Transcript Slide 1
CRIMSON EXPLORATION INC. Johnson Rice 2008 Emerging Growth Energy Conference Houston, TX January 23, 2008 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Certain statements included in this presentation are "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Crimson Exploration Inc. (“Crimson” or “the Company”) cautions that strategic plans, assumptions, expectations, objectives for future operations, projections, intentions, or beliefs about future events may, and often do, vary from actual results and the differences can be material. Some of the key factors which could cause actual results to vary from those Crimson expects include changes in natural gas and oil prices, the timing of planned capital expenditures, availability of acquisitions, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as the Company’s ability to access them, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting Crimson’s business. Statements regarding future production are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to, inflation or lack of availability of goods and services, environmental risks, drilling risks and regulatory changes and the potential lack of capital resources. The SEC has generally permitted oil and gas companies, in filings made with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. The Company and its independent third party reservoir engineers use the terms “probable” and “possible” to describe volumes of reserves potentially recoverable through additional drilling or recovery techniques that the SEC's guidelines may prohibit the Company from including in filings with the SEC. These estimates are by their nature more speculative than estimates of proved reserves and accordingly are subject to substantially greater risk of being actually realized by the Company. All estimates of probable reserves in this presentation have been prepared by independent third party engineers. More information about the risks and uncertainties relating to Crimson’s forward-looking statements are found in the Company’s SEC filings. 2 COMPANY PROFILE Corporate Overview NASDAQ bulletin board (TK: CXPO) EV – approx $390MM; Fully-diluted equity cap of approx $130 million (com & pref) Oaktree Capital Management as equity sponsor Producing assets focused in South Texas / Texas Gulf Coast & South LA Emerging plays in the DJ Basin, FW Barnett Shale and West Texas Barnett Shale $289.5MM acquisition from EXCO Resources, Inc. in May 2007 Pro Forma 2006 EBITDAX of $166 million 95 bcfe of proved reserves; 236 bcfe 3P (unrisked); 100+ drilling locations >83,000 gross acres in prolific producing trends; 255 producing wells Management familiarity with assets Pro forma proved reserves of 141 Bcfe @ 1/1/07 79% proved developed; 84% natural gas; 6.8 year proved reserve life ~80% operated; ~70% average working interest Approx 50 mmcfe/d current production (December 2007) 3 COMPANY HISTORY 2000 – 2001 2002 – Gulf West Energy, predecessor to Crimson, obtains funding from Aquila Energy Capital – buys Colorado, South Texas, and Grand Lake/Lacassine properties Aquila Energy Capital withdraws funding – merchant banking meltdown 2004 2005 No capital for development/exploration December 2004 – in desperate financial state Oaktree Capital acquires stake though preferred equity infusion (Feb) CEO Allan Keel and CFO Joseph Grady join Company in connection with Oaktree recapitalization (Feb) Expansion of management team Reincorporated in Delaware – renamed Crimson Exploration Inc. (June) 2006 Evaluated/pursued approximately $3B in various acquisition opportunities 2007 Announces acquisition of assets from EXCO (May) Future 3-prong strategy of acquisition, exploitation, and exploration 4 AREAS OF OPERATION (proforma for EXCO Property Acquisition in 5/2007) ($ in millions) Colorado Total Proved Reserves (Bcfe): % Gas: 84% Production (MMcfe/d)1: 56.7 Strip PV-10%: $567 Reserve Life (Years): 6.8x 3P Reserves (Bcfe): Proved Reserves (Bcfe): 141.4 % Gas: 75% Production DJ BASIN 7.9 (MMcfe/d)1: Strip PV-10%: 0.7 $24 3P Reserves (Bcfe): 7.9 281.6 BARNETT SHALE WEST TEXAS GULF COAST SOUTH TEXAS Texas Proved Reserves (Bcfe): % Gas: Production Note: (1) Louisiana 116.1 87% (MMcfe/d)1: 46.5 Proved Reserves (Bcfe): 17.1 % Gas: 47% Production (MMcfe/d)1: 9.4 Strip PV-10%: $464 Strip PV-10%: $78 3P Reserves (Bcfe): 256.3 3P Reserves (Bcfe): 17.1 Proved reserves as of December 31, 2006 and are third party engineered. 