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Blaze Energy Ltd. September 2009

Blaze Energy Ltd. September 2009. Forward-looking Information and Statements

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Blaze Energy Ltd. September 2009

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  1. Blaze Energy Ltd.September 2009 1

  2. Forward-looking Information and Statements This presentation contains certain forward–looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate“, "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the forgoing, this presentation may contain forward-looking information and statements pertaining to the following: the volumes and estimated value of Blaze's oil and gas reserves; the volume of Blaze's oil and gas production; future oil and natural gas prices and Blaze's commodity risk management programs; future liquidity and financial capacity; future results from operations and operating metrics; future costs, expenses and royalty rates; future interest costs; the exchange rate between the $US and $Cdn; future development, exploration, acquisition and development activities and related capital expenditures; the amount and timing of capital projects; operating costs; the total future capital associated with development of reserves and resources; and forecast reductions in operating expenses. The recovery and reserve estimates of Blaze's reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. In addition, forward- looking statements or information are based on a number of material factors, expectations or assumptions of Blaze which have been used to develop such statements and information but which may prove to be incorrect. Although Blaze believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Blaze can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which Blaze operates; the timely receipt of any required regulatory approvals; the ability of Blaze to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which Blaze has an interest in to operate the field in a safe, efficient and effective manner; the ability of Blaze to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and expansion and the ability of Blaze to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Blaze operates; and the ability of Blaze to successfully market its oil and natural gas products. The forward-looking information and statements included in this presentation are not guarantees of future performance and should not be unduly relied upon. Such information and statements, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements including, without limitation: changes in commodity prices; changes in the demand for or supply of Blaze's products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of Blaze or by third party operators of Blaze's properties; increased debt levels or debt service requirements; inaccurate estimation of Blaze's oil and gas reserve volumes; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of inadequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in Blaze's disclosure documents, (including, without limitation, those risks identified in this presentation). The forward-looking information and statements contained in this presentation speak only as of the date of this presentation, and Blaze does not assume any obligation to publicly update or revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws. BOE 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. Non-GAAP Terms This presentation may use the terms “cash flow from operations”, “funds flow from operations”, “funds flow”, “netbacks” and “net debt”, which are terms not recognized under Generally Accepted Accounting Principles (“GAAP”). The Company uses these measures to help evaluate its performance, leverage, and liquidity as well as to assess potential acquisitions. The Company considers funds flow from operations a key measure as it demonstrates the Company’s ability to generate funds necessary to repay debt and to fund future growth through capital investment. Funds flow from operations should not be considered as an alternative to, or more meaningful than, cash flow from operating activities as determined in accordance with Canadian GAAP as an indicator of Blaze’s performance. Blaze’s determination of funds flow from operations may not be comparable to that reported by other companies. Blaze also presents funds flow from operations per share whereby per share amounts are calculated using weighted average shares outstanding consistent with the calculation of net earnings per share, which per share amount is calculated under GAAP. The Company considers corporate netbacks as a key measure as it demonstrates its profitability relative to current commodity prices. Corporate netbacks are comprised of operating, funds flow and net earnings netbacks. Operating netback is calculated as the average sales price of its commodities (including hedging gains and losses) less royalties, transportation costs and operating expenses. Funds flow netback starts with the operating netback and further deducts general and administrative costs, interest expense and current income tax expense. Net earnings netback takes the funds flow netback and deducts unrealized gains/losses on hedges, stock-based compensation expense, depletion, depreciation and amortization charges and future income tax expense. There is no GAAP measure that is reasonably comparable to netbacks. Net debt and working capital deficiency, which terms represent current assets less current liabilities and bank debt is used to assess efficiency, liquidity and general financial strength. There is no GAAP measure that is reasonably comparable to net debt and working capital. 2

  3. Background • Private Western Canadian junior exploration company founded in 1995, • Management and Directors own 40% of outstanding common shares • Core management/technical team has been together since inception • Proved and P+P F&D costs since inception of $17.96/boe1 and $13.47/boe1, respectively • Company strategy • Growth through drill bit (organic exploration and development) • Opportunistic Acquisition/Exploitation/Divestiture • Cash flow maximization (reduce op-costs, think outside the box, empower personnel) • Proactive and adaptive to industry conditions (have successfully weathered several high/low oil and natural gas price cycles) • Flat management structure for faster decision making 1Cumulative since 2002. Calculated using actual costs on a per project basis using pricing and reserves as estimated at the end of the year in which the project was completed by independent reserve engineers. 3

