Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Investor Presentation (September 2023)
45 slides from Peyto Exploration & Development's investor presentation, September 2023
Slide 1: Corporate Presentation
www.peyto.com Corporate Presentation September 2023
Slide 2: Who Is Peyto | Highlights
WHO IS PEYTO | HIGHLIGHTS 25-year publicly traded company focused Focused Assets primarily on the Alberta Deep Basin ALBERTA 5th Largest ~123,000 boe/d (~11% liquids) Canadian Gas Long reserve life assets (9yr PDP, 24yr 2P Producer @ 2022YE)(2) Deep Basin Low-Cost Operate and control production with
Slide 3: Repsol Acquisition | Summary
REPSOL ACQUISITION | SUMMARY Consideration of US$468 million (before closing adjustments) 455,000 net acres of land (average 65% WI) in the Edson area with no expiries 23,000 boe/d(1)(2) (75% Natural Gas, 25% NGLs) at a 12% annual base decline rate 90 MMboe of PDP reserves and 306 MMboe of 2
Slide 4: Acquisition | Deep Drilling Inventory
ACQUISITION |DEEP DRILLING INVENTORY PEYTO AND REPSOL - 2013 PEYTO AND REPSOL – PRESENT DAY Drilling density on acquired lands represents where Peyto was 10 years ago Repsol drilled 52 Hz wells While Peyto drilled ~850 as compared to Peyto’s Hz wells in the last decade, Only five horizontal well
Slide 5: Acquisition | Reserves
ACQUISITION | RESERVES The purchase price approximates the Attractive Valuation developed producing reserves. Company Reserves(1) Before Tax ($million)(2) (5) After Tax ($million) (5) Gas Liquids Total NPV 5 NPV 8 NPV 10 NPV 5 NPV 8 NPV 10 (bcf) (MMbbls) (MMboe) PDP 409 22 90 $654 $566 $516 $498 $43
Slide 6: Acquisition | Financing
ACQUISITION | FINANCING Cash consideration of US$468MM Financing Highlights Purchase Price (before closing adjustments) Combination of debt and equity provides for shareholder accretion while maintaining balance sheet Revolving Commitment to upsize revolving credit strength Credit Facility facilit
Slide 7: Acquisition | Accretive Locations
ACQUISITION| ACCRETIVE LOCATIONS 137% 137% 132% 128% Peyto Repsol 99% Before Tax IRR (%) 93% 92% 88% 80% 72% 70% 68% 54% 38% GBA GBA GSA GSA GSA GBA GSA GSA Notikewin* Dunvegan* Falher* Bluesky* Wilrich* Cardium* Parameters Cardium Notikewin Notikewin Dunvegan Falher Wilrich Cardium Wilrich Gas (MMc
Slide 8: Acquisition | Facilities and Pipelines
ACQUISITION| FACILITIES AND PIPELINES Overlapping Pipelines and Proximal Plants 17 Operated Gas Plants with 1.5 Bcf/d Gross Capacity (52% utilized) NGTL Mainline Vast interconnected gas gathering system allows for future flexibility and optimization capabilities Alliance Pipeline Key access ro
Slide 9: Why We Do It | Natural Gas
WHY WE DO IT | NATURAL GAS Fossil fuels represent 80% of Demand for Natural Gas Continues the world’s energy consumption. Natural gas can play a World Energy Consumption by Source (1965-2021) significant role to displace coal in the future and reduce 650 emissions while doing so. 550 450 Exajoules 3
Slide 10: Why We Do It | Global Gas Markets
WHY WE DO IT | GLOBAL GAS MARKETS LNG cargoes have shifted towards Europe to replace supply from Russia. The expectation is that cargoes will continue to move in all directions going forward to meet world demand. ?? ?? Source: marinetraffic.com, March 2023 10
Slide 11: Why We Do It | Growing LNG Capacity
WHY WE DO IT | GROWING LNG CAPACITY The growth of LNG from the US continues to make up the supply for Asia and now Europe. >20 BCF/d by 2025 11
Slide 12: How We Do It | Own and Control
