Arc Resources — Investor Presentation (December 2023)
63 slides from Arc Resources's investor presentation, December 2023
Slide 1: ARC Resources Ltd. Investor Presentation December 2023
ARC Resources Ltd. Photo Caption copy area Investor Presentation December 2023
Slide 2: Corporate Profile
Corporate Profile Premium investment opportunity for Montney exposure, one of the most profitable assets in North America Shares outstanding1 609 million 2 Canada’s Market capitalization $13.7 billion largest Long-term debt1 $1.1 billion condensate producer Net debt 1 3 $1.2 billion Enterprise value
Slide 3: Scale in a World-class Resource Play
Scale in a World-class Resource Play Largest Montney producer, Canada’s largest condensate producer and 3rd largest gas producer Mboe/day BC and Alberta Montney Producers Mbbl/day Montney Condensate & Liquids Producers 400 160 Attachie Phase I Attachie Phase I (2025E) 350 (2025E) 140 300 120 250 100
Slide 4: Transformation to the Largest Montney Producer
Transformation to the Largest Montney Producer Large concentrated asset base drives efficiency, well positioned for the future 2014 2023 >1 million Montney acres >1 million Montney acres AVERAGE PRODUCTION: AVERAGE PRODUCTION: 4 110 Mboe/d 350 Mboe/d
Slide 5: Investment Case for ARC
Investment Case for ARC Disciplined Growth • Five-year plan to more than double free funds flow per share • Achieved by unlocking Montney development and reducing the share count Speaker: Dale Commitment to Shareholder Returns • Committed to return essentially all free funds flow to shareholders Wor
Slide 6: 2024 Capital Budget
2024 Capital Budget
Slide 7: 2024 Guidance – Production & Expenses
2024 Guidance – Production & Expenses 2024 Guidance Production Crude oil and condensate (bbl/day) 87,000 - 91,500 Natural gas (MMcf/day) 1,325 – 1,340 NGLs (bbl/day) 42,000 - 45,000 Total production (boe/day) 350,000 - 360,000 Expenses ($/boe)(1) Operating 4.50 - 4.90 Transportation 5.50 - 6.00 G&A
Slide 8: 2024 Guidance – Capital Expenditures & Production
2024 Guidance – Capital Expenditures & Production Attachie ~$600 MM1 Ante Creek ~2,500 boe/day ~$50MM 14 wells ~18,000 boe/day Greater Dawson ~$260 MM 36 wells Kakwa ~95,000 boe/day ~$630MM 42 wells ~175,000 boe/day Sunrise ~$115MM 11 wells ~59,000 boe/day Total capital expenditures of $1.75 to 1.85
Slide 9: Strategic Overview and Long-term Plan
Dawson III & IV, BC Strategic Overview and Long-term Plan
Slide 10: Five-Year Outlook Delivers Significant Value
Five-Year Outlook Delivers Significant Value Disciplined plan to grow free funds flow per share1 Boe/day Base Production Attachie I Attachie II 425,000 400,000 ~130% Free Funds Flow Per Share Growth 375,000 (~20% CAGR4) 350,000 325,000 ~55% of Market Cap Generated in 300,000 2024 2025 2026 2027 2028
Slide 11: Long-term Resource Optionality
Long-term Resource Optionality Unmatched inventory runway in a world-class asset Boe/d Production Outlook 600,000 500,000 400,000 300,000 200,000 100,000 0 2023 2024 2025 2026 2027 2028 Gas NGL Condensate Future production potential 11 ARC's Montney assets capable of sustaining ~500,000 boe per day
Slide 12: Global Leader in Responsible Energy Development
