IPAA Private Capital
Conference
A&D Market Update
January 24, 2019
Craig Lande
713-585-3335
www.rbcrichardsonbarr.com
RBC Capital Markets Richardson Barr1
Delaware
Advisor to 3ROC
April 2018
Confidential
10
Mineral and Royalty
Bakken
Midland Basin
Appalachia Basin
Eagle Ford
19
11
16
17
14
18
27
20 22
Recent Select RBC-Advised U.S. Transactions
Eagle Ford
Advisor to GulfTex
February 2018
Confidential
E VNER EST
6
Delaware
Advisor to Shell
April 2018
$200,000,000
9
Midland
Advisor to SM
May 2018
Confidential
11
Midstream
Advisor to MS
May 2018
$1,750,000,000
12
$900,000,000
Advisor to NGL
July 2018
Midstream
15
Appalachia
Advisor to EQT
July 2018
$575,000,000
16
Bakken
Advisor to W Energy
October 2018
$305,000,000
18
Minerals &
Royalties
Advisor to Continental
October 2018
$600,000,000
19
Delaware
Advisor to FME
October 2018
Confidential
21
Advisor to Devon
Pending
Central Basin
Platform
Confidential
Confidential
28
Midstream
Advisor to Andeavor
January 2018
Confidential
Midland
Advisor to ExL / EQ
October 2018
$312,500,000
20
Midstream
24
Advisor to Southcross
November 2018
Confidential
Midland
Advisor to ROXO
October 2018
Confidential
22
Confidential
Central Basin Platform
26 28
Midstream
15 243 12
Minerals &
Royalties
Advisor to Haymaker
July 2018
$404,000,000
14
Advisor to Beacon
February 2018
Delaware
Confidential
Confidential
5
Confidential
Advisor to Tapstone
April 2018
SCOOP / STACK
8
$120,000,000
Advisor to Linn
April 2018
Central Basin
Platform
7
Advisor to Concho
November 2018
Midland
Confidential
Confidential
23
Advisor to Dale
January 2019
Confidential
27
Minerals &
Royalties
Delaware Basin
5
7
SCOOP / STACK
8
2
DJ Basin
1
18
9
23
Advisor to ExL
January 2018
Delaware
Confidential
Confidential
2
DJ Basin
Advisor to Carrizo
January 2018
Confidential
1
Minerals &
Royalties
Advisor to Royal
February 2018
$123,000,000
4
Confidential
ConfidentialAdvisor to
Greystone/AmeriCo
December 2018
Central Basin
Platform
Confidential
26
Advisor to Incline
July 2018
DJ Basin
Confidential
Confidential
13
Bakken
Advisor to Oasis
July 2018
$283,000,000
Confidential
17
13
6
10 21
4
25
Confidential
Advisor to Williams
December 2018
Midstream
25
3
RBC Capital Markets Richardson Barr2
$56 $56$60
$43
$62
$23
$58
$47$44
2010 2011 2012 2013 2014 2015 2016 2017 2018
Annual A&D Asset Supply
Annual U.S. E&P Onshore Transaction History ($B) (1)
Source: RBC Richardson Barr internal database, public filings, company press releases.
(1) Includes onshore U.S. asset transactions greater than $20 million.
2010 - 2017
Average: ~$50 B
$10.8 B
RBC Capital Markets Richardson Barr3
Monthly A&D Asset Supply
$ in Billions
Source: RBC Richardson Barr internal database, public filings, company press releases.
(1) Includes onshore U.S. asset transactions greater than $20 million. Excludes BP / BHP Transaction
$2 $2 $2
$3 $3
$5 $5
$6 $6
$11
$5
$9
$13
$4
$3 $3 $3
$4
$4 $5
$1
$2 $2
$3
$1
$3
$1
$2
$5
$3
$4 $3
$2
$3
$1
$0 $0
$2
$4
$6
$8
$10
$12
$14
Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19
Active
DownFlat
Dead
RBC Capital Markets Richardson Barr4
$28$24
$36
$18
$32
$11
$20$24
$30
$28$31
$24
$26
$29
$12
$38$24
$14
$56 $56$60
$43
$62
$23
$58
$47$44
2010 2011 2012 2013 2014 2015 2016 2017 2018
Public Other
Who Is Selling?
