Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Investor Presentation (June 2019)
54 slides from Peyto Exploration & Development's investor presentation, June 2019
Slide 1: June 2019
June 2019
Slide 2: Regarding Forward-Looking Statements
Advisory 20th 1998‐2019 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", "ma
Slide 3: Who We Are
PEY.TO 20th1998‐2019 Who We Are N 6th Largest Natural Gas Producer in Canada N Pure Play Alberta Deep Basin – ~85,000‐90,000 boe/d Gas & NGLs N Returns Focused Strategy – Avg ROCE 16%, ROE 29% over last 20 yrs, among highest in industry N Long Reserve Life Asset ‐ 9 yrs PDP, 25 yrs 2P, sweet gas, no
Slide 4: Total Shareholder Return Model
PEY.TO 20th 1998‐2019 Total Shareholder Return Model Future Prospects Past Profits 4 BOE factor - 6 mcf = 1 bbl of oil equivalent 6/3/2019
Slide 5: The World Needs More Energy
The Big Picture 20th 1998‐2019 The World Needs More Energy 5 Source: BP Energy Outlook 2019 6/3/2019
Slide 6: Who Should Supply That Energy?
The Big Picture 20th 1998‐2019 Who Should Supply That Energy? Environmental Regulations Worker Safety Russia Saudi Iran Iraq Human Rights Ethical Standards Gender Equality Indigenous Consultation Russia Qatar China Iran CANADA 6 Source: Modern Resources 6/3/2019
Slide 7: Peyto Does It Better
The Big Picture 20th 1998‐2019 Peyto Does It Better Emission Intensity by Source Type for Canadian Oil and Gas (1990, 2005, 2016) 140 140 Emmission Intensity per Barrel (kg CO2eq/bbl) 121.4 120 105.4 120 100 88.4 90.1 100 83.4 79.5 80 80 53.8 56.1 52.1 60 50.3 49.1 60 42.8 40 40 23.9 22.9 20 20 0 0
Slide 8: Continuously Improving Environmental Performance
The Big Picture 20th 1998‐2019 Continuously Improving Environmental Performance Peyto GHG Emissions Intensity tCO2eq/boe (direct and indirect) 0.029 0.026 0.025 0.024 0.022 0.021 in GHG Emissions Intensity 2013 2014 2015 2016 2017 2018 Peyto Flaring and Venting of Methane 0.61 0.77 0.74 0.65 0.58 0.
Slide 9: So What Does All This Mean?
The Big Picture 20th 1998‐2019 So What Does All This Mean? Canada has energy abundance. Canada has a moral obligation to provide the rest of the world with our clean, responsibly developed energy to improve lives and preserve the environment. Peyto can continue to be an industry leader by prov
Slide 10: The Peyto Strategy
The Peyto Strategy PEYTO Exploration & Development Corp. 10 6/3/2019
Slide 11: What We Continue To Believe
Peyto’s Strategy 20th 1998‐2019 What We Continue To Believe N “Nature’s gas is the fuel for the future.” N “Our gas and NGLs are made from all natural, decomposed, organic materials.” N “Our business focus is on maximizing the return on invested capital – your capital.” N “By maintaining low cash co
Slide 12: Changing Gas Market Requires Changing Strategy
Peyto’s Strategy 20th 1998‐2019 Changing Gas Market Requires Changing Strategy US Natural Gas (EIA) 100 Supply Demand Supply Driven Driven Driven 90 80 83.4 82.1 70 60 50 40 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 U.S. Natural Gas Total Consumption BCF/d U.S. Dry Natural Gas
