Energy & Industrial Sector Observations

KPMG: More Than Half of Oil & Gas Executives to Initiate Transaction in 2014. Oil and gas executives expect a steady stream of merger and acquisition (M&A) activity in 2014 as their companies consolidate core businesses and eye access to new technology and geographic growth, according to the 2014 M&A Outlook Survey issued by KPMG LLP. Of the 100 oil and gas executives surveyed, 56% expect their company to initiate an acquisition in 2014, and 39% expect to initiate a divestiture. The desire to consolidate core businesses will be the primary driver of oil and gas M&A activity in 2014, according to 56% of respondents, followed by access to new technologies (52%), geographic growth (35%), product and service growth (18%), and customer growth (13%). (KPMG Press Release March 31, 2014) U.S. Produced 10% of Global Oil Total. Driven by production of crude oil in the Eagle Ford Shale and other tight formations, the United States produced a more than 1/10 of the worlds oil in 2013, the U.S. Energy Information Administration estimates. Total U.S. oil production averaged 7.84 million barrels a day in the fourth quarter according to new data from the federal agency. Thats up from 9 percent at the end of 2012. (San Antonio Business Journal March 27, 2014) Eagle Ford Led U.S. Shale Plays in Productivity Boosts. Five of the six U.S. shale formations tracked by the Department of Energys information arm had per-rig upswings in oil-and-gas production in recent years. And, in March, South Texas Eagle Ford led the pack in increased oil production per rig. The EIAs latest Annual Energy Outlook forecasts that U.S. oil production will reach 9.6 million barrels per day in 2019. Natural gas production is expected to rise by 56 percent through 2040. (San Antonio Business Journal March 13, 2014)

102 Decker Court Suite 204 Irving, Texas 75062 972.831.1300 WS-iBank.com

Broader Middle Market M&A Trends Historical M&A Volume

6,000 5,000 4,000 6.0x 3,000 2,000 1,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Transaction Valuations
10.0x (EBITDA Multiple; Completed Deals<$500 Million) 9.4x 9.2x 8.5x 8.4x 8.4x 8.2x 7.9x 7.4x 7.4x 7.1x 7.0x

(Completed Deals < $500 Million) 10 Year Avg. = 3,763

8.0x

4.0x 2.0x 0.0x

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sector Update | April 2014 phone 972.831.1300 | web WS-iBank.com

Energy Stock Price Performance

2,250 2,000 1,750 1,500 1,250 1,000

U.S. Rig Count

90.0% 80.0% 70.0% 60.0% 50.0% 40.0%

750
500 250

30.0%
20.0% 10.0%

0 0.0% Jan-07Jul-07Jan-08Jul-08Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11Jan-12Jul-12Jan-13Jul-13Jan-14
Oil Gas % Oil

(As of March 28, 2014)

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

Basin Permian Eagle Ford Williston

Rig Count 518 223 185

YoY Rig Change 51 -3 -1

% Change 11% -1% -1%

Industrial Stock Price Performance

75.0 70.0 65.0 60.0 55.0

U.S. Industrial Manufacturing (ISM)

PMI

50.0 45.0 40.0 35.0

30.0
25.0 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

(As of April 1, 2014)

Red New York Stock Exchange Composite Blue Industrial and Infrastructure

Jan-14 Feb-14 Mar-14 PMI 51.3 53.2 53.7

Sector Update | April 2014 phone 972.831.1300 | web WS-iBank.com

Notable Energy & Industrial Transactions

Announcement Date
3/27/14 3/26/14

Acquiror

Target

Target/Transaction Description

Transaction Value ($M)

