SPE 2018 - Enverus · Perf. ft Delaware Basin Completion Metrics, by Year lbs/ft Hz spuds up 229%...

SPE 2018PRESENTED TO: SPE

Dallas, TX | September 23, 2018

2018 2

DISCLAIMERS

Forward-Looking StatementsThis presentation may contain forw ard-looking statements. In this context, forw ard-looking statements often address future

commodity prices and M&A or E&P activity and often contain w ords such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “w ill,” “w ould,” “target,” similar expressions, and variations or negatives of these w ords. Forw ard-looking statements by their nature address matters that are, to different

degrees, uncertain and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially

from those expressed in any forw ard-looking statements.

Nothing in this presentation should be considered a guarantee of future results. Important risk factors that may cause such a

difference include, but are not limited to, trends in oil and gas production and exploration activity; government regulations,

including those that negatively affect the production of oil and

gas using hydraulic fracturing; industry and market trends; general changes in law s or regulations w hether or not specif ic to

the oil & gas industry; and general economic conditions w hether or not specif ic to the oil & gas industry. While this list of factors is

considered representative, no such list should be considered to

be a complete statement of all potential risks and uncertainties. Unlisted factors may present signif icant additional obstacles to

the realization of forw ard looking statements. We assume no obligation to publicly provide revisions or updates to any forw ard

looking statements, w hether as a result of new information,

future developments or otherw ise, should circumstances change, except as otherw ise required by securities and other

applicable law s.

No Investment AdviceThis presentation is being provided solely for informational purposes and nothing herein shall be considered investment

advice. We cannot guarantee the completeness, timeliness or accuracy of the information contained herein. Any decisions

based upon the information contained in this presentation are

the sole responsibility of the decision maker. INVESTMENTS IN OIL AND GAS PROPERTIES, EQUITIES, AND COMMODITIES

INVOLVES SUBSTANTIAL RISK INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THESE RISKS INCLUDE PRICE

FLUCTUATIONS AND UNFORESEEN EVENTS THAT MAY

AFFECT OIL & GAS VALUES.

No SolicitationThis presentation is not, and nothing in it should be construed as, an offer, invitation, or recommendation in respect of the

securities of Drilling Info Holdings, Inc. or any other company, or

an offer, invitation or recommendation to sell, or a solicitation of an offer to buy, any securities in any jurisdiction. Neither this

presentation nor anything in it shall form the basis of any contract or commitment. This presentation is not intended to be

relied upon as advice to investors or potential investors and does

not take into account the investment objectives, f inancial situation or needs of any investor. All investors should consider

such factors in consultation w ith a professional advisor of their choosing w hen deciding if an investment is appropriate.

