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Jefferies Energy Conference Permian Basin Technical Overview

November 2016 / Confidential

Jefferies LLC Member SIPC

Jefferies LLC November 2016 /

US Rig Count by Basin

-

100

200

300

400

500

600

Rig

Cou

nt

Permian Eagle Ford Bakken Niobrara

Key Points

US rig count has fallen dramatically since the commodity price downturn in late 2014

Permian is only play with increasing rig count, reflecting superior economics and ever increasing single well deliverability

Oil production has fallen in major plays across the US since the start of 2015 while Permian production has continued to rise

Systematic refocusing and capital reallocation into the Permian Basin for both near term and long term

Permian has most competitive rates of return today and remaining economic horizontal drilling locations >250,000 and may be upwards of 500,000

Recent USGS report was for Wolfcamp only and Midland Basin only

US Oil Production by Basin

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Oil

Pro

duct

ion

(bbl

)

Permian Eagle Ford Bakken Niobrara

US Production and Activity Trends

Upper Wolfcamp A Type Curve

EUR Economics

Oil (MBbls) 1,019 D&C ($MM) 5.7$

Gas (MMcf) 1,630 IRR @ NYMEX (1) 130%

EUR (MBoe) 1,291 PV-10 ($MM) 13.3$

Lat. Length (Ft) 5,000 PV-15 ($MM) 10.3$

IP30 (Boe/d) 1,242 PV-20 ($MM) 8.4$

Note: Assumes optimized D&C costs and 5,000’ laterals unless otherwise noted. (1) NYMEX strip pricing as of August 18, 2016.

1


Comparison of Selected Plays’ Core and Tier I PV-10 Breakeven Prices

PV-10 Breakeven Price – Key U.S. Oil Plays

Tier I Acreage

Core Acreage

# HZ Targets

12+

16+

4-7

2-3

4

3

Spot $47.08

3 Year Strip $52.83

Note: Source: EIA, Wall Street Research, Company filings, investor presentations and Jefferies estimates. Assumes crude oil to natural gas price ratio of 15:1. NYMEX pricing as of November 28, 2016.

$20.00

$25.00

$30.00

$30.00

$40.00

$40.00

$35.00

$45.00

$48.00

$52.50

$60.00

$60.00

Midland Basin

Delaware Basin

SCOOP / STACK

Eagle Ford

DJ Basin

Bakken

2


Permian Rig Activity

3


Permian Basin Resource Summary

Key Points

Jefferies estimates a total resource potential of approximately 325 BBoe (212 BBo) across the productive core of the Midland and Delaware Basins

─ Delaware: 218 BBoe (128 BBo)

─ Midland: 106 BBoe (84 BBo)

Spacing assumptions:

─ Delaware:

Wolfcamp A: 15 wells / section(1)

Wolfcamp B: 15 wells / section

2nd Bone Spring: 8 wells / section

3rd Bone Spring: 8 wells / section

Avalon: 8 wells / section

─ Midland:

Wolfcamp A: 15 wells / section

Wolfcamp B: 15 wells / section

Mid. Spraberry: 10 wells / section

Lower Spraberry: 10 wells / section

(1) Assumes development of 8 wells / section for the Wolfcamp A-X/Y Sand in southern Eddy County, NM and northern Loving County, TX.

Total Core Surface Acreage ~7,700,000 acres

Total Core “Effective” Acreage ~20,100,000 acres

Productive Benches 5 (Delaware) 4 (Midland)

Assumed Spacing 8-15 wells / section

Number of Wells to Develop ~316,000 wells

Average EUR / Well 1,137 MBoe (730 MBo)

Total Recoverable Resource ~325 BBoe (~212 BBo)

Peak Oil Production (400 Rig Ramp)

~11,000 MBo/d

Oil Reserves Half Life (400 Rig Ramp)

~32 Years

Total Capital Needed ~$1.9 Trillion

4


Permian Stratigraphy Overview

Key Points

Midland and Delaware Basin oil producing deposits were laid down during early Permian time as a series of organic rich mudstones and fine-grained interbedded sand or detrital carbonate turbidites

The Midland and Delaware stratigraphic sections mirror each other on opposing sides of the Central Basin Platform with the Delaware section being slightly thicker

At least 8 targets are proven and economic in both basins

A

A’

200’

Wolfcamp A

Producing Horizon

A A’

5


Permian Basin Depositional Model

Key Points

Delaware has three key rock types in Wolfcamp and Bone Spring intervals

Organic rich Basinal Avalon and Wolfcamp shale:

─ Basin subsidence formed the depocenter for organic rich siliciclastic Avalon and Wolfcamp facies

Carbonate:

─ Shallow water shelf-margin carbonate shoals and reefs were common around edges of the basin

─ Carbonate debris flow from unstable slope setting in Eastern margin

Turbidite Sands:

─ Basinal turbidite channel deposits – Bone Spring sands, similar to Spraberry in the Midland Basin

Midland Basin has similar depositional environments

Delaware Depositional Model

Source: Matador Resources May 2014 investor presentation.

6


Permian Basin with Type Curve Areas

Permian Basin Activity Map with Type Curve Areas

Key Points

The Permian Basin is one of the most prolific oil and gas basins in the onshore U.S.

─ Several thousands of feet of horizontal targets

─ 20+ target intervals economic at today’s commodity pricing

The Midland Basin has 1,500+ horizontal shale wells completed in Spraberry and Wolfcamp benches

─ Completion optimization has advanced rapidly compared to other basins

─ OOIP up to 300+ MMBo / section

The Delaware Basin horizontal shale has 4,500+ shale wells, with highly economical results in the Avalon, Bone Spring, Delaware, Wolfcamp and Yeso horizons

─ Until recently, completions have lagged Midland Basin

─ OOIP up to 500+ MMBo / section

─ Horizontal targets can have more geologic complexity than Midland Basin

7


Wells Permitted Since 2010

Midland Basin Activity Map – Key Well Results

(1) Source: DrillingInfo. (2) Normalized.

