laramie energy, llc · 18/08/2016 · laramie energy, llc (2007 –present) 2007 –restarted as a...
TRANSCRIPT
EnerCom Conference
August 18, 2016
Laramie Energy, LLC
Forward Looking Statements / Disclaimers
The information contained in this presentation has been prepared to assist you in making your own evaluation of the company and does notpurport to contain all of the information you may consider important. Any estimates or projections with respect to future performance havebeen provided to assist you in your evaluation but should not be relied upon as an accurate representation of future results.
Certain statements, estimates and financial information contained in this presentation constitute forward-‐looking statements. Such forward-looking statements involve known and unknown risks and uncertainties that could cause actual events or results to differ materially from theresults implied or expressed in such forward-‐looking statements. While presented with numerical specificity, certain forward-looking statementsare based (1) upon assumptions that are inherently subject to significant business, economic, regulatory, environmental, seasonal andcompetitive uncertainties, contingencies and risks including, without limitation, our ability to reduce costs and improve operating and financialperformance, our assumptions regarding the Piceance basin and the continued low gas price differential in the Piceance basin, our assumptionsregarding regional demand and pipeline capacity, our ability to continue to drill successfully, our assumptions regarding fracking size andreserves, our assumptions regarding drilling and completion capital expense, our ability to continue significant drilling time and cost reductions,our ability to pursue and successfully complete our go-forward business plan, including our ability to grow our asset position, re-start ourcompletion program in 2016, re-start our drilling program, integrate acreage recently acquired, successfully leverage scale, maintain our low-leveraged balance sheet and active hedging program, and achieve production, reserve, and EBITDA growth, and other known and unknown risks(all of which are difficult to predict and many of which are beyond the company's control) and (2) upon assumptions with respect to futurebusiness decisions that are subject to change.
There can be no assurance that the results implied or expressed in such forward-looking statements or the underlying assumptions will be realizedand that actual results of operations or future events will not be materially different from the results implied or expressed in such forward-looking statements. Under no circumstances should the inclusion of the forward-looking statements be regarded as a representation,undertaking, warranty or prediction by the company or any other person with respect to the accuracy thereof or the accuracy of the underlyingassumptions, or that the company will achieve or is likely to achieve any particular results. The forward-looking statements are made as of thedate hereof and the company disclaims any intent or obligation to update publicly or to revise any of the forward-looking statements, whetheras a result of new information, future events or otherwise, except as may be required by applicable law. Recipients are cautioned that forward-looking statements are not guarantees of future performance and, accordingly, recipients are expressly cautioned not to put undue reliance onforward-looking statements due to the inherent uncertainty therein.
Statements of reserves are only estimates and may not correspond to the ultimate quantities of oil and gas recovered. Any reserve estimates
provided in this presentation may include estimated reserves not necessarily calculated in accordance with, or contemplated by, the SEC’s
reserves reporting guidelines. Resource estimates do not take into account the certainty of resource recovery and are therefore not indicative of
the expected future recovery and should not be relied upon. Resource estimates might never be recovered and are contingent on exploration
success, technical improvements in drilling access, commerciality and other factors.
2
Laramie Energy LLC - Introduction
Laramie Energy, LLC is a Denver-based natural gas and oil development company funded
by management, public, and private equity.
Public Equity: Par Pacific Holdings
Private Equity: Avista, EnCap, APriori, Wells Fargo, & Energy Trust
Bank Funding: JP Morgan Chase, Wells Fargo, US Bank, CIBC, and Capital One
Laramie’s fundamental business strategy has changed from an early “prove and move”
strategy to a full scale production growth strategy
Piceance Basin Focused (Western Colorado)
Williams Fork Tight Gas Sand Play
Mancos Shale Gas Play (includes Niobrara)
Concentration leads to reduced costs, EUR improvement, and more robust
development economics 3
Introduction
Colorado’s Piceance Basin
4
One of North America’s largest accumulations of natural gas
5 of the top 50 gas fields in the USA
Peaked at over 1.6 Bcf/d of production
20% of all Rockies gas production
84% gas, 16% NGLs and condensate
Primary operators: Terra, EnCana, ExxonMobil, Laramie, Ursa,
Caerus, Legacy
Core area across Mesa, Garfield, Rio Blanco Counties with virtually
all acreage locked up by existing operators
Over 12,000 wells drilled to date in the Williams Fork play
Emerging deeper play delineated with over 60 vertical and
horizontal wells in the Mancos / Niobrara
Laramie Energy – Brief History
Laramie I (2004 to 2007)
Invested $210 million of equity and $180 million of bank debt in the Piceance Basin
Drilled over 200 wells by ramping up to a 5-rig program
Built-out the area’s midstream system
Sold to Plains Exploration & Production (PXP) for approximately $1.1 billion in May 2007
Laramie Energy, LLC (2007 – present)
2007 – Restarted as a new company with the same private equity investors
2008 – Ran 4 rigs in the Piceance Basin before pulling back due to declining gas prices.
