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Jefferies Energy Conference Permian Basin Technical Overview
November 2016 / Confidential
Jefferies LLC Member SIPC
Jefferies LLC November 2016 /
US Rig Count by Basin
-
100
200
300
400
500
600
Rig
Cou
nt
Permian Eagle Ford Bakken Niobrara
Key Points
US rig count has fallen dramatically since the commodity price downturn in late 2014
Permian is only play with increasing rig count, reflecting superior economics and ever increasing single well deliverability
Oil production has fallen in major plays across the US since the start of 2015 while Permian production has continued to rise
Systematic refocusing and capital reallocation into the Permian Basin for both near term and long term
Permian has most competitive rates of return today and remaining economic horizontal drilling locations >250,000 and may be upwards of 500,000
Recent USGS report was for Wolfcamp only and Midland Basin only
US Oil Production by Basin
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
Oil
Pro
duct
ion
(bbl
)
Permian Eagle Ford Bakken Niobrara
US Production and Activity Trends
Upper Wolfcamp A Type Curve
EUR Economics
Oil (MBbls) 1,019 D&C ($MM) 5.7$
Gas (MMcf) 1,630 IRR @ NYMEX (1) 130%
EUR (MBoe) 1,291 PV-10 ($MM) 13.3$
Lat. Length (Ft) 5,000 PV-15 ($MM) 10.3$
IP30 (Boe/d) 1,242 PV-20 ($MM) 8.4$
Note: Assumes optimized D&C costs and 5,000’ laterals unless otherwise noted. (1) NYMEX strip pricing as of August 18, 2016.
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Jefferies LLC November 2016 /
Comparison of Selected Plays’ Core and Tier I PV-10 Breakeven Prices
PV-10 Breakeven Price – Key U.S. Oil Plays
Tier I Acreage
Core Acreage
# HZ Targets
12+
16+
4-7
2-3
4
3
Spot $47.08
3 Year Strip $52.83
Note: Source: EIA, Wall Street Research, Company filings, investor presentations and Jefferies estimates. Assumes crude oil to natural gas price ratio of 15:1. NYMEX pricing as of November 28, 2016.
$20.00
$25.00
$30.00
$30.00
$40.00
$40.00
$35.00
$45.00
$48.00
$52.50
$60.00
$60.00
Midland Basin
Delaware Basin
SCOOP / STACK
Eagle Ford
DJ Basin
Bakken
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Jefferies LLC November 2016 /
Permian Rig Activity
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Jefferies LLC November 2016 /
Permian Basin Resource Summary
Key Points
Jefferies estimates a total resource potential of approximately 325 BBoe (212 BBo) across the productive core of the Midland and Delaware Basins
─ Delaware: 218 BBoe (128 BBo)
─ Midland: 106 BBoe (84 BBo)
Spacing assumptions:
─ Delaware:
Wolfcamp A: 15 wells / section(1)
Wolfcamp B: 15 wells / section
2nd Bone Spring: 8 wells / section
3rd Bone Spring: 8 wells / section
Avalon: 8 wells / section
─ Midland:
Wolfcamp A: 15 wells / section
Wolfcamp B: 15 wells / section
Mid. Spraberry: 10 wells / section
Lower Spraberry: 10 wells / section
(1) Assumes development of 8 wells / section for the Wolfcamp A-X/Y Sand in southern Eddy County, NM and northern Loving County, TX.
Total Core Surface Acreage ~7,700,000 acres
Total Core “Effective” Acreage ~20,100,000 acres
Productive Benches 5 (Delaware) 4 (Midland)
Assumed Spacing 8-15 wells / section
Number of Wells to Develop ~316,000 wells
Average EUR / Well 1,137 MBoe (730 MBo)
Total Recoverable Resource ~325 BBoe (~212 BBo)
Peak Oil Production (400 Rig Ramp)
~11,000 MBo/d
Oil Reserves Half Life (400 Rig Ramp)
~32 Years
Total Capital Needed ~$1.9 Trillion
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Jefferies LLC November 2016 /
Permian Stratigraphy Overview
Key Points
Midland and Delaware Basin oil producing deposits were laid down during early Permian time as a series of organic rich mudstones and fine-grained interbedded sand or detrital carbonate turbidites
The Midland and Delaware stratigraphic sections mirror each other on opposing sides of the Central Basin Platform with the Delaware section being slightly thicker
At least 8 targets are proven and economic in both basins
A
A’
200’
Wolfcamp A
Producing Horizon
A A’
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Jefferies LLC November 2016 /
Permian Basin Depositional Model
Key Points
Delaware has three key rock types in Wolfcamp and Bone Spring intervals
Organic rich Basinal Avalon and Wolfcamp shale:
─ Basin subsidence formed the depocenter for organic rich siliciclastic Avalon and Wolfcamp facies
Carbonate:
─ Shallow water shelf-margin carbonate shoals and reefs were common around edges of the basin
─ Carbonate debris flow from unstable slope setting in Eastern margin
Turbidite Sands:
─ Basinal turbidite channel deposits – Bone Spring sands, similar to Spraberry in the Midland Basin
Midland Basin has similar depositional environments
Delaware Depositional Model
Source: Matador Resources May 2014 investor presentation.
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Jefferies LLC November 2016 /
Permian Basin with Type Curve Areas
Permian Basin Activity Map with Type Curve Areas
Key Points
The Permian Basin is one of the most prolific oil and gas basins in the onshore U.S.
─ Several thousands of feet of horizontal targets
─ 20+ target intervals economic at today’s commodity pricing
The Midland Basin has 1,500+ horizontal shale wells completed in Spraberry and Wolfcamp benches
─ Completion optimization has advanced rapidly compared to other basins
─ OOIP up to 300+ MMBo / section
The Delaware Basin horizontal shale has 4,500+ shale wells, with highly economical results in the Avalon, Bone Spring, Delaware, Wolfcamp and Yeso horizons
─ Until recently, completions have lagged Midland Basin
─ OOIP up to 500+ MMBo / section
─ Horizontal targets can have more geologic complexity than Midland Basin
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Jefferies LLC November 2016 /
Wells Permitted Since 2010
Midland Basin Activity Map – Key Well Results
(1) Source: DrillingInfo. (2) Normalized.
