The Woodford Shale - University of Oklahoma · 2009-08-14 · Investor Conference 2008 Background &...

The Woodford Shale

Presenter Name: Sam Langford

Investor Conference 2008

Woodford Agenda

Background & HistoryBackground & History

Development Plan SummaryDevelopment Plan Summary

Pilots ResultsPilots Results

• Reserves• CAPEX• Type Well Economics

NAV Model ResultsNAV Model Results

Looking ForwardLooking Forward


Background & History Key Points

Statistically Predictable Statistically Predictable –– Low Uncertainty of OutcomesLow Uncertainty of Outcomes

• 1 horizontal well/every 2 square miles (excluding 100+ verticals)

>650 horizontal wells to date

Wells drilled from N to S and shallowest to deepest

Industry Activity Industry Activity –– Increasing not Decreasing Increasing not Decreasing

• Drilling & Production rapidly increasing

Benchmark Transaction Benchmark Transaction –– BP/CHKBP/CHK

• Purchase Price >$20,000/acre or $35,000/flowing Mcfe/d• NFX acreage ~ $1,000 total sunk cost

~$800/acre land cost

~$200/acre for seismic + G&G/Frac Mapping/testing

““PilotPilot”” phase ending phase ending –– Development phase UnderwayDevelopment phase Underway

• Resource play efficiencies evident


4 active NFX rigs

ARKANSAS

OKLAHOMA

TEXAS

BARNETT(CANEY) SHALE

BARNETT(CANEY) SHALE

WOODFORD / CANEY SHALES

FAYETT E VI LLE (CANEY) SHALE

FAYETT E VI LLE (CANEY) SHALE

OUACHITAMOUNTAINS

LLANOUPLIFT

ARBUCKLEMOUNTAINS

SABINEUPLIFT

FRO

NTAL

BEL

T

ARKOMA BASIN

FORT WORTH BASIN

WOODFORD / CANEY SHALES WOODFORD /

CANEY SHALES

200 m

iles

Woodford Shale Play Location

HAYNESVILLE SHALE

HAYNESVILLE SHALE


0

25,000

50,000

75,000

100,000

125,000

150,000

175,000

200,000

225,000

Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08

MM

CF/

DWoodford Shale History Milestones

1st WoodfordVertical Test1st WoodfordVertical Test

1st Horizontal Woodford Well 1st Horizontal Woodford Well

“Unveiled” Woodford Potential

“Unveiled” Woodford Potential

Multi-Rig Horizontal Drilling

Multi-Rig Horizontal Drilling

Longer Laterals and Increased Frac Density Longer Laterals and

Increased Frac Density

Pad Drilling Begins

Pad Drilling Begins

BP buysCHK

BP buysCHK

Leasing Phase

Assessment and HBP phase

Pilot Phase


0

25

50

75

100

125

150

175

200

225

250

275

Jan-05

Apr-05

Jul-0

5Oct-

05Ja

n-06Apr-0

6Ju

l-06

Oct-06

Jan-07

Apr-07

Jul-0

7Oct-

07Ja

n-08Apr-0

8Ju

l-08

Oct-08

Dai

ly P

rodu

ctio

n (M

MC

FD)

NFX Op Production (Horizontal)NFX Op Production Est (Horizontal)NFX Op Production (Vertical)NFX Op Production Est (Vertical)

Blevins 3H-9:First Horizontal Production 3/3/05

Woodford – NFX Gross Op Production Projection through YE 2008

Monthly Average

January 1, 2006 – January 1, 2009

CAGR 110%

’08 Exit Rate> 250 MM/D

Current220 MM/D


0

50

100

150

200

250

300

350

400

450

500

550

Jan-05

Apr-05

Jul-0

5Oct-

05Ja

n-06Apr-0

6Ju

l-06

Oct-06

Jan-07

Apr-07

Jul-0

7Oct-

07Ja

n-08Apr-0

8Ju

l-08

OBO ProductionNFX Operated ProductionNFX Op Production (Vertical)

Blevins 3H-9:First Horizontal Production 3/3/05

Ave

rage

Dai

ly P

rodu

ctio

n (M

MC

FD)

