DMS Publishing, LLC dba Energy Prospectus Group EPG newsletters, company profiles, forecasts, presentations and the information contained on our website are strictly the opinion of the publishers and are intended for informational purposes only. Readers are encouraged to do their own research and due diligence before making any investment decisions. The publishers will not be held liable for any actions taken by the reader. Although the information in the newsletters, company profiles, & this presentation have been obtained from resources that the publishers believe to be reliable, we do not guarantee its accuracy. Please note that the publishers may take positions in companies profiled or discussed in this presentation.

Oil is VERY IMPORTANT Crude oil is relatively unique as an asset class because it is a depleting resource that is: Directly related to standard of living Consumed in enormous volumes Each day the global economy uses about 95 million bbls of liquid fuels Demand is expected to SPIKE to 96.5 million bbls per day in the 3 rd quarter Constant renewal of supply requires ongoing investment of LOTS OF CAPITAL We have already consumed the low hanging fruit

John Templeton The four most expensive words in the English language: “This time it’s different.”

Oil Market History Lesson 30 Year Chart

What is the “Right” oil price?

IEA: Oil Market Report Published March 11, 2016 Global Market is heading back to balance Oversupply of 1.5 MM bbls per day today will shrink to near zero by the 3 rd quarter Big spike in demand coming in Q3 OPEC production down 90,000 BOPD in Feb OECD inventories down in February, but floating storage has increased Non-OPEC production is falling OPEC supply disruptions + Iran growth is slow Nigeria, Iraq and Libya have real problems

OPEC: Supply Risks are real

IEA: Oil Market Report U.S. production to fall 530,000 BOPD in 2016 Brazil & Columbia also on decline Total Non-OPEC decline estimated at 750,000 BOPD (up from 600,000 in February report) “Clear signs that market forces are working their magic and higher cost producers are cutting output.” OPEC / Russia agreement to freeze production will have very little real impact

IEA: Oil Market Report Iran will only increase production by 300,000 barrels per day this year. “It is clear that Iran will need billions of dollars of investment to reach their production potential and let's face it, with prices this low and major oil companies cutting spending, the cash just is not there. We believe this is a historic time to position for an energy sector recovery. Bust cycles do not last forever.” – Phil Flynn, PRICE Futures Group

Demand for oil is “Relentless”

Demand for Gasoline Increasing in United States

Demand for Gasoline Increasing even faster outside the U.S.

IEA: Conclusion Light at the end of the tunnel Oversupply will continue in first half of million bbl per day in Q1 1.5 million bbl per day in Q2 Supply / Demand will Balance in Q3 “…our view is that in the second half of 2016 the gap between supply and demand narrows significantly to 0.2 mb/d in both 3Q and 4Q.”

The Oil Price is set by Speculators

Oil Price Forecasts Credit Suisse Research: $50/bbl by end of May See big spike in gasoline demand just ahead Raymond James: $70/bbl WTI by 12/31/16 Tudor Pickering Holt: $80/bbl WTI by 12/31/16 Cornerstone Analytics: $85/bbl Brent by 12/31/16 Andrew Hall (Astenbeck Capital): Significant supply shortfall in 2017 Oil may be back to $100/bbl by mid-2017

Oil Price Forecast

Oil Prices used in EPG Forecast models 1 st Quarter$30 2 nd Quarter$35 3 rd Quarter$40 4 th Quarter$ $60 Natural Gas: $1.70 to $2.70 for 2016

U.S Active Rig Count

Four Oil Basins have accounted for 95% of U.S. Oil Production Growth

The Permian Basin was the only area not on decline at 12/31/2015

Drilling Activity Outside of the U.S. Major oil projects all over the world have been cancelled, which puts future supply at risk 22 Major Oil Projects have been cancelled

Geopolitical Risk Premium remains part of the equation We are still very dependent on oil supply from the Middle East and N. Africa Iran continues to expand its influence, which is a threat to Saudi Arabia ALL OF THE WORLD’S SPARE OIL PRODUCTION CAPACITY IS ON THIS MAP

Natural Gas Crude oil is priced and traded on a GLOBAL MARKET Natural gas is priced and traded on REGIONAL MARKETS

