Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Investor Presentation (August 2019)
57 slides from Peyto Exploration & Development's investor presentation, Aug 22, 2019
Slide 1: Slide 1
Slide 2: Advisory: Regarding Forward-Looking Statements
Advisory 20th 1998-2018 Regarding Forward-Looking Statements 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", "objective", "ongoing", "ma
Slide 3: Who We Are
PEY.TO 20th 1998-2018 Who We Are N 6th Largest Natural Gas Producer in Canada N Pure Play Alberta Deep Basin – ~80,000-85,000 boe/d Gas & NGLs N Returns Focused Strategy – Avg ROCE 16%, ROE 29% over last 20 yrs, among highest in industry R10 R5W6 R27 R22 R17 R12 R7 T65 T60 N Long Reserve Life Asset
Slide 4: Growth Per Share
PEY.TO 20th 1998-2018 Growth Per Share Production/share Reserves/share FFO/share 2P NPV5/debt adj. (MMcfe/d/mm sh) (2P Bcfe/mm sh) ($/sh) share ($/sh) 1363 29.2 $4.33 1289 1222 $40 $40 26.3 $38 1179 $36 $38 $38 $37 1087 24.2 $3.59 $35 $36 $3.48 $34 22.5 $34 $2.92 $3.17 $31 20.8 $3.02 $2.71 $2.94 $31
Slide 5: Total Shareholder Return Model
PEY.TO 20th 1998-2018 Total Shareholder Return Model Future Prospects Past Profits 5 BOE factor - 6 mcf = 1 bbl of oil equivalent 8/19/2019
Slide 6: The World Needs More Energy
The Big Picture 20th 1998-2018 The World Needs More Energy 6 Source: BP Energy Outlook 2019 8/19/2019
Slide 7: Who Should Supply That Energy?
The Big Picture 20th 1998-2018 Who Should Supply That Energy? ✓ Environmental Regulations ✓ Worker Safety Russia Saudi Iran Iraq ✓ Human Rights ✓ Ethical Standards ✓ Gender Equality ✓ Indigenous Consultation Russia Qatar China Iran ✓ CANADA 7 Source: Modern Resources 8/19/2019
Slide 8: Peyto Does It Better
The Big Picture 20th 1998-2018 Peyto Does It Better Emission Intensity by Source Type for Canadian Oil and Gas (1990, 2005, 2016) 140 140 Emmission Intensity per Barrel (kg CO2eq/bbl) 121.4 120 105.4 120 100 88.4 90.1 100 83.4 79.5 80 80 53.8 56.1 52.1 60 50.3 49.1 60 42.8 40 40 23.9 22.3 21.1 20 20
Slide 9: Continuously Improving Environmental Performance
The Big Picture 20th 1998-2018 Continuously Improving Environmental Performance Peyto GHG Emissions Intensity tCO2eq/boe (direct and indirect) 0.029 0.026 0.025 0.024 0.022 0.021 in GHG Emissions Intensity 2013 2014 2015 2016 2017 2018 Peyto Flaring and Venting of Methane 0.61 0.77 0.74 0.65 0.58 0.
Slide 10: So What Does All This Mean?
