DUG Mid-Continent Conference
DUG Mid-Continent Conference 2014 U.S. A&D Market Update March 3, 2014
Craig Lande [email protected] 713-585-3335 www.rbcrichardsonbarr.com
Notable U.S. E&P Themes Oil prices steady at ~$95 – $100 / Bbl level for front months
Commodity Prices Trending Differently
– However, backwardation results in below $80 / Bbl five years out Gas prices have rallied due to cold winter – Back of the curve remains below $4.50 / MMBtu Buyer price decks now distinctive
Capital Markets Wide Open / JVs Flatlined
Valuation Arbitrage: Shift from A&D to IPO
Private Equity, MLPs and Mid / Small Caps are Making the Market
High yield remains attractive and important source of funds for acquisitions E&P equity markets very strong; IPO window open JV market muted; appetite only for core and oily opportunities Six IPOs since July 2013: Jones, Athlon, Antero, EP, RSP, Rice ~ 4 companies actively contemplating IPO in next 12-18 months Private Equity continues to shape A&D landscape MLPs continue to aggressively pursue mature, conventional assets – Financial Buyers acquired ~80% of Mid-Con assets over LTM Mid / Small Caps aggressively pursuing transformative deals due to HY Majors and Large Caps sellers of assets to re-position portfolios
Majors and Large Caps: “Shrink to Grow”
– Trying to mitigate massive valuation disparity (multi-basin vs focused) – Mid-Con has been primary area for Public selling Focused on U.S. onshore, particularly Big 3 oil plays
1
Seminal Events And Transactions Of 2013 And 2014 Permian
IPO
IPO
Confidential
MLP
IPO
February Multi-Basin $4.9 Billion
Strategic
August Initial Public Offering $363.2 Million
MLP
Private Equity
2
IPO
January Initial Public Offering $664 Million
July GOM Shelf $3.8 Billion
Private Equity
Private Equity
July Initial Public Offering $187.5 Million
Private Equity
February Permian – CBP $2.6 Billion
December Wolfcamp $950 Million
February Hugoton $1.4 Billion
Strategic IPO
June Multi-Basin $800 Million
January Initial Public Offering $166 Million
October Initial Public Offering $1.6 Billion
August Permian “sizzle” Index +20% during week
June Postle Field $850 Million
MLP
Private Equity
October Anadarko Basin $1.0 Billion
Strategic
September Bakken $1.4 Billion
November Eagle Ford $6.0 Billion
Strategic
October Uinta $652 Million
Source: RBC Richardson Barr database. Certain figures above are RBC estimates. Note: Acreage values and implied $/acre metrics calculated after allocating for associated net production. Note: Large caps include: COP, OXY, APC, EOG, APA, MRO, DVN, NBL, ECA; Small caps include: PDC, FANG, FST, CRZO, MPO, BCEI, MHR, SN, SFY, REXX, REN, CRK, CWEI, AREX, JONE; MLPs include: LINN, VNR, EVEP, BBEP, LGCY, QRE, MEMP, PSE, LRE, MCEP; Permian includes: PXD, CXO, LPI, FANG, ATHL, EGN, CWEI, AREX.
January Utica $924 Million
IPO
January Initial Public Offering $1.1 Billion
2013 U.S. A&D Market Was “Quiet” U.S. A&D Asset Supply
Resource Play Conventional
Negatives
$60 $60 $55
KKR / Samson $7.2 B
$32 $43
$50 - $60
$33
$28
More failed deals – buyers increasingly discerning, focused on ‘core-of-core’ assets Lack of high profile conventional corporate acquisition in 2013 – Samson ($7.2 B) in 2011 and El Paso ($7.2 B) in 2012
$23
$27 $8 $7
$14
$13 2010 3
$42
Apollo / El Paso $7.2 B
Hot IPO Market resulting in companies with aggregate EV of ~$28.6 B going public rather than transacting in private market Fewer JV’s, < $3 B in 2013 vs. $10 B avg. in 2010 – 2012, now requires ‘brand’ operator in ‘Big 3’ play
RBC Estimate
Transaction Volume ($B)
$56
Impactful Recent Trends
2011
2012
2013
$5 $3 2014 YTD 2014
Source: RBC Richardson Barr internal database. Includes only U.S. onshore transactions of $20+ million since January 1, 2010.
