Private Equity Trends in Oil & Gas
The Growing Role of Private Equity in Oil and Gas Financings and M&A 2014 DUG Mid-Con Conference
Guest Speakers
Shaun Finnie – Senior Managing Director, Evercore Partners
Craig Borque – Senior Analyst, Evercore Partners
1
Topics of Discussion
U.S. oil and gas M&A activity
Increasing role of private equity in the U.S. oil and gas industry
IPO as an exit strategy for private equity backed E&P companies
Diversification of sources of capital utilized by private equity firms – Venture capital/growth equity – Non-operated working interest partnerships (development capital) – Buy-outs
M&A activity specifically in the MidContinent region 2
U.S. Oil and Gas M&A Activity in 2013 Lagged Previous Years Number of Transactions $100.0
156 4
160
140
29
120
132 6
128 1 35
100
123
$70.0 $60.0 $50.0 $40.0 $30.0
81
78
72
57
20
49
$80.0
114 5
55
$86
$90.0
56
92
40
142 6
129 2
54
84 4 23
80 60
Total Transaction Value ($ billions)
$20.0
53
$10.0
$61
$17
2007
2008 2009 2010 Conventional Resource Play
2011 2012 Corporate
$27 2007
2013
Average Transaction Size (Excl. Corporate) ($MM) $800 $595
$578
$566
$300
$7 $9
$20
2008 2009 (1) 2010 Conventional Resource Play
$28
$19
$225
$286
$279
$216 $158
$200
$319
$237
$290 Resource Play 56 Transactions 49%
$150
$100
Conventional 53 Transactions 46%
$0 2006
2007
2008
2009
Conventional
2010
2011
2012
2013
Resource Play
(1) Includes the ExxonMobil/XTO transaction of $40.5 billion Note: Only includes transactions with disclosed value greater than $10 million Source: IHS Herolds
Total Volume: $47 Billion 3
$11
$21 $26
2011 2012 Corporate
$378 $320
$47 $37
$31
Corporate 5 Transactions 4%
$500 $400
$15
$23
$20
Transactions: 114
$674
$600
$46
$66
2013 Transactions Breakdown
$735
$700
$42 $2 $26
$0.0
0
$11
$50 $6
$62
$15 2013
Buyers and Sellers in U.S. Oil and Gas in 2013
MLPs and PE buyers accounted for more than 50% of U.S. oil and gas 2013 transaction volume Buyer
Seller
Breakdown by Class (Volume)
Majors 0%
PE/Private 22%
Public Large Caps 22%
PE/Private 31%
Public Large Caps 30%
Public Small Caps 10%
Public Mid Caps 28%
Public Mid Caps 12% MLPs 32%
Internationals 1% Public Small Caps 7% Internationals 5%
$44.6 billion (1)
$44.5 billion (1)
Breakdown by Class (Number of Transactions)
Majors 1% Public Large Caps 8% PE/Private 27%
PE/Private 34%
Public Mid Caps 16%
Public Large Caps 24%
Public Mid Caps 15%
Public Small Caps 21% MLPs 22%
Internationals 2%
Public Small Caps 25%
Internationals 5%
96 Transactions (1)
92 Transactions (1)
(1) Includes disclosed transaction values only Source: IHS Herolds Note: Includes transactions with disclosed value greater than $10 million. Excludes public corporate transactions.
