Advantage Energy Ltd · TSX:AAV
Advantage Energy — Advantage Oil & Gas — Investor Presentation (November 2012)
32 slides from Advantage Energy's investor presentation, November 2012
Slide 1: Investor Presentation November 2012
Investor Presentation November 2012 November 2012 Page 1
Slide 2: Advantage Oil & Gas Ltd.
Advantage Oil & Gas Ltd. • Listed on TSX & NYSE AAV • Shares Outstanding (Basic) 168 million • Market Capitalization at November 15, 2012 $ 564 million • Q3 2012 Bank Debt (51% drawn) $ 154 million • Convertible Debentures - Jan 2015 $ 86 million • Enterprise Value $ 804 million • Longview Share val
Slide 3: Advantage Strategy – Corporate Simplification Continues
Advantage Strategy – Corporate Simplification Continues(1) • Non-core asset disposition process underway(2) • Will focus market valuation on Glacier & generate proceeds to reduce debt • Simplifies corporation leading to increased operational efficiencies and improved financial flexibility • Corporat
Slide 4: Overview
Overview • Significant position in the Montney natural gas resource play with 10.4 Tcfe gross raw (1) Discovered Petroleum Initially in Place (“DPIIP”) at our Glacier property • Recent discovery of NGLs in the Middle Montney formation provides additional reserves & resource growth potential in addit
Slide 5: Focused on 10.4 Tcfe Montney Natural Gas Resource Play at Glacier
Focused on 10.4 Tcfe (1) Montney Natural Gas Resource Play at Glacier Company Total YTD 2012 Production : 21,995 boe/d (2) Gas/Oil & Ngl % : 94/6 RLI: 24.3 yrs Glacier – Montney Natural Gas & Liquids Potential YTD 2012 Production : 15,574 boe/d (2) Gas/Oil & Ngl % : 100/0 Avg. W.I. : 93% RLI: 31.7 y
Slide 6: Glacier Natural Gas Production & Operating Cost Trend
Glacier Natural Gas Production & Operating Cost Trend 2.50 140.0 Glacier 100% W.I. Temporary drop Gas Plant On-Stream in production due to wet weather delays 120.0 2.00 100.0 1.50 80.0 mmcf/d $/mcf 60.0 1.00 Initial 25 mmcf/d Maintaining production between Op. Cost $1.50/mcf using 90 – 100 mmcf/d du
Slide 7: Top Decile Operating Cost Structure Due to Growth at Glacier
Top Decile Operating Cost Structure Due to Growth at Glacier $/boe (1) 25 Advantage is one of the lowest cost producers among the Canadian intermediate oil and gas sector. 20 Glacier is one of the lowest cost properties in the sector. 15 AAV Corporate Q3 2012 AAV $5.42/boe 10Glacier $1.80/boe 5 0 (1
Slide 8: Recent M&A Activity
Recent M&A Activity Shale AAV Glacier Silt Sand 400 Montney Total Hz Well Production (mmcfe/d) 300 Advantage is one of the larger Transactions to date have been mainly in the ‘over-pressured’ producers in the region of the montney fairway 200 Montney Resource Play 100 0 ARC Huron NAL Devon Trilogy A
Slide 9: Glacier’s Location Provides Technical & Economic Benefits
Glacier’s Location Provides Technical & Economic Benefits 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’ 09-36-79-20W6 05-09-76-13W6 01-21-77-11W6 c-42-F 93-P-09 Upper Montney 271 m
Slide 10: Glacier Montney Development Potential Could Exceed 1,000 Wells
Drilling Targets Glacier Montney – Glacier/Swan/Tupper Development Potential Could ExceedArea 1,000 Wells Total of 89 net wells drilled Drilling Inventory > 1,000 locations Upper Montney 73 wells drilled Potential for Inventory 300 to 400+ (1) (Lateral and vertical delineation Development of potenti
Slide 11: Updated Glacier Montney Resource Assessment Highlights
