Advantage Energy Ltd · TSX:AAV
Advantage Energy — Investor Presentation (May 2022)
38 slides from Advantage Energy's investor presentation, May 2022
Slide 1: A Progressive Montney Producer for the New Energy Market
A Progressive Montney Producer for the New Energy Market TSX: AAV 52-week trading $3.13 to $11.34 Investor Presentation Shares Outstanding (basic) 190 million May 2022 Market Cap / EV ($ billions) $2.0 / $2.2
Slide 2: Corporate Strategy – Surge in Profitability Creating Generational Opportunity
Corporate Strategy – Surge in Profitability Creating Generational Opportunity Free Cash Flow (1) Maintain Strong Beyond Expectations Enhance Resilience Foundations Plus Moderate and Scale Growth • Grow production • Net-zero by 2025 (2) ~10%/year • Liquids growth to • Focus on top tier economics bala
Slide 3: Corporate Strategy – Strength Across the Board
Corporate Strategy – Strength Across the Board Financial Stability Evolving Competitively Entropy Inc. - Unprecedented profitability Modular Carbon Capture and Storage Debt reduction ahead of expectations Advancing liquids development and acquisitions Capital investment driving significant Technical
Slide 4: 2022 Capital Investment Thesis Generates Significant Revenue Growth
2022 Capital Investment Thesis Generates Significant Revenue Growth (2) Glacier focused program $75 million (9 wells), maintenance Capital Efficiency (1) capital, corporate costs $10,000/boe/d Sustaining 24% corporate decline rate (1) Capital (1) Production ~$80 million Wembley, Valhalla & Progress
Slide 5: 2022 Capital Program: Profit Margins at Generational Highs
2022 Capital Program: Profit Margins at Generational Highs(2) $400 • Deleveraging $350 US$4.00/mcf • Acquisitions • Share buybacks $300 US$3.50/mcf $250 US$3.00/mcf ($ million) $200 US$2.59/mcf $30 $150 US$2.36/mcf $80 $100 $50 US$1.74/mcf $75 $- (1) Adjusted Funds Flow(1) Sustaining Liquids-Focused
Slide 6: World Class Assets, Operational Excellence, Environmental Leadership
World Class Assets, Operational Excellence, Environmental Leadership Disciplined Financial Management PROGRESS GLACIER Self funded growth with free cash flow (1) Glacier Carbon Capture & Storage Asset Prolific Gas Foundation Free cash flow (1) generation with lowest declines and cost VALHALLA High Q
Slide 7: Low-Cost Structure: A Key Factor in FCF Generation Capacity
Low-Cost Structure: A Key Factor in FCF Generation Capacity (1) Op Exp Royalty Exp G&A Int Exp Trans Exp $30 $25 $20 $/boe $15 $10 $5 $0 Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 Peer 13 AAV 1. Transportation expense is not a typical cost as it is general
Slide 8: Advantage Montney Assets – Multizone Oil, Liquids and Gas Throughout
Advantage Montney Assets – Multizone Oil, Liquids and Gas Throughout Glacier Valhalla Progress Wembley Doig Upper Montney D4 Middle Montney 300m D3 D2 D1 2022 Targets Lower Advantage Operated HZ Montney Belloy Offset Operator HZ 8
Slide 9: Glacier: World-Class Free Cash Flow Engine
Glacier: World-Class Free Cash Flow(1) Engine Area Production Forecast Net Capital Expenditures1 & FCF1 Free Cash 08-05: Onstream Q1/21 Actuals Operating Netback 1 Flow1,2 Growth Net Capital Expenditures [MM$] 1 Base Engine Cumulative Free Cash Flow [MM$]1 09-32: Q3/22 2 D4, 3 UM Production boe/d $6
Slide 10: Wembley/Pipestone: Premium Oil-Weighted Asset With Room to Run
Wembley/Pipestone: Premium Oil-Weighted Asset With Room to Run Area Production Forecast Net Capital Expenditures1 & FCF1 Free Cash Actuals Operating Netback 1 Flow1,2 Growth Rapid Oil-Weighted Net Capital Expenditures [MM$] 1 Imminent Base Growth Cumulative Free Cash Flow [MM$]1 Production boe/d $25
Slide 11: Progress/Valhalla: Integrated, Prolific Liquids-Rich Assets
Progress/Valhalla: Integrated, Prolific Liquids-Rich Assets Area Production Forecast Net Capital Expenditures1 & FCF1 Actuals Operating Netback 1 Self-Sustaining Growth Net Capital Expenditures [MM$] 1 Base Cumulative Free Cash Flow [MM$]1 Future Growth 2 Production boe/d 15-17: Q3/22 drill $50+ PRO
Slide 12: Compelling Economics Across Multiple Assets
Compelling Economics Across Multiple Assets IRR1,4 Payout1,4 NPV101,4 Type Curve (%) (months) ($MM) AAV Tier 1 Half Cycle Production Type Curves3 Glacier D1 Gas 335% 6 $13.9 Glacier Upper Gas 211% 8 $11.7 Glacier D1 - 6 month payout Glacier UM – 8 month payout Valhalla D4 Rich 200% 7 $15.5 Valhalla
