Raymond Leong, CFA

Transcription

1 EARNINGS PREVIEW October 26, Q16 Permian Sector Preview; Upgrade AREX to Hold We expect most Permian companies to address three primary data points during the upcoming 3Q16 conference calls: M&A activity, organic production growth/well returns, and incremental well results. While we favor a number of Permian names (9 Buys/4Holds), a few that could have catalysts into the upcoming 3Q16 calls include Matador Resources, WPX Energy, and Ring Energy among others. Key for two of these is their strong northern Delaware Basin/State Line areas that are currently our favorite newer part of the Permian given potential upcoming successful incremental bench results. Ring is a favorite given the start of its horizontal well program. M&A activity: While the year started off slow for Permian acquisitions and other plays, we have seen M&A activity materially increase the past few months. There have been more than 30 Permian deals valued at $10+ million since the beginning of 3Q16 with six deals over $1.5 billion. Not only are the number of sizeable deals during the quarter notable, but the price per acre on many of these deals is near the high end of the historical range in the US. Given the large number of private current Permian E&Ps and the stated continued appetite for deals by many public E&Ps, we suggest there could be several more deals completed. Some of our more acquisitive E&Ps remains Callon Petroleum, Diamondback Energy, Pioneer Natural Resources, Ring Energy, and WPX Energy. Notable 3Q16-4Q16 transactions include: RSP Permian acquires private Silver Hill Energy Partners for $2.5B EOG Resources acquires Yates Petroleum for $2.4B Silver Run Acquisition Company acquires Centennial Resource Development for $1.7B Concho Resources acquires Midland acres from Reliance Energy for $1.7B SM Energy acquires Midland Basin acres from QStar for $1.6B PDC Energy acquires two privates DE Basin companies for $1.5B Organic production growth/well returns: 2Q16 was the first time in a number of months that several of our Permian E&Ps began laying out plans for likely higher sequential quarterly growth. It appears the growth for most of our E&Ps should continue Company Rating Target Old New Old New AREX S H $1.50 $3.50 CPE B B $20.00 $20.00 CWEI H H $60.00 $ CXO B B $ $ EGN B B $65.00 $65.00 FANG B B $ $ LPI H H $12.00 $14.00 MTDR B B $29.00 $31.00 PE B B $40.00 $43.00 PXD B B $ $ QEP H H $20.00 $20.00 REI B B $11.00 $13.00 WPX B B $13.00 $15.00 Company EBITDA ($M) Estimates Current CY Next CY Old New Cons Old New Cons AREX $48 $50 $48.00 $62 $68 $63.00 CPE $144 $153 $ $257 $272 $ CWEI $56 $55 - $94 $147 - CXO $1,655 $1,598 $1, $1,760 $1,805 $1, EGN $313 $305 - $522 $547 - FANG $327 $346 $ $644 $695 $ LPI $430 $420 - $398 $437 - MTDR $151 $140 $ $275 $299 $ PE $364 $348 $ $621 $664 $ PXD $1,821 $1,546 $1, $2,796 $2,836 $2, Neal Dingmann neal.dingmann@suntrust.com Garth Grillo garth.grillo@suntrust.com Raymond Leong, CFA raymond.leong@suntrust.com SEE PAGE 25 FOR REQUIRED DISCLOSURE INFORMATION Page 1 Equity Research

2 throughout this year, resulting in double digit annual growth sequentially next year. We look for more color on upcoming total production growth expectations with the change driven by higher capital spending, increased rig activity, and more efficient D&C among other things. Below we illustrate just how much stronger the Permian rig count rebound has been this year compared to the US total. Further, we look for more details on what net effect a combination of potentially moderately higher well costs, but continued improved efficiencies will have on well returns. While we look for efficiencies such as longer laterals or more sand to continue at a moderate pace, early indications from oilfield service (OFS) providers that have reported 3Q16 earnings thus far suggest that prices could start firming and perhaps increasing in parts of the Permian starting at the end of this year. However, we believe that even if OFS costs increase slightly, incremental operating efficiencies can outweigh so that the net impact is higher well returns (ultimately a win/win for E&Ps and OFS companies in our view, which we have not seen in several years). We look for a number of our names such as Clayton Williams Energy, Diamondback Energy, Matador Resources, Parsley Energy, Pioneer Natural Resources, WPX Energy among others to announce incrementally higher well returns. QEP $605 $614 $ $785 $837 $ REI $ $37.00 WPX $414 $417 $ $637 $695 $ Source: Baker Hughes, STRH research Incremental well results: The Permian continues to not only see strong well results, but much of the play continues to see strong results in multiple zones. While investors seem to have an understanding of what zones are most prolific in much of the Midland Basin and some parts of the Delaware Basin, a number of our companies suggest the northern Delaware Basin/state line area could bear incremental notable wells in recently announced, newer zones like the Wolfcamp D or X/Y along with less common zones such as the Bone Spring. Operators that could have positive well announcements near the state line area include Energen, Matador Resources, and WPX Energy among others. Page 2 of 28

3 HH WTI Price Deck Updates Since our last price deck update in July, the forward curve for WTI has remained relatively consistent but the forward curve for Henry Hub has strengthened for near term months. As a result, we have updated our price deck and incorporated the changes into our updated models. WTI in 2017 & 2018 is largely in line with our previous deck, but Henry Hub is higher in 2017 & 2018 by 6.9% and 1.6%, respectively. Please see the table below for a summary of our changes moving forward. 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q STRH New Deck $50.12 $56.50 $57.83 $58.58 $59.05 $59.42 $59.72 $59.99 $60.32 $57.99 $59.86 STRH Old Deck $54.44 $55.88 $56.70 $58.64 $58.84 $59.76 $59.63 $60.41 $60.36 $57.52 $60.04 Delta -7.9% 1.1% 2.0% -0.1% 0.4% -0.6% 0.2% -0.7% -0.1% 0.8% -0.3% STRH New Deck $3.30 $3.79 $3.45 $3.47 $3.55 $3.70 $3.05 $3.06 $3.17 $3.57 $3.24 STRH Old Deck $3.20 $3.54 $3.20 $3.25 $3.35 $3.52 $3.02 $3.06 $3.17 $3.33 $3.19 Delta 2.9% 6.9% 7.9% 6.8% 6.1% 5.0% 0.8% -0.1% 0.1% 6.9% 1.6% Source: STRH research Page 3 of 28

