Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Investor Presentation (September 2012)
47 slides from Peyto Exploration & Development's investor presentation, September 2012
Slide 1: Peyto Exploration & Development Corp. September 2012
2011 ‐ 2003 ‐ 2010 1998 ‐ 2003 www.Peyto.com September 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: 144 million (5% insider ownership) N Current Production: 300 MMCFe/d (50,000 boe/d) N Net Debt: $100 million (senior secured notes, 7 yr, 4.39% coupon, Prudential IM) $50 mill
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 1,100 locations to date) Develop Superior Assets N Operated and geographically concentrated (99% operated and processed) N Longest reserve lif
Slide 5: Superior Shareholder Return
The Peyto Strategy Superior Shareholder Return $40 $35 $30 $25 $20 Shareholder IRR $15 $10 $5 $0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Share Price w/Div Share Price 5 Historical Per Unit and Units Outstanding numbers have been adjusted to reflect the May 27,
Slide 6: Growth per Share
The Peyto Strategy Growth per Share 2012 YE Target 57,000 boe/d or 395 boe/d/mmsh 400 $10 $50 Production per Unit or Share (boe/d per million) $9 350 $8 300 $7 Gas Price ($/GJ) PEY+ Cum Div 250 $6 200 $5 $25 $4 150 $3 100 $2 50 $1 YoY production 0 $- $- growth/share liq prod/share gas prod/share AEC
Slide 7: Returns Driven
The Peyto Strategy Returns Driven 45,000 40,000 35,000 2011 30,000 25,000 Net Capital to PV5 BOED 20,000 15,000 10,000 5,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Production/share growth 2011 Capital Program 30,000 62 Net Wells 21,700 boe/d 20,000 2P Reserves/share growth BOE
Slide 8: Peyto's Profitable Business
Peyto’s Profitable Business
Slide 9: Build it for less than you sell it
Peyto’s Profitable Business “Build it for less than you sell it” $8 2011 PP FD&A $6 $/mcfe AECO $4 $10 Monthly $10 $/GJ $2 Peyto Unhedged Realized Price ($/mcfe) Peyto Realized Gas Price ($/mcfe) $8 39% $8 $- Average PRQ* PEYTO ARX PGF BNP ERF NGL CLT FEL* BIR TET BTE PMT ONR NAE CPG PWT VET TOU "Pr
Slide 10: Controlling Costs
Peyto’s Profitable Business Controlling Costs Land $25MM PEY 2011A Seismic $3MM Drilling $175MM PDP FD&A Compl. $104MM $/mcfe ($2.12) Wellsite Facilities $32MM $40MM $379MM ∆PDP Reserves (before Prod.) 29.8 mmboes PDP FD&A $12.72/boe $2.12/mcfe Cash Costs $/mcfe ($1.35) Royalties Opex Transport ($0.
