Oil, Gas & Consumable Fuels: We've Got A Fever and The Only Prescription Is..

NBCFM Research | Thematic Research
October 13, 2021
INDUSTRY RATING
Oil, Gas & Consumable Fuels
Oil, Gas & Consumable Fuels:
Overweight We’ve Got a Fever and the Only Prescription Is...
(NBF Economics & Strategy Group)
This Time Is Different...so Far...

Through necessity, the last 18 months have provided the energy sector a much-needed dose of
medicine that appears to have cured an infamous ability to destroy shareholder value through
misallocating capital. In our view, and through a combination of events over the last year or so, the
sector will continue to adopt a prescribed approach to allocating capital. To date, six companies
in our coverage have provided a formulaic, prescription-based capital allocation strategy that
is intended to provide shareholders with improved certainty and transparency surrounding Free-
Cash-Flow (FCF) allocation. We believe a paradigm shift is underway, with a return of capital
model eventually becoming the epitome of a successful strategy, resulting in a growing number
of companies adopting this prescription-based FCF allocation approach.
Within This Note, We Look At:

Return of Capital Is the New Status Quo
If recent announcements are any indications (i.e., OVV, TOU, etc.), a clearly prescribed FCF
allocation framework is becoming the new norm. Those who have previously announced plans
surrounding a commitment to increased shareholder returns have been rewarded, which leads us
to believe further announcements are imminent.
Leverage Is Still the Short-Term Focus

As we continue to highlight (LINK), the majority of our coverage is quickly approaching stated
leverage targets, clearing the path for an attractive shareholder return profile. On strip pricing,
we see most names reaching 0.5x D/CF by mid-2022. With leverage in check, there are many
possible uses for FCF (dividend growth, share buybacks, M&A, etc.)
Theoretical Exercise
Based on our assumptions (more within), we are forecasting cumulative shareholder returns
(dividends + share buybacks) of approximately $73 billion from 2022 through 2024, in addition
to $97 billion of capital spending and debt repayment. As our scenario-based approach suggests,
a prescribed return of capital approach should support shareholder value by optimizing FCF
allocation.
Research: NBCFM Energy

Valuation Quandary
● ResearchEnergy@nbc.ca
Despite the sector being poised to deliver unprecedented FCF (backstopped by healthy balance
Analyst Travis Wood sheets), valuations remain at historic lows - so what gives? Many factors are at play; however,
(403) 290-5102● travis.wood@nbc.ca we make a case that valuations do not need to expand to drive shareholder returns (although
Analyst Dan Payne, CFA this could be a secondary driver longer term). We expect companies with a disciplined return on
(403) 290-5441● dan.payne@nbc.ca capital strategy can support a sustainable return of capital profile.
Associate Baltej Sidhu

(403) 290-5627● baltej.sidhu@nbc.ca
Associate Logan Fisher

(403) 441-0933● logan.fisher@nbc.ca
Associate James Harwood, CPA For required disclosures, please refer to the end of the document.
(403) 290-5445● james.harwood@nbc.ca
Thematic Research
NBCFM Research | October 13, 2021
Patience Will Be Rewarded

Thanks to what has been a constructive commodity price complex, the tide is turning for oil and gas equity
holders who continue to be rewarded after a multi-year, industry-wide focus on capital discipline and debt
reduction. As highlighted in a recent note (LINK), the majority of our coverage is quickly approaching their
stated leverage targets. For reference, we have compiled Exhibit 1 to showcase the timing for which we
anticipate each company to reach leverage of 1.0x D/CF and 0.5x D/CF, respectively. With leverage in
check, the path has been cleared for unprecedented shareholder returns. As such, we thought it would be an
opportune time to conduct a theoretical exercise to illustrate the shareholder return potential across the
sector as we look ahead.
Exhibit 1: NBF Coverage Universe; Leverage Targets

1.0x D/CF 0.5x D/CF DAPPS Growth 2022 FCF Yield 2022 EV/DACF 2022
Senior/Integrated
CNRL Q4/21 Q2/22 23% 19% 3.5x
Cenovus THERE Q2/22 29% 26% 2.8x
Imperial Oil THERE THERE 23% 22% 2.8x
Ovintiv Q3/22 Q1/24 16% 21% 3.3x
Suncor THERE Q2/22 25% 19% 3.1x
Median THERE Q2/22 23% 21% 3.1x
Large/Mid Cap
Advantage THERE Q4/21 58% 21% 2.8x
ARC THERE Q4/21 14% 19% 2.6x
Birchcliff THERE Q4/21 59% 27% 2.4x
Baytex Q4/22 Q4/23 29% 25% 3.0x
Crescent Point Q4/21 Q3/22 19% 32% 2.0x
Enerplus Q4/21 Q4/21 30% 24% 2.3x
Freehold THERE Q4/21 21% 10% 6.5x
Headwater THERE THERE 88% 13% 4.1x
Kelt THERE THERE 56% 12% 3.1x
MEG Q3/23 Q4/23 26% 27% 3.3x
NuVista Q4/21 Q2/22 71% 22% 2.3x
Peyto Q4/22 Q4/23 31% 25% 2.9x
Paramount THERE Q1/22 39% 19% 2.8x
PrairieSky THERE Q4/21 6% 6% 11.8x
Parex THERE THERE 42% 20% 1.9x
Spartan Delta Q1/22 Q3/22 72% 28% 2.0x
Storm THERE Q4/21 88% 24% 2.4x
Tourmaline THERE Q4/21 42% 18% 3.2x
Topaz R R R R R
Tamarack Q4/21 Q1/22 52% 25% 2.4x
Vermillion Q1/22 Q2/23 31% 37% 2.2x
Whitecap THERE Q1/22 33% 21% 2.6x
Median THERE/Q421 Q2/22 39% 22% 2.6x
Small Cap
Crew Q4/22 Q3/23 72% 32% 2.8x
Pipestone THERE Q1/22 102% 27% 1.8x
Surge Q4/21 Q3/22 23% 34% 1.8x
Yangarra Q1/22 Q4/22 124% 56% 1.3x
Median Q1/22 Q3/22 87% 33% 1.8x
Coverage Group Median THERE/Q122 Q2/22 32% 23% 2.8x
Strip pricing as of 2021-10-07

Source: NBF, Company Reports
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Increased return of capital to shareholders is beginning to gain momentum and is top-of-mind for companies
in the E&P space and will be an important factor in restoring investor confidence. In recent months, there
has been a multitude of announcements on dividend increases, share buybacks and/or the unveiling of
clearly defined capital allocation frameworks. We expect to see further announcements in the near future
(perhaps within Q3/21 results), given it appears that most of those who have provided a return of capital
plan have shown relative share price outperformance (see Exhibit 3 below) and demonstrates the
shareholder appetite for value over volume. For context, there are now six companies with our coverage
group who have outlined some form of a prescribed return of capital strategy (denoted below).
Exhibit 2: Capital Allocation Frameworks

Near Term FCF Allocation Policy Long Term FCF Allocation Policy
Debt Shareholder Debt Shareholder
Reduction Returns Type Reduction Returns Type
(%) (%) (%) (%)
CNQ* 50% 50% Share Buybacks 50% 50% Share Buybacks
CVE 100% - - N/A N/A -
ERF 90% 10% Dividend Growth, Share Buybacks N/A N/A -
OVV 75% 25% Share Buybacks, Variable Dividends 50% 50% Share Buybacks, Variable Dividends
TOU* N/A N/A Dividend Growth, Special Dividends, Share Buybacks N/A N/A Dividend Growth, Special Dividends, Share Buybacks
SU* 60% 40% Dividend Growth, Share Buybacks 60% 40% Dividend Growth, Share Buybacks
*CNQ: contingent upon $15 bln absolute debt target; TOU: "returning the vast majority of FCF to shareholders on a go-forward basis"; SU: based on
US$55/bbl WTI
Exhibit 3: Relative Performance vs. SPSTEN Index Post Announcement

