Surge Energy Inc. · TSX:SGY
Surge Energy — Investor Presentation (January 2023)
28 slides from Surge Energy's investor presentation, January 2023
Slide 1: Premier Oil Assets - Driving Free Cash Flow
Premier Oil Assets - Driving Free Cash Flow Corporate Presentation Winter 2023
Slide 2: The Surge Advantage
The Surge Advantage $$$ High Operating Netback, + Disciplined Capital Allocation + Proven Track Record = Free Cash Conventional Strategies of Execution Flow Assets • Light/medium oil weighted asset base • Dominant positions in conventional • Proven management team with track • Focus on execution dri
Slide 3: Proven Business Strategy
Proven Business Strategy Focused on sustainable DISCIPLINED CAPITAL ALLOCATION returns and enhancing free Undertake low cost, low risk cash flow projects that support sustainability Surge executes on a simple, repeatable business FINANCIAL FLEXIBILITY strategy: Focus on high return strategic opportu
Slide 4: Corporate Guidance for 2023
Corporate Guidance for 2023 Market Snapshot Focused on returns and $0.48 Anticipated annual per share dividend4 Basic Shares Outstanding1 96.5 MM enhancing free cash flow while managing risk Average Daily Volume 1.0 MM Shares Market Cap / Enterprise Value2 $820 MM / $1.15 Bn 25,000 BOEPD 2023 Averag
Slide 5: Recent Core Area Acquisition
Recent Core Area Acquisition Acquired assets are focused Surge’s recent strategic oil acquisition for a net purchase price of $202 MM: in SGY’s core areas • Adds 3,850 boepd (99% liquids) of sustainable, high operating netback, light and medium gravity Sparky: 1,900 boepd (99% 18°-24° API oil); 13%
Slide 6: Acquisition Highlights & Metrics
Acquisition Highlights & Metrics Strategic, long life, core area acquisition: At US$80 WTI4 • Allows Surge to upwardly revise forecast exit 2022 production to >25,000 boepd (87% Proved Developed Producing Reserves5 10.1 MMboe liquids); • Increases total estimated OOIP to >3.0 billion barrels, with a
Slide 7: Return of Capital Framework
Return of Capital Framework Surge is well-positioned to deliver to shareholders a combination of: • Share price appreciation (Sproule 2021YE NAV of >$24 per share at US$80 per bbl pricing); • Continued net debt repayment, systematically increasing Surge’s NAV per share; • A sustainable base monthly
Slide 8: Advantages of Conventional Reservoirs
Advantages of Conventional reservoirs offer lower risk, predictable, repeatable development with opportunity to improve Conventional recovery factors Reservoirs Surge proactively targets low risk conventional reservoirs. The Company currently has >3.0 billion barrels of net OOIP, with an estimated 7
Slide 9: Spotlight: Sparky and SE Saskatchewan
Spotlight: Sparky and SE Saskatchewan Surge offers exposure to two of the top four conventional oil growth plays in Canada
Slide 10: Sparky and SE Saskatchewan provide exceptional economics
Sparky and SE Saskatchewan 2023 Production provide exceptional >75% Weighting by Area economics and a depth of Combined Production Sparky Weighting in 2023 SE Saskatchewan drilling inventory Other Surge Assets Sparky Light/medium crude oil production with compelling returns. Low on-stream costs with
Slide 11: 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 Position Lloydminster Surge holds a dominant land position and has Alberta Giltedge drilled >55% of all horizontal multi-frac wells in the Edmonton Acquired ~1,450 boepd ~60km Saskatchewan light/medium
Slide 12: Long-Term Growth Potential
Long-Term Growth Potential Pad drilling, advanced horizontal multi-stage fracturing technology, and multi- leg horizontal success has unlocked the potential of the Sparky play 2X Well Payout in <2 Year >1 billion bbls OOIP net to SGY (internally estimated) Benefits of Sparky play: (Oil Plays Only, L
Slide 13: Leveraging Past Success
Surge Land SE Saskatchewan Recently Acquired Midale Subcrop Frobisher Subcrop Alida Subcrop Leveraging Past Success Ratcliff Subcrop Manitoba Surge’s operational track record of success in SE Saskatchewan make this an exciting growth area Saskatchewan Area benefits: • Organic growth opportunities pl
