Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Investor Presentation (August 2020)
55 slides from Peyto Exploration & Development's investor presentation, August 2020
Slide 1: Peyto Corporate Presentation August 2020
www.Peyto.com August 2020
Slide 2: Advisory Regarding Forward-Looking Statements
Advisory Regarding Forward-Looking Statements PEYTO Exploration & Development Corp. 2 9/1/2020
Slide 3: Who We Are
PEY.TO Who We Are PEYTO Exploration & Development Corp. N Pure Play Alberta Deep Basin - ∼405 mmcf/d Gas, 11,000 bbl/d NGLs N Returns Focused Strategy - Avg ROCE 15%, ROE 28% over last 21 yrs, among highest in the industry N Long Reserve Life Asset - YE 2019: 9 yrs PDP, 29 yrs 2P, sweet gas, no mobi
Slide 4: COVID19 Preparedness
PEY.TO COVID19 Preparedness PEYTO Exploration & Development Corp. 1. Office Preparations • All staff set up with remote desktop working capabilities (multiple communication tools: email, text, phone, conference, Webex, etc) • Small, tight knit office staff with 51 full time employees, 12 consultants
Slide 5: Year Growth Per Share
PEY.TO 20 Year Growth Per Share PEYTO Exploration & Development Corp. Production/share Reserves/share FFO/share 2P (NPV5-debt)/share ($/sh) (MMcfe/d/mm sh) (2P Bcfe/mm sh) ($/sh) 1363 29.229.6 $4.33 1289 $40$40 $38 1222 26.3 $36 $38 $38 $37 1179 $3.59 $35 $36 1087 24.2 $3.48 $34 $34 $34 1073 22.5 $3
Slide 6: Total Shareholder Return Model
PEY.TO Total Shareholder Return Model PEYTO Exploration & Development Corp. Future Prospects Past Profits 6 BOE factor - 6 mcf = 1 bbl of oil equivalent 9/1/2020
Slide 7: They Want More Energy – We Won't Change That
The Big Picture They Want More Energy – We Won’t Change That PEYTO Exploration & Development Corp. 7 Source: BP Energy Outlook 2019 9/1/2020
Slide 8: The World Needs More Canadian Energy
The Big Picture The World Needs More Canadian Energy PEYTO Exploration & Development Corp. Environmental Regulations Worker Safety Russia Saudi Iran Iraq Human Rights Ethical Standards Gender Equality Indigenous Consultation Russia Qatar China Iran CANADA 8 Source: Modern Resources 9/1
Slide 9: Continuously Improving – Peyto Leading the Way
The Big Picture Continuously Improving – Peyto Leading the Way PEYTO Exploration & Development Corp. Emission Intensity by Source Type for Canadian Oil and Gas (1990, 2005, 2016) 140 140 121.4 Emmission Intensity per Barrel (kg 120 105.4 120 100 88.4 83.4 90.1 100 74.7 79.5 78.4 80 80 CO2eq/bbl) 56.
Slide 10: Continuously Improving Environmental Performance
The Big Picture Continuously Improving Environmental Performance PEYTO Exploration & Development Corp. Peyto GHG Emissions Intensity KgCO2eq/boe (direct and 29.0 26.0 24.7 23.9 22.3 21.1 20.9 indirect) in GHG Emissions Intensity* 2013 2014 2015 2016 2017 2018 2019 Peyto Flaring and Venting of Methan
Slide 11: So What Does All This Mean?
