Advantage Energy Ltd · TSX:AAV
Advantage Energy — Investor Presentation (September 2011)
29 slides from Advantage Energy's investor presentation, September 2011
Slide 1: Investor Presentation September 2011
Investor Presentation September 2011 September 2011 Page 1
Slide 2: Corporate Highlights
Corporate Highlights • Advantage now a ‘pure play’ Montney natural gas resource company • Advantage production ~23,700 boe/d Q2 2011 • Oil weighted assets sold to Longview Oil Corp. (AAV 63% ownership) • Capex program focused on Montney development at Glacier • In ~3 years: Grew 2P reserves to 1 Tcf
Slide 3: Capital Budget to Grow Corporate Production 24%
Capital Budget to Grow Corporate Production 24% • Capital Budget $216 million for 12 months ended June 30, 2012 • Capital program focused on Montney Phase IV development at Glacier • $200 million (93%) allocated to Glacier with 2 key objectives: i. Increase Glacier throughput to 140 mmcf/d $155 mill
Slide 4: Advantage – Pure Play Natural Gas Focus
Advantage – “Pure Play” Natural Gas Focus Company Total Montney Unconventional June Exit Production : 15,700 boe/d June Exit Production : 23,400 boe/d Gas/Oil % : 100/0 Gas/Oil % : 94/6 Avg. W.I. : 93% RLI: 24.3 RLI: 31.7 Liquids Rich Multi-zone CBM + Colorado Group June Exit Production : 4,200 boe/
Slide 5: Glacier Development Driving Organic Production Growth & Lower Operating Costs
Glacier Development Driving Organic Production Growth & Lower Operating Costs Advantage Production Growth (1) Advantage Operating Costs boe/d $/boe 138% Production Growth • Q2 2011 production increased 22% • Q2 2011 operating costs decreased 17% compared to prior quarter due to Glacier to $6.74/boe
Slide 6: Glacier Growth Creates Low Corporate Operating Cost Structure
Glacier Growth Creates Low Corporate Operating Cost Structure $/boe (1) $25.00 Advantage is one of the lowest cost $20.00 producers among the Canadian intermediate oil and gas sector $15.00 $10.00 AAV $5.00 $0.00 (1) Based on Scotia Capital Inc. estimated 2012 operating & transportation costs for Ca
Slide 7: Glacier Phase IV Development Program
Glacier Phase IV Development Program • Project cycle July 2011 to June 2012 • Capital program of $200 million is comprised of: • Drill, complete & equip 30 Montney wells (100% W.I.) $176 million • 11 wells to sustain 100 mmcf/d base • 19 wells (including 7 to evaluate Lower & Middle Montney) to fill
Slide 8: Glacier – Location & Area Land Holders
Glacier – Location & Area Land Holders CNRL CNRL ARC PENGROWTH Shale ARC SHELL BIRCHCLIFF TALISMAN MURPHY Tupper W ENCANA CNRL SWAN AAV GLACIER AAV Glacier MURPHY ENCANA DEVON Silt APACHE CNRL Sand 50 Km APACHE Deep Basin BC AB September 2011 Page 8
Slide 9: 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 10: Significant Future Drilling Potential at Glacier
Significant Future Drilling Potential at Glacier Only 60 net wells drilled to date at Glacier. Drill Inventory could exceed 900 locations Current Inventory # Net Wells of Future Drilling Drilled/Tested to Date Locations (1) Upper Montney 52 300 – 350 2 (partially tested as Middle Montney 300 – 400 p
Slide 11: Glacier – Drilling Results & Upside Potential Support Future Growth
Glacier – Drilling Results & Upside Potential Support Future Growth Phase III Upper Montney Test Rates mmcf/d(1) Glacier Production History Recent delineation drilling results confirm high quality reservoir across our land block 7.7 5.2 8.9 Glacier Development Phases 9.8 (mmcf/d) 8.7 10.6 Phase I Ph
Slide 12: Glacier Improved Well Production Enhances Economics
Glacier Improved Well Production Enhances Economics 32 recent wells with >9 fracs/well 1 year cumulative 0.9 bcf 12 initial wells with <8 fracs/well 1 year cumulative 0.6 bcf September 2011 Page 12
Slide 13: Montney Well Economics
Glacier Montney Well Economics Economic at lower natural gas prices due to strong well performance and attractive cost structure Glacier Montney Horizontal Glacier Montney Horizontal Well NPV10% BT Rate of Return (%) 12 120 10 100 8 Rate of Return - % NPV 10% - $MM 80 6 4 60 2 40 0 20 -2 -4 0 2.00 3
Slide 14: Glacier Gas Plant Expansion
Glacier Gas Plant Expansion • Glacier gas plant (100% W.I.) will be expanded to 140 mmcf/d capacity by Q2 2012 for $13 million • Cost effective expansion due to optimization of existing equipment • Expansion beyond 140 mmcf/d will require: • Additional processing equipment • Expansion of gas plant •
Slide 15: Glacier – Strong Operating Netbacks & Recycle Ratios
