Saratoga Resources.pdf 5321 KB - EnerCom, Inc.

EnerCom’s The Oil & Services ConferenceSan Francisco, February 2013NYSE MKT: SARA Website: www.saratogaresources.com

Safe Harbor StatementCorporate OfficeHouston Office7500 San Felipe, Suite 675Houston, Texas 77063Phone: 713-458-1560Fax: 713-458-1561Transfer AgentSecurities Transfer CorporationLegal CounselSlattery, Marino & RobertsIndependent AuditorsMaloneBailey LLPWebsitewww.saratogaresources.comStock TickerNYSE MKT: SARAThis presentation includes certain estimates and other forward-lookingstatements within the meaning of Section 21E of the Securities ExchangeAct of 1934, as amended, including statements with respect to anticipatedoperating and financial performance, growth opportunities, growth rates,potential acquisition opportunities, and other statements of expectation.Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,”“assumes,” “seeks,” “estimates,” “should,” and variations of these wordsand similar expressions, are intended to identify these forward-lookingstatements. While we believe these statements are accurate, forwardlookingstatements are inherently uncertain and we cannot assure you thatthese expectations will occur and our actual results may be significantlydifferent. These statements by the Company and its management arebased on estimates, projections, beliefs and assumptions of managementand are not guarantees of future performance. Important factors that couldcause actual results to differ from those in the forward-looking statementsinclude the factors described in the “Risk Factors” section of our annualreport on Form 10-K for the year ended December 31, 2011 and otherreports filed by the Company with the SEC. The Company disclaims anyobligation to update or revise any forward-looking statement based on theoccurrence of future events, the receipt of new information, or otherwise.This presentation includes certain non-GAAP financial measures that aredifferent from financial measures calculated in accordance with GAAP andmay be different from similar measures used by other companies.1

Table of ContentsPageCompany Overview ….………………………………………Asset Overview ….………………………………………......Financial Overview …….…………………………………….310252

Company Overview

Company OverviewSaratoga Resources, Inc. is an independent E&P company engaged in the production, development,acquisition and exploitation of crude oil and natural gas properties with assets on state/parishleases in the shallow transition zone in Louisiana state waters• Publicly-traded on NYSE MKT: SARA• $109 MM market capitalization as of12/31/12• 100% WI and operate virtually all wells• 32,119 gross/net acres, all depths, 93%HBPTRANSITIONZONEMainPass/BretonSoundAssets• Water depth: 0 - 20 feet• Average Production (1) :‒ Net: 3,543 Boepd (62% Oil)State Waters3 Mile LimitVermilion16LittleBayGrandBay• Reserves Summary (2) :‒ 1P 19.0 MMBoe, PV-10: $464 MM‒ 2P 31.9 MMBoe, PV-10: $742 MM‒ 3P 65.6 MMBoe, PV-10: $1,354 MM• R/P Ratio: ~15 Years (3)Louisiana(1) Average daily production 12/17/12.(2) Collarini 1/1/12 reserve report using SEC average adjusted pricing of $106.51/Bbl oil, $5.13/Mcf gas.(3) Collarini 1/1/12 SEC 1P reserves divided by average net daily production on 12/17/12.4

Investment ConsiderationsHigh-Quality ResourceBase• Large, diversified reserve base with strong cash flows in the shallow transition zone in the state waters ofLouisiana• 32,119 gross / net acres, all depths, mostly Held by Production (“HBP”)• Net daily production of 3,543 Boepd (1) (62% oil) from 101 wells with 15 years of proved reserve life• High quality Heavy Louisiana Sweet / Light Louisiana Sweet crude prices at a substantial premium to WTI‒ Currently receiving approximately $21/bbl premium in pricingSignificant AssetCoverage• 19.0 MMBoe of proved reserves as of 1/1/12• Using SEC reserves PV-10 of $464.3MM, pro forma net debt will be covered 3.4x by total proved reserves‒ Pro forma net debt will be ~10.0x covered by 3P reserves (2)• Huge upside in exploratory drilling inventory with 50 BCF shallow gas and >10 TCF deep/ultra-deep gasLarge Workover &Drilling Inventory ofProved ReservesControl ofInfrastructure & 3rdParty ProcessingRevenueAcquisitionOpportunity Pipeline• 62 proved workovers/recompletion opportunities and 87 proved undeveloped opportunities in 24 proveddevelopment locations across 12 fields• Near term development capital budget focused on PUD conversion and low-risk recompletions• Six production platforms and over 100 miles of pipelines allow the opportunity to expand through jointventures with nearby producers• Additional revenues from 3rd party handling, processing and contract operations• Accretive “add-on” opportunities nearby existing assets and existing “Hub-and-Spoke” infrastructure• Since 2009, over 175 transactions for $8.5B have occurred in the areas the Company operatesExperiencedManagement Team• Extensive South Louisiana/Gulf Coast operational expertise with particular emphasis on cost-control andreservoir management• Over 100 years of Gulf Coast experience across the management team(1) Average daily production on 12/17/12.(2) Pro-forma net debt totals $136 MM, including $25 MM of notes issued in December 2012.5

