i PERMIAN BASIN ABSOLUTE NET SALE-LEASEBACK · opportunity to purchase a Permian Basin, Absolute...

PERMIAN BASIN ABSOLUTE NET SALE-LEASEBACK I N D U S T R I A L P O R T F O L I O

i

REVISED PRICING GUIDANCE/HIGHER YIELD AT 8.5%

O FF E R E D BY :

CHRISTOPHER S. [email protected]

JOHN S. PARSLEY, [email protected]

JEFF [email protected]

Colliers International1233 W. Loop SouthSuite 900 Houston, tx 77027

EXECUTIVE SUMMARY ......................................................................................................5

PORTFOLIO PROPERTY INFORMATION

> Andrews, Texas............................................................................................................8 > Big Spring, Texas ....................................................................................................... 12 > Carlsbad, New Mexico ............................................................................................... 16 > Denver City, Texas .................................................................................................... 20 > Hobbs, New Mexico .................................................................................................. 24 > Odessa, Texas ........................................................................................................... 28

RECENT NEWS ARTICLES > The largest oil deposit ever found in America was just discovered in Texas ........33 > In Permian land rush, oil companies knock, call and hope for divine .................... 34

> Houston oil stocks soar on OPEC news ...................................................................37 > Permian production on the rise ............................................................................... 38 > Oil companies keep paying for Permian land .......................................................... 39

EXPANSE ENERGY COMPANY PROFILE > Brochure ....................................................................................................................41

OFFERING PROCESS & TIMELINE ................................................................................ 44 CONFIDENTIALITY AGREEMENT ...................................................................................46

TABLE OF CONTENTS

P. 4 | offering memorandum

EXECUTIVE SUMMARY

P. 5

EXECUTIVE SUMMARYColliers International has been exclusively retained to offer qualified investors the opportunity to purchase a Permian Basin, Absolute Net, Sale/Leaseback Industrial Portfolio (the “Portfolio”). The Portfolio is a six property, multiple building, 137,621 square-foot industrial property portfolio located in West Texas and East New Mexico. The properties are located in the surrounding areas of Midland, Texas within the Permian Basin, the largest oil and gas play in the United States. Recently, the largest oil deposit ever found in America was discovered in the Wolfcamp shale, which is in the Midland portion of the Permian Basin (see page 33). This discovery will contribute to the prompt recovery of the Permian Basin from the recent woes of the oil and gas industry. In the long run, it will work to attracting new businesses and residential development to the area. The resurgence and continued expansion of the Permian Basin provides for a stable real estate investment environment for the long term investor.

The Portfolio consists of six properties strategically located for the seller’s success as an energy industry services provider. The Portfolio is ideal for an investor who would prefer an absolute net, single tenant investment containing the following highlights:

• The investment requires no maintenance and is a “hands off,” self- operating opportunity.

• The Portfolio has staggered lease terms ranging from 16 to 20 years to minimize market risk.

• The leasebacks can be done with a master lease, or individual leases for investor flexibility to move in and out of invested properties, as needed.

• The offering has rental rates set at, or below, current market rental rates with 1.5% annual rent bumps.

• All leases will come with a corporate guarantee.

• The investment package is offered at an 8.5% yield.

Offers will be accepted and evaluated on the individual properties. 2% Co-broker fee offered. CRITICAL MASS

The Portfolio offers the ability for existing regional investors to immediately supplement their holdings. By the same token, the Portfolio will allow new investors to the Permian Basin to gain immediate market presence complete with geographic and submarket diversification.

FUNCTIONAL INDUSTRIAL BUILDINGS

Each of the buildings in the Portfolio are designed to meet the needs of the leaseback tenant. Depending on the size of the market, the buildings range in size from approximately 5,000 square feet to 28,000 square feet with paved and/or stabilized yards for equipment and inventory storage ranging from 2.61 acres up to 15.42 acres. With the exception of a couple of older buildings, most of the properties are pre-engineered metal buildings with masonry wainscoting. All buildings, except one in Odessa, have grade level loading with the newer buildings containing equipment wash basins and training rooms.

100% LEASED PORTFOLIO WITH UPSIDE The Portfolio provides solid cash flow at 100% occupancy while providing an opportunity to create additional value through a 1.5% annual rent growth. The lease terms proposed in the portfolio properties range from 16 to 20 years.