Peak IP Rates Range Up to 3,000+ Boe/d

Energen - Wolfcamp A Jones-Holton #1-01H

30-Day IP: 1,171 Boe/d Lat Length: 6,675’

RSP - Wolfcamp B Cross Bar Ranch 1811H 30-Day IP: 650 Boe/d

Lat Length: 6,967’

Pioneer – Spraberry University 7-43 #16H

IP: 1,660 Boe/d Lat Length: 7,502 ft

Pioneer - Wolfcamp D/Cline University 7-43 10H

IP: 3,605 Boe/d Lat Length: 7,382’

Encana - Wolfcamp B Davidson 27C #12H


Diamondback - Spraberry ST W 702LS


Diamondback - Wolfcamp B Mabee Breedlove #22-1H


Oxy - Wolfcamp A May 1102WA

IP: 1,262 Boe/d (86% oil) Lat Length: 7,500’

Element - Spraberry Wright Unit 44-41 3H

IP: 776 Boe/d (90% oil) Lat Length: 6,776’

Big Star- Wolfcamp A Ryder Unit #A2H

IP30: 1,417 Boe/d Lat Length: 7,500’

Pioneer - Wolfcamp D Scharbauer Ranch #201H


Pioneer - Spraberry Scharbauer Ranch #5-01H

IP: 691 Boe/d Lat Length: 7,052’

Pioneer - Wolfcamp B ET O’Daniel #1H IP: 2,801 Boe/d


Encana – Wolfcamp A Guitar 15 5H

30 Day IP: 902 Boe/d Lat Length: 1,707’

Laredo - Wolfcamp D Glass-Glass 10-153H


Parsley - Middle Spraberry Texas Ten Y #17H


Callon – Wolfcamp A Silver City A 1H

30 Day IP: 1911 Bo/d Lat Length: 7363’

AEP - Wolfcamp A Loftin Hughes 13-1212 1H IP: 1,549 Boe/d (82% oil)


Pioneer - Wolfcamp B University 2-20 #12


EP Energy – Wolfcamp B University East 432 GH

IP24: 1,232 Boe/d

Parsley – Wolfcamp B Shauna 9-16B-4415H Day IP: 1,498 Boe/d Lat Length: 7,163’

Parsley - Wolfcamp B Char-Hughes 2H

IP24: 1,107 Boe/d Lat Length: 7,500’(2)

EP Energy – Wolfcamp B University E 43-17-AH


Pioneer EUR: 850 – 1,350 MBoe Capex: $5.5 - $6.8 MM Recent Martin County Wolfcamp A / B

wells tracking above 1,000 MBoe type curve with new frac

RSP Permian EUR: 600 – 1,200 MBoe Capex: $5.2 - $5.6 MM Successful spacing test at 500’ in

Lower Spraberry

Diamondback EUR: 530 – 1,000+ MBoe Capex: $5.0 - $5.5 MM Successful Middle and Lower

Spraberry wells

Callon EUR: 670 – 1,050 MBoe Capex: $5.1 MM Silver City well is significantly

outperforming 700 MBoe type curve

Encana EUR: 700 – 900 MBoe Capex: $4.7 - $5.7 MM Spacing tests of 330’ in Wolfcamp

Howard County

8


Midland Basin Completions Chronology

Clear Indication of Completion Progress in Midland Basin

Key Points

Key learnings with respect to Midland Basin completion practices were established in the southern portion of the basin, where lower pressures and higher GOR’s drove operators to enhance completions in horizontals

Some operators were early adopters

Early practices (“Gen 0”) were erratic, but had very low proppant concentrations

Gen 1 completions used proppant concentrations of <1,100 lb/ft

─ Generally utilized 800 – 1,100 lb/ft proppant concentrations, and wide stage/cluster spacing

Gen 2 completions utilized proppant concentrations from 1,100 to 1,600 lb/ft with two modes (~1,200 and ~1,600 lb/ft)

Gen 3 completions generally had the lowest stage/cluster spacing (150 – 170’ stages / 35’ clusters) and utilized the highest prop concentrations (>1,600 lb/ft)

Completions in the northern parts of the basin generally utilized Gen 2 completions, and progressed from there

Completions Evolution

initiated in Southern

Midland Basin

Generation 2 – SMB

Some operators testing stage / cluster spacing

Low Proppant concentrations (1,100 – 1,600 lb/ft)

Hybrid jobs more common

Early in understanding of optimum landing zones


Wide stage spacing (>240 ft / stage)

Sliding sleeves or wide clusters

Proppant concentrations (<1,100 lb/ft)

Use of cross-linked fluids common

Flow units not clearly understood


Reduced cluster spacing (~150 – 185 ft stages)

High proppant concentrations (>1,600 lb/ft)

Some operators using thin fluid / slickwater fracs

More attention to LZ / geo-steering

Selective use of additives (e.g., nano-surfactant)

Proppant (lb/ft)

Gen 3

Gen 2

Gen 1

Key Learnings Generally

Adopted as Horizontal Activity

Progressed to the North

9


Wolfcamp B: Proven Development Target

Key Points

Wolfcamp B is a primary development horizon for Pioneer in the Sale Ranch area of southern Martin County

Thick section supports upper and lower targets

Wolfcamp B expands to the south creating potential for additional stacked and staggered targets

Wolfcamp B Gross Thickness Wolfcamp B Net Thickness (GR>75 API, Res>15 Ohms)

10


Wolfcamp B Net Thickness – Core Key Points

Gross thickness ranges from 200’ - 500’

Net shale thickness ranges from 150’ - 350’

Wellhead EUR of 1,351 MBoe

Sales EUR of 1,478 MBoe

Wolfcamp B – Core Locator Map

Wolfcamp B - Core

Single Well PV-10 ($MM) $13.1 (1)

Single Well IRR (%) 131% (1)

Total Type Curve Wells (#) 30

(1) NYMEX pricing as of 11/8/2016, with 3-year forward averages of $49.73 / Bbl and $2.92 / MMBtu.

