Financial Strength To Pursue...
Transcript of Financial Strength To Pursue...
Financial Financial StrengthStrength
To Pursue To Pursue OpportunitiesOpportunitiesUBS Natural Gas, Electric,
Power and Coal ConferenceLost Pines, TXMarch 5, 2009
UBS Natural Gas, Electric, Power and Coal Conference
Lost Pines, TXMarch 5, 2009
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Safe Harbor Disclosure
This presentation contains statements expressing expectations offuture plans, objectives and performance that constitute forward-looking statements made pursuant to the Safe Harbor Provision ofthe Private Securities Litigation Reform Act of 1995. Unless noted, these statements do not reflect possible or pending acquisitions, divestitures, or restructurings. All statements based on expectationsare 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.
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Diversified Energy Company
EnergenResources
88%Net Income
Contribution(2008)
Earnings stabilitySingle-state utilityPrimary dividend source
Large unproved reserves inventoryLow-cost acquirerAlabama shales potential
AlabamaGas Corp.
12%Net Income
Contribution(2008)
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Minimizing Risk
Hedging strategy to protect cash flows, earningsAll-in reserve acquisition cost of $1.41 per Mcfe84% 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
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Earnings Outlook
$4.47$3.10-$3.50
$4.28
$2.35
$3.73
2005 2006 2007 2008 2009eAlagasco Energen Resources
* New York Mercantile Exchange (NYMEX) equivalent prices
2009e4% organic production growth65% hedgedAssumed prices of $6 and $50LOE: $2.24/McfeDD&A: $1.58/Mcfe
2009 hedges at $8.70/Mcf* and $72.31/barrel* help offset lower commodity prices
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Hedges Minimize Price Risk2009e Production: 106.5 Bcfe65% Hedged
65% Hedged @ $1.15/gallonTotal NGL: 66.4 MMgal
68% Hedged @ $8.70/McfTotal Gas: 69.3 Bcf
Total Oil: 4.6 MMBbl59% Hedged @ $72.31/bbl
2010: 42.6 Bcf at $9.12, 2.2 MMBO at $96.85
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Price Sensitivity Reduced
Every $0.01 changeEvery $1 changeEvery $0.10 change
0.1¢1.3¢1.2¢EPS (diluted) Impact
$100,000$900,000$850,000Net Income Impact
$0.65/Gal$50/Bbl$6/McfAssumed Price (unhedged)
NGLOilGas2009
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Significant After-Tax Cash Flows
Development of existing properties
Development of Alabama Shales
Acquisitions of Oil and Gas Properties
$498-$528
$698
$471$514*
$363
05 06 07 08 09e
Alagasco Energen Resources
($ in Millions)
* Includes one-time net gains of $41.3 million
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Identified Capital Spending
$65$63$76 $59$73
$225
$457
$363
$237
$168
$18
$30
$186
2005 2006 2007 2008 2009e
Alagasco Energen Resources Acquisitions
2009ePermian Basin:� $ 112 MMSan Juan Basin:� $ 71 MMBlack Warrior Basin:� $ 12 MMNo. LA/E. TX:� $ 18 MMExploration/Other:� $ 12 MM
($ in Millions)
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Estimated Cash Available for Discretionary Spending 2008-2009: $210-$240 MM
$225
$186-$216
2009eDividends/Other Debt Repayment
Capital Spending Available Cash
Discretionary Cash FlowsEnergen Resources ($MM)
2008YE Cash
Position:
$24 MM
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Committed Credit Facilities
July 31, 2009$ 25$ 00First Commercial
$ 105$ 10$ 15
$ 55AGC-DEDICATED ($MM)
Oct. 21, 2009$ 20RBCOct.14, 2009$ 15Northern Trust
Jan. 22, 2010$ 25BNYAug. 6, 2009$ 70 *Compass
Oct. 31, 2009April 24, 2009
RENEWAL
$ 375
ENERGEN ($MM)BANK
Total
$ 100 *Wachovia$ 145Regions
* Facility may be utilized by Energen or Alagasco
Consolidated Facilities: $480 MM
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OpportunitiesOpportunities
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DevelopmentDevelopmentOfOf
Existing Existing PropertiesProperties
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* Based on U.S. Reserves
Black Warrior Basin: 217 Bcf (14%)
TX
N. LA/E. TX/Other: 63 Bcfe (4%)
San Juan Basin: 871 Bcfe (55%)
Permian Basin: 434 Bcfe (27%)
Farmington
Midland ArcadiaBirmingham
NM
CO
LA
AL
Top 20 Independent Producer*
$3.2 B invested to acquire, develop U.S. reserves
1.6 Tcfe proved reserves in 4 key areas
1.9 Tcfe probable and possible reserves
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$ 0.9730$ 0.6617Black Warrior
1,25718
398811
RsrvsPossible
$ 1.23$ 2.29
$ 1.14$ 1.25
Cost/Mcfe Cost/McfeRsrvs
