Peyto Exploration & Development Corp. · TSX:PEY

Peyto Exploration & Development — Investor Presentation (March 2018)

35 slides from Peyto Exploration & Development's investor presentation, March 2018

  1. Slide 1: March 2018

    March 2018

  2. Slide 2: Advisory Regarding Forward-Looking Statements

    Advisory Regarding Forward-Looking Statements PEYTO Exploration & Development Corp. This presentation contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "obj

  3. Slide 3: Who We Are

    PEY.TO Who We Are PEYTO Exploration & Development Corp. N 5th Largest Natural Gas Producer in Canada N Pure Play Alberta Deep Basin – 100‐110,000 boe/d Gas & NGLs N Returns Focused Strategy – Avg ROCE 16%, ROE 30% over last 19 yrs, among highest in industry N Long Reserve Life Asset ‐ 7 yrs PDP, 18

  4. Slide 4: Total Shareholder Return

    PEY.TO Total Shareholder Return PEYTO Exploration & Development Corp. $60 120,000 $50 100,000 $40 80,000 $30 60,000 Future $20 Prospects 40,000 $10 Past 20,000 Profits $- 0 CTD Dividend ($/share) Month End Closing Price ($/share) Peyto Production (boe/d) 4 BOE factor - 6 mcf = 1 bbl of oil equivalen

  5. Slide 5: The Peyto Strategy: What We Believe

    The Peyto Strategy What We Believe PEYTO Exploration & Development Corp. We believe that: N “Nature’s gas is the fuel for the future.” N “Our focus should be on maximizing the return on invested capital – your capital.” N “By selectively and efficiently investing capital at periods in the cycle when

  6. Slide 6: Counter Cyclical Growth Per Share

    The Peyto Strategy Counter Cyclical Growth Per Share PEYTO Exploration & Development Corp. 2500 $80 Hit 2017 YE Target 115,000 boe/d $70 2000 $60 1500 $50 $40 1000 $30 $20 500 $10 Growth rate in Prod/div. 0 $0 adj. share (last 8 yrs) Q2 2001 Q1 2002 Q4 2002 Q3 2003 Q2 2004 Q1 2005 Q4 2005 Q3 2006 Q2

  7. Slide 7: Invest For Profit Not Growth

    The Peyto Strategy Invest For Profit Not Growth PEYTO Exploration & Development Corp. $800 $700 $600 $500 Peyto Earnings $400 CTD Q4/17 $300 $200 $100 $- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 CAPEX ($MM) Earnings ($'000) Peyto Capital CTD Q4/17 7 3

  8. Slide 8: Dividend Sustainability

    The Peyto Strategy Dividend Sustainability PEYTO Exploration & Development Corp. $2,500 $2,000 $1,500 (MM$) Peyto Ctd. Earnings Q4/17 $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 Q4 2017

  9. Slide 9: Profitable Business: Build it for less than we sell it

    Peyto’s Profitable Business “Build it for less than we sell it” PEYTO Exploration & Development Corp. 2017 PEY 2014 PEY 2015 PEY 2016 PEY 2017 Land/Acq/Disp Seismic Drilling PDP FD&A $/mcfe ($2.25) ($1.64) ($1.44) ($1.36) Compl. Wellsite Facilities $521MM Cash Costs $/mcfe ($1.08) ($0.81) ($0.76) ($

  10. Slide 10: The Price Bar Is Now Very Low, We Must Be Lower

    Peyto’s Profitable Business The Price Bar Is Now Very Low, We Must Be Lower PEYTO Exploration & Development Corp. AECO $10 Monthly $/GJ Peyto Realized Gas Price ($/mcfe) 36% Avg. "Profit“ $8 CTD $6 Bonus $4 PDP FD&A 35% $2 40% Cash Costs 25% $- Total Cash Costs per mcfe includes – Royalties, Op Cost

  11. Slide 11: Competitive In The North American Marketplace

    Peyto’s Profitable Business Competitive In The North American Marketplace PEYTO Exploration & Development Corp. 100% Montney 65% DB/35% Mont. 100% Deep 100% Montney 10% DB/90% Mont. VII 2017* TOU 2017* Basin PEY 2017 AAV 2017* ARX 2017* PDP FD&A $/mcfe ($2.53) ($1.38) ($1.36) ($1.32) ($2.51) Cash Co

  12. Slide 12: Results in a Low Cost Advantage

    Peyto’s Profitable Business Results in a Low Cost Advantage PEYTO Exploration & Development Corp. $2.10 $5.44 $0.30 $1.03 BOE factor - 6 mcf = 1 bbl of oil equivalent 12 Data from Peter’s & Co. 3/27/2018 Gas producers include: AAV,PNE,CKE,CQE,TOU,SRX,BIR,BXE,CR,ARX,BNP,POU,DEE,KEL,ECA,VII

