Slide 1: Sustainable Conventional Resource Company
SUSTAINABLE CONVENTIONAL RESOURCE COMPANY TSX: SGY JUNE, 2016
Slide 2: Reasons to Own Surge
REASONS TO OWN SURGE 100% operated, high quality, low decline asset base High quality light/medium crude oil asset base; low decline < 20% NAV of $4.79 per share (proforma Sunset sale) using Sproule and Associates pricing(1) Return capital to shareholders through dividend and share buyback opt
Slide 3: Surge Energy
SURGE ENERGY Well positioned for growth and sustainable dividends Total Proved plus Probable Reserves of 80.7 mmboe(1) 2016(e) Exit Production Rate 13,000 boepd (76% oil) Low Decline of < 20% (RLI >17 years) Q1 2016 Net Debt: $134 million Location Inventory: 764/744 (gross/net); 235/217 (g
Slide 4: Proactive Management
PROACTIVE MANAGEMENT Positioned to accelerate and grow as crude oil prices continue to rally Created over $759MM in liquidity since oil prices began to fall in 2014 • $512MM in accretive asset/facility sales • $117MM in dividend reductions (annualized) • $90MM in Capex reductions • $40MM in hedge
Slide 5: 2016 Capital Program
2016 CAPITAL PROGRAM Protecting NAV and balance sheet through conservative capital spending OPERATIONAL 2016(e) Exit Production (boe/d) 13,000 (76% Oil/NGLs) Capital Spending for 2016 ~$55 million • DCET $32.4 million • Waterflood $1.5 million • Facilities $6.2 million • Workover $7.2 million • Land
Slide 6: $55MM Capex – 2016(e) Exit Production of 13,000 boe/d
$55MM CAPEX – 2016(E) EXIT PRODUCTION OF 13,000 BOE/D Maintaining production with full cycle production efficiencies of $18,500 IP365 Capital Allocation Capital / Well Total Capital IP365 PE # of Drills Production Adds Area ($MM / DCET) ($MM) ($/boepd) (boe/d) Valhalla 3 $3.6 $10.8 1,200 $9,000 Shau
Slide 7: Cash Flow Sensitivities
CASH FLOW SENSITIVITIES Surge remains well positioned and poised to accelerate out of the downturn Production growth = compounding cash flow growth at higher prices: 2017 Growth Sensitivity Oil USD WTI $48* $55 $60 CAD $ $0.77 $0.80 $0.83 Production 13,000 13,500 14,027 FFO, MM$ 71.5 100.0 124.0 Cap
Slide 8: Elite Assets Focused in Three Core Areas
ELITE ASSETS FOCUSED IN THREE CORE AREAS Large OOIP pools in established conventional reservoirs Surge 2016(e) Exit Production: Total: >13,000 boe/d (79% Oil & NGL’s) (~57% on AB Crown) Western Alberta Production: Total: ~6,300 boe/d (64% Oil & NGL’s) SE AB Production: Total: ~3,450 boe/d (87% Oil &
Slide 9: Core Area Details
CORE AREA DETAILS >1.47 Billion bbl’s net OOIP with an additional ~187 Million net barrels of oil recoverable Drilling Locations Internally Estimated Ultimate OOIP (MMbbls) Gross/Net(2) Avg. CTD Oil Total Booked Independent (1) Recovery Net Core Area Formations WI Recovery Recovery Factor P+P (1) (W
Slide 10: Targeting Conventional Reservoirs
TARGETING CONVENTIONAL RESERVOIRS Large OOIP, high quality reservoirs tend to get larger over time Conventional reservoirs tend to outperform over time: • Year over year recovery factor reserve additions • Long life, low decline production • Higher ultimate recoveries • Enhanced oil recovery by ap
Slide 11: Conventional vs. Unconventional Reservoirs
CONVENTIONAL VS. UNCONVENTIONAL RESERVOIRS Surge targets reservoirs on the conventional end of the permeability spectrum Ultimate Oil Capital expenditures decrease, Recovery while recovery factors and ROR rates of return increase, as reservoir quality improves. Unconventional Conventional Reservoirs
Slide 12: Three Core Conventional Reservoirs