4 Ratings and Price Target Changes In conjunction with our updated price deck and model updates, we are making one ratings change and 10 price target changes. Please see the table below and the company specific summaries for further details. Company Name Ticker Price New Rating Old Rating New Price Target Old Price Target Price Target % Change Approach Resources Inc. AREX $3.13 Hold Sell $3.50 $ % Callon Petroleum Company CPE $14.88 Buy Buy $20.00 $ % Clayton Williams Energy, Inc. CWEI $74.09 Hold Hold $ $ % Concho Resources Inc. CXO $ Buy Buy $ $ % Diamondback Energy, Inc. FANG $99.60 Buy Buy $ $ % Energen Corporation EGN $53.61 Buy Buy $65.00 $ % Laredo Petroleum, Inc. LPI $12.91 Hold Hold $14.00 $ % Matador Resources MTDR $24.11 Buy Buy $31.00 $ % Parsley Energy, Inc. PE $35.50 Buy Buy $43.00 $ % Pioneer Natural Resources Company PXD $ Buy Buy $ $ % QEP Resources, Inc. QEP $17.62 Hold Hold $20.00 $ % Ring Energy, Inc. REI $10.73 Buy Buy $13.00 $ % WPX Energy Inc. WPX $12.30 Buy Buy $15.00 $ % Source: Factset, STRH estimates Approach Resources - AREX (Raise Rating to Hold and Increase Price Target to $3.50 from $1.50) 3Q16 CC 11am ET PW: Approach is likely to address activity after recently reengaging in drilling some wells after laying all rigs down last year. While the company has had some success improving its costs and efficiencies, the focus of the 3Q16 conference call is likely to be on commentary around the early performance of the new wells. Three DUCs were in the queue to be completed last quarter that should help boost 2016 production. Investors are also likely to focus on potentially rising service costs that could impact returns though management believes they could increase internal efficiencies to still keep well costs at ~$4mm. Additionally, we expect details on the impact of an expected partial production shut-in due to DPC plant maintenance. The company also likely benefitted from 11% higher sequential oil prices and 33% higher sequential natural gas price during 3Q16 given the relatively low amount of previous hedges. It appears that Approach has weathered the worst part of the storm and we forecast production/earnings to stay relatively flat through 2017 (could be higher if commodity prices continue to increase). Further, if the company is able to achieve incremental efficiencies, estimates could move even higher. Based on our new estimates, we raise our rating to Hold as our new price target increases to $3.50 from $1.50. Our new price target is derived from a 9.3x multiple (9.0x prior and 10.3x peer group average) applied to our 2017E EBITDA of $68 million ($62 million prior and $63 million Street consensus). Our discounted multiple reflects Approach s higher than average leverage. Callon Petroleum - CPE (Reiterate Buy and $20 Price Target) 3Q16 CC 10am ET Callon announced a $327 million Howard County acquisition that is likely to be highlighted on the upcoming earnings call as the purchase adds to the company s core foothold in that part of the Permian. Page 4 of 28

5 We look for the upcoming comments to focus on overall upcoming activity as Callon has hinted at potentially adding a fourth rig relatively soon given the recent financial and operational improvements. Additionally, we await an update on the result of the company s new completion designs and cost efficiency efforts. Callon has continued to be one of the more acquisitive US E&Ps doing several deals in recent quarters. While the company has established a solid Permian position of ~40,000 acres, we would not be surprised to see further acquisitions ahead. Given improved Permian well results by Callon and peers particularly around the Howard County area, we would not be surprised to see the company also discuss ramping activity. We have a $20 price target derived from a 10.5x multiple (9.9x prior and 10.4x peer group average) applied to our 2017E EBITDA of $272 million ($257 million prior and $253 million Street consensus). We believe Callon s trading multiple could close the gap versus Permian peers given the larger asset profile the company now possesses. Clayton Williams Energy - CWEI (Reiterate Hold and Increase Price Target to $105 from $60) 3Q16 CC 10:30am ET PW: Following up on its previously stated strategy, Clayton is likely to continue selling non-core assets. With a recent equity offering and asset sale improving liquidity, Clayton Williams has seemed to turn the corner financially and the company previously announced two solid Reeves county wells in its core position. After selling its non-permian non-core acreage, the focus turns exclusively to the Permian and more importantly to the core 70,000 Reeves County position. Not only did Clayton announce two solid wells last quarter in this core position, but a number of peers have also reported strong nearby wells in recent months. We also look for Clayton to address the potential for further non-core asset sales that could include ~100,000 Permian acres not in Reeves county, midstream assets, and various royalties. Going forward, we forecast a relatively new looking Clayton Williams as the company has sold its noncore non-permian legacy assets in order to focus on its best assets in Reeves County. With ~70,000 core acres, Clayton has approximately double the acres of nearby peers such as Centennial Resource Development that currently garners a valuation nearly 30% higher than Clayton. Further, the latest noncore-sale provides addition funds whereby Clayton could potentially add a second rig or pay down debt. Our new forecasts assume a second rig is added in 2017 that materially boosts production/earnings. As such, we increase our price target to $105 from $60. Our new price target derived from a 9.7x multiple (9.9x prior and 9.8x peer group average) applied to our 2017E EBITDA of $147 million ($94 million prior and $99 million Street consensus). Concho Resources - CXO (Reiterate Buy and Increase Price Target to $160 from $155) 3Q16 CC 9:30am ET PW: We anticipate Concho to discuss upcoming rig activity / allocation (including in the new Midland acreage) as the company has 17 rigs running that should help provide double digit sequential production growth next year. Besides continuing developmental activity in the northern DE including in the Avalon Shale and exploration in the NM Shelf and Southern DE, the company continues to focus more in the Midland Basin after recently adding 40,000+ acres in the play and now running 7+ rigs in the area. We Page 5 of 28

