Spears AssociatesOilfield Logix Directional Drilling Global Directional Drilling

Spears & Associates/Oilfield Logix: Directional Drilling Global Directional Drilling Featuring the US Land Markets Spears & Associates, Inc. 8908 South Yale, Suite 440 Tulsa, Oklahoma 74137 USA 1(918)496 -3434 Principal Author: Richard Spears rspears@spearsresearch. com Q 2 2015

Spears & Associates/Oilfield Logix: Directional Drilling Table of Contents Executive Summary Directional Drilling Market US Summary Eagle Ford/South Texas Permian Basin Mid. Continent Bakken Rocky Mountains Haynesville/East Texas Northeast/Marcellus West Coast Eastern Supply Chain Profiles Appendix 3 4 18 30 43 56 70 82 92 105 114 122 124 129 148 2

Spears & Associates/Oilfield Logix: Directional Drilling Executive Summary Global Directional Market Share The global directional drilling services market was $16. 4 billion in 2014. US Land represents $3. 8 billion of this market. CAGR since 2005 has been 13%, with 11% projected through 2020. SLB 3% 2% 4% WFT SDI 9% Rotary steerable technology (RST) has been gaining share within the directional market over the last 10 years. Today, RST captures at ~50% of the directional dollars. US $3. 8 $1. 2 $5. 0 Canada $1. 5 $0. 0 $1. 5 International $3. 3 $6. 6 $9. 9 Total $8. 6 $7. 8 $16. 4 COSL Others Global Directional Drilling Market ’ 05 -’ 16 $18, 000 $16, 000 $14, 000 $12, 000 Millions Total PHX 17% 14% Regional Directional Market (Billions) Offshore HAL 31% The directional drilling market is driven by demand for horizontal and directional wells on land in North America, and by all offshore drilling around the world. Land BHI 20% $10, 000 $8, 000 $6, 000 $4, 000 $2, 000 $0 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 3

Spears & Associates/Oilfield Logix: Directional Drilling Market: Quantification. 4

Spears & Associates/Oilfield Logix: Directional Drilling Global Directional Drilling Market $500 $18 $450 Global Oilfield 4% Directional Oilfield Mkt 96% Global Directional Market (Billions) $16 $14 $350 $12 $300 $10 $250 $8 $200 $6 $150 $4 $100 $2 $50 $0 $0 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 Directional drilling is only 4% of the total market, but remains a vital piece of the overall oilfield services market. Directional drilling rises and falls along with the broader market. This “inelasticity” indicates directional drilling services remains an essential and important tool for the industry. $400 Directional Global Oilfield Market (billions) $16. 4 B 2014 Directional Market as a % of $451 B Global Oilfield Services $20 5

Spears & Associates/Oilfield Logix: Directional Drilling Global Directional Drilling Market Global Directional Market Share SLB KEY FACTS BHI 20% 3% 2% 4% WFT SDI 9% COSL Others Global Directional Drilling Market ’ 05 -’ 16 Rotary steerable technology (RST) has been gaining share within the directional market over the last 10 years. Today, RST captures at ~50% of the directional dollars. For a directional company to succeed in US land, the company must match or exceed the drilling performance of other independents. This is 800 -900 feet per day. PHX 17% 14% The directional drilling market is driven by demand for horizontal and directional wells on land in North America, and by all offshore drilling around the world. $18, 000 $16, 000 $14, 000 $12, 000 Millions Spears & Associates has identified about 70 directional drillers providing services on land in the US. The top 3 (SLB, BHI, HAL) have 40% of this US land market. HAL 31% The global directional drilling services market was $16. 4 billion in 2014. US Land represents $3. 8 billion of this market. CAGR since 2005 has been 13%, with 11% projected through 2020. $10, 000 $8, 000 $6, 000 $4, 000 $2, 000 $0 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 6

Spears & Associates/Oilfield Logix: Directional Drilling Global Directional Drilling Market 7

Spears & Associates/Oilfield Logix: Directional Drilling Global Market Shares Global Market Share Companies Ranked by Total Revenues $6, 000 100% 90% $5, 000 80% 70% $4, 000 Million 60% All Others $3, 000 50% HAL BHI 40% $2, 000 SLB 30% 20% $1, 000 10% 0% 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 Calmena Payzone Enseco Ensign SPN San. An Pro. D Pacesetter Archer DDC Cathedral Crescent NBR PD Leam MS Gyro. D COSL PHX SDI WFT HAL BHI SLB $0 8

Spears & Associates/Oilfield Logix: Directional Drilling Global Directional Drilling Segments Global Directional Market Rotary Steerable vs Conventional $18, 000 $16, 000 Conventional No. Am $14, 000 26% Rotary Steerable La. Am Eur/Afr/CIS Millions 40% $12, 000 $10, 000 $8, 000 $6, 000 26% ME/Asia $4, 000 8% $2, 000 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 9

Spears & Associates/Oilfield Logix: Directional Drilling Global Directional & LWD Market Segmentation By Number of Wells 2014 Directional & LWD Market Segmentation By Revenues 2014 • Tier 1: integrated services - high value, high-cost service. Integrates Surface Data Logging information with MWD/LWD data. Deepwater wells, offshore exploratory and extremely deep/high cost land wells. • Tier 2: advanced monitoring $2 M per well TIER 1 1, 000 TIER 2 5, 000 Well Cost services – may include lithologic descriptions, pore pressure detection, hydrocarbon analysis and/or automated kick detection services. Used for offshore development wells, and high value land wells. $4 M per well $0. 3 M per well TIER 1 $4 B TIER 2 $10 B TIER 3 34, 000 • Tier 3: horizontal and directional land wells in North America and international locations. Limited LWD use. Goal is speed and accuracy of drilling. Well Complexity TIER 3 $7 B Well Complexity The major service companies (Schlumberger, Halliburton & Baker Hughes) consider directional and LWD as one service. Combined, this is an $21 billion global market. The graphic above demonstrates how directional & LWD use is driven to higher TIERs by intense use in offshore and deepwater drilling. Increasing well cost and wellbore complexity push operators toward sophisticated directional & LWD services geared toward drilling efficiency and data recovery. Almost all of the US land market, which is the focus of much of this report, falls in TIER 3.

Spears & Associates/Oilfield Logix: Directional Drilling by Macro Region Although the major focus of this report is US land directional drilling, we think it is instructive to include our estimates of the macro regions of the world. The table below breaks out the $16. 4 billion global market. These are Spears’ estimates based on hundreds of interviews with directional drilling service companies and their customers and are subject to revision as we improve our data collection. In 2014, the US land directional market grew strongly, but the international and offshore markets were more robust. Billions Land Offshore Total US $3. 8 $1. 2 $5. 0 Canada $1. 5 $0. 0 $1. 5 International $3. 3 $6. 6 $9. 9 Total $8. 6 $7. 8 $16. 4 11

Spears & Associates/Oilfield Logix: Directional Drilling by Company by Region 12

Spears & Associates/Oilfield Logix: Directional Drilling Annual Global Market Change 80% Total Oilfield Equipment & Service Market Annual Change 60% 40% 20% 0% -20% -40% 2005 2006 2007 2008 2009 2010 2011 The total oilfield equipment & service market grows & falls sharply, surging >30% some years, growing 5% some years… 50% 2013 2014 2015 The directional market tends to move erratically. The period 2005 -2011 were characterized by rapid growth or sudden collapse, but lean manufacturing of wells since 2012 has smoothed the curve. Directional Drilling Market Annual Change 40% 2012 Annual Change 30% 20% 10% 0% -10% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 -20% -30% -40% 13

Spears & Associates/Oilfield Logix: Directional Drilling Increasing Use of Directional Services One measure of a market’s growth is the year-to-year change of the intensity with which the product/service is used. The measure we use on this page is market size divided by number of rigs running. As the chart below shows, directional drilling services are a high growth market. In the year 2005, each active drilling rig generated about $1. 7 million in annual demand for directional work. By 2009, each rig was on average creating $3. 8 million in annual demand. In 2014, the number is $4. 7 million per active rig. BP Macondo’s offshore drilling shut-down, plus US land discounting deflated this market in 2010 -2011. The most expensive directional jobs in the world are on deepwater wells and in 2010, deepwater drilling shut down for half a year in the Gulf of Mexico due to the BP oil spill. Other regions slowed their deepwater activity as well. Millions of Dollars Spent on Directional Drilling Services Each Year Per Active Rig around the World $5. 0 $4. 5 $4. 0 $3. 5 $3. 0 $2. 5 $2. 0 $1. 5 $1. 0 $0. 5 $0. 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 14

Spears & Associates/Oilfield Logix: Directional Drilling Related Markets: LWD & Mud Logging RELATED MARKETS: LWD is deployed on the same drill string as the directional drilling system and is used to measure properties of the rock and the rock’s fluid immediately after being drilled. Surface Data Logging occurs during the drilling process, but involves capturing and analyzing samples of the fluid and rock flowing out of the hole. Surface Data/Mud Logging $4, 500 $1, 800 $4, 000 $1, 600 $3, 500 $1, 400 $3, 000 $1, 200 $2, 500 $1, 000 Millions Logging While Drilling $2, 000 $800 15 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2012 $0 2011 $0 2010 $200 2009 $500 2008 $400 2007 $1, 000 2006 $600 2005 $1, 500

Spears & Associates/Oilfield Logix: Directional Drilling North America $7, 000 $6, 000 Millions $5, 000 $4, 000 $3, 000 $2, 000 $1, 000 $0 Canada Gulf of Mexico Gulf Coast West Coast North East Other Rockies Bakken Mid. Continent East Texas/North Louisiana Permian Basin South Texas/Eagle Ford 2012 $1, 407 $900 $147 $76 $287 $286 $558 $635 $270 $225 $424 2013 $1, 392 $1, 050 $181 $89 $331 $297 $686 $618 $285 $301 $489 2014 $1, 500 $1, 200 $207 $105 $376 $324 $780 $654 $384 $523 $492 2015 $1, 000 $175 $45 $300 $165 $415 $375 $185 $350 $315 2016 $1, 150 $1, 100 $200 $50 $315 $185 $440 $400 $200 $375 $335 16

Spears & Associates/Oilfield Logix: Directional Drilling Bottom Hole Temperatures Temperature in degrees F at true vertical depth Region 5, 000’ 10, 000 15, 000’ South Texas 170 275 400 Permian 135 190 250 Haynesville 160 250 350 Mid. Continent 150 210 275 Niobrara 175 260 Based on an evaluation of several thousand wireline and MWD records, Spears has confirmed that the two hottest plays in the US are South Texas and the Haynesville. Most wells to 15, 000’ in South Texas are vertical and require little directional technology. Haynesville wells to that depth, however, are horizontal and require leading edge tools. 17

Spears & Associates/Oilfield Logix: Directional Drilling US Summary: Market Analysis 18

Spears & Associates/Oilfield Logix: Directional Drilling US Summary New Well Drilling Activity 50, 000 45, 000 New Wells Drilled 40, 000 35, 000 30, 000 25, 000 Vertical 20, 000 Horizontal/Directional 15, 000 10, 000 5, 000 0 Vertical Horizontal/Directional 2012 28, 130 18, 375 2013 25, 156 20, 236 2014 21, 664 24, 018 2015 9, 605 14, 961 2016 9, 343 15, 469 Spears’ drilling forecast assumes average oil prices in 2015 of ~$65 and natural gas prices in the US of about 3. 254. If oil prices are materially lower on average, drilling will decline further. 19

Spears & Associates/Oilfield Logix: Directional Drilling US Summary: Top 10 US Operators 7% 5% Chesapeake 4% 33% EOG Resources Marathon Oil 3% 3% 3% XTO Energy Anadarko Chevron 3% 2% 2% 2% Aera Energy Apache Conoco. Phillips Sandridge Companies with ~1% Share 31% Companies with 1% Share 20

