Online at (http://www.walden3d.com/ces)
CES, LLC. et al (CES) has entered into an agreement with Texas Independent Exploration, Inc. et al (TIE) to create a new C Corporation (C Corp). Monies from this private offering will be used by CES to acquire ownership interests in 20 of TIE's producing natural gas fields and surrounding leasehold in Louisiana and Texas in order to constitute the new C Corp. This C Corp will leverage technologies available through CES.
CES seeks $15 million in investment capital for the following purposes related to this transaction:
This will be a negotiated investment. The principals will present the details of
the Business Plan on October ____, 1999. No offers will be considered that are
subject to contingency financing. The effective date of the sale will be January
1, 2000.
TIE is selling to CES a 75% interest in 20 natural gas and oil
fields and surrounding leasehold in Louisiana and Texas. Net yearly gas production
will be 4.7 BCF in 1999. Proved Developed Producing (PDP) reserves in 2000 are
estimated to be valued at a PV10 of $10,980,000. Most production is currently
centered in southeast Texas.
Net to Gross interest holding in production is 52%, increasing to over 60% by
2003. Net gas production will have increased to 13 BCF, and Net Cash Flow (NCF) will have
increase fourfold from $5.7 million/yr to $23.5 million/yr by 2004 (since both %
interest and production volumes are increasing). This growth is accomplished with
a low risk PROVEN/PROBABLE drilling program centered around known gas fields
rather than from a higher risk, wildcat exploration program. Also, most
properties are operated by TIE, and operating expenses are tightly controlled.
Most production will be in south Louisiana by 2004.
Concerning present valuation, Total Net Reserves of the 20 fields are 180 BCF of gas and 10.2 million barrels of oil and condensate. Total PV10, using escalating but conservative prices, is $250 million. Net Proved Reserves are 99 BCF gas and 900,000 bbl oil and condensate. Total Proved PV10, using conservative but escalated prices, is $154 million. Risked valuation of the Proved PV10 is $112 million. Approximately 80% of future revenue is from natural gas sales.
CES will invest $5 million into a new drilling and acquisitions fund. Additional funds will come from the NCF of the company, $11million will be contributed from TIE's remaining working interest in the properties, and a $2.5 million credit facility will be collateralized by NCF of the company. TIE has acquired 3D seismic surveys over 7 of the 20 fields, and has evaluated costs and drilling schedules for bringing onto production the PDNP and PUD of the fields. In addition, CES has run a portfolio management model of the new C Corp that balances cash flow versus production growth to develop a drilling schedule for the first 7 years of the new C Corp. The plan involves drilling the PUDs, completing the PDNP, acquiring additional 3D seismic and working up drilling prospects for bringing online a significant percentage of the Probable reserves from these fields. The C Corp portfolio will also evaluate and invest in "surrogates", or fields nearby that have production profiles that fit the requirements for cash flow and growth required by the portfolio.
In 2000, PUDs and completed PDNP programs are executed in 17 of the 20 fields.
Significant wells are drilled in 5 of the fields. Additional 3D seismic is
acquired and worked to develop drilling targets for 2001.
In 2001, NCF of the new C Corp increases to $14.4 million because of the added production developed in the previous year's drilling program. Of this and other funds available to the drilling and acquisitions budget, $5 million is invested in the drilling of PUDs and Probable reserves in 4 fields, and $5.3 million is used to increase interest in 1 field. 2 surrogates are identified and purchased.
In 2002, NCF increases to $17.1 million because of the new production brought on
line in 2000 and 2001. Of this, $7 million is invested in drilling Probable
reserves in 6 fields, and $4.7 million is used to increase interest in 1 field.
One additional surrogate is identified and purchased as well.
In 2003, NCF has grown to $23.5 million from added production from the 2000, 2001 and 2002 drilling programs. Of this, 6 million is invested into drilling Probable reserves in 5 fields. The drilling fund invests an additional $7.8 million in surrogates for the production profiles of 2 fields, and interest is increased in 2 others.
