BUILDING SUSTAINABLE CASH FLOW 2014 Investor Day January 16, 2014 TSX:PGF NYSE:PGH
AGENDA Introduction & welcome Fred Kerr VP, Investor Relations Corporate strategy Derek Evans President & CEO 2014 Budget and asset overview Marlon McDougall Chief Operating Officer Financial strategy Chris Webster Chief…
WHERE WE OPERATE WHO WE ARE Listings: TSX: PGF NYSE: PGH Market Capitalization1 3.4 billion Enterprise Value2 4.6 billion Shares Outstanding3 522 million Monthly Dividend 0.04 per share Current Yield1 7.3 % Q4 2013 Production4…
EXPERIENCED TEAM WITH TRACK RECORD OF SUCCESS Pengrowth management has extensive oil and gas experience spanning many Derek Evans President & CEO commodity cycles in the Western Canadian Sedimentary Basin over several decades This…
WHY SHOULD YOU INVEST IN PENGROWTH Strategic plan We have one Become a long-term sustainable dividend paying entity by shifting to thermal oil production with lower declines, better capital efficiency and growing free cash flow Have…
CORPORATE STRATEGY 6 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
PENGROWTH HAS A UNIQUE STRATEGY Invest in low risk non-thermal assets to generate current cash flow Fund thermal oil opportunities that are expected to drive significant growth in production and sustainable cash Become a…
2013 A YEAR OF SUBSTANTIAL ACCOMPLISHMENTS: Financial Continued to pay monthly dividend of 0.04 per share Sold 1 billion of non-core assets Reduced outstanding debt by 175 million Renewed committed 1 billion credit facility until…
2013 A YEAR OF SUBSTANTIAL ACCOMPLISHMENTS: Assets Lindbergh Non-thermal Lindbergh 2P reserves increased by 48 High-graded capex to projects that MMbbls* to 143 MMbbls on pilot, seismic maximized funds flow from operations and core…
WHERE ARE WE TODAY Maintaining current 0.04/share monthly dividend Material asset sales are complete Construction of initial 12,500 bbl/d commercial phase of Lindbergh is on time and on budget Lindbergh first steam expected in…
WHERE ARE WE GOING Sustainable dividend paying entity with free cash flow and growth capacity Exploit existing inventory of oil and liquids-rich opportunities to maximize funds flow from operations Bring Lindbergh up to full…
THERMAL STRATEGY MAKES MORE SENSE THAN EVER Supply cost Thermal offers the lowest supply cost as compared to global alternatives Growth Niche thermal opportunities continue to exist for company of our size Competition U.S. is not…
THERMAL OFFERS THE LOWEST OIL SUPPLY COST Supply costs are defined as revenues required to cover operating costs, F&D/Exploration costs, royalties and taxes while generating a 10% rate of return on invested capital Supply Costs…
THERMAL DEVELOPMENT OFFERS SUSTAINING CAPITAL ADVANTAGES Capital reinvestment Capital reinvestment Capital reinvestment efficiency 27,000/boe/d efficiency 40,000/boe/d efficiency 40,000/boe/d 60%-80% First year declines…
THERMAL TECHNOLOGY CONTINUES TO EVOLVE We are early in the life of these reservoirs where small changes in technology can often have a big impact on recovery factors Key value creation step is the application of new technology that…
RAIL IS AN INCREASINGLY ATTRACTIVE OPTION FOR SHIPPING HEAVY OIL Canadian and U.S. crude shipments continue to grow (Cad 200,000 bbl/d, U.S. 800,000 bbl/d) Canadian crude rail shipments are primarily heavy oil while U.S. crude rail…
CANADIAN HEAVY OIL REPLACING DECLINING IMPORTED HEAVY OIL IN NORTH AMERICA Mexican and Venezuela import volumes Continue to decline Heading to new markets in Asia and Far East Top 3 U.S. importers of heavy crude oil Thousand…
GLOBAL HEAVY OIL COKING CAPACITY IS GROWING North America capacity projected to grow by 750K barrels by 2018 World wide capacity projected to grow by 2.9 MM bbl/d barrels by 2018 Latin America capacity projected to grow by 570K…
WHAT DOES OUR STRATEGY DELIVER 19 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
