Advantage Energy Ltd · TSX:AAV
Advantage Energy — Advantage Oil & Gas — Investor Presentation (June 2017)
40 slides from Advantage Energy's investor presentation, June 2017
Slide 1: Investor Presentation June 2017
“42% Production Growth to 238 mmcfe/d (39,635 boe/d) and a 79% Increase in Cash Flow to $54 Million Fully Funded our Q1 2017 Capital Program. 39% Increase in Undeveloped Montney Land Adds to Long Term Development Upside" Investor Presentation TSX / NYSE: AAV June 2017
Slide 2: Advantage at a Glance
ADVANTAGE AT A GLANCE TSX, NYSE: AAV TSX 52-week trading range $6.59 - $10.33 Shares Outstanding (basic) 185.1 million Annual Production - 2017 Budget 16% Production Growth 236 mmcfe/d (39,330 boe/d) Current Market Capitalization $1.6 billion As of March 31, 2017: Bank Debt (37% drawn on $400 millio
Slide 3: Our Strategy – Long Term Profitable & Sustainable Growth
OUR STRATEGY – LONG TERM PROFITABLE & SUSTAINABLE GROWTH (1) $0.89/mcfe Total Corp Cash Costs $0.23/mcfe Operating Costs (1) Strong Balance 24 net Undeveloped Sections Sheet added YTD 2017 0.8x D/CF Q1 2017 (see page 16) Hedging & Market Operating & Diversification (1) Financial Flexibility Own & Op
Slide 4: Last 3 Years - A Solid Track Record of Value Generation
LAST 3 YEARS - A SOLID TRACK RECORD OF VALUE GENERATION THREE-YEAR TOTAL SHAREHOLDER 2016 RETURN ON CAPITAL RETURN (Dec. 31/13 to Dec. 31/16) $/mcfe 98% Natural gas and liquids sales price $2.89 including realized hedging gains Total Corporate Cash Costs $(0.66)(1) Total Capital Costs, PDP F&D $(0.8
Slide 5: 2017 Budget Funded Through Cash Flow Including Upsized Glacier Gas Plant Expansion
2017 BUDGET FUNDED THROUGH CASH FLOW INCLUDING UPSIZED GLACIER GAS PLANT EXPANSION TO 400 MMCF/D ($ million) 2017 Highlights (1) $205 $210 16% Annual Production Growth Drill 21 wells $37 23% Cash Flow Per Share Growth(2) 236 MMcfe/d (39,330 Boe/d) Annual Average Complete 24 Production wells $71 $0.9
Slide 6: Productivity & Infrastructure Supporting 2017 Through 2019 Growth
PRODUCTIVITY & INFRASTRUCTURE SUPPORTING 2017 THROUGH 2019 GROWTH >65 mmcf/d Surplus Completed Well Productivity IP30 Average(1) This group of wells meets our 2017 production requirements 17 wells Uncompleted Standing Wells(2) contribute to 2018 growth 150 mmcf/d Plant Expansion to 400 mmcf/d in pro
Slide 7: Next 3 Years - 2017 Through 2019 Development Plan
NEXT 3 YEARS - 2017 THROUGH 2019 DEVELOPMENT PLAN 2017 thru 2019 Highlights 56% Production Growth (2017 thru 2019) $625 Million Capital Investment Post 2019 $735 Million Cash Flow @ Average AECO Cdn $2.95/mcf ($2.80/GJ) 400 mmcfe/d 0.2x YE 2019 Total Debt/Trailing Cash Flow (66,670 boe/d) 2017 Q1 –
Slide 8: Advantage Growth Plan 2017 Through 2019
ADVANTAGE GROWTH PLAN 2017 THROUGH 2019(1) Annual Average Production 16% Capital Spending Cumulative $625 million CAGR (2) (mmcfe/d) ($ millions) 2017-2019 16% 316 15% $205 $210 $210 16% 272 236 203 $128 2016 2017 Budget 2018E 2019E 2016 2017 Budget 2018E 2019E Cash Flow per Share Cumulative Cash Fl
Slide 9: Cash Surplus Reduces Total Debt to Cash Flow
CASH SURPLUS REDUCES TOTAL DEBT TO CASH FLOW Cumulative Cash Surplus(1) Year-end Total Debt to Cash Flow (1) @$2.95/MCF ($2.80/GJ) Ratio $80 $110 million surplus 2017-2019 1.0 $39 0.7 $25 0.5 $5 0.2 2016 2017 Budget 2018E 2019E 2016 2017 Budget 2018E 2019E Note: (1) Based on Advantage 2017 Budget an
Slide 10: Hedging, Transportation and Markets
HEDGING, TRANSPORTATION AND MARKETS Current Hedges TCPL Transportation Service 100% firm service secured thru 2019. Advantage’s surplus plant & well Production(1) Average AECO capacity provides flexibility to capture high pipeline flow periods. Period Hedged (net) CDN Fixed Price 2017 45% $3.19/mcf
Slide 11: Development Plan Resilient to Natural Gas Price Volatility
DEVELOPMENT PLAN IS RELATIVELY RESILIENT TO NATURAL GAS PRICE VOLATILITY & RETAINS UPSIDE TORQUE Cash Flow per Share Total Debt to Trailing Cash Sensitivity (1) Flow Sensitivity (1) $1.86 1.4 1.3 AECO $1.49 $1.58 1.2 $2.00/mcf 1.0 0.9 $1.32 AECO $2.50/mcf 0.8 $1.20 $1.30 0.7 0.6 $1.12 AECO 0.5 $1.03
