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Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

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JANUARY 2013 Combination of pace, avenex and charger to form a dividend paying corporation
Transcript
Page 1: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

JANUARY 2013

Combination of pace, avenex and charger to

form a dividend paying corporation

Page 2: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

Advisory statements

2

This presentation contains forward-looking information within the meaning of applicable securities laws and is based on the expectations, estimates and projections of management of each of Charger, Pace and AvenEx as

of the date of this presentation, unless otherwise stated. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and

similar expressions are intended to identify forward-looking information. More particularly and without limitation, this presentation contains forward-looking information concerning: the anticipated benefits of the Merger to

the shareholders of each of Charger, Pace and AvenEx, including anticipated synergies; anticipated future production, operating netbacks, cash flow, capital expenditures, dividends, payout ratios, decline rates,

development capital efficiencies, net debt to cash flow, reserve life index, credit facility availability and years of sustaining development available; the timing and anticipated receipt of required regulatory, court and

shareholder approvals for the transaction; the ability of each of Charger, Pace and AvenEx to satisfy the other conditions to, and to complete, the Merger including the Elbow River Sale; the anticipated timing of the joint

information circular regarding the Merger; the holding of the shareholder meetings of each of Charger, Pace and AvenEx; the anticipated dividend payments of Spyglass following closing and the closing of the Merger.

Such forward-looking information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Investors are cautioned that reliance on such information may

not be appropriate for other purposes, such as making investment decisions.

In respect of the forward-looking information and statements concerning the anticipated benefits and completion of the proposed Merger and the anticipated timing for completion of the Merger, each of Charger, Pace and

AvenEx has provided such in reliance on certain assumptions that it believes are reasonable at this time, including assumptions as to the time required to prepare and mail shareholder meeting materials, including the

required information circular; the ability of each of Charger, Pace and AvenEx to receive, in a timely manner, the necessary regulatory, court, shareholder, stock exchange and other third party approvals, including but not

limited to the receipt of applicable competition approvals; the ability of each of Charger, Pace and AvenEx to satisfy, in a timely manner, the other conditions to the closing of the Merger; and expectations and assumptions

concerning, among other things: commodity prices and interest and foreign exchange rates; planned synergies, capital efficiencies and cost-savings; applicable tax laws; future production rates; the sufficiency of budgeted

capital expenditures in carrying out planned activities; and the availability and cost of labour and services.

The anticipated dates provided may change for a number of reasons, including unforeseen delays in preparing meeting materials, inability to secure necessary shareholder, regulatory, court or other third party approvals in

the time assumed or the need for additional time to satisfy the other conditions to the completion of the Merger. Accordingly, readers should not place undue reliance on the forward-looking information contained in this

presentation. In respect of the forward-looking information, including the anticipated dividend payments of Spyglass following closing, each of Charger, Pace and AvenEx has provided such in reliance on certain

assumptions that it believes are reasonable at this time, including assumptions in respect of: prevailing commodity prices, margins and exchange rates; that each of Charger's, Pace's and AvenEx's future results of

operations will be consistent with past performance and management expectations in relation thereto; the continued availability of capital at attractive prices to fund future capital requirements relating to existing assets and

projects, including but not limited to future capital expenditures relating to expansion, upgrades and maintenance shutdowns; the success of growth projects; future operating costs; that counterparties to material

agreements will continue to perform in a timely manner; that there are no unforeseen events preventing the performance of contracts; and that there are no unforeseen material construction or other costs related to current

growth projects or current operations.

