Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Investor Presentation (September 2016)
46 slides from Peyto Exploration & Development's investor presentation, September 2016
Slide 1: September 2016
September 2016
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: Peyto Profile
Peyto Profile PEYTO Exploration & Development Corp. N TSX Listing: PEY N Shares Outstanding: 164.6 million, 3% insiders (as of May 18/16) N Monthly Dividend: $0.11/share N Current Production: 0.6 BCFe/d (~100,000 boe/d) - restricted N YE 2015 2P Reserves: 3.5 TCFe (590 mmboes) N Q2 2016 Net Debt: $0
Slide 4: The Peyto Strategy: 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 5: The Peyto Strategy: 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 5 9/10/2016
Slide 6: Results in a Low Cost Advantage
The Peyto Strategy Results in a Low Cost Advantage PEYTO Exploration & Development Corp. Operating Costs Transportation Costs $20 $5 $4 $15 $3 $/boe $/boe $10 $2 $0.88 $5 $6.64 $1 $- $- Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1
Slide 7: Counter Cyclical Growth Per Share
The Peyto Strategy Counter Cyclical Growth Per Share PEYTO Exploration & Development Corp. liq prod/share Production per Unit or Share (boe/d per million) 700 gas prod/share 2016 YE Target $15 $75 AECO Forecast ($/GJ) >110,000 boe/d AECO ($/GJ) 600 Share price w/div $12 $60 500 Gas Price ($/GJ) PEY+
Slide 8: Highest Total Return On TSX
Compound Annual Total Return (%) 0 5 10 15 20 25 30 35 40 45 Peyto Expl. & Development Computer Modelling Group Stella-Jones Inc. Smart REIT ALIMENTATION COUCHE TARD Parkland Fuel Corp. GILDAN ACTIVEWEAR INC First Quantum Minerals Home Capital Group Inc. Pason Systems Source: BMO, Total return inclu
Slide 9: Peyto's Profitable Business
Peyto’s Profitable Business PEYTO Exploration & Development Corp. 9 9/10/2016
Slide 10: Profitable Business: Build it for less than we sell it
Peyto’s Profitable Business 15th 1998‐2013 “Build it for less than we sell it” PEY 2014 PEY 2015 Land/Acq/Disp $2MM Seismic $7MM Drilling $288MM PDP FD&A $/mcfe ($2.25) ($1.64) Compl. Wellsite Facilities $173MM $49MM $74MM $594MM ∆PDP Reserves (before Prod.) 60.4 mmboes PDP FD&A $9.84/boe Cash Costs
Slide 11: 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 36% Avg. "Profit“ Cum To Date $8 $6 Bonus $4 Cash Costs $1.38 ($0.81) $2 PDP FD&A ($1.64) $- Forecast Total Cash Costs per mcfe includes – Royalt
Slide 12: 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 Basin VII 2015 TOU 2015 PEY 2015 PDP FD&A $/mcfe ($3.56) ($2.29) ($1.64) Cash Costs $/mcfe ($2.57) ($1.40) ($0.81) Supply Cost ($6.13) ($3.69) ($2.4
Slide 13: More Profit Per Dollar Of Capital
Peyto’s Profitable Business More Profit Per Dollar Of Capital PEYTO Exploration & Development Corp. 50% 43% 40% 40% 32% 32% 30% 21% 19% 20% 9% 10% 7% CTD Earnings/Capital 4% 2000-2015 0% -10% -6% PEY ARX CNQ VET ERF COG TOU RRC BTE SWN First Energy 13 9/10/2016
Slide 14: Peyto's Unique Assets
Peyto’s Unique Assets PEYTO Exploration & Development Corp. 14 9/10/2016
Slide 15: Geographically Focused Core Areas
Peyto’s Assets Geographically Focused Core Areas PEYTO Exploration & Development Corp. • 440,000 net acres R10 R5W6 R27 R22 R17 • 9 operated R12 R7W5 gas plants Cutbank ---(730 mmcf/d net capacity) • 1600+ km pipelines • 1200+ producing zones T60 Kakwa • >100,000 boe/d T60 Chicken Leland Processed b
Slide 16: Deep Basin Permeability Segregation
Peyto’s Assets Deep Basin Permeability Segregation PEYTO Exploration & Development Corp. Ante Ck FOOTHILLS STRUCTURES Elmworth GAS AS ING INCRE BILITY EA PERM WATER Kaybob TRANSITION ZONE WATER Kakwa GAS Gas INCREAH DEPT SE AREA OF GAS Window MATURATION Wild River Sundance Edson Bighorn Deep Basin T
Slide 17: 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* 17 *NGL recoveries can increase by 15+ bbl/mmcf with deeper cutting processing facilities 9/10
Slide 18: The Most Profitable Part Of The Basin
Peyto’s Assets The Most Profitable Part Of The Basin PEYTO Exploration & Development Corp. 18 9/10/2016
Slide 19: Production By Formation
Peyto’s Assets Production By Formation PEYTO Exploration & Development Corp. 120,000 100,000 80,000 40% BOE/D Wilrich 60,000 20% Notikewin 40,000 23% Falher 20,000 8% Cardium 5% Bluesky 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 19 9/10/2016
