OIL RISES AFTER OPEC EXTENDS CUTS GEOPOLITICAL ISSUES

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1 JANUARY 2018 Oil & Gas VOLUME 261 OIL RISES AFTER OPEC EXTENDS CUTS PRODUCTION CUTS OPEC agreed to extend production cuts another nine months through 2018, boosting the outlook for oil. GEOPOLITICAL ISSUES Major oil producer Iran faced political unrest across the country early in 2018, which rattled the oil market. TAX REDUCTIONS The oil and gas industry is poised to benefit from the passage of the Tax Cuts and Jobs Act in late December 2017.

2 In This Issue MONITOR OIL & GAS GREATAMERICAN.COM JANUARY GREAT VOLUME Rig Counts 11 Monitor Information 04 Commodity Prices 11 Experience 04 Texas Drilling Activity 12 Appraisal & Valuation Team 07 Drilling Rig Day Rates 13 About Great American Group 09 Well Service Rigs 10 Drilling Activity and Industry Trends Trending News OIL PRICES RISE AFTER OPEC EXTENDS PRODUCTION CUTS DECEMBER 2017 EAST COAST BLIZZARD PROMPTS NATURAL GAS PRICE SPIKE JANUARY 2018 PROTESTS THROUGHOUT IRAN RAISE OIL SUPPLY QUESTIONS JANUARY 2018 GAP BETWEEN WTI AND BRENT CRUDE WIDENS IN 2017 JANUARY 2018 Deals are a moving target. A constantly shifting mix of people, numbers, and timing. We re here to simplify this process for you. Our experts are dedicated to tracking down and flushing out the values you need, even on the most complex deals. So when the time comes to take your shot with Great American, you re always right on the money.

3 Rig Counts U.S. RIG COUNT - JANUARY 5, 2018 Current Week Weekly Change Prior Week 12-Month Change 12 Months Prior Current Week Weekly Change Prior Week 12-Month Change 12 Months Prior Location Land 906 (3) Inland Waters 1 (1) Offshore 17 (1) 18 (7) 24 Total 924 (5) Type Oil 742 (5) Gas Miscellaneous (1) 1 Total 924 (5) Directional 64 (4) Horizontal Vertical 62 (3) 65 (12) 74 Total 924 (5) State Texas Oklahoma 118 (2) Louisiana 56 (6) New Mexico North Dakota 45 (1) Pennsylvania Colorado Ohio Wyoming Alaska (3) 8 West Virginia California Utah Arkansas (1) 1 Major Basins Permian Eagle Ford Marcellus Cana Woodford Williston 46 (1) Haynesville 45 (1) DJ-Niobrara Utica Granite Wash Arkoma Woodford Barnett Mississippian Ardmoore Woodford Fayetteville (1) 1 Source: Baker Hughes The total U.S. drilling rig count decreased from October to November 2017 before increasing throughout December. The rig count then decreased slightly in early January As of January 5, 2018, U.S. drilling rigs totaled 924 units, which is slightly less versus the June 2017 average of 931 rigs. The weekly oil rig count decreased for the first time in a month to 742 units on January 5, For 2017, the oil rig count peaked at 768 on August 11, The gas rig count largely followed the trajectory of the oil rig count throughout However, the gas rig count experienced more volatility throughout the year. 3 MONITOR OIL & GAS JANUARY 2018

4 Commodity Prices Commodity 1/8/2017 Prior Week Prior Year Brent ($ per barrel) $67.62 $66.65 $54.39 West Texas Intermediate ($ per barrel) $61.90 $60.37 $51.95 Henry Hub ($ per MMBTU) $2.84 $6.24 $3.14 Texas Drilling Activity The level of oil and gas completions in Texas has fluctuated since August, with completions reaching a six-month high in December. The state s total rig count of 454 represented a large portion of the U.S. total of 924 units as of January 5, The Permian Basin, which includes West Texas and a portion of New Mexico, maintained 400 oil rigs but no natural gas rigs. 1 Texas - Oil versus Gas Completions December 2015 to December , Oil Completions Gas Completions 4 MONITOR OIL & GAS JANUARY 2018

