An Overview of Today s Common Oil and Gas Deals and Agreements

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1 An Overview of Today s Common Oil and Gas Deals and Agreements National Association of Lease & Title Analysts 32 nd Annual Conference Jerris Johnson, Land Manager, Energen - Birmingham, Alabama jerris.johnson@energen.com

2 1962 $1.00 = John F. Kennedy was President Hit Song Sherry by The Four Seasons #1 Movie The Music Man U.S. Population million June 6 Beatles First Recording Session at Abbey Road = $ Donald J. Trump is President (?!) Hit Song Despacito by Luis Fonsi/Daddy Yankee/Justin Bieber #1 Movie Beauty and the Beast (Gross Earning) U.S. Population 319 million 2

3 1962 Produce 7.3 Mbbls/d Consume 10.4 Mbbls/d 900 rigs (1968) Oil = $24/bbl (AFI) Crude oil reserves = 31.3 billion bbls Gasoline = $1.88 (AFI) 12.4 average MPG 2017 Produce 9.2 Mbbls/d Consume 19.6 Mbbls/d 954 rigs (807 HZ) Oil = $49/bbl Crude oil reserves = 35.2 billion bbls Gasoline = $ average MPG 3 Data sources: EIA, Baker Hughes

4 1962 Jersey Standard Vacuum Oil Company 2017 Shell Oil Socal Gulf Oil Texaco British Petroleum Sohio Amoco 4

5 How has the lease title analyst job changed in the past 55 years? How has the landman job changed in the past 55 years? 5

6 Buying oil and gas leases No lease, no grease The bigger the tract, the better State and federal agency oil and gas sales Example: Chevron owns approximately 2 million acres in the Permian Basin, approximately 1.2 million of which are fee minerals. 6

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10 Blackbird Oil will earn Day Tripper s Strawberry Fields lease by drilling a well(s). Typically a set term for when well(s) must be drilled. Day Tripper will normally receive the data from wells drilled. Day Tripper may retain an ORRI and/or carried working interest. Blackbird Oil gains acreage not otherwise available. Day Tripper gains well data and free production and revenue. Farmout agreement, joint operating agreement, assignment Day Tripper Blackbird Oil Blackbird Oil Day Tripper 10

11 CWEI Farmout

12 Traditional Growth - Acreage Trade Bulldog and Sun King trade their leasehold. Adding to existing leasehold results in additional locations. Each party has greater control of their destiny. May exclude or include existing wellbores Exchange agreement, assignment, and possibly joint use/operations agreement (if retaining wellbores) Sun King Bulldog Bulldog Sun King 12

13 Acreage Trade with CWEI

14 Term Assignment Assigns OGL(s) for specific term May provide well data May retain ORRI Letter agreement and term assignment Leasehold Acquisition Bungalow Bill Rocky Raccoon Rocky Raccoon Bungalow Bill Purchase all right, title, and interest in the lease(s) Letter agreement and assignment Entity Purchase Entire company is purchased Includes all associated assets Purchase sale agreement 14

15 Entity Purchase of CWEI

16 Traditional Growth - Joint Operations Parties develop the acreage jointly. Working interests often determined by number of acres contributed to the Contract Area. Initial well must be timely drilled. Often either party may propose operations, but only one is designated the Operator. Parties share in costs and production. Penalties if a party does not agree to operation Mutual cooperation is needed for success. Why might parties prefer or not prefer to jointly develop? Sgt. Pepper Billy Shears 16

17 Drilling Joint Venture

18 Well will drill through multiple tracts May be infinite number of mineral and working interest owners in each tract What types of agreements or contracts do we need to drill? Mr. Mustard Mr. Postman Oil and gas leases AND Agreement or consent to pool OR Compulsory pooling (if state allows) OR Production sharing agreement OR Drill as allocation well What is the impact to our jobs in the evolution of drilling conventional, vertical wells to unconventional, horizontal wells? 18

19 Find like-minded individuals Find a sponsor Become a private equity company Buy new and existing assets Put a block together Sell it Celebrate and repeat 19

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21 Rice Energy forms in 2008 by members of Rice family. Received $300 million in funding in 2012 from Natural Gas Partners (NGP). Raised $2.2 billion through debt and equity public markets in Acreage position grew from 90,000 net acres in 2014 to 252,000 acres in June 2017 EQT announces it is acquiring RICE for $6.7 billion (plus $1.5 billion debt) 21

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24 An Industry of Change and Volatility 24

25 Final Thoughts Our industry is moving fast. How do we keep up? Seek efficiency Know the resources available to you. Read and learn. Learn and read. Communicate, communicate, communicate Cultivate a culture that unites all land functions Don t just survive - Thrive! 25