Forward-Looking & Other Cautionary Statements

Transcription

1 February Investor Presentation February 6, 2018

2 Forward-Looking & Other Cautionary Statements The following presentation includes forward-looking statements. These statements relate to future events, such as anticipated revenues, 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 our ability to consummate financial or strategic alternatives, projections regarding our rig count, capital expenditures and lease operating expenses, our ability to drill high value Merge wells, our ability to enhance current spacing assumptions in Merge and Woodford, our ability to execute on our development plan in the Merge, including our drilling and leasing programs, projections regarding total production, average daily production, lease operating expenses, production taxes as a percentage of revenue, ad valorem taxes, cash G&A expenses and projected internal rates of return, and the results of our hedging program. Actual outcomes and results may differ 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; our ability to identify and consummate acquisitions and other growth opportunities, including acreage trades; unsuccessful exploratory activities; unsuccessful acquisitions; unexpected cost increases or technical difficulties in constructing, maintaining or modifying company facilities; potential liability for remedial actions under existing or future environmental regulations or from pending or future litigation; limited access to capital or significantly higher cost of capital related to illiquidity or uncertainty in the domestic or international financial markets; an inability to improve well spacing; general domestic and international economic and political conditions, as well as changes in tax, environmental and other laws applicable to our business and other economic, business, competitive and/or regulatory factors affecting our business generally as set forth in our 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 of the date of this presentation or as otherwise indicated, and we expressly disclaim any responsibility for updating such information. 2

3 Jones Energy Overview JONE NYSE Ticker $1.26 Class A Common Share Price [1] $179mm Equity Market Cap [1][2] $942mm Enterprise Value [1] 99.7mm Common Stock Outstanding[4] Western Anadarko Basin CLEVELAND Company H.Q. AUSTIN, TX Eastern Anadarko Basin MERGE Asset Summary Merge ~22,500 net acres Current production of ~5.9 Mboe/d [3] 28.3 MMboe of Proved reserves [4] Western Anadarko Basin ~152,000 net acres Current production of ~16.4 Mboe/d [3] 76.4 MMboe of Proved reserves [4] Operations Summary Merge 31 wells spud, 23 wells online 2-rig program Delineation & early development strategy Western Anadarko Basin Limited 4Q 2017 activity Evaluating 2018 plans [1] Market data as of February 5, [2] Includes 8.0% Convertible Preferred Stock at $25.00 per share. [3] Current production as of January 31, [4] As of 1/31/18. 3

4 Merge Play Overview Merge located between the STACK and the SCOOP within the Anadarko Basin Key Points: Unique and distinguishing play characteristics Best of Both attributes including Meramec extension from STACK and Upper Woodford extension from SCOOP Based on available geological data and the results of offset operators and our operations, we believe the Merge Play has multiple landing points within proven productive zones Higher reservoir quality Additional upside from Hunton/Springer/etc. NW STACK Dewey Custer Washita Woodford Well Mississippian Well JONE Acreage Kiowa STACK Blaine Kingfisher MERGE Canadian Caddo Grady Comanche SCOOP Pennsylvanian Silurian Devonian Mississippian Anadarko Basin Merge Stratigraphic Column Big Lime Oswego Cherokee Atoka Morrow Springer Sands Chester/ Caney Meramec Osage/ Sycamore Woodford Hunton Blackjack Creek Prue Skinner Caney Upper Lower Upper Lower Bois D Arc Chimney Hill JONE initial targets 4

5 JONE Merge Snapshot Summary Stats Acreage Map Current net acreage: ~22,500 Total sections: 218 Operated sections: [1] 38 Wells spud to date: 31 Producing 23 DUCs 6 Drilling 2 Current Production (Boe/d): [2] 5,892 Net Production Average (Mboe/d) Jones acreage - 1Q17 2Q17 3Q17 4Q17 Current [2] [1] Management estimate based on current development plan. [2] Current production as of January 31,

