Market Update IPAA CONFERENCE APRIL 21, 2016 APRIL 15, 2016
World Oil Supply and Demand Oversupply MMBbl/d 100 0.3 1.0 1.0 1.4 1.6 2.3 1.5 2.0 90 80 70 60 50 40 30 20 10 0 1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 World Supply World Demand Trend shows decelerations in demand growth Crude prices rose to their highest in three months in early March, with WTI above the $40/bbl level Opec and Non-Opec Producers meeting on April 17 th 2
OECD Crude Oil Industry Stocks million barrels 1400 1200 1000 800 600 400 200 0 Jan-2015 Mar-2015 May-2015 Jul-2015 Sep-2015 Nov-2015 Jan-2016(1) Americas Europe Asia Oceania (1) Estimated 3
US Commercial Crude Oil Storage Capacity and Utilization 600 million barrels 500 400 Storage Capacity 300 200 72% 100 - Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 (2) Inventories (1) Unused Working Storage Capacity Source: EIA (1) Inventories shown in the graph do not include pipeline fill, lease stocks, or oil in transit from Alaska (2) March 2016 shows crude oil inventories as of March 25 2016, adjusted for oil stocks in transit from Alaska, and for estimated lease stocks and pipeline fill. Storage capacity assumed constant to the capacity for September 2015 4
Global Oil Production by Region 120 100 80 NGLs, processing gains, biofuels Europe (1) South and Central America 60 40 Africa Asia Oceania Former USSR North America Middle East 20 0 2014 2015 3Q15 4Q15 Jan-Feb 2016 (1) NGLs Include condensates and oil from non-conventional sources reported by OPEC countries, e.g. Venezuelan Orimulsion (but not Orinoco extra-heavy oil), and non-oil inputs to Saudi Arabian MTBE. Processing gains include net volumetric gains and losses in refining and marine transportation losses 5
US Natural Gas by Region billion cubic feet per day 50 Rest of US 'shale' Utica (OH, PA & WV) Marcellus (PA,WV,OH & NY) Haynesville (LA & TX) Eagle Ford (TX) Fayetteville (AR) Barnett (TX) Woodford (OK) Bakken (ND) Antrim (MI, IN, & OH) 45 40 35 30 25 20 15 10 5 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 6
US Natural Gas Storage billion cubic feet 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 5-year (2009-2013) maximum Working Gas in Storage 5-year (2009-2013) minimum 7
Market Update WTI Strip Comparison Nat Gas Strip Comparison $ / bbl 75 70 65 60 55 50 45 40 35 30 Oct-15 Oct-17 Oct-19 Oct-21 Oct-23 3/29/2016 10/15/2015 4/15/2015 $ / Mcf 5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 Oct-15 Oct-17 Oct-19 Oct-21 Oct-23 Oct-25 Oct-27 3/29/2016 10/15/2015 4/15/2015 Historical Spot Prices WTI Spot Price 55 50 45 40 35 30 WTI HH 3/29/2016 $38.28 $1.98 1 Week (7.6%) 2.3% 25 1 M onth 13.4% 15.8% Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 3.10 2.90 2.70 2.50 2.30 2.10 1.90 1.70 1.50 Henry Hub Spot Price WTI Henry Hub Source: Company Cap IQ reports 8
2016E YoY Capex % Change % Change 150% 125% 100% 75% 50% 25% 0% -25% -50% Weighted Average = -51% -75% -100% WTI SWN CRC JONE AREX REXX WLL EVEP BCEI CRK MEMP CLR MUR UNTUS BBEP SN CHK SGY BBG HKUS NFX QEP DNR UPL CWEI SM ECR RRC LINE VNR EPENEG RSPP CRZO GPOR LPI CXO OAS MRD ALTMES WPX FANG MTDR AR PDCE CHAPAR RICE LGSY PARSLY REN Source: Company reports 9
Key Players in E&P Restructurings Company / Debtor Secured (first and second lien) creditors Noteholders M&M lien claimants Service providers Derivative counterparties Regulatory agencies Royalty owners Working interest owners Farmers / farmees / production payment parties Executory contract parties (JOAs, gathering systems, etc.) Equity The DIP Lender 10
Key E&P Restructuring Topics Value of reserves at current strip pricing Value of other assets Collateral - encumbered vs. unencumbered Assets Cash burn / liquidity runway Midstream contracts Post-reorganization capital structure Ability / attractiveness of selling asset in current environment Preserving joint operating agreements P&A Liabilities Exit financing Development plans in a depressed commodity price environment Quality of management Cost reductions: LOEs and G&A 11