Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Investor Presentation (June 2021)
57 slides from Peyto Exploration & Development's investor presentation, Jun 14, 2021
Slide 1: June 2021
June 2021
Slide 2: Advisory Regarding Forward-Looking Statements
Advisory Regarding Forward-Looking Statements PEYTO Exploration & Development Corp. 2 6/14/2021
Slide 3: New To Peyto? Who We Are
New To Peyto? Who We Are PEYTO Exploration & Development Corp. N 5th Largest Canadian Gas Producer > 540 MMcfe/d N 11th Largest Canadian Gas Processor 875 MMcf/d capacity N Pure Play Alberta Deep Basin – Multizone stacked resource, 5 TCFe 2P reserves N Long Reserve Life Asset - 9yr PDP, 27yr 2P, swe
Slide 4: Historical Growth Per Share
PEY.TO 20 Year Growth Per Share PEYTO Exploration & Development Corp. Historical Per Share (or unit) and Shares (units) Outstanding numbers have been adjusted to reflect the May 27, 2005 2:1 stock split 4 BOE factor - 6 mcf = 1 bbl of oil equivalent 6/14/2021
Slide 5: Total Shareholder Return Model
PEY.TO Total Shareholder Return Model PEYTO Exploration & Development Corp. Organic growth for LNG exports? Future Prospects Past Profits 5 BOE factor - 6 mcf = 1 bbl of oil equivalent 6/14/2021
Slide 6: We Heat Your Homes
PEY.TO We Heat Your Homes PEYTO Exploration & Development Corp. “Alberta Energy states that typical Alberta households use approximately 120 GJ of natural gas per year. As the 5th largest Canadian gas producer, Peyto provided enough natural gas to keep millions of homes warm last year.” Natural Gas
Slide 7: Environmental Leader
PEY.TO Environmental Leader PEYTO Exploration & Development Corp. Notes: Intensities are based on total subsector emissions and relevant production amounts. They represent overall averages, not facility intensities. *Calculated on a barrel of oil equivalent (boe) basis by converting production volum
Slide 8: Continuously Improving Emissions
PEY.TO Continuously Improving Emissions PEYTO Exploration & Development Corp. Peyto GHG Emissions Intensity 29.0 26.0 24.7 23.9 22.3 21.1 19.8 19.6 2013 2014 2015 2016 2017 2018 2019 2020 in GHG Emissions Intensity* KgCO2e/BOE (Scope 1,2,3) Peyto Flaring and Venting of Methane 9.3 8.3 8.2 8.1 7.0 5.
Slide 9: Less Impact on Land and Water
PEY.TO Less Impact on Land and Water PEYTO Exploration & Development Corp. Peyto Land Use Reduction 2.1 2.0 1.9 1.8 1.7 1.7 1.6 1.5 2013 2014 2015 2016 2017 2018 2019 2020 in Surface Land Use ha per well (cumulative… Freshwater Use and Flowback Recycling 100 0.08 74 0.07 0.07 80 bbls/BOE 0.05 0.05 6
Slide 10: The Peyto Strategy
The Peyto Strategy PEYTO Exploration & Development Corp. 10 6/14/2021
Slide 11: The Peyto's Strategy: What We Continue To Believe
The Peyto’s Strategy What We Continue To Believe PEYTO Exploration & Development Corp. N “Nature’s gas is the fuel for the future.” N “Our gas and NGLs have some of the lowest emissions of any hydrocarbons produced in Canada.” N “Our business focus is to maximize the return on invested capital – you
Slide 12: Growing North American Gas Market
The Peyto’s Strategy Growing North American Gas Market PEYTO Exploration & Development Corp. North America Gas Consumption (BCF/d) (BP Statistical Review of World Energy 2019) 140 140 120 120 100 100 32% growth 80 2008-2018 80 60 99 BCF/d 60 75 BCF/d 69 BCF/d 40 55 BFD/d 40 20 20 0 0 1970 1972 1974
