Investor Presentation September 2013 Forward-Looking Statements and - - PowerPoint PPT Presentation

Investor Presentation

September 2013

Forward-Looking Statements and Non-GAAP Financial Measures

This presentation includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The opinions, forecasts, projections or other statements, other than statements of historical fact, are forward-looking statements. Although Warren Resources (“Warren” or “WRES”) believes that the expectations reflected in such forward-looking statements are reasonable, they can give no assurance that such expectations will prove to have been correct. Additionally, in its filings with the SEC, Warren discloses only proved reserves, which are reserve estimates that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under economic and operating conditions. Warren uses certain terms in this presentation, such as “resource potential“ and “recoverable”, which SEC guidelines strictly prohibit from being included in filings with the SEC. Estimates of “resource potential“ and “recoverable” quantities of hydrocarbons, which may potentially be recoverable through additional drilling

• r recovery techniques are by their nature more uncertain than estimates of proved reserves and accordingly are

subject to substantially greater risk of not actually being realized by the Company. Investors are urged to consider closely Warren's disclosure of its proved reserves, along with certain risk factors and uncertainties inherent in its business set forth in its other filings with the SEC. WRES undertakes no obligation, and expressly disclaims any duty, to publicly update any forward-looking statements made herein, whether as a result of new information or future events. This presentation includes financial measures that are not in accordance with generally accepted accounting principles (“GAAP”) including PV-10 Value, EBITDA and Adjusted EBITDA. While management believes that such measures are useful for investors, they should not be used as a replacement for financial measures that are in accordance with

• GAAP. For a reconciliation of each to the nearest comparable measure in accordance with GAAP, please see the

Appendix.

Investing in the Future of Energy NASDAQ (WRES) 2

Senior Management Team

Investing in the Future of Energy NASDAQ (WRES) 3 Philip A. Epstein Chairman & CEO

• Joined Warren Resources in December 2012 as Chairman and CEO
• Over 25 years of significant experience in the oil and natural gas industry
• In 1992, participated in the founding of Belco Oil & Gas Corp. and served in senior positions
• Previously co-founded and formerly served as Managing Director of Calypso Energy LLC and co-

founded Superior Renewable Energy LLC

Timothy A. Larkin EVP – Mergers and Acquisitions

• Joined Warren Resources in 1995 as a founding member of the management team
• From 1991 to 1994, served as Accounting Manager of Merrill Lynch and Oppenheimer

sponsored Palmeri Fund Administrators, Inc.

• From 1985 to 1991, worked as Audit Manager at Deloitte & Touche, LLP

David E. Fleming Senior VP, General Counsel & Secretary

• Joined Warren Resources in 2001
• From 1999 to 2001, served as partner with the law firm of Cummings & Lockwood
• From 1993 to 2001, practiced corporate law at Epstein, Becker & Green, P.C.

Scott B. Daves Engineering Manager of Wyoming Division

• Joined Warren Resources in 2012
• Over 26 years of experience in conventional and CBM operations
• Held positions with Bearcat Energy, Samson Resources and MarkWest Hydrocarbon

Robert M. Dowell VP & General Manager of California Division

• Joined Warren Resources in 2007
• Over 33 years of experience in various engineering and operations roles
• Held positions with PA Consulting, Southern California Gas Company and Texaco/Getty Oil Co.

Company Overview

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• High quality, long-lived asset portfolio

comprised of two core operating areas

• California Properties
• Wilmington field in Los Angeles Basin
• Primarily focused on waterflood oil

recovery and horizontal development

• Wyoming Properties
• Greater Green River Basin in

southwestern Wyoming

• Coalbed methane (“CBM”) production

with deeper oil potential

(1) Fully diluted equity market cap as of 9/12/13

Financial Profile Asset Profile

• Ticker:
• Market Capitalization: (1)
• Enterprise Value:
• Long-Term Debt (6/30/13):
• LTM Adjusted EBITDA (6/30/13):

NASDAQ: WRES $200 MM $275 MM $90 MM $70 MM*

• Proved Reserves (12/31/12):
• % Oil:
• % Proved Developed:
• PV-10 (12/31/12):
• Q1 2013 Net Production:
• R/P Ratio:

24.9 MMBoe ~66% ~67% $495 MM* 5,700 Boe/d ~12 years

*See Non-GAAP Reconciliation in Appendix

Key Investment Highlights

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Balanced Portfolio with Investment Flexibility

