Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Non-Deal Roadshow (January 2012)
64 slides from Peyto Exploration & Development's roadshow presentation, January 2012
Slide 1: Haywood California Roadshow January 2012
2011 ‐ 2003 ‐ 2010 1998 ‐ 2003 www.Peyto.com Haywood California Roadshow January 2012
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 PEYTO Exploration & Development Corp. N TSX Listing: PEY N Monthly Dividend: $0.06/share N Shares Outstanding: 138 million (6% insider ownership) N Current Production: 250 MMCFe/d (42,000 boe/d) N Q3 2011 Net Debt*: $100 million (senior secured notes, 7 yr, 4.39% coupon, Prudential IM)
Slide 4: The Peyto Strategy
The Peyto Strategy Deploy Superior Business Acumen N Deep basin technical expertise N Continuous focus on returns N Internally generated drilling ideas (over 1,000 locations to date) Develop Superior Assets N Operated and geographically concentrated (98% operated and processed) N Longest reserve lif
Slide 5: Superior Shareholder Return
The Peyto’s Strategy Superior Shareholder Return $40 $35 $30 $25 $20 Shareholder IRR $15 $10 $5 $0 Share Price w/Div Share Price 5 Historical Per Unit and Units Outstanding numbers have been adjusted to reflect the May 27, 2005 2:1 stock split 3/8/2012 Oct 23,1998 price of $0.075/share, Dec 31, 2011
Slide 6: Growth per Share
The Peyto Strategy Growth per Share YoY production growth/share 6 Historical Per Unit (share) and Units (shares) Outstanding numbers have been adjusted to reflect the May 27, 2005 2:1 stock split BOE factor - 6 mcf = 1 bbl of oil equivalent 3/8/2012
Slide 7: Returns Driven
The Peyto Strategy Returns Driven 180 160 140 2010 120 100 80 Net Capital to PV10 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Production/share growth 2010 Capital Program 45 Net Wells 15,100 boe/d 2P Reserves/share growth IRR 7 Note: liquids are converted to molar equivale
Slide 8: Peyto's Profitable Business
Peyto’s Profitable Business
Slide 9: Build it for less than you sell it
Peyto’s Business “Build it for less than you sell it” 2010 PP FD&A $10 $8 $/mcfe $6 $4 $2 $- TET NGL PWT AAV PEYTO PRQ TOU BTE BIR NAE ZAR BNP DAY CLT FEL PMT VET ARX CPG PGF 2010 Op Costs (incl. Trans.) $3 $2 $/mcfe $1 $- TET NGL PWT AAV PEYTO TOU PRQ VRO BIR NAE BTE ZAR CLT BNP DAY PMT ARX FEL VET
Slide 10: Who's Profitable
Peyto’s Business Who’s Profitable Peyto Ave Profit 2002-2010 = $2.80/mcfe Ultra Pet. Ave Profit 2002-2010 = $1.96/mcfe $10 $10 NYMEX Daily Wellhead Gas Price ($/mcf) $8 $8 Ultra Realized Gas Price ($/mcfe) $6 $6 US$/mcf 39% Average $4 Bonus $4 Profit $2 PD FD&A $2 G&A, Interest Production Taxes Op C
Slide 11: The Low Cost Advantage
Peyto’s Business The Low Cost Advantage Peyto Ave CND >70% Gas* WTI Oil C$/bbl $105 11% 17% AECO Gas C$/GJ $2.75 89% 83% Unhedged Revenue ($/mcfe) $4.48 $5.18 Royalties ($0.46) ($0.56) Operating Costs (w/Transport) ($0.48) ($1.49) G&A ($0.04) ($0.31) Interest ($0.26) ($0.37) Cash Costs1 ($1.24) ($2.