The Big Picture So What Does All This Mean? PEYTO Exploration & Development Corp. Canada has energy abundance. Canada has a moral obligation to provide the rest of the world with our clean, responsibly developed energy to improve lives and preserve the environment. Peyto can continue to be an
Slide 12: The Peyto Strategy
The Peyto Strategy PEYTO Exploration & Development Corp. 12 9/1/2020
Slide 13: What We Continue To Believe
Peyto’s Strategy What We Continue To Believe PEYTO Exploration & Development Corp. N “Nature’s gas is the fuel for the future.” N “Our gas and NGLs have some of the lowest emissions of any hydrocarbons produced in Canada.” N “Our business focus is to maximize the return on invested capital – your ca
Slide 14: Growing North American Gas Market
Peyto’s Strategy Growing North American Gas Market PEYTO Exploration & Development Corp. North America Gas Consumption (BCF/d) (BP Statistical Review of World Energy 2019) 140 140 120 120 100 100 32% growth 80 2008-2018 80 60 99 BCF/d 60 75 BCF/d 69 BCF/d 40 55 BFD/d 40 20 20 0 0 1970 1972 1974 1976
Slide 15: Canadian Gas Egress Is Expanding
Peyto’s Strategy Canadian Gas Egress Is Expanding PEYTO Exploration & Development Corp. Dry Natural Gas Production - Canada 25 (EIA) $9 LNG Export $8 2.0 Bcf/d 21 $7 LNG Canada 20 $6 NGTL Expansion $5+40% BCF/D 19 $4 15 $3 $2 $1 3.2 Bcf/d NGTL Expansion – 2019 to 2021 1.9 Bcf/d LNG Canada (trains 1&
Slide 16: Fund Growth From Cashflow
The Peyto Strategy Fund Growth From Cashflow PEYTO Exploration & Development Corp. $7,000 6,258 120,000 $6,000 100,000 $5,000 6,165 80,000 Peyto FFO $4,000 60,000 CTD Q4/19 $3,000 40,000 $2,000 $1,000 20,000 $0 Q4 1999 - Q4 2000 Q4 2001 Q4 2002 Q4 2003 Q4 2004 Q4 2005 Q4 2006 Q4 2007 Q4 2008 Q4 2009
Slide 17: High Operating Margins
The Peyto Strategy High Operating Margins PEYTO Exploration & Development Corp. 90% $9.00 80% $8.00 70% $7.00 60% $6.00 50% $5.00 40% $4.00 30% $3.00 20% $2.00 10% $1.00 Peyto Operating Margin 0% $0.00 20 Year Avg. FFO/Revenue Intermediate Producer Avg FFO/Rev (Peter's &Co.) AECO Daily Gas Price ($/
Slide 18: Invest For Profit Not Growth
The Peyto Strategy Invest For Profit Not Growth PEYTO Exploration & Development Corp. $800 $700 $600 $500 Peyto Capital $400 CTD Q4/19 $300 $200 $100 $- 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 CAPEX ($MM) Earnings ($'000) Peyto Earnings CTD Q4/19 18 9/1/2020
Slide 19: Dividend Sustainability
The Peyto Strategy Dividend Sustainability PEYTO Exploration & Development Corp. $3,000 $2,500 $2,000 Peyto Ctd. Earnings (MM$) $1,500 Q4/19 $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 20: Cycle of Value Creation
The Peyto Strategy 21 Year Cycle of Value Creation PEYTO Exploration & Development Corp. $6.2B Capital Investment 55% retained FFO YE 2019 27% equity 18% debt 2P NPV5 $2.59B $8.5B Value Earnings $6.818B $2.45B in div/dist $0.38B to employees $6.82B remaining $2.45B asset value Shareholder ($1.12B) d
Slide 21: Profitable Business
Peyto’s Profitable Business PEYTO Exploration & Development Corp. 21 9/1/2020
Slide 22: Build it for less than we sell it
Peyto’s Profitable Business “Build it for less than we sell it” PEYTO Exploration & Development Corp. 2019 PEY 2014 PEY 2015 PEY 2016 PEY 2017 PEY 2018 PEY 2019 Land/Acq/Disp Seismic Drilling PDP FD&A $/mcfe ($2.25) ($1.64) ($1.44) ($1.36) ($1.18) ($1.55) Compl. Wellsite Facilities Cash Costs $206MM
Slide 23: 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 35% Avg. $6 "Profit“ CTD Bonus $4 PDP FD&A 10% 56% $2 Cash Costs 34% $- Total Cash Costs per mcfe includes – Royalties, Op Cost
Slide 24: Peyto's Moat is a Low-Cost Advantage
Peyto’s Profitable Business Peyto’s “Moat” is a Low-Cost Advantage PEYTO Exploration & Development Corp. $2.60 $4.61 ($0.16) $1.00 24 BOE factor - 6 mcf = 1 bbl of oil equivalent Data from Peter’s & Co. 9/1/2020 Gas producers include: AAV,PNE,CKE,CQE,TOU,SRX,BIR,BXE,CR,ARX,BNP,POU,DEE,KEL,ECA,VII
Slide 25: Unique Assets
Peyto’s Unique Assets PEYTO Exploration & Development Corp.
