ARC Resources Ltd. 2020 Investor Day February 11, 2020
Introduction
Update since ARCs 2018 Investor Day 2018 2019 2020 Sustained existing Montney businesses Sustained existing Montney businesses Sustain Montney businesses including Dawson Phase III Brought Sunrise Phase I & II to Brought Sunrise…
ARCs Vision for the Future Production (Mboe/day) (1) 158 139 133 123 2017 2018 2019 2020F Production Base Capital Expenditures ( millions) (2) 830 679 692 500 2017 2018 2019 2020F Three-year Average Sustaining…
Corporate Strategy FINANCIAL HIGH SUSTAINABILITY & PERFORMANCE RETURN ON PEOPLE & INVESTMENT CULTURE RISK- MANAGED VALUE CREATION HIGH-QUALITY COMMERCIAL ASSETS & ACTIVITIES & OPERATIONAL RISK EXCELLENCE MANAGEMENT…
ARC Is Realizing Efficiencies across the Business Production Net Well Count Sustaining Capital (1) Requirements 119% 57% 26% 2009 2019 2009 2019 2009 2019 Three-year Average F&D Costs (2) Operating Expense Headcount 39%…
The World Needs More Canadian Energy ESG Ratings and Reserves by Major Oil Producing Country (1)(2) 100 500 75 375 Average ESG Score Reserves (Bboe) 50 250 25 125 0 0 Average ESG Score (LHS) Reserves (RHS)…
World-class Montney Resource Montney Optionality Significant Montney Inventory (1) BC AB 7,500 Geographic Optionality Egress Optionality Commodity Optionality Multi-layer Optionality 6,000 Number of Locations 4,500 Oil &…
ARC Is Focused on Long-term Corporate Profitability Return on Average Capital Employed (1) Delivering Full-cycle Asset Level Returns (1) 30% 20% After-tax Rate of Return 10% 0% Proportional Facility and Appropriate…
Creating Value through Infrastructure Build-out Liquids-rich Area Returns Dry Gas Area Returns 30% 30% 20% 20% Area Returns (%) Area Returns (%) 10% 10% 0% 0% Infrastructure Build-out Infrastructure Build-out…
Key Themes Observed from the Investment Community 1 How does ARC approach capital allocation and the use of surplus funds from operations 2 What does 2020 hold for ARC 3 How is ARCs Attachie development progressing 4 What are the…
How Does ARC Approach Capital Allocation and the Use of Surplus Funds from Operations
Allocating Capital in Todays Environment Capital Allocation Options 2020E Production per Share Growth vs. Investment (1) 200% Capital Expenditures as a Percentage of Cash Flow 150% Return Capital to Pay a dividend Shareholders…
Capital Allocation Priorities and Principles Capital Allocation Priorities Capital Allocation Principles Manage net debt to funds from Debt Reduction operations ratio within 1.0 and 1.5x Long-term Development Investments Share…
Historical Capital Allocation and Outlook 2016 to 2019 Capital Allocation 2020 Forecasted Capital Allocation Inflows Outflows Inflows Outflows Funds from Operations Net A&D Proceeds Dividend Sustaining Capital (1) Long-term…
Surplus Funds from Operations Yield TSX Sector Yield vs. Valuation (1) E&P Yield (2) 12% 36 20% 27 Surplus Funds from Operations Yield (%) Surplus Funds from Operations Yield (%) 6% 18 5% ARC 2020E EV/EBITDA…
Dividend History and Principles Dividend History Dividend Principles 8 120% Dividends as a Percentage of Funds from Operations Dividend sustainability Cumulative Dividends ( billions) 6 90% 4 60% Balance sheet…
Capital Efficiency and Corporate Decline Rate 2020E Capital Efficiencies (1) 2020E Corporate Decline Rates (1) 20,000 48% 2020E Capital Efficiency (/boe/day) 15,000 36% Corporate Decline Rate (%) 10,000 24% ARC 5,000…
Strong Balance Sheet Balance Sheet History Balance Sheet Principles 1,600 2.5 Net Debt and Funds from Operations ( millions) Net Debt to Funds from Operations Ratio 2.0 Demonstrated history of 1,200 balance sheet management…
Share Buybacks How ARC Contemplates Share Buybacks Capital Allocation Considerations Sustain Production Long-term Scarcity of Capital Development Capital Investment Returns Debt Levels Payback Period Flowing Barrel Metrics…
What Does 2020 Hold for ARC
2020 Key Operational Objectives Operational Objectives Improve capital efficiencies FINANCIAL HIGH SUSTAINABILITY & PERFORMANCE Deliver strong safety performance RETURN ON PEOPLE & INVESTMENT CULTURE RISK- Continue to drive…
2020 Guidance Invest to keep facilities at or and to complete 500 million near gas capacity while maximizing liquids Dawson Phase IV and Ante Creek expansion, and production and funds from commence Parkland sour conversion operations…
2020 Budget of 500 Million (1) Attachie BC AB Attachie Tower Sunrise 30MM Septimus Parkland Pouce Coupe 40MM 8 wells Sunset 36,000 boe/day 5,000 boe/day Optimize pad profitability Sunrise Dawson Generate funds from operations…
