Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Investor Presentation (June 2004)
55 slides from Peyto Exploration & Development's investor presentation, Jun 24, 2004
Slide 1: June 24, 2004
June 24, 2004
Slide 2: Profile
Profile • Established - November 1998 • Market - PEY.UN, Toronto Stock Exchange • Expertise - Exploration & Development of Long-life Gas Reserves • Core Area of Operations - Sundance, Alberta (Twp 55, Rge 21W5) • Units Outstanding - Basic & Diluted 45,725,372 • Distribution - $0.15/unit since incept
Slide 3: A Unique Strategy
A Unique Strategy 9 Find, develop & produce natural gas in Alberta’s “In my opinion there are very few true finders in today’s oil patch. Central Deep Basin. Peyto’s strategy is unique. Most of today’s so-called finders are just good promoters using the romance of drilling to inflate their 9 Focus o
Slide 4: Track Record
Track Record Five Years of Unmatched Profitable Growth Growth Rate Start End Compounded Over Five Year 12/31/1998 12/31/2003 Annually Period Share Price $0.23 $28.20 162% 12161% Production (boe/d) 68 15,273 195% 22360% Production (per million unit) 6 336 124% 5579% Cashflow $ (57,000) $ 41,371,000 R
Slide 5: Industry Comparison
Industry Comparison Performance, 5 Year Annualized Return 5 Year Annualized Return 200% “Our shareholder’s return over the past five years was recently recognized as the best for Canada’s 500 largest companies (Canadian Business magazine, summer 2004) . This 150% return is indicative of the return o
Slide 6: Characteristics of the Trust
Characteristics of the Trust • Low Payout Ratio • Approximately 50% of cashflow • Distributions will be primarily interest & royalty income (70% Taxable in 2003) • Long Reserve Life • 18.8 years proven plus probable, 10.6 years proven developed (December 31, 2003 Reserves) • Low Cost Structure • ope
Slide 7: The Team
The Team • Don Gray President & CEO, Director “Our unique strategy allows us to have • Roberto Bosdachin Vice President, Exploration a much smaller team than the traditional E&P or Trust Co. The smaller • Darren Gee Vice President, Engineering team helps ensure that we do not lose • Scott Robinson V
Slide 8: Corporate Governance
Corporate Governance • “We will be candid in our reporting, emphasizing the pluses and “Insiders currently own 22% of minuses important in appraising business value. Our guideline is to tell the Trust. From the beginning, you the business facts that we would want to know if our positions were we loo
Slide 9: A Unique Energy Trust Model
A Unique Energy Trust Model Foundation + Performance + Sustainability = Growth The Best Foundation It all starts with the foundation. Our foundation has the lowest operating costs, and the longest reserve life. It also delivers the highest netbacks. We operate over 95% of our current production, mor
Slide 10: Industry Comparison: Foundation, Results
Industry Comparison Foundation, Results Results Q1 2004 Year End 2003 Res erve Life (yrs ) Ordinary Operating Cas h Average Well Average Revenue Netback Cos ts Cos ts Proven Productivity Weighted Com pany Nam e ($/boe) ($/boe) ($/boe) ($/boe) Producing Total Proven Es tablis hed (boe/d) Ranking Peyt
Slide 11: Industry Comparison: Foundation, Weighted Rankings
Industry Comparison Foundation, Weighted Rankings Weighted Rankings Q1 2004 Year End 2003 Res erve Life (yrs ) Ordinary Operating Cas h Average Well Average Revenue Netback Cos ts Cos ts Proven Productivity Weighted Com pany Nam e ($/boe) ($/boe) ($/boe) ($/boe) Producing Total Proven Es tablis hed
Slide 12: Industry Comparison: Foundation, Operating Costs
