chalker energy partners, lp 2007 ipaa private capital conference houston, texas january 2007
TRANSCRIPT
Chalker Energy Partners, LP
2007 IPAA Private CapitalConference
Houston, TexasJanuary 2007
Background on Chalker?
Chalker I Formed in December 2003
Built an East Texas Focused Company
Exceptional Operational & Geological Team
Total Equity Commitment of $25MM from QEP II
Sold to Forest Oil for $225MM, Closed 3/31/06
Chalker II Up and Running
The Chalker I Team
Alan Smith President & CEO
Tom Campbell EVP & COO
Gary Hall VP – Geoscience
Larry Tolleson VP – Operations
Janie Isbell Sr. Engineering Tech
Gayla Massey Sr. Executive Assistant
Chalker I Strategy
Initially an Acquire/Exploit Approach in Tight Gas Sand Basins
Evolved into Drilling Strategy in East Texas
Focus in Cotton Valley Sands
Utilize Relationships & Local Knowledge to Access Opportunities
Leverage Engineering, Operational & Geological Strengths
Creative Deal Structures
Why Tight Gas Basins & Multiple Pays?
Longer Life Assets with Predictable Reserves
Higher Margin Assets – Lower Operating Costs
Few Dry Holes Drilled – Basin Centered Gas, Stacked Pays
East Texas Stratigraphy
- Rodessa - Cotton Valley A-D Sands
- Pettet - Bossier
- Travis Peak - Cotton Valley Lime
Technology has Enhanced Reserve Recoveries
Focus Areas
South Texas
East Texas
Panhandle4 County
Drilling Area
Chalker I Results
Made 17 Producing Property Acquisitions - $17MM
Acquired 16,000 Net Acres in Cotton Valley - $6MM
Gained Access to Three Drilling Rigs
Drilled 42 Wells, 30 Operated, All Successful
Spent $46MM Through the Drill Bit, Avg F&D $1.40/Mcfe
Lease PositionEast Texas
Production – Base + UpliftActual Results
-
2
4
6
8
10
12
14
16
Jan-05
Feb-05
Mar-05
Apr-05
May-05
Jun-05
Jul-05
Aug-05
Sep-05
Oct-05
Nov-05
Dec-05
Jan-06
Feb-06
Mar-06
(Mm
cfed
)
Base Uplift
1 Rig 3 Rigs
PNP5% PDP
71%
PUD24%
Reserves & Production Summary
4.45.5
4.4 3.93.4 3.8
14.4
10.0
6.4
1Q 2A 3Q 4Q 1Q 2Q 3Q 4Q 1QE
2004 2005 2006
Production
PNP13%
PDP24%
PUD63%
Proved Reserves
2005 YE112.8 Bcfe, 90% Gas
2004 YE15.7 Bcfe, 58% Gas
Chalker I Sale
Proved Up Acreage Thru the Drill Bit Excellent Market Fundamentals Simmons & Griffis Ran a Formal Process Forest Preempted with Signed PSA on 2/9/06 Sales Price - $225MM
Reserve Cost - $2.32/Mcfe (Announced) Production Multiple - $19,900/Mcfed
(Announced) Outstanding Results
ROI – 7.4X IRR – 331%
Lessons Learned
We can Make Money in Up or Down Cycle – Must Adjust Acquisitions & Drilling Allocations
In Drilling Mode, Land Function Highly Critical
Deal Creativity is Very Important
Geographically Focused Asset Base Adds Significant Premium at Exit
Equity Partner Can & Did Add Value in Managing Leverage, Risk Management, Exit Deal Structure & As a Technical Sounding Board
Chalker II Formation & Strategy
Smith is Chairman of Chalker II, Full-Time at Quantum
Doug Krenek Joined Chalker Team, April 1, 2006 as President & CEO
Equity Commitment of $50MM from QEP III, $7MM from Management and Other Investors
Continued Focus in East Texas & Other Tight Gas Basins in Texas
Leverage Off of Technical Knowledge in Focus Areas
Be Opportunistic!
The Chalker II Team
Alan Smith Chairman
Doug Krenek President & CEO
Gary Hall VP – Geoscience
Larry Tolleson VP – Operations
Bill Dukes VP - Land
Janie Isbell Sr. Engineering Technician
Chalker II Update
Closed Two Acquisitions - $50MM
• $45MM Acquisition in Rusk County
• $5MM Acquisition in North Texas
Total Net Acerage – 35,000 Acres
• East Texas – 13,000 Acres
• Houston County – 14,000 Acres
• North Texas – 8,000 Acres
Current Production – 4.5 Mmcfed
Four Rigs Running in East Texas
2007 Drilling Capex - $60MM