Professional Documents
Culture Documents
Table of Contents
1. Introduction
2. E&P Valuation
3. Understanding the Upstream P&L
4. E&P Ratio Analysis
5. Glossary
6. Additional Resources
1. Introduction
Petroleum
Coal
Crude Oil
Conventional
Oil
APL Range
20-40
Condensate
APL Range
> 40
NGL
Natural Gas
Heavy Oil
APL Range
< 18
Oil Sands
Rock
Dry/Sweet
Methane (CH4)
Wet
Ethane (C2H4)
Propane (C3H8)
Buthane (C4H10)
NGL
Sour
Contains
Hydrogen
Sulfide (H10)
Oil and Natural Gas are not substitute products; there is no arbitrage
opportunity from pricing anomalies
2
http://www.priweb.org/ed/pgws/history/spindletop/spindletop.html
Production
Processing
Transportation
Marketing
Refining
Marketing
Natural
Gas
Exploration
Crude
Oil
Production
Transportation
Upstream
Midstream
Downstream
5,000
Initial Drilling & Completion (D&C) Cost: $5.00 million
Initial Production Rate (IP): 4.5 MMcfe/d
Estimated Ultimate Recovery (EUR): 6.5 Bcfe
4,000
3,000
2,000
1,000
0
2
52
102
152
Months
202
252
302
Proved
(1P)
Unproved
Possible
Probable
Developed
(PD)
Undeveloped
(PUD)
Non-Producing
(PDNP)
Behind-Pipe
(PDBP)
Shut-In
(PDSI)
Producing
(PDP)
25.0x
$120
20.0x
$90
15.0x
$60
10.0x
$30
5.0x
$0
11/01/01
0.0x
07/02/03
03/02/05
WTI 1-Yr FWD
11/01/06
HH 1-Yr FW D
07/01/08
Oil / Gas Ratio
03/02/10
11/01/11
$150
Historical relationships between oil and gas prices changed beginning in 2008 due to the emergence of
shale gas.
Oil Equivalent
Gas Volume
Oil Equivalent
1 Mcf
0.1667 Boe
1 BCF
166,667 Boe
6 Mcf
1.0 Boe
6 BCF
1 MMBoe
1 MMcf
166.7 Boe
1 TCF
166.7 MMBoe
6 MMcf
1.0 MBoe
6 TCF
1 BBoe
10 MCF = 1 Boe Convention: Occasionally, companies will convert their gas to oil
equivalent using a ratio other than a 6:1 ratio
Historically, 10:1 has been used to better reflect the economic equivalence of gas to
oil (i.e. gas less valuable)
6:1 reflects strict calorific equivalence
10:1 is actually standard reporting equivalence in Canada
$81.09
116.800
76%
146
Equity Value
Plus: Debt
Less: Cash
Other A djustments
Firm V alue
$9,471
2,563
(521)
109.4
$11,623
Operating Metrics
Proved Reserves (MMBoe)
PV-10
987
$4,894
V aluation Metrics
($ / Boe)
Firm Value / PV -10
$11.77
2.4x
10
11
12
2. E&P Valuation
Valuation Overview
Future Development
Opportunities Value
Firm Value
13
NAV / DCF
FV / EBITDA
Financial
Multiples
P/E
P / CFPS
$ / Boe of Reserves
$ / Net Acre
14
Suitability
Valuation Methodologies
NAV / DCF analysis incorporates operating characteristics of upstream assets, and is the most commonly used
valuation methodology; multiple-based valuation provides market-based reference points.
Pros
NAV / DCF
Cons
Precedent
Transactions
15
Oil
Gas
Pinedale /
Jonah
Source
Marcellus
EUR (Bcfe)
4.8
HPDI
Type Curve
--
HPDI
--
3/7/11 Investor
Presentation and
peer decline
rates
--
($14.50)
UPL 2008
Reserve Report
--
92%
3/7/11 Investor
Presentation
102%
12%
UPL 3Q10
Transcript
5%
$0.46
UPL 3Q10
Transcript
$0.24
UPL 3Q10
Transcript
$0.29 (3)
UPL 3Q10
Transcript
Included in
LOE and Capex
UPL 3Q10
Transcript
2011
2012
2013
2014
2015
>2016
$110.77 $109.41 $105.81 $103.53 $102.46 $102.46
4.44
4.93
5.31
5.65
6.03
6.03
3/7/11 Investor
Presentation
Source
4.2(1)
Assumptions
(1) Weighted average of North and South assuming ~65% North composition.
Net Remaining Well Locations
(2) Includes $0.25/mcfe of gathering expense.
(3) REX transportation cost reflected at the corporate level.
(4) Based on company disclosed net wells / gross wells.
16 (5) Pinedale wells based on company disclosed total gross wells as of 12/31/09 less wells brought online in 2010.
Marcellus gross well locations based on 3,000 net locations and a 45% working interest.
3/7/11 Investor
Presentation
Peer assumption
$4.6
3/7/11 Investor
Presentation
$4.8(1)
3/7/11 Investor
Presentation
55.5% (4)
1/12/11 Investor
Presentation
45.0%
1/12/11 Investor
Presentation
80%
UPL 2008
Reserve Report
86%
17
3/7/11 Investor
Presentation
10
44,000
Company 10K
260,000
11/4/10 UBS
Research
UPL 3Q10
Transcript
Company 10K
80
UPL 3Q10
Transcript
5,335
1/12/11 Investor
Presentation
6,667
Net Wells /
Working Interest
2,964
1/12/11 Investor
Presentation
3,000
UPL 4Q10
Transcript
6,007 (1)
Ne t We lls Drille d
Pinedale
Marcellus
Total Net Wells
Pinedale
45%
Marcellus
55%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
>2020
119
82
119
82
119
82
119
82
119
82
119
82
119
82
119
82
119
82
119
82
1,814
2,178
3,006
3,000
201
201
201
201
201
201
201
201
201
201
3,992
6,007
Total
250
250
2012
2013
2014
2015
2016
2017
2018
2019
2020
>2020
100
119
71
75
161
94
69
193
112
63
219
127
60
242
140
57
261
151
55
279
161
53
295
171
51
310
180
999
9,412
9,597
1,744
11,545
10,837
290
290
329
330
373
--
409
--
441
--
470
--
495
--
518
--
541
--
20,008
--
24,125
--
Marcellus
48%
22,381
PDP
Pinedale
Marcellus
(2)
Pinedale
52%
1,400
Net Production (MMcfe/d)
Total (Bcfe)
Total =
Total
1,200
1,000
800
600
400
200
0
2011
17
2012
2013
2014
2015
2016
2017
2018
2019
2020
Notes: (1) Pinedale wells based on company disclosed total gross wells as of 12/31/09 less expected wells brought online in 2010 (55% working interest). Marcellus gross well locations based on
3,000 net locations and 45% working interest per 4Q10 transcript.