Reserves ProfileTotal Reserves (1)65.6 MMBOE, PV10 $1,354 MMProved Reserves (2)19.0 MMBOE, PV10 $464 MMPOSSIBLE$612 MM45%PROVED$464 MM34%PDP$72 MM16%PDBP$57MM12%PDSI$5 MM1%PUD$330MM71%PROBABLE$278 MM21%Not including>8 TCF plus 600 MMBO deep oil/gas or 50 BCF shallow gas potential!(1) Collarini 1/1/2012 reserves using SEC pricing with average benchmark prices of $96.19/Bbl oil, $4.11/MMBtu gas or average realized prices of $106.51/Bbl oil,$5.13/Mcf gas (no escalation); (2) Collarini 1/1/2012 SEC 1P reserves using pricing as per (1).6

Production by FieldHistorical Production thru 12/2012 (1)HurricaneIsaacHurricanesGustav/IkeHurricaneKatrina(1) From Company production reports.7

Commodity MixThe Company is more heavily weighted towards oil as measured by production and revenues...Production by Commodity as of LTM 9/30/12Historical Production1,2001,000Gas41%Oil59%80060040020033%67%40%60%36%64%36%64%41%59%Revenues by Commodity as of LTM 9/30/12-2008 2009 2010 2011 LTM 9/30/12Gas (MBoe) Oil (MBbl)Gas11%Average realized LTM 9/30/12 pricing:‒ Oil: $116.09 per barrel‒ Gas: $3.56 per McfOil89%8

2013 Outlook• Continue Detailed Field Studies:• Grand Bay Field• Detailed sand-by-sand mapping and facies analysis• Integrate new PSDM and reprocessed 3D data• Identify vertical and horizontal well opportunities• Upgrade drilling inventory• Main Pass/Breton Sound fields• Update earlier field studies• Integrate reprocessed 3D data• Identify horizontal well opportunities• Continue Low-Risk, Oil-Prone Infill Drilling Program• Drill More Impactful Wells:• “Develo-Cats” with exploratory tails on infill wells• Horizontal wells with 300-700’ laterals• Pursue Accretive Acquisitions9

Asset Overview

Grand Bay – Long Life Wells• Grand Bay Field was discovered by Gulf Oil in 1938.• Cumulative production of >256.9 MMBOE with 83% Oil versusGas.• Currently producing from 36 wells >40 years old, including 12wells from 1940s/1950s:A29 WELL (1947)CUM. 1.4 MMBOE1A, 4, 19 sands: 1.2 MMBOE 6/47-6/903 sand: 244 MBOE + 254 MBW 9/90-8-9% declineQQ199 WELL (1991)CUM. 0.4 MMBOE7 sand: 0.4 MMBOE + 3.3 MMBW 7/91-PLUS 4, X5, 6B, 8, 8A, X9, 10B/10C,11A/11B SAND BHP’S!12% decline7% declineThere has never been a dry hole drilled at Grand BayField in >70 years!11

QQ199 Example, Grand BayQQ199 WELL (1991)CUM. 0.4 MMBOE7 sand: 0.4 MMBOE + 3.3 MMBW 7/91-Historical Projected34 YearReserveLife12% decline7% decline10 sandsbehind pipein dualstrings12

50 Year Life Wells>50 years of production from one sand!CAMILLENO EFFECTNOT CAUSEDBYHURRICANENOT CAUSEDBYHURRICANEANDREWNO EFFECTOPALNO EFFECTWeatherresistantassets andproduction:ALISONNO EFFECTIVANMINIMALEFFECTKATRINAMINIMALEFFECTKatrina Cat 5 (2005)30 days downtime$5.2 MM damageGustav/Ike (Cat 1) 200818 days downtime$2.0 MM damageIsaac (Cat 1) 201217 days downtime$1.0 MM damage13

