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Radio Frequency Heating: June 2019 A Better Way to Produce Oil Sands and Heavy Oil Resources
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Radio Frequency Heating:
June 2019
A Better Way to Produce Oil Sands and Heavy Oil Resources
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FORWARD LOOKING STATEMENTS & ADVISORYCertain statements in this presentation include forward-looking information (as defined in Canadian securities legislation). Suchstatements appear in Slide 4 [Benefits of the RF Solution], Slide 6 [Investing in AXE: Value Proposition], Slide 12 [RF Economics forE&P Companies], Slide 13 [Magnitude of RF Application], Slide 14 [Environmental Benefits of RF], and Slides 16 to Slide 17 [RFPath to Commercialization].
These statements involve numerous assumptions about future economic conditions and courses of action, and are thereforesubject to various risks and uncertainties. These risks and uncertainties include, but are not restricted to, the ability ofAcceleware Ltd. (“Acceleware”, “AXE” or the “Corporation”) to fund its research and development (“R&D”) activities, the timingof such R&D, the likelihood that the patent applications filed by the Corporation will be granted, continued increased demand forthe Corporation's products, the Corporation's ability to maintain its technological leadership in various fields, the future price andcost of producing heavy oil and bitumen, the availability of key components and the Corporation's ability to attract and retain keyemployees and defend itself against any future patent infringement claims.
There can be no assurance that such statements will prove to be accurate. Actual results could differ materially from thoseanticipated in such statements. These and all subsequent written and oral forward-looking statements are based on theestimates and opinions of management on the dates they are made and expressly qualified in their entirety by this notice. TheCorporation assumes no obligation to update forward-looking statements should circumstances, or management's estimates oropinions, change except as required by law.
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ACCELEWARE (“AXE”) CORPORATE SUMMARYAn Established Technology Company Developing a Game-Changing Process for Enhanced Oil Recovery (“EOR”)
AXE is focused on developing a technology that utilizes electro-magnetic energy in the radio frequency (“RF”) spectrum to heat and mobilize heavy oil and bitumen at a fraction of the cost of current processes
AXE is a clean-tech energy innovator developing low-cost, low-carbon extraction solutions for the oil industry
As a heavy oil and bitumen production technique, AXE’s RF solution yields dramatic benefits quickly, generates higher production than steam assisted gravity drainage (“SAGD”) and uses half the energy
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WHAT IS RF XL?An Innovative Solution for Recovering Heavy Oil and Bitumen
• RF heating works like an “inside-out” microwave
• RF XL lines heat connate water in the formation
• Connate water turns to steam,
• Steam conducts heat to rock & bitumen/oil, lowering viscosity and allowing production RF XL Well Configuration
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RF XL:475,000 GJ1.0 million bbls
SAGD:1,150,000 GJ0.7 million bbls
Oil Rate vs Time1
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ACCELEWARE RF HEATING TECHNOLOGYDriving a More Energy Efficient, Accessible and Environmentally-Friendly Solution
Adoption Drivers• Lower capex - $26,000/flowing bbl• Lower opex - $7.10/bbl• Lower GHG’s (25% - 100%)• No water or solvent.• AXE holds 2 patents, has 14 pending and is
preparing applications for an additional 8.
