1 M i c h i g a n A s s o c i a t i o n o f P r o f e s s i o n a l L a n d m e n Confidential

2 M i c h i g a n A s s o c i a t i o n o f P r o f e s s i o n a l L a n d m e n Confidential

September, 2016

MICHIGAN ASSOCIATION OF PROFESSIONAL LANDMEN INSURANCE – EXHIBIT D

3 M i c h i g a n A s s o c i a t i o n o f P r o f e s s i o n a l L a n d m e n Confidential

CONFIDENTIALITY STATEMENT

The information in this transmittal is confidential and intended solely for the intended recipient(s). The materials may not be

reproduced (in whole or in part) or distributed to any other person without our prior written consent from Charter Insurance &

Consulting. Such materials are not intended for use where such would be contrary to local law or regulation. This transmittal is

also delivered in accordance with the protocols of any non-disclosure or confidentiality agreement in place; in fact, if we are

passing on confidential information of our clients, we do so on the basis that you will use (and restrict distribution) of such

information only for the purposes intended in this transmittal.

4 M i c h i g a n A s s o c i a t i o n o f P r o f e s s i o n a l L a n d m e n Confidential

TOPICS - CHARTERenergy

Oil & Gas Risk Culture – Overview – Enterprise Risk Management (ERM) Questions & Observations – Real Time Oil & Gas Risk Strategy/Profile – JDA, Mineral Lease, JOA and MSA

Oil & Gas Insurance – JOA Insurance - Exhibit D

Next Steps to a win-win – Risk Insulation / Risk Based Decisions

5 M i c h i g a n A s s o c i a t i o n o f P r o f e s s i o n a l L a n d m e n Confidential

WHAT IS THE OIL & GAS RISK CULTURE?

On Your Way

Ostrich Ticking the Box

Actively

Transparent

Open

Ongoing Annual

Closed

“Risk comes from not knowing what you’re doing” – Warren Buffett

6 M i c h i g a n A s s o c i a t i o n o f P r o f e s s i o n a l L a n d m e n Confidential

HOW DOES A RISK STRATEGY DEVELOP?

OPERATOR STEPS TO RISK STRATEGY

Operator risk assessments by type of geologic play to manage risks. Best Practices for Operators and Co-Owners to mitigate risk.

ERM

• Set Risk Philosophy - People, Property & Negligence

Plans

• Operator joint & several framework - Insulate & De-risk

Implement

• Informed Risk based decision making – Set clear goals

Contractual

Risks

• Operator directed responsibility – Contract Compliance

Best

Practices

• Set ERM Platform to insulate JOA risks - Best Practices

7 M i c h i g a n A s s o c i a t i o n o f P r o f e s s i o n a l L a n d m e n Confidential

WHAT SETS A RISK PROFILE?

OIL & GAS RISK – CONTRACTS OVERVIEW

Operators set a risk strategy to best manage risk based decisions. Contracts enable Operators to mitigate risks.

Land Play

• Geologic play selected by stakeholders - Assessments

Development

Strategy

• Joint Development Agreement terms - AMI Strategy

Implement

• Mineral Lease Risk Requirements - Operator in place

JOA & MSA

Process

• Joint Operating Agreement - Contractual Risks - MSA

JOA

Exhibit D

• Assess risks and establish JOA Exhibit D – Consent

8 M i c h i g a n A s s o c i a t i o n o f P r o f e s s i o n a l L a n d m e n Confidential

HOW CAN A RISK ASSESSMENT MANAGE RISK?

TYPICAL RISK ASSESSMENT

Joint

Development

Agreement

‒ Delineate various Risk Philosophies and Risk Appetites

‒ Confirm leases & wells in AMI (Area of Mutual Interest) risk profiles

‒ Provide copies of final AFE, Well Schematics, Environmental Reports and jurisdictions to quantify and assess risks

‒ Set appropriate structure and risk transfer options

‒ Assess and review material contracts - MSAs, Drilling and O&M/Production Agreements

‒ Evaluate risk insulation tools vs. retaining risks from Reps, Warranties and Indemnification provisions

‒ Understand the Operator’s Enterprise Risk Platform

‒ Clarify risks for the JDA vs. risks that remain with the owners/stakeholders

‒ Apply ERM Best Practices

Joint Operating

Agreement

‒ Define JOA (Joint Operating Agreement) Exhibit D

‒ Many Operators do not offer a broad Exhibit D beyond primary limits and coverage

‒ Scope of coverage and limits based risk assessments for people, property, negligence and related risks

‒ Confirm Working Interest to be insured

‒ No insurance available in JOA Exhibit D

a

Mineral Lease /

MSA / Drilling

Contract etc.