Slide 13: Canadian Gas Egress Is Expanding
The Peyto’s Strategy Canadian Gas Egress Is Expanding PEYTO Exploration & Development Corp. Dry Natural Gas Production - Canada 25 (EIA) $9 LNG Export $8 2.0 Bcf/d $7 LNG Canada 20 $6 NGTL Expansion $5+40% BCF/D $4 15 15.43 $3 $2 $1 3.2 Bcf/d NGTL Expansion – 2019 to 2022 1.9 Bcf/d LNG Canada (train
Slide 14: Fund Growth From Cashflow
Peyto FFO CTD Q4/20 CTD Q4/20 Peyto Capital Fund Growth From Cashflow The Peyto Strategy $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 Q4 1999 Q2 2000 Q4 2000 Q2 2001 Q4 2001 Q2 2002 Q4 2002 Q2 2003 Q4 2003 Q2 2004 Q4 2004 Q2 2005 Q4 2005 Q2 2006 Q4 2006 Q2 2007 Q4 2007 Q2 2008 Q4 2008 Q2 2009
Slide 15: Invest For Profit Not Growth
The Peyto Strategy Invest For Profit Not Growth PEYTO Exploration & Development Corp. $800 $700 $600 $500 $400 Peyto Capital $300 CTD Q4/20 $200 $100 $- 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 $(100) CAPEX ($MM) Earnings ($'000) Peyto Earnings CTD Q4/20 15 6/14/2021
Slide 16: Dividend Sustainability
The Peyto Strategy Dividend Sustainability PEYTO Exploration & Development Corp. $3,000 $2,500 $2,000 Peyto Ctd. Earnings (MM$) $1,500 Q4/20 $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 17: Year Cycle of Value Creation
The Peyto Strategy 22 Year Cycle of Value Creation PEYTO Exploration & Development Corp. $6.40B Capital Investment 55% retained FFO YE 2020 26% equity 18% debt 2P NPV5 $2.55B $8.65B Value Earnings $6.992B $2.46B in div/dist $0.38B to employees $6.99B remaining $2.46B asset value Shareholder ($1.18B)
Slide 18: Profitable Business
Peyto’s Profitable Business PEYTO Exploration & Development Corp. 18 6/14/2021
Slide 19: Profitable Business: Build it for less than we sell it
Peyto’s Profitable Business “Build it for less than we sell it” PEYTO Exploration & Development Corp. 2014 2015 2016 2017 2018 2019 2020F 2020 Land/Acq/Disp Seismic Drilling PDP FD&A $/mcfe ($2.25) ($1.64) ($1.44) ($1.36) ($1.18) ($1.55) ($1.06) Compl. Wellsite Facilities Cash Costs ($1.08) ($0.81)
Slide 20: Lowering The Bar
Peyto’s Profitable Business Lowering The Bar PEYTO Exploration & Development Corp. AECO $10 Monthly $/GJ Peyto Realized Gas Price ($/mcfe) 35% Avg. $8 "Profit“ CTD Lowest realized price ever, but also lowest total supply cost ever $6 Bonus $4 PDP FD&A Supply cost down 45% since 2010 7% $2 48% Cash C
Slide 21: Peyto's Moat is a Low-Cost Advantage
Peyto’s Profitable Business Peyto’s “Moat” is a Low-Cost Advantage PEYTO Exploration & Development Corp. $2.26 $4.61 ($1.17) $1.20 21 BOE factor - 6 mcf = 1 bbl of oil equivalent Data from Peter’s & Co. 6/14/2021 Gas producers include: AAV,ARX,BIR,CR,KEL,NVA,PIPE,PMT,PNE,POU,SDE,SRX,TOU,VII
Slide 22: High Operating Margins
Peyto’s Profitable Business High Operating Margins PEYTO Exploration & Development Corp. 90% $9.00 80% $8.00 70% $7.00 60% $6.00 50% $5.00 40% $4.00 30% $3.00 20% $2.00 Peyto Operating Margin 10% $1.00 0% $0.00 Last 20 Year Avg. FFO/Revenue Intermediate Producer Avg FFO/Rev (Peter's &Co.) AECO Daily
Slide 23: Unique Assets
Peyto’s Unique Assets PEYTO Exploration & Development Corp.
