Advantage Energy Ltd · TSX:AAV
Advantage Energy — Advantage Oil & Gas — Investor Presentation (October 2016)
35 slides from Advantage Energy's investor presentation, October 2016
Slide 1: Investor Presentation October 2016
“68% Production Growth, Top Quartile Well Results and $0.59/mcfe Total Corporate Cash Costs in Q2 2016 Underpins Glacier Plant Expansion Plans to 350 MMcf/d (58,330 Boe/d)” Investor Presentation TSX / NYSE: AAV October 2016
Slide 2: Advantage at a Glance
ADVANTAGE AT A GLANCE TSX, NYSE: AAV TSX 52-week trading range $5.85 - $9.50 Shares Outstanding (basic) 184.5 million 2016 Annual Production Target >40% Annual Production Growth 200 mmcfe/d (33,300 boe/d) Market Capitalization @ September 30, 2016 $1.7 billion As of June 30, 2016: Bank Debt (49% dra
Slide 3: Focused on Glacier Development Since 2008
FOCUSED ON GLACIER DEVELOPMENT SINCE 2008 ADDITIONAL MONTNEY LANDS PROVIDES FUTURE UPSIDE Current development at Glacier including Progress dry and liquids rich gas drilling with a future (Future) drilling inventory >1,100 locations 100% owned Total 150 net Montney sections (96,000 Glacier Gas 9
Slide 4: Advantage's Growth & Achievements
ADVANTAGE’S GROWTH & ACHIEVEMENTS… 2016+ Record Low Cash Costs $0.59/mcfe Gen 4 Fracs (ports, 25+ frac stages) 350 mmcf/d Plant expansion plan in progress 2014 - 2015 30% Well IP30 + EUR(1) 58,330 Boe/d $0.82/mcfe Total Cash Costs 250 mmcf/d Plant expansion 2012 - 2013 Middle Montney Liquids Gen 3
Slide 5: Solid Foundation for Profitable & Sustainable Growth
…IS BASED ON A SOLID FOUNDATION FOR PROFITABLE & SUSTAINABLE GROWTH… Strong Balance Sheet 1.0x D/CF(1) 2016 Operating & Hedged to Protect Own & Operate Financial Flexibility Future Cash Flow (2) 100% Plant & Lowest Cash Cost Infrastructure Montney Producer(3) World Class Montney Asset (1) Total debt
Slide 6: With Operational Flexibility
…WITH OPERATIONAL FLEXIBILITY >60 mmcf/d Surplus Well Productivity from 8 Completed Standing Wells(1) 14 wells Uncompleted Standing Wells(1) 50 mmcf/d Currently Available Glacier Plant Capacity 100 mmcf/d Plant Expansion plan to 350 mmcf/d in progress 200 mmcf/d Additional Sales Gas Pipeline Capacit
Slide 7: Continuous Improvement Has Created Industry Leading Efficiencies
CONTINUOUS IMPROVEMENT HAS CREATED INDUSTRY LEADING EFFICIENCIES… 7
Slide 8: Driving Strong Growth & Financial Flexibility in 2016 Budget
…DRIVING STRONG GROWTH & FINANCIAL FLEXIBILITY IN OUR 2016 BUDGET “Surplus ($ million) Cash” $155 2016 Annual Estimates $30 $125 >40% Production Growth Drill 13 wells 190 to 210 mmcfe/d Annual ~$63 million Average Production in H2 2016 (31,670 – 35,000 Boe/d) Complete 13 standing wells $0.65/mcf Tot
Slide 9: Strong Netbacks & Recycle Ratios Achievable Without Hedging
STRONG NETBACKS & RECYCLE RATIOS ARE ACHIEVABLE EVEN WITHOUT HEDGING Montney Natural Gas Producers Total Cost Structure - Q2 2016 “NO HEDGING INCLUDED” $/Mcfe AAV - Lowest Total Corporate Cash Cost Montney Producer Illustrative Illustrative $4.50 Q2 2016 $0.59/mcfe AECO Cdn AECO Cdn $4.00 Glacier Ne
Slide 10: Maintenance Capital and Surplus Cash Flow Sensitivity
MAINTENANCE CAPITAL AND SURPLUS CASH FLOW SENSITIVITY “Surplus Cash Flow Above AECO $1.85/Mcf” Surplus (NO HEDGING INCLUDED) $100 million Surplus $55 million Based on average well type curve (1) $105 million Based on top $85 million $105 million $160 million $205 million quartile type well (2) Maint
Slide 11: Advantage Development Plan 2015 Through 2017
ADVANTAGE DEVELOPMENT PLAN – 2015 THROUGH 2017(1) Annual Average Production 22% Capital Spending CAGR (2) (mmcfe/d) ($ millions) 18% 235 40% $490 million Total (original 200 estimate $700 million) $200 $165 141 $125 2015 Actual 2016 Budget 2017 Estimate 2015 Actual 2016 Estimate 2017 Estimate Cash F
Slide 12: Development Plan Sensitivity & Hedging Positions
DEVELOPMENT PLAN SENSITIVITY & HEDGING POSITIONS Total Debt to Trailing Cash Current hedging program Flow Sensitivity (1) reduces downside risk and maintains upside torque 1.5 AECO 1.2 $2.00/mcf Production(2) Average 1.0 1.0 AECO Period Hedged (net) AECO Floor $2.50/mcf Price 0.8 AECO 2016 52% $3.62
Slide 13: Significant Drilling Inventory at Glacier
SIGNIFICANT DRILLING INVENTORY INCLUDES DRY AND LIQUIDS RICH NATURAL GAS LOCATIONS AT GLACIER Capable of maintaining 245 mmcfe/d (40,830 boe/d) for >50 years (1) >1,100 Future Drill Locations at Glacier supports future growth (1) 297 undeveloped locations booked in 2P reserves Year End 2015 (2