2018 3

MACRO OVERVIEWCOMMODITY FUNDAMENTALS & PRICE TRENDS

2018 4

US OIL BREAKEVENSE

F-H

aw

kville

-1E

F-G

ate

s R

anch-1

EF

-De W

itt-

1W

illisto

n-A

nte

lope-

1D

ela

ware

-Wolfcam

p-1

Dela

ware

-Spra

berr

y-1

Dela

ware

-Bone

Spri

ng

-1E

F-S

ug

ark

ane-1

Mid

land-

Spra

berr

y-1

EF

-Eag

levi

lle-1

Willisto

n-T

hre

shold

-1S

CO

OP

-1S

TA

CK

-1D

J-W

attenberg

-1E

F-B

riscoe R

anch-1

Mid

land-

Wolfcam

p-1

Willisto

n-P

ars

hall-1

Willisto

n-S

anis

h-1

PR

B-T

urn

er-

1W

illisto

n-N

esson-1

NW

Shelf-

Bone S

pri

ng

-1W

illisto

n-W

est

Nesson-1

Willisto

n-B

ailey-

1D

J-W

attenberg

E

xt.-

1P

RB

-Fro

ntier-

1M

iss L

ime-1

EF

-De W

itt-

2D

ela

ware

-Spra

berr

y-2

Willisto

n-A

nte

lope-2

Willisto

n-T

hre

shold

-2P

RB

-Park

man-1

EF

-Gid

din

gs-1

EF

-Sug

ark

ane-2

Willisto

n-W

est

Nesson-

2D

J-F

ring

e-1

EF

-Bri

scoe R

anch-2

DJ-S

ilo-1

Dela

ware

-Wolfcam

p-2

EF

-Eag

levi

lle-

2W

illisto

n-R

ose A

rea-

1D

ela

ware

-Oth

er-

1D

ela

ware

-Bone

Spri

ng

-2W

illisto

n-A

mbro

se-1

TX

GC

-1A

rdm

ore

-1D

J-W

attenberg

-2E

aste

rn S

helf-1

Mid

land-S

pra

berr

y-2

Willisto

n-S

anis

h-2

NW

Shelf-W

olfcam

p-1

Centr

al

Basin

Pla

tform

-1M

idla

nd-O

ther-

1P

RB

-Sussex-

1S

CO

OP

-2W

illisto

n-P

ars

hall-2

EF

-Gate

s R

anch-2

Gra

nite W

ash-1

ST

AC

K-2

Willisto

n-O

ther-

1C

lev/

Tonk-

1N

W S

helf-O

ther-

1W

illisto

n-N

esson-2

DJ-H

ere

ford

-1N

W S

helf-

Bone S

pri

ng

-2M

idla

nd-W

olfcam

p-2

DJ-O

ther-

1P

RB

-Turn

er-

2P

RB

-Nio

bra

ra-1

PR

B-S

hannon-

1W

illisto

n-E

lm C

oule

e-1

Willisto

n-P

opla

r D

om

e-1

EF

-Gid

din

gs-2

Dela

ware

-Oth

er-

2W

illisto

n-B

ailey-

2W

illisto

n-B

illing

s N

ose-1

EF

-EF

Dry

-1W

illisto

n-A

mbro

se-2

Willisto

n-A

nte

lope-3

EF

-Sug

ark

ane-

3W

illisto

n-O

ther-

2D

J-W

attenberg

E

xt.-

2P

RB

-Fro

ntier-

2W

illisto

n-P

ars

hall-3

Willisto

n-R

ose A

rea-2

Willisto

n-W

est

Nesson-3

EF

-De W

itt-

3W

illisto

n-E

lm C

oule

e-2

Willisto

n-T

hre

shold

-3W

illisto

n-S

anis

h-3

Willisto

n-N

esson-3

PR

B-P

ark

man-

2W

illisto

n-R

ed R

iver-

1D

J-F

ring

e-2

Mid

land-S

pra

berr

y-3

Dela

ware

-Wolfcam

p-3

Willisto

n-B

ailey-

3W

illisto

n-P

opla

r D

om

e-2

NW

Shelf-O

ther-

2D

ela

ware

-Spra

berr

y-3

EF

-Eag

levi

lle-3

Gra

nite W

ash-

2P

RB

-Teapot-

1D

J-W

attenberg

-3P

RB

-Sussex-

2P

RB

-Turn

er-

3M

idla

nd-O

ther-

2W

illisto

n-A

mbro

se-3

Mis

s L

ime-2

EF

-Ag

uila V

ado-1

Cle

v/T

onk-

2D

ela

ware

-Bone

Spri

ng

-3N

W S

helf-

Bone S

pri

ng

-3E

F-H

aw

kville

-2E

F-B

riscoe R

anch-3

NW

Shelf-W

olfcam

p-2

PR

B-S

hannon-2

EF

-Gate

s R

anch-3

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

WTI

Bre

akeve

n

($/B

bl) @

12.5

% M

AR

R &

$2.7

5/M

MB

tu H

H

Permian EF Williston Anadarko Rockies

Source: DI ProdCast

2018 5

KEY GAS BREAKEVEN THRESHOLDS

$2.40 $2.42 $2.46

$2.62 $2.64

$2.84 $2.91

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

HH

Bre

akeve

n ($

/MM

Btu

) @

12.5

% M

AR

R &

$60/B

bl

WTI

$2.60-$2.65

$2.65-$2.80$2.50-$2.60

Source: DI ProdCast

2018 6

M&A ACTIVITY 1H 18’

2018 7

2018 8

2018 9

2018 10

DELAWARE BASINBASIN OVERVIEW, DEALS, & OPPORTUNITIES

2018 11

DELAWARE BASIN: OVERVIEW

Delaware Basin GOR Delaware Basin Hz Spuds, by Year

➢The Delaware is gassier to the western extent of the basin.➢The oil window is at intersection of Ward Co., Reeves Co., and Loving Co.

Source: DI Delaware Basin Report

2018 12

DELAWARE BASIN: OVERVIEW (CONTD.)

