Industry Update Oil and Gas, Exploration and Production 22 July 2020 Canaccord Genuity Corp. (Canada) Energy ESG themes Anthony Petrucci| Analyst - 1.403.691.7807 [email protected] John Bereznicki, CFA| Analyst - 1.403.691.7805 Key themes impacting the sector [email protected] The Canadian energy sector is composed of the upstream, midstream and downstream Nathan Croswell, CPA| Associate - 1.403.691.7812 sectors. While we believe each of these subsectors has somewhat different ESG [email protected] priorities, we nonetheless believe environmental considerations have become the focal Pulkit Sabharwal, MBA| Associate - 1.403.508.3837 [email protected] point for most energy sector stakeholders in recent years. More specifically, we see greenhouse gas emissions, protection of surrounding habitat, and water usage as three Myles Jenken| Associate - 1.403.691.7806 [email protected] of the most significant environmental considerations now facing the domestic energy sector. Beyond environmental considerations, we believe community engagement (particularly with Indigenous stakeholders) has also become critical to the long-term viability of the Canadian energy sector. In addition, we view the ongoing recruitment and development of a diverse and well-trained workforce as critical to the health of Canadian Company Rating Price Target energy. Based on our dialogue with institutional shareholders, we also believe senior Oil and Gas, Exploration and Production management and independent board teams that reflect a broad range of backgrounds VII-TSX Hold C$3.15 C$3.50 and skillsets are key to attracting capital to the industry in the longer term. Oilfield Services SES-TSX Hold C$1.62 C$2.00 How we measure company performance Pipelines, Power and Utilities Regarding environmental considerations, we can measure E&P performance in part by GEI-TSX Buy C$21.50 C$26.00 analyzing greenhouse gas emissions (GHG) intensity, which is calculated by dividing a Priced as of close of business 20 July 2020 company’s total GHG emissions on a tonnes of CO2 equivalent basis by the company’s production. This method adjusts for the size of the company and brings the focus onto the nature of the asset and the efforts of each firm to reduce GHG emissions intensity. Social and governance issues remain a major priority for companies under our coverage, with most undertaking initiatives to promote accountability, diversity and community engagement. However, while we believe that these measures are key to attracting investors in the long term, we remain cognizant of the challenges associated with measuring performance across companies for these metrics. Given these challenges, we believe investors should lean toward companies that have outlined specific social and governance goals, and have demonstrated progress in achieving these goals. Which companies are doing it best? Conventional E&P: Most E&P companies under our coverage have explicitly defined ESG goals and/or have disclosures including sustainability reports. Within our coverage universe, we highlight Seven Generations Energy for recently receiving Equitable Origin’s certification as a responsible natural gas producer and consequently being awarded a contract with Quebec’s largest natural gas distributor, Energir s.e.c. Further to this, the company is a signatory of the 30% club and has one the lowest GHG emissions intensities in our coverage universe. Oilfield: About half the constituents of our oilfield coverage universe published 2019 sustainability reports. Of these, Secure Energy Services has materially reduced its GHG intensity since 2016 and has articulated its goal of further lowering this figure 50% by 2030. In addition, the company’s new Pipestone water disposal facility has displaced more than 1,000 truckloads of waste since opening in October 2019. Midstream: In our view, most of the companies in our midstream coverage universe have well-developed ESG disclosure and targets. We note Gibson Energy has made a strategic investment at its Moose Jaw Facility to reduce the intensity of GHG emissions by installing innovative thermal heat exchanger technology and is preparing its first submission to the Carbon Disclosure Project. Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX) The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all the companies and securities that are the subject of this report discussed herein. 22 July 2020 5