Cleveland Technical Presentation September 19, 2014

Transcription

1 Cleveland Technical Presentation September 19, 2014

2 Forward-Looking & Other Cautionary Statements This presentation contains forward-looking statements. All statements, other than statements of historical fact, included in this presentation that address activities, events or developments that Jones Energy, Inc. (the Company ) 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. However, the absence of these words does not mean that the statements are not forwardlooking. Without limiting the generality of the foregoing, forward-looking statements contained in this presentation specifically include the expectations of plans, strategies, objectives and anticipated operating results of the Company, including as to the Company s drilling program, drilling locations, production, frack trials, and other guidance included in this presentation. You should not place undue reliance on these forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Although we believe that our plans, expectations and estimates reflected in or suggested by the forward-looking statements we make in this presentation are reasonable, we can give no assurance that these plans, expectations or estimates will be achieved or occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. We disclose important factors that could cause our actual results to differ materially from our expectations. These include the factors discussed or referenced in the Risk Factors section of the Company s 10-K filed on 3/14/2014, the Company s 10-Q filed on 5/9/2014 and on 8/8/2014, 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. 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 Securities and Exchange Commission ( SEC ) requires 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 (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 are used for the estimation. The SEC also permits the disclosure of separate estimates of probable or possible reserves that meet SEC definitions 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 drilling services and equipment, drilling results, lease expirations, transportation constraints, regulatory approvals and other factors; and actual drilling results, including geological and mechanical factors affecting recovery rates. Estimates of per well recoverables and drilling locations may change significantly as the Company 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. 1

3 Jones Energy Overview (NYSE: JONE) NYSE Ticker: JONE Share Price: $19.01 Market Capitalization: Enterprise Value: ~$940 million ~$1,700 million Anadarko Basin Key Formations: Cleveland & Tonkawa Cleveland Daily Production: 16.8 MBoe/d Albany Arkoma Basin Key Formation: Woodford Woodford Daily Production: 4.2 MBoe/d Total Outstanding Shares: Average Daily Production: 49.4 million 23.6 MBoepd Austin Proved Reserves: 89.0 MMBoe Liquidity: ~$300 million Note: Proved reserves as of 12/31/13. Average daily production for Q Liquidity as of August Share price as of September 17, Denotes field offices. 2

4 Cleveland Play Evolution: More Frack Stages = More Oil JOHN B DOYLE #6H IP30: 948 BOE/D OIL IP30: 138 BO/D JOHN B DOYLE #703-15H IP30: 1,103 BOE/D OIL IP30: 645 BO/D JONES TRUST #189-1H IP30: 167 BOE/D OIL IP30: 94 BO/D PARNELL RANCH #165-1H IP30: 207 BOE/D OIL IP30: 179 BO/D JONES TRUST #189-4H IP30: 900 BOE/D OIL IP30: 684 BO/D PARNELL RANCH #165-3H IP30: 730 BOE/D OIL IP30: 501 BO/D JONES ACREAGE Wells drilled with <5 frack stages Wells drilled with 20 frack stages 3

5 Production in Bbl/Day Cleveland Frack Trial Results Relative Decline Curves Comparison of Oil Decline Curves 11 stage open-hole vs. 20 stage open-hole vs. 20x3 Perf & Plug (frack trial method) 500 Oil decline curves through 230 days 50 Sustained uplift of the oil curve with increased frack density Days of Production YEAR 1 YEAR 2 YEAR 3 11 Stage OH Average 20 Stage OH Average 20x3 Average (22) 11 stage open-hole wells (80) 20 stage open-hole wells (20) 20x3 plug and perf wells 4

6 Production in Bbl/Day Cumulative Production in MBO Cleveland Frack Trial Results Oil Uplift From Additional Frack Stages Comparison of Average Cumulative Oil Production & Oil Decline Curve 500 Comparable cumulative production through 230 days 11 Stage OH cum oil: 16.7 MBo 20 Stage OH cum oil: 25.4 MBo 20X3 P&P trial cum oil: 33.9 MBo Incremental oil production continues to grow ~7,200 bbls avg at 180 days versus ~8,500 bbls avg at 230 days Days of Production YEAR 1 YEAR 2 YEAR 3 11 Stage OH Average 20 Stage OH Average 20x3 Average 11 Stage OH Cumulative 20 Stage OH Cumulative 20x3 Cumulative (22) 11 stage open-hole wells (80) 20 stage open-hole wells (20) 20x3 plug and perf wells 5