Spears & Associates/Oilfield Logix: Directional Drilling US Summary: Top Directional Customers 10% 18% 6% 5% 4% 4% 19% 4% 3% 2% 2% 2% 2% 3% Chesapeake Continental Resources XTO Energy Anadarko WPX Energy Hess Corp Whiting Oil & Gas Sandridge Devon Energy Conoco. Phillips Marathon Oil Encana QEP Energy Petro-Hunt Barrett SM Energy Apache Kerr Mc. Gee Statoil Carrizo Companies with ~1% Share Companies with<1% Share 21

Spears & Associates/Oilfield Logix: Directional Drilling US Summary: Directional Market Directional Drilling Services Market $6, 000 The US directional drilling services market (land offshore) reached $5 billion in 2014. Directional drilling includes three primary services: Positive displacement mud motor (PDM), measurement-whiledrilling tools (MWD) and the directional driller. Combined, the cost of these tools has averaged around $15, 000 a day in recent years. $5, 000 Millions $4, 000 $3, 000 In 2013 the leading directional driller in the US was Schlumberger’s Pathfinder division, followed by Halliburton, Leam, Baker Hughes, Scientific Drilling and MS Energy. These 6 service companies drilled half the directional footage during the year. $2, 000 $1, 000 $0 DD Svs 2012 $3, 691 2013 $4, 000 2014 $5, 000 2015 $3, 300 2016 $3, 600 22

Spears & Associates/Oilfield Logix: Directional Drilling US Summary: Land Market Share SLB Pathfinder Halliburton Leam 7% Baker Hughes 16% Scientific Drilling 9% MS Energy 2% 2% 2% Professional Directional 9% Ensign Weatherford Nomac 2% Phoenix Technology Services 3% 9% Precision Geo. Guidance 3% Nabors 4% 8% 4% 5% DDC WPX Energy 5% 7% MWD Solutions Companies with ~1% Share Companies with <1% Share 23

Spears & Associates/Oilfield Logix: Directional Drilling 24

Spears & Associates/Oilfield Logix: Directional Drilling Who is the most productive directional driller ? Our team analyzed directional feet and days for the most active directional drillers in the nation. The chart below shows the average number of directional feet drilled per day. Baker Hughes, Cathedral, and Weatherford make up the top group of directional drillers, with around 1, 300 feet per day. Drilling between 1, 000 and 1, 200 feet per day, are Phoenix, Premier Drilling, Nomac, Professional Directional, and Nabors. The third group: Archer/Great White, Aim, Halliburton, MWD Solutions, Precision, MS Energy, Apache, and Crescent drill between 800 and 1, 000 feet per day with the lowest group still about 450 feet per day. Almost all companies included in this US summary are also top directional drillers in their respective regions. Drilling Speeds of the Most Active Directional Drillers (feet per day) Baker Hughes Cathedral Weatherford Phoenix Premier Nomac Professional Directional Nabors Archer/Great White Aim Halliburton MWD Solutions Precision MS Energy Apache Crescent DDC Scientific Drilling SLB Pathfinder Leam Ryan Ex. Pert Sharewell MWD Wellbenders East Coast - 200 400 600 800 1, 000 1, 200 1, 400 25

Spears & Associates/Oilfield Logix: Directional Drilling Directional Days in the Hole The number of days a directional drilling system is in the hole has been declining in the US. In 2012 the average was 20 days. In 2013, 17 days. Spears has projected the previous lowest value, 15 days, to become the new average in 2014. The chart to the right plots the number of directional days for each well in our sample. Most of the data is between 5 and 20 days per well. Drilling speeds continue to increase in all major basins. Year Average Days in the Hole 2012 20 2013 17 2014 15 0 20 Spears & Associates, Inc. / Oilfield Logix Series 40 60 80 26

Spears & Associates/Oilfield Logix: Directional Drilling Bottom hole temperatures in the US are fairly predictable, with few to no outliers. The chart below plots the bottom hold temperatures of about 500 US wells. At 5, 000’ the average temperature is just under 150 F. At 10, 000’, the average temperature reaches 200 F. Wells at 15, 000’ might reach temperatures of 240 F with wells at 20, 000’ hitting almost 300 F. Downhole tools tend to work fine when temperatures do not exceed 250 degrees F, but sustained drilling at 325 degrees is the death of many directional drilling tools, drilling fluids and well logging devices. Additionally, well completion equipment that can withstand those temperatures becomes extremely expensive. Bottom Hole Temperature Gradient 350 Bottom Hole Temperature (F) 300 250 200 150 100 50 - 5, 000 10, 000 15, 000 Total Measured Depth (ft. ) Spears & Associates, Inc. / Oilfield Logix Series 20, 000 25, 000 27

Spears & Associates/Oilfield Logix: Directional Drilling US Summary: Horizontal Lateral Lengths of horizontal wells have been getting longer each year. In 2011 the average length was ~4, 600’ and in 2012 the length was ~5, 000’. Using the 2012 -2014 data, well lengths are increasing 8% per year…or ~415’. The chart below plots the distribution of horizontal lateral lengths of hundreds of horizontal wells drilled in the last three years. The longest lateral in each year is 9, 000 -10, 000’, but the average or most frequently drilled lateral is right at 5, 000’. Distribution of Horizontal Lateral Lengths 250 100 50 0 1, 00 0 1, 50 0 2, 00 0 2, 50 0 3, 00 0 3, 50 0 4, 00 0 4, 50 0 5, 00 0 5, 50 0 6, 00 0 6, 50 0 7, 00 0 7, 50 0 8, 00 0 8, 50 0 9, 00 0 9, 50 10 0 , 0 00 0 50 Wells in Sample 200 Lateral Length (ft. ) 28

Spears & Associates/Oilfield Logix: Directional Drilling US Summary: Directional Feet per Well The number of feet drilled directionally in each well is greater than the horizontal length due to the need to drill a curve or some other trajectory to place the wellbore in the desired portion of the reservoir. At minimum, the directional driller will drill a 90 degree curve in ~1, 000 feet, plus a 5, 000 foot lateral, for a total of 6, 000 feet of directional work. But from the charts below, we see that the most common number of feet drilled directionally per well is more like 12, 000 -15, 000 feet. This is because operators now are starting the directional system in the hole just below the surface casing (~3, 000 feet) and drilling a well with a measured depth of 16, 000 feet, so 16, 000’-3, 000’=13, 000’. The intent is to use a single trip of the drill pipe to drill out of the surface pipe all the way to TD. The chart below analyze the drilling paths of several hundred wells drilled in 2012 and 2013. It is clear the distribution from 2012 to 2013 has not changed much, but there is less concentration below 9, 000’. Distribution of Total Directional Drilling Feet per Well 80 60 2012 50 2013 40 30 20 10 0 1, 00 0 2, 00 0 3, 00 0 4, 00 0 5, 00 0 6, 00 0 7, 00 0 8, 00 0 9, 00 10 0 , 0 0 11 0 , 0 0 12 0 , 0 0 13 0 , 0 0 14 0 , 0 0 15 0 , 0 0 16 0 , 0 0 17 0 , 0 0 18 0 , 0 0 19 0 , 0 0 20 0 , 0 00 Wells in Sample 70 Total Directional Feet (ft. ) 29

Spears & Associates/Oilfield Logix: Directional Drilling Eagle Ford/South Texas: Market analysis 30

Spears & Associates/Oilfield Logix: Directional Drilling Eagle Ford / South Texas New Well Drilling Activity 4, 500 4, 000 New Wells Drilled 3, 500 3, 000 2, 500 2, 000 Vertical 1, 500 Horizontal/Directional 1, 000 500 0 Vertical Horizontal/Directional 2012 3, 051 2013 319 3, 516 2014 252 3, 573 2015 95 2, 181 2016 107 2, 223 31

Spears & Associates/Oilfield Logix: Directional Drilling Leading Eagle Ford Operators EOG Chesapeake Oilfield Logix researchers found 112 oil and gas producers who have drilled wells in South Texas in the last three years. Of these 112, 2 represent onequarter the new well drilling in the region – EOG and Chesapeake. Rounding out the top 50% of all drilling are Marathon Oil, Omni Oil & Gas, Anadarko, Conoco. Phillips/Burlington Resources, Murphy, and Comstock. In 2014, different operators are bubbling to the top. For example, BHP Billiton has ramped up drilling with their directional partner, Schlumberger. Marathon Oil 12% 13% Omni Oil & Gas Anadarko Conoco. Phillips 11% Murphy Expl & Prod Comstock Oil & Gas Talisman Energy 22% Geosouthern Energy 9% Carrizo EP Energy BHP Billiton 5% 2% 2% 4% 2% 2% 2% 4% Plains Exploration Hunt Oil Pioneer Natural Resources Companies with 1% Share Companies with <1% Share 32

Spears & Associates/Oilfield Logix: Directional Drilling Eagle Ford Directional Customers Chesapeake Anadarko 1% 1% 1%1%1% 1% Here is the chart that is most meaningful to directional drilling service companies: A ranked list of directional customers. From this chart we see that Chesapeake is the leader in buying directional services by an enormous amount, with almost 50% of the market. Anadarko accounts for another 25%. Carrizo, Cabot, and Blackbrush O&G have respectable shares as well. Carrizo Oil & Gas Cabot Oil & Gas 2% Blackbrush O&G 4% Rosetta Resources BHP Billiton 7% 46% Ballard Exploration Marathon Oil BBX Operating 9% XTO Energy Century Exploration The companies making up the last quarter of the market hold practically equal shares. Laredo Argent Energy 21% BRC Operating Abraxas Petroleum Shell Western Companies with <1% Share 33

Spears & Associates/Oilfield Logix: Directional Drilling Eagle Ford Directional Market Over 10% of the nation’s land directional drilling services market is in South Texas. Directional drilling includes three primary services: Positive displacement mud motor (PDM), measurement-while-drilling tools (MWD) and the directional driller. The average cost of these tools and people has increased to $10 -15, 000 per day. The market in South Texas has continued to remain around $500 million, but will fall off slightly over the next few years. Directional Drilling Services Market $600 $500 Millions $400 $300 $200 $100 $0 DD Svs 2012 $424 2013 $489 2014 $492 2015 $315 2016 $335 During 2013 - 2014 the leading directional driller in the region was Schlumberger’s Pathfinder division, followed by Leam, Professional Directional, Crescent, and Aim. These 5 service companies drilled half the directional footage during the year. Most oil and gas producers in the basin tend to be quite loyal to their directional drilling service companies year in and year out, so regional market share of the service companies tends to rise and fall with the activity of their few primary customers. 34

Spears & Associates/Oilfield Logix: Directional Drilling Eagle Ford Directional Market Share SLB Pathfinder 2% 2% 2% Leam 4% Professional Directional 20% 2% 2% Crescent Aim Nova 3% Nomac Weatherford 3% MS Energy 3% 10% 4% Precision DDC Nabors 4% Archer Halliburton 4% 8% Premier MWD Solutions 4% Wellbenders 5% 5% 8% 6% Scientific Drilling Sharewell MWD Companies with <1% Share 35

Spears & Associates/Oilfield Logix: Directional Drilling Who is the most productive directional driller? Our team analyzed ~6, 000 days of directional drilling performance for almost 20 directional drillers drilling 4. 8 million feet of hole during the period 2012 -2014 in South Texas. The chart below shows the average number of directional feet drilled per day for the most active directional companies. The leading directional drillers with over 1, 200’ per day are Baker Hughes, Premier, Cathedral, Schlumberger Pathfinder, and MS Energy. Drilling Speeds of the Most Active Directional Drillers Baker Hughes Premier Cathedral SLB Pathfinder MS Energy Scientific Drilling Crescent Nomac MWD Solutions Nabors DDC Professional. . . Aim Leam Precision Halliburton Weatherford Archer Sharewell MWD Wellbenders East Coast - 200 400 600 800 1, 000 1, 200 1, 400 1, 600 1, 800 36

