Mid-Continent M&A Trends

August 6, 2020

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Petrie Partners – Strategic Advisors to the Energy Industry

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We emphasize execution over origination at the highest levels of the firm

Cycle-tested investment banking team

Mid-Con M&A Discussion

Recent Market Developments

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COVID-19 reported cases have exceeded 18 million globally, as some U.S. states begin to reimpose lockdowns

The broader U.S. markets have partially recovered from March lows on support from the Fed

Many energy investors are wary of increasing their exposure to shale in the face of muted oil demand, ESG pressure and challenging economics / margins

E&Ps trading at depressed multiples based on investor apathy creating a lack of access to new capital

Upstream bankruptcies accelerating and likely to continue with several companies filing the past few weeks

In contrast to past decade, public operators are no longer being rewarded for production growth and scale, with investors now focusing on right-sized balance sheets and returning capital to shareholders

Oil prices rebounded to ~$40 / Bbl in July but appear to be range bound at this level

U.S. rig count has fallen from 2019 highs of ~950 to ~250 while storage levels remain elevated

Mid-Con M&A Discussion

$0.1 $0.6 $0.8

$2.0

$1.4

$2.9

$1.1

$5.9

$1.6

$0.0

$1.3

$4.3

$0.1 $0.1 $0.0 $0.3 $0.5

$0.1 $0.1

$0.0

$2.0

$4.0

$6.0

$8.0

Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20

3

8

6 6

5 5

9

2

4

-

7

9

1

4

-

3 3

2 2

0

3

6

9

12

Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20

A&D Activity at Historical Lows (Last 18-Months)

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Source: PLS, IHS and Petrie transaction databases.

Total Deal Value ($Bn)

Total Deal Count (#)

MUR / LLOG $1.4 Bn

EQNR / RDS $1.0 Bn

CRK / Covey $1.5 Bn

Hilcorp / BP $5.6 Bn

WPX / Felix $2.5 Bn

Mid-Con M&A Discussion

All Deals > $1 Bn

Value ($Bn) $23.1 $12.6

Deal Count 79 5

Mid-Con Perspective

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Mid-Con M&A Discussion

“We're really pleased to have those mid-continent assets. They're generating really good cash flow. As the strip firms up on gas, they're

looking better and better. We have some investment opportunities there when we get back to work that will compete nicely with our Permian assets, particularly if oil prices stayed depressed”

- Tom Jordan, CEO

“The Anadarko is prime for additional capital cost initiatives such as Simul-Frac facilities and savings in water sourcing and disposal. This will continue to push costs down and enhance our rates of return” - Greg Givens, COO

“Prior to 2017, drilling was largely dominated by unbounded wells with increasingly larger completion designs. As operators

began downspacing and drilling child wells, recoveries decreased dramatically”

- L48 Basin Trends “We think all three of them [Mid-Con, PRB, Eagle Ford] have an important place in the portfolio going forward. But a rank order really going to depend on what kind of assumptions you want to make across the three streams” - David Harris, EVP

Operator and Research Excerpts

'08 '10 '12 '14 '16 '18 '20'06 '08 '10 '12 '14 '16 '18 '20

0

1 500

3 000

4 500

6 000

'10 '12 '14 '16 '18 '20 '06 '08 '10 '12 '14 '16 '18 '20 '10 '12 '14 '16 '18 '20'08 '10 '12 '14 '16 '18 '20

$0

$5

$10

$15

$20

'10 '12 '14 '16 '18 '20

Evolution of Major US Shale Oil Basins

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Mid-Con M&A Discussion

Mid-Con Development

Mid-Con A&D Transactions

Eagle Ford Development Permian Development Bakken Development

Permian A&D Transactions Eagle Ford A&D Transactions Bakken A&D Transactions

Transaction Value

$M / Net Acre

Source: Enervus, PLS, Petrie Databases.

