“Lowering Natural Gas Production & Increasing Liquids -Rich Development. Liquids Production Could Reach 13% or More of Total Production in 2020” Investor Presentation TSX / NYSE: AAV July 2018
ADVANTAGE AT A GLANCE TSX 52-week trading range $3.48 - $9.24 Shares Outstanding (basic) 186 million Market Capitalization $0.8 billion 2018 Guidance 240 to 255 mmcfe/d Liquids Production (50% Increase over 2017) 1,800 bbls/d Exit Liquids Production 2,400 bbls/d Corporate Cash Costs $1.10 to $1.30/mcfe Estimated Dec. 31, 2018: Bank Debt (58% drawn on $400 million Credit Facility) $233 million Total Debt (including working capital deficit) $240 million Total Debt/Trailing 12 Month Cash Flow 1.4 - 1.7x (@ AECO $1.50/mcf to $1.75/mcf + WTI $60U.S./bbl) 2
A STRONG FOUNDATION UNDERPINNED BY SIGNIFICANT NATURAL GAS & LIQUIDS-RICH MONTNEY RESOURCES TCFs of Natural Gas Millions of Barrels of Liquids including C5+/Oil wellhead liquids production >200 bbls/mmcf Plans underway to Increase Liquids, Moderate gas Operating flexibility to readily modify capital allocation Lowest Montney total corporate cash costs Access/Market Diversification in place Strong Balance Sheet Execution Track Record 3
RECENT LIQUIDS DRILLING SUCCESSES ENHANCES UPSIDE POTENTIAL ON 200 NET MONTNEY SECTIONS (128,000 NET ACRES) Alberta Only 4% of our liquids- B.C. East Glacier Middle Montney rich lands have been 50-80 bbls/mmcf C3+ drilled First Montney well 624 Progress Total 110 net sections (39 sections) boe/d with 172 bbls/d 100% owned at Valhalla, Wembley liquids including 75 bbls/d Glacier Glacier Gas & Progress acquired wellhead C5+/oil 90 net Plant for a total of $19 sections million since 2013 Valhalla (40 sections) 4 well pad success 6,410 boe/d (32 mmcf/d gas + 1,075 bbls/d liquids with certain yields up to 100 bbls/mmcf, 90% C5+/oil) Up to 5 layers of dry and Wembley/ liquids-rich gas Pipestone Future drilling inventory (31 sections) >1,200 locations and growing First Montney well 1,312 boe/d with 819 bbls/d liquids including 624 bbls/d 6 miles wellhead C5+/Oil 4
2018 PLAN UPDATED TO INCREASE FUTURE LIQUIDS PRODUCTION (1) LOWERING NATURAL GAS, INCREASING LIQUIDS • Reallocating budgeted capital to drill more liquids-rich wells at Valhalla & East Glacier in 2018 (maintain $175 million capital program) • Liquids growth from Valhalla & East Glacier 2018 & 2019, Wembley liquids begin mid-2020 • Deferring current standing dry gas well completions to 2019 • Lowering natural gas production during low AECO price periods • Maintaining flexibility to increase gas production winter of 2018 & beyond should prices strengthen Annual Average Production Liquids As % of Total Production (mmcfe/d) ~5% 10% - 15% 255 – 265 240 - 255 6% - 8% 5% - 6% 4.4% 2018 Original Guidance 2018 Updated Guidance (2) 2018 Guidance 2018 Exit 2019 2020 Update (2)(3) Primarily Valhalla & Wembley (1) Management estimates Notes: Glacier liquids growth mid-2020 (2) News Release dated April 19, 2018 5 (3) Midpoint of 2018 Guidance Range
INCREASING LIQUIDS STRENGTHENS REVENUE & NETBACKS (1)(2) (SENSITIVITIES + IMPACTS) Liquids As Annual Liquids Revenue 10% - 15% % of Total Production ($ Millions) $100 - $125 6% - 8% $58 - $65 5% - 6% $45 4.4% 2018 Guidance 2018 Exit 2019 2020 2018 2019 2020 Estimated Liquids Operating Netback 2020 Annual Liquids Revenue % of Total (excluding hedging) Revenue (Excluding Hedging) $/bbl 30% - 38% Royalties Operating 1% Liquids ≈ $(2.75) Cost Transportation 3% - 5% of Total Revenue Impact Blended $(2.25) $(5.00) Liquids Liquids 21% - 24% Price (C3+) Operating 20% $55/bbl Netback $45/bbl 2018 2019 2020 (1) 2018 average AECO price of $1.67/mcf based on strip as of June 29, 2018 then $2/mcf AECO, $2.55 US/mcf Dawn and WTI $60US/bbl 6 for 2019 and 2020 at Fx $0.79 (2) Management estimate. Liquids price based on blended C3+ volumes in 2020.
