Diamondback Energy FANG 65,000 26.49 Laredo Petroleum LPI ...

January 27, 2014 The “New” Horizontal Permian Basin

Figure 62: XEC’s Delaware Wolfcamp Acreage

Source: Cimarex Energy Company Presentation

Cimarex recently announced that its $1.4B Permian Basin budget for 2014 will focus
~$1.2B on drilling and completion activities allocated towards the Wolfcamp ($600MM),
the Bone Spring ($375MM), and the Avalon Shale ($175MM). We believe the 2014
drilling program will provide XEC with several operational catalysts including: testing its
new frac stimulation across all of its acreage, testing several stacked laterals, drilling more
long lateral wells in Reeves County, and testing a new completion design in the
Company’s 80,000 net acres in the Avalon.

Page 51 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

Concho Resources (CXO- $96.89 - FS)

Concho is one of the premier Permian operators with positions in the Northwest Shelf,
Midland and Delaware Basins that offer a combination of conventional oil plays and
unconventional liquids-rich shale plays. CXO offers investors unique leverage as a pure
Permian play with the basin representing 100% of CXO’s 447 MMBoe (61% Oil) year end
2012 proved reserves and 100% of the Company’s 9.4 MMBoe 3Q13 production.
However, the Company does offer investors a diversified asset portfolio by having
exposure to multiple high-return plays within the greater Permian.

CXO built its ~630,000 net acre Permian position through an aggressive acquisition
strategy, which includes the Company-transforming Marbob acquisition in 2010 and the
acquisition of Three Rivers’ Permian assets that added significant inventory and drilling
locations to Concho’s Delaware and Midland Basin assets in 2012. These acquisitions
provided the Company the necessary acreage to develop one of the premier drilling
programs in the Permian and have enabled Concho to be on the forefront of current
horizontal drilling activity.

Figure 63: CXO Delaware Basin HZ Wells

Source: Concho Resources Company Presentation

The core value of the Company is its Vertical Yeso and Wolfberry acreage; however, CXO
has been increasing its focus on horizontal activity because of the recent success of the 2nd
and 3rd Bone Spring in the northern & southern Delaware Basin, and the HZ Wolfcamp in
the southern Delaware and Midland Basins. The Company also has HZ prospects in the
Cline in Midland Basin and the Abo & Yeso in the NW New Mexico shelf. Concho has
capitalized on its quality acreage positions and efficient drilling programs to develop one
of the best cash margins in the Permian averaging ~$58/Bbl in 3Q13. The Company plans
to continue to focus on high return projects in the future as evidenced by its significant
commitment to horizontal drilling in its future CAPEX plans. Concho’s transition to
primarily horizontal drilling signifies a change in the Permian that we expect many
operators to follow in the near future. We are already seeing plenty of evidence of this
transformation in the Permian and we expect that trend to increase rapidly in the next
couple of years.

Page 52 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

Concho’s horizontal activity has been predominately in the northern Delaware to date
targeting the 2nd and 3rd Bone Spring. Concho is the most active operator in the area and
has made it clear that the Delaware will continue to be the focus for the Company moving
forward. Concho recently drilled one of if not the best HZ wells to date in the Permian
near the Texas/New Mexico which achieved an IP rate of 4,600 Boepd targeting the 2nd
Bone Spring with only a 4,600’ lateral. This new well was certainly an extraordinary result
for CXO; however, the Company has been extremely successful with majority of its 2nd
Bone Spring wells in the northern Delaware having drilled ~108 HZ 2nd Bone Spring wells
as of 3Q13 with an avg. 30-day IP rate of 812 Boepd (78% oil).

While the northern Delaware will remain the Company’s primary operating area moving
forward the southern Delaware and Midland Basin are going to see a significant ramp in
activity in 2014 and beyond. The southern Delaware acreage is located mostly in Reeves
and Pecos County and is prospective for the Upper Wolfcamp with additional upside in the
Delaware Sands, Avalon, Bone Spring, and Middle Wolfcamp. CXO has identified 200
Upper Wolfcamp drilling locations and has drilled 15 wells to date in the area with a
projected EUR type curve of 500 - 750MMBoe. The Company plans to exit 2013 running
6 rigs in the area and will continue the 6 rig program throughout 2014. In the Midland
Basin CXO has not been as active as many other Permian peers but the Company is
expecting a significant ramp in activity in 2014. To date CXO has drilled 7 HZ Wolfcamp
wells mainly in Upton County with an average 30-day IP rate of 695 Boepd (75% oil).
The Company currently plans to exit 2013 with 3 rigs and increase to 7 rigs in 2014.

