F:\Interoffice Information\DTP\Kharma\Libby\PowerPoint Presentations\2013\Generic Pitchbook - Draft\Generic_Pitchbook_v3.pptx 8/26/2013 9:56:39 AM

CONFIDENTIAL

F:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

October 7, 2013

3RD OILFIELD SERVICES

LAW CONFERENCE

1

Speaker BiosSpeaker BiosF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

Andrew C. Schroeder (Managing Director) joined the firm in 1998 and

focuses exclusively on the energy service and equipment sector.

Previously, Andrew qualified as a CPA while working at Price Waterhouse.

Andrew received an MBA from Harvard Business School and a BBA from

Texas A&M University.

Pearce Hammond (Managing Director) joined the firm in 2004 after

serving as a Director in Duke Energy's Financial Power Trading Group. He

previously held various positions at Enron Corporation, A.G. Edwards &

Sons, and as an Army Officer. Pearce graduated with a BS from the United

States Military Academy and an MBA from the Jones Graduate School of

Management at Rice University.

OVERVIEW OF SIMMONS & COMPANY

F:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

3

Overview Of Simmons & CompanyOverview Of Simmons & CompanyF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

�Leading investment bank for the energy industry since 1974.

�Focus on advisory services.

�Headquarters in Houston with other offices in Aberdeen,

London and Dubai.

�Approximately 170 employees.

Overview

Of The

Firm

Overview

Of The

Firm

Research

And

Trading

Research

And

Trading

�Leading provider of research coverage for the energy sector.

�Macro industry research.

�Diverse client base of mutual funds, hedge funds and other

investment firms.

Investment

Banking

Investment

Banking

�Market leader for M&A advisory in the oil service sector.

�Also serves the E&P and midstream/downstream sectors.

�Market leader for public equity offerings.

4

Select Oilfield Services Transactions Since January 2012Select Oilfield Services Transactions Since January 2012F:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

5

� The Simmons Research team has consistently ranked among the highest

in the industry.

Simmons Research Group Is Highly RatedSimmons Research Group Is Highly RatedF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

OFS M&A MARKET TRENDS

F:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

7

(Dollar amounts in billions)

10,139 10,369

11,442

10,442

8,048

6,751

9,444 9,661 9,635

8,484

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

� Despite historical low interest rates, high corporate cash balances and

low organic growth opportunities, overall U.S. M&A activity has been a

disappointment in recent years.

Overall U.S. M&A Activity Has Been DisappointingOverall U.S. M&A Activity Has Been DisappointingF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

Aggregate Deal ValueNumber of Transactions

U.S. M&A Transactions: 2004 – 2013

8

Oil Service M&A Activity Has Been BriskOil Service M&A Activity Has Been BriskF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

25

3944 42

28

35 35

44

53

68

88

5956

49

59

83

66

88

0

10

20

30

40

50

60

70

80

90

100

Q1

09

Q2

09

Q3

09

Q4

09

Q1

10

Q2

10

Q3

10

Q4

10

Q1

11

Q2

11

Q3

11

Q4

11

Q1

12

Q2

12

Q3

12

Q4

12

Q1

13

Q2

13

Number Of Transactions

Global Quarterly Energy Services And Equipment M&A Transactions

2009 – Q2 2013

� Oil service M&A activity has recovered strongly since 2009.

9

OFS Deal Review – By Transaction SizeOFS Deal Review – By Transaction SizeF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

Median Deal Size: $36 Million

Average Deal Size: $206 Million

62%13%

9%

8%4% 4%

< $50$50 –

$100

$100 –

$200

$200 –

$500

$500 –

$1,000> $1,000

10

OFS Deal Review – By Industry SectorOFS Deal Review – By Industry SectorF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

28%

9%

5%

27%

4%

11%

2%6%

8%

Upstream

Equipment

Manufacturing

Oil Service

Exposure

Rental ToolsProduction &

Well Services

Land Drillers

Offshore Services

Environmental

Geophysical

Other

11

OFS Deal Review – By Buyer TypeOFS Deal Review – By Buyer TypeF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

12%17%

22%4%

9%8%

85%

74%70%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 YTD 2013

Strategic Buyer

Energy-oriented PE Fund

Generalist PE Fund

12

� The strong outperformance of energy relative to the overall market has

attracted unconventional buyers, primarily general private equity groups

and industrial companies.

