Confidential: Not for Reproduction or Distribution

Private Equity Perspective on Current Minerals MarketPetroleum Engineering Club of Dallas

Brian Seline, Vice President – NGP Energy Capital ManagementMay 10, 2019

Confidential: Not for Reproduction or Distribution2

NGP Overview

Confidential: Not for Reproduction or Distribution

NGP Overview

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Founded in 1988, NGP has a family of private equity investment funds with $20 billion of cumulative equity commitments organized to make direct equity investments in the energy sector

30-year track record of generating consistent and strong investment returns in the energy industry

NGP has invested in over 360 transactions with over 210 companies and has been the catalyst in some of the largest transactions in the energy sector

Confidential: Not for Reproduction or Distribution

NGP Portfolio Companies

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NGP is an active investor in:• Energy companies operated by experienced “owner-managers” and entrepreneurs who are looking for a

strategic relationship with an experienced financial partner in the industry• Energy companies focused on property acquisition and development as well as companies operating in the

midstream and oilfield services sectors• Start-up opportunities or institutions that require capital to grow or to complete acquisitions

Sampling of Active Portfolio Companies

NGP invests where a management team’s growth strategy and NGP’s sponsorship capabilities align

Confidential: Not for Reproduction or Distribution

NGP has a Long History of Accessing Public Market Valuations Through IPOs and M&A

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Since 2014 NGP portfolio companies have raised $6.1 billion in 10 IPO transactions (~50% of all North American E&P IPOs(1))

In February 2019 NGP merged WildHorse with Chesapeake Energy in a ~$4bn mostly equity transaction

In March 2017 NGP merged Fifth Creek Energy with HighPoint Energy in a ~$650mm all equity transaction

We believe that the success of NGP portfolio company IPOs has created capital markets credibility

(1) Includes all E&P and Royalty IPOs with offering size greater than $100 million since January 2014. Includes Centennial SPAC transaction. Does not include PennTex Midstream Partners and other NGP non-E&P IPOs.

Selected E&P IPOs Since 2014 Selected Public Company Mergers

Confidential: Not for Reproduction or Distribution

NGP’s Leaders Under 40 Initiative is a Difference Maker

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1) Includes impact of recycled investments.

Since 2012, NGP has:

• Formed 24 portfolio companies across NGP X, NGP XI and NGP XII led by CEOs under 40(1)

• NGP X, NGP XI and NGP XII Leaders Under 40 portfolio companies have achieved strong returns for both realized and unrealized investments

• Solidified its reputation as the leader in identifying and backing the next generation of entrepreneurs in the energy industry

Confidential: Not for Reproduction or Distribution

NGP Historical Capital Allocation

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Percent of Total Capital Committed by Industry Sector(1)

NGP I-XII November 1988 – March 2019

Acquisition, Exploitation & Development

80%

Midstream10%

Oilfield Services

3%

Other7%

Note: This slide is generally indicative of NGP’s historical investments for the Flagship Funds, but there is no guarantee that future capital will be allocated in a comparable manner. Industry sector allocations are subject to change over time as funds mature. “Other” includes agribusiness investments and investments that do not fit into other listed categories. Percentages may not total 100% due to rounding.

1) Includes capital invested by the Flagship Funds.

Confidential: Not for Reproduction or Distribution

NGP Current Capital AllocationNGP Natural Resources XII, L.P. Portfolio Composition

Basin Distribution(1) Sector Mix(1)

Note: Numbers may not total due to rounding. Past performance is not indicative of future results. 1) Includes all commitments in the category specified as a percentage of the fund’s $2 billion of total commitments as of March 31, 2019.

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SCOOP/STACK/Merge33%

DJ/Powder River Basin35%

Permian31%

Other1%

Acquisition & Development

71%

Midstream29%

Confidential: Not for Reproduction or Distribution9

Mineral and Royalty Market Update

Confidential: Not for Reproduction or Distribution

How Mineral & Royalty Interests Work

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Mineral interests are perpetual real property interests and grant ownership to all oil and gas lying below the surface of the property

• Mineral owners grant leases to operators for an initial term for an upfront cash payment to the mineral owner, known as a lease bonus

• Under the lease, the mineral owner retains a royalty interest entitling it to a cost-free percentage (usually ranging from 20-25%) of revenue from production

Working interest operators lease minerals for the right to explore or develop the interest while bearing 100% of the costs and retaining the revenues, net of 20-25% Royalty owed to the royalty interest holder

