Prairiesky Royalty Ltd · TSX:PSK
Prairiesky Royalty — Investor Presentation (October 2021)
48 slides from Prairiesky Royalty's investor presentation, October 2021
Slide 1: Corporate Presentation Fall 2021
CORPORATE PRESENTATION Fall 2021
Slide 2: PrairieSky Royalty Snapshot
PrairieSky Royalty Snapshot TSX $3.7 Balance Sheet PSK Billion Strength Enterprise Value(1) Annual Dividend $0.36 221.7 NCIB Per Common Share Million Accelerated the repurchase of shares at cyclical lows Paid Quarterly Shares Outstanding 8.2 8.1 Million Million 4 Provinces Acres of Fee Lands Acres o
Slide 3: Dominant Land Position
Dominant Land Position PRAIRIESKY — ROYALTY LTD Alberta Saskatchewan | | PrairieSky - Fee Title I Prairiesky - corR I 2021 Acquired Royalty Land
Slide 4: Marten Hills Clearwater Royalty Acquisition
Marten Hills Clearwater Royalty Acquisition Acquired a 5% gross overriding royalty on over 76,000 acres of Clearwater lands in the core Marten Hills area for cash consideration of $155.0 million on July 19, 2021. A growth-oriented Current royalty production of ~500 BOE/d (96% liquids) with expected
Slide 5: Central Alberta Acquisition
Central Alberta Acquisition Acquired a portfolio of Fee Lands and gross overriding royalties for cash consideration of $34.8 million, before adjustments. 138,000 acres of Fee Land 125,000 acres of GORR Interests 575 km2 of 3D seismic Current royalty production of ~200 BOE/d (74% liquids) with expect
Slide 6: Introduction to PrairieSky Royalty
Introduction to PrairieSky Royalty 8.2 million acres of Fee Lands(1) Business model supports dividend payments 8.1 million acres of GORR Lands(1) Royalty operating margin(2) 99% Lands located throughout the heart of the oil Operating margin(2) of 91% and gas producing basins in Alberta, British Colu
Slide 7: A Unique and Diversified Approach to Investing in Oil & Gas
A Unique and Diversified Approach to Investing in Oil & Gas Third Party Operators • 315 lessees paying royalties on PrairieSky Royalty lands • Operators on PrairieSky Royalty Fee Lands include Majors, Independents, Mid Cap and Small Cap producers Commodity Geology • 79% of product revenue derived •
Slide 8: Royalty Advantage
Royalty Advantage Ownership in PrairieSky provides a long duration cash flow stream and the optionality associated with perpetual land title ownership. Exposure to: No exposure to: High margin cash flow streams Capital costs New discovery/exploration optionality Environmental liabilities Commodity p
Slide 9: Higher Margin, Lower Risk
Higher Margin, Lower Risk Margin Summary ($/BOE) Illustrative Working Interest Operator PrairieSky Royalty Revenue (50% Liquids Production)(1) $36.83/boe PrairieSky Royalty offers higher margins Production & Mineral Tax than conventional Royalties ($0.43/BOE) ($4.20/BOE) working interest production
Slide 10: Recycling the Land Base
Recycling the Land Base The perpetual nature of Fee Lands allows PrairieSky Royalty to continually recycle lands and grow its revenue base. PrairieSky leases At the end of the primary lease lands by zone – same term, any lands/rights not held aerial acreage can be by production revert back to leased
Slide 11: Production History on our Fee Lands
Production History on our Fee Lands Cumulative production of Historical Gross Production on PSK Fee Lands 4.5 billion BOE 300,000 250,000 200,000 150,000 100,000 50,000 - CD Avg. Oil (bbl/d) CD Avg. Gas (BOE/d) Source: Accumap Additional royalty production is generated on GORR Lands (not included ab
Slide 12: Reserves Replacement
Reserves Replacement Third-party capital on PrairieSky Funds from operations lands approximately replaces returned to shareholders as production annually. dividends and share repurchases or used to purchase additional royalty 2020 proved + probable reserves interests. increased 5% over 2019. Proved
Slide 13: Long-term Optionality
Long-term Optionality PrairieSky’s basket of call options includes: SAGD Lindbergh and Onion Lake projects have multiple phase expansion potential New leasing of Fee Lands to integrated and independent SAGD specialists Emerging Clearwater and Duvernay oil plays; stacked Montney and Spirit River liqu
Slide 14: PrairieSky Royalty Per Share Metrics
PrairieSky Royalty Per Share Metrics Production per Million Shares Acres per Million Shares(1) 140 80,000 120 60,000 100 80 40,000 60 40 20,000 20 - - Q1/14 Q2/14 Q3/14 Q4/14 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20
Slide 15: Revenues Generated from Royalty Properties
Revenues Generated from Royalty Properties PrairieSky generates revenues through Royalty Compliance analysis focuses on leasing its Fee Lands and its GORR capturing mispaid royalties through Interests, which includes Royalty forensic accounting. Production Revenue, Bonus Over $65 million in complian
