Advantage Energy Ltd · TSX:AAV

Advantage Energy — Advantage Oil & Gas — Investor Presentation (January 2016)

34 slides from Advantage Energy's investor presentation, January 2016

  1. Slide 1: 2016 Budget Targets 39% Production Growth, $0.75/mcf Total Cash Costs

    “2016 Budget Targets 39% Production Growth, $0.75/mcf Total Cash Costs and 1.6x Debt to Cash Flow @ AECO Cdn $2.50/mcf” Investor Presentation TSX / NYSE: AAV January 2016

  2. Slide 2: Advantage at a Glance

    ADVANTAGE AT A GLANCE TSX, NYSE: AAV TSX 52-week trading range $4.94-$8.36 Shares Outstanding (basic) 170.7 million 2016 Annual Production Target 39% Annual Production Growth 200 mmcfe/d (33,300 boe/d) Market Capitalization @ January 4, 2016 $1.2 billion Bank Debt @ Sept. 30, 2015 (37% undrawn on $4

  3. Slide 3: Positioned for Profitable & Sustainable Growth

    POSITIONED FOR PROFITABLE & SUSTAINABLE GROWTH World Class Glacier Montney Asset >1000 future drill Strong Balance Sheet locations Industry Leading Low Cost 1.6x Year-end D/CF Producer 2016 Budget $0.75/mcfe(2) total cash costs @$2.50 Cdn/mcf 26 Employees 2015-2017 Development Plan 22% Average Annua

  4. Slide 4: 2016 Budget – Strong Growth and Financial Flexibility

    2016 BUDGET – STRONG GROWTH AND FINANCIAL FLEXIBILITY KEY ASSUMPTIONS DELIVERABLES $120 Million Capital $160 Million Cash Flow(1) ($40 million surplus) 120 mmcf/d Completed Standing Well Inventory 39% Production Growth 13 Wells to Drill for 2017 29% Cash Flow per Share growth AAV Growth 70 mmcf/d Av

  5. Slide 5: 2016 D/CF vs Debt-Adjusted Production per Share Growth

    2016 D/CF VS DEBT-ADJUSTED PROD/FD SHARE GROWTH %(1) @ STRIP PRICING (Selected Montney Producers) AAV 44% PPS 1.3x D/CF AAV Source: (1) RBC December 21, 2015 Junior/Intermediate E&P: Weekly Review & Industry Tables @ Future Strip Pricing, $2.26 U.S./mcf @ Henry Hub on a Fully Diluted (“FD”) Basis 5

  6. Slide 6: World Class Montney Asset with Industry Leading Low Costs

    WORLD CLASS MONTNEY ASSET WITH INDUSTRY LEADING LOW COSTS & CAPITAL EFFICIENCIES Montney Thin Section Photo Glacier 6 300 meters thick Glacier Montney Natural gas Siltstone and liquids Core resource Strong economics at current commodity prices 6

  7. Slide 7: Glacier Development with Additional Montney Lands Provides Future Upside

    GLACIER DEVELOPMENT WITH ADDITIONAL MONTNEY LANDS PROVIDES FUTURE UPSIDE  Current development at Glacier including dry and liquids rich gas drilling Progress (Future)  Glacier future drilling inventory >1,000 100% owned locations Glacier Gas 9 net Montney Glacier Plant sections acquired  New Mont

  8. Slide 8: Pentastack Development with Decades of Drilling Inventory at Glacier

    “PENTASTACK” DEVELOPMENT WITH DECADES OF DRILLING INVENTORY AT GLACIER  Capable of maintaining 245 mmcfe/d (40,830 boe/d) for >50 years(1)  >1,000 Future Drill Locations at Glacier support future growth(1)  292 undeveloped locations booked in 2P reserves Year End 2014(2) # Wells Production C3+ (3

  9. Slide 9: Robust Upper & Lower Montney Dry Gas Well Economics

    ROBUST UPPER & LOWER MONTNEY DRY GAS WELL ECONOMICS ROR% @ CURRENT COMMODITY PRICES Upper & Lower Montney Middle Montney (Dry Gas) (50 bbls/mmcf C3+, 45% C5+) 77% Advantage achieved 20% cost reduction to average $5.5 million DC & E 47% 37% Type Higher IP Curve & & EUR Case 18% Higher IP Cost & EUR T

  10. Slide 10: Industry Leading Low Cost Structure Enhances Economic Return

    INDUSTRY LEADING LOW COST STRUCTURE ENHANCES ECONOMIC RETURN… AAV - Industry leading low cost structure 10

  11. Slide 11: …And Generates Strong Recycle Ratios

    …AND GENERATES STRONG RECYCLE RATIOS Illustrative Q3 2015 AECO Cdn Glacier Operating Netback ($/mcfe) $2.50/mcf Revenue (Realized Price) $3.28(1)(3) $2.40(1) Royalties ($0.12) ($0.12) Operating Costs (including liquids transportation costs) ($0.36) ($0.36) Operating Netback $2.80 $1.92 Recycle Ratio

  12. Slide 12: 2013 Upper & Lower Montney Wells Outperform Long Term Expectations

    2013 UPPER & LOWER MONTNEY WELLS OUTPERFORM LONG TERM PRODUCTION EXPECTATIONS. 2014 WELLS JUST STARTED… 8 New Wells on-stream @ December 2015 to sustain production at 180 mmcfe/d. Wells are normally restricted to ≤10 mmcf/d for frac sand flowback control during initial 6 months Production from 25 sl

