CRIMSON EXPLORATION INC. Johnson Rice 2008 Emerging Growth Energy Conference Houston, TX January 23, 2008

Transcription

1 CRIMSON EXPLORATION INC. Johnson Rice 2008 Emerging Growth Energy Conference Houston, TX January 23, 2008

2 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Certain statements included in this presentation are "forward-looking statements" under the Private Securities Litigation Reform Act of Crimson Exploration Inc. ( Crimson or the Company ) cautions that strategic plans, assumptions, expectations, objectives for future operations, projections, intentions, or beliefs about future events may, and often do, vary from actual results and the differences can be material. Some of the key factors which could cause actual results to vary from those Crimson expects include changes in natural gas and oil prices, the timing of planned capital expenditures, availability of acquisitions, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as the Company s ability to access them, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting Crimson s business. Statements regarding future production are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to, inflation or lack of availability of goods and services, environmental risks, drilling risks and regulatory changes and the potential lack of capital resources. The SEC has generally permitted oil and gas companies, in filings made with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. The Company and its independent third party reservoir engineers use the terms probable and possible to describe volumes of reserves potentially recoverable through additional drilling or recovery techniques that the SEC's guidelines may prohibit the Company from including in filings with the SEC. These estimates are by their nature more speculative than estimates of proved reserves and accordingly are subject to substantially greater risk of being actually realized by the Company. All estimates of probable reserves in this presentation have been prepared by independent third party engineers. More information about the risks and uncertainties relating to Crimson s forward-looking statements are found in the Company s SEC filings. 2

3 COMPANY PROFILE Corporate Overview NASDAQ bulletin board (TK: CXPO) EV approx $390MM; Fully-diluted equity cap of approx $130 million (com & pref) Oaktree Capital Management as equity sponsor Producing assets focused in South Texas / Texas Gulf Coast & South LA Emerging plays in the DJ Basin, FW Barnett Shale and West Texas Barnett Shale $289.5MM acquisition from EXCO Resources, Inc. in May 2007 Pro Forma 2006 EBITDAX of $166 million 95 bcfe of proved reserves; 236 bcfe 3P (unrisked); 100+ drilling locations >83,000 gross acres in prolific producing trends; 255 producing wells Management familiarity with assets Pro forma proved reserves of 141 1/1/07 79% proved developed; 84% natural gas; 6.8 year proved reserve life ~80% operated; ~70% average working interest Approx 50 mmcfe/d current production (December 2007) 3

4 COMPANY HISTORY Gulf West Energy, predecessor to Crimson, obtains funding from Aquila Energy Capital buys Colorado, South Texas, and Grand Lake/Lacassine properties Aquila Energy Capital withdraws funding merchant banking meltdown No capital for development/exploration December 2004 in desperate financial state Oaktree Capital acquires stake though preferred equity infusion (Feb) CEO Allan Keel and CFO Joseph Grady join Company in connection with Oaktree recapitalization (Feb) Expansion of management team Reincorporated in Delaware renamed Crimson Exploration Inc. (June) Evaluated/pursued approximately $3B in various acquisition opportunities Announces acquisition of assets from EXCO (May) Future 3-prong strategy of acquisition, exploitation, and exploration 4

5 AREAS OF OPERATION (proforma for EXCO Property Acquisition in 5/2007) ($ in millions) Total Proved Reserves (Bcfe): % Gas: 84% Production (MMcfe/d) 1 : 56.7 Strip PV-10%: $567 Reserve Life (Years): 6.8x 3P Reserves (Bcfe): DJ BASIN Colorado Proved Reserves (Bcfe): 7.9 % Gas: 75% Production (MMcfe/d) 1 : 0.7 Strip PV-10%: $24 3P Reserves (Bcfe): 7.9 BARNETT SHALE WEST TEXAS GULF COAST SOUTH TEXAS Texas Proved Reserves (Bcfe): % Gas: 87% Production (MMcfe/d) 1 : 46.5 Strip PV-10%: $464 3P Reserves (Bcfe): Louisiana Proved Reserves (Bcfe): 17.1 % Gas: 47% Production (MMcfe/d) 1 : 9.4 Strip PV-10%: $78 3P Reserves (Bcfe): 17.1 Note: Proved reserves as of December 31, 2006 and are third party engineered. 3P reserves only include the EXCO assets unrisked probable and possible reserves per Crimson management. Strip PV-10% as of May 8, (1) Based on average daily production in January