The Big Picture 20th 1998-2018 So What Does All This Mean? ✓ Canada has energy abundance. ✓ Canada has a moral obligation to provide the rest of the world with our clean, responsibly developed energy to improve lives and preserve the environment. ✓ Peyto can continue to be an industry leader by prov
Slide 11: The Peyto Strategy
The Peyto Strategy PEYTO Exploration & Development Corp. 11 8/19/2019
Slide 12: What We Continue To Believe
Peyto’s Strategy 20th 1998-2018 What We Continue To Believe N “Nature’s gas is the fuel for the future.” N “Our gas and NGLs are made from all natural, decomposed, organic materials.” N “Our business focus is on maximizing the return on invested capital – your capital.” N “By maintaining low cash co
Slide 13: Changing Gas Market Requires Changing Strategy
Peyto’s Strategy 20th 1998-2018 Changing Gas Market Requires Changing Strategy US Natural Gas (EIA) Canadian Natural Gas (EIA) 80 110 100 83.4 70 90 60 82.1 80 50 70 40 60 In 2018, the US grew consumption 30 faster than ever! 15.9 50 20 40 Supply Driven Demand Driven Supply Driven 10 12.3 30 0 1978
Slide 14: Integrate the Entire Oil & Gas Value Chain
Peyto’s Strategy 20th 1998-2018 Integrate the Entire Oil & Gas Value Chain ✓ ✓ ✓ ✓✓ ✓ 14 8/19/2019
Slide 15: Fast Becoming an Integrated Energy Business
Peyto’s Strategy Fast Becoming an Integrated Energy Business PEYTO Exploration & Development Corp. Exploration and Development Production and Processing Storage and Marketing Midstream and Power Generation • 647 Lands Purchased (YE ‘18) • 1,475 producing wells North American market 300+ mmcf/d midst
Slide 16: Alberta Egress Challenge – AECO Market Disconnect
Peyto’s Strategy 20th 1998-2018 Alberta Egress Challenge – AECO Market Disconnect • New Alberta government has made solving AECO market disconnection a priority • New Ministry of Natural Gas was created to address this issue • Associate Minister Dale Nally and staff have been appointed Start of chan
Slide 17: Canadian Gas Egress Is Expanding
Peyto’s Strategy 20th 1998-2018 Canadian Gas Egress Is Expanding Dry Natural Gas Production - Canada 25 (EIA) $9 LNG Export $8 2.0 Bcf/d 21 $7 LNG Canada 20 $6 NGTL Expansion $5+40% BCF/D 19 $4 15 $3 $2 $1 3.2 Bcf/d NGTL Expansion – 2019 to 2021 1.9 Bcf/d LNG Canada (trains 1&2) – 2024 10 $0 5.1 Bcf
Slide 18: Invest For Profit Not Growth
The Peyto Strategy Invest For Profit Not Growth PEYTO Exploration & Development Corp. $800 $700 $600 $500 Peyto Earnings $400 CTD Q2/19 $300 $200 $100 $- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 CAPEX ($MM) Earnings ($'000) Peyto Capital CTD Q2/1
Slide 19: Dividend Sustainability
The Peyto Strategy Dividend Sustainability PEYTO Exploration & Development Corp. $3,000 $2,500 $2,000 Peyto Ctd. Earnings (MM$) $1,500 Q2/19 $1,000 $500 $0 Q4 1999 Q4 2000 Q4 2001 Q4 2002 Q4 2003 Q4 2004 Q4 2005 Q4 2006 Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2015 Q4 2016
Slide 20: Profitable Business
Peyto’s Profitable Business PEYTO Exploration & Development Corp. 20 8/19/2019
Slide 21: Build it for less than we sell it
Peyto’s Profitable Business “Build it for less than we sell it” PEYTO Exploration & Development Corp. 2018 PEY 2014 PEY 2015 PEY 2016 PEY 2017 PEY 2018 Land/Acq/Disp Seismic Drilling PDP FD&A $/mcfe ($2.25) ($1.64) ($1.44) ($1.36) ($1.18) Compl. Wellsite Facilities $232MM Cash Costs $/mcfe ($1.08) (
Slide 22: The Price Bar Is Now Very Low, We Must Go Lower
Peyto’s Profitable Business The Price Bar Is Now Very Low, We Must Go Lower PEYTO Exploration & Development Corp. AECO $10 Monthly $/GJ Peyto Realized Gas Price ($/mcfe) $8 36% Avg. $6 "Profit“ CTD Bonus $4 PDP FD&A 35% $2 36% Cash Costs 29% $- Total Cash Costs per mcfe includes – Royalties, Op Cost
Slide 23: Competitive In The North American Marketplace
Peyto’s Profitable Business Competitive In The North American Marketplace PEYTO Exploration & Development Corp. 100% Montney 60% DB/40% Mont. 100% Deep 100% Montney 10% DB/90% Mont. VII 2018* TOU 2018* Basin PEY 2018 AAV 2018* ARX 2017* PDP FD&A $/mcfe ($2.67) ($1.52) ($1.18) ($1.51) ($1.28) Cash Co
Slide 24: Results in a Low Cost Advantage
Peyto’s Profitable Business Results in a Low Cost Advantage PEYTO Exploration & Development Corp. $2.88 $5.16 ($0.21) $1.09 BOE factor - 6 mcf = 1 bbl of oil equivalent 24 Data from Peter’s & Co. 8/19/2019 Gas producers include: AAV,PNE,CKE,CQE,TOU,SRX,BIR,BXE,CR,ARX,BNP,POU,DEE,KEL,ECA,VII
Slide 25: Unique Assets
Peyto’s Unique Assets PEYTO Exploration & Development Corp.
