CRISIS IN THE OILPATCH – DANGER OR OPPORTUNITY FOR … · School of Business at S.M.U. Elena is fluent in Spanish and Romanian, and conversational in French. Todd Dittmann ANGELO

CRISIS IN THE OILPATCH – DANGER OR OPPORTUNITY FOR LENDERS AND DISTRESSED INVESTORS

Panel Discussion

Rob Albergotti, Todd Dittmann, Elena Robciuc – Panelists

John Melko – Moderator

Distressed Investing Conference, December 2, 2019 – New York, NY

https://www.distressedinvestingconference.com/

TABLE OF CONTENTS

I. Introduction of Our Panelists

II. Quick Overview of the Oil & Gas Industry -John Melko, Partner, Foley Gardere

III. Reserve Based Lending – Elena Robciuc, Head of Reserve Based Finance in the

Americas, Societe Generale

III. Energy Dislocation and Distress, Is it Investable? – Todd Dittmann, Head of

Energy, Angelo Gordon

IV. Financial Advisory in O&G – Rob Albergotti, Managing Director, Alix Partners

I.

Introduction of Our Panelists

Elena Robciuc

SOCIETE GENERALE – Head of Reserve Based Finance in the Americas

Elena Robciuc is the Head of Reserve Based Finance in the Americas under

Societe Generale’s Energy Lending practice and manages a team of energy

finance professionals as well as the origination and investment banking cross sell

for the firm’s upstream structured finance client base. Prior to this, Elena was a

Managing Director in charge of originating and structuring reserve based lending

transactions and expanding the bank’s cross sell into commodity hedging

products, debt and equity capital markets, and advising clients on capital

structure and capital raising solutions. Elena’s prior experience also includes

investments management at a Hedge Fund at Enron Corp, and private equity

investments at a European Fund Manager. Elena’s professional career spans over

almost 20 years, and she holds a Master in Business Administration from the Cox

School of Business at S.M.U. Elena is fluent in Spanish and Romanian, and

conversational in French.

Todd Dittmann

ANGELO GORDON – Head of Energy

Todd Dittmann joined Angelo Gordon in 2013 to lead the firm’s energy strategy. He is a

Managing Director and a member of the firm’s executive committee. Todd is a seasoned

and experienced investment professional who has spent more than 25 years in energy

finance with investing and board experience in both public and private companies. His

experience includes the closing of approximately 150 debt, equity, M&A, derivative-linked

and other energy related transactions, most of which he completed as a principal investor

or lead lender. Todd has previously held roles with D.B. Zwirn & Co., Jefferies & Co. and the

Chase Manhattan Bank. Todd holds a B.B.A. degree with a concentration in finance and an

M.B.A. degree from the University of Texas, Austin and is a Chartered Financial Analyst.

Rob Albergotti

ALIXPARTNERS – Managing Director, Houston

Robert has worked with senior management teams, attorneys, creditors, and private-equity

sponsors at all levels to identify process improvements, to spot business trends, and to take

advantage of financial opportunities as a consultant and business unit controller.

He has a wealth of experience globally, with extensive operating experience in Europe and Asia.

Robert has had experience in the development and implementation of complex restructuring

solutions to maximize value for all stakeholders through internal reorganizations, asset

dispositions, divisional shutdowns, and chapter 11 restructurings. Robert has worked on behalf of

companies to negotiate debt financing options with numerous financial institutions as well as

provided representation to a number of creditor groups.

Prior to joining AlixPartners, Robert attended the Darden School of Business at the University of

Virginia. Before attending business school, Robert was based in Amsterdam with Akzo Nobel,

where he was controller in a global product and manufacturing business delivering specialty

chemicals to semiconductor producers.

John Melko

FOLEY & LARNDER LLP – Partner

John Melko's practice focuses on complex sales, acquisitions, bankruptcies and financings in the energy

sector throughout the United States, as well as shipping-related issues in both foreign and domestic cases

and financings. John has years of cross-border and multinational experience with oil and gas exploration

and production, refining and marketing, airlines, telecommunications, electric utilities, manufacturing,

retail, rig and ship finance, mass torts and asset-backed securities. He has represented:

• Borrowers and debtors in possession

• Creditors and creditors' committees

• Securitized noteholders

• Trustees

• Investors

• Buyers of assets and businesses in and out of restructuring or bankruptcy settings

Throughout his career, John has helped guide clients through dislocations in the energy, shipping,

telecommunication, real estate and health care markets, utilizing chapter 7, chapter 11, and chapter 15

procedures.

John also serves as co-chair of the firm's Bankruptcy & Business Reorganizations Practice and vice-chair of

the firm’s Oil & Gas Industry Team.

II.

Quick Overview of the Oil & Gas Industry

John Melko, Partner, Foley Gardere

CURRENT RIG COUNT

Updated November 22, 2019

U.S. PRODUCTION AND RIG COUNT

JULY 2014 SEPTEMBER 2014 CURRENT

Production Price Production Price Production Price

CRUDE 8.4 mm bpd $107/bbl 8.8 mm $93.54 11 . 8 m bpd* $53.18**

NAT GAS 2.2 tcf/month $4.00/mcf 2.2 tcf/month $3.90/mcf 3.3 tcf/month* $2.24/mcf**

RIGS 1,861 1,930 851***

* As of July 2019/EIA

** As of 10/21/2019

*** As of 10/18/19 Baker Hughes

Wells Fargo CommoditiesDaily Energy Report as of 11/26/2019

WTI Swap (S/bbl)

Tenor Current Day Change Year Ago

Bal19 $58.27 $0.27 $55.42

Cal20 $56.05 $0.27 $55.14

Cal21 $53.26 $0.27 $54.59

Cal22 $52.20 $0.27 $54.19

Cal23 $51.94 $0.27 $54.22

NG NYMEX Swap ($/Mmbtu)

