Advantage Energy Ltd · TSX:AAV
Advantage Energy — Advantage Oil & Gas — Investor Presentation (July 2011)
25 slides from Advantage Energy's investor presentation, July 2011
Slide 1: Capital Budget & Guidance (July 2011 – June 2012)
Capital Budget & Guidance (July 2011 – June 2012) July 2011 July 2011 Page 1
Slide 2: Corporate Highlights
Corporate Highlights • Advantage now a „pure play‟ Montney natural gas resource company • Pro forma Advantage production ~23,500 boe/d Q2 2011 • Oil weighted assets sold to Longview Oil Corp. (AAV 63% ownership) • Capex program focused on Montney development at Glacier • In ~3 years: Grew 2P reserve
Slide 3: Capital Budget to Grow Corporate Production 24%
Capital Budget to Grow Corporate Production 24% • Capital Budget $216 million for 12 months ended June 30, 2012 • Capital program focused on Montney Phase IV development at Glacier • $200 million (93%) allocated to Glacier with 2 key objectives: i. Increase Glacier throughput to 140 mmcf/d $155 mill
Slide 4: Advantage – “Pure Play” Natural Gas Focus
Advantage – “Pure Play” Natural Gas Focus Company Total Montney Unconventional June Exit Production : 23,400 boe/d June Exit Production : 15,700 boe/d Gas/Oil % : 100/0 Gas/Oil % : 94/6 Avg. W.I. : 93% Liquids Rich Multi-zone CBM + Colorado Group June Exit Production : 4,200 boe/d 2011 June Producti
Slide 5: Glacier Development Driving Organic Production Growth & Lower Operating Costs
Glacier Development Driving Organic Production Growth & Lower Operating Costs Advantage Production Growth (1) Advantage Operating Costs boe/d $/boe 30,000 13.89 138% Production 12.11 Growth 24,000 10.66 8.40 18,000 6.65 6.00 12,000 6,000 0 2008 2009 2010 H1 2011E H2 2011E H1 2012E 2008 2009 2010 201
Slide 6: Glacier Phase IV Development Program
Glacier Phase IV Development Program • Project cycle July 2011 to June 2012 • Capital program of $200 million is comprised of: Drill, complete & equip 30 Montney wells (100% W.I.) $176 million - 11 wells to sustain 100 mmcf/d base - 19 wells (including 7 to evaluate Lower & Middle Montney) to fill 1
Slide 7: Glacier's Location Provides Technical & Economic Benefits
Glacier‟s Location Provides Technical & Economic Benefits BC AB Glacier is located in Alberta and is within the over-pressured and extremely thick Montney siltstone fairway with Upper, Middle & Lower Montney Potential A 100 km A‟ 09-36-79-20W6 05-09-76-13W6 01-21-77-11W6 c-42-F 93-P-09 A Upper Montn
Slide 8: Significant Future Drilling Potential at Glacier
Significant Future Drilling Potential at Glacier Only 60 net wells drilled to date at Glacier. Drill Inventory could exceed 900 locations Current Inventory # Net Wells of Future Drilling Drilled/Tested to Date Locations (1) Upper Montney 52 300 – 350 2 (partially tested as Middle Montney 300 – 400 p
Slide 9: Glacier - Drilling Results & Upside Potential Support Future Growth
Glacier - Drilling Results & Upside Potential Support Future Growth 100 mmcf/d Phase III Upper Montney Test Rates mmcf/d(1) Glacier Production History Phase III March 2011 Recent delineation drilling results 50 mmcf/d confirm high quality reservoir across Phase II our land block 2010 25 mmcf/d Phase
Slide 10: Glacier Improved Well Production Enhances Economics
Glacier Improved Well Production Enhances Economics Glacier Upper Montney Horizontal Wells Normalized 30 Day IP Average Production Rate per Well 6000 32 recent wells with >9 fracs/well 5000 1 year cumulative 0.9 bcf Glacier well economics based on 5 mmcf/d IP, 5 bcf, $5.8 million/well, $4.00 Cdn fla
Slide 11: Glacier Montney Well Economics 80% ROR at $5.00/mcf Cdn
Glacier Montney Well Economics 80% ROR at $5.00/mcf Cdn Glacier Montney Horizontal Well Glacier Montney Horizontal Well NPV10% BT Rate of Return (%) 16 200 14 180 12 160 10 140 Rate of Return - % NPV 10% - $MM 8 120 6 100 4 80 2 60 0 40 -2 20 -4 0 2.00 3.00 4.00 5.00 6.00 7.00 2.00 3.00 4.00 5.00 6.
