Advantage Energy Ltd · TSX:AAV
Advantage Energy — Advantage Oil & Gas — Investor Presentation (April 2011)
25 slides from Advantage Energy's investor presentation, April 2011
Slide 1: Investor Presentation April 2011
Investor Presentation April 2011 April 2011 Page 1
Slide 2: Advantage - Recent Highlights
Advantage - Recent Highlights • Glacier production grows to 100 mmcf/d – March 2011 • Additional 100 mmcf/d of production behind pipe • Glacier Phase III program exceeds expectations • Confirms excellent reservoir quality across our land block • 2P reserves increase to 1.0 Tcf at year end December 3
Slide 3: Benefits of Longview Transaction
Benefits of Longview Transaction • Advantage now a „pure play‟ natural gas resource company • Top quartile cost structure • Multi-decade drilling inventory • 2P RLI 27.5 years • Increased financial flexibility through debt reduction • Conservative financial structure with significant liquidity to fu
Slide 4: Longview Transaction Summary
Longview Transaction Summary # of Shares % $ millions (million) Ownership Net Proceeds of IPO(1) $160 17.2 38% Draw on $200 million Credit Facility $85 – Total cash proceeds $245 Issue of Longview shares to Advantage $294 29.4 63% Total Purchase Price $539 46.7 100% (1) Total cash proceeds includes
Slide 5: Debt Reduction - Increased Financial Flexibility
Debt Reduction - Increased Financial Flexibility Advantage Pro forma Debt Position ($ millions) @ March 31, 2011 Pro forma Bank Debt (estimated at March 31, 2011) $344.0 $99.0 Convertible Debentures: December 2011 62.3 62.3 January 2015 86.3 86.3 Total Debt $492.6 $247.6 • Based on net cash proceeds
Slide 6: Advantage - Current Enterprise Value Analysis
Advantage - Current Enterprise Value Analysis # Shares (million) ($ million) Advantage Shares @$8.00/share(1) 164.0 $ 1,312 Current Total Debt $ 248 Total Enterprise Value $ 1,560 Less non-Glacier Assets ($ 410) (Pv 10% pre-tax, Sproule) (2) Less Longview Equity @$10.45/share(1) 29.4 ($ 307) Implied
Slide 7: Advantage – “Pure Play” Natural Gas Focus
Advantage – “Pure Play” Natural Gas Focus Company Total Montney Unconventional March Exit Production : 16,600 boe/d March Exit Production : 24,300 boe/d Gas/Oil % : 100/0 Gas/Oil % : 92/8 Avg. W.I. : 93% Liquids Rich Multi-zone CBM + Colorado Group March Exit Production : 4,300 boe/d 2011Exit March
Slide 8: Glacier Montney Development Dominates 2P Reserves
Glacier Montney Development Dominates 2P Reserves(1) Production : 4,557 boe/d Eastern Alberta Gas/Oil % : 65/35 RLI 12.8 Avg. W.I. %: Gas/Oil % 94/6 Western Alberta RLI 12.7 Glacier Gas/Oil % 68/32 RLI 31.7 Gas/Oil % 100/0 8% 11% 81% Total RLI 24.3 (1) Based on the December 31, 2010 Sproule Reserve
Slide 9: Glacier Development Driving Organic Production Growth
Glacier Development Driving Organic Production Growth Glacier Phase III results exceeded Advantage Pro forma Production(1) expectations: (boe/d) 24,000 • Glacier production exited March 2011 at 95% Production Growth 16,600 boe/d (100 mmcf/d) 18,000 • additional 16,600 boe/d (100 mmcf/d) of productio
Slide 10: Glacier – Thick Montney Siltstone Supports Higher Reserve Recoveries
Glacier – Thick Montney “Siltstone” Supports Higher Reserve Recoveries Unconventional Marcellus Glacier Shale Horn River Edmonton Shale Barnett Calgary “Shaley” silts Haynesville Arc Silt Shell Birchcliff Most active drilling area in Glacier Montney “Tight” sand Conventional Encana AAV Glacier the M
Slide 11: Recent M&A Activity
Recent M&A Activity Recent M&A Activity: CNRL PENGROWTH ARC • CNRL / Talisman • ARC / Storm SHELL ARC • Pengrowth / Monterey CNRL MURPHY BIRCHCLIFF • Apache / BP ENCANA • Murphy / Cequence ADVANTAGE MURPHY Recent Joint Venture Activity: ENCANA CNRL • Encana / Petro-China CNRL APACHE EnCana / PetroCh
Slide 12: Glacier's Location Provides Technical & Economic Benefits
Glacier‟s Location Provides Technical & Economic Benefits B.C. ALBERTA Glacier is located in Alberta and is within the over-pressured and extremely thick Montney siltstone fairway with Upper, Middle & Lower Montney Potential A A‟ • Formation thickness (up to 290 meters) more resource, reserves & dri