Slide 20: Deep Basin Lands Go A Long Way
Peyto’s Assets Deep Basin Lands Go A Long Way PEYTO Exploration & Development Corp. 500 Peyto Lands 450 Net Lands (000's acres) 400 350 300 250 200 150 Net Peyto Sections 100 50 - Net Sections of Cardium, Dunvegan, Notikewin, Falher, Wilrich, Bluesky, & Cadomin Net Sections for 2.8 TCFe of PD EUR* (
Slide 21: 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 14 432 72 176 391 5 1 5 11 1 2 22 14 Over 10 90 94 140 77 years of 7 53 42 19 inventory in 81 120 279 SR+BLSK 16 alone (1
Slide 22: 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 2017-12-31 1,000,000 (>1526 agreements, 0 2003 2004 2005 2006 2007 2008 2009 2010 20
Slide 23: Greater Sundance Area
Peyto’s Assets Greater Sundance Area PEYTO Exploration & Development Corp. Peyto Oldman & Oldman North Sweet Gas Peyto Wildhay Plants Sweet Gas Plant 245 mmcf/d 90 mmcf/d Peyto Nosehill Sweet Gas Plant 125 mmcf/d Peyto Galloway Peyto Swanson Sweet Gas Plant Sweet Gas Plant 60 mmcf/d 120 mmcf/d Peyto
Slide 24: Brazeau River Area
Peyto’s Assets Brazeau River Area PEYTO Exploration & Development Corp. W Keyera Brazeau CP O’Chiese Sour Gas Plant (1968) Sour Gas Plant (1997) 200 mmcf/d 85 mmcf/d Peyto Brazeau Sweet Gas Plant (2013) 120 mmcf/d Keyera Nordegg Sour Gas Plant (1969) 75 mmcf/d Peyto Brazeau River 120 mmcf/d Sweet Ga
Slide 25: Facility Ownership And Control
Peyto’s Assets Facility Ownership And Control PEYTO Exploration & Development Corp. R9 R4W6 R26 R21 R16 R11 R6W5 Cutbank Waskahigan W Chicken T60 W Smoky/Kakwa Cutpick Leland/Berland Oldman North T55 Wildhay W W Nosehill W W Sundance Galloway WW Swanson Ansell P/L Peyto Gas Plants 50km, 10", $10MM Y
Slide 26: Drilling Cost Performance
Peyto’s Assets Drilling Cost Performance PEYTO Exploration & Development Corp. Hz Spirit River 5,000 40 4,412 4,500 34.5 4,268 4,299 4,291 4,308 4,240 4,231 4,269 4,152 4,155 35 Drill & Case Cost / Depth 4,066 3,999 4,000 29.3 30 3,500 23.6 25 3,000 $3,193 22.5 21.8 21.6 $2,926 20.6 Days $2,804 $2,7
Slide 27: Completion Cost Performance
Peyto’s Assets Completion Cost Performance PEYTO Exploration & Development Corp. $2,000,000 Monthly Average Completion Costs $300,000 $1,800,000 -35% $250,000 $1,600,000 $1,400,000 $200,000 Cost Per Stage $1,200,000 Total Cost $1,000,000 -50%? $150,000 $800,000 $100,000 $600,000 $400,000 $50,000 $20
Slide 28: 2015 - A Better Year
Peyto’s Assets 2015 - A Better Year PEYTO Exploration & Development Corp. 28 9/10/2016
Slide 29: Peyto's Incredible Returns
Peyto’s Incredible Returns PEYTO Exploration & Development Corp. 29 9/10/2016
Slide 30: Focus On Returns Drives Capital Discipline
Peyto’s Returns Focus On Returns Drives Capital Discipline PEYTO Exploration & Development Corp. 2016E ~ $10,000/boe/d 120,000 2015 - $11,600/boe/d 2014 - $16,800/boe/d $900 2013 - $15,100/boe/d 2016 Forecast Exit 110-115,000 boe/d Annual Production Wedge (boe/d) 2012 - $17,600/boe/d ONR Acq - $38,6
Slide 31: 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 30% $6 17 yr Average ROE 20% $4 10% $2 0% $0 Return On Capital Employed (%) Return On Equity (%) Earnings/share Realized Price ($/mcfe) 17 yr Average ROCE Return on Equity (ROE) is ea
Slide 32: Peyto's Future
Peyto’s Future PEYTO Exploration & Development Corp. 32 9/10/2016
Slide 33: 2016 Outlook: More for less
2016 Outlook More for less PEYTO Exploration & Development Corp. Drill ~125-135 Hz Wells (100% Hz-MSF, Liquids Rich Natural Gas) Expand & Extract Increase Processing Capacity & NGL Yield ~80 mmcf/d Increase Undeveloped Land Base Shoot Seismic 2016 Capital Program Acquire Additional Opportunitie
Slide 34: 2016 Outlook: Summer Production Strategy
2016 Outlook Summer Production Strategy PEYTO Exploration & Development Corp. 120,000 102,200 boe/d exit 120,000 100,000 85,700 boe/d exit 100,000 Defer new production for 75,200 boe/d exit better gas 80,000 80,000 price? It’s a better IRR! 57,000 boe/d exit BOED 60,000 42,100 boe/d exit 51,000 adde
Slide 35: Continuously Improve Profitability
2016 Outlook 15th 1998‐2013 Continuously Improve Profitability PEY 2016 Goals 93% Gas @ $2.05/GJ AECO daily/monthly 7% NGLs @ $40/bbl = 75% of CND light sweet Revenue $2.70/mcfe $/mcfe $3.20 $0.50/mcfe hedging gain $3.20/mcfe Peyto Realized Cash Costs $/mcfe ($0.70) Royalties Opex Transport ($0.10)
Slide 36: Where To From Here?
