Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Shareholder Meeting (May 2005)
33 slides from Peyto Exploration & Development's shareholder meeting presentation, May 17, 2005
Slide 1: Annual General Meeting
Annual General Meeting May 17, 2005
Slide 2: Profile
Profile • Established - November 1998 • Expertise - Exploration & Development of Long-life Tight Gas Reserves • Market - PEY.UN, Toronto Stock Exchange • Area of Operations – Alberta’s Deep Basin • Units Outstanding - Basic & Diluted 48.4 million • NO CONVERTIBLE DEBENTURES OR EXCHANGEABLE SHARES •
Slide 3: Business Strategy
Business Strategy Maximize our return on every dollar invested 9Avoid unnecessary risk 9Invest in predictable and repeatable projects 9Invest in projects which have a long economic life 9Target a high degree of ownership and control 9Create and maintain a low cost structure 3 1/11/2006
Slide 4: Business Strategy: Develop Deep Basin Tight Gas
Business Strategy Maximize our return on every dollar invested 9Avoid unnecessary risk 9Invest in predictable and repeatable projects Develop Deep 9Invest in projects Basin which have aGas Tight long economic life 9Target a high degree of ownership and control 9Create and maintain a low cost structu
Slide 5: Area of Operations Map
Area of Operations Map “Today 100% of our W6 W5 W4 production and revenue Alberta comes from the natural gas and natural gas liquids we produce and process in Alberta’s Deep Basin.” Edmonton Calgary U.S. Canada Border 5 1/11/2006
Slide 6: Deep Basin Tight Gas
Deep Basin Tight Gas Low permeability natural gas reservoirs Production ultimately stabilizes Gas, oil and water are segregated by permeability Tight rock makes it impossible for water flow Environmentally friendly sweet gas (no acid gas) High heating value Rich in hydrocarbon liquids,
Slide 7: Deep Basin Tight Gas: Permeability Segregation
Deep Basin Tight Gas Permeability Segregation FOOTHILLS STRUCT URES GAS AS ING INCRE BILITY EA PERM WATER TRANSITION ZONE WATER GAS ASE INCRE H AREA OF GAS DEPT MATURATION 7 1/11/2006
Slide 8: Deep Basin Tight Gas: Formations or Reservoirs
Deep Basin Tight Gas Formations or Reservoirs % of Deep % of Peyto's Depth Formations Permeability Comments Basin Gas Gas These formations can Belly River 89% 100% Low Permeability "Tight Gas" be considered tight gas Deeper………………...……….Shallower Chinook reservoirs in the Deep Basin Area. They Cardiu
Slide 9: Deep Conventional Gas vs. Tight Gas (1)
Deep Basin Area, Deep Conventional Gas vs. Tight Gas (1) “This is our core area, Sundance. When Peyto started developing tight gas here in 1999, the last Cardium producer on the trend was the Talisman operated 16-29- 54-21W5 well. This Cardium well is highlighted below and High Rate is a good exampl
Slide 10: Deep Conventional Gas vs. Tight Gas (2)
Deep Basin Area, Deep Conventional Gas vs. Tight Gas (2) High Rate “If your objective is short term and more about creating 12000 Leduc ‘A’ Well the illusion of creating value with production, the high rate Leduc ‘A’ well would be your target. If you are investing based on real return then there is
Slide 11: Deep Conventional Gas vs. Tight Gas (3)
Deep Basin Area, Deep Conventional Gas vs. Tight Gas (3) High Rate Tight Conventional 1200 Leduc ‘A’ Well 16-29-54-21W5 12-25-55-22W5 Year 1 Raw Rate (boe/d) 485 1000 Year 1 Sales Rate (boe/d) 460 620 1000 Netback ($/boe) $ 28.00 $ 13.00 Reserve Life (years) 17 1 Producing Life (years) +50 1 Daily S