Peak IP Rates Range Up to 3,000+ Boe/d
Energen - Wolfcamp A Jones-Holton #1-01H
30-Day IP: 1,171 Boe/d Lat Length: 6,675’
RSP - Wolfcamp B Cross Bar Ranch 1811H 30-Day IP: 650 Boe/d
Lat Length: 6,967’
Pioneer – Spraberry University 7-43 #16H
IP: 1,660 Boe/d Lat Length: 7,502 ft
Pioneer - Wolfcamp D/Cline University 7-43 10H
IP: 3,605 Boe/d Lat Length: 7,382’
Encana - Wolfcamp B Davidson 27C #12H
IP: 2,078 Boe/d Lat Length: 7,426’
Diamondback - Spraberry ST W 702LS
30-Day IP: 1,289 Boe/d Lat Length: 7,291’
Diamondback - Wolfcamp B Mabee Breedlove #22-1H
IP: 1,029 Boe/d Lat Length: 8,296’
Oxy - Wolfcamp A May 1102WA
IP: 1,262 Boe/d (86% oil) Lat Length: 7,500’
Element - Spraberry Wright Unit 44-41 3H
IP: 776 Boe/d (90% oil) Lat Length: 6,776’
Big Star- Wolfcamp A Ryder Unit #A2H
IP30: 1,417 Boe/d Lat Length: 7,500’
Pioneer - Wolfcamp D Scharbauer Ranch #201H
IP: 1,509 Boe/d Lat Length: 7,862’
Pioneer - Spraberry Scharbauer Ranch #5-01H
IP: 691 Boe/d Lat Length: 7,052’
Pioneer - Wolfcamp B ET O’Daniel #1H IP: 2,801 Boe/d
Lat Length: 9,229’
Encana – Wolfcamp A Guitar 15 5H
30 Day IP: 902 Boe/d Lat Length: 1,707’
Laredo - Wolfcamp D Glass-Glass 10-153H
IP: 1,886 Boe/d Lat Length: 6,933’
Parsley - Middle Spraberry Texas Ten Y #17H
30-Day IP: 1,650 Boe/d Lat Length: 7,500’
Callon – Wolfcamp A Silver City A 1H
30 Day IP: 1911 Bo/d Lat Length: 7363’
AEP - Wolfcamp A Loftin Hughes 13-1212 1H IP: 1,549 Boe/d (82% oil)
Lat Length: 5,123’
Pioneer - Wolfcamp B University 2-20 #12
IP: 3,176 Boe/d Lat Length: 9,542’
EP Energy – Wolfcamp B University East 432 GH
IP24: 1,232 Boe/d
Parsley – Wolfcamp B Shauna 9-16B-4415H Day IP: 1,498 Boe/d Lat Length: 7,163’
Parsley - Wolfcamp B Char-Hughes 2H
IP24: 1,107 Boe/d Lat Length: 7,500’(2)
EP Energy – Wolfcamp B University E 43-17-AH
IP: 1,560 Boe/d Lat Length: 7,168’
Pioneer EUR: 850 – 1,350 MBoe Capex: $5.5 - $6.8 MM Recent Martin County Wolfcamp A / B
wells tracking above 1,000 MBoe type curve with new frac
RSP Permian EUR: 600 – 1,200 MBoe Capex: $5.2 - $5.6 MM Successful spacing test at 500’ in
Lower Spraberry
Diamondback EUR: 530 – 1,000+ MBoe Capex: $5.0 - $5.5 MM Successful Middle and Lower
Spraberry wells
Callon EUR: 670 – 1,050 MBoe Capex: $5.1 MM Silver City well is significantly
outperforming 700 MBoe type curve
Encana EUR: 700 – 900 MBoe Capex: $4.7 - $5.7 MM Spacing tests of 330’ in Wolfcamp
Howard County
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Jefferies LLC November 2016 /
Midland Basin Completions Chronology
Clear Indication of Completion Progress in Midland Basin
Key Points
Key learnings with respect to Midland Basin completion practices were established in the southern portion of the basin, where lower pressures and higher GOR’s drove operators to enhance completions in horizontals
Some operators were early adopters
Early practices (“Gen 0”) were erratic, but had very low proppant concentrations
Gen 1 completions used proppant concentrations of <1,100 lb/ft
─ Generally utilized 800 – 1,100 lb/ft proppant concentrations, and wide stage/cluster spacing
Gen 2 completions utilized proppant concentrations from 1,100 to 1,600 lb/ft with two modes (~1,200 and ~1,600 lb/ft)
Gen 3 completions generally had the lowest stage/cluster spacing (150 – 170’ stages / 35’ clusters) and utilized the highest prop concentrations (>1,600 lb/ft)
Completions in the northern parts of the basin generally utilized Gen 2 completions, and progressed from there
Completions Evolution
initiated in Southern
Midland Basin
Generation 2 – SMB
Some operators testing stage / cluster spacing
Low Proppant concentrations (1,100 – 1,600 lb/ft)
Hybrid jobs more common
Early in understanding of optimum landing zones
Generation 1 – SMB
Wide stage spacing (>240 ft / stage)
Sliding sleeves or wide clusters
Proppant concentrations (<1,100 lb/ft)
Use of cross-linked fluids common
Flow units not clearly understood
Generation 3 – SMB
Reduced cluster spacing (~150 – 185 ft stages)
High proppant concentrations (>1,600 lb/ft)
Some operators using thin fluid / slickwater fracs
More attention to LZ / geo-steering
Selective use of additives (e.g., nano-surfactant)
Proppant (lb/ft)
Gen 3
Gen 2
Gen 1
Key Learnings Generally
Adopted as Horizontal Activity
Progressed to the North
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Jefferies LLC November 2016 /
Wolfcamp B: Proven Development Target
Key Points
Wolfcamp B is a primary development horizon for Pioneer in the Sale Ranch area of southern Martin County
Thick section supports upper and lower targets
Wolfcamp B expands to the south creating potential for additional stacked and staggered targets
Wolfcamp B Gross Thickness Wolfcamp B Net Thickness (GR>75 API, Res>15 Ohms)
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Jefferies LLC November 2016 /
Wolfcamp B Net Thickness – Core Key Points
Gross thickness ranges from 200’ - 500’
Net shale thickness ranges from 150’ - 350’
Wellhead EUR of 1,351 MBoe
Sales EUR of 1,478 MBoe
Wolfcamp B – Core Locator Map
Wolfcamp B - Core
Single Well PV-10 ($MM) $13.1 (1)
Single Well IRR (%) 131% (1)
Total Type Curve Wells (#) 30
(1) NYMEX pricing as of 11/8/2016, with 3-year forward averages of $49.73 / Bbl and $2.92 / MMBtu.
