Resurrection Petroleum Limited Liability Corporation. Business Plan and Approach

Transcription

1 Resurrection Petroleum Limited Liability Corporation Business Plan and Approach

2 Business Philosophy Everyone makes money Investors rewarded upfront RP and JVs share economic goals Opportunity for exceptional return on investment Expect above average returns Develop outstanding projects Accomplish profitable projects with large upside Create new money by resurrecting old fields and finding new ones When making a decision refer to first bullet 2 Now is the time to do oil deals

3 OPPORTUNITY KNOCKS! Resurrection Petroleum LLC Ideas and methods to exploit mature oil fields and trends; converting oil and gas reserves into dollars.

4 Changes in energy companies 4 Consolidation of international oil companies by merger and acquisition (Texaco, Phillips, Arco, Getty, Skelly, etc.) Majors have sold most of their US assets and decreased US presence Many independents have sold out, gone out of business or became non-operating companies. Significant opportunities remain.

5 The Current Players 5 The majors - mostly international Large independents - private and public Medium independents - private and public Startups - private equity, public equity Joint ventures/non-traditional agreements Small independents mostly private

6 Who is Resurrection Petroleum 6 General Manager/Geology Michael F. McGowan Business Development/Res. Eng. W. Craig Gaines Operations Manager Michael Barnhart Financial Manager W. Bret Jackson

7 General Manager/Geology Michael F. McGowan 7 McGowan Geological Consulting, LLC Sr. Geologist Apache Corp. Sr. Geologist MidCon Energy Sr. Geologist Latigo Petroleum Geologist TXO Production Geologist Williams Exploration

8 Business Development / Reservoir Engineering Manager W. Craig Gaines 8 Consulting Petroleum Engineer Gaines Energy, Inc. Mgr Reservoir Engineering Arena Resources/SandRidge Sr. Reservoir Engineer MidCon Energy Sr. Reservoir Engineer Chaparral Energy Project Manager US Army Corp of Engineers Owner/Chief Engineer GYM Resources Consulting Engineer Keplinger and Associates Reservoir Engineer Texaco

9 Operations Manager Michael Barnhart 9 Consultant Production Engineer Production Manager Arena Resources VP Production Agate Petroleum VP Production Service Drilling LLC Petroleum Engineer Gulf Oil Co.

10 Financials Manager W. Bret Jackson 10 Certified Public Accountant firm owner for 30 years Accounting, tax and business consulting services Amoco Production Company

11 Organization MHB Operations Gaines Energy, Inc. Reservoir Engineering McGowan Geological Consulting, LLC Bret Jackson, CPA Angel Investors RP Contractors and Consultants Joint Venture A Joint Venture B Joint Venture C Joint Venture Participants Copyright 2012 Resurrection 11 Petroleum, LLC

12 Joint Ventures 12 MATURE FIELD REDEVELOPENT EXPLORATORY RP ACQUISTIONS ENHANCED RECOVERY

13 Mature Field Redevelopment Ventures 13

14 Where is the best place to find new oil and gas reserves?

15 The Oklahoma Oil Opportunity (from Boyd, 2006) Original and Remaining Oil In-Place Volumes (MMBO) Reservoir Class % of Total Cum Prod E.U.R. (Max) 15 Avg Recovery Factor OOIP Rem OIP Blanket Sands 17.5% 2, % 6,370 3,564 Carbonates 18.5% 2, % 29,490 26,541 Fluvial Sands 64.0% 10, % 48,356 38,111 Total ~16, % aggregate 84,216 68,216

16 Taking it from this

17 to this

18 Exploiting mature oil fields Step One: Characterize and evaluate existing hydrocarbon reservoirs and operations Old Well Logs Completion Methods Development Strategies Spacing Requirements Mapping (reservoir, gross/net, faults, etc.) Production Mechanism Previous owners inefficiencies 18

19 Geologic Mapping 19 SO&G SO&G SO 2 SO SO SO&G SO SO W SO&G SO SO FEET ,526 PETRA 1/18/ :36:11 PM

20 Geological Investigations 20

21 Production Studies 21

22 Seeing the forest through the trees 22

23 Opportunities 23 Multiple reservoir development and traps Untested fault blocks, Field extensions Changed gas/oil and oil/water contacts Increasing enhanced recovery response Accelerating Production Thicker reservoirs with low permeability