Since forward-looking information addresses future events and conditions, such information by its very nature involves inherent risks and uncertainties. Actual results could differ materially from those currently anticipated

due to a number of factors and risks. These include, but are not limited to the risks associated with the industries in which each of Charger, Pace and AvenEx operates in general such as: operational risks; delays or

changes in plans with respect to growth projects or capital expenditures; costs and expenses; health, safety and environmental risks; commodity price, interest rate and exchange rate fluctuations; environmental risks;

competition; failure to realize the anticipated benefits of the Merger and to successfully integrate each of Charger, Pace and AvenEx; ability to access sufficient capital from internal and external sources; and changes in

legislation, including but not limited to tax laws and environmental regulations. Risks and uncertainties inherent in the nature of the Merger include the failure of each of Charger, Pace and AvenEx to obtain necessary

shareholder, regulatory, court and other third party approvals, or to otherwise satisfy the conditions to the Merger, in a timely manner, or at all. Failure to so obtain such approvals, or the failure of each of Charger, Pace

and AvenEx to otherwise satisfy the conditions to the Merger, may result in the Merger not being completed on the proposed terms, or at all.

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on other factors that could affect the operations or financial results of each of Charger, Pace and AvenEx, and the combined

company, are included in reports on file with applicable securities regulatory authorities, including but not limited to; the Annual Information Form for the year ended December 31, 2011 for each of Charger, Pace and

AvenEx which may be accessed on their respective SEDAR profiles at www.sedar.com.

Any financial outlook or future oriented financial information in this presentation, as defined by applicable securities legislation, has been approved by management of Charger, Pace and AvenEx. Such financial outlook or

future oriented financial information is provided for the purpose of providing information about management's reasonable expectations as to the anticipated results of Spyglass and its anticipated business activities for the

twelve months following the closing of the Merger.

The forward-looking information contained in this presentation is made as of the date hereof and each of Charger, Pace and AvenEx undertake no obligation to update publicly or revise any forward-looking information,

whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

The production type curves used in this presentation are constructed from well data representing only those wells deemed to be most indicative of the go-forward wells which Spyglass intends to develop. These type

curves are for illustrative purposes of potential future performance only and do not constitute a guarantee of future well performance in the areas which they describe.

Boes are presented on the basis of one Boe for six Mcf of natural gas. Disclosure provided herein in respect of Boes may be misleading, particularly if used in isolation. A Boe conversion ratio of 6 Mcf:1 Bbl is based on an

energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an

indication of value.

Page 3: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

Creating a balanced

dividend-paying producer

3

The combination of Pace (“PCE”), AvenEx (“AVF”), and Charger (“CHX”) will create a cash

distributing producer with a balanced commodity portfolio

Spyglass will implement a $0.03 monthly cash dividend upon closing

• Creates long term value for shareholders through cash distributing model

• Initial implied yield

– 10.8% based on AvenEx closing share price prior to announcement ($3.32)

– 13.0% based on AvenEx closing share price on January 5, 2013 ($2.77)

• Additional value potential with yield compression

Balanced commodity portfolio, a strong management team and a sustainable yield model

• 12-month production averaging ~18,000 boe/d (~52% oil and liquids) (1)

• Management team with a track record of creating shareholder value in a dividend model

• Mature, low decline (~20%) producing assets coupled with capital efficient light oil development

(~$25,000 / boe/d) provide the scale, stability and low-risk running room to support a sustainable

yield model

Spyglass is well positioned with strong financial flexibility

• ~$120 million of available credit capacity upon closing (~30% availability)

• Potential to monetize non-core assets with minimal impact on cash flow

(1) Based on management estimates pro forma the transaction and implementation of a cash distributing model. First 12-months

commencing on the closing date of the Merger.

Spyglass will have an extensive inventory of low-risk, high-return drilling opportunities