Tenor Current Day Change Year Ago

Bal19 $2.467 ($0.065) $2.877

Cal20 $2.413 ($0.020) $2.619

Cal21 $2.461 ($0.006) $2.590

Cal22 $2.466 ($0.006) $2.609

Cal23 $2.517 ($0.006) $2.660

O & G COMPANIES- RECENT HISTORY –

2019 Chapter 11 filings of Exploration & Production (“E&P”) Companies

* from Haynes & Boone’s Oil Patch Bankruptcy Monitor

LIST OF NORTH AMERICAN OILFIELD SERVICES BANKRUPTCIES

2019 BANKRUPTCIES, January – September

* from Haynes and Boone Oilfield Services Bankruptcy Tracker

COMPLETE LIST OF NORTH AMERICAN MIDSTREAM

BANKRUPTCIES

2015-2019

* from Haynes and Boone Midstream Report

RECENT OIL & GAS CHAPTER 11 FILINGS

OCT. – NOV. 2019

Chapter 11 filing date Bankruptcy Court Debtor Name Approximate Debt Amount Docket

10/3/2019 SDTX EP Energy $4.3 B 19-35647

10/4/2019 SDNY Agera Energy $199 mm 19-23802

10/18/2019 WDOK Longhorn Service Company $10 - $50 mm 19-14276

10/22/2019 Delaware MTE Holdings LLC $470 mm 19-12269

10/31/2019 Wyoming Moriah Powder River $50 - $100 mm 19-20699

11/8/2019 Delaware

Arsenal Resources Development,

LLC $500 mm 19-12347

11/18/2019 SDTX Approach Resources $400 mm 19-3644

III.

Reserve Based Lending

Elena Robciuc

Head of Reserve Based Finance in the Americas, Societe Generale

DISTRESSED INVESTING CONFERENCE

D E C E M B E R 2 0 1 9 C O N F I D E N T I A L

PRESENTATION │ C1│NOVEMBER 2019│ 18

IS THERE A CRISIS IN THE OIL PATCH?

Source: SG Analytics, Bloomberg, EIA, PLS.

Commodity prices remain above 2015/2016 crisis levels,

but mounting bankruptcies reminiscent of 2015/2016

*in USD $bn*in USD

*in USD $mm

Total … Total HY Issuance

for Refinancing

Purposes, 2016,

7,100

Total HY Issuance

for Refinancing

Purposes, 2017,

17,655

Total HY Issuance

for Refinancing

Purposes, 2018,

17,275Total HY Issuance

for Refinancing

Purposes,

2019YTD, 5,650

Total HY Issuance

for Other

Purposes, 2015,

2,475 Total HY Issuance

for Other

Purposes, 2016,

3,025

Total HY Issuance

for Other

Purposes, 2017,

5,275

Total HY Issuance

for Other

Purposes, 2018,

1,785

Total HY Issuance

for Other

Purposes,

2019YTD, 500

*in USD $mm

BB Average Issue Yield, …





B Average Issue Yield, 2015, … B Average Issue

Yield, 2016, …

B Average Issue Yield, 2017, …

B Average Issue Yield, 2018, …

B Average Issue Yield, …

31

20

43 39

12

Occidental - AnadarkoA&D market deal execution is impacted by lack of funding

and low valuations

Capital markets liquidity has disappeared triggered by

investor demands for cash flow neutrality and measured growth


UPSTREAM TRENDS AND MARKET SENTIMENT

Source: Haynes & Boone.

Expected Change in Borrowing Base % of Future Expected Production Hedged

For the first time since Spring 2016, the majority of respondents expect borrowing base decreases

Investors are demanding improved cash flow and producers are hedging aggressively to protect that cash flow from commodity price

volatilityExpected Sources of Capital When Will Equity Markets Reopen?

Lower utilization of debt and equity capital markets has pushed producers to alternate sources of capital

There is the perception that public equity markets will not reopen until 2021 or later, restricting capital sources


RESERVE BASED LENDING MARKET UPDATE

RBL Lender Appetite and Sentiment Pulling Back

❖ Combination of deteriorating credit fundamentals and re-assessment of valuation methodology

❖ Losses incurred year to date by senior lenders reminiscent of 2015/2016 cycle; bankruptcies are mounting

❖ Weak A&D market and lack of public capital markets translate into lower advance rates

Bar is High for New Money Origination

❖ Requires RBL structure enhancements (rolling hedge requirements, tighter leverage ratio and R/P limitations)

❖ Higher equity requirements (acquisition financing)

❖ Gas is out of favor

Technical & financial underwriting standards

are changing

❖ Standard PV9 methodology is becoming PV?

❖ Advance rates and PUD (Proved Developed Unproducing) allowances paired back to align with cash flow valuations

❖ Focus on credit metrics to reduce probability of default

Market Liquidity Has Been Left to the RBL Market – But Can They Come Through?

RBL structures need enhanced terms to deliver RBL banks

RBL lenders are not likely to be as patient in distressed situations looking for faster ways out

Distressed debt investors have a role to play including via creative structures (securitizations, prepays, etc.)


