Sector Update | September 2014

phone 972.831.1300 | web WS-iBank.com

-

1,000

2,000

3,000

4,000

5,000

6,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM

Historical M&A Volume (Completed Deals < $500 Million)

10 Year Avg. = 3,703 7.9x

9.4x

8.4x 9.2x

8.4x

7.1x 7.4x

8.5x

7.4x 8.2x 8.0x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM

Transaction Valuations (EBITDA Multiple; Completed Deals<$500 Million)

Energy & Industrial Sector Observations

Deloitte Mid-Year Oil and Gas M&A Report. The oilfield services sector continues to attract the interest of private equity investors, especially among funds looking for ways to diversify their industry base and invest in energy. The oilfield services sector has many fragmented players that are in need of capital to grow, which is ideal for private equity investment. (‘Deloitte Oil & Gas Mergers and Acquisitions Report – Midyear 2014’ – August 2014)

Oilfield Equipment Rental Market to Double by 2019. The oilfield equipment rental market will grow from an estimated $26.8 billion in 2014 to $53.7 billion by 2019. The oilfield equipment rental industry is fragmented and offers several opportunities for consolidation and growth in efficiency through an increase in economies of scale. Renting equipment is much more viable for new-comers than buying costly equipment. As a result, the perception of buyers has shifted from buying towards renting equipment. (Oil and Gas Financial Journal – September 2, 2014)

Oilfield Water Management: Opportunities Abound in North American Shales. Halliburton indicated that on average there will be ~100,000 barrels of water required for a typical frac job. Water involved in oil and gas production (produced water) involves hundreds of thousands of wells, some operating for 20 to 35 years. This newly-evolving business could produce a market spend of about $10 billion this year just within major US shale areas. That figure expands if we include all oilfield water management across all conventional land operations. Where is the money being spent for oilfield water volumes involved in drilling/fracturing/completion? The Permian (including the Spraberry and Delaware basin) leads the list. The Eagle Ford is right behind. (Oil and Gas Financial Journal – August 11, 2014)

102 Decker Court Suite 204

Irving, Texas 75062

972.831.1300 WS-iBank.com

Broader Middle Market M&A Trends

2

Sector Update | September 2014

phone 972.831.1300 | web WS-iBank.com

Energy Stock Price Performance

Red – New York Stock Exchange Composite Blue – Oilfield Services Index Green – Exploration & Production

U.S. Rig Count

(As of August 29, 2014)

Industrial Stock Price Performance

Red – New York Stock Exchange Composite Blue – Industrial and Infrastructure

U.S. Industrial Manufacturing (ISM)

(As of September 1, 2014)

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

Jul-07Jan-08Jul-08Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11Jan-12Jul-12Jan-13Jul-13Jan-14Jul-14

Oil Gas % Oil

Basin

Rig

Count

YoY Rig

Change

%

Change

Permian 557 107 24%

Eagle Ford 203 -29 -13%

Williston 192 10 5%

25.0

30.0

35.0

40.0

45.0

50.0

55.0

60.0

65.0

70.0

75.0

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10Jan-11 Jul-11Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14

PM

I

Jun-14 Jul-14 Aug-14

PMI 55.3 57.1 59.0

3

Sector Update | September 2014

phone 972.831.1300 | web WS-iBank.com

Notable Energy & Industrial Transactions

Announce-ment Date

Acquiror Target Target/Transaction Description Transaction Value ($M)

Energy & Industrial Manufacturing and Services

8/28/14 MISTRAS Group The NACHER Corp. Louisiana-based provider of turnkey maintenance and inspection services to the offshore industry --

8/22/14 Matrix Service Company

HBD California-based provider of construction, fabrication and turnaround services to the upstream and midstream industries

--

8/20/14 Intervale Capital Recapture Solutions/Triten Corp.

Texas-based provider of flare reduction and natural gas power solutions through its fleet of gas capture processing units and natural gas powered generators

--

8/20/14 TUV SUD RCI Consultants Texas-based provider of project management, support and inspection services for the development, construction and installation of production facilities and pipelines

--

8/19/14 Natural Resource Partners

VantaCore Partners/Trilantic Capital

Pennsylvania-based operator of 3 hard rock quarries, 6 sand & gravel plants, 2 asphalt plants and a marine terminal (located throughout PA, WV, TN, KY & LA)

$205.0

8/18/14 Ingersoll-Rand Cameron Acquisition of Cameron’s Centrifugal Compression business, which provides centrifugal compression equipment and aftermarket parts & services

$850.0

8/18/14 Mexichem Dura-Line Corp./CHS Capital

Tennessee-based manufacturer (with facilities in North America, India, Oman, Europe & South Africa) of high-density polyethylene conduit, duct and pressure pipe

$630.0

8/14/14 Aqua Terra Water Management/Bregal Partners

Undisclosed seller Acquisition of two salt water disposal facilities located in the Bakken (McKenzie & Dunn counties) --

8/13/14 HII Technologies Hamilton Investment Group

Oklahoma-based provider of fracwater transfer rental services through its 50 miles of aluminum pipe & lay flat hose, pumps and related equipment

$11.3

8/12/14 Maxim Partners/ Falcon Investment Advisors

Laney Directional Drilling/Chart Capital Partners

Texas-based provider of horizontal directional drilling services through its 12 hydraulic powered drilling rigs --

8/7/14 Worthington Industries

James Russell Engineering Works

Manufacturer of aluminum and stainless-steel cryogenic transport trailers used for hauling liquid oxygen, nitrogen, argon, hydrogen and liquefied natural gas

--

8/6/14 TNT Crane & Rigging, Inc.

