Drilling Capital for the Small Producer Wells Fargo Energy Capital, Inc. Michael Nepveux Managing Director Williston Basin Petroleum Conference Bismarck, North Dakota May 22, 2012

Wells Fargo Overview One in three households in America does business with Wells Fargo. Wells Fargo has $1.3 trillion in assets and more than 275,000 team members across 80+ business lines. Key facts1 Assets $1.3 trillion Rank by assets 4th Among U.S. Peers Rank by value of stock 1st Among U.S. Peers Rank by value of stock 3rd Among global financial institutions Market value of stock $177.6 billion Team members 270,000 Customers More than 70 million Fortune 500 rank 23rd Among all companies, by revenue Total stores More than 10,000 North America ATMs More than 12,000 #3 branded bank ATM owner Our vision 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. 1 Company data as of March 31, 2012 1

Wells Fargo serves consumers and businesses in more communities than any other U.S. Bank

Market capitalization as of 3/31/12 Wells Fargo strength JP Morgan HSBC Citibank Bank of America RBC Capital Markets Goldman Sachs US Bank UBS Barclays Deutsche Bank Morgan Stanley Credit Suisse Numbers in billions Market capitalization as of 3/31/12 Source: Capital IQ

Wells Fargo Energy Group Overview

Wells Fargo Energy Group Commitments $30B Add $30B *estimated data

Wells Fargo Energy Group Comprehensive Coverage Model Dedicated relationship client coverage team with offices located geographically near clients 7 offices and 185+ team members in North America, including 19 in-house engineering professionals $30B of credit committed to Clients Relationship Manager is the primary contact into all the various solutions of the bank including: Credit and capital solutions Treasury management Asset management Risk management Receivables Management Corporate Services Second Lien, Mezzanine and Equity - Wells Fargo Energy Capital Deposit products offered by Wells Fargo Bank, N.A. Member FDIC. 6 6 6

Volume of Energy Transactions (2010 -2012 YTD) Wells Fargo has the #1 Energy Non-Investment Grade Debt Capital Markets Platform Volume of Energy Transactions (2010 -2012 YTD) ($ in Billions) JP Morgan Bank of America Credit Suisse RBS RBC Citi Bank Barclays Morgan Stanley UBS Deutsche Bank Goldman Sachs 7 7

Full Credit to Bookrunners (by Deals) Wells Fargo has the #1 Energy Non-Investment Grade Debt Capital Markets Platform 2011 Loan Syndications – Energy Lead Arranger Full Credit to Bookrunners (by Deals)

2011 High Yield Energy League Table Book-Managed Deals (by Deals) Wells Fargo has the #1 Energy Non-Investment Grade Debt Capital Markets Platform 2011 High Yield Energy League Table Book-Managed Deals (by Deals)

2012 YTD High Yield Energy League Table Book-Managed Deals (by Deals) Wells Fargo has the #1 Energy Non-Investment Grade Debt Capital Markets Platform 2012 YTD High Yield Energy League Table Book-Managed Deals (by Deals)

Wells Fargo Energy Capital Overview

Overview of Wells Fargo Energy Capital Established in 1996 as a non-bank subsidiary of Wells Fargo & Company Headquartered in Houston, satellite offices in Denver, Dallas and Pittsburgh 7 Investment professionals, 13 total staff Provides acquisition and development capital to upstream and midstream North American oil and gas companies Development Drilling (Mezzanine) Loans Direct Equity Investments Joint venture capital Second Lien Term Loans Equity Fund Investments Roughly $1.2B of active debt and equity commitments $600MM of Debt / $600MM of Equity Other products include bridge facilities, volumetric production payments (VPP’s), and private placements Before add title energy cap page

Few E&P mezz specialists have survived Wells Fargo Aquila Macquarie NGPC Beacon Mirant Denham CIT Cambrian Koch Williams Petro-bridge Lehman Guggen-heim Enron KCS Stratum Deutsche Bank Duke D.E. Shaw Silver-point Carlyle EIG (TCW) RIMCO Torch MG Tenneco / Range GE Capital Cargill Shell Goldman Sachs Gasrock Chambers 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2011 Prepared for the 2011 IPAA Private Capital Conference by EIG (TCW) – This list is illustrative only and is not purported to be comprehensive or precise as to the dates shown.

WFEC is one of a few long term players Wells Fargo Aquila Macquarie NGPC Beacon Mirant Denham CIT Cambrian Koch Williams Petro-bridge Lehman Guggen-heim Enron KCS Stratum Deutsche Bank Duke D.E. Shaw Silver-point Carlyle EIG (TCW) RIMCO Torch MG Tenneco / Range GE Capital Cargill Shell Goldman Sachs Gasrock Chambers 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2011 Prepared for the 2011 IPAA Private Capital Conference by EIG (TCW) – This list is illustrative only and is not purported to be comprehensive or precise as to the dates shown.

