Arc Resources — Investor Presentation (November 2022)
52 slides from Arc Resources's investor presentation, November 2022
Slide 1: ARC Resources Ltd. Investor Presentation
ARC Resources Ltd. Investor Presentation November 2022
Slide 2: Corporate Profile
Corporate Profile Premium investment opportunity for Montney exposure, one of the most profitable assets in North America 1 Shares outstanding 638 million Canada’s Market capitalization1 $12 billion largest Long-term debt 2 $1.1 billion condensate 23 producer Net debt $1.5 billion Enterprise value2
Slide 3: Corporate Strategy
Corporate Strategy Sustainable dividend-paying energy company focused on long-term profitability and shareholder returns Scale in Capital World-class Assets Discipline Profitable Returns Operational Balance Sheet Excellence with Low Strength & Costs & Emissions Risk Management 3
Slide 4: What Differentiates ARC?
What Differentiates ARC? Asset Quality & Duration Multi-decade inventory in world-class Montney assets; Company-owned infrastructure Financial Strength Investment-grade credit; Track record of low debt since 1996 Operational Excellence Capital Efficient and Low-cost; Corporate Break-even US$40/B WTI
Slide 5: Capital Allocation
Capital Allocation
Slide 6: Free Funds Flow Growth
Free Funds Flow Growth 24% Free Funds Flow1 Per Share CAGR2 3 4; 5% Production per share CAGR (2012-22) $6.00 0.60 Production per share FFO per share FFF per share $5.00 0.50 $4.00 0.40 BOE/d per 1,000 shares $ per share $3.00 0.30 $2.00 0.20 $1.00 0.10 $0.00 0.00 2012 2013 2014 2015 2016 2017 2018
Slide 7: Free Funds Flow Allocation
Free Funds Flow Allocation ARC plans to return 50% to 100% of free funds flow1 to shareholders Free Funds Flow Priorities 2023 Capital Allocation $ billions Maintain Balance Sheet Strength 5.0 • Balance sheet strength is foundational to our company • As debt reaches long-term target; free funds flow
Slide 8: 2023 Capital Budget
2023 Capital Budget CARC
Slide 9: 2023 - 2024 Capital Budget
2023 - 2024 Capital Budget $ millions 2.0 $100 $50 $1,800 $300 $125 $175 ~$1,500 1.5 100M $225 1.1 Billion ~$1,100 1.0 0.5 0.0 Capital to sustain Realized Kakwa(2) Rebuild NEBC Sunrise Other(3) 2023 Capital Reduction to one 2024 Capital to 340Mboe/d Inflation(1) Expansion Budget time costs sustain (
Slide 10: 2023 Guidance – Capital Expenditures & Production
2023 Guidance – Capital Expenditures & Production Attachie Sanction Ready Ante Creek ~2,500 boe/day ~$80MM 11 wells ~20,000 boe/day Greater Dawson $400MM 56 wells Kakwa ~83,000 boe/day $1,075MM 73 wells ~190,000 - 200,000 Sunrise boe/day $175MM 25 wells ~45,000 boe/day Total capital expenditures of
Slide 11: 2023 Guidance – Production & Expenses
2023 Guidance – Production & Expenses 2023 Guidance Production Crude oil (bbl/day) 8,500 - 9,000 Condensate (bbl/day) 79,000 - 81,000 Crude oil and condensate (bbl/day) 87,500 - 90,000 Natural gas (MMcf/day) 1,260 - 1,270 NGLs (bbl/day) 47,000 - 49,000 Total production (boe/day) 345,000 - 350,000 Ex
Slide 12: Financial Sustainability & Return on Investment
Financial Sustainability & Return on Investment
Slide 13: Financial Strength
Financial Strength 1 2023 forecasted net debt sensitivities Long-term notes repayment schedule $ billions, ratio Cdn$ millions 2.0 1.5x 600 1.5 1.0x 450 1.0 300 0.5x 0.5 150 0.0 0.0x 0 US$50/bbl WTI US$60/bbl WTI US$80/bbl WTI US$100/bbl WTI 2023 2024 2025 2026 2027 2028 2029 2030 2031 & US$3.0/GJ &
Slide 14: Financial Strength
Financial Strength Maintaining a strong balance sheet is foundational to ARC 1 Net debt and net debt to funds from operations $ billions, ratio 2.0 1.5x 1.6 1.0x 1.2 0.8 0.5x 0.4 0.0 0.0x Q4 2021 Q1 2022 Q2 2022 Q3 2022 2023E 2023E 2023E 2023E US$50/bbl WTI US$60/bbl WTI US$80/bbl WTI US$100/bbl WTI
