Spartan Delta Corp. / Energy Focus

S PA R TA N D E LTA

SPARTAN DELTA CORP

Strategy Success for Canada’s Rising Spartan PRODUCTION: Christina Allcock

Spartan Delta Corp. is building strong foundations in Canada’s Western Sedimentary Basin, acquiring a portfolio of companies that will be developed into value creating assets for shareholders. With a diverse leadership team, and a focus on social and community upliftment, this is a sustainable business set for a long-term future in Canada’s energy markets. www.energy-focus.net / 69

INDUSTRY FOCUS: OIL & GAS

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With so much disruption, disturbance, disparity, and distraction in the global energy market, growth and success require experience, patience, and calm. With an increasingly connected world throwing up unpredictable events at a seemingly faster rate, the success of a business can be impacted overnight.

This is especially true in the energy market where oil pricing has been on a rollercoaster ride, dipping into negative numbers and then booming again in the space of weeks and months. There is an energy transition underway, but most with any connection to the sector understand that fossil fuels will not be completely replaced anytime soon.

According to the US Energy Information Administration, just 12% of the energy mix comes from renewable sources, and in Canada around 25% is sourced from renewables (mainly hydro) and nuclear. Oil is mainly used as a transportation fuel and the prime use for natural gas is for fuel, heating, and electricity generation.

In Canada, Spartan Delta Corp

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– a modern energy company with a range of producing assets – is riding the waves in this volatile global energy cycle. Run by a team of highly experienced executives, this is a company that has managed to get timing just right, avoiding most of the disorder to create a sustainable business that is now aiming for organic growth that will drive shareholder value.

Previously, Spartan was known as Return Energy Inc. before a reorganisation and investment agreement saw the management team rename to Spartan Delta Corp, following on from a successful operation where they led Spartan Energy Corp in oil plays in Saskatchewan, growing from 625 boe/d to 23,000 boe/d in just four years, before selling to Vermilion.

Prior to this, the team led Spartan Oil in Alberta, and Spartan Exploration also in Saskatchewan. Today, the company is headquartered in Calgary and the team continues to thrive.

CFO Gerri Greenall tells

Energy Focus more about this dynamic young brand.

“Spartan Delta came out of the recapitalisation of a 200 boe/d company in December 2019,” she begins, remembering the time just before the pandemic hit, as the team sought to take advantage of depressed commodity prices and lucrative opportunities in Canada’s commercial markets.

The company went from 200 boe/d to 75,000 boe/d after 10 acquisitions, through a time when many closed doors.

“We went from a team of nine original founders to 127 direct employees – we have been very busy of the past two years,” she smiles, “we are proud.”

This is a business that utilises its internal expertise to identify, acquire, and develop diversified assets with the goal of increasing yield through optimisation. Currently operating in the country’s Western Sedimentary Basin, Spartan holds assets in both Montney and Deep Basin, described as ‘the two hottest natural gas plays in Western Canada’.

“Doing any business during a pandemic was challenging given the lockdowns and uncertainties it caused.

We were able to leverage our existing technology platform (we have started our business on cloud software) to effectively work from home and grow our operations. We empowered our employees by trusting them to do their work as they needed to (from home, from the office, or elsewhere) and they did not disappoint,” says Greenall of the core team as well as more than 200 consultants and contractors.

“I’m grateful we were so busy,” she adds. “We worked insanely hard through that period, and we managed to provide new jobs while integrating cultures – it has been fun. It was an exceptional challenge, but we managed to navigate our way through it and we are pretty happy with where we are.”

SPARTAN DELTA CORP

FLAGSHIP ACQUISITIONS Greenall highlights two acquisitions in particular as significant in the company’s journey. In June 2020, Spartan confirmed the acquisition of Bellatrix Exploration.

“The first acquisition we did was 25,000 boe/d out of bankruptcy - we brought on 45 people through Teams and never met them face-to-face,” Greenall says of the unique situation in 2020 where gatherings were banned.

“Bellatrix had been public in Canada but had been in bankruptcy since October 2019. We purchased their assets to give us our first core operating area - the Deep Basin.”

As part of the sale, Spartan gained access to high-quality, multi-zone, oil and gas operated production alongside a large land base and strategic infrastructure footprint.

The company’s view was that there was significant development potential around underexploited and undercapitalised assets that could provide material upside.

In August 2021, Velvet Energy was acquired by Spartan for CAD$750 million, helping the company grow into the market leader (by acreage and production) across Montney.

The company sees great current and future potential here, contributing to the overarching vision of generating returns for shareholders. This acquisition also offers up impact towards a healthy ESG campaign.

“Velvet Energy was a private company that had been in Canada for over a decade, and that gave us our second core area which is Montney.

We also acquired an award-winning water recycling programme within the acquisition which talks nicely about our ESG and Canada being one of the most responsible producers of hydrocarbons.

Those two assets have developed the core around which are now building our business,” details Greenall.

She adds that the company’s environmental focus, like Canada’s, is strong and strict. “Spartan is utilising many strategies to lower emissions.

From simple equipment replacement to larger carbon capture strategies.

We have 400 solar panels installed on our well sites for renewable electricity generation. We have converted 30 locations from fuel gas to solar powered pumps. In addition, all our new wells are equipped with low bleed devices or non-emitting equipment.”

CANADIAN PROGRESS Canada continues to be part of the leading pack in terms of innovation around carbon reduction – especially in energy generation. The country is targeting net zero emissions by 2050 and the government recently committed a new financial package

– reportedly around CAD$9 billion - to cut carbon emissions by 4045% on 2005 figures by 2030.

But the transition in the energy industry is only a part of the puzzle and the sector can contribute positively when managed effectively.

“We believe Canada is already well on this path and Spartan will to contribute towards this goal.

