Peyto IC - Pitch

KENNETH WOODS PORTFOLIO MANAGEMENT PROGRAM

All information remains proprietary to the Kenneth Woods Portfolio Management Program and it’s authors

Company (TSX:PEY) Energy Coverage February 4th 2016

Peyving the way for growth!“ ” Initiating coverage – BUY Report!Target Price: C$34.95, representing 23.0% upside!

Current Price : C$28.40!

Investment thesis Following the decline in the natural gas sector, we are shifting the portfolio to better perform in this bearish environment. The company has the lowest cost structure in the industry and coupled with their counter-cyclical approach, Peyto is better positioned to outperform its peers in the next coming years. Also, the company has a best in class management team that has been able to reduce costs as well as increase its reserve base in the deep basin Catalyst •  Strong Management team: Peyto has a strong

management team that has been effective at keeping extraction costs low and improving its capital efficiency

•  Low Cost Operations: While natural gas prices may be approaching historical lows, Peyto has all in cash costs of $0.86 per Mcfe, primarily a result of two factors: Its concentrated experience and ownership of wells in the deep basin and its strategy of chipping away at costs.

•  Resource Growth Potential: Due to its stacked formations, large undrilled inventory, and potential land purchases, the company is well positioned to grow its reserves in this bearish commodities environment

•  Counter-cyclical Approach: Peyto is focused on executing a counter-cyclical business strategy and aggressively increase its production during low commodity prices

Valuation Our C34.95 one year target price is based on the weighted average of Peyto’s NAV and DCF valuation

LTM Price Chart

Capitalization Table

Key Data

Price (04-Feb-2016) C$28.40

FD Shares outstanding (m) 159.0

Equity value (C$m) C$4,516.1

(+) Debt 1,479.0.

(-) Cash & equiv. -

Enterprise value (C$m) $5,995.2

FY 2014A 2015F 2016F

Sales (C$m) 782.5 644.7 681

EBITDA (C$m) 649.7 485.9 488.1

EPS (C$) 1.71 0.49 0.64

EV / EBITDA (C$m) 9.2x 11.7x 11.6x

EV / Daily Production 12.0x 12.3 12.3x

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Alvy Mizelle – Fund [email protected]!

+1 514 925-3015!Carolina Serrat Morra – Fund Manager!

[email protected]!+1 514 214-7001!

!

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Table of contents

Company History 3

Reserves and Operating Areas 7

Production and Reserve Growth 11

Drilling Locations and Gas Processing 12

Investment Catalyst – Strong Management Team 14

Investment Catalyst – Low Cost Operations 17

Investment Catalyst – Resource Growth Potential 21

Investment Catalyst – Counter-cyclical Approach 23

Valuation – Operating Model 25

Valuation – DCF 28

Valuation – NAV 30

Risks 32

Appendix – Comparable Companies 34

Appendix – Management Team 35

Appendix – Sources 36

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1998-2004 In 1998, Peyto was founded as a growth company focusing on the Cardium liquids present at Sundance. The company developed a simple but effective strategy of being a low cost producer in order to generate sustainable returns for investors regardless of commodity prices. The company decided to focus on the Sundance region due to the presence of many fundamentals. The Cardium liquids in this region was very tight, offering a large resource base and a longer resource life due to its low decline rates. Furthermore, the Sundance region was also composed of additional resource opportunities composed of multi-stacked areas that offered Peyto economies of scale. At the time, investors did not fully believe Peyto regarding their reserve potential (number of wells) mainly since the technology to extract the oil was not present at the time (only vertical drilling was available). Despite investor concerns, from 1998 to 2003, the company successfully grew from a micro-chip to the lowest cost producer in Western Canada, producing 15,000 boe/d in 2003, with the Sundance region being their primary growth driver.

In the fourth quarter of 2003, Peyto converted from a corporation to a Trust for tax advantages and to provide a balanced approach for investors between growth and income. This move was favourable for the company since the lower cost of capital complimented its low cost structure and long reserve life (a small change in cost of capital has a disproportionate change in full life value). The second reason for adopting a Trust structure was that their drilling program was becoming less capital efficient as well densities heightened and since they experienced lower than average drilling results.

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Exhibit 1 1998-2004 Stock Price Performance

Company Overview History


The Cardium area still had a large amount of resources and reserves but the pace at which it could be pulled out of the ground was slower as Peyto was forced to target areas and layers with tighter and tighter permeability. This caused them to experience lower returns on invested capital and coupled with the large inflation of services costs; their capital efficiency was deteriorating quickly. Therefore adopting a Trust structure was due to a combination of cost of capital advantage combined with management intent to reduce the focus on growth at a time where marginal rates of return on invested capital had increased. 2005-2009 The year 2004 remained one where Peyto posted outstanding growth but 2005-2008 really constituted its “dark period” where the more modest capital efficiencies/modest returns on invested capital became more obvious. Following 2004, Peyto’s share price performance was a function of the erosion that was quietly occurring. The company was biding time, awaiting either an upward shift in natural gas prices to improve returns on invested capital, a new layer of development big enough and with better returns or a new technical innovation to drive a fundamental improvement on capital returns. Out of the three elements, the latter of these became the driver of Peyto’s growth after 2008.

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ProducMon Capital Efficiency

Exhibit 2

2005-2009 Production and Capital Efficiency



2009-2015 In 2009 Peyto introduced multi-stage development drilling in order to expand its resource base. The impact of this new technology was almost immediate and reflected that Peyto’s resource potential was still large but that they needed to find higher capital returns from higher commodity prices or better capital efficiency. Horizontal multi-stage fracking delivered significantly better capital efficiencies and enabled them to grow their production faster as shown by the graph below:

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Exhibit 4

20011-2015 Production and Capital Efficiency


2004-2011 Stock Price Performance

Exhibit 3


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This global improvement in capital efficiency was a positive to all producers in the beginning but too much of a good thing can also become a bad thing. The potential for horizontal multistage fracking to improve marginal economics in virtually all pre-existing resource developments, at the same time fracking liberated previously trapped resources, created too much resource potential. This caused the North American market to be flooded with natural gas, causing natural gas prices to collapse. Now the company is using its proven counter-cyclical approach to grow reserves aggressively in a depressed natural gas price environment to generate superior shareholder returns. Exhibit 5 2009-2016 Stock Price Performance



Peyto’s land base covers 400,000 net acres of land located in the heart of the Deep Basin of west central Alberta. The company has two core areas of operations: The Sundance and Brazeau region. In terms of specific operating areas, Peyto is focused on the Spirit River group including the Wilrich, Notikewin and Falher, with the Bluesky emerging as the next area of growth. As of FY2014, approximately 36% of total corporate production comes from the Wilrich, with 24% from the Falher, 14% coming from the Notikewin and 13% from the Cardium. Peyto is one of the most active drillers in the Deep Basin and has amassed an inventory of greater than 1,300 locations. The Deep Basin is known for its high heat content natural gas and as a result, the company receives a premium for the natural gas it produces.