6 expect the company to likely discuss the continued development of multi-bench areas in the Midland Basin with upcoming focus in the Middle Spraberry, Lower Spraberry, Wolfcamp A, Wolfcamp B, Wolfcamp D, and Atoka. Concho has been careful about growing production while living within cash flow, which should set things up nicely for We slightly increase our 2017 forecasts driven by our expectation of improved Midland Basin results driven by developmental activity in the play. We increase our price target to $160 from $155 derived from a 12.9x multiple (12.5x prior and 10.4x peer group average) applied to our 2017E EBITDA of $1,805 million ($1,760 million prior and $1,679 million Street consensus). The premium multiple is due to the solid production and earnings growth, a strong balance sheet, and acreage expansion opportunities. Diamondback Energy - FANG (Reiterate Buy and Raise Price to $120 from $115) 3Q16 Earnings Release: TBD Diamondback issued a positive operations update in early October that highlighted better than estimated 3Q16 production and higher than forecasted returns. The focus of 3Q will likely be on recently indicated plans to add a fifth rig (possibly in the Delaware), thoughts on key areas of developmental focus for 2017, and potential acquisitions. Newer well performance will also be a key focus after recently reporting promising results in Howard and Glasscock Counties to go along with the strong Spanish Trail play. We increase our 2017 production/earnings estimates after Diamondback delivered 3Q16 results that we assume should carry over into next year along with incremental drilling. While we slightly increased our well costs estimates on higher upcoming assumptions as the market improves, this was more than offset by our forecast of continued operating efficiencies. We increase our price target to $120 from $115 derived from a 12.4x multiple (12.9x prior and 10.8x peer group average) applied to our 2017E EBITDA of $695 million ($644 million prior and $625 million Street consensus). Diamondback s premium multiple is due to their quality balance sheet, exceptional well returns, and flexibility to consolidate core acreage. Energen Corporation - EGN (Reiterate Buy and $65 Price Target) 3Q16 CC 11am ET PW: Energen After relative recent non-core asset sales, Energen is able to focus largely on developmental activity on its core Midland and Delaware positions. With nearly 50 2H16 wells suggested by the company to be drilled and over 50 suggested to be completed, Energen should have solid earnings growth next year after returning back to work earlier this year. We wait to hear a status update of all the expected activity along with new potential plans for next year. We forecast mostly Wolfcamp A& B wells in the core Delaware in the coming months along with Wolfcamp A&P and various other benches such as Jo Mill, Middle & Lower Spraberry in the Midland basin. Energen has a strong liquidity position that enables the company to spend ~$450 million this year, which should help provide over 15% sequential production growth next year. We have a $65 price target Page 6 of 28

7 derived from an 11.6x multiple (11.6x prior and 10.8x peer group average) applied to our 2017E EBITDA of $547 million ($522 million prior and $512 million Street consensus). Our premium multiple is predicated on the belief that Energen can achieve outsized growth by way of reinvesting its cash flows and proceeds from asset sales. Laredo Petroleum - LPI (Reiterate Hold and Increase Price Target to $14 from $12) 3Q16 CC 8:30am ET PW: Laredo is likely to discuss potential upcoming incremental activity in western Glasscock and Reagan counties which includes 9,200 bolt-on Midland Basin acreage acquired for $125 million in July. Inventory does not appear to be an issue for the company, but the above average leverage and desire to operate within cash flow could limit production growth upside. The company continues to own 50% of Medallion Midstream that we estimate could fetch nearly $2 billion gross when applying recently completed midstream multiples to the asset. We forecast Laredo to grow production nearly 7% sequentially next year but we estimate the company will have to outspend cash flows by nearly $70 million in order to achieve the production growth. We forecast leverage to stay around 4.5x next year, which is slightly higher than the group average of around 3.4x. Given our increased production forecast, we raise our price target to $14 from $12 derived from a 10.5x multiple (10.5x prior and 10.9x peer group average) applied to our 2017E EBITDA of $437 million ($398 million prior and $391 million Street consensus). Matador Resources - MTDR (Reiterate Buy and Increase Price Target to $31 from $29) 3Q16 CC 10am ET PW: We look forward to new results from Matadors continued three rig Delaware development program and also for commentary around a possible fourth rig relatively soon. The State Line area remains our favorite current Permian Basin play with companies such as Matador potentially highlighting results from newer zones. We expect for the company to begin mostly developmental activity around the Rustler Breaks area after the area has been widely delineated with potential exploration upside from Arrowhead, Twin Lakes, and the Ranger areas. The Rustler Breaks processing plant successfully went online late August which provides the company with 60 Mmcfepd of processing capacity in the area. The company has solid liquidity which opens the door to possibly ramping up activity (4 th possible rig) though we would not be surprised if Matador decides to sell some or all of its ~28,100 Eagle Ford acres given nearly all operating focus is in the Delaware Basin today (given the strong results seen). The company also has two infrastructure assets that could potentially be sold in the coming months as the company prefers to spend money upstream. Based on our estimated improved capital efficiencies, we increase our price target to $31 from $29 derived from an 10.9x multiple (11.2x prior and 8.9x peer group average) applied to our 2017E EBITDA of $299 million ($275 million prior and $250 million Street consensus). We believe the premium multiple is warranted given the company s strong operations and financial flexibility. Page 7 of 28

8 QEP Resources - QEP (Reiterate Hold and $20 Price Target) 3Q16 CC 9am ET Much of the upcoming discussion is likely to center on the Permian given the company s increased focus on the play since its Martin County/Midland Basin acquisition in June. While we would prefer a more active program than the existing two rigs running (given the increased Permian position), the need to balance spending with cash flow causes activity to be trimmed currently. We would be most interested in hearing about the expected pace of development in Martin County as well as potential A&D activity to increase the company s position in the Permian. Comments on the Haynesville could be interesting given the recent resurgence of that play. While the company has ample liquidity, QEP also holds many assets that we believe are non-core which could be divested to accelerate the pursuit of valuable Permian bolt-on acquisitions. We have a $20 price target derived from a 6.8x multiple (6.8x prior and 9.5x peer group average) applied to our 2017E EBITDA of $837 million ($785 million prior and $804 million Street consensus). Despite the company s strong balance sheet, we assign a discounted multiple based on the company s high gas mix and the potential for management distraction due to QEP s varied current asset base. Parsley Energy - PE (Reiterate Buy and Raise Price Target to $43 from $40) 3Q16 CC 9am ET Parsley will look to discuss how it continues to build on the momentum from the strong 2Q that saw nearly all prior estimates topped. The company announced a $400mm Midland acquisition back in August that established another key Permian developmental area. We anticipate more operational details in all the plays including around the recently acquisition. The new area saw the result of it first producing horizontal well in the county that was nearly 1,200 Boepd. We also anticipate more color on the expected inventory count in the two plays going into Parsley has been firing on all cylinders with very strong results in the Permian. The company continues to have ample liquidity for continued strong program growth and it would seem the company continues to be on the hunt for more Permian deals given their active and successful M&A track record. Given continued increased capital efficiencies, we increase our price target to $43 from $40 derived from a 12.5x multiple (12.5x prior and 11.7x peer group average) applied to our 2017E EBITDA of $664 million ($621 million prior and $572 million Street consensus). Our premium multiple is based on the company s strong performance relative to peers and high potential for growth. Pioneer Natural Resources - PXD (Reiterate Buy and Increase Price Target to $215 from $210) 3Q16 CC 10am ET PW: Most of the initial discussion is likely to focus on increasing activity as Pioneer previously indicated it would go to 17 rigs from 12 rigs with the focus likely on developmental activity of the Spraberry/Wolfcamp benches in the Midland Basin. Given the likely increased activity aided by stronger capital efficiency, we will be looking to see what level of capital spend is guided for next year. Pioneer also continues to conduct ongoing tests over well enhancements that are now up to Version 3. We anticipate management to add more color on the observed benefits in their new completion techniques Page 8 of 28

