2015 11 05 v0 Surmont Website Version.pptx

Investing Profitably
in the Canadian Oil Sands
2015 November 1
Executive Summary
Ø  12,000b/dPhase1(80mmbo)
Ø  18,000b/dPhase2(120mmbo)
Ø  Projectinputcostsaredroppingincurrentlowoilpricecycle
Ø  Greateraccesstosuppliesandmaterialsreducesschedulinguncertainty
Ø  Oilpricesbefore2020donotdirectlyaffecteconomics
Ø  ProjectisprofitablewithoilpricesaboveUS$65perbarrelaJer2020
This is an advantageous point in the oil price cycle to invest in the Wildwood oil
sands project.
2
Timeline
•  Wildwoodoilsandsleases(50km2)acquiredfromAlbertaGovernmentfor
$13millionin2006
•  SurmontEnergyconductedsuccessful3Dseismicprogramandcorehole
drillingprogramduringwinterof2011-2012
•  Resultssupportedindependentengineeringbookingsof151mmbo
recoverableoil(Phases1+2)underCSANI51-101standards
•  12,000b/dPhase1regulatoryapplicaXonssubmiYedinlate2012
•  Fundingtargetedforfirsthalfof2016toachievefirstoilproducXonbyearly
2020,whenoilpricesareexpectedtobehigher
Ø  Projectisprofitablewithworldoilpricesof$65/baJer2020
•  Phase2tobedevelopedthereaJerforanaddiXonal18,000b/d
Surmont has completed the initial development steps for the Wildwood Project, and
the project is now ready for the main investment.
3
Ideal Location
•  Surroundedbysuccessfulprojects
ownedbytopoilsandsdevelopers
•  AdjacenttoConocoPhillips’
Surmont136,000b/dprojectwith
regulatoryapprovalshavingbeen
filedtoincreasecapacityto
260,900b/d
•  Nearstrategicinfrastructurehub
withexcellentlocalaccessto
pipelines,railwaysandmajor
highways
Park
MEG
MapofAreaSouthofFt.McMurrayShowingOilSandsWellsandProjects
Wildwood’s ideal location contributes to lower capital and operating costs and welldeveloped oil transportation access.
4
High-Quality Oil Sands
•  Thicknessuptoover30mwith
averageover20m
•  HighoilsaturaXons
•  HighverXcalpermeability
•  Strongcaprockattopandflat
baseatboYomofreservoir
•  NoboYomwater,topgas,
compartmentalizaXon,orlean
zoneissues
•  475mdepthisidealforhighpressuresteaming
•  Analogtoadjacentsuccessful
ConocoPhillipsSurmontProject
PhotoofOil-SaturatedSplitCoresfromtheWildwoodProject
Wildwood’s high-quality resource is expected to achieve results similar to other highquality oil sands projects.
5
Proven Technology - Subsurface
Ø  Veryhighoilrecoveries–
oJen50-70%oftheoilin
place
Ø  Greatlyreducedsurfaceand
environmentalimpacts
comparedtominingprojects
Ø  Scalableandidealfor
implementaXoninphasesof
5,000-12,000b/d
IllustraXonsofTypicalSAGDImplementaXon
Surmont’s approach to the Wildwood Project fully addresses sub-surface risks.
6
Proven Technology - Surface
•  CentralproducXonfacility
usesprovenprocesses
•  Highlymodularizedto
minimizecostsandXming
delays
•  Sizeprovidescostcontrol
•  Designallowsfor
implementaXoninphases
of5,000-12,000b/d
•  CurrentconstrucXoncost
trendsarestrongly
downwardduetocyclical
industryslowdown
WildwoodCentralProcessingFacilityandWellPad#1(lookingNE)
Current economic environment and modular design provides cost and schedule
control.
7
Production
PhaseI
Ø  Full3Dseismiccoverage
Ø  TwowellpadstobedrillediniXally(14
wellpairs)
Ø  AddiXonal8wellpadstobedrilled
overXme(54wellpairs)
35,000
30,000
25,000
20,000
15,000
10,000
5,000
-
Phase2
18,000b/d
120mmbo
Phase1
12,000b/d
80mmbo
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
Ø  FiJypercentlargerthanPhase1
Ø  AddiXonal3Dseismicandcorehole
drillingrequiredtofinalizeassessment
andwellpadlayouts
Ø  RequiresfutureregulatoryapplicaXons
Phase2
AverageDailyOilProducXonbyYear
(b/d)
!"# Petroleum Consultants
Ø  Futurewellstobedrilledasneededto
keepCPFfull
Wildwood will be developed in two phases for an overall producing life of 25 years or
more.
