TXOGA Ad Valorem Tax

Committee ConferenceM&A Activity in the Energy Industry

February 20, 2020

Energy M&A Market Themes

Public valuations now at near all-time lows

Have generalist investors left Energy “for good”?

Restructuring and bankruptcies on the horizon

Wildcards

Election

ESG

Capital discipline and free cash flow continue as primary focus

A&D market fragmented and running at historic lows

Who are the buyers?

“Lots of” (too much?) G&A in the space

Private equity with numerous “stranded” portfolio companies

Small pockets of investor interest (e.g. minerals and high yield)

Strategics still looking to acquire, but not at “MLP-craze” multiples

Upstream bankruptcy risks impacting valuations and asset marketability

What is the Catalyst?

Upstream

Midstream

1

Stock Price Performance

Energy Index Price Performance Since 2013

Energy Index vs. S&P 500 Since 2013

___________________________Note: Market data as of 2/13/2020. Midstream C-Corps represented by ALTM, AM, ENB, ENLC, ETRN, LNG, KMI, OKE, PAGP, RTLR, TRP, TRGP, and WMB.1. Midstream C-Corps excludes AM for periods prior to Antero’s simplification announcement on 10/9/18.

These graphs speak for themselves

20%

60%

100%

140%

180%

12/31/2013 3/23/2015 6/12/2016 9/2/2017 11/23/2018 2/13/2020

Midstream C-Corps S&P 500 Energy WTI AMZ Henry Hub XOP

20%

60%

100%

140%

180%

12/31/2013 3/23/2015 6/12/2016 9/2/2017 11/23/2018 2/13/2020

S&P Energy 500 S&P 500

(1)

S&P 500

Energy:(37%)

Midstream

C-Corps:(25%)

WTI: (48%)

S&P 500: 83%

XOP: (72%)

AMZ: (57%)

Henry Hub: (58%)

S&P 500

Energy:(37%)

2

Upstream Market Valuation (Then and Now)

14.0x

7.6x

6.6x6.2x

5.5x4.9x 4.8x

4.0x

NA NA

3.9x

4.7x

2.8x

3.5x

5.6x

4.7x

3.0x

4.3x

8.5x

2.8x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

Appalachia Permian DJ Basin Bakken Large-Cap

Diversif ied

Majors Eagle Ford US Offshore Minerals SCOOP /

STACK

Median Multiples of Enterprise Value to Forward Year EBITDA

___________________________

Source: Company filings and FactSet as of 2/13/2020.Note: Permian includes: CDEV, CPE, CXO, FANG, LLEX, MTDR, PE, PXD, WPX and XEC. Appalachia includes: AR, CNX, COG, EQT, GPOR, MR, RRC and SWN. Bakken includes: ERF, NOG, OAS and WLL. DJ

Basin includes: BCEI, HPR and XOG. SCOOP / STACK includes: CHAP. Large-Cap Diversified includes: APA, CHK, CLR, COP, DVN, ECA, EOG, HES, MRO, and OXY. Majors include: BP, CVX, FP-FR, RDS and XOM. Eagle Ford includes: LONE, MGY, PVAC, SBOW and SNDE. Minerals includes: BSM, FLMN, KRP, MNRL (MNRL not included in price performance), TPL and VNOM. Offshore includes: KOS, TALO and WTI.

Haynesville includes: CRK and GDP.Note: 2013 values exclude: CDEV, PE, XOG, CHAP, MGY, PVAC, SBOW, SNDE, BSM, VNOM, KRP, MNRL, FLMN, MR.

