TSX: VII CORPORATE PRESENTATION October 2019
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 2
7G CORPORATE PROFILE Largest Producer of Condensate, Premier Alberta Montney Pure-Play Canada’s Most Valuable Hydrocarbon ▪ 202 Mboe/d (38% condensate, 22% NGL, 40% gas) in Q2/19 ▪ Multiple market exposures provide maximum gas price optionality Financial Strength and Capital Discipline ▪ $1.55 billion adjusted funds flow (trailing twelve months) ▪ 1.4x trailing 12 month net debt to adjusted funds flow ratio ▪ $1.3 billion current available funding (3)(4) A Sustainable, Top-tier assets located near demand centers, Free Cash Flow Generating Business Model (4) multiple pipeline routes, and future LNG optionality ▪ Over 15 years of premium inventory, with future upside ▪ Sustaining capital requirements of $1.1 billion, trending lower ▪ Best-in-class GHGe emissions TSX:VII Capitalization and Q2 2019 Financial Highlights Share Count Market Cap (1) $2.9 billion 348 million Basic (1) Generating Meaningful Returns (Trailing 12 Month) Adjusted Funds Flow Net Debt (2) $2.2 billion $1.00 per Diluted Share (4) ▪ 10.4% return on capital employed (ROCE) (4) ▪ 16.2% cash return on invested capital (CROIC) (4) Adjusted Funds Flow Enterprise Value (3) $5.1 billion $19.33 ▪ $2.08 per share of net income ($/boe) (4) (1) September 30, 2019 share price & shares outstanding as of June 30, 2019. (2) US$1.575B in senior unsecured notes converted at $1.3353 CAD/USD plus adjusted net working capital deficiency as of June 30, 2019 of $112 MM. (3) Figures may not add due to rounding. For additional information see “Non - IFRS Measures Advisory” in the “Important Notice” that appears at the end of the presentatio n. (4) 3
THE CORNERSTONES OF OUR BUSINESS Return of Capital Return on Capital Free Cash Flow Strategic Principles 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 7G’s strategic principles drive value creation 4
STRATEGIC PRINCIPLES: STAKEHOLDER SERVICE Governance Environment Social Total Recordable Incident and Practices That Drive Diversity, A Low GHGe Footprint vs Peers (2) Lost Time Injury Frequency Rates Accountability and Effective Oversight Tonnes of CO 2 e / boe Annual Rate per 100 Full-Time Employees 0.10 2.0 • Independent Board Chair 1.5 0.05 1.0 • 9 of 10 Independent Directors (1) 0.5 0.00 0.0 VII Peer Peer Peer Peer Peer Peer 2014 2015 2016 2017 2018 2019 • 100% Board attendance in 2018 1 2 3 4 5 6 YTD TRIF LTIF • Diverse Board and Management Best in Class Environmental Liability • Over $2.3B of capital, operating and Management (3) royalty contributions in 2018, • Improving ESG ratings reflect supporting economic activity in 40 commitment to sustainability LMR Western Canada 20 0 • Community partner actively engaging Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 Peer 13 VII local stakeholders • >5,000 hours of employee • 85,000 truck loads of water eliminated volunteerism, from ~200 staff due to investments in disposal and water handling Responsible development across all aspects of 7G’s business 1) Marty Proctor, Chief Executive Officer, is the only non-independent director. 2) Based upon 2017 data. For additional information regarding the company’s estimated carbon intensity, please refer to “Note Regarding Industry Metrics” in the “Important Notice” at the end of this presentation. Peers include ARX, BTE, CPG, HSE, SU, VET. 5 3) The peer companies in the Liability Management Rating chart include ARX, BIR, CNQ, CVE, CPG, ECA, ERF, HSE, MEG, PEY, TOU, VET, WCP.