4
Top 25 Largest U.S. Upstream M&A Transactions of 2013 ($ in millions) Date
Buyers
Sellers
11/20/13 02/21/13 07/18/13 01/30/13 09/05/13 01/15/13 02/25/13 10/03/13 12/09/13 03/05/13 06/24/13 03/15/13 06/10/13 07/03/13 06/03/13 10/21/13 04/04/13 05/08/13 07/15/13 12/23/13 10/25/13 09/12/13 12/17/13 06/17/13 03/29/13
Devon Energy Corp. Linn Energy, LLC / LinnCo, LLC Fieldwood Energy, LLC / Riverstone Holdings LLC Sinochem Corporation Oasis Petroleum Inc. Denbury Resources Incorporated Sinopec International Petroleum E&P Templar QEP Resources Inc. Undisclosed BreitBurn Energy Partners L.P. Rosetta Resources, Inc. Atlas Energy, L.P. / Atlas Resource Partners, L.P. EXCO Resources, Inc. Kodiak Oil & Gas Corp. Ultra Petroleum Midstates Petroleum Company Pioneer Natural Resources Company Memorial Production Partners LP Vanguard Natural Resources Caelus Energy LLC Linn Energy, LLC / LinnCo, LLC Chief Oil & Gas / Enerplus / Tug Hill WildHorse Resources LLC / Undisclosed Tokyo Gas Company Ltd
GeoSouthern Energy Berry Petroleum Company Apache Corporation Pioneer Natural Resources Company Zenergy Inc. ConocoPhillips Chesapeake Energy Corporation Forest Oil Corporation EnerVest Anadarko Petroleum Corporation Whiting Petroleum Corporation Comstock Resources Incorporated EP Energy, LLC Chesapeake Energy Corporation Liberty Energy LLC Axia Energy, LLC Panther Energy Company / Linn Energy, LLC Pioneer Southwest Energy Partners LP Memorial Resource Development LLC / Natural Gas Partners Anadarko Petroleum Corporation Pioneer Natural Resources Company BC Operating Chesapeake Energy Corporation EP Energy, LLC Quicksilver Resources Incorporated
Value $6,000 4,462 3,750 1,700 1,450 1,050 1,020 1,000 950 860 860 768 733 680 660 650 620 607 606 581 550 525 500 500 485
2013 Top 25 Upstream M&A Transactions Total Transaction Value Average Transaction Size Source: IHS Herolds, Bloomberg
Denotes transaction involving private equity 5
$31,567 1,263
Recent E&P IPO Market
Private companies with strong growth profiles in liquids-rich basins or the Marcellus, are increasingly exploring an IPO as an alternative to a strategic sale – Recent E&P IPOs include:
Pricing Date 01/25/14 01/17/14 01/17/14 10/10/13 08/02/13 07/24/13 10/12/12 04/20/12 02/02/12 12/15/11 12/15/11 12/14/11 05/26/11 05/11/11 06/17/10
Company Rice Energy Inc. RSP Permian, Inc. EP Energy Corporation Antero Resources Athlon Energy Inc Jones Energy Inc Diamondback Energy Inc Midstates Petroleum Company Matador Resources Company Laredo Petroleum Holdings Inc Bonanza Creek Eneryg Inc Sanchez Energy Corporation Lone Pine Resources Inc Kosmos Energy Ltd. Oasis Petroleum Inc
Ticker RICE RSPP EPE AR ATHL JONE FANG MPO MTDR LPI BCEI SN LPR KOS OAS
Initial Range Offer Price $19.00 - $21.00 $21.00 19.00 - 21.00 19.50 23.00 - 27.00 20.00 38.00 - 42.00 44.00 18.00 - 20.00 20.00 17.00 - 19.00 15.00 17.00 - 19.00 17.50 16.00 - 18.00 13.00 14.00 - 16.00 12.00 18.00 - 20.00 17.00 20.00 - 22.00 17.00 24.00 - 26.00 22.00 18.00 - 20.00 13.00 16.00 - 18.00 18.00 13.00 - 15.00 14.00
1 Day 104.3% 103.3% 90.4% 118.2% 137.8% 92.2% 100.0% 115.4% 97.9% 106.5% 80.1% 83.0% 96.5% 101.3% 106.3%
% Performance Since IPO 30 Days 6 Months 1 Year
121.6% 153.7% 100.1% 98.6% 91.9% 98.6% 130.4% 96.0% 82.3% 83.8% 99.1% 122.9%
Denotes private equity-backed companies
6
152.2% 56.2% 83.8% 112.5% 89.5% 89.3% 51.5% 75.8% 194.8%
255.4% 43.6% 65.0% 104.6% 153.9% 81.8% 25.5% 61.1% 187.5%
Highest 104.3% 107.2% 93.5% 144.2% 169.6% 118.1% 315.1% 125.8% 197.7% 197.2% 332.0% 136.8% 98.8% 106.9% 405.1%
Diversification of Capital Utilized by Private Equity Firms
In today’s market, private equity investments in the oil and gas space can, in our opinion, be summarized in three different categories:
–
Venture capital/growth equity – Historically, the majority of private equity investments have been by growth equity firms who deploy capital to back management teams generally before those teams have acquired any assets
–
Non-operated working interest partnerships (development capital) – Recently, private equity firms have begun to find increasingly creative ways to provide development capital to oil and gas companies (public and private). These transactions have included participating in non-operated joint ventures with operators that have a proven track record and existing assets
–
Buy-outs – In recent years, buy-out firms have become increasingly active in the oil and gas space pursuing large scale acquisitions (examples include Apollo/Riverstone acquisition of El Paso’s oil and gas assets and KKR/Itochu/NGP/Crestview acquisition of Samson Investment Co.)
