Strictly Private and Confidential
AAPL Annual Meeting
U.S. A&D Market Overview
June 8, 2011
Craig Lande
craig.lande@rbccm.com
713-585-3335
www.richardsonbarr.com
A&D Asset Supply
By Commodity
By Sector
($ Billions)
($ Billions)
Conventional Oil
$60.0
Oil Resource Play
$58.9
$60.0
Conventional Gas
$50.0
Public Company
$58.9
Private Equity
Gas Resource Play
$50.0
Private Company
$40.0
$40.0
$31.1
$31.1
$30.0
Tax Driven
$30.0
$24.0
$20.0
$24.0
$20.0
$15.2
$10.0
Opportunistic
$15.2
$10.0
$0.0
$0.0
Avg. 2004 - 2008
2009
2010
YTD 2011
Oil & Gas Resource Plays continue
to drive asset supply
1
Raising Shale
Capital
Note: Includes all U.S. transactions, including Gulf of Mexico
Avg. 2004 - 2008
2009
2010
YTD 2011
Publics JV-ing unconventional
assets and selling conventional gas
Regional Asset Supply – Conventional
($ Billions)
Legend
Mid Continent
Rockies
Last Twelve Months
$8.4
$2.3
3-Year Average
$1.4
$2.5
Appalachia (1)
$0.7
Mature Shale Gas
(Barnett, Fayetteville)
$0.3
Ark-La-Tex
Permian Basin
Gulf Coast (2)
$2.1
$2.0
$1.6
Conventional
Oil
$0.7
2
(1) Includes Michigan.
(2) Does not include Oxy / Shell transaction
$1.0
$0.9
Regional Asset Supply – Resource Plays
($ Billions)
Bakken
Marcellus
Niobrara
$5.1
$7.9
$1.5
$6.2
$2.3
Permian Resource
$7.9
Haynesville
$2.9
$4.8
Eagle Ford
$10.7
$1.0
Legend
Last Twelve Months
$3.0
3
3-Year Average
U.S. E&P Landscape – M&A Driver in 2011 / 2012?
Ranking By Enterprise Value ($ In Billions)
Major
$435 $251 $192 $172
$160
Oil-Weighted
Resource Play
$140
Other Independent
$20 - $75 Billion
$120
$5 - $20 Billion
$100
$1 - $5 Billion
$80
$60
Resource Plays do not have
the capital of Majors
$40
$20
XOM
RDS
CVX
BP
COP
OXY
APA
APC
MRO
DVN
EOG
ECA
CHK
HES
NBL
SWN
PXD
MUR
NFX
CLR
CXO
DNR
HK
RRC
EQT
UPL
WLL
XEC
PXP
SD
COG
XCO
FST
EGN
SM
KWK
BRY
CIE
EXXI
BEXP
ATPG
MMR
ROSE
OAS
BBG
SFY
CRK
CRZO
VQ
REN
PETD
PVA
REXX
$0
Majors, Internationals, and financially sound Large-Caps are the likely buyers;
resource players the likely targets
4
Commodity Futures Curves
Comparison of Forward Crude Pricing
Comparison of Forward Natural Gas Pricing
$110.00
$8.00
Current
$7.00
$100.00
($ / Bbl)
Jan. 1
$90.00
($ / MMBtu)
Current
$6.00
Jan. 1
$5.00
$80.00
$4.00
$70.00
$3.00
0
12
24
36
Futures Month
48
60
0
12
24
36
48
Futures Month
The market remains bullish on oil while sentiment remains bearish in the
natural gas market
5
60
E&P Sector Capital Markets / Joint Venture Financing Activity
Capital Markets Overview
Equity and Debt Capital Markets Activity Since January 1, 2007
$60.0
Debt
Bank
High Yield
Investment
Grade

Equity
IPO
2010
2011








Secondary



Private
Equity



Joint Venture
$52.5
IPO
$50.0
Follow-On + Converts
High Yield
Investment Grade
Capital Raised ($B)
2009
Private
Equity
$40.0
$34.4
$34.9
$35+ B
$30.0
$25.5
$20.3
$20.0
$10.0
MLP
Royalty
Trust
6



$0.0
2007
2008
Source: Dealogic data as of May 10, 2011. Includes independents only - excludes capital raised from Majors / Integrateds.
