2008 IPAA OGIS San Francisco, CA - October 6 2008
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IPAA OGIS Florida-February 17-18, 2009
1
2008 IPAA OGIS San Francisco, CA - October 6 2008
NYSE: PHX
August 9-13, 2009
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
22
Forward-Looking Statements and Risk Factors – This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include current expectations or forecasts of future events. They may include estimates of oil and gas reserves, expected oil and gas production and future expenses, projections of future oil and gas prices, planned capital expenditures for drilling, leasehold acquisitions and seismic data, statements concerning anticipated cash flow and liquidity and Panhandle’s strategy and other plans and objectives for future operations. Although Panhandle believes the expectations reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to be correct. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Factors that could cause actual results to differ materially from expected results are described under “Risk Factors” in Part 1, Item 1 of Panhandle’s 2008 Form 10-K filed with the Securities and Exchange Commission. These “Risk Factors” includes the volatility of oil and gas prices; Panhandle’s ability to compete effectively against strong independent oil and gas companies and majors; the availability of capital on an economic basis to fund reserve replacement costs; Panhandle’s ability to replace reserves and sustain production; uncertainties inherent in estimating quantities of oil and gas reserves and projecting future rates of production and the amount and timing of development expenditures; uncertainties in evaluating oil and gas reserves; unsuccessful exploration and development drilling; declines in the values of our oil and gas properties resulting in write-downs; the negative impact lower oil and gas prices could have on our ability to borrow; and drilling and operating risks.
Do not place undue reliance on these forward-looking statements, which speak only as of the date of this release, and Panhandle undertakes no obligation to update this information. Panhandle urges you to carefully review and consider the disclosures made in this presentation and Panhandle’s filings with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect Panhandle’s business.
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
Who isPanhandle Oil and Gas?
NYSE: PHX
3
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
44Panhandle Oil and Gas Inc.
Non-operating independent oil and gas company with current drilling projects in the Woodford Shale, Fayetteville Shale and Western Oklahoma
Market Capitalization - $210 million
52-week range - $13.15 - $39.98
8.3 million shares outstanding
Insider ownership – 13.8%
Unique and Evolving company
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
55UNIQUE: Operational Strategy
Use ownership of 254,600 mineral acres as base, “legacy assets”
Use mineral acreage ownership to participate with a working interest in the drilling of a significant numberof wells Working interest in 1,350 wells Royalty interest in 3,300 wells
As a non-operator, Panhandle participates in drilling with operating companies, principally large independents.
Majority of drilling is on perpetually owned fee mineral acreage, drilling on owned fee mineral acres maximizes rate of return, royalty on our acres is paid to Panhandle
Approximately 75% of oil and gas sales revenue is from working interests in wells
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
66
Fiscal Year Ended
September 30,
Revenue & Earnings 2008
2007
Revenue $69,119,121 $39,128,911
Net income $21,555,769 $6,343,464
Earnings per share $2.54 $.75
Net cash provided by operating activities $39,924,719 $28,106,500
Capital expenditures $38,747,749 $27,785,431
Mcfe produced (33% increase) 7,722,450 5,791,407
Average Mcfe sales price $8.94 $6.47
Financial Highlights
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
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Six Months Ended
March 31,
Revenue & Earnings 2009 2008
Revenue $20,193,717 $26,451,025
Net income (loss) ($1,819,885) $6,311,588
Earnings per share ($.22) $.74
Net cash provided by operating activities $24,911,686 $16,357,801
Capital expenditures $30,271,588 $16,095,211
Mcfe produced (37% increase) 4,875,423 3,558,963
Average Mcfe sales price $3.91 $7.91
Financial Highlights
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
88
March 31, 2009
Current assets $10,330,752
Property and equipment 203,613,769
Less accumulated DD&A (101,670,052)
Net property and equipment 101,943,717
Other 1,043,800
Total assets $113,318,269
Current liabilities $5,462,860
Long-term debt 15,810,247
Deferred income taxes 24,531,750
Asset retirement obligation 1,660,512
Long-term derivative contracts 282,540
Shareholders equity 65,570,360
Total liabilities and equity $113,318,269
Financial Highlights: Condensed Balance Sheet
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
99PHX: 2009 Operating Strategies
Maintain operational and financial flexibility
Prudently manage capital expenditures and credit facility drawdowns
Continue and expand participation in unconventional plays
Continue to exploit legacy assets, leveraging minerals ownership
Maintain ability and commitment to prudently maximize current and future drilling and development opportunities
Potentially divest of a limited number of properties in non-core areas or groups of marginal properties
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
1010PHX: 2009 Operating Strategies-continued
$50 million credit facility with Oklahoma banks, maturity October, 2011
Outstanding balance on credit facility at July 30, 2009, $11.1 million
$35 million borrowing base, as of May 2009 Would increase borrowing base, if needed
Natural Gas Swaps (all swaps tied to specific Oklahoma pipeline price)
Continually evaluating hedge position
Period Volume/Month Average Pipeline Price
2009 300,000 mmbtu $3.775
2010 300,000 mmbtu $5.30
11Trailing 12-Mo. Operating and G&A Expense
Peer Average: $2.44P
HX
$1.62$
/Mcf
e
Note: Trailing twelve month for periods ending 3/31/09.Source: EnerCom Incorporated. Peer set includes: BRY, CHK, CLR, CRK, DVN, FST, GDP, GMXR, HK, NFX, PETD, PLLL, PQ, PVA, PXP, RRC, SWN, XTO.