2012 - Acquired all of the bankrupt Delta Petroleum’s assets in the Piceance Basin, primarily by
issuing new equity to Delta’s bondholders through Delta’s Plan of Reorganization.
Delta emerged from bankruptcy under new management as Par Pacific Holdings, Inc.
as a successful operating company and significant Laramie Energy equity owner
(NYSE MKT: PARR)
3/1/2016 – Acquired +1,100 well asset base and approximately 72,000 net lease acres plus
24,000 mineral acres in the Piceance Basin including all of Laramie I’s previous assets sold to
PXP in 2007
5
Piceance Basin Keys for Success
Land / Contracts
High lease Net Revenue Interests (NRI’s)
Favorable Surface Use Agreements (surface ownership is valuable)
Optionality in Gathering & Processing Contracts
Operations
Manufacturing style drilling program
Large volume sandless slickwater fracs
Larger fracs, larger EUR’s
Sandless fracs reduce up-front capital & future LOE
Larger fracs require a change in drilling pattern
Large scale water infrastructure lowers overall water handling costs
Low operating costs (< $0.50/Mcfe)
6
Advantaged Interstate Pipeline Takeaway Capacity & Markets
Unlike the Eastern U.S., the Piceance Basin has completely unconstrained pipeline takeaway capacity due to the
construction of REX and Ruby pipelines and expansions of Kern River and Northwest pipelines during 2007 – 2010
Western market dynamics underpin a low Piceance Basin gas price differential for foreseeable future
Demand growth projected across Western U.S. and Mexico (and potential for LNG exports by 2018)
Production from San Juan Basin (NM) and Uinta Basin (UT) expected to decline
7MEXICO
+3 Bcf/d
Demand
+ 0.5 Bcf/d
Demand
+ 2.0 Bcf/d
Potential LNG Exports by
2018 from Jordan Cove
LNG Project
Piceance
Basin
Rockies Differentials to NYMEX vs. Eastern U.S.
8
Rockies Basis Strengthening Eastern Basis Weakening$0.50
- $1.50
- $1.00
- $0.50
$0.00
- $2.00
$ / MMBtu
($1.76)
($0.19)($0.23)
+ $0.33
($0.42)
($1.06)
2007 – 2010(before pipeline expansion)
2007 - 20102011 to now 3-yr fwd. strip(as of 9/9/15)
2011 to now 3-yr fwd. strip
$1.53
Increase
$1.39
Decrease
Northwest Rockies Index Dominion South Index
Attractive Rockies basis differentials due to regional demand and ample pipeline capacity
Laramie Overview – Summary Information
100% focused in Piceance Basin
+1,200 operated producing wells, +400 non-operated
All vertical/directional except for 2 horizontal wells
Production (June 2016): Net (w/ OBO)
Gas: 109 MMcfd
Condensate 310 Bpd
NGL’s: 4,700 Bpd
Equivalent: 140 MMcfed
Acreage: 367,027 Gross Acres / 136,000 Net Acres (+ 23,756 Acres Mineral Interest)
Drillable Locations:
Mesaverde +8,000 (10’s)
Mancos Shale +5,000 vertical (20’s) or 3,600 horizontal (320’s)
1P Reserves: 1.1 Tcfe Proved Mesaverde + 8 Mancos PDP wells
2P Reserves: 8.2 Tcfe Add Probable Mesaverde locations
3P Reserves: 37 Tcfe Add Possible Mancos locations
9
Primary Producing Formations
Williams Fork
Basin centered gas
Fluvial deposition
3000 feet of stacked sand bars
averaging 6 acres in size
Sourced by Cameo Coals & Mancos
Gas column increases w/ depth
Liquids-rich (1100 Btu w/ NGLs)
Drilled on 10-acre density
Mancos
Deepwater marine shale
Bottom 1/3rd is the Niobrara
3800 feet of productive shale
Over-pressured (>18ppg) in heart of
basin
Dry gas (slightly <1000 Btu/scf)
10
Rollins Structure Map
Mancos/Niobrara BH PSI
11
Piceance Basin Development - Pad Drilling of Directional Wells
Williams Fork Formation
Stacked, tight-sand gas reservoir
Developed on 10-acre density using directional pad drilling
16 to 28 wells per pad to minimize surface foot-print
Called “Mesaverde” formation when combined w/ Iles zones
Laramie’s current drilling pattern:
3-columns of 21-wells
Drilled from 3 pads per section
63 wells per 640-acre section
Pad 1 Pad 2
Pad 3
Williams Fork tight sand reservoirs,
interbedded with shales and coal formations
Pad
Map View: 640-acres, 1 square mile
2,00
0 –
3,00
0 fe
et
Drilling – Demonstrating Repeatable Performance
Significant Drill Cost & Time Reductions Achieved on Williams Fork Wells
12
$300
$400
$500
$600
$700
50 70 90 110 130 150
Com
plet
ion
Cos
t ($M
)
Completion Size (MBBL)
Cost Savings Through Sand-less Completions
Sand Sandless Upcoming Completions
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
1.0 1.2 1.4 1.6 1.8 2.0 2.2
Com
plet
ion
Cos
t per
BB
L ($
/BB
L)
EUR (BCF)
Completion Efficiency
Completions Update
Sandless Completions
Savings from propantless fracs allows for
increased job size without increasing AFE.
