Can This Idea Save the Orphaned Wells?

By
Keith Schaefer
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by Elizabeth Lappin, P.Geo
Elizabeth is the Geothermal Ambassador Coordinator at CanGEA, and the Founder of Castle Rock Consulting Ltd. 

In Part 1 of this series on geothermal energy, I outlined the potential of it for both the oil and gas industry and consumers.  It’s a feel-good story, that can get a lot of leverage with only a little co-operation.

But there’s also a more direct angle for the industry–geothermal heat could be marketed as a solution to the orphan well problem in Alberta.

Wells owned by defunct companies often become orphaned because there’s no cash leftover for the abandonments. According to the Redwater ruling from earlier in 2016, the bank will get paid first when an oil and gas company goes bankrupt. And that means that a bankrupt company’s well abandonment liabilities may end up with no owner – meaning they are “orphaned”.

With a current total of 1360 orphaned wells to be abandoned as of this week, there’s a growing fear that the increasing number of orphan wells could one day overwhelm the industry-funded orphan well fund.

This would leave taxpayers to pick up the tab for the P&A—Plug and Abandon—liability of wells with no owner – some of which may cost over a quarter million dollars each to remediate.

Then there’s also smaller producers in financial trouble due to LMR (Licensee Management Ratio) obligations.  The LMR is a basic ratio of assets (measured in netbacks, over a three-year rolling average) over liabilities. Anything less than a ratio of 2, and a company has to put money up to the bank in the form of bonds to protect against their growing liability.

These companies are looking to geothermal retrofits for rebranding their liability wells as assets. But not all wells are created equally, nor do they have equal geothermal potential.

The Alberta government has commissioned a “Filtering Study”, to determine which of the over 440,000 wells in the province are best suited to convert to geothermal.

CanGEA (www.cangea.ca) is doing the work, which is expected to be finished and submitted to the Alberta government in the winter of 2017. According to Alison Thompson, the chair of CanGEA, “there is no technical barrier” to these conversions.

The barrier, she explains, “is  a policy barrier. We need the Alberta government to legally define who owns the heat”.  Thompson expects that the study will ultimately “bring the materiality of the opportunity to light.”

There are several factors to consider when it comes to well suitability, including bottom-hole temperature, depth, casing size, geology, age of the wellbore, and casing integrity.

These are just a few.  Newer wells will carry less risk than decades-old wells that may require expensive wellbore repairs before conversion.

Deeper wells generally are hotter, and should yield better heat flow. Whether the bore will be producing formation fluids, or act as a single borehole heat exchanger isolated from the formation is another consideration.

Finally, who’s going to use the heat? And all of this begs the question – just how big, or small, is this geothermal opportunity in the oil patch, really?

The filtering study, if it is made public by the government, can help key stakeholders – producers, geothermal developers, community stakeholders and heat market end-users – understand both their geothermal opportunity and risk relating to geothermal retrofits.
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The Deep Basin in Alberta, an area with thousands of deep, hot wells, has been the focus of ongoing geothermal research at the University of Alberta.

The study has engaged several municipalities including Grand Prairie, Hinton and Fox Creek to understand the size of the geothermal prize in thermal megawatts, and perhaps most importantly, heat markets and end-users.

Deep Basin players such as Tourmaline (TOU-TSX) and Peyto (PEY-TSX), in addition to heat-intensive industry in these areas (who pay a premium on heat distribution costs) potentially have the most to gain from a filtering study like CanGEA’s.

And there are already projects in the works. At the Leduc #1 Disovery Centre, an old water injector well is being converted into a space heating well.

The town of Hinton, nestled in the foothills, is working with Alberta-based Epoch Energy to assess potential for geothermal district heat in the municipality. Both of these projects will rely on strategic partnerships with E&P companies and oil patch service companies to make progress.

And that’s why this is buzzworthy.

With oil and gas companies, geothermal developers, regulatory bodies and stakeholders all on board together – there’s a real chance of hitting this one way out of the park.

