Noble Royalties, Inc.

Transcription

1 Noble Royalties, Inc. Oil and Gas Acquisition is our Business Martin V. Fleming TIPRO Summer Meeting Galveston, Texas. August 11, Noble Royalties, Inc.

2 American Energy Policy Must be More than a Fairy Tale Solyndra s $535 million loss was not child s play

3 Alaska Pipeline Lost Opportunity Gross Revenue $295.1 B Royalty Revenue $36.4 B Gross Revenue $318.1 B Royalty Revenue $39.3 B OPD MMBO Gross Pipeline Fill-up Case.5 Historical Throughput Baseline decline Year 3

4 Credible Team and Study Noble Royalties is one of the largest private royalty owners in the United States with interests in more than 93, wells on more than 8.5 million acres. Noble was contacted prior to meeting of Super Committee to review royalty potential on Federal lands in Alaska and lower 48 onshore. Noble hired well-respected third party professionals with a broad knowledge of activity on Federal lands to produce an unbiased report. The report is based entirely on data from U.S. Federal government sources. 4

5 Solutions and Direct Economic Benefit 1. Slowly increase leasing on Federal lands back to historical activity levels. 2. Refill the Alaskan Pipeline. 3. Direct economic benefit ( ): Lower 48 increased royalty and bonus: Alaska increased royalty and bonus: Total Onshore Offshore, Gulf of Mexico Total $178.7 billion $243.7 billion $422.4 billion $363. billion $785.4 billion 5

6 Study Take Aways Annual leasing on Federal lands is at 3 year low. Onshore at 1% of 1985 level Federal mineral estate is currently under leased. Onshore 6% Offshore, Gulf of Mexico 2% 91% of undiscovered resources on onshore Federal lands are either inaccessible or restricted. Underdevelopment of Alaskan resources (based on underutilization of pipeline) has cost $295 billion to economy and $36 billion in lost Federal royalties. 6

7 Additional Benefits New activity on Federal lands will create $5.2 trillion in taxable revenue. Significant increase in jobs in and around oil and gas activity on Federal assets. New, sustainable revenue without tax increases for needs of Federal treasury. Roll back time and have reserve replacement. 7

8 BLM Oil and Gas Statistics 2 16 Annual New Acres Leased Cumulative Acres Leased res MM Acr Lower 48 Alaska 1.4 MM Ac cres Lower 48 Alaska 41.2 X-axis units are by Fiscal Year 8

9 BLM Oil and Gas Statistics Oil Production (MBOPD) Production 21: 74% Gas Production Gas Production (BCFPD) Producing Wells Annual MBOE per Producing Well Well Count (Thousands) 96.5 MBOE per Producing Well Alaska Lower X-axis units are by Fiscal Year. The producing well data for 25 are incomplete because the Automated Fluid Minerals Support System (AFMSS) had shut down. 9

10 Federal Onshore Royalty Model Inputs Assumptions and Correlations (based on historical trends) Lower 48 States Alaska Annual Leasing to Maintain 21 Levels (MM Acres) Peak Forecast Annual Leasing (MM Acres) 12 5 Productive Acres per Leased Acres (Percent) 3 3 Productive Acres per Productive Well (Acres/well) Annual Production per Productive Well (MBOE/Year) Federal Royalty (Percent) Price, Constant ($/BOE) Bonus ($/Acre) Maximum Alaska Pipeline Throughput (MMBOPD) (1) (2) (2) (1) Based on the Lower 48 states because of the limited historical data available for Alaska. (2) Assumed to be all oil because of the existing Alaska oil pipeline. 1

11 Forecast -- Federal Onshore, Lower 48 States MM Acres Total Leased Acres 12 MM Acres/Year 188 Baseline Well Count (Thousands) Producing Wells Baseline Historical Forecast Historical Forecast Year Year Production MMBOEPD Baseline 1.8 Historical Year Forecast 11