6 PROVED RESERVE DISTRIBUTION 1/1/07 (proforma for EXCO property acquisition in 5/2007) Pro Forma Reserves by Category Pro Forma PV-10% by Category (1) PDNP 25% PUD 21% PDP 54% PDNP 14% PUD 13% PDP 73% Pro Forma Reserves by Region Pro Forma PV-10% by Region (1) Louisiana 12% Colorado 6% Louisiana 14% Colorado 4% Texas 82% Texas 82% 141 Bcfe $567 MM PV-10% (1) Pre-tax figure based on proved reserves and NYMEX strip as of May 8,

7 MANAGEMENT TEAM NAME AND TITLE EXP. EXPERIENCE Allan D. Keel President, CEO, Director E. Joseph Grady SVP, CFO Jay S. Mengle SVP, Operations & Engineering Tracy Price SVP, Land & Business Development Thomas H. Atkins SVP, Exploration >25 VP/GM Westport Resources, President/COO Mariner Energy & Woodside Energy (USA) Energen >30 CFO - Texas Petrochemicals Holdings, Inc. CFO - Forcenergy, Inc. & Pelto Oil Company Deloitte & Touche >25 Shelf Asset Manager GOM for Kerr-McGee Senior management roles at Norcen Explorer and Westport Resources >25 SVP Land / Business Development at Houston Exploration Manager of Land / Business Development of Newfield Exploration Land Manager for Apache Corporation >25 General Manager GOM for Newfield Exploration Exploration Manager for EOG Resources 7

8 BOARD OF DIRECTORS NAME AND TITLE Allan D. Keel President, CEO, Director EXPERIENCE Above Lee B. Backsen Continental Land & Fur Co. and Grant Geophysical Senior exploration management positions with Burlington Resources, UMC Petroleum, General Atlantic Gulf Coast, Kerr-McGee, Pelto Oil Co., Spectrum Oil and Gas Co. and Shell Oil Co. Skardon F. Baker Senior Vice President, Oaktree Capital Management B. James Ford Managing Director, Oaktree Capital Management Joined Crimson s board in February 2005 JP Morgan Investment Banking Vice President in JP Morgan s M&A group Director of EXCO Resources, Inc.,Cequel Communications, Trenton Media and Red Technology Alliance Consultant with McKinsey & Co Lon McCain Director of Continental Resources, Inc. and Cheniere Energy Inc. Previous CFO of Westport Resources Corporation Principal of Petrie Parkman & Co. Senior financial management positions with Presidio Oil Co., Petro-Lewis Corporation and Ceres Capital 8

9 ORGANIZATION SUMMARY Pre-EXCO Recent Open Fully-Staffed Headcount Hires Positions Headcount Administrative Exploration Land Production Total

10 FELICIA FIELD AREA Area of Operations Field Overview Highlights Legacy Westport Resources property 21,658 gross / 12,910 net acres Felicia (Liberty County) Yegua, Cook Mountain, Wilcox and Vicksburg reservoirs (9,000 to 15,000 ) Well defined hydrocarbon traps Five 3-D surveys total over 500 sq miles within immediate trend Field Summary Operators Crimson/Cimarex/Edge Working Interest 10-75% Proved Reserves (Bcfe) 1/1/ % Gas 85% % PDP 96% Producing Wells 23 12/07 Production (MMcfe/d) 18.4 Upside Potential Probable & Possible Reserves: ~72 Bcfe 30 amplitude related prospects (3 PUD, 10 Prob, 17 Poss) Abandonment pressure could add as much as 25 Bcfe (net) 2007 Actual & 2008 Plans 2007: Drilled 4 successful wells out of 5 total 2008: Drill 10 gross wells total (costs: 8/8) 10 (6.1 Net) exploitation wells: ~$3.5MM to drill, ~$5MM to D&C 10

11 CAGE RANCH FIELD AREA Area of Operations Field Overview Highlights Legacy Westport Resources property 18,623 gross acres / 15,168 net acres Frio and Vicksburg reservoirs (8,500 to 12,000 ) Cage Ranch (Brooks County) Field Summary Operators Crimson/CHK/El Paso/Forest Working Interest 85% Proved Reserves (Bcfe) -1/1/ % Gas 94% % PDP 24% Producing Wells 43 12/07 Production (MMcfe/d) 2.9 Highly faulted structural traps Ten 3-D seismic surveys covering 176 square miles of outlined area Upside Potential PUD Reserves: ~13 Bcfe Probable & Possible Reserves: ~14 Bcfe Identification of additional shallow Frio oil traps Evaluation of Deeper Vicksburg sands below existing production 2008 Plans Drill 4 gross wells total (costs: 8/8) 2 (1.9 Net) PUDs: ~$2.0MM to drill, ~$2.7MM to D&C 2 (2 Net) exploitation: ~$2.0MM to drill, ~$2.5MM to D&C 11

