32
Detring Energy Advisors CONFIDENTIAL. DO NOT DISTRIBUTE. Haynesville A&D Market Update October 2020
Detring Energy Advisors
CONFIDENTIAL. DO NOT DISTRIBUTE.
Haynesville A&D Market UpdateOctober 2020
Detring Energy AdvisorsHaynesville A&D Market Update
Detring Energy Advisors | Company Overview – Sixteen Full-time Staff Devoted to A&D(1,2)
DerekDetring
President
MelindaFaust
ManagingDirector
MattLoewenstein
Director
RichardBall
DirectorGeology
JonathanBristalSenior
Associate
TonyFazioSenior
Associate
PaulNgo
Associate
AnthonyRojas
AssociateTechnician
PayneWinterAnalyst
JorgeRocha-Garcia
TechnicianGeology
JohnWoolley
Technician GIS
Buyers' concerns are alleviated up-front due to our focus on comprehensive, technically in-depth, and error-free data room packages
Transforms evaluation from a time-consuming bottoms-up analysis to a confirmatory exercise, allowing more buyers to show up on bid day
Generates competitive tension and enables bidders to trust data and apply less risking, leading to more aggressive bids
We fill the void between online listing services (which focus on deal volume) and bulge bracket banks (where group heads and senior staff focus on larger transactions), while providing the dedication and expertise of the latter to middle market assets
We have an unrivaled knowledge of the mid-cap buyer universe, including executive personnel and senior business development professionals, as well as a fulsome understanding of their approach to valuation across all major upstream asset classes
Detring’s comprehensive sell-side processes result in higher bids due to lower perceived risk and increased competition. Each
mandate is meaningful to our firm and our bottom line, and no advisor works harder to achieve first-class results.
Senior Leadership
Multi-Discipline, Highly Qualified Staff
JoshMiller
Technician Engineering
BryanBottomsAnalystGeology
31. Sixteen staff members include 15 current Detring staff as well as Jerry Edrington (Director, PetroDivest).
2. Cory Miller, a recently hired Associate engineer is not pictured above.
Detring Energy Advisors was established in Q3 2014 to bring best-in-class A&D expertise to the mid-cap market
Detring’s core philosophy centers around lowering perceived risk for potential buyers, which fundamentally translates to higher valuations for our clients
Detring targets closing 15-20 transactions per year, enabling us to dedicate the necessary time and resources to each project
Detring has advised on >US$2.4 Bn of A&D assignments since our establishment in 2014, with >US$20 billion of collective experience across our 16 team members(1)
JerryEdrington
DirectorPetroDivest
MohammadAbbasAnalyst
Detring Energy Advisors | Detring & PetroDivest 2020 YTD Transactions
AE&J Royalties
Mineral & Royalty AssetsLea County, NM
January 2020
Mineral & Royalty AssetsDelaware Basin
January 2020
Op. Working InterestVarious Counties, TX
January 2020
Non-Op Working InterestWard County, TX
February 2020
Op. Working InterestNorthwest Shelf
February 2020
Op. Working InterestCentral Basin Platform
February 2020
Op. Working InterestLea County, NM
April 2020
Op. Working InterestAppalachia
June 2020
Op. Working InterestPowder River Basin
July 2020
Op. Working InterestClaiborne Parish, LA
July 2020
Op. Working InterestCaddo Parish, LA
July 2020
Venada
Mineral & Royalty AssetsKarnes County, TX
July 2020
Private Seller
Mineral & Royalty AssetsLea County, NM
August 2020
Private Seller
Mineral & Royalty AssetsAppalachia
Closing Sep-20
Non-Op Working InterestAppalachia
Negotiating PSA
Non-Op Working InterestVarious Counties, TX
Negotiating PSA
Op. Working InterestNatrona County, WY
Negotiating PSA
Private Seller
Mineral & Royalty AssetsLoving & Reeves Co., TX
In-Progress
Op. Working InterestVarious Counties, TX
In-Progress
Op. Working InterestVarious Counties, WY
In-Progress
4
A&D Market Update (L48)Haynesville A&D Market Update
$41 $56
$41 $58
$17 $37 $39 $39
$19 $4
$34 $31
$6
$24
$12
$20 $23 $36
$17
$15
$75 $87
$47
$82
$29
$58 $62 $75
$35 $29
$0
$100
$200
$300
$400
$500
$600
$0
$20
$40
$60
$80
$100
$120
Avg. A
sset Size ($MM
)Tot
al U
.S. V
alu
e ($
Bn
)
Asset Corporate Annualized Avg Asset Deal Size
$41
$24
$8
$28
$7
$20 $19 $9 $6 $4
0%
20%
40%
60%
80%
100%
$0
$20
$40
$60
$80
% of T
otal U.S. V
alue
Gas
Val
ue
($B
n)
Actual Value Annualized Value % of Total U.S.
