Teck Resources Limited Class A · TSX:TECK.A
Teck Resources Limited Class A — Investor Day (September 2018)
41 slides from Teck Resources Limited Class A's investor day presentation, Sep 4, 2018
Slide 1: Energy Business Unit
Energy Business Unit September 4, 2018 Kieron McFadyen, Senior Vice President, Energy Brad Strueby, Director, Operations Glenn Burchnall, Director, Marketing and Logistics
Slide 2: Forward Looking Information
Forward Looking Information Both these slides and the accompanying oral presentations contain certain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of the Securities Act (Ontario)
Slide 3: Agenda
Agenda Introduction to Teck Energy Fort Hills Energy Marketing & Logistics Frontier Update Next Generation Oil Sands Development Summary 3
Slide 4: A Highly Focused Team
A Highly Focused Team Leveraging Teck’s mining capability Kieron McFadyen Senior Vice President, Energy In Attendance Brad Strueby Glenn Burchnall Lyndon Chiasson Scott McKenzie Robin Johnstone Yvonne Walsh Rob Sekhon Director, Operations Director, Marketing Director, Director, Regulatory GM, Commun
Slide 5: Quality Barrels in a Progressive Jurisdiction
Quality Barrels in a Progressive Jurisdiction 4th largest oil sands mining portfolio Alberta, Canada Fort Hills is in operation • Teck 21.3% = 0.6 billion barrels1 Frontier is in the regulatory phase • Teck 100% = 3.2 billion barrels2 Lease 421 is a future growth opportunity • Teck 50% • High qualit
Slide 6: Energy Within Teck's Portfolio
Energy Within Teck’s Portfolio Consistent with all our strategic criteria Strategic diversification Long life assets Truck & shovel operations Low unit operating costs Resource quality & scale Stable jurisdiction 6
Slide 7: Our Energy Strategy
Our Energy Strategy Teck as a partner of choice Focus on maximizing value of Fort Hills • Safe and efficient ramp-up, increase production volumes, lower costs De-risk Frontier & Lease 421 • Frontier regulatory hearing scheduled for September 25, 2018 Drive business results through technology & innov
Slide 8: Fort Hills
Fort Hills Teck
Slide 9: Fort Hills is a Premier Asset
Fort Hills is a Premier Asset Long-life of >45 years with a very low decline rate • Commissioning has exceeded our expectations, and full production expected by Q4 2018 • We won’t rest on our laurels; focus on unit costs & low capital intensity debottlenecking opportunities • Executing our comprehen
Slide 10: Lower Carbon Intensity Product at Fort Hills
Lower Carbon Intensity Product at Fort Hills Comparable to the average barrel refined in the U.S. PFT Diluted Bitumen has a Lower Carbon Intensity Than Around Half of the Barrels of Oil Refined in the US, on a Wells-to-Wheels Basis1 Total carbon intensity (kgCO2e per barrel of refined products) 600
Slide 11: A Modern Mine Built for Low Cost Operations
A Modern Mine Built for Low Cost Operations Provides the foundation for our Energy business Safe & efficient operations: • Using leading-edge technology • Learnings from other facilities Operating costs: • Life of mine cash operating costs: C$22-23/bbl1 • Target below C$20 per barrel Capital efficie
Slide 12: Significant Debottlenecking Potential at Fort Hills
Significant Debottlenecking Potential at Fort Hills Opportunities identified during commissioning and start-up Mining Ore Preparation Primary Extraction Secondary Extraction Reliability and Availability Modeling (RAM) will quantify the potential uplift 12
Slide 13: Debottlenecking and Expansion Opportunities
Debottlenecking and Expansion Opportunities With significant incremental cash flow potential Potential capacity increase of 20-40 kbpd on a 100% basis • Teck’s 21.3% share of annual production could increase from 14.0 Mbpa to 15.5-17.0 Mbpa • Near term opportunities to achieve some of the increase w
Slide 14: Free Cash Flow for Decades