OFS Has Outperformed Overall MarketOFS Has Outperformed Overall MarketF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

0

50

100

150

200

250

300

350

400

450

500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

OSX Index

S&P 500

+209%

+10%

Indexed To 100 As Of January 1, 2000

13

� Almost all generalist PE firms:

– Believe energy is a higher growth sector.

– Have dedicated point people(s) for energy.

� Many have dedicated energy teams (particularly larger funds).

� Knowledge gap between energy-oriented to generalist remains, but is

closing.

– Generalists review almost all deals.

– Generalists readily hire consulting firms.

Simmons’ Observations: Generalist PE FirmsSimmons’ Observations: Generalist PE FirmsF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

14

Generalist PE Firms Have Been Active In OFS M&AGeneralist PE Firms Have Been Active In OFS M&AF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

15

Strategic Buyer Universe Has Also BroadenedStrategic Buyer Universe Has Also BroadenedF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

16

Summary Comparison Of Deal Characteristics By SizeSummary Comparison Of Deal Characteristics By SizeF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

Transaction Range

< $100 $100 - $200 $200 - $500 > $500

Sell-side Advisor 33% 50% 58% 90%

Financial Buyers

Energy-oriented 7% 4% 1% 10%

Generalist 16% 19% 20% 13%

Strategic Buyers

Energy-oriented 71% 71% 71% 67%

Industrial 7% 5% 7% 10%

17

� Active acquirors see oil service as having lower valuations and stronger

growth potential.

OFS Deal Review – Valuations PaidOFS Deal Review – Valuations PaidF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

9.6x

8.0x

8.9x

9.9x

9.0x

8.3x

6.8x 6.7x 6.8x6.5x

7.1x

6.1x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

2008 2009 2010 2011 2012 2013

U.S. Overall M&A

OFS Services and

Products

18

� Particularly for larger OFS companies with differentiated products or

services, recent auctions have been very competitive.

Comparison Of Buyer Response To Recent Sell-Side MandatesComparison Of Buyer Response To Recent Sell-Side MandatesF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

Project A Project B Project C Project D

Groups

Contacted

12 94 239 144

Reviewed CIM 8 46 102 61

Submitted IOI 6 17 14 15

Participated in

Second Round

2 10 10 9

Form of Final

Offer

SPA SPA LOI SPA

Deal Size >$500 $400-$600 <$100 $200-$400

19

� Emphasis on internal preparation before marketing begins.

– Internal and advisor due diligence.

– Develop quality presentation materials.

– Well organized and comprehensive data room.

– Identification of presenting management team.

– Evaluate transaction incentive arrangements for key managers.

– Thorough assessment of potential buyers to focus efforts on best candidates.

� Collaboration between client, bankers and attorneys.

– All groups involved early.

– Weekly project update calls.

� Finesse timing of launching marketing to your advantage.

Keys To Successful Sale ProcessesKeys To Successful Sale ProcessesF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

20

� Open and fair process with realistic deadlines.

– Appropriate time for buyers to complete work.

– Anticipate time needed for internal decision making.

� Maximize competition between buyers.

– Consistent and accurate feedback.

– Avoid/minimize exclusivity.

� Have appropriate internal and external resources to move quickly during

the sale process.

Keys To Successful Sale Processes (Continued)Keys To Successful Sale Processes (Continued)F:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

21

� Marshall the appropriate resources to determine if Target is a priority.

� Actively market Buyer to Target’s management.

� Go extra mile on non-price factors:

– Due diligence complete;

– Financing in place;

– Competitive markup of legal documents; and

– All internal approvals in-hand.

� For post-transaction success, consider the following:

– Broad base of Target management to have non-competes or employee agreements.

– Consider earn-outs/targeted bonus plans.

– Early and frequent communication to Target’s employees.

Strategies For Buyers In Competitive AuctionsStrategies For Buyers In Competitive AuctionsF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

22

U.S. OFS Equity Offering ActivityU.S. OFS Equity Offering ActivityF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

$3,548

$1,485

$1,034 $602

$1,928

$8,115

$5,094

$896

$25

$1,262

$261

$2,310

$2,099

$974

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

IPO Proceeds Other Equity Proceeds

Offering Proceeds

(Dollar amounts in millions)

23

� $759 million raised.

� Largest oilfield services U.S. IPO since Santa Fe International in 1997.

� Equity market value of $4.5 billion.

– 10.7x 2013P EBITDA.

– 16.4x 2013P Net Income.

� Offering was highly successful with excellent investor reception.

