December 6, 2012 Houston, TX

Transcription

1 December 6, 2012 Houston, TX 1

2 The data contained in this presentation that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Exchange Act. Such statements may relate to capital expenditures, drilling and exploitation activities, production efforts and sales volumes, proved, probable, and possible reserves, operating and administrative costs, future operating or financial results, cash flow and anticipated liquidity, business strategy, property acquisitions, and the availability of drilling rigs and other oil field equipment and services. These forward-looking statements are generally accompanied by words such as estimated, projected, potential, anticipated, forecasted or other words that convey the uncertainty of future events or outcomes. Although we believe the expectations and forecasts reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to have been correct. These statements are based on our current plans and assumptions and are subject to a number of risks and uncertainties such as potential litigation as further outlined in our most recent 10-K and 10-Q. Therefore, the actual results may differ materially from the expectations, estimates or assumptions expressed in or implied by any forward-looking statement made by or on behalf of the Company. Cautionary Note to U.S. Investors The SEC has recently modified its rules regarding oil and gas reserve information that may be included in filings with the SEC. The newly applicable rules allow oil and gas companies to disclose not only proved reserves, but also probable and possible reserves that meet the SEC s definitions of such terms. We disclose proved, probable and possible reserves in our filings with the SEC. Our reserves as of June 30, 2012 were estimated by DeGolyer & MacNaughton, W.D Von Gonten & Co. ( Von Gonten ), and Pinnacle Energy Services, LLC ( Pinnacle ), independent petroleum engineering firms. In this presentation, we make reference to probable reserves and 2P reserves that aggregate proved and probable reserves. These estimates are by their nature more speculative than estimates of proved reserves and are subject to greater uncertainties, and accordingly the likelihood of recovering those reserves is subject to substantially greater risk. Please see Appendix. 2

3 Four Factors for Repeating Success and Building Value per Share Every Day Innovative Engineering Staff Fully Aligned with Shareholders Building Value per Share Redeploying Internal Cashflows Known Oil Fields 3

4 MMBoe 30 2P Reserves $M $20,000 Revenue (Fiscal years ended June 30) 25 $18,000 $16, $14,000 $12,000 $10, $8,000 $6, $4,000 $2,000 $0 PD PUD Probable 4

5 Ms Lime Drilling Began May % in JV spanning 38 sections (~5,400 net acres) 2 wells & 1 SWDW drilled to date 112 gross drilling locations (24 net to EPM) 6.4 MMBOE Probable (57% oil, 43% rich gas) GARP TM Patented artificial lift technology for horizontal and vertical wells Successfully installed in three commercial wells in Giddings S Lopez Field Producing Vertical redevelopment of previous waterflood, 100% oil Scheduled for monetization Delhi Field - Producing CO 2 EOR - 100% oil 11.0 MMBO Proved 5.8 MMBO Probable 61% of 2P is developed Giddings Field Monetizing Hz wells in Austin Chalk, Georgetown, Buda 2,000 net acres of Woodbine exposure 2.3 MMBOE Proved, 21% developed Note: all reserves as of 6/30/2012 5

6 Our Foundation Asset CO 2 Enhanced Oil Recovery

7 Gross cum production 192 MMBO Current production 5,057 gross BOPD (qtr ended 9/30) 6/30/2012 Reserves 7.5 MMBO Proved Developed (PV10: $326MM) 11.0 MMBO Proved (PV10: $409MM) 5.8 MMBO Probable (PV10 $103MM) 61% of 2P is developed 29% of 2P from royalty interests Projected EOR recovery Cash Annuity to Fund Growth Unit size 13% Proved (% of Original Oil in Place) 4% Probable 13,366 acres Delhi Jackson Dome Tax preferences Acquired by EPM in 2003 Severance tax holiday until mid-fy17 Total investment of $6.8 MM Farm-out to DNR in mid-2006 Received $50 MM + DNR pays for EOR Development + Reversionary interest Upside Potential Original Oil in Place (OOIP) may be much greater 3D seismic results Higher EOR % recovery high quality reservoir + residual secondary bbls Accelerated development of smaller reservoirs now scheduled for decade-end and totally categorized as Probable Reserves 7