8
Profitability
Ø  ProducealightlydilutedleanbitumenmixforrailtransportaXon
Ø  LeanbitumencanbeblendedtopipelinetransportaXonspecificaXons
Ø  Willallowsalestobedirectedtobestmarketsover25-yearlifeofproject
Ø  CurrentlowoilpricecycleisdrivingdowncapitalinvestmentandoperaXnginput
costs–effectwilldependonXmingofinvestment
Ø  20+%IRRsifpricesrisetoUS$90+/bin2020s
Ø  Nofurthernetinvestmentsrequiredtomaintaincashflow
Ø  Noreinvestmentriskfor25years
Ø  SurmontisbelowthethresholdforIndustryCanadaapprovalofforeignstate-owned
enterpriseacquisiXonsofCanadianoilsandsbusinessesandassets
Wildwood provides solid profitability at expected oil prices after 2020, with significant
upside.
9
Management
Ø  TopthreeexecuXveshaveover100yearsofIndustryexperienceinpublicly
tradedandprivatecompanies,bothCanadianandinternaXonaloperaXons
Ø  Surmont’slargestshareholdercompanyhasin-depthexperienceinearly
developmentofnumerousoilsandsprojects
Ø  Surmonthaspre-idenXfiedkeyaddiXonalexecuXveandtechnicalhuman
resourcestobebroughtonwhenfundingisinplacetoproceed
Ø  KPMGauditors
Ø  GLJPetroleumConsultantsindependentengineers(topoilsandsengineers)
Ø  RoyalBankofCanadabankers
Wildwood’s Management has deep experience and is ready to grow the company
once funding is in place.
10
Value Creation Process
Value
to 2024
with Phase 2
2020
Completed
toDate
2012
Additional Future Phases
•  Up to 30,000 b/d total
•  Improvements in technology
Operations
•  Commercial production
•  “Wall of cash flow” begins
Construction
•  Facility and well pads
•  Cost reduction in current low cycle
Scheme Approval
•  Regulatory approval, funding
•  Engineering, procurement of long-delivery equipment
Independent Engineering Report
•  Validation of oil reserves and resources
Core Hole Drilling
•  Resource assessment
•  Delineation of reservoir
Time
Surmont Energy has de-risked the project through work to date – readying the
project for investment in the next steps of substantial value creation.
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Wildwood Project Advantages
Low-Risk
SolidProfits
IdealTiming
AddiXonalUpsides
• Locatedincentreof
successfuloilsands
area
• Excellentaccessto
infrastructure
• High-qualityoil
sandsreservoir
• Useofproven
subsurfaceand
surface
technologies
• ProjectisapracGcal
sizetoimplement
• Regulatoryscheme
approvalimminent
• Capable
managementteam
• Canadaisasafe
investmentcountry
• Profitablewithoil
pricesover$65/b
aPer2020–
workingtodrive
breakeveneven
lower
• Largeannualcash
flowsaPeriniGal
investment
• Nore-investment
riskdueto25year
lifeofproject
• Belowthresholdfor
Canadianforeign
investment
approvalforoil
sands
• Currentlowoil
pricesarebeneficial
–oilsandscapital
andoperaGngcosts
arenowbeing
forceddown
significantly
• Reducedup-front
capitalcostsand
greaterschedule
control
• Top-qualityhuman
resourcesavailable
forfullcorporate
build-out
• Reducedcost
growthpotenGal
• Currentdiscounted
Canadiandollar
• Futuretechnologies
overlonglifeof
project
• Oilpriceincreases
aPer2020
• FurtherreducGons
incapitaland
operaGngcosts
• IniGalinvestment
canbefoundaGon
toaddmore
projects
• Futureincreasesin
valueofCanadian
dollaraPeriniGal
investment
Wildwood is a low-risk project of controllable size, for investment at an opportune
time in the oil price cycle.
12
Initial Steps for Phase 1 - 12,000 b/d
H1 2016
Finalize
funding of
US$370 mln
combined
equity and
debt
H2 2016
Invest
US$20 mln
for
engineering
and long
delivery items
2017
Invest
US$150 mln
for facilities,
infrastructure
2018
Invest
US$175 mln
for facilities,
wells
2019
Invest
US$25 mln
for facilities,
wells, startup, begin
steaming
mid-2019
Early 2020
First Oil
Commence
production
ramp up
Mid-2021
Full Phase 1
12,000 b/d
achieved
The next step is to finalize US$370 million combined equity and debt financing.
