Advantage Energy Ltd · TSX:AAV
Advantage Energy — Advantage Oil & Gas — Investor Presentation (March 2010)
38 slides from Advantage Energy's investor presentation, Mar 8, 2010
Slide 1: Year End 2009 Reserves & Glacier Update
Year End 2009 Reserves & Glacier Update March 8, 2010 TSX: AAV NYSE: AAV March 2010 Page 1
Slide 2: Advisory
Advisory The information in this presentation contains certain forward-looking statements, including within the meaning of the United States Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future intentions or performance. All statements other than s
Slide 3: Advantage Oil and Gas Ltd.
Advantage Oil and Gas Ltd. Listed on TSX & NYSE AAV Market Capitalization at March 8, 2010 $1.2 billion Shares Outstanding (Basic) 163 million Estimated 2010 H1 Production 24,700 boed Current Credit Facility $525 million Estimated Bank Debt at January 1, 2010 $250 million Estimated Ava
Slide 4: Advantage – 2009 Corporate Reserve Highlights
Advantage – 2009 Corporate Reserve Highlights* Replaced 698% of 2009 annual production at an all-in P+P FD&A cost of $10.14/boe including the change in Future Development Capital (“FDC”) Proven & Probable reserves grew 34% to 232.3 mmboe despite asset dispositions of 27.2 mmboe during 2009 One
Slide 5: Glacier Land Block is Contiguous and Significant
Glacier Land Block is Contiguous and Significant LEGEND Shell Advantage Arc Arc Birchcliff CNRL Encana Grey Wolf Murphy Shell Birchcliff Storm Talisman EnCana Advantage Murphy Glacier • 84 gross (80 net) sections of contiguous Montney acreage * Source: Company Reports, Accumap, and CIBC World Market
Slide 6: Glacier Development Highlights
Glacier Development Highlights Capital investment of $132.5 million in 2009 resulted in: Production growth to 25 mmcfd in Q2 2009 Drilling of 27 gross (19.4 net) horizontal wells Montney horizontal well tests exceeding expectations across the Glacier land block proving up significant areas o
Slide 7: Glacier – Recent Well Test Rates Exceeding Expectations Across Land Block
Glacier – Recent Well Test Rates Exceeding Expectations Across Land Block 1 New U Montney Hz 12 MMcf/d @ 1300 psi 2 New U. Montney Hz 8 New U Montney Hz Avg. 8.1 Mmcf/d @ 812 psi Avg 5.1 mmcf/d @ 1404 psi 2 New L Montney Hz 4.6 MMcf/d @ 917 psi 4.2 mmcfd @ 495 psi 1 New U Montney Hz 7 Mmcf/d @ 897 p
Slide 8: Glacier Upper Montney – Horizontal Well Test Rates Improving
Glacier Upper Montney – Horizontal Well Test Rates Improving 12,000 Average Hz well rate increased from 10,000 3.6 mmcf/d to 6.5 mmcf/d 8,000 Test Rate (mcf/d) 6,000 4,000 2,000 First 12 Last 16 - 0 500 1,000 1,500 2,000 2,500 Flowing Pressure (psi) March 2010 Page 8 8
Slide 9: Glacier Upper Montney Rate per Frac Improved 1.7x
Glacier Upper Montney Rate per Frac* Improved 1.7x 1,400 Rate per Frac increased from 1,200 465 mcf/d to 802 mcf/d 1,000 800 mcf/d 600 400 200 - *Due to testing equipment constraints on high rate/high pressure wells, the rate per frac has been adjusted to a common flowing pressure of 435 psi for com
Slide 10: Completion Costs per Frac Trending Lower
Completion Costs per Frac Trending Lower $1,000,000 $900,000 $800,000 Total Well Completion Cost per frac $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 March 2010 Page 10
Slide 11: Drilling and Completion Well Costs Improved Since 2008
Drilling and Completion Well Costs Improved Since 2008 $8,500,000 Completion Drilling $7,500,000 $6,500,000 $5,500,000 $4,500,000 $3,500,000 $2,500,000 $1,500,000 $500,000 March 2010 Page 11
Slide 12: Glacier 2009 Montney Reserve Highlights
Glacier 2009 Montney Reserve Highlights* Successful production growth, delineation & well results exceeding expectations across the land block resulted in strong P+P reserve additions 2009 2008 % change P+P reserves (mmboe) Developed 9.1 4.0 128% Undeveloped 128.3 31.8 303% Total 137.4 35.8 284% V
Slide 13: Montney Undeveloped Reserve Assumptions in Sproule Report
Montney Undeveloped Reserve Assumptions in Sproule Report Montney Undeveloped P+P Reserves Summary Upper Lower Montney Montney Total Number of future locations (gross/net) 181/170 62/53 243/223 Working Interest undeveloped reserves assigned (bcf) 634 135 769 Future Development Capital including faci