12 Oil, Gas, and NGL Royalty Revenues Federal Onshore, Lower 48 States 12 Total $132.9 B Royalty Revenue $11. B 1 Royalty Rev venue ($B) Historical Forecast $2.8 B $71.4 B $4.7 B $2.5 B 2 Baseline Year 12

13 We are trying to produce American Energy, but......our hands are tied!

14 Alaska Pipeline Throughput OPD MMBO Historical Throughput Baseline decline Year 14

15 Alaska Pipeline Lost Opportunity Gross Revenue $295.1 B Royalty Revenue $36.4 B Gross Revenue $318.1 B Royalty Revenue $39.3 B OPD MMBO Gross Pipeline Fill-up Case.5 Historical Throughput Baseline decline Year 15

16 Forecast -- Federal Onshore, Alaska 35 Total Leased Acres 25 Producing Wells MM Acres MM Acres/Year Historical Forecast 2.3 Baseline Well Count (Thousands) Historical Forecast.2 Baseline Year Year Production Pipeline Capacity Reached (2.3 MMBOPD) MMBOPD Historical Forecast Baseline Year 16

17 Oil, Gas, and NGL Royalty Revenues Federal Onshore, Alaska Royalty Rev venue ($B) Total $182.3 B Royalty Revenue $36.3 B $71.1 B $75. B 1. Historical Forecast Baseline Year 17

18 The Obama EPA oil and gas is an enforcement priority... my philosophy of enforcement... It was kind of like how the Romans used to, you know, conquer little villages in the Mediterranean. They d go into a little Turkish town somewhere, they d find the first five guys they saw and they would crucify them. And then you know that town was really easy to manage for the next few years. -Al Armendariz. U.S. EPA Region 6 Administrator

19 BOEM and EIA GOM Oil and Gas Statistics Annual New Acres Leased MM Acres.4.2. Production Gas Production (BCFPD) 4 Oil Production (MMBOPD) 1. 29: 58% Oil Production 2 1 Producing Wells Annual MBOE per Producing Well Well Count (Thousands) MBOE per Producing Well X-axis units are by Year. 19

20 Federal Royalty Model Inputs Assumptions and Correlations (based on historical trends) Onshore Lower 48 States Alaska Offshore Gulf of Mexico Annual Leasing to Maintain 21 Levels (MM Acres) Peak Forecast Annual Leasing (MM Acres) Productive Acres per Leased Acres (Percent) 3 (1) 3 19 Productive Acres per Productive Well (Acres/well) ,12 Annual Production per Productive Well (MBOE/Year) 7.5 (2) Federal Royalty (Percent) Price, Constant ($/BOE) (2) Bonus ($/Acre) Maximum Alaska Pipeline Throughput (MMBOPD) (1) Based on the Lower 48 states because of the limited historical data available for Alaska. (2) Assumed to be all oil because of the existing Alaska oil pipeline. 2

21 Forecast -- Federal Offshore, Gulf of Mexico MM Acres Total Leased Acres 8 MM Acres/Year Baseline Well Count (Thousands) Producing Wells 19.7 Baseline Historical Forecast Year Year 1 8 Production 9.4 MMBOEPD Historical Year 21 Forecast 2.7 Baseline

22 Oil, Gas, and NGL Royalty Revenues Federal Offshore, Gulf of Mexico 25 Total $363. B Royalty Revenue $23. B Royalty Rev venue ($B) Historical Forecast 5 $39. B $16.1 B $163.9 B Baseline $3.25 B Year 22

23 The Future of Energy. Only $424/Gallon. Source: U.S. Navy

24 Tax Rates are Going Up Income Tax (For 211, this rate applies when adjusted gross income exceeds $379,15 for both single and joint filers) Long-Term Capital Gain (For 211, this rate applies when adjusted gross income is equal to or exceeds $34,5 for singles and $69, for joint filers) Qualified Dividend (Applicable where adjusted gross income exceeds $373,65 for both singles and joint filers, adjusted for inflation) Social Security (Currently capped at wages up to $16,8, adjusted for inflation) Medicare on Wages (The.9% increase in 213 applies only where wages exceed $2, for singles and $25, for joint filers) Medicare on Net Investment Income (Applies to net investment income only where adjusted gross income exceeds $2, for singles and $25, for joint filers) % and Future Years 35.% 39.6% 15.% 2.% 15.% 39.6% % 12.4% 2.9% 2.9% 3.8% % % 3.8% Noble Royalties, Inc.