$27
$48
$29
$50
$18
$31 $30 $38
$21
$1 0%
20%
40%
60%
80%
100%
$0
$20
$40
$60
$80
% of T
otal U.S. V
alue
Oil
Val
ue
($B
n)
Actual Value Annualized Value % of Total U.S.
135 138 133 152
95 124
157 131
85 50
0
50
100
150
200
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Dea
l Cou
nt
A&D Market Update (L48) | Summary(1)
2020 is the worst market in recent memory as OPEC+ flooded the market with supply simultaneously with decreased demand caused by COVID-19
Drops of 60% in transaction count and 80% in value (annualized) vs 2019, a much steeper decrease than 2014-15, despite 2014 providing a much higher base level of activity than 2019
While conventional and mineral assets traded more freely in 2019, sellers are rotating to natural gas assets in the current market environment Natural gas operators/sellers are farther into a
pricing downturn than where we currently stand for oil, allowing the bid/ask spread to narrow for gas-weighted properties
Gas price has gained momentum with the drop in oil drilling and resulting supply of associated gas – however, demand concerns persist
2019 was the worst year since 2015, with only $35Bn in total deal value
The low activity levels in 2015 were driven by the collapse in commodity pricing in late 2014 (and the resulting bid/ask spread)
The recent down market (Q318+) has been driven by Wall Street’s retreat from the energy sector, leaving public companies unwilling to acquire additional inventory – and thus Private Equity (the 2nd largest buyer class) unsure of their exit strategy
While 2018 activity exceeded 2016-17 and roughly matched the 2012-14 peak, this was largely driven by the four “Mega-Cap” transactions (CXO/ RSP, BP/BHP, FANG/EGN, & ECA/NFX)
Only $42Bn in 2018 excluding these deals
1. Source: 1Derrick; asset & corporate level deals ≥$25MM. Excludes OXY/APC.2. Adjusted 2018 Avg excludes Concho/RSP ($9.5Bn), BP/BHP ($10.5Bn), & FANG/EGN
($9.2Bn) transactions.
6
WTI
$13
$23
$29
$16
$2
$10
$8
$9
$4
$14
$19 $2
1
$24
$21
$9 $9
$20
$8
$31
$18
$1
$8
$18
$9
$0
$3
$21
$11 $11
$10
$2
$0
$5
$10
$15
$20
$25
$30
$35
1Q20
14
2Q20
14
3Q20
14
4Q20
14
1Q20
15
2Q20
15
3Q20
15
4Q20
15
1Q20
16
2Q20
16
3Q20
16
4Q20
16
1Q20
17
2Q20
17
3Q20
17
4Q20
17
1Q20
18
2Q20
18
3Q20
18
4Q20
18
1Q20
19
2Q20
19
3Q20
19
4Q20
19
1Q20
20
2Q20
20
3Q20
20
37%
14%12%
8%
7%
5%
3%3% 11%
DiversifiedNorth SlopeDelawareMidlandMarcellus/UticaDenver JulesbergSCOOP/STACKOtherOther
23%
16%
8%
2%
51%
Unconv. OilConv. OilUnconv. GasConv. GasOther
A&D Market Update (L48) | Total U.S. A&D Activity(1)
Quarterly U.S. Value ($Bn) vs. Oil Price (Scale Not Shown)
LTM Activity ($37Bn) 2019-2020 have seen a substantial drop in A&D activity as traditionally aggressive Public and Private Equity acquirors re-focused on existing inventory in response to Wall Street’s shifting preference for free cash flow over unchecked growth and acquisitions
2018-2019 averaged ~$9-$10Bn/quarter (excluding mega-cap deals) while 2020 is averaging ~$2.5Bn/quarter (excluding recent M&A)
2014 Avg:$20.5Bn/Qtr
2015 Avg:$7.2Bn/Qtr
2016 Avg:$14.2Bn/Qtr
2017 Avg:$15.6Bn/Qtr
Adj. 2018 Avg:$9.9Bn/Qtr(2)
Concho/RSP (1Q2018) BP/BHP (3Q2018)FANG/EGN (3Q2018)ECA/NFX (4Q2018)CVX/Noble (3Q2020DVN/WPX (3Q2020)
2018 Avg:$19.1Bn/Qtr
7
2019 Avg:$9.0Bn/Qtr
2020 Avg:$6.2Bn/Qtr
1. Source: 1Derrick; asset & corporate level deals ≥$25MM. Excludes OXY/APC. Gas and oil transactions based on assets with >60% of the relevant commodity (and thus graphed “percent of total” metrics do not add to 100% due to properties with 40-60% gas/oil).