44% Performance (Announcement - Oct 8th) Performance (1 Day Post Announcement)
F*
30% D & F* D
20%
D F
D D* D*
10% D* D&F D* F
0%
-10%
-20%
-30%
CNQ ERF CPG WCP OVV PXT ARX FRU IMO TOU PSK SU
*Announcement concurrent with quarter results; D and F labels represent a dividend increase and/or FCF allocation policy announcement, respectively.
Source: NBF, Company Reports, Bloomberg
Hypothetical Exercise
To showcase shareholder return potential, we have undertaken a hypothetical exercise, while appreciating
that the outcome would not manifest for select companies under coverage in regard to their respective
business models' (i.e., delineation, build and dispose of, etc.) We have made the following consistent
assumptions, for comparative purposes, across our coverage universe from 2022 through 2024 on strip
pricing:
I. If D/CF > 2.0x, then 100% of FCF (CF – Capex - Dividends) will be directed towards debt repayment.
II. If 1.0x <= D/CF <= 2.0x, then 25% of FCF will be used to fund base dividend growth and share
buybacks, while the remaining 75% of FCF (CF – Capex – Dividends – Buybacks) will be directed
towards debt repayment.
III. If D/CF < 1.0x, then 75% FCF will be used to fund base dividend growth and share buybacks, while
the remaining 25% of FCF (CF – Capex – Dividends – Buybacks) will be directed towards debt
repayment.
For simplicity purposes, we’ve assumed dividend increases of 20% per year and that the company will
repurchase shares up to the maximum amount permissible under an NCIB (10% O/S) each year, so long as
D/CF remains below 1.5x. If a company currently does NOT have a dividend in place, we’ve assumed that
the initial dividend will equate to 5% of cash flow and grow by 20% per annum thereafter. Additionally, we
have assumed annual production growth of approximately 1-3% with an associated capex increase of ~2% per
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year. Certain companies have clearly defined 5-year plans (i.e., ARX, BTE, HWX, TOU, TVE, etc.). For these
names, we’ve left our existing production and capex assumptions unchanged.
Key Takeaways
Based on these assumptions, we are forecasting cumulative shareholder returns (dividends + share buybacks)
of approximately $73 billion from 2022 through 2024 across our coverage universe, as depicted in Exhibit 4.
The cumulative dividends and buybacks represent approximately 10% and 25% of total cash flow,
respectively. Additionally, capex and debt repayment represent approximately $70 billion (~33%) and $27
billion (~13%) from 2022 through 2024 respectively, while we’ve left an ‘Optional’ bucket (i.e., dry powder)
that could potentially be used for further shareholder returns and represents approximately $39 billion
(~18%) from 2022 through 2024. Despite these lofty shareholder return assumptions, most of our coverage
can extinguish their debt by the end of 2024E. As our evidence suggests and with a few exceptions, this new
paradigm would create shareholder value by growing PPS through prioritizing share count reduction rather
than seeking to grow absolute production through the drill bit. Refer to Appendix 1 for a detailed overview
of the results of our exercise.
Exhibit 4: Cumulative Shareholder Returns (2022-2024)
Valuation Quandary
Despite the sector being poised to deliver unprecedented FCF (backstopped by healthy balance sheets),
valuations remain at historic lows - so what gives? Many factors are at play; however, we argue that
valuations do not need to expand to drive shareholder returns (although this could be a secondary driver
longer term). We expect companies with a disciplined return ON capital strategy can support a sustainable
return OF capital profile longer term. How will the businesses be valued under this new paradigm? Time will
tell. However, as the strategies continue to show capital discipline and a prescribed approach to FCF
allocation persists, we are of the view that a form of yield (we see dividend yield as likely) will become a
reasonable value measure for the sector and a way to measure quality and inherently reintroducing multiple
expansion as a function of execution.
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Thematic Research
Exhibit 5: Historical Canadian E&P Valuations
Seniors/Integrated CAN Oil CAN Gas

14.0x
12.0x
10.0x
EV/EBITDA
8.0x
6.0x
4.0x
2.0x
0.0x
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: NBF, Bloomberg
Fast-forwarding to 2024 and using our debt-adjusted CFPS and total debt per share estimates, we have
derived an implied share price for each company assuming its current 2021E EV/DACF multiple remains flat.
Applying this methodology across our coverage, we estimate an average aggregate upside potential of
approximately 110% based on today’s valuations, attributable solely to the return of capital.
A shortfall of using the traditional EV/DACF metric is that it ignores capex requirements. The sustainability
of FCF and depth of inventory will undoubtedly come into question in a low-growth environment where most
companies are no longer growing reserves. As such, we remain oriented towards those names who have a
long runway of economic reserves and should be able to drive a sustainable FCF profile well into the future.
However, generating sustainable FCF is only one part of the equation - how said FCF is ultimately allocated
will, in our view, separate the outperformers from the laggards. This gears us towards companies with
clearly prescribed capital allocation frameworks coupled with management teams who have a track record
as effective allocators of capital.
Exhibit 6: 2022E Maintenance Sustaining Ratio vs. DAFCF Yield
0.40x CPG
OVV (13%, 0.5x) KEL POU SGY
PEY BTE
ERF
TVE
0.36x
PIPE
ARX
YGR (45%)
Sustaining Ratio (x)
SDE
SU NVA
VET
0.32x
AAV BIR
CR SRX
0.28x
TOU
MEG
0.24x
CVE
HWX WCP
CNQ PXT (42%)
IMO (0.17x)
0.20x
17% 19% 21% 23% 25% 27% 29% 31%
DAFCF Yield (%)
Note: Maintenance FCF calculated as CF - Sus. E&D Capex; sustaining ratio calculated on unhedged basis; strip pricing as of 2021-10-07
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Appendix 1: Assumptions (1/2)

Cash Flow ($mln) Capex ($mln) Dividends ($mln) Share Buybacks ($mln) Debt Repayment ($mln) Optional ($mln)
2022E 2023E 2024E 2022E 2023E 2024E 2022E 2023E 2024E 2022E 2023E 2024E 2022E 2023E 2024E 2022E 2023E 2024E
AAV $406 $329 $312 $150 $153 $156 $22 $23 $25 $71 $64 $58 $41 $22 $18 $122 $66 $55
ARX $3,170 $2,946 $2,764 $1,300 $1,450 $1,350 $219 $235 $254 $635 $571 $514 $375 $265 $254 $642 $425 $392
BIR $743 $610 $622 $240 $230 $275 $6 $7 $7 $96 $86 $77 $99 $71 $65 $302 $216 $198
BTE $916 $832 $752 $375 $420 $420 $44 $48 $51 $78 $96 $86 $315 $140 $49 $105 $129 $146
CNQ $16,671 $14,283 $13,072 $3,455 $3,592 $3,735 $2,496 $2,696 $2,911 $4,954 $4,458 $4,013 $2,191 $2,207 $1,455 $3,574 $1,330 $958
CR $257 $234 $217 $83 $84 $86 $14 $13 $14 $16 $20 $18 $109 $29 $25 $36 $88 $75
CPG $2,101 $1,854 $1,642 $900 $918 $936 $75 $81 $88 $301 $271 $244 $413 $527 $367 $412 $58 $7
CVE $10,275 $9,920 $9,026 $2,635 $2,687 $2,741 $197 $210 $224 $2,128 $1,915 $1,723 $2,197 $1,704 $1,799 $3,118 $3,403 $2,538
ERF $1,263 $1,137 $1,029 $500 $510 $520 $44 $48 $52 $195 $176 $158 $213 $177 $151 $311 $227 $147
FRU $252 $220 $202 $0 $0 $0 $99 $107 $117 $128 $110 $86 $7 $1 $0 $19 $3 $0
HWX $203 $170 $148 $74 $59 $54 $9 $10 $10 $88 $79 $71 $8 $6 $3 $24 $17 $9
IMO $8,783 $7,936 $7,157 $1,500 $1,400 $1,400 $867 $937 $1,012 $2,672 $2,405 $2,164 $936 $799 $645 $2,808 $2,396 $1,935
KEL $256 $223 $196 $150 $153 $156 $14 $15 $17 $56 $50 $45 $9 $1 -$5 $27 $3 $0
MEG $1,259 $1,224 $1,145 $350 $357 $364 $45 $70 $78 $60 $241 $230 $603 $373 $593 $201 $183 $0
NVA $612 $626 $596 $325 $350 $357 $35 $38 $41 $64 $57 $52 $47 $45 $37 $141 $136 $110
OVV $4,767 $4,075 $3,613 $2,071 $2,189 $2,309 $210 $227 $244 $887 $869 $716 $1,199 $532 $257 $400 $259 $86
PEY $764 $649 $629 $325 $328 $332 $8 $8 $9 $77 $95 $86 $237 $155 $49 $117 $63 $153
PIPE $391 $368 $338 $185 $130 $133 $33 $36 $41 $34 $30 $27 $35 $43 $34 $105 $129 $103
POU $950 $792 $708 $385 $393 $401 $38 $41 $45 $174 $157 $141 $88 $50 $30 $265 $151 $91
PSK $275 $243 $227 $0 $0 $0 $93 $106 $121 $185 $141 $110 $0 $0 $0 $0 $0 $0
PXT $1,011 $912 $840 $353 $380 $406 $69 $75 $82 $325 $299 $274 $0 $0 $0 $265 $158 $77
SDE $576 $595 $618 $300 $300 $300 $25 $28 $30 $71 $64 $58 $71 $51 $57 $109 $153 $172
SGY $287 $258 $231 $135 $138 $140 $13 $14 $15 $43 $39 $35 $35 $17 $10 $60 $51 $30
SRX $274 $256 $251 $100 $100 $85 $14 $16 $17 $43 $38 $35 $29 $25 $29 $88 $76 $86
SU $13,905 $12,618 $11,398 $4,478 $4,695 $4,924 $1,401 $1,513 $1,634 $4,145 $3,730 $3,357 $1,134 $1,088 $1,075 $2,748 $1,591 $407
TOU $4,008 $3,393 $2,844 $1,185 $1,315 $1,455 $269 $291 $315 $943 $849 $764 $403 $235 $77 $1,208 $704 $232
TVE $592 $508 $466 $225 $225 $225 $31 $34 $37 $103 $93 $84 $58 $39 $30 $174 $117 $90
VET $1,288 $1,025 $890 $477 $512 $549 $77 $83 $90 $156 $140 $126 $248 $73 $31 $331 $218 $93
WCP $1,697 $1,468 $1,289 $560 $571 $583 $138 $149 $161 $366 $329 $297 $308 $105 $212 $324 $313 $36
YGR $186 $161 $151 $85 $87 $88 $10 $11 $12 $11 $10 $9 $33 $13 $10 $47 $40 $31
Total $77,548 $69,377 $62,908 $22,665 $23,486 $24,236 $6,584 $7,136 $7,718 $19,021 $17,410 $15,592 $11,366 $8,756 $7,331 $17,914 $12,594 $8,173
Strip pricing as of 2021-10-07; Restricted on TPZ
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Appendix 1: Assumptions (2/2)