Spears & Associates/Oilfield Logix: Directional Drilling Who is the fastest drilling oil company? After analyzing almost a thousand wells and tens of thousands of feet of hole drilled, we were able to rank the top 15 or so operators based on speed to drill from surface to total depth (left chart) and speed to drill directionally (right chart). There is a wide gap between the fastest drilling oil company and the slowest drilling oil company. Looking just at the directional chart (right), BHP Billiton averages 1, 800 directional feet per day while Ballard averages just 200. The average for the group is about 820 feet per day. Directional Drilling Speed Ranked by Operator Total Well Depth Drilling Speed Ranked by Operator Hilcorp Energy BHP Billiton Century. . . Apache Anadarko Kingman. . . Carrizo Oil & Gas XTO Energy Chesapeake Cabot Oil & Gas Rosetta. . . Rosetta Resources Chesapeake Cabot Oil & Gas Enco. . . Blackbrush O&G Carrizo Oil &. . . Blackbrush. . . XTO Energy Anadarko Century Exploration BHP Billiton Ballard 0 200 400 600 Average Feet per Day 800 1000 - 500 1, 000 1, 500 Average Feet per Day 2, 000 37

Spears & Associates/Oilfield Logix: Directional Drilling 2012 Days in the Hole In the Eagle Ford, the number of days a directional drilling system is in the hole has been shrinking each of the last three years. The averages for 2012 and 2013 are the same at 15 days. Spears believes the average for 2014 in this region will drop to 13 days. But a review of the charts to the right– particularly noting the shape of the curves – tells a story of the industry becoming more predictable. A greater and greater percentage of the wells are being predictably drilled in 9 to 20 days. The distribution of directional days in the next chart clearly shows this range. 2013 Days in the Hole Year Average Days in the Hole 2012 15 2013 15 2014 13 0 20 Spears & Associates, Inc. / Oilfield Logix Series 40 Days in the Hole 60 80 38

Spears & Associates/Oilfield Logix: Directional Drilling Eagle Ford Directional Days The chart below shows the distribution of the number of directional drilling days per well. This is the same data as the previous charts, just displayed in a way that clearly shows the concentration of data around a specific range of values. Daysin-the-hole for 2012 – 2014 tend to range from ~9 – 20 days. Some as high as 40 days have been recorded, but are not common. Distribution of Directional Days per Well 16 14 Wells in Sample 12 10 8 6 4 2 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 Total Directional Days 39

Spears & Associates/Oilfield Logix: Directional Drilling Eagle Ford Lateral Lengths of horizontal wells have been getting longer each year. In 2011 the average length was ~4, 600’ and in 2013 the length is approaching ~5, 000’. Using the 2011 -2013 data, well lengths are increasing 8% per year…or ~415’. The chart below plots the distribution of completed lengths of hundreds of horizontal wells drilled in the last three years. The longest lateral in each year is 8, 000 -9, 000’, but the average or most frequently drilled lateral is right at 5, 000’ Year Average Completed Length of HW 2011 4, 600’ 2012 5, 015’ 2013 5, 407’ 2014 5, 829’ Distribution of Horizontal Lateral Lengths 160 140 100 80 60 40 20 0 1, 00 0 1, 50 0 2, 00 0 2, 50 0 3, 00 0 3, 50 0 4, 00 0 4, 50 0 5, 00 0 5, 50 0 6, 00 0 6, 50 0 7, 00 0 7, 50 0 8, 00 0 8, 50 0 9, 00 0 9, 50 10 0 , 0 00 0 50 Wells in Sample 120 Lateral Length (ft. ) 40

Spears & Associates/Oilfield Logix: Directional Drilling Eagle Ford Directional Feet per Well The number of feet drilled directionally in each well is greater than the horizontal length due to the need to drill a curve or some other trajectory to place the wellbore in the desired portion of the reservoir. The chart below analyzes the drilling paths of several hundred Eagle Ford wells drilled in 2012 and 2013. Pad drilling in 2013 and 2014 is driving these numbers higher and higher. Although we do not have as many data points from 2013 as we do from 2012, there are still visible similarities in the distributions, with the curve centralized around 12, 000’ – 14, 000’. Distribution of Total Directional Drilling Feet per Well 20 18 Wells in Sample 16 14 2012 12 2013 10 8 6 4 2 0 1, 00 0 2, 00 0 3, 00 0 4, 00 0 5, 00 0 6, 00 0 7, 00 0 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 00 00 000 000 000 0 Total 0 Directional Feet (ft. ) 41

Spears & Associates/Oilfield Logix: Directional Drilling Bottom hole temperatures in South Texas are some of the hottest in the nation. Although some Haynesville wells in North Louisiana might be hotter and there a few basins in the Gulf of Mexico that are extremely hot, Texas RRC districts 1 and 2 have high temperatures and fairly modest depths. The chart below plots the bottom hole temperatures of a few hundred South Texas wells, plotted versus the measured depth of the well. Since most wells are horizontal, the measured depth is far longer than the actual vertical depth – and it is true vertical depth which dictates temperature. Therefore, we have placed a red line along the left hand side of the data points. This red line represents the true vertical depth of wells in the region versus the temperature at each depth. For example, at 5, 000’ the temperature is 160 degrees F, at 10, 000’ the temperature is 275 degrees F, and at 14, 000’ the temperature is a blistering 350 degrees. Downhole tools tend to work fine when temperatures do not exceed 250 degrees F, but sustained drilling at 325 degrees is the death of many directional drilling tools, drilling fluids and well logging devices. Additionally, well completion equipment that can withstand those temperatures becomes extremely expensive. Bottom Hole Temperature Gradient 350 Bottom Hole Temperature (F) 300 250 200 150 100 50 - 5, 000 10, 000 15, 000 Total Measured Depth (ft. ) Spears & Associates, Inc. / Oilfield Logix Series 20, 000 25, 000 42

Spears & Associates/Oilfield Logix: Directional Drilling Permian Basin: Market analysis 43

Spears & Associates/Oilfield Logix: Directional Drilling Permian Basin New Well Drilling Activity 16, 000 14, 000 New Wells Drilled 12, 000 10, 000 8, 000 Vertical 6, 000 Horizontal/Directional 4, 000 2, 000 0 Vertical Horizontal/Directional 2012 11, 210 2, 101 2013 10, 452 2, 766 2014 9, 561 4, 727 2015 4, 509 3, 241 2016 3, 626 3, 316 44

Spears & Associates/Oilfield Logix: Directional Drilling Leading Permian Operators Apache Oilfield Logix has identified hundreds of oil and gas producers who have drilled wells in the Permian in the last three years. Of these, 3 represent half of the new well drilling in the region – Apache, XTO Energy, and Athlon Energy. All three of these operators have seen a major increase in market share in the last year. Another 4 operators represent the next 25%. These include Berry Oil, BC Operating, Endeavor, and Chesapeake. The last quarter includes many smaller operators, as well as major operators like Anadarko. 1% 1% 2% 2% XTO Energy 6% Athlon Energy 20% Berry Oil BC Operating, Inc. Endeavor Chesapeake 2% Anadarko Kinder Morgan 2% Approach Operating 4% 15% Big Star Oil & Gas Bluestem Callon 6% Juno Operating Banner Basa Resources 7% 9% 14% Capstone Highmount W&T Companies with <1% Share 45

Spears & Associates/Oilfield Logix: Directional Drilling Permian: Top Customer of Directional Here is the chart of the leading directional customers. From this chart we see that Chesapeake and Anadarko are the largest buyers of directional services in the basin, combining to represent about 40% of the demand. This is a combined 17% increase from last year. Apache and Callon make up the next 25%. As horizontal drilling grows in importance in West Texas and Southeastern New Mexico, more and more operators will be added to this list of customers. Chesapeake 15% Anadarko 1% 1% 3% 32% Apache Callon Petroleum Operating 4% Arrington Oil & Gas 5% Approach Operating Berry Oil 6% Athlon Energy 7% 17% Highmount XTO Energy Kinder Morgan 12 46

Spears & Associates/Oilfield Logix: Directional Drilling Permian: Directional Drilling Market Directional Drilling Services Market $600 About $0. 5 billion of the nation’s land directional drilling services market was in the Permian Basin in 2014. Despite drilling speeds rising and rental rates stable at best, the market is projected to fall through 2015 due to decreasing drilling activity. $500 Millions $400 $200 In 2012 - 2014 the leading directional driller in the region was Baker Hughes, followed by DDC, Schlumberger Pathfinder, Weatherford, and Archer/Great White. These five operators make up a little over half of the market. $100 Our research has found ~20 directional companies working in the region. $300 $0 DD Svs 2012 $225 2013 $301 2014 $523 2015 $350 2016 $375 47

Spears & Associates/Oilfield Logix: Directional Drilling Permian: Directional Market Share 4% 4% 4% Baker Hughes 15% DDC SLB Pathfinder 4% Weatherford 4% Archer/Great White 4% 11% Scientific Drilling Apache Drill. Tech 4% Halliburton 4% MS Energy Services 4% 11% 4% MWD Solutions Navigate Phoenix Premier 7% 5% 11% Professional Directional Vaughn 48

Spears & Associates/Oilfield Logix: Directional Drilling Most productive directional driller? Our team analyzed several thousand days of directional drilling performance for about 20 directional drillers during the period 2011 -2013. The chart below shows the average number of directional feet drilled per day for the most active directional companies. Archer/Great White is the most productive directional driller with about 1, 600 feet of hole per day. Professional Directional is second at 1, 100’ per day and MWD Solutions sits right at 1, 000 feet of hole per day. Drilling between 600’ and 1, 000’ per day are Apache, Premier, and Scientific Drilling. Baker Hughes, DDC, and SLB Pathfinder drill 200’ – 600’ per day. Drilling Speeds of the Most Active Directional Drillers Archer/Great White Professional Directional MWD Solutions Apache Premier Scientific Drilling Baker Hughes DDC SLB Pathfinder - 200 400 600 800 1, 000 1, 200 1, 400 1, 600 1, 800 Average Feet per Day 49

Spears & Associates/Oilfield Logix: Directional Drilling The fastest E&P company? Our team analyzed the drilling speeds of several oil and gas producers drilling horizontal wells during the period 2012 -2014 in the Permian Basin. Two charts are below. On the left is the average daily drilling speed in feet for the entire horizontal well. For example, Juno Operating and Capstone both drilled over 1, 000 feet per day. The right is the average daily drilling speed in feet for just the directional portion of the well…generally drilled in one run. At the top of the list is Chesapeake Operating with ~1, 200 feet per day. Followed by XTO Energy and Approach Operating with over 1, 000’ per day. Total Well Depth Drilling Speed Ranked by Operator Directional Drilling Speed Ranked by Operator Juno Operating Capstone Athlon Energy Highmount Approach Operating Berry Oil Apache W&T BC Operating, Inc. Bluestem Anadarko XTO Energy Big Star Basa Resources Endeavor Chesapeake Kinder Morgan Callon Chesapeake XTO Energy Approach Apache Anadarko Kinder Morgan 0 500 1000 Average Feet per Day 1500 - 200 400 600 800 1, 000 1, 200 1, 400 Average Feet per Day 50

Spears & Associates/Oilfield Logix: Directional Drilling Permian: Directional Days in the Hole Directional Days-in-the-Hole The number of days a directional drilling system is in the hole is rising in the Permian Basin. This is one of the few basins where days-in-hole is rising. Horizontal drilling in the basin is fairly new and operators are still experimenting with the proper configuration and drilling type. Our research indicates that days-to-drill directionally is around 13 currently, although we would expect that number to fall as horizontal drilling in the field matures. Year Average Days in the Hole 2011 11 2012 15 2013 13 0 20 40 60 51

Spears & Associates/Oilfield Logix: Directional Drilling Permian: Directional Days Per Well The chart below shows the distribution of the number of directional drilling days per well. This is the same data as the previous charts, just displayed in a way that clearly shows the concentration of data around a specific range of values. Daysin-the-hole for 2012 – 2014 tend to range from ~6 – 17 days in the Permian Basin. Directional drilling days-in-the-hole are significantly lower in this region due to the greater popularity of vertical wells. Horizontal wells still are not as deep as other areas. Distribution of Directional Days per Well 3. 5 Wells in Sample 3 2. 5 2 1. 5 1 0. 5 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 Total Directional Days 52

