Wells Fargo Energy Capital

Wells Fargo Energy Capital

Mark M. Green

Table of Contents

I

Overview of the Wells Fargo Energy Group

II

Wells Fargo Energy Capital

III

Market Activity

4

Who We Are

Company data as of June 30, 2013

1_{1H 2013 Thomson Reuters, LPC,} 2 _{1H 2013 Bloomberg,} 3_{1H 2013 Deal Logic,} 4_{FY 2012 Thomson Reuters, LPC,}

A diversified financial services company providing banking, insurance, investments, mortgage and consumer finance through more than 9,000 Wells Fargo stores, 12,000 Wells Fargo ATMs, the internet and other distribution channels across North America and

internationally.

One in three households in America does

business with Wells Fargo. Wells Fargo has $1.5 trillion in assets and more than 270,000 team members across 80+ business lines.

Company data as of September 30, 2013

We want to satisfy all our customers’ financial needs, help them succeed financially, be the premier provider of financial services in every one of our

markets, and be known as one of America’s great companies.

Our vision

Assets¹ $1.5 trillion

Rank by assets 4th

Among U.S. Peers

Rank by value of stock 1st

Among U.S. Peers

Rank by value of stock 1st

Among financial institutions in U.S.

Rank by value of stock 3rd

Among financial institutions in the world

Market value of stock $219 billion

Team members 270,000

Customers 70 million

Fortune 500 rank 25th

Among all companies, by revenue

Total stores More than 9,000

North America

ATMs More than 12,000

Wells Fargo Strength

We are one of only a handful of strong, stable and well-capitalized banks in the world today

Lending to the Energy industry for 30+ years

200+ team members and 19 in-house engineering professionals Total Commitments to the Energy Sector: $40B

Offices in Houston, Denver, Dallas, Charlotte, Minneapolis, Portland, Calgary (Canada), Aberdeen (UK)

Complementary Strengths:

• Interest and Commodity Derivatives • Debt and Equity Capital Markets • Mezzanine

• Private Equity • M&A

The Wells Fargo Energy Group

Energy Group Commitments by Industry Sector

41%

21% 12%

3% 23%

Exploration & Production Midstream/Pipeline Oil

Other & Refining Power and Utilities

Exploration & Production

Midstream/Pipeline

Oilfield Services

Other & Refining

Power and Utilities

Powerful Combined Platform

#1 Arranger in Non-Investment Grade Energy Loan Syndications1

#1 Oil & Gas Investment Grade Loan Syndications1

#1 High Yield Book-runner for Energy1

#2 Book-runner of Utility equity deals1

#3 Investment Grade Utility Syndication1

#3 Book-runner of all Energy equity deals1

Wells Fargo ranks at the very top in energy banking

Wells Fargo Energy Capital Overview

Wells Fargo Energy Capital is an industry leading

investment group with unique capabilities

$2.1B+ Portfolio

 Second lien commitments: $785MM

 Development drilling capital: $232MM

 Direct equity investments: $765MM

 Equity fund commitments: $315MM

 Lead arranger of second lien transactions by dollar and volume

 Largest provider of second lien loans in the middle market space

Source: Wells Fargo

 Mezzanine and equity products provided by Wells Fargo Energy Capital

 Fourteen total staff, headquartered in Houston, with offices in Denver, Dallas, and Pittsburgh

 Designed to provide capital beyond traditional senior bank loans

 Strong technical expertise

 Relationship-driven lender/arranger with the ability to structure and negotiate per client needs

 Strong balance sheet

Structured Finance Model

 Second Lien/Subordinated Debt

• Represents a “stretch” of conventional Borrowing Base - remains PDP focused

• Maturity 6 – 12 months outside bank facility

• Current all-in pricing for a fully conforming deal is in the 6.5% - 10% range

• Significant hedging typically required

• WFEC was a top arranger / lender of non-institutional 2nd Lien Term Loans over the last five years by dollar and by volume.

 Traditional Mezzanine Structure

• Senior Secured Loan

• Development Focus – fund specific projects

• Control via cash sweep and loan covenants

• Coupon - Prime + (3% to 6%)

• Equity Kicker – ORRI and/or NPI after payout

• Target return of 15 – 25%  Underwriting Criteria

• Know the People

• Familiarity with Assets / Basins / Production profiles (Mezz Loans in particular are highly engineered)

Direct Equity Portfolio

 Deal Selection Philosophy

• Direct company investments or asset specific development deals

• Co-investment with private equity funds and/or club deals with strong management teams

 Size and structure appropriate for portfolio

• Target investments from $5MM – $50MM

• $765MM in total commitments

• Target 25%+ IRR, 1.5x - 2.5x ROI with 3 to 5 year investment horizon

 32 Investments in current portfolio

Broad MA&D Trends in 2013

Oil- and liquids-weighted assets in reservoir rich plays dominate the market

PDP-weighted “MLP-qualified” assets see favorable market reception

Ample debt and equity capital available to the E&P industry; upstream IPO market is wide open

