Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Investor Presentation (July 2003)
54 slides from Peyto Exploration & Development's investor presentation, Jul 14, 2003
Slide 1: Peyto Energy Trust, July 14, 2003
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Slide 2: A Trust Worthy Foundation
A Trust Worthy Foundation Stable, Long Life Gas Reserves $18 “Our foundation, built with the drill bit, is made up Gross Gas Production of numerous gas wells whose production flattens $16 over time forming a stable base from which we can continue to build value.” $14 $12 $10 Share Price $8 $6 $4 $2
Slide 3: Corporate Profile
Corporate Profile • Established - November 1998 • Market – PEY.UN, Toronto Stock Exchange • Expertise - Exploration & Development of Long-life Gas Reserves • Core Area of Operations - Sundance, Alberta (Twp 55, Rge 21W5) • Shares Outstanding - Basic 45,391,222 = Diluted 45,391,222 7/15/2003 3
Slide 4: Characteristics of the Trust
Characteristics of the Trust • Minimum of $0.15 per unit per month for second half of 2003 • first distribution will be for the month of July 2003 • distributions will be primarily interest & royalty income • Long Life Reserves • 16.5 years established, 10.5 years proven producing (December 31, 2002
Slide 5: The Team
The Team • Don Gray President & CEO, Director • Roberto Bosdachin Vice President, Exploration • Darren Gee Vice President, Engineering • Lyle Skaien Vice President, Operations • Rick Braund Landman, Chairman • Sandra Brick Vice President, Finance • Rob Shepherd Chief Geophysicist • Dave Drover Senio
Slide 6: Corporate Governance
Corporate Governance • “We will be candid in our reporting, emphasizing the pluses and minuses important in appraising business value. Our guideline is to tell you the business facts that we would want to know if our positions were reversed.” • “Our policies and communications will be designed to en
Slide 7: Strategic Intent
Strategic Intent ?Find, develop & produce natural gas in Alberta’s Central Deep Basin. ?Focus on projects that are predictable and repeatable with long term value & immediate cash-flow. ?Control destiny by having a high working interest in the production & infrastructure. ?Create and maintain a low
Slide 8: Reasons for the Trust Reorganization
Reasons for the Trust Reorganization ?Creates a more tax efficient capital structure. ?Maintains our unique entrepreneurial environment. ?Allows for the continued growth of our capital investments without compromising the quality. ?Gives all shareholders the ability to allocate the distributed capit
Slide 9: A Unique Energy Trust Model
A Unique Energy Trust Model Unique Assets + Winning Track Record = Growth Unique Assets a rare combination of both low cost and long life gas and ngl‘s reserves Winning Track Record a business model that has consistently delivered industry leading results over the company’s history from internally g
Slide 10: Compensation
Compensation • Base G&A estimated to be a low $0.25/boe • Market Based Bonus Plan - Unit Appreciation Rights • estimated to be 7% of outstanding shares • designed to mirror the option plan that was previously in place • Reserve Value Based Bonus Plan • 3% of the yearly change in debt & equity adjust
Slide 11: Quarterly Track Record
Quarterly Track Record PEYTO’s Sundance Gas Plant Commences “We have been operating as a company for 17 quarters now. The first four quarters were focused on drilling and Production completing our initial wells. Since we began producing from these wells our production has grown from the previous qua
