Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Investor Presentation (November 2024)
42 slides from Peyto Exploration & Development's investor presentation, November 2024
Slide 1: Corporate Presentation November 2024
www.peyto.com Corporate Presentation November 2024
Slide 2: Who is Peyto | Corporate Overview
WHO IS PEYTO | CORPORATE OVERVIEW 26-year publicly traded company focused Focused Assets exclusively on the Alberta Deep Basin ALBERTA 5th Largest 130,000 boe/d (~12% liquids) October 2024 Canadian Gas Long reserve life assets (10yr PDP RLI , 30yr Producer 2P RLI @ 2023YE) Deep Basin 1.1 million net
Slide 3: Who is Peyto | Focused Core Areas
WHO IS PEYTO | FOCUSED CORE AREAS ✓ 1.1MM net acres of Alberta Deep Cutbank Basin Lands ✓ Own and operate 17 gas processing facilities with over 1.5 bcf/d of gross production capacity Kakwa ✓ Proximal to major pipeline egress (NGTL, Alliance) ✓ Drilled over 1,350 horizontals to date across 13 discre
Slide 4: Why We Do It | Natural Gas
WHY WE DO IT | NATURAL GAS Demand for Natural Gas Continues World Energy Consumption by Source (1965-2023) 700 Fossil fuels represent over 80% of 600 the world’s energy consumption. 500 Exajoules 400 300 200 100 0 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 Oil Natural Gas Coal Nucle
Slide 5: Why We Do It | Growing LNG Capacity
WHY WE DO IT | GROWING LNG CAPACITY LNG growth in North America in 2024 - 2028 ✓ Mexico 0.6 bcf/d ✓ Plaquemines 3.2 bcf/d ✓ Corpus Christi 1.5 bcf/d 12 bcf/d of ✓ LNG Canada 1.8 bcf/d ✓ Golden Pass 2.4 bcf/d new capacity! ✓ Rio Grande 2.3 bcf/d • Current North American LNG export capacity is ~14 bcf
Slide 6: North American Demand for Natural Gas Continues to Grow
WHY WE DO IT | NATURAL GAS North American Demand for Natural Gas Continues to Grow USA Electricity Generation from Gas Further coal to gas switching could add ~5 3500 Coal to gas switching in the bcf/d of gas demand by 2030 or as much 70 USA has added 10 – 15 bcf/d as 16 bcf/d if all coal plants are
Slide 7: How We Do It | Peyto & the Deep Basin
HOW WE DO IT | PEYTO & THE DEEP BASIN (1) (3) 2023 YE PDP FD&A ($/mcfe) Average Injected Water per Well by Formation, 2023 $6.00 500,000 $5.00 Better reservoir quality than Fit-for-purpose, nimble rigs (telescopic other plays such as Montney Water per Well(bbl/Well) 400,000 $4.00 doubles) decrease c
Slide 8: How We Do It | Low Costs Drive Margins
HOW WE DO IT | LOW COSTS DRIVE MARGINS At Peyto we focus on costs since they are “sticky”, and they drive superior margins. Peyto’s margins were even stronger than liquids-weighted producers in 2023. 2023 Cash Costs ($/mcfe) 2023 YE Results $4.50 70% PEY $4.00 65% $3.50 60% Pre-Hedge Margin $3.00 55
Slide 9: How We Do It | Own and Control
HOW WE DO IT | OWN AND CONTROL Gross Gross Raw Net Capacity Gas Plants Capacity Throughput (MMcf/d) (MMcf/d) (MMcf/d)* 1 Edson (WI: 83%) 275 228 112 2 Swanson 130 130 73 3 Nosehill 125 125 65 4 Oldman (Deep Cut) 125 125 100 5 Brazeau 120 120 58 9 6 Oldman North 105 105 93 7 Wild River (WI: 81%) 100
Slide 10: How We Do It | Edson Gas Plant
HOW WE DO IT | EDSON GAS PLANT ✓ Free capacity to grow into – producing 112 Greater Sundance Area mmcf/d with a total capacity of 275 mmcf/d ✓ Access to major gas and liquid pipeline egress (NGTL, Alliance, Plains, Pembina) Kakwa ✓ Proximity to 900 MW, Cascade power generation facility, CN Rail, Tra
Slide 11: How We Do It | Continuous Improvement
