Athabasca Oil Corporation · TSX:ATH
Athabasca Oil — Investor Presentation (June 2022)
32 slides from Athabasca Oil's investor presentation, June 2022
Slide 1: Athabasca Oil Corporation
ATHABASCA OIL CORPORATION FOCUSED | EXECUTING | DELIVERING JUNE 2022
Slide 2: Why Own Athabasca
WHY OWN ATHABASCA PREDICTABLE, LOW DECLINE THERMAL OIL BUSINESS Strong netbacks; $47/bbl in Q1/22 Low sustaining capital requirements (~$5/bbl) >1 billion boe 2P reserves underpins long reserve life Athabasca is committed to returning free cash flow to DE‐RISKED LIGHT OIL BUSINESS WITH FLEXIBLE
Slide 3: Portfolio ~35,000 boe/d | 90% Liquids
PORTFOLIO ~35,000 BOE/D | 90% LIQUIDS THERMAL OIL ASSETS (~29,000 BBL/D) LIGHT OIL ASSETS (~7,000 BOE/D) LEISMER Top tier project that PLACID MONTNEY HANGINGSTONE has been in operation for 11 years with 70% WI Placid with current production of stable declines, high ~20,000 bbl/d margins and flexible
Slide 4: Q1 2022 Highlights
Q1 2022 HIGHLIGHTS 34,679 boe/d (92% liquids) $75MM Adj FFO ($0.14/sh) $44MM FCF; $31MM Capex 2022e 33‐34,000 boe/d 2022e ~$300MM 2022e $180MM FCF ~$270MM Liquidity Operating Netback C$141MM Debt Reduction ~$49/boe Light Oil Inclusive of ~$190MM Cash US$350MM Notes US$240MM ~$47/bbl Thermal Oil Q1/
Slide 5: Capital Structure & Guidance
CAPITAL STRUCTURE & GUIDANCE CAPITAL STRUCTURE CAPITAL STRUCTURE OVERVIEW Equity Indexation Update o US$240MM Second Lien Notes ATH to be added to S&P/TSX Composite Index on June 20, 2022 • 9.75% coupon & 5‐year term to Q4 2026 • Semi‐annual free cash flow redemption feature at 105 • US$110MM (~C$14
Slide 6: Managing for Strong Free Cash Flow
MANAGING FOR STRONG FREE CASH FLOW EBITDA & FCF AT US$85 WTI (C$MM) STRONG FREE CASH FLOW ~$900MM 3‐year cum FCF o Maintain production base of ~34,000 boe/d o Low annual sustaining capital of ~$125MM o 10+ year tax free horizon ($3.1B of tax pools) EXCELLENT EXPOSURE TO COMMODITY UPSIDE o 2022 hedge
Slide 7: Creating Significant Shareholder Value
CREATING SIGNIFICANT SHAREHOLDER VALUE DEBT OUTLOOK US$85 WTI (C$MM) US$350MM UNIQUE LOW LEVERAGE COMPANY Term Debt Net cash position o Direct 100% of free cash flow to debt repayment near‐term • Net cash position achieved by year end 2022 US$175MM target • Debt target US$175MM (50% reduction) achie
Slide 8: Integrated Sustainability
INTEGRATED SUSTAINABILITY TECHNOLOGY OVERVIEW CARBON CAPTURE – AOC’S LOW‐CARBON BARREL o Entropy Inc. (Entropy) modular carbon capture technology (CCS) • Finalized a Letter of Intent in March 2022 • Detailed engineering underway; commercial model established o Sequestration into regional disposal zo
Slide 9: Asset Overview
ASSET OVERVIEW
Slide 10: The Thermal Business
THE THERMAL BUSINESS HIGHLIGHTS THERMAL PROPERTIES 100% Working Interest Fort McMurray 27,909 bbl/d Q1/22 Production AOC Hangingstone ~$400MM 2022E Operating Income 2022E Enbridge ~$115MM Capital Expenditures Hangingstone Cheecham 414 MMbbl & Gross Reserves Surmont 1,230 MMbbl (Proved & 2P) AOC Corn
Slide 11: Thermal Oil – Leismer
THERMAL OIL – LEISMER STRATEGIC POSITIONING DEVELOPMENT MAP o Maximize FCF and deliver strong netbacks ($49/bbl Q1/22) 2022 ACTIVITY OVERVIEW o Turnaround completed on schedule & on budget in May o Pad L8 – 5 wells on‐stream; ramping up to >5,000 bbl/d in 2022 o Pad L8M – spud 5 additional well pair
