“World Class Montney Resource, Industry Leading Low Cost Structure & Cash Margin and Operational Excellence Reinforces the Strength of our Three Year Growth Plan” Investor Presentation TSX / NYSE: AAV January 2015
ADVANTAGE: AT A GLANCE Canadian Pure Play Montney Producer Listed on TSX and NYSE AAV TSX 52 ‐ week trading range $3.84 ‐ $7.85 Shares Outstanding (basic) 169.8 million Glacier Q3 2014 production 132.5 mmcfe/d (22,087 boe/d) Market Capitalization @ January 15, 2014 $0.9 billion Bank Debt @ September 30, 2014 (18% drawn on $400 million credit facility) $71.0 million Total Debt including working capital deficit @ September 30, 2014 $205.6 million View of Glacier Plant Process Train – approximately 650 feet long 2
FOCUSED ON MONTNEY GROWTH & VALUE CREATION World Class Montney Asset Growth Plan & Operational Financial Excellence Strength 3 Year Development Plan 100% Production Increase 245 mmcfe/d in 2017 (40,800 boe/d) 27 employees 3
Advantage – Financial & Operational Strengths $0.85/mcfe (1) Total Cash Costs – Industry Leading 51%@$3.90 (2) 2015 Natural gas hedge position (% forecast production & price) $3.94/mcf (2) Average Price of natural gas hedges to Q1 2017 (31% 2016, 25% Q1 2017) $329 million (1) Available on Credit Facility of $400 million >120 mmcf/d (3) Current excess well deliverability available to grow production 36% to 183 mmcfe/d target in June 2015. Plant expansion underway. Improvement in one year cumulative well production to approximately 2 75% Bcf due to slickwater frac’s (payout < 1 year) $2.50/mcf (2) Generates >30% ROR on Upper, Middle & Lower Montney well economics based on budget type curves Ownership & Operatorship of Glacier gas plant & pipeline infrastructure 100% delivering sales gas directly into TCPL’s transmission system (1) Based on Q3 2014 operating and financial results (2) AECO Cdn price $/mcf 4 (3) Includes restricted and new Phase VII tested wells to date
STRONG NETBACKS PROVIDE SUSTAINABILITY Actual YTD Q3 2014 (1) Illustrative Glacier Operating Netback ($/mcfe) $2.50/mcfe $4.39 (2) $2.50 Revenue ($0.22) ($0.13) Royalties ($0.31) ($0.31) Operating Costs Q3 ‘14 Operating netback is 88% of $3.86 $2.06 Operating Netback revenue 2.9x 1.6x (Recycle Ratio at 2013 2P F&D $1.33/mcfe (3) ) G&A ($0.17) ($0.17) ($0.19) ($0.19) Interest Expense & other Q3 ‘14 Cash flow $3.50 or $1.70 or netback is 80% of Cash Flow Netback $21.00/boe $10.20/boe revenue (1) YTD 2014 Netback based on actual results. 5 (2) Revenue is net of transportation costs & hedging loss of $0.33/mcfe. (3) F&D includes Future Development Capital
FINANCIAL STRENGTH SUPPORTS DEVELOPMENT PLAN Credit Facility (1) $329 million currently available (18% drawn on our $400 million credit facility) Balance Sheet 1.4x Total debt to annualized Q3 2014 Cash Flow Hedging Program % Forecast Production Year Aeco $/mcf 56% 2014 Q4 $3.90 51% 2015 $3.90 31% 2016 $3.93 25% 2017 Q1 $3.95 6 (1) As of September 30, 2014
THREE YEAR GLACIER GROWTH PLAN Three Year Plan Summary (1) 245 mmcfe/d (40,830 boe/d) in 2017 $735 million Capital Expenditures 33 New Montney wells per year $3.75/GJ Aeco Cdn average price 1.5x Average Total Debt to Forward Cash Flow per plan pricing (1) See Plan Details in Appendix page 29 7
THREE YEAR PLAN ‐ PRICE SENSITIVITY REDUCED BY HEDGING & LOW COST STRUCTURE Downside gas price mitigation while retaining torque to upside 8
GROWTH LEADS TO SIGNIFICANT FREE CASH FLOW IN EARLY 2017 BASED ON PLAN 245 mmcfe/d @ $3.65/GJ 350 generates $160 million free annual cash flow 300 250 200 Million $ Capital Capital Capital required required required to grow to grow to grow 150 to 183 to 245 to 205 mmcfe/d mmcfe/d mmcfe/d 100 Capital Capital Capital Capital required required required required to stay to stay to stay to stay 50 flat at flat at flat at flat at 135 183 205 245 mmcfe/d mmcfe/d mmcfe/d mmcfe/d 0 Phase VII Phase VIII Phase IX Q2 2014 ‐ Q1 2015 Q2 2015 ‐ Q1 2016 Q2 2016 ‐ Q1 2017 Q2 2017 ‐ Q2 2018 Stay Flat Capex Growth Capex Cash Flow 9
INDUSTRY COST STRUCTURE & MARGIN COMPARISON Advantage’s full cycle margin is among the top Montney producers today. 10
WORLD CLASS MONTNEY ASSET Glacier 300 meters Natural gas and liquids resource 16 Tcf TPIIP 11
GLACIER – LOCATED IN THE HEART OF THE MONTNEY RESOURCE PLAY Montney Siltstone Comparison: • 700 times more permeability • 4x more formation thickness • Very low clay content • Liquids & Improved well efficiencies strong economics 12
