Empresa Energy, LP Jeff Elkin IPAA 2009 PCC Empresa 2008 Monetization January 14, 2009.
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Transcript of Empresa Energy, LP Jeff Elkin IPAA 2009 PCC Empresa 2008 Monetization January 14, 2009.
Empresa Energy, LPEmpresa Energy, LPJeff ElkinJeff Elkin
IPAA 2009 PCCIPAA 2009 PCCEmpresa 2008 MonetizationEmpresa 2008 Monetization
January 14, 2009January 14, 2009
Empresa Energy LP2
EELP Overview & Haynesville PositionEELP Overview & Haynesville Position
EELP is a EnCap Investments Fund V portfolio company with a drill-bit growth EELP is a EnCap Investments Fund V portfolio company with a drill-bit growth strategy focusing on East Texas and North Louisianastrategy focusing on East Texas and North Louisiana
While executing development program, Haynesville Shale play exploded due to While executing development program, Haynesville Shale play exploded due to public announcements from Chesapeake and Petrohawkpublic announcements from Chesapeake and Petrohawk
Touted highly attractive economics and the expansive acreage position in Touted highly attractive economics and the expansive acreage position in East Texas and North LouisianaEast Texas and North Louisiana
EELP held 30,000 acres within the core Haynesville areaEELP held 30,000 acres within the core Haynesville area
Acreage values escalated from $250/acre to $10,000/acre in one monthAcreage values escalated from $250/acre to $10,000/acre in one month
Acreage competition was driven by three primary playersAcreage competition was driven by three primary players
EELP had a very good relationship with all three companies EELP had a very good relationship with all three companies
EELP needed a strategy in order to capture the potential valueEELP needed a strategy in order to capture the potential value
Empresa Energy LP3
EarlyEarly 2008 Haynesville Risks/Concerns 2008 Haynesville Risks/Concerns Few Haynesville wells (Few Haynesville wells (limited public data and technical analysis)limited public data and technical analysis)
Potential for acreage prices to fall due to any poor Haynesville well results or Potential for acreage prices to fall due to any poor Haynesville well results or one of the primary competitors quits leasing (now we have seen that happen)one of the primary competitors quits leasing (now we have seen that happen)
Lease expirations were imminent and EELP could lose value by the dayLease expirations were imminent and EELP could lose value by the day
Large portions of acreage not HBP in deeper intervalsLarge portions of acreage not HBP in deeper intervals
Capital and resources are immense and unknown to develop HaynesvilleCapital and resources are immense and unknown to develop Haynesville
EELP’s financial position vs. capital required for developmentEELP’s financial position vs. capital required for development
30,000 acres – @80 acres/well – 375 wells – $3 billion net cost!30,000 acres – @80 acres/well – 375 wells – $3 billion net cost!
AMI’s and surface restrictions burdened portions of propertiesAMI’s and surface restrictions burdened portions of properties
If EELP sells all of the deep rights and the Haynesville wells are as good as If EELP sells all of the deep rights and the Haynesville wells are as good as advertised, EELP could leave substantial value on the tableadvertised, EELP could leave substantial value on the table
If EELP retains a working interest, which company is the best partner to executeIf EELP retains a working interest, which company is the best partner to execute
Empresa Energy LP
Field Locations North LouisianaField Locations North Louisiana
Elm Grove
Sligo
Caspiana
Holly
Shreveport
Empresa Energy LP
Empresa Acreage in Haynesville PlayEmpresa Acreage in Haynesville Play
Stonewall Bistineau
Woodardville
Clearlake
CHK Johnson Branch
EnCana Adcock 3
Empresa Energy LP6
Strategy – Analyzing Our Acreage PositionStrategy – Analyzing Our Acreage Position
30,000 acre net position in 4 main projects30,000 acre net position in 4 main projects Two prospects were fairly inactive with our model (Stonewall, Bistineau)Two prospects were fairly inactive with our model (Stonewall, Bistineau) One project operated by partner with ongoing low impact drilling (Clearlake)One project operated by partner with ongoing low impact drilling (Clearlake) One ongoing One ongoing operatedoperated project making 5+ MMCFD toward future sales point (Woodardville) project making 5+ MMCFD toward future sales point (Woodardville)
