Carrizo Oil & Gas — Merger or Acquisition (October 2019)
36 slides from Carrizo Oil & Gas's merger presentation, Oct 22, 2019
Slide 1: Filed by Callon Petroleum Company Pursuant to Rule 425
Filed by: Callon Petroleum Company Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to 14a-12 under the Securities Exchange Act of 1934 Subject Company: Carrizo Oil & Gas, Inc. Commission File No.: 000-29187-87 On October 22, 2019, Callon Petroleum Company (“Callon”) p
Slide 2: Acquiring Carrizo Creates Value and Enhances Optionality for Shareholders
ACQUIRING CARRIZO CREATES VALUE AND ENHANCES OPTIONALITY FOR SHAREHOLDERS October 22, 2019
Slide 3: Important Disclosures
IMPORTANT DISCLOSURES No Offer or Solicitation Communications herein do not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval with respect to the proposed transaction or otherwise, nor shall there be any sale of securities in
Slide 4: Acquiring Carrizo Creates Significant Value Now While Enhancing Optionality
ACQUIRING CARRIZO CREATES SIGNIFICANT VALUE NOW WHILE ENHANCING OPTIONALITY FOR THE FUTURE TRANSACTION PROGRESSES CALLON TOWARDS ITS STATED STRATEGIC FINANCIAL OBJECTIVES¹ ◼ Creates a self-funding, high-margin oil growth company — Sustainable free cash flow generation and deep drilling inventory por
Slide 5: Stronger Combined Company
STRONGER COMBINED COMPANY 2x Core Delaware Basin Footprint >17 Years Permian Inventory Scale >105 Mboed Production (2Q19)¹ >$1.2B Q2 2019 Annualized EBITDA ~$100MM Incremental Free Cash Flow in 2020² Financial <2.0x Target Leverage by Year-End 2020 Strength $ / Barrel Corporate 2020 Free Cash Flow ~
Slide 6: Compelling Value Proposition for Callon Shareholders
COMPELLING VALUE PROPOSITION FOR CALLON SHAREHOLDERS I.1 Self-funded, high-margin oil growth company with enhanced portfolio II.2 Better positioned for a changing industry landscape and commodity price volatility III.3 Significant and achievable synergies IV.4 Immediately accretive on all key per sh
Slide 7: Self-Funded, High-Margin Oil Growth Company with Enhanced Portfolio
SELF-FUNDED, HIGH-MARGIN OIL GROWTH COMPANY WITH 1 ENHANCED PORTFOLIO MORE ATTRACTIVE COMBINED ASSET BASE WITH FREE CASH FLOW TO DEVELOP DEEP PERMIAN INVENTORY ◼ Accelerated value realization from deep drilling inventory in the Permian — Significant scale improves operating flexibility in the Permia
Slide 8: The E&P Industry Is Transitioning to Manufacturing Mode
THE E&P INDUSTRY IS TRANSITIONING TO 2 “MANUFACTURING MODE” TODAY’S OBJECTIVES INCLUDE CAPITAL EFFICIENCY, SELF-FUNDED GROWTH, CORPORATE-LEVEL RETURNS AND RETURN OF CAPITAL RECENT HISTORY - SHALE REVOLUTION TODAY’S ENVIRONMENT - MANUFACTURING MODE Investors focused on single-basin, pure-play Investo
Slide 9: Better Positioned for the Changing Industry Landscape
2 BETTER POSITIONED FOR THE CHANGING INDUSTRY LANDSCAPE CALLON IS GAINING SIZE AND SCALE TO ENHANCE OPERATING EFFICIENCIES AND IMPROVE FREE CASH FLOW PRO FORMA CALLON SELECTED OBSERVATIONS POSITIONING ◼ Increased size and scale better positions Callon to meet capital needs of large scale development
Slide 10: Shareholders Will Benefit from Significant and Achievable Synergies
