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CALGARY, ALBERTA -- (Marketwired) -- 05/10/16 -- Peyto Exploration & Development Corp. ("Peyto" or the "Company") (TSX:PEY) is
pleased to present its operating and financial results for the first quarter of the 2016 fiscal year. Continued cost reductions and
record production combined for a 78% operating margin(1) and a 23% profit margin(2). Additional highlights included:
-- Production per share up 20%. First quarter 2016 production increased 24%, 20% per share, from 490 MMcfe/d (81,588 boe/d) in Q1 2015 to 609 MMcfe/d (101,546 boe/d) in Q1 2016, setting a new Company record. -- Funds from operations per share of $0.88. Generated $140 million in Funds from Operations ("FFO") in Q1 2016 down 3% (6% per share) from $145 million in Q1 2015 due to a 23% reduction in realized commodity prices, largely offset by a 20% reduction in cash costs and a 24% increase in production volumes. -- Record low cash costs of $0.71/Mcfe ($0.59/mcfe or $3.51/boe excluding royalties). Total cash costs, including $0.13/mcfe royalties, $0.23/mcfe operating costs, $0.16/mcfe transportation, $0.03/mcfe G&A and $0.17/mcfe interest, were a new Company record. This 20% decrease from $0.89/mcfe in Q1 2015 was primarily due to a 28% decrease in operating costs and a 28% decrease in royalties. Lower realized commodity prices, offset by these lower cash costs, resulted in a cash netback of $2.52/Mcfe ($15.14/boe) or a 78% operating margin. -- Capital investment of $176 million. A total of 37 gross wells (35.5 net) were drilled in the first quarter. New wells brought on production over the last 12 months accounted for 48,600 boe/d at the end of the quarter, which, when combined with a trailing twelve month capital investment of $631 million, equates to an annualized capital efficiency of $13,000/boe/d. In addition, approximately 3,200 boe/d of production was drilled, completed and tied in but was awaiting the $33 million Brazeau gas plant expansion which was substantially completed in March 2016. -- Earnings of $0.26/share, dividends of $0.33/share. Earnings of $42 million were generated in the quarter while dividends of $53 million were paid to shareholders, representing a before tax payout ratio of 38% of FFO.
First Quarter 2016 in Review
Peyto maintained the same level of activity at the start of the first quarter of 2016 as it had in the fourth quarter of 2015,
with 10 drilling rigs actively developing its Deep Basin core areas. Two rigs were released by the end of the quarter as continued
improvements in drilling execution meant 8 rigs could do the work of 10. Lower realized commodity prices were countered with lower
capital and cash costs allowing Peyto to maintain its expected return on new investments. Average drilling and completion costs per
horizontal well were $2.8 million in the first quarter 2016, down 28% from $3.9 million in Q1 2015 while total cash costs were down
20% from $0.89/mcfe to $0.71/mcfe. Peyto closed two small property acquisitions and one property swap in the quarter, totaling $28
million, which added more drilling locations to the Company's inventory of profitable Deep Basin opportunities. The Brazeau gas
plant was expanded in the quarter, taking processing capacity from 60 MMcf/d to 120 MMcf/d, in order to accommodate expected volume
additions this year. Despite the continued drop in commodity prices, the financial and operating performance delivered in the
quarter resulted in an annualized 10% Return on Equity (ROE) and 8% Return on Capital Employed (ROCE).
1. Operating Margin is defined as funds from operations divided by revenue before royalties but including realized hedging gains/losses. 2. Profit Margin is defined as net earnings for the quarter divided by revenue before royalties but including realized hedging gains/losses. Natural gas volumes recorded in thousand cubic feet (mcf) are converted to barrels of oil equivalent (boe) using the ratio of six (6) thousand cubic feet to one (1) barrel of oil (bbl). Natural gas liquids and oil volumes in barrel of oil (bbl) are converted to thousand cubic feet equivalent (Mcfe) using a ratio of one (1) barrel of oil to six (6) thousand cubic feet. This could be misleading, particularly if used in isolation as it is based on an energy equivalency conversion method primarily applied at the burner tip and does not represent a value equivalency at the wellhead. 3 Months Ended March 31 % 2016 2015 Change ---------------------------------------------------------------------------- Operations Production Natural gas (mcf/d) 567,230 444,794 28% Oil & NGLs (bbl/d) 7,008 7,456 -6% Thousand cubic feet equivalent (mcfe/d @ 1:6) 609,278 489,528 24% Barrels of oil equivalent (boe/d @ 6:1) 101,546 81,588 24% Production per million common shares (boe/d)(i) 638 530 20% Product prices Natural gas ($/mcf) 3.06 3.97 -23% Oil & NGLs ($/bbl) 33.60 37.03 -9% Operating expenses ($/mcfe) 0.23 0.32 -28% Transportation ($/mcfe) 0.16 0.15 7% Field netback ($/mcfe) 2.72 3.52 -23% General & administrative expenses ($/mcfe) 0.03 0.04 -25% Interest expense ($/mcfe) 0.17 0.20 -15% Financial ($000, except per share(i)) Revenue 179,351 183,812 -2% Royalties 6,985 7,992 -13% Funds from operations 139,907 144,643 -3% Funds from operations per share 0.88 0.94 -6% Total dividends 52,520 50,781 3% Total dividends per share 0.33 0.33 - Payout ratio 38 35 9% Earnings 41,943 44,513 -6% Earnings per diluted share 0.26 0.29 -10% Capital expenditures 175,763 138,077 27% Weighted average common shares outstanding 159,142,526 153,852,570 3% As at March 31 End of period shares outstanding (includes shares to be issued) 159,239,543 153,921,273 3% Net debt 1,181,963 1,064,491 11% Shareholders' equity 1,655,093 1,528,959 8% Total assets 3,503,343 3,163,162 11% (i)all per share amounts using weighted average common shares outstanding ---------------------------------------------------------------------------- 3 Months Ended March 31 ($000 except per share) 2016 2015 ---------------------------------------------------------------------------- Cash flows from operating activities 138,118 126,134 Change in non-cash working capital (1,112) 15,488 Change in provision for performance based compensation 2,901 9,369 ---------------------------------------------------------------------------- Funds from operations 139,907 144,643 ---------------------------------------------------------------------------- Funds from operations per share 0.88 0.94 ---------------------------------------------------------------------------- 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 Canadian generally accepted accounting principles ("GAAP") and does not have a standardized meaning prescribed by GAAP. 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 GAAP. Funds from operations cannot be assured and future distributions may vary.