PREDICTABLE CASH FLOW The Portfolio generates predictable cash flow resulting from the proposed long term leases to a single user with no responsibilities to the landlord because of the absolute net leases.

SELLER MOTIVATIONS The seller is looking to take advantage of two recent events which are as follows: 1. The Financial Accounting Standards Board (FASB) will require all holders of operating leases to place these leases on their balance sheet in calendar year 2019. However, the FASB will allow companies to convert their operating leases to capital leases in advance of 2019 and spread the capital gains from a sale/leaseback transaction out over the term of the leaseback allowing for minimal effect to the companies EBIDTA for accounting purposes. In 2019, FASB will require sale/leaseback gains to be booked in their entirety in the year of the sale. 2. As a result of the 3 year downturn in the oilfield business, for federal income tax purposes, the seller has accrued losses (deferred tax assets) that it can use to offset 100% of the gains it accrues by the sale of the portfolio. SALE PRICE The seller is looking to sell the portfolio at an initial yield to the investor of 8.5%, secured by the seller’s lease guarantees. Pricing per property is listed on the following page.


PROPERTIES & LOCATION MAP

PROPERTY ACREAGE YEAR BUILT# OF

BLDGSOFFICE

SFWAREHOUSE

SFTOTAL SF

W/ CANOPY CRANEEAVE

HEIGHT ELECTRICAL CAPACITY NOTES SALE PRICE

1 Andrews, Texas ± 10.82 2012 3 11,250 15,000 44,900 N 22’400 A, 3 Phase, 208V with redundant 10KVA

generator for data room

Truck/Equipment Wash Bay $3,144,411.76

2 Big Spring, Texas ± 15.43 1972-2013 2 3,030 18,780 26,125 N 15’ - 15’6” 200 A, 3 Phase, 240/120V $1,937,211.76

3 Carlsbad, New Mexico ± 1.88 1994-2001 2 1,000 6,185 7,185 N 12’ - 14’ 100 A, Single Phase, 208/120V $621,423.53

4 Denver City, Texas ± 2.61 1983 1 1,976 2,965 4,941 N 15’6” 100 A, Single Phase, 240/120 v

Truck/Equipment Wash Bay $509,188.24

5 Hobbs, New Mexico ± 6.16 2001 2 5,030 15,000 26,530 N 15’ - 16’6” 250 A, 3 Phase, 208/120 V

Truck/Equipment Wash Bay $2,086,764.71

6 Odessa, Texas ± 4.54 1961-1980 3 11,370 16,530 27,900 N 12’ - 14’ 150-200 A, Single Phase, 208/120 V $3,072,247.06

P. 7

LOCATION MAP

1 2

1 Andrews, TX

Denver City, TX

Big Spring, TXCarlsbad, NM

23

4

5 Hobbs, NM

Odessa, TX

2

3

4

5

6

6


ANDREWS, TX | PROPERTY DESCRIPTION

PROPERTY NAME: Andrews, Texas SUPERSTRUCTURE: 100% Pre-engineered steel

PROPERTY USE: Office/warehouse ROOF SYSTEM: Pitched, low

TOTAL NUMBER OF BUILDINGS: 3 PARKING AREA: Concrete pavement at grade; asphalt pavement at grade

STORIES OR FLOORS: One HEATING/COOLING SYSTEM: 100% Forced warm/cool air

TOTAL BUILDINGS SQUARE FOOTAGE (SF) W/OUT CANOPY:

26,250 EAVE HEIGHT: 22’

CANOPY SIZE (SF): 18,650 CRANES: No

PARCEL SIZE (ACRES): ± 10.82 ELECTRICAL CAPACITY: 400 A, 3 phase, 208V with redundant 10KVA generator for data room

YEAR BUILT: 2012 NOTES: Truck/equipment wash bay

OFFICE SF: 11,250 SALE PRICE: $3,144,411.76 (8.5% Cap Rate)

P. 9

ANDREWS, TX | PHOTOS


ANDREWS, TX | AERIAL

NORTH

NW AVE F

NW M

USTANG DRIVE

EUNICE HIGHWAY (187)

