EFTA02691629.pdf

Regent Street Energy Western Canadian Natural Gas \\\\\\111 RegentStreetCapita I One Sound Shore Drive, Suite 102 I Greenwich, CT 06830 I 203.202.3613 I regentstreetcap.com EFTA_R1_02033969 EFTA02691629 Executive Summary 11 ilAIR11111 Today's natural gas market in Western Canada offers a unique opportunity to invest in natural gas producing assets at prices substantially below their long-term values. Certain structural elements in the market are holding natural gas prices artificially low. While these elements may linger for several more years, they are unsustainable and will in time reverse. This creates a once-in-a-generation opportunity to enter the natural gas market at very attractive prices. Regent Street Capital is creating an investment vehicle to capitalize on this unique opportunity. Regent Street Energy will invest in Western Canadian natural gas assets. It will conduct a disciplined acquisition program. It will build a portfolio of quality natural gas assets. It will efficiently manage those assets, or partner with best-in-class operators. It will hold those assets until the market revalues them. Regent Street expects the revaluation process to take 7 to 10 years. The fund will be managed by Kent Whitaker, an energy industry veteran with more than 25 years experience in all aspects of the energy markets. Kent will make a large personal investment in Regent Street Energy. RegentStreetCa pita 2 EFTA_R1_02033970 EFTA02691630 Our Edge This opportunity fits Regent Street's core competency perfectly. Regent Street's founder and principal, Kent Whitaker, has been involved in the energy markets for the last 25+ years. He will manage the program and invest a sizable portion of his net worth in the fund. • Has invested his own and 3r4-party capital in the energy industry for the last 13 years. • Researched and invested in the early pioneers of shale gas production. • Has evaluated 100s of projects in all aspects of the oil and gas industry, including drilling projects, development projects, acquisitions, and divestments. • Was an exploration geologist with primary responsibilities in North Dakota and Texas. • Founded Regent Street Capital in April of 2006. Each of his funds has outperformed the S&P 500 since inception after all fees and expenses. See Kent's curriculum vitae at the end of this presentation. RegentStreetCa pita 3 EFTA_R1_02033971 EFTA02691631 The Situation North American natural gas prices have collapsed... Henry Hub Natural Gas Prices - $/mcf $16 $14 • $12 $10 $8 $6 $4 $2 $0 0 5$<° e 0 Si\ e 00 e as9 •s9 <'tit' Pi,' *if ti) N:1b & < & le V O V. O N.0 O VC̀' pc) yr") Oc N.() OG Source: Bloomberg. RegentStreetCapita 4 EFTA_R1_02033972 EFTA02691632 The Situation ...as a result of an influx of cheap natural gas from shale in the United States. Natural Gas Produced From Shale, U.S. — BCF/Day 30 — 25 Other Shales 20 .0 a • .• e d. Marcellus • 15 I 40 era ••• 0.de 41. ••• 10 le oil,. * Haynesville Shale C elm. IS inlo Barnett Shale ........ co N 03 cn ▪ CV CNI Crl CO 0 0 0 0 9 O 0 9 7 C 1 to -• - 03 RegentStreetCapita I EFTA R1_02033973 EFTA02691633 The Situation M 111111111111•111111rAgill Depressed prices have crippled natural gas producers across North American, but particularly in Western Canada. U.S. shale gas has displaced traditional Canadian exports to the U.S. West Coast Market *# RegentStreetCa pita 6 EFTA_R1_02033974 EFTA02691634 The Situation MS1111INIMINIFFSI This has created one of the best buyer's markets for natural gas assets in the last several decades. Here are some quotes: "I could count on one hand the purchasers of producing properties with cash in Western Canada" Banker active in Western Canada "We are buying properties for 3-3 Y2 times cash flow even at today's depressed natural gas prices" CEO of a company buying properties "Two years ago, 25 potential buyers would visit the data room; we would receive 8-10 bids. Today, we are lucky to get one or two bids. Sometimes we do not get any bids." Banker active in Western Canada RegentStreetCa pita 7 EFTA_R1_02033975 EFTA02691635 