Surge Energy Inc. · TSX:SGY
Surge Energy — Investor Presentation (March 2023)
31 slides from Surge Energy's investor presentation, March 2023
Slide 1: Premier Oil Assets - Driving Free Cash Flow
Premier Oil Assets - Driving Free Cash Flow Corporate Presentation Spring 2023
Slide 2: 2022 Highlights
2022 Highlights During 2022, Surge delivered a total shareholder return (“TSR”) of 112%1 on the back of the following operating and financial results: • increased SGY’s independent Sproule PDP NAV per share by 107%, from $3.51 on Dec. 31, 2021 to $7.28 on Dec. 31, 2022; • increased adjusted funds fl
Slide 3: New 2022 Reserves
New 2022 Reserves On March 8, 2023, SGY announced top tier reserves, F&D, and FD&A results as follows: Reserves Summary and Net Present Value Crude Oil Natural Oil Equivalent NPVBT104,5 Gross Reserves1 and NGLs2 Gas3 Total Reserves ($MM) (Mbbl) (MMcf) (Mboe) Proved: Proved Producing 39,070 33,053 44
Slide 4: 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 (average WTI over first 5 years: US$83/bbl) Total Proved Proved + PDP (1P) Probable (2P) SGY provides an excellent value proposition, trading a
Slide 5: The Surge Advantage
The Surge Advantage $$$ High Operating Netback, + Disciplined Capital Allocation + Proven Track Record = Free Cash Conventional Strategies of Execution Flow Assets • Light/medium oil weighted asset base • Dominant positions in conventional • Proven management team with track • Focus on execution dri
Slide 6: Proven Business Strategy
Proven Business Strategy Focused on sustainable DISCIPLINED CAPITAL ALLOCATION returns and enhancing free Undertake low cost, low risk cash flow projects that support sustainability Surge executes on a simple, repeatable business FINANCIAL FLEXIBILITY strategy: Focus on high return strategic opportu
Slide 7: Corporate Guidance for 2023
Corporate Guidance for 2023 Market Snapshot Focused on returns and $0.48 Annual per share dividend4 Basic Shares Outstanding1 96.5 MM enhancing free cash flow 25,000 while managing risk Average Daily Volume 0.9 MM Shares 2023 Average Production Market Cap / Enterprise Value2 $869 MM / $1.22 Bn Forec
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 2022YE 2P NAV of >$22 per share); • Continued net debt repayment, systematically increasing Surge’s NAV per share; • A sustainable base monthly cash dividend (current
Slide 9: Advantages of Conventional Reservoirs
Advantages of Conventional reservoirs offer lower risk, predictable, Conventional repeatable development with 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: Spotlight: Sparky and SE Saskatchewan
Spotlight: 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 drilling inventory
Sparky and SE Saskatchewan 2023 Production provide exceptional >75% Weighting by Area economics and a depth of Combined Production Sparky Weighting in 2023 SE Saskatchewan drilling inventory Other Surge Assets Sparky Light/medium crude oil production with compelling returns. Low on-stream costs with
Slide 12: 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 Position Lloydminster Surge holds a dominant land position and has Alberta drilled >55% of all horizontal multi-frac wells in the Edmonton Giltedge Saskatchewan Acquired ~1,450 boepd ~60km light/medium
Slide 13: Long-Term Growth Potential
Long-Term Growth Potential Pad drilling, advanced horizontal multi-stage fracturing technology, and multi- >1 billion bbls leg horizontal success has unlocked the potential of the Sparky play Benefits of Sparky play: Canadian Oil Half Cycle Payout Period OOIP net to SGY (internally estimated) • Low-
Slide 14: Leveraging Past Success
Surge Land SE Saskatchewan Recently Acquired Midale Subcrop Frobisher Subcrop Leveraging Past Success Alida Subcrop Ratcliff Subcrop Manitoba Surge’s operational track record of success in SE Saskatchewan make this an exciting growth area Saskatchewan Area benefits: • Organic growth opportunities pl