Exploration & Development
First quarter 2016 activity was focused in the Greater Sundance and Brazeau River areas on the Company's traditional, sweet,
liquids rich, natural gas resource plays. Despite the deterioration in commodity prices for summer 2016, these locations still met
Peyto's strict internal rate of return hurdles primarily due to lower costs and proximity to existing infrastructure. Two of the
drilling rigs were active in the Brazeau area delineating a proven Wilrich trend, as well as testing a Notikewin trend
characterized by high pressure channel sands with above average liquid yields. As well, Peyto drilled its first vertical well in
the past five years into a faulted Cardium target at Brazeau with initial condensate liquid yields in excess of 60 bbls/mmcf.
Several follow up locations in the Cardium now exist that may be pursued later in the year.
In total, 37 gross wells were drilled across the land base, similar to Q1 2015, as shown in the following table:
Field Total Kisku/ Wells Zone Sundance Nosehill Wildhay Ansell Berland Kakwa Brazeau Drilled ---------------------------------------------------------------------------- Cardium 1 1 Notikewin 2 1 3 1 7 Falher 9 2 11 Wilrich 7 2 1 3 5 18 Bluesky ---------------------------------------------------------------------------- Total 16 4 2 8 7 37 ----------------------------------------------------------------------------
Drilling costs per meter were 10% lower while completion costs per meter were 23% lower than average 2015 costs as continued
service cost reductions and efficiency gains were realized. The following table illustrates the ongoing efficiency gains which
should contribute to lower overall development costs and ultimately greater returns:
2010 2011 2012 2013 2014 2015 2016 Q1 ---------------------------------------------------------------------------- Gross Hz Spuds 52 70 86 99 123 140 36 Measured Depth (m) 3,762 3,903 4,017 4,179 4,251 4,309 4,231 Hz Length (m) 1,335 1,303 1,358 1,409 1,460 1,531 1,460 Drilling ($MM/well) $2.763 $2.823 $2.789 $2.720 $2.660 $2.159 $1.916 $ per meter $734 $723 $694 $651 $626 $501 $453 Completion ($MM/well) $1.358 $1.676 $1.672 $1.625 $1.702 $1.212 $0.910 $ per meter $361 $429 $416 $389 $400 $281 $215 ----------------------------------------------------------------------------
Capital Expenditures
Capital investments in the first quarter of 2016 totalled $175.7 million, comprised of $95.8 million for drilling and
completion, $11.6 million for wellsite equipment and well connections, $37 million for major pipelines and facilities, $27.9
million for acquisitions and land, and $3.4 million for new seismic data.
In total, 37 gross wells (35.5 net) were spud in the quarter and 36 gross wells (34.7 net) were completed and with 36 gross
(34.3 net) wells placed on production.
The Brazeau plant was expanded from 60 MMcf/d capacity to 120 MMcf/d with the installation of a third refrigeration process
train and 4 new compressors, taking the total compressor count at the plant to 10 machines. This expansion occurred over March and
was commissioned in early April. In addition, the TCPL meter station fed by Peyto's Brazeau plant was expanded up to 120 MMcf/d of
capacity to match the new facility limits. The estimated total cost for the plant expansion is $33 million with $25 million of the
expenditure occurring in the first quarter.
Two small acquisitions and one property swap were closed in the first quarter totalling $27.9 million which included
approximately 1,500 boe/d of production and 13 net sections of land on which Peyto has identified a significant number of new
drilling locations. One of the acquisitions also included 20% working interest in Peyto's Galloway gas plant, increasing total
ownership in that plant from 69% to 89%. All of the acquired lands are situated proximal to Peyto's existing infrastructure.
By the end of the quarter, the 36 gross (34.3 net) wells that were brought onstream were contributing 15,000 boe/d to the
quarter end exit rate of 102,000 boe/d.
Commodity Prices
A strong El Nino weather influence that occurs every three to five years resulted in above-normal winter temperatures and
reduced natural gas heating demand in North America in the first quarter of 2016. This was combined with record natural gas
production and resulted in less gas being withdrawn from storage inventories during the heating season than in prior years. The
reduced consumption, combined with increased supply, caused natural gas prices to fall. In Alberta, where local storage inventories
remained high, AECO daily natural gas prices, which averaged $2.34/GJ during the fourth quarter of 2015, fell over 45% to $1.27/GJ
by March 2016, or the end of the winter season.
The average first quarter 2016 Alberta (AECO) daily natural gas price was $1.75/GJ down 33% from $2.60/GJ in Q1 2015, while the
average AECO monthly price was $2.00/GJ down 28% from $2.80/GJ a year prior. As Peyto had committed 84% of its production to the
monthly price, Peyto realized a volume weighted average natural gas price of $1.93/GJ or $2.22/mcf, after the TCPL fuel charge and
prior to a $0.84/mcf hedging gain.
