Bakken and Permian: Deal Metrics
in the Two Hottest Plays
Ward Polzin
July 11, 2012
Industry Leading Investment Banking Practice
Top Energy Advisor(1)
Advisory
($ in millions)
2010 - 2012 YTD
Firm
2010 - 2012 YTD
# Deals
Firm
Value ($MM)
$143,412
Capital Markets
„
Sell-side & Buy-side
„
Public Equity
„
Joint Ventures
„
Hybrids
„
Opinions
„
Fixed income
Tudor Pickering Holt & Co
63
Barclays
RBC Capital Markets
45
Goldman Sachs
121,989
„
S
Special
i lC
Committee
itt
„
P i t placements
Private
l
t
Barclays
44
Tudor Pickering Holt & Co
76,902
„
Strategic advisory
„
QIU
Jefferies & Company
37
Credit Suisse
71,046
Bank of America Merrill Lynch
34
Evercore Partners Inc
65,828
„
Restructuring
Goldman Sachs
30
Citi
64,354
JPMorgan
30
Morgan Stanley
60,881
C dit SSuisse
Credit
i
28
J ff i & Company
Jefferies
C
57 868
57,868
Citi
28
JPMorgan
50,179
Deutsche Bank
20
Deutsche Bank
40,258
Overview
Managing
Director
11
Senior Advisor
1
Director
3
Associate
9
OFS
Power
Upstream
TPH combines banking expertise with engineering talent to deliver
high quality advice to energy clients
„
Analyst
12
Midstream/MLP
„
Senior execution expertise in M&A,
Corporate Finance, A&D and
Capital Markets
„
Industry/engineering expertise
integrated into IB effort across all
sectors
„
Three-year old team achieved
>25%
25% market share(1) in 2010
Vice President
4
T t lT
Total
Team: 40
Coverage of Midstream/MLP, OFS,
Power and Upstream sectors
Banking Expertise
___________________________________
(1)
Source: Dealogic: United States Oil & Gas – Exploration & Development/Field Equipment & Services/Diversified/Pipeline and
Utility & Energy – Gas, pending and completed M&A transactions announced 1/1/2010 to 6/22/2012.
Engineering Talent
2
TPH Resource Experience
TPH Investment Banking
TPH Research
Bakken
„
„
„
„
„
„
„
„
„
„
Current Sell-side: Helis Oil & Gas
Current Sell-side: Cornerstone Natural Resource
Buy-side: Crestview Partners acquisition of Samson Investment Company
Buy-side: Statoil ASA acquisition of Brigham Exploration
Sell-side: Citation Oil & Gas Corp. sale to multiple buyers
Sell-side: Kaiser Francis Oil Company
Sell-side: TRZ Energy (Tracker) sale to Hess
S ll id A
Sell-side:
American
i
Oil & G
Gas sale
l tto Hess
H
Atinum investment in Triangle Petroleum
Capital markets: Oasis IPO/high yield & multiple BEXP follow-on offerings
Permian
e
a
„
„
„
„
„
„
„
„
Buy-side: Apollo & Riverstone acquisition of El Paso’s upstream business
Buy-side: Laredo Petroleum acquisition of Broad Oak Energy
Sell-side: OGX Resources sale to undisclosed buyer
Sell-side: Eagle Oil and Gas to Comstock Resources
S ll id RKI Exploration
Sell-side:
E l ti & P
Production
d ti equity
it investment
i
t
t
Sell-side: Yates Drilling Company to undisclosed buyer
Buy-side: Crestview acquisition of equity in Select Energy Services
Sell-side: Arena Resources merger with SandRidge Energy
Sell-side: Antares Energy sale to Chesapeake
Buy-side: CNOOC/Chesapeake Joint Venture
Sell-side: Pioneer Joint Venture with Reliance
B
Buy-side:
id L
Large iintegrated
t
t d
Buy-side: Potential $400MM private equity investment
