Peyto Reports Record Funds from Operations and Dividend Increase

Peyto Reports Record Funds from Operations and Dividend Increase 
CALGARY, ALBERTA -- (Marketwired) -- 05/08/13 -- Peyto Exploration &
Development Corp. ("Peyto") (TSX:PEY) is pleased to present its
operating and financial results for the first quarter of the 2013
fiscal year. Peyto's production per share grew for the fourteenth
consecutive quarter with first quarter operating margins of 77%(1)
and profit margins of 27%(2). First quarter 2013 highlights were as
follows: 


 
--  Production per share up 26%. First quarter 2013 production increased 35%
    (26% per share) from 245 MMcfe/d (40,903 boe/d) in Q1 2012 to 332
    MMcfe/d (55,372 boe/d) in Q1 2013.
 
--  Funds from operations of $0.69/share. Generated a company record $103
    million in Funds from Operations ("FFO") in Q1 2013 up 32% (23% per
    share) from $78 million in Q1 2012 due to increased production volumes.
 
--  Operating costs less than $2/boe. Industry leading operating costs were
    further reduced from $0.33/mcfe ($1.96/boe) in Q1 2012 to $0.31/mcfe
    ($1.87/boe) in Q1 2013. Total cash costs, including royalties, operating
    costs, transportation, G&A and interest were $1.02/mcfe ($6.10/boe),
    resulting in a $3.44/mcfe ($20.64/boe) cash netback or 77% operating
    margin.
 
--  Capital investment of $169 million. An organic capital program of $169
    million was executed in the quarter resulting in production additions of
    10,300 boe/d at quarter end. The annualized cost (trailing twelve
    months) to build new production was $18,900/boe/d (including capital for
    Peyto's enhanced liquids extraction facilities but excluding the Open
    Range acquisition). A total of 31 gross wells were drilled during the
    first quarter.
 
--  Earnings of $0.25/share, dividends of $0.18/share. Earnings of $36
    million were generated in the quarter while dividends of $27 million
    were paid to shareholders, representing a before tax payout ratio of 26%
    of FFO.
 
--  Dividend increase to $0.08/share. The Board of Directors has approved a
    dividend increase of $0.02/share, starting in May 2013, to be paid on
    June 14, 2013 to shareholders of record as of May 31, 2013.
 
(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, particularily 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.                     

 
First Quarter 2013 in Review 
The first quarter of 2013 was a continuation from the fourth quarter
of 2012, with record levels of capital invested into the exploration
and development of Peyto's Deep Basin resource plays. As a result,
production continued to grow throughout the quarter while a strict
focus on maintaining industry leading cash costs ensured funds from
operations also grew proportionately. Peyto's realized natural gas
prices were similar to the first quarter of 2012, although less
supported by hedging gains, while realized liquids prices were down
10%. Despite the improvement in underlying natural gas prices, North
American drilling activity did not increase, allowing Peyto to
continue building and developing new production at its industry
leading capital efficiencies. The enhanced liquids extraction
facilities at Peyto's Oldman gas plant became fully operational at
the start of the quarter, achieving the designed process temperatures
and additional liquid recoveries, and thus increasing the price Peyto
realizes for its production stream. Subsequent to the quarter, Peyto
replaced its secured borrowing base revolving bank facility with an
unsecured covenant based facility with 37% greater borrowing
capacity. This new credit facility gives Peyto the ability to pursue
even more opportunities at a lower cost of capital. At quarter end,
65% of the new borrowing capacity of $1.15 billion was utilized
resulting in a net debt to annualized FFO ratio of 1.8 times. The
strong financial and operating performance delivered in the quarter
resulted in an annualized 12% Return on Equity (ROE) and 10% Return
on Capital Employed (ROCE). 


 
----------------------------------------------------------------------------
                                            3 Months Ended Mar. 31       %  
                                                 2013         2012  Change  
----------------------------------------------------------------------------
Operations                                                                  
Production                                                                  
  Natural gas (mcf/d)                         297,191      220,811      35% 
  Oil & NGLs (bbl/d)                            5,840        4,101      42% 
  Thousand cubic feet equivalent (mcfe/d                                    
   @ 1:6)                                     332,230      245,417      35% 
  Barrels of oil equivalent (boe/d @                                        
   6:1)                                        55,372       40,903      35% 
Product prices                                                              
  Natural gas ($/mcf)                            3.49         3.53      (1)%
  Oil & NGLs ($/bbl)                            75.88        84.83     (11)%
  Operating expenses ($/mcfe)                    0.31         0.33      (6)%
  Transportation ($/mcfe)                        0.12         0.12       -  
  Field netback ($/mcfe)                         3.67         3.75      (2)%
  General & administrative expenses                                         
   ($/mcfe)                                      0.02         0.04     (50)%
  Interest expense ($/mcfe)                      0.21         0.23      (9)%
Financial ($000, except per share)                                          
Revenue                                       133,203      102,496      30% 
Royalties                                      10,591        8,835      20% 
Funds from operations                         102,856       77,645      32% 
Funds from operations per share                  0.69         0.56      23% 
Total dividends                                26,766       24,912       7% 
Total dividends per share                        0.18         0.18       -  
  Payout ratio                                     26           32     (19)%
Earnings                                       36,405       26,868      35% 
Earnings per diluted share                       0.25         0.19      32% 
Capital expenditures                          169,099       98,632      71% 
Weighted average common shares                                              
 outstanding                              148,672,664  138,312,078       7% 
As at March 31                                                              
Net debt (before future compensation                                        
 expense and unrealized hedging gains)        749,546      512,627      46% 
Shareholders' equity                        1,197,254    1,027,231      17% 
Total assets                                2,281,287    1,800,394      27% 
                                                                            