• Partnership with General Electric for next-generation SiC power electronics technology to generate a higher-efficiency, lower-cost per watt solution
1. Internal AXE estimate
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AXE TRADING & CAPITAL STRUCTURE
Symbol TSXV: AXE
Shares outstanding (basic) 105 million
Shares outstanding (diluted) 116 million
Recent price $0.18
Market capitalization $18.8 million
Net debt (March 31/19) $0.3 million
Enterprise value $19.1 million
Management ownership 22%
Key institutional shareholdersNVIDIAResource Merchant Capital
4%9%
Significant management ownership strongly aligns with interests of shareholders
Trading Information Capital Structure
4-Year Share Price
0
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0.3
09-Jul-15 09-Jul-16 09-Jul-17 09-Jul-18
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INVESTING IN AXE: VALUE PROPOSITIONRF Platform Upside Supported by Existing High-Performance Computing Segment
• Acceleware‘s RF process (delivered through RF XL and Modular RF) is a transformative heating technology that uses radio waves rather than steam to mobilize heavy oil and bitumen, resulting in dramatic economic savings
• Lower costs and simpler logistics expand the application to allow smaller producers to develop previously uneconomic projects
• Near-term catalysts provide an attractive entry point for an investment in AXE• Awarded a $10 million, non-repayable grant from Sustainable Development Technology Canada and Emissions
Reduction Alberta
• Signed agreement with Prosper Petroleum Ltd. to conduct commercial-scale test at Rigel Oil Sands property
• Designed, manufactured and tested prototype high-efficiency SiC RF generator with partner GE Global Research
• A diversified revenue stream provides support to the balance sheet through AXE’s High Performance Computing (“HPC”) software segment
• AXE provides off-the-shelf and customized seismic imaging software that enables oil and gas companies to find hydrocarbons in the most complex geological formations
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Commercial-Scale TestCommencing Commercial-Scale Test of Innovative RF XL Technology with Prosper Petroleum
• July 17, 2018 AXE entered into a commercial test agreement with Prosper Petroleum Ltd. (“Prosper”) to perform a commercial-scale test of the RF XL radio frequency heating technology on specific Rigel leases
• The initial heating phase will run for six months using a two-megawatt prototype generator developed with General Electric using its proprietary Silicon Carbide (SiC) technology
• Prosper will contribute existing roads and well pads at Rigel, along with access to the planned central processing facility at Rigel while AXE will pay for the balance of the cost of the test, expected to be $16-$20 million
• AXE has the ability to recover the full cost of the test plus 10 percent• AXE will receive the proceeds from the sale of any bitumen produced during the test period• AXE and Prosper may continue operations beyond the test period to increase production from the well• Bitumen proceeds will be shared equally once AXE has recovered the full test cost plus 10 percent
• SDTC and ERA have committed up to $10 million in non-repayable funding • Acceleware has received in excess of $4 million from the funders to date• In total AXE has raised in excess of $17 million for the test to date• Discussions with other potential consortium members for the project are on-going to generate additional
financial, technical and operating supportRF XL technology has the potential to save billions
of dollars in oil sands production costs
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Cal Coulter Former Director of Subsurface Technology for Suncor
Chad Robinson Managing Director of Resource Merchant Capital
Don Verdonck Former VP Thermal, Athabasca Oil Corporation
Heath Williamson Director New Ventures, International Petroleum Corp.
Jeff Reading President, Actions Matter
John Howard Former VP, Production East, CNRL
TEAMA Leadership and Advisory Team with Deep Technical and Financial Expertise
Geoff Clark, BSc, MBA Chief Executive Officer
Michael Okoniewski, PhD Chief Scientific Officer
Mike Tourigny, BComm, MBA VP, Commercialization RF Heating
Laura McIntyre, BSc VP, Engineering
Brian LeBlanc, CPA, CMA Chief Financial Officer
AXE’s management team has experience spanning all key functions within public and private companies. They are supported by a seasoned Board of Directors with deep governance experience and an Advisory Board with key technical and financial backgrounds.
