Jagged Peak Energy, Inc. (JAG)

Transcription

1 Americas/United States Equity Research Oil & Gas Exploration & Production Rating OUTPERFORM Price (17-Feb-17, US$) 13.5 Target price (US$) week price range (US$) Market cap (US$ m) 2, Target price is for 12 months. [V] = Stock Considered Volatile (see Disclosure Appendix). Mark Lear, CFA mark.lear@credit-suisse.com Venkatesh Duvvuri venkatesh.duvvuri@credit-suisse.com Tom Hughes thomas.hughes@credit-suisse.com Veronica Liu qi.liu@credit-suisse.com Jagged Peak Energy, Inc. (JAG) INITIATION Pure-Play Southern Delaware SMID Arrives; Initiate Outperform Long Runway in the Southern Delaware. JAG holds ~67k net acres in the Southern Delaware, one of the hottest plays in US onshore E&P today. The company has booked 1,265 locations across its three main operating areas, but sees clear line of sight on increasing this statistic by ~42 locations with tighter lateral spacing (66' vs. 88'), delineating additional zones outside of currently booked inventory (3 rd Bone Spring, Wolfcamp A, and Wolfcamp B), proving up areas where it books less total inventory (Big Tex) and further acquisition. Before factoring in this upside potential, JAG nevertheless maintains 32 years of inventory assuming a five rig program in 217, offering ample running room to execute the company's peer leading growth plan. Growth Drives a 218 GARP Story. Inside we make the argument that JAG's ambitious and yet attainable growth strategy should drive 218 valuation metrics into a relatively advantaged position versus other Permian pure-play companies. Specifically, a 143% 218/16 production CAGR should drive 217 EV-to-EBITDA multiples from in-line with the Permian peer group to approximately a two turn discount by 218. In addition, while the company is outspending in 217 and 218 to fund this growth, a clean balance sheet following JAG's recent IPO and significant debt-adjusted cash flow growth should keep this relative advantage intact. Valuation. We initiate with an Outperform rating and $2 target price which assumes parity with our PD-Plus NAV, implying 48% upside potential versus the group at 25% upside potential. On a multiple basis, JAG currently trades at 13.5x 217E and 7.2x 218E EBITDA unhedged at the futures strip, versus our broader E&P coverage at 9.2x and 7.5x, respectively. Risks to our thesis include a constrained midstream picture in the Delaware (mitigated by JAG's infrastructure buildout), commodity and cost inflation pricing pressure, and any operational impediments which hinder JAG's ability to grow. Financial and valuation metrics Year 12/15A 12/16E 12/17E 12/18E Revenue (US$ m) EBIDAX (US$ m) EPS (CS adj.) (US$) Prev. EPS (US$) ROGIC (%) P/E (x) P/E rel. (%) n.m n.m OCFPS (US$) P/OCF (x) Qtrly ent. val./ tot. EBIDAX Net debt (US$ m) Dividend (current, US$). Dividend yield (%). Net debt (current, US$) - Net debt/tot eq (Next Qtr., %) - BV/share (Next Qtr., US$) - GIC (12/16E, US$ m) 492. EV qtr/gic (x) 5.5 Current WACC (%) - Free float (%) 25.3 Number of shares (m) Source: Company data, Thomson Reuters, Credit Suisse estimates DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

2 Jagged Peak Energy, Inc. (JAG) Price (17 Feb 217): US$13.5; Rating: OUTPERFORM; Target Price: US$2.; Analyst: Mark Lear Income Statement 12/15A 12/16E 12/17E 12/18E EBITDAX (US$ m) EBITDA (US$ m) EBIT (m) (9) Net interest income (exp) Net non operating inc (exp) 1 (7) Share of associates/jvs' equity Exceptionals 1 (7) Profit before tax (US$ m) (7) (1) Taxes 3 12 Profit after tax (7) (1) Extraordinary gain/(loss) Non-controlling interest (minority) Preferred dividends EBIDAX (US$ m) Adjusted net income (US$ m) (7) (1) Cash Flow 12/15A 12/16E 12/17E 12/18E DD&A Change in working capital (6) Other cash and non-cash items Cash flow from operations CAPEX (97) (245) (58) (589) Exploration expense Free cashflow to the firm (76) (212) (367) (117) Aquisitions Divestments Other investment/(outflows) Cashflow from investment (97) (245) (58) (589) Operating cash flow Depreciation & Amortization Balance Sheet 12/15A 12/16E 12/17E 12/18E Cash and cash equivalents Other current assets Total current assets Total fixed assets ,36 Other assets Total assets ,37 Total current liabilities Long-term debt Other Liabilities Total liabilities Shareholders' equity Minority interest Total equity and liabilities ,37 Per share 12/15A 12/16E 12/17E 12/18E Equiv. FPO (period Avg.) (mn) EPS (CS Adj.) (US$) (.) (.1).2.9 DPS (US$).... Operating CFPS (US$) Earnings 12/15A 12/16E 12/17E 12/18E EBITDAX margin (%) EBIT Margin (%) (25.6) Net Income Margin (%) (22.1) (13.6) Tax Burden (%) Valuation 12/15A 12/16E 12/17E 12/18E Dividend yield (%).... FCF yield (%) - (8.5) (12.9) (4.1) EV/EBITDAX (x) Returns 12/15A 12/16E 12/17E 12/18E ROE (%) (2.6) (3.5) ROGIC (avg.) (%) Gearing 12/15A 12/16E 12/17E 12/18E Net debt/equity (%) Interest coverage ratio (X) (43.9) Quarterly EPS 215A Q1 - Q2 - Q3 - Q4-216E E Source: Company data, Thomson Reuters, Credit Suisse estimates Company Background Jagged Peak Energy is a US-based independent oil and gas company, with core holdings in the Southern Delaware Basin. Jagged Peak's acreage includes positions in Winkler, Ward, Reeves, and Pecos Counties. Blue/Grey Sky Scenario Our Blue Sky Scenario (US$) 25. Our blue sky valuation is $25/sh, which assumes oil prices of $7/bbl and gas prices of $4/MMbtu. Our Grey Sky Scenario (US$) 11. Our gray sky valuation is $11/sh, which assumes oil prices of $5/bbl and gas prices of $3/MMbtu. Share price performance On 17-Feb-217 the S&P 5 INDEX closed at Daily Jan27, Feb17, 217, 1/27/17 = US$14.33 Jagged Peak Energy, Inc. (JAG) 2

3 Table of contents Investment Summary 7 Key Charts 11 Company Overview 13 Relative Valuation and Transaction Comps Suggest JAG will grow into an Advantaged Position Higher-Intensity Completions Appear Conducive to JAG's Acreage... 2 Type Curves by Fluid Concentrations bbls/ft bbls/ft bbls/ft bbls/ft 27 Future Upside Potential from Big Tex and Additional Benches Big Tex Delineation Peer-Leading LOE Appendix: ,-1,5 lbs/ft 36 1,5-2, lbs/ft. 37 2,-2,5 lbs/ft 37 2,5-3, lbs/ft 38 Financials 4 Valuation 43 Investment Risks 48 Management 49 Jagged Peak Energy, Inc. (JAG) 3

4 Table of Exhibits Figure 1: JAG Acreage Blocks and Wells to Date... 7 Figure 2: JAG Acreage vs. Offset Operator Activity... 7 Figure 3: JAG Operating Areas with Targeted and Upside Zones... 8 Figure 4: Delaware Implied per Acre Prices Based on 4Q16 Production... 8 Figure 5: JAG's 218/16 Peer-Leading Production CAGR... 9 Figure 6: Deep Delaware EV/217 EBITDA... 9 Figure 7: Deep Delaware EV/218 EBITDA... 9 Figure 8: 217 Net Debt to EBITDA... 1 Figure 9: 218 Net Debt to EBITDA... 1 Figure 1: Debt Adjusted Cash Flow per Share Growth (Unhedged at the Strip).. 1 Figure 11: JAG NAV Summary Figure 12: Debt-Adjusted Cash Flow per Share Growth E (Unhedged at the Strip) Figure 13: Total Production Growth (215-18E CAGR) Figure 14: JAG Delaware Acreage vs. Offset Operators Figure 15: JAG Proved Reserves (as of 11/3/16) Figure 16: JAG Proved Reserves (as of 11/3/16) Figure 17: CPE Map of the Deep Delaware Figure 18: Point in Time Delaware Oil Cut by County Figure 19: Cumulative Delaware Oil Cut by County Figure 2: Delaware Wells Since 1/1/ Figure 21: CS Estimated Type Curve and Economics for JAG Wolfcamp A Figure 22: CS Estimated Type Curve and Economics for JAG Wolfcamp B Figure 23: CS Estimated Type Curve and Economics for JAG 3 rd Bone Spring Figure 24: CS Estimated Type Curve and Economics for JAG Big Tex Area (Wolfcamp A wells) Figure 25: Delaware NPV-1 per Well ($MM) Figure 26: Recent Deep Delaware A&D Activity Figure 27: Relative Location of Recent Deep Delaware A&D Activities Figure 28: Developed Acreage as % of Total Acreage Figure 29: Lease Expiration Schedule (Net Acres)... 2 Figure 3: CS Forecast Rig Ramp Schedule... 2 Figure 31: JAG Average Proppant Loading vs. Offset Operators Figure 32: JAG Average Fluid Concentrations vs. Offset Operators Figure 33: JAG Proppant Loading vs. Peers Figure 34: JAG Fluid Concentration vs. Peers Figure 35: Well Locations on 2-4 bbls/ft Regime Figure 36: Cumulative Total Production (Mboe) Jagged Peak Energy, Inc. (JAG) 4

