer, he has been active in natural resource and industrial development companies with natural resource holdings in oil & gas worldwide

• In 1994 Dale earned his Professional Engineering status with The Association of Professional Engineers and Geoscientists of Alberta

Dale Lee – Petroleum Engineer

• Earl Tobin has more than 30 years of experience working as a geologist, using his expertise to build and grow both public and private oil & gas companies• His career has focused on full cycle exploration, from regional geologic mapping and reservoir modeling to field development and planning

• Earl is a member of the Association of Professional Engineers, and Geoscientists of Alberta, the Project Management Institute, and Canadian and American Society of Petroleum Geologists

Earl Tobin – Geologist

21CSE: OIL OTCQB: OILCF |

• Justin Kates is a partner of DuMoulin Black, practicing primarily in the areas of securities, corporate finance, mergers and acquisitions, and corporate and commercial law• He advises clients from all stages of development ranging from early stage to large public companies

• Justin received his J.D. from the University of Western Ontario and his Bachelor of Business Administration from Western Michigan University

Justin Kates – General Counsel & Advisor

DIRECTORS & ADVISORY BOARD MEMBERS

22

Doug Urch- Director

• Edward A. Odishaw currently serves as the President of Austpro Energy Corp. and worked as Barrister and Solicitor with the law firm of Swinton & Company in Canada from 1972 to 1992• He acts as Chairman of the Board of many energy and resource companies in both Canada and the U.S. such as Austpro Energy Corp. and United States Lime & Minerals, Inc.

Edward A. Odishaw – Barrister, Solicitor & Director

• Leslie Thomas has over 35 years experience as a petroleum geologist• He was successful in the discovery of several very profitable oil fields such as the S.W. Werewolf Field of Haskell County and the HMT Field of Stonewall County

• Since 1986 he has been acting as an independent geologist generating oil and gas prospects in the Permian Basin and Eastern Shelf of the Basin

Leslie M. Thomas – Geologist & Advisor

• Kit H. Maddox has more than fifteen years' experience as an Independent Petroleum Landman• He has a thorough knowledge of land data systems and is called upon to verify, summarize and update mineral, royalty and surface ownership information

• Kit earned a Bachelors degree in Electronics and attained the rank of E-5, Electronics Technician, ET2, Enlisted Surface Warfare Specialist

Kit H. Maddox – Petroleum Landman & Advisor

• Wayne Schoen has over 40 years of experience as a petroleum engineer• He formed Schoen Oil Company, LLC in February 2016 offering oil and gas consulting services to area operators in the West Central Texas region

• Wayne graduated with a BS and MS in Civil Engineering from Texas A&M University in 1974 and 1976, respectively

Wayne Schoen – Petroleum Engineer & Advisor

Technical Advisors

• Mr. Dorrins is a professional geologist and has been involved in global oil and gas companies including Amoco, BP, Shell and Junex, amongst others

• Ms. Goldstein is a reservoir engineering technologist and a member of the Society of Petroleum Engineers (SPE) with 20+ years of industry experience

Peter Dorrins – Geologist, Advisor

Diana Goldstein – Engineer, Advisor

• Doug Urch has over 35 years experience in the oil and gas industry• Mr. Urch has been a director for a number of listed (TSX & AIM) and private companies, offering financial management services

• For the last 10 years, Doug was the Executive Vice President, Finance and Chief Financial Officer and Corporate Secretary for Bankers Petroleum


• Greg Montgomery has over 27 years experience in the oil and gas industry• In the past 5 years, he has been a self-employed business consultant who has held the office of CFO for Oiltanking North America, Samarus Energy Consulting, Coast Energy, Laser

Midstream and Enbridge Energy Partners.