6 Merge Well Results 1 JONE - Bomhoff 1H 4,196 Lateral Length Peak IP30: 741 Boe/d (32% oil) or 177 Boe/d per 1,000 1 JONE - Bomhoff 2H 4,428 Lateral Length Peak IP30:1,345 Boe/d (41% oil) or 304 Boe/d per 1, JONE Hasten 1H 4,476 Lateral Length Peak IP30: 880 Boe/d (36% oil) or 196 Boe/d per 1,000 6 MRO MH Hrdy 4,935 Lateral Length IP30: 1,822 Boe/d (57% oil) or 369 Boe/d per 1, XEC Lydia 1-16H 4,795 Lateral Length Peak IP30: 1,034 (43% oil) or 216 Boe/d per 1,000 JONE - Rosewood 1H 4,579 Lateral Length Peak IP30: 1,005 (46% oil) or 220 Boe/d per 1,000 3 JONE - Rosewood 2H 4,586 Lateral Length Peak IP30: 1,201 Boe/d (44% oil) or 262 Boe/d per 1,000 CANADIAN CADDO OKLAHOMA CLEVELAND Citizen Gov. James 1H 4,960 Lateral Length IP30: 1,949 Boe/d (69% oil) or 393 Boe/d per 1,000 LINN Braum 28-1XH 10,206 Lateral Length IP30: 1,445 Boe/d (13% oil) or 142 Boe/d per 1,000 JONE - Garrett 1H 4,697 Lateral Length Peak IP30: 983 (63% oil) or 209 Boe/d per 1,000 3 JONE - Rosewood 3H 4,382 Lateral Length Peak IP30: 739 Boe/d (47% oil) or 169 Boe/d per 1,000 Meramec Well Woodford Well JONE Well LINN McNeff H 4,391 Lateral Length IP30: 961 (44% oil) or 219 Boe/d per 1,000 4 Gaedeke Bornemann 1H 4,834 Lateral Length IP30: 834 Boe/d (25% oil) or 173 Boe/d per 1,000 5 JONE - Hardesty 1H 4,586 Lateral Length Peak IP30: 653 Boe/d (47% oil) or 142 Boe/d per 1,000 GRADY MC CLAIN 14 JONE Bone 2H 14 JONE Bone 1H 4,375 Lateral Length 4,322 Lateral Length Peak IP30:1,276 Boe/d (65% oil) Peak IP30: 469 Boe/d (75% oil) or 292 Boe/d per 1,000 or 108 Boe/d per 1,000 *Not peak rates *Not peak rates 11 XEC Meyers 1H 7,982 Lateral Length IP30: 2,233 Boe/d (24% oil) or 280 Boe/d per 1, EOG Curry 1VH Norm. to 10,500 Lateral Length IP30: 1,730 Boe/d (84% oil) or 165 Boe/d per 1,000 Source: Note: Company presentations, IHS. Production data are reported as actuals, data is not normalized. IP 30 and oil cut based on 2-stream production metrics. Production results for selected wells not intended to be representative of potential production from wells we intend to drill on our identified drilling locations. 6

7 Merge Woodford: Industry Leaders Affirm JONE Thesis Recent announcements at 3Q 2017 earnings from XEC and EOG affirm JONE acreage quality. JONE Bomhoff & Rosewood area Bomhoff 1H 741 Boe/d (32% Oil) Rosewood 3H 739 Boe/d (47% Oil) JONE Woodford View: Woodford de-risked across JONE footprint Landing points matter; Woodford landing points defined by optimal rock properties. Ongoing completion optimization being driven by stage/cluster spacing and proppant loading. XEC Lone Rock Focus Area XEC Meyers well 13.4 Mmcfe/d (24% Oil) XEC Hines Federal well 15.2 Mmcfe/d (40% Oil) EOG Curry well 1,730 Boe/d (84% Oil) BOMHOFF & ROSEWOOD WOODFORD WELLS EXCEED CURRY WELL PRODUCTION Lateral Length IP30 Boe/d per 1,000 JONE Bomhoff 1H 4, JONE Rosewood 3H 4, EOG Curry 1VH 10, Woodford well JONE Acreage EOG Woodford Area of Interest Sources: XEC and EOG data per company releases and presentations. 7

