Advantage Energy Ltd · TSX:AAV
Advantage Energy — Advantage Oil & Gas — Investor Presentation (June 2010)
39 slides from Advantage Energy's investor presentation, June 2010
Slide 1: Investor Update
Investor Update June, 2010 TSX: AAV NYSE: AAV June 2010 Page 1
Slide 2: Advisory
Advisory The information in this presentation contains certain forward-looking statements, including within the meaning of the United States Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future intentions or performance. All statements other than s
Slide 3: Advantage Oil and Gas Ltd.
Advantage Oil and Gas Ltd. Listed on TSX & NYSE AAV Market Capitalization at June 7, 2010 $1.1 billion Shares Outstanding (Basic) 163 million Estimated Production Current (net of 1,700 boe/d non-core asset sales Q2 2010) ~24,000 boed Credit Facility $525 million Available Credit Facili
Slide 4: Advantage – Corporate Strategy
Advantage – Corporate Strategy Growth Oriented & Focused “Low Cost” Producer with Financial Flexibility Focus on Montney Natural Gas Resource Play Development at Glacier, Alberta Total capital investment at Glacier of $234 million in 2008 & 2009 confirmed significant upside potential (500+ horiz
Slide 5: Recent Alberta Royalty Incentive Changes Enhances Glacier Well Economics
Recent Alberta Royalty Incentive Changes Enhances Glacier Well Economics Significant enhancement for Glacier Montney horizontal wells due to changes in the Natural Gas Deep Drilling Program (“NGDDP”): Reduced qualifying depth from 2,500 meters to 2,000 meters Program is now a permanent feature
Slide 6: Glacier Success Leads to Record 2009 Corporate Reserve Growth
Glacier Success Leads to Record 2009 Corporate Reserve Growth* Replaced 698% of 2009 annual production at an all-in P+P FD&A cost of $10.14/boe including the change in Future Development Capital (“FDC”) Proven & Probable reserves grew 34% to 232.3 mmboe despite asset dispositions of 27.2 mmboe d
Slide 7: Focus on Our Extensive Montney Land Block at Glacier
Focus on Our Extensive Montney Land Block at Glacier LEGEND Shell Advantage Arc Arc Birchcliff CNRL Encana Grey Wolf Murphy Shell Storm Talisman Birchcliff Devon EnCana Advantage Murphy Large Contiguous Land Block at Glacier Devon • 84 gross (80 net) sections of Montney acreage* • 95% working intere
Slide 8: "Rock Type" at Glacier May Support Higher Reserve Recoveries
“Rock Type” at Glacier May Support Higher Reserve Recoveries Unconventional Unconventional Marcellus Shale Horn River Barnett Glacier Shale “Shaley” silts Edmonton Calgary Haynesville Silt Glacier Montney Shell Arc Dawson “Tight” sand Conventional Groundbirch Birchcliff Encana Swan Murphy Tupper AAV
Slide 9: Montney – Reserves/Well Could Exceed Expectations due to Silt/Sand Reservoir
Montney – Reserves/Well Could Exceed Expectations due to Silt/Sand Reservoir Montney type well @ Swan (based on 50 wells that have the longest production history) Barnett Shale type wells by operator Source: Facts are Stubborn Things, Oct. 25, 2009, Arthur E. Berman June 2010 Page 9
Slide 10: Glacier Montney Development Status
Glacier Montney Development Status Targeted Production Growth Current Highlights: * Gross plant inlet volume Decision New 50 mmcfd AAV gas plant mid-year 2010 (100% W.I.) at capacity New TCPL sales pipeline Completed connection in operation 50 mmcfd (8,300 boe/d) on-stream Completed earlier th
Slide 11: Glacier - Infrastructure Development
Glacier - Infrastructure Development New 50 mmcfd AAV gas plant AAV 50 mmcfd sales AAV Gas Plant gas to TCPL Location TCPL Mainline Existing TCPL Lateral New 100% W.I. Advantage 50 mmcfd Current gas plant on-stream Q2 2010 Gathering System Wembley Nat Glacier total operating costs Gas Plant targ
Slide 12: Glacier – Successful Delineation with Test Rates Exceeding Expectations
Glacier – Successful Delineation with Test Rates Exceeding Expectations Across Land Block 1 Upper Montney Hz 12 mmcf/d @ 1300 psi 2 Upper Montney Hz 8 Upper Montney Hz Avg. 8.1 mmcf/d @ 812 psi Avg 5.1 mmcf/d @ 1404 psi 2 Lower Montney Hz 4.6 mmcf/d @ 917 psi 4.2 mmcfd @ 495 psi 1 Upper Montney Hz 7
Slide 13: Glacier Upper Montney – Horizontal Well Test Rates Improving