„
Eagle Ford
„
„
„
„
„
„
„
„
„
Sell-side: Ellora Energy sale to ExxonMobil
Sell-side: Undisclosed Private Company to undisclosed buyer
Buy-side: Large public company seeking to establish E Tx position
Regency/GE/Alinda Haynesville Expansion Project (midstream)
„
„
„
„
„
Buy-side:
Buy-side:
Buy-side:
Sell-side:
$400MM Private Equity Joint Venture
Enerplus Joint Venture with Chief for $406MM
Potential $500MM Private Equity investment
Quest Resources Corp to Multi
„
„
„
„
Sell-side:
Sell-side:
Sell-side:
Buy-side:
DIA mineral lease sale
Undisclosed p
private company
p y
Joint Resources
CNOOC/Chesapeake Joint Venture
„
„
Sell-side: Marquette sale to Hess
Sell-side: PDC Energy Joint Venture
Haynesville
Marcellus
Ni b
Niobrara
Utica
„
„
„
„
„
„
„
„
„
Upstream companies covered with Bakken exposure: 12
□
Selected Bakken operator coverage: CLR, EOG, HES,
NFX, OAS, OXY, STO, WLL, XOM
Published detailed Williston Basin primer
Upstream companies covered with Permian exposure: 24
□
Selected Permian operator coverage: APA, APC, BRY,
CXO, DVN, EOG, OXY, PXD, SD, WLL, XEC
Published detailed Permian Basin primer focused on the
S b
Spraberry
T
Trend
d iin M
March
h 2009
Upstream companies covered with Eagle Ford exposure: 15
□
Selected Eagle Ford operator coverage: APC, EOG,
GDP, HK, NFX, PXD, ROSE, SM
R
Recently
tl released
l
d “Sh
“Shallow
ll
Di
Dive”
” iinto
t E
Eagle
l F
Ford
d iin 2010
Continuing close coverage of well results in play
Upstream companies covered with Hayesville exposure: 13
□
Selected Haynesville operator coverage: APC, BG, CHK,
GDP, RRC, XCO, XOM
Significant recent focus on midstream issues in basin
Upstream companies covered with Marcellus exposure: 16
□
Selected Marcellus operator coverage: CHK, COG, CRZ,
RRC, SWN, UPL, XCO
Released in-depth report on the play simultaneously with
initiation of Cabot in June
„
Upstream companies covered with Niobrara exposure: 14
□
Selected Niobrara operator
p
coverage:
g APC,, CHK,, CLR,,
EOG, NBL, SM
„
Upstream companies covered with Utica exposure: 8
□
Selected Utica operator coverage: APC, CHK, HES
3
Commodity Prices Set the Stage
Long Term Oil Price is Key
Today’ss Question: At what oil price do we drop rigs?
Today
Historical
WTI Spot
Historical WTIHistorical
Spot
WTIHistorical
Spot
1/1/2009
WTIHistorical
Strip
Spot
1/1/2009
WTIHistorical
Strip
Spot
1/1/2010
1/1/2009
WTI
Strip
Spot
1/1/2010
1/1/2009
Strip
1/1/2009
1/1/2010
1/1/2011 Strip
Strip
1/1/2010
1/1/2011 Strip1/1/2011
1/1/2012 Strip
Strip
1/1/2012 Strip7/2/2012 Strip
$150
WTI Price ($/Bbl))
$130
$110
$90
$70
$50
$30
___________________________________
Source: Bloomberg as of 7/2/2012.
5
Negative Gas Outlook Impacting Deal Metrics
Historic Henry Hub Spot
1/1/2009
1/1/2010
1/1/2011 Strip
Strip
1/1/2012 Strip
Historic Henry
HubStrip
Spot
1/1/2009
Historic
Henry
Hub Spot
1/1/2010
Historic
HenryHistoric
Hub Spot
Henry
HubStrip
Spot
1/1/2009
Strip
1/1/2009
1/1/2010 Strip1/1/2011
7/2/2012 Strip
$15
Natural Gas Pric
ce ($/MMbtu)
Natural Gas Pric
$12
$9
$6
$3
$0
___________________________________
Source: Bloomberg as of 7/2/2012.