8 JONE Well Performance In The Merge Meramec Meramec high initial rates drive IRR s Industry pilots testing well spacing assumptions IP30 boepd / 1,000 comparable to STACK & Permian 3-Stream and Oil Peak IP30 per 1,000 of Lateral Length Woodford Completion optimization on-going with positive results JONE testing Gen 4 design today Proven resource with long life, low decline production Gen 3 completions use 30% more proppant and 15% more fluid compared to Gen 2 3-Stream and Oil Peak IP30 per 1,000 of Lateral Length 400 Boepd / 1,000' Average Boepd / 1,000' Bopd / 1,000' 400 Boepd / 1,000' Average Boepd / 1,000' Bopd / 1,000' Gen 3 Frac Gen 3 Avg Shows Significant Uplift Gen 2 Frac [1] [1] 1st production 5/30/17 6/24/17 8/1/17 10/17/17 10/19/17 10/20/17 10/25/17 12/14/17 Drilling days Lateral (ft) 4,428 4,697 4,576 4,586 4,579 4,586 4,476 4,375 Proppant (lb/ft) 2,776 2,823 2,761 2,459 2,429 2,558 2,435 2,548 Fluid (gal/ft) 2,763 2,456 1,704 2,444 2,320 2,379 2,222 2,173 [1] Well has not yet reached Peak 30-day IP. 1st production 3/18/17 3/18/17 4/8/17 5/28/17 10/22/17 10/22/17 12/24/17 Drilling days Lateral (ft) 4,346 4,370 4,895 4,196 4,362 4,382 4,322 Proppant (lb/ft) 1,623 1,501 1,692 2,181 2,011 2,046 2,138 Fluid (gal/ft) 1,365 1,259 1,402 2,323 3,028 2,892 2,563 8

9 Drill Pace Driving Merge Execution and Efficiencies JONE Drill Times Spud to TD [1] Drilling Days Fastest well drilled in JONE history during 4Q Q17 2Q17 3Q17 4Q17 BEST JONE program advancing from learning mode to optimization Improved average drill time by 44% (>10 days) from 1Q17 to 4Q17 Reducing one day of drill time saves JONE ~$45K [1] Single section lateral wells only. 9

10 Deep Inventory of Drilling Locations in the Merge Over 5,400 potential gross drilling locations in the Merge 395 locations in the Upper Meramec 400 locations in the Lower Meramec 1,550 locations in the Woodford Potential inventory growth with tighter well spacing DSU Reserve Inventory and Potential Upside 1 Mile Ongoing optimization creates significant upside in well returns We believe Hunton, Osage, Chester, Caney and Springer provide additional opportunities across the acreage position Numerous opportunities to add to Merge acreage position Potential Upside Inventory (tests underway today) TARGET JONE 3P Reserve Locations JONE Current Location Inventory Upside From Industry UPPER MERAMEC 3 6 LOWER MERAMEC 3 6 UPPER WOODFORD 4 8 LOWER WOODFORD 4 8 Per Section TOTAL Note: 3P reserve report inventory assumes 14 wells per section; number of drilling locations noted above assumes an average 4,500 lateral length. 10

11 Western Anadarko Strategy Large, legacy asset with significant cash flow and acreage ~940 gross producing wells across ~152k net acres ~16.4 Mboe/d current production [1] Significant drilling inventory across multiple benches Ability to increase value of Western Anadarko focuses on two levers: Accelerate conversion of Cleveland locations to PDP Unlock additional zones to make upside more attractive Launched DrillCo process in late JONE Acreage Cleveland Play Goals and Objectives Continue operational excellence Pursue core Cleveland PDP conversion Develop top-ranked Marmaton, Cleveland extension and Penn shale locations Maintain flexibility for future monetization [1] Current production as of January 31,

