ARC Resources — Barclays CEO Energy-Power Conference 2016
39 slides from ARC Resources's conference presentation, Sep 7, 2016
Slide 1: Barclays CEO Energy-Power Conference
Barclays CEO Energy-Power Conference September 7, 2016
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking information as to ARC’s internal projections, expectations or beliefs relating to future events or future performance and includes information as to our future well inventory in our core areas, our exploration and development dril
Slide 3: Why Invest in ARC?
Why Invest in ARC? A Differentiated Investment • Peer-leading balance sheet Financial Discipline • Disciplined approach to profitable investment • Total return principle for shareholders • Montney oil and gas position globally competitive High-Quality • Geographic diversity and optionality Asset Por
Slide 4: Corporate Strategy
CORPORATE STRATEGY
Slide 5: Unique Strategy
Unique Strategy Delivering on Our Strategy of Risk-Managed Value Creation Realized Hedging Gains (Losses) Transitioning to the Montney 250 Base Montney 200 100% Montney Growth H1 2016 150 Production Operating Costs Production Split 75% $6.25/boe $ millions 100 50% 50 0 25% 2009 Operating Costs Base
Slide 6: Balance Sheet Strength
Balance Sheet Strength Targeting Net Debt to Funds from Operations 1.0 – 1.5x for the Long Term • During temporary periods, Net Debt to FFO will trend towards a maximum ratio of two times • Expect Net Debt to FFO to return to target range once normal pricing environment resumes 1,400 Net Debt to Fun
Slide 7: 2016 E&P Leverage Analysis
2016 E&P Leverage Analysis ARC Has One of the Strongest Balance Sheets in the Sector 13.1x 15.8x Canadian Benchmarking: 2016E YE Net Debt / 2016E Cash Flow (1)(2) 6.5 x Group Average 6.2 x 6.2 x 5.0 x 4.4 x 4.4 x 4.0 x 3.9 x 3.9 x 3.2 x 3.1 x 3.1 x 3.0 x 2.9 x 2.7 x 2.6 x 2.5 x 2.5 x 2.4 x 2.2 x 2.2
Slide 8: Right-Sizing ARC's Capital Investment & Dividend
Right-Sizing ARC’s Capital Investment & Dividend Balancing Inflows and Outflows for Long-term Sustainability • Objective to fully fund ARC's Dividend and Sustaining Capital from FFO over the long term • Profitable Growth Capital will be funded from remaining FFO, DRIP/SDP proceeds, and equity procee
Slide 9: Natural Gas – Commodity Marketing
Natural Gas – Commodity Marketing Diversified Sales Points and Purchasers of ARC’s Natural Gas • Secured firm transportation pipeline agreements to support existing production and future development out beyond 2019 • ARC continues to monitor market conditions to ensure its production is getting to m
Slide 10: Profitable Investment
Profitable Investment Managing a Profitable Business Through the Cycles • ARC’s high-quality assets, excellent capital efficiencies, and low operating costs have resulted in strong returns over the long term • ARC has realized earnings of ~$3.9 billion since inception Return on Average Capital Emplo
Slide 11: Committed to a Dividend & Business Sustainability
Committed to a Dividend & Business Sustainability ARC Has Always Paid a Dividend While Delivering Value • Robust business allows us to pay a sustainable dividend • ~$5.8 billion of dividends ($32.58/share) paid since inception • Target is to continue to reduce ARC’s payout ratio to 25-30% Cumulative
Slide 12: Environmental, Social & Governance Performance
Environmental, Social & Governance Performance Creating Value Through ESG Performance Our Commitment: Recognitions and Rankings: • Investment in facility upgrades and low-emissions • MSCI Global Sustainability Index technology • Jantzi Social Index drives strong performance in emissions management •
Slide 13: Operational Excellence
OPERATIONAL EXCELLENCE
Slide 14: Montney Growth Assets
Montney Growth Assets ARC’s Montney Assets Are Strategically Located BC AB 1,000m Geographic Optionality • Proximity of ARC Montney land base enables: • Capital & operating efficiencies 2,000m Blueberry • Application of learnings across areas Gas Condensate Red Creek • Holds ~1,200 net Montney secti