Management
Advisory Board
Bohdan Romaniuk, MA, LLB Independent Director; Chair
Dennis Nerland, BSc, MA, LLB, ICD.D Independent Director
Peter Neweduk, MD Independent Director
Jens Horstmann, MS Independent Director
Geoff Clark, BSc, MBA Chief Executive Officer
Michael Okoniewski, PhD Chief Scientific Officer
Board of Directors
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HEAVY OIL & BITUMENSetting Up RF as a Better, Cleaner Alternative for Enhanced Recovery
Economic challenges
• High cost structure not competitive with other investments globally or at lower oil prices
• Initial investment: >$400 million for a 10,000 bbl/d plant
• High operating costs
• Elevated F&D
• >$48,000/bbl/d
• Significant lag time to production:• > 4 years to first barrel
Process challenges
• Heat losses• At steam plant
• From plant to well pad
• Down to formation
• From produced water
Environmental Challenges
• High GHG emissions• Significant water usage• High land use and comprehensive reclamation
obligations• Needs new solutions to improve efficiency
RF Heating overcomes the challenges of SAGD:
RF is a more efficient, cleaner and economically profitable alternative to SAGD
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RF IS SUPERIOR TO SAGDDriving a More Energy Efficient, Accessible and Environmentally-Friendly Solution
• Economically scalable• Simple, inexpensive, easy to deploy• Familiar components and processes (uses SAGD drilling and
completions techniques; employs standard materials); minimal on-site labour to operate and maintain
• More energy efficient1
• Retains 97% of “useful heat” v. 70% for SAGD
• Quicker to first production• No steam plant construction
• Higher margin• Capital and operating costs are lower
• Specifically developed for long-reach horizontal wells• Facilitates state-of-the-art well design
• Smaller environmental footprint emits fewer GHG emissions
• Uses no water/steam; occupies 67% less land
1. Internal AXE estimate
RF XL:475,000 GJ1.0 million bbls
SAGD:1,150,000 GJ0.7 million bbls
Oil Rate vs Time1
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RF ECONOMICS FOR E&P COMPANIESDeploying Capital More Efficiently than SAGD
1,000 Meter Horizontals1 AXE RF XL2 SAGD3
Greenfield GreenfieldWTI (constant pricing) US/bbl $65.00 $65.00 Steam Oil Ratio bbl/bbl N/A 3.0Energy/Oil Ratio GJ/bbl 3.25 7.65Initial Capital - Facilities 000 $591,000 $1,512,000 Initial Capital - Wells 000 $282,000 $440,000Subsequent Capital 000 $2,236,000 $3,308,000 Total Capital 000 $3,109,000 $5,260,000 Estimated Ultimate Recovery 000 bbls 403,000 403,000
Average Production Rate bbls/d 36,800 36,800Time to First Oil Years <2 3After Tax NPV 10% 000 $1,211,485 ($78,840)F&D $/bbl $7.72 $13.05 Capital Intensity /bbl/d $21,830 $48,800 Opex /bbl $7.00 $10.41 Payback Years 4.8 10.5IRR after tax 28% 9%
1. 40 well pairs: 1 producing well paired with 1 RF/steam injector2. Source – Internal Estimate3. Source – GMP First Energy
Economics reflect a 40,000 bbl/d operation, a standard measure for
SAGD projects• RF generates a significantly higher return• RF economics relative to SAGD improve
further with smaller project sizes
RF also opens the door to smaller heavy oil and
bitumen projects
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MAGNITUDE OF RF MARKETHeavy Oil & Bitumen Market Potentially Supplemented by Other Play Types
Selected Area/Play1 Resource Original Oil in Place (billions of bbls)
Alberta: Athabasca Oil Sands Bitumen 1,600
Alberta & Saskatchewan: Post-CHPS Heavy Oil 250
Saskatchewan: Thin Pay Heavy Oil 25
Venezuela: Orinoco Belt Extra Heavy Oil 1,200
Middle East Heavy oil 500-900
Total 3,575-3,975Global Heavy Oil Basins
Additional Potential• Deep reservoirs where steam is not viable
• Fractured reservoirs where steam is lost through the fracture system
• Shallow reservoirs with or without a cap rock or other containment structure required for steam
1. Source – Multiple
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ENVIRONMENTAL BENEFITS OF RFElimination of Water and Steam Reduces Process GHG Emissions to Virtually NilWhile Project Footprint is Minimized
• When compared to competing technologies, Acceleware’s RF solution delivers broad improvement in environmental performance, including:
• GHG emission reductions ranging from:
• An immediate 23% reduction based on Alberta’s current power grid
