Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Shareholder Meeting (May 2011)
48 slides from Peyto Exploration & Development's shareholder meeting presentation, May 18, 2011
Slide 1: Peyto Exploration & Development Corp.
PEYTO Exploration & Development Corp Corp.
Slide 2: Annual General Meeting May 18, 2011
2011 ‐ 2003 ‐ 2010 1998 ‐ 2003 www.Peyto.com Annual General Meeting May 18, 2011
Slide 3: Peyto Profile
Peyto Profile PEYTO Exploration & Development Corp. N TSX Listing: PEY N Monthly Dividend: $0.06/share N Shares Outstanding: g 133 million ((6% insider ownership) p) N Current Production: 210 MMCFe/d (35,000 boe/d) N Reserves (12/31/11): PP 0.7 TCFe (111 mmboes) – 11 yrs TP 1.1 TCFe (180 mmboes) – 1
Slide 4: The Peyto Strategy
The Peyto Strategy PEYTO Exploration & Development Corp. Deploy p y Superior p 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% o
Slide 5: The Peyto Strategy: Superior Shareholder Return
The Peyto Strategy S Superior i ShShareholder h ld R Return t PEYTO Exploration & Development Corp. $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $‐ $ Share Sh price i w/dist /di t Share Sh price i 5 Historical Per Unit and Units Outstanding numbers have been adjusted to reflect the May 27,
Slide 6: We Invest In Ourselves
The Peyto Strategy W Invest We I t In I Ourselves O l PEYTO Exploration & Development Corp. $ $40.00 d per million) nd without cum distribution) Production/share >250 300 boe/d/mm shares!! $35.00 250 $30.00 or Share (boe/d Converted C t d to a Trust 200 $25.00 $20.00 150 uction per Unit o e price (w
Slide 7: Successful 2010 Capital Program
The Peyto Strategy S Successful f l 2010 C Capital it l P Program PEYTO Exploration & Development Corp. 180 160 140 120 2010 Drills 2010 Net Capex $201 Million 100 (All in $261MM less $60MM in Op Income from 2010 wells) 45 net wells 80 60 40 15,100 boe/d new production 20 0 91 MMCFe/d 2000 2001 2002
Slide 8: Peyto's Business
Peyto’s Business PEYTO Exploration & Development Corp.
Slide 9: Business Track Record
Peyto’s Business 12 Y Year T Track kRRecord d PEYTO Exploration & Development Corp. Prospect Generation Reserves Growth NAV Growth Profit Sharing (BCFe) (NPV5 Debt Adj/Unit) 1999 2000 2001 1999 2002 2000 2003 2001 2004 2002 2005 1999 2003 2006 2000 2004 2001 2007 2005 2008 2002 2006 2009 2003 2007 2
Slide 10: Applying Hz Technology to Tight Sands
Peyto’s Business A l i H Applying Hz T Technology h l tto Ti Tight ht S Sands d PEYTO Exploration & Development Corp. Sundance Area Reservoirs 10 12 10 5/17/2011
Slide 11: Proven Leader in the Deep Basin
Peyto’s Business P Proven Leader L d iin th the D Deep B Basin i PEYTO Exploration & Development Corp. Alberta's Central Deep Basin Activity AF AFF A FAA AA A EE A EF E Horizontal gas wells last 12 mo. A F F A AFAA F F AA FF F A F FA A A F A F AFA A A F F F F F A F Wells, On Production F A A F F AA
Slide 12: Focus on Returns Drives Capital Discipline