As a result of the Company's hedging strategy, approximately 60% of Peyto's natural gas production received a fixed price of
$3.21/GJ from hedges that were put in place over the previous 24 months, while the balance received the blended daily and monthly
price of $1.93/GJ, resulting in an after-hedge price of $2.66/GJ or $3.06/mcf.
Peyto realized an oil and natural gas liquids price of $33.60/bbl in Q1 2016 for its blend of condensate, pentane, butane and
propane, which represented 82% of the $40.83/bbl average Canadian Light Sweet posted price, as shown in the following table.
Commodity Prices by Component ---------------------------------------------------------------------------- Three Months ended March 31 2016 2015 ---------------------------------------------------------------------------- Natural gas - after hedging ($/mcf) 3.06 3.97 ---------------------------------------------------------------------------- Natural gas - after hedging ($/GJ) 2.66 3.48 ---------------------------------------------------------------------------- AECO monthly ($/GJ) 2.00 2.80 ---------------------------------------------------------------------------- Oil and natural gas liquids ($/bbl) Condensate ($/bbl) 37.86 48.64 Propane ($/bbl) (7.70) 3.96 Butane ($/bbl) 16.58 28.28 Pentane ($/bbl) 41.30 46.87 ---------------------------------------------------------------------------- Total Oil and natural gas liquids ($/bbl) 33.60 37.03 ---------------------------------------------------------------------------- Canadian Light Sweet postings ($/bbl) 40.83 52.72 ----------------------------------------------------------------------------
Liquids prices are Peyto realized prices in Canadian dollars adjusted for fractionation and transportation.
Financial Results
Peyto's realized natural gas price combined with realized liquids prices, resulted in unhedged revenues totaling $2.46/mcfe
($3.24/mcfe including hedging gains). Royalties of $0.13/mcfe, operating costs of $0.23/mcfe, transportation costs of $0.16/mcfe,
G&A of $0.03/mcfe and interest costs of $0.17/mcfe, all combined for total cash costs of $0.71/mcfe ($4.28/boe). This is the
lowest total cash cost ever achieved in the Company's history and represents the eighth consecutive quarter where costs were
reduced. Most significant of these reductions has been a 42% reduction in operating costs from $0.39/mcfe ($2.34/boe)
in Q1 of 2014 to $0.23/mcfe ($1.36/boe) in Q1 2016. Lower royalties has also been a significant contributor to cost reductions.
These total cash costs, when deducted from realized revenues, resulted in a cash netback of $2.52/mcfe or a 78% operating
margin.
Depletion, depreciation and amortization charges of $1.62/mcfe, along with a provision for deferred tax and market based bonus
payments reduced the cash netback to earnings of $0.76/mcfe, or a 23% profit margin. Dividends of $0.95/mcfe were paid to
shareholders.
Subsequent to the end of the quarter, on April 28, 2016, Peyto entered into a bought deal for 4,687,500 common shares at a price
of $32.00 per common share for net proceeds of $144 million. The Company has granted the underwriters an option, exercisable at any
time until 30 days following the closing of the offering, to purchase up to an additional 15% (703,125 common shares) to cover
over-allotments, if any. The offering is expected to close on May 18, 2016.
Natural Gas Marketing
Peyto's practice of layering in future sales in the form of fixed price swaps, and thus smoothing out the volatility in natural
gas prices, continued throughout the quarter. The following table summarizes the remaining hedged volumes and prices for the
upcoming years as of May 10, 2016.
---------------------------------------------------------------------------- Average Price Future Sales (CAD) ---------------------------------------------------------------------------- GJ Mcf $/GJ $/Mcf ---------------------------------------------------------------------------- 2016 Q2 (May 10 - Jun 30) 20,880,000 18,156,522 2.71 3.12 2016 Q3 40,475,000 35,195,652 2.67 3.06 2016 Q4 41,550,000 36,130,435 2.64 3.04 2017 108,790,000 94,600,000 2.56 2.94 2018 37,260,000 32,400,000 2.44 2.81 ---------------------------------------------------------------------------- Total 248,955,000 216,482,609 2.59 2.97 ----------------------------------------------------------------------------
(i)prices and volumes in mcf use Peyto's historic heat content premium of 1.15.
Activity Update
As of the end of April, the Company had two rigs drilling in the Greater Sundance area and 6 rigs racked at various wellsite
locations ready to resume drilling at the conclusion of breakup in early June. Drilling over the breakup period is being limited to
multi-well pads with the expectation of lower cost outcomes.
The recent decline of near term 2016 Alberta natural gas prices has prompted Peyto to adopt a summer producing strategy that
effectively defers the production from newly drilled, high flush rate wells from the current low summer prices until the fall. This
same strategy was successfully utilized in 2012 and 2013 in similar environments. The current future strip has AECO prices
averaging $1.48/GJ over the six month period from May to October but improving over 70% to $2.53 for the 5 month winter period from
November 2016 to March 2017. The economic return generated by new wells significantly improves by delaying their onstream date for
those six months. Therefore, Peyto has elected to hold approximately 10,000 boe/d of new 2016 production additions offline from
April to October to capture this improved return. In addition, the Company has received Board of Director approval to increase the
pace of its near term hedging program, up to 85% of forecast volumes, in order to secure these winter prices for the 2016 new
production additions. Should gas prices recover over the course of the summer, Peyto has the facility capacity and flexibility to
respond quickly and bring the shut in volumes on stream.
