OK HC Project 5-14-15 Webinar-Master

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NYSE: HK Oklahoma HC Project Osage County, OK Large Scale Oil & Gas Development Opportunity

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Transcript of OK HC Project 5-14-15 Webinar-Master

  • NYSE: HK

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    Oklahoma HC Project

    Osage County, OK

    Large Scale Oil & Gas Development Opportunity

  • Legal Disclaimer / Forward Looking Statements

    All statements, charts and graphs made in this PowerPoint other than purely historical information are forward-looking statements within the meaning of federal securities laws. These statements reflect expectations and are based on currently available information. Forward-looking statements include statements regarding future plans and objectives, future exploration and development expenditures, number and location of planned wells, as well as statements regarding the quality of our properties, potential reserves, and production levels. These statements may be preceded or followed by or otherwise include the words believes, expects, anticipates, intends, continues, plans, estimates, projects or similar expressions or statements that events will, should, could, might or may occur. Except as otherwise specifically indicated, these statements assume that no significant changes will occur in the operating environment for oil and that there will be no material acquisitions or divestitures except as otherwise described.

    The price of oil is subject to change. We may also make material acquisitions or divestitures or enter into financing transactions. None of these events can be predicted with certainty and are not taken into consideration in the forward-looking statements. Actual results may vary materially from the forward-looking statements, and we cannot assure you that the assumptions used are necessarily the most likely. We will not update any forward-looking statements to reflect events or circumstances occurring after the date the statement is made except as may be required by applicable securities laws.

    Please note that this webinar/PowerPoint is an interest seeking presentation only. The investments and strategies mentioned in the presentation may not be appropriate for everyone; other options not mentioned may be more suitable for your specific circumstances. Past performance is no guarantee of future results. Projected or discussed rates of return (ROI) on an investment discussed herein is not a guarantee that this rate of return will be achieved. While every effort is made to maintain accurate, current information, the possibility of errors and/or updates always exists. No guarantee is made that all information is current and accurate. Investor agrees to perform their own due diligence and take full responsibility in satisfying themselves as to the accuracy. Any projections, opinions, assumptions, or estimates used are for example only and may not represent the current or future performance of the project.

  • Ron Clark Vice President

    Oil Field Operations Reworking Old Wells Drilling New Ones Business Strategy

    Ron Herzfeld Vice President

    Rick Coody President

    Wanda Sanders CFO

    Handles the Financial and Administrative Side of the Business

    Geologist Drilling Strategy Business Strategy

    Marketing Communications Business Strategy Investor Relations IT Internet Website Design Computer Technology

    The Executive Management Team

  • Our Formula for Success

    People +

    Process +

    Product

    + the numbers must make sense!

    It takes experienced credible people with the knowledge and required skills to deliver results and get the job done.

    Our Unique Business Model

    = Success

  • Rick Coody

    "Field General" in charge of Oil Field Operations.

    Handles drilling new wells, reworking old ones, and oil & gas lease acquisitions.

    Has lived and worked in the OK/KS area his entire life.

    25+ years oil & gas industry experience (14 years at Schlumberger).

    Much of his career in the oil & gas industry has been in Management in the Well Service area or as an Owner of Technology Companies.

    President

    Hired as a consultant by oil & gas companies in OK and KS to direct and manage new well drilling and field development programs.

    Manages and works closely with geologists and drilling contractors, as well as with cementing and frac companies.

    Responsible for executing each step of the drilling program through completion and putting the wells into production.

    Involved as a consultant in over 200 oil & gas wells from 2008 to 2013.

    Oil production ranged from 3 to 20 barrels of oil per day.

    New wells and reworked older wells.

    Some involved a waterflood program designed to pressurize a formation and drive oil up to the earths surface through producing wells.

  • Ron Herzfeld

    Supports "Field General with Geology, Business Strategy, and Business Development.

    Studies and analyzes oil & gas formations and then develops a drilling strategy.

    B.A. degree from University of Texas / Captain in United States Marine Corps.

    30+ years oil & gas industry experience.

    Expertise and experience:

    Oil field exploration and drilling oil & gas wells at depths from 500 to 18,000 feet.

    Waterflood, gas gathering, pipeline operations, gas compression and refining operations.

    Active member of the Society of Petroleum Engineers (SPE); American Association of Petroleum Geologists (AAPG); Geological Society of America (GSA); and New York Academy of Sciences (NYAS).