12 2018 Capital Budget Key Points: Capex by Category Majority of capital budget focused on development of Merge assets $ million per well AFE [1] Merge Non- Op D&C 10% WAB D&C 7% Leasing & Other 11% 700 1,100 Mboe EUR per well [2] 11 wells with 1-mile lateral and 9 longer-lateral wells, testing for lateral length performance improvement 2018 production guidance: Mboe/d $150 Million Merge Operated D&C 72% [1] AFE range for a well with a 4,500 lateral. [2] EUR reflective of Meramec wells. 12

13 APPENDIX

14 Merge Represents Best of Both from STACK/SCOOP Meramec Fairway Woodford Oil Fairway Mississippian Wells JONE Acreage Mississippian Play Type: Meramec (Siltstone) Sycamore (limestone) Meramec is direct extension from STACK Play boundaries continually being pushed westward with additional delineation Net-to-gross pay is higher than STACK core. Southern extent of JONE position transitions to organic shale and limestone (which is Sycamore conventional reservoir) Maps denote reservoir thickness Woodford Wells JONE Acreage Upper Woodford Lower Woodford Upper Woodford is direct extension from SCOOP Landing points in the Woodford are defined by optimal rock properties. JONE has differentiated Upper and Lower Woodford landing points across position. Additional upside where both are present. 14

15 Merge Poised To Follow Similar Progression to SCOOP/STACK STACK NFX Identifies Meramec Potential While Pushing Woodford Up Dip CLR Establishes SCOOP Citizen Energy Gov. James well Establishes Meramec Potential In Merge 2016 Merge Delineation and Development: XEC announces Lone Rock; EOG announces McClain Woodford Canadian Oklahoma STACK Meramec Announced Initial Delineation and development Focused North 2017 CLR Drives Limit Of Meramec Production Down Dip In STACK & SCOOP JONE Enters Merge 2016 Highlights: Year of the Merge MERGE Cleveland JONE enters the Merge play, September 2016 Meramec: aggressively moving westward into over pressured, higher GOR Osage & Meramec facies Woodford: tested different Woodford landing points and saw an increase in proppant loading Caddo Jones Acreage Woodford Well Mississippian Well Grady SCOOP McClain 2017 To-Date: Meramec: JONE tests 6 of 7 stacked, proven productive benches. Woodford: JONE optimizes completion design. Offset operator density testing underway. 3Q announcements from EOG and XEC affirm JONE acreage quality. 15

16 Merge Meramec Evolution PRE JONE Entrance 2017 JONE Bomhoff & Rosemary pads STACK Meramec focus on reservoir thickness Scarce data for Meramec wells, Sycamore nomenclature adds to confusion Woodford primary focus Citizen Energy Gov. James 5,000 lateral length IP30: 2,074 Boe/d (70% Oil) Still limited Meramec data JONE initial Merge underwriting assumes minimal credit. Governor James well in thinner reservoir area challenges viewpoint. JONE challenges thickness viewpoint, develops Quality over Quantity proprietary mapping. CLR Pudge & Ryan Express pads Ward Petroleum Lynda well New Meramec wells rapidly advance understanding. JONE identifies 7 specific benches across its footprint. Tested 6 of 7 benches to-date. Spacing tests underway Current JONE acreage shown. 16

17 JONE Reserves Data as of December 31 st, 2017 Reserves Summary [1] WAB Merge Total Reserves PV-10 Reserves PV-10 Reserves PV-10 (MMBoe) ($mm) (MMBoe) ($mm) (MMBoe) ($mm) PDP 45.5 $ $ $423 [2] PDNP PUD P 76.5 $ $ $627 PROB POSS P $ $1, $2,017 Changes in Proved Reserves (MMBoe) (7.7) (13.7) 28.7 (7.7) /31/2016 Production Sales of Minerals in Place Extensions and Discoveries Revisions of Previous Estimates Note: All reserves figures assume SEC pricing. WAB figures include minimal amount of non-wab assets. [1] Source: Reserve reports prepared by Cawley, Gillespie & Associates, Inc., independent petroleum engineers. Breakdown of reserves between WAB and Merge based on our internal estimates. [2] PDNP inclusive of PDSI. 12/31/