Slide 12: Focus on Returns Drives Capital Discipline
Peyto’s Business Focus on Returns Drives Capital Discipline * Capital Efficiency is the cost to add new production measured at Dec 31 each year. Example: In 2010 , Peyto invested 12 $261MM to build 15,100 boe/d for a capital efficiency of $17,300/boe/d. 3/8/2012
Slide 13: Low Cost and Capital Efficiency Provides Insulation
Peyto’s Business Low Cost and Capital Efficiency Provides Insulation Cashflow less Decline Replacement Cost $200 $100 $‐ $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $(100) The Math… 42,000 boe/d $(200) *31% decline 13,000 boe/d decline *$17,500/boe/d $(300) $228MM replacement cost 42,000 boe/d *3.24/mcfe
Slide 14: Deep Basin Lands Go A Long Way
Peyto’s Business Deep Basin Lands Go A Long Way Net Peyto Sections Net Sections of Cardium, Dunvegan, Notikewin, Falher, Wilrich, Bluesky, & Cadomin Net Sections for 2 TCFe of 2P EUR 14 TCFe – Trillion Cubic Feet equivalent Lands at September 30, 2011 3/8/2012 Based on InSite Petroleum Consultants (
Slide 15: Peyto's Unique Assets
Peyto’s Unique Assets
Slide 16: Geographically Focused Core Areas
Peyto’s Assets Geographically Focused Core Areas • 292,000 net acres (825,000 net acres for all zones) • 5 operated gas plants ---(320 mmcf/d capacity) Cutbank • 900+ km pipelines • 750+ producing zones Kakwa • 42,000 boe/d Processed by Peyto Chicken Leland 150 miles Pine Creek Greater Sundance Oper
Slide 17: Deep Basin Permeability Segregation
Peyto’s Assets Deep Basin Permeability Segregation FOOTHILLS STRUCTURES GAS AS ING INCRE BILITY EA PERM WATER TRANSITION ZONE WATER GAS ASE INCRE AREA OF GAS DEPTH MATURATION 17 3/8/2012
Slide 18: Applying Hz Technology to Tight Deep Basin Sands
Peyto’s Assets Applying Hz Technology to Tight Deep Basin Sands Up to per section 18 *NGL recoveries can increase by up to 15 bbl/mmcf with deeper cutting processing facilities 3/8/2012
Slide 19: Large Hz MSF Inventory
Peyto’s Assets Large Hz MSF Inventory Horizontal Locations 192 locations 16 locations 14 locations 69 locations 180 locations Years of Drilling Inventory 182 locations 14 locations 2 locations >669 locations! 19 3/8/2012 *Over 300 of these locations are recognized in the IPC (formerly PLA) independe
Slide 20: Organically Built Core Areas
Peyto’s Assets Organically Built Core Areas W N 140 net sections of Chime Kakwa Cardium Rights N Over 85 wells Smoky drilled and on stream N Recent Horizontal success expands 2010 – 33 sections drilling 2011 – 15 sections Kisku inventory N Currently 2012 – 14 sections yielding > 60 bbl/mmcf of conde
Slide 21: Kisku Cardium – Vertical vs. Horizontal
Peyto’s Assets Kisku Cardium – Vertical vs. Horizontal 7,000 Hz Well #1 Hz Well #2 Kisku Cardium Hz Type Economics 6,000 Hz Well #3 Capital: $5.8MM (D/C/E/T) Raw production (mcfe/d) Hz Well #4 Vert Well #1 IP(1m): 3.6 mmcf/d, 60 bbl/mmcf sales 5,000 Vert Well #2 EUR: 3.2 BCFe sales Vert Well #3 Vert
Slide 22: Oldman Enhanced Liquids Extraction
Peyto’s Assets Oldman Enhanced Liquids Extraction N Reduce process temp. from -35oC to -80oC N Increase liquids recovery by 15 bbls/mmcf on bbl/mmcf more liquids over 100 mmcf/d net sales recovery N Approx. $23 MM Capital Investment N Less than 2 yr payout, IRR >75% at $3.27/GJ and $98/bbl Edm. Ligh
Slide 23: Longest Reserve Life
Peyto’s Assets Longest Reserve Life 2010 PP Reserve Life 15 10 Peyto PP RLI (yrs) 5 0 Industry PP RLI (yrs) 23 2010 Year End Proved Producing Reserve Life (using Q4 2010 production rate). 3/8/2012 Source: Company AIF & Financials
Slide 24: Lowest Operating Costs
