The Oil & Gas Conference Alta Mesa Resources Enercom Denver August 2018

Transcription

1 Alta Mesa Resources The Oil & Gas Conference Enercom Denver August 2018

2 Disclaimer FORWARD-LOOKING STATEMENTS The information in this presentation and the oral statements made in connection therewith include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of present or historical fact included in this presentation, regarding our strategy, future operations, financial position, growth, returns, free cash flow, liquidity, budget, drilling and development plans, pipeline construction, projected costs, prospects, and objectives of management are forward-looking statements. When used in this presentation, including any oral statements made in connection therewith, the words could, should, will, may, believe, anticipate, intend, estimate, expect, project, the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the development, production, gathering and sale of oil, natural gas and natural gas liquids. These risks include, but are not limited to, commodity price volatility, low prices for oil and/or natural gas, global economic conditions, inflation, increased operating costs, lack of availability of drilling and production equipment, supplies, services and qualified personnel, processing volumes and pipeline throughput, uncertainties related to new technologies, geographical concentration of operations of our subsidiaries Alta Mesa Holdings, LP ( Alta Mesa ) and Kingfisher Midstream, LLC ( KFM ), environmental risks, weather risks, security risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating oil and natural gas reserves and in projecting future rates of production, reductions in cash flow, lack of access to capital, Alta Mesa s and KFM s ability to satisfy future cash obligations, restrictions in existing or future debt agreements of Alta Mesa or KFM, the timing of development expenditures, managing Alta Mesa s and KFM s growth and integration of acquisitions, failure to realize expected value creation from property acquisitions, title defects and limited control over non-operated properties, our ability to complete an initial public offering of the KFM midstream business and the other risks described in our filings with the Securities and Exchange Commission (the SEC ). Should one or more of the risks or uncertainties described in this presentation and the oral statements made in connection therewith occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this presentation. RESERVE INFORMATION Reserve engineering is a process of estimating underground accumulations of hydrocarbons that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions could impact our strategy and change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil and natural gas that are ultimately recovered. Estimated Ultimate Recoveries, or EURs, refers to estimates of the sum of total gross remaining proved reserves per well as of a given date and cumulative production prior to such given date for developed wells. These quantities do not necessarily constitute or represent reserves as defined by the SEC and are not intended to be representative of anticipated future well results of all wells drilled on our STACK acreage. TRADEMARKS AND TRADE NAMES We own or have rights to various trademarks, service marks and trade names we use in connection with the operation of our business. This presentation also contains trademarks, service marks and trade names of third parties, which are the property of their respective owners. The use or display of third parties trademarks, service marks, trade names or products in this presentation is not intended to, and does not imply, a relationship with us, or an endorsement or sponsorship by or of us. Solely for convenience, the trademarks, service marks and trade names referred to in this presentation may appear without the, TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, service marks and trade names. 2

3 Alta Mesa Resources Leading Developer of STACK Oil Window Low cost, high return Meramec / Osage Drilled ~350 Hz wells, transitioned to multi-well pads Significant runway for capital efficient growth Integrated Business Drives Value Contiguous acreage facilitates efficient operations Midstream infrastructure enhances returns Kingfisher Midstream positioned for significant growth Strong Balance Sheet with Pre-Funded Growth Low leverage Liquidity to fund 2018 and 2019 growth Free cash flow positive by year-end 2019 Strong Management Alignment with Investors Management ownership >10% Compensation tied to debt-adjusted per share metrics 3

4 Alta Mesa s Trajectory Realization of benefits of business combination Complete business combination Strengthen balance sheet to pre-fund growth Production growth, driven by transition to development drilling Execute on midstream business development Maintain capital discipline and efficiencies Continued delineation of position in NW STACK Achieve peer leading capital efficient growth Become free cash flow positive by year-end Midstream business achieves scale for IPO or other alternatives Preserve leadership position in the STACK Capital efficient growth within cash flows Relentless Pursuit of Shareholder Value Creation 4

