Hello, and welcome to the Annual General Meeting of shareholders of Advantage Energy Ltd. Please note that today's meeting is being recorded. If you participate in today's meeting and disclose personal information, you will be deemed to consent to the recording, transfer, and use of same. If you disclose personal information of another person in today's meeting, you will be deemed to represent and warrant to Computershare and the corporation that you first obtained all required consents for the disclosure, recording, transfer, and use of such personal information from all appropriate persons before your disclosure. During the meeting, we'll have a question and answer session. You may submit questions or comments at any time by clicking on the message icon. It is now my pleasure to turn today's meeting over to Steven Balog, Chairman of the Board. Mr. Balog, the floor is yours.
Welcome to the Annual General Meeting of shareholders of Advantage Energy Ltd. My name is Steve Balog. I am the Chairman of the Board of Advantage, and in accordance with the bylaws of Advantage, will act as Chairman of this meeting. This year, the Annual General Meeting of shareholders is being hosted on the Computershare virtual meeting platform. This allows registered shareholders and duly appointed proxy holders to vote and to submit questions and comments to the moderator to be read and addressed at the meeting. If you have a question or comment, please submit it through the moderator. Questions directly related to the motions before the meeting may be addressed during the meeting. All other questions will only be addressed during the question period at the end of the meeting. Following the formal portion of the meeting, Mr.
Mike Belenkie, our President and Chief Executive Officer, will present an overview of Advantage's operations and results and an update on Advantage's subsidiary, Entropy Inc. The meeting will now come to order. With your approval, I shall ask Jay P. Reid as Secretary of the meeting and Keith Claremont, a representative of Computershare Trust Company of Canada, to act as scrutineer. I have received confirmation from Computershare Trust Company of Canada as to the mailing of the Notice of Annual General Meeting of Shareholders, Information Circular, Proxy Statement, Instrument of Proxy, Notice and Access Notification, and 2022 annual report to shareholders in compliance with applicable securities requirements. I direct that the confirmation, together with copies of the documents mailed to the shareholders, be kept by the Secretary with the minutes of this meeting.
If there is no objection, the reading of the notice of meeting will be dispensed with. Pursuant to the bylaws of the corporation, business may be transacted at this meeting if there are persons present not being less than two in number and holding or representing not less than 25% of the shares entitled to be voted at the meeting. I have the scrutineer's report, which shows that there is a quorum of shareholders present at the meeting. I now declare that the meeting is regularly called and properly constituted for the transaction of business. We will conduct each vote by way of vote cast on the Computershare virtual platform and those submitted by proxy. I will now take a moment to ask that the polls be opened to registered holders and duly appointed proxy holders. The polls are now open.
Please note that while the Computershare virtual platform permits voting by registered holders and duly appointed proxy holders, you should not use this feature to vote if you have already submitted a proxy, as it will automatically cause your prior vote to be revoked. At this point, all registered holders and duly appointed proxy holders who have properly logged in with their control number or invitation code and wish to vote should click the Voting button on the top right-hand portion of the platform to submit votes. You will be able to see on the screen all motions being brought forth at this meeting, including a motion to terminate the meeting, which will be enacted after the announcement of the voting results on the matters considered at this meeting. Please register your votes by selecting the For, Against, or Withheld buttons, as applicable, next to each of the resolutions.
You will only have a certain amount of time to vote. The polls will remain open during the period that all of the motions for matters to be considered at the meeting are being made and seconded. Once all of the motions for matters to be considered at the meeting have been made and seconded, we will give registered shareholders and duly appointed proxy holders 30 additional seconds to finish voting. Polls will be closed. Particulars of the votes cast on all matters may be obtained from the secretary after the meeting. I direct that the scrutineer's report on all matters be annexed to the minutes of this meeting as is scheduled.
The first item of business is the placement before shareholders of the financial statements of Advantage for the fiscal year ended December 31st, 2022. A copy of Advantage's annual report, which includes financial statements, has been mailed to each registered shareholder with a copy also located on the Computershare virtual dashboard page. The next item of business is to fix the number of directors to be elected at the meeting.
I move that the number of directors to be elected at this meeting be fixed at nine directors.