  4. Current Situation • Upstream: • Q2 2009 - 619 BOE/d oil and natural gas production (60% gas, 40% oil and NGL) • Expected exit December 31, 2009 rate of 1,000 BOE/d. • Estimated $1.7 mm net operating cash flow from upstream ops in 2009 (price assumptions - $3/Mcf and $60/bbl) • Midstream: • Estimated $5.1 mm net operating cash flow from midstream ops in 2009 • Natural Gas Storage: • Blaze holds late life reservoirs that are suitable natural gas storage candidates and have had experience with gas cycling for enhanced oil recovery • Financial • 6 months ended June 30, 2009 corporate cashflow - $2.9 MM • June 30, 2009 working capital deficit - $4.9 MM, driven by capital expenditures of $11.1 MM for the 6 months ended June 30, 2009 • $15 MM revolving credit facility, drawn to $7.2 MM at August 26, 2009 (48% utilized) 4

  5. Biagio Mele, P. Eng. President & Chief Executive Officer Ed Mills, C.E.T. Vice President Kevin Donegan, CA Chief Financial Officer Duncan MacKenzie, P. Geol. Senior Geologist Jacquelyn Frebrowski, C.G.T. Senior Geological Technologist Barry Dick, P.Geoph. Senior Geophysicist Larry Lefaivre Senior Landman Blaze Team • Twenty-five years exploitation, acquisition and reservoir engineering experience working for large and small companies. Founder of Blaze. Previous experience from Dome, Opinac, Cimarron, Northern Reef and Berkley • Twenty-nine years operations and production experience in Western Canada. Founder of Blaze. Previous experience with Ocelot, Opinac, PennWest and Berkley • Ten years oil & natural gas accounting experience. Joined Blaze July 2005. Previous experience with Deloitte, AltaGas and MGV Energy • Nine years of industry experience prospecting primarily in Central Alberta. Joined Blaze in 2008. Previous experience with Zargon Energy Trust • Twenty-eight years of industry experience with exploration based companies prospecting primarily Northeast British Columbia and West Central Alberta. Joined Blaze in 1997. Previous experience with TransCanada Pipelines and Canadian Hunter • Twenty-five years experience with large and small companies. Extensive experience and drilling success in a variety of play types in British Columbia, Saskatchewan and Alberta. Joined Blaze in 1997. Previous experience with Canada Cities Service, Chauvco, Poco, Valiant • Thirty-one years experience in Western Canada, working experience with large and mostly small companies. Joined Blaze team in 1999. Previous experience with PanCanadian, Petro-Canada, Luscar Ltd., Brenda Mines and Talon 5

  6. Biagio Mele, P. Eng. President & Chief Executive Officer, Blaze Energy Ltd. (2) Ed Mills, C.E.T. Vice President, Blaze Energy Ltd. (3) Kim Hubick, CA Chief Financial Officer, Enerchem International Inc. (1,3) Gerald Costigan, P. Geol Executive Vice President, Open Range Energy Corporation (1,2) Board of Directors • Director since April 20, 1995President and CEO of Blaze Energy Ltd since its incorporation in 1995. Member of the Institute of Corporate Directors of Canada. • Director since April 20, 1995Vice President of Blaze Energy Ltd since its incorporation in 1995. • Director since November 28, 2006Executive Vice President, Finance and Chief Financial Officer - ENMAX Corporation, an energy distribution supply and service company, October 2005 to 2008.Vice President and Controller – AltaGas Income Fund, an integrated energy infrastructure and services organization, June 2003 to September 2005.Vice President, Finance and Business Service – Central Alberta Midstream Company, July 2001 to May 2003. Mobil Oil Canada lead roles in reporting, analysis and audit – 1984-1996. • Director since November 28, 2006Vice President, Exploration – Tempest Energy Corp, an oil and natural gas company, January 2000 to 2005.Vice President, Exploration – Marathon Canada Ltd, a fully integrated international oil and natural gas company. Notes:1 Member of the Audit Committee2 Member of the Reserves Committee3 Member of the Administration Committee 6

  7. Corporate Governance • Board of Directors of Blaze: • Comprised of four members: two independent, two management • Focused on meeting corporate governance standards for public companies, although Blaze does not have any listed securities • Holds regularly scheduled meetings to review the business affairs of Blaze • Board comprised of four members of which two are independent • committees are: audit, reserves and administration • Alberta Boilers Safety Association approved safety and environmental program 7

  8. Liquids Gas Company Background – Production History Acquired Assets Sold Assets Sold Assets Sold Assets 2003 2004 2005 2006 2007 2008 Q1 & Q2 2009 8

  9. Liquids Gas Reserve Growth 2P5976 Acquired Assets (4.3 MMBOE) for $80.0 MM, including BRC facility 1P4628 Sold Assets (60 MBOE) for proceeds of $1.0 MM Sold Assets (5.2 MMBOE) for proceeds of $80 MM, excluding BRC facility Sold Assets (101 MBOE) for proceeds of $5.0 MM MBOE 2P1835 2P1757 1P1588 1P1280 2P614 2P657 2P790 1P401 1P613 2P467 1P379 1P239 2003 2004 2005 2006 2008 20091 2007 Notes: 1. Management estimates as of July 01, 2009 9

