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Current Oil and Gas Projects

Oil and Gas Projects Powerpoint - title slide

Oil & Gas Initiative

Timeline

  • January 2022 – WTI Oil prices steadily increase through January 2022 ending the month at over US $88 /bbl
  • February 9, 2022 – Crescent Point Energy Corp (CPG-TSX) announces sale of non-core Canadian assets producing ~10,554 bbl oil equivalent per day (Q4)
  • Market conditions create purchaser interest – CPG using 80 / 20 rule with respect to managing assets – Valuations at 2 – 3 X CF
  • February 2022 – WTI Oil prices consistently over US $90 /bbl
  • February 24 2022 – Russia invades the Ukraine
  • Mid-February Argo Gold signs CA with CPG, makes initiative to identify assets available or purchase and then continues to sign CA’s and do due diligence
  • March 2022, April 2022, May 2022 – Argo Gold retains multiple consultants for oil & gas project due diligence and to identify oi & gas opportunities
  • June 2022 – Two oil & gas opportunities identified with intent to sign LOI’s

Why the Oil & Gas Initiative

  • Oil is 90% of the transportation industry in the United States (2020). The EV initiative is great but the transformation reality is multiple decades.
  • Coal-fired electric power plants are being transformed to Natural Gas. US Electrical Power is now 40% natural gas and 40% coal.
  • Natural Gas heats 60% of US homes. 25% of US homes use electrical heat.
  • The Oil & Gas sector – transportation, heat and electricity – is important to people’s daily lives and reasonable prices are important for economic activity
  • Poor public perception of sector, low prices and COVID resulted in under-investment and challenges for expanding production now
  • US oil & gas inventories are well below 5-year averages
  • Decreasing Western world oil & gas production increases the world’s reliance on
    OPEC (36%) and Russia (10%) & gas prices and supply concerns. The Canadian oil & gas industry and is a world leader in environmental standards

Oil & Gas Valuations & Opportunity

  • Companies trading at 2 – 5 X cash flows and get no credit for long life assets or reserves
  • 2020 sector FCF of ~ US $126 B to anticipated 2022 sector FCF of ~ US 834 B with anticipated investment ratio of 20% to 30% (Rystad)
  • Q1 2022 oil prices provided first opportunity for companies to sell non-core assets
  • Long life, low decline and low risk assets available that require minimal capital
  • Many producing assets provide optimization opportunities such as low-cost workovers, re-activations and re-completions
  • Opportunity to increase production by implementing waterfloods and drilling additional wells
  • Abundant oil & gas exploration and development opportunities after a 7-year slowdown
  • Oil & Gas exploration almost immediately becomes development and production resulting in CASH FLOW

Location Geography

Canada’s Sedimentary Basin Map
Canada’s Sedimentary Basin Map
Western Canada Sedimentary Basin Cross-section
Western Canada Sedimentary Basin Cross-section
  • Western Canada Sedimentary Basin Cross-section Location (diagonal black line)
    Western Canada Sedimentary Basin Cross-section Location (diagonal black line)

    Tectonic activity resulted in burial to generate oil and migrate it up-dip

  • Hydrocarbons are expelled from source rock and move into reservoir rocks
  • 80% tar sands – remaining 20% a unique opportunity for junior producers

Geology Overview

Geology of the Western Canada Sedimentary Basin
Hydrocarbon distribution in the Western Canada Sedimentary Basin
Stratigraphic Correlation Chart – Core Lab
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