Keith

OPEC Is Smarter Than You Think

By
Keith Schaefer
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The core strategists of OPEC are brilliant.

In a nutshell, they’ve done TWO incredibly smart things.

One is that by timing their much publicized production cuts to start in January 2017—when oil demand starts a steep rise—they really don’t have to cut at all.

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As you can see on the chart, oil demand rises very steadily from February to August—each and every year like clockwork. Add an increase of 1-1.2 million barrels a day into that seasonality, and voila, the 1.2 million barrel a day cut essentially disappears.

Over the last five years, Saudi crude production in October averaged 9.827 million bopd.  Over the same five years, January production averaged only 9.31 million bopd — a decline of 513,000 bopd, almost exactly inline with their 486,000 bopd production cut.

Total OPEC production is similar averaging 32.03 million bopd in October over the past five years, then declining 1.24 million bopd to 30.79 in January.

I told you OPEC is smarter than you think.

But the really smart thing was…by intentionally announcing just a six month production cut, they flattened the forward curve for oil.

That greatly reduces the incentive for US producers to hedge—ok, well, maybe it just reduces their price.

If oil producers want to increase their debt levels to drill wells, they are required to do some level of hedging.

The Saudis don’t have to do that.  They can sell at spot or front month prices all day long.  So when the front month oil contract is up 13%, but the total curve going out two years is only up 7%–the Saudis get ALL the benefit of the oil price rise.

But the US shale producer who wants to ramp up production only gets 7%.
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Had OPEC agreed to just freeze production but do it indefinitely…it’s quite likely the back end of the futures curve—those out 12-24 months—would have risen a lot more.

The reason for that is–oil demand is rising a steady 1+ million barrels a day per year. And even if natural annual declines in production are only 3%–that’s 2.79 million barrels day less production.  That’s a swing of 3.79 million barrels a day—each year.  That gets rid of 500 million barrels in a hurry.

The Market would price in much higher oil prices very quickly in that scenario—which means the back end of the curve would rise—a lot.  That is called contango.  And the contango would be steep—meaning the guesstimated oil price 12-24 months out would be—a lot—higher.

And US shale producers could hedge that out.  But with just a 6 month cut creating such a flat curve—because who knows if OPEC will get along well enough to keep the cuts in place—hedging gains are much more limited.  This helps keep production growth down in the US.

I think it’s a brilliant strategy.  I bet they only announce 3 month extensions, and flatten the curve even more.  Why wouldn’t they?

The other side effect of this deal is…the Market will now view $44/barrel as OPEC’s line in the sand. There is an effective $44 OPEC put in the market now.  As dysfunctional as OPEC may be (though I think they look pretty smart now), the Market believes OPEC will do something about oil prices if they get back down to the $44/b it was at when this deal was crafted.

EDITORS NOTE--OPEC is smart, yes, but The West still won the oil war.  And that victory is because some companies lowered their costs by an incredible amount in the last two years–but none as much as my #1 Oil Stock–whose financials show they find and develop oil for $2/barrel.  TWO DOLLARS.  Those are the companies I want in my portfolio–the name and symbol is right HERE.

Keith

Christmas Has Come Early for Canadian Oil Producers—FOUR times!

By
Keith Schaefer
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Talk about being on a roll!  Everything is now coming up aces for Canadian oil producers.

Christmas has come early this year.

I’ll tell you Three Good Things that have happened for these companies.

And perhaps more importantly The One Thing that hasn’t happened.

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Early Christmas Present #1 – A Donald Trump Victory

No one in Calgary is throwing a farewell party in honour of outgoing US President Barack Obama (unless outgoing is the theme).

After taking his sweet time with the future of the Keystone XL pipeline through a series of regulatory delays Obama just went ahead and put the kibosh on it in November of 2015.

As we all know there is a very new sheriff in town with a very different view from his predecessor on most things.  One of which would seem to be the Keystone XL

During his campaign when asked about the Keystone XL, President-Elect Trump said that he would “absolutely approve it, 100 per cent,”  There was a bit of a caveat attached to that–Trump also said he would ‘get a better deal’ in exchange for that approval.  But he also said that Mexico would be paying for a certain wall so we will have to see about that.