    His work with magnetic geophysical exploration has led to the discovery of major hydrocarbon reserves in the U.S., Canada, and Australia.

    He has been widely published in the oil & gas industry . . . in publications such as the Oil and Gas Journal and World Oil.

    The production from oil & gas wells Mr. Herzfeld drilled, reworked, and operated over the past 17 years is 648,281 Barrels of Oil* and 4,072,174,000 Cubic Feet of Gas*. Thats around $50,000,000 at today's prices.

    He has also made 10 new oil & gas field discoveries.

    *Numbers based on Railroad Commission of Texas Records RRC ID #681459

    Geologist

  • New Oil & Gas Fields Discovered by Ron Herzfeld

    County Well Field First

    Production Last

    Production Oil

    (Barrels) Gas

    (MCF) Depth (Feet)

    Atascosa, TX Lawson West #1 Lawson West (Reef) Nov 2006 Current 8,845 - 3,921

    Brazos, TX Burkhart Lease (4 wells) Kurten (Buda) Jan 1987 Feb 2000 254,517 156,038 8,220

    Frio, TX Brown #1 Big Foot, N. (Olmos) Feb 1999 Jan 2002 - 91,285 3,346

    Frio, TX Hitzfelder #5 Pure Ranch (Serpentine) Mar 1998 Current 124,449 511,248 3,000

    Frio, TX Hitzfelder #3 & #8 Pure Ranch (Anacacho) Aug 1997 Current 247,408 111,435 3,000

    Frio, TX Hitzfelder A Pure Ranch (A Sand) Aug 1998 Current 6,297 31,872 2,550

    Kleberg, TX Salazar Unit #1 Heep (Baffin) Jun 2000 Aug 2003 41,362 2,328,948 9,618

    Waller, TX Stowe #1 Brookshire Dome Oct 2001 Nov 2002 - 314,734 1,180

    Waller, TX Stowe #2 Brookshire Dome Jan 2002 May 2002 - 27,837 980

    Waller, TX Stowe #3 Brookshire Dome Nov 2001 Dec 2014 64,822 268 2,700

    Young, TX Shanafelt #1A Shanafelt (Miss) Mar 1976 Current 64,917 79,647 4,979

    Zavala, TX Jennings #1 Jennings 300 (Anacacho) Nov 2009 Jan 2013 - 108,763 1,746

    Zavala, TX Jennings #2 Jennings 300 (Anacacho) Mar 2012 Current - 52,160 1,800

    812,617 3,814,235

    New Oil & Gas Field and Reservoir Discoveries Attributed to Ron Herzfeld (production from non-discoveries not listed)

  • Ron Clark

    Supports "Field General" with Business Strategy and Business Development.

    Handles Marketing Communications, Investor Relations, and IT/Internet/Website/Computer Technology.

    B.S. degree in Aerospace Engineering from Penn State University.

    Worked in Aerospace industry for six years at NASA and McDonnell Douglas.

    Transitioned from engineering to sales and marketing when joining Hewlett Packard (HP) working for four years with business and engineering computer systems as a systems analyst, an instructor, and in sales/marketing.

    Worked in a sales/marketing capacity with Computervision for eight years and was a key contributor in pioneering and defining the CAD/CAM marketplace. Wrote the first CAD/CAM paper that defined the central database concept that would eventually automate the design, engineering and manufacturing side of companies similar to what IBM had done to automate the business side of companies. Responsible for millions of dollars in sales of CAD/CAM systems to Fortune 500 companies, such as General Dynamics, Martin Marietta, Hughes, Rockwell International, Beckman Instruments, Solar Industries, Rohr Industries, Garett Air Research, and Bertea.

    Became an entrepreneur working with start-up companies in various capacities from V.P. of Sales & Marketing to President and CEO . Wrote business plans for them, "packaged them", helped them raise venture capital, developed their marketing materials, applied for patents, developed international markets/business, and much more.

    Vice President

  • Wanda Sanders

    Handles the Financial and Administrative side of the business.

    M.B.A. from Golden Gate University in San Francisco, CA.

    Bachelor of Science in Business Administration in Finance.

    Held executive-level positions at Hewlett Packard, Verizon Communications and Alere.

    Senior-level business leader with a successful track record producing tangible results in three diverse industries: high tech, telecommunications and medical devices/biotech. In her spare time she has served as a member of several Philanthropy Boards administering an annual budget of $66M designing and implementing Scholar Programs for students throughout the USA. Recently, she was nominated and featured in the annual issue of the Minority MBA magazine listing her as one of the Next Generation of Business Leaders to watch based on her proven, outstanding Leadership Qualities in her field. She has excellent administrative, financial, project management, leadership and communication skills.

