Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Investor Presentation (November 2018)
49 slides from Peyto Exploration & Development's investor presentation, Nov 7, 2018
Slide 1: Slide 1
Slide 2: Advisory Regarding Forward-Looking Statements
Advisory Regarding Forward-Looking Statements PEYTO Exploration & Development Corp. 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", "obj
Slide 3: Who We Are
PEY.TO Who We Are PEYTO Exploration & Development Corp. N 5th Largest Natural Gas Producer in Canada N Pure Play Alberta Deep Basin – ~100,000 boe/d Gas & NGLs N Returns Focused Strategy – Avg ROCE 16%, ROE 30% over last 19 yrs, among highest in industry N Long Reserve Life Asset ‐ 7 yrs PDP, 18 yrs
Slide 4: Peyto Is The 5th Largest Gas Producer In Canada
PEY.TO Peyto Is The 5th Largest Gas Producer In Canada PEYTO Exploration & Development Corp. 1.8 1.6 1.4 1.2 (Bcf/d) 1.0 0.8 0.6 0.4 0.2 0.0 YE 2016 YE 2017 Source: NBF, geoSCOUT; assumes 15% gas shrink 4 11/7/2018
Slide 5: Total Shareholder Return
PEY.TO Total Shareholder Return PEYTO Exploration & Development Corp. Peyto Exploration and Development Corp. $60 20 Year Trading History 120,000 Month End Closing Price ($/share) $50 100,000 $40 80,000 $11.61/share $30 Oct 23/18 60,000 Future $20 Prospects 40,000 $18.89/share $10 Past 20,000 $- Pro
Slide 6: What We've Done Over Years
Peyto’s History What We’ve Done Over 20 Years PEYTO Exploration & Development Corp. N Goods and Services Purchased = $5.8 Billion N Land Purchased = 646 sections N Wells Drilled = 1,512 N Reserves Discovered = 5.8 TCFe (YE 2017) N Production Recovered = 1.6 TCFe N Royalties Paid = $852 million N Pro
Slide 7: We Heat Your Homes
Peyto’s Contribution We Heat Your Homes PEYTO Exploration & Development Corp. “Alberta Energy states that typical Alberta households use approximately 120 GJ of natural gas per year. As the 5th largest gas producer in Canada, in 2017, Peyto provided the natural gas to keep all the homes in AB and SK
Slide 8: The Peyto Strategy
The Peyto Strategy PEYTO Exploration & Development Corp. 8 11/7/2018
Slide 9: What We Believe
The Peyto Strategy What We Believe PEYTO Exploration & Development Corp. We believe that: N “Nature’s gas is the fuel for the future.” N “Our focus should be on maximizing the return on invested capital – your capital.” N “By selectively and efficiently investing capital at periods in the cycle when
Slide 10: Counter Cyclical Growth Per Share
The Peyto Strategy Counter Cyclical Growth Per Share PEYTO Exploration & Development Corp. 2500 $80 $70 2000 $60 1500 $50 $40 1000 $30 $20 500 $10 Growth rate in Prod/div. 0 $0 adj. share (last 9 yrs) Q2 2001 Q1 2002 Q4 2002 Q3 2003 Q2 2004 Q1 2005 Q4 2005 Q3 2006 Q2 2007 Q1 2008 Q4 2008 Q3 2009 Q2
Slide 11: Invest For Profit Not Growth
The Peyto Strategy Invest For Profit Not Growth PEYTO Exploration & Development Corp. $800 $700 $600 $500 Peyto Earnings $400 CTD Q3/18 $300 $177 $200 $100 $- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 CAPEX ($MM) Earnings ($'000) Peyto Capital CTD Q3/1
Slide 12: Dividend Sustainability
Q3/18 Q3/18 Dividend Sustainability Peyto Ctd. Dist/Div. Peyto Ctd. Earnings The Peyto Strategy (MM$) $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 Q4 1999 Q2 2000 Q4 2000 Q2 2001 Q4 2001 Q2 2002 Q4 2002 Q2 2003 Q4 2003 Q2 2004 Q4 2004 Q2 2005 Q4 2005 Q2 2006 Q4 2006 Q2 2007 Q4 2007 Q2 2008 Q4 2008 Q2
Slide 13: Profitable Business
Peyto’s Profitable Business PEYTO Exploration & Development Corp. 13 11/7/2018
Slide 14: Build it for less than we sell it