2013 2020

2013 versus 2020

3

$46

$43

$24

$20

$18 $18

$15

$11$11

$10 $9 $9 $9 $8 $8 $8$7

$5 $5 $5 $5

$51$50

$4 $4$3

$2 $2 $2 $2 $2 $2 $1 $1 $1 $1 $1 $1 $0 $0 $0 $0

$0

$20

$40

$60

EN

B

ET

TR

P

EP

D

KM

I

WM

B

LN

G

MP

LX

OK

E

PA

A

TR

GP

MM

P

PS

XP

WE

S

EQ

M

DC

P

TG

E

SH

LX

ETR

N

EN

BL

EN

LC

HE

SM

NS

GE

L

CE

QP

AM

TC

P

NG

L

NB

LX

HE

P

RT

LR

SM

LP

PB

FX

BP

MP

DK

L

CN

XM

GLP

AL

TM

OM

P

SR

LP

CC

LP

CC

LP

MM

LP

BK

EP

US

DP

GP

P

SN

MP

($ in billions)

Current Midstream Landscape

Enterprise Values and Median Multiples of Midstream Companies

Today’s investors value size in Midstream

$143 $93 $89 $88 $86

Mid-Cap Midstream

Midstream Majors

MLPs to be Rationalized

EV / 2020 EBITDA

11.4 x

9.1 x

7.6 x

___________________________Source: Factset, company fi l ings, and investor presentations. Note: Market data as of 2/13/2020.

4

$0

$90

5%

6%

7%

8%

9%

10%

11%

Feb-16 Oct-16 Jun-17 Feb-18 Oct-18 Jun-19 Feb-20

$ / bblYield

HY Index WTI

170

263

$245

$339

2218

25 27 25

10

31

19

30

20

39

12

$26 $27

$33 $34 $34

$40

$30

$42

$21

$52

$16

$0

$75

$0

$100

$200

$300

$400

$500

2018 2019 Mar Apr May June July Aug Sep Oct Nov Dec Jan Feb

(Monthly - $bn)(Annual - $bn)

___________________________Source: Barclays, S&P LCD, Lipper FMI (All Reporters).

High Yield Index Trading Performance

Non-USD

USD

High Yield – New Issue Volumes

High Yield Market

5.3%

$50.32

Q1

Av erage

$22bn

Q2

Av erage

$31bn

Q3

Av erage

$28bn

Q4

Av erage

$31bn

High Yield market for Energy names is one encouraging area

5

Upstream M&A Activity

Removing the Oxy / APC deal from 2019 shows how slow the Upstream M&A market has

been

___________________________Source: IHS Herold as of 2/13/20. Includes transactions >$50mm. Dates based on announcement. Excludes transactions that failed to close.1. Includes corporate and asset transactions, excludes Shell / BG and OXY / APC transactions.

$5$2 $0 $0

$5$3

$17$13

$5$3 $2 $0

$5$7

$10$12

$10

$4 $3

$10

$3

$13 $14

$0$3 $4 $3

$9

$8 $12$15

$10

$22

$11 $18

$3

$1 $5 $8

$6

$6

$12

$13$11

$10

$8$6

$10

$5

$20

$6

$2

$5

$6

$1

$14

$10$13

$16 $16

$25

$28

$31

$3

$6$8

$10

$6

$12

$19

$23 $23

$20

$12

$9

$20

$8

$32

$21

$2

$7

$11

$5

29

37 37 37

40

4947

43

1110

30 30

25 25

35

49

35

30

33

25

35

24

28

25

10

1719

9

$0

$15

$30

$45

$60

$75

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Q12019

Q22019

Q32019

Q42019

$bn

Corporate Asset Deals

U.S. Upstream M&A Volumes by Quarter(1)

Av g. $14.5

6

Buyer Performance Versus XOP

Date Buyer Seller 1 Day 30 Day Current (1)

12/16/19 9% 15% 22%

8/26/19 17% 3% (3%)

6/10/19 9% 36% 59%

4/12/19 (5%) (6%) 28%

8/14/18 (12%) 1% 10%

3/28/18 (9%) 1% (5%)

10/14/19 (11%) (9%) 10%

4/24/19 (0%) (24%) 9%

11/19/18 (6%) (30%) (9%)

7/15/19 (16%) (25%) (26%)

11/1/18 (12%) (38%) (21%)

10/30/18 (12%) (29%) (42%)

10/28/18 (24%) (49%) (30%)

Market Reaction to Recently Announced Upstream M&A

___________________________Source: Company filings, FactSet as of 2/13/20.1. Current price performance reflects announcement to 2/13/20. Price performance is relative to the S&P Oil & Gas Exploration & Production Index (NYSE: XOP). CVX current reflect performance through 5/9/19 when CVX declined to increase offer.

