Forward-Looking & Other Cautionary Statements

Transcription

1 Wells Fargo Securities Energy Symposium December 9, 2015

2 Forward-Looking & Other Cautionary Statements The following presentation includes forward -looking statements. These statements relate to future events, such as anticipated re venues, earnings, business strategies, competitive position or other aspects of our operations or operating results or the industries or markets in which we operate or participate in general, including guidance regarding the timing and location of additional rigs, results of the Company's drilling program, 2015 capital budget, the projected drilling and completion cost savings and the resultant impact on 2015 ca pital budget, projected internal rates of return, results of our hedging program, the ability to fund the Company s 2015 capital expenditu re budget largely with free cash, projections regarding total production, average daily production, percentage liquids, operating expen ses, production taxes as a percentage of revenue, G&A expenses and capital expenditure levels for Actual outcomes and results may diffe r materially from what is expressed or forecast in such forward -looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that may prove to be incorrect and are difficult to predict such as oil and gas prices; operational hazards and drilling risks; potential failure to achieve, and potential delays in achieving expected reserves or production levels from existing and future oil and gas development projects; unsuccessful exploratory activities; unexpected cost increases or technical difficulties in constructing, maintaining or modifying company facilities; potential liability for remedial actions under exi sting or future environmental regulations or from pending or future litigation; limited access to capital or significantly higher cost of cap ital related to illiquidity or uncertainty in the domestic or international financial markets; general domestic and international economic an d political conditions, as well as changes in tax, environmental and other laws applicable to Jones Energy s business and other economic, business, competitive and/or regulatory factors affecting Jones Energy s business generally as set forth in Jones Energy s filings with the Securities and Exchange Commission (SEC). We caution you not to place undue reliance on our forward -looking statements, which are only as o f the date of this presentation or as otherwise indicated, and we expressly disclaim any responsibility for updating such informati on. The SEC requires oil and gas companies, in their filings with the SEC, to disclose proved reserves, which are those quantitie s of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions (using unweighted average 12-month first day of the month prices), operating methods, and government regulations prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods ar e used for the estimation. The SEC also permits the disclosure of separate estimates of probable or possible reserves that meet SEC definiti ons for such reserves, however, we currently do not disclose probable or possible reserves in our SEC filings. Factors affecting ultimate recovery include our ability to acquire the acreage we are targeting and the scope of our ongoing drilling program, which will be directly affected by the availability of capital, drilling and production costs, availability of drill ing services and equipment, drilling results, lease expirations, transportation constraints, regulatory approvals and other factors; and actua l drilling results, including geological and mechanical factors affecting recovery rates. Estimates of resource potential and drilling locations may change significantly as Jones Energy pursues acquisitions. In addition, our production forecasts and expectations for future periods are dependent upon many assumptions, including estimates of production decline rates from existing wells and the undertaking and outcome of future drilling activity, which may be affected by significant commodity price declines or drilling cost increases. U.S. investors are urged to consider closely the oil and gas disclosures in our Form 10 -K and other reports and filings with the SEC. Copies are available f rom the SEC and from the Jones Energy website. 1

3 Jones Energy Overview NYSE Ticker: JONE Share Price: $4.90 Market Cap: Enterprise Value: $303 million $1.1 billion Anadarko Basin Cleveland Austin Arkoma Basin Woodford Shares Outstanding: 61.8 million Production as of 3Q15: 25.3 MBoepd Field Office Note: Share price as of December 4,

4 Reduced Capex, Raised Production Guidance (Again) $ MM MMBoe Spud final wells of 2015 in October Reducing rigs to lever cost negotiations Can mobilize quickly once new AFE reached $260 $ Capex Guidance $30 million savings, despite leasing and working interest capture additions Reducing 2015 capex guidance Reduced to $210 million as of Nov 4 th Includes leasing and working interest gains Increasing production guidance Driven by well outperformance and operational efficiencies $220 $200 $ /4/15 8/5/15 9/9/15 11/4/ Production Guidance Full year guidance now exceeds 2014 >$210 million in MTM hedge value 8.0 $150 million attributable to 2016/17 positions 7.0 3/4/15 8/5/15 9/9/15 11/4/15 Note: MTM hedge value as of October 30,

