Cunningham Energy LLC/Cunningham Energy of Canada Inc. Appalachian Shallow Proven Oil Development-Quebec Light Oil Frontier Exploration Areas
Emerging areas (QC)– Quebec Canada, Approximate 1 million acre current farmout opportunity with Marzcorp Inc.
Company Summary Highlights u
u Defined Oil Exploration program with cores and 2D seismic available-$15m spent to date on property
u 12 Wildcat Oil Targets Identified on Acreage-4 Targets already surveyed for location-Permitting underway
u Forillon/Indian Cove Limestone Target Identified-Dolomitic Oil Bearing Limestone-Estimates of 7-12X returns
u All depths and formations included in Farm-out terms. Each of 7 drilled wells required by farmout earns 7.1m shares of parent (Marzcorp), giving negative control position, board seats. Marzcorp plans to conduct public IPO as a royalty trust once production established.
u Conventional Reservoirs Present with Tremendous Upside Probable Including New Fields to Be Discovered.
u Cooperative Government-Has Become Oil & Gas Friendly. Company has working relationship with Energy Ministry.
u Largest Wildcat Conventional Oil exploration opportunity current available in North America-Lease Current valuation of company holding undrilled farm-out rights by Chapman Engineering of $190m Undiscounted.
u Diverse Legacy Operating areas (U.S.) - historically productive - Established areas - West Virginia, Kentucky, and Ohio u Existing production with high growth potential-Company was first to develop shallow horizontal drilling in basin with oil focus. Verified increases of 60-80%+ over vertical shallow oil well drilling.
u Vertically Integrated Business Model with Multiple Acquisition Targets Identified
u Combining E&P and oilfield services lowers costs, increases control
u 30,000 Net Acres In West Virginia - Over 20,000+ Additional Acres Pending in West Virginia, Ohio & Kentucky
u New Shallow Horizontal Plays in Appalachian Basin- Cow Run, Big Injun, Weir Sandstone, Berea Sand, Clinton Sandstone, and Devonian Shale
Cunningham Energy LLC
u Appalachian Regional Oil And Gas Development And Drilling- West Virginia, Kentucky, and Ohio -Currently 30,000+ Net Acres, 90% HBP
Proven Shallow Oil Opportunities in the Appalachian Basin
u Cunningham Energy was a pioneer of shallow horizontal oil drilling in West Virginia during 2014. Other companies have not been able to replicate success to date
u Additional 50,000+ Net Acres Possible at relative low cost structures that include deep rights
u Numerous HBP Bolt on blocks available with deep rights-minor current competition in area
~ 75-100 Current Possible Well Locations
u Cow Run, Big Injun, Weir Sand, Berea Sand, Devonian Shale - Early Stage Plays, High Potential
Oil, Associated Liquids, & Natural Gas
u Shallow Horizontal Changes Valuation Metrics of Entire Region Dramatically
u Potential Marcellus And Utica Upside/Also Potential for Exploratory Rogersville Shale Play
Operated Interest In 300+ Wells - Mostly Shallow Oil
$40 Million Capital Request for Acquisitions & Growth
u Development Program for Big Injun & Weir Sand in Process Currently
Superior local knowledge through existing personnel
u Cow Run/Big Lime/Big Injun/Weir Sand/Berea Sand Oil Plays - Central West Virginia
u Multiple stacked sand pay formations – multiple strata oil targets inside traditional sandstone oil fields. 42 API Degree 42-51 API Degree light oil through out these areas.
Old Conventional Plays Made New With Shallow Horizontal Drilling
u Some areas have been producing since the 1800’s-Long gentle decline curves
u Acreage generally includes all deep rights, which are held HPB until further development occurs. Deep Rogersville Shale being explored by Chesapeake, Cabot, Cimarex, EQT in area.
Potential Marcellus/Utica upside in some areas
u Presently evaluating acquisitions of additional acreage and PDPs
Well depth TVD - 900 to 5500 feet (3500’-9000’ MD)
u Projected D&C cost - $1.4-2.0 million for most shallow Horizontal Oil Wells (Multi-Well Pad)
u Initial Big Injun Sandstone Oil Wells – 90-125 BOPD 30-day IP rate with additional high Btu wet gas
u Initial Weir Sand Shallow Horizontal Wells expected in the 300-500 BOPD range (Kanawha County, WV)
Current Core Operating Area
Roane, Clay And Kanawha Counties - West Virginia
Other Operators in area:
Energy Corp. of America
Large Operators Currently Adapting to Shallow Horizontal Oil & Gas u Diversified Oil & Gas-Aggressively acquiring large HBP operations from CHK, EQT and others. Has deployed over 750mm in acquisitions since 2017. Diversified Gas & Oil PLC (DGO) is focused on acquiring and enhancing our gas and oil producing assets in the Appalachian Basin, which cover part of the largest hydrocarbon producing region in the United States. u Nytis Exploration (Carbon Energy)-PE Backed, Company recently purchased all remaining shallow assets from Cabot Oil & Gas (700,000+ acres). Planning on starting shallow horizontal drilling program-rumored to be in talks with Core Appalachia for a sale.
