September 2017 Alta Mesa Resources, Inc. Investor Presentation
Table of Contents I. Introduction II. Company Overview III. Our Upstream Assets IV. Our Midstream Assets V. Financial Summary Multi-Well Pad Drilling KFM Cryogenic Processing Plant VI. Valuation and Timeline Appendix 3
Introduction
Transaction Silver Run II has agreed to merge with Alta Mesa and Kingfisher Midstream (collectively renamed Alta Mesa Resources, Inc.), creating a world class energy company with a high-quality, concentrated asset base in the core of…
Silver Run II Delivering on Investment Criteria Upstream Midstream Economic significantly below current oil price Competitively-positioned assets that benefit from strong supply/demand fundamentals High margin core basin…
Pure Play STACK Company Premier liquids upstream growth with value-enhancing midstream World class asset with attractive geology Highly contiguous 120,000 net acres with substantial infrastructure in core of STACK Oil-weighted…
Transaction Multiple Summary Firm Value / 2018E EBITDA1 Firm Value / 2019E EBITDA1 7.4x 6.1x 6.1x Alta Mesa2 3.1x Alta Mesa Peer Median Alta Mesa Peer Median 14.1x 11.1x KFM2 7.3x 4.2x KFM Peer Median…
Company Overview
Alta Mesa Resources Focused on development and acquisition in the STACK Upstream Metrics Contiguous Core Position in STACK Oil Window Net STACK Surface Acres 120,000 Current Production (BOE/D) 20,000 % Liquids 69% Resource…
Optimization, Delineation and Expansion Systematic horizontal development and growth of contiguous acreage 1992 - 2013 2014 - 2015 2016 & 2017 Plan 40,000+ Net Acres 73,000+ Net Acres 120,000+ Net Acres 1987 2013 2016 Founded by…
High Caliber STACK Operating Team Cohesive, tenured, scalable team producing world class results Name Position Years at AMR Years Experience Hal Chappelle President and CEO 13 30+ Mike Ellis Founder and Chief Operating Officer 30…
Progressive Execution Track record of growth in production, reserves, leasehold Net STACK Acreage 120,000 Alta Mesa Footprint 102,466 73,512 40,587 44,506 YE 2013 YE 2014 YE 2015 YE 2016 Current Total Net Production…
Strong Economic Fundamentals High quality rock and robust rig activity drive compelling returns Major U.S. Oil Plays Breakeven Prices (/BBL)1 Alta Mesa Type Well IRR3 33.36 34.66 34.76 103% 32.14 92% 27.71…
KFM is Value Accretive to Alta Mesa Vertical integration yields substantial strategic and financial benefits Rapidly Expanding G&P Complex KFM is positioned to capture volume growth from the STACK in the Heart of the STACK Acreage…
Market Multiples for Midstream Higher than Upstream Alta Mesa owners to capture GP / IDR cash flow / multiple arbitrage Illustrative Value Accretion from GP Structure Illustrative Midstream Value Creation (MM)1 Potential to continue…
Alta Mesas Conservative Approach Assumption Commentary Gen 2.0 650 MBOE Projections based on Gen 2.0 type curve Upstream type curve vs. Gen Production / Type Gen 2.5 drill & complete AFE costs assumed in forecasts 2.5 700 MBOE…
Our Strategic Vision: Premier STACK Operator Disciplined Execution Alta Mesa Position in Expanding STACK/MERGE/SCOOP Area Optimize returns on existing assets through technology and continuous learning Minimize operating costs by…
Our Upstream Assets
Significant Activity in Alta Mesa Neighborhood Prominent operators active in Updip Oil Window adjoining Alta Mesa Permits 180 Days SD SD SD CHK CHK CHK MRO CHK DVN NFX CHK AMR DVN AMR MRO AMR DVN MRO DVN CLR…