Slide 12: Production (boe/d)
Production Quarterly 15,000 Production (boe/d) 10,000 5,000 - Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 99 00 00 00 00 01 01 01 01 02 02 02 02 03 Gas, daily (boe/d) NGL's & Oil, daily (boe/d) BOE factor - 6 mcf = 1 bbl of oil equivalent 12 7/15/2003
Slide 13: Industry Comparison: Average Well Productivity
Industry Comparison Average Well Productivity Q1 2003 Well Productivity average production per well (boe/d) 100 “Over the past ten years it has been a sellers market. Sellers 75 tend to dispose of high cost low productivity assets when the commodity price cycle is on the high side. These assets are
Slide 14: Annual Source of Capital Expenditures
Annual Source of Capital Expenditures Debt, Equity & Cashflow $120 Millions “Over the past two years we have issued Equity only for the bonus and $100 option plan. We have been able to fund our CAPEX with Debt and Cash- flow and over time we will be able to $80 use even less Debt.” $60 $40 $20 $- 19
Slide 15: Industry Comparison: Leverage
Industry Comparison Leverage Year End 2002 Leverage - Net Debt as % of Proved Producing NPV @ 10% 80% “Our Net Debt relative to the value of the Proved Producing Reserves continues to 70% decline. Bank lines have now been expanded to $180,000,000. This is 720 times more than our 60% original lines i
Slide 16: Revenue: Gas & NGL's
Revenue Gas & NGL’s • Gas • Price Point AECO Hub • Wellhead price per mcf is equal to 1.17 (GJ/mcf) times the AECO price per GJ. • Natural Gas Liquids • Wellhead price for Peyto’s NGL’s is $6-$10 CDN/barrel less than the WTI price in CDN dollars. • Corporate Liquid Gas Ratio 45 - 47 bbls/mmcf (sales
Slide 17: Industry Comparison: Revenue per boe
Industry Comparison Revenue per boe Q1 2003 Revenue per boe $50 “The combination of high heating value gas and premium quality liquids deliver one of the industry’s highest revenue streams per unit of production.” $45 $40 $35 $30 X E R P M E Y T R Q U SH O N UN PG N UN UN UN CM UN EE UN UN UN BN TH
Slide 18: Operating Costs
Operating Costs 2002 Total $/boe • Field Expenses $ 4,680,000 $1.45 •50% Variable, 50% Fixed • TCPL Transportation $ 1,875,000 $ 0.58 •90% Firm, 10% Interruptible •$0.12/mcf • Processing Income $ (2,121,000) $ (0.66) • Operating Expense $ 4,434,000 $ 1.37 7/15/2003 18
Slide 19: Industry Comparison: Costs
Industry Comparison Costs - Operating, Interest, G&A, Management Fees Q1 2003 Total Costs $15 “Low costs are the best hedge against the commodity price cycle.“ $10 $5 $- E U T X Q E R P Y M O UN R UN UN N UN UN N UN EE N UN CM UN PG UN PO BT BN RE TH CN YT ZA TL _U I_U _U E_ F_ T_ N_ F_ E_ R_ C_ N_
Slide 20: Industry Comparison: Efficiency of Cashflow Generation
Industry Comparison Efficiency of Cashflow Generation Q1 2003 Cashflow as % of Revenue 70% “Not only do we have one of the highest revenue per boe of any producer, we also manage to turn a very high percentage of that revenue into cashflow. This 65% leaves us with more resources to build value while
Slide 21: Industry Comparison: Average Cashflow per well
Industry Comparison Average Cashflow per well Q1 2003 Average Cashflow per well (annualized) $1.5 Millions $1.0 $0.5 $- E X M Y R PG T E P VK R PW U Q O UN N NC N UN UN CM PG UN EE UN UN UN TH UN BT ZA UN BN N TL PO RE CN YT _U _U I_U N_ E_ F_ R_ N_ C_ E_ F_ T_ PE AE AY AV PV FE ER SH AR Average Cas
Slide 22: Reserves: Long Life vs. Short Life
Reserves Long Life vs. Short Life “Peyto has been engineered around Long Life Reserves.” Long Life Production 1,600 • Typically deeper reservoirs, with large definable areas and Short Life – Water Drive no associated water. 1,400 • Production profile is predictable and flattens over time. • Long Lif