Global Leader in Responsible Energy Development Providing reliable, affordable and sustainable energy to global demand markets Targeting up to 25% Exposure to International Pricing 12
Slide 13: Capital Allocation
Kakwa, AB Capital Allocation
Slide 14: Track Record of Capital Discipline
Track Record of Capital Discipline A disciplined investment framework fundamental to profitable growth 1 Return on Average Capital Employed 40% 30% Average 12% 20% 10% 0% -10% -20% 14 1) Non-GAAP Financial Measure — see "Non-GAAP and Other Financial Measures" in the Advisory Statements of this prese
Slide 15: Capital Allocation
Capital Allocation Lower reinvestment requirement allows for profitable growth and superior return on capital Reinvestment Rate1 2 Reinvestment Rate Average (Build Out & De-Risk Phase) Average (Staged Development) 120% 100% 87% 80% ~50% 60% 40% 20% 0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 202
Slide 16: Five-Year Outlook
Five-Year Outlook Disciplined investment drives free funds flow per share growth Capital Expenditures1 2 Free Funds Flow2 $ millions $ millions 2,000 3,000 WTI $50/AECO $2.50/GJ WTI $70/ AECO $3.50/GJ WTI $80/AECO $4.50/GJ 1,000 2,500 0 2,000 2024 2025 2026 2027 2028 Boe per day 1,500 Production % 4
Slide 17: Free Funds Flow Per Share Growth
Free Funds Flow Per Share1 2 Growth Sustainable per share growth $ per share 5.00 4.00 3.00 2.00 1.00 0.00 2023 2025 2028 Montney investment and share repurchases drive 20% free funds flow per share CAGR3 17 1) Non-GAAP Financial Ratio— see "Non-GAAP and Other Financial Measures" in the Advisory Sta
Slide 18: Free Funds Flow Allocation
Free Funds Flow Allocation Committed to returning essentially all free funds flow to shareholders Capital Allocation Priorities 2024 Capital Allocation 2028 Capital Allocation $billions Balance Sheet Strength 5.0 • Investment-grade rating and low debt 4.0 US$80 WTI & Cdn Base Growth $4.50 AECO • Gro
Slide 19: Return of Capital Strategy
Return of Capital Strategy Balancing sustainable dividend growth with share repurchases Dividend per share Dividend payout ratio Outstanding shares Shares (millions) >10% $1.20 800 Dividend Per Share Growth CAGR3 700 $1.00 ~15% 600 Dividend Payout Ratio3 $0.80 (% of FFO) 500 $0.60 400 Sustainable at
Slide 20: Asset Portfolio Overview
Parkland, BC Asset Portfolio Overview
Slide 21: Montney Overview
Montney Overview ARC’s competitive advantage in a world-class asset >1,600 Montney sections 5,000+ Tier 1 drilling locations 87% of these locations are unbooked 1.5 Bcf/d Owned-and-operated infrastructure 21 21
Slide 22: North American Natural Gas Inventory
North American Natural Gas Inventory ARC has a 25-year inventory life economic below US$2.50/MMbtu 22 Source | Enverus Intelligence Research
Slide 23: Montney – Track Record of Execution
Montney – Track Record of Execution Early movers to consolidate asset base at a low cost and deliver sustained profitable growth Boe per day 2028 Attachie 440,000 Montney Crude Oil & Liquids (bbl/d) 2025 Phase II Attachie Montney Natural Gas (boe/d) 2021 Phase I 400,000 ARC acquires Seven Generation
Slide 24: Large Network of Owned-and-operated Infrastructure
Large Network of Owned-and-operated Infrastructure Owned infrastructure results in approximately $300 million of cost avoidance annually Dawson Phase I & II Attachie Phase I 120 MMcf/day 90 MMcf/day3 >1.5 Bcf/d processing capacity Parkland 03-09 Dawson Phase III & IV 90 MMcf/day 180 MMcf/day Sunrise
