Peyto Exploration & Development Corp. · TSX:PEY

Peyto Exploration & Development — Investor Presentation (April 2017)

49 slides from Peyto Exploration & Development's investor presentation, Apr 10, 2017

  1. Slide 1: Peyto Corporate Presentation April 2017

    www.Peyto.com April 2017

  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: Peyto Profile

    Peyto Profile PEYTO Exploration & Development Corp. N TSX Listing: PEY N Shares Outstanding: 164.8 million, 3% insiders (as of Jan 6/17) N Monthly Dividend: $0.11/share N Current Production: 0.6 BCFe/d N YE 2016 2P Reserves: 3.9 TCFe (655 mmboes) N YE 2016 Net Debt: $0.52 billion (senior unsecured n

  4. Slide 4: 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

  5. Slide 5: Counter Cyclical Growth Per Share

    The Peyto Strategy Counter Cyclical Growth Per Share PEYTO Exploration & Development Corp. 2017 YE Target >120,000 boe/d 1,400 $70 1,200 $60 1,000 $50 800 $40 600 $30 400 $20 200 $10 Growth rate in prod. 0 $0 /debt & div. adj. share Q1 2017F Q2 2001 Q1 2002 Q4 2002 Q3 2003 Q2 2004 Q1 2005 Q4 2005 Q3

  6. Slide 6: More Profit Per Dollar Of Capital

    The Peyto Strategy More Profit Per Dollar Of Capital PEYTO Exploration & Development Corp. Earnings/Capital 2001-2016 50% 40% 30% 20% 10% 0% CTD Earnings/Capital -10% 2001-2016 -20% -30% PEY ARX CNQ BNE VET ERF COG RRC POU SWN First Energy 6 4/10/2017

  7. Slide 7: Peyto Dividend Sustainability

    Q4/16 Q4/16 Dividend Sustainability Peyto Ctd. Dist/Div. Peyto Ctd. Earnings The Peyto Strategy $1,000 $1,500 $2,000 $2,500 $0 $500 Q1 2000 Q3 2000 Q1 2001 Q3 2001 Q1 2002 Q3 2002 Q1 2003 Q3 2003 Q1 2004 Q3 2004 Q1 2005 Q3 2005 Q1 2006 Q3 2006 Q1 2007 Q3 2007 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Ctd Dist

  8. Slide 8: Highest Total Return On TSX

    Compound Annual Total Return (%) 0 5 10 15 20 25 30 35 40 45 Peyto Exploration & Development Computer Modelling Group Stella-Jones Inc. Smart REIT First Quantum Minerals ALIMENTATION COUCHE TARD Parkland Fuel Corp. Vermilion Energy Inc. Home Capital Group Inc. GILDAN ACTIVEWEAR INC Source: BMO, Tota

  9. Slide 9: Profitable Business

    Peyto’s Profitable Business PEYTO Exploration & Development Corp. 9 4/10/2017

  10. Slide 10: 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. PEY 2014 PEY 2015 PEY 2016 Land/Acq/Disp Seismic PDP FD&A $/mcfe ($2.25) ($1.64) ($1.44) Drilling Compl. Wellsite Facilities ~$469MM Cash Costs $/mcfe ($1.08) ($0.81) ($0.76) 54.4 mmboes ∆PDP Reserv

  11. Slide 11: Profitable Even Through The Lows

    Peyto’s Profitable Business Profitable Even Through The Lows PEYTO Exploration & Development Corp. AECO Monthly $10 Peyto Realized Gas Price ($/mcfe) $/GJ 36% Avg. "Profit“ Cum To Date $8 $6 Bonus $4 Cash Costs $0.98 ($0.76) $2 PDP FD&A ($1.44) $- Forecast Total Cash Costs per mcfe includes – Royalt

  12. Slide 12: 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 Basin VII 2016 TOU 2016 PEY 2016 PDP FD&A $/mcfe ($3.75) ($2.45) ($1.44) Cash Costs $/mcfe ($2.39) ($1.26) ($0.76) Supply Cost ($6.14) ($3.71) ($2.2