6
Recent Decline in NGL Prices
Ethane prices
Representative NGL Barrel % of WTI
100%
WTI Spot Price ($/Bbl)
$160
75%
$120
50%
$80
WTI Spot ($/Bbl)
NGL % of WTI
~74%
NGL prices
~44%
25%
0%
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
___________________________________
Source: Bloomberg as of 7/2/2012.
Note: Representative consists of barrel 40% ethane, 10% normal butane, 25% propane, 15% natural gasoline and 10% iso butane.
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
$40
Mar-12
$0
Jun-12
7
Liquids Rig Count Shift Has Been Dramatic
U.S. Onshore Rig Count
2,500
2,030
2,005
2,000
1,955
534
935
1,500
27%
1,606
1,000
879
1,421
700
500
73%
1,070
424
179
0
Peak
3Q09
Trough
2Q09
Liquids
___________________________________
Source: Baker Hughes as of 6/29/2012.
Note: “Peak 3Q09” defined as 9/12/2008, “Trough 2Q09” defined as 6/5/2009, and “Near-Term Peak” as 10/7/2011.
Near-Term Peak 3Q11
Current
6/29/12
Gas
8
Permian and Bakken Driving Oily Rig Shift
Selected Gas Shales
Permian
Eagle Ford
Bakken
Granite Wash
Nio brara
Hz. Ms Lime
Selected Oily Rig Count: ~940
1,500
Bakken: ~215
Seleccted Rig Countt
1,200
900
600
300
0
Q1'07
___________________________________
Source: TPH Research as of 7/2/2012.
Q3'07
Q1'08
Q3'08
Q1'09
Q3'09
Q1'10
Q3'10
Q1'11
Q3'11
Q1'12
9
Bakken Vaults North Dakota to #2 US Producer
Bakken
Production
(Mboe/d)
650
Montana Bakken Production
North Dakota Bakken Production
Bakken Rig Count
Monthly Avg.
Rig Count
March 2012 Production by State (Mbbl/d)
TX
240
1,790
,
600
550
500
450
220
ND
587
AK
579
CA
180
160
548
400
350
200
140
OK
226
120
300
100
250
80
200
150
60
100
40
50
20
0
Mar-01
Mar-02
Mar-03
Mar-04
___________________________________
Source: Baker Hughes Montana and North Dakota rig count, HPDI and EIA.
Note: HPDI production data reported with a 3 month lag.
Note: Texas, North Dakota and Alaska production per state industrial commissions.
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
0
Mar-12
10
Bakken Rig Count Close to a Peak?
Has Bakken rig count peaked in the 200 – 225 rig range in light of the current commodity backdrop?
WTI Spot Price
$125
200
$100
150
$75
100
$50
50
$25
0
Jun-10
__________________________________
Source: HPDI and RigData as of 7/2/2012.
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
WTI Spot Price ($/
/bbl)
Wiliston
n Basin Rig Count
Williston Basin Rig Count
250
$0
Jun-12
11
Deal Flow Follows Commodities
Gas Down, Oil Up: Shocking!
Resource Deal Volume
Resource Deal Volume Gas DealsGas Deals Oil Deals
$60
40
$45
30
$40.6
$35 1
$35.1
$30
20
$22.7
$
$18.4
$15
Resource Deal Coun
nt
Ressource Deal Volu me ($Bn)
$51.4
10
$6.9
$0
0
2007
_______________________________
Source: IHS Herold as of 7/2/2012.
2008
2009
2010
2011
2012
13
Deals Shifting to Oil/Liquids-Rich
2010 Deal Count
Gas Deals
53%
2011 - 2012 YTD Deal Count
Oil Deals
47%
Gas Transactions
_______________________________
Source: IHS Herold as of 7/2/2012. Includes transactions greater than $50 million in which United States is the primary country.
Note: Oil and gas transactions are separated on the basis of reserve composition.
Gas Deals
32%
Oil Deals
68%
Oil/Liquids-Rich Transactions
14
Diversity Among Oil/Liquids-Rich Deal Flow
2011 – Present Deal Count
Permian Shale
15%
Bakken
29%
Niobrara
8%
MS Lime
6%
Granite Wash
2%
Utica
Uti
13%
____________________________________
Source: IHS Herold as of 7/2/2012.