Slide 13: Payout Ranging Between 3 and 12 Months Since 2020
Payout(1) Ranging Between 3 and 12 Months Since 2020 2020-2022 AAV Well Payout (1) Performance 2022 Half Cycle & Project Economics by Area (2) 16 Glacier 2x Payout in 11-14 months 15 Months Onstream Progress 14 1x Payout Valhalla 13 2x Payout Wembley 12 Project Econ 11 10 [months] 9 8 7 Glacier(3) 1
Slide 14: Advantage Montney Wells Dominate Alberta 2021 Results
Advantage Montney Wells Dominate Alberta 2021 Results Calendar-Day Natural Gas Rate (Mcf/d) Natural Gas Rate Per 100 m (Mcf/d Per 100 m) 14,000 700 IP30 Natural Gas Rate (Mcf/d) 12,000 IP90 Natural Gas Rate (Mcf/d) 600 Gas Rate Per 100 m Lateral (Mcf/d Per 100 m) 10,000 500 8,000 400 6,000 300 4,000
Slide 15: Strategic Infrastructure Control, Flexible Pipeline Access
Strategic Infrastructure Control, Flexible Pipeline Access • 400 mmcf/d + 6,800 bbl/d capacity Glacier Gas Plant BC AB TCPL Groundbirch Lateral • 45 mmcf/d + 2,000 bbl/d Valhalla hub • 35 mmcf/d + 5,000 bbl/d Wembley hub – dual connected via AAV Glacier Gas Plant AAV Progress Liquids Hub 5,000 bbls/
Slide 16: Natural Gas Transportation Portfolio
Natural Gas Transportation Portfolio 27 mmcf/d of Prairies Mainline to Nov 2032, currently underpinning Great Lakes service Empress • Total Empress capacity of 130 – 180 mmcf/d between 2022 & 2025 • 75 – 100 mmcf/d is open exposure to Empress TC LTFP • 55 mmcf/d of TC Long-term Fixed Price (LTFP) ca
Slide 17: Market Diversification and Hedging Activities
Market Diversification and Hedging Activities Revenue Exposure by Markets Q1/22 Q2/22 Q3/22 Q4/22 2023 2024-2025 AECO 52% 38% 32% 32% 30% 32% Empress 9% 28% 32% 30% 30% 29% - 32% Emerson 0% 0% 0% 6% 8% 8% Dawn 28% 25% 26% 19% 16% 16% U.S. Midwest 11% 9% 10% 9% 9% 7% - 9% Gas Supply-to-Power Generati
Slide 18: Celebrating 20 Years of Sustainability – NET ZERO in 2025
Celebrating 20 Years of Sustainability – NET ZERO in 2025(1) Industry Leading Low Emissions Low Fresh Water Usage Emissions Intensity tCO2e/boe (Scope 1 and 2) Fresh Water Intensity m3/boe 0.017 0.005 Peer Peer Peer AAV Peer Peer Peer Peer Peer Peer Peer Peer AAV Peer Peer Peer Peer Peer Peer Peer P
Slide 19: Brookfield + Entropy Strategic Investment
Brookfield + Entropy Strategic Investment Transition Strategy $300 Million • 21,000 MW Renewable Power Portfolio • Expanded global reach Strategic Entropy Funded for Scale • Accelerated decarbonization Investment • $300 million to fund near-term projects including Glacier • Development & operating e
Slide 20: Entropy: Commercial Carbon Capture And Storage, Today
Entropy: Commercial Carbon Capture And Storage, Today Clean Tech Pure Play Technology • Dedicated, full-service • Exclusive ownership of world- industrial CCS company leading solvent • Proprietary, innovative • Innovative process technology and enhancement technologies commercial structure • Decades
Slide 21: Entropy Is Carbon Negative, Full Scope
Entropy Process Entropy Is Carbon Negative, Full Scope Entropy processes emit only 1 T CO2 with >90% carbon Entropy Parasitic Load capture efficiency Got smoke? Emissions Created by CCS Entropy captures >90% of both industrial process >9T of CO2 from Entropy emissions and its own carbon capture faci
Slide 22: Entropy's New Generation Of Carbon Capture Solvents
Entropy’s New Generation Of Carbon Capture Solvents • Traditional amines, such as monoethanolamine (“MEA”), can absorb CO2 but have significant heat and volume input requirements that make projects uneconomic at prevailing carbon prices ‒ MEA is used as industry standard for solvent benchmarking • I
Slide 23: CETRI Background: 2 GJ/Tonne Achieved In Two Pilots
CETRI Background: 2 GJ/Tonne Achieved In Two Pilots Entropy Technology Built on Unique Experience • At the U of R Boundary Dam Pilot Plant, CETRI achieved a heat duty of 2 GJ/tonne of CO2 on gas turbine exhaust. This compares to ~3.5 to 4 GJ/tonne for MEA • At the U of R GHG Technology Centre, CETRI
Slide 24: RES Using Deep Aquifers – The Local Solution Is Often Best
RES™ Using Deep Aquifers – The Local Solution Is Often Best Emitters Much of North America has suitable deep saline Tonnes CO2/year (000s) geological storage potential for permanent <10 10 100 1000 >1000 sequestration Deep Saline Storage Deposition - Millions of Years Ago In-House Subsurface Experti