9 and completion design thoughts going forward. Pioneer has also been relatively acquisitive in the past and we look forward to an update on the appetite for future acquisitions. Pioneer remains one of the more active, larger E&Ps with plans to continue to roll out incremental rigs. We anticipate most activity to focus on their core Midland Basin acres that include much of the recent acquisition. The higher rig activity along with continued operating efficiencies such is improved completion designs make for a solid combination. PXD is rapidly ramping up their activity level and has seen strong returns partially driven from innovations in completion design. Given these improvements, we increase our price target to $215 from $210 derived from a 12.2x multiple (12.2x prior and 10.7x peer group average) applied to our 2017E EBITDA of $2,836 million ($2,796 million prior and $2,370 million Street Consensus). Our premium multiple is based on the company s strong activity levels and returns. Ring Energy - REI (Reiterate Buy and Increase Price Target to $13 from $11) 3Q16 Earnings Release: TBD Ring is on the cusp of a significant change with results from its initial horizontal well program likely out in the coming months, though we are not likely looking for any production results from the first three wells on the upcoming 3Q16 conference call. We anticipate much of the upcoming discussion to be on the horizontal program currently in the Central Basin Platform (CBP) and soon to be in the Delaware Basin. We also anticipate the upcoming discussion to be centered on potential M&A activity given the past acquisitive nature of management. Lastly, we expect to hear further data points on operational efficiencies as the company has seen improved well results in most of the recent quarters. Ring is virtually our only E&P under coverage with nearly no debt and the ability to potentially double production next year (we currently forecast 82% growth). If the early horizontal well program is successful, there remains ample upside given the likelihood of 25+ wells drilled next year. Given continued improved capital efficiency, we increase our price target to $13 from $11 derived from a 9.8x multiple (9.4x prior and 11.5x peer group average) applied to our 2017E EBITDA of $51 million ($44 million prior and $37 million Street consensus). We expect the slightly discounted multiple to trend towards the peer average as results from Ring s initial horizontal program are reported in the coming quarters. WPX Energy - WPX (Reiterate Buy and increase Price Target to $15 from $13) 3Q16 CC 10am ET PW: WPX could have a number of catalysts on the upcoming 3Q16 conference call with potential Wolfcamp D and XY wells reported along with possible improvement on Wolfcamp A wells versus the 900 MBOE EUR stated type curve. Further, the company has announced adding a third rig in their core Delaware acreage along with a 4 th and 5 th in the coming month that could continue to show promise like the recent Lindsay 2-4H well (1,944 boepd 30-day average). We may also hear more data on the Williston as activity has picked up with the addition of a second rig and plans to complete 3-4 DUCS per month. Page 9 of 28

10 We think the increased activity speaks to the strong economics of WPX s inventory and we wait to hear details on a 2017 plan (could be on the upcoming conference call) after what looks like a successful production buildup to catalyze growth next year. While leverage remains higher than the peer group average, the solid liquidity position along with our forecast for positive free cash flow beginning next year gives us comfort. Given our increase in forecasted activity, we raise our price target. Our price target goes to $15 from $13 derived from a relatively inline 9.6x multiple (9.5x prior and 10.5x peer group average) applied to our 2017E EBITDA of $695 million ($637 million prior and $560 million Street consensus). Figure 1: Revolvers and Liquidity Borrowing Company Name Ticker Market Cap Cash Borrowing Base Credit Availability Total Debt Total Debt/(Cash + Available Credit) base Utilization Total Available Approach Resources Inc. AREX $125 $1 $325 $50 $ x 85% 16% Callon Petroleum Company CPE $2,295 $0 $300 $260 $ x 13% 87% Clayton Williams Energy, Inc. CWEI $1,610 $64 $100 $98 $ x 2% 162% Concho Resources Inc. CXO $18,735 $481 $2,500 $2,500 $3, x 0% 119% Diamondback Energy, Inc. FANG $7,604 $219 $750 $750 $ x 0% 129% Energen Corporation EGN $5,109 $310 $1,050 $1,050 $ x 0% 130% Laredo Petroleum, Inc. LPI $3,035 $19 $1,000 $890 $1, x 11% 91% Matador Resources Company MTDR $2,175 $41 $300 $299 $ x 0% 114% Parsley Energy, Inc. Class A PE $6,309 $471 $525 $525 $ x 0% 190% Pioneer Natural Resources Company PXD $31,043 $1,825 $1,500 $1,500 $3, x 0% 222% QEP Resources, Inc. QEP $4,092 $1,038 $1,800 $1,797 $2, x 0% 158% Ring Energy, Inc. REI $452 $8 $500 $500 $0 0.0x 0% 102% WPX Energy, Inc. Class A WPX $4,005 $1,031 $1,025 $1,025 $2, x 0% 201% Average 2.0x 9% 132% Source: Factset, Company data, STRH estimates Figure 2: Hedge Profile PERMIAN COMPANIES 3Q Company Name Ticker TOTAL TOTAL TOTAL Approach Resources Inc. AREX 40% 34% 15% Callon Petroleum Company CPE 42% 45% 18% Clayton Williams Energy, Inc. CWEI 49% 35% 31% Concho Resources Inc. CXO 48% 37% 45% Diamondback Energy, Inc. FANG 7% 5% 5% Energen Corporation EGN 55% 33% 44% Laredo Petroleum, Inc. LPI 60% 56% 37% Matador Resources Company MTDR 51% 47% 40% QEP Resources, Inc. QEP 43% 34% 41% Parsley Energy, Inc. Class A PE 52% 39% 35% Pioneer Natural Resources Company PXD 63% 31% 34% Ring Energy, Inc. REI 0% 0% 0% WPX Energy WPX 65% 71% 39% AVERAGE 44% 36% 29% Source: Factset, Company data, STRH estimates Page 10 of 28

