corridor resources - 2010 year end investor presentation

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  • 7/28/2019 Corridor Resources - 2010 Year End Investor Presentation

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    Investor Presentation

    Update 2010 Progress

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    Disclaimer

    Forward Looking Information Disclosure

    This presentation contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking information typically contains statements with words such as "anticipate", "believe", "plan","continuous", "estimate", "expect", "may", "will", "project", "should", or similar words suggesting future outcomes. This presentationcontains forward-looking statements pertaining to the following: Corridors operations, anticipated financial performance, businessprospects and strategies, including expectations relating to exploration and development drilling programs; fracturing, completion andwork-over programs; capital expenditure programs; the characteristics and potential of the Frederick Brook shale, Hiram Brook formation,and Old Harry prospect; the quantity of reserves and resources; initial production capacity; tax rates and royalties; Apache Canada Ltd.splans; Corridors farmout and option agreement with Apache, including the appraisal program, Apaches commitment to make

    expenditures and the potential exercise of Apaches option; and potential partners in respect of the Old Harry prospect and Anticosti.Furthermore, statements relating to reserves and "resources" are forward-looking statements, as they involve the implied assessment,based on certain estimates and assumptions that the reserves and resources, respectively, described exist in the quantities predicted orestimated and can profitably be produced in the future. Undue reliance should not be placed on forward-looking statements, which areinherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (bothgeneral and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-lookingstatements will not occur. These factors include, but are not limited to: risks associated with oil and gas exploration, financial risks,substantial capital requirements, bank financing, government regulation, environmental, prices, markets and marketing, issuance of debt,variations in exchange rates and hedging. Further information regarding these factors may be found under the heading "Risk Factors" inCorridor's Annual Information Form for the year ended December 31, 2009 and its most recent management's discussion and analysis,copies of which are available on www.sedar.com. Readers are cautioned that the foregoing list of factors that may affect future results isnot exhaustive. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based

    will in fact be realized. Actual results will differ, and the difference may be material and adverse to Corridor and its shareholders.

    Forward-looking statements are based on Corridor's current beliefs as well as assumptions made by, and information currently availableto, Corridor concerning anticipated financial performance, business prospects, strategies, regulatory developments, future natural gas andoil commodity prices, exchange rates, future natural gas production levels, the ability to obtain equipment in a timely manner to carry outdevelopment activities, the ability to market natural gas successfully to current and new customers, the impact of increasing competition,the ability to obtain financing on acceptable terms, the ability to add production and reserves through development and explorationactivities and the provisions of Corridors agreement with Apache Canada Ltd. Although management considers these assumptions tobereasonable based on information currently available to it, they may prove to be incorrect.

    http://www.sedar.com/http://www.sedar.com/
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    Disclaimer, contd

    The forward-looking statements contained in this presentation are made as of the date hereof and Corridor does not undertake anyobligation to update publicly or to revise any of the included forward-looking statements, except as required by applicable law. Theforward-looking statements contained herein are expressly qualified by this cautionary statement

    Oil and Gas Resources Disclosure

    "Resources" are quantities of petroleum that are estimated to exist originally in naturally occurring accumulations, including the quantityof petroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimatedquantities in accumulations yet to be discovered.

    "Discovered resources" refers to that quantity of petroleum that is estimated, as of a given date, to be contained in knownaccumulations prior to production. The term discovered resources is equivalent to discovered total petroleum-initially-in-place. There is nocertainty that it will be commercially viable to produce any portion of the discovered resources.

    "Contingent resources" are those quantities of petroleum estimated, on a given date, to be potentially recoverable from knownaccumulations using established technology or technology under development, but which are not currently considered to be commerciallyrecoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political andregulatory matters or a lack of markets. It is also appropriate to classify as "contingent resources" the estimated discovered recoverablequantities associated with a project in the early project stage. The primary contingencies with respect to Corridor's economic contingentresources include the uncertainty surrounding the economic viability of the related development project due to the early stage of resourceevaluation. This includes the uncertainty that all internal and external approvals will be forthcoming along with documented intent todevelop the resources within a reasonable time frame. Other commercial considerations that may preclude the classification of contingentresources as reserves include factors such as legal, environmental, political and regulatory matters or a lack of markets.

    Rider A

    GLJ provided a "Low Estimate", "Best Estimate" and "High Estimate" in its resources report on Corridor's resources in the areasurrounding the Green Road G-41 well located four kilometers north of Elgin, New Brunswick, which is only a subset of the area coveredby the GLJ Shale Resources Report. The Best Estimate is considered to be the best estimate of the quantity that will actually berecovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilisticmethods are used, there should be at least a 50% probability (P50) that the quantities actually recovered will equal or exceed the bestestimate.