$0
$10
$20
$30
$40
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Corporate Royalty Asset
WTI
A&D Market Update (L48) | Historical A&D Activity Relative to Oil Price and Oil Price Volatility(1)
Quarterly U.S. Value ($Bn) vs. Oil Price (Scale Not Shown)
There is a strong relationship between historical A&D activity and oil price volatility. 1Q2020 proved to be the most volatile quarter since 4Q2008 with a standard deviation of ~$12.50/Bbl (~26% of the quarter’s average WTI price of ~$48/Bbl). Accordingly, 1Q2020 experienced
one of the lowest levels of A&D activity over the past decade (~$1.1 Bn).
Average Quarterly Transaction Count by WTI Volatility Average Quarterly Transaction Value ($Bn) by WTI Volatility
32
26 23
16 14
0-5% 5-10% 10-15% 15-20% 20%+Quarterly WTI Price Volatility (Relative Std. Deviation %)
$12
$8 $7
$4 $3
0-5% 5-10% 10-15% 15-20% 20%+Quarterly WTI Price Volatility (Relative Std. Deviation %)
WTI (scale not shown)
Q1 2020 and Q4 2008 both at ~30% volatility
1. Source: Enevus asset-level transactions (excludes corporate transactions). Quarterly WTI Price Volatility (Relative Std. Deviation %) equals the standard deviation of daily WTI spot price divided by the average WTI spot price in a given quarter .
8
A&D Market Update (L48) | Market Crisis Case Studies(1)
Time Normalized A&D Transaction Values(2)Time Normalized A&D Transaction Volumes(2)
Discussion
0%20%40%60%80%
100%120%140%160%180%200%
0 1 2 3 4 5 6 7 8 9 10
Trx.
Vol
. % o
f Prio
r Yr.
Qua
rterly
Avg
.
Time Normalized Quarter
4Q 2008+ 4Q 2014+ 3Q 2019+
Accelerated recovery due to Shale Boom in 2009/10
following the GFC
7 quarters to return to 2014 quarterly average.
0%20%40%60%80%
100%120%140%160%180%200%
0 1 2 3 4 5 6 7 8 9 10Trx.
Valu
e. %
of P
rior Y
r. Q
uarte
rly A
vg.
Time Normalized Quarter
4Q 2008+ 4Q 2014+ 3Q 2019+
4Q 2008 and 1Q 2020 proved to be the most volatile quarters for WTI since 2000 Following the Global Financial Crisis, A&D activity recovered in only ~5 quarters – driven by strong commodity pricing and the ongoing
“Shale Boom” Following the commodity price collapse of 4Q 2014, seven (7) quarters passed before quarterly A&D transaction count reached pre-
crisis levels, and nine (9) quarters passed before quarterly A&D transaction value reached that seen pre-crisis Detring anticipates a minimum of four quarters of depressed A&D activity but remains optimistic the market will adjust to a
“new normal” as commodity price volatility decreases (and/or as commodity prices increase back to pre-collapse levels) In the current market gas properties have fared well, while oil-weighted assets have struggled Gas: Detring received a typical level of bids and buyer participation for an asset with bids due mid-lockdown; signed a PSA in early May
for a second process; and recently engaged with two new natural gas sellers Oil: Multiple processes with agreed PSA’s fell apart in March; sellers pulled back on marketing assets post-Q1 “beauty contests” and
advisor selection; however, oil sellers are beginning to re-emerge for Q4-20/Q1-21 processes
100% 100%
Longer timing to return to pre-crisis value levels than deal count as the mid-cap market recovered
more quickly than the large-cap market.
