The Growing Role of Private Equity in Oil and Gas Financings and M&A DUG Mid-Con Conference

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Donald Banks
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1 The Growing Role of Private Equity in Oil and Gas Financings and M&A 2014 DUG Mid-Con Conference

2 Guest Speakers Shaun Finnie Senior Managing Director, Evercore Partners Craig Borque Senior Analyst, Evercore Partners 1

3 Topics of Discussion U.S. oil and gas M&A activity Increasing role of private equity in the U.S. oil and gas industry IPO as an exit strategy for private equity backed E&P companies Diversification of sources of capital utilized by private equity firms Venture capital/growth equity Non-operated working interest partnerships (development capital) Buy-outs M&A activity specifically in the MidContinent region 2

4 U.S. Oil and Gas M&A Activity in 2013 Lagged Previous Years Number of Transactions Total Transaction Value ($ billions) Conventional Resource Play Corporate $100.0 $90.0 $80.0 $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 $86 $66 $23 $61 $62 $50 $11 $20 $47 $6 $42 $37 $2 $11 $17 $46 $31 $28 $26 $21 $27 $7 $15 $20 $26 $19 $15 $9 (1) Conventional Resource Play Corporate Average Transaction Size (Excl. Corporate) ($MM) 2013 Transactions Breakdown $800 $700 $600 $500 $400 $300 $200 $100 $0 $735 $674 $595 $578 $566 $378 $320 $319 $286 $279 $225 $216 $237 $290 $158 $ Conventional Resource Play Transactions: 114 Resource Play 56 Transactions 49% Corporate 5 Transactions 4% Conventional 53 Transactions 46% (1) Includes the ExxonMobil/XTO transaction of $40.5 billion Note: Only includes transactions with disclosed value greater than $10 million Source: IHS Herolds Total Volume: $47 Billion 3

5 Breakdown by Class (Number of Transactions) Breakdown by Class (Volume) Buyers and Sellers in U.S. Oil and Gas in 2013 MLPs and PE buyers accounted for more than 50% of U.S. oil and gas 2013 transaction volume Buyer Seller Majors 0% PE/Private 22% Public Large Caps 22% PE/Private 31% Public Large Caps 30% Public Mid Caps 12% MLPs 32% $44.6 billion (1) Public Small Caps 7% Internationals 5% Internationals 1% Public Small Caps 10% Public Mid Caps 28% $44.5 billion (1) Majors 1% PE/Private 27% Public Large Caps 8% Public Mid Caps 16% PE/Private 34% Public Large Caps 24% Public Small Caps 21% Public Mid Caps 15% MLPs 22% Internationals 2% Public Small Caps 25% Internationals 5% 96 Transactions (1) 92 Transactions (1) (1) Includes disclosed transaction values only Source: IHS Herolds Note: Includes transactions with disclosed value greater than $10 million. Excludes public corporate transactions. 4