While Peyto's operating cost are low enough to make positive operating income from these new wells, even at these low summer
prices, the total return on the capital invested in these new wells is enhanced considerably through this proven deferral strategy.
Peyto's strong infrastructure position and operating flexibility allows the Company to take this very adaptable approach to
volatile natural gas prices.
Modernized Royalty Framework
On January 29, 2016 the Alberta Government released a report of its Royalty Review and Advisory Panel. The report sets forth a
new Modernized Royalty Framework (MRF) that is scheduled to commence for wells drilled starting January 1, 2017. In general, the
MRF looks to reward those companies who continuously innovate, strive to reduce their costs and their environmental footprints.
Peyto is already an industry leader in this regard.
Most of the details on the quantitative aspects of the MRF were released on April 21, 2016. Additional details are scheduled to
be released by the Department of Energy in the coming weeks. From the information available so far, Peyto concludes this latest MRF
will not pose any significant additional burden to the Company's well investment economics over a reasonable commodity price range
as expected in the foreseeable future.
Outlook
Peyto's primary goal is to maximize the return on invested capital. The Company accomplishes this goal in two ways. Firstly, the
Company selectively and efficiently invests capital at periods in the commodity cycle when capital costs are at their lowest, using
industry activity as a guide as to when these periods occur. Historically, there is a strong correlation between the commodity
cycle and industry activity levels so that Peyto doesn't need to speculate on the future of commodity prices. Minimizing the risk
in operational execution at these times is critical to ensure profits are not lost in failed operations. Secondly, the Company
strives to achieve sustainably low cash costs to ensure investments generate a positive return for shareholders regardless of the
commodity price outcome. Included in this is a systematic hedging strategy that smooths out the potential volatility in future
commodity prices.
Historically, Peyto has been successful in accomplishing these two objectives and therefore maximizing the returns on invested
capital for its shareholders. The goal today remains the same and the strategy to achieving that goal is well understood across the
organization. Management remains confident future outcomes will mirror the same historical success.
Conference Call and Webcast
Disclosure rules for Canadian public corporations preclude the Company from certain activities and statements while in
distribution. As a result, there will not be a 2016 first quarter results conference call.
Management's Discussion and Analysis
A copy of the first quarter report to shareholders, including the MD&A, audited financial statements and related notes, is
available at http://www.peyto.com/news/Q12016MDandA.pdf and will be filed
at SEDAR, www.sedar.com at a later date.
Annual General Meeting
Peyto's Annual General Meeting of shareholders will be held on Wednesday, May 18, 2016 at 3:00 pm in the Grand Lecture Theatre
of the Metropolitan Conference Centre at 333 - 4th Avenue S.W. Calgary, Alberta T2P 0H9.
Darren Gee
President and CEO
May 10, 2016
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. To provide a single unit of production for analytical purposes, natural gas production and
reserves volumes are converted mathematically to equivalent barrels of oil (BOE). Peyto uses the industry-accepted standard
conversion of six thousand cubic feet of natural gas to one barrel of oil (6 Mcf = 1 bbl). The 6:1 BOE ratio is based on an energy
equivalency conversion method primarily applicable at the burner tip. It does not represent a value equivalency at the wellhead and
is not based on current prices. While the BOE ratio is useful for comparative measures and observing trends, it does not accurately
reflect individual product values and might be misleading, particularly if used in isolation. As well, given that the value ratio,
based on the current price of crude oil to natural gas, is significantly different from the 6:1 energy equivalency ratio, using a
6:1 conversion ratio may be misleading as an indication of value.
Peyto Exploration & Development Corp. Condensed Balance Sheet (unaudited) (Amount in $ thousands) March 31 December 31 2016 2015 ---------------------------------------------------------------------------- Assets Current assets Cash 3,742 - Accounts receivable 79,371 85,525 Due from private placement (Note 6) - 3,769 Derivative financial instruments (Note 8) 117,599 65,169 Prepaid expenses 10,030 12,992 ---------------------------------------------------------------------------- 210,742 167,455 ---------------------------------------------------------------------------- Property, plant and equipment, net (Note 3) 3,292,601 3,190,059 ---------------------------------------------------------------------------- 3,292,601 3,190,059 ---------------------------------------------------------------------------- 3,503,343 3,357,514 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Liabilities Current liabilities Accounts payable and accrued liabilities 117,590 144,402 Dividends payable (Note 6) 17,516 17,486 Provision for future performance based compensation (Note 7) 4,899 1,998 ---------------------------------------------------------------------------- 140,005 163,886 ---------------------------------------------------------------------------- Long-term debt (Note 4) 1,140,000 1,045,000 Long-term derivative financial instruments (Note 8) 2,323 2,299 Provision for future performance based compensation (Note 7) 1,654 - Decommissioning provision (Note 5) 130,721 118,882 Deferred income taxes 433,547 403,890 ---------------------------------------------------------------------------- 1,708,245 1,570,071 ---------------------------------------------------------------------------- Equity Share capital (Note 6) 1,474,890 1,467,264 Shares to be issued (Note 6) - 3,769 Retained earnings 92,762 103,339 Accumulated other comprehensive income (Note 6) 87,441 49,185 ---------------------------------------------------------------------------- 1,655,093 1,623,557 ---------------------------------------------------------------------------- 3,503,343 3,357,514 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notes to the financial statements. Approved by the Board of Directors (signed) "Michael MacBean" (signed) "Darren Gee" Director Director Peyto Exploration & Development Corp. Condensed Income Statement (unaudited) (Amount in $ thousands) Three months ended March 31 2016 2015 ---------------------------------------------------------------------------- Revenue Oil and gas sales 136,202 151,226 Realized gain on hedges (Note 8) 43,149 32,586 Royalties (6,985) (7,992) ---------------------------------------------------------------------------- Petroleum and natural gas sales, net 172,366 175,820 ---------------------------------------------------------------------------- Expenses