Slide 23: Reserves: March 31, 2003 Volume Summary
Reserves March 31, 2003 Volume Summary Sales Gas NGL's Oil BOE's Category (BCF) (Mstb) (Mstb) (Mstb) Proved Producing 221 9,769 31 46,560 Proved Non-Producing 30 1,213 - 6,290 Total Proved Developed 251 10,982 31 52,850 Probable Additional 160 6,632 - 33,258 Proved + Probable 411 17,614 31 86,108 Pr
Slide 24: Reserves: March 31, 2003 NPV Summary
Reserves March 31, 2003 NPV Summary Variable Price Economics NPV (millions of CDN dollars) Category 0% 4% 8% 10% Proved Developed 1,359 931 723 655 Probable Additional 784 410 272 231 Proved + Probable 2,143 1,341 995 886 Proved + Risked Probable 1,751 1,136 859 771 • Paddock Lindstrom & Associates
Slide 25: Industry Comparison: NPV of Proved Producing Reserves
Industry Comparison Net Present Value of Proved Producing Reserves 2002 Year End Proved Producing NPV @ 10% $2.0 Billions $1.5 $1.0 $0.5 $- O N N UN UN N UN UN UN UN UN UN UN YT _U _U I_U E_ N_ E_ T_ R_ N_ F_ F_ C_ PE AE AY PW PV AV PG FE ER NC VK SH AR Peyto reserves are updated effective March 31,
Slide 26: Industry Comparison: Reserve Life
Industry Comparison Reserve Life 2002 Year End Proved Producing Reserve Life (years) 11 9 7 5 NR 3 E U X Q T E R P Y M O UN R UN UN UN UN N N UN EE UN UN CM PG PO N BT RE UN BN CN TH TL ZA YT I_U _U _U N_ T_ F_ E_ F_ E_ C_ R_ N_ PE AE PW AY FE ER PG NC SH PV AR VK AV Reserve Life Index is calculated
Slide 27: Industry Comparison: Finding, Development & Acquisition Costs
Industry Comparison Finding, Development & Acquisition Costs 2002 Finding Development & Acquisition Costs ($ per boe) Proved Producing Category $25 $20 $15 $10 $5 $- E X Y NC R T E P R U Q O UN N N UN UN CM PG UN EE UN UN UN TH UN BT ZA BN N PO RE CN YT _U _U I_U N_ E_ F_ R_ N_ C_ E_ F_ PE AY AE PW
Slide 28: Industry Comparison: Recycle Ratio
Industry Comparison Recycle Ratio 2002 Proved Producing Recycle Ratio 4 “The Uniqueness of the Peyto Trust model is not the low percentage of cashflow being distributed. It’s the 3 business model that consistently delivers a high return for every dollar we invest. Unlike the others, we are not relia
Slide 29: Industry Comparison: Reserve Replacement Ratio
Industry Comparison Reserve Replacement Ratio 2002 Proved Producing Reserve Replacement Ratio 8 6 4 2 - X R E Y T R P Q E U O N N UN PG UN UN UN UN UN N CM UN EE ZA TH UN BN BT RE PO CN YT _U _U I_U E_ N_ R_ E_ C_ N_ F_ F_ PE AY AE PW PV AV PG ER VK NC AR SH Reserve Replacement Ratio – Reserves Adde
Slide 30: General Area of Operations Map
General Area of Operations Map “From the start Peyto has W6 W5 W4 W3 explored exclusively in the Alberta’s Deep Basin. In Alberta 2001 Peyto was the only Junior in the top 10 most active drillers in the Deep Basin.” PEYTO’S Sundance Area T 55 R 21W5 Edmonton Calgary U.S. Canada Border 7/15/2003 30
Slide 31: Central Deep Basin Land Map
Central Deep Basin Land Map • Over 128,000 net acres (198 sections) Sundance • Average Interest 70% • 98% Operated “Over the past four years Peyto’s Deep Basin land holdings have grown faster than any other producer operating in the area.” 7/15/2003 31
Slide 32: Gas Plant & Gathering System
Gas Plant & Gathering System PEYTO 11-17-55-21W5 Gas Plant ? 85 mmcf/d Compression, 100 mmcf/d Refrigeration ? Constructed & Installed April 2000 ? expanded four times over two years ? 100% PEYTO Owned & Operated ? Direct, Firm Access to NOVA ? Third Party Processing Revenue PEYTO 2003 Outlook Gas P
