UBS Natural Gas, Electric, Power and Coal Conference Lost Pines, TX March 5, 2009

Transcription

1 Financial Strength To Pursue Opportunities UBS Natural Gas, Electric, Power and Coal Conference Lost Pines, TX March 5, 2009

2 Safe Harbor Disclosure This presentation contains statements expressing expectations of future plans, objectives and performance that constitute forwardlooking statements made pursuant to the Safe Harbor Provision of the Private Securities Litigation Reform Act of Unless noted, these statements do not reflect possible or pending acquisitions, divestitures, or restructurings. All statements based on expectations are forward-looking statements that are dependent on certain events, risks and uncertainties that could cause actual results to differ materially from those anticipated. A discussion of risks and uncertainties is included in the Company s periodic reports filed with the Securities and Exchange Commission. 2

3 Diversified Energy Company Energen Resources Alabama Gas Corp. 88% Net Income Contribution (2008) 12% Net Income Contribution (2008) Large unproved reserves inventory Low-cost acquirer Alabama shales potential Earnings stability Single-state utility Primary dividend source 3

4 Minimizing Risk Hedging strategy to protect cash flows, earnings All-in reserve acquisition cost of $1.41 per Mcfe 84% of 1.6 Tcfe of proved reserves developed (2008 YE) 1.9 Tcfe inventory of low-cost drilling opportunities (2007 YE) Utility foundation with progressive regulatory environment 4

5 2009e 4% organic production growth 65% hedged Assumed prices of $6 and $50 LOE: $2.24/Mcfe DD&A: $1.58/Mcfe Earnings Outlook 2009 hedges at $8.70/Mcf* and $72.31/barrel* help offset lower commodity prices $2.35 $3.73 $4.28 $4.47 $3.10- $ e Alagasco Energen Resources * New York Mercantile Exchange (NYMEX) equivalent prices 5

6 Hedges Minimize Price Risk 2009e Production: Bcfe 65% Hedged Total NGL: 66.4 MMgal 65% $1.15/gallon 59% $72.31/bbl Total Oil: 4.6 MMBbl Total Gas: 69.3 Bcf 68% $8.70/Mcf 2010: 42.6 Bcf at $9.12, 2.2 MMBO at $

7 Price Sensitivity Reduced 2009 Gas Oil NGL Assumed Price (unhedged) $6/Mcf $50/Bbl $0.65/Gal Every $0.10 change Every $1 change Every $0.01 change Net Income Impact $850,000 $900,000 $100,000 EPS (diluted) Impact

8 Significant After-Tax Cash Flows ($ in Millions) Development of existing properties Development of Alabama Shales $363 $514* $471 $698 $498- $528 Acquisitions of Oil and Gas Properties e Alagasco Energen Resources * Includes one-time net gains of $41.3 million 8

9 Identified Capital Spending ($ in Millions) 2009e Permian Basin: $ 112 MM San Juan Basin: $ 71 MM $186 $168 $30 $237 $18 $363 $457 $225 Black Warrior Basin: $ 12 MM No. LA/E. TX: $ 18 MM Exploration/Other: $ 12 MM $73 $76 $59 $63 $ e Alagasco Energen Resources Acquisitions 9

10 Discretionary Cash Flows Energen Resources ($MM) Estimated Cash Available for Discretionary Spending : $210-$240 MM 2008YE Cash Position: $24 MM $186- $216 $ e Dividends/Other Debt Repayment Capital Spending Available Cash 10

11 Committed Credit Facilities BANK ENERGEN ($MM) AGC-DEDICATED ($MM) RENEWAL Regions $ 145 $ 55 April 24, 2009 Wachovia $ 100 * Oct. 31, 2009 Compass $ 70 * Aug. 6, 2009 BNY $ 25 Jan. 22, 2010 First Commercial $ 00 $ 25 July 31, 2009 RBC $ 20 $ 15 Oct. 21, 2009 Northern Trust $ 15 $ 10 Oct.14, 2009 Total $ 375 $ 105 * Facility may be utilized by Energen or Alagasco Consolidated Facilities: $480 MM 11

12 Opportunities 12

13 Development Of Existing Properties 13

14 Top 20 Independent Producer* $3.2 B invested to acquire, develop U.S. reserves 1.6 Tcfe proved reserves in 4 key areas 1.9 Tcfe probable and possible reserves * Based on U.S. Reserves CO Farmington NM Permian Basin: 434 Bcfe (27%) San Juan Basin: 871 Bcfe (55%) Midland TX Black Warrior Basin: 217 Bcf (14%) Arcadia LA N. LA/E. TX/Other: 63 Bcfe (4%) Birmingham AL 14

