Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — CIBC Whistler Conference 2015
49 slides from Peyto Exploration & Development's conference presentation, Jan 20, 2015
Slide 1: CIBC Whistler Conference January 2015
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: Corporate Fact Sheet
PEY.TO Corporate Fact Sheet N Pure Play Alberta Deep Basin ‐ 85,000 boe/d Gas & NGLs N Returns Focused Strategy – ROCE 18%, ROE 34% over last 15 yrs N Long Reserve Life Asset ‐ 7 yrs PDP, 19 yrs P+P N Lowest Cost Producer ‐ $1.14/mcfe ($6.84/boe) 2014 ytd total cash costs N Own and Control ‐ Operate
Slide 4: Counter Cyclical With A Tailwind
The Peyto Strategy Counter Cyclical With A Tailwind PEYTO Exploration & Development Corp. US Oil and Natural Gas Prices (6:1) $120 $20 $18 $100 $16 57% $14 $80 drop $12 $60 $10 $8 $40 $6 $4 $20 Oil Price Drop $2 $0 $0 2000 2002 2004 2006 2008 2010 2012 2014 2016 Cushing, OK WTI Spot Price FOB (Dolla
Slide 5: High Operating Margin
The Peyto Strategy High Operating Margin PEYTO Exploration & Development Corp. $250 $200 15 yr Avg >70% ($millions) $150 Revenue $100 $50 FFO $0 2000 2002 2004 2006 2008 2010 2012 2014 100% Operating Margin Peyto Operating Margin 80% (Q3/2014) 60% 40% 20% 0% AAV TOU TET VET BNP POU PEYTO ARX CPG PGF
Slide 6: High Operating Margin Illustration
The Peyto Strategy High Operating Margin Illustration PEYTO Exploration & Development Corp. Industry Average Peyto Before After Change Before After Change Revenue $100 $70 ‐30% $100 $70 ‐30% Costs $50 $50 $20 $20 Profit $50 $20 ‐60% $80 $50 ‐38% Cashflow 50% 29% ‐43% 80% 71% ‐11% Margin A 30% drop i
Slide 7: What We Believe
The Peyto Strategy What We Believe PEYTO Exploration & Development Corp. N “We believe nature’s gas is the fuel for the future.” N “We believe we can make a real profit by being the lowest cost, most efficient producer in the industry.” N “We believe in partnering with shareholders to make that prof
Slide 8: How We Do It
The Peyto Strategy How We Do It PEYTO Exploration & Development Corp. • Invest in our own ideas • Build it ourselves • Operate it ourselves • Focus on maximum return • Stay concentrated, lean & efficient 8 1/20/2015
Slide 9: Growth per Share
The Peyto Strategy Growth per Share PEYTO Exploration & Development Corp. NEW 2015 YE Target Production per Unit or Share (boe/d per million) 600 ~100,000 boe/d $15 $75 500 $12 $60 Gas Price ($/GJ) 400 PEY+ Cum Div $9 $45 300 $6 $30 200 $3 $15 100 5 Yr Prod/share growth rate 0 $- $- Jan-01 Jan-02 Ja
Slide 10: Superior Shareholder Returns
The Peyto Strategy Superior Shareholder Returns PEYTO Exploration & Development Corp. $60 ~$700,000 $14 $50 $12 $40 Shareholder IRR $10 $30 $8 Future strip $20 $6 $10 $4 $1,000 $0 $2 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Share Price w/Div
Slide 11: Profitable Business
Peyto’s Profitable Business PEYTO Exploration & Development Corp.
