Arc Resources — Investor Presentation (October 2024)
45 slides from Arc Resources's investor presentation, October 2024
Slide 1: Investor Update & Attachie Tour
ARC Resources Ltd. Investor Update & Attachie Tour Photo Caption copy area October 2024 1
Slide 2: Senior Leadership
Senior Leadership Terry Anderson Kris Bibby Armin Jahangiri President and Senior Vice President and Senior Vice President and Chief Executive Officer Chief Financial Officer Chief Operating Officer Lara Conrad Ryan Berrett Lisa Olsen Senior Vice President and Senior Vice President, Marketing Senior
Slide 3: Agenda
Agenda Introduction Dale Lewko 1 Manager, Capital Markets Corporate Overview Terry Anderson President and Chief Executive Officer Montney Overview Lara Conrad 2 Senior Vice President and Chief Development Officer Attachie Update Armin Jahangiri 3 Senior Vice President and Chief Operating Officer Lar
Slide 4: Corporate Overview
Attachie, BC Corporate Overview 4
Slide 5: Corporate Profile
Corporate Profile Premium investment opportunity for Montney exposure, one of the most profitable assets in North America BC & Alberta Montney Producers 400 Attachie Phase I Shares outstanding1 597 million (2025E) 300 Market capitalization2 $14.1 billion 200 Long-term debt1 $1.4 billion 100 0 Net de
Slide 6: Long-term Outlook Delivers Significant Value
Long-term Outlook Delivers Significant Value Disciplined plan to grow free funds flow per share1 Boe/day 425,000 Base Production Attachie I Attachie II 400,000 ~200% 375,000 Free Funds Flow3 Per Share Growth 350,000 (~30% CAGR4) 325,000 300,000 2024 2025 2026 2027 2028 ~10% CAGR Attachie Phase II P
Slide 7: Montney Overview
Ante Creek, AB Montney Overview 7
Slide 8: Montney Overview
Montney Overview ARC’s competitive advantage in a world-class asset >1,500 Montney sections ~5,000 drilling locations 80% of these locations are unbooked ~1.7 Bcf/d ~150 Mbbl/d Owned-and-operated infrastructure 8
Slide 9: Montney Outcompetes North America Plays
Montney Outcompetes North America Plays Low-cost and deep inventory relative to North American shale plays 9 1) Turn-in line (TILs)
Slide 10: Montney Unconventional Fairway
Montney Unconventional Fairway ARC’s premium quality, balanced portfolio ARC Montney Assets • >20 years of inventory • Concentrated in over-pressured fairway • Diverse fluid types (gas through to volatile oil) • Condensate-rich resource Montney Reservoir • Up to 300 metres of charged reservoir • Mul
Slide 11: ARC's Montney vs North American Peers
ARC's Montney vs North American Peers A competitive advantage in a world-class asset 11 1) Turn-in line (TILs)
Slide 12: Montney Inventory
Montney Inventory ARC has a deep Montney inventory at the low end of the cost curve Supply Cost of Inventory by Property C$/Mcf 3.50 Natural Gas Supply Cost - NPV10 After-tax 3.00 2.50 ~50% 2.00 of total inventory has a supply cost below C$0/Mcf 1.50 1.00 0.50 0.00 0 500 1000 1500 2000 2500 3000 350
Slide 13: Asset Level Inventory
Asset Level Inventory ARC has substantial Montney drilling inventory at each of our producing and growth assets Production Run Rate at Full Capacity Years of Development Inventory (Mboe/d) 0 5 10 15 20 25 30 Ante Creek Ante Creek 15 – 20 Greater Dawson Greater Dawson 90 – 100 Kakwa Kakwa 170 – 175 S
Slide 14: Attachie Overview
Attachie, BC Attachie Overview 14
Slide 15: Greater Attachie Development Plan
Greater Attachie Development Plan Liquids sales to Pembina Attachie Resource • > 300 net sections for future development • Multi-layered • Overpressured liquids-rich resource Development Plan Phase II • Natural gas and condensate sales infrastructure in place Phase I • First Nations support Gas sale
Slide 16: Attachie Montney Subsurface Overview
Attachie Montney Subsurface Overview High-quality reservoir throughout ARC’s lands Upper Montney reservoir thickness is consistent moving from west to east across Attachie Lower Montney reservoir thickness increases to the north Map depicts net pay times porosity, a fundamental view for reservoir qu
Slide 17: Integrated Workflow Identifying Opportunities
