DUG PERMIAN BASIN J. ROSS CRAFT PRESIDENT & CHIEF EXECUTIVE OFFICER Building Momentum: Multi-Bench and Pad Development in the Southern Midland Basin Exhibit 99.1 |
Wolfcamp oil shale play – activity overview 2 N = 1,809 Note: Data sourced from company news releases/IR presentations, public databases, DrillingInfo and IHS. |
Wolfcamp oil shale play – S Midland Basin 3 Ham 1801H 1,202 Boe/d (B) Rocker B-N 74H 1,338 Boe/d (B) University 2-20 12 3,176 Boe/d (B) University 901H 1,561 Boe/d (B) Rocker B 9H 1,022 Boe/d (B) University 2-20 14 1,852 Boe/d (C) University 1804H 1,803 Boe/d (C) University 905H 1,302 Boe/d (B) University 10-1 2H 1,311 Boe/d (B) University 906H 1,277 Boe/d (A) Scott Sugg 5051 1H 1,255 Boe/d (B) Halcomb 3304H 1,037 Boe/d (B) Munson 1005H 1,295 Boe/d (B) Bennie 4342 2H 1,260 Boe/d (B) Linthicum M 2H 1,294 Boe/d (B) University 48-7 1H 1,448 Boe/d (C) University 43 902H 1,256 Boe/d (B) University 40-1309H 2,005 Boe/d (B) University E 4108CH 1,021 Boe/d (B) University 49 1H 1,561 Boe/d (B) University 47-48 2301H 1,398 Boe/d (B) Pangea West 6533HA 843 Boe/d (A) University 45 803HB 1,044 Boe/d (B) University 45 2216HB 1,042 Boe/d (B) Baker B 207HB 1,003 Boe/d (B) University 45 2304HB 1,111 Boe/d (B) University 45 2302HB 1,136 Boe/d (B) University 45 2301HB 1, 310 Boe/d (B) University 45 905HA 1,027 Boe/d (A) Baker B 256HB 1,334 Boe/d (B) Clinch 4238 1H 1,260 Boe/d (A) Lane Trust C/E 42 2HL 2,147 Boe/d (C) Sugg C 271HU 1,112 Boe/d (C) Sugg C 273HU 1,221 Boe/d (A) Sugg A 143 4HU 1,904 Boe/d (A) Ham 1825H 1,780 Boe/d (C) Ham 1802H 1,338 Boe/d (B) Wolfcamp HZ Oil Shale Play was discovered in the S Midland Basin Well IPs range from several hundred Boe to >3,000 Boe/d and EURs range from 350 to >750 MBoe Note: Data sourced from company news releases/IR presentations, public databases, DrillingInfo and IHS. Baker B 234 HC 970 Boe/d (C) University 45 713HC 879 Boe/d (B) University 43-22 H 1,192 Boe/d (B) Reagan Upton Crockett Sutton Schleicher Tom Green Sterling Irion |
1 st Producing Asset Beginning Large Scale Development of Wolfcamp Oil Shale Play Launching IPO Announcing Wolfcamp Oil Shale Discovery Commercializing Wolfcamp Oil Shale Discovery Successful transition to an oil and liquids-rich Permian producer – Approach’s story 4 Oil NGL Gas 0 2,000 4,000 6,000 8,000 10,000 12,000 30 % 70 % |
Company overview AREX OVERVIEW ASSET OVERVIEW Enterprise value $1.1 BN High-quality reserve base 115 MMBoe proved reserves $1.1 BN proved PV-10 99% Permian Basin Permian core operating area 162,000 gross (144,000 net) acres ~1+ BnBoe gross, unrisked resource potential ~2,000+ Identified HZ drilling locations targeting Wolfcamp A/B/C 2014 Capital program of $400 MM Running 3 HZ rigs in the Wolfcamp shale play to drill 70 wells during 2014 Notes: Proved reserves and acreage as of 12/31/2013 and 3/31/2014, respectively. All Boe and Mcfe calculations are based on a 6 to 1 conversion ratio. Enterprise value is equal to market capitalization using the closing share price of $20.70 per share on 5/2/2014, plus net debt as of 3/31/2014. See “PV-10 (unaudited)” slide. 5 |
Long history of operating in Midland Basin 6 WELLS DRILLED TO DATE • Drilled more than 750 wells in Midland Basin since 2004 • One of the first-movers in the HZ Wolfcamp play with longest production history and track record of full- scale development • Well data, core data, 3-D seismic and micro-seismic reduces future development risk 69 46 |
Strong track record of reserve and production growth 7 RESERVE GROWTH CAGR 31% PRODUCTION GROWTH CAGR 34% |
Wolfcamp shale oil play 8 WIDESPREAD, THICK, CONSISTENT & REPEATABLE |
AREX Wolfcamp activity 9 Note: Acreage as of 3/31/2014. STRATIGRAPHIC UNIT Clearfork/Spraberry Dean Wolfcamp A B C Canyon Strawn Ellenburger NORTH & CENTRAL PANGEA PANGEA WEST • 1Q14 Activity included: Stacked A/C completion Schleicher Crockett Irion Reagan Sutton • 1Q14 Activity included: Stand-alone B-zone completions and stacked B/C completions in North & Central Pangea Legend Vertical Producer HZ Producer HZ – Waiting on Completion HZ – Drilling |
AREX HZ Wolfcamp well performance 10 AREX HZ WOLFCAMP (BOE/D) Note: Daily production normalized for operational downtime. Production Data from AREX C Bench Wells (4) Production Data from AREX A Bench Wells (8) Production Data from AREX B Bench Wells (63) 450 MBoe Type Curve Wolfcamp Shale Oil |