Peyto’s Business F Focus on Returns R t Drives Di C Capital it l Di Discipline i li PEYTO Exploration & Development Corp. 2011F < $20,000/boe/d? $60,000 2010 ‐ $17,300/boe/d 2009 ‐ $17,300/boe/d 2008 ‐ $33,100/boe/d 2007 ‐ $26,500/boe/d 2006 ‐ $50,300/boe/d 2005 ‐ $42,100/boe/d 2004 ‐ $22,200/boe/d
Slide 13: Unique Land Strategy
Peyto’s Business U i Unique L d St Land t Strategy PEYTO Exploration & Development Corp. 1,000 3,000,000 c) 900 ed Land (boe/ac 2,500,000 800 700 ac) 2,000,000 developed Reserrves/Undevelope eveloped Land (a 600 500 1,500,000 400 Unde 1,000,000 300 200 500,000 Und 100 - - PU (boe/ac) PA (boe/ac) Net
Slide 14: Deep Basin Lands Go A Long Way
Peyto’s Business Deep Basin Lands Go A Long Way PEYTO Exploration & Development Corp. Peyto Lands (as at Dec. 31, 2010) UNDEVELOPED DEVELOPED TOTAL ACRES COMPANY GROSS NET GROSS NET GROSS NET Peyto Energy Limited Partnership ("PELP") 210,016 164,265 146,296 102,626 356,311 266,891 Peyto - No. Of Sec
Slide 15: The Peyto Way: Deploy Superior Business Acumen
Deploy Superior Business Acumen The Peyto Way PEYTO Exploration & Development Corp. 15 5/17/2011
Slide 16: Understanding the Geology
Understanding the Geology Geotechnical Tools To Improve Hz Drilling PEYTO Exploration & Development Corp. 0 05 4 0 00 4 0 053 0 0 0 4 S A G E C 0 3 .0 0 003 L N E V A E / E 0 _ S D5W S D P D & N 0 N 2 2 1 0. O - U 0 69 0 IT 2 5 4 /7 4 0 5 2 1 /8 L C G R P 7 G X0 0 E/ 16 5/17/2011
Slide 17: Improved Drilling Performance
Improved Drilling Performance Better By Design PEYTO Exploration & Development Corp. Reduced Drill Times Optimized Bit Selection Improved Direction Control More Experienced Crews Top Drive Rigs > 30% faster!! 17 5/17/2011
Slide 18: Completion Cost Improvement
Completion Cost Improvement Innovative Water Handling PEYTO Exploration & Development Corp. 18 5/17/2011
Slide 19: Costs Coming Down
Drill and Complete , $M Drill and Complete, $M M $1,000 $2,000 $5,000 $6,000 $7,000 $0 $3,000 $4,000 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $0 00/06-27-054-22W5/2 00/14-07-056-17W5/2 00/13-06-055-21W5/0, Q1 00/03-16-055-22W5/0, Q1 00/14-03-055-20W5/3 00/14-36-054-22W5/0, Q1 00/13-18-055-24
Slide 20: Reduced Tie-in Costs
Reduced Tie-in Costs Multi-Well Pad Sites PEYTO Exploration & Development Corp. 20 5/17/2011
Slide 21: Infrastructure Investment
Infrastructure Investment Main Gathering Lines Minimize Backout PEYTO Exploration & Development Corp. R25 R24 R23 R22 R21 R20 R19 R18 R17 R16W5 FF C FF 36FCFF A FK FCF A AF CF A AF AF FF AFFF CF A 31 F A FFF L FAAFFF A F A G L A31 F F AF A F AF AF A F36 K F A G FF36 G J31F EE K L L L 36 K G CAFF AFF
Slide 22: Gas Plant Capacity Expansion
Gas Plant Capacity Expansion Nosehill, Wildhay and Oldman Plants All Bigger PEYTO Exploration & Development Corp. Peyto Nosehill Gas Processing Plant 11-21-55-20W5 20 mmcf/d 50 mmcf/d 60 mmcf/d 120 mmcf/d Capacity Capacity Capacity Capacity Q4 2009 Q3 2010 Q1 2011 Q4 2011 22 5/17/2011
Slide 23: Fun in the Field
Fun in the Field PEYTO Exploration & Development Corp.
Slide 24: Peyto's Assets
Peyto’s Peyto s Assets PEYTO Exploration & Development Corp.