24 Accomplished by - infill drilling 24

25 Drilling In Old Fields 25 Multiple deeper pays have potential but may not have been drilled Multiple shallower pays by-passed reservoirs are economic to develop Field extensions edge locations are often economic to develop

26 Equipment Upgrades 26 Larger pumping unit or submersibles Lowering tubing in producers Larger size tubing/line pipe Tank battery modification Increased water disposal capacity Compression/injection improvements More efficient oil/water, gas/oil separation

27 Workovers Cleaning out fill over perforations Refracs larger & improved Acidizing solvents hot oiling Drilling out bridge plugs to reopen zones Cement squeezes 27 Opening new zones

28 WATERFLOOD VENTURES 28

29 Projects for Enhanced Recovery 29 Waterflood Installation smaller projects Acquiring and reviving old waterfloods Infill drilling/pattern changes Evaluating for innovations Biological, Steam, Chemical, Polymer methods Preparation for CO 2 floods - The Future

30 EXPLORATORY VENTURES 30

31 Exploration Projects 31 Stepout/field extension drilling Drilling deeper in mature oil fields Exploring in mature basins New geologic ideas for mature formations New technological methods in conventionally drilled areas Rank wildcat plays with exceptional rewards

32 ACQUISITION VENTURES 32

33 Asset Acquisitions Many independents are open to acquisition as the owners age and families have conflicts over operations Companies need cash to develop but will sell rather than borrow or get partners. Company sales generate property divesture opportunities. Mergers and acquisitions precipitate unexpected opportunities. Neglected smaller properties with remaining reserves. 33

34 Economic Risks Assessments 34 Remaining reserves Reserve category (proved, probable, possible, potential) Cost to obtain (purchase, capital, operating cost, time, manpower) Return on investment Timeline constraints Conflicting goals Title Issues (poor documentation) Partner Issues

35 Historical Oil Prices 35

36 Funding Needs 36 Mature Field Development Ventures $200K $3 MM Enhanced Recovery Ventures $500K - $10MM Exploratory Ventures $1MM $5MM Acquisition Ventures $200K $50MM Lease Fund $100K - $400K

37 JV-Corporate Use of Funds 37 Drilling wells Workovers Operations expenses 1% JV setup negotiated on a project by project basis Equipment upgrades Buying production Buying shut-in/partly abandoned wells

38 Economics Goals - Joint Ventures 20% internal rate of return or better Return on Investment of 2 to 1 or better Discounted Return on Investment of 1.8 to 1 or better Target payout in less than 1 year for new wells Target payout of 4 years or less for production only purchases Acquisition cost of $30 per Proved BO or less 38

39 Joint Venture Project Examples Seminole County Cromwell /Hunton /Wilcox Hughes County Booch Carter County Multiple Penn sands/arbuckle and waterfloods Tulsa County Development prospect in Wilcox Carter County Exploratory prospect in Oil Creek Central Kansas Lansing/Kansas City/Arbuckle Garvin County Penn sands/bromide/oil Creek Eastern Kansas Shallow Penn sands 39

40 40 DISCUSSION/QUESTIONS?

41 JV Prospects Discussion 41 Mature Field Development Strategies

42 Strategy 1: Buy, improve, sell Purchase properties at competitive prices Upgrade surface facilities Treat wells, change pumps, increase disposal capacity, open new zones Increase production, increase proved reserves Quantify additional reserves Infill, drill deeper, etc. Sell for 2 to 5 times investment Split profits 65% Investor and 35% RP after return of capital (assumes sale before BIAPO) 42

43 Strategy 2: Purchase small leases 43 Buy at attractive costs from pumpers, investors, small mom and pop companies Clean up, replace equipment, enhance and implement well treatments, plug wells as necessary Identify deeper infill drill and workover potential Sell or keep the property Enhanced recovery potential

44 Example: Purchase producing property Purchase 160 acre lease with 5 BOPD net, 3 wells-one producing, one disposal, one shut-in, 83 MBO for approximately $300,000 RP would receive a 1-2% OR and 15% back-in working interest after payout Economics of operating purchased proved, developed producing property are 24% rate of return, return on investment is 3.4, discounted return on investment 1.7 Upside potential consists of two to three offset locations each with potential investor economics for a per new well $450,000 investment, a rate of return of greater than 100%, payout of less than a year on each new wells, return on investment of 3.5, 10% discounted return on investment of 2.5 and future net income of more than $1.1 million. 44