CFPS ($/sh) D/CF (x) Net Debt ($mln) Payout (%) PPS Growth (%) EV/DACF (x)
2022E 2023E 2024E 2022E 2023E 2024E 2022E 2023E 2024E 2022E 2023E 2024E 2022E 2023E 2024E 2022E 2023E 2024E
AAV $2.33 $2.10 $2.21 0.0x -0.3x -0.5x -$5 -$94 -$167 42% 54% 58% 19% 13% 13% 2.7x 2.8x 2.5x
ARX $4.59 $4.76 $4.96 0.1x -0.1x -0.3x $450 -$239 -$885 48% 57% 58% 6% 15% 19% 2.6x 2.3x 1.9x
BIR $2.90 $2.64 $2.99 0.0x -0.4x -0.8x $31 -$252 -$510 34% 39% 46% 8% 12% 16% 2.3x 2.2x 1.5x
BTE $1.67 $1.68 $1.69 1.0x 0.8x 0.7x $959 $690 $496 46% 56% 63% 3% 13% 13% 3.0x 2.8x 2.6x
CNQ $14.86 $14.15 $14.39 0.4x 0.2x 0.1x $6,609 $3,120 $708 36% 44% 51% 8% 12% 15% 3.4x 3.4x 3.2x
CR $1.69 $1.70 $1.76 1.0x 0.6x 0.1x $246 $129 $30 32% 36% 39% 24% 13% 13% 2.7x 2.4x 1.9x
CPG $3.79 $3.72 $3.66 0.5x 0.3x 0.1x $1,066 $488 $120 46% 54% 62% 4% 12% 12% 2.0x 1.8x 1.6x
CVE $5.29 $5.67 $5.72 0.3x -0.2x -0.7x $2,897 -$2,210 -$6,547 28% 29% 33% 5% 11% 11% 2.7x 2.1x 1.6x
ERF $5.18 $5.18 $5.21 0.2x -0.1x -0.4x $259 -$143 -$442 43% 49% 56% 9% 12% 13% 2.2x 1.9x 1.5x
FRU $1.79 $1.74 $1.75 0.5x 0.5x 0.6x $123 $119 $120 39% 48% 58% 21% 13% 11% 6.4x 6.7x 6.6x
HWX $0.94 $0.86 $0.82 -0.5x -0.7x -0.9x -$100 -$122 -$133 41% 40% 44% 70% 27% 16% 4.1x 4.4x 4.4x
IMO $13.12 $13.17 $13.20 -0.3x -0.7x -1.1x -$2,501 -$5,670 -$8,226 27% 29% 34% 7% 15% 12% 2.8x 2.3x 1.9x
KEL $1.43 $1.38 $1.35 -0.1x -0.2x -0.1x -$36 -$39 -$17 64% 76% 88% 33% 22% 13% 3.1x 3.1x 3.3x
MEG $3.95 $3.99 $3.97 1.2x 0.8x 0.5x $1,477 $921 $536 31% 35% 39% 1% 7% 8% 3.2x 2.8x 2.6x
NVA $2.77 $3.14 $3.31 0.4x 0.1x -0.1x $263 $82 -$64 59% 62% 67% 33% 36% 18% 2.3x 1.8x 1.5x
OVV $19.22 $18.31 $18.15 1.0x 1.0x 1.1x $4,676 $4,062 $3,886 48% 59% 71% -2% 8% 10% 3.1x 3.2x 3.3x
PEY $4.74 $4.46 $4.80 0.9x 0.8x 0.5x $717 $505 $307 44% 52% 54% 12% 14% 13% 2.7x 2.7x 2.4x
PIPE $1.44 $1.45 $1.43 0.1x -0.4x -0.8x $25 -$146 -$284 56% 45% 51% 43% 20% 9% 1.9x 1.4x 1.0x
POU $7.22 $6.66 $6.58 0.1x -0.1x -0.3x $104 -$98 -$220 45% 55% 63% 11% 13% 13% 2.7x 2.7x 2.6x
PSK $1.28 $1.19 $1.17 0.3x 0.4x 0.4x $90 $93 $97 34% 43% 53% 6% 8% 7% 11.8x 12.7x 13.1x
PXT $8.82 $8.69 $8.81 -0.8x -1.1x -1.3x -$793 -$972 -$1,051 42% 50% 58% 26% 15% 13% 1.9x 1.7x 1.4x
SDE $3.62 $4.12 $4.70 0.5x 0.2x -0.2x $304 $101 -$129 56% 55% 53% 26% 23% 18% 2.0x 1.5x 1.0x
SGY $3.62 $3.61 $3.59 0.6x 0.4x 0.2x $164 $97 $56 52% 59% 67% -16% 14% 14% 1.9x 1.7x 1.6x
SRX $2.28 $2.35 $2.54 -0.1x -0.5x -1.0x -$28 -$130 -$244 36% 39% 34% 33% 19% 17% 2.3x 1.9x 1.3x
SU $9.80 $9.86 $9.87 0.4x 0.2x 0.1x $5,455 $2,617 $928 42% 49% 58% 12% 12% 12% 3.1x 2.9x 2.8x
TOU $12.86 $12.08 $11.23 -0.1x -0.4x -0.6x -$437 -$1,424 -$1,783 36% 47% 62% 12% 14% 16% 3.1x 3.0x 3.1x
TVE $1.51 $1.44 $1.46 0.3x 0.0x -0.3x $152 -$4 -$124 38% 44% 48% 14% 11% 14% 2.4x 2.3x 2.0x
VET $8.37 $7.41 $7.14 0.7x 0.6x 0.6x $930 $642 $517 43% 58% 72% 4% 12% 14% 2.2x 2.3x 2.3x
WCP $2.81 $2.70 $2.64 0.2x -0.1x -0.3x $342 -$75 -$324 41% 49% 58% 10% 13% 13% 2.7x 2.5x 2.4x
YGR $2.20 $2.11 $2.18 0.5x 0.3x 0.0x $97 $43 $1 51% 61% 67% 52% 13% 13% 1.3x 1.2x 0.9x
Strip pricing as of 2021-10-07; Restricted on TPZ
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Disclosures
PRICE, RATING AND TARGET HISTORY: I = Initiation, OP = Outperform, SP = Sector Perform, UP = Underperform, UR = Under Review, R = Restricted; (Source: Factset, NBF)
ARC Resources Ltd. Rating History as of 10/13/2021

SP:$13.50 OP:$11.00 OP:$12.00 OP:$10.00 OP:$10.50 OP:$9.00 OP:$8.50 OP:$7.00 OP:$9.00 OP:$10.50 OP:$8.00 OP:$7.00
11/09/2018 12/10/2018 04/08/2019 06/24/2019 07/15/2019 10/01/2019 02/06/2020 03/09/2020 04/22/2020 10/15/2020 11/16/2020 01/05/2021
14
12
10
8
Price (CAD)
6
4
2
Jan 19 Apr 19 Jul 19 Oct 19 Jan 20 Apr 20 Jul 20 Oct 20 Jan 21 Apr 21 Jul 21 Oct 21
OP:$9.00 OP:$13.00 OP:$12.50 OP:$15.00 OP:$13.50 OP:$18.50
02/11/2021 02/18/2021 04/14/2021 05/13/2021 07/19/2021 09/27/2021
Closing Price
Canadian Natural Resources Limited Rating History as of 10/13/2021

