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Oil and Gas Presentation

Oil and Gas Presentation. Oil and Gas Drilling Activity. Rig count continues to be relatively flat at near 1,800 rigs, which has continued at that level since around September , 2012. Source: Baker Hughes. 1. 2.

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Oil and Gas Presentation

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  1. Oil and Gas Presentation

  2. Oil and Gas Drilling Activity Rig count continues to be relatively flat at near 1,800 rigs, which has continued at that level since around September , 2012 Source: Baker Hughes 1

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  4. Rigs drilling for gas hover around 375, which has been the case since March of this year. 3

  5. Oil based rigs continue at 1,387 in mid-November. This count has ranged from 1,315 to 1,417 over the last 12-month period. 6

  6. Source: Tudor Pickering

  7. In spite of the drop in rig counts from early 2012, U.S. crude production continues to increase and is roughly 2.1 million barrels per day higher in August 2013 than in January of 2010. Big contributions are made over that time frame by a 1.58 million barrel increase in Texas, and a 675,000 barrel increase in North Dakota. 8

  8. Oil rigs make up 78% of all rigs turning • Horizontal rigs are 64% of the total • Texas has 831 of the 1,761 total rigs, or 47%. Basically half the rig count. • Combining Texas, Oklahoma, New Mexico and Louisiana, we have 1,192 total rigs, or 68% of all rigs in the U.S. • Counts are down by 56 year over year, due to the reduction in gas drilling 9

  9. Baker Hughes has begun to track new wells started, as the rig count metrics have diminished in terms of their ability to measure activity. The following shows new drills by quarter in the various plays, ordered by size:

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  13. Stacked Laterals further increase drilling efficiency in the Spraberry/Wolfcamp play in the Permian Basin 19

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  15. Drilling Rig Day Rates 22

  16. Drilling Rig Day Rates 23

  17. Drilling Rig Day Rates 24

  18. Drilling Rig Day Rates 25

  19. Drilling Rig Day Rates At the end of November, drilling contractors and their clients are experiencing a stable market and feeling optimistic about activity over the next several months. According to a survey conducted by RigData, 90% of contractors reported that customer expect positive market conditions. More than 92% of those surveyed reported no changes in leading day rates for the past three month. In the RigData survey, approximately 58% felt the overall market was stable, 21% reported worsening indicators, and an equal 21% reported improvements in the market. Roughly 32% of those polled expected work volumes to increase during the next six months. A total of 72% expect day rates to remain steady over the next six months. While the pace in the Permian is still relatively frantic, rig wait lists are about the same as a few months ago, with reasonable wait times for a rig as there is still some availability. Based on this capacity, drillers feel rates will remain steady over the next few months, even with a bit higher activity. In South Texas, all metrics are relatively the same as compared to three months ago. There is competition in the region, but many have their rigs on term contracts. Some say pricing could potentially soften for rigs without a top drive or without walkers. At the same time, the fourth quarter usually shows a slowdown in the holiday season as workers take time to spend with their families, and there is the possibility that operators will have come to the end of their budgets before the end of the calendar year. This latter effect was especially true in 2012. The Midcontinent is mixed, with drillers near oilier plays seeing slightly longer wait lists, but anyone in the gas-prone areas are continuing to see shrinking wait lists. 26

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  21. Compression Need – Production and Transportation of Hydrocarbons • Natural Gas Transportation • Transport through the pipeline system requires compression • Compressors remain installed in the midstream system for relatively long periods of time • Compressors can be redeployed to other locations • Gas production from shale plays require more compression • Crude Oil Production • Compression assists in oil production from low-pressure wells • Horizontal oil wells utilize gas lift for their production lives • Oil shale economics are strong at current commodities pricing

  22. Natural Gas Compression Shale gas wells tend to produce at very high pressures and flow rates initially, but they decline rapidly to a lower level that is sustained for many years. As the pressure declines, gas compressors must be deployed to boost the pressure high enough to push it through pipelines to market. Gas compressors are prevalent throughout the interstate pipeline grid and in gas processing plants, strategically located in a limited number of centralized plants. But upstream of those plants are many more “gathering” compressors, located at or near the actual wells that produce gas from deep underground. Gathering compressors typically sit out in the open, not housed in buildings. They pull gas from individual or a group of wells and boost the pressure to push it into a gathering pipeline that leads to various types of processing facilities.

  23. The EIA forecasts significant growth in Shale gas production from 2013 to 2040, ultimately going from about 23 Tcf to around 33 Tcf per year. 30

  24. Growth from the Shale Basins • While many of these gas shale plays have had tremendous growth rates, some seem to have hit an inflection point. (not shown in the graph) • The Barnett Shale production in June 2013 dipped below 5 Bcf per day, reportedly down 16.0% from a year ago, and down 20.8% from June 2011. • Louisiana’s Gross Withdrawals (Haynesville proxy) have dropped from a peak of 276 Bcf per month in December 2011 to less than 200 Bcf for June 2013. • On the other hand, the Marcellus Shale is reported to have ramped up 8 Bcf/d and possibly to 9 Bcf/d by 2013 year end. Source: EIA Annual Energy Outlook 2013 31

  25. Steep Decline Curves = Greater Need for Compression EUR=Estimate Ultimate Recovery Source: http://www.eia.gov/analysis/studies/usshalegas/pdf/usshaleplays.pdf 32

  26. Per USA Compression’s May Investor Conference, they calculate that unconventional plays require up to three times as much compression as previous conventional production. 33

  27. Permian Basin – Oil Drilling in the Sprayberry/Wolfcamp Section Lots of growth for horizontal drilling = greater need for gas lift

  28. Gas Lift Applied to Oil Production - Vertical Well

  29. Compression Value Chain Natural gas value chain and compression requirements Lower Pressure Applications Higher Pressure Applications Pressure Wellhead Compression Gas Lift/Gas Reinjection Central Gathering Regional Gathering Processing/Treating Interstate Pipeline Trunkline Gathering Storage Facilities 1,000-5,000 2,500-30,000 Less than 250 250-1,800 Typical Unit Horsepower Owner E&P Pure-play Compression Diversified Midstream Pure-play Compression Diversified Midstream Pure-play Compression Diversified Midstream Diversified Midstream Exterran Compressco Valerus Exterran Energy Transfer CDM Resources USA Compression Valerus Companies Exterran Energy Transfer CDM Resources USA Compression Valerus Energy Transfer Kinder Morgan Williams Source: USA Compression Partners, LP, Goldman Sachs, Great American Group 36

  30. Great American Oil and Gas Team Members:

  31. Great American Oil and Gas Team Members:

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