Annual U.S. E&P Onshore Transaction History ($B) (1)
Source: RBC Richardson Barr internal database, public filings, company press releases.
(1) Includes onshore U.S. asset transactions greater than $20 million.
%
Public 50% 43% 60% 41% 53% 46% 34% 50% 67%
RBC Capital Markets Richardson Barr5
$47
$64 $78
$86
$104
$68
$84
$100 $94
$109 $118
$52
$37
$59
$93
($38)
($56)($70)
($76)
($109)
($67)
($87)
($113)
($133) ($128)
($156)
($97)
($61)
($82) ($86)
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Operating Cash Flow Capex
Why Are Publics Selling?
Source: FactSet market data.
Financial
Crisis
Commodity Price
Decline
FCF
Focus
($ in billions, unless otherwise specified)
+ + + + + +- - - - - - - - -
Free Cash Flow /+ -
~ $200 Billion of
outspend
RBC Capital Markets Richardson Barr6
Equity Markets Shut As Investors Demand ExecutionEquity Offerings by Quarter Since 2016 ($B)
$10.0
$7.0
$8.6
$5.4
$3.0
$0.2 $0.1 $1.0 $0.1 $1.0 $0.8 $0.2
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018
Source: RBC Richardson Barr database and public filings.
Publics Aggressively Buying
Publics Focused on Execution
RBC Capital Markets Richardson Barr7
2010 2011 2012 2013 2014 2015 2016 2017 2018
M&A Picked Up Dramatically In 2018
Source: RBC Richardson Barr database, public filings
(1) Select onshore corporate M&A transactions greater than $1.0 billion
Deal
Count 1 2 2 1 3 1 1 2 6
$33.7
$11.4
$4.4$3.9
$16.1
$4.9
$19.6$19.8
$3.9
RBC Capital Markets Richardson Barr8
Public E&P Universe – January 2017
Source: Factset
<$3 Billion$3B - $10B>$10 Billion
15
3626
Public Market Value
$562 Billion
RBC Capital Markets Richardson Barr9
Public E&P Universe – Today
Now
60
<$3 Billion$3B - $10B>$10 Billion
Jan 2017
15
Jan 2017
36
Jan 2017
26
Now
12
Now
11
Public Market Value
$562 Billion
Jan 2017
Public Market Value
$434 Billion
Now
Source: Factset
RBC Capital Markets Richardson Barr10
$16.1
$3.9 $4.4
$11.4
$33.7
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
2014 2015 2016 2017 2018
Deal A
mo
un
t ($
B)
M&A Has Been An Important Driver For Asset Supply…
Source: RBC Richardson Barr internal database, public filings, company press releases.
(1) Select corporate M&A transactions greater than $1.0 billion.
Deal
Count3 1 1 2 6
North Louisiana
(Grenadier)
Q1 2015
Rockies
(White Rock)
$108 MM
Q2 2015
Multi-Basin
(Cobra)
$152 MM
Q2 2015
Conventional
Multi-Basin
(Foundation)
$185 MM
Q3 2015
DJ Basin
(SRC Energy)
$608 MM
Q2 2016
Eagle Ford
(Verdun)
$68 MM
Q3 2016
Appalachia
(HG Energy)
$1.13 B
Q2 2017
Halff East
Midland Basin
Q4 2018
Appalachia
(Diversified)
$575 MM
Q2 2018
Big Chief
Delaware Basin
Did not sell
Multi-Basin
(BSM)
$340 MM
Q4 2017
Portfolio Management After M&A has Led to Significant Divestitures in Recent Years ($ in Billions)
RBC Capital Markets Richardson Barr11
SAN JUAN~567,000 net acres
~102 Mboe/d
San Juan County, NM
ARKOMA~440,000 net acres
~204 MMcfe/d
Pittsburg County, OK
BAKKEN~80,000 net acres
21 Mboe/d
McKenzie County, ND
ARKOMA~125,000 net acres
~84 MMcfe/d
Hughes County, OK
UINTA~220,000 net acres
~19 Mboe/d
Duchesne County, UT
EAGLE FORD~42,000 net acres
~50 Mboe/d
Karnes County, TX
Source: RBC internal database, public filings, and company presentations
WAMSUTTER~500,000 Net Acres
38 Mboe/d
Sweetwater County, WY
Non-Core
Non-Core Non-Core
M&A
M&A
M&A
Potential??