State Rankings of Oil Producing States 1. Texas 2. North Dakota 3. Alaska 4. California

North Dakota North Dakota

Where Do We Fit in the Development Cycle? Production Syndicating Senior Revolver Subordinated Debt, Equity Senior Revolver Development Loan, Equity Start-Up Development Acquisition Development

(Development Drilling Loans) Public Debt (High Yield) Risk / Return Matrix Equity (Public & Private) Mezzanine Debt (Development Drilling Loans) Target Rate of Return % 5 10 15 20 25 30 35+ Bank Loan (Senior Debt) Risk High Low Public Debt (High Yield) Second Lien Debt WFB WFEC Basically, to grow a business you need capital Here are our four areas of capital expertise- depending on the size of your company, you may need any or all of these at some point. We have traditionally operated in the Senior debt and Mezzanine debt sectors, but with the additional capabilities of Wachovia, we have added Public Debt and public equity to our solutions mix.

Definition of Mezzanine Debt Mezzanine (mĕz‘ ə-nēn) n. [from Latin, medianus middle, median]: An intermediate story, usually not of full width, between two main floors, especially the ground floor and the one above it. Energy finance translation: a middle layer of capital, typically supported to a material extent by undeveloped reserves, with equity beneath and sometimes senior debt above; not meant to be a permanent or primary source of capital. Good solution for companies who: Need capital to acquire and/or develop reserves Require more capital than commercial banks will provide Don’t want to sell or bring in a partner Want to avoid ownership dilution inherent in raising equity capital

Features of Typical Mezzanine Drilling Projects Primarily PUD reserves, sometimes lower risk probable reserves – as may be the case in current Bakken and Three Forks development drilling programs Usually requires some PDP, although lower risk drilling may not Reputable third party reserve report usually required to close, but not to start the process Experienced operators only, or non-operating companies with real oil and gas experience Typically the sponsor pays for leases and seismic; we pay for capital expenditures Since take-out is frequently conforming reserve-based bank loans, must be very economic drilling programs That helped the contagion jump in the past few weeks to the market for high-risk corporate debt. Many big banks, holding hundreds of millions in bonds for leveraged buyouts, are having a hard time selling them. “Bad loans can be like an infection. They spread through the financial markets because mortgage companies package them and sell them as investments.” The CLO window remains shut to new vehicles and hedge fund continue to approach the market gingerly, coming in only for bargains, while fund flows into retail funds went sharply negative in late July. In July, total inflows from CLO’s – including changes in the CLO calendar – and prime funds declined to a 17-month low of $4.6 billion, from $7.9 billion in June and a monthly average of $12.6 billion during the first half 1. Despite a strong market correction that has sent large-cap loans reeling, arrangers are pushing forward with a full slate of middle market transactions, gambling that they’ll be able to cobble together syndicates on smaller deals from pockets of cash that don’t rely on CLO funding.

Mezzanine Development Drilling Loan – Typical Structure and Terms Advancing line of credit; highly customizable; high level of lender involvement Designed to fund 100% of capex per pre-approved development plan; loan is funded as/when AFEs/JIBs presented to lender; may have some ability to refinance debt or equity at closing Recourse only to the oil and gas assets; no personal guarantees Two year term: typically sufficient time to allow refinancing by conforming reserve-based bank loan Most cash flow swept monthly to repay first interest, then principal; allowances made for G&A Targeted all-in IRR of 15 – 25%, including coupon of Prime + 3% - 6% plus equity kickers comprised primarily of APO NPI, possibly overrides or warrants Some hedging may be required

Mezzanine Advantages vs. Conforming Reserve-based Bank Loans Higher advance rates Accelerate funding and development (Bakken translation: keep up with pad drilling and zipper fracs) Ability to capitalize interest Willingness to absorb significantly higher reserve risk (e.g., undeveloped reserves, well concentration, recently drilled wells) Ability to customize for unusual situations Greater flexibility to change /amend once the program is underway Smaller equity contribution required Allows substantially higher leverage versus both cash flow and equity

Mezzanine Advantages vs. Private Equity Retain greater portion of the upside Easier access to a lot of capital Cheaper way to finance a lower-risk development drilling program Maintain control of Board Easier to exit on your chosen timing/terms

Thank you Michael Nepveux Managing Director, Wells Fargo Energy Capital 303-863-5589 michael.nepveux@wellsfargo.com