                                                                            
----------------------------------------------------------------------------
                                                  Three Months ended Mar. 31
($000)                                                 2013             2012
----------------------------------------------------------------------------
Cash flows from operating activities                 92,543           59,383
Change in non-cash working capital                    7,775           16,367
Change in provision for performance based                                   
 compensation                                         2,538            1,895
----------------------------------------------------------------------------
Funds from operations                               102,856           77,645
----------------------------------------------------------------------------
Funds from operations per share                        0.69             0.56
----------------------------------------------------------------------------
(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  
Peyto continued to explore and develop many of its liquids rich,
sweet gas resource plays in the Deep Basin throughout the first
quarter of 2013. A total of 31 wells were drilled across the land
base, targeting the many prospective zones, as shown in the following
table: 


 
                                     Field                                  
                                                                       Total
                                                     Kisku/            Wells
Zone       Sundance  Nosehill Wildhay Ansell Berland  Kakwa New Area Drilled
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cardium           2                                       1                3
Notikewin         3         2                                              5
Falher            4                 4      1                               9
Wilrich           1         1       2      3       2               2      11
Bluesky                     3                                              3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total            10         6       6      4       2      1        2      31
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
The majority of the activity focused on the Notikewin, Falher and
Wilrich formations of the Spirit River group. Despite the lower
natural gas liquids yields from these deeper Spirit River formations,
economic returns were still determined to be greater due to the
improved natural gas prices combined with greater productivity and
recoveries. 
In particular, considerable development occurred in the Falher
formation where Peyto has now drilled 38 horizontal wells since the
start of 2012 and sees significant unbooked drilling inventory that
can continue to be proven. Drilling costs in the Falher to date have
averaged $2.6 million/well, while completion costs have averaged $1.6
million/well.  
In addition, Peyto has drilled a total of six Bluesky horizontal
wells since the second quarter of 2012, helping to prove up
substantial existing and future inventory in this formation. To date,
Bluesky drilling and completion costs have averaged $2.9 million/well
and $1.6 million/well, respectively.  
Overall, Peyto continues to validate an ever greater inventory of
profitable drilling locations within the numerous formations across
its Deep Basin lands.  
Capital Expenditures  
During the first quarter of 2013, Peyto spent $75.5 million to spud
31 gross (28.3 net) horizontal wells and $41.2 million completing 25
gross (23.5 net) wells. Wellsite equipment and tie-ins accounted for
$14.6 million, while a total of $36.0 million was invested in new
pipelines and facilities including the balance of capital for the
Oldman gas plant Deep Cut equipment. New lands were acquired for $0.8
million, or $373/acre, while new seismic accounted for $1.0 million.  
In the quarter, 25 gross (23.1 net) wells were brought onstream which
contributed 10,300 boe/d to the quarter end exit rate of 59,000
boe/d. Pipeline and facility capital of $36.0 million included the
addition of one compressor each to the Wildhay and Nosehill gas
plants; the construction of a strategically located 47 km pipeline
from Peyto's Ansell property to its Swanson gas plant; the
installation of natural gas fired power generation equipment at the
Oldman gas plant; and the completion of the Oldman natural gas
liquids ("NGLs") extraction facilities. These newly installed Deep
Cut facilities are performing as designed, achieving process
temperatures ranging from -75C to -80C and recovering an additional
12 to 15 bbl of high value NGLs per MMcf of sales gas.  
Financial Results  
Alberta monthly natural gas prices averaged $2.91/GJ in the first
quarter 2013, resulting in a Peyto unhedged realized price of
$3.31/mcf before hedging gains of $0.18/mcf. Meanwhile, Edmonton
light oil prices averaged $88.60/bbl from which Peyto realized
$75.72/bbl, before hedging gains of $0.16/bbl, for its natural gas
liquids blend of condensate, pentane, butane and propane. Combined,
Peyto's unhedged revenues totaled $4.30/mcfe ($4.46/mcfe including
hedging gains), or 153% of the dry gas price, illustrating the
benefit of high heat content, liquids rich natural gas production. 
Royalties of $0.36/mcfe, operating costs of $0.31/mcfe,
transportation costs of $0.12/mcfe, G&A of $0.02/mcfe and interest
costs of $0.21/mcfe, combined for total cash costs of $1.02/mcfe.
These industry leading total cash costs resulted in a cash netback of
$3.44/mcfe or a 77% operating margin. 
Depletion, depreciation and amortization charges of $1.73/mcfe, along
with a provision for future tax and market based bonus payments
reduced the cash netback to earnings of $1.22/mcfe, or a 27% profit
margin. 
Subsequent to the end of the first quarter, Peyto's $730 million
credit facility was reviewed and the annual secured revolver was
replaced by a $1.0 billion, two year, covenant based unsecured
revolver. This increase in borrowing capacity was a reflection of the
2012 growth in volume and value of Peyto's Proved Producing reserves,
as well as a reflection of the company's efficiency with which
reserves are developed, produced and sold. The unsecured revolver
contains the same financial covenants as the previous secured
revolver (see the Management's Discussion & Analysis for a
description of the covenants). Including the $150 million of senior
unsecured notes, Peyto's total borrowing capacity increased to $1.15
billion. 
Marketing  
The first quarter 2013 AECO daily natural gas prices were 50% higher
than the same period in 2012 due to a more balanced supply demand
situation in North America coupled with more typical winter weather.
March weather, however, was colder than normal and resulted in record
volumes of gas being withdrawn from storage reservoirs, further
driving up the natural gas price in both the US and Canada. 
Despite this recovery in current natural gas prices, the price
offered for future supplies has not increased materially since a year
ago. AECO and NYMEX futures up to five years out are only 20% higher
than today's price, indicating that natural gas supplies in North
America, including those in the prolific US shale plays, will be
sufficient to meet current demand growth projections.  
The company's hedging practice of layering in future sales in the
form of fixed price swaps, in order to smooth out the volatility in
natural gas price, continued throughout the quarter. As at March 31,
2013, Peyto had committed to the future sale of 82,627,500 gigajoules
(GJ) of natural gas at an average price of $3.23/GJ or $3.71/mcf,
based on Peyto's historical heat content. As at May 8, 2013, the
remaining hedged volumes and prices for the upcoming years are
summarized in the following table. 