Delaware Basin Vintage Type Curves, by Year

Delaware Basin Spuds, by Year

lbs/ftPerf. ft Delaware Basin Completion Metrics, by Year

➢ Hz spuds up 229% YoY in 2017, up to an all-time high. 2018 on track to be higher.

➢ Wells are being drilled with longer lateral lengths and more intense fracs.

➢ Average well productivity has been responding to the completion efficiencies, yielding higher type curves YoY.

➢ Since optimal lateral lengths and completion practices

have largely been established, efficiency gains have slowed down.


0

200

400

600

800

1,000

1,200

1,400

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35

Pro

ductio

n (

Boe/d

)

Months on Prod2013 2014 2015 2016 2017 2018

2018 13

DELAWARE BASIN: OVERVIEW (CONTD.)

➢ Permitting correlates with activity, economics, and acreage valuations.

➢ Acreage valuations > $30k/acre for PUDs in eastern part of the basin, gassier western acreage < $10k/acre.

Source: DI Delaware Basin Report, DI Market Research

Delaware Basin Permitting Heat Map (Last 2 Yrs) Delaware Basin Acreage Values

2018 14

DELAWARE BASIN: DI TYPE CURVE AREAS

Average IRR, by TC Area

Delaware Basin Target Formation Summary (Norm. to 7.5K lat & 2K lbs/ft)

➢ Wolfcamp A well delineated across whole of Delaware Basin with top tier economics, making it the most attractive formation. Wolfcamp B & 2nd & 3rd Bone Springs well delineated and highly economic where prevalent.

➢ The TX/NM Border & Northern acreage have the best economics currently due to the higher oil percentage. Although other areas boast higher EURs in some cases, these areas are significantly gassier.


ZoneEUR

Gas (Bcf)

EUR Oil

(MBbl)

EUR

(MBoe)

%

Liquids

NVP10

MM$Average

IRROil BE

#

of TCs

Upper Avalon 2.56 271 1,153 65% $4.20 53% $24 4

Lower Avalon 2.59 385 1,279 68% $5.81 74% $26 8

Bone Springs 1 0.74 180 722 64% $0.54 13% $54 2

Bone Springs 2 1.13 417 808 78% $2.21 49% $38 13

Bone Springs 3 1.07 484 853 80% $4.55 52% $37 17

Wolfcamp A 1.55 564 1,100 78% $6.46 66% $32 24

Wolfcamp B 2.12 404 1,135 73% $4.32 40% $36 15

Average 1.68 386 1,010 73% $4.01 54% $35 12

AreaEUR Gas

(Bcf)

EUR Oil

(MBbl)

EUR

(MBoe)

%

Liquids

NVP10

$MMAverage

IRROil BE TCs

Avg.

TC/Area

Northern 3.02 438 776 81% $3.90 44% $40 21 2.6

Western 1.40 411 1,492 67% $6.34 65% $26 22 3.1

Border 1.65 503 1,073 76% $5.85 66% $31 16 3.2

Central 1.52 586 1,111 78% $6.46 59% $32 10 2

Southern 0.69 485 712 84% $3.52 38% $43 14 2.3

Average 1.65 485 1,033 77% $5.21 39% $35 16.6 2.6

Delaware Basin Region Summary (Norm. to 7.5K lat & 2K lbs/ft)

2018 15

DELAWARE BASIN: LARGE & MID CAP OPERATORS

➢ Large cap operators already command a vast portion of the Delaware Basin. Middle cap operators are offset to

large cap positions and are expected targets for the large cap operators as the basin continues to consolidate.

Source: DI Market Research

2018 16

DELAWARE BASIN: SMALL CAP & PE OPERATORS

➢ Small cap operators are noticeably on the fringes of the basin, but several still offer sizeable positions & contiguity.

➢ PE-backed E&Ps have continued to move toward fringes as investments in the core have been largely realized.


2018 17

DELAWARE BASIN: DEALS IN PLAY & ACTIVITY

1. Increased leasing has taken place to the southern extent of the basin deep into Reeves Co. & Pecos Co.

2. Deals in play are largely away from

the core and discontinuous, making it ever more important to have offset position in order to be able to drill longer laterals and realize maximum value.

3. Although activity is moving south, the larger, continuous deals in play to the south are pushing the boundaries of the basin and may be

more viable targets for PE-backed E&Ps looking to prove and flip.


1

2

3

2018 18

DELAWARE BASIN: TRANSACTION OVERVIEW

➢ Deal flow increased notably from 3Q2015 to 1Q2017, but has slowed down since. However, recent large acquisitions have kept 2018 lively (BP’s BHP acquisition & Diamondback’s Energen acquisition both have Delaware components).