SHAREHOLDERS WILL BENEFIT FROM 3 SIGNIFICANT AND ACHIEVABLE SYNERGIES NPV OF $2 PER CALLON SHARE REPRESENTS ~50% OF CALLON’S CURRENT SHARE PRICE 10 YR TOTAL (OPERATIONAL AND ANNUAL RUN RATE OPERATIONAL SYNERGIES (2021+) ($MM) CAPITAL) NPV OF SYNERGIES ($MM) Corporate Cash Delaware Drilling Improved
Slide 11: Well Positioned to Capture the Operational Benefits of the Merger
WELL POSITIONED TO CAPTURE THE OPERATIONAL BENEFITS OF 3 THE MERGER CALLON HAS A TRACK RECORD OF IMPROVING OPERATIONAL EFFICIENCIES BENEFITS OF SCALE AND CAPITAL EFFICIENCY DELAWARE D&C COST SAVINGS (1) ◼ Industry leaders are shifting to more efficient, “manufacturing” style development with benefit
Slide 12: Permian Uptime Synergies and Large Scale Development Model
◼ ◼ ◼ ◼ 0% 1% 2% 3% 4% (FRAC INTERFERENCE IMPACT AS % PRODUCTION) ASPRODUCTION) % IMPACT INTERFERENCE (FRAC SYNERGIES UPTIME PERMIAN 3 performance performance improvements and not relianton service cost reductions or subsurface Planned structural change in development model isdurable deployconsisten
Slide 13: Most Research Analysts Agree with the Synergies and Industrial Logic
MOST RESEARCH ANALYSTS AGREE WITH THE SYNERGIES AND 3 INDUSTRIAL LOGIC MOST RESEARCH ANALYSTS BELIEVE IN THE MERITS AND UPSIDE OF THE TRANSACTION “We see significant upside to the stated synergies and also “The proposed CRZO acquisition would enhance operations believe there are additional value cre
Slide 14: Immediately Accretive to All Key Per Share Financial Metrics
IMMEDIATELY ACCRETIVE TO ALL KEY PER SHARE FINANCIAL 4 METRICS ATTRACTIVE ACCRETION IN YEAR ONE WITH SIGNIFICANTLY IMPROVED UPSIDE AND OPTIONALITY Accretive to Accretive to 2020E EBITDA 2020E Cash +23% Per Share +20% Flow Per Share Incremental 2020E Accretive to Free Cash Flow NAV per Share +$0.20 p
Slide 15: Stock-for-Stock Transaction Maintains Callon's Strong Balance Sheet
STOCK-FOR-STOCK TRANSACTION MAINTAINS 4 CALLON’S STRONG BALANCE SHEET DELEVERAGING CASH FLOW PROFILE WITH TARGET LEVERAGE OF LESS THAN 2.0X BY YEAR-END 2020E Pro Forma Year End Net Debt / EBITDA (without asset sales) ◼ $1 billion of pro forma liquidity as of 30-Jun- 2.3 x 2019 < 2.0 x < 1.5 x ◼ No n
Slide 16: Compelling Value Relative to Our Contribution
5 COMPELLING VALUE RELATIVE TO OUR CONTRIBUTION OUR SHAREHOLDERS ARE RECEIVING OWNERSHIP IN EXCESS OF OUR PRODUCTION AND CASH FLOW CONTRIBUTION ◼ Callon is contributing a lower Callon Carrizo percentage of production and cash Debt-Adjusted Contribution¹ flow relative to our pro forma ownership in th
Slide 17: Premium and Multiples Are In-Line with or Better Than Recent Transactions
PREMIUM AND MULTIPLES ARE IN-LINE WITH OR BETTER THAN 5 RECENT TRANSACTIONS COMPELLING VALUE RELATIVE TO COMPARABLE TRANSACTIONS Implied Premium to Implied Premium to 60-Day Buyer Seller Announcement Date EV / NTM EBITDA Undisturbed Price VWAP 7/15/2019 25 % 18 % 4.2 x 10/14/2019 11 6 4.0 ¹ 8/26/201
Slide 18: Callon Has Traded In-Line with Peers Since Announcement
5 CALLON HAS TRADED IN-LINE WITH PEERS SINCE ANNOUNCEMENT CALLON AND PEERS HAVE BEEN IMPACTED BY SECTOR-WIDE INVESTOR SENTIMENT Share Price Performance Since Undisturbed Date (July 12, 2019) Relative Performance Relative Performance Since July 12, 2019 Through 100% 1-Day 30-Day October 18, 2019 2019