With Trump in place and Republicans now controlling both houses of U.S. Government–approval of the Keystone XL seems very likely.

Republican lawmakers had already attempted to push approval through Congress, so we know where the party stands on the issue.

Keystone’s benefit to Canadian producers would be its ability to deliver another 830,000 barrels of oil from Western Canada to the Gulf Coast Refineries.

That additional pipeline capacity would help reduce the discounted price that Canadian producers receive for their crude by as much as $5 per barrel according to analysts.  That $5/b would go straight to the bottom line—and get a 6-8x multiple in heavy oil stocks. It’s very material.

Early Christmas Present #2 – Finally Some Canadian Pipelines

The Trump victory came first.  Good news closer to home came second.

On November 29, 2016 Prime Minister Trudeau announced that the federal government would approve both Enbridge’s $7.5 billion Line 3 pipeline–a replacement/expansion on existing right of way–and the $6.8 billion Kinder Morgan Trans Mountain Project, also expanding an existing right of way.

The Line 3 project is intended to restore the pipeline’s original capacity of 760,000 barrels per day and allow for further expansion to 915,000 barrels per day.  Line 3 is nearly 50 years old and its current maximum output is only 390,000 barrels per day.

The Trans Mountain project will twin an existing pipeline and increase capacity from the current 300,000 barrels per day up to 890,000 barrels per day. Most importantly, it allows 900,000 bopd of Canadian oil to be sold on the world market, and NOT be beholden to US refineries.

Combined, these two pipeline expansions can add 1,000,000 bopd of pipeline capacity.  Then add in the Keystone XL and Canada’s pipeline situation has dramatically improved.

But of course there is more good news which came from a certain cartel…..

Early Christmas Present #3 – An OPEC Production Cut

After two full years of continuing to crank up production into an already oversupplied market the gang at OPEC reversed course and has agreed to a production cut.

Santa Claus himself couldn’t have thought of a better gift.

Better still, the oil market believes that OPEC is serious judging by the price reaction.

The OPEC agreement will see the countries reduce production by 1.2 million barrels per day by January.  Saudi Arabia will cut by 486,000 barrels per day, the UAE plus Kuwait a combined 270,000 barrels per day and even Iraq will join in with a 210,000 barrel per day reduction.

Non-OPEC member Russia will cut by 300,000 barrels per day to make up the rest.

We can speculate all day about whether they will actually follow through with the cuts, but the fact is that last time they announced a cut in 2008 they most certainly did.

The Shocking (And Important) Part Is What Hasn’t Happened

The Canadian dollar could not have asked for a better news trifecta.  Each one of these events by themselves is major news for Canadian oil prices and therefore the economy.  To have all three happen in one month is incredible; remarkable.

Canada is a petro-currency; there is a chart below that shows how closely oil and the Canadian dollar–affectionately called the ‘Loonie’–trade with each other.

This huge set of big oil-related news for Canada should be very strong for the Loonie–yet it can barely get off the mat.

Canadian Dollar per 1 United States Dollar

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Against the U.S. dollar the Canadian loonie has hardly moved from where it was when the month of November started–and it’s only up one penny in the last couple weeks.  You sure wouldn’t guess Canada got 1 million barrels of new pipelines–half of which will head to Asia–from the CAD $ chart.

Making this even more surprising is the fact that the price of oil has spiked on the OPEC news.  WTI oil was $45 prior to the OPEC announcement and has since jumped by $6.50 or 14%.

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Given how closely tied the Canadian dollar has been to the price of oil over the past five years a person would have expected that the Canadian dollar would directly follow this oil price spike higher.

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It hasn’t–and that is great news for Canadian oil producers.

No reaction from the loonie is the best reaction–the best Christmas present of all–for Canadian oil companies.

While these companies have revenues that are based on the price of oil in U.S. dollars–almost all of their expenses are in Canadian dollars. That is especially true for Canadian producers who have all of their debt in their home currency.