Slide 12: Thermal Oil – Hangingstone
THERMAL OIL – HANGINGSTONE DEVELOPMENT MAP STRONG RESERVOIR RESPONSE o Excellent facility utilization o Improved SOR due to the field wide NCG co‐injection o Start‐up of standing well pair in December 2021 COST OPTIMIZATION o Competitive non‐energy op. expenses ($7.37/bbl Q1/22) o 5,000 bbl/d third‐
Slide 13: Thermal Oil – Crown Royalty Advantage
THERMAL OIL – CROWN ROYALTY ADVANTAGE CROWN ROYALTY OVERVIEW OIL SANDS ROYALTY RATES o Royalties vary depending on whether a project is in Gross revenue less opex & capex pre‐payout or post‐payout phase • Pre‐payout royalty rates are lower to account for the initial cost of investment • Post‐payout
Slide 14: The Light Oil Business
THE LIGHT OIL BUSINESS HIGHLIGHTS LIGHT OIL PROPERTIES 6,769 boe/d Q1/22 Production Kaybob 2022E Net Capital ~$13MM Expenditures ~$95MM 2022E Operating Income ~850 Gross Locations ~280,000 Gross Acres Placid 27 MMboe & Gross Reserves 72 MMboe (Proved & 2P) ~12 years & RLI o Joint Venture with Murphy
Slide 15: Light Oil – 2022 Activity
LIGHT OIL – 2022 ACTIVITY STRATEGIC OBJECTIVES PLACID MONTNEY o Maintain future optionality o Maximize netback & cash flow generation ($49/boe in Q1) 2022 ACTIVITY o Kaybob Duvernay: 3 Two Creeks wells currently on stream FUTURE ACTIVITY o ~150 gross Montney development locations o ~700 gross Duvern
Slide 16: ESG Overview
mea ESG OVERVIEW
Slide 17: ESG – 2021 Report
ESG – 2021 REPORT We believe that the responsible energy we produce here in Alberta makes people’s lives better. Our ESG report is an opportunity for us to showcase the positive impacts we have made and explain how sustainability and responsibility are being embedded into every decision we make. “Ou
Slide 18: ESG – Integrated Sustainability
ESG – INTEGRATED SUSTAINABILITY TECHNOLOGY OVERVIEW CARBON CAPTURE – AOC’S LOW‐CARBON BARREL o Entropy Inc. (Entropy) modular carbon capture technology (CCS) • Finalized a Letter of Intent in March 2022 • Detailed engineering underway; commercial model established o Sequestration into regional dispo
Slide 19: ESG – Technology Roadmap to Decarbonization
ESG – TECHNOLOGY ROADMAP TO DECARBONIZATION Decarbonization Roadmap HIGHLIGHTS o Track record of utilizing new technologies to improve environmental performance o Evaluate and implement new technologies focused on reducing both intensity and total emissions o Developed a Technology Roadmap to Decarb
Slide 20: ESG – Governance & Social
ESG – GOVERNANCE & SOCIAL GOVERNANCE SOCIAL o Technically‐focused, experienced management team o Contributed 66% of the Provincial Park Lands • Four most senior executives have managed current • Expanded the ecologically and culturally significant portfolio for an aggregate of ~40 years Kitaskino Nu
Slide 21: ESG – Commitment to Responsibility
ESG – COMMITMENT TO RESPONSIBILITY “As we progress, Athabasca will focus on transparency and continuous advancement as we deliver on our commitments to our stakeholders, communities, and employees. We invite you to join us on our ESG journey as we continue to grow and responsibly produce energy in A