7 MCF/Day Cleveland Frack Trial Results Gas Production Remains the Same 10,000 Comparison of Natural Gas Decline Curves and Cumulative Production Gas decline curves and cumulative production through 230 days 1, Gas production shows no material effect from increased frack density Days of Production YEAR 1 YEAR 2 YEAR 3 11 Stage OH Average 20 Stage OH Average 20x3 Average (22) 11 stage open-hole wells (80) 20 stage open-hole wells (20) 20x3 plug and perf wells 6

8 Evolution of Jones Anadarko Completion Techniques 20 Stage Open Hole Unverifiable isolation Limits long-term wellbore optionality Max stages - 35 Increased drill-out, cost, and risk with higher stage count Plug and Perf Method Unverifiable isolation Likely paying for more stages than achieving Long flowback period Requires post frack drill-out Jones standard completion method prior to Cleveland frack trial Open-hole packers and sleeves PLANNED REAL WORLD (unpredictable) Completion technique utilized for 20 well frack trial during Q and Q Plug and perf PLANNED REAL WORLD (unpredictable) Cemented Sliding Sleeves Verifiable isolation Better long-term well bore optionality No operational limits on stages Deployment as planned Current completion technique; to be used in Anadarko completions moving forward Cemented sliding sleeves PLANNED REAL WORLD (predictable) Cemented sliding sleeve is the only method that provides verifiable high density independent fracks 7

9 Sliding Sleeves Attempted NCS Sliding Sleeve Deployment Process Frac ports Locator recess Inner barrel Casing sleeve Coiled tubing Resettable bridge plug Sleeve locator Pressure recorder Frac-isolation assembly NCS Sliding Sleeve Active Video Link Frack Deployment Process 1. Cement sleeves in casing string 2. Deploy NCS tool via coiled tubing 3. Locate sleeve 4. Set isolation packer 5. Open the sleeve 6. Initiate frack via ports 7. Equalize pressure, release plug 8. Move up-hole and locate next sleeve NCS Sliding Sleeve Performance History 25,000 20,000 15,000 10,000 5,000 92% 98% 99% 100% 98% 96% 94% 92% 90% % Success 9. Repeat steps 4 through Evaluate isolation of each stage via downhole gauges Sliding Sleeves Attempted 88% 8

10 Jones Energy Sliding Sleeve Progress Cemented sliding sleeves utilized in all current Anadarko completions Includes planned Tonkawa wells Current costs in-line with budgeted expectations $4.3 million to drill and complete using new methodology and 97 spacing in Cleveland formation 570 of 579 sleeves (98.5%) frack initiation success rate Over 250 additional sleeves in place awaiting frack Completions are averaging 12 stages per day This compares to 6 stages per day for 20x3 frack trial wells Beginning to see early production results from first NCS 97 wells 16 installed; 11 wells fracked; 8 wells online; only 1 well with 30 days of production Majority of production impact expected late in 2014 and primarily 2015 as more wells come online 9

11 Key Takeaways Increased frack density = increased oil production Multiple data sets over a 10 year period show that increased frack density = sustained increase in oil production Gas production unaffected Gas production is unaffected by an increase in frack density Cleveland is an oil play Cleveland formation has evolved into an oil play with further upside potential Cemented sliding sleeves are preferred technology Cemented sliding sleeves provide for consistent initiation of planned frack stages Jones Energy is an operational leader Jones Energy continues to lead in operational expertise and application of new technology in the Anadarko Basin 10

12 APPENDIX

13 12 20 Stage Open Hole Method Versus Cemented Liner w/sliding Sleeve Open Hole Completion System Cemented Liner w/sliding Sleeves 97 SPACING Open Hole Completion System Cemented Liner w/sliding Sleeves Multiple Stages: x Spacing (ft): x Prop (MMlb): x Water (Mbbl): x Propped frack half-length (ft): x Fracture Area (ft 3 ) 16,000 43, x