Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Peters & Co. North American Oil & Gas Conference 2008
35 slides from Peyto Exploration & Development's conference presentation, Sep 11, 2008
Slide 1: Peters & Co. North American Oil & Gas Conference
Peters & Co. North American Oil & Gas Conference September 2008 www.Peyto.com
Slide 2: What is Peyto going to be?
2011 What is Peyto going to be? "Peyto will be what it has always been, a profitable, growing energy company focused on unconventional natural gas resources." Peyto Peyto ? Energy Energy Trust Trust PEDC PEDC (GP) PEDC Peyto Peyto Operated Operated Trust Trust PEDC Peyto Energy LP 1998 2003 2008 201
Slide 3: A Growing Company: Reserves Growth
A Growing Company Reserves Growth 180,000 “Over 140 mmboes have been discovered and developed 160,000 through the drill bit, with 40 mmboes of those having been recovered to date.” 140,000 120,000 100,000 MBOE 80,000 60,000 40,000 20,000 - 1999 2000 2001 2002 2003 2004 2005 2006 2007 Proved Producin
Slide 4: A Growing Company: Net Asset Value Growth
A Growing Company Net Asset Value Growth $35 $30 NPV @ 5% debt adjusted per unit $25 $20 $15 $10 $5 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 Proven Producing Total Proven Proven + Probable Additional Historical Per Unit and Units Outstanding numbers have been adjusted to reflect the May 27, 2
Slide 5: A Profitable Company: Strong Returns on Capital and Equity
A Profitable Company Strong Returns on Capital and Equity “Over the last eight years, Peyto has 70% delivered an average 24% Return on Capital Employed and an average 49% Return on Equity.” 60% Corp. Trust 50% 40% 30% 20% 10% 0% 2000 2001 2002 2003 2004 2005 2006 2007 ROCE ROE Return on Equity (ROE)
Slide 6: A Profitable Company: Profits and Distributions History
A Profitable Company Profits and Distributions History $2.50 Earnings/Share "Peyto's earnings per share have grown Distributions/Share every year in the company's 9 year history. As a trust we have flowed those profits out to unitholders while continuing $2.00 to grow the asset base." $1.50 $1.00 $0
Slide 7: Strategy, We Build it Ourselves
Peyto Exploration Strategy, We Build it Ourselves Acquire Build 7 9/12/2008
Slide 8: Exploring for Tight Gas
Exploring for Tight Gas North American Tight Gas Deep Basins “Peyto’s Assets are all located in Canada’s Alberta Deep Basin.” Alberta Deep Basin 8 Map Courtesy of GTI 9/12/2008
Slide 9: Deep Basin Tight Gas: General Area of Operations Map
Deep Basin Tight Gas General Area of Operations Map “Over the past nine years, Peyto has focused it’s efforts on a design, drill and build strategy exclusively in the Deep Basin. The Deep Basin is considered Alberta’s premier exploration area for high quality long life gas reserves.” Peyto’s Sundanc
Slide 10: Deep Basin Tight Gas: Multiple Vertical Targets
Deep Basin Tight Gas Multiple Vertical Targets Sundance Area Reservoirs Peyto’s design, drill and build strategy targets over 7 different tight gas reservoirs in the Deep Basin. Just 3 of the primary targets offer close to 50 bcf/section! 10 9/12/2008
Slide 11: Cardium Resource Play: Permeability Segregation
Cardium Resource Play Permeability Segregation “The Cardium is a very fine grained, low permeability sand that will not allow water to flow through the pore spaces. This creates a “hydrodynamic” trap with water up-dip of gas.” FOOTHILLS STRUCTURES GAS AS ING INCRE BILITY EA PERM WATER TRANSITION ZON
Slide 12: Cardium Resource Play: Depositional Model
Cardium Resource Play Cardium Depositional Model “The Cardium Geological model is a prograding shoreline that creates an extensive sand body of relatively uniform thickness.” Plint and Walker, 1987 12 9/12/2008
