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1/20

CONFERENCE RECAP

THIRTEENTH ANNUAL

Spring 2013


2/20

SIMMONS & COMPANY INTERNATIONAL

THIRTEENTH ANNUAL ENERGY CONFERENCE PANEL PARTICIPANTS

E&P PERSPECTIVES:

LARGE CAP

Ernie Leyendecker

Vice President, Exploraon

Anadarko Petroleum Corporaon

John Christmann

Region Vice President

Apache Corporaon

William Thomas

President

EOG Resources

Tim Dove

President & CEO

Pioneer Natural Resources

CAPITAL EQUIPMENT

Chuck Sledge

Senior Vice President,

Finance & CFO

Cameron Internaonal

Corporaon

John Gremp

Chairman & CEO

FMC Technologies

Jeremy Thigpen

CFO

Naonal Oilwell Varco

E&P PERSPECTIVES:

NATURAL GAS

Dan Dinges

Chairman, President & CEOCabot Oil & Gas Corporaon

Ray Walker

COO & Senior Vice President

Range Resources

Steve Mueller

President & CEO

Southwestern Energy

MIDSTREAM/MLP

Randy Fowler

Execuve Vice President & CFO

Enterprise Products Partners

Park Shaper

President

Kinder Morgan, Inc.

Terry Spencer

President

ONEOK Partners

LARGE CAP SERVICE

Andy ODonnell

Vice President,

Oce Of The CEO

Baker Hughes Incorporated

Tim Probert

President, Strategy &

Corporate Developement

Halliburton Company

Bernard Duroc-Danner

Chairman, President & CEO

Weatherford Internaonal

MID CAP SERVICE

Ernesto Bausta III

CFO

CARBO Ceramics

David Demshur


Core Laboratories

Cindy Taylor

President & CEO

Oil States Internaonal

Dale Dusterho

CEO

Trican Well Service

SMALL CAP SERVICE

Josh Comstock

CEO

C&J Energy Services

Wm. Stacy Locke

President & CEO

Pioneer Energy Services

Bryan Shinn

President & CEO

U.S. Silica Holdings

MID CAP MAJORS: NAMUNCONVENTIONAL/GLOBAL EXPLORATION

Howard Thill

Vice President, Investor Relaons

& Public Aairs

Marathon Oil Corporaon

Kevin Fitzgerald

Execuve Vice President & CFO

Murphy Oil Corporaon

Helge Haldorsen

Vice President, Strategy &

Business Development North

America

Statoil ASA

OFFSHORE DRILLERS

Mark Mey

Senior Vice President, CFO

Atwood Oceanics

Larry DickersonPresident & CFO

Diamond Oshore Drilling

John Rynd

President & CEO

Hercules Oshore

Simon Johnson

Vice President, Markeng &

Contracts

Noble Corporaon

Mark Keller

Execuve Vice President,Business Development

Rowan Companies

REFINING

Donald Templin

Senior Vice President, CFO

Marathon Petroleum

Tim Taylor

Execuve Vice President,

Commercial, Markeng,

Transporaon & Business

Development

Phillips 66

Dan Romasko

Execuve Vice President,

Operaons

Tesoro Corporaon

Bill Klesse

CEO, Chairman Of The Boar

Valero Energy Coroporao

E&P PERSPECTIVES:MID CAP

Joe Wright

Senior Vice President, COO

Concho Resources

Lee Boothby


Neweld Exploraon Comp

Taylor Reid

Execuve Vice President, CO

Oasis Petroleum

Jim Flores


Plains Exploraon & Produ


3/20

SIMMONS & COMPANY INTERNATIONAL

THIRTEENTH ANNUAL ENERGY CONFERENCE OVERVIEW

At Simmons 13th annual Energy Conference in Las Vegas in February,

39 CEOs and other top execuves across the energy industry met withinvestors, and tackled some of the most pressing issues facing the industry

today in panel discussions. Among the most signicant takeaways were:

While some companies in the service and midstream segments see

potenal for consolidaon acvity, most panelistsparcularly in

exploraon and produconare put o by what they consider to be

high asset valuaons.

The big queson of the conference was about North American

onshore oil producon and whether or when the astounding growth

of the past few years will start to decelerate.

Another big queson was about when the decline in natural gas-

directed rig count will oset associated gas producon from oil plays,

catalyzing natural gas pricing improvement.