Slide 19: Callon Has a Track Record of Successful Portfolio Optimization
6 CALLON HAS A TRACK RECORD OF SUCCESSFUL PORTFOLIO OPTIMIZATION CALLON HAS MADE SEVERAL SUCCESSFUL VALUE ENHANCING ACQUISITIONS AND DIVESTED NON-CORE ASSETS April 2016 September 2016 December 2016 May 2018 April 2019 Acquisition Divestiture Midland Basin Midland Basin Delaware Basin Delaware Basin
Slide 20: Callon Is a Premier Operator of Upstream Assets
6 CALLON IS A PREMIER OPERATOR OF UPSTREAM ASSETS CALLON HAS DEMONSTRATED ABILITY TO ACHIEVE SIGNIFICANT WELL COST SAVINGS AND PRODUCTIVITY IMPROVEMENT THROUGH LARGER PROJECT DEVELOPMENT HIGHER CUMULATIVE OIL PRODUCTION LOWER COST BEST-IN-CLASS EBITDA MARGINS (6 MONTH CUMULATIVE OIL / 1,000’) (DRILL
Slide 21: Well-Qualified Board of Independent Directors
7 WELL-QUALIFIED BOARD OF INDEPENDENT DIRECTORS THE COMBINED BOARD HAS THE RIGHT M&A, INTEGRATION AND APPROPRIATE INDUSTRY EXPERTISE Matthew R. Bob 5 of 7 independent directors have overseen transformative M&A transactions, including Member of Strategic Planning & Reserves Committee selling 3 compan
Slide 22: The Combination Was the Result of an Extensive Review by an Independent Board
THE COMBINATION WAS THE RESULT OF AN EXTENSIVE 7 REVIEW BY AN INDEPENDENT AND QUALIFIED BOARD A COMBINATION WITH CARRIZO DOES NOT PRECLUDE ANY FUTURE ALTERNATIVES; RATHER IT BETTER POSITIONS CALLON’S FUTURE STRATEGIC OPPORTUNITIES INCLUDING A SALE OR MERGER ◼ The Board evaluated all strategic altern
Slide 23: Most Research Analysts View This as the Best Path for Value Creation
MOST RESEARCH ANALYSTS VIEW THIS AS THE BEST PATH 7 FOR VALUE CREATION THE COMBINATION WITH CARRIZO STRENGHTENS THE COMPANY TODAY AND ENHANCES FUTURE OPTIONALITY “Lower leverage and stronger free cash flow generation was “…in a world where investors are searching for operators one of the motivations
Slide 24: Research Analysts Overwhelmingly Support This Deal
RESEARCH ANALYSTS OVERWHELMINGLY SUPPORT THIS DEAL 85% OF RESEARCH ANALYSTS MAINTAIN A BUY RECOMMENDATION FOR CALLON AND HAVE EXPRESSED SUPPORT FOR THE COMBINATION EXPRESSED COMMENTARY BROKER REPORT DATE SUPPORT1 “Notably, based on 2Q19 execution, we have a higher degree of confidence that CPE shoul
Slide 25: Conclusion: Acquiring Carrizo Creates Significant Value Now
CONCLUSION: ACQUIRING CARRIZO CREATES SIGNIFICANT VALUE NOW WHILE ENHANCING OPTIONALITY FOR THE FUTURE TRANSACTION PROGRESSES CALLON TOWARDS ITS STATED STRATEGIC FINANCIAL OBJECTIVES¹ ◼ Creates a self-funding, high-margin oil growth company — Sustainable free cash flow generation and deep drilling i
Slide 26: Appendix
Appendix chp
Slide 27: Pro Forma Callon Is More Compelling Than Standalone Callon
PRO FORMA CALLON IS MORE COMPELLING THAN STANDALONE CALLON Based on broker consensus estimates as of 7/12/19 Standalone Pro forma Delta 2020E EBITDAX margin ($ / boe) $35.92 $33.55 -$2.37 Gross operated locations > 25% IRR1 1,100 2,000 +900 Quality assets CRZO assets comprise >50% of top quartile of
Slide 28: Valuations Have Reset and Pure-Plays No Longer Trade at a Premium