2009
2010
YTD 2011
Publics Co’s will be in Need of Capital to Fund 2011
Budgets
Public E&P Sector Capital Shortfall Analysis ($MM)
Undeveloped Leasehold Expiring In 2011 & 2012
90%
Large Cap Resource Co’s
Debt to ‘11E EBITDA: 1.9x ($3,605)
Debt to Cap: 44.5%
Small Cap Resource Co’s
Debt to ‘11E EBITDA: 2.6x ($797)
Debt to Cap: 52.0%
Oil Weighted Companies
Debt to ‘11E EBITDA: 1.4x ($1,039)
Debt to Cap: 35.2%
Bakken Companies
Debt to ‘11E EBITDA: 0.7x ($1,553)
Debt to Cap: 24.2%
Percentage Of Leasehold Expiring In Next Two Years
80%
77%
73%
70%
60%
58%
56%
53% 53%
50%
45%
42%
Average = 42%
41%
40%
38%
37%
36%
35%
33%
29%
30%
28%
27%
23%
22%
20%
10%
7
Source: FactSet estimates and latest company SEC filings as of June 2, 2011.
Large Cap Resource Co’s includes: CHK, SWN, UPL, RRC, EQT, HK, XCO.
Small Cap Resource Co’s includes: WKW, CRK, CRZO, GDP, REXX, GMXR
Oil-Weighted Companies includes: CLR, CXO, DNR, WLL, PXP, BRY, REN
Bakken Companies includes: CLR, BEXP, OAS, NOG, KOG
GMXR
DVN
XCO
FST
NFX
KOG
DNR
GDP
OAS
$0
KWK
($1,000)
CLR
PXP
($2,000)
PXD
RRC
($3,000)
EOG
BEXP
($4,000)
CRK
($5,000)
HK
AREX
0%
Top 10 Onshore Buyers – A Changing Landscape
U.S. Onshore Transactions (2005 – 2008)
Rank
Company
Asset
Acquisitions
Rank
Company
Asset
Acquisitions
1.
XTO
$16.3 Billion
1.
Chevron
$6.5 Billion
2.
Chesapeake
$8.2 Billion
2.
Shell
$5.7 Billion
3.
Oxy
$5.4 Billion
3.
Oxy
$5.6 Billion
4.
Exco
$5.2 Billion
4.
BHP Billiton
$4.3 Billion
5.
Plains E&P
$4.9 Billion
5.
ExxonMobil
$3.9 Billion
6.
Loews
$4.0 Billion
6.
Marathon
$3.7 Billion
7.
Devon
$3.7 Billion
7.
Consol
$3.5 Billion
8.
Linn
$3.7 Billion
8.
CNOOC
$3.4 Billion
9.
BP
$3.7 Billion
9.
Reliance
$3.2 Billion
10.
StatOIl
$3.4 Billion
10.
Apache
$3.1 Billion
U.S. Large Caps were primary buyers
8
U.S. Onshore Transactions (2010 – 2011 YTD)
Majors / Internationals emerge
Sector Themes – Pivot to Oil
Large & Mid Cap Oil Reserves
E&P Equity Stock Performance
Percentage of Total Reserves
250%
33%
200%
Oil Companies
Gas Companies
30%
150%
100%
50%
0%
Year End 2009
Year End 2010
Public E&P Universe
# Gas Companies
(50%)
Jan-07
Jan-08
# Oil Companies
56
Sub-Sector
Jan-11
17
2011
TEV /
2011 Production
($ / Boepd)
2011E
EBITDA
Reserves
($ / Boe)
$79,419
9.0x
$16.17
$146,909
8.1x
$29.02
E&P MLPs
$121,641
9.5x
$17.98
Bakken
Companies
$205,203
9.6x
$63.99
Large Cap Gas
Resource Plays
Oil-Weighted
Companies
11
9
Jan-10
E&P Public Valuations
62
2008
Jan-09
“Large-Cap” includes: OXY, APA, APC, DVN, EOG, ECA, CHK, WMB, NBL, SWN, EP, PXD, CLR, CXO, NFX, DNR, XEC, RRC, WLL, UPL, QEP, EQT, HK.
“Mid-Cap” includes: PXP, COG, SM, XCO, EGN, SD, FST, BEXP, OAS, KWK, BRY, EXXI, ROSE, NOG, BBG, SFY, WTI, GPOR, SGY, CRK, CRZO, KOG, CWEI, PETD.
“Large Cap Gas Resource Plays” includes: CHK, SWN, UPL, RRC, EQT, HK, XCO.
“Oil-Weighted Companies” includes: OXY, CLR, CXO, DNR, WLL, PXP, OAS, BRY, REN
“E&P MLPs” includes: LINE, BBEP, EVEP, LGCY, VNR, ENP, PSE, and QRE.
“Bakken Companies” includes: CLR, BEXP, OAS, NOG, KOG.