Slide 15: Investment-grade Capital Structure
Investment-grade Capital Structure ARC maintains a simple capital structure with ample liquidity 123 Credit capacity Long-term notes repayment schedule $ billions $ millions 600 $0.1B 450 $1.7B 300 150 $1.0B 0 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Undrawn Credit Facility Drawn Credit Fac
Slide 16: Long-term Corporate Profitability
Long-term Corporate Profitability Disciplined plan to deliver excellent corporate returns 1 Return on average capital employed % 30 15 0 (15) (30) 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 2023E 16 1) Non-G
Slide 17: Marketing & Fundamentals
Marketing & Fundamentals CARC
Slide 18: Natural Gas Physical Marketing Strategy
Natural Gas Physical Marketing Strategy Portfolio with well-diversified North American exposure is driving strong realizations 12 Natural gas sales exposure 9% 9% 8% 8% 8% 13% 12% 11% 11% 8% 10% 10% 11% 11% 11% 10% 23% 23% 28% 14% 46% 10% 48% 48% 40% 39% 170,000 21% MMBtu/day 125,000 MMBtu/day 600,0
Slide 19: Natural Gas Financial Exposure
Natural Gas Financial Exposure Diversified North American sales points with increasing exposure to global markets 4% 9% 9% 11% 14% 14% 9% 8% 10% 10% 9% 8% 8% 9% 8% 7% 10% 11% 11% 11% 25% 24% 23% 23% 15% 19% 21% 27% 30% 43% 47% 44% 31% 21% 15% 1% Bal 2022 2023 2024 2025 2026 2027 Hedged WCSB Floating
Slide 20: LNG Supply Agreements
LNG Supply Agreements ARC has secured access to western Canadian and US Gulf Coast LNG as part of its market diversification strategy LNG supply agreements North American LNG export facilities LNG Canada Cheniere Corpus Participant Christi Stage III Volumes 150 MMcf/day 140,000 MMBtu/day Term Long-t
Slide 21: Western Canadian Natural Gas Fundamentals
Western Canadian Natural Gas Fundamentals Significant demand and export capacity growth expected over the next five years 1 2 WCSB natural gas supply and demand WCSB demand and export capacity growth Bcf/day 3.8 Bcf/day Demand & Export Capacity Growth Expected by 2025 24 LNG Canada Phase 1 18 +2.1 B
Slide 22: Western Canadian Condensate Market Fundamentals
Western Canadian Condensate Market Fundamentals Continued reliance on imported volumes is constructive for Canadian condensate pricing 1 2 WCSB condensate supply and demand Crude oil and condensate pricing Mbbl/day US$/bbl 1,000 120 750 90 500 60 250 30 0 0 2017 2018 2019 2020 2021 2022F 2023F 2024F
Slide 23: Asset Portfolio Overview
Asset Portfolio Overview CARC
Slide 24: ARC’s Montney Assets Are World-class
ARC’s Montney Assets Are World-class Largest producer in the Montney positioned at the low end of the North American cost curve Break-even cost of supply of forecasted new wells drilled for 2023 to 20251 US$/MMBtu 4 3 2 1 0 0 1 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Bcf/day WCSB - Montney WC
Slide 25: Deep Inventory of Top-tier Development Opportunities
Deep Inventory of Top-tier Development Opportunities ARC has over 5,500 drilling locations with significant commodity and geographic optionality 1 Reserves Drilling inventory MMboe Number of locations 2,000 6,000 1,500 4,500 1,000 3,000 500 1,500 0 0 Proved Total Proved + Total Attachie Kakwa Greate
Slide 26: Large Network of Owned-and-operated Infrastructure
Large Network of Owned-and-operated Infrastructure Drives lower cost structure and results in greater operational control and reliability Northeast BC infrastructure Parkland 03-09 90 MMcf/day Dawson Phase III & IV 180 MMcf/day Dawson Phase I & II Sunrise Phase I & II 120 MMcf/day 280 MMcf/day 26
Slide 27: Large Network of Owned-and-operated Infrastructure
Large Network of Owned-and-operated Infrastructure Drives lower cost structure and results in greater operational control and reliability Northern AB infrastructure Gold Creek Plant 250 MMcf/day Ante Creek Facilities 65 MMcf/day Cutbank Plant 250 MMcf/day Karr Facility 60 Mbbl/day Lator Plants 260 M