Increasing knowledge of resource plays shapes demand

Operator focus shifting from land grab to development, from HBP drilling to well-manufacturing

Public markets favor focused growth stories and attractive play economics

For internal use only

2013 Product Mix - TTV

Underwhelming MA&D Activity

Quarterly TTV ($MM) vs. Deal Count – 2011 through 2013

14

Key Takeaways

Although overall deal count is on trend with 2011 and 2012, overall MA&D transaction value is

markedly down relative to 2011 and 2012 totals

• 2013 TTV of $47Bn compared to $72Bn in 2011 and $80Bn in 2012

• Average deal size in 2013 ($~390MM) down by ~40% when compared to 2012 (~$657MM) $13 $12 $26 $21 $18 $9 $18 $35 $13 $8 $11 $15 10 20 30 40 50 60 $0 $10 $20 $30 $40 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 D e a l C ou n t T T V ($ Bn )

Asset - TTV Corporate - TTV Deal Count TTV ($Bn)

5% 17% 15% 23% 18% 14% 8% Appalachia Permian MidCon South Texas Rockies GOM Other 9% 10% 41% 13% 13% 13% Unc. Gas Conv. Gas Unc. Oil Conv. Oil Offshore Other

Data source: IHS Herolds. Only includes transactions with disclosed transaction value >$25MM.

$52 _$49 $47 $54 $50 $50 $68 $72 $71 $54 $60 $80 $52 $41 $42 $47 $10 $20 $30 $40 $50 $60 $70 $80 $90

Q1 '10 Q2 '10 Q3 '10 2010A Q1 '11 Q2 '11 Q3 '11 2011A Q1 '12 Q2 '12 Q3 '12 2012A Q1 '13 Q2 '13 Q3 '13 2013A

T T V ($ Bn )

MA&D Market Dynamics – Supply / Demand Imbalance Resulting in Market Malaise

….Manifesting in Deal Activity

Annualized Actual

Asset Supply Drivers

• Non-core asset sales

• Raise capital via asset sale to delever and/or

fund development

• Supply – Demand imbalance contributing to

buyer’s market

• Supply Drivers

• Companies selling non-core assets to de-lever and/or fund development

• Sponsor-backed companies seeking monetization • Inventory-rich companies seeking development partners • Demand Drivers

• Opportunity vs. Scarcity – A&D market opportunity-rich • Inventory problem – growth capital going into the ground.

Need to access A&D market to grow inventory muted. • Availability of inexpensive capital

• Public markets • Commodity Pricing D1 S1 Pr ice / Va lue Quantity S₂

Bid / Ask spread

Data source: IHS Herolds. Only includes transactions with disclosed transaction value >$25MM.

Private Buyers and MLPs Were the Most Active in 2013

16

2013 MA&D Activity by Buyer Class

No. of

Deals Captured% ($MM)TTV Captured%

Year PE / Private 42 35% 65% $12,932 28% 72%

MicroCap 11 9% $1,337 3%

2013 TTV ($MM) SmallCap 15 12% 88% $3,691 8% 92%

MidCap 14 12% 88% $6,466 14% 86%

2013 Deal Count Large Cap / Majors 12 10% 90% $8,681 19% 81%

MLP 17 14% 86% $9,308 20% 80%

International 10 8% 92% $4,050 9% 91%

Total 121 100% $46,466 100%

Buyer Class

% of TTV

PE / Private Mid Cap Large Cap /

Majors MLP

Deal Count Total Trnxn. Value

Buyer Class International % of Deal Count $46,466 2013 121 2013 A&D Scorecard 35% 28% 10% 14% 14% 20% 8% 9% 12% 19%

MLP MA&D Market Update

MLP-able Asset Profile

% PDP Annual Decline Maintenance Capex Operatorship Commodity Greater than 50% 8-15% 30% of EBITDA Operated Assets Indifferent (NGLs less ideal) Upstream MLP Transactions

Data source: IHS Herolds. Only includes transactions with disclosed transaction value >$25MM.

Key Themes

 MLPs explore strategies to compete for undeveloped reserves

 “Side-car” vehicles to acquire and develop properties  Attracting private equity capital

 Partnerships with public c-corps

$8.1 $0.9 $2.4 $2.6 $3.5 $10.0 $9.3 0 5 10 15 20 25 30 35 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 2007 2008 2009 2010 2011 2012 2013 D e a l C ou n t T T V $ B

Market Themes in 2014

18

Portfolio realignments spur asset divestiture wave

Private equity portfolio company exits: “due course” and “delayed” monetizations Hunt for acquisitions sends MLPs to explore creative structures