Figure 64: CXO’s Successful HZ Wells

Source: Concho Resources Company Presentation

CXO recently announced a 2014 CAPEX budget of $2.3 billion, ~90% of which will focus
on developing the Company’s acreage in the northern Delaware and delineating its acreage
in the southern Delaware and Midland Basins with a 37 (32 HZ) rig drilling program up
from ~18 HZ rigs as of the Company’s 3Q13 earnings call. The 2014 program is the
beginning of a newly implemented 3-year program for Concho to double current
production by YE16 with an annualized average growth rate of ~25%. The Company
plans to accelerate HZ activity in 2015 and 2016 by running in the range of ~40 to ~50 HZ
rigs respectively in the Permian.

Page 53 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

ConocoPhillips (COP- $66.57 - SP)

COP holds approximately 1.1MM net acres in the Permian Basin, which is all currently
held by production. The Company is active in both conventional and unconventional plays
and sees >1BBoe of resource across its acreage. In its Permian conventional program, COP
aims to invest ~$3B over the next 5 years with plans to add ~40MBoepd by ’17, a CAGR
of ~7%. In the unconventional program, COP is testing several plays in both the Delaware
(COP 150k acres) and Midland Basin (COP 90k acres). Early tests of Avalon wells in the
Delaware Basin have shown ~60% liquids production and the Company sees at least two
producing intervals, with two to three potentially in the Wolfcamp.

Figure 65: COP’s Permian Basin Acreage Position

Source: Company Reports

Page 54 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

Devon Energy (DVN - $59.52 - SO)

Boasting a robust 1.3 million net acre position, DVN ranks as a leading operator in the
Permian Basin with exposure to a variety of emerging and established plays within the
region. The Company currently operates 23 rigs and achieved 3Q13 production of 82,000
Boepd, of which 60% was oil. We expect DVN’s activity levels to remain elevated for the
remainder of the year and into 2014. In 2013, DVN anticipates total capital expenditures of
$1.6 billion and to drill over 350 wells. Figure 66 depicts DVN’s Permian Basin oil-
levered opportunities. DVN maintains 320,000 net acres in the Bone Spring, 150,000 net
acres in the Wolfberry, 117,000 net acres in the Wolfcamp in the southern Midland Basin
and 377,000 net acres that are prospective for Cline development in the eastern shelf of the
Midland.

Figure 66: DVN Permian Exposure

Source: Devon Energy

In the Delaware, DVN is currently focused on developing low-risk, high-impact wells in
the Bone Spring with 12-13 operated rigs. The Company estimates an inventory of ~1,400
locations in the Bone Spring which should act as a meaningful driver of future oil
production growth. In 3Q13, DVN added 24 Bone Spring wells to production with 30-day
IP rates of 690 Boepd, 72% oil. Also in the Delaware, DVN is testing its Wolfcamp
potential in Reeves and Ward counties. The Company has drilled its initial Wolfcamp test
in Ward County and we hope that DVN will disclose initial results when the Company
reports 4Q13 results. DVN estimates ~140,000 net acres in the Delaware are prospective
for Wolfcamp Development.

In the Midland, DVN is currently developing the Wolfcamp with five operated rigs. The
incorporation of pad drilling has helped in reducing drill times to under 15 days and
increases efficiencies that result in lower operating and well costs and in turn boost returns.
DVN currently maintains ~117,000 net acres that are prospective for the Wolfcamp and
estimates an inventory of over 800 locations. Current well costs are approximately $5.5
million. In 3Q13, DVN added 26 Wolfcamp wells to production with 30-day rates of ~400
Boepd, consisting of 73% oil. DVN’s southern Midland Wolfcamp acreage is
concentrated in Reagan, Irion and Crockett counties.

Page 55 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

Diamondback Energy (FANG - $48.87 - SO)

Diamondback Energy launched its IPO in November of 2012 and raced onto the scene as
one of the best performing E&P names in 2013 up ~175%. Shortly following its IPO
FANG quickly began expanding its HZ drilling program and has now become one of the
premier HZ operators in the Permian. The Company holds ~65,000 net acres primarily in
Midland, Ector, Martin, and Andrews counties with some additional non-contiguous
acreage in Upton, Crockett, and Dawson counties.

FANG’s initial strategy into horizontal drilling was to be a “fast follower”, allowing other
operators to do some of the initial testing and then move into to the most prospective areas.
After watching other operators drill horizontals for some time, FANG identified Midland
County as its first and primary drilling location focusing on 5,000 and 7,500 lateral wells
targeting the Wolfcamp B. The Company is now actively delineating and developing its
acreage positions across the Midland running 4 HZ rigs and 1 vertical rig primarily
targeting the Wolfcamp B; however, the Company recently completed a successful
Clearfork test in Andrews County and a Middle Spraberry test in Midland County. The
Company is currently using a 600MBoe EUR type curve on its 7,500’ Wolfcamp laterals
and is seeing evidence from the recent Spraberry test that this zone could outperform that
curve making it a great potential candidate for future stacked laterals with the Wolfcamp.

