A Growth Company
IPAA OGIS Small Cap Conference
The Ritz-Carlton Palm BeachManalapan, Florida
February 7, 2005
2
Forward-Looking Statements
Some statements contained in this presentation are "forward-looking statements". All statements other than statements of historical facts included in this report, including, without limitation, statements regarding planned capital expenditures, the availability of capital resources to fund capital expenditures, estimates of proved reserves, our financial position, business strategy and other plans and objectives for future operations, are forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology like "may," "will," "expect," "intend," "anticipate," "estimate," "continue," "present value," "future" or "reserves" or other variations or comparable terminology. We believe the assumptions and expectations reflected in these forward-looking statements are reasonable. However, we can't give any assurance that our expectations will prove to be correct or that we will be able to take any actions that are presently planned. All of these statements involve assumptions of future events and risks and uncertainties. Risks and uncertainties associated with forward-looking statements include, but are not limited to: fluctuations in prices of oil and gas; future capital requirements and availability of financing; geological concentration of our reserves; risks associated with the drilling of wells; competition; general economic conditions; governmental regulations; potential defaults in the payment of amounts owed to us by purchasers of our production and counterparties to our hedging contracts; and risks of hedging activities.
For these and other reasons, actual results may differ materially from those projected or implied. We caution you against putting undue reliance on forward-looking statements or projecting any future results based on such statements.
3
Predictable Growth…Through a Proven Strategy
Niche Player
Acquire & Exploit
Growth
People - Skill Sets
4
Overview
Independent, domestic onshore E&P company, established 1979
Publicly traded on the NASDAQ National Market – “PLLL”– Equity market capitalization of approximately $130 million
Focused operations in three key areas– The Permian Basin of West Texas and New Mexico– North Texas (Fort Worth Basin)– The Onshore Gulf Coast area of South Texas
Substantial and diversified proved reserve base– 21.7 MMBOE proved reserves– $266.2 million SEC PV-10
Long life, 18.3 year proved R/P ratio and 13.8 year proved developed R/P ratio
5
Investment Considerations
Experienced technical team focused on accelerated production growth and reserve development
Excellent Industry Peer Comparisons
– F&D costs
– Full cycle economics
Balanced portfolio of long-life, high-quality assets
Significant re-investment opportunities in 5 active low-risk oil projects
Significant investment opportunities in 4 low-risk, technology-driven gas projects
Exposure to high impact exploration projects
Technology driven strategy to realize enhanced returns while minimizing risks
6
Management Team130 Years Combined Oil and Gas Experience
Larry OldhamPresident &
CEO
Don Tiffin, P.E.Chief Operating
Officer
John Rutherford, CPLVice PresidentLand & Admin
Eric Bayley, P.E. Vice President
Corp. Engineering
Steve Foster, CPAChief Financial
Officer
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Technical and Operations125 Years Combined Oil and Gas Experience
Jerry NevansDirector Business
Development
Kerry Meise, P.E.Senior Engineer
Mike MoylettSenior Geologist
Brian McCurryManager of Operations
Bobby KuhlProduction
Superintendent
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PLLL…a Growth Company!
100%
Production Reserve Volumes
575%
1,465%
Reserve Value
Since 2001
9
Production Growth. . . Since 2001
2,954
1,868
3,740
GAS 2,450
1,290
Boe per Day
OIL
Dec 04E
1,834
1,120
62%
38%
65%
35%
37820%
1,49080%
Dec 01
10
Reserve Volume Growth. . . Since 2001
3.2
21.7
GAS
MMBoe
OIL
11
Reserve Value Growth. . .Since 2001SEC PV-10
$17
$266
GAS
Millions of Dollars
OIL
12
2004 Operating Summary
13
Areas of Operations
Barnett Shale Gas ProjectAcquired April 2003
Utah ProjectAcquired June 2002
Fullerton San AndresAndrews Co.
Acquired December 2002
New Mexico Abo Gas ProjectAcquired April 2003
Carm-Ann / N Means QueenAndrews Co.
Acquired Oct & Dec 2004
Yegua/Frio GasJackson/Wharton Cos.
Acquired November 1994
Cook Mountain GasLiberty Co.
Acquired June 2002
Cotton Valley Project
Acquired Dec 2003
Diamond M FieldScurry Co.
Acquired December 2001
Proved Reserves
21.7 MMBoe
71% Proved Developed
87% of Proved Reserves -Oil assets
90% Operational control
SEC PV10 = $266.2 Million
R/P Ratio = 18.3 Years
14
Reserves and Production by Area
21.7 MMBoe at December 31, 2004 3.74 MBoepd Current Estimate
Fullerton53%
New Mexico Abo0%
Diamond M Canyon Reef
6%
Carm-Ann/N Means Queen
12%
Diamond M Shallow
15%
Yegua/Frio5%
Cook Mountain0%
Other Permian Basin
9%
Proved Reserves Daily Production
15
Peer Comparisons
2001-2003 Reserve Replacement Costs - $ per BOE
Sources: Public company data; Global Upstream Performance Review, 2004, John S. Herold, Inc. and Harrison Lovegrove & Co.
