Unlocking the Treasure of the

Alberta Montney

March 2019

Disclaimer

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Montney Fun Facts

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• Exploration focus for dozens of companies

– over 50 companies actively playing Montney

– About half of these are pure-play Montney

• Significant capital invested to date

– at least $3B spent acquiring Crown mineral rights in the unconventional fairway

• Over 8,400 horizontal wells drilled since 2007

– at $5MM to $10MM DCET per well gives total capital spend of $42B to $84B on wells alone!

• Of the 135 active rigs in Western Canada, 46 are drilling Montney(1)

• Over 6,000 horizontal Montney wells are producing 7.6 Bcf/d and 195 Mbbl/d liquids

– the Montney alone accounts for >39% of total Western Canada raw gas production(2)

Source: geoSCOUT, GeoEDGES, BMO Capital Markets

BC AB

The Big Picture – Resource Wise

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Turbidite Fan Complexes

Generalized Lithology(3)

Depositional Schematic(5)

BC AB

• In-Place resource estimate of 4,274 Tcf gas and 268.4 Bbbl oil and NGLs(4)

• Unconventional play area is roughly ~480 km by 70 km; 34,000 km2

• Montney thickness (unconventional areas) between 200 and 300+ metres (Calgary Tower is 191 m tall, Suncor is 215 m, The Bow is 236 m and Brookfield Place is 247 m tall!)

Source: geoSCOUT, GeoEDGES, BMO Capital Markets

Thick and Pervasively Charged from End to End(6)

Source: geoSCOUT, GeoEDGES, BMO Capital Markets 5

Birch Stoddart Dawson Karr Glacier

200 m

Upper Montney

325 m

Wapiti

235 m

British Columbia – 200 km Alberta – 170 km

Birch

Karr

Upper Middle Montney

Lower Middle Montney Lower Montney

Pouce Coupe Glacier Turbidite

Sinclair Turbidite ‘Karr

turbidite’ Claraia Biostrome

• Original Montney development (apart from the subcrop play) was in vertical gas wells targeting the deep, high porosity turbidite scour and fan deposits in the Pouce Coupe, Valhalla and La Glace areas

• By 2007 and 2008, operators were having great success placing horizontals into the tighter siltstones in and around these legacy fields, beginning a boom in unconventional development

• Today, operators are stacking horizontals into the Montney, four or five benches isn’t uncommon

Montney Land Grab - Riding the Wave

Source: geoSCOUT, BMO Capital Markets 6

Sections Sold at Crown Sales by Area Crown Sale Activity by Year 755

1,377

1,336

3,489

2,364

1,283

1,164

1,263

1,507

1,408

1,219

1,815

76

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019 ytd

- 2019 ytd

0

2

4

6

8

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

North BCSouth BC & North ABAB GasAB OilOther areas

142 331 352 597 681 699 860 1,177 786 592 1,164 932

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Development of the Unconventional Montney Play

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Horizontal Wells Rig Released

Horizontal Production (Bcfe/d) Horizontal Wells RR’d 2007 - 2018

1,400 since 2007 25 rigs running(1)

1,130 since 2007 1 rig running(1)

830 since 2007 4 rigs running(1) 2,640 since 2007

7 rigs running(1)

1,650 since 2007 8 rigs running(1)

670 since 2007 1 rig running(1)

Source: geoSCOUT, BMO Capital Markets

2.06 Bcfe/d from 1,000 wells in the

Focus Area (Dec 2018 cal day)

Biggest Growth Area 32% of 2018 horizontal wells were

RR’d in the Focus Area

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33Full Field

DevelopmentAppraisal &Delineation

Discovery Optimization & Early Development

Play Maturity

Karr

Kakwa

ElmworthBilboPipestone

East Pipestone& Gold Creek

Lower Montney

Pipestone

Elmworth

Gold Creek

Bilbo

Karr

Kakwa

Resthaven

Alberta Montney Focus: A Spectrum of Thermal and Play Maturity

Source: geoSCOUT, BMO Capital Markets 8

Dry Gas

Rich Gas

Volatile Oil

Lean Gas

Light Oil

Transition to Conventional

NE SW

All areas show favourable economics which is why the Alberta Montney is garnering its fair share of capital commitment leading to delineation in the understanding of the extent and types of hydrocarbons in this region

Valu

e

Sweet spots improve over time

Generalized Montney Thermal Maturity

Wembley

84

2

211

1

1

1

1

21

0 100 200 300 400 500 600

Seven GenerationsNuVistaEncana

HammerheadParamount

Pipestone OilCanadian Natural

OrlenShell

VelvetXTO

SinopecStrath

CequenceHusky

InceptionKelt

Kicking Horse

Producing

Standing

Location and Drilling

Active Rigs

Alberta Montney Focus: Who plays in this Sandbox?

