November 24, 2014 Calgary November 25, 2014 Toronto
Investor Day Agenda Welcome and Introductions David Carey Corporate Strategy Myron Stadnyk (15 min) Asset Overview Terry Anderson, Neil Groeneveld, Karen Nielsen (1:30 min) Montney Growth Assets Base Assets 2015 Capital Budget and…
Proven Leadership Team Committed Management Team Employee Since Myron Stadnyk President and Chief Executive Officer 1997 Terry Anderson Sr. VP and Chief Operating Officer 2000 Van Dafoe Sr. VP and Chief Financial Officer 1999 David…
Experienced Board of Directors Respected Board of Directors Board Member Since Mac Van Wielingen Chairman 1996 Myron Stadnyk Director 2013 John Dielwart Director 1996 Fred Dyment Director 2003 Tim Hearn Director 2011 James Houck…
Value Proposition Clear Line of Sight to Long-term Value Creation
Value Creation Culture Culture Focused on Organizational Learning Drives Ongoing Success Technology Efficiency Opportunity Applying New Focus on Operational Building for the Technology: Efficiency: Long-Term: Longer Laterals…
Corporate Profile Corporate Summary Production (Q3 2014) 115,530 boe/d Reserves (2P Gross YE 2013) (1) 634 mmboe Reserve Life Index (2P) (1) 15.5 years (2) Annualized Dividend / Dividend Yield 1.20 per share / 4.3% (3) Annualized…
Unique Strategy Risk Managed Value Creation is Central to ARCs Strategy Targeting net debt to funds 200% Reserve Replacement from operations between through the drill bit for the 1.0 1.5x past 6 consecutive years One of the…
High Quality Long Life Assets 200% or Greater Reserve Replacement Over the Past 6 Years Annual Reserve Replacement 700% Development 600% Acquisitions 500% 400% 300% 200% 100% 0%
Operational Excellence Capital Efficiencies Managing Declines and Driving Down Costs All In Capital Efficiencies /boe/d(1) 3 Year Avg. Capital Efficiencies /boe/d(2) 40,000 40,000 ARC Competitors 30,000 30,000 per boe/d…
Operational Excellence Cost Management Low Cost Producers Deliver Superior Returns Over Time Focused assets, characterized by high working interest, operatorship and ARC owned/operated facilities, provides control over costs and…
Financial Flexibility Balance Sheet Strength Targeting Net Debt to Funds from Operations Between 1.0 1.5x Net Debt to FFO 1,400 2.0 Net Debt to Funds from Operations 1,200 1.5 1,000 millions 800 1.0 600 400 0.5…
Financial Flexibility Balance Sheet Strength Strong Balance Sheet Provides Stability Through Cycles ARC is at the low end of the scale compared to peers for both debt to funds from operations and debt to capitalization 4.5 Net Debt…
People and Talent Leadership Putting People First Invest in Employee Development & Training Trusted and Respected Management and Board Culture of Innovation and Accountability Focus on High Employee Engagement directly supports…
Health & Safety Leadership Health & Safety is our Top Priority Target zero lost-time accidents Proactive approach to asset integrity Work to build culture of safety among employees and contractors
Environmental Leadership Committed to High Standards of Environmental Performance Investment in facility upgrades andHealth & Safety low-emissions technology results in improved Leadershipimpact over the long-term efficiencies and…
Risk Managed Value Creation 15% Compound Annual Production Growth (CAGR) Since Inception boe/d Forecast
Sustainable Dividend Committed to the Dividend While Delivering Profitable Growth 18% annualized total return since inception, 5.2 billion of dividends (30.78/share) 5,500 Cumulative Dividends and Historic Payout Ratio 120% 5,000…