• Geographic and commodity diversity with established infrastructure
• Operate 92% of producing wells as of December 31, 2012
• Emerging Wyoming oil resource potential

Low-Risk, Shallow Decline Assets

• 8.2 year proved reserve life
• Modest per well investment costs leading to low maintenance capex

Attractive Reinvestment Profile

• 2012: $43.75 / Boe margin; 3 year all-sources F&D of $14.26 / Boe
• Target 60% IRR on oil wells and 30% IRR on gas wells at current prices
• Premium California Midway Sunset oil prices

Strong Financial Position

• Current liquidity of approximately $66 million
• 50% production hedge target
• Balance sheet provides flexibility to pursue acquisitions

Experienced Management and Operations Team

• New management and Board additions bring substantial industry and

M&A experience

• Extensive industry experience in horizontal and directional drilling,

waterflood recovery operations and CBM development and completion

*See Non-GAAP Reconciliation in Appendix

• Located in the Wilmington Field

in the Los Angeles Basin

• Third largest U.S. oilfield
• Wilmington Townlot Unit (“WTU”)
• 1,424 net acres (99% WI)
• 12.4 MMBbls net proved

reserves as of December 31, 2012 (55% PDP)

• Net production: 2,815 Bbls/d

for July 2013

• North Wilmington Unit (“NWU”)
• 1,036 net acres (100% WI)
• 4.0 MMBbls net proved

reserves as of December 31, 2012 (27% PDP)

• Net production: 350 Bbls/d for

July 2013

• ~150 gross drilling locations
• Receives premium Midway

Sunset oil pricing (correlates with Brent pricing)

Areas of Operations

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California Properties Wyoming Properties

Producing Properties Focus Areas Offices

WY CA

• Located in southeast portion of

Greater Green River Basin

• Commercial CBM
• 51.2 Bcf of net proved reserves

as of December 31, 2012 (100% PD)

• Net production: 16,933 Mcf/d for

July 2013

• ~89,000 net acres
• ~150 targeted drilling locations

with additional potential locations

• Over 60 well stimulation
• pportunities
• November 2012 acquisition of

Anadarko interests provided

• peratorship over majority of

acreage and pipeline

• Deep rights for potential

Niobrara and other formations

Oil-Weighted Base with Gas Optionality

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Asset Summary Oil Reserves Proved Reserves Composition Natural Gas Reserves By Category By Product

PDP 49% PDNP 18% PUD 33% Oil 66% Natural Gas 34%

• Proved reserves of 24.9 MMBoe at December 31, 2012
• 66% oil, 67% proved developed
• PV-10 of $495 million*
• Proved developed reserve life index of 8.2 years
• 25 - 30 MMBbl resource potential in California
• 250 - 300 Bcf resource potential in Wyoming

16 28 8 16 24 32 40 48 Proved Resource Potential (MMBbl)

(1)

51 275

• 60

120 180 240 300 360 Proved Resource Potential (Bcf)

(1)

(1) Midpoint of resource potential estimate *See Non-GAAP Reconciliation in Appendix

1,034 1,499 1,600 1,744 1,748 2,028 500 1,000 1,500 2,000 2,500 2007 2008 2009 2010 2011 2012 Natural Gas Oil $22.18 $20.72 $16.93 $16.54 $17.53 $16.31 $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 2007 2008 2009 2010 2011 2012

Strong Production Growth Through Cycles

CAGR = 14% Annual Cost Reduction = 6%

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Historical Production (MBoe) Historical Lease Operating Costs ($/Boe)

Recent Achievements



Increased oil production in 2012 by 22%



Eight California DOGGR injection well permits received in 2012 – 2013 YTD



Improved reservoir pressure maintenance reducing production decline



Commenced field development at NWU following successful pilot program



Positive regulatory developments in 2012

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Execute in California to Drive Oil Production Focus on Cost Reduction and Maximizing Cash Margins



Decreased per unit lease operating costs while increasing oil production on a relative and absolute basis



WTU drilling costs in 2012 reduced 20% from 2011 costs



Negotiated more favorable oil sales contract with Midway Sunset pricing (tied to Brent) Maintain Wyoming Resource Upside



Acquired upstream and midstream interests from Anadarko in the Atlantic Rim and became

• perator with a focus on reducing operating expenses



Currently own and operate 59-mile pipeline transporting gas from Spyglass Hill Unit to Colorado Interstate Gas pipeline (“CIG”)



