Surge Energy Inc. · TSX:SGY
Surge Energy — Investor Presentation (December 2013)
24 slides from Surge Energy's investor presentation, December 2013
Slide 1: Positioned for Sustainability and Growth
“POSITIONED FOR SUSTAINABILITY AND GROWTH” December, 2013 TSX:SGY www.surgeenergy.ca
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements. More particularly, this presentation contains statements concerning anticipated: (i) potential development opportunities and drilling locations, expectations and assumptions concerning the success of future drilling an
Slide 3: Recent Developments
RECENT DEVELOPMENTS Delivered record results in Q3 2013: • Averaged > 2013 exit production in Q3 - with < forecast capital • Q3 debt to annualized FFO of <1.1x • Reduced G&A/boe by 18% • Achieved operating netback of $49.10 per boe (48% increase over Q3/12) Closed 3 elite, accretive, high qualit
Slide 4: Why Own Surge Energy?
WHY OWN SURGE ENERGY? High quality, crude oil asset and opportunity bases in peer group; >12 year RLI (with <2.1 years of FDC/cash flow); Very low “all-in” sustainability ratio (93.8%); NO DRIP Excellent replacement metrics/capital efficiencies (<$29,000/boepd); 10 year inventory of low risk dev
Slide 5: Surge Energy Inc.
SURGE ENERGY INC. Elite, operated, large OOIP crude oil reservoirs, with low recovery factors; Over 1.3 Billion bbls of OOIP under management - with current recovery factor of 7% Strong balance sheet; ongoing risk management/hedging program Experienced management team with proven track records
Slide 6: Defined Business Strategy
DEFINED BUSINESS STRATEGY 1. Provide a sustainable, protected, annual dividend to shareholders, payable monthly; and 2. Grow cost effectively at 3-5% per year on a reserves, production and cash flow per share basis; and 3. Pursue additional growth through accretive acquisitions targeting high qualit
Slide 7: Surge 2013E/2014E Guidance
SURGE 2013E/2014E GUIDANCE (1) (3) OPERATIONAL 2013 Exit Production (boe/d) 15,000 (83% Oil/NGLs) 2014E Average Production (boe/d) 15,250 (83% Oil/NGLs) 2014E Exit Production (boe/d) 15,500 (83% Oil/NGLs) 2P Reserves(2) 69.7 MMboe RLI (based on 2013E exit production) >12.5 years 2014E Capital Spendi
Slide 8: Elite, Focused Asset Base
ELITE, FOCUSED ASSET BASE Valhalla/Wembley Nipisi/Gift Sask. Viking Silver/Wainwright Manson Shaunavon Macoun EXPOSURE TO >1.3 BILLION BBLS OF OOIP 7% OIL RECOVERED TO DATE 8
Slide 9: Excellent Capital Efficiencies / Replacement Metrics
EXCELLENT CAPITAL EFFICIENCIES / REPLACEMENT METRICS Locations Capital Drill/ Complete/ Mboe/well 180 day IP (Gross / Net) Efficiency Equip (on primary) Valhalla $14,300/boepd $4.3MM 300 boepd (66% oil) 672 (46/38) Macoun $15,710/boepd $1.1MM 70 boepd (100% oil) 63 (16/14) Silver/Wainwright $18,800/
Slide 10: Summary of Quality Oil Reservoirs – Large OOIP with Low Recovery Factors
SUMMARY OF QUALITY OIL RESERVOIRS – LARGE OOIP(1) WITH LOW RECOVERY FACTORS Total Booked Internally Estimated Cum Oil Independent OOIP Ultimate Recovery Net Property Formation Avg. WI Recovery Recovery (MMbbls) (Waterflood with Factor Factor Development Drilling) P+P(2) (% OOIP) Silver/ Cretaceous W
Slide 11: Elite Waterflood Reservoirs – Low Decline
ELITE WATERFLOOD RESERVOIRS – LOW DECLINE Current Properties Under Full Commercial Waterflood Area Formation Start Date 2014 Decline Current RF Booked RF Expected RF Lloyd/ Silver 1996 18% 12.6% 35.7% 39.0% Cummings Wainwright Sparky 1962 8% 32.0% 35.5% 37.1% Current Waterflood Pilots # of Analog Ar
Slide 12: SW Saskatchewan
SW SASKATCHEWAN Shaunavon (Lower and Upper) • >250 MMbbls of OOIP in the Lower and Upper Shaunavon formations (medium gravity oil) • Current recovery factor ~1.3% • Rates of return in excess of 50% (1) • 271 gross/264 net drilling locations in the Lower and Upper Shaunavon based on 8 wells/section •
Slide 13: SE Alberta
