Surge Energy Inc. · TSX:SGY
Surge Energy — Investor Presentation (May 2023)
31 slides from Surge Energy's investor presentation, May 2023
Slide 1: Premier Oil Assets Driving Free Cash Flow
Premier Oil Assets Driving Free Cash Flow CORPORATE PRESENTATION SUMMER 2023
Slide 2: Q1/23 Highlights
Q1/23 Highlights During the quarter, Surge: • Achieved record average daily production of 25,138 boepd (87% liquids), an increase of 22% over Q1/22; • Reported a 107% increase to SGY’s independent Sproule PDP NAV per share, up from $3.51 on Dec. 31, 2021, to $7.28 on Dec. 31, 2022; • Successfully dr
Slide 3: The Surge Advantage
The Surge Advantage $$$ + = + High Operating Netback, Disciplined Capital Proven Track Conventional Assets Allocation Record of Execution Free Cash Flow • Light/medium oil weighted asset base • Dominant positions in conventional • Proven management team with track • Focus on operational execution dr
Slide 4: New 2022 Reserves
New 2022 Reserves On March 8, 2023, SGY announced top tier reserves, F&D, and FD&A results as follows: Reserves Summary and Net Present Value In 2022, Surge delivered: • PDP Finding & Development (“F&D”) cost of $22.08/boe, including Crude Oil Natural Oil Equivalent NPVBT10 4,5 changes in FDC provid
Slide 5: Net Asset Value
Net Asset Value Surge’s independent Sproule PDP NAV per share increased by 107% in 2022 (from $3.51 to $7.28 per share) Surge NAV on YE2022 Sproule Reserves SGY provides an excellent value proposition, trading (average WTI over first 5 years: US$83/bbl) at just 39% of its YE22 2P NAV/share. Total Pr
Slide 6: Proven Business Strategy
Proven Business Strategy Focused on sustainable returns and enhancing free cash flow Surge executes on a simple, DISCIPLINED CAPITAL ALLOCATION repeatable business strategy: Undertake low cost, low risk • Develop high quality, conventional oil projects that support sustainability reservoirs with pro
Slide 7: Corporate Guidance for 2023
Corporate Guidance for 2023 Key Guidance & Assumptions3 US$80 WTI 2023 Cash flow from operating activities4 $335 MM ($3.47 per share) Focused on returns and 2023 Free cash flow before dividends $160 MM ($1.66 per share) enhancing free cash 2023 All-in payout ratio (including est. $0.48/share annual
Slide 8: Return of Capital Framework
Return of Capital Framework Surge is well positioned to deliver to shareholders a combination of: • Share price appreciation (Sproule 25% 25% 2022YE 2P NAV of >$22/share); 25% • Continued net debt repayment, 50% 50% systematically increasing NAV per share; • A sustainable base monthly cash 75% 25% 2
Slide 9: Advantages of Conventional Reservoirs
Advantages of Conventional reservoirs offer lower risk, predictable, repeatable development with Conventional opportunity to improve recovery factors Reservoirs Surge proactively targets low risk conventional reservoirs. The Company currently has >3.0 billion barrels of net OOIP with an estimated 7.
Slide 10: Sparky and SE Saskatchewan
Sparky and SE Saskatchewan Surge offers exposure to two of the top four conventional oil growth plays in Canada
Slide 11: Sparky and SE Saskatchewan provide exceptional economics and depth of inventory
Sparky and SE Saskatchewan provide exceptional 2023 Production economics and a depth >75% Combined Production Weighting by Area Sparky of drilling inventory Weighting in 2023 SE Saskatchewan Other Surge Assets Sparky Light/medium crude oil production with compelling returns. Low on-stream costs with
Slide 12: Sparky: A One-of-a-Kind Position
Sparky Over 11 Billion Barrel Trend One of Canada’s Largest Accumulations of Oil A One-of-a-Kind Lloydminster Position Edmonton Alberta Gi ltedge Surge holds a dominant land position and has ~60km Acquired ~1,450 boepd Saskatchewan drilled >55% of all horizontal multi-frac wells in the light/medium
Slide 13: Sparky Long-Term Growth Potential
Long-Term Growth Potential Pad drilling, advanced horizontal multi-stage fracturing technology, and multi-leg horizontal success has unlocked the potential of the Sparky play Benefits of Sparky Play • Low-cost drilling (DCET of Canadian Oil Half-Cycle Payout Period1 Clearwater Marten Hills CDN Oil P
Slide 14: SE Saskatchewan: Leveraging Past Success
Surge Land SE Saskatchewan Recently Acquired Midale Subcrop Frobisher Subcrop Leveraging Past Alida Subcrop Ratcliff Subcrop Success Manitoba Saskatchewan Surge’s operational track record of success in SE Saskatchewan make this an exciting growth area Area Benefits • Organic growth opportunities plu
Slide 15: SE Saskatchewan Key Growth Driver
Key Growth Driver High operating netback light Key Operational Areas oil production and reserves >400 million bbls SE Saskatchewan ~7,400 boepd (>90% light oil) from low risk, proven Manitoba ~600 boepd (~99% light oil) conventional reservoirs OOIP net to SGY (internally estimated) Frobisher IP 90 B
Slide 16: Committed to Strong ESG Principles
