Arc Resources — Investor Presentation (May 2024)
66 slides from Arc Resources's investor presentation, May 2024
Slide 1: ARC Resources Ltd. Investor Presentation
ARC Resources Ltd. Investor Presentation Photo Caption copy area
Slide 2: Corporate Profile
Corporate Profile Premium investment opportunity for Montney exposure, one of the most profitable assets in North America 1 Shares outstanding 597 million 2 Canada’s Market capitalization $14.9 billion largest Long-term debt 1 $1.1 billion condensate 13 producer Net debt $1.3 billion 2 Enterprise va
Slide 3: Scale in a World-class Resource Play
Scale in a World-class Resource Play Largest Montney producer, Canada’s largest condensate producer and third largest gas producer Mboe/day BC and Alberta Montney Producers Montney Condensate & Liquids Producers Mbbl/day 400 160 350 Attachie Phase I Attachie Phase I (2025E) 140 (2025E) 300 120 250 1
Slide 4: Transformation to the Largest Montney Producer
Transformation to the Largest Montney Producer Large concentrated asset base drives efficiency, well positioned for the future 2014 2024 NEBC Pouce Prestville Valhalla Chinchaga >1 million Hotchkiss NEBC Montney acres Hawk Hills >1 million Montney acres Swan Hills Ante Redwater Creek Non Montney Min
Slide 5: Investment Case for ARC
Investment Case for ARC Disciplined Growth • Five-year plan to more than double free funds flow per share • Achieved by unlocking Montney development and reducing the share count Speaker: Dale Commitment to Shareholder Returns • Committed to return essentially all free funds flow to shareholders Wor
Slide 6: 2024 Capital Budget
2024 Capital Budget
Slide 7: 2024 Guidance – Production & Expenses
2024 Guidance – Production & Expenses 2024 Guidance Production Crude oil and condensate (bbl/day) 87,000 - 91,500 Natural gas (MMcf/day) 1,325 – 1,340 NGLs (bbl/day) 42,000 - 45,000 Total production (boe/day) 350,000 - 360,000 Expenses ($/boe)(1) Operating 4.50 - 4.90 Transportation 5.50 - 6.00 G&A
Slide 8: 2024 Guidance – Capital Expenditures & Production
2024 Guidance – Capital Expenditures & Production Attachie ~$600 MM1 Ante Creek ~2,500 boe/day ~$50MM 14 wells ~18,000 boe/day Greater Dawson ~$270 MM 37 wells Kakwa ~95,000 boe/day ~$650MM 48 wells ~175,000 boe/day Sunrise ~$115MM 6 wells ~59,000 boe/day Total capital expenditures of $1.75 to 1.85
Slide 9: Strategic Overview and Long-term Plan
Dawson III & IV, BC Strategic Overview and Long-term Plan
Slide 10: Five-Year Outlook Delivers Significant Value
Five-Year Outlook Delivers Significant Value Disciplined plan to grow free funds flow per share1 Boe/day Base Production Attachie I Attachie II ~150% 425,000 400,000 Free Funds Flow Per Share Growth 375,000 (~20% CAGR4) 350,000 325,000 ~50% 300,000 of Market Cap Generated in 2024 2025 2026 2027 2028
Slide 11: Long-term Resource Optionality
Long-term Resource Optionality Unmatched inventory runway in a world-class asset Boe/d Production Outlook 600,000 500,000 400,000 300,000 200,000 100,000 0 2023 2024 2025 2026 2027 2028 Gas NGL Condensate Future production potential 11 ARC's Montney assets capable of sustaining ~500,000 boe per day
Slide 12: Global Leader in Responsible Energy Development
Global Leader in Responsible Energy Development Providing reliable, affordable and sustainable energy to global demand markets ~25% of Future Natural Gas Production Linked to International Pricing 12
Slide 13: Capital Allocation
Kakwa, AB Capital Allocation
Slide 14: Track Record of Capital Discipline
Track Record of Capital Discipline A disciplined investment framework fundamental to profitable growth Return on Average Capital Employed1 40% 30% Average 12% 20% 10% 0% -10% -20% 14 1) Non-GAAP Financial Measure — see "Non-GAAP and Other Financial Measures" in the Advisory Statements of this presen
Slide 15: Capital Allocation
