Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Investor Presentation (July 2016)
48 slides from Peyto Exploration & Development's investor presentation, July 2016
Slide 1: Peyto July 2016
www.Peyto.com July 2016
Slide 2: Advisory: Regarding Forward-Looking Statements
Advisory Regarding Forward-Looking Statements 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", "objective", "ongoing", "may", "will", "pr
Slide 3: Peyto Profile
Peyto Profile N TSX Listing: PEY N Shares Outstanding: 164.6 million, 3% insiders (as of May 18/16) N Monthly Dividend: $0.11/share N Current Production: 0.57 BCFe/d (~95,000 boe/d) - restricted N YE 2015 2P Reserves: 3.5 TCFe (590 mmboes) N Q1 2016 Net Debt: $0.42 billion (senior unsecured notes, 7
Slide 4: The Peyto Strategy: What We Believe
The Peyto Strategy What We Believe N “We believe nature’s gas is the fuel for the future.” N “We believe we can make a real profit by being the lowest cost, most efficient producer in the industry.” N “We believe in partnering with shareholders to make that profit, not by trying to make your money o
Slide 5: The Peyto Strategy: How We Do It
The Peyto Strategy How We Do It • Invest in our own ideas • Build it ourselves • Operate it ourselves • Focus on maximum return • Stay concentrated, lean & efficient 5 7/22/2016
Slide 6: Results in a Low Cost Advantage
The Peyto Strategy Results in a Low Cost Advantage Operating Costs Transportation Costs $20 $5 $4 $15 $3 $/boe $/boe $10 $2 $1.10 $5 $7.66 $1 $- $- Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Large/Integrated Producers Intermediate
Slide 7: Counter Cyclical Growth Per Share
The Peyto Strategy Counter Cyclical Growth Per Share liq prod/share gas prod/share Production per Unit or Share (boe/d per million) 700 AECO Forecast ($/GJ) 2016 YE Target $15 $75 AECO ($/GJ) >110,000 boe/d Share price w/div 600 $12 $60 500 Gas Price ($/GJ) PEY+ Cum Div $9 $45 400 300 $30 $6 200 $3
Slide 8: Highest Total Return On TSX
Compound Annual Total Return (%) 0 5 10 15 20 25 30 35 40 45 Peyto Expl. & Development Computer Modelling Group Stella-Jones Inc. Smart REIT ALIMENTATION COUCHE TARD Parkland Fuel Corp. GILDAN ACTIVEWEAR INC First Quantum Minerals Home Capital Group Inc. Pason Systems Source: BMO, Total return inclu
Slide 9: Profitable Business
Peyto’s Profitable Business 9 7/22/2016
Slide 10: Profitable Business: Build it for less than we sell it
Peyto’s Profitable Business 15th 1998‐2013 “Build it for less than we sell it” PEY 2014 PEY 2015 Land/Acq/Disp $2MM Seismic $7MM Drilling $288MM PDP FD&A $/mcfe ($2.25) ($1.64) Compl. Wellsite Facilities $173MM $49MM $74MM $594MM ∆PDP Reserves (before Prod.) 60.4 mmboes PDP FD&A $9.84/boe Cash Costs
Slide 11: Profitable Even Through The Lows
Peyto’s Profitable Business Profitable Even Through The Lows 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 – Royalties, Op Costs, G&A, and Interest 11 PD
Slide 12: Competitive In The North American Marketplace
Peyto’s Profitable Business Competitive In The North American Marketplace 100% Montney 65% DB/35% Mont. 100% Deep Basin VII 2015 TOU 2015 PEY 2015 PDP FD&A $/mcfe ($3.56) ($2.29) ($1.64) Cash Costs $/mcfe ($2.57) ($1.40) ($0.81) Supply Cost ($6.13) ($3.69) ($2.45) Sales Price $/mcfe $5.67 $3.87 $3.8