– Priced at $22 per share (above range of $19 to $21).

– Closed at $26.36 after first day of trading.

– Order book was 15x oversubscribed.

– Over 60 one-on-one meetings during a nine-day roadshow, with very high

participation (95% hit rate).

� Simmons & Company was a lead underwriter.

Highlights Of IPO Of Frank’s InternationalHighlights Of IPO Of Frank’s InternationalF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

MACRO ENERGY REVIEW

25

� Higher Natural Gas Production Growth Next Year

– In 2014, we expect U.S. natural gas production to increase by 1.5 bcf/d y/y or +2.3% to 67.8

bcf/d (up from the 0.5 bcf/d of production growth this year.

� Producer Commentary Supports Gas Production Growth Estimates

– Some producers have been able to mitigate their base declines (DVN now expects a 2013 dry

gas base decline of 7% vs. a prior forecast of 8-10%).

� Despite Higher Y/Y Gas Production, 2014 Market Balance Will Likely be Similar

to 2013:

– Continued decline in net imports combined with higher levels of industrial and power

generation demand should keep the supply-demand balance relatively unchanged y/y.

� Weather Will Remain a Prominent Swing Factor

– The U.S. has not experienced a well below normal (colder) winter in a number of years, as

the past twenty years have included six of the ten mildest winters since 1895.

2014 Natural Gas Outlook2014 Natural Gas OutlookF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

26

� Gas Price Outlook

– Assuming normal weather, we expect calendar year average gas prices in 2014 to range

between $3.50 to $4.50/MMBtu.

– YTD, NYMEX prompt month and Henry Hub cash gas prices have averaged ~$3.70/MMBtu.

� One Year Closer To Structural Demand Inflection

– We estimate 12 to 20 bcf/d of incremental gas demand by 2020 with the structural demand

story meaningfully beginning in 2015.

– We do not believe the forward curve provides an adequate price signal to meet this demand

wave (current strip does not get above $4.50/MMBtu until 2019 and above $5.00/MMBtu

until 2021).

– We believe gas producers need a sustained gas price outlook of $4.50 to $5.00/MMBtu

before aggressively prosecuting the necessary gas drilling to meet coming demand.

� Near-term Realism And Long-term Optimism

– Despite our 2014 gas outlook being very similar to 2013, we are becoming increasingly

positive on the long term gas outlook as the demand horizon is approaching which highlights

the need for improved gas prices to incentivize production.

2014 Natural Gas Outlook (Continued)2014 Natural Gas Outlook (Continued)F:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

27

U.S. Natural Gas: Supply-Demand (in Bcf/d)U.S. Natural Gas: Supply-Demand (in Bcf/d)F:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

CURRENT FORECAST (9/13/13) in bcf/d

2010 2011 2012 2013E 2014E '14E/'13E '13E/'12E '12E/'11 '11/'10 '14E/'13E '13E/'12E '12E/'11 '11/'10

Supply

Dry Gas Production 58.4 62.7 65.7 66.3 67.8 1.5 0.5 3.0 4.3 2% 1% 5% 7%

Imports 10.2 9.5 8.6 7.9 7.7 (0.2) (0.6) (0.9) (0.7) -2% -8% -10% -7%

Exports 3.1 4.1 4.4 4.6 4.9 0.3 0.2 0.3 1.0 6% 4% 7% 33%

Net Imports 7.1 5.4 4.2 3.3 2.9 (0.5) (0.8) (1.2) (1.8) -14% -20% -23% -25%

Supplemental Gaseous Fuels 0.2 0.2 0.2 0.2 0.2 0.0 0.0 0.0 (0.0) 10% 6% 2% -8%

Total Supply 65.7 68.3 70.1 69.8 70.9 1.1 (0.3) 1.8 2.6 2% 0% 3% 4%

Demand

Residential/Commercial (R/C) 21.6 21.6 19.4 21.5 21.5 (0.1) 2.2 (2.2) (0.0) 0% 11% -10% 0%

Power Generation 20.2 20.8 25.0 22.2 22.8 0.6 (2.8) 4.2 0.5 3% -11% 20% 3%

Industrial 18.7 18.9 19.5 20.2 20.7 0.5 0.7 0.6 0.2 2% 4% 3% 1%

Lease & Plant Fuel/Other 3.6 3.7 3.9 3.9 3.9 0.0 0.0 0.2 0.1 0% 1% 5% 3%

Pipeline 1.8 1.9 2.0 2.0 2.0 0.0 0.0 0.1 0.0 0% 1% 4% 1%

Total Demand 66.0 66.8 69.7 69.8 70.8 1.0 0.1 2.9 0.8 1% 0% 4% 1%

Supply-Demand (0.3) 1.5 0.4 (0.0) 0.0 0.1 (0.4) (1.1) 1.8

To Storage 0.0 1.0 0.0 (0.1) 0.0

Balancing Factor (0.3) 0.5 0.4 0.1 (0.0)