(2) Excludes PDP of 1,744 Bcfe.
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
1,570
240,957
1,608
280,426
1,746
318,939
1,969
361,673
2,155
396,318
2,328
427,258
2,486
454,622
2,629
479,174
2,762
501,837
2,888
523,302
3,008
543,232
250,376
250,000
686
17.2%
290,077
290,000
795
15.9%
329,413
330,000
903
13.6%
373,489
409,250
441,227
469,537
494,948
518,407
540,633
561,281
$110.77
4.44
$109.41
4.93
$105.81
5.31
$103.53
5.65
$102.46
6.03
$102.46
6.03
$102.46
6.03
$102.46
6.03
$102.46
6.03
$102.46
6.03
$102.46
6.03
$754
250
149
$508
596
357
$403
855
510
$391
1,083
646
$382
1,304
780
$361
1,440
860
$345
1,558
930
$332
1,664
993
$319
1,761
1,051
$311
1,851
1,105
$306
1,933
1,155
$1,153
148
$1,460
9
$1,769
0
$2,120
0
$2,467
0
$2,661
0
$2,834
0
$2,989
0
$3,132
0
$3,267
0
$3,393
0
Total Revenue
$/mcfe (excl hedges)
$/mcfe (incl hedges)
$1,302
$4.61
5.20
$1,470
$5.07
5.07
$1,769
$5.37
5.37
$2,120
$5.68
5.68
$2,467
$6.03
6.03
$2,661
$6.03
6.03
$2,834
$6.04
6.04
$2,989
$6.04
6.04
$3,132
$6.04
6.04
$3,267
$6.04
6.04
$3,393
$6.05
6.05
Operating Costs
Production and Property Taxes
LOE
Corporate Transportation Costs
G&A
$162
70
61
24
$105
161
63
24
$81
225
68
24
$77
278
75
24
$74
327
81
24
$70
361
87
24
$67
390
92
24
$64
416
96
24
$62
441
100
24
$60
463
104
24
$59
483
108
24
$318
$1.27
$353
1.22
$398
1.21
$455
1.22
$506
1.24
$542
1.23
$573
1.22
$601
1.21
$627
1.21
$652
1.21
$675
1.20
2011
1,023
13.4%
1,121
9.6%
1,209
7.8%
1,286
6.4%
1,356
5.4%
1,420
4.7%
1,481
4.3%
1,538
3.8%
EBITDA
EBITDA Margin
$/mcfe
$983
76%
$3.93
$1,116
76%
$3.85
$1,371
78%
$4.16
$1,666
79%
$4.46
$1,960
79%
$4.79
$2,119
80%
$4.80
$2,261
80%
$4.81
$2,387
80%
$4.82
$2,505
80%
$4.83
$2,615
80%
$4.84
$2,718
80%
$4.84
Less: Interest
$/mcfe
$89
$0.35
$88
$0.30
$87
$0.26
$87
$0.23
$84
$0.21
$79
$0.18
$74
$0.16
$65
$0.13
$53
$0.10
$33
$0.06
$20
$0.04
$0
$0.00
$38
$0.13
$118
$0.36
$216
$0.58
$318
$0.78
$371
$0.84
$420
$0.90
$467
$0.94
$511
$0.99
$555
$1.03
$596
$1.06
$547
393
$552
395
$547
395
$549
393
$549
395
$549
395
$549
393
$547
395
$549
393
$549
395
$549
395
$940
$947
$942
$942
$945
$945
$942
$942
$942
$945
$945
$43
$224
$420
$613
$725
$824
$913
$998
$1,083
$1,158
$4,135
$4,696
$5,854
Total Capex
Free Cash Flow
Cash Balance
Total Debt
Debt / EBITDA
18
($45)
$71
$1,605
1.6x
$71
$1,562
1.4x
$293
$713
$1,226
$1,889
$2,597
$3,310
$1,560
1.1x
$1,560
0.9x
$1,460
0.7x
$1,398
0.7x
$1,282
0.6x
$1,082
0.5x
$909
0.4x
$387
0.1x
$387
0.1x
$48.12
$16,000
$13,909
$12,000
$13,909
$4,916
$1,489
$12,562
$244
$12,420
$142
$12,319
$8,993
Implied
Share
Price
$10,726
$1,593
$70.01
$10,726
Relative to
Current
$8,000
$6,124
$4,000
45%
$2,870
$2,870
$0
P DP (P V-10)
Net Resource
(Bcfe)
1,744
11,545
10,837
Total Resource
Value
Net Debt
Hedges
G&A
(2)
Income Taxes
Asset Value
PDP
Rockies
Marcellus
$6,422
$41,144
$54,432
$20,276
$1.65
$0.53
$0.45
$0.58
24,125
Valuation Metrics
PV 10 / 2011E Production ($ / mcfe/d)
PV-10 / Resources ($ / mcfe)
PV-10 / Risked Resources ($ / mcfe)
(4)
Total
$1.65
$0.38
$0.33
$0.48
NA
$139,171
$18,907
NA
19
(3)Net
Marcellus
10,000
Production (Mcfe / d)
Months
36
12
24
5,015
--
1,325
(74%)
881
(34%)
685
(22%)
48
60
571
(17%)
495
(13%)(1)
1,000
100
10
1
51
101
151
Months
201
251
301
Return Sensitivities
20
3.200
13.4%
18.0
23.2
29.2
35.9
43.3
Strip
21.1%
40.1%
32.9%
40.1%
50.3%
27.5%
5.200
40.9%
54.5
70.5
89.3
111.2
136.7
61.9%
($/Bbl / $/MMBtu)
$3,800
3.5x
$70.00 / $4.00
3.9
$80.00 / $4.50
4.4
$90.00 / $5.00
4.8
$100.00 / $5.50
5.3
$110.00 / $6.00
5.8
$120.00 / $6.50
Strip
($/Bbl / $/MMBtu)
$70.00 / $4.00
$80.00 / $4.50
$90.00 / $5.00
$100.00 / $5.50
$110.00 / $6.00
$120.00 / $6.50
50.0%
Commodity Price
64.5%
ROI
Commodity Price
($/Bbl / $/MMBtu)
($/Bbl / $/MMBtu)
Commodity Price
Commodity Price
IRR
$70.00 / $4.00
$80.00 / $4.50
$90.00 / $5.00
$100.00 / $5.50
$110.00 / $6.00
$120.00 / $6.50
Strip
4.9x
3.200
2.1x
2.4
2.6
2.9
3.2
3.5
2.8x
3.5x
3.2x
5.200
3.4x
3.8
4.3
4.7
5.2
5.6
3.4x
3.9x
3.9x
4.3x
4.8x
Year
21
Gross
Wells
Drilled
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Rem.