Growth Equity
Non-operated Partnerships
Examples of Active Private Equity Players Yorktown Partners
7
Buy-out
Overview of Current Mid-Con M&A Market
For public companies, 2013 was all about focusing on core oil and liquids-rich plays
In 2013, while private equity backed firms and MLPs continued their acquisition trend from 2012, the region witnessed the departure of several public companies looking to dispose of non-core positions in the Granite Wash and other plays
–
The Granite Wash saw significant M&A activity as operators for whom the play represented a non-core position chose to divest their interests to focus on oil-producing growth assets elsewhere
● Forest Oil shed its Mid-Con presence through the sale of its Granite Wash assets to Templar for $1 billion. Forest’s strategy is to focus on its Eagle Ford assets
● Laredo Petroleum and SM Energy also disposed of non-core Granite Wash positions to EnerVest
–
Whiting Petroleum's sale to BreitBurn signaled its strategic focus on its core Eagle Ford and Bakken operations
–
Cabot divested its Marmaton and legacy conventional Mid-Con assets to focus on the Marcellus and Eagle Ford
8
Recent Mid-Con Transactions Greater than $50 Million Date
Buyer
Seller
Trans. Value
Key Asset/ Play
R/P
($MM)
(Years)
$1,400
10.2
Implied Value / Proved Res. Production
($/boe)
13-Feb-14
Undisclosed
Occidental Petroleum
$20.59
$76,364
31-Jan-14
FourPoint Energy
EnerVest, Ltd.
268
--
--
45,943
13-Jan-14
Institutional Investors
Chaparral; Chesapeake
511
15.2
17.46
96,798
19-Dec-13
Peregrine Petroleum
Primary Nat. Res./Quantum
336
--
Anadarko Basin
--
126,792
9-Dec-13
Petroflow
Equal Energy Ltd.
228
8.5
Hunton Oil
10.94
33,928
9-Dec-13
Undisclosed
Cabot
123
--
Mid-Continent
--
49,200
25-Nov-13
Jones
Sabine
195
11.5
13.64
57,353
4-Nov-13
EnerVest
SM Energy
343
--
--
40,353
17-Oct-13
Chaparral
Cabot
160
11.5
Marmaton
19.05
80,000
3-Oct-13
Templar
Forest
1,000
14.2
Granite Wash
11.61
60,000
6-Sep-13
Gastar
Lime Rock Res.
188
14.6
Hunton Oil
16.89
90,231
3-Jul-13
Undisclosed
Gastar Exploration Ltd.
62
19.0
Hunton Oil
--
--
24-Jun-13
BreitBurn
Whiting
860
15.8
Oklahoma Panhandle
19.47
112,539
10-Jun-13
Atlas/Atlas Res.