Growth in Per Share Production and Cash Flow Delivering Value with Profitable Growth and Income 38% increase in production per share and 69% increase in Funds from Operations per share over five year period Production per Share(1)…
Superior Returns 18% Annualized Total Return Since 1996 ARC Total Return Performance vs. Indices 2800% 5 year 33% 3 year 9% 2300% 1800% ARX 18% Total Return 1300% 800% STOILP 7% 300% SPTSX 8% -200%…
ARCs Proven Development Model Inventory of Opportunities at all Stages
Looking Beyond 2016 Diverse Portfolio Provides Strategic Optionality ARC has a well balanced inventory of value creating opportunities which may be pursued beyond 2016 Project Options 2016 - 2020+ Dawson Phase 3 Pouce…
Operations Overview Western Canadian Producer Strategic Optionality BRITISH COLUMBIA ALBERTA SASKATCHEWAN MANITOBA NE British Columbia Northern Alberta Redwater Pembina Southern Alberta SE Sask and Manitoba
Understanding ARCs Assets Balanced Portfolio Provides Strategic Optionality Portfolio includes growth and free cash flow generating assets Optionality for oil, liquids and natural gas development dependent upon commodity prices…
Focused Production and Reserves Montney Comprises 70% of Production and 2P Reserves Production (boe/d) Q3 2014 2P Reserves (Mmboe) YE 2013(1) 40,000 200 180 Montney Montney 160 30,000 80,000 boe/d (70%) 457 mmboe (72%) 140…
Complimentary Asset Base Montney Production and Cash Flow Growth Supported by Base Assets ARCs Montney assets are expected to deliver 800 million of total field cash flow in 2014, up from 100 million in 2009 Field Cash Flow(1) -…
Complimentary Asset Base Montney Growth Assets Underpinned by Free Cash Flow Generating Base Assets Invested 2.3 billion of capital in Montney growth assets during 2009 2014F Base assets generated 1.6 billion of free cash flow…
Early Stages of Property Development* Large Identified Opportunity for Future Growth Gross Drilling Locations 1,600 Montney 4,000 Gross Drilling Locations 1,400 1,200 1,000 800 600 400 200 0 Dawson Parkland/…
Why the Montney Total Recoverable Resource Ranks High Amongst North American Resource Plays Massive thickness Large areal extent (500km) Superior lithology and fracability High permeability Over pressured Montney Higher…
Montney Growth Assets Growing our Montney Land Base 120 Net Montney Sections in 2003 970 Net Montney Sections Today 500 km 500 km
Significant Montney Land Position 3rd Largest Montney Landholder With Over 620,000 Net Acres 1,400 Top Montney Acreage Holder(1) 000 acres 1,200 1,000 Montney Acres (000's) 70% of ARCs Montney land is 800 undeveloped,…
Montney Geology World Class Resource Play Montney Stratigraphy Charlie Lake Unconformity Halfway Doig Doig Phosphate Upper Montney Montney Lower Montney Belloy Halfway Montney Schematic East/West…
Montney Geology Expertise = Confidence Upper Montney Lower Montney Laminated coarse silt and fine silt Laminated fine silt with higher clay content Variable bioturbation than Upper Montney Up to 3% TOC Bioturbation is absent Less…
Upper Montney Fairway ARC is Positioned in Dry Gas, Liquids-Rich Gas and Oil Windows LARGE TPIIP(1) Montney is an unconventional accumulation 10 We are pursuing generated 13 hydrocarbon that is trapped in the source and adjacent…