Spears & Associates/Oilfield Logix: Directional Drilling Permian: Horizontal Lateral Lengths Lateral Length of horizontal wells has been getting longer each year. In 2011 the average length was ~3, 500’ and in 2012 the length averaged ~4, 000’. Operators are experimenting with longer and longer laterals. Researchers found some laterals approaching 7, 000’, particularly in parts of the Permian that abut the Eagle Ford play. Year Average Completed Length of HW 2011 3, 500’ 2012 3, 900’ 2013 4, 200’ We think it is reasonable to assume that Permian Basin lateral lengths will continue to increase over the next few years, ultimately ranging from 4, 000’ to 5, 500’. Distribution of Horizontal Lateral Lengths 8 7 Wells in Sample 6 5 4 3 2 1 0 400 800 1, 1, 2, 2, 2, 3, 3, 4, 4, 4, 5, 5, 6, 6, 6, 7, 7, 8, 20 60 00 40 80 20 60 00 0 0 0 Lateral 0 0 Length 0 (ft. ) 0 0 0 0 0 53

Spears & Associates/Oilfield Logix: Directional Drilling Permian: Directional Feet per Well The number of feet drilled directionally in each well is greater than the horizontal length due to the need to drill a curve or some other trajectory to place the wellbore in the desired portion of the reservoir. The chart below analyzes the drilling paths of horizontal Permian wells drilled in 2012 and 2013. There are fewer data points in this region, especially in 2013, but this distribution succeeds in showing the total directional feet for smaller and larger horizontal wells. Those on the low end might have between 4, 000 and 9, 000 directional feet. The larger horizontal wells could be anywhere between 11, 000 and 16, 000 directional feet. Distribution of Directional Feet per Well 4. 5 4 2012 3 2013 2. 5 2 1. 5 1 0. 5 0 1, 00 0 2, 00 0 3, 00 0 4, 00 0 5, 00 0 6, 00 0 7, 00 0 8, 00 0 9, 00 10 0 , 0 0 11 0 , 0 0 12 0 , 0 0 13 0 , 0 0 14 0 , 0 0 15 0 , 0 0 16 0 , 0 0 17 0 , 0 0 18 0 , 0 0 19 0 , 0 0 20 0 , 0 00 Wells in Sample 3. 5 Total Directional Feet (ft. ) 54

Spears & Associates/Oilfield Logix: Directional Drilling Permian: Bottom Hole Temperatures Bottom hole temperatures in the Permian Basin are benign. The chart below plots the bottom hole temperatures of several hundred Permian Basin wells, plotted versus the vertical depth of the well. Bottom hole temperature in the Permian is best represented by a gradual power function. For example, at 4, 000’ the temperature is 110 degrees F, at 8, 000’ the temperature is 155 degrees F, and at 12, 000’ the temperature is 200 degrees F. Notice the cluster of well temperatures at 7, 000 -9, 000 feet. These are all horizontal wells that have a total depth of about 15, 000 feet. Very few wells in the Permian are drilled with vertical depths greater than 12, 000’. Bottom Hole Temperature Gradient Bottom Hole Temperature (F) 250 200 150 100 50 - - 2, 000 4, 000 6, 000 8, 000 True Vertical Depth (ft. ) 10, 000 Spears & Associates, Inc. / Oilfield Logix Series 12, 000 14, 000 55

Spears & Associates/Oilfield Logix: Directional Drilling Mid. Continent: Market analysis 56

Spears & Associates/Oilfield Logix: Directional Drilling Mid. Continent The Mid Continent spans a region including Western Oklahoma, the Texas Panhandle, and Kansas. And while gas well drilling is depressed in North Texas, we are including that play as well. The area is the site of much production from both deep and shallow conventional reservoirs as well as some emerging unconventional plays: Granite Wash: Tight oil formation located in western Oklahoma and the Texas panhandle. It produces oil, gas, and liquids-rich gas. Key operators in the area include Chesapeake, Apache, Devon, and Cimarex. Mississippi Lime: Tight oil formation centered along the Oklahoma-Kansas border. Drilling activity is split about 50: 50 between oil and gas in this market. Average drilling and completion costs in this market are estimated to range from $4. 0 -$5. 0 million per well; average measured depth is ~13, 500 feet. Horizontal drilling currently accounts for over 80% of the rig activity in the Mid Continent market. Most wells require multistage frac jobs in order to produce commercial quantities of hydrocarbon. 57

Spears & Associates/Oilfield Logix: Directional Drilling Mid. Continent New Well Drilling Activity 10, 000 9, 000 New Wells Drilled 8, 000 7, 000 6, 000 5, 000 Vertical 4, 000 Horizontal/Directional 3, 000 2, 000 1, 000 0 Vertical Horizontal/Directional 2012 4, 061 4, 903 2013 3, 500 4, 747 2014 3, 287 4, 966 2015 1, 519 2, 977 2016 1, 704 3, 039 58

Spears & Associates/Oilfield Logix: Directional Drilling Top Mid. Continent Operators Market Share of Operators Drilling is quite diverse in the extremely large Mid. Continent region. Shallow horizontal wells in Arkansas and Eastern Oklahoma are grouped with deep Granite Wash horizontal wells and Barnett Shale wells and deep vertical gas wells… In the end, Sandridge, Chesapeake, and Devon combine to drill one-quarter of all new wells, followed by Apache, XTO Energy, and Atlas Barnett. Hundreds of oil & gas producers drill wells in the Mid. Continent each year…perhaps as many as a thousand unique E&P companies. The small and large independents tend to make up most of the market, as is shown in the current market share. Companies with 1% or less market share hold 63%. 11% Sandridge Chesapeake 10% Devon Energy 38% Apache 5% XTO Energy Atlas Barnett 4% 3% 2% 2% Pioneer Natural Resources Companies with 1% Share Companies with <1% Share 25% 59

Spears & Associates/Oilfield Logix: Directional Drilling Mid. Continent: Top Directional Customers Sandridge Chesapeake Sandridge, Chesapeake, and Devon drilled about a quarter of all new wells, but count for over 30% of horizontal wells in the region. XTO Energy, Apache, and Marathon Oil round out the top 50% of directional buyers. Dozens of independent directional drilling service companies make a nice living working for the E&P companies who are too small to make this ranking, but who nevertheless drill large numbers of wells each year. 12% 15% Devon Energy XTO Energy Apache Marathon Oil 13% 21% Plains Exploration Pioneer Natural Resources Aruba Petroleum 2% 2% 8% 2% 6% 2% 3% 3% 6% Mewbourne Oil Newfield Exploration Unit Petroquest Energy LLC Companies with ~1% Share Comopanies with <1% Share 60

Spears & Associates/Oilfield Logix: Directional Drilling Mid. Continent: Directional Market Directional Drilling Services Market $700 ~$0. 6 billion of the continent’s directional drilling services market was in the Mid. Continent in 2014. Spears’ research points to a decline in 2015 - 2016 due to lower oil prices. $600 Millions $500 The leading directional driller in the region is Scientific Drilling, followed by Halliburton, Baker Hughes, MS Energy, SLB Pathfinder, and Leam who combine to drill half the directional footage in the region. $400 $300 $200 $100 $0 DD Svs 2012 $635 2013 $618 2014 $654 2015 $375 2016 $400 61

Spears & Associates/Oilfield Logix: Directional Drilling Mid. Continent: Directional Market Share 6% 13% 7% 2% 2% 2% 12% 2% 3% 9% 4% 4% 8% 4% 4% 5% 6% Scientific Drilling Halliburton Baker Hughes MS Energy SLB Pathfinder Leam Archer/Great White Calmena Crescent Directional Drilling DDC Nomac Compass Directional Survey Calculations Phoenix Technology Services Dril. Tech Stryker Directional Cathedral Companies with 1% Share Companies with <1% Share 62

Spears & Associates/Oilfield Logix: Directional Drilling Our sample of new wells drilled over the last few years points to a wide range of directional drilling performances. For example, little known Dril. Tech ranks first along with directional powerhouse Weatherford, drilling over 1, 400 feet of directional hole per day. Halliburton, Schlumberger and Leam are close behind, all drilling around 900 feet per day or more. Crescent and Scientific Drilling make up the last group, drilling between 300 and 700 feet per day. Drilling Speeds of the Most Active Directional Drillers Weatherford Dril. Tech Halliburton SLB Pathfinder Leam Crescent Scientific Drilling - 200 400 600 800 1, 000 Average Directional Feet/Day 1, 200 1, 400 1, 600 63

Spears & Associates/Oilfield Logix: Directional Drilling When considering the entire wellbore, average drilling speeds for the top 21 operators are quite similar. But the average speed of directional drilling has a wide performance range. Devon Energy averages 1, 700 directional feet per day while Plymouth lags with just over 200. A quick look at the chart on the right shows that none of these oil companies have similar directional performance. The wide range of targeted reservoirs – depths, complexity of wellbore, location – creates this wide range of outcomes. Total Well Depth Drilling Speed Ranked by Operator Legend Natural Gas Directional Drilling Speed Ranked by Operator Devon Energy Calyx Energy LLC Atlas Barnett Legend Natural Gas XTO Energy Enervest Devon Energy Unit Pioneer Natural Resources Penn Virginia Basa Resources Murphy Linn Operating Atlas Barnett Pioneer Natural Resources Plains Exploration Sandridge QEP Energy Petrohawk Chesapeake Cabot Oil & Gas Aruba Petroleum Sheridan Production Highmount Apache Petrohawk Chesapeake EOG Resources Mewbourne Oil Plymouth Exploration Apache 0 200 400 600 800 1000 1200 1400 Average Feet Per Day 0 500 1000 1500 2000 64 Average Feet Per Day

Spears & Associates/Oilfield Logix: Directional Drilling Mid. Continent: Directional Days In The Hole Directional Days-in-the-Hole The chart below plots the number of days that a directional drilling system was in the hole for several hundred horizontal wells drilled in the last two years. Some problem wells required as much as 90 days of directional drilling time, but we see a steady decline in the number of days-in-the-hole, dropping from 19 in 2012 to 12 in 2014. Year Average Days in the Hole 2011 26 2012 19 2013 18 2014 12 0 20 40 60 80 100 65

Spears & Associates/Oilfield Logix: Directional Drilling Mid. Continent: Directional Drilling Days The chart below shows the distribution of the number of directional drilling days per well. This is the same data as the previous charts, just displayed in a way that clearly shows the concentration of data around a specific range of values. The time it takes to drill a horizontal well in the Mid. Continent is less predictable than South Texas and the Permian Basin. Although there is a small concentration of data from 7 to 20 days, there is a significant number of wells taking more than 20 days. Distribution of Directional Days per Well 7 6 Wells in Sample 5 4 3 2 1 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 Total Directional Days 66

Spears & Associates/Oilfield Logix: Directional Drilling Mid. Continent: Horizontal Lateral Lengths Lateral length of horizontal wells grows each year. In 2012 the average length was ~4, 100’ and in 2013 the length averaged ~4, 200’. The most common lateral length has been 4, 000 -5, 000’. Mississippi Lime laterals tend to be on the shorter end of the scale (3, 0004, 000’) while Granite Wash laterals are 5, 000’ and greater. We believe that Continental Resources has experimented with Granite Wash laterals approaching 10, 000’. Year Average Completed Length of HW 2012 4, 100’ 2013 4, 200’ 2014 4, 400’ We are projecting a 5% per year increase in average horizontal lateral length through 2015. Distribution of Horizontal Lateral Lengths 70 60 40 30 20 10 0 80 0 1, 20 0 1, 60 0 2, 00 0 2, 40 0 2, 80 0 3, 20 0 3, 60 0 4, 00 0 4, 40 0 4, 80 0 5, 20 0 5, 60 0 6, 00 0 6, 40 0 6, 80 0 7, 20 0 7, 60 0 8, 00 0 8, 40 0 8, 80 0 9, 20 0 9, 60 10 0 , 0 00 0 40 Wells in Sample 50 Lateral Length (ft. ) 67

