Paramount Resource Ltd. - FirstEnergy Capital Corp.

EnergyGrowth Conference
FirstEnergy Capital Corp./Société Générale
November 13, 2012

Future Oriented Information
(See additional advisories at the end of this document)
• In the interest of providing information regarding Paramount Resources Ltd.
("Paramount" or the "Company"), including management's assessment of the
Company's future plans and operations, this presentation contains certain
forward-looking information and forward-looking statements.
• The projections, estimates and beliefs contained in such forward-looking
information and statements necessarily involve known and unknown risks and
uncertainties which may cause the Company's actual performance and
financial results in future periods to differ materially from any estimates or
projections of future performance or results expressed or implied by such
forward-looking statements. The material risks and uncertainties are referred
to in the advisories contained in Appendix A.
• Accordingly, shareholders and potential investors are cautioned that events or
circumstances could cause actual results to differ materially from those
predicted.
• Any use of information contained within this presentation is expressly
forbidden.
2

Corporate Profile
• Q3 YTD 2012 average production: 19,663 Boe/d (~ 80% gas)
• 89.8 MM shares outstanding
• Market capitalization @ $35.00/share: $3.1 billion
• > 50% insider ownership
• 1.2 million net acres undeveloped land (December 31, 2011)
• Net Debt: ~$500 MM (September 30, 2012 pro-forma equity issue)
• 2012 Capital Expenditure Guidance 1) :
• $475 MM E&D
• $60 MM Strategic Investments
• 2012 Exit production guidance 2) : ~26,000 Boe/d
1) The Company has the flexibility to increase or decrease spending.
2) Subject to the availability of downstream NGLs processing capacity.
3

Core Areas
Average Production (Boe/d) Q3 YTD 2012
Kaybob 10,710
Grande Prairie 4,299
Southern 3,014
Northern 1,640
Total Boe/d 19,663
2012 E&D Capital Budget*: $475 MM
• ~$350 MM in Kaybob
2012 Strategic Investments: $60 MM
• Build two new rigs in Fox Drilling
• Oilsands spending in Cavalier
• Liard Basin shale gas
*The Company has the flexibility to increase or decrease spending.
4

Kaybob Gas Resource
• Significant liquids-rich gas
resource exists within
Deep Basin tight sand
reservoirs
• 40–160 Bcf per section
OGIP*
• 1.5–5.0 Bcf EUR per
vertical/directional well
• ~ 5+ Bcf EUR per Hz well
• > 10.0 Tcf OGIP net to
PRL*
* Internal estimates
CRETACEOUS GAS SANDS OGIP PER SECTION
70 Bcf/Section Average OGIP*
5

Dunvegan Hz Wells
Gas Rate (MMcf/d)
10.00
8.00
6.00
4.00
2.00
0
• Hz Dunvegan well at
Resthaven
• Tested 11.3 MMcf/d*
at 6.2 MPa
• IP: 8.3 MMcf/d
• Producing 2.4 MMcf/d
• Cost: $8.3 MM d/c/t
Cum Production: 3.8 Bcf
100 200 300 400 500 600 700 800 900
Days on Production
*Please refer to the heading "Test Results" within the "Advisories" section of this presentation for further information
6

Falher Hz Wells
Raw Gas Prod (MMcf/d)
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
• Hz Falher well at
Musreau
• Tested 16.4 MMcf/d*
at 20.8 MPa
• IP: 12 MMcf/d
• Producing ~3 MMcf/d
• Cost: $8.6 MM d/c/t
Cum Production: 3.6 Bcf
0.0
0 100 200 300 400 500 600 700 800 900
Days on Production
*Please refer to the heading "Test Results" within the "Advisories" section of this presentation for further information
7

Falher Production
8

Economics of Kaybob 4.9 Bcf Horizontal Falher Well
* Based on processing through a refrigeration facility
9

Fahler Drilling Time Improvements
10

Fahler Completion Cost Improvements
* Data points not included in trend
*
*
*
*
*
*
11