Sale Ranch

11


Wolfcamp B – Core Type Curve

Stream 30-Day IP 30-Day IP 24-Hr IP Di Df b-factor GOR

Unit Per Month Per Day Per Day % % # Mcf / Bbl

Oil (Bbl) 38,945 1,280 1,560 79 6.0 1.45 1.0 - 2.1

Gas (Mcf) 37,987 1,249 1,522

EUR Crude Oil Wellhead Gas Wellhead Total Wellhead Total Oil Exponential

Unit MBbl MMcf MBoe Bcfe % Years

1,025 1,955 1,351 8.1 76% 11.0

Type Curve Parameters

30 analog wellbores normalized to 7,500’ lateral lengths

Peak 24-Hour IP: 1,814 Boe/d

GOR Profile

0

1

2

3

0 6 12 18 24 30 36

GO

R (

MC

F/B

bl)

Month

GOR (MCF/Bbl) Model

Version 1.0 Version 2 & 3.0

Q 1,015 1,620

Di 86 79

b-factor 1.3 1.45

Prop-Ft 1,009 1,400-1,700

Bin Range 850-1,200 Sale Ranch

EUR (MBo) 454 1,025

EUR (MMcf) 852 1,954

Well Count 11 100+

1

10

100

1,000

100

1,000

10,000

100,000

0 2 4 6 8 10 12 14 16 18 20 22 24

Wel

l Cou

nt

Oil,

Bbl

/Mo

Months

Digitized Version 2.0 PXD WB Digitized Version 3.0 PXD WB Version 1.0 PXD Type Curve

Version 1.0 PXD WB Version 3.0 Type Curve SALE RANCH `22A` 1H (976lbs/ft)

SALE RANCH `22G` 7H (1027lbs/ft) SALE RANCH `28K` 11H (1188lbs/ft) SALE RANCH `28L` 12H (1383lbs/ft)

SALE RANCH 15B 2H (1522lbs/ft) SALE RANCH 15C 3H (965lbs/ft) SALE RANCH 15D 4H (976lbs/ft)

SALE RANCH 15E 5H (954lbs/ft) SALE RANCH 16E 5H (875lbs/ft) SALE RANCH 15A 1H (1372lbs/ft)

SALE RANCH 16F 6H (869lbs/ft) SALE RANCH 20D 4H (N/Albs/ft) SALE RANCH 23F 6H (N/Albs/ft)

SALE RANCH 21C 3H (1334lbs/ft) SALE RANCH 23B 2H (N/Albs/ft) SALE RANCH 24A 1H (1096lbs/ft)

SALE RANCH 25C 3H (1344lbs/ft) SALE RANCH 22H 8H (1039lbs/ft) SALE RANCH 16A 1H (1070lbs/ft)

SALE RANCH 25E 5H (1348lbs/ft) SALE RANCH 28A 1H (1551lbs/ft) SALE RANCH 28J 10H (1303lbs/ft)

SHACKELTON 31 3H (1978lbs/ft) JONES-HOLTON 201H (849lbs/ft) MABEE K 1H (1078lbs/ft)

BENT NAIL 36 1H (1533lbs/ft) BOONE-COFFEE (PSA) 2HB (98lbs/ft) WOODY 04 02H (1498lbs/ft)

CALVERLY #2H WB (1680lbs/ft) SALE RANCH 25D 4H (1392lbs/ft) Well Count

12


Lower Spraberry Shale: A Proven Development Target

Key Points

Lower Spraberry is a primary development horizon for the western portion of the Midland Basin, with expansion into the central and eastern basin

Thick section supports upper and lower targets

Lower well count reflective of acreage holding requirements rather than lesser economics and deliverability

Lower Spraberry Shale Gross Thickness Lower Spraberry Shale Net Thickness (GR>75 API, Res>15 Ohms)

13


Lower Spraberry Shale Net Thickness Key Points





Lower Spraberry Shale – West Locator Map

Lower Spraberry – West





14


Lower Spraberry Shale – West



Oil (Bbl) 37,132 1,221 1,600 82 6.0 1.60 0.9 - 1.4

Gas (Mcf) 32,824 1,079 1,414



971 1,224 1,175 7.1 83% 10.0




GOR Profile

0

1

2

3

0 6 12 18 24 30 36

GO

R (

MC

F/B

bl)

