Layne Energy Exec summary

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Layne Energy Project Overview

Phil Winner

Project Overview

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• Agenda – Operations/Overview

• Production • Cost Structure • Business Intelligence “Dashboards”

– Geoscience/Upside Inventory • PDP Reserve “Write-Up” • Resource Mapping • Burgess Sand Reserve additions • Cattleman Sand Discovery and Waterflood • Weiser Shallow Oil Sand Redevelopment • Miss Lime Exploration and Discovery

Operations/Overview

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• Wells – Gas/Oil: 620/31 – Spacing: 160 acres – Disposal: 33 – Potential 160’s: 244

• Reserves (1/31/12) – Gas (Bcf): 22.1 – Oil (Mbo): 66.4 – PV10 ($MM): $31.3

• Net Daily Production – Gas (MMcf): 12.0 – Oil (Bbls): 50.0

• Pipeline – Miles: 750 – Compression HP: 8,000

• Acres – Total: 223,454 – Kansas: 184,191 – Indiana: 39,263

• Headcount – Total: 32 – Denver 6 – Independence 26

6 Miles

Cherryvale

Sycamore

Operations/Overview

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$1,310

$967

$761

$609 $497

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

$/w

ell/

mon

th

Lease Operating Expense

50.1

16.6 16.5 18.5 22.1

0.59 0.40

0

10

20

30

40

50

60

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Reserve Volumes

Gas (Bcf)

Oil (Bcfe @ 6:1)

Bcfe

$86.5

$40.2 $22.4 $28.1 $28.9

$3.3 $2.4

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$0$10$20$30$40$50$60$70$80$90

$100

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Reserve Value (PV10)

GasOil

$MM Gas Price ($/Mcf)

P & L

Production (Bcfe) 4.6 $/Mcfe

Revenue $ 20,388 $ 4.40

EBITDA $ 7,630 $ 1.65

IBT $ 501 $ 0.11

Reduction due to cost controls on compression and chemical

treatments

• LOE reduction • Upward adjustment on PDP • Conventional targets

0

5

10

15

20

25

0

5,000

10,000

15,000

20,000

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Pres

sure

(psi

g)

Rate

(mcf

/d)

Time

Kansas Production by Year Connected

Oil as MCFEColt Gas2011 - 12 Wells2010 - 14 Wells2009 - 18 Wells2008 - 116 Wells2007 - 104 Wells2006 - 154 Wells2005 - 72 Wells2004 - 54 Wells2003 and beforeAverage Line Pressure (psig)

Operations/Overview

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Increase Line Pressure to

Curtail Production During Low Gas Prices

Multi-stage fracs

Single-stage fracs

Multi-stage fracs

Operations/Overview

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$(1,000)

$(500)

$-

$500

$1,000

$1,500

$0.00 $1.00 $2.00 $3.00 $4.00 $5.00

EBITDA

IBT

EBIDA and IBT Gas Price Sensitivity (last 14 months)

EBIT

DA, I

BT

$M

Gas Price ($/Mcf)

Break-even cash flow $2.20/Mcf

Detailed knowledge of cost structure leads to good understanding of profitability

Break-even IBT $3.75/Mcf

Operations/Overview

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• All of Layne’s wells and compressor stations are self reporting on radio-based SCADA system, greatly enhancing operational efficiency

• Data captured on central server • Allows management by exceptions

SCADA remote data collection system

Operations/Overview

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By well

By month

By year

By Pumper

• Layne’s accounting system (Bolo) is interfaced with Tableau to identify areas for improvement or enhancement

Developed custom business intelligence dashboards: • Reduced costs • Streamline decision making

Operations/Overview

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Sort for most profitable wells

Developed custom business intelligence dashboards: • Reduced costs • Streamline decision making

Geoscience/Upside Inventory

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• PDP – Performance shows CGA decline is too steep.

• Probable – CBM: 244 locations on 160 acre spacing (40-60 “A” quality locations). – Miss “Chat” – Mississippian Lime

• Possible – Weiser oil sand, Burgess

Geoscience/Upside Inventory: PDP

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Well Count

Field performance has consistently outperformed

reserve forecasts

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Resource Mapping: Gas in Place

Geoscience/Upside Inventory

Geoscience/Upside Inventory: Burgess Sand Before

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Top of Burgess sand 750 Mcfd 125 Mcfd Top of Burgess

sand

1 Mile

Previously, Burgess Sand wells were completed “topset” so extent of reservoir and reserve potential was unknow

? ?