I second the motion. As previously noted, voting on this resolution will be conducted on the Computershare virtual platform. We will report the results of the meeting once all of the motions for matters to be considered at the meeting have been made and seconded. The next item of business is the election of nine directors of Advantage. In accordance with Advantage's advance notice bylaw, the only individuals entitled to be nominated as directors at this meeting are the persons named as nominees in Advantage's Information Circular for this meeting. Therefore, I will now entertain a motion nominating such individuals for election as directors of Advantage.
I nominate Jill T. Angevine, Steven E. Balog, Michael E. Belenkie, Deirdre M. Choate, Donald M. Clague, Paul G. Haggis, Norman W. MacDonald, Andy J. Mah, Janine J. McArdle as directors of Advantage Energy Ltd to hold office until the next annual election of directors or until their successors are elected or appointed, subject to the provisions of the Business Corporations Act ( Alberta), and the bylaws of Advantage Energy Ltd.
I second the nominations. As previously noted, voting on this resolution will be conducted on the Computershare virtual platform. We will report the results of the voting once all the motions for matters to be considered at the meeting have been made and seconded. I will now entertain a motion for the appointment of the auditors of Advantage.
I move that the firm of PricewaterhouseCoopers LLP Chartered Professional Accountants be appointed auditors of Advantage Energy Ltd. until the next annual meeting or until their successors are appointed, and that their remuneration as such be fixed by the Board of Directors.
Second the motion. As previously noted, voting on this resolution will be conducted on the Computershare virtual platform. We will report the results of the voting once all of the motions for matters to be considered at the meeting have been made and seconded. The final item of business is to arrange for the termination of the formal portion of the meeting. May I have a motion that the formal portion of the meeting be terminated following the announcement of the voting results on the matters considered at this meeting?
I make that motion.
I second the motion. As previously noted, voting on this resolution will be conducted on the Computershare virtual platform. We will report the results of the voting once all the motions for matters to be considered at the meeting have been made and seconded. Are there any questions on any of the motions from any registered shareholders or newly appointed proxy holders? I am advised that there are no questions. We will provide registered shareholders and newly appointed proxy holders approximately 30 more seconds to complete the electronic ballots. The polls are now closed. I would ask that the scrutineer compile a report regarding the results of voting in all business matters. I have been advised by the scrutineer that all resolutions have been approved by more than the requisite number of votes required. Therefore, I declare all of the resolutions carried.
I direct the results of the poll be included with the minutes of this meeting. The results of the voting on directors will be announced in a press release in accordance with the policies of the Toronto Stock Exchange. In adherence to the approved termination motion, I declare this meeting terminated. No other questions. With the formal portion of the annual meeting complete and there being no further questions, I will now turn the meeting over to Mr. Mike Belenkie, Advantage's President and Chief Executive Officer, who will now present an overview of Advantage's operations and results. Thank you.
Mike.
Thank you very much, Steve. I'll walk through our publicly available slide deck, which is also available on our webpage.
Should take about 15 or so minutes, after which point we'll be able to take questions if there are any. I'll start with the introduction to our corporate highlights. For those of you that are shareholders, you'll know much of this. The company is a mid-sized gas-weighted producer with high-quality assets, low net debt, and strong ownership of facilities, along with a carbon capture and storage development subsidiary called Entropy Inc. Our guidance is to grow at about 10% per year over the next three years by spending between CAD 250 million- CAD 300 million, with spending in the year 2023 to be approximately CAD 250 million-CAD 280 million. Current production guidance is between 59,000 and 62,500 boe/d.
Our corporate strategy is nice and straightforward, as most of you would know. Because the company has a strong balance sheet, has strong assets and existing infrastructure that allows us to operate in an efficient way, our strategy is focused on profitability. First and foremost, to deliver free cash and growth to maximize shareholder returns. The current state of the business is strong in all aspects of these approaches, and the intent is to continue to grow and shrink our share count in order to compound the value of that growth.
The one-year guidance for Advantage, again, is CAD 250 million-CAD 280 million, of which 16 wells, which buys us 16 wells in Glacier and nine wells in our liquids-rich assets, Valhalla and Wembley, as well as approximately CAD 40 million of infrastructure investment that allows us to grow our total processing capacity. With all those inputs, our net debt is expected to remain between CAD 170 million- CAD 230 million, and any free cash will be directed to our ongoing share buybacks. The added benefits of our ownership and high-quality assets bring us to a very low operating cost structure.
