Alta Mesa Resources, Inc. STACK-Focused Investor Presentation October 2017
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
Creation of a Pure-Play STACK Enterprise 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,…
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 Capital efficient liquids upstream growth with value-enhancing midstream World class upstream asset with long inventory of highly economic drilling locations Highly contiguous 120,000 net acres with substantial…
Transaction Metrics Imply a Highly Attractive Value Opportunity 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…
Company Overview
Alta Mesa Resources Focused on development and consolidation 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…
Progressive Execution through Cycles 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…
Strong Upstream and Midstream Fundamentals High quality rock and robust rig activity Major U.S. Oil Plays Breakeven Prices (/BBL)1 Alta Mesa Type Well IRR3 103% 92% 57% 82% 73% 44% 2 40.00/bbl / 2.50/MCF 50.00/bbl /…
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…
Upstream Consolidation & Midstream Expansion Neighboring operators provide future upstream and midstream consolidation opportunities Recent Major/Blaine County acquisition by Alta Mesa adds catalyst of 20,000 dedicated acreage…
Our Upstream Assets
Solid Well Results De-Risk Kingfisher Acreage Representative wells across 11 townships Key 2017 Alta Mesa Wells Well Target IP30 (BOE/D) Aces High 1606 4-11MH Osage 823 Coleman 1706 6A-9MH U Osage/L Meramec 514 1 Dalwhinnie 1605…
Alta Mesa Wells Among Top STACK Oil Producers Top Cumulative Oil Producing STACK Wells Producing Wells of Selected Permian Osage/Meramec/Oswego STACK Public Operator Producing Wells (2012-2Q 2017)1 Operators (2012-2Q 2017)2 255…
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 3.7x 1.7x 1.1x 0.8x CLR AMR FANG PE RSPP XEC NFX MRO DVN SEC Future…
STACK Development Early stages of development 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…
Asset Value of AMRs STACK Position 6B PV-10 Value in Identified Gross Locations before downspacing Drilling Inventory Gross Locations Im plied PV-10 753 Alta Mesas 4,200 Upside Area of Focus Value (MM) Identified Gross Drilling…
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 put in place during 3Q17 and…
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…
KFM Will be Uniquely Positioned MLP strongly supported by Alta Mesa organic production 1 Only Pure-Play STACK E&P Sponsored MLP 2 AMR Leads Peer Group on Production Growth E&Ps with Public Midstream Affiliates 2017E 2019E Debt-…
Financial Summary
Financial Strategy & Pro Forma Financial Impacts Financial Strategy Capitalization at Announcement Visible path to positive free cash flow with Current fully-financed development plan ( in millions, unless specified) Alta Mesa KFM…
Summary Financial Projections ( in millions unless otherwise noted) 2 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…
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 HESM EQM AM NBLX…
Anticipated Transaction Timeline Date Event File preliminary proxy statement / marketing Late-September 2017 materials with the SEC October 2017 Transaction marketing Late-November 2017 Definitive Proxy mailed to shareholders of…
Appendix Team
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…
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…
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…
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…
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…
Appendix Well Performance
Focus: Optimize Stimulated Rock Volume Operational advancements with proven results Completion Summary By Generation Goal: optimize stimulation Alta Mesa has advanced completion designs with each generation 100 to increase value /…
Completion Design Focus on increasing stimulated reservoir volume STACK Well Completion Strategy Average Total D&C Cost / Well (MM) Average D&C Cost / Lateral Foot Progressed through testing multiple generations Actual D&C Target…
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…
Osage Interval of Meramec/Osage System Osage produces across acreage, thickening to north and east Summary Average Type Curve 118 Generation 2.0+ wells with sufficient production history Key Statistics Average Generation 2.5 lateral…
Meramec Well Delineated Across our Acreage Meramec produces across acreage, thickening to south and west Summary Meramec Thickness in STACK with Vertical and Horizontal Meramec Producing Wells Meramec resource and production affirmed…
Oswego a Significant Regional Producing Zone Development expected across most of Alta Mesa acreage Oswego Formation Thickness in STACK with Oswego vertical main field pay in legacy Alta Mesa acreage Vertical and Horizontal Oswego…
High Early-Period Oil, Low Water Cut Drive Value Consistent Meramec/Osage GOR behavior Product Weighting Over Time Approximately 57% of oil, 38% of natural gas liquids, and 38% of natural gas produced in first five years --…
Appendix Geology
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…
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…
Appendix STACK Development
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…
STACK Shifting from Delineation to Development Leading STACK operators plan for multi-well / multi-bench patterns Recent Increased-Density Filings in Meramec/Osage and Oswego Drilling Units 56
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,…
STACK: A Significant Petroleum System Additional development potential in multiple stacked pay zones Alta Mesa Existing Development Potential 55 Wells per Section Over 800 days of strong well performance Type Log Down- Additional…
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…
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…
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…
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…
Appendix Midstream
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…
Premier Integration Story Drives Midstream Value Uplift ( in millions unless otherwise noted) AMR Growth Drives 1 Midstream Value Creation KFMs Scale Will Drive MLP Growth Story 69 Long-Term Growth Production Profile 318 175%…
Appendix Financial Performance / Outlook
2017 Capital Budget and Hedge Position 1 Commentary 2017E Budget by Quarter (MM) Ex. Acquisitions1 Alta Mesa Upstream Alta Mesas 2017 net capital budget is estimated to be 349MM 19% Alta Mesa estimates that 107MM of the FY 2017…
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…
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 Six Months Ended Years Ended December 31, ( in millions, unless specified) June 30, 2017 2016 2015 2014 Production Oil (MBBLS) 1,845.0 3,057.2 2,006.1 1,071.6 Natural Gas (MMCF) 7,004.0…
Reconciliation of Adjusted EBITDAX to Net Income Six Months Ended Years Ended December 31, ( in millions, unless specified) June 30, 2017 2016 2015 2014 Net Income (Loss) (3.7) (49.6) (91.6) (72.7) Adjustments: Interest expense…
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…
NAV Model Assumptions DrillCo includes all Osage Wells Note: Assumes 4,800 lateral length for all type curves. 1 D&C shown including PAD D&C facilities costs. 74
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…
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