Strathcona Resources Ltd. · TSX:SCR
Strathcona Resources — Investor Day (November 2024)
75 slides from Strathcona Resources's investor day presentation, Nov 14, 2024
Slide 1: 2024 Investor Day
2024 Investor Day November 14, 2024
Slide 2: Agenda
Agenda Adam Waterous 1 Introduction Executive Chairman Dale Babiak 2 Organization Update Chief Operating Officer Kim Chiu 3 Cold Lake President, SCR Cold Lake Ryan Tracy 4 Lloydminster Thermal President, SCR Lloydminster Thermal Seamus Murphy 5 Lloydminster Conventional President, SCR Lloydminster C
Slide 3: Introduction
Introduction Adam Waterous Executive Chairman
Slide 4: Three Takeaways for Today
Three Takeaways for Today 1 We have built a high-quality, unique business over the past 8 years ▪ High margin, low breakeven production ▪ Long-life, low capital intensity reserves base ▪ Unique employee culture and management structure 2 We have a compelling growth opportunity in front of us over th
Slide 5: Our First Years
Our First 8 Years Since our founding in 2017, we have invested ~$11 billion of capital (~$7 billion in acquisitions, ~$4bn in organic capex) to create Canada’s 5th largest oil producer Production and Capital Summary(1) Progress To Date 200,000 $4,000 1 21% 1P NAV (After-Tax) CAGR, Per Share(2) ▪ #1
Slide 6: High Margin Production
Strathcona Today is a Combination of High Margin Production… Strathcona has amongst the highest full-cycle margins in the sector, driven by a combination of low opex, low capital intensity and low G&A 1H 2024 Operating Earnings Margin (Pre-Tax)(1)(2)(3) 100% 90% 80% 70% 60% % Net Revenue 50% 40% 30%
Slide 7: Long Life Reserves
…Long Life Reserves… Strathcona has the third longest 2P reserve life index in Canada, positioning the company for significant future growth YE 2023 Reserve Life Index (Years)(1)(2)(3) 39 22 Peer 11 Peer 6 Peer 10 Peer 12 Peer 13 Peer 14 Peer 15 Peer 16 Peer 17 Peer 18 Peer 19 Peer 20 Peer 21 Peer 2
Slide 8: Unique Employee Culture / Management Structure
…and a Unique Employee Culture / Management Structure Strathcona is organized as a collection of semi-autonomous businesses, each with their own leadership team accountable for day-to-day operational performance Executive Chair & SCR Board of Directors Scott Seipert Connor Waterous Dale Babiak Conni
Slide 9: Another Way to Think About SCR vs. Public Peers
Another Way to Think About SCR vs. Public Peers SCR can be seen as either a “mini-CNQ” or a combination of MEG + NVA + HWX; SCR is currently trading at a large discount to these public peers (2) Thermal Montney Conventional 7 2P PV-10, After-Tax (C$mm) $25,000 $2,680 ($2,472) 2P PV-10, After-Tax (C$
Slide 10: Our Next Years
Our Next 6 Years Strathcona has the opportunity to add ~105 Mboe / d organically over the next 6 years, while continuing to generate top-tier returns and significant excess FCF Key Goals Production and Capital Summary(1) 300,000 $4,000 1 Maintain >25% ROE, Pre-Tax, @ $70 WTI(2) ▪ $825mm increase in
Slide 11: We Have Done this Before
We Have Done this Before Over the past 8 years Strathcona has executed on meaningful organic capital spending (at strong returns), giving us confidence we can execute on future growth 2017-2024 Production and Capex (Organic vs. Acquired)(1)(2) $1,400 200,000 ▪ ~$3.9bn organic capex invested 2017-202
Slide 12: The Buy vs. Build Test
The Buy vs. Build Test Strathcona’s 2025-2030 organic growth capital adds production and cash flow approximately equivalent to MEG today at ~1/3 the cost, providing a large margin of safety 2025-2030 Organic Growth (Today)(2) “Wedge”(1) ~$8.06bn ~$2.75bn Montney: ~$500mm Lloyd. Conventional: ~$50mm
Slide 13: 2025-2030 Total Return Proposition
2025-2030 Total Return Proposition Strathcona’s plan through 2030 reflects a unique combination of FCF and production growth with minimal reserves depletion, leading to a differentiated return proposition vs. peers Excess FCF Yield(4) + Production CAGR – Reserves Depletion = Total Return 30% “Curren