Slide 33: Activity Update - June 2003
Activity Update - June 2003 Spring Breakup shutdown drilling, completion and pipeline operations from the end of March till the beginning of June 2003. June 2003 Activity Update ? Completed 9 zones in 7 wells (all 100% working interest) ? 100% of the completions were successful ? Average rate per zo
Slide 34: Cardium Gas
Cardium Gas Greater Edson Area Trend “70% of PEYTO’s Production is from Cardium Gas Wells. Since Cardium Gas day one we have been working ?Low Risk Development Play towards increasing our ownership in the Cardium.” ?Liquid Rich, High Heating Value Gas ?Predictable Production Profile ?Long Life Reser
Slide 35: Cardium Producers on Production before 1991
Cardium Producers - on Production before 1991 Minehead, Ansel, Galloway, Sundance Cardium Gas Trend Cardium Producers that have an on Production Date before October 1, 1991 Cumulative Gas First Year Actual Ultimate Produced Avg Gas Reserve Current Time On Exponential Remaining Ultimate Rec. Reserve
Slide 36: Cardium Gas: Offset Well Performance
Cardium Gas Offset Well Performance “The Cardium Producers on before January 1, 1998, were all that existed before Peyto started developing the north end of the trend or Sundance.” 12-13 Cardium Producers on Before January 1, 1998 16-29 06-22 Cardium Producers on After January 1, 1998 7/15/2003 36
Slide 37: Cardium Gas: Offset Well Performance
Cardium Gas Offset Well Performance “The average decline of these wells over the past eleven years is 4.2%. It’s 10,000 this low decline that gives the Cardium its long term value.” The Last Three Producers on the Decline - 4.9%/year over Trend Before Peyto’s Sundance Calendar Daily Gas (mcf/d) 1,00
Slide 38: Peyto's Average Cardium Well Performance
Cardium Gas Peyto’s Average Cardium Well Performance 2,000 “This chart shows all of Peyto’s Cardium production. The wells have all • Average Year 1 Rate 790 mcf/d & 36 bbls/d been normalized to start at the same • NGL’s Yield 45 bbls/mmcf time. This can be considered a risked • Heating Value 1.16 GJ
Slide 39: What is the Corporate Decline?
What is the Corporate Decline ? 1. This is a chart of Peyto’s Gross Average Rate Per well over time. This should not be confused with the chart titled “Peyto’s Average Cardium Well Performance”. This is the sum of all those wells as they are added so any given month you have a combination wells at d
Slide 40: Gas Marketing
Gas Marketing Aeco Price Peyto Wellhead Price Daily Daily Counter Volume Volume Floor Ceiling Floor Ceiling Party Period Hedged Type (GJ) (mcf/d) ($/GJ) ($/GJ) ($/mcf) ($/mcf) Coral April 1, 2003 to October 31, 2003 Costless Collar 8,000 6,838 $3.50 $6.85 $4.10 $8.01 Coral April 1, 2003 to October 3
Slide 41: Gas Marketing: Net Hedged Gas Price
Gas Marketing Peyto Net Hedged Gas Price, Summer & Winter Periods Summer (Jul 1 - Oct 31, 2003) Winter (Nov 1 - Mar 31, 2004) $9 $9 Breakeven Price Breakeven Price $7.65/GJ or $8.95/mcf $7.26/GJ or $8.50/mcf $8 $8 Peyto Hedged Price ($/GJ) Peyto Hedged Price ($/GJ) $7 $7 Peyto Price $6 $6 Peyto Pric
Slide 42: Outlook 2003
Outlook 2003 • Capital Expenditures ($110 - $160 million) • Drill & Re-Enter New Gas Locations (50 - 70 wells) • Expand Gas Gathering & Processing Capacity • Expand Undeveloped Land Base • Expand 3-D & 2-D Seismic Database • Acquire Partner Working Interests 7/15/2003 42
Slide 43: A Trust Worthy Gas Company
A Trust Worthy Gas Company • Long Life Predictable Natural Gas Reserves • Premium Quality Natural Gas & Liquids • Low Total Cost Structure • High Netbacks • Predictable & Repeatable Gas Business Model 7/15/2003 43