Proven Emerging Shallow Horizontal Oil Play u Big Injun Sandstone - Emerging Play Proven by Cunningham Energy in 2014
Large Growth Potential
75-100 potential well sites on existing leases
Well Cost-$1.6mm D&C
u Highly Productive-Early Turn of the Century Prolific Producing Formation
Latest well - IP ~125 BOEPD, mostly oil, wet gas (propane)
u Other Favorable Economics; Royalties - 12.5% to 17.0% Lease bonus - $50 to $1300 per acre with HBP available
Big Injun Sandstone Play Acreage-Clay County, WV
Big Injun Log Section- King #5a API# 47- 015-02882 (Clay County, WV)
Field Example- Emerging Oil Play Weir Sandstone Formation (Kanawha County, WV)
Geological Report Available - Weir Formation
Historically proven production
Weir formation has produced oil since 1911
Apply horizontal technology with Plug & Perf Frac
Drill new wells
Re-enter and rework old wells
u Similar strategy to Permian drilling - access known formations economically
Shallow - 1,000 to 2,300 foot depth TVD
20 to 40 feet of net pay
u Over pressured-Low permeability, higher porosity 13-15%, low water content
Recent Vertical produced 42 BOPD-30 Day IP
u Horizontals are expected to produce 300-500 BOPD-30 Day IP
51 API Gravity Light Sweet Penn Grade
Weir Log Section- Crum #2A Vertical Well API# 47- 039-06350 (Kanawha County, WV)
Weir Sandstone Play Acreage-Kanawha County, WV
Doctors Creek Area-Kanawha County, WV Weir Sandstone Isopach Map
Oilfield Services & Equipment
Oilfield Service Business Segment
Compliments E&P activity
•Significant cost savings with drilling
u •More efficient drilling process - timing, moving rigs and crews, etc.
u Company foremen have spent decades in Appalachian Region oil and gas
u Horizontal and vertical well experience-Have drilled over 80 Shallow HZ wells in Basin (highest known to date in Basin)
Full equipment offerings – including:
u 3 Speedstar 185 drilling rigs, 6 double pole service rigs
1 swab rig
Complete support and dirt work equipment inventory
Quebec, Canada Light Oil Exploration Opportunity-Gaspe Peninsula
Cunningham Energy of Canada Inc.
Exploration of Gaspe Peninsula Light Oil
Reserve Potential: In excess of 200MM+ BOE Seeking: Cunningham Energy of Canada is proposing the development of an exploratory drilling program. The company plans include a multi-phased well development program spanning over 3 years. Proposed Phase 1 is a 7-well program, $60 MM USD capital investment consisting of vertical & horizontal exploratory production drilling Strategy: Develop multi-well horizontal program in Gaspe, Quebec on 935,000 acres with our current targets covering only 3% of the property. Tremendous blue sky development available on a virgin lease. Potential: Multiple Shallow & Deep Stacked Oil Plays. 12 Potential Targets have been identified through seismic and coring. Projected EUR’s for Horizontal Forillon/Indian Cove Limestone Median Case are near 1,000,000 barrels recoverable per lateral. (640 Acre Spacing) Cunningham Energy of Canada Inc. is uniquely positioned to execute on developing billions of dollars of proven oil and gas reserves in an area within the Gaspe peninsula in Eastern Quebec. Current (non proven) estimates from the 51-101 report estimate as much as five (5) Million BOE based on only just 3% of the property.
o Cunningham Energy Inc. controls 100% interest in the Matapédia Valley, Gaspésie, Quebec from Marzcorp Inc. on a 75% NRI Basis through executed Farmout Agreement. o 3 exploratory wells and 15 core holes have produced hydrocarbons to surface on production test. o 51-101 indicates a High Estimate case of 5.088MMSTB recoverable reserves (from 4 targets covering only 3% of the property). o Currently 7 verified drill targets for Phase 1 o Multiple other drill locations targeted (12 total) o Permits encompassing 378,579 ha/935,000 acres
Exploration Project Overview
Marzcorp Oil & Gas Inc. acquired 100% interest in the Prospection 2000 exploration permits located in the Matapedia Valley, Gaspésie, Quebec in 2009 for a cash value of $4.6 million and a credit against money spent on the property of $4.646 million thus issuing 11,000,000 shares to Prospection 2000 for the completion of the acquisition. In 2015 Cunningham Energy of Canada Inc. acquired a full farmout and control of the acreage from Marzcorp Inc. This very large land package of 378,579 hectares (~1 million acres) located 575 km East of Montreal - accessible by Highway 20 and Provincial Route 132. To date, 3 exploratory wells and 15 core holes have been drilled since 1996 Including well C123 (November 2000) that produced hydrocarbons to surface on production test. C123 was continuously core drilled to a total depth of 1247 meters through Lower Devonian Indian Cove Formation and Forillon Formation. Drill core from fractures reported oil showings on the core. Geologist core descriptions made long after the hole was drilled indicates many fractures, oil smell on fresh break and no porosity on most of the core except at a depth of 1171 meters where a 5% porosity is described in a brecciate zone near an important fracture or fault. A 51-101 Reserve Report prepared by Chapman Petroleum Engineering indicates a high Estimate case of 5.0088MMSTB recoverable reserves based on prior work (this report is based on vertical wells on 3% of the property)
Marzcorp has targeted and verified the first 3 well locations based on engineering and geological analyses performed by Chapman Engineering. Once drilled, additional well targets will be determined by utilizing the developed well data.