Slide 14: Clearing a Very High Bar for Growth
Clearing a Very High Bar for Growth We are conscious that organic growth strategies have a mixed track record in our industry; we believe Strathcona has the right set of assets and experience to execute on our plan Is Capital Better Allocated Are We Overcapitalizing Our 1 Do The Returns Justify the
Slide 15: Organization Update
Organization Update Dale Babiak Chief Operating Officer
Slide 16: Our Team Has Grown Significantly
Our Team Has Grown Significantly in the Past 8 Years Like our production base, Strathcona’s employee base has been built from the ground up through a combination of organic hiring and acquisitions Employee Growth Since Founding 800 200,000 180,000 SCR Montney 700 54 Employees (34 Calgary, 20 Field)
Slide 17: Four Businesses, Unified by One Culture and Set of Values
Four Businesses, Unified by One Culture and Set of Values We aim to combine the meritocracy of a sports team with the leanness and focus of a start-up; we seek employees who crave autonomy and are willing to be accountable for their performance What We Want What We Ask and What We Offer in Return Me
Slide 18: Fully Aligned With Our Owners
Fully Aligned With Our Owners Strathcona has a unique compensation system vs. peers, focused on rewarding our employees for items they can control, and minimizing dilution to our shareholders Compensation Principles 1H 2024 All-In G&A (as % of Net Revenue) vs. Peers(1)(3) 14% $8 ▪ 100% of Incentive
Slide 19: Safety: The #1 Thing We Are Accountable For
Safety: The #1 Thing We Are Accountable For Safety performance is of paramount importance at Strathcona, forming a significant part of every employee’s incentive compensation Lost Time Injuries Frequency (LTIF) (# / 200k Hrs) Total Recordable Injuries Frequency (TRIF) (# / 200k Hrs) 0.15 Industry Av
Slide 20: What You Will Hear From Our Presidents
What You Will Hear From Our Presidents A massive oil sands resource, primed for further optimization and growth SCR Cold Lake ▪ Small optimizations have led to ~20% production growth since YE 2022 Kim Chiu ▪ 2025-2030 will continue optimization focus, targeting further ~20% steam-oil-ratio reduction
Slide 21: Cold Lake
Cold Lake Kim Chiu President, SCR Cold Lake
Slide 22: Business Overview
Business Overview Strathcona’s Cold Lake business is a concentrated set of assets at the southern tip of the Alberta oil sands fairway with decades of low-risk undeveloped resource Asset Map Production, Capex and NOI(2) @ US$70 WTI / C$3 AECO(1) Key Statistics 100,000 Current Mboe/d ~60 90,000 Produ
Slide 23: The Cold Lake Advantage
The Cold Lake Advantage While SCR’s Cold Lake assets have higher steam-oil-ratios than many of the larger Athabasca projects, its higher quality oil and closer proximity to market drives higher average margins 2023 SCR Cold Lake Net Margin vs. Combined Athabasca Region SAGD Projects(1) (C$ / bbl) C$
Slide 24: Lindbergh: Massive Resource, Just Getting Started
Lindbergh: Massive Resource, Just Getting Started Lindbergh is Strathcona’s largest asset by reserves, with decades of future running room; over the past 5 years, Strathcona has steadily improved performance on the asset Net Pay (8m Cutoff) Production and Development History Lloydminster 25,000 SCR
Slide 25: Orion: Multi-Zone Oil Sands
Orion: Multi-Zone Oil Sands Orion has seen the most production growth under Strathcona’s operatorship, benefitting from development opportunities in both the Clearwater and Upper Grand Rapids Net Pay (8m Cutoff) Production and Development History Upper Grand Rapids 25,000 ~9 Mbbls / d added since SC
Slide 26: Tucker: Low Hanging Fruit Aplenty