Slide 24: Geographically Focused Core Areas
Peyto’s Assets Geographically Focused Core Areas PEYTO Exploration & Development Corp. • 566,400 net acres • 10 operated gas plants Cutbank ---(875 mmcf/d net capacity) • 2,000+ km pipelines • 1,442+ producing zones Kakwa • ∼90,000 boe/d Chicken Leland Pine Creek Of Production: Greater Processed by
Slide 25: Deep Basin Permeability Segregation
Peyto’s Assets PEYTO Deep Basin Permeability Segregation Exploration & Development Corp. FOOTHILLS STRUCTURES GAS AS ING INCRE BILITY EA PERM WATER TRANSITION ZONE WATER GAS ASE INCRE AREA OF GAS DEPTH MATURATION 25 6/14/2021
Slide 26: Multi Zone Stacked Sandstone Reservoirs
Peyto’s Assets Multi Zone Stacked Sandstone Reservoirs PEYTO Exploration & Development Corp. Up to per section* *NGL recoveries can increase by 15+ bbl/mmcf with deeper cutting processing facilities 6/14/2021 Reserves are 2P recoverable in a section at 85% RF
Slide 27: Cecilia Acquisitions
Peyto’s Assets Cecilia Acquisitions $35MM – Effective Jan 1/21 PEYTO Exploration & Development Corp. Cecilia Gas Plant 12-34-56-22W5 Ownership: 100% WI NGTL Nosehill Ck North Meter Current Throughput: ∼15mmcf/d sales @ 5.6bbl/mmcf Station 1-1-57-22W5 Cecilia Acquisitions Capacity: 30mmcf/d 139 MMcfd
Slide 28: Cecilia Acquisitions - Ultra-low Decline
Peyto’s Assets Cecilia Acquisitions – Ultra-low Decline PEYTO Exploration & Development Corp. 114 gross producers CTD 165 BCF 28 6/14/2021
Slide 29: #1 Horizontal Deep Basin Driller
Peyto’s Assets #1 Horizontal Deep Basin Driller PEYTO Exploration & Development Corp. Alberta Deep Basin Hz Spuds 1,200 Peyto spud it’s 1,000 th Hz w ell on Sept. 25, 2020 1,000 800 600 400 200 Peyto Deep Basin 0 Horizontal Wells (2009-Sept 2020) 29 6/14/2021
Slide 30: Large Hz MSF Inventory
Peyto’s Assets PEYTO Large Hz MSF Inventory Exploration & Development Corp. Done1 To Do Total Total Total Total Hz(Vt) Hz Locations Vertical Hz Locations Unbooked3 Wells Wells Booked2 2 (2) 440 200 459(9) 424 5 1 1 4 1 2 23 90 197 186 73 7 75 38 21 117 150 103 2 39 15 409 309 135 4 44 54 34 12 2 87
Slide 31: Deep Basin Lands Go A Long Way
Peyto’s Assets Deep Basin Lands Go A Long Way PEYTO Exploration & Development Corp. 1,000 Peyto Lands 900 800 700 Net Sections 600 Net Peyto Sections 500 400 300 200 100 - Net Sections of Cardium, Dunvegan, Notikewin, Falher, Wilrich, Bluesky, Cadomin, Montney & Duvernay Net Sections – Developed Are
Slide 32: Increased Facility Ownership And Control
Peyto’s Assets Increased Facility Ownership And Control PEYTO Exploration & Development Corp. Cutbank Kakwa Oldman (with Deep Cut) & Oldman North Cecilia W Peyto Gas Plants Wildhay Nosehill Swanson YE 2020 WI 1 Oldman 125 mmcf/d 100% Galloway 2 Nosehill 125 mmcf/d 100% 3 Wildhay 90 mmcf/d 100% 4 Gal
Slide 33: Big Sunny Natural Gas Storage Scheme
Peyto’s Assets “Big Sunny” Natural Gas Storage Scheme PEYTO Exploration & Development Corp. R.25 R.24 R.23 R.22 R.21 R.20 R.19 R.18 Nosehill Creek North Cecilia Meter Station 139 mmcfd Capacity T.56 T.56 Obed North Oldman Meter Station 227 mmcfd Capacity North Nosehill Edson Viking D Gas Storage Uni