HOW WE DO IT | CONTINUOUS IMPROVEMENT Average Well Production by Spud Year Unit Drill and Complete Costs 9,000 $1,000 By Year By Quarter 8,000 To date in 2024, Peyto has realized a $900 7,000 25% uplift in productivity relative to $800 6,000 previous years. Peyto continues to $700 optimize well desi
Slide 12: How We Do It | Early Wins
HOW WE DO IT| EARLY WINS Internally, Peyto estimates over Successful Development of Acquisition Lands 800 locations on the lands from 14,000 the Repsol acquisition. 12,000 Wells drilled across the acquired lands are, on 10,000 average, outperforming our recent programs by ~40% 8,000 MCF/D 6,000 4,00
Slide 13: How We Do It | Integrating the Acquisition
HOW WE DO IT| INTEGRATING THE ACQUISITION Pipeline header modification to Peyto has set a goal to reduce Reactivate pipeline to integrate Cecilia and Wild send Dunvegan gas to Wild River operating costs to $0.50/mcfe by for better liquid recoveries and River and allow gas to flow lower line pressure
Slide 14: How We Do It | Dunvegan HZ
HOW WE DO IT | DUNVEGAN HZ Dunvegan Type Well The recent acquisition expands an 6,000 emerging Dunvegan play. Peyto has 5,000 approximately 10 wells planned for 2024. 4,000 MCF/D 3,000 2,000 20-30 bbls/mmcf 101 DNVG 1,000 Booked(1) 13 PEY Drills to 0 Locations Date (10 on stream) 0 12 24 36 48 60 Mo
Slide 15: Returns | Robust Results
PEYTO’S RETURNS| ROBUST RESULTS Wells On Stream to end-Oct: 2024 Drilling Program Year to Date 63 gross / 61.3 net Price Deck: Flat, CA$3.00/GJ, US$70/bbl WTI Full Cycle Economics - $1,215,000/well Entire 2024 Program Forecasted BTAX IRR: 50% Dunvegan : 55% Notikewin : 63% 200% Wilrich : 49% Falher
Slide 16: Returns | Return on Equity
PEYTO’S RETURNS | RETURN ON EQUITY Investors rarely get to participate 60% in the wells themselves, making $12 type well economics somewhat meaningless. ROE and ROCE are 25% 50% the returns investors get, after $10 deducting corporate costs. 40% $8 25 yr Avg ROE to 2023 30% $6 20% $4 14% 10% 0% $2 $
Slide 17: Returns | Dividends
PEYTO’S RETURNS | DIVIDENDS Earnings are profits and Peyto returns those profits to shareholders through $8.8B Peyto Cumulative Capital Spent $4,000 $3,500 dividends. Peyto applies hedge accounting, so earnings are not skewed by large unrealized gains or losses during a quarter. Over time, Peyto exp
Slide 18: Future | 2025 Focus
PEYTO’S FUTURE | 2025 FOCUS ✓ Drill ~70 – 80 Net Hz Wells Focused on acquired lands and legacy Peyto properties Add 43,000 – 48,000 boe/d (~$10,500/boed) to offset ~26-28% base production decline $450M- ✓ Optimize Infrastructure Gathering and Plant Debottlenecking Projects Sundance Field Compression
Slide 19: Future | Undrilled Inventory
PEYTO’S FUTURE | UNDRILLED INVENTORY(1) Booked Inventory (Volume weighted) Average IRR by Species (3-year plan) $3.00/GJ and US$70/bbl WTI 6% 25% 120% 109% 105% Cardium 100% 24% Dunvegan 83% 80% Notikewin 60% 60% 52% Falher 9% 40% Wilrich Bluesky Bullhead 20% 19% 0% 17% Notikewin Dunvegan Wilrich Fa
Slide 20: Future | Supply Cost Goals
PEYTO’S FUTURE| SUPPLY COST GOALS 2024 $/mcfe 2020 2021 2022 2023 Goals Early results from acquisition means FD&A PDP FD&A (1) $1.06 $0.97 $1.41 $1.21(3) Royalties $0.32 $1.10 should come down for OPEX $0.49 2024 Cash Costs(1) $1.01 $1.25 $1.62 $1.42 Transport $0.27 $1.47 G&A $0.05 Royalties down. T
Slide 21: Past | Peyto's Future
