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1 Denali Oil & Gas Rick Louden President & CEO. 2 Denali Oil & Gas Background Founded June, 2003 with a $50 million commitment from Quantum Energy Partners,

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Presentation on theme: "1 Denali Oil & Gas Rick Louden President & CEO. 2 Denali Oil & Gas Background Founded June, 2003 with a $50 million commitment from Quantum Energy Partners,"— Presentation transcript:

1 1 Denali Oil & Gas Rick Louden President & CEO

2 2 Denali Oil & Gas Background Founded June, 2003 with a $50 million commitment from Quantum Energy Partners, Energy Trust and Walter Oil & Gas. Denali II funding commitment of $50 million in 2006. Founded June, 2003 with a $50 million commitment from Quantum Energy Partners, Energy Trust and Walter Oil & Gas. Denali II funding commitment of $50 million in 2006. Focus on S. Texas tight gas below 12,000 Focus on S. Texas tight gas below 12,000 Drilled 17 exploratory wells, 48 development wells, four small acquisitions. Drilled 17 exploratory wells, 48 development wells, four small acquisitions. Sold assets in 2004 and 2006 in multiple asset sales totaling $230 million. Sold assets in 2004 and 2006 in multiple asset sales totaling $230 million. Currently producing 13 Mmcfed. Currently producing 13 Mmcfed.

3 Denali Oil & Gas Fields Currently Producing and Fields Sold Finley Webb Las Hermanitas Destino La Perla S. Escobas Haynes Exsun Tierra Blanca Arrowhead Ranch Shivers Deep Edinburg South S. Friar Ranch Rapture Hardeman Slough South Bearhead Robinson Lake Creek

4 4 Denali Oil & Gas Investor Partners Bring Value to the Table Sounding Board and Brainstorming on key decisions and strategy Sounding Board and Brainstorming on key decisions and strategy Financial Expertise and Muscle Financial Expertise and Muscle Financial Strength and Staying Power Financial Strength and Staying Power

5 5 Planning Discussion with Quantum Energy Partners

6 6 Denali Oil & Gas Business Plan Primary focus on deep tight gas in South Texas. Primary focus on deep tight gas in South Texas. Create value through exploration and small acquisitions with significant drilling potential. Create value through exploration and small acquisitions with significant drilling potential. Operate the majority of properties and reserves. Operate the majority of properties and reserves. Be patient, wait for exceptional opportunities. Be patient, wait for exceptional opportunities.

7 7 Denali Oil & Gas Business Plan Starting Point Conditions Private Equity Funded Company Starting Point Conditions Private Equity Funded Company –Target 30%+ IRR and ROI of 3.0+ –Dont bet on rising oil and gas prices. –Minimize risk. No rank wildcatting. No rank wildcatting. Prudent level of borrowing. Prudent level of borrowing. Conservative Acquisition analysis assumptions. Conservative Acquisition analysis assumptions.

8 8 Denali Oil & Gas Strategy ……. How do we generate 30%+ IRR and 3.0+ ROI without rising gas prices and without significant risk? ……. How do we generate 30%+ IRR and 3.0+ ROI without rising gas prices and without significant risk? Basin Characteristics? Wells with high initial rates and steep declines or wells with moderate initial rates and flatter declines?...........high initial rates generate higher IRRs despite steeper declines. Basin Characteristics? Wells with high initial rates and steep declines or wells with moderate initial rates and flatter declines?...........high initial rates generate higher IRRs despite steeper declines. Exploration or acquisitions?........ exploration minimizes upfront capital improving ROI and IRR if success rate is good. Exploration or acquisitions?........ exploration minimizes upfront capital improving ROI and IRR if success rate is good.

9 9 Denali Oil & Gas Strategy Continued……….. Sell discoveries early or fully develop?......... selling fields early in life after minimum drilling further improves IRR and ROI, but sacrifices a portion of the future present value. Sell discoveries early or fully develop?......... selling fields early in life after minimum drilling further improves IRR and ROI, but sacrifices a portion of the future present value.