Slide 26: Geographically Focused Core Areas
Peyto’s Assets Geographically Focused Core Areas PEYTO Exploration & Development Corp. • 563,500 net acres • 9 operated gas plants Cutbank ---(845 mmcf/d net capacity) • 2,000+ km pipelines • 1,250+ producing zones Kakwa • 80,000 boe/d Chicken Leland Pine Creek Of Production: Greater Processed by Pe
Slide 27: 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 27 9/1/2020
Slide 28: 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* 28 *NGL recoveries can increase by 15+ bbl/mmcf with deeper cutting processing facilities 9/1/
Slide 29: 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 Unbooked3 Wells Wells Booked2 (2) 2 440 163 430(12) 419 5 1 2 4 1 2(2) 23 90 178 183(2) 75 7 74 40 17 113 169 218 2 39 15 388 363 154 4 40 55 38 1
Slide 30: Deep Basin Lands Go A Long Way
Peyto’s Assets Deep Basin Lands Go A Long Way PEYTO Exploration & Development Corp. 1,000 Peyto Lands 900 800 700 Net Sections 600 500 Net Peyto Sections 400 300 200 100 - Net Sections of Cardium, Dunvegan, Notikewin, Falher, Wilrich, Bluesky, Cadomin, Montney & Duvernay Net Sections – Developed Are
Slide 31: 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 32: Valuable Midstream Processing Capacity
Peyto’s Assets Valuable Midstream Processing Capacity PEYTO Exploration & Development Corp. Peyto Processing Capacity is currently limited to 715 MMCF/d* 700,000 2P Reserves 815 MMBoes Go Forward Processing Capacity Forecast Sales Gas Rate (mcf/d) 600,000 NPV5 $6.8B (Insite) @ $0.50/mcf 500,000 (ava
Slide 33: "Big Sunny" Natural Gas Storage Scheme
Peyto’s Assets “Big Sunny” Natural Gas Storage Scheme PEYTO Exploration & Development Corp. R.25 R.24 R.23 R.22 R.21 R.20 R.19 R.18 Nosehill Creek North Meter Station 139 mmcfd Capacity T.56 T.56 Obed North Oldman Meter Station 227 mmcfd Capacity North Nosehill Edson Viking D Gas Storage Unit Mayber
Slide 34: Unique Infrastructure Location
Peyto’s Assets Unique Infrastructure Location PEYTO Exploration & Development Corp. Alliance Oldman & Oldman North Nosehill Wildhay Big Sunny Galloway Swanson 240 kV Power Lines Highway 16 Cascade Power Project Greater Sundance Area ISD 2022 Location Advantages: • 900 MW Combined-Cycle • Nova/Allian
Slide 35: First Cardium Hz's Have Reached Terminal Decline
Peyto’s Assets First 2 Cardium Hz’s Have Reached Terminal Decline PEYTO Exploration & Development Corp. 6 Years! There is nothing sexy about a 200 mcf/d gas well, except when it doesn’t decline. Then it becomes an incredible annuity assuming you can keep the costs down (which Peyto can!). 35 See how
Slide 36: Long Reserve Life Asset
Peyto’s Assets Long Reserve Life Asset PEYTO Exploration & Development Corp. RESERVE LIFE INDEX 30 YEARS AT Q4 PRODUCTION 25 28.8 20 15 18.7 10 Years PDP 5 9.4 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 PDP PU PA 36 http://www.peyto.com/Files/New
Slide 37: Organic Reserves Growth
Peyto’s Assets Organic Reserves Growth PEYTO Exploration & Development Corp. 8,000 7,000 6,000 5,000 17% CAGR 4,000 3,000 1,600 2,000 1,000 1,859 TCFe of Discovered Reserves 0 Cum Production BCFE Proved Developed Producing Proved Undeveloped Probable Additional 37 http://www.peyto.com/Files/News/202
Slide 38: What Shareholders Currently Own
Peyto’s Assets What Shareholders Currently Own PEYTO Exploration & Development Corp. Tangible Infrastructure (Replacement Value as at Dec 31, 2019) 80 Compressors ($3.25MM each) $259 MM 17 Inlets ($1.8MM each) $31 MM 20 Refrigeration plants ($5.4MM each) $108 MM 12 Power Generation Sets ($1.6M each)
Slide 39: Incredible Returns
Peyto’s Incredible Returns PEYTO Exploration & Development Corp. 39 9/1/2020
Slide 40: Template Economics At Strip
Peyto’s Returns Template Economics At Strip PEYTO Exploration & Development Corp. Gross IP3 Gross EUR Gross DCET Type Entity (boe/d) (mboe) % Liquids (M$) IRR (%) 2020 Brazeau Cardium 790 600 21% $3,560 50% 2020 Brazeau Notikewin 900 940 15% $5,010 43% Majority of 2019 Prgm 2020 Sundance Notikewin 7
Slide 41: 2019 Post-Mortem Returns Analysis
Peyto’s Returns 20th 1998-2018 2019 Post-Mortem Returns Analysis 41 Full cycle IRR is determined using actual capital spent on each well, including a $825k provision for land, seismic, and facilities in order to total to the $206MM 2019 total capital expenditures. 9/1/2020 Economics are run using ac
Slide 42: 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 21 yr Avg ROE to 2019 30% $6 20% $4 10% $2 0% $0 Return On Capital Employed (%) Return On Equity (%) Earnings/share Realized Price ($/mcfe) 21 yr Avg ROCE to 2019 Return on Equity (RO
Slide 43: Peyto's Future
Peyto’s Future PEYTO Exploration & Development Corp.