Testing indicates no differences between
sand and sandless completions.
Cost Reduction
Cost reduction through efficiency, not reduction in
contract rate.
Originally completed 2 wells at a time.
Currently completing 5-6 wells at a time to
increase water recycling on pad.
Still increasing recoveries while reducing
per unit costs. 13
Sandless Fracs
Sup & Shep 25-11
Piceance 28-11
Upcoming Completions
120 – 150 MBBL
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
50 60 70 80 90 100 110 120 130 140 150
EU
R (
BC
F)
Completion Fluid (MBBL)
EUR vs Completion Volume
Sup and Shep 25-11 Series2Piceance 28-11
Completions - Frac Size Vs Reserves (WF)
14
Frac size (water volume) generally correlates to reserves
28-11 Pad Averages
100,000 Bbls/Well
Upcoming Pads
120 – 150 MBBL/Well
Sand Fracs
Owned Facilities – Compression & Dehydration Assets
15
2 Major sites & 5 Minor sites
270 MMscfd / 45,000 HP in Compression Capacity
Maintenance profile is excellent (high % runtime)
Compression sites integrated to new drilling areas
Current lease compression costs down 30% YTD
ConnCreek Facility CCI & CCII
Propane Refrig with bullets (idle)
Amine Treating Facility (idle)
2.6 MW (4160V) Power Plant (idle)CC I – 45 MMscfdCC II – 85 MMscfd
MVS – 85 MMscfd (140 MM exp.)
Owned Facilities – Water Storage & SWD Infrastructure
16
Cascade Creek 7 Ponds with 450k bbls of fresh & flowback storage
Fully integrated pond, facility, SWD, & pipeline system
3 SWD’s w/ 2000 bwpd capacity
Collbran Valley 2x 500k bbls Treated Water ponds, +600k bbls permitted
New DAF treatment facility (15k bwpd)
New Frac Supply Pump Station (20 bpm)
1x 600k bbls Fresh Water pond
Latest liner system for CO regulatory
6 SWD’s w/ 3500 bwpd capacity
May Snapshot Lease Operating Expenses
17
Ongoing cost-cutting measures:• Continued labor integration
• Working off inventories of chemicals and supplies
• Reverting to plunger-lift, cutting chemical cost (foamers)
• Shorten water hauling routes, use closest injectors
• Limit contractor usage (no crews/equipment on continuous payroll)
• Changing the culture from that of a major to an independent
Operations
May 2016
May LOE - Gross Operated $ $/Month % Cumulative
1 Labor $ 511,000 29% 29%
2 Salt Water Disposal $ 326,000 19% 48%
3 Compression $ 201,000 12% 60%
4 Storm Water Management $ 140,000 8% 68%
5 Automation & Telemetry $ 127,000 7% 75%
6 Chemicals $ 124,000 7% 82%
7 Road & Pad Maintenance, Signage $ 64,000 4% 86%
8 Surface & Misc Equipment M&R $ 49,000 3% 89%
9 Safety, Health & Environmental $ 35,000 2% 91%
10 Fuel, Power & Potable Water $ 23,000 1% 92%
11 Other (multiple categories) $ 134,000 8% 100%
Total Recurring LOE $ 1,734,000 100%
Average Operated Production (Mcf/Month) 4,056,532 (130.9 MMcfd)
Gross Operated LOE/Gross Mcf $ 0.427
29%
19%
12%
8%
7%
7%
4%
3%2%
1%8%
LOE Breakdown
Labor
Salt Water Disposal
Compression
Storm Water Management
Automation & Telemetry
Chemicals
Road & Pad Maintenance, Signage