Multiple Layers to Develop Attachie Septimus Sunrise Tower Parkland Dawson Pouce Coupe Montney A Upper Montney Montney B Montney C Lower Montney Montney D Montney E Existing Horizontal Wells,…
ARC in the Montney 40% Annual Montney Growth over 5 Year Period (2009 2014) 40% CAGR 2009 2014 2015 100,000 Sunrise 30% CAGR 2000 - 2014 Development 2014 90,000 Parkland Gas 2013 Plant: Phase 1 80,000 Construction begins…
NE BC Montney Reserves & Resources NE BC Montney TPIIP 55 Tcf of Gas and 2.2 Billion Barrels of Oil Corporate 2P Reserves of 634 mmboe OIL RESERVES 11.3 mmbbls 2.2 Tcf NGL 27.6 mmbbls OIL ECONOMIC CONTINGENT RESOURCE 10.7…
Montney Development Economics Strong Rates of Return Across the Montney Portfolio Half Cycle Economics Cdn85/bbl Oil and Cdn3/GJ Gas Parkland Tower Dawson Sunrise Ante Creek 50% IRR 50% IRR 65% IRR 50% IRR 50% IRR 4.2x Recycle…
NE BC/NW AB Montney First Year Cumulative Gas ARCs Montney Gas Wells Outperform Industry by 65% on First Year Average NE BC / NW AB Montney Gas Only First Year Cumulative Gas 3,000 2,500 Others (1297 wells) ARC (121 wells)…
New Technology Continues to Unlock Value Montney Fracture Stimulation Intensity is Evolving Montney - EUR vs Proppant Normalized by Lateral Foot Drilled Increased frac intensity over time primarily by tightening up inter-frac…
Montney Infrastructure Optionality Well Positioned For Market Access Area is currently well served with three major pipelines providing access to North American Markets: TransCanada Canada & US ARC Lands Alliance Chicago…
Dawson Gas World Class Resource, Unlimited Potential *Breakeven Cdn per bbl or mcf price as indicated defined as price at which NPV10 is equal to zero. *IRR Half cycle after tax rate of return based on C85/bbl Edm MSW and C3/GJ AECO…
Dawson Asset Details Excellent Free Cash Flow Net production (boe/d) Q3 2014 28,000 ARC Proposed Gas Plant (90 mmcfd & 7,500 Liquids (bbls/d) 920 bbls/d liquids) Gas (mmcf/d) 162 ARC 1-34 Production split % (liquids/gas) 97% gas…
Dawson Development Potential Additional Development Layer Below Core Acreage Dawson Dawson core development has been Upper Upper Montney A Montney Booked Reserves* focused on Upper Montney A; 55% of lands currently have no…
Dawson Upper Montney Liquids Story Dawson Rich Gas Window is Larger than the Core Dry Gas Window Liquids rich gas window Liquids content increases Dew Point Plant: 5 10 bbl/mmscf Cold Plant: 15 35 bbl/mmscf away from core dry gas…
Dawson Gas Type Curve Growth Frac Technology Advancements = Improvements in Well Performance Type curve growth over time due to Completions 2009-2011 2012 2013- 2015 2014 improvements in well design, focused on completions and…
Dawson Development Economics 65% Rate of Return at Flat 3/GJ AECO and C85/bbl Key Metrics 7,000 DCET Capex per well (MM) 5.5 Reserve estimate (Bcf) 7.4 6,000 IP (1 mo) (MMcf/d) 6.2 IP (12 mo) (MMcf/d) 5.4 5,000 Half Cycle…
Dawson A Cash Flow Machine Low Reinvestment Ratio to Maintain Significant Free Cash Flow Grown production from 50 Mmcfe/d in 2009 to 165 Mmcfe/d by mid 2012 At Cdn3 gas 30% Reinvestment Ratio to sustain cash flow and generate 100…
Dawson 2014 and Beyond Better with Age, Facility Expansion Planned 2015 Budget* 35,000 Capital (MM) 110 Continues to perform, Total (boe/d) 27,300 delivering significant cash flow 30,000 Wells (HZ) 9 Facilities producing at…
Dawson Infrastructure New Facility Planned For 2017 On-stream New Dawson Phase III Gas Plant 90 mmscfd with 7,500 bbls/day of liquids handling New site ideally situated in the Lower Montney/Liquids Rich play Designed to handle…
