100 CORPORATE RIDGE
SUITE 100
BIRMINGHAM, ALABAMA 35242 (USA)
PHONE 1-205-408-0909
FAX 1-205-408-0870
WWW.DIVERSIFIEDGASANDOIL.COM
COMPANY BACKGROUND
•
Diversified is an Appalachian focused oil and gas company with
headquarters in Birmingham, Alabama.
•
Diversified Resources began as a West Virginia (“WV”) oil & natural gas
production company in 2001.
•
Initially, operations were focused on the north central region of the state.
Over time, the Company expanded through drilling existing leases and
through acquisitions.
•
By 2008 the Company had drilled 120 wells and was operating 250 wells
that were producing 2,700 Mcfe/day in WV.
•
In June 2010 the Company entered the Ohio market by acquiring the
conventional assets of AB Resources. That was followed by the acquisition
of 300 wells from Deep Resources, another Ohio based production
company.
•
Combined, the acquisitions totaled $19.8 million and increased Diversified’s
gross production to 6,000 Mcfe/day. The Company now operates over +/1,000 wells across West Virginia and Ohio.
•
The Company is owned by two individuals: Rusty Hutson and Rusty Post
whom together control 100% of the equity interests in the Company.
2
COMPANY BACKGROUND
- CONTINUED
•
The Company’s primary focus has been developing and operating
conventional oil & natural gas assets.
•
These assets offer predictable production rates at an attractive rate of return
(15% to 20%). Specifically, management’s strategy involves:
3) Maximizing
production of neglected
wells
1) Executing low risk,
low cost drilling
2) Targeting high PDP
acquisitions
• Conventional Formations:
Clinton, Gordon and
Benson
• $25MM to $100MM: Noncore assets of larger shale
players
• Repairing lines
• Drilling & Completion
Costs: $200K to $450K
• $5MM to $25MM: Private
owners looking to
retire/forced to sell; off-theradar deals with little
competition
• Reconnecting wells
• Recompleting wells
• Adding compression
where feasible
• Placing wells on a swab
schedule
3
COMPANY HIGHLIGHTS
•
Great long term call on natural gas. Great opportunity for those with long
term positive view of natural gas prices.
•
Excellent platform for aggregating natural gas and oil producing asset.
•
Oil comprises 35% of total revenues. Long lived, low risk, oil and natural
gas production.
•
Significant conventional acreage position with significant undeveloped low
risk oil and gas reserves.
•
Operated working interest position with an experienced management team.
•
Wright & Company third party engineering report.
•
Company generated $2.5 million in annual cash flow in 2013 and forecasts
approximately $3.7 million in annual cash flow in 2014.
4
COMPANY HIGHLIGHTS
- CONTINUED
•
36.6 BCF of Proved Gas Reserves and 666,000 BBLs of Crude Oil
Reserves on Wright & Company 6/30/13 report.
•
$31.0 million PV10 Proved Developed at 6/30/13. $43.1 million total 3P
PV10 at 6/30/13.
•
45% EBITDA margins provides comfortable margin to profitably produce at
current prices.
•
65% of natural gas hedged at $3.50 DTH - $4.50 DTH in 2014. NO hedges
in 2015 forward leaving upward flexibility.
•
65% of oil hedged at $88.45/BBL for 2014 and $90.00/BBL for first 6mo. of
2015.
•
1,100 BTU gas provides 10% premium to NYMEX Natural Gas prices.
•
Sweet oil trades very close to NYMEX WTI with only a small $1 to $5
discount.
5
NET DAILY PRODUCTION
- PRESENT AND PROJECTED
•
Presently producing about 2,880 net MCF of natural gas per day and
approximately 65 net BOPD for a combined total of approximately 3,270 net
MCFE per day.
•
Production expected to increase to 4,543 MCF of natural gas per day and
approximately 120 BOPD or to 5,263 MCFE per day by year end 2015.
Net Daily Production Comparison
6000
140
5000
120
100
4000
80
3000
2000
1000
Natural Gas
60
MMCFE
40
Oil (Barrels)
20
0
0
Present
Production
Year End 2015
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CONVENTIONAL
OIL AND GAS ACREAGE POSITION
•
Company owns approximately 41,500 acres in total conventional oil and gas
leases.
•
Approximately 90% is held by production (“HBP”) and about 10% (+/- 4,000
acres) is undeveloped.
•
Comfortable 3 and 5 year leases on undeveloped acreage. No near term
pending expirations.
•
35,000 (84%) of this acreage is located in Ohio.
•
6,500 (16%) is located in WV.
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SIGNIFICANT PUD
OIL AND GAS RESERVE/POTENTIAL
•
Approximately 800 MBO and 20 BCF of natural gas reserves; about 24.9
MMCFGE net to the Company’s interest.
•
Over 200 proved undeveloped drilling locations engineered. $43.5 million in
capital required to for full development. Total revenue potential from the
engineered proved undeveloped reserves is +$156 MM.
