Rig Activity, Production and Trends

Rig Activity, Production and Trends Catherine Bernardo September 24, 2013 2013 Platts, McGraw Hill Financial. All rights reserved.

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Agenda What factors are driving producer activity across the US? Where are producers targeting rig activity? Why does natural gas production continue to grow, despite lower rig counts and a shift in resources away from dry plays? Is there demand to support US production potential?

Gas, Oil and NGL Price Comparison: MMBTU Equivalent $/MMBtu Equivalent $30.00 $30.00 $25.00 $25.00 $20.00 $20.00 $15.00 $15.00 $10.00 $10.00 $5.00 $5.00 $0.00 $0.00 CAPP WTI HH MB NGL Brent 4

Oil Plays are at the top of the IRR Stack Eagle Ford Oil Perm Delaware Bakken Utica Wet Miss Lime Cleve-Tonk Niobrara Marcellus Wet Perm Midland Eagle Ford Wet Perm Central Uinta Granite Wash Cana-Woodford Marcellus Dry Fayetteville Haynesville Pinedale Ark-Wood Piceance 80% 70% 60% 50% 40% 30% 20% 10% 0% IRR July 2013 Price Assumptions: Gas = 12 month forward average curve for each regional pricing point (range $3.39-$3.87/Mcf) Oil = 12 month forward average WTI +/- differential (range $89-$101/barrel) NGLs = weighted average $/barrel, 12-mo forward average Mt. Belvieu prices (range $24-$51/barrel)

Oil-Weighted Production Tilts Play Economics 100% 80% 90% 80% 70% 70% 60% 60% 50% % of Production 50% 40% IRR 40% 30% 30% 20% 20% 10% 10% 0% 0% Oil % Gas % NGL % IRR Price Assumptions: Gas = 12 month forward average curve for each regional pricing point as of July2013 (price range $3.39-$3.87/Mcf) Oil = 12 month forward average WTI +/- differential as of July 2013 (price range $89-$101/barrel) NGLs = weighted average $/barrel, 12-mo average forward Mt. Belvieu prices and the typical composition in each region (range $24-$51 barrel)

Oil and NGL Plays Earning the Highest Returns Bakken 58% Pinedale 12% Uinta 38% Piceance 7% Niobrara 54% Cleve/Tonk 55% 57% Miss Lime Utica 58% 22%/ 24% MarcellusDry 69% 51% MarcellusWet Dry Gas Play Oil and/or Liquids Play 154% Granite Wash 35% Permian Delaware Basin 64% Eagle Ford Oil/Wet 32% Cana-Wood 72%/ 63% 42% 9% 13% Arkoma-Wood Haynesville Price Assumptions: Gas = 12 month forward average curve for each regional pricing point as of July2013 (price range $3.39-$3.87/Mcf) Oil = 12 month forward average WTI +/- differential as of July 2013 (price range $89-$101/barrel) NGLs = weighted average $/barrel, 12-mo average forward Mt. Belvieu prices and the typical composition in each region (range $24-$51 barrel) Source: BENTEK

Plays With High Returns Attract Drilling Rigs 33/+8 50/+22 4/+1 20/-10 3/+0 4/-4 Rig Increases Liquids-Rich/Oil Focused Areas Rig Declines CALIFORNIA OTHER ROCKIES 28/+19 178/+101 POWDER RIVER WIND RIVER GREEN RIVER UINTA SAN JUAN 14/-9 PICEANCE 0/+0 RATON PERMIAN 460/+242 WILLISTON 47/+29 D-J ANADARKO 206/+84 56/-53 FT WORTH OTHER MIDCONTINENT 116/+79 208/+148 EAST TX 59/+0 2/-27 35/-55 34/-95 ILLINOIS ARK FAYETTEVILLE 4/-2 32/+28 12/+4 14/-23 ARK WOODFORD ARKLA TX GULF EAGLE FORD 12/-3 105/+21 MICHIGAN 20/+9 AL-MS-FL LA GULF TX GULF UTICA OFFSHORE 51/-25 43/+25 1/-11 OTHER APPALACHIAN MARCELLUS DRY MARCELLUS WET TOTAL 1853 CHANGE +504 Source: BENTEK, Aug. 2013 Active rig count: Aug. 16, 2013 / Change in rig count from Jan. 1, 2010

Rig Count Lower Compared to 2012 33/-4 50/-10 4/-1 20/-9 3/-1 4/-6 Rig Increases Liquids-Rich/Oil Focused Areas Rig Declines CALIFORNIA OTHER ROCKIES 28/+8 178/-3 POWDER RIVER WIND RIVER GREEN RIVER UINTA SAN JUAN 14/-8 PICEANCE 0/+0 RATON PERMIAN 460/+3 WILLISTON 47/+4 D-J ANADARKO 206/-27 56/-44 FT WORTH OTHER MIDCONTINENT 116/+41 208/-32 EAST TX 59/+1 2/-20 35/-44 34/-35 ILLINOIS ARK FAYETTEVILLE 4/-2 32/+20 12/+4 14/-16 ARK WOODFORD ARKLA TX GULF EAGLE FORD 12/-19 105/+17 MICHIGAN 20/+6 AL-MS-FL LA GULF TX GULF UTICA OFFSHORE 51/-66 43/+20 1/-2 OTHER APPALACHIAN MARCELLUS DRY MARCELLUS WET TOTAL 1853 CHANGE -223 Source: BENTEK, Aug. 2013 Active rig count: Aug. 16, 2013 / Change in rig count from Jan. 6, 2012

