harvest asset disposition - cibccm.com harvest asset disposition february 2019 offering process...

HARVEST ASSET DISPOSITIONFEBRUARY 2019

OFFERING PROCESS OVERVIEW

Harvest Operations Corp. (“Harvest” or the “Company”) has engaged CIBC Capital Markets (“CIBC”) as its

financial advisor to solicit and evaluate proposals for the sale of certain high-quality assets in Alberta and

British Columbia

CIBC CONTACTS

Investment Banking Acquisitions & Divestitures

Chris FolanManaging Director

[email protected]

Doug Ashton, P.Eng.Executive Director

Chief Engineer403-260-8654

[email protected]

Matt NorrisDirector

[email protected]

David Smith, P.Geol.Executive Director

Chief Geologist403-260-0505

[email protected]

Philip MankowskiAssociate

[email protected]

Chris Perry, P. Eng., MBAEvaluation Engineer

[email protected]

* Primary CA Contact

*

ASSET PACKAGE HIGHLIGHTS ASSET DISPOSITION PACKAGES

HARVEST ASSET DISPOSITION

1 Weighted average of identified asset packages.2 Based on GLJ Dec. 31, 2018 P+P reserves.

• 29,910 net acres• ~1,785 boe/d of high netback light to medium gravity oil (80%

oil) with associated gas from the Charlie Lake formation• Infill, step-out and EOR opportunities

Cecil - Royce

• 173,230 net acres• 1,850 boe/d of high netback, primarily light oil (96% oil) from

the Slave Point and Granite Wash formations• Extensive drilling and optimization potential, as well as

waterflood expansion

Red Earth

• Over 32,000 net acres on the Suffield military base• ~1,200 boe/d (92% oil) from the Mannville / Glauconitic

formation• Multiple step-out opportunities on undeveloped land

Suffield

• ~59,000 net acres with multi-zone potential• ~1,720 boe/d (28% oil) from multiple formations• Mature area with many operators continually exploiting new

ideas and opportunities

Sylvan Lake(excluding Duvernay)

• ~7,000 net acres of Duvernay rights• Many sections offsetting extensive delineation and

development by Vesta

Sylvan Lake Duvernay

• Over 255,000 gross (over 130,000 net) acres across northeast British Columbia

• 2018 average production of 115 boe/d (25% oil)NE BC

• 67% WI assets in Alberta and northeast British Columbia1

• Current oil-weighted production of ~6,600 boe/d (72% oil)• Estimated 2019 annual cash flow of $30 MM at strip pricing2

• Significant drilling and EOR opportunities

Overview

1

CECIL – ROYCE: OPPORTUNITY OVERVIEW

2

LOW DECLINE, OIL WEIGHTED PRODUCTION BASE• 29,910 net acres of land• ~1,785 boe/d of light to medium gravity ~25-40◦ API oil production

(80% oil) with associated gas from the Charlie Lake formation• Infill, step-out and EOR opportunities with ~30% IRR on strip pricing

LOW RISK DEVELOPMENT OPPORTUNITIES• Well established geological mapping for both Charlie Lake A and B

sands throughout the region based on offset wellbores and geophysical data interpretation

• Company lands are well situated in thicker regions with a large amount of current development providing lower risk go-forward infill and step-out development drilling opportunities, higher chance of success drilling and attractive economics

• 72 infill and step-out drilling locations identified– Including 10 Charlie Lake B locations at Royce

• Multi-well pad drilling reducing costs and provides timely development of the area

• 32 low cost frac and / or re-frac candidates identified to capture incremental production and reserves

WATERFLOOD IMPLEMENTATION POTENTIAL• Opportunity to add incremental reserves and production by initiating

enhanced recovery operations analogous to other Charlie Lake waterfloods in the area

EXTENSIVE COMPANY OWNED AND OPERATED FACILITIES• Substantial Company facilities within the area• Pipeline connected over much of the producing areas with good

existing regional infrastructure allowing for sufficient egress of both existing production and future upside growth

Developed Undeveloped Total Avg. WIGross Net Gross Net Gross Net

31.2 17.7 15.4 12.2 46.6 29.9 65.5%

Land Summary (thousands of acres)

CECIL – ROYCE: HISTORICAL PRODUCTION & FINANCIALS

3

HIGHLIGHTS:• 2018 Jan. – Sep. average production of ~1,800 boe/d with

~80% liquids weighting• Consistent production increases over the past three years

as Royce field development continues• Annualized 2018 Jan. – Sep. field cash flow of $23 MM• Realized prices continue to increase as overall product

mix changes to lighter oil• Stable, low operating costs with opportunities to decrease

through facility optimization

Production History (Mboe/d) Revenue History ($MM)

