Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Investor Presentation (April 2019)
49 slides from Peyto Exploration & Development's investor presentation, Apr 15, 2019
Slide 1: April 2019
April 2019
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: Who We Are
PEY.TO Who We Are PEYTO Exploration & Development Corp. N 5th Largest Natural Gas Producer in Canada N Pure Play Alberta Deep Basin – ~85,000‐90,000 boe/d Gas & NGLs N Returns Focused Strategy – Avg ROCE 16%, ROE 29% over last 20 yrs, among highest in industry N Long Reserve Life Asset ‐ 9 yrs PDP,
Slide 4: Total Shareholder Return
PEY.TO Total Shareholder Return PEYTO Exploration & Development Corp. Peyto Exploration and Development Corp. $60 20 Year Trading History 120,000 Month End Closing Price ($/share) CTD Dividend ($/share) $50 100,000 Peyto Production (boe/d) $40 80,000 $11.61/share $30 Oct 23/18 60,000 Future $20 Pros
Slide 5: The Peyto Strategy
The Peyto Strategy PEYTO Exploration & Development Corp. 5 4/15/2019
Slide 6: What We Believe
The Peyto Strategy What We Believe PEYTO Exploration & Development Corp. We believe that: N “Nature’s gas is the fuel for the future.” N “Our focus should be on maximizing the return on invested capital – your capital.” N “By selectively and efficiently investing capital at periods in the cycle when
Slide 7: 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 8: Long Term Natural Gas Runway
Peyto’s Strategy Long Term Natural Gas Runway PEYTO Exploration & Development Corp. Dry Natural Gas Production - Canada (EIA) $9 24,000 LNG Export 2.0 Bcf/d $8 22,000 $7 LNG Canada 20,000 $6 NGTL Expansion $5 +32% BCF/D 18,000 $4 16,000 $3 14,000 $2 12,000 $1 10,000 $0 2000 2005 2010 2015 2020 2025
Slide 9: Growth Per Share
The Peyto Strategy Growth Per Share PEYTO Exploration & Development Corp. 2500 $80 $70 2000 $60 1500 $50 $40 1000 $30 $20 500 $10 Growth rate in Prod/div. 0 $0 adj. share (last 10 yrs) Q2 2001 Q1 2002 Q4 2002 Q3 2003 Q2 2004 Q1 2005 Q4 2005 Q3 2006 Q2 2007 Q1 2008 Q4 2008 Q3 2009 Q2 2010 Q1 2011 Q4
Slide 10: 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 Q4/18 $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 Q4/1
Slide 11: Dividend Sustainability
The Peyto Strategy Dividend Sustainability PEYTO Exploration & Development Corp. $3,000 $2,500 $2,000 Peyto Ctd. Earnings (MM$) $1,500 Q4/18 $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 12: Profitable Business
Peyto’s Profitable Business PEYTO Exploration & Development Corp. 12 4/15/2019
Slide 13: 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 14: 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 15: 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 16: Results in a Low Cost Advantage
Peyto’s Profitable Business Results in a Low Cost Advantage PEYTO Exploration & Development Corp. $2.41 $4.84 ($0.10) $1.15 BOE factor - 6 mcf = 1 bbl of oil equivalent 16 Data from Peter’s & Co. 4/15/2019 Gas producers include: AAV,PNE,CKE,CQE,TOU,SRX,BIR,BXE,CR,ARX,BNP,POU,DEE,KEL,ECA,VII
Slide 17: Unique Assets
Peyto’s Unique Assets PEYTO Exploration & Development Corp.
Slide 18: 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 19: 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 SE INCREAH AREA OF GAS DEPT MATURATION 19 4/15/2019
Slide 20: 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* 20 *NGL recoveries can increase by 15+ bbl/mmcf with deeper cutting processing facilities 4/15
Slide 21: Large Hz MSF Inventory
Peyto’s Assets Large Hz MSF Inventory PEYTO Exploration & Development Corp. 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
Slide 22: 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 - Net Sections of Cardium, Dunvegan, Notikewin, Falher, Wilrich, Bluesky, Cadomin, & Montney Net Sections – Developed Area of All Reserves F
Slide 23: Facility Ownership And Control
Peyto’s Assets Facility Ownership And Control PEYTO Exploration & Development Corp. 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 mmc
Slide 24: 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 25: Potential For Additional Liquids Extraction
Peyto’s Assets Potential For Additional Liquids Extraction PEYTO Exploration & Development Corp. Oldman and Nosehill Oldman North Wildhay Propane Gas Phase Value Far Less Than C3 Value ($/bbl of liq eq.) Liquid Value Condensate $20 Swanson via Pembina $15 $10 Galloway $5 $0 $1.00 $2.00 $3.00 $4.00 G
Slide 26: The "New" Cardium Play – High Grade Land Base
Peyto’s Assets The “New” Cardium Play – High Grade Land Base PEYTO Exploration & Development Corp. 26 4/15/2019
Slide 27: The "New" Cardium Play – Abundant Opportunities
Peyto’s Assets The “New” Cardium Play – Abundant Opportunities PEYTO Exploration & Development Corp. Oldman & Oldman North Nosehill Wildhay Swanson Galloway Total Greater Sundance Cardium Resource* Proven Resource: 392 BCFe cumulative recovery to YE 2017 (Approx. 15% of lands drained) Large Inventor
