u.s. oil & gas landscape in a volatile oil environment · u.s. oil & gas landscape in a...

Jefferies LLCMember SIPC

The information provided in this document, including valuation discussions, represents the views of Jefferies Investment Banking. There is no assurance that the views expressed herein will be consistent with the views expressed by Jefferies Research or its Analysts. Nothing in this document should be understood as a promise or offer of favorable research coverage.

November 2018

U.S. Oil & Gas Landscape in a Volatile Oil Environment

Greg Chitty & Guy OliphintManaging Directors, Co-Heads of Americas Upstream

Jefferies LLC November 2018/

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i


Current Themes for U.S. Oil & Gas Development

1 Permian development will drive oil production growth in the U.S. over the long term with Bakken & Eagle Ford delivering meaningful mid-term production

2

Companies will continue to focus on optimizing operational efficiency in the core areas to drive oil growth, even in moderated price environment to provide this growth4

50+ years of inventory at current rig pace – Jefferies estimates a minimum of 400,000+ core Permian development locations with other resource plays adding 40,000+ additional core locations

5 Consolidation of the upstream sector is inevitable as public companies contemplate mergers while continuing tactical private acquisitions to achieve the most efficient growth machines

6 Robust U.S. oil, gas and NGL production will increase commodity price volatility over the near-to mid-term, as the global market digests production rebalancing and the L48 solves midstream / infrastructure issues

3 U.S. shale continues to “over-deliver” on production growth with the IEA estimating shale will contribute 9+ MMBo/d and 40-75% of global oil production growth through the mid-2020s

1


$30

$35

$40

$45

$50

$55

$60

$65

$70

$75

$80

Source: CapIQ as of November 23, 2018.

NYMEX Crude Spot Price

After a Year of Consistent Growth in Oil Prices, Oil Has Seen an Unprecedented Price Drop

Theme – “Lower for Longer”

Jefferies Energy Conference 2017

U.S. energy companies have established multi-decade low break even well inventory

Knowns

How fast will it grow?

What companies will be best positioned to grow it?

How will global markets deal with L48 increases in oil, gas and NGLs?

Unknowns

Key Data Points

December 6 OPEC Meeting

Trade War Resolution (or not)

Fed / Interest Rate Movement

Broad Geopolitical Concerns

Long Dated (Maybe Dead) Bull Market

Theme – “U.S. Oil & Gas Landscape in a Volatile Oil

Environment”

Jefferies Energy Conference 2018

2


Total Acreage: ~6 MM+ acresDaily Production: 1.8 MMBoe/d (77% oil)Active Horizontal Rigs: 52# of Core Oil Locations: ~4,000+Hydrocarbon Mix: Oil-weightedYears of Core Inventory: 10+

Total Acreage: ~3 MM acresDaily Production: ~0.2 MMBoe/d (75% oil)Active Horizontal Rigs: 12# of Core Oil Locations: ~11,000+Hydrocarbon Mix: Oil-weighedYears of Core Inventory: 50+

Powder River Basin

Total Acreage: ~2 MM acresDaily Production: ~1.5 MMBoe/d (44% oil)Active Horizontal Rigs: 28# of Core Oil Locations: ~5,000+Hydrocarbon Mix: Gas-weightedYears of Core Inventory: <10

DJ Basin

Total Acreage: ~5 MM acresDaily Production: ~0.2 MMBoe/d (38% oil)Active Horizontal Rigs: 3Hydrocarbon Mix: Oil and gas

Uinta Basin

Total Acreage: ~13 MM acresDaily Oil Production: ~3.6 MMBo/dDaily Gas Production ~12.4 Bcf/dActive Horizontal Rigs: 439 (54 Vertical Rigs)# of Core Oil Locations: ~525,000+Hydrocarbon Mix: Oil-weightedYears of Core Inventory: 50+

Permian Basin – Long Term Growth

Total Acreage: ~30 MM acresDaily Production: 30 Bcfe/d (97% gas)Active Horizontal Rigs: 74# of Core Gas Locations: ~14,500Hydrocarbon Mix: Gas-weightedYears of Core Inventory: 10+

Marcellus / Utica – Gas GrowthBakken – Intermediate Growth

Note: Statistics based on Baker Hughes Rig Count as of November 24, 2018, EIA and Jefferies estimates.(1) Represents Anadarko Basin statistics.