    CFO

  • Asset Acquisition in Dec 2014

    HALCON Resources: Public company with a prime oil & gas rich 6,800 acre lease in Osage County, OK.

    Spent over $50M on infrastructure and development.

    Their plan: Develop the lease by drilling horizontal wells.

    Recent large drop in oil prices combined with their flawed development plan forced them to unload this asset.

    Created an opportunity for us to acquire it.

    A high quality oil & gas asset like this rarely becomes available in this area of Oklahoma. Rick Coody has lived and worked in the oil & gas industry in Oklahoma all his life. He has never seen an oil & gas asset of this quality become available because they are usually scooped up by large companies before they even hit the market.

  • Lets look at the

    acquired HALCON

    $50M+ infrastructure.

  • Pump Jack

    Submersible Pump

    Pumping Equipment

    Extracts fluids (oil, gas, and salt water) from an underground formation reservoir. Fluids then go into a separator.

  • Tank Batteries

    Tanks store oil and salt water.

    3 oil storage tanks store oil prior to it being picked up by the oil purchasing company.

  • Horizontal & Vertical Separators

    Horizontal Separators

    Vertical Separator

    A separator is a large vessel designed to separate production fluids into their

    constituent components of oil, gas and water.

  • Fiberglass Salt Water Storage Tanks

    Underground salt water brought to the earths surface when drilling a well goes into

    a fiberglass storage tank.

  • Salt Water Disposal Wells

    Underground salt water brought to the earths

    surface when drilling a well goes into a fiberglass water storage tank and then is put back into the ground using a

    salt water disposal well.

    These are heavy duty salt water disposal wells.

  • Electrical and Tank Controls

  • Gas Sales Meter

    Gas sales meter with electronic measuring system

  • Lets look at

    Oil & gas Production

    from Existing Wells

  • Its a Revenue Producing Asset

    7 Producing wells (3 Horizontal and 4 Vertical)

    6 SWD (Salt Water Disposal) wells

    Production Revenue from Oklahoma HC Project's Acquired HALCON Asset February to June 2014 (5 months)

    Well Name Gross Gas MMBTU

    Gas WI Net Revenue

    Gross Oil Barrels

    Oil WI Net Revenue

    Monthly Total

    Rock Creek 4-9H 6,144 $14,956 341 $27,882 $42,838

    Surber 1-26 20,211 62,635 209 15,688 $78,323

    Surber 2T 5,390 16,706 70 5,229 $21,935

    Ricketts 2-35 3,594 11,136 105 7,966 $19,102

    Ricketts 3-26 14,721 48,720 70 5,229 $53,949

    Ricketts 4-35H 8,646 26,467 70 5,653 $32,120

    Strike AXE 5-36H 39,388 120,556 1,390 111,951 $232,507

    Total 98,094 $301,176 2,255 $179,598 $480,774

    Monthly Average 19,619 $60,235 451 $35,920 $96,155

  • 2015 Oil & Gas Production

    7 Producing wells (3 Horizontal and 4 Vertical)

    6 SWD (Salt Water Disposal) wells

    February to June 2014 (5 months) monthly average for Barrels of Oil produced was 441. In

    March of 2015 the oil production for the month was 448 barrels. The reason why January and

    February of 2015 are lower is that this area of the U.S. experienced the worst winter weather

    in 50 years, with temperatures frequently dipping down to 5 F to 20 F. Anytime the temperature

    gets down under 20 F for a sustained period of time, oil & gas wells have to be shut-in (turned off)

    because freezing water can damage the well and tank battery hardware. So the wells had many

    days with no production in January and February of 2015 because they were shut-in.

