DELIVERING GROWTH · This presentation contains statements that may constitute "forward-looking...

DELIVERING GROWTH OSUM OIL SANDS CORP. | AGM PRESENTATION | MAY 7, 2019

Osum Oil Sands Corp. 2

Forward Looking Statements

This presentation contains statements that may constitute "forward-looking statements” within the meaning of applicable securities legislation. These

statements include, among others, statements regarding business strategy, beliefs, plans, goals, objectives, assumptions or statements about future

events or performance. By their nature, forward looking statements are subject to numerous risks and uncertainties, some of which are beyond

the Company's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations,

environmental risks, competition from other industry participants, lack of availability of qualified personnel or management, stock market volatility and

ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such

information, although considered reasonable at the time of preparation, may prove to be incorrect and, as such, undue reliance should not be placed on

forward-looking statements. Actual results, performance or achievement could differ materially from those expressed in, or implied by any forward

looking statements in this presentation, and accordingly, no assurance can be given that any of the events anticipated by the forward-looking

statements will transpire or occur, or if any of them do so, what benefits the Company will derive therefrom.

The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future

events or otherwise.

Reserves and Resources

Except where noted to be from another source, the reserve estimates herein were extracted from reports prepared by GLJ Petroleum Consultants Ltd.

(GLJ), an independent professional petroleum engineering firm, in accordance with definitions, standards and procedures contained in the Canadian Oil

and Gas Evaluation Handbook (COGEH), with the exception that data pursuant to the Curtailment Rules not available as at December 31, 2018 was

considered when estimating allowable bitumen production for 2019 in the evaluation of reserves and resources estimates at December 31, 2018.

Reserves are classified according to the degree of certainty associated with the estimates. Proved reserves are those reserves which can be estimated

with a high degree of certainty to be recoverable. It is 90 percent likely that actual remaining quantities will exceed estimated proved reserves. Probable

reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities

recovered will be greater or less than the sum of proved plus probable reserves. Possible reserves are those additional reserves that are less certain to

be recovered than probable reserves. Other criteria that must also be met for the categorization of reserves are provided in the COGEH.

The preparation of an evaluation requires the use of judgement in applying the standards and definitions contained in the COGEH. As the Company’s

independent reserve evaluator, GLJ applies those standards and definitions based on its experience and knowledge of industry practice. However,

because the application of the standards and definitions contained in the COGEH requires the use of judgement there is no assurance that governing

securities regulator(s) will not take a different view than GLJ as to some of the determinations in an evaluation.

Presentation of Financial Information

Unless otherwise stated, all figures presented are in Canadian Dollars.

Disclaimer


• Private company focused on

building a robust oil business

• Established production and

cash flow base in the Cold

Lake region of Alberta

• Near-term focus at the Orion

SAGD project – pursuing

further facility debottlenecking,

cost savings and staged

growth opportunities

• Additional organic growth

opportunities include the Taiga

SAGD project in the Cold Lake

region and extensive holdings

in the Grosmont carbonates

• Led by an experienced

management team and Board

of Directors

Corporate Overview


2018: A Transformative Year

Successful Completion of

Orion Expansion Project

Achieved Record

Production Levels

• Orion Phase 2BC expansion completed on schedule and under budget

• Doubled production potential at Orion to 18,000 bbl/d

• Average annual production at Orion increased by 37% to 11,082 bbl/d

• Average Q4 2018 production of 15,424 bbl/d was well ahead of a target exit rate of 14,000 bbl/d and on track to demonstrate productive capacity in excess of 18,000 bbl/d in 2019

• Strong liquidity position with working capital of $60 million(1) at year end

• Further facility debottlenecking and staged growth opportunities at Orion will be timed to be funded from cash flow

• The Taiga Project, an approved greenfield development, is next in the development queue

• Proved reserves increased by 20% to 141.6 Mbbl compared to 2017

• Lowered unit operating costs and further reduced overhead costs

• In addition to record production levels, steam injection increased by 21% year over year

• An effective and methodical commodity hedging program coupled with an improved cost structure from a higher production base allowed Osum to navigate challenging market conditions, especially in Q4 2018.