Slide 14: Operational Excellence
OPERATIONAL EXCELLENCE 14
Slide 15: Improving Well Performance and Lower Well Costs
IMPROVING WELL PERFORMANCE AND LOWER WELL COSTS THROUGH DRILLING & COMPLETION TECHNOLOGY Recent “TOP Quartile” Wells (1) Well Costs Reduced ($ millions) Increasing frac count has improved long term production performance in all layers UPPER MONTNEY $5.5 $4.5 2014 2016 (18 fracs) (25 fracs) 9 mmcf/d
Slide 16: Upper & Lower Montney Well Production Continues to Improve
UPPER & LOWER MONTNEY WELL PRODUCTION CONTINUES TO IMPROVE New wells are normally restricted to ≤10 mmcf/d for frac sand flowback control during initial 6 months Wells tested, not on-production. 14 Upper & Lower Montney Wells with slickwater, average 19 frac stages, open-hole packers, started produc
Slide 17: Recent Lower Montney Wells with Up to 25 Frac Stages
RECENT LOWER MONTNEY WELLS WITH UP TO 25 FRAC STAGES (OPEN-HOLE PACKERS AND CEMENTED PORTS) 2 of 4 new wells “Additional Lower Montney wells >20 mmcf/d initial production including longer laterals, reduced frac spacing and cemented ports to be brought on production in next 6 months.” Wells restricte
Slide 18: 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 • 19 total Middle Montney wells on-production across Glacier land block. 2014-15 10 wells(1) Gen 4: Slickwater, OH
Slide 19: Top Quartile Glacier Middle Montney Wells
TOP QUARTILE GLACIER MIDDLE MONTNEY WELLS • 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 > 3.4 Bcfe Budget Type Curve (IP30 4.
Slide 20: Robust Glacier Montney Well Economics
ROBUST GLACIER MONTNEY WELL ECONOMICS Middle Montney Upper & Lower Montney (50 bbls/mmcf C3+, 45% C5+) (Dry Gas) 102% Advantage achieved >20% DC & E well cost reduction with 95% >35% increase in frac count 63% 57% Type Higher IP Curve & & EUR Case Higher IP Cost Type & EUR Curve & Case Cost 7.2/7.2
Slide 21: Growth Beyond 350 MMcf/d Can Be Accommodated on Existing Plant Site
GROWTH BEYOND 350 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 350 mmcf/d 250 mmcf/d to 350 Line mmcf/d Dry & Liquids TCPL Sales Meter
Slide 22: Clear Vision for Growth, Financial Strength, Proven Expertise
Clear Vision for Growth Financial Strength Proven Expertise
Slide 23: Appendix
APPENDIX 23
Slide 24: Fully Funded Glacier Growth Plan Details
FULLY FUNDED GLACIER GROWTH PLAN DETAILS: 22% ANNUAL AVERAGE PRODUCTION GROWTH FOR 2015 TO 2017 Annual Average Production (mmcfe/d) 235 200 141 2015 Actual 2016 Budget 2017 Estimate Annual Average Production Growth(3) 40% 22% average growth per year (“CAGR”) 18% 7% 2015 Actual 2016 Budget 2017 Estim
Slide 25: Upper and Lower Montney Wells - Improving Performance Since 2008
UPPER AND LOWER MONTNEY WELLS - IMPROVING PERFORMANCE SINCE 2008 Budget Type Curve (IP30 7.2 mmcf/d & 7.2 Bcf) Data: updated to June 2016 25
Slide 26: Exceptional Upper & Lower Montney Well Economics
(1) EXCEPTIONAL UPPER & LOWER MONTNEY WELL 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 $4.7 million per well based on management’s estimate of Capital
Slide 27: Strong East Glacier Middle Montney Well Economics
STRONG 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 Capital Cost for our nex
Slide 28: 2014 Middle Montney Program Focused on Higher Liquid Content in East Glacier
2014 MIDDLE MONTNEY PROGRAM FOCUSED ON HIGHER LIQUID CONTENT IN EAST GLACIER Glacier C5+ 57 Middle Montney wells to MM wells drilled in 2014 date illustrate higher liquid content(1) from west to east deg API 10 program at Glacier across Glacier East Glacier 30 to 83 MMCF/D average final test bbls/mm
Slide 29: Glacier Montney Assigned 2P EUR per Well & Interval
GLACIER MONTNEY ASSIGNED 2P EUR PER WELL & INTERVAL 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 2012 2013 2014 2015 2012 2013 2014 201
Slide 30: 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 30
Slide 31: 2012 Core and Completion Studies
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 32: 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 33: Advisory
ADVISORY determinative of the rates at which such wells will commence production and decline thereafter and are not indicative of long term performance or of ultimate recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for Ad
Slide 34: 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 35: 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
Advantage Oil & Gas — Investor Presentation (October 2016) on 6ix