Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Investor Presentation (March 2016)
47 slides from Peyto Exploration & Development's investor presentation, March 2016
Slide 1: Peyto March 2016
www.Peyto.com March 2016
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: Peyto Profile
Peyto Profile PEYTO Exploration & Development Corp. N TSX Listing: PEY N Shares Outstanding: 159.1 million, 3% insiders (as of Jan. 6/16) N Monthly Dividend: $0.11/share N Current Production: 0.6 BCFe/d (100,000 boe/d) N YE 2015 2P Reserves: 3.5 TCFe (590 mmboes) N Q4 2015 Net Debt: $0.42 billion (s
Slide 4: The Peyto Strategy: What We Believe
The Peyto Strategy What We Believe PEYTO Exploration & Development Corp. N “We believe nature’s gas is the fuel for the future.” N “We believe we can make a real profit by being the lowest cost, most efficient producer in the industry.” N “We believe in partnering with shareholders to make that prof
Slide 5: The Peyto Strategy: How We Do It
The Peyto Strategy How We Do It PEYTO Exploration & Development Corp. • Invest in our own ideas • Build it ourselves • Operate it ourselves • Focus on maximum return • Stay concentrated, lean & efficient 5 4/1/2016
Slide 6: Counter Cyclical Growth Per Share
The Peyto Strategy Counter Cyclical Growth Per Share PEYTO Exploration & Development Corp. liq prod/share gas prod/share Production per Unit or Share (boe/d per million) 700 AECO Forecast ($/GJ) 2016 YE Target $15 $75 AECO ($/GJ) >110,000 boe/d Share price w/div 600 $12 $60 500 Gas Price ($/GJ) PEY+
Slide 7: Profitable Business
Peyto’s Profitable Business PEYTO Exploration & Development Corp. 7 4/1/2016
Slide 8: 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 2014 PEY 2015 Land/Acq/Disp $2MM Seismic $7MM Drilling $288MM PDP FD&A $/mcfe ($2.25) ($1.64) Compl. Wellsite Facilities $173MM $49MM $74MM $594MM ∆PDP Reserves (before Prod.) 60.4 mmboes PDP FD&A $9.84/boe Cash Costs
Slide 9: 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 36% Avg. "Profit“ Cum To Date $8 $6 Bonus $4 Cash Costs $1.38 ($0.81) $2 PDP FD&A ($1.64) $- Forecast Total Cash Costs per mcfe includes – Royalt
Slide 10: Competitive In The North American Marketplace
Peyto’s Profitable Business Competitive In The North American Marketplace PEYTO Exploration & Development Corp. 100% Montney 65% DB/35% Mont. 100% Deep Basin VII 2015 TOU 2015 PEY 2015 PDP FD&A $/mcfe ($3.56) ($2.29) ($1.64) Cash Costs $/mcfe ($2.57) ($1.40) ($0.81) Supply Cost ($6.13) ($3.69) ($2.4
Slide 11: Unique Assets
Peyto’s Unique Assets PEYTO Exploration & Development Corp. 11 4/1/2016
Slide 12: 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 ---(730 mmcf/d net capacity) • 1600+ km pipelines • 1200+ producing zones T60 Kakwa • >100,000 boe/d T60 Chicken Leland Processed b
Slide 13: 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 14: 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* 14 *NGL recoveries can increase by 15+ bbl/mmcf with deeper cutting processing facilities 4/1/
Slide 15: Production By Formation
Peyto’s Assets Production By Formation PEYTO Exploration & Development Corp. 120,000 100,000 80,000 40% BOE/D Wilrich 60,000 20% Notikewin 40,000 23% Falher 20,000 8% Cardium 5% Bluesky 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 15 4/1/2016
Slide 16: Deep Basin Lands Go A Long Way
Peyto’s Assets Deep Basin Lands Go A Long Way PEYTO Exploration & Development Corp. 500 Peyto Lands 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 2.8 TCFe of PD EUR* (
Slide 17: 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 14 432 72 176 391 5 1 5 11 1 2 22 14 Over 10 90 94 140 77 years of 7 53 42 19 inventory in 81 120 279 SR+BLSK 16 alone (1
Slide 18: 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 4,000,000 24 Month Expiries 3,000,000 Earliest Expiry Date 2,000,000 out to 2017-12-31 1,000,000 (>1526 agreements, 0 2003 2004 2005 2006 2007 2008 2009 2010 20
Slide 19: Greater Sundance Area