HOW WE DO IT | OWN AND CONTROL Gross Gross Raw Net Capacity Gas Plants Capacity Throughput (MMcf/d) (MMcf/d) (MMcf/d) 1 Edson 275 167.8 101 2 Swanson 130 130 75 3 Nosehill 125 125 75 4 Oldman (Deep Cut) 125 125 84 5 Brazeau 120 120 62 9 6 Oldman North 105 105 84 7 Wild River 100 81 48 8 Jupiter (sus
Slide 13: How We Do It | Peyto's Moat
HOW WE DO IT | PEYTO’S MOAT Peyto’s strategy to own and control Total Cash Costs (excluding Royalties and Taxes) production helps keep our cash costs $3.00 down which gives us a considerable advantage over our peers. The Peyto Advantage represents $2.50 around $1.34/mcfe lower costs during the l
Slide 14: How We Do It | Cost Control
HOW WE DO IT | COST CONTROL Historically, Peyto has been successful by focusing on keeping controllable supply costs low to preserve margin $/mcfe 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023H1 (3) PDP FD&A(1) $2.25 $1.64 $1.44 $1.36 $1.18 $1.55 $1.06 $0.97 $1.41 $1.25 (2) Cash Costs(1) $1.08 $
Slide 15: How We Do It | High Margins
HOW WE DO IT | HIGH MARGINS Peyto’s industry leading cash costs, combined with low finding and developing costs, translates to an overall cost advantage that leads to superior margins even as compared to higher liquid producers. Source: TD Securities Mar 15, 2023 15
Slide 16: How We Do It | Continuous Improvement
HOW WE DO IT | CONTINUOUS IMPROVEMENT Average Well Production by Spud Year 7,000 Unit Drill and Complete Costs $1,000 6,000 The 2023 drilling program YTD $900 is shaping up for another $800 5,000 successful year. Inflation $700 pressures have eased on the $600 4,000 MCF/D capital side through first
Slide 17: Returns | Robust Results
PEYTO’S RETURNS| ROBUST RESULTS 29 wells have paid out full cycle capital already with 53 paying out their half cycle costs. 45% of spuds projected to payout full cycle capital in less than 1- year. Chambers Cardium Non- Op results vastly poorer than Peyto drilled wells. 17
Slide 18: Peyto's Returns | Return on Equity
PEYTO’S RETURNS | RETURN ON EQUITY Investors rarely get to participate in the wells themselves, making type well economics somewhat 60% meaningless. ROE and ROCE are $12 the returns investors get, after deducting corporate costs. 50% $10 40% $8 24 yr Avg ROE to 2022 30% $6 20% $4 10% $2 0% $0 1999 2
Slide 19: Peyto's Returns | Dividends
PEYTO’S RETURNS | DIVIDENDS Earnings are profits and Peyto returns those $3,500 profits to shareholders through dividends. Peyto applies hedge accounting, so earnings are not skewed by large unrealized $3,000 gains or losses during a quarter. Over time, Peyto expects to match dividends to earnings b
Slide 20: Peyto's Future | 3-Year Plan
PEYTO’S FUTURE | 3-YEAR PLAN Business Plan Highlights Growth and Optimization (2024 – 2026) Digest and Optimize >160,000 boe/d • Integrate Repsol assets • Quick wins on optimization/synergies Growth ~10% • Production growth to over 160,000 CAGR boe/d • Free Funds Growth for dividends and 123,000
Slide 21: Future | Undrilled Inventory
PEYTO’S FUTURE | UNDRILLED INVENTORY(1) Peyto Repsol >503 >3400 297 Increases total Deep Basin inventory by over 30% Undrilled Total (1) See “Advisory – Drilling Locations” 21
Slide 22: Future | Cash Costs
PEYTO’S FUTURE | CASH COSTS Still a Leader in the Industry Total Cash Costs(1) (excluding Royalties and Taxes) $2.50 Repsol’s operating costs are high, but Peyto expects to lower per unit operating costs with higher facility $2.00 utilization and operational synergies on these assets. Cash Costs ($/
Slide 23: Future | Hedging