Note: Deal value >$50 million. Reflects transactions where United States listed as primary country. Excludes JVs.
Eagle Fo rd
27%
15
Conventional Oil Metrics Stable
Reserves ($/Boe)
Reserves ($/Boe)
Production ($/Boe/d)
$/Boe
$/Boe/d
$32
$160,000
$23.58
$24
$20.10
$20.06
$19.16
$16.38
$16.07
$16
$120,000
,
$17.79 $17.63 $17.49
$80,000
$8
$40,000
$0
$0
Q2 10
Q3 10
Q4 10
Q1 11
Q2 11
____________________________________
Source: IHS Herold as of 7/2/2012.
Note: Deal value >$50 million. Reflects transactions where United States listed as primary country. Excludes JVs.
Q3 11
Q4 11
Q1 12
Q2 12
16
Bakken Deal Specifics
Strong Deal Market Throughout the Basin
Kodiak – Peak
Statoil - Brigham
375K acres,
$12,500/acre, 16,800
boe/d, 3Q 2011
Hess - American
Magnum
Hunter - Baytex
g
y
15K acres,
$7,600/acre, 500
boe/d, 4Q 2010
85K acres,
$5,400/acre, 167
boe/d, 3Q 2010
50K acres, $5,200/acre, 1,300
boe/d, 2Q 2012
Ursa
Oxy - Cirque
30K acres, 3Q 2010
Crescent Point Anschutz
Linn - Cade & Holt
25k acres
4.6K acres, 800 boe/d
Petro-Hunt
HK – GEOI
51K acres
55k acres, Q2 2012
Nesson
Anticline
Oasis
2 undisclosed
transactions,
16.7K + 10K acres,
$3,000/acre, 300 boe/d,
4Q 2010
Linn – Concho
11K acres, $17,500/acre,
1,350 boe/d, 1Q 2010
Kodiak – North Plains
50K acres, $11,800/acre,
3,500 boe/d, 4Q 2011
Li l Knife
K if
Little
Anticline
Petro-Hunt
5K acres
Williams – Dakota 3
85K acres, $10,800/acre, 3,300
boe/d, 4Q 2010
Ursa
100K acres
Enerplus – Peak
47K acres, $9,800/acre, 800 boe/d,
3Q 2010
Petro-Hunt
22K acres
Occidental – Anschutz
GMXR-Undisclosed
180K acres, $7,800/acre, 5,500
boe/d, 4Q 2010
26K acres, $2,165, 1Q 2011
Citation
30K acres
Kodiak - BTA
13.5K acres, $17,400/acre,
3,000 boe/d, 3Q 2011
___________________________________
Note: TPH estimates of current market conditions.
Hess - Tracker
Lower Bakken Limit
167K acres,
$8,000/acre, 4,400
boe/d, 4Q 2010
Petro-Hunt
12K acres /
5K acres
18
Bakken Transactions Through Time
Deal Metrics Remain Stable(1)
$14,000
$14,000
Median $/Acre
Median $/Acre
Average $/Acre
Constant ~$90/bbl price deck = Constant valuation
Adjusted $/Acre
$12,000
$12,000
$10,068 $10,068 $10,000
$10
$10 000
$10,000
000
$8,000
$8,000
$9,303 $9
$9303
$9,303 303
$7,946 $7,946 $7,118 $7,118 Median $/Acre = ~$6,600
$6,057 $6,057 $6,000
$6,000
$5,579 $5,233 $4,415 $4,415 $4,000
$4,000
$3,047 $3,047 $2,000
$2,000
$0
$0
Q3'10
Q3'10
Q4'10
Q4'10
Q1'11
Q1'11
Q2'11
Q2'11
Q3'11
Q3'11
Q4'11
Q4'11
Q1'12
Q1'12
Q2'12
Q2'12
Bakken Deal Flow Shaped by Large Transactions
$7,000
Other Transaction Volume ($MM)
Single Transaction Volume ($MM)
$5,000
6
$5,295 OXY / Anschutz: $1.4 Bn
$4,000
Statoil / BEXP: $4.7 Bn
$3,565 4
$3,000
$2,000
$914 $638 $
3
HK/GEOI: $945 MM
HES / Tracker: $1.0 Bn
$1 000
$1,000
$1,055 $251 $399
$399 Q2'11
Q3'11
$1,326 Q4'10
Q1'11
___________________________________
Source: Company Investor Presentations and press releases.
