Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Investor Presentation (February 2017)
50 slides from Peyto Exploration & Development's investor presentation, Feb 15, 2017
Slide 1: February 2017
February 2017
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
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 (~105,000 boe/d) N YE 2016 2P Reserves: 3.9 TCFe (655 mmboes) N Q3 2016 Net Debt: $0.52 billion (s
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
Slide 5: The Peyto Strategy: How We Do It
The Peyto Strategy How We Do It PEYTO Exploration & Development Corp. • Invest in our own ideas • Build it ourselves • Operate it ourselves • Focus on maximum return • Stay concentrated, lean & efficient 5 2/15/2017
Slide 6: Results in a Low Cost Advantage
The Peyto Strategy Results in a Low Cost Advantage PEYTO Exploration & Development Corp. Operating Costs Transportation Costs $20 $5 $4 $15 $3 $/boe $/boe $10 $2 $1.16 $5 $6.88 $1 $- $- Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 2014Q4 2014Q1 2015Q2 2015Q3 2015Q4 2015Q1 2016Q2 2016Q3 2016 2014 2014 2015 2015 201
Slide 7: Counter Cyclical Growth Per Share
The Peyto Strategy Counter Cyclical Growth Per Share PEYTO Exploration & Development Corp. liq prod/share Production per Unit or Share (boe/d per million) 700 gas prod/share 2017 YE Target $15 $75 AECO Forecast ($/GJ) >120,000 boe/d AECO ($/GJ) 600 Share price w/div $12 $60 500 Gas Price ($/GJ) PEY+
Slide 8: More Profit Per Dollar Of Capital
The Peyto Strategy More Profit Per Dollar Of Capital PEYTO Exploration & Development Corp. 50% 43% 40% 40% 32% 32% 30% 21% 19% 20% 9% 10% 7% CTD Earnings/Capital 4% 2000-2015 0% -10% -6% PEY ARX CNQ VET ERF COG TOU RRC BTE SWN First Energy 8 2/15/2017
Slide 9: 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
Slide 10: Profitable Business
Peyto’s Profitable Business PEYTO Exploration & Development Corp. 10 2/15/2017
Slide 11: 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 2016F 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 Reser
Slide 12: 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 $1.38 ($0.81) $2 PDP FD&A ($1.64) $- Forecast Total Cash Costs per mcfe includes – Royalt
Slide 13: 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 100% Deep Basin VII 2015 TOU 2015 PEY 2015 PEY 2016 PDP FD&A $/mcfe ($3.56) ($2.29) ($1.64) ($1.44) Cash Costs $/mcfe ($2.57) ($1.40) ($0.81)
Slide 14: Unique Assets
Peyto’s Unique Assets PEYTO Exploration & Development Corp. 14 2/15/2017
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
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
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 2/15
Slide 18: The Most Profitable Part Of The Basin
Peyto’s Assets The Most Profitable Part Of The Basin PEYTO Exploration & Development Corp. 18 2/15/2017
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
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 Net Sections of Land We’ve added 48 net sections with Added in 2016* over 72 locations Brazeau already in 2017! Area Added 10 Net Sections Locations Identified on New Lands
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
Slide 22: Reserve Growth Validates Future Locations
Peyto’s Assets Reserve Growth Validates Future Locations PEYTO Exploration & Development Corp. 4,500 $3.00 4,000 $2.50 3,500 3,000 $2.00 2,500 MMCFe $1.50 2,000 1,500 $1.00 1,000 $0.50 500 0 $0.00 2010 2011 2012 2013 2014 2015 2016 PDP PDNP PU PA Forecast Conversion Cost ($/mcfe) Actual Conversion C
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
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
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
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
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 2/15/2017
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
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
Slide 30: Predictable and Repeatable
Peyto’s Assets Predictable and Repeatable PEYTO Exploration & Development Corp. 30 2/15/2017
Slide 31: Incredible Returns