DISCLAIMER

IMPORTANT NOTICE

This Presentation (the “Presentation”) has been prepared solely for informational purposes for the client or potential client to whom such materials are directly addressed and delivered (the “Company”) and may not be used or relied upon for anypurpose other than as specifically contemplated by a written agreement with us. This Presentation is not intended to provide the sole basis for evaluating, and should not be considered a recommendation with respect to, any transaction or othermatter. This Presentation does not constitute an offer, or the solicitation of an offer, to buy or sell any securities or other financial product, to participate in any transaction or to provide any investment banking or other services, and should not bedeemed to be a commitment or undertaking of any kind on the part of Société Générale (“SG”) or any of its affiliates to underwrite, place or purchase any securities or to provide any debt or equity financing or to participate in any transaction, or arecommendation to buy or sell any securities, to make any investment or to participate in any transaction or trading strategy. This Presentation remains subject to our review and assessment from a legal, compliance, accounting policy and riskperspective, as appropriate, following our discussion with the Company. Although the information contained in this Presentation has been obtained or compiled from sources deemed reliable, neither SG nor any of its affiliates make anyrepresentation or warranty, express or implied, as to the accuracy or completeness of the information contained herein and nothing contained herein is, or shall be relied upon as, a promise or representation whether as to the past, present or futureperformance. The information set forth herein may include estimates and/or involve significant elements of subjective judgment and analysis. No representations are made as to the accuracy of such estimates or that all assumptions relating to suchestimates have been considered or stated or that such estimates will be realized. The information contained herein does not purport to contain all of the information that may be required to evaluate a participation in any transaction and anyrecipient hereof should conduct its own independent analysis of the data referred to herein. We assume no obligation to update or otherwise revise these materials. SG and its affiliates do not provide legal, tax or accounting advice. Prior to makingany investment or participating in any transaction, you should consult, to the extent necessary, your own independent legal, tax, accounting and other professional advisors to ensure that any transaction or investment is suitable for you in the light ofyour financial capacity and objectives. To the extent applicable to this Presentation, if this material discusses derivative products to be entered into by SG, please visit http://swapdisclosure.sgcib.com for important information with respect to suchproducts. By transacting with SG, you are deemed to acknowledge that you have read and accepted the information provided on such website. Société Générale and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. taxmatters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with Société Générale of any of the mattersaddressed herein or for the purpose of avoiding U.S. tax-related penalties. This Presentation has not been prepared with a view toward public disclosure under applicable securities laws or otherwise, is intended solely for the benefit and use of theCompany, is strictly confidential and may not be reproduced, disseminated, quoted or referred to, in whole or in part, without our prior written consent other than to your advisors and professionals who will be assisting you in evaluating thesematerials. This Presentation may not reflect information known to other professionals in other divisions or business units of SG and its affiliates. SG and its affiliates (the “SG Group”) comprise a full service securities firm and commercial bankengaged in securities, commodities and derivatives trading, foreign exchange and other brokerage activities, as well as providing investment, corporate and private banking, asset and investment management, financing and strategic advisoryservices and other commercial services and products to a wide range of corporations, governments and individuals, domestically and offshore, from which conflicting interests or duties, or a perception thereof, may arise. In the ordinary course ofthese activities, parts of the SG Group at any time may invest on a principal basis or manage funds that invest, make or hold long or short positions, finance positions or trade or otherwise effect transactions, for their own accounts or the accounts ofcustomers, in debt, equity or other securities or financial instruments (including derivatives, bank loans or other obligations) of the Company, potential counterparties or any other company that may be involved in a transaction. Société GénéraleCorporate & Investment Banking (SG CIB) is a marketing name for corporate and investment banking businesses of Société Générale and its subsidiaries worldwide.

Capital markets and investment banking activities in the United States are offered through its U.S. registered broker-dealer, SG Americas Securities, LLC (“SGAS”), a member of FINRA and SIPC. SGAS is also a futures commission merchant (FCM)registered with the NFA and CFTC. Please visit http://www.sgasdisclosure.com/ for important disclosures regarding SGAS and transactions you may enter into with SGAS. Lending, derivatives and other commercial banking activities are performed bySociété Générale and its banking affiliates. Products and services that may be referenced in this Presentation may be provided through one or more affiliates of SG. Additional information is available upon request. This material should not bereproduced or redistributed without the specific consent of SGAS, SG or its affiliates. Copyright: 2018. Société Générale (SG), SGAS, and their affiliates. All rights reserved.

www.sgcib.com

III.

Energy Dislocation and Distress, Is it Investable?

Todd Dittmann, Head of Energy, Angelo Gordon

Confidential – Not For Further Distribution. Proprietary and Confidential Trade Secret.

Distressed Investing Conference

December 2, 2019

24Proprietary and Confidential Trade Secret

Capital Vacuum – A Long Time Coming

2017 2018 Current

Residential Vacuum Super Sucker High Dump Vacuum Super Massive Black HoleM

ost

Lik

eC

apit

al S

tatu

s

ON

▪ High Yield

▪ Asset Sales

▪ Private Equity

OFF

▪ Bank Debt

▪ Public Equity

ON

▪ High Yield

▪ Private Equity

OFF

▪ Asset Sales

▪ Bank Debt

▪ Public Equity

ON OFF

▪ Asset Sales

▪ Bank Debt

▪ High Yield

▪ Private Equity

▪ Public Equity

Number of Transactions,

4Q16, 425

41

# o

f T

ran

sact

ion

s

Series1, 4Q14, $20.87

Series1, 3Q19, $13.25

$Bn

Upstream, 2016, $41

Upstream, 2017, $34 Upstream,

2018, $22 Upstream, YTD

2019, $6

Services, 2016, 11 Services, 2017,

8 Services, 2018,

11

$Bn

Banks Have Reduced Borrowing Base Availability by 36% Since 4Q ’14 (2) 90% Drop in Acquisition and Divestiture Activity (3)

HY Debt Issuance (1)


Upstream, 2016, 31.691

Upstream, 2017, 10.912 Upstream,

2018, 3.122

Services, 2016, 4.108

Services, 2017, 4.119

Services, 2018, 3.784 $1

$Bn

-86%-96%

-36%

E&P

OFS

E&P

OFS

-90%

Equity Issuance (1)