Page 4: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

Strategic Rationale

4

• Low decline light & medium oil assets

• Size and efficient operating scale

• Undervalued as a growth entity

• Diverse asset base

• Cash and balance sheet capacity after

$80 mm sale of Elbow River Marketing

• Low decline oil assets

• Gas growth inventory

• Low risk, large scale light oil development

• Large land base

• Management with yield experience

• Experience with Pace assets

• Sustainable dividend paying corp. with an

attractive total return proposition

• Low decline base production, balanced

commodity profile

• Large inventory of capital efficient light oil

development opportunities

• Proven management team

• G&A synergies

• Liquidity, with $120 mm of unused bank lines

• Diverse, low risk, efficient asset base

• Potential for asset rationalization

• Implement DRIP program

Page 5: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

Transaction overview

5

Share Exchange

Other Key Terms

Management &

Board

Transaction

Overview

1.30 Spyglass shares for each outstanding common share of Pace

1.00 Spyglass share for each outstanding common share of AvenEx

0.18 Spyglass shares for each outstanding Class A share of Charger

Spyglass will be led by the current Charger team

• Tom Buchanan, CEO & Director

• Dan O’Byrne, President

The Board will consist of 8 existing directors from the parties

• Randy Findlay will serve as an Independent Chair

Break fee of 2.5% of enterprise value payable to other two parties

Credit facility of $400 million (~$280 million drawn)

In conjunction with the Merger, AvenEx has reached a binding agreement for the

cash sale of its Elbow River Marketing business

• Expected to close in February 2013

The combination of AvenEx, Charger and Pace will create a cash distributing

producer with a balanced commodity portfolio

Spyglass will implement a $0.03 monthly cash dividend at closing

• Target dividend payout of 35% to 40% of cash flow (100-115% all-in payout)

• Considering implementing a dividend reinvestment plan (DRIP)

Approvals &

Timing

Customary approvals required, including the approval of at least 662/3% of

shareholders voting at each of the parties’ respective meetings

Anticipated to close in mid February 2013

Subject to closing the sale of AvenEx’s Elbow River Marketing business

Page 6: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

Management TEAM

6

Dan O’Byrne

President

Kelly Cowan

VP, Corporate

Development & Land

Mark Walker

VP, Finance & CFO

Tom Buchanan

CEO & Director

30+ years of diverse experience in the oil and natural gas sector

Recently as Executive VP & COO of Provident Energy Trust

Served as Division VP for Nexen Inc. and numerous executive positions with

Canadian Occidental

23+ years of experience in oil and gas finance and accounting

Recently as SVP Finance & CFO of Provident Energy Trust

30+ years of experience in the oil and gas sector

Recently as CEO of Churchill Energy Inc.

Co-founder, SVP & COO of Founders Energy Ltd., which was converted to Provident

Energy Trust in 2001

30+ years of experience in the oil and natural gas sector

Recently as President & CEO and Director of Provident Energy Trust

Co-founder, President & CEO of Founders Energy Ltd., which was converted to

Provident Energy Trust in 2001

Currently a Director of Pace Oil & Gas Ltd. , Pembina Pipeline Corporation,

Athabasca Oil Corp., and Hawk Exploration Ltd

Dan Fournier

General Counsel &

Corporate Secretary

30+ years as a Partner with Blakes Calgary office, and is currently a member of

Blakes energy financial services group

Advised on the structuring of numerous private and public energy financings

John Milford

VP, Exploration &

Development

30+ years of experience as a petroleum geologist

Founded and served in a Director / Executive role for a number of private oil and gas

companies including Predator Corporation, Primal Energy, and Mojo Energy

Page 7: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

BOARD OF DIRECTORS

7

Randy Findlay

Independent Chair

- Charger -

Jeff Smith

- Pace -

Mike Shaikh

- Charger & Pace -

Tom Buchanan

CEO & Director

- Charger & Pace -

Director of Charger Energy Corp., Canadian Helicopters Group Inc., Pembina

Pipeline Corporation, Superior Plus Corp., Whitemud Resources Inc., EllisDon Inc.,

Summerland Energy Inc. and SeaNG Ltd.

Director of Charger Energy Corp., Pace Oil and Gas Ltd. and Hawk Exploration Ltd.;

Former member of the board of the ASC (2003-2006)

Director of Pace Oil & Gas Ltd. and Pembina Pipeline Corporation

Chairman & CEO of Charger Energy Corp.

Director of Pace Oil & Gas Ltd., Pembina Pipeline Corporation, Athabasca Oil Corp.,

and Hawk Exploration Ltd.

Fred Woods

- Pace -

Director, President & CEO of Pace Oil & Gas Ltd.

