AGENDA Timeline Item Presenters Brian Newmarch 9:00 am Introduction VP Capital Markets Marty Proctor 9:05 am Strategy Chief Executive Officer Derek Aylesworth 9:25 am 2019 Capital Allocation Chief Financial Officer…
WHO IS SEVEN GENERATIONS ENERGY Serving our stakeholders through: Differentiated attention to selection, development & replenishment of the lowest supply cost resource Best in class execution through safe, responsible, innovative…
REVISITING THE CORNERSTONES OF OUR BUSINESS Return of Capital Return on Capital Free Cash Flow Financial Market Sustainability Resource Access Quality & Low Supply Cost Stakeholder Strong Service balance sheet…
7GS GUIDING PRINCIPLE STAKEHOLDER SERVICE Stakeholder Differentiation We believe that companies have only the rights given to them by society. While people have a natural entitlement to basic rights, corporations are an instrument…
THE RIGHT LOCATION FOR DEMAND 7
WITH A HIGH QUALITY RESOURCE 15+ years of core inventory Nest 1/2/3 Upper & Middle Montney Most economic resource in Canada Canadas largest condensate producer 750 MMcf/d of owned gas processing capacity Extensive…
AND LOW SUPPLY COST Montney Breakeven Henry Hub at Flat 60/bbl WTI, 10% IRR (/Mcf)1…
MARKET ACCESS THAT DIFFERENTIATES 7G Gas Market Sales Points AECO 9% AECO 11% AECO 5% Dawn 13% Dawn 15% Dawn 15% Ventura 4% Malin 13% Gulf 18% Gulf 18% Gulf 17% Chicago 55% Chicago 55% Chicago 50% GTN: 90 MMcf/d…
2019 BUDGET At US50/bbl WTI 2019 capital investments are projected to: Equal adjusted funds flow Generate a cash return on invested capital over 13% 1.25 billion capital investment program that includes: 780 million for Nest 2…
FINANCIAL SUSTAINABILITY Capital Allocation Adjusted Funds Flow 1.1 billion of sustaining capital 1.25 billion at US50/bbl WTI Delineation and infrastructure of 150MM (12% of budget) Risk Management Flexibility and Control…
REVISITING OUR COMMITMENTS What did we say in 2017 Organic growth of 7-14%/year to add 100 Mboe/d over 5 years 10-15% ROCE November Net debt / adjusted funds flow below 2 times 2017 Targeting a 2019 funds flow budget at US55/bbl…
REVISITING OUR COMMITMENTS DELIVERING WHAT WE PROMISE What did we say in 2017 Organic growth of 7-14%/year to add 100 Mboe/d over 5 years 10-15% ROCE November Net debt / adjusted funds flow below 2 times 2017 Targeting a 2019…
TODAYS TAKEAWAYS Updated Nest 1 economics with development plan for Nest 3 & Nest 1 Advanced resource understanding and Lower Montney delineation upside Ability to generate per-share growth with NCIB option in place January…
THE 7G INVESTMENT THESIS Expanding discretionary adjusted funds flow Delivering operating excellence Diverse marketing and price differentiation High quality resource and deep organic inventory Financial strength,…
TSX: VII 2019 CAPITAL ALLOCATION Derek Aylesworth, Chief Financial Officer
CAPITAL ALLOCATION 7GS BUDGETING PROCESS Macro Rigorous environment portfolio evaluation evaluation Per share Focused on growth rate best-ranked as an output returns Capital allocation as an input Returns-based…
A SUSTAINABLE BUSINESS Sustainability Capital Efficiencies Netbacks Decline Rates Industry leading liquids-rich Liquids-weighted production A function of historical capital capital efficiency drives top line revenue…
2019 STRATEGIC PRIORITIES Macro Backdrop 7G Priorities Challenged equity markets Balance sheet strength Canada Not reliant on additional external sources Energy of financing Industry challenged for incremental egress Continuous…
2019 BUDGET: BALANCE SHEET MANAGEMENT Net debt to trailing 12 month adjusted EBITDA Comfortably levered in lower prices 2.4x < 2.0x Target 1.8x 1.8x Potentially under- 1.4x 1.2x levered with 1.2x higher prices 0.9x 2015…
HEDGING STRATEGY Quarterly Revenue (/boe) 60 Hedging program has reduced revenue Objectives: volatility by 25% - Reduce revenue volatility 40 - Protect capital program - Preserve balance sheet 20 2014 2015 2016 2017 2018…