All Major Capital Sources Gone

(1) Source: PLS Capitalize

(2) Source: Bloomberg, company filings; represents bank credit extended to small cap E&P companies

(3) Source: BMO Capital Markets

E&P Market Capitalization ($Bn) (Left Axis), 01/02/13,

$169


$187


$181


$176


$171


$163


$162


$164


$167


$169


$171


$164


$170


$177


$171


$167


$169


$151


$147


$143


$143


$126


$138


$133


$138


$145


$148


$156


$157


$165


$165


$151


$155


$168


$157


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$168


$166


$173


$165


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$176


$182


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$197


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$206


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$343


$333


$327


$331


$333


$341


$332


$333


$313


$285


$287


$315


$309


$312


$308


$305


$302


$303


$317


$307


$295


$295


$282


$292


$323


$337


$346


$334


$345


$336


$331


$335


$315


$326


$334


$343


$340


$340


$318


$333


$331


$318


$331


$327


$322


$312


$303


$285


$290


$276


$274


$259


$260


$277


$268


$265


$268


$269


$244


$234


$225


$223


$212


$224


$214


$230


$250


$235


$242


$231


$219


$224


$224


$228


$249


$239


$245


$247


$271


$291


$276


$292


$289


$305


$304


$290


$293


$293


$296


$286


$295


$305


$323


$322


$325


$337


$344


$349


$348


$346


$325


$326


$330


$335


$336


$334


$337


$339


$346


$344


$344


$341


$364


$359


$342


$343


$345


$357


$361


$326


$350


$354


$342


$342


$346


$353


$352


$346


$341


$333


$332


$343


$331


$341


$354


$348


$358


$364


$375


$368


$369


$368


$369


$360


$365


$373


$373


$363


$361


$357


$372


$363


$356


$385


$390


$394


$390


$389


$385


$375


$383


$378


$369


$372


$360


$358


$358


$367


$375


$372


$382


$379


$392


$397


$381


$416


$417


$423


$426


$427


$422


$421


$419


$420


$419


$415


$409


$414


$418


$408


$415


$411


$412


$410


$407


$413


$410


$400


$399


$401


$391


$404


$404


$394


$392


$385


$379


$380


$383


$385


$364


$365


$362


$369


$368


$360


$358


$367


$377


$377


$378


$381


$386


$374


$376


$362


$364


$371


$360


$358


$353


$352


$351


$357


$359


$352


$359


$357


$344


$346


$336


$334


$339


$324


$337


$333


$331


$324


$317


$321


$322


$329


$337


$320


$322


$324


$329


$326


$331


$328


$336


$341


$335


$316


$316


$319


$313


$309


$299


$298


$304


$303


$298


$303


$307


$314


$305


$312


$324


$329


$336


$342


$352


$352


$354


$351


$348


$347


$346


$347


$346


$346


$342


$340


$350


$361


$364


$375


$375


$373


$356


$359


$356


$359


$352


$357


$372


$364


$357


$365


$361


$355


$364


$385


$386


$390


$389


$396


$405


$407


$404


$420


$412


$413


$422


$424


$421


$403


$407


$378


$372


$352


$360


$372


$371


$362


$378


$370


$360


$370


$364


$371


$367


$361


$357


$380


$375


$376


$378


$366


$373


$370


$389


$395


$404


$415


$413


$410


$420


$417


$418


$417


$426


$437


$437


$442


$448


$446


$434


$422


$436


$431


$421


$434


$436


$436


$417


$427


$424


$429


$449


$450


$446


$446


$462


$452


$456


$445


$453


$451


$463


$456


$460


$453


$449


$442


$443


$441


$423


$426


$438


$439


$437


$444


$442


$435


$421


$428


$432


$438


$449


$450


$463


$460


$470


$474


$471


$477


$440


$446


$441


$434


$411


$395


$377


$388


$383


$394


$389


$376


$364


$376


$359


$368


$359


$361


$361


$373


$363


$355


$358


$344


$326


$311


$290


$315


$312


$314


$321


$341


$355


$352


$355


$358


$364


$347


$355


$352


$356


$365


$355


$337


$347


$357


$362


$360


$351


$349


$346


$357


$344


$328


$338


$345


$353


$360


$349


$358


$360


$363


$350


$364


$361


$361


$380


$382


$382


$392


$381


$374


$361


$357


$355


$360


$354


$362


$360


$367


$338


$337


$335


$323


$329


$325


$326


$321


$321


$332


$340


$337


$343


$343


$331


$332


$333


$339


$340


$326


$321


$325


$327


$316


$324


$307


$292


$288


$257


$257


$243


$257


$255


$240


$239


$251


$249


$253


$255


$268


$265


$292


$276


$274


$266


$258


$258


$241


$246


$239


$245


$247


$244


$237

Ag

gre

gat

e M

arke

t C

apit

aliz

atio

n (

$Bn

)