Month

GOR (MCF/Bbl) Model

Current Optimized

Qi 875 1,600

Di 75 82

Df 6 6

b-factor 1.55 1.6

EUR (MBo) 723 971

EUR (MMcf) 1,237 1,224

1

10

100

1,000

100

1,000

10,000

100,000

0 2 4 6 8 10 12 14 16 18 20 22 24

Wel

l Cou

nt

Oil,

Bbl

/Mo

Months

Current Type Curve All Wells AverageProposed Type Curve Digitized Fang , Q1- Q3 / 2015UNIVERSITY LANDS TAWNY UNIT 8-12 1LS (1298lbs/ft) GLASSCOCK A5 2H (1107lbs/ft)SALE RANCH `22B` 2H (963lbs/ft) MABEE Y UNIVERSITY LANDS H 3SS (1456lbs/ft)MABEE C H16SS (1473lbs/ft) SPANISH TRAIL 48-03E 4817LS (1550lbs/ft)GRIDIRON S002LS (1278lbs/ft) GRIDIRON S017LS (1007lbs/ft)JAMIE 4043H (1399lbs/ft) MABEE C H 15SS (1479lbs/ft)XBC GIDDINGS ESTATE 3049H (1169lbs/ft) JOHNSON RANCH 1017 LS (N/Albs/ft)FENDLEY 405LS (N/Albs/ft) JOHNSON RANCH 1022 LS (N/Albs/ft)JOHNSON RANCH 1026H LS (N/Albs/ft) FENDLEY 404LS (N/Albs/ft)KENDRA-AMANDA PSA 2 29SH (1935lbs/ft) JOHNSON RANCH 1022MS(LS) (N/Albs/ft)SPANISH TRAIL 4818LS (1464lbs/ft) UNIVERSITY LANDS MUSTANG 13 241 (1899lbs/ft)KEYSTONE 1004LS (1861lbs/ft) KEYSTONE 1003LS (1063lbs/ft)ST W 701LS (1317lbs/ft) KENDRA-AMANDA PSA 2 30SH (1942lbs/ft)MABEE BREEDLOVE 4001LS (1279lbs/ft) MABEE BREEDLOVE 4003LS (1260lbs/ft)Well Count

15


Lower Spraberry Shale Net Thickness Key Points





Lower Spraberry – East (North) Locator Map

Lower Spraberry – East (North)





16


Lower Spraberry – East (North)



Oil (Bbl) 25,183 828 956 73 6.0 1.50 0.7 - 1.3

Gas (Mcf) 16,518 543 627



835 1,029 1,006 6.0 83% 10.6




Falkor is example of current best practice

─ 1,800+ lbs/ft proppant

─ 40+ stages

─ Nanosurfactant

─ Optimal landing zone

GOR Profile

0

1

2

3

0 6 12 18 24 30 36

GO

R (

MC

F/B

bl)

Month

GOR (MCF/Bbl) Model

1

10

100

1,000

100

1,000

10,000

100,000

0 2 4 6 8 10 12 14 16 18 20 22 24

Wel

l Cou

nt

Oil,

Bbl

/Mo

Months

All Wells Average All Wells Type CurveGARRETT UNIT 37-48 #3SH (1322lbs/ft) TALBOT A #1SH (1417lbs/ft)TALBOT C #3SH (1523lbs/ft) TALBOT E #5SH (1490lbs/ft)FRYAR UNIT `B` 13-1 #5SH (1338lbs/ft) WHITAKER 3905 #1LS (724lbs/ft)SHROYER-WILSON UNIT A 24-14 #1SH (1316lbs/ft) HAMLIN 19-30 #1H (1436lbs/ft)FALKOR 4-8 A 5LS (1793lbs/ft) Well Count

17


Cross Bar Ranch – Lower Spraberry Increased Density Plot

Cross Bar Ranch LS Performance

Cross Bar Ranch Section 17 Gun Barrel View Key Points

RSP’s 500’ spacing test at Cross Bar Ranch has performed above expectations despite relatively less oil in place vs. other RSP core acreage

Original 3 wells of pattern completed during July 2015 with prior frac design; next 3 wells completed during August 2016 with latest vintage frac design

Performance to date strongly supportive of high density frac design paired with downspacing

Potential for second row of wells 50’ above the Dean

RSP Permian

18


Gun Barrel View of Half Section – Avg. TVD of Lateral

Midland Basin Well Spacing

Key Points

AEP is developing a long lateral DSU with stacked and staggered targets in the Wolfcamp A, B, and C (also called Lower Wolfcamp B by others like Pioneer)

Current drilling activity suggests full section development with similar spacing assumptions

125’ – 150’ spacing between vertical targets 7700

7800

7900

8000

8100

8200

8300

8400

8500

8600

8700

0 500 1000 1500 2000

TVD

Feet From Section Line

Targeted TVD

A A’

A A’

Ham Spacing Example Locator – Reagan County

19


Middle Spraberry: An Emerging Midland Basin Target

Key Points

Middle Spraberry is shallower than the Lower Spraberry and possesses similar petrophysical attributes

Trend of early development (>50 wells) is along the western portion of the northern portion of the basin in Midland and Martin Counties

Early production is extremely encouraging and advances in completions will aid development expansion across the basin

Middle Spraberry Gross Thickness Middle Spraberry Net Thickness (GR>75 API, Res>15 Ohms)

20


Middle Spraberry: An Emerging Midland Basin Target

Key Points

Typical target is in the organic rich mudstone on top of the Lower Spraberry siltstone in high GR and resistive section

Operators such as QEP, Pioneer, RSP, OXY, and Diamondback have targeted the Middle Spraberry

Upper Spraberry

Middle Spraberry

Lower Spraberry

Lower Spraberry Shale

A A’

21


First Month 30-day IP (per day) 1st-day IP (per day) Di (%) Df (%) b IP30 GOR (Mcf/bbl) IP30 BOEPD IP30 %Oil

Oil (Bbl) 18,621 612 670 65 6 1.40

Gas (Mcf) 15,833 521 550 54 6 1.40

EUR Oil (Mbbl)EUR Wellhead Gas

(Bcf)EUR Mboe(2-stream)

EUR GOR (Mcf/bbl)

EUR Bcfe(2-stream)

