Bakken and Permian: Deal Metrics in the Two Hottest Plays Ward - - PowerPoint PPT Presentation

SLIDE 1

Bakken and Permian: Deal Metrics in the Two Hottest Plays

Ward Polzin July 11, 2012

SLIDE 2

Industry Leading Investment Banking Practice

2010 - 2012 YTD Firm Value ($MM) Barclays $143,412 2010 - 2012 YTD Firm # Deals Tudor Pickering Holt & Co 63

Advisory

• S

ell-side & Buy-side

• Joint Ventures
• Opinions
• S

i l C itt

Capital Markets

• Public Equity
• Hybrids
• Fixed income
• P i

t l t

Top Energy Advisor(1)

($ in millions) Goldman Sachs 121,989 Tudor Pickering Holt & Co 76,902 Credit Suisse 71,046 Evercore Partners Inc 65,828 Citi 64,354 Morgan Stanley 60,881 J ff i & C 57 868 RBC Capital Markets 45 Barclays 44 Jefferies & Company 37 Bank of America Merrill Lynch 34 Goldman Sachs 30 JPMorgan 30 C dit S i 28

• S

pecial Committee

• Strategic advisory
• Restructuring
• Private placements
• QIU

Jefferies & Company 57,868 JPMorgan 50,179 Deutsche Bank 40,258 Credit Suisse 28 Citi 28 Deutsche Bank 20

Upstream Midstream/ MLP OFS Power Overview

TPH combines banking expertise with engineering talent to deliver

• Coverage of Midstream/ MLP, OFS

, Power and Upstream sectors

• S

enior execution expertise in M&A, Corporate Finance, A&D and Capital Markets

Banking Expertise Engineering Talent

high quality advice to energy clients

Managing Direct or 11 Analyst 12

Capital Markets

• Industry/ engineering expertise

integrated into IB effort across all sectors

• Three-year old team achieved

25% market share(1) in 2010 T t l T 40

Senior Advisor 1 Direct or 3 Vice President 4 Associat e 9

2

___________________________________ (1) S

• urce: Dealogic: United S

tates Oil & Gas – Exploration & Development/ Field Equipment & S ervices/ Diversified/ Pipeline and Utility & Energy – Gas, pending and completed M&A transactions announced 1/ 1/ 2010 to 6/ 22/ 2012.

>25% market share(1) in 2010 Total Team: 40

SLIDE 3

TPH Investment Banking TPH Research

TPH Resource Experience

Bakken

• Current Sell-side: Helis Oil & Gas
• Current Sell-side: Cornerstone Natural Resource
• Buy-side: Crestview Partners acquisit ion of S

amson Investment Company

• Buy-side: S

tatoil AS A acquisit ion of Brigham Exploration

• Sell-side: Citation Oil & Gas Corp. sale to multiple buyers
• Sell-side: Kaiser Francis Oil Company
• Sell-side: TRZ Energy (Tracker) sale to Hess
• S ll

id A i Oil & G l t H

• Upstream companies covered with Bakken exposure: 12

□

Selected Bakken operator coverage: CLR, EOG, HES, NFX, OAS, OXY, STO, WLL, XOM

• Published detailed Williston Basin primer
• S

ell-side: American Oil & Gas sale to Hess

• Atinum investment in Triangle Petroleum
• Capital markets: Oasis IPO/ high yield & multiple BEXP follow-on offerings

Permian

• Buy-side: Apollo & Riverstone acquisition of El Paso’ s upstream business
• Buy-side: Laredo Petroleum acquisition of Broad Oak Energy
• Sell-side: OGX Resources sale to undisclosed buyer
• S

ell-side: Eagle Oil and Gas to Comstock Resources

• S ll

id RKI E l ti & P d ti it i t t

• Upstream companies covered with Permian exposure: 24

□

S elected Permian operator coverage: APA, APC, BRY, CXO, DVN, EOG, OXY, PXD, SD, WLL, XEC

• Published detailed Permian Basin primer focused on the

S b T d i M h 2009 e a

• S

ell-side: RKI Exploration & Production equity investment

• Sell-side: Yates Drilling Company to undisclosed buyer
• Buy-side: Crestview acquisition of equity in Select Energy Services
• S

ell-side: Arena Resources merger with SandRidge Energy S praberry Trend in March 2009 Eagle Ford