Parkland/Tower Reaping Acquisition Benefits *Breakeven Cdn per bbl or mcf price as indicated defined as price at which NPV10 is equal to zero. *IRR Half cycle after tax rate of return based on C85/bbl Edm MSW and C3/GJ AECO *Free…
Parkland/Tower Asset Details Material Value Creation in 2014 Parkland Tower Net production (boe/d) 18,200 6,880 Q3 2014 Liquids (bbls/d) 3,700 4,940 Gas (mmcf/d) 87 11.6 Land (net sections) 23 57 Working Interest 84% 92% Reserves…
Parkland/Tower Development Potential Incremental Reserves Potential with Multilayer Development Upper Montney Upper Montney A supports two layers Booked Reserves* of development at Upper Montney Parkland and Tower At year end…
Operational Excellence Tower Optimal Frac Design and Significant Efficiency Gains in Tight Oil Play 60% Decrease in Cost/Frac, 2X Increase in Applying Learnings in Well Length and Frac Intensity Frac Spacing 160,000 70 2,500 90 80…
Tower Completions Advancement Advanced Completion Design = Improved Performance 1,200 Completions 2014 2015 2014 Type Curve Frac spacing (m) 40 25 1,000 Fracs per well 44 60 2015 Type Curve Production Rate (boe/d) Avg.…
Tower Development Economics 50% Rate of Return at Flat 3/GJ AECO and C85/bbl 1400 Key Metrics 1200 DCET Capex per well (MM) 6.5 Reserve Estimate (Mboe) 600 1000 IP (1 mo) (boe/d) 1000 IP (12 mo) (boe/d) 400 800 Half Cycle…
Tower 2014 Wells New Completions Delivering Breakthrough Performance Total Production (boe/d) Oil Production (bbl/d) Old completion 12-16 Pad design 5-14 Pad (2014) New completion 8-15 Pad (2014) design 2015 Type curve 2015…
Tower Cumulative Production New Wells are Exceeding Type Curve Total Production (boe) Oil Production (bbl) 2015 Type curve 2015 Type curve 2014 Type curve 2014 Type curve Old completion 12-16 Pad design 5-14 Pad (2014)…
Tower 2014 and Beyond Strong 2014 Results = Accelerated 2015 Development 14,000 Tower oil is 50 degree API; 12,000 2015 Budget* realized condensate pricing Capital (MM) 145 10,000 Total (boe/d) 8,800 Initial production at new…
Operational Excellence Parkland Learnings from Dawson = Advanced Frac Design and Improved Results at Parkland Optimizing Fracs, Lowering Costs Optimizing Well Length and Frac Spacing 300,000 35 2,050 110 250,000 30 2,000…
Parkland Development Economics Targeting Liquids With Step Out From Core Completions 2012 2013 2014 2015 Frac spacing (m) 180 100 80 70 1,200 2012 Type Curve (Dry Gas) Fracs per well 10 15 22 30 Avg. tonnage per 100 60 60 100…
Parkland Development Economics 50% Rate of Return at Flat 3/GJ AECO and C85/bbl 1200 Key Metrics DCET Capex per well (MM) 5.7 1000 Reserve Estimate (Bcfe) 5.8 IP (1 mo) (boe/d) 1080 800 IP (12 mo) (boe/d) 645 Half Cycle…
Parkland 2014 and Beyond Drilling and New Facilities Delivered Significant Growth in 2014 25,000 2015 Budget* New wells brought on Capital (MM) 50 systematically through 2014 to 20,000 fill capacity of new facility Total…
Parkland/Tower 2015 115% Year-over-Year Increase in 2014F Production Parkland/Tower 35,000 Dry gas areas in 2015 Budget* Parkland have 30,000 Capital (MM) 195 delivered strong results Total (boe/d) 27,000 in 2014 25,000 Wells…
Parkland/Tower Infrastructure Expansion of Oil Battery in 2015 to 10,000 bbl/day 2013 New Facility 60 mmscfd of sales gas processing/ 3,000 bbls/day LPG production/ 5,000 bbls/day oil production Capacity largely filled over the course…
