ARC Resources Ltd. 2017 Investor Day November 13, 2017
Agenda 8:00 8:05 am Welcome Bevin Wirzba, Senior Vice President, Business Development and Capital Markets 8:05 8:25 am Built to Last Terry Anderson, Senior Vice President and Chief Operating Officer Van Dafoe, Senior Vice President and…
Our Plan ARCs Plan Is Fully Funded and Will Result in 10 Per Cent Production CAGR over a Three-year Period 2016 2017 2018 2019 Reduced the Brought on Dawson Sustain Montney Maintain consistent dividend Phase III businesses investment…
BUILT TO LAST
ARC at a Glance A Leading Montney Producer Focused on Risk-managed Value Creation and Strategic Decision-making 130,000 boe/day Q3 2017 Production Top Talent 550 38,000 High-quality, MMcf/day bbl/day and Strong Long-life…
Long-term Value Creation Strategic Decisions Have Created a Resilient Business and Positioned ARC for Future Success 6 Billion Stayed within 10% Target of 1.0 to 1.5x Transitioned of Distributions / Return on Average Asset Base to…
(1) Renaissance Energy Talisman Energy Suncor Inc. Alberta Energy (EnCana & Cenovus) Canadian Occidental Canadian Natural Resources Anderson Exploration Crestar Energy Poco Petroleums Survivor Bias Norcan Energy…
Banded Commodity Price Environment ARCs Response Has Been to Focus on the Montney, Reduce Costs, Improve Efficiencies, and Maintain a Strong Balance Sheet Crude Oil and Natural Gas Pricing (1) NYMEX Henry Hub Natural Gas…
Building Sustainable Businesses in the Montney Businesses Sustain Production and Generate Free Cash Flow at Low Reinvestment Rates 150,000 Montney Businesses Sunrise Phase II Montney Production 120,000 Cardium & Non-core…
Our Team Our Team Has the Proven Ability to Execute and Is Committed to Building an Enduring Company Myron Stadnyk Terry Anderson Van Dafoe Bevin Wirzba Chris Baldwin Ryan Berrett President & CEO Senior Vice President & Senior Vice…
Consistent and Sustainable Strategy Delivering on Our Strategy of Risk-managed Value Creation Top Talent High-quality, and Strong Long-life Leadership Assets Culture RISK- MANAGED VALUE CREATION HSE and Financial…
Top Talent and Strong Leadership Culture High-performance Culture Creates an Environment Where Employees Are Committed to Achieving Superior Business Results Top Talent High-quality, STRATEGIC DECISION-MAKING: and Strong…
High-quality, Long-life Assets Portfolio Strategy and Pace of Development Support Ongoing Value Creation Top Talent High-quality, STRATEGIC DECISION-MAKING: and Strong Leadership Culture Long-life Assets Completing Montney…
HSE and Operational Excellence Leveraging Expertise to Develop ARCs High-quality Assets and Continuing to Drive Efficiencies STRATEGIC DECISION-MAKING: Top Talent High-quality, Focusing on safety performance and Strong Long-life…
Financial Flexibility Managing a Profitable Business within Banded Commodity Price Environment Top Talent High-quality, STRATEGIC DECISION-MAKING: and Strong Leadership Culture Long-life Assets Preserving access to capital…
Building a Company for the Long Term Excelling in All Components of ARCs Strategy Is Critical to the Organization's Long-term Success Top Talent High-quality, and Strong Long-life Leadership Assets STRATEGIC DECISION-MAKING:…
PORTFOLIO STRATEGY & PACE OF DEVELOPMENT
Proven Development Model Inventory at All Stages Allows for Self-funding and Full-cycle Returns across Portfolio Growth for Future Phase Development Phase Free Cash Flow Phase Exploration Develop to Commercialize Optimization…
Optionality in the Montney ARCs Montney Assets Are Strategically Located BC AB Geographic Optionality Proximity of ARC Montney land base enables: Capital and operating efficiencies Lower Montney 10 kPa/m Line Application of…
Demonstrating Optionality at Ante Creek: A Case Study
Step Changes in Execution at Ante Creek 2017 Operational Results Are Allowing Ante Creek to Now Compete with Our Other Montney Assets New well design applied: NDP government elected Transverse orientation Royalty review initiated…
Capital Efficiency Improvements at Ante Creek Improvements in Drilling Times and Costs Are Sustainable across ARCs Asset Base 0 Drilling Times 750 Drilling Costs 750 1,000 35% 600 25% 600 Reduction in Reduction in Costs (1)…
Development Potential and Optionality to Expand New Well Design Is Delivering Promising Upside and Has Extended Development Area Ante Creek Type Curve Improvements (1)(2)(3) Ante Creek Development Plan 600 2016 Type Curve 2017 Type…
Creating Optionality through Facility Design Upfront Investment and Templated Approach to Facility Design Creates Flexibility within ARCs Long-term Plans Facility Investment Profile 180000000 Build Asset Confidence 160000000…
Managing the Pace of Development at Attachie: A Case Study
A Paced Approach to Development at Attachie ARCs Disciplined Approach Has Allowed for Learnings to be Applied from Other Fields and for Efficiencies to Be Captured Tower completion design applied First multi- to five wells well…
Integrated Learnings at Attachie and Tower Transferring Exploitation Strategies between Assets Is Resulting in Meaningful Improvements to Type Curves and Well Inventory 125 Cumulative Oil & Condensate Production (Mbbl) 100 60-well…