12 SW SPEAKS FIELD AREA Area of Operations Highlights Field Overview Legacy Westport Resources property 10,987 gross / 5,861 net acres Speaks (Lavaca County) Miocene to Deep Wilcox reservoirs (2,000 to 17,000 ) Upside Potential PUD Reserves: ~8 Bcfe Field Summary Operators Crimson/El Paso/XTO Working Interest 35% Proved Reserves (Bcfe) -1/1/ % Gas 97% % PDP 58% Producing Wells 24 12/07 Production (MMcfe/d) 2.7 Probable & Possible Reserves: ~42 Bcfe 26 identified drilling locations Multiple behind pipe opportunities 2007 Actual & 2008 Plans 2007: Drilled 1 successful well out of 1 total 2008: Drill 5 gross wells total (costs: 8/8) 4 (1.3 Net) PUDs: ~$4.0MM to drill, ~$6.0MM to D&C 1 (0.8 Net) exploitation: ~$4.0MM to drill, ~$6.0MM to D&C 12

13 STX LOBO Area of Operations Highlights Field Overview Non Operated Joint Venture Lower Wilcox Lobo 2,800 Gross Acres/ 550 Net Acres STX Lobo (Zapata & Webb Counties) Field Summary Operators Paloma/CHK/El Paso/Forest Working Interest 20-24% Proved Reserves (Bcfe) -1/1/ % Gas 100 % PDP N/A 12/07 Production (MMcfe/d) 1.6 Well defined Hydrocarbon System High Probability of Success Upside Potential Mulitiple Pays, Complex Geology 2007 Actual & 2008 Plans 2007: Drilled 6 successful wells out of 9 total 2008: Drill 9 gross wells total (costs: 8/8) 9 (2.0 net) Exploration wells: ~$1.6MM to drill, ~$2.7MM to D&C 13

14 DJ BASIN Area of Operations Highlights Field Overview 14,000 gross / 10,000 net acres Acquired in 2000 with Aquila Energy Capital financing DJ Basin (Colorado) Two development wells drilled in 2006, adding net production of approximately 368 Mcfe/d Long-life reserves; 32 producing wells Upside Potential Field Summary Operators Crimson/Anadarko/EnCana/Forest Working Interest 70-92% Proved Reserves (Bcfe) 1/1/ % Gas 75% % PDP 52% Producing Wells 32 12/07 Production (MMcfe/d) 0.7 PUD Reserves: ~3 Bcfe Probable & Possible Reserves: ~7 Bcfe 42 identified drilling locations Further potential evaluation in Niobrara, Codell and deeper formations 2008 Plans Drill 10 gross wells total (costs: 8/8) 5 (3.5 Net) PUDs: ~$0.5MM to drill, ~$0.6MM to D&C 5 (3.4 Net) exploitation: ~$0.5MM to drill, ~$0.6MM to D&C 14

15 BARNETT SHALE Ft. Worth Barnett Shale Joint Venture Approximate 10, 500 gross acreage position in Tarrant / Johnson counties (core area) Offset operators include Chesapeake Energy, EOG Resources, etc. 12.5% WI (non-operated) 2007 Actual & 2008 Plans 2007: Drilled 7 of 7 wells 2008: None Announced proposed sale in 1Q:08 approximately $30MM ; 2.5 3x return Ft. Worth Barnett Shale (Johnson and Tarrant Counties) 15

16 WEST TX BARNETT/WOODFORD SHALE Culberson County, TX HUDSPETH ENCANA TD 11,000 CXP ACREAGE EOG TD 9,100 2 LOCATIONS SOUTHWESTE RN ACREAGE ENCANA TD 13,500 SOUTHWESTERN LOCATION SOUTHWESTERN TESTING ENCANA TD 11,000 MATADOR LEASES PETRO- HUNT DRILLING CONCHO TD 11,900 CONCHO DRILLING QUICKSILVER LOCATION HALLWOOD LOCATION ENCANA TD 11,000 RANGE LOCATIO N HALLWOOD LOCATION BULLD OG TD 14,775 PETRO-HUNT DRILLING HALLWOOD LOCATION THOMPSON DRILLING HALLWOOD DRILLING BURLINGTON TD 13,450 PETRO-HUNT TD 13,500 CRIMSON 24,000 ACRES WI: 100% NRI: 77% EXPIRY: 2010 DRILLED WELL LOCATION QUICKSILVER ACREAGE DALLAS 2 LOCATIONS CULBERSON JEFF DAVIS QUICKSILVER TD 10,368 REEVES 5 MILES 16

