Mire & Associates, Inc.

www.mireandassociates.com

Tuscaloosa Marine Shale Activity & Performance

Review

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Introduction

• The Tuscaloosa Marine Shale (TMS) is an emerging oil shale play.

• Several operators have been drilling and testing horizontal wells since 2011.

• Well costs are very high ($10-$13+ million) and economic viability of the play has not been established.

• Mire & Associates, Inc. has analyzed the publically available data to document activity and well results to date. (April 2015)

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TMS – General Information

• Covers about 2.5 million acres in Louisiana & Mississippi

• Low acreage cost

• Numerous vertical wells define oil saturation & rock quality

• Deep play – 10,500’ to 14,500’ TVD

• Thickness – 100’ to 250’

• Good quality crude 38-45 API

• Abnormally pressured – 0.65 psi/ft.

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TMS Play Map

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Total Play - Activity & Results Summary

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Wells & Results by County/Parish

Amite & Wilkinson Counties have the most wells & the best production rates

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Best Areas

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Major Leaseholders

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Results by Operator

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Completion Summary by Operator

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Encana had the highest producing wells

EOG had the poorest producing wells

Encana had the highest reserves per well

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Production Rates & Reserves are Improving over Time

Well Performance Map – IP30 Green > 750 BOEPD Yellow 300 – 749 BOEPD Red < 300 BOEPD

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Wilkinson Amite

West Feliciana St Helena

East Feliciana

Avoyelles

Rapides

Tangipahoa

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2015 Wells – Completion & Test Rates

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2015 Wells – Reserves Summary

2015 Well Economics

IRR: 23.5% Payout: 3 years NPV(10): 4,443 M$

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EUR Oil: 627 MBO EUR Gas: 277 MMCF

2015 Well performance yields positive economics

Leasehold $80,000

Drill & Complete $10,000,000

Facilities $500,000

Total Producer Cost $10,580,000

Lease Net Revenue 80%

Operating expenses

Prices: June 2015 Nymex Strip

Oil Differential 1%

Gas Differential 38%

Oil Initial Rate (BOPD) 912

Oil IP30 757

Oil Initial Decline 99.57

Oil Hyperbolic Factor 1.40

Oil Minimum Decline 5%

Gas Initial Rate (MCFD) 373

Gas IP30 337

Gas Initial Decline 93.50

Gas Hyperbolic Factor 1.10

Gas Minimum Decline 5%

Type Curve Parameters

$15,000 / month for 6 months

$10,000 / month for 6 months

$7,000 / month until Ec Limit

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Goodrich – actively drilling & reporting high reserves estimates Halcon – May 2015 – no mention of TMS Encana – May 2015 – no mention of TMS (3 wells planned for 2015) EOG – May 2015 – no mention of TMS Sanchez Energy – May 2015 – brief mention of TMS Comstock – suspended activity Devon – sold out to Goodrich in 2014

2015 Industry Reports/Status

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TMS Conclusions

• Several operators have scaled back operations.

• Encana has been the most active operator & has the best well results.

• The best well results were from Amite County Mississippi.

• 2013 & 2014 well costs were too high ($13+ Million) & reserves per well

were too low to make the play economic.

• Well results are improving & wells costs are declining.

• 2015 wells - IP30 of 637 BOEPD & EUR of 683 MBOE.

• With a target $10 million Drill & Complete cost & current oil prices the

wells should be economic in the areas developed in 2015.

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Engineering Terms

• BOE – barrels oil equivalent of natural gas (6 MCF/BOE)

• IP30 – estimated average peak production rate over first 30 days

• EUR – estimated ultimate recovery (reserves per well) from hyperbolic decline analysis

• Stages – number of reported frac stages used to complete the well

• Proppant – reported amount of proppant (lbs) used in the fracturing process

• Lateral length – length of horizontal portion of the well

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Summary Mrs. Seidel is an IT professional with more than 18 years of experience in selecting, developing, and supporting scientific computing solutions for the oil industry. She worked as a project manager on systems ranging from Geographic Information Systems, Oracle database design and maintenance, and integrated upstream G&G systems including Landmark and Finder/Geoquest. In 2011, Diane began working as an engineering technologist/reserves analyst for Mire & Associates. Diane is proficient in using Excel and PHDWin to collect and analyze production data in support of reserve reports, field evaluations and royalty acquisitions. She is skilled in using online data sources such as IHS Energy, Drilling Info and various state oil & gas data sites.

Education Bachelor of Science in Computer Science, 1982 Baylor University, Magna Cum Laude Graduate coursework in Computer Science 1983 – 1985 University of Texas at Dallas

Experience – 18 years Mire & Associates, Inc., Houston 2011 – present Arco International Oil & Gas, Plano TX 1990 – 2000 Arco Oil & Gas Co., Plano TX 1983 – 1990 E-Systems, Inc., Greenville TX 1982 – 1983

Diane Seidel Engineering Technologist

Consultant

Summary Mr. Olaniyi is a petroleum engineer with seven (7) years of experience in E&P. Assigned to major oil companies and service companies he has supported, installed and provided training for popular petroleum engineering software applications. He is skilled in decline curve analysis, economics, and software troubleshooting. Femi is proficient with DSSTM, AriesTM, PHDWinTM, Fast RTATM, and Prosper, Mbal & GAP.

Education B.S., Chemical Engineering Obafemi Awolowo University, Nigeria 2004 M.S., Petroleum Engineering Missouri University of Science and Technology, 2008

Experience – 7 years Mire & Associates, Inc., Houston 2015 – present Halliburton, Houston 2014 - 2015 Wipro Technologies, Houston 2010 - 2014 SAIC, Houston 2008 - 2010

Femi Olaniyi Petroleum Engineer

Engineering Consultant

Summary Mr. Morgan is a junior petroleum engineer with two (2) years of experience in E&P. He has worked borehole seismic projects in Egypt, shale fracturing jobs in Pennsylvania and drilling operations in west Texas. He is skilled in data analysis, royalty database creation and cash-flow projections. Peter is fluent in Arabic and English.

Education B.S., Petroleum Engineering The American University in Cairo, 2012

Experience – 2 years Mire & Associates, Inc., Houston 2015 – present Halliburton, Midland 2014 - 2015 Halliburton, Pittsburg 2014 Schlumberger, Cairo Egypt 2013

Peter Morgan Petroleum Engineer

Engineering Consultant