U.S. Horizontal Wells Climb Despite Rig Drop Number of Wells/Rigs Wells per Month per Rig 1,600 1,400 1,200 1,000 800 600 400 200 - U.S. Horizontal Drilling Dynamics 1.60 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80 Horizontal Wells Drilled Horizontal Rigs Wells Drilled per Rig per Month 10

Oil and Liquids Directed Drilling Offsets Gas Rig Declines No. Rigs Bcf/d 3,000 2,500 Rig Count by Class vs. Gas Production 70 60 2,000 1,500 1,000 500-50 40 30 20 10 - Rigs Targeting Gas Rigs Targeting Oil/Liquids Natural Gas Production

No. Days Efficiencies Across the Board 50 45 40 44 Days Required to Drill One Well 35 30 31 29 25 22 20 15 10 5 17 15 16 13 11 6 0 Haynesville Eagle Ford Marcellus Barnett Fayetteville 2010 2011 2012 2013 12

Shale Gas Development Rates Are Increasing Bcf/d 12.0 10.0 8.0 Marcellus ( 09) 6.0 Haynesville ( 07) Barnett ( 02) 4.0 2.0 Eagle Ford ( 10) Fayetteville ( 05) 0.0-1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 Years Barnett Fayetteville Haynesville Marcellus Eagle Ford Source: Bentek Updated 8/30/2013

Bcf/d Impact of Shale Gas Production 30.0 25.0 20.0 15.0 10.0 Bakken (ND & MT) Eagle Ford (TX) Marcellus (PA & WV) Haynesville (LA) Fayetteville (AR) Woodford (OK) Barnett (TX) Shale Gas Production 5.0 0.0 Source: Bentek 14

Dry Gas Plays Remain Uneconomic through 2018 Eagle Ford Oil Perm Delaware Utica Oil Bakken Utica Wet Anad - Miss Lime Anad - Cleve/Tonk Niobrara Marcellus Wet Perm Midland Eagle Ford Wet Perm Central Basin Uinta Granite Wash Cana-Woodford Marcellus Dry Fayetteville Haynesville Pinedale Arkoma-Woodford Piceance 80% 70% 60% 50% 40% 30% 20% 10% 0% Jul-13 2018 2023 July 2013 Price Assumptions: Gas = 12 month forward average curve for each regional pricing point (range $3.39-$3.87/Mcf) Oil = 12 month forward average WTI +/- differential (range $89-$101/barrel) NGLs = weighted average $/barrel, 12-mo forward average Mt. Belvieu prices (range $24-$51/barrel) 2018: Gas = $4.28/Mcf, NGLs = $36.60/barrel, Oil = $79.75/barrel 2023: Gas = $4.82/Mcf, NGLs = 34.82/barrels, Oil = $89.26/barrel

Marcellus and Eagle Ford Lead in Production Growth Targets Bcf/d 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0-1.0-2.0-3.0 Production Change: 2018 vs. 2012 16

MMb/d U.S. & Canadian Production to Grow 4 MMb/d by 2018 16 U.S. & Canadian Production Forecast 14 12 10 8 6 4 2 0 Rest of U.S. Permian Bakken Eagle Ford Offshore Canada Source: HPDI & August 2013 BENTEK Crude Oil PADD Balances 17

US Gas Demand to rise to 90 Bcf/d by 2023 Bcf/d 100.0 90.0 80.0 70.0 US Natural Gas Demand (History & Forecast) 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Exports to Mexico PipeLoss Industrial ResComm Power LNG Exports

Mb/d Waterborne Imports Pushed Out by Growing US Oil Production 9,000 Waterborne Imports 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 PADD I PADD III PADD V Eastern Canada Source: BENTEK May 2013 Crude Oil PADD Balances 19

Key Takeaways Economics will continue to drive Oil/NGL directed drilling, pushing gas and oil production higher. Producers will chase the robust returns earned in the Marcellus, Eagle Ford, Permian, Bakken and Anadarko. LNG export facilities, industrial projects and power generation provides demand for growing natural gas production. Without new refineries or the ability to export oil, the US market will absorb increased oil production by pushing out waterborne imports.

BENTEK Energy Questions? Contact Catherine at: cbernardo@bentekenergy.com 720-264-6600 DISCLAIMER. THIS REPORT IS FURNISHED ON AN AS IS BASIS. BENTEK DOES NOT WARRANT THE ACCURACY OR CORRECTNESS OF THE REPORT OR THE INFORMATION CONTAINED THEREIN. BENTEK MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE USE OF ANY INFORMATION CONTAINED IN THIS REPORT IN CONNECTION WITH TRADING OF COMMODITIES, EQUITIES, FUTURES, OPTIONS OR ANY OTHER USE. BENTEK MAKES NO EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANT- ABILITY OR FITNESS FOR A PARTICULAR PURPOSE. RELEASE AND LIMITATION OF LIABILITY: IN NO EVENT SHALL BENTEK BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFIT) ARISING OUT OF OR RELATED TO THE ACCURACY OR CORRECTNESS OF THIS REPORT OR THE INFORMATION CONTAINED THEREIN,WHETHER BASED ON WARRANTY, CONTRACT, TORT OR ANY OTHER LEGAL THEORY.