Peyto’s Assets Greater Sundance Area PEYTO Exploration & Development Corp. F F F F F FF F AF FCF FF C F FFFF FF F FF F G G FA F F FF FAAF F G F C F A FF GF F F G CG L LI C G A FF AF F FF A F FAF AF AAF FAF AAF F F AFAAFA F AF AF AF AF A F AFA F AF FA DFA F FAA F GL F KAF C FLFFA F AF A F GAA F GA FA
Slide 20: Brazeau River Area
Peyto’s Assets Brazeau River Area PEYTO Exploration & Development Corp. G F F K F F K U C E DCV V VE E K A U F FFU F KA A F F AC F FA J F C L E EV V E F W F G A C F G G G W G E EE V VK DCACF A EG KEC V VC E K C E EV F VF E F A F U UF J UE F UA F F F U F GK F G KC FA F V K G F E FC I F F F F A KC K F
Slide 21: 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 22: 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 Flat for • Nat gas fuel 9 yrs • Continuous innovation 22 BOE factor - 6 mcf = 1 bbl of oil equivalent 4/1/2016 Operating costs inclu
Slide 23: Drilling Cost Performance
Peyto’s Assets Drilling Cost Performance PEYTO Exploration & Development Corp. Hz Spirit River 5,000 40 4,412 4,500 34.5 4,268 4,299 4,291 4,308 4,240 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 $2,792 18
Slide 24: Completion Cost Performance
Peyto’s Assets Completion Cost Performance PEYTO Exploration & Development Corp. Monthly Average Completion Costs $2,000,000 $240,000 $1,800,000 $210,000 $1,600,000 -35% $180,000 $1,400,000 $150,000 $1,200,000 Cost Per Stage Total Cost $1,000,000 $120,000 $800,000 $90,000 $600,000 $60,000 $400,000 $
Slide 25: 2015 - A Better Year
Peyto’s Assets 2015 - A Better Year PEYTO Exploration & Development Corp. 25 4/1/2016
Slide 26: 2015 – Why The Better Results?
Peyto’s Assets 2015 – Why The Better Results? PEYTO Exploration & Development Corp. 26 4/1/2016
Slide 27: Incredible Returns
Peyto’s Incredible Returns PEYTO Exploration & Development Corp. 27 4/1/2016
Slide 28: Focus On Returns Drives Capital Discipline
Peyto’s Returns Focus On Returns Drives Capital Discipline PEYTO Exploration & Development Corp. 2015 - $11,600/boe/d 120,000 2014 - $16,800/boe/d $900 2013 - $15,100/boe/d 2012 - $17,600/boe/d 2015 Exit 102,200 boe/d Annual Production Wedge (boe/d) ONR Acq - $38,600/boe/d 2011 - $17,500/boe/d $800
Slide 29: Stress Testing Low Commodity Prices
Peyto’s Returns Stress Testing Low Commodity Prices PEYTO Exploration & Development Corp. Species IP NGLs EUR D/C/E/T/ IRR @ IRR @ Number IRR @ Feb L/S/F Feb 2.50/GJ of 2016 22/16 mmcfd bbl/mmcf BCFE $MM 22/16 Flat Locations Strip Strip (10% less capex) Sundance Wilrich 5 6 3.1 4.1 12% 15% 35 15% Ed
Slide 30: High Returns On Your Capital And Equity
Peyto’s Returns High Returns On Your Capital And Equity PEYTO Exploration & Development Corp. 60% $12 50% $10 40% $8 30% $6 17 yr Average ROE 20% $4 10% $2 0% $0 Return On Capital Employed (%) Return On Equity (%) Earnings/share Realized Price ($/mcfe) 17 yr Average ROCE Return on Equity (ROE) is ea
Slide 31: Future
Peyto’s Future PEYTO Exploration & Development Corp. 31 4/1/2016
Slide 32: 2016 Outlook
2016 Outlook TCPL Takeaway Expansion PEYTO Exploration & Development Corp. $2.50/GJ 32 4/1/2016
Slide 33: TCPL Capacity Forecast
2016 Outlook TCPL Capacity Forecast PEYTO Exploration & Development Corp. Room for IT (50%) Brazeau is now out of the USJR area 33 4/1/2016
Slide 34: Western Canadian Gas Volumes and Rig Counts
2016 Outlook Western Canadian Gas Volumes and Rig Counts PEYTO Exploration & Development Corp. Canadian Gas Rig Count and Gas Production 400 Western Canadian Gas Production 17.5 17,000 $11.00 16,000 $10.00 Gas Production (mmcf/d) 15,000 $9.00 $8.00 350 14,000 $7.00 17.0 13,000 $6.00 12,000 $5.00 NEB
Slide 35: More for less: 2016 Capital Program
2016 Outlook More for less PEYTO Exploration & Development Corp. Drill ~125-135 Hz Wells (100% Hz-MSF, Liquids Rich Natural Gas) Expand & Extract Increase Processing Capacity & NGL Yield ~80 mmcf/d Increase Undeveloped Land Base Shoot Seismic 2016 Capital Program Acquire Additional Opportunitie
Slide 36: Drill Our Way To 115,000 BOE/D!