Potential??
Potential??
Potential??
M&A
CBP~82,000 net acres
~7 Mboe/d
Andrews County, TX
…And Should Continue To Provide Lots Of Opportunities
M&A
RBC Capital Markets Richardson Barr12
$7.0
$5.6
$5.0
$4.8
$4.5
$3.9
$4.0
$2.5$2.4
$2.0$1.6
$1.5 $1.5$1.4 $0.9 $0.7 $0.7 $0.6 $0.6 $0.6 $0.6 $0.5
$41.9
$94.5
Private Equity Has An Abundance Of Dry Powder…
BlackstoneSHERID NNN
OTHER TOTAL
~$95 Billion of dry powder available
to Private Equity for acquisitions
Source: Richardson Barr Internal Database
RBC Capital Markets Richardson Barr13
24%
41% 41% 40%
48%
66%
2013 2014 2015 2016 2017 2018
…And Has Become The Dominant Buyer In Today’s Market
% Private Equity Buyers By Year
Source: RBC Richardson Barr internal database and public filings. Includes onshore U.S. asset transactions > $20 MM. Includes acquisitions made by S.P.A.C.s.
(1) Excludes BP / BHP deal.
(1)
RBC Capital Markets Richardson Barr14
PE Asset Demand since 2016 ($B)
Where And What Has Private Equity Been Buying?
% of Total 23% 17% 12% 9% 8% 7% 7% 6%
Gas $12 $11
$9
$6 $5 $5 $5 $4
Oil$4
Conventional Eagle Ford Appalachia SCOOP/STACK Bakken Delaware Midland Haynesville
53%
24%
23%Oil Resource Play
Gas Resource Play
Conventional
Source: RBC Richardson Barr internal database.
S.P.A.C.s
~$4 S.P.A.C.s
~$3 S.P.A.C.s
~$2
S.P.A.C.s
~$2
RBC Capital Markets Richardson Barr15
Private Equity Buying Behind Publics – Conundrum or
Opportunity?
Big Land Positions: 10k – 100k+ Net AcresP
No Clock Ticking: Generally all HBPP
Serendipity: Generally all depths / all rights so multiple zones to
exploit now or down the roadP
Cost savings: Reduce big company LOE and G&A from day oneP
Efficiencies: Low-hanging fruit, e.g. better “plumbing”P
Unloved: Neglected and undercapitalized assetsP
Cash Flow: Most likely spitting out free cash flow from day oneP
Valuation: PDP to PDP+
- Lock in hedges on PSA
- Get upside for free
P
Pros
RBC Capital Markets Richardson Barr16
Private Equity Buying Behind Publics – Conundrum or
Opportunity?
EXIT??
Cons
RBC Capital Markets Richardson Barr17
0%
10%
20%
30%
40%
50%
60%
70%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Private Equity – We’ve Seen This Movie Before!
% Of Value Allocated To PDP (1)
Inventory Buying PDP / Cash FlowPDP / Cash Flow
(1) Select deals from RBC Richardson Barr internal transaction database.
3 to 5+ year hold
1 to 2 year hold
3 to 5+ year hold?