(1)
Adjusted $/acre estimate excludes PDP and does not correct for developed acres. PDP valued at $50,000 boe/d.
2
1
$0
Q3'10
5
Numbeer of Transactions
Deal Vo lume ($M
MM)
$6,000
7
Deal Count
Q4'11
Q1'12
Q2'12
0
19
Strong Deal Metrics Throughout the Basin
Factors Impacting Value:
„ Bakken and Three Forks present?
„ Offset well performance
$3,000 - $5,500/acre
„ Is the area “de-risked”?
„ # of wells/DSU?
„ Deeper Three Forks?
$4,000 - $8,000/acre
>$10,000/acre
$6,000 - $12,000/acre
$6,000 - $12,000/acre
$8,000 - $10,000/acre
Acreage values are after subtracting
current production at $50,000 boe/d
___________________________________
Note: TPH estimates of current market conditions.
20
Bakken Pure Play Public Companies…A Tale of the Tape
2011 Performance
2012 YTD Performance
232%
166%
92%
74%
58%
43%
36%
(13%)
(18%)
(49%)
___________________________________
Source: FactSet as of 7/2/2012.
Bakken: OAS, KOG, NOG, TPLM and BEXP (until acquired by STO).
Transition: AREX, EOG, ROSE, SD and SM.
High Growth Oil: CLR, CXO, DNR and OAS.
Oily: BRY, CWEI, PXD, PXP, REN, VQ and WLL.
GOM / Gulf Coast: ATPG, CPE, CXPO, EPL, EXXI, MCF, PQ, SFY, SGY and WTI.
Focused Gas Growth: COG, GDP, KWK, RRC, SWN and UPL.
Diversified Gas Growth: CHK, DVN, ECA, EOG, FST, NFX, QEP, XCO, and XEC.
Small Cap Gas: BBG, CRK, GMXR, PETD and PVA.
Permian: AREX, CWEI, CXO, LPI and PXD.
Marcellus: GOG, RRC and EQT.
Bakken
1%
Permian
(3%)
Transitio n
(4%)
High Growth
G
th Oil
(6%)
GoM / Gulf Coast
(8%)
Marcellus
(10%)
Oily
(13%)
Diversified Gas Gro wth
F cused
Fo
d Gas
G G
Growth
th
Small Cap Gas
(14%)
(16%)
(18%)
Marcellus
Oily
Focused Gas Growth
High Gro wth Oil
GoM / Gulf Coast
Small Cap Gas
Permian
Diversified Gas Growth
Bakken
Transitio n
21
Permian Deal Metrics
22
Stacked Oil Plays Drive the Permian
Current Permian Drilling Activity
Vertical Rig
Horizontal Rig
Midland
B i
Basin
Bone
Spring
Delaware
Sands
Avalon
Shale
Wolfcamp /
Wolfbone
__________________________________
Source: HPDI and RigData.
Delaware
Basin
Central
Platform
Wolfberry
Cline
Spraberry
Wolfcamp
(University)
23
Permian M&A Deal Flow
2009 - 2012 YTD Deal Flow
Conventional
25%
Delaware
22%
75% of deals in
resource plays
“resource”
Wolfberry
53%
_______________________________
Source: IHS.
