Enercom - The Oil and Gas Conference. August 16, 2017

Transcription

1 Enercom - The Oil and Gas Conference August 16, 2017

2 Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the federal Securities laws. All statements included in this presentation, other than statements of historical fact, regarding the Company s strategy, goals, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this presentation, the words could, believe, anticipate, intend, estimate, expect, may, continue, predict, potential, project, guidance, and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Without limiting the generality of the foregoing, these statements are based on certain assumptions made by the Company based on management s experience, expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Although the Company believes that its plans, intentions and expectations reflected in or suggested by the forward-looking statements made in this presentation are reasonable, the Company gives no assurance that actual future results will not differ materially from those forecasted in this presentation. Moreover, 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. Each investor must assess and bear the risk of uncertainty inherent in the forward looking statements in this presentation. The Company discloses important factors that could cause its actual results to differ materially from its expectations in the Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations sections of the Company s Form 10-K for the year ended December 31, 2016 and Form 10-Q for the quarter ended March 31, 2017, filed with the Securities and Exchange Commission ( SEC ); and its other filings with the SEC. These factors include risks or liabilities assumed as a result of acquisitions, increases in our indebtedness, ability to complete any divestitures or other strategic transactions, ability to meet financial and operating guidance, ability to achieve production targets, successfully manage capital expenditures, and to complete and to test and produce the wells and prospects identified in this presentation; risks related to variations in the market demand for, and prices of, oil and natural gas; uncertainties related to commodity prices, uncertainties about the Company s estimated quantities of oil and natural gas reserves or potential locations; infrastructure for produced water disposal and electricity and current and future ability to dispose of produced water; the adequacy of the Company s capital resources; general economic and business conditions; failure to realize expected value creation from property acquisitions; uncertainties about the Company s ability to replace reserves and economically develop its current reserves; risks related to the concentration of the Company s operations; drilling results; pending litigation; and potential financial losses or earnings reductions from the Company s commodity derivative positions. Accordingly, you should not place undue reliance on any of the Company s forward-looking statements. All forward-looking statements speak only as of the date on which such statements are 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 Midstates Petroleum Company, Inc. l NYSE: MPO 2

3 Reserve and Non-GAAP Information This presentation also includes historical and forward-looking financial measures that are not in accordance with generally accepted accounting principles ( GAAP ), including Adjusted EBITDA, Unlevered Free Cash Flow, adjusted G&A Cash, and PV-10. While management believes such measures are useful for investors because they allow for greater transparency with respect to key financial metrics, they should not be used as a replacement for financial measures that are in accordance with GAAP. Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without unreasonable effort, we have not provided reconciliations for forward-looking non-gaap measures. We refer to PV-10 as the present value of estimated future net cash flows of estimated proved reserves as calculated in the respective reserve report using a discount rate of 10%. This amount includes projected revenues, estimated production costs and estimated future development costs and estimated cash flows related to future asset retirement obligations. We believe the presentation of PV-10 provides useful information because it is widely used by investors in evaluating oil and natural gas companies without regard to specific income tax characteristics of such entities. PV-10 should not be considered in isolation or as a substitute for the standardized measure of discounted future net cash flows as defined under US GAAP, which is the most directly comparable GAAP financial measure. Additionally, standardized measure is based on proved reserves as of fiscal year end calculated using unweighted arithmetic average first-dayof-the-month prices for the prior 12 months. GAAP does not prescribe any corresponding GAAP measure for PV-10 of reserves adjusted for pricing sensitivities. For these reasons, it is not practicable for us to reconcile PV-10 at strip pricing to GAAP Standardized Measure. The SEC permits oil and gas companies, in their filings with the SEC, to disclose proved reserves, which are those quantities 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, 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 are used for the estimation. SEC rules also permit the disclosure of probable and possible reserves. We disclose proved reserves but do not disclose probable or possible reserves. We may use certain broader terms such as EUR (as defined below) and other descriptions of volumes of potentially recoverable hydrocarbon resources throughout this presentation that the SEC does not permit to be included in SEC filings. These broader classifications do not constitute "reserves" as defined by the SEC, and we do not attempt to distinguish these classifications from probable or possible reserves as defined by SEC guidelines. We define EUR as the cumulative oil and gas production expected to be economically recovered from a reservoir or individual well from initial production until the end of its useful life. Our estimates of EURs and resource potential have been prepared internally by our engineers and management without review by independent engineers. These estimates are, by their nature, more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized. We include these estimates to demonstrate what we believe to be the potential for future drilling and production by the Company. Actual locations drilled and quantities that may be ultimately recovered from our properties could differ substantially. In addition, we have made no commitment to drill all of the drilling locations which have been attributed to these quantities. Ultimate recoveries will be dependent upon numerous factors including actual encountered geological conditions, the impact of future oil and gas pricing, exploration and development costs, and future drilling decisions and budgets based upon our future evaluation of risk, returns and the availability of capital and, in many areas, the outcome of negotiation of drilling arrangements with holders of adjacent or fractional interest leases. Estimates of resource potential and other figures may change significantly as development of our properties provides additional data. Our forecast and expectations for future periods are dependent upon many assumptions, including estimates of production decline rates from existing wells, the undertaking and outcome of future drilling activity, including the type curve utilized in evaluating our proved undeveloped locations and reserves, and activity that may be affected by significant commodity price declines or drilling and completion cost increases. The Company s estimates of total proved reserves at December 31, 2016 are based on reports provided by Cawley, Gillespie & Associates, Inc., independent petroleum engineers. Midstates Petroleum Company, Inc. l NYSE: MPO 3