Positives Majors and Large Caps “shrink to grow”, selling assets to reposition portfolio and mitigate valuation disparity
Mid-Continent Asset Supply Increasing
Apache / Cordillera $2.8 B
Sinopec / CHK JV $1.0 B
$8.9
4
$6.6 Miss Lime
$5.6 $5.6
$4.9 $2.4
$3.4
2010
2011
$4 - $6 RBC Estimate
Transaction Volume ($B)
Miss Lime
$2.4
2012
Source: RBC Richardson Barr internal database. Includes only U.S. onshore transactions of $20+ million since January 1, 2010.
2013
2014 YTD
Commodity Price Environment Near-Term Oil In Industry Comfort Zone, Steep Backwardation In 5-Year Strip $130
Volatile Near-Term Gas Driven By Harsh Winter, Conservative Forward Strip $7.00
Historical WTI Front Month NYMEX Strip
NYMEX Strip
$120
Buyers holding price decks flat after 2 years to stay competitive in auctions
$100
$90
$80
Buyer Price Deck: $85 – $90 / Bbl
Break-Even: ~$80 / Bbl
$70
$60 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18 Jan 19
5
Source: Bloomberg data as of February 28, 2014. *Illustrative barrel assumes 42% Ethane, 28% Propane, 8% Butane, 9% Iso-Butane, 13% Natural Gasoline.
$6.00
Natural Gas Price ($ / MMBtu)
Oil Price ($ / Bbl)
$110
Historical HH Front Month
$5.00
Break-Even: ~$4.50 / MMBtu
$4.00
$3.00
$2.00
$1.00 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18 Jan 19
Liquid Debt & Equity Capital Environment Equity markets currently wide open but window can close quickly
E&P Equity Capital Markets Activity Since 2011 Follow-On Of f erings C-Corp IPOs $4.4
$4.0 $3.7 $3.3 $ in Billions
$2.9 $0.7
$2.2 $1.9 $3.7
$1.3
$1.5
$0.6
1Q 11
2Q 11
$0.2 3Q 11
$1.9
$4.4
$1.1
$1.0
$2.5
$1.6
$1.4 $1.8
$0.8 $1.0
$0.7
4Q 11
$0.4
1Q 12
2Q 12
3Q 12
4Q 12
$2.2
$0.6
$0.3
1Q 13
2Q 13
E&P Debt Capital Markets Activity Since 2011 High Yield
Quarterly Avg. $2.3 B
$3.1
$0.7
$ in Billions
$2.2
$2.5
3Q 13
4Q 13
1Q 14 To-Date
High Yield market remains strong despite rise in interest rates
$10.9 $8.6
$7.1
$7.1
$7.2 $6.3
$4.6
$4.0
Quarterly Avg. $6.0 B
$5.4
$5.4
$4.3
$1.7 $0.9 1Q 11 6
2Q 11
Source: Dealogic.
3Q 11
4Q 11
1Q 12
2Q 12
3Q 12
4Q 12
1Q 13
2Q 13
3Q 13
4Q 13
1Q 14 To-Date
The IPO Market Has Rewarded Focused Companies
Company
Total
7
Offering Date
Focus Area(s)
Private Equity Sponsor
2014E Production Growth (YOY)
EV at IPO ($ MM)
Current Valuation
Jul-13
Mid-Continent Cleveland Woodford
Metalmark
42%
Aug-13
Permian Wolfberry Wolfcamp
Apollo
Oct-13
Appalachia Marcellus Utica
Jan-14
EV / 2014E Production
EV / 2014E EBITDA
EV / Net Acre(1)
$1,619
$77,021 / Boepd
6.2x
$9,132
66%
$1,890
$169,738 / Boepd
9.2x
$26,057(2)
Warburg Yorktown
86%
$12,466
$18,216 / Mcfepd
13.6x
$31,658
Multi-Basin Eagle Ford Wolfcamp
Apollo Riverstone
13%
$8,664
$82,151 / Boepd
4.9x
$20,001(3)
Jan-14
Permian Wolfcamp Wolfberry
NGP
38%
$1,390
$195,013 / Boepd
9.2x
$42,978
Jan-14
Appalachia Marcellus Utica
NGP
127%
$2,536
$12,633 / Mcfepd
12.3x
$32,016
$28,565
Source: Company filings, Investor Presentations, RBC Estimates, FactSet as of February 28, 2014 market close. (1) EV / Net Acre calculated by allocating PDP PV-10 for production value; Jones production value assumes $40,000 / Boepd; Rice production value assumes $2,000 / Mcfepd. (2) Pro forma January 24, 2014 announced acquisition. (3) EP Energy $ / Acre calculated only using Eagle Ford and Wolfcamp acreage.