 
----------------------------------------------------------------------------
                     Future Sales                  Average Price (CAD)      
----------------------------------------------------------------------------
                         GJ              Mcf            $/GJ           $/Mcf
----------------------------------------------------------------------------
2013             47,322,500       41,150,000            3.22            3.70
2014             33,485,000       29,117,391            3.30            3.80
2015                450,000          391,304            3.60            4.14
----------------------------------------------------------------------------
Total            81,257,500       70,658,696            3.26            3.74
----------------------------------------------------------------------------

 
As illustrated in the following table, Peyto's unhedged realized
natural gas liquids prices (1) were down 11% year over year but up 4%
from the previous quarter. 


 
----------------------------------------------------------------------------
                                    Three Months ended March 31           Q4
                                             2013             2012      2012
----------------------------------------------------------------------------
Condensate ($/bbl)                          96.63           100.09     91.22
Propane ($/bbl)                             26.75            31.86     25.58
Butane ($/bbl)                              61.40            69.17     63.38
Pentane ($/bbl)                            107.13           102.92     94.34
----------------------------------------------------------------------------
Total Oil and NGLs ($/bbl)                  75.72            84.83     73.12
----------------------------------------------------------------------------
(1) Liquids prices are Peyto realized prices in Canadian dollars adjusted   
    for fractionation and transportation.                                   

 
Peyto's hedging practice with respect to propane also continued in
the quarter and as at March 31, 2013, Peyto had committed to the
future sale of 288,000 bbls of propane at an average price of
$34.61USD/bbl. As at May 8, 2013, the remaining hedged volumes and
prices for the upcoming years are summarized in the following table. 


 
----------------------------------------------------------------------------
                                         Propane                            
----------------------------------------------------------------------------
                         Future Sales (bbls)        Average Price ($USD/bbl)
----------------------------------------------------------------------------
2013                                 168,000                           33.60
2014                                  96,000                           36.59
----------------------------------------------------------------------------
Total                                264,000                           34.69
----------------------------------------------------------------------------

 
Activity Update  
Peyto has concluded all of its drilling and completion activities
leading up to this year's spring break-up period. Current production
levels have ranged from 60,000 to 61,000 boe/d with new 2013 wells
contributing 13,000 boe/d.  
During April, 10 gross wells (9.5 net) were completed and brought
onstream. Additionally, 6 gross wells (5.5 net) have finished
drilling and await completion and/or tie in which will occur after
break-up. Two wells were suspended at an intermediate stage of
drilling operations due to spring break-up. Resumption of drilling,
completion and tie in activity is anticipated for the last week of
May.  
The estimated production additions for the 6 wells awaiting
completion and/or tie in, as well as one other previously drilled
well in a new area, amount to greater than 5,000 boe/d.  
Peyto is planning for the continuation of an active 10 rig drilling
program after the breakup period. In order to accommodate the growth
in production anticipated from this activity, equipment is currently
being fabricated for three key facility projects. The first includes
a new gas plant adjacent to the Oldman facility (Oldman North) that
is being designed for an eventual 80 MMcf/d of capacity by the end of
2014. The facility will be brought on with initial compression
totalling 30 MMcf/d and with an estimated start-up of September,
2013. The second is a 30 MMcf/d expansion to Peyto's Swanson gas
plant which has been filled to its current 30 MMcf/d capacity over Q1
of this year. The estimated timing for that project is also
September/October of 2013. The final facility project is a new plant
contemplated for startup at the end of 2013 in a new area of
development. It is being built for an initial capacity of
approximately 20 MMcf/d but is fully expandable with continued
development drilling success.  
Dividend Increase  
In keeping with Peyto's total return model, profitable growth in the
Company's assets should ultimately yield growth in sustainable
dividends for shareholders. Since the conversion back to a dividend
paying, growth corporation at the end of 2010, when the current
$0.06/month dividend rate was set, Peyto has increased production per
share by 70% and grown proved plus probable additional reserves per
share by over 30%. Over the same period, and despite lower natural
gas prices, funds from operations per share also increased 30%. The
strength of the Company's balance sheet has also improved over that
time, with greater access to capital and at a lower cost, ensuring
future capital programs can continue to be adequately funded.  
Based on this recent profitable growth and financial strength, the
Board of Directors of Peyto has approved a $0.02/share increase to
the monthly dividend starting in May 2013.  
Outlook  
With the largest capital program in the company's history well
underway, 2013 looks to be another record breaking year for Peyto.
Near term natural gas prices have improved, driving returns on this
capital even higher, while at the same time industry activity remains
low, keeping costs down and ensuring services are readily available.
Peyto's low cost advantage, which yields high operating and profit
margins, ensures the growth in assets resulting from this capital
program is profitable growth. Peyto's disciplined, returns driven,
low cost strategy continues to reward investors willing to look
beyond just the natural gas commodity to a profitable energy business
with a clear vision for the future.  
Conference Call and Webcast  
A conference call will be held with the senior management of Peyto to
answer questions with respect to the 2013 first quarter financial
results on Thursday, May 9th, 2013, at 9:00 a.m. Mountain Daylight
Time (MDT), or 11:00 a.m. Eastern Daylight Time (EDT). To
participate, please call 1-416-340-8530 (Toronto area) or
1-877-440-9795 for all other participants. The conference call will
also be available on replay by calling 1-905-694-9451 (Toronto area)
or 1-800-408-3053 for all other parties, using passcode 9284446. The
replay will be available at 11:00 a.m. MDT, 1:00 p.m. EDT Thursday,
May 9th, 2013 until midnight EDT on Thursday, May 16th, 2013. The
conference call can also be accessed through the internet at
http://events.digitalmedia.telus.com/peyto/050913/index.php. After
this time the conference call will be archived on the Peyto
Exploration & Development website at www.peyto.com.  
Annual General Meeting  
Shareholders are invited to attend Peyto's AGM at 3:00 p.m. on
Wednesday, June 5, 2013 at Livingston Place Conference Centre, +15
level, 222-3rd Avenue SW, Calgary, Alberta.  
Management's Discussion and Analysis  
Management's Discussion and Analysis of this first quarter report is
available on the Peyto website at
http://www.peyto.com/news/Q12013MDandA.pdf. A complete copy of the
first quarter report to shareholders, including the Management's
Discussion and Analysis, and Financial Statements is also available
at www.peyto.com and will be filed at SEDAR, www.sedar.com, at a
later date. 
Darren Gee, President and CEO  
May 8, 2013 
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.  
Peyto Exploration & Development Corp.  
Condensed Balance Sheet (unaudited)  
(Amount in $ thousands) 


