Arc Resources — Investor Presentation (October 2022)
45 slides from Arc Resources's investor presentation, October 2022
Slide 1: ARC Resources Ltd. Investor Presentation
ARC Resources Ltd. Investor Presentation October 2022
Slide 2: Corporate Profile
Corporate Profile Premium investment opportunity for Montney exposure, one of the most profitable assets in North America Shares outstanding1 655 million 1 Canada’s Market capitalization $12.0 billion largest Long-term debt 2 $1.2 billion condensate producer Net debt 2 3 $1.5 billion Enterprise valu
Slide 3: Corporate Strategy
Corporate Strategy Sustainable dividend-paying energy company focused on long-term profitability and shareholder returns Scale in Capital World-class Assets Discipline Profitable Returns Operational Balance Sheet Excellence with Low Strength & Costs & Emissions Risk Management 3
Slide 4: What Differentiates ARC?
What Differentiates ARC? Asset Quality & Duration Multi-decade inventory in world-class Montney assets; Company-owned infrastructure Financial Strength Investment-grade Credit; Track record of low debt since 1996 Operational Excellence Capital Efficient and Low-cost; Corporate Break-even <US$40/B WT
Slide 5: Capital Allocation Priorities
Capital Allocation Priorities ARC has committed to returning 50% to 80% of free funds flow to shareholders Free Funds Flow Priorities 2022 Capital Allocation $ billions Base Dividend 5 • Pay quarterly at $0.12/share US$100/bbl WTI & • Long-term return mechanism that will grow with profits Cdn$5/GJ A
Slide 6: Financial Sustainability & Return on Investment
Financial Sustainability & Return on Investment
Slide 7: Financial Strength
Financial Strength Maintaining a strong balance sheet is foundational to ARC Net debt and net debt to funds from operations1 2 $ billions, ratio 2.4 2.0 1.8 1.5 1.2 1.0 0.6 0.5 0.0 0.0 Q3 2021 Q4 2021 Q1 2022 Q2 2022 2022F 2022F 2022F 2022F US$40/bbl WTI US$60/bbl WTI US$80/bbl WTI US$100/bbl WTI &
Slide 8: Investment-grade Capital Structure
Investment-grade Capital Structure ARC maintains a simple capital structure with ample liquidity Credit capacity1 2 3 4 Long-term notes repayment schedule $ billions $ millions 600 $0.2B 450 $1.8B 300 150 $1.0B 0 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Undrawn Credit Facility Drawn Credit
Slide 9: Long-term Corporate Profitability
Long-term Corporate Profitability Disciplined plan to deliver excellent corporate returns Return on average capital employed1 % 30 15 0 (15) (30) 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022e 1) Non-GAAP financ
Slide 10: Marketing & Fundamentals
Marketing & Fundamentals
Slide 11: Natural Gas Physical Marketing Strategy
Natural Gas Physical Marketing Strategy Portfolio with well-diversified North American exposure is driving strong realizations Natural gas sales exposure1 2 9% 9% 8% 8% 8% 13% 12% 11% 11% 8% 10% 10% 11% 11% 11% 10% 23% 23% 28% 14% 46% 10% 48% 48% 40% 39% 170,000 21% MMBtu/day 125,000 MMBtu/day 600,0
Slide 12: Natural Gas Financial Exposure
Natural Gas Financial Exposure Diversified North American sales points with increasing exposure to global markets 4% 9% 9% 11% 14% 13% 9% 8% 10% 10% 9% 8% 8% 9% 8% 7% 10% 11% 11% 11% 25% 24% 23% 23% 14% 12% 21% 29% 36% 48% 51% 43% 31% 19% 8% 1% Bal 2022 2023 2024 2025 2026 2027 Hedged WCSB Floating
Slide 13: LNG Supply Agreements
LNG Supply Agreements ARC has secured access to western Canadian and US Gulf Coast LNG as part of its market diversification strategy LNG supply agreements North American LNG export facilities LNG Canada Cheniere Corpus Participant Christi Stage III Volumes 150 MMcf/day 140,000 MMBtu/day Term Long-t
Slide 14: Western Canadian Natural Gas Fundamentals
Western Canadian Natural Gas Fundamentals Significant demand and export capacity growth expected over the next five years WCSB natural gas supply and demand1 WCSB demand and export capacity growth2 Bcf/day 3.8 Bcf/day Demand & Export Capacity Growth Expected by 2025 24 LNG Canada Phase 1 18 +2.1 Bcf
Slide 15: Western Canadian Condensate Market Fundamentals
Western Canadian Condensate Market Fundamentals Continued reliance on imported volumes is constructive for Canadian condensate pricing WCSB condensate supply and demand1 Crude oil and condensate pricing2 Mbbl/day US$/bbl 1,000 120 750 90 500 60 250 30 0 0 2017 2018 2019 2020 2021 2022F 2023F 2024F 2
Slide 16: Asset Portfolio Overview