Free Cash Flow for Decades Providing Teck with steady and reliable cash flow Assumptions WTI price US$75/bbl • Energy EBITDA potential of ~C$530M WTI-WCS differential US$14.75 at full production of 14 Mbpa1 C$/US$ exchange rate 1.25 • Significant upside with debottlenecking Operating costs C$20/bbl
Slide 15: Energy Marketing & Logistics
Energy Marketing & Logistics
Slide 16: Significant Market Presence
Significant Market Presence Developing a reputation as a preferred counterparty First sales in March 2018 Excellent acceptance of Fort Hills’ product (FRB) in our core markets Teck’s Commercial Activities1 Active purchaser of diluent Bitumen production 38.3 kbpd +Diluent acquisition 11.2 kbpd =Bitum
Slide 17: Executing Our Comprehensive Sales & Logistics Strategy
Executing Our Comprehensive Sales & Logistics Strategy Seeing early returns from diverse market access Sales Mix Our sales mix provides diverse market access1 Monthly basis Long term contracts • 10 kbpd shipped to US Gulf Coast via Keystone at Hardisty at Hardisty pipeline • 39.5 kbpd at Hardisty, a
Slide 18: US Midwest and US Gulf Coast are Key Markets
US Midwest and US Gulf Coast are Key Markets Excess capacity for heavy in North America Blended Bitumen Pipelines Key Markets: Teck has contracted capacity on the existing Keystone pipeline and the proposed TransMountain pipeline • US Midwest is the largest market, but future growth is constrained E
Slide 19: Long Term Alberta Logistics Capability in Place
Long Term Alberta Logistics Capability in Place Contracted capacity will accommodate production upside Fort Hills Mine Terminal Pipeline Legend FHELP Managed Bitumen Diluent Northern Courier Pipeline Products Blend Teck Contracted Third Party Shipper East Tank Farm Blending Facility Wood Buffalo Pip
Slide 20: Frontier Update
Frontier Update Teck
Slide 21: Frontier is Another Major Resource
Frontier is Another Major Resource 100% Teck Nameplate capacity of 260,000 bpd Resource of 3.2 billion barrels1 >40 year mine life 21
Slide 22: Frontier Hearing Commences September 25, 2018
Frontier Hearing Commences September 25, 2018 Strong community support Provincial Completeness Submitted Project Integrated Joint Update Joint Federal Application JRP JRP JRP Regulatory Submission Regulatory Panel Review Hearing Report Decision November Review Review Appointment Statement June 2015
Slide 23: We are Ready for the Next Phase
We are Ready for the Next Phase Regulatory permitting process continues We are leading: • One of most comprehensive environmental assessments to date • Developing strong relationships with Indigenous communities and other stakeholders • Recognized permitting and progressive mining experience What is
Slide 24: Next Generation Oil Sands Development
Next Generation Oil Sands Development
Slide 25: Driving Business Results
Driving Business Results Technology/innovation sustains competitiveness and license to operate Business Drivers: Technology/Innovation: • Operational excellence • Autonomous haul trucks • Unit cost savings • Solvent extraction • Capital efficiency • Debottlenecking • Environmental performance • Part
Slide 26: Collaborating with the Industry as Part of COSIA
Collaborating with the Industry as Part of COSIA Technology is king Canada’s Oil Sands Innovation Alliance (COSIA) 26
Slide 27: Teck's Technology Pipeline
Teck’s Technology Pipeline Levering our know-how & innovation Alternative Material Handling VR / AR Saturated Blast Drones Fill Fines Movement Flotation Predictive Core Agglomeration Magnets Maintenance Scanning Smart Shovel Diggability Heads up Shovel Remote UX Display Dozer Autonomous Coarse Filte
Slide 28: Technology & Innovation at Teck