Slide 28: Leading Cost Structure
Leading Cost Structure Low-cost structure driven by large network of owned-and-operated infrastructure 12 Comparative Q4 2021 operating expense per boe $/boe 16 12 8 4 0 ARC 28 1) See “Non-GAAP and Other Financial Measures” in the Q3 2022 MD&A for information relating to this supplementary financial
Slide 29: Sustainable Drilling Improvements at Kakwa
Sustainable Drilling Improvements at Kakwa Continuous improvements achieved through technology, innovation, and optimization Drilling costs per metre Drilling metres per day $/metre metres drilled/day 800 300 40% 600 225 36% 400 150 200 75 0 0 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 29
Slide 30: Kakwa Overview
Kakwa Overview Premium condensate-rich and high-deliverability natural gas play that generates significant free funds flow Gold Creek Plant Land position1 Production2 Cutbank Plant 470,743 net acres 176 Mboe/day 99% W.I. 58% crude oil and liquids Karr PDP Reserves3 Facility Lator Plants 2022 objecti
Slide 31: Greater Dawson Overview
Greater Dawson Overview Low reinvestment rates driving significant free funds flow generation Land position1 Production2 150,260 net acres 95 Mboe/day 97% W.I. 21% crude oil and liquids Tower Parkland 03-09 Dawson Phase III & IV PDP Reserves3 2022 objective Parkland Dawson 147 MMboe Sustain producti
Slide 32: Sunrise Overview
Sunrise Overview Lowest-cost dry natural gas play in North America Land position1 Production2 22,741 net acres 273 MMcf/day 100% W.I. Sunrise Phase I & II PDP Reserves3 2022 objective 74 MMboe Prepare for facility expansion to grow low-cost, low-emission production by 80 MMcf/day Coastal GasLink 32
Slide 33: Attachie Overview
Attachie Overview Attachie West is the leading development opportunity within ARC’s portfolio Land position1 Production2 203,419 net acres 3 Mboe/day 100% W.I. 53% crude oil and liquids PDP Reserves3 Attachie West Phase I 2022 objective 4-20 Battery 5 MMboe Invest in long-lead items to advance Attac
Slide 34: Attachie West Phase I
Attachie West Phase I Attachie West Phase I is the leading development opportunity within ARC’s portfolio Project overview Forecasted cash flow profile Processing capacity $600,000,000 60,000.000 Total 40 Mboe/day $400,000,000 40,000.000 Condensate and NGLs 25 Mbbl/day $200,000,000 20,000.000 Natura
Slide 35: Ante Creek Overview
Ante Creek Overview Highly profitable, stable light oil development generating significant free funds flow Land position1 Production2 118,460 net acres 20 Mboe/day Ante Creek 100% W.I. 47% crude oil and liquids 02-26 Ante Creek 10-07 PDP Reserves3 2022 objective Ante Creek 23 MMboe Continue to lever
Slide 36: ESG Strategy & Performance
ESG Strategy & Performance
Slide 37: ARC’s ESG Excellence
ARC’s ESG Excellence ARC scores amongst the best in the world for ESG performance 12 Global oil and gas companies’ relative ESG rankings 64 ARC Africa Social and Governance Score 58 Asia Canada Europe 52 Latin America Middle East Russia 46 United States 40 38 46 54 62 70 Environmental Score 37 1) So
Slide 38: Enverus ESG Score
38 Enverus ESG Score 10 20 30 40 50 60 70 80 90 100 0 EQT RRC SM ARX CTRA FANG PXD ERF OVV OXY Source | Enverus ESG Analytics, FactSet, company Disclosures CHK WCP AR HES ESG Leadership CRK COP CPG CVX PDCE TOU SWN GPOR DVN CIVI CRC Environmental CNX MUR MRO NVA Social BP WLL XOM EOG DEN Governance
Slide 39: Leading Emissions Profile
Leading Emissions Profile ARC has one of the lowest emissions profiles amongst Canadian E&P companies 12 Comparative 2020 GHG emissions intensity tCO2e/boe 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 ARX ARX-Corporate ARX-AB ARX-BC 39 1) Performance data for 2020 GHG emissions intensity comes from com