Figure 67: FANG Acreage Position

Source: Diamondback Energy Company Presentation

One of the most impressive aspects of the Company’s operations is its ability to analyze
and process drilling data, which allows the Company to improve production rates, frac
designs, and well costs. As of October 2013, FANG had total production of 10,500 Boepd
including 24 wells on production in the Wolfcamp B with another 7 wells in development.
In addition, during 3Q13 the Company announced that for the third consecutive quarter it
had achieved a >20% reduction in LOE/BOE costs bringing the number down to $7.27 for
3Q13. The cost reductions and improved production rates have led to some of the best
operating efficiencies in the Permian and in 3Q13 the Company realized a cash margin/Boe
of $69.82.

Page 56 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

Figure 68: FANG HZ Drilling Locations & EUR’s

Source: Diamondback Energy Company Presentation

Diamondback was one of the first companies to come out with its preliminary 2014 drilling
in November of 2013. The Company said that it expects to spend ~ $425 - $475MM on its
2014 drilling program and plans to add a 5th horizontal drilling rig. We expect FANG to
continue to drill 7,500’ laterals as they have been and 5,000’ laterals where there are
acreage constraints. However, management has also stated that they are very interested in
testing some 10,000’ laterals in the Wolfcamp and possibly the Spraberry. We also expect
to see the Company experiment with stacked laterals. FANG recently participated in a
stacked lateral targeting the Lower Spraberry and the Wolfcamp B and results should be
released sometime in 1Q14. Following the results of that stacked lateral, the Company will
assess their current inventory and determine the best intervals to target in its operated
stacked laterals.

FANG has an excellent balance sheet in order to fund the additional planned growth
initiatives it has set forth for 2014 with a current debt to book cap of only 35% after issuing
its first major debt deal in September of $450MM in notes to finance its recent mineral
rights acquisition in the Midland.

Page 57 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

Energen Corporation (EGN - $69.38 - SO)

The growth story continues for this emerging E&P Company that has amassed ~300k net
acres in the Permian between the Midland (Wolfberry, Wolfcamp), Delaware (3rd Bone
Spring, Wolfcamp) and Central Basin Platform through ~$1B of acquisitions since 2009.
More recently, the Wolfcamp’s potential has shown itself to be the growth driver for
Energen, leading the Company to turn its sights on growing its oil and NGL production by
+20% this year and 14% in 2014, while its attention on natural gas declines.

What has been the most active drilling program in the past for Energen, the vertical
Wolfberry program in the Midland Basin will be scaled back in 2014 to make way for the
horizontal Wolfcamp. The Company holds ~63k acres and is currently finishing a 126 well
vertical program for 2013, but has plans to run just 2 rigs in 2014 when this time nearly
two years ago a 7-8 rig program was the long-term plan.

Figure 69: EGN’s Midland Basin Position

Source: Energen Company Presentation

Staying in the Midland Basin, EGN holds 70k net acres with ~2,000 potential Wolfcamp
locations. The 7-well program in 2013 has been focused mainly on the Wolfcamp A bench
in Glasscock County. The Company has achieved consistent results thus far with peak 20
and 30-day averages of ~700 Boepd (~65% oil). EGN will accelerate drilling in Glasscock
County during 2014, running between 4-6 rigs in the play. We also expect the Company to
continue to delineate the other Wolfcamp benches and the Cline in 2014.

The 3rd Bone Spring in the Delaware Basin is approaching peak production for EGN as it
now has just ~36 remaining locations across 30k net acres. A 3-rig horizontal program is
anticipated for 2014 while the Company looks to finish drilling its current Bone Spring
inventory.

Page 58 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

Figure 70: EGN’s Delaware Basin Position

Source: Energen Company Presentation

Energen has 114k net acres in the Delaware Basin Wolfcamp with 5 wells producing (9-
well program in 2013) across Reeves, Winkler, and Ward counties. The promising
Bodacious C7-19 #1H well in Reeves Co. has the Company’s focus there after achieving
peak 30-day average production of 1,671 Boepd (61% oil). The Wolfcamp remains the
main growth driver for the Company’s Delaware acreage moving forward and we expect
Wolfcamp delineation to continue with +3,000 potential locations and a 2 rig program.

Page 59 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

EOG Resources (EOG - $165.53 - SO)

Since our initial report publication, the Permian Basin has come more into focus for EOG,
but still ranks behind the Eagle Ford and Bakken in terms of core development activities.
While EOG has exposure to both the Midland and Delaware areas of the Permian, the
Company has favored activity in the Delaware as it is exhibits less geological complexity
and greater consistency in results. Figure 71 summarizes EOG’s acreage position and
targeted plays in both the Midland and Delaware.