Sooner Trend Petroleum System Ideal for horizontal development in multiple horizons Oklahoma Oil & Gas Fields Significant system of petroleum reservoirs in eastern Anadarko, defined by 1000s of vertical wells Natural fracturing…
Solid Results Affirm De-Risked Acreage Position Representative wells across 11 townships Notable 2017 Alta Mesa Wells Lateral EUR EUR/'000 IP90 IP90 IP90/'000 Well Target IP30 (BOE/D) Well Name1 Length (MBOE)2 Lateral ft2 (BOE/D) %…
Top Cumulative Oil Producing STACK Wells Alta Mesa wells among top producers Selected Permian Operator Producing Osage/Meramec/Oswego STACK Public Operator Producing Wells (2012-2Q 2017)1 Wells (2012-2Q 2017)2 255 176 194 159…
Focus: Optimize Stimulated Rock Volume Operational advancements driven by multi-discipline collaboration Completion Summary By Generation Goal: optimize stimulation Alta Mesa has advanced completion designs with each generation 100…
High Early-Period Oil Cut Drives Value Consistent Meramec/Osage GOR behavior Oil-Weighting Over Time Approximately 73% of the oil, 58% of the natural gas liquids, and 58% of the natural gas are produced in the first five years…
Low Cost Operator Peer leader in operating cost and capital efficiency Recycle Ratio1 Illustrative KFM 4.0x Margin Uplift 3.4x 3.2x 3.1x 1.8x 1.7x 3.7x 1.1x 0.8x CLR AMR FANG PE RSPP XEC NFX MRO DVN SEC Future…
Cost-Advantaged Asset Base Infrastructure and basic well design mitigate cost inflation Advantage Why It Matters Gross D&C1 (MM) 1 Lat. Length: 4.8k 4.8k 4.8k 5.0k 4.8k 5.0k 9.6k 9.8k 9.6k 10.0k Allows for the elimination of…
STACK Development Moving into development mode on de-risked Kingfisher acreage Base Case Development Concept 2017 Development Plan Oswego/ Big Lime 150 ft 1,500 1,500 1,500 450 ft Meramec 750 750 Osage 750 750…
Alta Mesa Spacing Design Consistent with STACK Peers Spacing tests across footprint give confidence in base case Summary Observations Publicly Disclosed Inventory per DSU Assumptions Base case design reflects over 4,000 locations…
STACK: A Significant Petroleum System Additional development potential in multiple stacked pay zones Alta Mesa Existing Development Potential 55 Wells per Section Existing spacing tests at 660 show full Type Log Down- Additional…
Deep Drilling Inventory 4,000 Identified Gross Locations represent 14+ years of inventory Alta Mesas 4,000 Identified Gross Drilling Locations are the primary focus of the near-term 753 development plan 8,238 2,214 436 872…
Asset Value of AMRs STACK Position 6B PV-10 Value from Identified Gross Locations before downspacing Alta Mesas 4,000 Identified Gross Drilling Locations are the primary focus of Im plied PV-10 the near-term development plan Upside…
Near Term Consolidation Opportunity Play is expanding and significant acreage could change hands 34
Our Midstream Assets
Kingfisher Midstream Overview Acreage Dedications KFM Overview Current natural gas processing of 60 MMCF/D Cushing 60 mi. Year-end processing capacity of 350 MMCF/D includes 90 MMCF/D offtake processing expected 3Q 2017 300+ miles…
Complete Midstream Operation Processing, Pipelines, Compression, Other Infrastructure Natural Gas Current processing capacity of 60 MMCF/D Cushing 60 mi. Processing Second 200 MMCF/D plant under construction 90 MMCF/D offtake…
Market Access Optionality Pipeline Description Current Takeaway Capacity Expansion Projects Commentary Natural Connected to PEPL owned and 100,000/day FT on PEPL for KFM in discussion Gas takeaway is functionally full creating a Gas…