4 Focus On High Return Core Mississippian Lime Midstates Petroleum Company, Inc. l NYSE: MPO 4

5 Premier Mississippian Lime Player High Return Core Miss Lime with Competitive Returns and a Track Record of Success Midstates is the premier operator in the Mississippian Lime, well positioned in the high-return core in Woods and Alfalfa Counties, OK ~93,000 net acres (1) >35% (2) IRR s at current strip Opportunities to continue to resourcefully add to acreage position and location inventory Recent Achievements: Added a second rig to the development program Increased acreage position by ~35% in 2016 for future development (1) As of ; includes acreage capable of being earned under farm-ins (2) Assumes MPO YE 2016 CGA PUD Type Curve, strip pricing, & $2.8mm Midstates Petroleum Company, Inc. l NYSE: MPO 5 DCF well cost

6 Focus Capital in Top Tier Core Mississippian Lime 2017 Focus on Proven Area to Maximize Returns 2016 Focus Area 2017 Focus Area 2016 drilling program focused on opportunistically expanding Miss Lime acreage footprint and future inventory through bolt-on farm-in opportunities Increased acreage position by over 35% Secured inventory to be exploited in the future Initial well performance in western step-out comparable to early results in previous play extensions (i.e. Grainstone South Extension in 25N13W) Technical team has a proven track record of enhancing field development through refinement of geologic model and completion design evolution following evaluation of initial results 2017 drilling program to focus on high-graded opportunities in proven area that will deliver superior cash on cash returns in current depressed commodity price environment Two rig 2017 drilling program will stabilize production decline in 2017 and provide moderate production growth going forward Midstates Petroleum Company, Inc. l NYSE: MPO 6

7 Miss Lime Well Economics Strong, Competitive Returns at Current Depressed Pricing Miss Lime IRRs (1) at Various Well Costs (2) and Prices (3) (1) Assumes MPO YE 2016 CGA PUD Type Curve (2) Includes facilities cost Midstates Petroleum Company, Inc. l NYSE: MPO 7 (3) Gas prices held flat at $3.00/MMBtu

8 Generating Highly Attractive Returns In An Overlooked Basin Understanding Of Miss Lime Acreage Enhances Midstates Differentiated Returns Source: Simmons & Company E&P Perspectives: Well Economics For L48 Oil & Liquid Levered Regions ; Midstates calculated based on CGA PUD type curve at $2.8mm DC&F cost Note: Assumes flat $55 WTI and $3.00 HHUB; product realizations vary by region Midstates Petroleum Company, Inc. l NYSE: MPO 8