Figure 71: EOG Permian Exposure

EOG - Permian Basin Exposure

Play Area Net Acres Potl. Locations EUR/Well
Leonard 500 MMBoe
Wolfcamp Delaware Basin 73,000 1,600 800 MMBoe
Wolfcamp 430 MMBoe
Delaware Basin 134,000 1,100

Midland Basin 113,000 ND

Source: EOG Resources & Howard Weil

The Leonard shale generates the highest rates of return in EOG’s Permian portfolio (stated
to be 100% ATAX) and the Company expects to accelerate development in 2014. EOG has
drilled a total of 54 wells to date in the Leonard. Similar to the Leonard, the Wolfcamp in
the Delaware offers three distinct pay zones for horizontal development and represents
EOG’s second highest rate of return project (60% ATAX). The Company is early in the
play’s life cycle, but results are promising and midstream constraints have been eliminated,
due in part to a high-pressure gathering system coming on line in October 2013.

In the Midland, the Wolfcamp remains EOG’s primary target, but development has lagged
versus the Delaware plays. EOG is currently evaluating its acreage, but results in Irion and
Crockett counties are encouraging. EOG is currently incorporating micro seismic and 3D
imaging to improve completion effectiveness and recovery factors.

Figure 72 provides a snapshot of EOG’s typical well profile and well cost by play.

Figure 72: Permian Well Profiles

EOG - Permian Well Profile

Play Area % Oil % NGL % Gas Well Cost ($mm)
Leonard 26% 24% $5.5
Wolfcamp Delaware Basin 50% 32% 34% $6.5
Wolfcamp 30% 28% $5.0
Delaware Basin 34%

Midland Basin 42%

Source: EOG Resources & Howard Weil

Page 60 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

Forest Oil (FST- $3.46 - SP)

When we first published our initial report, FST had recently reported that the Company had
amassed a 51,000 net acre position in the Midland basin prospective for the Wolfcamp
Shale that would further bolster the Company’s footprint in the basin. Since that time, the
Company has undergone managerial changes, operational challenges and financial
difficulty, which has resulted in the Company looking to divest non-core assets.

In September of 2013, FST executed one level of this strategy, announcing the sale of a
portion of its Midland Basin assets for $35 million. The transaction included 52,350 net
acres located in the western portion of Crockett County, Texas, which equates to a sale
price of ~$670/acre. Following the closing of the transaction in mid-September, FST now
maintains a 60,250 net acre position in the Permian Basin, concentrated in Pecos, and
Reeves counties. FST currently has 2 active wells (identified by green stars in Figure 73)
that achieved first production in September 2012. FST currently does not have any
additional permits for wells.

Ultimately, we view this asset as a non-core divestiture candidate. Figure 73 highlights
FST’s acreage position relative to other operators in the area.

Figure 73: FST Permian Acreage Position

Source: Forest Oil Howard Weil
Page 61 of 82

January 27, 2014 The “New” Horizontal Permian Basin

Laredo Petroleum (LPI - $25.31 - SO)

Laredo Petroleum is one of the premier pure play Permian operators focusing the majority
of its drilling horizontally in the Cline and Upper, Middle, & Lower Wolfcamp formations
in addition to its complimentary vertical Wolfberry program. Laredo shed the bulk of its
non-Permian assets in May of 2013 when it sold its producing Anadarko Basin Assets for
~$438MM to ramp drilling in the Permian. Laredo currently holds ~141,230 net acres in
the heart of the Midland Basin in its Garden City acreage based predominantly Reagan and
Glasscock counties.

Figure 74: LPI Acreage & HZ Completions

Source: Laredo Petroleum Company Presentation

Laredo is one of the most active horizontal operators in the basin having drilled ~79
horizontals targeting the Cline and the Wolfcamp zones as of 3Q13. The Company
produces some of the best IP rates in the basin and has been most active in two areas: the
Cline where it has drilled 37 wells with an average 30-day IP rate of 594 Boepd and the
Upper Wolfcamp where it has drilled 32 wells with an average 30-day IP rate of 717
Boepd. To date, the Company has focused its Cline drilling in the Glasscock County
acreage and its Wolfcamp drilling in the northern Reagan County acreage; however, LPI is
in the early stages of drilling stacked laterals across its entire acreage position. Laredo
recently completed its first 3 well stacked lateral pad targeting the Upper, Middle, & Lower
Wolfcamp which came on with a 3-stream 24-hr rate of 3,778 Boepd.

