overview of mezzanine funded acquisition ipaa – capital conference – denver colorado july 21,...
TRANSCRIPT
OVERVIEW OF MEZZANINE FUNDED ACQUISITION
IPAA – Capital Conference – Denver Colorado July 21, 2008
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Forward Looking Statements
The statements contained in this presentation that are not historical are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements, without limitation, regarding the Company’s expectations, beliefs, intentions or strategies regarding the future. Such forward-looking statements relate to, among other things: (1) the Company’s proposed exploration and drilling operations on its various properties, (2) the expected production and revenue from its various properties, and(3) estimates regarding the reserve potential of its various properties. These statements are qualified by important factors that could cause the Company’s actual results to differ materially from those reflected by the forward-looking statements. Such factors include but are not limited to: (1) the Company’s ability to finance the continued exploration and drilling operations on its various properties, (2) positive confirmation of the reserves, production and operating expenses associated with its various properties; and (3) the general risks associated with oil and gas exploration and development, including those risks and factors described from time to time in the Company’s reports and registration statements filed with the Securities and Exchange Commission, including but not limited to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 filed on March 31, 2008. The Company cautions readers not to place undue reliance on any forward-looking statements. The Company does not undertake, and specifically disclaims any obligation, to update or revise such statements to reflect new circumstances or unanticipated events as they occur.
Wayne P. Hall – Chief Executive Officer & Chairman of the Board
27 years exploration industry experience / Co-founder and President, Hall-Houston Oil Company
(1983)
Don Kirkendall – President
27 years in E&P, gas marketing, gas pipeline industry / Co-founded successful E&P Company
Jim Denny, PE – Chief Operating Officer
PE and Certified Geologist / 35 years energy industry experience / President, CEO of Gulf Energy Management
Harry Lee Stout – Chief Financial Officer & General Counsel
29 years exploration and energy industry experience / Former President of KCS Energy Services, Inc.
Allen McGee – Chief Accounting Officer
35 years energy industry accounting experience / Former Controller for Williams Exploration
Company
PRC Management
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Energy experience with a “common sense” approach
American Stock Exchange: PRC
Common Shares : 36.6 Million
Preferred Shares: 2.47 Million
Share Price (as of 7/9/08): $2.91
Market Cap (as of 7/9/08): $105 Million
Average Daily Volume (3 months): 175,000
Net Daily Production (12/31/07): ~ 400 (boe/day)
Net Daily Production (3/31/08): ~ 550 (boe/day)
Total Debt (3/31/08): $15.7 Million Cash Position: (3/31/08): $14.7 Million
Indices: Russell Micro Cap Index (6/30/08)
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PRC Overview
Company Strategy
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Diversified Portfolio
Geographically and geologically balanced; weighted toward oil
Balancing low risk projects with “higher impact” exploration
Large project areas characterized by repeatable success
Growth Drivers
Multiple project areas under simultaneous development
Doubling of reserves and production
Excellent “upside” potential from:
Multiple secondary oil recovery projects in Williston Basin Cinco Terry Prospect - Permian Basin East Chalkley Field – SW Louisiana
Reserve Summary
91% crude oil
Proved Reserves ~ 2.7 Mmboe
Proved + Probable ~ 10.5 Mmboe
PV-10 Proved Reserves ~ $54 Million
PV-10 Probable Reserves ~ $187 Million
Total PV-10 of 2P Reserves~ $241 Million
R/P ~ 13 years
Reserve by Category
Probable 85%
9.0 Mmboe
PDP 12%
PUD 3%
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Reserve Base Year End 2007
2008 CAPEX – Approx $22.5 million
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In $000’s
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Producing
Williston Basin: North Dakota
Permian Basin: Texas
Offshore: Gulf of Mexico
East Chalkley: Louisiana (Drilled and being completed)
Prospects
Newporte: North Dakota (Drilling)
Chama Basin: New Mexico
Illinois Basin: Kentucky
Properties
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Mezzanine Transaction -
Williston Basin Acquisition
Williston Basin - Opportunity
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Purchase Properties and EOR Projects with 10 Mmboe Potential
Proved Reserves: 1.6 mmboe boe – PV10 $20 million
Probable (Secondary) Reserves: 7.3 mmboe – PV10 $151 million
Estimated CAPEX required to develop: $45 million
Expectation that Secondary Recovery = Primary Production
Williston Basin – Opportunity
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Transaction Details
Privately negotiated transaction
Very well respected operator with history in Williston Basin
150 stripper wells in 15 fields drilled in 1960’s and 1970’s
25 mmboe produced via primary = 10-13% OOIP
Expectation that Secondary Recovery = Primary Production
PRC Before Transaction
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Years in business: One
2006 Sales: $150,000
2006 Production: 20,000 mcf
YE Proved Reserves: $580,000 PV10
YE Cash Position: $15 million
Williston Basin – Obstacles
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Large transaction for PRC
Long term CAPEX commitment of $45 million
Seller: No reserve study
Rudimentary, non GAAP accounting records
Desired “no nonsense”, expeditious transaction
PRC: Needed full understanding of EOR Projects
Confirmation of reserve and production potential
No real financial capability
Williston Basin – Firms Hired
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Cawley Gillespie - Reserves and Engineering
study
Petrie Parkman (Merrill Lynch) – Financial advisor
Malone and Bailey – Field audit, accounting issues
Williston Basin - Solutions
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Mezzanine only real option to close transaction
PSA to mirror financing options / obligations
Petrobridge Investment Management LLC – Lender
o Experienced and grasped upside potential
o Worked quickly to expedite close
o Flexibility after closing transaction
Williston Basin – Deal Structure
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PRC to Seller
$10 million cash
$10 million PRC common stock
$45 million commitment to fund CAPEX over 5 years
Seller to PRC
300 bbl per day “floor” guaranteed to PRC
Deferred purchase price in form of CAPEX commitment
Exploratory AMI covers entire state of North Dakota
Williston Basin – Mezzanine Structure
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Four year term
Assigned an ORRI interest to lender
Secured lien position in properties financed
Normal loan covenants both financial and production
Weekly reporting of activities and bi-weekly conference calls
Funding tranches approved on “project by project” basis
Secondary Recovery Implementation Plan
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Secondary RecoveryRe-pressurize Tertiary Recovery
Unitize Drill New Wells
Year
Field
7.3 Mmbbls Probable
2.2 Mmbbls Proved
Williston Basin – Success to Date
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First field fully into secondary recovery; 600% increase
Second field drilled with first horizontal well turning to sales
Third field scheduled for horizontal drilling Q3 / Q4
Additional exploratory drilling currently underway
PV10 (2P) Reserves of $226 million at YE 2007
PRC North Grano Unit vs. Analog Secondary Recovery Fields
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Months
Percentage Change in Production Since Beginning Injection
17 Bbls/day
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Reserve Class Transition
PUD
PDP
PDP
PDP
Probable Probable
Petro Resources Corporation
Address: 777 Post Oak Blvd Suite 910 Houston, TX 77056Office: 832-369-6986 Fax: 832-369-6992Website: www.petroresourcescorp.comWayne P. Hall – CEO
Donald L. Kirkendall – President
Harry Lee Stout – CFO, General Counsel [email protected]
Jim Denny – COO, PE
Brad Holmes – Investor Relations
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Contact Information