Earthstone Energy — EnerCom Denver 2023
32 slides from Earthstone Energy's conference presentation, Aug 14, 2023
Slide 1: EnerCom Denver Presentation
EnerCom Denver Presentation A u g u s t 1 4 , 2 0 2 3 1 Exhibit 99.2
Slide 2: Disclaimer: Forward-Looking Statements
Disclaimer Forward-Looking Statements This presentation contains forward‐looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements that are
Slide 3: Earthstone's Differentiating Factors
Returns Focused Modest cash flow needed to maintain production levels, creates robust free cash flow generation1 Top Basins / Long Inventory Life Delaware Basin and Midland Basin asset base with ~13 years of high quality inventory life Earthstone’s Differentiating Factors 3 Strategic Consolidator Ei
Slide 4: Corporate Snapshot
Texas New Mexico Corporate Snapshot 4Note: See Appendix for footnotes. Earthstone Acreage Permian Basin Area MIDLAND BASIN DELAWARE BASIN Select Operational Data (Pro Forma Novo) 460 MMBoe Estimated Proved Reserves1 $5.4 Billion Proved PV-10 at Strip1 130 - 135 MBoe/d (41% Oil) 4Q23E Production ~223
Slide 5: Record Production Drives Strong Second Quarter Results
37,000- 35,000 74,000- 70,000 90,000- 86,000 102,000- 98,000 104,000- 96,000 104,000- 96,000 120,000- 115,000 135,000- 130,000 35,509 77,125 94,329 104,766 104,450 105,493 1Q22A 2Q22A 3Q22A 4Q22A 1Q23A 2Q23A 3Q23E 4Q23E Record Production Drives Strong Second Quarter Results 5See Appendix for non-GAA
Slide 6: Highly Accretive Novo Transaction Significantly Expands Delaware Basin Scale
Highly Accretive Novo Transaction Significantly Expands Delaware Basin Scale 6 Acquisition Highlights Pro Forma Snapshot Combined Delaware Basin Acreage Overview 1. Based on Earthstone management estimates for the next twelve months from 5/1/23 and NYMEX strip prices as of 5/24/23; excludes the impa
Slide 7: $1.5B Highly Accretive Delaware Basin Acquisition
$1.5B Highly Accretive Delaware Basin Acquisition1 Net purchase price of $1.0 billion represents 2.7x NTM Adj. EBITDAX, ~30% NTM unlevered FCF yield 2,3 Key Purchase Enhances Scale and Operational Synergies Materially expands existing Delaware Basin footprint and adds basin synergies Meaningful FCF
Slide 8: Novo Acquisition Drives Strong Financial Accretion and Maintains Financial Strength
$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 0.0x 1.0x 2.0x 3.0x 4.0x FY16A FY17A FY18A FY19A FY20A FY21A FY22A ESTE FY23E PF Novo FY24E Adj. EBITDAX Debt / Adj. EBITDAX Novo Acquisition Drives Strong Financial Accretion and Maintains Financial Strength 8 1. Adjusted EBITDAX and FCF estimates
Slide 9: Reserves and Inventory | Earthstone + Novo
76% 24% PD PUD Lea Eddy Culberson Midland / Ector Upton Reagan / Irion Pro Forma 1P Reserves as of 5/1/234 PV-10 Value ($MM) Proved Developed $4,628 Proved Undeveloped $754 Total Proved $5,383 Reserves and Inventory | Earthstone + Novo 9 460 MMBoe ~1,020 Gross Operated Locations Pro Forma 1P PV-10 V
Slide 10: Continued Transformation to Scaled Permian Operator with Multi-Basin Optionality
~15,300 ~133,000 FY2020A 2021-2022 Acquisitions Current Acquisition PF ESTE Continued Transformation to Scaled Permian Operator with Multi-Basin Optionality 10 1. Based on ESTE estimates; PV-10 as of 7/1/21 based on NYMEX strip pricing as of 9/30/21 for Foreland, as of 11/1/21 based on NYMEX strip p
Slide 11: Cumulative PV-10 of Proved Developed Reserves Greater Than Combined Purchase Price
Chisholm Novo Titus IRM Bighorn Tracker -- $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 IRM Tracker Foreland Chisholm Bighorn Titus Novo $ in m ill io n s Continuation of Conservative Valuation Leads to High Impact Valuation 111. Cumulative estimated PV-10 value of the PD reserves based upo
Slide 12: Top-Tier Inventory Solidifies Superior Permian Position
0 50 100 150 200 250 0 2 4 6 8 10 12 C u m u la ti ve G ro ss 2 0 :1 B O E P ro d u ct io n P er W el l ( M B O E) Producing Months Novo Average Earthstone Permian Average Permian Basin Average Bone Spring Wolfcamp Other • Assets are positioned in the core of the Delaware Basin with superior multi-b