Peyto’s Assets Lowest Operating Costs 2010 Operating Costs $20 $15 Peyto Op Costs ($/boe) $10 $5 $- Industry Op Costs ($/boe) Operating Costs include Transportation costs. ($/boe) 24 BOE factor - 6 mcf = 1 bbl of oil equivalent 3/8/2012
Slide 25: Lowest Operating Costs – Gas Producers
Peyto’s Assets Lowest Operating Costs – Gas Producers 1 %/yr 25 BOE factor - 6 mcf = 1 bbl of oil equivalent 3/8/2012 Note operating costs include transportation
Slide 26: Deep Gas Drilling Royalty Incentives
Peyto’s Assets Deep Gas Drilling Royalty Incentives 3,500-4,000 m MD Trigger depth for Natural Gas Deep Drilling Program 2,200 m reduced from TVD 2,500m TVD to 2,000m TVD 3,700-4,000 m MD 2,650-2,850 m TVD 4,200 m MD Effective Royalty 2,750-2,900 m TVD *3,700m Cardium Horizontal Well would receive 1
Slide 27: Lowest FD&A Cost
Peyto’s Assets Lowest FD&A Cost 2010 PP FD&A Costs $40 $35 $30 $25 $20 Peyto PP FD&A ($/boe) $15 $10 $5 $0 Industry PP FD&A ($/boe) 27 Proved Producing FD&A Cost – Inclusive of Acquisition, Finding and Development Capital 3/8/2012
Slide 28: Low FD&A Costs = High Recycle Ratio
Peyto’s Assets Low FD&A Costs = High Recycle Ratio PP FD&A $50 TP FD&A P+P FD&A $40 Field Netback $30 $20 Peyto PP Recycle Ratio $10 (10 yr) $‐ Recycle Ratio is the Netback divided by FD&A *FD&A costs include all capital expenditures and changes in Future Development Capital 28 Field Netback is reve
Slide 29: Lowest Total Costs
Peyto’s Assets Lowest Total Costs 2010 Total Costs Total Costs as % Total 140% 120% Revenue 100% 80% Peyto Margin 60% 40% 20% 0% Op Costs Royalties PP FD&A Interest G&A Industry Margin 29 Total Costs per boe includes – Royalties, Op Costs, G&A, Interest, Management Fees, and PP FD&A cost 3/8/2012
Slide 30: Peyto's Incredible Returns
Peyto’s Incredible Returns
Slide 31: High Returns on Capital and Equity
Peyto’s Returns High Returns on Capital and Equity 60% $10 $9 50% $8 40% $7 $6 30% $5 $4 20% Average ROE $3 10% $2 $1 0% $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Return On Capital Employed (%) Return On Equity (%) Earnings/share Realized Gas Price ($/mcfe) Average ROCE Return o
Slide 32: Shareholder Returns = NAV Growth + Income
Peyto’s Returns Shareholder Returns = NAV Growth + Income $50 Cum Dist/Div. PA $40 PU PV5 debt adjusted/share PDP $30 $20 $10 Compound Annual Growth Rate $- 32 PV5 DA/share is Before Tax Net Present Value, discounted at 5%, less debt divided by the number of shares/units outstanding Historical Units
Slide 33: Careful Use of Debt
Peyto’s Returns Careful Use of Debt $2.5 100% $2.0 80% $1.5 60% $1.0 40% $0.5 20% Average Net Debt $- 0% to NPV PDP NPV8 ($B) Net Debt/PDP NPV8 Proved Developed Producing (PDP) Net Present Value (NPV) discounted at 8%, as evaluated by the Independent Engineering firm 33 InSite Petroleum Consultants
Slide 34: 2012 Outlook: Drill, Expand, Increase
2012 Outlook More Of 2011 Drill (100% Hz Wells) Expand Gas Gathering & Processing Capacity Increase Undeveloped Land Base Shoot Seismic 2012 Capital Program Acquire Additional Opportunities and Partner Interests 34 3/8/2012
Slide 35: Select Your Menu For Best Returns
2012 Outlook Select Your Menu For Best Returns Peyto Energy Returns - January 2012 $2.50/GJ $4/GJ $2.50/GJ $4/GJ FROM THE GRILL STARTERS Sundance Falher Hz 20% 40% DESERTS Nosehill Wilrich Hz 13% 36% Sundance Bluesky Hz 24% 54% Oldman Enhanced Liquids >75% Nosehill Noti. Hz 16% 42% Recovery Obed Not
Slide 36: It Just Gets Easier to Grow
2012 Outlook It Just Gets Easier to Grow 2012 Decline Assumes ~20,700 @ 16%* ~21,300 @ 46% 31% base decline 2011 Decline Actual 2010 Base ~ 15,000 @ 14% 2010 New ~ 15,000 @ 52% 33% base decline Triple production in 3 years!! 36 BOE factor - 6 mcf = 1 bbl of oil equivalent *Forecast decline rate base
Slide 37: Grow Production in Time for Export?