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
123-Year Finding and Development Cost
Peer Average: $3.49
PH
X
$2.50
$/M
cfe
Source: EnerCom Incorporated. Peer set includes: BRY, CHK, CLR, CRK, DVN, FST, GDP, GMXR, HK, NFX, PETD, PLLL, PQ, PVA, PXP, RRC, SWN, XTO.
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
13Debt to Market Capitalization
Peer Average: 95%
PH
X
9%
Note: As of 7/17/09.Source: EnerCom Incorporated. Peer set includes: BRY, CHK, CLR, CRK, DVN, FST, GDP, GMXR, HK, NFX, PETD, PLLL, PQ, PVA, PXP, RRC, SWN, XTO.
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
14Asset Intensity
Peer Average: 63%
PH
X
47%
Note: As of 3/31/09.Source: EnerCom Incorporated. Peer set includes: BRY, CHK, CLR, CRK, DVN, FST, GDP, GMXR, HK, NFX, PETD, PLLL, PQ, PVA, PXP, RRC, SWN, XTO.
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
15Trailing 12-Mo. Capital Efficiency
Peer Average: 217%
PH
X
201%
Note: Trailing twelve month for periods ending 3/31/09.Source: EnerCom Incorporated. Peer set includes: BRY, CHK, CLR, CRK, DVN, FST, GDP, GMXR, HK, NFX, PETD, PLLL, PQ, PVA, PXP, RRC, SWN, XTO.
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
Asset Pyramid
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
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Perpetually owned 198,000 open acres, 56,000 producing or leased acres
Reserves on fee mineral acres, Fayetteville and Woodford Shale’s
Over 4,000 total wells, 88% natural gas
Low ratio of PUD to total proved reserves
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
Operations Overview 17
The Oil and Gas The Oil and Gas ConferenceConference – Denver, CO - August 2009 – Denver, CO - August 2009
1818Overview/Fiscal Year 2008 Operating Highlights
Total U.S. mineral ownership of ~ 255,000 acres Significant ownership in the Western Oklahoma Anadarko Basin,
Arkansas Fayetteville and the Southeastern Oklahoma Woodford
2008 proved reserves increased 29% to 54.1 Bcfe Reserve replacement 257% Growth through the drillbit 2008 finding cost - $2.64/Mcfe 89% natural gas 76% proved developed producing
2008 annual production increased 33% to 21.2 Mmcfe per day Q3 2009 production increased to 29.1 Mmcfe per day
Superior investment economics Large inventory of undrilled locations in premier established and
developing resource plays Participation with minerals as a working interest owner
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
1919PHX: Mid-Year Proved Reserve Update
Proved Reserves March 31,
2009September
30,2008
SEC Pricing (1)
Proved reserve volumes 53.1 Bcfe 54.1 Bcfe
Estimated future net cash flows, 10% discounted present value (before income taxes, millions of dollars)
$61.9 $119.9
Normalized Pricing (2)
Proved reserve volumes 62.4 Bcfe 54.8 Bcfe
Estimated future net cash flows,10% discounted present value (before income taxes, millions of dollars)
$156.3 $133.5
1. SEC Pricing September 30, 2008 - $4.52/Mcf & $97.74/Bbl, flatSEC Pricing March 31, 2009 - $2.45/Mcf & $46.93/Bbl, flat
2. Normalized Pricing - $6.00/Mcf & 45.00/Bbl, flat
Panhandle Oil and Gas Mineral Holdings
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
LeaseholdLeasehold
20
Significant Mineral Acreage Holdings
Net
Acre
s (
Th
ou
san
ds)
0
20
40
60
80
100
120
OK NM TX ND AR
Economic Impact of Participation with Mineral Interest
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
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Assumptions:• PHX ownership -1% W.I., 1% NRI
• Typical ownership – 1% W.I., 0.8125% NRI
• Gross well cost - $2,900,000
•Wellhead gas price – 7/31/09 NYMEX Strip, adjusted for basis ($6.19/Mcf wellhead average over life of well)
Arkansas Fayetteville
$1.78
$1.45
24%
34%
0
5
10
15
20
25
30
35
40
