Surge Energy Inc. · TSX:SGY
Surge Energy — Investor Presentation (June 2024)
30 slides from Surge Energy's investor presentation, June 2024
Slide 1: Premier Oil Assets Driving Free Cash Flow and Shareholder Returns
TSX: SGY Premier Oil Assets Driving Free Cash Flow and Shareholder Returns CORPORATE PRESENTATION SUMMER 2024
Slide 2: The Surge Value Proposition
The Surge Value Proposition High quality assets and strategic capital allocation maximize shareholder value and returns $$$ + = + High Quality Disciplined Capital Proven Track Maximize Free Cash Flow Conventional Assets Allocation Record of Execution and Shareholder Returns • Dominant positions in c
Slide 3: Proven Business Strategy
Proven Business Strategy Focused on sustainable returns and enhancing free cash flow Surge executes on a simple, DISCIPLINED repeatable business strategy: CAPITAL ALLOCATION Undertake low cost, low risk • Develop high quality conventional oil projects that support sustainability reservoirs with prov
Slide 4: Recent Highlights – May 29, 2024 PR
Recent Highlights – May 29, 2024 PR Surge continues to execute on its business model and Return of Capital framework, recently: • Closing the sale of two non-core assets for total proceeds of $37.4 million; • Achieving its $250 million Phase 2 debt target several months earlier than previously antic
Slide 5: Corporate Guidance for 2024
Corporate Guidance for 2024 Key Guidance & Assumptions1 US$75 WTI 2024 Cash flow from operating activities2 $290 MM Focused on returns and 2024 Free cash flow3 before dividends $100 MM enhancing free cash 2024 All-in payout ratio3 (including $0.52/share annual dividend) 83% flow while managing risk
Slide 6: Return of Capital Framework
Return of Capital Framework Surge is well positioned to deliver returns to shareholders through its base dividend and excess Free Cash Flow Excess FCF Allocation of Excess Free Cash Flow (after Base Dividend) After Dividends: $48 million Base Dividend: 25% $52 million 50% 50% 2024 Guidance Cashflow
Slide 7: Positioned To Be A Top Performer
Positioned To Be A Top Performer Surge has been independently recognized as having one 2024e Implied Share Price (US$90 WTI & US$60 WTI) of the best FCF yields in its intermediate peer group while trading at a very attractive NAV valuation. Surge’s top tier FCF yield takes into account its high netb
Slide 8: Compelling opportunity for energy investors
Energy will continue to offer investors a highly attractive Compelling value proposition in 2024 and beyond opportunity for energy investors While upstream investment is recovering from the 2020-2021 downturn, annual investment will need to increase by a cumulative $4.9 trillion between 2023 and 203
Slide 9: Compelling opportunity for energy investors
Compelling opportunity for energy investors With historically low debt levels, excellent free cash flow yields, and low trading multiples, top oil companies offer more attractive returns to investors than any other industry sector today. The forecast for oil prices in 2024 remains bullish, driven by
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: 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 a 7.7% recovery
Slide 12: Core Area Focused
Core Area Focused Sparky and SE Saskatchewan provide exceptional economics and a depth of drilling inventory Sparky SE Saskatchewan Light/medium crude oil production with compelling Highly focused, operated asset base with excellent light returns. Low on-stream costs with extensive drilling and oil
Slide 13: 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 is drilling ~60km Saskatchewan a mix of horizontal multi-frac and horizontal multi- lateral wells in the Sparky area 18°-2
Slide 14: Sparky Core Area Long-Term Growth Potential
Sparky Core Area Long-Term Growth Potential Pad drilling, advanced horizontal multi-stage fracturing technology, and multi-lateral horizontal success has unlocked the potential of the Sparky play Sparky Core Area Production Growth >1 billion bbls OOIP net to SGY (internally estimated) >470 net >110
Slide 15: SE Saskatchewan: A Light Oil Balance