Slide 34: Unique Infrastructure Location
Peyto’s Assets Unique Infrastructure Location PEYTO Exploration & Development Corp. Alliance Cecilia Oldman & Oldman North Nosehill Wildhay Big Sunny Galloway Swanson 240 kV Power Lines Highway 16 Cascade Power Project Greater Sundance Area ISD 2022 Location Advantages: • 900 MW Combined-Cycle • Nov
Slide 35: Successful Reserves Conversion, Again
Peyto’s Assets Successful Reserves Conversion, Again PEYTO Exploration & Development Corp. Actual/ Booked Forecast Actual Reserve Total Booked/ Forecast Locations Forecast Outcome Cost per Actual Outcome Cost per Year Drills Total Cost per Converted Unit Unit Unit gross Capex* Capex* gross wells BCF
Slide 36: Long Producing Reserve Life Maintained
Peyto’s Assets Long Producing Reserve Life Maintained PEYTO Exploration & Development Corp. Peyto Reserve Life Index 35 27 Years at Q4 Production 30 25 20 18 15 10 9 5 Peyto PDP RLI 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 PDP TP P+PA 2020 PDP RLI 10 Yea
Slide 37: Alberta's Gas Developer
Peyto’s Assets Alberta’s Gas Developer PEYTO Exploration & Development Corp. 8,000 7,000 6,000 1,787 5,000 27% 15% CAGR 1,572 4,000 CAGR 7,041 3,000 1,647 2,000 1,000 2,034 TCFe of Discovered Reserves 0 Cum Production BCFE Proved Developed Producing Proved Undeveloped Probable Additional 37 http://w
Slide 38: What Shareholders Currently Own
Peyto’s Assets What Shareholders Currently Own PEYTO Exploration & Development Corp. Tangible Infrastructure (Replacement Value as at Dec 31, 2020) 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)
Slide 39: Incredible Returns
Peyto’s Incredible Returns PEYTO Exploration & Development Corp. 39 6/14/2021
Slide 40: Production Performance by Vintage
Peyto’s Returns Production Performance by Vintage PEYTO Exploration & Development Corp. + 14 bbls/mmcf NGLs + 60 bbls/mmcf NGLs Drill & Complete 2020 2018-19 Costs (MM) + 12 bbls/mmcf NGLs $2.25 $2.56 Cardium (30 wells) (97 wells) $2.93 $3.04 Notikewin (12 wells) (8 wells) $2.8 $2.7 Wilrich (11 well
Slide 41: Updated Template Economics At Strip
Peyto’s Returns Updated Template Economics At Strip PEYTO Exploration & Development Corp. Brazeau / Chambers Greater Sundance Notikewin Notikewin Cardium Notikewin Wilrich Tier 1 Tier 2 Wilrich ERH Falher ERH Cardium Gas [MMcf] 2,605 4,348 4,921 4,753 2,242 3,774 4,502 1,567 NGLs [Mbbl] 149 122 76 5
Slide 42: 2020 Post-Mortem Returns Analysis
Peyto’s Returns 2020 Post-Mortem Returns Analysis PEYTO Exploration & Development Corp. ERH Wells 42 Full cycle IRR is determined using actual capital spent on each well, including a $825k provision for land, seismic, and facilities in order to total to the $236MM 2020 total capital expenditures. 6/
Slide 43: 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 22 yr Avg ROE to 2020 30% $6 20% $4 10% $2 0% $0 Return On Capital Employed (%) Return On Equity (%) 22 yr Avg ROCE to 2020 Earnings/share Realized Price ($/mcfe) Return on Equity (RO
Slide 44: Future
Peyto’s Future PEYTO Exploration & Development Corp.
