U.S. A&D Overview and Update September 14, 2016 BMO Financial Group and BMO Capital Markets
BMO CAPITAL MARKETS – BMO FINANCIAL GROUP GLOBAL INVESTMENT BANKING OPERATIONS
Canada's first bank: established in 1817
Offers broad range of retail banking, wealth CALGARY TORONTO LONDON Organization management and investment banking services VANCOUVER DUBLIN SEATTLE MILWAUKEE MONTREAL PARIS ZURICH BEIJING DENVER BOSTON One of the largest diversified financial services SAN FRANCISCO CHICAGO NEW YORK LOS ANGELES DELHI DALLAS SHANGHAI providers in North America HOUSTON ATLANTA GUANGZHOU TAIPEI MEXICO CITY HONG KONG Market Cap $49 billion Per FY2015 BMO Total Assets $642 billion Key Operating Factsheet 2015 Net Revenue $18.1 billion Data RIO DE JANEIRO Employees Over 47,000 MELBOURNE Tier 1 Capital Ratio 12.3% 50+ Employees $2.0 bn in loans outstanding US Energy $5.2 bn of loan commitments
BMO CAPITAL MARKETS’ CAPABILITIES
Advisory Services Corporate Finance Distribution & Trading Treasury
Mergers and Acquisitions Equity Underwriting Institutional Sales Cash/Asset Management
Asset Acquisitions and Convertible Securities Trading Correspondent Banking Divestitures Share Buybacks Equity Research Trade Finance Strategic Advisory Corporate Lending Fixed Income Research Corporate Card and Spend Fairness Opinions Solutions Investment-Grade Debt Investor Marketing Takeover Defense Risk Management Mezzanine Lending Investor Conferences Private Placements Commodity Products High-Yield Debt Account Sponsorship Valuation Analysis Equity/Credit Derivatives Securitization Retail Distribution Restructuring/Recapitalization Foreign Exchange Public Sector Finance Interest Rate Derivatives
Note: BMO financials – as of January 2016. Above figures are US$. 1 BMO Lending Relationships – Public Companies
2 $115 million Sale of Select BMO U.S. Energy A&D Transactions East Texas Eagle Ford assets Select BMO U.S. A&D Mandates US$2.2 billion US$23 million US$275 million Financial Advisor SELL-SIDE BUY-SIDE BP Hugoton & Jonah Field Bakken Western Anadarko Basin July 2015 Granite Wash Package
US$27 million Advisor Advisor Advisor March/July 2012 June 2011 June 2014 Powder River Basin Portfolio Company of US$315 million $310 million $78 million $178 million $115 million $910 million $119 million Advisor Sale of Permian Basin June 2014 assets to Blue Whale Energy Sale of Haynesville Assets Sale of Sale of Eagle Ford Assets Sale of Conventional South and Sale of Midland Basin Assets Sale of Acquisition of the Piceance Basin Sole Advisor on Acquisition of North America Corp. South Texas Gas Assets West Texas Assets East Texas Assets of WPX Energy FX Energy Inc. Eagle Ford assets
Sole Financial Advisor Advisor Advisor Financial Advisor Financial Advisor Advisor Advisor Financial Advisor Financial Advisor US$1.0 billion US$21 million US$497 million April 2015 Post Bid Post Bid August 2016 August 2016 December 2015 July 2015 April 2016 December 2015 BP Jonah Field Bakken / Three Forks Western Anadarko Basin Cana-Woodford/Stack Package
US$123 million US$52 million Advisor Advisor Advisor Williston Basin Operated Mid-Continent July 2012 January 2012 June 2014
$315 million $105 million $108 million $30.5 million $112 million $205 million $126 million $137 million Advisor Advisor May 2014 October 2010 US$205 million Permian Basin Powder River Basin South Central Oklahoma Eagle Ford Powder River Basin Bakken / Three Forks Acquisition of Marcellus Shale Acquisition of Joint Venture Ownership Harvey E. Yates Co. including Permian US$575 million certain Delaware Basin assets
Marcellus Sole Financial Advisor Advisor Advisor Advisor Advisor Advisor Advisor Advisor April 2015 January 2015 December 2014 December 2014 October 2014 September 2014 July 2015 March 2015 Advisor April 2011 US$1.2 billion US$39 million US$67 million Advisor BP Hugoton Rockies Tonkawa / Marmaton May 2011 US$51 million US$101 million North Louisiana GOM Shelf Advisor Advisor Advisor March 2012 December 2010 September 2013 $772 million $297 million $105 million $413 million $131 million $113 million $353 million $230 million Advisor Western Anadarko Basin South Texas, Mid-Continent, Powder River Basin Powder River / Rockies PRB/Tonkawa-Marm Bakken/N.LA/Permian Marcellus Shale Eagle Ford Shale December 2013 Advisor September 2010 Granite Wash and Cana- and Rockies and Sage Creek Plant US$55 million Woodford/Stack Packages Bone Springs/Avalon US$133 million Advisor Advisor Advisor Advisor Advisor Advisor Advisor Advisor June 2014 December 2013 October 2013 September 2013 June/Sept 2013 May/Nov/Dec 2013 June 2014 April 2014 Bakken $240 million Advisor January 2013 Wolfberry Advisor US$25 million June 2011 Marcellus US$81 million Advisor Bakken September 2011 US$36.5 million US$327 million Nuloch/Bakken $200 million $80 million $90.5 million $550 million $109 million $184 million $861 million $1.0 billion Gulf Coast Advisor January 2013 East Texas/North Louisiana Bakken Gulf Coast/Chatom Plant GOM Shelf Bakken/GRB/Niobrara Wolfberry Ute Energy/Uinta Three Rivers/Permian Advisor July 2013 Advisor Advisor April 2011 February 2011 Advisor Advisor Advisor Advisor Advisor Advisor Advisor Advisor March 2013 February 2013 October 2012 October 2012 May/June/August 2012 February 2012 November 2012 July 2012
3 $115 million Sale of BMO is Active in All Products East Texas Eagle Ford assets US$2.2 billion US$23 million US$275 million Financial Advisor TOP-TIER ADVISORY CAPABILITIES TOP-TIER ECM CAPABILITIES BP Hugoton & Jonah Field Bakken Western Anadarko Basin July 2015 Granite Wash Package
US$27 million Advisor Advisor Advisor March/July 2012 June 2011 June 2014 Powder River Basin US$315 million
Advisor Sale of Permian Basin June 2014 assets to Blue Whale Energy North America Corp. Portfolio Company of Acquisition of
Sole Financial Advisor US$1.0 billion US$21 million US$497 million April 2015 $910 million $64 million $243million $139 million $131 million BP Jonah Field Bakken / Three Forks Western Anadarko Basin Acquisition of the Piceance Basin Financial Terms Not Disclosed Acquisition of Oxford Resources Follow-on Offering Follow-on Offering Follow-on Offering Cana-Woodford/Stack Package Assets of WPX Energy GP and sale of assets to US$123 million Oxford LP for US$52 million a controlling stake Advisor Advisor Advisor Williston Basin Operated Mid-Continent July 2012 January 2012 June 2014 Financial Advisor Exclusive Financial Advisor Financial Advisor Joint Bookrunner Joint Bookrunner Joint Bookrunner April 2016 December 2015 December 2014 August 2016 July 2016 June 2016
