Surge Energy Inc. · TSX:SGY
Surge Energy — Investor Presentation (February 2014)
25 slides from Surge Energy's investor presentation, February 2014
Slide 1: Positioned for Sustainability and Growth
“POSITIONED FOR SUSTAINABILITY AND GROWTH” February, 2014 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 Announced an elite, accretive, high quality, large OOIP, light oil acquisition in January, 2014: • Proposed dividend increase of 4%; and • Lowered “all-in” sustainability ratio to <89% 2014 guidance projects >45% production growth and 70% growth in FFO Delivered record resu
Slide 4: Why Own Surge Energy?
WHY OWN SURGE ENERGY? Low risk, high quality, crude oil asset and opportunity base; >12 year RLI (with 2 years of FDC/cash flow); Very low “all-in” sustainability ratio (<89%); NO DRIP Excellent replacement metrics/capital efficiencies (<$29,000/boepd); 10 year inventory of low risk development
Slide 5: Surge Energy Inc.
SURGE ENERGY INC. Elite, operated, large OOIP crude oil reservoirs, with low recovery factors; Over 1.4 Billion bbls of OOIP under management - with current recovery factor of 10% Strong balance sheet; ongoing risk management/hedging program Experienced management team with proven track record
Slide 6: Key Value Drivers (Risk Adjusted)
KEY VALUE DRIVERS (RISK ADJUSTED) 1. 3-5% organic annual per share growth in reserves, production and cash flow; and 2. >8% dividend yield; and 3. Debt reduction i.e. due to low sustainability ratio; increases NAV; and 4. Accretive acquisitions. 6
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) 16,125 (84% Oil/NGLs) 2014E Exit Production (boe/d) 16,550 (84% Oil/NGLs) 2P Reserves(2) 74.3 Mmboe RLI (based on 2013E exit production) >12.5 years 2014E Capital Spendi
Slide 8: Elite, Focused Asset Base
ELITE, FOCUSED ASSET BASE EXPOSURE TO >1.4 BILLION BBLS OF OOIP 10% OIL RECOVERED TO DATE 8
Slide 9: Excellent Capital Efficiencies / Replacement Metrics
EXCELLENT CAPITAL EFFICIENCIES / REPLACEMENT METRICS Areas Capital Drill/ Complete/ Mboe/well Locations 180 day IP Efficiency Equip (on primary) (Gross / Net) Valhalla $14,300/boepd $4.3MM 300 boepd (66% oil) 672 (46/38) Macoun $15,700/boepd $1.1MM 70 boepd (100% oil) 63 (16/14) Silver/Wainwright $1
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 Estimated Total Booked Ultimate Drilling Cum Oil Independent OOIP (MMbbls) Rates of Recovery Net Property Formation Locations Avg. WI Recovery Recovery Gross/Net Return (Waterflood Gross/Net Factor Factor P+P(2) 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: Williston Basin
WILLISTON BASIN SE Sask (Midale/Frobisher/Alida) Steelman Rosebank Macoun Ingoldsby Silverton Hastings Gainsborough Alameda • 342 MMbbls of OOIP (35-37 degree API) Surge Land • Current recovery factor 19.8% of OOIP Surge Wells RPL Assets • Rates of return ~74% (1) • 45 gross/41 net drilling location
Slide 13: 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 14: 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 15: 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 16: 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 • Current recovery factor 0.5% of OOIP • 138 gross/111 net drilling locations remain at SW Saskatchewan Viking (2)
Slide 17: 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 18: 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 Gilw
Slide 19: Risk Management/Hedging Strategy
RISK MANAGEMENT/HEDGING STRATEGY Oil Hedges • The Company has an orderly, on-going, risk management / hedging program 55% designed to lock in future cash flows 6,000 to protect the Company’s capex Oil Volume program and fund dividends. 43% 43% Currently Hedged 45% 42% % Hedged of net after royalty v
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 <89%; NO DRIP • Strong balance sheet; 2014 debt to funds flow ratio of <1.3x • 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 years of FDC/cash flow) • Over 700 low risk develo
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 (USD$ WTI) $95.50 +/-$1.00 $2.4 million Gas Price (C$ / Mcf) $3.69 +/- $0.10 $0.5 million Production 16,125 +/- 100 $1.7 million Cash Netback $45.67 +/- $0.50 $3.0 million Exchange Rate $0.94 +/- $0.01 $2.6 million Interest Rate 4.5% +/-
Slide 25: Estimated Tax Pool Summary
Estimated Tax Pool Summary 2013 Canadian Exploration Expense $21.9 million Non-Capital Losses $26.8 million Canadian Development Expense $265.7 million Canadian Oil & Natural Gas Property Expense $610.8 million UCC $250.6 million Share Issue Costs $4.1 million Total $1,179.9 million 25