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Petroleum Equipment Supply Association Annual Meeting 2013
“Stability in Our Energy Future –
The Role of MLP’s and Private Equity”
Mark A. Houser President and CEO Executive VP and COO EV Energy Partners, LP EnerVest, Ltd.
Overview of EnerVest, Ltd.
20 Years in Business ◊ Private equity business
Over 30% realized IRR to limited partners in institutional funds
EV Energy Partners, LP ◊ Publicly traded MLP
◊ 26% annualized rate of return since IPO 6.5 years ago
2
EnerVest Institutional Properties
EVEP Properties
Houston Headquarters
21,000 Operated Wells in 14 states 4.6 TCFE 2P Reserves (68% gas) 554 MMCFED 5.5 Million Acres
2013 ◊ Over $3 billion in capital
available for acquisitions
Since 1992 ◊ Over $6.8 billion of
acquisitions
◊ Over $2 billion of divestitures
◊ Over 1,000 wells drilled
Producer Basin Ranking
EnerVest Basin Status
and Producer Rankings
Barnett Shale -#6 producer
Austin Chalk -#1 producer
Ohio -#1 conventional producer
Michigan - #5 producer
Appalachia – Top 10 producer;
#3 conventional
San Juan - #10 producer
US – Top 25 producer
3
10%
7%
61%
8%
14%
Reserves 4.6 Tcfe
Appalachia
Austin Chalk
Barnett Shale
Greater Mid-
Con
Permian/San
Juan
37%
18%
15%
5%
10%
5%
6% 4%
LaborCompressionSWDDownhole repairSurface RepairFuel
4
Capital Expenditures - $541 million
Barnett Shale $209
Austin Chalk $115
Permian $112
Utica/Bakken $57
Greater MidCon $26
Appalachia $22
TOTAL $541
Lease Operating Expenses
- $218 million
2013 Activity
EnerVest Barnett Position
Joint purchases between EVEP/EnerVest Institutional Partnerships totaling > $2.2 billion since December 2010
> 115,000 gross acres ◊ Located primarily in core & combo
areas
◊ Focus shifted to liquids-oriented areas
Reserves ◊ 1,687 Bcfe Proved Reserves
◊ 69% Proved Developed
◊ Net production: ~ 234 MMcfe/d
2013 Plans ◊ $209 million capital budget
◊ 70 gross wells
5
EVEP/EnerVest Acreage
EnerVest Ohio Position
Producing assets acquired in 5 separate transactions since 2003
Over 8,000 gross wells
85 MMcfe/d gross production
Largest Operator in Ohio ◊ 16% of wells
◊ 20% of oil production
◊ 19% of gas production
1.2 mm gross acres
~711,000 net Utica acres ◊ ~386,000 Operated
◊ ~325,000 with CHK
6
Overall Utica Activity
585 total permits issued
273 spud wells
◊ EnerVest has interest in ~100 wells
◊ 77 producing wells
EnerVest Institutional GP
Large institutions seeking
growth-oriented equity returns
Semi-mature property focus
Buy, fix up and sell mentality
EnerVest Operating Manages all upstream activities for EnerVest Companies
EnerVest Ltd.
EVEP
EnerVest Operating
EIGP
EV Energy Partners
Retail and institutional investors seeking yield oriented returns
Mature Property focus
The EnerVest Family
7
EnerVest Private Equity Fund Growth
8
0
200
400
600
800
1000
1200
1400
1600
1800
2000
$ M
illi
on
s
Various
1994 - 1999
1
Fund IX
2001
11
Fund X
2005
40
Fund VIII
1998
6
GE
Non GE
Fund XI
2006/2007
75
Fund
Year(s)
# of Investors
Fund XII
2010
113
Fund XIII
2012/2013
141
EVEP – Upstream MLP Overview
Created in September 2006
GP Ownership ◊ EnerVest & Management (76.25%)
◊ EnCap (23.75%)
42.6 million outstanding units ◊ $3.1 billion enterprise value
Current yield of 5.7%
Solid returns since IPO ◊ Total return 256%
◊ Compound annual rate of return 26%
9
Note: Current yield based on $0.767/unit 4Q12 distribution paid on Feb. 14, 2013. Unit price as of Mar. 22, 2013 and AMZX as of Mar. 15, 2013.
US Gas Production (lower 48 states)
10
Pro
du
cti
on
(tr
illi
on
cu
bic
feet
per y
ear)
Shale gas represents 34% of US gas production versus 14% 3 years ago & 1% 15 years ago
Source: Raymond James Equity Research 11
Major Oil Growth From New Areas
12
Rapid Growth of NGL Production
Source: Barclays
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2,600
NG
Ls E
xtr
act
ed F
rom
Gas
Pro
cess
ing (
MBbl/d)
70% Growth in 4 years
NG
L’s
Extr
acte
d f
rom
Gas P
rocessin
g (
MBbl/
d)
Shale Plays Have Changed the Oil & Gas Landscape
13
Source: BMO Capital Markets, UT Bureau of Economic Geology
Selected Play
Remaining Locations
Wells/ Year
Implied Years of Drilling
Marcellus 175,000 1,650 100
Eagle Ford 100,000 2,500 40
Barnett 10,000 550 20
Haynesville 50,000 1,000 50
Utica vs. Barnett – A Long Way to Go
0
10,000
20,000
30,000
40,000
50,000
60,000
Wells Drilled To Be Drilled CumulativeProduction (Bcfe)
Resource Potential(Bcfe)
Barnett
Utica
?