Laredo is planning to spend ~42% of its ~$950MM 2014 capital program on HZ
development running 6 HZ rigs and drilling ~ 50-60 development wells. In addition, the
Company is planning to drill 12-14 HZ delineation wells and continue its vertical
development program drilling 110 – 120 wells while running 5 rigs. The HZ development
program will continue to test 2, 3, & 4 well stacked laterals targeting the different

Page 62 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

Wolfcamp Zones and the Cline. In addition to testing different zones, Laredo will also
focus on finding the optimal spacing for the pads. The Company currently estimates that
660-acre initial spacing using offset pads will create the best opportunity for maximum
reservoir drainage under the development program. While Laredo’s stacked lateral pad-
drilling program is still in its infancy, the first result was encouraging and we believe once
the Company has the opportunity to test different intervals and spacing it will be able to
shift the program into full development mode sometime in 2015 or 2016.

Figure 75: LPI Stacked Lateral Development

Source: Laredo Petroleum Company Presentation

Over the past year, Laredo has successfully transformed not only the operational strategy
and focus of the Company but also its financial flexibility. LPI has reduced its debt
significantly through its divestiture of its Anadarko Basin Assets in May of 2013 and its
August 2013 follow-on equity offering. Because of these two actions, the Company has
lowered its debt to book cap to ~47% and its debt/NEV down to 21% essentially in line
with its peer group as of 3Q13. Furthermore, the Company currently has ~$825MM
available under its credit facility and ~$265MM in cash.

Page 63 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

LINN Energy/Linn Co (LINE - $33.04 - FS / LNCO - $32.46 - FS)

After LINN’s recent purchase of BRY, the Company now has ~164,000 net acres in the
Permian, which includes acreage on both the Delaware and Midland basin sides. The
Company has total production of 26,155 Boepd and proved reserves of 160 MMBoe. The
most valuable acreage is ~60,000 net acres in the heart of the Midland Basin, shown in the
following chart and prospective for horizontal Wolfcamp drilling. Because of LINN’s
status as an MLP, an asset swap netting cash flow for the non-producing horizontal
potential could be a very good deal, and we would not be surprised to see such a
transaction in 2014. We estimate the core Midland Basin acreage could be worth
$15,000/acre to $25,000/acre. LINN purchased ~4,800 Boepd of Clearfork production in
September 2013 for $525MM.

Figure 76: LINN Energy Midland Basin Acreage

Source: LINN Energy Company Presentation

Page 64 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

Matador Resources (MTDR- $19.48 - SO)

Matador has built a 44,835 net acres position in the Delaware Basin, which we subdivide
into 4 regions. The first region is called Ranger-Querecho and is located in central Lea
County, NM. The second is the Wolf prospect located in Loving County, TX. The third,
and most recent addition is Twin Lakes, north of Ranger-Querecho in Lea County, NM.
Finally, the fourth prospect is called Indian Draw and is located in Eddy County, NM.
MTDR is running 1 rig currently and has ~172 engineered net drilling locations. The
Company has built the position relatively recently, adding ~39,000 net acres in 2013.

Figure 77: MTDR Delaware Basin Acreage

Source: Matador Resources Company Presentation

MTDR has drilled two wells at the Ranger prospect where the Second Bone Spring looks
to be the primary initial target. One of the wells is offsetting CXO’s Stratojet 31 State #3H
well which has cumulative production of 360 MBo and 426 MMcf in 24 months. This
Ranger 33 State Com #1Hwell had a 24-hour IP of 619 Boepd (93% oil) and was
producing over 700 Boepd after 60 days on artificial lift. There are also a number of
successful 3rd Bone Spring wells in the region as well. Because the Bone Spring is a
deltaic deposition, it may take time to delineate this position, and we think there is likely
more geologic work to be done vs. the Wolf prospect further south. However, based on
some of the nearby well results, this asset could generate very high-return drilling
locations.

Page 65 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

Figure 78: MTDR Ranger-Querecho Prospect

Source: Matador Resources Company Presentation

MTDR’s Wolf prospect in Loving County, TX is prospective for horizontal Wolfcamp,
which could be a consistent and scalable reservoir. The acreage position is surrounded by
industry vertical wells and horizontal test wells, and activity is heating up currently.
MTDR has drilled 1 well on the acreage and results could come in 1Q14.

Figure 79: MTDR Wolf Prospect

Source: Matador Resources Company Presentation Howard Weil
Page 66 of 82

January 27, 2014 The “New” Horizontal Permian Basin

Occidental Petroleum (OXY- $88.00 - SP)

OXY continues to rank as a leading operator in the Permian Basin, boasting a sizable
acreage position, accelerating rig count and stable base of production that places OXY as
the number one oil producer in the state of Texas. While bulk of production,
approximately two-thirds, stems from the Company’s core enhanced oil recovery program,
the unconventional program should ramp significantly over the coming quarters and
become a greater focus for OXY going forward.

During the 3Q13 earnings call, management announced that it will be accelerated capital
expenditures in the basin and has put in place a team dedicated to optimizing drilling and
the acceleration of development in unconventional opportunities. In 2014, capital
expenditures in the Permian Basin are expected to increase by $500 million to an estimated
level of ~$2.4 billion, which will support the incorporation of four additional drilling rigs
that will be dedicated entirely to horizontal development of the Wolfcamp, Wolfbone and
Bone Spring in the Delaware Basin as well as the Wolfcamp in the Midland.