Slide 15: Risk-Managed Value Creation
Risk-Managed Value Creation Montney Assets Have Delivered Profitable Growth and Value • Quality assets and capital discipline has resulted in >500% Montney production growth since 2009 Production Profile 140,000 120,000 100,000 80,000 boe/day Forecast 60,000 40,000 20,000 0 Non-Montney Liquids (bbl/
Slide 16: Cost Management
Cost Management Low-Cost Producers Deliver Superior Returns over Time • Focused assets, characterized by high working interest, operatorship and ARC-owned and operated facilities, provide control over costs and operations • ARC has reduced its operating costs by ~40% since 2009 30 Three-Year FD&A Co
Slide 17: Improving NE BC Montney Capital Efficiencies
Improving NE BC Montney Capital Efficiencies Forecast Future Cost and Efficiency Savings in 2016 • ARC continues to incorporate efficiencies realized from its 2014 and 2015 capital programs and expects further service cost reductions in 2016 7.5 Dawson – 1,800m Well (1) 7.5 Parkland – 1,600m Well (1
Slide 18: Montney – Reduced Drilling Times
Montney – Reduced Drilling Times Applying Learnings from Tower and Sunrise to Dawson for Reduced Drilling Times and Cost Savings 0 Dawson Drilling Times 500 1,000 1,500 2,000 Depth (m) 2,500 3,000 Q2 2015 to Q2 2016: 3,500 40% Reduction in Overall Drill Times Q2 2015 Q2 2016 4,000 4,500 0 2 4 6 8 10
Slide 19: Portfolio Strategy
PORTFOLIO STRATEGY
Slide 20: Proven Development Model
Proven Development Model Inventory at All Stages Allows for Self-Funding and Full Cycle ROACE Across Portfolio Growth for Future Phase Development Phase Free Cash Flow Phase • Exploration • Develop to Commercialize • Optimization Redwater • Appraisal / Piloting • Exploit • Maintenance Southeast Sask
Slide 21: 2016 Mid-Year Budget
2016 Mid-Year Budget $450 Million 2016 Capital Budget Progress Construction of Dawson Phase III • Expected to be on-stream in late 2017 Investment at Attachie and Tower • Continue to delineate play with two drills at Attachie West and two appraisal wells at Attachie East • Increased drilling and com
Slide 22: Multiple Layers to Develop
Multiple Layers to Develop Significant Future Delineation Opportunities Attachie Septimus Sunrise Tower Parkland Dawson Pouce Coupe Montney Upper Montney A Montney B Montney C Lower Montney Montney D Montney E Existing Horizontal Wells, Development Existing Horizontal Wells, Pilots Potential Horizon
Slide 23: NE BC Montney Reserves and Risked Resources
NE BC Montney Reserves and Risked Resources NE BC Montney TPIIP: 90 Tcf of Shale Gas and 9.7 Billion Barrels of Oil Shale Gas Tight Oil and NGLs TOTAL PROVED + PROBABLE RESERVES Oil 23 MMbbl 2.6 Tcf NGLs 42 MMbbl ECONOMIC ECONOMIC CONTINGENT CONTINGENT RESOURCE RESOURCE DEVELOPMENT PENDING - RISKED
Slide 24: Montney Development Economics
Montney Development Economics Strong Rates of Return Across the Montney Portfolio Dawson Sunrise Parkland Tower Ante Creek Half Cycle Economics C$55/bbl MSW 75% IRR 45% IRR 50% IRR 40% IRR 30% IRR C$2.50/GJ AECO 4.2x Recycle Ratio 4.5x Recycle Ratio 3.8x Recycle Ratio 2.5x Recycle Ratio 2.9x Recycle
Slide 25: Type Curve Growth
Type Curve Growth Continuous Improvements in Well Performance Dawson Type Curve Sunrise Type Curve Tower Type Curve 7,000 7,000 1,400 6,000 2015/2016 Type Curve 6,000 2014-2016 Type Curve 1,200 2016 Type Curve 2013/2014 Type Curve 2013 Type Curve 2015 Type Curve 2009-2011 Forecast 2011 Type Curve 20
Slide 26: Montney Full Cycle Economics – Dawson & Tower
Montney Full Cycle Economics – Dawson & Tower Robust Project Economics for Next Growth Platforms • Significant drilling results and large inventory of future drilling locations provides support for favourable economics at Dawson Phase III and Parkland/Tower Phase II. Project Economics Single Well Ec