U.S. Onshore Demand Over Past 12 Months Current Themes ~$75 B and 250+ teams
$14.7
Fueled by high yield market
$11.0
Mature, conventional assets with low declines Demand limited to “core-of-core”
Operationally challenged, need team to come with asset ‘Brand’ operator in ‘Big 3’ play
8
$4.9
$2.4
Devon / GeoSouthern $6.0 B
Private Equity (conv. oil / gas)
Mid / Small Caps (oil resource plays)
Private Equity buying has increased
MLPs / Trusts (conv. oil / gas)
Large Cap (oil resource plays) International buying has decreased
$1.8
$0.8
Internationals
International JVs (oil resource plays)
Source: RBC Richardson Barr internal database. Note: Includes select U.S. onshore asset transactions of $20+ million since February 28, 2013. Chart does not show $1.9 B of Private Co. acquisitions, $0.4 B of Non-Traditional acquisitions, nor $0.1 B of Major acquisitions. Does not include corporate acquisitions.
Financial Buyers Increasingly Active In E&P Space Private Equity Sponsor Overview – Number of Management Teams 42
39
$75+ Billion 40+ sponsors 250+ portfolio teams
35
17
17 11
1
2
3
4
$60 Billion in Acquisitions since 2010 100% of IPO Market
5
8
6
Yorktown
8
7
8
7
9
7
10
6
5
6
5
4
4
3
3
11
12
13
14
Goldman 15 Sachs PE
16
17
18
E&P MLPs Growing Rapidly Via Acquisitions – $41 B In Aggregate EV
$3.9
$2.5
$2.4
$2.4
$2.4
$2.1
$0.8
$0.7
$0.6
$0.3
$4.2
$23 Billion in Acquisitions since 2010
$19.1
$41
MLP
1
2
3
4
5
6
7
8
9
10
11
12
13 Total
Acquisitions $ MM (2010-TD)
$10,906
$2,103
$2,946
$1,594
$931
$1,393
$758
$1,284
$514
$126
$52
$39
$22,646
9
Source: RBC Richardson Barr; Factset market data as of February 28, 2014 Note: Certain figures above may be estimates
Financial Buyers Are Dominating The Mid-Continent Le Norman Conf. February 2014 $1.4 Billion $12,600 / Mcfepd
December 2013 $336 Million $20,600 / Acre
December 2012 $655 Million $4,100 / Acre
June 2013 $850 Million $114,865 / Boepd
February 2014 $680 Million $2,200 / Acre
June 2012 $445 Million $5,855 / Mcfepd
October 2013 $1 Billion $5,500 / Acre
% Financial Buyers
FourPoint
2012: 69% May 2013 $438 Million $7,300 / Mcfepd
10
Various
2013: 77% 2014 YTD: 100%
January 2014 $268 Million $7,500 / Mcfepd
November 2013 $343 Million $7,800 / Mcfepd
“Core of Core” Valuations Are Competitive With Public And IPO Market Bakken Index: $19,400 / Acre
$25,300 / Acre
Conf
$17,000 / Acre $45,500 / Acre $163,000 / Boepd
$12,000 / Acre Mid-Con Index:
$15,000 / Acre
Appalachia Index:
$6,900 / Acre Conf
$32,200 / Acre
$13,700 / Acre $20,400 / Acre
Permian Index: $25,600 / Acre $30,100 / Acre Conf.
