Peyto Reports Q1 2014 Results and Another Dividend Increase

NEWS RELEASE TRANSMITTED BY Marketwired 
FOR: Peyto Exploration & Development Corp. 
TSX SYMBOL:  PEY 
MAY 14, 2014 
Peyto Reports Q1 2014 Results and Another Dividend Increase 
CALGARY, ALBERTA--(Marketwired - May 14, 2014) - Peyto Exploration &
Development Corp. (TSX:PEY) ("Peyto" or the "Company") is
pleased to present its operating and financial results for the first quarter of
the 2014 fiscal year. Production per share growth of 28%, combined with
earnings per share growth of 64%, support a 25% dividend increase. First
quarter 2014 highlights, including a 77% operating margin(1) and a 30% profit
margin(2), were as follows: 
/T/ 
--  Production per share up 28%. First quarter 2014 production increased 30% 
(28% per share) from 332 MMcfe/d (55,372 boe/d) in Q1 2013 to 433 
MMcfe/d (72,209 boe/d) in Q1 2014.  
--  Funds from operations per share up 54%. Generated a Company record $161 
million in Funds from Operations ("FFO") in Q1 2014 up 56% (54% per 
share) from $103 million in Q1 2013 due to increased production volumes 
and improved commodity prices.  
--  Cash costs of $1.25/Mcfe. Total cash costs, including royalties, 
operating costs, transportation, G&A and interest, were up from 
$1.02/Mcfe in Q1 2013 but still remain industry leading. This increase 
was primarily due to higher royalties, driven by higher commodity 
prices, and higher operating costs, due to front-end loaded chemical and 
maintenance costs. Higher revenues, combined with these cash costs, 
resulted in a cash netback of $4.12/Mcfe ($24.74/boe) or a 77% operating 
margin.  
--  Capital investment of $179 million. A capital program of $179 million 
was executed in the quarter resulting in production additions of 11,500 
boe/d at quarter end. The annualized cost (trailing twelve months) to 
build this new production was $17,140/boe/d. A total of 31 gross wells 
were drilled during the first quarter.  
--  Earnings of $0.41/share, dividends of $0.24/share. Earnings of $62 
million were generated in the quarter while dividends of $37 million 
were paid to shareholders, representing a before tax payout ratio of 23% 
of FFO.  
--  Dividend increase to $0.10/share. The Board of Directors has approved a 
monthly dividend increase of $0.02/share, starting in May 2014, to be 
paid on June 13, 2014 to shareholders of record as of May 31, 2014.  
/T/ 
First Quarter 2014 in Review 
The first quarter of 2014 was another active period for the Company with 9
drilling rigs developing the many Deep Basin resource plays within Peyto's
portfolio. Natural gas prices during the quarter were extremely volatile as
cold winter weather reduced storage volumes to multi-year lows causing gas
prices to increase dramatically. Peyto increased its pace of activity and
accelerated 2014 spending plans in response to the increase in natural gas
prices with an urgency to deploy more capital earlier in the year, before
potential cost inflation could occur. Drilling through spring break-up became
part of that plan, as did stockpiling chemicals and accelerating facility
maintenance during unscheduled transportation outages. These efforts, combined
with increased government and regulatory fees, resulted in higher per unit
operating costs for the first quarter. At just over $3/boe, Peyto's
operating costs, inclusive of transportation, continue to lead the industry by
a wide margin. Average first quarter production of 72,209 boe/d was up 7%
sequentially from the fourth quarter 2013, while average realized prices were
up 25%. These contributed to a record $161 million in FFO, despite a $30
million hedging loss. Progress on facility expansions continued in the quarter
in anticipation of ongoing production growth later in 2014. The strong
financial and operating performance delivered in the quarter resulted in an
annualized 20% Return on Equity (ROE) and 15% Return on Capital Employed
(ROCE). 
/T/ 
1.  Operating Margin is defined as funds from operations divided by revenue 
before royalties but including realized hedging gains/losses. 
2.  Profit Margin is defined as net earnings for the quarter divided by 
revenue before royalties but including realized hedging gains/losses. 
Natural gas volumes recorded in thousand cubic feet (mcf) are converted 
to barrels of oil equivalent (boe) using the ratio of six (6) thousand 
cubic feet to one (1) barrel of oil (bbl). Natural gas liquids and oil 
volumes in barrel of oil (bbl) are converted to thousand cubic feet 
equivalent (Mcfe) using a ratio of one (1) barrel of oil to six (6) 
thousand cubic feet. This could be misleading, particularly if used in 
isolation as it is based on an energy equivalency conversion method 
primarily applied at the burner tip and does not represent a value 
equivalency at the wellhead.  
