Texas Energy Council Symposium “The Future for Oil & Gas Service Companies” March 6, 2012

1. Texas Energy Council Symposium “The Future for Oil & Gas Service Companies” March 6, 2012

2. Wilcox | Swartzwelder & Co. Overview Leading boutique investment bank providing financial advisory solutions exclusively to mid-market companies in the Energy, Industrial and Infrastructure sector. • Corporate Mergers and Acquisitions • Oil & Gas Property Acquisitions and Divestitures • Capital Raising & Private Placements • Merchant/Principal Investing Services • Bring Wall Street expertise to Main Street • Senior level commitment; “boutique” level service • High quality advice and deal execution • Energy Industry focus Approach Track Record • 40 years of experience, completing more than 100 transactions with value in excess of $3.6 billion • Navigated through multiple energy cycles, completing transactions in periods of positive momentum as well as difficult circumstances

3. Industry Specialization – “3Ns” Across the Energy Chain Specialization offers numerous advantages to clients – research, industry intelligence, capital markets knowledge, valuations, trends, investor and buyer relationships. Energy Industrial Infrastructure • Energy Equipment and Services • Exploration & Production • Engineering and Infrastructure • Midstream Gathering and Distribution • Environmental • Construction • Electrical & Power • Industrial Distribution • Industrial Equipment and Services • Industrial Technology • Process/Flow Controls • Water/Wastewater

4. The Future for Oil & Gas Service Companies

5. Recent Media Descriptions of U.S. Oil and Gas Industry “Renaissance” “New Era” “Revolutionary” “Transformational” “Game Changer” “Early Stage” “Death of Peak Oil”

6. Difficulty of Predicting the Future

7. Difficulty of Predicting the Future (Oilfield Services Index – OSX) Oil price reaches $141.47/Bbl (June 27, 2008) European debt crisis Recession begins (April 2008) Oil price drops to $33.20/Bbl (January 16, 2009) Recession ends (June 2009)

8. How Good is Your Crystal Ball? “How frustrating. The crystal ball is down again” Source: New Yorker – August 12, 1991

9. Indications of What the Future May Hold Windows are relatively short and the oil and gas service sector can change rapidly. Primary Drivers of Activity • Follow the money ($$$) • Commodity prices and Oil & Gas producer expectations • Transition from natural gas to oil/liquids • Basin economics and rates of return • Technology  Efficiencies, Production Gains and Larger Recoveries Implications • NAM Oil & Gas service industry performance is strong • Strained availability of services in certain highly active basins; shifting of operations to oil/liquids areas - more competition coming • What the stock market is indicating; margins may have peaked • Notable transactions • Case Study: Middle-market oilfield services transaction

10. Commodity Prices: Oil/Liquids…Not Natural Gas!

11. Rig Count Gets “Oilier” Source: Baker Hughes Rig Count

12. Producer Expectations – 2012 Outlook Source: Barclays Capital annual oil & gas upstream spending survey (December 2011) Source: The American Oil & Gas Reporter – Outlook 2012 (January 2012)

13. Sensitivity of Drilling Based on Commodity Prices Natural Gas Prices at Which Operators Alter 2012 Drilling Oil Prices at Which Operators Alter 2012 Drilling Drilling Increases Drilling Decreases Source: The American Oil & Gas Reporter (January 2012)

14. Basin Economics – All Basins Not Created Equal Capital flowing to basins offering highest rates of return. Rate of Return Source: Credit Suisse (Jan. 3, 2012)

15. Rig Count is Bearing Out the Trend (Year-Over-Year Change) Bakken Shale +45 rigs 202 total rigs 29% change Mississippi Lime +28 rigs 55 total rigs 104% change Cana Woodford +10 rigs 63 total rigs 19% change Marcellus Shale +11 rigs 134 total rigs 9% change Granite Wash +2 rigs 77 total rigs 3% change Fayetteville Shale -2 rigs 23 total rigs -8% change Permian Basin +112 rigs 471 total rigs 31% change Eagle Ford Basin +94 rigs 241 total rigs 64% change Barnett Shale -24 rigs 56 total rigs -30% change Haynesville Shale -75 rigs 86 total rigs -47% change Source: Baker Hughes Rig Count

16. Technology Advances are Transformational Improved efficiencies resulting in substantial production gains. Rig Count (Horizontal vs. Vertical) • Horizontal Drilling • Geo - steering • Measurement-While-Drilling (MWD) • Logging-While-Drilling (LWD) • Pad development • Multi-Stage Hydraulic Fracturing/Enhanced Completion Techniques • Longer laterals • More stages • Zipper frac • Results (Oil & Gas “Manufacturing”) • Higher service intensity (oil 2-3x > gas) • Improved predictability and repeatability lowers risk and increases productivity

17. Domestic Natural Gas and Oil Production Has Turned the Corner

18. Can the U.S. become energy independent? Proof is in the Production – Sharply Accelerating Domestic Oil Supply MBPD Source: Raymond James Equity Research (February 13, 2012)

19. We Are Really Good, But It Hurts: Barnett as Analog to Haynesville? Haynesville service activity is in decline…will it resemble what happened in the Barnett? Barnett Shale Production vs. Rig Count • Roughly 400-500 drilled-but-uncompleted well inventory; won’t complete until gas prices improve

20. Oil & Gas Service Companies Shifting to Oil/Liquids Areas • Chesapeake announces decrease in active rigs in Haynesville (dry gas); where do these rigs go? • Increased competition and pricing pressure • Increased input costs (margin compression) • Labor • Raw materials • Logistics and transport costs from dry gas to oil/liquids basins • Pressure pumpers (hydraulic fracturing companies) – recent reports suggest pricing and margins coming down as “Big 3” (Schlumberger, Halliburton, Baker Hughes) defend market share Southwestern Cutting Fayetteville Drilling for MarcellusFebruary 29, 2012

21. Strained Availability of Services • People/Housing (Williston, North Dakota Wal-Mart) • Oilfield service equipment – logistics/transportation/relocations from dry gas regions • Commodities used for drilling and completing wells (e.g. Proppant) • Infrastructure (pipeline, rail, trucks, roads, water) Source: Bakken Investor Conference 2011 – North Dakota Association of Oil & Gas Producing Counties

22. Oil & Gas Service Company Performance Oilfield Service EBITDA and EBITDA Margin ($ in billions) Oilfield Service Revenue ($ in billions)

23. What the Stock Market is Indicating S&P 500 Index OSX Index

24. Notable Oil and Gas Service Transactions

25. Case Study: Middle Market Oilfield Service Transaction • “Beauty is in eye of beholder”; if considering a transaction, it pays to broadly test the market • $40 million difference between initial high and low bids Initial Indications of Interest ($mm) Financial Sponsor Strategic Buyer

26. Conclusion: The Future of Oil & Gas Service Companies Primary Drivers of Activity • Follow the $; capital flowing to areas offering highest returns given commodity prices • Transitioning from natural gas to oil/liquids • Technology will continue to advance leading to greater efficiencies, increased production, larger recoveries • Oil & Gas service company performance is strong, but momentum is slowing and margins will come down • Services will remain strained in highly active basins but competition will increase, thereby helping satisfy demand • Public equity markets indicate closer to top of cycle than bottom • M&A window remains open Implications

27. Thank You! For more information contact: Jason N. Wilcox, Managing Director Wilcox l Swartzwelder & Co. 433 E. Las Colinas Blvd, Suite 1200 Irving, Texas 75039 972-831-1300 E-Mail: jason@ws-ibank.com Website: ws-ibank.com