bringing down breakeven costs “how to survive and...
TRANSCRIPT
Bringing Down Breakeven Costs
“How to Survive and Thrive?”
DUG Conference Mike Eberhard, P.E.Denver, CO VP of CompletionsMarch 10, 2016
About Synergy
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Key Statistics
Stock Price (03/04/16) $7.46
52 Week High/Low $13.25-$5.05
Shares Outstanding Diluted* ~125MM
Public Float ~111 MM
Avg. Daily Vol. (3 month) 2.4 MM
Market Capitalization ~$925 MM
Insider & Employee Holdings, est. ~8%
Fiscal Year End December 31
Cash & Equivalents (11/30/15 Pro-forma*) ~$92 MM
Outstanding Debt (11/30/15 Pro-forma*) $0 MM
Borrowing Base Availability (as of 1/28/16) $145 MM
This presentation contains forward-looking statements, within the meaning of thePrivate Securities Litigation Reform Act of 1995. The use of words such as "believes,""expects," "anticipates," "intends," "plans," "estimates," "should," "likely" or similarexpressions, indicates a forward-looking statement. These statements are subject torisks and uncertainties and are based on the beliefs and assumptions of management,and information currently available to management. The actual results could differmaterially from a conclusion, forecast or projection in the forward-looking information.Certain material factors or assumptions were applied in drawing a conclusion or makinga forecast or projection as reflected in the forward-looking information. Theidentification in this presentation of factors that may affect the company’s futureperformance and the accuracy of forward-looking statements is meant to be illustrativeand by no means exhaustive.
All forward-looking statements should be evaluated with the understanding of theirinherent uncertainty. Factors that could cause the company’s actual results to differmaterially from those expressed or implied by forward-looking statements include, butare not limited to: the success of the company’s exploration and development efforts;the price of oil and gas; the worldwide economic situation; changes in interest rates orinflation; the ability of the company to transport gas; willingness and ability of thirdparties to honor their contractual commitments; the company’s ability to raiseadditional capital, as it may be affected by current conditions in the stock market andcompetition in the oil and gas industry for risk capital; the company’s capital costs,which may be affected by delays or cost overruns; costs of production; environmentaland other regulations, as the same presently exist or may later be amended; thecompany’s ability to identify, finance and integrate any future acquisitions; and thevolatility of the company’s stock price; and other factors described in the company’sfilings with the SEC, which are incorporated herein by reference. The companyundertakes no obligation to update any forward‐looking statements in order to reflectany event or circumstance occurring after the date of this presentation or currentlyunknown facts or conditions. Resource estimates and estimates of non‐proved reservesinclude potentially recoverable quantities that are subject to substantially greater riskthan proved reserves.
*Pro-forma for Equity Offering closed 1/27/16
Sources: Company estimates. In USD
Wattenberg Focus
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Synergy’s Acreage Position in the Greater Wattenberg Area
Synergy Leasehold
Focus on Core Wattenberg Area
~ 41,000 Net Acres
NE Wattenberg Extension Area
~ 52,000 Net Acres
Note: Offset operator acreage positions reflect approximations, are not meant to depict entire leasehold, and may contain inaccuracies.
Core Wattenberg Operated HZ Wells
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• Focus is shifting to longer length laterals
• DUC inventory Weideman Pad – 4 LL wells and 4 SL wells Vista Pad – 10 SL wells
• Current 2016 drilling program Fagerberg Pad (14 ML wells) Evans Pad (22 LL wells) Williams Pad (9 ML wells)
4
Drilled Uncompleted
Weideman Pad
Vista Pad
10 - 15%
~50%
>60%
2014 - 2015 2016 Long Term Plan
Estimated % of Operated Longer Lateral Wells Synergy Land LegendLeaseholdOperated pads w/ producing wells
Future Drilling Sites
Evans Pad
Williams Pad
Fagerberg Pad
Rapidly Growing Reserves and Production
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4,290
8,725
10,540
BO
EPD
Daily Net Production
FY 2014 FY 2015 Q1 FY 16
0
10,000
20,000
30,000
40,000
50,000
60,000
Re
serv
es
MM
Bo
ePUD PDNP PDP
* Proved Reserves as of 8/31/2015 (Ryder Scott 3rd Party Reserve Engineers)
32 MMBoe
57 MMBoe *
8/31/2014 8/31/2015
Recent Changes at Synergy
“…to build a successful organization and team you must get the right people on the bus...” Jim Collins, Good to Great
• New management team
• Development of in-house technical expertise Communication across disciplines Aligned goals Better evaluation of prospects
• Relocate corporate headquarters to Denver
• Change fiscal year end from Aug 31 to Dec 31 Aligned with peers for better comparison
• Be the operator of choice in urban areas
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“We cannot drill our way to lower prices at the pump” US Senate Democratic newsletter; June 18, 2008
“…and you know we can’t just drill our way to lower gas prices.” Barack Obama Feb 23, 2012
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2/86
1/91 3/98 9/0110/08
1/82
$31.80 – 11.60 $50
$133.93
“We cannot drill our way to lower prices at the pump” US Senate Democratic newsletter; June 18, 2008
“…and you know we can’t just drill our way to lower gas prices.” Barack Obama Feb 23, 2012
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2/86
1/91 3/98 9/0110/08
1/82
$31.80 – 11.60 $50
$133.93
How Do We Survive?