Sunrise Long-term Growth Opportunity *Breakeven Cdn per bbl or mcf price as indicated defined as price at which NPV10 is equal to zero. *IRR Half cycle after tax rate of return based on C85/bbl Edm MSW and C3/GJ AECO *Free Cash Flow…
Sunrise/Sunset Asset Details Sunrise/Sunset Moving Forward with Full Scale Development Sunrise has progressed from pilot to full scale development Net production (boe/d) Q3 2014 7,050 Liquids (bbls/d) 0 Gas (mmcf/d) 42.3 Land…
Sunrise Development Potential Proven Productivity from Four Layered Development Known reserves exist in Upper Montney A. 2014 Upper Montney A Booked Reserves* drilling program has proved Upper Montney Upper Montney Upper…
Operational Excellence Sunrise Incorporating Learnings into Early Development = Excellent Initial Results Doubling Fracs/well over 3 years Efficient Lateral Lengths 2,500 140 250,000 35 120 30 2,000 Lateral Length…
Sunrise Outperforming Expectations 2014 Drilling Results Prove Four Layer Development Model 10,000 2014 Type Curve (11.7 Bcf Raw) 9,000 08-24Hz (MTYA) 8,000 C09-13Hz (Lower (UpperMTYA) MTYA+) 7,000 B02-25Hz (MTYB) - see note…
Sunrise Continuous Improvements Enhanced Well Design = Type Curve Improvement Completions 2009-2011 2013-2014 2015 7,000 2015 Type Curve (11.5 Bcf) Frac spacing (m) 120 80 80 6,000 Fracs per well 16 25 25 2013/14 Type Curve (11…
Sunrise Development Economics 50% Rate of Return Flat at 3/GJ AECO and C85/bbl 7,000 Key Metrics DCET Capex per well (MM) 6.0 Reserve Estimate (Bcf) 11.5 6,000 IP (1 mo) (MMcf/d) 6.2 IP (12 mo) (MMcf/d) 5.4 5,000 Half Cycle…
Sunrise Infrastructure New Facility Setting the Stage to Double Production in Late 2015 100% owned and operated gas plant will double processing capacity at Sunrise Construction has commenced on the 60 mmscfd sweet gas plant…
Sunrise 2014 and Beyond Commercial Development of Sunrise with 60 mmcf/d Exit 2014 25,000 2015 Budget* New wells brought Capital (MM) 155 on-stream through third 20,000 Total (boe/d) 12,800 party processing facility Wells (HZ)…
Montney Pilots Proving Future Value Before Full Scale Development West Attachie: Pilot Production on-stream since Parkland: Q2 2014 Red Creek Lower Montney well on-stream Q3 Attachie 2014 East Attachie: Pouce Coupe: Monitoring…
Montney Pilots Attachie Continued Evaluation on Liquids Rich Land Attachie Western Pilot Wells 9 900 Condensate Rate (bbld), CGR (bbl/mmscf) 8 800 7 700 Raw Gas Rate (mmscfd) 6 600 Montney Pilot Wells 5 500 4…
Montney Pilots Septimus Early Days..Promising Property Production is facility constrained at 5 mmcf/d Septimus Pilot (A13-11) 6 60 Condensate Rate (bbld), CGR (bbl/mmscf) 5 50 Raw Gas Rate (mmscfd) 4 40 3 30 2…
Montney Pilots Lower Montney Potential ARCs Land Base is in the Sweet Spot Estimated Gross Lower Montney Land ARC is well positioned in optimal zone 160,000 Position in Liquids-Rich Window for Lower Montney development 140,000…
Ante Creek A Montney Success Story *Breakeven Cdn per bbl or mcf price as indicated defined as price at which NPV10 is equal to zero. *IRR Half cycle after tax rate of return based on C85/bbl Edm MSW and C3/GJ AECO *Free Cash Flow…
Ante Creek Asset Details Significant Cash Flow with Substantial Growth Opportunity Net production (boe/d) Q3 2014 17,800 Liquids (bbls/d) 9,300 Gas (mmcf/d) 51 Production split % (liquids/gas) 52/48 Land (Montney net sections)…