Figure 80 depicts OXY’s Permian acreage position relative to various plays while Figure
81 highlights OXY’s gross and net exposure to select Permian Basin play types.

Figure 80: OXY Acreage & Play Exposure

Source: Occidental Petroleum Howard Weil
Page 67 of 82

January 27, 2014 The “New” Horizontal Permian Basin

Figure 81: Select Acreage Counts

Permian Basin Acreage Detail

Delaware Basin: Gross Net
Avalon
1st Bone Spring 340 120
2nd Bone Spring 560 220
3rd Bone Spring 530 210
Wolfbone 420 140
Wolfcamp Shale 210 70
Delaware Shale 580 205
Penn Shale 420 160
Wabo 320 120
Yeso 190 50
230 60

Midland Basin: 390 160
Cline Shale 425 150
Wolfcamp Shale 280 100
Wolfberry

Total 4,895 1,765

Source: Occidental Petroleum & Howard Weil

The shift towards horizontal development in the basin represents a change in strategy for
the Company and we expect the unconventional development will continue to gain a larger
role within OXY.

Page 68 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

Pioneer Natural Resources (PXD - $172.73 - SP)

PXD has a commanding acreage position in the Midland Basin with a total of ~900,000
relatively contiguous acres prospective for Spraberry and Wolfcamp zones, and the
Company has been the clear leader in the play. The Company is the largest
Spraberry/Wolfcamp producer and is currently running 28 rigs in the basin (13 horizontal).
We divide PXD’s Midland Basin acreage into northern and southern with the southern
acreage consisting of Upton, Reagan, and Irion counties and the northern acreage primarily
located in Midland, Glasscock, Martin, and Gaines counties. The southern acreage has
been delineated with PXD inking a JV with Sinochem in 2013 while the more northern
acreage is being proved up and the geographical extent being defined now.

In the south, PXD has drilled ~90 horizontal Wolfcamp wells and is in the process of
extending laterals and moving to pad drilling. The average per well IP rate is 1,241 Boepd,
and PXD is running 8 gross horizontal rigs on the acreage. The Company signed a JV
agreement with Sinochem in January 2013 for a 40% interest in PXD’s 207,000 net acres
in the southern Midland for total consideration of $1.7 billion. This deal values the acreage
position at a discounted ~$17,500/acre (~$15,300/acre assuming $80,000 per flowing Bbl
of production), and PXD retains the right to Spraberry zones. Further, the Company is
generating better results recently and likely will continue testing additional Wolfcamp
zones. Recently, PXD brought online an Upper B well which IP’d at ~3,200 Boepd with
83% oil. The JV region average well has ~65% oil and ~90% liquids. We assume well
costs of $7.5-8MM for 8,300’ lateral wells, which use a combination of slickwater and
hybrid fracs and drill in 28 days. PXD is estimating the average lateral length for 2014
wells could be 9,400’.

Figure 82: PXD Midland Basin Acreage

Source: Pioneer Company Presentation Howard Weil
Page 69 of 82

January 27, 2014 The “New” Horizontal Permian Basin

In the northern region of the Midland Basin, PXD’s early horizontal results are even better,
and the Company has ~600,000 gross acres prospective. Further, the Company has had
success in three zones already: the Wolfcamp A, B, and D, and PXD is testing horizontal
potential in the shallower Spraberry zones as well.

Figure 83: PXD Appraisal Regional Focus

Source: Pioneer Company Presentation

To date, PXD has released data on 3 Wolfcamp B and 1 Wolfcamp A wells in Midland
County, 2 Wolfcamp B wells in Martin County, and most recently, 4 Wolfcamp D wells in
Martin, Midland, and Andrews counties. The Wolfcamp D IP rates ranged from 1,509
Boepd to 3,605 Boepd. The Wolfcamp B well with the most production data, the DL Hutt
C #1H, has cumulative production of 170 MBoe in 9 months and is tracking a 1 MMBoe
type curve. The Wolfcamp A well in Midland County has cumulative production of 115
MBoe in 5 months. To date, all three zones look highly prospective, although we are still
uncertain of the areal extent of the play. We assume 800 MBoe EURs for 2 zones on all of
PXD’s northern Midland acreage in our NAV today.

Page 70 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

QEP Resources (QEP - $30.84 - SO)

QEP entered the Permian in December 2013, buying 6,700 Boepd of production and 47
MMBoe of proved reserves in Martin and Andrews counties for $950MM. The acreage has
horizontal Wolfcamp prospectivity, and QEP’s initial estimates include 9 potential
horizontal target zones and 775 potential horizontal locations. QEP expects to grow
production from the acreage to ~33 MBoepd in the next five years.

