Peyto Exploration & Development Corp. · TSX:PEY
Peyto Exploration & Development — Conference Presentation (September 2015)
48 slides from Peyto Exploration & Development's conference presentation, September 2015
Slide 1: Peyto September 2015
www.Peyto.com September 2015
Slide 2: Advisory Regarding Forward-Looking Statements
Advisory Regarding Forward-Looking Statements PEYTO Exploration & Development Corp. 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", "obj
Slide 3: Oil and Gas Corporate Strategies
Oil and Gas Corporate Strategies PEYTO Exploration & Development Corp. 1. Pump And Dump it (PAD-it) • Acquire lands in the hottest play trend. • Promote on the dream of future returns. • Sell before any execution is required. 2. Growth At All Costs (GAAC) • The market rewards growth so chase it. • U
Slide 4: Our Profit and Returns Strategy
Our Profit and Returns Strategy What We Believe PEYTO Exploration & Development Corp. N “We believe nature’s gas is the fuel for the future.” N “We believe we can make a real profit by being the lowest cost, most efficient producer in the industry.” N “We believe in partnering with shareholders to m
Slide 5: The Peyto Strategy: How We Do It
The Peyto Strategy How We Do It PEYTO Exploration & Development Corp. • Invest in our own ideas • Build it ourselves • Operate it ourselves • Focus on maximum return • Stay concentrated, lean & efficient 5 9/22/2015
Slide 6: The Peyto Strategy: Superior Shareholder Returns
The Peyto Strategy Superior Shareholder Returns PEYTO Exploration & Development Corp. $60 $14 $50 ~$600,000 $12 $40 Shareholder IRR $10 $30 $8 Future strip $20 $6 $10 $4 $1,000 $0 $2 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Share Price
Slide 7: Profitable Business
Peyto’s Profitable Business PEYTO Exploration & Development Corp.
Slide 8: Profitable Business: Build it for less than we sell it
Peyto’s Profitable Business 15th 1998‐2013 “Build it for less than we sell it” PEY 2015 H1 PEY 2014 Land/Acq $13MM Seismic $8MM Drilling $312MM PDP FD&A $/mcfe (~$1.80)* ($2.25) Compl. Wellsite Facilities $183MM $54MM $120MM $690MM ∆PDP Reserves (before Prod.) 51.0 mmboes PDP FD&A $13.52/boe Cash Co
Slide 9: Profitable Even Through The Lows
Peyto’s Profitable Business Profitable Even Through The Lows PEYTO Exploration & Development Corp. AECO Monthly $10 Peyto Realized Gas Price ($/mcfe) $/GJ 37% Ave. "Profit“ Cum To Date $8 $6 Bonus $1.60 $4 Cash Costs ($1.08) $2 PDP FD&A ($2.25) $- Forecast Total Cash Costs per mcfe includes – Royalt
Slide 10: Profitability Challenges for the Canadian Gas Industry
Peyto’s Profitable Business Profitability Challenges for the Canadian Gas Industry PEYTO Exploration & Development Corp. 2015 H1 PDP FD&A 2014 2013 $/mcfe (~$2.47) ($3.09) ($2.93) 2012 2011 20101 ($3.43) ($3.68) ($3.11) Cash Costs $/mcfe ($2.54) ($3.12) ($3.13) ($2.98) ($3.31) ($3.19) Supply Cost ($
Slide 11: Competitive In The North American Marketplace
Peyto’s Profitable Business Competitive In The North American Marketplace PEYTO Exploration & Development Corp. 11 9/22/2015
Slide 12: Profitability By Basin - 2014
Peyto’s Profitable Business Profitability By Basin - 2014 PEYTO Exploration & Development Corp. 100% Deep Basin – PEY 2014 80% Marcellus – Cabot 2014* 64% Fay/36% Mar – SWN 2014** PD FD&A $/mcfe ($2.25) ($0.97) ($2.91) Cash Costs $/mcfe ($1.08) ($1.27) ($2.32) Supply Cost ($3.33) ($2.24) ($5.23) Sal
Slide 13: Incredible Returns
Peyto’s Incredible Returns PEYTO Exploration & Development Corp.