$0
$5
$10
$15
$20
$25
DPTR PLLL DBLE MSSN EPEX BEXP CRZO XEC CWEI TXCO AXAS TMR
Small-cap U.S. average = $10.72
16
Peer Comparisons
2001-2003 Reserve Replacement Percentage
Sources: Public company data; Global Upstream Performance Review, 2004, John S. Herold, Inc. and Harrison Lovegrove & Co.
0%
100%
200%
300%
400%
500%
600%
700%
800%
DPTR PLLL DBLE MSSN TXCO EPEX BEXP CRZO XEC CWEI AXAS TMR
Small-cap U.S. average = 205%
17
Peer Comparisons
Full-cycle Economics: Per Unit Revenue Less Production Costs (including production related G&A) Divided by 3-Year Reserve Replacement Costs Per Unit
Sources: Public company data; Global Upstream Performance Review, 2004, John S. Herold, Inc. and Harrison Lovegrove & Co.
0%
50%
100%
150%
200%
250%
300%
350%
PLLL DPTR DBLE BEXP EPEX MSSN CRZO XEC CWEI TXCO CWEI AXAS TMR
Small-cap U.S. average = 211%
NM NM
18
Future Growth
Exploitation of PUD Reserve Inventory
– Fullerton, Diamond M, N. Means Queen and Carm-Ann Projects
– 2005 Estimated CAPEX - $22.2 million
Exploitation of Gas Projects
– New Mexico Abo and North Texas Barnett Shale
– 2005 Estimated CAPEX - $15.4 million
Exploration Projects
– Utah and East Texas Cotton Valley Reef
– 2005 Estimated CAPEX - $2.5 million
Acquisition Targets
– Long-life oil and/or gas reserves (R/P 15)
– Low-risk (POS >50%) and low-cost PUD reserves
– Accretive to earnings and cash flow
– Deal size - $1 million - $100 million
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2005 Capital Investment Budget – $43.7 Million
Risk Dispersion ($Millions)
$15.2
$1.8
$14.8
$9.4 $2.5
90% Historic SuccessFullerton, Carm-Ann,Diamond M Shallow & Other Infill Drilling & Waterflood Implementation
Barnett Shale & New Mexico Gas Extension Wells
70+% Historic SuccessCook Mountain & Yegua Extension Wells
100% Historic SuccessDiamond M Canyon ReefDeepenings & Reactivations
New Projects
Geographic Dispersion ($Millions)
New Projects
Barnett Shale
New Mexico Abo Gas
Cook Mountain & Yegua
Fullerton
Diamond M Shallow
Carm-Ann / N. Means Queen
Other PermianBasin
Diamond M Canyon
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Areas of Operations
Barnett Shale Gas ProjectAcquired April 2003
Utah ProjectAcquired June 2002
Fullerton San AndresAndrews Co.
Acquired December 2002
New Mexico Abo Gas ProjectAcquired April 2003
Carm-Ann / N Means QueenAndrews Co.
Acquired Oct & Dec 2004
Yegua/Frio GasJackson/Wharton Cos.
Acquired November 1994
Cook Mountain GasLiberty Co.
Acquired June 2002
Cotton Valley Project
Acquired Dec 2003
Diamond M FieldScurry Co.