• Sell-side: Antares Energy sale to Chesapeake
• Buy-side: CNOOC/ Chesapeake Joint Venture
• Sell-side: Pioneer Joint Venture with Reliance
• B

id L i t t d

• Upstream companies covered with Eagle Ford exposure: 15

□

Selected Eagle Ford operator coverage: APC, EOG, GDP, HK, NFX, PXD, ROS E, S M

• R

tl l d “ Sh ll Di ” i t E l F d i 2010

• Buy-side: Large integrated
• Buy-side: Potential $400MM private equity investment
• Recently released “ S

hallow Dive” into Eagle Ford in 2010

• Continuing close coverage of well results in play

Haynesville

• S

ell-side: Ellora Energy sale to ExxonMobil

• S

ell-side: Undisclosed Private Company to undisclosed buyer

• Buy-side: Large public company seeking to establish E Tx position
• Regency/ GE/ Alinda Haynesville Expansion Proj ect (midstream)
• Upstream companies covered with Hayesville exposure: 13

□

Selected Haynesville operator coverage: APC, BG, CHK, GDP, RRC, XCO, XOM

• Significant recent focus on midstream issues in basin

Marcellus

• Buy-side: $400MM Private Equity Joint Venture
• Buy-side: Enerplus Joint Venture with Chief for $406MM
• Buy-side: Potential $500MM Private Equity investment
• Sell-side: Quest Resources Corp to Multi
• Upstream companies covered with Marcellus exposure: 16

□

Selected Marcellus operator coverage: CHK, COG, CRZ, RRC, S WN, UPL, XCO

• Released in-depth report on the play simultaneously with

initiation of Cabot in June Ni b

• S

ell-side: DIA mineral lease sale

• S

ell-side: Undisclosed private company

• Upstream companies covered with Niobrara exposure: 14

□

Selected Niobrara operator coverage: APC, CHK, CLR, Niobrara p p y

• S

ell-side: Joint Resources

• Buy-side: CNOOC/ Chesapeake Joint Venture

p g , , , EOG, NBL, S M Utica

• Sell-side: Marquette sale to Hess
• Sell-side: PDC Energy Joint Venture
• Upstream companies covered with Utica exposure: 8

□

Selected Utica operator coverage: APC, CHK, HES

3

SLIDE 4

Commodity Prices S et the S tage

SLIDE 5

Long Term Oil Price is Key

Today’s Question: At what oil price do we drop rigs? Today s Question: At what oil price do we drop rigs?

$150 Historical WTI Spot $150 Historical WTI Spot 1/ 1/ 2009 Strip $150 Historical WTI Spot 1/ 1/ 2009 Strip 1/ 1/ 2010 Strip $150 Historical WTI Spot 1/ 1/ 2009 Strip 1/ 1/ 2010 Strip 1/ 1/ 2011 Strip $150 Historical WTI Spot 1/ 1/ 2009 Strip 1/ 1/ 2010 Strip 1/ 1/ 2011 Strip 1/ 1/ 2012 Strip $150 Historical WTI Spot 1/ 1/ 2009 Strip 1/ 1/ 2010 Strip 1/ 1/ 2011 Strip 1/ 1/ 2012 Strip 7/ 2/ 2012 Strip $110 $130

)

$110 $130

)

$110 $130

)

$110 $130

)

$110 $130

)

$110 $130

)

$70 $90

WTI Price ($/Bbl)

$70 $90

WTI Price ($/Bbl)

$70 $90

WTI Price ($/Bbl)

$70 $90

WTI Price ($/Bbl)

$70 $90

WTI Price ($/Bbl)

$70 $90

WTI Price ($/Bbl)

$50 $70 $50 $70 $50 $70 $50 $70 $50 $70 $50 $70 $30 $30 $30 $30 $30 $30

5

___________________________________ S

• urce: Bloomberg as of 7/ 2/ 2012.