Canada’s emissions intensity has fallen 30% since 2000, ranking it lower than several energyproducing and consuming nations.

“We all care about the environment and our planet, but energy takes people out of poverty, and we still have millions of people suffering from a lack of energy. I believe the current energy crisis will highlight the need for an energy transition that includes hydrocarbons.

The energy industry is a leader at developing technologies that reduce its impact on the environment and will continue to look for solutions to reduce emissions and its environmental impact (like carbon capture and active reclamation projects),” says Greenall.

“Our hydrocarbons are produced

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INDUSTRY FOCUS: OIL & GAS

// OUR HYDROCARBONS ARE PRODUCED AGAINST SOME OF THE HIGHEST STANDARDS IN THE WORLD // against some of the highest standards in the world, we have diversity, we mandate women on the boards, we have indigenous partnerships – the last barrel of oil in the world should come from Canada because we are the most responsible country in the world when it comes to production, as long as you understand that you do need it. From an ESG perspective, Canada is so far ahead of other producing regions of the world,” she adds.

World Bank studies confirm that Canada does produce oil to some of the world’s highest standards, especially around worker’s rights and transparency. A 10% increase in demand for oil is expected by 2040 in emerging markets alone, and a good ESG scorecard is vital when attracting investors. In 2017, Canada was earmarked as a country with one of the largest reserves of natural resources but with an ESG scorecard among the top three globally according to the Environmental Performance Index (EPI), Social Progress Index (SPI), and the World Bank Governance Index (WGI).

Strong democracy and excellent social and environmental consciousness position Canada as a world leader.

COMMUNITY PARTNER Such a fast growth period has seen Spartan go from a small group of founders to a powerful business that impacts the lives of many. Greenall is clear that shareholders and stakeholders, including employees and host communities, all form part of the key strategy and all should benefit from value creation. To ensure this, the company has developed several programs to provide outreach and education, develop talent,

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share in success, and reward staff.

“We have several programs in place with our indigenous partners, some of the highlights from the last few months include a very successful summer student program, plus scholarship funding for indigenous students going on to post-secondary school. Spartan also recently sponsored a Youth First Nation Hockey Tournament, the building of an Elder Sweat Lodge, and social profit pizza program (we sponsored the purchase of a pizza oven where a group of students will make and sell pizzas to Band Members) at a First Nation school,” highlights Greenall.

“Spartan also has very good parental leave (not just maternity) and currently have two men taking advantage of our parental leave program. Spartan has a summer

student program where we source all our summer students from family and friends of employees and our indigenous partners. In 2022, Spartan will employ 14 students for the summer, several from our indigenous partners, and several young women. We are also a proud sponsor of the Warnica Family Graduate Scholarship for female MBA students at the University of Calgary.”

Greenall is a champion for female leadership and progression within organisations, especially in the energy sector. She has excelled in roles across multiple big-name operations, starting as a commodity trader at Enron before moving into equity research in the oil and gas sector, managing CAD$200 million of investments in early-stage energy companies. She also created a wealth management company, and was involved in venture capital investing.

SPARTAN DELTA CORP

The experience garnered across these roles makes for a well-versed CFO able to deal with people as well as balance sheets. She recites advice given to her as a young professional for women looking to build their careers: “Remain curious, continue to learn and put tools in the toolbox, the specific tool may not be completely applicable at the time but having a well-built supplied toolbox is critical for future success.”

FUTURE VALUE CREATION Despite its relatively young status as a brand, Spartan Delta Corp. has a seasoned management team driving towards one single, clear goal: value creation for shareholders. The team has moved through the first two stages of its stagey quickly and successfully, and is entering the important development phase where assets will be optimised for peak production. “Organic growth is definitely the way to create best value right now,” confirms Greenall.

“We have been lucky and our first acquisition was at a point where crude hit -40. Two years later, we are 75,000 boe/d and crude is at 110. In this cycle, we believed we needed to be of material size to be relevant as a producer of energies so we got there quickly. Spartan would like to continue to create value for its shareholders, other capital providers, and the communities in which we operate. We are focused on creating a sustainable business that delivers value.”

While the company is not actively seeking fresh acquisitions right now, there will always be an appetite for relevant opportunities, and Greenall states that Spartan will always have ears to the ground as it looks to add further strength to its portfolio. “We are good at acquisition and that is tough in this price environment,” she says. “You buy assets based on future curves and they are moving so

substantially that it is a challenge, and our ultimate goal is creation of value for our shareholders and stakeholders – our employees and the communities in which we operate. Looking at what is in front of us, the best way to create value is by developing what we have within our inventory right now.”

Having grown faster than most, achieving what would take competitors a decade in just three years and through a global pandemic, the work of Spartan Delta’s team has been remarkable. “Spartan is not a typical oil and gas story. It is a great success story, and we are tremendously lucky,” says Greenall.

She finishes by suggesting that the company will not look too far into the future, and focus on the immediate challenges alongside the holy grail of exceptional shareholder value creation, but all the time realising that developing hydrocarbon-based

// WE ARE GOOD AT ACQUISITION AND THAT IS TOUGH IN THIS PRICE ENVIRONMENT//

assets in a sustainable manner is still important, especially in challenging marketing conditions.

“The energy market is so disruptive and black swan events are more common so it is very hard to say what we will be or what we will look like in five years. Again, it comes back to our goal of creating value for stakeholders and we will follow a path which helps us achieve that – we won’t be limited to one strategy. Given what is in the news right now, the future is so unknown and hard to predict. I believe that the narrative in the world is changing, our industry has been starved of capital - and I am an environmentalist - but the idea that we are going to get away from fossil fuels completely in the next five years is a real challenge. Energy takes people out of poverty and that is very important to understand.”

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