➢ The slow down is largely due to investor pressure for public companies to “return to returns.” However, consolidation will continue as operators look to expand their Permian portfolios and search for G&A, service cost, contiguous acreage, and

operational efficiencies.

Metrics, Transactions (> $100MM) by Quarter

Deal Count


2018 19

DELAWARE BASIN: RECENT ACQUISITIONS

July 2018: BP acquired BHP’s Delaw are assets for an estimated $3.4B @ PUD of $41K/acre. Position is not heavily drilled and only decently contiguous, but is w ell delineated by offset operators. 83K net acres.

March 2018: Concho acquires RSP Permian for $9.5B @ PUD of $75K/Acre. Largest ever acquisition in the Permian. Position is largely contiguous and heavily delineated. Concho now runs the most rigs in the Permian. 45K net acres and allow s for 2-mile long lateral development.

August 2018: Diamondback acquires Energen for $9.2B @ PUD of $34K/acre. Diamondback is now third largest producer in Permian. +72K net acres in the DW. Signif icant midstream and SWD assets retained in transaction.


2018 20

DELAWARE BASIN: DEAL VALUATIONSJ

an

. 20

16

Oct.

20

16

Au

g. 2

01

7

Ma

r. 2

01

8

Silver Hill enters in 2013 with

acquisition from Clayton Williams

(11K net acres, $12MM @

$1.3K/acre). Jan 2016, Concho sells

14K acres to Silver Hill for $290MM

@ $13K/acre.

Silver Hill flips the 41K

position to RSP for $2.4B @

$45K/acre. Silver Hill

delineates the position to 6

horizons prior to sale.

RSP continued A&D activity

in the area with 2 deals for

$245MM @ ~$20K/acre.

Concho acquires RSP for $9.5B

@ $75K/acre for. RSP had 45K

net acres in this Delaware asset.

Deal Spotlight: Full Circle from $1.3K/Acre to $75K/AcreDelaware Basin Acreage Values


2018 21

DELAWARE BASIN: DEBT COMPARISONCarrizo: Debt ~$1.5B, Market Cap $2.0B

Resolute: Debt ~$668MM, Market Cap $723MM

Callon: Debt ~$1.0B, Market Cap $2.6B

Jagged Peak: Debt ~$490MM, Market Cap $2.7B

Source: DI Capitalize

2018 22

MIDLAND BASINBASIN OVERVIEW, DEALS, & OPPORTUNITIES

2018 23

MIDLAND BASIN: OVERVIEW

Midland Basin GOR Midland Basin Hz Spuds, by Year

➢Midland Basin originally developed in the southern part of the basin, where wells had a higher GOR. ➢Since downturn in 2014, activity has moved to northern part of the basin with higher oil cuts.

Source: DI Midland Basin Report

2018 24

MIDLAND BASIN: OVERVIEW (CONTD.)

0

200

400

600

800

1,000

1,200

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35

Pro

ductio

n (

Boe/d

)

Months on Prod

2013 2014 2015 2016 2017 2018

Midland Basin Vintage Type Curves, by Year

Midland Basin Spuds, by Year

lbs/ftPerf. ft Midland Basin Completion Metrics, by Year

➢ Hz spuds up 46% YoY in 2017, up to an all-time high. 2018 on track to be higher.

➢ Wells are being drilled with longer lateral lengths and more intense fracs.

➢ Average well productivity has been responding to the completion efficiencies, yielding higher type curves YoY.

➢ As optimal lateral lengths and completion practices have

largely been established, efficiency gains may slow down.


2018 25

MIDLAND BASIN: OVERVIEW (CONTD.)

➢ Permitting correlates with activity, economics, and acreage valuations.

➢ Acreage valuations > $30k/acre for PUDs in northern part of the basin, gassier southern acreage < $10k/acre.

Source: DI Midland Basin Report, DI Market Research

Midland Basin Permitting Heat Map (Last 2 Yrs) Midland Basin Acreage Values

Driven by QEP

2018 26

MIDLAND BASIN: DI TYPE CURVE AREAS

ZoneEUR Gas

(MMcf)

EUR Oil

(MBbl)

EUR

(MBoe)

%

Liquids

NVP10

(MM$)Avg.

