Energy PortfolioBY CARL ERICKSONAS OF AUGUST 8 T H , 2016

Why Energy?• Oil prices have been declining.• Commodity prices have also fallen during the past decade.• Can a firm produce positive results in this poor economic climate?• Energy is a resource that will only become more scarce.• While coal power is largely declining due to environmental concerns, the market for natural gas is expanding.• Recent technological developments have enabled the industry giants to greatly improve their shale oil and natural gas production methods.• Lower oil prices increase demand for natural gas, which in turn puts upward pressure on oil prices.

Portfolio List Oilfield Services and Equipment1. Eco-Stim Energy Solutions, Inc.

2. ENSERVCO Corporation

3. Natural Gas Services Group, Inc.

4. Oceaneering International, Inc.

Oil and Gas Production5. Adams Resources & Energy, Inc.

6. Abraxas Petroleum Corporation

7. Apache Corporation

8. Bill Barret Corporation

9. Climarex Energy Co.

10. Dawson Geophysical Company

11. Diamondback Energy Company

12. Earthstone Energy, Inc.

13. Evolution Petroleum Corporation, Inc.

14. Jones Energy, Inc.

15. Legacy Reserves LP

16. Marathon Oil Corporation

17. Matador Resources Company

18. Noble Energy, Inc

Natural Gas Distributors19. Blueknight Energy Partners, L.P.

20. Magellan Midstream Partners, L.P.

21. Nustar Energy, L.P.

22. Gulfport Energy Corporation

Metal Fabrications23. Dril-Quip, Inc.

24. Newpark Resources, Inc.

Integrated Oil Companies25. Alon USA Energy, Inc.

26. Chevron Corporation

27. ConocoPhillips

28. Exxon Mobil Corporation

29. Phillips 66

Industrial Machinery30. Capstone Turbine Corporation

Electric Utilities31. MGE Energy, Inc.

32. PG&E Corporation

Portfolio Components

42%

12%

18%

12%

3%6%

6%

Subsector Distribution

Oil and Gas Production Natural Gas DistributionIntegrated Oil Companies Oilfield ServicesIndustrial Machinery Electrical UtilitiesMetal Fabrications

13%

10%

10%

52%

3%

13%

Regional Distribution

California Colorado Oklahoma Texas Wisconsin Global

Methodology Screens• Subsector• Region• Debt/Equity Ratio• Dividend Payout• Management• Shareholder Base• ESG• EPS• Number of Employees• M&A

• Vanguard Energy Index Benchmark

• ISS QuickScore

Abraxas Petroleum Corporation (AXAS)

• Description: Development and production of crude oil

• Firm size: 89• Corporate governance: Management team in

place for 40+ years. Board selects a CEO and other higher management positions. Board members are not current employees.

Additional Notes• Forward P/E ratio of 14.13 (industry avg. of

10.75), which put Abraxas’ growth at a lower price than the industry

• Impressive profit margin• Needs to organize debt against cash on hand

Debt/Equity Ratio Holders (%) EPS

3.05 7.4 by insiders -1.59

Dec. 2011

Jul. 2012

Dec. 2012

Jul. 2013

Dec. 2013

Jul. 2014

Dec. 2014

Jul. 2015

Dec. 2015

Jul. 2016

$0.00

$20.00

$40.00

$60.00

$80.00

Vanguard Energy Index vs. Abraxas Petroleum

VENAX AXAS

Apache Corporation (APA)Debt/Equity Ratio Holders (%) EPS (%)

2.02 0.45 by insiders -50.5

• Description: Development and production of natural gas, crude oil and natural gas liquids

• Firm size: 3,860 • Corporate governance: Board and shareholder

rights both received a low ISS QuickScore

Additional Notes:• Consistent focus on optimizing assets• Egyptian wells are low cost• North Sea wells are highly profitable• Aims to reduce methane leakage to less than 1%

of total U.S. gas production

Dec. 2011

Jul. 2012

Dec. 2012

Jul. 2013

Dec. 2013

Jul. 2014

Dec. 2014

Jul. 2015

Dec. 2015

Jul. 2016

$0.00

$50.00

$100.00

$150.00

Vanguard Energy Index vs. Apache Corp.

VENAX APA

Bill Barret Corporation (BBG)Debt/Equity Ratio Holders (%) EPS (%)

1.96 1.07 by insiders -10.81

• Description: Exploration, development and production of natural gas and crude oil

• Firm size: 139• Corporate governance: Board has very low ISS

QuickScore and finances are above average

Additional Notes• Consistently exceeds forecasts• One of the lowest cost producers in the industry• Higher marginal return compared to competitors

Dec. 2011

Jul. 2012

Dec. 2012

Jul. 2013

Dec. 2013

Jul. 2014

Dec. 2014

Jul. 2015

Dec. 2015

Jul. 2016

$0.00

$20.00

$40.00

$60.00

$80.00

Vanguard Energy Index vs. Bill Barret Corp

VENAX BBG

Capstone Turbine Corporation (CPST)

Debt/Equity Ratio Holders (%) EPS (%)

1.59 1.07 by insiders -1.39

• Description: Develops, manufactures, and services micro turbines for use in stationary distributed power generation applications

• Firm size: 191• Corporate governance: ISS QuickScore of 5

Additional Notes• World’s leading producer of low-emission micro

turbines• Shifted towards energy efficiency rather than oil and

gas manufacturing• Shares have dropped but business is booming• Leading the industry due to cost reductions and

innovation

Dec. 2011

Jul. 2012

Dec. 2012

Jul. 2013

Dec. 2013

Jul. 2014

Dec. 2014

Jul. 2015

Dec. 2015

Jul. 2016

$0.00

$20.00

$40.00

$60.00

$80.00

Vanguard Energy Index vs. Capstone Turbine Corp.