Drilling ScheduleFive Year Development Schedule (1)The Company has an extensive drilling inventory including, but not limited to, the following:2012 2013 2014 through 2016DrilledMesa Verde 3763-14 PUDJupiter QQ202 PUDNorth Tiger 20433-1 PUDBuddy QQ209 PUD (2)DrilledRoux Toux QQ25 PUDPlannedDuchess QQ210 PUDWinston QQ189 PUD (2)Zeke 1227-24 PUD (2)Rocky 1227-25 PUD (2)Charlie 1227-26 PUD (2)Lilly A60 Offset PUD (2)GoldeneyeMerganserA120 Updip PUDA191 Twin PUDA192 PUDDP10 PUDDP10 Twin PUDMallardQQ63 UpdipQQ151 UpdipQQ166 Offset PUDQQ196 Offset PUDQQ204 Offset PUDQQ207 Offset PUDQQ215 PUDQQ216 PUDQQ45 Twin DeepQQ Loc BQQ Loc GRedheadTopaz PUDA188 Loc C PUDA189 Loc DAcadia PUDBlackjack PUDBryceCarencroCoquille MonsterDenali PUDDuckpondEast BlackjackLonesome DoveNorth ThorNW Blackjack PUDQQ212RexScooby PUDSE BlackjackSequoia PUDZion PUDCurrentlyunbookedUnscheduled Deep WellsCanvasbackPintailTealWidgeonInvictusLong John SilverZeusOrpheusPoseidonRheaThorUnscheduled Shallow Gas WellsBad BoyBLTCafé O LayCheez WhizChipolataEt-Too-FayKrispy KremeLucky DogOysterPo’ BoyPBJPop TartSalamiSweet PeaT-BoneTwinkieKey (3)Oil WellsGas WellsNew Additions(1) Nominal drilling schedule subject to change depending on commodity pricing, available cash flow, rig availability, weather and substitution of better projects.(2) These wells are candidates for horizontal completions in primary reservoir.(3) Most wells are a mix of oil and gas but the key assumes predominant hydrocarbon type in booked reserves.14

Drilling PerformanceACTUALPLANNEDDrilled last 8 wells on or undertime and budgetGeopressure15

Grand Bay Infill Drilling• SARA has identified several low-risk infilldrilling opportunities in Grand Bay Field.• We expect to identify several more as ourfield study progresses.• Each infill well will typically have between4 to 15 stacked target sands.• The recent QQ #202 “Jupiter” well was anexample of a successful infill well and weplan 2-3 more during 2013.SL 195QQ #202 NuTech Log AnalysisProposed QQ #1894 Sand Targets438 Mboe 2P (73% oil)QQ #166 Offset PUD4 Sand Targets275 Mboe 3P (94% oil)16

QQ #202 “Jupiter” PUD• The SL 195QQ #202 well was completed in 3Q2012 with total Capex of $6.0 MM in thepreviously unbooked 15 Sand.• Example of a “develo-cat” with exploratory tail.• Actual IP rate was 245 Bopd + 650 Mcfpd (net254 Boepd).• Post-job reserves (1) are estimated as 173Mboe (66% oil) for the 15 Sand alone.• Total reserves (1) associated with the QQ #202well are 966 Mboe (85% oil), which have beenallocated to the QQ #202 and QQ #210 wells.QQ #202 LogNuTech Log Analysis(1) Unaudited internal reserve estimates as of 12/2012.17

QQ #209 “Buddy” PUDNuTech Log AnalysisQQ #209 3A Sand Pay SectionIP rate: 275 Bopd, 81 Mcfpd (208 netBoepd), FTP 580#, 19/64” choke• The QQ #209 “Buddy” well was completed in 1Q2013 in the 3A Sand, previously unbooked.• Post-job reserves (1) are estimated as 259 Mboe(95% oil) for the 3A Sand alone.• The well has a 61% increase on SARA’s pre-drillreserves.• Final well costs were significantly under the AFEcost of $4.6 MM.(1) Unaudited internal reserve estimates as of 12/2012.18

De-Risking the GB Deep PlayWell 1:Well 2: Well 2:Step 1 Jupiter Step 2 Duchess or Duchess Step 3QQ-202QQ-210 QQ-210Well 3:ZeusQQ-217orWell 3:ZeusQQ-217QQ-202 well targeted0.7 MMBOE in 8 provedsands plus 1.2 MMBOEin 7 non-proved sands.Completion as dual withLS in 17 sand, SS in 15sand3B17NormallyPressuredPUDReservesPTD 10,000’25Geo-PressuredProbableReservesQQ-210 well willtarget >1.0 MMBOEin Tex W sand plusupside potential in 25thru 30 sands withoffset production andshowsFailing success indeeper targets, QQ-210 will serve as anacceleration well tothe QQ-202 well30Tex WGeo-PressuredPossibleReservesBig HumCris IPTD 16,000’QQ-217 well willtarget 15.5 MMBOEpotential in BigHum/Cris I sandsPTD 20,000’Failing success indeeper targets, QQ-217 will serve as anacceleration well tothe QQ-210 well19