Asset Portfolio Overview
Slide 17: ARC's Montney Assets Are World-class
ARC’s Montney Assets Are World-class Largest producer in the Montney positioned at the low end of the North American cost curve Break-even cost of supply of forecasted new wells drilled for 2023 to 20251 US$/MMBtu 4 3 2 1 0 0 1 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Bcf/day WCSB - Montney WC
Slide 18: Deep Inventory of Top-tier Development Opportunities
Deep Inventory of Top-tier Development Opportunities ARC has over 5,500 drilling locations with significant commodity and geographic optionality Reserves Drilling inventory1 MMboe Number of locations 2,000 6,000 1,500 4,500 1,000 3,000 500 1,500 0 0 Proved Total Proved + Total Attachie Kakwa Greater
Slide 19: Large Network of Owned-and-operated Infrastructure
Large Network of Owned-and-operated Infrastructure Drives lower cost structure and results in greater operational control and reliability Northeast BC infrastructure Parkland 03-09 90 MMcf/day Dawson Phase III & IV 180 MMcf/day Dawson Phase I & II Sunrise Phase I & II 120 MMcf/day 280 MMcf/day 19
Slide 20: Large Network of Owned-and-operated Infrastructure
Large Network of Owned-and-operated Infrastructure Drives lower cost structure and results in greater operational control and reliability Northern AB infrastructure Gold Creek Plant 250 MMcf/day Ante Creek Facilities 65 MMcf/day Cutbank Plant 250 MMcf/day Karr Facility 60 Mbbl/day Lator Plants 260 M
Slide 21: Leading Cost Structure
Leading Cost Structure Low-cost structure driven by large network of owned-and-operated infrastructure Comparative Q4 2021 operating expense per boe1 2 $/boe 16 12 8 4 0 ARC 21 1) See “Non-GAAP and Other Financial Measures” in the Q2 2022 MD&A for information relating to this supplementary financial
Slide 22: Sustainable Drilling Improvements at Kakwa
Sustainable Drilling Improvements at Kakwa Continuous improvements achieved through technology, innovation, and optimization Drilling costs per metre Drilling metres per day $/metre metres drilled/day 800 300 40% 600 225 36% 400 150 200 75 0 0 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 22
Slide 23: Kakwa Overview
Kakwa Overview Premium condensate-rich play that generates significant free funds flow Gold Creek Plant Land position1 Production2 Cutbank Plant 472,823 net acres 174 Mboe/day 99% W.I. 58% crude oil and liquids Karr PDP Reserves3 Facility Lator Plants 2022 objective Pembina Kakwa River Plant 250 MMb
Slide 24: Greater Dawson Overview
Greater Dawson Overview Low reinvestment rates driving significant free funds flow generation Land position1 Production2 150,260 net acres 97 Mboe/day 98% W.I. 21% crude oil and liquids Tower Parkland 03-09 Dawson Phase III & IV PDP Reserves3 2022 objective Parkland Dawson 147 MMboe Sustain producti
Slide 25: Sunrise Overview
Sunrise Overview Lowest-cost dry natural gas play in North America Land position1 Production2 22,741 net acres 269 MMcf/day 100% W.I. Sunrise Phase I & II PDP Reserves3 2022 objective 74 MMboe Prepare for facility expansion to grow low-cost, low-emission production by 80 MMcf/day Coastal GasLink 25
Slide 26: Attachie Overview
Attachie Overview Attachie West Phase I is the leading development opportunity within ARC’s portfolio Land position1 Production2 203,289 net acres 3 Mboe/day 100% W.I. 53% crude oil and liquids PDP Reserves3 Attachie West Phase I 2022 objective 4-20 Battery 5 MMboe Invest in long-lead items to advan
Slide 27: Attachie West Phase I
Attachie West Phase I Attachie West Phase I is the leading development opportunity within ARC’s portfolio Project overview Forecasted cash flow profile $600,000,000 60,000.000 Processing capacity Total 40 Mboe/day $400,000,000 40,000.000 Condensate and NGLs 25 Mbbl/day $200,000,000 20,000.000 Natura
Slide 28: Ante Creek Overview
Ante Creek Overview Highly profitable, stable light oil development Land position1 Production2 118,460 net acres 19 Mboe/day Ante Creek 100% W.I. 47% crude oil and liquids 02-26 Ante Creek 10-07 PDP Reserves3 2022 objective Ante Creek 23 MMboe Continue to leverage 2020 10-36 facility expansion to ha
Slide 29: ESG Strategy & Performance
ESG Strategy & Performance
Slide 30: ARC's ESG Excellence
ARC’s ESG Excellence ARC scores amongst the best in the world for ESG performance Global oil and gas companies’ relative ESG rankings1 2 64 ARC Africa Social and Governance Score 58 Asia Canada Europe 52 Latin America Middle East Russia 46 United States 40 38 46 54 62 70 Environmental Score 30 1) So