The renaissance in North American oil & gas producon is spreading

the wealth across industry segments as rising domesc supplies bring

new vitality into the midstream and downstream markets.

The outlook for oil service companies appears to be mixed, with some

panelists reporng pockets of strength while othersand many of

their E&P clientssaw pricing in selected areas remaining so.

Excitement over new nds and producon prospects has shied

decidedly from North American onshore sites to the Gulf of Mexico

and beyond. Oshore acvity has picked up in many places around

the globe, although acvity in Brazil remains somewhat uncertain.

Comments from panel parcipants were frank, and the discussions

revealed dierences in opinion and outlook. The following are some of

the insights from execuves, in their own words.

S I M M O NS & CO M P A NY I NT E R N A T I O NA L S

T H I R T E E NT H A NNU A L E NE R GY CO NFE R E NCE R E CA P 1


4/20

Panelists, with a few excepons, were unenthusiasc about current M&A

opportunies, cing high valuaons. Most companies will focus this year ongrowing their businesses and increasing producon from core assets--wheth

those assets are new drillships or Permian acreage or pipelines. Buying

earnings right now is a heck of a lot more expensive than building them, said

Terry Spencer, President of ONEOK Partnersin the midstream space. At 12

13x market mulples, we like the grassroots investments; those prices make

easy for us to decide where to deploy our capital.

Helge Haldorsen, Vice President of North American Strategy and Business

Development for Statoil ASA, would like to be a buyer in the U.S. but is held

back by the high prices. Our strategy is to get bigger so we can be doing thi

for 40 years, he said. We have our smallest presence in the Eagle Ford, and

if the price is right will increase our presence, but prices in the market are ve

high. Hw Thll, Mth Ol Cps Vc Pst f Ivst

Rls, agrees. We do connue to look at opportunies to do bolt-on

acquisions, but the market is very expensive today, and theres not a lot for

sale, quite frankly, he said. The Eagle Ford has just a few large companies

operang there, while the Bakken is more splintered with a lot of smaller

players. We expected more consolidaon there by this point, but over the ye

as we got comfortable with the price level, it would run away from us again.

On the North American service side, lower rig counts and some low pricing

might suggest there are opportunies for consolidaon, but asset prices are

holding buyers back. We are out of the M&A market, said Dl Dsth

CEO of Trican Well Service. If we were to do any M&A in the U.S., we

would want to do it under asset value, and we dont see any opportunies

out there right now. Others see selected opportunies. We are looking at

diversicaon of our exisng service lines, said Josh Comstock, CEO of C&J

Energy Services. We want to create higher diversicaon of our oerings a

see some opportunies. Taylor Reid, EVP and COO of Oasis Petroleum, thi

consolidaon would benet the North American E&P segment as well. Whe

you look at the shale plays, as people transion to pad and to drilling mulple

wells, the complexity of those operaons increases signicantly, he explaine

To gain the scale and ability to take advantage of those opportuniesit

makes sense to consolidate, its just a queson of whether you can make the

numbers work.

PRICEY ASSETS SUBDUE M&A INTEREST

2S I M M O NS & CO M P A NY I NT E R NA T I O NA L S

T H I R T E E NT H A NNU A L E NE R GY CO NFE R E NCE R E CA P


5/20

Companies are going to the markets

o sell paral interests in selected

projects in an eort to boost market

valuaons of what they feel are

under-recognized assets in their

porolios. Marathon announced in

October that it was considering selling

an interest in its Canadian oil sands

project. If we do sell, we would keep

an exposure of 10% or more, said

Howard Thill. That property has

great potenal over the next 20-40

years for development, so it is not like

we are exing the business. Selling

an interest would put a marker out

here. The full value of our oil sands

project is not reected in our share

price. Marathon is doing the same

hing with its Gulf of Mexico interests,owering its interest in prospects such

as Madagascar from 100% to 30-

50%. We are doing that to manage

nancial and polical risk, explained

Thill. Those properes are all part

of our larger porolio, and it is part of

whats dierent now about Marathon:

Our Gulf interests are more balanced.

Kevin Fitzgerald, CFO of Murphy

Oil Corp., has moved his company

forward with divestures to create

value for shareholders, with a spino

of U.S. retail operaons set for the

second half of 2013, and plans to move

capital from Canadian assets to the

Eagle Ford basin. We will be le with

a pure play E&P company that has

exploraon, primarily internaonal, as

its rst focus, he said.

