Reader Advisories

Forward-Looking Statements:

This presentation contains certain forward-looking statements and forward-looking information (collectively, "forward-looking statements") as defined by applicable securities legislation including, but not limited to: the ability to satisfy the conditions for closing of the Banarli farm-in agreement ("the Agreement"), including securing GDPA approval for the transfer of the licence interests and the expected timing; the anticipated closing date of the Agreement; the ultimate investment by Statoil under the Agreement and its ability to earn a 50% interest in the Banarli Licences; the anticipated spud date of the Phase 1 well; the expected US$6.0 million payment from Statoil at the closing of the Statoil farm-in; the Corporation’s 2016 work program and budget and target sales volumes; the future completion of the Danismen formation in the Bati Gurgen-1 well and the timing thereof; the planned drilling program on the Banarli licences and TBNG JV lands and the timing thereof; the extent of over-pressure below approximately 2,500 metres across the Banarli licences and certain TBNG JV lands and the potential for a basin-centered gas play; the availability of operating cash flow and the ability to finance development from existing cash and operating cash flow; the ability to grow sales volumes, tie-in new wells and get these on-stream; the ability to mitigate natural declines; the timing, estimated costs and ability to fund each of the foregoing; the plans to also attract a farm-in partner to drill the deep, potential basin-centered gas play on certain of the TBNG JV lands; the ability to complete a strategic acquisition; and the ability to find a viable option to re-start the exploration and development program on the TBNG JV lands. Forward-looking statements typically contain words such as "anticipate", "estimate", "expect", "target", "potential", "could", "should", "would" or similar words suggesting future outcomes. Valeura cautions readers and prospective investors in the Corporation’s securities to not place undue reliance on forward-looking statements, as by their nature, they are based on current expectations regarding future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially from those anticipated by the Corporation. Statements related to "reserves" are deemed forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves can be profitably produced in the future.


Forward-looking statements are based on management's current expectations and assumptions regarding, among other things: continued political stability of the areas in which the Corporation is operating and completing transactions, in particular in the aftermath of the recent failed coup attempt in Turkey; continued safety of operations and ability to proceed in a timely manner; continued operations of and approvals forthcoming from GDPA in a manner consistent with past conduct; future seismic, drilling, fracing and workover activity on the expected timelines; the prospectivity of the Banarli licences; future production rates, capital efficiencies and associated cash flow; future capital and other expenditures (including the amount and nature thereof); the ability to meet drilling deadlines and other requirements under licences and leases; the potential reversion of 9,981 acres in Banarli licence F19-d1, d4 to TPAO; the ability to attract a partner for deep exploration on certain TBNG JV lands, complete a strategic acquisition and find ways to re-start the drilling and fracking program on the TBNG JV lands; future sources of funding; future economic conditions; future currency and exchange rates; and the Corporation's continued ability to obtain and retain qualified staff and equipment in a timely and cost efficient manner. In addition, the Corporation’s work programs and budgets are in part based upon expected agreement among joint venture partners and associated exploration, development and marketing plans and anticipated costs and sales prices, which are subject to change based on, among other things, the actual results of drilling and related activity, availability of fracing and other specialized oilfield equipment and service providers, and unexpected delays and changes in market conditions. Although Valeura management believes the expectations and assumptions reflected in such forward-looking statements are reasonable, they may prove to be incorrect.
 

Forward-looking statements involve significant known and unknown risks and uncertainties. Exploration, appraisal, and development of oil and natural gas reserves are speculative activities and involve a significant degree of risk. A number of factors could cause actual results to differ materially from those anticipated by the Corporation including, but not limited to: the risk of not obtaining government approval for the Statoil farm-in; the risks of achieving viable production rates from the Yayli-1 well; risks associated with the oil and gas industry (e.g. operational risks in exploration, inherent uncertainties in interpreting geological data, and changes in plans with respect to exploration or capital expenditures, the uncertainty of estimates and projections in relation to costs and expenses, and health, safety, and environmental risks); uncertainty regarding the sustainability of initial production rates and decline rates thereafter, and the ability to mitigate these declines; uncertainty regarding the availability of drilling rigs and equipment and the ability to address technical drilling challenges; uncertainty regarding the state of capital markets; the risk of being unable to secure farm-in partners; the risk of being unable to meet drilling deadlines and the requirements under licences and leases; uncertainty regarding the amount of operating cash flow; the risks of disruption to operations and access to worksites, threats to security and safety of personnel and potential property damage related to political issues, terrorist attacks, insurgencies or civil unrest in Turkey; political stability in Turkey, including potential changes in political leaders or parties or a resurgence of a coup or other political turmoil; the risks of increased costs and delays in timing related to protecting the safety and security of Valeura's personnel and property; the risk of fluctuations in commodity pricing and BOTAS reference prices (in Turkish Lira); the risk of fluctuations in foreign exchange rates particularly the Turkish Lira; the uncertainty associated with negotiating with third parties in countries other than Canada; the risk of partners having different views on work programs and potential disputes among partners; the uncertainty regarding government or other approvals; potential changes in laws and regulations; risks associated with weather delays and natural disasters; the risk associated with international activity; and the uncertainty regarding the ability to secure a joint venture partner to pursue deep exploration in certain JV lands, complete a strategic acquisition and find a viable option to ramp-up the shallow program on TBNG JV lands. The forward-looking statements included in this presentation are expressly qualified in its entirety by this cautionary statement. The forward-looking statements included herein are made as of the date hereof and Valeura assumes no obligation to update or revise any forward-looking statements to reflect new events or circumstances, except as required by law. See Valeura's most recent annual information form ("AIF") for a detailed discussion of the risk factors.