$5.1 $4.8 $4.4

$6.4

$8.2

$10.4

$9.1

–

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3

2017 2018

Reve

nue

($M

M)

Oil NGLs Gas

1.3 1.3 1.41.5

1.9 2.0

1.7

75% 74%

78% 78%80% 79% 79%

65%

70%

75%

80%

85%

90%

95%

100%

(0.2)

0.7

1.6

2.5

Q1 Q2 Q3 Q4 Q1 Q2 Q3

2017 2018

Oil/Liquids (%)

Prod

ucti

on (

Mbo

e/d)

Oil NGLs Gas % Oil/Liquids

Lease Operating Statement Summary

Daily Production Volumes 2016A 2017A Jan.-Sep. 2018AOil bbl/d 741 1,008 1,431Condensate bbl/d 25 36 39Gas Mcf/d 1,217 1,934 2,263Total boe/d 969 1,367 1,847% Oil/Liquids % 79% 76% 80%

Cash Flow

Total Revenue $MM $11.7 $20.7 $27.7Royalties $MM ($0.6) ($1.6) ($2.6)Opex $MM ($5.7) ($8.1) ($7.8)Field Cash Flow $MM $5.4 $11.0 $17.3\NetbackRealized Price $/boe $32.95 $41.43 $55.02Effective Royalty Rate % 5.0% 7.6% 9.3%Opex $/boe ($16.21) ($16.20) ($15.54)Field Netback $/boe $15.11 $22.09 $34.35

CECIL – ROYCE: RESERVES SUMMARY1

41 Numbers may not add due to rounding.

Reserves Category Oil Sales Gas NGL Total(Mbbl) (MMcf) (Mbbl) (Mboe)

Proved Developed Producing 2,066 3,367 57 2,684Proved Developed Non-Producing 254 464 10 341Proved Undeveloped 305 427 9 385

Total Proved (1P) 2,625 4,258 76 3,411

P+P Developed Producing 2,777 4,534 77 3,610P+P Developed Non- Producing 568 1,121 27 782P+P Undeveloped 595 767 13 736

Total Proved + Probable (2P) 3,940 6,422 117 5,127

2P Reserves by Category(5,127 Mboe) 2P Reserves by Product 2P Reserves by Asset

P+PDP71%

P+PDNP15%

P+PUD14%

Oil77%

Sales Gas21%NGL

2%

Royce44%

Cecil South37%

Cecil North19%

RED EARTH: OPPORTUNITY OVERVIEW

5

LOW DECLINE, OIL WEIGHTED PRODUCTION BASE• 173,230 net acres of contiguous 90% WI land position• ~1,850 boe/d of high quality Slave Point high netback, light (38◦ API) sweet oil production

(96% oil, 2% NGL’s, 2% gas)• Infill, step-out and EOR opportunities with IRR ~20% on strip pricing• Significant potential to grow the land base both through acquisitions or crown land sales• Harvest would consider a potential separate sale of the oil sands rights only (please see inset

map)



63.3 48.5 127.9 124.4 191.2 172.9 90.4%

LOW RISK DEVELOPMENT OPPORTUNITIES• Detailed geological mapping and reservoir models completed to support future

development opportunities• Excellent reservoir quality, potential for 3 cycles of development showing shallow

shelf / protected marine (cycle 1), fore-reef (cycle 2) and reef (cycle 3) environments

• 79 horizontal step-out locations identified, multiple repeatable drilling upside locations

— 33 locations assigned reserves by independent evaluator— Horizontal waterflood potential by converting ~1/3 of the locations to

injection• 10 vertical infill locations within existing Slave Point G Unit waterflood• Development potential within the Bluesky (140 locations), Pekisko (92 locations),

Clearwater and Gilwood / Granite Wash— Significant oil in place in the Pekisko and Bluesky

WATERFLOOD IMPLEMENTATION POTENTIAL• Harvest horizontal waterflood pilot operating since 2016 with excellent response in

addition to 3 successful offsetting competitor waterfloods validates full field implementation

• Approximately 1/3 of identified horizontal locations to be converted to injectors• Significant recovery potential through expansion of Loon Unit waterflood

EXTENSIVE COMPANY OWNED AND OPERATED FACILITIES• Six major facilities and associated pipelines across Company lands• Numerous single-well batteries

RED EARTH: HISTORICAL PRODUCTION & FINANCIALS

6

HIGHLIGHTS:• ~1,850 boe/d average 2018 production with ~96% oil and

98% liquids• Over $21 MM of annualized Jan. – Sep. 2018 field cash

flow• Light oil production commands a premium oil price,

insulated from WCS differentials• Execution on proposed development plan would result in

substantial operating cost reductions on a $/bbl basis as many costs are fixed

$11.9

$10.4 $9.8

$11.3 $10.9$12.3 $12.0

–

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3

2017 2018

Reve

nue

($M

M)