E&P Sectors are Looking for Unique Characteristics
MLP Buyers – High PDP; Commodity Agnostic
Buyer
Amount
Region
% Gas
% PDP
Eagle Rock
$514
Mid-Continent
80%
66%
Linn
$330
Appalachia
99%
85%
Linn
$200
Permian
8%
70%
EV Energy
$123
Mid-Continent
86%
69%
Legacy
$105
Permian
48%
84%
 High PDP
 Low Decline
Private Equity Buyers – Mid-PDP; Gas
 Mid PDP
 Gas
Buyer
Amount
Region
% Gas
% PDP
EnerVest
$967
Barnett
71%
44%
Legend
$900
Barnett
92%
54%
EnerVest
$330
Appalachia
70%
55%
WildHorse
$320
Ark-La-Tex
90%
35%
Premier
$104
Barnett
100%
45%
Public Buyers – Low PDP; Oil / Resource
 Low PDP
 Oil / Resource
10
Buyer
Amount
Region
% Oil
% PDP
Apache
$3,100
Permian
65%
32%
Concho
$1,650
Permian
58%
63%
Oxy
$700
California
100%
35%
W&T
$366
Wolfberry
91%
22%
Bill Barrett
$120
Uinta
80%
30%
Unconventional Resources – Coming to America
Unconventional Demand By Buyer
U.S. Publics
39%
Other
3%
Majors /
Internationals
58%
Unconventional Demand By Sector
Canada
5%
Europeans Asians
17%
18%
US
60%
11 Note: Pie Charts demonstrate total transaction volume by Buyer Type and Sector from 2010 – 2011YTD.
Current Conventional Oil Valuations Equate to a $140+ Oil
Market
Quiet A&D Market
WTI near month
($/Bbl)
$143,200
Deal competition
created oversupply
Production Metric ($ / Boepd)
$145.29 / Bbl
$116,800
$105,500
$102,600
$100,000
$115,100
$111,100
$97,700
$86,800
$81,100
$70,000
$100.40 / Bbl
$31.14 / Bbl
Q1
Q2
2008
Q3
N/A
N/A
Q4
Q1
Q2
2009
12 Note: Includes $50+ MM onshore oil transactions with R/P ratio of at least 10 years
Q3
Q4
Q1
Q2
2010
Q3
Q4
1H
2011
Current Conventional Gas Valuations Reflect Commodity
Price
Henry Hub near month
($/Bbl)
$13.31 / MMBtu
Production Metric ($ / Mcfepd)
$20,400
$16,500
$4.63 / MMBtu
$12,500
$11,800
$10,800
$10,100
$10,700
$9,700
$8,400
$7,800 $8,200
$7,900 $7,800
$1.88 / MMBtu
Q1
Q2
2008
Q3
Q4
Q1
Q2
Q3
2009
13 Note: Includes $50+ MM onshore natural gas transactions with R/P ratio of approximately 10+ years
Q4
Q1
Q2
2010
Q3
Q4
1H
2011
Regional Production Multiples for Conventional Oil & Gas
Transactions
Conventional Gas Transactions
$150,000
$125,000
$120,000
$120,000
$100,000
$90,000
Permian
Mid-Con
Rockies
Production Multiple ($ per Mcfepd)
Production Multiple ($ per Boepd)
Conventional Oil Transactions
$11,000
$10,000
$9,000
$8,000
$7,000
$8,000
$7,000
$7,000
$4,000
$3,000
Barnett
Permian
Mid-Con Ark-La-Tx Rockies
Excludes Wolfberry
PDP PV9 to PV7
14
$5,000
$6,000
PDP PV12 to PV10
G. Coast
U.S. Resource Play Valuations – $ / Acre
$24,000
$22,000
$20,000
$20,000
$18,000
$16,000
$ / Acre
$14,000
$ / Acre Rising
$15,000
$12,000
$12,000
$12,000
$10,000
$10,000
$7,000
$8,000
$8,000
$8,000
$6,000
More De-Risking
Needed
$5,000
$5,000
$3,000
$3,000
Niobrara
Mississippian
$6,000
$4,000
$4,000
$2,000
$0
Wolfberry
Bakken /
Three Forks
Eagle Ford
(Liquids
Window)
Marcellus
Bone Spring /
Avalon
Oil resource play acreage valuations continue to climb while natural gas
resource play acreage valuations seem to have plateaued
15
Break-Even Economics for Key U.S. Oil Onshore Plays
Oil / Liquids Plays – Required NYMEX WTI Strip For 10% IRR
$70
$67
NYMEX WTI Strip ($ / Bbl)
$60
$50
$40
$62
Average = $55.30
$54
$55
Avalon
Bakken (West
Williston)
$57
$62
$58
$51
$45
$42
$30
$20
$10
$0
Wolfberry
Bone Spring
16 Source: Wall Street Research
Niobrara
Wolfcamp
Eagle Ford
(Condensate)
Three Forks
Bakken (East Eagle Ford (Oil)
Nesson)
Break-Even Economics for Key U.S. Gas Onshore Plays
Natural Gas Plays – Required NYMEX Henry Hub Strip For 10% IRR
$4.50
$4.20
NYMEX Henry Hub Strip ($ / MMBtu)
$4.00
$4.00
Average = $3.56
$3.50
$3.50
$3.60
$3.70
$3.80
$3.30
$3.00
$3.00
$2.50
$4.30
$3.10
$2.80
$2.00
$1.50
$1.00
$0.50
$0.00
M a rc e llus We t