Acquired December 2001
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Fullerton San Andres
Project Attributes
– 3,640 gross acres
– San Andres - 4,400'
– Immature waterflood
– Shallow decline rate
– Long reserve life
Future Work
– 2005 budget is $3.7 million 13 new infill wells Waterflood enhancement Exploitation of Clearfork
Formation
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Fullerton San Andres
Gross Daily Oil Production (Bopd)
Historical Projection
PLLL Acquired Dec. 2002
PLLL's Net Revenue Interest 71%
80+ workovers& 6 new wells
13 new wells
Development response associated with 2003 and 2004 capital activity
Projected development response associated with 2005 capital activity
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Diamond M – Canyon Reef
Project Attributes
– 5,500 gross acres
– Canyon Reef – 6,500’
– Significant original oil in place
– Prolific primary production
– Low recovery factor relative to offsets
Future Work
– 2005 budget is $9.4 million 24 well deepenings
and recompletions Additional 3D seismic data
acquisition 3 infill wells Waterflood enhancement
– Tertiary (CO2) enhancement
Diamond M43 Million Bbls
RF<30%1.25 Billion Bbls
RF >50%
201 Million BblsRF>50%
SACROC
Sharon Ridge
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Diamond M – Canyon Reef
Gross Daily Production (Boepd)
Development response associated with 2003 and 2004 capital activityProjected development response associated with 2005 capital activity
Historical Projection
PLLL's Net Revenue Interest ≅ 57%
4 workovers & 2 new wells
24 workovers & 3 new
wells
PLLL Assumed OperationsMarch 2003
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Diamond M Shallow
Diamond M Shallow4.0 Million Bbls
Anadarko Activity
Anadarko Activity
Project Attributes
– 2,600 gross productive acres
– 2,450' - 4,000'
– Proven primary well performance
– Inefficient waterflood on 20-acre spacing
– Demonstrated successful 10-acre waterfloods to north and south
Future Work
– 2005 Budget is $5.0 million 15 infill wells 16 workovers
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Diamond M Shallow
Gross Production Curve (Bopd)
Historical Projection
Development response associated with 2003 and 2004 capital activity (excludes flood response)
Projected development response associated with 2005 capital activity (excludes flood response)
PLLL Assumed Operations March 2003
PLLL's Net Revenue Interest ≅ 57%
11 workovers & 33 new
wells
16 workovers & 15 new
wells
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Carm-Ann San Andres / N. Means Queen
Project Attributes
– 5,360 gross acres
– San Andres - 4,900' 40 acre well spacing on
primary depletion
– Queen - 4,300' Inefficient abandoned
waterflood
Future Work
– 2005 Budget is $4.1 million
– San Andres 9 infill wells Stimulation of existing wells Waterflood initiation
– Queen 4 infill wells Well reactivation Waterflood redevelopment
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Carm-Ann San Andres / N. Means Queen
Gross Daily Production (Boepd)
Historical Projection
PLLL Acquired Oct. 2004
PLLL's Net Revenue Interest 59%
24 workovers
& 13 new wells
Projected development response associated with 2005 capital activity
29
North Texas Barnett Shale Gas Project
Project Attributes
– 5,000 gross acres; 28-40% working interest
– First gas well drilled and awaitingcompletion
– Second well currently drilling
– Estimated pay of more than 250gross feet of Barnett Shale
Future Work
– 2005 budget is $7.6 million 7 horizontal wells Water frac completions Pipeline installation
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Barnett Shale Development – 5 County Area
0
100
200
300
400
500
600
700
800
900
82 83 84 84 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Pro
du
cin
g W
ells
Wise Tarrant Parker J ohnson Denton(1) 8 months annualized
31
0
1000
2000
3000
4000
5000
6000
7000
Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04
MC
FP
DNorth Texas Barnett Shale GasXTO Energy - Brumbaugh No. 2 Horizontal Well - Average Daily Rate
PLLL owns no interest in this property
12 Months Cum1.36 BCF of gas
Initial Potential-7,000 Mcfg per Day
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North Texas Barnett Shale
ERATH
HOODJOHNSON
PALO PINTO
PARKER
TARRANT
XTO Energy Acquisition of Antero• $685 million• 440 Bcfe - 41% proved developed• 60 MMcfepd - production• 61,000 acres• Tarrant, Parker & Johnson Counties JACK WISE DENTON
MONTAGUE COOKE
Ft. Worth
Cleburne
PLLLLeasehold
5,000 Acres
Newark East Field• 3,700 wells• 1.0 Bcfepd• Largest producing
gas field in Texas