 
                                                    March 31     December 31
                                                        2013            2012
----------------------------------------------------------------------------
Assets                                                                      
Current assets                                                              
Accounts receivable                                   61,707          85,677
Due from private placement (Note 6)                        -           3,459
Financial derivative instruments (Note 8)                  -          10,254
Prepaid expenses                                       5,967           4,150
----------------------------------------------------------------------------
                                                      67,674         103,540
----------------------------------------------------------------------------
                                                                            
Prepaid capital                                            -           3,714
Property, plant and equipment, net (Note 3)        2,213,713       2,096,270
----------------------------------------------------------------------------
                                                   2,213,713       2,099,984
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
                                                   2,281,287       2,203,524
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Liabilities                                                                 
Current liabilities                                                         
Accounts payable and accrued liabilities             168,296         164,946
Income taxes payable                                       -           1,890
Dividends payable (Note 6)                             8,925           8,911
Financial derivative instruments (Note 8)             22,228               -
Provision for future performance based                                      
 compensation (Note 7)                                 4,206           2,677
----------------------------------------------------------------------------
                                                     203,655         178,424
----------------------------------------------------------------------------
                                                                            
Long-term debt (Note 4)                              640,000         580,000
Long-term derivative financial instruments                                  
 (Note 8)                                              2,957           2,532
Provision for future performance based                                      
 compensation (Note 7)                                 1,068              59
Decommissioning provision (Note 5)                    58,536          58,201
Deferred income taxes                                177,917         174,241
----------------------------------------------------------------------------
                                                     880,478         815,033
----------------------------------------------------------------------------
                                                                            
Equity                                             
                         
Share capital (Note 6)                             1,130,069       1,124,382
Shares to be issued (Note 6)                               -           3,459
Retained earnings                                     84,886          75,247
Accumulated other comprehensive income (loss)                               
 (Note 6)                                            (17,701)          6,979
----------------------------------------------------------------------------
                                                   1,197,254       1,210,067
----------------------------------------------------------------------------
                                                   2,281,387       2,203,524
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Approved by the Board of Directors 
Michael MacBean, Director 
Darren Gee, Director  
Peyto Exploration & Development Corp.  
Condensed Income Statement (unaudited) 
(Amount in $ thousands) 


 
                                                                            
                                                         Three months ended 
                                                                   March 31 
                                                       2013            2012 
----------------------------------------------------------------------------
Revenue                                                                     
Oil and gas sales                                   128,424          85,221 
Realized gain on hedges (Note 8)                      4,779          17,275 
Royalties                                           (10,591)         (8,835)
----------------------------------------------------------------------------
Petroleum and natural gas sales, net                122,612          93,661 
----------------------------------------------------------------------------
                                                                            
Expenses                                                                    
Operating                                             9,306           7,300 
Transportation                                        3,659           2,606 
General and administrative                              481             972 
Future performance based compensation (Note                                 
 7)                                                   2,538           1,895 
Interest                                              6,310           5,138 
Accretion of decommissioning provision (Note                                
 5)                                                     368             257 
Depletion and depreciation (Note 3)                  51,625          39,673 
----------------------------------------------------------------------------
                                                     74,287          57,841 
----------------------------------------------------------------------------
Earnings before taxes                                48,325          35,820 
----------------------------------------------------------------------------
                                                                            
Income tax                                                                  
Deferred income tax expense                          11,920           8,952 
                                                                            
----------------------------------------------------------------------------
Earnings for the period                              36,405          26,868 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
Earnings per share (Note 6)                                                 
Basic and diluted                            $         0.25  $         0.19 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Weighted average number of common shares                                    
 outstanding (Note 6)                                                       
Basic and diluted                               148,672,664     138,312,078 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Peyto Exploration & Development Corp.  
Condensed Statement of Comprehensive Income (unaudited)  
(Amount in $ thousands) 


 
                                                         Three months ended 
                                                                   March 31 
                                                      2013             2012 
----------------------------------------------------------------------------
Earnings for the period                             36,405           26,868 
Other comprehensive income                                                  
Change in unrealized gain on cash flow                                      
 hedges                                            (28,128)          27,116 
Deferred tax recovery (expense)                      8,227           (2,460)
Realized (gain) loss on cash flow hedges            (4,779)         (17,275)
----------------------------------------------------------------------------
Comprehensive income                                11,725           34,249 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Peyto Exploration & Development Corp.  
Condensed Statement of Changes in Equity (unaudited)  
(Amount in $ thousands) 