396
399
397
397
398
398
397
397
397
398
398
397
397
399
396
6,120
Total
12,081 -
Net
Wells
Drilled
201
202
201
201
202
202
201
201
201
202
202
201
201
202
201
2,985
6,007 -
Revenue
Natural Gas
($M)
Net Production
Oil
Natural Gas
(MBbls)
(MMcf)
Total Net
Production
(MMcfe)
1,570
1,608
1,746
1,969
2,155
2,328
2,486
2,629
2,762
2,888
3,008
3,118
3,217
3,312
3,394
73,519
240,957
280,426
318,939
361,673
396,318
427,258
454,622
479,174
501,837
523,302
543,232
561,800
578,731
595,244
609,750
16,581,507
250,376
290,077
329,413
373,489
409,250
441,227
469,537
494,948
518,407
540,633
561,281
580,509
598,032
615,115
630,112
17,022,618
111,709
23,454,769
24,125,025
$4.44
4.93
5.31
5.65
6.03
6.03
6.03
6.03
6.03
6.03
6.03
6.03
6.03
6.03
6.03
6.03
$4.16
4.66
5.05
5.38
5.75
5.75
5.75
5.75
5.76
5.76
5.76
5.76
5.76
5.76
5.76
5.86
$0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Total
Revenue
($M)
Production
Taxes
($M)
Lease
Op Expense
($M)
Transpo
Costs
($M)
Field Level
EBITDA
($M)
Drilling and
Com pletion
($M)
Field Level
Cash Flow
($M)
Discounted CF
PV-10
($M)
($80,469)
184,600
453,241
747,717
1,040,026
1,199,315
1,342,564
1,469,767
1,586,514
1,695,224
1,798,105
1,896,234
1,984,313
2,064,627
2,147,278
73,007,624
($78,769)
159,410
356,090
534,900
676,739
709,492
722,156
718,798
705,367
685,030
660,616
633,371
602,548
569,816
538,778
5,714,525
Year
Oil
($M)
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Rem.
$151,132
152,652
159,391
175,319
189,585
204,780
218,663
231,252
242,929
254,061
264,598
274,265
282,965
291,309
298,507
7,077,449
$1,001,975
1,307,783
1,609,219
1,945,167
2,277,006
2,456,421
2,615,035
2,757,393
2,888,816
3,013,239
3,128,667
3,236,307
3,334,566
3,430,411
3,514,790
97,209,313
$1,153,108
1,460,435
1,768,610
2,120,486
2,466,590
2,661,201
2,833,698
2,988,645
3,131,745
3,267,300
3,393,265
3,510,573
3,617,531
3,721,720
3,813,297
104,286,761
$125,961
149,111
175,616
208,448
240,648
258,501
274,381
288,620
301,759
314,248
325,921
336,721
346,486
355,990
364,214
8,812,407
$106,563
117,088
130,280
146,723
159,987
171,887
182,448
191,913
200,644
208,938
216,678
223,849
230,342
236,668
242,154
5,939,498
$61,259
62,573
67,519
75,250
81,421
86,990
91,955
96,392
100,480
104,382
108,052
111,421
114,437
117,372
119,858
2,444,000
$859,324
1,131,663
1,395,195
1,690,065
1,984,534
2,143,823
2,284,912
2,411,720
2,528,862
2,639,732
2,742,613
2,838,582
2,926,266
3,011,690
3,087,071
87,090,857
$939,793
947,063
941,953
942,348
944,508
944,508
942,348
941,953
942,348
944,508
944,508
942,348
941,953
947,063
939,793
14,083,233
Total
$10,468,855
$135,726,108
$146,194,963
$12,879,033
$8,705,659
$3,843,361
$120,766,910
$28,230,229
$92,536,680
$13,908,868
($ in millions)
UPL
RRC
EQT
QEP
COG
XCO
$48.21
$39.64
$26.29
$53.40
$46.96
$38.34
$53.23
$20.74
Equity Value
Plus: Debt
Less: Cash
Other Adjustments (1)
Enterprise Value
$7,377
1,560
(71)
0
$8,866
$13,897
1,094
(16)
0
$14,975
$8,046
2,607
(56)
217
$10,815
$8,674
1,061
(3)
155
$9,887
$7,034
2,003
0
191
$9,228
$6,797
1,531
0
97
$8,425
$5,551
975
(56)
0
$6,470
$4,546
1,310
(206)
379
$6,029
$6.17
6.85
$4.66
5.94
$3.53
4.93
$4.49
5.72
$5.09
6.08
$6.48
7.87
$5.40
7.29
$2.62
3.71
$941
1,045
$1,622
2,064
$1,068
1,492
$721
919
$759
907
$1,143
1,388
$564
760
$559
793
$1,024
1,141
$1,684
2,079
$1,378
1,779
$827
1,022
$835
1,011
$1,255
1,489
$642
837
$599
840
Operating Metrics
2011E Cash Flow per Share (3)
2012E Cash Flow per Share (3)
2011E Cash Flow
2012E Cash Flow
(3)
(3)
HK
53%
97
4,937
55%
100
3,392
35%
92
4,442
49%
80
5,220
49%
100
3,031
53%
86
2,701
64%
98
1,499
55%
97
622
705
840
19.3x
7.7
12.2x
