Advantage Energy Ltd · TSX:AAV
Advantage Energy — Shareholder Meeting (May 2012)
30 slides from Advantage Energy's shareholder meeting presentation, May 23, 2012
Slide 1: Annual General Meeting May 23, 2012
Annual General Meeting May 23, 2012 May 2012 Page 1
Slide 2: Annual General Meeting Topics
Annual General Meeting Topics 1. Corporate Highlights 2. Glacier & Middle Montney Liquids Potential 3. Natural Gas Market Indicators May 2012 Page 2
Slide 3: 1) Corporate Highlights
1) Corporate Highlights May 2012 Page 3
Slide 4: Corporate Highlights 2011
Corporate Highlights 2011 • Improved Balance Sheet Strength & Flexibility • Successful creation of Longview Oil Corp. significantly reduced AAV debt and provided increased financial flexibility with retained ownership of LNV shares • Top Quartile Reserve Additions • Replaced production by 2.2x at a
Slide 5: Corporate Highlights Q1 2012
Corporate Highlights Q1 2012 • Continued Focus on Maintaining Financial Flexibility • Credit facility increased from $275 million to $300 million • Secondary offering of Longview shares for gross proceeds of $74.7 million (closed May 22, 2012) • Pro-forma Q1 2012 undrawn credit facility of $183 mill
Slide 6: Corporate Reserve Addition Costs – 2009 to 2011, F&D $/Boe
Corporate Reserve Addition Costs – 2009 to 2011, F&D $/Boe* AAV Top Quartile Results $24.00 $22.73 $21.79 $20.64 $18.00 $17.42 $/Boe $12.00 $10.97 $9.82 $9.84 $8.74 $6.00 $0.00 2009YE 2010YE 2011YE-ESTD 3 Yr Avg E&P Sector Avg AAV * Sector F&D costs include change in FDC from RBC 2011 YE estimate. M
Slide 7: Focus on Debt Reduction Maintains Balance Sheet Strength
Focus on Debt Reduction Maintains Balance Sheet Strength Advantage’s Q1 2012 Balance Sheet Strength: $807 million • Total debt reduced by 74% since 2008 • Undrawn credit facility of $182 million • Longview share ownership value at $178 million(1) $469 million $440 million $229 million 57% $204 milli
Slide 8: Glacier Development Drives Production Growth & Lower Operating Costs
Glacier Development Drives Production Growth & Lower Operating Costs Advantage Production Growth (1) Advantage Operating Costs 25000 boe/d $/boe Top Tier Operating 95%Production 13.89 Cost Structure Growth 20000 12.11 10.66 15000 8.44 10000 5.80 ~5.80 5000 0 2008 2009 2010 2011 2012 H1 E 2008 2009 2
Slide 9: Top Decile Operating Cost Structure Due to Growth at Glacier
Top Decile Operating Cost Structure Due to Growth at Glacier $/boe (1) $25.00 Advantage is one of the lowest cost producers among the Canadian intermediate oil and gas sector $20.00 $15.00 AAV Corporate Q1 2012 $5.74/boe $10.00 $5.00 $0.00 (1) Based on Scotia Capital Inc. estimated 2012 operating &
Slide 10: Glacier Montney Resource Assessment - TPIIP Increased to 9.33 Tcf
Glacier Montney Resource Assessment - TPIIP Increased to 9.33 Tcf (1) Sproule identified 6 layers of potential within our ~300 meters of Montney formation at Glacier. 9.33 Tcf (2) TPIIP includes recognition of 156 million bbls of NGL’s initially in place with 51 million bbls identified as recoverabl
Slide 11: Glacier Montney Reserves - Significant Growth Potential
Glacier Montney Reserves - Significant Growth Potential Reserves & contingent resource(1) estimates 3.6 Tcf imply significant reserve growth potential based (39% RF) on the updated Sproule Resource Assessment results and assigned recovery factor(2) (“RF”) 2.5 Tcf (27% RF) 1.8 Tcf (19% RF) 1.1 Tcf (1
Slide 12: 2) Glacier & Middle Montney Liquids Potential
2) Glacier & Middle Montney Liquids Potential May 2012 Page 12
Slide 13: Advantage – Focused on 10 Tcf Montney Natural Gas Resource Play at Glacier
Advantage – Focused on 10 Tcf (1) Montney Natural Gas Resource Play at Glacier Company Total Q1 2012 Production : 23,121 boe/d (2) Gas/Oil & Ngl % : 94/6 RLI: 24.3 yrs Glacier – Montney Natural Gas & Liquids Potential Q1 2012 Production : 16,090boe/d (2) Alberta Gas/Oil & Ngl % : 100/0 Avg. W.I. : 9
Slide 14: Glacier – Location & Area Land Holders
Glacier – Location & Area Land Holders Shale CNRL CNRL ARC PENGROWTH ARC AAV Glacier SHELL Silt BIRCHCLIFF Sand TALISMAN MURPHY Tupper W ENCANA CNRL SWAN AAV GLACIER MURPHY ENCANA Montney Total Hz Well Production DEVON 400 (mmcfe/d) 350 APACHE CNRL 300 Advantage is one of the larger 250 producers in
Slide 15: Glacier's Location Provides Technical & Economic Benefits
