Advantage Energy Ltd · TSX:AAV
Advantage Energy — Advantage Oil & Gas — Investor Presentation (September 2012)
31 slides from Advantage Energy's investor presentation, September 2012
Slide 1: Investor Presentation September 2012
Investor Presentation September 2012 September 2012 Page 1
Slide 2: Advantage Oil & Gas Ltd.
Advantage Oil & Gas Ltd. • Listed on TSX & NYSE AAV • Shares Outstanding (Basic) 167 million • Market Capitalization at September 4, 2012 $ 576 million • Q2 2012 Bank Debt (57% drawn) $ 172 million Convertible Debentures - January 2015 $ 86 million • Enterprise Value $ 834 million • Longview Share v
Slide 3: Advantage Overview
Advantage Overview • Significant position in the Montney natural gas resource play with 10.4 Tcfe gross raw (1) Discovered Petroleum Initially in Place (“DPIIP”) at our Glacier property • Glacier is located within the Montney fairway where larger E&P’s and NOC’s have been active with consolidation &
Slide 4: Advantage – Focused on 10.4 Tcfe Montney Natural Gas Resource Play at Glacier
Advantage – Focused on 10.4 Tcfe (1) Montney Natural Gas Resource Play at Glacier Company Total Q2 2012 Production : 22,067 boe/d (2) Gas/Oil & Ngl % : 94/6 RLI: 24.3 yrs Glacier – Montney Natural Gas & Liquids Potential Q2 2012 Production : 15,776 boe/d (2) Alberta Gas/Oil & Ngl % : 100/0 Avg. W.I.
Slide 5: Advantage Year End 2011 Reserves
Advantage Year End 2011 Reserves 2P Reserves = 217.9 Million Boe • Replaced 220% of production at Reserves by Areas a 2P F&D cost of $8.85/boe (1) • Glacier 2P F&D at $7.41/boe (1) • Proven reserves comprise 64% 6% of the 2P reserves 10% • 2011 Recycle ratio of 1.9x 84% • 3 Year 2P F&D of $9.90/boe
Slide 6: Glacier Development Drives Production Growth & Lower Operating Costs
Glacier Development Drives Production Growth & Lower Operating Costs Advantage Production Growth (1) Advantage Operating Costs 25000 boe/d $/boe 95%Production Growth 13.89 Top Tier Operating Cost Replaced 16,000 boe/d of Structure asset sales since 2009 20000 12.11 10.66 15000 8.44 10000 5.80 5.45 5
Slide 7: Top Decile Operating Cost Structure Due to Growth at Glacier
Top Decile Operating Cost Structure Due to Growth at Glacier $/boe (1) 25 Advantage is one of the lowest cost producers among the Canadian 20 intermediate oil and gas sector 15 AAV Corporate AAV Q2 2012 $5.16/boe 10Glacier $1.80/boe 5 0 (1) Based on Scotia Capital Inc. estimated 2012 operating & tra
Slide 8: Recent M&A Activity
Recent M&A Activity Shale AAV Glacier Silt Sand 400 Montney Total Hz Well Production (mmcfe/d) 300 Advantage is one of the larger producers in the Transactions to date have been 200 Montney Resource Play mainly in the ‘over-pressured’ region of the montney fairway 100 0 Pengrowth Huron ARC Advantage
Slide 9: Glacier’s Location Provides Technical & Economic Benefits
Glacier’s Location Provides Technical & Economic Benefits BC AB Glacier is located in Alberta and is within the over-pressured and extremely thick Montney siltstone fairway with Upper, Middle & Lower Montney Potential A 100 km A’ 09-36-79-20W6 05-09-76-13W6 01-21-77-11W6 c-42-F 93-P-09 A Upper Montn
Slide 10: Glacier Montney Drilling Targets – Glacier/Swan/Tupper
Glacier Montney Drilling Targets – Glacier/Swan/Tupper Development Potential Could Exceed Area1,000 Wells Total of 89 net wells drilled Drilling Inventory > 1000 locations Upper Montney 73 wells drilled Potential for Inventory 300 to 400+ (1) (Lateral and vertical delineation Development of potentia
Slide 11: Updated Glacier Montney Resource Assessment Highlights