5 Texas Drilling Activity Completions totaled 492 and 623 units in November and December 2017, respectively. These figures represent decreases versus 2015 and Permits submitted for December 2017 totaled 901, while permits for December 2016 totaled Texas - Total Completions versus New Permits Filed December 2015 to December ,250 1,150 1, Total Completions New Permits Submitted 5 MONITOR OIL & GAS OCTOBER 2017

6 Texas Drilling Activity 3 Texas - Total Completions versus Rigs December 2015 to December ,400 1,200 1, Total Completions Total Rigs 6 MONITOR OIL & GAS JANUARY 2018

7 Drilling Rig Day Rates The day rate pricing for drilling rigs through December 2017 is shown below. Rates have experienced year-over-year rate increases in all basins and in all classes. In the prior Oil & Gas Monitor, rates had increased year over year, with the exception of Class E rigs in the Midcontinent region. NOV-16 DEC-16 JAN-17 FEB-17 MAR-17 APR-17 MAY-17 JUN-17 JUL-17 AUG-17 SEP-17 OCT-17 NOV-17 DEC-17 Midcontinent Class A $7,752 $7,778 $7,926 $7,988 $8,039 $8,053 $8,078 $8,098 $8,125 $8,240 $8,339 $8,351 $8,356 $8,360 Class B $10,923 $10,889 $10,982 $11,032 $11,221 $11,247 $11,395 $11,541 $11,595 $11,600 $11,638 $11,641 $11,657 $11,688 Class C $12,771 $12,809 $13,066 $13,197 $13,384 $13,456 $13,500 $13,558 $13,562 $13,693 $13,708 $13,709 $13,730 $13,752 Class D $16,166 $16,282 $16,426 $16,571 $16,621 $16,786 $17,195 $17,380 $17,395 $17,550 $17,567 $17,607 $17,727 $17,737 Class E $17,553 $17,586 $17,734 $17,791 $17,799 $17,871 $17,882 $17,883 $17,890 $17,780 $17,766 $17,768 $17,796 $17,800 ArkLaTex Class A Class B $10,778 $10,860 $10,943 $10,949 $11,062 $11,147 $11,354 $11,371 $11,473 $11,444 $11,450 $11,454 $11,458 $11,497 Class C $13,346 $13,434 $13,933 $13,972 $13,994 $14,088 $14,103 $14,219 $14,228 $14,287 $14,445 $14,534 $14,549 $14,577 Class D $15,802 $15,927 $16,821 $16,890 $16,934 $16,976 $17,210 $17,434 $17,495 $17,500 $17,538 $17,561 $17,601 $17,615 Class E $17,534 $17,587 $17,734 $17,898 $17,915 $17,966 $17,972 $17,997 $18,000 $18,000 $18,045 $18,050 $18,064 $18,065 Gulf Coast Class A Class B $10,934 $11,130 $11,260 $11,382 $11,590 $11,649 $11,681 $11,687 $11,714 $11,736 $11,737 $11,757 $11,797 $11,900 Class C $11,997 $12,331 $13,087 $13,174 $13,202 $13,496 $13,583 $13,590 $13,603 $13,738 $13,853 $13,946 $14,034 $14,080 Class D $15,559 $15,678 $16,044 $16,188 $16,411 $16,428 $16,756 $16,897 $16,907 $16,927 $17,006 $17,012 $17,032 $17,129 Class E $18,003 $18,143 $18,306 $18,472 $18,532 $18,540 $18,756 $18,787 $18,791 $18,792 $18,818 N/A $18,834 $18,898 Class A: horsepower ("HP"); Class B: HP; Class C: HP; Class D: HP; Class E: HP 7 MONITOR OIL & GAS JANUARY 2018

