Advantage Energy Ltd · TSX:AAV

Advantage Energy — Advantage Oil & Gas — Investor Presentation (September 2014)

35 slides from Advantage Energy's investor presentation, September 2014

  1. Slide 1: Investor Presentation September 2014

    “Record Q2 2014 Glacier Production, Industry Leading Low Cost Structure & Strong Cash Margin Reinforces Visibility to Execution of our Three Year Growth Plan” Investor Presentation TSX / NYSE: AAV September 2014

  2. Slide 2: Advantage: At a Glance

    ADVANTAGE: AT A GLANCE Intermediate Canadian Montney Producer Listed on TSX and NYSE AAV TSX 52‐week trading range ($Cdn) $3.66 ‐ $7.85 Shares Outstanding (basic) 169.4 million Record Glacier Q2 2014 production 136 mmcfe/d (22,685 boe/d) Market Capitalization (August 29, 2014) $1.1 billion Bank Debt

  3. Slide 3: Advantage Q2 2014 Highlights

    ADVANTAGE Q2 2014 HIGHLIGHTS  26% Glacier production growth to Record 136.1 mmcfe/d (22,685 boe/d)  81% Increase in Cash Flow to $0.25/share ($0.52/share for 6 months 2014)  88% Operating netback as % of Sales (strong netback margin)  31% Decrease in operating costs to $0.31/mcfe ($1.88/boe)  6

  4. Slide 4: Industry Leading Pure Play Montney Producer Focused on Glacier Area

    INDUSTRY LEADING PURE PLAY MONTNEY PRODUCER FOCUSED ON GLACIER AREA  Proven Montney only producer  Fully funded 3 year development plan  190% Cash Flow Per Share growth by 2017  100% Production/share growth by 2017 100% owned  Industry leading cost structure & netback margin Glacier Gas Glacier

  5. Slide 5: Glacier Delineation Drilling Provided Visibility to Multi-Layer Upside

    GLACIER DELINEATION DRILLING PROVIDED VISIBILITY TO MULTI‐LAYER UPSIDE Swan & Tupper at 4 to 7 wells/section density today. Potential for 20 wells/section at Glacier EnCana began horizontal drilling in 2005; however, numerous Advantage has drilled over 120 Montney wells at Glacier since 2008. vertic

  6. Slide 6: Glacier Delineation Drilling Led to Pentastack Development Plan

    GLACIER DELINEATION DRILLING LED TO “PENTASTACK” DEVELOPMENT PLAN Five Development Intervals Containing > 1,400 Future Locations  Development based on four wells per section per layer  Proven commercial well rates across Glacier in the Upper, Middle and Lower Montney  Three of the five intervals

  7. Slide 7: Middle Montney Liquids Resulted in Acquisition of New Montney Lands

    MIDDLE MONTNEY LIQUIDS RESULTED IN ACQUISITION OF NEW MONTNEY LANDS Phase VI drilling results confirm increasing liquids in east Glacier and extended liquids potential to 13‐29‐076‐12W6 C3+ =57 bbl/MMcf new lands acquired September 2013 Free C5+ =24 bbl/MMcf 12‐2‐76‐12W6 Middle Montney C3+ =42 bbl/M

  8. Slide 8: Going Forward: Financial Strength to Support Montney Growth Plan

    GOING FORWARD: FINANCIAL STRENGTH TO SUPPORT MONTNEY GROWTH PLAN Strengthened Balance Sheet Q2 2014 Total Debt / Cash flow 1.0x $94 million gross proceeds from Longview share sale $17.5 million from sale of Questfire investments 3 Year Downside Natural Gas Protection Total Debt/Cash flow 1.5x (1) ov

  9. Slide 9: Industry Leading Cost Structure Contributes to Strong Margin

    INDUSTRY LEADING COST STRUCTURE CONTRIBUTES TO STRONG MARGIN (UPDATED TO Q2 2014) Advantage’s full cycle margin is among the top Montney producers today. 2015 liquids production will further increase the realized price and margin. 9

  10. Slide 10: Three Year Fully Funded Glacier Growth Plan Details

    THREE YEAR FULLY FUNDED GLACIER GROWTH PLAN DETAILS: 100% PRODUCTION PER SHARE AND 190% CASH FLOW PER SHARE GROWTH Development Plan (3) Phase VII Phase VIII Phase IX Q2’14 to Q2‘15 to Q2’16 to Q1’15 Q1’16 Q1’17 Current Estimates Estimates Production (mmcfe/d) 12 month average 135 174 209 End of Phas

  11. Slide 11: Three Year Development Plan: Strong Growth Leads to Free Cash Flow

    THREE YEAR DEVELOPMENT PLAN: STRONG GROWTH LEADS TO FREE CASH FLOW Free cash flow is achieved in early 2017 based on Plan. Maintaining production at 245 mmcfe/d with a gas price of Cdn $3.65/GJ generates $160 million of free cash flow over a 12 month period Capital Capital Capital required required