Slide 13: More Profit Per Dollar Of Capital
Peyto’s Profitable Business More Profit Per Dollar Of Capital 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 13 7/22/2016
Slide 14: Unique Assets
Peyto’s Unique Assets 14 7/22/2016
Slide 15: Geographically Focused Core Areas
Peyto’s Assets Geographically Focused Core Areas • 440,000 net acres R10 R5W6 R27 R22 R17 • 9 operated R12 R7W5 gas plants Cutbank ---(730 mmcf/d net capacity) • 1600+ km pipelines • 1200+ producing zones T60 Kakwa • >100,000 boe/d T60 Chicken Leland Processed by Peyto Pine T55 Creek T55 150 miles G
Slide 16: Deep Basin Permeability Segregation
Peyto’s Assets Deep Basin Permeability Segregation 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 Trap Brazeau Hoadley 16 7/22/2016
Slide 17: Multi Zone Stacked Sandstone Reservoirs
Peyto’s Assets Multi Zone Stacked Sandstone Reservoirs 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 7/22/2016 Reserves are 2P recoverable in a
Slide 18: The Most Profitable Part Of The Basin
Peyto’s Assets The Most Profitable Part Of The Basin 18 7/22/2016
Slide 19: Production By Formation
Peyto’s Assets Production By Formation 120,000 100,000 80,000 40% BOE/D Wilrich 60,000 20% Notikewin 40,000 23% Falher 20,000 8% Cardium 5% Bluesky 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 19 7/22/2016
Slide 20: Deep Basin Lands Go A Long Way
Peyto’s Assets Deep Basin Lands Go A Long Way 500 Peyto Lands 450 Net Lands (000's acres) 400 350 300 250 200 150 Net Peyto Sections 100 50 - Net Sections of Cardium, Dunvegan, Notikewin, Falher, Wilrich, Bluesky, & Cadomin Net Sections for 2.8 TCFe of PD EUR* (8.5% of rights developed) TCFe of PD E
Slide 21: Large Hz MSF Inventory
Peyto’s Assets Large Hz MSF Inventory To Do Done1 Total Total Hz Hz Locations Total Total Locations Unbooked Vertical Hz Booked* Wells Wells 14 432 72 176 391 5 1 5 11 1 2 22 14 Over 10 90 94 140 77 years of 7 53 42 19 inventory in 81 120 279 SR+BLSK 16 alone (1,257 locations) 14 258 262 211 4 35 52
Slide 22: Spirit River Group Potential Land Expiries
Peyto’s Assets Spirit River Group Potential Land Expiries AB Land Sales 5 yr Term 6,000,000 5,000,000 4,000,000 24 Month Expiries 3,000,000 Earliest Expiry Date 2,000,000 out to 2017-12-31 1,000,000 (>1526 agreements, 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2,825 sect
Slide 23: Greater Sundance Area
Peyto’s Assets Greater Sundance Area F F F F F FF F AF FCF FF C F FFFF FF F FF F G G FA F F FF FAAF F G F C F A FF GF F F G CG L LI C G A FF AF F FF A F FAF AF AAF FAF AAF F F AFAAFA F AF AF AF AF A F AFA F AF FA DFA F FAA F GL F KAF C FLFFA F AF A F GAA F GA FAK F G FF K AKA F AJI A LG C C F G A F
Slide 24: Brazeau River Area
Peyto’s Assets Brazeau River Area G F F K F F K U C E DCV V VE E K A U F FFU F KA A F F AC F FA J F C L E EV V E F W F G A C F G G G W G E EE V VK DCACF A EG KEC V VC E K C E EV F VF E F A F U UF J UE F UA F F F U F GK F G KC FA F V K G F E FC I F F F F A KC K F G CU U E U G K G JC F F K G FF U G GG
Slide 25: Facility Ownership And Control
Peyto’s Assets Facility Ownership And Control R9 R4W6 R26 R21 R16 R11 R6W5 Cutbank Waskahigan W Chicken T60 W Smoky/Kakwa Cutpick Leland/Berland Oldman North T55 Wildhay W W Nosehill W W Sundance Galloway WW Swanson Ansell P/L Peyto Gas Plants 50km, 10", $10MM YE 2014 YE 2015 YE 2016 WI Peyto Nosehi
