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July 2018 – 3rd Anniversary of Kern Bluff Acquisition
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Forward Looking Statements
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This presentation contains forward-looking statements, including
without limitation those statements regarding Citadel’s ability to
exploit mining concessions. The statements and discussions
contained in this presentation that are not historical facts
constitute forward-looking statements, which can be identified by
the use of forward-looking words such as "believes," "expects,"
"may," "intends," "anticipates," "plans," "estimates" and
analogous or similar expressions intended to identify
forward-looking statements. Citadel wishes to caution the reader of
this
presentation that these forward-looking statements and estimates
as to future performance, estimates as to future valuations and
other statements contained herein regarding matters that are
not historical facts, are only predictions, and that actual
events or results may differ materially. Citadel cannot assure or
guarantee you that any future results described in this
presentation will be
achieved, and actual results could vary materially from those
reflected in such forward-looking statements. We assume no
obligation to update any forward-looking statements in order to
reflect
any event or circumstance that may arise after the date of this
presentation, other than as may be required by applicable law or
regulation. Reserve and Resource Disclosure: Securities and
Exchange Commission (“SEC”) rules prohibit a publicly-reporting
oil and gas company from including oil and gas resource estimates
in its filings with the SEC, except proved, probable and
possible
reserves that meet the SEC’s definition of such terms. Estimates
of non-proved and non-probable reserves included herein are not
based on SEC definitions and guidelines and may not meet
specific definitions of reserves or resource categories within
the meaning of the SPE/SPEE/WPC Petroleum Resource Management
System.
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Kern County California: Heart of California Oil
Yowlumne Area –2,800 acres
Kern Bluff Area –1,100 acres
Largest Producing County in the United States ~ 400,000 BOPD
Citadel currently has 3,900 acres in Kern County under lease
Kern County is the Heart of California Oil Production with four
of the top ten oil fields in the U.S.
Midway Sunset - 3.4 Billion BarrelsKern River - 2.5 Billion
BarrelsSouth Belridge - 2.0 Billion BarrelsElk Hills - 1.5 Billion
Barrels
Strong service industry and infrastructure to support
redevelopment opportunities
Business & Oil friendly environment
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Executive Summary
Capital Structure▪ (OTCQB: COIL) 45MM shares issued (60MM fully
diluted including options & restricted shares)▪ $8.0 MM in
Series A Convertible Participating Preferred Stock (Convertible at
$0.20/40MM shares)▪ $1,750,000 drawn on $3MM Senior Secured Debt
Facility.
Founder & CEO: Armen Nahabedian – 4th Generation Oilman▪
Extensive database & knowledge provide first-mover advantage▪
Experienced operator with boots on the ground advantage▪ United
States Marine 1999 – 2003; Infantry veteran of Iraq war
CFO: Phil McPherson – 11 Years as a Small Cap E&P Analyst▪
Noted expert on California E&P companies▪ Wall Street Journal
“Best on the Street” in 2011 ▪ East Carolina University 97’ – B.A.
Economics
Core Asset Under Development: Kern Bluff Oil Field▪ 25MM BTU
Steam Generator – Currently Steaming 10 wells▪ Producing ~100
Barrels of Oil per day. ▪ 3 Well Drilling Program Completed in
1Q18▪ Inventory of 20 Recompletions & 400 potential development
locations.
The Next Great California Independent
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Kern Bluff Oil Field: Discovered in 1944 by Shell
▪ Acquired Kern Bluff in July 2015 for $2MM in cash & 6MM
shares of Common Stocko 1,100 acres & One producing well - #324
Horizontal producing ~5 BOPD
o 29 idle well bores – all candidates to be returned to
production
▪ Field Estimated to hold over 100 Million Barrels of oil in
place (OOIP) o 169 Vertical Wells drilled from 1950’s to 1980’s
have recovered ~ 12 Million barrels or 20% of OOIP
o Similar fields in this area have achieved recovery levels
exceeding 60% of OOIP
o Current well spacing equates to ~2.5 to 5.0 acres. Analogous
fields down spaced to ~1.25 acre
o Over 300 New Vertical locations & 20 Horizontal locations
identified
▪ August 2015 to June 2018 Spent $8.0MM in CAPEX
o Major facility Upgrade Completed in July of 2016 – Production
capacity of ~500 BOPD
o Reworked 10 vertical wells and drilled 3 new vertical wells in
2016.
o Purchased and Installed 25MM BTU Steam Generator in 2018 –
1,500 Barrels of Steam per day capacity.
o Currently producing ~100 Barrels of oil per day.
o 2 Well Drilling Joint Venture in 1Q18 – JV Partner has 90%
working interest until payout, 20% after.
o 1 new well 100% owned by Citadel drilled in 1Q18.