Capital Allocation Lower reinvestment requirement allows for profitable growth and superior return on capital Reinvestment Rate1 2 Reinvestment Rate Average (Build Out & De-Risk Phase) Average (Staged Development) 120% 100% 87% 80% 60% ~50% 40% 20% 0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 202
Slide 16: Five-Year Outlook
Five-Year Outlook Disciplined investment drives free funds flow per share growth $ millions Capital Expenditures1,2 $ millions Free Funds Flow2 2,000 WTI $50/AECO $2.50/GJ WTI $70/ AECO $3.50/GJ 3,000 WTI $80/AECO $4.50/GJ 1,000 2,500 - 2,000 2024 2025 2026 2027 2028 Boe per day % Production 1,500 4
Slide 17: Free Funds Flow Per Share Growth
Free Funds Flow Per Share1 2 Growth Sustainable per share growth $ per share 5.00 4.00 3.00 2.00 1.00 0.00 2024 2025 2028 Montney investment and share repurchases drive 20% free funds flow per share CAGR3 17 1) Non-GAAP Financial Ratio— see "Non-GAAP and Other Financial Measures" in the Advisory Sta
Slide 18: Free Funds Flow Allocation
Free Funds Flow Allocation Committed to returning essentially all free funds flow to shareholders Capital Allocation Priorities 2024 Capital Allocation 2028 Capital Allocation $billions Balance Sheet Strength 5.0 5.0 • Investment-grade rating and low debt 4.0 4.0 US$80 WTI & Cdn Base Growth $4.50 AE
Slide 19: Return of Capital Strategy
Return of Capital Strategy Balancing sustainable dividend growth with share repurchases $1.20 Shares (millions) 800 >10% Dividend per share Dividend payout ratio Outstanding shares Dividend Per Share Growth CAGR3 700 $1.00 600 ~15% $0.80 Dividend Payout Ratio3 500 (% of FFO) $0.60 400 Sustainable 30
Slide 20: Asset Portfolio Overview
Parkland, BC Asset Portfolio Overview
Slide 21: Montney Scale & Inventory
Montney Scale & Inventory Reserves per share growth of 12% - 13% ~80% of ARC’s drilling inventory is unbooked locations 2023 Reserves (boe per share) Drilling locations 4.00 5,000 PDP TP 2P ~4,000 4,000 3.00 3,000 2.00 2,000 1.00 ~1,000 1,000 # of wells to sustain production - - 2022 2023 Booked Loc
Slide 22: Reserves Replacement
Reserves Replacement1 ARC has replaced >140% of production for 16 consecutive years 500% 450% 400% 350% 300% 250% 200% 150% 100% 50% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 22 1) See "Information Regarding Disclosure on Crude Oil and Natural Gas Reserves an
Slide 23: Deep Inventory of Top-tier Development Opportunities
Deep Inventory of Top-tier Development Opportunities ARC has substantial Montney drilling inventory at each of its producing and growth assets Locations 2,000 1,000 0 Attachie Kakwa Greater Dawson Sundown Ante Creek Sunrise Septimus Proved + Probable Booked Locations Unbooked ARC has ~5,000 drilling
Slide 24: Montney Overview
Montney Overview ARC’s competitive advantage in a world-class asset >1,500 (~100% W.I.) Montney sections ~5,000 Tier 1 drilling locations 80% of these locations are unbooked ~1.7 Bcf/d ~150 Mbbl/d Owned-and-operated infrastructure 24 24
Slide 25: North American Natural Gas Inventory
North American Natural Gas Inventory ARC has a 25-year inventory life economic below US$2.50/MMbtu Source | Enverus Intelligence Research 25
Slide 26: Montney – Track Record of Execution
Montney – Track Record of Execution Early movers to consolidate asset base at a low cost and deliver sustained profitable growth Boe per day 2028 Attachie 440,000 Montney Crude Oil & Liquids (bbl/d) 2025 Phase II Montney Natural Gas (boe/d) 2021 Attachie Phase I 400,000 ARC acquires Seven Generation
Slide 27: Large Network of Owned-and-operated Infrastructure
Large Network of Owned-and-operated Infrastructure Owned infrastructure results in approximately $300 million of cost avoidance annually Parkland 03-09 100 MMcf/day Attachie Phase I 90 MMcf/day2 10 Mbbl/day ~1.7 Bcf/d 25 Mbbl/day2 processing capacity Dawson ~150 Mbbl/d 300 MMcf/day 20 Mbbl/day Sunri
Slide 28: Kakwa Overview
