Energy Industry Data and Trends Supplemental Slides: The Art of the Share Buyback October 2017
Table of Contents Share Buyback Slides Pg. 3 Supplemental Market Slides Pg. 15
The Art of the Share Buyback
Allocation of Capital Flow Chart Source: EnerCom Inc.
M&A Deals in Excess of $2.5 Billion YTD Source: Bloomberg, EnerCom Inc.
Most Effective Use of E&P Free Cash-Flow 70% 60% 50% 40% 30% 20% 10% 0% Pay down debt Buyback shares Distribute capital back to investors Grow production Do nothing Focus on M&A Source: EnerCom Inc.
APC EV/Reserves vs. Peer Group $35 $30 $25 $20 $15 $10 $5 $0 APC EV/ Reserves Peer Valuation Source: Company Filings, EnerCom Inc.
Cost per BOE APC EV/Reserves vs. F&D Costs $35 $30 $25 $20 $15 $10 $5 $0 APC EV/ Reserves APC F&D Source: Company Filings, EnerCom Inc.
Cost per BOE APC EV/Reserves Vs. M&A Deals $80 $70 $60 $50 $40 $30 $20 $10 $0 APC EV/ Reserves Average Acquisition Cost without Permian Deals APC F&D Average Acquisition Cost of Permian Deals Source: Company Filings, Bloomberg, EnerCom Inc.
Percent of E&P Companies Expected to Outspend in 2018 60% 50% 40% 30% 20% 10% 0% 0% - 24% 25% - 49% 50% - 74% 75% or More Source: EnerCom Inc.
APC EV/Reserves vs. M&A Deals $50 $49 $48 $48.52 $48.99 $4.46 $47 $46 $45 $44 $43 $43.55 Anadarko's share price as of September 15 ($43.55) $43.35 $42 $41 $40 Share Buyback (Actual) Debt Reduction (Hypothetical) Dividend (Hypothetical) Drilling Program (Hypothetical) Source: Company Filings, Bloomberg, EnerCom Inc.
Price-to-Cash-Flow per Share Debt and its Effect on Multiples 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x 0% 200% 400% 600% 800% 1000% 1200% 1400% 1600% Debt-to-Market Cap Linear (All Companies) Linear (Low Debt Companies) Linear (High Debt Companies) Source: Company Filings, Bloomberg, EnerCom Inc.
Cost per BOE APC EV/Reserves Now Exceeding F&D $25 $24 $23 $22 $21 $20 $19 $18 APC EV/ Reserves APC F&D Source: Company Filings, Bloomberg, EnerCom Inc.
APC AR AXAS CLR COG CPE CRZO CXO DVN ECA ECR EGN EGY EOG EQT FANG GPOR GTE HES HK LPI MRO MTDR MUR NBL NFX OAS OXY PDCE PE PXD QEP REN RICE RRC RSPP WPX XEC EV/Reserves vs. 1-Year F&D Costs $60 $50 $40 $30 $20 $10 $- EV/Reserves 1-Yr F&D Cost Source: Company Filings, Bloomberg, EnerCom Inc.
Supplemental Market Slides
FUNDING A CAPITAL INTENSIVE INDUSTRY In 2016, Companies Raised More Than $110 Billion in Capital U.S. and Canadian Offerings 2012 2013 2014 2015 2016 2017 YTD Initial Public Offerings $5,710MM $6,670MM $8,210MM $1,390MM $3,230MM $2,250MM Follow-on Offerings $18,350MM $20,260MM $22,380MM $24,540MM $42,330MM $14,590MM Debt Offerings $78,634MM $53,783MM $73,586MM $107,155MM $64,634MM $42,280MM Totals $102,694MM $80,713MM $104,176 MM $133,085MM $110,194MM $59,070MM FUNDING $220B/ A CAPITAL $123B/ $264B/ U.S. & Canada M&A Announcements Global M&A Announcements 865 deals 770 deals 1040 deals INTENSIVE $319B/ INDUSTRY $215B/ $373B/ 1,326 deals 1,303 deals 1,694 deals $102.9B/ 492 deals $305.1B/ 1,021 deals $135.5B/ 549 deals $286.4B/ 1,078 deals $118.3B/ 483 deals $159.9B/ 763 deals
Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Number of Wells WTI Price Drilled, Completed, and DUC Wells 8000 120 7000 100 6000 5000 80 4000 60 3000 40 2000 1000 20 0 0 DUC Drilled Completed WTI Price Source: EIA, Baker Hughes Industries, EnerCom Inc.
Million Tons Total U.S. Sand Demand 90 80 70 60 50 40 30 20 10 0 2012 2013 2014 2015 2016 2017E 2018E Source: Credit Suisse
Yield to Maturity (Percent) U.S. Treasury Yields 6.0 5.0 4.0 3.0 2.0 1.0 0.0 8/1/2005 8/1/2006 8/1/2007 8/1/2008 8/1/2009 8/1/2010 8/1/2011 8/1/2012 8/1/2013 8/1/2014 8/1/2015 8/1/2016 8/1/2017 US 30-Year Bond US 10-Year Bond US 2-Year Bond
S&P 500 vs. 360-Day MAVG (Long-Term) 3,100 S&P 500 360-Day MAVG 2,600 2,100 1,600 1,100 600 Source: Bloomberg.