EP Energy
67
9.5
Coalbed Methane
8.93
30,923
21-May-13
EnerVest
Laredo
438
8.1
Granite Wash
15.37
45,506
4-Apr-13
Midstates
Linn/Panther/Red Willow
620
12.5
Marmaton and Cleveland
16.99
77,500
1-Apr-13
Gastar
Chesapeake
85
9.6
Mid-Continent
29.84
104,380
18-Mar-13
Exxon Mobil/XTO
BNK
148
45.3
Ardmore Woodford
6.10
100,855
25-Feb-13
SINOPEC/Sinopec
Chesapeake
1,020
11.3
Mississippi Lime
14.57
60,000
$424
13.5
$15.82
$71,592
268
11.5
16.13
68,182
Mean Median Source: IHS Herolds; Wood Mackenzie
9
Hugoton
($/boed)
Anadarko Basin Mississippian and Marmaton
Cleveland, Tonkawa and Marmaton Granite Wash
Mid-Con Case Study Midstates Petroleum Acquires Oil-Weighted Properties in the Western Anadarko Basin in Oklahoma and Texas from Panther Energy, Red Willow and Linn Energy for $620 million Overview of Assets
36.5 MMBoe proved reserves (45% oil, 22% NGLs, and 33% gas; 29% proved developed)
138,900 net acres (60% HBP)
> 8,000 Boed of current production (45-50% oil, 20-25% NGLs, and 30-35% gas)
Approximately 280 producing horizontal wells
–
66% average WI and 52% average NRI
–
Approximately 80% operated
Asset Map
Greater than 100 MMBoe resource potential Transaction Highlights for Midstates Petroleum
Acreage position provides exposure to multiple plays
Main drilling targets include Cleveland, Marmaton, Cottage Grove and Tonkawa with upside potential from drilling the deeper lower Pennsylvanian and Mississippian sections
Purchase price of $620 million
Financed through senior notes issued at 9.25% Metric
Lower-risk, predictable, and repeatable with strong rates of return –
Key Terms and Implied Valuation
100% horizontal development program
Greater than 700 locations identified (~33% PUDs) 10
Data
Implied Multiple
Proved Reserves 67% Liquids 29% Proved Developed
36.5 MMBoe
$16.99/Boe
Current Production R/P of 12.5 years
8,000 Boed
$77,500/Boed
Mid-Con Case Study Cabot Oil & Gas Announces Sale of Marmaton, West Texas and Legacy Conventional MidContinent Properties for $311 Million
In 3Q 2013, Cabot Oil & Gas Corporation (“Cabot”) announced three separate sales for aggregate proceeds of approximately $311 million (collectively, the “Transactions”) – On October 17, 2013, Cabot announced that it had entered into two purchase and sale agreements to sell certain proved and unproved oil and gas properties located in the Mid-Continent (the “Marmaton Assets”) and West Texas (the “West Texas Assets”) for aggregate proceeds of approximately $188 million – On December 9, 2013, Cabot announced that it had entered into a purchase and sale agreement to sell legacy conventional oil & gas assets located in the Mid-Continent (the “Legacy Mid-Continent Assets”) for proceeds of approximately $123 million Chaparral Energy Inc. acquired the Marmaton Assets for $160 million – Approximately 66,000 net acres in the Marmaton Play in the Oklahoma and Texas Panhandles – Current production of approximately 2,000 Boed – Proved reserves of approximately 8.4 MMBoe An undisclosed buyer acquired the West Texas Assets for $28 million – Current production of approximately 260 Boed – Proved reserves of approximately 2.3 MMBoe An undisclosed buyer acquired the Legacy Mid-Continent Assets for $123 million – Current production of approximately 15 MMcfed (94% gas) The Transactions are expected to close in 4Q 2013 Evercore acted as exclusive financial advisor to Cabot 11
Asset Map
Implied Valuation Metric Total Value Marmaton Assets ($MM) West Texas Assets ($MM) Legacy Mid-Continent Assets ($MM) Total
