Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Investor Presentation (November 2021)
58 slides from Peyto Exploration & Development's investor presentation, November 2021
Slide 1: Slide 1
Slide 2: Advisory Regarding Forward-Looking Statements
Advisory Regarding Forward-Looking Statements PEYTO Exploration & Development Corp. This presentation presents certain non-GAAP measures to assist readers in understanding the Company's performance. These measures do not have any standardized meaning and therefore are unlikely to be comparable to si
Slide 3: New To Peyto? Who We Are
New To Peyto? Who We Are PEYTO Exploration & Development Corp. N 5th Largest Canadian Gas Producer > 600 MMcfe/d N 11th Largest Canadian Gas Processor 875 MMcf/d capacity N Pure Play Alberta Deep Basin Multizone stacked resource, 5 TCFe 2P reserves N Long Reserve Life Asset 9yr PDP, 27yr 2P, sweet g
Slide 4: PEY.TO Year Growth Per Share
PEY.TO 20 Year Growth Per Share PEYTO Exploration & Development Corp. Historical Per Share (or unit) and Shares (units) Outstanding numbers have been adjusted to reflect the May 27, 2005 2:1 stock split 4 BOE factor - 6 mcf = 1 bbl of oil equivalent 11/19/2021
Slide 5: Total Shareholder Return Model
PEY.TO Total Shareholder Return Model PEYTO Exploration & Development Corp. Organic growth for LNG exports? Future Prospects Past Profits 5 BOE factor - 6 mcf = 1 bbl of oil equivalent 11/19/2021
Slide 6: We Heat Your Homes
PEY.TO We Heat Your Homes PEYTO Exploration & Development Corp. Natural Gas X X Safe Reliable Affordable 6 https://www.efficiencyalberta.ca 11/19/2021 http://www12.Statcan.gc.ca
Slide 7: Environmental Leader
PEY.TO Environmental Leader PEYTO Exploration & Development Corp. Notes: Intensities are based on total subsector emissions and relevant production amounts. They represent overall averages, not facility intensities. *Calculated on a barrel of oil equivalent (boe) basis by converting production volum
Slide 8: Continuously Improving Emissions
PEY.TO Continuously Improving Emissions PEYTO Exploration & Development Corp. Peyto GHG Emissions Intensity 29.0 26.0 24.7 23.9 22.3 21.1 19.8 19.6 2013 2014 2015 2016 2017 2018 2019 2020 in GHG Emissions Intensity* KgCO2e/BOE (Scope 1,2,3) Peyto Flaring and Venting of Methane 9.3 8.3 8.2 8.1 7.0 5.
Slide 9: Less Impact on Land and Water
PEY.TO Less Impact on Land and Water PEYTO Exploration & Development Corp. Peyto Land Use Reduction 2.1 2.0 1.9 1.8 1.7 1.7 1.6 1.5 2013 2014 2015 2016 2017 2018 2019 2020 in Surface Land Use ha per well (cumulative… Freshwater Use and Flowback Recycling 100 0.08 74 0.07 0.07 80 bbls/BOE 0.05 0.05 6
Slide 10: The Peyto Strategy
The Peyto Strategy PEYTO Exploration & Development Corp. 10 11/19/2021
Slide 11: The Peyto's Strategy: What We Continue To Believe
The 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 – you
Slide 12: Growing North American Gas Market
The 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
Slide 13: Canadian Gas Egress Is Expanding
The 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 $7 LNG Canada 20 $6 NGTL Expansion $5+40% BCF/D $4 15 15.43 $3 $2 $1 3.2 Bcf/d NGTL Expansion – 2019 to 2022 1.9 Bcf/d LNG Canada (train
Slide 14: Fund Growth From Cashflow
Peyto FFO CTD Q4/20 CTD Q4/20 Peyto Capital Fund Growth From Cashflow The Peyto Strategy $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 Q4 1999 Q2 2000 Q4 2000 Q2 2001 Q4 2001 Q2 2002 Q4 2002 Q2 2003 Q4 2003 Q2 2004 Q4 2004 Q2 2005 Q4 2005 Q2 2006 Q4 2006 Q2 2007 Q4 2007 Q2 2008 Q4 2008 Q2 2009
Slide 15: Invest For Profit Not Growth
The Peyto Strategy Invest For Profit Not Growth PEYTO Exploration & Development Corp. $800 $700 $600 $500 $400 Peyto Capital $300 CTD Q4/20 $200 $100 $- 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 $(100) CAPEX ($MM) Earnings ($'000) Peyto Earnings CTD Q4/20 15 11/19/2021