Montney Gas Resource
• Liquids-rich Montney gas play
• Paramount holds 210 sections
(113,000 net acres) of Montney rights
• 2011 drilling included 5 Hz Montney
wells:
• 15-33 (50% WI) tested over 10 MMcf/d (1)
on production; IP 6 MMcf/d + liquids
• First 4 operated Hz wells 9-14,1-35,16-28
& 13-30 drilled; tested 7.2–12 MMcf/d (1) +
liquids
• 2012 program includes eight Hz
Montney wells; first five drilled
• 14-21 tested 14.5 MMcf/d (1) + liquids
• 8-17 tested 5.5 MMcf/d (1) + liquids
• 102/9-31 tested 11.6 MMcf/d (1) + liquids
• 102/13-36 tested 10.6 MMcf/d (1) + liquids
• 102/16-31 tested 10.5 MMcf/d (1) + liquids
• Offset activity indicating exciting test
rates of over 10 MMcf/d + liquids
• Paramount estimates 70+ Bcf/section
OGIP, ~15 Tcf + liquids (2)
1) Please refer to the heading "Test Results" within the "Advisories" section of this presentation for further information 2) Internal estimates 12

Montney Cross - Section
13

Paramount Musreau/Resthaven Montney
Lands
1) Please refer to the heading "Test Results" within the "Advisories" section of this presentation for further information 2) Internal estimates
14

3.7 Bcf Montney Type Curve
* Based on processing through a refrigeration facility
15

Montney Wellbore Placement
Placement of the wellbore
matters:
1. Penetration rates
2. Accessing the “best” part of
the reservoir
3. Toe up/toe down can effect
the long term rates/EUR’s of
the wells
16

Montney Drilling Time Improvements
• Pad drilling/Pad
layout
• Bits/Muds/Motors
• Well design:
monobores/
orientation/
reservoir placement
• Toe up/Toe down:
effects on
production
• Natural gas fueled
rigs
17

Montney Completion Cost Improvements
• Cemented
liners/openhole
packers (ECP’s)
• Plug and perf/sliding
sleeves
• Frac sizing/spacing/
clusters
• Frac fluid/fluid
handling
• Pumping techniques
• Frac fluid recycling
• Proppants
• Flow back/production
practices
* Data points not included in trend
*
*
18

Kaybob Plant Capacity
Current Capacity
Gross
Raw
Gas
MMcf/d
Net POU
Raw
Capacity
MMcf/d
Est. Net
Sales
Boe/d
Musreau 45 45 8,600
Resthaven Plant 20 10 2,000
Smoky Plant 100 10 2,500
Kakwa Plant 40 4 720
Pembina Musreau
Processing Capacity 10 10 1,800
Subtotal 215 79 15,620
Future Capacity
Musreau Phase II Deep-
Cut (H2 2013) 200 200 50,000
Smoky/Resthaven
Deep-Cut (H1 2014) 200 30 7,500
Subtotal 400 230 57,500
Projected YE 2013 Total 615 309 73,120
•Behind pipe capacity at November 2, 1012: Over 200 MMcf/d (150 MMcf/d net) raw gas;
estimated 43,700 Boe/d (1st month average), 20,700 Boe/d (1st year average)
19

More NGL’s - Why Now?
• Historically, producers extracted only enough liquids to meet
“hydrocarbon dewpoint" for sales gas pipeline specifications
• Value gas with higher natural gas liquids (NGL's) was sold as a higher
heat content (more GJ's of energy per standard cubic foot of natural
gas) natural gas, i.e. higher priced gas
• The natural gas was sold in to the system and the NGL's were generally
recovered at straddle plants which then stripped these remaining NGL's
and sold them to end users
• Higher pricing for liquid hydrocarbons combined with lower natural gas
prices have created a situation where producers now wish to capture
this value for themselves, generally via a “Deep Cut” Plant
20

What is Deep-Cut?
• Deep-Cut simply refers to capturing a higher amount of NGLs
present in certain high-heat content (rich) natural gas streams
• Liquids are generally captured by cooling the natural gas stream
sufficiently to change the phase of the components from a gas
to a liquid, then separating these streams using gravity:
• Refrigeration units: ~ -10º C to - 40º C
• Pressure drop: down to -100º C
• J-T valve
• Turbo expander (more efficient)
21

