ARC Resources Ltd. 2018 Investor Day November 12, 2018
Agenda 9:30 am 9:35 am Welcome Bevin Wirzba, Senior Vice President, Business Development and Capital Markets 9:35 am 10:00 am Introduction Myron Stadnyk, President and Chief Executive Officer 10:00 am 10:20 am Capital Allocation,…
Introduction
ARC Is a Compelling Investment ARC Is a Unique and Differentiated Canadian Upstream E&P Company Canadian Public E&P 50 Companies (1) 2019E Debt-to-Cash 13…
Building Sustainable Businesses in the Montney Businesses Sustain Production and Generate Free Cash Flow at Low Reinvestment Rates Montney Businesses Attachie West Phase I Montney Production Ante Creek Cardium & Non-core Production…
ARCs Focus Has Improved The Results Are Clear Delivering Industry-leading Returns via per Share Growth and Dividends Sustaining Capital Three-year Average Requirements F&D Costs Disciplined Capital Allocation 28% 61% 2009 2019F…
Sustainable Dividend-paying E&P Company ARCs Business Model Supports Profitable Future Growth Capital Efficiencies 2019 Capital Portfolio Balance Sheet Fully Funded and Declines Program 775MM Montney land 23-year history of…
ARC Delivered through Its Transformation ARCs Plan Remains Focused on Profitability, Sustainability, and Creating Optionality for the Long Term 2016 2017 2018 2019 Monthly dividend of Brought on Dawson Sustained Montney Execute capital…
ARCs Three-year Plan Three-year Capital Investment Program Will Result in Meaningful Liquids Production and Cash Flow per Share Growth 2019 2020 2021 3 Years Execute capital program Bring on Dawson Bring on Attachie West Dividend of…
Capital Allocation, Funding Strategy & Commodity Outlook
ARCs Capital Allocation Principles Founded on Balance Sheet Strength, Based on In-depth Analysis of Project Economics and Impacts to Corporate Profitability Strong Stable and Detailed Total Full-cycle Balance Meaningful…
How ARC Chooses to Fund Its Business ARCs Current Funding Choices Cash and Long-term Debt Have the Lowest Cost of Capital Cash Increasing Cost of Capital Debt New Equity Asset Sale PDP Non-core Asset Disposition…
ARC Prudently Manages a Strong Balance Sheet Targeting a Net Debt to Annualized Funds from Operations Ratio of 1.0 to 1.5 Times over the Long Term Net Debt to Funds from Operations 1,500 2.5 1,200 2.0 900 1.5 millions…
ARC Has Pre-funded Its Three-year Growth Plan Disposition Proceeds Have Given ARC the Ability to Temporarily Outspend Cash Inflows Total Forecasted Inflows & Outflows (1)(2)(3) 2017 to 2020 Dawson Phase III Net A&D Proceeds Sunrise…
Crude Oil Outlook Global Crude Oil Fundamentals Remain Supported and Egress Relief Is Anticipated in Late 2019 for the WCSB Global Oil Supply/Demand Balance (1) WCSB Crude Oil Pipeline Takeaway Capacity (2) EIA Supply-Demand Existing…
Robust Demand for Canadian Condensate Demand for Diluent Remains Significantly Higher Than Local WCSB Production and Is Supportive of Strong Condensate Pricing WCSB Condensate Supply/Demand Balance (1) 800 600 Mbbl/day…
ARC Is Growing Its Liquids Business Growth Projects Target Organic Development of High-value Light Oil and Condensate Production 29% ARCs Crude Oil & Liquids Sales Mix (1) of ARCs 2018 YTD production is made up of crude oil and 2019…
Globalization of North American Natural Gas Supply North American Natural Gas Market Has Become Increasingly Connected to Global Natural Gas Markets Western Canadian & US Egress and Demand Outlook (1) Intra-AB Demand LNG Canada…
ARCs Natural Gas Business ARC Diversifies Its Price Exposure, Leading to Improved Price Realizations Firm transportation pipeline agreements in place for Dawson Phase IV and Attachie West Phase I Less than five per cent exposure to…
ARCs Funding Model Post-Dawson Phase IV, Productive Capacity Will Allow ARC to Self-fund Itself in a Modest Commodity Price Environment Future Inflows & Outflows (1)(2)(3) Pay meaningful dividend and grow Discretionary cash flow per…
2018 Accomplishments & 2019 Budget
2018 Accomplishments Strong Capital and Operational Performance across ARCs Portfolio Lower Attachie Montney Commissioning piloting success at of Sunrise activities Dawson and Phase II Parkland Lowest cost, Underpins Grows…
