Surge Energy Inc. · TSX:SGY
Surge Energy — Investor Presentation (January 2024)
29 slides from Surge Energy's investor presentation, January 2024
Slide 1: Premier Oil Assets Driving Free Cash Flow
Premier Oil Assets Driving Free Cash Flow CORPORATE PRESENTATION WINTER 2024
Slide 2: Q3/23 Highlights
Q3/23 Highlights During the quarter Surge: • Achieved average production of 24,108 boepd (86% liquids), an increase of 13% over Q3/22; • Delivered adjusted funds flow (“AFF”) of $86.9 million ($347.6 million annualized), an increase of 35% over Q2/23; • Delivered $40 million of free cash flow (befor
Slide 3: The Surge Advantage
The Surge Advantage $$$ + = + High Operating Netback, Disciplined Capital Proven Track Conventional Assets Allocation Record of Execution Free Cash Flow • Light/medium oil weighted asset base • Dominant positions in conventional • Proven management team with track • Focus on operational execution dr
Slide 4: 2022 Reserves
2022 Reserves On March 8, 2023, SGY announced top tier reserves, F&D, and FD&A results as follows: Reserves Summary and Net Present Value In 2022, Surge delivered: • PDP Finding & Development (“F&D”) cost of $22.08/boe, including Crude Oil Natural Oil Equivalent NPVBT10 4,5 changes in FDC providing
Slide 5: Net Asset Value
Net Asset Value Surge’s independent Sproule PDP NAV per share increased by 107% in 2022 (from $3.51 to $7.28 per share) SGY provides an excellent value proposition, trading Surge Dec 31, 2022 NAV on YE2022 Sproule Reserves (average WTI over first 5 years: US$83/bbl) at just 29% of its YE22 2P NAV/sh
Slide 6: Proven Business Strategy
Proven Business Strategy Focused on sustainable returns and enhancing free cash flow Surge executes on a simple, DISCIPLINED CAPITAL ALLOCATION repeatable business strategy: Undertake low cost, low risk • Develop high quality, conventional oil projects that support sustainability reservoirs with pro
Slide 7: Corporate Guidance for 2024
Corporate Guidance for 2024 Key Guidance & Assumptions3 US$75 WTI 2024 Annualized cash flow from operating activities4 $295 MM Focused on returns and 2024 Annualized free cash flow before dividends $105 MM enhancing free cash 2024 All-in payout ratio (including $0.48/share annual dividend) 81% flow
Slide 8: Return of Capital Framework
Return of Capital Framework Surge is well positioned to deliver to shareholders a combination of: • Share price appreciation (Sproule 25% 25% 2022YE 2P NAV of >$22/share); 25% • Continued net debt repayment, 50% 50% systematically increasing NAV per share; • A sustainable base monthly cash 75% 25% 2
Slide 9: Advantages of Conventional Reservoirs
Advantages of Conventional reservoirs offer lower risk, predictable, repeatable development with Conventional opportunity to improve 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 10: Sparky and SE Saskatchewan
Sparky and SE Saskatchewan Surge offers exposure to two of the top three conventional oil growth plays in Canada
Slide 11: Sparky and SE Saskatchewan provide exceptional economics and depth of inventory
Sparky and SE Saskatchewan provide exceptional 2024 Production economics and a depth ~80% Combined Production Weighting by Area Sparky of drilling inventory Weighting (est. 2024) SE Saskatchewan Other Surge Assets Sparky Light/medium crude oil production with compelling returns. Low on-stream costs
Slide 12: 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 Lloydminster Position Edmonton Alberta Surge holds a dominant land position and has ~60km Saskatchewan drilled >55% of all horizontal multi-frac wells in the light/medium window of the Sparky 18°-20° Gr
Slide 13: 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 >1 billion bbls Sparky Core Area Production Growth OOIP net to SGY (internally estimated) >480 net Sparky core drilling locat
Slide 14: Leveraging Past Success
SE Saskatchewan Surge Land Midale Subcrop Frobisher Subcrop Leveraging Past Alida Subcrop Ratcliff Subcrop Success Manitoba Saskatchewan Surge’s operational track record of success in SE Saskatchewan make this an exciting growth area Area Benefits • Organic growth opportunities plus strategic acquis