∆ Y/Y % ∆ Y/Y

28

U.S. Natural Gas: Production by Basin (in Bcf/d)U.S. Natural Gas: Production by Basin (in Bcf/d)F:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

Period Anadarko Permian Eagle Ford Fayetteville Barnett Haynesville Marcellus Other

2009 4.2 2.8 1.1 1.7 5.0 4.5 0.8 29.9 50.1 5.5 6.7 62.3 90.7% 56.5

2010 4.3 2.5 1.3 2.4 5.3 7.0 1.7 28.4 52.8 5.7 6.2 64.7 90.2% 58.4

2011 4.7 2.0 1.9 2.8 5.6 9.3 3.8 27.8 57.9 6.4 5.0 69.3 90.4% 62.7

2012 4.7 1.7 2.7 3.1 5.6 8.6 6.7 27.3 60.4 8.1 4.3 72.7 90.4% 65.7

2013 4.3 1.5 2.8 3.1 4.8 7.0 9.2 26.0 58.7 11.2 3.6 73.5 90.2% 66.3

2014 3.8 1.3 3.0 3.2 4.3 6.4 10.6 25.1 57.8 14.1 3.1 75.1 90.3% 67.8

'10/'09 %∆ 2% -13% 18% 36% 4% 56% 102% -5% 5% 4% -8% 4% 3%

'11/'10 %∆ 10% -17% 50% 18% 7% 33% 123% -2% 10% 11% -19% 7% 7%

'12/'11 %∆ 1% -15% 40% 10% -1% -8% 78% -2% 4% 26% -15% 5% 5%

'13/'12 %∆ -10% -13% 6% 2% -13% -19% 37% -5% -3% 39% -16% 1% 1%

'13/'09 CAGR (%) 1% -15% 27% 16% -1% 11% 82% -3% 4% 19% -15% 4% 4%

'14/'13 (Est.) -11% -11% 8% 1% -10% -8% 16% -3% -1% 26% -14% 2% 2%

'10/'09 ∆ (bcf/d) 0.1 (0.4) 0.2 0.6 0.2 2.5 0.8 (1.5) 2.7 0.2 (0.5) 2.4 1.9

'11/'10 ∆ (bcf/d) 0.4 (0.4) 0.6 0.4 0.4 2.3 2.1 (0.6) 5.2 0.6 (1.2) 4.6 4.3

'12/'11 ∆ (bcf/d) 0.0 (0.3) 0.8 0.3 (0.1) (0.7) 2.9 (0.5) 2.4 1.7 (0.8) 3.4 3.0

'13/'12 ∆ (bcf/d) (0.5) (0.2) 0.1 0.1 (0.7) (1.7) 2.5 (1.3) (1.7) 3.1 (0.7) 0.8 0.5

'13/'09 ∆ (bcf/d) 0.1 (1.3) 1.7 1.4 (0.2) 2.4 8.3 (3.9) 8.6 5.7 (3.1) 11.1 9.8

'14/'13 ∆ (bcf/d) (0.5) (0.2) 0.2 0.0 (0.5) (0.6) 1.5 (0.9) (0.8) 3.0 (0.5) 1.6 1.5

Total US

Dry Gas

L48 Onshore Gross Gas From Gas Wells L48 Onshore

Gross Gas From

Gas Wells

L48 Onshore

Gross

Associated Gas GOM Gross Gas

Total L48 Gross

Gas

Shrink Factor

(%)

29

U.S. Natural Gas: Associated Gas (in Bcf/d)U.S. Natural Gas: Associated Gas (in Bcf/d)F:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

2009 2010 2011 2012 2013E 2014E

30

U.S. Natural Gas: Marcellus Production (in Bcf/d)U.S. Natural Gas: Marcellus Production (in Bcf/d)F:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Jan