Other Advisories:

INITIAL ON-STREAM PRODUCTION RATES:The initial on-stream production rates and short production test rates disclosed in this presentation are preliminary in nature and may not be indicative of stabilized on-stream production rates. Initial on-stream production rates are typically disclosed with reference to the number of days in which production is measured (e.g., IP30 refers to an initial on-stream production rate measured over a 30 day period). Initial on-stream production rates are not necessarily indicative of long-term performance or ultimate recovery. To date, shallow gas conventional wells and fracked unconventional tight gas wells have exhibited relatively high decline rates at more than 50% and 75%, respectively, in their first year of production. All natural gas rates and volumes are presented net of any load fluids.

 

FUTURE NET REVENUE:The net present value of estimated future net revenue disclosed in this presentation should not be construed as the current market value of estimated crude oil, natural gas liquids and natural gas reserves attributable to Valeura's properties. The estimated discounted future net revenue from reserves are based upon price and cost estimates which may vary from actual prices and costs and such variance could be material. Actual future net revenue will also be affected production, supply and demand for crude oil and natural gas, curtailments or increases in consumption by purchasers and changes in governmental regulations or taxation.

DISCLOSURE OF LESS THAN ALL RESERVES:Estimates of reserves for individual properties in this presentation may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.

BARRELS OF OIL EQUIVALENT:The term "boe" or barrels of oil equivalent may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe to 6 Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

NON-IFRS MEASURES:This presentation contains the terms "operating netback" (petroleum and natural gas sales less royalties, production expenses and transportation costs) and "funds flow from operations" (net loss for the period adjusted for non‐cash items), which do not have a standardized meaning prescribed by International Financial Reporting Standards ("IFRS") and therefore may not be comparable with the calculation of similar measures by other companies. Management believes these non-IFRS measures are useful supplemental measures to evaluate performance. Additional information relating to these non-IFRS measures, including the reconciliation to "net income", can be found in Valeura’s most recent management’s discussion and analysis.

D&M RESERVES DISCLOSURE:The 2015 year-end reserves disclosure contained in this presentation is derived from the 2015 D& M Reserves Report, respectively. The foregoing reports were prepared using assumptions and methodology guidelines outlined in the COGE Handbook and in accordance with NI 51-101.

Glossary:

Certain other terms used in the corporate presentation but not defined herein or under "RESERVES DEFINITIONS" below are defined in NI 51-101 or Valeura’s most recent annual information form and, unless the context otherwise requires, shall have the same meanings herein as in NI 51-101 or Valeura’s most recent annual information form, as applicable.

"2015 D&M Reserves Report"means the independent engineering evaluation of the oil and natural gas reserves attributable to the properties of Valeura in Turkey prepared by D&M in its report with a preparation date of March 8, 2016 and effective December 31, 2015.

"COGE Handbook" means the Canadian Oil and Gas Evaluation Handbook prepared jointly by The Society of Petroleum Evaluation Engineers (Calgary Chapter) and the Canadian Institute of Mining, Metallurgy & Petroleum (Petroleum Society).

"D&M" means DeGolyer and MacNaughton, independent petroleum engineering consultants of Dallas, Texas.

"NI 51-101" means National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities.

"TBNG-PTI acquisition" means the joint acquisition of non-operated producing natural gas assets and lands in the Thrace Basin of Turkey and other interests in exploration lands in the Anatolian Basin of Turkey from Thrace Basin Natural Gas Turkiye Corporation and Pinnacle Turkey, Inc. by Valeura and an affiliate of TransAtlantic Petroleum Ltd. completed in 2011.

"TBNG-PTI JV" means the joint venture of Valeura (40% WI), Thrace Basin Natural Gas Turkiye Corporation (41.5% WI; operator) and Pinnacle Turkey, Inc. (18.5% WI).

"TBNG-PTI JV lands" means the lands acquired by the TBNG-PTI JV under the TBNG-PTI acquisition.

Reserves Definitions:

"reserves" are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, from a given date forward, based on: (a) analysis of drilling, geological, geophysical, and engineering data; (b) the use of established technology; and (c) specified economic conditions, which are generally accepted as being reasonable and shall be disclosed. Reserves are classified according to the degree of certainty associated with the estimates.are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on analysis of drilling, geological, geophysical and engineering data; the use of established technology; and specified economic conditions which are generally accepted as being reasonable.

"proved" or "1P" reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the 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 the estimated proved plus probable ("2P") 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 the estimated proved plus probable ("2P") reserves.

"possible" reserves are those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved plus probable plus possible ("3P") reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of the estimated proved plus probable plus possible reserves.

Abbreviations:

Oil and Natural Gas Liquids

bbl
barrels
bbl/d
barrels per day

NGLs
natural gas liquids

Natural Gas

Mcf
thousand cubic feet
Mcf/d
thousand cubic feet per day
MMcf/d
million cubic feet per day
Bcf
billion cubic feet

Other

boe
barrels of oil equivalent
m
metres
boe/d
barrels of oil equivalent per day
km
kilometres
M
thousand
km2
square kilometres
MM
million
2D
two dimensional
WI
working interest
3D
three dimensional
IP30
initial 30-day on-stream production rate
CAGR
compound annual growth rate
MD
measured depth
IRR
internal rate of return
TD
total depth
NPV10
net present value of estimated future net revenue, discounted at 10%
P10
10% probility of occurrence based on Monte Carlo analysis
TVD
true vertical depth
psi
pounds per square inch pressure
ft
feet
PSTM
pre-stack time migration (seismic)