Glacier – Strong Operating Netbacks & Recycle Ratios Glacier Operating Netbacks at: 100 mmcf/d 140 mmcf/d Revenue ($Cdn/mcf) $4.00(1) $4.00(1) Royalties (@ Royalty Rate 5.0%) $(0.20) $(0.20) Operating Costs $(0.30) $(0.20) Operating Netback ($/mcf) $3.50 $3.60 (2) Recyle Ratio at $1.54/mcf F&D 2.3x
Slide 16: Glacier Expansion to 140 MMCFD Increases Free Operating Cash Flow
Glacier Expansion to 140 MMCFD Increases Free Operating Cash Flow Annualized Operating $184 Million* Cash Flow $128 Million* $84 Million Free Operating Cash Flow $58 Million Capital required to $100 Million maintain production $70 Million level Glacier 100 MMCFD Glacier 140 MMCFD *Annualized operati
Slide 17: Significant Debt Reduction Provides Balance Sheet Strength
Significant Debt Reduction Provides Balance Sheet Strength Advantage’s Q2 2011 Balance Sheet Strength: $807 million • Total debt reduced by 69% since 2008 • Credit facility is 37% drawn ($103 million drawn on a $275 million facility) • 63% ownership of Longview Oil Corp shares valued at $336 million
Slide 18: Advantage Guidance – 12 Months ending June 2012
Advantage Guidance – 12 Months ending June 2012 Guidance H2 2011 H1 2012 12 Months Production Average (boe/d) 22,900 - 23,400 27,100 - 27,600 25,000 - 25,500 Exit Rate (boe/d) 28,500 – 29,500 Royalty Rate (%) 10% - 12% 10% - 12% 10% - 12% Operating Costs ($/boe) $6.50 - $6.80 $5.75 - $6.25 $6.12 - $
Slide 19: Advantage Summary
Advantage Summary • Corporate production to grow 24% to 29,000 boe/d (H1 2012 exit) • Glacier growth to 140 mmcf/d increases cash flow & improves cost structure • Further evaluation of Lower & Middle Montney layers could add significant resource & reserves growth • Glacier drilling inventory could e
Slide 20: Advantage Contact Information
Advantage Contact Information Investor Relations 1.866.393.0393 ir@advantageog.com Andy Mah, P.Eng. President & 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
Slide 21: Appendix
Appendix September 2011 Page 21
Slide 22: Western Canada Main Natural Gas Trunklines
Western Canada Main Natural Gas Trunklines British Horn River Alberta Columbia Basin Ft. St. John Ft. McMurray Natural gas pipeline Glacier interconnection already exists between B.C. and Montney Grande Prairie Alberta Basin Kitimat Edmonton Prince George Calgary Spectra Canada Pacific Northern Vanc
Slide 23: Glacier – Wet Weather Conditions (June – July, 2011)
Glacier – Wet Weather Conditions (June – July, 2011) Main West Access Road “wash-out’ Drilling Lease Lease Access Road Wet Weather Bears!! September 2011 Page 23
Slide 24: Thick Montney Siltstone Supports Higher Reserve Recoveries
Glacier – Thick Montney “Siltstone” Supports Higher Reserve Recoveries Unconventional Marcellus Shale Horn River Shale Barnett “Shaley” silts Haynesville Arc Silt Shell Birchcliff Most active drilling area in Glacier Montney “Tight” sand Conventional Encana AAV Glacier the Montney Murphy Devon Silt
Slide 25: Recent M&A Activity
Recent M&A Activity Recent M&A Activity: Recent M&A Activity: • CNRL / Talisman • CNRL / Talisman • ARC / Storm • ARC / Storm CNRL • Pengrowth ARC PENGROWTH / Monterey • Pengrowth / Monterey • Apache / BP ARC • Apache / BP • Murphy SHELL / Cequence CNRL • Murphy / Cequence BIRCHCLIFF TALISMAN MURPHY
Slide 26: Montney Horizontal Well Production Range and Type Curve
Montney Horizontal Well Production Range and Type Curve Data includes Glacier, Swan, Tupper, Pouce Coupe South & Groundbirch The IP30 range and average type curve based on 320 wells with up to 48 months of production history 30 Day IP Distribution Source: Based on public data through IHS/Accumap and
Slide 27: Top Quartile Initial Production Rates (30 day) at Glacier
Top Quartile Initial Production Rates (30 day) at Glacier To date results at Glacier prove up a Glacier Production Growth to significant amount of acreage across the land 50 mmcfd in 20 months block and IP’s are comparable to EnCana Swan wells EnCana Swan EnCana Swan Advantage Glacier Advantage IP 3
Slide 28: Montney – Reserves/Well Could Exceed Expectations due to Silt/Sand Reservoir
Montney – Reserves/Well Could Exceed Expectations due to Silt/Sand Reservoir Barnett Shale Horizontal vs Montney Horizontal Montney type well @ Swan (based on 50 wells that have the longest production history) Barnett Shale type wells by operator Source: Facts are Stubborn Things, Oct. 25, 2009, Art
Slide 29: 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
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