Slide 26: Drilling Cost Performance
Peyto’s Assets Drilling Cost Performance Hz Spirit River 5,000 40 4,412 4,500 34.5 4,268 4,299 4,291 4,308 4,240 4,231 4,152 4,155 4,210 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 20.6 Days $2,804 $2,752 $2,792 18.8 2,500 $2,681 17.8 18.4
Slide 27: Completion Cost Performance
Peyto’s Assets Completion Cost Performance $2,000,000 Monthly Average Completion Costs $300,000 $1,800,000 -35% $250,000 $1,600,000 $1,400,000 $200,000 Cost Per Stage $1,200,000 Total Cost $1,000,000 -50%? $150,000 $800,000 $100,000 $600,000 $400,000 $50,000 $200,000 $- $- Jan-14 Jan-15 Jan-16 Jan-1
Slide 28: 2015 - A Better Year
Peyto’s Assets 2015 - A Better Year 28 7/22/2016
Slide 29: Incredible Returns
Peyto’s Incredible Returns 29 7/22/2016
Slide 30: Focus On Returns Drives Capital Discipline
Peyto’s Returns Focus On Returns Drives Capital Discipline 2016 ~ $11,000/boe/d 120,000 2015 - $11,600/boe/d 2014 - $16,800/boe/d $900 2013 - $15,100/boe/d Annual Production Wedge (boe/d) 2012 - $17,600/boe/d ONR Acq - $38,600/boe/d $800 2011 - $17,500/boe/d 2015 Exit 102,200 boe/d 100,000 Capital E
Slide 31: Stress Testing Low Commodity Prices
Peyto’s Returns Stress Testing Low Commodity Prices Species IP NGLs EUR D/C/E/T IRR @ IRR @ IRR @ IRR @ IRR @ Number of mmcfd bbl/mmcf BCFE /L/S/F Feb Feb Apr Apr 1/16 2.50/GJ 2016 $MM 22/16 22/16 1/16 Strip Flat Locations Strip Strip Strip (delay (10% prod. to less Nov capex) 1/16) Better strip tod
Slide 32: Before-Tax IRR by Well
BT IRR, % 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 -50 -40 -30 -20 -10 02/01-28-054-21W5/0 00/10-30-054-21W5/0 00/15-33-054-21W5/0 02/01-05-055-21W5/0 00/12-05-055-21W5/0 03/13-24-055-22W5/0 00/03-10-048-17W5/0 03/01-05-054-19W5/0 00/16-05-051-19W5/0 00/01-31-051-19W5/0 00/02-07-051-19W5
Slide 33: High Returns On Your Capital And Equity
Peyto’s Returns High Returns On Your Capital And Equity 60% $12 50% $10 40% $8 30% $6 17 yr Average ROE 20% $4 10% $2 0% $0 Return On Capital Employed (%) Return On Equity (%) Earnings/share Realized Price ($/mcfe) 17 yr Average ROCE Return on Equity (ROE) is earnings for the period divided by avera
Slide 34: Peyto's Future
Peyto’s Future 34 7/22/2016
Slide 35: 2016 Outlook: More for less
2016 Outlook More for less Drill ~125-135 Hz Wells (100% Hz-MSF, Liquids Rich Natural Gas) Expand & Extract Increase Processing Capacity & NGL Yield ~80 mmcf/d Increase Undeveloped Land Base Shoot Seismic 2016 Capital Program Acquire Additional Opportunities and Partner Interests 35 7/22/2016
Slide 36: Summer Production Strategy
2016 Outlook Summer Production Strategy 120,000 102,200 boe/d exit 120,000 100,000 85,700 boe/d exit 100,000 Defer new production for 75,200 boe/d exit better gas 80,000 80,000 price? It’s a better IRR! 57,000 boe/d exit BOED 60,000 42,100 boe/d exit 51,000 added 60,000 40,000 30,600 boe/d exit Chok
Slide 37: Continuously Improve Profitability
2016 Outlook Continuously Improve Profitability 2016 Goals* • 10% service cost reduction • Drilling off season PDP FD&A ~($1.50) • Longer laterals, more stages $/mcfe • Continuous operations • Natural gas heated water • Slow down facility pre‐builds ~($0.70) Cash Costs $/mcfe • Chemical optimization
Slide 38: Where To From Here?