Operating 12,540 13,890 Transportation 8,669 6,578 General and administrative 1,857 1,834 Future performance based compensation (Note 7) 4,555 4,099 Interest 9,393 8,876 Accretion of decommissioning provision (Note 5) 604 511 Depletion and depreciation (Note 3) 89,960 80,681 Gain on disposition of assets (Note 3) (12,668) - ---------------------------------------------------------------------------- 114,910 116,469 ---------------------------------------------------------------------------- Earnings before taxes 57,456 59,351 ---------------------------------------------------------------------------- Income tax Deferred income tax expense 15,513 14,838 ---------------------------------------------------------------------------- Earnings for the period 41,943 44,513 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Earnings per share (Note 6) Basic and diluted $ 0.26 $ 0.29 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Weighted average number of common shares outstanding (Note 6) Basic and diluted 159,142,526 153,852,570 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Peyto Exploration & Development Corp. Condensed Statement of Comprehensive Income (Loss) (unaudited) (Amount in $ thousands) Three months ended March 31 2016 2015 ---------------------------------------------------------------------------- Earnings for the period 41,943 44,513 Other comprehensive income Change in unrealized gain (loss) on cash flow hedges 95,555 (25,037) Deferred tax (expense) recovery (14,150) 6,259 Realized (gain) on cash flow hedges (43,149) (32,586) ---------------------------------------------------------------------------- Comprehensive income (loss) 80,199 (6,851) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Peyto Exploration & Development Corp. Condensed Statement of Changes in Equity (unaudited) (Amount in $ thousands) Three months ended March 31 2016 2015 ---------------------------------------------------------------------------- Share capital, beginning of period 1,467,264 1,292,398 ---------------------------------------------------------------------------- Common shares issued by private placement 7,644 7,732 Common shares issuance costs (net of tax) (18) (38) ---------------------------------------------------------------------------- Share capital, end of period 1,474,890 1,300,092 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Common shares to be issued, beginning of period 3,769 5,625 ---------------------------------------------------------------------------- Common shares issued (3,769) (5,625) ---------------------------------------------------------------------------- Common shares to be issued, end of period - - ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Retained earnings, beginning of period 103,339 173,927 ---------------------------------------------------------------------------- Earnings for the period 41,943 44,513 Dividends (Note 6) (52,520) (50,781) ---------------------------------------------------------------------------- Retained earnings, end of period 92,762 167,659 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Accumulated other comprehensive income, beginning of period 49,185 79,986 ---------------------------------------------------------------------------- Other comprehensive loss (gain) 38,256 (18,778) ---------------------------------------------------------------------------- Accumulated other comprehensive income, end of period 87,441 61,208 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Total equity 1,655,093 1,528,959 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Peyto Exploration & Development Corp. Condensed Statement of Cash Flows (unaudited) (Amount in $ thousands) Three months ended March 31 2016 2015 ---------------------------------------------------------------------------- Cash provided by (used in) operating activities Earnings 41,943 44,513 Items not requiring cash: Deferred income tax 15,513 14,838 Depletion and depreciation 89,960 80,681 Accretion of decommissioning provision 604 511 Gain on disposition of assets (12,668) - Long term portion of future performance based compensation 1,654 1,079 Change in non-cash working capital related to operating activities 1,112 (15,488) ---------------------------------------------------------------------------- 138,118 126,134 ---------------------------------------------------------------------------- Financing activities Issuance of common shares 7,637 7,732 Issuance costs (18) (38) Cash dividends paid (52,490) (50,755) Increase (decrease) in bank debt 95,000 90,000 ---------------------------------------------------------------------------- 50,129 46,939 ---------------------------------------------------------------------------- Investing activities Additions to property, plant and equipment (175,763) (138,077) Change in prepaid capital 7,500 (12,624) Change in non-cash working capital relating to investing activities (16,242) (22,372) ---------------------------------------------------------------------------- (184,505) (173,073) ---------------------------------------------------------------------------- Net increase (decrease) in cash 3,742 - Cash, Beginning of Period - - ---------------------------------------------------------------------------- Cash, End of Period 3,742 - ---------------------------------------------------------------------------- The following amounts are included in cash flows from operating activities: ---------------------------------------------------------------------------- Cash interest paid 5,643 9,459 Cash taxes paid - - ----------------------------------------------------------------------------
Peyto Exploration & Development Corp.
Notes to Condensed Financial Statements (unaudited)
As at March 31, 2016 and 2015
(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 300, 600 - 3rd Avenue SW, Calgary, Alberta, Canada, T2P 0G5.
These financial statements were approved and authorized for issuance by the Audit Committee of Peyto on May 9, 2016.
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 financial
statements as at and for the years ended December 31, 2015 and 2014.
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.
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 financial statements as at and for the years ended December 31, 2015 and 2014.
(b) Recent Accounting Pronouncements
Standards issued but not yet effective
In July 2014, the IASB completed the final elements of IFRS 9 "Financial Instruments." The Standard supersedes earlier versions
of IFRS 9 and completes the IASB's project to replace IAS 39 "Financial Instruments: Recognition and Measurement." IFRS 9, as
amended, includes a principle-based approach for classification and measurement of financial assets, a single 'expected loss'
impairment model and a substantially-reformed approach to hedge accounting. The Standard will come into effect for annual periods
beginning on or after January 1, 2018, with earlier adoption permitted. IFRS 9 will be applied by Peyto on January 1, 2018 and the
Company is currently evaluating the impact of the standard on its financial statements.