Slide 14: Key Growth Driver
Key Growth Driver High operating netback light oil production and reserves from $54.50/boe >400 million bbls low risk, proven conventional operating netback at US $80 WTI = top decile operating netbacks OOIP net to SGY (internally estimated) reservoirs 2X Well Payout in <2 Year >240 net Key Operatio
Slide 15: Committed to Strong ESG Principles
Committed to Strong ESG Principles ESG and sustainability priorities balance the needs of multiple stakeholders Surge ESG Priorities ESG in Action • Published 2nd annual TCFD aligned ESG report in • Climate focus: Integrate climate risks and December of 2022 opportunities within both Board and Execu
Slide 16: Leadership
Leadership Paul Colborne Jared Ducs Murray Bye Derek Christie Margaret Elekes President & CEO CFO COO Senior VP, Geosciences Senior VP, Land & BD Paul Colborne has over 25 years of Jared Ducs is a Chartered Murray Bye is a Professional Derek Christie is a Senior Energy Margaret Elekes has more than
Slide 17: 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 18: Analyst Coverage
Analyst Coverage Financial Institution Analyst Email Address Acumen Capital Partners Trevor Reynolds treynolds@acumencapital.com ATB Capital Markets Amir Arif aarif@atb.com BMO Capital Markets Christopher Smerek christopher.smerek@bmo.com Canaccord Genuity Mike Mueller mmueller@cgf.com Cormark Secur
Slide 19: Corporate Information
Corporate Information TSX First Lien Lending Syndicate SGY.TO National Bank of Canada ATB Financial BDC Capital Auditor Registrar & Transfer Agent KPMG LLP Odyssey Trust Surge Energy Inc. Legal Counsel Investor Contacts Centennial Place, East Tower 1200 520 3rd Ave SW McCarthy Tétrault LLP Paul Colb
Slide 20: Appendix
Appendix
Slide 21: 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 22: WTI Hedging Summary
WTI Hedging Summary 7,000 6,000 5,000 Volumes (Bbl) 4,000 3,000 2,000 1,000 0 Qtr. 4 2022 Qtr. 1 2023 Qtr. 2 2023 Qtr. 3 2023 Qtr. 4 2023 Qtr. 1 2024 Swap Collar Bought Put 22
Slide 23: Hedging Detail
Hedging Detail WTI Crude Oil Derivative Contracts Natural Gas Derivative Contracts SWAPS COLLARS AECO Swaps AECO Collars Average Average Period Volumes Avg. Price Volumes Bought Put Sold Call Average Average Average Sold Volumes Bought Put Volumes Bought Put Call Q4 2022 4,000 $ 60.71 2,500 $ 60.00
Slide 24: 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 Semi-Annual Step Up • Beginning at 1.786% Fixed-to-Floating Rate Swap Feb 2018 – Feb 2023 $100,000,000 Floating Rate Fixed Rate • Ending at 2.714% • Averaging 2.4
Slide 25: Advisories - Forward-Looking Statements
Advisories - Forward-Looking Statements This presentation contains forward-looking More particularly, this presentation contains statements concerning: should not be placed on the forward-looking statements because Surge can Surge’s declared focus and primary goals; management’s expectations give no
Slide 26: Advisories – Oil and Gas Information
Advisories – Oil and Gas Information The term “boe” means barrel of oil equivalent on the basis of 1 boe to 6,000 cubic Surge’s total internal OOIP estimate of Cadogan (Lloyd + SPKY), Freda Lake & certain that the unbooked drilling locations have been de-risked by drilling feet of natural gas. Boe m
Slide 27: Advisories – Non-GAAP and Other Financial Measures
Advisories – Non-GAAP and Other Financial Measures This presentation includes references to non-GAAP and other financial All-in Payout Ratio Free Cash Flow and Free Cash Flow Yield measures used by the Company to evaluate its financial performance, All-in payout ratio is a non-GAPP ratio, calculated
Slide 28: Advisories – Non-GAAP and Other Financial Measures cont’d
Advisories – Non-GAAP and Other Financial Measures cont’d Net Debt and Net Debt to Cash Flow from Operating Activities Operating Netback Net debt is a non-GAAP financial measure, calculated as bank debt, Operating netback is a non-GAAP financial measure, calculated as term debt, plus the liability c