Surge Energy Inc. · TSX:SGY
Surge Energy — Investor Presentation (November 2015)
31 slides from Surge Energy's investor presentation, November 2015
Slide 1: Sustainable Conventional Resource Company
SUSTAINABLE CONVENTIONAL RESOURCE COMPANY TSX: SGY NOVEMBER, 2015
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 <21% >1.6B (1.4B net) barrels of OOIP under management; RF~7.4% Return capital to shareholders through dividend and share buyback • $0.15/share annual dividend
Slide 3: Surge Energy
SURGE ENERGY Well positioned for growth and sustainable dividends Total Proved plus Probable Reserves of 86.7 mmboe(1) 2015(e) Production Exit Rate >14,500 boepd (76% oil) Low Decline of 21% (RLI >15 years) Q3 2015 Net Debt: $143MM Bank line: $400 million (only ~36% drawn at Q3 2015) NAV
Slide 4: Second Half 2015 Capital Program
SECOND HALF 2015 CAPITAL PROGRAM Protecting NAV and balance sheet through conservative capital spending OPERATIONAL Average Production (boe/d) for 2H 2015 >14,250 (76% Oil/NGLs) Capital Spending for 2H 2015 $42.6 million Wells Drilled in 2H 2015 11 net wells • 7 Shaunavon • 2 Valhalla Doig • 2 Spark
Slide 5: $55MM(e) Capex to Maintain 14,500 boe/d in 2016
$55MM(e) CAPEX TO MAINTAIN 14,500 BOE/D IN 2016 Maintaining production with modest capital as a function of low corporate declines and excellent well results Estimated 2016 Capital Required to Maintain 14,500 boe/d Capital Allocation Capital / Well Total Capital IP365 / Well # of Drills Area ($MM /
Slide 6: Elite Assets Focused in Three Core Areas
ELITE ASSETS FOCUSED IN THREE CORE AREAS Large OOIP pools in established conventional reservoirs Surge Production: Total: >14,500 boe/d (76% Oil & NGL’s) (~57% on AB Crown) Western Alberta Production: Total: ~7,900 boe/d (66% Oil & NGL’s) SE AB Production: Total: ~3,700 boe/d (88% Oil & NGL’s) Shaun
Slide 7: Core Area Details
CORE AREA DETAILS >1.4 Billion bbl’s net OOIP with potential to recover an additional ~129 Million unbooked bbl’s (net to Surge) OOIP (MMbbls) Drilling Locations Avg. CTD(1) Oil Total Booked Independent (1) Internally Estimated Ultimate Core Area Formations WI Recovery Recovery Factor P+P Recovery N
Slide 8: 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 9: Conventional vs. Unconventional Reservoirs
CONVENTIONAL VS. UNCONVENTIONAL RESERVOIRS Surge targets reservoirs that sit 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 R
Slide 10: Three Core Conventional Reservoirs
THREE CORE CONVENTIONAL RESERVOIRS Applying proven technology to conventional reservoirs helps provide top tier performance and 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% Porosi
Slide 11: Top Tier Capital Efficiencies and Replacement Metrics
TOP TIER CAPITAL EFFICIENCIES AND REPLACEMENT METRICS Large inventory with excellent economics using September 2015 strip pricing Areas/Formations Rates of Capital Drill/ Complete/ Mboe/well Core Area Locations Return (1) 180 day IP (Gross / Net) Efficiency (November 2015 Strip Equip (on primary) Pr
Slide 12: 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 13: 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 ~1.0% Rates of return in excess of 66%(1) for the Upper Shaunavon
Slide 14: 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 1370 152.4 71 9420 2480 Dollard 109 5 1400 179.3 104 14660 1540
Slide 15: 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 16: Upper Shaunavon Performance
UPPER SHAUNAVON PERFORMANCE Surge horizontal results in the Upper Shaunavon outperforming area average Upper Shaunavon Monthly Production vs Area Average 400 SGY Wells Normalized Rate 350 SGY Wells Normalized Cum Area Avg Normalized Rate '13 TO '15 RR (135 wells) 300 Area Avg Normalized Cum '13 TO '