Here is Canadian oil price pre- and post-OPEC announcement:

Pre-announcement – $45 WTI x 1.34 USD/CAD = $60.30 CAD per barrel

Post-announcement – $51.50 WTI x 1.33 USD/CAD = $68.50 CAD per barrel

Those prices exclude the differential that Canadian producers receive, but the percentage increase of 14% is exactly the same.

Most importantly–almost all this 14% extra revenue goes right to the bottom line for the producers–since costs for these companies are in Canadian dollars and haven’t changed.

If these three major news announcements in one month can’t make the loonie fly–what really could?  To me it means the Canadian dollar will almost certainly stay low in the oil price range OPEC desires.

And that’s a great Christmas present to oil producers and their investors.

EDITORS NOTE–It wasn’t just US shale that Beat The Saudis–it was producers like this one, who have finding and development costs of $2/barrel.  The Saudis never saw it coming.  It’s my favourite oil producer in the world, and I think their next set of drill results are a game changer for the stock.  The name and symbol are right HERE.

Keith

Oil Stocks Traded Better Than You Think Yesterday

By
Keith Schaefer
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Oil stocks traded REALLY well yesterday.  You could just say ‘DUH!’ but there’s more to it than that.

Through the day, weakness—what little of it there was—was bought. Stocks opened higher and kept running.  Most closed at or near their highs.

The Biggest Gains were reserved for those stocks that had the biggest short positions—usually those with either high debt levels or a high cost of production.

But next set of stocks to get Big Love From The Market…are the high quality small caps.  Those with good land positions in the best plays.

Like my favourite right now, which also is fracking its first Permian well in the next two weeks.

It’s not just in the Permian, it’s in the best part of the Delaware Basin where Silver Hill was just bought, and where Resolute Energy (REN-NYSE; $3-$33 in five months) is.

It’s the biggest potential mover I see on the board right now.  Get the name and symbol HERE.

The Oil and Gas Industry is in Hot Water (and That’s a Good Thing)

By
Keith Schaefer
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by Elizabeth Lappin, P.Geo
Elizabeth is the Geothermal Ambassador Coordinator at CanGEA, and the Founder of Castle Rock Consulting Ltd. 

Alberta’s oil and gas wells produce thousands of barrels of water each day. This water is considered a waste by the oil patch, and operators pay to send it away by pipeline or truck.

But what if that water had a value? Albertans spend a lot of money heating water with natural gas. And yes – natural gas is pretty cheap right now – but costs are about to jump $1 per GJ in 2017, and an additional $0.50 in 2018 due to carbon taxes. Delivered natural gas costs in Alberta could reach over $8-10 per GJ within two years.

And that means geothermally-derived gigajoules will become cost-competitive in certain markets. Hot salty brine, or “formation water”, produced alongside oil and gas at temperatures above 30oC, can be used in a variety of direct-use applications.

These include central district heating, greenhouses, pasteurization, and even brewing beer. 46oC geothermal waters heat the popular Temple Gardens Mineral Spa from a well doublet in the Williston Basin.

Higher temperatures waters above 90oC are capable of generating power.

thermal
Geothermal Direct Use Applications & Opportunities Report, CanGEA, 2014

30oC isn’t hard to come by at depths over 1km, which means there are almost 240,000 wells to choose from, either operating or not, in Alberta alone. While not all these wells will be suitable for geothermal conversion, even a small fraction represent a huge opportunity.

The geothermal industry is well poised to take advantage, and oil and gas to geothermal well conversion is not far off. The Living Energy project in Devon, AB, will soon convert an old water disposal well near Leduc #1 (the well that kick-started Alberta’s oil industry) into a geothermal heat well, which will provide up to 120,000 BTU of heat for space heating and vertical farming.

In the Williston Basin in North Dakota, a demonstration oil and gas and geothermal co-production pilot is now producing 250kW of geothermal power. This is the same Williston Basin that stretches up into Saskatchewan with much of the same geology.