Slide 11: Cost Control Challenges for the Canadian Industry
Peyto’s Profitable Business Cost Control Challenges for the Canadian Industry CND 2011* CND 2010* CND 2009** PDP FD&A $/mcfe ($4.20) ($4.74) ($4.31) Cash Costs $/mcfe ($3.91) ($3.64) ($3.63) Sales Price $/mcfe $7.89 $7.60 $7.27 ($0.68) ($0.78) Loss ($0.22) 11 *Includes: AAV,ARX,BIR,BNP,BTE,CLT,CPG,C
Slide 12: Liquids Rich Gas Streams
Peyto’s Profitable Business Liquids Rich Gas Streams Effective Gas Price per Mcfe (assumes $100/bbl oil) $6 Effective Price ($/Mcfe) $5 $4 Cardium (45 bbl/MMcf sls) Wilrich (7 bbl/MMcf sls) $3 + PP FD&A $2.12/Mcfe Notikewin (10-15 bbl/MMcf sls) $2 Falher (15-17 bbl/MMcf sls) Kakwa Cardium (60 bbl/MM
Slide 13: Focus on Returns Drives Capital Discipline
Peyto’s Profitable Business Focus on Returns Drives Capital Discipline 2011 ‐ $17,500/boe/d 2010 ‐ $17,300/boe/d 2009 ‐ $17,300/boe/d $50,000 2008 ‐ $33,100/boe/d Annual Production Wedge 2007 ‐ $26,500/boe/d 2006 ‐ $50,300/boe/d 2005 ‐ $42,100/boe/d 2004 ‐ $22,200/boe/d $40,000 2003 ‐ $25,300/boe/d
Slide 14: Peyto's Unique Assets
Peyto’s Unique Assets
Slide 15: Geographically Focused Core Areas
Peyto’s Assets Geographically Focused Core Areas • 385,252 net acres R11 R9 R7 R5 R3 R1W6 R26 R24 R22 R20 (InclR18ONR) R16 R14W5 T65 • 7 operated gas plants T65 Waskahigan ---(400 mmcf/d net capacity) T63 Cutbank • 1000+ km pipelinesT63 • 800+ producing zones T61 Kakwa • 50,000 boe/d T61 Processed b
Slide 16: Deep Basin Lands Go A Long Way
Peyto’s Assets Deep Basin Lands Go A Long Way Net Peyto Sections Net Sections of Cardium, Dunvegan, Notikewin, Falher, Wilrich, Bluesky, & Cadomin Net Sections for 2.2 TCFe of 2P EUR TCFe – Trillion Cubic Feet equivalent Lands at December 31, 2011 – Prior to ONR acquisition August 15, 2012 16 Based
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 9/14/2012
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 9/14/2012
Slide 19: Large Hz MSF Inventory
Peyto’s Assets Large Hz MSF Inventory Done To Do Total Total Total Total Total Vertical Hz Hz Hz Locations ONR Hz Wells Wells Locations Unbooked Locations Booked* Unbooked** 432 40 206 103 9 5 1 6 10 1 2 12 90 29 44 25 35 7 11 34 148 7 14 53 83 99 30 4 2 14 6 19 12 87 1 21 124 652 137 410 527 100 Ov
Slide 20: Capturing Value from Liquid Hydrocarbons
Peyto’s Assets Capturing Value from Liquid Hydrocarbons Natural Gas $1.74/GJ** Ethane C2H6 $6/bbl = $2.10/GJ* Propane C3H8 $19/bbl = $4.67/GJ Liquid Conversion Existing “Cheap” Deep Cut Butane C4H10 $62/bbl = $13.77/GJ Refrig. Cut (-110C) (-35C) (-80C) 1% C2 1% C2 40% C2 Pentanes C5 $95/bbl = $17.71
Slide 21: The Peyto Cheap Cut
Peyto’s Assets The Peyto “Cheap” Cut 8,200 KPa Gas +15-17% HC -35 oC 8,200 KPa Gas +5-10% HC PV=zRT 97% 50% 30% C5+ C4 C3 50% -80 oC C4 3-4,000 KPa 22 bbls/mmcf 15-20 °C Gas/Liquid 15 bbls/mmcf 60% C3 19-37,000 KPa $25-$30 MM 75-110 °C 21 Gas 9/14/2012
Slide 22: Facility Ownership and Control
Peyto’s Assets Facility Ownership and Control Peyto Gas Plants Cheap cut ETA WI Oldman 125 mmcf/d Q4 ’12 100% Nosehill 110 mmcf/d* Q1 ’13 100% Wildhay 60 mmcf/d* Q3 ’13 100% Ansell 9-34 60 mmcf/d TBD 69% Kakwa 35 mmcf/d TBD 100% Ansell 12-34 20 mmcf/d* TBD 100% Peyto Cutbank 10 mmcf/d 100% ONR Total