---------------------------------------------------------------------------- 
3 Months Ended Mar. 31         % 
2014        2013   Change
----------------------------------------------------------------------------
Operations                                                                  
Production                                                                  
  Natural gas (mcf/d)                           389,002     297,191      31%
  Oil & NGLs (bbl/d)                              7,375       5,840      26%
  Thousand cubic feet equivalent (mcfe/d @                                   
1:6)                                         433,252     332,230      30%
  Barrels of oil equivalent (boe/d @ 6:1)        72,209      55,372      30%
Production per million common shares                                        
 (boe/d)(i)                                         476         372      28% 
Product prices                                                              
  Natural gas ($/mcf)                              4.45        3.49      28%
  Oil & NGLs ($/bbl)                              80.49       75.88       6%
  Operating expenses ($/mcfe)                      0.39        0.31      26%
  Transportation ($/mcfe)                          0.13        0.12       8%
  Field netback ($/mcfe)                           4.39        3.67      20%
  General & administrative expenses                                          
($/mcfe)                                        0.04        0.02     100%
  Interest expense ($/mcfe)                        0.23        0.21      10%
Financial ($000, except per share(i))                                       
Revenue                                         209,318     133,203      57%
Royalties                                        17,861      10,591      69%
Funds from operations                           160,785     102,856      56%
Funds from operations per share                    1.06        0.69      54%
Total dividends                                  36,505      26,766      36%
Total dividends per share                          0.24        0.18      33%
  Payout ratio                                       23          26    (12)%
Earnings                                         62,129      36,405      71%
Earnings per diluted share                         0.41        0.25      64%
Capital expenditures                            179,378     169,099       6%
Weighted average common shares outstanding  151,826,431 148,672,664       2%
As at March 31                                                              
End of period shares outstanding            153,690,808 148,758,923       3%
Net debt                                        838,495     749,546      12%
Shareholders' equity                          1,344,704   1,197,254      12%
Total assets                                  2,686,661   2,281,287      18%
(i)all per share amounts using weighted                                     
 average common shares outstanding                                           
---------------------------------------------------------------------------- 
Three Months ended Mar. 31
($000)                                                     2014         2013
----------------------------------------------------------------------------
Cash flows from operating activities                    146,452       92,543
Change in non-cash working capital                        7,964        8,784
Change in provision for performance based                                   
 compensation                                             6,369        1,529
----------------------------------------------------------------------------
Funds from operations                                   160,785      102,856
----------------------------------------------------------------------------
Funds from operations per share(i)                         1.06         0.69
---------------------------------------------------------------------------- 
/T/ 
(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's first quarter 2014 activity continued to be diversified across the
many stacked resource plays in the Alberta Deep Basin, with all zones yielding
liquids rich, sweet natural gas. A total of 31 wells were drilled across the
land base, targeting the many prospective zones, as shown in the following
table: 
/T/ 
Field                                   
Total 
Kisku/           Wells
Zone        Sundance Nosehill Wildhay Ansell Berland   Kakwa Brazeau Drilled
----------------------------------------------------------------------------
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Cardium            1        1       1      1                               4
Notikewin                           3                                      3
Falher             2        4                                      1       7
Wilrich            2        1       1      6       1                      11
Bluesky            2        3              1                               6
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total              7        9       5      8       1               1      31
----------------------------------------------------------------------------
---------------------------------------------------------------------------- 
/T/ 
The majority of the activity in the quarter focused on the deeper Falher,
Wilrich and Bluesky formations. These formations are yielding greater economic
returns due to a combination of higher natural gas prices, greater deep gas
drilling royalty incentives combined with higher productivity and reserve
recoveries. 
Both the average depth and lateral length of Peyto's horizontal wells
continued to increase in Q1 2014, as the Company attempts to develop more
resource with each wellbore. At the same time, the drilling cost per meter and
time required to drill, complete, and bring a new well on production continues
to fall as Peyto's infrastructure (roads, wellsites, pipelines, etc.)
expands and drilling practices are refined. The following table illustrates the
ongoing efficiency gains which should contribute to lower development costs and
greater returns: 
/T/ 
2011         2012         2013      2014 Q1
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross Spuds                        70           86           99           31
Measured Depth (m)              3,903        4,017        4,179        4,236
HZ Length (m)                   1,303        1,358        1,409        1,468 
Average Drilling ($MM)      $   2.823    $   2.789    $   2.720    $   2,767
$ per MD meter              $     723    $     694    $     651    $     653 
Spud-Onstream (days)               59           50           59           41
----------------------------------------------------------------------------
---------------------------------------------------------------------------- 
/T/ 
Capital Expenditures 
During the first quarter of 2014, Peyto spent $80.2 million to drill 31 gross
(28.4 net) horizontal wells and $36.1 million completing 22 gross (21.5 net)
wells. Wellsite equipment and tie-ins accounted for $15.7 million, while a
total of $40.4 million was invested in pipelines and facilities. A 27 km,
8" pipeline was installed which connected a new growth area called Pedley
to Peyto's Wildhay gas plant. This new pipeline corridor provides the
necessary infrastructure for future wells and the ultimate expansion of the
Wildhay gas plant later in the year. Additional compression was installed at
Swanson and Oldman North gas plants, as well as two compressors and a
refrigeration unit at the Brazeau River gas plant. New lands in Brazeau and
Sundance were acquired for $2.9 million, or $246/acre, while new 3D seismic was
acquired in Brazeau, Ansell and Sundance accounted for $3.9 million. 
By the end of the quarter, the 22 gross (21.6 net) wells that were brought
onstream were contributing 11,500 boe/d to the quarter end exit rate of 72,000
boe/d.  
Financial Results 
Alberta (AECO) daily natural gas prices averaged $5.36/GJ in Q1 2014, while
AECO monthly prices averaged $4.52/GJ. Typically, the monthly price exceeds the
daily price but this was not the case in the first quarter. As Peyto had
committed 88% of its production to the monthly price, Peyto realized a volume
weighted average natural gas price of $4.57/GJ or $5.23/mcf, prior to a
$0.78/mcf hedging loss. 
Peyto realized a blended oil and natural gas liquids price of $84.64/bbl in Q1
2014, prior to a $4.15/bbl hedging loss, for its blend of condensate, pentane,
butane and propane, which represented 85% of the $99.81/bbl average Edmonton
light oil price.  
Combining realized natural gas and liquids prices, Peyto's unhedged
revenues totaled $6.14/mcfe ($5.37/mcfe including hedging losses), or 134% of
the dry gas price, illustrating the benefit of high heat content, liquids rich
natural gas production. 
Royalties of $0.46/mcfe, operating costs of $0.39/mcfe, transportation costs of
$0.13/mcfe, G&A of $0.04/mcfe and interest costs of $0.23/mcfe, combined
for total cash costs of $1.25/mcfe ($7.47/boe). These industry leading total
cash costs resulted in a cash netback of $4.12/mcfe or a 77% operating margin. 
Depletion, depreciation and amortization charges of $1.77/mcfe, along with a
provision for future tax and market based bonus payments reduced the cash
netback to earnings of $1.59/mcfe, or a 30% profit margin, which funded
dividends of $0.94/mcfe.  
