Peyto Exploration & Development Corp. ("Peyto") (TSX:PEY) is pleased to present
its operating and financial results for the third quarter of the 2013 fiscal
year. This quarter culminates 15 successful years of delivering superior returns
to shareholders through the profitable development of long life, high value,
natural gas assets in one of the premium resource basins in North America. With
an industry leading cost structure, Peyto delivered third quarter operating
margins of 75%(1) and profit margins of 23%(2), while growing production per
share 18% year over year. Third quarter 2013 highlights included:
-- Production per share up 18%. Production increased 22% (18% per share)
from 276 MMcfe/d (46,033 boe/d) in Q3 2012 to 338 MMcfe/d (56,343 boe/d)
in Q3 2013. Year to date average production of 340 MMcfe/d (56,623
boe/d) is 32% higher than 2012 production of 257 MMcfe/d (42,772 boe/d).
Current production is approximately 420 MMcfe/d (70,000 boe/d),
exceeding the previous year-end 2013 guidance.
-- Funds from operations per share up 25%. Funds from Operations ("FFO")
grew 30% (25% per share) from $77 million in Q3 2012 to $100 million in
Q3 2013 due to increases in both production and natural gas price.
-- Industry leading cash costs of $1.07/mcfe. Total cash costs including
royalties, operating costs, transportation, G&A and interest were
$1.07/mcfe ($6.42/boe), up slightly from $1.00/mcfe ($6.02/boe) in Q3
2012 primarily due to higher royalties from higher natural gas prices,
resulting in cash netbacks of $3.22/mcfe ($19.32/boe) or a 75% operating
margin.
-- Record organic capital investment of $181 million. A total of 34
horizontal wells were drilled in Q3 2013, a new quarterly record for
Peyto.
-- Earnings of $0.21/share, dividends of $0.24/share. Earnings of $30
million ($105 million year-to-date) were generated in the quarter, while
dividends of $36 million ($95 million year-to-date) were paid to
shareholders, representing a before tax payout ratio of 36% of FFO (30%
year-to-date). The $0.08/share monthly dividend ($0.24/share for the
quarter) was up 33% from Q3 2012.
Third Quarter 2013 in Review
The third quarter of 2013 was a challenging period for Peyto as wet ground
conditions at the start of the quarter and weak AECO natural gas prices at the
end of the quarter hindered Peyto from maximizing production and Funds from
Operations as otherwise planned. Despite those challenges, a 10 rig drilling
program was successfully executed throughout the quarter and a record 34
horizontal wells were drilled and brought on production. The new producing wells
helped increase production from a post breakup low of 53,500 boe/d to 60,000
boe/d, however, production above that level was purposefully restricted to
prevent exposing unhedged flush volumes to the temporary and artificially low
Alberta natural gas prices that were prevalent in August and September. The low
Alberta (AECO) natural gas prices were due to a short term increase in
interruptible tolls on the TransCanada Mainline and a temporary widening of the
NYMEX to AECO basis differential. Peyto elected to conduct facility and pipeline
maintenance during those low price periods in advance of the return to normal
prices in October. On average for the quarter, approximately 2,000 boe/d was
offline due to maintenance and restrictions. Subsequent to the quarter, improved
natural gas prices along with the completion of three new facility projects have
allowed for the activation of all behind pipe production, with current
production exceeding 70,000 boe/d. Notwithstanding the volatility in natural gas
prices in the quarter, strong financial and operating performance was delivered
resulting in an annualized 12% Return on Equity (ROE) and 10% Return on Capital
Employed (ROCE).
(1) Operating Margin is defined as funds from operations divided by revenue
before royalties but including realized hedging gains/losses.
(2) Profit Margin is defined as net earnings for the quarter divided by
revenue before royalties but including realized hedging gains/losses.
Natural gas volumes recorded in thousand cubic feet (mcf) are converted to
barrels of oil equivalent (boe) using the ratio of six (6) thousand cubic
feet to one (1) barrel of oil (bbl). Natural gas liquids and oil volumes in
barrel of oil (bbl) are converted to thousand cubic feet equivalent (Mcfe)
using a ratio of one (1) barrel of oil to six (6) thousand cubic feet. This
could be misleading, particularly if used in isolation as it is based on an
energy equivalency conversion method primarily applied at the burner tip and
does not represent a value equivalency at the wellhead.
----------------------------------------------------------------------------
Three Months ended
September 30 %
2013 2012 Change
----------------------------------------------------------------------------
Operations
Production
Natural gas (mcf/d) 300,286 244,794 23%
Oil & NGLs (bbl/d) 6,295 5,236 20%
Thousand cubic feet equivalent (mcfe/d @ 338,058 276,200 22%
1:6)
Barrels of oil equivalent (boe/d @ 6:1) 56,343 46,033 22%
Product prices
Natural gas ($/mcf) 3.35 3.06 9%
Oil & NGLs ($/bbl) 70.91 68.62 3%
Operating expenses ($/mcfe) 0.37 0.35 6%
Transportation ($/mcfe) 0.12 0.11 9%
Field netback ($/mcfe) 3.49 3.29 6%
General & administrative expenses ($/mcfe) 0.02 0.03 (33)%
Interest expense ($/mcfe) 0.25 0.25 -
Financial ($000 except per share)
Revenue 133,573 102,042 31%
Royalties 9,722 6,632 47%
Funds from operations 99,736 76,918 31%
Funds from operations per share 0.67 0.54 25%
Total dividends 35,702 25,576 40%
Total dividends per share 0.24 0.18 33%
Payout ratio 36 33 9%
Earnings 30,461 23,058 32%
Earnings per diluted share 0.21 0.16 31%
Capital expenditures 180,801 317,089 (43)%
Weighted average shares outstanding 148,758,923 142,069,408 5%
As at September 30
Net debt
Shareholders' equity
Total assets
----------------------------------------------------------------------------
Nine Months ended
September 30 %
2013 2012 Change
----------------------------------------------------------------------------
Operations
Production
Natural gas (mcf/d) 302,711 228,982 32%
Oil & NGLs (bbl/d) 6,172 4,608 34%
Thousand cubic feet equivalent (mcfe/d @ 339,740 256,630 32%
1:6)
Barrels of oil equivalent (boe/d @ 6:1) 56,623 42,772 32%
Product prices
Natural gas ($/mcf) 3.52 3.15 12%
Oil & NGLs ($/bbl) 71.40 74.26 (4)%
Operating expenses ($/mcfe) 0.35 0.32 9%
Transportation ($/mcfe) 0.12 0.12 -
Field netback ($/mcfe) 3.64 3.39 7%
General & administrative expenses ($/mcfe) 0.03 0.05 (40)%
Interest expense ($/mcfe) 0.24 0.23 4%
Financial ($000 except per share)
Revenue 411,389 291,090 41%
Royalties 30,162 21,549 40%
Funds from operations 312,579 219,295 43%
Funds from operations per share 2.10 1.57 34%
Total dividends 95,197 75,415 26%
Total dividends per share 0.64 0.54 19%
Payout ratio 30 34 (12)%
Earnings 104,638 68,128 54%
Earnings per diluted share 0.71 0.49 45%
Capital expenditures 423,708 461,646 (8)%
Weighted average shares outstanding 148,730,485 139,631,290 7%
As at September 30
Net debt 862,864 683,540 26%
Shareholders' equity 1,218,362 1,092,079 12%
Total assets 2,429,125 2,077,890 17%
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Three Months ended Nine Months ended
September 30 September 30
($000) 2013 2012 2013 2012
----------------------------------------------------------------------------
Cash flows from operating activities 101,361 72,004 290,343 205,939
Change in non-cash working capital (4,404) 3,790 13,586 10,070
Change in provision for performance
based compensation 2,779 1,124 8,650 3,286
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Funds from operations 99,736 76,918 312,579 219,295
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Funds from operations per share 0.67 0.54 2.10 1.57
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(1) Funds from operations - Management uses funds from operations to analyze
the operating performance of its energy assets. In order to facilitate
comparative analysis, funds from operations is defined throughout this
report as earnings before performance based compensation, non-cash and
non-recurring expenses. Management believes that funds from operations
is an important parameter to measure the value of an asset when combined
with reserve life. Funds from operations is not a measure recognized by
International Financial Reporting Standards ("IFRS") and does not have a
standardized meaning prescribed by IFRS. Therefore, funds from
operations, as defined by Peyto, may not be comparable to similar
measures presented by other issuers, and investors are cautioned that
funds from operations should not be construed as an alternative to net
earnings, cash flow from operating activities or other measures of
financial performance calculated in accordance with IFRS. Funds from
operations cannot be assured and future dividends may vary.