2016 Outlook Drill Our Way To 115,000 BOE/D! PEYTO Exploration & Development Corp. 120,000 102,200 boe/d exit 120,000 100,000 85,700 boe/d exit TCPL Outage 100,000 75,200 boe/d exit 80,000 80,000 51,000 added 57,000 boe/d exit BOED 60,000 42,100 boe/d exit 60,000 40,000 30,600 boe/d exit Choking bac
Slide 37: Continuously Improve Profitability
2016 Outlook Continuously Improve Profitability PEYTO Exploration & Development Corp. 2016 Goals* • 10% service cost reduction • Drilling off season PDP FD&A ~($1.50) • Longer laterals, more stages $/mcfe • Continuous operations • Natural gas heated water • Slow down facility pre‐builds ~($0.70) Cas
Slide 38: Where To From Here?
Peyto’s Future Where To From Here? PEYTO Exploration & Development Corp. 150,000 ~115,000 boed 100,000 $10,000 /boe/d $12,000 /boe/d BOED 11,600 /boe/d $16,800/boe/d 50,000 $17,500/boe/d $15,100/boe/d $17,300/boe/d $17,600/boe/d 2015 2016F Budget 2017 CAPEX $594MM $550MM $650MM Base Decline Base Dec
Slide 39: Appendix
Appendix PEYTO Exploration & Development Corp. N Quarterly Track Record N Tax Pools N Payout N Hedging Strategy N Gas Marketing N FAQ 39 4/1/2016
Slide 40: Quarterly Track Record
Quarterly Track Record PEYTO Exploration & Development Corp. 2015 2014 2013 2012 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Operations Production Oil & NGLs (bbl/d) 6,643 6,943 5,352 6,843 7,456 7,632 8,077 7,502 7,568 7,375 6,376 6,984 6,295 6,374 5,840 4,778 Natural gas (mcf/d) 47
Slide 41: 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 Q4/15 $600 $400 $200 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 CEC UCC (25%) CEE (100%) CDE (30%) COGPE (10%
Slide 42: Dividend Sustainability
Peyto’s Payout Dividend Sustainability PEYTO Exploration & Development Corp. Peyto Dividend Sustainability $2,500 $2,000 $1,500 Peyto Cum. Earnings Q4/15 $1,000 $500 $0 Q1 2000 Q4 2000 Q3 2001 Q2 2002 Q1 2003 Q4 2003 Q3 2004 Q2 2005 Q1 2006 Q4 2006 Q3 2007 Q2 2008 Q1 2009 Q4 2009 Q3 2010 Q2 2011 Q1
Slide 43: Successful Hedging Strategy
Successful Hedging Strategy Peyto Realized Price History PEYTO Exploration & Development Corp. $16.00 2003 Peyto $7.51/mc 2004 Peyto $7.38/mcf 2005 Peyto $8.78/mcf 2006 Peyto $8.48/mcf 2007 Peyto 2008 Peyto $8.42/mc $8.64/mcf 2009 Peyto $6.44/mcf 2010 Peyto $5.36/mcf 2011 Peyto 2012 Peyto $4.47/mcf
Slide 44: Gas Marketing: Future Sales (1 of 3)
Gas Marketing Future Sales (1 of 3) PEYTO Exploration & Development Corp. Financial Hedges - Gas Pricing 2014 2015 2016 2017 2018 Da te contra cte d GJ/d ($/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 N D J F M A M J J A S O 04-Mar-13 5000 $3.603 ● ● ● ● ● 13-May -13
Slide 45: Gas Marketing: Future Sales (2 of 3)
Gas Marketing Future Sales (2 of 3) PEYTO Exploration & Development Corp. Financial Hedges - Gas Pricing 2014 2015 2016 2017 2018 Da te contra cte d GJ/d ($/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 N D J F M A M J J A S O 06-Aug-14 5000 $4.000 ● ● ● ● ● 06-Aug-14 5
Slide 46: Gas Marketing: Future Sales (3 of 3)
Gas Marketing Future Sales (3 of 3) PEYTO Exploration & Development Corp. Financial Hedges - Gas Pricing 2014 2015 2016 2017 2018 Da te contra cte d GJ/d ($/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 N D J F M A M J J A S O 21-Jul-15 5000 $3.010 ● ● ● ● ● ● ● ● ● ● ●
Slide 47: 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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