SLIDE 6

Negative Gas Outlook Impacting Deal Metrics

$15 Historic Henry Hub Spot $15 Historic Henry Hub Spot 1/ 1/ 2009 Strip $15 Historic Henry Hub Spot 1/ 1/ 2009 Strip 1/ 1/ 2010 Strip $15 Historic Henry Hub Spot 1/ 1/ 2009 Strip 1/ 1/ 2010 Strip 1/ 1/ 2011 Strip $15 Historic Henry Hub Spot 1/ 1/ 2009 Strip 1/ 1/ 2010 Strip 1/ 1/ 2011 Strip 1/ 1/ 2012 Strip 7/ 2/ 2012 Strip $9 $12

ce ($/MMbtu)

$9 $12

ce ($/MMbtu)

$9 $12

ce ($/MMbtu)

$9 $12

ce ($/MMbtu)

$9 $12

ce ($/MMbtu)

$6

Natural Gas Pric

$6

Natural Gas Pric

$6

Natural Gas Pric

$6

Natural Gas Pric

$6

Natural Gas Pric

$0 $3 $0 $3 $0 $3 $0 $3 $0 $3

6

___________________________________ S

• urce: Bloomberg as of 7/ 2/ 2012.

SLIDE 7

Recent Decline in NGL Prices

$160 100%

R epresentative NGL Barrel %

• f WTI

WTI Spot Price ($/ Bbl)

Ethane prices ~74%

$120 75%

~74%

$80 50% WTI S pot ($/ Bbl) NGL %

• f WTI

$40 25%

NGL prices ~44%

$0 0% Jun-08 S ep-08 Dec-08 Mar-09 Jun-09 S ep-09 Dec-09 Mar-10 Jun-10 S ep-10 Dec-10 Mar-11 Jun-11 S ep-11 Dec-11 Mar-12 Jun-12

___________________________________ S

• urce: Bloomberg as of 7/ 2/ 2012.

Note: Representative consists of barrel 40% ethane, 10% normal butane, 25% propane, 15% natural gasoline and 10% iso butane.

7

SLIDE 8

Liquids Rig Count S hift Has Been Dramatic

2,500

U.S. Onshore Rig Count

534 2,030 2,005 1,955

2,000

1,606 935 879

1,000 1,500

27%

1,070 1,421 700 879

500

73%

424 179 Peak 3Q09 Trough 2Q09 Near-Term Peak 3Q11 Current 6/ 29/ 12

___________________________________ S

• urce: Baker Hughes as of 6/ 29/ 2012.

Note: “ Peak 3Q09” defined as 9/ 12/ 2008, “ Trough 2Q09” defined as 6/ 5/ 2009, and “ Near-Term Peak” as 10/ 7/ 2011.

Gas Liquids

8

SLIDE 9

Permian and Bakken Driving Oily Rig S hift

S elected Gas S hales Permian Eagle Ford Bakken Granite Wash Niobrara

• Hz. Ms Lime

1,200 1,500

t

Selected Oily Rig Count: ~940 Bakken: ~215 900

cted Rig Count

300 600

Selec

Q1'07 Q3'07 Q1'08 Q3'08 Q1'09 Q3'09 Q1'10 Q3'10 Q1'11 Q3'11 Q1'12

9

___________________________________ S

• urce: TPH Research as of 7/ 2/ 2012.

SLIDE 10

Bakken Vaults North Dakota to #2 US Producer

March 2012 Production by State (Mbbl/d)

TX

1,790

240 650 Monthly Avg. Rig Count Bakken Production (Mboe/ d) Montana Bakken Production North Dakota Bakken Production Bakken Rig Count

AK ND

, 587 579

180 200 220 450 500 550 600

CA OK

548 226

100 120 140 160 300 350 400 450 40 60 80 100 100 150 200 250 20 50 100 Mar -01 Mar -02 Mar -03 Mar -04 Mar -05 Mar -06 Mar -07 Mar -08 Mar -09 Mar -10 Mar -11 Mar -12

10

___________________________________ S

• urce: Baker Hughes Montana and North Dakota rig count, HPDI and EIA.

Note: HPDI production data reported with a 3 month lag. Note: Texas, North Dakota and Alaska production per state industrial commissions.

SLIDE 11

Bakken Rig Count Close to a Peak?

Has Bakken rig count peaked in the 200 –225 rig range in light of the current commodity backdrop? Has Bakken rig count peaked in the 200 –225 rig range in light of the current commodity backdrop?

$125 250 Williston Basin Rig Count WTI Spot Price $100 $125 200 250 $75 150 WTI Spot Price ($/ n Basin Rig Count $25 $50 50 100 / bbl) Wiliston $0 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 11

__________________________________ S

• urce: HPDI and RigData as of 7/ 2/ 2012.