Subsequent to the end of the first quarter, Peyto's $1.0 billion covenant
based unsecured credit facility was renewed and extended for an additional two
years. This new revolver has more attractive pricing and the same covenants as
the previous revolver (see the Management's Discussion & Analysis for
a description of the covenants). Including the $270 million of senior unsecured
notes, Peyto's total borrowing capacity is $1.27 billion, leaving over
$430 million of available capacity as at March 31, 2014. 
Marketing 
Significantly colder than normal winter weather across much of North America
during the first quarter caused natural gas storage inventories to be drawn
down to multi-year lows. This led to higher natural gas prices, especially in
Alberta where AECO daily natural gas prices fluctuated from lows of $3.66/GJ to
highs of $24.82/GJ. The average daily price over the 90 day period of $5.36/GJ
was 19% higher than the average monthly price at $4.52/GJ. 
For the quarter, approximately 57% of Peyto's natural gas production
received a fixed price of $3.38/GJ from hedges that were put in place over the
previous 24 months, while the balance received the blended daily and monthly
price of $4.57/GJ, resulting in an after-hedge price of $3.89/GJ or $4.45/mcf.  
Peyto's practice of layering in future sales in the form of fixed price
swaps, and thus smoothing out the volatility in gas prices, continued
throughout the quarter. As at March 31, 2014 Peyto had committed to the future
sale of 100,285,000 GJ of natural gas at an average price of $3.58/GJ or
$4.12/mcf based on Peyto's historical heat content. The following table
summarizes the remaining hedged volumes and prices for the upcoming years as of
May 14, 2014. 
/T/ 
---------------------------------------------------------------------------- 
Future Sales             Average Price (CAD)   
---------------------------------------------------------------------------- 
GJ            Mcf         $/GJ        $/Mcf
----------------------------------------------------------------------------
2014                     65,095,000     56,604,348         3.58         4.12
2015                     34,480,000     29,982,609         3.73         4.29
2016                      1,820,000      1,582,609         3.97         4.57
----------------------------------------------------------------------------
Total                   101,395,000     88,169,566         3.64         4.19
---------------------------------------------------------------------------- 
/T/ 
(i)prices and volumes in mcf use Peyto's historic heat content premium of
1.15.  
As illustrated in the following table, Peyto's realized natural gas
liquids prices (1) were up 6% year over year with all but Butane receiving
greater prices. 
/T/ 
---------------------------------------------------------------------------- 
Three Months ended March 31  
2014           2013
----------------------------------------------------------------------------
Condensate ($/bbl)                                     100.68          92.18
Propane ($/bbl) (includes hedging)                      36.65          25.52
Butane ($/bbl)                                          55.98          58.57
Pentane ($/bbl)                                        105.37         102.19
----------------------------------------------------------------------------
Total oil and natural gas liquids ($/bbl)               80.49          75.88
----------------------------------------------------------------------------
Edmonton par crude postings ($/bbl)                     99.81          86.28
---------------------------------------------------------------------------- 
/T/ 
(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, 2014, Peyto had committed to the future sale of
204,000 bbls of propane at an average price of $45.82 CAD/bbl or $41.45USD/bbl. 
Activity Update 
Peyto has successfully maintained a high level of activity through April and
into the beginning of May while most of the industry has shut down for spring
break-up. Activity will continue provided that weather and surface access
conditions remain acceptable. Peyto currently has 7 of its 9 rigs drilling and
3 completion spreads running. Since the end of the first quarter, an additional
11 gross (9.7 net) wells have been, or are in the process of being drilled and
12 more wells (11.2 net) have been completed and brought on production. New
wells for 2014 are contributing 15,000 boe/d to the current total production of
73,000 boe/d. 
Most recently, Peyto has drilled and completed the longest horizontal well so
far in the Company's history. This Sundance horizontal Wilrich well was
drilled with a 2,888 m horizontal lateral and completed with a 21 stage
slickwater fracture stimulation. The Company expects that longer horizontal
laterals will not be applicable to all zones, nor in all areas, and while it is
still too early to determine with certainty, Peyto expects this well will
achieve above average rates of return.  
Facility and pipeline expansion work continues to progress in anticipation of
production growth in the second half of the year. A twinning of the Wildhay
sales pipeline is in the final stages of completion, as are fabrication of a
second refrigeration package and compressor for the Oldman North plant
expansion which is scheduled for a September startup. 
Recent investment success has prompted renewed focus on the Wilrich and Falher
formations in Ansell, the Bluesky play in North Sundance, the Falher and
Notikewin in Central Sundance, and the Wilrich in Brazeau River.  
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. Over the last year, production per share and Proved Developed
Producing reserves per share have grown 28% and 12%, respectively, while
earnings per share have increased 64%. Based on this profitable growth, and
irrespective of the recent strength in natural gas prices, the Board of
Directors of Peyto has approved a $0.02/share increase to the monthly dividend
starting in May 2014. This is the second dividend increase since Peyto
converted to a dividend-paying, growth corporation at the end of 2010.  
Outlook  
Commodity prices for the balance of 2014 continue to look robust, and while
higher commodity prices will drive higher funds from operations, Peyto will
remain vigilant with respect to service cost inflation. Peyto is executing more
of its 2014 capital program in the first half of the year in an attempt to
mitigate this potential cost inflation and fully expects to meet its rate of
return objectives. The Company remains committed to maximizing the returns on
shareholder's capital by continuing to be one of the lowest cost, most
efficient and most profitable energy companies in the industry.  
Conference Call and Webcast 
A conference call will be held with the senior management of Peyto to answer
questions with respect to the 2014 first quarter financial results on Thursday,
May 15th, 2014, at 9:00 a.m. Mountain Daylight Time (MDT), or 11:00 a.m.