  12. Slide 12: Track Record of Improving Operating Performance

    TRACK RECORD OF IMPROVING OPERATING PERFORMANCE Production Growth to 135 mmcfe/d & 73% Reduction in cost per frac despite increasing Operating Cost Reduction to ~$0.30/mcfe $475,000/frac stage average number of frac stages from 6 to 16 $130,000/frac stage No wells drilled 580% Increase in 2P Reserve

  13. Slide 13: Improving Upper & Lower Montney Well Performance with Slickwater

    IMPROVING UPPER & LOWER MONTNEY WELL PERFORMANCE WITH SLICKWATER Recent Upper and Lower Montney wells completed with slickwater fracs are outperforming Phase VII Budget type curve which is based on an IP30 6.9 mmcf/d. Graph illustrates production from 13 recent Montney wells (5 Upper and 8 Lower) Ph

  14. Slide 14: Improving Upper & Lower Montney Results Drives Attractive Well Payouts

    IMPROVING UPPER & LOWER MONTNEY RESULTS DRIVES ATTRACTIVE WELL PAYOUTS Average Type Curve Increased Each Year Top Tier Wells Trending toward Payout of <10 months(1) Cumulative production of >2 Bcf in first year • Upper and Lower Montney well performance has improved through frac design & increased r

  15. Slide 15: Solid Upper & Lower Montney Well Results Across Glacier

    SOLID UPPER & LOWER MONTNEY WELL RESULTS ACROSS GLACIER Upper Montney - Strong well results throughout block show Lower Montney – Recent wells with revised completions have markedly tremendous upside potential in future development locations. improved wells in West area. Advancing delineation to Nor

  16. Slide 16: Improving Liquids Rich Middle Montney Well Performance at Glacier

    IMPROVING LIQUIDS RICH MIDDLE MONTNEY WELL PERFORMANCE AT GLACIER Production Rate vs Time New Phase VI 12‐2 well started production at restricted rate of 9.5 mmcf/d. Still flowing over 6 mmcf/d after 150 days to manage handling of high liquid volumes Middle Montney wells have sequentially demonstrat

  17. Slide 17: Middle Montney: Results Confirm Liquid Trend and Improved Well Rates

    MIDDLE MONTNEY: RESULTS CONFIRM LIQUID TREND AND IMPROVED WELL RATES C3+ Middle Montney wells to date Liquids illustrate higher liquid content from Yield bbl/mmcf west to east across Glacier 26 57 31 63 30 bbl/mmcf 10 bbl/mmcf 76 vertical well 40 76 27  Historical Middle Montney wells confirm AAV g

  18. Slide 18: Proven Commerciality: Glacier Montney Well Economics

    PROVEN COMMERCIALITY: GLACIER MONTNEY WELL ECONOMICS(1) Dry Gas Liquids Rich Gas Upper and Lower Montney (2) Middle Montney Intervals (3) $10.9 million Rate of Return (%) $10.5 million $8.8 million $7.9 million $6.7 million $4.9 million Frac optimization of 108 Upper and Lower Montney wells since Pr

  19. Slide 19: Glacier Gas Plant (100% Owned): Significant Expansion Potential

    GLACIER GAS PLANT (100% OWNED): SIGNIFICANT EXPANSION POTENTIAL Glacier Gas Plant – Positioned for Production Ramp‐up 400 mmcf/d pipeline capacity to TCPL meter station in place 400 mmcf/d pipeline capacity to TCPL meter station in place Glacier Gas Plant Site & Proximity to Major Natural Gas & Liqu

  20. Slide 20: Advantage Summary: Growing Our Montney at Glacier

    ADVANTAGE SUMMARY: GROWING OUR MONTNEY AT GLACIER Focused on our world class 16 Tcf TPIIP Glacier Montney property and development of its 4.2 Tcfe contingent resources and 1.7 Tcfe 2P reserves(1)  Additional 43.25 net sections of new undeveloped Montney lands provides further upside Three Year Glac

  21. Slide 21: Appendix

    APPENDIX 21

  22. Slide 22: Glacier – Located in the Heart of the Montney Resource Play

    GLACIER – LOCATED IN THE HEART OF THE MONTNEY RESOURCE PLAY Montney Siltstone Comparison: • 700 times more permeability • 4x more formation thickness • Very low clay content • Liquids & Improved well efficiencies strong economics 22

  23. Slide 23: 2012 Core and Completion Studies: Increased Resource and Improved Well Results

    2012 CORE AND COMPLETION STUDIES: INCREASED RESOURCE AND IMPROVED WELL RESULTS Core study determined original density porosity logs have to be re‐ calibrated IP30’s on open hole Re‐calibration aligned log to actual wells improved by core porosities evident through entire 1.6x 290 meters of Montney f