Slide 25: Deep Inventory of Development Opportunities
Deep Inventory of Development Opportunities ARC has substantial Montney drilling inventory at each of our producing and growth assets Locations 2,000 ~15 years of ~20 years of Inventory Inventory 1,000 ~10 years of Inventory ~20 years of Inventory 0 Attachie Kakwa Greater Dawson Sundown Ante Creek S
Slide 26: Kakwa Overview
Kakwa Overview Liquids-rich asset offering a long runway of development with <50% developed 180,000 boe/d Able to sustain at 180,000 boe/d for the next 15 years SCALE Developed (45%) Significant inventory extension recently identified Undeveloped (55%) Gold Creek Plant Kakwa development to date cove
Slide 27: Kakwa Outperformance
Kakwa Outperformance Improved efficiencies via systematic design progressions Widened Inter-Well Spacing Single Layer Development 135 meters to 175 meters Trialed where layers differ in reservoir quality, and drilling and completion costs Up to improved 18% lowered 7% 10% capital efficiency increase
Slide 28: Dawson Overview
Dawson Overview Flagship asset delivering superior free funds flow2 with a long inventory runway >1 Tcf Natural Gas Produced Developed (33%) SCALE Undeveloped (67%) UMA 67% Undeveloped 20 Years of Inventory at current drilling pace Dawson Phase III & IV 2023-28 Asset Level Outlook ECONOMICS Dawson $
Slide 29: Sunrise Overview
Sunrise Overview Scale, low-cost, near-zero emissions – the key ingredients to supply West Coast LNG EFFICIENT Highly efficient dry natural gas play due to stacked Developed (37%) UMA development layers Undeveloped (63%) Interconnected LMA to Coastal GasLink to move gas volumes to West Coast LNG Sun
Slide 30: Septimus and Sundown Overview
Septimus and Sundown Overview Capable of delivering approximately 1 Bcf per day of combined production for ~15 years Quick Facts Sundown land position1 36,600 acres Septimus land position1 19,100 acres Inventory 15 years at 1 Bcf/d (internal estimate, combined) Development Objective 2025+ 30 . 1) Re
Slide 31: Attachie Phase I
Attachie, BC Attachie Phase I
Slide 32: Attachie Overview
Attachie Overview ARC’s largest and most economic undeveloped asset Scale to Replicate Kakwa READINESS EFFICIENT SCALE UMA >300 net sections in condensate-rich Montney LMA Consolidated Land Base Drives Efficiencies 3 Phases of Multi-layered development Development Leverage Montney data and experienc
Slide 33: Attachie Phase I Overview
Attachie Phase I Overview Aiming to deliver the most efficient Montney development to-date $740 MM to construct and fill facilities 40 Mboe/d Processing capacity 2025 Targeting full production capacity Natural Gas Sales Line Installed Low-Emissions Liquids-rich greenfield project First Nations suppo
Slide 34: Attachie Phase I Performance replicates Kakwa
Attachie Phase I Performance replicates Kakwa Cum Condensate (Mbbl) PERFORMANCE Condensate (bbl/d) Well performance at Attachie Phase I replicates Kakwa core for both gas and liquids Month Month EFFICIENT Cum Gas (MMscf) Pad, well and completion Gas (mcf/d) designs are specific to each asset to capt
Slide 35: Attachie Phase I Economics