 
                                                         Three months ended 
                                                                   March 31 
                                                      2013             2012 
----------------------------------------------------------------------------
Share capital, beginning of period               1,124,382          889,115 
----------------------------------------------------------------------------
Common shares issued by private placement            5,742           11,952 
Common shares issuance costs (net of tax)              (55)             (26)
----------------------------------------------------------------------------
Share capital, end of period                     1,130,069          901,041 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
                                                                            
----------------------------------------------------------------------------
Common shares to be issued, beginning of                                    
 period                                              3,459            9,740 
----------------------------------------------------------------------------
Common shares issued                                (3,459)          (9,740)
----------------------------------------------------------------------------
Common shares to be issued, end of period                -                - 
----------------------------------------------------------------------------
---------------------
-------------------------------------------------------
                                                                            
                                                                            
                                                                            
----------------------------------------------------------------------------
Retained earnings, beginning of period              75,247           82,889 
----------------------------------------------------------------------------
Earnings for the period                             36,405           26,868 
Dividends (Note 6)                                 (26,766)         (24,912)
----------------------------------------------------------------------------
Retained earnings, end of period                    84,886           84,845 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
                                                                            
----------------------------------------------------------------------------
Accumulated other comprehensive income,                                     
 beginning of period                                 6,979           33,964 
----------------------------------------------------------------------------
Other comprehensive income (loss)                  (24,680)           7,381 
----------------------------------------------------------------------------
Accumulated other comprehensive income                                      
 (loss), end of period                             (17,701)          41,345 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
                                                                            
----------------------------------------------------------------------------
Total equity                                     1,197,254        1,027,231 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Peyto Exploration & Development Corp.  
Condensed Statement of Cash Flows (unaudited)  
(Amount in $ thousands) 


 
The following amounts are included in cash flows from operating activities: 
--------------------------------------------------------------------------- 
                                                                            
                                                         Three months ended 
                                                                   March 31 
                                                      2013             2012 
----------------------------------------------------------------------------
Cash provided by (used in)                                                  
operating activities                                                        
Earnings                                            36,405           26,868 
Items not requiring cash:                                                   
  Deferred income tax                               11,920            8,952 
  Depletion and depreciation                        51,625           39,673 
  Accretion of decommissioning provision               368              257 
Change in non-cash working capital related                                  
 to operating activities                            (7,775)         (16,367)
----------------------------------------------------------------------------
                                                    92,543           59,383 
----------------------------------------------------------------------------
Financing activities                                                        
Issuance of common shares                            5,742           11,952 
Issuance costs                                         (73)             (35)
Cash dividends paid                                (26,752)         (24,881)
Increase in bank debt                               60,000                - 
----------------------------------------------------------------------------
                                                    38,917          (12,964)
----------------------------------------------------------------------------
Investing activities                                                        
Additions to property, plant and equipment        (131,460)        (103,643)
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Net increase (decrease) in cash                          -          (57,224)
Cash, Beginning of Period                                -           57,224 
----------------------------------------------------------------------------
Cash, End of Period                                      -                - 
----------------------------------------------------------------------------
                                                                            
                                                                            
--------------------------------------------------------------------------- 
                                                                            
Cash interest paid                                   7,867            4,313 
Cash taxes paid                                      1,890                - 
--------------------------------------------------------------------------- 

 
Peyto Exploration & Development Corp.  
Notes to Condensed Financial Statements (unaudited) 
As at March 31, 2013 and 2012  
(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 1500, 250 - 2nd Street SW,
Calgary, Alberta, Canada, T2P 0C1. 
On December 31, 2012, Peyto completed an amalgamation with its
wholly-owned subsidiary Open Range Energy Corp. pursuant to section
184(1) of the Business Corporations Act (Alberta). Following the
amalgamation, Peyto does not have any subsidiaries. 
These financial statements were approved and authorized for issuance
by the Audit Committee of Peyto on May 7, 2013. 


 
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 consolidated financial statements as
at and for the years ended December 31, 2012 and 2011.  
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. 
Except as disclosed below, 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 consolidated
financial statements as at and for the years ended December 31, 2012
and 2011.  
(b) Recent Accounting Pronouncements  
Certain new standards, interpretations, amendments and improvements
to existing standards were issued by the International Accounting
Standards Board (IASB) or International Financial Reporting
Interpretations Committee (IFRIC) that are mandatory for accounting
periods beginning January 1, 2013 or later periods. The affected
standards are consistent with those disclosed in Peyto's consolidated
financial statements as at and for the years ended December 31, 2012
and 2011.  
Peyto adopted the following standards on January 1, 2013:  
IFRS 10 - Consolidated Financial Statements; supercedes IAS 27
"Consolidation and Separate Financial Statements" and SIC-12
"Consolidation - Special Purpose Entities". This standard provides a
single model to be applied in control analysis for all investees
including special purpose entities. This standard became applicable
on January 1, 2013. Peyto adopted the standard on January 1, 2013,
with no impact on Peyto's financial position or results of
operations. 
IFRS 11 - Joint Arrangements; requires a venturer to classify its
interest in a joint arrangement as a joint venture or joint
operation. Joint ventures will be accounted for using the equity
method of accounting, whereas joint operations will require the
venturer to recognize its share of the assets, liabilities, revenue
and expenses. This standard became applicable on January 1, 2013.
Peyto adopted the standard on January 1, 2013, with no impact on
Peyto's financial position or results of operations. 
IFRS 12 - Disclosure of Interests in Other Entities; establishes
disclosure requirements for interests in other entities, such as
joint arrangements, associates, special purpose vehicles and
off-balance-sheet vehicles. The standard carries forward existing
disclosure and also introduces significant additional disclosure
requirements that address the nature of, and risks associated with,
an entity's interests in other entities. This standard became
effective for Peyto on January 1, 2013. Peyto adopted the standard on
January 1, 2013, with no impact on Peyto's financial position or
results of operations. 
IFRS 13 - Fair Value Measurement; defines fair value, sets out a
single IFRS framework for measuring fair value and requires
disclosure about fair value measurements. IFRS 13 applies to
accounting standards that require or permit fair value measurements
or disclosure about fair value measurements (and measurements, such
as fair value less costs to sell, based on fair value or disclosure
about those measurements), except in specified circumstances. IFRS 13
became applicable on January 1, 2013. Peyto adopted the standard on
January 1, 2013, with no impact on Peyto's financial position or
results of operations. 


