Sector Update | May 2014

phone 972.831.1300 | web WS-iBank.com

-

1,000

2,000

3,000

4,000

5,000

6,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

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

10 Year Avg. = 3,7637.0x

7.9x

9.4x

8.4x 9.2x

8.4x

7.1x 7.4x

8.5x

7.4x 8.2x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

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

Energy & Industrial Sector Observations

PwC: U.S. M&A Activity Reaches Highest Activity in More Than a Decade. M&A in the oil and gas industry reached the highest 1st quarter level of deal volume in more than a decade due to increased activity in the upstream sector and interest in oil and gas assets by foreign players. Although deal activity was high, the total value of deals dipped compared to the 4th quarter of 2013 due to companies divesting smaller non-core assets, a trend that PwC expects to continue through 2014. For the three month period ending March 31, 2014, there were a total of 43 oil and gas deals with values greater than $50 million accounting for $19.8 billion, compared to 41 deals in the first quarter of 2013. "The first three months of 2014 represented a historic 1st quarter across the board led by deal activity in the upstream sector, including in the Gulf of Mexico and interest from foreign players," said Doug Meier, PwC's US energy sector deals leader. "Divestures continue to be a major source of deal activity, but we are seeing smaller deals taking place; larger portfolio adjustments have already been made. Smaller deals are also happening in the oilfield services sector as a result of companies selectively looking to fill in the white space by adding assets that can increase productivity and reduce costs.” (PwC Press Release – April 30, 2014)

Texas Oil Output Could Surpass All OPEC Nations Except Saudi Arabia By End of This Year. The state’s production, driven mainly by the Eagle Ford Shale and Permian Basin, will reach about 3.4 million barrels per day, propelling Texas past Iraq and Iran, said Greg Leveille, manager for technology program-unconventional reservoirs at ConocoPhillips. Among non-OPEC countries, only Russia, the United States as a whole, China and Canada would exceed Texas’ oil production, making the state the world’s sixth-largest producer. (Longview News Journal – April 23, 2014)

102 Decker Court Suite 204

Irving, Texas 75062

972.831.1300 WS-iBank.com

Broader Middle Market M&A Trends

2

Sector Update | May 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 April 25, 2014)

Industrial Stock Price Performance

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

U.S. Industrial Manufacturing (ISM)

(As of May 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

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

Oil Gas % Oil

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

PM

I

Basin

Rig

Count

YoY Rig

Change

%

Change

Permian 542 71 15%

Eagle Ford 219 -11 -5%

Williston 187 2 1%

Feb-14 Mar-14 Apr-14

PMI 53.2 53.7 54.9

3

Sector Update | May 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

4/22/14 Undisclosed buyer MB Environmental Services

Texas-based provider of waste disposal services, such as vacuum trucks, cutting boxes and drums to the upstream oil and gas segment

$16.0

4/16/14 Aly Energy Services United Centrifuge Provider of fluid management, solids control and surface rental equipment operations which includes 46 centrifuges as well as shakers and vehicles

$25.0

4/15/14 EnerMech/ Lime Rock Partners

Diversified Oil Field Services

Louisiana-based provider of crane inspection, repair and maintenance services including hydraulic repair, testing & design, equipment rental and crane sales

--

4/15/14 Wood Group Cape Software Texas-based provider simulation software and services for operator training as well as logic validation for SCADA and DCS industrial control systems

--

4/15/14 Flotek SiteLark Texas-based provider of reservoir engineering & modeling services including engineering services for EOR projects and modeling for FTK’s Eclipse IOR Services

--

4/11/14 Premier Oil Services Perfect Metals USA Missouri-based recycling facility that specializes in recovery and processing of ferrous & non-ferrous metals and electronic waste

--

4/10/14 SCF Partners Seanic Ocean Systems

Texas-based that designs, assembles, maintains and rents intervention tools used in the subsea oil and gas industry for ROV-based applications

--

4/9/14 Prospect Capital Ark-La-Tex Wireline Services

Recapitalization for a provider of cased hole wireline and related completion-stage services in connection with oil and gas production.

$53.0

4/8/14 Baker Hughes Performix Texas-based provider of software technology and advisory services pertaining to field device integration, real-time data management, visualization and analytic software

--

4/4/14 Yellow Point Equity Partners

Bravo Oilfield Safety Services

Provider of emergency-response services to any oilfield or industrial situation --

4/3/14 Undisclosed buyer McDermott Sale of the Harbor Island fabrication yard located in Corpus Christ, TX $25.0

4/2/14 Victory Park Capital Surefire Industries USA

Texas-based manufacturer of equipment for the hydraulic fracturing, coiled tubing, cementing, nitrogen and fluid pumping sectors

--

4

Sector Update | May 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 4/30/14 EQT Corp. Range Resources Asset exchange agreement where EQT will receive 73,000

acres located in the Permian Basin along with 900 producing wells and Range Resources will receive 138,000 acres and $145 million

$145.0

4/9/14 Athlon Energy Undisclosed seller Acquisition of assets located in the Permian Basin that produce 4,800 Boe/d (67% oil) with proved reserves of 31M Boe

$873.0

4/4/14 Sundance Energy Undisclosed seller Acquisition of assets located in the Eagle Ford that consist of 4,800 net acres and 50 drilling locations $34.4

4/3/14 Crude Energy Undisclosed seller Acquisition of assets located in the Permian Basin that consist of 3,680 acres --

4/1/14 Warwick Partners II Riverstone Holdings/ R/K Sugarkane

Acquisition of R/K Sugarcane which is a upstream company with 6,000 net acres located in the Eagle Ford that produce approximately 3,000 Boe/d

--

4/1/14 Surge Energy Longview Oil Acquisition of assets located in the Bakken with estimated combined company production of 21,000 Boe/d assuming full completion of transaction

$430.0

5

Sector Update | May 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.