8 Operator has already spent most of 2012 planned investment of $64 MM. Developing three patterns and building additional facilities. Operator expects Calendar 2013 capex of $40MM gross, with reversion to EPM in ~late 2013, reducing operator s net production by 1,000-1,500 BOPD 2009 Activity 2012E Activity 2010 Activity 2011 Activity 2011 Activity expansion Reservoirs to be added later in this decade 2013E Activity ~$40MM gross Source: Denbury Resources Inc. Fall Analyst Meeting, November 2012 and September 2012 payout statement. 8

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10 ($000) 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 Reversionary WI Royalty Cal Year Note: Based on report from independent reserve engineers, DeGolyer & MacNaughton, and includes proved and probable reserves as of 6/30/2012 at SEC LLS pricing $113/bbl. 10

11 Notes: Residual PV10 is the PV10 of remaining cash flows from given year to project end. Includes proved and probable reserves from independent report of 6/30/2012 at SEC LLS pricing of $113/bbl. 11

12 Louisiana Light Sweet (LLS) Oil Price Impact on Delhi 2P PV10 per Fully Diluted Share $ / Fully-Diluted Share $18 $16 $14 $12 $10 $8 $6 $4 $2 $- PV-10* vs LLS Oil Price $7.80 ~$107 11/27/12 $60 $70 $80 $90 $100 $110 $120 $130 * From independent report of 6/30/2012 including proved and probable reserves at SEC LLS pricing of $113/bbl. Diluted shares include 5.5 MM options and warrants without effect of exercise proceeds. 12

13 Total 2P PV10 Heavily Driven by Proved Reserves Production MBO/month 1,000 Delhi Gross Production Forecast as of 6/30/ Probable Proved 10 7/1/2012 Forecasted production over first 16 years of 36+ year life Notes: From independent report of 6/30/2012 including proved and probable reserves at SEC LLS pricing of $113/bbl. 13

14 Growing Per-Share Value

15 Fits selection criteria: Oil-prone, horizontal drilling, onshore U.S., IRR(e) > 30%, known oil field, accessible, running room, repeatable Kay County, Oklahoma oily region of play JV holds ~12,000 net acres in 38 sections (24,320 acres) EPM owns 45% share of JV 112 gross, 24 net probable undrilled locations Horizontal drilling in area previously developed with vertical wells RRC and DVN active in Kay County Drilling and completion cost per well ~$3.2 MM, including water disposal Running room with multi-year development JV increasing its leasehold through pending bolt-on acquisitions Investment sink for Delhi cash flow develop ~5 BOE reserves from 1 barrel of Delhi production and fully utilize intangible drilling tax deduction to defer income tax 2 Ms Lime wells drilled & frac d, now dewatering as expected; 1 st SWD well completed, production results expected in quarter ended 12/31/12 15

16 Joint venture acreage in oil-prone area, east of the Nemaha ridge. Multi-year visible growth potential for reinvesting early Delhi free cash flow. SD, PQ Spyglass, Vitruvian, Orion, Century CHK, Chaparral, Eagle, SDR CHK, SDR, Vitruvian, PQ Calyx, Pablo, Range, Redfork, Spyglass, Territory D E V O N EPM DVN & Sinopec H K Devon, Calyx, Pablo, PQ, Range, Ram, SDR, Spyglass, Century, Territory, Vitruvian 16

17 Mississippian Lime is well defined by old vertical wells o Numerous vertical logs show thick, continuous pay Vitruvian Bowling 2-32H IP 527 Bopd 566 Boepd o Interpretation of well data and logs shows geologic continuity with offset wells Vertical average EURS: o o o Kay County: 97 MBOE Osage County: 80 MBOE Cowley County: 60 MBOE Horizontal Results: o Triple Diamond Hofmeister 21-1H IP 780 Bopd o Vitruvian Bowling 2-32H IP: 566 Boepd, ~3000' lateral o Spyglass Shaw 1A-8H Triple Diamond Hofmeister 21-1H IP 614 Bopd 780 Boepd Range Resources Type Curve EUR MBoe Pablo Gilbert 1H-32 IP 657 Bopd EPM Spyglass Shaw 1A-8HZ 2,228' Miss Lime Hz 500+ Bopd Territory Beast 1-27H IP Bopd Spyglass Bird Creek 1A-15H IP 210 Bopd IP: 500+ Boepd, 2228 lateral o 2 poor offsets located in bottom of zone instead of desired upper section 17