6 Top 25 Largest U.S. Upstream M&A Transactions of 2013 ($ in millions) Date Buyers Sellers Value 11/20/13 Devon Energy Corp. GeoSouthern Energy $6,000 02/21/13 Linn Energy, LLC / LinnCo, LLC Berry Petroleum Company 4,462 07/18/13 Fieldwood Energy, LLC / Riverstone Holdings LLC Apache Corporation 3,750 01/30/13 Sinochem Corporation Pioneer Natural Resources Company 1,700 09/05/13 Oasis Petroleum Inc. Zenergy Inc. 1,450 01/15/13 Denbury Resources Incorporated ConocoPhillips 1,050 02/25/13 Sinopec International Petroleum E&P Chesapeake Energy Corporation 1,020 10/03/13 Templar Forest Oil Corporation 1,000 12/09/13 QEP Resources Inc. EnerVest /05/13 Undisclosed Anadarko Petroleum Corporation /24/13 BreitBurn Energy Partners L.P. Whiting Petroleum Corporation /15/13 Rosetta Resources, Inc. Comstock Resources Incorporated /10/13 Atlas Energy, L.P. / Atlas Resource Partners, L.P. EP Energy, LLC /03/13 EXCO Resources, Inc. Chesapeake Energy Corporation /03/13 Kodiak Oil & Gas Corp. Liberty Energy LLC /21/13 Ultra Petroleum Axia Energy, LLC /04/13 Midstates Petroleum Company Panther Energy Company / Linn Energy, LLC /08/13 Pioneer Natural Resources Company Pioneer Southwest Energy Partners LP /15/13 Memorial Production Partners LP Memorial Resource Development LLC / Natural Gas Partners /23/13 Vanguard Natural Resources Anadarko Petroleum Corporation /25/13 Caelus Energy LLC Pioneer Natural Resources Company /12/13 Linn Energy, LLC / LinnCo, LLC BC Operating /17/13 Chief Oil & Gas / Enerplus / Tug Hill Chesapeake Energy Corporation /17/13 WildHorse Resources LLC / Undisclosed EP Energy, LLC /29/13 Tokyo Gas Company Ltd Quicksilver Resources Incorporated Top 25 Upstream M&A Transactions Total Transaction Value $31,567 Average Transaction Size 1,263 Source: IHS Herolds, Bloomberg Denotes transaction involving private equity 5

7 Recent E&P IPO Market Private companies with strong growth profiles in liquids-rich basins or the Marcellus, are increasingly exploring an IPO as an alternative to a strategic sale Recent E&P IPOs include: % Performance Since IPO Pricing Date Company Ticker Initial Range Offer Price 1 Day 30 Days 6 Months 1 Year Highest 01/25/14 Rice Energy Inc. RICE $ $21.00 $ % 104.3% 01/17/14 RSP Permian, Inc. RSPP % 107.2% 01/17/14 EP Energy Corporation EPE % 93.5% 10/10/13 Antero Resources AR % 121.6% 144.2% 08/02/13 Athlon Energy Inc ATHL % 153.7% 169.6% 07/24/13 Jones Energy Inc JONE % 100.1% 118.1% 10/12/12 Diamondback Energy Inc FANG % 98.6% 152.2% 255.4% 315.1% 04/20/12 Midstates Petroleum Company MPO % 91.9% 56.2% 43.6% 125.8% 02/02/12 Matador Resources Company MTDR % 98.6% 83.8% 65.0% 197.7% 12/15/11 Laredo Petroleum Holdings Inc LPI % 130.4% 112.5% 104.6% 197.2% 12/15/11 Bonanza Creek Eneryg Inc BCEI % 96.0% 89.5% 153.9% 332.0% 12/14/11 Sanchez Energy Corporation SN % 82.3% 89.3% 81.8% 136.8% 05/26/11 Lone Pine Resources Inc LPR % 83.8% 51.5% 25.5% 98.8% 05/11/11 Kosmos Energy Ltd. KOS % 99.1% 75.8% 61.1% 106.9% 06/17/10 Oasis Petroleum Inc OAS % 122.9% 194.8% 187.5% 405.1% Denotes private equity-backed companies 6

Diversification of Capital Utilized by Private Equity Firms In today s market, private equity investments in the oil and gas space can, in our opinion, be summarized in three different categories:

acquired any assets Non-operated working interest partnerships (development capital) Recently, private equity firms have begun to find increasingly creative ways to provide development capital to oil

8 Diversification of Capital Utilized by Private Equity Firms In today s market, private equity investments in the oil and gas space can, in our opinion, be summarized in three different categories: Venture capital/growth equity Historically, the majority of private equity investments have been by growth equity firms who deploy capital to back management teams generally before those teams have acquired any assets Non-operated working interest partnerships (development capital) Recently, private equity firms have begun to find increasingly creative ways to provide development capital to oil and gas companies (public and private). These transactions have included participating in non-operated joint ventures with operators that have a proven track record and existing assets Buy-outs In recent years, buy-out firms have become increasingly active in the oil and gas space pursuing large scale acquisitions (examples include Apollo/Riverstone acquisition of El Paso s oil and gas assets and KKR/Itochu/NGP/Crestview acquisition of Samson Investment Co.) Growth Equity Non-operated Partnerships Buy-out Examples of Active Private Equity Players Yorktown Partners 7

