DRILL, BABY, DRILL CAN UNCONVENTIONAL FUELS USHER IN A NEW ERA OF ENERGY ABUNDANCE?

2500 2000 Thousand Barrels per Day 1500 1000 500 0 2005

s Map s& gure ht Oil Fi ction s & Tig u Prod ale Ga Sh

Eagle Ford Bakken All Other Plays

2010

2015 Year
J. David Hughes February 2013

2020

2025

Shale gas production by play, 2000 through May 2012

Other Austin Chalk Bone Spring Bossier Antrim Niobrara Bakken Woodford Eagle Ford Fayetteville Marcellus Barnett Haynesville

25 Billion Cubic Feet per Day

20

15

10

5
Barnett Haynesville

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year
Shale gas produc/on appears to be plateauing as of late 2011.

Shale gas production by play, May 2012

7 6 5 Billion Cubic Feet per Day 4 3 2 1 0 Top 3 Plays: 66% of Total Top 6 Plays: 88% of Total

Shale Play

Shale gas production and number of producing wells for the Hayesville play, 2008 through May 2012
9 8 Production (Billion Cubic Feet per Day) 7 6 5 1500 4 3 2 500 1 0 2008 0 2009 2010 Year 2011 2012 1000 2000 Number of Producing Wells
Production Number of producing wells

3000

2500

Produc/on peaked in December 2012, despite con/nued growth in the number of opera/ng wells.

Type decline curve for Haynesville shale gas wells

8000 7000 6000 Gas Production (Mcf per Day) 5000 4000 3000 2000 1000 0 1 6 11 16 21 26 31 Months on Production 36 41 46 Yearly Declines: First Year = 68% Second Year = 49% Third Year = 50% Fourth Year = 48%

Based on data from the four years this shale play has been in produc/on.

Distribution of well quality in the Haynesville play, as defined by the highest one-month rate of production over well life
50000

Highest Monthly Production (Mcf/day)

40000 Median = 7954 mcf/day Mean = 8201 mcf/day

30000

20000

10000

0 0 10 20 30 40 50 60 Percentage of Wells 70 80 90 100

The x-axis indicates the cumula/ve percentage of wells, ordered from lowest to highest quality. The highest one- month rate of produc/on is typically achieved in the rst or second month aGer well comple/on.

Overall field decline for the Haynesville play, based on production from wells drilled prior to 2011
6 2000 1800 5 Gas Production (Billion cubic feet/day)
Production from pre-2011 wells Number of pre-2011 wells

1600 1400 1200

Number of Operating pre-2011 Wells

1000 800

2 Overall Field Decline = 52% 1

600 400 200

0 2008

0 2009 2010 Year 2011 2012

In order to oset the 52 percent decline rate for the eld, 774 new wells producing at 2011 rates are required.

Haynesville Well Quality - Top 20% with Highest One Month Production of >10989 mcf/day in black

20 miles

30 miles

Shale gas production and number of producing wells for the Barnett shale play, 2000 through May 2012
7 6 Production (Billion Cubic Feet per Day) 5 4 8000 3 6000 2 1 0 Year
Produc/on plateaued in December 2012, despite con/nued growth in the number of opera/ng wells

16000 14000
Production Number of producing wells

12000 10000

Number of Producing Wells

4000 2000 0

Type decline curve for Barnett shale gas wells

1600 1400 Gas Production (Mcf per Day) 1200 1000 800 600 400 200 0 1 6 11 16 21 26 31 36 Months on Production 41 46 51 56 Yearly Declines: First Year = 61% Second Year = 32% Third Year = 24% Fourth Year = 18% Fifth Year = 15%

Based on data from the most recent ve years of this plays produc/on.

Distribution of well quality in the Barnett play, as defined by the highest one-month rate of production over well life
12000

Highest Monthly Production (Mcf/day)

10000

8000

Median = 1332 mcf/day Mean = 1619 mcf/day

6000

4000

2000

0 0 10 20 30 40 50 60 Percentage of Wells 70 80 90 100

The x-axis indicates the cumula/ve percentage of wells, ordered from lowest to highest quality. The highest one- month rate of produc/on is typically achieved in the rst or second month aGer well comple/on.