Former Director, President & CEO of Midnight Oil Exploration Ltd., Daylight Energy

Ltd. (Chairman) and TriOil Resources Ltd.

John Wright

- Charger-

President, CEO and Director of Petrobank Energy and Resources Ltd., Chairman

and CEO of PetroBakken Energy Ltd. and Chairman of Petrominerales Ltd., Director

of Hawk Exploration Ltd., and Director of Charger Energy Corp.

Dennis Balderston

- Avenex - Director of AvenEx Energy Corp, Condor Petroleum Inc. and Suroco Energy Inc.

Gary Dundas

- Avenex -

VP, Finance & CFO of AvenEx Energy Corp.

Director of Avenex Energy Corp., Direct Cash Payments Inc., Athabasca Oil

Corporation, Canadian International Oil Corp. Fraction Energy Services

Page 8: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

Key attributes &

sustainability features

8

(1) Reserves from reserve reports for each company as of December 31, 2011 and the updated GLJ report on certain properties for Charger as of May 31, 2012 adjusted for AvenEx and Charger minor

dispositions in 2012 and adjusted for 2012 production to October 31, 2012 as forecast in the December 2011 reserve reports.

(2) Pro forma net debt and working capital incorporates cash proceeds from the disposition of Elbow River Marketing and estimated transaction costs and excludes risk management assets and liabilities

as of the closing date of the transaction.

\\CIBG-SRV-

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Presentation Tables.xlsx

Sheet: PR Table

Range: $C$3:$E$14

Pro Forma Operational

Current Production [boe/d] 18,000

% Oil & Liquids [%] 45%

Total Proved Reserves (1) [MMboe] 57.5

Total Proved plus Probable Reserves (1) [MMboe] 93.9

Undeveloped Land (Net) [Acres] 645,000

Pro Forma Financial

Shares Outstanding [MM] 129

Net Debt and Working Capital (2) [$MM] $280

Credit Facility Capacity [$MM] $400

Estimated Tax Pools [$MM] $900

Page 9: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

9

Key attributes & sustainability features

(Cont’d)

G:\INV_BKG\PROJECTS\P

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Presentation Tables.xlsx

Sheet: Sheet2

Range: $C$21:$E$32

(1) 12-months commencing from closing date of the Merger, currently anticipated to be in mid-February 2013.

(2) Commodity price assumptions: Edm Light C$80.00 to C$86.00, corporate realized crude oil and liquids price C$71.36 to C$76.80 at the wellhead, AECO $3.30 / Mcf

(3) Commodity price sensitivities: a $1.00/bbl change in realized crude oil prices, results in a $2.2 million change in annualized cash flow; a $0.50/Mcf change in natural gas

prices, results in an $6.0 million change in annualized cash flow.

(4) Commodity price sensitivities: a $1.00/bbl change in realized crude oil prices, results in a $2.2 million change in annualized cash flow; a $0.50/Mcf change in natural gas

prices, results in a $6.0 million change in annualized cash flow.

12-Month Outlook (1)(2)

12-Month Production Forecast [boe/d] 18,000

% Oil & Liquids [%] 52%

Operating Netback [$/boe] $21 - $23

12-Month Cash Flow Forecast (3)(4) [$MM] $115 - $130

Capital Expenditures [$MM] $80 - $90

Dividend Features & Sustainability Criteria

Annualized Dividend per Share [$/share] $0.36

Payment Frequency [Period] Monthly

Dividend Payout Ratio [%] 35% - 40%

All-In Payout Ratio [%] 100% - 115%

Base Decline Rate [%] 20%

Development Capital Efficiencies [$/boe/d] $25,000

Pro Forma Net Debt to Cash Flow [x] 2.2x - 2.4x

Reserve Life Index [Years] 14

Expected Credit Facility Availability ($400 MM Capacity) [$MM] $120

Light Oil Drilling Inventory (Halkirk, Matziwin, Pembina, Randell, etc.) [Locations] >1,000

