Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Non-Deal Roadshow (July 2012)
48 slides from Peyto Exploration & Development's roadshow presentation, Jul 5, 2012
Slide 1: TD Chicago Roadshow July 2012
2011 ‐ 2003 ‐ 2010 1998 ‐ 2003 www.Peyto.com TD Chicago Roadshow July 2012
Slide 2: Advisory Regarding Forward-Looking Statements
Advisory Regarding Forward-Looking Statements This presentation contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "pr
Slide 3: Peyto Profile
Peyto Profile PEYTO Exploration & Development Corp. N TSX Listing: PEY N Monthly Dividend: $0.06/share N Shares Outstanding: 138 million (6% insider ownership) N Current Production: 250 MMCFe/d (42,000 boe/d) N Q1 2012 Net Debt: $100 million (senior secured notes, 7 yr, 4.39% coupon, Prudential IM)
Slide 4: The Peyto Strategy
The Peyto Strategy Deploy Superior Business Acumen N Deep basin technical expertise N Continuous focus on returns N Internally generated drilling ideas (over 1,100 locations to date) Develop Superior Assets N Operated and geographically concentrated (99% operated and processed) N Longest reserve lif
Slide 5: Superior Shareholder Return
The Peyto Strategy Superior Shareholder Return $40 $35 $30 $25 $20 Shareholder IRR $15 $10 $5 $0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Share Price w/Div Share Price 5 Historical Per Unit and Units Outstanding numbers have been adjusted to reflect the May 27,
Slide 6: Production per Unit or Share Growth
The Peyto Strategy Growth per Share 400 $10 $50 Production per Unit or Share (boe/d per million) $9 350 $8 300 $7 Gas Price ($/GJ) 250 $6 PEY+Div 200 $5 $25 $4 150 $3 100 $2 50 $1 YoY production 0 $- $- growth/share liq prod/share gas prod/share AECO ($/GJ) Share price w/div 6 Historical Per Unit (s
Slide 7: Returns Driven 2011
The Peyto Strategy Returns Driven 250 200 2011 150 Net Capital to PV5 100 50 0 Production/share growth 250 2011 Capital Program 62 Net Wells 200 21,700 boe/d 150 2P Reserves/share growth 100 50 0 IRR 7 Note: liquids are converted to molar equivalent gas volume for this analysis (1 bbl approximately
Slide 8: Peyto's Profitable Business
Peyto’s Profitable Business
Slide 9: Controlling Costs
Peyto’s Profitable Business Controlling Costs Land $25MM PEY 2011A Seismic $3MM Drilling $175MM PDP FD&A Compl. $104MM $/mcfe ($2.12) Wellsite Facilities $32MM $40MM $379MM ∆PDP Reserves (before Prod.) 29.8 mmboes PDP FD&A $12.72/boe $2.12/mcfe Cash Costs $/mcfe ($1.35) Royalties Opex Transport ($0.
Slide 10: Peyto Unhedged Realized Price vs Peers
Peyto’s Profitable Business “Build it for less than you sell it” $8 2011 PP FD&A $6 $/mcfe AECO $4 $10 Monthly $10 $/GJ $2 Peyto Unhedged Realized Price ($/mcfe) Peyto Realized Gas Price ($/mcfe) $8 39% $8 $- Average PRQ* PEYTO ARX PGF BNP ERF NGL CLT FEL* BIR TET BTE PMT ONR NAE CPG PWT VET TOU "Pr
Slide 11: Cost Control Challenges for the Canadian Industry
Peyto’s Profitable Business Cost Control Challenges for the Canadian Industry CND 2011* CND 2010* CND 2009** PDP FD&A $/mcfe ($4.20) ($4.74) ($4.31) Cash Costs $/mcfe ($3.91) ($3.64) ($3.63) Sales Price $/mcfe $7.89 $7.60 $7.27 ($0.68) ($0.78) Loss ($0.22) 11 *Includes: AAV,ARX,BIR,BNP,BTE,CLT,CPG,C
Slide 12: Liquids Rich Gas Streams
Peyto’s Profitable Business Liquids Rich Gas Streams Effective Gas Price per Mcfe (assumes $100/bbl oil) $6 Effective Price ($/Mcfe) $5 $4 Cardium (45 bbl/MMcf sls) Wilrich (7 bbl/MMcf sls) $3 + PP FD&A $2.12/Mcfe Notikewin (10-15 bbl/MMcf sls) $2 Falher (15-17 bbl/MMcf sls) Kakwa Cardium (60 bbl/MM