OP:$42.00 OP:$49.00 OP:$47.00 OP:$45.00 OP:$43.00 SP:$43.00 SP:$44.00 SP:$42.00 SP:$40.00 SP:$39.00 SP:$30.00 SP:$27.00
12/10/2018 04/08/2019 05/09/2019 06/24/2019 07/15/2019 10/01/2019 11/07/2019 12/04/2019 01/30/2020 03/05/2020 03/09/2020 03/10/2020
60
50
40
Price (CAD)
30
20
10
SP:$25.00 OP:$39.00 OP:$40.00 OP:$35.00 OP:$36.00 OP:$42.00 OP:$41.00 OP:$50.00 OP:$49.00 OP:$66.00 OP:$63.00 OP:$61.00
04/22/2020 06/23/2020 08/06/2020 10/15/2020 12/09/2020 01/05/2021 02/01/2021 02/18/2021 04/14/2021 06/16/2021 07/19/2021 08/05/2021
OP:$70.00
09/27/2021
Closing Price
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Thematic Research
Cenovus Energy Inc. Rating History as of 10/13/2021

OP:$14.50 OP:$14.00 OP:$14.50 OP:$17.50 OP:$19.00 OP:$16.00 OP:$15.50 OP:$16.00 OP:$18.00 OP:$16.50 OP:$16.00 OP:$8.00
12/10/2018 12/11/2018 02/13/2019 04/08/2019 04/24/2019 06/24/2019 07/15/2019 07/25/2019 10/01/2019 01/30/2020 02/12/2020 03/09/2020
16
14
12
10
8
Price (CAD)
6
4
2
03/10/2020 04/02/2020 04/22/2020 06/24/2020 10/15/2020 10/26/2020 01/05/2021 01/28/2021 02/18/2021 04/14/2021 06/16/2021 07/19/2021
OP:$22.00
09/27/2021
Closing Price
Crescent Point Energy Corp. Rating History as of 10/13/2021

OP:$6.50 OP:$8.50 OP:$7.50 R:NM OP:$9.50 OP:$10.00 OP:$9.50 OP:$8.50 OP:$5.00 OP:$4.00 OP:$3.00 OP:$2.25
12/10/2018 04/08/2019 06/24/2019 09/05/2019 10/21/2019 11/14/2019 01/14/2020 01/30/2020 03/09/2020 03/16/2020 04/20/2020 04/22/2020
8
7
6
5
4
Price (CAD)
3
2
1
0
OP:$3.25 OP:$2.50 OP:$3.75 OP:$3.50 OP:$3.75 OP:$5.50 OP:$7.50 OP:$7.00 OP:$11.00 OP:$12.50
06/24/2020 10/15/2020 12/07/2020 01/05/2021 02/01/2021 02/17/2021 02/18/2021 04/14/2021 06/16/2021 09/27/2021
Closing Price
Enerplus Corporation Rating History as of 10/13/2021

12/10/2018 01/25/2019 04/08/2019 05/10/2019 06/24/2019 08/09/2019 01/20/2020 01/30/2020 02/21/2020 03/09/2020 04/22/2020 06/24/2020
16
14
12
10
8
Price (CAD)
6
4
2
0
OP:$5.50 OP:$4.50 OP:$4.75 OP:$5.50 R:NM OP:$7.50 OP:$10.50 OP:$9.50 OP:$10.00 OP:$10.50 OP:$9.50 OP:$14.00
08/07/2020 10/15/2020 11/16/2020 01/05/2021 01/25/2021 02/03/2021 02/18/2021 02/19/2021 04/08/2021 04/14/2021 05/13/2021 06/16/2021
OP:$13.50 OP:$17.00
08/05/2021 09/27/2021
Closing Price
9
Thematic Research
Freehold Royalties Ltd. Rating History as of 10/13/2021

OP:$18.50 OP:$17.00 OP:$10.50 OP:$10.00 OP:$11.00 OP:$10.00 OP:$10.50 SP:$9.50 OP:$9.00 OP:$6.00 OP:$4.50 SP:$4.25
10/17/2018 11/14/2018 12/10/2018 03/07/2019 04/08/2019 06/24/2019 08/01/2019 10/01/2019 01/30/2020 03/09/2020 04/22/2020 06/23/2020
12
10
Price (CAD)
6
2
SP:$4.50 R:NM OP:$7.50 OP:$9.00 OP:$10.00 OP:$11.50 OP:$12.00 R:NM OP:$13.00 OP:$15.00
10/15/2020 11/24/2020 12/09/2020 02/18/2021 05/13/2021 06/16/2021 07/19/2021 09/08/2021 09/22/2021 09/27/2021
Closing Price
Imperial Oil Limited Rating History as of 10/13/2021

SP:$46.00 SP:$42.00 SP:$48.00 SP:$43.00 SP:$45.00 SP:$47.00 SP:$41.00 SP:$37.00 SP:$34.00 SP:$25.00 SP:$29.00 SP:$26.00
10/17/2018 12/10/2018 04/08/2019 05/02/2019 07/15/2019 10/01/2019 11/12/2019 01/30/2020 02/28/2020 03/09/2020 03/10/2020 03/31/2020
45
40
35
30
25
Price (CAD)
20
15
10
SP:$20.00 SP:$30.00 SP:$21.00 SP:$22.00 SP:$30.00 SP:$31.00 SP:$38.00 SP:$33.00 SP:$38.00 SP:$45.00 SP:$49.00
04/22/2020 06/24/2020 10/15/2020 11/19/2020 01/05/2021 02/01/2021 02/18/2021 04/14/2021 05/13/2021 06/16/2021 09/27/2021
Closing Price
MEG Energy Corp. Rating History as of 10/13/2021

SP:$9.50 SP:$6.50 OP:$8.50 OP:$8.00 OP:$9.25 OP:$8.50 OP:$5.25 OP:$5.00 OP:$3.50 OP:$4.50 OP:$3.50 OP:$3.00
12/10/2018 01/17/2019 04/08/2019 06/24/2019 01/16/2020 01/30/2020 03/09/2020 03/11/2020 04/22/2020 06/24/2020 10/15/2020 11/16/2020
12
10
8
6
Price (CAD)
4
2
0
SP:$4.25 SP:$5.50 SP:$8.00 SP:$11.00 SP:$13.50 SP:$15.00 SP:$14.50 SP:$14.00
12/08/2020 01/05/2021 02/18/2021 04/14/2021 06/16/2021 07/19/2021 07/23/2021 09/27/2021
Closing Price
10
Thematic Research
Ovintiv Inc. Rating History as of 10/13/2021

11/02/2018 12/10/2018 04/08/2019 06/24/2019 07/31/2019 10/17/2019 10/31/2019 01/29/2020 01/30/2020 02/20/2020 03/09/2020 04/22/2020
60
50
40
30
Price (USD)
20
10
0
05/08/2020 06/24/2020 07/29/2020 10/15/2020 01/05/2021 02/01/2021 02/18/2021 04/14/2021 05/13/2021 06/16/2021 07/28/2021 09/27/2021
Closing Price
Parex Resources Inc. Rating History as of 10/13/2021

I:OP:$32.00 OP:$31.00 OP:$33.00 OP:$25.00 OP:$26.00 OP:$25.00 OP:$23.00 OP:$19.50 OP:$30.00 OP:$35.00 OP:$34.00 OP:$31.00
07/25/2019 01/30/2020 02/07/2020 03/09/2020 03/11/2020 04/03/2020 10/15/2020 11/16/2020 01/05/2021 02/18/2021 04/15/2021 05/05/2021
30
25
20
Price (CAD)
15
10
5
OP:$30.00 OP:$35.00 OP:$36.00 OP:$34.00 OP:$35.00
05/18/2021 06/16/2021 07/07/2021 08/04/2021 09/27/2021
Closing Price
Peyto Exploration & Development Corp. Rating History as of 10/13/2021

OP:$11.00 OP:$10.00 OP:$10.50 OP:$10.00 OP:$5.00 SP:$4.25 SP:$4.00 SP:$3.00 SP:$2.50 OP:$5.00 OP:$4.00 OP:$5.00
12/10/2018 01/17/2019 04/08/2019 05/07/2019 06/24/2019 10/01/2019 10/17/2019 01/30/2020 03/09/2020 04/22/2020 06/24/2020 10/15/2020
14
12
10
8
6
Price (CAD)
4
2
0
OP:$3.50 OP:$8.00 OP:$8.50 OP:$15.50
01/05/2021 02/18/2021 06/16/2021 09/27/2021
Closing Price
11
Thematic Research
PrairieSky Royalty Ltd. Rating History as of 10/13/2021