5 Figure 37: Cumulative Oil Production (Mbbl) Figure 38: Number of Wells Contributing to 2-4 bbls/ft Average Figure 39: Well Locations on 4-6 bbls/ft Regime Figure 4: Cumulative Total Production (Mboe) Figure 41: Cumulative Oil Production (Mbbl) Figure 42: Number of Wells Contributing to 4-6 bbls/ft Average Figure 43: Well Locations on 6-8 bbls/ft Regime Figure 44: Cumulative Total Production (Mboe) Figure 45: Cumulative Oil Production (Mbbl) Figure 46: Number of Wells Contributing to 6-8 bbls/ft Average Figure 47: Well Locations on 8-1 bbls/ft Regime Figure 48: Cumulative Total Production (Mboe) Figure 49: Cumulative Oil Production (Mbbl) Figure 5: Number of Wells Contributing to 8-1 bbls/ft Average Figure 51: Offset Bone Spring Wells Figure 52: Bone Spring Offsets Cume Production Normalized for 9,' Lateral (Well 1-6) Figure 53: Bone Spring Offsets Cume Production Normalized for 9,' Lateral (Well 7-11) Figure 54: BS Offsets Iterative Oil Cut (Well 1-6) Figure 55: BS Offsets Iterative Oil Cut (Well 7-11) Figure 56: S Delaware Wolfcamp B and Wolfcamp C Wells... 3 Figure 57: Wolfcamp B/C Offsets Cume Production Normalized for 9,' Lateral (Well 1-5)... 3 Figure 58: Wolfcamp B/C Offsets Iterative Oil Cut (Well 1-5)... 3 Figure 59: JAG Current Spacing Assumption Figure 6: JAG Current and Upside Target Zones Figure 61: Deep Delaware Spacing Assumptions Figure 62: JAG Big Tex Acreage Figure 63: JAG Big Tex Offset Operators Figure 64: JAG Big Tex Well Results (First prod 1/1/214+) Figure 65: Big Tex Offset Results Figure 66: Big Tex IP-3 per 1, lateral ft Figure 67: Total Vertical Depth (JAG vs Peers) Figure 68: Peer Group 3Q16 LOE per boe Figure 69: JAG Infrastructure Overview Figure 7: Cumulative Total Production (Mboe) Figure 71: Cumulative Oil Production (Mbbl) Figure 72: Number of Wells Contributing to 1,-1,5 lbs/ft Average Jagged Peak Energy, Inc. (JAG) 5

6 Figure 73: Cumulative Total Production (Mboe) Figure 74: Cumulative Oil Production (Mbbl) Figure 75: Number of Wells Contributing to 1,5-2, lbs/ft Average Figure 76: Cumulative Total Production (Mboe) Figure 77: Cumulative Oil Production (Mbbl) Figure 78: Number of Wells Contributing to 2,-2,5 lbs/ft Average Figure 79: Cumulative Total Production (Mboe) Figure 8: Cumulative Oil Production (Mbbl) Figure 81: Number of Wells Contributing to 2,5-3, lbs/ft Average Figure 82: Special Adjustments for Implied Delaware Acreage Price Calculation. 39 Figure 83: JAG Balance Sheet Summary... 4 Figure 84: 217 Net Debt/EBITDA Figure 85: 218 Net Debt/EBITDA Figure 86: JAG NAV Summary Figure 87: Blue and Gray Sky NAVs and Underpinning Assumptions Figure 88: JAG NAV Sensitivity Figure 89: Price to NAV at Credit Suisse Commodity Price Deck Figure 9: EV-to-217E EBITDA (Unhedged at the Current Futures Strip - $54.42/bbl and $3.2/MMbtu) Figure 91: EV-to-218E EBITDA (Unhedged at the Current Futures Strip - $54.93/bbl and $3.3/MMbtu) Figure 92: JAG Income Statement... 5 Figure 93: JAG per Unit Income Statement, Cash Flow Statement, and Balance Sheet Jagged Peak Energy, Inc. (JAG) 6

7 Investment Summary Initiate Coverage of Jagged Peak Energy (JAG) with an Outperform Rating and a $2 Target Price Sizable Acreage Position in the Fastest Rate of Change Basin After factoring in recent acreage additions totaling ~6.4k net acres, JAG now maintains ~67k net acres in the Southern Delaware Basin, one of the most rapidly evolving and sought-after plays. Figure 1: JAG Acreage Blocks and Wells to Date Figure 2: JAG Acreage vs. Offset Operator Activity Source: JAG Source: JAG Most of the appeal of the Southern Delaware has come from the potential for acreage to bear more oil and gas across multiple benches than originally thought. Similar to most offset operators, JAG specifically targets the Wolfcamp A; however, future delineation and spacing work should help prove up additional inventory for the company, which now books 11 wells per section in the Wolfcamp A (five Upper/six Lower), six wells per section in the 3 rd Bone Spring, and six wells per section in the Wolfcamp B. Across the company's three main operating areas (Cochise, Whiskey River, and Big Tex), JAG currently maintains 1,265 identified locations, while also highlighting that moving to a 66' spacing configuration would add an incremental ~42 locations. Jagged Peak Energy, Inc. (JAG) 7

8 Figure 3: JAG Operating Areas with Targeted and Upside Zones Source: JAG Attractive Relative Valuation with Increased Activity Drives the Valuation Gap Higher While initially an area of some pushback during the IPO process, we argue that JAG's current stock price offers an attractive entry opportunity. On an EV/acre basis, JAG is trading largely in-line with the median of its Delaware comps (when backing out other parts of those companies' portfolios full details in the appendix). However, we argue that the EV implied per acre price metric puts JAG at a relative disadvantage versus other peers as PDP is backed out based on a small 4Q16 production base, which inflates JAG's implied price. JAG's peer-leading production CAGR through 218 should enable the company to compress EV/acre metrics much faster than its peers, which is not fully factored into the metric shown in Figure 4. Figure 4: Delaware Implied per Acre Prices Based on 4Q16 Production Implied Per Acre ($ K) Median $4. $7. $65. $6. $5. $4. $3. $2. $46.3 $44. $42.6 $37.4 $32.4 $31.8 $22.4 $1. $. RSPP PE FANG CPE JAG NBL PDCE EGN Jagged Peak Energy, Inc. (JAG) 8

9 Figure 5: JAG's 218/16 Peer-Leading Production CAGR 16% 14% 218/16E Projected Production CAGR (Unadjusted) Median 58% 143% 12% 1% 8% 6% 4% 2% % 69% 6% 58% 54% 34% 26% 5% JAG PE RSPP FANG CPE PDCE EGN NBL (Non-covered's on Thomson consensus estimates / Covered companies use the CS Estimate) Similarly, when turning to 217 EV/EBITDA multiples for operators with positions in the Delaware peer group, JAG trades in-line with the median. However, after factoring in the significant production ramp into 218 (which should continue beyond 218), JAG's 218 EV/EBITDA screens at approximately a two turn discount to the group median. Figure 6: Deep Delaware EV/217 EBITDA Figure 7: Deep Delaware EV/218 EBITDA EV/ '17 EBITDA Median 12.1x EV/ '18 EBITDA Median 7.3x 18.x 16.x 15.5x 9.x 8.x 7.9x 7.5x 7.4x 7.3x 6.7x 14.x 12.x 1.x 8.x 12.7x 12.3x 12.1x 12.x 9.8x 9.4x 8.7x 7.x 6.x 5.x 4.x 6.1x 5.8x 5.4x 6.x 3.x 4.x 2.x 2.x 1.x.x PE FANG CPE JAG RSPP EGN NBL PDCE.x RSPP PE FANG NBL CPE EGN PDCE JAG (Non-covered's on Thomson consensus estimates / Covered companies use the CS Commodity Price Deck) (Non-covered's on Thomson consensus estimates / Covered companies use the CS Commodity Price Deck) While there is a level of execution risk associated with a production ramp of this magnitude, there is also precedent of SMID-cap companies growing organically at a higher rate (JAG itself included). On the balance sheet side, JAG screens as one of the least-levered names in our Permian coverage (see Figure 8 and Figure 9) and shows the best in terms of debt-adjusted cash flow growth (see Figure 1). As a result, we argue that the attractive growth trajectory, JAG trading at a discount to peers when looking out to 218, and the company s relative longer-term multiple compression (218+) should create good appetite for this Southern Delaware pure-play while also offering future upside potential from further delineation, spacing tests, and additional operational efficiencies. Jagged Peak Energy, Inc. (JAG) 9