SLIDE 12

Deal Flow Follows Commodities

SLIDE 13

Gas Down, Oil Up: S hocking!

$60 40 $60

Resource Deal Volume Gas Deals

40 $60

Resource Deal Volume Gas Deals Oil Deals

$35 1 $40.6 $51.4 $45

m e ($Bn)

$35 1 $40.6 $51.4 30 $45

Res m e ($Bn)

$35 1 $40.6 $51.4 30 $45

Res m e ($Bn)

$22.7 $35.1 $18.4 $30

source Deal Volu

$22.7 $35.1 $18.4 20 $30

• urce Deal Coun

source Deal Volu

$22.7 $35.1 $18.4 20 $30

• urce Deal Coun

source Deal Volu

$6.9 $15

Res

$6.9 $ 10 $15

nt Res

$6.9 $ 10 $15

nt Res

$0 2007 2008 2009 2010 2011 2012 $0 2007 2008 2009 2010 2011 2012 $0 2007 2008 2009 2010 2011 2012

13

_______________________________ S

• urce: IHS

Herold as of 7/ 2/ 2012.

SLIDE 14

Deals S hifting to Oil/ Liquids-Rich

2010 Deal Count 2011 - 2012 YTD Deal Count

Oil Deals 47% Gas Deals 53% Oil Deals 68% Gas Deals 32%

14

_______________________________ S

• urce: IHS

Herold as of 7/ 2/ 2012. Includes transactions greater than $50 million in which United S tates is the primary country. Note: Oil and gas transactions are separated on the basis of reserve composition.

Gas Transactions Oil/ Liquids-Rich Transactions

SLIDE 15

Diversity Among Oil/ Liquids-Rich Deal Flow

2011 Present Deal Count 2011 – Present Deal Count

Permian S hale 15% Bakken 29% Niobrara 8% MS Lime 6% Uti Granite Wash 2% Eagle Ford 27% Utica 13%

____________________________________ S

• urce: IHS

Herold as of 7/ 2/ 2012. Note: Deal value >$50 million. Reflects transactions where United S tates listed as primary country. Excludes JVs.

15

SLIDE 16

Conventional Oil Metrics S table

$32 $/ Boe

Reserves ($/ Boe)

$160, 000 $32 $/ Boe/ d $/ Boe

Reserves ($/ Boe) Product ion ($/ Boe/ d) $23.58

$24 $32

$23.58

$120, 000 $160, 000 $24 $32

$20.10 $16.07 $20.06 $16.38 $19.16 $17.79 $17.63 $17.49

$16

$20.10 $16.07 $20.06 $16.38 $19.16 $17.79 $17.63 $17.49

$80, 000 , $16 $8 $40, 000 $8 $0 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 $0 $0 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12

16

____________________________________ S

• urce: IHS

Herold as of 7/ 2/ 2012. Note: Deal value >$50 million. Reflects transactions where United S tates listed as primary country. Excludes JVs.

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12

SLIDE 17

Bakken Deal S pecifics

SLIDE 18

S trong Deal Market Throughout the Basin

Kodiak –Peak Magnum Hunter - Baytex Hess - American Oxy - Cirque

30K acres, 3Q 2010

Ursa

15K acres, $7,600/acre, 500 boe/d, 4Q 2010

g y

50K acres, $5,200/acre, 1,300 boe/d, 2Q 2012 85K acres, $5,400/acre, 167 boe/d, 3Q 2010

Statoil - Brigham

375K acres, $12,500/acre, 16,800 boe/d, 3Q 2011

Crescent Point - Linn - Cade & Holt

4.6K acres, 800 boe/d

Petro-Hunt

51K acres

Anschutz

25k acres

HK –GEOI

55k acres, Q2 2012 Nesson Anticline Li l K if

Linn –Concho

11K acres, $17,500/acre, 1,350 boe/d, 1Q 2010

Kodiak –North Plains

50K acres, $11,800/acre, 3,500 boe/d, 4Q 2011

Oasis

2 undisclosed transactions, 16.7K + 10K acres, $3,000/acre, 300 boe/d, 4Q 2010

Enerplus – Peak

Little Knife Anticline

Williams – Dakota 3

85K acres, $10,800/acre, 3,300 boe/d, 4Q 2010 3,500 boe/d, 4Q 2011

Ursa

100K acres

Petro-Hunt

5K acres

Occidental – Anschutz

180K acres, $7,800/acre, 5,500 boe/d, 4Q 2010 47K acres, $9,800/acre, 800 boe/d, 3Q 2010