24
Industry Weighted Towards Oily Production
Wolfcamp and Bone Spring Production
Oil (Boe/d)
Well Count
4,200
10-Yr gas production up ~20%
10-Yr oil production up ~153%
100,000
3,500
80,000
2,800
60,000
2,100
40,000
1,400
20,000
700
0
Dec-01
Well Count
Daily Production (Bo
D
oe/d)
120,000
Gas
(Boe/d)
Gas
(Boe/d)
0
Dec-02
Dec-02
Dec-03
Dec-03
Dec-04
Dec-04
Dec-05
Dec-09
Dec-05 Dec-06Dec-06 Dec-07 Dec-07Dec-08 Dec-08
___________________________________
Source: HPDI.
Note: Includes all Texas producing wells with Wolfcamp, Bone Spring or Trend Area as a target reservoir; Excludes wells with field reported as Spraberry.
Dec-10
Dec-09
Dec-11
Dec-10
Dec-11
25
Midland University Lands Wolfcamp Results
Pioneer Natural Resources
Two recent IPs > 800 boe/d
El Paso
Recent IP > 1,300 boe/d
Tom
Green
EOG Resources
Recent IPs up to 2,000 boe/d
El Paso
Initial IPs ranging
g g from 300 – 600 boe/d
Operator
Approach
Approach Resources
Multiple recent IPs of > 1,000 boe/d
Devon
El Paso
EOG
Terrell
Highmount
Petrohawk
Pioneer
Other
Horizontal
Vertical
____________________________________
Source: HPDI. All horizontal and vertical Wolfcamp, Wolfberry, and Wolffork permits from 1/1/2011.
26
The Evolution of a Permian Play…Wolfberry 2009
Concho / Terrace Petroleum
11/23/2009
$260 million
Andrews Country
Max: $1,554/acre
Shaw Interest,
Interest Inc
Inc.
October 2009
Reagan County
Max: $566/acre
Windsor Permian, LLC
April 2009
Crane County
Max: $207/acre
San Luis Energy
October 2009
Crockett County
Max: $301/acre
WTG Exploration
E l
i
October 2009
Upton
p
County
y
Max: $289/acre
Pioneer Nat. Resources
October 2009
Pioneer Southwest / PXD
8/31/2009
$171 million
Lease Sales
M&A Deals
UT Lands
d 2009 Lease Sale
l
157 Tracts Sold for average $287/acre
Highest bid $1,555/acre
___________________________________
Source: UT Lands, Company Investor Presentations and press releases.
(1)
$/acre estimate excludes PDP and does not correct for developed acres. PDP valued at $50,000/Boe/d.
27
The Evolution of a Permian Play…Wolfberry 2010
Energen / Undisclosed
8/23/2010
$185 million; $18,678/acre(1)
Andrews Country
Max: $3,587/acre
Private Broker
September 2010
Reagan County
Max: $1,626/acre
El Paso E&P
September 2010
Crane County
Max: $455/acre
San Luis Energy
September 2010
Crockett County
Max: $1,797/acre
El P
Paso E&P
September 2010
Upton
p
County
y
Max: $1,610/ace
Private Broker
September 2010
Energen / Undisclosed
8/23/2010
$75 million; $7,239/acre(1)
Berry Petroleum / Undisclosed
10/25/2012
$180 million; $12,903/acre(1)
Lease Sales
M&A Deals
UT Lands
d 2010 Lease Sale
l
510 Tracts Sold for average $985/acre
Highest bid $3,587/acre
___________________________________
Source: UT Lands, Company Investor Presentations and press releases.
(1)
$/acre estimate excludes PDP and does not correct for developed acres. PDP valued at $50,000/Boe/d.
28
The Evolution of a Permian Play…Wolfberry 2011
Andrews Country
Max: $10,000/acre
PDC Energy
September 2011
Berry Petroleum / Undisclosed
4/28/2011
$123 million; $16,333/acre(1)
Concho / PDC Energy
12/23/2011
$175 million; $11,765/acre(1)
Laredo Petroleum / Broad Oak
6/16/2011
$1.0 billion; $9,273/acre(1)
Crane County
Max: $511/acre
SandRidge Energy
September 2011
Reagan County
Max: $5,580/ace
ConocoPhillips
p
2011
September
Upton County
Max: $5,580/ace
ConocoPhillips
September 2011
Crockett County
Max: $5,580/ace
C
ConocoPhillips
Philli
September 2011
Lease Sales
M&A Deals
UT Lands
d 2011 Lease Sale
l
496 Tracts Sold for average $2,245/acre
Highest bid $10,000/acre
___________________________________
Source: UT Lands, Company Investor Presentations and press releases.
