ARC Resources — Barclays CEO Energy-Power Conference 2015
31 slides from ARC Resources's conference presentation, Sep 10, 2015
Slide 1: Barclays CEO Energy-Power Conference
Barclays CEO Energy-Power Conference September 10, 2015
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: Value Proposition
Value Proposition Clear Line of Sight to Long-term Value Creation CREATING VALUE Exposure to Early Growth & Cost Management & Stage Development Strategic Income Capital Discipline of World Class Optionality Assets Strong Technical Responsible Balance Sheet Expertise Development Dividend + Profitable
Slide 4: Unique Strategy
Unique Strategy Risk Managed Value Creation is Central to ARC’s Strategy Targeting net debt to funds Operating costs reduced by from operations between ~20% since 2009: 1.0 – 1.5x $10.19/boe in 2009 $8.05/boe in Q2 2015 >200% Reserve Replacement Highly skilled team of 570 through the drill bit for
Slide 5: Risk Managed Value Creation
Risk Managed Value Creation Montney Assets Delivering Profitable Growth and Value 140,000 Production Profile 120,000 100,000 80,000 boe/d Forecast 60,000 40,000 20,000 0 Non-Montney Liquids Montney Liquids Non-Montney Gas Montney Gas
Slide 6: Sustainable Dividend
Sustainable Dividend Committed to the Dividend While Delivering Profitable Growth • 15% annualized total return since inception, ~$5.5 billion of dividends ($31.68/share) $6,000 120% Cumulative Dividends and Historic Payout Ratio $5,000 100% Cumulative Dividends $ millions $4,000 80% $3,000 60% $2,0
Slide 7: Financial Flexibility – Balance Sheet Strength
Financial Flexibility – Balance Sheet Strength Strong Balance Sheet Provides Stability Through Cycles • Targeting Net Debt to Funds from Operations Between 1.0 to 1.5x Net Debt to Cash Flow 2015F(1) Net Debt to Enterprise Value 2015F(1) 16.0 80% 14.0 70% 12.0 60% 10.0 50% Group Average 8.0 40% 6.0 3
Slide 8: Operational Excellence – Cost Management
Operational Excellence – Cost Management Low Cost Producers Deliver Superior Returns over Time • Focused assets, characterized by high working interest, operatorship and ARC owned/operated facilities, provides control over costs and operations $30 3 Year FD&A (2012-2014) $/boe (1)(2) $25 H1 2015 Ope
Slide 9: Sustainability
Sustainability Balancing Inflows and Outflows for Long-term Sustainability • Objective to fully fund ARC's Dividend and Sustaining Capital from Funds from Operations (“FFO”) over the long-term • Profitable Growth Capital will be funded from remaining FFO and other sources 5 Year Total Inflows & Outf
Slide 10: ARC's Proven Development Model
ARC’s Proven Development Model Inventory of Opportunities at All Stages
Slide 11: Montney Assets
MONTNEY ASSETS CANS
Slide 12: Why the Montney
Why the Montney Total Recoverable Resource Ranks High amongst North American Resource Plays • Massive thickness • Large areal extent (>500km) • Superior lithology and “fracability” • High permeability • Over pressured • Higher recovery factors Montney • Repeatable performance • Dry gas, liquids-rich
Slide 13: Montney Growth Assets
Montney Growth Assets Growing our Montney Land Base • ARC has added 165 net Montney sections since Q2 2014 • ~70% of ARC’s Montney land is undeveloped, providing significant future opportunity 120 Net Montney Sections in 2003 >1,100 Net Montney Sections Today 500 km
Slide 14: ARC in the Montney
ARC in the Montney 33% Compound Annual Montney Growth - 5 Year Period 120,000 2015 100,000 Sunrise Gas Plant & Tower Liquid Expansion 2014 Parkland Gas Plant: Phase 1 80,000 boe/d 2012 Ante Creek Gas Plant 60,000 2011 Dawson Gas Forecast 2010 / 08 Plant: Phase 2 ARC acquires Storm 40,000 2010 / 04 2
Slide 15: NE BC Montney Reserves & Resources
NE BC Montney Reserves & Resources NE BC Montney TPIIP 67.4 Tcf of Gas and 2.3 Billion Barrels of Oil 2014 Resource evaluation conducted by GLJ saw significant growth in Gas TPIIP, which is mainly attributed to newly-acquired land in Pouce Coupe, Sundown and Dawson. OIL 14.5 MMbbl (11.2) 14% 2.5 Tc
Slide 16: Multiple Layers to Develop
Multiple Layers to Develop Attachie Septimus Sunrise Tower Parkland Dawson Pouce Coupe Montney A Upper Montney Montney B Montney C Lower Montney Montney D Montney E Existing Horizontal Wells, Development Potential Horizontal Wells Existing Horizontal Wells, Pilots
Slide 17: Montney Development Economics
Montney Development Economics Strong Rates of Return across the Montney Portfolio Parkland Tower Dawson Sunrise Ante Creek Half Cycle Economics C$55/bbl 55% IRR 35% IRR 95% IRR 65% IRR 35% IRR MSW 4.3x Recycle Ratio 3.5x Recycle Ratio 5.0x Recycle Ratio 6.2x Recycle Ratio 2.8x Recycle Ratio C$3/GJ $
Slide 18: Competitive Montney Economics
Competitive Montney Economics ARC’s Montney Competes with Some of the Lowest Break-Evens Marcellus vs Montney Break-evens Break-even NYMEX (US$/Mcf) Lowest Highest Source: ITG IR; raw data provided by Drilling Data Inc and Geoscout.