1. Source: Enverus asset-level transactions (excludes corporate transactions). Quarterly WTI Price Volatility (Relative Std. Deviation %) equals the standard deviation of daily WTI spot price divided by the average WTI spot price in a given quarter .
2. Relative quarterly activity indexed on prior year quarterly averages for each series.
9
0%
10%
20%
30%
40%
50%
60%
70%
80%
$0
$10
$20
$30
$40
$50
$60
$70
$80
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
% G
as-Weigh
tedT
ran
sact
ion
Val
ue
($B
n)
Unconventional Conventional Unconventional
Conventional Annualized % Gas-Weighted
A&D Market Update (L48) | Historical Transaction Value by Asset Class(1)
Over the past several years, gas-weighted transactions have accounted for only ~25% of total asset-level transaction activity. Following the recent pullback in oil pricing, the corresponding decline in oil-focused development, and emerging spotlight on ESG, we anticipate a resurgence
gas-weighted A&D activity heading into 2021.
1. Source: Enervus asset-level transactions (excludes corporate and multi-basin transactions). 10
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55%
NT
M O
p. C
F M
ult
iple
Annual Decline Rate
Theoretical PV-15%
Theoretical PV-10%
Comps
A&D Market Update (L48) | PDP-Weighted Cash Flow Multiple vs. Decline Rate
1. Theoretical multiples based on implied metrics varying only decline rate. 2. PDP-weighted comparables’ multiples based on high bid and run-rate cash flow based on net LOS.
Includes recent PDP-weighted deals for which Detring has confidential knowledge of cash
flow, declines, and bids.
(1)
(2)
PDP asset value is tied more closely to decline rate and cash flow then daily net production and reserve life. Longer-life, low-decline (<10%) assets are trading for ~4-5x+ NTM cash flow in the current market environment.
11
Haynesville A&D Market UpdateHaynesville A&D Market Update
$0.4
$1.3 $0.9
$1.3 $0.7
$2.9
$0.6 $0.3
$2.2
$0.4
$1.3
$0.9
$1.3
$0.7
$2.9 $2.8
$0.3
$0
$200
$400
$600
$800
$1,000
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
2013 2014 2015 2016 2017 2018 2019 2020
Avg. A
sset Size ($MM
)Tot
al U
.S. V
alu
e ($
Bn
)
Asset Corporate Annualized Avg Asset Size
Haynesville A&D Market Update | Haynesville Transactions(1)
Haynesville Transaction Through Time
Average Transaction Value / Production ($/Mcfed)
Blackstone / Shell -$1.2Bn
GeoSouthern / Encana - $850MM
$3,174
$4,800 $4,167
$9,339
$13,549
$3,277 $3,297
$1,594
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
2013 2014 2015 2016 2017 2018 2019 2020
Ave
rage
$/
Mcf
ed p
er Y
ear
Rockcliff / Samson -$525MM
BP / BHP - $2.0BnAethon / QEP - $735MM
Comstock / Covey Park - $2.2Bn
Osaka / Sabine -$610MM
13
Since 2018, publicly announced Haynesville transactions have been
largely PDP-weighted.
1. Source: Enverus.
Rusk
Winn
Sabine
Cass
Caddo
Shelby
Panola
Union
Bossier
Grant
De Soto
Harrison
Natchitoches
Bienville
Rapides
Upshur
Claiborne
Webster
Jackson
Nacogdoches
Angelina
Cherokee
Lincoln
Vernon
Marion
Smith
Gregg
Red River
San Augustine
La Salle
Camp
Ouachita
Columbia
Trinity
Titus
Caldwell
MorrisLafayette
Houston
Miller
Seller Date $MM $M/Acre
Tanos Energy WildHorse Feb-18 $217 $1
BP Goodrich Mar-18 23 6Osaka Gas Sabine Oil & Gas Jun-18 146 2Comstock Enduro Jun-18 31 Min.