Slide 16: Dividend Sustainability
The Peyto Strategy Dividend Sustainability PEYTO Exploration & Development Corp. $3,000 $2,500 $2,000 Peyto Ctd. Earnings (MM$) $1,500 Q4/20 $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 17: Year Cycle of Value Creation
The Peyto Strategy 22 Year Cycle of Value Creation PEYTO Exploration & Development Corp. $6.40B Capital Investment 55% retained FFO YE 2020 26% equity 18% debt 2P NPV5 $2.55B $8.65B Value Earnings $6.992B $2.46B in div/dist $0.38B to employees $6.99B remaining $2.46B asset value Shareholder ($1.18B)
Slide 18: Profitable Business
Peyto’s Profitable Business PEYTO Exploration & Development Corp. 18 11/19/2021
Slide 19: Build it for less than we sell it
Peyto’s Profitable Business “Build it for less than we sell it” PEYTO Exploration & Development Corp. 2014 2015 2016 2017 2018 2019 2020 2020 Land/Acq/Disp Seismic Drilling PDP FD&A $/mcfe ($2.25) ($1.64) ($1.44) ($1.36) ($1.18) ($1.55) ($1.06) Compl. Wellsite Facilities Cash Costs ($1.08) ($0.81) (
Slide 20: Lowering The Bar
Peyto’s Profitable Business Lowering The Bar PEYTO Exploration & Development Corp. AECO $10 Monthly $/GJ Peyto Realized Gas Price ($/mcfe) 35% Avg. $8 "Profit“ CTD Lowest realized price ever, but also lowest total supply cost ever $6 Bonus $4 PDP FD&A Supply cost down 45% since 2010 7% $2 48% Cash C
Slide 21: Peyto's Moat is a Low-Cost Advantage
Peyto’s Profitable Business Peyto’s “Moat” is a Low-Cost Advantage PEYTO Exploration & Development Corp. $2.30 $4.77 ($0.24) $1.36 21 BOE factor - 6 mcf = 1 bbl of oil equivalent Data from Peter’s & Co. 11/19/2021 Gas producers include: AAV,ARX,BIR,CR,KEL,NVA,PIPE,PMT,PNE,POU,SDE,SRX,TOU
Slide 22: High Operating Margins
Peyto’s Profitable Business 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 Peyto Operating Margin 10% $1.00 0% $0.00 Last 20 Year Avg. FFO/Revenue Intermediate Producer Avg FFO/Rev (Peter's &Co.) AECO Daily
Slide 23: Unique Assets
Peyto’s Unique Assets PEYTO Exploration & Development Corp.
Slide 24: Geographically Focused Core Areas
Peyto’s Assets Geographically Focused Core Areas PEYTO Exploration & Development Corp. • 597,338 net acres (Q321) • 10 operated gas plants - Cutbank --(875 mmcf/d net capacity) • 2,000+ km pipelines • 1,442+ producing zones Kakwa • ∼100,000 boe/d Chicken Leland Pine Creek Of Production: Greater Proc
Slide 25: Deep Basin Permeability Segregation
Peyto’s Assets PEYTO Deep Basin Permeability Segregation Exploration & Development Corp. FOOTHILLS STRUCTURES GAS AS ING INCRE BILITY EA PERM WATER TRANSITION ZONE WATER GAS ASE INCRE AREA OF GAS DEPTH MATURATION 25 11/19/2021
Slide 26: Multi Zone Stacked Sandstone Reservoirs
Peyto’s Assets Multi Zone Stacked Sandstone Reservoirs PEYTO Exploration & Development Corp. Up to per section* 26 *NGL recoveries can increase by 15+ bbl/mmcf with deeper cutting processing facilities 11/19/2021 Reserves are 2P recoverable in a section at 85% RF
Slide 27: Cecilia Acquisitions
Peyto’s Assets Cecilia Acquisitions $35MM – Effective Jan 1/21 PEYTO Exploration & Development Corp. • October Peak Rates: • Base: 2,900 boe/d Cecilia Gas Plant 12-34-56-22W5 Ownership: 100% WI • New: 10,100 boe/d (12 new wells Current Throughput: ∼15mmcf/d sales @ online, 3 reactivations) 5.6bbl/mm
Slide 28: #1 Horizontal Deep Basin Driller
Peyto’s Assets #1 Horizontal Deep Basin Driller PEYTO Exploration & Development Corp. Alberta Deep Basin Hz Spuds 1,200 Peyto spud it’s 1,000 th Hz w ell on Sept. 25, 2020 1,000 800 600 400 200 Peyto Deep Basin 0 Horizontal Wells (2009-Sept 2020) 28 11/19/2021
Slide 29: Large Hz MSF Inventory