THREE CORE CONVENTIONAL RESERVOIRS Applying proven technology to conventional reservoirs helps provide top tier performance and higher recovery factors U. Shaunavon Valhalla Doig Sparky Depth 1450m Depth 2000m Depth 725m Net Pay 4 - 10m Net Pay 15 - 35m Net Pay 8 - 12m Porosity 12-18% Porosity 6-10%
Slide 13: Top Tier Capital Efficiencies and Replacement Metrics
TOP TIER CAPITAL EFFICIENCIES AND REPLACEMENT METRICS Large inventory with excellent economics using May 2016 strip pricing Areas/Formations Capital Rates of Drill/ Complete/ Mboe/well Locations Core Area Gross / Net Efficiency Return (1) Equip 180 day IP (on primary) (May 2016 Strip Pricing) (Booke
Slide 14: Quality Waterflood Projects
QUALITY WATERFLOOD PROJECTS Waterflood - increasing reserves & flattening declines Current Properties Under Commercial Waterflood Area Formation Start Date 2015 Decline Current RF Booked RF Expected RF Silver Lloyd/ Cummings 1996 10% 12.6% 35.7% 39.0% Wainwright Sparky 1962 8% 32.0% 35.5% 37.1% Mack
Slide 15: Southwest Saskatchewan - Shaunavon
SOUTHWEST SASKATCHEWAN - SHAUNAVON >450MM barrels of net OOIP in the Upper and Lower Shaunavon combined >450 MMbbls of net OOIP in the Lower and Upper Shaunavon formations (medium gravity oil) Current combined recovery factor ~1.2% Rates of return in excess of 51%(1) for the Upper Shaunavon
Slide 16: Upper Shaunavon
UPPER SHAUNAVON Large contiguous undeveloped land position in the greater Upper Shaunavon trend R21W3 R19W3 Area/Pool Well Count Depth OOIP Cum Oil Peak Rate Current Rate T10 Instow Vt Hz (m) (MMbbl) (MMbbl) (bbl/d) (bbl/d) Instow 118 2 1,370 152 71 9,420 2,600 Dollard 109 5 1,400 179 104 14,660 1,4
Slide 17: Upper Shaunavon Activity
UPPER SHAUNAVON ACTIVITY >250MMbbl OOIP on Surge lands in the Upper Shaunavon R21W3 R20W3 R19W3 Upper Shaunavon A Sand T7 Upper Shaunavon B Sand Upper Shaunavon C Sand Lower Shaunavon T6 SGY Q3 Waterflood Pilot 36-005-20W3 SGY Q1 ‘15 U. Shvn Hz T5 191/13-18-005-19W3 On Prd March 2015 IP (90) = 219 B
Slide 18: Upper Shaunavon Performance
UPPER SHAUNAVON PERFORMANCE Surge horizontal results in the Upper Shaunavon outperforming area average Upper Shaunavon Monthly Production vs Area Average 400 350 300 Rate (bopd), Cum Oil (mbbl) 250 200 150 Primary EUR 150Mbbl 100 50 0 0 12 24 Month FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES 18
Slide 19: Upper Shaunavon Early Waterflood Response
UPPER SHAUNAVON Early Waterflood Response FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES 19
Slide 20: Northwest Alberta
NORTHWEST ALBERTA Large OOIP >695MMbbls in concentrated high quality light oil assets Large OOIP of >695 (585 net) MMbbls of high quality light oil (32-40° API) Valhalla OOIP: 228 mmbbl Large development inventory of (195 mmbbl net) Nipisi 191/179 (gross/net) locations: OOIP: 155 mmbbl (150 mmbb
Slide 21: Northwest Alberta - Valhalla
NORTHWEST ALBERTA - VALHALLA Firm service agreements for Alliance and TCPL pipelines mitigates production restrictions Valhalla Doig ~140 MMbbls of net combined OOIP on Surge’s Sexsmith Valhalla and Wembley Lands (40° API light oil) Doe Creek Oil Pool >60MMbbl 04-08-075-7W6 Rates of return of 12
Slide 22: Valhalla Doig Performance
VALHALLA DOIG PERFORMANCE 2015 drilling in Valhalla yielded 3 of the top oil wells in Canada North Valhalla Doig Recent drilling results outperforming type curve and exceeding expectations Optimization of drilling and completion techniques are improving results and lowering capex 02/15-06-075-8W
Slide 23: Southeast Alberta - Sparky
SOUTHEAST ALBERTA - SPARKY Provost / Eyehill / Wainwright area’s – Oil saturated Cretaceous sands Wainwright >430 MMbbls of net OOIP (23-31° API oil) Current recovery factor of ~15% Eyehill Sparky waterflood implemented in Q4 2014 Control of key infrastructure Rates of return in excess of