 
3.  Property, plant and equipment, net
 
----------------------------------------------------------------------------
Cost                                                                        
----------------------------------------------------------------------------
At December 31, 2012                                              2,483,008 
----------------------------------------------------------------------------
  Additions                                                         169,068 
----------------------------------------------------------------------------
At March 31, 2013                                                 2,652,076 
----------------------------------------------------------------------------
                                                                            
Accumulated depreciation                                                    
----------------------------------------------------------------------------
At December 31, 2012                                               (386,738)
----------------------------------------------------------------------------
  Depletion and depreciation                                        (51,625)
----------------------------------------------------------------------------
At March 31, 2013                                                  (438,363)
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Carrying amount at December 31, 2012                              2,096,270 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Carrying amount at March 31, 2013                                 2,213,713 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
During the period ended March 31, 2013, Peyto capitalized $2.6
million (2012 - $1.7 million) of general and administrative expense
directly attributable to production and development activities.  


 
4.  Long-term debt
 
----------------------------------------------------------------------------
                                          March 31, 2013   December 31, 2012
----------------------------------------------------------------------------
Bank credit facility                             490,000             430,000
Senior secured notes                             150,000             150,000
----------------------------------------------------------------------------
Balance, end of the year                         640,000             580,000
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
As at March 31, 2013, the Company had a syndicated $730 million
extendible revolving credit facility with a stated term date of April
28, 2013. The bank facility is made up of a $30 million working
capital sub-tranche and a $700 million production line. The
facilities are available on a revolving basis for a period of at
least 364 days and upon the term out date may be extended for a
further 364 day period at the request of the Company, subject to
approval by the lenders. In the event that the revolving period is
not extended, the facility is available on a non-revolving basis for
a further one year term, at the end of which time the facility would
be due and payable. Outstanding amounts on this facility will bear
interest at rates ranging from prime plus 1.0% to prime plus 2.5%
determined by the Company's debt to earnings before interest, taxes,
depreciation, depletion and amortization (EBITDA) ratios ranging from
less than 1:1 to greater than 2.5:1. A General Security Agreement
with a floating charge on land registered in Alberta is held as
collateral by the bank. 
Subsequent to March 31, 2013, Peyto has entered into a syndicated two
year, unsecured, covenant based revolving credit facility in the
amount of $1 billion with a stated term date of April 26, 2015. The
note purchase agreement (discussed below) was amended and restated to
reflect removal of security on the Senior Notes.  
On January 3, 2012, Peyto issued CDN $100 million of senior secured
notes pursuant to a note purchase and private shelf agreement. The
notes were issued by way of private placement and rank equally with
Peyto's obligations under its bank facility. The notes have a coupon
rate of 4.39% and mature on January 3, 2019. Interest is paid
semi-annually in arrears.  
On September 6, 2012, Peyto issued CDN $50 million of senior secured
notes pursuant to a note purchase and private shelf agre
ement. The
notes were issued by way of private placement and rank equally with
Peyto's obligations under its bank facility. The notes have a coupon
rate of 4.88% and mature on September 6, 2022. Interest is paid
semi-annually in arrears.  
Upon the issuance of the senior secured notes January 3, 2012, Peyto
became subject to the following financial covenants as defined in the
credit facility and note purchase and private shelf agreements: 


 
--  Senior Debt to EBITDA Ratio will not exceed 3.0 to 1.0  
--  Total Debt to EBITDA Ratio will not exceed 4.0 to 1.0  
--  Interest Coverage Ratio will not be less than 3.0 to 1.0 
--  Total Debt to Capitalization Ratio will not exceed 0.55:1.0

 
Peyto is in compliance with all financial covenants at March 31,
2013. 
Total interest expense for the period ended March 31, 2013 was $6.3
million (2012 - $5.1 million) and the average borrowing rate for the
period was 4.0% (2012 - 4.5%).  