Integrated Workflow Identifying Opportunities Optimizing well design to maximize returns 2019 results (300 m interwell, 3 T/m) 280 Attachie West Upper Montney Type Curve (300 m interwell, 3 T/m) Cumulative Condensate (Mbbl) 240 2018 results (150 m interwell, 2 T/m) 200 160 Type Curve Economics 120 D
Slide 18: Attachie Phase I Infrastructure Update
Attachie Phase I Infrastructure Update Halfway River 05-20 Plant Pipeline Crossing Completed Projects Remaining Work • Water Recycling Hub • Plant construction 90% complete • Farrell Creek Pipeline Bridge • Attachie Liquids Terminal 90% complete • Attachie Gas Sales Line and Gathering Lines • Attach
Slide 19: Attachie Drilling and Completions Update
Attachie Drilling and Completions Update 6 start-up pads: • 90% of wells drilled. All start-up pads to be drilled by end of October. • Using 2, best-in-class, high-spec AC triple drilling rigs • 70% of wells fracture stimulated. Last start-up pad to be completed starting mid Q4 as planned. • Using A
Slide 20: Attachie Drilling Efficiency
Attachie Drilling Efficiency Sustainable efficiency improvements since sanction Drilling Days Drilling Hole Size Optimization - 0 2 4 6 8 10 12 14 Successful transition to 171 mm vs 200 mm hole (-2 days/well) 1,000 Drill Bits and Directional Tool ~50% Measured Depth (m) 2,000 Optimization Improvemen
Slide 21: Attachie Completions Efficiency
Attachie Completions Efficiency Improvement in frac execution driving cost reductions Redesigned frac isolation equipment • Increased allowable frac pumping rates to 18 m3/min (from 12 m3/min in 2019) Improved frac sand logistics • Strategic alliance with sand supplier • Increased storage and offloa
Slide 22: Attachie Phase II
Attachie Phase II High conviction on Attachie Phase II Liquids sales to Pembina Financial Phase II Subsurface Phase I Regulatory & Permitting Commercial Gas sales to TCPL and West Coast 22
Slide 23: Operational Updates – Other Key Assets
Dawson III & IV, BC Operational Updates – Other Key Assets 23
Slide 24: Kakwa Production Performance
Kakwa Production Performance Production outcomes by vintage 30 Cumulative Production (Mboe per 100 metres) Highly productive reservoir 25 • Every vintage of wells have delivered strong results 20 • Infill drilling effectively complete as of 2023, allowing for return to orderly field development 15 1
Slide 25: Sunrise Development Plan
Sunrise Development Plan Low-cost natural gas asset UMA • ARC’s sole dry gas asset • Full-cycle breakeven of ~C$1.10 per Mcf MA Upper Montney LMA (~180 m) Well design changes yielding stronger productivity in Upper MB MB Montney • ~40% production increase (first 12 months) • Decrease of ~10% in sust
Slide 26: Marketing Strategy & Fundamentals
Sunrise, BC Marketing Strategy & Fundamentals 26
Slide 27: Condensate Market Overview and Outlook
Condensate Market Overview and Outlook WCSB condensate remains a structurally short market, reliant on imports to satisfy demand 2023 Canadian Oil 2023 WCSB Sands Production Blending Demand 475 Mbbl/d 750 Mbbl/d WCSB Condensate Balances ~250 Mbbl/d of imports required to meet projected Forecast 1,00
Slide 28: Condensate Demand Outlook
Condensate Demand Outlook WCSB condensate demand rising with brownfield expansions at oil sands operations; oil sands majors account for the vast majority of basin demand WCSB Condensate Demand 1,000 800 600 Mbbl/d 400 200 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Cenov
Slide 29: U.S. Natural Gas Market Outlook
U.S. Natural Gas Market Outlook Rising export demand requires ~11 Bcf/d of supply growth by 2028, a significant amount must be supplied by dry gas basins U.S. Natural Gas Outlook: Full-Year 2028 vs. Full-Year 2024 12 10 Call-on Dry Gas 8 Max Bcf/d 6 associated gas growth potential via 4 new (FID'd)
Slide 30: WCSB Natural Gas Market Outlook
WCSB Natural Gas Market Outlook WCSB demand projections suggest >3 Bcf/d of incremental production is required by 2028-2029 WCSB Natural Gas Outlook WCSB LNG Export Capacity Buildout 6 6 5 LNG Canada Ph. 2 5 Cedar LNG Woodfibre 4 4 LNG Canada Ph. 1 Operational 3 3 Bcf/d Bcf/d 2 2 1 1 0 0 LNG Exports
Slide 31: Natural Gas Marketing Strategy
