Investor Day Presentation November 17, 2015 Calgary November 18, 2015 Toronto
ARC Investor Day Themes Consistent Strategy, Culture of Performance Sustainable and efficient business model committed to balance sheet strength Transforming our business through continued Montney development and technical…
Management Team Committed Management Team Terry Anderson Kris Bibby Jay Billesberger Sean Calder David Carey Senior Vice President and Vice President, Vice President, Vice President, Senior Vice President, Chief Operating Officer…
Board of Directors Respected Board of Directors Mac Van Wielingen Hal Kvisle John Dielwart Tim Hearn Myron Stadnyk Board Member Since 1996 Board Member Since 2009 Board Member Since 1996 Board Member Since 2011 Board Member Since…
Corporate Profile ARC at a Glance Production Reserves 2P Annualized (2015 YTD) Returns (1) boe 112,500 per day Gas Liquids 14% Since 673 2P Gross MMboe Reserves Inception Net Debt to Funds 1.20/share from Operations…
Why Invest in ARC Clear Line of Sight to Long-term Value Creation Long-term Vision Strategy Value Creation Profitable Investment Technical Expertise Low Cost, High Rate Production High Low Replacement Costs Quality Assets ARC…
Strategy Unique and Difficult to Replicate ARCs Strategy is Focused on Long-term Value Creation and Profitable Investment
High Quality Assets Reserve Replacement 200% or Greater Reserve Replacement Over the Past Seven Years Montney assets have been the centrepiece to ARCs strategy of organic reserves and resources growth and provide continued upside…
High Quality Assets Montney Development Montney Development is Transforming ARCs Business 2.9 billion of capital invested in the Montney since 2009 to grow low cost, high value Montney production Production Proved + Probable…
High Quality Assets Sustaining Capital Superb Capital Efficiencies Drive Low Sustaining Capital Requirements 120,000 boe/day 450MM Forecast Forecast Production Sustaining Capital 25,000 boe/day Non-Montney 150MM (Capital…
High Quality Assets Operating Efficiencies ARC Continues to Drive Down Operating Costs as It Grows in the Montney Total per boe operating costs have decreased 20% (2010 to 2015 YTD) Montney per boe operating costs have decreased 25%…
High Quality Assets Cost Management Low Cost Producers Deliver Superior Returns Over Time Focused assets, characterized by high working interest, operatorship and ARC owned and operated facilities, provide control over costs and…
Financial Discipline Balance Sheet Strength Targeting Net Debt to Funds from Operations Between 1.0 1.5x 1,400 Net Debt to Funds from Operations 2.0 1.8 1,200 1.6 1,000 1.4 millions 1.2 800 Ratio 1.0 600 0.8 400…
Financial Discipline Priorities Balancing Inflows and Outflows for Long-term Sustainability Objective to fully fund ARC's Dividend and Sustaining Capital from Funds from Operations (FFO) over the long term Profitable Growth Capital…
Financial Discipline Sustainable Dividend Minimum Dividend Payment of 0.10 per Share per Month Since Inception 14% annualized total return since inception, 5.6 billion of dividends (31.88/share) 6 120% Cumulative Dividends and…
Financial Discipline Profitable Investment Managing a Profitable Business Through Cycles ARCs high-quality assets, excellent capital efficiencies, and low operating costs have resulted in strong returns over the long term ARC has…
ESG Performance Safety Committed to a Culture Where Safety Is a Core Value
ESG Performance NE BC Water Management Case Study: Water at the Forefront NE BC water management plan focuses on securing economic and sustainable water sources to support ARCs long-term development plans, while protecting stakeholder…
Proven Development Model Inventory of Opportunities at All Stages Builds Long-term Optionality FULL CYCLE GROWTH AND INCOME PROVIDER Dawson, Pembina, SE Sask/Manitoba, Redwater OPTIMIZE COMMERCIALITY ASSESSMENT OF POTENTIAL Ante…