Stonewall (6,900 net Haynesville acres)Stonewall (6,900 net Haynesville acres) Negotiated drill to earn with experienced local operatorNegotiated drill to earn with experienced local operator
Tests included Haynesville exposureTests included Haynesville exposure Multiple stage deal with Horizontal Haynesville as goalMultiple stage deal with Horizontal Haynesville as goal
Woodardville (5,100 net Haynesville acres)Woodardville (5,100 net Haynesville acres) Retain deep rights and incorporate into ongoing development programRetain deep rights and incorporate into ongoing development program Gives ‘new’ deep buyer stable cash flow from the shallow production and adds big Gives ‘new’ deep buyer stable cash flow from the shallow production and adds big
excitement to shallow buyerexcitement to shallow buyer
Evaluate Market Value of Haynesville Rights in Remaining Two Areas Evaluate Market Value of Haynesville Rights in Remaining Two Areas (Clearlake, Bistineau)(Clearlake, Bistineau)
18,000 net acres and very good working knowledge to lease more if deal moves18,000 net acres and very good working knowledge to lease more if deal moves Deep tests help evaluate shallow targetsDeep tests help evaluate shallow targets
Empresa Energy LP
Divestment Acreage as of 06/01/08Divestment Acreage as of 06/01/08
Bistineau
Clearlake
Empresa Energy LP
How to Manage the ProjectHow to Manage the Project
Board decided to act quickly, use internal contacts and evaluate Board decided to act quickly, use internal contacts and evaluate decisions continuously, lots of communicationdecisions continuously, lots of communication
Retain option to bring in formal advisor if neededRetain option to bring in formal advisor if needed Dealt only with ‘Decision Level’ contacts at ‘Key” players already Dealt only with ‘Decision Level’ contacts at ‘Key” players already
familiar with play (negotiated with 5 companies)familiar with play (negotiated with 5 companies) ‘‘Key’ players must have shown deep pockets and ability to do a Key’ players must have shown deep pockets and ability to do a
deal.deal. Initial contacts by phone and email to judge interestInitial contacts by phone and email to judge interest Initial proposals were sufficient and similar enough to help board Initial proposals were sufficient and similar enough to help board
decide to:decide to: Proceed with the ideaProceed with the idea Retain some interest to keep upside exposureRetain some interest to keep upside exposure Keep all contacts in negotiations until best offer was obviousKeep all contacts in negotiations until best offer was obvious
Empresa Energy LP9
Transaction ResultsTransaction Results
Sold 90% of Haynesville rights only in Bistineau and Sold 90% of Haynesville rights only in Bistineau and ClearlakeClearlake
EELP participates in Haynesville upside and retains 100% EELP participates in Haynesville upside and retains 100% of shallow rightsof shallow rights
Signed PSA in one week and closed within one month of Signed PSA in one week and closed within one month of negotiating termsnegotiating terms
Company received ~ $190MM for deep rights Company received ~ $190MM for deep rights
Cost basis in acreage: ~ $15MMCost basis in acreage: ~ $15MM
Empresa Energy LP
EELP Current PlansEELP Current Plans
Participating in developing remaining Haynesville Participating in developing remaining Haynesville acreage acreage
(8 producers, 5 drilling or completing, ___ proposed)(8 producers, 5 drilling or completing, ___ proposed) Cautiously managing Cotton Valley/Hosston Cautiously managing Cotton Valley/Hosston
reserves reserves (drilling horizontal CV well and using deeper tests for (drilling horizontal CV well and using deeper tests for
valuable well information)valuable well information) Looking to expand position in play along with our Looking to expand position in play along with our
investorsinvestors We are well capitalized and have the ability to be We are well capitalized and have the ability to be
patient patient