PEYTO’S PAST | PEYTO’S FUTURE 180,000 Timing production growth to meet future $8.00 LNG capacity expansion, generates free 160,000 $7.00 cash flow to fund the capital program, pay 140,000 dividends and reduce debt. $6.00 120,000 $5.00 Price ($/GJ) WI BOE/D 100,000 $4.00 80,000 $3.00 60,000 $2.00 40,
Slide 22: Future | Cash Costs
PEYTO’S FUTURE | CASH COSTS Still a Leader in the Industry Total Cash Costs (excluding(1) Royalties and Taxes) Operating costs at our newly acquired facilities are high, but $2.50 Peyto expects to lower unit operating costs by 10% from (Q1 levels) by end of 2024 with higher $2.00 utilization and ope
Slide 23: Marketing
PEYTO’S MARKETING Gas Hedging and Diversification Strategy Moderates Volatility Gas Price(1) ($/mcf) AECO $10.00 5% $9.00 $8.00 Kineticor Edmonton Empress $7.00 Power Calgary Emerson Parkway $6.00 13% 13% 17% $5.00 20% $4.00 $3.00 $2.00 $1.00 Ventura Chicago $- 2007 2004 2005 2006 2008 2009 2010 201
Slide 24: Gas Marketing
GAS MARKETING Future Market Diversification and Gas Price Protection Peyto has used financial basis deals between AECO and other hubs to gain market diversification and allow us to 436 MMcf/d fixed at $4.09/Mcf in H2 2024 hedge at various markets. This reduces market risk and 455 MMcf/d fixed at $4.
Slide 25: Gas Marketing | Fixed Price Gas Contracts
GAS MARKETING Peyto uses a dollar cost averaging approach to Fixed Price Gas Contracts smooth out the volatility in future prices by forward selling smaller blocks of production. Fixed price swaps give price certainty. Prices do not include deductions for Fuel (~2%). USD contracts converted at 1.38
Slide 26: Gas Marketing | Floating Price Gas Contracts
GAS MARKETING Peyto has exposure to natural gas price upside with its diversification to premium markets in Floating Price Gas Contracts California, Ontario and the US mid-west and its Cascade Power contract. • Henry Hub, Malin, Dawn and Chicago volumes are sold using physical basis deals from AECO
Slide 27: NGL Marketing
NGL MARKETING Peyto uses swaps and costless collars to secure Fixed Price Contracts liquids revenue as well. USD contracts converted at 1.38 CAD/USD 27
Slide 28: Diversification | Power
DIVERSIFICATION| POWER Cascade Gas Supply Agreement Peyto gas market diversification includes exposure to Alberta power pool prices NGTL Mainline ✓ A 15-year Gas Supply Agreement, which came into effect on August 31st, 2024, to directly supply ~52 MMcf/d to Kineticor’s Cascade Power Project, a 900MW
Slide 29: Gas Diversification | LNG Opportunity
GAS DIVERSIFICATION| LNG OPPORTUNITY Peyto is proud to participate in the Rockies LNG Consortium Our Partners whose goal is to support the construction of another LNG Rockies LNG is a partnership of Canadian natural gas producers working together to project off the Westcoast of BC to supply the Worl
Slide 30: Peyto's Debt
PEYTO’S DEBT In June 2024, Peyto extended its Revolving Credit Facility and Amortizing Term Loan to October 13, 2027, and October 13, 2026, respectively. Peyto plans to reduce debt over the next 3 years targeting leverage under 1.0 Debt/EBITDA(2). Net Debt(1) of $1.36 billion at September Date Issue
Slide 31: Tax Pools
PEYTO’S TAX POOLS $1.1B $1,800 $1,600 $1,400 $1,200 $1,000 Federal Tax Pools $800 Q4/23 Millions $600 $8.4B $400 $200 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 CEC UCC (25%) CEE (100%) CDE (30%) COGPE (10%) Tax Los
Slide 32: Advisories