Slide 26: Geographically Focused Core Areas
Peyto’s Assets Geographically Focused Core Areas PEYTO Exploration & Development Corp. • 480,000 net acres • 9 operated gas plants Cutbank ---(835 mmcf/d net capacity) • 1600+ km pipelines • 1200+ producing zones Kakwa • 100,000 boe/d Chicken Leland Pine Creek Of Production: Greater Processed by Pey
Slide 27: Deep Basin Permeability Segregation
Peyto’s Assets Deep Basin Permeability Segregation PEYTO Exploration & Development Corp. FOOTHILLS STRUCTURES GAS AS ING INCRE BILITY EA PERM WATER TRANSITION ZONE WATER GAS ASE INCRE AREA OF GAS DEPTH MATURATION R10 R5W6 R27 R22 R17 R12 R7 T65 T60 T55 T50 T45 T40 R23 R18 R13 File: Presentation map.
Slide 28: 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* 28 *NGL recoveries can increase by 15+ bbl/mmcf with deeper cutting processing facilities 8/19
Slide 29: Large Hz MSF Inventory
Peyto’s Assets 20th 1998-2018 Large Hz MSF Inventory Done1 To Do Total Total Total Total Hz(Vt) Hz Locations Vertical Hz Locations Unbooked Wells Wells Booked* (2) 2 440 113 363(12) 384 5 1 5 7 1 2(2) 18 90 176 165(2) 61 7 74 40 8 111 166 303 2 20 14 385 370 153 4 40 54 44 12 2 87 2 18 205 1 0 120 6
Slide 30: Deep Basin Lands Go A Long Way
Peyto’s Assets Deep Basin Lands Go A Long Way PEYTO Exploration & Development Corp. 800 Peyto Lands 700 600 Net Sections 500 400 Net Peyto Sections 300 200 100 - R10 R5W6 R27 R22 R17 R12 R7 T65 Net Sections of Cardium, Dunvegan, Notikewin, T60 T55 Falher, Wilrich, Bluesky, Cadomin, & Montney T50 T45
Slide 31: The "New" Cardium Play – Abundant Opportunities
Peyto’s Assets 20th 1998-2018 The “New” Cardium Play – Abundant Opportunities Oldman & Oldman North Nosehill Wildhay Swanson Galloway 31 8/19/2019
Slide 32: Facility Ownership And Control
Peyto’s Assets 20th 1998-2018 Facility Ownership And Control Cutbank Kakwa Oldman (with Deep Cut) & Oldman North Nosehill Wildhay Galloway Swanson Peyto Gas Plants YE 2014 YE 2015 YE 2016 YE 2017 YE 2018 WI Whitehorse (on hold) 1 Oldman 125 mmcf/d 125 mmcf/d 125 mmcf/d 125 mmcf/d 125 mmcf/d 100% 2 N
Slide 33: "Big Sunny" Natural Gas Storage Scheme
Peyto’s Assets 20th 1998-2018 “Big Sunny” Natural Gas Storage Scheme R.25 R.24 R.23 R.22 R.21 R.20 R.19 R.18 Nosehill Creek North Meter Station 139 mmcfd Capacity T.56 T.56 Obed North Oldman Meter Station 227 mmcfd Capacity North Nosehill Edson Viking D Gas Storage Unit Mayberne • TCPL Owned and Ope
Slide 34: Unique Infrastructure Location
Peyto’s Assets Unique Infrastructure Location PEYTO Exploration & Development Corp. Alliance Oldman & Oldman North Nosehill Wildhay Galloway Swanson 240 kV Power Lines Highway 16 Greater Sundance Area Bickerdike Location Advantages: • Nova/Alliance Supply Backstop • CN Rail (export) • Paved Highway
Slide 35: The "New" Cardium Play – Proving the Type Curve
Peyto’s Assets 20th 1998-2018 The “New” Cardium Play – Proving the Type Curve 35 March 26, 2019 Strip Pricing: AECO 2019 - $1.45/GJ, WTI 2019 - US$63 8/19/2019
Slide 36: The "New" Cardium Play – Best Results Yet?
