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A Growth Company IPAA OGIS Small Cap Conference The Ritz-Carlton Palm Beach Manalapan, Florida February 7, 2005.

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Presentation on theme: "A Growth Company IPAA OGIS Small Cap Conference The Ritz-Carlton Palm Beach Manalapan, Florida February 7, 2005."— Presentation transcript:

1 A Growth Company IPAA OGIS Small Cap Conference The Ritz-Carlton Palm Beach Manalapan, Florida February 7, 2005

2 1 Forward-Looking Statements Some statements contained in this presentation are "forward-looking statements". All statements other than statements of historical facts included in this report, including, without limitation, statements regarding planned capital expenditures, the availability of capital resources to fund capital expenditures, estimates of proved reserves, our financial position, business strategy and other plans and objectives for future operations, are forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology like "may," "will," "expect," "intend," "anticipate," "estimate," "continue," "present value," "future" or "reserves" or other variations or comparable terminology. We believe the assumptions and expectations reflected in these forward-looking statements are reasonable. However, we can't give any assurance that our expectations will prove to be correct or that we will be able to take any actions that are presently planned. All of these statements involve assumptions of future events and risks and uncertainties. Risks and uncertainties associated with forward-looking statements include, but are not limited to: fluctuations in prices of oil and gas; future capital requirements and availability of financing; geological concentration of our reserves; risks associated with the drilling of wells; competition; general economic conditions; governmental regulations; potential defaults in the payment of amounts owed to us by purchasers of our production and counterparties to our hedging contracts; and risks of hedging activities. For these and other reasons, actual results may differ materially from those projected or implied. We caution you against putting undue reliance on forward-looking statements or projecting any future results based on such statements.

3 2 Predictable Growth…Through a Proven Strategy Niche Player Acquire & Exploit Growth People - Skill Sets

4 3 Overview Independent, domestic onshore E&P company, established 1979 Publicly traded on the NASDAQ National Market – “PLLL” –Equity market capitalization of approximately $130 million Focused operations in three key areas –The Permian Basin of West Texas and New Mexico –North Texas (Fort Worth Basin) –The Onshore Gulf Coast area of South Texas Substantial and diversified proved reserve base –21.7 MMBOE proved reserves –$266.2 million SEC PV-10 Long life, 18.3 year proved R/P ratio and 13.8 year proved developed R/P ratio

5 4 Investment Considerations Experienced technical team focused on accelerated production growth and reserve development Excellent Industry Peer Comparisons –F&D costs –Full cycle economics Balanced portfolio of long-life, high-quality assets Significant re-investment opportunities in 5 active low-risk oil projects Significant investment opportunities in 4 low-risk, technology-driven gas projects Exposure to high impact exploration projects Technology driven strategy to realize enhanced returns while minimizing risks

6 5 Management Team 130 Years Combined Oil and Gas Experience Larry Oldham President & CEO Don Tiffin, P.E. Chief Operating Officer John Rutherford, CPL Vice President Land & Admin Eric Bayley, P.E. Vice President Corp. Engineering Steve Foster, CPA Chief Financial Officer

7 6 Technical and Operations 125 Years Combined Oil and Gas Experience Jerry Nevans Director Business Development Kerry Meise, P.E. Senior Engineer Mike Moylett Senior Geologist Brian McCurry Manager of Operations Bobby Kuhl Production Superintendent

8 7 PLLL…a Growth Company! 100% Production Reserve Volumes 575% 1,465% Reserve Value Since 2001

9 8 Production Growth... Since ,954 1,868 3,740 GAS 2,450 1,290 Boe per Day OIL Dec 04E 1,834 1,120 62% 38% 65% 35% % 1,490 80% Dec 01

10 9 Reserve Volume Growth... Since GAS MMBoe OIL

11 10 Reserve Value Growth...Since 2001 SEC PV-10 $17 $266 GAS Millions of Dollars OIL

12 Operating Summary

13 12 Areas of Operations Barnett Shale Gas Project Acquired April 2003 Utah Project Acquired June 2002 Fullerton San Andres Andrews Co. Acquired December 2002 New Mexico Abo Gas Project Acquired April 2003 Carm-Ann / N Means Queen Andrews Co. Acquired Oct & Dec 2004 Yegua/Frio Gas Jackson/Wharton Cos. Acquired November 1994 Cook Mountain Gas Liberty Co. Acquired June 2002 Cotton Valley Project Acquired Dec 2003 Diamond M Field Scurry Co. Acquired December 2001 Proved Reserves 21.7 MMBoe 71% Proved Developed 87% of Proved Reserves - Oil assets 90% Operational control SEC PV10 = $266.2 Million R/P Ratio = 18.3 Years

14 13 Reserves and Production by Area 21.7 MMBoe at December 31, MBoepd Current Estimate Proved ReservesDaily Production