(1)
$/acre estimate excludes PDP and does not correct for developed acres. PDP valued at $50,000/Boe/d.
29
The Evolution of a Permian Play…Wolfberry 2012
Andrews Country
Max: $3,000/acre
Windsor Petroleum
March 2012
Energen / Undisclosed
2/10/2012
$66 million; $20,563/acre(1)
Reagan County
Max: $5,814/ace
Pioneer Nat. Resources
March 2012
Crane County
Max: $525/acre
Henry Energy LP
March 2012
Crockett County
Max: $2,507/ace
P
Petrohawk
h kP
Properties
i
March 2012
Upton County
Max: $7,058/ace
Veritas Energy Partners
March 2012
Lease Sales
M&A Deals
UT Lands
d March
h 2012 Lease Sale
l
86 Tracts Sold for average $645/acre
Highest bid $7,123/acre
___________________________________
Source: UT Lands, Company Investor Presentations and press releases.
(1)
$/acre estimate excludes PDP and does not correct for developed acres. PDP valued at $50,000/Boe/d.
30
Wolfberry / Wolfcamp Acreage Now First In Class
Lease
Sales
LeaseLease
SalesSalesHighest
Lease
SaleLease
Bid Sale
M&A
Highest
BidDeals
$25,000
$20,563
erage
Ave
rage $/Acre
$20,000
$15,000
$12,940
$11,971
$10,000
$10
000
$10 000
$10,000
Average $/acre up ~10x since 2009
$10,000
$7,123
$7,123
$5,000
$3,587
$3
587
$3 587
$3,587
$1,555
$1,555
$287
$287$287
$2,245
$2,245
$2,245
$985
$985$985
$645
$645$645
$0
2009
2010
___________________________________
Source: Company Investor Presentations and press releases.
Note: $/acre estimate excludes PDP and does not correct for developed acres. PDP valued at $50,000/Boe/d.
2011
2012
31
Avalon / Bone Spring Production Rapidly Increasing
Oil (Boe/d)
Gas (Boe/d)
Well Count
1,500
First Avalon Shale Horizontal Producer
60,000
1,200
45,000
900
30,000
600
15,000
300
0
Dec-01
Well Count
W
Daily Production (Boe/d)
75,000
0
Dec-02
___________________________________
Source: HPDI.
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
32
Recent Industry Results in the Delaware
Bone Spring (2nd/3rd)
XEC: 7 recent wells
IPs 560-1,100 boe/d
1st, 2nd, 3rd Bone Spring
Avalon Shale
CHK IP of 1,160 boe/d
Avalon Shale
CXO IP of 1,368 boe/d
Avalon Shale
Devon IP of 950 boe/d
Delaware Sands
Yates IPs of
794 - 1,067 boe/d
Hz Brushy/Cherry
Avalon Shale (Loving)
APC TC IP ~800 boe/d
(60% liquids)
Avalon Shale
3rd Bone
B
S
Spring
i (W
(Ward)
d)
APC TC IP ~700 boe/d
(85% liquids)
Avalon Shale
EOG IP of 1,474 boe/d
Wolfcamp
Wolfbone
CXO IPs of 200-450 boe/d
CRK IPs of 150-300 boe/d
3rd Bone Spring
CHK IP of 2,200 boe/d
A d k
Anadarko
Chesapeake
Cimarex
Comstock
C
Concho
h
Devon
Energen
___________________________________
Source: Company Investor Presentations, HPDI: Vertical Wolfbone and all horizontal permits since 7/1/2011.
