Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Investor Presentation (June 2024)
42 slides from Peyto Exploration & Development's investor presentation, June 2024
Slide 1: Corporate Presentation June 2024
www.peyto.com Corporate Presentation June 2024
Slide 2: Who Is Peyto 101
WHO IS PEYTO | 101 25-year publicly traded company focused Focused Assets exclusively in the Alberta Deep Basin ALBERTA 5th Largest 124,000 boe/d (~12% liquids) April 2024 Canadian Gas Long reserve life assets (10yr PDP RLI , 30yr Producer 2P RLI @ 2023YE) Deep Basin 1.1 million net acres Operate an
Slide 3: Who Is Peyto | Focused Core Areas
WHO IS PEYTO | FOCUSED CORE AREAS ✓ 1.1MM net acres of Alberta Deep Cutbank Basin Lands ✓ Own and operate 17 gas processing facilities with over 1.5 bcf/d of gross production capacity Kakwa ✓ Proximal to major pipeline egress (NGTL, Alliance) ✓ Drilled over 1,300 horizontals to date across 13 discre
Slide 4: Why We Do It | Natural Gas
WHY WE DO IT | NATURAL GAS Demand for Natural Gas Continues World Energy Consumption by Source (1965-2023) 700 Fossil fuels represent over 80% of 600 the world’s energy consumption. Natural gas can play a significant 500 role to displace coal in the future. Exajoules 400 300 200 100 0 1965 1970 1975
Slide 5: Why We Do It | Growing LNG Capacity
WHY WE DO IT | GROWING LNG CAPACITY Rio Grande Costa Azul LNG Canada Plaquemines Corpus Christi III Golden Pass FAST LNG LNG growth in North America in 2024 - 2027 ✓ Fast LNG 0.6 bcf/d ✓ Golden Pass 2.4 bcf/d ✓ Corpus Christi 1.5 bcf/d 12 bcf/d of ✓ Plaquemines 3.2 bcf/d ✓ LNG Canada 1.8 bcf/d new c
Slide 6: North American Demand for Natural Gas Continues to Grow
WHY WE DO IT | NATURAL GAS North American Demand for Natural Gas Continues to Grow USA Electricity Generation from Gas Further coal to gas switching could add ~5 3500 Coal to gas switching in the bcf/d of gas demand by 2030 or as much 70 USA has added 10 – 15 bcf/d as 16 bcf/d if all coal plants are
Slide 7: How We Do It | Peyto & the Deep Basin
HOW WE DO IT | PEYTO & THE DEEP BASIN (1) $6.00 2023 YE PDP FD&A ($/mcfe) Average Injected Water per(3) Well by Formation, 2022 $5.00 500,000 Fit-for-purpose, nimble rigs (telescopic Better reservoir quality than other Water per Well(bbl/Well) $4.00 doubles) decrease cycle time and lowers 400,000 pl
Slide 8: How We Do It | Low Costs Drive Margins
HOW WE DO IT | LOW COSTS DRIVE MARGINS At Peyto we focus on costs since they are “sticky”, and they drive superior margins. Peyto’s margins were even stronger than liquids-weighted producers in 2023. 2023 Cash Costs ($/mcfe) 2023 YE Results $4.50 70% PEY $4.00 65% $3.50 60% Pre-Hedge Margin $3.00 55
Slide 9: How We Do It | Own and Control
HOW WE DO IT | OWN AND CONTROL Gross Gross Raw Net Capacity Gas Plants Capacity Throughput (MMcf/d) (MMcf/d) (MMcf/d) 1 Edson (WI: 83%) 275 228 91 2 Swanson 130 130 73 3 Nosehill 125 125 73 4 Oldman (Deep Cut) 125 125 94 5 Brazeau 120 120 60 9 6 Oldman North 105 105 88 7 Wild River (WI: 81%) 100 81
Slide 10: How We Do It | Continuous Improvement
HOW WE DO IT | CONTINUOUS IMPROVEMENT Average Well Production by Spud Year 9,000 Unit Drill and Complete Costs 8,000 $1,000 By Year By Quarter $900 7,000 Average production results continue $800 6,000 to improve while Peyto continues to optimize well designs. $700 5,000 MCF/D $600 4,000 $500 $400 3,
Slide 11: How We Do It | Early Wins
