SUSTAINABLE CONVENTIONAL RESOURCE COMPANY TSX: SGY … · Apr-19, $71.29 $-$10 $20 $30 $40 $50 $60...
Transcript of SUSTAINABLE CONVENTIONAL RESOURCE COMPANY TSX: SGY … · Apr-19, $71.29 $-$10 $20 $30 $40 $50 $60...
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SUSTAINABLE CONVENTIONAL
RESOURCE COMPANY
TSX: SGY
AGM PRESENTATION
MAY 14, 2019
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FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES22
WORLD CRUDE OIL - SUPPLY AND DEMAND
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FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES33
DECOUPLING OF CRUDE OIL PRICES AND ENERGY STOCKS
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FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES44
CONSISTENT PRODUCTION GROWTH OVER 11 FINANCIAL QUARTERS
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FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES5
2019 SUSTAINABILITY ANALYSISCommodity Sensitivity (1)
WTI (USD) $55 $65 $75
FX (USD / CAD) $0.75 $0.75 $0.75
WTI (CAD$ / Bbl) $73.33 $86.67 $100.00
MSW-to-WTI Differential (US$ / Bbl) -$5.00 -$5.00 -$5.00
WCS-to-WTI Differential (US$ / Bbl) -$15.00 -$15.00 -$15.00
Capital Efficiency ($ / boepd) $25,500 $25,500 $25,500
2019e Cash Flow from Operating Activities(2) ($ MM) $171 $236 $291
Exploration and Development Capital ($ MM) $135 $135 $135
Dividend ($ MM) $31 $31 $31
Capital & Dividend ($ MM) $166 $166 $166
Cash Flow from Operating Activities in Excess of Capital &
Dividend ($ MM)$5 $70 $125
All-in Payout Ratio(3) 97% 70% 57%
(1) Based on production of 22,000 Boepd.
(2) Assumes $NIL working capital.
(3) See the Non-GAAP financial measures and Capital Management measures section of this document.5
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FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES6
SURGE DIVIDEND GROWTH
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FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES7
CASHFLOW NETBACK COMPARISONTOP QUARTILE CASHFLOW NETBACKS(1)
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
A B C D E Surge F G H I J K L M N O P Q R S
(1) Information taken from National Bank Financial’s “Energy Equity Compsheet” dated May 9, 2019.
Peer Group Avg.
Netback of $14.91
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$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
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Shaunavon Greater Sawn Sparky Valhalla
Ne
tba
cks b
y A
rea
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TOP DECILE OPERATING NETBACKSSURGE’S FOUR CORE AREAS HAVE EXCELLENT OPERATING NETBACKS
Peer Group Avg.
Netback of $14.91
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NORMALIZATION OF REALIZED PRICESSurge’s Realized Oil Price Improved Dramatically in Q1 2019
Dec-18, $18.98
Apr-19, $79.17
Dec-18, $8.12
Apr-19, $71.29
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19
Oil
Prices (
CA
D$)
WTI EDMN WCS
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FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES10
PRODUCT MIX 2019Less than 10% of WCS correlated barrels exposed to widening differentials
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FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES11
OIL HEDGING
All USD-denominated WTI hedges have been converted to CAD at a rate of $0.75 USD/CAD for the purposes of this graph.11
4,0
00
Bb
l/d
6,7
50
B
bl/d
5,7
50
B
bl/d
2,5
00
B
bl/d
1,5
00
B
bl/d 500
Bbl/d $-
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Qtr. 2 2019 Qtr. 3 2019 Qtr. 4 2019 Qtr. 1 2020 Qtr. 2 2020 Qtr. 3 2020
WT
I per
Bbl (C
AD
)
Oil
Volu
me (
Bbl/D
)
Avg. Bbl/D Hedged Avg. Price Floor - CAD WTI / Bbl
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FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES12
OPERATIONS FOCUSED IN 4 CORE AREASHighly Economic Consistent Drilling Results
Valhalla:Total: ~5,300 boe/d
(65% Oil & NGL’s)
Sparky:Total: ~7,500 boe/d
(90% Oil & NGL’s)
Shaunavon:Total: ~2,500 boe/d
(100% Oil & NGL’s)
Surge 2019e Average Production
Total: 22,000 boe/d
(85% Oil & NGL’s)
Greater Sawn:Total: ~5,700 boe/d
(98% Oil & NGL’s)
Minors:
Total: ~1,000 boe/d
(50% Oil & NGL’s)
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FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES13
SPARKY – A DOMINANT POSITION Applying modern technology to a prolific Western Canadian formation
13
Medium Gravity
Oil Window
>20° API
Sparky Formation Facts(1)
First Production May 1922
Original Oil in Place > 11 Bbbls
Cum Production > 1 Bbbls
Recovery Factor <10%
Producing Wells > 20,000
Hz Wells / Multi-Stage Hz /
Surge Multi-Stage Hz>650 / >200 / >100
▪ The Sparky is a well established prolific oil producing
formation in Western Canada.
