dallas enercom conference presentation february 21 · surge 5 year plan surge can grow organically...
TRANSCRIPT
DALLAS ENERCOM
CONFERENCE PRESENTATION
FEBRUARY 21 – 22
1
$-
$0.02
$0.04
$0.06
$0.08
$0.10
$0.12
$0.14
$-
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 ConsensusQ4/17 est.
Un
he
dg
ed
CF
/Sh
are
($/S
ha
re)
Un
he
dg
ed
Ca
sh
flo
w($
MM
)58% Cashflow Per Share Growth in 18 Months
(Unhedged)
Unhedged FFO ($MM) Unhedged CF/Share
**CAD Fx increased by 7% from
US$0.74 to US$0.79.
2
58% UNHEDGED CASHFLOW PER SHARE GROWTH
3
STABLE PRODUCTION GROWTH
45.0
50.0
55.0
60.0
65.0
10,000
11,000
12,000
13,000
14,000
15,000
16,000
Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 ConsensusQ4/17 est.
Pro
du
cti
on
per
Sh
are
(bo
ep
d/M
M S
hare
s)
Pro
du
cti
on
(b
oe
pd
)
Over 28% Production Growth in 18 Months (22% Per Share)
Production (mboe/day) Prod/MM Shares (mmboe/day)
**6 week Alliance pipeline
outage negatively
impacting Valhalla
volumes.
4
GROWING DIVIDEND AND MAINTAINING PAYOUT RATIO
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
$-
$0.010
$0.020
$0.030
$0.040
$0.050
$0.060
$0.070
$0.080
$0.090
$0.100
$0.075 $0.085 $0.095
Sim
ple
Payo
ut
Rati
o(%
)
An
nu
al
Div
iden
d($
/Sh
are
)27% Dividend Growth over 18 Months - Maintaining a
Simple Payout of ~20%
Dividend Simple Payout
ELITE ASSETS FOCUSED IN THREE CORE AREASLarge OOIP pools in established conventional reservoir trends
5
Valhalla Core Area:
Total: ~6,150 boe/d
(65% Oil & NGL’s)
Sparky Core Area:
Total: ~7,000 boe/d
(90% Oil & NGL’s)
Shaunavon Core Area:
Total: ~3,000 boe/d
(100% Oil & NGL’s)
Surge 2018(e) Avg Est. Production:
Total: 16,150 boe/d
(82% Oil & NGL’s)
LARGE OOIP, LOW RECOVERY FACTORS>1.77 Billion bbl’s net OOIP with up to >235 Million net barrels remaining recoverable
Core Area Formations
Estimated OOIP
(MMbbls)
Drilling Locations
Gross/NetAvg.
WI
CTD Oil
Recovery
Factor(1)
Total Booked Independent
Recovery Factor P+P(1)
Internally Estimated Ultimate
Recovery Net
(Waterflood with
Development Drilling)Gross/Net (Booked) (2) (% OOIP)
Valhalla
Doig/ Montney/
Slave Point/ Banff/
Doe Creek/
Wabamun
727/595153/140
(107/96)82% 6.0% 10.2% 23%
Sparky Mannville Group 805/707316/309
(100/97)88% 12.8% 16.9% 25%
ShaunavonShaunavon
(Upper & Lower)483/472
243/230
(85/83)98% 1.7% 5.4% 15%
TOTALS: 2,016/1,774712/679
(292/276)88% 7.6% 11.6% 21%
6
>2.0B (>1.77B net) barrels of estimated OOIP under management;
Current RF 7.6%
7
TARGETING CONVENTIONAL RESERVOIRSSurge focuses on reservoirs in the conventional end of the permeability spectrum
0.0001 0.001 0.01 0.1 1 10 100
Extremely
Tight
Very Tight Tight Low Moderate High
Permeability (mD)
Unconventional
ReservoirsConventional Reservoirs
Ult
ima
te O
il
Rec
ove
ry
*Modified from US Department of Energy Study
PIR
&
IRR
DuvernayMontney
ResourceViking-Cardium
Halo
Valhalla Doig
Shaunavon
Sparky
Capital expenditures decrease,
while recovery factors, rates of
return, and profit to investment
ratio increase, as reservoir
quality improves.