Exploration & Development
Third quarter drilling activity focused on the Greater Sundance core area and
the many liquids rich, sweet gas resource plays currently under development. A
total of 34 wells were drilled across this land base, targeting the prospective
zones shown in the following table:
Total
Q3 2013 Field Wells
New
Zone Sundance Nosehill Wildhay Ansell Berland Kisku/Kakwa Area Drilled
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cardium 1 1 - 1 - - - 3
Notikewin 3 1 2 3 - - - 9
Falher 5 1 2 - - - - 8
Wilrich 3 2 2 5 - - - 12
Bluesky 2 - - - - - - 2
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total 14 5 6 9 - - - 34
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Over the last year, the Bluesky and Falher formations have contributed the
largest proportional increases in production with increases of 190% and 80%,
respectively. Currently, the Bluesky is contributing 4,800 boe/d while the
Falher is contributing 10,300 boe/d to Peyto's total production. Proven future
drilling inventory in these two formations continues to expand and Peyto
anticipates a larger percentage of future drilling activity will target these
formations.
Capital Expenditures
Peyto invested $86 million to drill, and $54 million to complete, 34 gross (31.6
net) horizontal wells in the quarter. In addition, $14 million was invested to
install wellsite equipment and pipelines to bring 34 gross (32.6 net) wells on
production, while $24 million was invested in the ongoing fabrication and
preparation of three new facility projects at Oldman North, Swanson and Brazeau.
The balance of the capital investments, or $3 million, was invested in the
acquisition and evaluation of new undeveloped lands. In total, $181 million of
capital was invested, representing the largest quarterly capital program in
Peyto's history.
Financial Results
Alberta (AECO) daily natural gas prices averaged $2.31/GJ in Q3 2013, while AECO
monthly prices averaged $2.66/GJ. As Peyto commits most of its production to the
monthly price, Peyto realized a volume weighted average natural gas price of
$2.62/GJ in Q3 2013, or $2.99/mcf, prior to a hedging gain of $0.36/mcf. This
unhedged realized price was up 26% from Q3 2012 but down 22% from the previous
quarter. Peyto realized a blended oil and natural gas liquids price of
$71.79/bbl in Q3 2013, prior to a $0.88/bbl hedging loss, for its blend of
condensate, pentane, butane and propane, which represented 68% of the
$105.13/bbl average Edmonton light oil price. The current offset to light oil
price has increased due to a greater percentage of propane and butane in Peyto's
natural gas liquids blend resulting from the Oldman deep cut facilities.
Combined, Peyto's unhedged revenues totaled $3.99/mcfe ($4.29/mcfe including
hedging gains), or 152% of the dry gas price, illustrating the benefit of high
heat content, liquids rich natural gas production.
Royalties of $0.31/mcfe, operating costs of $0.37/mcfe, transportation costs of
$0.12/mcfe, G&A of $0.02/mcfe and interest costs of $0.25/mcfe, combined for
total cash costs of $1.07/mcfe ($6.42/boe). These industry leading total cash
costs resulted in a cash netback of $3.22/mcfe ($19.32/boe) or a 75% operating
margin.
Depletion, depreciation and amortization charges of $1.75/mcfe, along with a
provision for future tax and market based bonus payments reduced the cash
netback to earnings of $1.00/mcfe, or a 23% profit margin.
Net debt at the end of Q3 2013 was $862 million or 2.2 times annualized FFO,
however, financial flexibility remained strong with over $280 million of
available borrowing capacity out of a total $1.15 billion. Subsequent to the
quarter, Peyto announced that it had priced an issuance of CND $120 million of
senior unsecured notes, to be issued by way of private placement pursuant to a
note purchase agreement. The notes have a coupon rate of 4.5% and mature in
December 2020. This issuance is expected to close in early December 2013 and
will increase Peyto's total borrowing capacity to $1.27 billion.
Marketing
Alberta (AECO) daily natural gas price dropped from a high of $3.81/GJ in the
second quarter 2013 to a low of $1.57/GJ in the third quarter 2013 as the basis
differential to NYMEX increased dramatically. This volatile differential was due
to an increase in short term interruptible tolls on the TransCanada mainline
system. By the end of the quarter, the basis had begun to return to normal
levels as longer term contracts were put in place allowing AECO prices to
stabilize at approximately the $3.00/GJ level. Currently, both the AECO and
NYMEX futures prices for natural gas are forecast to rise at very modest levels
as future supplies are expected to meet growing demands.
Approximately 63% of Peyto's (after royalty) natural gas production had been
pre-sold for Q3 2013, at an average fixed price of $3.20/GJ. This was the result
of an active hedging program which layers in future sales in the form of fixed
price swaps in order to smooth out the volatility in natural gas price.
Going forward, Peyto has committed to the future sale of 81,992,500 GJ of
natural gas at an average price of $3.37/GJ. As at November 13, 2013, the
remaining hedged volumes and prices for the upcoming years are summarized in the
following table.