  13. Slide 13: Geographically Focused Core Areas

    Peyto’s Assets Geographically Focused Core Areas PEYTO Exploration & Development Corp. • 480,000 net acres R10 R5W6 R27 R22 R17 R12 R7W5 • 9 operated gas plants Cutbank ---(835 mmcf/d net capacity) • 1600+ km pipelines • 1200+ producing zones T60 Kakwa • 115,000 boe/d T60 Chicken Leland Pine Creek O

  14. Slide 14: 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 14 3/27/2018

  15. Slide 15: 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* 15 *NGL recoveries can increase by 15+ bbl/mmcf with deeper cutting processing facilities 3/27

  16. Slide 16: 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 Unbooked Wells Wells Booked* (2) 1 (3) 434 72 174(13) 414 5 1 5 8 1 2(2) 20 90 125 160(2) 69 7 68 40 8 101 162 319 2 20 14 314 378 182 4 38 54 48

  17. Slide 17: Deep Basin Lands Go A Long Way

    Peyto’s Assets Deep Basin Lands Go A Long Way PEYTO Exploration & Development Corp. 800 Peyto Lands 700 600 Net Sections 500 400 Net Peyto Sections 300 200 100 - Net Sections of Cardium, Dunvegan, Notikewin, Falher, Wilrich, Bluesky, & Cadomin Net Sections – Developed Area of All Reserves Found and

  18. Slide 18: Greater Sundance Area

    Peyto’s Assets Greater Sundance Area PEYTO Exploration & Development Corp. Peyto Oldman & Oldman North Peyto Wildhay Sweet Gas Sweet Gas Plant Plants 90 mmcf/d Peyto Nosehill 250 mmcf/d Sweet Gas Plant 125 mmcf/d Peyto Swanson Sweet Gas Plant Peyto Galloway 130 mmcf/d Sweet Gas Plant 60 mmcf/d Peyto

  19. Slide 19: The Greater Brazeau River Area

    Peyto’s Assets The Greater Brazeau River Area? PEYTO Exploration & Development Corp. Peyto Brazeau Sweet Gas Plant (2013) 140 mmcf/d  Peyto Brazeau River 40,000 140 mmcf/d Sweet Gas Plant  35,000 30,000  Boe/d 25,000 20,000  15,000 10,000 5,000 0 2013 2014 2015 2016 2017 2018 2019 2020 19 3/27/2

  20. Slide 20: Facility Ownership And Control

    Peyto’s Assets Facility Ownership And Control PEYTO Exploration & Development Corp. Cutbank Kakwa Oldman & Oldman North Nosehill Wildhay Galloway Swanson Peyto Gas Plants YE 2014 YE 2015 YE 2016 YE 2017 YE 2018 WI Whitehorse 1 Oldman 125 mmcf/d 125 mmcf/d 125 mmcf/d 125 mmcf/d 125 mmcf/d 100% 2 Nose

  21. Slide 21: The "New" Cardium Play – Abundant Opportunities

    Peyto’s Assets The “New” Cardium Play – Abundant Opportunities PEYTO Exploration & Development Corp. Oldman & Oldman North 02-21 04-10 14-07 Nosehill Wildhay 16-34 Swanson Galloway 01-17 Total Greater Sundance Cardium Resource* Proven Resource: 350 BCFe cumulative recovery to YE 2017 (Less than 15%

  22. Slide 22: The "New" Cardium Play – A Double

    Peyto’s Assets The “New” Cardium Play – A Double PEYTO Exploration & Development Corp. Old Cardium Hz Well Design EUR 2.75 BCFe IP30 1.8 mmcf/d raw gas C5 25 bbl/mmcf Jan 4 Strip ($60 WTI) C4 10 bbl/mmcf 2018 - $1.32/GJ C3 12.5 bbl/mmcf 2019 - $1.53/GJ 2020 - $1.68/GJ Capex $4.2MM (DCETFLS) 2021 - $

  23. Slide 23: Strategies to Increase LGR to bbls/mmcf

    Peyto’s Assets Strategies to Increase LGR to 40 bbls/mmcf PEYTO Exploration & Development Corp. Deep Cut adds another 10-15 bbls/mmcf Forecast Q4 2017 NGL Split YE 2019 forecast NGL Split Condensate (C5+) 6,489 bbls/d (62% of liq.) Condensate (C5+) 10,000 bbls/d (67% of liq.) Butane (C4) 2,073 bbls/