Slide 13: Peyto's Unique Assets
Peyto’s Unique Assets
Slide 14: Geographically Focused Core Areas
Peyto’s Assets Geographically Focused Core Areas • 313,800 net acres (825,000 net acres for all zones) • 5 operated gas plants ---(340 mmcf/d capacity) Cutbank • 900+ km pipelines • 750+ producing zones Kakwa • 42,000 boe/d Processed by Peyto Chicken Leland 150 miles Pine Creek Greater Sundance Oper
Slide 15: Deep Basin Lands Go A Long Way
Peyto’s Assets Deep Basin Lands Go A Long Way Net Peyto Sections Net Sections of Cardium, Dunvegan, Notikewin, Falher, Wilrich, Bluesky, & Cadomin Net Sections for 2.2 TCFe of 2P EUR 15 TCFe – Trillion Cubic Feet equivalent Lands at December 31, 2011 7/4/2012 Based on InSite Petroleum Consultants (f
Slide 16: Deep Basin Permeability Segregation
Peyto’s Assets Deep Basin Permeability Segregation FOOTHILLS STRUCTURES GAS AS ING INCRE BILITY EA PERM WATER TRANSITION ZONE WATER GAS ASE INCRE AREA OF GAS DEPTH MATURATION 16 7/4/2012
Slide 17: Applying Hz Technology to Tight Deep Basin Sands
Peyto’s Assets Applying Hz Technology to Tight Deep Basin Sands Up to per section 17 *NGL recoveries can increase by up to 15 bbl/mmcf with deeper cutting processing facilities 7/4/2012
Slide 18: ONR Acquisition (Pending Mid-August 2012 Closing)
Peyto’s Assets ONR Acquisition* (Pending Mid-August 2012 Closing) PEYTO Exploration & Development Corp. N 5,600 boe/d (31 mmcf/d natural gas, 460 boe/d NGLs) N 98% operated and processed N 125 gross (110 net) sections of lands (principally Deep Basin) N 2 gas plants (100% - 20 mmcf/d, 69% - 60 mmcf/
Slide 19: PEY/ONR Strategic Fit: Infrastructure Access
PEY/ONR Strategic Fit Infrastructure Access for Peyto Step-out Areas PEYTO Exploration & Development Corp. Pedley Edson Ansell 19 Subject to Mid August 2012 closing. See press release dated July 3, 2012 7/4/2012
Slide 20: ONR is Step in Longer Term Plan
PEY/ONR Strategic Fit ONR is Step 1 in Longer Term Plan PEYTO Exploration & Development Corp. PEY ONR ONR Spirit River PNG Spirit River PNG Expiries Apr 1/12 - Jul 1/13 SPIRIT RIVER 12 MONTH PNG EXPIRY GROWTH POTENTIAL Notikewin Falher Wilrich PEY & ONR SUNDANCE Wells Pipelines Gas Plants 20 *Expiri
Slide 21: Large Hz MSF Inventory
Peyto’s Assets Large Hz MSF Inventory Done To Do Total Total Total Total Total Vertical Hz Hz Hz Locations ONR Hz Wells Wells Locations Unbooked Locations Booked* Unbooked** 432 40 206 103 9 5 1 6 10 1 2 12 90 29 44 25 35 7 11 34 148 7 14 53 83 99 30 4 2 14 6 19 12 87 1 21 124 652 137 410 527 100 Ov
Slide 22: Longest Reserve Life
Peyto’s Assets Longest Reserve Life 10 Peyto 2011 PP RLI (yrs) 5 0 Industry 2011 PP RLI (yrs) 22 2011 Year End Proved Producing Reserve Life (using Q4 2011 production rate). 7/4/2012 Source: Company AIF & Financials
Slide 23: Lowest Operating Costs
Peyto’s Assets Lowest Operating Costs $20 $15 $10 Peyto 2011 Op Costs ($/boe) $5 $‐ Industry 2011 Op Costs ($/boe) Operating Costs include Transportation costs. ($/boe) 23 BOE factor - 6 mcf = 1 bbl of oil equivalent 7/4/2012
Slide 24: Lowest Operating Costs – Gas Producers
Peyto’s Assets Lowest Operating Costs – Gas Producers 1 %/yr 24 BOE factor - 6 mcf = 1 bbl of oil equivalent 7/4/2012 Operating costs include transportation
Slide 25: Deep Gas Drilling Royalty Incentives
Peyto’s Assets Deep Gas Drilling Royalty Incentives 3,500-4,000 m MD Trigger depth for Natural Gas Deep Drilling Program 2,200 m reduced from TVD 2,500m TVD to 2,000m TVD 3,700-4,000 m MD 2,650-2,850 m TVD 4,200 m MD Effective Royalty 2,750-2,900 m TVD *3,700m Cardium Horizontal Well would receive 1