Slide 22: Appendix
mea APPENDIX
Slide 23: Management Team
MANAGEMENT TEAM o Joined Athabasca in 2012 as Senior Vice President Light Oil. Promoted to Chief Operating Officer in 2013 and President and Chief Executive Officer in 2015 o 30 years of exploration and production experience including 18 years with Talisman Energy in various technical Rob Broen, P.E
Slide 24: Historical Transformation of ATH
HISTORICAL TRANSFORMATION OF ATH $486MM $470MM Significant Deleveraging; Light Oil JV Contingent $265MM Infrastructure US$110MM Redeemed with Bitumen YTD (June 2022) Murphy Oil Royalties Sale Resource Resumption of Pre‐COVID Managing for Appraisal Business Plan strong FCF 2016 2017 2018 2019 2020 20
Slide 25: Market Egress and Risk Management
MARKET EGRESS AND RISK MANAGEMENT CANADIAN MARKET ACCESS IMPROVING CANADIAN EGRESS OUTLOOK (MMBBL/D) o Excess pipeline capacity for foreseeable future • Enbridge L3R: +270,000 bbl/d in‐service • TMX: +590,000 bbl/d in 2023 o Lower WCSB supply growth expectations • Producers focused on return of capi
Slide 26: Thermal Oil – Unparalleled Cash Flow Opportunity
THERMAL OIL – UNPARALLELED CASH FLOW OPPORTUNITY TECHNICAL HIGHLIGHTS FINANCIAL HIGHLIGHTS o Low decline o High torque to oil with operating leverage o Long‐life reserves • Q1/22 Thermal Oil netback of ~$47/bbl • 1.2 billion 2P reserves; >100 years RLI o Low Crown royalties • Land held • 9% (pre‐pay
Slide 27: Thermal Oil – Operations Improvements
THERMAL OIL – OPERATIONS IMPROVEMENTS HISTORY OF HIGH FACILITY UTILIZATION RATES LEISMER LOWER WELL PAIR COSTS ($MM) Hangingstone partial shut‐in in 2020 LEISMER TECHNOLOGY DRIVING RATES (BBL/D) NON‐ENERGY OPEX ($MM) 1,200 Leismer Pad 1‐6 Hangingstone 1,000 Pad 7 Hangingstone partial shut‐in in 2020
Slide 28: Light Oil – Netbacks & Operations Improvements
LIGHT OIL – NETBACKS & OPERATIONS IMPROVEMENTS INDUSTRY LEADING NETBACK (Q4/21) High Liquids % High Quality Product ~$49/boe (Q1) Low Lifting Costs 1,500 DUVERNAY OIL WELL RESULTS (BOE/D) HISTORICAL WELL COSTS ($MM) 2016 Wells 2017 Wells 1,200 2018 Wells 2019 Wells 2020 Wells 900 >100% increase in 6
Slide 29: Reader Advisory
READER ADVISORY Forward Looking Statements This Presentation contains forward‐looking information that involves various risks, uncertainties and other factors. All information other than statements of historical fact is forward‐looking information. The use of any of the words “anticipate”, “plan”, “
Slide 30: Reader Advisory Cont'd
READER ADVISORY CONT’D Reserves Information The McDaniel Report was prepared using the assumptions and methodology guidelines outlined in the COGE Handbook and in accordance with National Instrument 51‐101 Standards of Disclosure for Oil and Gas Activities, effective December 31, 2021. There are num
Slide 31: Reader Advisory Cont'd
READER ADVISORY CONT’D Production Athabasca’s 2022 forecasted total average daily production is between 33,000 ‐ 34,000 boe/d. Athabasca expects that approximately 82% of that production will be comprised of bitumen, 8% shale gas, 5% tight oil, 3% condensate natural gas liquids and 2% other natural
Slide 32: Athabasca Oil Corporation
ATHABASCA OIL CORPORATION