Eastern Daylight Time (EDT). To participate, please call 1-416-340-9432
(Toronto area) or 1-800-769-8320 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 9633376. The replay
will be available at 11:00 a.m. MDT, 1:00 p.m. EDT Thursday, May 15th, 2014
until midnight EDT on Thursday, May 22nd, 2014. The conference call can also be
accessed through the internet at http://www.gowebcasting.com/5336. After this
time the conference call will be archived on the Peyto Exploration &
Development website at www.peyto.com.  
Shareholders are invited to attend Peyto's AGM at 3:00 p.m. on Tuesday,
May 27, 2014 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/Q12014MDandA.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 14, 2014 
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.  
/T/ 
Peyto Exploration & Development Corp.                                       
Condensed Balance Sheet (unaudited)                                         
(Amount in $ thousands)                                                      
March 31    December 31  
2014           2013 
----------------------------------------------------------------------------
Assets                                                                      
Current assets                                                              
Accounts receivable                                  108,164         83,714 
Due from private placement (Note 6)                        -          6,245 
Prepaid expenses                                      11,586          5,666 
---------------------------------------------------------------------------- 
119,750         95,625 
---------------------------------------------------------------------------- 
Property, plant and equipment, net (Note 3)        2,566,911      2,459,531 
---------------------------------------------------------------------------- 
2,566,911      2,459,531 
---------------------------------------------------------------------------- 
2,686,661      2,555,156 
----------------------------------------------------------------------------
---------------------------------------------------------------------------- 
Liabilities                                                                 
Current liabilities                                                         
Accounts payable and accrued liabilities             185,950        155,265 
Dividends payable (Note 6)                            12,295         11,901 
Derivative financial instruments (Note 8)             64,221         26,606 
Provision for future performance based                                      
 compensation (Note 7)                                11,470          5,100 
---------------------------------------------------------------------------- 
273,936        198,872 
---------------------------------------------------------------------------- 
Long-term debt (Note 4)                              760,000        875,000 
Long-term derivative financial instruments                                  
 (Note 8)                                             17,735          5,180 
Provision for future performance based                                      
 compensation (Note 7)                                 5,426          3,200 
Decommissioning provision (Note 5)                    67,330         61,184 
Deferred income taxes                                217,530        211,082 
---------------------------------------------------------------------------- 
1,068,021      1,155,646 
---------------------------------------------------------------------------- 
Equity                                                                      
Share capital (Note 6)                             1,292,384      1,130,069 
Shares to be issued (Note 6)                               -          6,245 
Retained earnings                                    112,599         86,975 
Accumulated other comprehensive loss (Note 6)        (60,279)       (22,651)
---------------------------------------------------------------------------- 
1,344,704      1,200,638 
---------------------------------------------------------------------------- 
2,686,661      2,555,156 
----------------------------------------------------------------------------
---------------------------------------------------------------------------- 
/T/ 
See accompanying notes to the financial statements. 
Approved by the Board of Directors 
Michael MacBean, Director  
Darren Gee, Director  
/T/ 
Peyto Exploration & Development Corp.                                       
Condensed Income Statement (unaudited)                                      
(Amount in $ thousands)                                                      
Three months ended March 31   
2014           2013 
----------------------------------------------------------------------------
Revenue                                                                     
Oil and gas sales                                    239,421        128,424 
Realized (loss) gain on hedges (Note 8)              (30,103)         4,779 
Royalties                                            (17,861)       (10,591)
----------------------------------------------------------------------------
Petroleum and natural gas sales, net                 191,457        122,612 
---------------------------------------------------------------------------- 
Expenses                                                                    
Operating                                             15,230          9,306 
Transportation                                         5,145          3,659 
General and administrative                             1,556            481 
Future performance based compensation (Note 7)         8,596          2,538 
Interest                                               8,741          6,310 
Accretion of decommissioning provision (Note                                
 5)                                                      498            368 
Depletion and depreciation (Note 3)                   68,851         51,625 
---------------------------------------------------------------------------- 
108,617         74,287 
----------------------------------------------------------------------------
Earnings before taxes                                 82,840         48,325 
---------------------------------------------------------------------------- 
Income tax                                                                  
Deferred income tax expense                           20,711         11,920 
----------------------------------------------------------------------------
Earnings for the period                               62,129         36,405 
----------------------------------------------------------------------------
---------------------------------------------------------------------------- 
----------------------------------------------------------------------------
Earnings per share (Note 6)                                                 
Basic and diluted                             $         0.41 $         0.25 
----------------------------------------------------------------------------
---------------------------------------------------------------------------- 
----------------------------------------------------------------------------
Weighted average number of common shares                                    
 outstanding (Note 6)                                                       
Basic and diluted                                151,826,431    148,672,664 
----------------------------------------------------------------------------
---------------------------------------------------------------------------- 
Peyto Exploration & Development Corp.                                       
Condensed Statement of Comprehensive Income (unaudited)                     
(Amount in $ thousands)                                                      
Three months ended March  
31  
2014         2013 
----------------------------------------------------------------------------
Earnings for the period                                 62,129       36,405 
Other comprehensive income                                                  
Change in unrealized loss on cash flow hedges          (80,273)     (28,128)
Deferred tax expense                                    12,543        8,227 
Realized (gain) loss on cash flow hedges                30,103       (4,779)
----------------------------------------------------------------------------
Comprehensive income                                    24,502       11,725 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Peyto Exploration & Development Corp.                                       
Condensed Statement of Changes in Equity (unaudited)                        
(Amount in $ thousands)                                                      
Three months ended March  
31             
2014         2013 
----------------------------------------------------------------------------
Share capital, beginning of period                   1,130,069    1,124,382 
----------------------------------------------------------------------------
