2016 Brooks Case Competition

Michael Schwalen, Eric Lanning, Nick Briscoe, &

Kirk Petrowitz

Outline

• Executive Summary• Industry Outlook

• Likelihood of 50% price change• Traditional drilling vs. horizontal fracking• Saudi’s goal: Myth?

• Firm Analysis & Investment Decision• Impact of crude oil• Strategies• Investment attractiveness

• Conclusion

Industry Outlook – Price Change

• Supply• OPEC – High production• Iran – Sanctions• Market share focus

• Demand• China• Oil reserve storage

• Cost

Industry Outlook – Drilling vs. Fracking

• Traditional Drilling• Smaller Firms• Larger Firm• Sovereign States

• Horizontal Fracking• Smaller Firms• Larger Firms

Industry Outlook – Saudi Arabia

• Falling oil prices• Increase in production

• Decrease in oil rigs• U.S. countermeasures

• Ability to cut costs

Firm Analysis (ConocoPhillips)

• Revenue Mix:• Crude Oil (45%)• Natural Gas (39%)• Natural Gas Liquid (4%)• Other Sources (11%)

• Shift from natural gas to crude oil

Firm Analysis (Antero Resources)

• Revenue Mix:• Natural Gas (48%)• Natural Gas Liquids (12%)• Commodity Derivatives (32%)

• Shift from natural gas to natural gas liquids

Strategy Analysis

• ConocoPhillips• Shift from natural gas to oil• Reduction of labor• Increased focus on core business strategy

Strategy Analysis

• Antero Resources• Financial Hedging

• Fixing product volume• Transportation commitments

• Fixing price• Over time• Locations

Financial Analysis

Financial Analysis

Financial Analysis

Conclusion

• Antero• Buy

• ConocoPhillips• Hold

Recap• Executive Summary• Industry Outlook

• Likelihood of 50% price change• Traditional drilling vs. horizontal fracking• Saudi’s goal: Myth?

• Firm Analysis & Investment Decision• Impact of crude oil• Strategies• Investment attractiveness

• Conclusion

Thank You

• Michael.Schwalen@drake.edu• Eric.Lanning@drake.edu• Nicholas.Briscoe@drake.edu• Kirk.Petrowitz@drake.edu