Slide 12: Smoky Kakwa Project: Step One: Identify Analogs
Smoky Kakwa Project Step One: Identify Analogs Kakwa Cardium Kakwa Cardium Producer Producer Producing wells, 1 Average first year rate, 480 mcf/d Capital per well, $2.5 MM Payout, 3 years Cumulative cashflow as at Sept-2002, $8 MM Ultimate total cashflow, $23 MM Smoky Cardium Producers Producing we
Slide 13: Smoky Kakwa Project: Step Two: Acquire Land
Smoky Kakwa Project Step Two: Acquire Land Kakwa Cardium Seven Separate Land Deals Producer Acquire 55 gross sections 5 Farm-ins 3 Land Acquisitions Smoky Cardium Pool All numbers are estimates based on proprietary and public sources 13 1/11/2006
Slide 14: Smoky Kakwa Project: Step Three: Develop the Project
Smoky Kakwa Project Step Three: Develop the Project Kakwa Cardium Peyto Smoky / Kakwa Cardium Producers Producer 16 producing wells, as at Feb-2005 Average first year rate 1,300 mcf/d Capital per well $3.5 MM Payout 2 years Cumulative Cashflow as at Feb-2005 $43 MM (after 1 year) Estimated total cap
Slide 15: Proof That Tight Gas Works For Peyto
Proof That Tight Gas Works For Peyto 9Long Reserve Life 15 1/11/2006
Slide 16: Industry Comparison: Proven Reserve Life
Years - 2 4 6 8 10 PE YT ER O F_ U AE N T_ U PT N F_ U VE N T_ U PG N F_ U VK N R _U PW N I_ U Industry Comparison FE N T_ U AV N N Foundation, Proven Reserve Life _U BN N P_ U ZA N R_ U PG N X_ U SH N 2004 Year End Proven Reserve Life N_ UN AY _U CP N G _U HT N E_ U N AE _U PM N T_ U BT N E_ UN 16
Slide 17: Industry Comparison: Proven + Probable Reserve Life
Years - 5 10 15 20 PE YT ER O F_ U AE N T_ U FE N T_ U AV N N _U PT N F_ U VE N T_ U PG N F_ U Industry Comparison PW N I_ U BT N E_ U VK N R _U SH N N_ U BN N P_ UN Foundation, Proven + Probable Reserve Life AY _U ZA N R_ U 2004 Year End Proven + Probable Reserve Life CP N G _U PG N X_ U HT N E_ U
Slide 18: Proof That Tight Gas Works For Peyto
Proof That Tight Gas Works For Peyto 9Long Reserve Life 9Low and stable operating costs $1.80/boe 18 1/11/2006
Slide 19: Operating Costs: Quarterly Track Record
Operating Costs Quarterly Track Record “Our track record shows that we can $10 maintain and continue to build a low Fourth Quarter Operating Costs ($/boee) operating cost company. Since we first reported operating costs lower $8 than $2.00/boe, we have increased our production over seven fold and ma
Slide 20: Proof That Tight Gas Works For Peyto
Proof That Tight Gas Works For Peyto 9Long Reserve Life 9Low and stable operating costs $1.80/boe 9Growing production per unit 20 1/11/2006
Slide 21: Track Record: Production Growth
Track Record Production Growth “Our production growth has been steady since we started producing from our Sundance gas plant in Q2 25,000 2000. All of this growth has come from taking the ideas the team generates and developing those ideas with the drill bit. Very similar to manufacturing a finished
Slide 22: Per Unit, Production, Revenue & Funds from Operations
Track Record Per Unit, Production, Revenue & Funds from operations 500 $1.50 Net Revenue & Funds from Operations per uni Daily Production per million units (boe/d) 400 $1.20 300 $0.90 200 $0.60 100 $0.30 - $- 99 00 00 00 00 01 01 01 01 02 02 02 02 03 03 03 03 04 04 04 04 05 4 1 2 3 4 1 2 3 4 1 2 3 4
Slide 23: Proof That Tight Gas Works For Peyto