ANDREWS HIGH

SCHOOL

P. 11

ANDREWS, TX | AERIAL

NORTH

NW M

USTANG DRIVE


BIG SPRING, TX | PROPERTY DESCRIPTION

PROPERTY NAME: Big Spring, Texas SUPERSTRUCTURE: 100% Pre-engineered steel


TOTAL NUMBER OF BUILDINGS: 2 PARKING AREA: Asphalt pavement at grade



21,810 EAVE HEIGHT: 15’, 15’6”


PARCEL SIZE (ACRES): ± 15.43 ELECTRICAL CAPACITY: 200 A, 3 phase, 240/120V

YEAR BUILT: 1972, 2013 SALE PRICE: $1,937,211.76 (8.5% Cap Rate)

OFFICE SF: 3,030

P. 13

BIG SPRING, TX | SITE PLAN


BIG SPRING, TX | AERIAL

NORTH

LAMESA HIGHWAY (US HIGHWAY 87)

P. 15

BIG SPRING, TX | AERIALNORTH

LAMESA HIGHWAY (US HIGHWAY 87)


CARLSBAD, NM | PROPERTY DESCRIPTION

PROPERTY NAME: Carlsbad, New Mexico SUPERSTRUCTURE: 100% Pre-engineered metal

PROPERTY USE: Office/warehouse ROOF SYSTEM: Pitched, medium

TOTAL NUMBER OF BUILDINGS: 2 PARKING AREA: Concrete pavement at grade

STORIES OR FLOORS: One HEATING/COOLING SYSTEM: 100% Gas, oil, or electric suspended heater. 50% evaporative cooler and 50% forced air.


7,185 EAVE HEIGHT: 12’, 14’

CANOPY SIZE (SF): 0 CRANES: No

PARCEL SIZE (ACRES): ± 1.88 ELECTRICAL CAPACITY: 100 A, single phase, 208/120V

YEAR BUILT: 1994, 2001 SALE PRICE: $621,423.53 (8.5% Cap Rate)

OFFICE SF: 1,000

P. 17

CARLSBAD, NM | PHOTOS


CARLSBAD, NM | AERIAL

NORTH

BUEN

A VI

STA

DRIV

E

NATI

ONAL

NAT

IONA

L PA

RKS

HIGH

WAY

INDUSTRIAL DRIVE

P. 19

CARLSBAD, NM | AERIALNORTH

BUENA VISTA DRIVE

SIERRA VISTA DRIVE

INDU

STRI

AL D

RIVE


DENVER CITY, TX | PROPERTY DESCRIPTION

PROPERTY NAME: Denver City, Texas SUPERSTRUCTURE: 100% Masonry

PROPERTY USE: Office/warehouse ROOF SYSTEM: Pitched, low, metal




4,941 EAVE HEIGHT: 15’6


PARCEL SIZE (ACRES): ± 2.61 ELECTRICAL CAPACITY: 100 A, single phase, 240/120 v


OFFICE SF: 1,976 SALE PRICE: $509,188.24 (8.5% Cap Rate)

P. 21

DENVER CITY, TX | PHOTOS


DENVER CITY, TX | AERIAL

NORTH

COUN

TY R

OAD

265

HIGHWAY 83

P. 23

DENVER CITY, TX | AERIAL

NORTH

HIGHWAY 83

COUN

TY R

OAD

265


HOBBS, NM | PROPERTY DESCRIPTION

PROPERTY NAME: Hobbs, New Mexico SUPERSTRUCTURE: 100% Pre-engineered metal



STORIES OR FLOORS: One HEATING/COOLING SYSTEM: 100% forced warm/cool air.


20,030 EAVE HEIGHT: 15’, 16’6”


PARCEL SIZE (ACRES): ± 6.16 ELECTRICAL CAPACITY: 250 A, 3 phase, 208/120 V


OFFICE SF: 5,030 SALE PRICE: $2,086,764.71 (8.5% Cap Rate)

P. 25

HOBBS, NM | PHOTOS


HOBBS, NM | AERIAL

NORTH

LOVINGTON HIGHWAY (HWY 18)BUSINESS PA

RK

P. 27

HOBBS, NM | AERIAL

NORTH

BUSINESS PARK


ODESSA, TX | PROPERTY DESCRIPTION

PROPERTY NAME: Odessa, TX SUPERSTRUCTURE: 100% Pre-engineered metal



STORIES OR FLOORS: One HEATING/COOLING SYSTEM: 100% forced cool air


27,900 EAVE HEIGHT: 12’, 14’