Slide 13: Glacier – Gas Sales Grow, Strong Netbacks
Glacier – Gas Sales Grow to 100 mmcf/d, Strong Netbacks Glacier Operating Netbacks Exceed 87% of Revenue Revenue ($Cdn/mcf) $4.00 100 mmcf/d Royalties (@ Royalty Rate 5.0%) $(0.20) Phase III March 2011 100,000 Operating Costs(1) $(0.30) Operating Netback ($/mcf) $3.50 80,000 Annual Cash Flow ($Milli
Slide 14: Glacier 2P Reserves Exceed 1.0 Tcf
Glacier 2P Reserves Exceed 1.0 Tcf(1) • 2010 Finding and Development costs $9.29/boe (3 year F&D $10.75/boe)(2) • Significant future potential to add reserves in the Upper, Middle and Lower Montney 1.04 Tcf 0.82 Tcf Probable Proven 57% 0.21 Tcf 37% 29% 2008 YE 2009 YE 2010 YE (1) Based on the Decemb
Slide 15: Glacier Value Growth
Glacier Value Growth(1) • Glacier‟s asset value grew 19% to $1.4 Billion at YE 2010 despite a 25% reduction in Sproule‟s natural gas price forecast for the years 2011 through to 2015 $1.40 Billion $1.16 Billion $0.30 Billion 2008 YE 2009 YE 2010 YE (1) Based on the December 31, 2010, 2009 and 2008 S
Slide 16: Phase III Test Rates Exceed Expectations
Phase III Test Rates Exceed Expectations Glacier Phase III Upper Montney Test Rates(1) Recent delineation drilling results confirm high quality reservoir across our land block Phase III Upper Montney Test Rates 7.7 5.2 Continue to Improve 8.2 mmcf/d 7.3 mmcf/d 8.9 8.7 9.8 4.3 3.7 mmcf/d 10.6 Phase I
Slide 17: 2011 Pro forma Advantage Cash Flow Summary
2011 Pro forma Advantage Cash Flow Summary ($000’s) Daily production (boe/d)(1) 23,353 Gas/Oil % 92/8 Operating income(1) $ 147,512 Hedging gains 26,212 G&A and capital taxes(2) (19,900) Interest and financing expenses (7,400) Dividend income from Longview 17,670 Adjusted funds from operations $ 164
Slide 18: Low Cost Structure
Low Cost Structure Advantage 2011 Operating Netbacks(1) $/boe $/mcfe Revenue $25.36 $4.23 • Cost structure expected to rank in the top quartile Royalties @ 10.2% (2.58) (0.43) among the intermediate sector Operating Costs (5.48) (0.91) • 2011 hedging position – 2011 Operating Netback $17.30 $2.89 30
Slide 19: Advantage Summary
Advantage Summary • Glacier producing at 100 mmcf/d • Additional 100 mmcf/d behind pipe • 2P RLI 29 years • Pro forma cash flow of $164 million for 2011(1) • Top quartile cost structure • 30,000 gj/d hedged @ $6.00/mcf • Q1 2011 Pro forma total debt of $248 million • Debt/cash flow of ~ 1.5x • Bank
Slide 20: Advantage Contact Information
Advantage Contact Information Andy Mah, P.Eng. Chief Executive Officer Craig Blackwood, C.A. Vice President, Finance Investor Relations 1.866.393.0393 [email protected] Glacier Gas Plant www.advantageog.com TSX:AAV NYSE:AAV Advantage Oil & Gas Ltd. Suite 700, 400 – 3rd Avenue SW Calgary, Alberta T2
Slide 21: Appendix
Appendix @avantage April 2011 Page 21 ‘Oil & Gas Ld
Slide 22: Montney – Reserves/Well Could Exceed Expectations due to Silt/Sand Reservoir
Montney – Reserves/Well Could Exceed Expectations due to Silt/Sand Reservoir Barnett Shale Horizontal vs Montney Horizontal Montney type well @ Swan (based on 50 wells that have the longest production history) Barnett Shale type wells by operator April 2011 Page 22 Source: Facts are Stubborn Things,
Slide 23: Top Quartile Initial Production Rates (30 day) at Glacier
Top Quartile Initial Production Rates (30 day) at Glacier To date results at Glacier prove up a Glacier Production Growth to significant amount of acreage across the land 50 mmcfd in 20 months block and IP‟s are comparable to EnCana Swan wells EnCana Swan EnCana Swan Advantage Glacier Advantage IP 3
Slide 24: 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 Glacier well economics based on this type curve at 4.5 mmcfd IP, 5 bcf and $5.5 mm well cost: @$3.00 Cdn flat pricing: >18% ROR BT @$4.00 Cdn flat pricing: >39% ROR BT 30 Day
Slide 25: 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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