Sector Update | March 2014

phone 972.831.1300 | web WS-iBank.com

-

1,000

2,000

3,000

4,000

5,000

6,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Historical M&A Volume (Completed Deals < $500 Million)

10 Year Avg. = 3,7637.0x

7.9x

9.4x

8.4x 9.2x

8.4x

7.1x 7.4x

8.5x

7.4x 8.2x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Transaction Valuations (EBITDA Multiple; Completed Deals<$500 Million)

Energy & Industrial Sector Observations

Oilfield Service Industry’s Outlook in 2014. Higher GDP will help to spur on oil demand with North America generating oil production growth, resulting in a balanced supply and demand scenario and continued support for crude prices at ~$100/bbl. Total upstream capital expenditure levels are forecasted to grow in the upper single digits in 2014, with North American growth somewhat lower, offset by international growth expected to be somewhat higher. Overall, 2014 looks like it will be a year of growth for the oilfield services industry. (Market Realist – February 7, 2014)

U.S. Moving Toward Oil Independence. U.S. oil imports fell sharply again in 2013 while petroleum exports rose, leading some analysts to proclaim that a new era of energy independence is just a few years away. "We're at the beginning of a long upswing," says Citigroup analyst Eric Lee. Exports, mostly of refined gasoline and diesel, rose about 11%, narrowing the country's petroleum deficit by about $59 billion, or 20%, to $233 billion. (USA Today – February 9, 2014)

Eagle Ford Boom Could Produce $30 billion in Spending. The unrelenting pace of drilling and development will continue in South Texas this year, with oil and gas companies expected to spend between $23 billion and $30 billion in the Eagle Ford Shale. A new report from research and consulting company GlobalData calls the Eagle Ford “an even larger resource than initially thought” and says the industry remains enamored of the field, which has emerged as one of the country's hot spots for crude oil production. The report pegs 2014 spending at $30 billion as companies do everything from drilling wells to building pipelines and processing plants. (San Antonio Express News – March 18, 2014)

102 Decker Court Suite 204

Irving, Texas 75062

972.831.1300 WS-iBank.com

Broader Middle Market M&A Trends

2

Sector Update | March 2014

phone 972.831.1300 | web WS-iBank.com

Energy Stock Price Performance

Red – New York Stock Exchange Composite Blue – Oilfield Services Index Green – Exploration & Production

U.S. Rig Count

(As of February 28, 2014)

Industrial Stock Price Performance

Red – New York Stock Exchange Composite Blue – Industrial and Infrastructure

U.S. Industrial Manufacturing (ISM)

(As of March 1, 2014)

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

Jan-07Jul-07Jan-08Jul-08Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11Jan-12Jul-12Jan-13Jul-13Jan-14

Oil Gas % Oil

Basin

Rig

Count

YoY Rig

Change

%

Change

Permian 493 15 3%

Eagle Ford 221 -7 -3%

Williston 176 -13 -7%

25.0

30.0

35.0

40.0

45.0

50.0

55.0

60.0

65.0

70.0

75.0

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14

PM

I

Dec-13 Jan-14 Feb-14

PMI 56.5 51.3 53.2

3

Sector Update | March 2014

phone 972.831.1300 | web WS-iBank.com

Notable Energy & Industrial Transactions

Announce-ment Date

Acquiror Target Target/Transaction Description Transaction Value ($M)

Energy & Industrial Manufacturing and Services

2/28/14 National Automation Services, Inc.

JD Field Services Provider of roustabout, water services, rig haul and trucking services to the oil and gas industry with operations in the Bakken and Rocky Mountain regions

--

2/24/14 ALS Oil & Gas BMP Enterprises, LLC Texas-based provider of turnkey monitoring solutions including the design, planning and installation of monitoring solutions using memory tools, permanent tools and fiber optic based acoustic and temperature monitoring

--

2/18/24 Intervale Capital Energes Oilfield Solutions

Capitalization of new platform company that provides flowback and well-testing, H2S monitoring and safety services, and water transfer

--

2/13/14 AMEC Foster Wheeler Global conglomerate that provides engineering, construction services and supplies power equipment to the oil & gas, power and other industries

$3,300.0

2/13/14 SCF Partners Variperm Texas-based provider of sand control solutions, including downhole completion and production maintenance services

--

2/11/14 TETRA Technologies, Inc.

