Surge Energy Inc. · TSX:SGY
Surge Energy — Investor Presentation (March 2022)
31 slides from Surge Energy's investor presentation, March 2022
Slide 1: A Sustainable Energy Company Generating Significant Free Cash Flow Yields
A Sustainable Energy Company Generating Significant Free Cash Flow Yields Corporate Presentation March 2022
Slide 2: Corporate Guidance - 2022
Corporate Guidance - 2022 Market Snapshot 86% Liquids-weighted production Focused on returns and Basic Shares Outstanding 83.4 MM enhancing free cash flow Average Daily Volume 2.4 MM Shares 21,500 BOEPD Production Forecast 2022 Exit while managing risk Market Cap / Enterprise Value1 $709 MM / $1.04
Slide 3: New 2021 Reserves
New 2021 Reserves On March 9, 2022, SGY announced top tier reserves, F&D, and FD&A results as follows: Reserves Summary and Net Present Value 2021 Reserve Value (NPVBT10) 2021 Reserves (MMboe) Oil Crude Oil Natural Equivalent Gross NPVBT104 Reserves1 and NGLs2 Gas3 Total ($MM) (Mbbl) (MMcf) Reserves
Slide 4: Net Asset Value & Pricing Sensitivities
Net Asset Value & Pricing Sensitivities Significant upside for shareholders as Surge’s NAV/share increases with oil prices above US$70 WTI (Sproule’s YE 2021 price deck) Sproule YE2021 Net Asset Value Net Asset Value Flat Pricing Sensitivities2 (@ ~US$70 WTI flat oil prices) Total Proved Proved + Pr
Slide 5: The Surge Advantage
The Surge Advantage $$$ High Operating Netback, + Disciplined Capital Allocation + Proven Track Record = Free Cash Conventional Strategies of Execution Flow Assets • Light/medium oil weighted asset base • Dominant positions in conventional • Proven management team with track • Focus on execution dri
Slide 6: Sustainable Strategy
Sustainable Strategy Focused on sustainable DISCIPLINED returns and enhancing free CAPITAL ALLOCATION Undertake low cost, high impact projects cash flow that support long-term sustainability Surge executes on a simple, repeatable business FINANCIAL FLEXIBILITY strategy: SUSTAINABLE Focus on high ret
Slide 7: Enhancing Financial Sustainability
Enhancing Financial Sustainability 2022 Significant free cash flow over over forecast 2022 drives improved fundamentals and $295 cash flow from $171 forecast free cash million operating million flow provides visibility to activities shareholder returns Accelerating a return to a sustainable, value-b
Slide 8: Advantages of Conventional Reservoirs
Advantages of Conventional reservoirs offer lower risk, predictable, repeatable development with opportunity to improve Conventional recovery factors Reservoirs Surge proactively targets low risk, conventional reservoirs. Currently, Surge estimates it has over 2.6 Billion barrels of net OOIP, with a
Slide 9: Spotlight: Sparky and SE Saskatchewan
Spotlight: Sparky and SE Saskatchewan Surge offers exposure to two of the top five conventional oil growth plays in Canada
Slide 10: Sparky & SE Saskatchewan provide exceptional economics & a depth of drilling inventory
Sparky & SE Saskatchewan provide 2022 Production exceptional economics & ~65% Weighting by Area a depth of drilling Combined Production Sparky Weighting in 2022 SE Saskatchewan inventory Other Surge Assets Sparky Light/medium crude oil production with compelling returns. Low on-stream costs with ext
Slide 11: A One-of-a-Kind Position
Sparky: Over 11 Billion Barrel Trend One of Canada’s Largest Accumulations of Oil A One-of-a-Kind Position Lloydminster Surge holds a dominant land position and has Alberta drilled >55% of all horizontal multi-well frac wells in Edmonton ~60km Saskatchewan the light/medium window Sparky Formation F
Slide 12: Long-Term Growth Potential
Long-Term Growth Potential Pad drilling, advanced horizontal multi-stage fracturing technology, & multi-leg horizontal success has unlocked the potential of the Sparky play 2X Well Payout in <2 Year >800 Million bbls OOIP net to SGY (internally estimated) Benefits of Sparky play: (Oil Plays Only, Lo
Slide 13: Leveraging Past Success
Surge Land SE Saskatchewan: Midale Subcrop Frobisher Subcrop Alida Subcrop Leveraging Past Success Recent acquisitions highly accretive to 2022 debt adjusted cash flow and free cash flow per share Saskatchewan Manitoba The Surge management team has a strong track record of success in SE Saskatchewan
Slide 14: Key Growth Driver
Key Growth Driver High operating netback light oil production and reserves from $60/boe >240 Million bbls low risk, proven conventional operating netback at US$85 WTI = Top decile netbacks OOIP net to SGY (internally estimated) reservoirs 2X Well Payout in <2 Year >200 net Key Operational Areas (Oil
Slide 15: Committed to Strong ESG Principles
Committed to Strong ESG Principles ESG and sustainability priorities balance the needs of multiple stakeholders Surge ESG Priorities ESG in Action • Published inaugural ESG report in December 2021 • Climate focus: Integrate climate risks and opportunities within both Board and Executive • Integratio
Slide 16: The Surge Advantage
