Surge Energy Inc. · TSX:SGY
Surge Energy — Investor Presentation (August 2015)
31 slides from Surge Energy's investor presentation, August 2015
Slide 1: Positioned for Long Term Sustainability
POSITIONED FOR LONG TERM SUSTAINABILITY TSX: SGY AUGUST, 2015
Slide 2: Reasons to Own Surge
REASONS TO OWN SURGE 100% operated, high quality, low decline asset base High quality light/medium crude oil asset base; low decline <23% >1.6B (1.4B net) barrels of OOIP under management; RF~7.5% $0.30 annual dividend High netbacks; top tier capital efficiencies Experienced management tea
Slide 3: Surge Energy: Well positioned for growth and sustainable dividends
SURGE ENERGY Well positioned for growth and sustainable dividends Total Proved plus Probable Reserves of 86.7 mmboe Production Exit Rate >14,500 boepd (76% oil) Low Decline of 23% (RLI >15 years) Exit Net Debt(e): $138MM with forecast debt to annualized Q4 FFO of 0.96(1) Bank line: $425 mi
Slide 4: Q2 2015 Highlights
Q2 2015 HIGHLIGHTS Reduced G&A by 23% and OPEX by 15% as compared to Q1/15 Achieved a debt to funds flow ratio of 0.9x for Q2/15 Q2/15 capital program of $15MM represented only 42% of funds from operations; 90% payout ratio Reduced G&A costs by 23% quarter over quarter to $1.64 per boe OPEX
Slide 5: Second Half 2015
SECOND HALF 2015 Second half exit production of 14,500 boe per day with $42.6MM capital spend Conservative $42.6MM capital program 2015 exit rate of 14,500 boepd; production growth of >3% YOY Drill and complete 11 net wells (7 Upper Shaunavon, 2 Doig & 2 Sparky) Q3 initiation of Upper Shauna
Slide 6: Second Half 2015 Capital Program
SECOND HALF 2015 CAPITAL PROGRAM Protecting NAV and balance sheet through conservative capital spending OPERATIONAL Average Production (boe/d) for 2H 2015 >14,250 (76% Oil/NGLs) Capital Spending for 2H 2015 $42.6 million Wells Drilled in 2H 2015 11 net wells • 7 Shaunavon • 2 Valhalla Doig • 2 Spark
Slide 7: Elite Assets Focused in Three Core Areas
ELITE ASSETS FOCUSED IN THREE CORE AREAS Large OOIP pools in established conventional reservoirs Surge Production: Total: >14,250 boe/d (76% Oil & NGL’s) (~57% on AB Crown) Western Alberta Production: Total: ~7,750 boe/d (66% Oil & NGL’s) SE AB Production: Total: ~3,700 boe/d (88% Oil & NGL’s) Shaun
Slide 8: Core Area Details
CORE AREA DETAILS >1.4 Billion bbl’s net OOIP with potential to recover an additional ~124 Million bbl’s net to Surge OOIP (MMbbls) Drilling Locations Avg. CTD(1) Oil Total Booked Independent (1) Internally Estimated Ultimate Core Area Formations WI Recovery Recovery Factor P+P Recovery Net (Waterfl
Slide 9: Targeting Conventional Reservoir Rock
TARGETING CONVENTIONAL RESERVOIR ROCK Large OOIP, high quality reservoirs tend to get larger over time Conventional reservoirs tend to outperform over time: • Year over year recovery factor reserve additions • Long life, low decline production • Higher ultimate recoveries • Enhanced oil recovery b
Slide 10: Conventional vs. Unconventional Reservoirs
CONVENTIONAL VS. UNCONVENTIONAL RESERVOIRS Surge targets reservoirs that sit on the conventional end of the permeability spectrum Ultimate Oil Recovery factors and Recovery rates of return increase as ROR reservoir quality improves. Unconventional Conventional Reservoirs Reservoirs Extremely Very Ti
Slide 11: Three Core Conventional Reservoirs