Advisor Advisor May 2014 October 2010 US$205 million Permian US$575 million Marcellus
Advisor April 2011 TOP-TIER HIGH YIELD CAPABILITIES TOP-TIER LEVERAGED FINANCE CAPABILITIES US$1.2 billion US$39 million US$67 million Advisor BP Hugoton Rockies Tonkawa / Marmaton May 2011 US$51 million US$101 million North Louisiana GOM Shelf Advisor Advisor Advisor March 2012 December 2010 September 2013
Advisor Saddle Barnett December 2013 Advisor September 2010 US$55 million Resources, LLC Portfolio Company of Bone Springs/Avalon US$133 million Bakken Advisor $500 million $200 million $750 million $700 million $600 million $550 million January 2013 Acquisition Financing Senior Notes Senior Notes Senior Notes Acquisition Financing Acquisition Financing Advisor US$25 million Senior Secured Credit Facility Senior Unsecured Bridge Loan Senior Secured Credit Facility June 2011 Marcellus US$81 million Joint Bookrunner Bakken Joint Lead Arranger & Joint Lead Arranger & Joint Lead Arranger & US$36.5 million US$327 million Joint Bookrunner Joint Bookrunner Joint Bookrunner Joint Bookrunner Joint Bookrunner Nuloch/Bakken July 2016 May 2016 July 2015 Pending Pending Pending Gulf Coast Advisor January 2013 Advisor July 2013 Advisor Advisor April 2011 February 2011
4 A&D Market Conditions
THEME DISCUSSION EXAMPLES
A&D activity had dramatically slowed due to high 2014 vs. 2015 exhibited a 74% decline in value of announced deals uncertainty as to when prices will rise and by how much US M&A&D Activity(1) (2013-Present) $31.2 For quality assets, interest levels have been high with $29.0 many processes having over 75 CAs, 30 data rooms, and $27.2 multiple bids 2015 – 182 Shortage of @ $10 bn Interest in Eagle Ford, Haynesville, Permian, and high quality $16.3 2014 – 323 $14.9 $15.8 $14.9 assets with SCOOP/STACK assets remains high $14.2 @ $42.6 bn $11.3 scale $10.0 $10.1 Product price increases since early 2016 generating $8.1 optimism and increased activity $4.6 $2.2
Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 2013 2014 2015 2016
Jumbo and large-cap E&Ps have ~$22 billion of cash on Top 20 U.S. Private Equity by Dry Powder (US$ bn)(3) their balance sheets(2)
222 private equity funds in North America focused on energy with AUM of $270 billion (in funds still making Significant investments) acquisition Investable dry powder estimated to be $146 billion capital is
coming back A significant number of management teams received large to the market commitments and have yet to make their first acquisition as prices
stabilize Some teams with no deals over 12+ months are being shut
$7.3 $7.3 $2.4 $5.8 $5.8 $5.7 $5.7 $5.1 $5.0 $4.7 $4.5 $4.0 $3.9 $3.8 $3.1 $2.5 $2.1 $2.1 $2.0 $1.9 $1.9 down $9.3
EnCap Kohlberg Kravis Centerbridge Energy Capital Natural Gas Quantum Energy American Macquarie Funds Global EIG Global Energy EnCap Flatrock Warburg Pincus Brookfield Asset LS Power Group First Reserve North Haven CCMP Capital Denham Capital The Carlyle Group Veritas Capital Investments Roberts Partners Partners Partners Partners Securities Group Infrastructure Partners Midstream Management Advisors Management Partners
Quality energy assets are seeing meaningful interest and selling for pre-crash prices
1. Deal values in US$ billion. Data as of 30-Jun-16. 5 2. Based on BMO jumbo and large-cap coverage universe. 3. Includes EnCap, KKR, Centerbridge, Energy Capital, NGP, Quantum, American Securities, Macquarie, Global Infrastructure Partners, EIG, Warburg, Brookfield, LS Power, First Reserve, North Haven, CCMP, Denham, Carlyle, and Veritas.
Quarterly Deal Activity
Asset Corporate Number of Transactions
$40 200
180 $35
$28.5 $30.8 160 $30 $27.0 140
$25 120
$20 100
$16.3 $13.0 $14.7 80
$15
Transaction Value ($bn) Number ofTransactions 60 $10.0 $9.7 $10 $8.1 40
$5 $4.4 20 $2.1
-- -- 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 % Oil 69% 52% 77% 21% 61% 82% 76% 79% 52% 54% 68%
Source: BMO Transaction Database 6 LTM Deal Activity by Categories
LTM By Commodity
Gas 23%
LTM By Region
Oil 77% Other Permian 34% 28%
LTM By Buyer Type Bakken 7% Ark-La-Tex Other 6% Appalachia 24% Eagle Ford Mid-Con 8% Public 5% 12% MLP Company 2% 43% Private 11% PE / PE- Backed 20%
Source: BMO Transaction Database 7 Factors Driving Increased A&D Activity in 2016
Theme Issues Likely Outcome
Gas prices frozen at $3/mcf, oil range- Better agreement between buyer and Increased and/or No parameter impacts A&D activity more Stable Prices bound around $45/bbl seller value expectations
E&P production estimates assume Non-core positions need to be sold to Most E&P companies cannot fund drilling spending levels 20-80% above projected fund capital programs of most economic Need for Cash plans with cash flow from operations operating cash flows acreage
With little to no hedging in place in 2016, Assets are likely to be put on the market 2015 was buffered by sizeable hedge Hedges Have many E&P companies are fully exposed to to fund operations, interest expense and gains Rolled Off the new price environment capital plans
Investors have become very focused on Only strongest public companies have acreage quality, drilling economics and Highly selective market has created Selective Access been able to access the capital markets in production metrics and are deploying world of Haves and Have Nots to Capital Markets the last 12-18 months capital in a targeted manner
2015 Failed Deals Many failed deals may come back around Given recent stabilization of oil and gas Many deals failed to close in 2015 due to a in 2016 as companies still need to sell prices, buyer and seller expectations are Coming Back wide bid / ask spread Around these assets converging
Private Equity is PE capital is lined up and moving Significantly more capital available than Best assets selling for pre-crash metrics, Ready to Transact aggressively on premium assets higher quality assets some Tier II starting to move
2016 A&D activity is driven by the fact that E&P companies cannot afford to see production levels decline
8 Oil Price Volatility vs. Transaction Activity
ACTIVITY FROM 2008 TO 2010
Number of Deals Volatility 90 113 80 91 70 86 85 60 75 74 71 50 57 54 50 40 40 Volatility 30 23 20 10 -- Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 2010 ACTIVITY FROM 2014 TO PRESENT(1)
Number of Deals Volatility
90 111 106 80 101 70 78 60 72 65 50 61 49 40 48 39 Volatility 30 31 20 10 -- Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2014 2015 2016
Source: BMO Transaction Database, CBOE Oil Volatility Index OVX 9 1. Data as of 5-Aug-16.
