Arc Resources — Investor Presentation (August 2021)
41 slides from Arc Resources's investor presentation, August 2021
Slide 1: ARC Resources Ltd. Investor Presentation
ARC Resources Ltd. Investor Presentation August 2021
Slide 2: ARC Is the Largest Pure-play Montney Producer
ARC Is the Largest Pure-play Montney Producer Shares outstanding 725 million Market capitalization1 $6.9 billion Net debt2 $2.1 billion Enterprise value1 2 $9.0 billion Quarterly dividend3 $0.066/share Dividend yield4 2.8% Montney production5 Mboe/day ~340 2% 22% ~340 15% 61% (1) Market Capitalizati
Slide 3: ARC's Guiding Principles
ARC’s Guiding Principles Sustainable business Risk management around all aspects of the Superior capital discipline model with best-in-class business, including focused on maximizing free people and assets, along with maintaining a strong funds flow1 to optimize a relentless focus on financial posit
Slide 4: ARC Is a Premier Business
ARC Is a Premier Business Strong balance sheet Investment-grade credit rating; net debt1 is forecasted to be less than 1.0 time annualized funds from operations by Q3 20212 Substantial free funds flow3 Free funds flow3 is forecasted to be ~$1.0 billion in 20212 Recently increased dividend by 10% Div
Slide 5: 2021 Outlook
2021 Outlook
Slide 6: 2021 Plan – Executing on ARC's Disciplined Strategy
2021 Plan – Executing on ARC’s Disciplined Strategy Fully integrate Seven Generations Integrate people, assets, and processes while focusing on realizing immediate cost savings and synergies De-risk the business through debt reduction Maintain investment-grade credit rating and reduce net debt1 to ~
Slide 7: Delivering on Free Funds Flow Priorities
1 Delivering on Free Funds Flow Priorities US$55/bbl WTI Free funds flow1: Cdn$2.50/GJ AECO • Current dividend • Sustainable dividend US$45/bbl WTI increases Cdn$2.25/GJ AECO • Attachie West Phase I • Share repurchases • Strategic M&A US$40/bbl WTI Maintenance capital: Cdn$1.90/GJ AECO ~$1.1 billion
Slide 8: Q2 2021 in Review
Q2 2021 in Review Dividend increase Free funds flow1 Net debt2 $249.7 million or $2.1 billion or 10% increase $0.35/share 1.3 times FFO Quarterly dividend increased to $0.066/share Allocated to net debt2 Reduced by $270.8 million effective for ARC’s Q3 reduction and dividend or 11% 2021 dividend (1)
Slide 9: $160 Million in Annual Synergies from 7G Acquisition
$160 Million in Annual Synergies from 7G Acquisition Synergies expected for 2022 $160 million 180 Synergies $25 million 150 $25 million $15 million 120 1 $50 million 90 60 $45 million Synergies Captured 30 0 Corporate Costs Finance Costs Operating Efficiencies Market Optimization Drilling & Completi
Slide 10: De-risking the Business through Debt Reduction
De-risking the Business through Debt Reduction Long-term notes repayment schedule1 2021 forecasted net debt2 sensitivities Cdn$ millions $ billions, ratio 600 2,000 2.0 450 3.72% US$ Note 1,500 1.5 8.21% US$ Note 5.36% US$ Note 300 3.31% US$ Note 1,000 1.0 3.81% US$ Note 150 4.49% Cdn$ Note 2.354% C
Slide 11: Evaluating Strategic M&A Opportunities
Evaluating Strategic M&A Opportunities Assets must be as good or better than ARC’s existing assets Infrastructure must be largely owned and operated Assets must have similar ESG characteristics and performance Assets must be able to increase free funds flow1 per share at various commodity scenarios
Slide 12: Industry-leading Financial Performance amongst Peers
Industry-leading Financial Performance amongst Peers Comparative cash returns1 2 2022E return on average capital employed3 4 24% Canadian E&Ps 20% Canadian E&Ps US E&Ps US E&Ps 18% 15% 12% 10% 6% 5% 0% 0% ARC ARC Average Free Cash Flow Yield (2021E to 2022E) Dividend Yield (Current) (1) Source: Barc
Slide 13: Guidance – Production
Guidance – Production Q3 2021 to Q4 2021 2021 2021 Revised Guidance1 2 Guidance1 2 Guidance1 2 Production Crude oil (bbl/day) 8,000 - 9,000 12,000 - 13,500 9,000 - 10,500 Condensate (bbl/day) 72,000 - 78,000 55,000 - 60,000 55,000 - 60,000 Crude oil and condensate (bbl/day) 80,000 - 87,000 67,000 -
Slide 14: Guidance – Expenses and Capital Expenditures
Guidance – Expenses and Capital Expenditures 2021 2021 Revised Guidance1 2 Guidance1 2 Expenses ($/boe) Operating 4.10 - 4.60 3.90 - 4.40 Transportation 4.50 - 5.00 4.50 - 5.00 G&A expense before share-based compensation expense3 0.90 - 1.00 0.90 - 1.00 4 G&A - share-based compensation expense 0.30
Slide 15: Guidance – Capital Program of $950 Million to $1.0 Billion
Guidance – Capital Program of $950 Million to $1.0 Billion Attachie ~$5MM ~3,500 boe/day Complete detailed engineering work for Attachie West Phase I Ante Creek ~$60MM ● 16 wells ~17,000 boe/day Deliver profitable light oil Greater Dawson production by leveraging 2020 facility expansion ~$240MM ● 44
Slide 16: Asset Overview
Asset Overview CARC RESOURCES LTD.