Total Acreage: ~5 MM acresDaily Production: 1.4 Bcfe/d (92% gas)Active Horizontal Rigs: 3Hydrocarbon Mix: Gas-weighted

San Juan Basin

Permian: ~525,000+All Others: ~45,000+

Oil Inventory

Inventory & Performance of L48 Basins are Fairly Well Understood

Total Acreage: ~6 MM acresDaily Production: 1.8 MMBoe/d(1) (32% oil)Active Horizontal Rigs: 60# of Core Oil Locations: ~10,000+# of Core Gas Locations: ~15,000+Hydrocarbon Mix: Liquids-weightedYears of Core Inventory: 15+

SCOOP / STACK

Total Acreage: ~5 MM acresDaily Production: 2.6 MMBoe/d (54% oil)Active Horizontal Rigs: 78# of Core Oil Locations ~15,000+Hydrocarbon Mix: Liquids-weightedYears of Core Inventory: 10+

Eagle Ford / South Texas – Intermediate Growth

Total Acreage: ~4 MM acresDaily Production: 9.8 Bcfe/d (97% gas)Active Horizontal Rigs: 50# of Core Gas Locations: ~7,500Hydrocarbon Mix: Gas-weightedYears of Core Inventory: 10+

Haynesville – Gas Growth

Appalachia & associated gas from oil plays will dominate gas production

Gas Inventory

Permian will provide future growth

NGL Market

3


Comparison of Global Oil Resource Plays

2 BBo

10 BBo

13 BBo

28 BBo

160 BBo

165 BBo

212 BBo

Thunder Horse (GoM)

Bakken Shale

Prudhoe Bay

Eagle Ford Shale

Ghawar (Saudi Arabia)

Midland Basin

Delaware Basin

Source: Jefferies and Pioneer Natural Resources June 2015 Investor presentation.(1) Jefferies estimate.(2) Source: Pioneer Natural Resources June 2015 Investor Presentation.

300’ 400’ 450’Gross Thickness

Upper WCB

3,000’ 4,300’

U. Spraberry

M. Spraberry

L. Spraberry

DeanWCA

WCC

WCD

Strawn

Lower WCB

Eagle Ford / Austin Chalk

Austin Chalk

Upper EFLower EF

Bakken

U. Bakken Shale

Three Forks

TF 4th Bench

Niobrara

Nio. Chalk ANio. Chalk BNio. Chalk C

Codell

L. Spr. Shale

L. Bakken Shale

Remaining Dev. Locations:13,500OOIP: 50 MMBbl / section

Remaining Dev. Locations: 10,500OOIP: 50 MMBbl / section

Remaining Dev. Locations: 30,000+OOIP: 60 MMBbl / section

3rd BS

U. WCB

Base 2nd BS

L. WCB

Cline

WCA

1st BS

2nd BS

Base 1ST BS

Midland


Delaware

Avalon


(1)

(2)

(2)

(1)

(2)

(2)

(2)

Comparison of Net Recoverable Oil from Global Resource Plays

The Permian Basin is Taking its Place on the World Stage

Total Permian Basin is 2.4x Ghawar

Eagle Ford & Bakken will continue to contribute rate growth over the

near/mid-term

World Class Inventory Has Clearly Been Established

4


Permian Production vs. Other Plays (MMBo/d)(2)kk

Core of Core L48 Oil Plays Compete with Global Producers

Core Oil Type Curve Comparison (7,500’ LL)

-

200

400

600

800

1,000

1,200

1,400

1,600

- 10 20 30 40 50 60

Oil

Pro

duct

ion

(Bbl

/d)

Months

Bakken Midland Delaware Eagle Ford DJ Basin STACK

Type Curve Summary (7,500’ LL)

Core Oil Area Curves

EUR(Bo / Ft) ROI IRR Breakeven

($ / Bbl) (1) PV -10 Core Inventory

DJ Basin ~80 Bo/ft ~4.4x ~100%+ ~$25 ~$8.0 MM ~5,000+

Bakken ~126 Bo/ft ~4.0x ~100%+ ~$24 ~$10.0 MM ~4,000+

STACK ~118 Bo/ft ~5.0x ~100%+ ~$23 ~$10.0 MM ~10,000+

Midland ~135 Bo/ft ~6.0x ~100%+ ~$17 ~$15.0 MM ~100,000+

Eagle Ford ~140 Bo/ft ~11.0x ~100%+ ~$10 ~$25.0 MM ~10,000+

Delaware ~200 Bo/ft ~6.2x ~100%+ ~$10 ~$25.0 MM ~100,000+

15+ Years of Inventory

Source: Jefferies estimates and IHS - Enerdeq.(1) Assumes gas price of $3.00 per MMBtu.