Operational Excellence Operating Expense 10.50 170,000 Average Daily Production (boe/day) Operating Expense (/boe) 8.00 130,000 5.50 90,000 3.00 50,000 2009 2014 2019 2020F Operating Expense (LHS) Average Daily…
Lower Montney Development and Liquids Growth Greater Dawson Area Lower Montney Development 23 Tcf (1) of resources in lower Montney Large Resource in Place 105 MMbbl of contingent resource NGLs, of which 71 MMbbl is condensate…
Greater Dawson Area Strong Condensate Results Greater Dawson Area Condensate Performance 200,000 Lower Montney Range Upper Montney Range NGLs Natural Cumulative Condensate Production (bbl) [C2,C3,C4] Condensate Gas 150,000 Type…
Dawson Phase IV Update Dawson Phase IV Project Checklist Commercial and Development Execution Regulatory Approval Secured Takeaway Secured Economics Robust Facility Execution Project Cost On budget Safety 0 LTIs Mechanical Work…
How Is ARCs Attachie Development Progressing
Why Does ARC Like Attachie Attachie Large contiguous land base Large Liquids Resource in Place 8.9 Bbbl liquids and 32 Tcf natural gas in place (1) Over-pressured reservoir Excellent Deliverability 50 Mbbl per well produced…
Attachie Development Life Cycle of a Shale Play Land Initial Acquisitions & Appraisal Manufacturing Production Development Exploration 2 6 Years 2 5 Years (2010 2016) (2017 Ongoing) ARC Is Progressing Its Attachie…
Significant Competitor Activity at Attachie (1) COP C-035-D IP3: 490 bbl/day KEL A-034-I BC AB IP3: 427 bbl/day COP D-044-K IP3: 397 bbl/day KEL 2-23 COP 13-22 IP3: 248 bbl/day IP3: N/A KEL 5-9 IP3: 623 bbl/day YOHO 11-24…
Continuous Improvement in Pad and Well Design Pad and Well Design Evolution Cumulative Condensate Production 300 2016 13-26 Well Cumulative Condensate Production (Mbbl) Unconstrained 225 2017 B13-26 Well Unconstrained 300 m…
Attachie Is Being Advanced Towards Commercialization Technical Commercial Funding Strong liquids deliverability Commodity egress Balance sheet Improved capital efficiencies Regulatory Maximize profitability Competitor activity…
What Are the Advantages of Owning and Operating Infrastructure
Owned-and-operated Infrastructure Overview NE BC Ante Creek Phase I Parkland/Tower Phase I Dawson Phase III & IV AB Dawson Phase I & II Sunrise Phase I & II Facility Investment of 815 million 645 MMcf/day of Natural…
Strategic Advantages of Owned Infrastructure Benefits of Owned-and-operated Infrastructure 2019 YTD Operating Expense (1) 16 Lowers cost structure and increases funds from operations 12 Operating Expense (/boe) Ability to…
Dawson Phase IV Business Model 200,000,000 Dawson Phase IV Gas Processing and Liquids-handling Facility 35,000 Natural Gas Processing Capacity: 90 MMcf/day Condensate-handling Capacity: 7,500 bbl/day (production expected to stabilize…
How Does ARC Approach Commercial Diversification and Price Risk Management
Commercial Activities and Risk Management Upstream Commercial Function Downstream Commercial Function Natural Power Gas LNG Downstream Market Transportation Gas Petro-chemical Plant Distribution and Retail…
Natural Gas Financial and Physical Price Management WCSB Demand & Export Capacity Growth (1) Natural Gas Diversification (2)(3) 100% 2% 4% 6% 6% 8% 7% Percentage of Total Natural Gas Production (%) 7% 10% 5.6 Bcf/day Demand &…
Oil and Liquids Financial and Physical Price Management Crude Oil & Liquids Sales Mix Crude Oil Risk Management (1) 60% 76% of ARCs liquids production is made up of light oil and condensate Percentage of Crude Oil Production…
How Is ARC Leveraging New Technology and Innovation
Technology and Innovation at ARC ARCs Approach to Technology and Innovation Objective Is to Improve Efficiencies Add Value, Profitability, and ESG Performance Cycle-time Improvements Efficiency of Execution Direct Cost…
Industry-leading Drilling and Completions Performance Drilling Performance (1) Completions Performance (1) 400 1,400 Average Amount of Sand Pumped per Day (tonnes) Average Distance Drilled per Day (metres) 300 1,050 200…
Drilling Performance Sunrise British Columbia Montney Ante Creek 0 500 0 Average Distance Drilled per Day (metres) 1,500 375 1,500 Depth (metres) Depth (metres) 3,000 250 3,000 4,500 125 4,500 Drilled Drilled Drilled…
Optimizing Dawson Lower Montney Development Estimated Ultimate Recovery Capital Efficiency 1,500 10,000 Estimated Ultimate Capital Efficiency Recovery (Mboe) 1,125 7,500 (/boe/day) 750 5,000 375 2,500 0 0 2017…