PARCEL SIZE (ACRES): ± 4.54 ELECTRICAL CAPACITY: 200 A, single phase, 208/120 V 150 A, single phase, 208/120 V

YEAR BUILT: 1961, 1980 SALE PRICE: $3,072,247.06 (8.5% Cap Rate)

OFFICE SF: 11,370

P. 29

ODESSA, TX | PHOTOS


ODESSA, TX | AERIAL

NORTH

W MURPHY STREET

WILLIAM

S AVENUE

S COUNTY ROAD W (1882)

P. 31

ODESSA, TX| AERIALNORTH

W MURPHY STREET

WILLIAMS AVENUE


RECENT NEWS ARTICLES

P. 33

THE LARGEST OIL DEPOSIT EVER FOUND IN AMERICA WAS JUST DISCOVERED IN TEXAS NOVEMBER 16, 2016 | REPORTER: AKIN OYEDELE - BUSINESS INSIDER The US Geological Survey said Tuesday that it assessed what could be the largest deposit of untapped oil ever discovered in America.

An estimated average of 20 billion barrels of oil and 1.6 billion barrels of natural gas liquids are available for the taking in the Wolfcamp shale, which is in the Midland Basin portion of Texas’ Permian Basin.

Based on a West Texas Intermediate crude oil price of $45 per barrel, those deposits are worth about $900 billion.

US oil exploration companies have flocked to the superrich Permian Basin in recent years and used shale-drilling technology to create an oil boom that simultaneously helped trigger a price crash two years ago. The count of active oil rigs fell with prices, but has risen over the past few months, mostly in the Permian. Bloomberg noted that the Wolfcamp, where this deposit was found, has been one of the primary targets of shale drillers.

“The fact that this is the largest assessment of continuous oil we have ever done just goes to show that, even in areas that have produced billions of barrels of oil, there is still the potential to find billions more,” Walter Guidroz, program coordinator for the USGS Energy Resources Program, said in a statement.

More than 3,000 horizontal oil wells have already been drilled and completed in the Midland Basin Wolfcamp section, according to the USGS. To get the oil, producers fracture, or “frack,” the earth below with a high-pressure liquid mixture to untap oil and gas from shale rock.

This map from the USGS shows the area where the deposit was found:

P. 34

IN PERMIAN LAND RUSH, OIL COMPANIES KNOCK, CALL AND HOPE FOR DIVINE INTERVENTION NOVEMBER 12, 2016 | UPDATED NOVEMBER 14, 2016 | REPORTER: DAVID HUNN - HOUSTON CHRONICLE COMPANIES SCRAMBLING TO SECURE LAND RIGHTS IN COMPETITION LIKENED TO A ‘KNIFE FIGHT’

MIDLAND - Last spring, Pastor Jeff Franklin was fretting. He’d committed his congregation to three new international missions and wasn’t quite sure where they’d get the money.

Then an oilman knocked on the door.

Franklin’s church, Kelview Heights Baptist, is on 10 acres in the middle of this West Texas oil capital. Drillers were never interested before. But now acreage around Midland is so precious - and getting so expensive - landmen are dueling to secure leases for mineral rights under parks, restaurants, churches and thousands of Midland’s ranch homes.

“They literally went to every house,” said Jim Connell, Kelview’s associate pastor. “Who knew we’d get into the oil business?”

As oil prices have recovered, drillers have flocked back to Midland and the surrounding Permian Basin, one of the most productive oil fields in North America and among the few places where companies can make money with crude hovering between $40 and $50 a barrel. Majors, independents and small private companies are scrambling to secure land and mineral rights in a competition some producers call a “knife fight.”

As a result, land costs have skyrocketed from $2,000 to as much as $60,000 an acre,which one company paid this summer, raising eyebrows even among peers.

“Oh, yeah, everybody wants the same acreage,” Elizabeth Moses, a vice president at Midland-based Diamondback Energy, said after buying 19,000 Permian acres for $560 million. “Landmen are literally knocking on the same doors.”