    Resources do not constitute, and should not be confused with, reserves. Actual reserves and resources will vary from the reserve andresource estimates, and those variations could be material.

    GLJ 's estimates of resources and reserves were prepared in accordance with National Instrument 51-101 Standards of Disclosure forOil and Gas Activities and are summarized in Corridor's Annual Information Form for the year ended December 31, 2009, a copy of whichis available on www.sedar.com.

    http://www.sedar.com/http://www.sedar.com/http://www.sedar.com/
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    Highlights

    Atlantic Canadian Exploration & Production company with enormousresource potential

    Commanding land position in Eastern Canada

    Significant potential shale resource play in New Brunswick with Apache

    Recognized leader in developing frontier basins in Eastern Canada

    Strong technical and commercial team with focus on big play opportunities

    Existing cash flow has allowed Corridor to fund on-going developmentopportunities

    Prudent financial management with strong balance sheet and no debtdrawn to date through period of depressed gas market conditions

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    Opportunities

    ANTICOSTI

    900,000 NET ACRES

    OLD HARRY125,000 NET ACRES

    SOUTHERN NEW BRUNSWICK

    320,000 NET ACRES

    PRINCE EDWARD ISLAND260,000 NET ACRES

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    2011 Priorities

    Advance shale gas opportunities in New Brunswick with ApacheJ oint Venture

    Progress Old Harry Prospect towards drilling exploration well withintwo years

    Advance potential of farm-ins of Anticosti play with partner (Petrolia)

    Maintain cash flow from existing McCully Field to fund priorities

    Retain licenses adjacent to Apache farm-in and McCully lands toestablish additional resource potential

    Work with partners, government, and stakeholders to ensure thebenefits of oil and gas activities in Eastern Canada are recognizedand industry activity advanced

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    Strong & Experienced Team

    Management Team Board of Directors

    Phil Knoll, P.Eng. Doug Foster

    CEO/President

    Tom Martel, Ph.D. Norm Miller

    Chief Geologist

    Larry Huskins, P.Eng., M.B.A. J ack BrayDrilling Completions Team Lead

    Don LeBlanc, B.Sc. (Magnis Cum) Eng./Phys. Achille Desmarais

    Advisor Reservoir/Production Engineering

    Doug Bailey, P.Eng. Mike Seth

    Production Operations Manager

    Lisette Hachey, C.A. Robert Penner

    CFO

    Dena Murphy, M.Sc., M.M.M., C.R.S.P. Phil Knoll

    QHSE Manager

    Paul Durling, B.Sc.

    Chief Geophysicist

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    Maritime Advantages

    Large, relatively unexploredresource potential

    Relatively higher sales prices

    proximity to markets

    heat content premium

    sweet gas

    Competitive royalties

    Existing infrastructure &improving logistics

    Maritimes & NE Pipeline

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    Common Shares

    Common Shares (November 15, 2010) Issued and outstanding: 87,807,466

    Fully diluted: 92,804,134

    Market Capitalization

    $616 million

    Closing price of CDH Common Shares on the TSX Nov 15/09 to Nov 15/10

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    McCully/Elgin Explorationand Development Area

    321,242 net acres; high workinginterests

    Three large onshore plays

    Frederick Brook Shale Gas

    Hiram Brook Gas

    Hiram Brook Oil (discovered atSouth Branch G-36 well)

    Currently producing up to 20mmcf/d gross (15 mmcf/d net)from Hiram Brook reservoirs

    Completed inlet compressionproject in third quarter to stabilizeproduction levels

    McCully / Elgin

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    Shale Gas Potential inMcCully/Elgin Areas

    Corridor conducted two fracs inUpper Frederick Brook shale atGreen Road G-41 vertical well

    Lower Black Shale zone after 83hour flow period, final rate was0.43 mmscf/d at ~150 psi, peakingat 0.98 mmscf/d

    Upper Silty/Sandy zone produced 42.4 mmscf over 185hours, peaking at 11.7 mmscf/dwith final rate of 3 mmscf/d at~700 psi

    Lower Frederick Brook shaleproducing gas from the F-58 wellsince March 2008

    Still producing 0.2 mmscf/d from avery small (11 tonne) frac

    Testing indicates both Upper andLower Frederick Brook shale areproductive across a large area

    Green Road G-41 & B-41

    Will DeMille G-59

    McCully E67B & F-58

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    Shale Gas Assessment Elgin/McCully Area

    Independent assessment by GLJ provides a best estimate of 67 TCFof discovered resources (59 TCF net to Corridor), free gascomponent

    Upper Frederick Brook 500 meters thick, GLJ estimates 43 TCF ofgross discovered resources (TerraTek estimates 309 bcf/mi2 in the E-

