Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Investor Presentation (July 2015)
51 slides from Peyto Exploration & Development's investor presentation, July 2015
Slide 1: Peyto Exploration & Development July 2015
www.Peyto.com July 2015
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: 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 4: 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 4 8/12/2015
Slide 5: Superior Shareholder Returns
The Peyto Strategy Superior Shareholder Returns PEYTO Exploration & Development Corp. $60 ~$700,000 $14 $50 $12 $40 Shareholder IRR $10 $30 $8 Future strip $20 $6 $10 $4 $1,000 $0 $2 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Share Price
Slide 6: Profitably Grow Our Assets
The Peyto Strategy 15th 1998‐2013 Profitably Grow Our Assets Production Growth Reserves Growth PDP FD&A Operating Costs (MMcfe/d/mm sh) (2P Bcfe/mm sh) ($/Mcfe) w/transportation ($/Mcfe) $2.95 1087 $2.88 20.8 $2.35 $0.54 $2.39 $2.22 872 18.9 $2.26 $2.12 $2.25 $0.48 $2.11 $2.10 $0.52 $0.53 $0.49 16.7
Slide 7: Growth per Share
The Peyto Strategy Growth per Share PEYTO Exploration & Development Corp. NEW 2015 YE Target 96,000 to Production per Unit or Share (boe/d per million) 100,000 boe/d 600 $15 $75 500 $12 $60 Gas Price ($/GJ) 400 PEY+ Cum Div $9 $45 300 $6 $30 200 $3 $15 100 5 Yr Prod/share growth rate 0 $- $- Jan-01
Slide 8: Peyto Profile
Peyto Profile PEYTO Exploration & Development Corp. N TSX Listing: PEY N Shares Outstanding: 159 million, 4% insiders (as of Feb. 5/14) N Monthly Dividend: $0.11/share (incr. from $0.10 effective Nov/14) N Current Production: 0.54 BCFe/d (90,000 boe/d) N YE 2014 2P Reserves: 3.2 TCFe (531 mmboes) N
Slide 9: Profitable Business
Peyto’s Profitable Business PEYTO Exploration & Development Corp.
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 2015 Q1 PEY 2014 Land/Acq $13MM Seismic $8MM Drilling $312MM PDP FD&A $/mcfe (~$1.80)* ($2.25) Compl. Wellsite Facilities $183MM $54MM $120MM $690MM ∆PDP Reserves (before Prod.) 51.0 mmboes PDP FD&A $13.52/boe Cash Co
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 37% Ave. "Profit“ Cum To Date $8 $6 Bonus $1.60 $4 Cash Costs ($1.08) $2 PDP FD&A ($2.25) $- Forecast Total Cash Costs per mcfe includes – Royalt
Slide 12: Profitability Challenges for the Canadian Gas Industry
Peyto’s Profitable Business Profitability Challenges for the Canadian Gas Industry PEYTO Exploration & Development Corp. 2015 Q1 PDP FD&A 2014 2013 $/mcfe (~$2.47) ($3.09) ($2.93) 2012 2011 20101 ($3.43) ($3.68) ($3.11) Cash Costs $/mcfe ($2.48) ($3.12) ($3.13) ($2.98) ($3.31) ($3.19) Supply Cost ($
Slide 13: Competitive In The North American Marketplace
Peyto’s Profitable Business Competitive In The North American Marketplace PEYTO Exploration & Development Corp. 13 8/12/2015
Slide 14: Profitability By Basin - 2014
Peyto’s Profitable Business Profitability By Basin - 2014 PEYTO Exploration & Development Corp. 100% Deep Basin – PEY 2014 80% Marcellus – Cabot 2014* 64% Fay/36% Mar – SWN 2014** PD FD&A $/mcfe ($2.25) ($0.97) ($2.91) Cash Costs $/mcfe ($1.08) ($1.27) ($2.32) Supply Cost ($3.33) ($2.24) ($5.23) Sal
Slide 15: Unique Assets
Peyto’s Unique Assets PEYTO Exploration & Development Corp.
