Advantage Energy Ltd · TSX:AAV
Advantage Energy — Advantage Oil & Gas — Investor Presentation (May 2012)
30 slides from Advantage Energy's investor presentation, May 2012
Slide 1: Investor Presentation May 2012
Investor Presentation May 2012 May 2012 Page 1
Slide 2: Advantage Oil & Gas Ltd.
Advantage Oil & Gas Ltd. • Listed on TSX & NYSE AAV • Shares Outstanding (Basic) 167 million • Market Capitalization at May 22, 2012 $ 493 million • Pro-forma(1) Q1 2011 Bank Debt (39% drawn) $ 118 million Convertible Debentures - Jan 2015 $ 86 million • Enterprise Value $ 697 million • Longview Sha
Slide 3: Advantage – Highlights
Advantage – Highlights • Credit facility increased from $275 million to $300 million • Secondary offering of Longview shares for gross proceeds of $74.7 million (closed May 22, 2012) strengthened balance sheet • Will fund future delineation & potential development of liquids rich Middle Montney • Pr
Slide 4: Focused on 10 Tcf Montney Natural Gas Resource Play at Glacier
Advantage – Focused on 10 Tcf (1) Montney Natural Gas Resource Play at Glacier Company Total Q1 2012 Production : 23,121 boe/d (2) Gas/Oil & Ngl % : 94/6 RLI: 24.3 yrs Glacier – Montney Natural Gas & Liquids Potential Q1 2012 Production : 16,090boe/d (2) Alberta Gas/Oil & Ngl % : 100/0 Avg. W.I. : 9
Slide 5: Advantage Year End 2011 Reserves
Advantage Year End 2011 Reserves AAV 2P Reserves = 217.9 Million Boe • Replaced 220% of production at Reserves by Areas a 2P F&D cost of $8.85/boe (1) • Glacier 2P F&D at $7.41/boe (1) • Proven reserves comprise 64% 6% of the 2P reserves 10% • 2011 Recycle ratio of 1.9x 84% • 3 Year 2P F&D of $9.90/
Slide 6: Glacier – Location & Area Land Holders
Glacier – Location & Area Land Holders Shale CNRL CNRL ARC PENGROWTH ARC AAV Glacier SHELL Silt BIRCHCLIFF Sand TALISMAN MURPHY Tupper W ENCANA CNRL SWAN AAV GLACIER MURPHY ENCANA Montney Total Hz Well Production DEVON 400 (mmcfe/d) 350 APACHE CNRL 300 Advantage is one of the larger 250 producers in
Slide 7: Glacier's Location Provides Technical & Economic Benefits
Glacier’s Location Provides Technical & Economic Benefits BC AB Glacier is located in Alberta and is within the over-pressured and extremely thick Montney siltstone fairway with Upper, Middle & Lower Montney Potential A 100 km A’ 09-36-79-20W6 05-09-76-13W6 01-21-77-11W6 c-42-F 93-P-09 A Upper Montn
Slide 8: Glacier Development Drives Production Growth & Lower Operating Costs
Glacier Development Drives Production Growth & Lower Operating Costs Advantage Production Growth (1) Advantage Operating Costs 25000 boe/d $/boe Top Tier Operating 95%Production 13.89 Cost Structure Growth 20000 12.11 10.66 15000 8.44 10000 5.80 ~5.80 5000 0 2008 2009 2010 2011 2012 H1 E 2008 2009 2
Slide 9: Top Decile Operating Cost Structure Due to Growth at Glacier
Top Decile Operating Cost Structure Due to Growth at Glacier $/boe (1) $25.00 Advantage is one of the lowest cost producers among the Canadian $20.00 intermediate oil and gas sector $15.00 AAV Corporate Q1 2012 $5.74/boe $10.00 $5.00 $0.00 (1) Based on Scotia Capital Inc. estimated 2012 operating &
Slide 10: Updated Glacier Montney Resource Assessment Highlights
Updated Glacier Montney Resource Assessment Highlights(1) • TPIIP increased 320%(2) to 10.07 Tcf gross raw (9.33 Tcf raw AAV working interest) & includes Upper, Middle & Lower Montney • Resource potential includes previously unassigned Middle Montney formation due to recent evaluation drilling resul