RBC Capital Markets Richardson Barr18
Then – Portfolio Co. Org Chart (Lease and Flip)
CEO
CFO Sr. BD
Jr. BD
Jr. BD
Land
Land
Land
Land
Land
Land
Land
Land
RBC Capital Markets Richardson Barr19
Now – Portfolio Co. Org Chart (Hold, Develop and Exploit)
CEO
CFO BD / LandCOO
Accounting VP, Operations
Jr. Drilling Engineer
Sr. Drilling Engineer
Marketing
Completions Engineer
Reservoir Engineer
Facilities / Midstream
Geo. Tech
Geologist
RBC Capital Markets Richardson Barr20
Disclaimer (USA)
This presentation was prepared exclusively for the benefit of and internal use by the recipient for the purpose of considering the transaction or transactions contemplated herein.
This presentation is confidential and proprietary to RBC Capital Markets, LLC (“RBCCM”) and may not be disclosed, reproduced, distributed or used for any other purpose by the recipient without RBCCM’s express written consent; provided, however, that by acceptance of these materials, and notwithstanding any other express or implied agreement, arrangement, or understanding to the contrary, RBCCM, its affiliates and the recipient agree that the recipient (and its employees, representatives, and other agents) may disclose to any and all persons, without limitation of any kind from the commencement of discussions, the tax treatment, structure or strategy of the transaction and any fact that may be relevant to understanding such treatment, structure or strategy, and all materials of any kind (including opinions or other tax analyses) that are provided to the recipient relating to such tax treatment, structure, or strategy.
The information and any analyses contained in this presentation are taken from, or based upon, information obtained from the recipient or from publicly available sources, the completeness and accuracy of which has not been independently verified, and cannot be assured by RBCCM. The information and any analyses in these materials reflect prevailing conditions and RBCCM’s views as of this date, all of which are subject to change.
To the extent projections and financial analyses are set forth herein, they may be based on estimated financial performance prepared by or in consultation with the recipient and are intended only to suggest reasonable ranges of results. The printed presentation is incomplete without reference to the oral presentation or other written materials that supplement it.
References herein to “LIBOR”, “LIBO Rate”, “L” or other LIBOR abbreviations means the London interbank offered rate as administered by ICE Benchmark Administration (or any other person that takes over the administration of such rate).
Employees of RBCCM are prohibited from directly or indirectly, explicitly or implicitly: (a) promising any company favorable research coverage, a particular research rating or recommendation, as an inducement for the receipt of business or compensation; or (b) threatening to retaliate with adverse coverage or comments if such business or compensation is not awarded. All recommendations, ratings, price targets and opinions regarding a company are determined independently by RBCCM’s Research Department.
RBCCM and its affiliates do not provide tax advice and nothing contained herein should be construed as tax advice. Accordingly, you should seek advice based upon your particular circumstances from an independent tax advisor.
In the event that RBCCM is engaging in any discussion of activities that may be subject to the provisions of Section 15B of the Securities Exchange Act of 1934 or of any rules or regulations adopted thereunder by the Securities and Exchange Commission or the Municipal Securities Rulemaking Board (together, the “Municipal Regulations”), RBCCM hereby provides notice to you that it is providing the information contained in this document for discussion purposes only in anticipation of serving as Underwriter to you and/or any of your affiliates in which RBCCM would be acting solely as a principal in a commercial, arm’s length transaction and not as a municipal advisor, financial advisor or fiduciary to you and/or any of your affiliates or any other person or entity. The information provided herein or in connection herewith is not intended to be and should not be construed as “advice” within the meaning of the Municipal Regulations.
RBC Capital Markets is the global brand name for the capital markets businesses of Royal Bank of Canada and its affiliates, including RBC Capital Markets, LLC (member FINRA, NYSE and SIPC), RBC Dominion Securities Inc. (member IIROC and CIPF) and RBC Europe Limited (authorised in the United Kingdom by the Prudential Regulation Authority ("PRA") and regulated by the Financial Conduct Authority (“FCA”) and the PRA). This material is not for distribution to anyone without the express written permission of RBC Capital Markets. ® Registered trademark of Royal Bank of Canada. Used under license.
© Copyright 2019. All rights reserved.