OP:$20.00 SP:$20.00 SP:$21.00 SP:$18.50 SP:$17.50 SP:$18.50 SP:$16.50 SP:$16.00 SP:$16.50 SP:$12.00 SP:$11.00 SP:$10.00
12/10/2018 02/11/2019 04/08/2019 06/24/2019 07/15/2019 07/22/2019 10/28/2019 01/30/2020 02/10/2020 03/09/2020 04/22/2020 10/15/2020
25
20
15
Price (CAD)
10
5
SP:$11.50 SP:$12.00 SP:$15.00 SP:$16.50 SP:$20.00
01/05/2021 02/08/2021 02/18/2021 06/16/2021 09/27/2021
Closing Price
Suncor Energy Inc. Rating History as of 10/13/2021

OP:$51.00 OP:$56.00 OP:$65.00 OP:$59.00 OP:$56.00 OP:$55.00 SP:$49.00 SP:$48.00 SP:$47.00 SP:$43.00 SP:$32.00 SP:$36.00
12/10/2018 02/06/2019 04/08/2019 05/02/2019 06/24/2019 07/15/2019 10/01/2019 10/17/2019 10/31/2019 01/30/2020 03/09/2020 03/10/2020
50
45
40
35
30
Price (CAD)
25
20
15
10
SP:$27.00 SP:$23.00 SP:$27.00 SP:$28.00 SP:$21.00 SP:$22.00 SP:$28.00 SP:$33.00 SP:$29.00 SP:$33.00 SP:$42.00 SP:$41.00
03/24/2020 04/22/2020 06/24/2020 07/23/2020 10/15/2020 11/30/2020 01/05/2021 02/18/2021 04/14/2021 05/13/2021 06/16/2021 07/19/2021
SP:$36.00 SP:$39.00
07/29/2021 09/27/2021
Closing Price
Vermilion Energy Inc. Rating History as of 10/13/2021

OP:$61.00 OP:$58.00 OP:$41.00 OP:$40.00 OP:$35.00 OP:$36.00 OP:$28.00 SP:$24.00 SP:$20.00 UP:$17.50 UP:$9.00 UP:$4.75
10/17/2018 10/25/2018 12/10/2018 04/08/2019 06/24/2019 07/15/2019 07/29/2019 10/01/2019 10/31/2019 01/30/2020 03/06/2020 03/09/2020
50
40
30
Price (CAD)
20
10
0
UP:$3.25 SP:$6.00 SP:$8.00 SP:$7.00 SP:$6.00 SP:$5.00 SP:$4.75 SP:$7.00 SP:$6.50 SP:$7.00 SP:$9.50 SP:$10.00
03/16/2020 04/22/2020 05/25/2020 07/27/2020 09/24/2020 10/15/2020 11/16/2020 01/05/2021 01/18/2021 02/01/2021 02/18/2021 04/14/2021
SP:$14.00 SP:$13.50 SP:$18.00
06/16/2021 08/16/2021 09/27/2021
Closing Price
12
Thematic Research
Whitecap Resources Inc. Rating History as of 10/13/2021

12/10/2018 12/18/2018 04/08/2019 06/24/2019 08/26/2019 01/30/2020 03/09/2020 03/17/2020 04/22/2020 06/24/2020 08/31/2020 10/15/2020
8
7
6
5
4
Price (CAD)
3
2
1
0
OP:$4.75 R:NM OP:$8.00 OP:$8.50 OP:$10.00 OP:$9.50 OP:$10.00 OP:$11.00 OP:$12.00
12/07/2020 12/08/2020 02/24/2021 04/05/2021 06/16/2021 07/19/2021 07/29/2021 09/27/2021 10/05/2021
Closing Price
Advantage Energy Ltd. Rating History as of 10/13/2021

12/10/2018 06/24/2019 10/01/2019 01/30/2020 03/09/2020 04/13/2020 04/22/2020 06/24/2020 10/15/2020 01/05/2021 02/18/2021 02/26/2021
7
6
5
4
Price (CAD)
3
2
1
OP:$4.25 OP:$5.50 OP:$9.00
04/14/2021 06/16/2021 09/27/2021
Closing Price
Birchcliff Energy Ltd. Rating History as of 10/13/2021

12/10/2018 02/13/2019 06/24/2019 10/01/2019 01/30/2020 03/09/2020 03/11/2020 04/22/2020 06/24/2020 10/15/2020 01/20/2021 02/18/2021
8
7
6
5
4
Price (CAD)
3
2
1
0
OP:$4.50 OP:$6.25 OP:$10.00
04/14/2021 06/16/2021 09/27/2021
Closing Price
13
Thematic Research
Baytex Energy Corp. Rating History as of 10/13/2021

OP:$4.50 OP:$4.25 OP:$3.25 OP:$2.50 SP:$1.00 SP:$0.50 SP:$0.75 SP:$0.90 SP:$0.75 SP:$1.00 SP:$1.50
12/10/2018 12/17/2018 06/24/2019 01/30/2020 03/09/2020 03/18/2020 06/24/2020 07/30/2020 10/15/2020 01/05/2021 02/18/2021
4.00
3.50
3.00
2.50
2.00
Price (CAD)
1.50
1.00
0.50
0.00
SP:$1.75 SP:$2.00 SP:$3.00 SP:$4.50
02/24/2021 04/29/2021 06/16/2021 09/27/2021
Closing Price
Crew Energy Inc. Rating History as of 10/13/2021

OP:$1.65 OP:$2.00 SP:$1.20 SP:$1.00 SP:$0.50 UP:$0.25 UP:$0.20 UP:$0.30 SP:$0.40 SP:$0.50 SP:$0.60
12/10/2018 12/11/2018 06/24/2019 10/01/2019 01/30/2020 03/09/2020 04/22/2020 06/24/2020 08/06/2020 10/15/2020 12/10/2020
3.50
3.00
2.50
2.00
1.50
Price (CAD)
1.00
0.50
0.00
SP:$0.75 SP:$0.90 SP:$1.50 SP:$2.00 SP:$3.50
01/05/2021 02/01/2021 02/18/2021 06/16/2021 09/27/2021
Closing Price
Headwater Exploration Inc. Rating History as of 10/13/2021

I:OP:$3.00 OP:$3.50 OP:$4.00 OP:$4.50 OP:$5.50 OP:$6.25 OP:$7.00
11/30/2020 01/05/2021 01/27/2021 02/18/2021 05/12/2021 06/16/2021 09/27/2021
5
3
Price (CAD)
0
Closing Price
14
Thematic Research
Kelt Exploration Ltd. Rating History as of 10/13/2021

OP:$8.00 OP:$7.00 OP:$5.50 OP:$6.00 OP:$5.50 OP:$3.50 OP:$2.50 OP:$2.25 SP:$2.00 SP:$2.25 OP:$2.50 OP:$2.25
12/10/2018 10/01/2019 11/08/2019 01/30/2020 02/20/2020 03/09/2020 03/17/2020 04/22/2020 05/07/2020 06/24/2020 07/23/2020 11/10/2020
8
7
6
5
4
Price (CAD)
3
2
1
0
OP:$2.50 OP:$3.25 OP:$4.00 OP:$4.50 OP:$5.00 OP:$7.00
01/05/2021 02/18/2021 03/11/2021 05/25/2021 06/16/2021 09/27/2021
Closing Price
NuVista Energy Ltd. Rating History as of 10/13/2021

OP:$11.50 OP:$8.00 OP:$7.25 OP:$6.00 OP:$5.25 OP:$4.00 OP:$3.50 OP:$1.85 SP:$1.00 SP:$1.25 SP:$2.50 OP:$3.00
11/12/2018 12/10/2018 05/07/2019 06/24/2019 10/01/2019 01/30/2020 03/04/2020 03/09/2020 04/22/2020 01/05/2021 02/18/2021 02/25/2021
8
7
6
5
4
Price (CAD)
3
2
1
0
SP:$3.00 SP:$4.25 SP:$6.75
04/14/2021 06/16/2021 09/27/2021
Closing Price
Pipestone Energy Corp. Rating History as of 10/13/2021

I:OP:$3.50 OP:$2.75 OP:$2.00 SP:$1.00 SP:$0.75 OP:$0.85 SP:$0.85 SP:$1.50 SP:$2.50 SP:$3.25 SP:$4.00
01/10/2019 06/24/2019 01/30/2020 03/09/2020 04/22/2020 08/05/2020 10/15/2020 02/10/2021 02/18/2021 06/16/2021 09/27/2021
3.50
3.00
2.50
2.00
1.50
Price (CAD)
1.00
0.50
0.00
Closing Price
15
Thematic Research
Paramount Resources Ltd. Rating History as of 10/13/2021