Attachie Phase I Economics Full production anticipated in 2025; project payout in 2027 Economic Outlook Economics (2023 to 2032) $ millions • $740 million of capital to build and fill the facility $5,000 • ~$500 million of netback3 in 2025+ • Project payout in 2027 $4,000 • Above cost of capital ret
Slide 36: LNG & Marketing Strategy
Sunrise, BC LNG & Marketing Strategy
Slide 37: Our Marketing Strategy
Our Marketing Strategy Accessing global demand markets at the lowest cost Market Market Price Access Diversification Optimization Securing long-term Accessing diversified Increasing revenues transportation arrangements markets and moving through margin expansion and managing risk through molecules t
Slide 38: Condensate Supply and Demand Outlook
Condensate Supply and Demand Outlook • 35% of WCSB condensate demand 2022 Canadian Oil Sands Blending Demand is met by supply imported from the 700 Mbbl/d U.S. market • Import pipelines run at high utilization 2022 WCSB Production 450 Mbbl/d • Demand from the oil sands is growing 2022 Imports from U
Slide 39: Natural Gas Marketing Strategy
Natural Gas Marketing Strategy Portfolio with well-diversified North American exposure is driving strong realizations Natural Gas Financial Exposure1 2 ARC’s Current Natural Gas Portfolio 12% 9% 9% 14% 23% 10% 10% 8% 8% 8% 7% 11% 8% 11% 11% 11% 11% 8% 111% 22% 22% 10% 23% 14% 19% 27% 170,000 23% 125
Slide 40: Natural Gas Price Realization – Benchmarking
Natural Gas Price Realization – Benchmarking Physical diversification to end markets is a competitive advantage Realized Natural Gas Price1 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 2018 2019 2020 2021 2022 2023E AECO ARX ARC has realized an average premium to AECO of 20% over the
Slide 41: Global LNG Supply and Demand Outlook
Global LNG Supply and Demand Outlook Structural long-term outlook for global natural gas demand Bcf/d Global LNG Supply and Demand Outlook Historical Natural Gas Pricing 100 JKM (Asia) Henry Hub (North America) $80 80 $70 $60 60 $50 USD/MMBtu $40 40 $30 $20 20 $10 $0 0 2018 2019 2020 2021 2022 2023
Slide 42: Long-term Agreements
Long-term Agreements Shell Cheniere Cheniere (40% interest Corpus Sabine Pass Cedar LNG3 in LNG Christi Liquefaction Canada) Stage III Stage V Volumes 150 MMcf/day 140,000 140,000 200 MMcf/day MMBtu/day MMBtu/day Term Long-term 15 years 15 years 20 years Pricing Premium to JKM1 TTF2 JKM3 Structure W
Slide 43: LNG Economics
LNG Economics Long-term supply agreements to diversify and access global natural gas pricing LNG Revenue Enhancement Sensitivity ▪ LNG access is an 800 $775 MM Annual Incremental Net Revenue relative to AECO extension of ARC’s diversification activities 600 C$MM1 per MTPA $500 MM ▪ Diversify while m
Slide 44: ESG Strategy & Performance
Safety Performance GHG emissions intensities Best-in-Class GD lowest » . 100% in our Canadian peer group ORIGIN Certified Production ———— el _ er ———— — <a ee ——— ESG Strategy & Performance
Slide 45: Leading Emissions Profile
Leading Emissions Profile ARC has one of the lowest emissions profiles amongst Canadian E&P companies 2021 GHG Emissions Intensity1 2021 Methane Intensity1 (Scope 1 and 2) 0.0100 0.0800 Emissions Intensity (tCo2e/year) Methane Intensity (tCO2e/boe) 0.0080 0.0600 0.0060 0.0400 0.0040 0.0200 0.0020 0.