HOW WE DO IT| EARLY WINS Early Success on 2023 Acquisition Lands Internally, Peyto estimates over 800 locations on the lands from 14,000 the Repsol acquisition. 12,000 Wells drilled across the new lands are, on 10,000 average, outperforming our top programs by 30% 8,000 MCF/D 6,000 4,000 2,000 0 0 3
Slide 12: How We Do It | Integrating the Acquisition
HOW WE DO IT| INTEGRATING THE ACQUISITION Reactivate pipeline to Pipeline header modification to integrate Cecilia and Wild send Dunvegan gas to Wild River River and allow gas to flow for better liquid recoveries and between the two facilities lower line pressure Compressor tied-in to move gas from
Slide 13: How We Do It | Dunvegan HZ
HOW WE DO IT | DUNVEGAN HZ Dunvegan Type Well The recent acquisition expands an emerging 6,000 Dunvegan play. Peyto has approximately 10-12 5,000 wells planned for 2024. 101 DNVG 4,000 Booked(1) Locations MCF/D 3,000 2,000 20-30 bbls/mmcf 1,000 6 PEY Drills 0 to Date 0 12 24 36 48 60 Months on Produ
Slide 14: Returns | Robust Results
PEYTO’S RETURNS| ROBUST RESULTS 2023 Drilling Program Individual Well Results 200% Wells On Stream to end-Dec: Price Deck: 2023 Realized Unhedged + 2024+ 72 gross / 67.8 net Realized Hedged (Feb-07-2024 strip) 2023 Capital Program IRR YTD = 34% Includes ~$1,180k/well full cycle costs 150% DNVG IRR =
Slide 15: Returns | Return on Equity
PEYTO’S RETURNS | RETURN ON EQUITY Investors rarely get to participate 60% in the wells themselves, making $12 type well economics somewhat meaningless. ROE and ROCE are 25% 50% the returns investors get, after $10 deducting corporate costs. 40% $8 25 yr Avg ROE to 2023 30% $6 20% $4 14% 10% 0% $2 $
Slide 16: Returns | Dividends
PEYTO’S RETURNS | DIVIDENDS Earnings are profits and Peyto returns those profits to shareholders through $4,000 dividends. Peyto applies hedge accounting, $8.5B Peyto Cumulative Capital Spent $3,500 $3,000 so earnings are not skewed by large unrealized gains or losses during a quarter. Over time, Pe
Slide 17: Future | 2024 Focus
PEYTO’S FUTURE | 2024 FOCUS ✓ Drill ~70 – 80 Net Hz Wells Focused on newly acquired lands and legacy Peyto properties Adds of 40,000 – 45,000 boe/d (~$11,000/boed) to offset 25% base production $450M- ✓ Optimize Infrastructure Realize synergies and debottlenecking opportunities with newly acquired i
Slide 18: Future | Undrilled Inventory
PEYTO’S FUTURE | UNDRILLED INVENTORY(1) Booked Inventory (Volume weighted) Average IRR by Species (3-year plan) $3.00/GJ and US$70/bbl WTI 6% 25% 120% 109% 105% Cardium 100% 24% Dunvegan 83% 80% Notikewin 60% 60% 52% Falher 9% 40% Wilrich Bluesky Bullhead 20% 19% 0% 17% Notikewin Dunvegan Wilrich Fa
Slide 19: Future | Supply Cost Goals
PEYTO’S FUTURE| SUPPLY COST GOALS 2024 $/mcfe 2020 2021 2022 2023 Goals Early results from acquisition means FD&A PDP FD&A (1) $1.06 $0.97 $1.41 $1.21(3) Royalties $0.32 $1.10 should come down for OPEX $0.49 2024 Cash Costs(1) $1.01 $1.25 $1.62 $1.42 Transport $0.27 $1.45 G&A $0.05 Royalties down. T
Slide 20: Past | Peyto's Future
PEYTO’S PAST | PEYTO’S FUTURE 180,000 $8.00 Timing production growth to meet future 160,000 LNG capacity expansion, generates free $7.00 cash flow to fund the capital program, pay 140,000 dividends and reduce debt. $6.00 120,000 $5.00 Price ($/GJ) WI BOE/D 100,000 $4.00 80,000 $3.00 60,000 $2.00 40,
Slide 21: Past | Peyto's Future (FFO and Net Debt)