  13. Slide 13: Growing Cashflow With Falling Commodity Price

    Peyto’s Profitable Business Growing Cashflow With Falling Commodity Price PEYTO Exploration & Development Corp. $5 $50 $4 $40 $3 $30 $2 $20 $1 $10 $- $- 2009 2010 2011 2012 2013 2014 2015 2016 2017F FFO/share Revenue/boe 13 2017 forecast based on $2.50/GJ AECO and $50/bbl liquid prices. 4/10/2017

  14. Slide 14: Unique Assets

    Peyto’s Unique Assets PEYTO Exploration & Development Corp. 14 4/10/2017

  15. Slide 15: Geographically Focused Core Areas

    Peyto’s Assets Geographically Focused Core Areas PEYTO Exploration & Development Corp. • 450,000 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 • >100,000 boe/d T60 Chicken Leland Pine Creek

  16. Slide 16: Deep Basin Permeability Segregation

    Peyto’s Assets Deep Basin Permeability Segregation PEYTO Exploration & Development Corp. Ante Ck FOOTHILLS STRUCTURES Elmworth GAS AS ING INCRE BILITY EA PERM WATER Kaybob TRANSITION ZONE WATER Kakwa GAS Gas INCREAH DEPT SE AREA OF GAS Window MATURATION Wild River Sundance Edson Bighorn Deep Basin T

  17. Slide 17: 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* 17 *NGL recoveries can increase by 15+ bbl/mmcf with deeper cutting processing facilities 4/10

  18. Slide 18: The Most Profitable Part Of The Basin

    Peyto’s Assets The Most Profitable Part Of The Basin PEYTO Exploration & Development Corp. 18 4/10/2017

  19. Slide 19: 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

  20. Slide 20: Adding To Our Drilling Islands

    Peyto’s Assets Adding To Our Drilling Islands PEYTO Exploration & Development Corp. Greater Sundance Area Added 40 Net Sections We’ve added 56 Net Sections of Land net sections with over 84 Added in 2016* locations already in 2017! Brazeau Area Added 10 Net Sections Locations Identified on New Lands

  21. Slide 21: 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* (3) 1 11 (6) 434 72 176(14) 409 5 1 5 8 1 2(2) 16 5 90 125 169(2) 84 7 68 32 17 101 135 258 2 21 14 314 336 132 4 38

  22. Slide 22: Reserve Growth Validates Future Locations

    Peyto’s Assets Reserve Growth Validates Future Locations PEYTO Exploration & Development Corp. 4,500 $2.00 4,000 $1.80 $1.60 3,500 $1.40 3,000 $1.20 2,500 MMCFe $1.00 2,000 $0.80 1,500 $0.60 1,000 $0.40 500 $0.20 0 $0.00 2010 2011 2012 2013 2014 2015 2016 PDP PDNP PU PA Forecast Conversion Cost ($/m

  23. Slide 23: Constantly Growing Inventory

    Peyto’s Assets Constantly Growing Inventory PEYTO Exploration & Development Corp. PEYTO INVENTORY PEYTO LOCATION GENERATION RATE INVENTORY Ratio of Locations Added/Total Wells Drilled Cumulative Wells Drilled Booked Locations Wells Drilled Hz MSF Technology 1697 If we drilled 150 wells a year 3.3 16

  24. Slide 24: 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 250 mmcf/d Peyto Nosehill Sweet Gas Plant 125 mmcf/d Peyto Swanson Peyto Galloway Sweet Gas Plant Sweet Gas Plant 130 mmcf/d 60 mmcf/d Peyto

  25. Slide 25: Brazeau River Area

    Peyto’s Assets Brazeau River Area PEYTO Exploration & Development Corp. Keyera Brazeau CP O’Chiese Sour Gas Plant (1968) Sour Gas Plant (1997) 200 mmcf/d 85 mmcf/d Peyto Brazeau Sweet Gas Plant (2013) 120 mmcf/d Keyera Nordegg Sour Gas Plant (1969) 75 mmcf/d Peyto Brazeau River 140 mmcf/d Sweet Gas

  26. Slide 26: 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 WI 1 Oldman 125 mmcf/d 125 mmcf/d 125 mmcf/d 125 mmcf/d 100% Peyto Nosehill Gas Plant: 125 MMCF/d

  27. Slide 27: Drilling Performance Improvement

    Peyto’s Assets Drilling Performance Improvement PEYTO Exploration & Development Corp. Peyto Sundance Hztl Wilrich Drills (167 Total Wells) 35 26 29 25 19 16 17 2010 2011 2012 2013 2014 2015 2016 Decrease in Drilling Time (spud – RR) 27 4/10/2017

