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WS 360 August 2014 Newsletter

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Merger & Acquisition report for the Energy Industry, with focus on middle market companies. WS360 is produced by Wilcox, Swartzwelder & Co. a leading boutique energy investment bank in the United States.

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WS 360 August 2014 Newsletter

  1. 1. Energy & Industrial Sector Observations • Texas Petro Index Sets Record for 7th Month Straight. The comprehensive upstream economic indicator continues to produce record setting numbers. The June index was 308.4, up 7.4% from June 2013. According to Karr Ingham, crude oil production is at its highest since the late 1970s. During the current expansion that began in December 2009, Texas’s crude oil production has increased 160%. In response to crude oil pricing and expansion of the industry, employment in the oil and gas industry has increased 66% since it bottomed out in October 2009 and seems to be one of the driving factors behind statewide economic growth. (Oil & Gas Journal – August 2014) • PwC: 2Q oil and gas M&A activity strongest in 5 years. According to the quarterly report by PwC US Energy Practice, the US oil and gas industry saw a substantial increase in M&A activity. “Over the past 3 months, we continued to see companies looking to realign their portfolios and divest noncore assets, which provided opportunities for acquirers with cash and access to capital,” said Doug Meier, PwC’s US energy sector deals leader. Almost half of Q2 deal value came from US shale plays, totaling $20 billion and over 21 transactions. Texas was the primary hub of activity, with the Eagle Ford as the most active and the Permian right behind. (PwC – July 2014) • Strategic M&A May Rejuvenate a Tepid Wholesale Distribution Sector. The wholesale distribution industry has seen a few obstacles recently. However, according to Deloitte Consulting LLP, more strategic M&A deals could help propel the entire industry. Strategic M&A deals bring the advantages of scale and help strengthen a company’s economic outlook. Differentiation and transformational deals will drive efficiencies across the wholesale distribution value chain. In addition, increasing M&A through financial buyers, primarily PE firms, will likely create consolidation among the sector. According to Larry Hitchcock, a principal with Deloitte’s Consumer and Industrial Products practice, “Strategic transformational M&A, properly executed, can serve as a powerful engine for much-needed growth and value creation.” (Deloitte- April 2014) 102 Decker Court Suite 204 Irving, Texas 75062 972.831.1300 WS-iBank.com Broader Middle Market M&A Trends - 1,000 2,000 3,000 4,000 5,000 6,000 2004200520062007200820092010201120122013LTMHistorical M&A Volume(Completed Deals < $500 Million) 10 Year Avg. = 3,6837.9x9.4x8.4x9.2x8.4x7.1x7.4x8.5x7.4x8.2x7.8x0.0x2.0x4.0x6.0x8.0x10.0x2004200520062007200820092010201120122013LTMTransaction Valuations(EBITDA Multiple; Completed Deals<$500 Million) Sector Update | August 2014 phone 972.831.1300 | web WS-iBank.com
  2. 2. 2 Energy Stock Price Performance Red – New York Stock Exchange Composite Blue – Oilfield Services Index Green – Exploration & Production U.S. Rig Count (As of August 4, 2014) Industrial Stock Price Performance Red – New York Stock Exchange Composite Blue – Industrial and Infrastructure U.S. Industrial Manufacturing (ISM) (As of August 4, 2014) 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 0 250 500 750 1,000 1,250 1,500 1,750 2,000 2,250 Jul-07Jan-08Jul-08Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11Jan-12Jul-12Jan-13Jul-13Jan-14Jul-14OilGas% Oil25.030.035.040.045.050.055.060.065.070.075.0Jan-08Jul-08Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11Jan-12Jul-12Jan-13Jul-13Jan-14Jul-14 PMI Basin Rig Count YoY Rig Change % Change Permian 5629921% Eagle Ford 2043521% Williston18653% May-14Jun-14Jul-14PMI55.455.357.1 Sector Update | August 2014 phone 972.831.1300 | web WS-iBank.com
  3. 3. 3 Notable Energy & Industrial Transactions Announce- ment Date Acquiror Target Target/Transaction Description Transaction Value ($M) Energy & Industrial Manufacturing and Services 8/4/14 Hastings Equity Southern Petroleum Laboratories Texas-based provider of services necessary to accurately measure the volume and composition of hydrocarbon products -- 8/4/14 Bolttech Mannings/Grey Mountain AM Inspection Ltd. Industrial non-destructive radiographic testing to the oil and gas, mining, and manufacturing industries -- 7/30/14 Dover Corporation WellMark Co/Platte River Equity Oklahoma-based manufacturer of flow control solutions used in the oil and gas and petrochemicals industries -- 7/20/14 Compressco Partners Compressor Systems Texas-based manufacturer of natural gas compressors $825.0 7/16/14 