Arc Resources — Investor Presentation (June 2023)
63 slides from Arc Resources's investor presentation, June 2023
Slide 1: ARC Resources Ltd. Investor Update
ARC Resources Ltd. Investor Update Photo Caption copy area June 2023
Slide 2: Agenda
Dale Agenda Speaker: Dale Strategic Overview & Terry Anderson 1 President and Chief Executive Officer Long-term Plan 2 Capital Allocation Kris Bibby Senior Vice President and Chief Financial Officer 3 Asset Overview Armin Jahangiri • Kakwa Senior Vice President and Chief Operating Officer • Greater
Slide 3: Senior Leadership
Senior Leadership Speaker: Dale Terry Anderson Kris Bibby Armin Jahangiri President and Senior Vice President and Senior Vice President and Chief Executive Officer Chief Financial Officer Chief Operating Officer Lara Conrad Ryan Berrett Lisa Olsen Senior Vice President and Senior Vice President, Mar
Slide 4: Best-in-class Responsible Energy Producer
Ante Creek, AB Best-in-class Responsible Energy Producer
Slide 5: Corporate Profile
Corporate Profile Premium investment opportunity for Montney exposure, one of the most profitable assets in North America Shares outstanding1 609 million 1 Canada’s Market capitalization $10.0 billion largest Long-term debt2 $1.0 billion condensate producer Net debt 2 3 $1.3 billion Enterprise value
Slide 6: Scale in a World-class Resource Play
Scale in a World-class Resource Play Largest Montney producer, Canada’s largest condensate producer and 3 rd 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 10
Slide 7: 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 NEBC Pouce Prestville Valhalla Chinchaga >1 million Hotchkiss NEBC Montney acres Hawk Hills >1 million Montney acres Swan Hills Ante Redwater Non Montney Creek Min
Slide 8: Actions Taken to Deliver Free Funds Flow Growth
Actions Taken to Deliver Free Funds Flow Growth Executing our strategy to increase future profitability 2021 to 2023 Transformational counter-cyclical acquisition that doubled production to 350,000 boe/day Achieved investment-grade credit rating Initiated an NCIB and reduced the share count by 16% i
Slide 9: What Differentiates ARC?
What Differentiates ARC? Guiding principles to cement ARC as a ‘Blue Chip’ energy company Capital Operational Financial World-class Discipline Excellence Resilience Assets • Low-cost Producer • Best-in-class • Investment-grade Credit • Track Record of Capital Safety Performance Rating Discipline • M
Slide 10: Strategic Overview and Long-term Plan
Dawson III & IV, BC Strategic Overview and Long-term Plan
Slide 11: 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 450,000 ~200% 400,000 Free Funds Flow Per Share Growth (>20% CAGR4) 350,000 ~80% 300,000 of Market Cap Generated in 2024 2025 2026 2027 2028 Free Funds Flow
Slide 12: 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 12 ARC's Montney assets capable of sustaining ~500,000 boe per day
Slide 13: 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 13
Slide 14: 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 • Commitment to return essentially all free funds flow to shareholders Wo
Slide 15: Capital Allocation
Kakwa, AB Capital Allocation
Slide 16: 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 13% 20 10 0 (10) (20) 16 1) Non-GAAP Financial Measure — see "Non-GAAP and Other Financial Measures" in the Advisory Statements of this presenta
Slide 17: 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% 60% ~50% 40% 20% 0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 202
Slide 18: Five-Year Outlook
Five-Year Outlook Disciplined investment drives free funds flow per share growth $ millions Capital Expenditures1 2 $ millions Free Funds Flow2 2000 3,000 WTI $50/AECO $2.50/GJ WTI $70/ AECO $3.50/GJ WTI $80/AECO $4.50/GJ 1000 2,500 0 2,000 2024 2025 2026 2027 2028 Boe per day 1,500 % 450,000 Produc
Slide 19: 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 CAGR 3 19 1) Non-GAAP Financial Ratio— see "Non-GAAP and Other Financial Measures" in the Advis
Slide 20: Free Funds Flow Allocation
Free Funds Flow Allocation Committed to returning essentially all free funds flow to shareholders Capital Allocation Priorities 2023 Capital Allocation 2028 Capital Allocation $billions Balance Sheet Strength 5.0 • Investment-grade rating and low debt 4.0 US$80 WTI & Cdn $4.50 AECO Base Dividend Gro
Slide 21: 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 22: 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 23: Asset Portfolio Overview
Parkland, AB Asset Portfolio Overview
Slide 24: 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 24 24
Slide 25: 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 Montney Natural Gas (boe/d) 2021 Attachie Phase I 400,000 ARC acquires Seven Generation
Slide 26: 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 27: 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/Day 1 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 Drilli
Slide 28: 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/Day 1 Lateral Completed/Day 1 ARC m/day Tonnes/day Peer 1,500 2,000 1,600 1,000 1,200 800 500 400 - 0 ARC AR