Data
Multiple
$160.0 28.0 123.0 $311.0
EV/Proved Reserves Marmaton Assets West Texas Assets Legacy Mid-Continent Assets Total
8.4 MMBoe 2.3 MMBoe NA 10.7 MMBoe
$19.05/Boe $12.28/Boe NA
EV/Production Marmaton Assets (11.5 R/P) West Texas Assets (24.0 R/P) Legacy Mid-Continent Assets Total
2,000 Boed 260 Boed 2,500 Boed 4,760 Boed
$80,000/Boed $107,692/Boed $49,200/Boed
Recently Backed Mid-Con Teams Sponsor
Management Team
Key Management Team Members
Area of Focus
Assets Purchased ToDate
Charlie Stephenson
Conventional and unconventional acquisitions in North America
NA
George Solich
Anadarko and Permian Basins
Ownership stake in EnerVest assets in the West Anadarko Basin of Texas and Oklahoma
Barry Mullennix Roy Grossman
Mid-Con, Permian and Rockies
NA
Dudley C. Viles
Mid-Con and Ark-La-Tex
NA
Steve Antry Mike O’Kelley
Mid-Con
NA
12
Guest Speakers
Shaun Finnie – Senior Managing Director, Evercore Partners
Craig Borque – Senior Analyst, Evercore Partners
1
Topics of Discussion
U.S. oil and gas M&A activity
Increasing role of private equity in the U.S. oil and gas industry
IPO as an exit strategy for private equity backed E&P companies
Diversification of sources of capital utilized by private equity firms – Venture capital/growth equity – Non-operated working interest partnerships (development capital) – Buy-outs
M&A activity specifically in the MidContinent region 2
U.S. Oil and Gas M&A Activity in 2013 Lagged Previous Years Number of Transactions $100.0
156 4
160
140
29
120
132 6
128 1 35
100
123
$70.0 $60.0 $50.0 $40.0 $30.0
81
78
72
57
20
49
$80.0
114 5
55
$86
$90.0
56
92
40
142 6
129 2
54
84 4 23
80 60
Total Transaction Value ($ billions)
$20.0
53
$10.0
$61
$17
2007
2008 2009 2010 Conventional Resource Play
2011 2012 Corporate
$27 2007
2013
Average Transaction Size (Excl. Corporate) ($MM) $800 $595
$578
$566
$300
$7 $9
$20
2008 2009 (1) 2010 Conventional Resource Play
$28
$19
$225
$286
$279
$216 $158
$200
$319
$237
$290 Resource Play 56 Transactions 49%
$150
$100
Conventional 53 Transactions 46%
$0 2006
2007
2008
2009
Conventional
2010
2011
2012
2013
Resource Play
(1) Includes the ExxonMobil/XTO transaction of $40.5 billion Note: Only includes transactions with disclosed value greater than $10 million Source: IHS Herolds
Total Volume: $47 Billion 3
$11
$21 $26
2011 2012 Corporate
$378 $320
$47 $37
$31
Corporate 5 Transactions 4%
$500 $400
$15
$23
$20
Transactions: 114
$674
$600
$46
$66
2013 Transactions Breakdown
$735
$700
$42 $2 $26
$0.0
0
$11
$50 $6
$62
$15 2013
Buyers and Sellers in U.S. Oil and Gas in 2013
MLPs and PE buyers accounted for more than 50% of U.S. oil and gas 2013 transaction volume Buyer
Seller
Breakdown by Class (Volume)
Majors 0%
PE/Private 22%
Public Large Caps 22%
PE/Private 31%
Public Large Caps 30%
Public Small Caps 10%
Public Mid Caps 28%
Public Mid Caps 12% MLPs 32%
Internationals 1% Public Small Caps 7% Internationals 5%
$44.6 billion (1)
$44.5 billion (1)
Breakdown by Class (Number of Transactions)
Majors 1% Public Large Caps 8% PE/Private 27%
PE/Private 34%
Public Mid Caps 16%
Public Large Caps 24%
Public Mid Caps 15%
Public Small Caps 21% MLPs 22%
Internationals 2%
Public Small Caps 25%
Internationals 5%
96 Transactions (1)
92 Transactions (1)
(1) Includes disclosed transaction values only Source: IHS Herolds Note: Includes transactions with disclosed value greater than $10 million. Excludes public corporate transactions.