MBOPD Key Basins Driving Oil Production Growth Texas and North Dakota Crude Oil Production 4,000 3,500 Texas Field Production of Crude Oil North Dakota Field Production of Crude Oil 3,000 2,500 2,000 Permian and Eagle Ford 1,500 1,000 500 Bakken and Three Forks 0 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: EIA.
U.S. Oil and Petroleum Product Supplied Jul-17 U.S. oil demand was down 2.3% from Jun-17 and up 1.6% from Jul-16 22,000 Product Supplied of Crude Oil and Petroleum 12-Mo Avg 21,000 20,000 Thousands of Barrels per Day 19,000 18,000 17,000 16,000 Source: EIA, EnerCom
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Oil Price / Natural Gas Price Energy Equivalent Pricing 60.0 X 50.0 X 40.0 X 30.0 X Ratio of 18.1x on 10/18/17 is above 6:1 ratio 20.0 X 10.0 X Favorable to Oil 0.0 X Favorable to Gas Current Oil/Gas Ratio Energy Equivalent (6:1) Source: Bloomberg, EIA, EnerCom.
Active NYMEX Crude Oil Contracts 2001-2017 YTD 3,000,000 $120 2,500,000 2,440,472 $100 2,064,365 2,000,000 $80 1,500,000 1,671,345 1,615,844 1,457,729 1,430,155 1,473,345 1,361,258 1,328,317 1,189,046 1,190,543 1,193,065 $60 1,000,000 816,196 $40 500,000 423,760 586,966 595,676 501,947 $20 0 $0 Active Contracts CL1 Prices Sources: Bloomberg
$/Bbl Oil Prices WTI and Brent $160 WTI Brent $140 $120 $100 $80 $60 $40 $20 Source: Bloomberg.
Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Billion Cubic Feet per Day U.S. Natural Gas Production Average daily production in the Lower 48 was up 1.95% in February-17 from January-16 and down 3.38% from February-16 80 75 Dry Gas Production Production 12-Mo Avg 70 65 60 55 50 45 40 Source: EIA. Average Daily Production
Billion Cubic Feet per Day U.S. Natural Gas Consumption YTD July 2017 Natural Gas Consumption -5.0% over 2016 80 70 Vehicle Fuel +11.1% 60 27.42 23.84 50 Electric Power -14.4% Vehicle Fuel 40 30 Industrial +1.7% 21.05 21.39 Electric Power Industrial Commercial 20 Commercial -1.0% 8.93 8.83 Residential 10 Residential -2.9% 13.16 12.79 Source: EIA and EnerCom. 0 2016 YTD 2017 YTD
Active Natural Gas Contracts 2000-2017 YTD 1,400,000 1,291,380 1,250,847 1,324,060 $12.00 1,200,000 1,164,815 $10.00 1,000,000 874,752 849,704 1,011,388 939,402 957,249 $8.00 800,000 679,760 707,554 772,404 $6.00 600,000 539,226 400,000 344,808 466,200 378,402 317,661 390,562 $4.00 200,000 $2.00 0 $- Active Contracts NG1 Prices Sources: Bloomberg
$1.61 $1.37 $1.29 $1.75 $1.58 $1.31 $1.31 $2.73 $2.56 $2.67 $2.24 $1.88 $1.92 $2.64 $2.73 $2.92 $2.66 $2.65 $2.48 $2.65 $2.52 $2.68 $2.22 $1.87 $1.79 $2.62 $2.70 $2.78 $2.69 $2.57 $2.43 $1.77 $2.08 $2.12 $2.11 $1.96 $2.14 $2.30 $3.02 $2.84 $2.95 $2.53 $2.50 $/MMBtu $2.95 $3.06 $3.12 $3.05 $3.02 $2.88 $2.87 $2.73 $2.75 $2.85 $3.03 $2.99 $3.05 $2.91 $2.88 $2.99 $5.86 U.S. Regional Natural Gas Prices $7.00 $6.00 $5.00 $4.00 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 $3.00 $2.00 $1.00 $- Rocky Mtn. Average (1) West Texas Average (2) CA Border Average (3) Henry Hub NY Hub Notes: (1) Average of 3 Rocky Mountain hubs (2) Average of 2 West Texas hubs (3) Average of 3 hubs delivering gas to California border
$ / MMBtu Regional Gas Price Differentials $0.40 $0.20 $0.20 NY Hub Henry Hub MidCon Avg Rocky Mtn Avg West TX Avg $0.00 $0.00 $0.00 $0.07 ($0.20) ($0.18) ($0.40) ($0.34) ($0.33) ($0.37) ($0.60) ($0.58) ($0.80) ($1.00) ($1.20) ($1.40) ($1.40) Average (1/2/01-10/18/2017) 10/18/2017 ($1.60) Source: Bloomberg, EnerCom.
Average Natural Gas Differentials to Henry Hub Differential to Henry Hub $1.50 $1.00 $0.50 $- 2012 2013 2014 2015 2016 2017 YTD $(0.50) $(1.00) $(1.50) $(2.00) $(2.50) $(3.00) West TX Avg Rocky Mtn Avg MidCon Avg NY Hub