The joint venture project by the University of North Dakota and Continental Resources came online in April of this year, with the future intention of using the technology to deliver decentralized power to oil patch operators as an alternative to propane or diesel-sourced alternatives.

Over 80,000 wells in Alberta are currently inactive. Some of these wells were dusters to begin with, and some of them produced oil or gas over several decades, eventually declining to uneconomic flow rates. Many of these wells now sit idle in Canada, while operators await a favourable price environment, and delay abandonment costs (which range from 10’s to 100’s of thousands of dollars).

In light of the increase in orphaned wells due to bankruptcy in Alberta, it’s especially pertinent to consider recycling the wells into heat resource money-makers. Retrofit costs will vary depending on the application: Hot water can be circulated using a well “doublet” (a production and injection well), or secondary fluids can be circulated inside single wellbore using a U-tube or dual pipe installation. Heat is extracted from water using a heat exchanger.

A regulatory framework is in development by the Alberta provincial government, which will include new rules around permitting geothermal wells and “mineral” rights in the form of heat.

The oil patch has tremendous geothermal heat resources. Existing wells that are a liability to the oil patch and a nuisance to farmers and landowners can be converted into greenhouses, growing year-round fresh, local organic produce.

But the potential doesn’t stop there. Central district heat for municipalities, aquaculture, beet sugar extraction – or really any thermally intensive industry at all — can benefit from this resource, and that doesn’t even include the power opportunity.

The Oil Patch is in hot water, and the only question is: Who’s going to make money on it first?

OPEC says–“America First”

By
Keith Schaefer
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Who is saying “America First” when it comes to oil?

OPEC is!  And it means US oil stocks—especially in the Permian Basin in Texas–should have a great run in the coming months.

It’s so simple—let me explain.

The rising oil price is now pricing in a production cut of 1 million barrels a day or more from OPEC.

The Permian is the only US oilfield that makes GREAT money at US$50 oil.  Other basins may get by—but the Permian has excellent returns at that price.

OPEC is basically standing aside and opening the door for Permian oil producers to increase production by 1 million barrels a day—and they will be rushing in to fill that gap.

Land prices in the Permian have soared.  Stock prices in the Permian have soared.

But thanks to OPEC, the next leg up in Permian valuations—for both land and stocks—is now coming.

My favourite Permian stock has not one but TWO major catalysts coming—I expect both to happen in the next 6 weeks—before year end.

Both catalysts are massive game changers for this company—they will completely re-rate the stock.

My subscribers and I have been waiting for months—but the time is here.  I know there is great value in this stock—its neighbor was just bought for almost $50,000 per acre.

And now I expect these two catalysts to monetize that value for me—in a very, very short period of time.  Get the name and symbol of this Permian player right HERE:

Trump’s “America First” Energy Plan Means… Canada

By
Keith Schaefer
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It’s quite plausible that The Biggest Winner in Donald Trump’s America First energy plan is–Canadian heavy oil producers.

In Trump’s “An America First Energy Plan” he laid out his vision for the country’s energy policies going forward.  This plan had seven key points:

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  • Make America energy independent, create millions of new jobs, and protect clean air and clean water. We will conserve our natural habitats, reserves and resources. We will unleash an energy revolution that will bring vast new wealth to our country.
  • Declare American energy dominance a strategic economic and foreign policy goal of the United States.  
  • Unleash America’s $50 trillion in untapped shale, oil, and natural gas reserves, plus hundreds of years in clean coal reserves.
  • Become, and stay, totally independent of any need to import energy from the OPEC cartel or any nations hostile to our interests.
  • Open onshore and offshore leasing on federal lands, eliminate moratorium on coal leasing, and open shale energy deposits.
  • Encourage the use of natural gas and other American energy resources that will both reduce emissions but also reduce the price of energy and increase our economic output. 
  • Rescind all job-destroying Obama executive actions. Mr. Trump will reduce and eliminate all barriers to responsible energy production, creating at least a half million jobs a year, $30 billion in higher wages, and cheaper energy.