STRATEGIC PRINCIPLES: STAKEHOLDER SERVICE – ESG PERFORMANCE 2019 2018 2019 2018 2019 2018 Environment 2 3 Social 2 6 Governance 2 3 Risks and 3 8 Human Rights 3 4 Board Structure 2 3 Opportunities Carbon and Labor, Health 2 2 1 7 Compensation 3 4 Climate and Safety Natural Stakeholders Shareholder 1 3 1 6 3 3 Resources and Society Rights Product Safety, Waste and 3 5 Quality and N/A N/A Audit 1 2 Toxicity Brand 7G actively measures and improves upon its ESG performance 1) All figures based on ISS QualityScore ratings, with 1 being the most favorable rating and 10 being the least favorable. 2018 figures are effective December 1, 2018. 2019 Figures are effective July 1, 2019. Figures are calculated relative to a selection of peers determined by ISS. 6
STRATEGIC PRINCIPLES: HIGH QUALITY RESOURCE Most Economic Infrastructure Footprint Resource in Canada Canada’s largest producer Natural Gas Processing: of high-value condensate • ~1 Bcf/d capacity Nest IRRs average 125% • 510 MMcf/d owned & at US$55 WTI / US$3 Hub operated at Cutbank/Lator • 250 MMcf/d owned & operated at Gold Creek • 250 MMcf/d of 3rd party capacity access Deep Inventory Condensate Stabilization: with Further Upside • >80 Mbbl/d capacity • >60 Mbbl/d owned & Nest upper/middle operated Montney: 15+ years • Access 3rd party capacity of up to 20 Mbbl/d Decades of lower Montney, Wapiti & Rich Gas future drilling opportunities Cost & Operating Advantage 750 MMcf/d of owned gas processing capacity 1) For additional information, see “Forward - Looking Information Advisory” and “Note Regarding Potential Drilling Opportunities” in the “Important Notice” at the end 7 of this presentation.
STRATEGIC PRINCIPLES: MARKET ACCESS FOR NATURAL GAS 7G Gas Market Sales Points AECO 5% AECO 8% AECO 10% Dawn 15% Dawn 15% Dawn 15% Ventura 4% Malin 13% Gulf 18% Gulf 24% Gulf 26% Chicago 55% Chicago 49% Chicago 41% GTN: 90 MMcf/d Alliance: 2018 2019 2020 500 MMcf/d TCPL: 77 MMcf/d Revenue Mix 2018 Average Benchmark Pricing (US$/MMbtu) $3.00 Condensate $2.00 $1.00 NGL NGPL: 155 MMcf/d Natural Gas $0.00 Chicago Gulf Malin Dawn AECO US dollar revenue stream enhances 7G’s profitability 1) 2018 average benchmark prices sourced from Bloomberg. 8
STRATEGIC PRINCIPLES: MARKET ACCESS FOR CONDENSATE Forecast Supply & Demand of WCSB Condensate (Mbbl/d) (1)(3) Edmonton Condensate vs. Crude Oil Prices (US$/bbl) (2) ~250 Mbbl/d+ $80 800 gap between $70 supply & demand $60 $50 Total Demand 600 $40 $30 $20 400 $10 2015 2016 2017 2018 2019 WCSB Supply 200 WTI Oil Edm. Light Midland Oil WCS Heavy Oil Edm. Condensate Implied Condensate Imports Required to Meet Demand (Mbbl/d) (3) 400 Rail imports potentially set future • Condensate is Canada’s premium liquids product marginal price 300 • Total demand of ~650 Mbbl/d exceeds local supply by Condensate Import ~250 Mbbl/d Capacity = 275 Mbbl/d 200 • Canadian condensate continues to price in a range similar to US WTI and Midland streams 100 2018 2019 2020 2021 2017 Local demand continues to support Alberta condensate pricing 1) Source: Bloomberg, COLC, NEB and 7G internal forecasts. 2) Source: Bloomberg. 3) For additional information, see “Forward - Looking Information Advisory” in the “Important Notice” at the end of this presentation . 9
STRATEGIC PRINCIPLES: FINANCIAL SUSTAINABILITY Net debt to trailing 12 month adjusted EBITDA Solid Balance Sheet 2.4x Leverage is < 2.0x Target below 2x at US$50 WTI 2.1x 1.8x 1.5x 1.3x 1.2x C$1.7B of liquidity 0.9x C$1.4B undrawn credit facility 2015 2016 2017 2018 2019E C$0.3B accordion 2023 maturity Historical US$70 WTI US$60 WTI US$50 WTI Long maturities with fixed coupons Long term note maturities 4.5 Years to Next 6.875% Notes Maturity US$450MM 5.375% Notes 2023 is earliest senior US$700MM 6.75% Notes unsecured note maturity US$425MM 2019 2020 2021 2022 2023 2024 2025 Balance sheet strength is core to 7G’s business For additional information, see “Forward - Looking Information Advisory” and “Non - IFRS Measures Advisory” in the “Important Notice” at the end of this 1) presentation. 10
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