THE OIL & SERVICES CONFERENCE 13 FEBRUARY 18, Whipkey Drilling Pad, Marshall County, West Virginia

Transcription

1 THE OIL & SERVICES CONFERENCE 13 FEBRUARY 18, 2015 Whipkey Drilling Pad, Marshall County, West Virginia 1

2 Disclaimer This presentation contains forward-looking statements within the meaning of section 21E of the United States Securities Exchange Act of 1934, as amended (the Exchange Act ) which represent our expectations or beliefs about future events. These statements can be identified generally by forward-looking words such as expect, believe, anticipate, plan, intend, estimate, may, will or similar words. Forward-looking statements are statements about the future and are inherently uncertain, and our actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those described in Item 1A of the company s annual report on form 10-K for the year ended December 31, 2013 under the heading, Risk Factors, and elsewhere in the annual report and our filings with the Securities and Exchange Commission. These risks and uncertainties include, but are not limited to: 1. The risks of the oil and gas industry, such as operational risks in exploring for, developing and producing crude oil and natural gas; 2. market demand; 3. risks and uncertainties involving geology of oil and gas deposits; 4. the uncertainty of reserves estimates and reserves life; 5. the uncertainty of estimates and projections relating to production, costs and expenses; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; 6. fluctuations in oil and gas prices, foreign currency exchange rates and interest rates; 7. health, safety and environmental risks; 8. uncertainties as to the availability and cost of financing; 9. the possibility that government policies or laws may change or governmental approvals may be delayed or withheld; 10. other sections of this presentation may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Our forward-looking statements contained in this presentation are made as of the respective dates set forth in this presentation. Such forward-looking statements are based on the beliefs, expectations and opinions of management as of the date the statements are made. We do not intend to update these forward-looking statements. For the reasons set forth above, investors should not place undue reliance on forward-looking statements. Readers are encouraged to read our December 31, 2013 Annual Report on Form 10-K and any and all of our other documents filed with the SEC regarding information about Trans Energy, Inc. for meaningful cautionary language in respect of the forward-looking statements herein. Interested persons are able to obtain copies of filings containing information about Trans Energy, Inc., without charge, at the SEC s internet site ( 2

3 About Trans Energy Company Overview Area of Operation Trans Energy: (OTCQB: TENG) Pure Play Marcellus Shale PD Reserves: 77.3 Bcfe (12/31/2014 Internal Estimates - Marcellus only) Recent Daily Production: 20,000 Mcfe 52-Week Range: $ $ Month Avg. Daily Volume 1,931 Shares Shares Outstanding: 14.4 Million Market Capitalization: $30.0 million Experienced Management Team Selected Financial Information 12/31/2014 (est.) LTM Revenue $29.2 million Net Debt (as of 12/31/14) $108.0 million Recent Stock Price (TENG) $2.08 Shares Outstanding (11/19/2014) 14.4 million Market Capitalization $30.0 million Enterprise Value $138.0 million 3

4 Why Invest in Trans Energy? Marcellus Shale pure play Predictable and repeatable inventory Prominent land position with strong upside potential Marshall Wetzel Monongalia Trades at a significant discount to NAV Tyler Marion Experienced Management Team Pleasants Doddridge Harrison Taylor Ritchie WET GAS DRY GAS Marcellus Shale Pure Play Over 45,000 gross acres in core of the Marcellus Shale Utica Shale potential Upper Devonian upside potential High-BTU, liquid-rich focus <$1.50 per MMBtu breakeven net gas price on recent wells Extensive Organic Drilling Inventory 400/500 + potential drilling locations (211/308 drillable today) (1) 3+ Tcfe gross upside potential (including JV & royalty partners) Significant portion of acreage HBP (approx. 70%) Off-take agreements totaling more than 45,000 MMBtu per day Production Growing Production expected to grow with 4 new wells online soon Experienced Management w/ Technical Expertise More than 200 years combined management experience Well-funded joint development partner has geologic / engineering team (1) At 750 ft / 500 ft spacing 4

5 Marcellus Overview Majority of Company acreage located in wet gas window NGL yields in the gallons per mcf range Ft. Beeler processing plants provide 320 MMcf/day throughput capacity Williams is adding another 640 MMcf/day of processing to this system Condensate and NGLs provide $ $1.50 pricing uplift vs. dry gas Breakeven net natural gas price on new wells <$1.50 per MMBtu (with 50% WTI price) Wet Gas Dry Gas Trans Energy Area of Operation Low-cost, highly predictable and repeatable play In Trans Energy s area of operation, the Marcellus shale is approximately feet thick 5