$ 1.01638Total$ 2.7225NLa/ETx/Other
$ 1.25292Permian$ 0.85304San Juan
ProbableBasin/Area
By Basin/Area (Bcfe)Unrisked
* As of December 31, 2007 – Pro Forma for 1Q08 Property Sale
Unproved Reserves Potential*
Infill drilling
Step-out drilling
Performance improvements
Horizontal technology application
CO2 injectionEstimated Risked Cost:
$2.15 - $2.30/Mcfe
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FruitlandPictured Cliffs
Mesa Verde
GallupDakota
4th largest gas producer in San Juan Basin
12th largest oil producer in Permian Basin
Largest producer in Black Warrior Basin
Existing Operations
$ 18$ 12$112$ 71
$ MM
2009 CAPITAL
2009e2008
9.014.128.950.3
181796
1,6361,419
NET WELLS
7.7N. LA/E. TX/Other13.8Black Warrior31.953.0
PRODUCTION (Bcfe)
BASIN/AREA
PermianSan Juan
Note: Excludes Alabama shales
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San San JuanJuanBasinBasin
Over-pressured Coal
Tiffany/Navajo Lakes
COCO
NMNM
Carracas/32-5
30-4
SW Basin
4th largest gas producer in San Juan Basin4th largest gas producer in San Juan Basin
Jicarilla
SGI
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NMNM
TXTX
West Lovington North Robertson
East Penwell
North Westbrook
Southwest Westbrook
Warwink
12th largest oil producer in Permian Basin12th largest oil producer in Permian BasinStrawn
Bone Spring
Devonian
Ellenburger
PermianPermianBasinBasin
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Bayview
Oak GroveShoal Creek
Vance
BIRMINGHAM
ALAL
Largest gas producer in BWBLargest gas producer in BWB
BlackBlackWarriorWarriorBasinBasin
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Property Property AcquisitionsAcquisitions
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$1.41/McfeReserve Replacement Cost
2.65 TcfeReserves
$ 3.75 BTotal Investment$ .50 BFuture Development Costs$ 2.00 BDevelopment Costs to Date$ 1.25 BCapital Investment
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)
Proven, Low-cost Acquirer
Note: As of December 31, 2008
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1,716
929 984
As-Acquired Additions/Revisions Cum. Production
* October 1, 1995 – December 31, 2008
Organic Reserve Replacement*
Net reserve additions, revisions add 54% to as-acquired reserves
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Oil & Gas Acquisitions
AcquisitionFocus
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
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Alabama Alabama ShalesShales
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Pursuing Alabama Shales
343,000 net acres
Focus on Chattanooga and Conasauga shales
Test-program results neither positive nor conclusvie
Additional testing planned
Chesapeake to end participation
Marchant 22-16 No. 1
Black Warrior Basin
Lamb 1-3H No. 1
ConasaugaConasaugaTotal Acreage: 351,000Total Acreage: 351,000
Krout 10-14 No. 1
Chattanooga Thrust/FloydTotal Acreage: 82,000
Chattanooga Sub-Basin Total Acreage: 213,000
Total Acreage: 660,000
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CarbonateCarbonate--dominated dominated faciesfaciesStrong mud log showsStrong mud log shows66--8 potential pay zones8 potential pay zonesGood Good wellborewellbore (minimal deviation) (minimal deviation) and cement to 12,400and cement to 12,400��Hydraulically stimulated Hydraulically stimulated 11,55811,558�� �� 11,72311,723�� on Sept. 15, 2008on Sept. 15, 2008165,000 gal. of x165,000 gal. of x--link gellink gel220,000 lbs. sand220,000 lbs. sandFlowbackFlowback analysis: low porosity and analysis: low porosity and permeabilitypermeabilityDisappointing flow of Disappointing flow of << 50 50 mcf/dmcf/d
Marchant Well: Conasauga Play
Future PlansExamine larger, alternative fracture stimulation designs
Perform lateral drill-outs
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Lamb Well: Chattanooga Play
Future PlansDrill additional well to test Chattanooga and evaluate Penn Sands
Chattanooga Shale (93Chattanooga Shale (93�� gross, 91gross, 91�� netnet��))Gas shows in Penn SandsGas shows in Penn SandsPoor well conditions make detailed Poor well conditions make detailed analysis inconclusiveanalysis inconclusiveHydraulically stimulated 2,035Hydraulically stimulated 2,035�� lateral in lateral in Chattanooga section (9,150Chattanooga section (9,150�� vertical vertical depth) on Oct. 30, 2008depth) on Oct. 30, 200844--stage stage fracfrac2,000,000 gal. of 2,000,000 gal. of slickwaterslickwater2,000,000 lbs. sand2,000,000 lbs. sandFlowbackFlowback analysis: low porosity and analysis: low porosity and permeabilitypermeability50% fluid recovery: No meaningful gas 50% fluid recovery: No meaningful gas showsshows