Risk Managed Value Creation Montney Assets Have Delivered Long-term Profitable Growth and Value 140,000 120,000 Forecast 100,000 80,000 boe/day 60,000 40,000 20,000 0 Non-Montney Liquids (bbl/day)…
Long-term Value Creation Clear Line of Sight to Future Value Creation 2015 2016 2017 2018+ 113,000 115,000 boe/d Growing Profitable 119,000 124,000 boe/d Production 124,000 boe/d Dawson, Sunrise, Parkland/Tower, Ante New Sunrise…
Asset Overview
Operations Overview Western Canadian Producer With Massive Resource Potential YTD 2015 Production BRITISH COLUMBIA ALBERTA SASKATCHEWAN 30% 70% Montney Base 2014 2P Reserves 20% 80% Montney Assets Base Assets
Understanding Our 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…
Balanced Approach Investment in Both Natural Gas and Liquids 500,000 Natural Gas Production 14% CAGR in natural gas 400,000 production (2009 2016F) Montney gas CAGR of 27% Mcf/day 300,000 (2009 2016F) Forecast 200,000…
Oil and Liquids/Gas Revenue Split Oil and Liquids Production Drives Sales Revenue Oil and liquids comprised 35% of production and made up 60% of revenue in Q3 2015 600 Sales Revenue 500 400 millions 300 200 100…
Complimentary Asset Base Montney Development Underpinned by Base Asset Free Cash Flow Invested 2.9 billion of capital in Montney growth assets since 2009 Base assets generated 1.8 billion of free cash flow since 2009 Base production…
Early Stages of Property Development* Large Identified Opportunity for Future Value Creation Gross Drilling Locations 1,600 1,400 Montney 5,000 Future Gross Drilling Locations 1,200 1,000 800 600 400 200 0…
Montney Assets
Our Conviction in the Montney Strengthens Strong Value Creation Continuous improvement in well production performance Multiple layer development drives operational efficiency Diverse product mix allows optionality Huge long-term…
North American Gas Plays Supply Costs Montney is Extremely Competitive Against Other North American Gas Plays North American Natural Gas Plays Supply Costs 5.00 7.17 - 8.27 4.50 Reflects variation in capital inputs 4.00 Reflects…
Position in the Montney ARC is a Leader in the Montney ARCs Montney production totalled 78,000 boe per day in Q3 2015 Top Montney Producers (1) Top Montney Acreage Holders (1) Natural Gas Production (MMcf/day) 900 1,600,000 800…
Montney Growth Assets ARCs Core Montney Properties Three Super Areas Proximity of ARC Montney landbase within Super Areas enables: Capital & Operating Efficiencies Application of Learnings across Areas Greater Flexibility in…
Montney Infrastructure Dual-Connected ARC Facilities Allow for Takeaway Optionality TCPL Area is currently well Spectra served with three major Alliance pipelines providing TCPL Proposed access to North American markets ARCs…
Multiple Layers to Develop Significant Future Delineation Opportunities Attachie Septimus Sunrise Tower Parkland Dawson Pouce Coupe Montney A Upper Montney Montney B Montney C Lower Montney Montney D Montney…
Greater Dawson Super Area Schematic Multiple Montney Layers, Multiple Targets, Massive Opportunities Not to scale.
NE BC Montney Reserves & Resources NE BC Montney TPIIP 67.4 Tcf of Gas and 2.3 Billion Barrels of Oil 2014 Resource evaluation conducted by GLJ saw significant growth in Gas TPIIP, which is mainly attributed to newly-acquired land in…
ARC in the Montney 35% Compound Annual Montney Growth 2009 to 2015F 120,000 2015 Tower Liquid Expansion 2015 100,000 Sunrise Gas Plant 2014 Parkland Gas Plant Phase I 80,000 boe/day 2012 Ante Creek Gas Forecast…
Montney Technical Leadership ARC Drilled Its First Horizontal Well in the Montney 10 Years Ago In its 10 years of production, the Dawson 12-31 well has produced 4.5 Bcf of natural gas and has generated 20 million of cash flow
Montney Technical Leadership Leading the Way in Developing Tight Montney Oil ARC's Tower oil wells are some of the best light oil wells in Western Canada