10 Figure 8: 217 Net Debt to EBITDA Figure 9: 218 Net Debt to EBITDA 7.x CS Deck Futures Strip Median at CS Deck Median at Strip Median at CS Deck: 1.9x 8.x CS Deck Futures Strip Median at CS Deck Median at Strip Median at CS Deck: 1.3x 6.x Median at Strip: 2.x 7.x Median at Strip: 1.8x 5.x 6.x 4.x 5.x 4.x 3.x 3.x 2.x 2.x 1.x 1.x.x.x 217 Price Scenario CS Strip WTI Oil $55. $54.42 NYMEX Gas $3.25 $ Price Scenario CS Strip WTI Oil $62.5 $54.93 NYMEX Gas $3.5 $3.3 Figure 1: Debt Adjusted Cash Flow per Share Growth (Unhedged at the Strip) 16% 12% 8% 4% E&P Median: 4.2% Gas-Focused: 2.2% Oil-Focused: 4.2% 3% 4% 4% 6% 8% 9% 11% 13% 13% 16% 18% 19% 2% 32% 46% 52% 57% 72% 125% % -4% -8% -43% -22% -17% -16% -13% -12% -7% -5% -5% -5% -4% -3% -2% -2% -2% Infrastructure Network and Low Cost Structure Drive Solid Economics Despite having a relatively low production base of ~6.6 Mboe/d in 3Q16, JAG's per barrel operating costs stack up well against peers in the basin and should improve further as the company executes on its growth plan. Notably, JAG's LOE per boe was only $3.78 compared with a median $5. from the Permian group. One of the main factors driving JAG's low LOE is its ownership of water gathering and handling infrastructure, which includes 1.5 miles of fresh water pipelines, 63.6 miles of produced water transportation pipelines, 162 Mbbls of/d of water sourcing capacity, and 86 Mbbl/d of water disposal capacity. JAG also owns 1,85 surface acres that it can use to expand its current water handling capacity. The combined effect of the water ownership is a $.1/bbl water acquisition cost and a $.2/bbl disposal cost, which should only help compress JAG's per boe operating costs as it ramps production through 218. Jagged Peak Energy, Inc. (JAG) 1

11 Figure 11: JAG NAV Summary Key Charts Jagged Peak Energy OUTPERFORM Net Asset Value Summary Shares Out. (MM) 213 Proved Developed Reserves Liquids Gas Total Asset Value Oil & Gas Properties (MMbbls) (Bcf) (MMBoe) % Gas ($/Boe) ($MM) ($/Share) United States - PD as of 11/3/ % $24.95 $324 $1.5 Total Proved Developed Properties % $24.95 $324 $1.5 Other Assets ($MM) ($/Share) Total Other Assets $ $. Liabilities ($MM) ($/Share) Long-Term Debt 1 $. Cash & Equivalents ($89) ($.42) Total Liabilities ($88) ($.4) Proven Developed Net Asset Value $412 $2. Undeveloped / Unproven Reserves Liquids Gas Total Asset Value Oil & Gas Properties (MMbbls) (Bcf) (MMBoe) % Gas ($/Boe) ($MM) ($/Share) Wolfcamp A % $7.57 $2,483 $11.7 3rd Bone Spring % $2.5 $21 $1. Wolfcamp B % $.59 $525 $2.5 Big Tex Operating Area - Wolfcamp A % $5.36 $585 $2.7 Total Undeveloped/ Unproven 1, ,411 7% $2.7 $3,83 $17.9 Total 'PD Plus' Net Asset Value 1, ,424 7% $2.96 $4,215 $2. Last Price $13.5 Price - to - PD Plus NAV 68% Price - to - Proved Developed Only 675% Jagged Peak Energy, Inc. (JAG) 11

12 -6% -6% -5% -4% -3% -2% -2% -2% -1% -1% % 2% 5% 6% 9% 9% 9% 13% 14% 14% 16% 17% 18% 21% 25% 37% 43% 44% 54% 56% 66% 71% 14% 21 February 217 Figure 12: Debt-Adjusted Cash Flow per Share Growth E (Unhedged at the Strip) 16% 12% 8% 4% E&P Median: 4.2% Gas-Focused: 2.2% Oil-Focused: 4.2% 3% 4% 4% 6% 8% 9% 11% 13% 13% 16% 18% 19% 2% 32% 46% 52% 57% 72% 125% % -4% -8% -43% -22% -17% -16% -13% -12% -7% -5% -5% -5% -4% -3% -2% -2% -2% Figure 13: Total Production Growth (215-18E CAGR) 16% 14% 12% 1% E&P Median: 9.2% 8% 6% 4% 2% % -2% -4% Jagged Peak Energy, Inc. (JAG) 12

13 Company Overview Jagged Peak Energy Inc. (NYSE: JAG) / Outperform / $2 Target Price / $2.9bn Market Cap / Initiate Coverage with an Outperform Rating We are initiating coverage of Jagged Peak Energy (JAG) with an Outperform rating and a $2 target price derived from our PD-Plus NAV estimate, which includes $2 per share value for the company's proved developed assets net of debt. Our NAV estimate is driven by the following crude oil and natural gas forecasts: $42.18, $55., $62.5, and $62.5 per barrel crude oil and $2.45, $3.25, $3.5, and $3.5 per MMBtu natural gas in 216, 217, 218, and long term (219+), respectively. Figure 14: JAG Delaware Acreage vs. Offset Operators Source: JAG Jagged Peak Energy is an independent domestic oil and gas company headquartered in Denver, Colorado, that focuses on the exploration and development of oil and natural gas formations in the Delaware Basin located in western Texas. The company currently holds a little over 67k net acres after including recent developments where JAG was able to, through various purchase and swap agreements, increase that position by ~6.4k net acres. JAG also separates its acreage into three main operating areas, which, after adding in the 6.4k net acres recently acquired, results in these totals: Cochise (~13k net acres), Whiskey River (~32k net acres), and Big Tex (~22k net acres). After forming the company in April 213 and securing capital commitments from Quantum Energy Partners, JAG went out and bought its initial foothold in the Southern Delaware Basin in 1Q14, which comprised 41k net acres in the Whiskey River and Big Tex operating areas. In early August 214, JAG drilled and completed its first operated well, which was then added to by the company's first longer lateral well in September 214 and first slickwater well in December 214. Since inception, JAG has grown production from 345 boe/d in 1Q14 to Mboe/d in 3Q16 while operating only one rig. JAG began trading on the NYSE on January 27 th, 217 following the company's issuance of 28.3MM primary Jagged Peak Energy, Inc. (JAG) 13

14 shares at an offer price of $15/sh, netting the company a little over $4MM in proceeds that will be used to pay down debt and fund the company's capital plans. Insiders own 74.7% of all shares outstanding, with Quantum still holding 68.7% of shares outstanding following the primary offering. Figure 15: JAG Proved Reserves (as of 11/3/16) Figure 16: JAG Proved Reserves (as of 11/3/16) Total Proved Reserves: 32.7 Mmboe PUD 6% PDP 4% Oil 81% Total Proved Reserves: 32.7 Mmboe Gas 8% NGLs 11% Jagged Peak Energy, Inc. (JAG) 14

15 Relative Valuation and Transaction Comps Suggest JAG will grow into an Advantaged Position The year 216 marked the emergence of the Southern Delaware Basin from a nascent play to an area offering some of the best returns in US shale, with operators across the basin noting increased confidence in the stacked pay potential, which is also reflected in the surge of Delaware A&D activity since early 216. In our coverage universe, there have been 2 acquisitions in the Delaware Basin since the beginning of 216, with a deal flow totaling ~$25Bn in aggregate. Operationally, the basin has led the charge on increasing completion intensity, specifically sand and fluid loading per lateral foot. Meanwhile, operators continue to delineate their acreage and expand their drilling inventory, with many now testing additional Wolfcamp and Bone Spring intervals outside of the Wolfcamp A, and to date have seen largely promising initial results. In addition, operators are pushing the boundary on downspacing and stacking laterals within the Wolfcamp A, which has the potential to further expand the drillable location count. Despite the recent and rapid transformation the basin has seen, the Delaware remains thought of as the largest incremental driver of future upside potential in US shale, with recent acreage prices imbedding more credit for upside zones. JAG, as one of the only Delaware pure-plays publicly traded, is arguably the most direct way to play future improvements in underlying resource and return. Moreover, JAG's position in one of the deepest and highest pressured areas of the Delaware only further highlights the company's advantaged position relative to other Delaware peers (see Figure 17). Figure 17: CPE Map of the Deep Delaware Source: CPE Investor Presentation Along the eastern edge of the Delaware, operators continue to prove up what was previously thought of as fringy acreage, as completion evolution has been driving incrementally stronger well performance. Following its acquisition of Ameredev (CPE is a direct offset to JAG), CPE recently coined this area as the Deep Delaware, which spreads mostly across Loving, Winkler, and Ward Counties. While long thought to be a fringy part of the Delaware, we believe that (1) strong returns that stack up to the rest of the basin due to the acreage's oilier nature and shallower declines owing to higher reservoir pressure and (2) strong A&D activity further augmented by increased messaging from Jagged Peak Energy, Inc. (JAG) 15