Slide 26: Lowest FD&A Cost
Peyto’s Assets Lowest FD&A Cost $50 $40 $30 Peyto 2011 PP FD&A ($/boe) $20 $10 $‐ Industry 2011 PP FD&A ($/boe) 26 Proved Producing FD&A Cost – Inclusive of Acquisition, Finding and Development Capital *Inclusive of significant dispositions 7/4/2012
Slide 27: Low FD&A Costs = High Recycle Ratio
Peyto’s Assets Low FD&A Costs = High Recycle Ratio Proved Producing $50 Total Proved Proved + Probable $40 Field Netback $30 $20 Peyto PP Recycle Ratio $10 (10 yr) $0 Recycle Ratio is the Netback divided by FD&A *FD&A costs include all capital expenditures and changes in Future Development Capital 2
Slide 28: Lowest Total Costs
Peyto’s Assets Lowest Total Costs 200% Total Costs as % of Total Revenue 150% 100% Peyto 2011 Margin 50% 0% Op Costs Royalties G&A Interest PDP FD&A Industry 2011 Margin 28 Total Costs per boe includes – Royalties, Op Costs, G&A, Interest, Management Fees, and PP FD&A cost *Inclusive of significant
Slide 29: Peyto's Incredible Returns
Peyto’s Incredible Returns
Slide 30: High Returns on Capital and Equity
Peyto’s Returns High Returns on Capital and Equity 60% $10 50% $8 40% $6 30% 12 yr Average ROE $4 20% 10% $2 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 $0 Return On Capital Employed (%) Return On Equity (%) Earnings/share Realized Gas Price ($/mcfe) 12 yr Average ROCE Return
Slide 31: Strong Per Share Operating and Profit Margin
The Peyto Strategy Strong Per Share Operating and Profit Margin $140 Revenue $120 $100 $80 $ millions $60 Funds from $40 Ops Profit Margin $20 Earnings (last 12 yrs) $0 31 Funds from Operations is defined as earnings before performance based compensation, non-cash and non-recurring expenses. Profit
Slide 32: Shareholder Returns = NAV Growth + Income
Peyto’s Returns Shareholder Returns = NAV Growth + Income $60 Cum Div/Dist P+P $50 PV5 debt adj./share TP $40 PDP $30 $20 $10 Compound Annual $- Growth Rate 32 PV5 DA/share is Before Tax Net Present Value, discounted at 5%, less debt divided by the number of shares/units outstanding Historical Units
Slide 33: Maintain a Strong Balance Sheet
The Peyto Strategy Maintain a Strong Balance Sheet Q1 2012 Net Debt/FFO 3.0 2.5 2.0 Peyto Q1/12 D/FFO 1.5 1.0 0.5 0.0 BTE POU NGL PWT AAV ARX PGF PRQ PMT CPG ERF PBN ZAR BNP CR ONR BIR TOU PEYTO CQE VET TET CLT FEL Industry Ave. Q1/12 D/FFO 33 7/4/2012
Slide 34: Careful Use of Debt
Peyto’s Returns Careful Use of Debt $2.5 100% $2.0 80% $1.5 60% $1.0 40% $0.5 20% Average Net Debt $- 0% to NPV PDP NPV8 ($B) Net Debt/PDP NPV8 Proved Developed Producing (PDP) Net Present Value (NPV) discounted at 8%, as evaluated by the Independent Engineering firm 34 InSite Petroleum Consultants
Slide 35: 2012 Outlook: More Of 2011
2012 Outlook More Of 2011 Drill (100% Hz Wells, liquids rich) Expand & Extract Increase Processing Capacity & NGL Yield Increase Undeveloped Land Base Shoot Seismic 2012 Capital Program Acquire Additional Opportunities and Partner Interests 35 7/4/2012
Slide 36: Levering the Low Cost Advantage
2012 Outlook Levering the Low Cost Advantage $4.00 AECO Monthly Gas Price Actual & Forecast ($/GJ) $3.50 www.gasalberta.com $3.00 $2.50 $2.00 June 22, 2012 Strip $1.50 April 11, 2012 Strip $1.00 Jan‐11 Jan‐12 Jan‐13 Jan‐14 36 7/4/2012
Slide 37: It Just Gets Easier to Grow