Surface & Misc Equipment M&R
Safety, Health & Environmental
Fuel, Power & Potable Water
Other (multiple categories)
Drilling Program - Current D&C Cost Structure
Cost/Well Collbran Valley Cascade Creek
Road & Pad (1/20th) $20,000 $13,400
Rig Mob (1/20th) $11,500 $7,700
Drill & Case $375,000 $585,000
Complete $415,000 $474,000
Equip $65,000 $58,000
Total $886,500 $1,139,000
18
Collbran Valley – Based on actual operational performance
Cascade Creek – Based on extrapolation of Collbran Valley costs w/ adjustment for parasite string drilling
19
1.9(1)
Collbran Valley - Williams Fork
1.9 Bcf Gross EUR/Well 100% WI 87% NRI
0.886$ MM Gross Drill and Complete Cost
CIG Gas Price
($/MMBtu)
Nymex Oil
Price
($/bbl)
NGL Price
($/gal)
NPV10
($M/Well)ROR (%)
$2.00 $50.00 - 12 10%
$2.25 $50.00 - 188 16%
$2.50 $50.00 - 364 23%
$2.75 $50.00 - 541 29%
$3.00 $50.00 - 717 36%
$3.25 $50.00 - 893 42%
$3.50 $50.00 - 1,070 49%
$4.00 $50.00 - 1,423 73%
$4.50 $50.00 - 1,775 88%
$5.00 $50.00 - 2,128 97%
1.9 Bcf Gross EUR/Well 100% WI 93% NRI
0.821$ MM Gross Drill and Complete Cost
CIG Gas Price
($/MMBtu)
Nymex Oil
Price
($/bbl)
NGL Price
($/gal)
NPV10
($M/Well)ROR (%)
$2.00 $50.00 $0.24 196 17%
$2.25 $50.00 $0.24 378 25%
$2.50 $50.00 $0.24 560 32%
$2.75 $50.00 $0.24 742 40%
$3.00 $50.00 $0.24 925 49%
$3.25 $50.00 $0.24 1,107 65%
$3.50 $50.00 $0.24 1,289 78%
$4.00 $50.00 $0.24 1,653 96%
$4.50 $50.00 $0.24 2,017 110%
$5.00 $50.00 $0.24 2,382 >100
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7S 96W
6S 97W
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7S 97W
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2322
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10/12Niobrara 4MM/d
Red Pinnacle Unit
FEET
0 4,903
PETRA 6/7/2016 10:33:27 AM
Cascade Creek - Williams Fork EURs (Bcf/Well)
20
1.0 – 1.6 BCF
1.6 BCF
1.6 Bcf Gross EUR/Well 100% WI 99.4% NRI
1.136$ MM Gross Drill and Complete Cost
CIG Gas
Price
($/MMBtu)
Nymex
Oil Price
($/bbl)
NGL Price
($/gal)
NPV10
($M/Well)ROR (%)
$2.00 $50.00 $0.28 235 18%
$2.25 $50.00 $0.28 392 25%
$2.50 $50.00 $0.28 549 30%
$2.75 $50.00 $0.28 706 36%
$3.00 $50.00 $0.28 863 42%
$3.25 $50.00 $0.28 1,021 48%
$3.50 $50.00 $0.28 1,178 59%
$4.00 $50.00 $0.28 1,493 80%
$4.50 $50.00 $0.28 1,807 90%
$5.00 $50.00 $0.28 2,122 97%
Well Count By Net Revenue Interest
21
0
200
400
600
800
1000
1200
1400
1600
1800
2000
>75% and ≤80% >80% and ≤82.5% >82.5% and ≤85% >85% and ≤87.5% >87.5% and ≤90% >90% and ≤92.5% >92.5% and ≤95% >95%
Well Count
BDU BRUSH CREEK CASCADE CREEK COLLBRAN VALLEY EAST PLATEAU HELLS GULCH I-70 CORRIDOR
Well Count Internal Rate of Return at Current Strip prices
22
0
200
400
600
800
1000
1200
1400
0% 0-5% 5-10% 10-15% 15-20% 20-25% 25-30% 30-35% 35-40% 40-45% 45-50% 50-100%
ROR Count by Field Williams Fork Only
BDU BRUSH CREEK CASCADE CREEK COLLBRAN VALLEY EAST PLATEAU HELLS GULCH I-70 CORRIDOR
Mancos Shale 2nd Largest Shale Gas Resource Base in U.S.