16 vocal SMID operators that have recently entered the area should help investors find increased comfort with the aerial extension of the Deep Delaware. Looking across the Delaware Basin, JAG's geographical location offers one of the highest oil cuts (north of 8% on EURs) and one of the most stable GORs across all of the Permian. When looking at JAG's historical well performance, the oil cut (on a two-stream basis) remains stable around 85% for 12 months and drops only slightly to ~8% for the second year of production. The iterative oil cut (or oil cut on the cumulative production for each month) stays around 85% over the well of the life, which supports our type curve assumption of oil accounting for 82% of total EUR. Overall, Deep Delaware wells (marked as green dots in Figure 2) have oil cuts ranging between 65%-85% for the first 24 months of production. Figure 18: Point in Time Delaware Oil Cut by County Figure 19: Cumulative Delaware Oil Cut by County 95% Jagged Peak Deep Delaware Pecos Ward Winkler Loving Lea Eddy Culberson Reeves 95% Jagged Peak Deep Delaware Pecos Ward Winkler Loving Lea Eddy Culberson Reeves 85% 85% Oil Cut % 75% 65% 55% 45% 35% Oil Cut % 75% 65% 55% 45% 25% Months on Production 35% Months on Production Source: Credit Suisse estimates, HPDI Source: Credit Suisse estimates, HPDI Figure 2: Delaware Wells Since 1/1/215 Source: Credit Suisse estimates, HPDI Jagged Peak Energy, Inc. (JAG) 16

17 As a result of the higher oil cut on JAG's acreage, on an NPV per well basis, the company's Wolfcamp A projects in Whiskey River and Cochise screen as the best in the basin (see Figure 25). The attractive economics can also be attributed to well performance responding positively to larger completions, specifically higher fluid concentrations (details are laid out in the following section). While the Wolfcamp B, Bone Spring and Big Tex (Wolfcamp A) projects arguably find trouble competing on economics with JAG s core bench in its main operating area, we note that ~65% of our PUD NAV is assigned to the Wolfcamp A in Whiskey River and Cochise. Furthermore, JAG is arguably still in early innings of delineating the Wolfcamp B and the Bone Spring formations and while Big Tex may still be perceived as step-out acreage, we again point to the following section in which we highlight some very good results from offset operator Brigham (now owned by FANG) when utilizing significantly higher proppant loads. Figure 21: CS Estimated Type Curve and Economics for JAG Wolfcamp A Figure 22: CS Estimated Type Curve and Economics for JAG Wolfcamp B % Oil 82% % NGL 11% % Gas 7% % Oil 82% % NGL 11% % Gas 7% Production (boe/d) 1, 1 1 IP-3: EUR: Well Cost: ATAX IRR: NPV/well: 1,2 boe/d 1,248 Mboe $9.5mm 38.3% $9.5mm Years 1,2 1, Cumulative Production (Mboe) Production (boe/d) 1, 1 1 IP-3: EUR: Well Cost: ATAX IRR: NPV/well: 95 boe/d 1,73 Mboe $9.5mm 27.6% $6.4mm Years 1, Cumulative Production (Mboe) Figure 23: CS Estimated Type Curve and Economics for JAG 3 rd Bone Spring Figure 24: CS Estimated Type Curve and Economics for JAG Big Tex Area (Wolfcamp A wells) % Oil 83% % NGL 1% % Gas 7% % Oil 8% % NGL 12% % Gas 8% Production (boe/d) 1, 1 1 IP-3: EUR: Well Cost: ATAX IRR: NPV/well: 71 boe/d 751 Mboe $8.8mm 16.3% $2.4mm Years 1, Cumulative Production (Mboe) Production (boe/d) 1, 1 1 IP-3: EUR: Well Cost: ATAX IRR: NPV/well: 1, boe/d 934 Mboe $8.4mm 27.5% $5.4mm Years 1, Cumulative Production (Mboe) Jagged Peak Energy, Inc. (JAG) 17

18 Figure 25: Delaware NPV-1 per Well ($MM) $12. JAG NPV Basin NPV $1. $9.5 NPV ($mm) $8. $6. $4. $7.6 $7. $6.4 $5.7 $5.4 $5.2 $2.6 $2.4 $2. $. While historically perceived as a fringy region of the Delaware, the Deep Delaware has seen a marked increase in level of operator interest, as the land grab in 2H16 and 217 YTD would indicate. Almost every core Midland SMID player has entered into or added to its Deep Delaware position since July 216, which has pushed the price tag for recent deals to the $2-45k/acre range (more on par with the rest of the basin). When looking at the close-ology of recent deals which is further supported by stratigraphic and OIP heat maps, the FANG/Luxe and PE/APA deals would appear to be the best comps for JAG's Whiskey River/Cochise assets, while the FANG/Brigham acquisition is a direct offset to the company s Big Tex acreage. Confidence in Deep Delaware acreage is further augmented by what operators have been messaging during recent acquisitions. CPE believes that its Delaware acreage can compete for capital with core Midland Spanish Trail acreage, while FANG messaged that the Wolfcamp A across the Brigham asset base is arguably the best returning project in its entire portfolio. Either way, we argue that the level of A&D activity in the region and additional operator commentary should help introduce an incrementally higher floor on JAG's acreage value. Figure 26: Recent Deep Delaware A&D Activity Transaction Production Operator County Net Acres PDP ($MM) $/acre Date Value ($MM) (boe/d) NBL Reeves $3,2 71, 1, $55 $37,324 January 217 PE Reeves, Pecos $25 5,2 1,1 $44 $3,962 January 217 PDCE Reeves, Culberson $118 4,5 3 $12 $23,556 January 217 NBL Reeves $3 7,2 2,4 $96 $28,333 December 216 FANG Pecos, Reeves $2,43 76,319 9,482 $379 $26,87 December 216 CPE Ward, Pecos $615 16,98 1,945 $78 $33,371 December 216 RSPP Loving, Winkler $2,4 41, 15, $6 $43,92 October 216 PDCE Reeves, Culberson $1,55 57, 7, $28 $21,491 August 216 FANG Reeves, Ward $56 19,18 1, $4 $27,112 July 216 PE Reeves, Ward $144 14,197 1,2 $48 $6,762 March 216 Jagged Peak Energy, Inc. (JAG) 18

19 Figure 27: Relative Location of Recent Deep Delaware A&D Activities PDCE/Fortuna $24k/acre RSPP/Silver Hill $44k/acre CPE/Ameredev $33k/acre PDCE/Arris & PDC $21k/acre PE/APA $31k/acre FANG/Luxe $27k/acre NBL/CWEI $37k/acre FANG/Brigham $27k/acre Source: HPDI, Company data, Credit Suisse estimates Given the prevalence of A&D activity in the basin affords an availability of recent comparison transactions (market pricing) for assets that are similar in geographic location, the initial pushback on JAG coming public was why it was not bought out beforehand (similar to Brigham), if these are in fact quality assets as we argue. While a fair question, we believe, in the end, it was a function of price and ability to use cash flow from the asset to fund the required rig ramp instead of poor acreage quality. JAG's position is largely undeveloped (only 6% of total net acreage is developed, see Figure 28) and has little associated PDP value, but, as the company ramps production significantly, this will change. Figure 28: Developed Acreage as % of Total Acreage 6% 94% Developed Acreage Undeveloped Acreage Source: Company data While there are some lease expiry considerations that dictate the program in the near term, the company's planned rig ramp schedule is more than sufficient to HBP all acreage by the end of 218 or early 219. In addition, parts of the acreage, namely the eastern side of Whiskey River and the Big Tex acreage, still require additional delineation. As a result, there is more to prove up for which we argue JAG wasn't given credit for in a potential buy-out situation. Either way, the level of management commitment to the story via ownership stake size before and after the issuance does introduce additional confidence in the story. Jagged Peak Energy, Inc. (JAG) 19