We do have a strong and growing processing revenue stream, as well as capital efficiencies that, depending on what we're chasing with our primary drilling targets, tend to be top quartile within our peer group. Slide five is a overview of our three-year plan. We show right down to area by area and use of that capital, how we intend to spend our capital in the next three years. Each of the three years, spending is between CAD 250 million-CAD 300 million. That delivers about, well, over a 10% compound annual growth rate in production. We show the production on the right side and the ranges of outcomes there. You'll note that there are allowances for capacity expansions in each of those three years.
The current year capacity expansions being around CAD 40 million, 2024 being around closer to CAD 50 million, and 2025 being back towards CAD 40 million. Those expansions allow for capacity growth or for production growth in the following year. Should there be a change to a capital program, it would typically come out of capacity expansions first. That gives us a lot of flexibility to either accelerate or restrict our capital and the associated growth with that when commodity markets change. Elasticity for a company like ours is baked in. Of course, the output which we target most is Adjusted Funds Flow per share growth. Because in the energy space, especially in the midcap size, we believe almost all peers trade at about the same multiple of funds flow.
Advantage is focused on growing funds flow per share as the most direct way to control our value proposition. With the current plan and with the current and stated forward strips for commodity pricing, our current plan will deliver approximately 20% compound annual growth in AFF per share. If you look closely, the lighter color of orange in the next two years shows the direct impacts of the planned share buyback under the existing free cash flow assumptions. What that free cash flow does is we do our share buyback, is it doesn't just increase the current AFF per share, but has a compounding impact as our production grows. That allows us to go from a 10% production per share growth to a 20% AFF per share growth. That compounding with forward strip pricing.
Of course, we think about budgeting carefully and conservatively. We have in the slide on the right or in the graph on the right that shows that at about a $2 per MMBtu Henry Hub price, we can cover our capital spending without increasing debt or any outside capital. It's a fully funded program at $2 per MMBtu annualized. Of course, anything above that price is free cash for the buybacks. Slide seven shows an overview of the four assets, all within one map sheet. The gaps between those four assets are approximately 3 mi each. In most cases, many companies would see this as being one asset base. We've named them separately because each asset has its unique set of characteristics.
Overall, they share the same sort of quality and provide a lot of flexibility in how we deploy our capital, with Glacier being lean, the leanest of the assets, although there are liquids rich targets within Glacier. Wembley being oil, and Valhalla and Progress between being a combination of oil and liquid- rich gas. Slide eight is a overview of our operating cost and total cost structure versus peers. You'll note that we fall on the very on the left side, very close to the bottom. We also include our transportation expense, even though transportation expense is, as a general rule, is actually when you have long-haul pipe, you tend to get higher net backs associated with that. It's not the normal expense model that you might consider.
Op cost and royalty expenses fall, again, top decile, roughly within our peer group. That's because we have almost entirely 100% working interest, very low well count on a relative basis, our own infrastructure and very efficient operations. Those designs have been built and executed for the last, realistically, the last 15 years, plus or minus, with Glacier, the asset itself, being in operation for about 12 years in its current state. That's baked into our DNA and baked into the DNA of the actual assets and facilities. We talked about the drilling that we're doing. We're lucky to have a huge amount of inventory for a company our size. That good fortune comes from both the aerial extent of the assets, but also the thickness of the resource package.
For much of our resource base, we have 300 metres thick of Montney section, which allows us to have multiple tiers of development. Across the whole area, we're developing multiple zones as well, or multiple benches within the Montney. When you look at the targets that are most active right now, it allows us to avoid any notion of this being sweet spot drilling. We don't expect to run out of our tier one asset drilling for approximately 20 years. Zooming into Glacier as an asset, there are lots of sticks on the map showing the amount of drilling done to date. We figure we're probably in about the fourth inning at Glacier in terms of the maturity asset.
We have had incredible gains at Glacier, where the wells we're drilling now are actually producing approximately triple what they used to produce as recently as four years ago, thanks to a combination of different approaches from our, the entire group of the technical team, from geology, geophysics, drilling completions, and even production engineering, along with making sure that our pipe and plants are ready for that increase in production that happens so rapidly. We compare ourselves to our peers. You can see that we are certainly drilling outlier wells versus peers, and pound for pound, this asset is very difficult to compete with. We also show a lot of detail on these pages because the range of outcomes on what we do is now very low, which means it's very predictable.
