PacWest FracDB Capabilities: A Sophisticated Market Analysis Tool

PacWest Consulting Partners 920 Memorial City Dr, Suite 160

Houston, TX 77024

FracDB: The First US Frac Database A Powerful Tool for Understanding the Market

Houston, Texas

November 14, 2011

TERMS & CONDITIONS Information furnished in all reports produced by PacWest may be used by Client for internal purposes, as Client deems beneficial, as long as due care is taken to hold the information confidential within Client’s organization and PacWest is not liable for the information provided. All rights to the information remain with PacWest. PacWest represents that it will not breach any obligation of confidentiality with respect to information contained in the study. PacWest will maintain in confidence and not disclose any information related to Client, without prior written consent of the Client. PacWest will not disclose to any person, including, without limitation, any of the Client’s competitors or suppliers, the fact that Client has engaged PacWest in this project scope, the scope of the assignment or any other information relating to Client.

Client Confidential

FRACDB CAPABILITIES OVERVIEW

© PacWest 2011 | All rights reserved | 2

Contents

1. PacWest Snapshot

2. FracDB Capabilities

FracDB Overview

Pressure Pumper & Customer Relationships Case Study

Completions Chemical Market Case Study

3. PacWest Market Intelligence Offerings

Client Confidential



Firm Overview & Capabilities

PacWest is a boutique strategy consultancy and market intelligence firm that specializes in unconventional oil & gas

Provide strategy consulting and advisory services to Oil & Gas

Strength in Oil & Gas supply market

- Often work with operator supply chain groups analyzing supply/demand, developing sourcing strategies, building capabilities, etc.

With oilfield suppliers, often work at C-Level or business lead

Consulting & Advisory

Offer industry-leading analysis of unconventional market

Deep knowledge and strength in the pressure pumping / frac market

Employ combination of primary intelligence + secondary research

Unique in market: apply strategy consulting capabilities to turn research into actionable intelligence

Market Intelligence Products

All key staff come from top-tier strategy firms; consulting and market intelligence capabilities reinforce/inform each other

Client Confidential



Sample of Recent PacWest Consulting Projects

A sampling of some of PacWest’s recent projects demonstrate our depth of experience in North American and international shale

We have resources in nearly every major unconventional country/region to support international shale needs

PacWest Project Client Outcome

Analyzed Bakken & Eagle Ford supply/demand; conducted demand planning exercise to develop new pressure pumping sourcing/contract strategy

Operator avoided completion delays, avoided significant additional costs

Developed Poland unconventional market entry, product/service, and JV strategy for a potential shale service company for a private equity client

PE firm focused on high-growth segments only, with the right strategic partners

Developed an innovative economic and strategic analysis of operator all-in water management costs over 20-year timeframe, for Bakken & Eagle Ford assets

Operator understood cost implications, made optimal economic decisions

Conducted a study of frac pump market focused on supplier strategic plans, manufacturing capabilities, and supply chain capabilities

Equipment manufacturer developed optimal strategic investment plans

Conducted study of evolving service company landscape in Poland, including equipment, resources, and expansion plans

Operator made better informed contract award decision

Client Confidential



Contents

1. PacWest Snapshot


FracDB Overview




Client Confidential



FracDB is the definitive database of fracs and frac chemicals that can be used to conduct sophisticated market analyses

Data Elements Product Overview

Frac date

Well number, API number

Operator

TVD

Water volume

Pressure Pumper

Play

Chemical type

Chemical ingredient

Chemical supplier

Contact us for more detail

Database of US fracs and frac chemicals, built into a rich structured data set

- The data set already contains nearly 7,000 fracs conducted in 2011

A sophisticated tool that can be used to run a variety of analyses:

- Pressure pumping/frac market share

- Completion chemicals market share

- Regional frac design practices

- And dozens of other analyses…

Updated quarterly

FracDB is a powerful tool for the sophisticated market analyst – available late 2011

Client Confidential



Contents

1. PacWest Snapshot


FracDB Overview




Client Confidential



PacWest’s FracDB provides unprecedented insights into the completion chemicals market

Analysis of Pressure Pumper Customer Relationships

■ The PacWest FracDB is a database of US fracs and frac chemicals, built into a rich, structured data set

- The dataset currently contains detailed data from over nearly 7,000 US fracs conducted in 2011

- The FracDB provides a granular view of pressure pumper customer relationships across US plays/basins

■ As an example of the analysis possible with the PacWest FracDB, we have provided a detailed view of pressure pumper customer relationships for one key shale play and one of Baker Hughes’ key customers

Client Confidential



BHI has a well-established presence in the Barnett but works primarily with Devon, while HAL and WFT have a broader customer base

Pumper / Customer Relationships in the Barnett (major E&Ps only)

Note: Analysis includes data from 637 fracs in the Barnett executed between January 2011 and September 2011 from the PacWest FracDB

