WhiteHawk Minerals Corp. EnerCom Denver – The Energy Investment Conference

Please welcome Daniel. Good morning, everyone.

Can you hear me? Yes.

Great. It is nice to see you all. I have some very good news. You are in the right room. I think you are going to hear a unique story about WhiteHawk Minerals and a unique investment opportunity. Truly one that didn't exist five years ago, and I think the only one that exists today. WhiteHawk Minerals, we took public in June. Today, it is just approaching $1 billion in enterprise value, $750 million market cap. I would say, though, I haven't been here in 15 years, that is, to EnerCom, but it is great to be back. The last time I was here, we had just sold our E&P business, Atlas Energy, to Chevron for about $4.5 billion, generating a 900%-plus return for our investors from our IPO in 2004. We had a pipeline business as well. We were the largest pipeline and processing business in the Permian business.

We sold that in 2014 to Targa for about $7.5 billion, generating a 400% return for our limited partners and another $2 billion for the publicly traded general partner. I share that it is good to be back. I also share that you are in the right place because I think we've had a unique ability to find special opportunities, and I think that is exactly what we have at WhiteHawk Minerals. Let's dig in. The forward-looking language I'll trust you will study at your leisure. The map. The most important thing I've learned at an energy conference is to show the map of your assets. You'll see our assets. We cover, as was mentioned, 3.6 million gross unit acres.

Our thesis when Jeff Slotterback, who is here with me, our Chief Financial Officer, when he and I started WhiteHawk 5 years ago, was to build the premier natural gas, mineral, and royalty business. Before this, I was CEO of Falcon Minerals, which became Sitio Royalties and was bought by Viper last year for about $4 billion. I noticed running Falcon Minerals, there were no pure-play, core of the core natural gas, mineral, and royalty businesses, number one. Number two, that the mineral and royalty space is by far the best way to be involved in energy. I say that as someone who has been in E&P, who has been in midstream, who sat on the board of an offshore drilling company. I have been across the space.

The reason the mineral and royalty space, in my opinion, is by far the best way to be involved in energy is we have zero capital expenditures and minimal operating expenses. So when prices go up, we do not have the inflationary pressures from rising steel, sand, water, labor. More importantly, as a downside person as I am, we have no CapEx and minimal operating expenses. So Falcon, which was oil, during COVID, was generating cash flow during the second quarter of 2020 and still paying our shareholders a dividend, and that showed the strength of the model. So we saw there were no publicly traded pure-play natural gas royalty businesses, and we thought we could build the premier business. We also knew that private equity firms had amalgamated over the last decade $3 billion-$5 billion in the core of the Marcellus and the core of the Haynesville.

I should mention Atlas Energy pioneered the Marcellus Shale, drilling more wells than any company between 2005 and 2010. So it was an area we were deeply familiar with. The Haynesville we knew very well. Our Head of Corporate Development and Strategy oversaw the Haynesville for Blackstone, the private equity firm. So we had a deep history there as well. So we knew there were a lot of assets. We knew there were few buyers, and so we set out to build WhiteHawk Minerals. In February of 2022, we made our first acquisition. Under the terms of that deal, we had an option from a private equity firm to buy almost half a million acres in the Marcellus Shale in the core. That option was 8 months where we could buy each month based on how much we were able to raise.

In 2022, people hated energy, and they certainly hated natural gas. What we did not know was 2 weeks later, Russia would invade Ukraine, which is exactly what happened. Gas prices tripled, and we immediately bought the entire asset, and then Jeff brilliantly hedged out at $7 gas. That was great. We waited a year, and as gas does, it came back down. Then another private equity firm came to us, this time in the Haynesville Shale. They wanted us to buy a 375,000-acre position. We said, "Sure, but we need an option agreement." They too gave us an option agreement for 6 months, and we took full advantage of that. I say that really to illustrate the unbelievable opportunity that existed with the lack of competition that we had, where multiple private equity firms gave us options.

This was like what I had heard about in the '80s or the '70s when there would be seller financing and you signed a deal and then you got to work. That's how we started to build WhiteHawk, and we've done a series of large transactions, and we've built this position, which I think is unmatched, and certainly unmatched and unmatchable today. 13% of U.S. natural gas production pays WhiteHawk Minerals royalty. We're a material part of U.S. natural gas production, and I'll get specifically into our operators, which are the largest publicly traded operators of natural gas in the U.S. If you like the Marcellus and you like the Haynesville, you like the largest publicly traded natural gas producers, we are, I believe, the best way to own them.

We'll talk a little bit about the trajectory for natural gas, given the massive amount of power demand that's coming, as well as LNG exports. We recently announced, as a public company, our second quarter, which was our first public release in conjunction with our earnings. I think we surprised everyone to the positive, with nine acquisitions in the two months from going public, totaling $111.8 million, covering 700,000 gross unit acres in the core of the Marcellus and in the core of the Haynesville. Those assets we expect to add $17 million of cash flow in 2027, and about $18.5 million in 2028. If you do the math, that's about 6.7 times cash flow multiple in 2027, and about a six times cash flow multiple in 2028. Our analysis actually kind of does the opposite.

It does a complete deep dive on every single well, all of the undeveloped properties. I think we frankly have more information on the Marcellus, the Haynesville, the Utica, than any company in the U.S. We've not only engineered every producing well on our property, we've engineered every undeveloped location on our properties, plus adjacent properties, and then we rank them economically within the inventory of our operators to understand development cadence across our position. Our quarter was fantastic. We generated over $20 million of EBITDA, $0.63 of free cash flow. We announced an annualized dividend of $0.50 per quarter. That's $2 per year. That's 79% payout ratio. Our expectation is to grow cash flow per share. This is how we've built and created value across our companies over the last 20-plus years.

We do that through buying world-class assets at what we think are attractive prices, underlying top operators and top plays. We're really just getting started here. We've done a lot to get to where we are, but the opportunity set in front of us is massive. To that point, we have a two-pronged acquisition strategy: strategic and ground game. On the strategic side, I mentioned this, private equity firms have amalgamated $3 billion-$5 billion of core assets in the Marcellus and the Haynesville. They need to exit those assets. There is not a large-scale buyer of our nature out there, so we have minimal competition. That affords us a super attractive opportunity. We also have done $30 billion of energy transactions over the last 20 years, so we're pretty good at executing, in my opinion.

I say that with this much confidence, not because of me, but really because we have an amazing team. The second prong of the strategy is our ground game. This is where we are buying from individual landowners. We own a 0.51% royalty interest across our 3.6 million acres. The average royalty is 17%. That means there is 33 times our assets on our position. If we are worth $1 billion, that is over $30 billion of ground game for us to pursue. We did one strategic transaction in the first two months of being public and eight ground game transactions totaling the $111.8 million. The reason, in part, we are so emphatic about our engineering and our analysis is to give us advantages on both the strategic and the ground game side.