6.5
1,211
1,624
1,530
11.2x
6.1
762
877
1,080
12.2x
4.3
428
560
705
28.4x
14.0
438
477
567
32.7x
15.9
678
717
816
12.2x
6.5
407
481
564
18.2x
11.6
385
500
679
10.7x
5.8
$1,489
1.5x
1.3
$0.85
$2,112
1,773
1.4x
1.1
$0.79
$2,135
1,629
$1,078
0.6x
0.5
$0.40
$664
705
$2,551
1.9x
1.4
$2.15
$2,910
2,361
$1,058
1.3x
1.0
$0.48
$1,888
1,499
$2,003
2.4x
2.0
$0.79
$4,202
3,532
$1,531
1.2x
1.0
$0.95
$2,135
1,876
$919
1.4x
1.1
$0.53
$1,910
1,629
$1,105
1.8x
1.3
$1.34
$2,208
1,626
Valuation Metrics
Price /
2011E CFPS
2012E CFPS
7.8x
7.0
8.5x
6.7
8.5x
6.7
7.4x
5.3
11.9x
9.3
9.2x
7.7
5.9x
4.9
9.8x
7.3
7.9x
5.6
Firm Value /
2011E EBITDA
2012E EBITDA
8.7x
7.8
10.1x
7.2
8.9x
7.2
7.8x
6.1
11.9x
9.7
11.0x
9.1
6.7x
5.7
10.1x
7.7
10.1x
7.2
4,390
40%
96
SWN
$2.02
$12,578
10,556
$2.78
$12,338
10,327
$3.03
$9,219
9,786
$3.19
$12,338
10,009
Source: Company filings, investor presentations, Wall Street research. Market data as of 4/15/11.
(1)
Includes adjustments related to non-controlling interest and investments in affiliates.
Based on Q4 2010 production.
(3)
Per Wall Street mean consensus estimates.
22 (2)
$2.23
$17,646
14,016
$1.77
$19,363
16,273
$2.78
$11,748
10,327
$2.40
$13,446
11,471
$4.02
$12,055
8,878
Acquiror
Target / Seller
Location
Delta Petroleum
Piceance
Undisclosed
2009/03/03 Undisclosed
2008/11/03 Devon
Chevron
Chicago Energy
Associates
Dominion
Laramie Energy
Koch Exploration
Undisclosed
Undisclosed
Uinta
Piceance
Piceance
Piceance
Green River Basin
2004/09/01
2004/08/27
2004/08/27
2004/07/22
2004/06/29
2003/06/06
Calpine
Undisclosed
Calpine
Various
SG Interests
MarkWest
2008/05/05 Whiting
2007/06/04
2007/04/18
2006/03/09
2006/01/27
2005/02/23
XTO
Plains E&P
Black Hills
Berry Petroleum
Whiting
Bill Barrett
Pogo Producing
Pogo Producing
Western Gas
Energen
XTO
2003/04/09 XTO
2003/03/11
2002/11/25
2002/11/06
2002/08/01
2002/04/18
2002/04/11
2002/04/01
2001/01/09
Sacramento Municipal
Utility District
XTO
Westport Resources
EnCana
EnCana
MRO; XTO
Bill Barrett
Texaco
Transaction
Value ($ MM)
(Bcfe)
R/P
Transaction Value /
Reserves Daily Prod.
($ / Mcfe) ($ / Mcfe/d)
$400
32
9.2
95%
NA
9.5
$3.22
$11,124
$3.03
$10,486
113
63
14.5
92
81
11.9
1.49
6,464
1.40
6,091
Orion Energy
Piceance
258
150
24.0
100
NA
17.1
0.65
4,031
0.55
3,448
Berry Petroleum
Denver-Julesburg (D-J)
154
126
18.0
100
NA
19.2
1.11
7,778
1.00
7,035
Uinta
779
210
40.0
100
66
14.4
3.71
19,483
2.34
12,268
365
115
19.0
98
22
16.6
3.17
19,211
1.34
8,136
2,500
945
51
159
65
1,060
384
40
26
50
200.0
36.0
1.9
1.0
6.3
95
97
100
100
98
64
NA
22
NA
68
14.5
29.2
57.0
71.2
22.0
1.69
2.13
1.27
3.19
1.29
8,937
22,692
26,500
83,000
10,317
0.96
1.22
0.69
1.57
0.91
5,075
12,961
14,415
40,886
7,310
Denver-Julesburg (D-J)
105
87
8.8
100
39
27.1
1.21
11,932
0.84
8,348
Piceance
San Juan Basin
San Juan Basin
San Juan Basin
San Juan Basin
San Juan Basin
Raton/Hugoton/San
Juan
137
106
83
82
263
61
50
56
44
60
240
50
NA
8.4
6.6
NA
NA
9.5
98
100
100
100
80
100
56
NA
NA
NA
50
NA
NA
18.3
18.3
NA
NA
14.4
2.74
1.89
1.89
1.37
1.03
1.21
NA
12,607
12,591
NA
NA
6,369
2.16
1.40
1.40
1.00
1.10
0.87
NA
9,354
9,342
NA
NA
4,585
400
311
60.0
100
77
14.2
1.20
6,232
1.06
5,499
El Paso
138
163
16.0
100
NA
28.0
0.84
8,625
0.65
6,634
JM Huber
El Paso
Williams Companies
El Paso
CMS Energy
Williams Companies
EnerVest
160
502
350
293
101
74
121
154
600
395
300
110
58
204
29.0
80.0
106.7
38.0
14.0
27.9
21.5
100
100
96
85
100
100
100
79
47
68
NA
NA
NA
NA
14.5
20.5
10.1
21.6
21.6
5.7
26.0
1.04
0.84
0.79
0.93
0.67
1.23
0.53
5,517
6,275
2,911
7,349
5,253
2,573
5,056
1.16
0.98
1.12
1.50
0.88
1.57
0.38
6,156
7,369
4,151
11,872
6,909