Peyto’s Assets PEYTO Large Hz MSF Inventory Exploration & Development Corp. Done1 To Do Total Total Total Total Hz(Vt) Hz Locations Vertical Hz Locations Unbooked3 Wells Wells Booked2 2 (2) 440 200 459(9) 424 5 1 1 4 1 2 23 90 197 186 73 7 75 38 21 117 150 103 2 39 15 409 309 135 4 44 54 34 12 2 87
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 Net Peyto Sections 500 400 300 200 100 - Net Sections of Cardium, Dunvegan, Notikewin, Falher, Wilrich, Bluesky, Cadomin, Montney & Duvernay Net Sections – Developed Are
Slide 31: Increased Facility Ownership And Control
Peyto’s Assets Increased Facility Ownership And Control PEYTO Exploration & Development Corp. Cutbank Kakwa Cecilia Peyto Gas Plants Oldman (with Deep Cut) W & Oldman North Wildhay Nosehill YE 2020 WI 1 Oldman 125 mmcf/d 100% 2 Nosehill 125 mmcf/d 100% Galloway Swanson 3 Wildhay 90 mmcf/d 100% 4 Gal
Slide 32: 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 Cecilia Meter Station 139 mmcfd Capacity T.56 T.56 Obed North Oldman Meter Station 227 mmcfd Capacity North Nosehill Edson Viking D Gas Storage Uni
Slide 33: Unique Infrastructure Location
Peyto’s Assets Unique Infrastructure Location PEYTO Exploration & Development Corp. Alliance Cecilia 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 • Nov
Slide 34: Successful Reserves Conversion, Again
Peyto’s Assets Successful Reserves Conversion, Again PEYTO Exploration & Development Corp. Actual/ Booked Forecast Actual Reserve Total Booked/ Forecast Locations Forecast Outcome Cost per Actual Outcome Cost per Year Drills Total Cost per Converted Unit Unit Unit gross Capex* Capex* gross wells BCF
Slide 35: Long Producing Reserve Life Maintained
Peyto’s Assets Long Producing Reserve Life Maintained PEYTO Exploration & Development Corp. Peyto Reserve Life Index 35 27 Years at Q4 Production 30 25 20 18 15 10 9 5 Peyto PDP RLI 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 PDP TP P+PA 2020 PDP RLI 10 Yea
Slide 36: Alberta's Gas Developer
Peyto’s Assets Alberta’s Gas Developer PEYTO Exploration & Development Corp. 8,000 7,000 6,000 1,787 5,000 27% 15% CAGR 1,572 4,000 CAGR 7,041 3,000 1,647 2,000 1,000 2,034 TCFe of Discovered Reserves 0 Cum Production BCFE Proved Developed Producing Proved Undeveloped Probable Additional 36 http://w
Slide 37: What Shareholders Currently Own
Peyto’s Assets What Shareholders Currently Own PEYTO Exploration & Development Corp. Tangible Infrastructure (Replacement Value as at Dec 31, 2020) 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 38: Incredible Returns
Peyto’s Incredible Returns PEYTO Exploration & Development Corp. 38 11/19/2021
Slide 39: Production Performance by Vintage
Peyto’s Returns Production Performance by Vintage PEYTO Exploration & Development Corp. Year Over Year Performance - All Cardium Year Over Year Performance - All Wilrich 5,000 7,000 Gross Recombined Gas Rate (mcf/d) Gross Recombined Gas Rate (mcf/d) 6,000 4,000 +60 bbl/mmcf NGLs 5,000 +14 bbl/mmcf N
Slide 40: Updated Template Economics At Strip
Peyto’s Returns Updated Template Economics At Strip PEYTO Exploration & Development Corp. Brazeau / Chambers Greater Sundance Type Curve Notikewin Notikewin Economics Cardium Notikewin Wilrich ERH Tier 1 Tier 2 Wilrich ERH Falher ERH Cardium Gas [MMcf] 2,973 4,378 4,956 4,808 3,262 3,843 3,839 2,285
Slide 41: 2020 Post-Mortem Returns Analysis
Peyto’s Returns 2020 Post-Mortem Returns Analysis PEYTO Exploration & Development Corp. ERH Wells 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 $236MM 2020 total capital expenditures. 11
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 22 yr Avg ROE to 2020 30% $6 20% $4 10% $2 0% $0 Return On Capital Employed (%) Return On Equity (%) 22 yr Avg ROCE to 2020 Earnings/share Realized Price ($/mcfe) Return on Equity (RO
Slide 43: Peyto's Future
Peyto’s Future PEYTO Exploration & Development Corp.