GMXR-Undisclosed

26K acres, $2,165, 1Q 2011

Petro-Hunt

22K acres

18

Lower Bakken Limit

Hess - Tracker

167K acres, $8,000/acre, 4,400 boe/d, 4Q 2010

___________________________________ Note: TPH estimates of current market conditions.

Petro-Hunt

12K acres / 5K acres

Kodiak - BTA

13.5K acres, $17,400/acre, 3,000 boe/d, 3Q 2011

Citation 30K acres

SLIDE 19

Bakken Transactions Through Time

$10,068 $9 303

$10 000 $12,000 $14,000

Average $/Acre

Deal Metrics Remain Stable(1)

$10,068 $9 303

$10 000 $12,000 $14,000

Median $/Acre Median $/Acre Constant ~$90/bbl price deck = Constant valuation

$7,118 $6,057 $3,047 $4,415 $9,303 $7,946 $5,233

$4,000 $6,000 $8,000 $10,000 Adj usted $/ Acre

$7,118 $6,057 $3,047 $4,415 $9,303 $7,946 $5,579

$4,000 $6,000 $8,000 $10,000 Adj usted $/ Acre

Median $/Acre = ~$6,600

$0 $2,000 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12

Bakken Deal Flow Shaped by Large Transactions

$0 $2,000 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12

$5,295 5 6 7

$5,000 $6,000 $7,000

Numbe

MM) Other Transaction Volume ($MM) S ingle Transaction Volume ($MM) Deal Count

Bakken Deal Flow Shaped by Large Transactions

Statoil / BEXP: $4.7 Bn OXY / Anschutz: $1.4 Bn

$914 $3,565 $638 $399 $1,055 $1,326 1 2 3 4

$1 000 $2,000 $3,000 $4,000

er of Transactions

Deal Volume ($M HES / Tracker: $1.0 Bn HK/GEOI: $945 MM

$ $251 $399 1

$0 $1,000 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12

19

___________________________________ S

• urce: Company Investor Presentations and press releases.

(1) Adj usted $/ acre estimate excludes PDP and does not correct for developed acres. PDP valued at $50,000 boe/ d.

SLIDE 20

S trong Deal Metrics Throughout the Basin

Factors Impacting Value:

$3,000 - $5,500/acre

Factors Impacting Value:

• Bakken and Three Forks present?
• Offset well performance
• Is the area “de-risked”?
• # of wells/DSU?

$4,000 - $8,000/acre >$10,000/acre

• Deeper Three Forks?

$6,000 - $12,000/acre $6,000 - $12,000/acre $8,000 - $10,000/acre 20

___________________________________ Note: TPH estimates of current market conditions.

Acreage values are after subtracting current production at $50,000 boe/d

SLIDE 21

Bakken Pure Play Public Companies… A Tale of the Tape

2011 Performance 2012 YTD Performance

232% Bakken 1% Marcellus 74% 92% 166% High G th Oil Transition Permian (4% ) (3% ) Focused Gas Growth Oily 43% 58% 74% Marcellus GoM / Gulf Coast High Growth Oil (10% ) (8% ) (6% ) S mall Cap Gas GoM / Gulf Coast High Growth Oil (18% ) (13% ) 36% F d G G th Diversified Gas Growth Oily (14% ) (13% ) Diversified Gas Growth Permian

___________________________________ S

• urce: FactS

et as of 7/ 2/ 2012. Bakken: OAS , KOG, NOG, TPLM and BEXP (until acquired by S TO).

(49% ) (18% ) S mall Cap Gas Focused Gas Growth (18% ) (16% ) Transition Bakken

21

Transition: AREX, EOG, ROS E, S D and S M. High Growth Oil: CLR, CXO, DNR and OAS . Oily: BRY, CWEI, PXD, PXP, REN, VQ and WLL. GOM / Gulf Coast: ATPG, CPE, CXPO, EPL, EXXI, MCF, PQ, S FY, S GY and WTI. Focused Gas Growth: COG, GDP, KWK, RRC, S WN and UPL. Diversified Gas Growth: CHK, DVN, ECA, EOG, FS T, NFX, QEP, XCO, and XEC. S mall Cap Gas: BBG, CRK, GMXR, PETD and PVA. Permian: AREX, CWEI, CXO, LPI and PXD. Marcellus: GOG, RRC and EQT.

