Advantage Energy Ltd · TSX:AAV
Advantage Energy — Advantage Oil & Gas — Investor Presentation (June 2011)
24 slides from Advantage Energy's investor presentation, June 2011
Slide 1: Investor Presentation June 2011
Investor Presentation June 2011 June 2011 Page 1
Slide 2: Corporate Highlights
Corporate Highlights • Advantage now a ‘pure play’ Montney natural gas resource company • Pro forma Advantage production ~23,500 boe/d Q2 2011 • Oil weighted assets sold to Longview Oil Corp. (AAV 63% ownership) • Capex program focused on Montney development at Glacier • In ~3 years: Grew 2P reserve
Slide 3: Advantage – “Pure Play” Natural Gas Focus
Advantage – “Pure Play” Natural Gas Focus Company Total Montney Unconventional March Exit Production : 24,300 boe/d March Exit Production : 16,600 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 4: 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 5: 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 6: 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 7: 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 8: 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’ A A’ • Formation thickness ~290 meters at Glacier • Future development
Slide 9: Glacier - Drilling Results and Production Growth
Glacier - Drilling Results and Production Growth Phase III Upper Montney Test Rates mmcf/d(1) Recent delineation drilling results confirm high quality reservoir across Glacier Production Growth our land block 100 mmcf/d Phase III March 2011 7.7 5.2 50 mmcf/d Phase II 2010 8.9 25 mmcf/d Phase I 9.8 2
Slide 10: Glacier Improved Well Production Thru Frac Optimization
Glacier Improved Well Production Thru Frac Optimization Upper Montney Horizontals Normalized 30 Day IP Average Production Rate per Well 6000 32 recent wells with >9 fracs/well 5000 1 year cumulative 0.9 bcf Glacier well economics based on 5 mmcf/d IP, 5 bcf, $5.5 million/well, $4.00 Cdn flat pricing
Slide 11: Glacier Strong Operating Netbacks
Glacier Strong Operating Netbacks Glacier Operating Netbacks Exceed 87% of Revenue Revenue ($Cdn/mcf) $4.00 Royalties (@ Royalty Rate 5.0%) $(0.20) Operating Costs(1) $(0.30) Operating Netback ($/mcf) $3.50 Annual Cash Flow $128 million June 2011 Page 11
Slide 12: 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 13: 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 14: 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 15: 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 28
Slide 16: Significant Debt Reduction
Significant Debt Reduction Total Debt has been reduced by 69% since 2008 $807 million $469 million $440 million 57% $251million 2008 YE 2009 YE 2010 YE Q1 2011 Pro-forma Convertible Debentures Bank Debt June 2011 Page 16
Slide 17: Advantage - Current Enterprise Value Analysis
Advantage - Current Enterprise Value Analysis # Shares (million) ($ million) Advantage Shares @$8.15/share(1) 165 $ 1,345 Current Total Debt $ 251 Total Enterprise Value $ 1,596 Less non-Glacier Assets ($ 410) (Pv 10% pre-tax, Sproule) (2) Less Longview Equity @$12.02/share(1) 29.4 ($ 353) Implied V
Slide 18: Advantage Summary
Advantage Summary • Glacier production grows to 100 mmcf/d – March 2011 Exit Rate • Additional 100 mmcf/d of production behind pipe will offset declines for most of 2011 • 2P RLI 29 years • Pro forma cash flow of $164 million for 2011(1) • Top quartile cost structure • 28,400 mcf/d @ $6.25 Cdn AECO/
Slide 19: Advantage Contact Information
Advantage Contact Information Andy Mah, P.Eng. President & 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
Slide 20: Appendix
Appendix @avantage June 2011 Page 20 Oil & Gas Ltd.
Slide 21: 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 June 2011 Page 21 Source: Facts are Stubborn Things,
Slide 22: 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 23: 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 25% 20% 15% 10% 5% 0% 0-1 1-2 2-3 3-4 4-5 5-6 6-7 7-
Slide 24: 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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