Slide 44: 2022 Outlook
Peyto’s Future 2022 Outlook PEYTO Exploration & Development Corp. Drill ~90Hz Wells (Liquids Rich Natural Gas) vs 91 in 2021 Expand Infrastructure New Chambers Gas Plant, Cecilia Compression Increase Opportunities Expand Undeveloped Land Base Diversify Markets Continue to Evaluate New Pipe/Basis
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 28 bbl/mmcf 26 bbl/mmcf 25 bbl/mmcf 24 bbl/mmcf $5 Holding investment flat at $350MM/yr could $4.19 drive a measured 7-10% $17,500/boe/d $4
Slide 46: Lower Costs to Preserve Profit
Peyto’s Future Lower Costs to Preserve Profit PEYTO Exploration & Development Corp. PEY 2018 PEY 2019 PEY 2020 PEY Goals 86% Gas @$2.11/GJ*1.15 87% Gas @$2.50/GJ*1.15 14% NGLs@$31/bbl=(60%of $52oil) $3.27 $2.78 $2.23 ∼$3.60 13% NGLs@$50/bbl=(60%of $80 Revenue $2.81/mcfe -$0.58/mcfe diversifitcation
Slide 47: Balance Sheet Priority
Peyto’s Future Balance Sheet Priority PEYTO Exploration & Development Corp. $1,600 $200 Q4 2014, $173 $180 $1,400 $160 $1,200 $140 $1,000 $120 $800 $100 $80 $600 $60 $400 $40 $200 $20 $0 $0 Q4 1999 Q2 2000 Q4 2000 Q2 2001 Q4 2001 Q2 2002 Q4 2002 Q2 2003 Q4 2003 Q2 2004 Q4 2004 Q2 2005 Q4 2005 Q2 200
Slide 48: Back to Strong Earnings and Dividends
Peyto’s Future Back to Strong Earnings and Dividends PEYTO Exploration & Development Corp. Peyto Earnings per share $2.50 $2.00 $1.50 $1.00 $0.50 $- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2022F Earnings/sh Dividends/sh $(0.50) 4
Slide 49: Blue Hydrogen? We Have All the Right Ingredients
Peyto’s Future Blue Hydrogen? We Have All the Right Ingredients PEYTO Exploration & Development Corp. Cecilia Cascade Power Station H2 >4 TCF of 2P Interconnected gas Big Sunny Rail, Hwy, and natural gas pipeline and facility underground ultimately pipeline for reserves infrastructure storage cavern
Slide 50: Future Market Diversification and Gas Price Protection
Gas Marketing Future Market Diversification and Gas Price Protection PEYTO Exploration & Development Corp. 3-5 yr diversification program Our plan is to fill this up with Midwest US /Eastern CND exposure and direct connect industrial 50 *Average Heating Value of approximately 1.15 GJ/mcf for Peyto’s
Slide 51: Fixed Price Swaps For Gas and Liquids
Gas Marketing Fixed Price Swaps For Gas and Liquids PEYTO Exploration & Development Corp. Peyto Marketing Summary 1.15 Heating Value GJ/mcf AECO 7A Fixed Price Swaps (CAD$/GJ) 1.255 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 52: Rising Realized Gas Prices
Gas Marketing Rising Realized Gas Prices PEYTO Exploration & Development Corp. $6.00 Peyto Realized ($/Mcf) - Avg $2.91 $5.00 Hedge loss Rising as prices rise Realized Price $4.00 Falling $3.00 Futures Strip $2.00 Expensive Market Diversification Finished Q4 2021 $1.00 AECO 5a ($/Mcf) - Avg $2.87 $-
Slide 53: Successful Hedging Strategy Smoothes Volatility
Gas Marketing Successful Hedging Strategy Smoothes Volatility PEYTO Exploration & Development Corp. Gas Price ($/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 15 years using a $7.00 methodical hedging strategy. $7.00 $6.00 $6.00 $5.00 $5.00 $4.00
Slide 54: LNG Consortium and Export Potential
Gas Marketing LNG Consortium and Export Potential PEYTO Exploration & Development Corp. 54 11/19/2021
Slide 55: Appendix
Appendix PEYTO Exploration & Development Corp. N Quarterly Track Record N Tax Pools N Leverage N Reserves Growth 55 11/19/2021
Slide 56: Quarterly Track Record
Quarterly Track Record PEYTO Exploration & Development Corp. 2021 2020 2019 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Operations Production Oil & NGLs (bbl/d) 11,164 12,289 12,138 11,308 11,256 11,263 11,126 11,585 10,922 11,221 10,650 11,110 10,703 Natural gas (mcf/d) 473,008 458,696 455,593 409
Slide 57: 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 Q4/20 $200 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 CEC UCC (25%) CEE (1
Slide 58: Peyto's Debt
Peyto’s Debt Blend of fixed term and revolving debt PEYTO Exploration & Development Corp. $65 4.26% End of $0.95B Revolver Oct ‘23 $100 3.70% MM$ $100 3.95% $100 4.39% $40USD 3.98% 58 Interest rates are in CND$ 11/19/2021
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