Slide 19: Tower is Among the Best Oil Plays
Tower is Among the Best Oil Plays Strong Oil Economics at Tower Source: CIBC reports, CIBC World Markets Inc.
Slide 20: NE BC/NW AB Montney First Year Cumulative Gas
NE BC/NW AB Montney First Year Cumulative Gas ARC’s Montney Gas Wells Outperform Industry by ~55% on First Year Average NE BC / NW AB Montney Gas Only First Year Cumulative 4,000 3,500 Others (1553 wells) 3,000 ARC (137 wells) Cumulative Gas (MMcf) 2,500 ARC P50 = 1,348 MMcf (First Yr Avg Rate = 3.6
Slide 21: Dawson Development Potential
Dawson Development Potential Additional Development Layer below Core Acreage Dawson • Dawson core development has been Upper focused on Upper Montney Montney A; 65% of Upper Montney A Booked Reserves* lands have reserves booked in this layer • ARC drilled its first Lower Montney well in Lower 2008;
Slide 22: Dawson – A Cash Flow Machine
Dawson – “A Cash Flow Machine” Low Reinvestment Ratio to Maintain Significant Free Cash Flow Field Netback ($mm) Capex ($mm) $250 200 Net Cash Flow $200 Production (MMcfe/d) 160 MMcfe/d $150 120 $ millions $100 80 $50 40 $- - 2009 2010 2011 2012 2013 2014 2015 YTD $(50) (40) $(100) (80) $3.92 $3.91
Slide 23: Parkland/Tower Development Potential
Parkland/Tower Development Potential Incremental Reserves Potential with Multilayer Development • Upper Montney Upper Montney A Booked Reserves* supports two layers of development at Upper Montney Parkland and Tower • At year end 2014, ~60% of WI lands had reserves Lower booked to Upper Montney Mont
Slide 24: Tower Cumulative Production
Tower Cumulative Production New Wells Are Exceeding Type Curve • 7 wells have produced in excess of 100,000 barrels of oil within first year of production Total Production (boe) Oil Production (bbl) 130,000 240,000 120,000 220,000 110,000 200,000 100,000 180,000 90,000 160,000 Cumulative oil bbl 201
Slide 25: Tower Drilling Curves
Tower Drilling Curves ~25% Reduction in Drill Times Resulting in ~20% Cost Savings at Tower Pads • Realizing reduced drill days and cost savings in the last 6 months from re-engineering and optimization of drilling operations. Tower Drilling Curves 0 200 Horizon 50 (12-16 Pad) 400 Pacesetter 600 8-1
Slide 26: Sunrise Development Potential
Sunrise Development Potential Proven Productivity from Four-Layered Development • Known reserves exist in Upper Montney A; 2014 Upper Montney A Booked Reserves* drilling program proved Upper Montney A+ Upper Montney productivity • With four-layered Upper Montney A+ development at Booked Reserves* Su
Slide 27: Sunrise Outperforming Expectations
Sunrise Outperforming Expectations Drilling Results Prove Four-Layer Development Model 10,000 2015 Type Curve (11.3 Bcf) 2013/14 Type Curve (11 Bcf) 9,000 2012 Type Curve (9.7 Bcf) Estelle July 6, 8,000 2011 Type Curve (7 Bcf) 7,000 02-26-78-18 W6 (08-24Hz) Upper MTYA 15-23-78-18 (C09-13Hz) Upper MT
Slide 28: Strategic Montney Infrastructure
Colo Strategic Montney Infrastructure com cons Building Montney Infrastructure to Support Resource Development Tower Battery Coming 2015 Parkland Gas Plant On-Stream 2013 Attachie Tower Pouce Coupe Septimus Parkland Sunset Dawson Sunrise Dawson Dawson Gas Plant Phase 3 Phase 1: Coming On-Stream 2010
Slide 29: Montney Pilots
Montney Pilots Proving Future Value before Full-Scale Development
Slide 30: Summary
SUMMARY CANS
Slide 31: Looking Beyond 2016
Looking Beyond 2016 Diverse Portfolio Provides Strategic Optionality • ARC has a well-balanced inventory of value creating opportunities which may be pursued beyond 2016 140,000 Project Options 2016 - 2020+ Production Profile • Dawson Phase 3 120,000 • Pouce Commercialization 100,000 • Ante Creek Ex
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