Committed to Strong ESG Principles ESG and sustainability priorities balance the needs of multiple stakeholders ESG Priorities ESG in Action Climate focus: Integrate climate risks and opportunities within In 2022, SGY spent $11.2 million abandoning 139 wells both Board and Executive management manda
Slide 17: Leadership
Leadership Paul Colborne Jared Ducs Murray Bye Derek Christie Margaret Elekes President & CEO CFO COO Senior VP, Geosciences Senior VP, Land & BD Paul Colborne has over 25 Jared Ducs is a Chartered Murray Bye is a Professional Derek Christie is a Senior Margaret Elekes has more years of experience i
Slide 18: Board of Directors
Board of Directors Paul Colborne Robert Leach 2,5,6 Board Committees President & CEO Independent Director 1. Chair of the Board 2. Member of the Compensation, Nominating and Allison Maher 4,5 Corporate Governance Committee. Mr. Smith Jim Pasieka1 serves as Chair. Independent Director Chairman 3. Mem
Slide 19: Analyst Coverage
Analyst Coverage SGY 12-Month Financial Institution Analyst Email Address Target Price Acumen Capital Partners Trevor Reynolds treynolds@acumencapital.com $14.00 ATB Capital Markets Amir Arif aarif@atb.com $14.00 BMO Capital Markets Christopher Smerek christopher.smerek@bmo.com $12.00 Canaccord Genu
Slide 20: Corporate Information
Corporate Information TSX First Lien Lending Syndicate SGY.TO National Bank of Canada ATB Financial BDC Capital Auditor Registrar & Transfer Agent Headquarters KPMG LLP Odyssey Trust Surge Energy Inc. Centennial Place, East Tower Legal Counsel Investor Contacts 1200 520 3rd Ave SW Calgary, AB T2P 0R
Slide 21: Appendix
Appendix
Slide 22: Recent Core Area Acquisition
Recent Core Area Acquisition Acquired assets are focused Surge’s recent strategic oil acquisition for a net purchase in SGY’s core areas price of $202 MM: Sparky: 1,900 boepd (99% 18°-24° API oil); 13% decline • Adds 3,850 boepd (99% liquids) of sustainable, high operating netback, light and medium
Slide 23: Acquisition Highlights & Metrics
Acquisition Highlights & Metrics Strategic, long life, core area acquisition: At Sproule’s 2022 YE Price Deck4 • Allows Surge to upwardly revise forecast exit 2022 production to >25,000 Proved Developed Producing Reserves5 9.6 MMboe boepd (87% liquids); Total Proved plus Probable Reserves5 17.2 MMbo
Slide 24: Supporting Assets: Greater Sawn and Valhalla
Supporting Assets Greater Sawn Concentrated Light Oil Production >600 MMbbls net OOIP in concentrated, conventional Slave Greater Sawn / Carbonates ~2,900 boepd Point reefs Valhalla ~2,000 boepd Shaunavon ~1,150 boepd Minors ~300 boepd TOTAL ~6,350 boepd Valhalla Shaunavon Stacked pay multi-zone Edm
Slide 25: WTI Hedging Summary
WTI Hedging Summary 6,000 5,000 4,000 Volumes (Bbl) 3,000 2,000 1,000 0 Qtr. 1 2 2023 Qtr.23 2023 Qtr. 2023 Qtr. 34 2023 Qtr. 2023 Qtr. 41 2023 2024 Qtr.122024 Qtr. 2024 Bought Put Collar 25
Slide 26: Hedging Detail
Hedging Detail Natural Gas Derivative Contracts WTI Crude Oil Derivative Contracts AE CO Swaps AE CO Collars Bought Puts Col lars Average Average Sold Average Average Volumes Average Price Volumes Bought Put Call Period Volumes Avg. Price Volumes Bought Put Sold Call Period GJ/day CAD/GJ GJ/day CAD/
Slide 27: Hedging Detail: Interest Rate & Power
Hedging Detail Interest Rate & Power Interest Rate Hedges Type Term Notional Amount (CAD) Surge Receives Surge Pays Fixed Rate Surge Pays Fixed-to-Floating Rate Swap July 2019 – June 2024 $50,000,000 Floating Rate Fixed Rate 1.785% Surge Power Hedges 12 $140.00 As power prices fluctuate significantl
Slide 28: Advisories - Forward-Looking Statements
Advisories - Forward-Looking Statements This presentation contains forward- More particularly, this presentation contains statements concerning: Surge’ s declared focus and primary goals; Sur ge’s rese rve life inde x, drilling inventory and locations, decline rates development, exploration and p ro
Slide 29: Advisories - Oil and Gas Information
Advisories - Oil and Gas Information The term “boe” means ba rrel o f oil equi valent on the basis of 1 boe to 6,000 cubic feet o f Finding, Develop ment and Acquisition (F D&A) is the su m of the Capital spent for 2022 Assuming a Jan 1, 2023 refe rence date, the Company will ha ve o ver >480 gross
Slide 30: Advisories - Non-GAAP & Other Financial Measures
Advisories - Non-GAAP & Other Financial Measures This p resentation includes refe rences to non-GAA P and other financial measu res used b y A ll-in Payout Ratio Free Cash Flow and Free Cash Flow Yield the Compan y to evaluate its financial perfor mance, financial position or cash flow. The se speci
Slide 31: Advisories - Non-GAAP & Other Financial Measures
Advisories - Non-GAAP & Other Financial Measures Net Debt and Net Debt to Cash Flow from Operating Activities Op erating Netback Net debt is a non-GAA P financial measure, calculated as ban k debt, term debt, plus the Operating netback is a non-GAAP financial measure, calculated as petroleum and lia