Previous Well Work on Property WELL 2000C123 – SPPG PROSPECTION 2000 LAC MATAPÉDIA NO.1
Continuous core drilled to a total depth of 1247 meters through Lower Devonian Indian Cove Formation and Forillon Formation. Oil shows were reported by drillers in fractures on the core. Geologist core description made long after the hole was drilled indicates many fractures, oil smell on fresh break and no porosity on most of the core except at a depth of 1171 meters where a 5% porosity is described in a brecciate zone near an important fracture or fault. WELL 2002-C125 – BARTECH LAC MATAPÉDIA NO.1 Slim-hole core drilling that reached 1036 meters, located a few meters from the C-121 and a few hundred feet south of the C-123 in the northern part of the Matapédia Property. Numerous oil shows were reported by drillers while drilling the upper part of the hole and fresh break oil smell is reported on core (description made a few months after drilling). Many important fractures are observed all the way down to total depth where interbedded serpentine layers were encountered. No other hydrocarbon indication is described by the geologist on the core log. From electric logs interpretation however, different porous zones with possibilities for the presence of hydrocarbon are seen. Non conclusive tests were conducted in the fall 2004 but packers and tools remained jammed in the hole. These results indicate that oil could be present in reservoirs located down dip from where the numerous fractures outcrop. Exploration will therefore be aimed at tracking these fractures used by hydrocarbons as migration paths and follow them down dip in hoping to locate along the way a possible trapped reservoir rock containing commercial hydrocarbons accumulations.
Permit Area Overview
( Leases depicted in brown)
Phase 1 Drilling Target Locations
Phase 1 Targeted Well Locations No. 10 (3) & No. 12 (1) No. 4 (2)
ChapmanReport Reserve Estimates Cumulative indications of up to 1.87m bbls recoverable oil per lateral in Forillon Limestone alone. Cores show multiple stacked payzones present
Chapman Report Reserve Estimates
A 51-101 Reserve Report prepared by Chapman Petroleum Engineering Ltd indicates High Estimate case of 5.088MMSTB recoverable reserves based on the four outlined targets of 45º API light oil.
Test Well Drilled on Leasehold
Drilled in 2000 to a depth of 4700 feet.
o A log was done up to 896.5 m (2941 ft) and the gas samples analyzed were taken at 4200 ft. o Oil indicated on core samples. o 5% - 10% porosity (based on previous reports done on the property). o Secondary porosity (fractures) noted on logs and cores. o Hydrocarbon flowed to surface during 14 hour production test.
Photo of C-123 Flaring
Use of Funds $100mm Requested Investment P
Development Program in West Virginia: Permit, drill, and complete 15 Shallow horizontal Big Injun & Weir Sandstone Oil wells-4 year cashflow schedule (7 obligation wells), fulfil legacy drilling & lease obligations, $40mm investment. Acquisitions Program: Evaluate and Acquire existing HBP Cash flow properties for further development ($5mm). Initial goal of 75,000 acres HBP. Equipment Purchase from Lender: The company’s equipment, including all drilling rigs, can be purchased from the lender for remaining debt of $3mm. Rigs & Service Equipment can be also be transported to Canada for use in initial drilling program. Full Hadco Appraisal available.
Immediate Implementation of Phase 1 Well Development: Permit, drill and complete the first 7 targeted well locations with vertical tests. Plug back and kick off for a horizontal production well test on each target ($60mm). Establish company field offices & Infrastructure in Quebec. Partner earns into full 935,000 acre position held by farmout. Strategic Exploration Program: Continue development of additional wells from cash flow and additional debt/Equity financing. (Continue with Phases 2 & 3). ROI considerations: The company is currently private and can be flexible with any planning moving forward in terms of exit. Each of first 7 Wildcat wells earns CE of Canada 7.1m shares of farmout parent Marzcorp.
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