Slide 14: Montney Undeveloped Reserves - Per Well Assumptions in Sproule Report
Montney Undeveloped Reserves - Per Well Assumptions in Sproule Report Montney Undeveloped P+P Reserves Summary Upper Lower Montney Montney Total Net capital cost/well ($million) $5.5 $4.3 $5.2 Average reserves/net well (bcf) 3.7 2.6 3.4 Average Initial Production Rate/well (mmcf/d) 3.5 2.5 3.3 To
Slide 15: Glacier – Reserves and Resource Potential
Glacier – Reserves and Resource Potential Advantage working interest reserves and contingent sales gas resource in million boe 285.0 Significant Upside (1.7 TCF) Potential Remains 218.3 218.3 (1.3 TCF) 168.3 (1.0 TCF) 137.4 (0.82 TCF) 35.8 (0.2 TCF) Glacier 2008 Glacier 2009 Low Estimate Best Estima
Slide 16: Glacier - Infrastructure Development
Glacier - Infrastructure Development New 50 mmcfd AAV gas plant on-stream Q2 2010 Nat Gas Plant Existing Pipeline AAV Gas Plant AAV sales gas Location to TCPL Q2 2010 TCPL Mainline Existing TCPL Lateral Current Gathering New Advantage 50 mmcfd gas plant New AVV System 22.5 km (100% WI) on-stream Q
Slide 17: Glacier Montney Development Strategy
Glacier Montney Development Strategy Targeted Production Growth Phase I growth to 25 mmcfd achieved *Gross plant inlet volume in Q2 2009 125 Target Phase II growth to 50 mmcfd in 2010 and Phase III growth to 100 100 mmcfd mmcfd in 2011 100 Disciplined approach to improve project economics: 75
Slide 18: Other Resource Plays – Nikanassin and others
Other Resource Plays – Nikanassin and others Nikanassin at Glacier is located in: Thick part of the fairway (up to 50 meters) of net coarse grained sand developed in the key Middle section of the Nikanassin Clean sandstone with high porosity (low permeability) – requires multi stage frac – great
Slide 19: Solid Hedging Program to Support Future Cash Flow
Solid Hedging Program to Support Future Cash Flow % of net Cdn $ US $ Production Hedged Aeco Nymex (per mcf) (per mmbtu) * NATURAL GAS 2010 Q1 81% $7.64 $7.71 Q2 56% $7.53 $7.60 Q3 41% $7.27 $7.35 Q4 42% $7.27 $7.35 2010 Full Year 55% $7.46 $7.54 2011 Q1 40% $6.43 $6.50 Q2 23% $6.24 $6.31 Q3 23% $6.
Slide 20: H1 2010 Guidance
H1 2010 Guidance H1 Guidance 2010 Production (boe/d) 24,200 – 25,200 Royalty Rate (%) 13% - 16% Operating Costs ($/boe) $10.85 - $11.50 Capital Expenditures (Millions $) $105-115 (1) Note: 80% of H1 2010 capital is allocated to Glacier Funds from Operations Estimate (2) $107 (Millions $, based on mi
Slide 21: Operating Cash Flow to Capital Expenditures – Sproule Report
Operating Cash Flow to Capital Expenditures – Sproule Report Operating Total Cash Flow(1) Capital Excess Cash AECO Year ($million) ($million) ($million) Cdn$/mcf 2010 $284 $221 $63 5.35 2011 $392 $348 $44 6.19 2012 $495 $364 $131 6.40 3 year total $1,171 $933 $238 (1) Includes Alberta Drilling Incen
Slide 22: Advantage - Well Positioned for Growth
Advantage - Well Positioned for Growth Montney natural gas resource play at Glacier Significant reserves recognized by Sproule Current production capability including new wells tested exceeds 90 mmcfd New 50 mmcfd gas plant (100% AAV) will reduce operating costs from $8.25/boe to $2.75/boe
Slide 23: Contact Information
Contact Information Investor Relations 1.866.393.0393 ir@advantageog.com Andy Mah, P.Eng. Chief Executive Officer Craig Blackwood, C.A. Vice-President, Finance www.advantageog.com TSX:AAV NYSE:AAV Advantage Oil & Gas Ltd. Suite 700, 400 – 3rd Avenue SW Calgary, Alberta T2P 4H2 Main: 403.718.8000 Fac
Slide 24: Appendix
Appendix Montney and Other Properties March 2010 Page 24
Slide 25: Montney Deposition and Paleo - Geography
Montney Deposition and Paleo - Geography Meters of water 10’s of meters of water “Conventional”Montney 100’s of meters of water Doig Upper Montney) Montney (Lower) Modern US Atlantic Long Island shelf for scale Cape Hatteras March 2010 Page 25
Slide 26: Lithological Comparison of Major Unconventional Gas Plays
Lithological Comparison of Major Unconventional Gas Plays The Montney and Doig Formations have a 0% predominantly siltstone and sandstone matrix as 100% opposed to the mainly shale matrix common in other major resource plays Most of the gas in place at Glacier is situated within the silt and san
