Advantage Energy Ltd · TSX:AAV
Advantage Energy — Advantage Oil & Gas — Investor Presentation (March 2017)
40 slides from Advantage Energy's investor presentation, March 2017
Slide 1: Investor Presentation March 2017
“Record Low Reserve Addition Costs of PDP $0.84/Mcfe in 2016 Tops Off A Stellar Year of Operating & Financial Results. Development Plan Growth to 316 mmcfe/d (52,670 boe/d) Underway" Investor Presentation TSX / NYSE: AAV March 2017
Slide 2: Advantage at a Glance
ADVANTAGE AT A GLANCE TSX, NYSE: AAV TSX 52-week trading range $6.41 - $10.33 Shares Outstanding (basic) 184.7 million Annual Production - 2017 Budget 16% Production Growth 236 mmcfe/d (39,330 boe/d) Market Capitalization @ March 2, 2017 $1.5 billion As of December 31, 2016: Bank Debt (38% drawn on
Slide 3: Our Strategy – Long Term Profitable & Sustainable Growth
OUR STRATEGY – LONG TERM PROFITABLE & SUSTAINABLE GROWTH (2) 2016 PDP F+D $0.84/mcfe (2) 1P F+D $0.25/mcfe Strong Balance (2) 3 Year 2P F+D $0.46/mcfe Sheet 2016 Q4 Total corporate cash (3) 1.0x D/CF 2016 costs $0.83/mcfe Operating & Hedged to Protect Financial Flexibility Future Cash Flow (1) Own &
Slide 4: Last 3 Years - A Solid Track Record of Value Generation
LAST 3 YEARS - A SOLID TRACK RECORD OF VALUE GENERATION THREE-YEAR TOTAL SHAREHOLDER 2016 RETURN ON CAPITAL RETURN (Dec. 31/13 to Dec. 31/16) $/mcfe 98% Natural gas and liquids sales price $2.89 including realized hedging gains Total Corporate Cash Costs $(0.66)(1) Total Capital Costs, PDP F&D $(0.8
Slide 5: 2017 Budget Funded Through Cash Flow Including Upsized Glacier Gas Plant Expansion
2017 BUDGET FUNDED THROUGH CASH FLOW INCLUDING UPSIZED GLACIER GAS PLANT EXPANSION TO 400 MMCF/D ($ million) 2017 Highlights (1) $205 $210 16% Annual Production Growth Drill 21 wells $37 23% Cash Flow Per Share Growth(2) 236 MMcfe/d (39,330 Boe/d) Annual Average Complete 24 wells $71 Production $0.9
Slide 6: Productivity & Infrastructure Supporting 2017 Through 2019 Growth
PRODUCTIVITY & INFRASTRUCTURE SUPPORTING 2017 THROUGH 2019 GROWTH >70 mmcf/d Surplus Well Productivity IP30 Average(1) 5 wells Completed Waiting on Testing 15 wells Uncompleted Standing Wells(2) 150 mmcf/d Plant Expansion to 400 mmcf/d in progress >180 mmcf/d Additional Sales Gas Pipeline Capacity,
Slide 7: Advantage's 2017 Through 2019 Growth
ADVANTAGE’S 2017 THROUGH 2019 GROWTH 2017 thru 2019 Highlights Post 2019 56% Production Growth (2017 thru 2019) 400 mmcfe/d $625 Million Capital Investment (66,670 boe/d) $735 Million Cash Flow @ Average AECO Cdn $2.95/mcf ($2.80/GJ) 0.2x YE 2019 Total Debt/Trailing Cash Flow 2017 thru 2019 Q4 221 t
Slide 8: Advantage Growth Plan 2017 Through 2019
ADVANTAGE GROWTH PLAN 2017 THROUGH 2019(1) Annual Average Production 16% Capital Spending Cumulative $625 million CAGR (2) (mmcfe/d) ($ millions) 2017-2019 16% 316 15% $205 $210 $210 16% 272 236 203 $128 2016 2017 Budget 2018E 2019E 2016 2017 Budget 2018E 2019E Cash Flow per Share Cumulative Cash Fl
Slide 9: Cash Surplus Reduces Total Debt to Cash Flow
CASH SURPLUS REDUCES TOTAL DEBT TO CASH FLOW Cumulative Cash Surplus(1) Year-end Total Debt to Cash Flow (1) @$2.95/MCF ($2.80/GJ) Ratio $80 $110 million surplus 2017-2019 1.0 $39 0.7 $25 0.5 $5 0.2 2016 2017 Budget 2018E 2019E 2016 2017 Budget 2018E 2019E Note: (1) Based on Advantage 2017 Budget an