Kakwa Overview Liquids-rich asset offering a long runway of development with <50% developed 175,000 boe/d Able to sustain at 175,000 boe/d for the next 15 years SCALE Developed (45%) Significant inventory extension recently identified Undeveloped (55%) Gold Creek Plant Kakwa development to date cove
Slide 29: Dawson Overview
Dawson Overview Flagship asset delivering superior free funds flow2 with a long inventory runway >1 Tcf Natural Gas Produced Developed (33%) Undeveloped (67%) SCALE UMA 67% Undeveloped 25 Years of Inventory at current drilling pace Dawson Phase III & IV 2023-28 Asset Level Outlook ECONOMICS Dawson $
Slide 30: Sunrise Overview
Sunrise Overview Scale, low-cost, near-zero emissions – the key ingredients to supply West Coast LNG Highly efficient EFFICIENT dry natural gas play due to stacked Developed (37%) UMA development layers Undeveloped (63%) Interconnected LMA to Coastal GasLink to move gas volumes to West Coast LNG Sun
Slide 31: Septimus and Sundown Overview
Septimus and Sundown Overview Capable of delivering approximately 1 Bcf per day of combined production for ~20 years Quick Facts Sundown land position1 36,600 acres Septimus land position1 19,100 acres Inventory ~20 years at 1 Bcf/d (internal estimate, combined) Development Objective 2025+ 31 . 1) R
Slide 32: Attachie Phase I
Attachie, BC Attachie Phase I
Slide 33: Attachie Overview
Attachie Overview ARC’s largest and most economic undeveloped asset Scale to Replicate Kakwa READINESS EFFICIENT SCALE UMA >300 net sections in condensate-rich Montney LMA Consolidated Land Base Drives Efficiencies 3 Phases of Multi-layered development Development Leverage Montney data and experienc
Slide 34: Attachie Phase I Overview
Attachie Phase I Overview Aiming to deliver the most efficient Montney development to-date $740 MM to construct and fill facilities (60% facilities, 40% DCET) 40 Mboe/d 60% Liquids / 40% Natural Gas 2025 Targeting full production capacity $500 MM Asset level funds flow in 2025 Low-Emissions Liquids-
Slide 35: Attachie Phase I Update
Attachie Phase I Update Project tracking on-time and on-budget with no safety incidents Q1 2023 Q4 2023 Q1 2024 Q4 2024 Q1 2025 Project Sanctioning Drilling Commences First Pad Completed Facility Complete – Full Productive Commissioning Capacity of Volumes On-Steam 40,000 boe/day Complete: Progressi
Slide 36: Attachie Phase I Performance replicates Kakwa
Attachie Phase I Performance replicates Kakwa Cum Condensate (Mbbl) PERFORMANCE Condensate (bbl/d) Well performance at Attachie Phase I replicates Kakwa core for both gas and liquids Month Month EFFICIENT Cum Gas (MMscf) Pad, well and completion Gas (mcf/d) designs are specific to each asset to capt
Slide 37: Attachie Phase I Economics
Attachie Phase I Economics Full production anticipated in 2025; project payout in 2027 Economic Outlook Economics (2023 to 2032) $ millions • $740 million of capital to build and fill the facility $5,000 • ~$500 million of netback3 in 2025+ • Project payout in 2027 $4,000 • Above cost of capital ret
Slide 38: LNG & Marketing Strategy
Sunrise, BC LNG & Marketing Strategy
Slide 39: Our Marketing Strategy
Our Marketing Strategy Accessing global demand markets at the lowest cost Market Market Price Access Diversification Optimization Securing long-term Accessing diversified Increasing revenues transportation arrangements markets and moving through margin expansion and managing risk through molecules t
Slide 40: Condensate Supply and Demand Outlook
Condensate Supply and Demand Outlook • Long-term demand resilient 2023 Canadian Oil Sands Blending Demand • 35% of WCSB condensate demand 750 Mbbl/d is met by supply imported from the U.S. market • Import pipelines run at high utilization 2023 WCSB Production 475 Mbbl/d • Demand from the oil sands i
Slide 41: Natural Gas Marketing Strategy
Natural Gas Marketing Strategy Portfolio with well-diversified North American exposure is driving strong realizations Natural Gas Financial Exposure1 2 ARC’s Current Natural Gas Portfolio 9% 9% 15% 16% 23% 16% 16% 8% 8% 11% 8% 7% 11% 9% 11% 11% 14% 111% 21% 8% 21% 21% 20% 15% 25% 170,000 52% MMBtu/d