Slide 13: Cardium Thickness and Pool Map
Cardium Resource Play Cardium Thickness and Pool Map R12 R7 R2W6 R24 R19 R14 R9 R4W5 T66 “At an average sand thickness of 15 m and with over 120 townships of area, there is up T61 to 65 TCF of Original Gas In Place. That is a massive resource!” T56 T51 T46 T41 D T36 R20 R15 R10 •Pembina •Sundance •K
Slide 14: Deep Basin Cardium Production
Cardium Resource Play Deep Basin Cardium Production 400 1400 “On production for more than 20 years, the Cardium currently produces 350 1200 in excess of 300 mmcf/d and has produced close to 1 TCF of gas..” 300 1000 Production (mmcf/d) 250 Well Count 800 200 600 150 400 100 50 200 0 0 1988 1990 1992
Slide 15: Peyto's Cardium Producers
Cardium Resource Play Peyto’s Cardium Producers R13 R12 R11 R10 R9 R8 R7 R6 R5 R4 R3 R2 R1W6 R27 R26 R25 R24 R23 R22 R21 R20 R19 R18 R17 R16 R15 R14 R13W5 AC C F F CA D AA GCF E F C G G G G G GDG C G K F C AF F CF C K FF CD C G F C D KCC GC L F C C G C F G C G FL FG L C G J IES S EEEEJS GC G C C GJ
Slide 16: Historical F&DA Costs
Peyto Exploration and Development Historical F&DA Costs $45.00 “Peyto Exploration and Development has a proven track record of finding Proved Producing and developing for much less than the $40.00 cash that is generated from each boe.” Total Proved $/boe (including change in FDC) $35.00 Proved + Pro
Slide 17: Build versus Acquire
Peyto Exploration and Development Build versus Acquire Recycle Ratio “We all know “build it rather than buy it” generates better returns. Peyto averaged a 2.9 times recycle ratio over the past 5 years 4.0 versus the trust sector average of 1.4.” 3.5 3.0 2.5 2.0 1.5 1.0 0.5 76% on 52% on Acquisitions
Slide 18: Future Ideas
Future Ideas R11 R9 R7 R5 R3 R1W6 R26 R24 R22 R20 R18 R16 R14 F FF C F E FF FF FG C F FFFF G F C CF KC G GE C G K I DD SSDG G GG C IIEC C G GG G GL G GJ L G E EEEC G GG CEJJ SMG JCSEE ESS CM DSJ GG G CF CG G T65 D L FG CC GFFFG G F F FG CFF F CFDC F CFF CFCF FF FF F FFDCG FF FCF F DC CG FF F FFF FGF
Slide 19: Production Company: Operated Assets
Production Company Operated Assets Made Made by By Peyto Peyto Made by Peyto 19 9/12/2008
Slide 20: Peyto Operations Map
Peyto Operations Map Gas Plants & Land R10 R8 R6 R4 R2W6 R27 R25 R23 R21 R19 R17 T65 T65 “Peyto owns and operates 195 mmcf/d of gas processing capacity and maintains a Smoky/Kakwa very high working interest in its land base - T63 Cutbank 35 mmcf/d keys to low operating costs.” T63 W Chicken T61 T61
Slide 21: The Team
The Team • Darren Gee President, CEO, Director • Kathy Turgeon VP of Finance, CFO • Scott Robinson Executive VP and COO • Melanie Gallant Finance • Nicole Kehler Administrative Assistant • Lydia Hamaliuk Finance • Enrico Espiritu Engineering Manager • Liz Duerholt Finance • Neil Korchinski Engineeri
Slide 22: Low Operating Costs
Low Operating Costs Field Processing Operating “One of the reasons our assets are so valuable is our Expenses Transportation Income Costs industry leading operating costs. Our operating costs Year ($/boe) ($boe) ($/boe) ($/boe) are so low for a number of reasons. First, we produce from reservoirs th
Slide 23: Operating Costs: Eight Year Trend
Operating Costs Eight Year Trend “We have not been immune to inflationary $16 pressure on operating costs but our assets, Quarterly Operating Costs ($/boe) our concentration and our dedicated $14 operations staff help us keep the majority of it at bay.” $12 $10 $8 $6 $4 $2 $- 2000 2001 2002 2003 200
Slide 24: Operating Costs: Industry Comparison