Peyto’s Profitable Business “Build it for less than we sell it” PEYTO Exploration & Development Corp. 2017 PEY 2014 PEY 2015 PEY 2016 PEY 2017 Land/Acq/Disp Seismic Drilling PDP FD&A $/mcfe ($2.25) ($1.64) ($1.44) ($1.36) Compl. Wellsite Facilities $521MM Cash Costs $/mcfe ($1.08) ($0.81) ($0.76) ($
Slide 15: The Price Bar Is Now Very Low, We Must Be Lower
Peyto’s Profitable Business The Price Bar Is Now Very Low, We Must Be Lower PEYTO Exploration & Development Corp. AECO $10 Monthly $/GJ Peyto Realized Gas Price ($/mcfe) 36% Avg. "Profit“ $8 CTD $6 Bonus $4 PDP FD&A 35% $2 40% Cash Costs 25% $- Total Cash Costs per mcfe includes – Royalties, Op Cost
Slide 16: Competitive In The North American Marketplace
Peyto’s Profitable Business Competitive In The North American Marketplace PEYTO Exploration & Development Corp. 100% Montney 65% DB/35% Mont. 100% Deep 100% Montney 10% DB/90% Mont. VII 2017* TOU 2017* Basin PEY 2017 AAV 2017* ARX 2017* PDP FD&A $/mcfe ($2.53) ($1.38) ($1.36) ($1.32) ($2.51) Cash Co
Slide 17: Results in a Low Cost Advantage
Peyto’s Profitable Business Results in a Low Cost Advantage PEYTO Exploration & Development Corp. $2.36 $5.10 ($0.18) $0.87 BOE factor - 6 mcf = 1 bbl of oil equivalent 17 Data from Peter’s & Co. 11/7/2018 Gas producers include: AAV,PNE,CKE,CQE,TOU,SRX,BIR,BXE,CR,ARX,BNP,POU,DEE,KEL,ECA,VII
Slide 18: Unique Assets
Peyto’s Unique Assets PEYTO Exploration & Development Corp. 18 11/7/2018
Slide 19: Geographically Focused Core Areas
Peyto’s Assets Geographically Focused Core Areas PEYTO Exploration & Development Corp. • 480,000 net acres • 9 operated gas plants Cutbank ---(835 mmcf/d net capacity) • 1600+ km pipelines • 1200+ producing zones Kakwa • 100,000 boe/d Chicken Leland Pine Creek Of Production: Greater Processed by Pey
Slide 20: Deep Basin Permeability Segregation
Peyto’s Assets Deep Basin Permeability Segregation PEYTO Exploration & Development Corp. FOOTHILLS STRUCTURES GAS AS ING INCRE BILITY EA PERM WATER TRANSITION ZONE WATER GAS SE INCREAH AREA OF GAS DEPT MATURATION 20 11/7/2018
Slide 21: Multi Zone Stacked Sandstone Reservoirs
Peyto’s Assets Multi Zone Stacked Sandstone Reservoirs PEYTO Exploration & Development Corp. Detailed Petrophysical work on the Spirit River sands revealed >30% more reserves per section Up to per section* 21 *NGL recoveries can increase by 15+ bbl/mmcf with deeper cutting processing facilities 11/7
Slide 22: Large Hz MSF Inventory
Peyto’s Assets Large Hz MSF Inventory PEYTO Exploration & Development Corp. Done1 To Do Total Total Total Total Hz(Vt) Hz Locations Vertical Hz Locations Unbooked Wells Wells Booked* (2) 2 (3) 440 74 174(13) 414 5 1 5 8 1 2(2) 20 90 174 160(2) 69 7 74 40 8 111 162 319 2 20 14 381 378 182 4 39 54 48
Slide 23: Deep Basin Lands Go A Long Way
Peyto’s Assets Deep Basin Lands Go A Long Way PEYTO Exploration & Development Corp. 800 Peyto Lands 700 600 Net Sections 500 400 Net Peyto Sections 300 200 100 - Net Sections of Cardium, Dunvegan, Notikewin, Falher, Wilrich, Bluesky, & Cadomin Net Sections – Developed Area of All Reserves Found and
Slide 24: Facility Ownership And Control
Peyto’s Assets Facility Ownership And Control PEYTO Exploration & Development Corp. Cutbank Kakwa Oldman & Oldman North Nosehill Wildhay Galloway Swanson Peyto Gas Plants YE 2014 YE 2015 YE 2016 YE 2017 YE 2018 WI Whitehorse 1 Oldman 125 mmcf/d 125 mmcf/d 125 mmcf/d 125 mmcf/d 125 mmcf/d 100% 2 Nose
Slide 25: Unique Infrastructure Location
Peyto’s Assets Unique Infrastructure Location PEYTO Exploration & Development Corp. Alliance Oldman & Oldman North Nosehill Wildhay Galloway Swanson 240 kV Power Lines Highway 16 Greater Sundance Area Bickerdike Location Advantages: • Nova/Alliance Supply Backstop • CN Rail (export) • Paved Highway
