Advantage Energy Ltd · TSX:AAV
Advantage Energy — Advantage Oil & Gas — Investor Presentation (December 2014)
40 slides from Advantage Energy's investor presentation, December 2014
Slide 1: Investor Presentation December 2014
“World Class Montney Resource, Industry Leading Low Cost Structure & Cash Margin and Operational Excellence Reinforces the Strength of our Three Year Growth Plan” Investor Presentation TSX / NYSE: AAV December 2014
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) $3.84 ‐ $7.85 Shares Outstanding (basic) 169.8 million Glacier Q3 2014 production 132.5 mmcfe/d (22,087 boe/d) Market Capitalization (December 5, 2014) $0.9 billion Bank Debt @ S
Slide 3: Focused on Montney Growth & Value Creation
FOCUSED ON MONTNEY GROWTH & VALUE CREATION World Class Montney Asset Growth Plan & Operational Financial Excellence Strength 245 mmcfe/d in 2017 190% CFPS growth (1) 100% PPS growth (1) Free Cash Flow 2017 Pure Montney Producer 27 employees (1) Cash Flow Per Share (CFPS) and Production Per Share (PP
Slide 4: Growth Leads to Significant Free Cash Flow in 2017
GROWTH LEADS TO SIGNIFICANT FREE CASH FLOW IN 2017 Free cash flow is achieved in early 2017 based on Plan $160 million of free annual cash flow is generated at 245 mmcfe/d @ Cdn $3.65/GJ 350 300 250 200 Million $ Capital Capital Capital required required required to grow to grow to grow to 183 to 20
Slide 5: Three Year Fully Funded Glacier Growth Plan
THREE YEAR FULLY FUNDED GLACIER GROWTH PLAN Three Year Plan Summary: 245 mmcfe/d (40,830 boe/d) in 2017 $735 million Capital Expenditures 33 New Montney wells per year $3.75/GJ Aeco Cdn average price 1.5x Average Total Debt to Forward Cash Flow 190% CFPS growth 100% PPS growth 5
Slide 6: Financial Strength Supports Development Plan
FINANCIAL STRENGTH SUPPORTS DEVELOPMENT PLAN Credit Facility: (1) $329 million currently available (18% drawn on our $400 million credit facility) Balance Sheet: 1.4x Total debt to annualized Q3 2014 Cash Flow Hedging Program: % Forecast Production Year Aeco Cdn $/mcf 56% 2014 Q4 $3.90 51% 2015 $3.9
Slide 7: Gas Price Sensitivity Reduced by Hedging and Low Cost Structure
GAS PRICE SENSITIVITY REDUCED BY HEDGING AND LOW COST STRUCTURE Downside gas price mitigation while retaining torque to upside 7
Slide 8: YTD 2014 Strong Netbacks Underpin Growth Plan
YTD 2014 STRONG NETBACKS UNDERPIN GROWTH PLAN Glacier Operating Netback (1): ($/mcfe) Revenue (2) $4.39 Royalties ($0.22) Operating Costs ($0.31) Operating Operating Netback $3.86 netback is 88% of (Recycle Ratio at 2013 2P F&D $1.33/mcfe (3)) 2.9x revenue G&A ($0.17) Interest Expense & other ($0.19
Slide 9: Industry Cost Structure & Margin Comparison
INDUSTRY COST STRUCTURE & MARGIN COMPARISON Advantage’s full cycle margin is among the top Montney producers today. 9
Slide 10: World Class Montney Asset
WORLD CLASS MONTNEY ASSET Glacier 300 meters Natural gas and liquids resource 16 Tcf TPIIP 10
Slide 11: 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 11
Slide 12: Focused on Montney Surrounding Glacier Gas Plant
FOCUSED ON MONTNEY SURROUNDING GLACIER GAS PLANT Current development of 16 TCF (1) TPIIP at Glacier including liquids drilling Progress Glacier future drilling inventory ~1,400 100% owned locations 9 net Montney Glacier Glacier Gas Plant sections acquired New Montney lands at Vahalla, 77 net 2
Slide 13: Glacier 100% Owned Gas Plant & Pipeline Access
GLACIER 100% OWNED GAS PLANT & PIPELINE ACCESS Glacier Gas Plant – Positioned for Production Ramp‐up 400 mmcf/d pipeline capacity to TCPL meter station in place pipeline 400 mmcf/d capacity to TCPL meter station in place Glacier Gas Plant Site & Proximity to Major Natural Gas & Liquids Pipelines & R
Slide 14: Glacier Delineation Drilling Has Confirmed Multi-Layer Development
GLACIER DELINEATION DRILLING HAS CONFIRMED MULTI‐LAYER DEVELOPMENT Swan & Tupper at 4 to 7 wells/section density today. Potential for 20 wells/section at Glacier EnCana began horizontal drilling in 2005; however, Advantage has drilled over 140 Montney wells at Glacier numerous vertical wells had pen
Slide 15: Pentastack Development with Decades of Drill Inventory
“PENTASTACK” DEVELOPMENT WITH DECADES OF DRILL INVENTORY 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 are locat
Slide 16: Operational Excellence
OPERATIONAL EXCELLENCE 16
Slide 17: Track Record of Operating Performance
TRACK RECORD OF 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 7 to 16 $130,000/frac stage No wells drilled 580% Increase in 2P Reserves to 1.7 T
Slide 18: Upper and Lower Montney Average Well Type Curve Improvement
UPPER AND LOWER MONTNEY AVERAGE WELL TYPE CURVE IMPROVEMENT 8,000 Advantage has significantly improved well performance since 2008. Utilization 7,000 of more frac stages and slickwater fracs have recently created another step‐ rate change. We anticipate new technology could further improve results.