Sale Ranch
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Jefferies LLC November 2016 /
Wolfcamp B – Core Type Curve
Stream 30-Day IP 30-Day IP 24-Hr IP Di Df b-factor GOR
Unit Per Month Per Day Per Day % % # Mcf / Bbl
Oil (Bbl) 38,945 1,280 1,560 79 6.0 1.45 1.0 - 2.1
Gas (Mcf) 37,987 1,249 1,522
EUR Crude Oil Wellhead Gas Wellhead Total Wellhead Total Oil Exponential
Unit MBbl MMcf MBoe Bcfe % Years
1,025 1,955 1,351 8.1 76% 11.0
Type Curve Parameters
30 analog wellbores normalized to 7,500’ lateral lengths
Peak 24-Hour IP: 1,814 Boe/d
GOR Profile
0
1
2
3
0 6 12 18 24 30 36
GO
R (
MC
F/B
bl)
Month
GOR (MCF/Bbl) Model
Version 1.0 Version 2 & 3.0
Q 1,015 1,620
Di 86 79
b-factor 1.3 1.45
Prop-Ft 1,009 1,400-1,700
Bin Range 850-1,200 Sale Ranch
EUR (MBo) 454 1,025
EUR (MMcf) 852 1,954
Well Count 11 100+
1
10
100
1,000
100
1,000
10,000
100,000
0 2 4 6 8 10 12 14 16 18 20 22 24
Wel
l Cou
nt
Oil,
Bbl
/Mo
Months
Digitized Version 2.0 PXD WB Digitized Version 3.0 PXD WB Version 1.0 PXD Type Curve
Version 1.0 PXD WB Version 3.0 Type Curve SALE RANCH `22A` 1H (976lbs/ft)
SALE RANCH `22G` 7H (1027lbs/ft) SALE RANCH `28K` 11H (1188lbs/ft) SALE RANCH `28L` 12H (1383lbs/ft)
SALE RANCH 15B 2H (1522lbs/ft) SALE RANCH 15C 3H (965lbs/ft) SALE RANCH 15D 4H (976lbs/ft)
SALE RANCH 15E 5H (954lbs/ft) SALE RANCH 16E 5H (875lbs/ft) SALE RANCH 15A 1H (1372lbs/ft)
SALE RANCH 16F 6H (869lbs/ft) SALE RANCH 20D 4H (N/Albs/ft) SALE RANCH 23F 6H (N/Albs/ft)
SALE RANCH 21C 3H (1334lbs/ft) SALE RANCH 23B 2H (N/Albs/ft) SALE RANCH 24A 1H (1096lbs/ft)
SALE RANCH 25C 3H (1344lbs/ft) SALE RANCH 22H 8H (1039lbs/ft) SALE RANCH 16A 1H (1070lbs/ft)
SALE RANCH 25E 5H (1348lbs/ft) SALE RANCH 28A 1H (1551lbs/ft) SALE RANCH 28J 10H (1303lbs/ft)
SHACKELTON 31 3H (1978lbs/ft) JONES-HOLTON 201H (849lbs/ft) MABEE K 1H (1078lbs/ft)
BENT NAIL 36 1H (1533lbs/ft) BOONE-COFFEE (PSA) 2HB (98lbs/ft) WOODY 04 02H (1498lbs/ft)
CALVERLY #2H WB (1680lbs/ft) SALE RANCH 25D 4H (1392lbs/ft) Well Count
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Jefferies LLC November 2016 /
Lower Spraberry Shale: A Proven Development Target
Key Points
Lower Spraberry is a primary development horizon for the western portion of the Midland Basin, with expansion into the central and eastern basin
Thick section supports upper and lower targets
Lower well count reflective of acreage holding requirements rather than lesser economics and deliverability
Lower Spraberry Shale Gross Thickness Lower Spraberry Shale Net Thickness (GR>75 API, Res>15 Ohms)
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Jefferies LLC November 2016 /
Lower Spraberry Shale Net Thickness Key Points
Gross thickness ranges from 300’ - 450’
Net shale thickness ranges from 100’ - 260’
Wellhead EUR of 1,175 MBoe
Sales EUR of 1,254 MBoe
Lower Spraberry Shale – West Locator Map
Lower Spraberry – West
Single Well PV-10 ($MM) $11.2 (1)
Single Well IRR (%) 107% (1)
Total Type Curve Wells (#) 26
(1) NYMEX pricing as of 11/8/2016, with 3-year forward averages of $49.73 / Bbl and $2.92 / MMBtu.