Slide 26: Potential For Additional Liquids Extraction
Peyto’s Assets Potential For Additional Liquids Extraction PEYTO Exploration & Development Corp. Oldman and Nosehill Oldman North Wildhay Propane Gas Phase Value Far Less Than C3 Value ($/bbl of liq eq.) Liquid Value Condensate $20 Swanson via Pembina $15 $10 Galloway $5 $0 $1.00 $2.00 $3.00 $4.00 G
Slide 27: The "New" Cardium Play – High Grade Land Base
Peyto’s Assets The “New” Cardium Play – High Grade Land Base PEYTO Exploration & Development Corp. 27 11/7/2018
Slide 28: The "New" Cardium Play – Abundant Opportunities
Peyto’s Assets The “New” Cardium Play – Abundant Opportunities PEYTO Exploration & Development Corp. Oldman & Oldman North 02-21 04-10 14-07 Nosehill Wildhay 13-02 16-34 02-27 Swanson Galloway 03-17 01-17 02-17 Total Greater Sundance Cardium Resource* Proven Resource: 350 BCFe cumulative recovery to
Slide 29: The "New" Cardium Play – A Double
Peyto’s Assets The “New” Cardium Play – A Double PEYTO Exploration & Development Corp. Old Cardium Hz Well Design (avg 8 stages) Average of 18 EUR 2.75 BCFe wells completed with new IP30 1.8 mmcf/d raw gas slickwater design C5 25 bbl/mmcf C4 10 bbl/mmcf C3 12.5 bbl/mmcf Capex $4.2MM (DCETFLS*) BT IR
Slide 30: The "New" Cardium Play – A Different Design
Peyto’s Assets The “New” Cardium Play – A Different Design PEYTO Exploration & Development Corp. 2009-2014 2009-2014 Old Design (2009-2014) New Design (2017-2018) Old Design (last 12 wells) New Design (last 12 wells) 8 Stages 28 Stages $1.9MM Drill $1.6MM Drill 415 tonnes 695 tonnes $1.5MM Complete
Slide 31: Deep Basin Cardium – More Like Oil Than Gas
Peyto’s Assets Deep Basin Cardium – More Like Oil Than Gas PEYTO Exploration & Development Corp. Reserves Revenue Type Curve by Product by Product IP 365 58 bbl/d 13% C5+/Condy 37 10% 55% bbl/d C3/C4 1.5 mmcf/d Natural 16% Gas 77% 29% 31 • Price Deck: $1.50/GJ AECO, WTI $70/bbl 11/7/2018
Slide 32: Incredible Returns
Peyto’s Incredible Returns PEYTO Exploration & Development Corp. 32 11/7/2018
Slide 33: 2018 IRRs YTD
Peyto’s Returns 2018 IRRs YTD PEYTO Exploration & Development Corp. 2018 Wells ‐ YTD Prices Based on Actuals and 150 Price Deck: 2018 Actuals and Nov 1 Strip Forecast Nov 1 Strip Period Gas C5+ 130 Well Count Price Price ($/GJ) ($/bbl) 23 Gross @AECO @Edm 110 21 Net Cardium 39% 2018 Q1 1.76 75.08 90
Slide 34: High Returns On Your Capital And Equity
Peyto’s Returns High Returns On Your Capital And Equity PEYTO Exploration & Development Corp. 60% $12 50% $10 40% $8 19 yr Avg ROE to 2017 30% $6 20% $4 11% 10% 8% $2 0% $0 Return On Capital Employed (%) Return On Equity (%) Earnings/share Realized Price ($/mcfe) 19 yr Avg ROCE to 2017 Return on Equ
Slide 35: Future
Peyto’s Future PEYTO Exploration & Development Corp. 35 11/7/2018
Slide 36: 2019 Outlook
Peyto’s Future 2019 Outlook PEYTO Exploration & Development Corp. Drill ~75-90Hz Wells (Liquids Rich Natural Gas) vs 65-70 in 2018 Expand & Extract Increase Processing Capacity & NGL Yield Increase Undeveloped Land Base Shoot Seismic 2019 Capital Program Acquire Additional Opportunities and Par
Slide 37: Gas Price Stability Before Returning to Growth
Peyto’s Future Gas Price Stability Before Returning to Growth PEYTO Exploration & Development Corp. $5 14 bbl/mmcf 14 bbl/mmcf 17 bbl/mmcf 20 bbl/mmcf 26 bbl/mmcf 31 bbl/mmcf 35 bbl/mmcf, exit >18,000 bbl/d $4.19 $4 100,000 ~$10,900/boe/d $16,800/boe/d $10,800/boe/d ~$12,000/boe/d $3 AECO 7A ($/GJ)
Slide 38: Lower Costs and Increase Liquids to Preserve Profit