We tend to disclose as granular as monthly production forecasts and certainly our cash flow and capital forecasts for this area, for this asset. Across our map sheet to the Wembley asset. This is a newer asset, which I'd say we're in our second inning. You'll see that we've actually had two seasons, if you look on the bottom right, which shows all the well results that we've delivered in two separate campaigns. To date, we've had great outcomes. We're still making up some of that productivity that one of our peers has been able to deliver just to our west, we're actually beating several of our peers in the area at Wembley.
We think of Wembley as being a world-class oily Montney asset, and we intend to grow this asset by about 2x this year, at which point we'll start to taper or start to plateau around 10,000 boe/d . This is a very active area for us this year, in no small part because it's oil rich, where we have seen the gas pricing has been weakening after a rapid growth in this part of the States. We have a heavy deployment of our capital in Wembley this year, where we expect oil prices to be more resilient. Same thing with every other asset. We tend to show a great deal of dis-disclosure and accuracy and granularity on all the data here.
Suffice it to say, this is a crown jewel of an asset. We move over to Valhalla and Progress, which are our two least mature assets, with Valhalla being slightly more mature than Progress. Both these assets are limited only by the fact that their infrastructure has been full for quite some time. At Valhalla, we've drilled two of the best wells that the company's ever drilled. At Progress, we've drilled the best oil well that we have ever delivered as a company. Because they're behind facilities and because we're focused on AFF or cash flow per share growth, drilling wells, spending capital into existing facilities tends to have a higher rate of return. Therefore, we focus our efforts at Wembley, and that's, of course, Glacier.
These two assets won't form much of our future in the mid to long term, and we intend to build a gas plant or convert our compressor station to a gas plant on these assets in about two years' time, maybe a year and a half time, assuming that the market continues to remain encouraging. Slide 13 is an overview of genericized type- well economics. You can see that at low prices, all these assets, all the zones that we tend to think of as our primary targets, are still quite economic, with 50% + rates of return. As you climb, you start to see some of those results that we were able to deliver during the year 2022.
In some cases in 2022, flipping to the next slide, we were able to see wells pay out in as little as three months. In a few cases, we had wells that paid out 300%. That's 3x payouts within six months. Quite an unusual time when you can drill wells where you can receive a full payout prior to actually getting the bills from the drilling company. That's not something that we expect to return in the near future, but it's certainly a testament to the quality of the assets and the efficiency that we've drilled these assets up. Again, this is all of the last two drilling seasons that we've had. Every well shows up back to actually as early as 2020. Three years ago now.
We show capital per well, the gross operating net back of each well, and then the payouts of each of those wells along the way. We can do this because, first of all, our range of outcomes has been so tight and so strong, and secondly, because we have very strong data management systems that make full disclosure easy for us. Again, thinking back to our accomplishments from last year, slide 15 shows that within Alberta, Advantage drilled eight of the top 10 Montney wells of the year, and 11 of the top 20 wells of the year. Incredible outcomes. That's not I mean, definitely including some of the wells that were drilled around the end of the year, which have all outperformed every single well drilled in Alberta Montney last year. More of those wells to come.
We probably see about 12 of those coming on here in the first quarter as data becomes available. Since the geopolitical instability we've seen in the last year, along with some ramping in other plays in other parts of North America, we've had a lot of questions about how our inventory compares to others, and in particular, the quality of our inventory. We put together three pretty clear slides here to make sure that these things are available for all to check. The long story short on our inventory is that Advantage has about 50 years of inventory of which we currently consider to be tier one, 20 years' worth of inventory.
For a well to be considered tier one, it must be both within 2 mi of existing production, existing tier one production, and it has to be the same high rock quality that we expect to see from geological levels. These are not simply four wells per section multiplied against the number of sections. This is actually detailed geological scoping with nearby well productivity proving the level of tiering that we've used. Of course, as you can see from the pie chart, there's no concentration of this inventory in one area. These inventory wells are scattered across the entire asset base. That's why we have this sort of 50+ years inventory in front of us. Okay? That, of course, plays into our growth strategy.
