PrairieSky Royalty Ltd · TSX:PSK
PrairieSky Royalty — Investor Presentation (April 2020)
50 slides from PrairieSky Royalty's investor presentation, Apr 20, 2020
Slide 1: Corporate Presentation April 2020
APRIL 2020 CORPORATE PRESENTATION
Slide 2: PrairieSky Royalty Snapshot
PrairieSky Royalty Snapshot $1.9 TSX Balance Sheet PSK Billion Strength Enterprise Value(1) Quarterly Dividend 232.6 $50 $0.06 Million Million Per Common Share Shares Outstanding(1) NCIB Commencing Q2 2020 7.8 7.8 4 Million Million Provinces Acres of Fee Lands Acres of GORR Lands (1) Based on 232.6
Slide 3: Balance Sheet Strength
Balance Sheet Strength PrairieSky has a unique business PrairieSky has no long-term debt, no model and balance sheet, ideally operating costs, no mandatory capital expenditures and no environmental suited to paying dividends. liabilities. March 31, 2020 December 31, 2019 $millions ASSETS Current Ass
Slide 4: Dominant Land Position
Dominant Land Position PRAIRIESKY — ROYALTY LTD ; itoba Manito Saskatchewan PEI Praiviesky - Fee Title ( Prairiesky - GorR TSX | PSK 3
Slide 5: Introduction to PrairieSky Royalty
Introduction to PrairieSky Royalty 7.8 million acres of Fee Lands(1) Business model supports dividend payments 7.8 million acres of GORR Lands(1) Operating margin(2) of 97% Lands located throughout the heart of the oil and gas producing basins in Alberta, British Operating netback(2) of 88% Columbia
Slide 6: A Unique and Diversified Approach to Investing in Oil & Gas
A Unique and Diversified Approach to Investing in Oil & Gas Third Party Operators • 330 lessees paying royalties on PrairieSky Royalty lands • Operators on PrairieSky Royalty Fee Lands include Majors, Independents, Mid Cap and Small Cap producers Commodity Geology • 81% of product revenue derived •
Slide 7: Royalty Advantage
Royalty Advantage Ownership in PrairieSky provides a long duration cash flow stream and the optionality associated with perpetual land title ownership. Exposure to: No exposure to: High margin cash flow streams Capital costs New discovery/exploration optionality Environmental liabilities Commodity p
Slide 8: Higher Margin, Lower Risk
Higher Margin, Lower Risk Margin Summary ($/BOE) Illustrative Working Interest Operator PrairieSky Royalty Revenue (52% Liquids Production)(1) $24.35/boe PrairieSky Royalty offers higher margins Production & Mineral Tax than conventional Royalties ($0.64/BOE) ($3.65/BOE) working interest production
Slide 9: Recycling the Land Base
Recycling the Land Base The perpetual nature of Fee Lands allows PrairieSky Royalty to continually recycle lands and grow its revenue base. PrairieSky leases At the end of the primary lease lands by zone – same term, any lands/rights not held aerial acreage can be by production revert back to leased
Slide 10: Production History on our Fee Lands
Production History on our Fee Lands Cumulative production of Historical Gross Production on PSK Fee Lands 4.4 billion BOE 300,000 250,000 200,000 150,000 100,000 50,000 - CD Avg. Oil (bbl/d) CD Avg. Gas (Boe/d) Source: Accumap Additional royalty production is generated on GORR Lands (not included ab
Slide 11: Reserves Replacement
Reserves Replacement Third-party capital on PrairieSky Funds from operations lands approximately replaces returned to shareholders as production annually. dividends and share repurchases or used to purchase additional royalty In 2019, replaced 119% of oil interests. royalty production volumes and 15