Peak Investor Interest

2010-2014

Primary Basin Pre-Oil Crash

2013-2014

Investor Interest 2nd

Wave

2017-2019

Permian Rotation 2016-2018

Peak Investor Interest

2016-2017

Annual Hz. Wells

Oil Prod. (MBopd)

$0

$75

$150

$225

$300

$0

$5 000

$10 000

$15 000

$20 000

'10 '12 '14 '16 '18 '20

Transaction Value ($MM)

$M / Boepd

$0 $0

$540 $160

$1 225

$2 919

$4 766

$1 113

$550

$1 761

$160

$0

$50

$100

$150

$200

$250

$300

$0

$1 000

$2 000

$3 000

$4 000

$5 000

$6 000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

121 237

356 365 302

484 505

909

1 239

1 019

161

0

100

200

300

400

0

400

800

1 200

1 600

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Evolution of the Mid-Continent Mid-Con M&A Discussion

Source: Enervus, PLS, Petrie Databases.

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Mid-Con A&D Transactions

Mid-Con Basin Development

Annual Hz. Wells

Oil Prod. (MBopd)

Deal Count 1 1 1 6 5 14 7 2 5

Devon / Felix

Gulfport / Vitruvian

Transaction Values

$M / Boepd

Mid-Continent Significant Transactions Mid-Con M&A Discussion

Source: Enervus and public filings. (1) Transaction value adjusted for production value of $30,000 / Boepd.

(2) Assumes $1.34 Bn of purchase price allocated to Kingfisher Midstream based on 2018 EBITDA of $183 MM and a 7.3x EBITDA multiple.

(3) Calculated as total purchase price divided by target current production.

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Date Announced Acquiror Target

Transaction

Value ($MM)

Daily

Production (MBoepd)

Net Acres

Adj. Acreage

Value ($/acre) (1)

10/1/19 $1,014 50.8 182,000 $0

11/1/18 $7,700 199.0 360,000 $4,806

8/16/17 Silver Run $3,836 20.8 120,000 $15,590

12/14/16 $1,850 30.5 46,000 $20,151

6/20/16 $888 8.6 61,000 $10,328

12/7/15 $1,900 9.0 80,000 $20,375

Average: $92,241

Transaction Value / Production ($ / Boepd) (3)

(2)

$211 111

$103 256

$60 656

$119 764

$38 693 $19 964

$0

$50 000

$100 000

$150 000

$200 000

$250 000

12/7/15 6/20/16 12/14/16 8/16/17 11/1/18 10/1/19

Devon / Felix Marathon / PayRock Gulfport / Vitruvian Silver Run / Alta Mesa Encana / Newfield Citizen / ROAN

(2)

$2 809

$1 910

$2 591 $2 626

$1 323

$2 650

$1 800

$2 400

$2 700

$1 300

$0

$500

$1 000

$1 500

$2 000

$2 500

$3 000

CLR DVN MRO OVV XEC

Select Mid-Con Operators Capex Cuts ($MM) Mid-Con M&A Discussion

Source: Company press releases and public filings.

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2019 2020 2019 2020 2019 2020 2019 2020

2019 Capex – Mid-Con 2020E Initial Capex 2020E Revised Capex – Other

2019 2020

2019 Capex - Other 2020E Revised Capex – Mid-Con

0%

10%

20%

30%

40%

50%

2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019

CLR DVN MRO XEC

Bar

Heig

ht

= %

of T

ota

l C

apex

Spent in

Mid

-Con

Mid-Continent Capital Allocation Mid-Con M&A Discussion

Source: RSEG.

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Multi-Basin Operator Capital Allocation

Well Count

79%

21%

59%

41%

30%

70%

100%

100%

100% 94%

6%

71%

29% 12%

88%

100%

100%

100%

103 16 130 61 91 94 60 67 56 32 39 45

SCOOP % of Wells

STACK % of Wells

J.P. Morgan NAV Comparison – Select Mid-Con Operators Mid-Con M&A Discussion

Note: Analysis based on average oil pricing of $38.17 and $40.21 / Bbl in 2020 and 2021 and average gas pricing of $1.85 and $2.57 in 2020 and 2021.