Figure 84: QEP Permian Acreage

Source: QEP Resources Presentation

Page 71 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

Quicksilver Resources (KWK - $3.22 - SP)

Quicksilver Resources has ~81,000 net acres in the Southern Delaware and Southern
Midland Basins, including 36,000 net Midland acres in southern Upton and northern
Crockett counties. This area is further west from where we have seen the majority of
activity so we give minimal value for this acreage. On the Delaware Basin side, KWK has
45,000 net acres in Pecos, Reeves, and Jeff Davis counties. In November, KWK formed a
JV with ENI over the Pecos County acreage where half of the acreage was sold for $52
MM, or $2,000/acre. The JV should provide for some wells to be drilled on the acreage,
but it is further south than the development that we have seen to date in the basin.

Figure 85: KWK Permian Acreage

Source: Quicksilver Presentation

Page 72 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

Range Resources (RRC- $86.15 - SP)

While Range’s primary focus remains concentrated in the Marcellus, the Company
currently maintains a 100,000-acre position in the Midland Basin located primarily in
Sterling and Glasscock counties. The Conger Field is predominantly held-by-production,
91%, and has potential for both Cline, Wolfcamp and Wolfberry development. Figure 86
depicts RRC’s acreage in the Permian and highlights offset operator activity.

Figure 86: Range Resources Permian Position

Source: Range Resources

Over the past several quarters, Range’s activity levels have increased, but we do not
anticipate an acceleration of activity as the Company has stated it will continue to take a
“wait and see” approach, allowing other operators to take the lead. The Company is
currently completing two 7,000 ft. lateral tests in the Cline and Upper Wolfcamp, with
results likely to be provided during their 4Q13 earnings release in late February.

In the vertical Wolfberry program, Range turned in line 14 wells to sales with an average
24 hr. IP rate of 370 Boepd, consisting of 203 Bbls/d of oil, 88 Bbls/d of NGLs and 475
Mcf/d of natural gas. Activity to date has been concentrated in Glasscock County with
drilling costs reduced to $1.9mm per well. A recent well test in the eastern part of the
acreage in Sterling County has Range now estimating the potential for up to 1,000
locations on 20 acre spacing.

Ultimately we view this acreage as a divestible asset whereby proceeds generated by an
asset sale could be reinvested in the Company’s core Marcellus position in the Appalachian
basin. RRC has announced that it has hired advisors to market a portion of the acreage and
existing production. We estimate the asset package could generate proceeds of $550-$600
million.

Page 73 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

Rosetta Resources (ROSE - $45.92 - FS)

ROSE entered the Delaware Basin in March 2013, purchasing CRK’s ~40,000 net acres in
Reeves County for $768MM. The acreage lies in the heart of a region of significant
industry activity today and is in the process of being de-risked horizontally by Rosetta and
other operators. The Company’s base case valuation assumes a vertical program with wells
commingling from the top of the Bone Spring through the Middle Wolfcamp, but
horizontal drilling provides substantial upside and results to-date look very encouraging.
ROSE’s existing production comes almost entirely from its very good Eagle Ford asset.

Figure 87: ROSE Delaware Basin Acreage

Source: Rosetta Resources Company Presentation

ROSE is currently evaluating horizontal upside with 4 horizontal rigs running, but also
testing ways to increase the base case vertical valuation. So far, the primary effort is to
prove 20-acre spacing viability vs. the current assumption of 40-acre spacing. The
Company has 1,500 vertical locations assuming 20-acre spacing with an average well
costing $3.5MM. We assume a 250 MBoe type well in our valuation using 40-acre spacing
over 75% of the acreage.

The real substantial upside to valuation comes from horizontal drilling in multiple zones.
To date, the Wolfcamp A has been tested on and around the acreage position and looks
very encouraging so far. CRK drilled the Gaucho State #1H in the A zone on the eastern
portion of the acreage position, which IP’d at 1,134 Boepd and 76% oil. Recently, ROSE
completed the Balmorhea 32-15 #1H further to the west, which IP’d at 1,323 Boepd and
87% oil and had a 30-day rate of 737 Boepd. EGN recently announced the Bodacious #1H
well, which is just offsetting ROSE’s leaseline to the north – this Wolfcamp A well IP’d at
2,229 Boepd. Additionally, CXO has positive Wolfcamp A well results just to the east of
ROSE’s acreage, and other operators have had success to the south.

Page 74 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

ROSE is moving quickly to test the horizontal potential of the acreage position. The
Company recently announced a plan to run 4 horizontal rigs in 2014 and has laid out a
horizontal development plan for the asset. While we do not yet have a horizontal type
curve from ROSE, this could be coming in early 2014. Over time, the Company will likely
test multiple Wolfcamp zones and possibly targets in the Bone Spring, which could
provide very substantial inventory.