Slide 16: 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 ---(610 mmcf/d net capacity) • 1000+ km pipelines • 1000+ producing zones T60 Kakwa • 85,000 boe/d T60 Chicken Leland Processed by
Slide 17: 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 18: 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* 18 *NGL recoveries can increase by 15+ bbl/mmcf with deeper cutting processing facilities 8/12
Slide 19: Production By Formation
Peyto’s Assets Production By Formation PEYTO Exploration & Development Corp. 100,000 90,000 80,000 70,000 38% 60,000 BOE/D Wilrich 50,000 40,000 15% Notikewin 30,000 22% Falher 20,000 12% 10,000 Cardium 7% Bluesky 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 19 8/12/2015
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 438 450 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 2.0 TCFe of PD EU
Slide 21: 3-Dimensional Land Base Holds Large Potential
Peyto’s Assets 3-Dimensional Land Base Holds Large Potential PEYTO Exploration & Development Corp. Cardium (357,618 net acres) 9.5% of land developed in 466 Vt/Hz producers (70 acres/well) 4.4% of land booked in 176 Hz locations (90 acres/well) 86% of land remains potential (307,859 net acres) Notik
Slide 22: 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 31 432 72 176 387 5 1 5 13 1 20 14 90 71 118 62 7 39 41 20 51 90 292 16 14 183 256 155 4 28 45 58 12 2 87 2 16 216 652 44
Slide 23: 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 24 Month Expiries 4,000,000 Earliest Expiry Date 3,000,000 out to 2016-12-31 2,000,000 (>1550 agreements, 1,000,000 2,986 sections) 0 2003 2004 2005 2006 2007 2
Slide 24: Greater Sundance Area
Peyto’s Assets Greater Sundance Area PEYTO Exploration & Development Corp. FF FF FCFCAF A AF FF AF AG F36 A G 36L F A AF A36FC31F GAF GCF AF AF AF AFFC36A FA31FAF AF AF AF F A CF AF FAFAFF AF AF A36FAF A31FAF F AF W FAF AF A LKG36K A 31 F G C FA A FF36FF31 G C F GCAF E31GEJ F C 36 31 AA GL GG LK CF
Slide 25: Brazeau River Area
Peyto’s Assets Brazeau River Area PEYTO Exploration & Development Corp. G F V V U F K U J M L E F VF F S V E E E UF F GG L F U G F K GKAE F F VV E G GA E JS E E E FA KG JGA WM C Keyera E Brazeau G FG F FC U KC F FA G GVV F V A EE E A A A A E V E E EE UU F J U EV F C LF C G V F 1 G F KE G A E V S E V
Slide 26: 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 27: Lowest Operating Costs – Gas Producers
Peyto’s Assets Lowest Operating Costs – Gas Producers PEYTO Exploration & Development Corp. How? • We operate • Full facilities • No water • No sour • Chemical recycle • Nat gas fuel Flat for • Continuous 8 yrs innovation 27 BOE factor - 6 mcf = 1 bbl of oil equivalent 8/12/2015 Operating costs incl
Slide 28: Drilling Cost Performance
Peyto’s Assets Drilling Cost Performance PEYTO Exploration & Development Corp. Greater Sundance Hz Spirit River 5,000 40 4,409 4,500 34.5 4,268 4,299 4,227 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 $2,752 $2,7
Slide 29: Completion Cost Performance
Peyto’s Assets Completion Cost Performance PEYTO Exploration & Development Corp. Monthly Average Completion Costs $2,000,000 $300,000 $1,750,000 Total Completion Cost $250,000 2014 Avg = 1.7 MM$ $1,500,000 -43% $200,000 $1,250,000 Cost Per Stage Total Cost $1,000,000 $150,000 Completion Cost Per Sta
Slide 30: 2015 - A Good Start
Peyto’s Assets 2015 - A Good Start PEYTO Exploration & Development Corp. 2015 program results to date 30 8/12/2015
Slide 31: Incredible Returns
Peyto’s Incredible Returns PEYTO Exploration & Development Corp.
