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TBP SPEECH
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MONDAY
I. SINCE MOST OF YOU ARE WELL INFORMED ABOUT MESA'S FINANCIAL AND PRODUCTION HISTORY, I WOULD LIKE TO DEPART FROM MY USUAL FORMAT BY GIVING A BRIEF UPDATE ON CURRENT ACTIVITES OF INTEREST AND RESERVE THE MAJORITY OF MY TIME FOR YOUR QUESTIONS.
II. ACREAGE
A. UNDEVELOPED ACREAGE—SLIDE I
1. OUR PRESENTATIONS USUALLY BEGIN WITH A DISCUSSION OF UNDEVELOPED ACREAGE, AND THIS TIME IS CERTAINLY NO EXCEPTION. WE HAVE ALWAYS FELT THAT A QUALITY ACREAGE POSITION WAS BASIC TO SUCCESS.
A. IN CANADA, MESA RETAINED A 12.5% GROSS ORRI IN 1.2 MILLION ACRES. THIS EQUALS A 50% WORKING INTEREST OR THE EQUIVALENT
OF 600,000 NET ACRES. (1) PURCHASER HAS COMPLETED 68 OUT OF 83 WELLS DRILLED FOR AN 82% DRILLING SUCCESS.
B. INTERNATIONAL ACREAGE IS PRIMARILY IN WESTERN AUSTRALIA AND A SMALL AMOUNT IN THE GERMAN NORTH SEA.
TBP SPEECH HOWARD, WEIL, LABOUISSE, FRIEDRICHS OCTOBER 6, 1980
C. MESA'S CURRENT U.S. UNDEVELOPED ACREAGE INVENTORY ENABLED THE COMPANY TO PROVIDE THE BASIS FOR FORMING THE MTS LIMITED
PARTNERSHIP WITH TEXACO INC. AND SEQUOIA PETROLEUM INC. OF THE APPROXIMATELY 1.9 MILLION ACRES IN THE 1980 U.S. UNDEVELOPED
ACREAGE, THE HATCHURED AREA REPRESENTS TEXACO'S AND SEQUOIA'S 35% INTEREST IN MTS LIMITED. THE REMAINDER, WHICH IS VIRTUALLY
ALL IN THE PARTNERSHIP, REPRESENTS MESA'S SHARE.
B. MTS LIMITED PARTNERSHIP—SLIDE 2
1. MTS LIMITED.PARTNERSHIP IS OWNED 65% BY MESA, THE GENERAL PARTNER, 25% BY TEXACO INC. AND-1O% BY SEQUOIA PETROLEUM INC., THE LIMITED PARTNERS.
A. MESA CONTRIBUTED LEASES IN 15 STATES, PRIMARILY IN THE MID-CONTINENT, ROCKY MOUNTAIN AND SOUTHWESTERN PRODUCING AREAS AND
IN FEDERAL AND STATE WATERS OFFSHORE LOUISIANA AND TEXAS FOR ITS 65% WHILE TEXACO AND SEQUOIA CONTRIBUTED CASH FOR THEIR INVESTMENTS.
($177.875 MILLION AND $71.150 MILLION*, RESPECTIVELY.) WE NOW HAVE AN ENTITY WHICH HAS $249 MILLION IN CASH AND 1.9 MILLION
NET ACRES. MESA'S 1.9 MILLION ACRES. TRANSLATES INTO A VALUE OF $263 PER ACRE.
B. THE PARTNERSHIP WAS FORMED TO EXPLORE FOR OIL AND. GAS ON THE ACREAGE CONTRIBUTED BY MESA AND ANTICIPATES ACQUIRING ADDITIONAL
ACREAGE. *THESE ARE GROSS "UPED" FIGURES.
TBP SPEECH HOWARD, WEIL, LABOUISSE, FRIEDRICHS OCTOBER 6, 1980
2. IRONICALLY, THE QUALITY OF MESA'S ACREAGE INVENTORY PROVIDED MORE GOOD PROSPECTS THAN COULD BE ACCOMODATED IN THE BUDGET, AND ITS ACREAGE POSITION ENABLED THE COMPANY TO MAKE THE DEAL WITH TEXACO AND SEQUOIA, THUS ACQUIRING THE NEEDED CAPITAL TO DEVELOP THE ACREAGE.
3. IN ADDITION, TEXACO AGREED TO PURCHASE $150 MILLION OF CUMULATIVE PREFERRED STOCK AND SEQUOIA $60 MILLION.
C. OIL AND GAS EXPENDITURES—SLIDE 3
1. SPENT OVER $320 MILLION IN 1979 WHICH INCLUDES $28 MILLION FOR CANADA AND $10 MILLION FOR BEATRICE PRIOR TO THE SALES.