Slide 44: 2020 Outlook
Peyto’s Future 2020 Outlook PEYTO Exploration & Development Corp. Drill ~65Hz Wells (Liquids Rich Natural Gas) vs 50 in 2019 Market 3rd Party Capacity Offer Excess Capacity to Other Operators Increase Opportunities Undeveloped Land Base Diversify Markets Evaluate New Pipe Options 2020 Capital Pr
Slide 45: Gas Price Stability Before Returning to Growth
Peyto’s Future Gas Price Stability Before Returning to Growth PEYTO Exploration & Development Corp. 14 bbl/mmcf 14 bbl/mmcf 17 bbl/mmcf 20 bbl/mmcf 26 bbl/mmcf 27 bbl/mmcf 25 bbl/mmcf 25 bbl/mmcf $5 $4.19 $17,500/boe/d $4 100,000 $17,600/boe/d $12,000/boe/d $17,300/boe/d $16,800/boe/d $11,600/boe/d
Slide 46: Lower Costs and Increase Liquids to Preserve Profit
Peyto’s Future Lower Costs and Increase Liquids to Preserve Profit PEYTO Exploration & Development Corp. PEY 2017 PEY 2018 PEY 2019 PEY Goals 86% Gas @$1.54/GJ*1.15 14% NGLs@$45/bbl=(60%of $75oil) 84% Gas @$2.00/GJ*1.15 Revenue ~$2.61/mcfe $/mcfe $3.38 $3.27 $2.78 ~$0.16/mcfe hedge ~$2.77/mcfe $2.75
Slide 47: Future Market Diversification and Gas Price Protection
Gas Marketing Future Market Diversification and Gas Price Protection PEYTO Exploration & Development Corp. 47 *Average Heating Value of approximately 1.15 GJ/mcf for Peyto’s gas 9/1/2020
Slide 48: Fixed Price Swaps For Gas and Liquids
Gas Marketing Fixed Price Swaps For Gas and Liquids PEYTO Exploration & Development Corp. Peyto Marketing Summary 1.15 Heating Value GJ/mcf AECO 7A Fixed Price Swaps (CAD$/GJ) 1.330 cad/usd TOTAL TOTAL TOTAL TOTAL TOTAL Q4 2019 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 2020 Q1 2021 Q2 2021 Q3 2021 Q4 202
Slide 49: Successful Hedging Strategy Smoothes Volatility
Gas Marketing Successful Hedging Strategy Smoothes Volatility PEYTO Exploration & Development Corp. Gas Price ($/mcf) $10.00 $10.00 $9.00 Peyto has beat the AECO $9.00 $8.00 monthly price in 12 of the $8.00 last 14 years using a $7.00 methodical hedging strategy. $7.00 $6.00 $6.00 $5.00 $5.00 $4.00
Slide 50: Balanced Revenue Stream
Gas Marketing Balanced Revenue Stream PEYTO Exploration & Development Corp. 2019 ACTUALS Condy & C5+ Gas - AECO - Fixed Peyto Quarterly Revenue Breakdown (5a/7a) 11% 5% $300,000 60% $250,000 50% $200,000 40% Gas - AECO Condy & C5+ Fixed M$ $150,000 30% 22% 35% $100,000 20% $50,000 10% Gas- Henry Gas
Slide 51: LNG Consortium and Export Potential
Gas Marketing LNG Consortium and Export Potential PEYTO Exploration & Development Corp. 51 9/1/2020
Slide 52: Appendix
Appendix PEYTO Exploration & Development Corp. N Quarterly Track Record N Tax Pools N Leverage N Reserves Growth 52 9/1/2020
Slide 53: Quarterly Track Record
Quarterly Track Record PEYTO Exploration & Development Corp. 2020 2019 2018 2017 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Operations Production Oil & NGLs (bbl/d) 11,585 10,922 11,221 10,650 11,110 10,703 9,692 10,273 9,209 9,243 10,043 9,337 10,479 8,958 8,319 Natural gas (mcf/d) 401,5
Slide 54: Peyto's Tax Pools
Organic Business Model Peyto’s Tax Pools PEYTO Exploration & Development Corp. $1,800 $1,600 $1,400 $1,200 $1,000 $800 Federal Tax Pools Millions $600 $400 Q4/19 $200 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 CEC UCC (25%) CEE (100%)
Slide 55: Blend of fixed term and revolving debt
Peyto’s Debt Blend of fixed term and revolving debt PEYTO Exploration & Development Corp. $50 4.88% End of $0.95B Revolver Oct 22 $65 4.26% $100 3.70% $100 3.95% $100 4.39% 55 Interest rates are in CND$ 9/1/2020
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