3,280
3,559
53
75
5.2
100
20
39.5
0.65
9,309
0.65
9,437
98%
100
54% 22.5
60
18.3
$1.53
1.22
$12,886
8,625
$1.21
1.08
$8,984
7,310
Williams Companies
Uinta
Mean
Median
23
Proved Reserves
(MMcfe/d) % Gas % PD
Acquiror
Target / Seller
Location
2010/11/15
2010/11/09
2010/10/06
2010/09/22
2010/08/31
2010/07/20
2010/08/05
2010/05/28
2010/05/28
2010/05/10
2010/04/21
2010/04/09
2010/03/26
2010/03/15
2010/03/02
2010/02/16
2010/01/19
2009/12/21
2009/10/29
2009/09/30
2009/09/30
2009/09/18
2009/08/19
2009/06/22
2009/06/09
2008/11/11
2008/11/04
2008/06/30
2008/04/15
Newfield Exploration
Chevron
Chesapeake Energy
Atinum Partners
Sumitomo
Trans Energy
Reliance Industries
Royal Dutch Shell
Penn Virginia
BG Group
Atlas, Reliance
Reliance Industries
Statoil Hydro
CONSOL Energy
EQT
Mitsui
Chesapeake Energy
Ultra Petroleum
Magnum Hunter Resources
Chesapeake Energy
Fortuna Energy
Undisclosed
Enerplus Resources
Williams Companies
Kohlberg Kravis Roberts
Statoil Hydro
Carrizo Oil & Gas
Antero Resources
XTO Energy
EOG Resources
Marcellus
Atlas Energy
Marcellus
Marcellus
Anschutz Exploration
Gastar Exploration
Marcellus
Rex Energy
Marcellus
Republic Energy
Marcellus
Carrizo Oil & Gas
Marcellus
East Resources / Kohlberg Kravis Roberts
Marcellus
Marcellus
Undisclosed
EXCO Resources
Marcellus
Undisclosed
Marcellus
Atlas Energy
Marcellus
Chesapeake Energy
Marcellus
Dominion Resources
Marcellus
Undisclosed
Marcellus
Anadarko
Marcellus
Epsilon Energy
Marcellus
NCL Appalachian Partners
Marcellus
Triad Energy
Marcellus
Wyoming County Landowners Group Marcellus
Friendsville Group
Marcellus
Epsilon Energy
Marcellus
Chief Oil & Gas
Marcellus
Rex Energy
Marcellus
East Resources
Marcellus
Chesapeake Energy
Marcellus
Avista Capital Partners
Marcellus
Dominion Resources
Marcellus
Linn Energy
Marcellus
Mean JV
Median JV
24
Total
Value ($ MM)
$405.0
3,703.0
850.0
70.0
140.0
27.0
392.0
4,700.0
19.5
950.0
191.9
1,700.0
253.0
3,475.0
280.0
1,400.0
100.0
400.0
81.0
212.8
192.0
12.7
406.0
33.0
350.0
3,375.0
71.5
347.0
600.0
Net
Acreage
50,000
342,000
500,000
17,100
15,555
3,800
62,600
650,000
10,000
93,000
42,344
120,000
59,000
491,393
58,000
100,000
5,750
80,000
47,000
37,000
35,000
3,734
116,000
22,000
650,000
585,000
77,500
114,259
152,000
$ / Acre
$8,100
7,084
1,700 (1)
4,094
9,000
7,105
6,262
6,385
1,950
(2)
8,073
4,532
14,167
4,288
(3)
4,797
4,828
14,000
(4)
10,530
5,000
1,000 (5)
5,751
5,486
3,401
3,500
1,500
538
5,769
923
3,037 (6)
1,645
$6,696
6,016
$4,047
4,797
Drivers of Value
Good Oil & Gas Property = Good Real Estate
Good Rock
Attractive Location
Low Costs
Quality hydrocarbon
Rockies vs. Appalachia
Ability of the hydrocarbon to
flow through rock
(permeability)
Some rock tougher to drill
Proximity to Transportation
Infrastructure
Friendly operating
environment
25
26
Operating Drivers
Revenue = Price * Quantity
Expenses
Less: royalties
Net Production
Less: Basis
Less / Plus: Quality differences
Less: Transportation Costs
= Realized Prices
27
Calculating Production
Current Production
Net wells = gross wells * average working interest (W.I.)
Gross: wells in which you own an interest
Working interest: percent that you own
Note: all company-level disclosure is generally on a net basis
Production = net wells * average net production per well
Net production per well = wellhead production less royalties
Future Production
Remaining drilling inventory (locations)= risked acreage / well spacing
Production = type curve * wells drilled
Risked acreage = total acreage * risk rate
Wells drilled per year = rigs operating * (365 / spud-to-spud)
28
Set @ 295'
Cmt w/ 210 sxs.