• A 56% reduction based on Alberta’s estimated 2030 power grid
• Potential for a 100% reduction when using renewable sources of electricity
• No external water is required
• No solvent injection or solvent recovery is required, thereby eliminating associated safety and environmental risks
• Occupies 67% less land than similar output SAGD operation
SAGD Operation - Footprint
RF Operation - Footprint
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AXE’s RF BUSINESS MODELGenerating Returns for Our Shareholders
• Modular and mobile RF systems to be sold or leased to operators
• Services to operators include:• Installation
• Maintenance
• Optimization
• Pricing is based on power capacity plus annual maintenance• Remote monitoring for minimal down time
• AXE will monitor grid prices to manage power levels
• Applying machine learning to build more value over time• Results in continued growth in the value of AXE analytics, giving operators better results year after
year
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RF PATH TO COMMERCIALIZATIONSetting The Table For Success
1/20 Scale Test Success• Delivered high power to the formation with scaled components• Heated the formation as predicted by simulation• Tested and confirmed proprietary system design
AXE EM Solver SW was released2005 I
AXE RF Heating studies for super-major oil company
2010 I
Design, simulation & field tests begin2011 I
AXE modular RF tank tests & patent filing
2015 I
RF XL 1:20 scale field demo2017 I2016 I GE partnership announced &
additional RF XL Patents filed
Signed commercial-scale test agreement with Prosper Petroleum Ltd.
2018 I
Begin commercial-scale test2019 I
Complete commercial-scal test, begin selling RF XL sys
2020 I
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HPC PLATFORM – SEISMIC IMAGINGExisting Business Supports High-impact Potential of RF
• AxFWI: a flexible, modular platform producing fast and accurate results for detailed sub-surface imaging throughFull Waveform Inversion, an advanced method of improving velocity models by iteratively matching the modeled data with the recorded data
• AxRTM: an advanced, Reverse Time Migration method for seismic depth imaging that fully-respects the two-way acoustic wave equation, thus improving imaging in areas where complex geology violates certain assumptions. It has a modular architecture supporting a variety of integrator-specific functionality, and currently supports both optimized multi-core CPU and NVIDIA GPU hardware
• AxWAVE: enables a fast and accurate simulation of 2D and 3D seismic energy in an acoustic medium, using the same finite-difference two-way wave propagation engine that powers AxRTM. It is optimized for modern high performance computing platforms including NVIDIA GPUs, multi-core CPUs, and Intel Xeon Phi Coprocessors
HPC Platform• $4.3 million annual revenue (2018); cash-flow positive• Growth potential as oil prices stabilize and rise• Cloud-based
Strong Partnerships & Blue Chip Clients
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AXE SUMMARYAn Established Technology Company With a New Solution that Will Disrupt Oil Sands and Heavy Oil
• Acceleware’s disruptive RF solutions represent a low-cost, low-carbon innovation
• Simple deployment and superior economics will offer a compelling production technique for E&P companies and help drive their returns
• 1/20th scale field demonstration validated AXE’s RF solution
• Awarded a $10 million, non-repayable grant from Sustainable Development Technology Canada and Emissions Reduction Alberta
• Commencing commercial scale test of RF XL with Prosper Petroleum at Rigel
• Management has a combined 60 years experience in public and private companies, spanning all executive functions and is supported by a seasoned Board of Directors with deep governance experience and an Advisory Board with key technical and financial backgrounds
• Cash flow-positive software platform supports high-impact potential of RF
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CORPORATE CONTACT & ADVISORSSetting Up RF as a Better, Cleaner Alternative for Enhanced Recovery
Acceleware Ltd.
435 – 10th Avenue SE
Calgary, AB T2G 0W3
Geoff Clark, CEO
T: 403.249.9099
W: www.acceleware.com
Advisors
Legal counsel Nerland Lindsey
Auditors MNP LLP
Transfer Agent Computershare