Woodford History – Industry Production August Estimate

Monthly Average

~ 550 MM/d


Industry Horizontal Well Spuds August 2008

210

103 100

5748 40 36

26 246 13

0

25

50

75

100

125

150

175

200

225

NFX Antero DVN CLR CHK Pablo XTO SM PQ XEC Other

Wel

l Spu

ds 663 TOTAL 663 TOTAL

17 Operators

NFX W. I. in 58% of All Wells


Industry Horizontal Rigs Operating August 2008

0

2

4

6

8

10

12

Rig

s 44 TOTAL44 TOTAL

NFX AnteroDVN CLR CHK PabloXTO SMPQ XEC

44

55

6

12

3

2 21

10 Active Operators


Rig Count By Operator

Q1 ’07 Q2 ’07 Q3 ’07 Q4 ’07 Q1 ’08 Q2 ’08 Q3 ’080

1

2

3

4

5

6

7

DVN XTO PQ CLR

Highest Rig Count Since Inception

Highest Rig Count Since Inception


Woodford Horizontal Spuds by Quarter August 2008

0

10

20

30

40

50

60

70

80

90

100

3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3QE

NFX Operates32% of All WellsNFX Operates

32% of All Wells

OBONFX

2004 2005 2006 2007 2008

Wel

ls S

pud


4040--acre spacingacre spacing

• Wells approx. 660’ apart

8 wells per section 8 wells per section

• Avg. Lateral Length >4100’

~ 4.0 Bcf per well (average)~ 4.0 Bcf per well (average)

$5.6 $5.6 -- $6.0MM per well (average)$6.0MM per well (average)

F&D Metric F&D Metric $1.75 $1.75 -- $2.00/mcf$2.00/mcf

NFX Net Estimated Reserves:NFX Net Estimated Reserves:

• Booked PDP at YE ’07 – 300 Bcf (excl. 300 Bcf PUD)• Estimated Future Reserves – 5.6 - 6.2 Tcf

Total NFX Net Reserves Total NFX Net Reserves 5.9 5.9 –– 6.5 Tcf6.5 Tcf

NFX Net Future CAPEX NFX Net Future CAPEX $9.6 $9.6 -- $10.3B$10.3B

NFX Development Plan Summary


Pilot Results Key Points

SpacingSpacing

• Downspacing EUR Reduction Similar to Barnett• Recovery Efficiency Approx. 50% R.E. on 40 acre spacing

CostsCosts

• Pad Drilling Significant Cost Reductions

Optimal DevelopmentOptimal Development

• 40 acre Optimizes Reserves, NPV & Metrics


Effect of Downspacing 80 to 40 acre

80 ACRES 40 ACRES

5.3 BCF/WELL 4.0 BCF/WELL25%

REDUCTION

21.2Bcf 30.4

60+ BCF OGIP 60+ BCF OGIP

4 WELLS5.3 BCF/WELL

~35% R.E.

8 WELLS4.0 BCF/WELL

~50% R.E.32.0 Bcf

660’ 1,320’ 660’ 330’660


PARAMETERPARAMETERTARGET TARGET RANGERANGE

Western Western ArkomaArkoma

WOODFORDWOODFORD

Fort WorthFort WorthCANEY/CANEY/

BARNETTBARNETT

Eastern ArkomaEastern ArkomaCANEY/ CANEY/

FAYETTEVILLEFAYETTEVILLE

North LouisianaNorth LouisianaHAYNESVILLE/HAYNESVILLE/

BOSSIERBOSSIER

Total Organic Total Organic CarbonCarbon 2 2 –– 10%10% 3 3 –– 10%10% 3 3 –– 8%8% 3 3 –– 8%8% 3 3 –– 5%5%

Thermal Maturity Thermal Maturity Vitrinite % RoVitrinite % Ro 1.1 1.1 –– 3.0%3.0% 1.1 1.1 –– 3.0%3.0% 1.2 1.2 –– 2.0%2.0% 1.2 1.2 –– 4.0%4.0% ??

Mineralogy/Mineralogy/Silica ContentSilica Content 30 30 –– 80%80% 60 60 –– 80%80% 40 40 –– 60%60% 40 40 –– 60%60% <40%?<40%?

Gas Filled Gas Filled PorosityPorosity 2 2 –– 8%8% 3 3 –– 6.5%6.5% 3 3 –– 5.5%5.5% 3 3 –– 5.5%5.5% 66––10%10%

Depth (feet)Depth (feet) NANA 6,000 6,000 –– 14,00014,000 6,000 6,000 –– 9,0009,000 1,500 1,500 –– 6,5006,500 10,500 10,500 –– 13,50013,500

Thickness (feet)Thickness (feet) NANA 100 100 –– 220220 300 300 –– 500500 50 50 –– 325325 200200–– 240240

Shale Characteristics – Comparison Silica = Brittleness

FAYETTEVILLE WOODFORD BARNETT

LOG COMPARISONS

2300’

