Mid-Continent A&D Market Update

Transcription

1 Mid-Continent A&D Market Update March 2014 The opinions expressed in this presentation are general in nature and not intended to provide specific advice or recommendations. Contact your investment representative, attorney, accountant or tax advisor with regard to your specific situation. The opinions of the author do not necessarily reflect those of Wells Fargo Securities, LLC or any other Wells Fargo entity.

2 Highly Experienced & Proven MA&D Advisory Team Select 2013 Transactions $343,000,000 $438,000,000 $890,000,000 has sold its Anadarko Basin assets to has sold Anadarko Basin assets to has acquired EOR assets from Financial Advisor to SM Energy Co. December 2013 Financial Advisor to Laredo Petroleum, Inc. May 2013 Financial Advisor to Whiting Petroleum Corporation June 2013 $950,000,000 has agreed to sell its Midland Basin assets to Financial Advisor to EnerVest, Ltd. February 2014 $117,500,000 has sold Eagle Ford Shale assets to Co-Advisor to Cinco Resources February

3 David and Goliath: Underdogs, Misfits, and the Art of Battling Giants 1 The superior man makes the difficulty to be overcome his first interest; success only comes later. --Confucius 1. Source: Malcolm Gladwell 2. Source: corbis.com 3

4 $ / Bbl $ / MMBtu Commodity Pricing Underpins Upstream Activity Over the past 2 years, oil has traded within a relatively stable band Commodity Pricing 2009 YTD $120 $7 $100 $6 $80 $5 $4 $60 $3 $40 $2 $20 $1 $0 $0 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Source: FactSet. 4

5 Public Markets Favoring Focused, Repeatable, Resource Growth Stories Perceived over simplicity vs. perceived over complexity Select Pure Play Public Companies TEV / FWD EBITDA Appalachia 13x Permian Permian 10x Bakken Bakken 6.5x Mid-Con Mid-Con 6x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x TEV / NTM EBITDA Source: CapitalIQ. Data as of 2/19/

6 YOY Growth YOY Growth Bcf MMBbl Oklahoma Gross Production Profile 2001 through 2013 Stacked pay supporting growth and development optionality Natural Gas Production (Bcf) Oil Production (MMBbl) 2, , ,500 1, % 25% 20% 15% 10% 5% 0% -5% -10% 30% 25% 20% 15% 10% 5% 0% -5% -10% Source: Energy Information Administration. 6

7 HZ Granite Wash Development 2007 through 2013 The Granite Wash has seen tremendous growth over the last six years Through 2007 (69 Wells) Through 2009 (259 Wells) Through 2011 (1,012 Wells) Through 2013 (1,733 Wells) Source: IHS 7

8 Mor. Wells Spud Pennysylvanian Atok. Desmoinesian Missourian Virgilian Granite Wash Operators Targeting Shallow, Liquids-Rich Formations Anadarko Basin Stratigraphic Column Granite Wash Landing Analysis 1 Shawnee Group Douglas Group Lansing Group Shawnee Group Tonkawa Sand Cottage Grove 5% 67% 33% Kansas City Group Hogshooter Checkerboard Cleveland 95% 200 Marmaton Group Marmaton Wash Cherokee Group Skinner Wash Red Fork Shale Atoka Group Atoka Wash 100 Morrow Group Morrow Wash Springer Sand Mississippian Devonian Silurian Woodford Shale Hunton Group Primary Granite Wash targets Atoka Desmoinesian Missourian Total 1. Source: IHS Enerdeq. 8

9 Condensate Yield Over Time Stiles Ranch Operators are targeting the more liquids-rich zones of the Granite Wash HZ Wells 1 st Production HZ Wells 1 st Production Avg. 156 Bbl / MMcf Avg. 29 Bbl / MMcf Source: IHS. 9

10 TTV - $Bn. MA&D Broad Market Trends Supply demand imbalance contributed to underwhelming 2013 Operator Focus/Appetite Shifting in Resource Plays Activity in 2013 Was Slow to Materialize Bid Ask Spread Continues to be Impediment for Non- Conforming Assets Capital Markets Wide Open $90 $80 $70 $60 $50 $40 $30 $20 $10 $- $82 $72 $53 $47 $42 $ Asset Corporate Source: IHS. 10

11 TTV ($MM) % of Total TTV Deal Count % of Total Deal Count Mid-Continent A&D Relative Contribution TTV & Deal Count ( ) Deal making in the Mid-Con continues to thrive Mid-Con Transaction Value ( ) Mid-Con Deal Count ( ) $9,000 $8,404 18% 18 16% $8,000 16% % $7,000 $6,484 14% % $6,000 $5,610 12% % $5,000 10% 10 8% $4,000 $3,000 $3,262 8% 6% % $2,000 $1,918 4% 4 4% $1,000 2% 2 2% $ TTV ($MM) % of Total TTV 0% Deal Count % of Total Deal Count 0% Source: IHS Herolds. Only includes transactions with disclosed transaction value >$25MM. 11

12 Mid-Con Supplying Assets that Meet Primary A&D Demand Drivers Mid-Continent exhibits many of the attributes buyers are seeking Desired Asset Attributes Demand Drivers Mid-Con Running Room Reliability Economic Inventory Long-term Gas Option Repeatable / Conformance of Results 12

13 Laredo Petroleum & SM Energy Granite Wash Divestitures Mid-Con divestitures are being met with strong demand and valuations Net Acreage ( 000) Net Prod n (MMcfepd) 3P PV10 ($Bn) $1.4 13

14 Shifting Buyer Landscape Buyer and seller landscape has shifted 100% Buyer Distribution (% of TTV) 2008 vs Select PE Backed Companies 90% 86% 80% 70% 60% 50% 40% 41% 30% 25% 20% 16% 10% 6% 7% 0% Public MLP Private / PE % of TTV % of TTV Source: IHS Herolds. 14

15 WFS s Expectations for 2014 Mid-Con Activity Strong Deal Flow Will Continue Private Equity Will Continue its Buying Spree Public Companies to Continue Exiting Mid-Con 15

16 David and Goliath: Underdogs, Misfits, and the Art of Battling Giants 1 I never expect to lose. Even when I m the underdog, I still prepare a victory speech. --H. Jackson Brown, Jr. 1. Source: Malcolm Gladwell 2. Source: corbis.com 16

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