Slide 16: Returns to Shareholders
Returns to Shareholders 2.0 From IPO to September 30, 2021, 1.8 PrairieSky has returned $1.2 billion in dividends and $245 1.6 million in share buybacks to 1.4 shareholders. 1.2 Over the 12-month period ending $ billions September 30, 2021, PrairieSky 1.0 has repurchased 1.6 million common shares at
Slide 17: Capital-Free Returns and Diversification
Capital-Free Returns and Diversification PrairieSky Royalty E&Ps Midstream Capital-Free Returns No capital investment required x Requires significant capital x Requires significant capital or acquisitions for growth for growth Future embedded royalties and cash flow through x Responsibility for
Slide 18: ESG Policies and Practices
ESG Policies and Practices All of PrairieSky’s royalty Policies properties are in Canada which and provides the following advantages: Practices Environmental regulations are best-in-class standards and reflect global leadership PrairieSky’s policies and Focus on Health and Safety, Human Rights and p
Slide 19: ESG Policies and Practices
ESG Policies and Practices ESG Survey Results We are committed to operating our Ranked #1 by Sustainalytics for Global Oil and business in an economically, socially, Gas Producers and in top 7.5% for Global and environmentally responsible and Universe (October 18, 2021). sustainable manner for the b
Slide 20: Shareholder Alignment
Shareholder Alignment Board & Management invested ~$80 million in PSK Shares Shareholder All staff are shareholders “Pay for performance” long-term incentives Alignment and maximize participation in Employee Stock Purchase Plan Decisions focused on core strategy and creating long-term shareholder va
Slide 21: Spuds on PrairieSky Lands – YTD 2021
Spuds on PrairieSky Lands – YTD 2021 20
Slide 22: Quarterly Activity on PrairieSky Lands
Quarterly Activity on PrairieSky Lands Wells Spud Wells Spud 300 300 15.0% 200 200 10.0% 100 100 5.0% 0 0 0.0% 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021
Slide 23: 10 Year Free Cash Flow Generation
10 Year Free Cash Flow Generation YTD 2021 Average Royalty Production 19,654 BOE/d 10 Year Average Annual Production (boe/d) FX AECO WTI ($US / 18,000 20,000 22,000 24,000 ($/Mcf) ($/bbl) $CAD) 10 Year Free Cash Flow (Billions) % Annual Growth Rate ~-1.5% ~Flat ~2% ~3.5% 0.78 $2.75 $40.00 $1.3 $1.5
Slide 24: Why PrairieSky?
Why PrairieSky? • 8.2 million acres of Fee Lands Vast Land Base • 8.1 million acres of GORR Lands • Management and directors with an unparalleled understanding of the Experienced Team royalty business and are invested alongside shareholders Resource Play • Upside from resource play development on em
Slide 25: Financial Information
PRAIRIESKY FINANCIAL INFORMATION
Slide 26: Financial Highlights
Financial Highlights Year Ended December 31, $millions, unless otherwise noted Q3 2021 Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020 2020 2019 Production Volumes Crude Oil (bbls/d) 7,535 7,028 7,278 7,313 6,572 6,035 7,124 8,633 NGLs (bbls/d) 2,603 2,612 2,502 2,285 2,473 2,586 2,571 2,607 Natural Gas (Mm
Slide 27: Top Payors
Top Payors Top 10 payors represent 47% Exposure to various operators with of product revenue, while the diverse expertise ranging from Top 25 payors represent 71% private companies to Majors. of product revenue 12 months of Revenue by Top 25 Companies ($ millions) 1 2 Top 25 Payors 3 4 5 6 7 8 Artis
Slide 28: Appendices
PRAIRIESKY APPENDICES
Slide 29: High Quality Royalties = Optionality
HIGH QUALITY ROYALTIES = OPTIONALITY
Slide 30: Future Optionality
— Future Optionality PRAIRIESKY — ROYALTY LTD Optionality Beyond Current Valuation >> Expansion of productive trends >> Material new pool discoveries >> Improvements in drilling and completions technologies: incremental recovery via optimized completions, tighter inter-well spacing, and additional a
Slide 31: Industry Capital on PrairieSky Lands
Industry Capital on PrairieSky Lands Third-party operators invest capital on PrairieSky’s lands to develop and produce oil and natural gas. 2014 2015 2016 2017 2018 2019 2020 Industry Capital(1) (billions) $46.9 $31.6 $23.0 $28.7 $27.4 $25.8 $15.3 Gross Capital on PSK Lands(2) (billions) $1.9 $1.1 $
Slide 32: Multi-Zone Potential
Multi-Zone Potential Exploration and development has taken place since the 1950s in the form of new pool discoveries as well as through redevelopment with evolving technology 1950’s Future Homeglen Rimbey Duvernay, Banff Leduc Oil horizontal, Nordegg, Ellerslie, Upper Mannville 1960’s Post 2010 Nord
Slide 33: Saskatchewan Viking Continues to Attract Capital
Saskatchewan Viking Continues to Attract Capital Saskatchewan Viking remains a key play for many producers based on superior economics, short cycle times and low capital requirements < $1 million to bring well on-stream and quick payouts Wells produce > 50 years ~100 miles Over 10 Mmboe of oil in pl
