Surge Energy Inc. · TSX:SGY
Surge Energy — Investor Presentation (March 2024)
32 slides from Surge Energy's investor presentation, Mar 8, 2024
Slide 1: Premier Oil Assets Driving Free Cash Flow and Shareholder Returns
Premier Oil Assets Driving Free Cash Flow and Shareholder Returns CORPORATE PRESENTATION SPRING 2024
Slide 2: The Surge Value Proposition
The Surge Value Proposition High quality assets and strategic capital allocation maximize shareholder value and returns $$$ + = + High Quality Disciplined Capital Proven Track Maximize Free Cash Flow Conventional Assets Allocation Record of Execution and Shareholder Returns • Dominant positions in c
Slide 3: Proven Business Strategy
Proven Business Strategy Focused on sustainable returns and enhancing free cash flow Surge executes on a simple, DISCIPLINED repeatable business strategy: CAPITAL ALLOCATION Undertake low cost, low risk • Develop high quality conventional oil projects that support sustainability reservoirs with prov
Slide 4: 2023 Highlights
2023 Highlights In 2023, Surge: • Achieved record annual production of 24,438 boepd (86% liquids), an increase of 15% over 2022; • Delivered $94 million of free cash flow (before dividends), representing 35% of cash flow from operating activities; • Reduced net debt by $62 million (18%) and net oper
Slide 5: Corporate Guidance for 2024
Corporate Guidance for 2024 Key Guidance & Assumptions1 US$75 WTI 2024 Annualized cash flow from operating activities2 $295 MM Focused on returns and 2024 Annualized free cash flow before dividends $105 MM enhancing free cash 2024 All-in payout ratio (including $0.48/share annual dividend) 81% flow
Slide 6: 2023 Reserves and Net Asset Value
2023 Reserves and Net Asset Value Dec. 31, 2023 Sproule Reserves Surge provides an excellent value Oil Equivalent Oil & Liquids BTax NPV10 proposition, trading at just 39% of its 2P Gross Reserves1 Total Reserves (%) ($MM)2,3 NAV per share, which includes only half of (Mboe) Proved Developed Produci
Slide 7: Return of Capital Framework
Return of Capital Framework Surge is well positioned to deliver returns to shareholders through its base dividend and excess Free Cash Flow Excess FCF After Dividends: Allocation of Excess Free Cash Flow (after Base Dividend) $57 million Base Dividend: 25% $48 million 50% 50% 2024 Guidance Cashflow
Slide 8: Positioned To Be A Top Performer
Positioned To Be A Top Performer Surge has been independently recognized as having one 2024e Implied Share Price (US$90 WTI & US$60 WTI) of the best FCF yields in its intermediate peer group while trading at a very attractive NAV valuation. Surge’s top tier FCF yield takes into account its high netb
Slide 9: Compelling opportunity for energy investors
Energy will continue to offer investors a highly attractive Compelling value proposition in 2024 and beyond opportunity for energy investors While upstream investment is recovering from the 2020-2021 downturn, annual investment will need to increase by a cumulative $4.9 trillion between 2023 and 203
Slide 10: Compelling opportunity for energy investors
Compelling opportunity for energy investors With historically low debt levels, excellent free cash flow yields, and low trading multiples, top oil companies offer more attractive returns to investors than any other industry sector today. The forecast for oil prices in 2024 remains bullish, driven by
Slide 11: Sparky and SE Saskatchewan
Sparky and SE Saskatchewan Surge offers exposure to two of the top three conventional oil growth plays in Canada
Slide 12: Advantages of Conventional Reservoirs
Advantages of Conventional reservoirs offer lower risk, predictable, repeatable development with Conventional opportunity to improve recovery factors Reservoirs Surge proactively targets low risk conventional reservoirs. The Company currently has >3.0 billion barrels of net OOIP with a 7.7% recovery
Slide 13: Sparky and SE Saskatchewan provide exceptional economics and a depth of drilling inventory
Sparky and SE Saskatchewan provide exceptional 2024 Production economics and a depth ~80% Combined Production Weighting by Area Sparky of drilling inventory Weighting (est. 2024) SE Saskatchewan Other Surge Assets Sparky Light/medium crude oil production with compelling returns. Low on-stream costs
Slide 14: A One-of-a-Kind Position
Sparky Over 11 Billion Barrel Trend One of Canada’s Largest Accumulations of Oil A One-of-a-Kind Lloydminster Position Edmonton Alberta Surge holds a dominant land position and is drilling ~60km Saskatchewan a mix of horizontal multi-frac and horizontal multi- lateral wells in the Sparky 18°-20° Gr
Slide 15: Sparky Core Area Long-Term Growth Potential
Sparky Core Area Long-Term Growth Potential Pad drilling, advanced horizontal multi-stage fracturing technology, and multi-lateral horizontal success has unlocked the potential of the Sparky play Sparky Core Area Production Growth >1 billion bbls OOIP net to SGY (internally estimated) >470 net >85 M
Slide 16: SE Saskatchewan: A Light Oil Balance