20 Figure 29: Lease Expiration Schedule (Net Acres) Figure 3: CS Forecast Rig Ramp Schedule Lease Expiration Schedule CS Forecasted Rig Ramp Schedule Rigs Required for HBP 14, 12, 1, 8, 12,346 9,131 8,354 8, , 4, 2, 249 4Q Finally, we further argue that JAG s IPO introduced public equity as a currency to compete for future Delaware deals (while also adding some float to the name). Following the IPO, JAG is trading in-line with SMID peers in the basin on an implied EV/Delaware acre basis at $37k/acre as seen in Figure 4, making theoretical bolt-on transactions or entire acquisitions of similar quality assets at a lower EV/acre price point accretive. Higher-Intensity Completions Appear Conducive to JAG's Acreage Through a function of higher productivity and lower service cost inputs, the Delaware has recently seen an expansion in completion intensity to an extent few other onshore E&P shale plays can match. For example, in Figure 31 and Figure 32 we show the average proppant loading and fluid concentrations seen throughout time in the Delaware (for wells for which we have lateral lengths from state data and completion data from Frac Focus) and how this has trended into 216. Our main take-aways from these charts, which are further expounded upon in Figure 33 and Figure 34, are these: (1) Completion intensity measured in proppant loading per lateral foot has steadily increased, with SMID names (and operators that the SMID players ultimately bought) testing some of the highest concentrations as delineation in areas that were previously thought to be fringy are increasingly proving to be not only economic but actually compete and in some cases win on an economics basis relative to the core Midland. In JAG's case, the company had always been near leading edge for sand concentrations, and while JAG has been attributing the recent productivity uplift to higher fluid usage, it has nevertheless boosted proppant intensity near levels other SMIDs are now in the early innings of testing through their third- or fourth-generation frac designs. Thus far, JAG has been highlighting that any uplift seen from higher sand concentrations has been concentrated in the Big Tex/Pecos area, but also notes that, on average, the current completion design calls for 2,5-3,5 lbs/ft (see Figure 33). Jagged Peak Energy, Inc. (JAG) 2

21 Figure 31: JAG Average Proppant Loading vs. Offset Operators Proppant Loading (lbs/ft) Proppant Loading (lbs/ft) 3,5 3, 2,5 2, 1,5 1, 5 All Year Average 2,68 1,634 1,59 1,539 2,723 1,949 1, Average 2,667 2,48 2,125 1,823 2,689 1,957 Figure 32: JAG Average Fluid Concentrations vs. Offset Operators Proppant Loading (lbs/ft) All Year Average Average Source: Frac Focus, HPDI, Credit Suisse estimates (Note: Average Completion Intensity for Hz Wells only in Ward, Winkler, Pecos, and Reeves) Source: Frac Focus, HPDI, Credit Suisse estimates (Note: Average Completion Intensity for Hz Wells only in Ward, Winkler, Pecos, and Reeves) Figure 33: JAG Proppant Loading vs. Peers 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 (2) Completion intensity measured in fluid concentration per lateral foot has long been the key differentiator for JAG and Brigham Resources (now FANG). While other operators in the basin have historically averaged near 35 bbls/ft, 216 saw a step-up to ~45 bbls/ft, as increasing completion intensity become a vogue topic. However, JAG had historically been completing wells on average with ~6 bbls/ft and is now averaging closer to ~7 bbls/ft. The company has also been attributing the production uplift from newer completions to increased micro-fracture contribution when coupled with the use of 2 mesh sand. While 216 was a year that pushed the historical limit for fluid concentrations, JAG's current slickwater design appears to surpass even Brigham's historical results, as, on average, the completion calls for 85 bbls/ft of fluid (see Figure 34). Other OXY CXO APC APA XEC NBL FANG CDEV EOG PDCE PE JAG CPE Nov-13 Jun-14 Dec-14 Jul-15 Jan-16 Aug-16 Mar-17 Completion Date Source: Frac Focus, HPDI, Credit Suisse estimates Jagged Peak Energy, Inc. (JAG) 21

22 Figure 34: JAG Fluid Concentration vs. Peers 12. Other OXY CXO APC APA XEC NBL FANG CDEV EOG PDCE PE JAG CPE 1. Fluid Concentration (bbls/ft) Nov-13 Jun-14 Dec-14 Jul-15 Jan-16 Aug-16 Mar-17 Completion Date Source: Frac Focus, HPDI, Credit Suisse estimates (3) Outside of proppant and fluid intensity, JAG's current design calls for 18' stage spacing (implying 5 stages per 9,' lateral). Within each stage, JAG targets 3' cluster spacing, and it has been increasingly utilizing nano-surfactant and diversion technologies to further increase productivity. Type Curves by Fluid Concentrations Given how JAG specifically notes a belief that EUR uplift on the majority of its acreage is driven by the amount of fluid pumped, we review cumulative production results (total and oil only) under the following fluid concentration subsets: (1) 2-4 bbls/ft (2) 4-6 bbls/ft (3) 6-8 bbls/ft (4) 8-1 bbls/ft As we noted above, JAG appears to be near leading edge (along with Brigham/FANG) for fluid concentration per lateral foot. While the dataset includes all wells for which we have production and completion data, we have also added in offset operators and their respective horizontal wells in the counties in which JAG currently maintains leasehold (Pecos, Reeves, Ward, and Winkler). While the company has been downplaying the causation of higher proppant loading driving improved results on its main focus areas (Whiskey River and Cochise), it has footnoted that higher productivity has been seen from increasing proppant loading in the Big Tex area. Accordingly, in the appendix at the back of this report, we similarly segregate results under the following proppant loading regimes: (1) 1,-1,5 lbs/ft (2) 1,5-2, lbs/ft (3) 2,-2,5 lbs/ft (4) 2,5-3, lbs/ft Jagged Peak Energy, Inc. (JAG) 22

23 2-4 bbls/ft Figure 35: Well Locations on 2-4 bbls/ft Regime Source: Frac Focus, HPDI, Credit Suisse estimates Figure 36: Cumulative Total Production (Mboe) Model OXY APC XEC NBL CDEV CXO APA FANG EOG PE JAG 6 Figure 37: Cumulative Oil Production (Mbbl) Model OXY APC XEC NBL CDEV CXO APA FANG EOG PE JAG 35 Cumulative Total Production (Mboe) Cumulative Oil Production (Mbbl) Months on Production Months on Production Source: Frac Focus, HPDI, Credit Suisse estimates (Notes: Normalized to 9,', JAG Whiskey River/Cochise WCA Type Curve Shown Above MMboe EUR) Source: Frac Focus, HPDI, Credit Suisse estimates (Notes: Normalized to 9,', JAG Whiskey River/Cochise WCA Type Curve Shown Above MMboe EUR) Figure 38: Number of Wells Contributing to 2-4 bbls/ft Average # of Wells Contributing # of Wells: OXY APC XEC NBL CDEV CXO APA FANG EOG PE JAG Source: Frac Focus, HPDI, Credit Suisse estimates Jagged Peak Energy, Inc. (JAG) 23

24 While light on well count for JAG (see Figure 38), we nevertheless note relative underperformance on less intense completions (something that will become more evident as we step up the fluid concentration in the following figures). Given JAG's superior oil cut, the relative underperformance on total production (see Figure 36) does not translate as strongly on oil cumes (see Figure 37). Other notables from offset operators is EOG's outperformance on a total cume basis, which doesn't translate as strongly into oil cumes (gassier mix) and NBL/CXO's relative outperformance for total and oil cumes under this intensity regime. 4-6 bbls/ft Figure 39: Well Locations on 4-6 bbls/ft Regime Source: Frac Focus, HPDI, Credit Suisse estimates Figure 4: Cumulative Total Production (Mboe) Model OXY APC XEC NBL CDEV PDCE CXO FANG EOG PE JAG 6 Figure 41: Cumulative Oil Production (Mbbl) Model OXY APC XEC NBL CDEV PDCE CXO FANG EOG PE JAG 4 Cumulative Total Production (Mboe) Cumulative Oil Production (Mbbl) Months on Production Months on Production Source: Frac Focus, HPDI, Credit Suisse estimates (Notes: Normalized to 9,', JAG Whiskey River/Cochise WCA Type Curve Shown Above MMboe EUR) Source: Frac Focus, HPDI, Credit Suisse estimates (Notes: Normalized to 9,', JAG Whiskey River/Cochise WCA Type Curve Shown Above MMboe EUR) Jagged Peak Energy, Inc. (JAG) 24

25 Figure 42: Number of Wells Contributing to 4-6 bbls/ft Average # of Wells Contributing # of Wells: OXY APC XEC NBL CDEV PDCE CXO FANG EOG PE JAG Source: Frac Focus, HPDI, Credit Suisse estimates While again light on well count for JAG (see Figure 42), relative underperformance does improve under this regime (and again, owing to the superior oil cut, the relative underperformance on total production does not translate as strongly on oil cumes). Other notables from offset operators are EOG's outperformance on a total cume basis, which does translate better into oil cumes (vs. the 2-4 bbls/ft comparison) and NBL's relative outperformance for total and oil cumes under this intensity regime. 6-8 bbls/ft Figure 43: Well Locations on 6-8 bbls/ft Regime Source: Frac Focus, HPDI, Credit Suisse estimates Jagged Peak Energy, Inc. (JAG) 25

