“44% Production Growth, Top Quartile Well Results and $0.58/ mcfe Total Corporate Cash Costs in Q3 2016 Underpins Glacier Plant Expansion Plans to 350 MMcf/d (58,330 Boe /d)” Investor Presentation TSX / NYSE: AAV November 2016
ADVANTAGE AT A GLANCE TSX, NYSE: AAV TSX 52-week trading range $5.85 - $10.33 Shares Outstanding (basic) 184.6 million >40% Annual Production Growth 2016 Annual Production Target 200 mmcfe/d (33,300 boe/d) Market Capitalization @ November 9, 2016 $1.7 billion As of September 30, 2016: Bank Debt (45% drawn on $400 million Credit Facility) $179 million Total Debt (including working capital surplus) $184 million 1.0x (1) Total Year-end Debt /Trailing Cash Flow View of Glacier Plant Process Train – approximately 1000 feet long 2 (1) Estimated debt and cash flow based on Advantage’s 2016 Budget & Guidance assumptions @ AECO Cdn $2.00/mcf
FOCUSED ON GLACIER DEVELOPMENT SINCE 2008 ADDITIONAL MONTNEY LANDS PROVIDES FUTURE UPSIDE Current development at Glacier including Progress (Future) dry and liquids rich gas drilling with a future drilling inventory >1,100 locations 100% owned 9 net Montney Glacier Gas Total 150 net Montney sections (96,000 Glacier sections Plant acres) 88 net sections New Montney lands at Valhalla, Wembley & Valhalla Progress contain multiple layers and (Evaluating) requires delineation 53.25 net Montney sections “13 net Montney Sections (100% W.I.) Wembley (Future) Added Year to Date” 3
ADVANTAGE’S GROWTH & ACHIEVEMENTS… 2016+ Record Low Cash Costs $0.58/mcfe Gen 4 Fracs (ports, 25+ frac stages) 350 mmcf/d Plant expansion plan in progress 2014 - 2015 58,330 Boe/d 30% Well IP30 + EUR (1) $0.82/mcfe Total Cash Costs 250 mmcf/d Plant expansion 2012 - 2013 Middle Montney Liquids Gen 3 Fracs (16-18 frac stages, slickwater, OH packers) 2010- 2011 200 to 350 U&L Montney Delineation mmcfe/d Gen 2 Fracs (10-14 frac stages) Opex costs <$0.38/mcfe 180 to 200 2008 - 2009 mmcfe/d 130 to 180 Resource Appraisal mmcfe/d Gen 1 Fracs (6-10 frac stages) 50 to 100 First 25 mmcf/d mmcfe/d 25 to 50 mmcfe/d (1) IP30 is initial average well 30 day production rate and 2P Estimated Ultimate Recovery per Management estimates. Comparison is made to prior 4 Management estimated average well type curve.