4
Top 25 Largest U.S. Upstream M&A Transactions of 2013 ($ in millions) Date
Buyers
Sellers
11/20/13 02/21/13 07/18/13 01/30/13 09/05/13 01/15/13 02/25/13 10/03/13 12/09/13 03/05/13 06/24/13 03/15/13 06/10/13 07/03/13 06/03/13 10/21/13 04/04/13 05/08/13 07/15/13 12/23/13 10/25/13 09/12/13 12/17/13 06/17/13 03/29/13
Devon Energy Corp. Linn Energy, LLC / LinnCo, LLC Fieldwood Energy, LLC / Riverstone Holdings LLC Sinochem Corporation Oasis Petroleum Inc. Denbury Resources Incorporated Sinopec International Petroleum E&P Templar QEP Resources Inc. Undisclosed BreitBurn Energy Partners L.P. Rosetta Resources, Inc. Atlas Energy, L.P. / Atlas Resource Partners, L.P. EXCO Resources, Inc. Kodiak Oil & Gas Corp. Ultra Petroleum Midstates Petroleum Company Pioneer Natural Resources Company Memorial Production Partners LP Vanguard Natural Resources Caelus Energy LLC Linn Energy, LLC / LinnCo, LLC Chief Oil & Gas / Enerplus / Tug Hill WildHorse Resources LLC / Undisclosed Tokyo Gas Company Ltd
GeoSouthern Energy Berry Petroleum Company Apache Corporation Pioneer Natural Resources Company Zenergy Inc. ConocoPhillips Chesapeake Energy Corporation Forest Oil Corporation EnerVest Anadarko Petroleum Corporation Whiting Petroleum Corporation Comstock Resources Incorporated EP Energy, LLC Chesapeake Energy Corporation Liberty Energy LLC Axia Energy, LLC Panther Energy Company / Linn Energy, LLC Pioneer Southwest Energy Partners LP Memorial Resource Development LLC / Natural Gas Partners Anadarko Petroleum Corporation Pioneer Natural Resources Company BC Operating Chesapeake Energy Corporation EP Energy, LLC Quicksilver Resources Incorporated
Value $6,000 4,462 3,750 1,700 1,450 1,050 1,020 1,000 950 860 860 768 733 680 660 650 620 607 606 581 550 525 500 500 485
2013 Top 25 Upstream M&A Transactions Total Transaction Value Average Transaction Size Source: IHS Herolds, Bloomberg
Denotes transaction involving private equity 5
$31,567 1,263
Recent E&P IPO Market
Private companies with strong growth profiles in liquids-rich basins or the Marcellus, are increasingly exploring an IPO as an alternative to a strategic sale – Recent E&P IPOs include:
Pricing Date 01/25/14 01/17/14 01/17/14 10/10/13 08/02/13 07/24/13 10/12/12 04/20/12 02/02/12 12/15/11 12/15/11 12/14/11 05/26/11 05/11/11 06/17/10
Company Rice Energy Inc. RSP Permian, Inc. EP Energy Corporation Antero Resources Athlon Energy Inc Jones Energy Inc Diamondback Energy Inc Midstates Petroleum Company Matador Resources Company Laredo Petroleum Holdings Inc Bonanza Creek Eneryg Inc Sanchez Energy Corporation Lone Pine Resources Inc Kosmos Energy Ltd. Oasis Petroleum Inc
Ticker RICE RSPP EPE AR ATHL JONE FANG MPO MTDR LPI BCEI SN LPR KOS OAS
Initial Range Offer Price $19.00 - $21.00 $21.00 19.00 - 21.00 19.50 23.00 - 27.00 20.00 38.00 - 42.00 44.00 18.00 - 20.00 20.00 17.00 - 19.00 15.00 17.00 - 19.00 17.50 16.00 - 18.00 13.00 14.00 - 16.00 12.00 18.00 - 20.00 17.00 20.00 - 22.00 17.00 24.00 - 26.00 22.00 18.00 - 20.00 13.00 16.00 - 18.00 18.00 13.00 - 15.00 14.00
1 Day 104.3% 103.3% 90.4% 118.2% 137.8% 92.2% 100.0% 115.4% 97.9% 106.5% 80.1% 83.0% 96.5% 101.3% 106.3%
% Performance Since IPO 30 Days 6 Months 1 Year
121.6% 153.7% 100.1% 98.6% 91.9% 98.6% 130.4% 96.0% 82.3% 83.8% 99.1% 122.9%
Denotes private equity-backed companies
6
152.2% 56.2% 83.8% 112.5% 89.5% 89.3% 51.5% 75.8% 194.8%
255.4% 43.6% 65.0% 104.6% 153.9% 81.8% 25.5% 61.1% 187.5%
Highest 104.3% 107.2% 93.5% 144.2% 169.6% 118.1% 315.1% 125.8% 197.7% 197.2% 332.0% 136.8% 98.8% 106.9% 405.1%
Diversification of Capital Utilized by Private Equity Firms
In today’s market, private equity investments in the oil and gas space can, in our opinion, be summarized in three different categories:
–
Venture capital/growth equity – Historically, the majority of private equity investments have been by growth equity firms who deploy capital to back management teams generally before those teams have acquired any assets
–
Non-operated working interest partnerships (development capital) – Recently, private equity firms have begun to find increasingly creative ways to provide development capital to oil and gas companies (public and private). These transactions have included participating in non-operated joint ventures with operators that have a proven track record and existing assets
–
Buy-outs – In recent years, buy-out firms have become increasingly active in the oil and gas space pursuing large scale acquisitions (examples include Apollo/Riverstone acquisition of El Paso’s oil and gas assets and KKR/Itochu/NGP/Crestview acquisition of Samson Investment Co.)