Buyer Valuation Approaches Discount Rate not the Determining Factor for Winning Bids – Winning Requires Differentiated View of Costs, Midstream Synergies, Reserves Upside
PDP (Indication) PDNP (Indication) PUD (Indication) Acreage (Indication) PDP (Actual) PDNP (Actual) PUD (Actual) Acreage (Actual)
100.0%
90.0%
80.0%
70.0%
60.0%
50.0% %Liquids
40.0%
30.0%
20.0%
10.0%
-- -- 5 10 15 20 25 PV
10 Price Forecasts in A&D Cover a Range of Scenarios
Type Conservative Moderate Market Compete Research Consensus Description Current (Spot) Flat Strip then Flat Long Strip then Escalate Research Consensus Competitive? No Possibly Probably Surely Gas Oil Gas Oil Gas Oil Gas Oil 2016 $2.80 $45.88 $2.94 $46.47 $2.94 $46.47 $2.94 $47.00 2017 $2.80 $45.88 $3.09 $49.69 $3.09 $49.69 $3.09 $53.00 2018 $2.80 $45.88 $2.96 $52.02 $2.96 $52.02 $3.01 $60.00 2019 $2.80 $45.88 $2.92 $53.41 $2.92 $53.41 $3.25 $63.00 2020 $2.80 $45.88 $2.97 $54.50 $2.97 $54.50 $3.50 $65.00 Then $2.80 $45.88 Flat Escalate 3-5% Escalate 3-5%
Current prices = Spot or NYMEX prompt month as of 8-Sep-16 Strip = Calendar as of 8-Sep-16 Research Consensus = Combination of Bloomberg and FactSet as of late August 2016 combined with BMO market observations
11 US Breakevens Have Fallen Significantly Since 2014 Only Shows plays with anala Oil Breakevens – Fall 2014 vs Current NATURAL GAS BREAKEVENS
2014 Breakeven 2016 Breakeven 2016 Oil Strip ($46.47/bbl) Gas Breakeven 2016 Gas Strip ($2.22 per Mcf) $90 $6.00 $85 $85
$82 $83 $5.00 $4.81
$77 $3.99
$80 $76 $76 $83 $4.00
$3.35 $3.35
$3.31 $3.31
$3.30 $3.30 $3.29 $3.29
$72 $3.01 $2.95 $2.95
$72 $2.92 $70 $71 $71 $3.00 $2.84
$69
$2.32 $2.32
$2.29 $2.29
$2.27 $2.27 $2.24 $2.24 $70 $2.21 $66 $65 $65 $69 $68 $63 $2.00 $56 $62 perMMBtu) ($ GasPrice $58 $58 $58 $1.00 $60 $56 $56 $57 $54 $54 $54 $54 $50 -- $50 $47 $47 $48 $44 $44 $45 $40 $41 $41 $39 $39 $40 $40
$40 $US $US / bbl
$30
$20
$10
--
Source: street research 12 Note: Strip as of 8-Sep-16. 2014 breakeven data assumes flat $3.60/mmbtu for natural gas; 2016 breakeven data assumes flat $2.50/mmbtu for natural gas. How to keep up with all of this:
The BMO A&D Market Monitor
13 September 12, 2016 Covering the Week of September 3-9, 2016
Energy Week in Review A&D Week in Review Key Industry Indicators To paste the arrows with colors, Current Week's % Let’s follow these guidelines when sorting articles: EOG Resources and Yates Petroleum Corporation • FactSet Indicator Value Change Change Direction • First priority: Domestic A&D, ranked by size announced their combination in a $2.5 billion transaction • Settings Prompt Oil Price ($/bbl) $45.88 $1.44 3.2% • Next: Domestic M&A Callon Petroleum Company announced it acquired 5,667 • Presentation Linking and Formatting • Then: US companies doing international deals (like net surface acreage from Plymouth Petroleum in Howard Prompt Gas Price ($/mmbtu) $2.80 $0.01 0.4% • Import Noble’s Tamar) County, TX for a total consideration of $327 million in cash Wkly Trans. Value ($mm) $3,336 $2,911 nmf • Colors • Then: Others (Cabot’s Lackawanna) Charger Shale Oil Company, LLC and Oaktree Capital Wkly Trans. Count 4 2 100% • Change Color font… • Then: Prices, rig count, completions, etc. Management, L.P. announced their recently formed joint US Rig Count 508 11 2.2% venture focused in the Permian Basin for $900 million US Oil Prod'n (mmbbl/d) 8.5 (0) (0.4%) Samson Resources entered into stalking horse asset sale (1) agreements with Resource Energy, Tecolote Energy, and US Gas Prod'n (bcf/d) 87.8 (1) (1.7%) the Red Willow Production Co., for assets valued at ~$320 US Oil Storage (mmbbl) 511.4 (15) (2.8%) million US Gas Storage (tcf) 3.4 0 1.1% Total E&P USA announced that it is exercising its Global Oil Prod'n (mmbbl/d)(2) 96 1 1.3% preemption right to acquire Chesapeake’s 75% interests in Global Oil Storage (mmbbl)(2) 4,293 142 3.4% the jointly held Barnett Shale operating area located in North Texas Quarterly Deal Activity Asset Corporate Number of Transactions $40 200 180 $35 $30.8 160 $30 $27.0 $28.5 140 $25 120 $20 $16.3 100 $14.7 $13.0 $15 80 $10.0 $9.7 60 $10 $8.1 $4.4 40 $5 $2.1 20
-- -- Transaction Value ($bn) Value Transaction 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 of Transactions Number % Oil 69% 52% 77% 21% 61% 82% 76% 79% 52% 54% 68% In Commodities, ECM and DCM, let’s go to journalism standards, even though that’s not how we get the text from Commodities Crude trading opened Tuesday around $44 and the settlement Thursday was $47.62, for about an 8% gain. However, those groups. Main change is that any number below 10 is Friday saw a wide-spread sell-off on most markets on the back of continuing Fed uncertainty combined with more hawkish spelled out (one instead of 1). This does not apply to overtones. The S&P lost 52 points, or 2.4%, while 10-year Treasury yields jumped and crude dropped $1.74. The near- statistical analyses, percentages, or money, of course. term contract still managed to close the week at $45.88, up $1.44, or 3.2%. Despite an early sell off at the beginning of the week, prices rose after the EIA said natural gas stockpiles grew by 36 bcf, 16% less than Street expectations. Forecasts of warmer weather for the northeast have also allowed prices to rebound. For the primary Commodities bullet points on oil and gas The near-term contract opened the week at $2.79 and closed the week at $2.80, up $0.01, or 0.4%. prices, please start with “The near-term contract opened the Equity S&P E&P(3) outperformed the week +1.2% vs. SPX(3) (2.4%) week at $___” and end that same bullet point with “The During the week, two U.S. E&P issuers accessed the equity markets raising $1,111 million in proceeds for acquisition near-term contract closed the week at $____, down(up) Markets related financing $___, or ___%.” You don’t have to use exactly those words BMO acted as a Joint Bookrunner on PDC Energy’s $675 million common equity and convertible notes financing. as long as the opening and closing prices are included . For The common equity deal represented 17% of market cap and 6.8x 90D-ADTV(3) example, you could write, “Opening the week at $45.21, the Callon Petroleum executed a $437 million registered overnight representing 23% of market cap and 9.4x 90D- ADTV(3) near-term oil contract declined steadily based on …” – you know, think like a journalist, be creative. Debt 17 issuers priced 25 issues to raise $9.5 billion during the week Markets Year-to-date volume for 2016 stands at $233.9 billion, down 20.8% compared to $295.2 billion by this point in 2015 Retail cash inflows from U.S. high yield mutual funds totaled $610.3 million last week, reversing the prior week’s outflows of $386.8 million This brings total inflows for 2016 to $9.98 billion, compared to $3.1 billion of outflows for the comparable 2015 period SM Energy (B3/B+), a Denver-based oil and gas company priced its $500 million 6.75% Senior Notes due 2026 at par The proceeds will be used to fund the company’s acquisition of infrastructure assets from Rock Oil Holdings