The Surge Advantage $$$ High Operating Netback, + Disciplined Capital Allocation + Proven Track Record = Free Cash Conventional Strategies of Execution Flow Assets • Light/medium oil weighted asset base • Dominant positions in conventional • Proven management team with track • Focus on execution dri
Slide 17: Appendix
Appendix
Slide 18: Macro Oil Price and Fundamentals
Macro Oil With highly concentrated light oil reserves, production, land and large OOIP reservoirs across the asset base, Surge is well Price and positioned to benefit from rising oil prices. Fundamentals CAD WCS and CAD MSW $180.00 • Crude oil prices continue to rally $160.00 $154.46 from their lows
Slide 19: Supporting Assets
Supporting Assets Greater Sawn Concentrated Light Oil >600 MMbbls net OOIP in concentrated, conventional Slave Point reefs Valhalla Shaunavon Stacked pay multi-zone Edmonton potential Producing low decline, medium Light oil (~40° API) with gravity crude oil with high extensive area infrastructure op
Slide 20: Leadership
Leadership Paul Colborne Jared Ducs Murray Bye Derek Christie Margaret Elekes President & CEO CFO COO Senior VP, Geosciences Senior VP, Land & BD Paul Colborne has over 24 years of Jared Ducs is a Chartered Murray Bye is a Professional Derek Christie is a Senior Energy Margaret Elekes has more than
Slide 21: Board of Directors
Board of Directors Paul Colborne Robert Leach 2,5,6 Board Committees President & CEO Independent Director 1. Chair of the Board 2. Member of the Compensation, Nominating and Allison Maher 4,5 Corporate Governance Committee. Mr. Smith Jim Pasieka1 serves as Chair. Independent Director Chairman 3. Mem
Slide 22: Analyst Coverage
Analyst Coverage Financial Institution Analyst Email Address Acumen Capital Partners Trevor Reynolds treynolds@acumencapital.com BMO Capital Markets Ray Kwan ray.kwan@bmo.com Cormark Securities Inc. Garett Ursu gursu@cormark.com Stifel FirstEnergy Robert Fitzmartyn rjfitzmartyn@stifel.com National B
Slide 23: WTI Hedging Summary
WTI Hedging Summary 9,000 $ 80.00 $ 75.96 $ 75.72 $ 76.30 8,000 $ 75.00 $ 68.48 $ 70.00 $ 67.61 7,000 $ 65.00 6,000 $ 60.00 Volumes (Bbl) 5,000 $ 55.00 4,000 $ 50.00 3,000 $ 45.00 2,000 $ 40.00 1,000 $ 35.00 0 $ 30.00 Qtr. 1 2022 Qtr. 2 2022 Qtr. 3 2022 Qtr. 4 2022 Qtr. 1 2023 Swap Collar 3-Way Avg.
Slide 24: Hedging Detail Liquids
Hedging Detail Liquids WTI Crude Oil Derivative Contracts Western Canadian Select Differential Contracts (Swaps) Period Volumes Avg. Price SWAPS COLLARS THREE-WAY COLLARS Q1 2022 2,500 -$15.82 Average Average Average Average Average Q2 2022 4,000 -$16.28 Period Volumes Avg. Price Volumes Bought Put
Slide 25: Hedging Detail Natural Gas
Hedging Detail Natural Gas Natural Gas Derivative Contracts AECO Swaps Chicago Collars AECO Collars Physical Swaps Average Average Sold Average Average Average Sold Volumes Bought Put Call Volumes Bought Put Volumes Bought Put Call Volumes Average Swap Period MMBTU CAD/MMBTU CAD/MMBTU Gigajoules CAD
Slide 26: Hedging Detail Interest Rate & Power
Hedging Detail Interest Rate & Power Interest Rate Hedges Type Term Notional Amount (CAD) Surge Receives Surge Pays Fixed Rate Surge Pays Semi-Annual Step Up • Beginning at 1.786% Fixed-to-Floating Rate Swap Feb 2018 – Feb 2023 $100,000,000 Floating Rate Fixed Rate • Ending at 2.714% • Averaging 2.4
Slide 27: Advisories - Forward-Looking Statements
Advisories - Forward-Looking Statements This presentation contains forward-looking More particularly, this presentation contains statements concerning: should not be placed on the forward-looking statements because Surge can Surge’s declared focus and primary goals; management’s expectations give no
Slide 28: Advisories – Oil and Gas Information
Advisories – Oil and Gas Information The term “boe” means barrel of oil equivalent on the basis of 1 boe to 6,000 cubic feet estimate that is derived by Surge’s internal QRE’s and prepared in accordance with Engineers and Geologists (who are also Qualified Reserve Evaluators) as an estimation of of
Slide 29: Advisories – Non-GAAP and Other Financial Measures
Advisories – Non-GAAP and Other Financial Measures This presentation includes references to non-GAAP and other financial All-in Payout Ratio Free Cash Flow and Free Cash Flow Yield measures used by the Company to evaluate its financial performance, All-in payout ratio is a non-GAPP ratio, calculated
Slide 30: Advisories – Non-GAAP and Other Financial Measures cont’d
Advisories – Non-GAAP and Other Financial Measures cont’d Net Debt and Net Debt to Cash Flow from Operating Activities Operating Netback Net debt is a non-GAAP financial measure, calculated as bank debt, Operating netback is a non-GAAP financial measure, calculated as term debt, plus the liability c
Slide 31: Corporate Information
Corporate Information TSX Lending Syndicate SGY.TO National Bank of Canada ATB Financial Bank of Montreal BDC Capital Export Development Canada Auditor Registrar & Transfer Agent KPMG LLP Odyssey Trust Legal Counsel Investor Contacts Surge Energy Inc. 2100, 635 – 8th Ave. SW, McCarthy Tétrault Paul