----------------------------------------------------------------------------
Future Sales Average Price (CAD)
----------------------------------------------------------------------------
GJ Mcf $/GJ $/Mcf
----------------------------------------------------------------------------
2013 13,117,500 11,498,056 3.30 3.79
2014 61,225,000 53,666,358 3.37 3.84
2015 7,650,000 6,705,556 3.50 3.99
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Total 81,992,500 71,869,970 3.37 3.85
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As illustrated in the following table, Peyto's hedged realized natural gas
liquids prices were up 4% year over year and 3% from the previous quarter.
----------------------------------------------------------------------------
Three Months ended September 30 Q2
2013 2012 2013
----------------------------------------------------------------------------
Condensate ($/bbl) 95.96 85.70 92.44
Propane ($/bbl) - incl.
hedging 24.70 18.70 23.70
Butane ($/bbl) - incl. hedging 49.72 55.52 48.12
Pentane ($/bbl) 99.44 88.87 100.37
----------------------------------------------------------------------------
Total Oil and NGLs ($/bbl) 70.91 68.62 68.08
----------------------------------------------------------------------------
Peyto's hedging practice with respect to propane also continued in the quarter
and as of November 13, 2013, Peyto had committed to the future sale of 248,424
bbls of propane at an average price of $38.14USD/bbl. As at November 13, 2013,
the remaining hedged volumes and prices for the upcoming years are summarized in
the following table.
----------------------------------------------------------------------------
Propane
----------------------------------------------------------------------------
Future Sales (bbls) Average Price ($USD/bbl)
----------------------------------------------------------------------------
2013 56,364 $36.24
2014 192,060 $38.70
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Total 248,424 $38.14
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Prices for propane contracts listed above are in USD at Conway. The price Peyto
realizes is less: i) a market-basis differential from Conway to Edmonton, ii)
currency exchange, and iii) a pipeline and fractionation fee to get to Peyto's
plant gate price.
Activity Update
Peyto has been very busy of late with the recent commissioning of three new
facility projects and the activation of 25 new wells in the last eight weeks
which has contributed to the production growth from 60,000 boe/d to 70,000
boe/d.
At Brazeau River, Peyto constructed and activated the first 10 mmcf/d of process
capacity to accommodate the initial three wells that were waiting to be brought
on production. The second 10 mmcf/d of capacity will be commissioned over the
next two weeks for an additional three wells that will be drilled in the fourth
quarter. Peyto anticipates this facility will be further expanded in 2014 to 40
mmcf/d.
At Peyto's Swanson gas plant in the Ansell area, an additional 30 mmcf/d of
process capacity was added, bringing total capacity to 50 mmcf/d. This plant was
processing just under 5 mmcf/d a year ago and is now processing over 45 mmcf/d.
This new capacity is now able to process incremental volumes from the southern
end of Peyto's Ansell lands that were connected with a 50 km, 10" gathering line
earlier this year. Peyto plans to further expand the Swanson plant in mid-2014
with 15 mmcf/d of additional compression.
Finally, on November 10th, Peyto commissioned a new gas plant at Oldman North
which has initial compression capacity of 30 mmcf/d but with process capacity of
50 mmcf/d. Peyto expects this initial capacity to be full by year end and
further compression can be added in 2014 to match total capacity. This plant
will play a vital role in Peyto's ongoing development of the Upper Falher and
Bluesky plays in Greater Sundance.
Since the end of the quarter, Peyto has drilled 9 gross (8.3 net) wells and
brought on production 14 gross (12.6 net) wells. There are 12 additional wells
planned from now until the end of the year to round out this year's drilling
program at 99 gross (93.5 net) wells. Peyto anticipates that it will now exit
2013 with 71,000 boe/d of production on total capital expenditures of $565
million.
Drilling and completion activity during the past few months has provided
encouraging cost and well performance results. By combining even faster drilling
times, longer horizontal laterals, most recently as long as 2160m, as well as
higher frac density, Peyto has been able to achieve even better performance for
minimal additional cost. Production performance over the next several quarters
will help determine the success of these changes in achieving greater overall
returns.
2014 Budget
The Board of Directors has approved a preliminary 2014 budget which includes a
capital program that is expected to range between $575 and $625 million. This
would be the largest capital program in the company's history and involves
drilling between 110 and 125 wells (100 to 115 net to Peyto's working interest).
It is anticipated that this record level of activity would utilize 9 to 10
drilling rigs to develop the many stacked formations in Peyto's Deep Basin core
areas. Peyto plans to have a higher level of rig activity in summer months than
in winter to reduce costs associated with heating and to take advantage of
reduced service rates in summer. As in past years, it is projected that over 80%
of the total capital investment would be directed to the well-related activity
of drilling, completions, wellsite equipment, and pipelines.
The 110 to 125 wells will be selected from Peyto's inventory of over 1,300
locations, and are expected to add between 32,000 to 35,000 boe/d of new working
interest production, for a cost of less than $18,000/boe/d. This capital
efficiency is consistent with that achieved over the last four years and is not
dependent on improvements to historical efficiency that may come as a result of
additional innovation in drilling and completion technology. A portion of this
new production will offset an internally forecast 34% base decline, while a
portion will grow overall 2014 production to a forecast exit level between
78,500 and 81,500 boe/d.
Facility expansions at the Oldman North, Swanson and Brazeau gas plants, in
order to accommodate the production growth, are expected to account for 10% of
the budget, while acquisition of new drilling opportunities will make up the
balance. Today, total company gas processing capacity is 510 mmcf/d of natural
gas and associated liquids. With the 2014 planned expansion projects, Peyto
expects to exit 2014 with close to 600 mmcf/d of owned and operated processing
capacity. Peyto does not anticipate installing any additional liquids extraction
facilities in 2014. Considering the limitations in NGL fractionation capacity
and under forecast propane and butane prices, higher returns are currently being
generated drilling new wells than through facility modification projects.
Natural gas prices in Alberta are currently forecast to average approximately
$3.30/GJ, which, adjusted for an historic NGL and heat content premium of 150%
and combined with Peyto's current hedge position and industry leading cash costs
of $1/Mcfe ($6/boe), would yield cash netbacks of $23-$24/boe and give Peyto the
ability to fund the dividend and majority of the 2014 capital program. The
balance of the capital program can be funded from available bank lines and
working capital, while still maintaining Peyto's balance sheet strength and a
conservative level of debt.
Outlook
The demand for natural gas is expected to continue to increase in North America,
as both Canada and the US pursue increased coal to gas switching for power
generation, increased industrial consumption (including oil sands), eventual LNG
exports, and the adoption of natural gas as a transportation fuel. At the same
time, the industry is expected to meet this demand with growing supplies from
unconventional tight gas and shale gas sources. This is causing the current and
futures price for natural gas, both in Canada (AECO) and the US (NYMEX), to
trade at a constrained level, disconnected from the energy equivalence of crude
oil.
In reality, there are only a select few operators in a few basins in North
America that have demonstrated true profitability at current market prices and
an ability to consistently increase supply. The Deep Basin in Alberta is one of
those few basins with Peyto being one of the most active and profitable
operators. Insulated by an industry leading, low cost advantage, and with an
abundant and growing inventory of profitable drilling ideas, Peyto remains well
positioned to continue generating superior returns for shareholders into 2014
and beyond.