25 Increasing Taxes Take Money out of Your Pocket Expiring In Effect Obama Proposed Capital Gains 15% 23.8% 28.9% (15% + 5% + 3.8%) (15% + 5% + 3.8% + 5.1%) (Increase/Decrease) 58.7% 92.7% Ordinary Income 35% 43.4% 48.5% (35% + 4.6% + 3.8%) (35% + 4.6% + 3.8% + 5.1%) (Increase/Decrease) 24.% 38.6% Enterprise Value ( Cash Option ) $ 3,,. A Capital Gains Taxes $ 4,5,. $ 7,14,. $ 8,67,. B Net $ 25,5,. $ 22,86,. $ 21,33, Noble Royalties, Inc.

26 Holding Means Paying the Government HALF Expiring In Effect Obama Proposed Capital Gains 15% 23.8% 28.9% (15% + 5% + 3.8%) (15% + 5% + 3.8% + 5.1%) (Increase/Decrease) 58.7% 92.7% Ordinary Income 35% 43.4% 48.5% (35% + 4.6% + 3.8%) (35% + 4.6% + 3.8% + 5.1%) (Increase/Decrease) 24.% 38.6% Unrisked Value Field Cash -Flow $ 68,345,. Ordinary Income Taxes $ 23,92,75. $ 29,661,73. $ 33,147,325. Net After Taxes $ 44,424,25. $ 38,683,27. $ 35,197, Noble Royalties, Inc.

27 Selling Today = Lifetime of Cash Flow in 1 Years 1 Year Certainty Vs. Lifetime Risks 3.5% Reinvestment Yield Capital Gains YR 15% $ 25,5,. 23.8% After Tax Investment 28.9% (15% + 5% + 3.8%) (15% + 5% + 3.8% + 5.1%) (Increase/Decrease) 1 $ 26,392, % 92.7% 2 $ 27,316,237.5 Ordinary Income 3 35% $ 28,272, % 48.5% (35% + 4.6% + 3.8%) (35% + 4.6% + 3.8% + 5.1%) 4 $ 29,261, (Increase/Decrease) 24.% 38.6% 5 $ 3,286,.79 Unrisked Value 6 $ 31,346,1.82 Field Cash -Flow 7 $ 32,443,121.2 $ 68,345,. Ordinary Income Taxes 8 $ 23,92,75. $ $ 33,578, ,661,73. $ 33,147,325. Net After Taxes $ 44,424,25. $ 38,683,27. $ 35,197, $ 34,753, $ 35,97, Noble Royalties, Inc.

28 Where would your rather see the American Flag? Since September 11, 21, America Has lost 1 service man for every 2,999,326 barrels of oil imported. The Keystone Pipeline would save one life every 6 days.

29 It All Comes Down to Just a Few States Noble Royalties, Inc.

30 We Decided to Make A Difference Contributed meaningfully at national level and outside of Texas. Conducted focus groups in VA, OH, PA, NM, CO and nationally to be followed with quantitative polling for messages that make a difference. Building communications protocol for outreach by candidates, industry trade association and others to be launched at the Republican National Convention. Planning events in combination of oil and gas cities and swing states for the Fall. Dallas, Houston, Midland, Oklahoma City, Denver, Pittsburg, Columbus, Washington, D.C., New York and Los Angeles Noble Royalties, Inc.

31 What Can you Do About It? Courtesy Federal Elections Commission 31

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33 Noble Royalties, Inc. Oil and Gas Acquisition is our Business Martin V. Fleming TIPRO Summer Meeting Galveston, Texas. August 11, Noble Royalties, Inc.