Geoscience/Upside Inventory Burgess Sand: After

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Top of Burgess sand 750 Mcfd 125 Mcfd

Top Mississippian

72’ of neutron/density x-over in Burgess

26’ of neutron/density x-over in Mississippian

Complete penetration and core in Burgess sand revealed significant reservoir potential and supported significant reserve additions

Geoscience/Upside Inventory: Waterflood

15 0

50

100

150

200

250

300

40 50 60 70 80 90 100

Btax

IRR

Oil Price ($/bbl)

Oil Well Price Sensitivity, Primary Recovery Only

SINGLE WELL ECONOMICS • NPV10 ($M): $87.7 • ROI (disc./undisc.): 1.2/1.6 • CapEx: ($M): $72.0 • Net Reserves (Mbo): 3.4 • F&D ($/Bbl): $22.00 Wells

• Producers: 18 • Injectors: 9

020406080

100120140160180200220240

Daily Oil Volume

16

0

20

40

60

80

100

Primary EUR = 100 Mbo

Secondary + Primary EUR = 270 Mbo (27% Recovery Factor)

170 Mbo incremental

La Fontaine Unit Cattleman Waterflood Av

erag

e an

nual

Bop

d

Forecast Actual

Waterflood Economics • Oil in Place (Mbo): 1.0 • CapEx (M$): $533.7 • Btax IRR: 577% • Disc. ROI: 10.1 • F&D cost($/Bbl): $3.15/Bbl

Geoscience/Upside Inventory: Waterflood

Geoscience/Upside Inventory: Weiser shallow oil sand

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Areas with reported Weiser Production

(stats below are fieldwide, from KGS) Elk City Northeast • Cum 2.2 Mbo / 17.6 MMcf • 15 wells (146 Bo/well) • Lansing / Marmaton

Elk City Field • 178 Mbo / 2,660 MMcf • 79 wells (2,253 Bo/well) • Marmaton / Bartlesville

Sorghum Hollow Field • 1,050 Mbo / 101 MMcf • 144 wells (7,292 Bo/well) • Marmaton / Arbuckle

Wayside-Havana Field • 8,471 Mbo / 5,484 MMcf • 1,311 wells (6,461 Bo/well) • Lansing / Marmaton / Bartlesville /

CBM / Mississippian / Arbuckle

Frasier North & Frasier Fields • 381 Mbo / 3,378 MMcf • 191 wells (1,995 Bo/well) • Lansing / Peru / Marmaton / CBM /

Mississippian

Jefferson-Sycamore Field • 10,034 Mbo / 25,753 MMcf • 1,185 wells (8,468/well) • Marmaton / Bartlesville / CBM /

Arbuckle

Geoscience/Upside Inventory: Weiser shallow oil sand

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Oliver 14G 20 Weiser development and water flood

reactivation

24’ of sand with 25-28% porosity. Average SW for this interval is 46%.

Geoscience/Upside Inventory: Miss Lime

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Approximate relative position of Layne leasehold

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Upside Inventory: Mississippian Lime

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Geoscience: Miss Lime Regional Work to Thin Sections

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23


24


25


26


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170’ of Oil Shows (fluorescence and free oil)


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Miss “Chat” Fluorescence and 10’ oil

saturated core

Miss Lime Fluorescence and 40’ oil

saturated core

Mudlog Microlog

Miss Lime 30’ of Microlog perm in

zone of core and mudlog shows

Miss”Chat” 5’ of Microlog perm in

zone of core and mudlog shows

Miss Lime • Completed in perm zones • IP 45 Bopd, 80% WOR • $250,000 CWC


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White Light UV Light


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White Light UV Light

2393.15’

2393.15’

2393.70’

2393.70’


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Woodford shale • Strong odor, • Strong hotwire show • Excellent RockEval data

Mudlog Microlog


2,550

2,555

2,560

2,565

2,570

2,575

2,580

2,585

2,590

2,595

2,6000 5 10 15 20

Good - Excellent Po Fair 2,550

2,555

2,560

2,565

2,570

2,575

2,580

2,585

2,590

2,595

2,6000 200 400 600 800 1000

Oil (Type II) Gas Mix Oil (Type 0 20 40 60 80 100

2,550

2,555

2,560

2,565

2,570

2,575

2,580

2,585

2,590

2,595

2,6000 2 4 6 8 10 12Total Organic Carbon (wt% HC)

TOC% Carbonate

Upside: Woodford Shale Rock Eval Data

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Hydrogen Index (S2/TOC) Oil Potential S2 (mg HC/g) Total Organic Carbon (wt% HC)

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End

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Layne Energy Exec summary