Reserves and Operating Areas

Proxy


Peyto Lands

Exhibit 6

2014 Total Production of 76,372 boe/d


Greater Sundance Overview The Greater Sundance area, which includes Sundance, Oldman, Wildhay, Nosehill and Ansell, is Peyto’s largest producing area focused on the stacked multi-zone potential including the Cardium, Viking, Notikewin, Falher, Wilrich, Bluesky, and Cadomin formations. The Company currently owns five facilities in the area with total processing capacity of ~545 Mmcf/d. Brazeau River Overview Peyto’s relatively new core area resides at Brazeau River where the Company has assembled ~116 gross sections (114 net) of land with current operations focused on the Wilrich formation. Peyto now has over 40 Mmcf/d of sweet gas processing capacity at Brazeau and, as of October 2014, completed a 23 km gathering line linking Peyto’s Brazeau gas plant to its south acreage. Highlighted in the map below, Peyto has realized significant drilling results from the Wilrich with peak IP30 rates averaging 642 boe/d.


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Great Sundance Area Overview

2014 Production of ~70,000 boe/d

Exhibit 7



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Brazeau River Overview Exhibit 8

2014 Production of ~2,000

boe/d

Exhibit 9 Returns and IRR per Region

Sub-Operating Areas In terms of operating areas, the company classifies tem as the Cardium, Notikewin, Upper Falher, Middle Falher, Wilrich, Bluesky, Brazeau Falher and Brazeau Wilrich. As shown in the table below, the company generates a high lRR for all of its operating areas, with the Bluesky and Upper-Falher representing the highest IRR’s areas with 43% and 48% IRR respectively

Upper Middle Brazeau Brazeau Cardium Notikewin Falher Falher Wilrich Bluesky Falher Wilrich

All Costs (in C$ mm) 4,650 5,450 5,250 5,350 5,450 5,350 5,750 5,950IRR (in %) 22% 28% 48% 22% 23% 43% 32% 20%NPV10 (in C$ mm) 1,861 2,930 4,810 2,275 2,676 4,407 3,543 2,168

Peyto Internal Full Cycle Economics


Advantage of drilling in the deep basin The deep basin is known for producing high heat content gas from multiple producing horizons. Also, the lack of water in the formations is another draw for producers as it eliminates the need for handling or disposal of water, which again, helps in reducing operating costs. As gas prices started to rise in the late 1990s and early 2000s, interest in the Deep Basin started to grow. Historically the play was drilled using vertical wellbores and often targeting more than one formation; however, many formations were viewed as being too tight to actually produce. As technology evolved over the past six years, producers started to drill horizontal wells and applied multi-stage fracture completions. This technology has been further refined and since 2010, Peyto has moved to the point that all its wells are now drilled horizontally with multiple fracture stimulations. Activity levels in the Deep Basin have been relatively high since the late 1990s, but the evolution of drilling technology has further increased interest in the area. Where some formations were previously viewed as too tight to be a stand-alone producer, these are now among the most prolific wells in the area due to the formations’ relative thickness and the ability to tap incremental gas through fracture stimulation of horizontal wellbores. Peyto has moved to pad drilling in the Deep Basin with four formations off of a single pad. The company’s main focus for 2016 is on the Spirit River. The Spirit River also has less variation in rates between wells. A typical Peyto well in the Deep Basin will have a 1,200m long horizontal leg with 150m frac spacing and an 80 ton frac. Average well costs are between C$4.05 – 4.5 million including facility expenditures, full cycle costs are C$4.6 – 5.1 million/well.


Proxy


Exhibit 10 Deep Basin Geological Overview


Reserve Growth by Region As shown in the graph below, since horizontal drilling was introduced, Peyto has consistently increased its daily production. From 2010 to Q3 2015, the company increased daily production from ~20,000 Boe/d to ~90,000 Boe/d. The main areas of growth has been the Wilrich and Falher regions which have shown 38% and 22% 5 year CAGR growth respectively.

Acreage Growth Furthermore, the company has also been increasing its acreage in the deep basin to take advantage of land sales in Alberta. From 2010 to 2014, the company has successfully increased its net acreage from 200K to 438K acreage. With potential land expiries in the next years, the company will have further opportunities to increase its acreage position in the Deep Basin.

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Bluesky

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Production and Reserve Growth

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Exhibit 11 Reserve Growth by Region


Drilling Locations and Gas Processing

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Drilling Areas In 2014, Peyto completed a C$690 million capital program that included drilling 125 horizontal wells and expanding corporate processing capacity to over 100 Mmcf/d. On an annual basis, Peyto targets ~15% of its budget to be invested on facilities. As highlighted in the table below, Peyto has booked 628 future horizontal drilling locations as of December 31, 2014, and identified over 1,700 total future horizontal drilling locations

Drilling Areas and Expected Completions Exhibit 13

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Exhibit 12 Peyto 1999-2014 Acreage Growth

Asset VT Wells HZ WellsHZ Locations

BookedHZ LocationsUnbooked

Badheart -‐ -‐ -‐ 56.0

Cardium 432.0 63.0 200.0 356.0

Dunvegan 5.0 1.0 5.0 -‐Peace River 1.0 -‐ -‐ 14.0

Notikewin 90.0 56.0 87.0 43.0

Falher 7.0 27.0 37.0 23.0

Falher -‐ 27.0 56.0 254.0

Wilrich 14.0 136.0 179.0 192.0

Bluesky 4.0 14.0 47.0 48.0

Gething 12.0 2.0 -‐ -‐

Cadomin 87.0 2.0 16.0 177.0

Total 652.0 328.0 628.0 1,163.0

Completed Remaining


Drilling Locations and Gas Processing

Proxy


Fully Owned Gas Plants Infrastructure has played a significant role in Peyto’s strategy from the beginning. The company started with the ownership of its Sundance gas plant and today, the company owns seven gas processing facilities with 730 Mmcf/d net capacity. The company maintains operatorship of 98% of its production and processes 96% of those volumes. Early in the company’s history, there was a significant amount of concern/criticism surrounding the concentration of the company’s land base and its reliance on a sole gas plant at Sundance. By staying focused, the company has been able to maintain best in class operating costs, enabling them to generate superior netbacks. Through the construction of additional plants, the company has not been reliant on a single processing facility for over a decade, but has managed to maintain higher operatorship of its production and processing as displayed below.

