THE OIL & GAS CONFERENCE SCOT WOODALL PRESIDENT & CEO

Transcription

1 THE OIL & GAS CONFERENCE SCOT WOODALL PRESIDENT & CEO AUGUST 15, 2016

2 Forward-Looking & Other Cautionary Statements DISCLOSURE STATEMENTS FORWARD-LOOKING STATEMENTS: This presentation (which includes oral statements made in connection with this presentation) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All written or oral statements, other than historical financial information, may be deemed to be forward-looking statements. Words such as expects, forecast, guidance, anticipates, intends, plans, believes, seeks, estimates and similar expressions or variations of such words are intended to identify forward-looking statements; however, these are not the exclusive means of identifying forward-looking statements. In particular, the Company is providing 2016 operating guidance, which contains projections for certain 2016 operational and financial metrics. Additional forward-looking statements in this presentation relate to, among other things, future capital expenditures, projects and opportunities. These and other forward-looking statements in this presentation are based on management s judgment as of the date of this presentation and are subject to numerous risks and uncertainties. Actual results may vary significantly from those indicated in the forward-looking statements due to, among other things, oil, NGL and natural gas price volatility, including regional price differentials; changes in operational and capital plans; costs, availability and timing of build-out of third party facilities for gathering, processing, refining and transportation; delays or other impediments to drilling and completing wells arising from political or judicial developments at the local, state or federal level, including voter initiatives related to hydraulic fracturing; development drilling and testing results; the potential for production decline rates to be greater than expected; regulatory delays, including seasonal or other wildlife restrictions on federal lands; exploration risks such as drilling unsuccessful wells; higher than expected costs and expenses, including the availability and cost of services and material; and our potential inability to achieve expected cost savings; unexpected future capital expenditures; economic and competitive conditions; debt and equity market conditions, including the availability and costs of financing to fund the Company s operations; the ability to obtain industry partners to jointly explore certain prospects, and the willingness and ability of those partners to meet capital obligations when requested; declines in the values of our oil and gas properties resulting in impairments; changes in estimates of proved reserves; compliance with environmental and other regulations; derivative and hedging activities; risks associated with operating in one major geographic area; the success of the Company s risk management activities; title to properties; litigation; environmental liabilities and other factors discussed in the Company s reports filed with the Securities and Exchange Commission ( SEC ). Please refer to the Company s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC, specifically Item 1A, Risk Factors, and other filings including our Current Reports on Form 8-K and Quarterly Reports on Form 10-Q, for further discussion of risk factors that may affect the forwardlooking statements. Those disclosures are incorporated by reference herein. The Company assumes no obligation to publicly revise or update any forwardlooking statements based on future events or circumstances or otherwise, except as required by applicable law. All forward-looking statements are qualified in their entirety by this cautionary statement. This presentation is neither an offer to sell nor a solicitation of an offer to buy any securities, nor shall there be any sale of any such securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. 2 2

3 Well Positioned for 2016 NE Wattenberg generates compelling well economics XRL drilling program resuming in third quarter; strengthens production profile for 2017 Protecting balance sheet and liquidity is paramount Cash position of over $100 million at June 30, $335 million undrawn credit facility Non-core asset sales have augmented balance sheet and enhanced liquidity Opportunistically reduced debt and interest payments Positioned to be cash flow positive for the year Improving EBITDAX through operational execution and cost control No long-term drilling, completion or oil marketing commitments provide flexibility to adapt to changing operational environment Strong 2016 hedge program protects downside Oil hedges of 7,750 Bbls/d at $72.57 per bbl for remainder of the year Covers approximately 65-70% of remaining 2016 oil volumes 1 Pro forma for $30 million of cash proceeds related to the closing of Uinta Basin non-core asset sale completed in July