Well Positioned

for the Future

Navigated Challenging

Market Environment

Delivered Strong

Operating Results

1 Excludes net unrealized hedging asset and deferred consideration and includes restricted cash.


Phase 2A

• Completed in Q3 2017

• 3rd boiler

• 3 SAGD well pairs

• Crystallizer

Phase 2BC

• 4th boiler

• 18 SAGD well pairs and

surface facilities

• 2 produced water

evaporators

• Significant CPF expansion

• 635,000 Manhours directly

related to project execution

A Closer Look: Orion Growth Projects

2014

2018


View from the Field


Production increased 37%

• The significant production ramp up

was due to full year contributions

from the three Phase 2A well pairs

added in Q4 2017 and early

contributions from the Phase 2BC

well pairs brought on stream in the

second half of 2018

• Thirteen of 18 Phase 2BC well pairs

had been converted to SAGD by

year end

Steam injection increased 21%

• The increase in steam reflects the

impact of an additional boiler and

two evaporators that were part of

Phase 2BC.

Record Production and Steam

-

2,000

4,000

6,000

8,000

10,000

12,000

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Ste

am

In

jecti

on

(T

/day)

Bit

um

en

Pro

du

cti

on

(b

bl/d

ay)

Phase 1/2A Phase 2BC Steam Injection


In response to prices in Q4, Osum took

additional actions:

• Voluntarily curtailed production volumes

in November and December to limit the

impacts of pipeline apportionment

• Restricted planned Q4 2018 and 2019

capital spending to sustaining capital

• Increased 1H 2019 hedging targets and

expanded the program to included

condensate and natural gas

• Maintained focus on minimizing operating

expenses

2018 Commodity Price Environment

$(20)

$(10)

$-

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100Netback after Hedging C$/bblField Netback C$/bblWTI US$/bbl

On December 2, 2018, in an effort to address the excess

supply that led to the very wide price differential, the

Government of Alberta announced a curtailment of oil

production in the Province for up to 12 months beginning

January 2019.

GOVERNMENT RESPONSE

Since mid-2015, Osum has systematically and rateably hedged a portion of our WTI and WTI-WCS exposure to

reduce cash flow volatility.


Operating Results

2018 2017 Change %

Bitumen Production bbl/d 11,082 8,100 2,982 37%

WTI US$/bbl 64.78 50.85 13.93 27%

Cold Lake Blend US$/bbl 37.57 38.20 -0.63 -2%

Differential US$/bbl 27.21 12.65 14.56 115%

Differential % 42% 25%

Foreign Exchange Rate US$/C$ 0.79 0.77

AECO Gas Price $/mcf 1.46 2.04 -0.58 -28%

Bitumen Field Price $/bbl 25.81 39.43 -13.62 -35%

Royalties $/bbl 2.67 1.43 1.24 87%

Operating Costs $/bbl 13.08 18.03 -4.95 -27%

Field Netback Before Hedging $/bbl 10.06 19.97 -9.91 -50%

Realized Gains (Losses) on Risk Management $/bbl 1.97 (2.68) 4.65 -174%

Cash Operating Netback After Hedging $/bbl 12.03 17.29 -5.26 -30%

Field Netback Before Hedging $MM 40.7 59.1 -18.4 -31%

Realized Hedging Gains (Losses) $MM 8.0 (7.9) 15.9 201%

Cash Operating Netback After Hedging $MM 48.7 51.2 -2.5 -5%


Balance Sheet

31 Dec 2018 31 Dec 2017

Cash and Cash Equivalents (1) $ MM 66.6 230.5

Working Capital Surplus (1)(2) $ MM 60.0 213.2

Long Term Debt Outstanding (3) $ MM 271.4 252.8

Basic Shares Outstanding MM 131.0 131.0

Includes restricted cash of $13.9 MM

Excludes the current portions of net unrealized hedging assets and liabilities and deferred consideration

Consists of the outstanding non-current portion of the US$ term loan translated to C$ at the period-end exchange rate. The

current portion is accounted for in the working capital surplus


Reserves

31 Dec 2018(1) 31 Dec 2017(2) %

Reserves (MMbbls)

Proved Reserves 142 118 20%

Proved + Probable Reserves 542 537 1%

Present Value Before Tax 10% ($MM)

Proved Reserves $1,572 $957 64%

Proved + Probable Reserves $2,815 $1,890 49%

1. GLJ Petroleum Consultants as at December 31, 2018. See “Reserves and Resources” Disclaimer on page 2.

2. GLJ Petroleum Consultants as at December 31, 2017. See “Reserves and Resources” Disclaimer on page 2.

Osum Oil Sands Corp.