Spears & Associates/Oilfield Logix: Directional Drilling The number of feet drilled directionally per well has a very wide range each year. The chart below plots the number of feet drilled directionally in 300 -400 horizontal wells during each of the years 2012 and 2013. Although there is not as much data in 2013, the similarity in curves is obvious. In both years, the most common total of directional feet was ~10, 000’ with most of the data ranging from 6, 000’ to 13, 000’. The most directionally drilled wells see the MWD systems turned on much higher in the hole. This allows the hole to be steered in a way that the horizontal section can be placed precisely in the right part of the reservoir regardless of the surface location. Therefore, lots of horizontal wells in the Mid. Continent have 10 -12, 000’ of directional hole. Distribution of Directional Feet per Well 35 30 2012 Wells in Sample 25 2013 20 15 10 5 0 1, 00 0 2, 00 0 3, 00 0 4, 00 0 5, 00 0 6, 00 0 7, 00 0 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 00 00 000 000 000 0 Total 0 Directional Feet (Ft. ) 68

Spears & Associates/Oilfield Logix: Directional Drilling Mid. Continent: Bottom Hole Temperatures Bottom hole temperatures in the Mid. Continent are generally benign. The chart below shows the bottom hole temperatures of several Oklahoma and Texas Panhandle wells, plotted versus the measured depth of the well. Since most wells in the sample are vertical, the measured depth tends to equal the true vertical depth, so this chart plots true bottom hole temperature. Bottom hole temperature is generally linear with well depth. For example, at 6, 000’ the temperature is 120 degrees F and at 10, 000’ the temperature is almost 200 degrees F. There are some zones that are hotter than others, but none that can be considered truly hot…or hot enough to damage tools. Even the hottest wells are still well below any temperature threshold requiring special equipment. Bottom Hole Temperature Gradient Bottom Hole Temperature (F) 350 300 250 200 150 100 50 - 2, 000 4, 000 6, 000 8, 000 10, 000 True Vertical Depth (ft. ) 12, 000 Spears & Associates, Inc. / Oilfield Logix Series 14, 000 16, 000 69

Spears & Associates/Oilfield Logix: Directional Drilling Bakken/Williston: Market analysis 70

Spears & Associates/Oilfield Logix: Directional Drilling Bakken/Williston New Well Drilling Activity 3, 000 New Wells Drilled 2, 500 2, 000 1, 500 Vertical Horizontal/Directional 1, 000 500 0 Vertical Horizontal/Directional 2012 223 2, 005 2013 196 2, 230 2014 44 2, 499 2015 31 1, 369 2016 35 1, 400 71

Spears & Associates/Oilfield Logix: Directional Drilling Leading Bakken Operators Continental Resources Hess Corp 3% Oilfield Logix has identified ~50 oil and gas producers who have drilled wells in the Bakken in the last three years. Continental Resources, Hess Corp, Whiting, Conoco. Phillips/Burlington, Petro. Hunt, and XTO Energy account for half of the market. Marathon Oil and WPX Energy are close behind, followed by Kodiak, QEP, SM Energy, and Statoil. These 6 companies make up the next quarter of new wells drilled. Whiting Oil & Gas 13% 11% Conoco. Phillips Petro-Hunt 2% 2% 2% 10% XTO Energy Marathon Oil WPX Energy Kodiak 2% 7% 3% QEP Energy SM Energy Statoil 4% 6% 4% EOG Resources Samson Resources 4% 5% 6% Zenergy Fidelity Exporation Slawson Exploration Triangle USA Companies with~1% Share Companies with< 1% Share 72

Spears & Associates/Oilfield Logix: Directional Drilling Bakken: Top Directional Customers 3% Here is a ranked list of directional customers in the Bakken. From this chart we see that Continental Resources and Hess Corp purchased just over a quarter of the directional services in the last few years. Whiting, Conoco. Phillips/Burlington, XTO Energy, and Petro Hunt help make up the top half of directional customers. With so many long laterals drilled in the Bakken, any of the top 20 operators in the Bakken are significant buyers of directional services in the US. 13% Continental Resources Hess Corp 16% Whiting Oil & Gas Conoco. Phillips 2% 2% XTO Energy 11% 4% Petro-Hunt WPX Energy 4% SM Energy 7% 4% 5% 7% 5% 5% 6% 7% Marathon Oil Statoil Oil & Gas QEP Energy Kodiak Oil EOG Resources Enerplus Resources Companies with ~1% Share Companies with <1% Share 73

Spears & Associates/Oilfield Logix: Directional Drilling Bakken: Directional Market Directional Drilling Services Market $900 Spears estimates that $0. 8 billion in directional drilling services market was spent in the Bakken during 2014. $800 During 2012 - 2014 the leading directional driller in the region was Baker Hughes, followed by Leam, Schlumberger Pathfinder, Halliburton and Phoenix. These 5 directional drillers count for 75% of the market in the Bakken. $700 Millions $600 $500 There are fewer active directional drillers in this region and those that are, are drilling extremely long laterals. With these lateral lengths continuing to increase while new wells decrease in the region, Spears estimates the directional drilling market in the Bakken will fall to $0. 4 billion in 2015. $400 $300 $200 $100 $0 DD Svs 2012 $558 2013 $686 2014 $780 2015 $415 2016 $440 74

Spears & Associates/Oilfield Logix: Directional Drilling Bakken: Market Share of Directional Drillers Baker Hughes 9% Leam 2% SLB Pathfinder 2% 2% 2% 3% 28% Halliburton Phoenix Technology Services 4% MS Energy 4% Scientific Drilling Ryan Directional 6% Newsco 14% 12% Professional Directional Weatherford 14% Companies with ~1% Share Companies with <1% Share 75

Spears & Associates/Oilfield Logix: Directional Drilling Bakken: Directional Speed The range in drilling speed performance by the directional companies working in the Bakken is fairly narrow: 600 -900 feet per day. Given the relatively uniform well depths and lateral lengths of the thousands of wells drilled in the Bakken each year, this narrow range of performances does not surprise us. According to our data, Baker Hughes has doubled the average directional drilling speed this last year with 1, 800’ per day. Drilling Speeds of the Most Active Directional Drillers Baker Hughes Phoenix Professional Directional SLB Pathfinder MWD Solutions Scientific Drilling Leam Ryan MS Energy - 200 400 600 800 1, 000 1, 200 1, 400 1, 600 1, 800 2, 000 Average Feet per Day 76

Spears & Associates/Oilfield Logix: Directional Drilling The Oilfield Logix team also looked at the average daily drilling speeds of the operators working in North Dakota. The chart on the left ranks operators by the speed of drilling the entire well. The chart on the right ranks operators by the speed of directional drilling only. For most operators in this region, drilling speeds and rankings look similar whether it is the entire well or the directional portion. Hess Corp is the only operator with a huge disparity in drilling speed between the two charts with over 2, 000 feet per day when drilling directionally, and a much smaller 459 feet per day for the entire well. It might be worth noting, Hess Corp uses Baker Hughes for almost all horizontal wells in the Bakken. Total Well Depth Drilling Speed Ranked by Operator Marathon Oil Whiting Oil & Gas American Eagle Crescent Point Energy WPX Energy Hunt Oil Newfield Production Statoil Oil & Gas Continental Resources Kodiak Oil XTO Energy Petro-Hunt Fidelity Exporation Conoco. Phillips/Burlington Resources Hess Corp Samson resources SM Energy EOG Resources QEP Energy Triangle USA Directional Drilling Speed Ranked by Operator Hess Corp Continental Resources Kodiak Oil Whiting Oil & Gas XTO Energy EOG Resources Hunt Oil QEP Energy WPX Energy SM Energy Petro-Hunt - 200 400 600 800 1, 000 1, 200 Average Feet per Day - 500 1, 000 1, 500 Average Feet Per Day 2, 000 77 2, 500

Spears & Associates/Oilfield Logix: Directional Drilling Bakken: Directional Days in the Hole Drilling days are falling slowly in North Dakota. In 2012, directional systems were in the hole on average 25 days. By 2014, days have fallen to 22. As time goes by and as “lean manufacturing” techniques are perfected in the Bakken, we expect directional drilling days to fall by 10% per year despite increasing footage per well and increasing complexity. Year Average Days in the Hole 2012 25 2013 23 2014 22 - 20 40 60 80 100 78

Spears & Associates/Oilfield Logix: Directional Drilling Bakken: Directional Days per Well The distribution of directional drilling days per well in the Bakken resembles a bell curve more than any of the regions with directional data, although it is still not perfect. The most common number of days is ~21, but wells could take anywhere from 3 days to 40 days to drill. Since most wells in the Bakken tend to remain around 18, 000’ – 24, 000’, the wide range in drilling days could be due to the hired directional driller. Distribution of Directional Days per Well 14 12 Wells in Sample 10 8 6 4 2 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 Total Directional Days 79

Spears & Associates/Oilfield Logix: Directional Drilling Bakken: Horizontal Lateral Lengths Lateral lengths of horizontal wells have been getting longer each year in the Bakken. In 2012 the average length was ~8, 200’, in 2013 the length 9, 000’. Wells in 2014 are averaging 9, 400’. This indicates that fewer and fewer of the short laterals are being drilled as operators standardize on the 10, 000’ lateral. Year Average Lateral Length 2012 8, 200’ 2013 9, 000’ 2014 9, 400’ Distribution of Horizontal Lateral Lengths 70 50 40 30 20 10 0 50 1, 0 00 1, 0 50 2, 0 00 2, 0 50 3, 0 00 3, 0 50 4, 0 00 4, 0 50 5, 0 00 5, 0 50 6, 0 00 6, 0 50 7, 0 00 7, 0 50 8, 0 00 8, 0 50 9, 0 00 9, 0 5 10 00 , 0 10 00 , 5 11 00 , 0 11 00 , 5 12 00 , 0 12 00 , 5 13 00 , 0 00 Wells in Sample 60 Lateral Length (ft. ) 80

Spears & Associates/Oilfield Logix: Directional Drilling While lateral lengths in the Bakken might be close to 9, 500’ on average, the number of directionally drilled feet is double that amount. As the chart below shows, the average number of directionally drilled feet in a Bakken well is around 19, 000’. The curves for 2012 and 2013 are almost identical, and showing signs of another increase in directional feet per well, with more wells pushing 21, 000’ – 22, 000’. This is due largely to pad drilling, where multiple wells are drilled from a single well pad and, as a result, wellbores must be steered through a complex “flight path” in order to enter the reservoir at the correct place and at the correct angle. This puts most of the burden of drilling a well on the directional service company. Distribution of Directional Feet per Well 60 40 2012 2013 30 20 10 0 1, 00 0 2, 00 0 3, 00 0 4, 00 0 5, 00 0 6, 00 0 7, 00 0 8, 00 0 9, 00 10 0 , 0 0 11 0 , 0 0 12 0 , 0 0 13 0 , 0 0 14 0 , 0 0 15 0 , 0 0 16 0 , 0 0 17 0 , 0 0 18 0 , 0 0 19 0 , 0 0 20 0 , 0 0 21 0 , 0 0 22 0 , 0 0 23 0 , 0 0 24 0 , 0 0 25 0 , 0 00 Wells in Sample 50 Total Directional Feet (ft. ) 81

Spears & Associates/Oilfield Logix: Directional Drilling Rocky Mountain Region: Market analysis 82

Spears & Associates/Oilfield Logix: Directional Drilling Rocky Mountains The Rockies includes the following states: North Dakota, Montana, Wyoming, Colorado and Utah. The area is large, the drilling diverse, the activity erratic, but there is no question that it contains one of the most important plays ever to be discovered in the US: The Williston Basin’s Bakken. This report addresses: Niobrara: A reservoir within the Denver-Julesberg Basin in Eastern Colorado, Eastern Wyoming and a bit of Nebraska. Operators are still trying to determine the optimal way to develop this reservoir with horizontal wells. Western Wyoming: A gas play that still has some large operators drilling wells. Piceance & Uinta: The Western Rockies with vertical drilling through highly tilted rock layers, creating a complicated drilling situation. 83