Slide 32: Stress Testing Low Commodity Prices
Peyto’s Returns Stress Testing Low Commodity Prices PEYTO Exploration & Development Corp. Sundance/ Obed/Pedley/ Sundance Sundance/ Sundance Ansell Sundance Brazeau Species Nosehill Upper Edson Cardium Middle Bluesky Wilrich Notikewin Falher Wilrich Falher Full Cycle Well Costs ($M) $3,800 $4,600 $4
Slide 33: Focus on Returns Drives Capital Discipline
Peyto’s Returns Focus on Returns Drives Capital Discipline PEYTO Exploration & Development Corp. 2015 - ~$14,000/boe/d 90,000 2014 - $16,800/boe/d $900 2013 - $15,100/boe/d 2012 - $17,600/boe/d 2014YE Exit 85,700 boe/d Annual Production Wedge (boe/d) ONR Acq - $38,600/boe/d 80,000 2011 - $17,500/boe
Slide 34: Returns Driven – Organic Activity
Peyto’s Returns Returns Driven – Organic Activity PEYTO Exploration & Development Corp. 90,000 80,000 2014 70,000 60,000 Boe/d 50,000 40,000 Net Capital (after NOI) to PV5 30,000 20,000 10,000 0 2014 Capital Program Production/share growth 123 gross/114 Net Wells 41,000 boe/d 50,000 $16,800/boe/d 40
Slide 35: Peyto's Returns: Well IRR by Well
BT IRR (%) -50 -40 -30 -20 -10 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 03/02-32-054-21W5/0 02/04-13-055-22W5/0 00/04-26-053-20W5/0 00/13-13-055-22W5/0 00/01-08-055-21W5/0 02/02-03-054-20W5/0 00/16-11-056-21W5/0 00/11-13-055-22W5/0 00/01-25-053-20W5/0 02/16-11-056-21W5/0 00/04-15-056-21W
Slide 36: Peyto's Returns: Well IRR by Quarter
BT IRR, % 0 10 20 30 40 50 60 70 80 90 100 110 130 140 150 00/08-33-057-… 00/10-25-051-… 00/04-02-054-… 00/16-11-056-… 03/04-32-055-… 20% 00/02-25-051-… 02/05-14-055-… 120 2014 Q1 02/13-19-056-… 00/04-26-053-… 00/12-09-056-… 00/01-36-051-… 02/02-10-056-… 02/04-28-055-… 02/04-13-055-… 00/03-36-051-…
Slide 37: High Returns On Your Capital And Equity
Peyto’s Returns High Returns On Your Capital And Equity PEYTO Exploration & Development Corp. 60% $10 50% $8 40% $6 30% 16 yr Average ROE $4 19% 20% 13% 10% $2 0% $0 Return On Capital Employed (%) Return On Equity (%) Earnings/share Realized Gas Price ($/mcfe) 16 yr Average ROCE Return on Equity (RO
Slide 38: Future
Peyto’s Future PEYTO Exploration & Development Corp.
Slide 39: 2015 Outlook: More for less
2015 Outlook More for less PEYTO Exploration & Development Corp. Drill ~130 Gross Hz Wells (100% Hz-MSF, Liquids Rich Natural Gas) Expand & Extract Increase Processing Capacity & NGL Yield ~120 mmcf/d Increase Undeveloped Land Base Shoot Seismic 2015 Capital Program Acquire Additional Opportuni
Slide 40: Drill Our Way To 100,000 BOE/D!