Gas Plants and Ownership Exhibit 14

(in mmcf/d) 2014 YE 2015 YE 2016 YE WI

Oldman 125.0 125.0 125.0 100%

Nosehill 125.0 125.0 125.0 100%

Wildhay 90.0 90.0 90.0 100%

Galloway 60.0 60.0 60.0 100%

Oldman North 80.0 120.0 120.0 100%

Kakwa 35.0 45.0 35.0 100%

Swanson 65.0 120.0 150.0 100%

Brazeau 40.0 60.0 120.0 100%

Cubank 10.0 5.0 5.0 100%

Total 630 730 825 98%

Peyto Gas Plants


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Stock Price (C$)

Investment Catalysts Strong Management focused on Shareholder growth

Proxy


Strong Management focused on Shareholder growth Peyto has a strong management team led by Darren Gee who has been the CEO since January 2007. Over the years, management has been effective at preserving the company’s capital by keeping extraction costs low, increasing its capital efficiency as well as by applying a counter-cyclical approach. In the industry, due to the depleting nature of an E&P company’s assets many producers feel the pressure to pursue growth and add production and reserves without focusing on costs and as a result generate lower returns. However, Peyto’s management has a completely different approach to managing its E&P assets as described by its CEO: "At Peyto, we have always relied on an estimate of the IRR of a project to determine whether or not we proceed and also to look back at the success of that decision. Our strategy has always been to focus on a select type of investment that we feel yields the most predictable and repeatable returns and is accompanied by the lowest cost structure so as to be the least sensitive to commodity price variability. These opportunities also deliver the production stream over a very long period of time so as not to expose the entire resource to any one time price." Therefore, the company develops and produces assets when service costs are low, and is comfortable putting the brakes on growth when it's not profitable. From 2006 to 2010 daily production was roughly static/declining slightly, which was the result of a conscious decision to limit capex since they weren't seeing the returns they wanted (capital efficiency was over $40,000 in 2005 and 2006, comparatively was around $17,400 from 2010 onwards, with management guidance set for $12,000 in 2015). This is expressed by CEO Darren Gee: "It was diminishing returns and capital efficiency that caused us to curtail our capital program which resulted in smaller production adds and declining corporate production. In other words, exercising capital discipline was the real reason". The company has stuck to this strategy since its creation and has enabled the company to generate 95% Shareholder IRR and a 50% CAGR since inception as displayed below

Peyto Share Performance since Inception Exhibit 15



Proxy


Contrary to industry practices of growing for the sake of growth, the company has been able to grow its reserves and production. This has enabled the company to increase its cash flow per share significantly from C$1.80/share in 2009 to a forecasted C$3.99 in 2015 Dividends By applying its low cost strategy, the company has generated superior levels of cash flow, allowing them to increase the amounts of dividends paid to shareholders. Peyto currently distributes a monthly dividend of C$0.11/share which equates to an annual cash commitment of ~C$203 million. In November 2014, Peyto increased its monthly dividend by 10% to $0.11/share which was the third dividend increase for Peyto in the last two years. The company is also able to sustain its dividend payout by generating superior cash flows during the depressed natural gas environments in the past few years. As shown in the graph below the company has been able to significantly increase its dividends paid as earnings increased.

Cash Flow Growth per Share

Exhibit 16

Dividend Growth

Exhibit 17

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Focus on ROE and ROCE Management centers all its capital allocation decisions on the potential IRR the company could generate. By keeping production and development costs at low/decreasing levels, the company has been able to generate higher than industry averages in terms of ROE and ROCE. As shown below, in every year, the company has been able to generate higher than industry levels of ROE and ROCE. Due to the depressed commodities environment, service costs are expected to remain at all-time lows in the coming years, allowing the company to further develop its reserves at low costs, and to maintain high levels of ROCE and ROE

Peyto 2008-2014 ROE and ROCE Performance

2008A 2009A 2010A 2011A 2012A 2013A 2014A

Peyto Comps

ROE -‐ 26% 28% 14% 8% 12% 19% 16% 4%

ROCE -‐ 14% 17% 10% 6% 8% 11% 10% 5%

Peyto ROCE & ROE vs. Peers

5-‐Yr Average

Exhibit 18


Investment Catalysts Low cost operations

Proxy


Stable/declining Low All in Cash Costs While natural gas prices may be approaching historical lows, Peyto has healthy margins and a strong balance sheet. Over the past five years, the company has generated average EBITDA margins of 81% and 83% in 2013 and 2014 respectively. The company is able to generate higher margins and all in cash costs of $0.86 per Mcfe, primarily a result of two factors: Its concentrated experience and ownership of wells in the deep basin and its strategy of chipping away at costs. By concentrating its operations in the Deep Basin, the company has been able to gain experience in developing wells at low costs. They have been operating in this formation for over 15 years, and because they operate almost all of their production (instead of sharing responsibilities with partner companies or pursuing inorganic growth), the simple compounding of experience and trial and error has allowed them to become very specialized operators in the region, essentially developing a wealth of knowledge in drilling Deep Basin formations. This gives Peyto a large advantage in the industry since understanding how to drill a formation is a nuanced process; understanding the formation's permeability, getting the right frac solution mix and understanding how to frac the formation are some points where heavy experience in a specific set of layers help. Also, over the years, the company has been “chipping away” at costs. Through the President's Monthly Reports you can pick up on a culture of continuously looking for and making marginal cost improvements that add up. The company is willing to cut back production to capture better royalty rates, switching drilling rigs and transport trucks from diesel to gas-based by providing filling stations, developing drilling pads that save money and boost IRRs and the installation of its own processing and deep-cut facilities are some of the initiatives CEO Darren Gee discusses. They've also managed to control G&A costs pretty effectively by keeping the management team surprisingly small for a company of their size (50 employees), producing 1,589 boe/d/employee for FY2014, five times more efficient than the 309 boe/d/employee median for peers (does not include field employees)

Peyto Operating Costs Exhibit 19

(in C$ mm) 2008A 2009A 2010A 2011A 2012A 2013A 2014A

Extraction Costs (royalties, opex, transport) 2.36 1.15 1.12 1.01 0.75 0.78 0.84

PDP NPV-‐0 Recycle Ratio 2.1x 5.4x 3.5x 2.4x 1.6x 1.5x 1.5x

Peyto's Lean Cost Structure



Proxy


For example, in one of their biggest operating areas, the company has been slowly chipping away at costs. In the Sundance region, the company has been able to reduce average drilling costs from ~C$3.1 million per well in 2009 to ~C$2 million per well in Q3 2015. The company has been able to decrease average drilling costs all the while increasing its number of wells from 2 in 2009 to 30 in Q3 of 2015. Also, the company has also reduced its number of days to reserve replacement from 34.5 days to 17.8 days. Operating Costs vs. Industry The company has done an excellent job of keeping all-in cash costs at low/declining levels by accelerating production in a period where service costs are low. The company’s drilling and completion (D&C) costs declined from C$4.5 million a few years ago to closer to C$3.0 million. The company maintains the lowest operational expenses compared to its peers and is the only producer below $2.00/boe. Given depressed natural gas prices, maintaining the lowest operating cost structure in its peer group gives Peyto an advantage in delivering economic returns. As previously mentioned, the low operating costs can be attributed to its concentrated asset base and ownership of its facilities. As shown in the graph below, Peyto was by far the lowest cost (operating + transportation) natural gas producer in the WCSB, with only Advantage Oil & Gas currently reaching a similar cost structure. What is also important to highlight is that Peyto has executed its low operating cost structure business model for over 15 years and was the lowest cost producer in all of those years.