Tucker: Low Hanging Fruit Aplenty Since Strathcona acquired Tucker in 2022 it has focused on low-cost production optimizations, which previously hadn’t been prioritized by prior operators who viewed it as a non-core asset Net Pay (8m Cutoff) Production and Development History Colony Top Pay 25,000 2
Slide 27: Using Old Steam to Extract New Oil
Using Old Steam to Extract New Oil Orion and Tucker’s Clearwater formation is well suited for the use of Lower Drainage Wells to target unexploited pay below existing SAGD producers, adding oil without new steam Lower Drainage Wells (LDWs) ▪ Clearwater (Orion / Tucker) SAGD well pairs are typically
Slide 28: Lindbergh Phase 2: The Rare Shovel-Ready Oil Sands Expansion
Lindbergh Phase 2: The Rare Shovel-Ready Oil Sands Expansion Strathcona has the opportunity to more than double Lindbergh’s production by 2030, bringing forward the value of the project’s ultra long-life reserves 50,000 6.0x $600 Expansion Plan ▪ Expansion of Lindbergh to ~43 Mbbls / d in three phas
Slide 29: Adding More Oil Than Steam
Adding More Oil Than Steam The combined SCR Cold Lake development plan is expected to meaningfully reduce steam-oil ratios, leading to lower energy opex and breakevens for the business SCR Cold Lake Steam-Oil-Ratio (iSOR) 4.0x -0.4x -0.2x 19% Reduction -0.2x in iSOR Lindbergh 3.3x iSOR(1): 3.0x cSOR
Slide 30: Lloydminster Thermal
Lloydminster Thermal Ryan Tracy President, SCR Lloydminster Thermal
Slide 31: Business Overview
Business Overview Strathcona’s Lloydminster Thermal business is a portfolio of small-scale oil sands assets in Saskatchewan which present a unique combination of large resource and high margins Asset Map Production, Capex and NOI(2) @ US$70 WTI / C$3 AECO(1) Key Statistics 80,000 Current Production
Slide 32: Oil Sands, Downsized and Modularized
Oil Sands, Downsized and Modularized While SCR’s Lloydminster Thermal projects target smaller pools than the Alberta oil sands, they benefit from cost-effective, modular central processing facilities and a favorable royalty regime Lloydminster vs. Cold Lake Thermal SCR Cold Lake (Lindbergh) Cold Lak
Slide 33: Following A Tried and Tested Playbook for Success
Following A Tried and Tested Playbook for Success Cenovus / Husky’s successful development of its Lloydminster thermal projects provides a blueprint for Strathcona’s future growth; Strathcona’s projects stack up well vs. Cenovus Lloydminster Thermal Project Map Project Comparison TWP SCR(1) CVE(1) G
Slide 34: Hamlin: The Only Thing Better Than a New Pipeline
Hamlin: The Only Thing Better Than a New Pipeline Strathcona’s owned and operated Hamlin rail terminal is the only crude-by-rail terminal in Canada which delivers better netbacks than pipelines, while insulating SCR from differential blowouts 2017 – 2024 All-In Net Realized Price vs. WTI(1) Rail to
Slide 35: Two Years of Delineation Bearing Fruit
Two Years of Delineation Bearing Fruit Since acquiring the Meota and Edam properties in 2022, Strathcona has focused on further delineating the assets, yielding significant increases to OOIP Meota 8m Pay Contour Original Oil in Place (MMbbls)(1) 624 41 58 347 37 365 20 131 159 160 2022 2024 Plover 8
Slide 36: Meota: A World Class Oil Growth Asset
Meota: A World Class Oil Growth Asset Following several years of focusing on delineation, Meota is now poised for growth to more than 50 Mbbls / d by 2030, targeting a new GP pool in Meota West 2 and the Waseca in Meota Central Meota Net Pay (8m Cutoff) Producing Formation Colony General Petroleum M
Slide 37: Plover: Our Highest Quality Reservoir, Now Ready for Prime Time
Plover: Our Highest Quality Reservoir, Now Ready for Prime Time Plover is a high-quality reservoir which has been under-exploited by prior teams; Strathcona plans to develop it in two phases over the next 4 years, targeting a best-in-class SOR Plover Net Pay (8m Cutoff) Expansion Plan ▪ 1 minor faci
