quantum resources – 2006 coga / ipaa capital conference 1 ipaa private capital conference quantum...
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Quantum Resources – 2006 COGA / IPAA Capital Conference 1
IPAA Private Capital Conference
Quantum Resourcesan Oil and Gas Acquisition Company
Don Wolf - CEO
August 10, 2006
Quantum Resources – 2006 COGA / IPAA Capital Conference 2
Quantum ResourcesStructure
$2 Billion $1 Billion equity closed through July, 2006Acquisition plus ability to lever up another $1 billion debt Fund
Officers Don Wolf, CEO; formerly Westport, UMC, General AtlanticLogan Magruder, Pres & COO; formerly Berry, Barrett ResourcesBob Howard, CFO; formerly Bill Barrett Corp, Barrett ResourcesRussell des Cognets, VP Engr & Ops; formerly Burlington ResourcesLance Lauck, VP Acq & Bus Dev; formerly Anadarko Petroleum Corp
Business Model Acquire and develop legacy assets
Corporate office Quantum ResourcesDenver Financial Center, Tower 11775 Sherman Street, Suite 1525Denver Colorado 80203Main Office: 303-861-1170
Aspect EnergyAlex Cranberg / Don Wolf
GeneralPartnership
Quantum Energy PartnersWil VanLoh / Toby Neugebauer
Quantum Resources – 2006 COGA / IPAA Capital Conference 3
Employee Of The Month
“multi-tasking as usual”
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Quantum ResourcesStrategy
• Seek large transactions with long-life properties• Hedge production for 4 to 7 years to insure base
return assumptions• Enhance base return through leverage,
exploitation, operational improvements and selective dispositions
• Distribute dividends to partners• Create size and scale for appropriate exit ideally
within 5 to 10 years• Repeat above
Quantum Resources – 2006 COGA / IPAA Capital Conference 5
Quantum ResourcesWhy Now?
• Confluence of higher commodity prices and technology improvements– Creates new opportunities within mature fields– Yields lower cost structure due to greater execution efficiency and
improved reservoir performance• High transaction volume creates consolidation opportunities
– Dispose non-core areas– Build and flip models– Financing strategy
• Ability to minimize pricing volatility through hedging– Liquidity of long-term hedges
• Option on technology improvements– Better base economics generates new technology
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Quantum ResourcesMotivated Buyer
Deal Asset Acquisitions, Corporate Acquisitions, Joint VenturesStructures
Geographical Onshore North America (up to 20% International); opportunity drivenAreas
Niche Size $250 million to $1 billion Acquisitions Legacy assets in less favorable areas
>60% PDP reserves; long-life reservesModerate upside potentialOperated assets
Strengths Motivated buyerWell fundedCompetitive cost of capitalShort valuation and turn-around timeQuick closing without financial contingencies
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Capital Access Drivers
Taxes
PeopleTrack Records
Strategy Opportunity
Timing
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Marginal Income Tax RateIn
com
e T
ax R
ate
(%)
0
10
20
30
40
50
60
70
80
90
100
1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
1981Tax Rates: 70-90% 36-50%
High Risk Tolerance
Low Risk
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Tax Effects
• Pre-1981– Marginal rates of 70-90%– High risk tolerance– Individual high income investors were common– Year-end “rush” with pre-payments– Tax laws motivated investors to shelter income
• Post 1981– Marginal rates of 36-50%– Low risk tolerance– Rigorous economic analysis– Sophisticated institutional and corporate investors– Complex documentation addressing taxes, exits and governance
Quantum Resources – 2006 COGA / IPAA Capital Conference 10
Has progress made us better?
Terra Marine Energy
General Atlantic & WestportQuantum Resources
Investment 1
AssetsEmployees
Taxable
LimitedPartner
LimitedPartner
LimitedPartner
Investment 3
Leverage
Non-taxable
GeneralPartner
Non-leverage
Investment 2
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Capital Partners / Lessons Learned
• People– Your team is critical to you and your investors– Primary investor consideration
• Don’t forget the accountants– Easy to get behind– Accurate and timely reporting is crucial– Tax expertise is essential
• Risk tolerance is lower than you think– Positive returns essential to continuity
• Communication– Often, full disclosure and accurate
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Lessons Learned (continued…)
• Reputation– Hard to build and easy to destroy– All references checked which generally excluding the ones you list
• Momentum and urgency– Be sure your lead investors are with you– Close with urgency
• Stickiness– Success breeds confidence– Partners stay with winners and drop losers
• Little things matter– Indicators of personal values– Don’t win a battle and lose a war
Quantum Resources – 2006 COGA / IPAA Capital Conference 13
Quantum Resources
“An exceptionally well capitalized private oil & gas acquisition company comprised of world class partners and a first class management and operating team, focused on longer life oil and gas reservoirs primarily in North America.”