Slide 10: Hedging, Transportation and Markets
HEDGING, TRANSPORTATION AND MARKETS Current Hedges TCPL Transportation Service 100% firm service secured thru 2019. Advantage’s surplus plant & well Production(1) Average AECO capacity provides flexibility to capture high pipeline flow periods. Period Hedged (net) Fixed Price 2017 45% $3.19/mcf 2018
Slide 11: Development Plan Natural Gas Price Sensitivity – CFPS & D/CF
DEVELOPMENT PLAN NATURAL GAS PRICE SENSITIVITY – CFPS & D/CF Cash Flow per Share Total Debt to Trailing Cash Sensitivity (1) Flow Sensitivity (1) $1.86 1.4 1.3 AECO $1.49 $1.58 1.2 $2.00/mcf 1.0 0.9 $1.32 AECO $2.50/mcf 0.8 $1.20 $1.30 0.7 0.6 $1.12 AECO 0.5 $1.03 $1.12 $3.00/mcf $0.94 $1.02 $0.92 A
Slide 12: Maintenance Capital and Surplus Cash Flow Sensitivity
MAINTENANCE CAPITAL AND SURPLUS CASH FLOW SENSITIVITY ILLUSTRATIVE AT 325 MMCFE/D 3 Year Cumulative 3 Year Cumulative (NO HEDGING INCLUDED) Surplus Surplus $525 million $690 million $360 Million $305 Million “Surplus Cash Flow Above $1.45/mcf” Cash Cash Surplus Surplus $175 million $230 million per
Slide 13: Attractive Netbacks & Recycle Ratios Achievable Without Hedging
ATTRACTIVE NETBACKS & RECYCLE RATIOS ARE ACHIEVABLE WITHOUT HEDGING Montney Natural Gas Producers Total Cost Structure – Q3 2016 “NO HEDGING INCLUDED” $/Mcfe $5.00 Illustrative Illustrative AECO Cdn AECO Cdn $4.50 AAV - $0.85/mcfe Lowest Total Glacier Netbacks $2.00/mcf $3.00/mcf Corporate Cash Cost
Slide 14: High Quality Montney Assets, Operational Excellence
HIGH QUALITY MONTNEY ASSETS, OPERATIONAL EXCELLENCE 14
Slide 15: Glacier Drives Growth Through Next Decade, Additional Montney Lands Provide Upside
GLACIER DRIVES GROWTH THROUGH NEXT DECADE, ADDITIONAL MONTNEY LANDS PROVIDES FUTURE UPSIDE Current development at Glacier including dry Progress and liquids rich gas drilling with a future drilling (Future) inventory >1,100 locations 100% owned Total 157 net Montney sections (100,480 acres) Glac
Slide 16: Industry Activity Encroaching Progress, Wembley and Valhalla Land Blocks
INDUSTRY ACTIVITY ENCROACHING PROGRESS, WEMBLEY AND VALHALLA LAND BLOCKS Pipestone/Wembley Multi-Layer Development New Locations Upper Montney Middle Montney Lower Montney Progress Valhalla Recent Wells Pipestone New Wells On-Production Development Drill 12-18 Months (28 Net Sections) • Multi-Layer
Slide 17: Only 7% of Glacier's Future Well Inventory Required for 2017 Thru 2019
ONLY 7% OF GLACIER’S FUTURE WELL INVENTORY REQUIRED FOR 2017 THRU 2019 DEVELOPMENT Only 83 of our 1,100 Future Drill Locations at Glacier is required to achieve growth to 316 mmcfe/d average 2019 Only 307 undeveloped locations booked in 2P reserves Year End 2016 Drilled(3) Wells by Layer >1,100
Slide 18: LM Wells From Recent Eight Well Pad Outperforming Production Type Curve
(1) LM WELLS FROM RECENT 120 MMCF/D EIGHT WELL PAD OUTPERFORMING PRODUCTION TYPE CURVE 3 longer lateral LM wells (still production restricted) are significantly outperforming average well type curve LM Well #1 LM Well #2 LM Well #3 LM Well #4 Budget Type Curve (IP30 7.5 mmcf/d & 7.5 Bcf) Longer Late
