Overview of Key Pressure Pumping Markets Market Update – August 31, 2011

Christopher Robart Principal, PacWest Consulting Partners crobart@pacwestcp.com
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PRESSURE PUMPING MARKET UPDATE

Agenda
PacWest’s Market Intelligence Services Pressure Pumping Market Overview Frac Crew Deployment Bakken Case Study Questions

Client Confidential

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PRESSURE PUMPING MARKET UPDATE

PacWest Market Intelligence Services
PacWest has provided its strategic intelligence capabilities to oil and gas clients for years and has recently begun to make them more widely available. Our suite of Market Intelligence services spans the following:

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PRESSURE PUMPING MARKET UPDATE

Actionable Intelligence for Decision Makers
Actionable Intelligence
The PacWest team: ■ Transforms volumes of disparate market data, insider industry activity and expert input into strategic and actionable recommendations for decision-makers ■ Aggregates, organizes and distills a wide range of data and intelligence to provide information to our clients that is comprehensive, focused and strategic ■ Analyzes this information to assess its strategic implications and provide a clear path of action for each stakeholder

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PRESSURE PUMPING MARKET UPDATE

Comprehensive Methodology
PacWest uses a multi-pronged approach to develop its market intelligence offerings. The team:
1) Gathers and reviews all information available publicly and via proprietary databases 2) Engages its diverse network of industry contacts to gather real-time intelligence 3) Processes and synthesizes raw information into actionable intelligence

Primary Research
Many of the insights are based on: ■ Surveys from operators and suppliers ■ In-depth interviews and conversations with operators and suppliers ■ Industry-leading experts and technical specialists

Secondary Research
These sources are regularly consulted: ■ Market research and reports ■ Company annual reports, 10-Ks, 10-Qs ■ Speeches and presentations by company leadership and other industry experts ■ Analyst reports from leading banks

■ Budgetary estimates
■ PacWest proprietary databases

■ Government data

Client Confidential

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PRESSURE PUMPING MARKET UPDATE

Agenda
PacWest’s Market Intelligence Services Pressure Pumping Market Overview Frac Crew Deployment Bakken Case Study Questions

Client Confidential

© PacWest 2011 | All rights reserved | 6

PRESSURE PUMPING MARKET UPDATE

The US Land pressure pumping market is significantly under-supplied
2011 Supply and Demand Balance – US Land Pressure Pumping
200% Pressure Pumping Capacity Utilization 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% Supply Demand 100% 11,200,000 HP 131% 8,534,250 HP Backlog New Completions 735,890 HP 11,935,890 HP 9%

The under-supply is not expected to be relieved until late 2012 or early 2013
Source: CIBC World Markets; Macquarie; PacWest analysis Client Confidential © PacWest 2011 | All rights reserved | 7

PRESSURE PUMPING MARKET UPDATE

The tight supply market is driving up prices for pressure pumping prices, with cost escalation most severe in hot liquids plays
Forecast of Pressure Pumping Price Increases (2011 – 2014)
35%

30%
Annual Cost Increase 25% 20% 15% 10% 5% 0%

29.3% 26.1%

US Land Bakken Eagle Ford Marcellus
12.5% 9.9% 6.9% 4.8% 8.9% 7.4% 6.7% 3.9% 8.2% 7.4% 4.4%

19.4%

5.3%

6.0%

2011

2012

2013

2014

Source: PacWest Shale Market Research Service, 2011 Q2 Release Client Confidential

© PacWest 2011 | All rights reserved | 8

PRESSURE PUMPING MARKET UPDATE

Manufacturers of pressure pumping equipment are operating at full capacity and are experiencing order backlogs up to 1-yr for critical parts
Frac Pump Backlogs

Weir SPM
 Backlog currently extends into 2012 Q1, with lead times close to 1 year  New Destiny pump line at capacity for 2011 as of late July  Growth driven largely by OE orders, which were 180% ahead of plan; now account for 55% of input vs. 36% 1 year ago  Early 2012 customer discussions positive; potential for frac pump business to be $500MM+ in H2
Source: PacWest analysis Client Confidential