Slide 12: Long-term Optionality
Long-term Optionality PrairieSky’s basket of call options includes: SAGD Lindbergh and Onion Lake projects have multiple phase expansion potential New leasing to integrated and independent SAGD specialists Emerging Clearwater and Duvernay oil plays Large scale CO2 sequestration and EOR projects New
Slide 13: PrairieSky Royalty Per Share Metrics
PrairieSky Royalty Per Share Metrics Production per Million Shares Acres per Million Shares(1) 140 80,000 120 60,000 100 80 40,000 60 40 20,000 20 - - IPO Today (1)Acres per share based on number of common shares outstanding at March 31, 2020. 12
Slide 14: Revenues Generated from Royalty Properties
Revenues Generated from Royalty Properties PrairieSky generates revenues through Royalty Compliance analysis focuses on leasing its Fee Lands and its GORR capturing mispaid royalties through Interests, which includes Royalty forensic accounting. Production Revenue, Bonus Over $55 million in complian
Slide 15: Returns to Shareholders
Returns to Shareholders WTI down From IPO to March 31, 2020, ~49% AECO down PrairieSky has returned $1.1 ~50% 138 billion in dividends and $ million in share buybacks to shareholders High conversion of revenues to free cash flow for distribution to shareholders through all commodity price cycles Pra
Slide 16: Capital-Free Returns and Diversification
Capital-Free Returns and Diversification PrairieSky Royalty E&Ps Midstream Capital-Free Returns No capital investment required x Requires significant capital x Requires significant capital or acquisitions for growth for growth Future embedded royalties and cash flow through x Responsibility for
Slide 17: ESG Policies and Practices
ESG Policies and Practices All of PrairieSky’s royalty Policies properties are in Canada which and provides the following advantages: Practices Environmental regulations are best-in-class standards and reflect global leadership PrairieSky’s policies and practices are developed to Focus on Health and
Slide 18: ESG Policies and Practices
ESG Policies and Practices We are committed to operating our ESG Survey Results business in an economically, socially, and environmentally responsible and Received a B ranking from CDP in sustainable manner for the benefit of shareholders and relevant stakeholders. 2019, which is the management band
Slide 19: Shareholder Alignment
Shareholder Alignment Board & Management invested ~$80 million in PSK Shares Shareholder All staff are shareholders “Pay for performance” long-term incentives Alignment and maximize participation in Employee Stock Purchase Plan Decisions focused on core strategy and creating long-term shareholder va
Slide 20: Spuds on PrairieSky Lands – Q1 2020
Spuds on PrairieSky Lands – Q1 2020 19
Slide 21: Quarterly Activity on PrairieSky Lands
Quarterly Activity on PrairieSky Lands Wells Spud Wells Spud 300 300 12% 250 250 10% 200 200 8% 150 150 6% 100 100 4% 50 50 2% 0 0 0% 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Slide 22: 10 Year Free Cash Flow Generation
10 Year Free Cash Flow Generation 2019 Average Royalty Production 21,757 BOE/d 10 Year Average Annual Production (boe/d) FX AECO WTI ($US / 18,000 20,000 22,000 24,000 ($/Mcf) ($/bbl) $CAD) 10 Year Free Cash Flow (Billions) % Annual Growth Rate ~-2.5% ~-1.0% Flat ~2% 0.73 $2.00 $30.00 $1.0 $1.1 $1.2
Slide 23: Why PrairieSky?