Peyto’s Future Lower Costs and Increase Liquids to Preserve Profit PEYTO Exploration & Development Corp. 40‐50 bbl/mmcf new adds in 2018/19 increases liq to 14% PEY 2017 PEY 2018 Goals PEY 2019 Goals 91% Gas @ $2.30/GJ 90% Gas @ $1.42/GJ*1.15 86% Gas @$1.60/GJ*1.15 AECO*115% 14% NGLs @$56/bbl=(65%of
Slide 39: Future Market Diversification and Gas Price Protection
Gas Marketing Future Market Diversification and Gas Price Protection PEYTO Exploration & Development Corp. $6 2018 Budget 2019 Forecast 2020 Forecast 2017 $200-250MM $250-300MM $250-300MM Capex $521MM $5 100,000 Increasing liquids component $4 BOED This wedge represents $3 US (NYMEX) exposure via AE
Slide 40: Minimized AECO Spot Market Exposure
Gas Marketing Minimized AECO Spot Market Exposure PEYTO Exploration & Development Corp. 2018 Budget Revenue 2019 Forecast Revenue Condy & C5+ - Gas - AECO spot Fixed Condy & C5+ - (monthly/daily) 4% Fixed 5% 8% Gas - Henry Gas - AECO spot Hub spot (monthly/daily) 1.1% 16% Condy & C5+ - Floating 20%
Slide 41: Alberta Supply/Demand Almost Balanced
Gas Marketing Alberta Supply/Demand Almost Balanced PEYTO Exploration & Development Corp. When supply When supply exceeds demand exceeds demand and there is no and there is NGTL gas flows access to storage, access to storage, 15,000 price gets volatile $4.50 price remains 14,000 stable. $4.00 13,000
Slide 42: Fixed Price Swaps For Gas and Liquids
Gas Marketing Fixed Price Swaps For Gas and Liquids PEYTO Exploration & Development Corp. Peyto Marketing Summary AECO 7A Fixed Price Swaps (CDN$) Total Total Total Total Total 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2017 2018 Q1 2018 Q2 2018 Q3 2018 Q4 2018 2019 Q1 2019 Q2 2019 Q3 2019 Q4 2019 2020 Q1 2020
Slide 43: The Good News, Pipe Is Coming
Gas Marketing The Good News, Pipe Is Coming PEYTO Exploration & Development Corp. 43 Source: TCPL 2017 Q4 Conference Call Presentation Feb 15, 2018 11/7/2018
Slide 44: Supply Driven Market May Be Temporary
Gas Marketing Supply Driven Market May Be Temporary PEYTO Exploration & Development Corp. NORTH AMERICAN NATURAL GAS 20 92.1 100 18 79.4 90 Proven Reserve Life (years) Total Production (bcf/d) 16 80 13.7 14 11.4 70 12 60 10 50 8 40 6 30 4 20 2 10 - 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Slide 45: Appendix
Appendix PEYTO Exploration & Development Corp. N Quarterly Track Record N Tax Pools N Gas Marketing N Leverage 45 11/7/2018
Slide 46: Quarterly Track Record
Quarterly Track Record PEYTO Exploration & Development Corp. 2018 2017 2016 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Operations Production Oil & NGLs (bbl/d) 9,209 9,243 10,043 9,337 10,479 8,958 8,319 9,586 7,457 8,938 7,247 6,621 7,008 6,643 Natural gas (mcf/d) 456,197 493,821 568,496 55
Slide 47: Peyto's Tax Pools
Organic Business Model Peyto’s Tax Pools PEYTO Exploration & Development Corp. $1,800 $1,600 $1,400 $1,200 Federal Tax Pools Millions $1,000 $800 Q4/17 $600 $400 $200 $- 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 CEC UCC (25%) CEE (100%) CDE (30%) COGPE (10%) CAPEX Peyto CTD. CapEx Q4/17 47 1
Slide 48: Successful Hedging Strategy Smoothes Volatility
Gas Marketing Successful Hedging Strategy Smoothes Volatility PEYTO Exploration & Development Corp. 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto $7.38/mcf $8.78/mcf $8.48/mcf $8.42/mcf $8.64/
Slide 49: Careful Use Of Debt For Leveraged Returns
Peyto’s Debt Careful Use Of Debt For Leveraged Returns PEYTO Exploration & Development Corp. Peyto Net Debt/PDP NPV10 100% 80% Peyto becomes NAIC2 rated, gains access to cheaper term debt 60% 40% 20% Debt/PDP NPV10 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 20
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