Oil Exp Switch (Yrs)

Gas Exp Switch (Yrs)

EUR Time (Yrs)

734.7 0.832 873 1.1 5.24 11.2 11.0 50.0

0.9 699 88%

Middle Spraberry Type Curve


Type curve derived by fitting to the average oil production curve of 7 analog wellbores normalized to 7,500’ lateral lengths

Type curve EUR (50 year life): 873 MBoe

Technical parameters:

─ 30-day IP: 612 Bo/d

─ Dinit: 54-65%

─ B-Factor: 1.40

─ Dfinal: 6%

10

100

1,000

0 6 12 18 24

Bb

l/D

History - Oil

TC Oil Rate

UNIVERSITY 7-1726 S 16MS(1,208 lbs/ft)

UNIVERSITY 7-0213 N 08MS(1,404 lbs/ft)

Months

22


Delaware Basin Activity Map

Key Points

Wolfcamp has been the primary target in Texas and Bone Spring has been the primary target in New Mexico

Completions advances in the Wolfcamp have been applied to Bone Spring in New Mexico with success

XY Sands are attractive emerging target with high rate production

Anadarko EUR: 1,000+ MBoe Capex: <$5 MM - $5.8 MM

EOG Resources EUR: 950 – 1,550 MBoe Capex: $7.8 MM Currently testing 500’ spacing and

additional targets in the Wolfcamp

Matador EUR: 450 – 1,100 MBoe Capex: $4.5 - $6.5 MM

Source: Publicly available information.

State Mercury IOH 2,123 Boe/d IP24

1st Bone Spring EOG Resources

Guitar #202H 1,273 Boe/d IP24

Wolfcamp A Matador

Iron Mike 402E 2H

1,348 Bo/d IP Wolfcamp B

J Cleo Thompson

Apache St. 57 1101H 2,002 Boe/d Peak IP

Wolfcamp B EOG Resources

State Pathfinder #1H 1,832 Boe/d IP24

Avalon Upper EOG Resources

State Galileo #6H 3,160 Boe/d Peak IP

2nd Bone Spring EOG Resources

Big Chief 4802H 848 Boe/d IP 24 Hr

2nd Bone Spring Concho

Oppenheimer 188 2H 2,451 Boe/d IP 24 Hr Wolfcamp Debris Flow

J. Cleo Thompson

Dorothy White 1H 991 Boe/d IP

Wolfcamp A – X-Sand Matador Resources

Harrison 29-28 1H 1,650 Boe/d IP24 Wolfcamp A Lower

Anadarko

Miami Beach 34-123-1H 1,500 Bo/d IP30 3rd Bone Spring

Cimarex

Peck St 258 6H 2,432 Boe/d IP24

Wolfcamp A Rosetta Resources

Johnny Ringo 2H 1,000 Bo/d IP 24 Hr

3rd Bone Spring Rosetta

Tiger #224H 1,525 Boe/d IP24

Wolfcamp B Matador

Trinity 15-33 1H 1,271 Boe/d IP Peak

Wolfcamp A Jagged Peak Energy

Count Fleet 48 State 2H 1,416 Boe/d IP30

Wolfcamp D Cimarex Energy

n

n

n

n

n

n n

n

n

n

n

n

n

n

n

n n

n

n

n

o Hz Target Optimization

o Completion Optimization

Copperhead 23 - 1H 837 Bo/d IP30

Wolfcamp B Red Willow Production

Macho Grande State 1H 1,290 Boe/d IP24

1st Bone Spring Nadel and Gussman

Big Timber State 3309 Boe/d IP30

49% Oil Wolfcamp A

Cimarex

Ava State 770 Bo/d IP24

Wolfcamp A Capitan Energy

Osprey State Un #200H 1161 Boe/d IP24

56% Oil Upper 3rd Bone Spring

Apache

Neal Lethco 28-27 811 Boe/d IP 24 Hr

Wolfcamp A / Debris Flow Brigham Resources

Thor 21 702H 3,490 Boe/d IP30

Wolfcamp A EOG Resources

Formation Targets

Wolfcamp 7+

Bone Spring 7+

Avalon 2

Brushy Canyon 1

Strawn & Deeper NA

23


Average Proppant per Ft. vs. Date – Completion (Quarter)(2)

Diverting Agent Case Study(1)

Frac Type Market Share

Operators are Improving Completions in the Wolfcamp

Key Points

Most operators prefer slickwater (SW) and hybrid completion jobs over cross-linked gel completions in the Wolfcamp

Fracs have increased to over 3,200+ lbs/ft and well performance has improved accordingly

Additional optimization can include adjusting other parameters, such as:

─ Pump rate and proppant concentration (ppg)

─ Cluster spacing

─ Landing zone

─ Early time flowback management

─ Nanosurfactant additives

Operators are now also experimenting with diverting agents to maximize frac initiation at all clusters

Matador has seen a 38% uplift in production from its first offset test with diversion and has completed 5 total wells in Loving County with diversion that have yielded positive diagnostic results

(1) From Matador Investor Presentation, August 2016. (2) Select operators’ completions chronology (horizontal wells at least 2,000’ long since 1/2012).