Proof That Tight Gas Works For Peyto 9Long Reserve Life 9Low and stable operating costs $1.80/boe 9Growing production per unit 9Growing distributions per unit 23 1/11/2006
Slide 24: Quarterly Distribution History
Quarterly Distribution History Percent Change Since Trust Conversion Production Per Distribution Unit Funds from Rate Production (boe/d/million Distribution Operations Production Payout Quarter ($/unit/month) (boe/d) units) Payout Ratio Rate $/unit per unit per unit Ratio Q3 03 $ 0.15 14,086 310 57%
Slide 25: Proof That Tight Gas Works For Peyto
Proof That Tight Gas Works For Peyto 9Long Reserve Life 9Low and stable operating costs $1.80/boe 9Growing production per unit 9Growing distributions per unit 9Growing inventory of projects 25 1/11/2006
Slide 26: Yearly Capital Expenditures
Yearly Capital Expenditures $350 “Our capital expenditures $300 have always been focused Cashflow & CAPEX (Millions of Dollars on internally generated $250 drilling projects.” $200 $150 $100 $50 $- 1999 2000 2001 2002 2003 2004 2005E Year 26 1/11/2006
Slide 27: 2005 Capital Expenditures ($260 - $300 million)
2005 Capital Expenditures ($260 - $300 million) “Our 2005 capital Cutbank Smoky/Kakwa program is directed exclusively at developing tight gas Leland reserves in the Deep Basin.” Sundance Wild Hay 27 1/11/2006
Slide 28: Proof That Tight Gas Works For Peyto
Proof That Tight Gas Works For Peyto 9Long Reserve Life 9Low and stable operating costs $1.80/boe 9Growing production per unit 9Growing distributions per unit 9Growing inventory of projects 9Sustainable business model 28 1/11/2006
Slide 29: Sustainability: Payout Ratio
ZA 0% 20% 40% 60% 80% 100% 120% R_ U N PE YT O HT E_ U Payout Ratio AE N T_ U VE N T_ Sustainability UN AE _U N PT F_ U FE N T_ U PW N I_ U BT N E_ U ER N F_ U BN N P_ U VK N Q1 2005 Payout Ratio R _U CP N G _U PG N X_ U PG N F_ U SH N N_ UN AY _U AV N N _U PM N T_ UN 29 1/11/2006
Slide 30: Sustainability: Reserve Replacement Cycle (1)
Sustainability Performance, Reserve Replacement Cycle (1) Peyto Q1 2005 Example Funds From Operations ($/boe) $ 34.11 Distribution at 46% ($/boe) $ (15.76) Cash Available After Distribution ($/boe) $ 18.35 2004 PDP FDA ($/boe) $ (9.59) Cash Available After Distribution & Cost to Replace PDP Reserves
Slide 31: Sustainability: Reserve Replacement Cycle (2)
Sustainability Performance, Reserve Replacement Cycle (2) Cash Available for Growth After Distributions & Cost to Replace Proven Producing Reserves ($/boe) $10 $- N N O PM N N VK N N N N N N N PG N N N N SH N N BN N UN U U _U _U YT _U _U U U U U U _U U _U U U _U U T_ T_ T_ F_ I_ P_ F_ X_ T_ E_ F_ N_
Slide 32: Proof That Tight Gas Works For Peyto
Proof That Tight Gas Works For Peyto 9Long Reserve Life 9Low and stable operating costs $1.80/boe 9Growing production per unit 9Growing distributions per unit 9Growing inventory of projects 9Sustainable business model 9Proven track record 32 1/11/2006
Slide 33: Track Record: Five Years of Unmatched Profitable Growth
Track Record Five Years of Unmatched Profitable Growth “Our strategy is a perfect fit for the tight gas resource play. The success of this strategy has generated incredible returns for our shareholders since we began operations in 1999.” Growth Rate Start End Compounded Over Five Year 12/31/1999 12/
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