15 Unproved Reserves Potential* Unrisked By Basin/Area (Bcfe) Infill drilling Step-out drilling Performance improvements Horizontal technology application CO 2 injection Basin/Area San Juan Permian Black Warrior NLa/ETx/Other Total Rsrvs Probable Cost/Mcfe $ 1.25 $ 1.14 $ 0.66 $ 2.29 $ 1.23 Rsrvs ,257 Possible Cost/Mcfe $ 0.85 $ 1.25 $ 0.97 $ 2.72 $ 1.01 * As of December 31, 2007 Pro Forma for 1Q08 Property Sale Estimated Risked Cost: $ $2.30/Mcfe 15

16 Existing Operations BASIN/AREA San Juan Permian Black Warrior Fruitland Pictured N. LA/E. Cliffs TX/Other NET WELLS 1,419 1, Note: Excludes Alabama shales 2009 CAPITAL $ MM $71 $112 $ 12 $ 18 PRODUCTION (Bcfe) e Mesa Verde 4th largest gas producer in San Juan Basin 12 th largest oil producer in Permian Basin Gallup Dakota Largest producer in Black Warrior Basin 16

17 CO CO Over-pressured Coal San Juan Basin NM NM SGI Tiffany/Navajo Lakes Carracas/ SW Basin Jicarilla 4th 4th largest gas gas producer in in San San Juan Juan Basin Basin 17

18 Permian Basin West Lovington North Robertson North Westbrook NM NM East Penwell TX TX Bone Spring Strawn Devonian Ellenburger Southwest Westbrook Warwink 12thlargest largestoil oilproducer producerin inpermian PermianBasin Basin 12th 18

19 Bayview Black Warrior Basin Shoal Creek BIRMINGHAM Oak Grove AL AL Vance Largestgas gasproducer producerin inbwb BWB Largest 19

20 Property Acquisitions 20

21 Proven, Low-cost Acquirer San Juan Basin: Dominion (2006) Private Seller (2004) BP America (2003) Burlington (1997) Permian Basin: Private Seller (2005) First Permian (2002) EEX (1998) BC Oil & Gas (1997) Black Warrior Basin: Amoco (1997) Burlington (1996) No. LA/E. TX: Minatome (1998) Capital Investment Development Costs to Date Future Development Costs Total Investment Reserves Reserve Replacement Cost Note: As of December 31, 2008 $ 1.25 B $ 2.00 B $.50 B $ 3.75 B 2.65 Tcfe $1.41/Mcfe 21

22 Organic Reserve Replacement* 1,716 Net reserve additions, revisions add 54% to as-acquired reserves As-Acquired Additions/Revisions Cum. Production * October 1, 1995 December 31,

23 Oil & Gas Acquisitions Acquisition Focus Onshore N.A. Operated properties PDP + Unproved potential Financial constraints and lower commodity prices should result in attractive acquisition opportunities Primary interest: In/around existing properties Would consider company and/or asset purchases 23

24 Alabama Shales 24

25 Pursuing Alabama Shales 343,000 net acres Total Acreage: 660,000 Focus on Chattanooga and Conasauga shales Test-program results neither positive nor conclusvie Additional testing planned Chesapeake to end participation Black Warrior Basin Chattanooga Sub-Basin Total Acreage: 213,000 Lamb 1-3H No. 1 Marchant No. 1 Krout No. 1 Conasauga Total Acreage: 351,000 Chattanooga Thrust/Floyd Total Acreage: 82,000 25

26 Marchant Well: Conasauga Play Future Plans Examine larger, alternative fracture stimulation designs Perform lateral drill-outs Carbonate-dominated facies Strong mud log shows 6-88 potential pay zones Good wellbore (minimal deviation) and cement to 12,400 Hydraulically stimulated 11,558 11,723 on Sept. 15, ,000 gal. of x-link x gel 220,000 lbs. sand Flowback analysis: low porosity and permeability Disappointing flow of < 50 mcf/d 26