Glacier’s Location Provides Technical & Economic Benefits BC AB Glacier is located in Alberta and is within the over-pressured and extremely thick Montney siltstone fairway with Upper, Middle & Lower Montney Potential A 100 km A’ 09-36-79-20W6 05-09-76-13W6 01-21-77-11W6 c-42-F 93-P-09 A Upper Montn
Slide 16: Liquids Rich Middle Montney Delineation Drilling to Continue in H2 2012
Liquids Rich Middle Montney Delineation Drilling to Continue in H2 2012 • Phase IV program July 2011 to June 2012 consisted of drilling: • 22 gross (21.5 net) Upper Montney wells • 7 gross (7 net) “evaluation wells” to investigate Middle Montney & test new completion techniques in Lower Montney • Mi
Slide 17: Middle Montney Evaluation Wells Reveal NGL's Potential Q1 12
Middle Montney Evaluation Wells Reveal NGL’s Potential Q1 2012 • 5 Hz wells & 3 vertical recompletions targeted to evaluate porosity cut-off & MM flow potential across Glacier layer 1 land block • Vertical recompletions indicated presence of NGL’s MM • 4 Hz wells tested 3 separate layer 2 Middle Mon
Slide 18: Estimated Liquid Yields in Middle Montney Layers
Estimated Liquid Yields in Middle Montney Layers(1) Liquid Yield in On a revenue basis, a 2.5 mmcf/d liquids rich Bbls/mmcf 90 Middle Montney well is equivalent to a 5 mmcf/d Upper Montney well using the estimated average shallow cut liquid yield 68 57 57 51 35 30 25 Layer 1 Layer 2 Layer 3 Average
Slide 19: Middle Montney Liquids Processing Options
Middle Montney Liquids Processing Options Liquids processing options: Glacier 1 Glacier gas plant – install shallow cut (refrigeration) or deep cut facilities in a staged growth Glacier Gas Plant Alliance Pipeline approach Adjacent to TCPL 2 Alliance Pipeline – access liquids 1 2 handling capability
Slide 20: Glacier – Strong Operating Netbacks & Recycle Ratios
Glacier – Strong Operating Netbacks & Recycle Ratios Glacier Operating Netbacks & Recycle Ratio Illustrates “Torque” to Natural Gas Prices Revenue ($Cdn/mcf) $2.00(1) $3.00(1) $4.00(1) Royalties ($/mcf @ Royalty Rate 5.0%) $(0.10) $(0.15) $(0.20) Operating Costs ($/mcf) $(0.25) $(0.25) $(0.25) Opera
Slide 21: Glacier Upper Montney Well Economics – Sensitivity Analysis
Glacier Upper Montney(1) Well Economics – Sensitivity Analysis 120 Glacier Upper Montney Horizontal Rate of Return (%)(1) Current Average Upper 100 Montney type curve 5 mmcf/d & 5 Bcf 80 Rate of Return - % 60 40 20 0 2.00 3.00 4.00 5.00 6.00 Rate and Reserve AECO Gas Price - $/mcf per well Sensitivi
Slide 22: Significant Future Drilling Potential at Glacier
Significant Future Drilling Potential at Glacier Estimated Drill Inventory with 3 layers of development is in excess of 900 locations as shown below. Further evaluation of Middle Montney could result in 2 additional layers of drilling potential. Current Inventory # Net Wells of Future Drilling Drill
Slide 23: Glacier Gas Plant Positioned for Production Ramp-Up Capability
Glacier Gas Plant Positioned for Production Ramp-Up Capability Advantage 100% W.I. Glacier Gas Plant • Glacier gas plant will have capacity to process up to 140 mmcf/d • Plant modifications began in 2011 & will be completed in Q2 2012 as originally planned at a cost of $13 million • Provides operati
Slide 24: 3) Natural Gas Market Trends
3) Natural Gas Market Trends May 2012 Page 24
Slide 25: Natural Gas Power Demand at Record Levels
Natural Gas Power Demand at Record Levels Source: Arc Financial Energy Charts May 14, 2012 May 2012 Page 25
Slide 26: U.S. Natural Gas Drilling Has Fallen Due to Low Prices
U.S. Natural Gas Drilling Has Fallen Due to Low Prices Source: Arc Financial Energy Charts May 14, 2012 May 2012 Page 26
Slide 27: Natural Gas Price Arbitrage
Natural Gas Price Arbitrage (Far East vs N. America and Oil to Nat Gas Price differential) $2/mcf to $4/mcf $10/mcf to $15/mcf Largest Oil to Gas price differential ever and largest in the world today May 2012 Page 27
Slide 28: Nat Gas Price at $2.00/mcf Will Not Work for Resource Plays
Nat Gas Price at $2.00/mcf Will Not Work for Resource Plays A $2.00/mcf price will not support even mid-cycle drilling in the resource plays. A price of > $4.50/mcf is likely required to deliver sufficient full cycle returns in resource plays. May 2012 Page 28
Slide 29: Advantage Summary
Advantage Summary • World class Montney natural gas play at Glacier with one of the lowest cost structures in Western Canada • Discovery of NGL’s in the Middle Montney provides additional potential to increase reserves & resource growth • The Upper Montney & Lower Montney formations are still in ear
Slide 30: 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