SLIDE 22

Permian Deal Metrics

22

SLIDE 23

S tacked Oil Plays Drive the Permian

Current Permian Drilling Activity Current Permian Drilling Activity

Horizontal Rig Vertical Rig

Midland B i

Bone Spring

Delaware Basin Central Platform Basin

Wolfberry Delaware Sands Wolfberry Cline Avalon Shale Spraberry Wolfcamp / Wolfbone Wolfcamp (University) (University)

__________________________________ S

• urce: HPDI and RigData.

23

SLIDE 24

Permian M&A Deal Flow

2009 - 2012 YTD Deal Flow Delaware Conventional 22% Conventional 25%

75%

• f deals in

“ resource” plays resource plays

Wolfberry 53%

24

_______________________________ S

• urce: IHS

.

SLIDE 25

Industry Weighted Towards Oily Production

Gas (Boe/ d) Oil (Boe/ d) Gas (Boe/ d) Well Count

Wolfcamp and Bone Spring Production

100,000 120,000

• e/ d)

10-Yr gas production up ~20%

3,500 4,200 100,000 120,000

• e/ d)

10-Yr oil production up ~153%

60,000 80,000 Daily Production (Bo 2,100 2,800 60,000 80,000 Well Count Daily Production (Bo 20,000 40,000 D 700 1,400 20,000 40,000 D

Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11

25

___________________________________ S

• urce: HPDI.

Note: Includes all Texas producing wells with Wolfcamp, Bone S pring or Trend Area as a target reservoir; Excludes wells with field reported as S praberry.

SLIDE 26

Midland University Lands Wolfcamp Results

Pioneer Natural Resources Two recent IPs > 800 boe/d El Paso Recent IP > 1,300 boe/d

Tom

EOG Resources Recent IPs up to 2,000 boe/d

Green

El Paso Initial IPs ranging from 300 – 600 boe/d

Operator

Approach Devon El Paso

Approach Resources Multiple recent IPs of > 1,000 boe/d g g

El Paso EOG Highmount Petrohawk Pioneer Other

Terrell

26

____________________________________ S

• urce: HPDI. All horizontal and vertical Wolfcamp, Wolfberry, and Wolffork permits from 1/ 1/ 2011.

Other Horizontal Vertical

SLIDE 27

The Evolution of a Permian Play… Wolfberry 2009

Andrews Country Max: $1,554/acre Shaw Interest Inc Concho / Terrace Petroleum 11/23/2009 $260 million Shaw Interest, Inc. October 2009 Reagan County Max: $566/acre Windsor Permian, LLC April 2009 Crane County Max: $207/acre April 2009 Upton County Crockett County Max: $301/acre WTG E l i Max: $207/acre San Luis Energy October 2009 p y Max: $289/acre Pioneer Nat. Resources October 2009 WTG Exploration October 2009 Pioneer Southwest / PXD

M&A Deals Lease Sales

d l

Pioneer Southwest / PXD 8/31/2009 $171 million

27

UT Lands 2009 Lease Sale 157 Tracts Sold for average $287/acre Highest bid $1,555/acre

___________________________________ S

• urce: UT Lands, Company Investor Presentations and press releases.

(1) $/ acre estimate excludes PDP and does not correct for developed acres. PDP valued at $50,000/ Boe/ d.

SLIDE 28

The Evolution of a Permian Play… Wolfberry 2010

Andrews Country Max: $3,587/acre Private Broker Energen / Undisclosed 8/23/2010 $185 million; $18,678/acre(1) Private Broker September 2010 Reagan County Max: $1,626/acre El Paso E&P September 2010 Crane County Max: $455/acre September 2010 Upton County Crockett County Max: $1,797/acre El P E&P Max: $455/acre San Luis Energy September 2010 p y Max: $1,610/ace Private Broker September 2010 El Paso E&P September 2010 Berry Petroleum / Undisclosed 10/25/2012 Energen / Undisclosed 8/23/2010

M&A Deals Lease Sales

d l

10/25/2012 $180 million; $12,903/acre(1) $75 million; $7,239/acre(1)

28

UT Lands 2010 Lease Sale 510 Tracts Sold for average $985/acre Highest bid $3,587/acre

___________________________________ S

• urce: UT Lands, Company Investor Presentations and press releases.

