BUILDING ON A PROVEN TRACK RECORD CORPORATE PRESENTATION January 2017 1 CORPORATE PRESENTATION
CORPORATE PROFILE Corporate Summary Q3 2016 Avg. Daily Production 55,137 boe/d Production Mix 1 ~61% liquids/39% gas Intermediate Corporate Decline 2 ~12% Canadian oil and Undeveloped Land (net) 1 430,000 acres natural gas producer with 28 Reserves (2P YE 2015) 3 569.1 million boe years of operations Reserve Life Index (2P YE 2015) 4,9 25.2 years Increasing focus on oil and liquids Market Summary development Capitalization 5 $1.0 billion Enterprise Value 6 $2.7 billion Publically listed on both the Shares Outstanding 1 548 million Toronto and New Cash on hand 10 $530 million York Stock Exchanges Total Debt 7 $1.65 billion Total Debt/EBITDA 8,9 3.2x Tax Pools 1 ~$3.4 billion 1. As at September 30, 2016. 2. 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 January 18, 2017 TSX closing price of $1.87. 6. Defined as market capitalization as at January 18, 2017 + total debt before working capital as at September 30, 2016. 7. As at September 30, 2016. Debt includes convertible debentures and is before working capital. 8. EBITDA is trailing 12 month EBITDA as at September 30, 2016. 9. This measure does not have any standardized meaning and therefore is not comparable to similar measures presented by other companies. 10. As at January 6, 2017 2 CORPORATE PRESENTATION
PENGROWTH’S RESOURCE BASE INCREASING FOCUS ON OIL AND LIQUIDS DEVELOPMENT Large accumulations Long life assets Low declines Low cost structure Low sustaining capital Conventional Assets Thermal Assets Growth engines for Swan Hills Cardium Montney Lindbergh production and reserves Barbell strategy offers commodity and capital optionality and is expected to provide over $11 billion of long-term development & resource opportunities 3 CORPORATE PRESENTATION
2017 CAPITAL BUDGET ENHANCING FINANCIAL STRENGTH IN A RECOVERING COMMODITY PRICE ENVIRONMENT 2017 CAPITAL ALLOCATION ($ MILLION) 2017 Full Year Guidance Average daily production (boe/d) 50,000 to 52,000 Total capital expenditures ($ million) 125 Corporate (land, seismic, Funds flow from operations 1 ($ million) 195 capitalized G&A) Conventional maintenance and integrity Royalties 2 (% of sales) $3 9.0 Operating costs 3 ($ per boe) 13.25 to 13.75 $42 Cash G&A costs 3 ($ per boe) 3.50 to 4.00 $80 Production breakout Light oil (bbl/d) 10,300 Thermal oil (bbl/d) 15,400 NGLs (bbl/d) 6,100 Lindbergh development and maintenance Natural gas (Mcf/d) 115,000 (Boe/d) 51,000 1. Based on a WTI crude oil price of US $55.00/bbl, an AECO natural gas price of Cdn $3.25/Mcf and a $0.74 Cdn/USD exchange rate 2. Royalties are before impacts of commodity risk management activities 3. Per boe estimates based on high and low ends of production guidance 4 CORPORATE PRESENTATION
2017 CAPITAL BUDGET PRIORITIES 2017 CAPITAL BUDGET OF $125 MILLION • Optimization of • Progress with • Continue to focus on Lindbergh Phase One engineering and design safety, asset integrity and production work on Lindbergh Phase maintenance on Two conventional assets • Increase production to MAINTENANCE OPTIMIZATION ENGINEERING approximately 18,000 • Phase Two expected to • Support ongoing bbl/d by end of 2017 add incremental 17,500 operations across bbl/d nameplate capacity conventional portfolio • Drill seven new well pairs, two infill wells • Expect to be and expansion of approximately 70 percent associated complete design work by infrastructure end of 2017 5 CORPORATE PRESENTATION
SHORT-TERM STRATEGY PRIORITIES: FOCUS ON THE THINGS WE CAN CONTROL 1 Prudent capital spending 2 Cost reductions 3 Reduce indebtedness 4 Continue with asset dispositions 6 CORPORATE PRESENTATION
DEALING WITH THE CURRENT ECONOMIC ENVIRONMENT FOCUSING ON WHAT WE CAN CONTROL Asset Optimization Reducing Costs • Generating strong production • Year to date significant savings in despite conservative capital cost structures: program • ($85) million in operating costs • Lindbergh production continues • ($19) million in G&A to exceed nameplate capacity of • ($10) million in transportation 12,500 bbl per day expenses Debt Reduction 1 Strong Funds Flow • Reduced outstanding debt by • Consistent quarterly funds $203 million since the end of flow despite weaker 2015 commodity prices • Undrawn $1.0 billion credit facility Asset Sales • Funds flow stability supported • Approximately $530 million of by risk management gains cash on hand as of January 6, $250 million Lindbergh GORR 2 • • Approximately $700 million over 2017 • Approximately $50 million in past two years 1 additional dispositions completed in 2016 1. As at September 30, 2016 2. Closed on January 6, 2017 7 CORPORATE PRESENTATION