15 14 Peer Comparisons Reserve Replacement Costs - $ per BOE Sources: Public company data; Global Upstream Performance Review, 2004, John S. Herold, Inc. and Harrison Lovegrove & Co. Small-cap U.S. average = $10.72

16 15 Peer Comparisons Reserve Replacement Percentage Sources: Public company data; Global Upstream Performance Review, 2004, John S. Herold, Inc. and Harrison Lovegrove & Co. Small-cap U.S. average = 205%

17 16 Peer Comparisons Full-cycle Economics: Per Unit Revenue Less Production Costs (including production related G&A) Divided by 3-Year Reserve Replacement Costs Per Unit Sources: Public company data; Global Upstream Performance Review, 2004, John S. Herold, Inc. and Harrison Lovegrove & Co. Small-cap U.S. average = 211% NM

18 17 Future Growth Exploitation of PUD Reserve Inventory –Fullerton, Diamond M, N. Means Queen and Carm-Ann Projects –2005 Estimated CAPEX - $22.2 million Exploitation of Gas Projects –New Mexico Abo and North Texas Barnett Shale –2005 Estimated CAPEX - $15.4 million Exploration Projects –Utah and East Texas Cotton Valley Reef –2005 Estimated CAPEX - $2.5 million Acquisition Targets –Long-life oil and/or gas reserves (R/P 15) –Low-risk (POS >50%) and low-cost PUD reserves –Accretive to earnings and cash flow –Deal size - $1 million - $100 million

19 Capital Investment Budget – $43.7 Million Risk Dispersion ($Millions) 90% Historic Success Fullerton, Carm-Ann, Diamond M Shallow & Other Infill Drilling & Waterflood Implementation Barnett Shale & New Mexico Gas Extension Wells 70+% Historic Success Cook Mountain & Yegua Extension Wells 100% Historic Success Diamond M Canyon Reef Deepenings & Reactivations New Projects Geographic Dispersion ($Millions) New Projects Barnett Shale New Mexico Abo Gas Cook Mountain & Yegua Fullerton Diamond M Shallow Carm-Ann / N. Means Queen Other Permian Basin Diamond M Canyon

20 19 Areas of Operations Barnett Shale Gas Project Acquired April 2003 Utah Project Acquired June 2002 Fullerton San Andres Andrews Co. Acquired December 2002 New Mexico Abo Gas Project Acquired April 2003 Carm-Ann / N Means Queen Andrews Co. Acquired Oct & Dec 2004 Yegua/Frio Gas Jackson/Wharton Cos. Acquired November 1994 Cook Mountain Gas Liberty Co. Acquired June 2002 Cotton Valley Project Acquired Dec 2003 Diamond M Field Scurry Co. Acquired December 2001

21 20 Fullerton San Andres Project Attributes –3,640 gross acres –San Andres - 4,400' –Immature waterflood –Shallow decline rate –Long reserve life Future Work –2005 budget is $3.7 million 13 new infill wells Waterflood enhancement Exploitation of Clearfork Formation

22 21 Fullerton San Andres Gross Daily Oil Production (Bopd) HistoricalProjection PLLL Acquired Dec PLLL's Net Revenue Interest  71% 80+ workovers & 6 new wells 13 new wells Development response associated with 2003 and 2004 capital activity Projected development response associated with 2005 capital activity

23 22 Diamond M – Canyon Reef Project Attributes –5,500 gross acres –Canyon Reef – 6,500’ –Significant original oil in place –Prolific primary production –Low recovery factor relative to offsets Future Work –2005 budget is $9.4 million 24 well deepenings and recompletions Additional 3D seismic data acquisition 3 infill wells Waterflood enhancement –Tertiary (CO 2 ) enhancement Diamond M 43 Million Bbls RF<30% 1.25 Billion Bbls RF >50% 201 Million Bbls RF>50% SACROC Sharon Ridge

24 23 Diamond M – Canyon Reef Gross Daily Production (Boepd) Development response associated with 2003 and 2004 capital activity Projected development response associated with 2005 capital activity HistoricalProjection PLLL's Net Revenue Interest ≅ 57% 4 workovers & 2 new wells 24 workovers & 3 new wells PLLL Assumed Operations March 2003

25 24 Diamond M Shallow 4.0 Million Bbls Anadarko Activity Project Attributes –2,600 gross productive acres –2,450' - 4,000' –Proven primary well performance –Inefficient waterflood on 20-acre spacing –Demonstrated successful 10-acre waterfloods to north and south Future Work –2005 Budget is $5.0 million 15 infill wells 16 workovers

26 25 Diamond M Shallow Gross Production Curve (Bopd) HistoricalProjection Development response associated with 2003 and 2004 capital activity (excludes flood response) Projected development response associated with 2005 capital activity (excludes flood response) PLLL Assumed Operations March 2003 PLLL's Net Revenue Interest ≅ 57% 11 workovers & 33 new wells 16 workovers & 15 new wells