In May 2014, the IASB issued IFRS 15 "Revenue from Contracts with Customers," which replaces IAS 18 "Revenue," IAS 11
"Construction Contracts," and related interpretations. The standard is required to be adopted for fiscal years beginning on or
after January 1, 2018, with earlier adoption permitted. IFRS 15 will be applied by Peyto on January 1, 2018 and the Company is
currently evaluating the impact of the standard on Peyto's financial statements.
In January 2016, the IASB issued IFRS 16 "Leases", which replaces IAS 17 "Leases". For lessees applying IFRS 16,
a single recognition and measurement model for leases would apply, with required recognition of assets and liabilities for most
leases. The standard will come into effect for annual periods beginning on or after January 1, 2019, with earlier adoption
permitted. The Company is currently evaluating the impact of the standard on the Company's financial statements.
3. Property, plant and equipment, net
Cost ---------------------------------------------------------------------------- At December 31, 2015 4,416,643 ---------------------------------------------------------------------------- Additions 187,588 Decommissioning provision additions 11,235 Prepaid capital (7,500) ---------------------------------------------------------------------------- At March 31, 2016 4,607,966 ---------------------------------------------------------------------------- Accumulated depletion and depreciation ---------------------------------------------------------------------------- At December 31, 2015 (1,226,584) ---------------------------------------------------------------------------- Depletion and depreciation (88,781) ---------------------------------------------------------------------------- At March 31, 2016 (1,315,365) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Carrying amount at December 31, 2015 3,190,059 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Carrying amount at March 31, 2016 3,292,601 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
During the three month ended March 31, 2016, the Company closed an asset swap arrangement. For purposes of determining a gain on
disposition, the estimated fair value was based on the fair value of the assets received. The Company recorded a gain of $12.7
million for the three months ended March 31, 2016.
During the period ended March 31, 2016, Peyto capitalized $2.2 million (2015 - $2.0 million) of general and administrative
expense directly attributable to production and development activities.
4. Long-term debt
---------------------------------------------------------------------------- March 31, 2016 December 31, 2015 ---------------------------------------------------------------------------- Bank credit facility 720,000 625,000 Senior secured notes 420,000 420,000 ---------------------------------------------------------------------------- Balance, end of the year 1,140,000 1,045,000 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
The Company has a syndicated $1.0 billion extendible unsecured revolving credit facility with a stated term date of December 4,
2019. An accordion provision has been added that allows for the pre-approved increase of the facility up to $1.3 billion, at the
Company's request, subject to additional commitments by existing facility lenders or by adding new financial institutions to the
syndicate. 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. Borrowings under the facility bear interest at Canadian bank prime or US base rate,
or, at Peyto's option, Canadian dollar bankers' acceptances or US dollar LIBOR loan rates, plus applicable margin and stamping
fees. The total stamping fees range between 50 basis points and 215 basis points on Canadian bank prime and US base rate borrowings
and between 150 basis points and 315 basis points on Canadian dollar bankers' acceptance and US dollar LIBOR borrowings. The
undrawn portion of the facility is subject to a standby fee in the range of 30 to 63 basis points.
Peyto is subject to the following financial covenants as defined in the credit facility and note purchase agreements:
-- Long-term debt plus the average working capital deficiency (surplus) at the end of the two most recently completed fiscal quarters adjusted for non-cash items not to exceed 3.0 times trailing twelve month net income before non-cash items, interest and income taxes; -- Long-term debt and subordinated debt plus the average working capital deficiency (surplus) at the end of the two most recently completed fiscal quarters adjusted for non-cash items not to exceed 4.0 times trailing twelve month net income before non-cash items, interest and income taxes; -- Trailing twelve months net income before non-cash items, interest and income taxes to exceed 3.0 times trailing twelve months interest expense; -- Long-term debt and subordinated debt plus the average working capital deficiency (surplus) at the end of the two most recently completed fiscal quarters adjusted for non-cash items not to exceed 55 per cent of the book value of shareholders' equity and long-term debt and subordinated debt.
Peyto is in compliance with all financial covenants at March 31, 2016.
Total interest expense for the period ended March 31, 2016 was $9.4 million (2015 - $8.9 million) and the average borrowing rate
for the period was 3.4% (2015 - 3.6%).
5. Decommissioning provision
Peyto makes provision for the future cost of decommissioning wells 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 the Company's internal
estimates on 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, 2015 118,882 ---------------------------------------------------------------------------- New or increased provisions 6,361 Accretion of decommissioning provision 604 Change in discount rate and estimates 4,874 ---------------------------------------------------------------------------- Balance, March 31, 2016 130,721 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Current - Non-current 130,721 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Peyto has estimated the net present value of its total decommissioning provision to be $130.7 million as at March 31, 2016
($118.9 million at December 31, 2015) based on a total future undiscounted liability of $268.1 million ($239.0 million at December
31, 2015). At March 31, 2016 management estimates that these payments are expected to be made over the next 50 years with the
majority of payments being made in years 2040 to 2064. The Bank of Canada's long term bond rate of 2.00 per cent (2.15 per cent at
December 31, 2015) and an inflation rate of 2.0 per cent (2.0 per cent at December 31, 2015) 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 Shares (no par value) Common Shares Amount $ ---------------------------------------------------------------------------- Balance, December 31, 2015 158,958,273 1,467,264 ---------------------------------------------------------------------------- Common shares issued by private placement 281,270 7,644 Common share issuance costs, (net of tax) - (18) Balance, March 31, 2016 159,239,543 1,474,890 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
On December 31, 2015, Peyto completed a private placement of 149,030 common shares to employees and consultants for net proceeds
of $3.8 million ($25.29 per share). These common shares were issued January 6, 2016.