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Report Date 7/15/2020 7/14/2020 7/15/2020 7/13/2020

$MM $/Share $MM $/Share $MM $/Share $MM $/Share

Proved Developed Producing

United States $9,476 $25.90 $4,789 $12.50 $6,318 $7.90 $2,943 $28.90

Other - - - - 1,634 2.00 - -

Total PDP Reserve Value $9,476 $25.90 $4,789 $12.50 $7,952 $9.90 $2,943 $28.90

Undeveloped Reserves

Bakken $960 $2.60 - - $2,198 $2.80 - -

Permian Basin - - 2,743 7.10 156 0.25 2,588 25.50

SCOOP 489 1.30 - - 36 0.00 - -

STACK 59 0.20 - - 18 0.00 - -

Other Mid-Con 19 0.10 - - - - 53 0.50

Other - - 379 1.00 1,066 1.30 - -

Total Undeveloped Reserve Value $1,527 $4.20 $3,122 $8.10 $3,474 $4.35 $2,641 $26.00

Balance Sheet & Other

Less: Long-Term Debt + ARO ($5,326) ($14.60) ($4,918) ($12.80) ($5,501) ($6.90) ($2,642) ($25.90)

Plus: Cash & Equiv + NWC + Hedges 39 0.10 4,100 10.70 858 1.10 (215) (2.10)

Total Balance Sheet Adjustments ($5,287) ($14.50) ($818) ($2.10) ($4,643) ($5.80) ($2,857) ($28.00)

Net Asset Value $5,716 $15.60 $7,093 $18.50 $6,783 $8.45 $2,727 $26.90

Mid-Con % of Undeveloped Value 37% 0% 2% 2%

Company

Private Equity

Sponsor

Mid-Con

Net Acres Commentary

Kayne Anderson ~14,000 Actively marketing merger with other Kayne backed operators

Apollo ~127,000 Filed for Ch. 11 in Sept. 2019 with $1.1 Bn of outstanding debt; liquidation plan approved May 2020

Kayne Anderson ~10,000 Actively marketing merger with other Kayne backed operators

NGP ~100,000 Merged with NGP backed Rebellion and 89 Energy

Kayne Anderson ~61,000 Actively marketing merger with other Kayne backed operators

Ares / Apollo ~165,000 Merged with Gastar in 2019; filed for Ch. 11 in June 2020 with $517 MM of debt outstanding

Kayne Anderson ~24,000 Actively marketing merger with other Kayne backed operators

EnCap ~102,000 Merged with EnCap backed Excalibur in Jan. 2020

Kennedy Lewis ~154,000 Announced plan to restructure $450 MM of debt in April 2020, includes preferred equity commitment from Kennedy Lewis

Ares ~273,000 Filed for Chapter 11 in June 2020 with $426 MM of outstanding debt

Kayne Anderson ~12,000 Actively marketing merger with other Kayne backed operators

Private Equity-Backed Company Trends Mid-Con M&A Discussion

Source: Enervus and company presentations.

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Select Mid-Con Private Equity-Backed Companies Current / Recent Restructuring

Closing Remarks Mid-Con M&A Discussion

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The Mid-Con has fallen out of favor with investors over the last few years, a trend that has been heavily exacerbated by recent global events

Areal extent of the “core” has been redefined, along with thoughts on best practices for spacing and economic go-forward inventory

Traditional M&A and A&D markets likely to remain challenged in the current commodity price environment; however, the composition of the basin will be altered by the impending wave of bankruptcy-driven consolidation

Bankruptcies and restructurings likely to continue until commodity prices and capital markets recover

Key producers focusing on efficient, self-funded development and disciplined capital allocation versus prioritizing growth

Opportunities exist for well-capitalized buyers to make transformative acquisitions; universe of capable and interested parties remains limited