$18,200 / Acre
$22,000 / Acre $46,600 / Acre $39,900 / Acre Conf
$26,000 / Acre 11
Eagle Ford Index: $27,800 / Acre
$54,300 / Acre $34,500 / Acre
Note: RBC estimates. Index metrics as of February 28, 2014. Net acreage value calculated after allocating for associated net production Permian Index includes: PXD, CXO, LPI, AREX, FANG, ATHL; Bakken Index includes: CLR, OAS, KOG, NOG; Eagle Ford Index Includes: ROSE, SN, PVA, CRK; Appalachia Index Includes: AR, GPOR, RICE, REXX, COG, RRC; Mid-Con Index Includes: MPO, SD, JONE
“Core-of-Core” Acreage Represents Less Than 30% of Resource Plays Non-Core Transactions Core Resource Transactions $60
Transaction Volume ($B)
$56
$55
$42 $33 $49 $44 $28
$22
Core Deals 12
$8 $7 $14
$10
$10
2010
2011
2012
2013
15
10
11
13
$5
Note: RBC estimates. Net acreage value calculated after allocating for associated net production Permian Index includes: PXD, CXO, LPI, AREX, FANG, ATHL; Bakken Index includes: CLR, OAS, KOG, NOG; Eagle Ford Index Includes: ROSE, SN, PVA, CRK; Utica Index Includes: AR, GPOR, PDCE, REXX
2014 YTD 2014
4
RBC’s Expectations For 2014 RBC expects a more robust 2014 ($50 - $60 B) following a quiet 2013 ($42 B) − Increased conventional selling by undercapitalized Publics focused on resource development Private Equity will continue to be very active in 2014 with $75 B in capital availability − 250+ upstream management teams with top tier teams receiving increased equity commitments − Financial buyers (PE & MLP) will continue to be dominate buyers of conventional assets Capital markets should remain open − High yield (and equity follow-ons) to remain an important source of funds for acquisitions − Sponsor-backed, single basin-focused IPOs will continue on the backs of recent success; window can close quickly Permian, Bakken and Eagle Ford will maintain market share of A&D Publics to continue selling out of Mid-Con; Financial Buyers to continue buying up Mid-Con Premiums commanded for “core-of-core” positions − Fringe, non-de-risked assets struggle to trade Likely uptick in corp M&A as land grab wanes and Mid / Small Caps continue to outspend cash flow 13
Select Recent RBC Richardson Barr Transactions
has divested its offshore Gulf of Mexico and onshore Gulf Coast properties and related assets to
has divested certain oil and gas properties and undeveloped acreage located in the Permian Basin to two Confidential Buyers
has divested certain oil and gas properties and related assets located in the Anadarko Basin to
has divested certain oil and gas properties and related assets located in the Uinta Basin to
RBC Richardson Barr served as financial advisor to SandRidge Energy, Inc.
RBC Richardson Barr served as financial advisor to Merit Energy Company, LLC
RBC Richardson Barr served as financial advisor to Primary Natural Resources III, LLC
RBC Richardson Barr served as financial advisor to Axia Energy, LLC
$750,000,000
Confidential
$336,000,000
$652,000,000
February 2014
December 2013
December 2013
December 2013
The Oxford Oil Company, LLC has divested certain conventional oil and gas properties and related assets in the Permian Basin to
has divested certain producing gas properties and related assets in the Black Warrior Basin to a Confidential Buyer
has been acquired primarily for its holdings prospective for the Utica Shale by
has divested its position in the Permian Basin to
RBC Richardson Barr served as financial advisor to BC Operating, Inc., Crown Oil Partners IV, LP & Crump Energy Partners, LLC
RBC Richardson Barr served as financial advisor to Energen Corporation
RBC Richardson Barr served as financial advisor to Salt Run Capital, Inc., owner of The Oxford Oil Company, LLC
RBC Richardson Barr served as financial advisor to SandRidge Energy, Inc.
$525,000,000
$160,000,000
$650,000,000
$2,600,000,000
November 2013
October 2013
June 2013
February 2013
RBC Richardson Barr Has Advised On ~$20 Billion during the last 18 months 14
Selected 2013 RBC Richardson Barr Permian Transactions
Disclaimer This presentation was prepared exclusively for the benefit of and internal use by the recipient for the purpose of considering the transaction or transactions contemplated herein. This presentation is confidential and proprietary to RBC Capital Markets, LLC (“RBC CM”) and may not be disclosed, reproduced, distributed or used for any other purpose by the recipient without RBCCM’s express written consent. By acceptance of these materials, and notwithstanding any other express or implied agreement, arrangement, or understanding to the contrary, RBC CM, its affiliates and the recipient agree that the recipient (and its employees, representatives, and other agents) may disclose to any and all persons, without limitation of any kind from the commencement of discussions, the tax treatment, structure or strategy of the transaction and any fact that may be relevant to understanding such treatment, structure or strategy, and all materials of any kind (including opinions or other tax analyses) that are provided to the recipient relating to such tax treatment, structure, or strategy. The information and any analyses contained in this presentation are taken from, or based upon, information obtained from the recipient or from publicly available sources, the completeness and accuracy of which has not been independently verified, and cannot be assured by RBC CM. The information and any analyses in these materials reflect prevailing conditions and RBC CM’s views as of this date, all of which are subject to change. To the extent projections and financial analyses are set forth herein, they may be based on estimated financial performance prepared by or in consultation with the recipient and are intended only to suggest reasonable ranges of results. The printed presentation is incomplete without reference to the oral presentation or other written materials that supplement it. IRS Circular 230 Disclosure: RBC CM and its affiliates do not provide tax advice and nothing contained herein should be construed as tax advice. Any discussion of U.S. tax matters contained herein (including any attachments) (i) was not intended or written to be used, and cannot be used, by you for the purpose of avoiding tax penalties; and (ii) was written in connection with the promotion or marketing of the matters addressed herein. Accordingly, you should seek advice based upon your particular circumstances from an independent tax advisor.