• Maintain a strong balance sheet
• Look for opportunities that make sense
• Emphasis on base production
• Evaluate D&C costs vs. well performance
• High grade vendors
• Look across the fence to learn
• Access to higher cost technology
• Continue to Innovate
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Capital Preservation
• Maintain a strong balance sheet Evaluate all expenses for want vs. need
Detailed portfolio projects economicso Incorporate lease hold requirements, pipeline commitments, etc.
Continuous evaluation of vendor pricing
Do not get into big drilling commitments, lease hold commitments
• Growth through M&A Use equity instead of debt
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Growth Through M&A
• Core up acreage Allows for more medium to long laterals
o Better economics
o Fewer surface locations
Provides more surface location options
• Be realistic about well performance
• Don’t “fall in love with your deal” Be willing to walk away
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920’
SRL LRLMRL
Base Production
• Company pumpers for horizontal wells Compensation based on performance
• Track base production - KPI Communicate to field Analysis of downtime causes
• Evaluate cost of gas lift May cost more than the increased oil production
• Constant monitoring of plunger cycles for optimization Catch wells before problems occur (loading up and swabbing, fishing)
• 24hr monitoring for high production pads in high line pressure areas Can make 250 to 500 BOEPD difference in production
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Evaluate D&C Costs vs Well Performance
• What made sense at $100 oil may not work at $30 oil Need tangible results from spend
• Re-evaluate completion designs that may not be optimum Reduced cost may offset the lower production
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10% reduction in well performance is offset by lower completion costs
D&C 2,650$ 2,360$ 4,350$ 3,700$
Delta Prod 0% -10% 0% -10%
IRR 43% 43% 42% 46%
NPV ($M) 2,605$ 2,352$ 4,507$ 4,253$
MTP (mo) 26 26 27 25
Niobrara Wells - Current Strip
TC I - Short TC I - Long
High Grade Vendors
Relationships with past vendors are important
but…
Opportunity to improve where needed
Safety is still number oneo Vendors making cuts to keep margins
Improve on efficiency to reduce cycle times and costo Reduce NPT, upgrade equipment, experienced personnel
Sustainability of vendor base is important for long term o Can’t keep all vendors viable
Price
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Look Across the Fence
• Learn from other operators Available time to do a deep dive into offset well performance
• Time to go back and look at what you did Why is this well so good/bad
What can you learn from trouble job wells
• Continue development, training, and networking Opportunity to look up from what
you were doing
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Curtesy of “Home Improvement” - ABC
Access to Higher Cost Technology
• Service providers still want to prove up technology Shared risk/reward
• Fixed pricing for higher risk services
• Willingness to provide extra services for work Previously upsold services
• Easier access to technology groups
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Continue to Innovate
• Not all innovations result in reducing cost Improve EUR
• Process improvement Time to look at operations in more detail
Efficiency savings last even when prices increase
• Integrated project evaluation Integrating multiple disciplines
Well spacing, well placement based on geophysics
Engineered vs spreadsheet designs
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Issues
• Pipelines continue to be a problem Capacity, line pressure, oxygen
• Regulations continue to add cost Air – OOOO has added several layers to operations
Noise
• Price differential
• State and local regulatory changes Setbacks, MOU’s, Ballot Initiatives
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