9 Overview of Current Mid-Con M&A Market For public companies, 2013 was all about focusing on core oil and liquids-rich plays In 2013, while private equity backed firms and MLPs continued their acquisition trend from 2012, the region witnessed the departure of several public companies looking to dispose of non-core positions in the Granite Wash and other plays The Granite Wash saw significant M&A activity as operators for whom the play represented a non-core position chose to divest their interests to focus on oil-producing growth assets elsewhere Forest Oil shed its Mid-Con presence through the sale of its Granite Wash assets to Templar for $1 billion. Forest s strategy is to focus on its Eagle Ford assets Laredo Petroleum and SM Energy also disposed of non-core Granite Wash positions to EnerVest Whiting Petroleum's sale to BreitBurn signaled its strategic focus on its core Eagle Ford and Bakken operations Cabot divested its Marmaton and legacy conventional Mid-Con assets to focus on the Marcellus and Eagle Ford 8

10 Recent Mid-Con Transactions Greater than $50 Million Trans. Key Asset/ Implied Value / Date Buyer Seller Value R/P Play Proved Res. Production ($MM) (Years) ($/boe) ($/boed) 13-Feb-14 Undisclosed Occidental Petroleum $1, Hugoton $20.59 $76, Jan-14 FourPoint Energy EnerVest, Ltd Anadarko Basin -- 45, Jan-14 Institutional Investors Chaparral; Chesapeake Mississippian and Marmaton , Dec-13 Peregrine Petroleum Primary Nat. Res./Quantum Anadarko Basin ,792 9-Dec-13 Petroflow Equal Energy Ltd Hunton Oil ,928 9-Dec-13 Undisclosed Cabot Mid-Continent -- 49, Nov-13 Jones Sabine Cleveland, Tonkawa and Marmaton ,353 4-Nov-13 EnerVest SM Energy Granite Wash -- 40, Oct-13 Chaparral Cabot Marmaton ,000 3-Oct-13 Templar Forest 1, Granite Wash ,000 6-Sep-13 Gastar Lime Rock Res Hunton Oil ,231 3-Jul-13 Undisclosed Gastar Exploration Ltd Hunton Oil Jun-13 BreitBurn Whiting Oklahoma Panhandle , Jun-13 Atlas/Atlas Res. EP Energy Coalbed Methane , May-13 EnerVest Laredo Granite Wash ,506 4-Apr-13 Midstates Linn/Panther/Red Willow Marmaton and Cleveland ,500 1-Apr-13 Gastar Chesapeake Mid-Continent , Mar-13 Exxon Mobil/XTO BNK Ardmore Woodford , Feb-13 SINOPEC/Sinopec Chesapeake 1, Mississippi Lime ,000 Mean $ $15.82 $71,592 Median ,182 Source: IHS Herolds; Wood Mackenzie 9