5


-

20

40

60

80

100

120

2015 2020 2025 2030 2035

Oil

& G

as L

iqui

ds (

MM

Boe

/d)

PDP Permian Growth Other U.S. Production Other Growth Demand

Global Liquids Supply and Demand (MMBo/d)

Will the Permian be a Significant Wedge of Long-Term Growth in the World?

Source: ExxonMobil 2018 Outlook for Energy: A View to 2040 and Jefferies estimates.

Incremental Permian Production:

Daily Production (MMBoe/d)

% Total Production

% of Growth Wedge

Growth Wedge to Meet World Demand

Current Production

2.5 8.5 14.4

3% 8% 13%

12% 16% 17%

12.2

11%

17%

6


$-

$30

$60

$90

$120

$150

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

$/B

bl

MM

Bo/

d

Permian Eagle Ford Bakken Anadarko DJ / PRB Other Crude Oil Price

Permian Production vs. Other Plays (MMBo/d)(2)

Significant Long Term Oil Growth Likely to be Driven by Permian

Source: EIA Drilling Productivity Report (November 13, 2018).

Oil Production by Basin (MBo/d)

LTM Change: +827 MBo/d






Last 3 Mo: +160 MBo/d

Near / Mid Term Growth in Other Regions

LTM Permian Basin production growth is ~2x all other L48 basins combined

7


$-

$2

$4

$6

$8

$10

$12

$14

$16

-

5.0

10.0

15.0

20.0

25.0

30.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

$/M

MB

tu

Bcf

/d

Permian Eagle Ford Bakken Anadarko DJ / PRB Haynesville Appalachia Natural Gas Price


Significant Gas Growth Driven by Appalachia, Haynesville and Associated Gas From Oil Plays

Gas Production by Basin (Bcf/d)

LTM Change: +2,757 MMcf/d



3.9 Bcf/d36%

1.9 Bcf/d17%

2.8 Bcf/d25%

2.4 Bcf/d22%

LTM Growth Share

Appalachia Haynesville Permian Others

Incremental 20+ Bcfd of new gas production expected from

Permian associated gas by 2030

Source: EIA Drilling Productivity Report (November 13, 2018).

8


$-

$2

$4

$6

$8

$10

$12

$14

$16

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

$/M

MB

tu

Bcf

/d

Gas Plays Oil Plays Natural Gas Price


Oil Plays Will Provide Significant Wedge of Future Gas / NGL Growth

Source: EIA Drilling Productivity Report (November 13, 2018).(1) Includes Appalachia and Haynesville gas production.(2) Includes Permian, Eagle Ford, Bakken, Anadarko and DJ/Powder River gas production.

Gas Production by Basin Focus (Bcf/d)

(1) (2)



Growth of oil basin gas with ~100 Bbls NGL Yield / MMcfcould be disruptive to NGL markets

5.8 Bcf/d53%

5.1 Bcf/d47%

LTM Growth Share

Gas Plays Oil Plays

Incremental 3+ MMbpd of new NGL production expected

from Permian by 2030

9


The Race to Optimize Acreage Is On As Core Values Increase

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 2015 2016 2017 2018

% P

ads

Pad

2013 & 2014 Development 2015 & 2016 Development 2017 Development 1H 2018 Development

Single Pad Pad Wells2013 & 2014 540 286 679

Single Pad Pad Wells2015 & 2016 409 658 1770

Single Pad Pad Wells2017 173 530 1583

Single Pad Pad Wells2018 192 579 1480

Operators shifting focus to pad style drilling to drive down costs and improve ultimate recoveries on a per unit basis─ Increase in lateral footage drilled in less time due to keeping rigs mobilized─ Allows to mitigate potential for infill wells to be exposed to depleted reservoir

Pad drilling has shifted from < 25% in 2013 & 2014 to > 70 % over the last two years─ 52% CAGR in Pad development over last 5 years with ~ 2.0x the amount of wells being drilled per pad

-

2

4

6

8

10

12

2013 2014 2015 2016 2017 2018

LL’ (

x1,0

00

ft)

Top Quartile Lateral Length

Proportion of Pad and Single Wells Change in Lateral Length SM Howard County Avg. Production by Formation

