Baron Energy, Inc.
Company Overview
December 15, 2011
Safe Harbor Statement
This presentation includes “forward-looking statements.” All statements, other than statements of historical facts, included in this presentation that address activities, events, or developments that the Company expects, believes, or anticipates will or may occur in the future are forward-looking statements. These statements include but are not limited to forward-looking statements about acquisitions and the expectations of plans, strategies, objectives, and anticipated financial and operating results of the Company, including the Company’s drilling program, production, hedging activities, expenditure levels, and other information included in this presentation. These statements are based on certain assumptions made by the Company based on management’s experience and perception of historical trends, current conditions, anticipated future developments, and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include risks relating to the Company’s financial performance and results, availability of sufficient cash flow to execute its business plan, ability to secure funding for acquisitions, prices, and demand for oil, gas, and natural gas liquids, the ability to replace reserves and efficiently develop current reserves and other important factors that could cause actual results to differ materially from those projected in this presentation. Any forward- looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events, or otherwise.
Introduction
➢ On February 22, 2010, Baron Energy, Inc. merged with two privately held companies with oil and gas properties and operations in West Texas
➢ The merger brought with it a seasoned management team, new board of directors, and a new business strategy to acquire and exploit oil production within a core area of North Central and West Texas
➢ In December 2010, Baron sold most of its non-operated oil and gas properties in order to focus on operated only properties
➢ This new strategy is now underway
Company Overview
• HQ in New Braunfels, Texas
• OTC Markets: BROE.PK
• Shares outstanding: 54.4 million; 15 million float
• Current Price (12/15/11): $0.03/share
• 3 month average volume: 36,614 shares/day
• 52 week range: $0.025 – $0.14/share
• Current Market Cap: $1.6 million
• Total Debt: $2.7 million
A corporate vision and strategy proven during more than 10 years of regional transactions and operating history
➢ Baron grows its production and revenue by:
- Acquisition of producing properties with upside
- Production enhancements: workovers, reactivations, recompletions, and in-fill drilling
➢ Focused on conventional oil production
➢ Operate in North Central and West Texas
➢ Management has over 60-years of industry experience; 30 years in business development; executed more than 75 transactions within the past 10 years; strong operating background; worked together for 18 years
➢ Management has an established track record of results
Management Averages Over 30 Years of Oil and Gas Experience
➢ Ronnie L. Steinocher – Chairman, President and CEO: More than 32 years of oil and gas experience including 18 years with Conoco Inc. Co-founder and owner/operator of independent oil and gas companies since 2001. Extensive experience in drilling, production, reservoir, and operations engineering, oil and gas investment evaluation, deal structuring, fund sourcing, business development, including major acquisitions both international and domestic, and general management. BS in Civil Engineering, The University of Texas at Austin. Member of the Society of Petroleum Engineers. Licensed professional engineer in Texas.
➢ Lisa P. Hamilton – Executive Vice President, Chief Financial Officer and Director: More than 30 years of oil and gas experience including 20 years with Conoco Inc. Co-founder and owner/operator of independent oil and gas companies since 2001. Career includes finance, accounting, land administration, pipeline, right-of-way, contracts, risk management, business development, international oil and gas, deal structuring, banking, fund sourcing, and general management. BS in Business Administration with Highest Honors, University of Houston – Downtown.
Core Area of Operations is located in North Central and West Texas where management has operated for the past 10 years
Baron Energy, Inc. Core Area of Operations
HQ New Braunfels, Texas
PRESIDAG
HANS, FORD
MUORE
ARKANSAS
NE
VAL VERDE
GULF OF MEXICO
Core Operating Area
- North Central and West Texas
- 55 Counties
- 52,982 square miles
- 34 million acres
- 650,000 BOPD production
- 88,500 producing oil wells
- 36,500 shut-in wells
- Multiple pay zones
Well and production data from Texas Railroad Commission 2010
Operators in core area range from the largest to the smallest
➢ Many major oil companies continue to operate in West Texas
- ExxonMobil
- Chevron
- ConocoPhillips
➢ Smallest operator is a sole proprietorship
➢ 7,618 oil and gas companies operate in Texas
Data from Texas Railroad Commission 2010
Operating Status
- Annualized revenue of ~$1.2 million, an increase of ~300% since 1/1/11
- Net production 36 BOPD; gross 70 BOPD, an increase of ~200% since 1/1/11
- 100% oil production; 28 producers; 27 operated
- 12.5% to 100% WI ownership in leases
- Well depths range from 1,700 to 7,700 feet
- More than 2,300 acres in 8 Texas counties
- Ongoing field programs to increase production
- Continuous acquisitions program
- More than 10 future drilling locations, all with multiple pay zones
- Long-life oil production (> 30 years)
Preferred criteria used to identify acquisition candidates
- Located in core area
- Current production
- Operatorship
- Upside via workovers, reactivations, recompletions, in-fill drilling
- Well depths less than 5,000 feet
- Multiple pay zones
- Private negotiation
Production is increased by a balanced mixture of different programs
20% Acquisitions
15% Enhancements
25% Workovers
20% Reactivations
10% Recompletions
10% In-Fill Drilling
Number of Producing Wells
Number of Producing Wells (Beginning of Month) 2011-2012
Gross oil sales by truck load in 2011
Gross Oil Sales by Truck Load (170 BO) (Does not include pending acquisitions)
Beginning of Month Net Production
Proj 2011-2012
West Texas Intermediate Crude Oil Prices
WTI Crude Oil Prices 2010-2011
Revenue and Operating Cash Flow (OCF)
Revenue OCF
Est. Revenue and OCF
Highlights
- Potential for significant value increase over the next 12 months
- Understandable business plan driven by a focused strategy
- Veteran management team; worked together for >18 years
- Management’s 24% ownership directly aligned with shareholders
- Operate all but one property
- Conventional oil production in the defined core area
- Hedging used to fix price downside and reduce revenue volatility
- Rolling inventory of at least 5-7 acquisition candidates at all times
- Audited financials pending; soon to be fully SEC compliant
Keeping the pace will provide a significant increase in the number of producers and production within 12 months
Current State 12/15/11
Future State
Future State 1/31/12
12/31/12
Future State High 12/31/12
Net BOEPD 36 45-70 300 500
Producers/SI (est.)