Slide 11: Glacier Montney Resource Assessment - TPIIP Increased to 9.33 Tcf
Glacier Montney Resource Assessment - TPIIP Increased to 9.33 Tcf (1) Sproule identified 6 layers of potential within our ~300 meters of Montney formation at Glacier. 9.33 Tcf (2) TPIIP includes recognition of 156 million bbls of NGL’s initially in place with 51 million bbls identified as recoverabl
Slide 12: Glacier Montney Reserves - Significant Growth Potential
Glacier Montney Reserves - Significant Growth Potential Reserves & contingent resource(1) estimates 3.6 Tcf imply significant reserve growth potential based (39% RF) on the updated Sproule Resource Assessment results and assigned recovery factor(2) (“RF”) 2.5 Tcf (27% RF) 1.8 Tcf (19% RF) 1.1 Tcf (1
Slide 13: Liquids Rich Middle Montney Delineation Drilling to Continue in H2 2012
Liquids Rich Middle Montney Delineation Drilling to Continue in H2 2012 • Phase IV program July 2011 to June 2012 consisted of drilling: • 22 gross (21.5 net) Upper Montney wells • 7 gross (7 net) “evaluation wells” to investigate Middle Montney & test new completion techniques in Lower Montney • Mi
Slide 14: Middle Montney Evaluation Wells Reveal NGL's Potential Q1 12
Middle Montney Evaluation Wells Reveal NGL’s Potential Q1 2012 • 5 Hz wells & 3 vertical recompletions targeted to evaluate porosity cut-off & MM flow potential across Glacier layer 1 land block • Vertical recompletions indicated presence of NGL’s MM • 4 Hz wells tested 3 separate layer 2 Middle Mon
Slide 15: Estimated Liquid Yields in Middle Montney Layers
Estimated Liquid Yields in Middle Montney Layers(1) Liquid Yield in On a revenue basis, a 2.5 mmcf/d liquids rich Bbls/mmcf 90 Middle Montney well is equivalent to a 5 mmcf/d Upper Montney well using the estimated average shallow cut liquid yield 68 57 57 51 35 30 25 Layer 1 Layer 2 Layer 3 Average
Slide 16: Middle Montney Liquids Processing Options
Middle Montney Liquids Processing Options Liquids processing options : Glacier 1 Glacier gas plant – install shallow cut (refrigeration) or deep cut Glacier facilities in a staged growth approach Gas Plant Alliance Pipeline Adjacent to TCPL 2 Alliance Pipeline – access liquids handling capability by
Slide 17: Glacier Gas Plant Positioned for Production Ramp-Up Capability
Glacier Gas Plant Positioned for Production Ramp-Up Capability Advantage 100% W.I. Glacier Gas Plant • Glacier gas plant will have capacity to process up to 140 mmcf/d • Plant modifications began in 2011 & will be completed in Q2 2012 as originally planned at a cost of $13 million • Provides operati
Slide 18: Glacier – Strong Operating Netbacks & Recycle Ratios
Glacier – Strong Operating Netbacks & Recycle Ratios Glacier Operating Netbacks & Recycle Ratio Illustrates “Torque” to Natural Gas Prices Revenue ($Cdn/mcf) $2.00(1) $3.00(1) $4.00(1) Royalties ($/mcf @ Royalty Rate 5.0%) $(0.10) $(0.15) $(0.20) Operating Costs ($/mcf) $(0.25) $(0.25) $(0.25) Opera
Slide 19: Glacier Upper Montney Well Economics – Sensitivity Analysis
Glacier Upper Montney(1) Well Economics – Sensitivity Analysis 120 Glacier Upper Montney Horizontal Current Average Upper Rate of Return (%)(1) Montney type curve 100 5 mmcf/d & 5 Bcf 80 Rate of Return - % 60 40 20 0 2.00 3.00 4.00 5.00 6.00 AECO Gas Price - $/mcf Rate and Reserve per well Sensitivi
Slide 20: Significant Future Drilling Potential at Glacier
