PennEnergy Resources. DUG East Richard D. Weber Chairman and CEO. June 22, 2016

Transcription

1 PennEnergy Resources DUG East 2016 Richard D. Weber Chairman and CEO June 22, 2016

2 Extending the Core of the Marcellus to the North of Pittsburgh 2016 DUG East

3 PennEnergy Resources Founded in 2011 Rich Weber (Atlas) Greg Muse (Atlas, Marathon) John Johnston (EXCO, EOG) $450+ MM of Equity Commitments EnCap Wells Fargo PER Management 32 hand-picked employees Guided by Core Values Honesty & Integrity Safety & Environmental Stewardship Operational Excellence

4 PennEnergy Resources Operations - Commenced production January Mmcfe/d - 36 horizontal wells producing Land Greater Pittsburgh Metro Area - 79,000 gross acres (74,000 net) - 65% HBP - Average remaining term of 7 years - Average royalty burden 16% (net)

5 Operators in Southwestern PA Key Producers in the Core Marcellus North of Pittsburgh include: - PennEnergy Resources - XTO Energy - Range Resources - Rex Energy SWN CHK RRC RRC CNX PER RICE REX REX GREATER PITTSBURGH METRO AREA CNX CNX EQT EQT SWN RICE CVX CNX VANTAGE EQT Edgemark XTO PER CVX RRC XTO PER PER CNX RRC SNYDER EQT CVX Operator KEY Greater Pittsburgh PER CHK Consol CVX EQT RRC Edgemark EQT REX RICE RRC Snyder Brothers SWN Vantage XTO

6 Stacked Pay Reservoirs in the SW PA Core Upper Devonian Shales Depth Marcellus Depth Utica/ Pt. Pleasant Depth 10,000-11,000

7 PennEnergy uses an integrated approach to define the Core of the Play Geology Reservoir Characterization Production Performance Economics

8 Net Pays Determined from Rock & Petrophysical Analysis Applied to Regional Log Data Core Samples for Reservoir Characterization Integrate Rock Data with Full Suite E-Logs to derive Petrophysical Models Apply Models to Log Database for Net Pay Determination PER B1-2H Beaver Co., PA Upper Devonian Porosity in Organics Marcellus Marcellus SEM Image

9 High TOC s & Porosity (hot colors) in the Marcellus extend from Greene & Washington Counties north through Allegheny, Beaver, Butler & Armstrong Counties Greene S. Washington Washington PER Beaver W Butler A A A B Wet Gas Greene S. Washington PER Butler Co PER Armstrong Co N Armstrong A B B B Dry Gas

10 Resulting Net Pay and Gas-in-Place maps indicate the Core of the Marcellus extends across PennEnergy s acreage PER Acreage Net Marcellus Thickness C.I.= 5 GIP Marcellus BCF/section

11 Marcellus EUR BCFE/1000 Derived from Decline Curve Analysis of over 3,000 Marcellus Horizontal Wells Early wells in play account for many of lower performers Production matches well with Net Pay and GIP Greater Pittsburgh Metro Area Pittsburgh, City of Champions, can claim another title: More natural gas reserves than any other city in the World! BCFE/1000 > +

12 Net Pay analysis demonstrates that the Core of the Upper Devonian (Middlesex, Genesee, Burkett) extends through PennEnergy s Beaver County acreage - Additional contribution from Genesee & Middlesex members appears critical - Production results in Core area similar to Marcellus; confirmed in PER Beaver County Upper Devonian wells C Greene Washington Washington Beaver Butler Middlesex C C Genesee Burkett C Net Pay Upper Devonian

13 Utica/Pt. Pleasant Potential Proprietary seismic and amplitude modeling indicates increased Pt. Pleasant porosity across the central and southern portions of PennEnergy s acreage. Modeling also shows a decrease in porosity and amplitude of the Utica, thus indicating a potential frac barrier in Utica The structural position and similar amplitude attributes found in the central & southern portions of PennEnergy s acreage are similar to the prolific producing areas from the Pt Pleasant. in Washington and Greene Counties. Zahn #1 in Northern Beaver County (1 st Horizontal Utica well) showed low amplitudes in both the Utica and Pt. Pleasant; indicating a potential northern boundary for prospective Pt. Pleasant. RRC Zahn #1 PER ACREAGE PER

14 Dry Marcellus Production Comparison - Normalized Production Histories of over 500 Marcellus Wells in South (Washington & Greene Cos. PA) & North ( SE Butler, W Armstrong N. Allegheny) Core Areas Comparing South to North Core Areas South (Greene & Washington Cos.) to North (PER & others in SE Butler, W. Armstrong & N. Allegheny Counties ) MCF/1,000 /month for wells with BTU <1100 PER Wells Only - Comparison to South South (Greene & Washington Cos.) to North (PER in SE Butler, W. Armstrong) MCF/1,000 /month for wells with BTU <1100 South - Individual Normalized Well Production South - Average Curve North Average Curve 20 Months 40 South - Individual Normalized Well Production South - Average Curve PER - Average Curve 20 Months 40 PER Dry Gas Completion Design Lateral placement in lower 20 feet of Marcellus 210 ft stage length lbs per foot sand concentration 400,000 gals slick water per stage Initial 60 day drawdown management; Results in lower decline rate and higher EUR due to maintaining fracture conductivity; may cause slightly lower initial rate