Slide 12: Profitable Business 15th 1998-2013
Peyto’s Profitable Business 15th 1998‐2013 “Build it for less than we sell it” PEY 2014 to Q3 PEY 2013 Land/Acq $9MM Seismic $3MM Drilling $254MM ~($2.35)* ($2.35) PDP FD&A Compl. $152MM Wellsite $48MM $/mcfe Facilities $112MM $578MM ∆PDP Reserves (before Prod.) 41.0 mmboes PDP FD&A $14.09/boe Cash
Slide 13: Profitable Even Through The Lows
Peyto’s Profitable Business Profitable Even Through The Lows PEYTO Exploration & Development Corp. AECO Monthly $10 Peyto Realized Gas Price ($/mcfe) $/GJ 37% Ave. "Profit“ Cum To Date $8 $6 Bonus $1.02 $4 Cash Costs ($1.06) $2 PDP FD&A ($2.35) $- Forecast with 2000 2001 2002 2003 2004 2005 2006 200
Slide 14: Profitability Challenges for the Canadian Gas Industry
Peyto’s Profitable Business Profitability Challenges for the Canadian Gas Industry PEYTO Exploration & Development Corp. 2013 2012 2011 20101 PDP FD&A $/mcfe ($2.93) ($3.43) ($3.68) ($3.11) Cash Costs $/mcfe ($3.13) ($2.98) ($3.31) ($3.19) Supply Cost ($6.06) ($6.41) ($6.99) ($6.30) Sales Price $/mc
Slide 15: Competitive In The North American Marketplace
Peyto’s Profitable Business Competitive In The North American Marketplace PEYTO Exploration & Development Corp. 15 1/20/2015
Slide 16: Profitability By Basin
Peyto’s Profitable Business Profitability By Basin – 5 yr. Average* PEYTO Exploration & Development Corp. 100% Deep Basin ‐ PEY 80% Marcellus – Cabot* 75% Rockies – Ultra* 70% Haynesville – Exco** PD FD&A $/mcfe ($2.21) ($3.08) ($3.47) ($2.89) Cash Costs $/mcfe ($1.37) ($2.05) ($1.50) ($2.40) Supply
Slide 17: Unique Assets
Peyto’s Unique Assets PEYTO Exploration & Development Corp.
Slide 18: Geographically Focused Core Areas
Peyto’s Assets Geographically Focused Core Areas PEYTO Exploration & Development Corp. • 450,000 net acres • 9 operated gas plants Cutbank ---(610 mmcf/d net capacity) • 1000+ km pipelines • 900+ producing zones Kakwa • 85,000 boe/d Chicken Leland Processed by Peyto Pine Creek 150 miles Greater Sund
Slide 19: 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 19 1/20/2015
Slide 20: 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* 20 *NGL recoveries can increase by 15+ bbl/mmcf with deeper cutting processing facilities 1/20
Slide 21: Production By Formation
Peyto’s Assets Production By Formation PEYTO Exploration & Development Corp. 100,000 90,000 80,000 70,000 38% 60,000 BOE/D Wilrich 50,000 40,000 15% Notikewin 30,000 22% Falher 20,000 12% 10,000 Cardium 7% Bluesky 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 21 1/20/2015
Slide 22: Deep Basin Lands Go A Long Way
Peyto’s Assets Deep Basin Lands Go A Long Way PEYTO Exploration & Development Corp. 450 425 Peyto Lands 400 Net Lands (000's acres) 350 300 250 200 150 Net Peyto Sections 100 50 - Net Sections of Cardium, Dunvegan, Notikewin, Falher, Wilrich, Bluesky, & Cadomin Net Sections for 2.0 TCFe of PD EUR* T
Slide 23: 3-Dimensional Land Base Holds Large Potential
Peyto’s Assets 3-Dimensional Land Base Holds Large Potential PEYTO Exploration & Development Corp. Cardium (368,433 net acres) 9.1% of land developed in 474 Vt/Hz producers (70 acres/well) 4.9% of land booked in 200 Hz locations (90 acres/well) 86% of land remains potential (316,970 net acres) Notik
Slide 24: Large Hz MSF Inventory
Peyto’s Assets Large Hz MSF Inventory PEYTO Exploration & Development Corp. To Do Done1 Total Total Hz Hz Locations Total Total Locations Unbooked Vertical Hz Booked* Wells Wells 56 432 63 200 356 5 1 5 1 14 90 56 87 43 7 27 37 23 27 56 254 1 14 136 179 192 4 14 47 48 12 2 87 2 16 177 652 328 628 11