Slide 12: Maintenance Capital and Surplus Cash Flow Sensitivity
MAINTENANCE CAPITAL AND SURPLUS CASH FLOW SENSITIVITY ILLUSTRATIVE AT 325 MMCFE/D 3 Year Cumulative 3 Year Cumulative (NO HEDGING INCLUDED) Surplus Surplus $525 million $690 million $360 Million $305 Million “Surplus Cash Flow Above $1.45/mcf” Cash Cash Surplus Surplus $175 million $230 million per
Slide 13: Attractive Netbacks & Recycle Ratios Achievable Without Hedging
ATTRACTIVE NETBACKS & RECYCLE RATIOS ARE ACHIEVABLE WITHOUT HEDGING Select Montney Natural Gas Producers Total Cost Structure – Q4 2016 “NO HEDGING INCLUDED” $/Mcfe $4.50 Illustrative Illustrative AECO Cdn AECO Cdn AAV - $0.83/mcfe Lowest Total $4.00 Glacier Netbacks $2.00/mcf $3.00/mcf Corporate Ca
Slide 14: High Quality Montney Assets, Operational Excellence
HIGH QUALITY MONTNEY ASSETS, OPERATIONAL EXCELLENCE 14
Slide 15: Glacier Supports Growth Through Next Decade, New Montney Lands Provide Upside
GLACIER SUPPORTS GROWTH THROUGH NEXT DECADE, NEW MONTNEY LANDS PROVIDES ADDITIONAL UPSIDE Progress (29.75 sections) 100% owned Glacier Gas Glacier Plant 91 net sections Valhalla (30 sections) Successfully assembled 88 net Montney sections proximal to Glacier’s gas plant & gathering Acquired 24 net i
Slide 16: Industry Activity Adjacent to Progress, Wembley and Valhalla Land Blocks
INDUSTRY ACTIVITY ADJACENT TO PROGRESS, WEMBLEY AND VALHALLA LAND BLOCKS – ADVANTAGE TO DRILL DELINEATION WELLS H2 2017 Multi-Layer Development Pipestone/Wembley Upper Montney New Locations Middle Montney Lower Montney Progress Valhalla New lands Pipestone 2017 Development New lands Drill 12-18 Mont
Slide 17: Only 7% of Glacier's Future Well Inventory Required for 2017-2019
ONLY 7% OF GLACIER’S FUTURE WELL INVENTORY REQUIRED FOR 2017 THRU 2019 DEVELOPMENT Only 83 of our 1,100 Future Drill Locations at Glacier is required to achieve growth to 316 mmcfe/d average 2019 Only 307 undeveloped locations booked in 2P reserves Year End 2016 Drilled(3) Wells by Layer >1,100
Slide 18: Technical Expertise & Knowledge Gains Will Further Optimize Development
ADVANTAGE’S TECHNICAL EXPERTISE & KNOWLEDGE GAINS WILL FURTHER OPTIMIZE FUTURE DEVELOPMENT GLACIER 8 WELL PAD TESTED 120 MMCF/D(1) 5 longer lateral LM wells on-prod (still restricted) are significantly outperforming average well type curve Longer Laterals, More Frac Stages 5-16 3 LM wells average 2,
Slide 19: Upper & Lower Montney Well Production Continues to Improve
UPPER & LOWER MONTNEY WELL PRODUCTION CONTINUES TO IMPROVE New wells are normally restricted to ~10 mmcf/d for frac sand flowback control during initial 6 months Production Average (24 wells) Budget Type Curve (IP30 7.5 mmcf/d & 7.5 Bcf) IP30 9.0 mmcf/d & 9.0 Bcf Type Curve 24 Upper & Lower Montney
Slide 20: Glacier Middle Montney Wells Exceeding Average Budget Type Curve
GLACIER MIDDLE MONTNEY WELLS EXCEEDING AVERAGE BUDGET TYPE CURVE • Wells are exceeding current type curves • Ongoing delineation identifies sweet spots within different Middle Montney layers. Frac designs are tailored to further optimize results. 12-2 well (2013) cumulative production > 3.8 Bcfe Mid
Slide 21: Robust Glacier Montney Well Economics
ROBUST GLACIER MONTNEY WELL ECONOMICS Upper & Lower Montney Middle Montney (Dry Gas) (50 bbls/mmcf(1) C3+, 45% C5+) ROR = 108% Advantage achieved >20% ROR = 106% DC & E well cost reduction with >35% increase in frac count ROR = 76% ROR = 75% Type Higher IP Type Higher IP Curve & & EUR Curve & & EUR
Slide 22: Growth Beyond 400 mmcf/d Can Be Accommodated on Existing Plant Site
GROWTH BEYOND 400 MMCF/D CAN BE ACCOMMODATED ON EXISTING PLANT SITE 100% Owned Glacier Gas Plant – Positioned for Production Ramp-up Advantage Gas Plant Alliance Sales Gas Line Room for Additional Expansion To be expanded from Beyond 400 mmcf/d 250 mmcf/d to 400 TCPL Sales Meter mmcf/d Dry & Liquids
Slide 23: Canadian Natural Gas Transportation & Markets - Available & Growing