…IS BASED ON A SOLID FOUNDATION FOR PROFITABLE & SUSTAINABLE GROWTH… Strong Balance Sheet 1.0x D/CF (1) 2016 Operating & Hedged to Protect Financial Flexibility Own & Operate Future Cash Flow (2) 100% Plant & Infrastructure Lowest Cash Cost Montney Producer (3) World Class Montney Asset (1) Total debt to trailing cash flow based on 2016 Advantage Budget & Guidance @ AECO Cdn $2.00/mcf – See Advantage press release December 16, 2015 (2) % of estimated annual future production net of royalties, 48% @ $3.56 Cdn/mcf Q4 2016, 45% @ $3.19 Cdn/mcf 2017, 5 22% @ $3.02 Cdn/mcf 2018, 18% @ $3.00 Cdn/mcf Q1 2019 (3) Total corporate cash cost of $0.58/mcfe Q3 2016
…DRIVING STRONG RETURNS IN THE LAST 3 YEARS THREE-YEAR TOTAL SHAREHOLDER ESTIMATED ANNUAL RETURN RETURN (Nov.7/13 to Nov.7/16) 2016 Estimate $/mcfe 124% Natural gas and liquids sales price $2.75 including realized hedging gains Total Corporate Cash Costs $(0.60) (1) Total Capital Costs, PDP F&D $(1.10) 2016 Estimated All-In Netback $1.05 21% Estimated 2016 Annual Return on 38% Capital Estimated 3 Year Average Annual 25% Return on Capital -16% -21% Advantage Advantage Oil & S&P/TSX Composite S&P/TSX Capped S&P/TSX Oil & Gas Oil & Gas Ltd. Gas Ltd. Index Energy Index Exploration & (Total Return) (Total Return) Production GICS Sub Industry (Total Return) (1) Management estimate of 2016 PDP F&D cost 6
CONTINUOUS IMPROVEMENT HAS CREATED INDUSTRY LEADING EFFICIENCIES… 7
…WITH OPERATIONAL FLEXIBILITY Surplus Well Productivity from 9 Completed Standing Wells (1) >125 mmcf/d Uncompleted Standing Wells (2) 12 wells 100 mmcf/d Plant Expansion plan to 350 mmcf/d in progress >180 mmcf/d Additional Sales Gas Pipeline Capacity, Total 400 mmcf/d capacity 313 mmcf/d Total Firm Natural Gas Transportation Service by 2019 Well Pads Planned to 2019 Glacier Gas Plant 100% working interest Current Capacity 250 mmcf/d 8 (1) As of November 1, 2016. Management estimated initial 30 day average well production rate (IP30). (2) November 1, 2016
ESTIMATED SURPLUS CASH FLOW IN 2016 $161 “Surplus ($ million) Cash” 2016 Annual Estimates $36 $125 >40% Production Growth 190 to 210 mmcfe/d Annual Drill 13 wells Average Production ~$63 million in H2 2016 (31,670 – 35,000 Boe/d) Complete 13 $0.60/mcf Total Cash Costs standing wells 22% Cash Flow Per Share Pipeline looping Growth (2) $62 million in H1 2016 Utilities GGS Capital Program Includes Wells Land & Other for 2017 Production 2016 Capital Estimate 2016 Cash Flow (1) 2016 Capital Estimate 2016 Cash Flow… AECO $2.00/Mcf 9 (1) Cash Flow estimates includes Advantage’s current hedging positions. (2) Based on AECO Cdn $2.00/mcf, updated as of November 9, 2016
STRONG NETBACKS & RECYCLE RATIOS ARE ACHIEVABLE EVEN WITHOUT HEDGING Montney Natural Gas Producers “NO HEDGING INCLUDED” Total Cost Structure - Q2 2016 $/Mcfe Illustrative Illustrative AAV - Lowest Total Corporate Cash Cost Montney Producer $4.50 Q2 2016 $0.59/mcfe AECO Cdn AECO Cdn $4.00 Glacier Netbacks $2.00/mcf $3.00/mcf $1.88 (1) $2.90 (1) $3.50 Revenue (Realized Price) Royalties ($0.09) ($0.15) $3.00 $2.19 Average of Peers Operating Costs ($0.25) ($0.25) $2.50 Transportation Costs (2) ($0.04) ($0.04) $2.00 Operating Netback $/mcfe $1.50 $2.46 $1.50 G&A ($0.10) ($0.10) $1.00 Finance Expense & other ($0.10) ($0.10) $0.50 Cash Flow Netback $1.30/mcfe $2.26/mcfe $- or or $7.80/boe $13.56/boe $(0.50) AAV TOU PPY BIR VII CR NVA ARX KEL POU Recycle Ratio 2015 1.7x 2.9x Operating costs & transportation ($/mcfe) Royalties incl. GCA adjustments ($/mcfe) 2P F&D @ $0.77/mcfe (3) G&A ($/mcfe) Interest & other ($/mcfe) (1) Advantage's transportation includes liquids transportation. As required by accounting standards, Advantage's gas transportation of ~$0.27/mcf is deducted from revenue. Source : RBC Capital Markets, Public Disclosures (1) Natural Gas & Liquids revenue includes adjustments for heat value offset by natural gas transportation costs of $0.27/mcf as required by accounting standards. 10 (2) Natural Gas liquids transportation costs. (3) 2P F&D includes Future Development Capital and is based on Sproule’s 2015 year -end 2P reserves report.