Slide 25: Spirit River Group Potential Land Expiries
Peyto’s Assets Spirit River Group Potential Land Expiries PEYTO Exploration & Development Corp. AB Land Sales 5 yr Term 6,000,000 5,000,000 4,000,000 24 Month Expiries 3,000,000 Earliest Expiry Date 2,000,000 out to 2016-09-30 1,000,000 (>1800 agreements) 0 2003 2004 2005 2006 2007 2008 2009 2010 20
Slide 26: Greater Sundance Area
Peyto’s Assets Greater Sundance Area PEYTO Exploration & Development Corp. Peyto Oldman & Oldman North Peyto Wildhay Sweet Gas Sweet Gas Plant Plants Peyto Nosehill 90 mmcf/d 205 mmcf/d Sweet Gas Plant 125 mmcf/d Peyto Galloway Sweet Gas Plant 60 mmcf/d Peyto Swanson Sweet Gas Plant 65 mmcf/d Peyto
Slide 27: Brazeau River Area
Peyto’s Assets Brazeau River Area PEYTO Exploration & Development Corp. Keyera Brazeau Sour Gas Plant (1968) 200 mmcf/d CP O’Chiese Sour Gas Plant (1997) 85 mmcf/d Peyto Brazeau River 40 mmcf/d Sweet Gas Plant Keyera Nordegg Sour Gas Plant (1969) 10,000 75 mmcf/d 8,000 6,000 Boe/d 4,000 2,000 0 Land
Slide 28: Facility Ownership and Control
Peyto’s Assets Facility Ownership and Control PEYTO Exploration & Development Corp. Oldman North W WW Peyto Gas Plants YE 2013 YE 2014 YE 2015 WI Peyto Nosehill Gas Plant: 125 MMCF/d throughput 1 Oldman 125 mmcf/d 125 mmcf/d 125 mmcf/d 100% 2 Nosehill 125 mmcf/d 125 mmcf/d 125 mmcf/d 100% 3 Wildhay
Slide 29: Longest Reserve Life
Peyto’s Assets Longest Reserve Life PEYTO Exploration & Development Corp. 8 Reserve Life Index (yrs) 7 6 5 Peyto 2013 PP RLI (yrs) 4 3 2 1 0 PEYTO ZAR BNE PGF BXE CPG NVA PWT WCP TET BNP AAV VET LTS ARX POU TOU BIR ERF CQE CR PSK TBE VII Industry 2013 PP RLI (yrs) 29 2013 Year End Proved Producing R
Slide 30: Lowest Operating Costs – Gas Producers
Peyto’s Assets Lowest Operating Costs – Gas Producers PEYTO Exploration & Development Corp. How? • We operate • Full facilities • No water • No sour • Chemical recycle • Nat gas fuel • Continuous innovation Flat for 8 yrs 30 BOE factor - 6 mcf = 1 bbl of oil equivalent 1/20/2015 Operating costs incl
Slide 31: Incredible Returns
Peyto’s Incredible Returns PEYTO Exploration & Development Corp.
Slide 32: Focus on Returns Drives Capital Discipline
Peyto’s Returns Focus on Returns Drives Capital Discipline PEYTO Exploration & Development Corp. 2014 - $16,800/boe/d 90,000 2013 - $15,100/boe/d $900 2012 - $17,600/boe/d ONR Acq - $38,600/boe/d Annual Production Wedge (boe/d) 80,000 2011 - $17,500/boe/d $800 2010 - $17,300/boe/d Capital Efficiency
Slide 33: Peyto's Returns
ROR, % 0 20 40 60 80 100 120 140 160 100/01‐29‐54‐21W5/0 HZ 100/11‐32‐54‐21W5/0 HZ 102/04‐33‐54‐21W5/0 HZ 100/16‐16‐56‐21W5/0 HZ 102/16‐29‐54‐21W5/0 HZ 102/13‐32‐54‐21W5/0 HZ 103/05‐04‐55‐21W5/0 HZ 100/01‐05‐51‐19W5/0 HZ 102/15‐18‐056‐21W5/0 100/13‐18‐56‐21W5/0 HZ 100/16‐18‐56‐21W5/0 HZ 100/04‐07‐56
Slide 34: High Returns On Your Capital And Equity
Peyto’s Returns High Returns On Your Capital And Equity PEYTO Exploration & Development Corp. 60% $10 50% $8 40% $6 30% 15 yr Average ROE $4 20% 10% $2 0% $0 Return On Capital Employed (%) Return On Equity (%) Earnings/share Realized Gas Price ($/mcfe) 15 yr Average ROCE Return on Equity (ROE) is ea
Slide 35: Stress Testing Low Commodity Prices
Peyto’s Returns Stress Testing Low Commodity Prices PEYTO Exploration & Development Corp. Sundance/ Obed/Pedley/ Sundance Sundance/ Sundance Ansell Sundance Brazeau Species Nosehill Upper Edson Cardium Middle Bluesky Wilrich Notikewin Falher Wilrich Falher Full Cycle Well Costs ($M) $3,800 $4,600 $4
Slide 36: Future
Peyto’s Future PEYTO Exploration & Development Corp.