Slide 12: Glacier Gas Plant Expansion
Glacier Gas Plant Expansion • Glacier gas plant (100% W.I.) will be expanded to 140 mmcf/d capacity by Q2 2012 for $13 million • Cost effective expansion due to optimization of existing equipment • Expansion beyond 140 mmcf/d will require: • Additional processing equipment • Expansion of gas plant •
Slide 13: Glacier – Strong Operating Netbacks
Glacier – Strong Operating Netbacks Glacier Operating Netbacks at: 100 mmcf/d 140 mmcf/d Revenue ($Cdn/mcf) $4.00(1) $4.00(1) Royalties (@ Royalty Rate 5.0%) $(0.20) $(0.20) Operating Costs $(0.30) $(0.20) Operating Netback ($/mcf) $3.50 $3.60 Annualized Operating Cash Flow $128 $184 ($ million) (1)
Slide 14: Guidance – 12 Months ending June 2012
Guidance – 12 Months ending June 2012 Guidance H2 2011 H1 2012 12 Months Production Average (boe/d) 22,900 - 23,400 27,100 - 27,600 25,000 - 25,500 Royalty Rate (%) 10% - 12% 10% - 12% 10% - 12% Operating Costs ($/boe) $6.50 - $6.80 $5.75 - $6.25 $6.12 - $6.50 Capital Expenditures ($Millions) $125 -
Slide 15: Significant Debt Reduction Provides Balance Sheet Strength
Significant Debt Reduction Provides Balance Sheet Strength Total Debt has been reduced by 69% since 2008 $807 million $469 million $440 million 57% $251million 2008 YE 2009 YE 2010 YE Q1 2011 Pro-forma Convertible Debentures Bank Debt July 2011 Page 15
Slide 16: Advantage - Current Enterprise Value Analysis
Advantage - Current Enterprise Value Analysis # Shares (million) ($ million) Advantage Shares @$7.74/share(1) 165.0 $1,277 Current Total Debt $ 250 Total Enterprise Value $1,527 Less non-Glacier Assets ($ 410) (Pv 10% pre-tax, Sproule) (2) Less Longview Equity @$12.02/share(1) 29.4 ($ 334) Implied V
Slide 17: Advantage Summary
Advantage Summary • Corporate production to grow 24% to 29,000 boe/d (H1 2012 exit) • Glacier growth to 140 mmcf/d increases cash flow & improves cost structure • Further evaluation of Lower & Middle Montney layers could add significant resource & reserves growth • Glacier drilling inventory could e
Slide 18: Advantage Contact Information
Advantage Contact Information Investor Relations 1.866.393.0393 ir@advantageog.com Andy Mah, P.Eng. President & Chief Executive Officer Craig Blackwood, C.A. Vice-President, Finance www.advantageog.com TSX:AAV NYSE:AAV Advantage Oil & Gas Ltd. Suite 700, 400 – 3rd Avenue SW Calgary, Alberta T2P 4H2
Slide 19: Appendix
Appendix @avantage July 2011 Page 19 ‘Oil & Gas Ld
Slide 20: Glacier – Thick Montney “Siltstone” Supports Higher Reserve Recoveries
Glacier – Thick Montney “Siltstone” Supports Higher Reserve Recoveries Unconventional Marcellus Glacier Shale Horn River Edmonton Shale Barnett Calgary “Shaley” silts Haynesville Arc Silt Shell Birchcliff Most active drilling area in Glacier Montney “Tight” sand Conventional Encana AAV Glacier the M
Slide 21: Recent M&A Activity
Recent M&A Activity Recent M&A Activity: CNRL PENGROWTH ARC • CNRL / Talisman • ARC / Storm SHELL ARC • Pengrowth / Monterey CNRL MURPHY BIRCHCLIFF • Apache / BP Tupper W ENCANA • Murphy / Cequence SWAN AAV MURPHY GLACIER DEVON ENCANA CNRL CNRL APACHE APACHE Deep Basin BC AB July 2011 Page 21
Slide 22: Montney Horizontal Well Production Range and Type Curve
Montney Horizontal Well Production Range and Type Curve Data includes Glacier, Swan, Tupper, Pouce Coupe South & Groundbirch The IP30 range and average type curve based on 320 wells with up to 48 months of production history 30 Day IP Distribution 25% 20% 15% 10% 5% 0% 0-1 1-2 2-3 3-4 4-5 5-6 6-7 7-
Slide 23: Top Quartile Initial Production Rates (30 day) at Glacier
Top Quartile Initial Production Rates (30 day) at Glacier To date results at Glacier prove up a Glacier Production Growth to significant amount of acreage across the land 50 mmcfd in 20 months block and IP‟s are comparable to EnCana Swan wells EnCana Swan EnCana Swan Advantage Glacier Advantage IP 3
Slide 24: Montney – Reserves/Well Could Exceed Expectations due to Silt/Sand Reservoir
Montney – Reserves/Well Could Exceed Expectations due to Silt/Sand Reservoir Barnett Shale Horizontal vs Montney Horizontal Montney type well @ Swan (based on 50 wells that have the longest production history) Barnett Shale type wells by operator July 2011 Page 24 Source: Facts are Stubborn Things,
Slide 25: Advisory
Advisory The information in this presentation contains certain forward-looking statements, including within the meaning of the United States Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future intentions or performance. All statements other than s
Advantage Oil & Gas — Investor Presentation (July 2011) on 6ix