5 Leading Developer in STACK Black-Oil Window 350+ wells over 300+ sq. mi. area affirm robust economic opportunity Principal STACK Resource: Osage / Meramec STACK Phase Windows Osage / Meramec progrades basin-ward providing multitarget reservoirs, gradational from siliceous, cherty carbonate to silty carbonate to limy siltstones Osage / Meramec highly naturally-fractured in Kingfisher, Garfield, Major Counties Oil production increases and gas decreases moving from the southwest to the northeast across the Basin Well costs increase transitioning from the normal pressure window in the northeast to overpressure in the southwest SW Schematic Cross Section Flattened on the Top of the Oswego Lime NE Pennsylvanian Oswego Lime Mississippian Gas Oil Meramec/Osage True Dip 1 degree SW 5

6 Kingfisher County Development Activity points to increasing confidence in STACK/SCOOP/Merge/NW STACK 500 New Drill HZ Permits Issued by County Mississippian HZ Wells by Year and Active Rigs Woodward Custer 0 Blaine Canadian Dewey Garfield Grady Kingfisher Major Major Rig Count by County¹ Blaine Kingfisher 30 Dewey Blaine Canadian Dewey Garfield Grady Kingfisher Major New Wells by County Custer Canadian Blaine Canadian Dewey Garfield Grady Kingfisher Major Pre Washita Caddo Grady 1 Current rig count as of July 17, 2018; not annualized 6

7 Alta Mesa Resources Overview Focused on development and consolidation in the STACK Q2 Key Metrics Market Capitalization 1 Enterprise Value 1 ~$2.6bn ~$3.2bn Q2 Net Production (BOE/d) 25,600 Q2 Sales % Oil / % Liquids 2 48% / 72% Q2 KFM System Gas Volume (MMCF/d) 95.6 Upstream Assets Net STACK Surface Acres 3 ~130,000 Cushing Single-well IRRs (Individual / Corporate) 4 77% / 92% Operated STACK Hz. Wells Drilled Current rig count 8 Kingfisher Midstream Assets Gas Processing Capacity Gathering Pipelines Dedicated Acreage Oil Storage Capacity MMCF/d 400+ miles ~300,000 gross acres 50,000 BBLs 1 Equity share price as of 06/29/2018 close, the last trading day in the quarter, using aggregate Class A and Class C share count of 383,980,581 2 NGL volumes increased in Q2 due to transition to ethane recovery and improved plant efficiency 3 Acreage as of 08/01/2018, not pro forma for recently announced letter agreement in Major County 4 Mean IRR based on NYMEX close at 6/29/2018, calculated over economic life of wells 5 Horizontal wells drilled as of 08/01/ Includes existing 90 MMCF/d offtake processing 7

8 System Volumes (Mmcf/d) Kingfisher Midstream Operations Continued expansion of business Recent Developments Gas Gathering & Processing Alta Mesa delivered volumes Q1 vs. Q2 grew 10% 3rd party delivered volumes Q1 vs. Q2 grew 58% Oil Gathering Alta Mesa is initial customer Targeting 3rd party expansion with Cimarron Express start up in 2019 Produced Water Business to be transferred to KFM in 2018; not reflected in Q2 results KFM Gas Processing Plant System Volumes Increased 37% Since Closing, 3 rd Party Growth of 87% AMR Third Parties Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18E 1 Percentages calculated as July 2018 vs. February 2018 monthly volumes. 8

9 Kingfisher Midstream Expansion Opportunities Meaningful growth trajectories for all 3 services KFM Gas System KFM Oil System KFM Water System Gas Oil Water Base growth from Kingfisher County Expansion opportunities in NW STACK (Major, Blaine, and Dewey counties) Cimarron Express underpins near term growth Unique crude takeaway solution differentiates gathering Readily scalable business Significant undedicated acreage throughout the STACK 9

10 Recent Highlights Strong Production Ramp Underway Q production 25,600 BOE/d Estimated July 2018 production 31,800 BOE/d Current production rates >50% higher than 2017 exit rate Midstream Business Expanding NW STACK Activity Increasing Positioning for Ongoing Q system gas volume 96 MMCF/d Estimated July 2018 system gas volume 112 MMCF/d Transfer of produced water business to Kingfisher Midstream initiated Well results, geologic assessments affirm continued development of NW STACK KFM expanding to Major County with high pressure pipeline extension Signed letter agreement with private operator to to add net acreage and gain increased operational control in eastern Major County 9 th rig scheduled to move into the field in September Continuous multi-discipline efforts to define and optimize pattern drilling, completion, and production operations Planning and development for mid-2019 completion of Cimarron Express pipeline 10