9 Activity Level Cash Flow Profiles Zero-Rig (1) EBITDA & Cumulative UFCF (4)(5) ($MM) One-Rig (2) EBITDA & Cumulative UFCF (4)(5) ($MM) Currently operating a two rig drilling program to generate high cash on cash returns, stimulate production growth and increase future cash flows Two-Rig (3) EBITDA & Cumulative UFCF (4)(5) ($MM) If oil sustains below $45/bbl, potential rig count reduction to 1 or 0 rigs in Q to maximize free cash flows until commodity prices improve (1) 2 rigs running as of , assumes 1 rig dropped on , 2 nd rig dropped on ; reflects lower G&A due to reduced activity (2) 2 rigs running as of , assumes 1 rig dropped on (3) 2 rigs running as of (4) Includes hedge impact; Unlevered FCF = EBITDA CAPEX (5) EBITDA and Unlevered Free Cash Flow are considered non-gaap financial measures as defined by the SEC; see page 3 Note: Strip prices as of Midstates Petroleum Company, Inc. l NYSE: MPO 9

10 Exploring Strategic Alternatives for Anadarko Basin & NW STACK Assets Midstates Petroleum Company, Inc. l NYSE: MPO 10

11 Anadarko Basin & NW STACK Assets Prospective Stacked Pay in Anadarko and Northwest STACK Midstates has retained SunTrust Robinson Humphrey as financial advisor to explore strategic alternatives for the Anadarko Basin and NW STACK assets Anadarko Basin Over 97,000 (1) net acres in a proven oil basin with deep inventory of consistent and predictable results in the Cleveland Stacked pay potential includes upside in the Marmaton, Tonkawa, and Cottage Grove, among other formations Vast majority of acreage is HBP NW STACK ~6,700 (1) net acres in Dewey County, OK prospective for Meramec and Osage development in emerging NW STACK Currently exploring NW STACK potential via farm-out Midstates Petroleum Company, Inc. l NYSE: MPO (1) As of ; inclusive of ~6,700 net acres in NW STACK 11

12 Anadarko Basin & NW STACK Drilling Activity (1) Midstates Petroleum Company, Inc. l NYSE: MPO (1) Drilling Activity from 2015 to Present 12

13 Midstates Anadarko Basin & NW STACK Assets Significant Stacked Pay Position $400mm EOG & Carlyle Marmaton DrillCo ~6,700 (1) net acre NW STACK position ~77,000 (1) net acres in Texas is ~95% HBP Midstates Petroleum Company, Inc. l NYSE: MPO (1) As of

14 Exploiting Strong Balance Sheet to Maximize Shareholder Returns Midstates Petroleum Company, Inc. l NYSE: MPO 14

15 Overlooked and Underappreciated Assets Robust Reserve Value of ~$1.0 Billion (1) vs. Enterprise Value of ~$375 Million (2)(3) Reserve Category Oil (MMboe) Gas (Bcf) NGL (MMboe) Total (MMboe) (1) PV-10 (4) Strip Pricing (1) (MM) PV-10 (4) $55 / $3.25 (MM) PV-10 (4) $60 / $3.50 (MM) Miss Lime: PDP PDNP PUD Total Miss Lime Proved $879.9 $1,036.8 $1,235.7 Anadarko: PDP Total Anadarko Proved $57.9 $64.5 $79.2 Total MPO: PDP PDNP PUD Total MPO Proved $937.7 $1,101.3 $1,314.9 Plus: Hedges (MM) $10.9 $1.6 ($5.0) Less: Net Debt (MM) $42.0 $42.0 $42.0 Implied Equity Value (MM) $906.7 $1,060.9 $1,267.9 Current Share Count (MM) Implied Equity Value ($ / Share) $36.27 $42.43 $50.72 Premium to Current Share Price (3) (%) 173% 219% 281% (1) YE 2016 (2) EV Value = Mkt Cap of ~$333mm (25,065,009 (3) Share Price = $13.30 (4) PV-10 is a non-gaap financial measure; Midstates Petroleum Company, Inc. l NYSE: MPO Strip Pricing $13.30/share) & $42mm of Net Debt see page 3 15