Slide 24: Positioned for Long Term Sustainability
POSITIONED FOR LONG TERM SUSTAINABILITY Low base decline <20%, high netbacks, excellent capital efficiencies $0.075 annual dividend; NO DRIP! ; Share buyback in place Excellent balance sheet – one of the best in the peer group FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES 24
Slide 25: High Quality Crude Oil Asset Base
HIGH QUALITY CRUDE OIL ASSET BASE Focused, high quality, crude oil asset and opportunity base; 3 core areas are 100% operated, with working interests of ~90% Large OOIP crude oil reservoirs – with low recovery factors; >17 year RLI Over 700 net low risk development drilling locations provide >
Slide 26: Risk Management / Hedging Strategy
RISK MANAGEMENT / HEDGING STRATEGY The Company has an orderly, on-going, risk management / hedging program designed to lock in future cash flows to protect the Company’s capex program and fund dividends. Below is a list of Surge’s current hedging programs: Oil Hedges Natural Gas Hedges Floor Ceiling
Slide 27: Oil Hedging Philosophy
OIL HEDGING PHILOSOPHY Reflects management best efforts, not hedge policy 4,000 $77.38 $77.38 $80.00 3,500 $70.99 Ceiling $70.99 $70.00 $66.57 C$ WTI - Average hedge Floor / Ceiling Price 3,000 Targeted Hedging Level 2,500 $60.00 bbl/d Hedged 2,000 Floor $50.00 $50.00 $50.00 $49.00 $49.00 1,500 $45.
Slide 28: 2015 Year End Reserves
2015 YEAR END RESERVES ~$1.1 Billion of Total Proved plus Probable Reserves Value (NPVBT10) 2015 Year End Reserves Proforma Sunset Asset Sale Oil& NGLs Gas Total Reserve Category NPVBT10 ($MM) (1) (Mbbl) (MMcf) (Mboe) Proved Producing 21,413 33,642 27,020 $442 Proved Non-Producing 1,114 3,288 1,662
Slide 29: Analyst Coverage
ANALYST COVERAGE Financial Institution Analyst Email Address Acumen Capital Partners Trevor Reynolds treynolds@acumencapital.com BMO Capital Markets Ray Kwan ray.kwan@bmo.com Canaccord Genuity Anthony Petrucci apetrucci@canaccordgenuity.com Clarus Securities Inc. Josie Ho jho@clarussecurities.com Co
Slide 30: Corporate Partners
CORPORATE PARTNERS Advisors National Bank of Canada Bank of Nova Scotia Canadian Imperial Bank of Commerce Toronto-Dominion Bank Bankers Syndicate: Bank of Montreal ATB Financial HSBC Bank Canada Wells Fargo Goldman Sachs Auditor: KPMG LLP Legal Counsel: McCarthy Tétrault Evaluation Engineers: Sprou
Slide 31: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements. More particularly, this presentation contains statements concerning anticipated: business strategies, plans and objectives; potential development opportunities and drilling locations, expecta
Slide 32: Endnotes
ENDNOTES Slide 2: (1) Based on Sproule's December 31, 2015 Price Forecast Slides 3 & 9: (1) December 31, 2015 reserves. (2) This presentation discloses drilling locations in three categories: (i) proved locations; (ii) probable locations; and (iii) unbooked locations. Proved locations and probable l
Slide 33: Oil and Gas Advisory
OIL AND GAS ADVISORY "In this presentation, "Boe" means barrel of oil equivalent on the basis of 6 mcf of natural gas to 1 bbl of oil. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 6mcf: 1 bbl is based on an energy equivalency conversion method primarily appli
Slide 34: Non-GAAP Measures
NON-GAAP MEASURES NON-GAAP MEASURES This presentation includes non-GAAP measures as further described herein. These non-GAAP measures do not have a standardized meaning prescribed by International Financial Reporting Standards (“IFRS or, alternatively, “GAAP”) and, therefore, may not be comparable w