Transcript Document
Randall & Dewey
A division of Jefferies & Company, Inc.
Member, SIPC
IPAA/COGA – Denver Private Capital Conference
David C. Rockecharlie
Managing Director
August 10, 2006
CONFIDENTIAL
Overview of Randall & Dewey, a division of Jefferies
Jefferies was voted 2005 middle market investment bank of the year
Focused on private companies and middle market public
companies
2,000 employees across 25 offices worldwide
Randall & Dewey is the oil and gas group of Jefferies
Largest E&P team on Wall Street - 125 global E&P professionals
Randall & Dewey serves the entire E&P market
Work with E&P startups
the Majors
$15 billion in M&A transactions
$5 billion in public and private financing transactions
Deal sizes from $2 million to $2+ billion
Advisor on nearly 50% of U.S. MA&D transaction volume
2
Selected R&D Transactions
M&A
November 2005
Sale of Denver Julesburg Basin
Assets acquired by
Transaction Advisor to the Seller
May 2006
December 2005
has been acquired by
has been acquired by
June 2006
Pending
has been acquired by
has been acquired by
$2,450,000,000
$750,000,000
$1,246,000,000
Financial Advisor to the Seller
Financial Advisor to the Seller
Financial Advisor to the Seller
$2,200,000,000
Financial Advisor to the Seller
Capital Markets
December 2005
November 2005
December
July 2006
January 2006
July 2006
W T FFSHORE
I
N
C
O
R
P
O
R
A
T
E
D
Sale of Royalty Interests in Brea Olinda Field
$250,000,000
Senior Secured Notes Offering
Sole Placement Agent
$81,250,000
$100,500,000
Follow-on
Offering
Public
Equity
Offering
Co-Manager Manager
Sole Book-Running
$49,750,000
Financial Advisor to the Seller
$50,000,000
$276,250,000
Convertible Notes
Sole Manager
Follow-on Equity Offering
Joint Bookrunner
3
State of the Energy Market…
Newton Discovers the Theory of Commodity Prices
4
Preliminary Term Sheet
Cost of Capital
How does L – 200 sound?
Secured by Assets
As long as they aren’t my
assets
Equity Dilution
I like owning 100% of my
company
Gives you Credit for Current
Commodity Prices
The forward curve is
conservative in my opinion
Gives you Credit for Upside
Potential
Pay me for 3P (and some
more)
Structural Flexibility
Yes, please
Investment Time Horizon
Call my grandchildren
Capital Commitment
Back up the truck
Time to Close
Yesterday
5
An Abundance of Capital Sources
Commercial Banks
Utilities
Mezz Funds
MLPs/LLCs
Private Equity
Pension Funds
Venture Capital
High Net-Worth Individuals
Royalty Funds
Large-Cap Industry Players (CVX,
Hedge Funds
Insurance Funds
Municipals
End-user Industrials
RD, CHK, etc.)
Traditional Public Markets (NYSE,
NASDAQ, AMEX, LSE)
Emerging Public Markets (AIM, TSE,
Dubai)
6
7
Traditional Corporate Finance Alternatives Were
Easily Classified…
Traditional Debt Alternatives
Bank
Debt
High
Yield
Mezz.
Convert.
Debt
Traditional Equity Alternatives
Public
Equity
PIPE
Structured Financing
Alternatives
Private
Equity
VPP
Royalty
Sale
Cost of Capital
(Relative)
Low
Mid
High
High
Mid
High
High
Low
Low
Secured by
Assets
Yes
Yes / No
Yes
No
No
No
No
Yes
No
Current
Commodity
Prices
No
No
No
Some
Some
Some
Some
Yes
Yes
Exploration
Credit
No
No
No
Some
Yes
Yes
Yes
No
Some
8
The Increasing Gray Area…Create Order From
Chaos
Risk Profile
Cost of
Capital
Proved Reserves (Engineering Risk)
3P Reserves (Geological Risk)
Low
Bank Debt
High
VPP
Royalty
Sale
High Yield
Convertible
Debt
Mezzanine
Debt
Public Equity
Private Equity
Lines are starting to blur as financial instruments are being
structured in unique ways to take on new characteristics
Warrants coverage
Pref. Rights
Participating interest rates
(pegged to commodity prices,
dividends, etc.)
Ultra Short/Long Maturities
Security
Covenants
Convertible Features
Increasing Risk Profile
Amortization / Bullet / Zero
9
The Elegant Solution is not Always Apparent
Equity dilution vs. operational
control?
Cost of Capital?
Leverage against my
assets?
Gives me credit for
today’s commodity prices?
Values my upside
potential?
Structural Flexibility?
Einstein develops his theory of negativity.
10
Case Studies:
Solving the Puzzle
Blacksand Energy
In early 2005, Blacksand Energy undertook a recapitalization of the
Company
Key considerations for Blacksand’s management team:
Provide growth platform
Align asset characteristics with new capital structure
Increase equity ownership
Maintain operating control
Explored range of alternatives to find the right solution
Results
Management nearly doubled equity stake in company
Secured commitments of $250MM in debt and $50MM in equity
from strong partners
Executed on acquisition and divestiture plan
Sold Company in ideal commodity price/capital markets environment
12
Blacksand Energy: Solving the Puzzle
Acquisition of Assets
Management Equity
Recapitalization
Buyout Partner
Monetization
Royalty Sale 1
Private Equity
Bank Debt Sub Debt Private Equity Hedge
Royalty Sale 2
Growth
Offset Acquisition
Exit = $
Sale to recent IPO Company
13
Other Creative Financing Case Studies
High Yield Debt
with Warrants
Recap + Development Capital
Long-Term VPP
Acquisition of BP San Juan Assets
High Yield/Private
Equity/Hedges
Structured acquisition of
Belden & Blake
Leveraged Recap/
VPP
Recap + Acquisition and
Development Capital
Convertible Debt
Bank Debt
Warrant Exercise
Development Capital
Financing S. Louisiana Asset
Purchase
14