Technology & Innovation at Teck We put ideas to work Smart Shovels Autonomous Haul Trucks Operator Augmentation • Sensors used to separate • Improved productivity & • Empowers shovel ore from waste safety operators to increase • Currently employed at • Fort Hills is autonomous efficiency Highland Va
Slide 29: Summary
Summary Teck
Slide 30: Excellent Assets & People
Excellent Assets & People Teck Energy - a partner of choice; levering our mining leadership Energy is consistent with all our strategic criteria and provides growth options Energy moves from significant cash outflow to cash inflow by the end of 2018 #1 priority for Energy is to maximize value from F
Slide 31: Notes
Notes Slide 5: Quality Barrels in a Progressive Jurisdiction 1. Proved and probable reserves as at December 31, 2017. See Teck’s annual information form dated February 26, 2018 for further information regarding Fort Hills reserves. 2. Best estimate of unrisked contingent resources as at December 31,
Slide 32: Appendix - Energy Business Unit Modelling
Appendix - Energy Business Unit Modelling
Slide 33: Operating Netback – Q2 2018 (June)
Operating Netback – Q2 2018 (June) • Operating netback is a non-GAAP measure, presented on a product and sales barrel basis on page 22 of the Q2 2018 news release. • Derived from the Energy segmented information (P&L), after adjusting for items not directly attributable to the revenues and costs ass
Slide 34: Operating Netback – Q2 2018 (June)
Operating Netback – Q2 2018 (June) Fort Hills Mine Terminal Legend FHELP Managed Bitumen Price Realized Transportation East Tank Farm Operating Costs Blending Facility (-) Wood Buffalo Pipeline Norlite Pipeline(-) Wood Buffalo Pipeline Extension Teck Fort Saskatchewan Hardisty Terminal Cavern Storag
Slide 35: Operating Netback Reconciliation – Q2 2018 (June)
Operating Netback Reconciliation – Q2 2018 (June) Non-GAAP Financial Measure on page 49 of Q2 2018 news release One month ended One month ended (C$ in millions, except where noted) June 30, 2018 (C$ in millions, except where noted) June 30, 2018 Revenue as reported $ 78 Per barrel amounts (C$/barrel
Slide 36: Energy Gross Profit - Q2 2018 (June)
Energy Gross Profit - Q2 2018 (June) From Revenue and Gross Profit Table Blended Bitumen Revenue Calculation Q2 2018 news release; page 35 CAD$ in millions June 1-30, 2018 CAD$ in millions June 1-30, 2018 Revenue, as reported (A) $78 Revenue (A) $78 Add back: crown royalty (G) – from 3 Gross profit
Slide 37: Modelling Bitumen Price Realized – Q2 2018 (June)
Modelling Bitumen Price Realized – Q2 2018 (June) Non-GAAP Financial Measure Bitumen price realized = (blend salesA – diluent expenseB) / bitumen bbls soldC A. Blend sales = blend sales @ Hardisty + blend sales @ U.S. Gulf Coast (USGC) = $81 per “Blended Bitumen Price Realized Reconciliation” and “R
Slide 38: Energy EBITDA Simplified Model
Energy EBITDA Simplified Model Illustrative EBITDA Calculation - Teck Attributable @ 21.3% (14 Mbpd)1 Assumption Per Barrel Total WTI price US$75.00 Less: Weighted average WTI-WCS differential (US$13.50) Multiplied by: C$/US$ exchange rate @ $1.25 WCS price (WTI price less WTI-WCS differential x C$/
Slide 39: Notes: Appendix – Energy Business Unit Modelling
Notes: Appendix – Energy Business Unit Modelling Slide 38: Energy EBITDA Simplified Model 1. EBITDA is a non-GAAP financial measure. This model is being provided to illustrate how Teck calculates EBITDA for its Energy business unit. The figures included are not forecasts of projected figures of Teck
Slide 40: Non-GAAP Financial Measures
Non-GAAP Financial Measures
Slide 41: Non-GAAP Financial Measures
Non-GAAP Financial Measures EBITDA is profit attributable to shareholders before net finance expense, income and resource taxes, and depreciation and amortization. We believe that disclosing this measure assists readers in understanding the ongoing cash generating potential of our business in order