 
5.  Decommissioning provision

 
Peyto makes provision for the future cost of decommissioning wells,
pipelines 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 Peyto's internal estimates of 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, 2012                                           58,201 
----------------------------------------------------------------------------
New or increased provisions                                           2,961 
Accretion of decommissioning provision                                  368 
Change in discount rate and estimates                                (2,994)
----------------------------------------------------------------------------
Balance, March 31, 2013                                              58,536 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Current                                                                   - 
Non-current                                                          58,536 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Peyto has estimated the net present value of its total
decommissioning provision to be $58.5 million as at March 31, 2013
($58.2 million at December 31, 2012) based on a total future
undiscounted liability of $134.8 million ($127.9 million at December
31, 2012). At March 31, 2013 management estimates that these payments
are expected to be made over the next 50 years with the majority of
payments being made in years 2041 to 2062. The Bank of Canada's long
term bond rate of 2.50 per cent (2.36 per cent at December 31, 2012)
and an inflation rate of two per cent (two per cent at December 31,
2012) 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          Amount 
Common Shares (no par value)                  Common Shares               $ 
----------------------------------------------------------------------------
Balance, December 31, 2011                      137,960,301         889,115 
----------------------------------------------------------------------------
Common shares issued                              4,628,750         115,024 
Common shares issued for acquisition              5,404,007         112,187 
Common shares issued by private placement           525,655          11,952 
Common share issuance costs (net of tax)                  -          (3,896)
----------------------------------------------------------------------------
Balance, December 31,2012                       148,518,713       1,124,382 
----------------------------------------------------------------------------
Common shares issued by private placement           240,210           5,742 
Common share issuance costs, (net of tax)                 -             (55)
----------------------------------------------------------------------------
Balance, March 31, 2013                         148,758,923       1,130,069 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
On December 31, 2011 Peyto completed a private placement of 397,235
common shares to employees and consultants for net proceeds of $9.7
million ($24.52 per share). These common shares were issued on
January 13, 2012. 
On March 23, 2012, Peyto completed a private placement of 128,420
common shares to employees and consultants for net proceeds of $2.2
million ($17.22 per share). 
On August 14, 2012, Peyto issued 5,404,007 common shares which were
valued at $112.2 million (net of issuance costs) ($20.76 per share)
in relation to the closing of a corporate acquisition. 
On December 11, 2012, Peyto closed an offering of 4,628,750 common
shares at a price of $24.85 per common share, receiving proceeds of
$110.0 million (net of issuance costs). 
On December 31, 2012, Peyto completed a private placement of 154,550
common shares to employees and consultants for net proceeds of $3.5
million ($22.38 per share). These common shares were issued January
7, 2013. 
On March 19, 2013, Peyto completed a private placement of 85,660
common shares to employees and consultants for net proceeds of $2.2
million ($26.65 per share). 
Per share amounts  
Earnings per share or unit have been calculated based upon the
weighted average number of common shares outstanding for the period
ended March 31, 2013 of 148,672,664 (2012 - 138,312,078). There are
no dilutive instruments outstanding. 
Dividends  
During the period ended March 31, 2013, Peyto declared and paid
dividends of $0.18 per common share or $0.06 per common share per
month, totaling $26.8 million (2012 - $0.18 or $0.06 per share per
month, $24.9 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  
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, 2013     March 31, 2012 
----------------------------------------------------------------------------
Share price                              $22.58 - $26.94     $16.38 -$24.75 
Exercise price                           $19.30 - $22.58    $12.06 - $24.75 
Expected volatility                                   25%                31%
Option life                                       1 year             1 year 
Dividend yield                                         0%                 0%
Risk-free interest rate                             1.02%              1.19%
----------------------------------------------------------------------------
 
8.  Financial instruments

 
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, 2013. 
The Company's areas of financial risk management and risks related to
financial instruments remained unchanged from December 31, 2012. 
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 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, 2013, 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, 2013: 


 
----------------------------------------------------------------------------
Propane                                                  Monthly       Price
Period Hedged                            Type             Volume       (USD)
----------------------------------------------------------------------------
April 1, 2013 to June 30, 2013           Fixed Price   4,000 bbl $ 34.86/bbl
April 1, 2013 to December 31, 2013       Fixed Price   4,000 bbl $ 30.66/bbl
April 1, 2013 to December 31, 2013       Fixed Price   4,000 bbl $ 32.34/bbl
April 1, 2013 to December 31, 2013       Fixed Price   4,000 bbl $ 34.86/bbl
April 1, 2013 to December 31, 2013       Fixed Price   4,000 bbl $ 35.39/bbl
April 1, 2013 to December 31, 2013       Fixed Price   4,000 bbl $ 34.44/bbl
January 1, 2014 to December 31, 2014     Fixed Price   4,000 bbl $ 35.70/bbl
January 1, 2014 to December 31, 2014     Fixed Price   4,000 bbl $ 35.49/bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Natural Gas                                                Daily       Price
Period Hedged                            Type             Volume       (CAD)
----------------------------------------------------------------------------
April 1, 2012 to October 31, 2013        Fixed Price    5,000 GJ $   4.00/GJ
April 1, 2012 to October 31, 2013        Fixed Price    5,000 GJ $   4.00/GJ
April 1, 2012 to October 31, 2013        Fixed Price    5,000 GJ $   4.00/GJ
April 1, 2012 to October 31, 2013        Fixed Price    5,000 GJ $   4.00/GJ
April 1, 2012 to October 31, 2013        Fixed Price    5,000 GJ $   2.52/GJ
April 1, 2012 to March 31, 2014          Fixed Price    5,000 GJ $   3.00/GJ
May 1, 2012 to October 31, 2013          Fixed Price    5,000 GJ $   2.30/GJ
August 1, 2012 to March 31, 2014         Fixed Price    5,000 GJ $   3.00/GJ
August 1, 2012 to October 31, 2014       Fixed Price    5,000 GJ $   3.10/GJ
November 1, 2012 to October 31, 2013     Fixed Price    5,000 GJ $   2.60/GJ
November 1, 2012 to October 31, 2013     Fixed Price    5,000 GJ $  3.005/GJ
November 1, 2012 to October 31, 2013     Fixed Price    5,000 GJ $   3.00/GJ
November 1, 2012 to March 31, 2014       Fixed Price    5,000 GJ $   2.81/GJ
November 1, 2012 to March 31, 2014       Fixed Price    5,000 GJ $   3.00/GJ
November 1, 2012 to March 31, 2014       Fixed Price    5,000 GJ $   3.05/GJ
November 1, 2012 to March 31, 2014       Fixed Price    5,000 GJ $   3.02/GJ
November 1, 2012 to October 31, 2014     Fixed Price    5,000 GJ $ 3.0575/GJ
January 1, 2013 to October 31, 2013      Fixed Price    5,000 GJ $   3.42/GJ
January 1, 2013 to December 31, 2013     Fixed Price    5,000 GJ $  3.105/GJ
January 1, 2013 to March 31, 2014        Fixed Price    5,000 GJ $   3.00/GJ
January 1, 2013 to March 31, 2014        Fixed Price    5,000 GJ $   3.02/GJ
April 1, 2013 to October 31, 2013        Fixed Price    5,000 GJ $  3.205/GJ
April 1, 2013 to March 31, 2014          Fixed Price    5,000 GJ $  3.105/GJ
April 1, 2013 to March 31, 2014          Fixed Price    5,000 GJ $   3.53/GJ
April 1, 2013 to March 31, 2014          Fixed Price    5,000 GJ $   3.45/GJ
April 1, 2013 to March 31, 2014          Fixed Price    5,000 GJ $   3.50/GJ
April 1, 2013 to March 31, 2014          Fixed Price    5,000 GJ $   3.08/GJ
April 1, 2013 to March 31, 2014          Fixed Price    5,000 GJ $    3.17GJ
April 1, 2013 to March 31, 2014          Fixed Price    5,000 GJ $   3.10/GJ
April 1, 2013 to October 31, 2014        Fixed Price    5,000 GJ $   3.25/GJ
April 1, 2013 to October 31, 2014        Fixed Price    5,000 GJ $   3.30/GJ
April 1, 2013 to October 31, 2014 
       Fixed Price    5,000 GJ $   3.33/GJ
April 1, 2013 to October 31, 2014        Fixed Price    7,500 GJ $   3.20/GJ
April 1, 2013 to October 31, 2014        Fixed Price    5,000 GJ $   3.22/GJ
April 1, 2013 to October 31, 2014        Fixed Price    5,000 GJ $   3.20/GJ
April 1, 2013 to October 31, 2014        Fixed Price    5,000 GJ $ 3.1925/GJ
April 1, 2013 to October 31, 2014        Fixed Price    5,000 GJ $   3.25/GJ
April 1, 2013 to October 31, 2014        Fixed Price    5,000 GJ $   3.30/GJ
July 1, 2013 to October 31, 2013         Fixed Price    5,000 GJ $   3.34/GJ
August 1, 2013 to March 31, 2014         Fixed Price    5,000 GJ $   3.55/GJ
November 1, 2013 to March 31, 2014       Fixed Price    5,000 GJ $   3.71/GJ
November 1, 2013 to October 31, 2014     Fixed Price    5,000 GJ $   3.50/GJ
November 1, 2013 to October 31, 2014     Fixed Price    5,000 GJ $   3.53/GJ
November 1, 2013 to March 31, 2015       Fixed Price    5,000 GJ $ 3.6025/GJ
----------------------------------------------------------------------------