The Situation We expect distressed conditions to persist in the coming 12-24 months as the Marcellus shale in the U.S. continues to grow. But, starting in 2016, we expect the growth in gas production from the Marcellus to slow as the initial wells begin their decline. North American gas production in total has already started to level off despite growth from the Marcellus due to production declines elsewhere on the continent. RegentStreetCaprta FFT;.R 1_0.,C3H76 EFTA02691636 The Situation In addition, a number of natural gas liquefaction facilities on Canada's West Coast will require large incremental supplies of natural gas by 2020. Disposition of Canadian Natural Gas Production — BCF/Day 35.0 Actual Forecast 30.0 Incremental gas required to 25.0 supply proposed, but not yet approved, LNG plants. m 15.0 Incremental gas required to supply fully approved LNG plants. 10.0 Incremental gas required to offset existing decline in 5.0 Canadian natural gas production. . „ 00 ‘i la 0 It 0 N CO 8 2 72. N 2 2 '4 ; 22,9g; PI N1 O u1 0000 000000000000 0000000 N N N N N N N N N N N N N N N N N N N N N N N RegentStreetCa pita 9 EFTA_R1_02033977 EFTA02691637 The Situation Many owners of natural gas assets in Western Canada are not willing to wait for the recovery. Some have too much debt. Others have "better" opportunities elsewhere. We estimate there are $8-12 billion of assets on the market today in Western Canada. Patient, long-term investors can acquire natural gas assets in Western Canada at prices substantially below their long-term values. RegentStreetCapitaI 10 EFTA_R1_02033978 EFTA02691638  Regent Street Energy Regent Street Capital is creating a special purpose vehicle to capture this opportunity. Regent Street Energy (a Canadian corporation) will raise capital by issuing equity to private investors and invest in Western Canadian natural gas assets. Mgt & Incentive $100 million Regent Street Fees Equity Private Capital Capital Capital Regent Street Payout in 2020- Directs the 2022 activities of RSE Energy Western Canadian Natural Gas Assets RegentStreetCa pita 11 EFTA_R1_02033979 EFTA02691639 Regent Street Energy ✓ Regent Street Energy (RSE) will issue debt (not to exceed 2x operating cash flow) to supplement equity capital. ✓ RSE will use the proceeds to invest in Western Canadian natural gas assets. ✓ RSE will manage the natural gas assets and reinvest operating cash flow. ✓ RSE will seek a liquidity event beginning in 2020. Possible liquidity events include an initial public offering of RSE, the private sale of RSE to a larger energy company, and the sale of RSE assets. RegentStreetCa pita 12 EFTA_R1_02033980 EFTA02691640 Regent Street Energy Regent Street believes the opportunity exists to allocate $300 to $400 million of equity capital in attractive opportunities. Public Partnerships Non-Operated Operated Equities With Existing Properties Properties Operators Size of the F . Opportunity 50-100 30-100 30-100 > 200 $ Mils RegentStreetCa pita 13 EFTA_R1_02033981 EFTA02691641 Regent Street Energy - Time Line 2014 2015 2016 2017 2018 2019 2020 2021 2022 5-Year Holding Period; RSE reinvests cash RSE liquidity event flow to grow production and cash flow until market rebounds —I 2-Year Investment Period Investor Commitment RegentStreetCa pita 14 EFTA_R1_02033982 EFTA02691642 Base Case Cash Flow Summary RSE Cash Flow Summary 2014 2015 2016 2017 2018 2019 2020 Total Equity Capital 50 50 - - 100 Debt Capital 20 40 25 85 Cash Operations (1) 9 28 39 66 74 110 324 Cash Available 49 79 68 64 66 74 110 509 Interest (1) (3) (5) (6) (6) (6) (26) Capital Spending (40) (85) (60) (60) (60) (70) (80) (455) Cash Build/(Draw) 9 (7) 5 (1) (0) (2) 24 28 Equity Investor CF 2014 2015 2016 2017 2018 2019 2020 End Equity Capital (50) (50) Net Proceeds @ 6.5x Cash Flow Net Return Net IRR Our base case projections show a 30% net IRR over 6 years RegentStreetCa pita 15 EFTA_R1_02033983 EFTA02691643  Regent Street Energy The economic returns for RSE depend on three key variables: • Acquisition and Reinvestment Economics: The better the acquisition