MAINTENANCE CAPITAL AND SURPLUS CASH FLOW SENSITIVITY “Surplus Cash Flow Above AECO $1.76/ Mcf ” Surplus $110 million (NO HEDGING INCLUDED) Surplus $65 million Based on average well type curve (1) $100 million Based on top $100 million $165 million $80 million $210 million quartile type well (2) Maintenance Capital at Cash Flow at AECO Cash Flow at AECO Cash Flow at AECO 245 mmcfe/d $1.76/Mcf $2.50/Mcf $3.00/Mcf Notes (1) Assumes 7.2 mmcf/d /7.2 Bcf for Upper/Lower Montney wells and 4.5 mmcf/d /4.5 Bcf for Middle Montney wells 11 (2) Assumes 9 mmcf/d /9 Bcf for Upper/Lower Montney wells and 6 mmcf/d /6 Bcf for Middle Montney wells
ADVANTAGE DEVELOPMENT PLAN – 2015 THROUGH 2017 (1) Annual Average Production 22% Capital Spending CAGR (2) (mmcfe/d) ($ millions) 18% 235 $490 million Total (original 40% 200 $200 estimate $700 million) $165 141 $125 2015 Actual 2016 Budget 2017 Estimate 2015 Actual 2016 Estimate 2017 Estimate Cash Flow per Share ALL-IN Capital Efficiency ($/boe/d) 18% $1.04 $13,300 per boe/d 22% $0.88 $20,400 Average Capital Efficiency $0.72 $12,500 $7,100 2015 Actual 2016 Estimate 2017 Estimate 2015 Actual 2016 Budget 2017 Estimate @ $2.00 Cdn Notes : (1) Price assumptions: 2016 AECO $2.00/mcf and 2017 AECO $2.75/mcf. See Appendix for Plan details AECO/mcf 12 (2) Compound annual growth rate. (3) Capital Efficiency calculated using 30% per annum decline and includes total annual capital expenditures
DEVELOPMENT PLAN SENSITIVITY & HEDGING POSITIONS Total Debt to Trailing “Current Hedging Program Extended” (1) Cash Flow Sensitivity (reduces downside risk and maintains upside torque) 1.3 Production (2) Average Period Hedged (net) AECO Floor AECO 1.0 Price $2.00/mcf 2016 Q4 48% $3.56/mcf 0.8 AECO $2.50/mcf 2017 45% $3.19/mcf 2018 22% $3.02/mcf AECO $3.00/mcf 2019 Q1 18% $3.00/mcf 2017 (1) I ncludes Advantage’s current hedges 13 Notes : (2) % of estimated annual future production, net of royalties
SIGNIFICANT DRILLING INVENTORY INCLUDES DRY AND LIQUIDS RICH NATURAL GAS LOCATIONS AT GLACIER Capable of maintaining 245 mmcfe/d (40,830 boe/d) for >50 years (1) >1,100 Future Drill Locations at Glacier supports future growth (1) 297 undeveloped locations booked in 2P reserves Year End 2015 (2) Drilled (3) Wells by Layer >1,100 Future Drilling Locations Upper (Management 104 Estimate) Drilled Wells 169 Middle 23 2P Reserves Lower Undeveloped 42 Wells *Interval 6 not assigned reserves or resource Liquids Rich intervals 297 Average 50 bbls/mmcf, >45% C5+ East Glacier (1) Management Estimates (2) Based on Sproule December 31, 2015 Glacier Reserves Report (3) As of Dec. 31, 2015 14
OPERATIONAL EXCELLENCE 15
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