Common shares issued by private placement                6,997        5,742 
Equity offering                                        160,480            - 
Common shares issuance costs (net of tax)               (5,162)         (55)
----------------------------------------------------------------------------
Share capital, end of period                         1,292,384    1,130,069 
----------------------------------------------------------------------------
---------------------------------------------------------------------------- 
----------------------------------------------------------------------------
Common shares to be issued, beginning of period          6,245        3,459 
----------------------------------------------------------------------------
Common shares issued                                    (6,245)      (3,459)
----------------------------------------------------------------------------
Common shares to be issued, end of period                    -            - 
----------------------------------------------------------------------------
---------------------------------------------------------------------------- 
----------------------------------------------------------------------------
Retained earnings, beginning of period                  86,975       75,247 
----------------------------------------------------------------------------
Earnings for the period                                 62,129       36,405 
Dividends (Note 6)                                     (36,505)     (26,766)
----------------------------------------------------------------------------
Retained earnings, end of period                       112,599       84,886 
----------------------------------------------------------------------------
---------------------------------------------------------------------------- 
----------------------------------------------------------------------------
Accumulated other comprehensive (loss) income,                              
 beginning of period                                   (22,651)       6,979 
----------------------------------------------------------------------------
Other comprehensive loss                               (37,628)     (24,680)
----------------------------------------------------------------------------
Accumulated other comprehensive loss, end of                                
 period                                                (60,279)     (17,701)
----------------------------------------------------------------------------
---------------------------------------------------------------------------- 
----------------------------------------------------------------------------
Total equity                                         1,344,704    1,197,254 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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             
2014         2013 
----------------------------------------------------------------------------
Cash provided by (used in) operating activities                             
Earnings                                                62,129       36,405 
Items not requiring cash:                                                   
  Deferred income tax                                   20,711       11,920 
  Depletion and depreciation                            68,851       51,625 
  Accretion of decommissioning provision                   498          368 
  Long term portion of future performance based                              
compensation                                          2,227        1,009 
Change in non-cash working capital related to                               
 operating activities                                   (7,964)      (8,784)
---------------------------------------------------------------------------- 
146,452       92,543 
----------------------------------------------------------------------------
Financing activities                                                        
Issuance of common shares                              167,477        5,742 
Issuance costs                                          (6,883)         (73)
Cash dividends paid                                    (36,110)     (26,752)
Increase (decrease) in bank debt                      (115,000)      60,000 
---------------------------------------------------------------------------- 
9,484       38,917 
----------------------------------------------------------------------------
Investing activities                                                        
Additions to property, plant and equipment            (179,378)    (169,099)
Change in prepaid capital                                8,795        3,714 
Change in non-cash working capital relating to                              
 investing activities                                   14,647       33,925 
---------------------------------------------------------------------------- 
(155,936)    (131,460)
----------------------------------------------------------------------------
Net increase (decrease) in cash                              -            - 
Cash, Beginning of Period                                    -            - 
----------------------------------------------------------------------------
Cash, End of Period                                          -            - 
---------------------------------------------------------------------------- 
Cash interest paid                                       8,330        7,867 
Cash taxes paid                                              -        1,890  
Peyto Exploration & Development Corp.                                       
Notes to Condensed Financial Statements (unaudited)                         
As at March 31, 2014 and 2013                                               
(Amount in $ thousands, except as otherwise noted)                           
1.  Nature of operations  
/T/ 
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. 
These financial statements were approved and authorized for issuance by the
Audit Committee of Peyto on May 13, 2014. 
/T/ 
2.  Basis of presentation  
/T/ 
The condensed financial statements have been prepared by management and
reported in Canadian dollars in accordance with International Accounting
Standard ("IAS") 34, "Interim Financial Reporting". These
condensed financial statements do not include all of the information required
for full annual financial statements and should be read in conjunction with the
Company's financial statements as at and for the years ended December 31,
2013 and 2012. 
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 financial statements as at and for the
years ended December 31, 2013 and 2012.  
(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, 2014 or later periods.
The affected standards are consistent with those disclosed in Peyto's
financial statements as at and for the years ended December 31, 2013 and 2012.  
Peyto adopted the following standards on January 1, 2014: 
IAS 36 "Impairment of Assets" has been amended to reduce the
circumstances in which the recoverable amount of cash generating units
"CGUs" are required to be disclosed and clarify the disclosures
required when an impairment loss has been recognized or reversed in the period.
The retrospective adoption of these amendments will only impact Peyto's
disclosures in the notes to the financial statements in periods when an
impairment loss or impairment reversal is recognized. 
IFRIC 21 "Levies" was developed by the IFRS Interpretations Committee
("IFRIC") and is applicable to all levies imposed by governments
under legislation, other than outflows that are within the scope of other
standards (e.g., IAS 12 "Income Taxes") and fines or other penalties
for breaches of legislation. The interpretation clarifies that an entity
recognizes a liability for a levy when the activity that triggers payment, as
identified by the relevant legislation, occurs. It also clarifies that a levy
liability is accrued progressively only if the activity that triggers payment
occurs over a period of time, in accordance with the relevant legislation.
Lastly, the interpretation clarifies that a liability should not be recognized
before the specified minimum threshold to trigger that levy is reached. The
retrospective adoption of this interpretation does not have any impact on
Peyto's financial statements. 
Standards issued but not yet effective 
IFRS 9, as issued, reflects part of the IASB's work on the replacement of
IAS 39 "Financial Instruments: Recognition and Measurement" and
applies to classification and measurement of financial assets and financial
liabilities as defined in IAS 39 and hedging transactions. The standard has no
effective date. In subsequent phases, the IASB will address impairment of
financial assets. The adoption of IFRS 9 may have an effect on the
classification and measurement of the company's financial assets and
financial liabilities. The Company will quantify the effect in conjunction with
the other phases, when the final standard including all phases is issued with
an effective date. 