‒ HSE protocols and controls - mitigation

‒ Contractual Risk Compliance – clear and consistent indemnity and insurance provisions with Certificate of Insurance compliance

‒ Mineral Lease – Scope of indemnity and insurance limits required

‒ Master Service Agreement – Scope of indemnity and insurance limits for risk insulation

Scope of work being provided

Enterprise Risk Considerations

‒ Drilling - Provide Well schematic

AFE Range ~ ??

Confirm hazardous conditions provisions

Provide a safe work place

9 M i c h i g a n A s s o c i a t i o n o f P r o f e s s i o n a l L a n d m e n Confidential

HOW IS EXHIBIT D SET – SCOPE VS. LIMITS?

GEOPHYSICAL & ASSET/OPERATIONAL RISKS

MI Well Geophysical Risks

AFE: $Confirm

Operator: ABC

Drilling/

Completion

Contractor:

Confirm contract terms

WI%: ~ ??%

TVD: Confirm

TMD: Confirm

State (s): Michigan

Counties: Confirm

Commodity: Oil or Gas

Well Class: Exploration or Developmental

Geology: Conventional vs. Non-Conventional

Mud Weight: Xx-xx ppg

Pressure: Balanced / Normal

Casing: Cased vertical section / Lined HZ section

Completion: Conventional / xx stage fracs

JOA Exhibit D – Typical Scope for MI

Operators

Extra Expense

Coverage: Well control, redrill, pollution, and care

custody & control

Limit: $(2.0x-4.5x + AFE) / Frac Risks

Deductible: Various – Risk Appetite

Property

Coverage: All Risk property, breakdown

Limit: Review total insurable values

Deductible: Various - Risk Appetite

General

Liability

Coverage: BI/PD arising from Oil and Gas

Operations including Pollution

Limits: $Pending

Deductible: Various

Pollution Liability

Terms

Coverage: Sudden & Accidental vs. Sudden &

Gradual

Limit: $Pending

Deductible: $Pending

Automobile Liability Limit: $Pending

Workers

Compensation

Limit: $1mm

Deductible: Various – typically none

Umbrella Liability

Coverage: Excess GL, Pollution, Auto, WC

Limit: $Pending

Deductible: Various

10 M i c h i g a n A s s o c i a t i o n o f P r o f e s s i o n a l L a n d m e n Confidential

WHAT DOES A TYPICAL EXHIBIT D PROVIDE?

MAJORS VS. MI INDEPENDENTS-RISK SHARING JOA Exhibit D – Typical Scope for MI - Not Always Provided

Operators

Extra Expense

Maybe

Coverage: Well control, redrill, pollution, and care custody & control

Limit: $1mm to $5mm

Deductible: Various – Risk Appetite

XOM - none

Property

Not Likely

Coverage: All Risk property, breakdown

Limit: Review total insurable values

Deductible: Various - Risk Appetite

XOM - none

General Liability

Likely

Coverage: BI/PD arising from Oil and Gas Operations including

Pollution considerable variability

Limits: $1mm

Deductible: Various

XOM - none

Pollution Liability

Likely

Coverage: Sudden & Accidental vs. Sudden Gradual

Limit: $Pending

Deductible: $Pending

XOM - none

Automobile Liability

Likely

Limit: $1mm

XOM - none

Workers Compensation

Always

Limit: $1mm

Deductible: Various – typically none

XOM - yes

Umbrella Liability

Maybe

Coverage: Excess GL, Pollution, Auto, WC

Limit: $3mm to $5mm or less

XOM - none

11 M i c h i g a n A s s o c i a t i o n o f P r o f e s s i o n a l L a n d m e n Confidential

WHAT ARE SOME EXHIBIT D SHORTFALLS?

There are the risks beyond Exhibit D leaving Co-Owners with risks.

