SURVIVE TO THRIVE 2016 CAPP SCOTIABANK INVESTMENT SYMPOSIUM

Transcription

1 SURVIVE TO THRIVE 2016 CAPP SCOTIABANK INVESTMENT SYMPOSIUM April 12,

2 CORPORATE PROFILE Corporate Summary Q4/2015 Avg. Daily Production 67,934 boe/d Production Mix 1 ~60% liquids/40% gas Corporate Decline 2 ~12% Undeveloped Land (net) 503,000 acres Reserves (2P YE 2015) million boe Reserve Life Index (2P YE 2015) years Market Summary Capitalization 5 Enterprise Value 6 Shares Outstanding 1 Total Debt 7 Total Debt/EBITDA 8 2.9x Tax Pools 1 1. As at December 31, Calculated as decline in 2015 base production from 2014 base production. This measure does not have any standardized meaning and therefore is not comparable to similar measures presented by other companies. 3. GLJ December 31, 2015 reserve report Company Interest using forecast prices and costs. 4. December 31, 2015 year end reserves divided by 2016 forecast production. 5. Based on April 1, 2016 TSX closing price of $ Defined as market capitalization as at April 1, total debt before working capital as at March 31, As at March 31, Debt includes convertible debentures and is before working capital. 8. EBITDA is trailing 12 month EBITDA as at December 31, $869 million $2.6 billion 543 million $1.68 billion ~$3.4 billion 2

3 OUTLOOK FOR 2016 FOCUSED ON REDUCING OUTSTANDING DEBT AND STRENGTHENING BALANCE SHEET 2016 capital program of $60 to $70 million Anticipated excess funds flow of approximately $280 million in 2016 to be directed to debt reduction Continue asset divesture program with approximately $300 million of further asset sales targeted in 2016 Continued focus on efforts to drive down all cost structures within the organization Anticipate $23 million savings in operating cost in 2016 Anticipate $25 million savings in G&A costs in 2016 Year end 2016 senior Debt to EBITDA of 3.4x vs. covenant of 3.5x Year end 2016 total Debt to EBITDA of 3.7x vs. covenant of 4.0x Assumptions: US$ $30.00/bbl WTI, $2.40/Mcf AECO, WTI/WCS heavy oil differential of US $12.60/bbl and US/Cdn $0.70 No additional asset sales Net of cash on hand Prepayment of convertible debentures at less than face value 3

4 RISK MANAGEMENT PROGRAM ENSURING EXCESS FUNDS FLOW AFTER CAPITAL PROGRAM AND DIVIDENDS Hedge positions as at April 1, 2016 Crude Oil 1 Natural Gas Volume Percentage Hedged 2 Average Price Volume Percentage Hedged 2 Average Price Mark to Market 3 (bbl/d) (Cdn$/bbl) (MMcf/d) (Cdn$/Mcf) ($ millions) ,239 74% $ % $3.28 $ ,000 50% $ % $3.47 $ ,500 18% $ % $3.59 $61 Pengrowth realized $327 million of hedging gains in 2015 as a result of the strength of hedging program Realized approximately $126 million of hedging gains in Q1, Crude oil hedge percentages exclude NGL production volumes 2. Percentages based on mid-point of 2016 production guidance of 59,000 boe/d to 61,000 boe/d 3. Includes $18 million of foreign exchange gains 4

5 LONG-TERM DEVELOPMENT OVER $11 BILLION OF DEVELOPMENT OPPORTUNITIES Thermal oil Montney gas Lindbergh $6.6 billion Groundbirch/Bernadet $4.7 billion GROWTH VEHICLES 5

6 Bitumen Production (bbl/d) LINDBERGH COMMERCIAL PRODUCTION PHASE ONE PRODUCTION CONTINUES TO GROW Commenced steaming operations on commercial facilities 2016 Average Annual Production 16,500 bbl/d Peak production 17,200 bbl/d Forecast Instantaneous Steam-Oil Ratio (ISOR) 6

7 Production (Boe/d) GROUNDBIRCH MONTNEY WELL PERFORMANCE WELLS DRILLED IN 2014 OUTPERFORMING FIRST GENERATION WELLS Initial 2014 IP 30 Rate (MMcf/d) EUR (Bcf) DCET ($ million/well) Frac Stages Proppant (tonnes/stage) Month P50 Type Curve 100/ W6/0 102/ W6/0 Historical Pengrowth Area Average (14 wells) 2014 Well 2014 Well 7

8 SURVIVE TO THRIVE EXECUTING ON WHAT IS IN OUR CONTROL We have a plan to survive and thrive Focusing on preserving and improving financial strength Targeting debt reduction through free cash flow and proceeds from asset sales Capital discipline in 2015 and 2016 preserves balance sheet in face of low commodity price environment, without significant impact on production levels Long-term strategy remains unchanged with over $11 billion of long-term development and resource opportunities 8