Overall field decline for the Barnett play based on production from wells drilled prior to 2011
7 6 Gas Production (Billion cubic feet/day) 5 4 3 Overall Field Decline = 30% 2 1 0 2006
Production from pre-2011 wells Number of pre-2011 wells

18000 16000 14000 12000 10000 8000 6000 4000 2000 0 2007 2008 2009 Year 2010 2011 2012 Number of Operating pre-2011 Wells

In order to oset the 30 percent decline rate for the eld, 1,507 new wells producing at 2011 rates are required.

Barnett Well Quality - Top 20% with Highest One-Month Production of >2436 mcf/day in black

30 miles

5 miles

2 miles

Shale gas production and number of producing wells for the Marcellus shale play, 2006 through December 2011
4500 5 Production (Billion Cubic Feet per Day)
Production Number of producing wells

4000 3500 Number of Producing Wells 3000 2500 2000

1500 1000 500

0 2006

0 2007 2008 2009 Year 2010 2011

The steep growth in produc/on during and aGer 2009 reects the applica/on of mul/-stage horizontal fracturing technology.

Type decline curve for Marcellus shale gas wells.

2000 1800 1600 Gas Production (Mcf per Day) 1400 1200 1000 800 600 400 200 0 1 6 11 16 21 26 31 Months on Production 36 41 46 Yearly Declines: First Year = 47% Second Year = 66% Third Year = 71% Fourth Year = 47%

Based on data from the most recent four years of this plays produc/on.

Distribution of well quality in the Marcellus play, as defined by the highest one-month rate of production over well life
18000 16000 Highest Monthly Production (Mcf/day) 14000 12000 10000 8000 6000 4000 2000 0 0 10 20 30 40 50 60 Percentage of Wells 70 80 90 100 Median = 1133 mcf/day Mean = 1947 mcf/day

The x-axis indicates the cumula/ve percentage of wells, ordered from lowest to highest quality. The highest one- month rate of produc/on is typically achieved in the rst or second month aGer well comple/on.

Overall field decline for the Marcellus play based on production from wells drilled prior to 2011
2.5 3000

Gas Production (Billion cubic feet/day)

Production from pre-2011 wells Number of pre-2011 wells

2500 Number of Operating pre-2011 Wells

2000 1.5 Overall Field Decline = 29% 1 1000 0.5 1500

500

0 2006

0 2007 2008 2009 Year 2010 2011

In order to oset the 29 percent decline rate for the eld, 561 new wells producing at 2011 rates are required.

Marcellus Well Quality - Top 20% with Highest One-Month Production of >3603 mcf/day in black

100 miles

20 miles

30 miles

Shale gas production by play, May 2011 through May 2012

25 Billion Cubic Feet per Day

d Woodfor Eagle Ford

20
Other Austin Chalk Bone Spring Bossier Antrim Niobrara Bakken Woodford Eagle Ford Fayetteville Marcellus Barnett Haynesville

Fayetteville

15

Marcellus

10

Barnett

Haynesville

0 May-11

Jul-11

Sep-11

Nov-11 Year

Jan-12

Mar-12

May-12

Shale gas produc/on clearly peaked in December 2011 and is now on an undula/ng plateau.

Tight oil production by play, 2000 through May 2012

1400 1200 1000 800 600 400 200
Bakken Other Woodford Marcellus Monterey-Tremblor Austin Chalk Spraberry Barnett Permian Delaware Midland Granite Wash Niobrara Bone Spring Eagle Ford Bakken

Thousand Barrels per Day

0 2000

2001

2002

2003

2004

2005

2006 2007 Year

2008

2009

2010

2011

2012

Together the Bakken and Eagle Ford comprise 81 percent of /ght oil produc/on.