JOA Risk Shortfalls: Risk Mitigation - Insulation

Contractor / Subcontractor Risks

Asset Risks

Executive Risks

Liability Risks

Risks to Assess

Master Service Agreements utilized by Operator

Stakeholder and Lender Agreements

Consistent indemnity & insurance provisions - compliance

Scope / availability of Property Insurance

Scope / availability of OEE-Well Control Insurance

Asset Integrity, maintenance and control

Employment Practices Liability & Fiduciary Liability (implied duties)

Crime & Directors & Officers Liability

Liability – Operations, Pollution, Auto and Umbrella

JOA – Operator Risks insured or not insured may have Worker’s Comp only

Co-Owner risks and adequacy of limits based on risk appetite

Downhole tools and equipment – fishing costs & sidetrack costs

Property in CCC – Fracing Risks – equipment & pumper trucks

Scope of pollution insurance provided may present a shortfall

Any Drones in the air

Adequate and shared liability limits-aggregates

Operator size

Age / Vintage of JOA Exhibit D insurance available

JOA risks assessed by both Operator and Co-Owners for risk insulation. Wealth Accumulation vs. Wealth Preservation Risk Strategy

12 M i c h i g a n A s s o c i a t i o n o f P r o f e s s i o n a l L a n d m e n Confidential

NEXT STEPS

Management Team to evaluate strategic risk alternatives for a win-win:

‒ Set an overall risk strategy by considering risks related to current and targeted assets

‒ Assess Contractual Risks: JDA, JOA, MSA, Mineral Leases and Drilling-Completion

‒ Manage and control risks to insulate the balance sheet by setting a strong risk culture

Review operational risks and services:

‒ Review and assess geophysical risks

‒ Review scope of operations and services being offered by contractors to size risk

MAPL member “Golden Ticket” - define a risk based test project for Charter to deliver.

Peter J. Lunati – CPCU

Tel: (404) 256-7900

Mobile: (404) 513-9700

PJL@charterenergy.com

Our Clients can leverage Charter’s Energy Risk Management Platform to lower cost of risk leading to a direct increase in corporate valuation.

13 M i c h i g a n A s s o c i a t i o n o f P r o f e s s i o n a l L a n d m e n Confidential

CHARTERenergy STORY

Charter is a energy enterprise risk management firm providing consulting and brokerage services since 1986. We support

energy firms that value face to face – high touch enhanced risk support services. The Charter Platform enables clients to

make better risk based decisions that protects and insulates the enterprise which increases enterprise value.

Our clients are located throughout the major energy basins in the US and internationally (Canada, UK, Europe & Africa).

Charter pioneered a geosciences approach to Enterprise Risk Management (ERM) by serving energy clients.

Energy ERM is our corporate focus with over 125 years of experience. We serve:

• Public, Private, Family-Owned, and Private Equity Portfolio companies

• Upstream and Midstream clients along with respective contractors, suppliers, and manufacturers

• Power, Mining-Processing, and Heavy Industry

Charter’s absence of service limitations and bureaucratic time drag enables us to serve clients consistently and efficiently at a

pace defined by each client. Charter partners with management teams for the long term allowing access to our most

experienced team members.

Charter’s geosciences approach and client defined services facilitates a reduction in the total cost of risk, maximizing investment performance for clients.

14 M i c h i g a n A s s o c i a t i o n o f P r o f e s s i o n a l L a n d m e n Confidential

CHARTERenergy RECENT EXPERIENCE

Charter has over 125 years of energy risk management experience inclusive of these recent projects:

Companies Served: Services Provided (not exhaustive)

Domestic E&P Operators

International Energy Companies

Midstream G&P Companies

Oilfield Services Contractors

Power/Utility Energy Contractors

Heavy Industry

Full Corporate Enterprise Risk Management Consulting Services

Scalable Energy Insurance Programs - Creation to Evolution

MSA program implementation and support services

Premium Allocations

Contractual Risk Control & Compliance - PSA, JDA, JOA and MSA

Field/Operational Risk Analysis Reports performed with operational teams

Risk Matrix Implementation

Benchmarking and Risk Analytics

Builders Risk for midstream onshore and E&P offshore

‒ $2 billion in past 24 months

Operational Placements for Upstream & Midstream companies

Construction Property & Liability

‒ Small gathering line installations to large processing facility construction

‒ Heavy Industry projects of $3.3B

Environmental liability considerations

‒ Greenfield to EPA superfund sites

M&A due diligence and support services (PSA review, Enviro Liability, etc.)

‒ $55 billion in transactions

‒ $7 billion in past 18 months

Relationships and experience with operators and contractors enables CHARTERenergy to provide our clients a unique perspective and approach to Enterprise Risk Management.