11 Figure 3: STRH Estimates Production STRH New STRH Old Street 3Q16 %Δ STRH New STRH Old Street 2016 %Δ STRH New STRH Old Street 2017 %Δ Ticker 3Q16E 3Q16E 3Q16E vs Street 2016E 2016E 2016E vs Street 2017E 2017E 2017E vs Street AREX % % % CPE % % % CWEI % % % CXO % % % EGN % % % FANG % % % LPI % % % MTDR % % % PE % % % PXD % % % QEP % % % REI % % % WPX % % % Source: Factset, Company data, STRH estimates Figure 4: STRH Estimates EBITDA Source: Factset, Company data, STRH estimates Figure 5: STRH Estimates EPS Source: Factset, Company data, STRH estimates Production (Mboe/d) EBITDA STRH New STRH Old Street 3Q16 %Δ STRH New STRH Old Street 2016 %Δ STRH New STRH Old Street 2017 %Δ Ticker 3Q16E 3Q16E 3Q16E vs Street 2016E 2016E 2016E vs Street 2017E 2017E 2017E vs Street AREX $11 $11 $12-8% $50 $48 $48 4% $68 $62 $63 9% CPE $47 $43 $43 9% $153 $144 $156-2% $272 $257 $253 7% CWEI $15 $16 $13 15% $54 $56 $48 13% $147 $94 $99 48% CXO $424 $456 $419 1% $1,598 $1,654 $1,582 1% $1,805 $1,760 $1,679 7% EGN $89 $91 $83 7% $305 $313 $288 6% $547 $522 $512 7% FANG $102 $95 $96 6% $346 $327 $340 2% $695 $644 $625 11% LPI $110 $116 $106 4% $419 $430 $417 1% $437 $397 $391 12% MTDR $41 $45 $42-3% $140 $151 $146-4% $299 $275 $250 20% PE $103 $108 $90 14% $348 $364 $340 2% $664 $620 $572 16% PXD $496 $627 $555-11% $1,546 $1,821 $1,815-15% $2,836 $2,796 $2,370 20% QEP $198 $170 $162 22% $614 $531 $606 1% $837 $744 $804 4% REI $4 $5 $4 13% $13 $15 $13-2% $51 $44 $37 39% WPX $95 $90 $121-22% $417 $414 $486-14% $695 $637 $560 24% STRH New STRH Old Street 3Q16 %Δ STRH New STRH Old Street 2016 %Δ STRH New STRH Old Street 2017 %Δ Ticker 3Q16E 3Q16E 3Q16E vs Street 2016E 2016E 2016E vs Street 2017E 2017E 2017E vs Street AREX -$0.27 -$0.27 -$ % -$1.08 -$1.09 -$1.03-4% -$0.83 -$0.84 -$0.77-8% CPE $0.06 $0.06 $ % $0.21 $0.22 $ % $0.47 $0.60 $0.46 1% CWEI -$1.83 -$2.52 -$ % -$8.72 -$ $ % -$3.47 -$7.58 -$ % CXO $0.21 $0.13 $ % $0.37 $0.14 $ % -$0.16 -$0.59 -$ % EGN -$0.26 -$0.31 -$0.26 0% -$1.36 -$1.44 -$1.35-1% -$0.21 -$0.95 -$0.23 8% FANG $0.27 $0.26 $ % $0.89 $0.88 $ % $3.02 $2.90 $2.82 7% LPI $0.10 $0.12 $ % $0.41 $0.46 $ % $0.47 $0.41 $ % MTDR -$0.01 $0.04 $ % -$0.15 -$0.05 -$ % $0.81 $0.74 $ % PE $0.03 $0.05 $ % $0.09 $0.15 $0.10-5% $0.63 $0.56 $ % PXD -$0.07 $0.46 $ % -$0.98 $0.13 -$ % $1.45 $1.26 $ % QEP -$0.25 -$0.20 -$0.23-8% -$1.20 -$1.17 -$1.20 0% -$0.62 -$0.83 -$0.60-3% REI $0.01 $0.02 $ % -$0.03 $0.00 -$ % $0.43 $0.36 $ % WPX -$0.19 -$0.21 -$0.18-6% -$0.84 -$0.88 -$0.80-6% -$0.20 -$0.30 -$ % EPS Page 11 of 28

12 Figure 6: PE 2016E 2017E Parsley Energy 1QA 2QA 3QE 4QE Total 1QE 2QE 3QE 4QE Total Production Volume: Oil/Condensate (Mbbls) Gas/NGL (Mmcf) Oil Equivalent (Mboe) Production Rate: Oil/Condensate (Mbopd) Gas/NGL (Mmcfpd) Oil Equivalent (Mboepd) NYMEX Prices: Crude Oil ($/Bbl) $33.40 $45.59 $50.71 $50.12 $44.96 $56.50 $57.83 $58.58 $59.05 $57.99 Natural Gas ($/Mmbtu) $2.00 $2.24 $2.99 $3.30 $2.63 $3.79 $3.45 $3.47 $3.55 $3.57 Realized Prices: Oil/Condensate ($/Bbl) $30.06 $42.25 $46.71 $46.12 $42.37 $51.50 $52.83 $53.58 $54.05 $53.08 Gas/NGL ($/Mcf) $1.86 $2.32 $3.49 $3.80 $2.96 $3.29 $2.95 $2.97 $3.05 $3.06 Revenue: Oil & Gas $62.3 $117.6 $145.0 $156.9 $481.7 $183.0 $204.4 $224.1 $241.5 $853.0 Other Total Revenue $62.3 $118.1 $145.0 $156.9 $482.2 $183.0 $204.4 $224.1 $241.5 $853.0 Expenses: Operating $13.9 $14.2 $18.8 $20.2 $67.1 $19.7 $21.6 $23.3 $24.7 $89.3 Exploration Depl., Depr. & Amortization General & Administrative Taxes (other than income) Other (15.5) (13.8) Total Operating Expenses $72.2 $95.8 $123.4 $130.7 $422.1 $137.9 $149.8 $159.7 $168.3 $615.7 EBIT ($9.9) $22.3 $21.5 $26.2 $60.1 $45.0 $54.6 $64.4 $73.2 $237.3 Interest $11.3 $12.2 $11.9 $ $10.8 $10.8 $10.8 $ EBT ($21.2) $10.1 $9.6 $14.6 $13.1 $34.2 $43.8 $53.6 $62.4 $194.0 Tax Provision ($9.6) $3.3 $3.3 $5.1 $2.2 $12.0 $15.3 $18.8 $21.8 $67.9 Minority Interest $ $0.0 Net Income ($5.3) $6.8 $6.2 $9.5 $17.3 $22.2 $28.5 $34.8 $40.6 $126.1 Fully Diluted Shares Recurring Diluted EPS ($0.03) $0.04 $0.03 $0.05 $0.09 $0.11 $0.14 $0.17 $0.20 $0.63 Reported Diluted EPS ($0.14) ($0.13) $0.03 $0.05 ($0.20) $0.11 $0.14 $0.17 $0.20 $0.63 Cash Flow Reconciliation: Net Income ($5.3) $6.8 $6.2 $9.5 $17.3 $22.2 $28.5 $34.8 $40.6 $126.1 Exploration Depl., Depr. & Amortization Amortized / (Capitalized) Int Stock-Based Compensation Deferred Taxes (9.6) Operating Cash Flow $38.5 $70.1 $91.6 $102.1 $302.3 $129.2 $147.7 $164.9 $180.2 $622.1 CFPS $0.23 $0.37 $0.46 $0.51 $1.59 $0.65 $0.74 $0.82 $0.90 $3.11 EBITDA Reconciliation: Operating Cash Flow $38.5 $70.1 $91.6 $102.1 $302.3 $129.2 $147.7 $164.9 $180.2 $622.1 (Amortized) / Capitalized Int. (0.4) (0.4) (0.4) (0.4) (1.5) (0.4) (0.4) (0.4) (0.4) (1.5) Interest Expense Cash Taxes Other EBITDA $54.8 $81.9 $103.1 $113.3 $347.8 $139.6 $158.2 $175.4 $190.6 $663.8 Source: STRH research Page 12 of 28