E&P Market Capitalization: A Brutal Round Trip

January 2009

Brigham Exploration

completes Brad Olson

10-15 #1H in the Bakken

May to December 2009

Drilling rigs in the

Bakken double from

35 to 75E&P Market Capitalization ($Bn) (Left

Axis), 01/02/23,

$314

E&P Market Capitalization ($Bn) (Left

Axis), 01/03/23,

$323


Axis), 01/04/23,

$321


Axis), 01/05/23,

$335


Axis), 01/08/23,

$341


Axis), 01/09/23,

$345


Axis), 01/10/23,

$355


Axis), 01/11/23,

$358


Axis), 01/12/23,

$352


Axis), 01/15/23,

$353


Axis), 01/16/23,

$355


Axis), 01/17/23,

$355


Axis), 01/18/23,

$358


Axis), 01/19/23,

$364


Axis), 01/22/23,

$364


Axis), 01/23/23,

$351


Axis), 01/24/23,

$347


Axis), 01/25/23,

$349


Axis), 01/26/23,

$355


Axis), 01/29/23,

$350


Axis), 01/30/23,

$352


Axis), 01/31/23,

$357


Axis), 02/01/23,

$356


Axis), 02/02/23,

$361


Axis), 02/05/23,

$365


Axis), 02/06/23,

$360


Axis), 02/07/23,

$355


Axis), 02/08/23,

$341


Axis), 02/09/23,

$337


Axis), 02/12/23,

$342


Axis), 02/13/23,

$347


Axis), 02/14/23,

$353


Axis), 02/15/23,

$357


Axis), 02/16/23,

$362


Axis), 02/19/23,

$362


Axis), 02/20/23,

$359


Axis), 02/21/23,

$360


Axis), 02/22/23,

$350


Axis), 02/23/23,

$351


Axis), 02/26/23,

$352


Axis), 02/27/23,

$349


Axis), 02/28/23,

$351


Axis), 03/01/23,

$346


Axis), 03/02/23,

$354


Axis), 03/05/23,

$357


Axis), 03/06/23,

$353


Axis), 03/07/23,

$344


Axis), 03/08/23,

$341


Axis), 03/09/23,

$328


Axis), 03/12/23,

$332


Axis), 03/13/23,

$338


Axis), 03/14/23,

$344


Axis), 03/15/23,

$345


Axis), 03/16/23,

$344


Axis), 03/19/23,

$353


Axis), 03/20/23,

$351


Axis), 03/21/23,

$360


Axis), 03/22/23,

$363


Axis), 03/23/23,

$349


Axis), 03/26/23,

$350


Axis), 03/27/23,

$358


Axis), 03/28/23,

$357


Axis), 03/29/23,

$360


Axis), 03/30/23,

$358


Axis), 04/02/23,

$363


Axis), 04/03/23,

$358


Axis), 04/04/23,

$350


Axis), 04/05/23,

$353


Axis), 04/06/23,

$364


Axis), 04/09/23,

$367


Axis), 04/10/23,

$361


Axis), 04/11/23,

$365


Axis), 04/12/23,

$361


Axis), 04/13/23,

$385


Axis), 04/16/23,

$380


Axis), 04/17/23,

$382


Axis), 04/18/23,

$382


Axis), 04/19/23,

$382


Axis), 04/20/23,

$382


Axis), 04/23/23,

$392


Axis), 04/24/23,

$392


Axis), 04/25/23,

$387


Axis), 04/26/23,

$381


Axis), 04/27/23,

$375


Axis), 04/30/23,

$374


Axis), 05/01/23,

$372


Axis), 05/02/23,

$361


Axis), 05/03/23,

$351


Axis), 05/04/23,

$357


Axis), 05/07/23,

$359


Axis), 05/08/23,

$355


Axis), 05/09/23,

$361


Axis), 05/10/23,

$360


Axis), 05/11/23,

$361


Axis), 05/14/23,

$354


Axis), 05/15/23,

$361


Axis), 05/16/23,

$362


Axis), 05/17/23,

$365


Axis), 05/18/23,

$360


Axis), 05/21/23,

$359


Axis), 05/22/23,

$367


Axis), 05/23/23,

$356


Axis), 05/24/23,

$338


Axis), 05/25/23,

$337


Axis), 05/28/23,

$337


Axis), 05/29/23,

$336


Axis), 05/30/23,

$335


Axis), 05/31/23,

$328


Axis), 06/01/23,

$323


Axis), 06/04/23,

$326


Axis), 06/05/23,

$329


Axis), 06/06/23,

$320


Axis), 06/07/23,

$325


Axis), 06/08/23,

$326


Axis), 06/11/23,

$326


Axis), 06/12/23,

$328


Axis), 06/13/23,

$321


Axis), 06/14/23,

$326


Axis), 06/15/23,

$321


Axis), 06/18/23,

$325


Axis), 06/19/23,

$332


Axis), 06/20/23,

$331


Axis), 06/21/23,

$340


Axis), 06/22/23,

$340


Axis), 06/25/23,

$337


Axis), 06/26/23,

$333


Axis), 06/27/23,

$343


Axis), 06/28/23,

$340


Axis), 06/29/23,

$343


Axis), 07/02/23,

$345


Axis), 07/03/23,

$331


Axis), 07/04/23,

$332


Axis), 07/05/23,

$332


Axis), 07/06/23,

$334


Axis), 07/09/23,

$333


Axis), 07/10/23,

$332


Axis), 07/11/23,

$339


Axis), 07/12/23,

$338


Axis), 07/13/23,

$340


Axis), 07/16/23,

$332


Axis), 07/17/23,

$326


Axis), 07/18/23,

$321


Axis), 07/19/23,

$321


Axis), 07/20/23,

$325


Axis), 07/23/23,

$325


Axis), 07/24/23,

$326


Axis), 07/25/23,

$327


Axis), 07/26/23,

$320