Long Term Potential Grow Production in Time for Export? 2015 is the forecast for first N.A. LNG Export 37 BOE factor - 6 mcf = 1 bbl of oil equivalent *Assumes equivalent capital efficiency to years 2009 and 2010 of $17,300/boe/d 3/8/2012
Slide 38: Appendix
Appendix • Tight Gas Resource Plays • Cardium • Notikewin • Wilrich • Falher • Quarterly Track Record • Tax Pools • Payout Ratio • Gas Marketing • Hedging Strategy • Reserves data – volumes, values, RLI 38 3/8/2012
Slide 39: Tight Gas Resource Plays
Tight Gas Resource Plays Horizontal MSF Projects 39 3/8/2012
Slide 40: Cardium Resource Play
Cardium Resource Play Horizontal MSF Project Cardium Gas Fairway Sundance Cardium • >4,000 sq miles • up to 65 TCF Gas in Place1 • ~ 2-3 TCF developed to date Peyto Cardium Rights • >400 sq miles (gross) • 1.0 TCF developed to date (vertical wells only)2 Gas Pools • ~ 72% Working Interest Oil Pools
Slide 41: Cardium Type Log and Reserves
Cardium Resource Play Cardium Type Log and Reserves Volumetric Reserves AREA(Ha)= 256 (1 section) 23m Gross thickness H(m)= 15 15m Net Pay (using POROSITY(%)= 9 6% porosity cutoff) SW(%)= 18 TEMP.(Deg.C)= 80 PRES.(kPa)= 19000 Z= 0.8 Recovery Factor(%)= 85 Surface Loss(%)= 7 OGIP(BCF)= 19.2 RGIP RAW(
Slide 42: Cardium Resource Play Horizontal MSF Project
Cardium Resource Play Horizontal MSF Project A N Peyto Crdm vt A N Peyto Crdm hz 42 3/8/2012
Slide 43: Economic Comparison – Vertical vs. Horizontal
Cardium Resource Play Economic Comparison – Vertical vs. Horizontal Ave Cardium Vertical ‐ last 5 yrs (00/13‐20‐055‐22W5/0) Well 1 Well 2 8,000 Well 3 Well 4 Well 5 Well 6 7,000 Well 7 Well 8 Well 9 Well 10 Well 11 6,000 Well 12 High Hz Well 13 Ave Vertical Ave Target Well 14 Ave Vertical Daily Gas
Slide 44: Payout Analysis
Cardium Resource Play Payout Analysis All in Costs (000’s) Drill $2,800 Complete $2,000 Equip/Tie in $250 Well Cost $5,050 Land/Seismic $50 Facilities $550 Total $5,650 44 3/8/2012
Slide 45: Conservative Horizontal Reserve Assignment
Cardium Resource Play Conservative Horizontal Reserve Assignment P+P 280m Ave Drainage Area: PDP 90 ac (340m perimeter) Ave 80 T P+P 100 ac (360m perimeter) sand PDP N 340m P+P Ave Drainage Area: 360m PDP 135 ac (250m perimeter) P+P 155 ac (280m perimeter) N *Average of 12 horizontal PDP 1Average of
Slide 46: Notikewin Resource Play
Notikewin Resource Play Horizontal MSF Project A N Peyto Not. vt A N Peyto PeytoCrdm hz Not. hz Peyto Notikewin Mineral Rights 46 3/8/2012
Slide 47: Notikewin Type Log