8000’

7000’

350’

150’

350’

200’

11300’

HAYNESVILLE

•COMPACT (Hi Net/Gross) INTERVAL • HIGH SILICA / LOW CLAY• NATURAL FRAC BOUNDARIES


Cattle Pilot Frac Mapping


$-

$500

$1,000

$1,500

$2,000

$2,500

1 2 3 4 5 6 7 8 9

Pad Wells – Dramatic Improvements Drilling Cost / Lateral Foot

Hashed well / HBP well

(43%)(43%)(27%)(27%)

(54%)(54%)

(48%)(48%)

(41%)(41%)(52%)(52%)

(46%)(46%)

(54%)(54%) (72%)(72%)


YTD Increased Density Drilling Pilot Cost

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

1st well 2nd well 3rd well 4th well 5th well 6th well

2008 Avg. Drill $/lateral foot

59% decrease

59% decrease


Development Plan – Methodology Key Points

10% Acreage10% Acreage –– Assumed NonAssumed Non--commercial for developmentcommercial for development

150,000 Net Acres 150,000 Net Acres –– DevelopedDeveloped

90% of Development Acreage 90% of Development Acreage –– 33--D Seismic in HandD Seismic in Hand

Reserves Reserves -- Based on 50 Pilot WellsBased on 50 Pilot Wells

Costs Costs -- Based on 17 MultiBased on 17 Multi--Well PadsWell Pads

Breakeven (10% IRR) Gas Price Breakeven (10% IRR) Gas Price –– F&D @ $1.75 = $5.00/McfF&D @ $1.75 = $5.00/Mcf@ $2.00 = $5.50/Mcf@ $2.00 = $5.50/Mcf


Development Plan - Methodology Lateral Length Scenarios

5280’

5280

’

175’ FAULT5280’

5

175’ FAULT

4620

’La

tera

l Len

gth


Horizontal Well Cost per Lateral Foot Total Drill & Complete

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000200820072006

PILOTASSESSMENT

· 41 wells· $2,605 per lateral ft avg· 2,521' lateral length avg

· 91 wells· $2,487 per lateral ft avg· 2,428' lateral length avg

38% Reduction in Cost/Lateral Foot from 2007

· 40 wells· $1,546 per lat ft avg· 4,224' lat length avg

10-well Moving Average


Horizontal Well Cost per Lateral Foot Total Drill & Complete – Last 20 wells

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,80020 Most Recent Wells Average $1,370 / lateral ft

Average


0

100

200

300

400

500

600

Q1 ’07 Q2 ’07 Q3 ’07 Q4 ’07 Q1 ’08 Q2 ’08 Q3 ’08

Avg. Vertical Ft./Day Avg. Lateral Ft./Day

77% improvement77% improvement

39% improvement39% improvement

Feet

/Day

Development Plan - Methodology Drilling Performance Improvements


Development Plan - Methodology Completion Cost Improvement

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08

Avg. Compl $/Lateral Foot

47% decrease47% decrease


-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

0

MCF

DHorizontal Woodford Type Curve 4 Bcfe Typical Well

1 2 3 4 5 6 7 8 9 10

Net Revenue Interest:Net Revenue Interest: 81.0%81.0%Fixed LOE ($/MCF):Fixed LOE ($/MCF): $0.45$0.45

- Production Tax (first 48 months or PO)- Production Tax (first 48 months or PO) 1.09%1.09%- Production Tax (thereafter):- Production Tax (thereafter): 7.09%7.09%

Wellhead Pricing vs. Henry Hub ($/MCF):Wellhead Pricing vs. Henry Hub ($/MCF): -$0.75-$0.75

Total Fuel Gas %(Wellhead to Perryville):Total Fuel Gas %(Wellhead to Perryville): 8.0%8.0%

Typical Well Economic AssumptionsTypical Well Economic Assumptions

Production Tax (% of Revenue):Production Tax (% of Revenue):

0

62% 28% 18% 13% 11% 7%

Gas Quality (BTU/CF)Gas Quality (BTU/CF) 10501050

End of Year


Type Well Economics Flat HH Gas Prices

Henry Hub Price $/MMBTUHenry Hub Price $/MMBTU (Flat)(Flat)

F&D = $1.75F&D = $1.75 $5 $7 $9$5 $7 $9NPV @ 10% ($M) NPV @ 10% ($M) 150150 3550 6700 3550 6700 ROR (%)ROR (%) 1111 3030 5050PAYOUT (Months)PAYOUT (Months) 80 80 3232 2020