GB Deep OpportunitiesCarencroTealWidgeonLillyMerganserGoldeneyePintailCanvasbackRedheadMallardCC(25 Sd)CC(25 Sd)CC(25 Sd)Uvig3(30 Sd)Uvig3(31B Sd)TealLEGENDUnbooked ProspectTested/Produced OilTex W(43 Sd)Tested/Produced GasPROPRIETARY 3D DATA - PSTM MID OFFSETS20

“North Tiger” PUD, BS-18• The SL 20433 #1 “North Tiger” well was completedin 3Q 2012 with total Capex of $6.9 MM as a dualcompletion with the 7100’ Sand in the short stringand CC Sand in the long string, with both sandsgravel packed.• The well was drilled directionally after encounteringthe 7100’ Sand in order to target previouslyunbooked Cib Carst oil reserves.NORTH TIGERA A’7100’ Sand AmpsArb Line A-A’Seismic data courtesy of SEI21

“North Tiger” PUD, BS-18• Actual combined IP rate for the two sands was 775Bopd + 1.9 MMcfpd (net 840 Boepd).• North Tiger encountered 6 pay sands, two of whichwere not pre-drill targets and encountered more oiland less gas than expected.• Post-job reserves (1) for the well are estimated as 639Mboe (77% oil) 1P and 1079 Mboe (73% oil) 2P.• Current rate (2) is gross 573 Boepd/net 430 Boepd.7100’ Sand - SS CompletionCC Sand - LS Completion(1) Unaudited internal reserve estimates as of 12/2012. (2) Based on test data on 2/7/13 for long string and 2/9/13 for short string.22

“Mesa Verde” Sidetrack, V-16Fina 3762 #8 Future 3763 #14 S/T “Mesa Verde” 3763 #14Cumulative production of 352.9 MMCF, 1.2MBO, 2.1 MBW 11/91-8/92Log analysis:ave = 18%, k ave = 73 md, Sw ave = 34%, Vsh = 5%The 3763 #14 wellencountered a balding effecton the “Mesa Verde”structure with thin MA-4sands almost 200 feet highto the downdip #8 well.The future 3763 #14 sidetrack willtarget the MA-4 sands closer tothe 3762 #8 producer.23

V-16 Ultra-Deep PotentialSaratoga’s Long John Silver Ultra-Deep Prospect lies in the heart of the Lower Wilcox Play FairwayLINEHAMCREEKLower Wilcox Sand FairwayLineham Creek 20571#1 Drilling Ahead>27,400’ with 29,000’PTD~30 MilesLONG JOHNSILVERENGLAND~30 MilesDavy Jones #2AppraisalDavy Jones #1DiscoverySaratoga LeasesMcMoRan LeasesChevron Leases$2.9 MM in bids byChevron/MMR inCGOM Sale 216/222in England prospectDAVY JONESWESTDAVYJONES24

Financial Overview

Hedging Strategy• The Company has hedges in place covering approximately 70% of its current oil production thru 1Q 2013@ average price of $107.83 per barrel on LLS/Brent basis• Hedges in place thru 4Q 2013 @ average price of $107.87 per barrelSaratoga’s strategy is to hedge between 50-70% of its PDP production going forward with a currentemphasis on oil versus gas and will continue to monitor the market and layer in additional hedges witha combination of swaps, collars and other instruments, depending on market conditions.26

Net Production, MBoeRevenues, $MMOil versus Gas MixProduction By Commodity (MBOE)Revenues By Commodity ($MM)1,00090080070060086436%94636%66233%80740%80.070.060.050.0$52.719%$76.214%$53.513%$59.611%50040030020064%64%67%60%40.030.020.081%86%87%89%10010.0-Yr 2010 Yr 2011 YTD9/30/11YTD9/30/12-Yr 2010 Yr 2011 YTD9/30/11YTD9/30/12Oil (Mboe)Gas (Mboe)Oil ($MM)Gas ($MM)Average realized pricing: Yr. 2010 $77.75 oil, $5.27 gas; Yr. 2011 $108.35 oil, $5.16 gas;YTD 3Q11 $105.11 oil, $5.37 gas; YTD 3Q12 $109.04 oil, $3.51 gas27