▪ Next 12 Month CAPEX $5.0 MM
o Drill 1 Horizontal Well ~$1MM ~ 200 BOPD
o Drill 10 New Vertical Wells ~$3MM ~300 BOPD
o Facility Expansion~ $1MM
o Target 20-30 producing wells and ~600+ BOPD – self fund future
growth from cash flow at $60.00 oil.
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Facility Upgrade Complete:
Capable of processing 500 barrels of oil per day
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Installation of Steam Generator:
25MM BTU Generator – Steam 50 wells per Year
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Thermal Recovery Methods
• Cyclic Steaming also called Huff & Puff (Method to be
deployed by Citadel)• Phase I inject 5,000 to 10,000 barrels of
steam into reservoir (5 – 10 days)• Let steam soak and permeate the
rock (5-10 days)
• Phase II – Return pump and begin production• Continue
production for 180+ days then repeat
as reservoir cools.
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Kern Bluff Geology: Five Stacked Oil Zones
Chanac – Transition - 1st, 2nd & 3rd Benches of the Santa
Margarita
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Field Development Program
Map of Kern Bluff proper ~ 320 acres - location of current
development
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Return to Production (RTP) Production Profile
Average EUR of 29,000 BOE
5,000 - 10,000 Barrels of Steam
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New Vertical Well Production Profile:
Average EUR of 70,000 BOE
5,000 to 10,000 Barrels of Steam
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Economic Profile: 400% ROI
Economics for Vertical, Horizontal & RTP’s at $65.00 Oil
Deck
Cost Assumptions Cost Assumptions Cost Assumptions
Net Well Cost $250,000 Net Well Cost $1,000,000 Net Well Cost
$75,000
LOE per Boe $25.00 LOE per Boe $25.00 LOE per Boe $25.00
Working Interest 100% Working Interest 100.0% Working Interest
100%
Royalty 21% Royalty 21% Royalty 21%
Severence Tax 2% Severence Tax 2% Severence Tax 2%
Performance Assumptions Performance Assumptions Performance
Assumptions
30-Day IP Rate (Boepd) 50 30-Day IP Rate (Boepd) 150 30-Day IP
Rate (Boepd) 20
10,000 BOS Annualy 25,000$ 30,000 BOS Annualy 75,000$ 5,000 BOS
Twice a Year 25,000$
1st Year Production 9,354 1st Year Production 25,510 1st Year
Production 4,622
Economics Economics Economics
Payout (Months) 11.0 Payout (Months) 12.0 Payout (Months)
6.0
EUR (Bbls) 55,310 EUR (Bbls) 229,882 EUR (Bbls) 23,214
PV-10 PUD Well $1,024,198 PV-10 PUD Well $3,855,138 PV-10 PUD
Well $444,419
PV-10 PUD Well per Bbl $18.52 PV-10 PUD Well per Bbl $16.77
PV-10 PUD Well per Bbl $19.14
Full Field Potential ~300 wells Full Field Potential ~100 wells
Full Field Potential ~28 wells
Kern Bluff Vertical Kern Bluff Horizontal Kern Bluff -
Recomplete
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Investment Summary: Don’t Miss a Good Downturn
Commodity Price Cycle Has Bottomed▪ Citadel able to buy a
distressed asset while other companies forced to sell
▪ Low Risk Exploitation
▪ Potentially 20MM to 40MM Barrels Recoverable
▪ Full Field Potential of ~5,000 BOPD
▪ Phase I Facility Upgrade Complete
▪ Purchased/Installed Steam Generator - Steam capacity to grow
to over 50 producing wells ~ 1,000 BOPD in production
▪ Pure play on California Oil & Higher Oil Prices
▪ California Oil Currently Trading at a $2.00 -$3.00 per Barrel
Premium to WTI
▪ Significant Backing from Private Equity Energy Investor – Long
Term View
The Best Place to Find Oil – Is where it has already been
found
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Don’t Miss a Good Downturn
World Headquarters:417 31st St. Unit ANewport Beach, CA
92663949-612-8040Phil McPherson,
[email protected]:
COIL
Kern Bluff Field Office:8850 Paladino Dr. Bakersfield, CA
93308805-910-5369Armen Nahabedian, President /
[email protected]
mailto:[email protected]://www.citadelexploration.com/mailto:[email protected]