18 Merge Type Curve Data Single Section Type Curve IP Range (Boe/d) EUR Range (MBoe) % Oil % Liquids Gross Locations AFE Range ($mm) Meramec 800-1, ,100 10% - 40% 50% - 70% 795 $5.4 - $6.1 Woodford 500-1, ,400 5% - 60% 50% - 80% 1,550 $5.5 - $6.0 Gas Shrink NGL Yield NGL Realization Opex Differentials Production Tax (Bbl/Mmcf) (%of WTI) ($/Mo./Well) $/Bbl $/Mcf Gas/NGL (Yrs. 1-3) Gas/NGL (Yrs. 3+) 25% % $5,000 ($1.50) ($1.30) 2.5% 7.5% 4.6% Oil Source: Company estimates. 18

19 2018 Guidance 2018E 1Q18E Total Production (MMBoe) Average Daily Production (MBoe/d) Crude Oil (MBbl/d) Natural Gas (MMcf/d) NGLs (MBbl/d) Lease Operating Expense ($mm) $43.0 $46.0 Production Taxes (% of Unhedged Revenue) * 4.0% 4.5% Ad Valorem Taxes ($mm) * $1.0 $2.0 Cash G&A Expense ($mm) $22.0 $24.0 Capital Expenditures ($mm) Merge D&C Operated $108 Merge D&C Non-operated 15 Cleveland D&C 11 Other (pooling, leasing & maintenance) 16 Total Capital Expenditures $150 * Production and ad valorem taxes are included as one line item on the Company s income statement. 19

20 Hedge Position Oil Hedges Swaps Sold (MBbl) 2,364 1, Price ($/Bbl) $51.08 $50.04 $50.00 Collars (MBbl) 810 Floor ($/Bbl) $48.52 Ceiling ($/Bbl) $59.64 Gas Hedges Swaps Sold (MMcf) 18,190 7,260 8,400 Price ($/Mcf) $2.98 $2.84 $2.79 Collars (MMcf) 11,890 Floor ($/Mcf) $2.55 Ceiling ($/Mcf) $3.19 NGL Swaps (MBbl) Ethane Propane 850 Iso Butane 120 Butane 335 Natural Gasoline 360 Total NGLs 1,665 NGL Swap Prices ($/Gal) Ethane Propane $0.57 Iso Butane 0.72 Butane 0.69 Natural Gasoline 1.05 Basis Hedges ANR (MMcf) 6,000 Price ($/Mcf) $0.40 PEPL (MMcf) 2,000 Price ($/Mcf) $0.45 Hedge position as of 12/4/