economics, the better the RSE Economics. In our base case, we assume we can purchase assets at a 10% rate of return with current prices. We believe the current market for acquisitions in Western Canada is 12-15% return with current prices. • Price Improvement from now to 2020: The greater the price recovery, the better the economics. Our base case assumes natural gas prices escalate to $6.00/mcf by 2020. • Exit Conditions: The better the exit multiples, the better the RSE economics. Our base case assumes we can liquidate RSE at the end of 2020 for 6.5x cash flow. RegentStreetCa pita 16 EFTA_R1_02033984 EFTA02691644 Regent Street Energy - Sensitivity Table Acquisition IRR Base Case Henry Hub Price in 2020 4.00 4.50 5.00 5.50 6.00 6.50 7. 8.00 10.00 10% 6.0x 0.9x 2.0x 3.2x 4.3x 5.2x 6 7.2x 8.4x 13.2x 10% 6.5x 1.1x 2.3x 3.4x 4.5x 5.6x 6.7x 7.8x 10.0x 14.2x 12% 7.0x 1.6x 2.9x 4.1x 5.4x 6.7x 8.0x 9.2x 11.6x 16.5x 15% 7 5x 2.0x 3.6x 5.3x 7.0x 8.0x 9.5x 11.0x 13.9x 19.9x 1 Exit CF Multiple Net Return; Multiple of Initial Investment After Fees RegentStreetCa pita 17 EFTA_R1_02033985 EFTA02691645 Terms Investment Terms Fund Size: Regent Street is seeking commitments of $100 million. Kent will make a large personal investment in the fund. Closing Date: February 28, 2014. Commitment Period: Two years commencing at the Closing Date. Fund Term: Seven years from the Closing Date, with 3 one-year extension options. Management Fee: 1.0% Annually. Performance Fee: 15% payable at time of liquidation. Communications: Investors will receive annual audited financial statements and quarterly letters describing the status of portfolio investments. Regent Street will also be available for one-on-one consultation. Contact: Kent Whitaker Phone: 203 202 3613 [email protected] RegentStreetCa pita 18 EFTA_R1_02033986 EFTA02691646 Kent's Curriculum Vitae Experience 2006-Present Regent Street Capital Evaluates and invests in all aspects of the global energy and natural resource industries. 2000-2006 Davis Selected Advisors Lead energy analyst and portfolio manager. Researched and invested in the early pioneers of shale gas production. 1998-2000 British Petroleum General Manager Paraxylene; full profit-and-loss responsibility for this S1 billion (revenues) business. 1989-1998 Amoco Corporation Evaluated projects in all aspects of the oil and gas industry, including drilling projects, development projects, acquisitions, and divestments; arranged project financings; conducted acquisition due diligence; performed economic audits on capital projects. 1981-1987 Asarco; Hunt Energy; Oil and gas exploration geologist in North Dakota (Hunt Energy Lomak Petroleum Corporation), gold and silver exploration geologist in Nevada (Asarco), and oil & gas exploration geologist in Texas (Lomak Petroleum) Education 1989 Amos Tuck Business School at Dartmouth College (MBA); with distinction; Edward Tuck Scholar 1987 Miami University (MS, Geology); Masters Thesis: Depositional Environments of the Bisher Formation, Kentucky 1981 Dartmouth College (BA, Geology) RegentStreetCa pita EFTA_R1_02033987 EFTA02691647 Disclaimer The information contained herein regarding Regent Street Capital, LLC (the 'Advisor') hos been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any interests in any fund or to participate in any trading strategy with the Advisor. Any decision to hove the Advisor manage interests or shares described herein should be made after reviewing the definitive Confidential Private Placement Memorandum and such other relevant documents, conducting such investigations as the investor deems necessary and consulting the investor's own investment, legal, accounting, and tax advisors in order to make an independent determination of the suitability and consequences of an investment managed by the Advisor. Except where stated otherwise, all returns reported herein are unaudited estimates, net of commissions, fees and expenses, and include the reinvestment of dividends. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. RegentStreetCa pita 20 EFTA_R1_02033988 EFTA02691648