sustainable conventional resource company tsx: sgy … · apr-19, $71.29 $-$10 $20 $30 $40 $50 $60...

SUSTAINABLE CONVENTIONAL

RESOURCE COMPANY

TSX: SGY

AGM PRESENTATION

MAY 14, 2019

FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES22

WORLD CRUDE OIL - SUPPLY AND DEMAND


DECOUPLING OF CRUDE OIL PRICES AND ENERGY STOCKS


CONSISTENT PRODUCTION GROWTH OVER 11 FINANCIAL QUARTERS


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


SURGE DIVIDEND GROWTH


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

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

Shaunavon Greater Sawn Sparky Valhalla

Ne

tba

cks b

y A

rea

8

TOP DECILE OPERATING NETBACKSSURGE’S FOUR CORE AREAS HAVE EXCELLENT OPERATING NETBACKS

Peer Group Avg.

Netback of $14.91

9

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


PRODUCT MIX 2019Less than 10% of WCS correlated barrels exposed to widening differentials


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


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)


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

14

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)

15

SAWN SLAVE POINT WELL RESULTS


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



• EUR: 186,000 bbls

• Inventory: >110 Slave Point Locations

• OOIP/section: 4 to 8 MMbbls


P90: 120 bopd

P10: 296 bopd

P10/P90 ratio: 2.5 (296/120)

16

UPPER SHAUNAVON WELL RESULTSIP180 Lognormal Distribution (oil only): 65 Surge wells over 5 years

P10

P50

P90


SGY Upper Shaunavon



• EUR: 90,000 bbls

• Inventory: >100 Upper Shaun Locations



P50: 118 bopd Cap Eff: $11,440/bopd

P10: 219 bopd

P90: 51 bopd

P10/P90 ratio: 4.3 (219/51)

17

DOIG WELL RESULTSIP180 Lognormal Distribution (oil only): 44 Surge wells over 8 years

P10

P50

P90


SGY Doig



• EUR: 232,000 bbls

• Inventory: >32 Doig Locations



P10: 885 bopd

P90: 140 bopd

P50: 348 bopd, Cap Eff: $11,494/bopd

P10/P90 ratio: 6.3 (885/140)

18

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.

sustainable conventional resource company tsx: sgy … · apr-19, $71.29 $-$10 $20 $30 $40 $50 $60...

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