Tight oil production by play, May 2012

600 500 Thousand Barrels per Day 400 300 200 100 0 Top 2 Plays = 81% of Total Top 5 Plays = 92% of Total

Shale Play

Tight oil production and number of producing wells for the Bakken shale play, 2000 through May 2012
600 5000 500 Production (Thousand Barrels per Day)
Production Number of producing wells

4000 Number of Producing Wells

400 3000

300

200

2000

100

1000

0 2000

0 2002 2004 2006 Year 2008 2010 2012

Type decline curve for Bakken tight oil wells

500 450 400 Oil Production (Barrels per Day) 350 300 250 200 150 100 50 0 0 12 24 36 Months on Production 48 60 Yearly Declines: First Year = 69% Second Year = 39% Third Year = 26% Fourth Year = 27% Fifth Year = 33%

Based on data from the most recent 66 months of this plays oil produc/on.

Distribution of well quality in the Bakken play, as defined by the highest one-month rate of production over well life
2500

Highest Monthly Production (Bbls/day)

2000 Median = 341 bbls/day Mean = 400 bbls/day 1500

1000

500

0 0 10 20 30 40 50 60 Percentage of Wells 70 80 90 100

The x-axis indicates the cumula/ve percentage of wells, ordered from lowest to highest quality. The highest one- month rate of produc/on is typically achieved in the rst or second month aGer well comple/on.

Overall field decline for the Bakken play based on production from wells drilled prior to 2011
400 350 Oil Production (Thousand bbls/day) 300 250 200 150 Overall Field Decline = 40% 100 50 0 2006 1000 500 0 2007 2008 2009 Year 2010 2011 2012
Production from pre-2011 wells Number of pre-2011 wells

4000 3500 Number of Operating pre-2011 Wells 3000 2500 2000 1500

In order to oset the 40 percent decline rate for the eld, 819 new wells producing at 2011 rates are required.

Future oil production profile for the Bakken play, assuming current rate of new well additions
1000
Peak 973 Kbbls/day in 2017

900 Production (Thousand Barrels per Day) 800 700 600 500 400 300 200 100 0 2000 2005 2010 Year 2015
Assumptions: - Current drilling rate of 1500 wells/year maintained - EIA estimate of 9767 remaining locations as of 1/1/2010 is correct -Well quality is maintained at 2011 levels Production Number of producing wells

Locations run out in 2017 at 11725 operating wells

16000 14000 12000 Number of Producing Wells 10000 8000 6000 4000 2000 0 2025

2020

This scenario assumes constant new well quality and EIA es/mate of remaining available well loca/ons. Produc/on declines at the overall eld rate of 40 percent aGer peak in 2017.

Future oil production profiles for the Bakken play, assuming current rate of well additions compared to a scenario of 2,000 new wells per year
1200 1000 800 600 400 200 0 2000
Production at 1500 wells/year Production at 2000 wells/year Drilling Rate 1500 wells/year Drilling Rate 2000 wells/year Peak 1099 Kbbls/day in 2015 if 2000 wells added each year Peak 973 Kbbls/day in 2017 if 1500 wells added each year

18000 16000 14000 12000 10000 8000 6000 4000 2000 0 2025 Number of Producing Wells

Production (Thousand Barrels per Day)

2005

2010 Year

2015

2020

Both scenarios assume constant new well quality and the EIA es/mate of 11,725 total available well loca/ons. Produc/on declines aGer peak in both scenarios at the overall eld rate of 40 percent.

Bakken Well Quality - Top 20% with Highest One-Month Production of >589 bbls/day in black

40 miles

Bakken Well Quality Sweet Spot - Top 20% with Highest One Month Production of >589 bbls/day in black

20 miles

Distribution of horizontal wells in the Parshall sweet spot of the Bakken

3 Miles
See right-hand side of previous slide. This area is almost completely saturated with wells although there are s/ll a few loca/ons leG. Green symbols indicate rigs drilling as of December 17, 2012.

Petroleum liquids production and number of producing wells for the Eagle Ford shale play, 2009 through June 2012
600 4000 3500 3000 Number of Producing Wells 2500 2000 1500 1000 100 500 0 2010 Year 2011 2012

500 Production (Thousand Barrels per Day)

Production Number of producing wells

400

300

200

0 2009

Type decline curve for Eagle Ford tight oil wells

400 350 300 250 200 150 100 50 0 1 13 25 Months on Production 37 49
Production 2008-2011 Production first 5 months of 2012

Based on data from the most recent 50 months through year-end 2011 of this plays produc/on. Produc/on for the rst ve months of 2012 is also shown, indica/ng that IPs are rising as drilling focuses on recently dened sweet spots.