Slide 40: Emissions Performance and Targets
Emissions Performance and Targets ARC has reduced its emissions primarily through electrification of its BC facilities 1 Absolute GHG emissions reduction 2025 emissions-reduction targets tCO2e, boe/day Relative to 2019 baseline2 1,000,000 180,000 Reduce Scope 1 and 2 emissions intensity by 875,000 1
Slide 41: Appendix
Appendix
Slide 42: Historical Performance
Historical Performance ARC has managed a profitable business through all commodity price cycles with its efficient Montney assets, capital discipline, and strong balance sheet 1 Production Net debt to FFO Dividends boe/day $ billions, ratio $ billions, % of FFO 3.0 4.0 8 120% 360 3.5 2.5 270 3.0 6 9
Slide 43: Risk Management Contracts Positions
Risk Management Contracts Positions ARC’s long-term focus is to reduce downside risk and create certainty in cash flows 12 As at September 30, 2022 Q4 2022 2023 2024 2025 Crude Oil – WTI US$/bbl bbl/day US$/bbl bbl/day US$/bbl bbl/day US$/bbl bbl/day Ceiling 60.23 27,000 74.28 17,000 123.86 5,243 –
Slide 44: Asset Details
Asset Details ARC consistently delivers strong results across its asset base Greater Kakwa Sunrise Ante Creek Attachie Dawson Production1 Crude oil & liquids (bbl/day) 102,901 19,770 162 9,150 1,677 Natural gas (MMcf/day) 438.2 452.1 273.4 62.7 9.1 Total (boe/day) 175,933 95,122 45,724 19,599 3,187
Slide 45: ESG Ratings and Rankings
ESG Ratings and Rankings View ARC’s ESG performance and highlights at www.arcresources.com/responsibility Member of MSCI Global Sustainability Index Member of Sustainalytics’ Jantzi Social Index MSCI ESG Rating: AAA Voluntary participant since 2007 Member of FTSE Russell’s FTSE4Good Index Series sin
Slide 46: Advisory Statements
Advisory Statements
Slide 47: Advisory Statements
Advisory Statements Notes Regarding Forward-looking Information This presentation contains certain forward-looking statements and forward-looking information (collectively referred to as "forward-looking information") within the meaning of applicable securities legislation about current expectations
Slide 48: Advisory Statements
Advisory Statements Basis of Preparation All financial figures and information have been prepared in Canadian dollars (which includes references to "dollars" and "$"), except where another currency has been indicated, and in accordance with International Financial Reporting Standards ("IFRS" or "GAA
Slide 49: Advisory Statements
Advisory Statements Non-GAAP Financial Ratios Netback per boe ARC calculates netback per boe as netback divided by weighted average daily production. Netback is a non-GAAP financial measure component of netback per boe. Management believes that netback per boe is a key industry performance measure o
Slide 50: Advisory Statements
Advisory Statements Barrels of Oil Equivalent Natural gas volumes have been converted to barrels of oil equivalent ("boe") on the basis of six thousand cubic feet ("Mcf") of natural gas to one barrel ("bbl") of liquids. Boe may be misleading, particularly if used in isolation. A conversion ratio of
Slide 51: Advisory Statements
Advisory Statements Advisory – Credit Ratings Credit ratings are intended to provide investors with an independent measure of credit quality of an issue of securities. Credit ratings are not recommendations to purchase, hold, or sell securities and do not address the market price or suitability of a
Slide 52: Investor Relations Contacts
Investor Relations Contacts Dale Lewko General Investor Relations Enquiries Manager, Capital Markets 403.503.8600 403.503.8696 1.888.272.4900 DLewko@arcresources.com IR@arcresources.com
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