5 Breakeven WTI Price ($/bbl) Cleveland is Competitive with the Best US Plays Eagle Ford Oil Tier 1 Bakken Tier 1 TFS Tier 1 JONE Cleveland SCOOP Condensate STACK San Juan Niobrara Tier 1 SCOOP Oil Eagle Ford Oil Tier 2 Bakken Tier 2 PRB Tier 1 Delaware Bone Spring Midland Wolfcamp Tier 1 Midland Wolfcamp Tier 2 Niobrara Tier 2 MS Lime Tier 1 TFS Tier 2 Delaware Wolfcamp Delaware Vt Bakken Tier 3 Midland Wolfberry Vt Tier 1 Midland Wolfcamp Tier 3 PRB Tier 2 East Texas Eagle Ford Uinta Vt Midland Wolfberry Vt Tier 2 MS Lime Tier 2 Eagle Ford Oil Tier 3 Uinta Oil Hz $70 $65 $60 $55 $50 $45 $40 $35 $30 $25 $20 Source: Tudor, Pickering, Holt & Co. with the exception of JONE Cleveland returns. Basin breakevens represent PV-10 breakeven assuming flat $3.75 gas and 40% NGL realizations. 4

6 JONE JONE % hedged Hedge price % hedged Hedge price Peer Leading Hedge Book More hedged than peers in 2016 and 2017 at better prices, $150 million in MTM value Most peers are not very hedged in Oil Hedges 2017 Oil Hedges 90% $90 45% $90 80% $80 40% $80 70% $70 35% $70 60% $60 30% $60 50% $50 25% $50 40% $40 20% $40 30% $30 15% $30 20% $20 10% $20 10% $10 5% $10 0% $- 0% $- Percent hedged* Percent hedged* Peer average percent hedged Peer average percent hedged JONE average hedge price JONE average hedge price *Percentage hedged based on TPH forecasts as of November 16, Data sourced from Tudor, Pickering, Holt & Co. research. Peers include CRZO, CXO, FANG, MRD, NFX, OAS, QEP, RRC, RSPP, SM, WPX, and XEC. 5

7 Operational Flexibility in 2016 Net Cash Outspend, $ in millions Production Growth Option to maintain cash flow neutral or positive position through 2016 At 3 rigs, positive cash flow plus production growth exit to exit At 4 rigs, 15% production growth with minimal outspend (<$20 mm) With $2.2 million AFE in sight, positive CF and production growth attainable $ Cash Outspend vs. Production Scenarios 20% $30.0 $20.0 $ ($10.0) ($20.0) 15% 10% 5% 0% -5% -10% ($30.0) 2 Rigs 3 Rigs 4 Rigs Net Outspend 2016 Production vs '15 Exit Rate -15% Note: Cash Outspend is calculated as EBITDAX Capex Cash Interest. Production comparison is exit rate 2016 versus exit rate 2015 in Boepd. Commodity pricing reflects strip as of October 16, Assumes all three scenarios only involve Cleveland drilling activity and include maintenance capital and leasing on par with 2015 capex budget. 95% working interest assumed in all scenarios. 6

8 Focused on Execution and Delivering Results Days Decreased drilling times equal sustained cost savings and higher rig utilization 35 Average Spud to Rig Release budget incorporated 22 days YTD Recent results Record Note: Wells included have average lateral length of approximately 4,300 feet. YTD 2015 value as of October 31, Record was achieved in 1Q15. 7

9 AFE in millions Line of Sight to Additional Cost Reductions $4.0 $3.8 $3.0 Achieved Reductions: $1,200,000 $2.0 $1.0 Breakdown of Savings: Frack Services $487,000 Rig Rates $122,000 Downhole Equipment $96,000 Casing $81,000 Drilling Fluid $73,000 Directional Drilling $66,000 Fuel & Drayage $59,000 Cement & Services $45,000 Other Items $171,000 Total $1,200,000 $2.6 Targeted Reductions: Drilling Time Vendor Cost Reduction Process Improvement $2.0 $- Previous AFE Current AFE Next Target AFE All-in Cleveland AFE Achieved Cost Reductions Targeted Reductions 8

10 Returns Improve with Further Cost Reductions 140% 10/28/15 Strip Cleveland Well Level IRR $2.0mm AFE 120% $2.2mm AFE 100% 80% $2.4mm AFE 60% 40% 20% - $45 $50 $55 $60 $65 $70 $75 WTI Price ($/bbl) Note: Oil prices held constant at price indicated; gas prices held constant at $3/mcf. Royalty interest of 18.75%. 9