EOG
Mewbourne
Clayton
O
Oxy
Whiting
Other
33
Recent Notable Delaware Basin Transactions
June 2011 Land Auction
$5,076 - $5,630/acre
September 2011 Land Auction
$6,150/acre
$
,
August 2010 Land Auction
$7,250/acre
August 2010 Land Auction
$5,313/acre
May 2010 Land Auction
$3,957/acre
July 2011 Land Auction
$6 000/acre
$6,000/acre
April 2011 Land Auction
$4,200/acre
Concho / Undisclosed:
11/2/2011
$330 million; $2,237/acre(1)
Comstock Resources / Eagle Oil & Gas:
12/5/2011
$333 million: $5,970/acre(1)
Clayton Williams
$3,333/acre
March 2012
Forest Oil Corp. / Undisclosed: 2/16/2012
$103 million; $1,635/acre
$1 635/acre((1))
Lease Sales
___________________________________
Source: Company Investor Presentations and press releases.
(1)
$/acre estimate excludes PDP and does not correct for developed acres. PDP valued at $50,000/Boe/d.
M&A Deals
34
Conclusions
Metrics Should Increase With Drilling
Type Curve Established
Widespread Horizontal Results
Type Curve Being Established
Focused Horizontal Results
Little to No
Horizontal Results
$20,000
$18,000
$16,000
Price ($/acre
($/acrre)
Price
e)
$14,000
$12,000
$12
000
$10,000
$8,000
$8,000
$6,000
$6,000
$4,000
$4,000
_______________________________
Source: IHS Herold and TPH research.
5.5
5.5
6.5
6.5
Niob
brara
4.5
4.5
Miss. L
Lime
3.5
3.5
Marcellus
2.5
2.5
Perm
mian
Reso
ource
1.5
1.5
Utica
U
0.5
0.5
Bakken
$0
$0
Eagle Ford
Conden
nsate
$2,000
$2
$2 000
$2,000
000
36
Permian – Right Place at Right Time
„
Oil prices to remain strong
„
Liquids pricing strong enough
„
Oil deals increasing
„
Horizontal applications
„
Vertical – accessing new pay
„
Scale – running room
„
Multiple targets
„
O
Open
for
f business
b i
37
Bakken Themes – Now and In The Future
Major Themes and Catalysts as the Bakken Continues to Evolve
1) Completion Technology
1) Continues to Advance
2) Well Performance
2) IPs Define Sweet Spots
3) Infill Drilling/Spacing
3) Denser Over Time with Pad Drilling
4) Three Forks
B kk Values
Bakken
V l
will
ill
Rise
4) Similar to Bakken and Contiguous
5) Deep Three Forks
5) Emerging Value
6) Drilling Costs
6) Improve With Time
7) Western Rough Rider
7) Core Extends West of the Nesson
38
Disclosure Statement
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advice. In addition, we mutually agree that, subject to applicable law, you
(and your employees, representatives and other agents) may disclose any
p
of anyy p
potential transaction or structure described herein that are
aspects
necessary to support any U.S. federal income tax benefits, and all materials
of any kind (including tax opinions and other tax analyses) related to those
benefits, with no limitations imposed by Tudor, Pickering, Holt & Co.
About The Firm
Tudor, Pickering,
Tudor
Pickering Holt & Co.,
Co LLC is an integrated energy investment
and merchant bank, providing high quality advice and services to
institutional and corporate clients. Through the company’s two brokerdealer units, Tudor, Pickering, Holt & Co. Securities, Inc. (TPHCSI) and
Tudor, Pickering, Holt & Co. Advisors, LLC (TPHCA), the company offers
securities and investment banking services to the energy community.
TPH Asset Management, LLC (TPHAM) is an SEC registered investment
adviser that delivers a suite of energy investment strategies.
strategies TPH
Partners Management, LLC is an SEC exempt reporting advisor. Certain
employees of TPHAM are also employees of TPHCSI.
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130 employees and offices in Denver, Colorado; and in New York, New
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located in London, England.
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) 212-220-9254
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(including estimates of potential cost savings and synergies) prepared by,
reviewed or discussed with the managements of your company and/ or other
potential
i l transaction
i participants
i i
or obtained
b i d from
f
public
bli sources, we have
h
assumed that such estimates and forecasts have been reasonably prepared
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39