Operator Pumpco BHI HAL SLB WFT Superior Trican Univer-

sal Pioneer Frac Tech C&J

Chesapeake

EOG

Devon

XTO

Pioneer

Williams

ConocoPhillips

Enervest

Titan

Vantage

Range

Major customer

Minor customer

Client Confidential



Baker is Devon’s frac provider of choice, but Devon still uses other pumpers in its other assets

Frac Provider’s Used by Devon in 2011 (Jan-Sep)

Comments Devon’s Frac Providers

Note: Analysis includes data from 274 fracs executed for Devon between January 2011 and September 2011from the PacWest FracDB

Play BHI HAL WFT

Arkoma Woodford

Barnett

Eagle Ford

Green River

Haynesville

Permian

Major customer

Minor customer

■ Although Baker Hughes has provided the vast majority of Devon’s fracs in 2011 (92%), Devon has also worked with Halliburton and Weatherford

■ Baker Hughes is creating an opportunity for its competitors to gain a foothold with one of its major customers

Is Baker Hughes leaving value on the table by opening the door for other pumpers to work with Devon?

Client Confidential



Contents

1. PacWest Snapshot


FracDB Overview




Client Confidential



PacWest’s FracDB provides unprecedented insights into the completion chemicals market

Completion Chemicals Market Analysis

■ The PacWest FracDB is a database of US fracs and frac chemicals, built into a rich structured data set

- The dataset currently contains detailed data from over nearly 7,000 US fracs conducted in 2011

- The FracDB provides extremely detailed data on types and volumes of chemicals used in the hydraulic fracturing process

■ As an example of the granular detail provided by the PacWest FracDB, we have conducted an initial analysis of the market for biocides used during stimulation in the DJ Basin

Client Confidential



BHI is the dominant supplier (75%) of biocide in the DJ basin, although it only runs 27% of frac jobs

Frac and Biocide Market Share in the DJ Basin

27% 28%

23% 20%

1% 1%

19%

36%

22% 22%

1% 0%

75%

10%

0%

13%

1% 0% 0%

10%

20%

30%

40%

50%

60%

70%

80%

Baker Hughes Halliburton Superior Calfrac Unknown Maverick

Mar

ket

Shar

e

Share of Frac Jobs (total = 612)

Share of Fluid Pumped (total = 6.9M barrels)

Share of Biocide (total = 336K pounds)

Comments Fracs vs. Biocide in the DJ Basin (Jan-Sep 2011)

■ HAL is the largest frac provider in the DJ Basin, with 28% of the market by number of frac jobs, and 36% of the market by total fluid pumped

■ However, BHI is the dominant supplier of biocide in the DJ Basin, with 75% of the market by weight

■ Baker supplied 56% of biocide used in it’s competitors’ frac jobs (i.e. frac jobs not executed by Baker)

Note: Analysis includes data from 612 fracs in the DJ Basin executed between January 2011 and September 2011 from the PacWest FracDB

Client Confidential



Although there are eight different biocides used in the DJ Basin, Baker’s DBNPA product is by far the most common

Biocide Market Share in the DJ Basin

253,532

44,182 34,768

3,859 0

50,000

100,000

150,000

200,000

250,000

300,000

Baker Hughes Calfrac Halliburton Unknown

Po

un

ds

Bio

cid

e

MBNPA

Propietary

Bronopol

NaOH

THPS

NaClO

PEG

DBNPA

Comments Biocide Consumption in the DJ Basin (Jan-Sep 2011)

■ Baker is the dominant biocide supplier in the DJ Basin, with 75% of market share

■ Baker sells two biocide products in the DJ: DBNPA (94%) and THPS (6%)

■ Calfrac is the 2nd largest supplier, with 13% share (44,182 pounds), followed by Halliburton with 10% share (44,182 pounds)

Total = 336,342 pounds

Short-Hand Biocide Full Name

Bronopol 2-Bromo-2-Nitro-1,3-Propanediol

DBNPA 2,2-Dibromo-3-Nitrilopropionamide

MBNPA 2-Monobromo-3-itrilopropionamide

NaClO Sodium Hypochlorite

NaOH Sodium Hydroxide

PEG Polyethylene Glycol

Proprietary Unknown Proprietary

THPS Tetrakis (Hydroxymethyl) Phosphonium Sulfate

Note: Analysis includes data from 612 fracs in the DJ Basin executed between January 2011 and September 2011 from the PacWest FracDB

Client Confidential



Contents

1. PacWest Snapshot


FracDB Overview




Client Confidential



Market Intelligence Offerings

PacWest currently offers multiple unconventional market intelligence product offerings to support subscriber decision-making

Breakdown of pressure pumping fleets/capacity by basin and supplier with strategic analysis of latest regional supply market trends

Interactive database of 100+ critical unconventional suppliers

Cost escalation forecast for major D&C categories

Detailed breakdown of frac activity by basin, operator, pumper

Database of fracs including basin, operator, pumper, chemicals, chemical suppliers

Client Confidential



PumpingIQ provides the only granular breakdown of regional fleets/capacity by pressure pumper and analysis of market trends