26 Figure 44: Cumulative Total Production (Mboe) 45 Model OXY CXO FANG EOG PE JAG Figure 45: Cumulative Oil Production (Mbbl) 35 Model OXY CXO FANG EOG PE JAG Cumulative Total Production (Mboe) Cumulative Oil Production (Mbbl) Months on Production Months on Production Source: Frac Focus, HPDI, Credit Suisse estimates (Notes: Normalized to 9,', JAG Whiskey River/Cochise WCA Type Curve Shown Above MMboe EUR) Source: Frac Focus, HPDI, Credit Suisse estimates (Notes: Normalized to 9,', JAG Whiskey River/Cochise WCA Type Curve Shown Above MMboe EUR) Figure 46: Number of Wells Contributing to 6-8 bbls/ft Average # of Wells Contributing # of Wells: OXY CXO FANG EOG PE JAG Source: Frac Focus, HPDI, Credit Suisse estimates With JAG's current completion design calling for ~85 bbls/ft, the 6-8 bbls/ft is very close to the company's leading-edge design and does track our Wolfcamp A type curve (1.248 MMboe for Cochise and Whiskey River). While largely in-line on total production, oil cut outperformance versus our model drives superior oil cume outperformance to date. Nevertheless, the main caveat here is that JAG's cume is supported by one well (see Figure 46). However, one operator (Brigham/FANG) which may be considered more of a step out than JAG by some, supports a very similar curve when normalized to 9,', giving us confidence in the continued outperformance applying to future JAG wells within this completion regime. Other notables from the preceding figures are again CXO and EOG, which are among the few large caps that are pushing the envelope on completion intensity in the Delaware. However, given the relative performance from total versus oil cumes, we suspect that CXO and EOG are largely targeting the Avalon and Bone Spring formations versus JAG going after the oily Wolfcamp A as its primary target. In addition, while EOG is supported by two wells, there does seem to be a hiccup in the data around the seven- to eighth-month time frame, suggesting either problems when allocating Texas lease level production to an individual well or even something as simple as operational downtime contributing to what appears to be understated production rates for those two months. Jagged Peak Energy, Inc. (JAG) 26

27 8-1 bbls/ft Figure 47: Well Locations on 8-1 bbls/ft Regime Source: Frac Focus, HPDI, Credit Suisse estimates Figure 48: Cumulative Total Production (Mboe) 45 Model OXY FANG JAG Figure 49: Cumulative Oil Production (Mbbl) 35 Model OXY FANG JAG Cumulative Total Production (Mboe) Cumulative Oil Production (Mbbl) Months on Production Months on Production Source: Frac Focus, HPDI, Credit Suisse estimates (Notes: Normalized to 9,', JAG Whiskey River/Cochise WCA Type Curve Shown Above MMboe EUR) Source: Frac Focus, HPDI, Credit Suisse estimates (Notes: Normalized to 9,', JAG Whiskey River/Cochise WCA Type Curve Shown Above MMboe EUR) Figure 5: Number of Wells Contributing to 8-1 bbls/ft Average # of Wells Contributing # of Wells: OXY FANG JAG Source: Frac Focus, HPDI, Credit Suisse estimates Given the relative strength of JAG's well count under the 8-1 bbls/ft regime, we have the greatest level of confidence in matching our modeled Wolfcamp A curve to this cume chart. Again, the company's consistency and even potential for further outperformance is backed by historic Brigham results under this regime. Finally, while OXY may have had one well that tested fluid concentrations this high (this could potentially be a data error), that curve tracks closely in between JAG and Brigham's band. Jagged Peak Energy, Inc. (JAG) 27

28 Future Upside Potential from Big Tex and Additional Benches We see JAG's ability to further delineate the Wolfcamp B/C and the Bone Spring as additional upside potential to our NAV, as the company is arguably still in the early innings of testing these zones. As a result, the 3 rd Bone Spring and the Wolfcamp B represent only 6% and 14% of our undeveloped NAV, respectively. In this section, we look at offset operator well data to highlight the potential of these plays relative to our current assumptions. As specific interval targeted in the Delaware are not reported by the Texas RRC, we limit our samples to Bone Spring wells and Wolfcamp B wells highlighted by offset operators, and we note a likely selection bias resulting from operators tending to highlight outperforming wells. Figure 51: Offset Bone Spring Wells Source: Credit Suisse estimates, HPDI In the Bone Spring intervals, we look at 11 wells scattered in Ward, Reeves, and Pecos Counties, operated by Brigham Resources (now FANG), Chevron, Cimarex and Patriot. Based on Figure 52 and Figure 53, which highlight the performance of each well after normalizing lateral length to 9,' and applying a 15% longer lateral discount, we argue that Ward County is the most prospective for Bone Spring development, followed by Reeves. Cumulative oil cuts on Ward and Reeves wells range between 7% and 9% on a two-stream basis, slightly below the oil cut on the core target Wolfcamp A. Pecos County Bone Spring wells, while lagging on cumulative production, are slightly oiler, which is also consistent with what we observe in other intervals. While geographic location is driving the largest variation in well performance, within each county we can make an argument for upsized completions driving superior well performance. This relationship is most evident when comparing the well performance of the two Chevron Lasater wells, as well as the three Brigham Mcintyre State wells. In general, we see Ward and Reeves County Bone Spring wells performing in-line or above our modeled 3 rd Bone Spring type curve, which gives us more comfort with our type curve and the productivity of Bone Spring intervals on JAG's Cochise and Whiskey River operating areas. Jagged Peak Energy, Inc. (JAG) 28

29 Figure 52: Bone Spring Offsets Cume Production Normalized for 9,' Lateral (Well 1-6) Cumulative Production (Mboe) Modeled JAG Type Curve Cimarex #Pitzer-Lasater State Unit #1H (415 lbs/ft) - 4,828' - 6/19/213 WARD (TX) Chevron #Lasater #2 (153 lbs/ft) - 4,585' - 6/21/213 WARD (TX) Chevron #Lasater #3 (791 lbs/ft) - 3,2' - 6/11/213 WARD (TX) Brigham #Stewart 3 #1H (1,226 lbs/ft) - 4,299' - 2/4/214 REEVES (TX) Cimarex #Miami Beach #1H (722 lbs/ft) - 4,521' - 1/2/214 WARD (TX) Figure 53: Bone Spring Offsets Cume Production Normalized for 9,' Lateral (Well 7-11) Cumulative Production (Mboe) Modeled JAG Type Curve Brigham #Mcintyre State #1H (1,961 lbs/ft) - 7,664' - 1/31/214 PECOS (TX) Brigham #Mcintyre State #1H (2,268 lbs/ft) - 7,551' - 7/4/215 PECOS (TX) Brigham #Mcintyre State 4 #1H (2,26 lbs/ft) - 4,828' - 4/16/216 PECOS (TX) Patriot #Aardvark State 6 #2H (2,841 lbs/ft) - 4,999' - 5/8/216 REEVES (TX) Brigham #Mcintyre State 38 #1H (2,644 lbs/ft) - 4,923' - 6/11/216 PECOS (TX) Months on Production Months on Production Source: Credit Suisse estimates, HPDI, Frac Focus (Notes: Normalized to 9,', JAG Whiskey River/Cochise 3 rd Bone Spring Type Curve Shown Above 751 Mboe EUR) Source: Credit Suisse estimates, HPDI, Frac Focus (Notes: Normalized to 9,', JAG Whiskey River/Cochise 3 rd Bone Spring Type Curve Shown Above 751 Mboe EUR) Figure 54: BS Offsets Iterative Oil Cut (Well 1-6) Figure 55: BS Offsets Iterative Oil Cut (Well 7-11) 1% JAG Modeled Type Curve Cimarex #Pitzer-Lasater State Unit #1H (415 lbs/ft) - 4,828' - 6/19/213 WARD (TX) Chevron #Lasater #2 (153 lbs/ft) - 4,585' - 6/21/213 WARD (TX) Chevron #Lasater #3 (791 lbs/ft) - 3,2' - 6/11/213 WARD (TX) Brigham #Stewart 3 #1H (1,226 lbs/ft) - 4,299' - 2/4/214 REEVES (TX) Cimarex #Miami Beach #1H (722 lbs/ft) - 4,521' - 1/2/214 WARD (TX) Brigham #Alexander 4-45 #1H (2,7 lbs/ft) - 7,546' - 11/27/214 REEVES (TX) 1% JAG Modeled Type Curve Brigham #Mcintyre State #1H (1,961 lbs/ft) - 7,664' - 1/31/214 PECOS (TX) Brigham #Mcintyre State #1H (2,268 lbs/ft) - 7,551' - 7/4/215 PECOS (TX) Brigham #Mcintyre State 4 #1H (2,26 lbs/ft) - 4,828' - 4/16/216 PECOS (TX) Patriot #Aardvark State 6 #2H (2,841 lbs/ft) - 4,999' - 5/8/216 REEVES (TX) Brigham #Mcintyre State 38 #1H (2,644 lbs/ft) - 4,923' - 6/11/216 PECOS (TX) Iterative Cume % Oil 95% 9% 85% 8% Iterative Cume % Oil 95% 9% 85% 8% 75% 75% 7% Months on Production 7% Months on Production Source: Credit Suisse estimates, HPDI, Frac Focus (Notes: Normalized to 9,', JAG Whiskey River/Cochise 3 rd Bone Spring Type Curve Shown Above 751 Mboe EUR) Source: Credit Suisse estimates, HPDI, Frac Focus (Notes: Normalized to 9,', JAG Whiskey River/Cochise 3 rd Bone Spring Type Curve Shown Above 751 Mboe EUR) Similarly, we also looked at a four-well sample of Wolfcamp C wells offsetting Jagged Peak's acreage, including one JAG well (Eiland 8-33 #1H) that is OBO. All four wells are currently tracking at or above the modeled Wolfcamp B type curve, while oil cuts are also in-line with our assumptions. Figure 57 and Figure 58 also include a Brigham Wolfcamp B well (Lowe 4-9 1H), which is showcasing higher cumulative production but a relatively lower oil cut. Overall, while recognizing that we are extrapolating based on a small sample, the consistent performance of wells across Ward, Pecos, and Reeves Counties do provide some level of confidence in our type curve and JAG's future development potential outside the Wolfcamp A. Jagged Peak Energy, Inc. (JAG) 29

