IPAA Houston Feb 2012 FINAL · 2019. 9. 29. · Business Development and Operations David Knox Sr...

Review of the Upstream Transaction Market Through YTD 2011

A&D Overview

The Petroleum Club

Houston, Texas

February 8, 2011

IPAA/TIPRO

Leaders in Industry luncheon

THE PERFECT VENUE

AuctionAuction

$$4.3 4.3 BillionBillionSince 1993Since 1993

NegotiatedNegotiated

30,447Transactions30,447Transactions

$5 $5 BillionBillionSince 1999Since 1999

167 167 TransactionsTransactions

MULTIPLE DIVESTMENT SERVICES

Mid-Value Negotiated Transactions (MVN)

� Alternative to Auction for assets with:• Higher PDP/Upside Ratio• $10 – 50 Million with substantial reserves

� Operated & non-operated working interests

MVN Express

Custom Negotiated Transactions� Significant upside – Technically Comples� Geographically consolidated� $40 - >$1 Billion� Customized process required (“story to tell”)

MVN Express� Unconventional Leasehold Marketing� $5 – 20 Million� Short Cycle Marketing

Auctions� Geographically diverse properties� Operated & non-operated working interests� Premiums for royalties & minerals� Individual property values up to $20 MM+� Primarily PDP reserves (70%+)� Online and Hybrid (live + online)

$0 $200 $400 $600 $800 $1,000$0 $20 $40 $60 $80 $100

Auction

MVN & MVN Express

Negotiated

THE CLEARINGHOUSE TEAM

Land Manager

Acct Mgr

HoustonBusiness

Development

HoustonBusiness

Development

IT Manager

Shipping

ClientRegistration

Amber ColvinReceptionist

Ken OlivePresident & CEO

Accountant

Heather AdamsonAdmin Asst Vice President

Land

Office Manager

Ron BarnesExecutive Vice President

Business Development and Operations

David KnoxSr Vice President

Negotiated Transactions

Business AnalystDon MillikIT Analyst

DatabaseDeveloper

Receptionist

IT Analyst

Land Manager

Sr Geologist

Sr Eng Tech

Sr Engineer

Sr Geologist

Sr Eng Tech

Land Admin

Land Tech

Denver - BusinessDevelopment

EventCoordinator

Exec Asst

Development

OKC - BusinessDevelopment

(1) Houston

(2) Denver

(3) Oklahoma City(4) Dallas

Mgr–Evaluations& Exploitation

Mgr–NegotiatedTransactions

Eng TechLand Tech

Draftsman Sr Geologist

Sr DataTechnician

Sr Engineer

Land Admin

Sr Engineer

DataAdministrator

Sr Engineer

Mgr ClientServices



Draftsman

Sr Geologist

Sr Geologist

Geologist

Sr Eng TechSr Engineer

Dallas - BusinessDevelopment

EngineerLand Tech

Geologist

Sr Engineer

Engineer

Sr Engineer

Sr Geologist

Sr Engineer DataCoordinator

A&D Environment

SM

TODAY’S A&D ENVIRONMENT

� Industry is poised for significant asset rationalization

• Capital demands associated with unconventional and shale play developments are significant and immediate

• Oil/Gas price discrepancy is unprecedented and confusing the A&D marketplace

• Income from oil production providing good cash flow stream for many

• Starting to see some bank pressure on gas heavy producers

� Capital Availability – debt, equity or asset sales

• New equity raises were active in late 2011

• Debt is available• Debt is available

• Reserve-based bank lines have grown

• Private equity sponsor firms have ample capital to place and can be formidable buyers

� Attention is on liquids rich resource plays� Repeatable and predictable development� Securing leasehold positions is the priority� Balancing act while trying to live within cash flow� All-in economics can be challenging – JV arrangements are an answer

NATURAL GAS FUTURES

Source: NYMEX

OIL FUTURES

Source: NYMEX

U.S. A&D ACTIVITYD

ea

l Co

un

t

400

500

600

700

800

$40

$50

$60

$70

$80

$90

$100

$ B

illi

on

s

Total U.S. Upstream Transaction Volume

Source: IHS Herold

De

al C

ou

nt

0

100

200

300

$0

$10

$20

$30

$40

2007 2008 2009 2010 2011

Transaction Value - Asset Transaction Value - Corporate

Deal Count - Asset Deal Count - Corporate

DECOUPLING OF OIL AND GAS PRICING

Source: NYMEX

US RIG COUNT – OIL, GAS, HORIZONTAL and TOTAL

� Total rig count: 2,008 as of 1/27/2012

� Five-year high: 2,031 on 9/12/2008

� Five-year low: 876 on 6/12/2009

Source: Baker Hughes

ASSET VALUATIONS AND METRICS

SM

ACQUISITION VALUATIONS TODAY

� PDP reserves are highly sought after

� PDNP and PUD reserves are receiving value if currently economic

� Buyers will pay for upside if drilling is economically viable at current prices