Spears & Associates/Oilfield Logix: Directional Drilling Rocky Mountains New Well Drilling Activity 8, 000 7, 000 New Wells Drilled 6, 000 5, 000 4, 000 Vertical 3, 000 Horizontal/Directional 2, 000 1, 000 0 Vertical Horizontal/Directional 2012 5, 136 1, 858 2013 4, 512 1, 926 2014 3, 223 2, 130 2015 948 1, 131 2016 1, 064 1, 208 84

Spears & Associates/Oilfield Logix: Directional Drilling Leading Rocky Mountain Operators 5% Oilfield Logix has identified ~50 oil and gas producers who have drilled wells in the Rockies (excluding the Bakken) in the last three years. Eleven oil companies represent just over half the new wells drilled: WPX Energy and Encana have the highest unique market shares. This is followed by Noble Energy, BP America, Ultra, and Barrett, who are all consistently active operators in this region. Closing out the top 60% is: Kerr. Mc. Gee, Anadarko, QEP Energy, Bonanca Creek, and PDC Energy. 8% 11% 7% 2% 2% 6% 6% 3% 3% 3% 6% 4% 4% 5% WPX Energy Encana Noble Energy BP America Ultra Petroleum Barrett Kerr-Mc. Gee Oil & Gas Anadarko QEP Energy Bonanza Creek Energy PDC Energy Whiting Oil & Gas Linn Operating Synergy Ursa Operating Great Western Chesapeake Bayswater Extraction Samson Resources Wexpro Wiepking-Fullerton Companies with Approximately 1% Share Companies with Less than 1% Share 85

Spears & Associates/Oilfield Logix: Directional Drilling Rockies: Leading Directional Customers WPX Energy Barrett Encana 5% Here is a ranked list of directional customers in the Rocky Mountains. From this chart we see WPX and Barrett have purchased almost a quarter of the directional services in the region. Encana, Kerr-Mc. Gee, PDC Energy, and Noble Energy make up the next 25%. Kerr Mc. Gee 13% 8% PDC Energy 2% 2% 2% 3% Noble Energy 10% Bonanza Creek Energy Whiting Oil & Gas Extraction 3% Synergy 3% 9% 3% Linn Great Western Ultra Petroleum 4% 9% 4% 5% 5% 5% 6% Ursa Operating Oxy USA Bayswater Samson Companies with ~1% Share Companies with <1% Share 86

Spears & Associates/Oilfield Logix: Directional Drilling Rockies: Directional Drilling Market Directional Drilling Services Market $500 Spears estimates that $0. 4 billion in directional drilling services market is spent annually in the Rocky Mountain basins. This is less than half of the amount spent in the Bakken. Significant plays are the horizontal wells in the Niobrara of Eastern Colorado and the tough vertical drilling of Western Colorado and Utah, which often require directional services to drill a straight hole. $450 $400 Millions $350 $300 $250 $200 In 2012 - 2014 the leading directional driller in the region, by an extremely large margin, was Ensign with over a quarter of the market. Unlike most regions, the number of active directional drillers is fairly low and all hold a significant share of the market. $150 $100 $50 $0 DD Svs 2012 $418 2013 $414 2014 $437 2015 $416 2016 $413 87

Spears & Associates/Oilfield Logix: Directional Drilling Rockies: Market Share of Directional Drillers Ensign 1% Scientific Drilling 3% Halliburton 3% SLB Pathfinder 3% 31% 4% Payzone Weatherford Cathedral Total 5% Precision Baker Hughes MS Energy Services Crescent Directional 8% DDC 9% 12% Directional Plus Great White/Archer Mesa West Sharewell 88

Spears & Associates/Oilfield Logix: Directional Drilling Rockies: Drilling Speeds The Oilfield Logix team also looked at the average daily drilling speeds of the operators working in Colorado and Wyoming. This is the average drilling speed for the entire well. In Colorado and Wyoming, the range of performance is quite wide. Granted, our sample of wells and operators in those two states is limited, but, for example, Noble Energy drills almost 2, 000 feet per day BP drills ~100 feet per day. Total Well Depth Drilling Speed Ranked by Operator Noble Energy Kerr-Mc. Gee Anadarko Ultra Petroleum Encana Jonah Wexpro EOG Resources QEP Energy Chesapeake BP America 0 500 1000 1500 2000 Average Feet per Day 2500 89

Spears & Associates/Oilfield Logix: Directional Drilling Rockies: Horizontal Lateral Lengths Lateral length of horizontal wells has been slowly getting longer each year in the Rocky Mountains, although the lengths themselves are much lower than those in the Bakken and other horizontal plays. In the Niobrara, lateral length has started to increase, with averages reaching 3, 000’ in 2013 and estimated to hit 3, 400’ this year. Once operators find the best way to drill and complete wells in this field, these numbers should see more growth, but after several years of trying, we see little encouraging news coming from NE Colorado. Year Average Lateral Length 2012 2, 400’ 2013 3, 000’ 2014 3, 400’ Distribution of Horizontal Lateral Lengths 7 Wells in Sample 6 5 4 3 2 1 0 400 800 1, 1, 2, 2, 2, 3, 3, 4, 4, 4, 5, 5, 6, 6, 6, 7, 7, 8, 20 60 00 40 80 20 60 00 0 0 0 Lateral 0 0 Length 0 (ft. ) 0 0 0 0 0 90

Spears & Associates/Oilfield Logix: Directional Drilling Rockies: Directional Footage While lateral lengths in the Rockies might see little growth, the chart below clearly shows significant increase in the amount of directional feet drilled per well. The most common value for total directional feet was 8, 000’ in 2012, and current data shows this value is now more like 10, 000’ – 11, 000’. The Rockies are the only region with this large of an increase. Eagle Ford, Permian, Mid. Continent, and Bakken distributions show little change from 2012 to 2013. Similarly to the Bakken, multiple wells are drilled from a single well pad in the Rocky Mountains. As a result, wellbores must be steered through a complex “flight path” in order to enter the reservoir at the correct place and at the correct angle. Distribution of Directional Feet per Well 30 25 20 2013 15 10 5 0 1, 00 0 2, 00 0 3, 00 0 4, 00 0 5, 00 0 6, 00 0 7, 00 0 8, 00 0 9, 00 10 0 , 0 0 11 0 , 0 0 12 0 , 0 0 13 0 , 0 0 14 0 , 0 0 15 0 , 0 0 16 0 , 0 0 17 0 , 0 0 18 0 , 0 0 19 0 , 0 0 20 0 , 0 00 Wells in Sample 2012 Total Directional Feet (ft. ) 91

Spears & Associates/Oilfield Logix: Directional Drilling Haynesville/East Texas: Market analysis 92

Spears & Associates/Oilfield Logix: Directional Drilling Haynesville/East Texas The Haynesville Shale spans an area of 100 by 100 miles, from Harrison County in East Texas to Bienville Parish in northern Louisiana. Reservoir pressures range from 9, 000 to 12, 000 psi; as a result, Haynesville shale wells can be produced at far higher rates than wells in such shales as the Barnett or Fayetteville. Average well costs are estimated at $8 -$10 million. With formation depth of 10, 000 ft to 13, 000 ft, reservoir temperatures can reach 300 -350 F, causing directional drilling tools and formation evaluation tools to fail. Development of the Haynesville shale began in 2009. Rig activity in North Louisiana increased from about 80 active rigs in mid 2009 to approximately 160 active rigs as of mid-2010 but fell below 120 active rigs by mid-2011 as operators shifted their drilling programs to more lucrative plays. ~1, 600 new wells will be drilled in the region in 2013, down from 3, 000 two years ago. Gas-oriented drilling accounts for over 95% of the rig activity in this market. Horizontal drilling currently accounts for about 95% of the rig activity in the Haynesville Shale, with the balance being vertical wells. Wells require multi-stage frac jobs in order to produce commercial quantities of gas. Henry Hub gas prices are the most relevant “marker” gas price for the Haynesville Shale market. Operators are estimated to require an expectation of long-term gas prices in excess of $4/mmbtu in order to sustain/grow drilling activity. Long-term gas price expectations below $3/mmbtu will result in lower drilling activity in this region. The operators with the largest lease holdings in the Haynesville/Bossier shale play in North Louisiana/East Texas are Chesapeake (~525, 000 acres), Encana (~425, 000 acres), Petrohawk (~380, 000 acres), EOG Resources (~160, 000 acres), Devon Energy (~160, 000 acres), Forest Oil (~125, 000 acres), Plains Exploration (~110, 000 acres), Exxon. Mobil (~100, 000 acres), Goodrich Petroleum (~80, 000 acres), and Anadarko (~80, 000 acres). In all about 20 -25 operators are currently drilling in the Haynesville Shale. The three most active operators (Chesapeake, Exco Resources, and Petro. Hawk/BHP Billiton) combine to account for ~40% of the rigs currently working in this area. 93

Spears & Associates/Oilfield Logix: Directional Drilling Haynesville/East Texas New Well Drilling Activity 3, 500 3, 000 New Wells Drilled 2, 500 2, 000 Vertical 1, 500 Horizontal/Directional 1, 000 500 0 Vertical Horizontal/Directional 2012 1, 154 1, 498 2013 1, 056 1, 585 2014 1, 176 2, 080 2015 577 1, 050 2016 647 1, 089 94

Spears & Associates/Oilfield Logix: Directional Drilling Leading Haynesville/East Texas Operators XTO Energy 11% This is a chart of the leading new well drilling customers. XTO Energy drilled a quarter of all new wells in the region. With Anadarko, EXCO, Chesapeake, Devon Energy, Encana, Petrohawk/BHP, QEP, and Shell rounding out the top 50%. There another ~15 operators who drill several wells each year, both large producers and small producers. Anadarko 24% 2% 2% EXCO Operating Chesapeake 3% Devon Energy 3% Encana Oil & Gas 4% Petrohawk/BHP QEP Energy 4% 10% Shell BP America 4% Legend Natural Gas 5% 7% 10% 8% EOG Resources Quicksilver Resources Companies with~1% Share 95

Spears & Associates/Oilfield Logix: Directional Drilling Haynesville: Leading Directional Customers Here is the chart of the leading directional customers. XTO Energy is the top directional customer, followed by Devon Energy, EXCO, Anadarko, Encana, Chesapeake and QEP. These 7 operators purchased 75% of the directional services in East Texas/ Haynesville in the last couple years. 3% 3% 2% 2%1%1% 14% 3% 4% 12% 5% 8% This list is ranked by the number of feet of directional hole drilled in the last year or so. 12% 9% 10% 11% XTO Energy Devon Energy EXCO Operating Company Anadarko Encana Oil & Gas Chesapeake QEP Energy Petrohawk Quicksilver Resources Legend Natural Gas BP America Barnett Shale Alta Mesa Allied J-W Operating Comstock Oil & Gas 96

Spears & Associates/Oilfield Logix: Directional Drilling Haynesville: Directional Market Only a small portion of the US land directional drilling services market is in the East Texas/North Louisiana area. With “dry gas” plays falling out of favor in the last several years, horizontal drilling has fallen, prices have come down, and demand for directional drilling work has collapsed. This region peaked at ~$0. 9 billion in directional work in 2008. Directional Drilling Services Market $450 $400 $350 Millions $300 In 2012 -2014 the leading directional driller in the region was Halliburton, followed by Schlumberger Pathfinder, Baker Hughes, Weatherford, and Professional Directional. These companies tend to have the highest temperature rated tools, which are able to cope with the highest bottom hole temperatures in the nation. $250 $200 $150 $100 $50 $0 DD Svs 2012 $270 2013 $285 2014 $384 2015 $185 2016 $200 97

Spears & Associates/Oilfield Logix: Directional Drilling Haynesville: Directional Market Share 5% 1% 1% 3% 1%1% Halliburton SLB Pathfinder 5% 31% Baker Hughes Weatherford Professional Directional 6% Leam Archer/Great White Phoenix Technology Services 10% Ex. Pert Extreme Engineering 13% 11% 12% Ryan Crescent DDC 98