IRR

Oil BE

($/Bbl WTI)

% TCs

NPV10>0

WC A 1,013 507 856 81% $4.94 50% $39 77%

WC B 1,302 384 833 74% $2.93 30% $43 88%

LS 743 559 816 85% $5.14 48% $38 92%

Other 1,381 348 824 74% $2.21 27% $46 83%

Average 1,110 450 832 79% $3.81 39% $41 84%

Average IRR, by TC Area

Midlands Basin Target Formation Summary (Normalized to 10K lat & 2K lbs/ft)

➢ Wolfcamp B is the most actively targeted zone and had consistent results across the basin.

➢ Wolfcamp A generally has better economics, but it carries more regional risk as almost ¼ of the Wolfcamp A wells in the different DI Type Curve Areas were uneconomic under current market conditions.

➢ Lower Spraberry has excellent economics due to highest oil percentage, but has only been widely delineated in the northern extent of the basin.

➢ Other target formations include the Upper Spraberry, WolfcampC, and Wolfcamp D. There are very few DI Type Curve Areas in which they are delineated.


2018 27

MIDLAND BASIN: TRANSACTION OVERVIEW➢ Deal flow was notably high 3Q2015 to 1Q2017, but has slowed down (except for the RSP/Concho deal). ➢ This is largely due to investor pressure for public companies to “return to returns.” COG and FANG were able to make

large acquisitions from operating inside cash flow.➢ The rising $/Acre for PUD has been driven by the northern extent of the basin. The recent decrease in value is due to

PDP asset sales (mainly in the southern extent of the basin) which generally trade higher on production multiples.

➢ In the past 4 quarters, there has been a rising divergence between prices and PDP ($/flowing Boe). Both sides of the market are cautious, but this has recently driven a large volume of PDP transactions across the L48. Many PDP assets are for sale in the southern Midland Basin with increasing pressure on operators to reduce debt.

Metrics, Transactions (> $100MM) by Quarter

Deal Count


2018 28

MIDLAND BASIN: DEALS IN PLAY & ACTIVITY

1. Increased leasing has taken place in Scurry Co., which is on the Eastern Shelf. Operators are taking a chance on the outskirts of the basin. Several Wolfcamp D & Cline wells were drilled in Sterling county

several years ago, but only produced marginal results.

2. Deals in play are effectively a buffer zone between leasing and spuds over the past

18 months in the northern part of the basin.

3. Leasing continues to push the basin boundaries. Murphy E&P has been active on University Lands in Gaines Co., Dawson

Co. and Andrews Co.

4. A large amount of consolidated positions are in play in the south, representing PDP assets with infill and recompletion upside.

Will more PE follow Triple Crown's move in southeast portion of the play?

Deals in Play (via DI Market Research)

Spuds over past 18 months

Leases taken over past 18 months

1

2

3

4


2018 29

MIDLAND BASIN: LARGE & MID CAP OPERATORS


2018 30

MIDLAND BASIN: PE ACTIVITY & POSITIONS


➢ There has been a growing number of PE backed E&P rigs in the basin.

➢ Private companies have acquired large land positions from early A&D transactions or legacy assets. The A&D market

remains active for private to private transactions.➢ Ex: Endeavor sold ~70K net acres to Double Eagle III

for undisclosed amount in 2018.

0

5

10

15

20

25

30

35

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2014 2015 2016 2017 2018

HZ R

IG C

OU

NT

Private E&P Activity

Sum of CROWNQUEST Sum of ENDEAVOR

Sum of HUNT Sum of SABLE PERMIAN

Sum of SURGE Sum of SEQUITUR

2018 31

MIDLAND BASIN: PE FUND YEARS

➢ The map shows PE funds with Midland Basin positions, colored by fund year.

➢ There is still some PE transactions from portfolios funded in 2017, but activity has cooled from the 2016

Permian rush.

➢ There has been an increase of Private Equity backed royalty and mineral companies in the Permian, where it is difficult to acquire operated land positions for

a low cost.

➢ Newly funded PE companies are focusing on the basin fringes. If they validate that the formations are profitable in these areas, we expect most to flip their positions.

➢ Exit strategy concerns of PE backed companies are increasing as larger operators struggle to stay within cashflow.


2018 32

THANK YOU

SPE 2018 - Enverus · Perf. ft Delaware Basin Completion Metrics, by Year lbs/ft Hz spuds up 229%...

Documents

Transcript of SPE 2018 - Enverus · Perf. ft Delaware Basin Completion Metrics, by Year lbs/ft Hz spuds up 229%...