A few companies who have been

aggressive buyers in the past connue

to look for acquisions, sll seeing

opportunies to earn a reasonable

return. Park Shaper, President ofKinder Morgan, Inc., is sll a buyer.

We are happy to invest capital in

transacons where we earn in excess

of our cost of capital, he said. We

found lots of opportunies to do that

with our El Paso acquision. We invest

in both acquisions and expansion

so we are trying to nd transacon

where we have condence that we

earn in excess of our cost of capita

Other execuves whose companie

are in niche markets see potenal

M&A opportunies among weaker

performing competors. We are

looking all along our value chain,starng in the mining and process

areas where lots of capacity has be

added, said Bryan Shinn, Preside

and CEO of U.S. Silica Holdings. L

of people have goen themselves

over their heads, so we are in the M

market right now. Some oshore

companies would also welcome

consolidaon acvity. We would to see a bit more M&A acvity, sa

Simon Johnson, Vice President of

Mkg & Ctcts t Nl C

There have been new names com

into the drilling space, and it would

good to see headcount reduced a

We invest in both acquisions and expansionsso we are trying to nd transacons where we

have condence that we will earn in excess of

our cost of capital.

Park Shaper, President of Kinder Morgan, In




6/20

This year, discussion of North American unconventional oil

E&P moved away from last years tales of new discoveries andclimbing reserve estimates toward spirited debates about how

high U.S. onshore oil production will actually goand when the

peak will come. While most participants that are active in the

unconventional space believe there are still further production

gain surprises to come on the upside, particularly in the Permian

basin, a few voiced skepticism that the current trajectory of

production growth will continue much longer or reach 10 million

barrels per day by 2015. When it comes to U.S. oil production,we think estimates of 10 million barrels are too optimistic, said

Dv Dmsh, CEO f C Lts. In the oil plays,

all the good wells get drilled first. Over the last three years,

they have drilled a lot of pretty good wells, and efficiencies

can only take us so far. The days of the best wells being drilled

are probably behind us. Demshur is skeptical of the economic

viability of some of the onshore oil development. Outside of t

sweet spots in the Bakken, Eagle Ford and Wolfcamp plays, youneed WTI upwards of $90 to get a decent return on capital.

Others are more optimistic. With the right fundamentals we

can get significant volume out of all these incredible plays, said

Ernie Leyendecker, Vice President of Exploration for Anadarko

Petroleum. We are optimistic that the Eagle Ford and the

Bakken plays really have the resource potential for us to unlock

and grow capacity. Jim Flores, CEO of Plains Exploration &

Productionpointed out that responsibility for reaching 10 millio

barrels of production is shared across other segments of the

industry. To get to those production levels you have to have

infrastructure, he said. Think of all those pipelines that cause

increased gas production; we havent built any crude pipelines.

NORTH AMERICAN OIL: WHEN DOES THE FLOW START TO SLOW?

To get to those producon levels,

you have to have infrastructure.

Think of all those pipelines that

caused increased gas producon;

we havent built any crude

pipelines. Youve got a long way

to go to get to those 10 million

barrel producon levels with

infrastructure for crude.

Jim Flores, CEO of Plains

Exploraon & Producon




7/20

Youve got a long way to go to get to those 10 million barrel

production levels with infrastructure for crude.

Most panelists expressed excitement over the production

prospects in the Permian Basin and believe in the potential

or more positive surprises as horizontal drilling ramps up.

We are very early in the Permian plays with horizontal

drilling, said John Christmann, Region Vice President of

Apache Corp. The Permian basin has historically been

developed using vertical spacing. It is now starting to be

urned on its side, which takes a lot of legwork up front. But

hat is what you have to do to develop those vast resources,

nd the results will surprise people. Tim Dove, CEO of

Pioneer Natural Resources,agrees. The big surprise in the

U.S. will be the Permian, he said. When it is turned on its

ide, it is going to be shocking to see the kind of resources

hat will come out of those horizontal plays.

The big surprise in the U.S. will be

the Permian. When it is turned on

its side, it is going to be shocking

to see the kind of resources that

will come out of those horizontal

plays.