11 Mid-Con Case Study Midstates Petroleum Acquires Oil-Weighted Properties in the Western Anadarko Basin in Oklahoma and Texas from Panther Energy, Red Willow and Linn Energy for $620 million Overview of Assets 36.5 MMBoe proved reserves (45% oil, 22% NGLs, and 33% gas; 29% proved developed) 138,900 net acres (60% HBP) > 8,000 Boed of current production (45-50% oil, 20-25% NGLs, and 30-35% gas) Approximately 280 producing horizontal wells 66% average WI and 52% average NRI Approximately 80% operated Greater than 100 MMBoe resource potential Asset Map Transaction Highlights for Midstates Petroleum Acreage position provides exposure to multiple plays Main drilling targets include Cleveland, Marmaton, Cottage Grove and Tonkawa with upside potential from drilling the deeper lower Pennsylvanian and Mississippian sections Lower-risk, predictable, and repeatable with strong rates of return 100% horizontal development program Greater than 700 locations identified (~33% PUDs) Key Terms and Implied Valuation Purchase price of $620 million Financed through senior notes issued at 9.25% Metric Data Implied Multiple Proved Reserves 36.5 MMBoe $16.99/Boe 67% Liquids 29% Proved Developed Current Production 8,000 Boed $77,500/Boed R/P of 12.5 years 10

Mid-Con Case Study Cabot Oil & Gas Announces Sale of Marmaton, West Texas and Legacy Conventional Mid- Continent Properties for $311 Million In 3Q 2013, Cabot Oil & Gas Corporation ( Cabot )

12 Mid-Con Case Study Cabot Oil & Gas Announces Sale of Marmaton, West Texas and Legacy Conventional Mid- Continent Properties for $311 Million In 3Q 2013, Cabot Oil & Gas Corporation ( Cabot ) announced three separate sales for aggregate proceeds of approximately $311 million (collectively, the Transactions ) On October 17, 2013, Cabot announced that it had entered into two purchase and sale agreements to sell certain proved and unproved oil and gas properties located in the Mid-Continent (the Marmaton Assets ) and West Texas (the West Texas Assets ) for aggregate proceeds of approximately $188 million On December 9, 2013, Cabot announced that it had entered into a purchase and sale agreement to sell legacy conventional oil & gas assets located in the Mid-Continent (the Legacy Mid-Continent Assets ) for proceeds of approximately $123 million Chaparral Energy Inc. acquired the Marmaton Assets for $160 million Approximately 66,000 net acres in the Marmaton Play in the Oklahoma and Texas Panhandles Current production of approximately 2,000 Boed Proved reserves of approximately 8.4 MMBoe An undisclosed buyer acquired the West Texas Assets for $28 million Current production of approximately 260 Boed Proved reserves of approximately 2.3 MMBoe An undisclosed buyer acquired the Legacy Mid-Continent Assets for $123 million Current production of approximately 15 MMcfed (94% gas) The Transactions are expected to close in 4Q 2013 Evercore acted as exclusive financial advisor to Cabot 11 Asset Map Implied Valuation Metric Data Multiple Total Value Marmaton Assets ($MM) $160.0 West Texas Assets ($MM) 28.0 Legacy Mid-Continent Assets ($MM) Total $311.0 EV/Proved Reserves Marmaton Assets 8.4 MMBoe $19.05/Boe West Texas Assets 2.3 MMBoe $12.28/Boe Legacy Mid-Continent Assets NA NA Total 10.7 MMBoe EV/Production Marmaton Assets (11.5 R/P) 2,000 Boed $80,000/Boed West Texas Assets (24.0 R/P) 260 Boed $107,692/Boed Legacy Mid-Continent Assets 2,500 Boed $49,200/Boed Total 4,760 Boed

Recently Backed Mid-Con Teams Sponsor Management Team Key Management Team

Conventional and unconventional acquisitions in North America NA George Solich

Anadarko Basin of Texas and Oklahoma Barry Mullennix Roy Grossman Mid-Con,

13 Recently Backed Mid-Con Teams Sponsor Management Team Key Management Team Members Area of Focus Assets Purchased To- Date Charlie Stephenson Conventional and unconventional acquisitions in North America NA George Solich Anadarko and Permian Basins Ownership stake in EnerVest assets in the West Anadarko Basin of Texas and Oklahoma Barry Mullennix Roy Grossman Mid-Con, Permian and Rockies NA Dudley C. Viles Mid-Con and Ark-La-Tex NA Steve Antry Mike O Kelley Mid-Con NA 12

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