  28. Slide 28: Drilling Cost Performance

    Peyto’s Assets Drilling Cost Performance PEYTO Exploration & Development Corp. Hz Spirit River 5,000 40 4,500 34.5 4,268 4,299 4,310 4,152 4,155 4,222 35 Drill & Case Cost / Depth 4,066 3,999 4,000 29.3 30 3,500 23.6 25 3,000 $3,193 22.5 21.8 21.6 $2,926 Days $2,804 $2,752 $2,792 18.9 2,500 $2,681 2

  29. Slide 29: Completion Cost Performance

    Peyto’s Assets Completion Cost Performance PEYTO Exploration & Development Corp. Monthly Average Completion Costs $2,000,000 $300,000 $1,800,000 $250,000 $1,600,000 -35% $1,400,000 $200,000 Cost Per Stage $1,200,000 Total Cost -29% $1,000,000 $150,000 $800,000 $100,000 $600,000 $400,000 $50,000 $200

  30. Slide 30: Predictable and Repeatable

    Peyto’s Assets Predictable and Repeatable PEYTO Exploration & Development Corp. 30 4/10/2017

  31. Slide 31: Lumpy Production From Pads and New Areas

    Peyto’s Assets Lumpy Production From Pads and New Areas PEYTO Exploration & Development Corp. 25 120,000 20 100,000 15 10 80,000 5 0 60,000 -5 40,000 -10 -15 20,000 -20 -25 0 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15

  32. Slide 32: Incredible Returns

    Peyto’s Incredible Returns PEYTO Exploration & Development Corp. 32 4/10/2017

  33. Slide 33: BTAX IRR by Well

    BTAX IRR (%) -50 0 50 100 150 200 250 300 02/13-11-043-12W5/0 02/08-08-055-21W5/0 00/08-18-055-21W5/0 00/08-28-054-21W5/0 00/14-15-043-12W5/0 00/13-11-043-12W5/0 02/16-33-054-22W5/0 02/15-34-055-21W5/0 00/15-33-054-22W5/0 04/16-27-054-22W5/0 00/12-22-055-21W5/0 00/16-32-053-19W5/0 00/05-22-055-21W5/

  34. Slide 34: BTAX IRR by Well

    BTAX IRR (%) 0.0 -100.0 -50.0 50.0 100.0 150.0 200.0 02/13-11-043-12W5/0 02/08-08-055-21W5/0 00/08-28-054-21W5/0 00/08-18-055-21W5/0 00/14-15-043-12W5/0 00/13-11-043-12W5/0 02/16-33-054-22W5/0 02/15-34-055-21W5/0 00/15-33-054-22W5/0 04/16-27-054-22W5/0 00/16-32-053-19W5/0 00/12-22-055-21W5/0 00/05-2

  35. Slide 35: BTAX IRR by Well (Q1 Spuds)

    BTAX IRR (%) -100.0 -50.0 0.0 50.0 100.0 150.0 200.0 250.0 300.0 00/13-06-044-14W5/0 00/16-35-053-20W5/0 00/04-14-052-20W5/0 00/10-21-043-12W5/0 02/01-04-055-21W5/0 00/04-02-055-21W5/0 00/13-27-055-22W5/0 00/03-13-051-20W5/2 02/08-27-054-22W5/0 03/01-21-055-21W5/0 02/16-03-054-20W5/0 00/03-31-043-14

  36. Slide 36: Focus On Returns Drives Capital Discipline

    Peyto’s Returns Focus On Returns Drives Capital Discipline PEYTO Exploration & Development Corp. 2016 - $10,800/boe/d 120,000 2015 - $11,600/boe/d 2014 - $16,800/boe/d $900 2013 - $15,100/boe/d 2017 Forecast Exit 120-125,000 boe/d Annual Production Wedge (boe/d) 2012 - $17,600/boe/d ONR Acq - $38,60

  37. Slide 37: 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 30% $6 18 yr Avg ROE to 2016 20% $4 10% $2 0% $0 Return On Capital Employed (%) Return On Equity (%) Earnings/share Realized Price ($/mcfe) 18 yr Avg ROCE to 2016 Return on Equity (RO