Slide 42: Natural Gas Price Realization – Benchmarking
Natural Gas Price Realization – Benchmarking Physical diversification to end markets is a competitive advantage Realized Natural Gas Price1 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 2018 2019 2020 2021 2022 2023 2024E AECO ARX ARC has realized an average premium to AECO of 25% over
Slide 43: Global LNG Supply and Demand Outlook
Global LNG Supply and Demand Outlook Structural long-term outlook for global natural gas demand Global LNG Supply and Demand Outlook Historical Natural Gas Pricing Bcf/d JKM (Asia) Henry Hub (North America) 100 $80 $70 80 $60 60 $50 USD/MMBtu Bcf/d $40 40 $30 $20 20 $10 0 $0 2023 2025 2027 2029 2031
Slide 44: Long-term Agreements
Long-term Agreements Shell Cheniere Cheniere (40% interest Corpus Sabine Pass Cedar LNG4 in LNG Christi Stage Liquefaction Canada) III Stage V4 Volumes 150 MMcf/day 140 MMcf/day 140 MMcf/day 200 MMcf/day Term Long-term 15 years 15 years 20 years Pricing Premium to JKM2 TTF3 International Structure W
Slide 45: LNG Economics
LNG Economics Long-term supply agreements to diversify and access global natural gas pricing LNG Revenue Enhancement Sensitivity LNG access is an 800 $775 MM Annual Incremental Net Revenue relative to AECO extension of ARC’s diversification activities 600 C$MM1 per MTPA $500 MM Diversify while m
Slide 46: ESG Strategy & Performance
among the Best-in-Class Safety Performance lowest GHG emissions intensities 100% Certified Production in our Canadian peer group ESG Strategy & Performance
Slide 47: Leading Emissions Profile
Leading Emissions Profile ARC has one of the lowest emissions profiles amongst Canadian E&P companies 2022 GHG Emissions Intensity1 2022 Methane Intensity1 (Scope 1 and 2) 0.018 0.30 0.015 Emissions Intensity (tCo2e/year) Methane Intensity (tCO2e/boe) 0.25 0.012 0.20 0.009 0.15 0.10 0.006 0.05 0.003
Slide 48: ESG Leadership
ESG Leadership Northeast BC Infrastructure NEBC Absolute GHG emissions reduction1 Production (Boed) Absolute Emissions (tCO2e) 160,000 400,000 140,000 Attachie Parkland Electrified in 2018 120,000 Septimus 300,000 100,000 80,000 Sunrise Dawson Electrified in 2018 First electrified in 2011 60,000 200
Slide 49: ESG Leadership Through Innovation
ESG Leadership Through Innovation Driving operational efficiencies and enabling top-quartile emissions performance OUR APPROACH ARC has committed to invest Invest $50 in emerging technologies directly (equity) or indirectly (funds) that have the potential to drive operational efficiencies or improve
Slide 50: Appendix
Ante Creek, AB Appendix
Slide 51: BC Landscape
BC Landscape • 100% of ARC’s assets are outside of the BRFN high value areas • ARC’s producing assets Dawson, Parkland, and Sunrise are on freehold (private) lands • Attachie’s land is split 50/50 freehold and crown BRFN High Value Areas Surface Disturbance Limited by 60 – 100% ARC’s Northeast BC As
Slide 52: Financial Strength
Financial Strength Strong financial position has been a foundation of ARC for 26 years 2024 forecasted net debt sensitivities1 Long-term notes repayment schedule $ billions, ratio Cdn$ millions 1.5x 600 1.5 450 1.0x 1.0 300 0.5 0.5x 150 0.0 0.0x 0 US$50/bbl WTI US$60/bbl WTI US$80/bbl WTI US$90/bbl
Slide 53: Debt Strategy
Debt Strategy ARC is a balance sheet first organization $ millions Simple Investment Grade Capital Structure 3,000 $1.0 billion low-cost, long-term notes provide stability • DBRS BBB (stable) 2,500 • Weighted average interest rate 2.9% • Remaining duration 5.8 years Credit 2,000 Facility Ample Credi
Slide 54: NEBC Montney Operational Excellence
NEBC Montney Operational Excellence ARC outperforms industry peers on both drilling and completions operating metrics Completions Efficiency Completions Efficiency Proppant Pumped/Day1 Lateral Completed/Day1 Tonnes/day m/day 3,000 2,000 2,500 1,500 2,000 1,500 1,000 1,000 500 500 0 0 ARC ARC Drillin