6 Gas Off-Take (Williams & Momentum 3) 20-year gas gathering agreement with Williams for up to 45,000 MMBTU / day 90,000 MMBTU / day including Republic capacity Williams committed to provide offtake for all wells to be drilled (1) Marshall and Wetzel County wells feed into TETCO Marion feeds into TETCO or TCO Ft. Beeler cryogenic processing facility started up in 2Q 2011 NGL yields up to gal/mcf Second facility started Moundsville fractionation plant online since November 2012; Oak Grove de-ethanizer began May 2014 Momentum 3 gathers and provides transportation for all of our volumes in Marion County (1) Based on acreage dedication; Excludes Marion County 6

7 Corporate Strategy - Prove Acreage / Add Drillable Locations Consolidate acreage surrounding legacy positions in the core of the Marcellus Marshall, Wetzel and Marion counties Building upon local presence a West Virginia company Drill to turn highly prospective acreage into 3P reserves Secure and maintain land position via leasehold rights Grow production and reserves / monetize assets 7

8 Competitive Market Position 8

9 Acreage Wellbores There is no forced pooling in West Virginia Acreage has value, drillable pad sites have (much) more value. Four criteria four a drillable wellbore: Defensible title on 100% of the underlying acreage Topography supports a pad site Hillside drilling Wetlands, etc. Mining Minimum wellbore length Minimum number of wellbores We can drill over 300 wellbores today at 500 spacing 9

10 Current Marcellus Acreage Significant Marcellus acreage that is held by shallow well production Acreage Breakdown 15,598 Net acres (a) Approximately 300 horizontal well locations from HBP acreage alone 784 ac. Primary term leased acreage can generally be held by production from shallow vertical or Marcellus horizontal wells 4,834 ac. Leased-Termed Held By Production Current drilling program supplemented with selective shallow drilling will HBP all strategic acreage with near term lease expirations over the next two years 9,980 ac. Mineral Rights Purchased Significant amount of acreage is also prospective for the Utica shale and Upper Devonian formations 10

11 Reserves and Resources (Internal 12/31/14) Trans Energy has exposure to more than 3 Tcfe of Marcellus resource potential More than 400/500 potential drilling locations (204/307 ready to drill today) (3) EUR per well of Bcfe /1000 of lateral (Est. Reserves as of 12/31/14) 12/31/14 Internal Reserve Summary (1) Oil Gas NGL Total % of (MMBbl) (Bcf) (MMBbl) (Bcfe) Total Total PV9% PDP/PDNP % $204.2 $102.0 Total Proved $204.2 $102.0 (2) PROBABLE $1,646.9 $367.3 POSSIBLE $49.5 $10.7 Reserve Mix (1) Reserve Category Mix (1) Oil Gas NGL (1) Based on reserve estimates for ASD from the 12/31/2014 reserve report prepared internally (2/16/15 NYMEX pricing) (2) Approximately 45% of the Probable Reserves shown above have been designated as such due to the SEC 5-year rule. (3) At 750 ft / 500 ft spacing 11

12 Wet Gas Provides Positive Economics $3.00 NYMEX Equals $2.68/MCF Wellhead Price $3.00 / MMBTU NYMEX Henry Hub $55 NYMEX WTI One mcf Natural Gas via Wellhead Production Natural Gas Natural Gas Liquids Condensate Production Breakdown.88 MCF 1.2 Gallons/MCF BBLS/MCF Gross Realized Price by Product Total Realized Price per 1 MCF Gathering, Transportation and Processing Net Realized Price per 1 MCF $1.87 net (1)(2) $0.71 net (3)(4)(5) $0.10 net (6) $2.68/MCF ($0.75/MCF) $1.93/MCF 1. $1.10 discount to NYMEX Henry Hub MMBTU/mcf residue BTU factor 3. 50% NYMEX WTI per NGLs gal/bbl conversion factor 5. 90% NGLs 6. WTI less $7.00 for Appalachian Light Sweet 12

13 Experienced Management Team Steve Lucado Chairman of the Board John Corp President & Director Mike Guzzetta Treasurer / Controller Director since 2011 More than 20 years professional financial experience, including E&P CFO experience Bachelor of Arts Degree Harvard University, MBA, University of Chicago Director since 2005 and President since June 2010 More than 25 years drilling, production and operations experience Received a Bachelor of Science Degree in Petroleum Engineering from Marietta College Treasurer & Controller of Trans Energy since May 2014 More than 20 years experience in accounting and finance, including 7 years in the oil and natural gas industry Received a Bachelor of Arts Degree Walsh University, MBA from Capitol University and is a certified public accountant Leslie Gearhart Vice President of Operations & General Secretary Vice President of Operations and General Secretary Has more than 25 years of experience in the oil and gas industry in the Appalachian Basin Graduated with a Bachelor of Science Degree in Petroleum Engineering from Marietta College 13

