Surge Energy Inc. · TSX:SGY
Surge Energy — Investor Presentation (April 2014)
22 slides from Surge Energy's investor presentation, April 2014
Slide 1: Positioned for Sustainability and Growth
“POSITIONED FOR SUSTAINABILITY AND GROWTH” April, 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 Q1/14 Drilling/Waterflood Results – Better Than Expected: • 100% drilling success in Q1/14; exit rate increased to 16,850 boed (85% oil & NGLs) and 21,350 boed (84% oil & NGLs) proforma strategic business combination with Longview • Large new pool discovery in the Upper Shaunav
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 1.5 Billion barrels of OOIP under management - with current recovery factor of 10%; proforma the LNV combination over 1.9 Billion barrels of OOIP under management Strong balance sheet; ongoing ris
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: Elite, Focused Asset Base
ELITE, FOCUSED ASSET BASE EXPOSURE TO >1.5 BILLION BBLS OF OOIP 10% OIL RECOVERED TO DATE 7
Slide 8: Excellent Capital Efficiencies / Replacement Metrics
EXCELLENT CAPITAL EFFICIENCIES / REPLACEMENT METRICS Areas Rates of Drill/ Capital Mboe/well Locations Return Complete/ 180 day IP Efficiency (on primary) (Gross / Net) % Equip Upper Shaunavon (100/100) $18,950/boepd 78% $2.00MM 105 boepd (100% oil) 125 Lower Shaunavon $23,570/boepd 41% $1.65MM 70 b
Slide 9: 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) Recovery Net Property Formation Locations Avg. WI Recovery Recovery Gross/Net (Waterflood Gross/Net Factor Factor P+P(2) with (% OOIP) Dev
Slide 10: 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 11: Williston Basin
WILLISTON BASIN SE Sask (Midale/Frobisher/Alida) Steelman Rosebank Macoun Hastings Ingoldsby Silverton Gainsborough Alameda • 342 MMbbls of OOIP (35-37 degree API) • Current recovery factor 19.8% of OOIP Surge Land • Rates of return ~74% (1) • 67 gross/54 net drilling locations (2) • Estimated 23% R
Slide 12: 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) • 38 gross/34 net drilling locations remain at Manson(2) • 2 injectors have been implemented in Q3; exciting early response • Based on successful w
Slide 13: SW Saskatchewan
SW SASKATCHEWAN Shaunavon (Lower and Upper) • >350 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) • 369 gross/362 net drilling locations in the Lower and Upper Shaunavon based on 8 wells/section (
Slide 14: 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 15: 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/112 net drilling locations remain at SW Saskatchewan Viking (2)
Slide 16: 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) • 44 gross/37 net drilling locations at both Valhalla and Wembley • Continue delineating large
Slide 17: 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 • 37 gross/37 net Slave Point and Gilw
Slide 18: 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 50% 49% 49% to protect the Company’s capex 6,000 Oil Volume program and fund dividends. 43% Currently Hedged 45% % Hedged of net after royal
Slide 19: 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 19
Slide 20: 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 800 low risk develop
Slide 21: 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 22: 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 Sproule Associates Ltd. Evaluation Engineers: McDaniel & Associates Con