Growth Equity
Non-operated Partnerships
Examples of Active Private Equity Players Yorktown Partners
7
Buy-out
Overview of Current Mid-Con M&A Market
For public companies, 2013 was all about focusing on core oil and liquids-rich plays
In 2013, while private equity backed firms and MLPs continued their acquisition trend from 2012, the region witnessed the departure of several public companies looking to dispose of non-core positions in the Granite Wash and other plays
–
The Granite Wash saw significant M&A activity as operators for whom the play represented a non-core position chose to divest their interests to focus on oil-producing growth assets elsewhere
● Forest Oil shed its Mid-Con presence through the sale of its Granite Wash assets to Templar for $1 billion. Forest’s strategy is to focus on its Eagle Ford assets
● Laredo Petroleum and SM Energy also disposed of non-core Granite Wash positions to EnerVest
–
Whiting Petroleum's sale to BreitBurn signaled its strategic focus on its core Eagle Ford and Bakken operations
–
Cabot divested its Marmaton and legacy conventional Mid-Con assets to focus on the Marcellus and Eagle Ford
8
Recent Mid-Con Transactions Greater than $50 Million Date
Buyer
Seller
Trans. Value
Key Asset/ Play
R/P
($MM)
(Years)
$1,400
10.2
Implied Value / Proved Res. Production
($/boe)
13-Feb-14
Undisclosed
Occidental Petroleum
$20.59
$76,364
31-Jan-14
FourPoint Energy
EnerVest, Ltd.
268
--
--
45,943
13-Jan-14
Institutional Investors
Chaparral; Chesapeake
511
15.2
17.46
96,798
19-Dec-13
Peregrine Petroleum
Primary Nat. Res./Quantum
336
--
Anadarko Basin
--
126,792
9-Dec-13
Petroflow
Equal Energy Ltd.
228
8.5
Hunton Oil
10.94
33,928
9-Dec-13
Undisclosed
Cabot
123
--
Mid-Continent
--
49,200
25-Nov-13
Jones
Sabine
195
11.5
13.64
57,353
4-Nov-13
EnerVest
SM Energy
343
--
--
40,353
17-Oct-13
Chaparral
Cabot
160
11.5
Marmaton
19.05
80,000
3-Oct-13
Templar
Forest
1,000
14.2
Granite Wash
11.61
60,000
6-Sep-13
Gastar
Lime Rock Res.
188
14.6
Hunton Oil
16.89
90,231
3-Jul-13
Undisclosed
Gastar Exploration Ltd.
62
19.0
Hunton Oil
--
--
24-Jun-13
BreitBurn
Whiting
860
15.8
Oklahoma Panhandle
19.47
112,539
10-Jun-13
Atlas/Atlas Res.