F&D = $2.00F&D = $2.00NPV @ 10% ($M) NPV @ 10% ($M) (500)(500) 2850 5850 2850 5850 ROR (%)ROR (%) 9 239 23 3939PAYOUT (Months) 95PAYOUT (Months) 95 3737 2323


NAV Model Results Key Points

Model assumes 4 Bcf EUR & $5.8 MM type wellModel assumes 4 Bcf EUR & $5.8 MM type well

• 2250 Operated wells drilled beginning MY 2008• Projected results smoother than actual

Rig Fleet Rig Fleet –– Increasing from 12 to 30 over 4 yearsIncreasing from 12 to 30 over 4 years

Production Growth Production Growth

• NFX Gross Operated Production Projected to reach 1.5 Bcf/d • 10 Year CAGR 20%

Gathering infrastructure in place, expandingGathering infrastructure in place, expanding

• No production delays or curtailments

Firm Transportation Secured Firm Transportation Secured –– Differentials to HH FixedDifferentials to HH Fixed


NAV Model Results NFX W.I. D&C Capex Projection

Year

-end

Rig

Cou

nt

30

27

22

17

13

0

100

200

300

400

500

600

700

800

900

1,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

$ M

illio

ns

0

5

10

15

20

25

30

35

Operated Drilling Capital Non-operated Drilling Capital Operated Year-end Rig Count6 months

Rig Fleet Assumption12 Rigs Currently

Increasing to 30 MY 2012


NAV Model Results Gross Operated Production Projection - 10-Year Horizon

0

200

400

600

800

1,000

1,200

1,400

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

YEARS

MM

CFD

CAGR 20%


Woodford Shale Production Area

Arkoma Connector Pipeline

Midcontinent Express and Gulf Crossing Pipelines

Perryville Hub

Henry Hub

NFX FIRM TRANSPORTATION

Mid-Cont Express (MEP): 300 MMcf/dBoardwalk: Up to 300 MMcf/dLaClede: 50 MMcf/d

NFX FIRM TRANSPORTATION

Mid-Cont Express (MEP): 300 MMcf/dBoardwalk: Up to 300 MMcf/dLaClede: 50 MMcf/d


NFX GROSS OPERATED PRODUCTION Firm Transportation Capacity

0

100

200

300

400

500

600

700

800

900

Jan-0

8

Jul-0

8

Jan-0

9

Jul-0

9

Jan-1

0

Jul-1

0

Jan-1

1

Jul-1

1

Jan-1

2

Jul-1

2

MM

CFD

MEP

LaClede

550 MMCFD

465 MMCFD Boardw alk Expansion

650 MMCFD

NFX Gross Op. Prod


NAV Model Results NFX NPV @ 10%

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$7.00 $8.00 $9.00 $10.00

Flat Gas Price ($/MMBtu)

$ M

illio

ns

Existing New OBO

132 mm shares

$24/sh

$36/sh

$48/sh

$60/sh$3,220

$4,777

$7,889

$6,333


WOODFORDWOODFORD

WOODFORD

CANEY

WOODFORD

1 MILE 1 MILE 1 MILE 1 MILE

1 M

ILE

1 M

ILE

1 M

ILE

2 M

ILES

STANDARD EXTENDEDLATERAL DUAL LATERAL STACKED LATERAL SUPER EXTENDED

LATERAL

Future Well Designs Goal: Lower Cost per Foot

In Progress4th Qtr 08


4040--acre spacingacre spacing

• Wells approx. 660’ apart

8 wells per section 8 wells per section

• Ave Lateral Length >4100’

~ 4.0 Bcf per well (average)~ 4.0 Bcf per well (average)

$5.6 $5.6 -- $6.0MM per well (average)$6.0MM per well (average)

F&D Metric F&D Metric $1.75 $1.75 -- $2.00/mcf$2.00/mcf

NFX Net Estimated Reserves:NFX Net Estimated Reserves:

• Booked PDP at YE ’07 300 Bcf (excl. 300 Bcf PUD)• Estimated Future Reserves 5.6 - 6.2 Tcf

Total NFX Net Reserves Total NFX Net Reserves 5.9 5.9 –– 6.5 Tcf6.5 Tcf

NFX Net Future CAPEX NFX Net Future CAPEX $9.6 $9.6 -- $10.3B$10.3B

NFX Development Plan Summary


Presenter Name: Sam Langford

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The Woodford Shale - University of Oklahoma · 2009-08-14 · Investor Conference 2008 Background &...

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