Gardner Denver
 Backlog current extends into 2012 Q1 and backlogs are currently at record highs  Have seen 100%+ YoY increase in both pump and fluid end orders

FMC
 Backlog extends into 2012 with nearly 40% of 2012 capacity tentatively committed, though expect to see some of 2012 demand released in H2  Fluid Control backlog currently at a record $421MM  Currently looking at 9-12 month lead time for pumps and 2-4 weeks for flow iron

 Current OE/AM mix stands around 75/25; expect to be 60/40 in 1-2 years
 Management is concerned frac unit and component, particularly engines, constraints holding back pressure pumping market growth

© PacWest 2011 | All rights reserved | 9

PRESSURE PUMPING MARKET UPDATE

Manufacturers are responding with major capital investments to fuel capacity expansions, and other actions to satisfy demand
Frac Pump Capacity Expansion Initiatives

Weir SPM
Capital Investments
 In midst of $40MM upgrade to Ft. Worth facility; increase pump capacity 30-35% by Apr 2012  Just announced incremental $75MM investment; increase pump capacity additional 20-25% by EOY 2012  Implemented lean mfg. and reengineered processes  Extended H1 capacity 20-25% through outsourcing components, reliance on 3rd party machining
Client Confidential

Gardner Denver
 Halfway through $20MM upgrade of Fort Worth and Tulsa pump manufacturing facilities; doubling capacity by Apr 2012  Aggressively increasing aftermarket fluid end capacity; already doubled YoY and plan on another doubling in next year  Implemented lean mfg. to increase throughput

FMC
 Unclear what portion of a $200MM spend is going towards pump capacity expansion  Portion of pump capacity expansions coming online in H2, with full completion targeted for year-end  Flowline capacity expansions coming online in H2  Expanding use of machine tools around the world to extend frac pump capacity

New Entrants
 AXON: launching 2nd generation frac pump and expanding capacity to support it  OFM: recently expanded mfg. facility 40-60%  J-Mac: recently launched frac pump line  Dixie/MSI: recently launched frac pump  Southwest/Global Energy: potentially launching frac pump

Other Initiatives

Source: PacWest analysis

© PacWest 2011 | All rights reserved | 10

PRESSURE PUMPING MARKET UPDATE

On the demand side, US Land rig count has rebounded dramatically since 2009, driving demand of pressure pumping services
US Land Rig Count (Aug 2009 – Aug 2011)
2,500

2,000

Land Rigs

1,500

1,000

500

0 Nov-09 Nov-10 Sep-09 Feb-10 Sep-10 May-10 Feb-11 May-11 Jan-10 Jan-11 Jul-10 Dec-09 Dec-10 Apr-10 Apr-11 Jun-10 Oct-09 Mar-10 Oct-10 Mar-11 Aug-09 Aug-10 Jun-11 Jul-11

Source: Baker Hughes Client Confidential

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PRESSURE PUMPING MARKET UPDATE

The focus on oily plays is evident in the US Land rig count: oil drilling activity finally overtook gas drilling activity in early 2011
US Land Rig Count – Oil vs. Gas (Aug 2009 – Aug 2011)
100% 90% 80% Percentage of Land Rigs 70% 60% 50% 40% 30% 20% 10% 0% Sep-09 Feb-10 Sep-10 Nov-09 Nov-10 Feb-11 Jul-10 Dec-09 Dec-10 Apr-10 Apr-11 Jun-10 Oct-09 Mar-10 Oct-10 May-10 Mar-11 May-11 Aug-09 Aug-10 Jun-11 Jan-10 Jan-11 Jul-11

Oil Gas

Source: Baker Hughes Client Confidential

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PRESSURE PUMPING MARKET UPDATE