Oil NGLs Gas

2.32.0 2.1

2.01.8 1.9 1.8

98% 98%98% 98%

98%98%

98%

95%

96%

97%

98%

99%

100%

–

0.5

1.0

1.5

2.0

2.5

Q1 Q2 Q3 Q4 Q1 Q2 Q3

2017 2018

Oil/Liquids (%)

Prod

ucti

on (

Mbo

e/d)



Daily Production Volumes 2016A 2017A Jan.-Sep. 2018AOil bbl/d 2,420 2,004 1,762Condensate bbl/d 61 47 32Gas Mcf/d 449 287 208Total boe/d 2,555 2,098 1,829% Oil/Liquids % 97% 98% 98%

Cash Flow



RED EARTH: RESERVES SUMMARY1

7


Proved Developed Producing 3,881 294 58 3,988Proved Developed Non-Producing 491 40 8 506Proved Undeveloped 1,179 142 28 1,231

Total Proved (1P) 5,552 476 94 5,725

P+P Developed Producing 5,196 390 78 5,339P+P Developed Non- Producing 639 52 10 658P+P Undeveloped 2,865 344 68 2,990

Total Proved + Probable (2P) 8,700 786 156 8,987

2P Reserves by Category(8,987 Mboe) 2P Reserves by Product 2P Reserves by Asset

P+PDP60%

P+PDNP7%

P+PUD33%

Oil97%

Sales Gas1%

NGL2%

Red Earth

2%

Loon Lake73%

Golden10%

Evi 19%

Evi 36%


SUFFIELD: OPPORTUNITY OVERVIEW

8

LOW DECLINE, OIL WEIGHTED PRODUCTION BASE• Over 32,000 net acres mostly within the Suffield military base• ~1,200 boe/d (92% oil) from the Mannville / Glauconitic formation• Medium gravity (~17◦ API) conventional oil production

LOW RISK DEVELOPMENT OPPORTUNITIES• Company lands are well situated over well established highly

productive Glauconitic shoreface sand trends– Significant development has occurred, validating the play and

heavily reducing the risk of future infill / offset development – Low risk horizontal locations supported by offset drilling and

production– 19 horizontal locations identified on Company lands

• Ability to grow production within other Lower Mannville target formations– Secondary potential within the Sunburst with 7 horizontal

locations identified• Extensive Company seismic reduces risk on all future development



14.6 14.1 18.1 18.1 32.7 32.1 98.2%

SUFFIELD: HISTORICAL PRODUCTION & FINANCIALS

9

HIGHLIGHTS:• Over ~1,200 boe/d average 2018 production with ~92% oil• ~$10 MM of annualized Jan. – Sep. 2018 free cash flow• Medium oil production close to sales point minimizes

transportation costs

Daily Production Volumes 2016A 2017A Jan.-Sep. 2018AOil bbl/d 1,585 1,253 1,129Condensate bbl/d 15 13 5Gas Mcf/d 640 582 552Total boe/d 1,707 1,362 1,226% Oil/Liquids % 94% 93% 92%

Cash Flow


$5.5 $5.2 $5.0$5.4

$4.7

$6.0$5.7

–

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3

2017 2018

Reve

nue

($M

M)

Oil NGLs Gas

1.5

1.4 1.4

1.31.3

1.21.2

93%93%

93%

92%

93% 93%

92%

91%

92%

93%

94%

95%

0.8

1.0

1.2

1.4

Q1 Q2 Q3 Q4 Q1 Q2 Q3

2017 2018

Oil/Liquids (%)

Prod

ucti

on (

Mbo

e/d)




SUFFIELD: RESERVES SUMMARY1

10


Proved Developed Producing 2,489 1,118 15 2,690Proved Developed Non-Producing 16 8 0 18Proved Undeveloped 180 103 1 198

Total Proved (1P) 2,685 1,229 16 2,906

P+P Developed Producing 3,400 1,527 21 3,676P+P Developed Non- Producing 21 10 0 23P+P Undeveloped 600 342 5 662

Total Proved + Probable (2P) 4,021 1,879 26 4,360

2P Reserves by Category(4,360 Mboe) 2P Reserves by Product

P+PDP84%

P+PDNP1%

P+PUD15%

Oil92%

Sales Gas7%

NGL1%


SYLVAN LAKE (EXCLUDING DUVERNAY)

11

LOW DECLINE PRODUCTION BASE• ~59,000 net acres of land with multi-zone potential• ~1,720 boe/d (28% oil / liquids) from multiple formations