Conference Call and Webcast
A conference call will be held with the senior management of Peyto to answer
questions with respect to the 2013 third quarter on Thursday, November 14th,
2013, at 9:00 a.m. Mountain Standard Time (MST), or 11:00 a.m. Eastern Standard
Time (EST). To participate, please call 1-866-225-2055, or for those outside
North America or in the Toronto area call 1-416-340-2220. The conference call
will also be available on replay by calling 1-800-408-3053 (North American Toll
Free) or 1-905-694-9451 (for those outside North America or local in Toronto)
using passcode 9185851. The replay will be available at 11:00 a.m. MST, 1:00
p.m. EST Thursday, November 14th, 2013 until 11:00 am MST on Thursday, November
21st, 2013. In addition to telephone access, the conference call can be accessed
through the internet at http://www.gowebcasting.com/4974. After this time the
conference call will be archived on the Peyto Exploration & Development website
at www.peyto.com.
Management's Discussion and Analysis
Management's Discussion and Analysis of this third quarter report is available
on the Peyto website at http://www.peyto.com/news/Q32013MDandA.pdf. A complete
copy of the third quarter report to shareholders, including the Management's
Discussion and Analysis, and Financial Statements is also available at
www.peyto.com and will be filed at SEDAR, www.sedar.com, at a later date.
Darren Gee, President and CEO
November 13, 2013
Certain information set forth in this document and Management's Discussion and
Analysis, including management's assessment of Peyto's future plans and
operations, capital expenditures and capital efficiencies, contains
forward-looking statements. By their nature, forward-looking statements are
subject to numerous risks and uncertainties, some of which are beyond these
parties' control, including the impact of general economic conditions, industry
conditions, volatility of commodity prices, currency fluctuations, imprecision
of reserve estimates, environmental risks, competition from other industry
participants, the lack of availability of qualified personnel or management,
stock market volatility and ability to access sufficient capital from internal
and external sources. Readers are cautioned that the assumptions used in the
preparation of such information, although considered reasonable at the time of
preparation, may prove to be imprecise and, as such, undue reliance should not
be placed on forward-looking statements. Peyto's actual results, performance or
achievement could differ materially from those expressed in, or implied by,
these forward-looking statements and, accordingly, no assurance can be given
that any of the events anticipated by the forward-looking statements will
transpire or occur, or if any of them do so, what benefits Peyto will derive
there from. In addition, Peyto is providing future oriented financial
information set out in this press release for the purposes of providing clarity
with respect to Peyto's strategic direction and readers are cautioned that this
information may not be appropriate for any other purpose. Other than is required
pursuant to applicable securities law, Peyto does not undertake to update
forward looking statements at any particular time.
Peyto Exploration & Development Corp.
Condensed Balance Sheet (unaudited)
(Amount in $ thousands)
September 30 December 31
2013 2012
----------------------------------------------------------------------------
Assets
Current assets
Cash 191 -
Accounts receivable 60,067 85,677
Due from private placement (Note 6) - 3,459
Financial derivative instruments (Note 8) 3,313 10,254
Prepaid expenses 11,815 4,150
----------------------------------------------------------------------------
75,386 103,540
----------------------------------------------------------------------------
Prepaid capital - 3,714
Property, plant and equipment, net (Note 3) 2,353,829 2,096,270
----------------------------------------------------------------------------
2,353,829 2,099,984
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2,429,215 2,203,524
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 143,036 164,946
Income taxes payable - 1,890
Dividends payable (Note 6) 11,901 8,911
Provision for future performance based compensation
(Note 7) 11,326 2,677
----------------------------------------------------------------------------
166,263 178,424
----------------------------------------------------------------------------
Long-term debt (Note 4) 780,000 580,000
Long-term derivative financial instruments (Note 8) 91 2,532
Provision for future performance based compensation
(Note 7) 4,958 59
Decommissioning provision (Note 5) 52,370 58,201
Deferred income taxes 207,171 174,241
----------------------------------------------------------------------------
1,044,590 815,033
----------------------------------------------------------------------------
Equity
Share capital (Note 6) 1,130,069 1,124,382
Shares to be issued (Note 6) - 3,459
Retained earnings 84,688 75,247
Accumulated other comprehensive income (Note 6) 3,605 6,979
----------------------------------------------------------------------------
1,218,362 1,210,067
----------------------------------------------------------------------------
2,429,215 2,203,524
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Peyto Exploration & Development Corp.
Condensed Income Statement (unaudited)
(Amount in $ thousands)
Three months ended Nine months ended
September 30 September 30
2013 2012 2013 2012
----------------------------------------------------------------------------
Revenue
Oil and gas sales 124,248 86,827 401,137 240,927
Realized gain on hedges
(Note 8) 9,325 15,214 10,252 50,163
Royalties (9,722) (6,632) (30,162) (21,549)
----------------------------------------------------------------------------
Petroleum and natural gas
sales, net 123,851 95,409 381,227 269,541
----------------------------------------------------------------------------
Expenses
Operating 11,656 8,843 32,204 22,747
Transportation 3,879 2,900 11,334 8,151
General and administrative 701 759 2,899 3,369
Future performance based
compensation (Note 7) 4,451 1,882 13,548 4,893
Interest 7,880 6,352 22,212 16,486
Accretion of decommissioning
provision (Note 5) 393 284 1,130 773
Depletion and depreciation
(Note 3) 54,277 43,772 159,189 122,546
Gain on disposition of
assets - (363) - (508)
----------------------------------------------------------------------------
83,237 64,429 242,516 178,457
----------------------------------------------------------------------------
Earnings before taxes 40,614 30,980 138,711 91,084
----------------------------------------------------------------------------
Income tax
Deferred income tax expense 10,153 7,922 34,073 22,956
----------------------------------------------------------------------------
Earnings for the period 30,461 23,058 104,638 68,128
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per share (Note 6)
Basic and diluted $0.21 $ 0.16 $ 0.71 $ 0.49
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted average number of
common shares outstanding
(Note 6)
Basic and diluted 148,758,923 142,069,048 148,730,485 139,631,290
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Peyto Exploration & Development Corp.
Condensed Statement of Comprehensive Income (unaudited)
(Amount in $ thousands)
Three months ended Nine months ended
September 30 September 30
2013 2012 2013 2012
----------------------------------------------------------------------------
Earnings for the period 30,461 23,058 104,638 68,128
Other comprehensive income
Change in unrealized gain on
cash flow hedges 3,676 (6,812) 5,752 9,381
Deferred tax recovery 1,412 5,507 1,125 10,195
Realized (gain) on cash flow
hedges (9,325) (15,214) (10,252) (50,163)
----------------------------------------------------------------------------
Comprehensive income 26,224 6,539 101,263 37,541
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Peyto Exploration & Development Corp.