Many Pure-Play Operators Large and Contiguous Acreage Footprints Land situation is very dynamic Ongoing consolidation and expansion Very active area, currently 25 rigs running

Top Operators by Well Count(1)(7)

Pipestone

Elmworth

Gold Creek

Bilbo

Karr

Kakwa

Resthaven

Source: geoSCOUT, BMO Capital Markets, Land from corporate presentations, press releases and public sources 9

Wembley

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2011 2012 2013 2014 2015 2016 2017 2018

Delineating and Derisking the Play

Source: geoSCOUT, BMO Capital Markets 10

Continues to attract significant capital:

– double the production in the last three years,

– 50 wells already drilled in 2019 and existing permits for 355 more!

79% of current Alberta Montney well licenses and 65% of Alberta Montney wells spud since Jan 2018 are focused in this area of Alberta

Production Adds by Year (MMcfe/d)

Rig Releases by Year - 2012

Rig Releases by Year - 2013 Rig Releases by Year - 2014 Rig Releases by Year - 2015 Rig Releases by Year - 2016 Rig Releases by Year - 2017 Rig Releases by Year – 2018 Current Situation as of end Feb 2019

2,070 MMcfe/d 1.54 Bcf/d, 87.8 Mbbl/d

from 1,050 wells and growing!

Improved Completion Methods Optimize Deliverability

Source: geoSCOUT, BMO Capital Markets, Verdazo Analytics, geoLOGIC Well Completions & Frac Database, Company Corporate Presentations

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Lateral Length (m)

Longer Lateral Length Average completed lateral lengths have increased by almost 900 m; Top longest completed lengths ~5,000 m

0

1000

2000

3000

4000

5000

6000

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019

Late

ral L

engt

h (m

)

Pipestone Average Pipestone

0

1000

2000

3000

4000

5000

6000

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019

Late

ral L

engt

h (m

)

Elmworth Bilbo Average

0

1000

2000

3000

4000

5000

6000

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019

Late

ral L

engt

h (m

)

Gold Creek Average Gold Creek Karr

0

1000

2000

3000

4000

5000

6000

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019

Late

ral L

engt

h (m

)

Karr Average

0

1000

2000

3000

4000

5000

6000

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019

Late

ral L

engt

h (m

)

Kakwa Average Kakwa Elmworth Focus Area

0

1000

2000

3000

4000

5000

6000

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019

Late

ral L

engt

h (m

)

Pipestone Elmworth Bilbo Gold Creek Kakwa Karr Average

Improved Completion Methods Optimize Deliverability

Source: geoSCOUT, BMO Capital Markets, Verdazo Analytics, geoLOGIC Well Completions & Frac Database, Company Corporate Presentations 12

Frac Spacing (m)

Tighter Frac Spacing Frac spacing has significantly decreased from an average of 105 m to 55 m resulting in increased number of stages from <15 to >60

0

50

100

150

200

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018

Frac

Spa

cing

(m

)

Pipestone AveragePipestone Elmworth

0

50

100

150

200

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018

Frac

Spa

cing

(m

)

Elmworth Bilbo Average

0

50

100

150

200

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018

Frac

Spa

cing

(m

)

Gold Creek AverageGold Creek

0

50

100

150

200

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018

Frac

Spa

cing

(m

)

Karr AverageKarr

0

50

100

150

200

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018

Frac

Spa

cing

(m

)

Kakwa AverageKakwa

0

50

100

150

200

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018

Frac

Spa

cing

(m

)

Pipestone Elmworth Bilbo Gold Creek Kakwa Karr AverageFocus Area

Improved Completion Methods Optimize Deliverability

Source: geoSCOUT, BMO Capital Markets, Verdazo Analytics, geoLOGIC Well Completions & Frac Database, Company Corporate Presentations 13

Total Proppant Placed (t)

Increased Proppant Placed In every area except Gold Creek, proppant tonnage has significantly increased from an average of ~800 t to >8,000 t

0

2000

4000

6000

8000

10000

12000

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019

Tota

l Pro

ppan

t (t)

Pipestone AveragePipestone

0

2000

4000

6000

8000

10000

12000

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019

Tota

l Pro

ppan

t (t)

Elmworth Bilbo Average Elmworth

0

2000

4000

6000

8000

10000

12000

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019

Tota

l Pro

ppan

t (t)

Gold Creek Average Gold Creek

0

2000

4000

6000

8000

10000

12000

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019

Tota

l Pro

ppan

t (t)

Karr Average Karr

0

2000

4000

6000

8000

10000

12000

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019

Tota

l Pro

ppan

t (t)

Kakwa Average Kakwa

0

2000

4000

6000

8000

10000

12000

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019

Tota

l Pro

ppan

t (t)

Pipestone Elmworth Bilbo Gold Creek Kakwa Karr Average Focus Area

Improved Efficiencies Result in Reduced Well Costs

Source: geoSCOUT, BMO Capital Markets, Verdazo Analytics, geoLOGIC Well Completions & Frac Database, Company Corporate Presentations 14

Drill & Completion Costs Normalized per 100 m LL ($M)

Decreased Drill and Completion Well Costs Drill costs have reduced by 64% and completion costs have reduced by 42% since 2012

0

100

200

300

400

500

600

700

800

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018

Cos

ts p

er 1

00 m

LL

($ 0

00)