2012 Outlook It Just Gets Easier to Grow 2012 Decline Assumes 2011 Base 20,700 @ 13% 2011 New 21,300 @ 48% 31% forecast base decline* 2011 Decline 2010 Base = 15,500 @ 14% 2010 New = 15,100 @ 53% 33% actual base decline Triple production in 3 years!! 37 BOE factor - 6 mcf = 1 bbl of oil equivalent *
Slide 38: Organic Growth Potential
2012 Outlook Organic Growth Potential 70,000 60,000 50,000 BOED First forecast NA 40,000 LNG exports. 30,000 20,000 10,000 0 38 7/4/2012
Slide 39: Appendix
Appendix • Quarterly Track Record • Tax Pools • Payout Ratio • Gas Marketing • Hedging Strategy • Reserves data – volumes, values, RLI 39 7/4/2012
Slide 40: Quarterly Track Record
Quarterly Track Record 2012 2011 2010 2009 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Operations Production Oil & NGLs (bbl/d) 4,101 3,856 3,947 3,918 3,811 3,746 3,389 3,439 3,322 3,465 3,330 3,028 Natural gas (mcf/d) 220,811 189,653 212,715 194,832 183,790 166,710 122,031 148,551 122,717 112,422
Slide 41: Peyto's Tax Pools
Organic Business Model Peyto’s Tax Pools $1,200 $1,000 $800 Millions $600 $400 $200 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 CEC UCC (25%) CEE (100%) CDE (30%) COGPE (10%) CAPEX 41 7/4/2012
Slide 42: Payout Ratio History
Payout Ratio History Maximum Historical Payout Ratio 91% 100% Minimum Converted 42% 80% to a Trust at 57% 60% 40% 20% 0% Cash Payout Ratio Total Payout Ratio Converted to a Corp. at 32% Historical Per Unit and Units Outstanding numbers have been adjusted to reflect the May 27, 2005 2:1 stock split T
Slide 43: Gas Marketing
Gas Marketing Future Sales Financial Hedges - Gas Pricing 2011 2012 2013 2014 Term GJ/d ($/GJ) A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O From To 1-Apr-10 31-Mar-12 5000 $5.670 ● ● ● ● ● ● ● ● ● ● ● ● 1-Apr-11 31-Mar-12 5000 $6.200 ● ● ● ● ● ● ● ● ● ● ● ● 1
Slide 44: Liquids Marketing
Liquids Marketing Future Sales Financial Hedges - Propane 2012 2013 2014 Term bbl/d Pricing ($/bbl) A M J J A S O N D J F M A M J J A S O N D J F M From To 1-Sep-12 31-Mar-13 66 $49.56 ● ● ● ● ● ● ● 1-Sep-12 31-Mar-13 66 $44.10 ● ● ● ● ● ● ● Avg (propane) Avg bbl/d 38 132 0 0 Avg $ per bbl $46.83 $4
Slide 45: Successful Hedging Strategy
Successful Hedging Strategy Peyto Realized Price History $16.00 2003 2004 2005 2006 2007 2008 2009 2010 2010 Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto $7.51/mcf $7.38/mcf $8.78/mcf $8.46/mcf $8.42/mcf $8.64/mcf $6.44/mcf $5.36/mcf $4.47/mcf AECO Mo AECO Mo AECO Mo $14.00 AECO Mo AECO Mo
Slide 46: Peyto's 2011 Reserves
Peyto’s 2011 Reserves Volumes Natural Gas Sales Gas Liquids & Oil Category (BCF) (Mstb) BOE's(Mstb) Proven Producing 668 16,125 127,457 Proven Non-Producing 14 356 2,745 Proven Undeveloped 422 24,834 95,102 Total Proven 1,104 41,314 225,304 Probable Additional 496 14,525 79,977 Proved + Probable 1,6
Slide 47: Peyto's 2011 Reserves: Before Tax NPV
Peyto’s 2011 Reserves Before Tax Net Present Value Variable Price Economics NPV (millions of CDN dollars) Category 0% 5% 8% 10% Proven Producing $ 4,809 $ 2,624 $ 2,049 $ 1,792 Proven Non-Producing $ 97 $ 43 $ 29 $ 23 Proven Undeveloped $ 2,796 $ 1,306 $ 878 $ 681 Total Proven $ 7,702 $ 3,972 $ 2,95
Slide 48: Frequently Asked Questions
FAQ Frequently Asked Questions 1. Peyto has had some spectacular growth over the last two years, how can that growth continue? The profitable growth in production, reserves and funds from operations per share that we’ve experienced over the last two years is the result of achieving very good rates o
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