Condensed Statement of Changes in Equity (unaudited)
(Amount in $ thousands)
Nine months ended
September 30
2013 2012
----------------------------------------------------------------------------
Share capital, beginning of period 1,124,382 889,115
----------------------------------------------------------------------------
Common shares issued - 112,187
Common shares issued by private placement 5,742 11,952
Common shares issuance costs (net of tax) (55) (154)
----------------------------------------------------------------------------
Share capital, end of period 1,130,069 1,013,100
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Common shares to be issued, beginning of period 3,459 9,740
----------------------------------------------------------------------------
Common shares issued (3,459) (9,740)
----------------------------------------------------------------------------
Common shares to be issued, end of period - -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Retained earnings, beginning of period 75,247 82,889
----------------------------------------------------------------------------
Earnings for the period 104,638 68,128
Dividends (Note 6) (95,197) (75,415)
----------------------------------------------------------------------------
Retained earnings, end of period 84,688 75,602
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accumulated other comprehensive income, beginning of
period 6,979 33,964
----------------------------------------------------------------------------
Other comprehensive loss (3,374) (30,587)
----------------------------------------------------------------------------
Accumulated other comprehensive income, end of
period 3,605 3,377
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total equity 1,218,362 1,092,079
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Peyto Exploration & Development Corp.
Condensed Statement of Cash Flows (unaudited)
(Amount in $ thousands)
The following amounts are included in cash flows from operating activities:
----------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2013 2012 2013 2012
----------------------------------------------------------------------------
Cash provided by (used in)
operating activities
Earnings 30,461 23,058 104,638 68,128
Items not requiring cash:
Deferred income tax 10,153 7,922 34,073 22,956
Depletion and depreciation 54,277 43,772 159,189 122,546
Accretion of
decommissioning provision 393 284 1,130 773
Long term portion of
future performance based
compensation 1,673 758 4,899 1,606
Change in non-cash working
capital related to
operating activities 4,404 (3,790) (13,586) (10,070)
----------------------------------------------------------------------------
101,361 72,004 290,343 205,939
----------------------------------------------------------------------------
Financing activities
Issuance of common shares - - 5,742 11,952
Issuance costs - (170) (73) (205)
Cash dividends paid (35,702) (25,251) (92,206) (75,060)
Increase (decrease) in bank
debt 30,000 70,000 200,000 (5,000)
Repayment of Open Range bank
debt - (72,000) - (72,000)
Issuance of long term notes - 50,000 - 150,000
----------------------------------------------------------------------------
(5,702) 22,579 113,463 9,687
----------------------------------------------------------------------------
Investing activities
Additions to property, plant
and equipment (180,801) (129,902) (423,708) (274,459)
Change in prepaid capital - 4,581 3,714 (17,259)
Gain on disposition of
assets - (363) - (508)
Change in non-cash working
capital related to
investing activities 69,822 31,101 16,379 19,376
----------------------------------------------------------------------------
(110,979) (94,583) (403,615) (272,850)
----------------------------------------------------------------------------
Net increase (decrease) in
cash (15,320) - 191 (57,224)
Cash, beginning of period 15,511 - - 57,224
----------------------------------------------------------------------------
Cash, end of period 191 - 191 -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash interest paid 9,407 7,544 23,920 15,979
Cash taxes paid - - 1,890 -
----------------------------------------------------------------------------
Peyto Exploration & Development Corp.
Notes to Condensed Financial Statements (unaudited)
As at September 30, 2013 and 2012
(Amount in $ thousands, except as otherwise noted)
1. Nature of operations
Peyto Exploration & Development Corp. ("Peyto" or the "Company") is a Calgary
based oil and natural gas company. Peyto conducts exploration, development and
production activities in Canada. Peyto is incorporated and domiciled in the
Province of Alberta, Canada. The address of its registered office is 1500, 250 -
2nd Street SW, Calgary, Alberta, Canada, T2P 0C1.
Effective December 31, 2012, Peyto completed an amalgamation with its
wholly-owned subsidiary Open Range Energy Corp. pursuant to section 184(1) of
the Business Corporations Act (Alberta). Following the amalgamation, Peyto does
not have any subsidiaries.
These financial statements were approved and authorized for issuance by the
Audit Committee of Peyto on November 12, 2013.
2. Basis of presentation
The condensed financial statements have been prepared by management and reported
in Canadian dollars in accordance with International Accounting Standard ("IAS")
34, "Interim Financial Reporting". These condensed financial statements do not
include all of the information required for full annual financial statements and
should be read in conjunction with the Company's consolidated financial
statements as at and for the years ended December 31, 2012 and 2011.
Significant Accounting Policies
(a) Significant Accounting Judgments, Estimates and Assumptions
The timely preparation of the condensed financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingencies, if any, as at the date of the
financial statements and the reported amounts of revenue and expenses during the
period. By their nature, estimates are subject to measurement uncertainty and
changes in such estimates in future years could require a material change in the
condensed financial statements.
Except as disclosed below, all accounting policies and methods of computation
followed in the preparation of these financial statements are the same as those
disclosed in Note 2 of Peyto's consolidated financial statements as at and for
the years ended December 31, 2012 and 2011.
(b) Recent Accounting Pronouncements
Certain new standards, interpretations, amendments and improvements to existing
standards were issued by the International Accounting Standards Board (IASB) or
International Financial Reporting Interpretations Committee (IFRIC) that are
mandatory for accounting periods beginning January 1, 2013 or later periods. The
affected standards are consistent with those disclosed in Peyto's consolidated
financial statements as at and for the years ended December 31, 2012 and 2011.
Peyto adopted the following standards on January 1, 2013:
IFRS 10 - Consolidated Financial Statements; supercedes IAS 27 "Consolidation
and Separate Financial Statements" and SIC-12 "Consolidation - Special Purpose
Entities". This standard provides a single model to be applied in control
analysis for all investees including special purpose entities. This standard
became applicable on January 1, 2013. Peyto adopted the standard on January 1,
2013, with no impact on Peyto's financial position or results of operations.
IFRS 11 - Joint Arrangements; requires a venturer to classify its interest in a
joint arrangement as a joint venture or joint operation. Joint ventures will be
accounted for using the equity method of accounting, whereas joint operations
will require the venturer to recognize its share of the assets, liabilities,
revenue and expenses. This standard became applicable on January 1, 2013. Peyto
adopted the standard on January 1, 2013, with no impact on Peyto's financial
position or results of operations.
IFRS 12 - Disclosure of Interests in Other Entities; establishes disclosure
requirements for interests in other entities, such as joint arrangements,
associates, special purpose vehicles and off-balance-sheet vehicles. The
standard carries forward existing disclosure and also introduces significant
additional disclosure requirements that address the nature of, and risks
associated with, an entity's interests in other entities. This standard became
effective for Peyto on January 1, 2013. Peyto adopted the standard on January 1,
2013, with no impact on Peyto's financial position or results of operations.