-

100,000

200,000

300,000

0 50 100 150 200 250 300

Cu

mu

lati

ve B

OE

Peer 1 MMboe T.C. Lower Spraberry Average

Wolfcamp A Avg Wolfcamp B Avg

SM Energy “Seinfeld” Units

B B BB B660’ 660’ 660’ 660’

WC

AW

CB

AU

AL AL

AU AU

660’ 660’

660’ 660’

AL

AU 660’

AL

AU

330’ 130’

SM Gun Barrell

Value / Acre Production Growth / Rig$50K 1 – 2 MBbl/d



Value / Acre Production Growth / Rig$250K+ 4 – 5+ MBbl/d

10


Core Development Cubes Will Become Like Offshore Platforms

Source: Jefferies internal estimates.(1) Assumes spud to spud of 20 days.(2) Assume 4.0 WOR for Delaware Basin.(3) Assumes Delaware acreage represents 20,000 net acres. Jefferies water forecast assumes spacing by resource bench

according to the diagram above, 7,500’ LL locations, development order from most economic type curve to least, Jefferies

internal estimates for type curve volumes, development plan of 1-rig / 10,000 acres, 20-day spud-to-spud, 2 month spud to sales, fixed WOR of 4.0, 290 MBw per completion and average month-over-month decline rate of 3%. Assumes 2 rigs in 2018, 4 rigs in 2019 and 6 rigs thereafter.

Case Current Near Term Future

Gross Acres 20,000 20,000 20,000

Gross OOIP 29.3 BBbl 29.3 BBbl 29.3 BBbl

EUR/ft (Bone/Wolfcamp)

70/110 Bo 90/135 Bo 150/250 Bo

Sticks / Section 68 108 180

Recovery Factor (%) 3.2% 6.2% 17.6%

Gross Asset Oil Recovered 0.9 BBbl 1.8 BBbl 5.2 BBbl

Gross NGL Vols Recovered 0.27 BBbl 0.54 BBbl 1.56 BBbl

Post-shrunk Gas MMCF 2.0 Tcf 3.9 Tcf 11.4 Tcf

Rig Years / Section (1) 2.8 4.4 7.4

Gross Produced Water – 20k (2) 3.6 BBbl Water 7.2 BBbl Water 20.8 BBbl Water

Delaware Basin “Cube” Will Spawn Many Business Opportunities Beyond Typical Upstream

Gross Water Forecast for 20,000 Acres(3)

Wells / zoneOOIP (MMBo / section)

1st Bone Spring

1st Bone Shale

2nd Bone Spring

2nd Bone Shale

3rd Bone Spring

Wolfcamp A

Upper Wolfcamp B

Lower Wolfcamp B

11

52

20

73

26

12

91

79

52

28

22

28

62

28

21

65

2Avalon Shale 2

42

87

WORBw/bo

12

22

3.5

56

32

.5

2958

87 87

177225

318

407

44 5680

102111141

199

255

11 14 20 25

2018 2019 2020 2021

Frac Water (MBw/d) Water (MBw/d) Oil (MBo/d) Pre Shrunk Gas (MMcf/d) NGL (MBbl/d)

11


hgk

Core Acreage Value Reaches Record at Recent Lease Sale

Acres $ / Acre Winning Bid

640 $95,001 Matador

901 $95,001 Matador

1,179 $86,514 Matador

1,240 $81,889 Matador

240 $72,101 Tap Rock

200 $66,501 Percheron Professional Services

601 $65,509 Blue Devil Exploration

400 $64,832 Marathon


1,200 $62,861 Tap Rock

320 $59,112 Tap Rock


920 $54,601 Chevron


80 $47,590 Matador

120 $47,583 Tap Rock

1,120 $46,401 Franklin Mountain Energy

640 $46,008 Novo O&G

640 $46,008 Novo O&G

240 $45,705 Matador

880 $45,003 Franklin Mountain Energy

160 $45,001 Matador





80 $35,005 XTO

120 $35,002 COG Operating

120 $33,001 XTO

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

Key Points

Leases transacted at multiples ranging from $30,000 to $95,000 an acre

Results of lease sale indicates that operators now well understand the multiple de-risked and highly prolific target horizons in SE New Mexico

Values still trade inside Jefferies calculated NAV/acre by a wide margin (assuming acreage drilled early in inventory)