FINANCIAL AND OPERATING HIGHLIGHTS THIRD QUARTER RESULTS SHOW CONTINUED PERFORMANCE IN DELIVERING RESULTS ($ millions except per share and per boe amounts) Three Months Ended Nine Months Ended September 30 September 30 Realized a total of $104 million of 2016 2015 2016 2015 hedging gains in the quarter, including $41.6 million from the monetization of Production (boe/d) 1 55,137 74,239 57,966 72,580 2018 and 2019 commodity risk management contracts Nat. gas (%) 39 40 39 43 Liquids (%) 61 60 61 57 As at September 30, 2016: Revenue (2) 250 296 706 891 • Reduced total debt by $203 million since December 31, 2015 Funds from operations 123 121 318 345 • Year over year, debt reduced by $416 million Capital expenditures 15 16 36 165 Realized price (after risk 49.28 43.40 44.42 44.97 Exited the quarter with approximately management) (3) ($/boe) $140 million of cash on hand and Operating expenses ($/boe) 13.52 13.32 12.93 14.67 increased to approximately $530 million by January 6, 2017 Cash G&A expense ($/boe) 2.92 3.54 3.31 3.59 Operating netbacks ($/boe) 32.13 25.48 28.25 24.93 Total debt 4 1,653 2,069 1. Production results include impact of asset disposition program 2. Includes impact of risk management activities and before adjusting for royalties 3. Includes other income 4. Total debt includes convertible debentures 8 CORPORATE PRESENTATION
RISK MANAGEMENT 2017 WTI Crude Oil Fixed Hedges Volumes (bbl/d) 7,000 Fixed price (Cdn$/bbl) $72.73 Volumes (bbl/d) 8,000 Fixed price (US$/bbl) $45.76 Total WTI Hedge Volumes 15,000 Fixed price (Cdn$ equivalent/bbl) 1 $66.04 2017 AECO Natural Gas Fixed Hedges Volumes (MMcf/d) 4.7 Fixed price (Cdn$/Mcf) $3.46 1. US dollar crude oil hedges converted to Canadian dollar equivalent using $0.76 Cdn/USD foreign exchange rate as at January 16, 2017 9 CORPORATE PRESENTATION
BALANCE SHEET MANAGEMENT LONG-TERM DEBT STRUCTURE IS PRIMARILY MADE UP OF PRIVATE TERM NOTES DEBT COMPOSITION (AS AT SEPTEMBER 30, 2016) COVENANT COMPLIANCE (AS AT SEPTEMBER 30, 2016) Convertible Debentures September (Cdn $ millions) 30, 2016 8% Credit Facilities/Bank line $0 Term Notes $1,526 Convertible Debentures $127 Long-term Notes 92% Total Senior Debt $1,653 Senior Debt to EBITDA 1 3.2x Senior Debt to EBITDA Covenant 3.5x Cash on hand as at January 6, 2017 of approximately $530 million not reflected in debt summary Approximately 88 percent of total debt is denominated in US$, causing reported debt balances to fluctuate with changes in the value of the Canadian dollar relative to the US$. As at September 30, 2016, Pengrowth has approximately 82 percent of its $1.1 billion US dollar denominated debt hedged at an average exchange rate of $0.78 Cdn/USD 1. Includes an additional $41 million of letters of credit and $38 million of finance leases in determination of covenant calculation. 10 CORPORATE PRESENTATION
BALANCE SHEET MANAGEMENT LONG-TERM DEBT MATURITIES (MILLIONS) Convertible Debentures (Cdn$) Long-term Notes (£) Long-term Notes (Cdn$) Long-term Notes (US$) $127 $15 $400 $265 $25 $195 $116 $105 £15 $35 2017 2018 2019 2020 2021 2022 2023 2024 Average cost of term debt 5.76% Current cost of credit facilities 3.27% 11 CORPORATE PRESENTATION
ASSET DISPOSITION STRATEGY OBJECTIVE: DE-LEVER THE BALANCE SHEET Consistent with our strategy De-levers the balance Lindbergh GORR sheet (credit positive) Criteria Swan Hills Targets for dispositions Olds/Garrington Economic Commodity price optionality trade off 12 CORPORATE PRESENTATION
PROPERTY DISPOSITION ACTIVITY ACTIONS TAKEN OVER THE PREVIOUS 2 YEARS Challenges to Success 120 4.50 1. Declining commodity price environment 2. Acquirers did not have cash 3. Not debt/credit accretive 4. Proposals did not reflect fair value 100 3.75 80 3.00 AECo Gas Prices (C$/GJ) WTI Oil Price (US$/bbl) 60 2.25 40 1.50 20 0.75 Swan Hills Sales Process Olds/Garrington Sales Process 0 0.00 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 WTI AECO 13 CORPORATE PRESENTATION
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