The dominance of unconventionals is also evident in the US Land rig count: increases in directional drilling has driven the rig count
US Land Rig Count – Dir/Hor vs Vert (Aug 2009 – Aug 2011)
2,500

Directional/Horizontal
2,000

Vertical

Land Rigs

1,500

1,000

500

0 Sep-09 Feb-10 Sep-10 Nov-09 Nov-10 Feb-11 Jul-10 Dec-09 Dec-10 Apr-10 Apr-11 Jun-10 Oct-09 Mar-10 Oct-10 May-10 Mar-11 May-11 Aug-09 Aug-10 Jun-11 Jan-10 Jan-11 Jul-11

Source: Baker Hughes Client Confidential

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PRESSURE PUMPING MARKET UPDATE

Most analysts expect the rig count to increase through 2014
US Land Average Rig Count Forecast (2011-2014)
2,500

Current: 1,740 rigs (8/19/11)
2,000 1,709 Land Rigs 1,500 1,950 2,020

2,089

1,000

500

0 2011 2012 2013 2014

Source: PacWest Analysis; Macquarie Client Confidential

© PacWest 2011 | All rights reserved | 14

PRESSURE PUMPING MARKET UPDATE

The Marcellus, Bakken, and Eagle Ford account for nearly 30% of US Land drilling activity
Rig Count: Key Plays (Aug 2009 – Aug 2011)
2,500

2,000

Land Rigs

1,500

Other US Land (69% of US Land) California shales (2% of US Land) Appalachian (8% of US Land) Bakken (10% of US Land) Eagle Ford (12% of US Land)

1,000

500

0 Sep-09 Feb-10 Sep-10 Nov-09 Nov-10 Feb-11 Jul-10 Dec-09 Dec-10 Apr-10 Apr-11 Jun-10 Oct-09 Mar-10 Oct-10 May-10 Mar-11 May-11 Aug-09 Aug-10 Jun-11 Jan-10 Jan-11 Jul-11

Source: Baker Hughes Client Confidential

© PacWest 2011 | All rights reserved | 15

PRESSURE PUMPING MARKET UPDATE

Eagle Ford and Bakken are in a major growth phase, California is still an emerging play, and the Marcellus is a relatively mature play
Rig Count Growth Rate: Key Plays (Aug 2009 – Aug 2011)
350% 300% 250% 200% Land Rigs 150% 100% 50% 0% Nov-09 Nov-10 Sep-09 Feb-10 Sep-10 May-10 Feb-11 May-11 Jan-10 Jan-11 Jul-10 Dec-09 Dec-10 Apr-10 Apr-11 Jun-10 Oct-09 Mar-10 Oct-10 -50% Mar-11 Aug-09 Aug-10 Jun-11 Jul-11

Eagle Ford (+309%) Bakken (+276%) Appalachian (+50%) California shales (+258%) US Land (+100%)

Source: Baker Hughes Client Confidential

© PacWest 2011 | All rights reserved | 16

PRESSURE PUMPING MARKET UPDATE

Liquids-rich Eagle Ford is projected to be one of the most active plays in the country
Eagle Ford Rig Count & Forecast
Rig Count – Dir/Hor vs Vertical
Land Rigs Land Rigs

Average Rig Count Forecast
350 Current: 229 rigs (8/19/11) 270 240 193

250
Directional/Horizontal

300 250 200 150 100

300

200 150 100 50 0

Vertical

50
0 Feb-10 Dec-09 Dec-10 Feb-11 Apr-10 Apr-11 Jun-10 Oct-09 Aug-09 Aug-10 Oct-10 Jun-11 2011 2012 2013 2014

Source: PacWest Analysis; Macquarie; Baker Hughes Client Confidential

© PacWest 2011 | All rights reserved | 17

PRESSURE PUMPING MARKET UPDATE

Frac Tech, BJ, and SLB are the dominant pumpers in 2011 H1 in the Eagle Ford, while Chesapeake is the dominant operator
PRELIMINARY ANALYSIS