Focus Markets Fleet/Capacity Breakdown & Trends

Bakken

Eagle Ford

Permian

DJ Basin

Anadarko

Marcellus

Uinta/Piceance/Green River

Haynesville

Fayetteville

Barnett

On-going monitoring of pressure pumping fleets and capacity in major US onshore frac markets

Granular regional breakdowns of fleets/capacity by pumper

Key customers by pumper

Detailed discussion of major trends and strategic insights for each region and US market in aggregate

PumpingIQ is the only granular fleet breakdown available in the market

Client Confidential



SupplierIQ is an interactive database of 100+ suppliers that are critical players in shale supply markets

Profile Contents Supplier Analysis

PacWest Supplier Classification

Company Overview & Analysis

Service Offerings

Geographic Footprint

Financials

Customers

Organizational Footprint

Detailed discussion of Service Offerings: 15 product/services that are critical for shale production

Interactive database of 100+ companies that supply critical D&C products/services for shale production

Database is updated quarterly with new suppliers; updates made to existing suppliers bi-annually

Subscribers can request supplier additions

Offer two forms of subscription to database: full SupplierIQ access or a subset of suppliers, customized to subscriber needs

SupplierIQ provides insightful snapshots of your key suppliers and competitors

Client Confidential



CostIQ provides a forecast of cost increases for key drilling and completion cost drivers

Cost Segments Forecast Analysis

Drilling

- Land rigs

- OCTG

- Drilling fluids

- Cementing services

Completion

- Pressure pumping services

- Proppant

- Frac chemicals

- Completion hardware

- Completion rigs

3-year forecast of D&C cost escalation, segmented into major categories

Includes strategic discussion of trends driving increases and/or decreases

Updated bi-annually (every 6 months)

PacWest utilizes three quantitative methods to forecast prices changes for each market segment:

- Multi-variable regression

- Demand/supply models

- Macroeconomic models

CostIQ provides 3-year cost forecasts for each key US region

Client Confidential



FracIQ is the source of frac activity data by operator and pressure pumper, with data broken down US-wide and regionally

Contents Product Overview

Aggregate US fracs:

- By operator

- By pressure pumper

Regional breakdown of fracs:

- By operator

- By pressure pumper

- By frac type

Operator and pumper relationships

Frac practices, including chemicals usage

The definitive subscription publication on frac activity across the US

Summary of fracs by region, operator, pressure pumper

Market share by pumper and operator across multiple metrics

Strategic analysis of frac trends and market dynamics, including implications for operators, pressure pumpers, and other stakeholders

Updated quarterly

Your “Land Rig Newsletter” for the frac market – available late 2011

Client Confidential



FracDB is the definitive database of fracs and frac chemicals that can be used to conduct sophisticated market analyses

Data Elements Product Overview

Frac date

Well number, API number

Operator

TVD

Water volume

Pressure Pumper

Play

Chemical type

Chemical ingredient

Chemical supplier

Contact us for more detail

Database of US fracs and frac chemicals, built into a rich structured data set

- The data set already contains nearly 7,000 fracs conducted in 2011

A sophisticated tool that can be used to run a variety of analyses:

- Pressure pumping/frac market share

- Completion chemicals market share

- Regional frac design practices

- And dozens of other analyses…

Updated quarterly

FracDB is a powerful tool for the sophisticated market analyst – available late 2011

Client Confidential



The ShaleIQ bundled product provides access to 3 useful products at a reduced price point

Breakdown of pressure pumping fleets/capacity

by basin and supplier with strategic analysis of latest

regional supply market trends

Interactive database of 100+ critical

unconventional suppliers

Cost escalation forecast for major D&C categories

The ShaleIQ bundle is a valuable resource to add to your decision-making toolkit

Bundle Includes

Client Confidential



Actionable Intelligence

Transforms volumes of disparate market data, insider industry activity and expert input into strategic and actionable recommendations for decision-makers

Aggregates, organizes and distills a wide range of data and intelligence to provide information to our clients that is comprehensive, focused and strategic

Analyzes this information to assess its strategic implications and provide a clear path of action for each stakeholder

PacWest delivers actionable intelligence that is designed to provide strategic recommendations to key decision-makers

Decision-Makers

Client Confidential



Methodology

PacWest uses a multi-pronged approach to develop its market intelligence offerings; the team:

1) Gathers and reviews all information available publicly and via proprietary databases

2) Engages its diverse network of industry contacts to gather real-time intelligence

3) Processes and synthesizes raw information into actionable intelligence

PacWest employs a comprehensive methodology that relies on primary intelligence and rigorous research and analysis

Insights are based on:

Constant conversations with our source network of field experts on-the-ground

Surveys from operators and suppliers

In-depth interviews and conversations with operators and suppliers

Industry-leading experts and technical specialists

PacWest internal databases

Primary Intelligence Gathering

These sources are regularly consulted:

Market research and reports

Company annual reports, 10-Ks, 10-Qs

Speeches and presentations by company leadership and other industry experts

Analyst reports from leading banks

Government data

Secondary Research

Business

PacWest FracDB Capabilities: A Sophisticated Market Analysis Tool