FOCUSED ON MONTNEY SURROUNDING GLACIER GAS PLANT Current development of 16 TCF (1) TPIIP at Glacier including liquids drilling Progress Glacier future drilling inventory ~1,400 100% owned locations 9 net Montney Glacier Gas Glacier sections acquired Plant 77 net New Montney lands at Vahalla, 2014 sections Wembley & Progress contain multiple Valhalla layers but require evaluation Total 129 net Montney sections (82,560 net acres) 43.25 net Montney sections Wembley acquired 2013 (1) Based on Sproule’s March 31, 2013 Glacier Resource Assessment. 13
GLACIER 100% OWNED GAS PLANT & PIPELINE ACCESS Glacier Gas Plant – Positioned for Production Ramp ‐ up 400 mmcf/d pipeline capacity to TCPL meter station in place Expansion to 250 MMcf/d Dry and Liquid Gas Processing Capability 400 mmcf/d pipeline capacity to TCPL meter station in place Glacier Gas Plant Site & Proximity to Major Natural Gas & Liquids Pipelines & Rail Access Provides Significant Expansion Potential 14
GLACIER DELINEATION DRILLING HAS CONFIRMED MULTI ‐ LAYER DEVELOPMENT Swan & Tupper at 4 to 7 wells/section density today. Potential for 20 wells/section at Glacier EnCana began horizontal drilling in 2005; however, Advantage has drilled over 140 Montney wells at Glacier numerous vertical wells had penetrated the Montney since 2008. Delineation drilling was designed to evaluate the providing geological information Montney across our land block and in each of the multiple layers contained in ~300 meters of formation thickness 15
“PENTASTACK” DEVELOPMENT WITH DECADES OF DRILLING INVENTORY Five Development Intervals Containing > 1,400 Future Locations Development based on four wells per section per layer Proven commercial well rates across Glacier in the Upper, Middle and Lower Montney Three of the five intervals are located in the liquids rich Middle Montney formation Wells are vertically and laterally offset in each layer for optimal recovery Remaining Inventory of # Wells Required in 3 Year Remaining Undrilled # of Undeveloped Locations Booked in Locations (1) Development Plan (2) Locations post 2017 Sproule Dec 31, 2013 Report 230 39 191 169 Upper Montney Middle Montney 882 39 843 57 Lower Montney 304 33 271 72 Total 1416 111 1305 298 (1) Excludes 117 Developed wells booked in the Sproule Dec. 31, 2013 Reserve Report 16 (2) Includes 12 Phase VI wells drilled in Q1 2014
OPERATIONAL EXCELLENCE 17
TRACK RECORD OF OPERATING PERFORMANCE Production Growth to 135 mmcfe/d & 73% Reduction in cost per frac despite increasing Operating Cost Reduction to ~$0.30/mcfe average number of frac stages from 7 to 16 $475,000/frac stage $130,000/frac stage No wells drilled 580% Increase in 2P Reserves to 1.7 Tcfe 43% Reduction in 3 Year 2P F&D cost to $1.06/mcfe 18
UPPER AND LOWER MONTNEY AVERAGE WELL TYPE CURVE IMPROVEMENT 8,000 Advantage has significantly improved well performance since 2008. Utilization of more frac stages and slickwater fracs have recently created another step ‐ 7,000 rate change. We anticipate new technology could further improve results. Raw Gas Production Rate (mcf/d) 6,000 Phase VI 5,000 2013 14 4,000 Current Budget Type Curve Phase IV & V (IP30 6.9 mmcf/d) 24 2011/12 3,000 Phase III 2010 28 Phase II 2,000 31 2009 Phase I 1,000 10 2008 0 0.0 0.5 1.0 1.5 2.0 2.5 1 Well Count Cumulative Raw Gas Production (Bcf) Data: updated to November 2014 19
IMPROVING UPPER & LOWER MONTNEY WELL PERFORMANCE WITH SLICKWATER Recent Upper and Lower Montney wells completed with slickwater fracs are outperforming Phase VII Budget type curve which is based on an IP30 6.9 mmcf/d. Graph illustrates production from 14 recent Montney wells (5 Upper and 9 Lower) Phase VII Upper & Lower Budget Type Curve (IP30 6.9 mmcf/d) 20 Data: updated to November 2014
IMPROVING UPPER & LOWER MONTNEY WELL PAYOUT Top Tier Wells Trending toward Payout of <10 months (1) Cumulative production of >2 Bcf in first year • Upper and Lower Montney well performance has improved through frac design & increased reservoir knowledge. • Some recent wells were initially restricted as noted by the slope change in their cumulative production trend. Data: updated to November 2014 21 (1) Based on Advantage Operating Netback of $3.86/mcfe for the first nine months of 2014
(1) EXCEPTIONAL UPPER MONTNEY WELL ECONOMICS Upper Montney Dry Gas (2) Frac optimization of 108 Upper and Lower Montney wells since 2008 at Glacier has increased the average Budget type curve to an IP of 6.9 mmcf/d. (3) mmcf/d IP30 / Bcf (1) Management estimates. NPV 10% pre ‐ tax (2) Based on $5.5 million per well with 18 frac stages 22 (3) Natural gas prices and costs escalated at 2%. Average C3+ Avg NGL price of $63.44/bbl escalated at 2%
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