Updated Glacier Montney Resource Assessment Highlights(1) • DPIIP of 10.4 Tcfe gross raw (9.66 Tcfe AAV working interest) and includes estimates for Upper, Middle & Lower Montney • Resource potential includes previously unassigned Middle Montney formation due to recent evaluation drilling results wh
Slide 12: Glacier Montney Resource Assessment - DPIIP Increased to 9.7 Tcfe
Glacier Montney Resource Assessment - DPIIP Increased to 9.7 Tcfe (1) Sproule identified 6 layers of potential within our ~300 meters of Montney formation at Glacier. 9.66 Tcfe (2) DPIIP includes recognition of 156 million bbls of NGL’s initially in place with 51 million bbls identified as recoverab
Slide 13: Glacier Montney Reserves - Significant Growth Potential
Glacier Montney Reserves - Significant Growth Potential Reserves and contingent resource(1) estimates imply significant reserve growth potential. Negligible Middle Montney Reserves booked at YE 2011. 3.8 Tcfe (39% RF) Sproule estimated recoveries based on 4 hz wells per section per layer development
Slide 14: Middle Montney Evaluation Wells Reveal NGL’s Potential
Middle Montney Evaluation Wells Reveal NGL’s Potential • 5 Hz wells & 3 vertical recompletions evaluated the Middle Montney in Q1 2012 & MM Q4 2011 layer 1 • 4 Hz wells completed in Q1 2012 evaluated 3 separate Middle Montney layers & demonstrated test rates of 1.1 MM to 4.4 mmcf/d(1) with NGL’s of
Slide 15: Estimated Liquid Yields in Middle Montney Layers
Estimated Liquid Yields in Middle Montney Layers(1) C3+ components estimated at 46% to 60% Liquid Yield in 90 based on deep cut Bbls/mmcf On a revenue basis: 2.5 mmcf/d Middle Montney well ≈ 5 mmcf/d Upper Montney dry gas well 68 57 57 51 35 30 25 Middle Montney Middle Montney Middle Montney Middle
Slide 16: Middle Montney Liquids Processing Options
Middle Montney Liquids Processing Options Liquids processing options : Glacier 1 Glacier gas plant – install shallow cut (refrigeration) or deep cut Glacier facilities in a staged growth approach Gas Plant Alliance Pipeline Adjacent to TCPL 2 Alliance Pipeline – access liquids handling capability by
Slide 17: Glacier Gas Plant Positioned for Production Ramp-Up Capability
Glacier Gas Plant Positioned for Production Ramp-Up Capability • Glacier gas plant has current processing capacity of 140 mmcf/d • Provides operational flexibility to respond quickly to a natural gas price recovery • Additional operating cost reduction projects underway Expansion to 200 mmcfd requir
Slide 18: Glacier – Strong Operating Netbacks & Recycle Ratios
Glacier – Strong Operating Netbacks & Recycle Ratios Glacier Operating Netbacks & Recycle Ratio (Based on Upper Montney “Dry Gas”) Revenue ($Cdn/mcf)(1) $2.00 $3.00 $4.00 Royalties ($/mcf @ Royalty Rate 5.0%) $(0.10) $(0.15) $(0.20) Operating Costs ($/mcf)(3) $(0.25) $(0.25) $(0.25) Operating Netbac
Slide 19: Glacier Upper Montney Dry Gas Well Economics – Sensitivity Analysis
Glacier Upper Montney(1) Dry Gas Well Economics – Sensitivity Analysis 120 Glacier Upper Montney Horizontal Current Average Upper Rate of Return (%)(1) Montney type curve 100 5 mmcf/d & 5 Bcf 80 Rate of Return - % 60 40 20 0 2.00 3.00 4.00 5.00 6.00 AECO Gas Price - $/mcf Rate and Reserve per well S
Slide 20: Advantage Summary
Advantage Summary • World class Montney natural gas resource play at Glacier with one of the lowest cost structures in Western Canada • Recent discovery of NGL’s in the Middle Montney formation provides growth potential in reserves & resource in addition to the Upper & Lower Montney • DPIIP increase
Slide 21: Advantage Contact Information