Franklin wouldn’t say how much money Kelview Heights Baptist pocketed. But the competition helped. At one point, negotiations with Midland’s Arrington Oil & Gas were slowing down. Franklin sensed the church might get stiffed.

“Then the Lord led another landman by,” he said.

Arrington cut the deal at the next meeting. Franklin promptly sent the cash to Honduras, for water wells, to Guatemala, for an orphanage and soup kitchen, and to India, for a new wing on a home for widows. “It’s a miracle,” Franklin said.

Boom. Crash

The shale revolution came late to the Permian. Operators first perfected horizontal drilling and high-pressure hydraulic fracturing in shale gas fields, like Fort Worth’s Barnett and Louisiana’s Haynesville, and in newer oil plays, like North Dakota’s Bakken and San Antonio’s Eagle Ford.

“Everybody thought the Permian was dead,” said Pete Stark, a senior director at research firm IHS Markit.

Companies eventually tried fracking there, but the rock was more complex - if drillers figured out how to frack in one spot, that didn’t mean they’d succeed a few miles away. It took years of trial-and-error to come up with the right horizontal drilling techniques that allowed them to efficiently tap the reservoirs of oil.

Soon after, drillers began singing the Permian’s praises. The basin had dozens of layers of oil-soaked rock, meaning companies could access a lot of oil from one location and dig wells without hardly moving their rigs. Acres of the Permian were still unexplored. And the support that drillers needed - water trucks, service companies and pipelines - were readily available.

U.S. oil prices were surging then, to well over $100 in 2011, and drillers began pumping at rates unseen in 20 years. But all the success eventually glutted the market; oil prices started tumbling in the summer of 2014, falling to a low of $26 a barrel in February. The U.S. rig count plummeted from 2,000 to just over 400, according to data compiled by oil field services firm Baker Hughes. At least 100,000 workers lost their jobs.

P. 35

IN PERMIAN LAND RUSH, OIL COMPANIES KNOCK, CALL AND HOPE FOR DIVINE INTERVENTION (CONTINUED)There was, however, a bright spot: the Permian. As oil prices stayed stubbornly low, producers found few other plays as economical. Companies like Irving-based Pioneer Natural Resources trimmed operations in other fields and focused on the Permian.

Companies have added about 80 rigs to the basin since May. No other play has grown as much since the bottom of the crash. The closest, Oklahoma’s Cana Woodford, is up 16.

Two years ago, one-quarter of U.S. rigs were in the Permian. Now, more than 40 percent are.

$60,000 an acre

The rush for land in the Permian has driven prices to record levels. In 2006, companies spent $2,000 on average per acre of oil land in the Permian, according to IHS Markit. So far this year, they’ve averaged more than $30,000, almost 10 times higher than prices in the Bakken or Eagle Ford.

“They’re paying absurd amounts of money,” said Erik Paulson, 30, a landman who works in Midland.

In June, Denver’s QEP Resources bought 9,400 acres for $60,000 per undeveloped acre, according to analysts at energy research firm WoodMackenzie. In July, Houston-based Silver Run Acquisition bought 38,000 acres for $29,000 an acre. And in August, companies booked four big deals, including Austin-based Parsley Energy’s 9,000-acre buy for at least $35,000 an acre. The pace slowed in September; it seemed like the big deals had been cut.

But they returned in October. Dallas-based RSP Permian bought 41,000 acres for $2.4 billion, or as much as $47,000 per undeveloped acre. Then, Denver’s SM Energy

announced it was buying 35,700 acres from QStar of Houston for $1.6 billion in cash and stock, or at least $42,000 per undeveloped acre.

The cost is worth it, said Steven Gray, chief executive of RSP Permian.

“Some of the best wells in the entire basin are out of there,” he said

Ten years ago, substantial Permian deals - those over $10 million each - totaled $1.1 billion, or less than 2 percent of U.S. transactions. This year, oil companies have already spent more than $14 billion, representing more than one-third of all U.S. exploration and production sales.

Longtime Permian operators now are watching their land sprout in value. Diamondback, a publicly traded company with prime Midland real estate, bought some of its best acreage 10 years ago for about $2,500 an acre. The company now values it at $60,000 an acre or more.

Discovery Operating of Midland figures some of its leases are worth 30 to 40 times what it paid for them in 1999.

