Advantage Energy Ltd · TSX:AAV
Advantage Energy — Advantage Oil & Gas — Investor Presentation (April 2016)
35 slides from Advantage Energy's investor presentation, April 2016
Slide 1: Investor Presentation April 2016
“Strengthened Balance Sheet with Industry leading Total Cash Costs of $0.77 per mcfe, capital efficiencies and strong hedging positions Advantage for continual organic growth.” Investor Presentation TSX / NYSE: AAV April 2016
Slide 2: Advantage at a Glance
ADVANTAGE AT A GLANCE TSX, NYSE: AAV TSX 52-week trading range $5.85 - $8.36 Shares Outstanding (basic) 184.4 million 2016 Annual Production Target 39% Annual Production Growth 200 mmcfe/d (33,300 boe/d) Market Capitalization @ March 31, 2016 $1.3 billion Estimated @ March 8, 2016: Bank Debt (57% un
Slide 3: Positioned for Profitable & Sustainable Growth
POSITIONED FOR PROFITABLE & SUSTAINABLE GROWTH World Class Glacier Montney Asset >1,000 future drill Strong Balance Sheet locations Industry Leading Low Cost 2016 Budget (2) @Cdn $2.00 per mcf Producer $26 million surplus cash flow $0.77/mcfe (3) total cash costs 1.2x Total Debt/Cash Flow 26 Employe
Slide 4: Focused on Glacier Development, Additional Montney Lands Provide Future Upside
FOCUSED ON GLACIER DEVELOPMENT ADDITIONAL MONTNEY LANDS PROVIDES FUTURE UPSIDE Current development at Glacier including dry and liquids rich gas drilling with a Progress (Future) future drilling inventory >1,000 locations 100% owned Glacier Gas 9 net Montney New Montney lands at Valhalla, Glacie
Slide 5: Continuous Improvement Has Created Industry Leading Efficiencies
CONTINUOUS IMPROVEMENT HAS CREATED INDUSTRY LEADING EFFICIENCIES… 5
Slide 6: Driving Strong Growth and Financial Flexibility in Our 2016 Budget
…DRIVING STRONG GROWTH AND FINANCIAL FLEXIBILITY IN OUR 2016 BUDGET… KEY ASSUMPTIONS DELIVERABLES $120 Million Capital $146 Million Cash Flow (1) ($26 million surplus) 32 Standing Wells 39% Production Growth 13 Wells to Drill for 2017 growth 12% Cash Flow per Share Available Glacier Plant AAV Growth
Slide 7: Surplus Cash Flow Targeted at Budget Commodity Prices
…WITH SURPLUS CASH FLOW TARGETED AT BUDGET COMMODITY PRICES ($ million) “Surplus Cash” $163 $146 $43 $26 $123 $120 Drill 13 wells $35 ~$70 million in H2 2016 Complete 13 wells $41 Pipeline looping $18 ~$50 million in H1 2016 Utilities GGS $17 Other $9 2016 Capital Budget 2016 Cash Flow 2016 Cash Flo
Slide 8: Advantage Development Plan – 2015 Through 2017
ADVANTAGE DEVELOPMENT PLAN – 2015 THROUGH 2017(1) Annual Average Production 22% Capital Spending CAGR (2) (mmcfe/d) ($ millions) 18% 235 40% $485 million Total (original 200 estimate $700 million) $200 $165 141 $120 2015 Actual 2016 Budget 2017 Estimate 2015 Actual 2016 Budget 2017 Estimate Cash Flo
Slide 9: Development Plan Sensitivity & Hedging Positions
DEVELOPMENT PLAN SENSITIVITY & HEDGING POSITIONS Current hedging program reduces downside risk and maintains upside torque Production Average Period Hedged (net) AECO Floor Price 2016 52% $3.62/mcf 2017 36% $3.24/mcf 2018 Q1 52% $3.10/mcf Notes: (1) Includes Advantage’s current hedges and updated fo
Slide 10: Maintenance Capital and Cash Flow Sensitivity
MAINTENANCE CAPITAL AND CASH FLOW SENSITIVITY “Staying Flat” is achievable at ≈ AECO $2.00/Mcf (NO HEDGING INCLUDED) Based on average well type curve (1) $115 million $200 million Based $155 million on top $115 million quartile $90 million type well (2) Maintenance Capital at Cash Flow at AECO Cash