2009-Q3 2015 Greater Sundance Region Drilling Costs

Exhibit 20

3,193 2,926 2,804 2,752 2,792 2,681

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By utilizing a low cost natural gas approach, the company has been able to deliver a 1.8x recycle ratio (measured as netback/F&D costs) over the last three years, which is impressive in the context of weak gas prices. This translates into better‐than‐average returns on investment and should continue in the coming years.

Exhibit 21 Industry Operating Costs

Exhibit 22 2006-2014 Peyto FD&A costs and Recycle Ratios

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All-‐in FD&A Cost Peer Group Median FD&A costs All-‐in Recycle RaMo



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Even with growing Production, the company has been able to increase its capital efficiency From 2005-2008, high service costs and drilling less economical areas significantly decreased the company’s capital efficiency. As previously mentioned, Peyto established the company to control infrastructure and in turn keep costs low; however, by 2005/2006, the model started to be tested. Although operating costs were still best in class, its production addition costs were escalating. The company’s drill bit production addition costs rose from C$24k/Boe/d in 2004 to C$46k/Boe/d in 2005 and $48k/Boe/d in 2006. During this time, Peyto recorded production addition costs that were higher than its Royalty Trust peers on a both a drill bit and all-in basis. Following 2008, the company was able to significantly decrease its capital costs with the introduction of horizontal drilling. This enabled the company to drill more economical wells and coupled with the decline in service costs, the company’s capital efficiency improved significantly. Their capital efficiency improved significantly from 34k/Boe/d in 2008 to 18k/Boe/d in 2009 and is expected to be at 12k/Boe/d at the end of 2015. At the same time, the company has been able to increase its production from 30,600 Boe/d in 2010 to a forecasted ~86,620 boe/d in 2015. Even with the company expected to increase its production significantly as natural gas prices remain low, the company is forecasted to maintain/increase its capital efficiency.

Exhibit 23 2010-2015 Capital Efficiency and Production

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Investment Catalysts Resource Potential

Proxy


Large resources potential concentrated and stacked that can be developed with modern horizontal MSF. Peyto’s land base is one of the most concentrated for an intermediate company of this size, the drilling inventory is much greater than the acreage position would suggest due to the stacked potential in the Deep Basin. The multi-zone potential is consistent throughout the majority of Peyto’s acreage with the potential to increase the liquids yield, decrease cost further as well as drilling optimization. In most instances, Peyto will produce both natural gas and liquids from a combination of formations within a particular play. The multi-zone offers management the ability to divert capital in an attempt to capitalize on commodity trends/economics within different core areas. The company currently counts more than 1,300 horizontal drill locations, of which two‐thirds are unbooked. To put this into perspective, the company expects to drill ~100–115 net locations in 2014. Due to the company’s low‐cost asset base, the resulting capital efficiencies are attractive at less than C$18,000/boe/d. .

Exhibit 24 Stacked Formations


Ability to purchase more land due to depressed prices and land expiries In Alberta 2010 and 2011 were record land sales. However, successful bidders have two–five years, depending on the region of the province, to satisfy “License and Lease Continuation & Validation” requirements to evaluate or prove productivity of hydrocarbons. If companies are not able to meet these requirements, the land is surrendered and returned to the Crown land bank for future sale. Due to the current depressed commodity price environment, Peyto will have the opportunity to accumulate significant acreage additions from Crown land sales over the next 24 months at attractive prices

Investment Catalysts Resource Potential

Proxy


Exhibit 25 Undrilled Locations

Exhibit 26

Asset VT Wells HZ WellsHZ Locations

BookedHZ LocationsUnbooked

Badheart -‐ -‐ -‐ 56.0Cardium 432.0 63.0 200.0 356.0Dunvegan 5.0 1.0 5.0 -‐Peace River 1.0 -‐ -‐ 14.0Notikewin 90.0 56.0 87.0 43.0Falher 7.0 27.0 37.0 23.0Falher -‐ 27.0 56.0 254.0Wilrich 14.0 136.0 179.0 192.0Bluesky 4.0 14.0 47.0 48.0Gething 12.0 2.0 -‐ -‐Cadomin 87.0 2.0 16.0 177.0Total 652.0 328.0 628.0 1,163.0

Completed Remaining

Potential Land Sales


Investment Catalysts Counter-Cyclical Approach

Proxy


Peyto is focused executing a counter-cyclical business strategy, which is only executable due to its low operating cost structure as discussed in its corporate presentation “history has shown us that when natural gas and oil prices rise, so too do service costs and industry activity levels. This results in much greater development costs and effectively the same rates of return being generated for higher natural gas prices. The problem is that prices tend to be cyclical and do not necessarily stay high to justify higher development costs.” Part of the reason they're able to execute this strategy is because even in really low gas price environments, Peyto is still making healthy IRRs and a good level of operating cash flow to fund part of their capital program. Peyto employs a counter-cyclical investment strategy and invests aggressively when gas prices are low, ensuring costs are also at their lowest and returns are at their highest. With its counter-cyclical strategy, Peyto drilled a record number of wells in Q3 2015(40), leading the company to hit the 100,000 boe/d mark for the first time in its history. With 104 net wells drilled in the first 9 months of 2015, Peyto has already drilled more wells than in all of 2013 (99) and has done so at an average D&C cost savings of 22%. This is expressed by Thomas Gee: "So Peyto's low costs mean we're well insulated from commodity price volatility. What does that really mean though? If we slow down and behave in a very defensive manner during periods of low commodity prices, much like everyone else in the industry, having that insulation doesn't really do much for us. Where it becomes a significant advantage, however, is if it allows us to take the opposite tactic. If we aggressively deploy capital in the low commodity environment, much like we've being doing for the last few years, then we are levering off this low cost advantage to improve the returns on that capital. Things will cost less, dollars will go further, and the returns we generate on the same kind of well will be even better at a lower capital cost.” As shown by the graph below, the company has significantly increased its production as natural gas prices have been declining. As natural gas prices declined by more than 20%, annual production went from 39,399 boe/d in 2010 to a forecasted 85,620 boe/d in 2015.