30 Figure 56: S Delaware Wolfcamp B and Wolfcamp C Wells Source: Credit Suisse estimates, HPDI Figure 57: Wolfcamp B/C Offsets Cume Production Normalized for 9,' Lateral (Well 1-5) Cumulative Production (Mboe) Modeled JAG Type Curve Felix #University #1H (1,382 lbs/ft) - 4,262' - 4/13/214 WARD (TX) Brigham #Lowe 4-9 #1H (2,112 lbs/ft) - 7,635' - 11/27/214 REEVES (TX) Brigham #Neal Lethco 31 #1H (2,96 lbs/ft) - 4,289' - 2/6/215 PECOS (TX) Felix #University #1H (663 lbs/ft) - 7,68' - 4/8/215 WARD (TX) Jagged #Eiland 8-33 #1H (2,184 lbs/ft) - 7,866' - 11/29/214 REEVES (TX) Figure 58: Wolfcamp B/C Offsets Iterative Oil Cut (Well 1-5) Iterative Cume % Oil 1% 9% 8% 7% 6% Modeled JAG Type Curve Felix #University #1H (1,382 lbs/ft) - 4,262' - 4/13/214 WARD (TX) Brigham #Lowe 4-9 #1H (2,112 lbs/ft) - 7,635' - 11/27/214 REEVES (TX) Brigham #Neal Lethco 31 #1H (2,96 lbs/ft) - 4,289' - 2/6/215 PECOS (TX) Felix #University #1H (663 lbs/ft) - 7,68' - 4/8/215 WARD (TX) Jagged #Eiland 8-33 #1H (2,184 lbs/ft) - 7,866' - 11/29/214 REEVES (TX) Months on Production 5% Months on Production Source: Credit Suisse estimates, HPDI, Frac Focus (Notes: Normalized to 9,', JAG Whiskey River/Cochise Wolfcamp B Type Curve Shown Above 1.73 MMboe EUR) Source: Credit Suisse estimates, HPDI, Frac Focus (Notes: Normalized to 9,', JAG Whiskey River/Cochise Wolfcamp B Type Curve Shown Above 1.73 MMboe EUR) Based on this review of well performances in additional Bone Spring and Wolfcamp intervals, we believe that there could be upside to JAG's current inventory assumptions, which is baking in only the 3 rd Bone Spring and Wolfcamp B locations in Whiskey River and Cochise. As the rate of change story continues to receive new information on the Delaware, JAG remains levered to continued delineation in the basin and the associated NAV and inventory expansion. Jagged Peak Energy, Inc. (JAG) 3

31 Figure 59: JAG Current Spacing Assumption Figure 6: JAG Current and Upside Target Zones Moreover, JAG also stands to benefit from further downspacing and wine-racking in current target zones. Offsets are assuming up to 16 wells/section in the Wolfcamp A, which, when transferred to JAG's acreage, would result in another ~42 locations added to the company's inventory. Figure 61: Deep Delaware Spacing Assumptions Deep Delaware Spacing Assumptions (Well/section) JAG CPE NBL-CWEI FANG Legacy NBL PDCE PE Avalon st Bone Spring nd Bone Spring rd Bone Spring Wolfcamp A Wolfcamp B Wolfcamp C Total Well/Section Big Tex Delineation One area of concern for investors has been the Big Tex delineation, given the lack of recent results in the area. The area, which encompasses 21,948 net acres (33% of JAG's total), sits northeast of FANG's acreage in Pecos County and is in an area with few offset results (see Figure 62 and Figure 63). Jagged Peak Energy, Inc. (JAG) 31

32 Figure 62: JAG Big Tex Acreage Figure 63: JAG Big Tex Offset Operators Source: JAG Research Analyst Presentation Source: HPDI, Credit Suisse estimates In Big Tex, JAG has a total of five wells with first production dates after January 214, with two appearing to have mechanical issues/poor data and a third having only one month of production. Of the remaining two wells, the State Neal Lethco B3427 1H has showcased solid production data, flowing at a peak 897 boe/d rate (87% oil) from a 7,47 ft lateral (see Figure 64), which equates to 12 boe/d per 1, lateral ft. Looking at the closest offset results from FANG slightly southwest of JAG's results, we find that those wells so far do stack up better than JAG's State Neal Lethco well (see Figure 65). After normalizing results per 1, ft of lateral, FANG's Neal Lethco's wells are more productive and showcase similar oil cuts to JAG (see Figure 66). Based on all five wells that JAG has in Big Tex, the company has targeted what appears to be the Upper Wolfcamp A, as the total vertical depth for JAG is materially shallower than other operators (see Figure 67). JAG has drilled only two wells in the area in 216, but we note that 4,113 of the 6,389 net acres added since September 3 th (~64%) were in Big Tex. Per the company's completion schedule, JAG guided a third well coming online in Big Tex in late November 216, and 217's completion schedule features two 1Q17 wells as well as a third in late May 217. While there have been a handful of encouraging wells drilled in Big Tex by JAG and offset operators, it would appear that further work is needed to prove up the consistency and productivity of the asset, given the variability in initial results and vertical depth differences between JAG and its peers. Jagged Peak Energy, Inc. (JAG) 32

33 Production (boe/d) 21 February 217 Figure 64: JAG Big Tex Well Results (First prod 1/1/214+) 1, 9 8 Bonebrake H B&B Sisters State 42H State Neal Letcho `A` H State Neal Lethco H State Neal Lethco B3427 1H 1H Production (boe/d) Months Online Source: HPDI, Credit Suisse estimates Figure 65: Big Tex Offset Results Egl 291H Neal Lethco 16 1H Neal Lethco 18 1H Neal Lethco State 2 1H Neal Lethco H 1,2 1, Months Online Source: HPDI, Credit Suisse estimates Jagged Peak Energy, Inc. (JAG) 33

34 Figure 66: Big Tex IP-3 per 1, lateral ft IP-3 (boe/d per 1, ft) IP-3 (boe/d per 1, ft) % Oil % 9% 85% 8% 75% % Oil 7% Source: HPDI, Credit Suisse estimates Figure 67: Total Vertical Depth (JAG vs Peers) 2, 18, 16, 14, 12, 1, 8, 6, 4, 2, 8,13 JAG Average TVD Min TVD Max TVD 1,724 Manti Tarka 1,814 1,814 1,848 11,27 PE Samson OXY FANG Source: HPDI, Credit Suisse estimates Peer-Leading LOE Despite having a relatively low production base at ~6.6 Mboe/d in 3Q16, JAG's per barrel operating costs stack up well against peers in the basin and should improve further as the company ramps up production. Most notably, JAG's LOE per boe was only $3.78 compared with a median $5. from the Permian group, which includes PE, CXO, FANG and PXD (see Figure 68). Jagged Peak Energy, Inc. (JAG) 34

35 Figure 68: Peer Group 3Q16 LOE per boe $7. $6. $5. $4. Median $5. $3.8 3Q16 LOE per boe $4.3 $5. Median $5.4 $6.4 $3. $2. $1. $. JAG PE CXO FANG PXD One of the main factors behind JAG's low LOE is its ownership of water gathering and handling infrastructure, which includes 1.5 miles of fresh water pipelines, 63.6 miles of produced water transportation pipelines, 162 Mbbls of/d of water sourcing capacity, and 86 Mbbl/d of water disposal capacity. JAG also owns 1,85 surface acres that it can use to expand its current water handling capacity. The combined effect of the water ownership is a $.1/bbl water acquisition cost and a $.2/bbl disposal cost, which should help compress JAG's per boe operating costs as it ramps production through 218. Figure 69: JAG Infrastructure Overview Water Pipeline Proposed Water Pipeline Oil Pipeline Proposed Oil Pipeline Gas Pipeline Proposed Gas Pipeline Source: JAG Analyst Presentation Jagged Peak Energy, Inc. (JAG) 35