Spears & Associates/Oilfield Logix: Directional Drilling Our sample of directionally drilled wells is small in the region, so drilling performance metrics are weak. Nevertheless, our initial work in the region points to Weatherford having the best directional performance this year (~1, 400 feet per day average), Phoenix and Professional Directional drill ~1, 300’ per day, and Baker Hughes also averages over 1, 000’ per day with an average ~1, 200’. The Haynesville has some of the nation’s most challenging horizontal drilling conditions – deep, high pressure, high temperature, corrosive – so it is logical that this play should have some of the slowest directional drilling in the country. This last year, however, has seen a significant increase in drilling speeds. In previous years, the highest directional drilling speed was ~900’ per day. Drilling Speeds of the Most Active Directional Drillers Weatherford Phoenix Technology Services Professional Directional Baker Hughes Halliburton Ex. Pert Archer SLB Pathfinder Leam - 200 400 600 800 1, 000 Average Feet per Day 1, 200 1, 400 1, 600 99

Spears & Associates/Oilfield Logix: Directional Drilling Haynesville: Drilling Speeds These two charts compare the average drilling speeds of the leading operators – total well speed on the left, directional feet drilled on the right. Directional speeds in this region are far greater than total well drilling speeds. Devon Energy is the only operator who has consistently high productivity with ~1, 400’ per day. Total Well Depth Drilling Speed Ranked by Operator Directional Drilling Speed Ranked by Operator Devon Energy Quicksilver Resources XTO Energy EOG Resources Legend Natural Gas Chesapeake XTO Energy Anadarko EXCO Operating BP America QEP Energy Encana Oil & Gas Petrohawk Anadarko EXCO Operating Shell Encana Oil & Gas QEP Energy Petrohawk Chesapeake - 500 1, 000 1, 500 2, 000 100

Spears & Associates/Oilfield Logix: Directional Drilling Haynesville: Directional Days in the Hole After evaluating the drilling profiles of about 100 horizontal wells in the region, we see no clear indication of an average number of days that an MWD tool will be used in a horizontal well. The chart to the right shows the number of days an MWD tool was used in about 50 wells. The wells, which are ranked from longest to shortest in the hole, show a steady change from one to the next. There is no clustering of days. Directional Days in the Hole We believe that oil & gas producers are drilling a wide range of wells in the area in order to hold leases and are not attempting to standardize their operations or seek out operational efficiencies. If drilling ramps up in the future, we expect “lean manufacturing” techniques to be adopted rapidly. Year Average Days in the Hole 2012 18 2013 22 2014 17 0 20 40 60 80 101

Spears & Associates/Oilfield Logix: Directional Drilling Haynesville: Horizontal Lateral Lengths 5, 400’ is a typical horizontal lateral length in this region, but many wells have lateral lengths as short as 1, 000’ and as long as 8, 000’. Our well sample in the past was not sufficient enough to show trends in lateral lengths, but now East Texas and North Louisiana can be properly represented. Year Average Completed Length 2012 4, 300’ 2013 4, 900’ 2014 5, 400’ Distribution of Horizontal Lateral Lengths 25 Wells in Sample 20 15 10 5 0 400 800 1, 20 0 1, 60 0 2, 00 0 2, 40 0 2, 80 0 3, 20 0 3, 4, 4, 4, 60 00 40 80 0 0 Length 0 (ft. ) 0 Lateral 5, 20 0 5, 60 0 6, 00 0 6, 40 0 6, 80 0 7, 20 0 7, 60 0 8, 00 0 102

Spears & Associates/Oilfield Logix: Directional Drilling Haynesville: Directional Feet per Well The number of feet drilled directionally is greater than the horizontal length due to the need to drill a curve or some other trajectory to place the wellbore in the desired portion of the reservoir. The chart below analyzes the drilling paths of about 70 East Texas/North Louisiana wells drilled in 2012 and 2013. 6, 000’ - 7, 000’ of total directional hole is a fairly typical length, but each year wells with 19, 000 -20, 000’ of directionally drilled hole are in the mix. It is hard to tell, but we think that average lateral lengths are not currently growing in this play. The limited 2013 data suggests a slight shift in directional feet, but a definite increase cannot be confirmed. Distribution of Directional Feet per Well 12 2013 8 6 4 2 0 3, 00 0 4, 00 0 5, 00 0 6, 00 0 7, 00 0 8, 00 0 9, 00 10 0 , 0 0 11 0 , 0 0 12 0 , 0 0 13 0 , 0 0 14 0 , 0 0 15 0 , 0 0 16 0 , 0 0 17 0 , 0 0 18 0 , 0 0 19 0 , 0 0 20 0 , 0 00 2, 00 0 0 1, 00 Wells in Sample 10 Total Directional Feet (ft. ) 103

Spears & Associates/Oilfield Logix: Directional Drilling Bottom hole temperatures in the East Texas and the Haynesville range from cool to hot. The chart below shows the bottom hole temperatures of several East Texas and Haynesville wells, plotted versus the true vertical depth of the well. Bottom hole temperature appears to be linear with well depth. For example, at 5, 000’ the temperature is 110 degrees F, at 10, 000’ the temperature is 230 degrees F, and at 15, 000’ the temperature could reach, or even surpass 350 degrees F. With some bottom hole temperatures reaching 400 degrees F and with high pressures and corrosive downhole fluids, the Haynesville is the most demanding in the country. The chart below shows a cluster of well temperatures around 200 -300 degrees and 10, 000’ – 12, 000’ vertical depth. These are wells with a total measured depth of 15, 000’ – 20, 000’. Bottom Hole Temperature Gradient Bottom Hole Temperature (F) 350 300 250 200 150 100 50 - 2, 000 4, 000 6, 000 8, 000 True Vertical Depth (ft. ) 10, 000 Spears & Associates, Inc. / Oilfield Logix Series 12, 000 14, 000 104

Spears & Associates/Oilfield Logix: Directional Drilling Marcellus/Northeast: Market Analysis 105

Spears & Associates/Oilfield Logix: Directional Drilling Marcellus/Northeast The Northeast US has several plays both new and old. The two primary states are Ohio and Pennsylvania, plus a bit of West Virginia. This report, which carries the shorthand term “Marcellus”, covers primarily Ohio and Pennsylvania and all drilling in the region. The biggest influencers of drilling and spending, however, are the Utica and the Marcellus, which have driven strong demand growth for horizontal drilling and multiple stage frac jobs. These two maps point out where the larger operators work versus the smallest operators. The large operators tend to drill horizontal wells. 106

Spears & Associates/Oilfield Logix: Directional Drilling Marcellus/Northeast New Well Drilling Activity 5, 000 4, 500 New Wells Drilled 4, 000 3, 500 3, 000 2, 500 Vertical 2, 000 Horizontal/Directional 1, 500 1, 000 500 0 Vertical Horizontal/Directional 2012 2, 953 1, 577 2013 2, 660 1, 792 2014 1, 788 2, 089 2015 932 1, 687 2016 1, 046 1, 724 107

Spears & Associates/Oilfield Logix: Directional Drilling Leading Marcellus/Northeast Operators Range Resources Anadarko 10% Chesapeake Oilfield Logix researchers found ~75 oil and gas producers who have drilled wells in the Northeast in the last three years. Range Resources is the top operator with 10% of new wells drilled. Close behind are Anadarko and Chesapeake. Small and large independents, as well as widely known operators with a market share of approximately 1%, make up almost half of the new wells drilled. The Marcellus appears to be a highly saturated market. 7% Cabot Oil & Gas Enervest 7% 42% Shell EOG Resources 4% Knox Energy, Inc Talisman Energy 4% 4% 2% 2% 2% 3% 3% 3% Carrizo JD Drilling Co Mackenco Inc Ohio Valley Energy System Corp Southwestern Energy Production Company Companies with Approximately 1% Share 108

Spears & Associates/Oilfield Logix: Directional Drilling Marcellus: Leading Directional Customers Here is the chart that is most meaningful to directional drilling service companies: A ranked list of directional customers. From this chart we see that Anadarko and Range Resources are the two largest directional customers with 18% of the market. These two operators, along with Chesapeake, make up 50% of the market. Shell, EOG, and Cabot have a combined share of 25%. Vertical wells are more popular in this region so there are fewer buyers of directional services than there are operators. Compared to the market as a whole, directional drilling in this region is done by only a few major drillers and purchased by only small portion of operators. 2% 2% 2% 6% Anadarko 0% Range Resources 18% Chesapeake 3% Shell EOG Resources 4% Cabot Oil & Gas Carrizo 5% Southwestern Energy 18% 8% XTO Energy Citrus Energy Vantage Energy WPX Energy Companies with ~1% Share 8% 9% 13% Companies with <1% Share 109

Spears & Associates/Oilfield Logix: Directional Drilling Marcellus: Directional Market Directional Drilling Services Market $400 $350 A growing percentage of the US land directional drilling services market is in the Northeast. In 2014, the market reached almost $400 million, but should fall slightly in the next few years. $300 Millions $250 In 2012 -2014 the leading directional driller in the region was Phoenix Technology Services, followed by Scientific Drilling, and Halliburton. Data for 2014 is sparse in this region and there are some directional drillers who might not be represented in our calculated share; we always have additional work we can do in this region to determine market sizes and shares. $200 $150 $100 $50 $0 DD Svs 2012 $287 2013 $331 2014 $376 2015 $300 2016 $315 110

Spears & Associates/Oilfield Logix: Directional Drilling Market Share of Directional Drillers 20% Phoenix Scientific Drilling Halliburton 20% 60% 111

Spears & Associates/Oilfield Logix: Directional Drilling Marcellus: Horizontal Lateral Lengths Lateral lengths of horizontal wells have been increasing by ~10% each year in the northeast region. The average length in 2014 is expected to be ~5, 500’. Year Average Completed Length of HW 2012 4, 700’ The most common length is ~4, 000’, but wells with lateral lengths greater than 5, 000’ continue to be more prevalent. 2013 5, 000’ 2014 5, 500’ Distribution of Horizontal Lateral Lengths 10 9 Wells in Sample 8 7 6 5 4 3 2 1 0 400 800 1, 1, 2, 2, 2, 3, 3, 4, 4, 4, 5, 5, 6, 6, 6, 7, 7, 8, 20 60 00 40 80 20 60 00 0 0 0 Lateral 0 0 Length 0 (ft. ) 0 0 0 0 0 112

Spears & Associates/Oilfield Logix: Directional Drilling Marcellus: Directional Feet per Well The number of feet drilled directionally in each well is greater than the horizontal length due to the need to drill a curve or some other trajectory to place the wellbore in the desired portion of the reservoir. Like many other regions, the distributions for 2012 and 2013 look fairly similar. The data is centered around 12, 000’-15, 000’ with wells having less than 2, 000’ and more than 19, 000’ recorded. 20 18 16 14 12 10 8 6 4 2 0 2012 2013 1, 00 0 2, 00 0 3, 00 0 4, 00 0 5, 00 0 6, 00 0 7, 00 0 8, 00 0 9, 00 10 0 , 0 0 11 0 , 0 0 12 0 , 0 0 13 0 , 0 0 14 0 , 0 0 15 0 , 0 0 16 0 , 0 0 17 0 , 0 0 18 0 , 0 0 19 0 , 0 0 20 0 , 0 00 Wells in Sample Distribution of Total Directional Drilling Feet per Well Total Directional Feet (ft. ) 113

Spears & Associates/Oilfield Logix: Directional Drilling West Coast: Market Analysis 114

Spears & Associates/Oilfield Logix: Directional Drilling West Coast New Well Drilling Activity 3, 000 New Wells Drilled 2, 500 2, 000 1, 500 Vertical Horizontal/Directional 1, 000 500 0 Vertical Horizontal/Directional 2012 1, 950 544 2013 1, 519 637 2014 1, 419 728 2015 453 311 2016 508 340 115