SE Saskatchewan A Light Oil Balance Surge’s operational track record of success in SE Saskatchewan Manitoba Surge Land Saskatchewan make this an exciting growth area Midale Subcrop Frobisher Subcrop Area Benefits Alida Subcrop Ratcliff Subcrop • Organic growth opportunities • Strategic acquisitions
Slide 17: Key Growth Driver
Key Growth Driver High operating netback light Key Operational Areas oil production and reserves >400 million bbls SE Saskatchewan ~7,600 boepd (>90% light oil) from low risk, proven Manitoba ~400 boepd (~99% light oil) conventional reservoirs OOIP net to SGY (internally estimated) >290 net SE Saska
Slide 18: Key Growth Driver
Key Growth Driver High operating netback light Key Operational Areas oil production and reserves >400 million bbls SE Saskatchewan ~7,600 boepd (>90% light oil) from low risk, proven Manitoba ~400 boepd (~99% light oil) conventional reservoirs OOIP net to SGY (internally estimated) SE Saskatchewan F
Slide 19: Committed to Sustainability
Committed to Sustainability Surge is dedicated to responsible asset development and creating value for current and future generations Climate focus: integrate climate risks and opportunities within both Board and Executive management mandates Minimize environmental impact: ensure all operating areas
Slide 20: Sustainability in Action
Sustainability in Action Surge continues to execute on its sustainability priorities • 2024 Sustainability Report will be released in May 2024 ARO Spending and Well Abandonment Fresh Water Use Intensity • Outstanding safety track record, consistently outperforming peer group on safety performance in
Slide 21: Leadership
Leadership Paul Colborne Jared Ducs Murray Bye Derek Christie Margaret Elekes President & CEO CFO COO Senior VP, Exploration Senior VP, Land & BD Paul Colborne has over 25 Jared Ducs is a Chartered Murray Bye is a Professional Derek Christie is a Senior Margaret Elekes has more years of experience i
Slide 22: Board of Directors
Board of Directors Paul Colborne Robert Leach 2,5,6 Board Committees President & CEO Independent Director 1. Chair of the Board 2. Member of the Compensation, Nominating and Allison Maher 4,5 Corporate Governance Committee. Mr. Smith Jim Pasieka1 serves as Chair. Independent Director Chairman 3. Mem
Slide 23: Corporate Information
Corporate Information TSX First Lien Lending Syndicate SGY.TO National Bank of Canada ATB Financial BDC Capital Canadian Western Bank Auditor Registrar & Transfer Agent Headquarters KPMG LLP Odyssey Trust Surge Energy Inc. Centennial Place, East Tower Legal Counsel Investor Contacts 1200 520 3rd Ave
Slide 24: Appendix
Appendix
Slide 25: Supporting Assets
Supporting Assets Greater Sawn Concentrated Light Oil Production >600 MMbbls net OOIP in concentrated, conventional Slave Greater Sawn / Carbonates ~2,900 boepd Point reefs Valhalla ~2,000 boepd Shaunavon ~1,150 boepd Minors ~300 boepd TOTAL ~6,350 boepd Valhalla Shaunavon Stacked pay multi-zone Edm
Slide 26: WTI Hedging Summary
WTI Hedging Summary 7,000 6,000 5,000 Volumes (Bbl) 4,000 3,000 2,000 1,000 0 Qtr. 1 2024 Qtr. 2 2024 Qtr. 3 2024 Qtr. 4 2024 Qtr. 1 2025 Swaps Puts Collars 26
Slide 27: Hedging Detail
Hedging Detail WTI Crude Oil Derivative Contracts Natural Gas Derivative Contracts Swaps Puts Collars Swaps Collars Average Average Average Period Volumes Avg. Price Volumes Volumes Bought Average Average Bought Put Sold Call Put Period Vol. Avg. Price Vol Bought Put Sold Call Qtr. 1 2024 681 $85.03
Slide 28: Hedging Detail: Interest Rate & Power
Hedging Detail Interest Rate & Power Interest Rate Hedges Type Term Notional Amount (CAD) Surge Receives Surge Pays Fixed Rate Surge Pays Fixed-to-Floating Rate Swap July 2019 – June 2024 $50,000,000 Floating Rate Fixed Rate 1.785% Surge Power Hedges 12 $100.00 As power prices fluctuate significantl
Slide 29: Advisories - Forward-Looking Statements
Advisories - Forward-Looking Statements This presentation contains forward- More particularly, this presentation contains statements concerning: Surge’s declared focus and primary goals; Surge’s reserve life index, drilling inventory and locations, decline rates risks; risks associated with the oil
Slide 30: Advisories - Oil and Gas Advisories
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 Finding, Development and Acquisition (FD&A) is the sum of the Capital spent for 2023 uncertainty that such wells will result in additional oil and gas reserves, resources or
Slide 31: Advisories - Non-GAAP & Other Financial Measures
Advisories - Non-GAAP & Other Financial Measures This presentation includes references to non-GAAP and other financial measures used by nature, are not considered principal business activities and vary between periods, which Net Debt and Net Debt to Cash Flow from Operating Activities the Company to
Slide 32: Advisories - Non-GAAP & Other Financial Measures
Advisories - Non-GAAP & Other Financial Measures All-in Payout Ratio Operating Netback, Operating Netback per boe, and Adjusted Funds Flow per boe All-in payout ratio is a non-GAAP ratio, calculated as expenditures on property, plant, and equipment divided by Operating netback is a non-GAAP financia