Average Surge Permeability
Wolfcamp Bone Spring
Sands
Spraberry
Sands
8
SURGE 5 YEAR PLANSurge can grow organically to 20,000 boe/d in 5 years while generating FCF of $36 MM to $380 MM above its current dividend
Inflation/year FxWCS Diff EDMN Diff AECO
2018 2022 2018 2022 2018 2022
$55 WTI 1.50% $0.780 $14.00 $14.86 $3.00 $3.18 $1.95 $2.07
$65 WTI 1.50% $0.800 $16.50 $17.51 $3.50 $3.71 $1.95 $2.07
$75 WTI 1.50% $0.820 $19.00 $20.17 $4.00 $4.25 $1.95 $2.07
Price
Assumptions:
* 5 year plan uses
only 47% of current
drilling inventory.
9
“FULL CYCLE” ECONOMIC DRILLING INVENTORY
✓ Strong balance sheet: 2017 Debt/CF = 1.25x
✓ Ample liquidity: ~60% drawn on bank line
✓ 7-8% production growth
✓ 2-3% dividend yield
✓ 2-3% free cash flow yield
8 years of drilling locations with an average 53% risked IRR @ $45 WTI & $3 Henry Hub
IRR
*: 5
3%
IRR
*: 7
8%
IRR
*: 8
9%
IRR
*: 9
4%
10
SHAUNAVON OIL FAIRWAY
Initial Waterflood Pilot:
Flood initiated Sept 2015
Play Attributes:
▪ Upper Shaunavon is a 65 foot thick sandstone/shale
sequence (net pay up to 42 feet)
▪ Shallow marine shoreface sandstone
▪ Depth 4,200 feet (8 hz wells per sq mile)
▪ Porosity: 12-18%, Perm Ave 10-12 md
▪ Upper and Lower Shaunavon are developed
separately (>10 year inventory)
▪ Lower Shaunavon deposited in as a shallow marine
carbonate bank, up to 50 feet thick
▪ Frac: Cemented Liner, 24 stages, 10 tons/stage
Upper Shaunavon A Sand
Upper Shaunavon B Sand
Upper Shaunavon C Sand
Lower Shaunavon
65 ft
Upper Shaunavon Oil Well
Upper Shaunavon Injector
Lower Shaunavon Oil Well
South Waterflood Pilot:
3 injector conversions Sept 2017
12 miles
450 MM BBLS OOIP, over 200 drilling locations (8 year inventory)
Shaunavon Type Log
UPPER SHAUNAVON WELL TYPES AND ECONOMICS
11
0
20
40
60
80
100
120
140
160
180
200
0 12 24 36 48
Pro
duction R
ate
(bopd)
Months
U. Shaunavon Primary Type Curve vs Waterflood Production
Waterflood Producers (9 Wells) Rate
Sproule YE 2017 Type Curve Rate
Type Curve Rate
* SGY Guidance pricing:
2018 - US$57.50/bbl WTI, US$42.00/bbl WCS, US$54.50/bbl EDMN,
AECO: C$1.85/MMBtu; a 1.5% per year inflation rate was applied.
An inflating CAD/USD exchange rate of $0.77 (to max of $0.90 by
2034) was assumed.