I’ve bolded the part of the plan that could have big implications specifically for Canadian heavy oil producers.
If Trump means to completely eliminate all oil imports from OPEC nations within the next four years Canadian heavy oil will have to be a critical part of the plan.

Remember – The United States is Still a Major Oil Importer

The Shale Revolution did not free the United States from imported oil—in fact, it didn’t even come close.

In August 2016 the US imported a whopping 10.3 million barrels of oil per day.  That is almost as much oil as Russia or Saudi Arabia produce.  Of those 10.3 million barrels the largest source was Canada at 3.8 million barrels followed by 3.4 million barrels from the nations of OPEC.

That’s right—to carry out President Elect Trump’s plan, the US would have to replace 3.4 million barrels a day.
Now, how can that be you ask?  It’s because the US uses A LOT more oil than any other country on the planet.  The US is 25% of the world’s economy, after all.

In 2015 US consumption averaged 19.4 million barrels per day—far more than the country produces.  At its peak in early 2015 US oil production did not even reach 10 million barrels per day.  From that peak production has fallen to 8.7 million barrels per day.

In its entire history, US oil production has exceeded 10 million barrels per day for only two months in 1970.

Without much higher oil prices, US shale production—about 4 million barrels per day now—could never completely replace OPEC’s 3.4 million barrels.

Even if it could—it can’t provide the heavy oil that much of the America’s refinery complex requires.

That refinery complex has been built up over a period of 40 years with tens of billions of dollars of investment and can’t be switched over to light-oil quickly.

Of the 3.4 million barrels that the U.S imports from OPEC every day, 700,000 are heavy oil from Venezuela.   If they get banned, what replaces that?

Mexico is a heavy oil supplier but the country has little ability to increase production in the near term.  In fact Mexican production is down almost 1.5 million bopd since 2004 to 1.944 million bopd.

PEMEX—Mexico’s state oil company—forecasts 2017 oil production will drop  8.7% or 186,000 b/d vs 2016 in its newly released 2016-2021 business plan.  This is a country that couldn’t grow production with oil at $100 per barrel so it is hard to imagine it doing it now under any circumstances.

If Mexico can’t pick up the slack there is really just one country that can–Canada.

If Canadian heavy oil is to replace Venezuelan barrels the first thing that needs to happen is pipeline expansion.

The Gulf Coast refineries can’t refine heavy oil if it can’t get to them.

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That means that TransCanada’s (TRP-NYSE/TSX) Keystone XL pipeline is likely required and Trump has already weighed in on the controversial pipeline.  In his May 26 speech where he outlined his America First Energy Plan he said about the Keystone XL “I would absolutely approve it, 100%, but I want a better deal”.

The Keystone XL had a proposed capacity of 830,000 b/d and could clearly replace pretty much all of the US heavy oil imports from OPEC.

If President-Elect Trump carries out his plan, it couldn’t come at a better time for the beleaguered Canadian heavy oil industry.  If it wasn’t for bad luck they would have no luck at all—and it’s about to get worse.

From big price discounts to lack of pipeline space to a real threat from environmentalists to a massive forest fire—everything has gone against Canadian heavy oil companies for a long time.

Canadian heavy oil always trades at a discount to WTI, which is a light oil.  This year that discount has been a steady US$12-$15/barrel—due to Enbridge creating some incremental capacity and the fires in Fort MacMurray reducing supply for a long stretch this year.

But these discounts can blow out (i.e. the price drops a lot more) when pipeline capacity gets tight.

And that is starting to happen again, as it did in 2014.  In 2015 that range was much wider at $10.00 per bbl and 2014 was even wider at $16.00 per bbl.

Heavy oil production is about to increase due to legacy oil sands investments coming on-stream.

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That is almost 500,000 bopd!  And since early 2015–a total of 291,500 bopd of oilsands projects have come online from 11 different projects.

The Canadian industry is already gearing up for lower heavy oil prices–everyone is dusting off their railcars, which haven’t been used for over a year now.   But the industry is expecting that these heavy oil discounts will blow out big enough to make it economic to ship heavy crude to the Gulf Coast by rail again.