Technology Has Improved Environmental Performance Waste Heat Recovery Unit Economic and Environmental Benefits 1 million initial investment 7 million improvement to Dawson Economic Phase III facilitys net present Benefits value…
How Does ARC Differentiate Itself on ESG Performance
ARCs ESG Strategy Is Focused on Sustainability Integrated Approach to Sustainability ESG Strategy Safety Environmental Performance Responsibility Environment Social Governance Sustainability Air Safety Disclosure…
ARCs ESG Excellence ESG Ratings by Major Oil Producing Country (1) Oil and Gas Companies Relative ESG Rankings (1) 100 70 Social Progress Index Africa Yale Environmental Performance Index Asia Worldbank Governance Index Canada 64…
Emissions Management Strategy Emissions Management Strategy GHG Emissions Intensity Performance (Scope 1 and 2) 0.04 Proactively focus on reducing GHG intensity Set GHG emissions intensity reduction target Tonnes of CO2…
Proactive Portfolio Management Strategy 2014 2019 Growth Property NE BC Hold Property Divest Candidate Ante Creek Pembina ARCs Business Has Become Increasingly More Efficient while Its Surface Footprint Has Been…
Land Management and Asset Liability Strategy Land Management Strategy Multi-well Pad Development Has Reduced ARCs Overall Surface Footprint 160,000 6,000 119% increase Rigorous asset integrity program in production Average…
Water Management Strategy Water Management Strategy Water Storage Reservoirs Responsibly manage water use in operations Evaluate technologies and procedures to implement best practices Sunrise Parkland Water strategy key in…
Strong Safety Performance Contractor Total Recordable Incident Frequency (TRIF) 2.0 Total Recordable Incident Frequency 1.5 1.0 0.5 0.0 2014 2015 2016 2017 2018 2019 Employees Have Gone Six Years without a…
ARCs Strong ESG Performance ESG Strategy in Action Sustainability Societal Reporting Contributions Ethical Business Risk Executive Practices Management Compensation ARC Is Committed to ESG Transparency
Why Should ARX Be in an Investors Portfolio
Why Should You Own ARX We Are Growing Our Production Base with Lower Capital Requirements We Are a Leader in Operational Excellence We Are Focused on Technology and Innovation We Are a Leader in ESG Performance We Are…
Dawson Type Curve and Economics Medium Liquids Upper Montney Type Curve (1)(2)(3) Development Economics 8,000 200 Natural Gas (Mcf/day) (bbl/day) Condensate (bbl/day) Rate(bbl/day) NGLs [C2, C3, C4] (bbl/day) Medium…
Dawson-Parkland Type Curve and Economics Medium Liquids Lower Montney Type Curve (1)(2)(3) Development Economics 7,500 250 Natural Gas (Mcf/day) (bbl/day) Condensate (bbl/day) Rate(bbl/day) NGLs [C2, C3, C4] (bbl/day)…
Dawson-Parkland Type Curve and Economics High Liquids Lower Montney Type Curve (1)(2)(3) Development Economics 3,000 600 Natural Gas (Mcf/day) (bbl/day) Rate (bbl/day) Condensate (bbl/day) NGLs [C2, C3, C4] (bbl/day) High…
Parkland Type Curve and Economics Upper Montney Type Curve (1)(2)(3) Development Economics 6,000 600 Natural Gas (Mcf/day) (bbl/day) Rate (bbl/day) Condensate (bbl/day) NGLs [C2, C3, C4] (bbl/day) Upper Montney Natural Gas…
Ante Creek Type Curve and Economics Type Curve (1)(2)(3) Development Economics 2,000 500 Rate (bbl/day) Natural Gas (Mcf/day) Crude Oil (bbl/day) Condensate (bbl/day) Natural Gas Production Rate (Mcf/day) 1,600 NGLs [C2,…
Ante Creek Development Potential Reserves Maps Drilling Inventory 800 600 400 Wells 200 0 Wells Drilled to 2P Booked Internal Inventory YE 2019 Locations Estimate ARC Montney Lands ARC Montney Lands with 2P…
Attachie West Type Curve and Economics Type Curve (1)(2)(3)(4) Development Economics 3,000 2,000 Natural Gas (Mcf/day) Condensate & NGLs Production Rate (bbl/day) Condensate (bbl/day) NGLs [C2, C3, C4] (bbl/day) Natural Gas…
Sunrise Type Curve and Economics Type Curve (1)(2)(3) Development Economics 7,500 Natural Gas (Mcf/day) Type Curve Natural Gas Production Rate (Mcf/day) Key Metrics (Average of 3 Layers) 5,625 DCET Capital/Well ( millions)…
Sunrise Development Potential Reserves Maps Drilling Inventory 500 375 Upper Montney Upper Montney A Booked Reserves 250 Wells Upper Montney A+ Booked Reserves 125 Upper Montney B Lower Montney Booked…
Reserves and Resources Disclosure All reserves in this presentation are, unless indicated otherwise, as at December 31, 2019 as evaluated by GLJ Petroleum Consultants Ltd. (GLJ) in accordance with the definitions, standards, and…
Definitions of 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 recoverable portion of…
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