Slide 13: Ovation Pad Demonstrates Strong Performance In 5 Distinct Targets
G ro ss T h ic kn es s ~ 4 ,5 0 0’ 22-Well Novo Ovation Pad Demonstrates Strong Performance In 5 Distinct Targets at Full Development Spacing 13 • Acquisition underwriting assumes Ovation targeting, well spacing and well density on a go-forward basis • Additional significant upside in Break Sand (Ha
Slide 14: Strategic Divestitures in the Past Twelve Months
Strategic Divestitures in the Past Twelve Months 14 Earthstone Divestitures • Earthstone has netted >$100 MM from selling non-core assets in the Midland Basin/Eagle Ford over the past year • Proceeds used to repay RBL debt Date July 2022 December 2022 May 2023 Geographical Area Eagle Ford Midland Ba
Slide 15: Robust Value Growth in Proved Reserves
$0.5 B 79 MMBoe $2.0 B 148 MMBoe $7.8 B 368 MMBoe $4.6 B 352 MMBoe¹ $5.4 B 460 MMBoe² $4.0 B YE20 SEC Pricing YE21 SEC Pricing YE22 SEC Pricing 1/1/23 Reserves 12/30/22 Strip¹ 5/1/23 Reserves 05/24/23 Strip² Enterprise Value³ PUD PD Shareholder Value Accretion Reflected in Significant Proved Reserve
Slide 16: Deep Inventory of High-Return Drilling Locations
MIDLAND New Mexico Earthstone Acreage Texas Deep Inventory of High-Return Drilling Locations 16 Recent Well Results # Pad Peak IP-30 (Boepd) Oil (%) Lateral Length (ft) WI (%) 1 Lonesome Dove (4 Wells) 1,762 72% ~7,710’ 90% 2 Cattlemen (2 Wells) 1,934 67% ~7,722’ 67% 3 Barnhart (4 Wells) 1,032¹ 86%
Slide 17: Step-Change Improvements in ESTE Trading Liquidity
Step-Change Improvements in ESTE Trading Liquidity 17 Source: Factset data as of 8/8/23. • Warburg Pincus recent stock sale of 12.9 MM shares to increase float by ~25% and is expected to increase trading liquidity ESTE Average Daily Trading Volume (MM shares)ESTE Average Daily Dollars Traded ($MM) $
Slide 18: Earthstone Offers an Attractive Value Opportunity
2.9x 6.0x 5.4x 4.0x 3.8x 3.4x 3.4x 2.8x 4.8x 4.7x 3.5x 3.4x 2.3x ESTE Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 20% 7% 10% 8% 9% 11% 11% 13% 9% 15% 16% 16% 19% ESTE Peer 1 Peer 2 Peer 7 Peer 3 Peer 6 Peer 5 Peer 4 Peer 8 Peer 10 Peer 11 Peer 12 Peer 9 Ear
Slide 19: Recently Published Inaugural Sustainability Report
Recently Published Inaugural Sustainability Report 19 Minimized Air Emissions Installed Vapor Recovery Towers (“VRTs”) and Vapor Recovery Units (“VRUs”) with tank battery construction minimizes air emissions ✓ Targeted Zero Flaring Connected natural gas pipelines ahead of flowback and first producti
Slide 20: Company Guidance
Company Guidance 20 Note: Guidance is forward-looking information that is subject to considerable change and numerous risks and uncertainties, many of which are beyond Earthstone’s control. See “Forward-Looking Statements”. Guidance assumes Novo transaction closes on August 15th 2023. 1. Cash G&A is
Slide 21: Earthstone Presents A Compelling Investment Opportunity
Earthstone Presents A Compelling Investment Opportunity 21 Earthstone Management has consistently shown fundamental conservatism in assessing and executing a broader corporate strategy of value driven investment in high quality assets, operating cost leadership, and management of its balance sheet o
Slide 22: Appendix
Appendix 22
Slide 23: Oil and Gas Hedge Summary
Oil and Gas Hedge Summary 23 Oil Hedge Positions (WTI based, Bbls/d, and $/Bbl)¹ Natural Gas Hedge Positions (HH based, MMBtu/d, and $/MMBtu)² Focused on protecting cash flow while leaving upside for a stronger commodity outlook • Utilize a mix of collars, swaps and puts on oil and gas production •
Slide 24: Oil and Gas Hedge Positions
Oil and Gas Hedge Positions 24Note: Hedgebook as of 8/2/23. WTI Oil Hedges - Swaps HH Gas Hedges - Swaps Oil Swap Schedule Period Volume (Bbls) Volume (Bbls/d) $/Bbl Period Volume (MMBtu) Volume (MMBtu/d) $/MMBtu 2Q 2023 409,500 4,500 $76.94 2Q 2023 1,137,500 12,500 $3.349 3Q 2023 492,000 5,348 $75.