Industry Comparison Foundation, Operating Costs Q4 2003 Operating Costs $14 $12 $10 $8 $/boe $6 $4 $2 $- UN N N UN N UN N UN N UN O UN N UN N N U U _U _U U _U _U YT U T_ T_ I_ E_ F_ F_ P_ N_ T_ F_ E_ AE AY N R PE PW AE BT PT ER PM FE PG BN SH AV VK PV 12 6/24/2004
Slide 13: Industry Comparison: Foundation, Proven Reserve Life
Industry Comparison Foundation, Proven Reserve Life 2003 Year End Proven Reserve Life 15 10 Years 5 - UN N N UN N N N UN UN UN O UN N N UN N U U _U _U U _U _U YT U T_ F_ T_ I_ E_ F_ F_ N_ P_ T_ E_ AE AY N R PE PW AE PT BT ER PM FE PG SH BN AV VK PV 13 6/24/2004
Slide 14: Industry Comparison: Foundation, Established Reserve Life
Industry Comparison Foundation, Established Reserve Life 2003 Year End Established Reserve Life 20 15 Years 10 5 - O N N N N N N UN N N N N N N UN N _U _U YT _U U U U U _U U U U U U E_ F_ T_ T_ T_ F_ I_ E_ F_ N_ P_ N PE AE AY R PW PM AE AV PV PG PT BT ER FE VK SH BN 14 6/24/2004
Slide 15: Industry Comparison: Foundation, Well Productivity
Industry Comparison Foundation, Well Productivity 2003 Y ear End Well Productivity 120 “You can’t make a banquet out of someone else’s leftovers. Average Well Productivity (boe/d) This is true in oil and gas. Over the past ten years it has been 100 a sellers market. Most trust’s rely on acquisitions
Slide 16: Industry Comparison: Performance, Results
Industry Comparison Performance, Results Results Q1 2004 2003 Recycle Ratio 2003 Res erve Growth Per Unit Cos t of New 2003 Res erves ($/boe) Annual Production Average Growth Per Proven Proven Proven Weighted Com pany Nam e Unit Producing Proven Es tablis hed Producing Proven Es tablis hed Producing
Slide 17: Industry Comparison: Performance, Weighted Rankings
Industry Comparison Performance, Weighted Rankings Weighted Rankings Q1 2004 2003 Recycle Ratio 2003 Res erve Growth Per Unit Cos t of New 2003 Res erves ($/boe) Annual Production Average Growth Per Proven Proven Proven Weighted Com pany Nam e Unit Producing Proven Es tablis hed Producing Proven Es
Slide 18: Industry Comparison: Production Growth Per Unit
Industry Comparison Performance, Production Growth Per Unit Production Growth Per Unit Q1 2004 vs Q1 2003 30% 20% 10% 0% O N N N N N N UN N N N N N N UN N _U _U YT _U U U U _U U U U U U U E_ T_ F_ T_ I_ E_ T_ F_ -10% F_ P_ N_ N PE AE AY R PW PM AE AV PV PG BT PT ER FE VK BN SH -20% -30% -40% -50% 18
Slide 19: Industry Comparison: Proven Recycle Ratio
Industry Comparison Performance, Proven Recycle Ratio 2003 Proven Recycle Ratio 8 6 4 2 Recycle Ratio of 1, Breakeven Line or 0% Return 0 O N N N N N UN N N N N N N N UN N _U _U YT _U U U U _U U U U U U U E_ T_ F_ T_ F_ T_ I_ E_ F_ N_ P_ N PE AE AY R PW PM AE AV PV PG PT BT ER FE VK SH BN -2 -4 19 6
Slide 20: Industry Comparison: Proven Reserve Growth Per Unit
Industry Comparison Performance, Proven Reserve Growth Per Unit 2003 Proven Reserve Growth Per Unit 60% 40% 20% 0% N N N N N N N N N N N N N N N O _U _U _U U _U U U U U _U _U U U U U YT E_ I_ T_ T_ E_ F_ F_ T_ F_ N N P R AE AY PE PW SH BN AE FE AV PV PM PT BT ER PG VK -20% -40% -60% 20 6/24/2004
Slide 21: Industry Comparison: Established Reserve Growth Per Unit
Industry Comparison Performance, Established Reserve Growth Per Unit 2003 Established Reserve Growth Per Unit 60% 40% 20% 0% N N N N N N N N N N N N N N N O _U _U _U U _U U U U U _U _U U U U U YT E_ I_ T_ E_ T_ F_ F_ T_ F_ N N P R AE AY PE PW SH BN FE AE AV PV ER PM PT BT PG VK -20% -40% -60% 21 6/2
Slide 22: Industry Comparison: Sustainability, Results
Industry Comparison Sustainability, Results Results 2003 Year End Payout Adjus ted Q1 2004 Res erve Life (yrs ) Operating Average Dis tribution Cos ts Proven Weighted Com pany Nam e Payout Ratio ($/boe) Producing Proven Es tablis hed Ranking Peyto 45% 1.66 20 28 42 1 ARC 76% 7.27 9 13 16 7 Focus 78%