Slide 38: Adding More Oil Than Steam, Part 2
Adding More Oil Than Steam, Part 2 The combined SCR Lloydminster Thermal development plan is expected to meaningfully reduce steam-oil ratios, leading to lower energy opex and breakevens for the business SCR Lloydminster Thermal Steam-Oil-Ratio (iSOR) 3.9x -0.3x -0.4x 23% Reduction in iSOR -0.2x Meo
Slide 39: Lloydminster Conventional
Lloydminster Conventional Seamus Murphy President, SCR Lloydminster Conventional
Slide 40: Business Overview
Business Overview Strathcona’s Lloydminster Conventional business is a collection of fields under polymer flood and waterflood, providing low-risk, high-margin free cash flow generation Asset Map Production, Capex and NOI(2) @ US$70 WTI / C$3 AECO(1) 30,000 Key Statistics Current Mboe/d ~25 Producti
Slide 41: Not Your Average Conventional Heavy Oil
Not Your Average Conventional Heavy Oil Strathcona’s Lloydminster Conventional business is unique amongst peers, offering a combination of high margin current production and long-life reserves 1H 2024 Netback, Production and RLI vs. Conventional Oil Public Peers(2)(3) $90.00 140,000 $80.00 120,000 $
Slide 42: Big Fields Get Bigger
Big Fields Get Bigger Strathcona’s Lloydminster Conventional assets benefit from a massive resource in place, allowing small incremental improvements in technology to equate to large increases in reserves Estimated Ultimate Recovery Oil In Place (OOIP) vs. Recovery(1) 400 Upside from improved techno
Slide 43: Cactus Lake and Bodo-Cosine: The Gifts That Keep on Giving
Cactus Lake and Bodo-Cosine: The Gifts That Keep on Giving Strathcona’s polymer floods are expected to be among the rare “100-year fields” thanks to a combination of a large resource in place and a relatively high long-term recovery factor Recovery Method Progression 40-Acre 40-Acre 10-Acre Unbooked
Slide 44: Why We Love Polymer Floods
Why We Love Polymer Floods While new polymer flood wells may appear to have unimpressive initial rates, their low capital cost and ultra-low base decline lead to decades and decades of payouts Cactus Lake Per Well Production / Payout Profile @ US$70 WTI 30 10x Single Well Economics DCE&T C$700k 9x E
Slide 45: Big News at Druid: First Multi-Lateral and 50m Infill
Big News at Druid: Our First Multi-Lateral and First 50m Infill Strathcona recently drilled its first multi-lateral well targeting the Mannville Stack in Druid; early results are encouraging, with the potential to apply learnings across our asset base Druid Net Pay Map (1m Cutoff) 2024 Drill Perform
Slide 46: Montney
Montney Al Grabas President, SCR Montney
Slide 47: Business Overview
Business Overview Strathcona’s Montney business is spread across two assets in the condensate-rich sweet spot of the AB Montney and a long-life dry-gas asset in NE BC directly adjacent to LNG Canada Asset Map Production, Capex and NOI(2) @ US$70 WTI / C$3 AECO(1) Key Statistics 100,000 60% Current 9
Slide 48: Vertically Integrating Our Oil Businesses
Vertically Integrating Our Oil Businesses The Montney serves as a natural hedge to Strathcona’s oil businesses, producing natural gas which is burned to make SAGD steam and condensate which is blended with heavy oil Sensitivity to +/- $1/Mcf Change In Gas Prices Sensitivity to +/- $10/bbl Change In
Slide 49: Decades of Resource Across Multiple Horizons
Decades of Resource Across Multiple Horizons Strathcona’s Montney business benefits from multiple producing horizons across all three properties, most of which have been significantly de-risked through drilling to date Reserves and Resources (YE 2023) Groundbirch Grand Prairie Kakwa 2P(1) 144 MMboe
Slide 50: Kakwa: An SCR Organic Growth Success Story
Kakwa: An SCR Organic Growth Success Story Kakwa has historically been Strathcona’s largest source of organic growth, driven strong drilling economics due to high condensate yields and substantial owned infrastructure capacity Production, NOI and Capital Summary Key Metrics 40,000 $450 ▪ ~$575mm of