With all that inventory, as much as 10 or 20 years in the future, what we can do for shareholders most is to make sure that that inventory gets monetized in some way far forward. Slide 17 is an example of bringing inventory, sorry, what we would call untiered or tier two inventory into the tier one. The left graph is from about three years ago. The left map is from about three years ago. The right map is from last year. As we drill new wells into areas that were not well established, we have the ability to display and demonstrate the tier one nature of that rock and the productivity. You can see in areas in the Northeast, we had wells, a new well.
It's an old well at 1.4 million a day IP30 well. A new well came in at 9.5. Same thing, on the lower example, 1.8 million a day became 15.4 million a day. Of course, the rock around those results gets promoted from untiered into tier one inventory. That's just one example. That's the one zone. Of course, we have five target zones at Glacier alone. As we drill more, you know, it's not uncommon for people to start to drill through their tier one inventory and watch their tier one numbers shrink. For us, as we drill more tier one inventory, our numbers have been growing. That's because of that previous slide showing how we promote areas from being underdefined into tier one.
One last, one quick note here to talk about infrastructure. One of the things that makes Advantage is the Glacier Gas Plant in the bottom right corner in the photo. That asset is really a CAD 800 million infrastructure asset when you factor in the plant plus the pipes. On top of that, we have compressors and oil batteries at Valhalla, Progress, and Wembley. Keep in mind that our market cap is currently CAD 1.2 billion. Those investments in infrastructure have created this structural cost advantage and the structural control that allows us to do what we do. If we were to have used a midstreamer to build those facilities, we'd have sort of off-balance sheet financing for that asset and a much higher structural cost, which looks a lot like debt.
By avoiding midstreamers, for the lion's share of our infrastructure, we keep control, we keep our costs low. Of course, it gives us a strategic advantage by dominating the area. On the gas marketing side, we do have a strong diversification book. Part of our strategy of growing by about 10% per year is underpinned by the goal of growing our export pipeline by about 10% per year. We don't believe that AECO is a good market. We think that it's actually managed in a way that's somewhat dysfunctional, and it's been that way for more than half a decade. It's tough to see that improving, at least to improve in a sustainable way, just based on the fact that it's as complex as it is.
In order to mitigate that risk, that concentration at AECO has been reduced significantly. We now expect to have roughly 8% exposed to AECO this summer. We vary that based on our outlook for pricing in the markets. In the meantime, while we're avoiding AECO, we're typically getting exposure to places like Dawn, Chicago, Ventura, and in some cases, Hub via financial hedges. We will continue through the year here with modest hedging to reduce volatility in the sort of face of very volatile gas prices. Broadly speaking, if we're bearish, we hedge a little more. If we're bullish, we hedge a little less. That's brings us to really where we start talking about Entropy.
We've had lots of focus on sustainability through the life of the company. We have been around for more than 20 years. Really, you know, the product of the 20 years of responsible development and sustainability, became what Entropy is now. That is really a focus on applying our expertise and skills in low- cost, safe operations and efficient operations, and taking that one step further and investing in carbon capture storage. As we think about Entropy's business is like an inversion of the traditional resource business, where we capture the emissions from, the burning of energy, and we put them back in the ground where they came from. It's a nice way to close the loop, and it's a natural hedge to Advantage's business as it relates to exposure to carbon policy. How do we do this?
Well, we have a pure play focus on it. It's very complicated, and it's difficult to do in your spare time. We have a pure play focus. We developed a team, assembled a team of expertise, that includes subsurface for storage, includes process engineering, includes the engineering procurement construction management, includes operations management, as well as the commercial and data management systems that are required to make this type of complex project possible, and possible at today's carbon pricing. On top of that, to address the pricing challenges, ownership of the best technology gives us a huge structural advantage. Lastly, this is a capital-intensive business. We have access to capital, thanks to the investment we received from Brookfield.
