SUSTAINABLE CONVENTIONAL RESOURCE COMPANY TSX: SGY JANUARY, 2019 - PowerPoint PPT Presentation

SUSTAINABLE CONVENTIONAL RESOURCE COMPANY TSX: SGY JANUARY, 2019

REASONS TO OWN SURGE – TSX: SGY Value based with a strong focus on shareholder returns ▪ High quality conventional, large OOIP (1) , light/medium gravity crude oil asset base; 84% of production is oil + liquids; low decline of 23%; excellent capital efficiencies (2) ; ▪ Deep value proposition; ▪ >80% growth in production over the last 10 quarters; and (3) . ▪ 2017 year end 2P Sproule NAV of $6.06 per common share (1P NAV of $3.67 per common share) ▪ Over $900 million enterprise value; average daily trading volumes of 1.5 million shares – covered by 19 brokerage firms; ▪ Return capital to shareholders through a sustainable monthly dividend; Dividend of $0.10 per share annually (dividend yield >6%) (4) . ▪ ▪ Drilling inventory: over 800 net locations (>12 years of drilling) (5) ; and ▪ ~$130 million available on credit facility (6) . (1) See the reserves section of the forward looking statements at the back of this presentation. (2) See the Additional Metrics section at the back of this presentation for additional information. (3) Based on Surge’s 3rd party evaluated reserves as of December 31, 2017, and does not include acquisitions or divestures ma de by Surge in 2018. (4) Based on a $1.50 share price and a $0.10 annual dividend. 2 (5) Drilling locations are comprised of both booked and un-booked locations and are defined in the Drilling Locations section at the back of this presentation. FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES (6) Calculated as follows: $550 million credit facility less $420 million in estimated bank debt as of December 31, 2018.

CONSISTENT PRODUCTION GROWTH Surge management continues to deliver quarterly production growth >80% Production Growth Since Q2 2016 23,000 21,000 Accretive light oil acquisition 19,000 Production (boepd) 17,000 15,000 13,000 11,000 9,000 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 2019 Budget Avg Surge has delivered six upward revisions to production guidance since Q2 2016 - twice organically, and four times through accretive core area acquisitions. 3 FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES

2019 CAPITAL BUDGET AND PRODUCTION GUIDANCE Cost effective, sustainable, low decline production base Capital Category 2019 Total Drilling and Completions $100 million Facilities, Equipment, and Pipelines $25 million Other (Land, Seismic, G&A) $10 million Total Exploration and Development Capital $135 million Production and Cost Guidance 2019e Average Production 22,000 boepd (84% liquids) 2019e Exit Production 22,000 boepd (84% liquids) 2019e Operating Costs $15.45 - $15.95 per boe 2019e Transportation Costs $1.50 - $1.75 per boe 2019e General & Administrative Costs $1.75 - $1.90 per boe 4 4 FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES

2019 SUSTAINABILITY ANALYSIS Commodity Sensitivity (1) WTI (USD) $55 $65 $75 FX (USD / CAD) $0.75 $0.75 $0.75 WTI (CAD$ / Bbl) $73.33 $86.67 $100.00 MSW-to-WTI Differential (US$ / Bbl) -$5.00 -$5.00 -$5.00 WCS-to-WTI Differential (US$ / Bbl) -$15.00 -$15.00 -$15.00 Capital Efficiency ($ / boepd) $25,500 $25,500 $25,500 2019e Cash Flow from Operating Activities (2) ($ MM) $171 $236 $291 Exploration and Development Capital ($ MM) $135 $135 $135 Dividend ($ MM) $31 $31 $31 Capital & Dividend ($ MM) $166 $166 $166 Cash Flow from Operating Activities in $5 $70 $125 Excess of Capital & Dividend ($ MM) All-in Payout Ratio (3) 97% 70% 57% (1) Based on production of 22,000 Boepd (2) Assumes $NIL working capital. 5 5 (3) This is a Non-GAAP financial measure which is defined in the Non-GAAP financial measures section of this document. FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES

SURGE ASSET BASE HIGHLIGHTS An operational platform to continue to execute a sustainable model ▪ Over 2.4 billion net barrels of conventional OOIP under management - with an (1) to date; estimated 6.9% recovery factor ▪ Proven plus probable year end 2017 reserves of over 120 million boe (90% oil) (2) ; ▪ 22,000 boepd light and medium gravity oil producer (84% oil and liquids weighted); ▪ Low corporate base production decline of 23%; ▪ Development drilling upside: >800 net locations; provides a drilling inventory of more than 12 years; and ▪ >14 year reserve life index (proved plus probable) (3) . (1) See the Additional Metrics section at the back of this presentation for additional information. 6 (2) Based on 3 rd party evaluated reserves as of December 31, 2017, and includes acquisitions or divestures made by Surge in 2018. (3) Reserve Life Index (RLI) is calculated by dividing year end reserves by expected annual production.