23
Mancos / Niobrara Structure Map
Deep structure is similar to
shallower structure (Rollins)
except the base of the
syncline moves North
Collbran Valley is situated at
shallower drilling depths than
Grand Valley
Gas is richer at shallower
depths but also lower pressure
Oil rim is very thin and
generally contains non-
flowable hydrocarbons
1000’ Contours
Regional Mancos Stratigraphic Cross Section
WPX ENERGY ROCKY MOUNTAIN LLCFEDERAL #GM 743-4
GM 743-405045209120000
Twn-Rge-Sec : T7S R96W S34PICEANCE ENERGY LLC
REPPO34-14A
05045185300000
Twn-Rge-Sec : T9S R95W S24PICEANCE ENERGY LLC
HAWXHURST19-13A
05077101660000
Twn-Rge-Sec : T9S R94W S11TERRA RESOURCES INC
MCDANIEL1-11
05077083450000
Twn-Rge-Sec : T9S R93W S19PICEANCE ENERGY LLC
BRUTON19-14B
05077100940000
Twn-Rge-Sec : T7S R92W S34MOBIL OIL CORP
O`CONNELLF11X-34P
05045067230000
Twn-Rge-Sec : T6S R92W S15ANTERO RESOURCES PICEANCE CORP
DIXON FEDERALB8
05045143680000
<26,615FT> <67,202FT> <27,002FT> <14,680FT> <69,991FT> <43,768FT>
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HS=6188
PETRA 6/19/2013 11:06:01 AM
Rollins
Marapos
47.2 MilesA A’
Cozzette
Corcoran
Frontier
Hot Marker
Meeker
Niobrara
Juana Lopez
Dakota
24
Regional section shows consistency of Mancos Stratigraphy across basin
M
A
N
C
O
S
Laramie in Mancos/Niobrara Fairway with 8-14 MM/d IP30’s
Laramie in Mancos/Niobrara Fairway with 8-14 MM/d IP30’s
25
WPX Beast H-Wells
Encana Orchard
3 Layer H-Wells
Black Hills H-Wells
w/Cond & NGL’s
ECA Kirkendale
Flats 10+BCF Well
Encana Hi IP Wells
LE Vertical-Niobrara
LE_OXY H- Well
Laramie Energy Offset By High IP/EUR H-Wells
Mancos Resource Play with Stacked Horizontal Potential
Mancos Shale (includes Niobrara)
26
Nio
brar
a S
ectio
nW
illia
ms
Fo
rk F
orm
atio
n
Man
cos
Sh
ale
(+40
00’)
2-Mile Horizontal LateralVertical WellboreStacked Horizontal Laterals
Mancos/Niobrara Horizontal Economics – “Art of the Possible”
27
Laramie Energy, LLC
1 Mile Niobrara HorizontalDevelopment CaseEnterprise Processing10.0 Bcf Gross EUR/Well 100% WI 82.5% NRI
4.56$ MM Gross Drill and Complete Cost
CIG Gas
Price
($/MMBtu)
Nymex
Oil Price
($/bbl)
NGL Price
($/gal)
NPV10
($M/Well)ROR (%)
$2.00 $50.00 $0.35 (582) 7%
$2.25 $50.00 $0.35 401 13%
$2.50 $50.00 $0.35 1,383 20%
$2.75 $50.00 $0.35 2,366 29%
$3.00 $50.00 $0.35 3,349 39%
$3.25 $50.00 $0.35 4,332 49%
$3.50 $50.00 $0.35 5,314 67%
$4.00 $50.00 $0.35 7,280 93%
$4.50 $50.00 $0.35 9,245 120%
$5.00 $50.00 $0.35 11,211 >100
-20%
0%
20%
40%
60%
80%
100%
(2,000)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
$2
.00
$2
.50
$3
.00
$3
.50
$4
.00
$4
.50
$5
.00
IRO
R
NP
V (
$M
)
CIG Gas Price ($/MMBtu)
1 Mile Niobrara HorizontalEnterprise Processing
NPV10 ($M/Well)
ROR (%)
Goal is to reduce drill and complete costs using latest lessons learned in the
DJ Basin Niobrara Program
Laramie Energy “Production Growth” Strategy Summary
Premier position in a prolific gas resource basin with the following attributes:
Repeatable
Competitive returns
Long life
Consistent results
Significant running room
Operating Control
Mancos shale upside
Laramie will continue to focus operations and build value by conducting a highly efficient, low-risk development program
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