    67b well)

    Lower Frederick Brook 600+ meters thick, GLJ estimates 24 TCF ofgross discovered resources (TerraTek estimates 318 bcf/mi2 in the E-67b well)

    Productivity extends widely across the basin, although basin area isrelatively small, the shale thickness means resource estimate is verylarge

    GLJ s 10% recovery factor may be conservative, based on others nowachieving >20% recoveries

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    Example Shale GasDevelopment

    Corridor holds a continuous land position across McCully/Elgin area(includes Apache farm-out lands)

    Very thick shale means large gas volumes per area providing aneconomy of scale potential

    Multiple horizontals from a single pad development. Thereforepotential to lower infrastructure/development costs, (i.e. pipelines,pads, H20 supply and handling, G&P, etc.)

    Location close to existing mainline transportation to major markets(MNP system) allows for premium netback prices potential relativeto other shale gas developments

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    Apache Canada Farm-Out

    Apache committed to undertake $25mmprogram to earn 50% working interest inthe units drilled and option program

    Apache has option to undertake further notless than $100mm program to earn 50%working interest in area wide farm-outlands (58,000 acres net), starting not laterthen J une 1, 2011

    Apache completed two horizontal wells atGreen Road G-41 and Will DeMilletargeting 1,000 meters horizontal FB

    Apache commenced frac of G-41 well onNov.7th with expectation of five days tocomplete operation and intends to moveonto Will DeMille to undertake similar

    program Target 30 day flow tests, after

    completion of five fracs per well, expectedto be scalable, results to follow

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    Shale Gas Fraccing

    ~1000 m horizontal legs in both GreenRoad & Will DeMille wells

    5 fracs in each well

    3000 4000 m3 of water per stage

    200 tonnes of proppant (sand) per stage

    Planned rate of 16 m3/min

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    Old Harry Prospect

    43,000 acres (67 mi2) of early,simple, four-way closure

    Thick oil-prone source rock, andcarboniferous coal source rock witha large fetch area

    Good reservoir rock derived fromthe Canadian Shield

    Overlying shale seal is 1000 thick

    Multi-TCF or billion bbl resourcespotential

    Six satellite seepage slicks

    Flat spots, amplitude, frequency

    and AVO anomalies within thesame horizon

    Thousands of mi2 of unexploredbasin with excellent source,reservoir and trap potential

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    Old Harry Update

    Corridor is currently solicitingpartners to drill an exploration wellon NFLD side

    Corridor is commencing planningpreparation and permitting

    documentation to support drillingexploration well within two yeartarget

    Corridor completed site survey inOctober as per budget, in order toprovide data to support drilling

    plans

    Corridors 2011 capital budgetexpected to include funds tosupport above activities

    Old Harry Prospect

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    Anticosti ExplorationUpdate

    Drilled three wells to target BlackRiver and Mingan oil plays and toevaluate shale oil potential ofMacasty (Utica)

    Drilling results showed two wellswith oil shows and no perm andone well with great perm (15,000

    bbls/d) and salt water

    Cored 27 m of Macasty fromChaloupe well, currently in fortesting; oil indications are present

    Prospective Macasty shale oilunder most of Anticosti lands

    (1.5mm gross acres)

    Corridor proceeding with partnerto solicit farm-in for shale oilexploration program

    1.5 Million Acres

    (900k Corridor, 600k Petrolia)

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    Q3 2010 FinancialResults

    $ in thousands Sept 2010 Sept 2009

    Revenues $21,694 $37,600

    Net earnings (loss) $(5,203) $3,492

    Net earnings (loss) per share- Basic $(0.059) $0.040

    - Diluted $(0.059) $0.040

    Cash flow from operations $10,112 $22,165

    Capital expenditures $20,141 $32,580

    Net working capital $1,883 $11,261

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    Q3 2010 Netback

    Sept 2010 Sept 2009

    Production (mmscfpd) 13.2 16.1

    ($/mscf)

    Average gas price $5.63 $8.08Transportation expense $1.40 $1.74

    Royalty expense $0.10 $0.38

    Production expense $0.72 $0.54

    Netback $3.41 $5.42

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    2010 Outlook

    $ in thousands Q4 2010 Dec 2010

    Production (mmscfpd) - net 13.7 13.3

    Revenues $7,000 $29,000

    ($/mscf)

    Average gas price $4.97 $5.46

    Transportation expense $1.46 $1.42

    Royalty expense $0.10 $0.10

    Production expense $0.91 $0.77

    Netback $2.50 $3.17

    Capital expenditures $2,400 $22,500

    Net working capital $2,000 $2,000

    Cash flow from operations $2,500 $12,500