Axis), 07/27/23,

$316


Axis), 07/30/23,

$313


Axis), 07/31/23,

$324


Axis), 08/01/23,

$324


Axis), 08/02/23,

$307


Axis), 08/03/23,

$304


Axis), 08/06/23,

$292


Axis), 08/07/23,

$289


Axis), 08/08/23,

$288


Axis), 08/09/23,

$297


Axis), 08/10/23,

$257


Axis), 08/13/23,

$254


Axis), 08/14/23,

$257


Axis), 08/15/23,

$244


Axis), 08/16/23,

$243


Axis), 08/17/23,

$248


Axis), 08/20/23,

$257


Axis), 08/21/23,

$254


Axis), 08/22/23,

$255


Axis), 08/23/23,

$252


Axis), 08/24/23,

$240


Axis), 08/27/23,

$242


Axis), 08/28/23,

$239


Axis), 08/29/23,

$246


Axis), 08/30/23,

$251


Axis), 08/31/23,

$249


Axis), 09/03/23,

$249


Axis), 09/04/23,

$247


Axis), 09/05/23,

$253


Axis), 09/06/23,

$255


Axis), 09/07/23,

$255


Axis), 09/10/23,

$265


Axis), 09/11/23,

$268


Axis), 09/12/23,

$270


Axis), 09/13/23,

$265


Axis), 09/14/23,

$268


Axis), 09/17/23,

$292


Axis), 09/18/23,

$280


Axis), 09/19/23,

$276


Axis), 09/20/23,

$274


Axis), 09/21/23,

$274


Axis), 09/24/23,

$273


Axis), 09/25/23,

$266


Axis), 09/26/23,

$264


Axis), 09/27/23,

$258


Axis), 09/28/23,

$258


Axis), 10/01/23,

$258


Axis), 10/02/23,

$248


Axis), 10/03/23,

$241


Axis), 10/04/23,

$246


Axis), 10/05/23,

$246


Axis), 10/08/23,

$244


Axis), 10/09/23,

$239


Axis), 10/10/23,

$242


Axis), 10/11/23,

$245


Axis), 10/12/23,

$249


Axis), 10/15/23,

$247


Axis), 10/16/23,

$248


Axis), 10/17/23,

$244


Axis), 10/18/23,

$242


Axis), 10/19/23,

$237

WTI ($/Bbl) (Right Axis),

01/02/23, $45.41


01/03/23, $46.54


01/04/23, $47.09


01/05/23, $47.96


01/08/23, $48.52


01/09/23, $49.78


01/10/23, $52.69


01/11/23, $52.91


01/12/23, $51.91


01/15/23, $50.80


01/16/23, $52.39


01/17/23, $52.61


01/18/23, $52.36


01/19/23, $54.04


01/22/23, $54.04


01/23/23, $53.01


01/24/23, $52.62


01/25/23, $53.13


01/26/23, $53.69


01/29/23, $51.99


01/30/23, $53.31


01/31/23, $54.23


02/01/23, $53.79


02/02/23, $55.26


02/05/23, $54.56


02/06/23, $53.66


02/07/23, $54.01


02/08/23, $52.64


02/09/23, $52.72


02/12/23, $52.41


02/13/23, $53.47


02/14/23, $54.31


02/15/23, $54.79


02/16/23, $55.98


02/19/23, $55.98


02/20/23, $56.45


02/21/23, $57.16


02/22/23, $56.96


02/23/23, $57.26


02/26/23, $55.48


02/27/23, $55.50


02/28/23, $56.94


03/01/23, $57.22


03/02/23, $55.80


03/05/23, $56.59


03/06/23, $56.56


03/07/23, $56.22


03/08/23, $56.66


03/09/23, $56.07


03/12/23, $57.12


03/13/23, $57.20


03/14/23, $58.59


03/15/23, $58.91


03/16/23, $58.82


03/19/23, $59.38


03/20/23, $59.29


03/21/23, $60.23


03/22/23, $59.98


03/23/23, $59.04


03/26/23, $58.82


03/27/23, $59.94


03/28/23, $59.41


03/29/23, $59.30


03/30/23, $60.14


04/02/23, $61.59


04/03/23, $62.58


04/04/23, $62.46


04/05/23, $62.10


04/06/23, $63.08


04/09/23, $64.40


04/10/23, $63.98


04/11/23, $64.65


04/12/23, $63.67


04/13/23, $64.02


04/16/23, $63.56


04/17/23, $64.19


04/18/23, $63.87


04/19/23, $64.07


04/20/23, $64.07


04/23/23, $65.55


04/24/23, $66.30


04/25/23, $65.89


04/26/23, $65.21


04/27/23, $63.30


04/30/23, $63.50


05/01/23, $63.91


05/02/23, $63.60


05/03/23, $61.81


05/04/23, $61.94


05/07/23, $62.25


05/08/23, $61.40


05/09/23, $62.12


05/10/23, $61.70


05/11/23, $61.80


05/14/23, $61.21


05/15/23, $61.96


05/16/23, $62.24


05/17/23, $63.06


05/18/23, $62.92


05/21/23, $63.21


05/22/23, $63.13


05/23/23, $61.42


05/24/23, $57.91


05/25/23, $58.63


05/28/23, $58.63


05/29/23, $59.14


05/30/23, $58.81


05/31/23, $56.59


06/01/23, $53.50


06/04/23, $53.25


06/05/23, $53.48


06/06/23, $51.68


06/07/23, $52.59


06/08/23, $53.99


06/11/23, $53.26


06/12/23, $53.27


06/13/23, $51.37


06/14/23, $52.54


06/15/23, $52.77


06/18/23, $52.17


06/19/23, $54.11


06/20/23, $53.97


06/21/23, $57.07


06/22/23, $57.43


06/25/23, $57.90


06/26/23, $57.83


06/27/23, $59.38


06/28/23, $59.43