/T/ 
3.  Property, plant and equipment, net  
/T/ 
/T/ 
Cost                                                                        
----------------------------------------------------------------------------
At December 31, 2013                                              3,071,245 
----------------------------------------------------------------------------
  Additions                                                         179,378 
  Decommissioning provision additions                                 5,648 
  Prepaid capital                                                    (8,795)
----------------------------------------------------------------------------
At March 31, 2014                                                 3,247,476 
----------------------------------------------------------------------------
Accumulated depletion and depreciation                                      
----------------------------------------------------------------------------
At December 31, 2013                                               (611,714)
----------------------------------------------------------------------------
  Depletion and depreciation                                        (68,851)
----------------------------------------------------------------------------
At March 31, 2014                                                  (680,565)
---------------------------------------------------------------------------- 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Carrying amount at December 31, 2013                              2,459,531 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Carrying amount at March 31, 2014                                 2,566,911 
----------------------------------------------------------------------------
---------------------------------------------------------------------------- 
/T/ 
During the period ended March 31, 2014, Peyto capitalized $2.8 million (2013 -
$2.6 million) of general and administrative expense directly attributable to
production and development activities.  
/T/ 
4.  Long-term debt  
---------------------------------------------------------------------------- 
March 31, 2014  December 31, 2013
----------------------------------------------------------------------------
Bank credit facility                              490,000            605,000
Senior secured notes                              270,000            270,000
----------------------------------------------------------------------------
Balance, end of the year                          760,000            875,000
----------------------------------------------------------------------------
---------------------------------------------------------------------------- 
/T/ 
As at March 31, 2014, the Company had a syndicated $1 billion extendible
revolving credit facility with a stated term date of April 26, 2015. The bank
facility is made up of a $30 million working capital sub-tranche and a $970
million production line. The facilities are available on a revolving basis for
a two year period. Borrowings under the facility bear interest at Canadian bank
prime (3% at both December 31, 2013 and 2012) or US base rate, or, at
Peyto's option, Canadian dollar bankers' acceptances or US dollar
LIBOR loan rates, plus applicable margin and stamping fees. The total stamping
fees range between 80 basis points and 225 basis points on Canadian bank prime
and US base rate borrowings and between 180 basis points and 325 basis points
on Canadian dollar bankers' acceptance and US dollar LIBOR borrowings. The
undrawn portion of the facility is subject to a standby fee in the range of
40.5 to 73.13 basis points. 
On December 4, 2013, Peyto issued $120 million of senior unsecured notes
pursuant to a note purchase 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 4.50% and mature on December 4, 2020.
Interest will be paid semi-annually in arrears. 
Peyto is subject to the following financial covenants as defined in the credit
facility and note purchase agreements: 
/T/ 
--  Long-term debt plus the average working capital deficiency (surplus) at 
the end of the two most recently completed fiscal quarters adjusted for 
non-cash items not to exceed 3.0 times trailing twelve month net income 
before non-cash items, interest and income taxes;  
--  Long-term debt and subordinated debt plus the average working capital 
deficiency (surplus) at the end of the two most recently completed 
fiscal quarters adjusted for non-cash items not to exceed 4.0 times 
trailing twelve month net income before non-cash items, interest and 
income taxes;  
--  Trailing twelve months net income before non-cash items, interest and 
income taxes to exceed 3.0 times trailing twelve months interest 
expense;  
--  Long-term debt and subordinated debt plus the average working capital 
deficiency (surplus) at the end of the two most recently completed 
fiscal quarters adjusted for non-cash items not to exceed 55 per cent of 
the book value of shareholders' equity and long-term debt and 
subordinated debt.  
/T/ 
Peyto is in compliance with all financial covenants at March 31, 2014. 
Total interest expense for the period ended March 31, 2014 was $8.7 million
(2013 - $6.3 million) and the average borrowing rate for the period was 4.4%
(2013 - 4.0%).  
Subsequent to March 31, 2014, Peyto's banking syndicate agreed to extend
the stated term date of the credit facility to April 26, 2017. Borrowings under
the amended facility bear interest at Canadian bank prime or US base rate, or,
at Peyto's option, Canadian dollar bankers' acceptances or US dollar
LIBOR loan rates, plus applicable margin and stamping fees. The total stamping
fees range between 50 basis points and 215 basis points on Canadian bank prime
and US base rate borrowings and between 150 basis points and 315 basis points
on Canadian dollar bankers' acceptance and US dollar LIBOR borrowings. The
undrawn portion of the facility is subject to a standby fee in the range of 30
to 63 basis points. 
/T/ 
5.  Decommissioning provision  
/T/ 
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: 
/T/ 
----------------------------------------------------------------------------
Balance, December 31, 2013                                            61,184
----------------------------------------------------------------------------
New or increased provisions                                            2,630
Accretion of decommissioning provision                                   498
Change in discount rate and estimates                                  3,018
----------------------------------------------------------------------------
Balance, March 31, 2014                                               67,330
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Current                                                                    -
Non-current                                                           67,330
----------------------------------------------------------------------------
---------------------------------------------------------------------------- 
/T/ 
Peyto has estimated the net present value of its total decommissioning
provision to be $67.3 million as at March 31, 2014 ($61.2 million at December
31, 2013) based on a total future undiscounted liability of $178.5 million
($177.8 million at December 31, 2013). At March 31, 2014 management estimates
that these payments are expected to be made over the next 50 years with the
majority of payments being made in years 2040 to 2063. The Bank of
Canada's long term bond rate of 2.96 per cent (3.24 per cent at December
31, 2013) and an inflation rate of two per cent (two per cent at December 31,
2013) were used to calculate the present value of the decommissioning
provision. 
/T/ 
6.  Share capital  
/T/ 
Authorized: Unlimited number of voting common shares 
Issued and Outstanding 
/T/ 
Number of Common         Amount 
Common Shares (no par value)                          Shares              $ 
----------------------------------------------------------------------------
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, December 31,2013                        148,758,923      1,130,069 
----------------------------------------------------------------------------
Common shares issued by private placement            211,885          6,997 
Equity offering                                    4,720,000        160,480 
Common share issuance costs, (net of tax)                  -         (5,162)
----------------------------------------------------------------------------
Balance, March 31, 2014                          153,690,808      1,292,384 
----------------------------------------------------------------------------
---------------------------------------------------------------------------- 
/T/ 
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). 