Identified inventory of higher return wells



Continued to evaluate opportunities to exploit multi-stacked oil and gas potential

Goal Result

California Operations

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California: Wilmington Oil Field

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Overview Los Angeles Basin

• Third largest U.S. oilfield
• Produced over 2.5 billion barrels of oil

since discovery in the 1930s

• Warren represents ~10% of current

production of the Wilmington field

• Primary operator in the area is

Occidental

• Warren-operated WTU and NWU have

produced more than 149 and 38 MMBbls, respectively

• Waterflood development in the shallow

Tar, Ranger and Upper Terminal formations

• Deeper Ford formation with light oil

potential drilled in late 2011

• 5 stacked pay zones from 2,600’ to

6,000’

Warren Properties

Wilmington Field 9 billion Bbls OOIP ~27% produced to date

California: Asset Overview

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Wilmington Townlot Unit (“WTU”) North Wilmington Unit (“NWU”)

• Unitized oilfield located in the Wilmington Field
• Operated by Warren with a 99% WI / 81% NRI
• 1,440 gross (1,424 net) acres
• Produced over 149 MMBbls from primary and

secondary production

• Production (July 2013): 2,815 Bbls/d, net
• Proved Reserves (December 31, 2012): 12.4

MMBbls, net (55% PD)

• Adjacent to WTU
• Operated by Warren with 100% WI / 85% NRI
• 1,036 gross and net acres
• Produced more than 37.6 MMBbls
• Production (July 2013): 350 Bbls/d, net
• Proved Reserves (December 31, 2012): 4.0

MMBbls, net (27% PD)

North Wilmington Unit Wilmington Townlot Unit

Huntington Beach Seal Beach Long Beach Dominguez Rosecrans Chevice Hills Beverly Hills Salt Lake Los Angeles Bandin Sante Fe Springs West Coyote East Coyote Olive Krawe Richfield Yorba Linda Brea-Olenda Montebello

CA

L.A. Basin El Segundo Playa Del Rey Englewood

WILMINGTON

California: Operations Overview

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Existing WTU Cellar Wilmington Townlot Unit

• Apply risk management concepts (to significantly reduce the probability of major business losses)
• Focus: model of urban development
• Major milestones achieved: SW Ranger AOR approval, Ford waterflood application approved

California: Development Strategy

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Tar

Ranger Terminal Ford/237

SW

Schist Basement Union Pacific

• 3000'
• 6000'
• 9000'

NE

Productive Limits One Mile

Producing Zones Oil Reservoirs

• Continue horizontal / sinusoidal

redevelopment

• 28% 7-year CAGR growth rate
• 14% growth rate target for 2013
• Drill “highly targeted wells” in 14 layers of

stacked pay (2,600’ - 6,000’)

• Target IRR per well of 50% - 100%
• $85.00 CMS oil price deck used for

planning

• 150 locations with 100 - 200 MBbls EURs
• 20 Tar and over 50 Ranger wells
• 50 - 60 Upper Terminal and 20 - 30

Ford

• 25 - 30 MMBbl resource potential
• Use modern technology to maximize

recovery

• 27% of Warren’s 750 MMBbl OOIP

produced since 1930’s

• Increased proved oil reserves by 9%

to 16.4 MMBbls from 2011 to 2012

California: Tar Economics

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Illustrative Economics ($/Bbl) (1)

California Midway Sunset Oil Price $85 Sales Adjustment ($4) Realized Price $81 LOE, Gathering & Transportation ($17) Cash Flow $64

IRR @ $77 NYMEX = 100%+

NYMEX Price Required for 10% ROR $45

Illustrative EUR and Drilling & Completion Costs

Gross EUR (MBbls) 148 NRI 81% Net EUR (MBbls) 121 Drilling ($MM) $1.2 Completion ($MM) $0.3 Total ($MM) $1.5 Development costs ($/Bbl) $12.40

WTU Tar Well Type Curve

• 30

60 90 120 150 1 2 3 4 Bbl/d Years

60% Decline 35% Decline 25% Decline 10% Decline 120 Bbl/d 66 Bbl/d 46 Bbl/d 36 Bbl/d 33 Bbl/d (1) Illustrative economics run at $85.00/Bbl CMS price which is equivalent to $77.00 NYMEX price