  24. Slide 24: Upper and Lower Montney Average Well Type Curve Improvement

    UPPER AND LOWER MONTNEY AVERAGE WELL TYPE CURVE IMPROVEMENT (DATA UPDATED TO AUGUST, 2014) Advantage has significantly improved well performance since 2008. Utilization of more frac stages and slickwater fracs have recently created another step‐ rate change. We anticipate new technology could furthe

  25. Slide 25: Summary of Well Tests Referenced in Presentation Slides

    SUMMARY OF WELL TESTS REFERENCED IN PRESENTATION SLIDES Normalized Estimated Final Gas Test Rate Test Period Final Flow Pressure Final Gas Test Rate (1) C3+ liquid yield Horizontal Well Formation (mmcf/d) (hrs) (kpa) (mmcf/d) (bbls/mmcf) (2) 00/01-27-76-13W6 Upper Montney 11.2 78 4,601 11.4 - 02/10-

  26. Slide 26: Glacier Drilling Economics and 2P Recoveries per Interval

    GLACIER DRILLING ECONOMICS AND 2P RECOVERIES PER INTERVAL ($ millions unless otherwise indicated) Glacier Drilling Economics – PV’s @ 10% Discount(1) Dry Gas(3) Liquids Rich Gas(4) AECO C natural gas price ($/mcf)(2) $3.00 $4.00 $5.00 $3.00 $4.00 $5.00 IP30’s and 2P Reserves: 4 mmcf/d & 4 Bcf N/A N/

  27. Slide 27: Glacier March 31, 2013 Contingent and Prospective Resource Assessment

    GLACIER MARCH 31, 2013 CONTINGENT AND PROSPECTIVE RESOURCE ASSESSMENT Advantage engaged our independent qualified reserves evaluator Sproule Associates Ltd. (“Sproule”) to update the resource analysis and provide a 2C evaluation (“Sproule 2C Contingent Resource Evaluation”) at Glacier as of March 31

  28. Slide 28: Glacier Contingent and Prospective Resource Assessment

    GLACIER CONTINGENT AND PROSPECTIVE RESOURCE ASSESSMENT UPIIP (AAV Working Interest, Sales) (3) Low Estimate Best Estimate High Estimate Natural Gas Prospective Resources (Tcf) 0.342 0.556 0.776 Unrecoverable UPIIP (Tcf) 1.561 1.347 1.127 Natural Gas Liquids Prospective Resources (mbbls) 7,381 11,691

  29. Slide 29: Glacier Contingent and Prospective Resource Assessment

    GLACIER CONTINGENT AND PROSPECTIVE RESOURCE ASSESSMENT 2C (Best Estimate) Contingent Resources Gross 2C Recoverable Net Present Values Before Income Taxes ($ millions) Gross Number of Hz Resources per Location Interval Well Locations (Raw – Bcf per Well) 0% 10% 15% 1 60 3.425 777 46 13 2 286 4.035 6

  30. Slide 30: Glacier Contingent and Prospective Resource Assessment

    GLACIER CONTINGENT AND PROSPECTIVE RESOURCE ASSESSMENT Other Notes about Resource Estimates:  TPIIP, DPIIP and UPIIP have been estimated using a zero percent porosity cut‐off (sandstone log scale). The Montney formation is approximately 300 meters thick. Sproule’s analysis utilized 6 potential laye

  31. Slide 31: Appendix: Reserve and Resource Definitions

    APPENDIX: RESERVE AND RESOURCE DEFINITIONS Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on the analysis of drilling, geological, geophysical and engineering data; the use of

  32. Slide 32: Advisory

    ADVISORY Certain statements contained in this presentation constitute forward‐looking statements. These statements relate to future events or our future performance. All statements other than statements of historical fact may be forward‐looking statements. Forward‐looking statements are often, but n

  33. Slide 33: Advisory

    ADVISORY Advantage's actual decisions, activities, results, performance or achievement could differ materially from those expressed in, or implied by, such forward‐looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward‐looking statements wil

  34. Slide 34: Advisory

    ADVISORY The following abbreviations used in this press release, including in the appendices hereto, have the meanings set forth below: bbls barrels mcf thousand cubic feet bbls/d barrels per day mmcf million cubic feet mmcf/d million cubic feet per day mbbls thousand barrels bcf billion cubic feet

  35. Slide 35: Advantage Contact Information

    ADVANTAGE CONTACT INFORMATION Investor Relations 1.866.393.0393 ir@advantageog.com www.advantageog.com Listed on NYSE and TSX: AAV Advantage Oil & Gas Ltd. Suite 300, 440 – 2nd Avenue SW Calgary, Alberta T2P 5E9 Main: 403.718.8000 Facsimile: 403.718.8332 Advantage 100% W.I. Glacier Gas Plant Andy Ma

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