MULTI-ZONE POTENTIAL• Mature area with many operators continually exploiting new ideas and

opportunities • Numerous play types within the area with Company identified

opportunities in the:– Cardium– Viking– Ellerslie– Pekisko– Leduc

• Potential to grow the land base both through acquisitions and crown / freehold land sales



91.9 53.7 8.4 5.1 100.3 58.8 58.6%



- - 17.0 6.9 17.0 6.9 40.6%

SYLVAN LAKE DUVERNAY

12

SIGNIFICANT COMPANY LAND POSITION WITHIN THE EAST SHALE BASIN• ~7,000 net acres of Duvernay (DVRN) rights• Many sections offsetting extensive delineation and development by Vesta

Recent Duvernay Land Sales

RECENT DUVERNAY ACTIVITY• Large land sale posting and sales through 2017 and 2018

targeting primarily Duvernay rights are immediately offsetting or intertwined with Company acreage– Suggests high interest in the play and increases the value to

current landholders significantly– Offsetting lands in the East Shale Basin have sold for over

$5,000/ha

2017 Land Sale$5,275/ha



NORTHEAST BC

13

• Over 255,000 gross (over 130,000 net) acres of land across northeast British Columbia

• Very diverse asset base with productive potential throughout the stratigraphic column

• 2018 average production of 115 boe/d (25% oil)



107.5 47.5 149.6 84.5 257.1 131.9 51.3%

PROCESS OVERVIEWDISCLAIMERThis document is confidential and has been prepared by CIBC Capital Markets. In preparing this presentation, CIBC Capital Markets has relied without any independent verification on information provided or that is publicly available. The information and any analyses in this document are preliminary and is not intended to constitute a “valuation,” “formal valuation,” “appraisal,” “prior valuation,” or a “report, statement or opinion of an expert” for purposes of any securities legislation in Canada or otherwise. We are not legal, tax or accounting experts and we express no opinion concerning any legal, tax or accounting matters or the sufficiency of this document for your purposes. Prospective counterparties are responsible for their own due diligence investigation in respect of any investment or joint venture in the assets described herein. This printed document is incomplete without reference to discussions and any related written materials that supplement it. These materials are confidential and are intended solely for your benefit and for your internal use only and may not be reproduced, disseminated, quoted from or referred to in whole or in part at any time, in any manner or for any purpose, without obtaining the prior written consent of CIBC Capital Markets in each specific instance. CIBC Capital Markets employees are prohibited from offering to change or otherwise influence any research report, rating or price target to any company as inducement for the receipt of any business or compensation. This document does not constitute an offer or solicitation to buy or sell any securities in any jurisdiction where such would be prohibited. CIBC World Markets Inc. is a legal entity name. CIBC Capital Markets is a trademark brand name under which different legal entities provide different services under this umbrella brand. Products and/or services offered through CIBC Capital Markets include products and/or services offered by the Canadian Imperial Bank of Commerce, the parent bank of CIBC World Markets Inc. and various other subsidiaries of the Canadian Imperial Bank of Commerce. Services offered by the Canadian Imperial Bank of Commerce include corporate lending services, foreign exchange, money market instruments, structured notes, interest rate products and commodities, equity options and OTC derivatives. Canadian exchange-traded equity options are executed through CIBC World Markets Inc. Equity and fixed income securities are executed through CIBC World Markets Inc. and other directly or indirectly held subsidiaries of CIBC. CIBC World Markets Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. CIBC World Markets Corp. is a member of the Financial Industry Regulatory Authority. CIBC World Markets plc is regulated by the Prudential Regulation Authority and Financial Conduct Authority. CIBC World Markets Securities Ireland Limited is regulated by the Central Bank of Ireland. CIBC Australia Ltd is regulated by the Australia Securities and Investment Commission. CIBC World Markets (Japan) Inc. is a member of the Japanese Securities Dealer Association. Canadian Imperial Bank of Commerce, Hong Kong Branch, is a registered institution under the Securities and Futures Ordinance, Cap 571. Canadian Imperial Bank of Commerce, Singapore Branch, is an offshore bank licensed and regulated by the Monetary Authority of Singapore. All values are expressed in Canadian dollars, unless otherwise noted.

It is the intention of Harvest and CIBC to conduct the process such that it minimizes any disruption to Harvest’s operations. Interested parties should not contact Harvest directly regarding any aspect of the process. All communications, enquiries and requests for information relating to the process should be directed to one of the CIBC individuals listed herein.Signed Confidentiality Agreements (“CA”) should be forwarded by email or courier to CIBC. Once a CA has been executed, confidential information will be made available to qualified parties via a Virtual Data Room (“VDR”).The offering process timeline will be communicated to counterparties after they have executed a CA.

harvest asset disposition - cibccm.com harvest asset disposition february 2019 offering process...

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