    Oklahoma HC Project Production Q1 2015

    Jan Feb Mar

    Barrels of Oil 110 281 448

    Cubic Feet of Gas 7,692,000 9,369,000 14,462,000

    Barrels of Oil Equivalent (BOE) 1,436 1,896 2,941

    BOE/Day 46 68 95

  • Strike Axe March 2015

    Gas (MCF)

    Oil (Barrels)

    1st 250 5.43

    2nd 244 4.18

    3rd 251 5.43

    4th 253 6.26

    5th 257 1.67

    6th 261 6.68

    7th 263 5.01

    8th 263 8.35

    9th 263 5.43

    10th 262 9.6

    11th 261 5.85

    12th 251 7.52

    13th 261 8.35

    14th 260 9.6

    15th 259 8.35

    16th 259 8.35

    17th 266 10.44

    18th 264 10.44

    19th 265 10.44

    20th 263 14.2

    21st 264 9.6

    22nd 261 10.44

    23rd 262 7.93

    24th 259 12.11

    25th 253 10.44

    26th 245 13.36

    27th 239 12.53

    28th 238 10.86

    29th 237 12.94

    30th 235 11.27

    31st 231 8.35

    Total 7,900 271.41

    Oil & Gas Production from Strike Axe Well

    Daily Gauge Sheet March 2015

  • Lets look at the

    Opportunity

  • HC-5A Project

    5 Well Drilling Program

    4 Months to complete

    Heavily structured in favor of the investors

    Low Risk / High Potential Return

    Current Investment Opportunity

  • Type of Project from a Financial Perspective: Turnkey

    Lease Acquisition: HALCON owned leases and infrastructure

    Location: Osage County, OK

    Drill: 5 New Wells

    Type of Wells: Vertical

    Depth of Wells/Formations: 1,800 to 2,300 ft.

    Acreage: 6,800 Acres

    Primary Formations: Skinner Sand, Bartlesville Sand, Burgess, Mississippi Chat/Lime

    Operator: Oklahoma HC Project LLC

    Production: Oil & Gas

    Purchaser of Oil Production: Coffeyville Resources Energy Marketing

    Purchaser of Gas Production: Copano

    Rights: Surface to Deep

    Working Interest (WI): 100%

    Net Income Interest (NI): 100%

    Royalty Interest (RI): 20%

    HC-5A Project Highlights

  • Projects foundation: 6,800 acre oil & gas property with extensive infrastructure.

    Geology/Engineering Library: 3D seismic maps that are the road map to oil.

    5 vertical wells being drilled are not complicated, costly, or risky to drill.

    Oil & gas formations are shallow (1,800 to 2,300 ft.) and easy to access.

    Targeting 4 primary formations with proven oil & gas reserves.

    Low risk, high potential return venture.

    Investor friendly venture where investors are treated like partners.

    Investors have a significant amount of control and full transparency.

    Investors receive 86% of the net income. (very high in the oil & gas industry)

    Solid management team with over 50 years of experience in all aspects of the industry .

    10 reasons why the HC-5A Project is so attractive

  • Extensive 3D Seismic Data came with the HALCON Acquisition

    This is one of many 3D Seismic Maps obtained from HALCON Resources that will be used to help define the best locations to drill the 5 vertical wells.

  • Geology Summary

    Formation Depth Range: 1,800 to 2,300 feet

    OK HC Project is located in the 26,500 sq. mi. Cherokee Platform Province in SE KS & NE OK. This oil & gas Province has been highly prolific, since its first oil discovery in 1873. Since then over 200,000 wells drilled and 431 new oil & gas fields discovered. 5.3 Billion Barrels of Oil and 4.3 Trillion Cubic Feet of Gas produced by 1990 in this Province.

    Primary Formations

    From 1979 to 1996 the Bartlesville Sand produced 90,277,717 Barrels of Oil

  • Lets look at

    how we do Business.

  • Our Due Diligence

    Cutting Edge Technology

    Investor Participation

    $s

    Oil & Gas Production

    Cash Flow $s

    Sell Asset at a Nice Profit

    Longer Term Exit Strategy

    Cash Flow $s

    Short Term Exit Strategy

    Investors decide to take a short or longer term exit strategy.

    Business Model

    Its all about increasing the ASSET VALUE of a project by increasing the oil & gas production.

    Increasing Production = Increase in Cash Flow = Increase in Asset Value

    Our Industry Knowhow/Expertise

    We Manage the Project

    New Oil & Gas Project

  • Our Project Plan includes Operating with Integrity.

  • A New Oil & Gas Project

    We find the oil & gas property.

    We do the due diligence.

    We do all the legal work.

    We acquire the lease(s)/asset.

    We structure a new project.

  • Lets look at some

    concerns you may have

    and risk factors.

  • Lets Talk about the Price of Oil.

    Does the price of oil matter? Of course it does because we all make more money the higher the price.

    The Key Questions are:

    Can we make a good profit today with oil at $50 per barrel? Answer: Absolutely

    Is oil a good long term play? Answer: Absolutely

    Is there large oil reserves where we will be drilling? Answer: Absolutely

    The oil market is cyclical . . .