  13. Slide 13: Improving Liquids Rich Middle Montney Well Performance at Glacier

    IMPROVING LIQUIDS RICH MIDDLE MONTNEY WELL PERFORMANCE AT GLACIER 10 New MM wells could exceed type curve Production Test Rate Initial On-production Rate 12-2 well (2013) cumulative production >2 Bcfe after 400 days (restricted) with current flowing pressure 1,000 psi. Middle Montney Budget Type Cur

  14. Slide 14: 2014 Middle Montney Program Focused on Higher Liquid Content

    2014 MIDDLE MONTNEY PROGRAM FOCUSED ON HIGHER LIQUID CONTENT IN EAST GLACIER Middle Montney wells to date Glacier C5+ 57 illustrate higher liquid content(1) from west to east across Glacier deg API 10 MM wells drilled in 2014 program at Glacier East Glacier 30 to 83 bbls/mmcf 8 Wells completed & sta

  15. Slide 15: Low Risk Development with a Well Defined Growth Plan

    LOW RISK DEVELOPMENT WITH A WELL DEFINED GROWTH PLAN 15

  16. Slide 16: Large Inventory of Standing Wells & Production Capability

    LARGE INVENTORY OF STANDING WELLS & PRODUCTION CAPABILITY Only 8 Wells Required to 15 Wells Completed & Standing Sustain Production from 130 to (current) 180 mmcfe/d since July 2015 120+ MMCF/D IP30 from the 15 wells + older wells 20 Wells Drilled, uncompleted 2-18 LM (2013) 21 mmcf/d(1) 5-3 UM 12-3

  17. Slide 17: Expanded Glacier Gas Plant Provides Additional Capacity

    EXPANDED GLACIER GAS PLANT PROVIDES ADDITIONAL CAPACITY FOR FUTURE GROWTH & OPERATIONAL FLEXIBILITY  Plant Process Capacity 250 mmcf/d after installation of final inlet compressor unit December 2015 (provides 70 mmcfe/d of additional plant capacity for 2016 & 2017 growth)  100% ownership of the Gl

  18. Slide 18: Growth Beyond 2017 Can Be Accommodated on Existing Plant Site

    GROWTH BEYOND 2017 CAN BE ACCOMMODATED ON EXISTING PLANT SITE R14 R13 R12 R11 R10 R9 R8 R7W6 100% Owned Glacier Gas Plant – Positioned for T78 T78 Advantage Gas Plant Production Ramp-up T77 T77 Alliance Sales Gas Line TCPL Sales Potential Area Expansion to Potential Area Expansion to Meter Stations

  19. Slide 19: Plan Targets 22% Production Growth (CAGR) Through 2017

    PLAN TARGETS 22% PRODUCTION GROWTH (CAGR) THROUGH 2017 Annual Average Production Plan Summary 2015 thru 2017 (1) (mmcfe/d) 235 245 mmcfe/d (40,830 boe/d) in 2017 200 142 $485 million Capital Expenditures, down from original estimates of $700 million 55 New Montney wells 2015 Actual + Estimate 2016 B

  20. Slide 20: Growing Cash Flow Funds Capital Requirements

    GROWING CASH FLOW FUNDS CAPITAL REQUIREMENTS $250 Cash flow significantly exceeds maintenance 245 mmcfe/d @ $3.00/mcf capital each year. Maintenance capital levels can generates ~$85 million free be achieved at ~$1.50/mcfe cash flow netback annual cash flow each year to keep production flat $200 Fin

  21. Slide 21: 2015 Through 2017 Growth Plan Price Sensitivity

    2015 THROUGH 2017 – GROWTH PLAN PRICE SENSITIVITY Cash Flow per Share Downside gas price Total Debt to Trailing mitigation while retaining Sensitivity torque to upside Cash Flow Sensitivity 2.3 $1.20 $1.10 AECO $1.04 $2.50/mcf 1.6 1.6 $0.99 $1.00 AECO 1.4 1.4 $2.75/mcf $0.94 1.3 $0.73 AECO $3.00/mcf

  22. Slide 22: Clear Vision for Growth, Financial Strength, Proven Expertise

    Clear Vision for Growth Financial Strength Proven Expertise

  23. Slide 23: Appendix

    APPENDIX 23

  24. 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) 235 200 142 142 8% 2015 Actual + Estimate 2016 Budget 2017 Estimate Annual Average Production Growth (2) 39% 22% average growth per year ("CAGR") (2) 18% 8% 2015 Actual

  25. Slide 25: 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) Based on $5.5 million per well with 20 frac stages (3) Natural gas prices a

  26. Slide 26: 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) Based on $5.9 million per well with 20 frac stages and C3+ NGL yields of 50 bbls/mmcf raw g

  27. Slide 27: 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 December 2015 27

  28. Slide 28: Glacier Montney Assigned 2P EUR per Well & Interval

    GLACIER MONTNEY ASSIGNED 2P EUR PER WELL & INTERVAL ($ millions unless otherwise indicated) Glacier - 2P Recoveries per Interval(1) # of Gross HZ Wells 2P Recovery [bcf/well] Interval Developed Undeveloped TOTAL Developed Undeveloped TOTAL YE 2012 YE 2013 YE 2014 YE 2012 YE 2013 YE 2014 YE 2012 YE 2

  29. Slide 29: 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 29

  30. Slide 30: 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

  31. Slide 31: 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

  32. Slide 32: 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

  33. Slide 33: 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

  34. Slide 34: 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

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