Slide 19: 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 14 recent Montney wells (5 Upper and 9 Lower) Ph
Slide 20: Improving Upper & Lower Montney Well Payout
IMPROVING UPPER & LOWER MONTNEY WELL PAYOUT 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 reservoir knowledge. • Some recent wells were initially restricted
Slide 21: Exceptional Upper Montney Well Economics
(1) EXCEPTIONAL UPPER MONTNEY WELL ECONOMICS Upper Montney Dry Gas (2) Frac optimization of 108 Upper and Lower Montney wells since 2008 at Glacier has increased the average Budget type curve to an IP of 6.9 mmcf/d. (3) mmcf/d IP30 / Bcf (1) Management estimates. NPV 10% pre‐tax (2) Based on $5.5 mi
Slide 22: Exceptional Lower Montney Well Economics
(1) EXCEPTIONAL LOWER MONTNEY WELL ECONOMICS Lower Montney at 11 bbls/mmcf C3+(2) Budget type curve 6.9 mmcf/d. Lower Montney wells have improved with frac design changes and are similar to Upper Montney wells AECO Gas Price $/mcf (3) mmcf/d IP30 / Bcf (1) Management estimates. NPV 10% pre‐tax (2) B
Slide 23: East Glacier Contains Higher Middle Montney Liquid Content
EAST GLACIER CONTAINS HIGHER MIDDLE MONTNEY LIQUID CONTENT Middle Montney wells to date Glacier C5+ 57 illustrate higher liquid content from deg API west to east across Glacier 26 57 31 63 30 bbl/mmcf 10 bbl/mmcf vertical well 40 76 76 27 Record Well 30 100/12‐2‐76‐ 12w6 Results have commercialize
Slide 24: Improving Liquids Rich Middle Montney Well Performance at Glacier
IMPROVING LIQUIDS RICH MIDDLE MONTNEY WELL PERFORMANCE AT GLACIER Budget Type Curve 4mmcf/d New Phase VI 12‐2 well started Middle Montney wells have sequentially production at restricted rate of 9.5 demonstrated improved productivity as mmcf/d. Currently restricted at 5 we optimize frac design. Rece
Slide 25: Strong East Glacier Middle Montney Well Economics
(1) STRONG EAST GLACIER MIDDLE MONTNEY WELL ECONOMICS Middle Montney at 50 bbls/mmcf C3+ (2) Current Budget Type Curve 4 mmcf/d IP 30 Continued frac design changes have shown improving rates in each subsequent MM program. (3) mmcf/d IP30 / Bcf (1) (2) Management estimates. NPV 10% pre‐tax Based on $
Slide 26: 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 52.25 net sections of new undeveloped Montney lands provides further upside Three Year Deve
Slide 27: Appendix
APPENDIX 27
Slide 28: 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
Slide 29: 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
Slide 30: 2012 Core and Completion Studies
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 31: 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) AECO C natural gas price Layer 1(6) Layer 5(3) Liquids Rich Gas (East Glacier)(4) ($/mcf)(2) $3.00 $4.00 $5.00 $3.00 $4.00 $5.00 $3.00 $4.00 $5.00 IP3
Slide 32: Glacier March 31, 2013 Contingent and Prospective Resource Assessment
GLACIER MARCH 31, 2013 CONTINGENT AND PROSPECTIVE RESOURCE ASSESSMENT Advantage engaged our independent qualified reserves evaluator Sproule Associates Ltd. (“Sproule”) to update the resource analysis and provide a 2C evaluation (“Sproule 2C Contingent Resource Evaluation”) at Glacier as of March 31
Slide 33: Glacier Contingent and Prospective Resource Assessment
GLACIER CONTINGENT AND PROSPECTIVE RESOURCE ASSESSMENT UPIIP (AAV Working Interest, Sales) (3) Low Estimate Best Estimate High Estimate Natural Gas Prospective Resources (Tcf) 0.342 0.556 0.776 Unrecoverable UPIIP (Tcf) 1.561 1.347 1.127 Natural Gas Liquids Prospective Resources (mbbls) 7,381 11,691
Slide 34: Glacier Contingent and Prospective Resource Assessment
GLACIER CONTINGENT AND PROSPECTIVE RESOURCE ASSESSMENT 2C (Best Estimate) Contingent Resources Gross 2C Recoverable Net Present Values Before Income Taxes ($ 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
Slide 35: 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
Slide 36: 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
Slide 37: 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 38: 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
Slide 39: 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 40: 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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