Slide 28: The "New" Cardium Play – A Different Design
Peyto’s Assets The “New” Cardium Play – A Different Design PEYTO Exploration & Development Corp. 2009-2014 2009-2014 Old Design (2009-2014) New Design (2017-2018) Old Design (last 12 wells) New Design (last 12 wells) 8 Stages 25 Stages $1.9MM Drill $1.6MM Drill 415 tonnes 650 tonnes $1.5MM Complete
Slide 29: The "New" Cardium Play – Proving the Type Curve
Peyto’s Assets The “New” Cardium Play – Proving the Type Curve PEYTO Exploration & Development Corp. 29 Dec 14, 2018 Commodity strip: WTI US$ 52/bbl flat, AECO Gas $1.24, 1.37, 1.53, 1.67, 1.89/GJ 4/15/2019
Slide 30: Deep Basin Cardium – More Like Oil Than Gas
Peyto’s Assets Deep Basin Cardium – More Like Oil Than Gas PEYTO Exploration & Development Corp. Reserves Revenue Type Curve by Product by Product IP 365 58 bbl/d 13% C5+/Condy 37 10% 55% bbl/d C3/C4 1.5 mmcf/d Natural 16% Gas 77% 29% 30 • Price Deck: $1.50/GJ AECO, WTI $70/bbl 4/15/2019
Slide 31: Cardium Condensate Yields Improving
Peyto’s Assets Cardium Condensate Yields Improving PEYTO Exploration & Development Corp. 42 bbl/mmcf C5+ 32 bbl/mmcf C5+ 31 4/15/2019
Slide 32: New Montney Play and Potential Expiries
Peyto’s Assets New Montney Play and Potential Expiries PEYTO Exploration & Development Corp. Potential Montney Intermediate Term Expiries 2019-2020 32 4/15/2019
Slide 33: Incredible Returns
Peyto’s Incredible Returns PEYTO Exploration & Development Corp. 33 4/15/2019
Slide 34: 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 35: Future
Peyto’s Future PEYTO Exploration & Development Corp.
Slide 36: 2019 Outlook
Peyto’s Future 2019 Outlook PEYTO Exploration & Development Corp. Drill ~50Hz Wells (Liquids Rich Natural Gas) vs 70 in 2018 Expand & Extract Increase Processing Capacity & NGL Yield Increase Undeveloped Land Base Shoot Seismic 2019 Capital Program Acquire Additional Opportunities and Partner I
Slide 37: 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 Temporary liquids rejection, low $4.19 C3/C4 price + high gas price = less prod. but more CF
Slide 38: 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 @$1.45/GJ*1.15 AECO*115% 14% NGLs @$45/bbl=(60%ofoil) 9
Slide 39: Future Market Diversification and Gas Price Protection
Gas Marketing Future Market Diversification and Gas Price Protection PEYTO Exploration & Development Corp. 88% Hedged 75% Hedged 18% Hedged 2% Hedged Markets Markets Markets Markets 99% AECO 67% AECO 45% AECO 48% AECO 1% Dawn 8% Dawn 8% Dawn 15% Dawn 0% Henry Hub 25% Henry Hub 47% Henry Hub 37% Henr
Slide 40: Minimized AECO Spot Market Exposure
Gas Marketing Minimized AECO Spot Market Exposure PEYTO Exploration & Development Corp. 2018 Actuals 2019 Forecast Revenue Condy & C5+ - Gas - AECO spot Gas - AECO spot Fixed (monthly/daily) (monthly/daily) 4% 5% 6% Gas - Henry Gas - Hub spot Condy & Dawn/Henry 2% C5+ - Hub/Ventura Fixed spot 10% 9%
Slide 41: Alberta Needs Storage, Supply/Delivery Balancing
Gas Marketing Alberta Needs Storage, Supply/Delivery Balancing PEYTO Exploration & Development Corp. When supply When supply exceeds demand exceeds demand and there is no and there is NGTL gas flows access to storage, access to storage, price gets volatile 15,000 price remains $6.00 14,000 stable. 1
Slide 42: Fixed Price Swaps For Gas and Liquids
Gas Marketing Fixed Price Swaps For Gas and Liquids PEYTO Exploration & Development Corp. 42 For a real time summary of Peyto’s future hedges see: http://www.peyto.com/Files/Marketing/hedges.pdf 4/15/2019 •Assumes an Average Heating Value of 1.15 GJ/mcf for Peyto’s gas
Slide 43: The Good News, Pipe Is Coming
Gas Marketing The Good News, Pipe Is Coming PEYTO Exploration & Development Corp. 43 Source: TCPL 2018 Investor Day 4/15/2019
Slide 44: 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 45: Appendix
Appendix PEYTO Exploration & Development Corp. N Quarterly Track Record N Tax Pools N Gas Marketing N Leverage 45 4/15/2019
Slide 46: Quarterly Track Record
Quarterly Track Record PEYTO Exploration & Development Corp. 2018 2017 2016 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Operations Production Oil & NGLs (bbl/d) 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 6,621 Natural gas (mcf/d) 493,921 458,792 456,197 4
Slide 47: 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 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 CEC UCC (25%) CEE (100%) CDE (
Slide 48: Successful Hedging Strategy Smoothes Volatility
Gas Marketing Successful Hedging Strategy Smoothes Volatility PEYTO Exploration & Development Corp. Gas Price ($/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 49: 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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