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Jefferies LLC November 2016 /
Lower Spraberry Shale – West
Stream 30-Day IP 30-Day IP 24-Hr IP Di Df b-factor GOR
Unit Per Month Per Day Per Day % % # Mcf / Bbl
Oil (Bbl) 37,132 1,221 1,600 82 6.0 1.60 0.9 - 1.4
Gas (Mcf) 32,824 1,079 1,414
EUR Crude Oil Wellhead Gas Wellhead Total Wellhead Total Oil Exponential
Unit MBbl MMcf MBoe Bcfe % Years
971 1,224 1,175 7.1 83% 10.0
Type Curve Parameters
26 analog wellbores normalized to 7,500’ lateral lengths
Peak 24-Hour IP: 1,836 Boe/d
GOR Profile
0
1
2
3
0 6 12 18 24 30 36
GO
R (
MC
F/B
bl)
Month
GOR (MCF/Bbl) Model
Current Optimized
Qi 875 1,600
Di 75 82
Df 6 6
b-factor 1.55 1.6
EUR (MBo) 723 971
EUR (MMcf) 1,237 1,224
1
10
100
1,000
100
1,000
10,000
100,000
0 2 4 6 8 10 12 14 16 18 20 22 24
Wel
l Cou
nt
Oil,
Bbl
/Mo
Months
Current Type Curve All Wells AverageProposed Type Curve Digitized Fang , Q1- Q3 / 2015UNIVERSITY LANDS TAWNY UNIT 8-12 1LS (1298lbs/ft) GLASSCOCK A5 2H (1107lbs/ft)SALE RANCH `22B` 2H (963lbs/ft) MABEE Y UNIVERSITY LANDS H 3SS (1456lbs/ft)MABEE C H16SS (1473lbs/ft) SPANISH TRAIL 48-03E 4817LS (1550lbs/ft)GRIDIRON S002LS (1278lbs/ft) GRIDIRON S017LS (1007lbs/ft)JAMIE 4043H (1399lbs/ft) MABEE C H 15SS (1479lbs/ft)XBC GIDDINGS ESTATE 3049H (1169lbs/ft) JOHNSON RANCH 1017 LS (N/Albs/ft)FENDLEY 405LS (N/Albs/ft) JOHNSON RANCH 1022 LS (N/Albs/ft)JOHNSON RANCH 1026H LS (N/Albs/ft) FENDLEY 404LS (N/Albs/ft)KENDRA-AMANDA PSA 2 29SH (1935lbs/ft) JOHNSON RANCH 1022MS(LS) (N/Albs/ft)SPANISH TRAIL 4818LS (1464lbs/ft) UNIVERSITY LANDS MUSTANG 13 241 (1899lbs/ft)KEYSTONE 1004LS (1861lbs/ft) KEYSTONE 1003LS (1063lbs/ft)ST W 701LS (1317lbs/ft) KENDRA-AMANDA PSA 2 30SH (1942lbs/ft)MABEE BREEDLOVE 4001LS (1279lbs/ft) MABEE BREEDLOVE 4003LS (1260lbs/ft)Well Count
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Jefferies LLC November 2016 /
Lower Spraberry Shale Net Thickness Key Points
Gross thickness ranges from 300’ - 450’
Net shale thickness ranges from 100’ - 260’
Wellhead EUR of 1,006 MBoe
Sales EUR of 1,073 MBoe
Lower Spraberry – East (North) Locator Map
Lower Spraberry – East (North)
Single Well PV-10 ($MM) $8.7 (1)
Single Well IRR (%) 74% (1)
Total Type Curve Wells (#) 9
(1) NYMEX pricing as of 11/8/2016, with 3-year forward averages of $49.73 / Bbl and $2.92 / MMBtu.
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Jefferies LLC November 2016 /
Lower Spraberry – East (North)
Stream 30-Day IP 30-Day IP 24-Hr IP Di Df b-factor GOR
Unit Per Month Per Day Per Day % % # Mcf / Bbl
Oil (Bbl) 25,183 828 956 73 6.0 1.50 0.7 - 1.3
Gas (Mcf) 16,518 543 627
EUR Crude Oil Wellhead Gas Wellhead Total Wellhead Total Oil Exponential
Unit MBbl MMcf MBoe Bcfe % Years
835 1,029 1,006 6.0 83% 10.6
Type Curve Parameters
9 analog wellbores normalized to 7,500’ lateral lengths
Peak 24-Hour IP: 1,061 Boe/d
Falkor is example of current best practice
─ 1,800+ lbs/ft proppant
─ 40+ stages
─ Nanosurfactant
─ Optimal landing zone
GOR Profile
0
1
2
3
0 6 12 18 24 30 36
GO
R (
MC
F/B
bl)
Month
GOR (MCF/Bbl) Model
1
10
100
1,000
100
1,000
10,000
100,000
0 2 4 6 8 10 12 14 16 18 20 22 24
Wel
l Cou
nt
Oil,
Bbl
/Mo
Months
All Wells Average All Wells Type CurveGARRETT UNIT 37-48 #3SH (1322lbs/ft) TALBOT A #1SH (1417lbs/ft)TALBOT C #3SH (1523lbs/ft) TALBOT E #5SH (1490lbs/ft)FRYAR UNIT `B` 13-1 #5SH (1338lbs/ft) WHITAKER 3905 #1LS (724lbs/ft)SHROYER-WILSON UNIT A 24-14 #1SH (1316lbs/ft) HAMLIN 19-30 #1H (1436lbs/ft)FALKOR 4-8 A 5LS (1793lbs/ft) Well Count
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Jefferies LLC November 2016 /
Cross Bar Ranch – Lower Spraberry Increased Density Plot
Cross Bar Ranch LS Performance
Cross Bar Ranch Section 17 Gun Barrel View Key Points
RSP’s 500’ spacing test at Cross Bar Ranch has performed above expectations despite relatively less oil in place vs. other RSP core acreage
Original 3 wells of pattern completed during July 2015 with prior frac design; next 3 wells completed during August 2016 with latest vintage frac design
Performance to date strongly supportive of high density frac design paired with downspacing
Potential for second row of wells 50’ above the Dean
RSP Permian
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Jefferies LLC November 2016 /
Gun Barrel View of Half Section – Avg. TVD of Lateral
Midland Basin Well Spacing
Key Points
AEP is developing a long lateral DSU with stacked and staggered targets in the Wolfcamp A, B, and C (also called Lower Wolfcamp B by others like Pioneer)
Current drilling activity suggests full section development with similar spacing assumptions
125’ – 150’ spacing between vertical targets 7700
7800
7900
8000
8100
8200
8300
8400
8500
8600
8700
0 500 1000 1500 2000
TVD
Feet From Section Line
Targeted TVD
A A’
A A’
Ham Spacing Example Locator – Reagan County
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Jefferies LLC November 2016 /
Middle Spraberry: An Emerging Midland Basin Target
Key Points
Middle Spraberry is shallower than the Lower Spraberry and possesses similar petrophysical attributes