Slide 25: Geographically Focused Core Areas
Peyto’s Assets G hi ll F Geographically dC Focused Core A Areas PEYTO Exploration & Development Corp. • 267,000 net acres R10 R8 R6 R4 R2W6 R27 R25 • 5 R23 operated R21 gas R19 plants R17 R15 R13W5 T64 ---(285 mmcf/d capacity) T64 • 900+ km pipelines C G F F CF F C F F F F GG Cutbank • 700+ producin
Slide 26: Large Hz MSF Inventory
Peyto’s Assets L Large H Hz MSF IInventory t PEYTO Exploration & Development Corp. Horizontal Locations 126 locations 19 locations 87 locations 116 locations 154 locations 6 locations >500 locations! 26 5/17/2011 *Over 300 of these locations are recognized in the IPC (formerly PLA) independent reser
Slide 27: Cardium Resource Play
Cardium Resource Play E Economic i CComparison i – Vertical V ti l vs. H Horizontal i t l PEYTO Exploration & Development Corp. 9,000 Ave Cardium Vertical ‐ last 5 yrs (00/13‐20‐055‐22W5/0) Well 1 Well 2 Well 3 8 000 8,000 Well 4 Well 5 Well 6 7,000 Well 7 Well 8 High Hz Well 9 Ave Vertical Ave Vert
Slide 28: Notikewin Resource Play
Notikewin Resource Play E Economic i CComparison i – Vertical V ti l vs. H Horizontal i t l PEYTO Exploration & Development Corp. Average Vertical Notikewin 00/08‐03‐056‐21W5/0 10,000 Well 1 Well 2 Hi h Hz High H W ll 4 Well 9,000 Well 3 Well 5 8,000 Well 6 Well 7 Well 8 Ave Vertical Ave Target on (
Slide 29: Wilrich Resource Play
Wilrich Resource Play E Economic i CComparison i – Vertical V ti l vs. H Horizontal i t l PEYTO Exploration & Development Corp. 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
Slide 30: Falher Resource Play
Falher Resource Play E Economic i CComparison i PEYTO Exploration & Development Corp. 9,000 Well 1 Well 2 8,000 Well 3 Well 4 7,000 Well 5 Ave Falher Hz Daily Gas Production (mcfe/d) 6,000 Target Hz Extrap 5,000 4,000 3,000 2,000 1,000 0 Months 30 5/17/2011
Slide 31: Longest Reserve Life
Peyto’s Assets L Longest tRReserve Lif Life PEYTO Exploration & Development Corp. 2010 Year End Proven Producing Reserve Life 15 Long 10 ears Average Ye Short 5 - 31 5/17/2011
Slide 32: Lowest Operating Costs
Peyto’s Assets Lowest Operating Costs 2010 Operating Costs $20 $18 $16 $14 Ave $10.82/boe $12 $/boe $10 $ $8 $6 $4 $2 $- Operating Costs include Transportation costs. 32 BOE factor - 6 mcf = 1 bbl of oil equivalent 5/17/2011
Slide 33: Lowest Operating Costs - Gas Producers
Peyto’s Assets L Lowest tOOperating ti C Costs t – Gas G Producers P d PEYTO Exploration & Development Corp. $18 $140 PEYTO $16 Daylight $120 Trilogy $14 Fairborne $100 Edm Par Oil Price ($/bbbl) Advantage Operatinng Costs ($/booe) $12 Perpetual Progress $10 $80 Tourmaline Celtic $8 $60 Average 12 %
Slide 34: Continuous Improvement in Operating Costs
Peyto’s Assets C ti Continuous IImprovementt in i OOperating ti Costs C t PEYTO Exploration & Development Corp. Methanol M h l recovery reduces d cost and recycles methanol Downhole chokes reduce methanol and the need for sand separators/more robust surface equipment Pad sites and automation r
Slide 35: Deep Gas Drilling Royalty Incentives
Peyto’s Assets D Deep G Gas Drilling D illi R Royalty lt IIncentives ti PEYTO Exploration & Development Corp. 3,500-4,000 m MD Trigger depth for Natural Gas Deep Drilling Program 2,200 m TVD reduced from 2,500m TVD to 2,000m TVD 3,700-4,000 m MD 2,650-2,850 m TVD 4,200 m MD 2,750-2,900 m TVD *3,700m
Slide 36: Low FD&A Costs, High Recycle Ratio
Peyto’s Assets Low FD&A Costs, Costs High Recycle Ratio PEYTO Exploration & Development Corp. $8 $7 $6 $5.02 $5 $/Mcfe $4 $3 $2 0 $2.10 $2 $1 $‐ 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 PDP TP P+P Field Netback 36 *FD&A costs include all capital expenditures and changes in Future Devel
