Investor Day November 26, 2013 Calgary November 27, 2013 Toronto
Corporate Profile Corporate Summary Production (YTD Q3 2013) 94,471 boe/d Reserves (2P Gross YE 2012) (1) 607 mmboe Reserve Life Index (2P) (1) 17.5 years (2) Annualized Dividend / Dividend Yield 1.20 per share / 4.1% (3)…
Investor Day Agenda Welcome and Introductions Corporate Strategy Asset Overview Montney Growth Assets Non-Montney Assets 2014 Budget and 2015 Look Ahead Finance Strategy Marketing and Financial Risk Management Summary…
Proven Leadership Team Employee Since Myron Stadnyk President and Chief Executive Officer 1997 Steve Sinclair Sr. VP and Chief Financial Officer 1996 Cam Kramer Sr. VP and Chief Operating Officer 2011 Terry Anderson Sr. VP Engineering…
Experienced Board of Directors Board Member Since Mac Van Wielingen Chairman 1996 Myron Stadnyk Director 2013 John Dielwart Director 1996 Fred Dyment Director 2003 Tim Hearn Director 2011 James Houck Director 2008 Hal Kvisle Director…
Organizational Update Effective Late First Quarter 2014: Steve Sinclair retires as Chief Financial Officer Van Dafoe promoted to Sr. Vice President and Chief Financial Officer Van Dafoe Steve Sinclair Planned, Deliberate…
Unique Strategy Targeting net debt to 200% Reserve funds from operations Replacement through between 1.0 1.5x the drill bit for the past Active Hedging 5 consecutive years Program Capital Discipline and Pace of Development…
ARCs Proven Development Model Focus on Value Creation
Operations Overview Western Canadian Producer Western Canadian Managed
Delivering Income and Growth Delivered 19% annualized total return since inception Paid out 4.8 billion in total dividends - 29.58/share *Compound Annual Growth Rate Long-term Vision
Risk Managed Value Creation Production Profile boe/d Montney Non- Montney Strategic Optionality
ARC in the Montney Montney ARCs Growth Engine
Reserve Replacement Significant organic growth in reserves over past five years Five consecutive years of greater than 200% reserve replacement Adding Value Through the Drill Bit
Significant Reserve and Resource Base 607 mmboe of 2P reserves and RLI of 17.5 years (1) See Reserves and Resources Disclosure and Definitions of Oil and Gas Reserves and Resources in the Appendix to this presentation. 18% Annual…
Per Share Growth Growth in per share production and reserves while also paying a meaningful dividend Production per thousand shares 2P Reserves per share Normalized per thousand shares (1) Normalized per shares (1) Dividend…
Sustainable Dividend Key component of strategy Supported by active hedging and balance sheet strength Historic Dividends and Funds from Operations Committed to the Dividend While Delivering Profitable Growth
Operational Excellence Peer Cost Management Benchmarking Focused assets, characterized by high working interest, operatorship and ARC owned/operated facilities, provides control over costs and operations Peer group includes: ARX,…
Financial Flexibility - Peer Balance Sheet Benchmarking Targeted debt to funds from operations of 1 to 1.5 times and debt to capitalization of less than 20% Industry peer group includes : ARX, BNP, BTE, CPG, ERF, LTS, PEY, PGF,…
Top Talent and Leadership Culture ARCs ability to attract and retain the best and brightest people has been key to achieving industry leading performance Outstanding team of 560 employees driven to deliver great results Strong culture…
Socially Responsible Operator ARC strives to meet the highest standards in health, safety and environment Environmental Stewardship Health and Safety Commitment Ranked 1 in the CDPs Canadian Targets zero lost time incidents Carbon…
Superior Returns ARC Total Return Performance vs. Indices 19% Annualized Total Return Since 1996 Total return to November 22, 2013 from inception assuming DRIP participation.