Craig Lande [email protected] 713-585-3335 www.rbcrichardsonbarr.com
Notable U.S. E&P Themes Oil prices steady at ~$95 – $100 / Bbl level for front months
Commodity Prices Trending Differently
– However, backwardation results in below $80 / Bbl five years out Gas prices have rallied due to cold winter – Back of the curve remains below $4.50 / MMBtu Buyer price decks now distinctive
Capital Markets Wide Open / JVs Flatlined
Valuation Arbitrage: Shift from A&D to IPO
Private Equity, MLPs and Mid / Small Caps are Making the Market
High yield remains attractive and important source of funds for acquisitions E&P equity markets very strong; IPO window open JV market muted; appetite only for core and oily opportunities Six IPOs since July 2013: Jones, Athlon, Antero, EP, RSP, Rice ~ 4 companies actively contemplating IPO in next 12-18 months Private Equity continues to shape A&D landscape MLPs continue to aggressively pursue mature, conventional assets – Financial Buyers acquired ~80% of Mid-Con assets over LTM Mid / Small Caps aggressively pursuing transformative deals due to HY Majors and Large Caps sellers of assets to re-position portfolios
Majors and Large Caps: “Shrink to Grow”
– Trying to mitigate massive valuation disparity (multi-basin vs focused) – Mid-Con has been primary area for Public selling Focused on U.S. onshore, particularly Big 3 oil plays
1
Seminal Events And Transactions Of 2013 And 2014 Permian
IPO
IPO
Confidential
MLP
IPO
February Multi-Basin $4.9 Billion
Strategic
August Initial Public Offering $363.2 Million
MLP
Private Equity
2
IPO
January Initial Public Offering $664 Million
July GOM Shelf $3.8 Billion
Private Equity
Private Equity
July Initial Public Offering $187.5 Million
Private Equity
February Permian – CBP $2.6 Billion
December Wolfcamp $950 Million
February Hugoton $1.4 Billion
Strategic IPO
June Multi-Basin $800 Million
January Initial Public Offering $166 Million
October Initial Public Offering $1.6 Billion
August Permian “sizzle” Index +20% during week
June Postle Field $850 Million
MLP
Private Equity
October Anadarko Basin $1.0 Billion
Strategic
September Bakken $1.4 Billion
November Eagle Ford $6.0 Billion
Strategic
October Uinta $652 Million
Source: RBC Richardson Barr database. Certain figures above are RBC estimates. Note: Acreage values and implied $/acre metrics calculated after allocating for associated net production. Note: Large caps include: COP, OXY, APC, EOG, APA, MRO, DVN, NBL, ECA; Small caps include: PDC, FANG, FST, CRZO, MPO, BCEI, MHR, SN, SFY, REXX, REN, CRK, CWEI, AREX, JONE; MLPs include: LINN, VNR, EVEP, BBEP, LGCY, QRE, MEMP, PSE, LRE, MCEP; Permian includes: PXD, CXO, LPI, FANG, ATHL, EGN, CWEI, AREX.