9 ADVISORIES Caution Regarding Forward Looking Information: This presentation contains forward-looking statements within the meaning of securities laws, including the "safe harbour" provisions of Canadian securities legislation and the United States Private Securities Litigation Reform Act of Forward-looking information is often, but not always, identified by the use of words such as "anticipate", "believe", "expect", "plan", "intend", "forecast", "target", "project", "guidance", "may", "will", "should", "could", "estimate", "predict" or similar words suggesting future outcomes or language suggesting an outlook. In particular, forward-looking statements in this presentation include, but are not limited to: tax pool value; value of commodity and foreign exchange hedges; assumptions for future commodity prices, exchange rates and differentials; estimated 2016 capital spending, operating costs and general and administrative costs; efforts to continue to reduce costs in 2016; 2016 asset disposition target; expected excess funds flow from operations and the application thereof to reduce debt; commodity price expectations for 2016; expected debt covenant ratios in 2016; future hedge positions; plans to make offers to retire term notes and convertible debentures early; focus on long-life, low cost and competitively advantaged assets; balancing development focus between thermal assets and conventional assets; increasing focus on oil and liquids development; over $11 billion of future development opportunities; anticipated future production and ISOR at Lindbergh; expected Montney returns; and expected Montney well performance; By their very nature, the forward-looking statements included in this presentation involve inherent risks and uncertainties, both general and specific, and risks that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations and anticipations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to: the volatility of oil and gas prices; production and development costs and capital expenditures; the imprecision of reserve estimates and estimates of recoverable quantities of oil, natural gas and liquids; Pengrowth's ability to replace and expand oil and gas reserves; environmental claims and liabilities; incorrect assessments of value when making acquisitions; increases in debt service charges; the loss of key personnel; the marketability of production; defaults by third party operators; unforeseen title defects; fluctuations in foreign currency and exchange rates; inadequate insurance coverage; changes in environmental or other legislation applicable to our operations, and our ability to comply with current and future environmental and other laws and regulations; actions by governmental or regulatory authorities including changes in royalty structures and programs and income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry laws; our ability to access external sources of debt and equity capital, and the implementation of greenhouse gas emissions legislation. Further information regarding these factors may be found under the heading "Risk Factors" in our most recent Annual Information Form under the heading Business Risks in our most recent year-end Management s Discussion and Analysis and in our most recent consolidated financial statements, management information circular, quarterly reports, material change reports and news releases. Copies of our Canadian public filings are available on SEDAR at Our U.S. public filings, including our most recent annual report form 40-F as supplemented by our filings on form 6-K, are available at Readers are cautioned that the foregoing list of factors that may affect future results is not exhaustive. When relying on our forward-looking statements to make decisions with respect to Pengrowth, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Furthermore, the forward-looking statements contained in this presentation are made as of the date of this presentation and we do not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. The forward-looking statements contained in this presentation are expressly qualified by this cautionary statement Caution Regarding Engineering Terms: When used herein, the term "boe" means barrels of oil equivalent on the basis of one boe being equal to one barrel of oil or NGLs or 6,000 cubic feet of natural gas (6 Mcf: 1 bbl). Barrels of oil equivalent may be misleading, particularly if used in isolation. A conversion ratio of six Mcf of natural gas to one boe is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a six to one basis may be misleading as an Indication of value. The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation. In addition, Pengrowth uses the following frequently-recurring industry terms in this presentation: bbls refers to barrels, Mbbls refers to a thousand barrels, MMbbls refers to a million barrels, Mboe refers to a thousand barrels of oil equivalent, MMboe refers to a million barrels of oil equivalent, Mcf refers to thousand cubic feet, Bcf refers to billion cubic feet. Caution Regarding Reserves: All amounts are stated in Canadian dollars unless otherwise specified. All reserves, resources, reserve life index, and production information herein is based upon Pengrowth s company interest working interest share of reserves or production plus Pengrowth s royalty interest, being Pengrowth s interest in production and payment that is based on the gross production at the wellhead, before royalties and using GLJ s January 1, 2016 forecast prices and costs. Caution Regarding Well Test and Initial Production ( IP ) and Steam/Oil Ratios Results: This presentation makes references to well test results, IP rates and steam/oil ratios for certain properties. These results are not necessarily representative of long-term well performance or ultimate recoveries and are subject to various performance factors including geological formation, duration of test, pressure and production declines. Some wells will experience significant and immediate decreases in production rates. 9

10 2100, rd Avenue SW Calgary, AB, Canada T2P 0B4 Tel Toll-Free Fax INVESTOR RELATIONS Toll-Free investorrelations@pengrowth.com Website 10