Updated Glacier Montney Resource Assessment Highlights(1) • DPIIP of 10.4 Tcfe gross raw (9.66 Tcfe AAV working interest) & includes estimates for Upper, Middle & Lower Montney • Resource potential includes previously unassigned Middle Montney formation due to recent evaluation drilling results whic
Slide 12: Glacier Montney Resource Assessment - DPIIP Increased to 9.7 Tcfe
Glacier Montney Resource Assessment - DPIIP Increased to 9.7 Tcfe (1) Sproule identified 6 layers of potential within our ~300 meters of Montney formation at Glacier. 9.66 Tcfe (2) TPIIP includes recognition of 156 million bbls of NGL’s initially in place with 51 million bbls identified as recoverab
Slide 13: Glacier Montney Reserves - Significant Growth Potential
Glacier Montney Reserves - Significant Growth Potential Reserves & contingent resource(1) estimates imply significant reserve growth potential. Negligible Middle Montney Reserves booked at YE 2011. 3.8 Tcfe Sproule estimated recoveries based on 4 hz wells (39% RF) per section per layer development.
Slide 14: Middle Montney Evaluation Wells Reveal NGL’s Potential
Middle Montney Evaluation Wells Reveal NGL’s Potential Q1 2012 • 5 Hz wells & 3 vertical recompletions targeted to evaluate porosity cut-off & MM flow potential across Glacier layer 1 land block • Vertical recompletions indicated presence of NGL’s MM • 4 Hz wells tested 3 separate layer 2 Middle Mon
Slide 15: Estimated Liquid Yields in Middle Montney Layers
Estimated Liquid Yields in Middle Montney Layers(1) C3+ components estimated at 46% to 60% Liquid Yield in based on deep cut 90 Bbls/mmcf On a revenue basis: 2.5 mmcf/d Middle Montney well ≈ 5 mmcf/d Upper Montney dry gas well 68 57 57 51 35 30 25 Middle Montney Middle Montney Middle Montney Middle
Slide 16: Middle Montney Liquids Processing Options
Middle Montney Liquids Processing Options Liquids processing options : Glacier 1 Glacier gas plant – install shallow cut (refrigeration) or deep cut Glacier facilities in a staged growth approach Gas Plant Alliance Pipeline Adjacent to TCPL 2 Alliance Pipeline – access liquids handling capability by
Slide 17: Glacier Gas Plant Positioned for Production Ramp-Up Capability
Glacier Gas Plant Positioned for Production Ramp-Up Capability Advantage 100% W.I. Glacier Gas Plant • Glacier gas plant will have capacity to process up to 140 mmcf/d • Plant modifications began in 2011 & are now complete as originally planned at a cost of $13 million • Provides operational flexibi
Slide 18: Glacier – Strong Operating Netbacks & Recycle Ratios
Glacier – Strong Operating Netbacks & Recycle Ratios Glacier Operating Netbacks & Recycle Ratio (Based on Upper Montney “Dry Gas”) Revenue ($Cdn/mcf)(1) $2.00 $3.00 $4.00 Royalties ($/mcf @ Royalty Rate 5.0%) $(0.10) $(0.15) $(0.20) Operating Costs ($/mcf) $(0.25) $(0.25) $(0.25) Operating Netback (
Slide 19: Glacier Upper Montney Dry Gas Well Economics – Sensitivity Analysis
Glacier Upper Montney(1) Dry Gas Well Economics – Sensitivity Analysis 120 Glacier Upper Montney Horizontal Current Average Upper Rate of Return (%)(1) Montney type curve 100 5 mmcf/d & 5 Bcf 80 Rate of Return - % 60 40 20 0 2.00 3.00 4.00 5.00 6.00 AECO Gas Price - $/mcf Rate and Reserve per well S
Slide 20: Advantage Guidance & Hedging
Advantage Guidance & Hedging 12 months ending Guidance Jun 2013 Production Average (boe/d) 22,000 – 23,000 Royalty Rate (%) 6% to 8% Operating Costs ($/boe) $5.50 - $5.95 Capital Expenditures ($Millions) $70 - $80 Hedging – 51%(1) of current AAV production hedged as of July 2012 May to December 2012