3P reserves only include the EXCO assets’ unrisked probable and possible reserves per Crimson management. Strip PV-10% as of May 8, 2007. Based on average daily production in January 2007. 5 PROVED RESERVE DISTRIBUTION – 1/1/07 (proforma for EXCO property acquisition in 5/2007) Pro Forma Reserves by Category Pro Forma PV-10% by Category (1) PUD 13% PUD 21% PDNP 14% PDP 54% PDNP 25% PDP 73% Pro Forma Reserves by Region Pro Forma PV-10% by Region (1) Louisiana 12% Colorado 6% Louisiana 14% Colorado 4% Texas 82% 141 Bcfe (1) Texas 82% $567 MM PV-10% Pre-tax figure based on proved reserves and NYMEX strip as of May 8, 2007. 6 MANAGEMENT TEAM NAME AND TITLE Allan D. Keel President, CEO, Director EXP. >25 EXPERIENCE E. Joseph Grady SVP, CFO >30 Jay S. Mengle SVP, Operations & Engineering >25 Tracy Price SVP, Land & Business Development >25 Thomas H. Atkins SVP, Exploration >25 VP/GM Westport Resources, President/COO Mariner Energy & Woodside Energy (USA) Energen CFO - Texas Petrochemicals Holdings, Inc. CFO - Forcenergy, Inc. & Pelto Oil Company Deloitte & Touche Shelf Asset Manager – GOM for Kerr-McGee Senior management roles at Norcen Explorer and Westport Resources SVP – Land / Business Development at Houston Exploration Manager of Land / Business Development of Newfield Exploration Land Manager for Apache Corporation General Manager – GOM for Newfield Exploration Exploration Manager for EOG Resources 7 BOARD OF DIRECTORS NAME AND TITLE EXPERIENCE Allan D. Keel President, CEO, Director Above Lee B. Backsen Continental Land & Fur Co. and Grant Geophysical Senior exploration management positions with Burlington Resources, UMC Petroleum, General Atlantic Gulf Coast, Kerr-McGee, Pelto Oil Co., Spectrum Oil and Gas Co. and Shell Oil Co. Skardon F. Baker Senior Vice President, Oaktree Capital Management B. James Ford Managing Director, Oaktree Capital Management Lon McCain Joined Crimson’s board in February 2005 JP Morgan Investment Banking Vice President in JP Morgan’s M&A group Director of EXCO Resources, Inc. ,Cequel Communications, Trenton Media and Red Technology Alliance Consultant with McKinsey & Co Director of Continental Resources, Inc. and Cheniere Energy Inc. Previous CFO of Westport Resources Corporation Principal of Petrie Parkman & Co. Senior financial management positions with Presidio Oil Co., Petro-Lewis Corporation and Ceres Capital 8 ORGANIZATION SUMMARY Administrative Exploration Land Production Total Pre-EXCO Headcount 8 2 4 3 17 Recent Open Fully-Staffed Hires Positions Headcount 6 8 22 7 1 10 5 1 10 14 1 18 32 11 60 9 FELICIA FIELD AREA Area of Operations Highlights Field Overview Legacy Westport Resources property 21,658 gross / 12,910 net acres Felicia (Liberty County) Yegua, Cook Mountain, Wilcox and Vicksburg reservoirs (9,000’ to 15,000’) Well defined hydrocarbon traps Five 3-D surveys total over 500 sq miles within immediate trend Upside Potential Field Summary Probable & Possible Reserves: ~72 Bcfe 30 amplitude related prospects (3 PUD, 10 Prob, 17 Poss) 30.0 Abandonment pressure could add as much as 25 Bcfe (net) % Gas 85% 2007 Actual & 2008 Plans % PDP 96% Operators Crimson/Cimarex/Edge Working Interest Proved Reserves (Bcfe) – 1/1/07 10 - 75% Producing Wells 23 12/07 Production (MMcfe/d) 18.4 2007: Drilled 4 successful wells out of 5 total 2008: Drill 10 gross wells total (costs: 8/8) 10 (6.1 Net) exploitation wells: ~$3.5MM to drill, ~$5MM to D&C 10 CAGE RANCH FIELD AREA Area of Operations Highlights Field Overview Cage Ranch (Brooks County) Legacy