Slide 14: Stress Testing Low Commodity Prices
Peyto’s Returns Stress Testing Low Commodity Prices PEYTO Exploration & Development Corp. Sundance/ Obed/Pedley/ Sundance Sundance/ Sundance Ansell Sundance Brazeau Species Nosehill Upper Edson Cardium Middle Bluesky Wilrich Notikewin Falher Wilrich Falher Full Cycle Well Costs ($M) $3,800 $4,600 $4
Slide 15: Focus on Returns Drives Capital Discipline
Peyto’s Returns Focus on Returns Drives Capital Discipline PEYTO Exploration & Development Corp. 2015 - ~$14,000/boe/d 90,000 2014 - $16,800/boe/d $900 2013 - $15,100/boe/d 2012 - $17,600/boe/d 2014YE Exit 85,700 boe/d Annual Production Wedge (boe/d) ONR Acq - $38,600/boe/d 80,000 2011 - $17,500/boe
Slide 16: Peyto's Returns: Well IRRs
BT IRR (%) -50 -40 -30 -20 -10 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 03/02-32-054-21W5/0 02/04-13-055-22W5/0 00/04-26-053-20W5/0 00/13-13-055-22W5/0 00/01-08-055-21W5/0 02/02-03-054-20W5/0 00/16-11-056-21W5/0 00/11-13-055-22W5/0 00/01-25-053-20W5/0 02/16-11-056-21W5/0 00/04-15-056-21W
Slide 17: Drilling Cost Performance
Peyto’s Returns Drilling Cost Performance PEYTO Exploration & Development Corp. Greater Sundance Hz Spirit River 5,000 40 4,409 4,500 34.5 4,268 4,299 4,227 4,152 4,155 35 Drill & Case Cost / Depth 4,066 3,999 4,000 29.3 30 3,500 23.6 25 3,000 $3,193 22.5 21.8 21.6 $2,926 20.6 Days $2,804 $2,752 $2,
Slide 18: Completion Cost Performance
Peyto’s Returns Completion Cost Performance PEYTO Exploration & Development Corp. Monthly Average Completion Costs $2,000,000 $300,000 Total Completion Cost $1,800,000 2014 Avg = 1.7 MM$ $250,000 $1,600,000 -43% $1,400,000 Completion Cost Per Stage $200,000 $1,200,000 2014 Avg = 166 M$ Cost Per Stag
Slide 19: 2015 – Above average production
Peyto’s Returns 2015 – Above average production PEYTO Exploration & Development Corp. 2015 program results to date 19 9/22/2015
Slide 20: Full Cycle Real Returns
BT IRR, % 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 00/08-33-057-… 00/04-02-054-… 03/04-32-055-… 02/05-14-055-… 00/04-26-053-… 00/01-36-051-… 02/04-28-055-… 00/03-36-051-… 00/04-21-053-… 20% 00/15-25-052-… 00/09-15-056-… 2014 Q1 00/01-02-055-… 00/02-29-053-… 00/04-15-056-… 00/08-27-054-…
Slide 21: High Returns On Your Capital And Equity
Peyto’s Returns High Returns On Your Capital And Equity PEYTO Exploration & Development Corp. 60.0% $10 50.0% $8 40.0% $6 30.0% 16 yr Average ROE $4 19% 20.0% 13.2% 10.0% $2 0.0% $0 Return On Capital Employed (%) Return On Equity (%) Earnings/share Realized Gas Price ($/mcfe) 16 yr Average ROCE Retu
Slide 22: Future
Peyto’s Future PEYTO Exploration & Development Corp.
Slide 23: 2015 Outlook: More for less
2015 Outlook More for less PEYTO Exploration & Development Corp. Drill ~140 Gross Hz Wells (100% Hz-MSF, Liquids Rich Natural Gas) Expand & Extract Increase Processing Capacity by ~120 mmcf/d Increase Undeveloped Land Base Shoot Seismic 2015 Capital Program Acquire Additional Opportunities and
Slide 24: Drill Our Way To 100,000 BOE/D!
2015 Outlook Drill Our Way To 100,000 BOE/D! PEYTO Exploration & Development Corp. 3% annual yield 120,000 +25%/sh CAGR growth ~96,000-100,000 120,000 28% CAGR total return boe/d exit over last 5 years! 100,000 85,700 boe/d exit TCPL Outage 100,000 75,200 boe/d exit 80,000 80,000 57,000 boe/d exit B
Slide 25: Continuously Improve Profitability
2015 Outlook Continuously Improve Profitability PEYTO Exploration & Development Corp. 2015 Goals* • 20% service cost reduction • Drilling off season PDP FD&A ~($1.80) • Longer laterals, more stages $/mcfe • Continuous operations • Natural gas heated water • Slow down facility pre‐builds ~($0.85) Cas
Slide 26: Where to from here?