Gen 1

Gen 2

Gen 3

Gen 4

4% 14% 36%

47% 28%

48%

60%

55% 39% 72%

48% 26%

9% 14%

2012 2013 2014 2015 2016

Completion Date

Slickwater Hybrid Gel

24


Southern Delaware Basin Optimized Type Curve – Wolfcamp A Red Bull North

Key Points

Completions optimization changes production dramatically

Large proppant volumes are translating into outsized production

Type curve parameters (7,500' lateral):

─ Wellhead EUR: 1,250 MBo (1,459 MBoe)

─ Initial rate (30-day): 1,203 Bbls/d / 1,021 Mcf/d

─ b Factor: 1.40 (oil) / 1.30 (gas)

─ Initial decline rate: 70% (oil) / 62% (gas)

─ Terminal decline rate: 6.0% (oil) / 6.0% (gas)

Locator Map

Peak Month 30-day IP (per day) 1st-day IP (per

day) Di (%) Df (%) b GOR (Mcf/Bbl) Shrink NGL (bbl/MMcf)

Oil (bbl) 25,742 846 985 55 6.0 1.20 0.9 - 1.4 100% 0 Gas (Mcf)

21,420 704 820

EUR Gas (MMcf) EUR Oil (Mbo) EUR Sales Gas

(Bcf) EUR NGL

(Mbbl) EUR Mboe EUR Bcfe

Exponential Switch (Yrs)

1,664.5 1,299 1.665 0.0 1,576.5 9.46 12.8

1

10

100

1,000

100

1,000

10,000

100,000

0 2 4 6 8 10 12 14 16 18 20 22 24

We

ll C

ou

nt

Oil,

Bb

l/M

o

Months

All Wells Average

All Wells Type Curve

African Lion 1-2H (2434lbs/ft)

Giraffe Unit 18 B 4H (2570lbs/ft)

Giraffe Unit 18 C 5H (2931lbs/ft)

Well Count

25


Upper Wolfcamp B Type Curve

Stream 30-Day IP 30-Day IP 24-HR IP Di Df GOR

Unit Per Month Per Day Per Day % % Mcf / Bbl

Oil (Bbl) 48,743 1,603 1,800 69 6 1.5

Gas (Mcf) 73,115 2,404 2,700

WH Oil WH Gas Total Total Oil Exp

MBbl Bcf MBoe Bcfe Years

1,819 2.728 2,274 4.67 10.5

Key Points

Large proppant volumes and modern completions are translating into astounding production

Type curve parameters (7,500’ lateral):

─ Wellhead EUR: 1,819 MBbls (2,274 MBoe)

─ Initial rate (30-day): 1,603 Bbls/d

─ b Factor: 1.5

─ Initial decline rate: 69%

─ Terminal decline rate: 6%

─ GOR: 1.5 Mcf/Bbl

Single Well IRR(1)

10

100

1,000

10,000

0 6 12 18 24 30

Bbl

/D

MONTH

Avg All Wells EXCELSIOR 7 8H (2,426 lbs/ft)

UNIVERSITY B20 1 W201PA ( lbs/ft) Optimized TC Oil Rate

Base TC Oil Rate

76%

116%

(1) Assumes NYMEX strip pricing as of October 31, 2016. (2) Assumes D+C Capex for 7,500’ lateral of $8.2 MM.

Pad Well Single Well

26


Locator Map – 2nd Bone Spring Net 6% DPHI Type Well Statistics

31 wells selected for type curve

─ Avg IP-30: 688

─ Avg proppant: 1,246 lbs/ft

2nd Bone Spring West Locator Map

Well Name Operator LL Prop. IP-30 (ft) (lbs/ft) (Boe/d)

Antweil ANU Federal - 3H Yates 3,914 1,344 353 Baroque BTQ Federal Com - 1H Yates 6,600 1,466 1,494 Benson Deep BDX Federal - 2H Yates 4,134 1,426 491 Bradley 36 B2DA State Com - 1H Mewbourne 4,174 447 393 Burton Flat Deep Unit - 61H Devon 4,615 1,518 307 Burton Flat Deep Unit - 62H Devon 4,645 1,532 668 Cedar 11 State - 1H Devon 4,421 1,512 431 CERF 10 State - 9H Devon 4,594 1,463 633 Cookie Tosser State Com - 1H Concho 4,208 1,509 755 Cookie Tosser State Com - 2H Concho 4,323 1,446 651 Crapshoot 13 Federal Com - 2H Concho 4,555 1,377 525 CTA State Com - 5H Concho 4,092 1,542 444 CTA State Com - 6H Concho 4,140 1,548 1,066 Darthrow State - 4H Concho 3,996 1,532 583 Emerald PWU 20 - 66H Devon 4,617 1,413 675 Glock 16 B2AD Federal - 1H Mewbourne 4,430 1,369 797 Gobbler 5 B2IL #1H Mewbourne 4,343 1,371 WOP Gobbler 5 B2PM State Com - 1H Mewbourne 4,069 873 2,355 Leo 15 B2DH Federal Com - 1H Mewbourne 2,950 924 1,106 Leo 15 B2DP Federal Com - 1H Mewbourne 4,690 1,031 674 Lone Tree Draw 13 State Com - 8H Devon 4,355 1,497 642 Man State - 2H Concho 4,291 1,524 1,396 Mirage 30 B2HE State Com - 1H Mewbourne 3,865 522 475 Mossy Federal - 1H Concho 4,413 1,329 376 Mossy Federal - 2H Concho 4,462 1,410 339 Palmillo 14 State - 4H Apache 4,100 698 294 Perazzi 9 B2EH Federal - 1H Mewbourne 4,280 1,424 661 Solution Federal Com - 3H Concho 6,966 1,517 726 Winchester 36 B2LI State - 1H Mewbourne 4,201 420 250 Zircon 12/7 B2JK Federal Com - 1H Mewbourne 4,910 443 552 Zircon 12/7 B2ON Federal Com - 1H Mewbourne 4,558 1,210 535