  38. Slide 38: Future

    Peyto’s Future PEYTO Exploration & Development Corp. 38 4/10/2017

  39. Slide 39: Build it for less than we sell it: 2017 Goals

    Peyto’s Future 15th1998‐2013 “Build it for less than we sell it” PEY 2016 92% Gas @ $2.00/GJ AECO PEY 2017 Goals 8% NGLs @ $40/bbl (75% oil) 91% Gas @ $2.75/GJ $2.63/mcfe 9% NGLs @ $50/bbl Revenue $/mcfe $3.18 $0.56/mcfe hedging gain $3.18/mcfe Peyto Realized $3.52 $3.63/mcfe ($0.11/mcfe) hedge loss

  40. Slide 40: 2017 Outlook: Over 20% Larger Capex Program

    2017 Outlook Over 20% Larger Capex Program PEYTO Exploration & Development Corp. Drill ~145-160Hz Wells (Liquids Rich Natural Gas) vs 129 in 2016 Expand & Extract Increase Processing Capacity & NGL Yield ~120 mmcf/d With Brazeau East GP Increase Undeveloped Land Base Shoot Seismic 2017 Capital P

  41. Slide 41: Where To From Here?

    Peyto’s Future Where To From Here? PEYTO Exploration & Development Corp. 150,000 120,000+ boe/d exit $10,800/boe/d 11,600/boe/d ~$11,000 /boe/d 100,000 $16,800/boe/d ~$11,000 /boe/d BOED ~$11,00 $15,100/boe/d /boe/d $17,600/boe/d $17,500/boe/d 50,000 $17,300/boe/d 2013 2014 2015 2016 2017 Budget 201

  42. Slide 42: Working Around The Takeaway Constraints

    Peyto’s Future Working Around The Takeaway Constraints PEYTO Exploration & Development Corp. The capacity has been oversold by 60% 42 4/10/2017

  43. Slide 43: Appendix

    Appendix PEYTO Exploration & Development Corp. N Quarterly Track Record N Tax Pools N Payout N Hedging Strategy N Gas Marketing N FAQ 43 4/10/2017

  44. Slide 44: Quarterly Track Record

    Quarterly Track Record PEYTO Exploration & Development Corp. 2016 2015 2014 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Operations Production Oil & NGLs (bbl/d) 7,457 8,938 7,247 6,621 7,008 6,643 6,943 5,352 6,843 7,456 7,632 8,077 7,502 7,568 7,375 Natural gas (mcf/d) 537,111 556,975 534

  45. Slide 45: 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 Q4/16 $600 $400 $200 $- 1999 2001 2003 2005 2007 2009 2011 2013 2015 CEC UCC (25%) CEE (100%) CDE (30%) COGPE (10%) CAPEX Peyto CTD. CapEx Q4/16 45 4/10/2

  46. Slide 46: Successful Hedging Strategy

    Successful Hedging Strategy Peyto Realized Price History PEYTO Exploration & Development Corp. 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 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/mcf $6.44/mcf $5

  47. Slide 47: Gas Marketing: Future Sales (1 of 3)

    Gas Marketing Future Sales (1 of 3) PEYTO Exploration & Development Corp. 47 4/10/2017 •Assuming an Average Heating Value of 1.15 GJ/mcf for Peyto’s gas

  48. Slide 48: Gas Marketing: Future Sales (2 of 3)

    Gas Marketing Future Sales (2 of 3) PEYTO Exploration & Development Corp. 48 4/10/2017 •Assuming an Average Heating Value of 1.15 GJ/mcf for Peyto’s gas

  49. Slide 49: Gas Marketing: Future Sales (3 of 3)

    Gas Marketing Future Sales (3 of 3) PEYTO Exploration & Development Corp. Aug-16 Aug-17 Aug-18 May-16 Nov-16 May-17 Nov-17 May-18 Nov-18 Feb-16 Jun-16 Sep-16 Dec-16 Feb-17 Jun-17 Sep-17 Dec-17 Feb-18 Jun-18 Sep-18 Dec-18 Feb-19 Jan-16 Mar-16 Apr-16 Oct-16 Jan-17 Mar-17 Apr-17 Oct-17 Jan-18 Mar-18 Ap

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