KOP @ 7440'
5 1/2" P-110, 17# csg set @ 13057'
Cmt w/ 880 sxs
TD @13057'
90.57 deg
7838' TVD
PBD @ 13000'
Top of
8270'
8700'
9110'
9496'
10040'
10470'
10910'
11355'
11790'
12230'
12670'
8370'
8470'
8570'
8800'
8900'
8990'
9190'
9280'
9380'
9540'
9590'
9640'
10130'
10230'
10330'
10565'
10675'
10770'
11010'
11110'
11200'
11450'
11550'
11650'
11890'
11990'
12090'
12330'
12430'
12530'
12810'
12950'
9690'
9740'
9790'
9885'
29
175
#2
#3
#4
#5
#7
#8
4930 Laterals
5280
330
660
660
175
175
#6
4930 Laterals
#1
330
Commodity
Benchmark
Pricing
Differentials
Transportation
WTI
Realized
Pricing
Quality
Quality
Brent
Location
Henry Hub
Location
31
$12.00
$ / MMBtu
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
Jan-08
Jul-08
Centerpoint East
Jan-09
Panhandle East
32
Jul-09
Jan-10
Jul-10
Henry Hub
Accounting Discussion
E&P companies may choose from two different accounting methods for exploration and dry well expenses: full cost
or successful efforts.
Full Cost
Successful Efforts
33
34
$
$
5
Worldwide
3
United States
1 Year
3 Years
5 Years
2000
1998-00
1996-00
340 $
1,004 $
5,460
38.0
27.5
7.4
72.9
4.66
4.66
NA
$
$
59.2
70.7
14.7
144.6
6.94
6.94
NA
$
$
66.6
191.3
474.6
732.5
7.45
7.45
NA
$
$
1 Year
3 Years
5 Years
2000
1998-00
1996-00
204 $
640 $
3,908
15.9
29.9
5.9
51.8
3.94
3.94
NA
$
$
17.0
74.8
5.9
97.8
6.55
6.55
NA
$
$
23.1
195.9
320.7
539.8
7.24
7.24
NA
72.9
43.6
167%
144.6
157.5
92%
732.5
216.8
338%
51.8
30.9
168%
97.8
117.0
84%
539.8
175.4
308%
72.9
(6.6)
66.3
43.6
152%
NA
NA
144.6
(120.5)
24.1
157.5
15%
NA
NA
732.5
(184.3)
548.2
216.8
253%
NA
NA
51.8
(6.6)
45.2
30.9
146%
146%
NA
97.8
(104.1)
(6.3)
117.0
(5%)
NA
NA
539.8
(136.5)
403.3
175.4
230%
230%
NA
35
2000
$
$
$
$
31
131
142
304
38.0
27.5
65.5
4.64
4.64
NA
Worldwide
1998-00
$
$
$
$
65.5
43.6
150%
150%
NA
37
323
544
905
59.2
70.7
129.9
6.97
6.97
NA
1996-00
$
$
$
$
129.9
157.5
82%
82%
NA
581
458
965
2,003
66.6
191.3
257.9
7.77
7.77
NA
38.0
38.0
7.99
38.0
43.6
87%
59.2
157.5
38%
$
$
$
$
257.9
216.8
119%
119%
NA
Worldwide
2000
1998-00
1996-00
304 $
905 $
2,003
59.2
59.2
15.29
2000
66.6
66.6
30.07
66.6
216.8
31%
United States
1998-00
28
65
85
178
15.9
29.9
45.8
3.88
3.88
NA
$
$
$
$
45.8
30.9
149%
149%
NA
65
170
358
594
17.0
74.8
91.9
6.46
6.46
NA
1996-00
$
$
$
$
91.9
117.0
79%
79%
NA
162
290
770
1,222
23.1
195.9
219.0
5.58
5.58
NA
219.0
175.4
125%
125%
NA
United States
2000
1998-00
1996-00
178 $
594 $
1,222
15.9
15.9
11.20
15.9
30.9
52%
17.0
17.0
34.85
17.0
117.0
15%
23.1
23.1
52.88
23.1
175.4
13%
2000
$
$
36
$
$
Worldwide
1998-00
1996-00
131
142
273 $
38.0
7.17 $
323
544
868 $
59.2
14.66 $
458
965
1,423
66.6
21.36
38.0
43.6
87%
59.2
157.5
38%
66.6
216.8
31%
Worldwide
2000
1998-00
1996-00
36 $
99 $
3,457
7.4
14.7
474.6
4.90 $
6.73 $
7.28
7.4
43.6
17%
14.7
157.5
9%
474.6
216.8
219%
2000
$
$
$
$
United States
1998-00
1996-00
65
85
150 $
15.9
9.42 $
170
358
528 $
17.0
31.01 $
290
770
1,060
23.1
45.87
15.9
30.9
52%
17.0
117.0
15%
23.1
175.4
13%
United States
2000
1998-00
1996-00
26 $
47 $
2,686
5.9
5.9
320.7
4.41 $
7.89 $
8.38
5.9
30.9
19%
5.9
117.0
5%
320.7
175.4
183%
1998A
1999A
FYE Dec 31
2000A
1997
1999
2000
Total Production
Liquids (MMBBL)
Gas (BCF)
Oil Equivalent (MMBOE 6:1)
1998A
14.5
179.0
44.3
17.8
177.0
47.3
21.1
170.0
49.4
47.0
385.0
111.2
16.76
(2.00)
14.76
13.20
(1.84)
11.37
16.04
(2.15)
13.89
27.72
(2.51)
25.21
16.76
2.30
11.05
1.92
15.76
2.08
25.29
4.13
(3.56)
0.00
11.20
(3.66)
0.00
7.70
(3.23)
0.00
10.66
(5.17)
0.00
20.04
20.58
2.48
14.38
2.08
19.30
2.27
30.37
4.30
(4.09)
7.11
(3.88)
3.82
(3.97)
6.70
(5.13)
14.91
Commodity Differentials
Liquids (US$ / BBL)
Natural Gas (US$ / MCF)
(3.83)
(0.18)
(3.33)
(0.16)
(3.54)
(0.19)
(5.07)
(0.17)
(2.52)
4.59
(1.37)
2.45
(2.83)
3.87
(5.78)
9.13
7.59
6.24
6.46
9.28
242.6