Peyto’s Assets 20th 1998-2018 The “New” Cardium Play – Best Results Yet? 36 EURs are from the Insite Petroleum Consultants Report of December 31, 2018 8/19/2019
Slide 37: New Montney Play and Potential Expiries
Peyto’s Assets 20th 1998-2018 New Montney Play and Potential Expiries Potential Montney Intermediate Term Expiries 2019-2020 37 8/19/2019
Slide 38: Reserves Growth
Peyto’s Assets 20th 1998-2018 Reserves Growth 7,000 6,000 5,000 17% CAGR 4,000 3,000 2,000 1,000 TCFe of Discovered Reserves 0 Probable Additional Proved Undeveloped Proved Developed Producing Cum Production BCFE 38 8/19/2019
Slide 39: What Shareholders Currently Own
Peyto’s Assets 20th 1998-2018 What Shareholders Currently Own Tangible Infrastructure (Replacement Value as at Dec 31, 2018) 80 Compressors ($3.25MM each) $259 MM 17 Inlets ($1.8MM each) $31 MM 20 Refrigeration plants ($5.4MM each) $108 MM 12 Power Generation Sets ($1.6M each) $19 MM 23 LPG Bullets
Slide 40: Incredible Returns
Peyto’s Incredible Returns PEYTO Exploration & Development Corp. 40 8/19/2019
Slide 41: 2018 Post Mortem Returns Analysis
Peyto’s Assets 20th 1998-2018 2018 Post Mortem Returns Analysis Cardium completion attempts with cased hole and cemented systems 41 Full cycle IRR is determined using actual capital spent on each well, including a $365k provision for land, seismic, and facilities. 8/19/2019 Economics are run using a
Slide 42: 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 20 yr Avg ROE to 2018 30% $6 20% $4 10% $2 0% $0 Return On Capital Employed (%) Return On Equity (%) Earnings/share Realized Price ($/mcfe) 20 yr Avg ROCE to 2018 Return on Equity (RO
Slide 43: Future
Peyto’s Future PEYTO Exploration & Development Corp.