EP Energy
67
9.5
Coalbed Methane
8.93
30,923
21-May-13
EnerVest
Laredo
438
8.1
Granite Wash
15.37
45,506
4-Apr-13
Midstates
Linn/Panther/Red Willow
620
12.5
Marmaton and Cleveland
16.99
77,500
1-Apr-13
Gastar
Chesapeake
85
9.6
Mid-Continent
29.84
104,380
18-Mar-13
Exxon Mobil/XTO
BNK
148
45.3
Ardmore Woodford
6.10
100,855
25-Feb-13
SINOPEC/Sinopec
Chesapeake
1,020
11.3
Mississippi Lime
14.57
60,000
$424
13.5
$15.82
$71,592
268
11.5
16.13
68,182
Mean Median Source: IHS Herolds; Wood Mackenzie
9
Hugoton
($/boed)
Anadarko Basin Mississippian and Marmaton
Cleveland, Tonkawa and Marmaton Granite Wash
Mid-Con Case Study Midstates Petroleum Acquires Oil-Weighted Properties in the Western Anadarko Basin in Oklahoma and Texas from Panther Energy, Red Willow and Linn Energy for $620 million Overview of Assets
36.5 MMBoe proved reserves (45% oil, 22% NGLs, and 33% gas; 29% proved developed)
138,900 net acres (60% HBP)
> 8,000 Boed of current production (45-50% oil, 20-25% NGLs, and 30-35% gas)
Approximately 280 producing horizontal wells
–
66% average WI and 52% average NRI
–
Approximately 80% operated
Asset Map
Greater than 100 MMBoe resource potential Transaction Highlights for Midstates Petroleum
Acreage position provides exposure to multiple plays
Main drilling targets include Cleveland, Marmaton, Cottage Grove and Tonkawa with upside potential from drilling the deeper lower Pennsylvanian and Mississippian sections
Purchase price of $620 million
Financed through senior notes issued at 9.25% Metric
Lower-risk, predictable, and repeatable with strong rates of return –
Key Terms and Implied Valuation
100% horizontal development program
Greater than 700 locations identified (~33% PUDs) 10
Data
Implied Multiple
Proved Reserves 67% Liquids 29% Proved Developed
36.5 MMBoe
$16.99/Boe
Current Production R/P of 12.5 years
8,000 Boed
$77,500/Boed
Mid-Con Case Study Cabot Oil & Gas Announces Sale of Marmaton, West Texas and Legacy Conventional MidContinent Properties for $311 Million
In 3Q 2013, Cabot Oil & Gas Corporation (“Cabot”) announced three separate sales for aggregate proceeds of approximately $311 million (collectively, the “Transactions”) – On October 17, 2013, Cabot announced that it had entered into two purchase and sale agreements to sell certain proved and unproved oil and gas properties located in the Mid-Continent (the “Marmaton Assets”) and West Texas (the “West Texas Assets”) for aggregate proceeds of approximately $188 million – On December 9, 2013, Cabot announced that it had entered into a purchase and sale agreement to sell legacy conventional oil & gas assets located in the Mid-Continent (the “Legacy Mid-Continent Assets”) for proceeds of approximately $123 million Chaparral Energy Inc. acquired the Marmaton Assets for $160 million – Approximately 66,000 net acres in the Marmaton Play in the Oklahoma and Texas Panhandles – Current production of approximately 2,000 Boed – Proved reserves of approximately 8.4 MMBoe An undisclosed buyer acquired the West Texas Assets for $28 million – Current production of approximately 260 Boed – Proved reserves of approximately 2.3 MMBoe An undisclosed buyer acquired the Legacy Mid-Continent Assets for $123 million – Current production of approximately 15 MMcfed (94% gas) The Transactions are expected to close in 4Q 2013 Evercore acted as exclusive financial advisor to Cabot 11
Asset Map
Implied Valuation Metric Total Value Marmaton Assets ($MM) West Texas Assets ($MM) Legacy Mid-Continent Assets ($MM) Total
Data
Multiple
$160.0 28.0 123.0 $311.0
EV/Proved Reserves Marmaton Assets West Texas Assets Legacy Mid-Continent Assets Total
8.4 MMBoe 2.3 MMBoe NA 10.7 MMBoe
$19.05/Boe $12.28/Boe NA
EV/Production Marmaton Assets (11.5 R/P) West Texas Assets (24.0 R/P) Legacy Mid-Continent Assets Total
2,000 Boed 260 Boed 2,500 Boed 4,760 Boed
$80,000/Boed $107,692/Boed $49,200/Boed
Recently Backed Mid-Con Teams Sponsor
Management Team
Key Management Team Members
Area of Focus
Assets Purchased ToDate
Charlie Stephenson
Conventional and unconventional acquisitions in North America
NA
George Solich
Anadarko and Permian Basins
Ownership stake in EnerVest assets in the West Anadarko Basin of Texas and Oklahoma
Barry Mullennix Roy Grossman
Mid-Con, Permian and Rockies
NA
Dudley C. Viles
Mid-Con and Ark-La-Tex
NA
Steve Antry Mike O’Kelley
Mid-Con
NA
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