Unless President-Elect Trump puts his America First plan to work, helping Canadian producers.

Keith

Three Themes to Change Your Energy Views

By
Keith Schaefer
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THREE THEMES TO CHANGE YOUR ENERGY VIEWS

Why Oil and Natural Gas Should Both Be Stronger To 2020

What happens to oil prices if OPEC does not co-ordinate a cut in oil production?  What happens to natural gas prices if Old Man Winter doesn’t show up again this year?

Energy strategist Dan Tsubouchi has some ideas for you to consider if these questions are taking up too much mental space in your head.

Tsubouchi, from Stream Asset Financial Management in Calgary, takes a longer term view of what’s happening in oil and natural gas markets. In his October presentation to my subscribers at the Vancouver Subscriber Investment Summit (SIS), he gave us some detailed data that makes one thing clear: there will be a lot of opportunity in energy in the coming five years.

One thing I like about Dan’s research is that he combs the technical media, and the middle-eastern media–and the technical middle-eastern media to dig up facts and trends I don’t find anywhere else.  Me and 350 other investors got a private screening of his latest thoughts–and I’m sharing them with you now.  He highlights three themes that he thinks are being overlooked in the energy markets.

Now, before you click on the link to Dan’s 18 minute presentation, you really are supposed to read the disclaimer below from Stream Asset Financial Management (just like you all do with every investor presentation you see on the web, right?).

First, here is the link to Dan’s video: http://bit.ly/3-Themes-to-Change-Your-Energy-Views

Second, here is the disclaimer:

This presentation may contain forward-looking information relating to capital expenditures, economic predictions, cash flow, investment payouts, valuations, commodity price predictions and other matters. These statements relate to future events or future performance. Forward-looking statements are often, but not always, identified by the use of words such as “anticipate”, “budget”, “plan”, “estimate”, “expect”, “forecast”, “may”, “will”, “project”, “potential”, “target”, “intend”, “could”, “might”, “should”, “believe” and similar expressions. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking statements.Although we believe that the expectations forward reasonable there can be no assurance that reflected in the forward-looking statements are reasonable, such expectations will prove to be correct. We cannot guarantee future results, level of activity, performance or achievements and there is no representation that the actual results achieved will be the same, inwhole or in part, as those set out in the forward-looking statements. The forward-looking statements contained in this presentation are expressly qualified by this cautionary statement. We undertake no obligation to update or revise publicly any forward-looking statements except as required by applicable securities legislation. The forward-looking statements made herein relate only to events or information as of the date on which the statements are made. The reader is cautioned not to place undue reliance on forward-looking statements.
Some of the risks and other factors that could cause results to differ materially from those expressed in the forward-looking statements include, but are not limited to: general economic conditions in Canada, the United States and globally; governmental and environmental regulation of the oil and gas industry; geological; unanticipated operating events; the availability of capital on acceptable terms; weather conditions, resulting reserves production, ability to tie-in production, decline rates, commodity prices, exchange rates, interest rates the need to obtain required approvals from regulatory authorities; stock market volatility; volatility in market prices for commodities; liabilities inherent in oil and gas exploration operations; and changes in tax laws and incentive programs relating to the oil and gas industry. Readers are cautioned that this list of riskfactors should not be construed as exhaustive and the forward-looking statements contained herein speak as of the date of this presentation.
The material assumptions applied are: (i) volumetricson infrastructure; (ii) reserves and production are within expectations; and (iii) oil prices remain at or above their current expected levels.
The information contained in this presentation has been solely for informational purposes and is only being delivered to a limited number of persons. The presentation has not been independently verified and the information contained within is subject to updating, completion, revision, verification and further amendment. The presentation does not purport to contain all information that a prospective investor may require. While the information contained herein has been prepared in good faith, neither the Fund nor its limited partners, directors, officers, agents, employees, or advisors give, has given or has authority to give, any representations or warranties (express or implied) as to, or in relation to, the accuracy, reliability or completeness of the information in this presentation, or any revision thereof, or of any other written or oralinformation made or to be made available to any interested party or its advisers (all such information being referred to as “Information”) and liability therefore is expressly disclaimed. Accordingly, neither the Fund nor any of its limited partners, directors, officers, agents, employees or advisers take any responsibility for, or will accept any liability whether direct or indirect, express or implied, contractual, tortuous, statutory or otherwise, in respect of the accuracy or completeness of the Information or for any of the opinions contained herein or for any errors, omissions or misstatements or for any loss, howsoever arising from the use of this presentation. In furnishing this presentation, the Fund does not undertake or agree toany obligation to provide the recipient with access to any additional information or to update this presentation or to correct any inaccuracies in, or omissions from, this presentationwhich may become apparent.
This presentation does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer to subscribe for or purchase any securities in the Fund, nor shall it, or the facto of its distribution, form the basis of, or be relied up in connection with, or act as any inducement to enter into, any contract or commitment whatsoever with respect to such securities.
This presentation should not be considered as the giving of investment advice by the Fund or any of its limited partners, directors, officers, agents, employees or advisors.  Each party to whom this presentation is made available must make its own independent assessment of the Fund after making such investigations and taking such advice as may be deemed necessary.   In particular, any estimates or projections or opinions contained herein necessarily involve significant elements of subjective judgment, analysis, and assumption and each recipient should satisfy itself in relation to such matters.
The information in this presentation was prepared and obtained by Fund, including from internal sources which are not independent. Such information is provided as at the date hereof and may not have been prepared in accordance with the Canadian Oil & Gas Evaluation Handbook or by a qualified reserves evaluator or auditor.
Certain disclosure in this presentation may constitute “anticipated results” for the purposes of National Instrument 51-101 of the Canadian Securities Administrators because the disclosure in question may, in the opinion of a reasonable person, indicate the potential value or quantities of resources attributable to assets. Without limitation, the anticipated results disclosed in this presentation include certain disclosures with respect to estimated ultimate recoveries and future flow rates. Anticipated results are subject to numerous risks and uncertainties, including various geotechnical, geological, technical, operational, engineering, commercial and technical risks. In addition, the geotechnical analysis and engineering to be conducted in respect of such assets is incomplete. Such risks and uncertainties may render some such assets uneconomic or maycause the anticipated results disclosed herein to be inaccurate. Actual results may vary, perhaps materially.
The delivery or distribution of this presentation in or to persons in certain jurisdictions may be restricted by law and personsinto whose possession this presentation comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the laws of the relevant jurisdiction.
The Fund’s securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or applicable state securities laws, and may not be offered or sold in the United States unless the securities are registered under the U.S. Securities Act, or an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws is available. This presentation shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state in the United States of America in which such offer, solicitation or sale would be unlawful.
Neither the communication of this presentation nor any part of its contents is to be taken as any form of commitment on the partof the Fund to proceed with any transaction. In no circumstances will the Fund be responsible for any costs, losses or expenses incurred in connection with any appraisal or investigation by you of the Fund.
In Canada, this presentation does not constitute, of form part of, any offer or invitation to sell or issue, or any solicitationof any offer to subscribe for or purchase any securities in the Fund, nor shall it, or the fact of its communication, form the basis of, or be relied upon in connection with, or act as any inducement to enter into, any contract or commitment whatsoever with respect to such securities. No securities regulatory authority in either the United States of America or Canada has passed upon the securities described herein or reviewed this presentation.
Neither this presentation nor any copy of it may be transmitted into the United States of America or Canada or be distributeddirectly or indirectly, in the United States of America or Canada, or to any resident thereof except in compliance with the applicable securities laws. Any failure to comply with theserestrictions may constitute a violation of applicable United States or Canadian securities laws. By accepting communication of this presentation, the recipient represents and warrants that it is a person to whom this presentation may be communicated without a violation of the laws of any relevant jurisdiction. This presentation is not to be communicated to an yother person or used for any other purpose and any other person who receives communication of this presentation should not rely or act upon it.

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