2015 Outlook Drill Our Way To 100,000 BOE/D! PEYTO Exploration & Development Corp. 3% annual yield 120,000 +25%/sh CAGR growth ~96,000-100,000 120,000 28% CAGR total return boe/d exit over last 5 years! 100,000 85,700 boe/d exit TCPL Outage 100,000 75,200 boe/d exit 80,000 80,000 57,000 boe/d exit B
Slide 41: Continuously Improve Profitability
2015 Outlook Continuously Improve Profitability PEYTO Exploration & Development Corp. 2015 Goals* • 20% service cost reduction • Drilling off season PDP FD&A ~($1.80) • Longer laterals, more stages $/mcfe • Continuous operations • Natural gas heated water • Slow down facility pre‐builds ~($0.85) Cas
Slide 42: Where to from here?
Peyto’s Future Where to from here? PEYTO Exploration & Development Corp. 150,000 ~120,000 boed ~96,000-100,000 boed 100,000 $13,000 /boe/d BOED 13,500 /boe/d $17,500/boe/d $16,800/boe/d 50,000 $17,300/boe/d $15,100/boe/d $17,600/boe/d 2015 Budget 2016 CAPEX 2017 CAPEX $600MM $700MM $800MM Base Decli
Slide 43: Appendix
Appendix PEYTO Exploration & Development Corp. N Quarterly Track Record N Tax Pools N Payout N Hedging Strategy N Gas Marketing N FAQ 43 8/12/2015
Slide 44: Quarterly Track Record
Quarterly Track Record PEYTO Exploration & Development Corp. 2015 2014 2013 2012 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Operations Production Oil & NGLs (bbl/d) 7,456 7,632 8,077 7,502 7,568 7,375 6,376 6,984 6,295 6,374 5,840 4,778 5,286 5,236 4,480 4,101 Natural gas (mcf/d) 444,7
Slide 45: 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 Q4/14 $600 $400 $200 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 CEC UCC (25%) CEE (100%) CDE (30%) COGPE (10%) CAP
Slide 46: Dividend Sustainability
Peyto’s Payout Dividend Sustainability PEYTO Exploration & Development Corp. Peyto Dividend Sustainability $2,500 $2,000 $1,500 Peyto Cum. Earnings Q1/15 $1,000 $500 $0 Q1 2000 Q3 2000 Q1 2001 Q3 2001 Q1 2002 Q3 2002 Q1 2003 Q3 2003 Q1 2004 Q3 2004 Q1 2005 Q3 2005 Q1 2006 Q3 2006 Q1 2007 Q3 2007 Q1
Slide 47: Successful Hedging Strategy
Successful Hedging Strategy Peyto Realized Price History PEYTO Exploration & Development Corp. 2003 2004 2006 2010 2013 2014 $16.00 2005 2007 2008 2009 2011 2012 Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto $7.51/mcf $7.38/mcf $8.78/mcf $8.48/mcf $8.42/mcf $8.64/mcf $6.44/
Slide 48: Gas Marketing: Future Sales (1 of 3)
Gas Marketing Future Sales (1 of 3) PEYTO Exploration & Development Corp. Financial Hedges - Gas Pricing 2013 2014 2015 2016 Da te contra cte d GJ/d ($/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 17-Feb-12 5000 $3.000 ● ● ● ● ● 27-A pr-12 5000 $2.810 ● ● ● ● ● 08-May
Slide 49: Gas Marketing: Future Sales (2 of 3)
Gas Marketing Future Sales (2 of 3) PEYTO Exploration & Development Corp. Financial Hedges - Gas Pricing 2013 2014 2015 2016 Da te contra cte d GJ/d ($/GJ) 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 21-Jan-14 5000 $3.825 ● ● ● ● ● ● ● 21-Jan-14 5000 $3.950
Slide 50: Gas Marketing: Future Sales (3 of 3)
Gas Marketing Future Sales (3 of 3) PEYTO Exploration & Development Corp. Financial Hedges - Gas Pricing 2013 2014 2015 2016 2017 Date contracted GJ/d ($/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 N D J F M A M J J A S O 10-Dec-14 5000 $3.250 ● ● ● ● ● ● ● ● ● ● ● ●
Slide 51: 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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