4 FINANCIAL OVERVIEW 4 4

5 Solid Financial Position Undrawn credit facility with borrowing base of $335 million Debt Maturities (in millions) No need to draw funds anticipated through 2017 Nearest debt maturity is not until 2019 $500 $400 Debt Exchange - retired $85 million at discount Borrowing Base - $335 million with zero drawn Net debt/ebitdax ratio of 2.8x at June 30, 2016 Focused on opportunities to increase stakeholder value and improve capital structure $300 $200 $100 Liquidity enhanced with cash proceeds of $30 million from Uinta Basin non-core asset sale 1 $ $400 million 7.625% senior notes due 2019 and $400 million of 7.0% senior notes due Uinta Basin non-core asset sale closed on July 14,

6 Disciplined Capital Approach 2016 drilling program provides operational and financial flexibility XRL drilling program resuming in the third quarter Free cash flow positive compared to current 2016 sell-side cash flow estimates Executing on the items within our control Costs are lower and production is higher Demonstrated ability to improve efficiency and drive well costs lower Significant improvement in XRL wells costs; generating attractive drilling economics $mm $8 $6 $4 $2 XRL Well Costs Down 48% $8.25 $6.25 $5.6 $4.25 $ H15 2H15 2H16E Drilling Completions Facilities 6 6

7 2016 Guidance Capital expenditures of $75-$100 million, 30% reduction from initial guidance, XRL drilling program resumes in third quarter; expect spending to be at high end of guidance Guidance lowered twice as a result of XRL well cost improvements and less infrastructure and non-drilling capital Total production of MMBoe; low end increased Maintaining positive operational momentum with higher production and lower costs Higher growth at the mid-point compared to 2015 production of 5.9 MMBoe, pro forma for asset sales 3Q16 production expected to approximate MMBoe Lease operating expense of $31-$34 million; ~24% lower than 2015 General and administrative expense of $30-$33 million 1 ; ~27% lower than 2015 Gathering, transportation and processing costs of $2-$4 million 1 Excludes non-cash, performance-based compensation and one-time costs 7 7

8 Volume (bbl/d) Volume (mmbtu/d) Hedging Program Protects Balance Sheet Actively manage hedge portfolio to protect future cash flow Strategy is to hedge 50-70% of production on a forward 12-month to 18-month basis 2016: 7,750 Bbls/d of crude oil hedged at an average WTI price of $72.57/Bbl 1 and 5,000 MMBtu/d of natural gas hedged at an average NWPL price of $4.10/MMBtu : 3,989 Bbls/d of crude oil hedged at an average WTI price of $61.72/Bbl 1 8,000 Crude Oil $72.57 $72.57 $80 12,000 Natural Gas $2.96 $20 10,000 6,000 $60 8,000 4,000 $61.72 $40 6,000 $4.10 $4.10 4,000 2,000 $20 2, Q16 4Q FY $0 0 2Q16 4Q FY $0 1 Hedge position as of August 12,

9 OPERATIONAL OVERVIEW 9 9

10 DJ Basin: Strategic Advantage Large, contiguous acreage position provides substantial development opportunity ~60,000 total net acres favorable for XRL development Targeted development of stacked-pay horizons within Niobrara formation Drilling depth of ~6,000 with ~9,500 lateral for an XRL well Core and seismic analysis confirms consistent geologic setting across acreage position NE Wattenberg provides focused extended reach lateral ( XRL ) horizontal development ~50,000 net acres in NE Wattenberg ~80% of acreage can be developed with XRL wells in 1,280-acre drilling spacing unit Ability to efficiently manage capital program Maintain operational flexibility with no long-term drilling rig or completion commitments DJ Basin Acreage Generating greater capital efficiency gains through 50% faster XRL drilling times and 48% lower costs Wyoming Colorado 10 10