Glacier Upper Montney – Horizontal Well Test Rates Improving 12,000 Average Hz well rate increased from 10,000 3.6 mmcf/d to 6.5 mmcf/d 8,000 Test Rate (mcf/d) 6,000 4,000 2,000 0 0 500 1,000 1,500 2,000 2,500 Flowing Pressure (psi) First 12 Last 16 First 12 Wells Last 16 Wells June 2010 Page 13 13
Slide 14: Glacier Upper Montney Rate per Frac Improved 1.7x
Glacier Upper Montney Rate per Frac* Improved 1.7x 1,400 Rate per Frac increased from 1,200 465 mcf/d to 802 mcf/d 1,000 800 mcf/d 600 400 200 0 * Due to testing equipment constraints on high rate/high pressure wells, the rate per frac has been adjusted to a common flowing pressure of 435 psi for co
Slide 15: Completion Costs per Frac Declining
Completion Costs per Frac Declining $1,000,000 $900,000 Completion costs per frac $800,000 decreased over 50% $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 June 2010 Page 15
Slide 16: Drilling and Completion Well Costs Reduced Since 2008
Drilling and Completion Well Costs Reduced Since 2008 D+C costs decreased despite increased # fracs per well $8,000,000 Completion Drilling $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 June 2010 Page 16
Slide 17: Significant Upside Drilling Potential at Glacier
Significant Upside Drilling Potential at Glacier Significant Upside Potential due to Low Well Density at Glacier Advantage Glacier and EnCana Swan Production Growth EnCana Swan Swan Glacier Advantage Glacier Glacier Production Growth to 50 mmcfd in 20 months Wells/section Wells as of June 2010 22
Slide 18: Glacier – Reserves and Resource Potential
Glacier – Reserves and Resource Potential Advantage working interest reserves and contingent sales gas resource in million boe (TCF) Significant Upside Potential Remains (1.7 TCF) 2009 Reserves assignment: • 56 of 84 sections @ 3.8 wells/sec Upper Montney 218.3 • 27 of 84 sections @ 2.5 wells/sec Lo
Slide 19: Glacier - Nikanassin and Other Resource Plays
Glacier - Nikanassin and Other Resource Plays Nikanassin at Glacier is located in: Thick part of the fairway (up to 50 meters) of net coarse grained sand developed in the key Middle section of the Nikanassin Clean sandstone with high porosity (low permeability) – multi stage frac – should improv
Slide 20: Solid Hedging Program to Support Future Cash Flow
Solid Hedging Program to Support Future Cash Flow % of net Aeco Cdn $ Nymex US $ NATURAL GAS Production Hedged (per mcf) (per mmbtu) * 2010 Q1 81% $7.64 $8.04 Q2 57% $7.53 $7.93 Q3 44% $7.27 $7.67 Q4 45% $7.27 $7.67 2010 Full Year 57% $7.46 $7.86 2011 Q1 41% $6.43 $6.83 Q2 23% $6.24 $6.64 Q3 24% $6.
Slide 21: Advantage - Well Positioned for Growth
Advantage - Well Positioned for Growth Montney natural gas resource play at Glacier Significant reserves recognized by Sproule New 50 mmcfd Glacier gas plant (100% AAV) Significant reduction in operating cost structure from $8.25/boe to $2.75/boe Improved Cost Structure Increasing Glacie
Slide 22: Contact Information
Contact Information Investor Relations 1.866.393.0393 ir@advantageog.com Andy Mah, P.Eng. Chief Executive Officer Craig Blackwood, C.A. Vice-President, Finance www.advantageog.com TSX:AAV NYSE:AAV Advantage Oil & Gas Ltd. Suite 700, 400 – 3rd Avenue SW Calgary, Alberta T2P 4H2 Main: 403.718.8000 Fac
Slide 23: Appendix
Appendix Montney and Other Properties June 2010 Page 23
Slide 24: Montney Deposition and Paleo - Geography
Montney Deposition and Paleo - Geography Meters of water 10’s of meters of water “Conventional”Montney 100’s of meters of water Doig Upper Montney) Montney (Lower) Modern US Atlantic Long Island shelf for scale Cape Hatteras June 2010 Page 24
Slide 25: Lithological Comparison of Major Unconventional Gas Plays
Lithological Comparison of Major Unconventional Gas Plays 0% The Montney and Doig Formations have a 100% predominantly siltstone and sandstone matrix as opposed to the mainly shale matrix common in other major resource plays Most of the gas in place at Glacier is situated Shales within the silt
Slide 26: Montney Formation Geology
Montney Formation Geology West East Swan Tupper Sunset Groundbirch Glacier Dawson Sturgeon Ante Ck Upper Doig Phosphate W-E Cross schematic section of Note truck for scale Montney and Doig Formations Thin bedded turbidites and mudstones in Sacramento Valley, California, a modern analog for the Lower
