Advantage Energy Ltd · TSX:AAV
Advantage Energy — Advantage Oil & Gas — Investor Presentation (April 2012)
33 slides from Advantage Energy's investor presentation, April 2012
Slide 1: Investor Presentation April 2012
Investor Presentation April 2012 April 2012 Page 1
Slide 2: Advantage Oil & Gas Ltd.
Advantage Oil & Gas Ltd. • Listed on TSX & NYSE AAV • Shares Outstanding (Basic) 166.3 million • Market Capitalization at April 2, 2012 $ 564 million • YE 2011 Bank Debt $ 142 million Convertible Debentures - Jan 2015 $ 86 million • Enterprise Value $ 792 million • Longview Share value at April 2, 2
Slide 3: 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 YE 2011 Production : 23,500 boe/d (2) Gas/Oil % : 94/6 RLI: 24.3 yrs Glacier – Montney Natural Gas & Liquids Potential YE 2011 Production : 16,000boe/d (2) Alberta Gas/Oil % : 100/0 Avg. W.I. : 93% RLI: 31.7
Slide 4: Advantage – Recent Highlights
Advantage – Recent Highlights • Solid 2011 year-end operating & financial results • Glacier increased to 100 mmcf/d Q2 2011 • Top tier operating cost performance • Flexibility retained in our Balance Sheet • Top quartile 2011 F&D cost at $8.85/boe(1) • Efficient drill bit reserve additions & strong
Slide 5: 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 6: 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 2008 2009 201
Slide 7: 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 Q4 2011 $5.72/boe $10.00 $5.00 $0.00 (1) Based on Scotia Capital Inc. estimated 2012 operating &
Slide 8: 2011 YE Balance Sheet Retains Financial Flexibility
2011 YE Balance Sheet Retains Financial Flexibility Advantage’s YE 2011 Balance Sheet Strength: • Undrawn credit facility of $133 million • 63% ownership of Longview Oil Corp shares could be used to reduce debt position(1) $431 million Financing Capacity $ 228 million $298 million YE 2011 Debt LNV S
Slide 9: Highly Efficient Year End 2011 Reserve Additions
Highly Efficient Year End 2011 Reserve Additions Glacier • 2P Reserves increased 10% to 1.102 Tcf (183.7 mmboe) at F&D cost of $7.41/boe (2P reserves including change in FDC) • Strong production performance in Upper Montney & Lower Montney led to reclassification into higher category reserves • Prov
Slide 10: Advantage Year End 2011 Reserves
Advantage Year End 2011 Reserves AAV 2P Reserves = 217.9 Million Boe Reserves by Category Reserves by Areas 6% 10% 36% 64% 84% Proven Probable Glacier West Alberta East Alberta April 2012 Page 10
Slide 11: 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 12: Glacier Montney TPIIP Increased to 9.33 Tcf
Glacier Montney TPIIP Increased to 9.33 Tcf (1) TPIIP increased in each of the Upper, Middle and Lower Montney formations due to delineation 9.33 Tcf (2) and recent evaluation drilling results 2.75 Upper Montney 3.74 Middle Montney 2.88Tcf (2) No resource assigned to Middle Montney in 2009 1.96 2.84
Slide 13: Sproule Montney Reserves & Contingent Resource
Sproule Montney Reserves & Contingent Resource(1) 300 meters thick with 6 layers of potential TPIIP Reserves + Contingent (TCF, Sales) (TCF raw) ~2300 to 2350 m TVD 1P + 2P + 3P+ Low Best High (%RF) (%RF) (%RF) Upper Montney 2.75 0.86 1.11 1.50 31% 40% 55% 1000 feet (300 meters) Middle Montney 3.74
Slide 14: Glacier Montney Reserves - Significant Growth Potential
Glacier Montney Reserves - Significant Growth Potential Reserves & contingent resource estimates imply significant reserve growth potential based on the 3.6 Tcf updated Sproule Resource Assessment results 2.5 Tcf 1.8 Tcf 1.1 Tcf YE 2011 2P 1P + Contingent Low 2P + Contingent Best 3P+ Contingent High
Slide 15: Glacier Phase IV Drilling Program Reveals Liquids in Middle Montney
Glacier Phase IV Drilling Program Reveals Liquids in Middle Montney • Program started July 2011 and consists 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 • Upper Montney wel
Slide 16: Middle Montney Evaluation Wells Reveal NGL's Potential