THREE CORE CONVENTIONAL RESERVOIRS Applying proven technology to conventional reservoirs helps provide top tier performance and recovery factors U. Shaunavon Valhalla Doig Sparky Depth 1450m Depth 2000m Depth 725m Net Pay 4 - 10m Net Pay 15 - 35m Net Pay 8 - 12m Porosity 12-18% Porosity 6-10% Porosi
Slide 12: Top Tier Capital Efficiencies and Replacement Metrics
TOP TIER CAPITAL EFFICIENCIES AND REPLACEMENT METRICS Large inventory with excellent economics using June 2015 strip pricing Areas/Formations Capital Rates of Drill/ Complete/ Mboe/well Core Area Locations Efficiency Return (1) Equip 180 day IP (on primary) (Gross / Net) (July 2015 Strip Pricing) Up
Slide 13: Quality Waterflood Projects
QUALITY WATERFLOOD PROJECTS Increasing reserves / flattening declines through waterflood implementation Current Properties Under Full Commercial Waterflood Area Formation Start Date 2015 Decline Current RF Booked RF Expected RF Silver Lloyd/ Cummings 1996 18% 12.6% 35.7% 39.0% Wainwright Sparky 1962
Slide 14: Southwest Saskatchewan - Shaunavon
SOUTHWEST SASKATCHEWAN - SHAUNAVON ~450MM barrels of net OOIP in the Upper and Lower Shaunavon combined ~450 MMbbls of net OOIP in the Lower and Upper Shaunavon formations (medium gravity oil) Current combined recovery factor ~1.0% Rates of return in excess of 85%(1) for the Upper Shaunavon
Slide 15: Upper Shaunavon
UPPER SHAUNAVON Large contiguous undeveloped land position in the Upper Shaunavon trend R21W3 R19W3 Area/Pool Well Count Depth OOIP Cum Oil Peak Rate Current Rate T10 Instow Vt Hz (m) (MMbbl) (MMbbl) (bbl/d) (bbl/d) Instow 118 2 1372 152.4 69.6 9420 2415 Dollard 109 5 1402 179.3 101 14660 2950 Eastb
Slide 16: Upper Shaunavon Activity
UPPER SHAUNAVON ACTIVITY >250MMbbl OOIP on Surge lands in the Upper Shaunavon R20W3 R19W3 R18W3 CPG U. Shvn Hz T7 191/13-20-006-19W3 On Prd Mar 2011 IP(90) = 109 BOPD Cum(YTD) = 24.5 mbbl Upper Shaunavon A Sand SGY Q4 ‘14 U.Shvn Hz Upper Shaunavon B Sand 191/04-34-005-19W3 On Prd Dec 2014 T6 Avg. 13
Slide 17: Upper Shaunavon Performance
UPPER SHAUNAVON PERFORMANCE Surge results in the Upper Shaunavon exceeding expectations Upper Shaunavon - SGY Results vs Type Curve 250 SGY Wells Normalized Rate (bopd) - 10 wells Production Rate (bopd), Cumulative Oil Production (mbbls) SGY Wells Avg. Cum (mbbls) McDaniel YE2014 Type Curve Rate (bo
Slide 18: Shaunavon Development Plan
SHAUNAVON DEVELOPMENT PLAN Increased cashflow and recovery through drilling and early waterflood implementation FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES 18
Slide 19: Northwest Alberta
NORTHWEST ALBERTA Large OOIP >700MMbbls in concentrated high quality light oil assets Large OOIP of >700 (600 net) MMbbls of high quality light Valhalla oil (32-40° API) OOIP: 228 mmbbl (195 mmbbl net) Nipisi OOIP: 155 mmbbl (150 mmbbl net) Current Production ~7,750 boe/d (66% Oil and NGL’s) Sun
Slide 20: Northwest Alberta - Valhalla
NORTHWEST ALBERTA - VALHALLA >195MMbbls net OOIP in oil rich Doig and Doe Creek formations Valhalla Doig Doe Creek ~130 MMbbls of net combined OOIP on Surge’s Valhalla Oil Pool and Wembley Lands (40 degree API light oil) Valhalla Rates of return of 62% (1) Current recovery factor ~3% 43/36 (
Slide 21: Southeast Alberta - Sparky
