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IPPA Private Capital ConferenceIPPA Private Capital Conference
Houston, TexasHouston, Texas
January 19, 2006January 19, 2006
PETRIEPETRIE PARKMAN & Co.PARKMAN & Co.
Mike Bock, CFAMike Bock, CFAPrincipal and Director of Principal and Director of
Corporate FinanceCorporate FinancePetrie Parkman & Co. Petrie Parkman & Co.
PETRIE PARKMAN & Co.2
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4
3 3 3
2 2 2 2
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1
2
3
4
5
6
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Petrie Parkman Recent Experience – IPO’s 2000-2006 YTDPetrie Parkman Recent Experience – IPO’s 2000-2006 YTD
PETRIE PARKMAN & Co.3
E&P Equity Market Performance E&P Equity Market Performance
80%
100%
120%
140%
160%
180%
200%
1/3/200
5
2/3/200
5
3/3/200
5
4/3/200
5
5/3/200
5
6/3/200
5
7/3/200
5
8/3/200
5
9/3/200
5
10/3/
2005
11/3/
2005
12/3/
2005
1/3/200
6
S&P E&P S&P 500 NASDAQ
PETRIE PARKMAN & Co.4
IPO Issuance Volume 2000 - 2005 IPO Issuance Volume 2000 - 2005
$0.0$50.0
$100.0
$150.0$200.0
$250.0$300.0
$350.0
$400.0$450.0
$500.0
($m
m)
2000 2001 2002 2003 2004 2005
2 deals3 deals
0 deals
1 deal
3 deals
2 deals
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E&P IPO’s by Class E&P IPO’s by Class
2000
Westport ResEnergy Prtnrs
2001
EncoreGMX ResATP Oil & Gas
2002
None
2003
Whiting
2005
Bois d’ArcW&T Offshore
2004
Bill Barrett Warren ResAtlas America
2006
Linn Energy MarinerStroudRosettaCNX Gas
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Bois d’ Arc 5/5/05
• 13.5 million shares priced at $13.00
• Use of proceeds: Repay outstanding debt to Comstock
• Lead managed by Raymond James, Co-managed by Petrie Parkman and others
% Change Since Pricing
Capital Market Environment- Recent IPO’s
27.36%
32.86%
25.08%
9.67%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
Bois d' Arc ComparableCompanies
Commodities S&P 500
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% Change Since Pricing
W&T Offshore- 1/27/05
• 12.66 million shares priced at $19.00
• Use of proceeds: Secondary sale of shares by management and Jefferies & Company
• Lead managed by Jefferies and Lehman Brothers
Capital Market Environment- Recent IPO’s
9.49%
41.67%
27.58%
63.79%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
W&T Offshore ComparableCompanies
Commodities S&P 500
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Bill Barrett Corporation- 12/9/04
• 14.95 million shares at $25.00
• Use of proceeds: Repay indebtedness in connection with acquisitions, in order to free up availability under credit facility to fund capex and future acquisitions
• Lead managed by Goldman Sachs, Co-managed by Petrie Parkman and others
% Change Since Pricing
Capital Market Environment- Recent IPO’s
51.92%
79.23%
49.11%
8.14%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
Bill Barrett Corp. Comparable Companies Commodities S&P 500
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% Change Since Pricing
Warren Resources- 12/17/04
• 9.5 million shares priced at $7.50
• Use of proceeds: To accelerate and fund exploration and development activities in the Atlantic and Pacific Rim projects of the Washakie Basin, as well as in the Willmington unit and Powder River Basin
• Lead managed by Keybanc Capital Markets
Capital Market Environment- Recent IPO’s
7.7%
40.1%
53.8%
93.3%
0.00%10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%90.00%
100.00%
Warren Comparable Companies Commodities S&P 500
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Exit Alternatives: IPO vs. Sale of AssetsExit Alternatives: IPO vs. Sale of Assets
Rockies2005 Average
Market Value or Purchase Price /
2005E EBITDA 2006E EBITDA $ / McfePublic Companies
Barrett 8.6x 6.7x $5.01Delta 11.5x 9.5x $4.83
2005 Private Company Sales /Asset Sales (3 Transactions)
High 6.4x 4.4x $3.12Average 4.3x 3.3x $1.98Low 2.8x 2.2x $0.76
PETRIE PARKMAN & Co.11
Exit Alternatives: IPO vs. Sale of AssetsExit Alternatives: IPO vs. Sale of Assets
Appalachia2005 Average
Market Value or Purchase Price /
2005 EBITDA 2006 EBITDA $ / McfePublic Companies
Range 8.9x 7.3x $2.80
2005 Private Company Sales /Asset Sales (1 Transaction)
10.2x 6.5x $2.23
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Exit Alternatives: IPO vs. Sale of AssetsExit Alternatives: IPO vs. Sale of Assets
Permian2005 Average
Market Value or Purchase Price /
2005 EBITDA 2006 EBITDA $ / McfePublic Companies
Cabot 5.6x 4.8x $1.95Cimarex 4.8x 3.9x $3.00Whiting 5.5x 5.4x $1.52
2005 Private Company Sales /Asset Sales (2 Transactions)
High 7.2x 4.5x $1.62Average 4.7x 3.8x $1.57Low 2.2x 3.1x $1.52
PETRIE PARKMAN & Co.13
Exit Alternatives: IPO vs. Sale of AssetsExit Alternatives: IPO vs. Sale of Assets
East / South Texas2005 Average
Market Value or Purchase Price /
2005 EBITDA 2006 EBITDA $ / McfePublic Companies
Comstock 4.9x 4.5x $1.90Petrohawk 7.1x 4.3x $3.09Range 8.9x 7.3x $2.80
2005 Private Company Sales /Asset Sales (2 Transactions)
High 7.0x 4.3x $2.09Average 5.9x 3.0x $2.09Low 4.9x 1.6x $2.09
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Cons- Potential to bust general solicitation rules
Pros- Sometimes patience paysPros- Quicker financing,
avoids SEC delaysCons- SEC Delays
Pros- Better if market declines
Pros- More coverage
Pros- Lesser discount /Better valuationCons- Worse if market declines
Cons- 20% discount versus typical 5-15% on IPO’s
Market Risk
IPO144A
Cons- More analysts
Valuation
Pros- Fewer analysts to deal with
Cons- Lesser coverage
ResearchCoverage
Exit Alternatives: IPO vs. 144AExit Alternatives: IPO vs. 144A
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Basic Requirements for an Institutionally-Embraced IPOBasic Requirements for an Institutionally-Embraced IPO
• Offering at least $100 million
• Market capitalization of at least $250 million
• SARBOX compliant, notably: -No loans to management -Independent board of directors
• Growth potential
• Use of proceeds
• Management team with desire to run a public company
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Market Preferences
• Offering of at least $200 million
• Market capitalization of at least $1 billion
• Geographic and strategic focus
• Resource-oriented plays
• Solid future organic growth potential combined with company-maker exposure
• Well-articulated use of proceeds
• Seasoned management with public experience
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The Hidden Costs of Public Market CapitalThe Hidden Costs of Public Market Capital
• Regulatory compliance- a drain on financial and human resources ― Sarbanes Oxley― SEC filings and reviews― Trading exchange regulations
• Short-term demands of public markets can influence executive decision-making
• Increased personal scrutiny of and liability for executives
• Increased costs of audit and reservoir engineering services
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