Royalty interest owners do not bear any operating expenses or capital expenditures except for severance and ad valorem taxes (~7% of revenue)

Upon termination of lease, all future development rights revert to mineral owner to explore or lease again

Unleased Minerals Leased MineralsRevenue Costs Revenue Costs

Mineral Owner 25%Mineral Owner

100% Mineral Owner

100% Operator 100%

Operator 75%

Confidential: Not for Reproduction or Distribution

Why NGP Got into Minerals

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Compelling all-in return profile with lots of optionality

Lots of undeveloped minerals to buy at attractive rates of return

Access to core rock

Development activity concentrating to known core areas

Highly fragmented market

Limited sophisticated competition

Informational advantage over most sellers

Perpetual interests; long-term option on commodity prices and technology

Emerging public markets exit options to achieve premium valuations

Confidential: Not for Reproduction or Distribution

Diversified ~16,500 >600

Midland / Delaware ~14,500 ~50

Midland / Delaware ~12,000 >70

SCOOP / STACK / Merge

>10,500 >550

Delaware ~1,200 1

NGP Has Assembled a Scaled Minerals Portfolio Alongside Several Management Teams

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Basin Focus # of Transactions

Minerals

>1,200~55,000

NRA’sAdditional NGP E&P Companies Owning Minerals and Royalties

Confidential: Not for Reproduction or Distribution

How We Think About Mineral Acquisitions

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Building Blocks of a Typical Mineral Deal

– Premium Geological Characteristics

– Multiple Pay Zones

– Consistent Well Results

– Derisked Core of Basins

– Long Lateral Drilling– Manufacture-Style

Development

– Tier 1 Capital Efficiency

– Well Capitalized Operators

– Rights to All Depths– HBP, lease clocks,

etc.

– PDP/DUCs/Permits– Number of Offset

Rigs

Underlying Rocks

Proven Well Control

High IRR Drilling

Operator Specific

Characteristics

Land Specifics

Activity

Underlying Rocks

Proven Well Control

High IRR Drilling

Operator Specific

Characteristics

Land Specifics

Activity

Every acquisition is unique and needs to stand on its own merits

How does this deal impact our overall portfolio?

In core areas timing risk is (just about) everything!

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NGP Invests in the Lowest Breakeven Inventory

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Note: Any change to the assumptions, however minor, will alter the outcome of the analysis. Actual breakevens for assets by oil play may differ materially from those shown on this slide. Source: Breakeven oil price per Jefferies Equity Research (April 30, 2018). 5 year average NYMEX Strip per FactSet as of March 31, 2019.

Breakevens by Oil Play (15% After-Tax IRR)

*Assumes Gas Price of $3.00 per MMBtu

–

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

Oil

Pric

e ($

/Bbl

)

NGP Portfolio Company Exposure 5-Year NYMEX Strip (March 31, 2019)Permian

Confidential: Not for Reproduction or Distribution

Springer/Goddard

Caney

Lower Meramec/Sycamore/Osage

Upper Woodford

Lower Woodford

Upper Meramec/Sycamore/Osage

640 Acre Unit

26 wells per section

45%

15%

11%

29%

While Targeting Acreage with a Deep Inventory of Horizontal Locations in Stacked Pay Zones

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NGP XI Percentage of Minerals Capital Invested by Basin

Midland Basin174 Hz Rigs

Delaware Basin243 Hz Rigs

SCOOP/STACK/Merge

97 Hz Rigs

Other Basins(Bakken, Haynesville,

Appalachia, Eagle Ford, DJ, etc.)

Note: NGP XI capital funded as of March 31, 2019. Capital invested in mineral and royalty focused only companies includes capital recycled at NGP XI Mineral Holdings, LLC.Source: Baker Hughes rig count (March 29, 2019), Jefferies Investment Banking, public company investor presentations and NGP analysis.

59 wells per section

1st Bone Spring

1st Bone Shale

2nd Bone Shale

3rd Bone Spring

Wolfcamp A

Upper Wolfcamp B

Lower Wolfcamp B

2nd Bone Spring

640 Acre Unit

Middle Spraberry

Lower Spraberry

Wolfcamp A

Upper Wolfcamp B

Lower Wolfcamp B

Wolfcamp C

640 Acre Unit

Wolfcamp D

Lower Spraberry Shale

52 wells per section

Confidential: Not for Reproduction or Distribution16

There are currently 1,006 rigs in the United States. Of the 1,006 rigs, 417 are in the Delaware and Midland Basins

Basin Has Majority Oil Rigs

Basin Has Majority Gas Rigs

“Other” U.S. Basin (Less Active)

Source: Baker Hughes U.S. Rotary Rig Count (March 29, 2019).