(1) $/ acre estimate excludes PDP and does not correct for developed acres. PDP valued at $50,000/ Boe/ d.

SLIDE 29

The Evolution of a Permian Play… Wolfberry 2011

Andrews Country Max: $10,000/acre PDC Energy September 2011 Berry Petroleum / Undisclosed 4/28/2011 $123 million; $16,333/acre(1) Concho / PDC Energy 12/23/2011 $175 million; $11,765/acre(1) Laredo Petroleum / Broad Oak 6/16/2011 $1.0 billion; $9,273/acre(1) Reagan County Max: $5,580/ace ConocoPhillips September 2011 Crane County Max: $511/acre SandRidge Energy September 2011 p Upton County Max: $5,580/ace ConocoPhillips September 2011 Crockett County Max: $5,580/ace C Philli

M&A Deals Lease Sales

d l

ConocoPhillips September 2011

29

___________________________________ S

• urce: UT Lands, Company Investor Presentations and press releases.

(1) $/ acre estimate excludes PDP and does not correct for developed acres. PDP valued at $50,000/ Boe/ d.

UT Lands 2011 Lease Sale 496 Tracts Sold for average $2,245/acre Highest bid $10,000/acre

SLIDE 30

The Evolution of a Permian Play… Wolfberry 2012

Andrews Country Max: $3,000/acre Windsor Petroleum March 2012 Reagan County Max: $5,814/ace Pioneer Nat. Resources March 2012 Crane County Energen / Undisclosed 2/10/2012 $66 million; $20,563/acre(1) March 2012 Crockett County Max: $2,507/ace P h k P i Crane County Max: $525/acre Henry Energy LP March 2012 Upton County Max: $7,058/ace Veritas Energy Partners March 2012 Petrohawk Properties March 2012

M&A Deals Lease Sales

d h l

30

UT Lands March 2012 Lease Sale 86 Tracts Sold for average $645/acre Highest bid $7,123/acre

___________________________________ S

• urce: UT Lands, Company Investor Presentations and press releases.

(1) $/ acre estimate excludes PDP and does not correct for developed acres. PDP valued at $50,000/ Boe/ d.

SLIDE 31

Wolfberry / Wolfcamp Acreage Now First In Class

$25,000

Lease S ales

$25,000

Lease S ales Highest Lease S ale Bid

$25,000

Lease S ales Highest Lease S ale Bid M&A Deals

$20,000 $20,000 $20,563 $20,000 $15,000 erage $/ Acre $10 000 $15,000 rage $/ Acre $10 000 $12,940 $11,971 $15,000 erage $/ Acre $5,000 $10,000 Ave

Average $/acre up ~10x since 2009

$3 587 $10,000 $7,123 $5,000 $10,000 Ave $3 587 $10,000 $7,123 $5,000 $10,000 Ave $287 $985 $2,245 $645 $0 2009 2010 2011 2012 $287 $985 $2,245 $645 $1,555 $3,587 $0 2009 2010 2011 2012 $287 $985 $2,245 $645 $1,555 $3,587 $0 2009 2010 2011 2012 31

___________________________________ S

• urce: Company Investor Presentations and press releases.

Note: $/ acre estimate excludes PDP and does not correct for developed acres. PDP valued at $50,000/ Boe/ d.

SLIDE 32

Avalon / Bone S pring Production Rapidly Increasing

1,500 75,000 Oil (Boe/ d) Gas (Boe/ d) Well Count 1,200 60,000 W (Boe/ d)

First Avalon Shale Horizontal Producer

600 900 30,000 45,000 Well Count Daily Production 300 15,000

Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11

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___________________________________ S

• urce: HPDI.