Slide 51: We Continue to Drill Faster and Longer in Kakwa
We Continue to Drill Faster and Longer in Kakwa Strathcona has built a strong capital execution capability in the Montney since 2017, leading to best-in-class performance even versus much larger peers Kakwa Drilling Speed Progression 2024 Drill Performance vs. South AB Montney Peers (m / day)(1)(2)
Slide 52: Owned Infrastructure Facilitating Continued Growth at Kakwa
Owned Infrastructure Facilitating Continued Growth at Kakwa Kakwa benefits from significant owned gas processing and condensate handling infrastructure, setting the asset up for continued growth through 2030 Asset Map Well Performance vs. Peers (2020+) 300 Cum. Condensate (Mbbls) 250 VRN 200 150 100
Slide 53: Groundbirch: In the Right Neighborhood
Groundbirch: In the Right Neighborhood Groundbirch is a prolific dry gas asset located in between several of Canada’s largest natural gas operators and LNG projects; Strathcona is planning a major plant expansion for 2028 Asset Map Well Performance vs. Peers (2020+, Dry Gas Wells Only)(1) 9,000 8,00
Slide 54: Grand Prairie: Resetting for a Value Approach
Grand Prairie: Resetting for a Value Approach Since acquiring the Grand Prairie asset, Strathcona has taken a “value over volumes” approach to development, targeting fewer benches with wider spacing vs. the prior operator Asset Map Single vs. Dual Bench Development Performance, per Well 160 140 Cum.
Slide 55: Carbon
Carbon Connie De Ciancio Chief Commercial Officer
Slide 56: Why Is Our Emissions Intensity Important?
Why Is Our Emissions Intensity Important? Carbon taxes are a growing part of SCR’s cost structure, and our reserves currently reflect a “worst case scenario”; to the extent we can reduce our CO2 we can increase cash flow and NAV Historical Carbon Taxes(1) Future Carbon Tax Liability (Included in YE
Slide 57: Slow and Steady Progress To Date
Slow and Steady Progress To Date Strathcona’s focus to date has been executing small-scale projects which reduce our SAGD assets’ power needs, decreasing our scope 2 emissions while improving our cost structure 1 Lindbergh Cogen Expansion – Online Q1 2023 Financial Highlights ▪ ~$25mm total project
Slide 58: Strathcona's CCS Advantage
Strathcona’s CCS Advantage Carbon capture and storage presents the best opportunity to make large-scale improvements to our carbon intensity; Strathcona’s thermal assets are uniquely suited for CCS vs peers CO2 Storage Reservoirs vs. Major Oil Sands Projects CCS Economic Drivers Concentrated Point S
Slide 59: Managing Risk Through Government Support
Managing Risk Through Government Support Strathcona has been successful in securing government support for carbon projects, helping manage capital costs and technology risk Government Grants Awarded To Date (C$mm) Canada Growth Fund Partnership Canada Growth Fund Federal ITC / Other Grants $13 $43 ▪
Slide 60: Marching Towards Our First CCS Project
Marching Towards Our First CCS Project Strathcona is progressing towards the sanction of its first CCS project at Meota East in mid-2025, which is expected to be ~100% funded by the CGF partnership and Federal ITCs First Project Construction Project Development / Technology Selection Detailed FEED (
Slide 61: Capital Allocation
Capital Allocation Connor Waterous Chief Financial Officer
Slide 62: 2025 – 2030 In Detail
2025 – 2030 In Detail All four of Strathcona’s businesses are expected to compete for capital over the next six years, with the majority of production growth coming from our oil sands properties Production (Mboe / d) 2030 Plateau (Mboe / d) 450 80% 80% 80% 78% 78% 79% 79% ~93 ~75 ~27 ~95 ~290 ~218 4
Slide 63: Improving our ROE, Despite More Capital
