The Importance of Permian Oil Production Nationally

Transcription

1 The Importance of Permian Oil Production Nationally 18 th Annual Executive Oil Conference Jerry Schuyler, President & COO Laredo Petroleum, Inc. April 3, 2012 NYSE: LPI

2 Forward Looking / Cautionary 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 and Section 21E of the Securities Exchange Act of All statements, other than statements of historical fact included in this presentation that address activities, events or developments that Laredo Petroleum Holdings, Inc. (the Company, Laredo or LPI ) assumes, plans, expects, believes or anticipates will or may occur in the future are forward looking statements. The words believe, expect, may, estimates, will, anticipate, plan, intend, foresee, should, would, could, or other similar expressions are intended to identify forward looking statements, which are generally not historical in nature. However, the absence of these words does not mean that the statements are not forward looking. Without limiting the generality of the foregoing, forward looking statements contained in this presentation specifically include the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including as to the Company s drilling program, production, hedging activities, capital expenditure levels and other guidance included in this presentation. These statements are based on certain assumptions made by the Company based on management s expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward looking statements. These include the factors discussed or referenced in the Risk Factors section of the Company s Annual Report on Form 10 K dated March 20, 2012, risks relating to financial performance and results, current economic conditions and resulting capital restraints, prices and demand for oil and natural gas, availability of drilling equipment and personnel, availability of sufficient capital to execute the Company s business plan, impact of compliance with legislation and regulations, successful results from our identified drilling locations, the Company s ability to replace reserves and efficiently develop and exploit its current reserves and other important factors that could cause actual results to differ materially from those projected. Any forward looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forwardlooking statement, whether as a result of new information, future events or otherwise, except as required by applicable law. The Securities i and Exchange Commission i ( SEC ) generally permits oil and gas companies, in filings made with the SEC, to disclose proved reserves, which h are reserve estimates that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions and certain probable and possible reserves that meet the SEC s definitions for such terms. In this presentation, the Company may use the term unproved reserves which the SEC guidelines restrict from being included in filings with the SEC without strict compliance with SEC definitions. The Company does not choose to include unproved reserve estimates in its filings with the SEC. Unproved reserves refers to the Company s internal estimates of hydrocarbon quantities that may be potentially discovered through exploratory drilling or recovered with additional drilling or recovery techniques. Unproved reserves may not constitute reserves within the meaning of the Society of Petroleum Engineer s Petroleum Resource Management System or SEC rules and does not include any proved reserves. Actual quantities that may be ultimately recovered from the Company s interests will differ substantially. Factors affecting ultimate recovery include the scope of the Company s ongoing drilling program, which will be directly affected by the availability of capital, drilling and production costs, availability of drilling services and equipment, drilling results, lease expirations, transportation constraints, regulatory approvals and other factors; and actual drilling results, including geological and mechanical factors affecting recovery rates. Estimates of unproved reserves may change significantly as development of the Company s core assets provide additional data. In addition, our production forecasts and expectations for future periods are dependent upon many assumptions, including estimates of production decline rates from existing wells and the undertaking and outcome of future drilling activity, which may be affected by significant commodity price declines or drilling cost increases. This presentation includes financial measures that are not in accordance with generally accepted accounting principals ( GAAP ) including adjusted EBITDA. While management believes that such measures are useful for investors, they should not be used as a replacement for financial measures that are in accordance with GAAP. For a reconciliation of adjusted EBITDA to the nearest comparable measure in accordance with GAAP, please see the Appendix. 2

3 Global Supply and Demand 100 Annual World Liquids Supply & Demand Today Supply Demand Million Barrels Per Day Year Source: EIA 3

4 The World s Top Liquids Producers The Top 15 in 2011 (MMb/d) Saudi Arabia Russia US Iran China Canada FSU Other Brazil Mexico UAE 9.6 Iraq Nigeria 4.2 Kuwait Venezuela Algeria All Others 87.5 MMB/D TOTAL Source: EIA 4

5 Domestic Oil Production Growth U.S. Avg Daily Oil Production ( ) Thousand Barrels per day Oil Shale Revolution Begins! Source: EIA, Raymond James 5

6 Sources of US Domestic Supply U.S. Oil Production by Major Play Williston MBpd Permian Eagle Ford Miss. Lime, Granite Wash, Niobrara, Barnett Shale, Anadarko Basin 3000 GOM Rest of U.S. 0 Source: Raymond James 6

7 Permian Basin Oil Production 2,500 Permian Basin Avg Daily Oil Production 2,000 Thousa and Barrels pe r day 1,500 1, Source: TRCC and NMOCC, Forecast based Raymond James growth model

8 Supply Available to Meet U.S. Demand U.S. Domestic and Canadian Import Daily Production Forecast (MMb/d) % 13% 20% 31% 22% 41% 24% 25% 10.5 MMb/d 16.4 MMb/d Permian, Bakken, Eagle Ford Other U.S. U.S. NGL Canada Source: CAPP, Raymond James, EIA, Bentek 8

9 How Much do we Close the Gap? U.S. Demand 21 MMBbl/D U.S. Demand 19 MMBbl/D U.S. Demand 20 MMBbl/D Imports Permian, Bakken, Eagle Ford Canada US Other 1 % of Demand Supplied by U.S. & Canada 45% 58% 82% 1 US Other includes GOM and NGLs along with all other basins Source: CAPP, Raymond James, EIA, Bentek 9