  24. Slide 24: Template Economics At Strip

    Peyto’s Returns Template Economics At Strip PEYTO Exploration & Development Corp. Species IP Avg. EUR D&C IRR @ IRR @ IRR @ IRR @ IRR @ MMcf NGLs BCFE $MM Jan 4 Dec 7 $2.00 $2.50 $2.50 bbl/M Strip Strip Flat Flat esc M Sundance Wilrich 5.3 10 2.6 2.8 4% 4% 6% 15% 18% Nosehill Wilrich 5.5 10 3.3 3.0

  25. Slide 25: 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 19 yr Avg ROE to 2017 30% $6 20% $4 11% 10% 8% $2 0% $0 Return On Capital Employed (%) Return On Equity (%) Earnings/share Realized Price ($/mcfe) 19 yr Avg ROCE to 2017 Return on Equ

  26. Slide 26: 2018 Outlook

    Peyto’s Future 2018 Outlook PEYTO Exploration & Development Corp. Drill ~50-60Hz Wells (Liquids Rich Natural Gas) vs 143 in 2017 Expand & Extract Increase Processing Capacity & NGL Yield Increase Undeveloped Land Base Shoot Seismic 2018 Capital Program Acquire Additional Opportunities and Partn

  27. Slide 27: Lower Supply Cost Before Returning to Growth

    Peyto’s Future Lower Supply Cost Before Returning to Growth PEYTO Exploration & Development Corp. Budget for summer In this scenario, gas price 15% of Q4/19 $6 production weakness? would be liquid (~16,500 boe/d) $17,500/boe/d $17,600/boe/d $17,300/boe/d $16,800/boe/d $5 $15,100/boe/d 100,000 $11,60

  28. Slide 28: Lower Costs and Increase Liquids to Preserve Profit

    Peyto’s Future Lower Costs and Increase Liquids to Preserve Profit PEYTO Exploration & Development Corp. 40 bbl/mmcf new adds in 2018/19 increases liq to 12% PEY 2017 PEY 2018 Goals PEY 2019 Goals 91% Gas @ $2.30/GJ 90% Gas @ $1.40/GJ*1.15 88% Gas @$1.55/GJ*1.15 Revenue AECO*115% 10% NGLs @ $78/bbl*

  29. Slide 29: Limited Exposure to AECO Daily (5A)

    Peyto’s Future Limited Exposure to AECO Daily (5A) PEYTO Exploration & Development Corp. Peyto AECO Gas Marketing Portfolio 100% 0% 6% 3% 8% 8% 12% 11% 90% Target 27% 29% 85% of 80% Sales To Be Hedged 70% % of forecast gas production 65% 65% 65% 78% of 2018 hedged @ $2.30/GJ 60% 34% of 2019 hedged @

  30. Slide 30: Appendix

    Appendix PEYTO Exploration & Development Corp. N Quarterly Track Record N Tax Pools N Hedging Strategy N Gas Marketing N Leverage 30 3/27/2018

  31. Slide 31: Quarterly Track Record

    Quarterly Track Record PEYTO Exploration & Development Corp. 2017 2016 2015 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Operations Production Oil & NGLs (bbl/d) 9,337 10,479 8,958 8,319 9,586 7,457 8,938 7,247 6,621 7,008 6,643 6,943 5,352 6,843 7,456 Natural gas (mcf/d) 559,663 595,885 55

  32. Slide 32: Peyto's Tax Pools

    Organic Business Model Peyto’s Tax Pools PEYTO Exploration & Development Corp. $1,800 $1,600 $1,400 $1,200 Federal Tax Pools Millions $1,000 $800 Q4/17 $600 $400 $200 $- 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 CEC UCC (25%) CEE (100%) CDE (30%) COGPE (10%) CAPEX Peyto CTD. CapEx Q4/17 32 3

  33. Slide 33: Fixed Price Swaps Settled Against AECO 7A

    Gas Marketing Fixed Price Swaps Settled Against AECO 7A PEYTO Exploration & Development Corp. Hedges by year (averaged) Year Vol. GJ/d Price/GJ Vol. mcf/d Price/mcf 2015 344,644 3.48 299,690 4.00 2016 460,656 2.77 400,915 3.18 2017 554,904 2.58 482,821 2.97 2018 487,151 2.30 423,869 2.64 2019 179,31

  34. Slide 34: Successful Hedging Strategy Smoothes Volatility

    Gas Marketing Successful Hedging Strategy Smoothes Volatility PEYTO Exploration & Development Corp. 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto $7.38/mcf $8.78/mcf $8.48/mcf $8.42/mcf $8.64/

  35. Slide 35: Careful Use Of Debt For Leveraged Returns

    Peyto’s Debt Careful Use Of Debt For Leveraged Returns PEYTO Exploration & Development Corp. Peyto Net Debt/PDP NPV10 100% 80% Peyto becomes NAIC2 rated, gains access to cheaper term debt 60% 40% 20% Debt/PDP NPV10 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 20

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