OPERATIONS FOCUSED IN 4 CORE AREAS Large OOIP pools in established conventional reservoir trends Greater Sawn: Total: ~5,700 boe/d (98% Oil & NGL’s) Surge 2019 Average Production Total: 22,000 boe/d (84% Oil & NGL’s) Valhalla: Total: ~5,300 boe/d (65% Oil & NGL’s) Sparky: Total: ~7,500 boe/d (90% Oil & NGL’s) Shaunavon: Total: ~2,500 boe/d (100% Oil & NGL’s) Minors: Total: ~1,000 boe/d (50% Oil & NGL’s) 7 FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES

TARGETING CONVENTIONAL RESERVOIRS Surge focuses on reservoirs at the conventional end of the permeability spectrum Recovery factors, internal rates of return (IRR) (1) , decline rate, and profit to investment ratio (PIR) (1) increases, as reservoir quality Ultimate Oil Recovery improves. PIR & IRR Unconventional Conventional Reservoirs Reservoirs Extremely Very Tight Tight Low Moderate High Tight Slave Point Valhalla Doig Shaunavon Montney Viking-Cardium Duvernay Resource Sparky Halo 0.0001 0.001 0.01 0.1 1 10 100 Permeability (mD) Source: Modified from US Department of Energy Study Average Surge Permeability (1) See the Additional Metrics section at the back of this presentation for additional information. 8

NET OOIP OF >2.4 BILLION BARRELS Large OOIP, with low recovery factors - focused in conventional reservoirs Total Booked Net Net CTD (2) SGY Total Net drilling Independent Recovery Estimated Net Avg. WI Oil Locations Core Area Formations Factor P+P OOIP Recovery (MMbbls) Factor (Booked) (1) (% OOIP) (1) 400 Sparky Formation + Sparky Core >800 89% 10.4% 13.6% Mannville Group (97) Doig / Montney / 89 Valhalla Doe Creek / >285 82% 8.6% 10.0% (50) Charlie Lake 119 Greater Sawn Slave Point >690 89% 6.8% 11.5% (80) 177 Shaunavon Shaunavon >470 98% 1.7% 5.4% (Upper & Lower) (83) >800 (3) : TOTALS >2,400 88% 6.9% 10.6% (340) >2.4B net barrels of internally estimated OOIP under ownership; Current net recovery factor ~6.9%. (1) Based on 3 rd party evaluated reserves as of December 31, 2017, and includes acquisitions or divestures made by Surge in 2018. Also see Drilling Locations section at the back of this presentation for additional information. 9 (2) CTD means cumulative oil produced to date. FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES (3) Totals do not add up as minor properties have been included in the totals but have not been subcategorized in the table.

SURGE’S ECONOMIC INVENTORY > 20% IRR 12 years of drilling @ US$65 WTI - Average Risked IRR: 85% & PIR10: 1.13 SGY Economic Locations - >20% Risked IRR 900 13 yrs 13 yrs * Risked weighted average 12 yrs 800 700 10 yrs SGY Economic Locations Years of Drilling Inventory (assumes 65 wells/yr.) 600 500 400 *PIR10: 0.93 (1) *PIR10: 1.45 (1) *PIR10: 1.13 (1) *PIR10: 1.40 (1) *IRR: 118% *IRR: 68% *IRR: 114% *IRR: 85% 300 200 100 0 $55 WTI $65 WTI $75 WTI $85 WTI $1.75 AECO $1.75 AECO $1.75 AECO $1.75 AECO (0.75 FX) (0.76 FX) (0.78 FX) (0.80 FX) C$49 C$59 C$68 C$76 Realized WCS C$67 C$77 C$87 C$96 Realized EDMN (1) Profit to Investment ratio, discounted at 10% (PIR10) equals 0.0, when NPV10 equals the original investment capital (i.e. 0.0 = breakeven). See the Additional Metrics section at the back of this presentation for additional information 10 (2) Drilling locations are comprised of both booked and un-booked locations. See the Drilling Locations section at the back of this presentation. FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES

SPARKY – A DOMINANT POSITION Applying modern technology to a prolific Western Canadian formation AB SK ▪ The Sparky is a well established prolific oil producing formation in Western Canada. ▪ Surge holds a dominant land position in the medium / light gravity oil window and is effectively applying modern horizontal multi-stage fracturing technology. Key Sparky Value Drivers: • Shallow depth (700-900m). • Low cost drilling (D,C&E at CAD$1.2MM per well). • Low geological risk due to 3D seismic and thousands of vertical penetrations. • Lighter oil gravity (23-31 ° API) = higher netbacks. • Proven waterflood potential (Wainwright pool at >35% recovery factor*). Medium Gravity Sparky Formation Facts * Oil Window >20 ° API First Production May 1922 Original Oil in Place > 11 Bbbls Cum Production > 1 Bbbls Recovery Factor <10% > 20,000 Producing Wells Hz Wells / Multi-Stage Hz / >650 / >200 / >90 Surge Multi-Stage Hz * Data sourced from Canadian Discovery and GeoScout 11 11 FOOTNOTES INCLUDED IN THE BACK AS ENDNOTES