Slide 23: Industry Comparison: Sustainability, Weighted Rankings
Industry Comparison Sustainability, Weighted Rankings Weighted Rankings 2003 Year End Payout Adjus ted Q1 2004 Res erve Life (yrs ) Operating Average Dis tribution Cos ts Proven Weighted Com pany Nam e Payout Ratio ($/boe) Producing Proven Es tablis hed Ranking Peyto 1 1 1 1 1 1 ARC 7 5 7 7 8 7 Focu
Slide 24: Industry Comparison: Sustainability, Payout Ratio
Industry Comparison Sustainability, Payout Ratio Q1 2004 Payout Ratio 100% 75% 50% 25% 0% N UN N N N UN N UN UN UN O UN N N N UN U _U _U U U _U _U YT U F_ I_ E_ T_ T_ F_ P_ N_ T_ F_ E_ AE AY R N PE PW AE PT BT ER PM FE PG BN SH PV VK AV 24 6/24/2004
Slide 25: Industry Comparison: Payout Adjusted Proven Reserve Life
Industry Comparison Sustainability, Payout Adjusted Proven Reserve Life Q1 2004 Payout Adjusted Proven Reserve Life 20 “In order to use reserve life as a measure of sustainability, you need to account for the payout ratio. If the trust is paying out all of it’s cashflow to the 15 unit holders than t
Slide 26: Industry Comparison: Overall Rankings
Industry Comparison Overall Rankings, Foundation, Performance, Sustainability Weighted Rankings Com pany Nam e Foundation Perform ance Sus tainability Overall Ranking Peyto 1 1 1 1 ARC 5 5 7 6 Focus 5 6 7 6 Acclaim 6 5 8 6 Shinningbank 6 6 8 7 Advantage 6 7 7 7 Enerplus 6 7 7 7 Petrofund 7 6 7 7 Pri
Slide 27: Track Record: Quarterly Performance
Track Record Quarterly Performance 2004 2003 2002 2001 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Operations Production Oil & NGLs (bbl/d) 3,315 2,904 3,104 2,948 2,870 2,689 1,823 2,349 2,009 1,512 1,409 785 1,222 815 621 472 Natural gas (mcf/d) 78,597 65,015 73,013 66,827 62,577 57,4
Slide 28: Track Record: Production Growth
Track Record Production Growth 20,000 Q1 2004 Exit “We have been operating as a company for 20 Production Over quarters now. The first four quarters were focused on drilling and completing our initial wells. Since we 18,000 boe/d began producing from these wells our production has 15,000 grown from
Slide 29: Per Share Production, Revenue & Cashflow
Track Record Per Share, Production, Revenue & Cashflow 500 $1.30 Net Revenue & Cashflow per share Daily Production per million shares 400 $1.00 300 $0.70 (boe/d) 200 $0.40 100 $0.10 - $(0.20) 99 00 00 00 00 01 01 01 01 02 02 02 02 03 03 03 03 04 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 Q Q Q Q Q Q Q Q Q
Slide 30: Revenue: Gas & NGLs
Revenue Gas & NGL’s • Gas • Price Point AECO Hub • Wellhead price per mcf is equal to 1.17 (GJ/mcf) times the AECO price per GJ. • Natural Gas Liquids • Wellhead price for Peyto’s NGL’s is $6-$10 CDN/barrel less than the WTI price in CDN dollars. • Corporate Liquid Gas Ratio 45 - 47 bbls/mmcf (sales
Slide 31: Operating Costs
Operating Costs 2002 2003 Q1 2004 “We are focused on building and maintaining the best oil and $/boe $/boe $/boe gas trust. In order to do so you must control your operating costs. Our operating costs are the lowest in the industry for a Field Expenses $1.45 $1.99 $1.83 number of reasons. First, we
Slide 32: Operating Costs: Quarterly Track Record
Operating Costs Quarterly Track Record $8.00 “Our track record shows that we can maintain and $7.00 continue to build a low operating cost company. Since we first reported operating costs lower than $2.00/boe, we have increased our production over $6.00 six fold and managed to keep our costs in chec
Slide 33: Reserves: December 31, 2003 Volume Summary
Reserves December 31, 2003 Volume Summary Sales Gas NGL's & Oil BOE's Category (BCF) (Mstb) (Mstb) Proven Producing 251 11,961 53,822 Proven Non-Producing 26 1,041 5,425 Proven Undeveloped 49 2,381 10,573 Total Proven 327 15,383 69,820 Probable Additional 168 7,330 35,251 Proved + Probable 494 22,71
