TSX: VII INVESTOR DAY January 10, 2019 - Calgary
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 David Holt 9:50 am Operational Excellence Chief Operating Officer Chris Feltin VP Corporate Planning Planning 10:10 am & Resource Update Lynne Chrumka Director of Geosciences 10:45 am Q&A 2
TSX: VII.TO 7G’S STRATEGY Marty Proctor, President & Chief Executive 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 and efficient development • Maximizing profitability by proactively securing access to premium-priced markets • Maintaining an unwavering focus on balance sheet strength 4
REVISITING THE CORNERSTONES OF OUR BUSINESS Return of Capital Return on Capital Free Cash Flow Financial Sustainability Market Resource Access Quality & Low Supply Cost Stakeholder Strong Service balance sheet Large, high quality asset base Location/access to infrastructure Control/flexibility Skilled and knowledgeable staff 5
7G’S 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 created by society to provide its needs and ought to have no expectation of basic entitlements other than equitable rights with other corporations, including those wholly owned by a person. We recognize that rights, sufficient to build and operate an energy project, can be granted and taken away by society. Over the longer term, companies can only expect to thrive if they serve the legitimate needs of society in which they exist. To thrive, companies must differentiate, rise above the pack, standout as being among the best with all of their stakeholders. At Seven Generations Energy Ltd., we acknowledge this granted entitlement and accept from our stakeholders a duty to thrive and an understanding of the need to differentiate. Specifically, in acceptance of this challenge to differentiate with all stakeholders, we acknowledge: The need of society for us to conduct our business in a The need of our business partners and infrastructure way that protects the natural beauty of the environment and preserves the capacity of the earth to meet the needs customers to be treated fairly and attentively; of present and future generations; The need of Canada and Alberta for us to obey all The need of our suppliers and service providers to be regulations and to proactively assist with the formulation treated fairly and paid promptly for equipment and services of new policy that enables our company and our industry provided to us and to receive feedback from us that can to better serve society; help them to be competitive and thrive in their businesses; The need of the communities where we operate to The need of our employees to be compensated fairly and be engaged in the planning of our projects and to provided a safe, healthy and happy work environment participate in the benefits arising from them as they including a healthy work life – outside life balance; and are built and operated; The need of our shareholders and capital providers to have their investment managed responsibly and ethically and to earn strong returns. We see ourselves as being in the service business, serving the needs of our stakeholders . We seek satisfaction for all stakeholders. Differentiation is imperative. We support an open and competitive business environment, recognizing in the competitive world that we envision, only those who best serve their stakeholders can expect the support required to survive for the longer term. 6
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 Canada’s largest condensate producer 750 MMcf/d of owned gas processing capacity Extensive delineation potential 1) For additional information, see “Forward Looking Information Advisory” and “Note Regarding Potential Drilling Opportunities” in t he “Important Notice” at the end 8 of this presentation.
… AND LOW SUPPLY COST Montney Breakeven Henry Hub at Flat $60/bbl WTI, 10% IRR ($/Mcf) 1 $12 <10% Liquids 10% to 50% Liquids $10 >50% Liquids $8 $6.25 $6 $3.51 $4 $2.79 $1.96 $1.89 $1.88 $1.85 $1.78 $1.77 $1.58 $1.45 $1.45 $1.36 $2 $1.23 $1.22 $1.17 $1.13 $0.99 $0.95 $0.95 $0.90 $0.88 $0.84 $0.82 $0.75 $0.67 $0.47 $0.43 $0.42 $0.31 $0.22 $0.16 ($0.01) ($0.16) ($0.20) ($0.26) ($0.29) $0 ($1.15) -$2 -$4 Gold Creek Girouxville Glacier Bilbo Dawson Tower I Altares Kakwa Greater Placid Elmworth Inga/Fireweed Town II Ante Creek Parkland I Cypress Groundbirch Daiber Townsend Tower II Pouce Coupe Bigstone Blair Dawson South Umbach Tupper North Montney II Gordondale Sunrise East Kakwa General Gundy Ck Parkland II Pipestone Septimus North Montney I Karr Kaybob VII Nest 2 High Quality Inventory Beyond Nest 2 • Nest 1 • Significant condensate production from 2018 activity • Optimizing completions techniques for future development • Nest 3 • Strong condensate production supported by prolific gas rates • Significant activity in 2019 program 1) Source: Modified from RSEG 9 2) For additional information, see “Forward Looking Information Advisory” in the “Important Notice” at the end of this presentation.
MARKET ACCESS THAT DIFFERENTIATES 7G Gas Market Sales Points AECO 5% AECO 9% AECO 11% Dawn 13% Dawn 15% Dawn 15% Malin 13% Ventura 4% Gulf 18% Gulf 18% Gulf 17% Chicago 55% Chicago 55% Chicago 50% GTN: 90 MMcf/d Alliance: 2018 2019 2020 500 MMcf/d TCPL: 77 MMcf/d Revenue Mix NGL Condensate Natural Gas NGPL: 100 MMcf/d Multiple options available through market access initiatives 10
CONDENSATE MARKET OVERVIEW Forecast Supply & Demand of WCSB Condensate (Mbbl/d) 1 850 Supply grew faster than demand + Maintenance & curtailments impacts 650 Total Demand 450 WCSB Supply 250 Implied Condensate Imports Required to Meet Demand (Mbbl/d) 400 300 Condensate Import Capacity - 275 Mbbl/d 200 100 0 2018 2019 2020 2017 2021 Local demand continues to support Alberta condensate pricing 1) Source: Bloomberg, COLC, NEB and 7G Internal forecasts. 2) For additional information, see “Forward Looking Information Advisory” in the “Important Notice” at the end of this presentation. 11
2019 BUDGET • At US$50/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 development • Core area drilling, completions and tie-ins • $320 million for Nest 3 and Nest 1 development • Includes key infrastructure and pipelines required to integrate the region into the company’s existing gathering and processing network • $125 million for delineation • Lower Montney and Wapiti region delineation drilling and advanced completion design testing along the Nest 1 North and East perimeters • $25 million for infrastructure and other • Value-enhancing infrastructure projects including production and pressure optimization initiatives, workovers and water handling Core investments that enhance margins and expand inventory 1) For additional information, see “Forward Looking Information Advisory”, “Non - IFRS Measures Advisory” and “Note Regarding Potential Drilling 12 Opportunities” in the “Important Notice” at the end of this presentation.
FINANCIAL SUSTAINABILITY Capital Allocation Adjusted Funds Flow $1.1 billion of sustaining capital ~$1.25 billion at US$50/bbl WTI Delineation and infrastructure of $150MM (12% of budget) Flexibility and Control Risk Management 2019 React to changing commodity prices 40-50% of condensate NCIB + flex capital in 2019 hedged between $62-$78/bbl WTI Liquidity Leverage $1.4 billion Net debt of $2.2 billion or (+$0.3 billion option) 1.2x trailing 12 month adjusted funds flow Undrawn credit facility as of September 30, 2018 A flexible and resilient balance sheet 1) For additional information, see “Forward Looking Information Advisory” and “Non - IFRS Measures Advisory” in the “Important Notice” at the end of 13 this presentation.
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 US$55/bbl WTI 2019 forecast of 220-240 Mboe/d at 55% liquids mix ( ~75 Mbbl/d condensate ) 1) For additional information, see “Forward Looking Information Advisory” and “Non - IFRS Measures Advisory” in the “Important Notice” at the end of this 14 presentation.
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