Slide 27: Dawson – Sustainable Cash Flow Model
Dawson – Sustainable Cash Flow Model Low Reinvestment Ratio to Maintain Significant Free Cash Flow Field Netback ($ millions) 250 Capital Expenditures ($ millions) 250 Net Cash Flow ($ millions) 200 Production (MMcfe/day) 200 150 150 MMcfe/day $ millions 100 100 50 50 0 0 2010 2011 2012 2013 2014 20
Slide 28: Dawson – Phase III Projected Cash Flows
Dawson – Phase III Projected Cash Flows Replicating Sustainable Business Model at Low Reinvestment Rates Development Timeline: • 2015 to 2017: Facility and infrastructure spending • 2017: Pre-drill ~20 feeder wells to fill facility • 2018: Drill ~10 wells to offset initial declines • 2019 and beyond
Slide 29: Dawson – Natural Gas Liquids Potential
Dawson – Natural Gas Liquids Potential Finding Higher Liquids With Move Away From Dawson Core • Liquids ratio at Dawson varies across Upper and Lower Montney • Majority of development to-date focused on the Upper Montney A, which has lower liquids yields (core is defined by yellow contours on map) •
Slide 30: Tower – Outstanding Well Performance
Tower – Outstanding Well Performance ARC’s Tower Wells Are Some of the Best in Western Canada Cumulative Production Increasing Days on Production Increasing Source: AltaCorp Research (includes May 2016 production data).
Slide 31: Tower – Cumulative Production
Tower – Cumulative Production Continuous Improvement in Well Performance • Cumulative production from 24 wells from 2015 now exceeds 1.8 MMbbl of oil and 7.6 Bcf of natural gas • Eight wells have exceeded 100 Mbbl cumulative oil production • L7-12 reached 100 Mbbl in 84 producing days – a new record
Slide 32: Sunrise – Outperforming Expectations
Sunrise – Outperforming Expectations Drilling Results Reaffirm Four-Layer Development Model 2015/16 Upper MTY Type Curve (11.7 Bcf) 10,000 02-26-78-18 W6 (08-24Hz) Upper MTYA 9,000 00/16-35-78-18 W6 (A13-30) Upper MTYA 15-23-78-18 (C09-13Hz) Lower MTYA+ 8,000 02/14-26-78-18 W6 (B02-25Hz) MTYB 7,000
Slide 33: Attachie Pilots – Planning for the Future
Attachie Pilots – Planning for the Future Applying Tower Learnings to Attachie West Attachie • Two HZ wells have produced 2015 1.7 Bcf of gas and 165 Mbbl • Three wells were drilled on of liquids in 24 months newly acquired lands in H2 (average of 100 bbl/MMcf) 2015 • NGLs yield up to 25 bbl/MMcf de
Slide 34: Lower Montney Fairway
Lower Montney Fairway Building Understanding of the Lower Montney Fairway • Only Lower Montney wells are displayed.
Slide 35: Ante Creek – 2016 Plans
Ante Creek – 2016 Plans Application of New Fracture Stimulation • H2 2016 drilling will apply new fracture stimulation mechanical isolation using NCS cemented sliding sleeves to allow for pinpoint fracturing
Slide 36: Pembina – Strategic Acquisitions
Pembina – Strategic Acquisitions Strategic Acquisitions Further Consolidate Large Oil-in-Place, Low Risk, Predictable Production • Q2 2016 acquisition added 2,200 boe per day of light, high-netback oil production • Additional 800 boe per day of production acquired in Q3 2016 • Combined acquisitions
Slide 37: Pembina – Focus on Technology
Pembina – Focus on Technology Horizontal Drilling and Water Injection Pilot Delivers Incremental Crude Oil 400 North Pembina Cardium Unit 2,000 • Waterflood injection started in December 2012; cumulative injection of ~885 Mbbl Hz+V Oil to Q2 2016 Producing GOR (scf/bbl) and Water Injection (bbl/day)
Slide 38: Summary
SUMMARY
Slide 39: Why Invest in ARC?
Why Invest in ARC? A Differentiated Investment • Peer-leading balance sheet Financial Discipline • Disciplined approach to profitable investment • Total return principle for shareholders • Montney oil and gas position globally competitive High-Quality • Geographic diversity and optionality Asset Por
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