Eagle Ford Pressure Pumping Market (Jan 2011 – Jun 2011)
Supplier Market Share
20% 18% 16% 14% Market Share 12% 10% 8% 13% 12% 12% 18% 40% 18% 17% 35% 35%

Operator Market Share

30%
Market Share 25% 20% 15% 10% 1% 5% 0% 17% 16%

8%
6% 4% 2% 0%

6% 5%

3% 3% 3% 3%

2% 2% 2% 1%

1% 1%

Source: PacWest Frac DB (under development) Client Confidential

Chesapeake Petrohawk Anadarko El Paso Shell Penn… Pioneer Cabot XTO Enervest Talisman Forest Plains Chevron Hess
© PacWest 2011 | All rights reserved | 18

PRESSURE PUMPING MARKET UPDATE

Analysts expect higher gas prices through 2014, which will drive significant rig count growth in the Appalachian
Appalachian Rig Count & Forecast
Rig Count – Dir/Hor vs Vertical
Land Rigs Land Rigs

Average Rig Count Forecast
300
Current: 147 rigs (8/19/11) 200 175 145

180 160 140 120 100 80
Directional/Horizontal Vertical

250 200 150 100 50 0

250

60
40 20 0 Feb-10 Feb-11 Apr-10 Apr-11 Jun-10 Dec-09 Aug-09 Aug-10 Dec-10 Oct-09 Oct-10 Jun-11

2011

2012

2013

2014

Source: PacWest Analysis; Macquarie; Baker Hughes Client Confidential

© PacWest 2011 | All rights reserved | 19

PRESSURE PUMPING MARKET UPDATE

Halliburton is the dominant pumper in 2011 H1 in the Marcellus, while Chesapeake is again the dominant operator
PRELIMINARY ANALYSIS

Marcellus Pressure Pumping Market (Jan 2011 – Jun 2011)
Supplier Market Share
30% 25% 20% 16% 15% 10% 5% 0% 14% 11% 11% 8% 5% 4% 3% 27% 30% 25% 20% 15% 10% 5% 11% 11% 9% 7%7% 27%

Operator Market Share

Market Share

Market Share

5%4%

4%3%3%

1%
0%

3%3%2%

2%

1%0%

Source: PacWest Frac DB (under development) Client Confidential

Chesapeake Cabot Talisman Anadarko Shell EQT Atlas Exco Range Williams Chevron Seneca EOG Southwes… Energy… PDC… XTO
© PacWest 2011 | All rights reserved | 20

PRESSURE PUMPING MARKET UPDATE

California shales are still a question mark in the mind of most analysts and they have not yet factored in its impact on the market
California Shale* Rig Count & Forecast
Rig Count – Dir/Hor vs Vertical
Land Rigs Land Rigs

Average Rig Count Forecast
35 Current: 43 rigs (8/19/11) 26 22 18

Dec-…

Aug-…

Feb-10

Aug-…

Dec-…

50 45 40 35 30 25 20 15 10 5 0

Directional/Horizontal Vertical

30 25 20 15 10

30

5
Feb-11 Apr-10 Apr-11 Jun-10 Oct-09 Oct-10 Jun-11 0 2011 2012 2013 2014

Note: California Shale rig count is focused on counties in shale plays. It includes Colusa, Fresno, Kern, Kings, Los Angeles, and Sutter counties, although the majority of drilling activity is in Kern county. Source: PacWest Analysis; Macquarie; Baker Hughes Client Confidential © PacWest 2011 | All rights reserved | 21

PRESSURE PUMPING MARKET UPDATE

Bakken continues to experience growth challenges, which will be discussed later in this presentation
Bakken Rig Count & Forecast
Rig Count – Dir/Hor vs Vertical
Land Rigs Land Rigs