BP BHP Billiton Jul-18 2,000 6
Mission Creek Bonanza Creek Aug-18 117 4
Flywheel Southwestern Sep-18 1,865 1Aethon QEP Nov-18 735 1Comstock Shelby Shale Dec-18 21 4Midstates Amplify May-19 512 Min.Comstock Covey Park Jun-19 2,185 4Shelby Weatherly Jul-19 26 1Osaka Gas Sabine Oil & Gas Jul-19 610 2Comstock Undisclosed Sep-19 31 Min.NGLF Energy Riviera Jul-20 27 Min.Castleton Range Resources Jul-20 245 Min.
Value
Buyer
Haynesville A&D Market Update | Regional A&D Transactions (2018-20)(1)
1. Acreage metrics exclude estimated PDP value. 14
Rusk
Winn
Sabine
Cass
Caddo
Shelby
Panola
Union
Bossier
Grant
De Soto
Harrison
Natchitoches
Bienville
Rapides
Upshur
Claiborne
Webster
Jackson
Nacogdoches
Angelina
Cherokee
Lincoln
Vernon
Marion
Smith
Gregg
Red River
San Augustine
La Salle
Camp
Ouachita
Columbia
Trinity
Titus
Caldwell
MorrisLafayette
Houston
Miller
Haynesville A&D Market Update | Regional A&D Transactions Heat Map(1)
LTM Tnx<2.5
2.5 – 5.05.0 – 7.57.5 – 1010 – 15
>15
$M/Acre
1. Acreage metrics exclude estimated PDP value. 15
$1.75
$2.00
$2.25
$2.50
$2.75
$3.00
$3.25
2021 2022 2023 2024 2025 2026
Hen
ry H
ub
($/
MM
Btu
)
1/1/2020 4/1/2020 7/1/2020 10/16/2020
Haynesville A&D Market Update | Favorable Market Backdrop for Haynesville A&D in 2021
Favorable In-Basin Pricing & Midstream Costs(1)2021+ HHUB Strip Pricing
Haynesville vs. Appalachia vs. Total L48 Rig Count(2)
Strong rally in 2021-2022
Stable tail-end
Haynesville vs. Appalachia Completion Trends
Strong near-term pricing with minimal long-term volatility present a favorable macro backdrop
Higher realized pricing and lower gathering and transportation costs yield single-well returns on par with core Appalachia
Large reduction in both gas and liquids-focused operating activity, however Haynesville and Appalachia rig counts have shown the most resilience.
Haynesville completions have evolved rapidly over the past several years (significantly higher proppant and fluid volumes, tighter stage-spacing), whereas
Appalachia operators generally “cracked the code” several years prior.
(100%)
(80%)
(60%)
(40%)
(20%)
0%
20%
Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20
Haynesville Marcellus Total L48
($0.55)
($1.20)($1.25)
($1.00)
($0.75)
($0.50)
($0.25)
$0.00Haynesville Dry Gas Marcellus
Gathering & TransportationBasis Differential
1. Basis differential reflects 2020 average for Perryville/Cathage and Dominion South for Haynesville and Dry Gas Marcellus, respectively. Gathering & Transportation costs per Detring estimates based on public operator disclosure (CRK, GDP, AR, EQT, CNX, COG).
2. Source: Enverus.
16
1.2 1.5 1.5
1.7
2.3 2.7 2.7
2.9 2.8
1.31.5
1.7 1.82.0 2.0 2.1
1.9 2.0
2012 2013 2014 2015 2016 2017 2018 2019 2020
Ave
rage
Fra
c D
ensi
ty (
lbs/
Mft
)
Haynesville Appalachia
Haynesville Activity UpdateHaynesville A&D Market Update
25
22
19
15
11 119 9
86
5 5 5 54 4 4 4 4 4
Eddy(NM)
Lea(NM)
Martin(TX)
Midland(TX)
De Soto(LA)
Reeves(TX)
Howard(TX)
Panola(TX)
Loving(TX)
Karnes(TX)
Grady(OK)
McKenzie(ND)
Upton(TX)
Ward(TX)
Andrews(TX)
Bradford(PA)
Culberson(TX)
Red River(LA)
Washington(PA)
Webb(TX)
Haynesville Activity Update | Rig Activity Update(1)