Slide 31: Enverus ESG Score
31 Enverus ESG Score 10 20 30 40 50 60 70 80 90 0 100 EQT RRC SM ARX CTRA FANG PXD ERF OVV OXY Source | Enverus ESG Analytics, FactSet, company Disclosures CHK WCP AR HES ESG Leadership CRK COP CPG CVX PDCE TOU SWN GPOR DVN CIVI CRC Environmental CNX MUR MRO NVA Social BP WLL XOM EOG DEN Governance
Slide 32: Leading Emissions Profile
Leading Emissions Profile ARC has one of the lowest emissions profiles amongst Canadian E&P companies Comparative 2020 GHG emissions intensity1 2 tCO2e/boe 0.08 0.06 0.04 0.02 0.00 ARC 1) Performance data for 2020 GHG emissions intensity comes from company reports and other publicly available data s
Slide 33: Emissions Performance and Targets
Emissions Performance and Targets ARC has reduced its emissions primarily through electrification of its BC facilities Absolute GHG emissions reduction1 2025 emissions-reduction targets tCO2e, boe/day Relative to 2019 baseline2 1,000,000 180,000 Reduce Scope 1 and 2 emissions intensity by 875,000 16
Slide 34: Appendix
Appendix
Slide 35: Historical Performance
Historical Performance ARC has managed a profitable business through all commodity price cycles with its efficient Montney assets, capital discipline, and strong balance sheet Production Net debt to FFO Dividends1 boe/day $ billions, ratio $ billions, % of FFO 360 3.0 3.5 8 120% 3.0 2.4 270 6 90% 2.
Slide 36: Risk Management Contracts Positions
Risk Management Contracts Positions ARC’s long-term focus is to reduce downside risk and create certainty in cash flows 12 As at June 30, 2022 Q3 2022 to Q4 2022 2023 2024 2025 Crude Oil – WTI US$/bbl bbl/day US$/bbl bbl/day US$/bbl bbl/day US$/bbl bbl/day Ceiling 60.23 27,000 67.44 14,000 123.86 5,
Slide 37: Asset Details
Asset Details ARC consistently delivers strong results across its asset base Greater Kakwa Sunrise Ante Creek Attachie Dawson Production1 Crude oil & liquids (bbl/day) 100,336 20,050 166 9,071 1,746 Natural gas (MMcf/day) 442.9 460.7 269.3 60.4 9.3 Total (boe/day) 174,158 96,842 45,041 19,134 3,302
Slide 38: ESG Ratings and Rankings
ESG Ratings and Rankings View ARC’s ESG performance and highlights at www.arcresources.com/responsibility Member of MSCI Global Sustainability Index Member of Sustainalytics’ Jantzi Social Index MSCI ESG Rating: AAA Voluntary participant since 2007 Member of FTSE Russell’s FTSE4Good Index Series sin
Slide 39: Advisory Statements
Advisory Statements
Slide 40: Advisory Statements
Advisory Statements Notes Regarding Forward-looking Information This presentation contains certain forward-looking statements and forward-looking information (collectively referred to as "forward-looking information") within the meaning of applicable securities legislation about current expectations
Slide 41: Advisory Statements
Advisory Statements Basis of Preparation All financial figures and information have been prepared in Canadian dollars (which includes references to "dollars" and "$"), except where another currency has been indicated, and in accordance with International Financial Reporting Standards ("IFRS" or "GAA
Slide 42: Advisory Statements
Advisory Statements Non-GAAP Financial Ratios Netback per boe ARC calculates netback per boe as netback divided by weighted average daily production. Netback is a non-GAAP financial measure component of netback per boe. Management believes that netback per boe is a key industry performance measure o
Slide 43: Advisory Statements
Advisory Statements Barrels of Oil Equivalent Natural gas volumes have been converted to barrels of oil equivalent ("boe") on the basis of six thousand cubic feet ("Mcf") of natural gas to one barrel ("bbl") of liquids. Boe may be misleading, particularly if used in isolation. A conversion ratio of
Slide 44: Advisory Statements
Advisory Statements Advisory – Credit Ratings Credit ratings are intended to provide investors with an independent measure of credit quality of an issue of securities. Credit ratings are not recommendations to purchase, hold, or sell securities and do not address the market price or suitability of a
Slide 45: Investor Relations Contacts
Investor Relations Contacts Dale Lewko General Investor Relations Enquiries Manager, Capital Markets 403.503.8600 403.503.8696 1.888.272.4900 [email protected] [email protected]