1

2

3

4

5

6

7

8

10

12

14

16

18

20

9

11

13

15

17

19

21

22

23

24

25

26

27

28

29

30

31

27


2nd Bone Spring Type Curve



Oil (Bbl) 33,929 1,116 1,375 85 6 1.4 – 3.9

Gas (Mcf) 47,134 1,550 1,910


MBbl MMcf MBoe Bcfe Years

497 1,685 778 4.67 15.2

Key Points

Completions learnings from the Wolfcamp are working in the Bone Spring

Type curve parameters (5,000’ lateral):

─ Wellhead EUR: 497 MBbls (778 MBoe)


─ b Factor: 1.10



─ GOR: 1.4 – 3.9 Mcf/Bbl

─ Proppant: 1,246 # / linear-ft

1

10

100

1,000

100

1,000

10,000

100,000

0 6 12 18 24

Wel

l Cou

nt

Oil,

Bbl

/Mo

Months

All Wells Average All Wells Type CurveLEO 15 B2DH FEDERAL COM - 1H (1457lbs/ft) CTA STATE COM - 6H (1548lbs/ft)LEO 15 B2DP FEDERAL COM - 1H (1031lbs/ft) BENSON DEEP BDX FEDERAL - 2H (1426lbs/ft)WINCHESTER 36 B2LI STATE - 1H (420lbs/ft) SOLUTION FEDERAL COM - 3H (1517lbs/ft)PALMILLO 14 STATE - 4H (698lbs/ft) BAROQUE `BTQ` FEDERAL COM - 1H (1466lbs/ft)COOKIE TOSSER STATE COM - 1H (1509lbs/ft) BURTON FLAT DEEP UNIT - 62H (1532lbs/ft)MAN STATE - 2H (1524lbs/ft) CTA STATE COM - 5H (1542lbs/ft)PERAZZI 9 B2EH FEDERAL - 1H (1424lbs/ft) MOSSY FEDERAL - 2H (1410lbs/ft)BRADLEY 36 B2DA STATE COM - 1H (447lbs/ft) GLOCK 16 B2AD FEDERAL - 1H (1369lbs/ft)CRAPSHOOT 13 FEDERAL COM - 2H (1377lbs/ft) LONE TREE DRAW 13 STATE COM - 8H (1497lbs/ft)DARTHROW STATE - 4H (1532lbs/ft) ZIRCON 12/7 B2JK FEDERAL COM - 1H (443lbs/ft)ANTWEIL `ANU` FEDERAL - 3H (1344lbs/ft) GOBBLER 5 B2PM STATE COM - 1H (902lbs/ft)BURTON FLAT DEEP UNIT - 61H (1518lbs/ft) CERF 10 STATE - 9H (1463lbs/ft)CEDAR 11 STATE - 1H (1512lbs/ft) ZIRCON 12/7 B2ON FEDERAL COM - 1H (1210lbs/ft)COOKIE TOSSER STATE COM - 2H (1446lbs/ft) MIRAGE 30 B2HE STATE COM - 1H (522lbs/ft)EMERALD PWU 20 - 66H (1413lbs/ft) Gobbler 5 B2IL #1H (1371lbs/ft)

Single Well IRR(1)

(1) Assumes single well and pad well capex of $4.5 MM and $3.8 MM, respectively.

140%

209%

Optimized Curve

Base Curve


28


Offset Avalon and Bone Spring Development Well Spacing

Key Points

EOG down-spacing of ~600’ in the State Galileo unit represents 8 wells / section in Lower 2nd Bone Spring sand landing zone

Devon has several successful spacing Upper / Lower Landing zone tests in the 2nd Bone Spring sand

EOG has tested Avalon spacing of 250’-270’ in the Sandbar Field – Excelsior 12 and State Mercury units

29


Wolfcamp % Oil

Delaware Basin Fluid Production

Wolfcamp GOR Map

Source: DrillingInfo.

Key Points

Basin is oilier in the deeper eastern portion of the basin and gassier in the shallow west ─ Combination of depth, pressure, rock quality, thickness / number of targets and hydrocarbon mix makes this one of the highest performing basins

for resource plays Some uplifting of the basin during Laramide Orogeny created the divergence of depth and fluid type relationship

Mantle thermal hot zones are associated with higher GOR in the west

30


Western Delaware Basin Gas Condensate Expansion Type Curve Locator Map

Wolfcamp % Oil

Key Points

Recent Wolfcamp A wells drilled in higher GOR regions of Reeves and Culberson have come on line with strong production

EUR’s from TC analysis suggest total production 779 Mbo and 4.4 Bcf

31


Oil Trend Plot – Wolfcamp A

Key Points

Type Curve Parameters (5,000’ lateral):

Oil EUR: 779 MBo

B factor: 1.20

Initial decline rate of 65%

Terminal decline rate of 6.0%

5,000’ Lateral Length

Peak Month 30-day IP (per day) 1st-day IP (per day) Di (%) Df (%) b

22,439 738 800 65 6.0 1.20Oil (bbl)

1

10

100

1,000

100

1,000

10,000

100,000

0 2 4 6 8 10 12 14 16 18 20 22 24

Wel

l Cou

nt

Oil,

Bbl

/Mo

Months

All Wells Average All Wells Type Curve Alice Fee 34 1H Ava State 36 1HCliff Fee 4 1H Dorothy State 12 1H James Fee 6 1H JE Liles State 6 1HJess Fee 40 1H JS Blair 2 1H Lauren State 30 1H Georgette State 2HMattie State 2 1H Mike State 3 1H Rylan Fee 44 1H Mother Fee 28 1HRoxanne Fee 46 1H Scott Fee 1H Shelly Fee 40 1H Pat Fee 4 1HKaren Fee 17 1H WA State 2H WA State 3 H William Fee 32 1HTyson Fee 44 1H Well Count