IFRS 13 - Fair Value Measurement; defines fair value, sets out a single IFRS
framework for measuring fair value and requires disclosure about fair value
measurements. IFRS 13 applies to accounting standards that require or permit
fair value measurements or disclosure about fair value measurements (and
measurements, such as fair value less costs to sell, based on fair value or
disclosure about those measurements), except in specified circumstances. IFRS 13
became applicable on January 1, 2013. Peyto adopted the standard on January 1,
2013, with no impact on Peyto's financial position or results of operations.
3. Property, plant and equipment, net
----------------------------------------------------------------------------
Cost
----------------------------------------------------------------------------
At December 31, 2012 2,483,008
----------------------------------------------------------------------------
Additions 416,747
----------------------------------------------------------------------------
At September 30, 2013 2,899,755
----------------------------------------------------------------------------
Accumulated depreciation
----------------------------------------------------------------------------
At December 31, 2012 (386,737)
----------------------------------------------------------------------------
Depletion and depreciation (159,189)
----------------------------------------------------------------------------
At September 30, 2013 (545,926)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Carrying amount at December 31, 2012 2,096,270
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Carrying amount at September 30, 2013 2,353,829
----------------------------------------------------------------------------
----------------------------------------------------------------------------
During the three and nine month periods ended September 30, 2013, Peyto
capitalized $2.8 million and $6.9 million (2012 - $2.3 million and $4.8 million)
of general and administrative expense directly attributable to production and
development activities.
4. Long-term debt
----------------------------------------------------------------------------
September 30, 2013 December 31, 2012
----------------------------------------------------------------------------
Bank credit facility 630,000 430,000
Senior unsecured notes 150,000 150,000
----------------------------------------------------------------------------
Balance, end of the period 780,000 580,000
----------------------------------------------------------------------------
----------------------------------------------------------------------------
As at September 30, 2013, the Company had a syndicated unsecured $1.0 billion
extendible revolving credit facility with a stated term date of April 26, 2015.
The bank facility is made up of a $30 million working capital sub-tranche and a
$970 million production line. The facilities are available on a revolving basis
for a two year period. Outstanding amounts on this facility will bear interest
at rates ranging from prime plus 0.8% to prime plus 2.25% determined by the
Company's debt to earnings before interest, taxes, depreciation, depletion and
amortization (EBITDA) ratios ranging from less than 1:1 to greater than 2.5:1.
On January 3, 2012, Peyto issued CDN $100 million of senior unsecured notes
pursuant to a note purchase and private shelf agreement. The notes were issued
by way of private placement and rank equally with Peyto's obligations under its
bank facility. The notes have a coupon rate of 4.39% and mature on January 3,
2019. Interest is paid semi-annually in arrears.
On September 6, 2012, Peyto issued CDN $50 million of senior unsecured notes
pursuant to a note purchase and private shelf agreement. The notes were issued
by way of private placement and rank equally with Peyto's obligations under its
bank facility. The notes have a coupon rate of 4.88% and mature on September 6,
2022. Interest is paid semi-annually in arrears.
Upon the issuance of the senior unsecured notes January 3, 2012, Peyto became
subject to the following financial covenants as defined in the credit facility
and note purchase and private shelf agreements:
-- Senior Debt to EBITDA Ratio will not exceed 3.0 to 1.0
-- Total Debt to EBITDA Ratio will not exceed 4.0 to 1.0
-- Interest Coverage Ratio will not be less than 3.0 to 1.0
-- Total Debt to Capitalization Ratio will not exceed 0.55:1.0
Peyto is in compliance with all financial covenants at September 30, 2013.
Total interest expense for the three and nine month periods ended September 30,
2013 was $7.9 million and $22.2 million (2012 - $6.4 million and $16.5 million)
and the average borrowing rate for the period was 4.1% and 4.2% (2012 - 4.6% and
4.4%).
5. Decommissioning provision
Peyto makes provision for the future cost of decommissioning wells, pipelines
and facilities on a discounted basis based on the commissioning of these assets.
The decommissioning provision represents the present value of the
decommissioning costs related to the above infrastructure, which are expected to
be incurred over the economic life of the assets. The provisions have been based
on Peyto's internal estimates of the cost of decommissioning, the discount rate,
the inflation rate and the economic life of the infrastructure. Assumptions,
based on the current economic environment, have been made which management
believes are a reasonable basis upon which to estimate the future liability.
These estimates are reviewed regularly to take into account any material changes
to the assumptions. However, actual decommissioning costs will ultimately depend
upon the future market prices for the necessary decommissioning work required
which will reflect market conditions at the relevant time. Furthermore, the
timing of the decommissioning is likely to depend on when production activities
ceases to be economically viable. This in turn will depend and be directly
related to the current and future commodity prices, which are inherently
uncertain.
The following table reconciles the change in decommissioning provision:
----------------------------------------------------------------------------
Balance, December 31, 2012 58,201
----------------------------------------------------------------------------
New or increased provisions 6,853
Accretion of decommissioning provision 1,130
Change in discount rate and estimates (13,814)
----------------------------------------------------------------------------
Balance, September 30, 2013 52,370
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Current -
Non-current 52,370
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Peyto has estimated the net present value of its total decommissioning provision
to be $52.4 million as at September 30, 2013 ($58.2 million at December 31,
2012) based on a total future undiscounted liability of $145.4 million ($127.9
million at December 31, 2012). At September 30, 2013 management estimates that
these payments are expected to be made over the next 50 years with the majority
of payments being made in years 2041 to 2062. The Bank of Canada's long term
bond rate of 3.07 per cent (2.36 per cent at December 31, 2012) and an inflation
rate of two per cent (two per cent at December 31, 2012) were used to calculate
the present value of the decommissioning provision.
6. Share capital
Authorized: Unlimited number of voting common shares
Issued and Outstanding
Number of
Common Amount
Common Shares (no par value) Shares $
----------------------------------------------------------------------------
Balance, December 31, 2011 137,960,301 889,115
----------------------------------------------------------------------------
Common shares issued 4,628,750 115,024
Common shares issued for acquisition 5,404,007 112,187
Common shares issued by private placement 525,655 11,952
Common share issuance costs (net of tax) - (3,896)
----------------------------------------------------------------------------
Balance, December 31,2012 148,518,713 1,124,382
----------------------------------------------------------------------------
Common shares issued by private placement 240,210 5,742
Common share issuance costs (net of tax) - (55)
----------------------------------------------------------------------------
Balance, September 30, 2013 148,758,923 1,130,069
----------------------------------------------------------------------------
----------------------------------------------------------------------------
On December 31, 2011 Peyto completed a private placement of 397,235 common
shares to employees and consultants for net proceeds of $9.7 million ($24.52 per
share). These common shares were issued on January 13, 2012.
On March 23, 2012, Peyto completed a private placement of 128,420 common shares
to employees and consultants for net proceeds of $2.2 million ($17.22 per
share).