Source: BMO Transaction Database, Baker Hughes, BMO Commodity Products Group, Bloomberg, EIA 1 Note: Current quarter’s data is through the week covered by this issue. 1. U.S. gas production reported monthly as of June 2016. 2. Global oil production and global oil storage reported monthly as of October 2015 and annually as of 2014, respectively. 3. S&P E&P = S&P Oil & Gas E&P Select Industry, SPX = S&P 500 Index, ADTV = Average Daily Trading Volume. September 12, 2016
Recent A&D Transactions (>$20 mm) Ann'd Proved Prod. Net Date Buyer Seller Area Asset Description Value(1) Multiple Multiple Acres ($mm) ($/boe) ($/boe/d) ($/acre)
09-Sep-16 Total Chesapeake Barnett 75% WI in Barnett Shale assets $558 $6.89 $8,585 $2,595
06-Sep-16 Callon Petroleum Plymouth Petroleum LLC Permian 5,667 net acres in Howard Co., TX $327 $26.80 $142,174 $57,702
29-Aug-16 EnVen Energy Ventures Shell Gulf of Mexico Brutus/Glider GOM assets $425 n.a. $17,000 n.a. Asset descriptions are all hard-coded and need to be adjusted if new deals are added 23-Aug-16 PDC Energy Arris Pet.; 299 Resources Permian 57,000 net acres in Delaware Basin $1,505 n.a. $215,000 $26,404 18-Aug-16 Jones Energy American Energy Partners LP Mid-Continent 18,000 net acres in SCOOP/STACK $137 n.a. n.a. $7,583
18-Aug-16 Undisclosed Buyer Continental Resources Inc Bakken 80,000 net acres in ND and MT $222 n.a. $79,286 $2,775
15-Aug-16 Concho Resources Inc Reliance Energy Inc Permian 40,000 net acres in Midland Basin $1,625 $37.79 $162,500 $40,625
15-Aug-16 Parsley Energy LP BTA Oil Producers LLC Permian 9,140 net acres in Midland Basin $400 n.a. n.a. $43,764
08-Aug-16 SM Energy Rock Oil Company LLC Permian 24,783 net acres in Midland Basin $980 n.a. $200,000 $39,543
03-Aug-16 Protégé LLC Newfield Exploration Eagle Ford 36,000 net acres in Eagle Ford $310 n.a. $38,419 $8,611
LTM By Commodity LTM By Region LTM By Buyer Type
Gas Other 23% Other Permian 24% 34% 29% Public MLP Company 2% 43% Private 11% Oil Bakken PE / PE- Ark-La-Tex 77% 7% Backed 5% 20% Appalachia Eagle Ford Mid-Con 8% 5% 12% A&D Valuation Trends(2)
Sales Value / R / P Proved Reserves (15:1) $60.00 y = 30.184e-0.065x (ratio) ($ / boe) ($ / mcfe) $50.00 R² = 0.3668 8x $17.81 $1.19 10x $15.68 $1.05 $40.00 15x $11.41 $0.76 20x $8.30 $0.55 $30.00
$20.00
Sales Sales Price Proved / $10.00 Reserves Reserves 15:1) ($/boe
-- -- 5.0x 10.0x 15.0x 20.0x 25.0x R / P Source: BMO Transaction Database, Baker Hughes, BMO Commodity Products Group, Bloomberg 2 1. Represents total enterprise value. 2. 100 transactions from Jan 2013 to 2016YTD with transaction value >$20mm. Adjusted for changes in price outlooks. Recalculated boe reserves are on a 15:1 (gas:oil) basis. Acreage transactions excluded by using deals with PDP of >= 40% of total proved. September 12, 2016
Select Significant Deals on the Market
Bakken 1 Deal Appalachia 3 Deals 9/12/2016 Rockies Appalachia 3 4 Deals Ark-La-Tex 5 Bakken 1 Eagle Ford 7 Mid-Con 13 Mid-Con Other 8 13 Deals Permian 17 BMO Deals (Status) Rockies 4 Ark-La-Tex EOG Haynesville (Post Bid) Permian 5 Deals Comstock S. TX (Post Bid) 17 Deals Newfield Eagle Ford (Announced) Newfield S. TX (Announced) Eagle Ford
7 Deals Other 8 Deals
For more detail contact Chelsea Neville at [email protected]
Energy Headlines A&D Headlines Macro E&P Headlines
EOG and Yates Agree to Combine in Transaction Valued at Market Currents: OPEC Oil Exports Hit New Record $2.5 Billion E&P Headlines Saudi Arabia Said Poised to Add Boutique for Aramco IPO
Charger Shale Oil Company and Oaktree Announce World’s Hottest Oil Market Gets a Jolt From China’s Taxman $900 Million Permian Basin Joint Venture
Apache Corporation Discovers Significant New Resource Callon Petroleum Company Announces Howard County Play In Southern Delaware Basin Acquisition and Operational Update Biggest Oil Traders See Another Year of Pain as Glut Endures France’s Total Buys Bigger Piece of Barnett Shale in Texas
US Oil Drillers Add Rigs During Longest Streak In Five Resource Energy to Pay $75 Million for Samson Resources’ Years Bakken Assets Lighter Stuff
(Click headline to link to the full article)
Disclaimer: The foregoing links are for convenience only and relate to materials that were not prepared or reviewed by BMO Capital Markets. 3 BMO Capital Markets takes no responsibility for and makes no representations with respect to the contents thereof. These materials may be inconsistent with the views of BMO Capital Markets. Source of Select Significant Deals on the Market: IHS, 1Derrick September 12, 2016
BMO Deal of the Week: Enbridge & Spectra: Creating North America’s Leading Energy Infrastructure Company OVERVIEW TRANSACTION HIGHLIGHTS
BMO Capital Markets (“BMO”) is acting as joint lead Creates largest energy infrastructure company in North financial advisor to Spectra Energy Corp. (“Spectra”) in America with an enterprise value of US$127 billion(1) connection with its definitive merger agreement it has Industry leading secured project and risked development entered into with Enbridge Inc. (“Enbridge”) pursuant to inventory of US$57 billion(1) with US$20 billion(1) currently which Enbridge and Spectra will combine in a stock-for- in execution stock merger transaction (the "Transaction"), which 12% - 14% ACFFO per share CAGR guidance values Spectra common stock at approximately US$28 maintained through 2019 billion Anticipated 15% dividend growth in 2017(2), expected 10- Implied enterprise value of approximately US$47 12% annual growth through 2024 billion Complementary and diversified asset base to increase ~11.5% premium to Spectra’s closing stock price as customer service offerings and optionality of September 2, 2016 Strengthens investment grade balance sheet TIMING AND APPROVALS
