HISTORY – 1980 TO DATE

1

Energy M&A Market Consolidation Waves

! There have been three distinct waves of consolidation among upstream companies over the last three decades

" Big oil – mid 1980’s

" Big oil – late 1990’s

" Super Independent – 2000’s

! These waves have tended to correlate with periods of low relative prices, for several primary reasons:

" Consolidation occurs in an effort to lower costs by capturing synergies and taking advantage of economies of scale

" Opportunities emerge for larger players or those with stronger balance sheets to consolidate smaller, more levered players

" Both parties to a merger can rationalize the trade based on good relative value despite reduced absolute value

! Does this portend another merger wave given today’s low prices?

$160

$140

$120

$100

$80

$60

$40

$20

$0

Iranian Revolution shah deposed

Saudis abandon “swing producer”

role; oil prices collapse

Iraq invades Kuwait

Prices rise sharply on OPEC cutbacks, increased demand

Prices fall sharply on 9/11 attacks,

economy weakness

Prices spike on Iraq war, rapid demand increases, constrained OPEC capacity,

low inventories, etc.

Fear of global economic meltdown

Back from the abyss

Fiscal Cliff fallout concerns

OPEC agrees to quota increase Gulf War ends

1973 Arab Oil Embargo

OPEC agrees to quotas

Syrian civil war escalates

1971 1975 1980 1985 1990 1995 2000 2005 2010 2014

ISIS on the rise

Russia challenges Ukraine

Iran-Iraq War begins;

oil prices peak

Source: EIA.

The Oil Price Supercycle WORLD EVENTS AND OIL PRICES – NOMINAL PRICING (1971 – 2014)

2

Saudis abandon “swing producer”

role again

THE ACQUISITIONS OF COMPANIES THAT HAVE CREATED BIG OIL M&A Consolidation Waves

Source: Thomas A. Petrie’s Following Oil.

3

THE ACQUISITIONS OF COMPANIES THAT HAVE CREATED BIG OIL M&A Consolidation Waves

Source: Thomas A. Petrie’s Following Oil and EIA.

4

Big Oil mid-80’s merger wave

Big Oil late-90’s merger wave

BIG OIL – MID 80’s MERGER WAVE M&A Consolidation Waves

Source: EIA.

5

Occidental / Cities Service

Phillips / General American

Standard Oil (CA) / Gulf Oil

Royal Dutch / Shell Oil

Mobil / Superior Oil

Texaco / Getty Oil

BP / Standard Oil (Ohio)

U.S. Steel / Marathon

DuPont / Conoco

Crud

e O

il ($

/ B

bl)

BIG OIL – LATE 90’s MERGER WAVE M&A Consolidation Waves

6

ARCO / Union Texas

Total / PetroFina

BP / ARCO

Total / Elf Aquitaine

Exxon / Mobil

Source: EIA.

BP / Amoco

Crud

e O

il ($

/ B

bl)

SUPER INDEPENDENT MERGER WAVE – FIRST HALF OF 2000s M&A Consolidation Waves

7

Anadarko / Union Pacific

Conoco / Burlington

Pioneer / Evergreen

Anadarko / Kerr-McGee / Western Gas

Alberta / Pan Canadian (Encana)

Source: EIA.

Devon / Ocean

Crud

e O

il ($

/ B

bl)

Natura G

as ($ / MM

Btu)

Devon / Mitchell Williams / Barrett

NOTABLE M&A ACTIVITY SINCE 2008 M&A Consolidation Waves

8

Suncor / Petro-Canada

Exxon / XTO

BHP Billiton/ PetroHawk

Freeport / Plains

Source: EIA.

Crud

e O

il ($

/ B

bl)

Natura G

as ($ / MM

Btu)

Whiting / Kodiak

Contango / Crimson

9

Large Cap Companies (Greater than $15 Billion) (1) ($ in millions, except per unit data)

The Next Wave of M&A A RELATIVE VALUE PROPOSITION

(1)  Market data and estimates based on Wall Street consensus per FactSet as of January 23, 2015.

10

The Next Wave of M&A A DARWINIAN UNIVERSE?

Source: Market data and estimates based on Wall Street consensus per FactSet as of January 23, 2015.

Small Caps ($500 MM -

$2 Bn)

Micro Caps (<$500 MM)

Mid Caps ($2 Bn - $15

Bn)

Large Caps (> $15 Bn)

Majors

CONCLUSIONS

11

A Brief History of Oil and Gas M&A

! Historically, waves of upstream company consolidation have correlated with periods of low relative prices

! Each environment is unique, but the similarities between today and prior periods are too significant to overlook

! The relative value trade that drove some recent mergers (witness Whiting / Kodiak) is even more relevant in this environment

! Investors’ flight to quality and liquidity creates an environment of predator and prey

! Circumstances that could potentially impede such an M&A wave:

" Continued volatility

" Rapid price recovery