8 Drilling Rig Day Rates NOV-16 DEC-16 JAN-17 FEB-17 MAR-17 APR-17 MAY-17 JUN-17 JUL-17 AUG-17 SEP-17 OCT-17 NOV-17 DEC-17 Permian Basin Class A $10,559 $10,611 $10,769 $10,819 $11,142 $11,208 $11,239 $11,320 $11,335 $11,461 $11,480 $11,522 $11,525 $11,534 Class B $11,954 $12,032 $12,080 $12,251 $12,483 $12,875 $12,949 $13,032 $13,058 $13,132 $13,145 $13,190 $13,213 $13,218 Class C $13,083 $13,449 $13,727 $14,210 $14,362 $14,451 $14,631 $14,914 $14,936 $14,957 $14,997 $15,083 $15,132 $15,303 Class D $16,058 $16,178 $16,610 $16,758 $17,154 $17,185 $17,618 $17,805 $17,823 $17,883 $17,968 $18,359 $18,412 $18,574 Class E $16,502 $16,563 $17,118 $17,291 $17,421 $17,436 $17,493 $17,499 $17,500 $17,661 $17,711 $17,746 $17,759 $17,783 Rockies Class A Class B $12,756 $12,799 $12,936 $13,198 $13,261 $13,308 $13,333 $13,383 $13,398 $13,432 $13,520 $13,551 $13,554 $13,654 Class C $13,903 $13,980 $14,071 $14,155 $14,373 $14,429 $14,491 $14,611 $14,659 $14,705 $14,708 $14,824 $14,840 $14,842 Class D $15,007 $15,167 $15,897 $15,992 $16,442 $16,662 $17,128 $17,202 $17,285 $17,291 $17,295 $17,334 $17,437 $17,464 Class E $18,557 $18,612 $19,026 $19,061 $19,110 $19,115 $19,320 $19,672 $19,707 $19,711 $19,957 $19,857 $19,907 $19,913 South Texas Class A Class B $10,524 $10,627 $10,683 $10,845 $11,012 $11,043 $11,087 $11,262 $11,324 $11,335 $11,382 $11,526 $11,539 $11,549 Class C $13,333 $13,394 $13,715 $13,778 $13,821 $13,977 $14,073 $14,206 $14,217 $14,218 $14,260 $14,301 $14,312 $14,320 Class D $15,863 $15,989 $16,076 $16,275 $16,406 $16,454 $17,080 $17,275 $17,290 $17,330 $17,452 $17,550 $17,571 $17,664 Class E $17,700 $17,783 $17,964 $18,077 $18,096 $18,099 $18,142 $18,232 $18,247 $18,249 $18,286 $18,291 $18,292 $18,435 Appalachia Class A Class B $11,346 $11,454 $11,464 $11,636 $11,726 $11,792 $11,810 $11,914 $11,945 $11,949 $11,956 $11,983 $11,993 $11,969 Class C $13,296 $13,275 $13,481 $13,582 $13,644 $13,783 $13,815 $13,949 $14,004 $14,047 $14,051 $14,093 $14,102 $14,140 Class D $13,844 $14,004 $14,362 $14,630 $14,989 $15,095 $15,565 $15,659 $15,674 $15,721 $16,043 $16,112 $16,143 $16,154 Class E $15,628 $15,625 $16,240 $16,395 $16,450 $16,537 $16,854 $16,935 $16,944 $16,994 $17,181 $17,221 $17,234 $17,258 8 MONITOR OIL & GAS JANUARY 2018

9 Well Service Rigs Well service rig counts through November 2017 are shown by region below. The service rig count in the Permian Basin decreased gradually on a monthly basis from May to October 2017 before increasing in November. The Permian Basin remains the top operational area due to its low breakeven cost to produce oil. The counts for the Permian Basin, Rocky Mountain, West Coast/Alaska, Texas/Gulf Coast, Midcontinent, ArkLaTex, and Eastern U.S. regions were up on a year-over-year basis. Meanwhile, the count for the Texas Gulf Coast region was down and the count for the South Louisiana region remained flat versus a year ago. 4 Well Service Rigs November 2015 to November Texas Gulf Coast ArkLaTex Eastern U.S. South Louisiana Midcontinent West Texas/Permian 9 MONITOR OIL & GAS JANUARY 2018