411.7
654.29
197.8
339.8
537.6
333.0
353.6
686.6
1,213.0
1,590.1
2,803.0
(157.8)
0.0
0.0
0.0
0.0
(181.2)
(339.0)
(173.2)
0.0
0.0
0.0
0.0
(183.6)
(356.8)
(159.5)
0.0
0.0
0.0
0.0
(196.2)
(355.7)
(575.0)
0.0
0.0
0.0
0.0
(570.0)
(1,145.0)
1,658.0
315.3
180.8
331.0
(US$ MM)
(111.7)
(64.8)
(139.7)
(US$ MM)
203.6
116.0
191.3
1,015.0
496.4
364.4
527.2
2,228.0
FYE Dec 31
1997A
1998A
1999A
FYE Dec 31
2000A
203.6
181.2
0.0
(48.3)
336.5
116.0
183.6
0.0
(4.5)
295.1
191.3
196.2
0.0
(68.1)
319.4
1,015.0
570.0
0.0
(553.7)
1,031.3
(55.6)
(231.1)
(363.7)
(650.4)
(177.3)
(305.2)
(377.2)
(859.7)
(92.9)
(206.7)
(353.5)
(653.1)
(7,047.0)
(415.0)
(1,054.0)
(8,516.0)
(643.0)
(314.0)
(564.6)
(333.7)
(7,484.7)
12/97 10-K
12/98 10-K
12/99 10-K
12/00 10-K
FYE Dec 31
1997A
1998
FYE Dec 31
1999A
2000A
37
FYE Dec 31
1997A
(1) Based on WTI oil and Henry Hub natural gas spot prices using co's actual production mix in given year
U .S . L a rg e -C a p E x p lo ra tio n a n d P ro d u c tio n S e c to r
Y e a r 2 0 0 0 F u ll C yc le E c o n o m ic s ($ /B O E )
3 -Y r A ll S o u rc e s
2000 L ease
2000
F u ll-C yc le
R e s e rv e R e p la c e O p e ra tin g
G &A
E c o n o m ic
m e n t C o s ts
E xpen ses
C o st
C o s ts
(6 M C F / B b l)
H is to ric a l F u ll C yc le E c o n o m ic s ($ /B O E )
2000
1999
1998
3 -Y r A v e r a g e
(1 9 9 8 -0 0 )
B u rlin g to n
5 .8 0
7 .1 6
0 .0 0
1 2 .9 6
1 2 .9 6
1 1 .1 1
1 1 .4 2
1 1 .8 3
O c e a n E n e rg y
6 .0 8
5 .1 8
0 .0 0
1 1 .2 7
1 1 .2 7
1 1 .0 0
1 2 .4 3
1 1 .5 6
K e rr-M c G e e
5 .5 9
5 .8 4
0 .0 0
1 1 .4 3
1 1 .4 3
1 0 .9 8
1 3 .3 3
1 1 .9 1
P io n e e r N a t R e s
6 .9 4
5 .8 9
0 .0 0
1 2 .8 3
1 2 .8 3
1 2 .1 6
1 2 .8 4
1 2 .6 1
D e v o n E n e rg y
6 .5 7
4 .9 4
0 .0 0
1 1 .5 0
1 1 .5 0
9 .2 9
9 .6 3
1 0 .1 4
X T O E n e rg y
3 .8 1
5 .2 6
0 .0 0
9 .0 7
9 .0 7
8 .8 3
8 .7 8
8 .8 9
A n a d a rk o P e tro le u m
6 .3 0
5 .1 7
0 .0 0
1 1 .4 7
1 1 .4 7
7 .0 8
7 .0 2
8 .5 3
U n o c a l C o rp .
7 .1 0
3 .8 2
0 .0 0
1 0 .9 2
1 0 .9 2
1 0 .5 3
1 1 .4 3
1 0 .9 6
N o b le A ffilia te s
7 .6 5
4 .3 1
0 .0 0
1 1 .9 6
1 1 .9 6
9 .1 9
1 0 .9 4
1 0 .7 0
A p a c h e C o rp .
5 .6 1
3 .2 3
0 .0 0
8 .8 4
8 .8 4
8 .5 5
8 .9 2
8 .7 7
E O G R e s o u rc e s
5 .8 7
3 .2 5
0 .0 0
9 .1 1
9 .1 1
7 .5 5
5 .6 8
7 .4 5
M ean
6 .1 2
4 .9 1
1 1 .0 3
1 1 .0 3
9 .6 6
1 0 .2 2
1 0 .3 0
M e d ia n
6 .0 8
5 .1 7
1 1 .4 3
1 1 .4 3
9 .2 9
1 0 .9 4
1 0 .7 0
38
Iraq
2.50
5.52
Kazakhstan
7.00
Western Canada
9.25
Kuwait
3.80
Alaska
5.70
Mexico
7.20
North Sea
9.85
Saudi Arabia
4.00
Nigeria
5.75
US Lower 48
8.10
Indonesia
10.50
Venezuela
4.23
Oman
6.25
China-Onshore
8.90
China Offshore
11.80
Iran
4.50
Algeria
7.00
Angola
9.00
Brazil
12.50
Abu Dhabi
5.00
Western Siberia
7.00
US GOM
9.00
US Stripper Wells
15.17
Cash Break-Even
WTI Price ($/bbl)
Full-Cycle Cost$10.07
Gen. & Admin. 1.00
Differential to WTI2.28
Break-Even WTI$13.35
(%)
$24.00 Oil
18.7%
$22.00 Oil
15.1%
18
16
14
12
10
11.2%
$18.50 Oil
9.0%
$18.00 Oil
8.1%
$16.00 Oil
4.6%
$14.00 Oil
1.1%
0
$3
$5
$7
$9
$11
$13
1998A
1999A
FYEDec 31
2000A
124.3
23.2
(26.4)
121.1
59.2
55.6
(66.1)
48.7
201.2
88.8
(70.5)
219.5
406.5
39.8
(61.3)
385.0
(8.6)
(57.5)
(66.1)
(10.8)
(59.6)
(70.5)
(4.6)
(56.7)
(61.3)
(456.9)
0.0
115.7
212.4
(128.7)
(538.9)
0.0
21.9
337.3
(179.7)
(191.5)
0.0
390.5
236.0
435.0
(299.7)
2.4
102.7
214.9
20.4
(128.7)
(39.3)
(168.0)
(179.7)
86.0
(93.7)
435.0
(49.6)
385.5
20.4
(44.0)
(23.6)
35%
Correct
Invested Capital
Invested Capital: Beginning
Addition: Net NewInvestment
Invested Capital: Ending
40
1998A
1999A
FYE Dec 31
2000A
121.1
(168.0)
(47.0)
48.7
(93.7)
(45.0)
219.5
385.5
605.0
385.0
(23.6)
361.5
(0.0)
0.0
0.0
0.0
----3,498.4
8.0%
3,498.4
93.7
3,592.0
3,592.0
(385.5)
3,206.6
3,206.6
23.6
3,230.1
280
(231)
287
(68)
257
128