Greg Montgomery – General Counsel & Director

CAPITAL STRUCTURE

23

(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




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 3.24M1

Warrants 4.81M2

Fully Diluted Shares Outstanding 48.07MMarket Cap. Basic $2.00MMarket Cap. FD $2.40MCash Balance / AR $190,000Enterprise Value 2.15MManagement % Ownership ~%15*52 Week High - Low is based on closing price

Trading Symbol CSE: OIL



OIL & GAS DISCLOSURES

Oil ReservesAll estimates of reserves and future net income contained in this presentation with respect to the Corporation'sproperties are derived from reserves reports prepared by MKM Engineering, an independent qualified reservesevaluator, effective December 31, 2016. MKM Engineering's evaluation was carried out in accordance withstandards set out in the Canadian Oil and Gas Evaluation Handbook, prepared jointly by the Society of PetroleumEvaluation Engineers (Calgary Chapter) and the Canadian Institute of Mining, Metallurgy & Petroleum (PetroleumSociety).

It should not be assumed that the present value of estimated future net income presented represents the fairmarket value of the reserves. There is no assurance that the forecast prices and costs assumptions will beattained 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 theestimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greaterthan 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 abefore 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 confidencelevel as estimates of reserves and future net income for all properties, due to the effects of aggregation.

Barrels of Oil EquivalentBarrel of oil equivalents or BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and doesnot represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crudeoil as compared to natural gas is significantly different than the energy equivalency of the 6:1 conversion ratio,utilizing the 6:1 conversion ratio may be misleading as an indication of value.

Drilling LocationsThis presentation discloses drilling locations in two categories: (i) proved locations; and (ii) potential drillingopportunities. Proved locations, which are sometimes collectively referred to as “booked locations”, are derivedfrom the Corporation’s most recent independent reserves evaluation as of December 31, 2016 and account fordrilling locations that have associated proven reserves, as applicable. Potential drilling opportunities are internalestimates based on the Corporation’s prospective acreage and an assumption as to the number of wells that canbe drilled per section based on industry practice and internal review. Potential drilling opportunities do not haveattributed reserves or resources. The Corporation has, based on the December 31, 2016 reserve report andmanagement'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 ourexperience in drilling activities based on evaluation of applicable geologic, seismic, engineering, productionand reserves data on prospective acreage and geologic formations. The drilling locations on which theCorporation 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 ofthe potential drilling opportunities have been de-risked by drilling of wells by the Corporation or otheroperators in close proximity to such potential drilling opportunities, the majority of other potential drillingopportunities are farther away from existing wells where management has less information about thecharacteristics of the reservoir and therefore there is more uncertainty whether wells will be drilled in suchlocations and, if drilled, there is more uncertainty that such wells will result in additional oil and gas reserves,resources or production.

Oil and Gas MetricsThis 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 similarmeasures presented by other companies. As such, they should not be used to make comparisons. Managementuses these oil and gas metrics for its own performance measurements and to provide shareholders withmeasures to compare the Corporation's performance over a period of time, however, such measures are notreliable indicators of the Corporation's future performance and future performance may not compare to theperformance in previous periods.

"Finding and development costs" or "F&D costs" are calculated by dividing the sum of the total capitalexpenditures for the year [inclusive of the net acquisition costs and disposition proceeds] (in dollars) by thechange in reserves within the applicable reserves category [inclusive of changes due to acquisitions anddispositions] (in boe). F&D costs includes all capital expenditures in the year [inclusive of the net acquisitioncosts and disposition proceeds] as well as the change in future development costs required to bring thereserves within the specified reserves category on production. Management uses F&D as a measure of theCorporation'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 andsubtracting 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 dollarsper boe) for the year. The Corporation uses recycle ratio as an indicator of profitability of its oil and gasactivities.