LINDBERGH SIGNIFICANTLY INCREASES FUNDS FLOW WHILE REPLACING NON-THERMAL PRODUCTION Liquids content grows from 53% (2014) to 79% (2018) Average production (boe/d) Total liquids production Lindbergh oil growth Liquids…
STRATEGY DELIVERS STRONG RETURNS Strategy expected to generate a 12% CAGR in funds flow per share through 2018 Expected funds flow per share growth is expected to be 6x faster than production, driven by growing high netback oil and…
KEY MODEL INPUT/OUTPUT CHANGES 1. Capital efficiencies in non-thermal business have improved (spending less capital for more returns) 2. Reduced non-thermal capital going forward to reflect improved capital efficiencies 3.…
STRATEGIC SUMMARY Our thermal strategy expected to renew organic production growth in 2015 and provide higher free cash flow with lower declines and better maintenance capital efficiencies Lindbergh is on track with first steam…
OPERATIONS REVIEW 25 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
2013 REVIEW (ESTIMATES) Drilled 141 (80.9 net) wells not including Lindbergh wells 74(44.3 net) Cardium oil wells 3(2.3 net) Elkton oil and liquid rich gas wells 13(11.5 net) Heavy oil wells in Jenner 51(22.7 net) Misc Operated /…
2013 REVIEW (ESTIMATES) Full year capital expenditures are expected to be approximately 700 million which is 9% below the original budget of 770 million Non-thermal spending of approximately 400 million vs. a budget of 470 million…
2014 - STICK TO THE STRATEGY Exercise prudence while exploiting a significant existing inventory of oil and liquids-rich projects Consistent execution driving performance with 520 better capital efficiency through economy of scale…
2014 GUIDANCE Capital (MM) 700 - 730 Non-thermal* 350 Lindbergh* 365 Average daily production (boe/d) 71,000 73,000 EBITDA (MM) 575 625 Funds Flow (MM) 500 540 Royalties (%) 16 18 Net operating costs (/boe) 15.20 15.80 Cash…
FOCUSED 2014 NON-THERMAL PROGRAM 2014 Capital allocation 2014 Development capital 270 MM 350 MM Development Non-thermal Drilling Program 30 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
CARDIUM 31 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
GREATER OLDS/GARRINGTON AREA Large, contiguous land base RED DEER Over 500 gross sections of Cardium rights Prospective sections 290 gross (160 net) SYLVAN LAKE 4-5 years of Tier 1 drilling locations Extensive infrastructure…
GARRINGTON CARDIUM Typical 100% Well 30 day initial production (boe/d) 170 First year average production (boe/d) 77 Reserves* Mboe 137 Metrics Drill/complete(MM/well) 3.0 Tie in Costs (MM/well) 0.4 0.6 F&D (/boe) 24-26 Gross…
Pengrowth Lightstream Vermillion Exxon/Imperial Bellatrix ARC Resources Source: geoSCOUT. Peters & Co. Bonterra Whitecap 34 INVESTOR DAY 2014 Angle Sinopec Bonavista Penn West TORC Crocotta Manitok Husky Oil…
PENGROWTHS GARRINGTON CARDIUM WELLS HAVE OUTPERFORMED THE INDUSTRY AVERAGE RESULTS CURVE Pengrowth has a superior land position Production (boe/d) Completions have outperformed peer group Drilling costs are competitive…
LOCHEND CARDIUM Typical 100% Well 30 day initial production (boe/d) 285 First year average production (boe/d) 132 Reserves* (Mboe) 239 Metrics Drill/complete (MM/well) 3.4 Tie in Costs (MM/well) 0.4 0.6 F&D (/boe) 15-17…
PENGROWTHS LOCHEND CARDIUM WELLS HAVE EXCEEDED EXPECTATIONS Production (boe/d) 16 18 stage slick water fracs Month Lochend Type Curve Average production 38 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
LOCHEND CARDIUM OFFERS SOME OF THE BEST RECYCLE RATIOS IN PENGROWTHS PORTFOLIO Flat Edmonton Par 50/bbl 60/bbl 70/bbl 80/bbl 90/bbl 100/bbl NPV 10% (M) 200 1,000 1,700 2,500 3,200 4,000 IRR (%) 11 18 25 34 46 59 Payout (Yrs) 6.6…
SWAN HILLS LIGHT OIL 40 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
SWAN HILLS TREND - LOW DECLINE WITH STRONG CASH FLOW Devil 2.3 Billion1 barrels of original oil in 100% WI House Mountain House Mountain Unit No.2 Unit No.1 19.3% WI place net to Pengrowth 7.1% WI Deer Mountain Unit…