Recent Upstream M&A Performance

Ne

utr

al

Ne

ga

tive

Po

siti

ve

7

How Many Upstream Companies Do We Need?

129

91 90

62

25 2212 9

0

50

100

150

Permian Midcontinent Rockies Gulf Coast Ark-La-Tex Appalachia CommittedCapital (No

Asset)

Gulf of Mexico

# of Companies

Private Upstream Companies by Region as of 2020

___________________________

Source: Bloomberg and Enverus as of 2/13/2020.

Note: Only includes public companies with market capitalization greater than $10 million.

210 206 195

161 170183 174

128 124

$572 $603 $603

$398

$594 $587

$443$392

$343

$0

$300

$600

$900

$1,200

0

75

150

225

300

2012 2013 2014 2015 2016 2017 2018 2019 2020

Market Cap ($bn)# of Companies

Public Upstream Companies Over Time

Total: 440

8

1 2 34

56

79 9 9

11 1112

1314

18

23 2324

31

41

4850

46

46

52

58

67

74

6968

61

50

39

0

5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

(20)

(15)

(10)

(5)

0

5

10

15

MLP / GP IPOs and Eliminations by Year

MLPs are “going away”?

ETP

EOT

GTM

OKSKMPEEPTPPKPP

XTXI

PAGP

IPOs Public Midstream MLPs / GPs

MLP IPO

GP IPO

Elimination

Pending Elimination

BPL

VLP

SFLVLP GEL EPD

PAA

SFL

TCLP

MMP

NS

PVR

PPX

SXL

MW E

APL NRGY

MMLP

HEP

GTM

EOT

CPNO DPM

GLP

KPP

TLP

W PZ

HLND

EPE

NRGP

ETE

PPX

EROC

AHGP

BGH

HPGP

MGG

PVG

NSH KGS

CQP

SEP

DEP

EPB

W MZ

TPP

HLND

HPGP

MGG

TRGP

EPE

NRGP

BGH

W MZ

ACMP

NKA

PNG

DKL

EQM

MPLX

SMLP

W GP

NGL

GSJK

PVG

DEP

KMI

OIL

NRGM

CNNX

ENBL

PBFX

SHLX

USDP

KMP

EPB

PVR

PSXP

SRLP

VLP

USAC

PAGP

NRGY

NRGM

CPNO

PNG

TEP

ARCX

FISH

MEP

QEPM

W PT

W NRL

CQH

DM

RMP

JPEP

VTTI

GPP

APL

ATLS

MW E

EROC

RGP

CMLP

ACMP

NKA

OILT

QEPM

CPPL

PTXP

NBLX

NGLS

RRMS APLP

BW P

TEP

NSH

AHGP

BPMP

HESM

OMP

AMGP

OKS

SXL

ARCX

AZUR

MEP

W NRL

W PT

JPEP

VTTI

CPPL

PTXP

RMP

EEP

SEP

W PZ

CQH

ETP

VLP

W ES

NGLS

TLP

DM

AM

ENLK

HCLP

W ES

EQGP

RTLR

AM

ENLK

VLP

W ES

TLP

DM

AMID

ANDX

BPL

SXE

KPP TPP EEP KMP OKS

GTM

EOT

ETP

XTEX EXLP

SGLP

TLLP

RRMS

SXE

VLP

STGT

EQGP

TEGP

BW P

RGP

AMAMID

AHD

SEMG

BPL

MLPs Remaining at <$5bn EV: 18 MLPs

9

Midstream M&A Activity

Sponsors and Utilities are driving the Midstream M&A market

___________________________Sources: Company filings, press releases and Wall Street equity research.

Total Midstream Third-Party Acquisitions & Dropdowns

$18 $16 $15 $12 $10 $7 $7

$4 $8 $10

$3$16 $20

$24

$7$9

$10

$7

$3 $2

$12$3

$4

$6

$29

$33

$37

$26$29

$29

$48

$0$0

$10

$20

$30

$40

$50

$60

2013 2014 2015 2016 2017 2018 2019 2020 YTD

($bn)

