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Sabalo Acquisition – Earthstone Energy Inc.

Earthstone Energy Inc. · Oct 17, 2018 · 31 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. Sabalo Acquisition – Earthstone Energy Inc. – slide 1
    Sabalo Acquisition October 17, 2018 1
  2. Sabalo Acquisition – Earthstone Energy Inc. – slide 2
    Investment Highlights Track record for creating shareholder value Proven Management Four prior successful public entities and Technical Team Long-term demonstrated operational excellence Repeat institutional investors 50,800(1)…
  3. Sabalo Acquisition – Earthstone Energy Inc. – slide 3
    Transformational Acquisition Accelerates Earthstones Midland Basin Evolution Key Highlights Combined Midland Basin Map 20,800 acre highly contiguous operated position in the core of the Midland Basin (85% operated) Dawson Borden…
  4. Sabalo Acquisition – Earthstone Energy Inc. – slide 4
    Increased Size, Scale and Core Inventory in the Midland Basin Pro Forma Midland Basin Net Acres(1) 30,000 20,800 50,800 Proved Reserves 84 91 174 (MMBoe)(2) (5) 1P PV-10 (MM)(2) (5) 965 1,228 2,193 Current Net Production…
  5. Sabalo Acquisition – Earthstone Energy Inc. – slide 5
    Selected Midland Basin Transactions Highlight Value Paid per Acre Comparable Midland Basin A&D Activity Precedent Transactions /Undeveloped Acre(1) 9/6/2016 ESTE / Sabalo Acquisition 10/18/2016 1 2 3 4 5 6 7 Callon / Plymouth…
  6. Sabalo Acquisition – Earthstone Energy Inc. – slide 6
    Deep Inventory of Identified Highly Economic Locations Pro forma portfolio provides for decades of drilling inventory 990 Midland Basin gross operated Midland Basin Gross Operated Locations Midland Basin Net Acres locations ESTE…
  7. Sabalo Acquisition – Earthstone Energy Inc. – slide 7
    Sabalo Acquisition Meets Key Earthstone Criteria Sabalo Criteria Benchmark Acquisition Well known geology with high oil-in-place across the position Allows current ESTE team to leverage existing experience and execute on…
  8. Sabalo Acquisition – Earthstone Energy Inc. – slide 8
    Stacked Pay Opportunity Derisked by Delineated Benches Purchase price supported by Wolfcamp A and Lower Spraberry, which are completely delineated Four proven targets across Sabalo acreage Midland Basin Spacing Assumptions Lower…
  9. Sabalo Acquisition – Earthstone Energy Inc. – slide 9
    Sabalo and Offset Operator Well Results Recent Well Results Howard County Activity Map Normalized IP-30 / Well Name Operator LL (Ft.) 1000' (Boe/d) (1) % Oil 1 Sledge Unit 06-07 2SH Surge 7,035 161 88% 2 Newton Unit 06-43 2SH Surge…
  10. Sabalo Acquisition – Earthstone Energy Inc. – slide 10
    Sabalo Acquisition: Wolfcamp A Performance Geologic data and extensive delineation confirms Sabalos position is Wolfcamp A Performance Profile within the core development window Primary development zone in Howard County with 200 of…
  11. Sabalo Acquisition – Earthstone Energy Inc. – slide 11
    Sabalo Acquisition: Lower Spraberry Performance Thick Lower Spraberry resource across the entire Sabalo position Lower Spraberry Performance Profile ideally positions the asset for extended lateral development Improvements in…
  12. Sabalo Acquisition – Earthstone Energy Inc. – slide 12
    Midstream Agreements Provide Oil Flow Assurance Sabalo Multi-year dedications to support long-term crude oil and Current ESTE 100% Trucked natural gas production growth Oil Production 7-Yr (with 3-Yr option) oil gathering and…
  13. Sabalo Acquisition – Earthstone Energy Inc. – slide 13
    Takeaway Optionality Across the Midland Basin Earthstone has access to multiple delivery points across the Midland Basin Ample capacity for legacy Southern Midland Basin volume via various trucking points Proximity to Midland and…
  14. Sabalo Acquisition – Earthstone Energy Inc. – slide 14
    Owned Water Infrastructure on Sabalo Acreage Supports Low Cost Development Water Infrastructure Overview Sabalo Water Infrastructure Map 30 miles of owned produced water gathering lines Produced water recycling facility in process…
  15. Sabalo Acquisition – Earthstone Energy Inc. – slide 15
    Strong Oil Production and Cash Margins Compare Favorably to Permian Peer Group Oil cut and cash margins continue to be at the forefront of investor focus % Oil 2Q18 Production 2Q18 Adjusted EBITDAX Margin (/Boe)(4) 90% 60.00…