Natural Gas United States is the world’s largest consumer of natural gas U.S. has very little import capacity U.S. gas production is falling and demand is going up Natural gas is priced and traded on REGIONAL MARKETS

U.S. Gas Market will be tighter in 2016

Natural Gas Demand Ramping Up

What happens next? Oil & Gas Prices: The fundamentals will win out in the long run, but in the short run they are frequently trumped by emotions (and speculative traders) Investors are always looking ahead: Rapidly dropping active rig count Shrinking oil production + increasing demand Whenever you see everyone agreeing that one course is certain, you should take time to consider the fact that they might be wrong, especially if “everyone” is being lead by Goldman Sachs

High Yield Investment Ideas Callon Petroleum Pfd Stock (CPE-PA) 11.0% Evolution Petroleum Pfd Stock (EPM-PA) 8.5% Memorial Production Partners LP (MEMP) 18.8% Magellan Midstream Partners LP (MMP) 4.6% MPLX LP (MPLX) 6.7% ONEOK Partners LP (OKS) 10.1%

Callon Petroleum (CPE-PA) Market Cap = $835 Million Pure Play on the Permian Basin Production Growth is locked in Production increased 70% in 2015 / 20% growth forecast in 2016 Current production is ~11,700 boepd Heavily weighted to oil (80% of 2015 production) 2016 CapEx fully funded by cash flow from operations ~50% of 2016 crude oil is hedged at $50.25/bbl 10% Series A Cumulative Preferred Stock ($50 par value) Forecasts:2015A Cash flow per share $1.13 $0.90 $1.56 Production (boepd)9,605 11,750 13,500

Evolution Petroleum (EPM-PA) Market Cap = $160 Million DEBT FREE + EXTREMELY CONSERVATIVE One Big Asset: Non-op interest in Delhi Field CO2 Flood operated by Denbury Resources (DNR) 20% production growth locked in for several years Estimated economic life of field is 40 years NGL plant coming on-line in Q will increase revenues 8.5% Series A Cumulative Preferred Stock ($25 par value) EPM also pays dividends on their common stock Fiscal Year end is June 30 Forecasts:2015A Cash flow per share $0.33 $0.28 $0.61 Production (boepd)1,243 1,794 2,500

Memorial Production Partners (MEMP) Market Cap = $180 Million Over 90% of 2016 Production is Hedged Hedges lock in free cash flow for % of Crude Oil hedged at $85.48/bbl 95% of Natural Gas hedged at $4.14/mcf Current distributions are $0.10/Qtr for yield of 18.8% In compliance with debt covenants at Proved reserves of 1.27 Tcfe (43% crude oil) Fiscal Year end is June 30 Forecasts:2015A Cash flow per unit $2.76 $2.52 $2.15 Production (boepd)42,158 40,225 38,000 Production mix is 54% Ngas, 28% crude oil, 18% NGLs

Memorial Production Partners (MEMP) Market Cap = $180 Million

Magellan Midstream Partners (MMP) Market Cap = $15.4 Billion BIG COMPANY with strong track record Revenue Forecast is over $2.3 Billion this year Cash flow from operations over $1.0 Billion Increased distributions for 55 quarters in a row Capital appreciation + growing cash flow for investors Forecasts:2015A Cash flow per unit $4.48 $4.47 $4.70

Magellan Midstream Partners (MMP)

MPLX LP (MPLX) Market Cap = $9.7 Billion Primarily focused on Marcellus / Utica Gathering, Processing, Storage, Pipelines Natural Gas and NGLs Reverse merger with MarkWest was BIG DEAL Marathon Oil controls the GP Distribution Growth (based on public statements) 12-15% in 2016 and at least 10% in 2017 Forecasts:2015A Cash flow per unit $2.99 $2.97 $3.36

ONEOK Partners LP (OKS) Market Cap = $9.0 Billion Strong Balance Sheet 37,000 mile network Gathering, Processing, Storage, Pipelines Natural Gas and NGLs Distribution flat in 2016 then growing by 10% annually Forecasts:2015A Cash flow per unit $4.52 $5.45 $6.21