Slide 13: Integrate the Entire Oil & Gas Value Chain
Peyto’s Strategy 20th 1998‐2019 Integrate the Entire Oil & Gas Value Chain 13 6/3/2019
Slide 14: Fast Becoming an Integrated Energy Business
Peyto’s Strategy Fast Becoming an Integrated Energy Business PEYTO Exploration & Development Corp. Exploration and Development Production and Processing Storage and Marketing Midstream and Power Generation • 647 Lands Purchased (YE ‘18) • 1,475 producing wells North American market 300+ mmcf/d midst
Slide 15: Canadian Gas Egress Is Expanding
Peyto’s Strategy 20th 1998‐2019 Canadian Gas Egress Is Expanding Dry Natural Gas Production - Canada 25 (EIA) $9 LNG Export 2.0 Bcf/d $8 21 $7 LNG Canada 20 $6 NGTL Expansion $5+30% BCF/D 19 $4 15 $3 $2 $1 10 $0 2000 2005 2010 2015 2020 2025 3.2 Bcf/d NGTL Expansion – 2019 to 2021 Canadian Gas Produ
Slide 16: 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 Q4/18 $300 $200 $100 $- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 CAPEX ($MM) Earnings ($'000) Peyto Capital CTD Q4/1
Slide 17: Dividend Sustainability
The Peyto Strategy Dividend Sustainability PEYTO Exploration & Development Corp. $3,000 $2,500 $2,000 Peyto Ctd. Earnings (MM$) $1,500 Q4/18 $1,000 $500 $0 Q4 1999 Q4 2000 Q4 2001 Q4 2002 Q4 2003 Q4 2004 Q4 2005 Q4 2006 Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2015 Q4 2016
Slide 18: Profitable Business
Peyto’s Profitable Business PEYTO Exploration & Development Corp. 18 6/3/2019
Slide 19: Build it for less than we sell it
Peyto’s Profitable Business “Build it for less than we sell it” PEYTO Exploration & Development Corp. 2018 PEY 2014 PEY 2015 PEY 2016 PEY 2017 PEY 2018 Land/Acq/Disp Seismic Drilling PDP FD&A $/mcfe ($2.25) ($1.64) ($1.44) ($1.36) ($1.18) Compl. Wellsite Facilities $232MM Cash Costs $/mcfe ($1.08) (
Slide 20: The Price Bar Is Now Very Low, We Must Go Lower
Peyto’s Profitable Business The Price Bar Is Now Very Low, We Must Go Lower PEYTO Exploration & Development Corp. AECO $10 Monthly $/GJ Peyto Realized Gas Price ($/mcfe) $8 36% Avg. $6 "Profit“ CTD Bonus $4 PDP FD&A 35% $2 36% Cash Costs 29% $- Total Cash Costs per mcfe includes – Royalties, Op Cost
Slide 21: Competitive In The North American Marketplace
Peyto’s Profitable Business Competitive In The North American Marketplace PEYTO Exploration & Development Corp. 100% Montney 60% DB/40% Mont. 100% Deep 100% Montney 10% DB/90% Mont. VII 2018* TOU 2018* Basin PEY 2018 AAV 2018* ARX 2017* PDP FD&A $/mcfe ($2.67) ($1.52) ($1.18) ($1.51) ($1.28) Cash Co
Slide 22: Results in a Low Cost Advantage
Peyto’s Profitable Business Results in a Low Cost Advantage PEYTO Exploration & Development Corp. $2.92 $5.02 ($0.25) $1.40 BOE factor - 6 mcf = 1 bbl of oil equivalent 22 Data from Peter’s & Co. 6/3/2019 Gas producers include: AAV,PNE,CKE,CQE,TOU,SRX,BIR,BXE,CR,ARX,BNP,POU,DEE,KEL,ECA,VII
Slide 23: Unique Assets
Peyto’s Unique Assets PEYTO Exploration & Development Corp.