On August 14, 2012, Peyto issued 5,404,007 common shares which were valued at
$112.2 million (net of issuance costs) ($20.76 per share) in relation to the
closing of a corporate acquisition.
On December 11, 2012, Peyto closed an offering of 4,628,750 common shares at a
price of $24.85 per common share, receiving proceeds of $110.0 million (net of
issuance costs).
On December 31, 2012, Peyto completed a private placement of 154,550 common
shares to employees and consultants for net proceeds of $3.5 million ($22.38 per
share). These common shares were issued January 7, 2013.
On March 19, 2013, Peyto completed a private placement of 85,660 common shares
to employees and consultants for net proceeds of $2.2 million ($26.65 per
share).
Per share amounts
Earnings per share or unit have been calculated based upon the weighted average
number of common shares outstanding for the three and nine month periods ended
September 30, 2013 of 148,758,923 and 148,730,485 (2012 - 142,069,048 and
139,631,290). There are no dilutive instruments outstanding.
Dividends
During the three and nine month periods ended September 30, 2013, Peyto declared
and paid dividends of $0.24 per common share and $0.64 per common share,
totaling $35.7 million and $95.2 million (2012 - $0.18 and $0.54, $25.6 million
and $75.4 million).
Comprehensive income
Comprehensive income consists of earnings and other comprehensive income
("OCI"). OCI comprises the change in the fair value of the effective portion of
the derivatives used as hedging items in a cash flow hedge. "Accumulated other
comprehensive income" is an equity category comprised of the cumulative amounts
of OCI.
Accumulated hedging gains
Gains and losses from cash flow hedges are accumulated until settled. These
outstanding hedging contracts are recognized in earnings on settlement with
gains and losses being recognized as a component of net revenue. Further
information on these contracts is set out in Note 8.
7. Future performance based compensation
Peyto awards performance based compensation to employees annually. The
performance based compensation is comprised of reserve and market value based
components.
Reserve based component
The reserves value based component is 4% of the incremental increase in value,
if any, as adjusted to reflect changes in debt, equity, dividends, general and
administrative costs and interest, of proved producing reserves calculated using
a constant price at December 31 of the current year and a discount rate of 8%.
Market based component
Under the market based component, rights with a three year vesting period are
allocated to employees. The number of rights outstanding at any time is not to
exceed 6% of the total number of common shares outstanding. At December 31 of
each year, all vested rights are automatically cancelled and, if applicable,
paid out in cash. Compensation is calculated as the number of vested rights
multiplied by the total of the market appreciation (over the price at the date
of grant) and associated dividends of a common share for that period.
The fair values were calculated using a Black-Scholes valuation model. The
principal inputs to the option valuation model were:
September 30, September 30,
2013 2012
----------------------------------------------------------------------------
Share price $22.58 - $30.44 $18.83 - $24.75
Exercise price $18.41 - $22.08 $12.06 - $24.37
Expected volatility 0% - 23% 0% - 32%
Option life 0.25 years 0.25 years
Dividend yield 0% 0%
Risk-free interest rate 1.19% 1.08%
----------------------------------------------------------------------------
8. Financial instruments
Financial instrument classification and measurement
Financial instruments of the Company carried on the condensed balance sheet are
carried at amortized cost with the exception of cash and financial derivative
instruments, specifically fixed price contracts, which are carried at fair
value. There are no significant differences between the carrying amount of
financial instruments and their estimated fair values as at September 30, 2013.
The Company's areas of financial risk management and risks related to financial
instruments remained unchanged from December 31, 2012.
The fair value of the Company's cash and financial derivative instruments are
quoted in active markets. The Company classifies the fair value of these
transactions according to the following hierarchy.
-- Level 1 - quoted prices in active markets for identical financial
instruments.
-- Level 2 - quoted prices for similar instruments in active markets;
quoted prices for identical or similar instruments in markets that are
not active; and model-derived valuations in which all significant inputs
and value drivers are observable in active markets.
-- Level 3 - valuations derived from valuation techniques in which one or
more significant inputs or value drivers are unobservable.
The Company's cash and financial derivative instruments have been assessed on
the fair value hierarchy described above and classified as Level 1.
Fair values of financial assets and liabilities
The Company's financial instruments include cash, accounts receivable, financial
derivative instruments, due from private placement, current liabilities,
provision for future performance based compensation and long term debt. At
September 30, 2013, cash and financial derivative instruments are carried at
fair value. Accounts receivable, due from private placement, current liabilities
and provision for future performance based compensation approximate their fair
value due to their short term nature. The carrying value of the long term debt
approximates its fair value due to the floating rate of interest charged under
the credit facility.
Commodity price risk management
Peyto uses derivative instruments to reduce its exposure to fluctuations in
commodity prices. Peyto considers all of these transactions to be effective
economic hedges for accounting purposes.
Following is a summary of all risk management contracts in place as at September
30, 2013:
----------------------------------------------------------------------------
Propane Monthly Price
Period Hedged Type Volume (USD)
----------------------------------------------------------------------------
April 1, 2013 to December 31, 2013 Fixed Price 4,000 bbl $30.66/bbl
April 1, 2013 to December 31, 2013 Fixed Price 4,000 bbl $32.34/bbl
April 1, 2013 to December 31, 2013 Fixed Price 4,000 bbl $34.885/bbl
April 1, 2013 to December 31, 2013 Fixed Price 4,000 bbl $35.39/bbl
April 1, 2013 to December 31, 2013 Fixed Price 4,000 bbl $34.44/bbl
October 1, 2013 to December 31, 2013 Fixed Price 4,000 bbl $39.774/bbl
October 1, 2013 to December 31, 2013 Fixed Price 4,000 bbl $46.20/bbl
January 1, 2014 to March 31, 2014 Fixed Price 4,000 bbl $37.80/bbl
January 1, 2014 to March 31, 2014 Fixed Price 4,000 bbl $36.54/bbl
January 1, 2014 to March 31, 2014 Fixed Price 4,000 bbl $39.354/bbl
January 1, 2014 to March 31, 2014 Fixed Price 4,000 bbl $41.37/bbl
January 1, 2014 to March 31, 2014 Fixed Price 4,000 bbl $44.94/bbl
January 1, 2014 to December 31, 2014 Fixed Price 4,000 bbl $35.70/bbl
January 1, 2014 to December 31, 2014 Fixed Price 4,000 bbl $37.485/bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Natural Gas Daily Price
Period Hedged Type Volume (CAD)
----------------------------------------------------------------------------
April 1, 2012 to October 31, 2013 Fixed Price 5,000 GJ $4.00/GJ
April 1, 2012 to October 31, 2013 Fixed Price 5,000 GJ $4.00/GJ
April 1, 2012 to October 31, 2013 Fixed Price 5,000 GJ $4.00/GJ
April 1, 2012 to October 31, 2013 Fixed Price 5,000 GJ $4.00/GJ
April 1, 2012 to October 31, 2013 Fixed Price 5,000 GJ $2.52/GJ
April 1, 2012 to March 31, 2014 Fixed Price 5,000 GJ $3.00/GJ
May 1, 2012 to October 31, 2013 Fixed Price 5,000 GJ $2.30/GJ
August 1, 2012 to March 31, 2014 Fixed Price 5,000 GJ $3.00/GJ
August 1, 2012 to October 31, 2014 Fixed Price 5,000 GJ $3.10/GJ
November 1, 2012 to October 31, 2013 Fixed Price 5,000 GJ $2.60/GJ
November 1, 2012 to October 31, 2013 Fixed Price 5,000 GJ $3.005/GJ
