Surge Energy Inc. · TSX:SGY
Surge Energy — Investor Presentation (December 2021)
26 slides from Surge Energy's investor presentation, December 2021
Slide 1: A Compelling Value Proposition
A COMPELLING VALUE PROPOSITION TSX: SGY December, 2021
Slide 2: Key Reasons to Own Surge
KEY REASONS TO OWN SURGE Surge has industry leading positive cash flow ‘torque’ to both rising oil prices and tight Canadian oil price differentials; as well as a very high quality, low cost, low risk, conventional crude oil asset base. ▪ The Company has a proven management team with significant ins
Slide 3: New $130 Million Term Debt Financing
NEW $130 MILLION TERM DEBT FINANCING (1) Adds significant term and stability to Surge’s debt capital structure ▪ On December 9, 2021 Surge closed a new, strategic $130 million second lien term debt facility with an annual coupon of 8.85%, and a 5 year term through to December 2026. ▪ The significant
Slide 4: Operational Developments
OPERATIONAL DEVELOPMENTS (1) Strategic re-entry into SE Saskatchewan through two corporate acquisitions ▪ Surge has now fully integrated the previously announced private company acquisitions of Astra Oil Corp. (“Astra”) and Fire Sky Energy Inc. (“Fire Sky”) which were acquired for a combined purchas
Slide 5: 2021 Exit & 2022 Preliminary Guidance
2021 EXIT & 2022 PRELIMINARY GUIDANCE 2022 preliminary guidance provides strong ‘torque’ to WTI oil pricing US $WTI per barrel $70(1) $75(1) $80(1) Exit 2021(e) production 21,500 boepd (86% liquids) Average 2022(e) production 21,500 boepd (86% liquids) 2022 Exploration and Development $120 million C
Slide 6: Strategic Focus
STRATEGIC FOCUS High quality, conventional reservoirs provide top-tier production efficiencies, leading to sustainable asset development, strengthening of the balance sheet, and continued emphasis on ESG initiatives Elite, Large OOIP, Disciplined Financial ESG Conventional Capital Positioning Initia
Slide 7: Operations Focused in 4 Core Areas
OPERATIONS FOCUSED IN 4 CORE AREAS Large OOIP pools in established conventional reservoir trends 2022e Production ~21,500 boe/d Greater Sawn: Average: 86% Oil & NGL’s 3,200 boe/d 93% Oil & NGL’s Valhalla: 2,400 boe/d 65% Oil & NGL’s Sparky: 9,400 boe/d 93% Oil & NGL’s SE Saskatchewan 5,200 boe/d 90%
Slide 8: Net OOIP of >2.6 Billion Barrels
NET OOIP OF >2.6 BILLION BARRELS Large OOIP pools in established conventional reservoir trends SGY Net CTD(3) Total Booked Net Total Net drilling Estimated Oil Independent Recovery Core Area Formations Locations Avg. WI Net OOIP (1) Recovery Factor P+P (MMbbls) (Booked)(2) Factor (% OOIP) Sparky For
Slide 9: Targeting Conventional Oil Reservoirs
TARGETING CONVENTIONAL OIL RESERVOIRS Surge focuses on high quality reservoirs at the conventional end of the permeability spectrum Recovery factors, internal rates of return (IRR), decline rate, and profit to investment ratio (PIR)(1) improve as reservoir quality improves. Ultimate Oil Recovery PIR
Slide 10: Sparky – Positioned for Continued Success
SPARKY – POSITIONED FOR CONTINUED SUCCESS Delivering sustainable production and cash flow growth Surge controls a dominant position in its core Sparky medium/light oil asset; the Sparky oil play is one of the top conventional crude oil growth plays in all of Canada, possessing: ▪ >800 million barrel
Slide 11: Sparky: A Dominant Position
SPARKY: A DOMINANT POSITION Low on-stream costs, year-round access = a premier Canadian medium/light oil growth play ▪ The Sparky is a large, well established, oil producing AB SK formation in Western Canada. >11 Billion Barrel ▪ Surge holds a dominant land position in the medium / Trend light gravi
Slide 12: Strategic Re-entry into SE Saskatchewan
STRATEGIC RE-ENTRY INTO SE SASKATCHEWAN Adding high netback light oil production and reserves ▪ Surge has targeted SE Saskatchewan as a new, light oil, core area with the following benefits: • >240MMbbl’s of net OOIP in low risk, proven conventional reservoirs; and • ~5,200 boepd of predominantly li
Slide 13: Southeast Saskatchewan – Asset Overview