18
Current Rigs by Basin (273 Rigs)Rig Count by Basin Through Time
Top 20 U.S. Counties by Rig Activity by Basin
1. Source: Enverus.
0
50
100
150
200
250
300
Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20
Delaware MidlandHaynesville MarcellusEagle Ford WillistonSMS
77 29%
50 19%
38 14%
27 10%
21 8%
13 5%
13 5%
5 2% 22
8%Delaware
Midland
Haynesville
Marcellus
Eagle Ford
Williston
SMS
Central Basin
Other
With the precipitous decline in oil-focused activity, Haynesville rigs now account for 14% of the L48 total rig count, with three of the top 20 counties by total rig count.
LouisianaTexas
Arkansas
Natchitoches
Nacogdoches
Upshur
Vernon
Smith
Panola
Columbia
Harrison
Trinity
Rusk
Marion
CassMorris
Newton
Angelina
Gregg
Tyler
Bossier Webster
Bienville
Shelby
Caddo
Titus
Cherokee
Miller
Polk
Red River
SabineSan Augustine
Camp
Jasper
De Soto
Lafayette
Haynesville Activity Update | Haynesville Horizontal Activity Through Time(1)
19
Hz Spuds Through Time
Gross Operated Production
Current Rig Snapshot (38 Total)
0
2
4
6
8
10
12
2010 2012 2014 2016 2018 2020Pro
du
ctio
n (
Bcf
e/d
)
0%
10%
20%
30%
40%
50%
60%
0
200
400
600
800
1,000
1,200
1,400
20102011201220132014201520162017201820192020
% Texas Spuds
Hz
Spud
s per
Yea
r63%
37%Louisiana
Texas
Louisiana Texas
Louisiana Texas
Active Permit2020 Hz Spud2019 Hz Spud2018 Hz Spud2017 Hz SpudPre-2016 Hz SpudHz Rigs
Legend
1. Source: Enverus.
Louisiana
Texas
Natchitoches
Nacogdoches
Upshur
Vernon
Panola
Harrison
TrinityRapides
Rusk
Grant
Marion
Newton
Angelina
Gregg
BossierWebster
Bienville
Winn
Shelby
Caddo
Cherokee
Lincoln
Union
Polk
Red River
Claiborne
Jackson
Sabine
San Augustine
Jasper
De Soto
Gross Operated Production
0
2
4
6
8
10
12
2008 2010 2012 2014 2016 2018 2020G
ross
Ope
rate
d Pr
oduc
tion
(Bcf
ed) Public Private
Haynesville Activity Update | Top Operators(1)
20
Current Rig Snapshot
18%
16%
16%10%
8%5%
3%
24%AethonComstockIndigoRockcliffOsakaChesapeakeVineOther
LegendAethon GoodrichAmplify IndigoBP OsakaCastleton RockcliffChesapeake TanosChevron VineComstock