10 10 Denali Oil & Gas Strategy ……. How do we generate 30%+ IRR & 3.0 ROI? Example: Ten well field, each well costs $4 million and has a PV10 of $6 million and ROI of 2.5. CapitalSale ValueROI Land & Seismic$ 1-- Drill 3 wells$12$302.5 Drill 7 PUDs $28$702.5 Total$41$1002.44

11 11 Denali Oil & Gas Strategy ……. How do we generate 30%+ IRR & 3.0 ROI? Example: Ten well field, each well costs $4 million and has a PV10 of $6 million and ROI of 2.5. CapitalSale ValueROI Land & Seismic$ 1-- Drill 3 wells$12$302.5 Sell 7 PUDs --$21- (at 50% of PV10) Total$13$513.9

12 12 Denali Oil & Gas Business Plan Starting Point Conditions Private Equity Funded Company Starting Point Conditions Private Equity Funded Company –Target 30%+ IRR and ROI of 3.0+ –Dont bet on rising oil and gas prices. –Minimize risk. No rank wildcatting. No rank wildcatting. Prudent level of borrowing. Prudent level of borrowing. Conservative Acquisition analysis assumptions. Conservative Acquisition analysis assumptions.

13 13 ??? U.S. Gas Prices Adjusted for Inflation 1985 - 2009

14 14 Denali Oil & Gas Business Plan Minimize Risk Top 10% Technical Team Top 10% Technical Team Wait for exceptional opportunities Wait for exceptional opportunities No Rank Wildcatting No Rank Wildcatting State of the Art Technologies State of the Art Technologies

15 15 309,919 Wells < 10,000 TD Total Wells 361,030 South Texas Wells less than 10,000 deep

16 16 13,007 Wells > 13,000 TD South Texas Wells deeper than 13,000

17 17 Denali Oil & Gas Business Plan Minimize Risk Top 10% Technical Team Top 10% Technical Team Wait for exceptional opportunities Wait for exceptional opportunities No Rank Wildcatting No Rank Wildcatting State of the Art Technologies State of the Art Technologies

18 18 Denali Oil & Gas State of the Art Technology Denali

19 19 Denali Oil & Gas Results Denali I (2003 – 2006) Three small acquisitions ($9.1 Million), 4 exploration wells (3 successful and 1 dry hole), 35 development wells. Three small acquisitions ($9.1 Million), 4 exploration wells (3 successful and 1 dry hole), 35 development wells. $44 million of investor capital and $15 million debt. $44 million of investor capital and $15 million debt. Sold in multiple transactions totaling $230 million. Sold in multiple transactions totaling $230 million. IRR = 214%, multiple = 4.5. IRR = 214%, multiple = 4.5.

20 20 Denali Oil & Gas Rick Louden President & CEO

21 21 Denali Oil & Gas Results Denali II (2006 – 2008) One acquisition, 13 exploration wells (6 successful and 7 dry holes), 13 development wells. One acquisition, 13 exploration wells (6 successful and 7 dry holes), 13 development wells. $64 million of investor capital and $24 million debt. $64 million of investor capital and $24 million debt. Current proved reserves of 70 Bcfe and probable reserves of 73 Bcfe. Current proved reserves of 70 Bcfe and probable reserves of 73 Bcfe. 100,000 net undeveloped acres in resource play with acreage going for $250-350 per acre. 100,000 net undeveloped acres in resource play with acreage going for $250-350 per acre.

22 22 Denali Oil & Gas Rick Louden President & CEO Denalis S. Escobas Field Escobas Field Fandango field

23 23 Fandango Field 429 BCF Escobas Field 89 BCF

24 South Escobas Type Log

25 Type Log Cont.

26 26 Denali Oil & Gas Rick Louden President & CEO Denalis S. Escobas Field Escobas Field Fandango field

27 27 Denali Oil & Gas Finding Costs YearReserve AddsFinding Cost YearReserve AddsFinding Cost 200313 Bcfe$0.67/Mcfe 200428 Bcfe$1.06/Mcfe 200541 Bcfe$1.24/Mcfe 200635 Bcfe$1.08/Mcfe 200725 Bcfe$1.00/Mcfe 200830 Bcfe$1.44/Mcfe Total172 Bcfe$1.17/Mcfe

28 28 Denali Oil & Gas Denali III Same Investor Group. Same Investor Group. $140 million commitment. Additional capital available for larger acquisition. $140 million commitment. Additional capital available for larger acquisition. Exploration and acquisitions with increased focus on identifying acquisitions. Exploration and acquisitions with increased focus on identifying acquisitions. Partner with companies who have acreage and prospects in S. Texas, but are reallocating capital to other basins………through farmouts and joint ventures. Partner with companies who have acreage and prospects in S. Texas, but are reallocating capital to other basins………through farmouts and joint ventures.

29 29 Experience... Focus... Innovation... Technology... Experience... Focus... Innovation... Technology...


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