NE BC/NW AB Montney First Year Cumulative Gas ARCs Montney Gas Wells Outperform Industry by 35% on First Year Average NE BC / NW AB Montney Gas Wells Only (1) 4,000 First Year Cumulative Gas Production (2) 3,500 Frist Year…
Greater Dawson Super Area
Greater Dawson Asset Details Leveraging Super Area for Greater Efficiencies 400 net Montney Sections 63,660 boe/day Q3 2015 Net Production
Dawson Asset Details Poised for Next Stage of Development Net production (boe/d) Q3 2015 24,770 Liquids (bbl/d) 810 Gas (MMcf/d) 144 Production split % (liquids/gas) 97% gas Land (Montney net sections) 133 Working Interest…
Dawson Gas Type Curve Growth Continuous Improvement in Well Performance 7,000 Key Metrics 2016 Budget 6,000 2015 Type Curve DCET Capex/well ( millions) 4.2 2013/2014 Type Curve Internal 2P Reserves (Bcfe) 7.4 5,000 2009-2011…
Dawson Natural Gas Liquids Potential Finding Higher Liquids With Move Away from Dawson Core Liquid ratio at Dawson 70 bbl/MMcf varies across Upper and Wellhead 30 bbl/MMcf Condensate Lower Montney Wellhead (after 4 months…
Dawson Phase III Plant Full Regulatory Approval Obtained in Q3 2015 Dawson Phase III Sour Gas Plant with 90 MMcf per day of gas and 7,500 barrels of liquids- handling sales capacity approved by the BC Oil and Gas Commission in…
Dawson Phase III Project Economics From Well Economics to Project Economics Well Economics Dawson Phase III After-tax IRR Include drill, completion, wellsite equipment and pipeline from well to 160 gathering system 140 Standalone…
Dawson A Cash Flow Machine Low Reinvestment Ratio to Maintain Significant Free Cash Flow Field Netback ( millions) Capital Expenditures ( millions) 250 250 Free Cash Flow ( millions) 200 Production (MMcfe/day) 200 150 150…
Dawson 2016 and Beyond Foundation of Montney Gas Business Ready for Next Stage of Growth 35,000 Provides significant cash flow, with superior half 30,000 cycle economics Continued refinement of 25,000 well design resulting in…
Sunrise/Sunset Asset Details Sunrise Has Progressed from Pilot to Full Scale Development Net production (boe/d) Q3 2015 16,560 Liquids (bbl/d) 90 Gas (MMcf/d) 99 Land (Montney net sections) 32 Working Interest 89% Reserves (2P…
Sunrise Development Potential Proven Productivity from Four-Layered Development 21 Hzs drilled Drilling Inventory 500 Upper Montney A Booked Reserves* Upper 400 Montney 12 Hzs drilled 300 Wells Upper Montney A+ Booked…
Sunrise Continuous Improvements Enhanced Well Design = Type Curve Improvement 7,000 2014-16 Type Curve (11.5 Bcf) Key Metrics 2016 Type Curve 6,000 2013 Type Curve (11 Bcf) DCET Capex/well ( millions) 5.4 2011 Type Curve (7 Bcf)…
Sunrise Gas Plant Commissioning Sunrise Facility Showcases ARCs Infrastructure Expertise Construction of the plant was completed in Q3 2015 ahead of schedule and under budget ARC achieved an extremely smooth start-up and has had…
Sunrise Phase II Project Economics From Well Economics to Project Economics Well Economics Sunrise After-tax IRR Include drill, completion, wellsite 100% equipment and pipeline from well to gathering system Standalone after-tax…
Sunrise Investment in Place for Free Cash Flow Replicating Dawsons Cash Flow Machine Model Sunrise free cash flow is expected to replicate the Dawson model once full impact of new gas plant is realized Field Netback ( millions)…
Sunrise 2016 and Beyond Commercial Development of Sunrise With 100% YoY Increase in 2015F Production 25,000 Producing from four layers of the Montney, half through ARC owned 20,000 facility, half through third- party processing…
Parkland/Tower Asset Details Significant Value Creation Parkland Tower Net production (boe/d) 16,740 3,380 Q3 2015 Liquids (bbl/d) 2,670 1,800 Gas (MMcf/d) 84 9 Land (net sections) 23 57 Working Interest 84% 92% Reserves (2P…
Parkland/Tower Development Potential Incremental Reserves Potential with Multilayer Development Upper Montney A Drilling Inventory Booked Reserves* Upper Tower 1,000 Montney 42 Hzs drilled 900 800 700 Parkland 70 Hzs drilled…