06/29/23, $58.47


07/02/23, $59.09


07/03/23, $56.25


07/04/23, $57.34


07/05/23, $57.34


07/06/23, $57.51


07/09/23, $57.66


07/10/23, $57.83


07/11/23, $60.52


07/12/23, $60.28


07/13/23, $60.30


07/16/23, $59.68


07/17/23, $57.74


07/18/23, $56.92


07/19/23, $55.42


07/20/23, $55.76


07/23/23, $56.22


07/24/23, $56.77


07/25/23, $55.88


07/26/23, $56.02


07/27/23, $56.20


07/30/23, $56.87


07/31/23, $58.05


08/01/23, $58.58


08/02/23, $53.95


08/03/23, $55.66


08/06/23, $54.69


08/07/23, $53.63


08/08/23, $51.09


08/09/23, $52.54


08/10/23, $54.50


08/13/23, $54.93


08/14/23, $57.10


08/15/23, $55.25


08/16/23, $54.42


08/17/23, $54.81


08/20/23, $56.14


08/21/23, $56.13


08/22/23, $55.68


08/23/23, $55.35


08/24/23, $54.17


08/27/23, $53.64


08/28/23, $54.93


08/29/23, $55.78


08/30/23, $56.71


08/31/23, $55.10


09/03/23, $55.10


09/04/23, $53.94


09/05/23, $56.26


09/06/23, $56.30


09/07/23, $56.52


09/10/23, $57.85


09/11/23, $57.40


09/12/23, $55.44


09/13/23, $55.05


09/14/23, $54.80


09/17/23, $62.67


09/18/23, $59.10


09/19/23, $58.04


09/20/23, $58.19


09/21/23, $58.09


09/24/23, $58.64


09/25/23, $57.29


09/26/23, $56.49


09/27/23, $56.41


09/28/23, $55.91


10/01/23, $54.07


10/02/23, $53.62


10/03/23, $52.64


10/04/23, $52.45


10/05/23, $52.81


10/08/23, $52.75


10/09/23, $52.63


10/10/23, $52.59


10/11/23, $53.56


10/12/23, $54.78


10/15/23, $53.65


10/16/23, $52.88


10/17/23, $53.45


10/18/23, $54.03


10/19/23, $53.87

E&P Market Capitalization ($Bn) (Left Axis)

WTI ($/Bbl) (Right Axis)

E&P Stocks De-Linking from Crude (1)

(1) Source: Bloomberg; based on S&P Composite 1500 Oil & Gas Exploration & Production Sub Industry Index

Market Capitalization of Independent E&Ps (1)

August 2009 Market Capitalization: $200Bn

# of Private Equity Investments, 8+, 62

# of Private Equity Investments, 7, 34







# o

f E

ner

gy

PE

Inve

stm

ents

Vintage Year


Now at 20-Year Trough Valuations, Yet No Private Equity Answer

Broken “Buy and Flip” Energy PE Model (1)

Funding Year Pre-2013 2013 2014 2015 2016 2017 2018 2019

A significant number of PE investments have

been held for longer than the typical

5-yr hold period

(1) Source: Capital One; data as of 8/7/19

Number of Deals Announced (Left

Axis), 2016, 1,310

Number of Deals Announced (Left

Axis), 2017, 1,365

Number of Deals Announced (Left Axis), 2018, 515

Number of Deals Announced (Left Axis), 2019, 127

Average $ per Flowing Boe

(Right Axis), 2016, $76,745


(Right Axis), 2017, $74,757


(Right Axis), 2018, $56,282


(Right Axis), 2019, $42,786

Number of Deals Announced (Left Axis) Average $ per Flowing Boe (Right Axis)

EV / EBITDA, 4Q16, 7.6x

EV / EBITDA, 1Q17, 8.1xEV / EBITDA,

2Q17, 7.1x




2Q18, 5.3x




2Q19, 3.9xEV / EBITDA,

3Q19, 3.8x

EV / SEC PV10, 4Q16, 4.0x

EV / SEC PV10, 1Q17, 4.1x

EV / SEC PV10, 2Q17, 3.8x

EV / SEC PV10, 3Q17, 3.7x

EV / SEC PV10, 4Q17, 4.4x

EV / SEC PV10, 1Q18, 4.6x

EV / SEC PV10, 2Q18, 2.2x

EV / SEC PV10, 3Q18, 2.2xEV / SEC PV10,

4Q18, 1.8x

EV / SEC PV10, 1Q19, 2.0xEV / SEC PV10,

2Q19, 1.1xEV / SEC PV10,

3Q19, 1.0x

EV / EBITDA EV / SEC PV10


From Growth to Value Investing:

Assets at High Risk of Value Loss without Liquidity

Loss of Asset Value: Public Markets (1)

Loss of Asset Value: Private Sale Markets (2) Mor

e E

ther

eal

Less

Eth

erea

l

(1) Source: Seaport Global Securities

(2) Source: S&P Capital IQ

(3) Source: Enervus, BMO Capital Markets

With few exceptions, we are seeing a collapse in

value in more speculative asset categories:

Median Price / Book

E&P (1)

0.6x

OFS (2)

0.7x

Acreage X Equipment X

Undrilled

Locations X Inventory ~

PDNP / DUCs ~ A/R ✔

PDP

PV10

→

PV12-18

Cash ✔

Series1, Dune, 98% Series1, Quicksilver, 97%

Series1, Sabine, 124%

Series1, Milagro, 91%

Series1, Samson, 100% Series1, New Gulf, 100% Series1, Swift, 100% Series1, Emerald, 98% Series1, Energy XXI, 100%