2

3

4

5

6

7

89

10

11

12

1314

15

16

17

18

19

20

21

22

23

24

25

26

27

2829

1

Eddy Lea

Culberson Reeves Loving Winkler

Texas

New Mexico

> $60K / Acre

$50K – $60K / Acre

$40K – $50K / Acre

$30K – $40K / Acre

$20K – $30K / Acre

$10K – $20K / Acre

< $10K / Acre

Federal Lease Sale Acreage

$75K – $90K / Acre

$60K – $75K / Acre

$45K – $60K / Acre

$30K – $45K / Acre

$15K – $30K / Acre

$5K – $15K / Acre

Delaware PV-25 Analysis

12


Consolidation & Tactical Acquisitions / Mergers Will Continue to Grow in Midland Basin

Midland Basin Intrinsic Value ($/Net Acre) Map Date Buyer SellerValue($MM)

NetAcres

Prod. (Net MBoe/d)

Adjusted$ / Net Acre(1)

10/17/18 $950 20,800 11.2 $29,519

8/14/18 $9,200 179,000 97.4 $35,073

8/8/2018 $1,245 25,493 12.1 $34,598

04/04/18 $100 5,420 1.0 $12,832

03/28/18 $9,500 91,887 62.4 $83,015

07/26/17JM Cox

Resources $732 13,800 0.6 $51,671

06/19/17 $600 12,400 3.0 $41,129

03/24/17 $105 3,048 NA $34,449

03/15/17 $266 20,500 1.5 $10,780

02/07/17 $2,800 71,000 3.6 $36,683(2)

01/19/17 $345 10,000 1.9 $28,950

01/10/17 $402 17,800 1.2 $20,562

11/08/16 $324 20,900 2.3 $12,172

10/18/16 $1,600 35,700 2.4 $42,801

09/06/16 $327 5,667(3) 2.3 $45,937

08/25/16 $405 16,000 0.9 $23,625

08/15/16 $1,625 40,000 10.0 $28,125(4)

(3) Acquisition included ORRI in 1,440 gross acres in addition to 5,667 net acres.(4) Adjusted for disclosed value for production: $500 MM.

(1) Where applicable, existing production valued at $30,000 / Boe/d.(2) Adjusted for $87.5 MM in DUC inventory.

40K – 60K

Legend

60K – 80K

80K – 100K

100K – 120K

Key Areas

Type Curve Areas

4K – 20K

20K – 40K

$ / Acre Metrics Still Trading Inside Jefferies’ NAV / Acre

13


What Does This Market Want?

LTM Stock Price Performance

2017 & 2018 Financial Performance - Independent Company Results (1)

Source: CapIQ as of November 23, 2018.(1) Includes independent energy companies with a market cap over $1B.

2017

2018E

$68.3 B

$101.5 B

EBITDA

$18.52

$25.51

EBITDA / Bbl

($3.38)

$2.02

FCF / Bbl

(8)%

60%

(10)%

(70)%

87%

(27)%

(72)%

164%

(34)%

(100%)

(50%)

0%

50%

100%

150%

200%

7/25/14 - 2/11/16 2/11/16 - 10/3/18 10/3/18 - 11/23/18

S&P 500 S&P E&P Index NYMEX Oil

14


Comparison of Global


2018 YTD Debt Reduction, Share Buybacks and Dividend Payments ($MM)

CFOs Pulling all the Levers

Dividends Paid Stock Repurchases Debt Reduction

$4,634

$10,966

$50,967

15


Company 1 2 3 4 5 6 7 8 9 10 11 12 13

Stock Price Performance (26%) (17%) (2%) 3% 40% (26%) 7% (40%) 8% (31%) (10%) 8% 1%

Distributions (% Mkt Cap)

14% 10% 7% 5% 4% 3% 3% 2% 1% 1% 0% 0% 0%

Executed Buyback ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

R² = 0.0322

(50%)

(40%)

(30%)

(20%)

(10%)

0%

10%

20%

30%

40%

50%

0% 5% 10% 15%

Sto

ck P

rice

Per

from

ance

2018 YTD Distributions as % of Market Cap

Company 1 2 3 4 5 6 7 8 9 10 11 12 13

Stock Price Performance 40% 3% (2%) 8% 8% (10%) 7% 1% (17%) (40%) (26%) (26%) (31%)

US Oil % (1) 68% 67% 66% 64% 59% 59% 57% 55% 41% 38% 32% 32% 30%

LQA $/Boe (2) $36.54 $47.67 $31.73 $34.51 $35.74 $32.32 $26.71 $37.02 $34.87 $32.43 $19.90 $13.32 $16.70