JUDY CREEK MISCIBLE FLOOD ADDING INCREMENTAL PRODUCTION AND RESERVES Production (boe/d) Incremental production resulting from miscible flood program 42 INVESTOR DAY 2014 TSX:PGF NYSE:PGH 42
ADDITIONAL OPPORTUNITIES TO ADD INCREMENTAL PRODUCTION USING MISCIBLE FLOOD 2500 Strong Miscible Flood historical contribution from Judy Creek A Pool Efficient adds< 10,000 / flowing boe 2000 Development to continue with 2 new…
HEAVY OIL 44 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
GREATER JENNER AREA Large contiguous land base Low risk 3-4 year drilling inventory exploitable at low cost Control of extensive infrastructure system Access to transportation Capital spend in 2014 approximately 20 million Area…
JENNER GLAUCONITE SAND OFFER HIGH CAPITAL EFFICIENCY AND STRONG RECYCLE RATIOS Typical 100% Well 30 day initial production (boe/d) 120 Full year average production (boe/d) 60 Reserves* Mboe 60 Metrics DD Pool…
JENNER DD POOL GLAUCONITE TYPE CURVE HEAVY OIL AVERAGE 120 BBL/D OIL (IP30) Production (boe/d) Month Jenner Type Curve 47 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
OPERATING COSTS 48 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
POWER PRICES ACCOUNTED FOR A SIGNIFICANT PORTION OF 2013 OPEX Power was the largest operating cost category in 2013 due to higher pool prices and increases in transmission and distribution costs. Ongoing significant usage at large…
FOCUS IN 2014 IS TO REDUCE OPERATING COSTS Operating costs for 2014 are projected at 15.50/boe, mid-point of guidance and down from 15.80/boe guidance for 2013 (adjusted for sold properties) For 2014 we are focused on reducing our…
LINDBERGH THERMAL PROJECT 51 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
LINDBERGH WHERE AND WHAT IS IT Targeting the Lloydminster formation Land position: 43 sections with 100% working interest Resource potential of 769 million barrels of exploitable Bitumen Initially In Place a 2P NPV10 of 975…
WHY WE BELIEVE LINDBERGH WILL BE ON TIME AND ON BUDGET Location advantages All season access off of a paved highway Parts and services are 20 minutes away in Bonnyville Located east of Edmonton - no need to drive highway 63 Local…
WHY WE BELIEVE LINDBERGH WILL BE ON TIME AND ON BUDGET Construction advantages Good ground conditions (no muskeg) makes building easier Modular construction saves money and time Drifter Group has built four other SAGD projects on…
CONSTRUCTION OF TANK FARM ONE OF THE FEW ELEMENTS TO BE STICK BUILT ON SITE 56 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
MODULAR CONSTRUCTION OF CENTRAL PROCESSING FACILITIES 57 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
55% OF THE 12,500 BBL/D COMMERCIAL PROJECT CAPITAL IS SPENT AND PROJECT CONTINUES TO BE ON TIME AND ON BUDGET 325MM of capital spent/committed (1-2% variance potential) Includes - civil work, purchase of modular packages, 55%…
WHY WE EXPECT THE COMMERCIAL PROJECT TO PERFORM AS WELL AS THE PILOT Consistent reservoir characteristics Evident in 150 coreholes Homogeneous sands…
RESERVOIR IS CONSISTENT AT LINDBERGH NO SIGNIFICANT SHALES 6 m oil/water contact Core samples show the reservoir is consistently clean with few interbedded shales Athabasca McMurray No IHS bedding typically seen in…
PERMEABILITY AND POROSITY DATA FALL IN A NARROW RANGE Porosity data from both core Porosity Permeability cross plot analysis and open hole log data is consistent within a 10000 narrow band across 150 core holes 1000…
CORE ANALYSIS SHOW HIGH BITUMEN CONCENTRATION AT 10 OHM-M Analysis of samples in the water zone have high bitumen saturation readings Increased sampling in the water zone in 2012 to see if this was common Concluded that more…
OIL-WATER CONTACT WILL VARY ACROSS THE LEASE, BUT BOTTOM WATER HAS NOT BEEN MOBILE THUS FAR Top The oil-water contact is irregular due to late- stage salt dissolution that post-dated oil migration, trapping and degradation The…