Slide 27: Montney Formation Geology
Montney Formation Geology West East Swan Tupper Sunset Groundbirch Glacier Dawson Sturgeon Ante Ck Upper Doig Phosphate W-E Cross schematic section of Note truck for scale Montney and Doig Formations Thin bedded turbidites and mudstones in Sacramento Valley, California, a modern analog for the Lower
Slide 28: Montney – a balance of factors
Montney – a balance of factors Shale Silty shale Silt Silty sand Sand 1,250 1,750 2,250 2,750 3,250 3,750 Depth (meters) 40 60 80 100 120 140 160 180 200 220 Thickness (meters) Utica Woodford MONTNEY Marcellus Horn River Haynesville Fayetteville Barnett 2 3 4 5 6 7 8 9 10 11 12 Porosity (%) March 20
Slide 29: Glacier – Montney Geology
Glacier – Montney Geology Source: Tristone Shale Gas Report October 2008. March 2010 Page 29
Slide 30: Doig/Montney Completion Techniques
Doig/Montney Completion Techniques Swell Packer Packers Plus Completion Delta Stim/Packers Plus or Weatherford ARES Hydra jet (sand plug) Hydra Jet Sand Plugs Delta Stim tool “Frac Door systems” run as integral part of casing Perforate or cut slots to frac through production casing Swell Packe
Slide 31: Increased Drilling Activity & Successful Well Results Surrounding Glacier Land Block
Increased Drilling Activity & Successful Well Results Surrounding Glacier Land Block New Birchcliff Lower Montney HZs Birchcliff Upper Montney/Doig Murphy – 4 L. Montney Hz’s Tested average of 8.4 MMcf/d Cequence 3.5 Mmcf/d U Montney Devon New Upper Montney HZ Drilling Cequence 5.5 Mmcf/d U Montney
Slide 32: Enviable Asset Base
Enviable Asset Base Enviable Asset Base Glacier (4,100 boe/d) Significant Montney natural Alberta Saskatchewan gas resource play Central Alberta (12,100 boe/d) Montney natural gas resource play Conventional & emerging oil & Glacier natural gas resource plays Sunset Foothills Gas (1,200 boe
Slide 33: Nevis - Light Oil and Coal Bed Methane Resource Plays
Nevis - Light Oil and Coal Bed Methane Resource Plays Horseshoe Canyon CBM Gas Pool West Wabamun Light Oil Pool East Wabamun Light Oil Pool W.I. Production: 4,800 boe/d W.I. 90%; 100% operated 40% Light Oil, 60% Natural Gas Reserve Life Index: 9 years Hz Wabamun Oilwells Significant light oi
Slide 34: Nevis – Wabamun Light Oil Resource Play
Nevis – Wabamun Light Oil Resource Play 225 Horizontal Type Well vs Vertical Type Well 200 Lower permeability light oil 175 carbonate reservoir 150 High porosity 30% -> Large OOIP 125 Hz wells enhanced play BOED 100 economics Hz well EUR = 220 mboe 70 Hz wells drilled to date 75 (estimated u
Slide 35: Nevis – Horseshoe Canyon Coal Bed Methane
Nevis – Horseshoe Canyon Coal Bed Methane Nevis CBM Normalized Well Production 1000 Horseshoe Canyon CBM Based on Advantage’s CBM wells development Current WI production 11 mmcfd 100 Property acquired in Sept 2007 mcfd/well Less than 5% decline (Sproule’s forecast uses 105 wells drilled to d
Slide 36: Sunset A Pool – Montney Light Oil, Drilling & Waterflood Upside
Sunset A Pool – Montney Light Oil, Drilling & Waterflood Upside Sunset Montney A oil pool has significant upside W.I. Production: 618 boe/d potential Montney light oil, 32 degree API W.I. 70%, 100% operated Reserve Life Index P+P: 17 years OOIP: 46 million bbls Recovered to date 12% OOIP
Slide 37: Lookout Butte – Foothills Gas with Multi-zone Drilling Upside
Lookout Butte – Foothills Gas with Multi-zone Drilling Upside Mississipian Rundle – main producing gas zone Mannville – uphole light oil Cardium – uphole gas R28W4 T2 Waterton National Park W.I. Production: 1,100 boe/d (20% ngl’s) Rundle – main producing W.I. 100%; 100% operated T1 pool OGIP > 6
Slide 38: Lookout Butte – Example of Rundle Drilling Potential
Lookout Butte – Example of Rundle Drilling Potential L E Section 16 has produced 79 BCF to F U 36 31 U 32 33 34 date from 3 wells: C U L U 14-16 49 Bcf 25 30 U L 29 7-16 26 Bcf 28 27 K A U 2-16 4 Bcf (drilled 2004) F U A Reservoir pressure at 2-16 is still at 24 19 20 VU F C GL 21 22 79% o
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