Correlating Market Themes to Actual Share Price Performance

Lower 48 Oil Percentage (of Total) vs. Share Price Performance

R² = 0.7234

(50%)

(40%)

(30%)

(20%)

(10%)

0%

10%

20%

30%

40%

50%

30% 40% 50% 60% 70%

Sto

ck P

rice

Per

from

ance

U.S. Production % Oil

Total Distributions to Shareholders vs. Share Price Performance

No correlation demonstrated between stock buybacks and dividends to share performance

Stocks have demonstrated a strong response to Lower 48 oil production (and productive capacity)

Stock Price Performance Since January 1, 2017

(1) L48 oil production as a percent of total U.S. production.(2) Reflects EBITDA over total production for Q3 2018.

16


What Drives M&A From Here?

1 Growth of L48 Resource and Production (Discussed)

2

Build a Brand - Ability to Attract Large Institutional Investors3

Limited Edition - Scarcity of Remaining Scaled Onshore Oil Assets

4 Greed is Good – G&A Synergies Support Traditional M&A Metrics

17


Number of Deals Net Acres Value ($MM)12 416,263 $31,436

Source: PLS as of November 23, 2018.

Delaware Basin Transactions Over $500 MM Since 2015

Limited Edition - Scarcity of Remaining Scaled Onshore Oil Assets

Midland Basin Transactions Over $500 MM Since 2015

Buyer / Seller

Buyer / Seller

Number of Deals Net Acres Value ($MM)24 3,179,436 $35,125

18


Build a Brand - Ability to Attract Large Institutional Investors

Company A Company B Company C Company D

Market Cap($MM)

$27,000 $12,000 $2,500 $500

6-MonthADTV ($MM)

$300 $220 $60 $20

YTD Value Traded ($MM)

$62,000 $45,000 $13,000 $4,500

InstitutionalShareholderBreakdown

Larger Companies with Greater Trading Liquidity Have Attracted Bigger Funds with the Ability to Accumulate Sizable Equity Positions

Key Points

Investors with large AUM are more favorable shareholders for several reasons:

─ Larger funds take larger positions

─ Generally more patient with volatility

─ Deeper pockets to support subsequent equity raises

Source: Factset, Bloomberg data. 2Q18 account holdings are based on 13F filings as of 6/30/2018.

> $20 B

$10 B - $20 B

$5 B - $10 B

< $5 B

> $20 B

$10 B - $20 B

$5 B - $10 B

< $5 B

> $20 B

$10 B - $20 B

$5 B - $10 B

< $5 B

> $20 B

$10 B - $20 B

$5 B - $10 B

< $5 B

19


34%

30%

28%

24%

23%

21% 21%20%

20%

18% 18% 18%17% 17%

14%13% 13%

12%11%

11% 11%10% 10%

9% 9% 9%

7%

5%

3% 3%

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z AA AB AC AD

Capitalized SG&A as a Percent of Market Cap (1)

Greed is Good – G&A Synergies Support Traditional M&A Metrics

Average: 15.3%

Source: Company filings and CapIQ as of November 23, 2018.(1) LQA cash G&A is capitalized at TEV/2018E multiple.

Average Premium Paid prior to announcement of M&A

deals in 2018 is 21%

20


Public Investors Need to Embrace New Business Models

Reliable Oil

Low Cost Gas

PDP

Delineated, high quality oil inventory

─ Primarily Bakken and Eagle Ford focused

─ Potential to consolidate legacy and private operators

High deliverability gas proximate to the Gulf Coast

─ Primarily Haynesville and SCOOP/STACK/MERGE focused

─ Scaled businesses have been established and are IPO ready

Low decline PDP assets – gas and oil

─ Provide immediate and durable distribution capacity

─ Current asset pricing provides potential for cash on cash return

Non-Permian E&P assets can still support: Return on capital (not just of), Free cash flow generation and current return to shareholders, Growth via acquisitions driven by traditional financial metrics

21


$272

$95

$80

$24 $10 $5 $7

$-

$50

$100

$150

$200

$250

$300

Diversified(Oil-Weighted)

Permian Basin Diversified(Gas-Weighted)

AppalachianBasin

Rockies Mid-Continent Eagle Ford

Mar

ket

Cap

ital

izat

ion

($B

n)

Total Market Capitalization by Region

Regional Distribution ($Bn)

$272

$95 $80

$24

$5 $7

$0.6

$1

$1 $1

$2

$3

$1

$10

Public Investors Need to Embrace New Business Models (Cont’d)


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