ASSET OVERVIEW
Asset Overview
Understanding ARCs Assets Balanced portfolio of growth assets and free cash flow generating assets Optionality for both liquids and natural gas development dependent upon commodity prices ARC targets to develop growth opportunities,…
Focused Reserves Liquids Gas Total (mmbbls) (bcf) (mmboe) Proved Producing 100 607 201 Total Proved 127 1,420 364 Proved Plus Probable 186 2,529 607 (1) 2P Gross Reserves as at December 31, 2012. Two Thirds of 2P…
Focused Production (1) 2013 Q3 YTD Average Daily Production, includes Operated and Non-operated 85% of Production from 7 Areas
MONTNEY ASSETS
Montney Growth Assets
Reserve Benchmarking - North American Plays ARC Montney EUR 5.5 Bcf/well Wellhead EUR (Mboe) Wellhead EUR (Bcfe) Source: ITG April 2013, raw data provided by DI Desktop, geoScout Montney is a World Class Play with 3x…
Breakeven Price Benchmarking Montney and Marcellus Break-Even NYMEX (/Mcf) Break-Even WTI (/bbl) ARC West Montney early pilot data shows costs coming down and EUR going up. Source: ITG April 2013, raw data provided by DI Desktop,…
Significant Montney Land Base Grown ARCs Montney land base from 130 net sections in 2005 to 888 net sections today Significant Montney landholdings with 951 gross sections (888 net sections) including 671 gross undeveloped sections and…
NEBC Montney Reserves & Resources Corporate 2P Reserves of 607 mmboe (186 mmbbls liquids/ 2.5 Tcf gas) (1) (1) Independent Resources Evaluation conducted by GLJ effective December 31, 2012. (2) See Reserves and Resources…
NEBC Montney 30 Day Hz IP Rates 16 14 12 Production Rate (MMcf/d) 10 8 ARC Wells P50 = 5.0 MMcf/d 6 All Other Wells P50 = 3.4 MMcf/d 4 2 0 ARCs 30 Day Production Rates Outperforms Industry by 50% (1)…
NEBC Montney First Year Cumulative Gas 3.0 2.5 ARC Wells P50 = 1.46 Bcf (4.0 MMcf/d) 2.0 Cumulative Gas (Bcf) 1.5 All Other Wells P50 = 0.84 Bcf (2.3 MMcf/d) 1.0 0.5 ARCs First Year Cumulative Production…
E Montney Infrastructure Optionality F 2 G H E F 1 G H E F 4 G H E F 3 G H E F 2 G H E F 1 G H D C B A D A C B A D A D C B C B A D C B A D C B L K J I L I R12 R11 R10W6 K J I L I L K J K J I L K J I L K J T91…
DAWSON GAS WORLD CLASS GAS RESOURCE
Dawson Asset Details Net production (boe/d) Q3 2013 27,800 Liquids (bbls/d) 960 ARC 1-34 Gas (mmcf/d) 161 Compressor Station Production split % (liquids/gas) 97% gas (45 mmcfd) Land (Montney net sections) 130 ARC 5-35 Gas…
Dawson Gas Achievements Dawson Production Approximately 9 wells required to sustain production annually Slickwater completions performing well on fringe lands - expanding future growth opportunity Strategically testing fringe…
Dawson A Cash Flow Machine Grown production from approximately 50 Mmcfe/d in 2009 to 165 Mmcfe/d by mid 2012 Significant capital investment in 2009-2010, Dawson can now generate approximately 100 million of free cash flow annually at…
Dawson Gas Type Curve Growth Expect 2014 type curve to be consistent with 2013; plans to drill core Dawson wells to keep plant full in 2014 and into 2015 Based on delineation data from pressure and rate performance, we expect…
Dawson Development Economics Key Metrics DCET Capex per well (MM) 4.6 2P Reserves per well (Bcf) 7.1 IP (1 mo) (MMcf/d) 5.0 IP (12 mo) (MMcf/d) 4.8 Half Cycle Economics (C85/bbl) 4/GJ 3/GJ IRR (% AT) 86% 55% Recycle Ratio 4.5…
Dawson 2014 Budget 54 Million Drilling Three Pads to Keep Production Flat in 2014 and into 2015