November 1, 2012 to October 31, 2013 Fixed Price 5,000 GJ $3.00/GJ
November 1, 2012 to March 31, 2014 Fixed Price 5,000 GJ $2.81/GJ
November 1, 2012 to March 31, 2014 Fixed Price 5,000 GJ $3.00/GJ
November 1, 2012 to March 31, 2014 Fixed Price 5,000 GJ $3.05/GJ
November 1, 2012 to March 31, 2014 Fixed Price 5,000 GJ $3.02/GJ
November 1, 2012 to October 31, 2014 Fixed Price 5,000 GJ $3.0575/GJ
January 1, 2013 to October 31, 2013 Fixed Price 5,000 GJ $3.42/GJ
January 1, 2013 to December 31, 2013 Fixed Price 5,000 GJ $3.105/GJ
January 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.00/GJ
January 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.02/GJ
April 1, 2013 to October 31, 2013 Fixed Price 5,000 GJ $3.205/GJ
April 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.105/GJ
April 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.53/GJ
April 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.45/GJ
April 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.50/GJ
April 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.08/GJ
April 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.17GJ
April 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.10/GJ
April 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $3.25/GJ
April 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $3.30/GJ
April 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $3.33/GJ
April 1, 2013 to October 31, 2014 Fixed Price 7,500 GJ $3.20/GJ
April 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $3.22/GJ
April 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $3.20/GJ
April 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $3.1925/GJ
April 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $3.25/GJ
April 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $3.30/GJ
July 1, 2013 to October 31, 2013 Fixed Price 5,000 GJ $3.34/GJ
August 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.55/GJ
November 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.71/GJ
November 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.76/GJ
November 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.86/GJ
November 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $4.00/GJ
November 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.52/GJ
November 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.1025/GJ
November 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.245/GJ
November 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.45/GJ
November 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.3075/GJ
November 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $3.50/GJ
November 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $3.53/GJ
November 1, 2013 to March 31, 2015 Fixed Price 5,000 GJ $3.6025/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $3.505/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $3.555/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $3.48/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $3.82/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $3.44/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $3.52/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $3.4725/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $3.525/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $3.60/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $3.27/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $3.41/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $3.5575/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $3.465/GJ
November 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $3.81/GJ
November 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $3.90/GJ
As at September 30, 2013, Peyto had committed to the future sale of 240,000
barrels of propane at an average price of $37.32 US per barrel and 75,645,000
gigajoules (GJ) of natural gas at an average price of $3.36 per GJ. Had these
contracts been closed on September 30, 2013, Peyto would have realized a gain in
the amount of $3.2 million.
Subsequent to September 30, 2013 Peyto entered into the following contracts:
----------------------------------------------------------------------------
Propane Monthly Price
Period Hedged Type Volume (USD)
----------------------------------------------------------------------------
April 1, 2014 to September 30, 2014 Fixed Price 4,000 bbl $41.79/bbl
October 1, 2014 to December 31, 2014 Fixed Price 4,000 bbl $42.84/bbl
----------------------------------------------------------------------------
Natural Gas Daily Price
Period Hedged Type Volume (CAD)
----------------------------------------------------------------------------
November 1, 2013 to March 31, 2014 Fixed Price 5,000 GJ $3.25/GJ
December 1, 2013 to March 31,2014 Fixed Price 5,000 GJ $3.50/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $3.335/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $3.10/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $3.43/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $3.54/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $3.335/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $3.25/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $3.25/GJ
----------------------------------------------------------------------------
9. Commitments
Following is a summary of Peyto's contractual obligations and commitments as at
September 30, 2013.
2013 2014 2015 2016 2017 Thereafter
----------------------------------------------------------------------------
Note repayment(1) - - - - - 150,000
Interest payments(2) - 6,830 6,830 6,830 6,830 18,785
Transportation 4,107 17,290 16,044 11,692 8,027 10,957
commitments
Operating leases 592 2,392 1,228 712 360 -
----------------------------------------------------------------------------
Total 4,699 26,512 24,102 19,234 15,217 179,742
----------------------------------------------------------------------------
(1) Long-term debt repayment on senior unsecured notes
(2) Fixed interest payments on senior unsecured notes
10. Subsequent events
1. On November 4, 2013, Peyto announced that it had priced an issuance of
CDN $120 million of senior unsecured notes. The notes will be issued by
way of private placement pursuant to a note purchase agreement and will
rank equally with Peyto's obligations under its bank facility and
existing note purchase and private shelf agreement. The notes have a
coupon rate of 4.5% and mature in December 2020. Interest will be paid
semi-annually in arrears. Closing of the private placement is expected
to occur in early December, 2013.
2. On October 31, 2013, Peyto was named as a party to a statement of claim
received with respect to transactions between Poseidon Concepts Corp.
and Open Range Energy Corp. Management is currently assessing the nature
of this claim, in conjunction with their legal advisors.
Officers
Darren Gee Tim Louie
President and Chief Executive Officer Vice President, Land
Scott Robinson
Executive Vice President and Chief David Thomas
Operating Officer Vice President, Exploration
Kathy Turgeon
Vice President, Finance and Chief Jean-Paul Lachance
Financial Officer Vice President, Exploitation
Stephen Chetner
Corporate Secretary
Directors
Don Gray, Chairman
Stephen Chetner
Brian Davis
Michael MacBean, Lead Independent Director
Darren Gee
Gregory Fletcher
Scott Robinson
Auditors
Deloitte LLP
Solicitors
Burnet, Duckworth & Palmer LLP
Bankers
Bank of Montreal
Union Bank, Canada Branch
Royal Bank of Canada
Canadian Imperial Bank of Commerce
The Toronto-Dominion Bank
Bank of Nova Scotia
HSBC Bank Canada
Alberta Treasury Branches
Canadian Western Bank
Transfer Agent
Valiant Trust Company
Head Office
1500, 250 - 2nd Street SW
Calgary, AB
T2P 0C1
Phone: 403.261.6081
Fax: 403.451.4100
Web: http://www.peyto.com/
Stock Listing Symbol: PEY.TO
Toronto Stock Exchange
FOR FURTHER INFORMATION PLEASE CONTACT:
Peyto Exploration & Development Corp.
1500, 250 - 2nd Street SW
Calgary, AB T2P 0C1
403.261.6081
403.451.4100 (FAX)
www.peyto.com
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