Westport Resources property 18,623 gross acres / 15,168 net acres Frio and Vicksburg reservoirs (8,500’ to 12,000’) Highly faulted structural traps Upside Potential Field Summary Operators Ten 3-D seismic surveys covering 176 square miles of outlined area Crimson/CHK/El Paso/Forest PUD Reserves: ~13 Bcfe Working Interest 85% Probable & Possible Reserves: ~14 Bcfe Proved Reserves (Bcfe) -1/1/07 28.0 Identification of additional shallow Frio oil traps % Gas 94% Evaluation of Deeper Vicksburg sands below existing production % PDP 24% Producing Wells 43 12/07 Production (MMcfe/d) 2.9 2008 Plans Drill 4 gross wells total (costs: 8/8) 2 (1.9 Net) PUDs: ~$2.0MM to drill, ~$2.7MM to D&C 2 (2 Net) exploitation: ~$2.0MM to drill, ~$2.5MM to D&C 11 SW SPEAKS FIELD AREA Area of Operations Highlights Field Overview Speaks (Lavaca County) Legacy Westport Resources property 10,987 gross / 5,861 net acres Miocene to Deep Wilcox reservoirs (2,000’ to 17,000’) Upside Potential PUD Reserves: ~8 Bcfe Probable & Possible Reserves: ~42 Bcfe 26 identified drilling locations Multiple behind pipe opportunities Field Summary Operators Crimson/El Paso/XTO Working Interest 35% Proved Reserves (Bcfe) -1/1/07 21.0 2007 Actual & 2008 Plans % Gas 97% 2007: Drilled 1 successful well out of 1 total % PDP 58% 2008: Drill 5 gross wells total (costs: 8/8) Producing Wells 24 12/07 Production (MMcfe/d) 2.7 4 (1.3 Net) PUDs: ~$4.0MM to drill, ~$6.0MM to D&C 1 (0.8 Net) exploitation: ~$4.0MM to drill, ~$6.0MM to D&C 12 STX – LOBO Area of Operations Highlights Field Overview STX – Lobo (Zapata & Webb Counties) Non Operated Joint Venture Lower Wilcox Lobo 2,800 Gross Acres/ 550 Net Acres Well defined Hydrocarbon System High Probability of Success Upside Potential Field Summary Operators Paloma/CHK/El Paso/Forest Mulitiple Pays, Complex Geology 2007 Actual & 2008 Plans Working Interest 20-24% Proved Reserves (Bcfe) -1/1/07 0.0 2007: Drilled 6 successful wells out of 9 total % Gas 100 2008: Drill 9 gross wells total (costs: 8/8) % PDP N/A 12/07 Production (MMcfe/d) 1.6 9 (2.0 net) Exploration wells: ~$1.6MM to drill, ~$2.7MM to D&C 13 DJ BASIN Area of Operations Highlights Field Overview 14,000 gross / 10,000 net acres Acquired in 2000 with Aquila Energy Capital financing DJ Basin (Colorado) Two development wells drilled in 2006, adding net production of approximately 368 Mcfe/d Long-life reserves; 32 producing wells Upside Potential Field Summary PUD Reserves: ~3 Bcfe Operators Crimson/Anadarko/EnCana/Forest Probable & Possible Reserves: ~7 Bcfe Working Interest 70 - 92% 42 identified drilling locations 8.0 Proved Reserves (Bcfe) – 1/1/07 Further potential evaluation in Niobrara, Codell and deeper formations % Gas 75% % PDP 52% 2008 Plans Producing Wells 32 12/07 Production (MMcfe/d) 0.7 Drill 10 gross wells total (costs: 8/8) 5 (3.5 Net) PUDs: ~$0.5MM to drill, ~$0.6MM to D&C 5 (3.4 Net) exploitation: ~$0.5MM to drill, ~$0.6MM to D&C 14 BARNETT SHALE Ft. Worth Barnett Shale Joint Venture Approximate 10, 500 gross acreage position in Tarrant / Johnson counties (core area) Offset operators include Chesapeake Energy, EOG Resources, etc. 12.5% WI (non-operated) 2007 Actual & 2008 Plans 2007: Drilled 7 of 7 wells 2008: None Announced proposed sale in 1Q:08 – approximately $30MM ; 2.5 – 3x return Ft. Worth Barnett Shale (Johnson and Tarrant Counties) 15 WEST TX BARNETT/WOODFORD SHALE Culberson County, TX SOUTHWESTERN LOCATION HALLWOOD LOCATION ENCANA TD 13,500’ ENCANA TD 11,000’ NRI: 77% SOUTHWESTERN TESTING ENCANA TD 11,000’ ENCANA TD 11,000’ BULLD OG TD 14,775’ HUDSPETH PETRO-HUNT DRILLING CXP ACREAGE WI: 100% PETROHUNT DRILLING EOG TD 9,100’ 2 LOCATIONS SOUTHWESTE RN ACREAGE CRIMSON 24,000 ACRES HALLWOOD LOCATION MATADOR LEASES CONCHO TD 11,900’ RANGE LOCATIO N EXPIRY: 2010 HALLWOOD DRILLING BURLINGTON TD 13,450’ PETRO-HUNT TD 13,500’ HALLWOOD LOCATION DRILLED WELL CONCHO DRILLING QUICKSILVER LOCATION LOCATION THOMPSON DRILLING DALLAS 2 LOCATIONS QUICKSILVER ACREAGE QUICKSILVER