Transaction unanimously approved by the Board of the Directors of both companies Subject to both companies’ shareholder approval and certain regulatory approvals, and other customary conditions Transaction expected to close in first quarter of 2017
BMO Capital Markets acted as financial advisor to Spectra Energy
Source: Company filings, FactSet 4 1. Converted at spot C$/US$ as of September 2, 2016. 2. Contingent on transaction closing. September 12, 2016
Interesting Deal of the Week: EOG Resources and Yates Agree to Combine in Transaction Valued at $2.5 Billion
TRANSACTION SUMMARY YATES OPERATIONAL OVERVIEW
On 6-Sep-16, EOG Resources Announced its acquisition of Yates is primarily located across the Delaware Basin, Yates Petroleum Corp, including its wholly owned Northwest Shelf play and Powder River Basin and also subsidiaries Abo Petroleum Corp and MYCO Industries Inc. includes acreage spread across the Williston, Denver, San EOG will pay $37 million in cash and issue 26.06 million in Juan, Paradox, Unita-Piceance, and Green River basins EOG shares valued at $2.3 billion or ~$88 per share. EOG Covers ~1.6 million net acres will also assume debt of $245 million, offset by $131 million 186,000 net acres in the Delaware Basin of anticipated cash from Yates 138,000 net acres in the Northwest Shelf 200,000 net acres in the Powder River Basin OBSERVATIONS 1.1 million net acres in New Mexico, Wyoming, Colorado, Montana, North Dakota, and Utah Expands Delaware Basin acreage position by 186,000 net Contains 1,740 net premium drilling locations (98% acres in Eddy Co. and Lea Co., NM Delaware) defined by EOG as a direct after-tax ROR of at least 30% assuming a $40 flat crude oil price Doubles Powder River Basin position to 400,000 net acres Premium net resource potential of 1,600 mmboe Opportunity to deploy EOG’s advanced completion and Net proved developed reserves of 44 mmboe precision targeting technologies and low cost structure Net production of 29.6 mboe/d (51% gas)
ACQUIRED ASSETS ACQUISITION METRICS(1)
Purchase Price (US$ mm) Common Stock (26.06 million EOG Shares) - Implies $88.26/share $2,300 1.6 Million Net Acres EOG Cash 37 Assumption of Yates Debt Less Yates Cash 114 Total Consideration $2,451 Williston Metrics MT ND Daily Production (boe/d) 29,600 Proved Developed (mmboe) 44
Permian - Delaware Acreage (net acres) 186,000 Permian - NW Shelf Acreage (net acres) 138,000 Powder River SD Total Permian Acreage (net acres) 324,000 Powder River Basin Acreage (net acres) 200,000 ID WY Other Acreage - NM, WY, CO, MT, ND, UT (net acres) 1,100,000 Total Yates acreage (net acres) 1,624,000 Green River Denver NE Basic Multiples UT Production ($/boepd) $82,804 PD Reserves ($/boe) $55.70 Uinta-Piceance Total Acreage - 1,624,000 Net Acres ($/net acre) $1,509 KS Permian & PRB Acreage Only - 524,000 Net Acres ($/net acre) $4,677
CO Implied Total Permian (Delaware & NW Shelf) Acreage Value (US$ mm) Paradox Low - High San Juan Production Value ($25,000/boe/d)(1) $740 - $740 OK Other Acreage Value $50 - -- PRB Acreage Value ($500/acre - $1,000/acre) $200 - $100 NM TX Implied Total Permian Acreage Value (US$ mm) $1,461 - $1,611 AZ Implied Total Permian Acreage Value (US$/acre) $4,509 $4,972
Implied Delaware Basin Acreage Value (US$ mm) Low - High Delaware Implied Total Permian Acreage Value $1,461 - $1,611 NW Shelf Acreage Value ($1,000/acre - $2,000/acre) $276 - $138 Implied Total Delaware Acreage Value $1,185 - $1,473 Core Plays Implied Total Delaware Acreage Value (US$/acre) $6,371 $7,919
Source: Company filings and presentations 5 1. Average of $35,000/boe/d for oil weighted transactions and $15,000/boe/d for gas weighted transactions. September 12, 2016
Commodity Prices
WTI OIL (HISTORICAL / FORECAST)
$80 NYMEX WTI Futures as of 09-Sep-16 Close ($/bbl) NYMEX Gas Futures as of 09-Sep-16 Close ($/mmbtu) $70 Link to Detailed Link to Detailed (1) Historical Graph Futures Graph Period Current Last Wk. 6 Mo. Ago 1 Yr. Ago $60 12 Mo. Strip $48.51 $47.00 $42.37 $44.04 2016 $46.47 $45.04 $41.94 $48.90 $50
2017 $49.79 $48.27 $45.44 $52.88 ($/bbl) $40 2018 $52.01 $50.65 $47.36 $55.78 Links: $30 2019 $53.41 $52.09 $48.42 $57.75 http://www.nasdaq.com/markets/crude-oil.aspx 2020 $54.50 $53.25 $49.29 $59.18 http://www.bloomberg.com/quote/CL1:COM $20 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 http://www.nasdaq.com/markets/natural-gas.aspx http://www.bloomberg.com/quote/NG1:COM
HENRY HUB NATURAL GAS (HISTORICAL / FORECAST)
$4
NYMEX Gas Futures as of 09-Sep-16 Close ($/mmbtu) $3 Period(1) Current Last Wk. 6 Mo. Ago 1 Yr. Ago 12 Mo. Strip $3.05 $3.03 $2.20 $2.91 $2 2016 $2.94 $2.93 $2.09 $2.96 2017 $3.09 $3.07 $2.65 $3.14 ($/mmbtu) Link to Detailed Link to Detailed $1 Historical Graph Futures Graph 2018 $2.96 $2.95 $2.74 $3.20 2019 $2.92 $2.93 $2.78 $3.26 2020 $2.97 $3.00 $2.87 $3.37 -- Jul-15 Jan-16 Jul-16 Jan-17 Jul-17
NGL PRICING(2)
NGL as % of WTI 60% Historical Prices as of 09-Sep-16 Close ($/gal) 50% NGLs Current Last Wk. 6 Mo. Ago 1 Yr. Ago Ethane $0.19 $0.18 $0.18 $0.18 40% Propane $0.48 $0.46 $0.48 $0.43
Butane $0.63 $0.59 $0.53 $0.54 % of WTI of % 30% Iso-butane $0.65 $0.61 $0.57 $0.55 Pentane+ $0.98 $0.92 $0.87 $0.95 20% Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16
Source: BMO Transaction Database, Baker Hughes, BMO Commodity Products Group, Bloomberg, FactSet 6 1. 2016 = October 2016 to December 2016 average; rest are calendar year average unless stated otherwise. 2. Assumes typical Gulf Coast barrel composition. September 12, 2016
Commodity Prices (cont’d) MAPS IN MASTER VIEW OIL PRICING & DIFFERENTIALS TO CUSHING WTI ($ / BBL) – AS OF 9-SEP-16
Legend Clearbrook Price Diff. $45.38 WCS ($0.50) $48.01 $31.24 $2.13 ($14.64) East Coast U.S. (Brent) Cushing $45.88
Midland St. James Midland Sweet- (LLS) Sour Spread $45.37 ($1.74) ($0.51) $47.38 $1.50
NATURAL GAS PRICING & DIFFERENTIALS TO HENRY HUB ($ / MMBTU) – AS OF 9-SEP-16
Legend Sumas $1.89 AECO Price $2.39 ($0.91) ($0.41) Diff. Transco $2.61 CIG Chicago ($0.19) $3.27 Northern $2.52 $2.84 Dominion California $0.47 ($0.28) $0.04 Panhandle $1.26 $2.57 ($1.54) $2.61 ($0.23) ($0.19) $2.74 ($0.06) El Paso - SJ
Southern $2.58 Waha California ($0.22)
HSC $2.75 ($0.05) Henry Hub $2.80