Process Flow Chart: Musreau Deep Cut Facility
*Based on indicative prices and differentials which are subject to change
22

Deep-Cut
@ $3.00/Mcf, $100/Bbl
Price
Mix of Cretaceous and Montney
Wells Example
200 MMcf/d x 15% Shrinkage = 170
MMcf/d (28,333 Boe/d) Sales Gas
100 Bbl/MMcf: 20,000 Bbl/d NGL’s
Montney Wells Only Example
200 MMcf/d x 23% Shrinkage = 154
MMcf/d (25,667 Boe/d) Sales Gas
150 Bbl/MMcf: ~ 30,000 Bbl/d NGL’s
Deep-Cut Rich Gas $3.00/mcf 170 MMcf/d $510,000 154 MMcf/d $462,000
Condensate $100.00/Bbl 8,000 Bbl/d $800,000 12,400 Bbl/d $1,240,000
Butane $65.00/Bbl 2,000 Bbl/d $130,000 2,500 Bbl/d $162,500
Propane $35.00/Bbl 4,000 Bbl/d $140,000 5,000 Bbl/d $175,000
Ethane $12.00/Bbl 6,000 Bbl/d $72,000 10,480 Bbl/d $125,760
Total: 48,333 Boe/d $1,652,000 MM/d 56,047 Boe/d $2,165,260/d
Royalty 5% ($82,600/day) 5% ($108,260/day)
Operating Cost ($0.50/mcf) ($85,000/day) ($0.50/mcf) ($77,000/day)
Total:
17.6
MMBoe/year
$1,484,400 /day
$542 MM /year
$30.78/Boe
20.5
MMBoe/year
$1,980,000/day
$723 MM /year
$35.25/Boe
23

Paramount Deep-Cut Montney Project
Economics
Resource Needed:
200 MMcf/d x 365 ~ 73 Bcf/year x 10 year RLI = 730 Bcf
70 Bcf/section @ ~ 50 % recovery = ~ 20 Sections
Cost
40 (5 MMcf/d wells) x $10 MM/well = $400 MM
Gas Plant = $200 MM
Total: $600 MM
Annual Deep-Cut Cash Flow $542 MM/year - $723 MM/year
Annual Capital = 20 (3.5 Bcf) wells x $10 MM/well $200 MM/year
Free Cash Flow $342 MM - $523 MM/year
• Paramount’s shallow rights will add substantially to the RLI
• Paramount has de-risked a substantial amount of its land base and
thus could have the potential to do this many times: Simple Payout is
1.1 - 1.75 years
24

Karr-Gold Creek
• Located 50 km SW of Grande
Prairie
• Multi-zone potential, including
Halfway, Montney sour and
Nikanassin, Gething, Bluesky and
Falher sweet commingled gas
• Current lands ~95,000 net acres
(~148 sections)
• Average 83% working interest
• Current program:
• Expanded plant and gathering
systems to 40 MMcf/d
• Production optimization
through addition of artificial lift
in high liquids yield wells
• Constructing gathering to west
to capture new liquids-rich
Halfway discovery and future
associated development
• Currently testing first horizontal
Upper Montney well
25

Valhalla
• Montney/Doig Play
• Eight wells tied in at restricted
rates (facility constraints)
• Four wells awaiting completion
• Two wells awaiting tie-in
• Gathering system expansion
and additional compression
completed Q1 2012
• Continued acquisition of
strategic producing assets and
land
• Refocus on high-liquid yield
prospects at East Valhalla
*Please refer to the heading "Test Results" within the "Advisories" section of this presentation for further information 26

Birch
• Acquired as part of the Prospex
acquisition
• Completed Hz Montney well with
promising results; significant liquids
ratio on test
• Production processed through pilot
facility limited to 3 MMcf/d
• Drilled and completed two additional
horizontal Montney wells awaiting tie in
*Please refer to the heading "Test Results" within the "Advisories" section of this presentation for further information
27

Paramount Investments

Paramount Investments
19.1 MM shares of Trilogy @ $27.00/share ~$517 MM
43.8 MM MGM Energy Corp. shares @
~$0.21/share
~$9 MM
Paramount Drilling U.S./Fox Drilling Inc. ~$85 MM
3.7 MM shares of MEG Energy @ $35.50/share ~$131 MM
Other (Paxton, Fox Creek, etc) ~$15 MM
Total
~$757 MM
Paramount shares outstanding 89.8 MM
Paramount investments/share ~$8.43/share
29

Cavalier Energy Inc.