Peyto’s Future Where to from here? PEYTO Exploration & Development Corp. 150,000 ~120,000 boed ~96,000-100,000 boed 100,000 $13,000 /boe/d BOED 13,000 /boe/d $17,500/boe/d $16,800/boe/d 50,000 $17,300/boe/d $15,100/boe/d $17,600/boe/d 2015 Budget 2016 CAPEX 2017 CAPEX $600MM $700MM $800MM Base Decli
Slide 27: Peyto Profile
Peyto Profile PEYTO Exploration & Development Corp. N TSX Listing: PEY N Shares Outstanding: 159 million, 4% insiders (as of Feb. 5/14) N Monthly Dividend: $0.11/share (incr. from $0.10 effective Nov/14) N Current Production: 0.54 BCFe/d (90,000 boe/d) N YE 2014 2P Reserves: 3.2 TCFe (531 mmboes) N
Slide 28: Appendix
Appendix PEYTO Exploration & Development Corp. N Peyto’s Assets N Quarterly Track Record N Tax Pools N Payout N Hedging Strategy N Gas Marketing N FAQ 28 9/22/2015
Slide 29: Geographically Focused Core Areas
Peyto’s Assets Geographically Focused Core Areas PEYTO Exploration & Development Corp. • 440,000 net acres R10 R5W6 R27 R22 R17 • 9 operated R12 R7W5 gas plants Cutbank ---(610 mmcf/d net capacity) • 1000+ km pipelines • 1000+ producing zones T60 Kakwa • 85,000 boe/d T60 Chicken Leland Processed by
Slide 30: Deep Basin Permeability Segregation
Peyto’s Assets Deep Basin Permeability Segregation PEYTO Exploration & Development Corp. Ante Ck FOOTHILLS STRUCTURES Elmworth GAS AS ING INCRE BILITY EA PERM WATER Kaybob TRANSITION ZONE WATER Kakwa GAS Gas INCREAH DEPT SE AREA OF GAS Window MATURATION Wild River Sundance Edson Bighorn Deep Basin T
Slide 31: Multi Zone Stacked Sandstone Reservoirs
Peyto’s Assets Multi Zone Stacked Sandstone Reservoirs PEYTO Exploration & Development Corp. Detailed Petrophysical work on the Spirit River sands revealed >30% more reserves per section Up to per section* 31 *NGL recoveries can increase by 15+ bbl/mmcf with deeper cutting processing facilities 9/22
Slide 32: Production By Formation
Peyto’s Assets Production By Formation PEYTO Exploration & Development Corp. 100,000 90,000 80,000 70,000 38% 60,000 BOE/D Wilrich 50,000 40,000 15% Notikewin 30,000 22% Falher 20,000 12% 10,000 Cardium 7% Bluesky 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 32 9/22/2015
Slide 33: Deep Basin Lands Go A Long Way
Peyto’s Assets Deep Basin Lands Go A Long Way PEYTO Exploration & Development Corp. 500 Peyto Lands 438 450 Net Lands (000's acres) 400 350 300 250 200 150 Net Peyto Sections 100 50 - Net Sections of Cardium, Dunvegan, Notikewin, Falher, Wilrich, Bluesky, & Cadomin Net Sections for 2.0 TCFe of PD EU
Slide 34: 3-Dimensional Land Base Holds Large Potential
Peyto’s Assets 3-Dimensional Land Base Holds Large Potential PEYTO Exploration & Development Corp. Cardium (357,618 net acres) 9.5% of land developed in 466 Vt/Hz producers (70 acres/well) 4.4% of land booked in 176 Hz locations (90 acres/well) 86% of land remains potential (307,859 net acres) Notik
Slide 35: Large Hz MSF Inventory
Peyto’s Assets Large Hz MSF Inventory PEYTO Exploration & Development Corp. To Do Done1 Total Total Hz Hz Locations Total Total Locations Unbooked Vertical Hz Booked* Wells Wells 31 432 72 176 387 5 1 5 13 1 20 14 90 71 118 62 7 39 41 20 51 90 292 16 14 183 256 155 4 28 45 58 12 2 87 2 16 216 652 44
Slide 36: Spirit River Group Potential Land Expiries
Peyto’s Assets Spirit River Group Potential Land Expiries PEYTO Exploration & Development Corp. AB Land Sales 5 yr Term 6,000,000 5,000,000 24 Month Expiries 4,000,000 Earliest Expiry Date 3,000,000 out to 2016-12-31 2,000,000 (>1550 agreements, 1,000,000 2,986 sections) 0 2003 2004 2005 2006 2007 2
Slide 37: Greater Sundance Area