SE ALBERTA Silver/Wainwright Area (Cretaceous Sands) Wainwright • >435 MMbbls OOIP (23-31 degree API oil) • Multi-zone, medium gravity crude at shallow depths (<1,000 meters) • Current recovery factor of 19.1% • Low-decline, high ROR assets that provide stable cash flow base • Continued positive oil
Slide 14: Western Alberta
WESTERN ALBERTA Valhalla South / Wembley (Doig) • >160 MMbbls of combined OOIP at Valhalla and Wembley Valhalla (40 degree API light oil) • Rates of return of >130% (1) • Current recovery factor ~2.4% (2) • 46 gross/38.6 net drilling locations at both Valhalla and Wembley • Continue delineating larg
Slide 15: Western Alberta
WESTERN ALBERTA Nipisi (Slave Point)) Analogue Slave Point Waterflood • 115 MMbbls of combined OOIP (35-42 degree API) in the Slave Point Formation at Nipisi North and Nipisi South • Current recovery factor ~0.7% of OOIP Gift • Rates of return of ~50% (1) Nipisi • 27 gross/27 net Slave Point and Gil
Slide 16: Williston Basin
WILLISTON BASIN Manson (Bakken/Three Forks) • 76 MMbbls of OOIP (35 degree API) • Current recovery factor 0.9% of OOIP Manson • Rates of return ~40% (1) • 64 gross/58 net drilling locations remain at Manson(2) • 2 injectors have been implemented in Q3; exciting early response • Based on successful w
Slide 17: Williston Basin
WILLISTON BASIN Macoun (Midale Marly) • 30 MMbbls of OOIP (27 degree API) Macoun • Current recovery factor 1.8% of OOIP • Rates of return ~100% (1) • 16 gross/14 net drilling locations remain at Macoun(2) • Estimated 8% RF on primary • First injector started in Q3, 2013 • Based on successful waterfl
Slide 18: SW Saskatchewan
SW SASKATCHEWAN Viking Plenty • Operated; high working interests • High netback > $55/bbl Dodsland • Rates of return ~34% (1) • 143 MMbbls of OOIP (37 degree API) in the Viking formation(2) • Current recovery factor 0.5% of OOIP • 138 gross/111 net drilling locations remain at SW Saskatchewan Viking
Slide 19: Risk Management/Hedging Strategy
RISK MANAGEMENT/HEDGING STRATEGY Oil Hedges • The Company has an orderly, on-going, risk management / 55% hedging program designed to 6,000 lock in future cash flows to Oil Volume 44% 44% 43% 43% Currently Hedged 45% protect the Company’s capex % Hedged of net after royalty volumes 5,000 40% program
Slide 20: Surge – Positioned for Sustainability
SURGE – POSITIONED FOR SUSTAINABILITY • Low base decline 24%, high netbacks, excellent capital efficiencies • Very low “all-in” sustainability ratio of 93.8%; NO DRIP • Strong balance sheet; 2014 debt to funds flow ratio of 1.35x • Ongoing risk management/hedging program protects cash flow 20
Slide 21: Surge – Positioned for Growth
SURGE – POSITIONED FOR GROWTH • Focused, high quality, crude oil asset and opportunity base; core properties are 100% operated with working interests of >90% • Elite, large OOIP crude oil reservoirs – with low recovery factors; >12 year RLI (only <2.1 years of FDC/cash flow) • Over 600 low risk deve
Slide 22: Analyst Coverage
ANALYST COVERAGE Financial Institution Analyst Email Address AltaCorp. Capital Don Rawson drawson@altacorpcapital.com BMO Capital Markets Jim Byrne jim.byrne@bmo.com Cannaccord Genuity Anthony Petrucci apetrucci@canaccordgenuity.com CIBC World Markets Inc. Jeremy Kaliel jeremy.kaliel@cibc.ca Cormark
Slide 23: Corporate Partners
CORPORATE PARTNERS Advisors National Bank of Canada Bank of Nova Scotia Canadian Imperial Bank of Commerce Bankers: ATB Financial Toronto-Dominion Bank JPMorgan Chase Bank, N.A. Auditor: KPMG LLP Legal Counsel: McCarthy Tétrault Evaluation Engineers: Sproule Associates Registrar & Transfer Agent: Ol
Slide 24: 2014 Key Sensitivities
2014 KEY SENSITIVITIES BASE SENSITIVITY IMPACT (C$) Oil Price (C$ Ed Par) $90.45 +/-$1.00 $4.6 million Gas Price (C$ / Mcf) $3.69 +/- $0.10 $0.7 million Production 15,250 +/- 100 $1.4 million Cash Netback $42.78 +/- $0.50 $2.8 million Exchange Rate $0.98 +/- $0.01 $4.5 million Interest Rate 4.80% +/