Slide 44: 2019 Outlook
Peyto’s Future 20th 1998-2018 2019 Outlook ✓Drill ~50Hz Wells (Liquids Rich Natural Gas) vs 70 in 2018 ✓Market 3rd Party Capacity Offer Excess Capacity to Other Operators ✓Increase Opportunities Undeveloped Land Base ✓Diversify Markets Evaluate New Pipe Options 2019 Capital Program ✓Improve Balance
Slide 45: Gas Price Stability Before Returning to Growth
Peyto’s Future Gas Price Stability Before Returning to Growth PEYTO Exploration & Development Corp. $5 14 bbl/mmcf 14 bbl/mmcf 17 bbl/mmcf 20 bbl/mmcf 27 bbl/mmcf 32 bbl/mmcf 36 bbl/mmcf, exit >18,000 bbl/d Lean gas $4.19 deferral due to low price. $4 100,000 ~$10,900/boe/d ~$10,000/boe/d $16,800/bo
Slide 46: Liquids Growth
Peyto’s Future 20th 1998-2018 Liquids Growth Periods where Oldman Deep Cut shut in Liquids growing faster than gas in the short term 46 8/19/2019
Slide 47: Lower Costs and Increase Liquids to Preserve Profit
Peyto’s Future Lower Costs and Increase Liquids to Preserve Profit PEYTO Exploration & Development Corp. 40-50 bbl/mmcf new adds in 2018/19 increases liq to 14% PEY 2017 PEY 2018 PEY 2019 Goals 91% Gas @ $2.30/GJ 89% Gas @ $1.43/GJ*1.16 86% Gas @$1.50/GJ*1.15 AECO*115% 14% NGLs @$50/bbl=(60%ofoil) 9
Slide 48: Future Market Diversification and Gas Price Protection
Gas Marketing 20th 1998-2018 Future Market Diversification and Gas Price Protection Q2 2019 Sales Gas 422 mmcf/d Average Heating Value of 1.15 GJ/mcf for Peyto’s gas 48 For a real time summary of Peyto’s future hedges see: http://www.peyto.com/Files/Marketing/hedges.pdf 8/22/2019
Slide 49: Minimized AECO Spot Market Exposure
Gas Marketing 20th 1998-2018 Minimized AECO Spot Market Exposure 31% Liquids 38% Revenue Liquids Revenue 49 * 2019 and beyond provided for illustration only. Budgets and forecasts beyond 2019 have not been finalized and are subject to change due to a variety of factors including but not limited to p
Slide 50: LNG Consortium and Export Potential
Gas Marketing 20th 1998-2018 LNG Consortium and Export Potential 50 8/19/2019
Slide 51: Fixed Price Swaps For Gas and Liquids
Gas Marketing Fixed Price Swaps For Gas and Liquids PEYTO Exploration & Development Corp. 51 For a real time summary of Peyto’s future hedges see: http://www.peyto.com/Files/Operations/Marketing/hedges.pdf 8/19/2019 •Assumes an Average Heating Value of 1.15 GJ/mcf for Peyto’s gas
Slide 52: Supply Driven Market May Be Temporary
Gas Marketing Supply Driven Market May Be Temporary PEYTO Exploration & Development Corp. NORTH AMERICAN NATURAL GAS 20 92.1 100 18 79.4 90 Proven Reserve Life (years) Total Production (bcf/d) 16 80 13.7 14 11.4 70 12 60 10 50 8 40 6 30 4 20 2 10 - 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Slide 53: Appendix
Appendix PEYTO Exploration & Development Corp. N Quarterly Track Record N Tax Pools N Gas Marketing N Leverage N Reserves Growth 53 8/19/2019
Slide 54: Quarterly Track Record
Quarterly Track Record PEYTO Exploration & Development Corp. 2019 2018 2017 2016 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Operations Production Oil & NGLs (bbl/d) 11,110 10,703 9,692 10,273 9,209 9,243 10,043 9,337 10,479 8,958 8,319 9,586 7,457 8,938 7,247 Natural gas (mcf/d) 422,320 4
Slide 55: 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 Q4/18 $600 $400 $200 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 CEC UCC (25%) CEE (100%) CDE (
Slide 56: Successful Hedging Strategy Smoothes Volatility
Gas Marketing Successful Hedging Strategy Smoothes Volatility PEYTO Exploration & Development Corp. Gas Price ($/mcf) $12.00 $12.00 Peyto has beat the AECO $10.00 monthly price in 11 of the $10.00 last 13 years using a $8.00 methodical hedging strategy. $8.00 $6.00 $6.00 $4.00 $4.00 $2.00 $2.00 $- $
Slide 57: Careful Use Of Debt For Leveraged Returns
Peyto’s Debt Careful Use Of Debt For Leveraged Returns PEYTO Exploration & Development Corp. Peyto Net Debt/PDP NPV10 100% 80% Peyto becomes NAIC2 rated, gains access to 60% cheaper term debt 40% 20% Debt/PDP NPV10 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 20
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