• Created in December 2011
• Experienced team led by CEO Dr. Will Roach (ex UTS)
• Paramount has contributed all of its oilsands assets to Cavalier
Energy and seed capital
• Funding at the Cavalier level will be via a combination of equity
and debt
• Assets retained as 100% WI within Cavalier Energy
31

Cavalier Assets
• Approximately 311 sections
• Prospective primarily for
conventional oilsands, bitumen
in carbonates, and cold flow
heavy oil
• All but 4 sections 100% WI
32

Hoole Grand Rapids - 1st Project
Grand Rapids Reservoir
• Φ = 30 %, k = 1 to 4 D
• d = 250m, h ~ 20m, p = 1500 kPa
• Viscosity = 200,000 to 2,000,000 cp
1AA/06-13-081-24W4/00
Paramount 2004/02/28
Paramount Kwabiskaw
483.0
• McDaniel Best Estimate 614.1 : OBIP= 1.6 Billion
Bbl
• 75 wells drilled to date; 39 cored
• 763 million Bbl* Best Estimate Recoverable
Contingent resource
• NPV BT 10%: $1.2 - $3.8 billion*
• Best Estimate NPV BT 10%: $2.5 billion*
Kjoli_fou
Kgrand_rp
250
275
300
*Evaluation effective June 30, 2012. Please refer to
the Advisories for description of resource
definition.
33

Liard Basin
• Paramount holds
~127,000 net acres
prospective for shale
gas
• 200-500+* Bcf/section
• ~20% recovery
• POU ~ 15 Tcf sales
gas*
*Internal estimates
34

Liard Basin
Cross Section – Besa River Shale Gas
35

Quarterly Operating Results
Production
Boe/d
Funds Flow
$MM
• Q3 YTD 2012
Production
represents a 17%
growth year over
year YTD Q3 2011
• Growing production and
cost controls are
mitigating the impact of
lower commodity
pricing
Operating Costs
$/Boe
G&A - Corporate
$/Boe
• Maintaining cost
controls with
increasing production
volumes is driving per
Boe operating costs
down
• Paramount has
doubled production
while maintaining
staffing levels and
costs
36

Reserves
Reserve Category
Natural
Gas
BCF
Crude Oil
MBbl
NGL
MBbl
Boe
(6:1)
MBoe %
Proved Producing 120.9 4,632 2,455 27,233 51
Proved Non-Producing 30.6 241 1,128 6,469 12
Proved Undeveloped 10.5 - 216 1,963 4
Total Proved 162.0 4,873 3,799 35,665 67
Reserve Category
Natural
Gas
BCF
Crude Oil
MBbl
NGL
MBbl
Boe
(6:1)
MBoe %
Probable Producing 42.5 1,418 859 9,357 18
Probable Non-Producing 17.0 182 521 3,547 7
Probable Undeveloped 22.6 99 581 4,446 8
Total Probable 82.1 1,699 1,961 17,350 33
Total Proved plus Probable 244.1 6,573 5,760 53,015 100
37

Summary
• Exposure to significant reserve opportunities
• Kaybob Deep Basin: Cretaceous, Montney
• Karr: Montney, Nikanassin
• Valhalla: Montney, Doig
• Birch: Montney
• Significant asset value
• Trilogy
• MGM
• MEG Energy
• Cavalier Energy
• Horn River/Liard Shale Gas
• Paramount continues to provide long-term value creation for
shareholders
38

4700 Bankers Hall West
888 Third Street S.W.
Calgary, Alberta
Canada T2P 5C5
Telephone: (403) 290-3600
Facsimile: (403) 262-7994
www.paramountres.com