14 Joint Development Partner: Republic Energy Republic is a privately held Dallas-based E&P company Technical team has 200+ years combined industry experience Former VP Geology and Head of Completion Operations for North Texas from Mitchell Energy Corporation Mitchell was the cutting edge Barnett player wrote the book on shale fracing Republic focused on assets in the JV with Trans Energy 100% of Trans Energy s Marcellus assets in the JV JV agreement requires mutual consent to drill >6 wells/year Equity financing from Energy Trust Partners (an affiliate of Energy Spectrum) and Wells Fargo 14

15 Marshall County JV has 12,475 gross acres of leased and owned minerals (4,389 net to ASD) 17 wells online Average 30-day IP of 4.9 MMcfe/d (1) / 5.7 MMcfe/d (2) 20% Liquids (excl. ethane) Average lateral length 4,030 (1) / 3,905 (2) 4.5 Frac Stages/1000' lateral Drill time of 35 days spud to rig release Total Potential Wells: > 175 Wells Drillable Today: 55 / 86 (3) 2 wells drilled and fraced (1) Excludes all except Whipkey 1H and Goshorn 3H (2) Includes recent wells only - Doman 1H & 2H, Martinez 1H, Goshorn 4H, Woodruff 1H & 2H (3) At 750 ft / 500 ft spacing 15

16 Wetzel County JV has 18,212 gross acres of leased and owned minerals (5,182 net to ASD) 9 wells online Average 30-day IP of 8.1 MMcfe/d (1) 20% liquids (excl. ethane) 5,000 Average lateral length (1) v Average EUR / 1000 lateral (1) of 2.27 Bcfe 4.5 Frac Stages/1000' lateral Drill time of 35 days spud to rig release Total Potential Wells: > 200 Wells Drillable Today: 86 / 126 (2) 4 wells turned online recently (1) Excludes Hart 28H, Blackshere 200H, 201H, Anderson 8H, 9H (2) At 750 ft / 500 ft spacing 16

17 Marion County JV has 20,460 gross acres of leased and owned minerals (6,027 net to ASD) 4 wells online Average 30-day IP of 8.9 MMcfe/d (1) 5,100 Average lateral length (1) BTU between 1050 and 1100 Marion County Marshall Total Potential Wells: ~200 Wetzel Monongalia Total Wells Drillable Today: 70 / 96 (1) 2 wells scheduled for turn on in next several weeks Tyler Doddridge Harrison Marion 5 more wells planned for frac in 2015 (1) At 750 ft / 500 ft spacing 17

18 Drilling Program Recap 30 Hz wells online 2013 drilling program included 8 wells 2014 drilling program included drilling 19 wells, of which 14 are completed, with remainder scheduled to frac Completed (Online): Anderson 5H, 7H Beatty 1H, 2H Dewhurst 110H, 111H Doman 1H, 2H Freeland 1H, 2H Goshorn 1H, 2H, 3H, 4H Groves 1H Hart 28H Keaton 1H Lucey 1H, 2H Martinez 1H Stout 2H Whipkey 1H, 2H, 3H Woodruff 1H, 2H Blackshere 200H, 201H Anderson 8H, 9H Completed (Resting): Sivert 1H, 2H Shaver 1H, 2H Marshall Wetzel Monongalia Drilled, waiting on Frac: Jones 2H, 3H Michaels 1H Wright 1H, 2H Scheduled to Drill: Michaels 2H Dewhurst 300H, 301H Elliott 1H, 2H Blackshere 202H, 203H Pleasants Tyler Harrison Marion Ritchie Doddridge 18

19 Mcfe/d Bcfe West Virginia Peer Well Performance TENG is drilling some of the best wells in the wet gas window of the Marcellus 30-Day IP Rates per 1,000 Lateral (1) EUR per 1,000 Lateral (1) 2,500 2,000 1,500 1, (2) (4) (3) - (4) 1. Peer data compiled and estimated from public investor materials by EnerCom, Inc.. Peer Group includes: Antero Resources, EQT, Gastar and Magnum Hunter. 2. Based on the Freeland #1H, 2H and Beatty #1H, 2H 3. Based on the Doman 1H, 2H, Woodruff 1H & 2H and Martinez #1H (Note: well was choked back due to constraints imposed at the pipeline interconnect) 4. Excludes Hart 28H 19