2018 UPDATED PLAN SUMMARY ($ million) $45 2018 SUMMARY (1) (2) $130 • $155 to $165 Million Cash Flow • ≈ 1.5x Year-end 2018 Total Debt/Cash Flow Glacier Valhalla, Wembley, Progress • 240 to 255 mmcfe/d Annual Production Range • 50% Annual Liquids Production Growth to 1,800 bbls/d exiting the year at 2,400 bbls/d (>70% C5+) $175 • $30 Million to Advance Liquids Development at $155-$165 Valhalla, Wembley and Progress Well • Drill additional Valhalla & east Glacier liquids-rich Operations wells, complete in early 2019 $80 • Complete Glacier Gas Plant Expansion to 400 mmcf/d & 6,800 bbls/d of liquids extraction Q2 2018 Plant & Value Add Facilities • $1.10-$1.30/mcfe Total Cash Costs $85 • $13,300/boe/d All-In Capital Efficiency Other $10 2018 Capital Estimate 2018 Cash Flow (1) Midpoint of 2018 Guidance Range. 7 (2) Based on an average AECO Cdn $1.50/mcf to $1.75/mcf ($1.42/GJ to $1.66/GJ) and average Dawn US $2.80/mmbtu natural gas price and Advantage’s current hedge positions
MARKET & REVENUE DIVERSIFICATION ENHANCES NETBACKS (<25% REVENUE EXPOSURE TO AECO PRICES THRU 2020) Revenue Diversification (1) 2018 Estimates at AECO Cdn 17% 23% Glacier Netbacks ($/mcfe) $1.75/mcf 1% 37% Revenue (1) $2.62 4% Hedging $0.34 8% Liquids Royalties ($0.10) 26% Operating Costs ($0.31) Midwest U.S. 23% 12% Transportation Costs (2) ($0.58) 5% Henry Hub Operating Netback $1.97 (2) 28% Dawn G&A ($0.09) 21% 22% Finance & other ($0.12) (3) Fixed Price Cash Flow Netback $/mcfe $1.77 AECO $/Boe $10.62 25% 24% 24% Recycle Ratio based on 3 Year Average 2P 3.4x F&D @ $0.52/mcfe (3) 2018E 2019E 2020E Notes: Notes: (1) Graph represents % of estimated revenue based on strip pricing at May 10, 2018. (1) Includes Dawn and Chicago natural gas revenue, adjustments for heat value (realized (2) Includes Dawn hedges of 30,000 mmbtu/d at an average price of US $2.86/mmbtu for 2018 price) and natural gas liquids revenue. and 6,250 mmbtu/d at an average price of US $3.13/mmbtu for 2019 (2) Includes liquids transportation costs of $0.04/mcfe, AECO gas transportation costs of (3) Includes AECO hedges of 81,680 mmcf/d at avg price of AECO Cdn $2.59/mcf 2018 and 75,155 $0.29/mcfe and AECO to Dawn transportation costs of $1.10/mcfe. mmcf/d at avg price of $2.26/mcf 2019 (3) 2P F&D includes Future Development Capital and is based on Sproule’s 2015, 2016 and 2017 year-end 2P reserves reports. 8
NATURAL GAS TRANSPORTATION SERVICE IN PLACE ACCESSING SEVERAL HUBS AECO Transportation Service 500 (mmcf/d) 393 mmcf/d as of April, 2021 400 • Increasing firm service secured to 2021 • Ability to reduce future total service 300 commitments through evergreen contract 200 renewals 100 Alliance Pipeline Connection Proceeding TCPL 0 2018 2019 2020 2021 Alliance Firm Contracted Service Evergreen Contract Renewals Proceeding with Alliance meter station Physical Downstream Transport Capacity connection for 2018 125 (mmcf/d) 100 Glacier gas plant 75 TCPL Meter Station 50 Alliance Meter Station 25 0 Ability to further diversify downstream markets and 2018 2019 2020 2021 Dawn Chicago Ventura capture revenue optimization opportunities 9
MAINTENANCE CAPITAL AND SURPLUS CASH FLOW SENSITIVITY ILLUSTRATIVE AT 280 MMCFE/D (Q4 2018) (NO HEDGING INCLUDED) CASH FLOW Capable of Maintaining Annual Surplus Cash Production at of $100 million $215 Million AECO $1.20/mcf $100 MAINTENANCE Million CAPITAL CASH FLOW $115 Million $115 Million (2) Cash Flow at AECO $2.50/Mcf 280 mmcfe/d Q4 2018 AECO $1.20/Mcf (1) Assumes 7.5 mmcf/d /7.5 Bcf for Upper/Lower Montney wells and 5.0 mmcf/d /5.0 Bcf for Middle Montney wells 10 Notes (2) Assumes Dawn at $3.30/mcf and a WTI price of $55 US/bbl.
ONGOING VALUE CREATION FROM OUR HIGH QUALITY ASSETS THROUGH OPERATIONAL EXCELLENCE 11
EXTENSIVE LIQUIDS-RICH MONTNEY RESOURCE Increasing Total C3+ and C5+/Oil liquids content from East Glacier to Wembley Progress 50-100 bbls/mmcf Only 4% of liquids-rich lands have been drilled Valhalla E Glacier 20 to >100 bbls/mmcf 50-80 bbls/mmcf C3+ Multi-layer Montney development potential Wembley >250 bbls/mmcf Source: Canadian Discovery Digest/Advantage Source: Canadian Discovery Digest/Advantage Recent Advantage Evaluation/Delineation wells 12 Wells drilled within last 18 months
SIGNIFICANT NATURAL GAS AND LIQUIDS UPSIDE ACROSS LAND HOLDINGS • 200 net sections (128,000 First AAV net acres) Progress East Glacier 50-80 Progress well (LM) bbls/mmcf 63 bbls/mmcf • 110 net sections Progress, Glacier Valhalla, Wembley Glacier gas plant • Only 169 dry gas Upper & Lower Glacier wells drilled Valhalla to date (7 standing wells) AAV Valhalla 20-100 bbls/mmcf • Only 48 liquids-rich wells Glacier gas well drilled to date (13 standing rates up to 20 mmcf/d Wembley First AAV Wembley wells) 12-25 277 bbls/mmcf • >1,200 future locations (Glacier & Valhalla only) • 100% Ownership of Glacier gas plant with 400 mmcf/d, Pipestone 6,800 bbls/d C3+ liquids provides capacity for 6 miles development of AAV’s land blocks 13 NOTE: Liquid yields indicated are propane plus (“C 3 +”) based on a Glacier shallow cut liquids extraction process
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