23 Bbl/d

• 18

36 54 72 90 1 2 3 4 Bbl/d Years

40% Decline 35% Decline 25% Decline 10% Decline 70 Bbl/d 47 Bbl/d 33 Bbl/d 26 Bbl/d

California: Ranger / Upper Terminal Economics

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Illustrative Economics ($/Bbl) (1)

California Midway Sunset Oil Price $85 Sales Adjustment ($4) Realized Price $81 LOE, Gathering & Transportation ($17) Cash Flow $64

IRR @ $77 NYMEX = 59%

NYMEX Price Required for 10% ROR $50

Illustrative EUR and Drilling & Completion Costs

Gross EUR (MBbls) 128 NRI 81% Net EUR (MBbls) 104 Drilling ($MM) $1.6 Completion ($MM) $0.2 Total ($MM) $1.8 Development costs ($/Bbl) $17.31

Ranger / Upper Terminal Type Curve

(1) Illustrative economics run at $85.00/Bbl CMS price which is equivalent to $77.00 NYMEX price

Wyoming Operations

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Kaiparowtis + Black Mesa

Wyoming: Greater Green River Basin

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• Washakie Basin is located in the

southeast portion of the Greater Green River Basin in southwestern Wyoming

• Commercial CBM production

established by Warren and Anadarko in 2002

• Own ~113,000 gross (88,000 net)

acres prospective for CBM development (“Atlantic Rim Project”)

• Target shallow Mesa Verde coalbeds
• ~72,000 net acres prospective for

deeper, oil-bearing formations

Overview

Powder River Uinta + Piceance + Park Williston Big Horn Wind River DJ

Atlantic Rim Project

Greater Green River

March 2013 Net Proved Current Producing Production Reserves Area Operator WI (%) Wells (MMcf/d) (Bcf) Atlantic Rim Sun Dog Warren 67% 110 7.5 24.4 Doty Mountain Warren 73% 59 6.5 18.4 Grace Point Warren 86% 25 0.6 5.6 Other Other Non-op 13% 71 1.4 2.8 Total 265 16.0 51.2

Wyoming: Asset Overview

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Atlantic Rim Project Area Summary

Doty Mountain Sun Dog Grace Point Brown Cow Starr Draw Catalina Unit

• Comprises ~113,000 gross (88,000 net) acres on

the eastern rim of the Greater Green River Basin

• Proved reserves: 51.2 Bcf (December 31, 2012)
• ~150 targeted drilling locations
• Over 60 well stimulation opportunities
• Current development focused on targeted, higher

return wells

Wyoming: Economics

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Operational Goals Illustrative Type Curve (1.0 Bcf) Illustrative Atlantic Rim Details

• Focus capital on highest return wells
• ~150 targeted drilling locations
• 25 wells per year to perpetuate unit
• 25 wells drilled in 2013
• Potential to utilize third party capital in

the future

• 100

200 300 400 500 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Mcf/d Year EUR (gross): 0.8 - 1.16 Bcf IRR: 28% IRR: 36% IRR: 45% IRR: 23% IRR: 34% IRR: 42% 0% 10% 20% 30% 40% 50% 0.80 1.00 1.16 IRR (%) Gross EUR (Bcf) Strip $4.00 Flat

(1)

EUR (Bcf) 0.80 1.00 1.16 Capex ($000s) $680 $680 $680 Peak Daily Production (Mcf/d) 381 476 562 Peak Time Period (Months) 35 28 23 LOE ($/Mcf) $1.62 $1.57 $1.54

(1) NYMEX strip pricing as of April 24, 2013 and net of basis differential of $0.25/Mcf

Illustrative Single Well Economics

Wyoming: Rockies Producing Zones

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Atlantic Rim Zones

• Owns certain deep rights in a

portion of the Atlantic Rim area

• ~72,000 net acres potentially

prospective for oil bearing formations including:

─ Niobrara (oil) ─ Shannon (oil) ─ Sussex (oil) ─ Frontier (gas) ─ Dakota (gas)

• Currently completing a geological

analysis of Niobrara acreage

• Double Eagle has drilled a

Niobrara well

• Geology analogous to DJ and

Powder River Basins

CBM – current Warren production

Wyoming: Development Strategy

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WRES Acreage

Double Eagle Niobrara Test East/Entek/Emerald Niobrara Activity Shell/Quicksilver Niobrara Activity Buck Peak Field Sierra Madre Field Powder River Basin Green River Basin DJ Basin Silo Field EOG Jake Well