Figure 88: ROSE Engineered Locations

Source: Rosetta Resources Company Presentation

ROSE is planning to drill 3 additional horizontal wells on the acreage this year with one at
the eastern extent, one offsetting the original CRK Gaucho well, and the third further to the
southwest. CXO is also planning a new well on the two companies’ shared acreage
position to the north, offsetting EGN’s Bodacious well. We will likely be hearing
considerable dataflow around ROSE’s position later this year and throughout 2014.

Page 75 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

Royal Dutch Shell (RDS - $71.05 - FS)

Shell entered the Permian through an acquisition from Chesapeake in ‘12of 618k net acres,
primarily in the Delaware Basin. Despite an announcement in mid-’13 to market its U.S.
liquids-rich shale acreage, RDS increased its Permian rig count through ’13 and currently
operates 8 rigs in the play. The Company is in development mode in the Bone Spring while
the Avalon and Wolfcamp are considered exploration.

Figure 89: Shell Delaware Basin Acreage

Source: Shell Company Presentation

Page 76 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

SM Energy (SM - $84.00 - SO)

SM currently holds ~ 129,750 net acres in the Permian following its recently acquired
32,500 net acres in Dawson & Gaines counties. The Company’s acreage spreads
throughout the Midland Basin with ~19,000 net acres in the core of the Play in Upton
County, another 53,500 net acres in Gaines and Dawson counties, 54,500 net acres in
Borden and Garza counties, and a small position in the Delaware Basin in SE New Mexico.
The Permian has been an increasing focus for the Company as it now accounts for ~5% of
SM’s 3Q13 production. However, both production and CAPEX spending significantly lag
behind the Company’s core Eagle Ford and Bakken positions. With the recent sale of the
Company’s Anadarko Basin assets behind them, we think the Company will be increasing
CAPEX dollars in the Permian in 2014 and beyond as management has stated that they
believe the Permian will be third leg of the Company’s operational portfolio moving
forward.

Figure 90: SM Permian Midland Acreage

Source: SM Company Presentation

SM’s best acreage positions in the Permian are its Sweetie Peck and Halff East Fields in
Upton County where the Company recently drilled its best Wolfcamp B well to date, the
Dorcus 3035H, that achieved a 30-day IP rate of 1,226 Boepd (82% oil) with a ~5,000’
lateral. In addition the Company recently announced 2 more Upton County Wolfcamp B
tests which achieved 24-hr IP rates of 1,162 Boepd (83% oil) and 1,259 Boepd (81% oil).
While, SM has not been as active in its Upton County acreage as some offset operators
such as FANG and PXD, the Company’s recent well results along with the near 100%
success rates in the HZ Wolfcamp B achieved by offset operators, essentially de-risk the 2
Upton County fields for SM.

The real driver for SM moving forward in the Permian will be the successful development
of its more northern acreage where the Company holds the majority of its Permian
position. SM has been the most active operator in the Garza/Borden counties area to date
drilling mostly Cline and Mississippian wells with varying degrees of success. We do not
expect the Company to keep drilling this acreage in 2014 as it recently completed two
wells in 3Q13 that did not meet its expectations. We believe the Company will start to
focus on higher return acreage positions both in the Permian and in its other basins.

Page 77 of 82 Howard Weil

January 27, 2014 The “New” Horizontal Permian Basin

In the Company’s more southern Buffalo field, SM is currently planning to spud its first
Wolfcamp B well in 4Q13 on the Gaines/Dawson County border. Industry activity has
certainly been increasing in the northern portion of the Midland primarily in Martin and
Andrews counties and it appears those counties can deliver economic wells. Activity in the
Dawson and Gaines counties area is much lower than in Martin and Andrews; however, a
successful test from SM and offset operators such as FANG could spur additional activity.
If SM can successfully develop the Wolfcamp and or the Clearfork and Spraberry in its
Buffalo acreage it will be a real boon for the Company as it currently holds ~53,500 net
acres in the area.

SM’s smallest acreage position in the Permian is in its New Mexico PDU/ESDU field,
which is prospective for the Bone Spring formations. The Company has been actively
drilling the acreage having drilled 2 Bone Spring wells in 3Q13 however if the Company
does not increase its acreage position from its current 2,700 net acres this play will not be a
real needle mover for a Company the size of SM.

SM’s recently announced that ~9% of the Company’s ~$1.66B drilling and completion
budget for 2014 will focus on the development of the Permian Basin with majority of the
remaining budget targeting the Eagle Ford (54%) and Bakken (21%). SM plans to operate
~2.5 HZ rigs for the year focusing on the Wolfcamp in its Sweetie Peck Field in Upton
County and its Buffalo Field in Dawson & Gaines counties.

Page 78 of 82 Howard Weil