Cleburne Field
Chesapeake Acquisition of Hallwood• $277 million• 135 Bcfe - 15% proved developed• 25 MMcfepd - production• 18,000 acres• Johnson County
Recently Announced Acquisitions
33
New Mexico Abo Gas Project
Project Attributes
– Technology driven gasdevelopment play
– Area 1 - 50,000 gross acres (4,250 net); 8.5% working interest
– Area 2 - 30,000 gross acres (25,500 net); 85.0% working interest
Future Work
– 2005 Budget is $7.6 million 3 re-entries 6 horizontal wells Fracture stimulation Pipeline installation
New Mexico
34
Best Vertical Abo Well
Initial Rate 1,450 Mcfg per Day
15 Year Cum.78 BCF of gas
PLLL owns no interest in this property
(
Average Daily Rate
35
First Abo Horizontal Producer – Area 1
0
500
1000
1500
2000
2500
3000
MC
FG
PD
6 Months Cum.356 BCF of gas
Initial Rate 2,300 Mcfg per DayArea 1 - PLLL's Net Revenue Interest ≅ 6.8%
Area 2 - PLLL's Net Revenue Interest ≅ 68.0%
Average Daily Rate
36
Other Projects
Utah CBM (Coal Bed Methane) Gas / Conventional Oil & Gas Projects
– 125,000 gross acres with both shallow gas and oil targets; 100% working interest
– First test well expected to spud in first half of 2005
– 2005 Budget is $1.4 million
East Texas Cotton Valley Reef Gas Project
– 5,000 gross acres; 13.125% working interest
– Existing long-life natural gas fields nearby with impressive production histories from similar reef facies
– 2005 Budget is $1.1 million
Financial Overview
38
AssetsCurrent assets 5.3$ 16.1$ 23.6$ 13.7$ Net property and equipment 29.8 85.7 94.0 129.0 Other assets, net 6.7 0.6 0.7 1.2
Total 41.8$ 102.4$ 118.3$ 143.9$
Liabilities and Stockholders' EquityCurrent liabilities 5.8$ 7.5$ 7.2$ 16.7$ Long-term debt, net 9.6 45.6 39.8 55.0 Deferred tax - 3.6 5.8 5.4 Derivative obligations - 0.1 2.7 9.3 Asset retirement obligations - - 1.6 1.8 Stockholders' equity 26.4 45.6 61.2 55.7
Total 41.8$ 102.4$ 118.3$ 143.9$
December 31,2002
December 31,2001
(unaudited)
September 30,2004
December 31,2003
Balance Sheet Data
Millions of Dollars
39
Statement of Operations
Oil and gas revenues 17.8$ 12.1$ 33.8$ 23.7$
Cost and expenses:
Lease operating expense 2.7 2.1 6.5 5.5
Production taxes 1.2 0.8 1.9 1.4
General and administrative 1.4 2.1 4.3 3.9
Depreciation and depletion 6.3 6.2 8.4 6.0
Impairment of oil and gas properties 16.8 - - -
Total costs and expenses 28.4 11.2 21.1 16.8
Other income (expense), net (0.2) 27.5 (2.0) (1.3)
Income (loss) before income taxes (10.8) 28.4 10.7 5.6
Income tax benefit (expense), deferred 6.1 (9.7) (3.1) (2.0)
Cumulative preferred stock dividend (0.6) (0.6) (0.6) (0.4)
Net income (loss) available tocommon stockholders (5.3)$ 18.1$ 7.0$ 3.2$
12 Months2001
12 Months2002
12 Months2003
9 Months2004Millions of Dollars
40
Oil Hedges and Prices
0
500
1,000
1,500
2,000
2,500
Current Oil
Production
2005 2006 2007 2008
BO
PD
2,450
1,900@
$30.80
700@
$39.96
1,200@
$25.56
1,421@
$30.80
500@
$36.36
921@
$25.56
1,300@
$34.36
1,200@
$33.37
41
Gas Hedges and Price
0
2,000
4,000
6,000
8,000
10,000
Current Gas Production 2005
MC
FGPD
7,800
1,700@
$4.91
42
Realized Oil and Gas Prices
1Q 04 2Q 04 3Q 04Oil per Bbl
NYMEX 35.14$ 38.30$ 43.85$ Differential (2.21) (2.64) (2.55)
Wellhead price 32.93$ 35.66$ 41.30$ Hedge payment (7.00) (9.16) (12.80) Realized Price 25.93$ 26.54$ 28.50$
Gas per McfNYMEX 5.68$ 6.18$ 5.72$
Differential (0.47) (0.24) (0.48) Wellhead price 5.21$ 5.94$ 5.24$ Hedge payment 0.03 (0.45) (0.49) Realized Price 5.24$ 5.45$ 4.75$
43
2 Year Stock Performance
$13 MM Equity PlacementDecember 23, 2003
Fulcrum ReportSept. 2, 2004
DE Investment ReportJuly 30, 2004
Jefferies ReportJune 3, 2004
Sterne, Agee & Leach ReportNov. 23, 2004
44
Investment Considerations
Experienced technical team focused on accelerated production growth and reserve development
Excellent Industry Peer Comparisons
– F&D costs
– Full cycle economics
Balanced portfolio of long-life, high-quality assets
Significant re-investment opportunities in 5 active low-risk oil projects
Significant investment opportunities in 4 low-risk, technology-driven gas projects
Exposure to high impact exploration projects
Technology driven strategy to realize enhanced returns while minimizing risks
45
Corporate Information
Cindy ThomasonManager Investor [email protected]
Steve FosterChief Financial [email protected]
Don TiffinChief Operating [email protected]
Larry OldhamPresident & [email protected]
Web sitehttp://www.plll.com
Common StockNasdaq: PLLL
Parallel Headquarters Contacts1004 N. Big Spring, Suite 400 Midland, TX 79701 (432) 684-3727
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