Spears & Associates/Oilfield Logix: Directional Drilling Leading West Coast Operators The chart to the right lists the top operators in the West Coast. Aera Energy and Chevron are each responsible for a quarter of the new wells drilled. Berry, Vintage Production, and Occidental of Elk Hills make up the next 25%. The West Coast market is dominated by shallow, vertical wells and is the least active, least diverse areas. [VALUE], Compass Global Resources 1% and after 3% 2% 3% 27% 6% 8% 9% 9% 26% Aera Energy Chevron Berry Petroleum Vintage Production Occidental of Elk Hills Freeport-Mc. Mo. Ran Macpherson Oil Kern River Holdings Holmes Western Exxon. Mobil Seneca Resources E&B Natural Resources Naftex Operating Venoco Compass Global Resources Hathaway Incremental Longview TRC Operating 116

Spears & Associates/Oilfield Logix: Directional Drilling West Coast: Leading Directional Customers 5% The chart to the right is a ranked list of operators based on total directional services purchased. 3% 2%1% Occidental of Elk Hills Chevron 13% 44% Occidental of Elk Hills has almost 50% of the market, and Chevron, Aera Energy, Berry Petroleum, and Vintage Production make up the other 50%. It seems only the larger operators in the region are drilling horizontal wells and buying directional services. Aera Energy Berry Petroleum Vintage Production Macpherson Oil 15% Hathaway Holmes Western 17% 117

Spears & Associates/Oilfield Logix: Directional Drilling West Coast: Directional Market Directional Drilling Services Market $120 $100 The directional drilling market in California is the smallest of all the regions. The 2015 market is projected to fall below $50 M. Millions $80 The top directional driller for 2012 -2014 is Baker Hughes with over 30% of the market. This is followed by Halliburton, Geoguidance, Scientific Drilling, and Ensign Drilling. $60 $40 $20 $0 DD Svs 2012 $76 2013 $89 2014 $105 2015 $45 2016 $50 118

Spears & Associates/Oilfield Logix: Directional Drilling West Coast: Directional Market Share 2% 2%1% 12% 33% Baker Hughes Halliburton Geo. Guidance 13% Scientific Drilling Ensign Thomas Payzone SLB Pathfinder 16% 21% 119

Spears & Associates/Oilfield Logix: Directional Drilling West Coast: Horizontal Lateral Lengths Lateral lengths of horizontal wells in the West Coast are extremely short and growing slowly. The most common lateral length is ~400’, although the average for 2014 is expected to hit 1, 200’. Year Average Completed Length of HW 2012 830’ 2013 900’ 2014 1, 200’ Distribution of Horizontal Lateral Lengths 9 8 Wells in Sample 7 6 5 4 3 2 1 0 400 800 1, 1, 2, 2, 2, 3, 3, 4, 4, 4, 5, 5, 6, 6, 6, 7, 7, 8, 20 60 00 40 80 20 60 00 0 0 0 Lateral 0 0 Length 0 (ft. ) 0 0 0 0 0 120

Spears & Associates/Oilfield Logix: Directional Drilling West Coast: Directional Feet per Well The number of feet drilled directionally in each well is greater than the horizontal length due to the need to drill a curve or some other trajectory to place the wellbore in the desired portion of the reservoir. The chart below analyzes the drilling paths of 2012 and 2013 wells in California. The curves are identical, showing little change in directional feet per well over the last year. Total directional feet for 2012 and 2013 averaged ~2, 000’ – 3, 000’ per well. Distribution of Directional Feet per Well 18 16 12 2012 10 2013 8 6 4 2 0 1, 00 0 2, 00 0 3, 00 0 4, 00 0 5, 00 0 6, 00 0 7, 00 0 8, 00 0 9, 00 10 0 , 0 0 11 0 , 0 0 12 0 , 0 0 13 0 , 0 0 14 0 , 0 0 15 0 , 0 0 16 0 , 0 0 17 0 , 0 0 18 0 , 0 0 19 0 , 0 0 20 0 , 0 00 Wells in Sample 14 Total Directional Feet (ft. ) 121

Spears & Associates/Oilfield Logix: Directional Drilling Gulf Coast: Market Analysis 122

Spears & Associates/Oilfield Logix: Directional Drilling Gulf Coast Directional Drilling Services Market 2, 500 $250 2, 000 $200 1, 500 $150 Millions New Wells Drilled New Well Drilling Activity 1, 000 $100 500 $50 0 Vertical Horizontal/Directional 2012 1, 130 838 2013 942 1, 036 2014 912 1, 227 2015 541 1, 014 2016 607 1, 130 $0 DD Svs 2012 $147 2013 $181 2014 $207 2015 $175 2016 $200 123

Spears & Associates/Oilfield Logix: Directional Drilling Supply Chain: Size, share, & trends in the fleet. 124

Spears & Associates/Oilfield Logix: Directional Drilling PDM MOTOR CONSTRUCTION The PDM motor industry has quite a few suppliers, most of whom sell to each other and directly to their customers. Supply Chain For example, Netzsch is a German manufacturer of rotors and stators for mud motors and progressing cavity pumps. Netzsch does not build a complete motor, but sells and repairs parts to Robbins & Myers, Dyna-Drill (Schlumberger), Sperry (Halliburton), Scientific Drilling and many others. At the same time, Dyna-Drill sells motors and their components to Crescent Directional and other competitors to Schlumberger, which owns Dyna-Drill. As a result of this extensive supply chain of pieces and parts, many independent directional drillers have motors of their own design that they assemble from pieces sourced from a variety of manufacturers. Bearing Assembly Rotors Stators Motor Manufacturer Directional Drilling Service Companies Housing Transmission 125

Spears & Associates/Oilfield Logix: Directional Drilling Motor Fleet estimates through 2015 Based on Spears outlook for directional drilling services through 2015 and on the industry’s penchant for making large additions to its fleet every few years (rather than a steady tool build schedule), we have constructed the following forecast for the positive displacement mud motor fleet (top chart) and the resulting annual motor build scheduled (lower chart). Surveys and our analysis indicates that 2011 and 2012 were record years for fleet additions. PDM Motor Fleet 35, 000 30, 000 25, 000 20, 000 15, 000 10, 000 5, 700 6, 700 31, 000 29, 500 28, 000 26, 000 23, 000 20, 500 17, 70019, 000 15, 500 13, 000 10, 200 8, 200 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 PDM Fleet Additions 4, 000 3, 000 2, 800 2, 000 1, 500 2, 000 2, 500 2, 200 1, 300 1, 500 3, 000 2, 000 1, 500 300 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 126

Spears & Associates/Oilfield Logix: Directional Drilling Motor Fleet estimates 2013 The 28, 000 PDMs in the world are held by 50 -100 directional drilling service companies. As the chart below estimates, Schlumbergerrelated companies hold 30% of the motor fleet, Baker Hughes and Halliburton have 18% each, Weatherford has 7%, and each of the rest have on average 1% or less of the fleet. Fleet Market Share 18% 30% 1% 2% 2% SLB BHI HAL WFT 4% Sci Drilling Phoenix 7% Cathedral Crescent 18% Others 127

Spears & Associates/Oilfield Logix: Directional Drilling Relationship: Sales of Downhole Tools vs. Directional Services Global Directional Market (millions) $ 18, 000 This chart compares 2005 -2014’s directional market with each year’s sales of downhole tools. The relationship is linear. If directional sales rise, downhole tool sales rise. $ 16, 000 $ 14, 000 $ 12, 000 $ 10, 000 $ 8, 000 $ 6, 000 $ 4, 000 $ 2, 000 $- $- $ 1, 000 $ 2, 000 $ 3, 000 $ 4, 000 DH Tool Sales (Millions) $ 5, 000 128

Spears & Associates/Oilfield Logix: Directional Drilling Profiles: Companies associated with directional 129

Spears & Associates/Oilfield Logix: Directional Drilling Baker Hughes 130

Spears & Associates/Oilfield Logix: Directional Drilling Cathedral Energy Services 131

Spears & Associates/Oilfield Logix: Directional Drilling China Oilfield Services, Ltd. (COSL) 132

Spears & Associates/Oilfield Logix: Directional Drilling Crescent Directional 133

Spears & Associates/Oilfield Logix: Directional Drilling Ensign Resource Services 134

Spears & Associates/Oilfield Logix: Directional Drilling Enseco Energy Services 135

Spears & Associates/Oilfield Logix: Directional Drilling GE Oil & Gas 136

Spears & Associates/Oilfield Logix: Directional Drilling Halliburton 137

Spears & Associates/Oilfield Logix: Directional Drilling Leam 138

Spears & Associates/Oilfield Logix: Directional Drilling Nabors Industries 139

Spears & Associates/Oilfield Logix: Directional Drilling National Oilwell Varco 140

Spears & Associates/Oilfield Logix: Directional Drilling PHX Energy Services 141

Spears & Associates/Oilfield Logix: Directional Drilling Precision Drilling Group 142

Spears & Associates/Oilfield Logix: Directional Drilling Schlumberger 143

Spears & Associates/Oilfield Logix: Directional Drilling Schoeller-Bleckmann Oilfield Equipment 144

Spears & Associates/Oilfield Logix: Directional Drilling Scientific Drilling International 145

Spears & Associates/Oilfield Logix: Directional Drilling Tolteq 146

Spears & Associates/Oilfield Logix: Directional Drilling Weatherford International 147

Spears & Associates/Oilfield Logix: Directional Drilling Appendix: Spears & Associates, Inc. 148

Spears & Associates/Oilfield Logix: Directional Drilling Spears & Associates, Inc. MISSION: HISTORY: PEOPLE: COVERAGE: COMMITMENT: INVESTMENTS: CLIENTS: PRODUCTS: Spears & Associates is a research-based oilfield equipment and service market consulting firm. Founded in Tulsa in 1965 by Robert Spears and operated today by 33 -year oilfield veterans with strong engineering, financial and marketing backgrounds. Principals are John Spears (president) and Richard Spears (vice president). Katie Bewley is director of client relations. Lauren Collette is lead analyst. Upstream exploration, drilling, completion, and production equipment and services. SAI works in every oil and gas producing country. SAI partners are actively engaged in the Society of Petroleum Engineers, Association of Energy Service Companies, American Petroleum Institute, and other regional trade groups. SAI partners occasionally invest in private upstream opportunities. In 2013 these investments included drilling projects in 5 countries and partial ownership of 8 oilfield equipment and service companies. Some of these investments include board responsibilities. The list is available upon request. In 2013 SAI provided services to >400 companies. ~200 were oilfield service companies and steel mills, ~100 were E&P companies, and ~100 were financial firms. Our largest client represents 1% of our annual sales. Spears accepts ~50 consulting engagements each year, but also publishes reports for subscribers around the world. Flagship reports include the quarterly Drilling and Production Outlook, the annual Oilfield Market Report, and the Oilfield Market Intelligence series. Pipe. Logix and Oilfield Logix are affiliated companies. 149

Spears & Associates/Oilfield Logix: Directional Drilling Legal Matters Copyright 2015, Spears and Associates, Inc. All rights reserved. This communication is confidential and is provided to clients of Spears and Associates, Inc. for their lawful use. This communication may not be disclosed, copied or disseminated, in whole or in part, without the prior written permission of Spears and Associates, Inc. The report and its contents are the property of Spears and Associates Inc. and are protected by applicable copyright, trade secret or other intellectual property laws. Disclaimer: This communication is based on information that Spears & Associates, Inc. believes is reliable. However, Spears and Associates, Inc. does not represent or warrant its accuracy, completeness, or any other aspect of this information. The viewpoints and opinions expressed in this report represent the views of Spears and Associates, Inc. as of the date of this report. These viewpoints and opinions may be subject to change without notice. This message should not be considered as a recommendation to buy or sell any securities. In no event shall Spears and Associates, Inc. be liable for incidental or consequential damages associated with reliance on any statement or opinion contained in this report. Important Disclosures: The following analysts were involved in creating or supervising the content of this report: Richard Spears, John Spears, and Lauren Collette. David Otte and Missy Parker are responsible for Oilfield Market Report analysis. These analysts certify that the views and opinions expressed in this report accurately reflect their personal views. Spears and Associates, Inc. provides market research services to the petroleum industry, but does not provide investment banking services. From time to time Spears and Associates, Inc. will provide market research consulting services to some of the oilfield service companies mentioned in this report for which the firm is compensated. 150