27 Lamb Well: Chattanooga Play Future Plans Drill additional well to test Chattanooga and evaluate Penn Sands Chattanooga Shale (93 gross, 91 net) Gas shows in Penn Sands Poor well conditions make detailed analysis inconclusive Hydraulically stimulated 2,035 lateral in Chattanooga section (9,150 vertical depth) on Oct. 30, stage frac 2,000,000 gal. of slickwater 2,000,000 lbs. sand Flowback analysis: low porosity and permeability 50% fluid recovery: No meaningful gas shows 27

28 Krout Well: Chattanooga Thrust/Floyd Future Plans Examine Floyd Section Geologically complex setting Five, separate Chattanooga zones (262 net) Floyd Shale section (416 gross, 158 net) Hydraulically stimulated lower Chattanooga interval (8,210-8,250 8,250 & 8,300-8,390) 8,390) on Oct. 8, ,000 gal. x-link x gel, slickwater 150,000 lbs. sand Flowback analysis: Very low permeability (structurally related) Disappointing flow of < 50 mcf/d 28

29 Opportunity: Stock Repurchase Share Repurchase Activity Available - 8,992, % Percent of Diluted Shares Outstanding Repurchased in 2006: 2,158,000 shares at $

30 Alagasco Operations 30

31 Single-state utility Approx. 450,000 customers Progressive regulation RSE extended through rate-year 2015 Allowed ROE: % Forward-looking test year Real-time temperature adjustment Birmingham Montgomery CY ROE(%) Allowed Earned

32 27 Years of Dividend Growth January 2009: Dividend raised 4.2% Alagasco funds Energens dividend at utility payout of 65+% $ year CAGR: 5.1% $0.44 $0.46 $0.40 $0.48 $0.50 Energen Resources makes small payout contribution

33 Lower-risk Energy Investment Opportunity Strong After-tax Cash Flows Excellent Fundamentals Proven Track Record 33

34 ATFC Reconciliation to GAAP ($ in millions) Years Ended 12/ Estimate Net Income (GAAP) Depreciation, depletion and amortization Deferred income taxes, net After-tax Cash Flows (Non-GAAP) Changes in assets and liabilities and other adjustments (103) Net Cash Provided by Operating Activities (GAAP) (a)the U.S. Securities and Exchange Commission (SEC) requires public companies, such as Energen, to reconcile Non-GAAP (GAAP refers to generally accepted accounting principles) financial measures to related GAAP measures. After-tax Cash Flow is a Non-GAAP financial measure. Energen believes after-tax cash flow is relevant because it is a measure of cash available to fund the company's capital expenditures, dividends and to service its debt. This estimate is a "forward-looking statement" as defined by the SEC. All statements based on future expectations rather than on historical facts are forward-looking statements that are dependent on certain events, risks and uncertainties that could cause actual results to differ materially from those anticipated. The Company cannot guarantee the absence of errors in input data, calculations and formulas used in its estimates, assumptions and forecasts. A discussion of risks and uncertainties that could affect future results of Energen and its subsidiaries is included in the Company's periodic reports filed with the Securities and Exchange Commission. 34

35 ERC ATFC Reconciliation to GAAP ($ in millions) Years Ended 12/ Estimate Net Cash Provided by Operating Activities (GAAP) Changes in assets and liabilities and other adjustments 103 (96) (96) After-tax Cash Flow (Non-GAAP) Less: AGC cash flows from operations (GAAP) (133) (81) (81) Adj. Cash Flows from Operations Excluding Alagasco (Non-GAAP) (a)the U.S. Securities and Exchange Commission (SEC) requires public companies, such as Energen, to reconcile Non-GAAP (GAAP refers to generally accepted accounting principles) financial measures to related GAAP measures. After-tax Cash Flow is a Non-GAAP financial measure. Energen believes after-tax cash flow is relevant because it is a measure of cash available to fund the company's capital expenditures, dividends and to service its debt. This estimate is a "forward-looking statement" as defined by the SEC. All statements based on future expectations rather than on historical facts are forward-looking statements that are dependent on certain events, risks and uncertainties that could cause actual results to differ materially from those anticipated. The Company cannot guarantee the absence of errors in input data, calculations and formulas used in its estimates, assumptions and forecasts. A discussion of risks and uncertainties that could affect future results of Energen and its subsidiaries is included in the Company's periodic reports filed with the Securities and Exchange Commission. 35

36 Financial Strength To Pursue Opportunities UBS Natural Gas, Electric, Power and Coal Conference Lost Pines, TX March 5, 2009