Middle Montney Evaluation Wells Reveal NGL’s Potential • 5 Hz wells & 3 vertical recompletions targeted to evaluate porosity cut-off & flow potential across Glacier land MM layer 1 block • Vertical recompletions indicated presence of NGL’s MM layer 2 • 4 Hz wells tested 3 separate MM layer 3 MM laye
Slide 17: Estimated Liquid Yields in Middle Montney Layers
Estimated Liquid Yields in Middle Montney Layers(1) Liquid Yield in Bbls/mmcf On a revenue basis, a 2.5 mmcf/d liquids rich Middle Montney well is equivalent to a 5 mmcf/d 90 Upper Montney well using the estimated average shallow cut liquid yield 68 57 57 51 35 30 25 MM Layer 1 MM Layer 2 MM Layer 3
Slide 18: 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 19: 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 $(0.10) $(0.15) $(0.20) 5.0%) Operating Costs ($/mcf) $(0.25) $(0.25) $(0.25) Opera
Slide 20: Glacier Upper Montney Well Economics – Sensitivity Analysis
Glacier Upper Montney(1) Well Economics – Sensitivity Analysis Low operating cost and attractive royalty structure supports well economics Glacier Montney Horizontal - NPV10% ($MM)(1) Glacier Montney Horizontal - Rate of Return (%)(1) 12 120 10 Rate of Return - % 100 8 NPV 10% - $MM 80 6 4 60 2 40 0
Slide 21: Significant Future Drilling Potential at Glacier
Significant Future Drilling Potential at Glacier Estimated Drill Inventory with only 3 layers of development is in excess of 900 locations. Potential exists for 5 layers. Current Inventory # Net Wells of Future Drilling Drilled to Date Locations (1) Upper Montney 73 300 – 350 Middle Montney 5 300 –
Slide 22: Phase IV Production Ramp-up to 140 mmcf/d Deferred
Phase IV Production Ramp-up to 140 mmcf/d Deferred • Production at Glacier will be maintained between 90 to 100 mmcf/d until natural gas prices show a sustained improvement • To date, 29 gross (28.5 net) Montney wells are estimated to provide inventory to replace current production declines at Glaci
Slide 23: Glacier Gas Plant Positioned for Production Ramp-Up Capability
Glacier Gas Plant Positioned for Production Ramp-Up Capability • Glacier gas plant (100% W.I.) expansion to 140 mmcf/d will be completed in Q2 2012 for total cost of $13 million • Cost effective expansion due to optimization of existing equipment • Provides operational flexibility to respond quickly
Slide 24: Advantage Interim Guidance & Hedging
Advantage Interim Guidance & Hedging Guidance January - June 2012 Production Average (boe/d) 22,800 – 23,400 Royalty Rate (%) 8% – 10% Operating Costs ($/boe) $5.70 – $6.00 Capital Expenditures ($Millions) $65 – $75 Additional Capital Budget & Guidance detail will be provided pending evaluation of f
Slide 25: 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 new potential to increase reserves & resource growth • The Upper Montney & Lower Montney formations are still in early deve
Slide 26: 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 27: Appendix
Appendix @ayantage April 2012 Page 27 ‘Oil & Gas Lid
Slide 28: 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 29: 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 30: 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 31: Recent M&A Activity
Recent M&A Activity Recent M&A Activity: Recent M&A Activity: • CNRL / Talisman • CNRL / Talisman • ARC / Storm • ARC / Storm CNRL • Pengrowth ARC PENGROWTH / Monterey • Pengrowth / Monterey • Apache / BP • Apache / BP ARC • Murphy SHELL / Cequence CNRL • Murphy / Cequence BIRCHCLIFF TALISMAN MURPHY
Slide 32: Montney Horizontal Well Production Range and Type Curve
Montney Horizontal Well Production Range and Type Curve Data includes Glacier, Swan, Tupper, Pouce Coupe South & Groundbirch The IP30 range and average type curve based on 320 wells with up to 48 months of production history 30 Day IP Distribution Source: Based on public data through IHS/Accumap and
Slide 33: 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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