Slide 44: Notes – Table of Contents
Notes – Table of Contents • E&P Industry Comparison Slides (Q1 2003) • Major Share Placements • Financing (2003 - 1997) • Employees • Directors 7/15/2003 44
Slide 45: E&P Industry Comparison (1)
E&P Industry Comparison (1) Q1 2003 Results Canadian Company Peyto Thunder Progress Compton Zargon Bonavista Natural Baytex Esprit Real Talisman Paramount Gauntlet Symbol PEYTO THY PGX CMT ZAR BNP CNQ BTE EEE RER TLM POU GAU Q1 2003 Cashflow as a % of Revenue 68% 61% 58% 52% 56% 60% 56% 51% 57% 51%
Slide 46: E&P Industry Comparison (2)
E&P Industry Comparison (2) Q1 2003 Results – Weighted Rankings Canadian Company Peyto Thunder Progress Compton Zargon Bonavista Natural Baytex Esprit Real Talisman Paramount Gauntlet Symbol PEYTO THY PGX CMT ZAR BNP CNQ BTE EEE RER TLM POU GAU Q1 2003 Cashflow as a % of Revenue 1 4 6 8 6 5 7 9 6 9
Slide 47: Major Share Placements
Major Share Placements Issue Shares Price Placement Year Type (000's) ($/share) Initial 1998 Private/Public 13,100 $ 0.16 1999 Rights Offering 1999 Public 6,550 $ 0.32 Paramount Assets 1999 Private 4,360 $ 0.55 1999 Flow Through 1999 Private 500 $ 0.85 Largo 2000 Public 6,600 $ 1.21 Eclipse 2000 Pri
Slide 48: Financing (2003 - 2002)
Financing (2003 - 2002) • 2002 • $100,000,000 Revolving Line of Credit from Bank • Moved from $80,000,000 Revolving Line of Credit with the Royal Bank of Canada to a $100,000,000 Revolving Line of Credit with the Bank of Montreal. • $1,098,630 Flow Through Share Issue (93,900 shares $11.70/share) •
Slide 49: Financing (2001-2002)
Financing (2001-2002) • 2001 • $50,000,000 Revolving Line of Credit from Bank • Moved from $25,000,000 Revolving Line of Credit with the National Bank of Canada to a $50,000,000 Revolving Line of Credit with the Royal Bank of Canada. • $60,000,000 Revolving Line of Credit from Bank • Increased from
Slide 50: Financing (2000)
Financing (2000) • $2,700,000 Convertible Debenture issued to Paramount Resources L td. • Bears interest at 3% per annum; Convertible at $0.60/share over five year term. Redeemable after July 1, 2000 if trading price above $0.84/share. Issued January 2000 • $7,958,000 Takeover of Largo Resources Inc
Slide 51: Financing (1999)
Financing (1999) • $267,000 Private Placement • Issued 1,485,000 shares at $0.18/share, January 1999 • $2,073,037 Shareholder Rights Offering • Issued 6,554,335 shares, November 1999 • $2,500,000 P&NG Purchase from Paramount Resources Ltd. • Originally Farmed in on two suspended Paramount wells and
Slide 52: Financing (1997-98)
Financing (1997-98) • $250,000 Private Placement to JCP Founders • Issued 2,500,000 shares at $0.10/share March 1997 • $250,000 JCP IPO • Issued 1,250,000 shares at $0.20/share December 1997 • $254,000 Private Placement • Acquired Producing Property in Saskatchewan with 1,694,000 shares at $0.15/sha
Slide 53: Employees
Employees Don T. Gray, President & CEO, Director Founder of PEYTO, Professional Engineer up to December 31, 2002, 15 years of oil & gas reservoir, evaluation & exploitation engineering experience, B.Sc. Petroleum Engineering, Texas A&M University Roberto Bosdachin, Vice President, Exploration (P.Geo
Slide 54: Directors
Directors Don T. Gray, CEO & President,since 1998 “We have five independent Board members, one Board member who Rick Braund, Chairman of the Board, Landman, since 1998 is a consulting Landman to Peyto and one Board member that is part Brian Craig, CEO of Solium Capital Inc., since 1998 of the manage
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