Tim Dove, CEO of Pioneer

Natural Resources




8/20

Panelists at the Simmons Conference voiced near-universal consensus on

one topic: that U.S. natural gas price weakness will extend at least into 201

Execuves were much more sanguine about a quick rebound in natural gas

liquids (NGL) prices, but panelists made clear that the best thing for dry gas

at the moment is to have it stay in the ground. I think that natural gas pric

will connue to be impaired, said Jim Flores of Plains. We are in $3.00 la

for some me unl we get industrial demand. We are planning on good ga

prices in 2016-2020. It is good to make plans now, but it will be hard to get

superior returns in the gas business.

Associated gas from oil plays is not staying in the ground and appears to

be part of the supply problem. About 40% of current producon of gas isassociated gas, explained Tim Dove, President & CEO of Pioneer Natural

Resources. With all the oil drilling that went on last year, we grew gas

producon by 10%, even though we drilled no gas wells. Joe Wright, COO

of Concho Resources, is in the same posion. 100% of our gas produco

is associated gas, so we are growing both oil and gas domescally, he said

Those producers with the luxury of choosing between oil and gas produc

would need to see a substanal upswing in prices to lure them back to

the dry gas elds. We would like to see prices north of $5.00 to push the

accelerators on with gas producon, said Ernie Leyendecker of AnadarkoHowever, we will certainly see some people go back to gas when it is

between $4.00 and $5.00. D Dgs, CEO f Ct Ol & Gs, also

idened $4.50 as the price point for natural gas. I think gas has to be up

that area before you see a large inux of rigs, and prices have to be there f

a long period of me.

Producers who had switched over to liquids were hit with a sudden

downturn in those prices during 2012, but most panelists expect NGL price

to recover much more quickly than dry gas. We see a so market for NG

in the short term, but over the long term, when petrochemical demandcatches up, we will see price recovery, said Ernie Leyendecker. In the

midstream area, panelists also were opmisc about the liquids market.

Inventories have reached historically high levels, said Terry Spencer,

President of ONEOK Partners. We see the propane situaon resolving w

a more normal winter this year and ethane inventories coming down as we

So we think we will see pricing strength in liquids in 2014 and 2015.

LOW U.S. GAS PRICES ARE NO FUN FOR PRODUCERS BUT BOOST DEMAND

Inventories have reached

historically high levels. We

see the propane situaon

resolving with a more

normal winter this year and

ethane inventories coming

down as well. So we think

we will see pricing strength

in liquids in 2014 and 2015.

Terry Spencer, President of

ONEOK Partners




9/20

One issue of contenon is the level and impact of any

uture LNG exports on the natural gas sector. Parkhaper of Kinder Morganbelieves exports will play

part in the natural gas future. Clearly more gas

will be exported, he said. Steve Mueller, CEO of

outhwestern Energy, does not believe exports will be a

ignicant source of demand long-term given the limited

ize of the market, the cost, and the expectaon that

nly a limited number of plants will be approved in the

U.S. I am very comfortable that plants approved will be

more than one, but it is a long process and we will not

ee anywhere near the 12-13 approved that equals theumber that have been requested, he said.

ooking ahead, the good newsand a glimpse of that

right future for domesc natural gascame from

anelists in the midstream and downstream areas. Low

as prices are benecial to the extent that they drive up

emand, said Park Shaper of Kinder Morgan. Those

rices are driving demand in gas-red generaon, in

etrochemicals, and other industrial sources.

More posive news was evident in natural gas panelists

escripons of eorts by the gas industry itself to bring

bright future closer. The good news is that today,

ouve got the Marcellus Coalion and other groups

ocused on raising demand for natural gas, said Ray

Walker, COO of Range Resources. If we all believe

hat gas is a superior fuel, then we need to work on

emand, and thats the real secret. Transportaon

s the big potenal market, but all agreed it would be

low to develop. We see a 10-year me frame to get to

omething that will signicantly impact the demand side

or natural gas, said Steve Mueller, CEO of Southwestern

nergy. It is coming, however, because it is economically

iable.

That bright future for domesc natural gas is compelling

enough for execuves to look beyond the more cloudypresent. We are in the right business, asserts Walker.

It might be two years, it might be ve before prices

improve, but at some point we are going to be really

glad that we are doing what were doing. That gets me

excited.

We are in the right business. It might be

two years, it might be ve before prices

improve, but at some point we are going

to be really glad that we are doing what

were doing. That gets me excited.