18 BOEPD Assumptions: EUR: 268 MBOE (75% oil) $3.2 MM drilling and completion cost (our 1 st two at ~$3.1MM) Includes SWD facilities Rich gas is minor contributor Commodity prices in economics: WTI $85/Bbl (before $5 differential) Natural gas rising from $2.50 to $4.00/MMBtu by 2014 (then flat) IRR > 30% at base case EUR Range recently upped their Kay County well estimates to 600 MBOE for 4,000 laterals % 300% 200% 100% Estimated Mississippian Lime Type Curves by Operator Range 485 MBOE SDR 450 MBOE EPM JV 268 MBOE Month EPM assumes a declining GOR, thus initial BOE decline rate appears higher and with more Ms Lime Sensitivity IRR vs Wellhead Oil Price EPM Base Case 267 MBOE Industry 400 MBOE 0% $40 $50 $60 $70 $80 $90 $100 $110 18

19 Innovation for Increasing Recovery

20 Industry at risk of losing vast quantities of reserves and production as mature horizontal wells encounter liquid loading Our technology re-establishes economic production of the Tail reserves at risk due to the liquid loading, as it: Supplements & enhances existing rod pump Mobilizes remaining fluid to rod pump inlet Four commercial installations completed demonstrating success Risk-sharing participation model 20

21 BEFORE: Conventional Rod Pump Either fluid level eventually drops to a level where rod pump or gas lift are no longer effective, or Fluid production in gas well builds and eventually shuts off gas production This can leave substantial volumes of oil and gas unrecovered (the Tail ) AFTER: GARP Adds substantial new reserves at low cost Benefit = up to 25% incremental recovery Benefit = extends life of lease(s) Low development cost per net BOE Patented 21

22 100 BOPD Installed GARP Selected Lands #2 w/garp Daily Rate versus Time Downtime for repairs of inherited equipment BOPD Pre-GARP BOPD /1/2012 3/1/2012 4/1/2012 5/1/2012 6/1/2012 7/1/2012 8/1/2012 9/1/2012 1,000 BOPD Production decline due to well loading up Selected Lands #2 Daily Rate versus Cumulative Production 0 50, , , , ,000 Cumulative Production, bbls oil Restored production rate from marginal 1 BOPD to 18+ BOPD due to GARP GARP targeted recapture of Tail 22

23 LOPEZ FIELD SOUTH TEXAS Steady oil production of ~24 BOPD from 1 st two producers Third producer now producing desired oil cut 37 drilling locations on existing leases Candidate for monetizing due to long term horizon for material expansion GIDDINGS (nongarpr) Monetizing assets through multiple divestments Retaining 5% royalty interest in 900+ net acres in Woodbine play Proceeds to be re-invested in core projects 23

24 Conservative, Strong and Aligned

25 EPM PQ WRES DNR AXAS MH CWEI CXPO 120% 100% 80% 60% 40% 20% 0% 0% Debt to Market Cap (as of 9/17/12) 38% 43% 44% 67% 69% 105% 97% $MM $20 4 FQFQCFFO $18 $16 $14 $12 $10 $8 $6 $4 $2 $- Liquidity Sources & Uses + FQ2-4 CFFO Credit Line 9/30/12 Working Capital Resources + expansions Rem'g FY13 Capex 25

26 Total Per Fully Diluted Share $20 $19.04 $16 $12 $11.24 Gap to NAV $8 $4 20% discount to Delhi Proved Developed PV10! $7.80 $0 Investment W/C Proved PV10 Delhi Probable PV10 Delhi Proved PV10 Other Probable PV10 Ms Lime Total Value Share Price (11/27/12) Note: Per-share values are based on 33.4 MM diluted shares and no debt. PV10 from 6/30/12 reserves report. 26