CONTACT US



CANADIAN OFFICE:

Suite 2300 1066 West Hastings Street Vancouver, BC, V6E 3X2

U.S. TEXAS OFFICE:

Suite 3100 325 North Saint Paul StreetDallas, TX 75201

U.S. NEW MEXICO OFFICE:

Ste. 1000 500 4th St. NW,Albuquerque, NM 87102

[email protected]

mailto:[email protected]

APPENDIX



THE PERMIAN BASINAmerica’s Most Important Oil And Gas Resource

Q2 2017 http://www.rrc.state.tx.us/oil-gas/major-oil-gas-formations/permian-basin/

Investor takeawayThe 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.

o Over $24 bn invested in the region in 2017.

o Largest petroleum-producing basin in the U.S.

o 2nd largest oil field in the world behind Saudi Arabia's Ghawar field.

o The Permian accounts for about 30% of the country's oil production.

o Output totaling more than 3M barrels per day.

o The Permian now accounts for 471 rigs – 40% of all the U.S. oil rigs and 22% of Global rigs.

o The basin produced a prodigious 29 bn bbls of oil since 1921.

o Potential to produce another 20 bn bbls of oil from tight rock resources alone.

BREAK EVEN COSTS

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. OILSANDSOilsands breakeven costs are now comparible

to some of the most prolific U.S. shale basins

NATIONAL POST

$38

$35

$33

$33

$29

$24

Other U.S. (non-shale)

Other U.S. (shale)

Permian (Delaware)

Permian (Central)

Eagle Ford

Permian (Midland)

U.S. LIGHT OIL*

$37

$40

$45

$49

$57

$60

Suncor Energy Inc.

Cenovus Energy Inc.

MEG Energy Inc.

SAGD (solvents only)

SAGD (with solvents)

SAGD

OILSANDS

*Price needed to cover operating on existing wells

comparable



THE DELAWARE BASINAmerica’s Hottest Oil And Gas ResourceDELAWARE BASIN

The Delaware Basin constitutes roughly 10,000 square miles, or 6.4 M acres, extending from the southern New Mexico counties of Eddyand Lea southward into the west Texas counties of Reeves, Loving, Ward and Pecos. Given drilling and completion costs that generallyrange 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 perbarrel 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



29

UNDERSTANDING THE SAN ANDRES RESERVOIR

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.


30

PROVEN RESERVOIR

San Andres Formation

• Over 30 bbl produced from the Permian over the past 90 years with approximately 12 bbl and two Trillion Cubic Feet from the San Andres

• The San Andres is a Permian Age Carbonate Reservoir (conventional) that traditionally produced from vertical wells across much of the Permian Basin

• Formation depth from 4,500’-5,500’ (in Texas)

• 312 horizontal San Andres wells have been permitted in Texas on the 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



31

PERMIAN BASIN CROSS SECTIONS

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’


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SAN ANDRES CROSS SECTION

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 operations required

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 | 33CSE: OIL | 33CSE: OIL | 33

PRIMARY OBJECTIVES

Option 1: Horizontal San Andres Dolomites (Unconventional Oil Play):

• Hydrocarbon-charges shallow stratigraphic objective (4,500’-5,500’), very large areal extent• Project is in known oil field, provides significant upside potential for scale• Numerous producing, with major, historical conventional oil production• Opportunity to develop a significant new unconventional play (est. 200-400 MBOE per well)• Have offset horizontal analog for play. Gross potential in excess of MMBOE

Option 2: Vertical Down-space and implement Waterflood (Conventional Oil Play):

• Successful area waterfloods utilize 10 to 20-acre spacing units. Lease currently drilled on 40 acre pattern with a few 20 acre spacings

• Requires 4 new wells and re-equipping certain existing wells• Area waterfloods achieve 1.5:1 secondary to primary recovery ratio

Total Reserve Potential Exceeds Three MMBOE1 from a Single Objective

(1) Million barrels of oil equivalent

CSE: OIL | 34CSE: OIL | 34CSE: OIL | 34

SAN ANDRES WELL ECONOMICS

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 NetReturns (6)

Net Returns (5) Fully Loaded NetReturns (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

(CSE: OIL)(OTCQB:OILCF) - Permex Petroleum Corp · 2020-03-27 · LEGAL DISCLAIMER Presentation and...

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Transcript of (CSE: OIL)(OTCQB:OILCF) - Permex Petroleum Corp · 2020-03-27 · LEGAL DISCLAIMER Presentation and...