Advantage Energy Ltd · TSX:AAV
Advantage Energy — Investor Presentation (July 2024)
39 slides from Advantage Energy's investor presentation, July 2024
Slide 1: A Progressive Montney Producer for the New Energy Market
A Progressive Montney Producer for the New Energy Market Investor Presentation July 2024
Slide 2: Advantage Corporate Highlights
Advantage Corporate Highlights(1) Market Overview AB AAV Lands Montney and Charlie Lake Producer GORDONDALE AAV Facilities Market Capitalization: $1.7 b Decades of top-tier inventory Enterprise Value: $2.3 b Gas processing capacity of 500 mmcf/d Net Debt(2): $0.6 b(3) (Advantage only) PROGRESS risin
Slide 3: Corporate Strategy – Building on Our Track Record
Corporate Strategy – Building on Our Track Record Performance Evolving Competitively ~10% compound annual production Entropy Inc. - growth (long-term) Modular Carbon Capture and StorageTM Prolific, predictable well productivity Increasing liquids exposure Bought back ~20% of shares and Technical enh
Slide 4: Three-Year Strategic Plan Augmented by Strategic Acquisition
Three-Year Strategic Plan Augmented by Strategic Acquisition(1) Net Capital Expenditures (2)(3) Production Range (3) Includes $20 million reduction to gas $350 Standalone drilling program 85,000 Standalone Includes Pro-forma Pro-forma reduced gas $300 Range Range drilling 80,000 program $250 75,000
Slide 5: Acquisition Highlights
Acquisition Highlights(1) Inga Cash consideration of $445 million, before closing adjustments GORDONDALE Attachie 14,100 boe/d of production (6,685 bbls/d oil, 810 bbls/d NGLs, 39.7 mmcf/d natural gas) Septimus 163 net sections of Charlie Lake rights in the premium Charlie Lake GLACIER oil producing
Slide 6: Acquisition Highlights | Prudent, Cost-Efficient Financing Mix
Acquisition Highlights | Prudent, Cost-Efficient Financing Mix $445 m $65 m equity total purchase $143.75 m issuance Combination of equity, debentures, and bank debt price(1) convertible maintains balance sheet strength while providing debenture issuance meaningful shareholder accretion Upsized cr
Slide 7: Acquisition Highlights | Higher AFF per Share
Acquisition Highlights | Higher AFF per Share(1)(2) Maximizing AFF per share growth while improving per-unit profitability and reducing payout ratios AFF per Share Accretion (1)(2) Higher Operating Netbacks (1)(2) Lower Payout Ratios (1)(2) 30% 25% 100% Standalone Pro-forma 20% 75% 20% 15% 50% 10% 1
Slide 8: Acquisition Highlights | Higher Free Cash Flow per Share
Acquisition Highlights | Higher Free Cash Flow (“FCF”) per Share(1)(2) A substantially higher and more resilient free cash flow profile (1)(2) (1)(2) (1)(2) Higher Absolute FCF Higher FCF per Share FCF per Share Accretion 200 1.25 200% Standalone Standalone Pro-forma 1.00 Pro-forma 150 150% 0.75 100
Slide 9: Acquisition Highlights | FCF Driving Debt Reduction, Reverting to Buyback Focus in 2025
Acquisition Highlights | FCF Driving Debt Reduction, Reverting to Buyback Focus in 2025 Substantial production volumes have been hedged with fixed-price swaps to reduce financial risk Additional de-leveraging opportunities will be pursued including non-core asset dispositions Net Debt (1)(2) Net Deb
Slide 10: Acquisition Highlights | Higher Production per Share
Acquisition Highlights | Higher Production per Share Delivering more production per share - weighted toward higher-value liquids - with a more robust overall growth profile Production per Share Accretion (1) Liquids per Share Accretion(1) Production Growth (1) 15% 150% 25% Standalone 20% Pro-forma 1
Slide 11: Acquisition Highlights | Premium Charlie Lake Asset in Heart of the Fairway
Acquisition Highlights | Premium Charlie Lake Asset in Heart of the Fairway Acquiring 163 net sections of Charlie Lake rights in the premium Charlie Lake oil producing fairway Gordondale 14-10-80-9W6 IP30 1,030 bbls/d Regional delineation strategy has derisked multiple horizons including recent 4-18
Slide 12: Acquisition Highlights | Regional Infrastructure Reduces Future Capital
Acquisition Highlights | Regional Infrastructure Reduces Future Capital 650 Raw Gas Processing Capacity (mmcf/d) Acquired Batteries NRM Gordondale Plant 600 550 500 CNRL 01-01 Progress Plant 450 400 AAV Glacier Gas Plant 350 AAV Progress Gas Plant (under construction) 300 Jul-24 Oct-24 J
Slide 13: Acquisition Highlights | Synergies to Drive Lower Capital and Operating Costs
Acquisition Highlights | Synergies to Drive Lower Capital and Operating Costs(1) Capital spending reductions in 2026/27 $100 MM Indefinite deferral of Progress Phase 2 expansion Capital spending reductions through year-end 2025 $16 MM Elimination of redundant infrastructure investments Incre