Average Rig Count Forecast
250 Current: 184 rigs (8/19/11) 200 180 210

200
180 160 140 120 100 80 60 40 20 0 Feb-10 Dec-09 Dec-10 Feb-11 Apr-10 Apr-11 Jun-10 Oct-09 Aug-09 Aug-10 Oct-10 Jun-11
Directional/Horizontal Vertical

220

200 150 100 50 0

2011

2012

2013

2014

Source: PacWest Analysis; Macquarie; Baker Hughes Client Confidential

© PacWest 2011 | All rights reserved | 22

PRESSURE PUMPING MARKET UPDATE

Agenda
PacWest’s Market Intelligence Services Pressure Pumping Market Overview Frac Crew Deployment Bakken Case Study Questions

Client Confidential

© PacWest 2011 | All rights reserved | 23

PRESSURE PUMPING MARKET UPDATE

Staffing experienced crews is a critical challenge faced by pressure pumping service providers
The Quality vs. Quantity Dilemma
■ Completion increases = HHP increases = Frac crew increases = Need for trained staff!! ■ North American pressure pumping industry is expanding rapidly (~20% YoY increase 2010-2011) and needs to add new hires to meet expansion targets ■ Major increases in completions require major increases in frac crews, for example: - Typical 25K HHP frac fleet in the Bakken requires 2-3 crews of 30 staff = 60 – 90 experienced employees

- PacWest forecasts an increase in frac fleets in the Bakken from 38 fleets (May 2011) to 52 fleets (year-end 2011) = 840-1,260 experienced employees
■ Fact: Critical driver of oilfield safety = experienced staff ■ Problem: There are no more experienced field workers left; pumpers are forced to manage deployment of large numbers of inexperienced employees

Client Confidential

© PacWest 2011 | All rights reserved | 24

PRESSURE PUMPING MARKET UPDATE

Pressure pumpers are deploying equipment and staff from other regions when possible, but there are limitations to this approach
Frac Fleet Redeployment Few Existing Deployment Options
 Pumpers are deploying staff and equipment from nearby plays  However, the prevalence of dedicated contracts and ‘take-or-pay’ relationships is constraining the number of available staff and equipment for redeployment

Majority of US Fleets dedicated
Pressure Pumper BJ Services Cudd Frac Tech Schlumberger Pumpco Superior % Dedicated 50% 60% 70% 60%-70% 74% 80%-90%

Roughly 60-65% of fleets dedicated

■ For example: Calfrac has redeployed frac fleets from its Colorado base to the Bakken but it still does not have a sufficient facilities for major maintenance so it drives frac trucks back to Colorado every 1-2 months to service equipment

Client Confidential

© PacWest 2011 | All rights reserved | 25

PRESSURE PUMPING MARKET UPDATE

Most pressure pumpers depend heavily on non-local employees to meet staffing needs
Pressure Pumping “flex crews”
■ Flex crews = non-local employees working at a local base on a temporary basis ■ Flex crews typically spend 2-3 weeks working 17 hours or more per day and then have 1-2 weeks off before returning to the local base ■ All service companies have reported using flex crews to some degree - Larger companies (e.g. Halliburton) often meet half of their staffing needs with flex crews in some areas

- Smaller new entrants are sometimes forced to depend entirely on flex crews
■ Companies trying to hire locally, but there are few suitable potential hires in many hot areas (e.g. Eagle Ford, Bakken) ■ Pumpers have admitted that they will never be able to eliminate flex crews entirely in more remote areas

Client Confidential

© PacWest 2011 | All rights reserved | 26

PRESSURE PUMPING MARKET UPDATE

There are significant differences in the commitment of pressure pumping companies to safety
Employee Training & Management

Training

Staff Deployment
 More important is how companies balance the deployment of inexperienced employees vs. experienced employees in a crew  Good = Majority experienced employees + minority inexperienced, which provides mentors upon which greenhats can depend  Bad = Minority experienced + majority inexperienced… a recipe for disaster