Significant Future Drilling Potential at Glacier Estimated Drill Inventory with 3 layers of development is in excess of 900 locations as shown below. Further evaluation of Middle Montney could result in 2 additional layers of drilling potential. Current Inventory # Net Wells of Future Drilling Drill
Slide 21: Advantage Guidance & Hedging
Advantage Guidance & Hedging 6 months ending 12 months ending Guidance Jun 2012 Jun 2013 Production Average (boe/d) 22,800 – 23,400 22,500 – 23,000 Royalty Rate (%) 8% – 10% 6% to 8% Operating Costs ($/boe) $5.70 – $6.00 $5.50 - $5.95 Capital Expenditures ($Millions) $65 – $75 $70 - $80 Hedging – 51
Slide 22: Advantage Summary
Advantage Summary • World class Montney natural gas play at Glacier with one of the lowest cost structures in Western Canada • Discovery of NGL’s in the Middle Montney provides additional potential to increase reserves & resource growth • The Upper Montney & Lower Montney formations are still in ear
Slide 23: Advantage Contact Information
Advantage Contact Information Investor Relations 1.866.393.0393 [email protected] Andy Mah, P.Eng. President & Chief Executive Officer Craig Blackwood, C.A. Vice-President, Finance www.advantageog.com TSX:AAV NYSE:AAV Advantage Oil & Gas Ltd. Suite 700, 400 – 3rd Avenue SW Calgary, Alberta T2P 4H2
Slide 24: Appendix
Appendix @ayantage May 2012 Page 24 ‘Oil & Gas Lid
Slide 25: Western Canada Main Natural Gas Trunklines
Western Canada Main Natural Gas Trunklines British Horn River Alberta Columbia Basin Ft. St. John Ft. McMurray Natural gas pipeline Glacier interconnection already exists between B.C. and Montney Grande Prairie Alberta Basin Kitimat Edmonton Prince George Calgary Spectra Canada Pacific Northern Vanc
Slide 26: Glacier – Thick Montney Siltstone Supports Higher Reserve Recoveries
Glacier – Thick Montney “Siltstone” Supports Higher Reserve Recoveries Unconventional Marcellus Shale Horn River Shale Barnett “Shaley” silts Haynesville Arc Silt Shell Birchcliff Most active drilling area in Glacier Montney “Tight” sand Conventional Encana AAV Glacier the Montney Murphy Devon Silt
Slide 27: Sproule Montney Reserves & Contingent Resource
Sproule Montney Reserves & Contingent Resource(1) TPIIP Reserves + Contingent (TCF, Sales) 300 meters thick with 6 layers of potential (TCF raw) 1P + 2P + 3P+ ~2300 to 2350 m TVD Low Best High (%RF) (%RF) (%RF) 2.75 0.86 1.11 1.50 Upper Montney 31% 40% 55% 3.74 0.42 0.63 0.93 1000 feet (300 meters)
Slide 28: Montney Horizontal Well Production Range and Type Curve
Montney Horizontal Well Production Range and Type Curve Swan, Sunrise, Tupper, Pouce Coupe, Groundbirch and Glacier Data includes Glacier, Upper & Lower Montney Horizontals Swan, Tupper, Pouce Coupe South & Normalized 30 Day IP Production Rates Groundbirch 14000 12000 10000 The IP30 range and averag
Slide 29: Recent M&A Activity
Recent M&A Activity Recent M&A Activity: Recent M&A Activity: • CNRL / Talisman • Encana JV - Mitsubishi • ARC / Storm • Shell JV - PetroChina CNRL • Pengrowth ARC PENGROWTH / Monterey • CNRL / Talisman • Apache / BP • Apache / BP ARC • Murphy SHELL / Cequence CNRL • Murphy / Cequence BIRCHCLIFF TAL
Slide 30: Advisory
Advisory The information in this presentation contains certain forward-looking statements, including within the meaning of the United States Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future intentions or performance. All statements other than s
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