Exhibit 27

0

2

4

6

8

10

12

14

-‐

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015F

AECO

Natural Gas Price ($/G

J)

Prod

ucMo

n (boe

/d)

Natural Gas ProducMon /boe/d) Liquids ProducMon (boe/d) Aeco Price ($/GJ)

2001-2015 Production and Natural Gas Prices


Investment Catalysts Counter-Cyclical Approach

Proxy


Peyto also distinguishes itself with a counter‐cyclical approach to the development of its asset base to optimize the return on capital employed. As gas prices rise, the company directs a higher proportion of the incremental cash flow to dividends and debt repayment, opting to minimize the impact of the associated increase in drilling and service costs as activity levels pick up across the basin. The combination of low costs and premium pricing translates into better‐than‐average netbacks for Peyto as a gas producer which, when combined with its top‐quartile F&D costs, allows the company to achieve a benchmark recycle ratio of 2.0x at current gas prices. Profitable despite decline in prices Even if natural gas prices have been severely depressed over the past couple of years, Peyto has been able to generate healthy margins and netbacks. The company has been able to generate netbacks of C$4.19/mcfe and C$3.65/mcfe in the past in 2013 and 2014. This is a direct result of the company's low cost structure as well as its counter cyclical approach which takes advantage of low service costs. As commodity prices are expected to remain depressed in the coming years, we see this trend continuing as well as increased investments to increased production and reserves.


Production Profile In order to forecast the company’s production profile, an analysis was completed based on the company’s projected capital expenditures, decline rates and management expectations for future years production. The company currently produces mainly natural gas and is expected to increase its daily production from ~500 Mmcfe/d in 2014to 853 Mmcfe/d at the end of 2020.

Commodity Price Projections Commodity price projections were based on current strip forward prices for the years 2016-2020. An important element to note is that Peyto sells its natural gas at a 30% premium to AECO natural gas prices due to its higher heat content OF gas

Proxy


Valuation Operating Model

Exhibit 28 2015-2020 Forecasted Production Profile

Exhibit 29 2015-2020 Forecasted Commodity Prices

Peyto Exploration - Production Profile

Projected Fiscal Years Ending December 31st

2013A 2014A 2015E 2016F 2017F 2018F 2019F 2020F

Days in Year 365 365 365 366 365 365 365 366

Average Daily Production

Gas (MMcf) 361.9 451.0 474.7 561.4 575.6 641.3 744.8 785.0

Oil and NGL's (MBbls) 7.0 8.1 6.5 7.9 9.0 10.1 10.6 11.4

Total Daily MMcfe 403.8 499.5 513.7 608.6 629.6 701.7 808.1 853.4

Total Annual Production

Gas (Bfce) 132.1 164.6 173.3 205.5 210.1 234.1 271.9 287.3

Oil and NGL's (MMBbls) 2.5 2.9 2.4 2.9 3.3 3.7 3.9 4.2

Total Bcfe 147.4 182.3 187.5 222.7 229.8 256.1 295.0 312.3

Reserves

Proved Producing 1,251.9 1,200.0

Total Proved 89.9 2,085.0

Probable Additional 77.9 1,104.0

Total Reserves (Bcfe) 167.8 3,189.0

Total Reserves (MMBOE) 376.5 3,389.0

Reserve Life Ratio (Years) 1.1 17.5

Proved Reserves % Oil 20.7% 32.6%

Peyto Exploration - Resource Price, Hedging and Revenue Profile


($ as Stated) 2013A 2014A 2015E 2016F 2017F 2018F 2019F 2020F

Average AECO Prices

Gas ($ Per Mcf) 3.25 3.50 2.5 2.5 3.0 3.8 3.8 3.8

Oil and NGL's ($ Per Bbl) 70.97 70.68 40.00 40.00 50.00 50.00 50.00 50.00


Revenue Forecast Overall, the company should see its revenue growing from ~C$783 million in 2014 to C$1.59 billion in 2020. Royalties paid will also increase proportionally over the next years and grow from ~C$61 million in 2014 to ~C$109 million in 2020.

Expense Projections Operating and production expense projections were calculated on a per Mcfe basis and based on 5 year historical averages.

Proxy


Valuation Operating Model

Exhibit 30 2015-2020 Revenue Forecast

Exhibit 31 2015-2020 Expense Forecast

Peyto Exploration - Revenue Forecast


($ in Millions ) 2013A 2014A 2015E 2016F 2017F 2018F 2019F 2020F

Oil and Gas Sales 561.6 910.4 641.9 763.7 960.1 1,292.1 1,480.0 1,569.2

Realized gain on hedges (loss) 14.2 (66.6) 68.4 (4.8) 62.4 69.5 80.0 84.8

Royalties (40.5) (61.3) (65.6) (78.0) (80.4) (89.6) (103.2) (109.3)

Total Revenue 535.4 782.5 644.7 681.0 942.0 1,272.0 1,456.8 1,544.6

Revenue Grow th % 40.7% 46.1% (17.6%) 5.6% 38.3% 35.0% 14.5% 6.0%

Peyto Exploration - Expense Projections


($ in Millions or Per Mcfe) 2013A 2014A 2015E 2016F 2017F 2018F 2019F 2020F

Expenses Per MMcfe of Production

Operating 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3

Transportation 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

G&A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Market and reserves bonus 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2

Accretion of decommissioning 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Depletion and depreciation 1.5 1.6 1.8 1.6 1.6 1.6 1.6 1.6

Royalties 0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.4

Total Expenses Per MMcfe 2.1 2.2 2.5 2.7 2.7 2.7 2.7 2.7

Total Expenses Per Mmcfe excluding depreciation0.6 0.6 0.7 1.1 1.1 1.1 1.1 1.1

Total Production-Linked Expenses ($ in Millions)

Operating 45.2 57.6 54.6 72.0 74.3 82.8 95.3 100.9

Transportation 16.2 21.9 26.2 31.1 32.1 35.7 41.1 43.6

G&A 5.2 5.8 6.0 10.5 10.8 12.1 13.9 14.7

Market and reserves bonus 16.3 19.2 22.4 53.4 55.1 61.4 70.7 74.8



Royalties 40.5 61.3 65.6 78.0 80.4 89.6 103.2 109.3

Total Production-Linked Exp 309.5 398.1 109.2 166.9 172.2 191.9 221.1 234.1


Income Statement Forecast Overall, the company should see its net income growing form ~C$262 million in 2014 to ~C$545 million in 2015.

EBITDA Projections Since certain expenses on the income statement such as depletion and depreciation are non-cash, EBITDA is a better proxy of how much cash the company generates. As shown below, the company’s EBITDA should grow from ~C$ 650 million to 1,260 million in 2020.