( C o re )
M a rc e llus D ry
( C o re )
17 Source: Wall Street Research
G ra nit e Wa s h
( H o rizo nt a l)
D e e p B o s s ie r
(East T X)
C a na Wo o df o rd
( C o re )
P ic e a nc e
( C o re )
B a rne t t ( T ie r I)
H a yne s v ille
E a gle F o rd
(Gas)
F a ye t t e v ille
Wo o df o rd
( A rk o m a )
Asset Sale Valuation Drivers
Operations
 Premium paid for control
Working Interest
 Higher the better
Production / Cash Flow
 Conventional - need more
 Resource - not as important, focus on de-risking
R/P
 10+ years optimal
Acreage
 More is more, contiguous will get premium
Lease Expirations
 Need good term or won’t get paid (HBP is best)
Commodity
 Buyers bullish on oil, bearish on gas
All Rights / All Depths
 Impacts reserve analysis and ultimately value
Overall Size
 Bigger deals get premium over smaller deals
Capital Markets
 When open, more money chasing deals
Deal Competition
 Participation impacted adversely in busy market
18
What is Next for the U.S. MA&D Market?
19
Joint Ventures /
Foreign Capital
Publics Continue Pivoting
Towards Oil
Conventional Deal Flow
To Increase
Private Equity Will
Increase Investing
MLPs / Trusts Will Increase
$40 to $50 Billion in
2011 A&D
RBC Richardson Barr – Selected Recent Transactions
Bakken Shale
Rocky Mountains
Antrim Shale
Marcellus
$196 million
66,000 Acres
Bakken
Bids Due June 9
$380 million
$175 million
$330 million
Multi-Basin
Williston Basin
Antrim Shale
Private Co.
12,000 Acres
50,000 Acres
July Data Rooms
Aug. Data Rooms
Niobrara Shale
Glade Park Gas LP
and
$406 million
$280 million
Marcellus
Marcellus
250,000 Acres
Mississippi Lime
37,000 Acres
Appalachia
Private Co.
June Data Room
July Data Rooms
53,000 Acres
June Data Rooms
Mid Continent
$210 million
$155 million
8 MMcfepd
Conv. Multi-Basin
Conventional
June Data Room
$330 million
$145 million
Conventional
Conventional
Black Warrior Basin
Permian Basin
$210 million
CBM
Confidential
Conv. Permian
$265 million
Bone Spring / Wolfberry
$200 million
Conv. Permian
Ark-La-Tex
JUNO ENERGY, LLC
20
$105 million
$185 million
Confidential
Conv. Permian
Wolfberry
Conv. Permian
Eagle Ford
$483 million
$900 million
$123 million
Confidential
$967 million
Confidential
Conv. Permian
Conv. Multi-Basin
Wolfberry
Eagle Ford
Barnett Shale
Barnett Shale
Current Transactions
Barnett Shale
$121 million
$218 million
Conventional
Haynesville
Bio – Craig R. Lande
Craig R. Lande, Director
 Craig Lande joined RBC Richardson Barr in June 2005. Mr. Lande has over 16 years of broad experience in the U.S.
acquisition and divestiture market. Mr. Lande's transaction experience includes the sale of both public and private E&P
companies, fairness opinions, general advisory and asset divestitures. Over the years, he has developed an extensive
database that includes the acquisition and divestiture priorities of the majority of E&P companies in the U.S. Prior to RBC
Richardson Barr, Mr. Lande worked in the Houston office of Waterous & Co. from 2001-2005 and served as a Vice President.
Mr. Lande was actively involved in business development for the U.S. practice. He was also the creator and editor of the
Quarterly Market Review, a newsletter focusing on upstream acquisition and divestiture valuations and trends.
 From 1996 – 2001, Mr. Lande was a Senior Analyst with the energy investment banking firm Cornerstone Ventures, L.P.
where he concentrated on corporate research and company and asset valuations.
 Mr. Lande's professional speaking engagements include many to the SPEE, ADAM Energy Forum, Drilling Info and various
Hart Energy Conferences.
 Mr. Lande holds a Bachelor of Science degree in Business Management and Marketing from Tulane University.
21