Why PrairieSky? • 7.8 million acres of Fee Lands Vast Land Base • 7.8 million acres of GORR Lands • Management and directors with an unparalleled understanding of the Experienced Team royalty business and are invested alongside shareholders Resource Play • Upside from resource play development on em
Slide 24: Financial Information
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Slide 25: Financial Highlights
Financial Highlights Year Ended December 31, Q1 2020 Q4 2019 Q3 2019 Q2 2019 Q1 2019 Q4 2018 $millions, unless otherwise 2019 2018 noted Production Volumes Crude Oil (bbls/d) 8,582 8,884 8,011 8,740 8,904 9,163 8,633 9,004 NGLs (bbls/d) 2,945 2,819 2,334 2,690 2,586 2,676 2,607 2,463 Natural Gas (Mm
Slide 26: Top Payors
Top Payors Top 10 payors represent 51% Exposure to various operators with of product revenue, while the diverse expertise ranging from Top 25 payors represent 71% private companies to Majors of product revenue 12 months of Revenue by Top 25 Companies ($ millions) Top 25 Payors 25
Slide 27: Appendices
TSX PSK PRAIRIESKY — ROYALTY LTD APPENDICES
Slide 28: High Quality Royalties = Optionality
HIGH QUALITY ROYALTIES = OPTIONALITY
Slide 29: Future Optionality
FUTURE OPTIONALITY PRAIRIESKY — ROYALTY LTD Optionality Beyond Current Valuation » Expansion of productive trends >> Material new pool discoveries >> Improvements in drilling and completions technologies: incremental recovery via optimized completions, tighter inter-well spacing, and additional appl
Slide 30: Industry Capital on PSK Lands
INDUSTRY CAPITAL ON PSK LANDS Third-party operators invest capital on PrairieSky’s lands to develop and produce oil and natural gas. 2014 2015 2016 2017 2018 2019 Industry Capital(1) (billions) $46.9 $31.6 $23.0 $28.7 $27.4 $20.1(1) Gross Capital on PSK Lands(2) $1.9 $1.1 $0.7 $1.1 $1.3 $1.1 (billio
Slide 31: Multi-Zone Potential
Multi-Zone Potential Exploration and development has taken place since the 1950s in the form of new pool discoveries as well as through redevelopment with evolving technology 1950’s Future Homeglen Rimbey Duvernay, Banff Leduc Oil horizontal, Nordegg, Ellerslie, Upper Mannville 1960’s Post 2010 Nord
Slide 32: Saskatchewan Viking Continues to Attract Capital
Saskatchewan Viking Continues to Attract Capital Saskatchewan Viking remains a key play for many producers based on superior economics, short cycle times and low capital requirements < $1 million to bring well on-stream and quick payouts Wells produce > 50 years ~100 miles Over 10 Mmboe of oil in pl
Slide 33: Development of an Economic Resource Play
Development of an Economic Resource Play Saskatchewan Viking Wells Drilled Before 2010 2,650 vertical wells drilled (in this map area) 36 horizontal wells drilled Horizontal lateral length 1 mile or 0.5 mile PrairieSky Drilling density 4 to 8 wells per section Inventory Most wells target vertical we
Slide 34: Central Alberta Duvernay
Central Alberta Duvernay ~900,000 acres of royalty lands in the oil and volatile oil window of an emerging shale resource play. Duvernay is in early stages of contributing to PrairieSky’s revenues: Trailing 12-month production Potential for averaged royalty significant production of royalty ~350 BOE
Slide 35: Alberta Viking – Growth in Activity
Alberta Viking – Growth in Activity 16,000 14,000 Gross Oil Production (bbl/d) 12,000 10,000 8,000 6,000 4,000 2,000 0 2014 2015 2016 2017 2018 2019 2020 pre-2014 RR 2014 RR 2015 RR 2016 RR 2017 RR 2018 RR 2019 RR Activity has grown in the Alberta Viking representing >25% of Viking ~240 miles activi
Slide 36: Investing in Future Growth Opportunities
Investing in Future Growth Opportunities PrairieSky has re-invested its cash lease bonus consideration into new emerging oil An emerging resource play opportunities to provide capital efficient liquids growth in the medium to long term. oil play, with scale and large OOIP reservoirs in the Clearwate
Slide 37: Upper Montney Light Oil Exposure
Upper Montney Light Oil Exposure GORR on ~90 sections of prospective Upper Montney light oil lands in Two Rivers region of British Columbia PrairieSky will benefit from future development of play without capital expenditures, operating costs or abandonment and environmental liabilities 0 6 Miles 36