Trend of early development (>50 wells) is along the western portion of the northern portion of the basin in Midland and Martin Counties
Early production is extremely encouraging and advances in completions will aid development expansion across the basin
Middle Spraberry Gross Thickness Middle Spraberry Net Thickness (GR>75 API, Res>15 Ohms)
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Jefferies LLC November 2016 /
Middle Spraberry: An Emerging Midland Basin Target
Key Points
Typical target is in the organic rich mudstone on top of the Lower Spraberry siltstone in high GR and resistive section
Operators such as QEP, Pioneer, RSP, OXY, and Diamondback have targeted the Middle Spraberry
Upper Spraberry
Middle Spraberry
Lower Spraberry
Lower Spraberry Shale
A A’
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Jefferies LLC November 2016 /
First Month 30-day IP (per day) 1st-day IP (per day) Di (%) Df (%) b IP30 GOR (Mcf/bbl) IP30 BOEPD IP30 %Oil
Oil (Bbl) 18,621 612 670 65 6 1.40
Gas (Mcf) 15,833 521 550 54 6 1.40
EUR Oil (Mbbl)EUR Wellhead Gas
(Bcf)EUR Mboe(2-stream)
EUR GOR (Mcf/bbl)
EUR Bcfe(2-stream)
Oil Exp Switch (Yrs)
Gas Exp Switch (Yrs)
EUR Time (Yrs)
734.7 0.832 873 1.1 5.24 11.2 11.0 50.0
0.9 699 88%
Middle Spraberry Type Curve
Type Curve Parameters
Type curve derived by fitting to the average oil production curve of 7 analog wellbores normalized to 7,500’ lateral lengths
Type curve EUR (50 year life): 873 MBoe
Technical parameters:
─ 30-day IP: 612 Bo/d
─ Dinit: 54-65%
─ B-Factor: 1.40
─ Dfinal: 6%
10
100
1,000
0 6 12 18 24
Bb
l/D
History - Oil
TC Oil Rate
UNIVERSITY 7-1726 S 16MS(1,208 lbs/ft)
UNIVERSITY 7-0213 N 08MS(1,404 lbs/ft)
Months
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Jefferies LLC November 2016 /
Delaware Basin Activity Map
Key Points
Wolfcamp has been the primary target in Texas and Bone Spring has been the primary target in New Mexico
Completions advances in the Wolfcamp have been applied to Bone Spring in New Mexico with success
XY Sands are attractive emerging target with high rate production
Anadarko EUR: 1,000+ MBoe Capex: <$5 MM - $5.8 MM
EOG Resources EUR: 950 – 1,550 MBoe Capex: $7.8 MM Currently testing 500’ spacing and
additional targets in the Wolfcamp
Matador EUR: 450 – 1,100 MBoe Capex: $4.5 - $6.5 MM
Source: Publicly available information.
State Mercury IOH 2,123 Boe/d IP24
1st Bone Spring EOG Resources
Guitar #202H 1,273 Boe/d IP24
Wolfcamp A Matador
Iron Mike 402E 2H
1,348 Bo/d IP Wolfcamp B
J Cleo Thompson
Apache St. 57 1101H 2,002 Boe/d Peak IP
Wolfcamp B EOG Resources
State Pathfinder #1H 1,832 Boe/d IP24
Avalon Upper EOG Resources
State Galileo #6H 3,160 Boe/d Peak IP
2nd Bone Spring EOG Resources
Big Chief 4802H 848 Boe/d IP 24 Hr
2nd Bone Spring Concho
Oppenheimer 188 2H 2,451 Boe/d IP 24 Hr Wolfcamp Debris Flow
J. Cleo Thompson
Dorothy White 1H 991 Boe/d IP
Wolfcamp A – X-Sand Matador Resources
Harrison 29-28 1H 1,650 Boe/d IP24 Wolfcamp A Lower
Anadarko
Miami Beach 34-123-1H 1,500 Bo/d IP30 3rd Bone Spring
Cimarex
Peck St 258 6H 2,432 Boe/d IP24
Wolfcamp A Rosetta Resources
Johnny Ringo 2H 1,000 Bo/d IP 24 Hr
3rd Bone Spring Rosetta
Tiger #224H 1,525 Boe/d IP24
Wolfcamp B Matador
Trinity 15-33 1H 1,271 Boe/d IP Peak
Wolfcamp A Jagged Peak Energy
Count Fleet 48 State 2H 1,416 Boe/d IP30
Wolfcamp D Cimarex Energy
n
n
n
n
n
n n
n
n
n
n
n
n
n
n
n n
n
n
n
o Hz Target Optimization
o Completion Optimization
Copperhead 23 - 1H 837 Bo/d IP30
Wolfcamp B Red Willow Production
Macho Grande State 1H 1,290 Boe/d IP24
1st Bone Spring Nadel and Gussman
Big Timber State 3309 Boe/d IP30
49% Oil Wolfcamp A
Cimarex
Ava State 770 Bo/d IP24
Wolfcamp A Capitan Energy
Osprey State Un #200H 1161 Boe/d IP24
56% Oil Upper 3rd Bone Spring
Apache
Neal Lethco 28-27 811 Boe/d IP 24 Hr
Wolfcamp A / Debris Flow Brigham Resources
Thor 21 702H 3,490 Boe/d IP30
Wolfcamp A EOG Resources
Formation Targets
Wolfcamp 7+
Bone Spring 7+
Avalon 2
Brushy Canyon 1
Strawn & Deeper NA
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Jefferies LLC November 2016 /
Average Proppant per Ft. vs. Date – Completion (Quarter)(2)
Diverting Agent Case Study(1)
Frac Type Market Share
Operators are Improving Completions in the Wolfcamp
Key Points
Most operators prefer slickwater (SW) and hybrid completion jobs over cross-linked gel completions in the Wolfcamp
Fracs have increased to over 3,200+ lbs/ft and well performance has improved accordingly
Additional optimization can include adjusting other parameters, such as:
─ Pump rate and proppant concentration (ppg)
─ Cluster spacing
─ Landing zone
─ Early time flowback management
─ Nanosurfactant additives
Operators are now also experimenting with diverting agents to maximize frac initiation at all clusters
Matador has seen a 38% uplift in production from its first offset test with diversion and has completed 5 total wells in Loving County with diversion that have yielded positive diagnostic results
(1) From Matador Investor Presentation, August 2016. (2) Select operators’ completions chronology (horizontal wells at least 2,000’ long since 1/2012).