Efficiency-driven transition to two-bench pad development 11 • Reduces time between spud to first sales • 7 to 8 wells per section • Reduces surface footprint • Reduces rig mobilization costs • Completion optimization from zipper fracs and frac cost savings • 14 to 16 wells per section 2011 – 2013: SINGLE-BENCH DEVELOPMENT CURRENT: TWO-BENCH DEVELOPMENT TRANSITION FROM SINGLE-BENCH TO TWO-BENCH DEVELOPMENT 660’ A B C Map view X-Section view ~1200’ thick 660’ Note: Target zones in X-Section view are illustrative. 660’ OR |
Evaluating water infrastructure 12 Key factors for Approach in determining to install large-scale water infrastructure system: Large, primarily contiguous acreage position Delineation of Wolfcamp shale across acreage position and transition to large-scale development phase How efficiently can we source and transport water from A to B? Responsible operatorship Water infrastructure and equipment projects are key to large-scale field development and to reducing D&C and LOE costs |
Infrastructure for large-scale development 13 • Reducing D&C cost • Reducing LOE • Increasing project profit margin • Minimizing truck traffic and surface disturbance Pangea West North & Central Pangea South Pangea Schleicher Crockett Irion Reagan Sutton 50-Mile Oil Pipeline 100,000 Bbls/d Capacity |
Low cost operator 14 Expect to drill ~20 to 24 HZ wells per rig in 2014 vs. prior estimate of 10 to 12 HZ wells per rig 3 HZ rigs currently running in Project Pangea / Pangea West Recently drilled wells in 10 to 11 days (~7,500’ lateral) Compressing spud-to-sales times Focusing activity around field infrastructure systems COMPETITIVE LOE (FY13 LOE/Boe) OPERATIONAL EFFICIENCY BEST-IN-CLASS HZ D&C ($MM/Well) Avg. $6.9 MM Avg. $8.96/Boe Note: Peers include APA, ATHL, CPE, DVN, FANG, EGN, EPE, LPI, PXD and RSPP. Data sourced from SEC filings and company news releases/IR presentations. |
AREX HZ Wolfcamp economics 15 Notes: Identified locations based on multi-bench development and 120-acre spacing for HZ Wolfcamp. No locations assigned to south Project Pangea. HZ Wolfcamp economics assume NYMEX – Henry Hub strip and NGL price based on 40% of WTI. Play Type Horizontal Wolfcamp Avg. EUR (gross) 450 MBoe Targeted Well Cost $5.5 MM Potential Locations ~2,000 Gross Resource Potential ~1 Bn Boe BTAX IRR SENSITIVITIES • Horizontal drilling improves recoveries and returns • Targeting Wolfcamp A / B / C • 7,000’+ lateral length • ~80% of EUR made up of oil and NGLs |
Key takeaways • Wolfcamp HZ oil shale play has expanded to more than 10 counties since discovered in Crockett and Irion Counties in 2010 • More than 1,800 HZ Wolfcamp wells have been drilled across the Midland Basin • Nearly 80% of the horizontal wells have been drilled in S Midland Basin • Crockett, Irion and Reagan Counties account for most activity • S Midland Basin is shallower– lower cost of drilling • N Midland Basin is deeper – higher cost of drilling • Contiguous acreage, infrastructure and operational efficiency – lower cost of completion and operations 16 |
Appendix |
PV-10 (unaudited) 18 PV-10 (UNAUDITED) (in millions) December 31, 2013 PV-10 $ 1,132 Less income taxes: Undiscounted future income taxes (919) 10% discount factor 463 Future discounted income taxes (456) Standardized measure of discounted future net cash flows $ 676 The present value of our proved reserves, discounted at 10% (“PV-10”), was estimated at $1.1 billion at December 31, 2013, and was calculated based on the first-of-the-month, twelve-month average prices for oil, NGLs and gas, of $97.28 per Bbl of oil, $30.16 per Bbl of NGLs and $3.66 per MMBtu of natural gas. PV-10 is our estimate of the present value of future net revenues from proved oil and gas reserves after deducting estimated production and ad valorem taxes, future capital costs and operating expenses, but before deducting any estimates of future income taxes. The estimated future net revenues are discounted at an annual rate of 10% to determine their “present value.” We believe PV-10 to be an important measure for evaluating the relative significance of our oil and gas properties and that the presentation of the non-GAAP financial measure of PV-10 provides useful information to investors because it is widely used by professional analysts and investors in evaluating oil and gas companies. Because there are many unique factors that can impact an individual company when estimating the amount of future income taxes to be paid, we believe the use of a pre-tax measure is valuable for evaluating the Company. We believe that PV-10 is a financial measure routinely used and calculated similarly by other companies in the oil and gas industry. The following table reconciles PV-10 to our standardized measure of discounted future net cash flows, the most directly comparable measure calculated and presented in accordance with GAAP. PV-10 should not be considered as an alternative to the standardized measure as computed under GAAP. |