Slide 19: Upper & Lower Montney Well Production Continues to Improve
UPPER & LOWER MONTNEY WELL PRODUCTION CONTINUES TO IMPROVE >16mmcf/d New wells are normally restricted to ~10 mmcf/d for frac sand flowback control during initial 6 months Production Average (24 wells) Budget Type Curve (IP30 7.5 mmcf/d & 7.5 Bcf) Wells tested, not on-production. IP30 9.0 mmcf/d & 9
Slide 20: Most Recent Lower Montney Wells With Up To 30 Frac Stages
MOST RECENT LOWER MONTNEY WELLS WITH UP TO 30 FRAC STAGES (OPEN-HOLE PACKERS AND CEMENTED PORTS) “Additional Lower Montney wells with longer laterals, reduced frac spacing and cemented ports are continuing to be brought on production.” Wells restricted to ~10mmcf/d for frac sand flowback control dur
Slide 21: Glacier Middle Montney Wells Exceeding Average Budget Type Curve
GLACIER MIDDLE MONTNEY WELLS EXCEEDING AVERAGE BUDGET TYPE CURVE • Wells are exceeding current type curves • Ongoing delineation identifies sweet spots within different Middle Montney layers. Frac designs are tailored to further optimize results. 12-2 well (2013) cumulative production > 3.8 Bcfe Mid
Slide 22: Robust Glacier Montney Well Economics
ROBUST GLACIER MONTNEY WELL ECONOMICS Upper & Lower Montney Middle Montney (Dry Gas) (50 bbls/mmcf(1) C3+, 45% C5+) ROR = 108% Advantage achieved >20% ROR = 106% DC & E well cost reduction with >35% increase in frac count ROR = 76% ROR = 75% Type Higher IP Type Higher IP Curve & & EUR Curve & & EUR
Slide 23: Growth Beyond 400 mmcf/d Can Be Accommodated on Existing Plant Site
GROWTH BEYOND 400 MMCF/D CAN BE ACCOMMODATED ON EXISTING PLANT SITE 100% Owned Glacier Gas Plant – Positioned for Production Ramp-up Advantage Gas Plant Room for Additional Expansion To be expanded from Alliance Sales Gas Beyond 400 mmcf/d 250 mmcf/d to 400 TCPL Sales Meter Line mmcf/d Dry & Liquids
Slide 24: Clear Vision for Growth, Financial Strength, Proven Expertise
Clear Vision for Growth Financial Strength Proven Expertise
Slide 25: Appendix
APPENDIX 25
Slide 26: Glacier Growth Plan Details
GLACIER GROWTH PLAN DETAILS 16% ANNUAL AVERAGE PRODUCTION GROWTH 2017 THRU 2019 Annual Average Production (mmcfe/d) 316 272 236 203 2016 2017 Budget 2018E 2019E Annual Average Production Growth 16% average growth per year (“CAGR”) 16% 16% 15% 2017 Budget 2018E 2019E 26
Slide 27: Improving Well Performance and Lower Well Costs Through Technology
IMPROVING WELL PERFORMANCE AND LOWER WELL COSTS THROUGH DRILLING & COMPLETION TECHNOLOGY Recent “TOP Quartile” Wells (1) Well Costs Reduced ($ millions) Increasing frac count has improved long term NOTE: 2017 cost estimate includes an allowance for inflation production performance in all layers UPPE
Slide 28: Continuous Improvement Has Created Industry Leading Efficiencies
CONTINUOUS IMPROVEMENT HAS CREATED INDUSTRY LEADING EFFICIENCIES 28
Slide 29: Upper and Lower Montney Wells - Improving Performance Since 2008
UPPER AND LOWER MONTNEY WELLS - IMPROVING PERFORMANCE SINCE 2008 Newer wells restricted for frac sand flow back Budget Type Curve (IP30 7.5 mmcf/d & 7.5 Bcf) Data: updated to February 2017 29
Slide 30: Liquids Rich Middle Montney Well Performance Improvements Since 2011