Stampede/Eagle West

Full service provider of crane and rigging services with nine branches and 78 cranes located across the Canadian Bakken

--

8/5/14 Hastings Equity Partners

Southern Petroleum Laboratories, Inc.

Texas-based provider of an array of services for the measurement and composition of hydrocarbon products --

8/4/14 TexCom, Inc. Undisclosed seller Acquisition of two salt water disposal facilities located in Arkansas --

4

Sector Update | September 2014

phone 972.831.1300 | web WS-iBank.com

Notable Exploration & Production and Midstream/Downstream Transactions

Announce-ment Date

Acquiror Target Target/Transaction Description Transaction Value ($M)

Exploration & Production and Midstream/Downstream 8/27/14 Chestnut Exploration

& Production, Inc. Undisclosed seller Acquisition of assets located in Texas that consist of 1,720

acres that produced 34 MBoe and 45 MMcf last year $13.1

8/26/14 Parsley Energy, Inc. Multiple sellers Acquisition of assets located in the Permian Basin consisting of 5,472 acres and 157 horizontal drilling locations, with the ability to convert 30 existing short lateral drilling locations to long lateral locations

$252.0

8/26/14 Undisclosed buyer Cimarex Energy, Co. Sale of assets located in the Permian Basin, Mid-Continent and Gulf Coast regions consisting of 47 Bcf proved reserves and production of 11Mcfe/d

$326.0

8/18/14 Vine Oil & Gas, LP/Blackstone

Royal Dutch Shell Acquisition of assets located in the North Louisiana that consist of 107,000 acres $1,200.0

8/6/14 American Energy Partners, LP

East Resources, Inc. Two acquisitions of 1) 27,000 acres, production of 56 MMcf/d, 14 miles of pipeline and tap on an existing line all located in Ohio and 2) 48,000 acres, production of 107 MMcfe/d from 24 producing wells, 10 miles of pipeline and two pipeline taps all located in West Virginia

$1,750.0

8/5/14 Emerald Oil, Inc. Liberty Resources, LLC

Liberty Resources divests 31,500 acres in North Dakota producing 400 Boe/d to Emerald Oil in exchange for $78.4 million in cash and 4,175 acres located in North Dakota adding 30 operated drilling locations to Liberty’s portfolio

$78.4

8/5/14 LINN Energy, LLC Pioneer Natural Resources, Co.

Acquisition of assets in the Hugoton field currently producing 40 MMcfe/d and proved reserves of 340 bcfe on 235,000 acres

$340.0

8/5/14 Undisclosed buyer Pioneer Natural Resources, Co.

Acquisition of assets located in the Barnett Shale producing 10,300 boe/d $155.0

8/4/14 Vanguard Natural Resources, LLC

Hunt Oil Co. Acquisition of assets located in North Louisiana and East Texas that produce 17.5 MMcfe/d on 23,000 acres $278.0

8/4/14 American Energy Partners

Enduring Resources, LLC

Acquisition of assets located in the Permian Basin that consist of 63,000 acres located in the Texas counties of Reagan, Irion and Crockett

$2,500.0

5

Sector Update | September 2014

phone 972.831.1300 | web WS-iBank.com

Wilcox | Swartzwelder & Co.

Wilcox Swartzwelder & Co. is a boutique investment bank, specialized in delivering high quality financial advice exclusively to owners of middle market companies and oil and gas properties in the energy and industrial sector.

Advisory services include company sales, mergers and acquisitions, private placements of debt and equity, oil and gas property acquisitions and divestitures, institutional capital raises, and general corporate finance matters. Through its merchant funding activities, the Firm acts as direct investor providing flexible capital to support small, entrepreneurial companies.

Principals have more than 40 years of combined investment banking experience, closing over 100 transactions with an aggregate value in excess of $3.9 billion. They have also acted as investors with capital at risk, operators and board members in multiple companies, having navigated through various business cycles and completed transactions in both up and down markets.

The Firm is fully licensed and registered. Securities are offered through PetroGrowth Energy Advisors, LLC, a registered broker-dealer and member of FINRA/SIPC.

Notes:

The information and views contained in this report were prepared by Wilcox Swartzwelder & Co. LLC and should not be construed as an offer to buy or sell or a solicitation to buy or sell any financial instruments or to participate in any trading strategy. The information contained herein is believed to be reliable, but Wilcox Swartzwelder & Co. LLC makes no representation as to its accuracy or completeness.

Indices: Dow Jones U.S. Select Oil Equipment and Services Index (DJSOES), Dow Jones U.S. Select Oil Exploration and Production (DJSOEP), Industrial Select Sector SPDR (XLI), NYSE Composite Index (NYA)

Data Sources: Dealogic, Capital IQ, Stockcharts.com, Baker Hughes, RigData, Rig Zone, Energy Information Agency (EIA), Association of Energy Service Companies (AESC), Institute of Supply Management (ISM), Wilcox Swartzwelder Proprietary Energy and Industrial M&A Database

Copyright © 2014 Wilcox Swartzwelder & Co. LLC, all rights reserved.