Slide 25: Reconciliation of Non-GAAP Financial Measure – Adjusted EBITDAX
Reconciliation of Non-GAAP Financial Measure – Adjusted EBITDAX 25 2Q 2023 Adjusted EBITDAX ($ in 000s) 1. Consists of expense for non-cash equity awards and cash-based liability awards that are expected to be settled in cash. On February 8, 2023, cash-based liability awards were settled in the amou
Slide 26: Reconciliation of Non-GAAP Financial Measure – Free Cash Flow
Reconciliation of Non-GAAP Financial Measure – Free Cash Flow 26 2Q 2023 Free Cash Flow ($ in 000s) Free Cash Flow is a non-GAAP financial measure that Earthstone uses as an indicator of our ability to fund our development activities and reduce our leverage. Earthstone defines Free Cash Flow as Net
Slide 27: Estimated Proved Reserves Summary as of 5/1/23
Estimated Proved Reserves Summary as of 5/1/23 at NYMEX Strip Pricing as of 5/24/23 27 This summary of proved developed reserve volumes and values as shown in the table below is based on management estimates and has been prepared as of May 1, 2023, utilizing NYMEX strip benchmark prices and basis di
Slide 28: SEC Proved Reserves Summary & PV-10 – Year-End 2022
SEC Proved Reserves Summary & PV-10 – Year-End 2022 28 Year-End 2022 SEC Proved Reserves Reconciliation of PV-10 As shown in the table below, Earthstone’s estimated proved reserves at year end 2022 were estimated by Cawley, Gillespie & Associates, Inc. (“CGA”), independent petroleum engineers, and w
Slide 29: SEC Stand-Alone Reserves Summary & PV-10 – Year-End 2021
SEC Stand-Alone Reserves Summary & PV-10 – Year-End 2021 29 Stand-Alone Year-End 2021 SEC Proved Reserves Reconciliation of PV-10 As shown in the table below, Earthstone’s stand-alone estimated proved reserves at year end 2021 were independently estimated by CGA and which was prepared in accordance
Slide 30: SEC Stand-Alone Reserves Summary & PV-10 – Year-End 2020
SEC Stand-Alone Reserves Summary & PV-10 – Year-End 2020 30 Year-End 2020 SEC Proved Reserves Reconciliation of PV-10 Earthstone’s proved reserves as of December 31, 2020 were independently estimated by CGA, utilizing SEC prescribed oil and gas prices of $39.57/bbl and $1.985/mmbtu, respectively, ca
Slide 31: Market Capitalization Table
Market Capitalization Table 31 Provided as of 8/2/2023¹ 1. Based on current shares outstanding (as of 7/25/23). 2. Based on current shares outstanding (as of 7/25/23) and ESTE estimated net debt at 7/31/23, as adjusted for the expected 8/15/23 closing of Novo, including the midpoint of ESTE manageme
Slide 32: Notes and Supplemental Information
1. Free cash flow is a non-GAAP financial measure defined as Adjusted EBITDAX less interest expense, net, less the current portion of income tax expense, less accrual-based capital expenditures. See Appendix for reconciliation of non-GAAP financial measures. 2. Leverage is a non-GAAP financial measu