17 CAPITAL EXPENDITURE PROGRAM (Preliminary, subject to Board approval) Estimated 2008 Capex by Region Louisiana 3% Color ado 5% Other 1% Estimated 2008 Capex by Category Lease 8% East Texas 31% SW Cent r al Texas 25% Sout h Texas 35% Exploration 23% Development 23% Exploitation 46% $62.6 million $45 South Texas Central Texas East Texas $62.6 million TOTAL 2008 Unrisked Potential Bcfe (net) Louisiana Colorado Other 2008E Drilling Capital ($MM) (1) Development (Proved) Exploitation (Prob/Poss) Exploration Lease Acquisitions Total E Drilling Schedule (# Wells) Development Exploitation Exploration Total (1) Excludes: seismic data (~$7.1MM), land delay rentals (~$0.5MM), & non-o&g capex (~$0.3MM). 17

18 FINANCIAL STRATEGY Maintain conservative financial policy: Borrowing capacity for acquisitions Fund capex from operating cash flow Utilize oil and gas derivatives to limit commodity price downside risk - ~75% Target net debt / EBITDAX ratio under 2.5x Target net debt / proved reserves under $1.80 / Mcfe Target adjusted EBITDAX/interest over 3.5x Maintain manageable debt levels Senior revolver $200MM borrowing base; $90MM available Second lien facility - $150MM fully drawn; L+575; 5/2012 maturity Excess cash flow, after capital expenditures, for revolver repayment, preserving flexibility Balanced, conservative capital program Low-risk drilling inventory to increase cash flow and asset value, and reduce debt Exploration consists primarily of delineation/step-out drilling in existing, defined producing trends Limited wildcat exploration Expand investor base and opportunistically access equity capital for growth Don t need new equity to reduce debt levels Provide powder for future acquisitions Increase liquidity in stock to unlock value 18

19 TOTAL COMPANY PRODUCTION BY TYPE (MMcfe/d) 19

20 TOTAL COMPANY PRODUCTION BY CATEGORY (MMcfe/d) 20

21 REVENUE & EBITDAX 21

22 BALANCE SHEET Actual (000 s) 12/31/05 12/31/06 9/30//07 Cash /Current Assets $ 5,825 $ 3,532 $ 40,029 Property, Plant & Equipment, net 54,223 76, ,223 Other Assets 3,067 1,690 4,315 Derivative Instruments (Curr & LT) - 2,934 4,258 Total Assets $ 63,115 $ 84,703 $ 395,825 Notes Payable/Current Debt $ 121 $ 91 $ 95 Other Current Liabilities 4,626 10,656 38,255 Long-term Debt 1,103 8, ,568 Asset Retirement Obligations (Curr & LT) 1,311 4,215 7,690 Derivative Instruments (Curr & LT) 3,149-1,582 Equity 52,805 61,326 77,635 Total Liabilities & Stockholders Equity $ 63,115 $ 84,703 $ 395,825 22

23 ATTRACTIVE VALUATION VS. PEERS CXPO 9/30/07 ($7.85/share) is pro forma the EXCO acquisition. CXPO* ($12.45/share) is pro forma the EXCO acquisition; assumes all Preferred shares are converted, thus increasing O/S by 5.8MM. PV-10 values and proved reserves as of 12/31/2006 SEC filings. EV based on companies 9/30/2007 SEC filings. Source: Fortis Merchant Banking Weekly Market Update (1/7/08) 23

24 ATTRACTIVE VALUATION VS. PEERS CXPO 9/30/07 ($7.85/share) & EBITDA is pro forma the EXCO acquisition. CXPO* ($12.45/share) & EBITDA is pro forma the EXCO acquisition. Daily production based on most recent quarter. EBITDA estimates are Thomson FirstCall consensus. EV based on companies 9/30/2007 SEC filings. Source: Fortis Merchant Banking Weekly Market Update (1/7/08) 24

25 SUMMARY Experienced management team proven track record of growth Low-risk growth potential through significant upside from 3P reserves Inventory of lower risk exploitation and exploration opportunities in the Barnett/Woodford Shale, South Texas Lobo and DJ Basin Visible near-term debt reduction through free cash flow Limited commodity risk due to aggressive hedging program Strong financial partner in Oaktree Capital Prospect generation capability for above-average value creation 25