Notikewin Resource Play Type Log 1-20-54-22W5 28m Gross Pay 19m Net Pay Volumetric Reserves AREA(Ha)= 256 (1 section) H(m)= 19 POROSITY(%)= 8 SW(%)= 35 TEMP.(Deg.C)= 96 PRES.(kPa)= 32000 Z= 1.02 Recovery Factor(%)= 85 Surface Loss(%)= 4.5 OGIP(BCF)= 22 RGIP RAW(BCF)= 18 SALES GAS(BCF)= 18 6% Porosit
Slide 48: Economic Comparison – Vertical vs. Horizontal
Notikewin Resource Play Economic Comparison – Vertical vs. Horizontal Average Vertical Notikewin 00/08‐03‐056‐21W5/0 Well 1 Well 2 9,000 Well 4 Well 3 Well 5 High Hz Well 6 Well 7 8,000 Well 8 Well 9 Well 10 Well 11 7,000 Well 12 Well 13 Ave Vertical Ave Target Daily Gas Production (mcfe/d) Well 14
Slide 49: Payout Analysis
Notikewin Resource Play Payout Analysis All in Costs (000’s) Drill $2,900 Complete $1,500 Equip/Tie in $250 Well Cost $4,650 Land/Seismic $50 Facilities $500 Total $5,200 49 3/8/2012
Slide 50: Wilrich Resource Play
Wilrich Resource Play Horizontal MSF Project Nosehill Project Area A N Peyto Wil. vt A N Peyto PeytoCrdm hz Wil. hz Peyto Wilrich Mineral Rights 50 3/8/2012
Slide 51: Wilrich Type Log
Wilrich Resource Play Type Log 7-5-56-20W5 23m Gross Pay 16m Net Pay Volumetric Reserves AREA(Ha)= 256 (1 section) JET H(m)= 16 2825 FRAC (-1578.4) POROSITY(%)= 8 SW(%)= 35 TEMP.(Deg.C)= 98 PRES.(kPa)= 24000 Z= 0.92 Recovery Factor(%)= 85 Surface Loss(%)= 4.5 OGIP(BCF)= 15 RGIP RAW(BCF)= 13 SALES GA
Slide 52: Economic Comparison – Vertical vs. Horizontal
Wilrich Resource Play Economic Comparison – Vertical vs. Horizontal Average Wilrich Vertical 00/02‐26‐055‐20W5/0 Well 1 Well 2 Well 3 9,000 Well 4 Well 5 Well 6 Well 7 Well 8 Well 9 Well 10 Well 11 8,000 Well 12 Well 13 High Hz Well 14 Well 15 Ave Target Well 16 Well 17 7,000 Well 18 Well 19 Ave Ver
Slide 53: Payout Analysis
Wilrich Resource Play Payout Analysis All in Costs (000’s) Drill $2,800 Complete $1,600 Equip/Tie in $250 Well Cost $4,650 Land/Seismic $50 Facilities $500 Total $5,200 53 3/8/2012
Slide 54: Falher Type Log
Falher Resource Play Type Log 2-8-55-21W5 Example Volumetric Reserves Notikewin AREA(Ha)= 256 (1 section) H(m)= 10 POROSITY(%)= 8 SW(%)= 35 TEMP.(Deg.C)= 98 Falher A PRES.(kPa)= 30000 Z= 0.92 Recovery Factor(%)= 85 Surface Loss(%)= 4.5 Falher B OGIP(BCF)= 12 RGIP RAW(BCF)= 10 SALES GAS(BCF)= 10 Falh
Slide 55: Falher Economic Comparison
Falher Resource Play Economic Comparison 9,000 Well 1 Well 2 8,000 Well 3 Well 4 7,000 Daily Gas Production (mcfe/d) Well 5 Well 6 6,000 Ave Falher Hz Target Hz Extrap 5,000 4,000 3,000 2,000 1,000 0 Months 55 3/8/2012
Slide 56: Payout Analysis
Falher Resource Play Payout Analysis All in Costs (000’s) Drill $2,800 Complete $1,600 Equip/Tie in $250 Well Cost $4,650 Land/Seismic $50 Facilities $500 Total $5,200 56 3/8/2012