  16. Sabalo Acquisition – Earthstone Energy Inc. – slide 16
    Compelling Valuation for High Quality Permian Position Peer Pro Forma Peer 1 Peer 2 Peer 3 Average Net Permian Acres 21,100 79,300 86,155 62,182 50,800 2Q18 Permian 24,036 34,562 28,954 29,184 21,850 (1) Production (Boe/d)…
  17. Sabalo Acquisition – Earthstone Energy Inc. – slide 17
    Earthstone is Uniquely Positioned to Create Shareholder Value 50,800 net acres primed for years of low-cost growth Creation of Must Own Entire Midland Basin portfolio offers attractive economics creating Midland Basin Growth Right…
  18. Sabalo Acquisition – Earthstone Energy Inc. – slide 18
    Attractive Acquisition Financing Committed financing in place for entire cash portion of Sabalo purchase price and upsized borrowing base of 475MM Committed Contemplated financing includes: 500MM senior notes, 225MM preferred…
  19. Sabalo Acquisition – Earthstone Energy Inc. – slide 19
    Pro Forma Capitalization Assumptions ESTE Pro Forma Capitalization 500MM senior notes offering ( in millions) As Filed Sabalo Acquisition Pro Forma 225MM preferred equity placement 2Q'2018 Adjustments 2Q'2018 300MM equity to…
  20. Sabalo Acquisition – Earthstone Energy Inc. – slide 20
    Capital Budget, Guidance and Estimated Q3 2018 Results ESTE 2018 Capital Budget(1) FY Guidance(2) FY 2018E (1)(3) FY 2019E (3) ( in millions) Gross / Net Well Count Average Production (Boe/d) 10,500 - 11,000 25,000 - 29,000 Wells…
  21. Sabalo Acquisition – Earthstone Energy Inc. – slide 21
    Legacy Earthstone Overview 23
  22. Sabalo Acquisition – Earthstone Energy Inc. – slide 22
    Legacy Earthstone Overview The Woodlands, Texas based E&P company is focused on development and production of oil and natural gas with current operations in the Midland Basin Asset Overview Midland Basin (30,000 core net acres) and…
  23. Sabalo Acquisition – Earthstone Energy Inc. – slide 23
    ESTE: Consistent Growth and Margin Expansion While Maintaining the Balance Sheet Average Daily Production (Boe/d)(1) (2) (3) Unhedged Debt-Adjusted CFPS(1) 2.00 2Q'16-2Q'18 CAGR 3.0x 12,000 10,650 10,750 63.4% 4Q17: ESTE Sale of…
  24. Sabalo Acquisition – Earthstone Energy Inc. – slide 24
    Recent Southern Midland Basin Results Recent Well Results Southern Midland Basin Activity Map Well Name Operator IPW2 (Boe/d) % Oil 1 SRH North 1526HU Apache 1,403 85% 2 SRH North 1527HA Apache 1,266 75% 3 University 3-310 PU 9H…
  25. Sabalo Acquisition – Earthstone Energy Inc. – slide 25
    ESTE Southern Midland Basin Well Performance Update Outperforming initial expectations and generating attractive returns at strip prices with cost inflations Improved internal rate of return (IRR) due to initial production…
  26. Sabalo Acquisition – Earthstone Energy Inc. – slide 26
    Continuous Focus on Operational Improvement Against Service Cost Inflation Backdrop Meaningful improvements in drilling days and prudent service cost Actual Drilling, Completions & Equipment Cost / Foot management over past year…
  27. Sabalo Acquisition – Earthstone Energy Inc. – slide 27
    Acreage Trade Central Reagan County Acreage Trade Highlights Pre-Trade Post-Trade In October 2018, ESTE traded non-operated working interests in Glasscock County and paid 27.8 million in cash for operated working interests in Reagan…
  28. Sabalo Acquisition – Earthstone Energy Inc. – slide 28
    Appendix 30
  29. Sabalo Acquisition – Earthstone Energy Inc. – slide 29
    Proven Leadership and Track Record of Value Creation Operating team has extensive experience running multi-rig development programs across various basins Years Years of Experience Title Working Together Frank Lodzinski 46 29…
  30. Sabalo Acquisition – Earthstone Energy Inc. – slide 30
    Hedging Summary Earthstone will continue to opportunistically add to its hedge position Oil Production Hedged Gas Production Hedged Period Volume (Bbls) /Bbl Period Volume (MMBtu) /MMBtu Q3 2018 459,700 54.55 Q3 2018 610,000…
  31. Sabalo Acquisition – Earthstone Energy Inc. – slide 31
    Reconciliation of Non-GAAP Financial Measure The following table provides a reconciliation of Net income to Adjusted EBITDAX for ESTE and the computation of Operating Cash Flow for Sabalo for the periods indicated: ESTE 3Q18…

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