Progressing Attachie Towards Commercialization De-risking and Piloting Attachie for Optimal Infrastructure Design Canbriam/ Pembina Liquids Manage Pace of Development Takeaway Secured on ARC 4-20 TCPL North Montney…
HOW WE ACHIEVE LONG-TERM PROFITABILITY
Why Invest in Sunrise High Well Deliverability and Competitive Cost Structure Create Significant Value and Superior Full-cycle Economics Low Cost Structure Significant Resource Competes Continentally Strong Economics
Full-stack Development at Sunrise Significant Natural Gas Resource Base with Excellent Capital and Operating Efficiencies Sunrise Full-stack Development (1) Upper Montney Lower Montney Existing Horizontal Wells, Development…
Sunrise Phase II Expansion ARCs Next Growth Driver Is a High-rate-of-return Project Sunrise Production Profile Sunrise Phase II 240 Third-party Processing Facility ARC Sunrise 13-36 180 MMcf/day sales capacity Natural Gas…
Moving Our Sunrise Gas to Market Competitive Cost Structure and Long-term Approach to Takeaway Is Resulting in Favourable Netbacks Operated Sunrise Cost Structure (Cdn/Mcfe) Market Access F&D Costs 0.45 AECO Operating Expenses &…
Natural Gas Pricing Exposure ARC Continues to Physically and Financially Diversify to Downstream Markets to Manage Risk and to Achieve Optimal Pricing Financial Risk Management 2018 Physical and Financial 240 Realized Gains (Losses)…
Delivering Full-cycle and Corporate Returns Efficiently Converting Resources into Corporate Earnings for Shareholders Sunrise Type Curves & Single-well Economics (Half-cycle) Projected Sunrise Phase II Cash Flows 8,000 200,000,000…
ARC Allocates Capital on the Basis of Profitability Low Cost Structure Makes Sunrise ARCs Most Profitable Asset 2017 YTD Operating Netbacks less DD&A (1) 8 40% 36% Operating Netback less DD&A (/boe) 6 30% Operating Margin…
How We Choose to Fund Our Business ARCs Funding Choices Have the Lowest Cost of Capital ARC is currently funding its business through the use of cash and long-term debt Cash Increasing Cost of Capital Debt Equity Asset…
ARCs Funding Model Disposition Proceeds Give ARC the Ability to Outspend Cash Inflows over the Next Two Years Objective is to fully fund ARCs dividend and sustaining capital with funds from operations over the long term ARC will…
Positioned for Continued Long-term Profitability Low Sustaining Capital Requirements, Efficient Investment of Growth Capital and Low-cost Funding Decisions Lead to Profitability Return on Average Capital Employed (1) 30% ROACE…
ARCS APPROACH TO LONG-TERM SUSTAINABLE DEVELOPMENT
Unlocking the Lower Montney
Benefits of Multi-layer Development Significant Future Delineation Opportunities Attachie Septimus Sunrise Tower Parkland Dawson Pouce Coupe Montney A Upper Montney Montney B Montney C Montney Lower Montney D…
Increased Liquids Potential in the Lower Montney Strategic Appraisal Program from 2017 Has Unlocked a Tremendous Resource (1) Average of first 80 days 16-13 of production: 2017 Lower Montney Appraisal Program 4.5 MMcf/day of…
Montney Exploitation Approach Improves Efficiencies ARC Has Advanced Its Understanding of the Full-stack Development Potential for All Project Areas in Order to Execute Efficiently Dawson Full-stack Development (1) (1) Spacing and…
ARCs ESG Considerations for Infrastructure Development
Water Strategy Limits Impact and Creates Efficiencies Integrated Approach with Collaboration Between Technical Experts and Participation in Industry Discussions and Partnerships ARCs Guiding Principles of Water Stewardship…
Carbon and Emissions Management Strategy Committed to Minimizing Emissions that Pose Potential Risks While Recognizing the Importance of Economic Viability ARCs Guiding Principles of Carbon and Emissions Management Participate in…
Proven Expertise in NE BC Facility Development Investment in Strategic Infrastructure Has Resulted in Best-in-class Efficiencies Dawson Phase I Best-in-class Capital Efficiency Sunrise Phase II (2010) 550 million (2019 Est.) 500…
ARCs Approach to Long-term Planning
Building Our Integrated Long-term Plan Collaborative Approach Facilitates Learnings, Leverages Technical Expertise and Creates Both Ownership and Optionality Data Collection Economic and Review Screening Determine Well Designs…
2018 Budget and Guidance
2018 Guidance Focused on Profitability and Long-term Value Creation Invest to drill Keeping gas plants in 690 million our core Montney areas 64 gross at capacity operated wells To produce 37,500 40,500 bbl/day 555 565 MMcf/day of…
2018 Budget Our Most Capitally Efficient Year Capital Budget of 690 Million Focuses on Overall Capital Efficiency and Profitability BC AB Blueberry Dawson Attachie Red Creek 150MM 17 wells Attachie Manage overall pace Tower Pouce…
SUMMARY
Why Invest in ARC Built to Last A Differentiated Investment with Tremendous Opportunity Competitive Cost Profitable Deep Project Long-term Structure Investment Inventory Value Creation Top-tier Assets Balance Sheet Strength Growth…
Our Plan ARCs Plan Is Fully Funded and Will Result in 10 Per Cent Production CAGR over a Three-year Period 2016 2017 2018 2019 Reduced the Brought on Dawson Sustain Montney Maintain consistent dividend Phase III businesses investment…
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