Slide 34: Reserves: NPV Summary
Reserves December 31, 2003 NPV Summary Variable Price Economics NPV (millions of CDN dollars) Category 0% 5% 8% 10% Proven Developed 1,446 878 719 645 Proven Undeveloped 213 123 94 81 Total Proven 1,659 1,002 813 726 Probable Additional 803 387 283 238 Proven + Probable 2,462 1,389 1,097 963 • Paddo
Slide 35: Reserves: Performance Ratios
Reserves Performance Ratios Pe rformance Ratios Prove d De ve lope d Total Prove d Prove d + Probable Re se rve l ife i n de x (ye ars) 2003 average production – 13,740 boe/d 11.8 13.9 21.0 Q4 2003 average product ion – 15,273 boe/d 10.6 12.5 18.8 Fi n din g, de ve l opm e n t an d acqu i si ti on c
Slide 36: Performance, Proven NPV Gain on 2003 Investments
Industry Comparison Performance, Proven NPV 10 Gain on 2003 Investments Proven NPV 10 Gain on 2003 Drilling & Acquistion Investments 300 “The AIF now requires companies to reconcile the annual change in the Proven NPV. When you add up all the NPV that was created by the capital program 200 (extensio
Slide 37: NI 51-101 Cautionary Statements
Reserves National Instrument 51-101 Cautionary Statements The Canadian Securities Administrators have implemented new standards of disclosure for reporting issuers engaged in upstream oil and gas activities effective December 31, 2003. The new disclosure standards referred to as National Instrument
Slide 38: Reserves: Long Life vs. Short Life
Reserves Long Life vs. Short Life Long Life Production 1,600 • Typically deeper reservoirs, with large definable areas and Short Life – Water Drive no associated water. “Peyto has been 1,400 engineered around • Production profile is predictable and flattens over time. Long Life Reserves.” • Long Lif
Slide 39: Cardium Gas
Cardium Gas Greater Edson Area Trend Cardium Gas 9Low Risk Development Play 9Liquid Rich, High Heating Value Gas 9Predictable Production Profile 9Long Life Reserves 1 Cardium Gas Producers On production before 1991 z 32 wells on production before 1991 z 32 wells still producing today z No Cardium We
Slide 40: "Old" Analog Cardium Producers
“Old” Analog Cardium Producers on Production before 1991 Minehead, Ansel, Galloway, Sundance Cardium Gas Trend "Old" Analog Cardium Producers (on Production before Oct-1991) Cumulative Gas First Year Actual Ultimate “Its been a couple of Produced Avg Gas Reserve Current Time On Exponential Remaining
Slide 41: Cardium Gas: Offset Well Performance
Cardium Gas Offset Well Performance “The Cardium Producers on before January 1, 1998, were all that existed before Peyto started developing the north end of the trend or Sundance.” 12-13 Cardium Producers on Before January 1, 1998 16-29 06-22 Cardium Producers on After January 1, 1998 41 6/24/2004
Slide 42: Cardium Gas: Offset Well Performance
Cardium Gas Offset Well Performance 10,000 “The average decline of these wells over the past eleven years The Last Three Producers on the is 4.2%. It’s this low decline that Trend Before Peyto’s Sundance gives the Cardium its long term value.” 16-29-54-21W5 Cardium Decline - 4.9%/year over On Produc
Slide 43: Cardium Gas: Well Performance
Cardium Gas Well Performance PEYTO Cardium Gas W ell Performance By Year 2 ,0 00 “This chart shows all of Peyto’s Cardium production. The wells have all been normalized to start at the same time. This can be considered Cal-Dly Gas Rate (m cf/d) a risked average rate for Peyto’s Cardium Gas wells.” 1
Slide 44: General Area of Operations Map
General Area of Operations Map From the start, Peyto has focused it’s efforts exclusively in the Deep W6 W5 W4 Basin. We are the only company in the five most active list that has not Alberta acquired our way into the Deep Basin. The table below ranks the the top five companies with respect to new p