Proxy


Valuation Operating Model Exhibit 32

2015-2020 Income Statement Forecast

Peyto Exploration - Income Statement


($ in Millions Except Per Share Data) 2013A 2014A 2015E 2016F 2017F 2018F 2019F 2020F

RevenueOil and gas sales 561.6 910.4 641.9 763.7 960.1 1,292.1 1,480.0 1,569.2

Realized gain on hedges 14.2 (66.6) 68.4 (4.8) 62.4 69.5 80.0 84.8

Royalties (40.5) (61.3) (65.6) (78.0) (80.4) (89.6) (103.2) (109.3)

Total Revenue 535.4 782.5 644.7 681.0 942.0 1,272.0 1,456.8 1,544.6

Expenses

Operating 45.2 57.6 54.6 72.0 74.3 82.8 95.3 100.9

Transportation 16.2 21.9 26.2 31.1 32.1 35.7 41.1 43.6

G&A 5.2 5.8 6.0 10.5 10.8 12.1 13.9 14.7

Reserves based bonus 16.3 19.2 22.4 53.4 55.1 61.4 70.7 74.8

Performance based compensation 5.6 0.9 9.6 6.8 9.4 12.7 14.6 15.4

Interest 31.0 34.4 32.1 34.0 42.4 50.9 58.3 61.8



Total Expenses 346.0 433.4 472.3 566.5 594.2 668.0 769.0 814.4

Operating Income 189.4 349.0 173.8 114.4 347.8 603.9 687.8 730.2

Income tax expense (benefit) 46.7 87.3 72.8 11.4 88.0 152.8 174.1 184.8

Net Income 142.6 261.8 101.0 103.0 259.8 451.1 513.7 545.4

Earnings Per Diluted Share 0.96 1.71 0.63 0.64 1.59 2.73 3.08 3.23

Average Diluted Shares 148.7 153.2 160.5 162.2 163.8 165.4 167.1 168.7

Exhibit 33 2015-2020 Income Statement Forecast Peyto Exploration - Non-Cash and One-Time Expenses and EBITDA


($ in Millions) 2013A 2014A 2015E 2016F 2017F 2018F 2019F 2020F

Operating Income 189.4 349.0 173.8 114.4 347.8 603.9 687.8 730.2

Plus DD&A 225.0 291.7 317.1 356.3 367.6 409.7 471.9 499.7

Plus Asset Retirement Accr. 13.0 8.0 10.0 10.5 10.8 12.1 13.9 14.7

Plus Performance based comp. 5.6 0.9 9.6 6.8 9.4 12.7 14.6 15.4

EBITDA 432.9 649.7 511.1 488.1 735.7 1,038.5 1,188.2 1,260.1


Unlevered Free Cash Flow Projections Peyto’s projected unlevered free cash flows was based on the aforementioned production, commodity price and expense projections. The company is expected to generate ~C$591 million in unlevered free cash flow in 2020.

Terminal Value and Discount Rate The standard 10% O&G discount rate was applied as well as an 8.0x (current multiple is 11.7x) 2020 exit multiple was used.

Valuation DCF

Exhibit 34 2015-2020 Unlevered Free Cash Flow Projections

Peyto Exploration - Unlevered Free Cash Flow Projections

Projected Fiscal Year Ending December 31st

2015E 2016F 2017F 2018F 2019F 2020F

Normal Discount Period 1.0 2.0 3.0 4.0 5.0 6.0

Mid-Year Discount 0.25 1.25 2.25 3.25 4.25 5.25

Annual Production 187.5 222.7 229.8 256.1 295.0 312.3

Revenue 644.7 681.0 942.0 1,272.0 1,456.8 1,544.6

EBITDA 485.9 488.1 735.7 1,038.5 1,188.2 1,260.1

Operating Income (EBIT) 149.2 114.4 347.8 603.9 687.8 730.2

( – ) Taxes (37.8) (11.4) (88.0) (152.8) (174.1) (184.8)

EBIAT 111.4 103.0 259.8 451.1 513.7 545.4

( + ) DD&A 317.1 356.3 367.6 409.7 471.9 499.7

( + ) Asset Retirement Accretion 0.5 2.3 2.4 2.5 2.8 3.2

( + ) Future performance based compensation 9.6 6.8 9.4 12.7 14.6 15.4

( + ) Deffered Income Tax 70.4 11.4 88.0 152.8 174.1 184.8

( – ) Change in Netw orking Capital (19.3) (20.4) (28.3) (38.2) (43.7) (46.3)

( – ) Capital Expenditures (600.0) (615.0) (650.0) (690.0) (710.0) (715.0)

Unlevered Free Cash Flow (71.6) (114.7) 105.6 377.0 510.8 579.9

Present Value of Free Cash Flow (69.9) (101.8) 85.2 276.6 340.7 351.6


Implied Share Price Calculation With a 8.0 terminal EBITDA multiple and by using a 10% discount rate, Peyto’s implied equity value amounts to ~C$5.7 billion, implying a C$34.8 share price and 22.4% upside.

Valuation DCF

Exhibit 36 Terminal EBITDA Multiples and Discount Rate Sensitivity Analysis

Exhibit 35 DCF Share Price Calculation

DCF Implied Share Price

Present Value of Terminal Value 5,690.4

Sum of PV of Free Cash Flows 882.36

Enterprise Value 6,572.7

( – ) Net Debt 1,047.0

Implied Equity Value 5,525.7

Diluted Shares Outstanding 159.0

Implied Share Price 34.8

% premium / (discount) over market share price 22.4%

Peyto Exploration - Net Present Value Sensitivity - Terminal EBITDA Multiples

34.76$ 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0%

10.0 x 52.6 49.4 46.5 43.7 41.1 38.7 36.4

9.0 x 47.3 44.4 41.8 39.2 36.9 34.6 32.6

8.0 x 42.0 39.4 37.0 34.8 32.6 30.6 28.7

7.0 x 36.7 34.4 32.3 30.3 28.4 26.6 24.9

6.0 x 31.4 29.4 27.6 25.8 24.2 22.6 21.1

5.0 x 26.2 24.5 22.8 21.3 19.9 18.6 17.3

Discount Rate

Term

inal

EB

ITD

AX

Mul

tiple

s


Assumptions Decline rates of 35% was used for the company’s natural gas and liquids production and the aforementioned production forecast was used as well as the companies reserve information. Operating expenses were forecasted for the first five years and maintained constant thereafter. Also, development expenses of C$1.2 billion over 10 years was subtract from each years' cash flow calculations and cash taxes of 1of 15% was also applied. NAV Build-up In order to calculate the company’s NAV, its proven and drilled risked undeveloped reserves was added . In terms of risked drilled undrilled reserves, the four main regions was the Notikewin, Wilrich, Falher and Bluesky region was accounted for and their respective Net Asset Value was risked by 75% in order to find the value of undeveloped reserves.