ABSENCE OF FAULTS PROVIDES HIGH CONFIDENCE IN UNIFORM STEAM CHAMBER DEVELOPMENT AND CONTAINMENT New 3D seismic has high enough resolution to image faults if present One fault has been identified in the Colorado shale but it does not…
CAP ROCK IS LATERALLY EXTENSIVE ABOVE THE RESERVOIR Caprock above the reservoir identified on open hole logs Two independent mini-frac tests on wells in the pilot and in first commercial phase areas show steam can be contained if…
WHY WE BELIEVE COMMERCIAL PRODUCTION WILL BE BETTER THAN ORIGINALLY MODELED IN 2012 Production advantages Pilot production has outperformed internal expectations Lower SOR than originally anticipated creates flexibility Production…
EXCELLENT PILOT PERFORMANCE Total cumulative production in excess of 1.0 MMbbls at December 31st 2013 Estimated combined January rate 1700 bbl/d Bitumen Production (bbl/d) Monthly ISOR Pump efficiency issues drove a change…
LINDBERGH PILOT RESULTS DEMONSTRATE IMPRESSIVE INSTANTANEOUS STEAM-OIL RATIO AND WELL PRODUCTIVITY 2,000 1,800 Christina C-D 1,600 1,400 Average well productivity (bbl/d) 1,200 Firebag 1,000 Jackfish 1 Lindbergh 800…
LINDBERGH HAS OUTPERFORMED THE WOLF LAKE ANALOGUE Analogue: CNRL Wolf Lake Pad S1A (6 of 8 WPs) Grand Rapids Formation Post peak rate decline 2.5% per month Post peak rate ISOR 1.8 + 0.06 per month Analogue demonstrates Higher…
UNPRECEDENTED LINDBERGH PILOT PERFORMANCE DEMANDS NEW TYPE CURVE Wolf Lake post peak rate ISOR and declines are likely relevant to Lindbergh Post peak decline rates expected to decrease over time EUR of approximately 1.2…
EFFICIENT EXECUTION OF THE LINDBERGH STRATEGY Low SOR and better than expected well production performance has created capital spending flexibility Phase one completion will establish the backbone of infrastructure required at the…
LINDBERGH PRODUCTION RAMP-UP PLAN FOCUSED ON ACHIEVING TARGET OF 50,000 BBLS/DAY 100 MM EIA application submitted in December 2013 for the Production (bbl/d) 17,500 bbl/d expansion - approval expected by Q1 2016 360 MM…
POTENTIAL UPSIDE AT LINDBERGH Low SOR and higher production should result in higher recoveries in less time, yielding a higher overall project IRR Rapid ramp up and excess capability/capacity could result in higher production…
FINANCIAL STRATEGY 74 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
2013 FINANCIAL COMMITMENTS MADE AND DELIVERED: Continued to pay monthly dividend of 0.04 per share Sold 1 billion of non-core assets Reduced outstanding debt by 175 million Renewed committed 1 billion credit facility until July,…
2014 GUIDANCE Capital (MM) 700 - 730 Non-thermal* 350 Lindbergh* 365 Average daily production (boe/d) 71,000 73,000 EBITDA (MM) 575 625 Funds Flow (MM) 500 540 Royalties (%) 16 18 Net operating costs (/boe) 15.20 15.80 Cash…
2014 EBITDA SENSITIVITY TO VARIOUS COMMODITY PRICES AND FX Crude oil price (US/bbl) 75 80 85 90 95 100 Assumptions used in 5 year model AECO natural gas price (Cad/Mcf) 2.50 538 550 561 572 584 595 3.00 547 559 570 582 593…
2014 EBITDA SENSITIVITY TO VARIOUS PRICE DIFFERENTIALS Light oil differential (% of C WTI) 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% Assumptions used in 5 year model 75 591 585 581 575 570 565 Crude oil price 80 597 591 585 580 575 569…
MAINTAINING A BALANCED CASH IN/OUT PROFILE IN 2014 1.0 B of Cash inflows 965 MM of Cash outflows Cash on hand 430 715 Capex Anticipated funds 520 flow from operations 250 Dividends Anticipated DRIP proceeds 50 79…
FIVE YEAR OUTLOOK Approximately 430 million of cash on hand as at December 31, 2013 2014 debt/EBITDA expected to be 2.8x at year end, as a result of: Disposition activity completed in 2013 Commodity prices and differentials Higher…
DEBT/EBITDA EXPECTED TO DECLINE FROM 2.8X IN 2014 TO 1.5X IN 2018 Pengrowth has a history of financial discipline Strategy reduces Debt/EBITDA in the 2015 to 2018 period Total Debt/EBITDA * Total debt includes notes, convertible…