-09

Ap

r-0

9

Jul-

09

Oct

-09

Jan

-10

Ap

r-1

0

Jul-

10

Oct

-10

Jan

-11

Ap

r-1

1

Jul-

11

Oct

-11

Jan

-12

Ap

r-1

2

Jul-

12

Oct

-12

Jan

-13

Ap

r-1

3

Jul-

13

Oct

-13

Jan

-14

Ap

r-1

4

Jul-

14

Oct

-14

31

U.S. Natural Gas: Marcellus Moves Past the Haynesville (in Bcf/d)U.S. Natural Gas: Marcellus Moves Past the Haynesville (in Bcf/d)F:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Jan

-09

Ap

r-0

9

Jul-

09

Oct

-09

Jan

-10

Ap

r-1

0

Jul-

10

Oct

-10

Jan

-11

Ap

r-1

1

Jul-

11

Oct

-11

Jan

-12

Ap

r-1

2

Jul-

12

Oct

-12

Jan

-13

Ap

r-1

3

Jul-

13

Oct

-13

Jan

-14

Ap

r-1

4

Jul-

14

Oct

-14

Barnett Haynesville Marcellus

32

U.S. Natural Gas: Net Imports (in Bcf/d)U.S. Natural Gas: Net Imports (in Bcf/d)F:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

Year Imports Exports Net Imports Y/Y ∆ Y/Y % ∆

2000 10.3 0.7 9.7

2001 10.9 1.0 9.9 0.2 2.1%

2002 11.0 1.4 9.6 (0.3) -2.9%

2003 10.8 1.9 8.9 (0.6) -6.7%

2004 11.6 2.3 9.3 0.4 4.0%

2005 11.9 2.0 9.9 0.6 6.4%

2006 11.5 2.0 9.5 (0.4) -4.2%

2007 12.6 2.3 10.4 0.9 9.3%

2008 10.9 2.6 8.3 (2.1) -20.4%

2009 10.3 2.9 7.3 (0.9) -11.1%

2010 10.2 3.1 7.1 (0.2) -2.8%

2011 9.5 4.1 5.4 (1.8) -24.7%

2012 8.6 4.4 4.2 (1.2) -22.8%

2013E 7.9 4.6 3.3 (0.8) -20.0%

2014E 7.7 4.9 2.9 (0.5) -14.1%

33

U.S. Natural Gas: Warmer Winters in the Past 20 YearsU.S. Natural Gas: Warmer Winters in the Past 20 YearsF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

Rank Winter HDDs Rank Winter HDDs

1 1976-77 4,009 1 2011-12 2,986

2 1911-12 4,001 2 1931-32 3,138

3 1977-78 3,961 3 2001-02 3,153

4 1898-99 3,936 4 1999-00 3,157

5 1903-04 3,927 5 1920-21 3,184

6 1978-79 3,909 6 1952-53 3,253

7 2000-01 3,881 7 2005-06 3,279

8 1917-18 3,874 8 1998-99 3,294

9 1969-70 3,862 9 1994-95 3,302

10 1935-36 3,847 10 1953-54 3,313

Top 10 Cold Winters Top 10 Warm Winters

34

U.S. Natural Gas: Incremental Long Term Demand (2014-2020)U.S. Natural Gas: Incremental Long Term Demand (2014-2020)F:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

(in bcf/d) Low High

LNG Exports 4.2 6.8

Canada/Mexico Exports 2.5 3.4

Power Generation 3.2 5.6

Industrial 1.5 2.8

Transportation 0.5 1.0

Total 11.8 19.6

Incremental Gas Demand by 2020

35

U.S. Natural Gas: Long Term Demand (2014-2020)—20 Bcf/d ScenarioU.S. Natural Gas: Long Term Demand (2014-2020)—20 Bcf/d ScenarioF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

0

5

10

15

20

25

2014E 2015E 2016E 2017E 2018E 2019E 2020E

bcf

/d

LNG Exports Canada/Mexico Exports Power Generation

Industrial Transportation

36

U.S. Natural Gas: Long Term Demand (2014-2020)—12 Bcf/d ScenarioU.S. Natural Gas: Long Term Demand (2014-2020)—12 Bcf/d ScenarioF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

0

2

4

6

8

10

12

14

2014E 2015E 2016E 2017E 2018E 2019E 2020E

bcf

/d

LNG Exports Canada/Mexico Exports Power Generation

Industrial Transportation

OIL

F:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

38

U.S. Oil: Simmons Production Forecast (in kb/d)U.S. Oil: Simmons Production Forecast (in kb/d)F:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