Slide 15: Key Growth Driver
Key Growth Driver High operating netback light Key Operational Areas oil production and reserves >400 million bbls SE Saskatchewan ~7,400 boepd (>90% light oil) from low risk, proven Manitoba ~600 boepd (~99% light oil) conventional reservoirs OOIP net to SGY (internally estimated) SE Saskatchewan F
Slide 16: Committed to Sustainability
Committed to Sustainability Surge continues to execute on its sustainability priorities Sustainability Priorities Sustainability in Action Climate focus: Integrate climate risks and opportunities within Published 3rd annual TCFD-aligned Sustainability Report both Board and Executive management manda
Slide 17: 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 Jared Ducs is a Chartered Murray Bye is a Professional Derek Christie is a Senior Margaret Elekes has more years of experience i
Slide 18: 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 19: Analyst Coverage
Analyst Coverage SGY 12-Month Financial Institution Analyst Email Address Target Price Acumen Capital Partners Trevor Reynolds treynolds@acumencapital.com $13.25 ATB Capital Markets Amir Arif aarif@atb.com $10.50 BMO Capital Markets Christopher Smerek christopher.smerek@bmo.com - Canaccord Genuity M
Slide 20: Corporate Information
Corporate Information TSX First Lien Lending Syndicate SGY.TO National Bank of Canada ATB Financial BDC Capital Auditor Registrar & Transfer Agent Headquarters KPMG LLP Odyssey Trust Surge Energy Inc. Centennial Place, East Tower Legal Counsel Investor Contacts 1200 520 3rd Ave SW Calgary, AB T2P 0R
Slide 21: Appendix
Appendix
Slide 22: 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 23: WTI Hedging Summary
WTI Hedging Summary 10,000 9,000 8,000 7,000 6,000 Volumes (Bbl) 5,000 4,000 3,000 2,000 1,000 0 Qtr. 4 2023 Qtr. 1 2024 Qtr. 2 2024 Qtr. 3 2024 Qtr. 4 2024 Bought Put Swap Collar 3-Way 23
Slide 24: Hedging Detail
Hedging Detail WTI Crude Oil Derivative Contracts Natural Gas Derivative Contracts Swaps Puts Collars SWAPS Collars Average Average Average Average Average Period Volumes Avg. Price Volumes Volumes Bought Bought Put Sold Call Period Vol. Avg. Price Vol Bought Put Sold Call Put Qtr. 4 2023 2,000 $85.
Slide 25: 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 Fixed-to-Floating Rate Swap July 2019 – June 2024 $50,000,000 Floating Rate Fixed Rate 1.785% Surge Power Hedges 12 $140.00 As power prices fluctuate significantl
Slide 26: Advisories - Forward-Looking Statements
Advisories - Forward-Looking Statements This presentation contains forward- More particularly, this presentation contains statements concerning: Surge’s continued focus on free cash flow generation and shareholder returns; Surge’s plans for the allocation include, but are not limited to, risks assoc
Slide 27: Advisories - Oil and Gas Advisories
Advisories - Oil and Gas Advisories The term “boe” means barrel of oil equivalent on the basis of 1 boe to 6,000 cubic feet of natural Report and referenced in this presentation are estimates only and there is no guarantee that an average number of wells drilled per year of 80, Surge’s >1,050 net lo
Slide 28: Advisories - Non-GAAP & Other Financial Measures
Advisories - Non-GAAP & Other Financial Measures This presentation includes references to non-GAAP and other financial measures used by such, costs may vary between periods. Transaction and other costs represent expenditures Free cash flow yield is a non-GAAP ratio, calculated as free cash flow divi
Slide 29: Advisories - Non-GAAP & Other Financial Measures
Advisories - Non-GAAP & Other Financial Measures All-in Payout Ratio Operating Netback, Operating Netback per boe, and Adjusted Funds Flow per boe All-in payout ratio is a non-GAAP ratio, calculated as expenditures on property, plant, and equipment divided by Operating netback is a non-GAAP financia