Oil Production (Barrels per Day)

Yearly Declines: First Year = 60% Second Year = 64% Third Year = 72% Fourth Year = 46%

Distribution of well quality in the Eagle Ford play, as defined by the highest one-month rate of production over well life
8000 7000 Highest Monthly Production (Bbls/day) 6000 5000 4000 3000 2000 1000 0 0 10 20 30 40 50 60 Percentage of Wells 70 80 90 100 Median = 292 bbls/day Mean = 437 bbls/day

The x-axis indicates the cumula/ve percentage of wells, ordered from lowest to highest quality. The highest one- month rate of produc/on is typically achieved in the rst or second month aGer well comple/on.

Overall field decline for the Eagle Ford play based on production from wells drilled prior to 2011
90 80 Oil Production (Thousand bbls/day) 70 60 50 40 30 20 10 0 2008 2009 2010 Year 2011 2012 300 200 100 0 Overall Field Decline = 27%
Production from pre-2011 wells Number of pre-2011 wells

800 700 Number of Operating pre-2011 Wells 600 500 400

The actual overall eld decline is likely steeper than shown as many pre-2011 wells were being connected over the subsequent months as indicated by the rising well count in 2011 and 2012. If the 27 percent rate is accepted, it would require 723 new wells producing at 2011 rates to oset eld decline each year from current produc/on levels.

Future liquids production profile for the Eagle Ford play assuming current rate of new well additions
1000 900 800 Production (Thousand Barrels per Day) 700 600 500 400 300 200 100 0 2008 2013 Year
This scenario assumes constant new well quality and EIA es/mate of remaining available well loca/ons. Produc/on declines at the overall eld rate of 40 percent aGer peak in 2016. Production Number of producing wells Assumptions: - Current drilling rate of 1983 wells/year maintained - Estimate of 11406 remaining locations as of 1/1/2010 is correct -Well quality is maintained at 2011 levels Peak at 891 Kbbls/day in 2016 Locations run out in 2016 at 11406 operating wells

14000 12000 10000 8000 6000 4000 2000 0

Number of Producing Wells

2018

2023

Future oil production profiles for the Eagle Ford play assuming current rate of new well additions compared to a scenario of 2,500 wells per year
1200
Peak 1031 Kbbls/day In 2015 if 2500 wells added each year Peak 891 Kbbls/day 2016 if 1983 wells added each year

16000 14000 12000 Number of Producing Wells

Production (Thousand Barrels per Day)

1000

800

10000 8000 6000 4000 2000 0 2013 Year 2018 2023

600

400
Production at 1983 wells/year Production at 2500 wells/year Drilling rate 1983 wells/year Drilling rate 2500 wells/year

200

0 2008

Both scenarios assume constant new well quality at 2011 levels and the EIA es/mate of 11,406 total available well loca/ons.158 Produc/on declines aGer peak in both scenarios at the overall eld rate of 40 percent.

Eagle Ford Well Quality - Top 20% with Highest One Month Production of >667 bbls/day in black

40 miles

20 miles

10 miles

Tight oil production by play, May 2011 through May 2012

1800 1600 1400 Thousand Barrels per Day 1200 1000 800 600 400 200 0 May-11
Bakken Eagle Ford Eagle Ford Woodford Austin Chalk Permian Delaware Midland Bakken Marcellus Spraberry Granite Wash Other Monterey-Tremblor Barnett Niobrara

Jul-11

Sep-11

Nov-11 Month

Jan-12

Mar-12

May-12

The Bakken and Eagle Ford are clearly unique among /ght oil plays in the United States.

Projection of tight oil production by play in the U.S. through 2025

2500

History
2000 Thousand Barrels per Day

Forecast
Eagle Ford Bakken All Other Plays

1500

1000

500

0 2005

2010

2015 Year

2020

2025

Based on vintaged type curve produc/on, the number of drilling loca/ons projected by the EIA for the Bakken and Eagle Ford plays, and the assump/on of con/nued recent growth rates in the other plays.