16 Strategic Update Fir Tree Partners, Centerbridge Partners, and Avenue Capital (owners of ~54% of shares outstanding) have recently elected to become restricted investors and are in regular dialogue with senior management and the board of directors on strategic matters to maximize shareholder returns Exploiting Strong Balance Sheet ~$42mm of net debt and strong liquidity position of ~$126mm ~55% of 2017 oil and gas production hedged at attractive prices Year-to-date Adjusted G&A Cash (1) expense of ~$2.60/boe; trending below the mid-point of guidance RBL Lenders approved amendment in May 2017 providing operational flexibility and we plan to continue to work with them as we pursue our strategic goals Return Value through Buybacks and/or Dividends Development Focus on High Return Mississippian Lime Exploring Strategic Alternatives Executive Leadership Search Based on YE 2016 PV-10 reserve value of ~$1.0bn (1)(2) vs. enterprise value of $375mm (3) and an EBITDA multiple of less than 3x, Management and the Board believe MPO stock is currently undervalued Implied 1P equity value of $36.27/share (2) vs. current share price of $13.30/share As the Company continues to build cash, Management and the Board are also exploring the potential to initiate a share repurchase program (4) and/or issue cash dividends (4) Generate IRRs greater than 35% (5) in current depressed price environment Currently operating a two rig drilling program to generate high cash on cash returns, stimulate production growth and increase future cash flows If oil sustains below $45/bbl, potential rig count reduction to 1 or 0 rigs in Q to maximize free cash flows until commodity prices improve Hired SunTrust Robinson Humphrey to explore strategic alternatives for Anadarko Basin and NW STACK positions Anadarko Basin properties in north Texas and western Oklahoma include ~4,200 (6) BOEPD of net production and ~97,000 (6) net acres predominantly HBP ~6,700 (6) net acres in emerging NW STACK play in Dewey County, OK Sold non-core Lincoln County, OK assets in July 2017 Continue to explore potential value-maximizing transactions for core Mississippian Lime position As part of the long term post-restructuring plan, the Company has initiated a search for a permanent, post-restructuring Chief Executive Officer In conjunction with new Chief Executive Officer search, the Company will identify a new Chief Financial Officer (1) Adjusted G&A Cash & PV-10 are a (3) EV Value = Mkt Cap of ~$333mm (4) Subject to availability under (5) Assumes MPO YE 2016 CGA PUD Type Curve, strip Midstates Petroleum Company, Inc. l NYSE: MPO non-gaap financial measures; see page 3 (25,065,009 $13.30/share) & then current credit agreement pricing, & $2.8mm DCF well cost 16 (2) Strip Pricing $42mm of Net Debt (6) As of ; acreage inclusive of ~6,700 net acres in NW Stack

17 Appendix Midstates Petroleum Company, Inc. l NYSE: MPO 17

18 Updated 2017 Guidance 2 Rig Program Operational CAPEX Guidance $MM D,C&F $100 - $104 Production Guidance Production (Boe/d) 22,000 24,000 Infrastructure (Incl. SWD Wells) $14 - $18 Land & G&G $6 - $7 Workover $10 - $11 Operational Capital Expenditures $130 - $140 Cost Guidance per BOE Lease Operating Expense (1) $ $9.00 Severance & Other Taxes $ $1.10 Gathering and Transportation $ $2.00 Adjusted G&A - Cash (2) $ $3.00 1) Includes expense workover 2) Adjusted G&A Cash is a non-gaap financial measure as it excludes from G&A non-cash compensation and other non-recurring items, but includes capitalized general and administrative costs. The most directly comparable GAAP measure for Adjusted G&A cash is General and Administrative Expense. See page 3 Midstates Petroleum Company, Inc. l NYSE: MPO 18