VENAX CPST

ConocoPhillips (COP)Debt/Equity Ratio Holders (%) EPS (%)

1.24 0.02 by insiders -4.98

• Description: Exploration and production of crude oil and natural gas

• Firm size: 15,600• Corporate governance: ISS QuickScore of 9

Additional Notes• Very transparent on environmental impact• Focused on water treatment and sustainability• Holds $5 billion in cash and credit lines are largely

unused• Halted deep water projects due to environmental and

financial concerns

Dec. 2011

Jul. 2012

Dec. 2012

Jul. 2013

Dec. 2013

Jul. 2014

Dec. 2014

Jul. 2015

Dec. 2015

Jul. 2016

$0.00 $20.00 $40.00 $60.00 $80.00

$100.00

Vanguard Energy Index vs. ConocoPhillips

VENAX COP

Diamondback Energy Inc. (FANG)

Debt/Equity Ratio Holders (%) EPS (%)

2.73 0.15 by insiders -9.11

• Description: Exploration, development and production of natural gas and crude oil

• Firm size: 141• Corporate governance: ISS QuickScore of 5

Additional Notes• Has shown it can generate profits despite

price of oil• Very low cost producer• Has decreased debt to manageable levels• Strong cash position

Dec. 2011

Jul. 2012

Dec. 2012

Jul. 2013

Dec. 2013

Jul. 2014

Dec. 2014

Jul. 2015

Dec. 2015

Jul. 2016

$0.00 $20.00 $40.00 $60.00 $80.00

$100.00

Vanguard Energy Index vs. Di-amondback Energy Inc.

VENAX FANG

Earthstone Energy, Inc. (ESTE)Debt/Equity Ratio Holders (%) EPS (%)

0.81 90.0 by insiders -8.81

• Description: Exploration, development and production of natural gas and crude oil

• Firm Size: 50• Corporate Governance: ISS QuickScore of 9.

Management team has successfully built and sold 5 oil companies

Additional Notes• Management team has significant portion of

shares• Debt free balance sheet• Current plan for a 20% production increase

Dec. 2011

Jul. 2012

Dec. 2012

Jul. 2013

Dec. 2013

Jul. 2014

Dec. 2014

Jul. 2015

Dec. 2015

Jul. 2016

$0.00

$20.00

$40.00

$60.00

$80.00

Vanguard Energy Index vs. Earthstone Energy Inc.

VENAX ESTE

ENSERVCO Corporation (ENSV)Debt/Equity Ratio Holders (%) EPS (%)

2.49 42.0 by insiders -0.13

• Description: Provides oil field services to the onshore oil and natural gas industry

• Firm size: 179• Corporate governance: No ISS QuickScore, but

research showed very low employee turnover

Additional Notes• Substantially higher return on equity compared to

industry average (61% to 13%)• Only provider of frac heating in industry• Involved in a growing industry• Planned expansion of fleet expected to increase

revenues

Dec. 2011

Jul. 2012

Dec. 2012

Jul. 2013

Dec. 2013

Jul. 2014

Dec. 2014

Jul. 2015

Dec. 2015

Jul. 2016

$0.00

$20.00

$40.00

$60.00

$80.00

Vanguard Energy Index vs. ENSERVCO Corp.

VENAX ENSV

Gulfport Energy Corporation (GPOR)

Debt/Equity Ratio Holders (%) EPS (%)

1.59 0.33 by insiders -16.14

• Description: Acquisition, exploration, and production of natural gas

• Firm size: 230• Corporate governance: ISS QuickScore of 4

Additional Notes• Very low cost of production at Utica, OH location• Immense production growth over the past 2 years • Reduced number of wells from 47 to 12• Phasing in a new pipeline division partnering with

Rockies Express Pipeline and Texas Gas Transmission that will cover the transportation of existing and future production

Dec. 2011

Jul. 2012

Dec. 2012

Jul. 2013

Dec. 2013

Jul. 2014

Dec. 2014

Jul. 2015

Dec. 2015

Jul. 2016

$0.00

$20.00

$40.00

$60.00

$80.00

Vanguard Energy Index vs. Gulfport Energy Corp.

VENAX GPOR

Phillips 66 (PSX)Debt/Equity Ratio Holders (%) EPS (%)

1.22 10.84 by insiders 5.75

• Description: Exploration and production of crude oil and natural gas

• Firm size: 14,000• Corporate governance: ISS QuickScore of 9

Additional Notes• Only Valero and HollyFrontier have lower

Debt-to-Assets, long term debt/equity, and total debt/equity

• Has experienced drop in cash flow, however business has enough liquidity to meet all of its capital needs including raising dividend rates by 12.5%

• Management consistently outlasts market volatility with a strong balance sheet

Dec. 2011

Jul. 2012

Dec. 2012

Jul. 2013

Dec. 2013

Jul. 2014

Dec. 2014

Jul. 2015

Dec. 2015

Jul. 2016

$0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00

Vanguard Energy Index vs. Phillips 66

VENAX PSX

Summary• Oil prices have declined, but are poised to bounce back.• Advances in technology have increased efficiency. • The companies in this portfolio are indicators of success in these poor market conditions

Sources• Seekingalpha.com

• Yahoo Finance

• Company Websites

• SEC filings/quarterly reports

• NYSE.com

• Vanguard Group company website