� 2X PDP continues to be a ceiling for many buyers

� Exceptions exist: Resource plays, infill, redrills, recompletions, etc. (strategic acquisitions)

� NYMEX strip (“hedgeable”) prices are routinely used in forecastsNYMEX strip (“hedgeable”) prices are routinely used in forecasts

� Most bidders have accepted future strip as the standard

� Required to be competitive in acquisitions

� Metrics determined by production profile of asset

� Vary materially by basin

� Still ample buyers of gas assets

� Cash flow metric rules of thumb are unchanged

� Any metric using a gas-to-oil conversion ratio can be deceptive (reserves or daily production)

TRANSACTION METRICS VS SPOT PRICE - OIL

20% 15% 16% 15% 19%

TRANSACTION METRICS VS SPOT PRICE - GAS

57%

37%40%

37%31% 43%

YTD AVERAGE OIL METRIC – ASSET TRANSACTIONS

Denbury Permian

sale to Quantum

($0.9 Billion)

ExxonMobil GOM

sale to Energy XXI

($1.0 Billion)

Texas American

sale to Bill Barrett

($150 Million)

Source: IHS Herold & Harts A-D CenterStrategic Oil and Liquid Rich Deals Bring a Premium

YTD AVERAGE GAS METRIC – ASSET TRANSACTIONS

Source: IHS Herold & Harts A-D Center

Dominion Marcellus sale to Consol

($3.5 Billion)

40

50

60

70

80

AUCTION SALES – WORKING INTERESTS – CASH FLOWC

as

h F

low

(m

on

ths

)

January 2010 thru December 2011

0

10

20

30

E T

EX

AS

GU

LF

CO

AS

T

MID

CO

NT

OT

HE

R

PE

RM

IAN

RO

CK

IES

SA

N J

UA

N

S T

EX

AS

Ca

sh

Flo

w (

mo

nth

s)

GAS OIL•# in bar indicates number of lots sold

71 32 15 12 18 27 13 44 2 2 26 319 12 20 21

60

80

100

120

140

AUCTION SALES – ROYALTY INTERESTS – CASH FLOWC

as

hfl

ow

(m

on

ths

)

January 2010 thru December 2011

0

20

40

60

E T

EX

AS

GU

LF

CO

AS

T

MID

CO

NT

OT

HE

R

PE

RM

IAN

RO

CK

IES

SA

N J

UA

N

S T

EX

AS

Ca

sh

flo

w (

mo

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GAS OIL•# in bar indicates number of lots sold

13 211 20

Mid-Value Negotiated

Custom Negotiated

AuctionMid-Value Negotiated

Custom Negotiated

CURRENT ENGAGEMENTS

Mid-Value Negotiated Express

Upland Exploration, Inc.Upland Exploration, Inc.


Custom Negotiated

Auction

Auction

Force 5 Energy, LLC


CONTACTS

Company Headquarters – Houston

Ken Olive – President & CEORon Barnes – EVP, Business Development and OperationsDave Knox – Sr. VP Negotiated Transactions

Main Phone: 281-873-4600Main Fax: 281-873-0055

Client Relations Managers

Houston Region: Kevin Townsend Houston Region: Kevin Townsend Phone: 832.601.7610 Fax: 832.601.7641

Denver Region: John Klee

Phone: 303.263.1946 Fax: 303.744.8220

Dallas Region: Chase MorrisPhone: 214.696.6400 Fax: 214.563.6252

Oklahoma Region: Bob DawsonPhone: 405.341.9658 Fax: 405.330.7931

www.ogclearinghouse.com


Custom Negotiated

AuctionMid-Value Negotiated

Custom Negotiated

CURRENT ENGAGEMENTS

Mid-Value Negotiated Express

Upland Exploration, Inc.Upland Exploration, Inc.


Custom Negotiated

Auction

Auction

Force 5 Energy, LLC


IPAA Houston Feb 2012 FINAL · 2019. 9. 29. · Business Development and Operations David Knox Sr...

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