Primary Objectives of ARCs 2019 Budget Investing in Infrastructure to Advance Multi-year Development Projects to Deliver Future Liquids Growth Initial success at Attachie supports multi-phase development Attachie Progress first…
2019 Guidance Investing in Multi-year Infrastructure to Grow Liquids Production and Deliver per Share Growth over the Long Term Invest to add through investing 775 million facility capacity 300 million in NE BC and Alberta in multi-year…
2019 Budget Outcomes and 2019 to 2021 Outlook Confidence in Future Development Plan to Provide Multi-year Outlook Outlook 2019 to 2021 Dividend Annual average of 210 million Sustaining capital (1) Annual average of 400 million…
2019 Budget of 775 Million Advances Projects to Deliver Near-term Annual Production of 135,000 to 142,000 boe per day and Multi-year Growth BC AB Red Creek Attachie Attachie Sunrise Tower 24MM 184MM 6 wells Pouce Coupe (5 Hz +1…
Proven Expertise in Facility Development Investment in Infrastructure Results in Operational Flexibility to Maximize Profitability Aggressive in Aligned with 100% ARC Advancing Designed for Long-term Owned-and- Multiple Projects…
Three-year Infrastructure Investment Plan ARC Will Advance Multiple Projects to Add Significant Processing Capacity; Production Will Grow into Development Processing Capacity Oil and Natural 2017 2018 2019 2020 2021 2022…
Asset Overview
Montney Fairway Highly-efficient, Low-cost Montney Assets Driving Value BC AB Significant Resource Potential Geographic Total petroleum initially-in-place (1) identified across Optionality ARCs NE BC and Pouce Coupe assets…
Attachie West
Attachie West Ready to Invest in World-class Reservoir Significantly Over-pressured Reservoir and Large Contiguous Land Position Foundation for Decades of Future Development BC AB Lower Montney 10 kPa/m Line Pembina…
Attachie West Condensate-rich Production Profile Suited for Multi-layered Development, Condensate Is Being Produced from Both the Upper and Lower Montney Horizons Upper Montney Attachie West 13-14 pad currently averaging CGR of…
Attachie West Ready for Commercial Development Attachie West Is Delineated and Ready for Development 13 wells on production in Attachie West Includes multi-well demonstration pad brought on production in 2018 Strong well…
Attachie West Strong Production Results Transferred Learnings between Tower and Attachie Has Resulted in Meaningful Improvements to Type Curves and Well Inventory 225 Cumulative Oil & Condensate Production Cumulative Oil & Condensate…
Attachie West Phase I Type Curve Expectations Initial Type Curve Developed for Broad Range of Outcomes and Confidently Supports Development Attachie West Development (1)(2)(3)(4) 1,000 2019 Type Curve 2019 Key Metrics Type Curve…
Attachie West Focused on Efficient Execution Leveraging Technology to Optimize Attachie Fracture Stimulation Design Microseismic Monitoring Fibre-optic Monitoring Fracture Modelling (1) Utilizing technology to optimize design…
Attachie Planning for Multi-phase Development Investment in Additional Infrastructure Earlier in Project Life Cycle Results in Capital Savings and Higher Profitability Access Road Water Infrastructure Temporary Accommodation…
Attachie West Phase I Project Timeline Development Timeline for Q2 2021 On-stream Date; Licensing up Front for Multiple Phases Investment Decision Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2…
ARCs Attachie West Phase I Business Outcome Profitably Investing in First Major Phase of Development While Planning for Subsequent Phases Natural Gas Processing Capacity: 60 MMcf/day Condensate-handling Capacity: 10,000 bbl/day…
Attachie Ready to Invest in First Major Phase Key Success Factors to Become ARCs Next Core Growth Platform Significant Acreage Attachie West Has Development Plan Is Profitable Business Position in Sweet Spot Been Delineated Well…
Greater Dawson Area
Greater Dawson Area Integration and Optimization Proximity of Lands Allows for Optimized Infrastructure Utilization and Efficient Multi-layered Development and Area Egress Q4 2018 Parkland-Dawson Pembina & Enbridge Pipeline…
Greater Dawson Area Lower Montney Investments 2017 Appraisal Activities and Subsequent 2018 Investments Unlocked Significant Opportunity to Grow Liquids Production Tower Pouce Coupe Total Lower Montney Wells Drilled/Planned…