Slide 17: Greater Dawson Overview
Greater Dawson Overview Snapshot Overview Low break-evens2 Production1 Dawson & Parkland 91 Mboe/day (22% liquids) $0.26/Mcf to $0.39/Mcf Land position Tower 149,800 net acres (97% W.I.) Phase I & II Gas Plants Phase III & IV Parkland Gas Plants Large resource Significant optionality Phase I & II Da
Slide 18: Sunrise Overview
Sunrise Overview Snapshot Overview Low cost structure Production1 Operating expense ~280 MMcf/day ~$0.20/Mcf Optimally positioned for Finding and development cost LNG supply ~$0.35/Mcf Phase I & II Gas Plants Efficient resource Environmental performance Land position Electrified facility and field d
Slide 19: Kakwa Overview
Kakwa Overview Snapshot Gold Creek Gas Plant Overview Near-term objective Production1 Integrate asset into portfolio and Cutbank Gas Plant 173 Mboe/day (58% liquids) focus on realizing immediate Land position operations, drilling, and 493,100 net acres (99% W.I.) completions synergies Karr Facility
Slide 20: Ante Creek Overview
Ante Creek Overview Snapshot Overview Stable cash flows 2-26 Production1 Balanced commodity mix and Gas Plant 17 Mboe/day (50% liquids) moderate decline rates Land position Break-even2 122,000 net acres (100% W.I.) US$20/bbl 10-7 Gas Plant Efficiency Optimizing 10-36 Gas Plant evolution infrastructu
Slide 21: Attachie Overview
Attachie Overview Snapshot Overview Significant resource Pilot production1 Resource in place2 4.4 Mboe/day (54% liquids) 8.9 Bbbl of liquids 32 Tcf of gas Phase I 4-20 Gas Plant Development Delineation Battery potential complete Land position Piloting activities have set the 202,000 net acres (99% W
Slide 22: Attachie West Phase I Design
Attachie West Phase I Design Total Condensate and Natural Gas Forecasted Capital Processing NGLs Processing Processing Investment Capacity Capacity Capacity (2022 to 2023) 40 Mboe/day 25 Mbbl/day 90 MMcf/day ~$600 million Targeted Sanction Date: Q4 2021 Targeted On-stream Date: Q3 2023 Subject to Bo
Slide 23: Attachie West Phase I Forecasted Cash Flow Profile
Attachie West Phase I Forecasted Cash Flow Profile $500,000,000 45, 000 40, 000 $400,000,000 35, 000 30, 000 $300,000,000 25, 000 20, 000 $200,000,000 15, 000 10, 000 $100,000,000 5,0 00 0 $0 -5,000 2021F 2022F 2023F 2024F 2025F 2026F 2027F 2028F 2029F 2030F -10,000 ($100,000,000) -15,000 Netback1 2
Slide 24: Network of Owned-and-operated Infrastructure
Network of Owned-and-operated Infrastructure Combined network of owned-and-operated infrastructure + Natural gas processing and sales capacity of 1.5 Bcf/day + Ability to optimize larger portfolio, which has access to downstream markets across North America Benefits of owned-and-operated infrastruct
Slide 25: ARC's ESG Excellence
ARC’s ESG Excellence Global oil and gas companies’ relative ESG rankings1 2 64 ARC Social and Governance Score 58 Africa Asia Canada 52 Europe Latin America Middle East Russia 46 United States 40 38 46 54 62 70 Environmental Score (1) Source: BMO Capital Markets; CSRHub; Bloomberg (January 2021). (2
Slide 26: Strong Performance across Key ESG Factors
Strong Performance across Key ESG Factors Environmental Social Governance 1 1 Emissions performance Safety Executive compensation + Lowest GHG emissions intensity + #1 corporate priority + 95% shareholder approval of ARC’s amongst Canadian upstream E&P + Absolute focus on workplace safety for 2021 “
Slide 27: ARC's Resource and Scalability Potential
ARC’s Resource and Scalability Potential Drilling locations by area1 2 Resource potential 2,000 1,500 1,000 500 0 Attachie Greater Kakwa Sundown Ante Sunrise Septimus 2020 Dawson Creek Base Production Future Development Projects (1) Comprises 2P booked undeveloped locations and internal inventory es
Slide 28: Additional Information
Additional Information CARC RESOURCES LTD.