PEYTO’S PAST | PEYTO’S FUTURE $3,000 $375 $2,400 $300 Quarterly FFO (MM$) Net Debt (MM$) $1,800 $225 $1,200 $150 $600 $75 $0 $0 2011-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 2012-Q4 2013-Q4 2014-Q4 2015-Q4 2016-Q4 2017-Q4 2018-Q4 2019-Q4 2020
Slide 22: Future | Cash Costs
PEYTO’S FUTURE | CASH COSTS Still a Leader in the Industry Operating costs at our newly Total Cash Costs(1) (excluding Royalties and Taxes) acquired facilities are high, but $2.50 Peyto expects to lower unit operating costs by 10% from (Q1 levels) by end of 2024 with higher utilization and operation
Slide 23: Marketing
PEYTO’S MARKETING Gas Hedging and Diversification Strategy Moderates Volatility Gas Price(1) ($/mcf) AECO $10.00 0% $9.00 $8.00 Kineticor Edmonton Empress $7.00 Power Calgary Emerson $6.00 33% $5.00 10% 9% Dawn $4.00 18% $3.00 $2.00 $1.00 Ventura Chicago $- 2004 2022 2024F 2025F 2026F 2005 2006 2007
Slide 24: Gas Marketing
GAS MARKETING Future Market Diversification and Gas Price Protection Peyto has used financial basis deals between AECO and other hubs to gain market diversification and allow us to 459 MMcf/d fixed at $3.93/Mcf in 2024 hedge at various markets. This reduces market risk and 450 MMcf/d fixed at $4.09/
Slide 25: Gas Marketing: Fixed Price Gas Contracts
GAS MARKETING Peyto uses a dollar cost averaging approach to Fixed Price Gas Contracts smooth out the volatility in future prices by forward selling smaller blocks of production. Fixed price swaps give price certainty. Prices do not include a deducts for Fuel (~2%). USD contracts converted at 1.37 C
Slide 26: Gas Marketing: Floating Price Gas Contracts
GAS MARKETING Peyto has exposure to natural gas price upside with its diversification to premium markets in Floating Price Gas Contracts California, Ontario and the US mid-west and its Cascade Power contract. • Emerson 2 volumes are priced on the Emerson 2 index less transport and fuel of ~4%. • Hen
Slide 27: NGL Marketing
NGL MARKETING Peyto uses swaps and costless collars to secure Fixed Price Gas Contracts liquids revenue as well. 27
Slide 28: Diversification | Power
DIVERSIFICATION| POWER Peyto gas market diversification includes Cascade Gas Supply Agreement exposure to Alberta power pool prices • 15-year Gas Supply Agreement for ~52 MMcf/d to Kineticor’s Cascade Power Project, a 900MW combined cycle power generating facility • Expected onstream in Q3 2024 (onc
Slide 29: Gas Diversification | LNG Opportunity
GAS DIVERSIFICATION| LNG OPPORTUNITY Peyto is proud to participate in the Rockies LNG Consortium Our Partners whose goal is to support the construction of another LNG Rockies LNG is a partnership of Canadian natural gas producers working together to project off the Westcoast of BC to supply the Worl
Slide 30: Debt
PEYTO’S DEBT Peyto plans to reduce debt over the next 3 years targeting leverage under 1.0 Debt/EBITDA(2). Net Debt(1) of $1.34 billion at March 31, Date Issued Rate Maturity Date Senior Secured Notes 2024: $65 million (CAD) May 1, 2015 4.26% May 1, 2025 $100 million (CAD) January 3, 2012 4.39% Janu
Slide 31: Tax Pools
PEYTO’S TAX POOLS $1.1B $1,800 $1,600 $1,400 $1,200 $1,000 Federal Tax Pools $800 Q4/23 Millions $600 $8.4B $400 $200 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 CEC UCC (25%) CEE (100%) CDE (30%) COGPE (10%) Tax Los
Slide 32: Advisories