Operating Costs Industry Comparison Q2 2008 Operating Costs $18 $16 $14 Ave $11.78/boe $12 $10 $/boe $8 $6 $4 $2 $- N PM N N N N N N N N PW N N N N N N N O _U _U _U _U _U _U _U _U U U U U U U U U YT T_ T_ T_ E_ T_ F_ F_ T_ N AE P E R X PG AY PE BN BN PG AE ZA VE TE AV ER BT PG N D C Operating Costs
Slide 25: Netback: Industry Comparison
Netback Industry Comparison Commodity Price History Q2 2008 Netback $150 $18.00 $140 “Despite gas prices being disconnected $130 $16.00 $120 $65 with oil prices, Peyto’s gassy “boes” $110 Oil Price $14.00 AECO Monthly Gas Price ($/GJ) continue to demonstrate their high Edm Par Oil Price ($/bbl) $100
Slide 26: Profit Margin: Industry Comparison
Profit Margin Industry Comparison Q2 2008 Profit Margin “Peyto’s high quality boes combined with 70% a low cost structure delivers one of the highest profit margins.” 60% 50% 40% 30% 20% 10% 0% O N N N N N N N N N N N N N UN N N YT _U _U _U U U U _U U U U _U U U U U T_ X_ F_ T_ E_ T_ T_ T_ F_ E_ P_
Slide 27: Reserve Life: Industry Comparison
Reserve Life Industry Comparison, Proven Producing Reserve Life 2007 Year End Proven Producing Reserve Life 15 Long “The average trust yield of 13% implies a distribution life of 7.5 years but the average trust only has 6.5 years of proven producing reserves.” 10 Years Average 5 Short - O N N N N N
Slide 28: Producing Life: Cardium Example
Producing Life Cardium Example “Although Deep Basin tight gas wells have a long reserve life of 10-20 years, their actually producing life is much longer.” 60 yrs 20 yrs 28 9/12/2008
Slide 29: Achievement of Growth: Building Our Own Production
Achievement of Growth Building Our Own Production 2008 Drills 2007 Drills 2006 Drills 2005 Drills 2004 Drills 2003 Drills 2002 Drills 2001 Drills 2000 Drills 29 9/12/2008
Slide 30: Tight Gas: Understanding the Value (1)
Tight Gas Understanding the Value (1) Op Costs “Royalty rate drops as the productivity + Royalty declines. The operating costs increase because of the lower productivity $15 relative to the component of fixed operating costs.” Royalty $10 Costs ($/boe) Operating Costs $5 $- 0 5 10 15 20 25 30 Years
Slide 31: Tight Gas: Understanding the Value (2)
Tight Gas Understanding the Value (2) 60 $180 NPV 8% per boe/d 50 “Typical Peyto deep basin tight gas $150 Value of Production, NPV 8% (k$/boed) production actually becomes more valuable over time as netbacks continue to improve (2%/yr to year 24). Even Production Rate (boe/d) 40 Production though p
Slide 32: Natural Gas Prices: Historical AECO Gas Price
Natural Gas Prices Historical AECO Gas Price $14 “Over time, long reserve life $12 assets expose you to rising energy prices.” $10 $8 ($/GJ) $6 $4 $2 $0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 32 9/12/2008
Slide 33: Keys to Sustainability: Accumulating Tax Pools
Keys to Sustainability Accumulating Tax Pools Peyto Year End Tax Pools $800 $700 “At Peyto, our tax efficiency accumulates the old fashioned way, we build it.” $600 $500 Millions $400 $300 $200 $100 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 UCC (25%) CEE (100%) CDE (30%) COGPE (10%) CAPEX 33 9
Slide 34: 2011 and Beyond
2011 and Beyond E&P with PEDC Peyto Exploration and Development Corp. (PEDC) • An Exploration Company • Explore for and develop new natural gas reserves • A Production Company • Efficiently operate and produce the reserves we find 34 9/12/2008
Slide 35: Disclaimer: Forward Looking Statements
Disclaimer Forward Looking Statements Statements in this presentation contain forward-looking information including expectations of future production, reserves, components of distributable cash, cash flow and earnings, completion dates of construction and development projects, drilling and explorati
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