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Perfecting the Search for Drilling Capital Leslie Haines Editor-in-chief Oil and Gas Investor

This comprehensive guide from Oil and Gas Investor delves into the strategies for sourcing drilling capital in the energy sector, focusing on growth, flexibility, and financial structuring. Learn about funding alternatives, financing avenues, and the key elements investors seek for successful partnerships.

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Perfecting the Search for Drilling Capital Leslie Haines Editor-in-chief Oil and Gas Investor

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  1. Perfecting the Search for Drilling Capital Leslie Haines Editor-in-chief Oil and Gas Investor AAPG Annual Convention DPA Luncheon Speaker April 2006

  2. Why use outside capital? • Speedier growth • Flexibility • Better deal flow/more contacts • Access to other $ sources • Outsourced CFO • Identify strategies-- Sounding board • Negotiation • Tax advantages if LP or LLC • Credibility

  3. Perfecting the Search 4 Themes: • How much is available? • Where do you find it? • What structures are possible? • E&P Success stories

  4. $ Makes the World Go Around Between Private Equity, Mezzanine Funds & Hedge funds, $8.5 Billion raised in last 2 years!

  5. New Capital

  6. New Capital

  7. New Capital Source: Oil and Gas Investor This Week

  8. The Capital Pyramid Tier 1: Institutional Aggregators General/Specific Tier 2: Institutional Investors Pensions, Endowments, Ins. Cos. Financial Corp. Industry Corp. Tier 3: Individual Aggregators Mutual Funds, Hedge Funds, Family Offices Tier 4: Individual Investors High Net Worth “Angels” Source: COSCO Capital Management LLC

  9. Financing Alternatives • for Early Stage or Private Company • For Leasing/Seismic/Drilling: • Affluent individuals/Angels • Industry partners • Prospect brokers • For Acquisition & Follow-on Drilling: • Volumetric Production Payments (VPP) • Bank Debt • Mezzanine Debt • Private Equity • Joint Ventures

  10. Alternatives for Growth Stage • (Private or Public) • Private placements • Bank Debt • Notes/Debentures • 144A Equity or Debt • IPO • Sale of Company

  11. Sell and restart: Laredo Energy & Chesapeake

  12. Where/How do you find it? • Oil and Gas Investor • Oil and Gas Investor This Week • Oil and Gas Finance Sourcebook • Financial Intermediaries

  13. What do investors want? • Strong management team — technical, financial, operational • Track Record: Drilling success & financial value creation • Competitive Advantages: Geographic focus, land position ortechnical niche • Skin in the game

  14. What do investors want? • Drill-bit growth • Acquire and exploit • Management reputation

  15. Path to Success John Doe Partners 1995-97 $2 MM Principals’ sweat equity, angels, industry partners 1998 $1 MM VPP 1998 $5 MM Commercial bank debt 1999 $8 MM Property-level JV w/ a fund 2000 $12 MM Private equity from a fund 2001 $15 MM Project debt from fund 2003 $38 MM Sale to public E&P 2004 $10 MM Start over!

  16. Some Recent Investments

  17. Some Recent Investments

  18. Some Recent Investments Source: Oil and Gas Investor This Week

  19. Capital Providers are eager to hear your story • Execution is more important than strategy • Return is more important than growth • Dollars are better than barrels

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