Gen 1
Gen 2
Gen 3
Gen 4
4% 14% 36%
47% 28%
48%
60%
55% 39% 72%
48% 26%
9% 14%
2012 2013 2014 2015 2016
Completion Date
Slickwater Hybrid Gel
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Jefferies LLC November 2016 /
Southern Delaware Basin Optimized Type Curve – Wolfcamp A Red Bull North
Key Points
Completions optimization changes production dramatically
Large proppant volumes are translating into outsized production
Type curve parameters (7,500' lateral):
─ Wellhead EUR: 1,250 MBo (1,459 MBoe)
─ Initial rate (30-day): 1,203 Bbls/d / 1,021 Mcf/d
─ b Factor: 1.40 (oil) / 1.30 (gas)
─ Initial decline rate: 70% (oil) / 62% (gas)
─ Terminal decline rate: 6.0% (oil) / 6.0% (gas)
Locator Map
Peak Month 30-day IP (per day) 1st-day IP (per
day) Di (%) Df (%) b GOR (Mcf/Bbl) Shrink NGL (bbl/MMcf)
Oil (bbl) 25,742 846 985 55 6.0 1.20 0.9 - 1.4 100% 0 Gas (Mcf)
21,420 704 820
EUR Gas (MMcf) EUR Oil (Mbo) EUR Sales Gas
(Bcf) EUR NGL
(Mbbl) EUR Mboe EUR Bcfe
Exponential Switch (Yrs)
1,664.5 1,299 1.665 0.0 1,576.5 9.46 12.8
1
10
100
1,000
100
1,000
10,000
100,000
0 2 4 6 8 10 12 14 16 18 20 22 24
We
ll C
ou
nt
Oil,
Bb
l/M
o
Months
All Wells Average
All Wells Type Curve
African Lion 1-2H (2434lbs/ft)
Giraffe Unit 18 B 4H (2570lbs/ft)
Giraffe Unit 18 C 5H (2931lbs/ft)
Well Count
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Jefferies LLC November 2016 /
Upper Wolfcamp B Type Curve
Stream 30-Day IP 30-Day IP 24-HR IP Di Df GOR
Unit Per Month Per Day Per Day % % Mcf / Bbl
Oil (Bbl) 48,743 1,603 1,800 69 6 1.5
Gas (Mcf) 73,115 2,404 2,700
WH Oil WH Gas Total Total Oil Exp
MBbl Bcf MBoe Bcfe Years
1,819 2.728 2,274 4.67 10.5
Key Points
Large proppant volumes and modern completions are translating into astounding production
Type curve parameters (7,500’ lateral):
─ Wellhead EUR: 1,819 MBbls (2,274 MBoe)
─ Initial rate (30-day): 1,603 Bbls/d
─ b Factor: 1.5
─ Initial decline rate: 69%
─ Terminal decline rate: 6%
─ GOR: 1.5 Mcf/Bbl
Single Well IRR(1)
10
100
1,000
10,000
0 6 12 18 24 30
Bbl
/D
MONTH
Avg All Wells EXCELSIOR 7 8H (2,426 lbs/ft)
UNIVERSITY B20 1 W201PA ( lbs/ft) Optimized TC Oil Rate
Base TC Oil Rate
76%
116%
(1) Assumes NYMEX strip pricing as of October 31, 2016. (2) Assumes D+C Capex for 7,500’ lateral of $8.2 MM.
Pad Well Single Well
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Jefferies LLC November 2016 /
Locator Map – 2nd Bone Spring Net 6% DPHI Type Well Statistics
31 wells selected for type curve
─ Avg IP-30: 688
─ Avg proppant: 1,246 lbs/ft
2nd Bone Spring West Locator Map
Well Name Operator LL Prop. IP-30 (ft) (lbs/ft) (Boe/d)
Antweil ANU Federal - 3H Yates 3,914 1,344 353 Baroque BTQ Federal Com - 1H Yates 6,600 1,466 1,494 Benson Deep BDX Federal - 2H Yates 4,134 1,426 491 Bradley 36 B2DA State Com - 1H Mewbourne 4,174 447 393 Burton Flat Deep Unit - 61H Devon 4,615 1,518 307 Burton Flat Deep Unit - 62H Devon 4,645 1,532 668 Cedar 11 State - 1H Devon 4,421 1,512 431 CERF 10 State - 9H Devon 4,594 1,463 633 Cookie Tosser State Com - 1H Concho 4,208 1,509 755 Cookie Tosser State Com - 2H Concho 4,323 1,446 651 Crapshoot 13 Federal Com - 2H Concho 4,555 1,377 525 CTA State Com - 5H Concho 4,092 1,542 444 CTA State Com - 6H Concho 4,140 1,548 1,066 Darthrow State - 4H Concho 3,996 1,532 583 Emerald PWU 20 - 66H Devon 4,617 1,413 675 Glock 16 B2AD Federal - 1H Mewbourne 4,430 1,369 797 Gobbler 5 B2IL #1H Mewbourne 4,343 1,371 WOP Gobbler 5 B2PM State Com - 1H Mewbourne 4,069 873 2,355 Leo 15 B2DH Federal Com - 1H Mewbourne 2,950 924 1,106 Leo 15 B2DP Federal Com - 1H Mewbourne 4,690 1,031 674 Lone Tree Draw 13 State Com - 8H Devon 4,355 1,497 642 Man State - 2H Concho 4,291 1,524 1,396 Mirage 30 B2HE State Com - 1H Mewbourne 3,865 522 475 Mossy Federal - 1H Concho 4,413 1,329 376 Mossy Federal - 2H Concho 4,462 1,410 339 Palmillo 14 State - 4H Apache 4,100 698 294 Perazzi 9 B2EH Federal - 1H Mewbourne 4,280 1,424 661 Solution Federal Com - 3H Concho 6,966 1,517 726 Winchester 36 B2LI State - 1H Mewbourne 4,201 420 250 Zircon 12/7 B2JK Federal Com - 1H Mewbourne 4,910 443 552 Zircon 12/7 B2ON Federal Com - 1H Mewbourne 4,558 1,210 535
1
2
3
4
5
6
7
8
10
12
14
16
18
20
9
11
13
15
17
19
21
22
23
24
25
26
27
28
29
30
31
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Jefferies LLC November 2016 /
2nd Bone Spring Type Curve
Stream 30-Day IP 30-Day IP 24-HR IP Di Df GOR
Unit Per Month Per Day Per Day % % Mcf / Bbl
Oil (Bbl) 33,929 1,116 1,375 85 6 1.4 – 3.9
Gas (Mcf) 47,134 1,550 1,910
WH Oil WH Gas Total Total Oil Exp