11 Strong Production Trajectory Ongoing coordination and optimization of multi-well drilling & completion Gross Operated Production, BOE/d 2018 Net Production Outlook, BOE/d 60, Rigs 4-6 Rigs 8 Rigs ~85-100% increase in production from 2017 Exit Targeted 40,000 50,000 Gross BOPD 58% oil (2 stream) 50%+ increase in production from 2017 Exit Achieved 31,800 38,000 Gross BOEPD 40,000 23,900 25,500 30,000 20,300 20,000 10,000 - Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Dec 2017 Q1 '18 Q2 '18 Jul 2018E Exit 2018E 11

12 Upstream Operational Execution Cost control and coordination with increasing level of activity Progression of Wells Drilled Well Costs Maintained Focused discipline on costs as activity levels in H approached full year 2017 activity levels Improved efficiencies in spud to rig release and completions stages per day offsetting service price pressure and materials cost increases YTD wells have averaged $3.8mm 113 Days to First Oil On Production to 1st Oil Frac End to On Production Frac Start to Frac End RR to Frac Start Spud to Rig Release YTD 1 To date 2018 as of 08/01/ Days are averages for respective periods Total YTD 12

13 BOPD Production Optimization Key driver to maximize ROI, EBITDA and optimize reserves Steele Well Production Example Optimization Overview 2,000 6,000 Process Disciplined daily surveillance engineer review 1,500 ESP Installed 4,500 Lift parameters adjusted or lift method changed Actions 1, Water Hit 3,000 1,500 MCFD / BWPD Systematically deploying ESP/jet pump KFM gathering system pressure reduced Initial results reflect base decline rate mitigation 0 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 0 Oil - BOPD Water - BWPD Gas - MCFD 13

14 Cumulative BO Development Patterns Underway Multi-well development pattern results continue to be favorable 100,000 90,000 80, Multi-Well Development Patterns 1 70,000 60,000 50,000 40,000 30,000 Average NFX Chlouber NFX Margie MRO Yost NFX Freeman MRO Hansens MRO Cerny MRO Eve 20,000 10,000 0 Type Curve Days on Production 74 of 86 wells drilled in 1H 2018 on multi-well pads Methodical approach, goal to achieve maximum present value from resource with target recovery of >8% OOIP Initial results from 21 patterns give distribution of outcomes for insight into well placement, completion design, and production methods including artificial lift 1 Includes wells with at least 32 days production 14

15 Gross BOE/d Pattern Drilling Optimization Focus on coordination, cost control, minimizing offset production impact Net Deferred BOE/d YTD 2018 Estimated Deferral for Offset Activity Q2 Deferral 5,000 4,000 3,000 2,000 1,000 70% Oil 0 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Net Deferred BOE (2-stream) Net Deferred Oil Optimization Factors for Multi-Well Pad Profitability Reservoir wellbore landing interval, spatial distribution of wells, frac stage spacing, fluid volumes, infill well production profile, initial well production profile Offset activity east-west proximity for shut-in wells (e.g., 0.5 mi.), loading parent wells and volumes to fill, recovery times after frac hit Drilling operations surface locations, regulatory permitting, rig selection Completion Operations Water sourcing, water transfer infrastructure, offset impact scheduling, crew selection Production operations produced water, gas lift gas supply, gas gathering / compression, high-volume lift 7,000 Example: Four Adjacent Units Q2 Production 6,000 5,000 4,000 3,000 ~3,000 BOE/D for 2 months 2,000 1,000 0 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Todd Miller The Trick Greene Mackey Greene-Mackey The Trick Todd Miller 640-ac DSU 640-ac DSU 640-ac DSU 2x 320-ac DSU 15