Slide 23: PEY/ONR Strategic Fit
Peyto’s Assets PEY/ONR Strategic Fit Pedley Edson Ansell 23 ONR Acquisition closed August 15, 2012. See press release dated July 3, 2012 9/14/2012
Slide 24: Longest Reserve Life
Peyto’s Assets Longest Reserve Life 10 Peyto 2011 PP RLI (yrs) 5 0 Industry 2011 PP RLI (yrs) 24 2011 Year End Proved Producing Reserve Life (using Q4 2011 production rate). 9/14/2012 Source: Company AIF & Financials
Slide 25: Lowest Operating Costs
Peyto’s Assets Lowest Operating Costs $20 $15 $10 Peyto 2011 Op Costs ($/boe) $5 $‐ Industry 2011 Op Costs ($/boe) Operating Costs include Transportation costs. ($/boe) 25 BOE factor - 6 mcf = 1 bbl of oil equivalent 9/14/2012
Slide 26: Lowest Operating Costs – Gas Producers
Peyto’s Assets Lowest Operating Costs – Gas Producers 1 %/yr 26 BOE factor - 6 mcf = 1 bbl of oil equivalent 9/14/2012 Operating costs include transportation
Slide 27: 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 28: Lowest FD&A Cost
Peyto’s Assets Lowest FD&A Cost $50 $40 $30 Peyto 2011 PP FD&A ($/boe) $20 $10 $‐ Industry 2011 PP FD&A ($/boe) 28 Proved Producing FD&A Cost – Inclusive of Acquisition, Finding and Development Capital *Inclusive of significant dispositions 9/14/2012
Slide 29: Low FD&A Costs = High Recycle Ratio
Peyto’s Assets Low FD&A Costs = High Recycle Ratio Proved Producing $50 Total Proved Proved + Probable $40 Field Netback $30 $20 Peyto PP Recycle Ratio $10 (10 yr) $0 Recycle Ratio is the Netback divided by FD&A *FD&A costs include all capital expenditures and changes in Future Development Capital 2
Slide 30: Lowest Total Costs
Peyto’s Assets Lowest Total Costs 200% Total Costs as % of Total Revenue 150% 100% Peyto 2011 Margin 50% 0% Op Costs Royalties G&A Interest PDP FD&A Industry 2011 Margin 30 Total Costs per boe includes – Royalties, Op Costs, G&A, Interest, Management Fees, and PP FD&A cost *Inclusive of significant
Slide 31: Peyto's Incredible Returns
Peyto’s Incredible Returns
Slide 32: High Returns on Capital and Equity
Peyto’s Returns High Returns on Capital and Equity 60% $10 50% $8 40% $6 30% 12 yr Average ROE $4 20% 10% $2 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 $0 Return On Capital Employed (%) Return On Equity (%) Earnings/share Realized Gas Price ($/mcfe) 12 yr Average ROCE Return
Slide 33: Strong Per Share Operating and Profit Margin
Peyto’s Returns Strong Per Share Operating and Profit Margin $140 Revenue $120 $100 $80 $ millions $60 Funds from $40 Ops Profit Margin $20 Earnings (last 12 yrs) $0 33 Funds from Operations is defined as earnings before performance based compensation, non-cash and non-recurring expenses. Profit Mar
Slide 34: Shareholder Returns = NAV Growth + Income
Peyto’s Returns Shareholder Returns = NAV Growth + Income $60 Cum Div/Dist P+P $50 PV5 debt adj./share TP $40 PDP $30 $20 $10 Compound Annual $- Growth Rate 34 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 35: Maintain a Strong Balance Sheet
Peyto’s Returns Maintain a Strong Balance Sheet Q2 2012 Net Debt/FFO 4.0 3.5 3.0 Peyto Q2/12 D/FFO 2.5 2.0 1.5 1.0 0.5 0.0 BTE POU NGL ARX PRQ PWT AAV PMT CPG ERF PBN PGF CR ZAR ONR BNP BIR TOU PEYTO VET TET CLT FEL Industry Ave. Q2/12 D/FFO 35 Net debt/annualized funds from operations is not a meas