LIQUIDS RICH MIDDLE MONTNEY WELL PERFORMANCE IMPROVEMENTS SINCE 2011 • 2015/16 Middle Montney wells with frac design changes including >20 frac stages and cemented ports to be evaluated 2015-16 1 Well Slickwater, OH Packers • 20 total Middle Montney wells on-production across 26 frac stages Glacier
Slide 31: Exceptional Upper & Lower Montney Well Economics
EXCEPTIONAL UPPER & LOWER MONTNEY WELL (1) ECONOMICS Upper & Lower Montney Dry Gas (2) Budget Type Curve. Some recent Upper & Lower Montney wells are outperforming type curve (3) (1) Management estimates. NPV 10% pre-tax. (2) Capital of $4.8 million per well based on management’s estimate of DCE+T c
Slide 32: Exceptional East Glacier Middle Montney Well Economics
EXCEPTIONAL EAST GLACIER MIDDLE MONTNEY WELL (1) ECONOMICS Middle Montney at 50 bbls/mmcf C3+ (2) Budget type curve. Some recent MM wells are exceeding type curve. (3) (1) Management estimates. NPV 10% pre-tax. (2) Capital of $4.8 million per well based on management’s estimate of DCE+T capital cost
Slide 33: Glacier Montney Assigned 2P EUR Per Well & Interval
GLACIER MONTNEY ASSIGNED 2P EUR PER WELL & INTERVAL Glacier - 2P Recoveries per Interval(1) # of Gross HZ Wells 2P Recovery [bcf/well] Interval Developed Undeveloped Total Developed Undeveloped Total YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE YE 2012 2013
Slide 34: Glacier – Located in the Heart of the Montney Resource Play
GLACIER – LOCATED IN THE HEART OF THE MONTNEY RESOURCE PLAY Montney Siltstone Comparison: • 700 times more permeability • 4x more formation thickness • Very low clay content • Liquids & Improved well efficiencies strong economics Up to 83 bbls/MMcf 34
Slide 35: 2012 Core and Completion Studies: Increased Resource and Improved Well Results
2012 CORE AND COMPLETION STUDIES: INCREASED RESOURCE AND IMPROVED WELL RESULTS Core study determined original density porosity logs have to be re- calibrated IP30’s on open hole Re-calibration aligned log to actual wells improved by core porosities evident through entire 1.6x 290 meters of Montney f
Slide 36: Advisory
ADVISORY Certain statements contained in this presentation constitute forward-looking statements. These statements relate to future events or our future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but n
Slide 37: Advisory
ADVISORY continue in effect or as anticipated; and that the 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. Production estimates contained herein for the years
Slide 38: Advisory
ADVISORY based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equiva
Slide 39: Advisory
ADVISORY The following abbreviations used in this press release, including in the appendices hereto, have the meanings set forth below: bbls barrels mcf thousand cubic feet bbls/d barrels per day mmcf million cubic feet mmcf/d million cubic feet per day mbbls thousand barrels bcf billion cubic feet
Slide 40: Advantage Contact Information
ADVANTAGE CONTACT INFORMATION Investor Relations 1.866.393.0393 [email protected] www.advantageog.com Listed on NYSE and TSX: AAV Advantage Oil & Gas Ltd. Suite 300, 440 – 2nd Avenue SW Calgary, Alberta T2P 5E9 Main: 403.718.8000 Facsimile: 403.718.8332 Advantage 100% W.I. Glacier Gas Plant Andy Ma
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