20 Mcfe/d Comparative Well Performance 90-Day IP Rates per 1,000 Lateral (1) 2,500 2,000 TENG Wells Rice Energy Avg. 6/12 - IPO TENG Wells Turned In to Sales from 6/12-12/13 Using New Completion Techniques 1,500 1, Rice Energy data from IPO Prospectus. 2. Martinez 1H and Freeland 2H were restricted due to pipeline constraints. Data represents first 90 days for Freeland 2H; It was further restricted after first 60 days. 20

21 The Market Still Favors Appalachian Assets Precedent Transactions, Guideline Companies Trade at Premium Prices Value Production Net Undeveloped PDP Value Implied Date Buyer Seller ($ mm) (Mcfe/d) Acres (1) Acres (2) ($ mm) (3) $/Acre 12/23/2014 Southwestern Statoil $365 29,000 18,072 17,169 $116 $14,503 10/16/2014 Southwestern Chesapeake $4, , , ,500 $1,344 $15,288 7/7/2014 Rice Chesapeake $336 20,000 22,000 20,900 $80 $12,249 6/9/2014 American Energy Partners East Resources, Shell (Marcellus only) 1, ,000 48,000 45, ,123 1/29/2014 American Energy Partners Hess 924 N/A 74,000 74,000-12,486 Mean $14,730 Enterprise Daily Net Implied Value Production Net Undeveloped PDP Value Implied Company ($ mm) (Mcfe/d) Acres Acres (1) ($ mm) (2) $/Acre Antero $15,271 1,265, , ,850 $5,060 $19,795 Eclipse 1, , ,140 96, ,789 Rice 3, , , ,675 1,592 15,469 Mean $16,684 (1) Net acres in the two Southwestern transactions are adjusted to avoid double counting the same acreage for both Utica and Marcellus formations. (2) Assumes 95% of net acreagae is undeveloped, except in the case of the Hess transaction, where no production was reported. (3) Assumes $4,000 x net daily production (Mcfe/d) is allocated to PDP value as part of the transaction/enterprise value. 21

22 Trading At a Significant Discount to Net Asset Value (NAV) NAV based on PDP and acreage values from precedent transactions $20.00 $18.00 $12.85 $0.35 $16.00 $14.00 $12.00 $10.00 $(6.24) $(0.80) $10.79 $8.00 $6.00 $4.00 $2.00 $2.08 $4.62 Unrealized Value $0.00 Share Price (2/17/15) PDP Value Undeveloped Acreage Options Proceeds less Net Debt (12/31/14 est.) less NPI Value per TENG Share See Appendix for the assumptions behind the per share calculations shown above 22

23 Why Invest in Trans Energy? Marcellus Shale Pure Play Over 45,000 gross acres in core of the Marcellus Shale Utica Shale potential Upper Devonian upside potential High-BTU, liquid-rich focus <$1.50 per MMBtu breakeven net natural gas price on recent wells Extensive Organic Drilling Inventory w/ Large Acreage Position 400/500 + potential drilling locations (1) 3+ Tcfe upside potential (including JV and royalty partners) Significant portion of acreage HBP (approx. 70%) Off-take agreements totaling over 45,000 MMBtu per day Production Growing Daily production expected to increase with 4 new wells online soon Experienced Management w/ Technical Expertise More than 200 years combined management experience Well-funded joint development partner has geologic / engineering team (1) At 750 ft / 500 ft spacing 23

24 A P P E N D I X Doman Drilling Pad, Marshall County, West Virginia 24

25 Detailed NAV Assumptions Using $6,000 and $4,000 / Mcfe/d NAV based on Mcfe/d plus acreage valuation from precedent transactions Undeveloped Acreage Assumption Assumes 95% of Acreage is Undeveloped PDP Value in $/Mcfe/d $6,000 $4,000 Daily Production in Mcfe/d 20,000 20,000 PDP Value $120.0 $80.0 % of Acreage Considered "Undeveloped" 95% 95% Total Net Acreage 15,598 15,598 Acreage Considered Undeveloped 14,818 14,818 $/Acre Assumption for Undeveloped Acreage $12,500 $15,000 Valuation of Acreage Considered "Undeveloped" $185.2 $222.3 Total ASD Enterprise Value $305.2 $302.3 less Net Debt as of 6/30/14 ($108.0) ($108.0) Total ASD Equity Value $197.2 $194.3 less NPI of 7.0% (13.9) (13.6) Total Equity Value to TENG Shareholders Approx. # Shares Outstanding, in Millions (Assumes Vesting and Exercise of All Shares/Options) Value to TENG Shareholders (Incl. Option Proceeds) $189.4 $186.6 Value per TENG Share $10.95 $