13 Figure 7: WPX WPX Energy (WPX) Historical and Forecasted Income Statement 2016 Quarterly Results/Est Quarterly Results/Est. (mm as appropriate) 1Q16 2Q16 3Q16E 4Q16E 1Q17E 2Q17E 3Q17E 4Q17E Oil Prod. (Mmbbls) Unhedged Price ($/bbl) $25.62 $38.09 $43.21 $44.12 $51.50 $52.83 $53.58 $54.05 Realized Price ($/bbl) $25.62 $54.30 $56.12 $56.22 $51.08 $51.70 $52.13 $52.51 NGL Prod. (Mmbbls) Price ($/bbl) $7.14 $9.57 $10.65 $13.53 $15.26 $15.61 $15.82 $15.94 Gas Prod. (Bcf) Unhedged Price ($/mcf) $1.52 $1.49 $2.24 $2.80 $3.29 $2.95 $2.97 $3.05 Realized Price ($/mcf) $1.52 $3.19 $3.56 $3.78 $3.06 $2.89 $2.90 $2.96 Average Realized Price $14.55 $28.44 $30.68 $32.24 $29.62 $29.98 $30.27 $30.82 Total Production (Mmboe) Total Production Per Day (Mmboe) Total Production (Bcfe) Total Production Per Day (Bcf/d) % Oil 52% 48% 50% 52% 52% 52% 52% 53% % NGL 10% 12% 13% 14% 13% 13% 13% 12% % Gas 38% 40% 37% 35% 35% 35% 35% 35% Sequential Growth -54.2% 5.1% -3.0% -2.6% 7.2% 7.2% 7.2% 8.5% Commodity Price Deck Average Commodity Price $14.55 $28.44 $30.68 $32.24 $29.62 $29.98 $30.27 $30.82 Henry Hub Gas Price ($/mmbtu) $2.00 $2.24 $2.99 $3.30 $3.79 $3.45 $3.47 $3.55 WTI Oil Price ($/bbl) $33.40 $45.59 $50.71 $50.12 $56.50 $57.83 $58.58 $59.05 Days in Period Oil & Gas Sales Gas Management Realized Gain (Loss) on Derivatives 57 (154) (21) (22) (24) (26) Other Revenue Total Revenue $216 $138 $272 $282 $295 $315 $339 $371 Lease Operating Expenses Gathering, Processing and Transportation Taxes Other Than Income Gas Management Exploration DD&A General and Administrative Other (73) (231) Operating Income ($33) ($70) ($54) ($35) ($17) ($3) $42 $65 Interest Expense, net Other Expense (Income) (2) Income Before Taxes ($88) ($124) ($103) ($85) ($67) ($52) ($8) $15 Income Tax Expense (5) Income (Loss) From Continuing Operations (53) (79) (67) (55) (43) (34) (5) 10 Income (Loss) From Discontinued Operations (12) Net Income (65) ($79) ($67) ($55) ($43) ($34) ($5) $10 NI attributable to non-controlling interests Net Income to WPX Energy ($65) ($79) ($67) ($55) ($43) ($34) ($5) $10 Dividends on Preferred Stock $5 $6 $6 $6 $6 $6 $6 $6 Net Income Attributable to Common ($70) ($85) ($73) ($61) ($49) ($40) ($11) $4 Unrealized Gain (Loss) on Derivatives (118) Settlement of Fixed Price Forward Contracts Gain (Loss) on Sale of Assets 0 (4) Impairment of Oil & Gas Properties Insurance Recoveries Change in Accounting Principle, net Other One-Time Expenses Net Income to Common ($5) ($229) ($134) ($110) ($87) ($68) ($10) $20 EBITDA $119 $94 $95 $110 $130 $148 $195 $222 Basic Operating EPS ($0.21) ($0.26) ($0.19) ($0.16) ($0.12) ($0.09) ($0.01) $0.03 Basic Reported EPS ($0.02) ($0.76) ($0.39) ($0.31) ($0.25) ($0.19) ($0.03) $0.06 Diluted Operating EPS ($0.21) ($0.28) ($0.19) ($0.16) ($0.12) ($0.09) ($0.01) $0.03 Diluted Reported EPS ($0.02) ($0.76) ($0.39) ($0.31) ($0.25) ($0.19) ($0.03) $0.06 Basic Shares Outstanding Diluted Shares Outstanding Margin Analysis Gross Margin 81% 70% 84% 85% 85% 85% 91% 91% Operating Margin -15% -51% -20% -13% -6% -1% 12% 17% Net Margin -30% -57% -25% -19% -15% -11% -1% 3% EBITDA Margin 55% 68% 35% 39% 44% 47% 57% 60% Cash Flow Statement Net Income from Continuing Operations (53) (79) (67) (55) (43) (34) (5) 10 DD&A Exploration Expense Deferred Income Taxes Capitalized Interest Accretion Expense Stock-Based Compensation Cash Flow From Operations $108 $96 $91 $99 $113 $126 $153 $178 Cash Flow/Share $0.39 $0.32 $0.26 $0.28 $0.32 $0.35 $0.42 $0.49 Capital Expenditures $150 $141 $80 $125 $125 $125 $125 $125 Asset Sales Free Cash Flow $239 ($45) $11 ($26) ($12) $1 $28 $53 Source: STRH research Page 13 of 28

