Biggest transaction challenges

Outside counsel needs

Top lessons from the field

Words of wisdom

Participant profiles and demographics

About Steptoe & Johnson PLLC

Breaking ground, part two

DIGG

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The first edition of our Below the Surface shale gas research focused on legal challenges and costs in U.S. shales, particularly disputes and litigation. This follow-up study expands the field of respondents, takes a harder look at transactions and deals, and offers words of wisdom from major players in the shale plays. Explore more findings at research.steptoe-johnson.com.

A deeper look at transactions and deals

Breaking ground, part two

BREADTH OF INVOLVEMENT

Acquiring Land and/or Leases

Transporting Oil & Gas Field Products

Drilling

Supplying Water

Seeking Permits

Processing Oil & Gas Field Products

Producing Gas

Providing Drilling Equipment

Producing Oil

Other

Land Reclamation

Manufacturing

Real Estate Sales/Leasing

Breaking ground, part two

The majority of respondents’ companies are working in two shales and expect an increasing presence over the next twelve months.

0

10

20

30

40

50

60

70

80

88%

82%

80%

77%

68%

54%

44%

38%

29%

27%

10%

6%

8%

1005025 750

Less than half of the respondents’ companies are working in the shales below. As many as 16% expect to increase their presence in an area below.

68% 75% 23% 23% 35% 35% 29% 30% 24%Utica Shale

Marcellus Shale

Woodford Shale

Barnett Shale

Eagle Ford Shale

Niobrara Shale

Permian Basin

Bakken Shale

Haynesville Shale

DEPTH OF INVOLVEMENT

Dealmaking headaches are most often caused by title and real estate, regulatory, environmental, and government challenges. Respondents are most concerned about lack of clear or current title law, poor records, and increasing or changing regulations. These pressures show no sign of waning: 97% say the volume of challenges will be the same or increase in the foreseeable future.

Biggest transaction challengesMurky title law and changing regulations pose greatest challenge

100

50

75

25

0

23%

32%

74%

67% 62%

58%

Labo

r &

Empl

oy-

men

t

Title

& R

eal E

stat

e

Priv

ate

Fina

ncin

g

Reg

ulat

ory

Envi

ronm

enta

l

Gov

ernm

ent

3% Down

Biggest transaction challenges

Heirship and Legacy

Lack of Precedence or Poor Records

60% 37% UpSame

Lack of Clear or Current Title Law

PERCENTAGE OF RESPONDENTS NAMING THESE TRANSACTIONAL AREAS AS “MODERATELY TO EXTREMELY” CONCERNING

TOP CAUSES OF CONCERNWILL TRANSACTIONAL CONCERNS

INCREASE IN 2015?

Outside counsel needs

Nearly all of those working in U.S. shales engage outside counsel for title and real estate transactions; more than half do so often. Two-thirds engage outside counsel for regulatory transactions, and more than half use outside counsel for environmental and government relations needs.

Local experience wanted for transactions

Outside counsel needs

PERCENTAGE WHO USE OUTSIDE COUNSEL OFTEN OR SOMETIMES FOR

Title & Real Estate87%

5025 75 1000

Other Transactions58%

5025 75 1000

Regulatory67%

5025 75 1000

Environmental55%

5025 75 1000

Private Financing & Related Securities

43%

5025 75 1000

Labor & Employment

29%

5025 75 1000

Government50%

5025 75 1000

Top lessons from the field

Respondents offer specific guidance for newcomers with six categories of advice dominating the lessons learned. These areas range from “know what you’re getting into” to “attract competent employees and partners.” Also, respondents say good communication is key.

Knowledge is power

Top lessons from the field

GAUGING LESSONS LEARNED

33%

0

1020

30

40

Make Sure You Know What You’re Getting Into

15%

0

2010 30

40

Allow Enough Time and Resources

23%

0

2010 30

40

Establish Good Communication/PR/Local Relationships

3%

39%Up

Down

Same23%

0

1020

30

40

UnderstandState/Local Concerns

Attract Competent Employees& Partners

10%

20

30

400

18%

10

20

30

400

Use Legal Counsel

Words of wisdom

“Communicate. Communicate. Communicate.”

“Pay very close attention to outsales and well unitizations that could be holding

an old lease.”

“Rules vary state by

state—know your state.”

“Use local people whenever possible, especially for legal

counsel.”

“Develop a good process for vetting

title when evaluating a transaction.”

“Plan ahead, focus on details, and proactively

get out ahead of any key public issues.”

“Make sure you fully understand your issue before attempting to

resolve it.”

“There is a lot of misleading

information. Go directly to the

source.”

“A lot of people can produce oil and

gas, but not a lot of people make money doing it.”