Years of Sustaining Development Available [Years] >20

Page 10: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

ZAR BNP PGF ERF LNV SPY TBE RPL WCP

201

3E

All-I

n P

ayo

ut

Ra

tio

(%

)

Dividends Capex Range

Average: 122%

Peer Benchmarking

all-in payout

10

2013E All-In Payout Ratio (1)(2)(3)(4)

(1) Capex consensus estimates per Capital IQ

(2) Dividend and cash flow estimates per First Call consensus, as available

(3) Assumes Spyglass commences operations on January 1, 2013

(4) Average excludes Spyglass

\\CIBG-SRV-

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Group Charts - Dividend

Analysis - PEBBLE BEACH

v.02 - ROADSHOW

PRES.xlsx

Sheet: Payout (Excl. DRIP)

Page 11: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

A D G E H SPY B F C

Ca

pit

al

Eff

icie

nc

y (

$ / b

oe

/d)

Average: $30,392

0%

5%

10%

15%

20%

25%

30%

35%

H B F G A E SPY D C

De

clin

e R

ate

(%

)

Average: 25%

Peer Benchmarking

capital efficiency & decline rates

11

Capital Efficiency (1)(2)(3) Decline Rate (1)(2)(3)

(1) Peer estimates per TD research

(2) Assumes Spyglass commences operations on January 1, 2013

(3) Average excludes Spyglass

na

na

Exploiting low-risk, light-oil development plays

key to long-term value

Stable, mature, low-decline base supports

dividend model

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Group Charts - Dividend

Analysis - PEBBLE BEACH

v.02 - ROADSHOW

PRES.xlsx

Sheet: Capital Efficiency

\\CIBG-SRV-

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Group Charts - Dividend

Analysis - PEBBLE BEACH

v.02 - ROADSHOW

PRES.xlsx

Sheet: Decline Rate

Page 12: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

$3.45$2.77

$0.48

$3.22

$4.09

$5.32

$4.09

$0.74

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

SPG PCE AVF CHX

Sh

are

Pri

ce

Current Share Price

Highest Peer Yield

Avg Peer Yield

0%

2%

4%

6%

8%

10%

12%

LNV BNP PGF RPL ZAR ERF TBE WCP

Yie

ld (

MR

A)

Average: 8.8%

Peer Benchmarking

current yield & Implied Trading Levels

12

Current Yield

An analysis of dividend paying peer yields would suggest an implied Spyglass share price

in the range of $3.22 to $4.09 per share

Implied Share Price

Page 13: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

File: SPYGLASS_v2.0.MAP Datum: NAD27 Projection: Stereographic Center: N54.61689 W113.26251 Created in AccuMap™, a product of IHS

Light Oil focus areas

13

Randell Slave Point

& Gilwood

Pembina

Cardium

Halkirk-

Provost

Viking

Southern Alberta

Multi-zone

Legend

Pace

AvenEx

Charger Dixonville

Montney

$80 - $90 Million Capital Program

Area

Proposed Capex

Allocation

Halkirk-Provost Viking 30%

Southern Alberta Multiple Zones (Pekisko and Other) 20%

Randell Slave Point and Gilwood 20%

Pembina Cardium 10%

Other 20%

Total 100%

Page 14: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

Underpinning the Model –

Low Decline, Balanced Production Base

14

Company Core Area

Q3-2012 Production (boe/d)(1)

Q3-2012 Oil & Liquids

Q3-2012 Op Costs ($/boe)

Q3-2012 Netback ($/boe)(2)