Slide 27: Montney – A Balance of Factors
Montney – A Balance of Factors Shale Silty shale Silt Silty sand Sand 1,250 1,750 2,250 2,750 3,250 3,750 Depth (meters) 40 60 80 100 120 140 160 180 200 220 Thickness (meters) Utica Woodford MONTNEY Marcellus Horn River Haynesville Fayetteville Barnett 2 3 4 5 6 7 8 9 10 11 12 Porosity (%) June 201
Slide 28: Glacier – Montney Geology
Glacier – Montney Geology Source: Tristone Shale Gas Report October 2008. June 2010 Page 28
Slide 29: Doig/Montney Completion Techniques
Doig/Montney Completion Techniques Swell Packer Packers Plus Completion Delta Stim/Packers Plus or Weatherford ARES Hydra jet (sand plug) Hydra Jet Sand Plugs Delta Stim tool “Frac Door systems” run as integral part of casing Perforate or cut slots to frac through production casing Swell Packe
Slide 30: Increased Drilling Activity & Successful Well Results Surrounding Glacier Land Block
Increased Drilling Activity & Successful Well Results Surrounding Glacier Land Block New Birchcliff Lower Montney HZs Birchcliff Upper Montney/Doig Murphy – 4 L. Montney Hz’s Tested average of 8.4 mmcf/d Cequence 3.5 mmcf/d U Montney Devon New Upper Montney HZ Drilling Cequence 5.5 mmcf/d U Montney
Slide 31: Montney Horizontal Well Density – wells/section
Montney Horizontal Well Density – wells/section BC AB BC AB •Drilling to June 2010 LOWER MONTNEY UPPER MONTNEY 5 + wells 3 - 4 wells 1 - 2 wells No wells AAV lands June 2010 Page 31
Slide 32: Enviable Asset Base
Enviable Asset Base Enviable Asset Base Glacier (8,300 boe/d) Significant Montney natural gas resource play Alberta Saskatchewan Central Alberta (11,400 boe/d)* Montney natural gas resource play Conventional & emerging oil Glacier & natural gas resource plays Sunset Foothills Gas Central A
Slide 33: Nevis - Light Oil and Coal Bed Methane Resource Plays
Nevis - Light Oil and Coal Bed Methane Resource Plays Horseshoe Canyon CBM Gas Pool W West Wabamun W Light Oil Pool East Wabamun Light Oil Pool W.I. Production: 4,800 boe/d W.I. 90%; 100% operated 40% Light Oil, 60% Natural Gas Reserve Life Index: 9 years Hz Wabamun Oil Wells Significant lig
Slide 34: Nevis – Wabamun Light Oil Resource Play
Nevis – Wabamun Light Oil Resource Play Horizontal Type Well vs Vertical Type Well Lower permeability light oil carbonate reservoir High porosity 30% -> Large OOIP Hz wells enhanced play economics Hz well EUR = 220 mboe 70 Hz wells drilled to date (estimated ultimate recovery) Primary rese
Slide 35: Nevis – Horseshoe Canyon Coal Bed Methane
Nevis – Horseshoe Canyon Coal Bed Methane Nevis CBM Normalized Well Production Horseshoe Canyon CBM development Based on Advantage’s CBM wells Current WI production 11 mmcfd Property acquired in Sept 2007 mcfd/well Less than 5% decline (Sproule’s forecast uses declines of 14% - 20%) 105 well
Slide 36: Sunset A Pool – Montney Light Oil, Drilling & Waterflood Upside
Sunset A Pool – Montney Light Oil, Drilling & Waterflood Upside Sunset Montney A oil pool has significant upside potential W.I. Production: 618 boe/d Montney light oil, 32 degree API W.I. 70%, 100% operated Reserve Life Index P+P: 17 years OOIP: 46 million bbls Recovered to date 12% OOIP
Slide 37: Lookout Butte – Foothills Gas with Multi-zone Drilling Upside
Lookout Butte – Foothills Gas with Multi-zone Drilling Upside Mississipian Rundle – main producing gas zone Mannville – uphole light oil Cardium – uphole gas R28W4 T2 Less than 10% decline Waterton National Park W.I. Production: 1,100 boe/d (20% ngl’s) W.I. 100%; 100% operated Rundle – main prod
Slide 38: Lookout Butte – Example of Rundle Drilling Potential
Lookout Butte – Example of Rundle Drilling Potential L E F Section 16 has produced 79 BCF to U 36 31 U 32 33 34 date from 3 wells: C L U 14-16 49 Bcf U L 7-16 26 Bcf 25 30 U 29 28 27 K A 2-16 4 Bcf (drilled 2004) U F U Reservoir pressure at 2-16 is still at A 24 19 20 F 21 22 79% of origin
Slide 39: Contact Information
Contact Information Investor Relations 1.866.393.0393 ir@advantageog.com Andy Mah, P.Eng. Chief Executive Officer Craig Blackwood, C.A. Vice-President, Finance www.advantageog.com TSX:AAV NYSE:AAV Advantage Oil & Gas Ltd. Suite 700, 400 – 3rd Avenue SW Calgary, Alberta T2P 4H2 Main: 403.718.8000 Fac
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