2019 BUDGET: ROLE OF SHARE REPURCHASES 2018 NCIB Activity 9.7 MM Shares 104 MM 3% Shares Retired Retired in 2018 Total invested at 10.72/sh NAV improvement from NCIB with Accelerated NCIB successful Growth delineation…
2019 CAPITAL ALLOCATION GUIDING PRINCIPALS 2.0B Spending to fall Other by 0.5B y/y with Delineation flat production 70 WTI Substantial E&P discretionary free Adjusted funds flow with Infrastructure Funds improved prices Flow 60…
2019 BUDGET 2019 Guidance Sustaining Capital 1.1 billion Nest 2 Development Discretionary Capital 0.15 billion Value Total Capital Investment 1.25 billion Enhancing Average Production 200 - 205 Mboe/d H1/19 Production 195-200…
2019 BUDGET: NEST 2 DEVELOPMENT Completions Drilling 780 MM Other Infrastructure Nest 2 Base drilling, completions and required infrastructure to maintain production on an annual basis Infrastructure includes…
2019 BUDGET: NEW DEVELOPMENT & INFRASTRUCTURE Nest 3 Development Nest 1 320 MM Development Nest 3 Pipeline Network Nest 3 Nest 1 Supported by up-front infrastructure investments in Successful results to date 2019…
2019 BUDGET: DELINEATION FOR ORGANIC INVENTORY EXPANSION Nest 1 Perimeter Rich Gas 125 MM Boundary Wapiti Lower Montney Denotes approximate areas of delineation activity Lower Montney Wapiti Rich Gas Boundary…
2019 BUDGET: VALUE ENHANCING PROJECTS Water Disposal Operating Expense vs. Corporate Gas Weighting Wells /boe opex(1,2) 15 25 MM 10 Water Handling 5 7G per-boe opex is 38% below trend for peers with similar liquids/gas…
TSX: VII OPERATIONAL EXCELLENCE David Holt, Chief Operating Officer
OBSERVATIONS FIRST YEAR World-class asset Talented workforce Safety is a core value Highly effective infrastructure Operations never stand still Production practices Cost mindfulness Timing & logistics 32
DEVELOPMENT AND OPERATING PHILOSOPHY Delivering What We Promise 33
EXECUTION: PLANNING STRATEGIES 14 250 Quarterly Average Rig Counts Production 200 150 100 50 0 0 2015 2016 2017 2018 2019 A level-loaded drilling program supports lower volatility production 34 1) For…
DRILLING & COMPLETIONS FOCUSED ON EXECUTION EFFICIENCY Rig 1 Rig 2 Rig 3 Rig 4 Rig 5 Rig 6 Rig 7 Rig 8 Rig 9 Continuing on 2018s operational success Operational group accountability for results Efficient planning has reduced…
EXECUTION: COMPLETIONS EFFICIENCIES Completion design optimization Increased stage count with lower tonnage per stage Focused fracture network within the immediate wellbore area Allows optimization of completions equipment Lower…
EXECUTION: FOCUSED ON DOWNTIME Downtime as a % of Total Sales Volumes 15% Operating friction with high pace of growth Better pace, plant performance, and planning of concurrent operations 10% 5% 0% January-2017…
OPTIMIZATION: BASE PRODUCTION IS A PRIORITY 2018 Exit 2020E Exit 5Y+ Maturing business 5Y+ 4Y means a more balanced, lower-decline portfolio 1Y 3Y 1.5 Years 2.2 Years 4Y 1Y Production-Weighted Production-Weighted Average…
2018 FIELD OPTIMIZATION INITIATIVES Incremental Project Description Production (Post 30d Avg) Satellite Compression Installed gas compression on satellite pads to reduce wellhead pressures on pad wells 615 Tubing Changes Changed…
OPTIMIZATION: ACTIVELY MANAGING LEGACY VOLUMES Production (Mboe/d) 80 Base is stabilizing with renewed focus 70 on legacy wells 60 2016 Vintage Wells 50 40 30 20 2015 Vintage Wells 10 0 H1/2018 H2/2018 40
COST CONTROL: CAPITAL INVESTMENT IMPROVEMENTS Sourcing strategies have yielded the following savings for 2019 Category % Change Completions -14% Drilling -1% Facilities -7% Camp Facilities -15% Other - Drill, Comp, FAC -1%…
COST CONTROL: THE VALUE OF WATER HANDLING INFRASTRUCTURE WDW1 WDW2 WDW3 2017 17 km of pipeline Pembina WDW WDW1 Access to Pembina WDW Disposal Capacity 1,100 m3/d 26 MM of investment WDW4 2018 30 km of pipeline WDW2…
