Magnolia Oil & Gas Corporation · NYSE:MGY
Magnolia Oil & Gas — TPG Pace Energy Holdings — SPAC Merger (March 2018)
31 slides from Magnolia Oil & Gas's SPAC merger presentation, Mar 20, 2018
Slide 1: Magnolia Investor Presentation
Exhibit 99.2 re md \ srs tan eB == PACE ENERGY Magnolia Investor Presentation
Slide 2: Disclaimer
Disclaimer FORWARD LOOKING STATEMENTS The information in this presentation and the oral statements made in connection therewith include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
Slide 3: Transaction Summary
Steve Chazen and TPG raised $650 million through the IPO of a special purpose acquisition company (“SPAC”) in May 2017, called TPG Pace Energy Holdings Corp. (“Pace Energy” or “TPGE”) Pace Energy was established to build a large scale, focused oil & gas business with a meaningful production base, st
Slide 4: Introduction to Magnolia Oil & Gas
Introduction to Magnolia Oil & Gas TPGE has entered into an agreement with EnerVest to create Magnolia through the carve-out of its South Texas Division (Eagle Ford & Austin Chalk) for ~$2.66 billion(1) $650 million cash from IPO $355 million PIPE $300 million Senior Notes $1.2 billion retained Ener
Slide 5: Acquisition Delivers on The Steve Chazen Playbook
Acquisition Delivers on The Steve Chazen Playbook Steve Chazen Playbook Magnolia Core Karnes County acreage with some of the best economics in the U.S. Infrastructure in place / limited basin differential concerns Attractive realized prices with access to the Gulf Coast demand markets Highly economi
Slide 6: High-quality, low-risk pure-play South Texas operator
High-quality, low-risk pure-play South Texas operator with a core Eagle Ford and Austin Chalk position Significant scale and PDP base generates material free cash flow, reduces development risk and increases optionality Core Karnes County Position Some of the most prolific acreage in Karnes County,
Slide 7: Value Creation Plan: Multiple Drivers of Share Price Accretion
Value Creation Plan: Multiple Drivers of Share Price Accretion Magnolia will focus on extracting money from oil rather than just extracting oil from the ground Compelling Value Proposition Overriding goal is to maximize shareholder returns We believe this can be achieved through a combination of: St
Slide 8: Industry Leading Fundamentals at a Discounted Purchase Multiple
Industry Leading Fundamentals at a Discounted Purchase Multiple U.S. Independents <1.5x 2018E Leverage >8% Production CAGR (2017E-2019E) 2018E and 2019E FCF Positive Source: Company filings, FactSet consensus peer projections as of 3/16/2018. Note: U.S. Independents include: APA, APC, AR, BBG, CDEV,
Slide 9: Magnolia Comparable Companies
Magnolia Comparable Companies Source: Company filings, FactSet consensus peer projections as of 3/17/2018. Note: See slide 25 (Financial Projections) for 2018E forecast assumptions related to Magnolia. (1) Free Cash Flow Yield calculated as 2018E Free Cash Flow divided by equity market capitalizatio
Slide 10: Karnes County – Core Eagle Ford and World Class Austin Chalk
World-class acreage footprint located in the core of the Eagle Ford, substantially de-risked 14,070 net acres (28,886 gross acres), 65% operated, 88% HBP, 31 Mboe/d current production (73% oil, 86% liquids) EOG represents ~50% of non-operated interest Steady production growth while generating substa
Slide 11: Karnes County has some of the Top Economics in North America
Karnes County has some of the Top Economics in North America Karnes has some of the highest U.S. IPs… Note: Magnolia type curves normalized to 5,000’ laterals. Projections based on flat $58 WTI and $2.75 Henry Hub pricing. Commodity percentage splits represent first 24 months of production. Source:
Slide 12: Giddings Field – Austin Chalk Redeveloping as an Emerging Play
Giddings Field – Austin Chalk Redeveloping as an Emerging Play Giddings Asset Overview Emerging, high-growth asset with extensive inventory potential and significant development flexibility ~345,000+ net acres, 99%+ HBP and ~87% operated, 9.3 Mboe/d current production(1) (28% oil, 55% liquids) HBP n
Slide 13: Giddings – Early Results Indicate Large Development Potential
Giddings – Early Results Indicate Large Development Potential Application of modern high intensity slickwater completions have unlocked significant reserves previously thought inaccessible Recent Giddings Results Magnolia Giddings Footprint Note: Giddings Results shown on a Gross Pre-Royalty Basis.