24/4 35/120 120/200 400
Avg Net BOEPD/well
1.8 0.75 1.6 1.25
Gross Acres (est.)
2,300 7,500 14,000 20,000
- Future State estimates are based on management’s current judgment and may be higher or lower depending on the success of the Company’s acquisition programs
- Current per well production range is 0.5 to 14 BOPD gross
- Future State High Case would include a large acquisition
Larger producing properties are also under consideration for acquisition
➢ Example of the types of larger properties under consideration for acquisition:
✓ Located in Core Area
✓ 20-100 BOEPD gross
✓ 12-75 producing wells
✓ Water disposal available
✓ 300 to 4,000 acres
✓ Upside via workovers, reactivations, recompletions, and in-fill drilling
Inventory of Potential Acquisitions
➢ The Company keeps a rolling inventory for producing property acquisitions; this inventory is updated monthly or as needed
➢ Current inventory consists of 12 properties ranging from 4 BOPD to 140 BOEPD
➢ All projects on the acquisition list have upside in line with the Company’s stated criteria
1Q 2012 TARGETS
- 1) Complete audited financials
- 2) Restructure debt
- 3) Close on at least 3 acquisitions (pending)
- Two with options to raise WI% in current properties
- Two under LOI to close prior to year-end
- 4) Target 1Q 2012 45-70 BOEPD NET (> 120 BOEPD Gross)
- 5) Return to OTCBB
- 6) Increase market awareness
Plan to Increase Shareholder Value
➢ Build a solid base of operated properties generating growing, predictable cash flows
➢ Increase production continually; stay on pace
➢ Restructure and reduce debt
➢ Develop and implement a Strategic Plan that will increase shareholder value and create increased liquidity by:
- Merging with another public growth-oriented company
- Merging with a private company; Baron as survivor
- Making a major producing property acquisition
➢ Strategic Plan to be finalized NLT December 31, 2011
Plans for 2012
➢ Continue to drive production upward
- Target 300-500 BOEPD net by year-end 2012
➢ Continue to make bolt-on acquisitions
- Target closing 6-12 bolt-on acquisitions in Core Area
➢ Restructure and reduce debt
➢ Implement Strategic Plan; increase shareholder value and liquidity
- Merging with another public growth-oriented company
- Preliminary talks
- Merging with a private company; Baron as survivor
- Preliminary talks
- Making a major producing property acquisition
- Multiple projects under evaluation
- 50 to 200 BOEPD range
- Target date of May 1, 2012
Examples
Bolt-on Acquisitions and Production Enhancement Programs 2011
Bolt-on Acquisitions and Production Enhancement Programs
- Baron seeks to acquire bolt-on properties local to its current operations
- The properties should have near-term potential to increase production
- Successful bolt-on acquisitions will lead to other opportunities in the local area
Acquire and Enhance Project
Strawn Production
Production Keller Leases 1700-2100′
Young County, Texas
Baron acquires property and begins enhancement programs
2007-2011
Reactivation Project
Canyon Production
Production Green Leases 4500′
Baylor County, Texas
Baron starts operations to begin production
2008-2011
Reactivation Project
Gunsight Production
Production Parish Lease 1700′
Archer County, Texas
Baron acquires lease and begins reactivation program
2008-2011
Number of producing wells, production, and acreage will continue to ramp up in 2012
2010 YE (Actual)
1Q 2012
2012 YE (Estimated)
(Target) Producers 4 35-70 400
BOPD (gross) 16 85-120 800
Texas Counties 5 8-10 16
Acres (est.) 2,300 3,500-7,500 20,000
Notes:
- 2011 YE estimates are based on the closing of pending acquisitions by year-end.
- 2012 YE targets are based on current work program and budget for 2012. This may change up or down due to company and/or market conditions.
- Production numbers are gross; net production will depend on final working interest ownership on acquisitions.
Company Contact
Baron Energy, Inc.
392 West Mill Street New Braunfels, Texas 78130 Phone / Fax (830) 608-0300