VALUATIONS HAVE RESET AND PURE-PLAYS NO LONGER TRADE AT A PREMIUM HISTORICAL EV / NTM EBITDA MULTIPLES 14.0 x SMID-Cap Permian Pure-Plays Large-Cap Independents Universe 12.0 x 10.0 x 8.0 x 6.0 x 5.3x 5.1x 4.5x 4.0 x 2.0 x 0.0 x Oct-2006 Oct-2008 Oct-2010 Oct-2012 Oct-2014 Oct-2016 Oct-2018 Source:
Slide 29: Oil-Weighted Small Cap E&Ps Are a Logical Peer Group for Callon
THE OIL-WEIGHTED SMALL CAP E&PS ARE A LOGICAL PEER GROUP FOR CALLON Share Price Performance Since 7/12/2019 Proxy Callon Oil-Weighted Bloomberg Market Cap Net Debt / Through Company Name Peers S-4 Peers Small Cap¹ Peers² ($mm) EBITDA³ Oil %⁴ 1-Day Trading 5-Day Trading 10-Day Trading 20-Day Trading
Slide 30: Callon Has Traded In-Line with Peers Since Announcement
CALLON HAS TRADED IN-LINE WITH PEERS SINCE ANNOUNCEMENT RELATIVE PERFORMANCE = CALLON STOCK PRICE PERFORMANCE MINUS THE PERFORMANCE OF THE INDEX Share Price Performance Since 7/12/2019 Market Cap Net Debt / 1-Day 5-Day Through 2019 Company Name ($mm) EBITDA¹ Oil %² Trading Trading 10-Day Trading 20-
Slide 31: Most XOP Constituents Are Not Logical Peers
MOST XOP CONSTITUENTS ARE NOT LOGICAL PEERS XOP Callon S-4 Peers Callon Proxy Peers Oil-Weighted Small Cap E&P Peers¹ Bloomberg Peers² Majors Chevron Corporation Exxon Mobil Corporation Hess Corporation ConocoPhillips ✓ Noble Energy Inc. ✓ Pioneer Natural Resources Company Occidental Petroleum Corpo
Slide 32: Carrizo's Eagle Ford Position Is Best-in-Class
CARRIZO’S EAGLE FORD POSITION IS BEST-IN-CLASS EAGLE FORD MAP DRILLING & COMPLETION COSTS ($/ft)¹ Peer Avg: $776/1k $960 $949 $855 $830 $800 $719 $673 $606 $600 $596 Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 CRZO Peer 8 Peer 9 CARRIZO EAGLE FORD HAS BETTER MARGINS THAN PURE-PLAY PERMIAN OPERA
Slide 33: Callon Delivers Best in Class Operational Results
CALLON DELIVERS BEST IN CLASS OPERATONAL RESULTS 6 MONTH CUMULATIVE BOE / 1,000’ DRILLING & COMPLETION COST / 1,000’ CALLON AND OFFSET OPERATORS (2018+) (2018+) DELAWARE BASIN DELAWARE BASIN¹ DELAWARE BASIN¹ Peer Avg: $1,212/1k $1,551 20,472 19,803 $1,373 $1,250 16,757 16,630 $1,200 $1,144 15,115 $1
Slide 34: Callon's Highly Qualified and Independent Board
CALLON’S HIGHLY QUALIFIED AND INDEPENDENT BOARD CURRENT CALLON BOARD L. Richard Matthew R. Barbara J. Michael L. Flury Joseph C. Larry D. Anthony J. James M. Name Bob Faulkenberry Finch (Chairman) Gatto, Jr. McVay Nocchiero Trimble Age (09-May-2019) 62 59 63 71 48 71 68 70 Tenure (as of 09-May-2019)
Slide 35: Callon Management Incentives Aligned with Shareholders
CALLON MANAGEMENT INCENTIVES ALIGNED WITH SHAREHOLDERS All transaction-related compensation programs for Callon management are “double trigger” ◼ Special Severance Program for CRZO Transaction — Broad-based benefit for all Callon employees including officers — “Double trigger” benefit that pays only
Slide 36: Important Disclosures: Supplemental Non-GAAP Financial Measures
IMPORTANT DISCLOSURES Supplemental Non-GAAP Financial Measures This presentation includes non-GAAP measures, such as Adjusted EBITDA, Net Debt to LTM Adjusted EBITDA, Net Debt to LQA Adjusted EBITDA, Total Liquidity, and other measures identified as non-GAAP. Management also uses EBITDAX, which refl
Carrizo Oil & Gas — Merger or Acquisition (October 2019) on 6ix