 All pressure pumpers have training programs to orient ‘greenhats’ to the oilfield and provide them with the basic knowledge and skills to safely and effectively operate frac equipment  Programs vary widely in structure, duration, and effectiveness  However, no training programs can substitute for solid field experience

■ For example: A former Sanjel employee in the Bakken reports often being deployed in crews where the majority of staff had less than two months of oilfield experience - Outcome: Multiple cases of splitting iron and debilitating injuries
Client Confidential © PacWest 2011 | All rights reserved | 27

PRESSURE PUMPING MARKET UPDATE

Agenda
PacWest’s Market Intelligence Services Pressure Pumping Market Overview Frac Crew Deployment Bakken Case Study Questions

Client Confidential

© PacWest 2011 | All rights reserved | 28

PRESSURE PUMPING MARKET UPDATE

Overwhelming demand in the Bakken is expected to lead to a significant under-supply of pressure pumping capacity for 2011
Sensitivity Analysis of 2011 Bakken Pressure Pumping Capacity Utilization
250% Pressure Pumping Capacity Utilization 241%

2011 completions + backlog
200% 201%

42%

2011 completions
161% 28% 121% 21%
100% utilization of 2011 capacity

35%

150%

100%

199% 166% 133%

50%

100%

0% 15 20 25 Average Stages per Well 30

The Bakken will be 61% under-supplied in 2011, conservatively assuming 20 stages/well
Sources: CIBC World Markets; Macquarie; PacWest analysis Client Confidential © PacWest 2011 | All rights reserved | 29

PRESSURE PUMPING MARKET UPDATE

Demand will continue to outpace supply for pressure pumping capacity into 2012 in the Bakken
Sensitivity Analysis of 2012 Bakken Pressure Pumping Capacity Utilization
200% Pressure Pumping Capacity Utilization 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% 30% 40% 50% Capacity Growth (2011 – 2012) 60% 114% 109% 104% 100% 159% 45% 152%
100% utilization of 2012 capacity

2012 completions + backlog 2012 completions
146% 140%

43%

42%

40%

Note: Sensitivity analysis assumes an average of 20 frac stages / well in 2012, a conservative estimate
Source: CIBC World Markets; Macquarie; PacWest analysis Client Confidential © PacWest 2011 | All rights reserved | 30

PRESSURE PUMPING MARKET UPDATE

Drilling & completion activity in the Bakken is up considerably and continued increases are forecast
Bakken Rig Count (Aug 2009 – Aug 2011)
200 180 160 140 Rig Count 120 100 184

80
60 49

40
20

Forecast Bakken D&C Activity Metric 2011 2012 2013 Average rig count 180 200 210 Drilling days / well 32 31 30 New completions 2,053 2,355 2,555 Feb-10 Sep-10 Nov-09 Nov-10 Feb-11 Jul-10 Apr-10 Apr-11 Jun-10 Mar-10 May-10 Mar-11 May-11 Jan-10 Dec-09 Aug-10 Dec-10 Oct-09 Oct-10 Jan-11

2014 220 30 2,677 Jun-11 Jul-11

0
Aug-09 Sep-09

Sources: Baker Hughes, Macquarie, CIBC World Markets, PacWest analysis Client Confidential

© PacWest 2011 | All rights reserved | 31

PRESSURE PUMPING MARKET UPDATE

Pressure pumping companies are significantly expanding their capacity in the Bakken in response to increased demand…
Bakken Pressure Pumping Supply (May 2011)
Halliburton Sanjel Schlumberger Frac Tech BJ Services Superior Calfrac Pumpco Cudd 0 1 2 2 4 6 8 10 12 14 2 2 2 1 3 1 1 1 1 2 3 5 3 Bakken Pressure Pumping Equipment Current dedicated 25 Current spot 14 Fleets Total current 38 Future additions 14 Total year-end 52 Current 773 HHP Year-end 1,074 7 4 1 1 2 5 2