Strategic Midstream Third Party Asset Transactions

Sponsor Backed Third Party Asset Transactions

Drop Down Transactions

Strategic Power & Utilities Third Party Transactions

10

Restructuring / Bankruptcy Landscape

8

1915

5

2

12

6

10

36

21

0

10

20

30

40

Recently Filed Stressed Credits(Yields of 10-20%)

Distressed Credits(Yields > 20%)

# Companies

Upstream Midstream Oilfield Services

Current Distressed CreditsUpcoming High Yield Upstream Maturities and

Trading Levels

(1)

(2)

___________________________

Source: Bloomberg as of 2/13/2020

1. 2019 represents E&P Issuances

2. Weighted Average Yield calculated on benchmark securities of maturing names

$1$2

$5$2

$6

$5

$2

$1

$6

$0

$6

$12

7%

39%

29%

33%

0%

10%

20%

30%

40%

50%

$0

$2

$4

$6

$8

$10

$12

$14

2019 2020 2021 2022

Below 90 90-95 Above 95 Weighted Average Yield

Vol ($bn)

11

Energy M&A and IPO Market Over Time

0.0x

5.0x

10.0x

15.0x

20.0x

25.0x

30.0x

1997 2000 2003 2006 2008 2011 2014 2016 2019

EV / EBITDA Multiple

M&A IPO

Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20192020

YTD

Energy % of

S&P:6.3% 5.6% 6.6% 6.3% 6.0% 6.0% 7.2% 9.3% 9.8% 12.9% 13.3% 11.5% 12.0% 12.3% 11.0% 10.3% 8.4% 6.5% 7.6% 6.1% 5.3% 4.4% 3.5%

___________________________

Source: Company fi l ings, HIS, Wall Street research, FactSet as of 2/13/2020.

Enterprise Value and EBITDA Multiples

12

So What is the Catalyst for M&A?

Potential drivers of activity in 2020

1.

3. 4.

2.

Valuation

Restructuring Investor

Receptivity

Synergies

1.

2.

3.

4.

Expectations lowered

Scale matters

Will be no other choice for

some

Response muted so far

13

~$17.2 billion transaction value

June 2017

has been acquired by

Premier Energy Sector Experience

Americas Energy(1): 2009 – 2019

$6.4 billion transaction value

June 2017

has been acquired by

$45 billion transaction value

April 2017

has merged with

~$10 billion transaction value

Nov ember 2017

has merged with

~$36 billion transaction value

October 2018

has acquired

~$60 billion transaction value

October 2018

has acquired the remaining public stake of

~$2.52 billion transaction value

Nov ember 2018

has contributed its midstream assets at

Alpine High to

~$10.8 billion transaction value

September / October 2018

has sold its Onshore U.S. oil and gas assets to

and

~$14 billion transaction value

July 2019

has combined its two MLPs:

September 2018

has acquired midstreamassets from

~$2.6 billion transaction value

Pending

~$2.5 billion transaction value

has agreed to acquire

Barclays is an Energy M&A Powerhouse

has acquired a gathering sy stem and gathering pipeline

f rom

&

~$2.3 billion transaction value

December 2019

___________________________Source: Dealogic as of December 31, 2019.1. Energy includes E&P, Oilfield Services, Majors, R&M and Midstream transactions.

($ in billions) % Share

1 Barclays $835 32%

2 Citi 719 28%

3 Goldman Sachs 630 24%

4 J.P. Morgan 481 19%

5 Jefferies LLC 459 18%

6 Evercore Inc 383 15%

7 BofA Securities 361 14%

8 Morgan Stanley 343 13%

9 Credit Suisse 306 12%

10 RBC Capital Markets 272 10%

14

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