27 26 Carm-Ann San Andres / N. Means Queen Project Attributes –5,360 gross acres –San Andres - 4,900' 40 acre well spacing on primary depletion –Queen - 4,300' Inefficient abandoned waterflood Future Work –2005 Budget is $4.1 million –San Andres 9 infill wells Stimulation of existing wells Waterflood initiation –Queen 4 infill wells Well reactivation Waterflood redevelopment

28 27 Carm-Ann San Andres / N. Means Queen Gross Daily Production (Boepd) HistoricalProjection PLLL Acquired Oct PLLL's Net Revenue Interest  59% 24 workovers & 13 new wells Projected development response associated with 2005 capital activity

29 28 North Texas Barnett Shale Gas Project Project Attributes –5,000 gross acres; 28-40% working interest –First gas well drilled and awaiting completion –Second well currently drilling –Estimated pay of more than 250 gross feet of Barnett Shale Future Work –2005 budget is $7.6 million 7 horizontal wells Water frac completions Pipeline installation

30 29 Barnett Shale Development – 5 County Area

31 30 North Texas Barnett Shale Gas XTO Energy - Brumbaugh No. 2 Horizontal Well - Average Daily Rate PLLL owns no interest in this property 12 Months Cum 1.36 BCF of gas Initial Potential-7,000 Mcfg per Day

32 31 North Texas Barnett Shale ERATH HOOD JOHNSON PALO PINTO PARKER TARRANT XTO Energy Acquisition of Antero $685 million 440 Bcfe - 41% proved developed 60 MMcfepd - production 61,000 acres Tarrant, Parker & Johnson Counties JACK WISEDENTON MONTAGUE COOKE Ft. Worth Cleburne PLLL Leasehold 5,000 Acres Newark East Field 3,700 wells 1.0 Bcfepd Largest producing gas field in Texas Cleburne Field Chesapeake Acquisition of Hallwood $277 million 135 Bcfe - 15% proved developed 25 MMcfepd - production 18,000 acres Johnson County Recently Announced Acquisitions

33 32 New Mexico Abo Gas Project Project Attributes –Technology driven gas development play –Area ,000 gross acres (4,250 net); 8.5% working interest –Area ,000 gross acres (25,500 net); 85.0% working interest Future Work –2005 Budget is $7.6 million 3 re-entries 6 horizontal wells Fracture stimulation Pipeline installation New Mexico

34 33 Best Vertical Abo Well Initial Rate 1,450 Mcfg per Day 15 Year Cum.78 BCF of gas PLLL owns no interest in this property ( Average Daily Rate

35 34 First Abo Horizontal Producer – Area 1 6 Months Cum.356 BCF of gas Initial Rate 2,300 Mcfg per Day Area 1 - PLLL's Net Revenue Interest ≅ 6.8% Area 2 - PLLL's Net Revenue Interest ≅ 68.0% Average Daily Rate

36 35 Other Projects Utah CBM (Coal Bed Methane) Gas / Conventional Oil & Gas Projects –125,000 gross acres with both shallow gas and oil targets; 100% working interest –First test well expected to spud in first half of 2005 –2005 Budget is $1.4 million East Texas Cotton Valley Reef Gas Project –5,000 gross acres; % working interest –Existing long-life natural gas fields nearby with impressive production histories from similar reef facies –2005 Budget is $1.1 million

37 Financial Overview

38 37 Balance Sheet Data Millions of Dollars

39 38 Statement of Operations Millions of Dollars

40 39 Oil Hedges and Prices 2,450 $30.80 $39.96 $25.56 $30.80 $36.36 $25.56 $34.36 $33.37

41 40 Gas Hedges and Price 7,800 $4.91

42 41 Realized Oil and Gas Prices

43 42 2 Year Stock Performance $13 MM Equity Placement December 23, 2003 Fulcrum Report Sept. 2, 2004 DE Investment Report July 30, 2004 Jefferies Report June 3, 2004 Sterne, Agee & Leach Report Nov. 23, 2004

44 43 Investment Considerations Experienced technical team focused on accelerated production growth and reserve development Excellent Industry Peer Comparisons –F&D costs –Full cycle economics Balanced portfolio of long-life, high-quality assets Significant re-investment opportunities in 5 active low-risk oil projects Significant investment opportunities in 4 low-risk, technology-driven gas projects Exposure to high impact exploration projects Technology driven strategy to realize enhanced returns while minimizing risks

45 44 Corporate Information Cindy Thomason Manager Investor Relations Steve Foster Chief Financial Officer Don Tiffin Chief Operating Officer Larry Oldham President & CEO Web site Common Stock Nasdaq: PLLL Parallel HeadquartersContacts 1004 N. Big Spring, Suite 400 Midland, TX (432)


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