36 Cumulative Total Production (Mboe) Cumulative Oil Production (Mbbl) 21 February 217 Given the high pressure of the Southern Delaware, which enables wells to flow for nine to 12 months naturally before needing artificial lift, initial operating costs should be lower than a comparative well in the Midland, and given the absence of significant legacy vertical wells, JAG expects its lease operating expense per boe to trend down to ~$2.1 per boe by the end of 218. Appendix: 1,-1,5 lbs/ft Figure 7: Cumulative Total Production (Mboe) 6 Model OXY APC XEC NBL CDEV PDCE CXO APA FANG EOG PE JAG Figure 71: Cumulative Oil Production (Mbbl) 35 Model OXY APC XEC NBL CDEV PDCE CXO APA FANG EOG PE JAG Months on Production Months on Production Source: Frac Focus, HPDI, Credit Suisse estimates (Notes: Normalized to 9,', JAG Whiskey River/Cochise WCA Type Curve Shown Above MMboe EUR) Source: Frac Focus, HPDI, Credit Suisse estimates (Notes: Normalized to 9,', JAG Whiskey River/Cochise WCA Type Curve Shown Above MMboe EUR) Figure 72: Number of Wells Contributing to 1,-1,5 lbs/ft Average # of Wells Contributing # of Wells: OXY APC XEC NBL CDEV PDCE CXO APA FANG EOG PE JAG Source: Frac Focus, HPDI, Credit Suisse estimates Jagged Peak Energy, Inc. (JAG) 36

37 1,5-2, lbs/ft. Cumulative Total Production (Mboe) Cumulative Oil Production (Mbbl) Figure 73: Cumulative Total Production (Mboe) Cumulative Total Production (Mboe) APA FANG EOG PE JAG Model OXY XEC NBL CDEV CXO Months on Production Source: Frac Focus, HPDI, Credit Suisse estimates (Notes: Normalized to 9,', JAG Whiskey River/Cochise WCA Type Curve Shown Above MMboe EUR) Figure 74: Cumulative Oil Production (Mbbl) Cumulative Oil Production (Mbbl) Model OXY XEC NBL CDEV CXO APA FANG EOG PE JAG Months on Production Source: Frac Focus, HPDI, Credit Suisse estimates (Notes: Normalized to 9,', JAG Whiskey River/Cochise WCA Type Curve Shown Above MMboe EUR) Figure 75: Number of Wells Contributing to 1,5-2, lbs/ft Average # of Wells Contributing # of Wells: OXY XEC NBL CDEV CXO APA FANG EOG PE JAG Source: Frac Focus, HPDI, Credit Suisse estimates 2,-2,5 lbs/ft Figure 76: Cumulative Total Production (Mboe) Model OXY XEC NBL CXO FANG EOG PE JAG 6 Figure 77: Cumulative Oil Production (Mbbl) Model OXY XEC NBL CXO FANG EOG PE JAG Months on Production Months on Production Source: Frac Focus, HPDI, Credit Suisse estimates (Notes: Normalized to 9,', JAG Whiskey River/Cochise WCA Type Curve Shown Above MMboe EUR) Source: Frac Focus, HPDI, Credit Suisse estimates (Notes: Normalized to 9,', JAG Whiskey River/Cochise WCA Type Curve Shown Above MMboe EUR) Jagged Peak Energy, Inc. (JAG) 37

38 Figure 78: Number of Wells Contributing to 2,-2,5 lbs/ft Average # of Wells Contributing # of Wells: OXY XEC NBL CXO FANG EOG PE JAG Source: Frac Focus, HPDI, Credit Suisse estimates 2,5-3, lbs/ft Figure 79: Cumulative Total Production (Mboe) Figure 8: Cumulative Oil Production (Mbbl) Model NBL CDEV CXO Model NBL CDEV CXO 45 APA FANG PE JAG 45 APA FANG PE JAG Cumulative Total Production (Mboe) Cumulative Total Production (Mboe) Months on Production Months on Production Source: Frac Focus, HPDI, Credit Suisse estimates (Notes: Normalized to 9,', JAG Whiskey River/Cochise WCA Type Curve Shown Above MMboe EUR) Source: Frac Focus, HPDI, Credit Suisse estimates (Notes: Normalized to 9,', JAG Whiskey River/Cochise WCA Type Curve Shown Above MMboe EUR) Figure 81: Number of Wells Contributing to 2,5-3, lbs/ft Average # of Wells Contributing # of Wells: NBL CDEV APA FANG PE JAG Source: Frac Focus, HPDI, Credit Suisse estimates Jagged Peak Energy, Inc. (JAG) 38

39 Figure 82: Special Adjustments for Implied Delaware Acreage Price Calculation Ticker Description Per Acre ($ K) Net Acres (K) Value ($mm) FANG VNOM - Model Valuation (based on shares O/S tax effected held by FANG) $988 FANG Midland Acreage $ $3,897 FANG Delaware Mineral Interests $ $75 PE Mineral Interests $ $382 PE Midland Acreage $ $6,265 CPE Midland Acreage $ $1,87 PDCE DJ Acreage $ $1,44 PDCE Utica Acreage $ $65 NBL DJ Acreage $ $5,28 NBL Eagle Ford Acreage $ $175 NBL Marcellus Acreage $ $726 NBL International - Model Valuation $4,483 EGN N Midland Acreage $ $1,811 EGN Central Midland Acreage $ $886 RSPP Midland Acreage $ $3,35 Jagged Peak Energy, Inc. (JAG) 39

40 Financials Figure 83: JAG Balance Sheet Summary Projected Balance Sheet in US$ millions unless otherwise noted Year-End 215 Year-End 216E Year-End 217E Year-End 218E Cash $14 $5 $89 $89 High Yield $ $ $ $ Bank Debt 1 $2 $19 $239 $356 Total Long-term Debt $2 $19 $239 $356 Net Debt $6 $185 $15 $267 Shareholders' Equity $284 $38 $89 $995 Total Capitalization $34 $498 $1,48 $1,351 Annualized Cash Flow 2 $26 $33 $213 $472 Capital Expenditure $97 $245 $58 $589 Debt-to-Capital 6.6% 38.2% 22.8% 26.4% Net Debt-to-Capital 1.9% 37.1% 14.3% 19.8% Net Debt-to-Cash Flow 3.2x 5.6x.7x.6x Net Debt / BOE (11/3/16 Proved) 4 $.18 $5.65 $4.6 $8.18 Net Debt / BOE (11/3/16 PDP) 4 $.45 $14.23 $11.58 $2.61 Bank Debt Available 5 $18. -% Drawn (Current) % Note: 1) Assumes a $245MM capex budget in 216 2) Reflects Operating cash flow based on $43.26 oil and $2.43 gas realized in Debt is adjusted for free cash/(deficit) 3) Debt-to-Cash Flow (annualized, incl. hedges) 4) Proved reserves of 32.7 MMboe, Proved Developed Reserves of 13. MMboe 5) JAG w as undraw n on its credit facility pro-forma for the company's IPO Jagged Peak Energy, Inc. (JAG) 4

41 Figure 84: 217 Net Debt/EBITDA 7.x 6.x CS Deck Futures Strip Median at CS Deck Median at Strip Median at CS Deck: 1.9x Median at Strip: 2.x 5.x 4.x 3.x 2.x 1.x.x 217 Price Scenario CS Strip WTI Oil $55. $54.42 NYMEX Gas $3.25 $3.2 Jagged Peak Energy, Inc. (JAG) 41

42 Figure 85: 218 Net Debt/EBITDA 8.x 7.x 6.x CS Deck Futures Strip Median at CS Deck Median at Strip Median at CS Deck: 1.3x Median at Strip: 1.8x 5.x 4.x 3.x 2.x 1.x.x 218 Price Scenario CS Strip WTI Oil $62.5 $54.93 NYMEX Gas $3.5 $3.3 Jagged Peak Energy, Inc. (JAG) 42

43 Figure 86: JAG NAV Summary Valuation Jagged Peak Energy OUTPERFORM Net Asset Value Summary Shares Out. (MM) 213 Proved Developed Reserves Liquids Gas Total Asset Value Oil & Gas Properties (MMbbls) (Bcf) (MMBoe) % Gas ($/Boe) ($MM) ($/Share) United States - PD as of 11/3/ % $24.95 $324 $1.5 Total Proved Developed Properties % $24.95 $324 $1.5 Other Assets ($MM) ($/Share) Total Other Assets $ $. Liabilities ($MM) ($/Share) Long-Term Debt 1 $. Cash & Equivalents ($89) ($.42) Total Liabilities ($88) ($.4) Proven Developed Net Asset Value $412 $2. Undeveloped / Unproven Reserves Liquids Gas Total Asset Value Oil & Gas Properties (MMbbls) (Bcf) (MMBoe) % Gas ($/Boe) ($MM) ($/Share) Wolfcamp A % $7.57 $2,483 $11.7 3rd Bone Spring % $2.5 $21 $1. Wolfcamp B % $.59 $525 $2.5 Big Tex Operating Area - Wolfcamp A % $5.36 $585 $2.7 Total Undeveloped/ Unproven 1, ,411 7% $2.7 $3,83 $17.9 Total 'PD Plus' Net Asset Value 1, ,424 7% $2.96 $4,215 $2. Last Price $13.5 Price - to - PD Plus NAV 68% Price - to - Proved Developed Only 675% Jagged Peak Energy, Inc. (JAG) 43