OPERATIONS WRAP-UP We are progressing We are instilling a Investments and operating culture of cost organizational improvements on awareness enhancements that multiple fronts drive results 43
TSX: VII PLANNING UPDATE Chris Feltin, VP Corporate Planning
2019 DEVELOPMENT OBJECTIVES Expand Utilize existing Superpad infrastructure where possible Nest 2 Add more Pads in Nest 2 West and Nest 2 North Add first development pad in Nest 2 East Boundaries Construct pipeline network…
NEST 3 STRATEGIC BENEFITS Nest 3: Lower CGRs but high gas deliverability Nest 1 CGR: 300 Condensate-Gas Ratios lower than 500 bbl/mmcf other parts of Nest Higher overall gas rates result in condensate rates per well in line 2…
INTEGRATED APPROACH TO DEVELOPMENT Integrated Development Production Strategy Land Operations Functional teams contribute to all aspects of development and Corporate Planning Drilling execution Value Pad level project…
DELINEATION STRATEGY Denotes approximate areas of delineation activity Lower Montney Wapiti Rich Gas Boundary Nest 1 Perimeter Further completion Assess liquids ratios Expansion of Nest-quality Enhanced resource testing…
DEVELOPMENT PLAN 2018 2019 2020+ Integrate Nest 3 Return to Nest 1 for Step into Nest 1 development Nest 3 development pads Define Nest 2 sub- Grow Nest 3 into regions pipeline capacity Expand understanding of Nest 1…
TSX: VII RESOURCE UPDATE Lynne Chrumka, Director of Geosciences
7GS NEST MONTNEY DEVELOPMENT AREA New Development Area Segmentation Integrated Reservoir Characterization Utilizing 3D Seismic Attribute analysis (reservoir characterization, pore fluids, rock properties) Structural…
NEST 2 UPDATE Condensate gas ratios (bbl/MMcf) vs. time (normalized month) 500 0 0 12 24 2017 Nest 2 Type Curve North South East West Liquids Nov 2017 May 2018 2019 More geotechnical data supports 7Gs & Gas Details Budget…
NEST 3 UPDATE Cumulative condensate (Mbbl) vs. time (normalized days) 100 50 0 0 30 60 90 120 150 180 Development Plans Resource View 2019 pipeline investment of 30 MM opens up High gas rates drive strong condensate…
LOWER MONTNEY UPDATE Triple-stack test Comingled vertical test (5d): 2MMcf gas; 162 bbls condensate 2,800-3,000 meters IP90: 1048 boe/d, 72% condensate Latest test well at 1,048 boe/d (72% condensate) Single well stack…
CRETACEOUS UPDATE OPPORTUNISTIC DEVELOPMENT Kakwa River Resource Stack 2 horizontal wells in 2018 Shared infrastructure from primary Montney development Cretaceous provides sweet gas for gas lift and potential EOR of the Montney…
SUMMARY OF PREMIUM SINGLE WELL DCE&T ECONOMICS Nest 1 Nest 2 Key Stats (2018 Weighted Nest 3 Estimates) South East West North Average IP30 (boe/d) 1,500 1,950 - 2,350 2,000 IP365 (boe/d) 775 1,150 - 1,650 1,400 DCET Cost (MM) 11…
TSX: VII WRAP-UP Q & A Marty Proctor, President & Chief Executive Officer
2019 TAKEAWAYS Expanding discretionary adjusted funds flow Moderating declines reduce sustaining capital Major gas processing investments completed Delivering operating excellence Execution, optimization and cost control…
IMPORTANT NOTICE (Continued) Further Economic Assumptions For Nest 1: NGL recoveries and shrinkage factors are based on the companys best estimate of the liquids to be extracted at the Pembina Kakwa River Plant and at 7Gs wholly…
DEFINITIONS AND ABBREVIATIONS A annual m metres AECO physical storage and trading hub for natural gas on the TransCanada Alberta transmission Mbbl thousand of barrels system Mboe thousands of barrels of oil equivalent AFF adjusted…
For more information: Brian Newmarch Vice President Capital Markets 1.403.767.0752 bnewmarch7genergy.com Ryan Galloway Investor Relations Manager 1.403.718.0709 ryan.galloway7genergy.com www.7genergy.com TSX: VII
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