Series1, Goodrich, 86%

Series1, Trinity River, 118%

Series1, Ultra, 100%

Series1, Midstates, 146%

Series1, Chaparral, 100% Series1, Berry, 100% Series1, Linn, 100%

Series1, Penn Virginia, 41%

Series1, Breitburn, 89% Series1, SandRidge, 92%

Series1, Triangle, 156% Series1, Atinum, 265%

Series1, Halcon, 64%

Series1, Atlas, 127%

Series1, Shoreline, 96% Series1, Stone, 100%

Series1, Bonanza Creek, 128%

Series1, Memorial, 100%

Series1, Vanguard, 114%

Series1, Castex, 156%

Series1, Exco, 100%

Series1, EV Energy, 91%

Series1, Vanguard, 100%

Series1, Edgemarc, 194% Series1, White Star, 151%

Series1, Legacy, 99%

Series1, Halcon, 47%

Series1, Alta Mesa, 181%

Series1, Sheridan II, 100% R

BL

Util

izat

ion

at T

ime

of F

iling


Borrowing Base Utilization at Bankruptcy Filing

E&P Bankruptcies (2015 – Present)(1)

(1) Source: Bankruptcy filings, SEC filings, Reorg Research; includes companies which had traditional first lien reserve-based revolving credit facilities in place at filing

50%


Without Liquidity. . .

▪ The private equity-funded acreage play is not flipped

▪ Portfolio marks are increasingly scrutinized given lack of comps

▪ The cash flow outspending pubco is no longer valued on location count

▪ Rendering “net asset value” and “resource potential” bygone vocabulary

▪ Highly funded revolvers lead to lender-initiated liquidation

▪ Booked, non-producing locations are written off

▪ Often old lenders become new owners in any development financings light on production

▪ Approaching maturities mature

▪ Amendments, fees, forbearances and restructurings / debt-equity exchanges

▪ Post-reorg equities trade poorly

▪ Midstream differentiation occurs as hockey sticks are skeptically questioned


Investing From Here: Reversion to an Older Mean

Private Equity ▪ Buy PDP cheap, lever modestly, hedge

Distress / Dislocation

▪ Buy unimpaired secured tranches at discounts, amortize prior to maturity through

sweeps and asset sales

▪ Buy discounted bonds, uptier exchange, recover capital through multiyear distributions

▪ Buy deeply-discounted, PDP-covered bonds, convert to post-reorg equity, recover

capital through multiyear distributions

Non-Bank Lending ▪ Make PDP-covered loans, amortize and hedge

Invest well within established cash flow, a reversion to a pre-2008 mindset, a value approach

Disclosure

Proprietary and Confidential Trade Secret 32

This does not constitute an offer for sale of interests in any Angelo, Gordon funds. Such an offer may only be made by means of the definitive

Confidential Offering Memorandum of a specific Angelo, Gordon fund and will be made exclusively to investors satisfying the applicable eligibility

criteria. There is no representation or guarantee regarding the reliability, accuracy or completeness of this material, and neither Angelo, Gordon &

Co., L.P. (“AG”), its affiliates nor their respective members, officers or employees will be liable for any damages including loss of profits which

result from reliance on this material. A fund investment is very speculative and involves a high degree of risk, not suitable for all investors.

IV.

Financial Advisory in O&G

Rob Albergotti, Managing Director, Alix Partners

December 2, 2019

2019 Distressed Investing Conference

Crisis in the Oilpatch - Danger or Opportunity for Lenders and Distressed Investors?

35

Emerging Trends in Distressed Energy

Exploration & Production Oil Field Services & EquipmentMidstream Oil & Gas

• Prolonged period of lower commodity

prices is leading to increased distress

across all types of producers

• Areas in the Permian Basin are starting

to show weakness compounded by

lower commodity prices and continued

bottlenecks in midstream capacity

• Reserve Based Lenders are increasingly

flexing their muscles as the primary

secured lender. In a number of

situations these lenders are no longer

willing to wait for junior creditors to

provide reorganization solutions

• Producers heavily weighted to gas

production are seeing liquidity buffers

exhausted as hedge portfolios roll off

leading to increased pressure on the

capital structure

• Acquisition & Divesture (A&D) market

is extremely challenging leading to

potential need for secured lenders to

rethink their potential for ownership of

oil and gas assets

• Reemergence of the potential to

modifiy / reject midstream contracts

− Badlands, Alta Mesa, EP Energy

• Once the place fixed income traders

“hid” in market is starting to show

cracks

• Not all midstream companies are

created equal, and for the investor

looking to hide out in a “safe”

investment, midstream may not be the

safest place to be

• Historically volatility has been lower on

equity and fixed income pricing in

midstream producers, but caution must

be exercised

• Type of agreement matters, as well as

the place in the value chain the

midstream operator plays

− Gathering & Processing

− Gas or Crude Transport

− Refined Product Transport

− Minimum Volume Commitment /

acreage dedication / capital sharing

• Chapter 11’s in midstream space have

been rare; however, the ones that

have filed have yielded sub-optimal

results for lenders (secured and

unsecured)

• Frac Sand companies are experiencing

significant levels of distress at the

moment as E&P providers slow drilling

programs down and change the types

of frac operations they are performing

− Rail car leases and inefficient sand

mining operations when not running

at high utilization

• Onshore Drilling Services who saw

an uptick in utilization coming out of

2016 / 2017 did not see a material

increase in business are now facing

with significant declines in utilization

and future business. Distress is

starting to show up in the capital

markets for a number operators

• Onshore Ancillary Services typically

are fairing ok in the current

environment, but will likely start to be

pinched as operators continue to

reduce capital spending and focus on

production

• Offshore Operators have been in a

perpetual start of restructuring since

2016 with early movers starting to

benefit; however, as offshore

development slows, they will feel pain

©2019 AlixPartners, LLP.

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CRISIS IN THE OILPATCH – DANGER OR OPPORTUNITY FOR … · School of Business at S.M.U. Elena is fluent in Spanish and Romanian, and conversational in French. Todd Dittmann ANGELO