Parkland-Dawson Proven Lower Montney Results Impressive Liquids Results Drove Decision to Interconnect Parkland and Dawson Fields Parkland-Dawson Lower Montney Wellhead Liquids Production 140 100 Mbbl of liquids 950 MMcf of gas…
Parkland-Dawson Lower Montney Development High Liquids Yields Driving Strong Economics for Lower Montney Development Parkland-Dawson Lower Montney Development (1)(2)(3) 1,600 Medium Liquids Ratio 2019 Type Curve High Liquids Ratio…
Dawson Optimizing Upper Montney Development ARC Is Growing Its Inventory of Liquids-rich Wells outside of the Dawson Core Dawson Upper Montney Development (1)(2)(3)(4) 8,000 Dawson Upper Dry Gas 2019 Type Curve Dawson Upper…
Dawson Phase IV Profitable Investment Robust Project Economics across Range of Pricing Scenarios Benefit from Increases in Both Gas and Condensate Pricing Single Well Economics Project Economics ROR of 80-110% (1) ROR of 22% (1)…
Dawson I & II Liquids Upgrade Project Project Leverages Existing Infrastructure and Will Add 3,000 Barrels per Day of Liquids Processing Capacity by Year-end 2019 Montney Upper Lower Montney Existing core infrastructure is key to…
Dawson IV Expansion Project Flexibility Incorporated into Facility Design and Takes Advantage of Prior Investments in Dawson Phase III Infrastructure Dawson Phase IV Adds 90 MMcf/day of natural gas, 7.5 Mbbl/day of condensate, and 3…
ARCs Dawson Phase IV Business Outcome Infrastructure Investment in Greater Dawson Area to Support Broad Shift to Liquids-rich Lower Montney Natural Gas Processing Capacity: 90 MMcf/day 35,000 Condensate-handling Capacity: 7,500…
Greater Dawson Area Confidence in Outcomes Key Success Factors Support Investment in Infrastructure to Develop Liquids-rich Lower Montney High Confidence, Efficiencies of Liquids-rich Development Large Well Inventory Profitable…
Ante Creek
Ante Creek Maximizing Free Cash Flow Generation Facility Expansion Capitalizes on Successful Well Design and Capital Efficiency Improvements Ante Creek Production 20 Average Daily Production (Mboe/day) Cumulative Production 15…
Ante Creek Enhancing Free Cash Flows Recent Modifications to Well Design Has Enhanced Capital Efficiencies and Overall Profitability of Wells Ante Creek Development (1)(2)(3)(4) 800 2019 Type Curve (boe/day) 2019 2019 Oil Type…
Ante Creek Excellence in Execution Better Efficiency of Execution Has Resulted in Strong Profitability Strong Culture of Optimization of Improved Operational Learning Well Design Profitability Efficiencies Drilling Times 6.00…
Ante Creek Creating More Oil Production Capacity Facility Expansion Will Add Up to 2,500 Barrels per Day of Light Oil Production by Q2 2020 Optimize Plant to Handle 2,500 bbl/day of Additional Oil Production Invest in Water…
Ante Creek Enhancing Free Cash Flow Key Success Factors to Drive Free Cash Flow with Low-risk, Capitally Efficient Well Inventory Minimal Strong Cash Flow Excellent Capital Profitable Facility Investment to Increase Asset…
Summary
ARCs Three-year Plan Three-year Capital Investment Program Will Result in Meaningful Liquids Production and Cash Flow per Share Growth 2019 2020 2021 3 Years Execute capital program Bring on Dawson Bring on Attachie West Dividend of…
Why Invest in ARC 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 for Future Per…
Appendix
Montney Development Economics Strong Rates of Return across the Montney Portfolio Half-cycle Attachie West Dawson Ante Creek Tower Sunrise Parkland- Economics (1)(2)(3) Dawson US60/bbl WTI Cdn2.00/GJ AECO Upper Montney Lower…
Tower Strong Oil Production Delivering High-quality Oil Production Tower Development (1)(2)(3)(4) 1,200 2019 Transition Type Curve (boe/day) Core Transition 2019 Core Type Curve (boe/day) 2019 Transition Oil Rate (bbl/day) Key…
Sunrise Multi-layer Development Strong Reservoir, Low Capital and Operating Costs Sunrise Development (1)(2)(3)(4) 8,000 2019 Type Curve 2019 Type Curve Key Metrics (Average of 3 Layers) DCET Capex/Well ( millions) 4.2 6,000…
Advisory Statements
Definitions of Oil and Gas Reserves and Resources Undiscovered Petroleum Initially-in-Place (UPIIP) is that quantity of petroleum that is estimated, on a given date, to be contained in accumulations yet to be discovered. The…
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