ARC Resources — Peters & Co. 20th Annual Fall Energy Conference 2016
27 slides from ARC Resources's conference presentation, Sep 14, 2016
Slide 1: Peters & Co. Limited 20th Annual Fall Energy Conference
Peters & Co. Limited 20th Annual Fall Energy Conference September 14, 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: 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 6: Delivering on Our Strategy of Risk-Managed Value Creation
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 Operating Costs Production Production Split 75% $6.25/boe $ millions 100 50% 50 25% 2009 0 Operating Costs Base
Slide 7: 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 8: Hedging Program Results
Hedging Program Results Hedging Continues to Smooth Cash Flow Volatility • ARC’s hedging program provides greater certainty of cash flows and supports the business plan 250 Realized Hedging Gains (Losses) 200 Crude Oil Natural Gas Foreign Exchange & Power 150 Total $ millions 100 50 0 (50) 2009 2010
Slide 9: 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 10: 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 11: 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 12: 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 13: 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 14: Portfolio Strategy
PORTFOLIO STRATEGY
Slide 15: 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 • Appraisal / Piloting • Exploit • Maintenance Redwater • Geographic a
Slide 16: 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$2.50/GJ AECO 4.2x Recycle Ratio 4.5x Recycle Ratio 3.8x Recycle Ratio 2.5x Recycle Ratio 2.9x Recycle
Slide 17: Type Curve Growth
Type Curve Growth Continuous Improvements in Well Performance Dawson Type Curve 7,000 Sunrise Type Curve Tower Type Curve 7,000 1,400 6,000 2015/2016 Type Curve 6,000 2014-2016 Type Curve 1,200 2016 Type Curve 2013/2014 Type Curve 2013 Type Curve 2015 Type Curve 2009-2011 Forecast 2011 Type Curve 20
Slide 18: Montney Full Cycle Economics – Dawson & Tower
Montney Full Cycle Economics – Dawson & Tower Robust Project Economics for Next Growth Platforms • Significant drilling results and large inventory of future drilling locations provides support for favourable economics at Dawson Phase III and Parkland/Tower Phase II. Project Economics Single Well Ec
Slide 19: Dawson – Sustainable Cash Flow Model
Dawson – Sustainable Cash Flow Model Low Reinvestment Ratio to Maintain Significant Free Cash Flow Field Netback ($ 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 20: 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 21: Dawson – Phase III Plant
Dawson – Phase III Plant Construction of Dawson Phase III Underway • Dawson Phase III Sour Gas Plant with 90 MMcf per day of gas and 7,500 barrels of liquids-handling sales capacity approved by the BC Oil and Gas Commission in September • Liquids production will initially be below design capacity un
Slide 22: 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 23: 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 24: 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 25: 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 26: Summary
SUMMARY
Slide 27: 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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