University of Texas at Austin Energy Symposium 2013 Energy Innovation and Entrepreneurship

Transcription

1 April 30, 2013 University of Texas at Austin Energy Symposium 2013 Energy Innovation and Entrepreneurship NYSE: LPI

2 Forward-Looking / Cautionary Statements This presentation (which includes oral statements made in connection with this presentation) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of All statements, other than statements of historical fact, included in this presentation that address activities, events or developments that Laredo Petroleum Holdings, Inc. (the Company, Laredo or LPI ) assumes, plans, expects, believes or anticipates will or may occur in the future are forward-looking statements. The words believe, expect, may, estimates, will, anticipate, plan, intend, foresee, should, would, could, or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. However, the absence of these words does not mean that the statements are not forward-looking. Without limiting the generality of the foregoing, forward-looking statements contained in this presentation specifically include the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including as to the Company s drilling program, production, hedging activities, capital expenditure levels and other guidance included in this presentation. These statements are based on certain assumptions made by the Company based on management s expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include risks relating to financial performance and results, current economic conditions and resulting capital restraints, prices and demand for oil and natural gas, availability of drilling equipment and personnel, availability of sufficient capital to execute the Company s business plan, impact of compliance with legislation and regulations, successful results from our identified drilling locations, the Company s ability to replace reserves and efficiently develop and exploit its current reserves and other important factors that could cause actual results to differ materially from those projected as described in the Company s Annual Report on Form 10-K for the year ended December 31, 2012, and other reports filed with the Securities and Exchange Commission ( SEC ). Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law. The SEC generally permits oil and gas companies, in filings made with the SEC, to disclose proved reserves, which are reserve estimates that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions and certain probable and possible reserves that meet the SEC s definitions for such terms. In this presentation, the Company may use the terms unproved reserves, unbooked resource potential, estimated ultimate recovery, EUR or other descriptions of volumes of reserves, which the SEC guidelines restrict from being included in filings with the SEC. The Company does not choose to include unproved reserve estimates in its filings with the SEC. Unproved reserves refers to the Company s internal estimates of hydrocarbon quantities that may be potentially discovered through exploratory drilling or recovered with additional drilling or recovery techniques. Unbooked resource potential is used by the Company to refer to the estimated quantities of hydrocarbons that may be added to proved reserves, largely from a specified resource play. A resource play is a term used by the Company to describe an accumulation of hydrocarbons known to exist over a large areal expanse and/or thick vertical section, which, when compared to a conventional play, typically has a lower geological and/or commercial development risk. Estimated ultimate recovery, or EUR, refers to the Company s internal estimates of per well hydrocarbon quantities that may be potentially recovered from a hypothetical future well completed as a producer in the area. Unproved reserves, EURs and unbooked resource potential, may not constitute reserves within the meaning of the Society of Petroleum Engineer s Petroleum Resource Management System or SEC rules and do not include any proved reserves. Actual quantities that may be ultimately recovered from the Company s interests will differ substantially. Factors affecting ultimate recovery include the scope of the Company s ongoing drilling program, which will be directly affected by the availability of capital, drilling and production costs, availability of drilling services and equipment, drilling results, lease expirations, transportation constraints, regulatory approvals and other factors, as well as actual drilling results, including geological and mechanical factors affecting recovery rates. Estimates of unproved reserves, EURs and unbooked resource potential may change significantly as development of the Company s core assets provide additional data. In addition, the Company s 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. This presentation includes financial measures that are not in accordance with generally accepted accounting principles ( GAAP ), including Adjusted EBITDA. While management believes that such measures are useful for investors, they should not be used as a replacement for financial measures that are in accordance with GAAP. For a reconciliation of Adjusted EBITDA to the nearest comparable measure in accordance with GAAP, please see the Appendix. 2

3 Technological Innovations Create Step Changes Offshore Drilling Rotary Drill Bit. Horizontal Drilling and Hydraulic Fracturing 3

4 Horizontal Drilling & Hydraulic Fracturing: Unlocking Potential Horizontal drilling, hydraulic fracturing and long-reach laterals Multi-stage horizontal fracturing Fracturing fluids and techniques Seismic and other geophysical analysis of drilling locations Reductions in environmental impacts (pad drilling, water conservation and recycling, reformulation of additives, etc) Shale fractures Groundwater aquifer Water wells >1,000 feet Steel casing and cement to protect groundwater Protective steel casing 10,000+ Feet Horizontal Drilling and Hydraulic Fracturing Have Revolutionized the Oil and Gas Industry 4

5 Shale Gas Revolutionized North American Natural Gas Development Large-scale application of horizontal drilling and hydraulic fracturing techniques in the shale plays began in the early 2000s. Since 2005, shale gas production has been increasing by about 50% per year. 5

6 Oil Shale Revolution Changing U.S. Energy Landscape U.S. Avg Daily Oil Production ( ) 11,000 10,000 Thousand Barrels per day 9,000 8,000 7,000 6,000 5,000 Oil Shale Revolution Begins! 4,000 3, Source: EIA, Raymond James 6