SOUTHEAST ALBERTA - SPARKY Provost / Eyehill / Wainwright area’s – Oil saturated Cretaceous sands Wainwright >400 MMbbls of net OOIP (23-31 degree API oil) Current recovery factor of ~15% Current production: ~3,900 boe/d Eyehill Sparky waterflood started in Q4 2014 and Provost waterflood pil
Slide 22: Risk Management / Hedging Strategy
RISK MANAGEMENT / HEDGING STRATEGY Oil Hedges The Company has an orderly, on-going, risk management / hedging program $100.00 7,500 designed to lock in future cash flows to protect the Company’s capex program and fund dividends. 6,500 $90.00 Surge has 5,500 barrels per day of WTI hedged (~ 60% 2
Slide 23: 2014 Year End Reserves
2014 YEAR END RESERVES ~$1.4 Billion of Total Proved plus Probable Reserves Value (NPVBT10) 2014 Year End Reserves Proforma SE Sask/MB Disposition Oil& NGLs Gas Total Reserve Category NPVBT10 ($MM) (1) (Mbbl) (MMcf) (Mboe) Proved Producing 26,327 49,784 34,624 $731 Proved Non-Producing 594 3,264 1,1
Slide 24: Positioned for Long Term Sustainability
POSITIONED FOR LONG TERM SUSTAINABILITY Low base decline <23%, high netbacks, excellent capital efficiencies $0.30 annual dividend; NO DRIP! Ongoing risk management/hedging program protects cash flow Excellent balance sheet – one of the best in the industry FOOTNOTES INCLUDED IN THE BACK AS
Slide 25: High Quality Crude Oil Asset Base
HIGH QUALITY CRUDE OIL ASSET BASE Focused, high quality, crude oil asset and opportunity base; 3 core areas are 100% operated, with working interests of ~90% Large OOIP crude oil reservoirs – with low recovery factors; >15 year RLI Over 700 net low risk development drilling locations provide >
Slide 26: Analyst Coverage
ANALYST COVERAGE Financial Institution Analyst Email Address Acumen Capital Partners Trevor Reynolds treynolds@acumencapital.com BMO Capital Markets Jim Byrne jim.byrne@bmo.com Canaccord Genuity Anthony Petrucci apetrucci@canaccordgenuity.com CIBC World Markets Inc. Jeremy Kaliel jeremy.kaliel@cibc.
Slide 27: Corporate Partners
CORPORATE PARTNERS Advisors National Bank of Canada Bank of Nova Scotia Canadian Imperial Bank of Commerce Toronto-Dominion Bank Bankers: Bank of Montreal ATB Financial HSBC Bank Canada Wells Fargo Goldman Sachs Auditor: KPMG LLP Legal Counsel: McCarthy Tétrault Sproule Associates Ltd. Evaluation En
Slide 28: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements. More particularly, this presentation contains statements concerning anticipated: business strategies, plans and objectives; potential development opportunities and drilling locations, expecta
Slide 29: Endnotes
ENDNOTES Slide 3: (1) Based on guidance pricing: WTI US$65.00, CAD/USD FX $0.81, WTI CAD$80.25, WTI-to-EDM differential CAD$3.70, EDM light CAD$76.55, $2.95/mmbtu AECO Slide 5 - 6: (1) Based on guidance pricing: WTI US$65.00, CAD/USD FX $0.81, WTI CAD$80.25, WTI-to-EDM differential CAD$3.70, EDM lig
Slide 30: Oil and Gas Advisory
OIL AND GAS ADVISORY "In this presentation, "Boe" means barrel of oil equivalent on the basis of 6 mcf of natural gas to 1 bbl of oil. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 6mcf: 1 bbl is based on an energy equivalency conversion method primarily appli
Slide 31: Non-GAAP Measures
NON-GAAP MEASURES NON-GAAP MEASURES This presentation includes non-GAAP measures as further described herein. These non-GAAP measures do not have a standardized meaning prescribed by International Financial Reporting Standards (“IFRS or, alternatively, “GAAP”) and, therefore, may not be comparable w