Advice from the field

Words of wisdomWhen asked for their thoughts, respondents were forthright about their own experiences and lessons learned. Several of those comments are shared below. One favorite among other gems: “Understand what you know and don’t know about shale and gas development.”

“Implement a CYA approach and be

prepared to settle.”

Participant profiles and demographics

Shale players surveyed

A total of 176 individuals completed the online surveyfrom February 2014 through May 2014. They represent 119energy companies of varying sizes doing business inU.S. shales. Respondents are mostly landmen, in-house counsel, and executives with an average of just over 11 years working with outside counsel or legal issues in the field.

Participant profiles and demographics

INDUSTRY SECTORS

Oil & GasExtraction

35

52

17

70

0

Oil & GasConstruction

Providers of Oil & Gas

Title, Real Estate &

Land

Upstream(Exploration

& Production)

Consultant OtherTransporters of Oil &

Gas Field Commodities

Oil & GasPipeline

Oil & GasWell

Drilling

AAPLAcadian Land ServicesAnadarko Petroleum Corp.Antero Resources Corp.Apex Energy, LLCAssets InternationalAtlas Energy, L.P.Atlas Resource PartnersBertison-George, LLCBG GroupBHP BillitonBiehl Land Services, LLCBill Barrett Corp.Billman Geologic Consultants, Inc.Bonanza Creek Energy, Inc.BP Production CompanyBranzan Investment Advisors, Inc.BreitburnBrighton ResourcesCaddo Bay Energy, LLCCardno MM&AChesapeake Energy Corp.ChevronCitation Oil & Gas Corp.Columbia Pipeline GroupConoco Phillips CompanyCONSOL Energy/CNX GasCrestwood Midstream Partners

LIST OF RESPONDENTS

DaleDevonDominionDorado E&P Partners, LLCDrake Land Services, LLCEdgewood EnergyEMGEmpire Energy E&P LLCEnerplusEnervestEnvironmental Standards, Inc.EQT Corp.Ervin Equipment, Inc.Fedoris Enterprises, LLCFirstEnergy Services CompanyFlat Rock Development, LLCFreeport-McMoran Oil & GasGlobal Gas Law ConsultantsGraves & Co.Greenwood EnergyGriffin Petroleum CompanyGulfport Energy Corp.Harbinger LandHat Creek Energy LLCHess CorporationHonor Resources Co.Hunt Oil CompanyHuntington Bank

Independent Key Oil Company Marathon Oil MCDRS LLC McElvain Energy, Inc.McFarren Group LLC Memorial Resource DevelopmentMidwest Land ServicesMogul Energy International, Inc. Moody and Associates, Inc.Mountaineer KeystoneMRO NCPS NiSourceNoble EnergyNortheast Natural EnergyNorthwest Savings BankNuEnergy Operating, Inc.Pardee Resources CompanyPDC Energy, Inc.PennEnergy ResourcesPennsylvania General EnergyPercheron Pioneer Natural Resources Range ResourcesReserve Energy Rex EnergyRH USA

Rice Energy RKIRobert L. Bayless, ProducerSamuel Gary Jr. and Associates Sierra Buckeye Southwestern Energy Spectra Energy Statoil Stone EnergyTalisman EnergyTenaska Resources, LLCTexas Keystone, Inc. Total E&P USA, Inc. TRC Environmental Triana Energy True Oil LLC Ursa Operating Company LLCVanguard Natural Resources, LLC Vista Ridge Resources, LLC Vistar Oil Texas LLCVitruvian II Woodford, LLCWestern Land Services Wolverine Gas and Oil Corp. Wright ConsultingXOG Resources, LLC XTO Energy Inc.

Several respondents identify themselves with multiple sectors.

66% 41% 17% 13% 10% 2% 2% 2% 2%1%

0

25

50

ANNUAL REVENUE7%

40%

13%$50 - 99million

$100 - 499million

$500 - 999million

$1 billion+

Less than$50 million

10%

30%

Signs of naturally resourceful counsel

DEPTH & BREADTH OF ENERGY EXPERIENCE

30

75

Former in-house energy attorneys

Seasoned energy litigators

8,500Recent mineral title opinions

FERCIn-house FERC and public utility experience

Offices in key shale plays

$14BRecent transactions including SEC, private placements, MLPs, JVs

15

350Attorneys

Multidisciplinary emergency response team

Labor & employment attorneys

40

Dedicated DOTO team

220In-house land professionals

Years in the industry100+

20Nationally recognized environmental lawyers and professionals

Attorneys licensed in 23 states

1 of the largest Mineral Title teams in the country

steptoe-johnson.com/energy

About Steptoe & Johnson PLLC

DIG DEEP

research.steptoe-johnson.com