Slide 11: Industry Leading Low Cost Structure Provides Strong Netbacks & Recycle Ratio
INDUSTRY LEADING LOW COST STRUCTURE PROVIDES STRONG NETBACKS & RECYCLE RATIO EVEN WITHOUT HEDGING “NO HEDGING INCLUDED” Illustrative AECO Cdn Glacier Operating Netback $2.00/mcf Revenue (Realized Price) $1.80 (1) Royalties ($0.09) AAV - Industry leading low ($0.35) cost structure Operating Costs (2)
Slide 12: 100% Owned Glacier Gas Plant to Be Expanded to 350 MMcf/d
100% OWNED GLACIER GAS PLANT TO BE EXPANDED TO 350 MMCF/D Plant Process Capacity expanded in 2015 to 250 mmcf/d provides additional plant capacity for 2016 & 2017 growth Next plant expansion to 350 mmcf/d begins in H2 2017 to accommodate growth in 2018 to 2020 100% ownership of the Glacier pla
Slide 13: Operational Excellence
OPERATIONAL EXCELLENCE 13
Slide 14: Large Inventory of Standing Wells & Production Capability
LARGE INVENTORY OF STANDING WELLS & PRODUCTION CAPABILITY "2016 Annual Target of 200 mmcfe/d attainable with current standing inventory of wells" 18 Wells Completed & Standing (as of April 2, 2016) 14 Wells Drilled, uncompleted 2-18 LM (2013) 21 mmcf/d(1) 5-3 UM 12-35 MM (2014) (2014) 12 mmcf/d(1) 1
Slide 15: Pentastack Development with Decades of Drilling Inventory at Glacier
“PENTASTACK” DEVELOPMENT WITH DECADES OF DRILLING INVENTORY AT GLACIER Capable of maintaining 245 mmcfe/d (40,830 boe/d) for >50 years (1) >1,000 Future Drill Locations at Glacier support future growth (1) 297 undeveloped locations booked in 2P reserves Year End 2015 (2) Drilled (3) Wells by L
Slide 16: Robust Upper & Lower Montney Dry Gas Well Economics
ROBUST UPPER & LOWER MONTNEY DRY GAS WELL ECONOMICS Upper & Lower Montney Middle Montney (Dry Gas) (50 bbls/mmcf C3+, 45% C5+) Advantage achieved 20% cost reduction to average $5.1 million DC & E 68% 45% 33% Type Higher IP Curve & & EUR 20% Case Higher IP Cost Type & EUR Curve & Case Cost 7.2/7.2 @
Slide 17: 2013 Upper & Lower Montney Wells Outperform Long Term Production Expectations
2013 UPPER & LOWER MONTNEY WELLS OUTPERFORM LONG TERM PRODUCTION EXPECTATIONS. 2014 WELLS JUST STARTED… New wells are normally restricted to ≤10 mmcf/d for frac sand flowback control during initial 6 months Ten wells from our 2014 program are demonstrating strong performance Production from 22 previ
Slide 18: Improving Liquids Rich Middle Montney Well Performance at Glacier
IMPROVING LIQUIDS RICH MIDDLE MONTNEY WELL PERFORMANCE AT GLACIER 10 New MM wells could exceed type curve Production Test Rate On-production Rate New 8-35 well (2014) cumulative production > 1.4 Bcf in 8 months (restricted) 12-2 well (2013) cumulative production > 3.0 Bcfe (restricted) with current
Slide 19: Growth Beyond 350 MMcf/d Can Be Accommodated on Existing Plant Site
GROWTH BEYOND 350 MMCF/D CAN BE ACCOMMODATED ON EXISTING PLANT SITE R14 R13 R12 R11 R10 R9 R8 R7W6 100% Owned Glacier Gas Plant – Positioned for T78 T78 Advantage Gas Plant Production Ramp-up T77 T77 Alliance Sales Gas Line TCPL Sales Potential Area Expansion to Potential Area Expansion to Meter Sta
Slide 20: Clear Vision for Growth, Financial Strength, Proven Expertise
Clear Vision for Growth Financial Strength Proven Expertise
Slide 21: Appendix
APPENDIX 21