Peyto’s Assets Greater Sundance Area PEYTO Exploration & Development Corp. FF FF FCFCAF A AF FF AF AG F36 A G 36L F A AF A36FC31F GAF GCF AF AF AF AFFC36A FA31FAF AF AF AF F A CF AF FAFAFF AF AF A36FAF A31FAF F AF W FAF AF A LKG36K A 31 F G C FA A FF36FF31 G C F GCAF E31GEJ F C 36 31 AA GL GG LK CF
Slide 38: Brazeau River Area
Peyto’s Assets Brazeau River Area PEYTO Exploration & Development Corp. G F V V U F K U J M L E F VF F S V E E E UF F GG L F U G F K GKAE F F VV E G GA E JS E E E FA KG JGA WM C Keyera E Brazeau G FG F FC U KC F FA G GVV F V A EE E A A A A E V E E EE UU F J U EV F C LF C G V F 1 G F KE G A E V S E V
Slide 39: Facility Ownership and Control
Peyto’s Assets Facility Ownership and Control PEYTO Exploration & Development Corp. R9 R4W6 R26 R21 R16 R11 R6W5 Cutbank Waskahigan W Chicken T60 W Smoky/Kakwa Cutpick Leland/Berland Oldman North T55 Wildhay W W Nosehill W W Sundance Galloway WW Swanson Ansell P/L Peyto Gas Plants 50km, 10", $10MM Y
Slide 40: Lowest Operating Costs – Gas Producers
Peyto’s Assets Lowest Operating Costs – Gas Producers PEYTO Exploration & Development Corp. How? • We operate • Full facilities • No water • No sour • Chemical recycle • Nat gas fuel Flat for • Continuous 8 yrs innovation 40 BOE factor - 6 mcf = 1 bbl of oil equivalent 9/22/2015 Operating costs incl
Slide 41: Quarterly Track Record
Quarterly Track Record PEYTO Exploration & Development Corp. 2015 2014 2013 2012 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Operations Production Oil & NGLs (bbl/d) 6,843 7,456 7,632 8,077 7,502 7,568 7,375 6,376 6,984 6,295 6,374 5,840 4,778 5,286 5,236 4,480 4,101 Natural gas (mcf
Slide 42: Peyto's Tax Pools
Organic Business Model Peyto’s Tax Pools PEYTO Exploration & Development Corp. $1,800 $1,600 $1,400 $1,200 Federal Tax Pools Millions $1,000 $800 Q4/14 $600 $400 $200 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 CEC UCC (25%) CEE (100%) CDE (30%) COGPE (10%) CAP
Slide 43: Peyto's Payout: Dividend Sustainability
Q2/15 Q2/15 Dividend Sustainability Peyto’s Payout Peyto Cum. Dist/Div. Peyto Cum. Earnings $1,000 $1,500 $2,000 $2,500 $0 $500 Q1 2000 Q2 2000 Q3 2000 Q4 2000 Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002 Q4 2002 Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2
Slide 44: Successful Hedging Strategy
Successful Hedging Strategy Peyto Realized Price History PEYTO Exploration & Development Corp. 2003 2004 2006 2010 2013 2014 $16.00 2005 2007 2008 2009 2011 2012 Peyto Peyto Peyto 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 $6.44/
Slide 45: Gas Marketing: Future Sales (1 of 3)
Gas Marketing Future Sales (1 of 3) PEYTO Exploration & Development Corp. Financial Hedges - Gas Pricing 2013 2014 2015 2016 Da te contra cte d GJ/d ($/GJ) 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 17-Feb-12 5000 $3.000 ● ● ● ● ● 27-A pr-12 5000 $2.810 ● ● ● ● ● 08-May
Slide 46: Gas Marketing: Future Sales (2 of 3)
Gas Marketing Future Sales (2 of 3) PEYTO Exploration & Development Corp. Financial Hedges - Gas Pricing 2013 2014 2015 2016 Da te contra cte d GJ/d ($/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 21-Jan-14 5000 $3.825 ● ● ● ● ● ● ● 21-Jan-14 5000 $3.950
Slide 47: Gas Marketing: Future Sales (3 of 3)
Gas Marketing Future Sales (3 of 3) PEYTO Exploration & Development Corp. Financial Hedges - Gas Pricing 2013 2014 2015 2016 2017 Date contracted GJ/d ($/GJ) 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 N D J F M A M J J A S O 10-Dec-14 5000 $3.250 ● ● ● ● ● ● ● ● ● ● ● ●
Slide 48: Frequently Asked Questions
FAQ Frequently Asked Questions PEYTO Exploration & Development Corp. 1. Peyto has had some spectacular growth over the last five 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 four years is t
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