▪ Surge holds a dominant land position in the medium /
light gravity oil window and is applying modern
horizontal multi-stage fracturing technology.
Key Sparky Value Drivers:
• Shallow depth (700-900m).
• Low cost drilling (D,C&E at CAD$1.2MM per well).
• Low geological risk due to 3D seismic and thousands of
vertical penetrations.
• Focus on lighter oil gravity (23-31° API) = higher netbacks.
• Proven waterflood potential (Wainwright pool at >35%
recovery factor(1)).
AB SK
(1) Data sourced from Canadian Discovery and GeoScout
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SPARKY WELL RESULTS
Producing Day IP180 bopd (Geoscout)
P10
P50
P90
P50: 91 bopd, Cap Eff: $13,736/bopd
IP180 Lognormal Distribution (oil only): 101 Surge wells over 6 years
(IP180 results within a given play follows a lognormal distribution)
P10: 130 bopd
P90: 54 bopd
SGY Sparky
• Well Cost: $1.25 MM
• Capital Efficiencies: $13,736/bopd
• EUR 120,000 bbls
• Inventory: >400 Sparky locations
• OOIP/section: 4 to18 MMbbls
• SGY Estimated Net OOIP >850 MMbbls
P10/P90 ratio: 2.4 (130/54)
Surge target’s a P10/P90 ratio of 6 or less (consistent results)
Production efficiencies calculated using P50 ($/bopd)
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SAWN SLAVE POINT WELL RESULTS
Producing Day IP180 bopd (Geoscout)
P10
P50
P90
IP180 Lognormal Distribution (oil only): 43 wells over 6 years
P50: 190 bopd
Cap Eff: $16,842/bopd
SGY Sawn Slave Point
• Well Cost: $3.2 MM
• Capital Efficiencies: $16,842/bopd
• EUR: 186,000 bbls
• Inventory: >110 Slave Point Locations
• OOIP/section: 4 to 8 MMbbls
• SGY Estimated Net OOIP >690 MMbbls
P90: 120 bopd
P10: 296 bopd
P10/P90 ratio: 2.5 (296/120)
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UPPER SHAUNAVON WELL RESULTSIP180 Lognormal Distribution (oil only): 65 Surge wells over 5 years
P10
P50
P90
Producing Day IP180 bopd (Geoscout)
SGY Upper Shaunavon
• Well Cost: $1.35 MM
• Capital Efficiencies: $11,440/bopd
• EUR: 90,000 bbls
• Inventory: >100 Upper Shaun Locations
• OOIP/section: 4 to 10 MMbbls
• SGY Estimated Net OOIP >225 MMbbls
P50: 118 bopd Cap Eff: $11,440/bopd
P10: 219 bopd
P90: 51 bopd
P10/P90 ratio: 4.3 (219/51)
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DOIG WELL RESULTSIP180 Lognormal Distribution (oil only): 44 Surge wells over 8 years
P10
P50
P90
Producing Day IP180 bopd (Geoscout)
SGY Doig
• Well Cost: $4.0 MM
• Capital Efficiencies: $11,494/bopd
• EUR: 232,000 bbls
• Inventory: >32 Doig Locations
• OOIP/section: 5 to 20 MMbbls
• SGY Estimated Net OOIP >150 MMbbls
P10: 885 bopd
P90: 140 bopd
P50: 348 bopd, Cap Eff: $11,494/bopd
P10/P90 ratio: 6.3 (885/140)
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SURGE – PROACTIVELY MANAGING AROSurge continues to abandon and reclaim inactive wells
▪ Over the past 5 years, Surge has abandoned over 495 wells, compared to only 177 net
new drills.
• Historically, Surge has completed well abandonments for less than ~70% of the stated government
amounts (i.e. AER).
▪ The Company has budgeted $6 million for decommissioning expenditures in 2019, which
is 45% more than required by the AER under the ABC program.
▪ Area Based Closure (“ABC”) is a voluntary program that allows operators to efficiently
utilize capital to address the abandonment of wells, facilities and pipelines.
• ABC allows Surge to concentrate its abandonment efforts on areas of choice instead of chasing ‘one off’
wells across the province.
▪ Surge has recently initiated an ABC program in its inactive Cherry natural gas property
(65 wells).
• Program scheduled to be finished within one year (initiated in January 2019, expected completion in Q3
2019);
• Expected to complete the Cherry ABC program for less than 55% the AER’s stated deemed liability
amount; and
• Surge is anticipating similar results in several of the Company’s other inactive fields.