DEBT-TO-BOOK CAPITALIZATION REMAINS IN LINE WITH HISTORICAL AVERAGE Debt as % of book capitalization Cad MM 83 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
TOTAL PAYOUT RATIOS DECLINE FROM 2014 ONWARDS Payout Ratio Total payout defined as capex + dividends divided by funds flow 84 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
PENGROWTHS CREDIT CAPACITY IS MORE THAN SUFFICIENT TO MEET OUR NEEDS Sept 30, 2013 Forecast year Forecast year end (MM) end 2014 2015 Outstanding (MM) (MM) Senior fixed term notes 1,369 1,393 1,350 Term Credit facilities/Bank…
RESERVES GROWTH HAS OUTPACED DEBT Reserve Life Index (RLI)(Years) debt / boe of P+P reserves * Debt is total debt, includes notes, convertible debentures and bank debt ** Reserve life index calculated using year-end reserves…
NO MATERIAL DEBT REPAYMENTS REQUIRED UNTIL 2017 Long-term debt maturities (all amounts in millions) 138 Convertible Debentures Cad Long-term Notes (Cad) Weighted average Long-term Notes () coupon of 5.7% Long-term Notes (US)…
HEDGING FOREIGN EXCHANGE EXPOSURE ON TERM NOTES TO MITIGATE CURRENCY VOLATILITY 450 Principal amount Amount hedged 63% 400 % of principal hedged 350 300 47% Cad MM 250 200 150 17% 100 70% 50 43% 0 2015 2017…
MARKETING 89 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
WHERE WE CURRENTLY MARKET OUR OIL 3% Local Utilizing pipeline, trucking and rail to provide optionality in where we market our product 8% PADD IV 62% PADD II 13% West 3% East 11% PADD III 90 INVESTOR DAY 2014…
WE WILL MAXIMIZE TRANSPORTATION FLEXIBILITY THROUGH RAIL AND PIPELINE SOLUTIONS Rail opens new markets not currently pipeline connected or to areas downstream of pipeline bottlenecks We send Lindbergh crude to over 10 different…
ENSURE CASH FLOW CERTAINTY Ramped up oil hedging volumes and terms Ramped up natural gas hedging volumes and terms Hedging power Moving to hedge light and heavy oil differentials Board of Directors has approved higher hedging…
CORPORATE HEDGING PROVIDES A MEASURE OF STABILITY TO CASH FLOW Calendar Year Hedge positions as at January 7, 2013 Oil Volume (bbl/d) Price per bbl (Cad) Current oil production Hedging Limits hedged* (% of production) 2013 23,500…
OIL HEDGE POSITION PROTECTS CASH FLOW Hedged Volume (Mbbl/d) Cad per bbl 67% 67% 65% 65% 65% 65% 46% 46% 2014 2015 *Percentage of production hedged 94 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
NATURAL GAS HEDGE POSITION PROTECTS CASH FLOW Hedged Volume (MMcf/d) Cad per Mcf 60% 60% 60% 60% 38% 38% 38% 38% 2014 2015 *Percentage of production hedged 95 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
CONTINUED FOCUS ON REDUCING CASH G&A COSTS 1. Re-aligning G&A to appropriate levels with production output 2. Lindbergh will move to commercial production with few new personnel costs expected Cash G&A ( per boe) Prior periods…
NO CASH INCOME TAX EXPECTED TO BE PAYABLE UNTIL AT LEAST 2018 Tax Pools as at September 30, 2013 Category (MM) Canadian Oil and Gas Property Expense 765 Canadian Development Expense 872 Undepreciated Capital Cost 721…
2014 FINANCIAL STRATEGY TO SUPPORT GROWTH Starting the year with approximately 430 million of cash on hand Debt levels expected to remain manageable prior to Lindbergh production Non-thermal capital spending in 2014 of 350…
CLOSING COMMENTS 99 INVESTOR DAY 2014 TSX:PGF NYSE:PGH
WHY SHOULD YOU INVEST IN PENGROWTH Strategic plan We have one Become a long-term sustainable dividend paying entity by shifting to thermal oil production with lower declines, better capital efficiency and growing free cash flow Have…
CONCLUSION We did what we said we would do Dividends will be maintained Debt levels are manageable Lindbergh is on time and on budget Sound and balanced strategy of non-thermal and thermal oil exploitation will grow production…
Loading...
