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Denali Oil & Gas. Rick Louden President & CEO. Denali Oil & Gas Background. Founded June, 2003 with a $50 million commitment from Quantum Energy Partners, Energy Trust and Walter Oil & Gas. Denali II funding commitment of $50 million in 2006. Focus on S. Texas tight gas below 12,000’

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denali oil gas

Denali Oil & Gas

Rick Louden

President & CEO

denali oil gas background
Denali Oil & GasBackground
  • Founded June, 2003 with a $50 million commitment from Quantum Energy Partners, Energy Trust and Walter Oil & Gas. Denali II funding commitment of $50 million in 2006.
  • Focus on S. Texas tight gas below 12,000’
  • Drilled 17 exploratory wells, 48 development wells, four small acquisitions.
  • Sold assets in 2004 and 2006 in multiple asset sales totaling $230 million.
  • Currently producing 13 Mmcfed.
denali oil gas fields currently producing and fields sold
Denali Oil & GasFields Currently Producingand Fields Sold

South Bearhead

Creek

Rapture

S. Friar Ranch

Robinson Lake

Hardeman Slough

Destino

Finley Webb

Las Hermanitas

La Perla

S. Escobas

Haynes

Exsun

Shivers Deep

Tierra Blanca

Edinburg South

Arrowhead Ranch

denali oil gas investor partners
Denali Oil & GasInvestor Partners

Bring Value to the Table

  • Sounding Board and Brainstorming on key decisions and strategy
  • Financial Expertise and Muscle
  • Financial Strength and Staying Power
slide5

Planning Discussion with

Quantum Energy Partners

denali oil gas business plan
Denali Oil & GasBusiness Plan
  • Primary focus on deep tight gas in South Texas.
  • Create value through exploration and small acquisitions with significant drilling potential.
  • Operate the majority of properties and reserves.
  • Be patient, wait for exceptional opportunities.
denali oil gas business plan7
Denali Oil & GasBusiness Plan

Starting Point Conditions Private Equity Funded Company

  • Target 30%+ IRR and ROI of 3.0+
  • Don’t bet on rising oil and gas prices.
  • Minimize risk.
    • No rank wildcatting.
    • Prudent level of borrowing.
    • Conservative Acquisition analysis assumptions.
denali oil gas strategy
Denali Oil & GasStrategy

…….How do we generate 30%+ IRR and 3.0+ ROI without rising gas prices and without significant risk?

  • Basin Characteristics? Wells with high initial rates and steep declines or wells with moderate initial rates and flatter declines?...........high initial rates generate higher IRR’s despite steeper declines.
  • Exploration or acquisitions?........exploration minimizes upfront capital improving ROI and IRR if success rate is good.
denali oil gas strategy9
Denali Oil & GasStrategy

Continued………..

  • Sell discoveries early or fully develop?.........selling fields early in life after minimum drilling further improves IRR and ROI , but sacrifices a portion of the future present value.
denali oil gas strategy10
Denali Oil & GasStrategy

…….How do we generate 30%+ IRR & 3.0 ROI?

Example: Ten well field, each well costs $4 million and has a PV10 of $6 million and ROI of 2.5.

Capital Sale Value ROI

Land & Seismic $ 1 - -

Drill 3 wells $12 $30 2.5

Drill 7 PUD’s $28 $70 2.5

Total $41 $100 2.44

denali oil gas strategy11
Denali Oil & GasStrategy

…….How do we generate 30%+ IRR& 3.0 ROI?

Example: Ten well field, each well costs $4 million and has a PV10 of $6 million and ROI of 2.5.

Capital Sale Value ROI

Land & Seismic $ 1 - -

Drill 3 wells $12 $30 2.5

Sell 7 PUD’s -- $21 - (at 50% of PV10)

Total $13 $51 3.9

denali oil gas business plan12
Denali Oil & GasBusiness Plan

Starting Point Conditions Private Equity Funded Company

  • Target 30%+ IRR and ROI of 3.0+
  • Don’t bet on rising oil and gas prices.
  • Minimize risk.
    • No rank wildcatting.
    • Prudent level of borrowing.
    • Conservative Acquisition analysis assumptions.
slide13

U.S. Gas Prices

Adjusted for Inflation

1985 - 2009

???

denali oil gas business plan14
Denali Oil & GasBusiness Plan

Minimize Risk

  • Top 10% Technical Team
  • Wait for exceptional opportunities
  • No Rank Wildcatting
  • State of the Art Technologies
slide15

South TexasWells less than 10,000’ deep

Total Wells 361,030

309,919 Wells < 10,000’ TD

slide16

South TexasWells deeper than 13,000’

13,007 Wells > 13,000’ TD

denali oil gas business plan17
Denali Oil & GasBusiness Plan

Minimize Risk

  • Top 10% Technical Team
  • Wait for exceptional opportunities
  • No Rank Wildcatting
  • State of the Art Technologies
denali oil gas results
Denali Oil & GasResults

Denali I (2003 – 2006)

  • Three small acquisitions ($9.1 Million), 4 exploration wells (3 successful and 1 dry hole), 35 development wells.
  • $44 million of investor capital and $15 million debt.
  • Sold in multiple transactions totaling $230 million.
  • IRR = 214%, multiple = 4.5.
denali oil gas20

Denali Oil & Gas

Rick Louden

President & CEO

denali oil gas results21
Denali Oil & GasResults

Denali II (2006 – 2008)

  • One acquisition, 13 exploration wells (6 successful and 7 dry holes), 13 development wells.
  • $64 million of investor capital and $24 million debt.
  • Current proved reserves of 70 Bcfe and probable reserves of 73 Bcfe.
  • 100,000 net undeveloped acres in resource play with acreage going for $250-350 per acre.
denali oil gas22

Denali’s S. Escobas Field

Denali Oil & Gas

Escobas Field

Rick Louden

President & CEO

Fandango field

slide23

Escobas Field89 BCF

Fandango Field429 BCF

denali oil gas26

Denali’s S. Escobas Field

Denali Oil & Gas

Escobas Field

Rick Louden

President & CEO

Fandango field

denali oil gas finding costs
Denali Oil & GasFinding Costs

YearReserve AddsFinding Cost

2003 13 Bcfe $0.67/Mcfe

2004 28 Bcfe $1.06/Mcfe

2005 41 Bcfe $1.24/Mcfe

2006 35 Bcfe $1.08/Mcfe

2007 25 Bcfe $1.00/Mcfe

2008 30 Bcfe$1.44/Mcfe

Total 172 Bcfe $1.17/Mcfe

denali oil gas denali iii
Denali Oil & GasDenali III
  • Same Investor Group.
  • $140 million commitment. Additional capital available for larger acquisition.
  • Exploration and acquisitions with increased focus on identifying acquisitions.
  • Partner with companies who have acreage and prospects in S. Texas, but are reallocating capital to other basins………through farmouts and joint ventures.
experience focus innovation technology
Experience . . . Focus . . . Innovation . . . Technology . . .