On March 15, 2016, Peyto completed a private placement of 132,240 common shares to employees and consultants for net proceeds of
$3.9 million ($29.30 per common share).
Per share amounts
Earnings per share have been calculated based upon the weighted average number of common shares outstanding for the period ended
March 31, 2016 of 159,142,526 (2015 - 153,852,570). There are no dilutive instruments outstanding.
Dividends
During the period ended March 31, 2016, Peyto declared and paid dividends of $0.33 per common share or $0.11 per common share
per month, totaling $52.5 million (2015 - $0.33 or $0.11 per common share per month, $50.8 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 and losses
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:
March 31, 2016 March 31, 2015 ---------------------------------------------------------------------------- Share price $24.09 - $34.34 $32.27 - $34.34 Exercise price $23.76 - $33.02 $21.70 - $34.01 Expected volatility 37.03% 31.5% Option life 0.75 year 0.75 year Dividend yield 0% 0% Risk-free interest rate 0.5% 0.5% ----------------------------------------------------------------------------
8. Financial instruments and Capital management
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 March 31,
2016.
The Company's areas of financial risk management and risks related to financial instruments remained unchanged from December 31,
2015.
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 significant value drivers are observable in active markets. -- Level 3 - valuations derived from valuation techniques in which one or more significant inputs or significant 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 March 31, 2016 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 March 31, 2016:
---------------------------------------------------------------------------- Natural Gas Price Period Hedged Type Daily Volume (CAD) ---------------------------------------------------------------------------- April 1, 2015 to October 31, 2016 Fixed Price 5,000 GJ $2.885/GJ April 1, 2015 to March 31, 2017 Fixed Price 50,000 GJ $2.83/GJ to $3.05/GJ May 1, 2015 to March 31, 2017 Fixed Price 5,000 GJ $2.82/GJ November 1, 2015 to March 31, 2017 Fixed Price 40,000 GJ $2.84/GJ to $2.975/GJ December 1, 2015 to March 31, 2017 Fixed Price 5,000 GJ $2.55/GJ January 1, 2016 to March 31, 2018 Fixed Price 5,000 GJ $2.54/GJ April 1, 2016 to October 31, 2016 Fixed Price 50,000 GJ $2.40/GJ to $3.43/GJ April 1, 2016 to March 31, 2017 Fixed Price 95,000 GJ $2.58/GJ to $3.01/GJ April 1, 2016 to March 31, 2018 Fixed Price 60,000 GJ $2.42/GJ to $2.75/GJ April 1, 2016 to October 31, 2018 Fixed Price 35,000 GJ $2.10/GJ to $2.60/GJ May 1, 2016 to October 31, 2017 Fixed Price 15,000 GJ $2.11/GJ to $2.22/GJ May 1, 2016 to October 31, 2018 Fixed Price 20,000 GJ $2.20/GJ to $2.35/GJ November 1, 2016 to March 31, 2017 Fixed Price 5,000 GJ $2.95/GJ November 1, 2016 to March 31, 2018 Fixed Price 5,000 GJ $2.51/GJ April 1, 2017 to October 31, 2017 Fixed Price 25,000 GJ $2.40/GJ to $2.845/GJ April 1, 2017 to March 31, 2018 Fixed Price 40,000 GJ $2.825/GJ to $2.945/GJ ----------------------------------------------------------------------------
As at March 31, 2016, Peyto had committed to the future sale of 213,235,000, gigajoules (GJ) of natural gas at an average price
of $2.66 per GJ or $3.06 per mcf. Had these contracts been closed on March 31, 2016, Peyto would have realized a gain in the amount
of $115.3 million. If the AECO gas price on March 31, 2016 were to decrease by $1/GJ, the unrealized gain would increase by
approximately $213.2 million. An opposite change in commodity prices rates would result in an opposite impact on other
comprehensive income.
Subsequent to March 31, 2016 Peyto entered into the following contracts:
---------------------------------------------------------------------------- Natural Gas Price Period Hedged Type Daily Volume (CAD) ---------------------------------------------------------------------------- May 1, 2016 to October 31, 2018 Fixed Price 5,000 GJ $2.305/GJ June 1, 2016 to October 31, 2016 Fixed Price 20,000 GJ $1.52/GJ to $1.63/GJ July 1, 2016 to October 31, 2018 Fixed Price 20,000 GJ $2.28/GJ to $2.45/GJ August 1, 2016 to October 31, 2017 Fixed Price 5,000 GJ $2.22/GJ August 1, 2016 to October 31, 2018 Fixed Price 10,000 GJ $2.3175/GJ to $2.45/GJ November 1, 2016 to March 31, 2017 Fixed Price 75,000 GJ $2.34/GJ to $2.5625/GJ April 1, 2017 to October 31, 2017 Fixed Price 15,000 GJ $2.23/GJ to $2.40/GJ ----------------------------------------------------------------------------
9. Related party transactions
Certain directors of Peyto are considered to have significant influence over other reporting entities that Peyto engages in
commercial transactions with. Such services are provided in the normal course of business and at market rates. These directors are
not involved in the day to day operational decision making of the Company. The dollar value of the transactions between Peyto and
each of the related reporting entities is summarized below:
---------------------------------------------------------------------------- March 31, ---------------------------------------------------------------------------- 2016 2015 ---------------------------------------------------------------------------- Director Company Description Expense Payable Expense Payable ---------------------------------------------------------------------------- Don Gray Petrus Chairman of the Resources Ltd. Board (1.6) (1.7) (4.4) (4.5) Michael NCSG Hauling & Director, NCSG MacBean Rigging Ltd. 213.8 140.1 59.5 59.5 (subsidiary of Crane and Heavy NCSG Crane and Haul Heavy Haul) (1) Stephen Burnet Partner Chetner Duckworth & Palmer LLP 150.0 150.0 115.0 115.0 ----------------------------------------------------------------------------
10. Commitments
Following is a summary of Peyto's contractual obligations and commitments as at March 31, 2016.