11 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 MBbls Focused on the Cleveland in 2015 Production continues to beat expectations YE 14 Jones Cleveland Locations Gross: 704 Net: 477 3Q production above top end of guidance 115 miles wide Oil uplift achieved with gas bonus Reduced activity in 4Q ` 2015 Drilling Targets Hard Reset will capture savings Potential to capture significant future growth 1,200 1, Cleveland Gross Operated Oil Production JONE Acreage 10

12 Gross Gas, Mcf/day Well Count Gross Oil, Bbl/day Well Count Stage Open Hole Reservoir Performance Oil Performance 1, wells in sample Actual Expected Well Count Days on Production Gas Performance 10,000 1, wells in sample Actual Expected Well Count Days on Production 11

13 Size of the Prize is Huge: Cleveland is Only 30% Developed 5,800 remaining undeveloped Cleveland locations >3,000 undrilled locations owned by 10 largest operators Potential to capture additional locations at low cost (leasing, JVs, etc.) Horizontal Cleveland Locations 2,200 Developed 5,800 Undeveloped JV Opportunity: 3,000+ locations Jones Locations: 700 Leasing Opportunity: 2,000+ locations 12

14 Expanding in the Core $5 million lease budget for 2H15, roughly one-third remaining ~10,000 net acres acquired already with one-third of the budget remaining Royalty terms on average have improved from ~22% to ~19% 50,000+ net acres available today ( net locations) JONE Acreage 13

15 Leasing Now Creates Tremendous Value $ in millions Low cost path to add immediate value, 75 net locations added already Some locations could be booked as PUDs this year Compelling value proposition, as high as 28:1 return on investment $160 PV-10 Potential of $5 Million in Leasing $140 $120 $100 $80 $60 $40 $20 $- $500 per acre $400 per acre $300 per acre PV-10 at $50 oil / $3 gas PV-10 at $60 oil / $3.50 gas Note: Assumes $2.2 million AFE and average royalty terms of leases acquired thus far in PV-10 figures are representative of number of locations obtained multiplied by time zero PV-10 value at stated prices. 14

16 Cleveland Growth Opportunity is Meaningful Over 3,000 undrilled locations owned by 10 largest operators Large opportunity as many operators not active Undeveloped Cleveland Locations by Operator Over 3,000 undrilled locations owned by 10 largest operators 15

17 Jones Energy is Built for Times Like These Capital Discipline Maximizes Value 2015 CAPEX reduced from $240 mm to $210 mm while increasing production $420 mm of liquidity targeting cash flow neutral to positive 2016 Low cost, high value leasing program quietly building extensive inventory Operational Excellence is Critical No drilling contracts = flexibility, can ramp up/down quickly when ready On target for ~7% y-o-y production growth with 60% drop in CAPEX Leader in Cost Reductions AFEs down from $3.8 mm to $2.6 mm with new target of $2.2 mm 3Q 2015 LOE down 21% y-o-y Hedge Book Provides Tremendous Support Approximately 100% of oil and gas PDP hedged through mid-2019 $150 million in MTM value just for 2016 & 2017 hedges 16

18 Excellence: Strived for in All That We Do 17

19 APPENDIX

20 Morrowan Atokan Pennsylvanian Desmoinesian Missourian GRANITE WASH Virgilian Lower Permian Wolfcampian TOPS Texas/Oklahoma Pennsylvanian Sands Hugoton Brown Dolomite Chase / Council Grove Current Target Formations Admire Upper Virgil Douglas Tonkawa 7500' Tonkawa Sandstone Lease Acreage: ~122,000 Gross Locations: 324 Cottage Grove Hogshooter Checkerboard Cleveland 8500' Marmaton 9000' Cleveland Sandstone Lease Acreage: ~163,000 Gross Locations: 704 Oswego Cherokee Skinner Red Fork Atoka 13 Finger Lime Marmaton Sandstone Lease Acreage: ~97,000 Gross Locations: 566 JONE Acreage Morrow SH Morrow SD Note: All lease acreage and locations as of year-end

21 2015 Cleveland Type Curve Key statistics shown below for 2015 Cleveland type curve (274 Mboe EUR) Cleveland 3P EUR of 305 Mboe, but with a higher gas component Key Statistic: Oil Gas NGL Total IP Bbl/d Mcf/d Bbl/d Boe/d IP IP Cumulative Production Mbbl MMcf Mbbl Mboe 1 Year Year EUR % of Total 41% 33% 26% 100% 20