Ray Walker, COO of Range Resources




10/20

Operators of pipelines and reneries in the U.S. are

reaping the benets of burgeoning U.S. oil & gas

producon, which has breathed new life into once-

sleepy industry segments. Keep telling the E&P guys

to drill, said Bill Klesse, CEO of Valero Energy Corp.

We announced last quarter that we ran all domesc

for light sweet crude in our Gulf Coast and Memphis

plants, and that used to be foreign oil. Where once

execuves focused on how quickly capacity could

be eliminated, now the focus is on how to grow

light crude handling ability on the Gulf Coast fastenough, and in the right direcons. What investors

under-appreciate about us is that we reners have

growth prospects with the resource advantages

of crude and natural gas, and at the same me we

are generang lots of free cash ow, said Klesse.

Prot forecasts will be upgraded for all of us. With

our free cash ow and the amount of oil coming in,

that is changing everything.

While E&P execuves are already debang howhigh onshore oil producon will go and how long it

will last, execuves downstream are just beginning

to prepare for the inux of light, sweet crude that

is coming their way. Producers and reners alike

believe the Gulf Coast will be the recipient of most

of this producon increase. We are focusing on

a large inux of light sweet crude coming into the

Gulf and that could aect pricing over the next

2-3 years, said Tim Dove of Pioneer Natural

Resources. Bill Klesse of Valeroagrees. By the

me you get to 2015, a lot of light sweet oil will be

moving to a lot of places, and that is when it is going

to be more signicant to see everyones ability to

process it, he said. The Gulf Coast will be very

long light, sweet crude.

Midstream execuves tell an equally posive story.

It is a phenomenal me to be in the midstream

area, thanks to the work of our upstream colleagues,

said Park Shaper of Kinder Morgan. Theres

tremendous incremental demand for transporng

liquids right now, we have an abundant domesc

supply of fuel, low prices that will drive domesc

demand, and export potenal. Randy Fowler, CFO

of Enterprise Products Partnersdrew parcular

aenon to NGLs, where low prices may have

U.S. PRODUCTION BREATHES LIFE INTO THE MIDSTREAM

AND DOWNSTREAM SEGMENTS

Keep telling the E&P guys to drill. We

announced last quarter that we ran all

domesc for light sweet crude in our Gulf

Coast and Memphis plants, and that used to

be foreign oil.

Bill Klesse, CEO of Valero Energy Corporaon




11/20

egavely aected producers but have spurred demand

or pipeline capacity. The NGL side has been preymazing, he said. It is amazing what NGLs have done

or the U.S. petrochemical industry, which was given up

or dead. Weve taken that industry from one of the most

xpensive producers in the world in 2003, to producon

hat is now the cheapest in the world.

&P sector panelists spoke of their dependence on

midstream commitments to provide takeaway capacity

nd how that will aect producon over the long term.

In the Eagle Ford, we cant say enough how importanthe takeaway capacity has been, said Howard Thill,

f Marathon. Weve spent $350 million on pipelines

nd facilies. People dont think about the addional

work past the wells you have to do to make certain

ou have takeaway capacity. Long-term prospects

epend on capital outlays to expand takeaway capacity

s well. Some of the midstream projects that are

esigned out there are not just trying to create gas-on-

as compeon in exisng markets, but also to access

ew markets on the Atlanc Seaboard, said Dan Dinges

f Ct Ol & Gs. In the long term that will lead to

nhanced demand for us.

eners are engaged in transport issues as well.

For example, they have to grapple with the high potena

but dicult logiscs of transporng Canadian crude intoCalifornia. Midstream operators see years of opportunit

for expansion ahead, transporng natural gas to Mexico

and new markets in the eastern U.S. and eastern Canada

Overall, panelists in the midstream and downstream

segments are gearing up for growth, and their comment

reect the posive outlook for once-dormant industry

segments that North American producon now promise

to deliver.

In the Eagle Ford, we cant say enough how important the takeaway capacity has

been. Weve spent $350 million on pipelines and facilies. People dont think about the

addional work past the wells you have to do to make certain you have takeaway capacity.

Howard Thill, Vice President, Investor Relaons & Public Aairs

Marathon Oil Corporaon




12/20

Acvity in the Gulf of Mexico has fully recovered to pre-Macondo

levels, and at the Simmons conference, the Gulf was the focus of muenthusiasm. In the Gulf, we saw super-strong results in the fourth

quarter, and the outlook connues to be strongboth in acvity an

mix, and even some pricing, said Andy ODonnell, Vice President a

Baker Hughes, Inc. Helge Haldorsen of Statoilis equally bullish on t

Gulf. This year, we have a number of excing wells coming up on t

producon side, he said. We have enormous investments in the G

We are ramping up producon, and with our exploraon eorts, we

hope to nd something big soon. Last year, we found Logan with 1.

billion barrels in place, so the boom line is that we are in the Gulf fo

the long haul and believe the Mpd return per barrel is twice as high

you get onshore.