Strong Producer Commercial Commitments Customer Acreage Positions Contracted Customers 14 year remaining term on fixed-fee natural gas and crude agreement 9 year remaining term on fixed-fee natural gas agreement 9 year…
System Expansion Underway Neighboring operators provide future upstream and midstream consolidation opportunities Recent Major/Blaine County Active Rigs acquisition by Alta Mesa adds catalyst of 20,000 dedicated Future Planned…
Financial Summary
Financial Strategy & Pro Forma Financial Impacts Demonstrated trajectory to positive free cash Capitalization at Announcement flow with near-term development funded with transaction proceeds Current ( in millions, unless specified)…
2017 Capital Budget and Hedge Position Commentary 2017E Budget by Quarter (MM) Ex. Acquisitions1 1 Alta Mesa Upstream Alta Mesas 2017 net capital budget is estimated to be 349MM, 11% higher than 18% capital expenditures of 316MM…
Summary Financial Projections ( in millions unless otherwise noted) 1 Average Net Daily Production (BOE/D) EBITDA(X) Capital Expenditures (excl. DrillCo Funds) 925 68,900 1,019 171 785 63 2,003 35 255 139 202 38,510 543 474…
KFM Financial Overview Detailed Capital Expenditures by Phase Existing Infrastructure (MM) 2017E 2018E 2019E Processing 30 130 79 Pipeline & Well Connects 53 52 27 Compression Principal Payments 0 14 25 Compression Lease Interest…
Valuation and Timeline
Upstream Valuation Benchmarking ( in millions unless otherwise noted) Firm Value / 2018E EBITDA Firm Value / 2019E EBITDA 8.0x 7.8x 7.8x 7.5x 7.3x 7.2x 6.8x 6.3x 6.3x 6.2x 6.2x 6.1x 6.0x 5.8x 5.1x 4.6x 4.4x 3.1x MTDR…
Benchmarking KFM Against High Growth G&P Peers ( in millions unless otherwise noted) Firm Value / 2018E EBITDA Firm Value / 2019E EBITDA 15.3x 14.6x 13.7x 11.7x 11.3x 11.0x 11.0x 8.0x 7.3x 4.2x 1 1 HESM EQM AM NBLX…
Anticipated Transaction Timeline Date Event File preliminary proxy statement / marketing Mid-September 2017 materials with the SEC October 2017 Transaction marketing Mid/Late-November 2017 Anticipated close 49
Key Combination Highlights Pure Play STACK Enterprise Truly integrated upstream / midstream assets of material scale Highly-contiguous position in core of one of the most active US oil basins Delineated acreage with 167…
Appendix
Alta Mesa Management Jim Hackett Hal Chappelle Michael McCabe Executive Chairman and COO of Midstream President and Chief Executive Officer Vice President and Chief Financial Officer Jim Hackett is a Partner at Riverstone Hal…
Alta Mesa Management Michael Ellis Gene Cole David Murrell Founder and COO of Upstream Operations VP and Chief Technical Officer VP, Land and Business Development Michael Ellis founded Alta Mesa in 1987 after Gene Cole has served in…
Jim Hacketts Track Record Under Mr. Hacketts leadership as Chairman, President, and/or CEO of Anadarko from 2003 to 2013, Anadarko was transformed into one of the largest U.S. oil and gas producers, growing its market cap from…
Well Spacing Optimization on De-Risked Acreage DVN, CLR, MRO, NFX and AMR aggressively defining optimum spacing Alta Mesa is the Leader in the Oil Window with Successful Long Life Spacing Tests Alta Mesa4-well Spacing Test EHU 237,…
Completion Design Focus on increasing stimulated reservoir volume STACK Well Completion Strategy Total D&C Cost (MM) D&C Cost / Lateral Foot Progressed through testing multiple generations Actual D&C Target Pattern Test D&C 1,359…