10 Drilling Activity and Industry Trends After middling oil prices in the spring and winter, with average monthly prices hovering around $50 per barrel, oil prices gradually increased during the last half of 2017, nearly hitting $60 per barrel on a daily basis. In late December 2017, WTI oil prices traded at a three-year high of $62 per barrel as geopolitical tensions in oil-producing regions raised concerns about oil supply disruptions. Natural gas prices, meanwhile, dropped throughout 2017; however, prices spiked in early January 2018 due to an extremely cold storm along the East Coast that spurred natural gas demand. In late December 2017 and early January 2018, thousands of protesters took to the streets in Iran, one of the world s top producers of oil. The protests, driven by anti-government sentiment and poor economic conditions, rattled the oil market as uncertainty loomed around the stability of Iran s government. In addition, the U.S. is due to review temporary waivers on sanctions against Iran later in January, which, if not approved, could impact the country s ability to supply the oil market. Another major world oil producer, Venezuela, has faced deteriorating conditions and government instability over the past several months, and, some analysts warn, is on the verge of collapse. The geopolitical tensions have popped up just as the Organization of the Oil-Exporting Countries ( OPEC ) agreed to reduce the group s production output by 1.8 million barrels per day in an attempt to reduce worldwide oil supplies and boost oil prices. In late November, OPEC announced plans to extend the cuts, which were set to expire in March 2018, through This news is expected to boost the oil market for another year. Leading oil producer Russia, which is not a member of OPEC, has also pledged to cut production. Some analysts have expressed skepticism that OPEC countries can maintain their reductions, noting that the member nations were only 91% compliant with their pledged output reductions through November The compliance rate has varied by OPEC-member nation, with Angola, Qatar, Saudi Arabia, and Venezuela leading the way in However, analysts note the production reductions in Venezuela are not voluntary due to the country's social unrest. U.S. shale production is likely to remain strong, which could keep oil prices from rising significantly despite the OPEC cuts. Crude oil production in the U.S. is expected to reach a record of 9.9 million barrels per day in 2018, according to a study released in late December by the U.S. Energy Information Administration. Although there is a lag, the number of active rotary oil drilling rigs has increased in line with rising oil prices. The average total monthly count broke 900 for the first time since April 2015 in June 2017 and has remained well above 900 since then. Oil drilling rigs account for approximately 80% of the total count; as a result, oil rigs represent the vast majority of the recent rig increases. However, the oil rig increases are largely limited to land-based rigs, as the price of oil over the past year, though improving compared to the recent downturn, is not high enough to support an expansion of offshore rigs due to their higher breakeven cost. The recently passed Tax Cuts and Jobs Act is expected to have a positive impact on the oil and gas industry by lowering the corporate tax rate from 35% to 21%, as well as allowing businesses to expense the full cost of new investments in certain plants and equipment for the next five years, which could promote expansion in the oil and gas industry. 10 MONITOR OIL & GAS JANUARY 2018

11 Monitor Information GA s Oil & Gas Monitor relates information covering the oil and gas sectors, including industry trends and their relation to our valuation process. Due to the dynamic nature of the oil and gas industry, timely reporting is necessary to understand an ever-changing marketplace. GA strives to contextualize important indicators in order to provide a more in-depth perspective of the market as a whole. GA welcomes the opportunity to make our expertise available to you in every possible way. Should you need any further information or wish to discuss recovery ranges for a particular segment, please feel free to contact your GA Business Development Officer. The information contained herein is based on a composite of GA s industry expertise, contact with industry personnel, liquidation and appraisal experience, and data compiled from a variety of respected sources believed to be reliable. GA does not make any representation or warranty, expressed or implied, as to the accuracy or completeness of the information contained in this issue. Neither GA nor any of its representatives shall be liable for use of any of the information in this issue or any errors therein or omissions therefrom. Experience GA has worked with and appraised a number of companies within the oil and gas industry. GA has built a quality team to deliver both tangible and intangible valuations across the oil and gas platform. GA s extensive experience includes valuations across a broad range of assets including: Compression equipment Drilling and well service equipment Frac tank rental/manufacturing Well logging tools Pipeline equipment Pressure pumping units Rental tools Transportation assets Wire line services Saltwater disposal wells Valves Tubular goods 11 MONITOR OIL & GAS JANUARY 2018