OP:$20.00 OP:$11.75 SP:$10.00 SP:$7.25 SP:$8.50 SP:$8.00 SP:$7.00 SP:$4.75 UP:$2.00 UP:$1.25 UP:$1.50 UP:$1.75
11/08/2018 12/10/2018 03/07/2019 06/24/2019 06/28/2019 11/07/2019 01/30/2020 03/04/2020 03/09/2020 04/22/2020 06/24/2020 08/06/2020
25
20
15
Price (CAD)
10
0
SP:$3.00 SP:$3.75 SP:$7.00 SP:$10.50 SP:$13.50 SP:$14.00 SP:$18.00 SP:$19.00 OP:$28.00 SP:$19.00
10/15/2020 11/05/2020 01/05/2021 02/08/2021 02/18/2021 05/05/2021 06/16/2021 08/04/2021 09/27/2021 09/27/2021
Closing Price
Spartan Delta Corp. Rating History as of 10/13/2021

I:OP:$5.00 OP:$6.00 R:NM OP:$6.00 OP:$6.75 OP:$7.25 OP:$8.00 R:NM OP:$8.00 OP:$10.00
06/05/2020 01/06/2021 02/16/2021 03/08/2021 03/12/2021 05/26/2021 06/16/2021 07/28/2021 08/18/2021 09/27/2021
8
7
6
5
4
Price (CAD)
3
2
1
0
Closing Price
Surge Energy Inc. Rating History as of 10/13/2021

OP:$4.00 OP:$2.50 OP:$2.25 R:NM OP:$2.25 OP:$1.75 OP:$1.50 SP:$0.65 SP:$0.50 SP:$0.40 SP:$0.50 SP:$0.40
10/25/2018 12/10/2018 01/14/2019 04/17/2019 05/08/2019 06/24/2019 01/30/2020 03/09/2020 04/14/2020 04/22/2020 06/24/2020 10/15/2020
25
20
15
Price (CAD)
10
0
SP:$0.50 SP:$0.75 OP:$0.90 SP:$0.90 R:NM SP:$0.90 SP:$1.00 R:NM SP:$1.00 SP:$8.50 SP:$9.00
01/05/2021 02/18/2021 03/05/2021 04/14/2021 04/28/2021 05/13/2021 06/16/2021 06/22/2021 08/18/2021 08/23/2021 10/04/2021
Closing Price
8.5:1 share consolidation effective August 20, 2021.
16
Thematic Research
Storm Resources Ltd. Rating History as of 10/13/2021

SP:$3.25 OP:$2.75 OP:$2.25 OP:$2.00 OP:$2.25 OP:$2.00 SP:$1.25 SP:$1.75 SP:$2.00 OP:$2.50 SP:$3.00 SP:$2.75
12/10/2018 06/24/2019 08/14/2019 11/12/2019 01/30/2020 02/28/2020 03/09/2020 04/22/2020 05/13/2020 08/10/2020 10/15/2020 11/11/2020
7
6
5
4
3
Price (CAD)
2
1
0
SP:$3.00 SP:$4.00 SP:$4.50 SP:$5.00 SP:$7.50
01/05/2021 02/18/2021 05/13/2021 06/16/2021 09/27/2021
Closing Price
Topaz Energy Corp. Rating History as of 10/13/2021

I:OP:$18.00 OP:$17.00 OP:$18.00 R:NM OP:$18.00 OP:$20.00 R:NM
11/13/2020 01/05/2021 02/18/2021 05/18/2021 06/08/2021 07/08/2021 10/05/2021
18
17
16
15
Price (CAD)
14
13
12
Closing Price
Tourmaline Oil Corp. Rating History as of 10/13/2021

OP:$29.00 OP:$30.00 OP:$25.00 OP:$23.50 OP:$22.00 OP:$21.00 OP:$17.00 OP:$20.00 OP:$22.50 R:NM OP:$30.00 OP:$32.50
12/10/2018 01/15/2019 06/24/2019 07/31/2019 11/06/2019 01/30/2020 03/09/2020 04/22/2020 05/06/2020 09/25/2020 10/21/2020 11/05/2020
50
40
30
Price (CAD)
20
10
0
OP:$30.00 OP:$37.50 OP:$40.00 OP:$45.00 OP:$57.50
01/05/2021 02/18/2021 06/11/2021 09/22/2021 09/27/2021
Closing Price
17
Thematic Research
Yangarra Resources Ltd. Rating History as of 10/13/2021

OP:$8.75 OP:$6.00 OP:$5.50 OP:$5.00 OP:$3.75 OP:$2.75 OP:$2.50 OP:$1.75 OP:$1.50 SP:$0.65 SP:$0.50 SP:$0.75
11/07/2018 12/10/2018 01/07/2019 06/24/2019 10/01/2019 10/30/2019 01/30/2020 02/06/2020 03/05/2020 03/09/2020 04/01/2020 06/24/2020
5
Price (CAD)
2
0
SP:$0.90 SP:$1.00 SP:$1.50 SP:$2.00 SP:$2.50
12/11/2020 01/05/2021 02/18/2021 06/16/2021 09/27/2021
Closing Price
RISKS:
ARX
Commodity Price Risk: Fluctuations in global and local commodity prices, in addition to foreign exchange rates, can have material, adverse impacts on operations, financial condition and reserves
value. A decline in commodity prices presents the greatest single direct risk to a company’s revenue, cash flow and earnings.
Operational Risk: Oil and natural gas development involves a high degree of risk, which is managed through a combination of experience, knowledge and careful evaluation. There is no assurance
that expenditures made on exploration and development will result in new discoveries or commercial quantities of oil and gas. As well, existing production and processing activities can be impacted
by unforeseeable events that can negatively impact production and cash flow. Additionally, controls and regulations may be imposed and amended from all levels of government, presenting immediate
material impacts to companies in some cases.
Changes to production deliverability: As ARC’s Attachie asset is currently in the early stage of development, adverse changes to well performance, largely in terms of production deliverability and
declines, could have material impacts on the future profitability of this asset.
CNQ
Lack of Integration: Canadian Natural has elevated exposure to commodity price volatility compared with its peers as it currently does not own substantial refining capacity relative to its production,
and additionally, it does not use hedging as an alternative form of downside protection.
Environmental Spill: As the company owns and operates a large number of older legacy assets, the risk is typically higher for an environmental spill. In addition to any associated clean-up costs and
fines, an environmental incident can also damage the company’s reputation and standing to the public.
CVE
Heavy Oil Exposure: Cenovus’s upstream heavy production outpaces downstream refining capacity, resulting in additional exposure to a widening light/heavy differential.
CPG
18
Thematic Research
Changes to production deliverability: As Crescent Point drills many wells to sustain and grow its production volumes, adverse changes to well performance, largely in terms of production deliverability
and declines, can have material negative impacts on the future profitability of the company and its assets.
ERF
Market Access: Market access constraints in North Dakota, which have historically impacted oil prices related to limited pipeline capacity, could have sudden and drastic cash flow impacts on Enerplus’s
core North Dakota Bakken asset.
FRU
Market access: Market access constraints in Western Canada, affecting both oil and natural gas production, can have sudden and drastic impacts on local commodity prices and industry activity.
Changes to Industry Activity: As Freehold collects royalties and does not operate the production across most of its asset base, the company’s cash flow is dependent upon industry activity across
its lands. Changes to industry spending can impact the company’s future cash flows.
IMO
Major Asset Performance and Reliability: Imperial’s major assets, including Cold Lake Syncrude and Kearl, have each been affected by operational and reliability challenges historically. Future
operational issues and asset underperformance could be negative for the company’s shareholders.
MEG
High cash flow sensitivity: MEG retains some of the highest sensitivity to commodity prices in our coverage space. While this provides strong torque to the upside, downside is also sensitive to changes
lower in oil prices or Canadian differentials. Given absolute net debt levels remain relatively high, the sensitivity on cash flow and higher costs structure can drive leverage ratios to unsustainable levels
over relatively short periods of weak commodity prices.
OVV
19
Thematic Research
Market Access: Market access constraints in the Permian, which have historically impacted both oil and gas prices related to limited pipeline capacity, can have sudden and drastic cash flow impacts
on Ovintiv’s Permian asset. Ovintiv has historically partially mitigated this risk through hedging and marketing contracts.
PXT
Changes to production deliverability: Adverse changes to well performance, largely in terms of production deliverability and declines, can have material negative impacts on the future profitability
of a company and its assets.
Exploration Risk: Oil and natural gas exploration involves a high degree of risk, which is managed through a combination of experience, knowledge and careful evaluation. There is no assurance that
expenditures made on exploration will result in new discoveries or commercial quantities of oil and gas.
PEY
NGTL System Downtime: A significant portion of Peyto’s natural gas volumes flow on TC Energy’s NGTL system, which has historically experienced sudden and prolonged operational downtime due
to planned and unplanned maintenance activity. Sudden changes to operational conditions can have immediate impacts to Peyto’s production volumes.
PSK
Market access: Market access constraints in Western Canada, affecting both oil and natural gas production, can have sudden and drastic impacts on local commodity prices and industry activity.
Changes to Industry Activity: As PrairieSky collects royalties and does not operate the production across its asset base, the company’s cash flow is dependent upon industry activity across its lands.
Changes to industry spending can impact the company’s future cash flows.
SU
Syncrude Performance and Reliability: Syncrude, which represents a sizeable portion of Suncor’s portfolio, has been historically affected by operational and reliability challenges. Future operational
issues and asset underperformance could be negative for the company’s shareholders.
VET
value. A decline in commodity prices presents the greatest single direct risk to the company’s revenue, cash flow and earnings.
International Assets: Vermilion operates in several international jurisdictions, which can be subject to changing regulatory, government and environmental policies.
20
Thematic Research
WCP
Market access: As a large Western Canada-focused oil producer, market access constraints, affecting both oil and natural gas production, can have sudden and drastic impacts on Whitecap’s cash flows.
AAV
Commodity Prices: Fluctuations in global and local commodity prices, in addition to foreign exchange rates, can have material, adverse impacts on operations, financial condition and reserves value.
A decline in commodity prices presents the greatest single direct risk to a company’s revenue, cash flow and earnings.
Operational/Regulatory: Oil and natural gas development involves a high degree of risk, which is managed through a combination of experience, knowledge and careful evaluation. There is no assurance
Gathering and Processing Facilities and Pipeline Systems: Lack of capacity and/or constraints on gathering and processing facilities and pipeline systems may have a negative impact on the
Corporation's ability to produce and sell its oil and natural gas.
BIR
BTE
Non-Operated Assets: The company is not the operator of its drilling locations in the Eagle Ford, and therefore, not able to control the timing of development, associated costs or the rate of production
on the subject properties.
CR
Gathering and Processing Facilities and Pipeline Systems: Lack of capacity and/or constraints on gathering and processing facilities, pipeline systems, and in certain circumstances rail, may have
a negative impact on the Corporation's ability to produce and sell its oil and natural gas.
HWX
21
Thematic Research
Major Shareholder Risk: Additionally, major shareholders that may hold a substantial proportion of the company’s outstanding shares can also present risk to liquidity, cost of capital and capitalization
of the company. In HWX case, CVE is a 26% (31% fully diluted) shareholder, and while its interests are aligned, could present an overhang to the stock through its own strategic interests (orientation
of the company or need to crystalize its interests).
Clearwater Risks: While the project holds substantially positive attributes, as with all elements of the exploration and production business, this play holds inherent risk, which we primarily highlight through
WCS differentials, sulphur content, infrastructure support, solution gas drive, land access and structure & geology (in-depth understanding of the aforementioned can be found within our initiation report).
Operational Risk: Oil and natural gas exploration involves a high degree of risk, which is managed through a combination of experience, knowledge and careful evaluation. There is no assurance
that expenditures made on exploration will result in new discoveries or commercial quantities of oil and gas. As well, existing production and processing activities can be impacted by unforeseeable
events that can negatively impact production and cash flow levels. HWX’s has a meaningful orientation towards exploration investment, which in addition to ongoing validation of EOR response, will
comprise the key sources of risk to our outlook.
KEL
NVA
PIPE
POU
SDE
22
Thematic Research
SGY
SRX
TPZ
Execution of the Strategy: The value of its assets & strategy will be predicated on its ability to execute continued growth, principally targeting diversification (jurisdiction, counterparty, commodity) and
quality (counterparty & take-or-pay). Deal flow may not be readily accessible in a timely fashion and could cause a drag to sentiment and value.
Concentration Risk: As it sits, TOU is the major underlying counterparty, and will predicate the majority of its embedded growth strategy but could in specific situations prove an impediment to its outlook
(as growth, optionality & transactions will largely be dictated by TOU; i.e., take-or-pays & activity distribution).
Tourmaline Share Overhang: Given the significance of TOU’s holdings, and the competing opportunities to expand its interest (future dropdowns) relative to its ultimate goal to reduce its interest, there
could be material blocks of stock available at various intervals of time, which may or may not be affiliated with an accretive transaction, subject to the needs of the parent company, and could present
overhang to the stock and risk to its cost of capital.
TOU
TVE
23
Thematic Research
Surface Conditions: Oil and gas industry operations are affected by road bans imposed from time to time during the winter break-up and thaw period in the spring. Road bans are also imposed due to
snow, mud and rock slides and periods of high water or wildfires which can restrict access to well sites and production facilities.
YGR
Changes to production deliverability: Adverse changes to well performance, largely in terms of production deliverability and declines, can have material negative impacts on the future profitability
of a company and its assets.
ADDITIONAL COMPANY RELATED DISCLOSURES