Powder River Basin DJ Basin Green River Basin

Niobrara Frontier Belle Fourche Mowry Mowry/Muddy Niobrara Production Target Zone

• Focus capital expenditures
• n highest return projects
• Maximize Warren-owned

infrastructure value

• Evaluate and exploit deep
• il stacked pay potential
• Form multiple federal

exploration / resource units

• Actively seek partners

to develop acreage

• Opportunistically evaluate

acquisitions

CONFIDENTIAL

Financial Overview

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2013 Capital Expenditures

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2013 Capex by Area – $76 Million 2013 California Wilmington Capex – $53 Million

California 72% Wyoming 28%

$73 MM

• 2013 expected capital expenditures of

$76 million

• 23 well California 2013 drilling program
• Drill 13 new producing wells and 3

water injector wells in WTU

• Initiate development of NWU with 4

new producing wells and 3 water injector wells

• 25 new CBM wells in the Spyglass Hill

Unit in the Greater Green River Basin

• Acquisition and drilling of 3 wells in the

Leroy Pine Project

WTU Drilling 53% NWU Drilling 22% Facilities & Other 25% $53 MM 6

1,375 700 2,075 700

• 500

1,000 1,500 2,000 2,500 2013 2014 (Bbl/d) Swaps Puts

Existing Hedges*

Investing in the Future of Energy NASDAQ (WRES) 25

Oil Hedges Volume Natural Gas Hedges Volume

Derivatives Quantity Period Oil Brent Put $70.00 1,375 Bbl/d 4/1/13-9/30/13 Oil Brent Swap $104.30 700 Bbl/d 10/1/13-9/30/14 Oil Brent Swap $102.12 800 Bbl/d 1/1/14-12/31/14 Derivatives Quantity Period Gas NYMEX Swap $3.39 7,000 MMBtu/d 4/1/13-12/31/13 Gas NYMEX Swap $3.79 7,000 MMBtu/d 1/1/14-12/31/14 Gas NYMEX Swap $4.18 2,000 MMBtu/d 5/1/13-12/31/14

9,000 9,000

• 2,200

4,400 6,600 8,800 11,000 2013 2014 (MMBtu/d) Swaps

* At September 16, 2013

Summary of Key Investment Highlights

Investing in the Future of Energy NASDAQ (WRES) 26

Experienced Management and Operations Team Balanced Portfolio with Investment Flexibility Strong Financial Position Low-Risk, Shallow Decline Assets Attractive Reinvestment Profile

CONFIDENTIAL

Appendix

Investing in the Future of Energy NASDAQ (WRES) 27

Non-GAAP Reconciliation

Investing in the Future of Energy NASDAQ (WRES) 28

PV-10 Reconciliation

Year Ended December 31,

($000s)

2010 2011 2012 Estimated Present Value of Net Proved Reserves: Proved Developed $245,306 $359,549 $337,786 Proved Undeveloped $42,322 $166,527 $157,128 Total PV-10 Value (1) $287,628 $526,076 $494,914 Less: Future Income Taxes, Discounted at 10%

• $40,070

$35,033 Standardized Measure (2) $287,628 $486,006 $459,881

(1) The PV-10 Value represents the future net cash flows attributable to our proved oil and natural gas reserves before income tax, discounted at 10% per annum. Although it is a non- GAAP measure, we believe that the presentation of the PV-10 Value is relevant and useful to our investors because it presents the discounted future net cash flows attributable to

• ur proved reserves prior to taking into account future corporate income taxes and our current tax structure. We use this measure when assessing the potential return on

investment related to our oil and natural gas properties. Our reconciliation of this non-GAAP financial measure is shown in the table as the PV-10 Value, less future income taxes, discounted at 10% per annum, resulting in the Standardized Measure. The Standardized Measure represents the present value of future cash flows attributable to our proved oil and natural gas reserves after income tax, discounted at 10%. In accordance with SEC requirements, our reserves and the future net revenues at December 31, 2010, 2011 and 2012, were determined using average monthly pricing for 2010, 2011 and 2012. These prices reflect adjustment by lease for quality, transportation fees and regional price

• differences. For 2010, there was no income tax effect due to our net loss carry forward for income tax purposes

(2) Standardized Measure differs from PV-10 Value because it includes the effect of future income taxes

Warren Resources, Inc.

Please visit our website: www.warrenresources.com

Investing in the Future of Energy NASDAQ (WRES) 29