19 Activity Level Cash Flow Profiles Strip Zero-Rig (1) Drilling Program 2017E 2018E One-Rig (2) Drilling Program 2017E 2018E Pricing: Oil - WTI ($/Bbl) -- NYMEX Strip - 7/26/17 $48.97 $49.43 Gas - HHUB ($/MMBtu) -- NYMEX Strip - 7/26/ Oil (Bbl/d) 7,217 6,173 Gas (Mcf/d) 62,843 52,150 NGL (Bbl/d) 5,303 4,235 Average Daily Equivalents (Boed) 22,993 19,100 EBITDA (4)(5) $129 $98 Total Capital Expenditures $109 $8 Unlevered Free Cash Flow (4)(5) $20 $90 Pricing: Oil - WTI ($/Bbl) -- NYMEX Strip - 7/26/17 $48.97 $49.43 Gas - HHUB ($/MMBtu) -- NYMEX Strip - 7/26/ Oil (Bbl/d) 7,217 7,428 Gas (Mcf/d) 62,843 58,844 NGL (Bbl/d) 5,303 4,758 Average Daily Equivalents (Boed) 22,993 21,993 EBITDA (4)(5) $129 $116 Total Capital Expenditures $116 $82 Unlevered Free Cash Flow (4)(5) $13 $34 Two-Rig (3) Drilling Program 2017E 2018E (1) 2 rigs running as of , assumes 1 rig dropped on , 2 nd rig dropped on ; reflects lower G&A due to reduced activity (2) 2 rigs running as of , assumes 1 rig dropped on (3) 2 rigs running as of (4) Includes hedge impact; Unlevered FCF = EBITDA CAPEX (5) EBITDA and Unlevered Free Cash Flow are considered non-gaap financial measures as defined by the SEC; see page 3 Pricing: Oil - WTI ($/Bbl) -- NYMEX Strip - 7/26/17 $48.97 $49.43 Gas - HHUB ($/MMBtu) -- NYMEX Strip - 7/26/ Oil (Bbl/d) 7,287 9,027 Gas (Mcf/d) 63,178 67,544 NGL (Bbl/d) 5,329 5,438 Average Daily Equivalents (Boed) 23,146 25,722 EBITDA (4)(5) $131 $152 Total Capital Expenditures $134 $146 Unlevered Free Cash Flow (4)(5) ($4) $6 Midstates Petroleum Company, Inc. l NYSE: MPO 19

20 Hedged Production 0 Rigs Program Strong Hedge Position With ~55% of 2017 Oil and Gas Production Hedged at Attractive Prices 12,000 10,000 8,000 6,000 4,000 2,000 0-Rigs Crude Forecasted Production vs. Hedged Production -- Q Q Q Q Q Q Q Q Oil (Bbl/d) Crude Hedged Volume (Bbl/d) 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, Rigs NG Forecasted Production vs. Hedged Production Q Q Q Q Q Q Q Q Q Q Gas (Mcf/d) Gas Hedged Volume (Mcf/d) Midstates Petroleum Company, Inc. l NYSE: MPO 20

21 Hedged Production 1 Rig Program Strong Hedge Position With ~55% of 2017 Oil and Gas Production Hedged at Attractive Prices 12,000 10,000 8,000 6,000 4,000 2,000 1 Rig Forecasted Oil Production vs. Hedged Production -- Q Q Q Q Q Q Q Q Oil (Bbl/d) Crude Hedged Volume (Bbl/d) 1 Rig Forecasted Gas Production vs. Hedged Production 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, Q Q Q Q Q Q Q Q Q Q Gas (Mcf/d) Gas Hedged Volume (Mcf/d) Midstates Petroleum Company, Inc. l NYSE: MPO 21

22 Hedged Production 2 Rig Program Strong Hedge Position With ~55% of 2017 Oil and Gas Production Hedged at Attractive Prices 12,000 2 Rig Forecasted Oil Production vs. Hedged Production 10,000 8,000 6,000 4,000 2, ,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, Q Q Q Q Q Q Q Q Oil (Bbl/d) Crude Hedged Volume (Bbl/d) 2 Rig Forecasted Gas Production vs. Hedged Production Q Q Q Q Q Q Q Q Q Q Gas (Mcf/d) Gas Hedged Volume (Mcf/d) Midstates Petroleum Company, Inc. l NYSE: MPO 22

23 Midstates Petroleum Company, Inc. l NYSE: MPO 23