By applying a 10% discount rate, the discounted cash flows from the company’s proven reserves amounted to ~C$3.9 billion and the undeveloped reserves amounted to ~C$2.7 billion. The Enterprise Value amounted to ~C$ 6.5, implying a share price of C$35.1 and 23.5% upside.

Proxy Valuation NAV

Exhibit 37

Peyto Exploration Risked Valuation

Unrisked $/Share Probality Risked $/Share

Notikwen 405 2.5 75% 304 1.9

Wilrich 1,239 7.8 75% 929 5.8

Falher 1,493 9.4 75% 1,120 7.0

Bluesky 426 2.7 75% 320 2.0

Total 3,563 22.4 2,672 16.8

Undeveloped Reserves

Exhibit 38 NAV Implied Share Price Calculation

NAV Buildup

Price Assumptions 2015 Gas Price LT Nat Gas price LT Oil Price

3.2$ 4.50$ 50.00$

Probability Risked Value ($M) $/Share

PDP Reserves Cash Flow Undiscounted 6,199 39.0

PV-10 PDP Cash Flow 100% 3,767 23.7

Land Value 100% 97 0.6Total Proved Reserves 3,864 24.3Undeveloped Reserves 2,672 16.8Net Asset Value (Enterprise Value) 6,536 41.1

Net Debt 960 6.0

Implied Equity Value 5,576 35.1

Diluted Shares Outstanding 159.0

Value/ Share 35.1% premium / (discount) over market share price 23.5%


Valuation Summary The weighted average of the DFC and NAV valuation was used in order to determine target share price. Based on the implied shared price of C$34.8 for the DCF and C$35.1 for the NAV, the implied one year target price of C$34.95

Proxy Valuation NAV

Exhibit 39 Natural Gas Prices and Discount Rate

Peyto Exploration - Net Present Value Sensitivity - Natural Gas Prices

35.08$ 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0%

5.75 41.5 40.1 38.7 37.5 36.4 35.3 34.3

5.00 39.7 38.4 37.2 36.1 35.0 34.0 33.1

4.25 38.0 36.8 35.6 34.6 33.6 32.7 31.8

3.50 36.2 35.1 34.1 33.1 32.2 31.4 30.6

2.75 34.4 33.4 32.5 31.7 30.8 30.1 29.4

2.00 32.7 31.8 31.0 30.2 29.5 28.8 28.2

Nat

ural

Gas

Pric

es($

/Mcf

e)

Discount Rate

Exhibit 40 Natural Gas Prices and Discount Rate

Peyto Exploration - Valuation Upside

0.23$ 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0%

5.75 46% 41% 36% 32% 28% 24% 21%

5.00 40% 35% 31% 27% 23% 20% 16%

4.25 34% 29% 25% 22% 18% 15% 12%

3.50 27% 24% 20% 17% 13% 10% 8%

2.75 21% 18% 14% 11% 9% 6% 3%

2.00 15% 12% 9% 6% 4% 1% -1%

Oil

Pric

es

Discount Rate


Reliance on Natural Gas Peyto's production is predominately skewed toward natural gas. As such, the company's cash flow and profitability are highly exposed to the price of natural gas. While the company is doing a good job of protecting cash flows with its hedging strategy, continued low gas prices will limit Peyto's upside potential. Need to reduce CO2 emissions The newly elected government in Alberta is eliciting strong opinions in terms of tax and emissions policies. While tax discussions are still under way, Peyto said the new regime has tasked it to reduce CO2 emissions per unit of gas processed. As an example, Peyto's Oldman gas processing plant needs to reduce emissions by 15% by 2015 and 20% by 2017 or else it will be paying penalties of $20 and $30 a ton for 2016 and 2017 and thereafter. However, Peyto says it sees an "extremely strong alignment" between CO2 emissions and business costs performance. For example: at the Oldman plant, Peyto expects to reduce fuel gas consumption by over 20% by way of process modifications that are currently maintained so that the facility falls back to or below the 100,000 ton emissions level. The result is that Peyto is going to save about $1 million in fuel gas cost per year. So not only is Peyto producing a fuel that is cleaner and cheaper than either coal or oil sands crude, it is able to reduce fuel costs in order to meet the tougher emission standards coming down the road. As a matter of fact, increased awareness of CO2 emissions will likely lead to a reduction in coal consumption and an increase in demand for the natural gas Peyto produces. Natural gas burned for electrical power generation releases 30% less CO2 than does coal, and 100% less of the toxic particulate emissions that coal leaves behind. Third-Party Pipeline Constraints – TransCanada Like most gas operators in the region, Peyto's Production for the quarter (81,208 boe/d) was negatively impacted by capacity constraints on the TransCanada Nova Gas Transmission Network (NGTL). The NGTL system has been undergoing maintenance and expansion work throughout the year. Peyto reported that service interruptions and curtailments on the NGTL system deferred an average of 65 MMcfe/d (10,750 boe/d) in Q3. This is significant, as the deferred production was some 13% of Q3's reported total production. After the end of the quarter, Peyto said production had reached ~104,000 boe/d. NGTL is forecasting that the capability of their system should not only return to previous levels, but increase to over 9 BCF/d by November 2015 when all of these issues have been resolved and work completed. With only a few producers drilling and adding new production in this part of the province (PEY, TOU, Progress, etc.) it is unlikely that total throughput will be back to where it was last winter at just over 8 BCF/d. This means there should be ample room for all volumes plus some additional growth, assuming there isn’t a large amount of contracted but unused capacity. Recently, TransCanada announced an additional $570 million expansion to the NGTL system, supported by 2.7 Bcfe/d of new firm natural gas transportation service contracts. Commenting on the new contracts, Russ Girdling, TRP's President & CEO, said: "Our NGTL System is sitting on top of extensive natural gas supplies, making it well-positioned to unlock the resource and reliably and efficiently link it to growing markets.

Proxy Risks


The system has been operating at capacity, and more capacity is needed in these key areas that support the growth of the prolific gas resource in the Western Sedimentary Basin." And, of course, Peyto is lowest-cost gas producer in the prolific Deep Basin and one of the largest producers in the region. As a result, there is a good chance Peyto was one of the companies signing new transportation service contracts with TransCanada for additional NGTL pipeline capacity. While service restrictions continued into October, Peyto was able to secure temporary service for the last 11 days of the month for all previously restricted production. As a result, Peyto said it increased production from the start of October (83,500 boe/d) to an estimated average of 102,000 boe/d by the end of the month. TRP is currently forecasting additional constraints for the first 3 weeks of November prior to increasing system capacity which should alleviate restrictions in Peyto's production toward the end of the year and into 2016.