10 Is the Permian Production Forecast Underestimated? A Hypothetical Upside Case Assumptions: Grows drilling activity i 10%/year Assumes drilling locations are not limited Maintains current ratio of horizontal to vertical drilling rigs Assumes no well performance improvements in the future 10

11 Permian Hypothetical Upside Scenario Permian Texas Total Rig Count % Annual Growth Forecast Permian (TX) Total % Growth Forecast Source: Baker Hughes 11 Jan 00 Jul 00 Jan 01 Jul 01 Jan 02 Jul 02 Jan 03 Jul 03 Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16

12 Permian Rig Activity by Operator Rig count includes Texas and New Mexico 12 Source: Bentek

13 Permian: Geologically Complex & Historically Prolific Bone Spring, Avalon Shale, Wolfbone, Wolfberry, Wolffork, Wolfcamp Shale, Penn Shale, Cline Shale, etc. 13

14 Permian: Sample of Multiple Opportunities 3,900 5,700 MULTIPLE IDENTIFIED POTENTIAL HORIZONAL TARGETS STACKED VERTICAL PAYS 5,000 7,500 6,000 8,000 7,000 8,300 VER RTICAL WOLF FBERRY TAR RGETS 9,000 9,500 9,500 10,000 1 Formation depths are approximate. 14

15 Permian: Hypothetical Growth Potential 3000 Permian Basin Avg Daily Oil Production ( ) 2500 r day Thousa and Barrels pe % Increase In Rig Actvity Case Raymond James Forecast TRCC & NMOOC Data Source: TRCC, NMOCC, Raymond James, Laredo 15

16 Is U.S. Energy Independence Achievable by 2020? MMBbl/D Demand Contributing i Factors: Permian Basin Bakken/Eagle Ford Other Oil Shales GOM Deepwater Canadian Production Diesel Fleet Conversion to CNG Natural Gas Vehicles Hypothetically ti Yes! 16

17 The Importance of the Permian to Laredo Petroleum NYSE: LPI

18 Permian Driven Oil / Liquids Growth Boe/d 35,000 30,000 25,000 23,709 29,040 41% Oil Increased oil production driven by expansion in Vertical Wolfberry, Horizontal Wolfcamp and Cline Shales drilling in the Permian Basin 20, FY Production: 8.7 MMBoe 15,000 14,278 Other 12% 10,000 5,000 4,226 9,762 59% Liquidsrich gas Granite Wash 26% Permian 62% FY 08 FY 09 FY 10 FY 11 FY 12E 1 FY 2011 production includes production from Broad Oak Energy, Inc. on a combined basis for 2011 and for periods prior to July 1, Company released guidance on January 18, 2012 based on 2011 estimated production of 8.5 MMBoe 18

19 Significant PDP Growth Potential Laredo s current drilling program is concentrated on exploring and exploiting high potential h ti acreage in the Permian / Midland Basin with multi year PUD to PDP conversion phase underway 2011 Year End Reserves: MMBoe 1 Other 10 MMBoe 6% Granite Wash Permian 45 MMBoe 101 MMBoe 29% 65% (MMBbl) Year over Year Oil + Condensate PD Growth Increase in PD Oil Reserves RESERVES (NET MMBOE) PDP PDNP PUD Total Proved % DEV Oil / Condensate (MMBbl) % Natural Gas (MMcf) % Total (MMBOE) % Oil / Condensate (MMBbl) 1 Proved reserves reported on a two stream basis. Gas price is adjusted to reflect NGL benefit. Proved reserves and value as of 12/31/11, Ryder Scott evaluation, SEC pricing. 19

20 Years of Growth Embedded in Extensive Drilling Inventory Total Gross Identified Potential Drilling Locations 1 = 6,004 (94% Permian) Granite Wash 335 locations Laredo s inventory of high quality drilling locations is identified and derisked through Drilling Results: Laredo has over 600 vertical & horizontal wells on its Permian acreage Permian Vertical 3,426 locations 1 Company estimates. See page 35and 36 for details. Permian Horizontal 2,243 locations Vertical well single zone testing Core Samples: More than 2,200 ft of whole cores, 400+ sidewall cores taken 3D Seismic Library: Over 470 sq. miles of data in house, another 250+ sq. miles being acquired Advanced logging / stimulation technologies employed Verification of upside potential supported by Industry activity 20

21 Focused Capital Program Approximately 80% of 2012 drilling $10 MM $35 MM Pipeline $15 MM capital directed to vertical Wolfberry, Land d& Seismic Si i Other horizontal Wolfcamp and Cline Shale drilling in the Permian Basin $20 MM Other Drilling Capital Plan Summary $700 MM Drilling $760 MM Capital Budget $120 MM Granite Wash $560 MM Permian Basin $700 MM Drilling Budget Currently 16 operated rigs Permian 4 horizontal 8 vertical Anadarko Granite Wash 3 horizontal 1 vertical Exit 2012 with operated rigs 1 1 The mix of Laredo s planned capital deployment (rig count, area, and horizontal and vertical well type) is driven by continuously emerging data and is subject to change. 21

22 NYSE: LPI