Slide 17: Shaunavon Development Plan
SHAUNAVON DEVELOPMENT PLAN Increased cashflow and recovery through drilling (25/yr) and early waterflood implementation Surge Energy Shaunavon Development: $55 US WTI FLAT, FX = 0.75 8000 400 Surge Prod Forecast - with Waterflood Surge Prod Forecast - No Waterflood 7000 350 McDaniel YE2014 TPP Prod
Slide 18: Northwest Alberta
NORTHWEST ALBERTA Large OOIP >700MMbbls in concentrated high quality light oil assets Large OOIP of >700 (600 net) MMbbls of high quality Valhalla light oil (32-40° API) OOIP: 228 mmbbl (195 mmbbl net) Nipisi OOIP: 155 mmbbl (150 mmbbl net) Current Production ~7,900 boe/d (66% Oil and NGL’s) Sun
Slide 19: Northwest Alberta - Valhalla
NORTHWEST ALBERTA - VALHALLA Firm service agreements for Alliance and TCPL pipelines mitigates production restrictions Valhalla Doig ~130 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 14
Slide 20: Valhalla Doig Performance
VALHALLA DOIG PERFORMANCE Recent drilling in Valhalla has yielded 3 of the top oil wells in Canada year to date North Valhalla Doig Recent drilling results outperforming type curve and exceeding expectations Optimization of drilling and completion techniques are improving results and lowering ca
Slide 21: Southeast Alberta - Sparky
SOUTHEAST ALBERTA - SPARKY Provost / Eyehill / Wainwright area’s – Oil saturated Cretaceous sands Wainwright >400 MMbbls of net OOIP (23-31° API oil) Current recovery factor of <15% Current production: ~3,700 boe/d Eyehill Sparky waterflood implemented in Q4 2014; Provost waterflood pilot ex
Slide 22: 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. Surge has 5,500 barrels per day of WTI hedged (~ 60% 2H net oil + NGL’s) with a costless collar
Slide 23: 2014 Year End Reserves
2014 YEAR END RESERVES ~$1.4 Billion of Total Proved plus Probable Reserves Value (NPVBT10) 2014 Year End Reserves Proforma Dispositions Oil& NGLs Gas Total Reserve Category NPVBT10 ($MM) (1) (Mbbl) (MMcf) (Mboe) Proved Producing 26,327 49,784 34,624 $731 Proved Non-Producing 594 3,264 1,138 $17 Pro
Slide 24: Positioned for Long Term Sustainability
POSITIONED FOR LONG TERM SUSTAINABILITY Low base decline <21%, high netbacks, excellent capital efficiencies $0.15 annual dividend; NO DRIP! ; Share buyback in place Ongoing risk management/hedging program protects cash flow Excellent balance sheet – one of the best in the peer group FOOTNOT
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; >15 year RLI Over 700 net low risk development drilling locations provide >
Slide 26: 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 CIBC World Markets Inc. Jeremy Kaliel jeremy.kaliel@cibc.ca
Slide 27: Corporate Partners
CORPORATE PARTNERS Advisors National Bank of Canada Bank of Nova Scotia Canadian Imperial Bank of Commerce Toronto-Dominion Bank Bankers: Bank of Montreal ATB Financial HSBC Bank Canada Wells Fargo Goldman Sachs Auditor: KPMG LLP Legal Counsel: McCarthy Tétrault Sproule Associates Ltd. Evaluation En
Slide 28: 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 29: Endnotes
ENDNOTES Slide 3 & 7: (1) December 31, 2014 reserves. (2) This presentation discloses drilling locations in three categories: (i) proved locations; (ii) probable locations; and (iii) unbooked locations. Proved locations and probable locations, which are sometimes collectively referred to as “booked
Slide 30: 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 31: 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