22 2015 Guidance and 4Q Production Guidance 2015E 4Q15E Total Production (MMBoe) Average Daily Production (MBoe/d) Oil (MBbls/d) Natural Gas (MMcf/d) NGLs (MBbls/d) Lease Operating Expense ($/Boe) $ $5.00 Production/Ad Valorem Taxes (% of Unhedged Revenue) 6.5% - 7.5% Cash G&A Expense ($mm) $ $29.5 Total Capital Expenditures ($mm) $

23 Hedge Positions Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Crude Swaps (Mbbl) Hedge Price / Bbl $83.77 $80.78 $83.67 $83.64 $83.35 $80.07 $80.49 $76.58 $77.14 Natural Gas Swaps (MMcf) 4,646 4,820 4,270 3,960 3,800 3,330 3,150 2,970 2,850 Hedge Price / Mcf $4.45 $4.51 $4.41 $4.45 $4.37 $4.28 $4.32 $4.28 $4.29 NGLs (MBbl) Ethane Propane Iso Butane Butane N. Gasoline Total NGL Hedge Price ($/gal) Ethane $0.27 $0.21 $0.21 $0.21 $0.21 N/A N/A N/A N/A Propane $0.90 $0.55 $0.55 $0.55 $0.55 N/A N/A N/A N/A Iso Butane $0.95 $0.80 $0.80 $0.77 $0.60 $1.42 $1.42 $1.42 N/A Butane $0.97 $0.74 $0.73 $0.72 $0.68 $1.37 $1.37 $1.37 $1.37 N. Gasoline $1.83 $1.52 $1.46 $1.46 $1.39 $1.73 $1.73 $1.73 $

24 NGL Hedge Position Detail Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Mt. Belvieu NGLs (MBbl) Ethane Propane Iso Butane Butane N. Gasoline Sub-Total Mt. Belvieu Hedge Price ($/gal) Ethane $0.34 N/A N/A N/A N/A N/A N/A N/A N/A Propane $1.01 $0.53 $0.53 $0.53 $0.53 N/A N/A N/A N/A Iso Butane $1.55 $1.48 $1.48 $1.48 N/A $1.42 $1.42 $1.42 N/A Butane $1.31 $0.95 $0.95 $0.95 $0.83 $1.37 $1.37 $1.37 $1.37 N. Gasoline $2.05 $2.09 $1.93 $1.93 $1.85 $1.73 $1.73 $1.73 $1.73 Conway NGLs (MBbl) Ethane Propane Iso Butane Butane N. Gasoline Sub-Total Conway Hedge Price ($/gal) Ethane $0.20 $0.21 $0.21 $0.21 $0.21 N/A N/A N/A N/A Propane $0.87 $0.55 $0.55 $0.55 $0.56 N/A N/A N/A N/A Iso Butane $0.85 $0.69 $0.69 $0.63 $0.60 N/A N/A N/A N/A Butane $0.85 $0.66 $0.65 $0.63 $0.63 N/A N/A N/A N/A N. Gasoline $1.71 $1.28 $1.25 $1.24 $1.24 N/A N/A N/A N/A 23

25 NGL Barrel Component Detail Cleveland Conway (80% of forecasted 2015 NGL production) Basket Ethane 37% Propane 34% Butane 12% Iso Butane 5% Natural Gasoline 12% Cleveland Natural Gasoline 12% Iso Butane 5% Butane 12% Propane 34% Ethane 37% Woodford Mont Belvieu (20% of forecasted 2015 NGL production) Basket Ethane* 13% Propane 45% Butane 19% Iso Butane 5% Natural Gasoline 18% *Assumes ethane rejection in the Woodford Woodford Natural Gasoline 18% Iso Butane 5% Butane 19% Propane 45% Ethane 13% 24

26 Corporate Structure Updated for recent capital markets transactions Stock trading liquidity has improved significantly post-recent transactions Metalmark, Management & Other Investors Class B Common Stock 50.6% of voting power in Jones Energy, Inc. Class A Common Stock 49.4% of voting power in Jones Energy, Inc. Public Shareholders 50.6% of total economic interest of JEH LLC Jones Energy, Inc. (NYSE: JONE) Jones Energy Holdings, LLC (JEH LLC) 49.4% of total economic interest of JEH LLC JONE company ownership summary Metalmark 30% Jones Family and Management 22% JVL Advisors 10% Rubric Capital Management 4% GSO Capital Partners 4% Magnetar Capital 4% Remaining Shareholders 26% Total 100% 25