Slide 45: Central Deep Basin Land Map
Central Deep Basin Land Map • Over 156,000 net Smoky/Kakwa acres (244 sections) • Average Interest 80% Sundance • 98% Operated “Over the past four years Peyto’s Deep Basin land holdings have grown faster than any other producer operating in the area.” 45 6/24/2004
Slide 46: Gas Plant & Gathering System: Sundance
Gas Plant & Gathering System Sundance Sundance Gas Plant z 97 mmcf/d Compression, 100 mmcf/d Refrigeration z Constructed & Installed April 2000 z expanded four times over two years z 100% PEYTO Owned & Operated z Direct, Firm Access to TCPL z Joint Venture & Third Party Processing Revenue PEYTO Gas
Slide 47: Gas Plant & Gathering System: Smoky/Kakwa
Gas Plant & Gathering System Smoky/Kakwa Smoky/Kakwa Gas Plant z 25 mmcf/d Compression, 40 mmcf/d Refrigeration z Constructed & Installed February 2004 z 100% PEYTO Owned & Operated z Direct, Firm Access to TCPL z Joint Venture & Third Party Processing Revenue PEYTO Gas Plant 47 6/24/2004
Slide 48: 2003 Drilling Activity & Capital Expenditures
2003 Drilling Activity & Capital Expenditures z Drilling Activity z Gross wells, 79 z Net wells, 65 (82% Average WI) z 96% conversion (spud to tied in) z Capital Expenditures (2003E) z Total $139MM z Drill & Complete $110MM z Tie ins & Facilities $23MM 48 6/24/2004
Slide 49: Outlook 2004
Outlook 2004 • Capital Expenditures ($130 - $180 million) • Drill & Re-Enter New Gas Locations (80 - 110 wells) • Expand Gas Gathering & Processing Capacity • Expand Undeveloped Land Base • Expand 3-D & 2-D Seismic Database • Acquire Partner Working Interests 49 6/24/2004
Slide 50: A Trust Worthy Gas Company
A Trust Worthy Gas Company • Long Life Predictable Natural Gas Reserves • Premium Quality Natural Gas & Liquids • Low Total Cost Structure • High Netbacks • Predictable & Repeatable Gas Business Model 50 6/24/2004
Slide 51: Notes: Table of Contents, Gas Marketing
Notes Table of Contents Gas Marketing (1) • Gas & Liquids Marketing Season W inter 03/04 Period Hedged November 1, 2003 to March 31, 2004 Type Costless Collar Daily Volume GJ's/d 5,000 mcf/d 4,274 Aeco Price ($/GJ) Floor $5.50 Ceiling $8.45 Peyto W ellhead Price ($/mcf) Floor $6.44 Ceiling $9.89 Nov
Slide 52: Bonus Plan and Compensation
Bonus Plan Compensation Reserve Based Component • Base G&A estimated to be a low $0.25/boe “The principal behind our bonus • Rules plan is to reward performance • At the time of payout, a share of the bonus plan is allocated, based on performance, to employees and key consultants. which benefits the
Slide 53: Distribution History, Major Share Placements
Distribution History Major Share Placements Is s ue Distribution Distribution Number of Units Total Shares Price “We raised a total of $58 million Month per Unit O/S Distribution dollars through equity issues Placem ent Year Type (000's ) ($/s hare) Jul-03 $ 0.15 45,395,122 $ 6,809,268 over our corp
Slide 54: Financing History
Financing (2001-2002) Financing (2000) • 2001 • 2000 • $50,000,000 Revolving Line of Credit from Bank • $2,700,000 Convertible Debenture issued to Paramount Resources Ltd. • Moved from $25,000,000 Revolving Line of Credit with the National Bank of Canada to a $50,000,000 Revolving Line • Bears inter
Slide 55: Employees and Directors
Employees Directors Don T. Gray, President & CEO, Director Don T. Gray, Co-founder, CEO & President,since 1998 Founder of PEYTO, Professional Engineer up to December 31, 2002, 15 years of oil & gas reservoir, evaluation & exploitation “We have four independent Board members, one engineering experien
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