Net Oil (MBO)
Probable , 1.94 PDP, 366.06 Net Gas (MMCF)
PUD, 814.08 PDNP, 76.89 Probable , 3,564.23 PDP, 17,863.62 PUD, 19,980.05 PDNP, 1,937.21 8
FINANCIAL SUMMARY
2012
Gross - Ex isting (Mcf)
2013
1,788,815
Gross - New PUD (Mcf)
Gross - Ex isting (Bbl)
Gross - New PUD (Bbl)
1,484,589
-
8,994
34,587
30,368
-
1,565
Net Mcf
1,109,065
927,640
Net Bbl
19,023
20,080
4,969
4,149
96
89
5,545
4,681
Year End
MCF/Day
Oil/Day
MCFE/Day
CapEx
$
-
$
1,863,390
Realized Yearly Av g. $/Mcf
$
3.75
$
3.15
Realized Yearly Av g. $/Bbl
$
87.18
$
92.27
Gross - Ex isting Gas $
$
6,704,653
$
4,676,455
Gross - New PUD Gas $
$
Gross - Ex isting Oil $
$
Gross - New PUD Oil $
$
Gross Rev enue
$
Net - Ex isting Gas $
$
Net - New PUD Gas $
$
Net - Ex isting Oil $
$
Net - New PUD Oil $
$
Other Operating Income
$
Net Rev enue
-
$
28,331
$
2,802,055
$
144,434
9,719,930
$
7,651,275
4,156,885
$
2,899,402
$
22,665
$
1,737,274
$
115,547
1,798,987
$
1,981,439
$
7,825,344
$
6,756,327
LOEs
$
3,685,183
$
3,498,309
Production Tax es
$
262,588
$
168,908
SG&A
$
612,803
$
526,675
EBITDA
$
3,264,770
$
2,562,435
3,015,277
-
1,869,472
-
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MANAGEMENT
•
Robert “Rusty” Hutson—President
Before founding Diversified Resources in 2001, Mr. Hutson held finance and accounting roles for 13
years at Bank One (Columbus, OH) and Compass Bank (Birmingham, AL). He finished his banking
career as CFO of Compass Financial Services. Mr. Hutson has a B.S. degree in Accounting from
Fairmont State College— West Virginia. He is a former CPA (Ohio).
•
Robert “Rusty” Post—Vice President
Mr. Post joined Diversified Resources in 2005 and is a 50% owner with Mr. Hutson. Mr. Post was
Comptroller for Whiting Corporation for 3 years. He then purchased TramBeam, an overhead crane
company, from Whiting Corporation and owned and operated the business for 20 years. Mr. Post sold
TramBeam in 2002 to a London based corporation, FKI Industries. He has a B.S. degree in
Accounting (Finance minor) from Jacksonville State University—Alabama.
•
Rusty Hutson, Sr.—Field Operations Manager
Hutson, Sr., spent 30 years in the oil and gas business in various operational roles before retiring in
2008. The Hutson family has been engaged in aspects of the oil and gas industry in WV since the
early 1900s. He now supervises all operations in Ohio for Diversified, which includes 15 employees
and 3 service rigs.
•
Lindsey S. Pourciau, CPA—Controller
Mrs. Pourciau joined Diversified resources in 2011 and is responsible for financial statement and
budget preparation, monthly closing procedures, and audit & tax oversight. Prior to joining Diversified,
Mrs. Pourciau was a Senior Accountant with Barfield, Murphy, Shank & Smith where she audited
construction contractors, manufacturing and distribution companies. She has a Master of
Accountancy and a B.S. in Accounting from Samford University.
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SHAREHOLDERS AND BOARD OF DIRECTORS
Shareholders
Chairman of the Board
Zadok Hakim
Treasury/Secretary of the Board
Lindsey Pourciau
Board of Directors
Director
Robert
(Rusty)
Hutson, Jr.
Director
Robert
(Rusty)
Post
Director
Zadok
Hakim
Director
To be
Nominated
Director
To be
Nominated
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PERSONNEL CHART
President / CEO
Robert (Rusty) Hutson, Jr.
Legal
Department
Public Relations
Vice-President
Production / Oil and Gas
OH Field
Operations Mgr.
Rusty Hutson,
Sr.
12 Well Tenders
WV Field
Operations
Mgr.
Mark Hutson
6 Well Tenders
COO / CFO
Robert (Rusty) Post
Controller
Lindsey
Pourciau
3 Distribution
Managers
External Auditors
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CONTACT INFORMATION
100 CORPORATE RIDGE
SUITE 100
BIRMINGHAM, ALABAMA 35242 (USA)
PHONE 1-205-408-0909
FAX 1-205-408-0870
WWW.DIVERSIFIEDGASNADOIL.COM
Rusty Hutson, Jr.
CEO
Robert Post
COO/CFO
Zadok Hakim
Chairman
rhutson@divresinc.com
rpost@divresinc.com
zhakim777@divresinc.com
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