Outside of the Gulf, E&P companies express enthusiasm about the

potenal of deepwater plays around the world and the oshore

drilling and subsea capital equipment panelists echo that enthusiasm

We are seeing a strong internaonal market in all sectors, said Ma

Kll, Excv Vc Pst f Bsss Dvlpmt t Rw

Companies.

John Gremp, CEO of FMC Technologies, was, like other makers of

subsea equipment, happy to see a strong pickup in tree orders durin

2012 and sees strength connuing into this year. The increase com

from a number of West Africa projects, he said. Weve got a num

of Angola projects queued up to be awarded, another in Ghana, one

Equatorial Guinea, and in other places. It looks like West Africa is n

starng to break out. A large tree order for Cameron Internaonal

Corp. in Nigeria pointed to higher prices ahead, but Chuck Sledge,

CFOof the company, warned that the pricing on that order reected

the parcular risks Cameron assumes while operang in Nigeria andmay not reect pricing in other parts of the world. Helge Haldorsen

of Statoilexpects lots of good news to come from Africa in the near

future. For us, exploraon is a major growth engine, he said. We

are working on rigs now in Angola presalt, and you should see that

come on in 2013. On the other side of Africa, we have Tanzania whe

we are drilling a new well, and one in Mozambique that might be oil

To have wells in that acreage this year is very excing.

E&P FOCUS SHIFTS FROM U.S. ONSHORE PLAYS TO THE GULF OF MEXICO

AND INTERNATIONAL WATERS

This year, we have a number

of excing wells coming up

on the producon side. We

have enormous investments

in the Gulf. We are ramping

up producon, and with our

exploraon eorts, we hope to

nd something big soon.

Helge Haldorsen, Vice President

of North American Strategy for

Statoil




13/20

Panelists also menoned Mexico, Southeast Asia, and

even the U.K. as areas of increased acvity. The U.K.sector in the North Sea has blossomed with a new,

sensible tax policy, noted Andy ODonnell of Baker-

Hughes. Brazil, however, remains a queson mark,

although subsea equipment makers expect to see new

orders this year. Brazil is a dicult market, said Chuck

Sledge of Cameron. This year, however, we do expect

o see incremental orders out of Brazil. John Gremp of

FMC Technologies, agrees. Its very hard to predict what

Petrobras will do, but I am more opmisc and think we

will denitely see not only presalt manifold awards but

addional tree awards this year, maybe in the rst half.

Drillers are less opmisc but believe that Petrobras will

have to respond to todays oshore market condions.

The big change is that Petrobras is facing capital

discipline challenges from the government, said Larry

Dcks, CEO f Dm Osh Dllg. Theres

a downside for them to cut back in midwater because of

exisng producon there. Youve also got renewals in

deepwater coming, and all operaons have been facingregulatory challenges. I suspect that Petrobras is going

o get scker shock when they see the rebids. Simon

hs f Nl Cp.believes that Petrobras will also

have to adjust its expectaons in order to aract the sort

of drilling partners it needs to move forward. One of the

things people are watching is the terms and condions

Petrobras puts in the contracts going forward, he said.They have not changed, and I would argue that they are

out of step with the rest of the world.

Execuves across a number of panels at the conference

complained that investors do not appreciate the value of

their internaonal holdings and operaons. For example

Apache Corp.s Egypan projects generate generous cash

ows used to fund other operaons, and Anadarko sold

a percentage interest in its Mozambique acvies to

parally moneze their investment and highlight its valuWe dont get the value in our share price for a lot of our

internaonal assets, said Ernie Leyendecker of Anadark

This is true parcularly for our deepwater assets. We

are spending 20% of our capital looking for new and larg

opportunies around the world in deepwater basins, and

it is parcularly frustrang that the value recognion

is not there. Howard Thill of Marathonagrees that

investors underesmate the value of internaonal

assetsand their importance to the balance sheet. We

have such a strong balance sheet and are able to fund

resource play growth as well as exploraon because we

have an internaonal porolio that spins o a lot of cash

he said. The idea that we should spin o our internaon

operaons because of their low return, that is simply a

misunderstood piece of our business.