Safety and Environmental Performance

12

Safety

• Significantly

reduced Total

Recordable Injury

Frequency (TRIF)

from 0.943 in 2017

to 0.511 in 2018

• Osum employees

and contractors

achieved two million

hours without a lost

time incident

Water

• No fresh water for

used for steam

generation

• Produced water

recycle rate has been

nearly 90% for the

last three years

Air

• In 2018, there was an

11% reduction in

greenhouse gas

intensity over 2017

• Overall, 26%

reduction from

original facility

baseline GHG

intensity (2010

versus 2018)

Land

• Phase 2ABC wells

were drilled from

existing Phase 1 well

pads resulting in a

74% reduction in

surface disturbance

compared to the

original Phase 2

design


Community

13

Community

• Since 2009, actively

engaged with

stakeholders including

government,

community groups and

Indigenous groups

• Well-established

community investment

program supports

initiatives targeting

education, promoting

student interest in

science and innovation

and sport

• Committed to creating

jobs and supporting

businesses in the

community


The Future: 2019 and Beyond


• Scoping and planning activities for further expansion of the Orion facility are in progress.

• Phase 2D scope includes: debottlenecking of the existing facility and the installation of facilities and equipment

to support additional well pairs and lower drainage wells (producer wells drilled between and below existing well

pairs).

• The execution of the individual components will be timed to allow them to be funded from cash flow and will be

subject to visibility of curtailment being lifted.

Orion Expansion Opportunities: Phase 2D

5th Boiler

2nd Waste Water

Treatment

Heat Integration


Cold Lake Growth Plan

0

10,000

20,000

30,000

40,000

50,000

60,000

Oil R

ate

(b

bls

/d)

Orion: Current Production

Orion: Optimization / Phase 2D

Taiga: Phase 1

Taiga: Phase 2

Taiga: Phase 3 • Clear path for staged, self-funded growth to

~60,000 bbls/d

• 100% Osum owned and operated

Timing Cash Flow Cash on Hand Debt Equity

Maintenance Capital Ongoing

Corporate G&A and Debt Service Ongoing

Orion Optimization Ongoing

Orion Expansion Phase 2D 2019/2020

Taiga (Phase 1) 2021+ TBD TBD TBD TBD


• Maintain focus on safety and environmental performance

• Deliver profitable production while continuing to reduce structural costs

• Continue to deliver on Phase 2BC performance within the confines of curtailment

• Prepare for next growth steps

• Manage our finances prudently

2019 Priorities


Summary

2018 was a transformative year:

• Delivered strong operational performance

while successfully completing Orion

Phase 2BC expansion project on

schedule and under budget

• Exited the year with an average Q4

production of 15,424 bbl/d, well ahead of

target exit rate of 14,000 bbl/d

• Materially reduced per barrel operating

costs, driving cash flow sustainability

• Maintained an active risk management

program to decrease cash flow volatility

and enhance cash flow predictability

• Positioned the Company for future growth

with a significant portfolio of opportunities


Board of Directors

Name / Title Relevant Prior Experience

William A. Friley

Chairman

• Independent Businessman

• President and Chief Executive Officer of Telluride Oil and Gas and President of Skyeland Oils

• Director of Obsidian Energy and Advanced Flow Technologies

Angelo Acconcia • Senior Managing Director, Blackstone Capital Partners and Blackstone Energy Partners

• Director of Beacon Oil & Gas, Brix & Harvest, Gavilan Resources, Guidon Energy, Huntley &

Huntley, Jetta Energy Permian, Primexx, LLOG, Royal Resources, and Vine Oil & Gas

Roy Ben-Dor • Principal, Warburg Pincus LLC

• Director of Black Swan Energy, Artis Exploration and Zenith Energy

Vincent Chahley • Independent Businessman

• Director of Venturion Oil, Velvet Energy, and Aequitas Innovations

• Former Managing Director of Corporate Finance at FirstEnergy Capital

George Crookshank • Independent Businessman

• Director of Advanced Flow Technologies

• Former Vice President of Finance and Chief Financial Officer of OPTI Canada Inc. (2002 to

2007)

Jun Hyung (John) Lee • Principal, Blackstone Capital Partners and Blackstone Energy Partners

• Director of Huntley and Huntley, Utility One Source GP LLP and Gavilan Resources LLP

Francesco Mele • Partner, Azimuth Capital Management

• Director of Timber Rock Energy, Cequence Energy, and Altex Energy

Brian Reinsborough • Independent Businessman

• Founder and CEO of Novara Energy LLC

• Founder, former President and CEO of Venari Resources

Steve Spence • President & CEO of Osum



1900, 255 – 5th Avenue SW

Calgary, Alberta T2P 3G6

T. 403 283 3224 F. 403.283.3970

E: [email protected]

Facebook.com/osumcorp

osumcorp.com

mailto:[email protected]

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