Surge Energy Inc. · TSX:SGY
Surge Energy — Investor Presentation (July 2013)
20 slides from Surge Energy's investor presentation, July 2013
Slide 1: Positioned for Sustainability and Growth
“POSITIONED FOR SUSTAINABILITY AND GROWTH” July, 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: Why Own Surge Energy?
WHY OWN SURGE ENERGY? One of the highest quality, crude oil asset and opportunity bases in peer group; >12 year RLI (with 2.5 years of FDC/cash flow) 10 year inventory of low risk development drilling locations; largely unbooked waterflood upside Very low payout ratio (34%), and “all-in” sustainabil
Slide 4: Recent Developments
RECENT DEVELOPMENTS On June 11, 2013, Surge’s Board approved an orderly transition to a sustainable, moderate growth, dividend paying company. On July 3, 2013 Surge closed the $240MM acquisition of an elite, operated, large OOIP(1) crude oil asset in SW Saskatchewan, and a concurrent $247.5MM equity
Slide 5: Surge Energy Inc.
SURGE ENERGY INC. Elite, operated large OOIP crude oil reservoirs, with low recovery factors Strong balance sheet; ongoing risk management/hedging program Experienced management team with proven track records 5
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 qual
Slide 7: Surge 2013E/2014E Guidance
(1) SURGE 2013E/2014E GUIDANCE OPERATIONAL 2014E Q1 Production (boe/d) 12,000 (78% Oil/NGLs) 2014E Average Production (boe/d) 12,100 (78% Oil/NGLs) 2014E Exit Production (boe/d) 12,500 (80% Oil/NGLs) 2P Reserves 54.6 mmboe Net Asset Value (NAV) per share $8.21 P+P NPV10(2) RLI (based on 2013E exit p
Slide 8: Excellent Capital Efficiencies / Replacement Metrics
EXCELLENT CAPITAL EFFICIENCIES / REPLACEMENT METRICS $15,200/boepd – Valhalla (46 gross/38.6 net locations) • Drill/Complete/Equip: $4.6MM • 180 day IP: 300 boepd (66% oil) • 672,000 boe/reserves/well (on primary) $16,500/boepd – Silver (109 gross/104 net locations) • Drill/Complete/Equip: $1.6MM •
Slide 9: Elite, Focused Asset Base
ELITE, FOCUSED ASSET BASE EXPOSURE TO >825 MMBBLS OF GROSS OOIP <3% OIL RECOVERED TO DATE 9
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 Internally Booked Internally Estimated Gross Cum Oil Independent Estimated Ultimate Property Formation OOIP Ave. WI Recovery Recovery Ultimate Recovery (mmbbls) Factor Factor P+P(2) Recovery (with (% OOIP) (Primary) Waterflo
Slide 11: 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% • Operated property that represents 20% of Surge’s 2P reserves (1) • Rates of return in excess of 40% • 271 gross/264 net drilling locati
Slide 12: SE Alberta
SE ALBERTA SILVER AREA (CRETACEOUS SANDS) • >195 mmbbls OOIP (24-31 degree API oil) • Multi-zone, medium gravity crude at shallow depths (<1,000 meters) • Current recovery factor ~7.6% • Low-decline, high ROR assets that provide stable cash flow base • Continued positive oil response from expanded w
Slide 13: Western Alberta – Valhalla South / Wembley
WESTERN ALBERTA VALHALLA SOUTH / WEMBLEY (DOIG) Valhalla • >160 mmbbls of combined OOIP at Valhalla and Wembley (40 degree API light oil) • Current recovery factor ~2.4% • Operated property that represents 35% of Surge’s reserves (1) • Rates of return of ~200% • 46 gross/38.6 net drilling locations
Slide 14: Western Alberta – Nipisi
WESTERN ALBERTA NIPISI (SLAVE POINT) • >125 mmbbls of combined OOIP (35-42 degree API) in Utikuma the Slave Point Formation at Nipisi North and Nipisi South • Current recovery factor ~0.6% of OOIP • Operated property that represents 19% of Surge’s Analogue Slave Point Waterflood reserves (1) Gift •
Slide 15: Risk Management/Hedging Strategy
RISK MANAGEMENT/HEDGING STRATEGY Oil Hedges 4,000 48% 48% 50% The Company has an orderly, 46% 46% • % Hedged of net after royalty Oil Volume Currently Hedged 3,500 45% on-going, risk management / 39% 39% Percentage of Current Net Oil 40% hedging program designed to 3,000 Production Hedged lock in fu
Slide 16: Surge – Positioned for Sustainability
SURGE – POSITIONED FOR SUSTAINABILITY • Low base decline <25%, high netbacks, excellent capital efficiencies • Very low “payout ratio” of 34% ; All-in “sustainability ratio” of 93%; NO DRIP • Strong balance sheet; debt to forward cash flow ratio of 1.4X • Ongoing risk management/hedging program prot
Slide 17: 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 2.5 years of FDC/cash flow) • Over 500 low risk devel
Slide 18: 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 CIBC World Markets Inc. Arthur Grayfer arthur.grayfer@cibc.com Cormark Securities Inc. Jonathan Fleming jfleming@cormark.com Desjardin
Slide 19: Corporate Partners
CORPORATE PARTNERS Advisors National Bank of Canada Bank of Nova Scotia Canadian Imperial Bank of Commerce Bankers: ATB Financial JPMorgan Chase Bank, N.A. Toronto-Dominion Bank Auditor: KPMG LLP Legal Counsel: Heenan Blaikie LLP Evaluation Engineers: Sproule Associates Registrar & Transfer Agent: O
Slide 20: 2014 Key Sensitivities
2014 KEY SENSITIVITIES BASE SENSITIVITY IMPACT (C$) Oil Price (C$ Ed Par) $88.66 +/-$1.00 $2.5 million Gas Price (C$ / Mcf) $3.69 +/- $0.10 $0.4 million Production 12,111 +/- 100 $1.2 million Cash Netback $33.25 +/- $0.50 $2.2 million Exchange Rate $0.98 +/- $0.01 $1.7 million Interest Rate 4.8% +/-