Slide 25: Glacier Combined Phases
(2) (1) (1) (5) (1) (4) (1) (3) (2) (1) (1) (1) (4) (1) (3) (2) (1) Glacier Combined Phases (1) Tonnes CO2e/Year 200,000 (1) (4) Net Capital Expenditures(1) $81 MM Annual Net Operating Income(1) (1) (3) $6.8 MM ($50/T) BECP(1) ($/T) $55 1. See “Specified Financial Measures” in Advantage’s MD&A on pa
Slide 26: Advantage Contact Information
Advantage Contact Information Investor Relations 1.866.393.0393 ir@advantageog.com www.advantageog.com Listed on TSX: AAV Advantage Energy Ltd. Suite 2200, 440 – 2nd Avenue SW Calgary, Alberta T2P 5E9 Main: 403.718.8000 Facsimile: 403.718.8332 Advantage Glacier Gas Plant Mike Belenkie, P.Eng. Direct
Slide 27: Appendix
Financial Discipline Operationally Nimble Focus on Profitability APPENDIX
Slide 28: Area Overview – Deep Inventory of Gas, NGLs and Oil
Area Overview – Deep Inventory of Gas, NGLs and Oil PROGRESS Deep Inventory (1)(2)(3) GLACIER Booked Undeveloped Unbooked Upside TOTAL future location VALHALLA inventory ~1,400 to 1,500 650 WEMBLEY 143 318 166 119 228 Net <25 bbls/mmcf 25-100 bbls/mmcf >100 bbls/mmcf Sections AAV Lands • Total of ~2
Slide 29: Track Record of Enhancing Efficiency and Performance
Track Record of Enhancing Efficiency and Performance Pacesetter Drill Rates per Day $12,000 Relentless Drilling, Completion, & Tie-In Cost Efficiency 700 Relentless Drilling, Completion, & Tie-In Cost Efficiency 600 $10,000 Meters/Day (Spud to RR) 500 $8,000 400 $/Tonne $6,000 300 $4,000 200 $2,000
Slide 30: Advisory
Advisory Forward-Looking Information and Statements The information in this presentation contains certain forward-looking information and forward-looking statements (collectively, "forward-looking statements") within the meaning of applicable securities laws relating to the Corporation's plans and o
Slide 31: Advisory
Advisory estimates of the Corporation’s production and reserves volumes and the assumptions related thereto (including commodity prices and development costs) are accurate in all material respects; Entropy's receipt of partner, regulatory and community approvals; current and future carbon prices and
Slide 32: Advisory
Advisory The future acquisition by the Corporation of the Corporation's shares pursuant to a share buyback program, if any, and the level thereof is uncertain. Any decision to implement a share buyback program or acquire shares of the Corporation will be subject to the discretion of the board of dir
Slide 33: Advisory
Advisory Oil and Gas Metrics This presentation contains a number of oil and gas and finance metrics, including "FD&A cost", "capital efficiency", "PDP Reserve Replacement", "sustaining capital", "payout", "internal rate of return (IRR)", "break even carbon price (BECP)", "operating netback", “corpor
Slide 34: Advisory
Advisory Non-GAAP Financial Measures Adjusted Funds Flow The Corporation considers adjusted funds flow to be a useful measure of Advantage’s ability to generate cash from the production of natural gas and liquids, which may be used to settle outstanding debt and obligations, support future capital e
Slide 35: Advisory
Advisory Non-GAAP Ratios Adjusted Funds Flow per Share Adjusted funds flow per share is derived by dividing adjusted funds flow by the basic weighted average shares outstanding of the Corporation. Management believes that adjusted funds flow per share provides investors an indicator of funds generat
Slide 36: Advisory
Advisory Supplementary Financial Measures Break even carbon price Break even carbon price denotes the carbon price of a project that is equal to the net present value of capital spending and operating costs divided by the total CO2 captured over a 30-year period with both the numerator and denominat
Slide 37: Advisory
Advisory Oil and Gas Information Barrels of oil equivalent ("boe") and thousand cubic feet of natural gas equivalent ("mcfe") may be misleading, particularly if used in isolation. Boe and mcfe conversion ratios have been calculated using a conversion rate of six thousand cubic feet of natural gas eq
Slide 38: Advisory
Advisory Abbreviations The following abbreviations used in this presentation have the meanings set forth below. bbl barrel bbl/d barrel per day bbls/d barrels per day bbls/mmcf barrels per million cubic feet Bcf billion cubic feet boe barrels of oil equivalent of natural gas, on the basis of one bar