Surge Energy Inc. · TSX:SGY
Surge Energy — Investor Presentation (October 2024)
27 slides from Surge Energy's investor presentation, Oct 1, 2024
Slide 1: Corporate Presentation Fall 2024
TSX: SGY Premier Oil Assets Driving Free Cash Flow and Shareholder Returns CORPORATE PRESENTATION FALL 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: Recent Highlights
Recent Highlights During the summer of 2024, Surge: • Increased adjusted funds flow (“AFF”) by >32% to $82.8 million (up from $62.5 million in Q1/24); • Delivered free AFF of $46.7 million, representing >56% of Q2/24 AFF; • Reduced net debt by $61.2 million; • Distributed $12.1 million to shareholde
Slide 5: Corporate Guidance for 2024
Corporate Guidance for 2024 Key Guidance & Assumptions1 US$75 WTI 2024 Cash Flow From Operating Activities2 $290 MM Focused on returns and 2024 Free Cash Flow3 Before Dividends $100 MM enhancing free cash 2024 All-In Payout Ratio3 (Including $0.52/share Annual Dividend) 83% flow while managing risk
Slide 6: 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 2024 Guidance Cash Flow @ US$75 WTI: $290 MM Allocation of Excess Free Cash Flow (After Base Dividend) 2024e Capital $190 MM Excess Free Production Share Cash F
Slide 7: Significant Liquidity
Significant Liquidity Debt structure supports return of capital framework Surge’s current drawn debt has long-dated maturities, termed out through late 2028 and 2029, with attractive interest rates. Debt Composition ($MM) Term Debt Maturity Schedule $200 $Millions $172 $160 $172 $250 $120 $41 $80 $4
Slide 8: Positioned To Be A Top Performer
Positioned To Be A Top Performer Surge has been independently recognized as having one of the best FCF margins in its intermediate peer group while trading at a very attractive NAV valuation. Surge’s top tier FCF margin takes into account the Company’s high crude oil operating netbacks (>$40/boe in
Slide 9: Compelling opportunity for energy investors
Energy will continue to offer investors a highly attractive Compelling value proposition in the second half of 2024 and beyond opportunity for Global Observable Oil Inventories (onshore + oil-on-water) (MM Bbls) energy investors With historically low debt levels, excellent free cash flow margins, an
Slide 10: Sparky and SE Saskatchewan
Sparky and SE Saskatchewan Surge offers exposure to two of the top four conventional oil growth plays in Canada
Slide 11: 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 >2.5 billion barrels of net OOIP with an 8.7% recover
Slide 12: Core Area Focused
Core Area Focused Sparky and SE Saskatchewan provide exceptional economics and a depth of drilling inventory Sparky SE Saskatchewan Light/medium crude oil production with compelling Highly focused, operated asset base with excellent light returns. Low on-stream costs with extensive drilling and oil
Slide 13: 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 area 18°-2
Slide 14: 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 >110
Slide 15: 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 makes this an exciting growth area Midale Subcrop Frobisher Subcrop Alida Subcrop Area Benefits Ratcliff Subcrop • Organic growth opportunities • Strategic acquisitions
Slide 16: SE Saskatchewan Key Growth Driver
SE Saskatchewan Key Growth Driver High operating netback light oil Key Operational Areas production and reserves from low risk, proven conventional reservoirs SE Saskatchewan ~7,600 boepd (>90% light oil) Manitoba ~400 boepd (~99% light oil) >400 million bbls OOIP net to SGY (internally estimated) S
Slide 17: Leadership
Leadership Paul Colborne Jared Ducs Murray Bye Derek Christie Margaret Elekes President & CEO CFO COO Senior VP, Exploration Senior VP, Land & BD Dan Kelly Grant Cutforth VP, Finance VP, Business Development 17
Slide 18: 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 2,4,5 Corporate Governance Committee. Ms. Jim Pasieka1 Burnyeat serves as Chair. Independent Director Chairman 3
Slide 19: Corporate Information
Corporate Information TSX First Lien Lending Syndicate SGY.TO National Bank of Canada ATB Financial Bank of Montreal BDC Capital Canadian Western Bank Headquarters Auditor Registrar & Transfer Agent Surge Energy Inc. KPMG LLP Odyssey Trust Centennial Place, East Tower 1200 520 3rd Ave SW Legal Couns
Slide 20: Appendix
Appendix
Slide 21: 2023 Reserves and Net Asset Value
2023 Reserves and Net Asset Value Dec. 31, 2023 Sproule (Proforma Disposition) Reserves1 Oil Equivalent Oil & Liquids BTax NPV10 Gross Reserves2 Total Reserves (%) ($MM)3,4 (Mboe) Proved Developed Producing (PDP) 41,155 88% $823 Total Proved (1P) (339 net locations) 78,790 87% $1,342 Total Proved Pl
Slide 22: WTI Hedging Summary
WTI Hedging Summary 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Q3 2024 Q4 2024 Q1 2025 Q2 2025 Q3 2025 Collar Put Swap 22
Slide 23: 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 Q3 2024 3,000 $ 79.87
Slide 24: Advisories - Forward-Looking Statements
Advisories - Forward-Looking Statements This presentation contains forward- More particularly, this presentation contains statements concerning: Surge’s focus and defined operating strategy; the Company’s forecast that it will have $48 million of excess geological characteristics of Surge’s properti
Slide 25: 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 Drilling Inventory Probable locations based on Sproule's 2023 year-end reserves and excluding the sold non- natural gas. Boe may be misleading, particularly if used in isola
Slide 26: 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 Changes in non-cash working capital are a result of the timing of cash flows related to and excess FCF to determine the amount of funds available to the Company for
Slide 27: Advisories - Non-GAAP & Other Financial Measures
Advisories - Non-GAAP & Other Financial Measures All-in Payout Ratio Three Months Ended June 30, Six Months Ended June 30, ($000s) 2024 2023 2024 2023 All-in payout ratio is a non-GAAP ratio, calculated as exploration and development expenditures, plus Petroleum and natural gas revenue 173,173 155,4