Peyto’s Incredible Returns PEYTO Exploration & Development Corp. 31 2/15/2017
Slide 32: 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
Slide 33: 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 17 yr Avg ROE to 2015 20% $4 10% $2 0% $0 Return On Capital Employed (%) Return On Equity (%) Earnings/share Realized Price ($/mcfe) 17 yr Avg ROCE to 2015 Return on Equity (RO
Slide 34: Future
Peyto’s Future PEYTO Exploration & Development Corp. 34 2/15/2017
Slide 35: 2017 Outlook: Back On Track to 120,000
2017 Outlook Back On Track to 120,000 PEYTO Exploration & Development Corp. ~120,000+ boe/d forecast exit 105,000 boe/d exit 102,200 boe/d exit 120,000 120,000 85,700 boe/d exit 100,000 100,000 ~53,000 75,200 boe/d exit 80,000 80,000 57,000 boe/d exit BOED ~67,500 60,000 42,100 boe/d exit 43,600 60,
Slide 36: Build it for less than we sell it: 2017 Goals
Peyto’s Future 15th1998‐2013 “Build it for less than we sell it” PEY 2016F 93% Gas @ $2.00/GJ AECO PEY 2017 Goals 7% NGLs @ $40/bbl (75% oil) 91% Gas @ $2.75/GJ $2.60/mcfe 9% NGLs @ $50/bbl Revenue $/mcfe $3.20 $0.60/mcfe hedging gain $3.20/mcfe Peyto Realized $3.52 $3.63/mcfe ($0.11/mcfe) hedge los
Slide 37: 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
Slide 38: 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 2016F 2017 Budget 20
Slide 39: Working Around The Takeaway Constraints
Peyto’s Future Working Around The Takeaway Constraints PEYTO Exploration & Development Corp. The capacity has been oversold by 60% 39 2/15/2017
Slide 40: Working Around The Takeaway Constraints
Peyto’s Future Working Around The Takeaway Constraints PEYTO Exploration & Development Corp. Maximum Contract Pressure 40 2/15/2017
Slide 41: Appendix
Appendix PEYTO Exploration & Development Corp. N Quarterly Track Record N Tax Pools N Payout N Hedging Strategy N Gas Marketing N FAQ 41 2/15/2017
Slide 42: Quarterly Track Record
Quarterly Track Record PEYTO Exploration & Development Corp. 2016 2015 2014 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Operations Production Oil & NGLs (bbl/d) 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) 534,710 489,337 567,230 474,182 540,512
Slide 43: 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 Q3/16 $600 $400 $200 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 CEC UCC (25%) CEE (100%) CDE (30%) COGPE (10%
Slide 44: Dividend Sustainability
Peyto’s Payout Dividend Sustainability PEYTO Exploration & Development Corp. Peyto Dividend Sustainability $2,500 $2,000 $1,500 Peyto Cum. Earnings Q3/16 $1,000 $500 $0 Q1 2000 Q4 2000 Q3 2001 Q2 2002 Q1 2003 Q4 2003 Q3 2004 Q2 2005 Q1 2006 Q4 2006 Q3 2007 Q2 2008 Q1 2009 Q4 2009 Q3 2010 Q2 2011 Q1
Slide 45: 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 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 $5.36/mcf $4.
Slide 46: Future Sales (1 of 4)
Gas Marketing Future Sales (1 of 4) PEYTO Exploration & Development Corp. Hedges by year (averaged) Year Vol. GJ/d Price/GJ Vol. mcf/d Price/mcf 2016 460,656 2.77 400,915 3.18 2017 490,795 2.60 427,145 2.98 2018 208,575 2.55 181,526 2.93 2019 14,932 2.53 12,995 2.91 2020 10,000 2.47 8,703 2.84 46 2/
Slide 47: Future Sales (2 of 4)
Gas Marketing Future Sales (2 of 4) PEYTO Exploration & Development Corp. 47 2/15/2017 •Assuming an Average Heating Value of 1.15 GJ/mcf for Peyto’s gas
Slide 48: Future Sales (3 of 4)
Gas Marketing Future Sales (3 of 4) PEYTO Exploration & Development Corp. 48 2/15/2017 •Assuming an Average Heating Value of 1.15 GJ/mcf for Peyto’s gas
Slide 49: Future Sales (4 of 4)
Gas Marketing Future Sales (4 of 4) 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
Slide 50: Frequently Asked Questions
FAQ Frequently Asked Questions PEYTO Exploration & Development Corp. 1. Peyto has had some spectacular growth over the last five years, how can that growth continue? The profitable growth in production, reserves and funds from operations per share that we’ve experienced over the last four years is t
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