ADVISORIES Forward Looking Statements This presentation contains forward-looking information (forward-looking statements). Words such as "guidance", "may", "can", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "aim", "seek", "propose", "contemplate", "estimate", "focu
Slide 33: Development Plan
Development Plan The Company has presented herein a three-year illustrative development plan that provides for developing both the acquired assets and Peyto's current assets. The development plan is based on a number of assumptions including, without limitation: the required reinvestment rates to ma
Slide 34: Oil and Gas Metrics
Oil and Gas Metrics Peyto has used a number of oil and gas metrics herein which do not have standardized meanings and therefore may be calculated differently from the metrics presented by other oil and gas companies. Such metrics include "DCET", "EUR", "payout", "Before tax IRR" and "NPV @ 10%". DCE
Slide 35: Netback and Non-GAAP Measures
Netback is a non-GAAP measure that represents the profit margin associated with the production and sale of petroleum and natural gas. Peyto computes "field netback per Mcfe" as commodity sales from production, plus third-party sales net of purchases, if any, plus other income, less royalties, operat
Slide 36: History
PEYTO’S HISTORY The Ensign #401 rig has been drilling for Peyto since November 2009. 36
Slide 37: History | Per Share Growth
PEYTO’S HISTORY| PER SHARE GROWTH Over time, the Peyto model is designed to deliver a superior total return with per share growth in value, income and assets. Production/share Reserves/share 1 FFO/share 2 2P NPV5/debt adj. share 3 (MMcfe/y/mm sh) (2P Bcfe/mm sh) ($/sh) ($/sh) 1363 1391 $75.88 $4.85
Slide 38: History | Shareholder Returns
PEYTO’S HISTORY| SHAREHOLDER RETURNS $70.00 180,000 160,000 $60.00 Peyto has a 25-year history of growing value, income and assets while delivering strong returns to 140,000 $50.00 shareholders Sept-30-2024 $15.40/sh 120,000 $40.00 Future Prospects 100,000 $/share boe/d Enterprise $30.00 Value 80,00
Slide 39: History | Cost Control
PEYTO’S HISTORY| COST CONTROL Peyto has been successfully controlling supply costs to preserve margin >30% on average during last 10 years. $/mcfe 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 PDP FD&A(1) $2.25 $1.64 $1.44 $1.36 $1.18 $1.55 $1.06 $0.97 $1.41 $1.21(3) Cash Costs(1) $1.08 $0.81 $0
Slide 40: History | Profitable Reserves Growth
PEYTO’S HISTORY| PROFITABLE RESERVES GROWTH Annual Reserves Per Share Reserve Life Index (1) (by Category) 8.00 (Reserves/ Q4 Annualized Production) Reserves per Share (boe/sh) 7.00 6.73 30 35 6.00 Reserve Life Index 30 5.00 25 4.00 20 3.00 15 10 2.00 10 1.00 5 0 - 2001 2003 2005 2007 2009 2011 2013
Slide 41: History | Reserve Growth
PEYTO’S HISTORY| RESERVE GROWTH Over the past 25 years, Peyto has discovered 10.5 TCFe of natural gas reserves. 12,000 10,000 2,837 10.5 (BCFe) 8,000 6,000 4,000 26% CAGR 2,322 2,661 10,511 TCFe of Discovered Reserves 2,000 2,691 0 2004 2018 1998 1999 2000 2001 2002 2003 2005 2006 2007 2008 2009 201
Slide 42: History | Land Growth
PEYTO’S HISTORY| LAND GROWTH Peyto continues to expand its Alberta Deep Basin footprint with additional drilling inventory. Peyto Lands 1.1 2,000 1,800 1,600 Million Net Acres 1,400 1,200 Net Sections 1,747 1,000 800 600 Net Peyto Sections 400 200 - 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
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