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Krout Well: Chattanooga Thrust/Floyd
Future PlansExamine Floyd Section
Geologically complex settingGeologically complex settingFive, separate Chattanooga zones Five, separate Chattanooga zones (262(262�� net)net)Floyd Shale section (416Floyd Shale section (416�� gross, 158gross, 158�� net)net)Hydraulically stimulated lower Chattanooga Hydraulically stimulated lower Chattanooga interval (8,210interval (8,210--8,250 & 8,3008,250 & 8,300--8,390) on 8,390) on Oct. 8, 2008Oct. 8, 2008200,000 gal. x200,000 gal. x--link gel, link gel, slickwaterslickwater150,000 lbs. sand 150,000 lbs. sand FlowbackFlowback analysis: Very low permeability analysis: Very low permeability (structurally related)(structurally related)Disappointing flow of <Disappointing flow of < 50 50 mcf/dmcf/d
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Share Repurchase ActivityAvailable - 8,992,700
12.5% Percent of Diluted Shares Outstanding
Repurchased in 2006: 2,158,000 shares at $39.08
Opportunity: Stock Repurchase
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AlagascoAlagascoOperationsOperations
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12.912.313.113.512.813.5Earned
13.15 - 13.65Allowed
200820072006200520042003CY ROE(%)
Single-state utilityApprox. 450,000 customersProgressive regulation
RSE extended through rate-year 2015Allowed ROE: 13.15-13.65%Forward-looking test yearReal-time temperature adjustment
Birmingham
Montgomery
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27 Years of Dividend Growth
$0.50$0.48$0.46$0.44$0.40$0.39
2004 2005 2006 2007 2008 2009
5-year CAGR: 5.1%
January 2009: Dividend raised 4.2%
Alagasco funds Energen�sdividend at utility payout of 65+%
Energen Resources makes small payout contribution
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Lower-risk Energy Investment OpportunityStrong After-tax Cash FlowsExcellent FundamentalsProven Track Record
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(a)The U.S. Securities and Exchange Commission (SEC) requires public companies, such as Energen, to reconcile Non-GAAP (GAAP refers to generally accepted accounting principles) financial measures to related GAAP measures. After-tax Cash Flow is a Non-GAAP financial measure. Energen believes after-tax cash flow is relevant because it is a measure of cash available to fund the company's capital expenditures, dividends and to service its debt.
This estimate is a "forward-looking statement" as defined by the SEC. All statements based on future expectations rather than on historical facts are forward-looking statements that are dependent on certain events, risks and uncertainties that could cause actual results to differ materially from those anticipated. The Company cannot guarantee the absence of errors in input data, calculations and formulas used in its estimates, assumptions and forecasts. A discussion of risks and uncertainties that could affect futureresults of Energen and its subsidiaries is included in the Company's periodic reports filed with the Securities and Exchange Commission.
ATFC Reconciliation to GAAP($ in millions)
2008Net Income (GAAP) 322 222 ― 252Depreciation, depletion and amortization 188 223 ― 223Deferred income taxes, net 188 53 ― 53After-tax Cash Flows (Non-GAAP) 698 498 ― 528 Changes in assets and liabilities and other adjustments (103) 96 ― 96Net Cash Provided by Operating Activities (GAAP) 595 594 ― 624
Years Ended 12/312009 Estimate
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(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 futureresults of Energen and its subsidiaries is included in the Company's periodic reports filed with the Securities and Exchange Commission.
ERC ATFC Reconciliation to GAAP($ in millions)
2008Net Cash Provided by Operating Activities (GAAP) 595 594 ― 624 Changes in assets and liabilities and other adjustments 103 (96) ― (96)After-tax Cash Flow (Non-GAAP) 698 498 ― 528Less: AGC cash flows from operations (GAAP) (133) (81) ― (81)Adj. Cash Flows from Operations Excluding Alagasco (Non-GAAP) 565 417 ― 447
Years Ended 12/312009 Estimate
Financial Financial StrengthStrength
To Pursue To Pursue OpportunitiesOpportunitiesUBS Natural Gas, Electric,
Power and Coal ConferenceLost Pines, TXMarch 5, 2009
UBS Natural Gas, Electric, Power and Coal Conference
Lost Pines, TXMarch 5, 2009