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Business Strategy
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The principal elements of our business strategy are designed to grow our reserves, production volumes and cash flows at a positive return on invested capital. We intend to accomplish this by focusing on the following key strategies:

Exploit Existing Properties Through the Drillbit
We seek to maximize the value of our existing asset base by developing properties that have existing production and reserve growth potential. We have identified a total of approximately 26 gross Lower Marcellus and 48 Upper Marcellus additional drilling locations in the Marcellus Assets, 150 gross drilling locations in our Wilmington Field oil properties, and 175 gross CBM drilling locations in our Wyoming properties. Our drilling locations are located in mature fields with established production profiles and supported by existing infrastructure and end markets.

Increase Production and Increase Proved Developed Producing Reserves from our Existing Oil and Gas Asset Base
We intend to increase our proved reserves and production in future years by drilling wells on our properties with undeveloped reserves or with resource potential.

Invest our Capital in a Disciplined Manner and Maintain a Strong Financial Position
We focus on utilizing our available capital on projects where we believe we are likely to have success in increasing production and/or proved reserves at attractive returns. We believe that maintaining a strong financial position will allow us to capitalize on investment opportunities in all commodity cycles. Our capital programs are generally developed to be funded through internally generated cash flows and the use of our credit line, but we also may obtain alternative sources of capital to develop our assets through partnerships, joint ventures or other investment opportunities with third parties or additional debt or equity. We hedge a portion of our production and generally utilize long-term sales contracts to maintain a strong financial position and provide us with the cash flow necessary for the development of our assets.

Control Operations and Reduce Costs Through Economies of Scale and Efficient Operations
As we continue to increase our production and develop our existing properties, we expect that our cost structure will benefit from economies of scale. We seek to exert more control over costs and timing in our exploration, development, production and operating activities. We seek to serve as the operator of the wells in which we have a significant interest. As the operator, we are better positioned to control the timing and plans for future enhancement and exploitation efforts, the costs of drilling, completing, enhancing and producing the wells, and the marketing negotiations for our gas and oil production. We believe this enables us to maximize both production volumes and wellhead prices.

Acquire Additional Assets
We have been successful in expanding operations through targeted acquisitions in our core areas of expertise. For example, our expertise in coalbed methane, waterflood and horizontal drilling lead to the acquisitions of the Atlantic Rim Project, Leroy Pine Project, Wilmington Townlot Unit, North Wilmington Unit, and Marcellus Assets. We will continue to review asset acquisitions that meet our economic criteria with a focus on development potential of oil and gas properties that can be developed at a reasonable cost.

Manage Commodity Price Exposure Through an Active Derivatives Program
We actively seek to minimize our future exposure to commodity price fluctuations by entering into oil and natural gas derivatives. We target hedging of approximately 50% of our anticipated annual oil and gas production and expect to continue this target after the acquisition of the Marcellus Assets.

Business Strengths

We have a number of strengths that we believe will help us successfully execute our business strategies, including:

Commodity Balanced Diverse Asset Portfolio We have historically grown our asset base and diversified our production through California oil property acquisitions in the Los Angeles Basin and Santa Maria basin and natural gas property acquisition in Wyoming. In each of our areas of operations we are achieving attractive rates of returns with low geological risk. With the Citrus Acquisition, we are continuing this type of growth and diversification strategy. We believe our diverse asset base provides us with the flexibility to reallocate capital among our assets depending on fluctuations in oil and natural gas prices as well as area economics.

High Degree of Operational Control and Flexibility As of December 31, 2013, we were the operator of record or actively participated in the management and operations for 93% of our producing wells. We intend to operate 100% of the wells that we are acquiring in the Marcellus Assets. We generally prefer to retain operating control over our properties, which allows us to more effectively control operating costs, timing of development activities and technological enhancements, marketing of production, and allocation of our capital budget. In addition, the timing of most of our capital expenditures is discretionary, which allows us a significant degree of flexibility to adjust the size of our capital budget. We finance our drilling budget primarily through our internally generated operating cash flows and the use of our line of credit.

Experienced Management and Operational Teams Our core team of technical staff and operating managers has broad industry experience, including substantial experience in horizontal and directional drilling, waterflood recovery operations and CBM development and completion. In addition, all of Citrus’ approximately 20 key technical, operating and land personnel transitioned over to Warren as full-time employees following the Citrus acquisition, including Zach Waite, our new Vice President of Business Development and Marcellus Operations, and Dan Collins, Vice President of Marcellus Land. Each of our operational teams in our Pennsylvania, California and Wyoming projects has extensive operating experience in their respective geographic areas.

Significant Financial Flexibility We employ a disciplined approach to our capital structure that provides us financial flexibility through the use of leverage, aligning capital expenditures to cash flows and maintaining a strategic derivatives program. As of March 31, 2014, on a pro forma basis after giving effect to the Citrus Acquisition and related borrowings, we would have had a total liquidity of approximately $116.5 million, consisting of cash of $1.8 million and borrowing capacity of $114.6 million under our Credit Facility. On a combined basis (using Warren information as of December 31, 2013 and Citrus information as of June 30, 2014), we have a PV-10 Value of $694 million, equivalent to approximately 1.7 times our pro forma combined total long-term debt at March 31, 2014.


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