Slide 15: Key Growth Driver
Key Growth Driver High operating netback light oil production and reserves from >400 million bbls OOIP net to SGY (internally estimated) low risk, proven conventional Canadian Oil Half Cycle Payout Period reservoirs >275 net Clearwater Marten Hills Benefits of SE Sask plays: Clearwater Nipisi NA Oil
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 • In 2022, SGY spent $11.2 million abandoning 139 opportunities within both Board and Executive wells (representin
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 years of Jared Ducs is a Chartered Murray Bye is a Professional Derek Christie is a Senior Energy Margaret Elekes has more than
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 Financial Institution Analyst Email Address Acumen Capital Partners Trevor Reynolds treynolds@acumencapital.com ATB Capital Markets Amir Arif aarif@atb.com BMO Capital Markets Christopher Smerek christopher.smerek@bmo.com Canaccord Genuity Mike Mueller mmueller@cgf.com Cormark Secur
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 KPMG LLP Odyssey Trust Surge Energy Inc. Legal Counsel Investor Contacts Centennial Place, East Tower McCarthy Tétrault LLP Paul Colborne, President & CE
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 price of $202 MM: in SGY’s core areas • Adds 3,850 boepd (99% liquids) of sustainable, high operating netback, light and medium gravity Sparky: 1,900 boepd (99% 18°-24° API oil); 13%
Slide 23: Acquisition Highlights & Metrics
Acquisition Highlights & Metrics Strategic, long life, core area acquisition: At Sproule’s 2022YE Price Deck4 • Allows Surge to upwardly revise forecast exit 2022 production to >25,000 boepd (87% Proved Developed Producing Reserves5 9.6 MMboe liquids); • Increases total estimated OOIP to >3.0 billio
Slide 24: Supporting Assets
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. 2 2023 Qtr. 3 2023 Qtr. 4 2023 Qtr. 1 2024 Qtr. 2 2024 Bought Put Collar 25
Slide 26: Hedging Detail
Hedging Detail Natural Gas Derivative Contracts AECO Swaps AECO Collars Average Average Average Volumes Price Volumes Bought Put Sold Call Period GJ/day CAD/GJ GJ/day CAD/GJ CAD/GJ WTI Crude Oil Derivative Contracts Q1 2023 4,000 $ 3.66 2,000 $ 2.90 $ 3.91 Q2 2023 - $- 4,000 $ 2.75 $ 3.67 Bought Put
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 10 As power prices fluctuate significa
Slide 28: Advisories - Forward-Looking Statements
Advisories - Forward-Looking Statements This presentation contains forward-looking More particularly, this press release contains statements concerning: Surge’s give no assurance that they will prove to be correct. Since forward-looking declared focus and primary goals; Surge’s reserve life index, d
Slide 29: Advisories – Oil and Gas Information
Advisories – Oil and Gas Information The term “boe” means barrel of oil equivalent on the basis of 1 boe to 6,000 cubic Finding, Development and Acquisition (FD&A) is the sum of the Capital spent for Assuming a Jan 1, 2023 reference date, the Company will have over >480 gross feet of natural gas. Bo
Slide 30: Advisories – Non-GAAP and Other Financial Measures
Advisories – Non-GAAP and Other Financial Measures This presentation includes references to non-GAAP and other financial All-in Payout Ratio Free Cash Flow and Free Cash Flow Yield measures used by the Company to evaluate its financial performance, All-in payout ratio is a non-GAPP ratio, calculated
Slide 31: Advisories – Non-GAAP and Other Financial Measures cont’d
Advisories – Non-GAAP and Other Financial Measures cont’d Net Debt and Net Debt to Cash Flow from Operating Activities Operating Netback Net debt is a non-GAAP financial measure, calculated as bank debt, Operating netback is a non-GAAP financial measure, calculated as term debt, plus the liability c