From the desk of
I.J. “Chip” Berthelot, II


Summer 2019

Greetings Azure Midstream Energy, LLC (“Azure”) stakeholders, investors, customers, team members, host communities and landowners:

The first half of 2019 has been very positive for Azure and we expect our momentum to continue building through the second half of the year and beyond.

First, Azure has never been healthier, with an extremely commercial and productive bank group relationship. Our debt load is at an all-time low, from a debt-to-EBITDA ratio perspective.

We really appreciate the business relationships we have developed with BP, Covey Park, Chesapeake, Goodrich, Tellurian, Shell and others!

Specific recent business highlights include:

Well connects:
In 2018 we completed 22 well connects. At just the halfway point for 2019, we’ve already connected 15, with 13 currently being drilled and an additional 5 scheduled for a total of 34 – a 50+ percent increase!

Volumes:
Our 2018 average volume was 555 MMscfd. For 2019, our average volume thru May is 713 MMscfd – a 28 percent increase!

In 2018 our peak system volume was 640 MMscfd. For 2019 our projected peak volume (November) is 975 MMscfd – a 52% increase! 

Asset key milestones:
2018

  • February/March – connected 11 wells
  • March - 11-mile gathering System Expansion, extending our reach westward
  • March – 5th consecutive GPA safety Award
  • December – Completed refinancing led by ABN AMRO with second lien facility provided by Madava Financial
  • December – connected 7 wells since Thanksgiving

 

2019

  • March - Shelby Plant Optimization (increasing capacity by 30 MMscfd)
  • April - 6th consecutive GPA safety award
  • June – Exco emerges from bankruptcy
  • June/July – Expect to connect 17 wells
  • Ongoing - Shelby Plant Expansion (increasing capacity by 200 MMscfd)

 

Secondly, we congratulate our employee team for receiving our 6th consecutive annual safety award from the Gas Processors Association, taking 1st place in our class of operators! Safety is always the top priority for us. As I frequently remind our team,” It is our full intention to send all of our team members--along with any contractor partners who support us--home at the end of each work day, physically, intellectually and emotionally safe,” so they can appropriately enjoy and support their families!

Thirdly, we congratulate one of our major customers, EXCO Resources on their recent emergence from bankruptcy!

EXCO emerges with a much healthier balance sheet, enabling them to reengage on their growth plan as the operator of the over 100,000-acre lease position in the Core of the Haynesville and their Shelby trough areas. Both these areas are dedicated to Azure’s gathering system under a life of lease contract.

We have recently connected six new wells from EXCO/Shell and their working interest owners through our 2018 completed Muslow lateral. Additionally, our reliance on EXCO as our primary customer has reduced from 45% of our revenue in 2017, to a projected 33% and 28% in 2019 and 2020, respectively!

We obviously wish EXCO the best and look forward to our continued work together.

Looking to the future,

We see continued growth for Azure into 2020 and beyond. East Texas and Northern Louisiana drilling activity is up year-to-year. Based on our customer visibility, we expect to connect more wells in 2020 than in 2019.

Going into 2020, Haynesville continues to dominate U.S. unconventional natural gas plays with top ranks in existing base, growth potential, break-even price and midstream architecture. Analysts are consistently ranking it one of the top basins in North America. Cowboys owner Jerry Jones recently entered his vote for its dominance as a money maker with a major investment; and Oil & Gas 360 recently quoted BP as calling the Haynesville, “the most revenue generating gas play in the U.S.”

You may remember that we entered this investment in November 2013 and have managed it through one of the most severe downturn cycles in decades. This was only accomplished through an incredible team effort. I want to acknowledge and thank all our stakeholders for sticking with us through the challenging times to experience these fun times!

Also, you may have read that we recently launched a new midstream development and operations company, called Laser Midstream Energy, LLC.  Laser is a start-up company focused on basins across the U.S., excluding the Haynesville/Bossier plays of East Texas and Northern Louisiana. It is specifically designed not to compete with Azure. I hope you find our latest update informative. If you have questions about anything contained within, please don’t hesitate to contact either me, or the appropriate person on our management team, directly.

We at Azure wish all of you and your families a safe and happy summer and we look forward to connecting soon!

l.J. "Chip" Berthelot, II
President, Azure Midstream Energy