Source: BMO Transaction Database, Baker Hughes, BMO Commodity Products Group, Bloomberg 7 Note: Prices and differentials are for prompt month futures except for Clearbrook which is based on spot prices. September 12, 2016
Permian Snapshot
Item Value Wkly Change Last Week Item Value Wkly Change Last Week Rig Count 200 (2) 202 Oil Differential ($0.20) ($0.00) ($0.20) Permitting Activity 51 (134) 185 Gas Differential ($0.16) ($0.00) ($0.15)
RIG COUNT DIFFERENTIALS Midland Waha 400 D H V $2.00 $0.20 300 -- -- 200
100 ($2.00) ($0.20) mmbtu $ / $ bbl $ /
-- ($4.00) ($0.40) Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 PERMITTING ACTIVITY BY MONTH GROSS PRODUCTION
751 V H D Oil Gas 2,006 709 683 635 653 669 666 2,000 8,000 568 582 543 474 480 473 1,800 7,000 1,600 6,000
1,400
mbbl/d mcf/d 1,200 6,910 5,000 1,000 4,000 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 TRANSACTION ACTIVITY Ann'd Proved Prod. Net Date Buyer Seller Asset Description Value(1) Multiple Multiple Acres ($mm) ($/boe) ($/boe/d) ($/acre) 06-Sep-16 Callon Petroleum Plymouth Petroleum LLC 5,667 net acres in Howard Co., TX $327 $26.80 $142,174 $57,702 23-Aug-16 PDC Energy Arris Pet.; 299 Resources 57,000 net acres in Delaware Basin $1,505 n.a. $215,000 $26,404 Asset descriptions are all hard-coded and need to be 15-Aug-16 Concho Resources Inc Reliance Energy Inc 40,000 net acres in Midland Basin $1,625 $37.79 $162,500 $40,625 adjusted if new deals are added 15-Aug-16 Parsley Energy LP BTA Oil Producers LLC 9,140 net acres in Midland Basin $400 n.a. n.a. $43,764 08-Aug-16 SM Energy Rock Oil Company LLC 24,783 net acres in Howard County $980 n.a. $200,000 $39,543 Mean $967 $32.30 $179,918 $41,608 Median $980 $32.30 $181,250 $40,625
TRANSACTION PROVED RESERVE MULTIPLES(1) TRANSACTION PRODUCTION MULTIPLES(1)
$120 $400,000 $100 $80 $300,000 $149,823 $60 $33.36 $200,000 $40 $20 $100,000
$ boe $ / -- --
$ / boe/d $ /
2Q13 1Q14 1Q13 3Q13 4Q13 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
1Q14 4Q15 1Q13 2Q13 3Q13 4Q13 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 1Q16 2Q16 3Q16 # Deals 3 5 3 6 2 3 7 4 1 2 3 2 2 3 4 # Deals 4 6 6 6 3 7 9 6 1 3 8 8 5 8 10
Source: BMO Transaction Database, Baker Hughes, BMO Commodity Products Group, Bloomberg, Drilling Info 8 Note: Current quarter’s data is through the week covered by this issue. 1. Represents total enterprise value. Excludes transactions with deal value <$20 million. Red line denotes average since 1-Jan-15. September 12, 2016
Eagle Ford Snapshot Item Value Wkly Change Last Week Item Value Wkly Change Last Week Rig Count 38 -- 38 Oil Differential $1.70 $0.10 $1.60 Permitting Activity 38 (49) 87 Gas Differential ($0.04) ($0.00) ($0.04)
RIG COUNT DIFFERENTIALS
LLS HSC D H V $8.00 $0.40 250 $6.00 200 $4.00 $0.20 150 $2.00
100 -- -- $ / mmbtu $ / 50 bbl $ / ($2.00) -- ($4.00) ($0.20) Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 PERMITTING ACTIVITY BY MONTH GROSS PRODUCTION
V H D 437 2,500 Oil Gas 12,000 418 397 8,979 325 331 319 287 278 298 248 241 2,000 10,000 198 223
mbbl/d 1,500 8,000 mcf/d 1,546 1,000 6,000 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 TRANSACTION ACTIVITY Ann'd Proved Prod. Net Date Buyer Seller Asset Description Value(1) Multiple Multiple Acres ($mm) ($/boe) ($/boe/d) ($/acre) 03-Aug-16 Protégé LLC Newfield Exploration Dimmit Co. and Atascosa Co., TX $310 n.a. $38,419 $8,611 29-Apr-16 EnerVest GulfTex Energy Primarily in Karnes Co., TX $501 $4.56 $58,473 $119,343 Asset descriptions are all hard-coded and need to be 29-Apr-16 EnerVest BlackBrush Primarily in Karnes Co., TX $674 n.a. $130,368 $95,522 adjusted if new deals are added 27-Jan-16 Carrier Energy Partners II AWE Karnes Co., TX $199 $8.16 $48,126 $82,917 18-Jan-16 Carrier Energy Partners II Empyrean Energy Plc Karnes Co., TX $62 $9.35 $49,200 $84,362 Mean $349 $7.36 $64,917 $78,151 Median $310 $8.16 $49,200 $84,362
TRANSACTION PROVED RESERVE MULTIPLES(1) TRANSACTION PRODUCTION MULTIPLES(1)
$60 $150,000 $50 $100,000 $40 $60,438 $30 $11.77 $20 $50,000 $10
$ $ /boe -- --
$ boe/d $ /
1Q14 4Q15 1Q13 2Q13 3Q13 4Q13 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 1Q16 2Q16 3Q16
2Q13 1Q14 1Q13 3Q13 4Q13 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 # Deals 3 2 2 3 3 5 2 2 1 1 3 0 2 1 0 # Deals 4 4 2 4 3 6 3 3 1 1 3 1 2 2 1
Source: BMO Transaction Database, Baker Hughes, BMO Commodity Products Group, Bloomberg, Drilling Info 9 Note: Current quarter’s data is through the week covered by this issue. 1. Represents total enterprise value. Excludes transactions with deal value <$20 million. Red line denotes average since 1-Jan-15. September 12, 2016
Ark-La-Tex Snapshot Item Value Wkly Change Last Week Item Value Wkly Change Last Week Rig Count 14 -- 14 Oil Differential $1.70 $0.10 $1.60 Permitting Activity 12 (12) 24 Gas Differential ------
RIG COUNT DIFFERENTIALS
D H V LLS HSC $8.00 $0.40 60 50 $6.00 40 $4.00 $0.20 30 $2.00 -- -- 20 mmbtu $ / 10 bbl $ / ($2.00) -- ($4.00) ($0.20) Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 PERMITTING ACTIVITY BY MONTH GROSS PRODUCTION
V H D 200 Oil Gas 10,000 192 9,000 153 7,660 150 120 118 120 8,000 83 94 88 68 78 74 77 7,000
51 mbbl/d 100 mcf/d 6,000 107 50 5,000 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 TRANSACTION ACTIVITY Ann'd Proved Prod. Net Date Buyer Seller Asset Description Value(1) Multiple Multiple Acres ($mm) ($/mcfe) ($/mcfe/d) ($/acre) 26-Jul-16 Chesapeake Freeport-McMoRan 72,000 net acres and 1,450 wells $87 n.a. n.a. $1,208 06-Jun-16 Undisclosed Buyer Devon Energy Panola Co., TX $525 $1.01 $3,977 n.a. Asset descriptions are all hard-coded and need to be 15-May-16 Range Resources Corp Memorial Resource Dev. Terryville Field, LA $4,400 $3.19 $10,483 $19,299 adjusted if new deals are added 18-Mar-16 Covey Park Energy LLC EP Energy Corp De Soto & Bossier Pa., LA $420 $2.05 $3,717 $12,293 29-Feb-16 KJ Energy LLC Cabot Cotton Valley $57 $3.41 n.a. n.a. Mean $1,098 $2.42 $6,059 $10,933 Median $420 $2.62 $3,977 $12,293
TRANSACTION PROVED RESERVE MULTIPLES(1) TRANSACTION PRODUCTION MULTIPLES(1)
$3.0 $15,000 $2.5 $1.90 $2.0 $10,000 $1.5 $5,380 $1.0 $5,000
$ $ /mcf $0.5
$0.0 mcf/d $ / --
3Q16 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
2Q13 3Q14 4Q15 1Q13 3Q13 4Q13 1Q14 2Q14 4Q14 1Q15 2Q15 3Q15 1Q16 2Q16 3Q16 # Deals 2 1 2 0 3 2 1 2 0 0 4 0 2 2 0 # Deals 2 1 2 1 1 3 2 3 0 0 4 1 1 2 0