    The world runs on oil and that is not going to change any time soon.

    We are in it for the long term. We know that the price of oil will go back up. It is just a matter of how soon and how much.

    The long term trend for the price of oil is up.

  • Lets Talk about Risk.

    Can risk ever be zero? Realistically no

    The Key Risks are:

    People Do they have the skills, drive, motivation, and passion to successfully complete this project? Are they trustworthy? Do they operate with integrity and transparency? Answer: Yes

    Finding Oil Can they find oil? Answer: Yes

    HALCON leases have large untapped underground oil & gas reserves.

    Oil and gas is being produced daily from the HALCON wells.

    Seismic maps point to the best locations for drilling into large oil & gas reserves.

    The 5 new wells will be drilled after analyzing all available geological data.

    This is not Wildcat drilling where you drill a hole in the ground hoping to find oil and its a hit or miss proposition. That type of oil exploration is highly risky.

  • Risk Continued

    Over Promotion It is common for an oil & gas deal to be over promoted. This makes it difficult for investors to get a decent return on their investment, or any

    return at all in some cases. Is the HC-5A Project over promoted? Answer: No

    This HC-5A Project is actually under promoted because investors are getting an unusually large piece of the pie. They are getting 86% of net revenue. This is very high!

    Price of Oil & Profitability Can they be profitable through wild swings in oil prices? Answer: Yes

    Our cost to get a barrel of oil out of the ground is $25 to $30. So we are in good shape with oil at $50 or $40/barrel. Even at $35/barrel, we could run a lean and mean operation and turn a profit.

    We are in it for the long term and in the long term oil prices are going to go up based on all the data that is out there on the industry.

    Bottom Line: This is not a zero risk investment. It is a lower risk investment for the reasons stated above.

  • Our COST to produce a Barrel of Oil is $25 to $30. Currently sells for around $60.

    Do the Math

    = Gross Profit Margin of around $30 to $35 per Barrel

  • Investing in Oil Lets look at some of the

    important facts.

  • A Barrel of Crude Oil

  • Here is Why Crude Oil is a

    Good Investment

    Classic supply and demand situation

    Soaring demand and dwindling supply

    World produces 74 million barrels of oil per day World consumes 87.6 million!

    That is a 13.6 million barrel shortfall per day!

    When the demand for a commodity greatly exceeds the supply the price is going to go up.

  • Global Demand for Oil

    Oil is the most important commodity in the world. All major economies depend on it. Oil is also the most important military resource. With oil an army can move and fight. Without it, it cant.

    Oil

  • Oil Price and Balancing Budgets

    What this means is that at some point in the near future OPEC will be highly motivated to do what it can to drive the price of oil higher in order to keep the economies of the member countries from falling apart.

  • Oklahoma Next Exit

    On Our Way To Find Oil

  • Producing Oil & Gas Wells in U.S. (includes offshore)

    Oklahoma

    Oklahoma

  • #5 oil producer & #4 natural gas producer in U.S. Over 120,000 active oil & gas wells. Oil & gas production in 72 of its 77 counties. (IHS Energy) Proven oil reserves of 1,019,000,000 barrels as of 2013.

    Oklahoma is the #5 Oil Producing State

    Oklahoma was averaging 262,000 barrels of oil per day by the end of 2012.

    Oklahoma Crude Oil Production in Osage County Jan - Jun 2012

    Barrels of Oil

    Jan Feb Mar Apr May Jun Total

    398,902 397,103 361,209 353,935 86,137 338,282 1,935,567

  • Osage County Next Exit

    On Our Way To Find Oil

  • Oklahoma Counties

  • Oklahoma Oil Production 2012

  • Osage Indian Reservation

    Osage Nation has sovereign rights in the United States of America. It is headquartered in Pawhuska, OK with jurisdiction in Osage County. It has 13,307 enrolled tribal members.

  • Lets look at the

    Oklahoma HC Project

    website.

  • Oklahoma HC Project Website

    This website is a powerful tool that was designed to keep investors in the Project up to date on all aspects of it.

    www.oklahomaHCproject.com

    The website is private and can only be accessed by those investing in the Project. They are given a Username and Password that enables them to logon to it.

    24 Hour Temporary

    Access

  • Questions? Need More Information?

    Hope you have enjoyed the journey to oil country in Osage County, OK