2016 2017 2018 2019 2020 Thereafter ---------------------------------------------------------------------------- Interest payments(1) 14,023 18,385 18,385 16,190 13,995 27,840 Transportation commitments 22,305 29,573 38,186 32,659 47,673 79,703 Operating leases 1,699 2,353 1,994 1,994 1,295 11,963 Other 1,332 - - - - - ---------------------------------------------------------------------------- Total 39,359 50,311 58,565 50,843 62,963 119,506 ---------------------------------------------------------------------------- 1. Fixed interest payments on senior unsecured notes
11. Contingencies
On October 1, 2013, two shareholders (the "Plaintiffs") of Poseidon Concepts Corp. ("Poseidon") filed an application to seek
leave of the Alberta Court of Queen's Bench (the "Court") to pursue a class action lawsuit against the Company, as a successor to
new Open Range Energy Corp. ("New Open Range"). The proposed action contains various claims relating to alleged misrepresentations
in disclosure documents of Poseidon (not New Open Range), which claims are also alleged in class action lawsuits filed in Alberta,
Ontario, and Quebec earlier in 2013 against Poseidon and certain of its current and former directors and officers, and underwriters
involved in the public offering of common shares of Poseidon completed in February 2012. The proposed class action seeks various
declarations and damages including compensatory damages which the Plaintiffs estimate at $651 million and punitive damages which
the Plaintiffs estimate at $10 million, which damage amounts appear to be duplicative of damage amounts claimed in the class
actions against Poseidon, certain of its current and former directors and officers, and underwriters.
New Open Range was incorporated on September 14, 2011 solely for purposes of participating in a plan of arrangement with
Poseidon (formerly named Open Range Energy Corp. ("Old Open Range")), which was completed on November 1, 2011. Pursuant to such
arrangement, Poseidon completed a corporate reorganization resulting in two separate publicly-traded companies: Poseidon, which
continued to carry on the energy service and supply business; and New Open Range, which carried on Poseidon's former oil and gas
exploration and production business. The Company acquired all of the issued and outstanding common shares of New Open Range on
August 14, 2012. On April 9, 2013, Poseidon obtained creditor protection under the Companies' Creditor Protection Act.
On October 31, 2013, Poseidon filed a lawsuit with the Court naming the Company as a co-defendant along with the former
directors and officers of Poseidon, the former directors and officers of Old Open Range and the former directors and officers of
New Open Range. Poseidon claims, among other things, that the Company is vicariously liable for the alleged wrongful acts and
breaches of duty of the directors, officers and employees of New Open Range.
On July 3, 2014, the Plaintiffs filed a lawsuit with the Court against KPMG LLP, Poseidon's and Old Open Range's former
auditors, making allegations substantially similar to those in the other claims. On July 29, 2014, KPMG LLP filed a statement of
defense and a third party claim against Poseidon, the Company and the former directors and officers of Poseidon. The third party
claim seeks, among other things, an indemnity, or alternatively contribution, from the third party defendants with respect to any
judgment awarded against KPMG LLP.
The allegations against New Open Range contained in the claims described above are based on factual matters that pre-existed the
Company's acquisition of New Open Range. The Company has not yet been required to defend either of the actions. If it is required
to defend the actions, the Company intends to aggressively protect its interests and the interests of its Shareholders and will
seek all available legal remedies in defending the actions. Although the outcome of this matter is not determinable at this time,
the Company believes that this claim will not have a material adverse effect on the Company's financial position or results of
operations as the Company believes the claims against it are unprecedented and are without merit.
12. Subsequent Events
On April 26, 2016, the amended and restated note purchase and private shelf agreement dated January 3, 2012 and restated as of
April 26, 2013 was amended to increase the shelf facility from $150 million to $250 million. $150 million has been drawn under this
shelf facility.
On April 28, 2016, Peyto entered into an offering for 4,687,500 common shares at a price of $32.00 per common share for net
proceeds of $144 million. The Company has granted the underwriters an option, exercisable at any time until 30 days following the
closing of the offering, to purchase up to an additional 15% (703,125 common shares) of the offering to cover over-allotments, if
any. The offering is expected to close on May 18, 2016.
Officers Darren Gee Tim Louie President and Chief Executive Officer Vice President, Land Scott Robinson David Thomas Executive Vice President Vice President, Exploration and Chief Operating Officer Kathy Turgeon Jean-Paul Lachance Vice President, Finance Vice President, Exploitation and Chief Financial Officer Lee Curran Todd Burdick Vice President, Drilling Vice President, Production and Completions 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 Alberta Treasury Branches Canadian Western Bank Transfer Agent Computershare Head Office 300, 600 - 3 Avenue SW Calgary, AB T2P 0G5 Phone: 403.261.6081 Fax: 403.451.4100 Web: http://www.peyto.com/ Stock Listing Symbol: PEY.TO Toronto Stock Exchange
Contacts:
Peyto Exploration & Development Corp.
Darren Gee
President and Chief Executive Officer
(403) 237-8911
(403) 451-4100 (FAX)
www.peyto.com