Source: BMO Transaction Database, Baker Hughes, BMO Commodity Products Group, Bloomberg, Drilling Info 10 Note: Current quarter’s data is through the week covered by this issue. 1. Represents total enterprise value. Excludes transactions with deal value <$20 million. Red line denotes average since 1-Jan-15. September 12, 2016
Appalachia Snapshot
Item Value Wkly Change Last Week Item Value Wkly Change Last Week Rig Count 44 3 41 Oil Differential $2.13 ($0.26) $2.39 Permitting Activity 14 (10) 24 Gas Differential ($1.72) ($0.06) ($1.66)
RIG COUNT DIFFERENTIALS
D H V $15.00 Brent Dominion $2.00 150 $10.00 $1.00 $5.00 100
-- -- $ bbl $ /
($5.00) mmbtu$ / 50 ($1.00) ($10.00) -- ($15.00) ($2.00) Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 PERMITTING ACTIVITY BY MONTH GROSS PRODUCTION
V H D 150 Oil Gas 24,000 461 488 13,956 445 22,000 384 373 321 291 277 308 290 100 20,000 269 238 206 18,000 16
mbbl/d 50 16,000 mcf/d 14,000 -- 12,000 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 TRANSACTION ACTIVITY Ann'd Proved Prod. Net Date Buyer Seller Asset Description Value(1) Multiple Multiple Acres ($mm) ($/mcfe) ($/mcfe/d) ($/acre) 10-Jul-16 Antero Resources Corp Statoil Wetzel and Tyler Counties, WV $96 n.a. $32,000 $7,385 09-Jun-16 Antero Resources Corp Southwestern Energy West Virginia $450 $40.92 $32,147 $8,182 Asset descriptions are all hard-coded and need to be 16-May-16 Vantage Energy Inc Alpha Natural Resources Greene Co., PA $340 n.a. n.a. n.a. adjusted if new deals are added 02-May-16 EQT Corporation Statoil West Virginia $407 n.a. $8,140 $6,512 01-Mar-16 Benefit Street Partners Rex Energy Corp Butler Co., PA $175 n.a. n.a. n.a. Mean $294 $40.92 $24,096 $7,359 Median $340 $40.92 $32,000 $7,385
TRANSACTION PROVED RESERVE MULTIPLES(1) TRANSACTION PRODUCTION MULTIPLES(1)
$50 $50,000 $40 $40,000 $30 $20.91 $30,000 $19,644 $20 $20,000 $10 $10,000
$ / mcfe $ / -- --
$ mcfe/d $ /
1Q15 3Q16 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 2Q15 3Q15 4Q15 1Q16 2Q16
2Q13 1Q14 1Q13 3Q13 4Q13 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 # Deals 0 1 1 0 0 0 3 1 0 0 0 0 3 1 0 # Deals 0 1 1 2 1 2 4 3 0 1 0 0 1 2 1
Source: BMO Transaction Database, Baker Hughes, BMO Commodity Products Group, Bloomberg, Drilling Info 11 Note: Current quarter’s data is through the week covered by this issue. 1. Represents total enterprise value. Excludes transactions with deal value <$20 million. Red line denotes average since 1-Jan-15. September 12, 2016
Bakken Snapshot Item Value Wkly Change Last Week Item Value Wkly Change Last Week Rig Count 28 -- 28 Oil Differential ($0.50) $0.20 ($0.70) Permitting Activity 5 (6) 11 Gas Differential ($0.27) ($0.02) ($0.25)
RIG COUNT DIFFERENTIALS
D H V $2.00 Clearbrook CIG $0.20 200 -- -- 150 ($2.00) ($0.20) 100 ($4.00) ($0.40)
50 $ mmbtu$ /
$ bbl $ / ($6.00) ($0.60) -- Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 ($8.00) ($0.80) Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 PERMITTING ACTIVITY BY MONTH GROSS PRODUCTION
V H D Oil Gas 161 160 153 1,400 1,741 2,000 117 1,800 100 1,200 88 81 69 79 77 1,600 67 68 1,000
46 1,082 1,400
mbbl/d mcf/d 800 1,200
Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 600 1,000 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 TRANSACTION ACTIVITY Ann'd Proved Prod. Net Date Buyer Seller Asset Description Value(1) Multiple Multiple Acres ($mm) ($/boe) ($/boe/d) ($/acre) 18-Aug-16 Undisclosed Buyer Continental Resources Inc 80,000 net acres in ND and MT $222 n.a. $79,286 $2,775 01-Aug-16 Undisclosed Buyer SM Energy 76,000 net acres in Williston $173 $18.16 $52,273 $2,270 Asset descriptions are all hard-coded and need to be 14-Jun-16 Lime Rock Resources Natural Resource Partners Non-operated WI Williston $116 $11.54 $33,642 $5,413 adjusted if new deals are added 27-May-16 Undisclosed Buyer Arsenal Energy Inc Mountrail Co., & Williams, ND $34 $5.05 $44,156 n.a. 25-May-16 New Emerald Holdings Emerald Oil Inc McKenzie Co., ND $73 n.a. $12,836 $849 Mean $124 $11.58 $44,439 $2,827 Median $116 $11.54 $44,156 $2,522
TRANSACTION PROVED RESERVE MULTIPLES(1) TRANSACTION PRODUCTION MULTIPLES(1)
$200 $200,000 $150 $150,000 $100 $100,000 $47,855 $50 $19.11
$ boe $ / $50,000
-- boe/d $ / --
3Q16 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
2Q13 3Q14 4Q15 1Q13 3Q13 4Q13 1Q14 2Q14 4Q14 1Q15 2Q15 3Q15 1Q16 2Q16 3Q16 # Deals 1 2 4 1 3 1 4 1 0 0 1 2 0 2 1 # Deals 1 4 6 1 4 2 6 2 0 0 1 3 0 3 2
Source: BMO Transaction Database, Baker Hughes, BMO Commodity Products Group, Bloomberg, Drilling Info 12 Note: Current quarter’s data is through the week covered by this issue. 1. Represents total enterprise value. Excludes transactions with deal value <$20 million. Red line denotes average since 1-Jan-15. September 12, 2016
Mid-Continent Snapshot
Item Value Wkly Change Last Week Item Value Wkly Change Last Week Rig Count 45 (1) 46 Oil Differential ------Permitting Activity 16 (31) 47 Gas Differential ($0.23) $0.01 ($0.24)
RIG COUNT DIFFERENTIALS
D H V $0.20 Cushing Panhandle $0.20 200
150 -- -- 100
($0.20) ($0.20) $ mmbtu$ /
50 bbl $ /
-- ($0.40) ($0.40) Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 PERMITTING ACTIVITY BY MONTH GROSS PRODUCTION
V H D 318 Oil Gas 306 305 286 800 15,000 255 253 8,491 223 216 198 600 171 175 170 160 10,000 400 253 mbbl/d 5,000 200 mcf/d
-- -- Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 TRANSACTION ACTIVITY Ann'd Proved Prod. Net Date Buyer Seller Asset Description Value(1) Multiple Multiple Acres ($mm) ($/boe) ($/boe/d) ($/acre) 18-Aug-16 Jones Energy American Energy Partners LP 18,000 acres in SCOOP/STACK $137 n.a. n.a. $7,583 02-Aug-16 Undisclosed Buyer Continental Resources Inc 29,500 net acres in SCOOP $281 n.a. $510,909 $9,525 Asset descriptions are all hard-coded and need to be 02-Aug-16 Jones Energy EOG 26,000 in Anadarko Basin $27 n.a. $31,882 $1,042 adjusted if new deals are added 28-Jul-16 Rimrock Merit Energy 24,500 net acres in SCOOP $150 n.a. $71,429 $6,122 28-Jul-16 Cornerstone Petroleum Rimrock 6,125 net acres in SCOOP $38 n.a. $71,429 $6,122 Mean $126 n.a. $171,412 $6,079 Median $137 n.a. $71,429 $6,122
TRANSACTION PROVED RESERVE MULTIPLES(1) TRANSACTION PRODUCTION MULTIPLES(1)
$30 $250,000 $25 $200,000 $20 $150,000 $15 $10.98 $80,309 $10 $100,000 $5 $50,000
$ / boe $ / -- --
$ boe/d $ /
4Q13 3Q14 2Q15 1Q13 2Q13 3Q13 1Q14 2Q14 4Q14 1Q15 3Q15 4Q15 1Q16 2Q16 3Q16