January Utica $924 Million
IPO
January Initial Public Offering $1.1 Billion
2013 U.S. A&D Market Was “Quiet” U.S. A&D Asset Supply
Resource Play Conventional
Negatives
$60 $60 $55
KKR / Samson $7.2 B
$32 $43
$50 - $60
$33
$28
More failed deals – buyers increasingly discerning, focused on ‘core-of-core’ assets Lack of high profile conventional corporate acquisition in 2013 – Samson ($7.2 B) in 2011 and El Paso ($7.2 B) in 2012
$23
$27 $8 $7
$14
$13 2010 3
$42
Apollo / El Paso $7.2 B
Hot IPO Market resulting in companies with aggregate EV of ~$28.6 B going public rather than transacting in private market Fewer JV’s, < $3 B in 2013 vs. $10 B avg. in 2010 – 2012, now requires ‘brand’ operator in ‘Big 3’ play
RBC Estimate
Transaction Volume ($B)
$56
Impactful Recent Trends
2011
2012
2013
$5 $3 2014 YTD 2014
Source: RBC Richardson Barr internal database. Includes only U.S. onshore transactions of $20+ million since January 1, 2010.
Positives Majors and Large Caps “shrink to grow”, selling assets to reposition portfolio and mitigate valuation disparity
Mid-Continent Asset Supply Increasing
Apache / Cordillera $2.8 B
Sinopec / CHK JV $1.0 B
$8.9
4
$6.6 Miss Lime
$5.6 $5.6
$4.9 $2.4
$3.4
2010
2011
$4 - $6 RBC Estimate
Transaction Volume ($B)
Miss Lime
$2.4
2012
Source: RBC Richardson Barr internal database. Includes only U.S. onshore transactions of $20+ million since January 1, 2010.
2013
2014 YTD
Commodity Price Environment Near-Term Oil In Industry Comfort Zone, Steep Backwardation In 5-Year Strip $130
Volatile Near-Term Gas Driven By Harsh Winter, Conservative Forward Strip $7.00
Historical WTI Front Month NYMEX Strip
NYMEX Strip
$120
Buyers holding price decks flat after 2 years to stay competitive in auctions
$100
$90
$80
Buyer Price Deck: $85 – $90 / Bbl
Break-Even: ~$80 / Bbl
$70
$60 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18 Jan 19
5
Source: Bloomberg data as of February 28, 2014. *Illustrative barrel assumes 42% Ethane, 28% Propane, 8% Butane, 9% Iso-Butane, 13% Natural Gasoline.
$6.00
Natural Gas Price ($ / MMBtu)
Oil Price ($ / Bbl)
$110
Historical HH Front Month
$5.00
Break-Even: ~$4.50 / MMBtu
$4.00
$3.00
$2.00
$1.00 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18 Jan 19
Liquid Debt & Equity Capital Environment Equity markets currently wide open but window can close quickly
E&P Equity Capital Markets Activity Since 2011 Follow-On Of f erings C-Corp IPOs $4.4
$4.0 $3.7 $3.3 $ in Billions
$2.9 $0.7
$2.2 $1.9 $3.7
$1.3
$1.5
$0.6
1Q 11
2Q 11
$0.2 3Q 11
$1.9
$4.4
$1.1
$1.0
$2.5
$1.6
$1.4 $1.8
$0.8 $1.0
$0.7
4Q 11
$0.4
1Q 12
2Q 12
3Q 12
4Q 12
$2.2
$0.6
$0.3
1Q 13
2Q 13
E&P Debt Capital Markets Activity Since 2011 High Yield
Quarterly Avg. $2.3 B
$3.1
$0.7
$ in Billions
$2.2
$2.5
3Q 13
4Q 13
1Q 14 To-Date
High Yield market remains strong despite rise in interest rates
$10.9 $8.6
$7.1
$7.1
$7.2 $6.3
$4.6
$4.0
Quarterly Avg. $6.0 B
$5.4
$5.4
$4.3
$1.7 $0.9 1Q 11 6
2Q 11
Source: Dealogic.