Slide 14: Acquisition Highlights | Shifting From Delineation to Development
Acquisition Highlights | Shifting From Delineation to Development Drilling to date has focused on resource delineation and field-wide development with a wide distribution of well results Higher productivity being realized by offsetting peers focused on development Advantage will focus on high-gradin
Slide 15: Compelling Economics Across Multiple Assets
Compelling Economics Across Multiple Assets AAV Tier 1 Half Cycle Production Generic Type Wells3 Type Curve4 Generic IRR1,4 Generic Payout1,4 Generic Type Well Capital Liquids Oil & C5+ (%) (%) Legend (%) (months) ($MM)3 Glacier D1 Gas 89% 14 $6.8 2% 1% Glacier D4 Gas 90% 13 $6.8 6% 3% mcf/day Glaci
Slide 16: Advantage Montney Assets – Multizone Oil, Liquids and Gas Throughout
Advantage Montney Assets – Multizone Oil, Liquids and Gas Throughout Glacier Valhalla Progress Wembley Conroy, BC Doig Upper Montney D4 Middle Montney 300m D3 D2 D1 2024 Targets Lower Advantage Operated HZ Montney Belloy Offset Operator HZ 16
Slide 17: Glacier Core: World-Class Free Cash Flow Engine
Glacier Core: World-Class Free Cash Flow(1) Engine Glacier Production Forecast2 Net Capital Expenditures1,4 & FCF1 Free Cash Actuals Growth Net Operating Income1,2 Flow1 Net Capital Expenditures [MM$]1,2 Base Cumulative Free Cash Flow [MM$]1,2 Engine Production boe/d3 $230MM+ 02-32: On prod Q2/24 08
Slide 18: Wembley/Pipestone: Premium Oil-Weighted Asset With Room to Run
Wembley/Pipestone: Premium Oil-Weighted Asset With Room to Run Wembley Production Forecast2 Net Capital Expenditures1 & FCF1 Actuals Net Operating Income1,2 Growth Net Capital Expenditures [MM$]1,2 Base Cumulative Free Cash Flow [MM$]1,2 $60MM+ Production boe/d3 04-22: On production Q3/24 2023 2024
Slide 19: Progress/Valhalla: Integrated, Prolific Liquids-Rich Assets
Progress/Valhalla: Integrated, Prolific Liquids-Rich Assets Progress/Valhalla Production Forecast2 Net Capital Expenditures1,4 & FCF1 Actuals Net Operating Income1,2 2025 Gas Plant AAV Pipelines Growth Net Capital Expenditures [MM$]1,2 Base Cumulative Free Cash Flow [MM$]1,2 Sets Stage For Locations
Slide 20: Charlie Lake: Shifting From Delineation to Development
Charlie Lake: Shifting From Delineation to Development Charlie Lake Production Forecast2 Net Capital Expenditures1,4 & FCF1 Actuals Net Operating Income1,2 AAV Pipelines Growth Net Capital Expenditures [MM$]1,2 Base Cumulative Free Cash Flow [MM$]1,2 24/25 locations Production boe/d3 Charlie Lake We
Slide 21: Since 2020 - All Wells Have Ranged From 2 to 14 Months Payout
Since 2020 - All Wells Have Ranged From 2 to 14 Months Payout1 2020-2022 Well Payout 1 Performance 2H 2020 average 1x payout: 8 mo 2021 average 2x payout: 19 mo 1x payout: 6 mo 2x payout: 11 mo 2022 average 40 1x payout: 7 mo 30 20 10 0 25 20 15 10 5 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Slide 22: Advantage Montney Gas Wells Dominated 2023 Alberta Results
Advantage Montney Gas Wells Dominated 2023 Alberta Results Calendar-Day Natural Gas Rate (Mcf/d) IP30 Natural Gas Rate (Mcf/d) IP30/100m (mcf/d/100m) 20,000 IP90 Natural Gas Rate (Mcf/d) 800 18,000 IP30/m (mcf/d/100m) 700 16,000 600 14,000 500 12,000 10,000 400 8,000 300 6,000 200 4,000 100 2,000 0
Slide 23: Deep Inventory of Gas, NGLs and Oil
Deep Inventory of Gas, NGLs and Oil Deep Inventory (1)(2) Tier 1 Inventory – 20 Years | Booked Inventory – 10 Years | Unbooked Inventory - ~50 Years CHARLIE LAKE 2024 Budget Drill Count GLACIER PROGRESS VALHALLA Tier 1 Inventory (3) Two miles from existing WEMBLEY Tier 1 production High quality
Slide 24: Tier Promotion – Glacier D1 Example
Tier Promotion – Glacier D1 Example 2020 D1 Inventory Map 2024 D1 Inventory Map West Glacier Legacy Well: IP 30 1.4 mmcf/d 2020 Well: IP 30 9.5 mmcf/d East Glacier Legacy Well: IP 30 1.8 mmcf/d 2022 Well: IP 30 15.4 mmcf/d South Glacier Legacy Well: IP 30 3.3 mmcf/d 2024 Well: IP 30 16.9 mmcf/d 2024
Slide 25: Well Execution Driving Increased Tier 1 Inventory
Well Execution Driving Increased Tier 1 Inventory Glacier Tier 1 Inventory Valhalla Tier 1 Inventory Wembley Tier 1 Inventory 47% Inventory Growth 26% Inventory Growth 69% Inventory Growth 2020 Inventory Tier 1 Wells Tier 1 2024 Total 2020 Inventory Tier 1 Wells Tier 1 2024 Total 2020 Inventory Tier
Slide 26: Natural Gas Market Exposure