Natural Gas Marketing Strategy Portfolio with well-diversified global price exposure is driving strong realizations Natural Gas Financial Exposure1 2 ARC’s Current Natural Gas Portfolio 9% 11% 14% 17% 15% 15% 29% 8% 8% 15% 8% 11% 11% 10% 9% 2% 9% 9% 10% 10% 111% 23% 8% 23% 20% 20% 10% 16% 16% 16% 17
Slide 32: Capital Allocation
Kakwa, AB Capital Allocation 32
Slide 33: Long-term Outlook
Long-term Outlook Disciplined investment drives free funds flow per share growth C$ millions C$ millions Free Funds Flow2 Capital Expenditures1,2 2,000 3,000 WTI US$50/B; AECO C$2.50/GJ WTI US$70/B; AECO C$3.50/GJ WTI US$80/B; AECO C$4.50/GJ 2,500 1,000 2,000 - 2024 2025 2026 2027 2028 Boe per day %
Slide 34: Long-term Outlook
Long-term Outlook Attachie drives sustainable production and free funds flow growth Boe per day Production & Cumulative Free Funds Flow1 C$ millions 450,000 8,000 7,000 6,000 400,000 5,000 4,000 3,000 350,000 2,000 1,000 300,000 0 2024 2025 2026 2027 2028 Production WTI US$65/AECO C$2.25/GJ WTI US$7
Slide 35: Return of Capital Strategy
Return of Capital Strategy Balancing sustainable dividend growth with share repurchases Shares (millions) >10% $1.20 800 Dividend Per Share Growth CAGR3 Dividend per share Dividend payout ratio Outstanding shares 750 $1.00 700 ~15% 650 Dividend Payout Ratio3 $0.80 (% of FFO) 600 $0.60 550 500 Sustai
Slide 36: Closing Remarks
Kakwa Field, AB Closing Remarks 36
Slide 37: Key Takeaways
Key Takeaways World-class Assets Free Funds Flow Per Share1 2 Growth • Canada's largest Montney & condensate producer 5.00 • Capability to grow >500 mboe/d and sustain for greater than 10 years 4.00 Commitment to Shareholder Returns • Clear strategy to triple free funds flow per share 3.00 by 2028 $
Slide 38: Advisory Statements
Advisory Statements Notes Regarding Forward-looking Information This presentation contains certain forward-looking statements and forward-looking information (collectively referred to as "forward-looking information") within the meaning of applicable securities legislation about current expectations
Slide 39: Advisory Statements
Advisory Statements Notes Regarding Forward-looking Information The forward-looking information contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking information included in this presentation are made as of the date of this presentation and, exc
Slide 40: Advisory Statements
Advisory Statements Basis of Preparation All financial figures and information have been prepared in Canadian dollars (which includes references to "dollars" and "$"), except where another currency has been indicated, and in accordance with International Financial Reporting Standards ("IFRS" or "GAA
Slide 41: Advisory Statements
Advisory Statements Netback ARC computes netback as commodity sales from production less royalties, operating, and transportation expense. Management believes that netback is a key industry performance indicator and one that provides investors with information that is also commonly presented by othe
Slide 42: Advisory Statements
Advisory Statements Capital Management Measures Funds from Operations ARC considers funds from operations to be a key measure of capital management as it demonstrates ARC’s ability to generate the necessary funds to maintain production at current levels and fund future growth through capital investm
Slide 43: Advisory Statements
Advisory Statements Barrels of Oil Equivalent Natural gas volumes have been converted to barrels of oil equivalent ("boe") on the basis of six thousand cubic feet ("Mcf") of natural gas to one barrel ("bbl") of liquids. Boe may be misleading, particularly if used in isolation. A conversion ratio of
Slide 44: Advisory Statements
Advisory Statements Advisory – Credit Ratings Credit ratings are intended to provide investors with an independent measure of credit quality of an issue of securities. Credit ratings are not recommendations to purchase, hold, or sell securities and do not address the market price or suitability of a
Slide 45: Investor Relations Contacts
Investor Relations Contacts Dale Lewko General Investor Relations Enquiries Manager, Capital Markets 403.503.8600 403.503.8696 1.888.272.4900 DLewko@arcresources.com IR@arcresources.com 45