15 Wet Marcellus Production Comparison - Normalized Production Histories of 500 Marcellus Wells in South (Washington Co. PA) & North ( E. Beaver & W. Butler) Comparing South to North Core Areas South (Washington Co.) to North (PER & others in E. Beaver & W. Butler Cos. ) PER Wells Only - Comparison to South South (Washington Co.) to North (PER in E. Beaver ) MCF/1,000 for wells with BTU >1250 MCF/1,000 for wells with BTU > Months Months 40 South - Individual Normalized Well Production South - Average Curve North Average Curve South - Individual Normalized Well Production South - Average Curve PER - Average Curve PER Wet Gas Completion Design Lateral placement in lower 20 feet of Marcellus 180 ft stage length 2400 lbs per foot sand concentration 400,000 gals slick water per stage Initial 60 day drawdown management; Results in lower decline rate and higher EUR due to maintaining fracture conductivity; may cause slightly lower Initial rate

16 Example PER Production Histories : Steady, Consistent Rates with Low Declines PER Marcellus Dry Gas Butler/Armstrong Cos. PA Field Average to Date: 2.70 Bcf/1000 PER W73-1H PER W74-4H PER W23-1H Monthly Daily Monthly Daily Monthly Daily PER Marcellus & Upper Devonian Wet Gas Beaver Co.PA Field Average to Date: 2.36 Bcfe/1000 (30 % ethane recovery) PER B1-1H PER B3-1H PER B3-3H Upper Dev Monthly Gas Daily Gas Daily Condensate Monthly Gas Daily Gas Daily Condensate Monthly Gas Daily Gas Daily Condensate PER Reserves reviewed semi-annually by Wright & Co., in addition to Wells Fargo & EnCap

17 EUR Probability Distribution - PER wells compared to SW PA PER field averages exceed P50 in both Wet & Dry Marcellus Dry Gas Wet Gas Dataset comprised of 500+ Marcellus Dry Gas (<1100 btu) wells in Washington & Greene Cos PA Dataset comprised of 500+ Marcellus Wet Gas (>1250 btu) wells in Washington Co. PA EUR s derived from individual Decline Curve Analysis from State Reported Production and lateral lengths

18 PennEnergy Economics Mcf/Month Mcfe/Month Wet Gas Type Curve ROR % at Flat Pricing 1,000, % 10,000 Mcfe 75% 50% % Year 0% $2.00 $2.50 $3.00 $3.50 IRR - Dry Gas IRR - Wet Gas 1 1,000,000 10,000 Dry Gas Type Curve Mcf Area Beaver Clinton/Worthington Gas Type Liquids Rich Dry Gas Formation Marcellus & Upper Devonian Marcellus Average Lateral Length 6,000 6, Total Cost/Lateral Ft $865 $879 Gross F&D Cost $0.40 $ Year Current Strip 33% 39% 1: Condensate $30/bbl; NGLs (C3+) $16/bbl

19 PennEnergy Resource Potential Beaver Area Reservoir Gross Acreage Gas Type EUR/1000 (Bcfe) Actual Laterals Net Reserves (Tcfe) Marcellus, Upper Devonian 36,054 Wet gas Butler/Armstrong Marcellus 42,969 Dry gas PennEnergy Total 79, Note: Utica not included Net Reserves are to PER Net Revenue Interest

20 Market Optionality

21 All-In $/Ft Top Tier Operator $1,000 Well Cost Comparison $950 Average $910/Ft $900 $850 $800 $750 RRC PER REX EQT RICE ANTERO COG SWN $/1,000' $819 $872 $883 $900 $925 $944 $957 $980 Average Well Cost $5,630 $5,234 $5,300 $6,300 $7,585 $8,500 $6,700 $7,350 Average Lateral Length $/1,000' Source: Operator data from latest Investor Presentation as of June 15, 2016

22 Best in Class Environmental Performance PennEnergy s Violations have resulted in $0 in Fines P A D E P I n s p e c t i o n s & V i o l a t i o n s f r o m 1 / 1 / / 3 1 / Unconventional Operations Only PER Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 # Inspections Total Violations % of Violations 0.4% 3.7% 2.3% 3.0% 3.1% 1.2% 1.5% # of Wells Inspected Inspections/Well NOTE: UNCONVENTIONAL WELLS ONLY; SOURCE:

23 Extending the Core of the Marcellus to the North of Pittsburgh Presentation available at DUG East