U.S. Silica Holdings Cadre Services/Denham Capital Texas-based operator of frac sand mine and plant in Voca, TX with capacity of 800,00 tons/year of proppant $98.0 7/15/14 National Automation Services Undisclosed Seller North Dakota-based construction company that provides installation of piping, tanks, pumps, and automation equipment for the oil and gas industry -- 7/15/2014 Oilfield Water Logistics AggieTech Operating LLC Operator of 8 saltwater disposal wells and a network of water pipelines with producer contracts expanding in the Permian Basin -- 7/14/14 TNT Crane & Rigging Rent-A-Crane Oklahoma-based provider of crane lifting services to the oil and gas industry -- 7/14/14 Linx Partners Transpro Burgener Provider of bulk material and hauling services to the oil and gas industry -- 7/10/14 Castle Harlan Tensar/Arcapital Provider of geosynthetic site development technology -- 7/9/14 Rockwater Energy Solutions Inc Neohydro Corp Texas-based provider of water treatment technology to the oilfield industry with a large customer base in the Permian and Eagle Ford -- 7/9/14 National Automation Services Devoe Construction Provider of construction services to the oil and gas industry with 100+ employees -- 7/2/14 Danos API Control Systems Solutions Louisiana-based provider of instrumentation and electrical services -- 7/1/14 Nine Energy Service/SCF Partners Crest Pumping Technologies Texas-based provider of cementing, acidizing, and pump down services in the Permian, Eagle Ford, and Barnett -- 6/26/14 Dos Rios Partners/RLM McCall Capital Case Drilling & Pump West Texas-based provider of fresh water well drilling and maintenance -- Sector Update | August 2014 phone 972.831.1300 | web WS-iBank.com
  4. 4. 4 Notable Exploration & Production and Midstream Transactions Announce- ment Date Acquiror Target Target/Transaction Description Transaction Value ($M) Exploration & Production and Midstream 8/5/14 American Midstream Partners Republic Midstream/ ArcLight Capital Partners 50% interest in the operate of a crude oil gathering system, central delivery terminal complex, and an intermediate takeaway pipeline to serve Penn Virginia’s acreage position in the Eagle Ford Shale $200.0 8/4/14 American Midstream Partners Gonzales County system/ArcLight Capital Partners Texas-based full-well-stream gathering system $110.0 7/30/2014 SM Energy Co Undisclosed Seller 61,000 net acres in Divide and Williams counties, North Dakota, directly adjacent to its Gooseneck area with net production of 3,200 boe/d (91% oil) $330.0 7/30/2014 Templar Energy LLC Newfield Exploration Co 42,000 net acres with net daily production of 65 MMcfe/d (60% gas) and proved net reserves of 38 MMboe in the Granite Wash Play $588.0 7/28/2014 RSP Permian Multiple Sellers Agreement to purchase 6,652 net surface acres or 19,367 net effective horizontal acres in Glasscock County, Texas with net production of 1,106 boe/d and net proved reserves of 22 million boe $259.0 7/24/2014 Breitburn Energy Parteners LP QR Energy LP Acquisition of MLP in a unit-for-unit exchange with current daily production of approximately 57,300 boe/d (67% liquids) to create the largest oil-weighted MLP $1,670.0 7/15/2014 American Midstream Partners LP Mobile Bay/Dauphin Island/Main Pass Oil Gathering System Acquisition of oil and gas processing and gathering, and transportation systems that complement American Midstream's High Point system $115.0 7/14/2014 Whiting Petroleum Corp. Kodiak Oil & Gas Corp. 855,000 combined net acres with 3,460 net future drilling locations and estimated production at 107,000 Boe/d $6,000.0 7/14/14 Exterran Partners compression units of MidCon Compression Acquisition of 162 natural gas compression units with 110,000 total horseoower, in order to provide services to VHP Billiton Petroleum $135.0 7/10/14 Penn Virginia Corp. Undisclosed Seller 11,660 net acres in Lavaca County, Texas allowing Penn Virginia to reach its corporate target of 100,000 net acres in the Eagle Ford $45.0 7/8/14 Warren Resources Inc Citrus Energy Corp Assets producing 82 MMcfe/d of natural gas and estimated proved net reserves of 208.3 Bcfe (55% proved developed) providing Warren a new basin platform in the Marcellus $352.5 7/7/14 Rice Energy Inc Chesapeake Appalachia LLC 22,000 net acres and 12 wells in the Marcellus shale with net production of 20 MMcfe/d from 7 wells, plus 5 additional wells in various stages of development $336.0 7/5/14 Regency Energy Partners LP Eagle Rock Energy Partners LP Acquisition of Eagle Rock’s midstream business which includes 8,100 miles of gathering pipeline and over 800 MMcf/d of processing plants $1,200.0 Sector Update | August 2014 phone 972.831.1300 | web WS-iBank.com
  5. 5. 5 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 | August 2014 phone 972.831.1300 | web WS-iBank.com

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