Forward-looking statements 19 The Securities and Exchange Commission (“SEC”) permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves that meet the SEC’s definitions for such terms, and price and cost sensitivities for such reserves, and prohibits disclosure of resources that do not constitute such reserves. The Company uses the terms “estimated ultimate recovery” or “EUR,” reserve or resource “potential,” and other descriptions of volumes of reserves potentially recoverable through additional drilling or recovery techniques that the SEC’s rules may prohibit the Company from including in filings with the SEC. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized by the Company. EUR estimates, identified drilling locations and resource potential estimates have not been risked by the Company. Actual locations drilled and quantities that may be ultimately recovered from the Company’s interest may differ substantially from the Company’s estimates. There is no commitment by the Company to drill all of the drilling locations that have been attributed these quantities. Factors affecting ultimate recovery include the scope of the Company’s ongoing drilling program, which will be directly affected by the availability of capital, drilling and production costs, availability of drilling and completion services and equipment, drilling results, lease expirations, regulatory approval and actual drilling results, as well as geological and mechanical factors Estimates of unproved reserves, type/decline curves, per well EUR and resource potential may change significantly as development of the Company’s oil and gas assets provides additional data. Type/decline curves, estimated EURs, resource potential, recovery factors and well costs represent Company estimates based on evaluation of petrophysical analysis, core data and well logs, well performance from limited drilling and recompletion results and seismic data, and have not been reviewed by independent engineers. These are presented as hypothetical recoveries if assumptions and estimates regarding recoverable hydrocarbons, recovery factors and costs prove correct. The Company has very limited production experience with these projects, and accordingly, such estimates may change significantly as results from more wells are evaluated. Estimates of resource potential and EURs do not constitute reserves, but constitute estimates of contingent resources which the SEC has determined are too speculative to include in SEC filings. Unless otherwise noted, IRR estimates are before taxes and assume NYMEX forward-curve oil and gas pricing and Company-generated EUR and decline curve estimates based on Company drilling and completion cost estimates that do not include land, seismic or G&A costs. Cautionary statements regarding oil & gas quantities This presentation contains 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. All statements, other than statements of historical facts, included in this presentation that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this presentation specifically include the expectations of management regarding plans, strategies, objectives, anticipated financial and operating results of the Company, including as to the Company’s Wolfcamp shale resource play, estimated resource potential and recoverability of the oil and gas, estimated reserves and drilling locations, capital expenditures, typical well results and well profiles, type curve, and production and operating expenses guidance included in the presentation. These statements are based on certain assumptions made by the Company based on management's experience and technical analyses, current conditions, anticipated future developments and other factors believed to be appropriate and believed to be reasonable by management. When used in this presentation, the words “will,” “potential,” “believe,” “intend,” “expect,” “may,” “should,” “anticipate,” “could,” “estimate,” “plan,” “predict,” “project,” “target,” “profile,” “model” or their negatives, other similar expressions or the statements that include those words, are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. In particular, careful consideration should be given to the cautionary statements and risk factors described in the Company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law. |
Thank you |