Projecting US Upstream Activity · • Industry Stock Prices Outperforming Underlying Commodities ....

2016 IADC Drilling Onshore Conference & Exhibition

Projecting US Upstream Activity The Market Outlook with Forecasted US Land Rig Demand

Trey Cowan May 19, 2016


Key Factors Shaping Tomorrow’s Trends

Historical Context • Comparison to Prior Downturns

• Influential Relationships and Current Conditions

Key Factors Shaping Our Projections • The Big Reset – Innovation And Cost Base Reductions

• Capital Budgets and Other Leading Indicators

Projected Rig Demand


Historical Context – Crude Prices


Historical Context – US Land Rig Counts


Key Relationships For L48

• Rig Counts Track the Pricing of their Production Streams

• Horizontal Drilling Tracks Approved Permits

• Industry Stock Prices Outperforming Underlying Commodities


Global Fundamentals

Headwinds

• Oversupply Remains • China Slowing • Federal Reserve & US$


Current Environment


General Industry Trends XLE Segmented By Industry and Primary Drilling Concentration

Priced As of 5/10/16Key Indicators Y/Y YTDWTI Crude - Spot -25% 20%Natural Gas - HH Spot -24% -5%S&P 500 -1% 2%XLE -16% 9%

Producers' Stock Performances Constituent TickersMajors 3% 15% CVX, XOMBy Play:Marcellus/Utica -38% 62% CNX, COG, RRC, EQT, SWNEagle Ford -47% 5% CHK, MRO, MUR, COPWoodford (SCOOP/STACK) -16% 25% CLR, DVN, NFXBakken -16% 25% QEP, HESWolfberry/Wolfcamp/Bone Spring -4% 21% APA, EOG, OXY, PXD, XECNiobrara -32% 4% APC, NBLProducers' Average -24% 27%

Non-ProducersContract Drillers Land -32% 6% HP, NBRContract Drillers Offshore -44% -11% DO, ESV, NE, RIGMidstream -32% 23% KMI, OKE, SE, WMBOilfield Equipment -15% -2% NOV, CAMOilfield Services -21% 7% BHI, HAL, SLBRefining -10% -20% MPC, PSX, TSO, VLONon-Producers' Average -26% 0%

Source: SPDR State Street Global Advisors, CME Group, RigData News & Analysis


Stock Performance & Rig Activity by Play Performance Since Oil Prices Peaked on 6/24/14

Key Indicators As of 5/10/16WTI - Spot -59%Natural Gas - HH Spot -52%S&P 500 6%

Energy Select Sector (XLE) -32%

Producers' Stock Performance by RegionWoodford (SCOOP/STACK) -40%Permian (Wberry, Wcamp, Bone Spring) -29%Niobrara -55%Bakken -44%Eagle Ford -63%Marcellus/Utica -51%

Producers' Average Performance -43%

Non-Producers' Stock Performance by RegionContract Drillers Land -57%Contract Drillers Offshore -67%Midstream -41%Oilfield Equipment -37%Oilfield Services -37%Refining 3%

Source: EIA, CME Group, RigData News & Analysis


Refining Industry’s Run Is Long In The Tooth


Downstream: Margins and Throughput Are Falling


Innovation and Lower Oil Prices Mandated the Reset in Costs Across the Industry

Horizontal YTD Play ------------- Active Rigs ------------- Well Cost Top Ten Counties Stock

4/29/2016 2015 Avg. Change $ million Performance2

Anadarko Woodford 27 44 -39% 9.5 Blaine, Kingfisher 31%

Permian Unconventional 104 209 -50% 6.91 Midland, Reeves, Loving, Upton, Martin 21%Niobrara 15 31 -52% 3.9 Weld 4%Eagle Ford 25 99 -75% 4 Karnes 5%Bakken 25 82 -70% 6.3 McKenzie 25%Marcellus/Utica 28 76 -63% 6.7/11.5 NA 62%Remainder 129 348 -63%Total 353 889 -60% 27%

Note 1: Permian wells costs are based only producers' results targeting Wolfcamp formation.

Note 2: Stock performances by play based on simple averages for producers who are components of the XLE - Energy Select Sector SPDR Fund Index.


Capital Budgets & Production Moving In Opposite Directions

Sample of 22 US Producers 1Q16 Financial Results:

Capital Expenditures • Shaved $300 mn. off previous 2016 guidance of $24 bn. or

-53% below 2015 CAPEX levels • Only 1 from sample increasing CAPEX guidance Production • Raising 2016 production volume expectations by 140 basis

points to 5.8 mn BOE or -4.5% Y/Y • 13 of 22 increased their 2016 production guidance


Land Rig Forecast

--- Forecasts ---Regions 2014 2015 2016 2017 17/16

Appalachia 133 81 31 31 1%ArkLaTex 83 60 22 21 -5%California 35 10 5 8 57%Gulf Coast 77 30 10 14 37%Mid-Continent 333 157 68 72 5%Permian 533 261 122 121 -1%Rocky Mountains 326 160 53 61 15%South Texas 220 108 35 41 19%Other 43 21 9 9 2%

Total US Land Rigs 1,783 889 355 379 7%


Land Rig Forecast Versus Prior Downturns


Implied WTI Crude Price (Monthly average $/bbl)


Implied WTI Crude Price Versus Prior Downturns


Thank You

Presenter’s Contact Information: RigData W.A. (Trey) Cowan, Senior Industry Analyst 15915 Katy Freeway, Suite 450 Houston, Texas 77094 [email protected] 281-646-1960 x4222

mailto:[email protected]

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Projecting US Upstream Activity · • Industry Stock Prices Outperforming Underlying Commodities ....

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