Est. Base Decline Rate

PCE Southern AB 4,591 48% 19.76 16.76 25%

PCE Dixonville 3,185 89% 12.53 29.71 11%

PCE Northwest AB 3,065 19% 13.39 5.91 18%

PCE Deep Basin 1,206 5% 6.95 6.29 22%

PCE Peace River Arch 634 55% 21.83 15.94 30%

AVF BC 930 1% 9.39 2.13 13%

AVF Northern AB 1,131 67% 16.22 25.77 20%

AVF Southern AB(3) 667 83% 33.84 21.18 12%

AVF Saskatchewan 404 99% 26.78 33.03 10%

AVF Royalty Volumes 36 86% - - -

CHX Halkirk-Provost 1,106 65% 21.95 26.86 34%

CHX Peace River Arch 1,481 17% 10.62 12.40 23%

CHX Drumheller 441 8% 6.40 8.65 16%

CHX Royalty Volumes 111 95% - - -

Pro Forma Total / Weighted Avg 18,988 47% 15.65 16.74 20%

(1) Pro forma current production estimated at approximately 18,000 boe/d, 45% oil and liquids.

(2) Excludes hedging gains and losses.

(3) AVF production excludes central AB disposition in Q4 2012. Southern AB production includes remaining 99 boe/d (31% liquids) of remaining central AB production.

Page 15: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

Sustaining the Model –

Low Risk, High Return Development Portfolio

15

Development Plays Unrisked Single Well Economic Indicators(1)

Prospective Locations(2)

EUR (Mboe)

Capex ($MM) % Oil

30 day IP (boe/d)

1st yr Op Costs

($/boe)

1st yr Netback ($/boe)

NPV at 10% ($MM)

Capital Efficiency ($/boed)(5)

IRR (btax)

F&D Costs

($/boe)

Provost Viking Long Reach(3) 425 143 1.8 70% 128 7.95 38.99 2.2 22,397 53% 12.24

Provost Viking Short Reach(3) 106 107 1.4 70% 85 8.38 40.80 1.6 27,389 46% 13.32

Twining Pekisko 7 191 3.0 65% 168 8.33 34.14 1.6 28,511 27% 15.74

Pembina Cardium 11 60 2.3 100% 169 12.17 75.67 1.2 30,417 69% 38.33

Randell Slave Point 22 90 2.6 100% 138 13.03 72.43 1.4 31,988 54% 28.89

Randell Gilwood 16 70 1.7 100% 135 13.37 72.09 1.5 22,500 146% 23.57

Noel Cadomin 93 448 5.0 0% 982 4.16 15.96 1.1 8,995 27% 11.17

Matziwin Pekisko 78 134 2.3 93% 103 7.23 64.80 2.0 31,186 56% 17.18

Elmworth Commingled 5 467 5.0 0% 641 2.56 14.87 0.6 14,205 14% 10.70

Other(4) 281

Total 1,044

(1) Economic indicators based on evaluations at consultant's average October 2012 price forecasts with an effective date, investment date and start of production date of January 1, 2013.

(2) Includes all primary, secondary and prospective (gross) drilling locations.

(3) Provost Viking economics weighted 75% freehold and 25% crown.

(4) Includes Bellshill Ellerslie, Red Earth, Cranberry, Kitty and Lubicon Slave Point, Wapiti Cardium, Sutton Montney, Southern AB Glauconite and Mannville and others.

(5) Based on 1st year average production.

Page 16: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

Proved Developed

Producing, 42%

Proved Undeveloped &

PDNP, 19%

Probable, 39%

Pro Forma Reserves Summary

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Sheet: Sheet3

Range: $C$3:$I$18

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Range: $C$3:$I$18

16

Total Proved plus Probable Reserves by Category

Oil (Mbbl)

Nat. Gas

(MMcf)

NGL

(Mbbl)

Total

(Mboe)(2)

Proved Developed Producing 20,921 105,746 798 39,345

% by Product 53% 45% 2%

Total Proved 28,459 166,800 1,240 57,499

% by Product 49% 48% 2%

Total Proved plus Probable 43,059 290,923 2,312 93,858

% by Product 46% 52% 2%

Pro Forma Selected Reserves

Information(1)

as at October 31, 2012(1)

(1) Working interest reserves from reserve reports for Pace, AvenEx and Charger as of

December 31, 2011 and the updated GLJ report on certain properties for Charger as of

May 31, 2012 adjusted for AvenEx and Charger minor dispositions in 2012 and adjusted

for 2012 production to October 31, 2012 as forecast in the December 2011 reserve

reports.