1. Source: Enverus.
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Louisiana
Texas
Natchitoches
Nacogdoches
Upshur
Vernon
Panola
Harrison
TrinityRapides
Rusk
Grant
Marion
Newton
Angelina
Gregg
BossierWebster
Bienville
Winn
Shelby
Caddo
Cherokee
Lincoln
Union
Polk
Red River
Claiborne
Jackson
Sabine
San Augustine
Jasper
De Soto
Haynesville Activity Update | 12 Month Cum Bubble Map(1)
Spud Year 2010-17Spud 2017+
12 Month Cum. (Mmcfe)
< 900900 – 1,800
1,800 – 3,6003,600 – 7,200
> 7,200
Legend
1. Source: IHS Energy. 21
Well Performance AnalysisHaynesville A&D Market Update
Rusk
Sabine
Caddo
Shelby
Panola
De Soto
Bossier
Harrison
Natchitoches
Upshur
Bienville
Nacogdoches
Cherokee
Webster
Smith
Marion
AngelinaVernon
Claiborne
Gregg
Red River
San Augustine
Trinity
Pricing: NYMEX strip
Differentials: ($3.00)/Bbl oil, ($0.30)/Mcf, 40% of NYMEX NGL realized pricing (Cotton Valley only)
LOE: $5k/well/mo. for 6 months, $4k/well/mo. for following 6 months, $2.5k/well/mo. thereafter (fixed) + $0.20/Mcf (variable)
Haynesville/Bossier Gas Stream: 100% shrink (residual)
Cotton Valley Gas Stream: 75% shrink (residual), 50 Bbl/MMcfNGL yield
TX Taxes: Oil 4.6%, Gas 7.5%
LA Taxes: Oil 12.5%, Gas $0.11/Mcf
Capex: Based on public disclosure and varied by well based on lateral length, proppant, and depth
Economic Assumptions Location Map
Methodology
23
• 4,858 horizontal wells were declined across the Ark-La-Tex Region (HV/Bossier/CV)(1)
– Both hydrocarbon streams forecast (wellhead oil and gas)– Wells parsed by data quality to increase accuracy (see following page)
• Economics by well generated using actual & forecast prod. and econ. parameters above– Capex calculated by well based on lateral length, measured depth and proppant pumped
• Type curve subsets generated within each play based on well vintage, geography, geology, performance, hydrocarbon content and completion parameters
– IP-30 and EUR based on statistical distributions (wellhead oil and gas)– Curvature (“b”) and final decline (“Dm”) based on average of Type 1A wells within subset – Initial decline (“Di”) varied until IP-30 and EUR match statistical data
• Production normalized to 3,000 lbs/ft frac intensity using logarithmic trend at the right
DeclinedUndeclined(2)
Legend
Well Performance Analysis | Summary
1. Horizontal wells with first production after 1/1/2010 and publicly availableproduction data at time of publication.
2. Wells with inadequate production data to forecast reserves & economics.
0.00
0.50
1.00
1.50
2.00
2.50
500 - 1000 1000 - 1500 1500 - 2000 2000 - 2500 2500 - 3000 3000 - 3500 3500 - 400
Ave
rage
EU
R (
Bcf
/M
ft)
Proppant Density Range (lbs/ft)
𝒚 𝒄 ∗ 𝒍𝒏 𝒙 𝒃𝒚 𝟎.𝟕𝟕𝟔𝒍𝒏 𝒙 𝟑.𝟗𝟏𝟕
Type 1A | IP-30, Arps, EUR Type 1B | IP-30, Di, EUR
Type 2 | IP-30 Type 3 | IP-30, EUR
Type 4 | IP-30, EUR Type 5 | IP-30, EUR
24
Highest quality. Peak production in first 6 months followed by smooth decline profile over several years.
New well result with >3 months of data post-peak. Average “b” and “Dm” of Type 1A’s applied to forecast EUR.
New well result with <4 months of data post-peak production. No production forecast. Forecast begins after first 6 months of production. Typically due to mechanical problems, interference, recompletions, etc.
Peak within first 6 months of production, with subsequent data following general Arp’s trend in a highly variable fashion.
Well has finished producing – no forecast.
Well Performance Analysis | Data Quality
Rusk
Smith
Sabine
Shelby
Winn
Panola
Caddo
Cherokee
De Soto
Harrison
Natchitoches
Bienville
Bossier
NacogdochesGrant
WoodUpshur
LincolnWebster
Jackson
Houston
Gregg
Red River
Anderson
ClaiborneMarion
San Augustine
Angelina Rapides
Union
Example Type Curve Area Generation | Haynesville/Bossier
25
Each Haynesville/Bossier and Cotton Valley zone was broken into multiple sub-areas with type curves generated for each based on statistical distributions of EUR and IP30 per normalized Mft
Type curve area outlines are meticulously drawn to ensure low statistical skewness
Areas incorporate economics, geology, hydrocarbon content, and well performance (see example below – Haynesville/Bossier)
While the below offers a detailed analysis at the basin level, Detring is substantially more granular on our advisory assignments
Type Curve area outlines shown in red.
Well Performance Analysis | Defining Type Curve Areas
0.0x – 0.25x0.25x – 0.8x0.8x – 1.5x1.5x – 2.0x2.0x – 2.5x2.5 – 5.1x
Legend
Haynesville/Bossier
Cotton Valley
26
Our type curve analysis statistically analyzes IP and EUR normalized to proppant pumped as performance is highly correlated to this variable.