SOUTHEAST SASKATCHEWAN – ASSET OVERVIEW High netback, low cost, conventional focused, light oil assets in the Williston Basin Key Operational Areas BOEPD S.E. Saskatchewan ~4,500 (>90% Light oil) SK MB Manitoba ~700 (99% Light Oil) Hargrave Lodgepole / Bakken Frobisher / Midale Production Production
Slide 14: Environmental, Social, and Governance
ENVIRONMENTAL, SOCIAL, AND GOVERNACE Surge is committed to being a leader in ESG within the Canadian peer group ▪ The Company continues to execute on its aggressive abandonment program and has abandoned >300 total inactive wells over the last year; ▪ Surge has received more than $14 million in fundi
Slide 15: Appendix
APPENDIX —S$GRGE ENERGY INC
Slide 16: Valhalla – Stacked Pay Multi-Zone Potential
VALHALLA – STACKED PAY MULTI-ZONE POTENTIAL Multiple large OOIP light oil reservoirs provide a sustainable drilling inventory and production base ▪ ~200MMbbls of net combined OOIP. ▪ Doig and Montney turbidite wells among the most prolific oil producers in Western Canada. ▪ A previously drilled hori
Slide 17: Greater Sawn - Concentrated Light Oil
GREATER SAWN - CONCENTRATED LIGHT OIL >600 MMbbls net OOIP in concentrated Slave Point reservoirs ▪ Net OOIP of >600 MMbbls of light oil Sawn OOIP: >200 MMbbl net (35-42° API). ▪ Development inventory of 100 net locations (62 net booked). Red Earth OOIP: >250 MMbbl net ▪ Key Slave Point attributes:
Slide 18: Oil Hedging
OIL HEDGING 9,000 8,000 7,000 6,000 WTI Oil Bbls Hedged 5,000 4,000 3,000 2,000 1,000 0 Qtr. 4 2021 Qtr. 1 2022 Qtr. 2 2022 Qtr. 3 2022 Qtr. 4 2022 Hedged Bbl. Qtr. 4 2021 Qtr. 1 2022 Qtr. 2 2022 Qtr. 3 2022 Qtr. 4 2022 Avg. Floor Price(1) $ 57.40 $ 67.61 $75.96 $ 77.79 $ 77.30 (1) All USD-denominat
Slide 19: Risk Management / Hedging
RISK MANAGEMENT / HEDGING The Company has an on-going, risk management / hedging program. Below is a list of Surge’s current WTI, WCS differential, and MSW differential hedges: WTI Crude Oil Derivative Contracts(1) Swaps Collars Three-way Collar Average Average Price Average Bought Average Sold Aver
Slide 20: Risk Management / Hedging
RISK MANAGEMENT / HEDGING The Company has an on-going, risk management / hedging program. Below is a list of Surge’s current AECO & Chicago natural gas hedges and interest rate hedges(1): Chicago & AECO Natural Gas Hedges(2) Chicago Swaps Chicago Collars AECO Swaps Average Bought Average Sold Volume
Slide 21: 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. Robert Pare rpare@clarussecurities.c
Slide 22: Corporate Partners
CORPORATE PARTNERS Advisors National Bank of Canada ATB Financial Lending Syndicate: Bank of Montreal BDC Capital Export Development Canada Auditor: KPMG LLP Legal Counsel: McCarthy Tétrault Evaluation Engineers: Sproule Common Share Registrar & Transfer Agent: Odyssey Trust Paul Colborne, President
Slide 23: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements. The use of any of the words “anticipate”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “should”, “believe” and similar expressions are intended to identify forward-looking stat
Slide 24: Oil and Gas Advisories
OIL AND GAS ADVISORIES The term “boe” means barrel of oil equivalent on the basis of 1 boe to 6,000 cubic feet of natural gas. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe for 6,000 cubic feet of natural gas is based on an energy equivalency conversion me
Slide 25: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES Certain secondary financial measures in this presentation – namely, "adjusted funds flow", “free cash flow”, “net debt”, "net debt to annualized Q4/22 adjusted fund flow“, “operating netback” and “all-in payout ratio” are not prescribed by GAAP. These non-GAAP financial m
Slide 26: Additional Metrics
ADDITIONAL METRICS Additional Metrics This presentation contains additional metrics commonly used in the oil and natural gas industry. These terms have been calculated by Management and do not have a standardized meaning. Management uses these oil and gas metrics to further analyze the performance o