Slide 57: Quarterly Track Record
Quarterly Track Record 2011 2010 2009 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Operations Production Oil & NGLs (bbl/d) 3,918 3,811 3,746 3,389 3,439 3,322 3,465 3,330 3,028 3,222 2,916 Natural gas (mcf/d) 194,832 183,790 166,710 122,031 148,551 122,717 112,422 103,934 92,718 95,467 89,259 Barrels of
Slide 58: Peyto's Tax Pools
Organic Business Model Peyto’s Tax Pools $1,000 $900 $800 $700 $600 Millions $500 $400 $300 $200 $100 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 UCC (25%) CEE (100%) CDE (30%) COGPE (10%) CAPEX 58 3/8/2012
Slide 59: Payout Ratio History
Payout Ratio History Maximum 91% Minimum Converted 42% to a Trust at 57% Converted to a Corp. at 32% Historical Per Unit and Units Outstanding numbers have been adjusted to reflect the May 27, 2005 2:1 stock split Total Payout Ratio is prior to Distribution Re-investments 59 3/8/2012
Slide 60: Gas Marketing
Gas Marketing Future Sales Financial Hedges - Gas Pricing 2010 2011 2012 20 Term GJ/d ($/GJ) 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 From To 1-Nov-10 31-Mar-11 5000 $8.910 ● ● ● ● ● 1-Nov-10 31-Mar-11 5000 $9.150 ● ● ● ● ● 4-Nov-09 31-Mar-11 5000 $6.200 ● ● ● ● ●
Slide 61: Successful Hedging Strategy
Successful Hedging Strategy Peyto Realized Price History 2003 2004 2005 2006 2007 2008 2009 2010 $16.00 Peyto $7.51/mcf Peyto $7.38/mcf Peyto $8.78/mcf Peyto $8.46/mcf Peyto $8.42/mcf Peyto $8.64/mcf Peyto $6.44/mcf Peyto $5.36/mcf AECO Mo AECO Mo AECO Mo AECO Mo AECO Mo AECO Mo AECO Mo AECO Mo $14.
Slide 62: Peyto's 2010 Reserves
Peyto’s 2010 Reserves Volumes Natural Gas Sales Gas Liquids & Oil Category (BCF) (Mstb) BOE's(Mstb) Proven Producing 568 15,959 110,620 Proven Non-Producing 12 305 2,236 Proven Undeveloped 350 8,595 66,846 Total Proven 929 24,859 179,701 Probable Additional 424 9,255 79,977 Proved + Probable 1,353 3
Slide 63: Peyto's 2010 Reserves – Before Tax NPV
Peyto’s 2010 Reserves Before Tax Net Present Value Variable Price Economics NPV (millions of CDN dollars) Category 0% 5% 8% 10% Proven Producing $ 4,503 $ 2,363 $ 1,821 $ 1,582 Proven Non-Producing $ 92 $ 37 $ 24 $ 18 Proven Undeveloped $ 2,198 $ 1,004 $ 678 $ 532 Total Proven $ 6,793 $ 3,404 $ 2,52
Slide 64: Frequently Asked Questions
FAQ Frequently Asked Questions 1. Peyto has had some spectacular growth over the last two 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 two years is the result of achieving very good rates o
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