PARKLAND/TOWER REAPING ACQUISITION BENEFITS
Parkland/Tower Asset Details Parkland Tower Tower Net production (boe/d) - 8,600 1,600 Q3 2013 Liquids (bbls/d) 920 1,180 Gas (mmcf/d) 46 2.5 Land (net sections) 23 57 ARC 8-13 Compressor (20 mmcfd) Working Interest 84% 92% ARC…
Parkland/Tower Infrastructure Regulatory approval for 120 Mmcf/d, sweet service with two trains of 60 Mmcf/d (staged construction) First phase of plant built with design capacity of: 64 Mmcf/d of inlet gas 3,000 bbls/day LPG…
Parkland 2013 Achievements Parkland Production Wells on production - 39 Hz, 5 vertical and 12 non-op Hz wells Drilling and completions costs at Parkland have decreased due to pad drilling despite incremental well length and…
Tower Commercialization Two 8 well pads, drilled, completed and tied-in through 2013 Successful execution and realized cost savings through pad development Average cost reduction of approximately 20% for total pad development…
Tower 2013 Achievements Tower Production Tower oil is 48 to 50 degree API; markets like condensate Production volumes currently constrained due to liquid handling restrictions Two 8 well pads completed in 2013 4-3 pad average 30…
Parkland Dual-Layer Development Layered Well Placement Upper 1 Upper 2 400 m Lower Montney 50 m 200 m 200 m Multiple Non-Competing Reserve Adding Opportunities
Tower Dual-Layer Development Parkland and Tower have similar geology Two Layer Horizontal Development Very Thick Montney A 100M (328 ft.) Tower Also has Dual-Layer Montney Development Opportunity
Parkland Development Economics Key Metrics DCET Capex per well (MM) 5.0 2P Reserves per well (Bcf) 5.8 IP (1 mo) (MMcf/d) 4.5 IP (12 mo) (MMcf/d) 3.3 Half Cycle Economics (C85/bbl) 4/GJ 3/GJ IRR (% AT) 67% 48% Recycle Ratio 4.0…
Tower Development Economics Key Metrics DCET Capex per well (MM) 5.9 2P Reserves per well (Mboe) 400 IP (1 mo) (boe/d) 440 IP (12 mo) (boe/d) 220 Half Cycle Economics (C85/bbl) 4/GJ 3/GJ IRR (% AT) 30% 28% Recycle Ratio 3.6…
Parkland/Tower 2014 Budget 191MM* * Operated Capital Only 115% YoY Increase in Average Production in 2014
Parkland/Tower Operated Gas 110% YoY Increase in Average Gas Production in 2014
Parkland/Tower Operated Liquids 120% YoY Increase in Average Liquids Production in 2014
WEST MONTNEY OIL AND GAS LONG-TERM GROWTH OPPORTUNITY
West Montney Asset Details Net production (boe/d)- Q3 2013 4,590 Blueberry Liquids (bbls/d) 50 Gas (mmcf/d) 27.2 Land (net Montney sections) 275 Working Interest 90% Attachie Reserves (2P mmboe) 131 Liquids (mmbbls) 11 Tower…
Sunrise/Sunset Asset Details Sunrise has progressed from pilot to full scale development Net production (boe/d)- Q3 2013 3,470 Liquids (bbls/d) 0 Gas (mmcf/d) 20.8 Land (net Montney sections) 32 Working Interest 89% Reserves…
Sunrise 2013 Achievements Q3 2013: reached 21 Mmcf/d using horizontal inventory wells Production from Montney B suggests similar performance to the Montney A based on IP and projected EUR Signed long-term processing agreement…
West Montney Oil and Gas Geology 150 km (90 mi) Blueberry Attachie Septimus Sunrise Sundown 300 m (980 ft) Thick Multi-Zone Potential Across Entire Land Base
Sunrise Development Planning Sunrise 02-25 Sunrise Development Model Vertical Frac Offset Proposal Upper Montney Middle Montney Montney B Montney E Multiple Zones with Economies of Scale