Slide 38: Enhanced Oil Recovery
Enhanced Oil Recovery Unit on single section of land first started producing in 1979 Production has increased dramatically with EOR scheme, delivering ~$65,000 per month in royalty revenue over the 12- month trailing period. 1,600 0 1 Mile 1,400 Gross Oil Production (bbl/d) 1,200 1,000 800 600 400 2
Slide 39: Multi-Zoned, Prolific Spirit River Exposure
Multi-Zoned, Prolific Spirit River Exposure 35,000 30,000 Gross Production (boe/d) 25,000 20,000 15,000 10,000 5,000 - 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Pre-2011 RR 2011 RR 2012 RR 2013 RR 2014 RR 2015 RR 2016 RR 2017 RR 2018 RR 2019 RR Horizontal drilling and improved completio
Slide 40: Legacy Production
Legacy Production Unit was discovered in 1956 and developed vertically until 1965 Placed under a partial waterflood in 2003 Operator has an inventory of 166 net wells, 93 are booked locations (1) First horizontal well drilled in 2011, 51 drilled to date (35 in 2012) 3,000 Gross Production (boe/d) 2,
Slide 41: Technology
Technology Unit started producing in the 1950s. Horizontal, multi-stage fracture development started in ~2012 increasing production to levels not seen since the 1960s. Increased horizontal drilling activity on a number of units across PrairieSky lands. Provides significant development opportunity. 1
Slide 42: New Pool Discovery and Development
New Pool Discovery and Development The pool encompasses 32 sections of Fee Land, currently under natural gas flood 4,500 4,000 Gross Oil Production (bbl/d) 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 Production began in early 2012 and reached peak productio
Slide 43: Understanding Royalties
7 PRAIRIESKY TSX | PSK UNDERSTANDING ROYALTIES
Slide 44: History of PrairieSky’s Fee Lands
History of PrairieSky’s Fee Lands 1676 1887 1958 2002 2014 Present King Charles II of Dominion of CPR creates Encana created PrairieSky completes PrairieSky is the largest England granted Canada stops Canadian Pacific through merger of acquisition of Range fee simple mineral title 948 million acres
Slide 45: Types of Royalties
Types of Royalties Crown Royalties The following figure Fee Simple Mineral Title - outlines the royalty PrairieSky owns 7.8 million acres hierarchy. As you Gross Overriding Royalties - PrairieSky owns 7.8 million acres move down the royalty hierarchy, Streams costs increase and duration decreases. N
Slide 46: Active Management of Land Base
Active Management of Land Base PrairieSky actively License to ~13,000 km2 of 3D manages its Fee seismic over 3.3 million acres & Lands: ~46,000 km of 2D seismic PrairieSky’s Seismic Coverage Meeting with operators and providing updates on available lands Providing seismic to lessors and generating p
Slide 47: Leadership Team
Leadership Team Board of Directors Robert Robotti Founder and Chief Investment Officer Robotti & Company Advisors, LLC James M. Estey, Chair of the Board On the board of directors of Pulse Seismic Inc., Panhandle Oil and Gas Corporate Director, Retired Chairman of UBS Securities Canada Inc., and has
Slide 48: Disclaimer & Cautionary Statements
Disclaimer & Cautionary Statements Cautionary Statement on Forward Looking Information This presentation contains “forward looking information” and “forward looking statements” within the meaning of applicable securities laws, which may include, but are not limited to: statements with respect to fut
Slide 49: Other Disclosure
Other Disclosure NON-GAAP MEASURES Certain measures in this presentation do not have any standardized meaning as prescribed by IFRS and therefore, are considered non-GAPP measures. These measures may not be comparable to similar measures presented by other issuers. These measures are commonly used i
Slide 50: Contact Information
CONTACT INFORMATION WWW.PRAIRIESKY.COM PRAIRIESKY ROYALTY LTD. 1700, 350 – 7 Avenue SW Calgary, AB T2P 3N9 T 587.293.4000 E [email protected]
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