PEYTO’S FUTURE| HEDGING Successful Hedging Strategy Moderates Volatility Gas Price ($/mcf) $10.00 $9.00 Peyto has beat the AECO monthly price in 12 of the last 17 years using a methodical hedging and $8.00 diversification strategy. Hedging gains are expected through 2023 and 2024 based on $7.00 curr
Slide 24: Market Diversification
MARKET DIVERSIFICATION Peyto has diversified gas exposure to many premium markets through Peyto’s Gas Markets physical and financial basis deals. AECO / NIT Empress Emerson 2 Malin Ventura Dawn Chicago Henry Hub 24
Slide 25: Gas Marketing
GAS MARKETING Future Market Diversification and Gas Price Protection Peyto has used financial basis deals between 338 MMcf/d fixed at AECO and other hubs to gain market $4.03/Mcf in 2024 and 288 MMcf/d fixed at diversification and allow us to hedge at $4.11/Mcf in 2025 various markets. This reduces
Slide 26: Gas Marketing | Fixed Price Gas Contracts
GAS MARKETING Peyto uses a dollar cost averaging approach to Fixed Price Gas Contracts smooth out the volatility in future prices by forward selling smaller blocks of production. Fixed price swaps give price certainty. Prices do not include a deducts for Fuel (~2%). Please refer to https://www.peyto
Slide 27: Gas Marketing | Floating Price Gas Contracts
GAS MARKETING Peyto has exposure to natural gas price upside with its diversification to premium markets in Floating Price Gas Contracts California, Ontario and the US mid-west and its Cascade Power contract. • Emerson 2 volumes are priced on the Emerson 2 index less transport and fuel of ~4%. • Hen
Slide 28: NGL Marketing
NGL MARKETING Peyto uses swaps and costless collars to secure Fixed Price Gas Contracts liquids revenue as well. 28
Slide 29: Diversification | Power
DIVERSIFICATION| POWER Cascade Gas Supply Agreement Peyto gas market diversification includes exposure to Alberta power pool prices • 15-year Gas Supply Agreement for ~52 MMcf/d to Kineticor’s Cascade Power Project, a 900MW combined cycle power generating facility • Expected onstream in late 2023 or
Slide 30: Gas Diversification | LNG Opportunity
GAS DIVERSIFICATION| LNG OPPORTUNITY Peyto is proud to participate in the Rockies LNG Consortium whose goal is to support the construction another LNG project Our Partners Rockies LNG is a partnership of Canadian natural gas producers working together to off the Westcoast of BC to supply the World w
Slide 31: Peyto's Debt
PEYTO’S DEBT Debt on Close of Repsol Acquisition Date Issued Rate Maturity Date Forecasted pro forma debt of $1.36 Senior Secured Notes billion on closing the Repsol acquisition: $100 million (CAD) $65 million (CAD) October 24, 2016 May 1, 2015 3.70% 4.26% October 24, 2023* May 1, 2025 $100 million
Slide 32: Tax Pools
PEYTO’S TAX POOLS $1,800 $1,600 $1,400 $1,200 $1,000 Federal Tax Pools $800 Q4/22 Millions $600 $400 $200 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 CEC UCC (25%) CEE (100%) CDE (30%) COGPE (10%) Tax Loss Carry Forward P
Slide 33: Advisories
ADVISORIES This presentation relates to a public offering of subscription receipts (the "Subscription Receipts") of Peyto Exploration & Development Corp. (the "Company" or "Peyto"). The information provided in this presentation is not intended to provide financial, tax, legal or accounting advice. E
Slide 34: Development Plan
Development Plan The Company has presented herein a three-year illustrative development plan that provides for developing both the acquired assets and Peyto's current assets. The development plan is based on a number of assumptions including, without limitation: the required reinvestment rates to ma