Slide 36: 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 36 InSite Petroleum Consultants
Slide 37: 2012 Outlook: Biggest Year Ever
2012 Outlook Biggest Year Ever Drill (100% Hz Wells, Liquids Rich Natural Gas) Expand & Extract Increase Processing Capacity & NGL Yield Increase Undeveloped Land Base Shoot Seismic 2012 Capital Program Acquire Additional Opportunities and Partner Interests 37 9/14/2012
Slide 38: Future Outlook: Organic Growth Potential
Future Outlook Organic Growth Potential 80,000 70,000 60,000 50,000 First forecast NA BOED LNG exports. 40,000 30,000 20,000 10,000 0 38 9/14/2012
Slide 39: Corporate Fact Sheet
PEY.TO Corporate Fact Sheet PEYTO Exploration & Development Corp. N Long Reserve Life Asset ‐ 9 yrs PDP, 22 yrs P+P at YE 2011 N Lowest Cost Producer ‐ $0.97/mcfe ($5.84/boe) cash costs* Q2/12 N Superior Shareholder Returns ‐ Ave ROCE 21%, Ave ROE 40% N Own and Control ‐ Operate 99% of production, O
Slide 40: Appendix
Appendix • Quarterly Track Record • Tax Pools • Payout History • Gas Marketing • Liquids Marketing • Hedging Strategy • FAQ 40 9/14/2012
Slide 41: Quarterly Track Record
Quarterly Track Record 2012 2011 2010 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Operations Production Oil & NGLs (bbl/d) 4,480 4,101 3,856 3,947 3,918 3,811 3,746 3,389 3,439 3,322 3,465 3,330 Natural gas (mcf/d) 221,176 220,811 189,653 212,715 194,832 183,790 166,710 122,031 148,551 122,717 112,422
Slide 42: Peyto's Tax Pools
Organic Business Model Peyto’s Tax Pools $1,200 $1,000 $800 Millions $600 $400 $200 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 CEC UCC (25%) CEE (100%) CDE (30%) COGPE (10%) CAPEX 42 9/14/2012
Slide 43: Payout History
Payout History Peyto’s Dividend Sustainability $1,600 $1,400 $1,200 (Millions) $1,000 $800 Peyto Cum. Earnings $600 Q2/12 $400 $200 $0 Q1 2000 Q4 2000 Q3 2001 Q2 2002 Q1 2003 Q4 2003 Q3 2004 Q2 2005 Q1 2006 Q4 2006 Q3 2007 Q2 2008 Q1 2009 Q4 2009 Q3 2010 Q2 2011 Q1 2012 Cum Dist/Div (before DRIP) Cu
Slide 44: Gas Marketing
Gas Marketing Future Sales Financial Hedges - Gas Pricing 2011 2012 2013 2014 Te rm GJ/d ($/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 J J A S O From To 1-Apr-10 31-Mar-12 5000 $5.670 ● ● ● ● ● ● ● ● ● ● ● ● 1-Apr-11 31-Mar-12 5000 $6.200 ● ● ● ● ● ● ● ● ● ● ● ●
Slide 45: Liquids Marketing
Liquids Marketing Future Sales Financial Hedges - Propane 2012 2013 2014 Term bbl/d Pricing ($/bbl) A M J J A S O N D J F M A M J J A S O N D J F M From To 1-Sep-12 31-Mar-13 66 $49.56 ● ● ● ● ● ● ● 1-Sep-12 31-Mar-13 66 $44.10 ● ● ● ● ● ● ● 1-Sep-12 31-Mar-13 66 $32.34 ● ● ● ● ● ● ● 1-Sep-12 31-Mar
Slide 46: Successful Hedging Strategy
Successful Hedging Strategy Peyto Realized Price History 2003 2004 2006 2008 2009 2010 2011 $16.00 2005 2007 Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto Peyto $7.51/mcf $7.38/mcf $8.78/mcf $8.48/mcf $8.42/mcf $8.64/mcf $6.44/mcf $5.36/mcf $4.47/mcf AECO Mo AECO Mo AECO Mo AECO Mo AECO Mo AECO Mo
Slide 47: 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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