7 Where is it Coming From? 7

8 Energy Independence Now a Real Speaking Point North American Energy Independence and Security are now possible 8

9 L Companies have Capitalized on the Changing Energy Landscape Colt Resources Corp. Lariat Petroleum, Inc. Latigo Petroleum, Inc. Laredo Petroleum, Inc. Sold to JN Resources in 1996 for $33.5 million Sold to Newfield in 2001 for $333 million Sold to Pogo Producing in 2006 for $750 million Equity Investor: First Reserve Equity Investor: Warburg Pincus Equity Investors: Warburg Pincus JPMorgan Founded in October 2006 Equity Investor: Warburg Pincus ($ millions) Equity Utilized Debt Utilized Sales Price / Enterprise Value $2,750 $1,215 $3,620 $750 Focus Areas: $13 $33.5 $333 $360 $174 $200 $100 $74 $160 $710 A 20+-Year History of Generating Significant Value for Investors 9

10 The L Company Culture INTEGRITY Always do the right thing. STEWARDSHIP Take care of the company, industry and environment. RESPECT Treat people everywhere the way you want to be treated. TEAMWORK One company working together to achieve common goals. SUCCESS Driven to succeed and plan for success. 10

11 Critical Elements for L Companies Plan for success from day one Determine your strengths Determine area of concentration Develop a business plan Secure correct equity funding 11

12 The Private Equity Market INVESTORS Pension funds Endowments Foundations Bank holding companies High-net-worth individuals Investment banks Corporations Other investors Private Equity Provider Advantages Fast Access to Capital Strategic Advice Formal Structure Credibility Disadvantages Fast Equity Dilution Strategic Advice Formal Structure Investment Cycle 12

13 Requirements for Private Equity Partners Compatibility Access to significant capital Long-term investment cycle Understand oil and gas industry risk and reward Strategic advice / experience Allow a strong outside board of directors 13

14 Warburg Pincus: Strong Track Record Supporting E&P Companies Warburg Pincus: Sample of their Worldwide Energy Companies: Warburg Pincus philosophy of not over leveraging entities provides prudent balance sheet stewardship Management leverages Warburg Pincus relationships and industry contacts to support Company Warburg Pincus has taken over 120 of their portfolio companies public Laredo formed through a $600 million equity commitment from Warburg Pincus and members of management 14

15 Laredo Overview NYSE: LPI Market Cap: ~$2.4 Billion Total Enterprise Value: ~$3.6 Billion Total Company Permian oil focused Low-risk drilling inventory >10 years Proved reserves: MMBOE 1 Average daily production: ~33.3 MBOE/D during Q Sound financial structure Rapidly growing cash flow from operations Operational and financial flexibility maintains capital options 1 Production and reserves reported on a two-stream basis. Reserves are gas price adjusted to reflect NGL benefit. Proved reserves per Ryder Scott evaluation at 12/31/12, at SEC pricing. 15

16 Concentrated Asset Portfolio Focused in Permian Basin Tulsa Headquarters Permian China Grove Delaware Basin Midland Basin Permian Garden City Permian Basin ~203,500 net acres 1 ~85% of total company reserves ~69% of Q total production ~92% working interest - average 1 Acreage totals as of 12/31/12. 16

17 Consistent Growth in Reserves and Production Permian oil is driving repeatable growth MMBOE Reserves % 64% 67% % 92% 89% 33% 36% 8% 11% MBOE/D Production E Successful transition to higher value oil reserves % growth in oil production Targeting 15% total production growth Reserves reported on a two-stream basis with gas price adjusted to reflect NGL benefit; per Ryder Scott evaluation at 12/31/12, at SEC pricing. Production data includes production from Broad Oak Energy, Inc. on a combined basis and presented on a two-stream basis. CAGR in MBOE/D production from 2008 through midpoint of projected

18 Permian Basin: Multiple Targets of Opportunity Howard Mitchell Martin Midland Sterling 85+ miles Glasscock Upton Reagan LPI Acreage LPI Horizontal Wells Upper Wolfcamp Middle Wolfcamp Lower Wolfcamp Cline Tom Green Irion Commercial horizontal development has been proven for all four zones from >60 wells 20+ miles 1 Well counts as of 2/28/13 2 Based on 2012 and 2013 completions with at least 30 days of production history as of 2/28/13 18

19 Identified Resource Potential De-risked Acreage To-Date , ,600 + Identified Resource Potential 1 De-risked Resource Potential of greater than 1,600 MMBOE 1200 Additional upside to resource potential for continued delineation of: MMBOE Hz Upper Wolfcamp Hz Middle Wolfcamp Hz Lower Wolfcamp Hz Cline year of development opportunities Development of our identified resource potential will require access to additional capital 0 Estimated Total Proved Reserves 12/31/12 Additional De-risked Resource Potential Identified De-risked Resource Potential Debt capital markets Equity capital markets 1 De-risked acreage and resource potential totals as of 2/28/13 19

20 Laredo s Debt Financing Strong bank group $825 million Revolving Credit Facility from commercial banks Comprehensive risk management program Public debt $550 million HY 9.5% Senior Notes due 2019 $500 million HY 7.375% Senior Notes due 2022 Laredo s Bank Group Includes: 20

21 Laredo s Initial Public Offering Advantages to public equity Access to capital Increased liquidity Public currency for acquisitions Enhanced benefits for current employees Disadvantages to public equity Expensive and time consuming Restrictions Broader shareholder base Reduced control 21

22 What Are The Next Innovations in Oil and Gas? Offshore Drilling Horizontal Drilling and Hydraulic Fracturing Rotary Drill Bit?. 22

23 NYSE: LPI