Slide 24: Geographically Focused Core Areas
Peyto’s Assets Geographically Focused Core Areas PEYTO Exploration & Development Corp. • 480,000 net acres R10 R5W6 R27 R22 R17 R12 R7W5 • 9 operated gas plants Cutbank ---(835 mmcf/d net capacity) • 1600+ km pipelines • 1200+ producing zones T60 Kakwa • 100,000 boe/d T60 Chicken Leland Pine Creek O
Slide 25: 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 25 6/3/2019
Slide 26: 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* 26 *NGL recoveries can increase by 15+ bbl/mmcf with deeper cutting processing facilities 6/3/
Slide 27: Large Hz MSF Inventory
Peyto’s Assets 20th1998‐2019 Large Hz MSF Inventory Done1 To Do Total Total Total Total Hz(Vt) Hz Locations Vertical Hz Locations Unbooked Wells Wells Booked* (2) 2 440 113 363(12) 384 5 1 5 7 1 2(2) 18 90 176 165(2) 61 7 74 40 8 111 166 303 2 20 14 385 370 153 4 40 54 44 12 2 87 2 18 205 1 0 120 66
Slide 28: 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, & Montney Net Sections – Developed Area of All Reserves F
Slide 29: The "New" Cardium Play – Abundant Opportunities
Peyto’s Assets 20th 1998‐2019 The “New” Cardium Play – Abundant Opportunities Oldman & Oldman North Nosehill Wildhay Swanson Galloway 29 6/3/2019
Slide 30: Facility Ownership And Control
Peyto’s Assets 20th 1998‐2019 Facility Ownership And Control Cutbank Kakwa Oldman (with Deep Cut) & Oldman North Nosehill Wildhay Galloway Swanson Peyto Gas Plants YE 2014 YE 2015 YE 2016 YE 2017 YE 2018 WI Whitehorse (on hold) 1 Oldman 125 mmcf/d 125 mmcf/d 125 mmcf/d 125 mmcf/d 125 mmcf/d 100% 2 N
Slide 31: "Big Sunny" Natural Gas Storage Scheme
Peyto’s Assets 20th 1998‐2019 “Big Sunny” Natural Gas Storage Scheme R.25 R.24 R.23 R.22 R.21 R.20 R.19 R.18 Nosehill Creek North Meter Station 139 mmcfd Capacity T.56 T.56 Obed North Oldman Meter Station 227 mmcfd Capacity North Nosehill Edson Viking D Gas Storage Unit Mayberne • TCPL Owned and Ope
Slide 32: 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 33: The "New" Cardium Play – Proving the Type Curve
Peyto’s Assets 20th 1998‐2019 The “New” Cardium Play – Proving the Type Curve 33 March 26, 2019 Strip Pricing: AECO 2019 - $1.45/GJ, WTI 2019 - US$63 6/3/2019
Slide 34: The "New" Cardium Play – Best Results Yet?
Peyto’s Assets 20th 1998‐2019 The “New” Cardium Play – Best Results Yet? 34 EURs are from the Insite Petroleum Consultants Report of December 31, 2018 6/3/2019
Slide 35: New Montney Play and Potential Expiries
Peyto’s Assets 20th 1998‐2019 New Montney Play and Potential Expiries Potential Montney Intermediate Term Expiries 2019-2020 35 6/3/2019
Slide 36: Incredible Returns
Peyto’s Incredible Returns PEYTO Exploration & Development Corp. 36 6/3/2019
Slide 37: 2018 Post Mortem Returns Analysis
Peyto’s Assets 20th 1998‐2019 2018 Post Mortem Returns Analysis Cardium completion attempts with cased hole and cemented systems 37 Full cycle IRR is determined using actual capital spent on each well, including a $365k provision for land, seismic, and facilities. 6/3/2019 Economics are run using ac
Slide 38: 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 20 yr Avg ROE to 2018 30% $6 20% $4 10% $2 0% $0 Return On Capital Employed (%) Return On Equity (%) Earnings/share Realized Price ($/mcfe) 20 yr Avg ROCE to 2018 Return on Equity (RO
Slide 39: Future
Peyto’s Future PEYTO Exploration & Development Corp.