ARC Resources Ltd. 2, 3, 4, 5, 7, 9
Advantage Energy Ltd. 2, 3, 5, 7, 10
Baytex Energy Corp. 2, 3, 5, 6, 7
Birchcliff Energy Ltd. 2, 3, 5, 7, 10
Canadian Natural Resources Limited 2, 3, 4, 5, 7, 9
Cenovus Energy Inc. 2, 3, 5, 6, 7, 10
Crescent Point Energy Corp. 2, 3, 5, 6, 7
Crew Energy Inc. 2, 3, 5, 7
Enerplus Corporation 2, 3, 4, 5, 7, 9
Freehold Royalties Ltd. 2, 3, 4, 5, 7
Headwater Exploration Inc. 2, 3, 5, 7
Imperial Oil Limited
Kelt Exploration Ltd. 2, 3, 5, 7
MEG Energy Corp.
NuVista Energy Ltd.
Ovintiv Inc. 10
Paramount Resources Ltd. 2, 3, 5, 7
Parex Resources Inc.
Peyto Exploration & Development Corp. 2, 3, 5, 7
Pipestone Energy Corp. 2, 3, 5, 7, 10
PrairieSky Royalty Ltd. 2, 3, 5, 7
Spartan Delta Corp. 2, 3, 4, 5, 7
Storm Resources Ltd. 10
Suncor Energy Inc. 2, 3, 5, 7, 9
Surge Energy Inc. 2, 3, 4, 5, 6, 7, c_adhoc
Tamarack Valley Energy Ltd. 2, 3, 4, 5, 6, 7
Topaz Energy Corp. 2, 3, 4, 5, 7
Tourmaline Oil Corp. 2, 3, 4, 5, 7
Vermilion Energy Inc. 2, 3, 5, 6, 7, 10
Whitecap Resources Inc. 2, 3, 5, 6, 7, 9
Yangarra Resources Ltd. 2, 3, 5, 7
LEGEND FOR COMPANY RELATED DISCLOSURES:
2 National Bank Financial Inc. has acted as an underwriter with respect to this issuer within the past 12 months.
3 National Bank Financial Inc. has provided investment banking services for this issuer within the past 12 months.
4 National Bank Financial Inc. or an affiliate has managed or co-managed a public offering of securities with respect to this issuer within the past 12 months.
5 National Bank Financial Inc. or an affiliate has received compensation for investment banking services from this issuer within the past 12 months.
6 National Bank Financial Inc. or an affiliate has a non-investment banking services related relationship during the past 12 months.
7 The issuer is a client, or was a client, of National Bank Financial Inc. or an affiliate within the past 12 months.
8 National Bank Financial Inc. or its affiliates expects to receive or intends to seek compensation for investment banking services from this issuer in the next 3 months.
9 As of the end of the month immediately preceding the date of publication of this research report (or the end of the second most recent month if the publication date is less than 10 calendar days after
the end of the most recent month), National Bank Financial Inc. or an affiliate beneficially own 1% or more of any class of common equity securities of this issuer.
10 National Bank Financial Inc. makes a market in the securities of this issuer, at the time of this report publication.
11 A partner, director, officer or research analyst involved in the preparation of this report has, during the preceding 12 months provided services to this issuer for remuneration other than normal
course investment advisory or trade execution services.
24
Thematic Research
12 A research analyst, associate or any other person (or a member of their household) directly involved in preparing this report has a financial interest in the securities of this issuer.
13 A partner, director, officer, employee or agent of National Bank Financial Inc., is an officer, director, employee of, or serves in any advisory capacity to the issuer.
14 A member of the Board of Directors of National Bank Financial Inc. is also a member of the Board of Directors or is an officer of this issuer.
15 A redacted draft version of this report has been shown to the issuer for fact checking purposes and changes may have been made to the report before publication.
RATING DISTRIBUTION
Outperform Sector Perform Underperform
Coverage Universe Ratings Distribution 66% 32% 0%
Investment Banking Distribution 73% 65% 100%
DISCLOSURES
Ratings And What They Mean: PRIMARY STOCK RATING: NBF has a three-tiered rating system that is relative to the coverage universe of the particular analyst. Here is a brief description of each:
Outperform (OP) – The stock is expected to outperform the analyst’s coverage universe over the next 12 months; Sector Perform (SP) – The stock is projected to perform in line with the sector over
the next 12 months; Underperform (UP) – The stock is expected to underperform the sector over the next 12 months. SECONDARY STOCK RATING: Under Review (UR) − Our analyst has withdrawn
the rating because of insufficient information and is awaiting more information and/or clarification; Tender (T) − Our analyst is recommending that investors tender to a specific offering for the company’s
stock; Restricted (R) − Because of ongoing investment banking transactions or because of other circumstances, NBF policy and/or laws or regulations preclude our analyst from rating a company’s stock.
INDUSTRY RATING: NBF has an Industry Weighting system that reflects the view of our Economics & Strategy Group, using its sector rotation strategy. The three-tiered system rates industries as
Overweight, Market Weight and Underweight, depending on the sector’s projected performance against broader market averages over the next 12 months. RISK RATING: As of June 30, 2020, National
Bank Financial discontinued its Below Average, Average and Above Average risk ratings. We continue to use the Speculative risk rating which reflects higher financial and/or operational risk.
GENERAL: This Report was prepared by National Bank Financial Inc. (NBF), a Canadian investment dealer, a dealer member of IIROC and an indirect wholly owned subsidiary of National Bank of
Canada. National Bank of Canada is a public company listed on the Toronto Stock Exchange.
The particulars contained herein were obtained from sources which we believe to be reliable but are not guaranteed by us and may be incomplete and may be subject to change without notice. The
information is current as of the date of this document. Neither the author nor NBF assumes any obligation to update the information or advise on further developments relating to the topics or securities
discussed. The opinions expressed are based upon the author(s) analysis and interpretation of these particulars and are not to be construed as a solicitation or offer to buy or sell the securities mentioned
herein, and nothing in this Report constitutes a representation that any investment strategy or recommendation contained herein is suitable or appropriate to a recipient’s individual circumstances. In all
cases, investors should conduct their own investigation and analysis of such information before taking or omitting to take any action in relation to securities or markets that are analyzed in this Report.
The Report alone is not intended to form the basis for an investment decision, or to replace any due diligence or analytical work required by you in making an investment decision.
This Report is for distribution only under such circumstances as may be permitted by applicable law. This Report is not directed at you if NBF or any affiliate distributing this Report is prohibited or
restricted by any legislation or regulation in any jurisdiction from making it available to you.
National Bank of Canada Financial Markets is a trade name used by National Bank Financial Inc. and National Bank of Canada Financial Inc.
RESEARCH ANALYSTS: The Research Analyst(s) who prepared these reports certify that their respective report accurately reflects his or her personal opinion and that no part of his/her compensation
was, is, or will be directly or indirectly related to the specific recommendations or views as to the securities or companies.
NBF compensates its Research Analysts from a variety of sources. The Research Department is a cost centre and is funded by the business activities of NBF including Institutional Equity Sales and
Trading, Retail Sales, the correspondent clearing business, and Corporate and Investment Banking. Since the revenues from these businesses vary, the funds for research compensation vary. No one
business line has a greater influence than any other for Research Analyst compensation.
CANADIAN RESIDENTS: NBF or its affiliates may engage in any trading strategies described herein for their own account or on a discretionary basis on behalf of certain clients and, as market conditions
change, may amend or change investment strategy including full and complete divestment. The trading interests of NBF and its affiliates may also be contrary to any opinions expressed in this Report.
NBF or its affiliates often act as financial advisor, agent, lender or underwriter or provides trading related services for certain issuers mentioned herein and may receive remuneration for its services. As
well, NBF and its affiliates and/or their officers, directors, representatives, associates, may have a position in the securities mentioned herein and may make purchases and/or sales of these securities
from time to time in the open market or otherwise. NBF and its affiliates may make a market in securities mentioned in this Report. This Report may not be independent of the proprietary interests
of NBF and its affiliates.
NBF is a member of the Canadian Investor Protection Fund.
UK RESIDENTS: This Report is a marketing document. This Report has not been prepared in accordance with EU legal requirements designed to promote the independence of investment research
and it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
In respect of the distribution of this Report to UK residents, NBF has approved the contents (including, where necessary, for the purposes of Section 21(1) of the Financial Services and Markets Act
2000). This Report is for information purposes only and does not constitute a personal recommendation, or investment, legal or tax advice.
NBF makes no representation as to the proper characterization of the investments for legal, regulatory or tax purposes, or as to the ability of a particular investor to invest or transact in the investments
under applicable legal restrictions.
25
Thematic Research
If securities are offered by an issuer in a foreign jurisdiction, or the security is structured through a foreign special-purpose-vehicle, or you purchase securities that are issued by foreign issuers, your
investment and continued holding of securities may be subject to the laws and regulations of more than one jurisdiction. There may be differences in legal and regulatory regimes across different
jurisdictions which may significantly impact the legal and regulatory risks affecting the investment sector and / or investment.
NBF and/or its parent and/or any companies within or affiliates of the National Bank of Canada group and/or any of their directors, officers and employees may have or may have had interests or long or
short positions in, and may at any time make purchases and/or sales as principal or agent, or may act or may have acted as market maker in the relevant investments or related investments discussed
in this Report, or may act or have acted as investment and/or commercial banker with respect hereto. The value of investments, and the income derived from them, can go down as well as up and you
may not get back the amount invested. Past performance is not a guide to future performance. If an investment is denominated in a foreign currency, rates of exchange may have an adverse effect on
the value of the investment. Investments which are illiquid may be difficult to sell or realise; it may also be difficult to obtain reliable information about their value or the extent of the risks to which they are
exposed. Certain transactions, including those involving futures, swaps, and other derivatives, give rise to substantial risk and are not suitable for all investors. The investments contained in this Report
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Oil, Gas & Consumable Fuels: We've Got A Fever and The Only Prescription Is..