Slide 14: High quality assets allow for two self sustaining operating areas
High quality assets allow for two self sustaining operating areas Karnes County World class asset that generates substantial free cash flow Engine to fund inorganic growth via acquisitions or to accelerate drilling Giddings Emerging, high growth assets with substantial upside Impressive results to d
Slide 15: Magnolia to Partner with EnerVest to Operate Assets
Magnolia to Partner with EnerVest to Operate Assets Note: EnerVest Organization and South Texas Division statistics are as of YE 2017. (1) 30-Day IP represents max month volumes. Includes data from active producing wells since January 2015. Excludes operators with less than 10 wells. (2) Defined as
Slide 16: Production with Free Cash Flow Generation in 2018+
Production with Free Cash Flow Generation in 2018+ Note: Projections based on flat $58 WTI and $2.75 Henry Hub pricing and include recent acquisition. See slide 25 (Financial Projections) for information regarding rig program, online production, EBITDA generation and cash flow generation projections
Slide 17: Focus on Maintaining High Full-Cycle Operating Margins
Focus on Maintaining High Full-Cycle Operating Margins Focus on full-cycle economics is a distinguishing characteristic compared to many public peers today Illustrative Full Cycle Margin Operations focused on producing best-in-class full-cycle operating margins (inclusive of development costs) Reali
Slide 18: Illustrative Full Cycle Margins at Various Prices
Illustrative Full Cycle Margins at Various Prices Illustrative TPGE estimated F&D costs. F&D costs defined as estimated D&C well capex divided by estimated ultimate production. Illustrative TPGE estimated undeveloped purchase price allocation divided by estimated resource, subject to further diligen
Slide 19: Effective Use of Cash to Maximize Shareholder Returns
Effective Use of Cash to Maximize Shareholder Returns Robust Cumulative Free Cash Flow Note: Projections based on flat $58 WTI and $2.75 Henry Hub pricing and include recent acquisition. See slide 25 (Financial Projections) for 2018E and 2019E forecast assumptions. Potential Uses of Free Cash Flow W
Slide 20: Benefits of Focusing on South Texas
Benefits of Focusing on South Texas Less competition ü Proven plays with significant remaining oil in place ü Favorable differentials and access to Gulf Coast markets ü Attractive cost of doing business in an oilfield-friendly regulatory environment ü Material consolidation opportunities Large numbe
Slide 21: Large opportunity set of potential consolidation targets
Large opportunity set of potential consolidation targets: An increasing number of public companies view South Texas assets as non-core and are not actively allocating capital to the region Several public companies are actively marketing their positions via publicly disclosed sales processes Large nu
Slide 22: Magnolia – Summary Investment Highlights
Magnolia – Summary Investment Highlights ~359,000 net acres across Karnes County and the Giddings Field of South Texas with multi-bench development and stacked pay Coveted position in Karnes Country core with industry leading breakevens between $28 - $32 per barrel(1) Emerging position in the Giddin
Slide 23: Financial Appendix
Financial Appendix
Slide 24: Sources, Uses and Pro Forma Valuation
Sources, Uses and Pro Forma Valuation Note: Projections based on flat $58 WTI and $2.75 Henry Hub pricing and include recent acquisition. Other outstanding instruments from TPGE.U IPO: 21.7 million warrants for 21.7 million shares at $11.50 per share; 10 million founder warrants for 10 million share
Slide 25: Financial Projections
Financial Projections Magnolia Financial Projections Commodity Prices: $58/bbl WTI $2.50/bbl LLS-WTI Differential $2.75/mcf Henry Hub 38% NGL realizations Development Pace: 1 current rig in Karnes, 2nd rig added June 2018 1 current rig in Giddings, 2nd rig added January 2019 Forecast includes impact
Slide 26: Anticipated Transaction Timeline
Anticipated Transaction Timeline Date Event March 20 Transaction Agreements Executed Transaction Announced April / May 2018 Preliminary Proxy Materials Filed with the SEC June 2018 Set Record Date for Shareholder Vote June 2018 Mail Final Proxy Materials to Shareholders Late June 2018 Hold Sharehold
Slide 27: Appendix
Appendix
Slide 28: Pro Forma Management Organization
Pro Forma Management Organization Combined organization will be managed by Steve Chazen leading strategy and capital allocation (drilling, M&A) and will be supported by EnerVest’s existing Operations Team Responsibilities / Corporate Functions Corporate Strategy Capital Allocation Drilling Plan Fina
Slide 29: Magnolia Plans to Execute with the Same Approach as Steve Did at OXY
Magnolia Plans to Execute with the Same Approach as Steve Did at OXY Steve Chazen established his track record as a full cycle money maker and disciplined acquirer Source: Capital IQ, company filings, OXY website. Note: Historical results of OXY are not necessarily indicative of the future performan
Slide 30: Karnes County – Core Eagle Ford and Austin Chalk
Karnes County – Core Eagle Ford and Austin Chalk Eagle Ford Play Heat Map Karnes Overview Karnes Well Spacing Lower Eagle Ford Well Performance(1) Austin Chalk A Austin Chalk B Austin Chalk C Upper EF Lower EF 600’ Spacing 250’ Spacing (“wine racked”) Cum Oil per well per 1,000’ (bbls) Months 300’-
Slide 31: Illustrative Fully Diluted Share Count
Illustrative Fully Diluted Share Count (1) Assumes treasury share method for warrants. (2) 21.7 million public warrants issued as part of IPO with strike price of $11.50 and redemption price of $18.00. (3) 10 million sponsor warrants issued as part of IPO with strike price of $11.50. (4) Seller shar