16 Expansion into Northwest STACK New agreement, positive results spurring increased activity NW STACK Update KFM Infrastructure Expanding to Service Area 1 Drilling, specialty well logging, geologic analysis, initial well results affirm continued development of NW STACK area Kingfisher Midstream expanding into Major County and has started construction of a new high-pressure pipeline Signed letter agreement with a private E&P company, related to approximately 17,000 acres in Major County: Contiguous with Alta Mesa s existing acreage Alta Mesa will be operator of the combined acreage position Midstream dedication of acreage made to Kingfisher Midstream (Gas, Oil and Water) 1 AMR leasehold is not pro forma for letter agreement with private E&P 16

17 Alta Mesa Resources Leading Developer of STACK Oil Window Integrated Business Drives Value Strong Balance Sheet with Pre-Funded Growth Strong Management Alignment with Investors 17

18 APPENDIX 18

19 Strong Balance Sheet Pre-Funds Growth Plans Significant liquidity in place to support activity levels Balance Sheet Highlights Debt Maturity Profile Liquidity to fund capital plan to provide positive free cash flow in Q No near term debt maturities $700 Capitalization as of June 30, 2018 Capitalization and Liquidity ($ mm) $500 Cash and Cash Equivalents $83.4 Alta Mesa Holdings RCF $0.0 Kingfisher Midstream RCF $ % Senior Unsecured Notes $500.0 Net Debt $563.5 Availability on Alta Mesa Holdings RCF 1 $378.1 Availability on Kingfisher Midstream RCF 2 $236.5 Total Liquidity $ $21.9mm of outstanding letters of credit as of 06/30/2018 against $400mm borrowing base 2 $63.5mm drawn against $300mm credit facility Undrawn Alta Mesa Holdings RCF Undrawn Kingfisher Midstream RCF Drawn Kingfisher Midstream RCF 7.875% Senior Unsecured Notes 19

20 Commodities and Marketing Oil and liquids drive economics, natural gas flow assurance in place H Commodity Sales Production Mix Two stream wellhead production remained at 56% oil in H and mix is forecast to continue as new, lower GOR wells come on production 21% 29% 50% Ethane recovery and improved plant efficiencies have increased NGL volumes and percentage of 3-stream sales since April Q2 production mix also impacted by deferral from early life wells that have higher oil cut. Average two stream oil was ~70% for offset frac shut-ins in Q2 Oil Gas NGLs Firm Transport and Marketing Commodity Take Away End Markets Oil and Liquids H Continues Revenue to Drive Source Economics Natural Gas 100,000 Dth/d PEPL FT, 20 years Additional 20,000 Dth/d PEPL FT through ,000 Dth/d OGT West FT 1 through May 2023 Panhandle Pool OGT Pool Cap Rock El Paso North Plains 10% 10% NGLs Connected to Phillips 66 Chisholm Pipeline 3 year contract extendable for 2 1- year terms with shipper history Conway, KS 80% Oil Trucking to Cushing and/or pipelines to Cushing Cimarron Express to provide takeaway beginning in 2019 with 90,000 Bbls/d capacity expandable to 175,000 Bbls/d Cushing, OK Oil Gas NGLs 1 Contract at Alta Mesa Holdings, LP 20

21 Sunoco 30 Enterprise 20 Sunoco 30 Centurion 16 Cimarron Express Update Construction underway, expected in-service Mid 2019 Asset Overview KFM Ownership 50% Pipeline Routing Length ~65 miles Pipeline Size 16 Capacity Connectivity AMR Acreage Dedication KFM Share of Capex Initial: 90,000 BBLs/d Expandable to: 175,000 BBLs/d Access to regional refineries and all major Cushing downstream markets ~120,000 Net Acres in Kingfisher and Garfield Counties ~$45mm (Initial) Downstream Connectivity Bi-directional BKEP Cushing north Rose Rock 20 Indirect Connectivity Seaway via Enterprise TransCanada via Magellan or Plains NGL via Magellan or Enterprise BKEP north manifold BKEP 20 BKEP 12 BKEP Cushing central BKEP manifold R BKEP central manifold BKEP 20 BKEP 12 Spearhead 20 BKEP Cushing south Enterprise 12 Magellan 20 Receipt only (Spearhead) Delivery only (Enterprise 12 ) BKEP manifold D Plains 20 21