TD 10,368’ JEFF DAVIS 5 MILES 16 CAPITAL EXPENDITURE PROGRAM (Preliminary, subject to Board approval) Estimated 2008 Capex by Region Louisiana Colorado 5% 3% Estimated 2008 Capex by Category Other 1% Lease 8% South Texas 35% East Texas 31% Exploitation 46% SW Central Texas 25% $62.6 million $62.6 million $45 2008E Drilling Capital ($MM) Development (Proved) Exploitation (Prob/Pos s ) Exploration Leas e Acquis itions Total 2008E Drilling Schedule (# Wells) Development Exploitation Exploration Total Development 23% Exploration 23% South Texas Central Texas East Texas 5.3 3.7 8.8 4.0 21.8 5.5 5.1 4.1 0.8 15.5 0.1 18.4 1.1 19.6 6 2 14 22 7 3 5 15 1 10 2 13 Louisiana Colorado Other TOTAL 2008 Unrisked Potential Bcfe (net) (1) 1.3 0.8 2.1 1.8 1.5 3.4 1 6 5 1 2 11 - 0.3 0.3 - 14.3 28.7 14.7 4.8 62.6 22.9 26.6 49.5 21 20 22 63 (1) Excludes: seismic data (~$7.1MM), land delay rentals (~$0.5MM), & non-O&G capex (~$0.3MM). 17 FINANCIAL STRATEGY Maintain conservative financial policy: Maintain manageable debt levels Senior revolver –$200MM borrowing base; $90MM available Second lien facility - $150MM fully drawn; L+575; 5/2012 maturity Excess cash flow, after capital expenditures, for revolver repayment, preserving flexibility Balanced, conservative capital program Borrowing capacity for acquisitions Fund capex from operating cash flow Utilize oil and gas derivatives to limit commodity price downside risk - ~75% Target net debt / EBITDAX ratio under 2.5x Target net debt / proved reserves under $1.80 / Mcfe Target adjusted EBITDAX/interest over 3.5x Low-risk drilling inventory to increase cash flow and asset value, and reduce debt Exploration consists primarily of delineation/step-out drilling in existing, defined producing trends Limited “wildcat” exploration Expand investor base and opportunistically access equity capital for growth Don’t need new equity to reduce debt levels Provide “powder” for future acquisitions Increase liquidity in stock to unlock value 18 TOTAL COMPANY PRODUCTION BY TYPE (MMcfe/d) 19 TOTAL COMPANY PRODUCTION BY CATEGORY (MMcfe/d) 20 REVENUE & EBITDAX 21 BALANCE SHEET Actual (000’s) 12/31/05 Cash /Current Assets Property, Plant & Equipment, net Other Assets Derivative Instruments (Curr & LT) Total Assets $ Notes Payable/Current Debt Other Current Liabilities Long-term Debt Asset Retirement Obligations (Curr & LT) Derivative Instruments (Curr & LT) Equity Total Liabilities & Stockholders’ Equity 12/31/06 9/30//07 5,825 54,223 3,067 63,115 $ 3,532 76,547 1,690 2,934 $ 84,703 $ $ 121 4,626 1,103 1,311 3,149 52,805 $ $ $ 63,115 $ 84,703 $ 91 10,656 8,415 4,215 61,326 $ 40,029 347,223 4,315 4,258 395,825 95 38,255 270,568 7,690 1,582 77,635 $ 395,825 22 ATTRACTIVE VALUATION VS. PEERS CXPO EV @ 9/30/07 ($7.85/share) is pro forma the EXCO acquisition. CXPO* EV @1/16/08 ($12.45/share) is pro forma the EXCO acquisition; assumes all Preferred shares are converted, thus increasing O/S by 5.8MM. PV-10 values and proved reserves as of 12/31/2006 SEC filings. EV based on companies’ 9/30/2007 SEC filings. Source: Fortis Merchant Banking Weekly Market Update (1/7/08) 23 ATTRACTIVE VALUATION VS. PEERS CXPO EV @ 9/30/07 ($7.85/share) & EBITDA is pro forma the EXCO acquisition. CXPO* EV @1/16/08 ($12.45/share) & EBITDA is pro forma the EXCO acquisition. Daily production based on most recent quarter. EBITDA estimates are Thomson FirstCall consensus. EV based on companies’ 9/30/2007 SEC filings. Source: Fortis Merchant Banking Weekly Market Update (1/7/08) 24 SUMMARY Experienced management team – proven track record of growth Low-risk growth potential through significant upside from 3P reserves Inventory of lower risk exploitation and exploration opportunities in the Barnett/Woodford Shale, South Texas Lobo and DJ Basin Visible near-term debt reduction through free cash flow Limited commodity risk due to aggressive hedging program Strong financial partner in Oaktree Capital Prospect generation capability for above-average value creation 25