MBbl MMcf MBoe Bcfe Years
497 1,685 778 4.67 15.2
Key Points
Completions learnings from the Wolfcamp are working in the Bone Spring
Type curve parameters (5,000’ lateral):
─ Wellhead EUR: 497 MBbls (778 MBoe)
─ Initial rate (30-day): 1,116 Bbls/d
─ b Factor: 1.10
─ Initial decline rate: 85%
─ Terminal decline rate: 6%
─ GOR: 1.4 – 3.9 Mcf/Bbl
─ Proppant: 1,246 # / linear-ft
1
10
100
1,000
100
1,000
10,000
100,000
0 6 12 18 24
Wel
l Cou
nt
Oil,
Bbl
/Mo
Months
All Wells Average All Wells Type CurveLEO 15 B2DH FEDERAL COM - 1H (1457lbs/ft) CTA STATE COM - 6H (1548lbs/ft)LEO 15 B2DP FEDERAL COM - 1H (1031lbs/ft) BENSON DEEP BDX FEDERAL - 2H (1426lbs/ft)WINCHESTER 36 B2LI STATE - 1H (420lbs/ft) SOLUTION FEDERAL COM - 3H (1517lbs/ft)PALMILLO 14 STATE - 4H (698lbs/ft) BAROQUE `BTQ` FEDERAL COM - 1H (1466lbs/ft)COOKIE TOSSER STATE COM - 1H (1509lbs/ft) BURTON FLAT DEEP UNIT - 62H (1532lbs/ft)MAN STATE - 2H (1524lbs/ft) CTA STATE COM - 5H (1542lbs/ft)PERAZZI 9 B2EH FEDERAL - 1H (1424lbs/ft) MOSSY FEDERAL - 2H (1410lbs/ft)BRADLEY 36 B2DA STATE COM - 1H (447lbs/ft) GLOCK 16 B2AD FEDERAL - 1H (1369lbs/ft)CRAPSHOOT 13 FEDERAL COM - 2H (1377lbs/ft) LONE TREE DRAW 13 STATE COM - 8H (1497lbs/ft)DARTHROW STATE - 4H (1532lbs/ft) ZIRCON 12/7 B2JK FEDERAL COM - 1H (443lbs/ft)ANTWEIL `ANU` FEDERAL - 3H (1344lbs/ft) GOBBLER 5 B2PM STATE COM - 1H (902lbs/ft)BURTON FLAT DEEP UNIT - 61H (1518lbs/ft) CERF 10 STATE - 9H (1463lbs/ft)CEDAR 11 STATE - 1H (1512lbs/ft) ZIRCON 12/7 B2ON FEDERAL COM - 1H (1210lbs/ft)COOKIE TOSSER STATE COM - 2H (1446lbs/ft) MIRAGE 30 B2HE STATE COM - 1H (522lbs/ft)EMERALD PWU 20 - 66H (1413lbs/ft) Gobbler 5 B2IL #1H (1371lbs/ft)
Single Well IRR(1)
(1) Assumes single well and pad well capex of $4.5 MM and $3.8 MM, respectively.
140%
209%
Optimized Curve
Base Curve
Pad Well Single Well
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Jefferies LLC November 2016 /
Offset Avalon and Bone Spring Development Well Spacing
Key Points
EOG down-spacing of ~600’ in the State Galileo unit represents 8 wells / section in Lower 2nd Bone Spring sand landing zone
Devon has several successful spacing Upper / Lower Landing zone tests in the 2nd Bone Spring sand
EOG has tested Avalon spacing of 250’-270’ in the Sandbar Field – Excelsior 12 and State Mercury units
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Jefferies LLC November 2016 /
Wolfcamp % Oil
Delaware Basin Fluid Production
Wolfcamp GOR Map
Source: DrillingInfo.
Key Points
Basin is oilier in the deeper eastern portion of the basin and gassier in the shallow west ─ Combination of depth, pressure, rock quality, thickness / number of targets and hydrocarbon mix makes this one of the highest performing basins
for resource plays Some uplifting of the basin during Laramide Orogeny created the divergence of depth and fluid type relationship
Mantle thermal hot zones are associated with higher GOR in the west
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Jefferies LLC November 2016 /
Western Delaware Basin Gas Condensate Expansion Type Curve Locator Map
Wolfcamp % Oil
Key Points
Recent Wolfcamp A wells drilled in higher GOR regions of Reeves and Culberson have come on line with strong production
EUR’s from TC analysis suggest total production 779 Mbo and 4.4 Bcf
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Jefferies LLC November 2016 /
Oil Trend Plot – Wolfcamp A
Key Points
Type Curve Parameters (5,000’ lateral):
Oil EUR: 779 MBo
B factor: 1.20
Initial decline rate of 65%
Terminal decline rate of 6.0%
5,000’ Lateral Length
Peak Month 30-day IP (per day) 1st-day IP (per day) Di (%) Df (%) b
22,439 738 800 65 6.0 1.20Oil (bbl)
1
10
100
1,000
100
1,000
10,000
100,000
0 2 4 6 8 10 12 14 16 18 20 22 24
Wel
l Cou
nt
Oil,
Bbl
/Mo
Months
All Wells Average All Wells Type Curve Alice Fee 34 1H Ava State 36 1HCliff Fee 4 1H Dorothy State 12 1H James Fee 6 1H JE Liles State 6 1HJess Fee 40 1H JS Blair 2 1H Lauren State 30 1H Georgette State 2HMattie State 2 1H Mike State 3 1H Rylan Fee 44 1H Mother Fee 28 1HRoxanne Fee 46 1H Scott Fee 1H Shelly Fee 40 1H Pat Fee 4 1HKaren Fee 17 1H WA State 2H WA State 3 H William Fee 32 1HTyson Fee 44 1H Well Count
EUR Oil (Mbo)
779
Exponential Switch (Yrs)
13.1
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Jefferies LLC November 2016 /
Gas Trend Plot – Wolfcamp A
Key Points
Type Curve Parameters (5,000’ lateral):
Gas EUR: 4,418 MMcf
B factor: 1.30
Initial decline rate of 65%
Terminal decline rate of 6.0%
5,000’ Lateral Length