Current dedicated fleets*
Sources: company documents, interviews Client Confidential

Current spot fleets*

Future 2011 fleet additions
© PacWest 2011 | All rights reserved | 32

Note: “Spot” fleets are not necessarily available; only implies not in long-term dedicated contract; little to no scheduling availability remains for most spot fleets in the 2011

PRESSURE PUMPING MARKET UPDATE

… but supply chain constraints are holding back the deployment of new equipment and the ability to consistently supply pumping services
Bakken Supply Chain Constraints Logistics
■ Railway (primarily BNSF) import capacity into the Bakken is limited for all products, particularly proppant due to the large volumes required (1 railcar has capacity of 200K lbs of proppant; average 3 million lbs frac job requires 15 railcars)

Proppant
■ Global proppant consumption has reached unprecedented levels and most domestic producers are essentially sold out of product ■ Greatest constraint is in 20/40 raw sand

Guar
■ Demand has reached record highs and the guar supply chain is not highly responsive due to its length (90% of raw guar seed grown in rural India)

Equipment
■ Manufacturers of pumping equipment reporting order backlogs of up to 1 year

Labor
■ Local labor force in the Bakken is limited and unemployment is extremely low
Client Confidential © PacWest 2011 | All rights reserved | 33

PRESSURE PUMPING MARKET UPDATE

Bakken pressure pumping supply has been unable to keep pace with demand so well completion backlogs are growing
Days Required for D&C in North Dakota
Days between Well Spud and Completion 180 120 90 60 0 85 76 67 103 80 81 107 172 96 72 57 99 95 98 103 118

87
50

81

82 67

93

Bakken Well Count (May 2011)
500 400 300 200 100 0 Number of Wells

Uncompleted 429 57 372

Drilling 162 6 156

Permitted 413 67 346
© PacWest 2011 | All rights reserved | 34

Bakken Montana North Dakota

Sources: Montana Board of Oil & Gas; North Dakota Industrial Commission; PacWest analysis Client Confidential

PRESSURE PUMPING MARKET UPDATE

Operator D&C performance varies, in some cases depending on contracting practices
Bakken Ratio of Uncompleted Wells to Active Rigs (May 2011)
Well Backlog Rigs

Anschutz/OXY Continental Resources Whiting Oil & Gas Zenergy Brigham Oil & Gas ConocoPhillips Hess Slawson Newfield EOG Resources Marathon Oasis Petroleum 0 1

1.0 1.8 1.9 2.0 2.4 2.6 2.7 2.8

7
45 29 12 17 13 48 17 15

7 25 15 6 7 5 18 6 5 10 7 6

3.0 3.4
3.6 4.5 2 3 4 5

34
25 27

Note: Well backlog is best estimate based on data from Montana and North Dakota oil/gas regulators; rig count is from April 2011 Sources: Montana Board of Oil & Gas; North Dakota Industrial Commission; PacWest analysis Client Confidential © PacWest 2011 | All rights reserved | 35

PRESSURE PUMPING MARKET UPDATE

The Bakken supply/demand imbalance is not expected to improve drastically anytime soon so operators must contract accordingly
Implications for Contracting Strategy in the Bakken
■ It is important to be proactive to develop long-term solutions rather than short-term fixes, while considering other infrastructure challenges ■ Operators should include terms in contract to incentivize for safety improvements, performance improvement ■ Avoid safety incidents by forcing service companies to provide their best crews, when possible

■ Consider using greenhat clauses or crew continuity incentives, similar to drilling contracts

Client Confidential

© PacWest 2011 | All rights reserved | 36

PRESSURE PUMPING MARKET UPDATE

Agenda
PacWest’s Market Intelligence Services Pressure Pumping Market Overview Frac Crew Deployment Bakken Case Study Questions

Client Confidential

© PacWest 2011 | All rights reserved | 37

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