Slide 37: Lowest FD&A Cost
Peyto’s Assets L Lowest t FD&A Cost C t PEYTO Exploration & Development Corp. 2010 Proven Producing FD&A Costs $40 $35 $30 $25 ost ($/boe) $20 FD&A Co $15 $10 $5 $0 37 FD&A Cost – Inclusive of Acquisition, Finding and Development Capital 5/17/2011
Slide 38: Lowest Total Costs
Peyto’s Assets L Lowest tTTotal t l Costs C t PEYTO Exploration & Development Corp. 2010 Low Total Costs 140% Total Revenue (($/boe) 120% 100% 80% 60% Total Costs ($/boe) / T 40% 20% 0% Op Costs Royalties PP FD&A Interest G&A 38 Total Costs per boe includes – Royalties, Op Costs, G&A, Interest, Mana
Slide 39: Peyto's Full-Cycle Gas Supply Cost
Peyto’s Assets P t ’ Full-Cycle Peyto’s F ll C l G Gas S Supply l CCostt PEYTO Exploration & Development Corp. $10 $10 hedged Realiized Price ($//mcfe) cfe) $8 40% $8 as Price ($/GJ J) s Price ($/mc Average Profit $6 $6 $/mcf Bonus Cnd$ Realized Gas O Monthly Ga $4 $4 PDP FD&A G&A, Interest $2 $2 Pe
Slide 40: Who's Profitable
Peyto’s Assets Wh ’ Profitable Who’s P fit bl PEYTO Exploration & Development Corp. Peyto Ave Profit 2002-2010 = $2.80/mcfe Ultra Pet. Ave Profit 2002-2010 = $1.96/mcfe $10 $10 $10 $10 Price ($/mcfe) e ($/mcfe) Price ($/mcf) $8 40% $8 $8 $8 ce ($/GJ) Average $/mcfe) Profit o Realized Gas Price $6 $6
Slide 41: Liquids Rich Margins
Peyto’s Assets Li id Ri Liquids Rich hMMargins i PEYTO Exploration & Development Corp. Total Peyto Revenue 85.7% Gas 14 3% Liquids 14.3% New Drilling May 16 Peyto 2010 Unhedged Cardium Hztl Wilrich/Notikewin Hztl swaps $3.80/GJ (Ave AECO daily) $4/GJ $4.50/mcf $ / ((Heat 17% up p Peyto y realized))
Slide 42: Peyto's Returns
Peyto’s Peyto s Returns PEYTO Exploration & Development Corp.
Slide 43: High Returns on Capital and Equity
Peyto’s Returns Hi hR High t Returns on C it l and Capital dE it Equity PEYTO Exploration & Development Corp. 60% $10 $ $9 50% $8 $7 40% $6 30% $5 $4 20% $3 $2 10% $1 0% $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* Return On Capital Employed (%) Return On Equity (%) Earnings/share
Slide 44: Shareholder Returns = Growth + Income
Peyto’s Returns Sh h ld Returns Shareholder R t = Growth G th + IIncome PEYTO Exploration & Development Corp. $50 $40 are PV5 debt adjusted/sha $30 $20 $10 $- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 PDP PU PA Cum Distribution/Div. 44 PV5 DA/share is Before Tax Net Present Value, disco
Slide 45: Investor Recycle Ratio - Industry Comparison
Peyto’s Returns I Investor t Recycle R l Ratio R ti - Industry I d t Comparison C i PEYTO Exploration & Development Corp. 30 3.0 Below 1.0 means you are paying more for the boes than the company sells them for. 2.5 2.0 ecycle Ratio 1.5 2010 Investor Re 1.0 0.5 - PP P+P 45 Investor Recycle Ratio = Q4
Slide 46: 2011 Outlook: More Of 2010
2011 Outlook More Of 2010 PEYTO Exploration & Development Corp. • Capital Expenditures ($300-$325 million before DRC) • Drill and Re-enter New Gas Locations ((90% Hz)) • Expand Gas Gathering & Processing Capacity • Expand Undeveloped Land Base • Expand Seismic Database • Acquire Additional Opportuni
Slide 47: 2011 Outlook: 2010 All Over Again?
2011 Outlook 2010 All O Over A Again? i ? PEYTO Exploration & Development Corp. $60,000 2011F ‐ $17,300/boe/d 2010 ‐ $17,300/boe/d 2009 ‐ $17,300/boe/d 2008 ‐ $33,100/boe/d 2012 Decline Assumes boe/d) 2007 ‐ $26,500/boe/d ~20,000 @ 16%* 2006 ‐ $50,300/boe/d ~18,000 @ 50% Annual Produciton Wedge (b 2
Slide 48: Peyto Exploration & Development Corp.
PEYTO Exploration & Development Corp Corp.
Peyto Exploration & Development — Shareholder Meeting (May 2011) on 6ix