CANADIAN NATURAL GAS TRANSPORTATION & MARKETS - AVAILABLE & GROWING TCPL Oil Sands, Transportation & Markets N.Montney Power Gen 1.4 bcf/d • Increasing take-away options • N.A. Natural gas demand growth ~9 Enbridge TCPL Mainline 1.4 Bcf/d bcf/d 2017 to 2021(1) 160 mmcf/d + 3 Bcf/d Avail? • NE U.S. p
Slide 24: Montney Is a Competitive Low Cost Supply Source
MONTNEY IS A COMPETITIVE LOW COST SUPPLY SOURCE WITH ADVANTAGE LEADING THE WAY Select Montney and Marcellus Natural Gas Producers Cash Costs 2018 Estimates $2.85 Cdn $/Mcfe $2.19 $0.88 (1) (2) (3) AAV Montney Marcellus Operating costs & transportation ($/mcfe) Royalties incl. GCA adjustments ($/mcfe
Slide 25: Clear Vision for Growth, Financial Strength, Proven Expertise
Clear Vision for Growth Financial Strength Proven Expertise
Slide 26: Appendix
APPENDIX 26
Slide 27: Glacier Growth Plan Details
GLACIER GROWTH PLAN DETAILS 16% ANNUAL AVERAGE PRODUCTION GROWTH 2017 THRU 2019 Annual Average Production (mmcfe/d) 316 272 236 203 2016 2017 Budget 2018E 2019E Annual Average Production Growth 16% average growth per year (“CAGR”) 16% 16% 15% 2017 Budget 2018E 2019E 27
Slide 28: Continuous Improvement Has Created Industry Leading Efficiencies
CONTINUOUS IMPROVEMENT HAS CREATED INDUSTRY LEADING EFFICIENCIES 28
Slide 29: Upper and Lower Montney Wells - Improving Performance Since 2008
UPPER AND LOWER MONTNEY WELLS - IMPROVING PERFORMANCE SINCE 2008 Newer wells restricted for frac sand flow back Budget Type Curve (IP30 7.5 mmcf/d & 7.5 Bcf) Data: updated to February 2017 29
Slide 30: Liquids Rich Middle Montney Well Performance Improvements Since 2011
LIQUIDS RICH MIDDLE MONTNEY WELL PERFORMANCE IMPROVEMENTS SINCE 2011 • 2015/16 Middle Montney wells with frac design changes including >20 frac stages and cemented ports to be evaluated 2015-16 1 Well Slickwater, OH Packers • 20 total Middle Montney wells on-production across 26 frac stages Glacier
Slide 31: Most Recent Lower Montney Wells With Up to 30 Frac Stages
MOST RECENT LOWER MONTNEY WELLS WITH UP TO 30 FRAC STAGES (OPEN-HOLE PACKERS AND CEMENTED PORTS) “Additional Lower Montney wells with longer laterals, reduced frac spacing Wells restricted to ~10mmcf/d for frac sand and cemented ports are continuing to flowback control during initial 6 months be bro
Slide 32: Exceptional Upper & Lower Montney Well Economics
EXCEPTIONAL(1)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 $4.8 million per well based on management’s estimate of DCE+T cap
Slide 33: Exceptional East Glacier Middle Montney Well Economics
EXCEPTIONAL(1)EAST GLACIER MIDDLE MONTNEY WELL 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 $4.8 million per well based on management’s estimate of DCE+T capital cost a
Slide 34: Glacier Montney Assigned 2P EUR Per Well & Interval
GLACIER MONTNEY ASSIGNED 2P EUR PER WELL & INTERVAL Glacier - 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 YE YE YE YE YE YE 2012 2013
Slide 35: 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 35
Slide 36: 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 37: Advisory
ADVISORY Certain statements contained in this presentation constitute forward-looking information, which 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 not always,
Slide 38: Advisory
ADVISORY Advantage discloses several financial measures that do not have any standardized meaning prescribed under International Financial Reporting Standards ("IFRS"). These financial measures include total debt to trailing cash flow ratio, total cash costs, funds from operations and operating netb
Slide 39: Advisory
ADVISORY will drill all unbooked drilling locations and if drilled there is no certainty that such locations will result in additional oil and gas reserves, resources or production. The drilling locations on which we actually drill wells will ultimately depend upon the availability of capital, regul
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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