This was announced a year and a quarter ago, where Brookfield agreed to invest CAD 300 million into Entropy in exchange for what will eventually become approximately half the company. As we spend money on carbon capture projects within Entropy, Brookfield funds those costs 100%. All the work we do within Entropy is at no capital cost to Advantage. This is a different business. Infrastructure-style returns. It's certainly not an appropriate use of Advantage's high cost of capital cash flow. We deployed a few. A bit more explanation on the way the business works. This is an inversion of the traditional resource business, we take the resource out of the pipe, out of the tailpipe of a, of a industrial emitter. For us, carbon dioxide is the resource. This is for Entropy.
Carbon dioxide is the resource. We process that resource from being low concentration CO2 and mixed gases, and we purify it, which is necessary in order to inject it into the rock, the subsurface and the storage zones where it's permanently stored safely. Then in order to get revenue from this process, really, it requires carbon offsets. You're creating a derivative, carbon offsets, which we sell to monetize. The sale of those derivatives or those carbon offsets is our revenue stream. Okay? The business itself is essentially the opposite direction of the oil and gas business, where you're taking this exhaust, and you're putting it back where it came from and getting paid for that. On a technical level, we started with what is known to be the only currently viable industrial solution for scrubbing carbon dioxide out of mixed gases, which is amine-style processing.
We were able to secure what we believe to be the most advanced amine technology in the world, based empirically on the data from the University of Regina, who developed this technology over the last decade. When we acquired this technology, we had great hopes. In the last nine months since we've been running this technology at the Glacier Gas Plant, it's delivered on those high hopes with an energy intensity now just delivered of about 2.4 GJ per tonne of carbon captured, which is perhaps 40% better than off-the-shelf generic engineering would deliver. In addition to that, though, again, this is about managing a very complicated, very new industry.
We had to develop a calculation and data management platform to manage all the data, to manage all the energy flows, as well as all the costs, op costs and variables in operating the systems. EntropyIQ was announced a couple months ago as the first sort of data management platform that's available for managing and reporting CCS projects. This will be available to anyone, whether they're working with Entropy on carbon capture or not. A quick real-life photo of the first phase of carbon capture and storage at the Glacier plant. It's important to note that gas-fired CCS, while everyone's known it's possible and certain elements have been done in pilot stage or pilot level in the past, the Glacier first phase CCS project is the first gas-fired project in the world to run. It's running well.
The team's done a great job. The learnings from phase I have allowed us to stretch our lead over other what might be competing technologies at some point. We show a little bit of background on how this makes money. Basically, we invest in the carbon capture project. We do receive in Canada an investment tax credit. After that, we receive carbon offsets for every tonne generated. By selling those offsets at what's expected to be a 10% discount versus face value, we receive our cash flow. The economics of these projects will be variable, but illustratively, they have the potential to be 20%-30% rate of return.
Of course, what's happening right now in Canada is the evolution of carbon policy. Unfortunately, it's been slow to become really refined, but we have some degree of faith that in the coming year or so, the markets will be better established such that very large investments can be made in Canadian carbon capture. Meanwhile, while we're waiting for that, we're putting our resources to work in the United States with several projects underway. A quick shout-out to the fact that carbon capture and storage can't be done without the S, the storage piece. We do apply Advantage's long and strong history of subsurface expertise. In fact, that led us to being awarded two separate global -scale storage hubs. Number one, the Grande Prairie Net- Zero Gateway in partnership with Keyera and North River, which is gonna be capable of storing 3.3 megatonnes per annum.
The second one, the Bow Valley Hub, in partnership with Inter Pipeline. That one will be capable of storing about five megatonnes per annum. Both those projects are global scale and create an opportunity to gather and store more carbon, but also the ability for us to work on projects that we currently are developing the capture for as well. In addition to that, we have two local storage projects, Glacier and Athabasca Leismer, which is on hold waiting policy to develop. More to come on Entropy in the coming quarters. The long goal for Entropy is to reach IPO, at which point Advantage would be able to offer our common equity for sale through a secondary. Through that sale process, that capital would return to Advantage shareholders via the strategy of the day, potentially still share buybacks or dividends.
The goal there, of course, is to turn Entropy what we've created with Entropy into a cash return for Advantage shareholders. With that really is the end of my overview of the business of Advantage and Entropy. If there are no questions, which there don't appear to be, I would throw this back to Steve, Mr. Balog, to conclude the meeting.
Thank you, Mike. This concludes the informal portion of the meeting.
Thank you. This will conclude the meeting. You may now disconnect and have a pleasant day.