14 Figure 8: REI Historical and Forecasted Income Statement 2016 Quarterly Results/Est Quarterly Results/Est. (000s as appropriate) 1Q16 2Q16 3Q16E 4Q16E 1Q17E 2Q17E 3Q17E 4Q17E Oil Prod. (Mbbls) Price ($/bbl) $29.20 $41.22 $46.71 $46.12 $52.50 $53.83 $55.58 $56.05 Gas Prod. (MMcf) Price ($/mcf) $1.97 $2.33 $2.96 $3.27 $3.76 $3.42 $3.47 $3.55 Average Realized Price $26.02 $36.51 $41.37 $41.16 $47.62 $48.76 $50.64 $51.34 Total Production (Mboe) Total Production Per Day (Mboe) % Oil 81.7% 82.7% 81.6% 81.3% 83.7% 84.8% 85.8% 86.5% Sequential Growth 10.1% -16.9% 7.1% 18.1% 26.3% 17.7% 17.9% 15.3% Average Commodity Price $29.48 $40.03 $44.67 $44.44 $51.00 $52.18 $53.21 $53.94 Henry Hub Gas Price ($/mmbtu) $2.00 $2.24 $2.99 $3.30 $3.79 $3.45 $3.47 $3.55 WTI Oil Price ($/bbl) $33.40 $45.59 $50.71 $50.12 $56.50 $57.83 $58.58 $59.05 Days in Period Theoretical Revenue 6,094 7,104 8,622 10,126 14,792 17,831 21,838 25,537 Oil & Gas Sales 6,092 7,105 8,622 10,126 14,792 17,831 21,838 25,537 Realized Gain (Loss) on Derivatives Other Revenue Total Revenue $6,092 $7,105 $8,622 $10,126 $14,792 $17,831 $21,838 $25,537 Operating Expenses 2,490 2,200 2,292 2,652 3,029 3,494 3,666 4,153 Production Taxes DD&A 3,395 2,579 2,735 3,196 3,995 4,656 5,436 6,207 Accretion Expense Non-Cash Stock Compensation General and Administrative 2,220 1,920 1,892 2,055 2,543 2,934 3,019 3,482 Operating Income ($2,421) ($64) $1,196 $1,674 $4,466 $5,854 $8,654 $10,480 Interest Expense, net Interest Expense-Preferred Stock Other Expense (Income) (3) Income Before Taxes ($2,834) ($76) $848 $1,326 $4,118 $5,506 $8,306 $10,133 Income Tax Expense 1,049 0 (297) (464) (1,441) (1,927) (2,907) (3,546) Net Income ($1,785) ($76) $551 $862 $2,677 $3,579 $5,399 $6,586 Preferred Stock Dividends Net Income to Common Shareholders ($1,785) ($76) $551 $862 $2,677 $3,579 $5,399 $6,586 Unrealized Gain (Loss) on Derivatives Settlement of Fixed Price Forward Contracts Gain (Loss) on Sale of Assets Impairment of Oil & Gas Properties (13,490) Insurance Recoveries Change in Accounting Principle, net Other One-Time Expenses 0 (15,866) Net Income to Common ($15,275) ($15,942) $551 $862 $2,677 $3,579 $5,399 $6,586 EBITDA $1,085 $2,640 $4,054 $5,003 $8,626 $10,701 $14,310 $16,937 Basic Operating EPS ($0.06) ($0.00) $0.01 $0.02 $0.06 $0.09 $0.13 $0.16 Basic Reported EPS ($0.50) ($0.41) $0.01 $0.02 $0.06 $0.09 $0.13 $0.16 Diluted Operating EPS ($0.06) ($0.00) $0.01 $0.02 $0.06 $0.09 $0.13 $0.16 Diluted Reported EPS ($0.50) ($0.41) $0.01 $0.02 $0.06 $0.09 $0.13 $0.16 Basic Shares Outstanding 30,394 39,241 41,894 41,915 41,936 41,957 41,978 41,999 Diluted Shares Outstanding 30,407 39,253 41,907 41,928 41,949 41,970 41,991 42,012 Margin Analysis Gross Margin 59% 69% 73% 74% 80% 80% 83% 84% Operating Margin -40% -1% 14% 17% 30% 33% 40% 41% Net Margin -29% -1% 6% 9% 18% 20% 25% 26% EBITDA Margin 18% 37% 47% 49% 58% 60% 66% 66% Cash Flow Statement Net Income from Continuing Operations ($1,785) ($76) $551 $862 $2,677 $3,579 $5,399 $6,586 DD&A 3,395 2,579 2,735 3,196 3,995 4,656 5,436 6,207 Deferred Income Taxes (1,049) ,441 1,927 2,907 3,546 Accretion Expense Stock-Based Compensation Cash Flow From Operations $670 $2,628 $3,706 $4,656 $8,279 $10,353 $13,963 $16,589 Cash Flow/Share $0.02 $0.07 $0.09 $0.11 $0.20 $0.25 $0.33 $0.39 Capital Expenditures $2,000 $2,000 $7,813 $7,813 $7,813 $7,813 $13,625 $13,625 Asset Sales Free Cash Flow ($1,330) $628 ($4,107) ($3,157) $466 $2,541 $338 $2,964 Source: STRH research Page 14 of 28