Slide 55: Greater Kakwa Montney Operational Excellence
Greater Kakwa Montney Operational Excellence ARC continues to deliver top-quartile completions and drilling efficiencies in Kakwa Completions Efficiency Completions Efficiency Proppant Pumped/Day1 Lateral Completed/Day1 ARC m/day Tonnes/day Peer 1,500 2,000 1,600 1,000 1,200 800 500 400 - 0 ARC ARC
Slide 56: Risk Management Contracts Positions
Risk Management Contracts Positions ARC’s long-term focus is to reduce downside risk and create certainty in cash flows 1 As at March 31, 2024 2024 (remainder) 2025 2026 2027 2028 2029 Crude Oil – WTI US$/bbl bbl/day US$/bbl bbl/day US$/bbl bbl/day US$/bbl bbl/day US$/bbl bbl/day US$/bbl bbl/day Cei
Slide 57: ESG Ratings and Rankings
ESG Ratings and Rankings View ARC’s ESG performance and highlights at www.arcresources.com/sustainability Member of MSCI Global Sustainability Index Member of Sustainalytics’ Jantzi Social Index MSCI ESG Rating: AAA Environment Score: 5 Member of FTSE Russell’s FTSE4Good Index Series since 2018 Soci
Slide 58: Advisory Statements
Advisory Statements
Slide 59: Advisory Statements
Advisory Statements Notes Regarding Forward-looking Information This presentation contains certain forward-looking statements and forward-looking information (collectively referred to as "forward-looking information") within the meaning of applicable securities legislation about current expectations
Slide 60: Advisory Statements – Financial Outlook
Advisory Statements Financial Outlook This presentation contains information that may be considered a financial outlook under applicable securities laws about ARC's potential financial position, including, but not limited to, ARC's production guidance, production estimates and expenses; ARC's plans
Slide 61: Advisory Statements – Non-GAAP Financial Measures
Advisory Statements Non-GAAP Financial Measures Capital Expenditures ARC uses capital expenditures to measure its capital investment level compared to the Company’s annual budgeted capital expenditures. ARC’s budgeted capital expenditures exclude any acquisition or disposition activities as well as
Slide 62: Advisory Statements – Non-GAAP Ratios
Advisory Statements Non-GAAP Ratios Netback per boe ARC calculates netback per boe as netback divided by weighted average daily production. Netback is a non-GAAP financial measure component of netback per boe. Management believes that netback per boe is a key industry performance measure of operatio
Slide 63: Advisory Statements – Supplementary Financial Measures
Advisory Statements Supplementary Financial Measures "Average realized natural gas price" is comprised of natural gas commodity sales from production, as determined in accordance with IFRS, divided by the Company's natural gas production. "Before-tax 2P NPV per share" is comprised of the before-tax
Slide 64: Advisory Statements – Reserves and Operational Information
Advisory Statements Information Regarding Disclosure on Crude Oil and Natural Gas Reserves and Operational Information In accordance with Canadian practice, production volumes and revenues are reported on a company gross basis, before deduction of Crown and other royalties, and without including any
Slide 65: Advisory Statements – Credit Ratings
Advisory Statements Advisory – Credit Ratings Credit ratings are intended to provide investors with an independent measure of credit quality of an issue of securities. Credit ratings are not recommendations to purchase, hold, or sell securities and do not address the market price or suitability of a
Slide 66: Investor Relations Contacts
Investor Relations Contacts Dale Lewko General Investor Relations Enquiries Manager, Capital Markets 403.503.8600 403.503.8696 1.888.272.4900 DLewko@arcresources.com IR@arcresources.com