Slide 35: Oil and Gas Metrics
Oil and Gas Metrics Peyto has used a number of oil and gas metrics herein which do not have standardized meanings and therefore may be calculated differently from the metrics presented by other oil and gas companies. Such metrics include "DCET", "EUR", "payout", "Before tax IRR" and "NPV @ 10%". DCE
Slide 36: Netback and Non-GAAP Measures
Netback is a non-GAAP measure that represents the profit margin associated with the production and sale of petroleum and natural gas. Peyto computes "field netback per Mcfe" as commodity sales from production, plus third party sales net of purchases, if any, plus other income, less royalties, operat
Slide 37: Peyto's History
PEYTO’S HISTORY Ensign Rig #401 has been drilling for Peyto for over 12 years. 37
Slide 38: History | Per Share Growth
PEYTO’S HISTORY| PER SHARE GROWTH Over time, the Peyto model is designed to deliver a superior total return with per share growth in value, income and assets. 1 2 3 YoY +10% +0.3% +70% +32% (1) Total Proved + Probable reserves (2) Funds from operations (“FFO”) is a non-GAAP financial measure or rati
Slide 39: History | Reserve Growth
PEYTO’S HISTORY| RESERVE GROWTH Over the past 24 years, Peyto has discovered 8.0 TCFe of natural gas reserves. 6,000 5,000 2,033 4,000 26% (BCFe) CAGR 3,000 8,035 1,570 2,000 TCFe of Discovered Reserves (1) 1,000 1,971 0 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 PDP Reserves T
Slide 40: History | Land Growth
PEYTO’S HISTORY| LAND GROWTH Peyto continues to expand its Deep Basin footprint with additional drilling inventory. To date we’ve only developed 10% of our land base. 1,200 Peyto Lands Net Peyto Sections 1,000 800 Net Sections 600 Net Sections of Cardium, Dunvegan, Notikewin, Falher, Wilrich, Bluesk
Slide 41: History | Acquisitions: Cecilia Tuck-in
PEYTO’S HISTORY| ACQUISITIONS Cecilia Tuck-in 2021 Although acquisitions are rare at Peyto, they are generally defined by the synergies with our existing core areas. Cecilia is a great example of how we buy and exploit tuck-in acquisitions and increase production by over five times. PEY Cecilia Gas
Slide 42: History | Acquisitions: Brazeau
PEYTO’S HISTORY| ACQUISITIONS Brazeau Private Co and Area Growth Peyto continued to bolt on properties in 2022, adding 2 complimentary assets and has since grown production back up to 30,000 boe/d in the GBA and climbing. Brazeau PrivateCo Acquisition • $22 million, effective Jan 1, 2022 Aurora W •
Slide 43: History | Emissions Leader
PEYTO’S HISTORY| EMISSIONS LEADER Emissions Intensity by Source Type for Canadian Oil and Gas (1990, 2005, 2020) Emission Intensity per Barrel (kg CO2eq/bbl) 119.8 Peyto provides energy for the world for far less emissions intensity than the average of the Canadian Gas Industry. 91.7 79.7 80.3 75.1
Slide 44: History | Emissions
PEYTO’S HISTORY | EMISSIONS Continuous Improvement Peyto GHG Emissions Intensity* 24.9 22.1 21.1 20.9 19.4 19.0 18.8 18.6 18.1 2013 2014 2015 2016 2017 2018 2019 2020 2021 in GHG Emissions Intensity* Scope 1 Scope 2 Peyto Methane Emissions Intensity 9.32 8.34 8.19 8.07 7.00 5.89 5.16 4.37 3.29 In Fl
Slide 45: History | Sustainability
PEYTO’S HISTORY | SUSTAINABILITY Responsible Land and Water Use Land Use Reduction Water Injected per BOE1 Cumulative Hectares/Well by Operator, 2021 Water per 6-Month BOE (bbl/BOE) 2.10 2.5 1.90 1.70 2.0 1.50 1.30 Low water use intensity 1.5 1.10 0.90 1.0 0.70 0.50 0.5 2013 2014 2015 2016 2017 2018
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