Risks


Appendix Comparable Companies Analysis Exhibit 41 Comparable Company Production Metrics

Capitalization EBITDAX Proved Reserves Daily Production Proved Developed Gas

Company Name Mkt. Cap ($M) EV ($M) 2015 2016 (Bcfe) (Mcfe) / Proved Mix %

Antero Resources 6,632 10,535 1,239 2,667 10,535 1,494 31.2% 81.0%

Cabot Oil and Gas 8,123 10,230 897 790 7,082 1,644 61.3% 94.0%

Chesapeake 2,712 15,123 2,479 2,853 10,692 3,600 80.6% 72.0%

EQT 8,903 10,536 1,484 2,509 9,776 1,662 43.5% 91.0%

Memorial Resources 3,063 5,726 418 93 1,740 348 44.4% 77.0%

Rice Energy 1,369 2,726 440 779 1,307 534 49.3% 99%

Soutw estern 3,456 8,239 1,681 1,873 9,809 2,682 57.9% 92%

Tourmaline 5,890 8,613 1,002 1,595 2,417 930 43.0% 87%

Maximum 8,903 15,123 2,479 2,853 10,692 3,600 80.6% 99.0%

75th Percentile 7,005 10,535 1,533 2,548 9,991 1,917 58.7% 92.5%

Median 4,673 9,422 1,120 1,734 8,429 1,569 46.9% 89.0%

25th Percentile 2,975 7,611 783 787 2,248 831 43.4% 80.0%

Minimum 1,369 2,726 418 93 1,307 348 31.2% 72.0%

Peyto Exploration 4,516 5,995 486 488 3,189 514 0.0% 90%

Exhibit 42 Comparable Company Trading Multiples

Capitalization EV/ EBITDA EV/ EV/ D/CF

Company Name Mkt. Cap ($M) EV ($M) 31/12/2015 31/12/2016 Proved Reserves Daily Production 2016E

Antero Resources 6,632 10,535 8.5 x 7.9 x 1.0x 7.1x 3.7

Cabot Oil and Gas 8,123 10,230 11.4 x 25.9 x 1.4x 6.2x 9.4

Chesapeake 2,712 15,123 6.1 x 10.6 x 1.4x 4.2x 11.1

EQT 8,903 10,536 7.1 x 8.4 x 1.1x 6.3x 1.5

Memorial Resources 3,063 5,726 13.7 x 122.7 x 3.3x 16.5x 7.5Rice Energy 1,369 2,726 6.2 x 7.0 x 2.1x 5.1x 4.1Soutw estern 3,456 8,239 4.9 8.8 0.8x 3.1x 8.7Tourmaline 5,890 8,613 8.6 10.8 3.6x 9.3x 13.2

Maximum 8,903 15,123 13.7 x 122.7 x 3.6x 16.5x 13.275th Percentile 7,005 10,535 9.3 x 14.6 x 2.4x 7.6x 9.8Median 4,673 9,422 7.8 x 9.7 x 1.4x 6.3x 8.125th Percentile 2,975 7,611 6.2 x 8.3 x 1.1x 4.9x 4.0Minimum 1,369 2,726 4.9 x 7.0 x 0.8x 3.1x 1.5

Peyto Exploration 4,516 5,995 12.3 x 12.3 x 1.9x 11.7x 2.5


Appendix Management

Management and Ownership Institutions hold approximately 40% of the outstanding shares of PEY while insiders represent 5.4% of the total shares. Management: •  Darren Gee, Director, President and CEO: Mr. Gee has over 23 years of

experience working in the oil and gas industry. Mr. Gee joined Peyto in 2001 as the VP Engineering before entering his current position as President and CEO.

•  Scott Robinson, Director, Executive VP and COO: Mr. Robinson brings with him over 30 years of experience in the oil and gas industry, he has been with Peyto since 2004 when he first joined as VP Operations. In 2006 Mr. Robinson became Executive Vice President and COO at Peyto.

•  Kathy Turgeon, VP Finance and CFO: Ms. Turgeon joined Peyto as the Controller in 2004. Since then Ms. Turgeon held the role of VP Finance before becoming the VP Finance and CFO in 2007.

•  Timothy Louie, VP Land: Mr. Louie has over 25 years of experience in the oil and gas industry. Prior to joining Peyto, Mr. Louie was a Land Manager at Daylight Energy Ltd.

•  David Thomas, VP Exploration: Mr. Thomas brings 21 years of experience in the oil and gas industry. Mr. Thomas first joined Peyto as a Senior Geologist before entering his current position as VP Exploration

•  Jean-Paul Lachance, VP Exploitation: Mr. Lachance has over 21 years of experience working in the oil and gas industry. Previously, Mr. Lachance was VP Engineering at ProspEx Resources, a company that explores, develops and produces oil and natural gas in western Canada.

•  Stephen Chetner, Director, Corporate Secretary: Mr. Chetner has been the Corporate Secretary at Peyto since 2000. Mr. Chetner is a partner at Burnet, Duckworth & Palmer LLP, a legal services firm.

Directors •  Donald Gray, Chairman: Mr. Gray co-founded Peyto in 1998 and held the

position of CEO for 8 years. Currently, Mr. Gray is Chairman of the Board a Peyto

•  Rick Braund, Director: Mr. Braund is a co-founder of Peyto and has been Director since 1998. Mr. Braund is a Director at Gear Energy Corporation and Petrus Resources Ltd, private oil and gas companies

•  Brian Davis, Director: Mr. Davis brings with him over 17 years of oil and gas industry experience. Mr. Davis has been a director at Peyto since 2006 and is currently a Managing Partner at an oil and gas engineering consultancy firm.

•  Michael MacBean, Director: Mr. MacBean has been a director at Peyto since 2003 and brings over 13 years of experience in the oil and gas industry. Mr. MacBean is currently a Managing Director of TriWest Capital Partners and previously held the position of CEO at Diamond Energy Services LP.

•  Gregory Fletcher, Director: Mr. Fletcher brings with him over 14 years of experience working in the oil and gas industry. Mr. Fletcher has been a Director at Peyto since 2007 and is currently the President of Sierra Energy Inc, a private oil and gas company.


Proxy


Sources

1.  Company Reports

2.  GeoScout

3.  Canada International Energy Agency

4.  Altacorp Equity Research – Q3 2015

5.  BMO Equity Research – Q2 2015

6.  CIBC Equity Research – Q2 2015

7.  Haywood Equity Research – Q1 2015

8.  Barclays Equity Research – Q1 2015

9.  RBC Equity Research – Q1 2015

10. GMP Equity Research – Q4 2014

11. UBS Equity Research – 2014 Initiating Coverage

Documents

Peyto IC - Pitch