Bakken58 Rigs

DJ Basin27 Rigs

Delaware243 Rigs

Midland174 Rigs

SCOOP/STACK97 Rigs

Eagle Ford77 Rigs

Haynesville71 Rigs

Marcellus/Utica75 Rigs

And Where Operators are Investing Significant Development Capital

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NGP Permian Mineral and Royalty Position

17Source: DrillingInfo

Confidential: Not for Reproduction or Distribution

NGP Permian Mineral and Royalty Position

18Source: DrillingInfo, Company files

Confidential: Not for Reproduction or Distribution

Concentrated Rig Activity Leads to Increased Development of New Wells

19Source: DrillingInfo, Company files

Confidential: Not for Reproduction or Distribution

While Well Productivity Has (Generally) Improved

20Source: Pioneer Natural Resources (April 2019 IR Presentation)

Pioneer Natural Resources April 2019 Investor Presentation

Confidential: Not for Reproduction or Distribution

Permian Mineral and Royalty Market Competitive Landscape

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Public Companies / Institutional Buyers:

Primarily look to purchase larger, marketed packages with a current yield and growth component

Generally have a lower cost of capital and longer hold period

Private Equity Portfolio Co. / Fund Buyers:

Larger, well-capitalized buyers that are focused on generating 15% - 25% returns

Deal flow edge and technical evaluation are the two main drivers of differentiation

Privately-Backed Companies / Flippers:

Mostly landmen/brokers that are using their own capital to buy deals and then immediately flipping them for a small profit or fee

Have been squeezed over the past year as more sophisticated buyers have entered the market and captured their deal flow GRB Minerals LTD

Confidential: Not for Reproduction or Distribution

Permian Mineral Valuations Have Increased Significantly Since 2016

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–

50%

100%

150%

200%

250%

300%

350%

Apr-16 Apr-17 Apr-18 Apr-19

Midland Basin (Avg $/NRA) Delaware Basin (Avg $/NRA) 2020-2024 WTI Prices

169%

134%

10%

143 Rigs 331 Rigs 444 Rigs 462 Rigs

Source: Company files, Baker Hughes, EIA, FactSetRig count based on both horizontal and vertical rigs.

Confidential: Not for Reproduction or Distribution

$894

$500

$404

$300

$1,145

$1,375

$3,305

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

2016 2017 2018

($M

M)

Institutional Capital Interest in Minerals is Growing and Driving Meaningful M&A

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Range/OTPP

Haymaker/Kimbell

Dale/Alliance

Royal/Falcon

$2.1bn

Source: PLS

Confidential: Not for Reproduction or Distribution

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Feb-17 May-17 Aug-17 Nov-17 Mar-18 Jun-18 Sep-18 Jan-19 Apr-19

($M

M)

VNOM BSM KRP FLMN MNRL

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Apr-18 Jul-18 Oct-18 Jan-19 Apr-19

LQA

Dis

trib

utio

n Yi

eld

VNOM BSM KRP FLMN

Creating an Attractive Exit Market, but Also Increasing Well Capitalized Competition

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U.S. Mineral & Royalty Market Cap. Since KRP IPO LQA Distribution Yield Since Last Year

6.2%

9.0%

8.4%8.8%

Source: FactSet

Confidential: Not for Reproduction or Distribution25

Recent Minerals IPO Likely to Lead to Additional Public Minerals Vehicles

Confidential: Not for Reproduction or Distribution

More IPOs to come… success of Brigham IPO will lead to more mineral IPOs

Consolidation of private minerals companies to achieve scale necessary to access public markets (~$100mm NTM cash flow)

More public companies with currency will continue to be acquisitive

Continued consolidation of fragmented industry throughout buyer value chain

Mineral owners will increasingly face tough sell or hold decisions

• Unique asset class with positive free cash flow in any environment and no capex requirements

• ROI always accretes the longer you hold (but at expense of IRR?)

• Valuations must be robust to overcome the old adage of never selling your minerals

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Conclusions

Irving, TX Houston, TX

Founded in 1988, NGP Energy Capital Management is a premier investment franchise in the natural resources sector

www.ngpenergycapital.com