Slide 29: Natural Gas Financial and Physical Price Management
Natural Gas Financial and Physical Price Management WCSB demand and export capacity growth1 Natural gas realizations2 and diversification3 4 5.00 $4.39 4.00 $1.41 $3.16 5.4 Bcf/day Demand & Export Capacity $2.82 Cdn$/Mcf 3.00 Realized Gain (Loss) on Growth Expected by 2025 $2.03 $2.18 Risk Managemen
Slide 30: Canadian Condensate Market
Canadian Condensate Market Crude oil and condensate pricing1 WCSB condensate supply and demand2 3 US$/bbl Mbbl/day 80 800 60 600 40 400 20 200 0 0 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021F 2022F 2023F 2024F WTI Condensate WCS WCSB Condensate Supply Imports Required WCSB Condensate Demand •
Slide 31: Cash Flow Protection
Cash Flow Protection Crude oil and condensate production hedged1 Natural gas production hedged1 Mbbl/day, % MMBtu/day, % 48 60% 720,000 60% 36 45% 540,000 45% 24 30% 360,000 30% 12 15% 180,000 15% 0 0% 0 0% Q3 2021 Q4 2021 2022 Q3 2021 Q4 2021 2022 Production Hedged % Hedged Production Hedged % Hedg
Slide 32: Risk Management Contracts Positions at June 30, 2021
12 Risk Management Contracts Positions at June 30, 2021 Q3 2021 to Q4 2021 2022 2023 2024 2025 Crude Oil – WTI US$/bbl bbl/day US$/bbl bbl/day US$/bbl bbl/day US$/bbl bbl/day US$/bbl bbl/day Ceiling 53.66 23,500 58.91 21,767 62.35 12,000 55.82 1,243 - - Floor 45.82 23,500 48.45 21,767 51.25 12,000 5
Slide 33: Asset Details
Asset Details Greater Dawson Sunrise Kakwa Ante Creek Attachie Net production – Q2 2021 Crude oil & liquids (bbl/day) 19,972 43 99,952 8,461 2,380 Natural gas (MMcf/day) 427.5 259.2 437.6 53.2 12.2 Total (boe/day) 91,219 43,242 172,890 17,331 4,418 1 Land Net sections 231 36 771 191 308 Net acres 14
Slide 34: Historical Performance
Historical Performance Production Net debt1 to FFO Dividends2 Mboe/day $ billions, ratio $ billions, % of FFO 350 2.5 2.5 8 120% 280 2.0 2.0 6 90% 210 1.5 1.5 4 60% 140 1.0 1.0 2 30% 70 0.5 0.5 0 0.0 0.0 0 0% 2021 YTD 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20
Slide 35: ESG Recognitions and Rankings
12 ESG Recognitions and Rankings Member of MSCI Global Sustainability Index Member of Sustainalytics’ Jantzi Social Index MSCI ESG Rating: AAA Voluntary participant since 2007 2020 Climate Change Score: A- Member of FTSE Russell’s FTSE4Good Index Series since 2018 2020 Water Security Score: B Enviro
Slide 36: Advisory Statements
Advisory Statements CARC RESOURCES LTD.
Slide 37: 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 38: 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 39: Advisory Statements
Advisory Statements Information Regarding Disclosure on Oil and Gas Reserves, Resources, and Other Oil and Gas Metrics Unless otherwise specified, all reserves estimates disclosed in this presentation are derived from ARC's independent reserve evaluation prepared by GLJ Ltd. (“GLJ”) dated January 29
Slide 40: 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 41: Investor Relations Contacts
Investor Relations Contacts Kris Bibby Dale Lewko Senior Vice President and Chief Financial Officer Manager, Capital Markets 403.503.8675 403.503.8696 KBibby@arcresources.com DLewko@arcresources.com Martha Wilmot General Investor Relations Enquiries Senior Investor Relations Advisor 403.503.8600 403