(2) The Company has adopted the standard of 6 Mcf to 1 boe when converting natural gas to

barrels of oil equivalent. Boes may be misleading, particularly if used in isolation. A boe

conversion ratio of 6 Mcf :1 boe is based on an energy equivalency conversion method

primarily applicable at the burner tip and does not represent a value equivalency at the

wellhead.

2P RLI: ~14 years (based on 18,000 boe/d production)

Page 17: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

Pro forma Hedging Summary

Active hedging strategy designed to protect capital program and dividend with

up to 60% of production hedged by volume

17

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Sheet: Hedging

Range: $C$3:$I$18

Commodity Term Type Volume Price

[Floor] [Ceiling]

Oil (C$ WTI) 2013 Fiscal Call (Sold) 100 bbl/d $88.25

Oil (US$ WTI) 2013 Fiscal Call (Sold) 200 bbl/d $72.50

Oil (C$ WTI) 2013 Fiscal Call (Bought) 100 bbl/d $105.00

Oil (US$ WTI) 2013 Fiscal Call (Bought) 200 bbl/d $105.00

Oil (US$ WTI) Jan - Jul 2013 Swap 150 bbl/d $101.05 - $101.05

Oil (C$ WTI) 2013 Fiscal Swap 500 bbl/d $97.00 - $97.00

Oil (C$ WTI) Jan - Mar 2013 Swap 150 bbl/d $101.12 - $101.12

Oil (US$ WTI) Jan - Jul 2013 Swap 200 bbl/d $105.75 - $105.75

Oil (C$ WTI) Feb - Dec 2013 Swap 1,000 bbl/d $92.97 - $92.97

Oil (C$ WTI) Feb - Dec 2013 Swap 1,000 bbl/d $93.49 - $93.49

Natural Gas (C$ AECO) 2013 Fiscal Call (Sold) 3,000 gj/d $7.40

Natural Gas (C$ AECO) 2013 Fiscal Collar 5,000 gj/d $2.75 - $3.38

Natural Gas (C$ AECO) Jan - Mar 2013 Put 3,000 gj/d $1.80

Natural Gas (C$ AECO) 2013 Fiscal Put 1,850 gj/d $2.80

Natural Gas (C$ AECO) 2013 Fiscal Put 1,650 gj/d $3.10

Natural Gas (C$ AECO) Jan - Apr 2013 Swap 5,000 gj/d $2.06 - $2.06

Natural Gas (C$ AECO) 2013 Fiscal Swap 5,000 gj/d $3.06 - $3.06

Natural Gas (C$ AECO) 2013 Fiscal Swap 2,000 gj/d $3.00 - $3.00

Page 18: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

Investment Highlights

18

Creation of a Balanced, Dividend-Paying Producer

• $0.03 Monthly Cash Dividend Implemented Upon Closing

Proven Management Team with Track Record of Creating Shareholder

Value

Sustainable Dividend-Paying Model

• Target Dividend Payout of 35% to 40% of Cash Flow (100-115% All-In Payout)

• Mature, Low Decline Producing Assets Coupled With Capital Efficient Light Oil

Development Potential

• Extensive Inventory of Low-risk, High-Return Drilling Opportunities

Pro Forma Growth Entity Well Positioned With Strong Financial Flexibility

• ~$120 million of Available Liquidity Upon Closing

Page 19: Pace, AvenEx and Charger to Merge and Form Spyglass Resources Corp

Contact information

19

Suite 2500, 500 – 4th Ave. SW

Calgary, AB T2P 2V6

Tel: (403) 457-1612

Fax: (403) 457-1613

Email: [email protected]

Suite 1700, 250 – 2nd Ave. SW

Calgary, AB T2P 0C1

Tel: (403) 303-8500

Email: [email protected]

Suite 300, 808 – 1st St. SW

Calgary, AB T2P 1M9

Tel: (403) 237-9949

Fax: (403) 237-0903

Email: [email protected]


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