Ante Creek Significant Drilling Inventory Large Land Base and Down-spacing = Significant Drilling Inventory Booked reserves exist on 30% of ARC held mineral rights Significant opportunity to prove up this large land base with…
Operational Excellence Ante Creek Reducing Business Cycle Times with Optimized Frac Design Drilling Longer Laterals in Fewer Days Lower Cost/Frac, Optimizing Frac Intensity 2,500 20 180,000 180 19 160,000 160 Lateral Length…
Ante Creek Delivering Results Type Curve Consistency Moving Out of the Core Completions 2012 2013 2014 2015 Ante Creek Normalized Type Curves for Montney Horizontal Wells Frac spacing (m) 120 100 100 80 500 Fracs per well 14 17 16…
Ante Creek Development Economics 50% Rate of Return at Flat 3/GJ AECO and C85/bbl 400 Key Metrics 350 DCET Capex per well (MM) 4.2 Reserve Estimate (Mboe) 290 300 IP (1 mo) (boe/d) 375 IP (12 mo) (boe/d) 210 250 Half Cycle…
Growing Our Alberta Montney Presence Ante Creek Land Base has Grown 16x Since 2000 Grew land position in 2014 through tuck-in acquisitions and crown land sales 2000 Ante Creek 2014 Ante Creek 21 sections 351 sections
Ante Creek Oil Leading Capital Efficiency ARCs Ante Creek Montney Capital Efficiency Outperforms Industry 1,200 30 Day Average Daily IP Rate (BOE/d) ARC Gas ARC Liquids 1,000 Other Gas Other Liquids 800 Ante Creek D&C Costs…
Ante Creek 2014 and Beyond Ante Creek is 20% of ARCs High Value Liquids Production 20,000 18,000 2015 Budget* ARCs three plants filled to 16,000 Capital (MM) 180 capacity in late 2013 with Total (boe/d) 17,300 development…
Base Assets BRITISH COLUMBIA ALBERTA SASKATCHEWAN MANITOBA Redwater Pembina Southern Alberta SE Sask and Manitoba
Pembina Revitalizing a Mature Oil Field *Breakeven Cdn per bbl or mcf price as indicated defined as price at which NPV10 is equal to zero. *IRR Half cycle after tax rate of return based on C85/bbl Edm MSW and C3/GJ AECO *Free Cash…
Pembina Asset Details Large Oil in Place, Low Risk, Predictable Production Net production (boe/d) Q3 2014 11,000 Liquids (bbls/d) 9,020 Gas (mmcf/d) 11.9 Land (Cardium net sections) 140 Working Interest 80% Reserves (2P mmboe…
Operational Excellence Pembina Extended Reach of Horizontals with Increased Fracture Intensity Pembina Cost/frac and average fracs/well Pembina Average well length and frac spacing 70,000 30 2,100 120 60,000 1,900 25 110…
Pembina Leading Capital Efficiency ARCs Pembina Capital Efficiency Outperforms Industry Pembina Cardium HZ IP3 Average (3 Month Rate) 800 ARC Avg Dly BOE IP3 (143 wells) 700 Others Avg Dly BOE IP3 (286 wells) 600 Pembina…
Pembina Development Economics 60% Rate of Return at 3/GJ AECO and C85/bbl 300 Key Metrics 250 DCET Capex per well (MM) 2.6 Reserve Estimate (Mboe) 190 IP (1 mo) (boe/d) 255 200 IP (12 mo) (boe/d) 115 Half Cycle Economics…
Pembina Free Cash Flow Consistent Free Cash Flow High quality light oil significant free cash flow to fund growth opportunities Significant drilling inventory to sustain production over several years 250 15,000 Field Netback…
Pembina Oil Buck Creek Waterflood Inclining Oil Rate and Declining GOR Waterflood optimization has resulted in: Inclining Oil rate trend, indicating improved flood efficiency and operational excellence Declining GOR, showing…
Pembina Oil NPCU Horizontal Injection Pilot Incremental Oil Above Base Decline HZ Injection Pilot R7W5 Injection started in Dec 2012, cumulative injection of 507 Mbbl Area of influence Monitoring 14 T48 Wells highlighted in…
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