2Q13 1Q14 1Q13 3Q13 4Q13 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 # Deals 4 6 2 7 1 1 4 1 0 3 0 0 0 2 0 # Deals 4 6 3 9 2 2 5 4 0 3 1 2 1 5 4
Source: BMO Transaction Database, Baker Hughes, BMO Commodity Products Group, Bloomberg, Drilling Info 13 Note: Current quarter’s data is through the week covered by this issue. 1. Represents total enterprise value. Excludes transactions with deal value <$20 million. Red line denotes average since 1-Jan-15. September 12, 2016
Rig Count Summary This Last Last Week Change Week Year Total Rigs 508 11 497 848 Oil 414 7 407 652 Williston Gas 92 4 88 196 28 Miscellaneous 2 -- 2 -- -- Directional 48 6 42 81 Horizontal 396 1 395 648 Marcellus Vertical 64 4 60 119 DJ-Niobrara Utica 29 15 2 Basin Mississippian 15 -- 1 Arkoma 2 -- 2 7 2 Barnett 3 -- 3 6 -- Cana 31 (1) 32 38 Granite Wash Cana DJ-Niobrara 15 -- 15 29 MAPS IN 9 31 Arkoma Fayetteville Eagle Ford 38 -- 38 90 -- (1) 2 -- MASTER VIEW Fayetteville ------4 -- -- Granite Wash 9 -- 9 15 Permian 3 GOM 18 8 10 29 200 -- Haynesville 14 -- 14 29 (2) Barnett Haynesville Marcellus 29 2 27 51 14 Eagle Ford Mississippian 2 -- 2 19 -- 38 Permian 200 (2) 202 250 Legend -- Utica 15 1 14 19 GOM Current Williston 28 -- 28 71 18 Change Other 104 3 101 191 8 Contacts TRANSACTIONS NEWSLETTER
Geoff Roberts Howard Barnwell Rob Priske Ani Sen MD & Head of U.S. A&D Director & Transactions Mgr. Director & Transactions Mgr. Associate 713-518-1268 713-546-9767 713-546-9727 713-546-9759 [email protected] [email protected] [email protected] [email protected] Rob Priske Chelsea Neville Director & Transactions Mgr. Transactions Coordinator 713-546-9727 713-546-9703 [email protected] [email protected] Disclaimer This material is prepared by the BMO Capital Markets’ Investment and Corporate Banking Department, for distribution to BMO Capital Markets’ clientele. It is not a product of BMO Capital Markets’ Research Department. The views of the Investment and Corporate Banking Department may differ from those of the Research Department. BMO Capital Markets is a trade name used by BMO Financial Group for the wholesale banking businesses of Bank of Montreal, BMO Harris Bank N.A. (member FDIC), Bank of Montreal Ireland p.l.c, and Bank of Montreal (China) Co. Ltd and the institutional broker dealer businesses of BMO Capital Markets Corp. (Member SIPC) in the U.S., BMO Nesbitt Burns Inc. (Member Canadian Investor Protection Fund) in Canada and Asia and BMO Capital Markets Limited (authorised and regulated by the Financial Conduct Authority) in Europe and Australia. “Nesbitt Burns” is a registered trademark of BMO Nesbitt Burns Inc., used under license. “BMO Capital Markets” is a trademark of Bank of Montreal, used under license. "BMO (M-Bar roundel symbol)" is a registered trademark of Bank of Montreal, used under license. ® Registered trademark of Bank of Montreal in the United States, Canada and elsewhere.™ Trademark of Bank of Montreal in the United States and Canada. Bank of Montreal or its subsidiaries (“BMO Financial Group”) has lending arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets endeavors to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. BMO Capital Markets may act as financial advisor and/or underwriter for the issuers mentioned herein and may receive remuneration for same. The reader should assume that BMO Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. All values in this document are in US$ unless otherwise specified.
Source of rig count stats: Baker Hughes 14 BMO A&D Contacts
Geoff Roberts, PE Howard Barnwell, CFA Rob Priske Managing Director Director Director A&D Group Head Transactions Manager & Transactions Manager & +1-713-547-0808 Business Development Business Development [email protected] +1-713-546-9767 +1-713-546-9727 [email protected] [email protected]
Chelsea Neville Lindsey Fuquen Transaction Coordinator Executive +1-713-546-9703 Administration [email protected] +1-713-518-1187 [email protected]
14 Disclaimer
These materials are confidential and proprietary to, and may not be reproduced, disseminated or referred to, in whole or in part without the prior consent of BMO Capital Markets (“BMO”). These materials have been prepared exclusively for the BMO client or potential client to which such materials are delivered and may not be used for any purpose other than as authorized in writing by BMO. BMO assumes no responsibility for verification of the information in these materials, and no representation or warranty is made as to the accuracy or completeness of such information. BMO assumes no obligation to correct or update these materials. These materials do not contain all information that may be required to evaluate, and do not constitute a recommendation with respect to, any transaction or matter. Any recipient of these materials should conduct its own independent analysis of the matters referred to herein.
BMO Capital Markets is a trade name used by BMO Financial Group for the wholesale banking businesses of Bank of Montreal, BMO Harris Bank N.A. (member FDIC), Bank of Montreal Ireland p.l.c, and Bank of Montreal (China) Co. Ltd and the institutional broker dealer businesses of BMO Capital Markets Corp. (Member SIPC) in the U.S., BMO Nesbitt Burns Inc. (Member Canadian Investor Protection Fund) in Canada and Asia and BMO Capital Markets Limited (authorised and regulated by the Financial Conduct Authority) in Europe and Australia. “Nesbitt Burns” is a registered trademark of BMO Nesbitt Burns Inc., used under license. “BMO Capital Markets” is a trademark of Bank of Montreal, used under license. "BMO (M-Bar roundel symbol)" is a registered trademark of Bank of Montreal, used under license.
® Registered trademark of Bank of Montreal in the United States, Canada and elsewhere.
™ Trademark of Bank of Montreal in the United States and Canada.
BMO does not provide tax or legal advice. Any discussion of tax matters in these materials (i) is not intended to be used, and cannot be used or relied upon, for the purposes of avoiding any tax penalties and (ii) may have been written in connection with the “promotion or marketing” of the transaction or matter described herein. Accordingly, the recipient should seek advice based on its particular circumstances from an independent tax advisor.
All values in this document are in US$ unless otherwise specified
15