Sunrise Outperforming Expectations Estimated Ultimate Recovery (EUR) is Cumulative Production + Forecast or GLJ 2P Reserves A 02-25 Hz MTYA Cum to Oct.31, 2013: 3.4 Bcf ARC EUR Forecast (RTA): 16 Bcf GLJ 2012 EUR: 10 Bcf B 02-25…
Sunrise Development Economics Key Metrics DCET Capex per well (MM) 5.2 2P Reserves per well (Bcf) 11.0 IP (1 mo) (MMcf/d) 5.3 IP (12 mo) (MMcf/d) 4.8 Half Cycle Economics (C85/bbl) 4/GJ 3/GJ IRR (% AT) 80% 50% Recycle Ratio 4.8…
Sunrise 2014 Budget 119MM* * Operated Capital Only Commercial Development of Sunrise with 60 mmcf/d Exit 2014
Building Confidence for Commercialization Attachie West and Septimus moving into pilot production phase to assess commerciality Attachie East continues delineation and land retention Blueberry and Sundown are waiting in inventory…
ANTE CREEK OIL & GAS A MONTNEY SUCCESS STORY
Ante Creek Asset Details Net production (boe/d) Q3 2013 11,400 Liquids (bbls/d) 5,700 Gas (mmcf/d) 34 Production split % (liquids/gas) 50/50 Land (Montney net sections) 332 Working Interest 99% Reserves (2P mmboe) 47.7…
Ante Creek 2013 Achievements Ante Creek Production 45% growth in 2013 oil and liquids production year-over-year Successful delineation step out locations have added low risk pad drilling opportunities Horizontal well down-spacing…
Growing Our Alberta Montney Presence 65 net sections added in first nine months of 2013 through tuck-in acquisitions and crown land sales 2000 Ante Creek 2013 Ante Creek 21 sections 332 sections Ante Creek Land Base has Grown 16x…
R1W6 R26 R25 R24 R23 R22 R21W5 Ante Creek Area Overview T70 T70 Capacities: Gas Processing: 58 mmcf/d Infrastructure ARC: 40 mmcf/d T69 Alta Gas: 18 mmcf/d Pembina Sales Oil Point T69 Pipeline upgrades continue Oil…
Ante Creek Opportunity for Down-Spacing Infill Hz drilling encountered near virgin (original) pressure implies substantial incremental reserves to be produced by the new wells Substantial Incremental Reserves from New Wells
Ante Creek Opportunity for Down-Spacing Testing 200m lateral horizontal well spacing in Montney through pilot schemes; ensuring future development extracts maximum value The down-spacing is aimed at greatly increasing the NPV of the…
Ante Creek Oil Leading Capital Efficiency (1) Source information from Well Completions & Frac Database Canadian Discovery Ltd. and Introspec Energy Group Inc., wells rig released Jan 2011 to current. (2) All reported wells from…
Ante Creek Capital Efficiency Conversion to Pad drilling has reduced drill costs by 20% Switching to water based frac fluids has reduced stimulation costs by 45% ** Pad drilling includes drill with greater than 3 drills executed on…
Ante Creek Development Economics Key Metrics DCET Capex per well (MM) 3.9 2P Reserves per well (Mboe) 276 IP (1 mo) (boe/d) 357 IP (12 mo) (boe/d) 214 Half Cycle Economics (C85/bbl) 4/GJ 3/GJ IRR (% AT) 55% 50% Recycle Ratio 3.0…
Ante Creek 2014 Budget 198MM 30% YoY Increase in Average Production in 2014
BREAK
NON-MONTNEY ASSETS
Non-Montney Assets
PEMBINA OIL REVITALIZING A MATURE OIL FIELD
Pembina Asset Details Net production (boe/d) Q3 12,000 2013 Cardium production 89% Production split % (liquids/gas) 79/21 Land (Cardium net sections) 137 Working Interest 80% Reserves (2P mmboe) Cardium 49.4 Reserve Life Index…
Pembina 2013 Achievements Pembina Production (1) Prudent reservoir and waterflood management Testing 2 Hz water injection pilot projects 9% increase in Q3 2013 production compared to Q3 2012 35 Hz Cardium wells drilled to end of…
