Peyto Exploration & Development

Peyto actively markets all components of its production stream including natural gas, condensate, pentane, butane and propane. Natural gas was sold in Q1 2022 at various hubs including Emerson (35%), AECO (30%), Henry Hub (20%), Malin (7%), Empress (5%), and Ventura (3%) using both physical transportation and basis transactions (diversification activities) to access those hubs. Natural gas prices were left to float on daily or monthly pricing or locked in using fixed price swaps at those hubs and Peyto's realized price is benchmarked against those local prices, then adjusted for transportation (either physical or synthetic) to those markets. Net of diversification activities of $1.17/Mcf, Peyto realized a before hedge price of $4.23/GJ prior to NGTL fuel deductions. This compares to an AECO Daily (5A) average price of $4.49/GJ. Peyto also employs a methodical commodity risk management program that is designed to smooth out the short-term fluctuations in the price of natural gas and natural gas liquids through future sales. This smoothing gives greater predictability of cashflows for the purposes of capital planning and dividend payments. The future sales are meant to be orderly and consistent to avoid speculation, much like "dollar cost averaging" the future prices. In general, this approach will show hedging losses when short term prices climb and hedging gains when short term prices fall. For the first quarter of 2022, approximately 69% of Peyto's gas was locked in at a fixed price of $3.82/Mcf. Most of those contracts were established several quarters prior at then market prices that were lower than the first quarter spot prices. Since Peyto began this hedging practice in 2003, the Company has accumulated $404 million in total hedging gain utilizing this program. The Company's liquids are also actively marketed with condensate being sold on a monthly index differential linked to West Texas Intermediate ("WTI") oil prices. Peyto's NGLs (a blend of pentanes plus, butane and propane) are fractionated by a third party in Fort Saskatchewan, Alberta and Peyto markets each product separately. Pentanes Plus are sold on a monthly index differential linked to WTI, with some volumes forward sold on fixed differentials to WTI. Butane is sold as a percent of WTI or a fixed differential to Mount Belvieu, Texas markets. Propane is sold on a fixed differential to Conway, Kansas markets. While some products like Butane and Propane require annual term contracts to ensure delivery paths and markets are certain, others can be sold on the daily spot market. Peyto's realized product prices for Q1 2022, relative to 2021 and benchmark prices, are shown in the following table.