3Q 11
4Q 11
1Q 12
2Q 12
3Q 12
4Q 12
1Q 13
2Q 13
3Q 13
4Q 13
1Q 14 To-Date
The IPO Market Has Rewarded Focused Companies
Company
Total
7
Offering Date
Focus Area(s)
Private Equity Sponsor
2014E Production Growth (YOY)
EV at IPO ($ MM)
Current Valuation
Jul-13
Mid-Continent Cleveland Woodford
Metalmark
42%
Aug-13
Permian Wolfberry Wolfcamp
Apollo
Oct-13
Appalachia Marcellus Utica
Jan-14
EV / 2014E Production
EV / 2014E EBITDA
EV / Net Acre(1)
$1,619
$77,021 / Boepd
6.2x
$9,132
66%
$1,890
$169,738 / Boepd
9.2x
$26,057(2)
Warburg Yorktown
86%
$12,466
$18,216 / Mcfepd
13.6x
$31,658
Multi-Basin Eagle Ford Wolfcamp
Apollo Riverstone
13%
$8,664
$82,151 / Boepd
4.9x
$20,001(3)
Jan-14
Permian Wolfcamp Wolfberry
NGP
38%
$1,390
$195,013 / Boepd
9.2x
$42,978
Jan-14
Appalachia Marcellus Utica
NGP
127%
$2,536
$12,633 / Mcfepd
12.3x
$32,016
$28,565
Source: Company filings, Investor Presentations, RBC Estimates, FactSet as of February 28, 2014 market close. (1) EV / Net Acre calculated by allocating PDP PV-10 for production value; Jones production value assumes $40,000 / Boepd; Rice production value assumes $2,000 / Mcfepd. (2) Pro forma January 24, 2014 announced acquisition. (3) EP Energy $ / Acre calculated only using Eagle Ford and Wolfcamp acreage.
U.S. Onshore Demand Over Past 12 Months Current Themes ~$75 B and 250+ teams
$14.7
Fueled by high yield market
$11.0
Mature, conventional assets with low declines Demand limited to “core-of-core”
Operationally challenged, need team to come with asset ‘Brand’ operator in ‘Big 3’ play
8
$4.9
$2.4
Devon / GeoSouthern $6.0 B
Private Equity (conv. oil / gas)
Mid / Small Caps (oil resource plays)
Private Equity buying has increased
MLPs / Trusts (conv. oil / gas)
Large Cap (oil resource plays) International buying has decreased
$1.8
$0.8
Internationals
International JVs (oil resource plays)
Source: RBC Richardson Barr internal database. Note: Includes select U.S. onshore asset transactions of $20+ million since February 28, 2013. Chart does not show $1.9 B of Private Co. acquisitions, $0.4 B of Non-Traditional acquisitions, nor $0.1 B of Major acquisitions. Does not include corporate acquisitions.
Financial Buyers Increasingly Active In E&P Space Private Equity Sponsor Overview – Number of Management Teams 42
39
$75+ Billion 40+ sponsors 250+ portfolio teams
35
17
17 11
1
2
3
4
$60 Billion in Acquisitions since 2010 100% of IPO Market
5
8
6
Yorktown
8
7
8
7
9
7
10
6
5
6
5
4
4
3
3
11
12
13
14
Goldman 15 Sachs PE
16
17
18
E&P MLPs Growing Rapidly Via Acquisitions – $41 B In Aggregate EV
$3.9
$2.5
$2.4
$2.4
$2.4
$2.1
$0.8
$0.7
$0.6
$0.3
$4.2
$23 Billion in Acquisitions since 2010
$19.1
$41
MLP
1
2
3
4
5
6
7
8
9
10
11
12
13 Total
Acquisitions $ MM (2010-TD)
$10,906
$2,103
$2,946
$1,594
$931
$1,393
$758
$1,284
$514
$126
$52
$39
$22,646
9
Source: RBC Richardson Barr; Factset market data as of February 28, 2014 Note: Certain figures above may be estimates
Financial Buyers Are Dominating The Mid-Continent Le Norman Conf. February 2014 $1.4 Billion $12,600 / Mcfepd
December 2013 $336 Million $20,600 / Acre
December 2012 $655 Million $4,100 / Acre
June 2013 $850 Million $114,865 / Boepd
February 2014 $680 Million $2,200 / Acre
June 2012 $445 Million $5,855 / Mcfepd
October 2013 $1 Billion $5,500 / Acre
% Financial Buyers
FourPoint
2012: 69% May 2013 $438 Million $7,300 / Mcfepd
10
Various
2013: 77% 2014 YTD: 100%
January 2014 $268 Million $7,500 / Mcfepd
November 2013 $343 Million $7,800 / Mcfepd
“Core of Core” Valuations Are Competitive With Public And IPO Market Bakken Index: $19,400 / Acre
$25,300 / Acre
Conf
$17,000 / Acre $45,500 / Acre $163,000 / Boepd
$12,000 / Acre Mid-Con Index:
$15,000 / Acre
Appalachia Index:
$6,900 / Acre Conf
$32,200 / Acre
$13,700 / Acre $20,400 / Acre
Permian Index: $25,600 / Acre $30,100 / Acre Conf.