11 NE Wattenberg Activity Targeted development of Niobrara horizons throughout acreage position Section Will pad (9 XRL wells) Initial Niobrara A and C wells on northern acreage Section (15 XRL wells) Initiated tighter frac density concept Section (8 XRL wells) Initiated new spacing concept XRL program generates competitive economics in current pricing environment Continue to refine well construction techniques to enhance operational returns Section Will pad 9 XRL/1 SRL wells on flowback NE Wattenberg Current D&C Activity Section XRL/1 SRL wells on flowback in April Section XRL wells placed on flowback in June 11 BBG horizontal wells Current XRL well activity 11

12 Niobrara Pay Section NE Wattenberg Cross Section Detailed core analysis confirms reservoir and resource quality is consistent Over 920 of core was analyzed from four distinct well locations throughout acreage position Strong average oil saturations (So) across acreage = 45%-57% Nine mineral petrophysical model calibrated from core data for more accurate reservoir and resource assessment Calculated oil saturated pore volume (SoPhiH), an indicator of resource in place, is consistent with range = Net footage of resistivity greater than 20 Ohmms, an indicator of overall hydrocarbon charge, is also fairly consistent, with a range of Core and reservoir characterization data conclusion Data analysis confirms the geologic, reservoir and resource potential across the NE Wattenberg position GR Resistivity Highlight > 20 ohms A A Clay Bound Water / Free Water / Hydrocarbon Volume GR Resistivity Highlight > 20 ohms Clay Bound Water / Free Water / Hydrocarbon Volume GR Resistivity Highlight > 20 ohms Clay Bound Water / Free Water / Hydrocarbon Volume A Bench B Bench C Bench 12 12

13 Feet/Day Enhancing XRL Cost Efficiencies XRL Well Average Drilling Days XRL Well Average Ft./Day Drilled 3, Days 2,500 2,704' 2,226' 1H Days 2,000 1,800' 1,500 1,343' 2H Days 1,000 1H Days Best-in-class well drilled in 6.5 days spud to RR Spud to TD TD to RR Rig Move H15 2H15 1H16 13

14 DJ Basin XRL Indicative Economics 100% IRR Mboe EUR 80% 700 Mboe EUR 60% 600 Mboe EUR 40% 20% Pre-Tax EUR PV10 Payout (Mboe) IRR 2 ($ millions) (Years) % $ % $ % $ % $40 $50 $60 Flat WTI Oil Price ($/bbl) 1 Calculated for an XRL well with a ~9,500 lateral, 55-stage plug-and-perf, $4.25 mm well cost, $4.00/bbl WTI differential 2 Based on $50/bbl flat WTI, a $250k decrease in well costs improves IRR by ~5% 14 14

15 DJ Basin Infrastructure Improvement Weld County to Cushing pipeline capacity nearing 650 Mbbls/d Local refineries and rail provide additional capacity We benefit from having no firm marketing commitments Oil price differential expected to average $3-$5 per barrel below WTI 2Q16 differential averaged $4.82 per barrel; 14% sequential improvement DJ Basin Infrastructure Projects Capacity (MBbls/d) Pony Express DJ Lateral 90 White Cliffs 215 Saddlehorn/Grand Mesa Pipeline

16 Uinta Oil Program East Bluebell ~26,000 net acres Vertical well development targeting Lower Green River formation High oil cut (~90%) provides strong margins and steady cash flow Continued refinement of reservoir and resource understanding to optimize and enhance completions Core, micro seismic and pilot analysis confirms viability of 40-acre development spacing 2Q16 production of 2,130 Boe/d 1 Uintah County BBG acreage 1 Pro forma for sale of Uinta Basin assets 16 16

17 Well-positioned for 2016 Core acreage position located within a top-tier basin Solid financial position with cash, attractive hedges and undrawn credit facility Execution of items within our control; generating positive operational momentum heading into 2017 Positioned to be free cash flow positive in 2016 Focused on opportunities to increase stakeholder value and improve balance sheet 17 17

18 1099 Eighteenth Street, Suite 2300 Denver, CO Website: Investor Relations Contact: Larry C. Busnardo (303)