15 Figure 9: QEP 2016E 2017E QEP Resources 1QA 2QA 3QE 4QE Total 1QE 2QE 3QE 4QE Total Production Volume: Oil/Condensate/NGL (Mbbls) Gas (Mmcf) Oil Equivalent (Mboe) Production Rate: Oil/Condensate/NGL (Mbopd) Gas (Mmcfpd) Oil Equivalent (Mboepd) NYMEX Prices: Crude Oil ($/Bbl) $33.40 $45.59 $50.71 $50.12 $44.96 $56.50 $57.83 $58.58 $59.05 $57.99 Natural Gas ($/Mmbtu) $2.00 $2.24 $2.99 $3.30 $2.63 $3.79 $3.45 $3.47 $3.55 $3.57 Realized Prices: Oil/Condensate ($/Bbl) $24.06 $35.99 $41.96 $41.69 $35.77 $39.43 $40.40 $41.01 $41.43 $40.60 Gas/NGL ($/Mcf) $1.96 $2.31 $2.87 $3.02 $2.53 $3.08 $2.91 $2.93 $2.98 $2.97 Revenue: Oil & Gas $242.5 $359.2 $386.3 $373.4 $1,361.4 $374.1 $389.6 $410.3 $429.6 $1,603.5 Marketing (14.2) (41.7) ($14.9) $399.1 Other 2.3 (0.5) Total Revenue $261.3 $383.2 $374.1 $333.7 $1,352.3 $494.1 $517.6 $499.6 $491.4 $2,002.6 Expenses: Operating $60.0 $52.6 $119.6 $114.8 $346.9 $104.6 $108.8 $112.9 $116.4 $442.8 Marketing (15.5) (43.0) Exploration Depl., Depr. & Amortization General & Administrative Taxes (other than income) Total Operating Expenses $458.6 $425.0 $434.0 $392.0 $1,709.6 $523.5 $546.4 $523.5 $509.8 $2,103.2 EBIT ($197.3) ($41.8) ($60.0) ($58.2) ($357.3) ($29.4) ($28.8) ($23.9) ($18.4) ($100.6) Interest ($36.7) $36.9 $32.6 $32.1 $64.9 $32.1 $32.1 $32.1 $32.1 $128.3 EBT ($160.6) ($78.7) ($92.6) ($90.3) ($422.2) ($61.5) ($60.9) ($56.0) ($50.5) ($228.9) Tax Provision (63.3) (28.7) (32.4) (31.6) (156.0) (21.5) (21.3) (19.6) (17.7) (80.1) Minority Interest $ $0.0 Net Income ($101.0) ($50.0) ($60.2) ($58.7) ($266.1) ($40.0) ($39.6) ($36.4) ($32.8) ($148.8) Fully Diluted Shares Recurring Diluted EPS ($0.53) ($0.23) ($0.25) ($0.25) ($1.20) ($0.17) ($0.17) ($0.15) ($0.14) ($0.62) Reported Diluted EPS ($4.55) ($0.90) ($0.25) ($0.25) ($5.95) ($0.17) ($0.17) ($0.15) ($0.14) ($0.62) Cash Flow Reconciliation: Net Income ($101.0) ($50.0) ($60.2) ($58.7) ($266.1) ($40.0) ($39.6) ($36.4) ($32.8) ($148.8) Exploration Depl., Depr. & Amortization Amortized / (Capitalized) Int Stock-Based Compensation Deferred Taxes 4.8 (28.0) (31.6) (30.8) (85.6) (21.0) (20.8) (19.1) (17.2) (78.1) Operating Cash Flow $153.6 $144.7 $167.5 $160.1 $626.0 $162.4 $171.7 $185.1 $197.8 $717.0 CFPS $0.81 $0.66 $0.70 $0.67 $2.82 $0.68 $0.72 $0.77 $0.83 $2.99 EBITDA Reconciliation: Operating Cash Flow $153.6 $144.7 $167.5 $160.1 $626.0 $162.4 $171.7 $185.1 $197.8 $717.0 (Amortized) / Capitalized Int. (1.5) (1.5) (1.5) (1.5) (6.0) (1.5) (1.5) (1.5) (1.5) (6.0) Interest Expense (36.7) Cash Taxes - (0.7) (0.8) (0.8) (70.4) (0.5) (0.5) (0.5) (0.4) (2.0) EBITDA $115.4 $179.4 $197.8 $189.9 $614.4 $192.5 $201.8 $215.2 $227.9 $837.3 Source: STRH research Page 15 of 28

16 Figure 10: PXD Pioneer Natural Resources 1QA 2QA 3QE 4QE Total 1QE 2QE 3QE 4QE Total Production Volume: Oil/Condensate/NGL (Mbbls) Gas (Mmcf) Oil Equivalent (Mboe) Production Rate: Oil/Condensate/NGL (Mbopd) Gas (Mmcfpd) Oil Equivalent (Mboepd) NYMEX Prices: Crude Oil ($/Bbl) $33.40 $45.59 $50.71 $50.12 $44.96 $56.50 $57.83 $58.58 $59.05 $57.99 Natural Gas ($/Mmbtu) $2.00 $2.24 $2.99 $3.30 $2.63 $3.79 $3.45 $3.47 $3.55 $3.57 Realized Prices: Oil/Condensate/NGL ($/Bbl) $23.79 $23.79 $44.57 $44.03 $34.56 $46.50 $47.83 $48.58 $49.05 $48.04 Gas ($/Mcf) $1.79 $1.79 $3.09 $3.21 $2.46 $3.14 $2.88 $2.90 $2.96 $2.97 Revenue: Oil & Gas $632.0 $613.0 $840.2 $858.9 $2,944.1 $955.5 $1,023.8 $1,080.7 $1,134.8 $4,194.8 Other 53.0 (6.0) Total Revenue $685.0 $607.0 $845.2 $863.9 $3,001.1 $960.5 $1,028.8 $1,085.7 $1,139.8 $4,214.8 Expenses: Operating $156.0 $141.0 $196.5 $201.1 $694.6 $189.1 $198.4 $205.8 $213.2 $806.6 Exploration Depl., Depr. & Amortization , ,076.6 General & Administrative Taxes Other Than Income $ $210.3 Other Total Operating Expenses $875.0 $731.0 $816.0 $831.6 $3,253.5 $864.0 $900.7 $929.8 $959.1 $3,653.5 EBIT ($190.0) ($124.0) $29.2 $32.4 ($252.4) $96.6 $128.1 $155.9 $180.7 $561.3 Interest $55.0 $56.0 $47.0 $45.2 $203.1 $45.2 $45.2 $45.2 $45.2 $180.7 EBT ($245.0) ($180.0) ($17.7) ($12.8) ($455.5) $51.4 $83.0 $110.7 $135.6 $380.6 Tax Provision (141.0) (143.0) (6.7) (4.8) (295.5) Net Income ($104.0) ($37.0) ($11.1) ($8.0) ($160.1) $32.1 $51.8 $69.2 $84.7 $237.9 Fully Diluted Shares Recurring Diluted EPS ($0.64) ($0.23) ($0.07) ($0.05) ($0.98) $0.20 $0.32 $0.42 $0.52 $1.45 Reported Diluted EPS ($1.65) ($1.63) ($0.07) ($0.05) ($3.40) $0.20 $0.32 $0.42 $0.52 $1.45 Cash Flow Reconciliation: Net Income ($104.0) ($37.0) ($11.1) ($8.0) ($160.1) $32.1 $51.8 $69.2 $84.7 $237.9 Exploration Depl., Depr. & Amortization , ,076.6 Amortized / (Capitalized) Int Stock-Based Compensation Deferred Taxes (141.0) (141.0) (5.0) (3.6) (290.6) Operating Cash Flow $190.7 $247.9 $453.2 $467.6 $1,359.4 $585.9 $638.6 $682.7 $724.3 $2,631.5 CFPS $1.18 $1.51 $2.76 $2.85 $8.31 $3.57 $3.89 $4.16 $4.42 $16.05 EBITDA Reconciliation: 2016E Operating Cash Flow $190.7 $247.9 $453.2 $467.6 $1,359.4 $585.9 $638.6 $682.7 $724.3 $2,631.5 (Amortized) / Capitalized Int. (2.7) (2.9) (2.9) (3.0) (11.6) (3.0) (3.0) (3.0) (3.0) (11.9) Interest Expense Cash Taxes/Other (1.7) (1.2) (4.9) EBITDA $312.0 $314.4 $495.5 $508.5 $1,546.1 $632.9 $688.5 $735.3 $779.2 $2, E Source: STRH research Page 16 of 28