Slide 22: Fully Funded Glacier Growth Plan Details
FULLY FUNDED GLACIER GROWTH PLAN DETAILS: 22% ANNUAL AVERAGE PRODUCTION GROWTH FOR 2015 TO 2017 Annual Average Production Development Plan (1) (2) (mmcfe/d) 2014 2015 2016 2017 235 Pro Forma Actual Actual Budget Estimate 200 Production Annual average (mmcfe/d) 132 141 200 235 growth (3) 26% 7% 39% 1
Slide 23: Upper and Lower Montney Wells - Improving Performance Since 2008
UPPER AND LOWER MONTNEY WELLS - IMPROVING PERFORMANCE SINCE 2008 Budget Type Curve (IP30 7.2 mmcf/d & 7.2 Bcf) Data: updated to March 2016 23
Slide 24: Exceptional Upper & Lower Montney Well Economics
(1) EXCEPTIONAL UPPER & LOWER MONTNEY WELL ECONOMICS Upper & Lower Montney Dry Gas (2) Budget Type Curve. Some recent Upper & Lower Montney wells are outperforming type curve (3) (1) Management estimates. NPV 10% pre-tax (2) Capital of $5.1 million per well based on management’s estimate of Capital
Slide 25: Strong East Glacier Middle Montney Well Economics
STRONG EAST GLACIER MIDDLE MONTNEY WELL (1) ECONOMICS Middle Montney at 50 bbls/mmcf C3+ (2) Budget type curve. Some recent MM wells are exceeding type curve. (3) (1) Management estimates. NPV 10% pre-tax (2) Capital of $5.8 million per well based on management’s estimate of Capital Cost for our nex
Slide 26: 2014 Middle Montney Program Focused on Higher Liquid Content in East Glacier
2014 MIDDLE MONTNEY PROGRAM FOCUSED ON HIGHER LIQUID CONTENT IN EAST GLACIER Glacier C5+ 57 Middle Montney wells to date illustrate higher liquid content(1) from west to east deg API 10 MM wells drilled in 2014 program at Glacier across Glacier East Glacier 30 to 83 bbls/mmcf 8 Wells completed & sta
Slide 27: Glacier Montney Assigned 2P EUR Per Well & Interval
GLACIER MONTNEY ASSIGNED 2P EUR PER WELL & INTERVAL 2P Recoveries per Interval(1) # of Gross HZ Wells 2P Recovery [bcf/well] Interval Developed Undeveloped TOTAL Developed Undeveloped TOTAL YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE 2012 2013 2014 2015 2012 2013 2014 201
Slide 28: 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 Up to 83 bbls/MMcf 28
Slide 29: 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
Slide 30: Investment Analysis of 2013 Drilling Program
INVESTMENT ANALYSIS OF 2013 DRILLING PROGRAM (25 Wells, No Hedging Gains Included) Capital Investment DC & E 25 Wells in 2013(1) ($150) million Allocation of Plant, GGS, P/L cost to 25 wells (2) ($13) million Total Capital investment (July 2013 to March 2014) ($163) million “90% of Capital Cash Flow
Slide 31: Advantage Compared to North American Gas Weighted Producers
ADVANTAGE COMPARED TO NORTH AMERICAN GAS WEIGHTED PRODUCERS 16E/15E Production Growth (%) 2016E Total Cash Costs (Cdn $/boe) $12.78 $12.43 38% 17% $4.48 13% AAV Canadian E&P US E&P AAV Canadian E&P US E&P (Gas Weighted) (Gas Weighted) (Gas Weighted) (Gas Weighted) 2016E Capital/Cash Flow (%) 2016E D
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
Slide 33: Advisory
ADVISORY determinative of the rates at which such wells will commence production and decline thereafter and are not indicative of long term performance or of ultimate recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for Ad
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
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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