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NBCFM Research | Thematic Research

October 13, 2021

This Time Is Different...so Far...

Within This Note, We Look At:

Leverage Is Still the Short-Term Focus

Research: NBCFM Energy

Associate Baltej Sidhu

Associate Logan Fisher

Patience Will Be Rewarded

Exhibit 1: NBF Coverage Universe; Leverage Targets

Strip pricing as of 2021-10-07

Exhibit 2: Capital Allocation Frameworks

Exhibit 3: Relative Performance vs. SPSTEN Index Post Announcement

Exhibit 4: Cumulative Shareholder Returns (2022-2024)

Source: NBF, Company Reports

Exhibit 5: Historical Canadian E&P Valuations

Seniors/Integrated CAN Oil CAN Gas

Source: NBF, Bloomberg

Exhibit 6: 2022E Maintenance Sustaining Ratio vs. DAFCF Yield

Appendix 1: Assumptions (1/2)

Appendix 1: Assumptions (2/2)

ARC Resources Ltd. Rating History as of 10/13/2021

Canadian Natural Resources Limited Rating History as of 10/13/2021

Cenovus Energy Inc. Rating History as of 10/13/2021

Crescent Point Energy Corp. Rating History as of 10/13/2021

Enerplus Corporation Rating History as of 10/13/2021

Freehold Royalties Ltd. Rating History as of 10/13/2021

Imperial Oil Limited Rating History as of 10/13/2021

MEG Energy Corp. Rating History as of 10/13/2021

Ovintiv Inc. Rating History as of 10/13/2021

Parex Resources Inc. Rating History as of 10/13/2021

Peyto Exploration & Development Corp. Rating History as of 10/13/2021

PrairieSky Royalty Ltd. Rating History as of 10/13/2021

Suncor Energy Inc. Rating History as of 10/13/2021

Vermilion Energy Inc. Rating History as of 10/13/2021

Whitecap Resources Inc. Rating History as of 10/13/2021

Advantage Energy Ltd. Rating History as of 10/13/2021

Birchcliff Energy Ltd. Rating History as of 10/13/2021

Baytex Energy Corp. Rating History as of 10/13/2021

Crew Energy Inc. Rating History as of 10/13/2021

Headwater Exploration Inc. Rating History as of 10/13/2021

Kelt Exploration Ltd. Rating History as of 10/13/2021

NuVista Energy Ltd. Rating History as of 10/13/2021

Pipestone Energy Corp. Rating History as of 10/13/2021

Paramount Resources Ltd. Rating History as of 10/13/2021

Spartan Delta Corp. Rating History as of 10/13/2021

Surge Energy Inc. Rating History as of 10/13/2021

8.5:1 share consolidation effective August 20, 2021.

Storm Resources Ltd. Rating History as of 10/13/2021

Topaz Energy Corp. Rating History as of 10/13/2021

Tourmaline Oil Corp. Rating History as of 10/13/2021

Yangarra Resources Ltd. Rating History as of 10/13/2021

ADDITIONAL COMPANY RELATED DISCLOSURES

LEGEND FOR COMPANY RELATED DISCLOSURES:

Outperform Sector Perform Underperform

Coverage Universe Ratings Distribution 66% 32% 0%

Investment Banking Distribution 73% 65% 100%

NBF is a member of the Canadian Investor Protection Fund.

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