21 Experienced Management Team Jonny Jones (Founder, Chairman & CEO) Founded Jones Energy in years of industry experience focused in the US Mid-Continent Formerly geologist with subsidiaries and affiliates of British Petroleum Active in the American Association of Petroleum Geologists and Independent Petroleum Association of America Served on the Advisory Council of the University of Oklahoma School of Geology and Geophysics and has been actively involved in fundraising efforts at the school Chairman of the U.S. Oil and Gas Association, immediate past Chairman of the Texas Oil & Gas Association Winner of Ernst & Young Entrepreneur of the Year 2012 Central Texas Award BS in Geology from the University of Oklahoma and an MA in Geology from the University of Texas Mike McConnell (President) Joined Jones Energy in years of industry experience Leads Jones Oklahoma City office Formerly CEO of the Generation and Production Group at Enron, CEO of Enron Global Markets LLC and President of Houston Pipe Line and Louisiana Resources Company Numerous other commercial positions in London and Houston Vice Chairman of the Independent Petroleum Association of America natural gas steering committee Past chairman of the Price Business School Board of Advisors for the University of Oklahoma BBA in Petroleum Land Management from the University of Oklahoma Robert Brooks (EVP & CFO) Joined Jones Energy in May years of industry experience Most recently Senior Managing Director and Head of Energy at Focus Capital Group Inc. / Whiteface Capital LLC Formerly served as Senior Managing Director and Head of U.S. Oil & Gas for Macquarie Capital Previously served as Principal at Bank of America Securities in the Global Energy and Power Group Prior to Bank of America, was Vice President in the Global Energy Group at Salomon Brothers BS in Mechanical Engineering from Massachusetts Institute of Technology, MS in Mechanical Engineering from Stanford, and MS in Management from Massachusetts Institute of Technology Jeff Tanner (EVP Geosciences) Joined Jones Energy in September years of industry experience Most recently Vice President, Exploration for Southwestern Energy Formerly held a variety of leadership and technical positions for Laredo Petroleum, Cabot Oil and Gas, and Noble Energy Began career with Shell in Houston Member of the American Association of Petroleum Geologists and the Houston Geological Society B.S. in Geology from Texas A&M and an M.S. in Geology from the University of Houston 21

22 Reconciliation of PV 10 to Standardized Measure Year ended December 31, ($ in millions) FY2015 FY2016 FY2017 Standardized measure $464.8 $383.5 $567.2 Present value of future income taxes discounted at 10% PV-10 $469.9 $401.4 $626.6 GAAP does not provide a measure of estimated future net cash flows for reserves other than proved reserves or for proved, probable or possible reserves calculated using prices other than SEC prices. PV-10 does not take into account the effect of future taxes, and PV-10 estimates for reserve categories other than proved or for pricing sensitivities uses the relevant reserve volumes and prices, as applicable, but PV-10 is otherwise calculated using the same assumptions as those for, and in a manner consistent with, the calculation of standardized measure. Because PV-10 estimates of probable and possible reserves are more uncertain than PV-10 and standardized measure of proved reserves, but have not been adjusted for risk due to that uncertainty, they may not be comparable with each other. Similarly, PV-10 estimates for price sensitivities are not adjusted for the likelihood that the relevant pricing scenario will occur, and thus they may be subject to the same issues with comparability. Nonetheless, we believe that PV-10 estimates for reserve categories other than proved or for pricing sensitivities present useful information for investors about the future net cash flows of our reserves in the absence of a comparable GAAP measure such as standardized measure. Because of this, PV-10 can be used within the industry and by creditors and securities analysts to evaluate estimated net cash flows from proved reserves on a more comparable basis. Investors should be cautioned that neither PV-10 nor standardized measure represents an estimate of the fair market value of our proved reserves. In addition, investors should be further cautioned that estimates of PV-10 of probable reserves, as well as the underlying volumetric estimates, are inherently more uncertain of being recovered and realized than comparable measures for proved reserves, and that the uncertainty for possible reserves is even more significant. Further, because estimates of probable and possible reserve volumes and PV-10 have not been adjusted for risk due to this uncertainty of recovery, they should not be summed arithmetically with each other or with comparable estimates for proved reserves. GAAP does not prescribe any corresponding measure for PV-10 of probable reserves and possible reserves or reserves based on other than SEC prices. As a result, it is not practicable for us to reconcile these additional PV-10 measures to GAAP standardized measure. Source: Company data. Note: PV-10 is equal to the standardized measure of discounted future net cash flows at the applicable date, before deducting future income taxes, discounted at 10 percent. 22

23 Corporate Structure Metalmark, Management & Other Investors Class B Common Stock 9.6 million shares 10% of voting power in Jones Energy, Inc. Class A Common Stock 90.1 million shares 90% of voting power in Jones Energy, Inc. Public Shareholders Jones Energy, Inc. (NYSE: JONE) 10% of total common economic interest of JEH LLC 90% of total common economic interest of JEH LLC Jones Energy Holdings, LLC (JEH LLC) 23