Pembina Base Waterflood - Case Study Increased water injection and optimization of waterflood patterns has: Decreased Gas-Oil Ratio, showing improvement in pressure maintenance Reduced Oil decline, indicating improvement in flood…
Pembina Horizontal Injection Pilot 1 Injection started in Dec 2012; encouraging trend of declining GOR, stabilizing/increasing oil Monitoring 15 offsetting producers; 5 Hz wells and 9 verticals Gain of 50-70 bbl/d of incremental oil…
Pembina Leading Capital Efficiency (1) Source information from Well Completions and Frac Database Canadian Discovery Ltd. and Introspec Energy Group Inc., 2013 (2) TWP 47-49 RNG 5-10W5 (3) IP3 data from Accumap - includes wells with…
Pembina Gas Infrastructure Capacity Acquisition and construction of infrastructure provides greater control over costs and run-times Adding Value by Controlling Infrastructure Ownership
Pembina Development Economics Key Metrics DCET Capex per well (MM) 2.6 2P Reserves per well (Mboe) 191 IP (1 mo) (boe/d) 270 IP (12 mo) (boe/d) 104 Half Cycle Economics (C85/bbl) 4/GJ 3/GJ IRR (% AT) 60% 58% Recycle Ratio 3.9…
Pembina 2014 Budget 118MM* * Operated Capital Only 7% YoY Increase in Average Liquids Production in 2014
SE SASKATCHEWAN & MANITOBA OIL SOLID LONG LIFE ASSETS
SE Sask/Manitoba Asset Details OIL PROPERTIES Parkman Virden Weyburn North Lougheed Midale Landscape Browning Radville Storthoaks Weir Hill Bromhead Wilmar Goodlands Oungre Elmore Net production (boe/d) Q3 2013 11,300…
SE Sask/Manitoba 2013 Accomplishments Drilled 41 wells to the end of Q3 and plan to drill 7 wells in Q4 Continued to drill horizontally in a number of properties that were previously only exploited vertically Facility upgrades…
SE Sask/Manitoba Development Economics Key Metrics DCET Capex per well (MM) 1.4 2P Reserves per well (Mboe) 54 IP (1 mo) (boe/d) 124 IP (12 mo) (boe/d) 72 Half Cycle Economics (85/bbl) (gas not conserved) IRR (% AT) 62% Recycle…
SE Sask/Manitoba 2014 Budget 100MM* * Operated Capital and production only Maintaining High Value/High Netback Oil Production
2014 BUDGET AND OUTLOOK
2014 Capital Budget 915 Million Significant spending on oil and liquids-rich gas and low cost, high rate of return Montney gas development 2014 Capital Budget Volumes Year Capital Average Gross Net MM (boe/d) Wells Wells…
Looking Forward to 2014 and 2015 Assuming economic conditions remain similar to the current outlook, 2014 would likely entail the following: Ante Creek Explore newly-acquired lands Continue testing 200m lateral horizontal well spacing…
Production Outlook Managing decline…
Growing Our Low Cost Gas Business 15% CAGR total Natural Gas production driven by 33% CAGR Montney Natural Gas production 2009-2015 Forecast 26% CAGR in 2P Natural Gas reserves from 1 Tcf to 2.5 Tcf 2008-2012 Montney Gas 33%…
Growing Oil and Liquids since 2009 7% CAGR total Liquids production driven by 34% CAGR Montney Liquids production 2009 2015 Forecast 5% CAGR in 2P Liquids reserves from 152 Mmbbls to 186 Mmbbls 2008-2012 Montney Montney Liquids…
Significant Land & Drilling Inventory Avg Well Net Net Drilling Spacing Developed Undeveloped Total Net 2P Reserves Location (Metres) Primary Zones Area Sections(2) Sections(2) Sections(2) (Mmboe) Inventory(1) NEBC Montney 168 317…
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