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Typical W.I. Owner PHX Typical W.I. Owner PHX
Finding Cost, $/Mcfe Rate of Return, % (BTAX)
42% Higher
19% Lower
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
2222PHX Quarterly Production Profile
0
5
10
15
20
25
30
35
Mm
cfe
per
day
CAGR 28.4%
2323PHX Areas of Focus
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
2424Western Oklahoma: Anadarko Basin
Anadarko Basin (Cana) horizontal Woodford
Anadarko Basin (Colony) horizontal Granite Wash
Anadarko Basin (SE Leedey) horizontal Cleveland
Anadarko Basin
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
2525Anadarko Basin: Woodford Shale
~30 horizontal wells on production in the play (as of April, 2009)
10,000’ – 13,000’ depth
~ 3,000 Mcfd typical initial month production rate
PHX generates superior returns Drilling on our minerals, we keep royalty
4.3% average NRI in 42 sections (1,365 net acres)
9 working interest wells approved (as of 7/10/09) 4 producers, 1 drilling, 1 testing, 3 scheduled
2 royalty interest wells producing
~ 330 undeveloped locations (based on 8 wells per section)
Anadarko Basin
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
2626Anadarko Basin: Woodford Shale
Daily net production ~ 2.9 Mmcf per day
PHX generates superior returns Drilling on our minerals, we keep royalty
2% average N.R.I. in 284 sections (8,000 net acres)
85 working interest wells approved (as of 7/10/09) 62 producers, 1 drilling, 2 testing, 20 scheduled W. I. <1% to 8%, average 4.3% in these wells N.R.I. <1% to 8%, average 5.1% in these wells
138 royalty interest wells producing
~ 2,200 probable/possible locations
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
2727Arkansas: Fayetteville Shale
Fayetteville Shale
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
2828Arkansas: Fayetteville Shale
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
2929
Net Reserves (Bcf) to PHX
Proved 3.5
Probable 19.0 * Possible39.0 * ~ 2,200 locations
Arkansas: Fayetteville Shale Reserves
* DeGolyer and MacNaughton, as of 9/30/08 based on 8 wells per section
Operators: Southwestern Energy, Chesapeake, Petrohawk
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
3030SE Oklahoma: Woodford Shale
Daily net production ~ 8.4 Mmcf per day
PHX generates superior returns Drilling on our minerals, we keep royalty
10,000 acres in active counties (Coal, Hughes, Pittsburgh & Atoka)
3.9% average N.R.I. in 185 sections (6,200 net acres)
130 working interest wells approved (as of 7/10/09) 109 producers, 2 drilling, 12 testing, 7 scheduled W.I. <1% to 42%, average 6.9% in these wells N.R.I. <1% to 38%, average 6.9% in these wells
24 royalty interest wells producing
~ 1,200 probable/possible locations
Woodford Shale
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
3131SE Oklahoma: Woodford Shale
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
3232
* DeGolyer and MacNaughton, as of 9/30/08
based on 8 wells per section
Operators:
Newfield, Continental, Devon, BP, XTO
SE Oklahoma: Woodford Shale Reserves
Net Reserves (Bcf) to PHX
Proved 15Probable 67.0 * Possible36.0 * ~ 1,200 locations
The Oil and Gas Conference – Denver, CO - August 2009The Oil and Gas Conference – Denver, CO - August 2009
3333
The Panhandle Oil and Gas Advantage
Strong financial metrics < 10% debt to market capitalization
Broadly diversified perpetual mineral holdings Total US mineral ownership of ~ 255,000 acres
Large drilling inventory in multiple resource plays Over 3,000 locations identified
Substantial advantage in capital efficiency due to mineral ownership Participate with mineral interest as a working interest
owner or;
Retain a significant royalty ownership in properties with no additional capital investment
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