WIT Water Transfer, LLC

Texas-based provider of water management services for the Eagle Ford, Permian and Bakken --

2/11/14 Ecoserv/Lariat Partners

Newpark Resources Acquisition of New Park Resources’ Environmental Services division which provides low-pressure deep well injection methodology and waste receiving facilities

$100.0

2/11/14 Phoenix Services/Quantum Energy Partners

Super Heaters/ Heat-On-The-Fly

Provider of technology for continuous heating of water during pressure pumping operations and water heating services

--

2/10/14 Trinity Industries Platinum Energy Services

Manufactures and resells oil and gas process and storage equipment, including separators & treaters, used at wellsites and midstream locations

--

2/7/14 RBC, Inc. Hy-Bon Engineering/ Pfingsten Partners

Texas-based designer and fabricator of vapor recovery units --

2/7/14 Engineered Controls, LLC/Windjammer Capital

Superior Holding, LLC Ohio-based manufacturer of flow control products used in the transportation, delivery and storage of LNG --

2/3/14 Sable Environmental Group

GreenHunter Water Acquisition of saltwater disposal well located in the Eagle Ford $3.8

4

Sector Update | March 2014

phone 972.831.1300 | web WS-iBank.com

Notable Exploration & Production and Midstream/Downstream Transactions

Announce-ment Date

Acquiror Target Target/Transaction Description Transaction Value ($M)

Exploration & Production and Midstream/Downstream 2/20/14 Breitling Energy

Corp. Stellar Energy/Clayton, Williams Energy

Acquisition of 3,680 acres located in the Permian Basin that were originally assigned to Stellar Energy from Clayton, Williams but have been transferred to Breitling Energy instead

--

2/19/14 Canadian Natural Resources, Ltd.

Devon Energy Corp. Divestiture of assets for Devon which are located in Canada and consist of 170 million barrels proved reserves $2,800.0

2/18/14 Diamondback Energy, Inc.

Undisclosed seller Acquisition of assets located in the Permian Basin that includes 6,450 gross acres, net production of 1,600 Boe/d, 75% of which is oil, from 145 vertical wells and 4,185 MMBoe of proved reserves

$174.0

2/13/14 STV, Inc. GWD Colorado-based energy services firm that provides design, engineering, procurement and construction/field services to the midstream natural gas processing market

--

2/13/14 Rice Energy, Inc. M3 Appalachia Gathering, LLC

Acquisition of gathering assets located in eastern Washington and Pennsylvania that consist of a 28-mile gathering system with rights to construct an addition 18-mile system with an aggregate capacity of over 1 Bcf/d

$110.0

2/7/14 Baytex Energy Corp. Aurora Oil and Gas, Ltd.

Acquisition of Aurora Oil and Gas, which has 22,000 net acres in the Eagle Ford with 2013 production of 24.6 MBoe/d

$2,600.0

2/6/14 New Source Energy Partners, LP

CEU Paradigm, LLC Acquisition of properties located Oklahoma that consist of 490 Boep/d, 34% of which is oil $18.8

5

Sector Update | March 2014

phone 972.831.1300 | web WS-iBank.com

Wilcox | Swartzwelder & Co.

Wilcox Swartzwelder & Co. is a boutique investment bank, specialized in delivering high quality financial advice exclusively to owners of middle market companies and oil and gas properties in the energy and industrial sector.

Advisory services include company sales, mergers and acquisitions, private placements of debt and equity, oil and gas property acquisitions and divestitures, institutional capital raises, and general corporate finance matters. Through its merchant funding activities, the Firm acts as direct investor providing flexible capital to support small, entrepreneurial companies.

Principals have more than 40 years of combined investment banking experience, closing over 100 transactions with an aggregate value in excess of $3.9 billion. They have also acted as investors with capital at risk, operators and board members in multiple companies, having navigated through various business cycles and completed transactions in both up and down markets.

The Firm is fully licensed and registered. Securities are offered through PetroGrowth Energy Advisors, LLC, a registered broker-dealer and member of FINRA/SIPC.

Notes:

The information and views contained in this report were prepared by Wilcox Swartzwelder & Co. LLC and should not be construed as an offer to buy or sell or a solicitation to buy or sell any financial instruments or to participate in any trading strategy. The information contained herein is believed to be reliable, but Wilcox Swartzwelder & Co. LLC makes no representation as to its accuracy or completeness.

Indices: Dow Jones U.S. Select Oil Equipment and Services Index (DJSOES), Dow Jones U.S. Select Oil Exploration and Production (DJSOEP), Industrial Select Sector SPDR (XLI), NYSE Composite Index (NYA)

Data Sources: Dealogic, Capital IQ, Stockcharts.com, Baker Hughes, RigData, Rig Zone, Energy Information Agency (EIA), Association of Energy Service Companies (AESC), Institute of Supply Management (ISM), Wilcox Swartzwelder Proprietary Energy and Industrial M&A Database

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