Completion Cost Drill Cost Average

$

Highlighted Recent Successes

Source: geoSCOUT, BMO Capital Markets, Company Corporate Presentations 15

Light Oil

Volatile Oil

Rich Gas

Lean Gas Dry Gas

Gold Creek

Karr

Kakwa

Resthaven

Pipestone

Wembley

Elmworth

Bilbo

Wapiti

NuVista (Bilbo) Upper Montney 56-well average IP30 6 MMcf/d

CGR 124 bbl/MMcf testing Lower Montney

IP30 3.6 CGR 182 bbl/MMcf

NuVista (Gold Creek) IP30 5.0 MMcf/d CGR 81 bbl/MMcf 2/05-27-068-07W6 Cdn well record

longest lateral MD 7,848 m LL 5,049 m IP30 10.4 MMcf/d

NuVista (Elmworth) Hi-Fi Type-Curve 7.0 MMcf/d CGR 40 bbl/MMcf

Paramount (Karr) Avg IP365 961 boe/d CGR 173 bbl/MMcf

Drilled two 5-well pads in 2018 Lwr Mtny well results par with Middle

Paramount (Wapiti) Avg IP365 1,395 boe/d CGR 80 bbl/MMcf

All 3 intervals tested Pad 9-3 Drilled 11 wells in 2018 12-well pad 5-3 planned in 2019

Seven Generations (Nest 3) IP30 2 Mboe/d CGR365 55 bbl/MMcf

Seven Generations (Nest 1) IP30 1.5 Mboe/d CGR365 478 bbl/MMcf

Seven Generations (Nest 2)

IP30 2.0 – 2.4 Mboe/d CGR365 90 - 295 bbl/MMcf

06-12-063-05W6: Peak IP >20 MMcf/d

Hammerhead (Karr) Gen III TC IP30 1.5 – 2.0 Mboe/d

EUR 1.2 – 1.4 MMboe (60-70% Liquids) testing Lower Montney IP30 430 bbl/d

Hammerhead (Gold Creek) Gen III TC IP30 1.5 Mboe/d

Velvet Stacked Horizontals 01-10-069-03W6 IP120 486 bbl/d oil

and 1.3 MMcf/d gas

Hammerhead (Sweet Spot) IP30 of 20 wells

607 bbl/d and 4.9 MMcf/d

Encana reported yields (bbl/MMcf) Volatile Oil >250

Very Rich CND 150-250 Rich Gas CND 50-150

NuVista (Pipestone) Drilling 8-well Hi-Fi Pad and piloting 4 layer ‘Cube’

Northwest Pad restricted IP365 2.2 MMcf/d CGR 185 bbl/MMcf

Pipestone and Blackbird Merge Strong initial test results up to

3,100 boe/d and CGR to 300 bbl/MMcf Drill 11 wells in 2019 (3 drilled)

Kelt (Wembley) 6-wells RR in 2018 04-01-072-08W6 IP30 1.34 Mboe/d

(83% liquids)

What to Watch For in the Alberta Montney…

Continued optimization of well design and production practice • New generation well completions are showing extraordinary initial well results • Multi-well pads result in reduced capital and increased recoveries (no parent-child impact) • Reservoir management strategies to optimize long-term condensate performance (slow-back

or extended soaking)

Continued delineation of the tight-oil fairway, and pushing the play eastward • The high condensate ratios in the ultra-rich & volatile-oil fairways are the best in the basin • Were the large Crown land blocks purchased last fall acquired for the Montney?

Lower Montney showing great promise • Some of the first wells into the lower zones are showing higher than expected liquids • Will the Lower Montney play double the locations of the Upper/Middle Montney?

Continued land consolidation and M&A activity • 2018 asset transactions included Strath acquiring Paramount Resthaven block and

NuVista acquiring Cenovus Pipestone block • Corporate transactions included Velvet takeover of Iron Bridge and the strategic combination

of Pipestone and Blackbird • SemCAMS Midstream JV acquired Meritage Midstream • What and who is next?

There is plenty more treasure to be discovered

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Acknowledgments & Contributions:

BMO Capital Markets A&D Advisory Group

Publications: http://www.bmoaddeals.com

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Questions?

Reference Material and Footnotes

Sources and References: • geoSCOUT, GeoEDGES, BMO Capital Markets

Note: Public production data (Dec, 2018) is raw gas, oil and field condensate (which is rarely reported). Production does not include plant liquids.

Footnotes: 1. Daily Oil Bulletin (DOB) - Weekly Activity Report, Mar 15, 2019 2. BMO Canadian A&D Market Monitor publications; http://www.bmoaddeals.com 3. Alberta Geological Survey WCSB Atlas Figure 16.24 4. NEB Energy Briefing Note, 2013 The Ultimate Potential for Unconventional Petroleum from the Montney Formation of

BC and AB 5. Schematic modified from NEB Briefing Note, 2009 A Primer for Understanding Canadian Shale Gas 6. Cross Section modified from CSPG Bulletin, 2018 The Montney Play of Western Canada Vol. 1 Figures 12 and 14 7. Well Counts as of Feb 28, 2019. Producing: produced in the last 12 months (LTM); Standing: no production but

RRed in the LTM; Location and Drilling: licensed in last 2 years with no RR date on record

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