2. OUR CAPITAL BUDGET FOR 1980 IS ABOUT $300 MILLION AND IS ESTIMATED AT $350 MILLION FOR 1981—VERY AGGRESSIVE FOR RESIDUAL COMPANY. (THE $350 MILLION INCLUDES MESA'S SHARE OF MTS BUDGET MTS LIMITED IN THEIR BUDGET ESTIMATES COMPLETION COSTS FOR ALL EXPLORATORY WELLS WHERE MESA DOES NOT; THEREFORE, MESA'S PARTICIPATION IN MTS BUDGET IS $36 MILLION MORE.)
3. NOTE THE INCREASE IN EXPLORATORY DRILLING FOR 1979, 1980 AND 1981—THE EXPECTED PARTNERSHIP EXPENDITURES OF OVER $100 MILLION PER YEAR WILL HELP. TBP SPEECH HOWARD, WELL, LABOUISSE, FRIEDRICHS OCTOBER 6, 1980
D. U.S. WELLS OF SPECIAL INTEREST—SLIDE 4
1. MESA'S AGGRESSIVE DRILLING ACTIVITY IS REFLECTED IN THE LATEST DRILLING REPORT—63 WELLS—18 MESA OPERATED. (INCLUDES 4 DEEP WELLS OF WHICH 1 IS MESA OPERATED.)
2. I WOULD LIKE TO BRIEFLY REVIEW SOME OF OUR WELLS OF SPECIAL INTEREST.
3. GULF COAST—SLIDE 5
A. GALVESTON 1OO-L #3 (MESA 100%) (WILL ATTEMPT TO COMPLETE AS DUAL OIL AND GAS)—B. BRAZOS 542 A-6 #1 (MTS 22.3%, MESA 14.5%)
(DRILLING TO 17,OOO - 20,000 FEET)
TBP SPELCH HOWARD, WEIL, LABOUISEE, FRIEDRICHS OCTOBER 6, 1980
4. GULF COAST—SLIDE 6
A. V-273 #2 (MTS 75%, MESA 48.75%) DISCOVERY (TESTED AT 451 BARRELS OF OIL PER DAY)
B. V-381 #2 (MESA 80%) (#1 WAS DRY BUT DID NOT GO AS DEEP AS PLANNED DUE TO MECHANICAL FAILURE)
C. S.M.I. 155 42 (MESA 70%)
D. S.M.I. 156 #6. (MESA 70%) (WILL COMMENCE DRILLING #6 WHEN RIG RETURNS FROM HAVING DRILLED RELIEF WELL ON V-348 WHICH HAS
NOW BEEN BROUGHT UNDER CONTROL.)
E. S.P. 12 #2 (MESA 37.8%) (HAS A P.T.D. OF.16,000 FEET)
F. ONSHORE, MESA CROWN ZELLERBACH #1 (MESA 100%) (A 20,000-FOOT TUSCALOOSA TEST)
G. THE COMPANY WAS HIGH BIDDER ON THREE 100% MESA TRACTS AT THE SEPTEMBER 30 LEASE SALE IN NEW ORLEANS: (1) E.C. 43 - $7.608
MILLION (2) V-336 - $3.308 MILLION (3) S.T. 284 - $.508 MILLION
H. $7.1 BILLION WAS RISKED AT SALE—$2.8 BILLION SPENT.
5. OKLAHOMA-TEXAS—SLIDE 7
A. CROOK #1-32 (MESA 64%) ( APPROXIMATELY 650 FEET FROM T.D.)
B. Cox #1-34 (MESA 58%) (3 MILES S.E. OF CROOK. NOW RIGGING UP)
C. TIPTON #1-29 (MESA 46%) (1 MILE TN. OF CROOK, WILL COMMENCE DRILLING IN MID-NOVEMBER.)
TBP SPEECH HOWARD, WEIL, LABOUISSE, FRIEDRICHS OCTOBER 6, 1980
D. UNIVERSITY 42-20 #1 (MESA 50%) (FUSSELMAN/ELLENBURGER GAS DISCOVERY. COMBINED RATE OF 10.5 MMcF.)
E. CERF RANCH #1-9 (MTS 25%, MESA 16.25%) (NOW AT 22,700 FEET)
6. WYOMING—SLIDE 8
A. RILEY RIDGE FEDERAL #8-24 (MESA 40%) (MADISON/BIGHORN DISCOVERY-HIGHLY C02)
B. UTELAND FEDERAL-#1-35 (MTS 41.97% , MESA 27.28%) (AN MTS PROPERTY-CURRENTLY DRILLING
AT 7,000 FEET)
E. BEFORE OPENING FOR QUESTIONS FROM THE FLOOR, I WAS ASKED TO BRIEFLY DISCUSS HOW TO INCREASE AVERAGE GAS PRICES.
1. AVERAGE. GAS PRICES—SLIDE 9 I THINK THIS GRAPHICALLY DEPICTS THE ANSWER—YOU SPIN OFF YOUR LOWER PRICED GAS RESERVES TO A ROYALTY TRUST.
F. I WILL BE GLAD TO ENTERTAIN ANY OF YOUR QUESTIONS—SLIDE 10 (LOGO)