Cash Cost Per Boe$/BoeCash Cost Per BOEAll-in Cash Cost Per Boe$70.00$60.00$50.00$40.00$57.28$55.18$6.03(11%) $6.44$6.83(12%)(12%) $9.09(16%)$57.45$6.19(11%)$8.65(15%)$52.19$6.66(13%)$7.44(14%)$30.00$25.99(45%)$18.72(34%)$22.76(40%)$16.14(31%)$20.00$10.00$18.43(32%)$20.93(38%)$19.86(35%)$21.94(42%)$-2010 2011 YTDYTD9/30/119/30/12Lease Operating Expense ¹ Interest Expense ² G&A ³ Production & Sev. Taxes(1) Includes Workover Expense of $2.49, $2.82, $0.69 and $4.77 in 2010, 2011, YTD 3Q2011 and YTD3Q2012, respectively.(2) Includes Amort. of Debt Discount of $2.88, $2.35, $2.90 and $1.28 in 2010, 2011, YTD 3Q2011 and YTD 3Q2012, respectively.(3) Includes Financing Expense $0.89 in 2011, Excludes Non-Cash Portion of G&A.28

DCF, $MMDCF / Diluted WA Share$/shareDiscretionary Cash FlowDiscretionary Cash Flow($ in millions)Discretionary Cash Flow Per Diluted WA Common ShareOutstanding($/share)$35.0$30.0$25.0$30.1$27.7$26.7$1.40$1.20$1.00$1.35 $1.36$0.93$20.0$0.80$15.0$10.0$6.2$0.60$0.40$0.36$5.0$0.20$-2010 2011 LTM9/30/11LTM9/30/12$-2010 2011 LTM9/30/11LTM9/30/1229

Net Debt (WCA)/EBITDAXNet Debt (WCA) (1) , TTM EBITDAX($ in millions)Net Debt (WCA) (1) / TTM EBITDAX Ratio$126$129$117$132$28.7$28.2$47.5$44.64.4 x4.6 x2.5 x3.0 xNet Debt (WCA)TTM EBITDAXNet Debt (WCA) / TTM EBITDAX2009 2010 2011 YTD9/30/122009 2010 2011 YTD9/30/12(1) Net Debt = LT Debt - Unamortized Discount - Positive WC.30

Investment ConsiderationsHigh-Quality ResourceBase• Large, diversified reserve base with strong cash flows in the shallow transition zone in the state waters ofLouisiana• 32,119 gross / net acres, all depths, mostly Held by Production (“HBP”)• Net daily production of 3,543 Boepd (1) (62% oil) from 101 wells with 15 years of proved reserve life• High quality Heavy Louisiana Sweet / Light Louisiana Sweet crude prices at a substantial premium to WTI‒ Currently receiving approximately $21/bbl premium in pricingSignificant AssetCoverage• 19.0 MMBoe of proved reserves as of 1/1/12• Using SEC reserves PV-10 of $464.3MM, pro forma net debt will be covered 3.4x by total proved reserves‒ Pro forma net debt will be ~10.0x covered by 3P reserves (2)• Huge upside in exploratory drilling inventory with 50 BCF shallow gas and >10 TCF deep/ultra-deep gasLarge Workover &Drilling Inventory ofProved ReservesControl ofInfrastructure & 3rdParty ProcessingRevenueAcquisitionOpportunity Pipeline• 62 proved workovers/recompletion opportunities and 87 proved undeveloped opportunities in 24 proveddevelopment locations across 12 fields• Near term development capital budget focused on PUD conversion and low-risk recompletions• Six production platforms and over 100 miles of pipelines allow the opportunity to expand through jointventures with nearby producers• Additional revenues from 3rd party handling, processing and contract operations• Accretive “add-on” opportunities nearby existing assets and existing “Hub-and-Spoke” infrastructure• Since 2009, over 175 transactions for $8.5B have occurred in the areas the Company operatesExperiencedManagement Team• Extensive South Louisiana/Gulf Coast operational expertise with particular emphasis on cost-control andreservoir management• Over 100 years of Gulf Coast experience across the management team(1) Average daily production on 12/17/12.(2) Pro-forma net debt totals $136 MM, including $25 MM of notes issued in December 2012.31

Thank You for your Attention!Website: www.saratogaresources.com