$18,200 / Acre
$22,000 / Acre $46,600 / Acre $39,900 / Acre Conf
$26,000 / Acre 11
Eagle Ford Index: $27,800 / Acre
$54,300 / Acre $34,500 / Acre
Note: RBC estimates. Index metrics as of February 28, 2014. Net acreage value calculated after allocating for associated net production Permian Index includes: PXD, CXO, LPI, AREX, FANG, ATHL; Bakken Index includes: CLR, OAS, KOG, NOG; Eagle Ford Index Includes: ROSE, SN, PVA, CRK; Appalachia Index Includes: AR, GPOR, RICE, REXX, COG, RRC; Mid-Con Index Includes: MPO, SD, JONE
“Core-of-Core” Acreage Represents Less Than 30% of Resource Plays Non-Core Transactions Core Resource Transactions $60
Transaction Volume ($B)
$56
$55
$42 $33 $49 $44 $28
$22
Core Deals 12
$8 $7 $14
$10
$10
2010
2011
2012
2013
15
10
11
13
$5
Note: RBC estimates. Net acreage value calculated after allocating for associated net production Permian Index includes: PXD, CXO, LPI, AREX, FANG, ATHL; Bakken Index includes: CLR, OAS, KOG, NOG; Eagle Ford Index Includes: ROSE, SN, PVA, CRK; Utica Index Includes: AR, GPOR, PDCE, REXX
2014 YTD 2014
4
RBC’s Expectations For 2014 RBC expects a more robust 2014 ($50 - $60 B) following a quiet 2013 ($42 B) − Increased conventional selling by undercapitalized Publics focused on resource development Private Equity will continue to be very active in 2014 with $75 B in capital availability − 250+ upstream management teams with top tier teams receiving increased equity commitments − Financial buyers (PE & MLP) will continue to be dominate buyers of conventional assets Capital markets should remain open − High yield (and equity follow-ons) to remain an important source of funds for acquisitions − Sponsor-backed, single basin-focused IPOs will continue on the backs of recent success; window can close quickly Permian, Bakken and Eagle Ford will maintain market share of A&D Publics to continue selling out of Mid-Con; Financial Buyers to continue buying up Mid-Con Premiums commanded for “core-of-core” positions − Fringe, non-de-risked assets struggle to trade Likely uptick in corp M&A as land grab wanes and Mid / Small Caps continue to outspend cash flow 13
Select Recent RBC Richardson Barr Transactions
has divested its offshore Gulf of Mexico and onshore Gulf Coast properties and related assets to
has divested certain oil and gas properties and undeveloped acreage located in the Permian Basin to two Confidential Buyers
has divested certain oil and gas properties and related assets located in the Anadarko Basin to
has divested certain oil and gas properties and related assets located in the Uinta Basin to
RBC Richardson Barr served as financial advisor to SandRidge Energy, Inc.
RBC Richardson Barr served as financial advisor to Merit Energy Company, LLC
RBC Richardson Barr served as financial advisor to Primary Natural Resources III, LLC
RBC Richardson Barr served as financial advisor to Axia Energy, LLC
$750,000,000
Confidential
$336,000,000
$652,000,000
February 2014
December 2013
December 2013
December 2013
The Oxford Oil Company, LLC has divested certain conventional oil and gas properties and related assets in the Permian Basin to
has divested certain producing gas properties and related assets in the Black Warrior Basin to a Confidential Buyer
has been acquired primarily for its holdings prospective for the Utica Shale by
has divested its position in the Permian Basin to
RBC Richardson Barr served as financial advisor to BC Operating, Inc., Crown Oil Partners IV, LP & Crump Energy Partners, LLC
RBC Richardson Barr served as financial advisor to Energen Corporation
RBC Richardson Barr served as financial advisor to Salt Run Capital, Inc., owner of The Oxford Oil Company, LLC
RBC Richardson Barr served as financial advisor to SandRidge Energy, Inc.
$525,000,000
$160,000,000
$650,000,000
$2,600,000,000
November 2013
October 2013
June 2013
February 2013
RBC Richardson Barr Has Advised On ~$20 Billion during the last 18 months 14
Selected 2013 RBC Richardson Barr Permian Transactions
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