Slide 37: 2015 Outlook: Larger, but with the same result
2015 Outlook Larger, but with the same result PEYTO Exploration & Development Corp. Drill ~130 Gross Hz Wells (100% Hz-MSF, Liquids Rich Natural Gas) Expand & Extract Increase Processing Capacity & NGL Yield ~120 mmcf/d Increase Undeveloped Land Base Shoot Seismic 2015 Capital Program Acquire A
Slide 38: Drill Our Way To 100,000 BOE/D
2015 Outlook Drill Our Way To 100,000 BOE/D! PEYTO Exploration & Development Corp. 3% annual yield 120,000 +25%/sh CAGR growth ~96,000-100,000 120,000 28% CAGR total return boe/d exit over last 5 years! 100,000 ~85,000 boe/d exit 100,000 75,200 boe/d exit 80,000 80,000 57,000 boe/d exit BOED 60,000
Slide 39: Continuously Improve Profitability
2015 Outlook Continuously Improve Profitability PEYTO Exploration & Development Corp. 2015 Goals* • 20% service cost reduction • Drilling off season PDP FD&A $/mcfe <($1.90) • • • Longer laterals, more stages Continuous operations Natural gas heated water • Slow down facility pre‐builds Cash Costs $
Slide 40: Where to from here?
Peyto’s Future Where to from here? PEYTO Exploration & Development Corp. 150,000 ~120,000 boed ~100,000 boed ~85,000 boed 100,000 $13,000 /boe/d BOED 14,000 /boe/d $16,800 /boe/d 50,000 $15,100/boe/d $17,600/boe/d $17,300/boe/d $17,500/boe/d 2014 Budget 2016 CAPEX 2015 Budget 2017 CAPEX $690MM $600M
Slide 41: Appendix
Appendix PEYTO Exploration & Development Corp. N Quarterly Track Record N Tax Pools N Payout N Hedging Strategy N Gas Marketing N Liquids Marketing N FAQ 41 1/20/2015
Slide 42: Quarterly Track Record
Quarterly Track Record PEYTO Exploration & Development Corp. 2014 2013 2012 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Operations Production Oil & NGLs (bbl/d) 7,502 7,568 7,375 6,376 6,984 6,295 6,374 5,840 4,778 5,286 5,236 4,480 4,101 3,856 3,947 Natural gas (mcf/d) 420,538 388,407 389
Slide 43: Peyto's Tax Pools
Organic Business Model Peyto’s Tax Pools PEYTO Exploration & Development Corp. $1,600 $1,400 $1,200 $1,000 Federal Tax Pools Millions $800 Q3/14 $600 $400 $200 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 CEC UCC (25%) CEE (100%) CDE (30%) COGPE (10%) CAPEX Peyto Cum
Slide 44: Dividend Sustainability
Peyto’s Payout Dividend Sustainability PEYTO Exploration & Development Corp. Peyto Dividend Sustainability $2,000 $1,800 $1,600 $1,400 $1,200 Peyto Cum. Earnings $1,000 Q3/14 $800 $600 $400 $200 $0 Cum Dist/Div (before DRIP) Cum Earnings Peyto Cum. Dist/Div. Q3/14 44 1/20/2015
Slide 45: Successful Hedging Strategy
Successful Hedging Strategy Peyto Realized Price History PEYTO Exploration & Development Corp. 2003 2004 2006 2008 2010 2012 2013 $16.00 2005 2007 2009 2011 Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto $7.51/mcf $7.38/mcf $8.78/mcf $8.48/mcf $8.42/mcf $8.64/mcf $6.44/mcf $5.36/m
Slide 46: Gas Marketing: Future Sales (1 of 3)
Gas Marketing Future Sales (1 of 3) PEYTO Exploration & Development Corp. Financial Hedges - Gas Pricing 2013 2014 2015 2016 Da te contra cte d GJ/d ($/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 01-Sep-11 5000 $4.000 ● ● ● ● ● ● ● $4.000 Hedges by year
Slide 47: Gas Marketing: Future Sales (2 of 3)
Gas Marketing Future Sales (2 of 3) PEYTO Exploration & Development Corp. Financial Hedges - Gas Pricing 2013 2014 2015 2016 Da te contra cte d GJ/d ($/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 11-Sep-13 5000 $3.308 ● ● ● ● ● 12-Sep-13 5000 $3.465 ● ●
Slide 48: Gas Marketing: Future Sales (3 of 3)
Gas Marketing Future Sales (3 of 3) PEYTO Exploration & Development Corp. Financial Hedges - Gas Pricing 2013 2014 2015 2016 2017 Da te contra cte d GJ/d ($/GJ) 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 N D J F M A M J J A S O N D J F M A M J J A S O 09-Apr-14 5000 $4.680 ●
Slide 49: Frequently Asked Questions
FAQ Frequently Asked Questions PEYTO Exploration & Development Corp. 1. Peyto has had some spectacular growth over the last five 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 four years is t
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