SLIDE 33

Recent Industry Results in the Delaware

Avalon Shale Devon IP of 950 boe/d

1st, 2nd, 3rd Bone Spring

Bone Spring (2nd/3rd) XEC: 7 recent wells IPs 560-1,100 boe/d

Hz Brushy/Cherry

Avalon Shale CHK IP of 1,160 boe/d Delaware Sands Yates IPs of 794 - 1,067 boe/d Avalon Shale (Loving)

Avalon Shale

Avalon Shale CXO IP of 1,368 boe/d 3rd B S i (W d) Avalon Shale (Loving) APC TC IP ~800 boe/d (60% liquids)

Wolfcamp

Avalon Shale EOG IP of 1,474 boe/d 3rd Bone Spring (Ward) APC TC IP ~700 boe/d (85% liquids) Wolfbone CXO IPs of 200-450 boe/d CRK IPs of 150-300 boe/d

A d k C h EOG O

3rd Bone Spring CHK IP of 2,200 boe/d

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___________________________________ S

• urce: Company Investor Presentations, HPDI: Vertical Wolfbone and all horizontal permits since 7/ 1/ 2011.

Anadarko Concho EOG Oxy Chesapeake Devon Mewbourne Whiting Cimarex Energen Clayton Other Comstock

SLIDE 34

Recent Notable Delaware Basin Transactions

June 2011 Land Auction $5,076 - $5,630/acre September 2011 Land Auction $6,150/acre August 2010 Land Auction $5,313/acre August 2010 Land Auction $7,250/acre $ , May 2010 Land Auction $3,957/acre July 2011 Land Auction $6 000/acre $6,000/acre April 2011 Land Auction $4,200/acre Concho / Undisclosed: 11/2/2011 $330 million; $2,237/acre(1) Comstock Resources / Eagle Oil & Gas: 12/5/2011 $333 million: $5,970/acre(1) Forest Oil Corp. / Undisclosed: 2/16/2012 $103 million; $1 635/acre(1) Clayton Williams $3,333/acre March 2012

M&A Deals Lease Sales

___________________________________ S

• urce: Company Investor Presentations and press releases.

(1) $/ acre estimate excludes PDP and does not correct for developed acres. PDP valued at $50,000/ Boe/ d.

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$103 million; $1,635/acre( )

SLIDE 35

Conclusions

SLIDE 36

Metrics S hould Increase With Drilling

Little to No Type Curve Being Established Type Curve Established

$18,000 $20,000

Little to No Horizontal Results

$18,000 $20,000

Type Curve Being Established Focused Horizontal Results

$18,000 $20,000

Type Curve Established Widespread Horizontal Results

$12 000 $14,000 $16,000

re)

$12 000 $14,000 $16,000

e)

$12 000 $14,000 $16,000

e)

$8,000 $10,000 $12,000

Price ($/ acr

$8,000 $10,000 $12,000

Price ($/ acre

$8,000 $10,000 $12,000

Price ($/ acre

$2 000 $4,000 $6,000 $2 000 $4,000 $6,000 $2 000 $4,000 $6,000 $0 $2,000 0.5 1.5 2.5 3.5 4.5 5.5 6.5 $0 $2,000 0.5 1.5 2.5 3.5 4.5 5.5 6.5 $0 $2,000 0.5 1.5 2.5 3.5 4.5 5.5 6.5 Ford nsate kken Utica ellus mian

• urce

brara Lime

36

_______________________________ S

• urce: IHS

Herold and TPH research.

Eagle Conden Ba U Marc Perm Reso Niob

• Miss. L

SLIDE 37

Permian – Right Place at Right Time

• Oil prices to remain strong
• Liquids pricing strong enough

Liquids pricing strong enough

• Oil deals increasing
• Horizontal applications
• Horizontal applications
• Vertical – accessing new pay
• S

cale running room

• S

cale – running room

• Multiple targets
• O

f b i

• Open for business

37

SLIDE 38

Bakken Themes – Now and In The Future

Major Themes and Catalysts as the Bakken Continues to Evolve

1) Completion Technology 1) Continues to Advance 1) Completion Technology 2) Well Performance 3) Infill Drilling/Spacing 1) Continues to Advance 2) IPs Define Sweet Spots 3) Denser Over Time with Pad Drilling

B kk V l ill

4) Three Forks 5) Deep Three Forks 4) Similar to Bakken and Contiguous 5) Emerging Value

Bakken Values will Rise

6) Drilling Costs 7) Western Rough Rider 6) Improve With Time 7) Core Extends West of the Nesson

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SLIDE 39

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