Peak Month 30-day IP (per day) 1st-day IP (per day) Di (%) Df (%) b
65 6.0 1.30Gas (Mcf) 118,957 3,911 4,260
4,417.5
Exponential Switch (Yrs)
12.1
EUR Gas (Mmcf)
1
10
100
1,000
1,000
10,000
100,000
1,000,000
0 2 4 6 8 10 12 14 16 18 20 22 24
Wel
l Cou
nt
Gas
, M
cf/M
o
Months
All Wells Type Curve "All Wells" Average Cliff Fee 4 1H JE Liles State 6 1HJess Fee 40 1H Lauren State 30 1H Mattie State 2 1H Mike State 3 1HMother Fee 28 1H Roxanne Fee 46 1H William Fee 32 1H Ava State 36 1HAlice Fee 34 1H Dorothy State 12 1H Georgette State 2H James Fee 6 1HJS Blair 2 1H Karen Fee 17 1H Pat Fee 4 1H Rylan Fee 44 1HScott Fee 1H Shelly Fee 40 1H Tyson Fee 44 1H WA State 2HWA State 3 H Well Count
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Jefferies LLC November 2016 /
XY Sands: An Emerging Delaware Basin Target
Key Points
Turbidite reservoirs of the XY Sands of the Upper Wolfcamp A have produced some of the highest rate oil wells in the Permian Basin
Operators such as EOG, Concho, and Matador have targeted the reservoirs, primarily in New Mexico
Completions advancements continue to show better results
XY Sand Gross Thickness XY Sand Net Thickness (6% DPHI)
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Jefferies LLC November 2016 /
Key Points
Low resistivity and low GR lobes of the Upper Wolfcamp A are diagnostic of the XY Sands
These reservoirs have exceptionally good porosity upwards of 10%+
XY Sands: An Emerging Delaware Basin Target
A A’
3rd Bone Spring
Wolfcamp A
X Sand
Y Sand
Wolfcamp B
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Jefferies LLC November 2016 /
Locator Map: XY Sand Net 6% DPHI Type Well Statistics
8 wells selected for type curve
─ Avg IP-30: 1,426 Boe/d
─ Avg proppant: 1,632 lbs/ft
Wolfcamp A-X/Y Sand Locator Map – Red Hills East
Well Name Operator LL Prop. IP-30 (ft) (lbs/ft) (Boe/d)
Brown Bear 36 State 701H EOG 4,616 1,510 1,925 Brown Bear 36 State 702H EOG 4,585 1,613 1,420 Brown Bear 36 State 703H EOG 4,583 1,633 1,519 Ruby 2 State Com 701H EOG 4,720 1,535 959 Stove Pipe Federal Com 2H Concho 6,805 1,979 2,261 Telecaster Bass 36 State 4H Endurance 3,968 1,269 392 Viking Helmet Federal Com 3H Concho 6,973 1,986 1,880 Wheatfield 16 State 701H EOG 4,450 1,529 1,054
1
2
3
4
5
6
7
8
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Jefferies LLC November 2016 /
Stream 30-Day IP 30-Day IP 24-HR IP Di Df GOR
Unit Per Month Per Day Per Day % % Mcf / Bbl
Oil (Bbl) 35,913 1,181 1,615 84 6 1.3 – 1.6
Gas (Mcf) 44,629 1,467 2,007
WH Oil WH Gas Total Total Oil Exp
MBbl MMcf MBoe Bcfe Years
871 1,350 1,096 6.58 10
Key Points
Type curve parameters (5,000' lateral):
─ Wellhead EUR: 871 MBbls (1,096 MBoe)
─ Initial rate (30-day): 1,181 Bbls/d
─ b Factor: 1.60
─ Initial decline rate: 84%
─ Terminal decline rate: 6%
─ GOR: 1.3 - 1.6 Mcf/Bbl
─ Proppant: 1,632 # / linear-ft
Wolfcamp A-X/Y Sand Type Curve – Red Hills East
Single Well IRR(1)
(1) Assumes single well and pad well capex of $6.7 MM and $6.3 MM, respectively.
71% 80% 1
10
100
1,000
100
1,000
10,000
100,000
0 6 12 18 24
Wel
l Cou
nt
Oil,
Bbl
/Mo
Months
All Wells AverageAll Wells Type CurveBROWN BEAR 36 STATE 703H (1633lbs/ft)RUBY 2 STATE COM 701H (1535lbs/ft)BROWN BEAR 36 STATE 702H (1613lbs/ft)BROWN BEAR 36 STATE 701H (1511lbs/ft)Wheatfield 16 State 701H (1529lbs/ft)Stove Pipe Federal Com 2H (1985lbs/ft)Viking Helmet Federal Com 3H (1979lbs/ft)Well Count
Pad Well Single Well
37
Jefferies LLC November 2016 /
Offset Upper Wolfcamp A Development Well Spacing
Key Points
EOG has tested downspacing of 420’-455’ targeting the Upper A shale in their Excelsior lease
Matador has drilled several spacing tests (<660’) with staggered X/Y sand landing zones
Matador microseismic tests in Barnett 90-TTT-B01 wells indicate that well spacing of 660’ between X/Y targets can be achieved without material microseismic events in the adjacent drilling unit
X Sand
Y Sand
38
Jefferies LLC November 2016 /
Spacing Schematic – Full 640 Acre Development
Delaware Basin Generic Development Spacing Schematic
Key Points
50 wells / section translates to $350 MM / section in development capex for primary development
Potential for additional 30 development wells with spacing tests
Reduced need for large acreage footprint, rather, small footprint in core areas can turn large capex investment into best in class returns
Derisked Upside
Avalon
1st Bone Spring
2nd Bone Spring
3rd Bone Spring
Wolfcamp A
Upper Wolfcamp B
Lower Wolfcamp B
Delaware / Brushy Canyon
Upper Lower
(Upside)
39
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