Improving our ROE, Despite More Capital The incremental capital employed to undertake Strathcona’s growth plan is expected to earn attractive incremental returns, with a large margin of safety Capital to replace Capital to replace Operating Return on Equity, Pre- and Post-Tax(1) production reserves
Slide 64: Improving the Durability of Our Business
Improving the Durability of Our Business Over the course of the next six years Strathcona’s sustaining WTI breakeven falls by ~US$4 / bbl, primarily due to the allocation of fixed costs over a larger production base 2025 – 2030 Sources and Uses of Cash(1) $4,000 $3,500 100% of excess FCF available f
Slide 65: Multiple Attractive Capital Allocation Options
Multiple Attractive Capital Allocation Options Strathcona is expected to generate significant excess FCF over the next 6 years, the vast majority of which is expected to be returned to shareholders in some form 2025 – 2030 Cumulative Sources and Uses of Cash(1) 1 Base Dividends $22,500 ▪ Increases t
Slide 66: Sending More Barrels to Premium Markets
Sending More Barrels to Premium Markets The majority of Strathcona’s incremental production is expected to be sold in the USGC via rail or consumed internally, significantly insulating Strathcona from local egress issues 2025 – 2030 Production by End Market 300 105 290 ~58% of incremental 45% oil pr
Slide 67: Maximizing Access to Capital, Minimizing Cost
Maximizing Access to Capital, Minimizing Cost Strathcona’s goal for the liabilities side of its balance sheet is to maximize access to capital while minimizing cost; Strathcona’s next goal is to achieve an investment grade credit rating Debt Capacity Cost of Debt vs. Leverage(1) 13 $2,500 9% 4 13 se
Slide 68: Starting the Process of Growing Our Float
Starting the Process of Growing Our Float WEF plans to complete the first of a series of share pass-throughs to its limited partners in Q1, which will more than double Strathcona’s public float Before Q1 2025 Pass-Through After Q1 2025 Pass-Through WEF Public 19.7mm shares 43.7mm shares 9% 20% 80% 9
Slide 69: NS STRATHCONA
NS STRATHCONA “= RESOURCES LTD
Slide 70: Appendix
NS STRATHCONA “= RESOURCES LTD
Slide 71: 2025 Capital Program
2025 Capital Program Strathcona’s 2025 capital budget reflects a disciplined approach to value-added growth, focused on a combination of drilling to fill existing facilities and major expansion projects Capital Budget (C$mm) 2025E Sources and Uses of Cash (Unhedged) (C$mm) $3,200 US$100 WTI 100% of
Slide 72: Simplified Modeling Assumptions
Simplified Modeling Assumptions 2025 2030 Total Oil(1): 72% Total Oil(1): 75% Product Splits Other NGLs: 6% ~ Straight Line Change Other NGLs: 5% Natural Gas: 22% Natural Gas: 20% Total Oil(1): 100% WCS (AB) Realized Prices Other NGLs: 30% WTI Natural Gas: 115% AECO 37% of Operating Free Cash Flow(2
Slide 73: 2017-2023 Reserves Highlights
2017-2023 Reserves Highlights Since 2017 Strathcona has grown 1P and 2P Reserves at a 19% CAGR, averaged a 2.4x PDP recycle ratio while organically growing PDP at a 5% CAGR, and grown intrinsic value at a 21% CAGR Reserves Growth(1) 2,612 2,360 7-Year CAGR, per Share 1,693 PDP 1P 2P 943 Organic 5% 9
Slide 74: Forward Looking Information
Forward Looking Information Certain statements contained in this presentation constitute forward-looking All forward-looking information reflects Strathcona’s beliefs and services; failure to realize the anticipated benefits of Strathcona’s information within the meaning of applicable securities law
Slide 75: Specified Financial Measures and Oil and Gas Advisories
“Operating Earnings Margin” is calculated as operating earnings divided by net revenue. consisting of production, reserves and contingent resources. There is no certainty that it will Specified Financial Measures “Profit-Investment-Ratio PV-10” or “PIR PV-10” reflects the estimated present value of