Slide 34: Development of an Economic Resource Play
Development of an Economic Resource Play Saskatchewan Viking Wells Drilled Before 2010 2,650 vertical wells drilled (in this map area) 36 horizontal wells drilled Horizontal lateral length 1 mile or 0.5 mile PrairieSky Drilling density 4 to 8 wells per section Inventory Most wells target vertical we
Slide 35: Alberta Viking – Growth in Activity
Alberta Viking – Growth in Activity Production on PrairieSky Lands 16,000 Gross Oil Production (bbl/d) 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2014 2015 2016 2017 2018 2019 2020 2021 pre-2014 RR 2014 RR 2015 RR 2016 RR 2017 RR 2018 RR 2019 RR 2020 RR 2021 RR Activity has grown in the Alberta
Slide 36: Central Alberta Duvernay
Central Alberta Duvernay One million acres of royalty lands in the oil and volatile oil window of an emerging shale resource play. ~180 miles Duvernay is in early stages of contributing to PrairieSky’s revenues: Average royalty Potential for production of significant royalty ~450 BOE/d, up from 20 B
Slide 37: Upper Montney Light Oil Exposure
Upper Montney Light Oil Exposure GORR on ~110 sections of prospective Upper Montney light oil lands in Two Rivers region of British Columbia PrairieSky will benefit from future development of play without capital expenditures, operating costs or abandonment and environmental liabilities 0 6 Miles 36
Slide 38: Enhanced Oil Recovery
Enhanced Oil Recovery Unit on single section of land first started producing in 1979 Production has increased dramatically with EOR scheme, averaging ~$37,000 per month in royalty revenue over the 12- month trailing period. 0 1 Mile 1,600 1,400 Gross Oil Production (bbl/d) 1,200 1,000 800 600 400 20
Slide 39: Multi-Zoned, Prolific Spirit River Exposure
Multi-Zoned, Prolific Spirit River Exposure Spirit River Royalty HZ Production on GORR Lands 40,000 35,000 Gross Production (boe/d) 30,000 25,000 20,000 15,000 10,000 5,000 - 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Pre-2011 RR 2011 RR 2012 RR 2013 RR 2014 RR 2015 RR 2016 RR 2017
Slide 40: Technology
Technology Unit started producing in the 1950s. Horizontal, multi-stage fracture development started in ~2012 increasing production to levels not seen since the 1960s. Increased horizontal drilling activity on a number of units across PrairieSky lands. Provides significant development opportunity. 1
Slide 41: Understanding Royalties
PRAIRIESKY UNDERSTANDING
Slide 42: History of PrairieSky's Fee Lands
History of PrairieSky’s Fee Lands 1676 1887 1958 2002 2014 2021 King Charles II of Dominion of CPR creates Encana created PrairieSky completes PrairieSky completes a England granted Canada stops Canadian Pacific through merger of acquisition of Range 640,000 acre royalty 948 million acres of Royalty
Slide 43: Types of Royalties
Types of Royalties Crown Royalties The following figure Fee Simple Mineral Title - outlines the royalty PrairieSky owns 8.2 million acres hierarchy. As you Gross Overriding Royalties - move down the PrairieSky owns 8.1 million acres royalty hierarchy, Streams costs increase and duration decreases. N
Slide 44: Active Management of Land Base
Active Management of Land Base License to ~17,300 km2 of 3D PrairieSky actively seismic(1) over 4.3 million acres & manages its Fee ~49,200 km of 2D seismic Lands: PrairieSky’s Seismic Coverage Meeting with operators and providing updates on available lands Providing seismic to lessors and generatin
Slide 45: Leadership Team
Leadership Team Board of Directors Sheldon Steeves Corporate Director, Previously President & CEO of EchoEx; Executive James M. Estey, Chair of the Board Vice President & COO at Renaissance Energy Ltd. Corporate Director, Retired Chairman of UBS Securities Canada Inc., and has Director of Enerplus C
Slide 46: Disclaimer & Cautionary Statements
Disclaimer & Cautionary Statements Cautionary Statement on Forward Looking Information This presentation contains “forward looking information” and “forward looking statements” within the meaning of applicable securities laws, which may include, but are not limited to: statements with respect to fut
Slide 47: Other Disclosure
Other Disclosure NON-GAAP MEASURES Certain measures in this presentation do not have any standardized meaning as prescribed by IFRS and therefore, are considered non-GAAP measures. These measures may not be comparable to similar measures presented by other issuers. These measures are commonly used i
Slide 48: Contact Information
CONTACT INFORMATION WWW.PRAIRIESKY.COM PRAIRIESKY ROYALTY LTD. 1700, 350 – 7 Avenue SW Calgary, AB T2P 3N9 T 587.293.4000 E Investor.relations@prairiesky.com
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