12 Appraisal & Valuation Team ENERGY OPERATIONS Robert Callaway Managing Director National Practice Leader - Energy (972) rcallaway@greatamerican.com Thomas J. McNulty Managing Director, CAVS (832) tmcnulty@greatamerican.com BUSINESS DEVELOPMENT Ryan Mulcunry Executive Vice President Northeast Region, Canada & Europe (857) rmulcunry@greatamerican.com David Seiden Executive Vice President Southeast Region (404) dseiden@greatamerican.com Bill Soncini Senior Vice President Midwest Region (773) bsoncini@greatamerican.com Jennie Kim Vice President Western Region (818) jkim@greatamerican.com Daniel J. Williams Managing Director New York Region (908) dwilliams@greatamerican.com Drew Jakubek Managing Director Southwest Region (214) djakubek@greatamerican.com 12 MONITOR OIL & GAS JANUARY 2018

13 About Great American Group Great American Group is a leading provider of asset disposition solutions and valuation and appraisal services to a wide range of retail, wholesale, and industrial clients, as well as lenders, capital providers, private equity investors, and professional services firms. In addition to the Oil & Gas Monitor, GA also provides clients with industry expertise in the form of monitors for the construction and transportation, chemicals and plastics, metals, food, paper and packaging, and building products sectors, among many others. For more information, please visit Great American Group, LLC is a wholly owned subsidiary of B. Riley Financial, Inc. (NASDAQ: RILY), a diversified provider of collaborative financial and business advisory services through several subsidiaries, including: B. Riley & Co. LLC, a leading investment bank and a FINRA & SIPC member, which provides corporate finance, research, and sales & trading to corporate, institutional and high net worth individual clients; Great American Group, LLC; B. Riley Capital Management, LLC, an SEC registered Investment Advisor, which includes B. Riley Asset Management, a provider of investment products to institutional and high net worth investors, and B. Riley Wealth Management (formerly MK Capital Advisors), a multi-family office practice and wealth management firm focused on the needs of ultra-high net worth individuals and families; and Great American Capital Partners, a provider of senior secured loans and second lien secured loan facilities to middle market public and private U.S. companies. B. Riley Financial, Inc. is headquartered in Los Angeles with offi ces in major financial markets throughout the United States and Europe. For more information on B. Riley Financial, Inc., please visit For B. Riley s research access, please contact a B. Riley representative at MONITOR OIL & GAS GREATAMERICAN.COM JANUARY GREAT VOLUME 261 LOS ANGELES (HQ) Burbank Blvd. Suite 400 Woodland Hills, CA T NEW YORK 299 Park Ave. 7th Floor New York, NY T ATLANTA 1200 Abernathy Rd. Suite 1700 Atlanta, GA T BOSTON 300 First Ave. Suite 201 Needham, MA T CHICAGO 200 West Madison St. Suite 2950 Chicago, IL T DALLAS 2745 North Dallas Parkway Suite 660 Plano, TX T HOUSTON 9 Greenway Plaza Suite 2050 Houston, TX T MILWAUKEE West Park Place Suite 970 Milwaukee, WI T WILTON, CT 73 Old Ridgefield Rd. Suite 6 Wilton, CT T GERMANY Prinzregentenstr 18 5th Floor Munchen, Germany AUSTRALIA Level 29, Chifley Tower 2 Chifley Square Sydney, NSW 2000 Australia 2018 Great American Group, LLC. All Rights Reserved.