Brazil is a dicult market. This year, however, we do

expect to see incremental orders out of Brazil.

Chuck Sledge, Senior Vice President, Finance & CFO

Cameron Internaonal Corporaon




14/20

Onshore rig counts have aened in 2013, but Simmons conference

parcipants were lukewarm on the outlook for onshore servicecompanies. Panelists described a 2013 outlook for the onshore North

American service segment that was good but not great, with pockets

pricing pressure in certain areas and business lines. Aer a year wher

several E&P panelists reported that they were seeing 10-12% overall

reducons in onshore service costs, larger service companies were

eager to change the subject away from the U.S. unconvenonal marke

to stronger Gulf and internaonal operaons.

Onshore, as producon matures in some places

and is just geng started in others, pockets of

strength and weakness are occurring throughou

the service segment. The areas of interest are

shiing, said Cindy Taylor, CEO of Oil States

Itl. The outlook is cloudy for verca

rigs and lower horsepower rigs. Theres nothing

negave going on in any play; the issue right now

geng the right equipment to customers in tho

plays.

Several players menoned seeing parcular

pricing soness in fracking services. Compleo

intensity has increased, and that is good for us,

said Josh Comstock, CEO of C&J Energy Services. But there is pressure on pricing in the frack market. The spot markets

extremely compeve, and we have seen lots of degradaon there in pricing. We think we have seen the boom, though

Producers back this up, reporng easing service costs in the fracking sector. We have seen a 10-15% drop in frack costs t

quarter in the Eagle Ford, and that speaks to capacity, said Jm Fls, CEO f Pls Expl & Pc. What he

some boom lines puts pressure on others. Most people underesmate the size of our smulaon equipment business

and that business has fallen o the face of the earth, said Jmy Thgp, CFO f Nl Olwll Vc. In the second

quarter of 2012, we had our highest backlog ever for smulaon equipment, but by the end of the year it had dropped o

65%. We are denitely right-sizing that business.

Stacy Locke, CEO of Pioneer Energy Service, sees a wide variaon in the service outlook among his business segments. O

the producon services side, wireline services, well and coil tubing, the outlook compared to November and December is

improving as rig counts pick up and should be even beer in the second half, he said. On the drilling side, the one chang

is in the Permian vercal market for oilthat changed rather abruptly as some of our major clients have decided to allocat

more to horizontal than to vercal drilling.

OIL SERVICE: POCKETS OF STRENGTH, POCKETS OF WEAKNESS

The areas of interest are shiing. The outlook is

cloudy for vercal rigs and lower horsepower rigs.

Theres nothing negave going on in any play; the

issue right now is geng the right equipment to

customers in those plays.

Cindy Taylor, CEO of Oil States Internaonal




15/20

Oil & gas and the producon of these two commodies have usually gone hand in

hand in North America. One of the most notable trends on display at this years energy

conference was how divergent the pathways have becomenot only for current prices, but

for future domesc supply growth prospects as well. The worldwide outlook for oil prices is

bright according to the overwhelming majority of panelists, but quesons are being raised

about how long the onshore oil boom will last in the U.S.

Meanwhile, natural gas producers chase a bright future that to some is beginning to seem

forever out of reach, given connued depressed domesc prices. However, midstream and

downstream companies are already prospering from the growing demand for natural gas

that these low prices are encouraging. All conference parcipants agreed a brighter future

s just a maer of me and paencequalies some companies may possess in more

abundance than others.

Excitement in the energy industry has always revolved around new discoveries. For

the past several years, that enthusiasm has been focused on North America as newtechnologies opened up new basins for development and reserve esmates climbed. At the

Simmons conference this year, however, a noceable change in E&P emphasis took place as

panelists worked to shi aenon to discoveries oshore and overseas.

For the industry as a whole, in North America and around the globe, the outlook is bright,

and well-posioned parcipants in most industry segments are looking forward to healthy

oil prices and growth opportunies in many areas.

NORTH AMERICAN OIL AND NATURAL GAS E&P ON DIVERGING PATHS

Other panelists noted the big switch to horizontal drilling in

the Permian as well. For C&J Energy Services, this is goodnews. In the Permian as a whole, a relavely large poron

of the rig count is sll vercal, but it is shiing to horizontal,

and doing more stages as well, with mulwall pads and

mullaterals per well. All that intensity will drive higher

demand, Comstocksaid.