2018 Type curve and economics (CAD$)
Primary
• Well cost - $1.35M
• EUR = 105 MBOE (100% Oil)
• 12% RF
• NPV8/well = $1.7M
• IRR = 106%
• PIR0 = 2.2x
Waterflood
• Conversion cost - $450K
• EUR = 353 MBOE (well pair)
• 100% Oil
20% RF Case:
• NPV8/well = $2.3M
• IRR = 85%
• PIR0 = 3.6x
30% RF Case:
• NPV8/well = $2.7M
• IRR = 86%
• PIR0 = 6.2x
12
SPARKY: CRETACEOUS UPPER MANNVILLE (11 BBOE IN PLACE)
Shallow, Conventional Marine Sandstone Reservoir
Sparky Formation
Prograding Shorefaces & Wave Dominated Deltas
~105 Million Years Old at a Depth of ~2400 ft
~65 ft
160 miles
Sp
ark
y F
m
150 miles
AB SK
Sparky
Heavy Oil
<20° API
Pembina
Cardium
Dodsland
Viking
CR
ETA
CE
OU
S84 million
Years
125 million
Years
SGY Sparky
Core
▪ Surge’s Sparky core area is
dominated by conventional
shallow marine sandstone
reservoirs and resides in the light
to medium oil window
Sparky
Medium Oil
20-30° API
Edmonton
Calgary
SOUTHEAST ALBERTA650 MMBBLS NET OOIP (23-31° API), over 300 drilling locations, 10 year inventory
Surge Land
Surge Wells
13
Lakeview
Wainwright
Silver
Macklin
Eye Hill
SK
Betty
Lake
Provost
AB
Sounding
Lk
Sounding
Lk East
75 miles
Play Attributes:
▪ Sparky: Delta and Shoreface Sands with pay up to 60 feet
▪ Depth: 2,400 feet (8 hz wells per sq mile)
▪ Porosity: 18-30%, Perm Ave 20-40 md
▪ Over 10 year drilling Inventory
▪ Frac: Cemented Liner, 24 stages, 12 tons/stage
Sparky Type Log
50 ft
SPARKY WELL TYPES AND ECONOMICS
14
2018 Type curve and economics (CAD$)
Primary
• Well cost - $1.15M
• EUR = 140 MBOE (85% Oil)
• 9.5% RF
• NPV8/well = $2.5M
• IRR = 154%
• PIR0 = 3.2x
Waterflood
• Conversion cost - $750K
• EUR = 450 MBOE (well pair)
• 85% Oil
18% RF Case:
• NPV8/well = $4.0M
• IRR = 133%
• PIR0 = 5.7x0
20
40
60
80
100
120
140
160
0 6 12 18 24 30 36 42 48
Pro
duction R
ate
(bopd)
Month
Eyehill SPKY - SGY Results vs Type Curve
100/12-10-037-03W4/00 Rate
102/13-10-037-03W4/00 Rate
Type Curve Rate
Sproule YE2017 Type Curve Rate
* SGY Guidance pricing:
2018 - US$57.50/bbl WTI, US$42.00/bbl WCS, US$54.50/bbl EDMN,
AECO: C$1.85/MMBtu; a 1.5% per year inflation rate was applied.
An inflating CAD/USD exchange rate of $0.77 (to max of $0.90 by
2034) was assumed.
30% RF Case:
• NPV8/well = $5.8M
• IRR = 137%
• PIR0 = 10.3x
STACKED LIGHT OIL PAY - VALHALLAMulti Zone, Light Oil Prone Area: Doe Creek, Charlie Lake, Doig and Montney: >258 mmbbls ooip,
10 year drilling inventory
▪ Triassic Near Shore, Shelf Margin and Turbidite
Deposits
▪ Doig: Porosity 5-9%, Perm: 0.1 -100 md
Net pay up to 165 feet
Coquina and Dolomitic Sandstones
Frac: Ball drop, 24 stages, 35 tons/stage
▪ Montney: Porosity: 9-14%, Perm: 0.1 to 10 md
Net Pay up to 60 feet
Valhalla Area Attributes
15
Stacked OOIP:
Doe Creek Oil
Pool >57 MMbbls
Doig Oil Pool
150 MMbbls
Montney B Oil Pool
32 MMbbls OOIPFormation
Depth
(ft)
Net OOIP
(MMbbl)
Current
Recovery
Doe Creek 2,300 57 26.9%
Charlie Lk. 6,200 >20 0%
Doig (Shelf Margin) 6,700 150 3.6%
Montney (Turbidite) 7,200 32 8.8%
Totals - >258 9.1%
Doig Type Log
150 ft
26 miles
DOIG WELL TYPES AND ECONOMICS
16
2018 Type curve and economics (CAD$)
Primary
• Well cost - $3.8M
• EUR = 577 MBOE
• 45% Oil (55% Oil & NGL)
• 16.3% RF
• IRR = 139%
• PIR0 = 2.4x
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
0 12 24 36 48 60
CU
M (
bo
e)
Months
SGY Doig: 2015 - 2017
2017 Doig Type Curve
Avg 2015 (3 wells)
Avg 2016 (3 wells)
Avg 2017 (5 wells)
104/05-07
* SGY Guidance pricing:
2018 - US$57.50/bbl WTI, US$42.00/bbl WCS, US$54.50/bbl EDMN,
AECO: C$1.85/MMBtu; a 1.5% per year inflation rate was applied.
An inflating CAD/USD exchange rate of $0.77 (to max of $0.90 by
2034) was assumed.