  10. Core Area • 99% of Blaze’s operations are in the Brazeau area of West Central Alberta, Canada. • Large, long-life, liquid-rich natural gas reserves • Primarily operated • As Operator, Blaze controls plant infrastructure • Exploration/Exploitation opportunities are significant in the area • Growing resource plays • Focused area expertise Alberta, Canada Core Area - Brazeau Edmonton Calgary *Image Courtesy of Google Earth

  11. Area of Operations 11

  12. Active Area Players 1. Based on public data 12

  13. Going Forward Upstream • Access to over 78 sq. mi. (200 km2) of modern 3D seismic • Access to 115,000 acres with shallow and deep drilling opportunities • Large land base with little development or new exploration over the last decade • Horizontal drilling and improving completion and stimulation technology for both vertical and horizontal wells are contributing to renewed activity and high land prices in the area, even at current natural gas prices. • Develop uphole drilling opportunities & exploit bypassed pay in deep wells • Multi-zone potential with up to 14 economic zones • Developed in the past with no more than one well per section • Surrounding acreage developed with up to four wells per section • Reduced spacing on sweet gas drilling • Current spacing 640 acre can go down to 320 acre Midstream • Increase third party processing revenue by working with active area producers • Direct new Blaze natural gas to owned facilities • Plant operating costs have been reduced and there are further opportunities • Increase sulphur handling capabilities with acid gas injection, saving $3MM, gross per year • Implement water disposal facility to handle third party produced water. Natural Gas Storage • Blaze holds late life reservoirs that are suitable natural gas storage candidates and have had gas cycling for enhanced oil recovery 13

  14. Upstream - Risk Mitigation Strategies • Extensive technical backup • Diversified play types • Multi-zone drilling • Seismic signatures • Nearby drilling activity, production • Shallow pay on logs • Re-entries • Operator of all wells in program • Control of mid-stream assets • Rigorous in-house screening • Have our own capital at stake (40%) 14

  15. Upstream - Opportunities • 1Management estimates of vertical wells in area • 2 Calculated as drill, complete and tie in costs, divided by initial production, adjusted for chance of success • 3 Calculated as drill, complete and tie in costs, divided by recoverable reserves, adjusted for chance of success 15

  16. Upstream – Area Activity by Formation 1. Based on public data from the Brazeau/Pembina area 16

  17. 2008/2009 - Capital Program Summary 1Calculated on a per project basis -- internal estimates of total company project reserves (July 2009 pricing per independent reserve engineer) and actual costs incurred to June 30, 2009 plus current management estimates of future capital (expected to be completely spent by the end of September 2009). 17

  18. Midstream – Blaze BRC • Blaze Brazeau River Complex • Sour natural gas processing facility • 186 MMcf/d capacity 18

  19. Midstream – Opportunities • 26% owner (and Operator) of second largest natural gas processing facility in region: • Acid gas injection project will reduce costs by $3 MM (gross per year) and reduce emissions • Oil blending/terminalling creates a new source of revenue • As an owner, Blaze is assured processing and marketing for our current and future production with no capital fee processing charges • Increase third party processed volumes, increasing income - increased drilling activity, including high volume horizontals, are giving rise to substantial opportunities • As Operator of only one plant we bring a “small company” feel for cost control to a large facility. This plant is 100% of our business whereas it was less than 1% of the former Operator’s business. • Regulatory issues and high construction costs make it virtually impossible for new natural gas processing plants to open in the area 19

  20. Natural Gas Storage - Opportunities • We have completed detailed technical screening of certain Blaze reservoirs to determine suitability for natural gas storage • Conceptual design of stand alone facility is completed • Commercial, economic and partner review of project in progress • Finalize reservoir engineering predictions and performance estimates • Full design and engineering to commence subject to satisfactory economic, financing and partner review • Current natural gas storage in North America is close to capacity making Blaze natural gas storage reservoirs more valuable 20

  21. Annualized 2009 Forecast 1Actual funds flow from operations of $2.9 MM ($0.22/fd share) for the 6 months ended June 30, 2009 plus estimate for the balance of 2009. 21

  22. Net Asset Value 6/30/09 22

  23. Snapshot of Blaze at EOY 2010 • Operational • Continue to develop inventory of drilling prospects • Natural gas storage potential • Dominant mid-stream position in the area • Exit Options • IPO • Potential sale to strategic buyer 23

  24. Vision for the Future • Control, consolidate and grow asset base as an owner and operator of major area facilities • Expand exploration and development portfolio • Maintain high interest and operatorship • Pursue strategic property acquisitions in focus areas • 2-4 years investigate liquidity options 24

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