 
As at March 31, 2013, Peyto had committed to the future sale of
288,000 barrels of propane at an average price of $34.61 per barrel
and 82,627,500 gigajoules (GJ) of natural gas at an average price of
$3.23 per GJ or $3.71 per mcf. Had these contracts been closed on
March 31, 2013, Peyto would have realized a loss in the amount of
$25.2 million. If the AECO gas price on March 31, 2013 were to
increase by $1/GJ, the unrealized loss would increase by
approximately $82.6 million. An opposite change in commodity prices
rates would result in an opposite impact on other comprehensive
income.  
Subsequent to March 31, 2013 Peyto entered into the following
contracts: 


 
----------------------------------------------------------------------------
Natural Gas                                                Daily       Price
Period Hedged                            Type             Volume       (CAD)
----------------------------------------------------------------------------
November 1, 2013 to March 31, 2014       Fixed Price    5,000 GJ $   3.76/GJ
November 1, 2013 to March 31, 2014       Fixed Price    5,000 GJ $   3.86/GJ
November 1, 2013 to March 31, 2014       Fixed Price    5,000 GJ $   4.00/GJ
April 1, 2014 to October 31, 2014        Fixed Price    5,000 GJ $  3.505/GJ
April 1, 2014 to October 31, 2014        Fixed Price    5,000 GJ $  3.555/GJ
April 1, 2014 to October 31, 2014        Fixed Price    5,000 GJ $   3.48/GJ
----------------------------------------------------------------------------
 
9.  Commitments 

 
Following is a summary of Peyto's contractual obligations and
commitments as at March 31, 2013.  


 
                            2013    2014    2015    2016    2017  Thereafter
----------------------------------------------------------------------------
Note repayment(1)              -       -       -       -       -     150,000
Interest payments(2)       3,415   6,830   6,830   6,830   6,830      18,785
Transportation                                                              
 commitments              10,300  13,217   9,913   5,224   1,688       1,235
Operating leases           1,258   1,694     522       -       -           -
----------------------------------------------------------------------------
Total                     14,973  21,741  17,265  12,054   8,518     170,020
----------------------------------------------------------------------------
(1) Long-term debt repayment on senior secured notes                        
(2) Fixed interest payments on senior secured notes                         

 
Officers 


 
Darren Gee                             Tim Louie                            
President and Chief Executive Officer  Vice President, Land                 
Scott Robinson                         David Thomas                         
Executive Vice President and Chief     Vice President, Exploration          
Operating Officer                      Jean-Paul Lachance                   
Kathy Turgeon                          Vice President, Exploitation         
Vice President, Finance and Chief                                           
Financial Officer                                                           
Stephen Chetner                                                             
Corporate Secretary                                                         
                                                                            
Directors                                                                   
Don Gray, Chairman                                                          
Rick Braund                                                                 
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                                                         
HSBC Bank Canada
                                                            
Alberta Treasury Branches                                                   
Canadian Western Bank                                                       
Transfer Agent                                                              
Valiant Trust Company                                                       
Head Office                                                                 
1500, 250 - 2nd Street SW                                                   
Calgary, AB                                                                 
T2P 0C1                                                                     
Phone: 403.261.6081                                                         
Fax: 403.451.4100                                                           
Web: http://www.peyto.com/                                                  
Stock Listing Symbol: PEY.TO                                                

Contacts:
Peyto Exploration & Development Corp.
1500, 250 - 2nd Street SW
Calgary, AB T2P 0C1
403.261.6081
403.451.4100 (FAX)
www.peyto.com