Multiple Long Term Density Pattern Tests Density Patterns Test Horizontal and Vertical Spacing 1,320ft spacing / 2 benches 1,500ft spacing / 2 benches 1,500ft spacing / 2 benches Section 29 18N 5W Section 8 17N 5W Section 28 17N 5W…
NAV Model Assumptions Operated Other Area Osage Meramec Oswego DrillCo Pricing & Discount Assumptions Gas Differential (% of HH) 95% 95% 95% 95% Oil Differential (% of WTI) 94% 94% 94% 94% NGL Realization (% of WTI) 45% 45% 45%…
Osage Type Curve Summary Average Type Curve 118 Generation 2.0+ wells with production history Key Statistics Average Generation 2.5 lateral length of 4,612; Generation 2.0+ 4,767 1,200 Gen 2.5 Type Curve Gen 2.5 Gen 2.0 Type Curve…
Meramec Type Curve Summary Average Type Curve Over 100 wells drilled in the Meramec by Newfield, Devon, Marathon, Gastar, and Chaparral 1,200 Meramec Type Curve Key Statistics Offset Well Results1 Initial Rate (BO/D / MCF/D) 170 /…
Oswego Type Curve Summary Average Type Curve Chesapeake, Chaparral, Cimarex, Gastar, and Longfellow are actively 1,500 Type Curve Key Statistics Initial Rate (BO/D / MCF/D) 320 / 320 targeting the Oswego Incline Period (oil / gas)…
Substantial Inventory of Drilling Locations Identified Drilling Locations Prospective Drilling Locations Com bined Average Working Interest Average Other (Including Working Form ations Dow nspacing Total Dow nspacing Total…
Substantial Resources Volumes and PV-10 Value for 4,196 Primary Gross Identified Locations Only PV-10 at Research Consensus PV-10 at NYMEX1 PV-10 at 70/3.50 Osage Osage Osage 3,541 2,782 4,945 6,059MM 4,778MM 8,493MM…
Stacked Pay: Oswego, Osage/Meramec Prominent Oswego, Osage, and Meramec consistent east to west; Manning in northwest West A East A Big Lime Penn - Cherokee Oswego Manning Chester Unc. A A Chester Shale Meramec…
Significant Oswego, Osage/Meramec Section Consistent thickness east to west West B East B Big Lime Oswego Penn - Cherokee Chester Unc. Chester Shale Meramec Unconformity Upr Meramec Lwr Meramec B B Upr Osage…
Significant Oswego, Osage/Meramec Osage & Woodford prominent, thickening to the north; Manning in north North C South C C Manning Chester Shale Meramec Unc. Upr Meramec Lwr Meramec C Upr Osage Lwr Osage…
DrillCo JV Pivotal relationship with Bayou City Energy Parameters 2017 Alta Mesa Estimated Capital Expenditures Entered into joint development agreement with Houston-based Alta Mesa Only private equity firm, Bayou City Energy, in…
One Mile Laterals Optimum for Up-Dip STACK Alta Mesa and other efficient operators adopt fit-for-purpose solutions 5,000 laterals used for multi-faceted benefits: drilling, completions, production operations, land and legal…
Implied Valuation at Various Prices Share Price 10.00 11.50 14.00 16.00 18.00 20.00 10.00 Equity Ow nership (Million Shares) 11.50 14.00 16.00 18.00 20.00 1 Legacy Silver Run II Ow ners 103.500 103.500 109.661 113.203 115.958…
Alta Mesa Summary STACK Pro Forma Financials Three Months Ended Years Ended December 31, ( in millions, unless specified) March 31, 2017 December 31, 2016 2016 2015 2014 Production Oil (MBBLS) 942.0 989.1 3,057.2 2,006.1 1,071.6…
Reconciliation of Adjusted EBITDAX to Net Income Three Months Ended Years Ended December 31, ( in millions, unless specified) March 31, 2017 December 31, 2016 2016 2015 2014 Net Income (Loss) (0.8) 4.1 (49.6) (91.6) (72.7)…
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