EUR Oil (Mbo)

779


13.1

32


Gas Trend Plot – Wolfcamp A

Key Points

Type Curve Parameters (5,000’ lateral):

Gas EUR: 4,418 MMcf

B factor: 1.30

Initial decline rate of 65%

Terminal decline rate of 6.0%

5,000’ Lateral Length

Peak Month 30-day IP (per day) 1st-day IP (per day) Di (%) Df (%) b

65 6.0 1.30Gas (Mcf) 118,957 3,911 4,260

4,417.5


12.1

EUR Gas (Mmcf)

1

10

100

1,000

1,000

10,000

100,000

1,000,000

0 2 4 6 8 10 12 14 16 18 20 22 24

Wel

l Cou

nt

Gas

, M

cf/M

o

Months

All Wells Type Curve "All Wells" Average Cliff Fee 4 1H JE Liles State 6 1HJess Fee 40 1H Lauren State 30 1H Mattie State 2 1H Mike State 3 1HMother Fee 28 1H Roxanne Fee 46 1H William Fee 32 1H Ava State 36 1HAlice Fee 34 1H Dorothy State 12 1H Georgette State 2H James Fee 6 1HJS Blair 2 1H Karen Fee 17 1H Pat Fee 4 1H Rylan Fee 44 1HScott Fee 1H Shelly Fee 40 1H Tyson Fee 44 1H WA State 2HWA State 3 H Well Count

33


XY Sands: An Emerging Delaware Basin Target

Key Points

Turbidite reservoirs of the XY Sands of the Upper Wolfcamp A have produced some of the highest rate oil wells in the Permian Basin

Operators such as EOG, Concho, and Matador have targeted the reservoirs, primarily in New Mexico

Completions advancements continue to show better results

XY Sand Gross Thickness XY Sand Net Thickness (6% DPHI)

34


Key Points

Low resistivity and low GR lobes of the Upper Wolfcamp A are diagnostic of the XY Sands

These reservoirs have exceptionally good porosity upwards of 10%+

XY Sands: An Emerging Delaware Basin Target

A A’

3rd Bone Spring

Wolfcamp A

X Sand

Y Sand

Wolfcamp B

35


Locator Map: XY Sand Net 6% DPHI Type Well Statistics

8 wells selected for type curve

─ Avg IP-30: 1,426 Boe/d

─ Avg proppant: 1,632 lbs/ft

Wolfcamp A-X/Y Sand Locator Map – Red Hills East

Well Name Operator LL Prop. IP-30 (ft) (lbs/ft) (Boe/d)

Brown Bear 36 State 701H EOG 4,616 1,510 1,925 Brown Bear 36 State 702H EOG 4,585 1,613 1,420 Brown Bear 36 State 703H EOG 4,583 1,633 1,519 Ruby 2 State Com 701H EOG 4,720 1,535 959 Stove Pipe Federal Com 2H Concho 6,805 1,979 2,261 Telecaster Bass 36 State 4H Endurance 3,968 1,269 392 Viking Helmet Federal Com 3H Concho 6,973 1,986 1,880 Wheatfield 16 State 701H EOG 4,450 1,529 1,054

1

2

3

4

5

6

7

8

36




Oil (Bbl) 35,913 1,181 1,615 84 6 1.3 – 1.6

Gas (Mcf) 44,629 1,467 2,007


MBbl MMcf MBoe Bcfe Years

871 1,350 1,096 6.58 10

Key Points

Type curve parameters (5,000' lateral):

─ Wellhead EUR: 871 MBbls (1,096 MBoe)


─ b Factor: 1.60



─ GOR: 1.3 - 1.6 Mcf/Bbl

─ Proppant: 1,632 # / linear-ft

Wolfcamp A-X/Y Sand Type Curve – Red Hills East

Single Well IRR(1)

(1) Assumes single well and pad well capex of $6.7 MM and $6.3 MM, respectively.

71% 80% 1

10

100

1,000

100

1,000

10,000

100,000

0 6 12 18 24

Wel

l Cou

nt

Oil,

Bbl

/Mo

Months

All Wells AverageAll Wells Type CurveBROWN BEAR 36 STATE 703H (1633lbs/ft)RUBY 2 STATE COM 701H (1535lbs/ft)BROWN BEAR 36 STATE 702H (1613lbs/ft)BROWN BEAR 36 STATE 701H (1511lbs/ft)Wheatfield 16 State 701H (1529lbs/ft)Stove Pipe Federal Com 2H (1985lbs/ft)Viking Helmet Federal Com 3H (1979lbs/ft)Well Count


37


Offset Upper Wolfcamp A Development Well Spacing

Key Points

EOG has tested downspacing of 420’-455’ targeting the Upper A shale in their Excelsior lease

Matador has drilled several spacing tests (<660’) with staggered X/Y sand landing zones

Matador microseismic tests in Barnett 90-TTT-B01 wells indicate that well spacing of 660’ between X/Y targets can be achieved without material microseismic events in the adjacent drilling unit

X Sand

Y Sand

38


Spacing Schematic – Full 640 Acre Development

Delaware Basin Generic Development Spacing Schematic

Key Points

50 wells / section translates to $350 MM / section in development capex for primary development

Potential for additional 30 development wells with spacing tests

Reduced need for large acreage footprint, rather, small footprint in core areas can turn large capex investment into best in class returns

Derisked Upside

Avalon

1st Bone Spring

2nd Bone Spring

3rd Bone Spring

Wolfcamp A

Upper Wolfcamp B

Lower Wolfcamp B

Delaware / Brushy Canyon

Upper Lower

(Upside)

39

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