Slide 40: 2019 Outlook
Peyto’s Future 20th 1998‐2019 2019 Outlook Drill ~50Hz Wells (Liquids Rich Natural Gas) vs 70 in 2018 Market 3rd Party Capacity Offer Excess Capacity to Other Operators Increase Opportunities Undeveloped Land Base Diversify Markets Evaluate New Pipe Options 2019 Capital Program Improve Balance
Slide 41: 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 27 bbl/mmcf 32 bbl/mmcf 36 bbl/mmcf, exit >18,000 bbl/d Temporary liquids rejection, low $4.19 C3/C4 price + high gas price = less prod. but more CF
Slide 42: Liquids Growth
Peyto’s Future 20th 1998‐2019 Liquids Growth Periods where Oldman Deep Cut shut in Liquids growing faster than gas in the short term 42 6/3/2019
Slide 43: 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 PEY 2019 Goals 91% Gas @ $2.30/GJ 89% Gas @ $1.43/GJ*1.16 86% Gas @$1.50/GJ*1.15 AECO*115% 14% NGLs @$50/bbl=(60%ofoil) 9
Slide 44: Future Market Diversification and Gas Price Protection
Gas Marketing 20th 1998‐2019 Future Market Diversification and Gas Price Protection 88% Hedged 75% Hedged 21% Hedged 2% Hedged Markets Markets Markets Markets 99% AECO 64% AECO 42% AECO 43% AECO 1% Dawn 11% Dawn/Vent 13% Dawn/Vent 15% Dawn/Vent 0% Henry Hub 25% Henry Hub 45% Henry Hub 42% Henry Hub
Slide 45: Minimized AECO Spot Market Exposure
Gas Marketing 20th 1998‐2019 Minimized AECO Spot Market Exposure 31% Liquids 38% Revenue Liquids Revenue 45 * 2019 and beyond provided for illustration only. Budgets and forecasts beyond 2019 have not been finalized and are subject to change due to a variety of factors including but not limited to p
Slide 46: LNG Consortium and Export Potential
Gas Marketing 20th 1998‐2019 LNG Consortium and Export Potential 46 6/3/2019
Slide 47: Fixed Price Swaps For Gas and Liquids
Gas Marketing Fixed Price Swaps For Gas and Liquids PEYTO Exploration & Development Corp. 47 For a real time summary of Peyto’s future hedges see: http://www.peyto.com/Files/Operations/Marketing/hedges.pdf 6/3/2019 •Assumes an Average Heating Value of 1.15 GJ/mcf for Peyto’s gas
Slide 48: 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 49: Appendix
Appendix PEYTO Exploration & Development Corp. N Quarterly Track Record N Tax Pools N Gas Marketing N Leverage N Reserves Growth 49 6/3/2019
Slide 50: Quarterly Track Record
Quarterly Track Record PEYTO Exploration & Development Corp. 2018 2017 2016 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Operations Production Oil & NGLs (bbl/d) 9,692 10,273 9,209 9,243 10,043 9,337 10,479 8,958 8,319 9,586 7,457 8,938 7,247 6,621 Natural gas (mcf/d) 493,921 458,792 456,197 4
Slide 51: 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 Q4/18 $600 $400 $200 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 CEC UCC (25%) CEE (100%) CDE (
Slide 52: Successful Hedging Strategy Smoothes Volatility
Gas Marketing Successful Hedging Strategy Smoothes Volatility PEYTO Exploration & Development Corp. Gas Price ($/mcf) $12.00 $12.00 Peyto has beat the AECO $10.00 monthly price in 11 of the $10.00 last 13 years using a $8.00 methodical hedging strategy. $8.00 $6.00 $6.00 $4.00 $4.00 $2.00 $2.00 $- $
Slide 53: 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 60% cheaper term debt 40% 20% Debt/PDP NPV10 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 20
Slide 54: Reserves Growth
Peyto’s Assets 20th 1998‐2019 Reserves Growth 7,000 6,000 5,000 17% CAGR 4,000 3,000 2,000 1,000 TCFe of Discovered Reserves 0 Probable Additional Proved Undeveloped Proved Developed Producing Cum Production BCFE 54 6/3/2019
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