Energy & Industrial Manufacturing and Services

Clear Water Resources Calumet Specialty Products Partners Baker Hughes GreenHunter Water Anchor Drilling Fluids USA Weatherford Acquisition of saltwater disposal facility located in the Eagle Ford Provider of drilling fluid solutions, completion fluids and production chemicals with 400+ employees and facilities in 13 states Acquisition of Weatherfords pipeline and specialty services business which provides inspection, cleaning, testing, integrity and other services Acquisition of saltwater disposal facility located in the Powder River Basin Acquisition of Newpark Resources Environmental Services business segment which provides non-hazardous waste disposal services Provider of land advisory services, such as E&P services, asset management, due diligence, document management and surface acquisition services Texas-based provider of specialty chemicals and related technical & lab services Oklahoma-based provider of production chemicals, capillary services and completion chemical solutions Acquisition of Nuverras Thermo Fluids which collects and purchases used motor oil and provides waste collection and recycling services Louisiana-based manufacturer, renter and refurbisher of downhole drilling tools, such as stabilizers, drill collers and reamers Acquisition of National Pump & Compressor, which manufactures and distributes pumps, compressors and dryers, and of Gulfco Industrial, which distributes compressors and pumps Acquisition of Morrison Well Services, which provides plug and abandonment services through its 15 rigless well abandonment units, from Morrison Energy Group Provider of open hole and cased hole wireline services to the Marcellus/Utica and Eagle Ford/Woodbine areas Provider of portable liquid storage tank container rental, with 1200+ units in inventory, and fluid management services $3.4

$235.0

3/24/14

$250.0

3/19/14 3/17/14

Black Bison Water Services Ecoserv

Undisclosed seller Newpark Resources/ Lariat Partners AED Group

--

$100.0

3/11/14

Holland Services/ HIG Capital Arsenal Capital Partners Arsenal Capital Partners VeroLube

--

3/10/14 3/10/14

Kel-Tech Danlin Industries/Hastings Equity Partners Thermo Fluids/Nuverra Environmental Reamco

--

--

3/10/14

$165.0

3/10/14

Directional Rentals/Hicks Equity Partners United Rentals

--

3/9/14

National Pump & Compressor/ Gulfco Industrial Morrison Well Services/Morrison Energy Group Horizontal Wireline Services Lone Star Tank Rental/KHM Rentals

$780.0

3/7/14

Rooster Energy

$95.0

3/5/14

Allied Wireline Services/Turnbridge Capital General Finance Corp.

--

3/3/14

$95.0

Sector Update | April 2014 phone 972.831.1300 | web WS-iBank.com

Notable Exploration & Production and Midstream/Downstream Transactions

Announcement Date
3/27/14

Acquiror

Target

Target/Transaction Description

Transaction Value ($M)

Exploration & Production and Midstream/Downstream

American Eagle Corp. Undisclosed seller Acquisition of assets located in North Dakota that includes 8,244 net acres with production of 450 Boe/d and 2,300 MMBOE proved reserves Acquisition of assets located in Montana and New Mexico that produces 890 Boe/d, 95% of which is oil, and 9,000 MMBoe proved reserves Acquisition of assets located in the Eagle Ford that consist of 15,200 gross acres and interest in 117 producing wells generating 1,650 Boe/d Acquisition of assets located in the Tuscaloosa Marina Shale that consist of 235,000 net acres Acquisition of assets located in the Eagle Ford that consist of nine wells located within Halcons 100,000 acre core operating area Acquisition of a 50% interest in Twin Resource Management, LLC, which is engaged in the logistics and wholesale marketing of energy-related commodities, from Chesapeake Energy Corp. with an additional $200 million capital commitment to Twin Resource to fund the next growth phase $45.6

3/26/14

Legacy Reserves

Undisclosed seller

$112.0

3/26/14

Memorial Production Partners Halcon Resources Halcon Resources

Alta Mesa Holdings

$173.0

3/24/14 3/20/14

Encana Corp. Aresco, LP

--

--

3/19/14

Five Point Capital Partners/GSO Capital Partners, LP

Twin Eagle Resource Management/ Chesapeake Energy Corp.

--

Sector Update | April 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.

Sector Update | April 2014 phone 972.831.1300 | web WS-iBank.com