SE Saskatchewan A Light Oil Balance Surge’s operational track record of success in SE Saskatchewan Manitoba Surge Land Saskatchewan makes this an exciting growth area Midale Subcrop Frobisher Subcrop Area Benefits Alida Subcrop Ratcliff Subcrop • Organic growth opportunities • Strategic acquisitions
Slide 16: Key Growth Driver
Key Growth Driver High operating netback light Key Operational Areas oil production and reserves >400 million bbls SE Saskatchewan ~7,600 boepd (>90% light oil) from low risk, proven Manitoba ~400 boepd (~99% light oil) conventional reservoirs OOIP net to SGY (internally estimated) SE Saskatchewan F
Slide 17: Committed to Sustainability
Committed to Sustainability Surge is dedicated to responsible asset development and creating value for current and future generations Climate focus: integrate climate risks and opportunities within both Board and Executive management mandates Minimize environmental impact: ensure all operating areas
Slide 18: Sustainability in Action
Sustainability in Action Surge continues to execute on its focused sustainability priorities CANADA OIL CARBON INTENSITY VS GLOBAL AVERAGE* • Surge maintains an active sustainability advisory committee focused on supporting emission reduction targets, water 0.1000 management, spill mitigation, and e
Slide 19: Leadership
Leadership Paul Colborne Jared Ducs Murray Bye Derek Christie Margaret Elekes President & CEO CFO COO Senior VP, Exploration Senior VP, Land & BD Dan Kelly Grant Cutforth VP, Finance VP, Business Development 19
Slide 20: 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 2,4,5 Corporate Governance Committee. Ms. Jim Pasieka1 Burnyeat serves as Chair. Independent Director Chairman 3
Slide 21: Corporate Information
Corporate Information TSX First Lien Lending Syndicate SGY.TO National Bank of Canada ATB Financial BDC Capital Canadian Western Bank Auditor Registrar & Transfer Agent Headquarters KPMG LLP Odyssey Trust Surge Energy Inc. Centennial Place, East Tower Legal Counsel Investor Contacts 1200 520 3rd Ave
Slide 22: Appendix
Appendix
Slide 23: 2023 Reserves and Net Asset Value
2023 Reserves and Net Asset Value Dec. 31, 2023 Sproule (Proforma Disposition) Reserves1 Oil Equivalent Oil & Liquids BTax NPV10 Gross Reserves2 Total Reserves (%) ($MM)3,4 (Mboe) Proved Developed Producing (PDP) 41,155 88% $823 Total Proved (1P) (339 net locations) 78,790 87% $1,342 Total Proved Pl
Slide 24: WTI Hedging Summary
WTI Hedging Summary 8,000 7,000 6,000 5,000 WTI Volumes (Bbl) 4,000 3,000 2,000 1,000 0 Qtr. 2 2024 Qtr. 3 2024 Qtr. 4 2024 Qtr. 1 2025 Qtr. 2 2025 Swaps Puts Collars 24
Slide 25: Hedging Detail
Hedging Detail WTI Crude Oil Derivative Contracts Natural Gas Derivative Contracts Swaps Puts Collars Swaps Collars Average Average Average Period Volumes Avg. Price Volumes Volumes Bought Average Average Bought Put Sold Call Put Period Vol. Avg. Price Vol Bought Put Sold Call Qtr. 2 2024 1,500 $ 80
Slide 26: 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 $100.00 As power prices fluctuate significantl
Slide 27: Advisories - Forward-Looking Statements
Advisories - Forward-Looking Statements This presentation contains forward- More particularly, this presentation contains statements concerning: Surge’s anticipations regarding 2024 excess FCF and the allocation thereof, including the commencement of a gas industry in general (e.g., operational risk
Slide 28: 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 Drilling Inventory for on a well-by-well basis by Surge’s Qualified Reserve Evaluators. All type curves fully natural gas. Boe may be misleading, particularly if used in iso
Slide 29: 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 predominately as a discretionary allocation of capital, with flexibility to determine the size Free cash flow yield is a non-GAAP ratio, calculated as free cash flo
Slide 30: Advisories - Non-GAAP & Other Financial Measures
Advisories - Non-GAAP & Other Financial Measures Operating Netback, Operating Netback per boe, and Adjusted Funds Flow per boe All-in Payout Ratio All-in payout ratio is a non-GAAP ratio, calculated as exploration and development expenditures, plus dividends paid, divided by cash Operating netback i