45 JV Prospects Discussion 45 Enhanced Recovery Strategies

46 Strategy 1: Purchase existing waterfloods Existing waterfloods with upside, usually infill drill, pattern and waterflood efficiency improvement Upgrade and implement within 6 months of purchase Purchase costs $250,000 to $5,000,000 Improvement costs $1-10 million Potential to sell in 1.5 to 3 years for 3 to 5 times the purchase price and investment 46

47 Example: Purchase a unit (part 1) 47 Purchase 8 BOPD net, 6 wells, est. primary cum. 500 gross MBO, est. secondary cum. 375 MBO $200,000+ to purchase, if we can get all Proved producing 9 MBO net (100% WI, 80% NRI) as near economic limit; proved secondary 146 MBO net (100% WI, 77% NRI) or 213 MBO net Investors $200,000 initial capital to buy $100,000 upgrade equipment Additional capital requirements full scale proved $3.6 million

48 Example: Purchase a Unit (part 2) 48 RP OR of 1-2%, 15% back-in Working Interest after payout, if sold--split net sales price 65% Investor-35% after repayment of capital (before BIAPO) Internal Rate of Return 47%, Return on Investment 2.2, 10% Discount Return on Investment 1.8 Buy, Fix Up, Sell scenario would require about $1 million additional capital rather than $3.6 million Sell year 2. Has additional probable and possible reserves of 114+ MBO net.

49 Strategy 2: Unitize for enhanced recovery Have identified waterfloods already Lease open acreage Purchase production (0.5 to 1 year to buy) Unitize Buyout other owners if possible (0.5 to 2 years) Implement waterflood (1.5 to 2 years) Total time 3 to 5 years then sell or sell when first response hits (2 to 3 years) 49

50 Example: Form waterflood unit (part 1) Purchase 16 BOPD net, 8 producing leases, 4 different operators, currently leasing open acreage, current primary cum. 1.6 million gross BO $800,000+ to purchase, if can get all Proved producing 59 MBO net (used 100% WI, 80% NRI); Proved behind pipe 16+ MBO net; proved secondary 652 MBO net (used 100% WI, 77% NRI) Investors $1,000,000 initial capital to buy, unitize, upgrade surface Additional capital requirements for full scale proved development $7.8 million 50

51 Example: Form Waterflood Unit (part 2) RP OR of 1-2%, 15% back-in working interest after payout, if sold--split net sales price 65% Investor-35% after repayment of capital Internal Rate of Return 26%, Return on Investment 4.5, 10% Discounted Return on Investment 2.1 if fully developed Buy, Fix Up, Sell scenario would require about $2 million additional capital rather than $7.8 million Sell year 3 Has additional probable and possible reserves of 300,000+ BO net. 51

52 JV Prospects Discussion 52 Exploratory Ventures

53 Joint Venture: Exploration Projects 0.5 million to 20 MMBO potential High reserve potential per well 50 MBO to 500 MBO Quick payout - 6 months or less/well Multiple offsets, blocks of acreage Potential high return on investment 4 or more to 1 Potential internal rate of return of 60% or more Managed risk, surface, seismic, remote sensing, on trend, well control 53

54 JV Prospects Discussion 54 Corporate Acquisition Ventures

55 Joint Venture: Acquire Small Companies Target family owned old company with aged owners and companies with family disputes $10 million to $50 million range Additional investment of $10 million to $150 million range to enhance production and increase proved reserves. Workover projects, buy partners (additional capital needed), infill or field extend, form waterfloods, etc. Sell all or part in 2 to 3 years Goal to have 3 to 1 or more return on investment 55

56 The Future C O N S O L I D A T I O N O F P R O P E R T I E S F E W E R P R O P E R T I E S T O I M P R O V E?? Getting ready for the rise of natural gas

57 Natural Gas Future Opportunities 57 Develop stranded gas Improve gas markets-new pipelines Low volume now economic Improve profitability by equipment upgrades