On December 31, 2013, Peyto completed a private placement of 190,525 common
shares to employees and consultants for net proceeds of $6.2 million ($32.78
per share). These common shares were issued January 8, 2014. 
On February 5, 2014, Peyto closed an offering for 4,720,000 common shares at a
price of $34.00 per common share, receiving net proceeds of $153.6 million.  
On March 17, 2014, Peyto completed a private placement of 21,360 common shares
to employees and consultants for net proceeds of $ 0.8 million ($35.20 per
common 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, 2014 of
151,826,431 (2013 - 148,672,664). There are no dilutive instruments
outstanding. 
Dividends 
During the period ended March 31, 2014, Peyto declared and paid dividends of
$0.24 per common share or $0.08 per common share per month, totaling $36.5
million (2013 - $0.18 or $0.06 per common share per month, $26.8 million).  
Comprehensive income 
Comprehensive income consists of earnings and other comprehensive income
("OCI"). OCI comprises the change in the fair value of the effective
portion of the derivatives used as hedging items in a cash flow hedge.
"Accumulated other comprehensive income" is an equity category
comprised of the cumulative amounts of OCI. 
Accumulated hedging gains and losses 
Gains and losses from cash flow hedges are accumulated until settled. These
outstanding hedging contracts are recognized in earnings on settlement with
gains and losses being recognized as a component of net revenue. Further
information on these contracts is set out in Note 8.  
/T/ 
7.  Future performance based compensation  
/T/ 
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:  
/T/ 
March 31, 2014      March 31, 2013 
----------------------------------------------------------------------------
Share price                             $22.58 - $37.72     $22.58 - $26.94 
Exercise price                          $19.91 - $32.03     $19.30 - $22.58 
Expected volatility                                  24%                 25%
Option life                                      1 year              1 year 
Dividend yield                                        0%                  0%
Risk-free interest rate                            1.07%               1.02%
---------------------------------------------------------------------------- 
8.  Financial instruments and Capital management  
/T/ 
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, 2014. 
The Company's areas of financial risk management and risks related to
financial instruments remained unchanged from December 31, 2013. 
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. 
/T/ 
--  Level 1 - quoted prices in active markets for identical financial 
instruments. 
--  Level 2 - quoted prices for similar instruments in active markets; 
quoted prices for identical or similar instruments in markets that are 
not active; and model-derived valuations in which all significant inputs 
and significant value drivers are observable in active markets. 
--  Level 3 - valuations derived from valuation techniques in which one or 
more significant inputs or significant value drivers are unobservable.  
/T/ 
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, 2014, 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, 2014: 
/T/ 
----------------------------------------------------------------------------
Propane                                                                Price
Period Hedged                         Type        Monthly Volume       (USD)
----------------------------------------------------------------------------
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 $37.485/bbl
April 1, 2014 to September 30, 2014   Fixed Price      4,000 bbl $ 41.79/bbl
April 1, 2014 to September 30, 2014   Fixed Price      4,000 bbl $ 42.63/bbl
April 1, 2014 to September 30, 2014   Fixed Price      4,000 bbl $ 44.31/bbl
April 1, 2014 to September 30, 2014   Fixed Price      4,000 bbl $ 46.20/bbl
October 1, 2014 to December 31, 2014  Fixed Price      4,000 bbl $ 42.84/bbl
----------------------------------------------------------------------------
---------------------------------------------------------------------------- 
Natural Gas                                                            Price
Period Hedged                          Type         Daily Volume       (CAD)
----------------------------------------------------------------------------
November 1, 2012 to October 31, 2014   Fixed Price      5,000 GJ $ 3.0575/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
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
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
April 1, 2014 to October 31, 2014      Fixed Price      5,000 GJ $  3.335/GJ
April 1, 2014 to October 31, 2014      Fixed Price      5,000 GJ $   3.10/GJ
April 1, 2014 to October 31, 2014      Fixed Price      5,000 GJ $   3.80/GJ
April 1, 2014 to October 31, 2014      Fixed Price      5,000 GJ $  3.825/GJ
April 1, 2014 to October 31, 2014      Fixed Price      5,000 GJ $   3.95/GJ
April 1, 2014 to October 31, 2014      Fixed Price      5,000 GJ $   3.98/GJ
April 1, 2014 to October 31, 2014      Fixed Price      5,000 GJ $   4.07/GJ
April 1, 2014 to October 31, 2014      Fixed Price      5,000 GJ $   4.32/GJ
April 1, 2014 to October 31, 2014      Fixed Price      5,000 GJ $   4.35/GJ
April 1, 2014 to October 31, 2014      Fixed Price      5,000 GJ $   4.55/GJ
April 1, 2014 to October 31, 2014      Fixed Price      5,000 GJ $   4.42/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.82/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.44/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.52/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $ 3.4725/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $  3.525/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.60/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.27/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.41/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $ 3.5575/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $  3.465/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.43/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.54/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.50/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.25/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.25/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.23/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.23/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.23/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.31/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $ 3.3525/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.40/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.49/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.54/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.61/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.70/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.75/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.81/GJ
April 1, 2014 to March 31, 2015        Fixed Price      5,000 GJ $   3.83/GJ
November 1, 2014 to March 31, 2015     Fixed Price      5,000 GJ $   3.81/GJ
