Notes to WRES LBO Assumptions

Revenue Forecast

Oil & gas sales methodology: First, project future reserve, an estimated amount of oil/gas that

can be recovered from wells. Increases in reserve results from exploration & development

activities, which are usually capitalized, and decreases are caused by production of that year.

Second, calculate production by multiplying a 3 year historical average conversion factor

(production/ previous year ending reserve) and projected reserve, except for 2015 production

volume from management guidance. Third, determine crude oil/natural gas prices. Forth,

multiply production by price/unit to derive oil & gas sales

Crude oil reserve: We assume that there will be no increases in oil reserves in 2015 & 2016

because there will be no expansion capex spent on crude oil segment as a result of low oil

prices. 2015 oil reserve decreased after subtracting 2015 oil production and the same for

2016. As oil prices slowly recovers, Warrens ending net oil reserves is projected to grow at

an annual rate of 3.92%, which is the 3-year historical CAGR growth rate for oil reserve

Crude oil prices: We used conservative estimate for oil price recovery. Our 2015 average

price is lower than that of the market consensus of $57/bbl (WTI Crude). Moreover, we

project the crude oil price to reach $75/bbl, which is significantly lower than the peak last

summer of above $100/bbl. The recovery is projected to be moderate because the market

is currently experiencing a demand and supply structural price correction, so the rebound

will happen over a period of time as oil production growth slows in U.S (see slide 16)

Natural gas reserve: For 2015, we project a small net increase in ending gas reserve of 3%

from 2014 due to the low 2015 expansion capex indicated in management guidance due to

the low natural gas prices. Since natural gas prices have a much more favorable outlook

than oil and Warren just acquired the Marcellus shale gas assets, net ending natural gas

reserve is projected to increase at an annual rate of 7.92%, which is half of the 3-year

historical CAGR from 2011-2013 in order to be conservative (excluded 2014 due to the

300MM acquisition of Marcellus shale gas asset that tripled gas reserve)

Natural gas prices: Future natural gas prices are based on futures contracts in order to be

conservative (See slide 17)

Transportation Revenue: Transportation revenue from fees charged on transporting natural

gas through pipelines is usually considered to be stable, relatively immune to energy prices

fluctuation. Therefore, transportation revenue is projected to stay the same as 2014 in the next

five years as Warren changed its point of sale for Atlantic Rim gas at the beginning of 2014

Operating Expenses

Production costs as % of oil & gas production: Production cost/bbl of crude oil is projected to

increase by 2 cents each year until 2017 and stay the constant throughout the rest of the

projection period. We believe that managements focus on reducing oil production cost during

the low oil price environment will partially offset the increasing trend of crude oil production

cost/bbl in the past. 2015 Production cost/Mcf of natural gas is projected to decrease by 5%

from 2014 due to the ramp up in natural gas production as a result of the Marcellus shale gas

asset acquisition. We project production cost/Mcf to decrease moderately at an annual rate of

0.3 cents/Mcf from 2016-2019 also due to increase in production volume

Depreciation, depletion and amortization: Warrens PP&Es weighted average useful life is

around 15 years, and the we assumed that the depreciation base decreases by 6.67% (1-1/15)

each year due to the retirement of certain existing PP&E (see incremental PP&E schedule)

Transportation expense as % of transportation revenue: This percentage is expected to stay

the same as 2014 in the entire projection period because the 2014 ratio reflects the new

margin for this segment after Warren changed point of sale of Atlantic Rim natural gas at the

start of 2014

General and administrative as % of total revenue: This ratio is projected to increase 2% in 2015

from that of 2014 and stay constant for the rest of the projection period to reflect the stock

option granted to existing management after the LBO and the increased need for

administrative staff due to the acquisition of Marcellus shale gas asset in Pennsylvania in 2014

Free Cash Flow Items

Working Capital as % of Total Revenue: We took the three year historical average for this ratio

and kept it constant throughout the projection period

Expansion Capex as % of gross changes in oil/gas reserves: We assumed no expansion capex

for oil segment in 2016 due to the low projected oil price that year, in line with a decrease in oil

reserve at year end. The future expansion capex as % of gross change in oil/gas reserves are

derived from historical average in the past, using the projected gross change in reserve (ending

reserve - beginning reserve + production that year) mentioned above in revenue forecast.

Please note that historical expansion capex/gross change in reserve ratios that are either

negative or related to acquisitions are considered as not meaningful, and those data cannot be

used to project future ratios

Maintenance Capex: Maintenance capex refers to expenditures related to maintaining oil & gas

properties and infrastructure. Maintenance capex is projected to increase by US$0.2 million

each year in the projection period due to increased production

Terminal Value

Exit Multiple: In order to be conservative, we assumed a 6.5x EBITDA exit multiple, which is

right between the mean and 75th of the comparable companies (see slide 19) due to the

improvement of market condition due to energy prices rebound and Warrens solid

fundamentals. In our projection, EBIDTA more than doubled from 2014 at the end of our

projection period, so we decided not to assume any multiple-expansion at the time of exit