Peyto’s Future Where To From Here? PEYTO Exploration & Development Corp. 150,000 ~115-120,000 boed $11,000 /boe/d 100,000 $11,000 $16,800/boe/d /boe/d BOED $10,000 $15,100/boe/d /boe/d 11,600 $17,600/boe/d /boe/d 50,000 $17,500/boe/d $17,300/boe/d 2015 2016F Budget 2017 CAPEX 2018 CAPEX $594MM $550M
Slide 37: Appendix
Appendix PEYTO Exploration & Development Corp. N Quarterly Track Record N Tax Pools N Payout N Hedging Strategy N Gas Marketing N FAQ 37 9/10/2016
Slide 38: Quarterly Track Record
Quarterly Track Record PEYTO Exploration & Development Corp. 2016 2015 2014 2013 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Operations Production Oil & NGLs (bbl/d) 6,621 7,008 6,643 6,943 5,352 6,843 7,456 7,632 8,077 7,502 7,568 7,375 6,376 6,984 6,295 6,374 Natural gas (mcf/d) 489,3
Slide 39: 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 Q2/16 $600 $400 $200 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 CEC UCC (25%) CEE (100%) CDE (30%) COGPE (10%
Slide 40: Dividend Sustainability
Peyto’s Payout Dividend Sustainability PEYTO Exploration & Development Corp. Peyto Dividend Sustainability $2,500 $2,000 $1,500 Peyto Cum. Earnings Q2/16 $1,000 $500 $0 Q1 2000 Q4 2000 Q3 2001 Q2 2002 Q1 2003 Q4 2003 Q3 2004 Q2 2005 Q1 2006 Q4 2006 Q3 2007 Q2 2008 Q1 2009 Q4 2009 Q3 2010 Q2 2011 Q1
Slide 41: AECO vs NYMEX: Canada's Natural Gas Exports
AECO vs NYMEX Canada’s Natural Gas Exports PEYTO Exploration & Development Corp. Mainline T-south 1.1 BCF/D US 1.4 BCF/D GTN 1.5 BCF/D CAD (full) 1.7 BCF/D (4.5 cap) (2.3 cap) Northern Border Alliance 1.9 BCF/D 1.6 BCF/D 1.6 BCF/D (full) (full) Dawn Chicago 41 9/10/2016
Slide 42: Successful Hedging Strategy
Successful Hedging Strategy Peyto Realized Price History PEYTO Exploration & Development Corp. 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 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/mcf $6.44/mcf $5.36/mcf $4.
Slide 43: Gas Marketing: Future Sales (1 of 3)
Gas Marketing Future Sales (1 of 3) PEYTO Exploration & Development Corp. Financial Hedges - Gas Pricing 2014 2015 2016 2017 2018 Da te contra cte d GJ/d ($/GJ) 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 04-Mar-13 5000 $3.603 ● ● ● ● ● 13-May -13
Slide 44: Gas Marketing: Future Sales (2 of 3)
Gas Marketing Future Sales (2 of 3) PEYTO Exploration & Development Corp. Financial Hedges - Gas Pricing 2014 2015 2016 2017 2018 Da te contra cte d GJ/d ($/GJ) 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 04-Nov-14 5000 $3.850 ● ● ● ● 04-Nov-14 500
Slide 45: Gas Marketing: Future Sales (3 of 3)
Gas Marketing Future Sales (3 of 3) PEYTO Exploration & Development Corp. Financial Hedges - Gas Pricing 2015 2016 2017 2018 Date contracted GJ/d ($/GJ) 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 4-Feb-16 5000 $2.450 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
Slide 46: 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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