November 1, 2014 to March 31, 2015     Fixed Price      5,000 GJ $   3.95/GJ
November 1, 2014 to March 31, 2015     Fixed Price      5,000 GJ $   4.05/GJ
November 1, 2014 to March 31, 2015     Fixed Price      5,000 GJ $   4.12/GJ
November 1, 2014 to March 31, 2015     Fixed Price      5,000 GJ $   4.20/GJ
November 1, 2014 to March 31, 2015     Fixed Price      5,000 GJ $   4.44/GJ
November 1, 2014 to March 31, 2015     Fixed Price      5,000 GJ $  4.585/GJ
November 1, 2014 to March 31, 2015     Fixed Price      5,000 GJ $   4.78/GJ
November 1, 2014 to March 31, 2015     Fixed Price      5,000 GJ $   4.60/GJ
November 1, 2014 to March 31, 2015     Fixed Price      5,000 GJ $   4.58/GJ
November 1, 2014 to March 31, 2015     Fixed Price      5,000 GJ $   4.68/GJ
April 1, 2015 to October 31, 2015      Fixed Price      5,000 GJ $  3.285/GJ
April 1, 2015 to October 31, 2015      Fixed Price      5,000 GJ $   3.30/GJ
April 1, 2015 to October 31, 2015      Fixed Price      5,000 GJ $   3.35/GJ
April 1, 2015 to October 31, 2015      Fixed Price      5,000 GJ $   3.40/GJ
April 1, 2015 to October 31, 2015      Fixed Price      5,000 GJ $   3.47/GJ
April 1, 2015 to October 31, 2015      Fixed Price      5,000 GJ $   3.48/GJ
April 1, 2015 to October 31, 2015      Fixed Price      5,000 GJ $   3.52/GJ
April 1, 2015 to October 31, 2015      Fixed Price      5,000 GJ $   3.70/GJ
April 1, 2015 to October 31, 2015      Fixed Price      5,000 GJ $   3.75/GJ
---------------------------------------------------------------------------- 
/T/ 
As at March 31, 2014, Peyto had committed to the future sale of 204,000 barrels
of propane at an average price of $45.82 CAD ($41.45 USD) per barrel and
100,285,000 gigajoules (GJ) of natural gas at an average price of $3.58 per GJ
or $4.12 per mcf. Had these contracts been closed on March 31, 2014, Peyto
would have realized a loss in the amount of $82.0 million. If the AECO gas
price on March 31, 2014 were to increase by $1/GJ, the unrealized loss would
increase by approximately $100.3 million. An opposite change in commodity
prices rates would result in an opposite impact on other comprehensive income.  
Subsequent to March 31, 2014 Peyto entered into the following contracts: 
/T/ 
----------------------------------------------------------------------------
Natural Gas                                                            Price
Period Hedged                       Type          Daily Volume         (CAD)
----------------------------------------------------------------------------
November 1, 2014 to March 31, 2015  Fixed Price       5,000 GJ $     4.68/GJ
November 1, 2014 to March 31, 2015  Fixed Price       5,000 GJ $     4.80/GJ
November 1, 2014 to March 31, 2015  Fixed Price       5,000 GJ $     4.87/GJ
April 1, 2015 to March 31, 2016     Fixed Price       5,000 GJ $   3.9175/GJ
April 1, 2015 to March 31, 2016     Fixed Price       5,000 GJ $     3.93/GJ
April 1, 2015 to March 31, 2016     Fixed Price       5,000 GJ $     4.00/GJ
April 1, 2015 to March 31, 2016     Fixed Price       5,000 GJ $     4.05/GJ
---------------------------------------------------------------------------- 
9.  Commitments  
/T/ 
Following is a summary of Peyto's contractual obligations and commitments
as at March 31, 2014.  
/T/ 
2014   2015   2016   2017   2018 Thereafter
----------------------------------------------------------------------------
Note repayment(1)                   -      -      -      -      -    270,000
Interest payments(2)            8,815 12,230 12,230 12,230 12,230     22,755
Transportation commitments     13,580 19,531 18,796 14,975 11,261     13,356
Operating leases                2,126  2,380  1,863  1,654  1,295     10,356
----------------------------------------------------------------------------
Total                          24,521 34,141 32,889 28,859 24,786    316,467
----------------------------------------------------------------------------
(1) Long-term debt repayment on senior secured notes                        
(2) Fixed interest payments on senior secured notes                          
10. Contingencies  
/T/ 
On October 31, 2013, Peyto was named as a party to a statement of claim
received with respect to transactions between Poseidon Concepts Corp. and Open
Range Energy Corp. The allegations contained in the claim are based on factual
matters that pre-existed Peyto's involvement with New Open Range which
makes them difficult to assess at this time. However, Peyto intends to
aggressively protect its interests and the interests of its shareholders and
will seek all available legal remedies in defending the action. Management
continues to assess the nature of this claim, in conjunction with their legal
advisors. 
Officers 
/T/ 
Darren Gee, President and Chief                                           
  Executive Officer                    Tim Louie, Vice President, Land       
Scott Robinson, Executive Vice                                            
  President and Chief Operating        David Thomas, Vice President,        
  Officer                              Exploration                           
Kathy Turgeon, Vice President,       Jean-Paul Lachance, Vice President,  
  Finance and Chief Financial Officer  Exploitation                          
Stephen Chetner, Corporate Secretary                                      
Directors                                                                   
  Don Gray, Chairman                                                        
  Stephen Chetner                                                           
  Brian Davis                                                               
  Michael MacBean, Lead Independent Director                                
  Darren Gee                                                                
  Gregory Fletcher                                                          
  Scott Robinson                                                            
Auditors                                                                    
  Deloitte LLP                                                              
Solicitors                      
  Burnet, Duckworth & Palmer LLP
Bankers                                                                     
  Bank of Montreal                                                          
  Union Bank, Canada Branch                                                 
  Royal Bank of Canada                                                      
  Canadian Imperial Bank of Commerce                                        
  The Toronto-Dominion Bank                                                 
  Bank of Nova Scotia                                                       
  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                                                 
Toronto Stock Exchange                                                   
/T/ 
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FOR FURTHER INFORMATION PLEASE CONTACT: 
Peyto Energy Trust
Darren Gee
President and CEO
403.261.6081
403.451.4100
www.peyto.com 
INDUSTRY:  Energy and Utilities - Oil and Gas  
SUBJECT:  ERN 
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-0- May/14/2014 20:42 GMT
 
 
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