Tower Completions Advancement Advanced Completion Design = Improved Performance 1,400 1,400 Key Metrics 2016 Budget 2014 Type 2016 Curve Type Curve DCET Capex/well ( millions) 5.5 2015 Type Curve 1,200 1,200 2015 Type Curve…
Tower Cumulative Production Continuous Improvement in Type Curve Cumulative oil production from nine 2014 wells approaching one million barrels Total Production Oil Production 280,000 160,000 260,000 140,000 240,000 220,000…
Tower Wells Deliver Outstanding Results ARCs Tower Wells Are Some of the Best in Western Canada Cumulative Production Increasing Majority of wells never produce 100,000 barrels Days on Production Increasing Source: AltaCorp…
Tower Oil Battery Expansion Infrastructure Build Out in NE BC Continues Construction of Parkland/Tower battery expansion to 10,000 barrels of oil commenced in Q3 2015 The project was completed and commissioned in Q4 2015 Expansion…
Parkland/Tower Free Cash Flow 2015 Investment to Drive 2016 Free Cash Flow Field Netback ( millions) Capital Expenditures ( millions) 400 25,000 Free Cash Flow ( millions) Production (boe/day) 20,000 300 15,000 200 10,000…
Parkland/Tower 2016 and Beyond 5% Year-over-Year Increase to 2015F Production 35,000 30,000 2015 drilling focused on Tower oil and Parkland liquids-rich areas to 25,000 optimize facility capacity New oil treating capacity in…
Greater Dawson Pilots
Greater Dawson Montney Pilots Proving Future Value Before Full-Scale Development Septimus Pouce Coupe Pilot production Lower Montney on-stream since pilot production Q2 2014 on-stream since late 2013 Parkland Dawson Lower…
Greater Dawson Lower Montney Fairway Building Understanding of the Lower Montney Fairway Parkland 11-36 Pouce 1-15 Dawson 1-17 Dawson 8-1 Sunrise C2-25 Sunrise B8-24 Only Lower Montney wells are displayed.
Greater Attachie
Attachie Asset Details Highly Prospective Asset With Strong Liquids Potential Net production (boe/d) Q3 2015 420 Liquids (bbl/d) 180 Gas (MMcf/d) 1.5 Land (Montney net sections) 279 Working Interest 100% Reserves (2P MMboe)…
Attachie Pilots Continued Evaluation on Liquids-Rich Land Two pilot horizontal wells on western side of lands have produced 1.4 Bcf of gas and 130 Mbbl of liquids in 18 months NGLs yield up to 25 bbl/MMcf dependent on plant design;…
Ante Creek Asset Details Significant Cash Flow With Substantial Growth Opportunity Net production (boe/d) Q3 2015 15,260 Liquids (bbl/d) 7,150 Gas (MMcf/d) 49 Production split % (liquids/gas) 47/53 Land (Montney net sections)…
Ante Creek Significant Drilling Inventory Large Land Base and Down-Spacing = Significant Drilling Inventory Drilling Inventory 800 700 600 500 Wells 400 300 200 100 0 Wells Drilled to YE2014 Drilling…
Ante Creek Strong First Year Production ARCs Ante Creek First Year Production Rates Outperform Industry 700 12 Month Average Daily IP Rate (boe/day) 12 Month Average Daily Production (Raw boe/day) 600 ARC 12Mo Avg Daily Gas Rate…
Ante Creek Delivering Results Type Curve Repeatability in Core of Ante Creek 450 Key Metrics 2016 Budget 2016 DCET Capex/well ( millions) 3.3 400 2014 Internal 2P Reserves (Mboe) 290 350 2012 IP (1 month) (boe/day) 375 Production…
Ante Creek Technology Advancement Wells Designed Specific to Reservoir Geology Longitudinal wells best suited to areas with conventional waterfloods Transverse orientation best suited to unconventional reservoirs Longitudinal…
Ante Creek Free Cash Flow Free Cash Flow Generation With Exposure to Both Commodities Field Netback ( millions) Capital Expenditures ( millions) 250 Free Cash Flow ( millions) 20,000 Production (boe/day) 200 15,000 150…
Ante Creek 2016 and Beyond Ante Creek is 20% of ARCs High Value Liquids Production 20,000 18,000 ARCs three plants 16,000 producing at capacity 14,000 Successful delineation step- out locations have added low 12,000 risk pad…
Operational Excellence