Slide 46: ESG Leadership
ESG Leadership Northeast BC Infrastructure NEBC Absolute GHG emissions reduction1 Production (Boed) Absolute Emissions (tCO2e) 160,000 400,000 140,000 Attachie Parkland Electrified in 2018 120,000 Septimus 300,000 100,000 80,000 Sunrise Dawson Electrified in 2018 First electrified in 2011 60,000 200
Slide 47: ESG Leadership Through Innovation
ESG Leadership Through Innovation Driving operational efficiencies and enabling top-quartile emissions performance OUR APPROACH ARC has committed to invest Invest $50 in emerging technologies directly (equity) or indirectly (funds) that have the potential to drive operational efficiencies or improve
Slide 48: Appendix
"ke ge 2” ptt sak hg ial Ante Creek, AB Appendix ARC |
Slide 49: Financial Strength
Financial Strength Strong financial position has been a foundation of ARC for 26 years 1 2023 forecasted net debt sensitivities Long-term notes repayment schedule $ billions, ratio Cdn$ millions 1.5x 600 1.5 450 1.0x 1.0 300 0.5 0.5x 150 0.0 0.0x US$50/bbl WTI & US$60/bbl WTI & US$80/bbl WTI & US$90
Slide 50: Debt Strategy
Debt Strategy ARC is a balance sheet first organization $ millions Simple Investment Grade Capital Structure 3,000 $1.0 billion low-cost, long-term notes provide stability • DBRS BBB (stable) 2,500 • Weighted average interest rate 2.9% • Remaining duration 5.8 years Credit 2,000 Facility Ample Credi
Slide 51: NEBC Montney Operational Excellence
NEBC Montney Operational Excellence ARC outperforms industry peers on both drilling and completions operating metrics Completions Efficiency Completions Efficiency Proppant Pumped/Day1 Lateral Completed/Day1 Tonnes/day m/day 3,000 2,000 2,500 1,500 2,000 1,500 1,000 1,000 500 500 0 0 ARC ARC Drillin
Slide 52: Greater Kakwa Montney Operational Excellence
Greater Kakwa Montney Operational Excellence ARC continues to deliver top-quartile completions and drilling efficiencies in Kakwa Completions Efficiency Completions Efficiency Proppant Pumped/Day1 Lateral Completed/Day1 ARC m/day Tonnes/day Peer 1,500 2,000 1,600 1,000 1,200 800 500 400 - 0 ARC ARC
Slide 53: Reserves Replacement
Reserves Replacement ARC has replaced >140% of production for 15 consecutive years 500% 400% 300% 200% 100% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 53
Slide 54: Risk Management Contracts Positions
Risk Management Contracts Positions ARC’s long-term focus is to reduce downside risk and create certainty in cash flows 1 As at September 30, 2023 Remainder 2023 2024 2025 2026 2027 2028 Crude Oil – WTI US$/bbl bbl/day US$/bbl bbl/day US$/bbl bbl/day US$/bbl bbl/day US$/bbl bbl/day US$/bbl bbl/day C
Slide 55: ESG Ratings and Rankings
ESG Ratings and Rankings View ARC’s ESG performance and highlights at www.arcresources.com/sustainability Member of MSCI Global Sustainability Index Member of Sustainalytics’ Jantzi Social Index MSCI ESG Rating: AAA Environment Score: 6 Member of FTSE Russell’s FTSE4Good Index Series since 2018 Soci
Slide 56: Advisory Statements
Advisory Statements
Slide 57: 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 58: Advisory Statements – Financial Outlook
Advisory Statements Financial Outlook This presentation contains information that may be considered a financial outlook under applicable securities laws about ARC's potential financial position, including, but not limited to, ARC's production guidance, production estimates and expenses; ARC's plans
Slide 59: Advisory Statements – Non-GAAP Financial Measures
Advisory Statements Non-GAAP Financial Measures Capital Expenditures ARC uses capital expenditures to measure its capital investment level compared to the Company’s annual budgeted capital expenditures. ARC’s budgeted capital expenditures exclude any acquisition or disposition activities as well as
Slide 60: Advisory Statements – Non-GAAP Ratios
Advisory Statements Non-GAAP 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 of operatio
Slide 61: Advisory Statements – Supplementary Financial Measures
Advisory Statements Supplementary Financial Measures "Average realized natural gas price" is comprised of natural gas commodity sales from production, as determined in accordance with IFRS, divided by the Company's natural gas production. “Break-even” is comprised as funds from operation less capita
Slide 62: Advisory Statements – Drilling Locations
Advisory Statements Drilling Locations This presentation discloses ARC's expectations of future drilling location in two categories: (i) proved plus probable locations; and (ii) unbooked locations. Proved plus probable locations are derived from the Reserves Evaluation conducted by GLJ and account f
Slide 63: 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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