Advantage Contact Information Investor Relations 1.866.393.0393 [email protected] Andy Mah, P.Eng. President & Chief Executive Officer Craig Blackwood, C.A. Vice-President, Finance Advantage 100% W.I. Glacier Gas Plant www.advantageog.com TSX:AAV NYSE:AAV Advantage Oil & Gas Ltd. Suite 700, 400 – 3
Slide 22: Appendix
Appendix November 2012 Page 22
Slide 23: Advantage Year End 2011 Reserves
Advantage Year End 2011 Reserves 2P Reserves = 217.9 Million Boe • Replaced 220% of production at Reserves by Areas a 2P F&D cost of $8.85/boe (1) • Glacier 2P F&D at $7.41/boe (1) • Proven reserves comprise 64% 6% of the 2P reserves 10% • 2011 Recycle ratio of 1.9x 84% • 3 Year 2P F&D of $9.90/boe
Slide 24: Glacier Development Drives Production Growth & Lower Operating Costs
Glacier Development Drives Production Growth & Lower Operating Costs Advantage Production Growth (1) Advantage Operating Costs 25000 boe/d $/boe 95% Production Growth 13.89 Top Tier Operating Cost Replaced 16,000 boe/d of Structure asset sales since 2009 20000 12.11 10.66 15000 8.44 10000 5.80 5.44
Slide 25: Western Canada Main Natural Gas Trunklines
Western Canada Main Natural Gas Trunklines Natural gas pipeline interconnection already exists between B.C. and Alberta November 2012 Page 25
Slide 26: Sproule Montney Reserves & Contingent Resource
Sproule Montney Reserves & Contingent Resource(1) DPIIP Reserves + Contingent (TCF, Sales) 300 meters thick with 6 layers of potential (TCFE raw) 1P + 2P + 3P+ ~2300 to 2350 m TVD Low Best High (%RF) (%RF) (%RF) 0.86 1.11 1.50 Upper Montney 2.75 31% 40% 55% 0.42 0.63 0.93 1000 feet (300 meters) Midd
Slide 27: Upper Montney Development
Upper Montney Development • 73 net (79 gross) Upper Montney wells drilled to date • Type curve 5 mmcf/d IP, 5 Bcf • Low well density to date • Only 8 of 80 net sections developed to ≥ 3 wells/section • Potential to increase well density per section by drilling laterally & ‘stacking’ hz wells vertica
Slide 28: Montney Horizontal Well Production Range and Type Curve
Montney Horizontal Well Production Range and Type Curve Swan, Sunrise, Tupper, Pouce Coupe, Groundbirch and Glacier Data includes Glacier, Upper & Lower Montney Horizontals Swan, Tupper, Pouce Coupe South & Normalized 30 Day IP Production Rates Groundbirch 14000 12000 10000 The IP30 range and averag
Slide 29: Lower Montney Development
Lower Montney Development • 11 net (14 gross) Lower Montney wells drilled to date • Majority of wells drilled in 2008/2009 to preserve expiring sections • Fracs utilized 2008/2009 technology - 6 to 8 frac stages • Lower decline production supports significant reserve potential & opportunity to incre
Slide 30: Lower Montney Production – Low Decline
Lower Montney Production – Low Decline Advantage Glacier Area Lower Montney Horizontals Normalized 30 Day IP Production Rates 5,000 4,000 Lower Initial declines & flatter 3,000 production profile confirms Gas Rate - Mcfd significant reserve potential & opportunity to improve productivity 2,000 1,000
Slide 31: Glacier – Thick Montney Siltstone Supports Higher Reserve Recoveries
Glacier – Thick Montney “Siltstone” Supports Higher Reserve Recoveries Unconventional Marcellus Shale Horn River Shale Barnett “Shaley” silts Haynesville Arc Silt Shell Birchcliff Most active drilling area in Glacier Montney “Tight” sand Conventional Encana AAV Glacier the Montney Murphy Devon Silt
Slide 32: 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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