Strategic Montney Infrastructure Building Montney Infrastructure to Support Resource Development Parkland Gas Plant On-Stream 2013 Tower Battery October 2015 Dawson Gas Plant Phase I: On-Stream 2010 Phase II: On-Stream…
Expertise in Facility Development Commissioned Five Major Facilities in Six Years Align With Long- Build infrastructure in NE BC to align with long-term term Development development strategy ARC Owned & 100% owned and operated…
ARC Montney Infrastructure Template A Template Approach to Building Gas Plants Dawson Phase I (Commissioned 2010) Dawson Phase II (Commissioned 2011) First 60 MMcf/day Second 60 MMcf/day Parkland Plant (Commissioned 2014) Sunrise…
ARC Montney Infrastructure Gas Plant Development Timeline for Typical Sweet Plant Investment Decision months 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Government Application Plant Design Ordering of Items Breaking Ground…
Concurrent Operations Optimizing Efficiencies Optimizing operational efficiencies and improving the business cycle by safely coordinating concurrent operations Pads are designed to accommodate simultaneous operations Tower 16 well…
Tower Drilling Curves 25% Reduction in Drill Times = 30% Cost Savings at Tower Pads 0 12-16 Best Well 30% cost savings and 25% 8-24 Pad Average reduction in drilling time over previous Tower pads 500 12-16 Pad Average (Horizon…
Completion Design Proppant Concentration Increasing Frac Intensity in the Montney Increasing frac intensity to match individual field and stratigraphic reservoir parameters Proppant per Lateral Foot Drilled at Tower 1,200 1,150…
ARC Well Design Designing Tonnage to Deliver Value 12,000 240% What we design: Increasing Capital Cost, IRR or NPV Well length 10,000 200% Inter-well spacing Inter-frac spacing 8,000 160% Tonnage per frac All other frac…
Base Assets
Base Assets Stable High Netback Assets BRITISH COLUMBIA ALBERTA SASKATCHEWAN MANITOBA
Pembina Asset Details Large Oil in Place, Low Risk, Predictable Production Net production (boe/d) Q3 2015 10,550 Liquids (bbl/d) 8,450 Gas (MMcf/d) 12.6 Land (Cardium net sections) 142 Working Interest 80% Reserves (2P MMboe…
Pembina Cardium Geology Optimizing Existing Production, Exploiting New Unconventional Reserves
Pembina Leading Capital Efficiencies ARC Pembina Capital Efficiency Outperforms Industry Pembina Cardium Hz 12 Month Cumulative Production (1) 120 Other Industry 12 Month Cum (186 Wells) ARC 12 Month Cum (91 Wells) 12 Month…
Pembina Outperforming Expectations Slickwater Completions Delivering Strong Results 350 2016 Type Curve Key Metrics 2016 Budget 300 2014 Type Curve DCET Capex/well ( millions) 2.8 Production Rate (boe/day) 2012 Type Curve…
Pembina Focus on Technology Horizontal Injection Pilot Delivers Incremental Crude Oil North Pembina Cardium Unit Waterflood injection 400 1,600 started in December Oil 2012; cumulative injection Producing GOR (scf/bbl) & Water…
Pembina Free Cash Flow Portfolio Leading Netbacks High quality light oil yields highest per boe netback in ARCs portfolio Significant drilling inventory to sustain production over several years Field Netback ( millions) 250 Capital…
Pembina 2016 and Beyond Founding Property Providing Long-term Value 14,000 Reduced drilling in 2015 as compared to previous years; 12,000 drilling will resume in 2016 Redesigned wellbores and 10,000 service sector cost reductions…
Southeast Saskatchewan & Manitoba Solid Long-life Assets Cash Flow High Netback Breakeven Proven Engine Oil Price EOR 65 million of free C30 to 35/bbl 45/bbl Long-term EOR projects cash flow for 2015F in place IRR Half-cycle,…
SE Saskatchewan & Manitoba Asset Details Stable Production and High Netbacks Net production (boe/d) Q3 2015 9,610 Production split 98% liquids 2015 2016 Year 2014 Forecast Budget Land (net sections) 211 Hz Working Interest 80%…
SE Saskatchewan & Manitoba Geology Exploitation and Optimization of Conventional Mississippian Reservoirs NE
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