Slide 45: 2021 Outlook
Peyto’s Future 2021 Outlook PEYTO Exploration & Development Corp. Drill ~80Hz Wells (Liquids Rich Natural Gas) vs 65 in 2020 Market 3rd Party Capacity Offer Excess Capacity to Other Operators Increase Opportunities Undeveloped Land Base Diversify Markets Evaluate New Pipe Options 2021 Capital Pr
Slide 46: Gas Price Stability Before Returning to Growth
Peyto’s Future Gas Price Stability Before Returning to Growth PEYTO Exploration & Development Corp. 14 bbl/mmcf 14 bbl/mmcf 17 bbl/mmcf 20 bbl/mmcf 26 bbl/mmcf 28 bbl/mmcf 26 bbl/mmcf 25 bbl/mmcf 24 bbl/mmcf $5 Possible Growth scenario $4.19 Uses ∼90% of Plant Capacity $17,500/boe/d $4 100,000 $17,6
Slide 47: Lower Costs to Preserve Profit
Peyto’s Future Lower Costs to Preserve Profit PEYTO Exploration & Development Corp. PEY 2018 PEY 2019 PEY 2020 2021 PEY Goals 86% Gas @$2.11/GJ*1.15 87% Gas @$2.80/GJ*1.15 14% NGLs@$31/bbl=(60%of $52oil) $3.27 $2.78 $2.23 $3.30 13% NGLs@$47/bbl=(60%of $78 Revenue $2.81/mcfe -$0.58/mcfe diversifitcat
Slide 48: Blue Hydrogen? We Have All the Right Ingredients
Peyto’s Future Blue Hydrogen? We Have All the Right Ingredients PEYTO Exploration & Development Corp. Cecilia Cascade Power Station H2 >4 TCF of 2P Interconnected gas Big Sunny Rail, Hwy, and natural gas pipeline and facility underground ultimately pipeline for reserves infrastructure storage cavern
Slide 49: Future Market Diversification and Gas Price Protection
Gas Marketing Future Market Diversification and Gas Price Protection PEYTO Exploration & Development Corp. 49 *Average Heating Value of approximately 1.15 GJ/mcf for Peyto’s gas 6/14/2021
Slide 50: Fixed Price Swaps For Gas and Liquids
Gas Marketing Fixed Price Swaps For Gas and Liquids PEYTO Exploration & Development Corp. Peyto Marketing Summary 1.15 Heating Value GJ/mcf AECO 7A Fixed Price Swaps (CAD$/GJ) 1.255 cad/usd TOTAL TOTAL TOTAL TOTAL TOTAL Q4 2019 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 2020 Q1 2021 Q2 2021 Q3 2021 Q4 202
Slide 51: Rising Realized Gas Prices
Gas Marketing Rising Realized Gas Prices PEYTO Exploration & Development Corp. $4.50 $4.00 Peyto Realized ($/Mcf) - Avg $2.66 $3.50 Rising Realized Price $3.00 $2.50 Falling Futures $2.00 Strip $1.50 Expensive Market Diversification $1.00 Finished Q4 2021 $0.50 AECO 5a ($/Mcf) - Avg $2.50 $- Q2 2021
Slide 52: Successful Hedging Strategy Smoothes Volatility
Gas Marketing Successful Hedging Strategy Smoothes Volatility PEYTO Exploration & Development Corp. Gas Price ($/mcf) $10.00 $10.00 $9.00 Peyto has beat the AECO $9.00 $8.00 monthly price in 12 of the $8.00 last 15 years using a $7.00 methodical hedging strategy. $7.00 $6.00 $6.00 $5.00 $5.00 $4.00
Slide 53: LNG Consortium and Export Potential
Gas Marketing LNG Consortium and Export Potential PEYTO Exploration & Development Corp. 53 6/14/2021
Slide 54: Appendix
Appendix PEYTO Exploration & Development Corp. N Quarterly Track Record N Tax Pools N Leverage N Reserves Growth 54 6/14/2021
Slide 55: Quarterly Track Record
Quarterly Track Record PEYTO Exploration & Development Corp. 2021 2020 2019 2018 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Operations Production Oil & NGLs (bbl/d) 12,138 11,308 11,256 11,263 11,126 11,585 10,922 11,221 10,650 11,110 10,703 9,692 10,273 9,209 Natural gas (mcf/d) 455,593 409
Slide 56: Peyto's Tax Pools
Organic Business Model Peyto’s Tax Pools PEYTO Exploration & Development Corp. $1,800 $1,600 $1,400 $1,200 $1,000 $800 Federal Tax Pools Millions $600 $400 Q4/20 $200 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 CEC UCC (25%) CEE (1
Slide 57: Peyto's Debt
Peyto’s Debt Blend of fixed term and revolving debt PEYTO Exploration & Development Corp. $50 4.88% End of $0.95B Revolver Oct 22 $65 4.26% $100 3.70% $100 3.95% $100 4.39% 57 Interest rates are in CND$ 6/14/2021
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