Natural Gas Market Exposure Revenue Exposure by 27 mmcf/d of TC Q3-24 Q4-24 Q1-25 Q2-25 Q3-25 Q4-25 Market Mainline to Emerson until Nov-32 Fixed Price 21% 27% 29% 20% 21% 22% Aeco 16% 25% 31% 42% 39% 46% Empress 19% 17% 17% 20% 21% 10% Emerson 11% 10% 10% 6% 6% 6% Dawn 13% 7% 4% 4% 4% 7% U.S. Midwe
Slide 27: Commodity Hedging: De-risking our Net Debt Target
Commodity Hedging: De-risking our Net Debt Target Targeting hedging levels between 30% and 50% of production volumes (liquids + gas) (1) Current Natural Gas Hedging (MMcf/d) Current Crude Hedging (bbl/d) 160 40% 8,000 80% 140 35% 7,000 70% 120 30% 6,000 60% 100 25% 5,000 50% 80 20% 4,000 40% $76.62
Slide 28: Focused on Environmental, Safety and Stakeholder Stewardship
Focused on Environmental, Safety and Stakeholder Stewardship Industry Peers Emissions Intensity Environmental Highlights 6% increase in emissions 8% decrease in emission $2.2 million spent on abandonment and intensity(4) reclamation 1% increase in methane 14% reduction in sites under active manageme
Slide 29: Advisory
Advisory Forward-Looking Information and Statements The information in this presentation contains certain forward-looking information and forward-looking statements (collectively, "forward-looking statements") within the meaning of applicable securities laws relating to the Corporation's plans and o
Slide 30: Advisory (continued)
Advisory (continued) This presentation contains additional forward-looking statements which are estimates of Advantage's 2024 and 2025 net capital expenditures, annual production, net operating income, free cash flow, net debt to adjusted funds flow, AFF per share accretion, operating netbacks and p
Slide 31: Advisory (continued)
Advisory (continued) The future acquisition by the Corporation of the Corporation's shares pursuant to a share buyback program, if any, and the level thereof is uncertain. Any decision to implement a share buyback program or acquire shares of the Corporation will be subject to the discretion of the
Slide 32: Advisory (continued)
Advisory (continued) Oil and Gas Metrics This presentation contains a number of oil and gas and finance metrics, including "PDP reserve additions replaced", "PDP F&D", "recycle ratio", "payout", "internal rate of return (IRR)", "operating netback", "IP30", "IP30/m" "IP90" and "IP180" which do not ha
Slide 33: Advisory (continued)
Advisory (continued) Net Capital Expenditures Net capital expenditures include total capital expenditures related to property, plant and equipment, exploration and evaluation assets and intangible assets. Management considers this measure reflective of actual capital activity for the period as it ex
Slide 34: Advisory (continued)
Advisory (continued) Adjusted Funds Flow per Share Adjusted funds flow per share is derived by dividing adjusted funds flow by the basic weighted average shares outstanding of the Corporation. Management believes that adjusted funds flow per share provides investors an indicator of funds generated f
Slide 35: Advisory (continued)
Advisory (continued) Capital Management Measures Net Debt Net debt is a capital management financial measure that provides Management and users with a measure to assess the Corporation's liquidity. Net debt is not a standardized measure and therefore may not be comparable with the calculation of sim
Slide 36: Advisory (continued)
Advisory (continued) This presentation discloses drilling inventory in three categories: (i) proved locations; (ii) probable locations; and (iii) unbooked locations. Booked locations include both proved locations and probable locations that are derived from the Sproule Associates Limited (Glacier, P
Slide 37: Advisory (continued)
Advisory (continued) Advantage has presented certain type curves and well economics for its Glacier, Valhalla, Wembley and Charlie Lake areas. The type curves presented with respect to Glacier, Vahalla and Wembley are Management estimates based on Advantage's historical production, and with respect
Slide 38: Advisory (continued)
Advisory (continued) Abbreviations The following abbreviations used in this presentation have the meanings set forth below. b billion bbl barrel bbl/d barrel per day bbls/d barrels per day bbls/mmcf barrels per million cubic feet Bcf billion cubic feet boe barrels of oil equivalent of natural gas, o
Slide 39: Advantage Contact Information
Advantage Contact Information Investor Relations 1.866.393.0393 ir@advantageog.com www.advantageog.com TSX Listed Common shares: AAV 5% Debentures: AAV.DB Advantage Energy Ltd. Suite 2200, 440 – 2nd Avenue SW Calgary, Alberta T2P 5E9 Advantage Glacier Gas Plant Main: 403.718.8000 Facsimile: 403.718.