ADVISORIES Forward Looking Statements This presentation contains forward-looking information (forward-looking statements). Words such as "guidance", "may", "can", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "aim", "seek", "propose", "contemplate", "estimate", "focu
Slide 33: Development Plan
Development Plan The Company has presented herein a three-year illustrative development plan that provides for developing both the acquired assets and Peyto's current assets. The development plan is based on a number of assumptions including, without limitation: the required reinvestment rates to ma
Slide 34: Oil and Gas Metrics
Oil and Gas Metrics Peyto has used a number of oil and gas metrics herein which do not have standardized meanings and therefore may be calculated differently from the metrics presented by other oil and gas companies. Such metrics include "DCET", "EUR", "payout", "Before tax IRR" and "NPV @ 10%". DCE
Slide 35: Netback and Non-GAAP Measures
Netback is a non-GAAP measure that represents the profit margin associated with the production and sale of petroleum and natural gas. Peyto computes "field netback per Mcfe" as commodity sales from production, plus third-party sales net of purchases, if any, plus other income, less royalties, operat
Slide 36: History
PEYTO’S HISTORY The Ensign #401 rig has been drilling for Peyto since November 2009. 36
Slide 37: History | Per Share Growth
PEYTO’S HISTORY| PER SHARE GROWTH Over time, the Peyto model is designed to deliver a superior total return with per share growth in value, income and assets. Production/share Reserves/share 1 FFO/share 2 2P NPV5/debt adj. share 3 (MMcfe/y/mm sh) (2P Bcfe/mm sh) ($/sh) ($/sh) 1363 1391 $75.88 $4.85
Slide 38: History | Shareholder Returns
PEYTO’S HISTORY| SHAREHOLDER RETURNS $70.00 180,000 Peyto has a 25-year history of 160,000 $60.00 growing value, income and assets while delivering strong returns to 140,000 $50.00 shareholders May-19-2023 $15.92/sh 120,000 $40.00 Future Prospects 100,000 $/share boe/d $30.00 80,000 Enterprise Value
Slide 39: History | Cost Control
PEYTO’S HISTORY| COST CONTROL Peyto has been successfully controlling supply costs to preserve margin >30% on average during last 10 years. $/mcfe 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 PDP FD&A(1) $2.25 $1.64 $1.44 $1.36 $1.18 $1.55 $1.06 $0.97 $1.41 $1.21(3) Cash Costs(1) $1.08 $0.81 $0
Slide 40: History | Profitable Reserves Growth
PEYTO’S HISTORY| PROFITABLE RESERVES GROWTH Annual Reserves Per Share Reserve Life Index (1) (by Category) 8.00 (Reserves/ Q4 Annualized Production) Reserves per Share (boe/sh) 7.00 6.73 30 35 6.00 Reserve Life Index 30 5.00 25 4.00 20 3.00 15 10 2.00 10 1.00 5 0 - 2005 2001 2003 2007 2009 2011 2013
Slide 41: History | Reserve Growth
PEYTO’S HISTORY| RESERVE GROWTH Over the past 25 years, Peyto has discovered 10.5 TCFe of natural gas reserves. 12,000 10,000 2,837 10.5 (BCFe) 8,000 6,000 4,000 26% CAGR 2,322 2,661 10,511 TCFe of Discovered Reserves 2,000 2,691 0 1999 1998 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201
Slide 42: History | Land Growth
PEYTO’S HISTORY| LAND GROWTH Peyto continues to expand its Alberta Deep Basin footprint with additional drilling inventory. Peyto Lands 1.5 2,000 1,800 1,600 Million Gross Acres 1,400 1,200 Net Sections 1,747 1,000 800 600 Net Peyto Sections 400 200 - 1999 2001 2003 2005 2007 2009 2011 2013 2015 201
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