13
Executive Contacts
MarkR.Smith,ChiefExecuXveOfficer
[email protected]
+1.403.689.5488
GordonD.Holden,ChiefOperaXngOfficer
[email protected]
+1.403.807.2397
Suite2300,144FourthAvenue,SW
Calgary,Alberta,CANADAT2P3N4
[email protected]
+1.403.930.4692
www.surmontenergy.com
14
Disclaimer
This presentaXon material contains forward-looking statements and forward-looking informaXon within the
meaningofSecXon27AoftheSecuriXesActof1933,asamended,SecXon21EoftheSecuriXesExchangeAct
of1934,asamended,andapplicableCanadiansecuriXeslaws.Theopinions,forecasts,projecXons,statements
of resource potenXal or other statements about future events of results, are forward looking informaXon,
forward-looking statements or financial outlooks (collecXvely, "forward-looking statements") under the
meaning of applicable securiXes laws, including Canadian SecuriXes Administrators' NaXonal Instrument
51-102 ConXnuous Disclosure ObligaXons and the United States Private SecuriXes LiXgaXon Reform Act of
1995. These statements are made as of the date of this presentaXon and the fact that this presentaXon
remainsavailabledoesnotconsXtutearepresentaXonbySurmontEnergythatSurmontEnergybelievesthese
forward-lookingstatementsconXnuetobetrueasofanysubsequentdate.AlthoughSurmontEnergybelieves
that the assumpXons underlying, and expectaXons reflected in, these forward-looking statements are
reasonable,itcangivenoassurancethattheseassumpXonsandexpectaXonswillprovetobecorrect.Such
statements include, but are not limited to, statements about future projected or target producXon, future
expected product prices, future financial and operaXng results, the plans, objecXves, expectaXons and
intenXonsofthecompanyregardingproducXon,exploraXon,drillinganddevelopment,futureenvironmental
legislaXon, and the future development of the company’s business. Amongtheimportant factorsthatcould
causeactualresultstodiffermateriallyfromthoseindicatedbysuchforward-lookingstatementsare:Surmont
Energy’s operaXons are bitumen-related in Alberta Canada, and unexpected problems can arise due to
technicaldifficulXesandoperaXonaldifficulXeswhichimpacttheproducXon,transportorsaleofitsproducts;
geographicandweathercondiXonscanimpacttheproducXon,transportorsaleofitsproducts;theriskthat
currentglobaleconomicandcreditcondiXonsmayimpactoilpricesandoilconsumpXonmorethanSurmont
Energy currently predicts; the risk that unexpected delays and difficulXes in developing currently owned
properXes may occur; the failure of exploratory drilling to result in commercial projects; unexpected delays
duetothelimitedavailabilityofdrillingequipmentandpersonnel;andtheriskfactorsdetailedfromXmeto
Xme in Surmont Energy’s periodic reports. Surmont Energy's forward-looking statements are expressly
qualifiedintheirenXretybythiscauXonarystatement.
Additional Information
16
Management
•  MarkR.Smith,BComm,LLB–ChiefExecuXveOfficerandDirector
Ø  Over30yearsexperienceinoilandgastransacXons,corporatelaw,andexecuXve
leadership,inpublicandprivateandCanadianandinternaXonalcompanies
•  GordonD.Holden,BScEng,MSc[Dist]–ChiefOperaXngOfficerandDirector
Ø  Nearly40yearsofexperienceinengineering,projectmanagement,economic
evaluaXonsandexecuXveleadership,inpublicandprivateandCanadianand
internaXonalcompanies
•  WilliamB.Cooper–Director
Ø  Nearly30yearsofexperienceincorporatedevelopment,foundingandfinancing
companies,inpublicandprivateandCanadianandinternaXonalcompanies
•  BountyDevelopmentsLtd.–LargestShareholder
Ø  Geosciences,reservoirengineering,regulatoryexperXse
•  AddiXonalkeyhumanresourceshavebeenpre-idenXfied,tobebroughtinto
companyoncefundingisinplacetoproceed
Ø  CrudeoilmarkeXng,oilsandsgeologyandsubsurfaceengineering,oilsandssurface
engineeringandoperaXons
17
Terms
b
b/d
CPF
GLJ
mln
mmbo
SAGD
-barrels(=0.159m3)
-barrelsperday
-CentralProcessingFacility
-GLJPetroleumConsultants(independentreservesengineers)
-million
-millionsofbarrelsofoil
-steam-assistedgravitydrainage
www.surmontenergy.com
18