Peyto’s Future Where To From Here? 150,000 ~115-120,000 boed $11,000 /boe/d 100,000 $11,000 $16,800/boe/d /boe/d BOED $10,000 $15,100/boe/d /boe/d 11,600 $17,600/boe/d /boe/d 50,000 $17,500/boe/d $17,300/boe/d 2015 2016F Budget 2017 CAPEX 2018 CAPEX $594MM $550MM $650MM $700MM Base Decline Base Decl
Slide 39: Appendix
Appendix N Quarterly Track Record N Tax Pools N Payout N Hedging Strategy N Gas Marketing N FAQ 39 7/22/2016
Slide 40: Quarterly Track Record
Quarterly Track Record 2016 2015 2014 2013 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Operations Production Oil & NGLs (bbl/d) 7,008 6,643 6,943 5,352 6,843 7,456 7,632 8,077 7,502 7,568 7,375 6,376 6,984 6,295 6,374 5,840 Natural gas (mcf/d) 567,230 474,182 540,512 455,137 455,443 444
Slide 41: Peyto's Tax Pools
Organic Business Model Peyto’s Tax Pools $1,800 $1,600 $1,400 $1,200 Federal Tax Pools Millions $1,000 $800 Q1/16 $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%) CAPEX Peyto Cum. CapEx Q1/16 41 7/22
Slide 42: Dividend Sustainability
Peyto’s Payout Dividend Sustainability Peyto Dividend Sustainability $2,500 $2,000 $1,500 Peyto Cum. Earnings Q1/16 $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 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015 Q
Slide 43: AECO vs NYMEX: Canada's Natural Gas Exports
AECO vs NYMEX Canada’s Natural Gas Exports Mainline T-south 1.1 BCF/D US 1.4 BCF/D GTN 1.5 BCF/D CAD (full) 1.7 BCF/D (4.5 cap) (2.3 cap) Northern Border Alliance 1.9 BCF/D 1.6 BCF/D 1.6 BCF/D (full) (full) Dawn Chicago 43 7/22/2016
Slide 44: Successful Hedging Strategy
Successful Hedging Strategy Peyto Realized Price History 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 $4.47/mcf $3.23/mcf $3.54/mcf $4.30/mcf $
Slide 45: Gas Marketing: Future Sales (1 of 3)
Gas Marketing Future Sales (1 of 3) Financial Hedges - Gas Pricing 2014 2015 2016 2017 2018 Da te contra cte d GJ/d ($/GJ) N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O 04-Mar-13 5000 $3.603 ● ● ● ● ● 13-May -13 5000 $3.810 ● ● ● ● ● 22-May -13 5000
Slide 46: Gas Marketing: Future Sales (2 of 3)
Gas Marketing Future Sales (2 of 3) Financial Hedges - Gas Pricing 2014 2015 2016 2017 2018 Da te contra cte d GJ/d ($/GJ) N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O 04-Nov-14 5000 $3.850 ● ● ● ● 04-Nov-14 5000 $3.580 ● ● ● ● ● ● ● ● ● ● ● ● 04-No
Slide 47: Gas Marketing: Future Sales (3 of 3)
Gas Marketing Future Sales (3 of 3) Financial Hedges - Gas Pricing 2014 2015 2016 2017 2018 Da te contra cte d GJ/d ($/GJ) N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O 4-Feb-16 5000 $2.450 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
Slide 48: Frequently Asked Questions
FAQ Frequently Asked Questions 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 the result of achieving very good rates
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