Well Performance Analysis | Well Performance vs. Total Proppant(1)
1. Horizontal wells with first production after 1/1/2012 and publicly availableproduction data at time of publication.
GeologyHaynesville A&D Market Update
Carbonate Marine Shelf, Bank, Ramp, Local Deeper Water
Shales, Local Sand & Lime - Marine Basin, Slope/Rise (Deposited on Continent)
Continental and Marine
Geology | Stratigraphy & Depositional Environment
Jurassic Facies(1) Jurassic Depositional Environment(1)
During the Jurassic, a restricted basin setting existed in the depositional core of the Haynesville. An emerged highland to the south and surrounding carbonate reefs restricted oceanic circulation and led to
preservation of immense amounts of organic matter in the Haynesville Shale.
Formations/UnitsSeries
Key Interval/ Upside Interval
Craton, Shield; Undifferentiated Lowlands
Louann Salt
Trinity Group
Haynesville
Cret
aceo
usJu
rass
ic
Cotton Valley
Fredericksburg
Smackover
Norphlet
Werner
Bossier
1. Blakey’s North American Key Time Slices ©2013 Colorado Plateau Geosystems Inc. 28
Wine-racking of wells into the Lower and Upper Haynesville has proven successful where sufficient thickness and frac barriers exist. The Haynesville Overview map highlights the core and lower-tiered areas
of the basin.
Overview
Geology | Haynesville Overview
Formations/UnitsSeries
Key Interval/ Upside Interval
Louann Salt
Trinity Group
Haynesville
Cret
aceo
usJu
rass
ic
Cotton Valley
Fredericksburg
Smackover
Norphlet
Werner
Bossier
Central Core – high pressure, less
structurally complex, high TOC, great well
results
SW Core – high pressure, high TOC,
more structurally complex and deeper to
southwest
Tier 1B – Thicker but lower pressured /less favorable TOC than core. Thicker interval allows for wine-
racking of wells. Shallower depth
Tier 1A – favorable pressure and TOC. Increased depth and
structural complexity to southeast add to well
cost
Tier 2 – Thickest interval but with lower TOC and reservoir quality
Play OutlineCoreTier 1ATier 1BTier 2Tier 3Faults
Legend
GR ResDNPHI DPHI
API: 42365371600000
LowerHaynesville
LZUpper
Haynesville
LZ
Haynesville Type Well
29
The Haynesville play area deepens to the southeast and west, with a prominent anticline running NE-SW across the Texas side of the play. The thickness of the Haynesville is greatest in the northwest and thins to the southwest. Increased sedimentation rates diluted the rock quality in the
thickest areas of the play.
Geology | Haynesville
Haynesville Structure (SSTVD’) Haynesville Isopach (ft.)
30
Detring Energy Advisors verifies well targets across a position to ensure the Upper Haynesville and Lower Haynesville wells can bedifferentiated. ‘Wine-racking’ wells across the Haynesville allows for more effective hydrocarbon recovery from the total Haynesville reservoir.
Lower HaynesvilleUpper Haynesville
Well Target
Top and Base of Haynesville Displayed15x Vertically Exaggerated
Profile View3D Inventory Overview
Geology | Haynesville Inventory Example
Upper Haynesville
Lower Haynesville~120’
800’
1600’1600’
Wine-racked Development Pattern
Cross SectionA A’
A A’
31
Disclaimer & Contact Information
This presentation is for discussion purposes only. Information is provided "as is" without warranty of any kind, either expressed or implied. You assume all risk using the information. In no event shall Detring & Associates, LLC or its representatives be liable for any direct, indirect, special or consequential damages resulting from the use of this information.
The materials are confidential, for your private use only, and may not be shared with others (other than your advisors) without Detring & Associates, LLC's written permission.
Data throughout this presentation was sourced from IHS and Enverus.
Suite 1200Houston, TX 77056
www.detring.comwww.petrodivest.com
Derek DetringPresident
Melinda FaustManaging Director
Matt LoewensteinDirector
Richard BallDirectorGeology
Jerry EdringtonDirector
PetroDivest713-595-1017