YearAvg. Production

(in Kb/d)∆ Y/Y (in Kb/d) % ∆ Y/Y

2011A 5,650

2012A 6,486 835 15%

2013E 7,385 900 14%

2014E 8,237 852 12%

2015E 9,206 968 12%

Cumulative ('12-'15) 1,820

Per Annum 910

%CAGR '13-'15 12%

Year

Exit Rate

Production

(in Kb/d)

∆ Y/Y

(in Kb/d)% ∆ Y/Y

Dec '11A 6,027

Dec '12A 7,093 1,066 18%

Dec '13E 7,830 736 10%

Dec '14E 8,766 936 12%

Dec '15E 9,688 922 11%

Cumulative ('12-'15) 1,858

Per Annum 929

%CAGR '13-'15 7%

Annual Average Rate Oil Production Forecast

Annual Exit Rate Oil Production Forecast

39

U.S. Oil: Simmons Regional Production Forecast (in kb/d)U.S. Oil: Simmons Regional Production Forecast (in kb/d)F:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

Year Williston Eagle Ford Permian DJ Anadarko Alaska GOM L48/Other Total

2012A 859 557 1,229 127 198 526 1,260 1,729 6,486

2013E 1,018 927 1,411 160 240 492 1,254 1,884 7,385

2014E 1,144 1,189 1,617 229 280 455 1,263 2,060 8,237

2015E 1,269 1,435 1,882 309 318 418 1,364 2,211 9,206

'13/'12 159 370 182 33 42 (34) (6) 155 900

'14/'13 126 263 206 69 40 (37) 9 176 852

'15/'14 125 246 265 80 38 (37) 101 151 968

Cumulative 251 508 471 149 78 (74) 110 327 1,820

%CAGR '13-'15 12% 24% 15% 39% 15% -8% 4% 8% 12%

Absolute ∆ Y/Y

40

� The pace of infrastructure development is set to exceed production

growth in 2013 and 2014, including over 3 mb/d of pipeline and 2 mb/d

of rail unloading capacity additions.

� The Cushing/Permian bottleneck is eliminated in 2013 and 2014 with

the addition of 785 kb/d of Permian pipelines and 1.15 mb/d of Cushing

to the U.S. Gulf Coast (USGC) pipelines. We expect Cushing crude

inventories to approach operating minimums, supporting WTI pricing

relative to the USGC and Brent, as well as contributing to steep

backwardation in the front of the forward WTI curve.

� USGC oil prices are more challenging to predict, but given our

expectations that the Cushing pipelines will not be highly utilized, that a

meaningful portion of the crude movement will be medium (WTS) and

heavy (WCS) grades, and that NAM still imports 1.5 mb/d of light crude,

we do not expect USGC light crude prices to trade at a substantial

discount to Brent until after 2014.

U.S. Oil: Infrastructure OutlookU.S. Oil: Infrastructure OutlookF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM

41

� The U.S. has supplied over 100% of non-OPEC supply growth over the last two years, while

non-OPEC supply has been plagued by between 0.6 mb/d and 1.2 mb/d of unplanned

outages.

� U.S. oil production has grown by about 2.4 mb/d since 2009, while effective OPEC spare

capacity is only 2.9 mb/d (IEA), of which 2.2 mb/d is in Saudi Arabia where production is at a

32 year high.

� Without U.S. supply growth, oil prices would be materially higher, especially considering OPEC

supply outages in Iran, Libya and slower growth/potential maintenance outages in Iraq.

� The current oil market is exceptionally tight, as evidenced by rapidly declining OECD

inventories. Since May, OECD inventories have drawn by 32 mb vs. a five-year average build of

57 mb, representing an 89 mb improvement vs. the five year average over just four months.

� While supply is expected to improve in 2014 (U.S. oil and NGLs, non-OPEC major project start-

ups), growing U.S. oil supply is needed to meet global oil demand.

� Our oil price range expectations: Brent $95/bbl to $120/bbl and WTI $90/bbl to

$115/bbl. We expect WTI/Brent differentials to remain narrow through 2014, with the

potential for modest widening post 2014. We expect Bakken and Canadian differentials to be

limited to rail transportation costs to coastal markets once the planned infrastructure

additions are completed in 2014.

Oil: Global Perspective/Price Implications/DifferentialsOil: Global Perspective/Price Implications/DifferentialsF:\Marketing\2013\Attorney Conference\Publications\Attorney Conference 01-9.pptx 9/23/2013 4:11:02 PM