Execuves with service operaons outside of North

America spoke of improving business and major

opportunies popping up in other parts of the world. For

us, the most notable improvement has come in Australia,

said Cindy Taylor of Oil States Intl. The outlook has beenclouded there by slowing demand growth in China, but

GDP forecasts are up, and we have seen a re-acceleraon

of growth in Australia. Dl Dsth, CEO f Tc

Well Service, agreed. I was pleasantly surprised by things

moving ahead more quickly in Australia, he said. In

Russia, we also saw a beer than expected increase in the

growth of horizontal fracturing. We are now doing quite a

few horizontal wells there.




16/20

SIMMONS & COMPANY EXECUTIVES

SENIOR EXECUTIVES

Michael E. Frazier

Chairman, President &

Chief Execuve Ocer

[email protected]

Anthony P. Banham

Advisor Director

[email protected]

Nicholas L. Swyka

Advisor Director

[email protected]

CORPORATE FINANCE

HOUSTON

James P. Baker

Managing Director,

Midstream & Downstream

[email protected]

Jay B. Boudreaux

Managing Director,


[email protected]

Frederick W. Charlton

Managing Director,

Ener Services & Euipment

[email protected]

Ira H. Green, Jr.

Managing Director,

Capital Markets,

E&P and Alt. Ener

[email protected]

Mhw G. Pl

Managing Director,


[email protected]

Spencer W. Rippstein

Managing Director,

Midstream & Downstream

[email protected]

Andrew C. Schroeder

Managing Director,


[email protected]

Paul R. Steier

Managing Director,


[email protected]

Damon Box

Director, Exploraon & Producon

[email protected]

David C. Newman

Director of Enineerin


[email protected]

Todd A. Parsapour

Director, Ener Services &

[email protected]

Michael S. Sulton

Director, Midstream &

Downstream

[email protected]

J. Kris Terrill

Director, Ener Services &

Euipment

[email protected]

SIMMONS COMPANY

INTERNATIONAL LIMITED

Aberdeen, London, Dubai

Colin I. Welsh

Chief Execuve Ocer (SCIL)

[email protected]

Mike Beveridge

Manain Director (SCIL)

[email protected]

Nick Dalgarno


[email protected]

Eddie Leigh


[email protected]

Craig Lyon

Manain Director (SCIL)[email protected]

Dan Barnosky

Manain Driector (SCIL)

[email protected]

SECURITIES

HOUSTON

Wllm F. B

Managing Director,

Co-Head of [email protected]

A. Denney Cancelmo

Managing Director,

Head of Tradin

[email protected]

J A. Dtt

Managing Director,

Head of Research

[email protected]

Pearce W. HammondManaging Director,

Co-Head of E&P Research

[email protected]

Wllm A. Ht

Managing Director,

Co-Head of Securies

[email protected]

David W. Kistler

Managing Director,

Co-Head of E&P Research

[email protected]

John M. Daniel

Director, Co-Head of Oil Serv

Research

[email protected]

B Gml

Director, Research

[email protected]

Ian Macpherson

Director, Co-Head of Oil Serv

Research

imacpherson@simmonsco-in

Sean W. Mitchell

Director, Co-Head of

Instuonal Sales

[email protected]

David P. Orr

Director, Instuonal Sales

[email protected]

Mark L. Reichman

Director, Research

mreichman@simmonsco-intl

SIMMONS COMPANY

INTERNATIONAL CAPITAL

MARKETS LIMITED

London

Rt C. Ms

Director, Head of European

Instuonal Sales (SCICML)

[email protected]




17/20

SELECT ACTIVITIES

UPSTREAM OIL & gAS




18/20

SELECT ACTIVITIES

ENERgy SERVICES & EqUIPMENT

*Denotes a transacon completed by Simmons & Company Advisory Limited.




19/20

SELECT ACTIVITIES

MIDSTREAM & DOwNSTREAM




20/20

*Simmons & Company International is a member of FINRA/SIPC. Simmons & Company International Limited (SCIL) (Reg. No. SC190220) is authorised and regulatedby the Financial Conduct Authority in the United Kingdom and by the Dubai Financial Services Authority as a Representative Office in Dubai Simmons & Company

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