Slide 21: Advantage Summary
Advantage Summary • World class Montney natural gas play at Glacier with one of the lowest cost structures in Western Canada • Recent discovery of NGL’s in the Middle Montney formation provides growth potential in reserves & resource in addition to the Upper & Lower Montney • DPIIP increased to 10.4
Slide 22: Advantage Contact Information
Advantage Contact Information Investor Relations 1.866.393.0393 ir@advantageog.com Andy Mah, P.Eng. President & Chief Executive Officer Craig Blackwood, C.A. Vice-President, Finance www.advantageog.com TSX:AAV NYSE:AAV Advantage Oil & Gas Ltd. Suite 700, 400 – 3rd Avenue SW Calgary, Alberta T2P 4H2
Slide 23: Appendix
Appendix September 2012 Page 23
Slide 24: Western Canada Main Natural Gas Trunklines
Western Canada Main Natural Gas Trunklines British Horn River Alberta Columbia Basin Ft. St. John Ft. McMurray Natural gas pipeline Glacier interconnection already exists between B.C. and Montney Grande Prairie Alberta Basin Kitimat Edmonton Prince George Calgary Spectra Canada Pacific Northern Vanc
Slide 25: Sproule Montney Reserves & Contingent Resource
Sproule Montney Reserves & Contingent Resource(1) TPIIP Reserves + Contingent (TCF, Sales) 300 meters thick with 6 layers of potential (TCF raw) 1P + 2P + 3P+ ~2300 to 2350 m TVD Low Best High (%RF) (%RF) (%RF) 2.75 0.86 1.11 1.50 Upper Montney 31% 40% 55% 3.74 0.42 0.63 0.93 1000 feet (300 meters)
Slide 26: Upper Montney Development
Upper Montney Development • 73 net (79 gross) Upper Montney wells drilled to date • Type curve 5 mmcf/d IP, 5 Bcf • Low well density to date • Only 8 of 80 net sections developed to ≥ 3 wells/section • Potential to increase well density per section by drilling laterally & ‘stacking’ hz wells vertica
Slide 27: Montney Horizontal Well Production Range and Type Curve
Montney Horizontal Well Production Range and Type Curve Swan, Sunrise, Tupper, Pouce Coupe, Groundbirch and Glacier Data includes Glacier, Upper & Lower Montney Horizontals Swan, Tupper, Pouce Coupe South & Normalized 30 Day IP Production Rates Groundbirch 14000 12000 10000 The IP30 range and averag
Slide 28: Lower Montney Development
Lower Montney Development • 11 net (14 gross) Lower Montney wells drilled to date • Majority of wells drilled in 2008/2009 to preserve expiring sections • Fracs utilized 2008/2009 technology - 6 to 8 frac stages • Lower decline production supports significant reserve potential & opportunity to incre
Slide 29: Lower Montney Production – Low Decline
Lower Montney Production – Low Decline Advantage Glacier Area Lower Montney Horizontals Normalized 30 Day IP Production Rates 5,000 4,000 Lower Initial declines & flatter 3,000 production profile confirms Gas Rate - Mcfd significant reserve potential & opportunity to improve productivity 2,000 1,000
Slide 30: Glacier – Thick Montney Siltstone Supports Higher Reserve Recoveries
Glacier – Thick Montney “Siltstone” Supports Higher Reserve Recoveries Unconventional Marcellus Shale Horn River Shale Barnett “Shaley” silts Haynesville Arc Silt Shell Birchcliff Most active drilling area in Glacier Montney “Tight” sand Conventional Encana AAV Glacier the Montney Murphy Devon Silt
Slide 31: Advisory
Advisory The information in this presentation contains certain forward-looking statements, including within the meaning of the United States Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future intentions or performance. All statements other than s
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