1.4%
(231)
6.1%
(68)
12.0%
128
124
(26)
98
59
(66)
(7)
201
(70)
131
407
(61)
345
1,950
(73)
0
0
1,549
3,425
2,175
(59)
0
0
789
2,905
1,746
(35)
0
0
775
2,486
1,579
(26)
0
0
905
2,458
(c) ROCE I
Reported NOPAT
Capital Employed, beginning
ROCE
98
3,425
2.9%
(7)
3,425
(0.2%)
131
2,905
4.5%
345
2,486
13.9%
(2) ROCE II
(a) Reported NOPAT
Operating EBIT (B4 Expl Expense)
Less: Unlevered Cash Taxes
NOPAT (After-Tax EBIT)
124
(26)
98
----3,498
3,498
94
3,592
3,592
(385)
3,207
3,207
24
3,230
(c) ROCE II
Reported NOPAT
Capital Employed, beginning
ROCE
98
3,498
2.8%
(7)
3,498
(0.2%)
131
3,592
3.6%
345
3,207
10.8%
FYE Dec 31
1997A
1998A
1999A
FYE Dec 31
2000A
59
(66)
(7)
201
(70)
131
407
(61)
345
FYE Dec 31
1997A
1998A
1999A
FYE Dec 31
2000A
(4) ROCE IV
This ROCE is like (3) above except that it keeps running tally of invested capital using EVA framework
This ROCE is like (1) above except that it keeps running tally of invested capital using EVA framework
Economic Profit
Capital charge (WACC[8.0%] * IC)
Economic profit (NOPAT - Cap charge)
FYE Dec 31
1997A
(1) ROCE I
This is traditional ROCE: uses actual cash taxes and capital at historical cost from balance sheet
0.7
(27.1)
(26.4)
FYEDec 31
1997A
124
(44)
81
59
(21)
38
201
(70)
131
407
(142)
264
1,950
(73)
0
0
1,549
3,425
2,175
(59)
0
0
789
2,905
1,746
(35)
0
0
775
2,486
1,579
(26)
0
0
905
2,458
81
3,425
2.4%
38
3,425
1.1%
131
2,905
4.5%
264
2,486
10.6%
35%
35%
124
(44)
81
59
(21)
38
201
(70)
131
407
(142)
264
----3,498
3,498
94
3,592
3,592
(385)
3,207
3,207
24
3,230
(c) ROCE IV
Tax-Adjusted NOPAT
Capital Employed, beginning
ROCE
81
3,498
2.3%
38
3,498
1.1%
131
3,592
3.6%
264
3,207
8.2%
FYE Dec 31
1997A
1998A
1999A
FYE Dec 31
2000A
This is meant to be best economic ROCE measure for an E&P company; accounting-warped DD&A is
replaced with economic cost of generating associated EBITDAX (i.e., production times reserve replacement cost); actual taxes are used; and accounting-capital is replaced w/ economic cost of replacing capital
337
(249)
(26)
61
397
(544)
(66)
(214)
437
(427)
(70)
(60)
621
(302)
(61)
258
302
7.04
2,127
(91)
2,036
762
8.65
6,590
(129)
6,461
677
8.36
5,659
(17)
5,641
605
6.94
4,203
(57)
4,146
(c) ROCE V
Normalized NOPAT
Replacement Cost Capital
ROCE
61
2,036
3.0%
(214)
6,461
(3.3%)
(60)
5,641
(1.1%)
258
4,146
6.2%
35.4
7.04
249
62.9
8.65
544
51.1
8.36
427
43.6
6.94
302
1998A
1999A
FYE Dec 31
1997A
FYE Dec 31
2000A
(6) ROCE VI
This ROCE is like (5) above except that NOPAT is adjusted to have uniform tax rate (across all companies)
337
(249)
(31)
57
397
(544)
52
(96)
437
(427)
(4)
7
621
(302)
(112)
207
302
7.04
2,127
(91)
2,036
762
8.65
6,590
(129)
6,461
677
8.36
5,659
(17)
5,641
605
6.94
4,203
(57)
4,146
57
(96)
207
5. Glossary
41
42
43
44
45
46
6. Additional Resources
Additional Resources
Macro Information:
http://www.naturalgas.org/index.asp
http://www.eia.gov/natural_gas/data_publications/natural_gas_monthly/ngm.html
http://www.woodmacresearch.com/cgi-bin/wmprod/portal/corp/corpPortal.jsp
http://www.ihs.com/
http://www.oilandgasinvestor.com/
http://www.UGcenter.com
http://www.info.drillinginfo.com
Public Filings:
http://www.sec.gov/edgar/searchedgar/companysearch.html
http://www.sedar.com/search/search_form_pc_en.htm
Rig Counts:
http://investor.shareholder.com/bhi/rig_counts/rc_index.cfm
http://www.smithprodserv.com/%24ca88deed-1360-463d-a271-5b959eb7fb87
Glossaries:
http://www.spe.org/industry/docs/GlossaryPetroleumReserves-ResourcesDefinitions_2005.pdf
http://www.spectraenergy.com/Natural-Gas-101/Glossary-of-Energy-Terms/
http://media.corporate-ir.net/media_files/irol/70/70888/pdf/Glossary_of_Drillings_Terms_041805.pdf
http://www.glossary.oilfield.slb.com/default.cfm
http://www.eia.gov/emeu/iea/glossary.html
47