Among leading edge technologies developed by CES for the oil and gas industry, CES is a leader in the introduction of Portfolio Management. The new C Corp will use these technologies to develop a portfolio strategy that manages oil and gas property acquisition and development so that maximum cash flow is delivered, while at the same time allowing for significant growth. Properties will be purchased "just-in-time," immediately worked up and drilled so that the portfolio optimizes return-on-capital-employed. Gas prices will be hedged to shelter against price downturns.
The C Corp portfolio strategy emphasizes liquidity and minimizes non-productive
assets. In 2002, $4.7 million from the NCF of the new C Corp's oil and gas
business will be held in a Capital/Liquidity Fund within the portfolio. In 2003,
another $7.9 million, and in 2004, $7.2 million is added to the fund. It grows to
$30 million by 2005 and $43.2 million by 2006. The fund provides liquidity to buy
the right properties at the right price and the right time in order to exploit
reserves quickly to maximize NCF. In addition, the fund stabilizes profitability
for the new C Corp through the diversification into publicly-traded technologies.
IPO is anticipated in 2002-2003 during the ramp-up of the fund.
Roger Anderson has been a Research Scientist at Columbia University in New York for 26 years. Roger has a Ph.D. from the Scripps Institution of Oceanography and is currently the Managing Director of the Energy Research Center at Columbia (http://www.ldeo.columbia.edu/4d4). He has 6 patents, has authored almost 200 scientific articles on technology, and has created oil and gas business, computation, and networking alliances with "far-field" suppliers such as IBM, GTE/BBN, Lockheed Martin, United Technologies, Boeing and Bell Aerospace. Roger founded Bell Geospace Inc. (http://www.bellgeo.com), 4D Systems Corp. (acquired by Western Geophysical), and is a founder of CES, LLC (http://www.ces-enterprise.com).
Stephen Joseph is an owner and founder of SJR Projects, LLC, which specializes in providing organizational and leadership development for fast growth, early stage companies. He was an Organizational Leadership Consultant with the Covey Leadership Center (now Franklin Covey Co) (http://www.franklincovey.com). Steve is currently a change-management consultant. Additionally, he has seven years of organizational and leadership development experience with Covey clients. Steve was a member of the three-person team that developed and implemented Covey’s consulting methodology. Steve has led consulting efforts in large-scale organizational change for oil industry companies, including a large Mobil refinery and a medium size oil services company.
Roice Nelson is Chief Visualization Officer for Continuum Resources International Corporation (http://www.continuum-corp.com) which was formed by the merger of the Energy Innovations Group and Roice's Walden Visualization Systems. Roice has more than twenty years experience in both entrepreneurial and technical roles in the oil and gas industry, as an explorer and founder of extremely successful new companies. Roice was the Initial founder/employee of Landmark Graphics Corporation, which was bounght for $560 million by Halliburton (http://www.lgc.com). After Landmark, Roice was the founder/Chairman-of-the-Board of HyperMedia Corporation, which was positioned and had the hypermedia technology to become a challenger to Netscape Communications, but was too early to market (before Mosaic, let alone Netscape and Explorer). Roice has been a lifelong entrepreneur and his website contains much of further interest (http://www.walden3d.com).
Rick Zimmerman is sole owner and CEO of Texas Independent Exploration, Inc, a successful natural gas production company with operations in Texas, Louisiana and New Mexico (http://www.walden3d.com/tie). TIE has been in the exploration and production business for 14 years. Rick, of TIE, is in the process of selling the privately held company. He will mentor our C Corp efforts and sit on the Board-of-Directors. He brings a thorough understanding of the independent oil and gas producer and is a true "oil finder."
ATTACHMENTS:
1. ACQUISITION LIST OF 20 TIE FIELDS
2. RESERVES BASE IN PV10 FOR THE 20 FIELDS
3. RESERVES BASE - PRODUCTION
4. INVESTMENT AND DRILLING SCHEDULE
5. C CORP Cas Flow pro froma
6-9. PRODUCTION, NCF, OPERATING, AND DRILLING BUDGETS FOR 2000, 2001, 2002, 2003