14
By any industry measure, the Utica is a very new play, in the early stages of development
The Barnett, by comparison, has been commercially exploited for over 10 years
Source: UT Bureau of Economic Geology, Ohio Department of Natural Resources Note: Cumulative Barnett production from January 2004 through July 2012.
High
Low
Historical U.S. Acquisition Activity
$4 $4.5 $5.2 $5.1
$4.1 $3.9
$5.8
$7.7 $6.9 $6.8
$5.5 $4.4
$9.3 $9.9
$15.7
$23.6
$28.7
$44.5 $44.2
$15.3
$56.3
$54.3
$59
$7
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
$50.0
$55.0
$60.0
$65.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013YTD
A&
D A
sse
t T
ran
sa
cti
on
s (
$ B
illi
on
s)
15
Source: RBC Richardson Barr
Shale Plays – Changing the Acquisition World
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
$50.0
$55.0
$60.0
$65.0
16
Source: EIA, Annual Energy Outlook 2011
A&
D A
sset
Tran
sacti
on
s (
in b
illio
ns)
Source: RBC
US Dry Gas trillion cubic feet per year
Key Players in the Acquisition World
17
Source: RBC Richardson Barr
Private Equity
Private Equity
MLPs
Publics
Publics
Low High
Hig
h
Low
Risk Profile
Resource Play Maturity & Development
17
Mature Assets Increasingly Operated By MLPs
18
Source: BMO Capital Markets
MLP Asset Transactions (2007 – 2012)
19 Source: IHS Herold
2010 marks broad based MLP entry into “shale plays”
Expect increasing divestiture activity in shale plays as E&P corps monetize “tail” production streams to fund drilling programs
Substantial Private Equity Capital ($ in Millions)
Capital Provider/ Financing Funds Fund Size %
Riverstone $6,000
Natural Gas Partners $2,600
Quantum Energy Partners $2,500
EnCap $5,000
First Reserve $1,500
ArcLight Capital Partners $530
Denham Capital Management $750
Kayne Anderson $1,600
White Deer $750
Limerock Capital $1,400
SFC Energy Partners $596
Yorktown Partners $1,000
Energy Spectrum $450
Various other funds $1,000
$25,676 79%
Operating Companies
EnerVest Fund XIII $2,000
Urban Oil and Gas $200
Merit Energy $912
Quantum Resources $1,000
Sheridan Resources $1,800
Limerock Resources $850
$6,762 21%
Total $32,438 100%
20
Including Leverage, over $40 billion of spending power
Large Buyout Shops
(Blackstone, KKR, etc.) represent an additional
~$15 billion of spending power
(1) Estimate 25% of funds will be for the upstream sector
(1)
(1)
(1)
Publics, Majors Continue to be Active Record Activity From Private Equity, MLPs and Non-Traditionals
2012 Market Recap of Buyer’s Focus
21
$17.6
$17.0
$12.6
$7.2
$4.6
$0.8
Publics
Private Equity
Majors / Int'ls
MLPs / Trusts
Non-Traditional
Privates
Publics52%
Majors / Int'ls39%
Private Equity
7%Other2%
Private Equity61%
MLPs / Trusts27%
Non-Traditional
4%Privates3%
Other5%
Source: RBC Richardson Barr internal database. Note: Includes select U.S. onshore transactions of $20+ million since January 1, 2012. *Excludes the Nucor-Encana $3.6 B joint venture transaction.
Demand is ~90% Financial Buyers*
Capex Requires Big Balance Sheets
Resource Plays (oil / liquids)
Conventional (oil and gas)
Res. Plays / JVs
(oil / liquids)
Conventional (oil and gas)
Conventional (gas)
Majors 44%
Growth-Focused Buying Resource
PE and MLPs Buying Conventional
Expanding Service Capabilities in Maturing Plays
Water Handling
Compression
Artificial Lift
Refracs
Infill Drilling
Micro-seismic
Frac Enhancements
Pad Drilling Enhancement
Land Value
Reserves Value
Resource Play Maturity / Development
Gas Plays
Haynesville
Emerging Plays Commercial Development Blow down Assets
Liquids Plays
Barnett
Bakken / Three Forks
Eagle Ford (condensate)
Eagle Ford (oil)
Mississippian
Niobrara
Bone Spring / Avalon
Fayetteville
E. Utica
Hz Wolfcamp
Marcellus Vertical Wolfberry
Cline
Tuscaloosa Marine Shale
ETOF Cotton Valley
22
An Independent’s Perspective
Abundant Commodity Supply will likely limit commodity price growth
Economics will drive drilling more so than land requirements
Unconventional reserves will compete even more with conventional reserves
◊ Water production, compression, artificial lift will increase cost of maturing shale wells
◊ Scale will be increasingly important
◊ Technology advancement will be needed to guide “mature shale development”
◊ “Help us keep these low productivity wells profitable”!!
Urbanization of oil and gas development activities continues
The “food chain” of acquisitions will continue ◊ MLP’s and PE will continue to move into the conventionals and mature shales
23