Slide 29: 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 30: 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%) Undeveloped (55%) Significant inventory extension recently Gold Creek identified Plant Kakwa development to date cove
Slide 31: 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 32: 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 $1.8 bil
Slide 33: 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 34: 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+ 34 . 1) Re
Slide 35: Attachie Phase I
Attachie, BC Attachie Phase I
Slide 36: Attachie Overview
Attachie Overview ARC’s largest and most economic undeveloped asset Scale to Replicate Kakwa EFFICIENT SCALE UMA >300 net sections in condensate-rich Montney LMA Consolidated Land Base Drives Efficiencies 3 Phases of Development Multi-layered development Leverage Montney data and experience to 2 Pha
Slide 37: 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 Low-Emissions Liquids-rich greenfield project (among the lowest to be developed to-date) First Nat
Slide 38: 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 39: 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 40: Asset Strategy Summary
Asset Strategy Summary Inventory rich across all assets, continued focus on optimizing capital efficiency NEBC Assets 45% of corporate production Greater Dawson: Continued focus on minimizing sustaining capital to maximize free funds flow generation Greater Sunrise (including Septimus/Sundown): LNG
Slide 41: LNG & Marketing Strategy
Sunrise, AB LNG & Marketing Strategy
Slide 42: 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 43: 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 44: Natural Gas Marketing Strategy
Natural Gas Marketing Strategy Portfolio with well-diversified North American exposure is driving strong realizations 12 Natural Gas Financial Exposure ARC’s Current Natural Gas Portfolio 11% 9% 10% 15% 14% 9% 10% 11% 8% 8% 9% 8% 7% 11% 11% 11% 11% 110% 24% 9% 24% 23% 20% 12% 15% 23% 170,000 25% MMB
Slide 45: Natural Gas Price Realization – Benchmarking
Natural Gas Price Realization – Benchmarking Physical diversification to end markets is a competitive advantage Realized Natural Gas Price 1 $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 AECO ARX ARC has realized an average premium to AECO of 20% over the past
Slide 46: Global LNG Supply and Demand Outlook
Global LNG Supply and Demand Outlook Structural long-term outlook for global natural gas demand Bcf/d Historical Natural Gas Pricing Global LNG Supply and Demand Outlook 100 JKM (Asia) Henry Hub (North America) $80 80 $70 $60 60 $50 USD/MMBtu $40 40 $30 $20 20 $10 0 $0 2022 2024 2026 2028 2030 2032
Slide 47: LNG Supply Agreements
LNG Supply Agreements To ASIA JKM pricing Earm arked for next LNG agreement 47 1) Platts JKMTM (Japan Korea Marker), after deductions for fixed LNG shipping costs and a fixed liquefaction fee. 4747 2) Non-binding Memorandum of Understanding signed. ARC advancing offtake discussions with high-quality
Slide 48: 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 49: ESG Strategy & Performance
Best-in-Cl Go» lowest ry -in- sion owe esse ins ass vv GHG emissions intensities EQUITABLE 100 % 0 in our Canadian peer group ORIGIN Certified Production alk _— a — — ee ESG Strategy & Performance
Slide 50: Leading Emissions Profile
Leading Emissions Profile ARC has one of the lowest emissions profiles amongst Canadian E&P companies 2021 Methane Intensity1 2021 GHG Emissions Intensity1 0.0800 0.0100 (Scope 1 and 2) Methane Intensity (tCO2e/boe) Emissions Intensity (tCo2e/year) 0.0600 0.0080 0.0060 0.0400 0.0040 0.0200 0.0020 0.
Slide 51: ESG Leadership
ESG Leadership Northeast BC Infrastructure NEBC Absolute GHG emissions reduction1 Production (Boed) Absolute Emissions (tCO 2e) 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 20
Slide 52: 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 53: Closing Remarks
Kakwa Field, AB Closing Remarks
Slide 54: Key Takeaways
Key Takeaways World-class Assets • Largest condensate producer • Kakwa has 15 years of inventory to sustain production at 180,000 boe/d • Attachie Phase I unlocks decades of liquids-rich development opportunities Speaker: Dale • Capability to grow and sustain production at ~500,000 boe/d Commitment
Slide 55: Best-in-class Responsible Energy Producer
Ante Creek, AB Best-in-class Responsible Energy Producer
Slide 56: Question & Answer Session
Kakwa Field, AB Question & Answer Session
Slide 57: Advisory Statements
Advisory Statements Notes Regarding Forward-looking Information This presentation contains certain forw ard-looking statements and forw ard-looking infor mation (collectively referred to as "forw ard-looking infor mation") w ithin the meaning of applicable securities legislation about current expect
Slide 58: Advisory Statements
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
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
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
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
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