“There’s lots of Wall Street money in the Permian right now,” said chief operations officer Jeff Sparks. “They look at it as a good investment. I do, too.”

Sparks isn’t selling, and others wished they didn’t have to. Eastland Oil, family-owned for 94 years, has tried to cobble together acreage in three different counties around Midland over the past year or so, only to watch big land companies swoop in and offer double the money. Eastland had two choices: Start matching the offers or selling its rights to the competition. It sold.

“We buy acreage to drill. We don’t buy it to turn,” said president and owner Robin Donnelly. “So our business model is not functioning right now.”

P. 36

IN PERMIAN LAND RUSH, OIL COMPANIES KNOCK, CALL AND HOPE FOR DIVINE INTERVENTION (CONTINUED) ‘Never, never sell’

Companies aren’t the only ones watching prices jump. Landmen are hounding rancher Mary Nell Haley, 50, who runs cattle on about 14,000 acres in Loving County, 80 miles west of Midland.

Haley says she gets calls, letters and emails each week from companies hoping to pick up leases on about 1,200 of her acres.

“I got four more requests in the mail the other day,” Haley said last week.

The landmen used to offer about $3,000 an acre. Now they’re pushing $8,000. And some want to buy - not lease - her mineral rights.

Haley chuckled. Texans, she said, know better than that.

“You never, never, never sell,” she said.

Even the city of Midland is getting a piece of the action. This summer, Midland awarded bids to four companies for 10 sections of city land - under parks, right-of-ways and other city properties. The city got as much as $13,500 an acre, said oil and gas coordinator Ron Jenkins, and has already made more than $5 million this year. The money goes into the city’s general fund, which pays for streets, water and police, among other needs.

“That’s real good, in my book,” Jenkins said. “I’m not kidding. Everybody’s liking me right now.”

In the city’s subdivisions, among brick homes and neatly trimmed front yards, homeowners were stunned to learn they still owned their mineral rights. Old Midland landowners often separated oil from surface rights before selling tracts to home builders, saving future royalties for themselves. If not, builders usually did before selling the homes.

Few thought to separate mineral from surface rights in city neighborhoods before the shale boom, since traditional vertical rigs drill straight down and Midland regulations bar drilling within 500 feet of homes. Horizontal wells changed all that, enabling drillers to reach oil with rigs a mile or more away.

Neighbor after neighbor here said they answered their doors to landmen over this past year. Most said the offer wasn’t for a lot of money - about $400 up front, plus 25 percent of the proceeds from the oil and gas under their properties.

Some liked the idea, and signed. Some were nervous about drilling under their homes. Most had mixed feelings.

Clarieca Tabors, 64, a retired nursing home cook, scooted her wheelchair up to her front door, a small house with dying grass and a bad paint job.

It’s been a rough year for Tabors, personally and financially. She lost family oil land around San Antonio because she couldn’t afford the taxes. Social Security cut her monthly benefits, saying she was getting too much. Her husband, in a nursing home, isn’t doing well.

“This is one year I’ll be glad when it goes away,” she said.

She can still afford her mortgage and utilities, but there’s nothing left over, she said. So the notice left on her door earlier this year seeking to lease her mineral rights was something of a blessing - if a small one.

P. 37

HOUSTON OIL STOCKS SOAR ON OPEC NEWS NOVEMBER 30, 2016 | REPORTER: DAVID HUNN - HOUSTON CHRONICLE

Houston oil company stocks surged Wednesday following news that OPEC brokered a groundbreaking deal to cut oil production, adding kick to the slow U.S. energy recovery.

A RECORD DAY: OPEC deal gives oil best day in seven years

The Organization of the Petroleum Exporting Countries agreed to cut production by 1.2 million barrels a day during a meeting Wednesday in Vienna. It’s the cartel’s first cut in eight years, and ended up much deeper than the 750,000 barrels a day first suggested in September.

The news drove U.S. crude prices up 9 percent and stock prices up — at times by double-digits — among Houston oil companies.

ON THE MOVE: ConocoPhillips leaving Energy Corridor headquarters

Highlights: EOG Resources rose $10 or about 11 percent to $103. Anadarko Petroleum Corp. leaped $8 or 13 percent to $68. Marathon Oil Corp. jumped 21 percent or $3 to $18.

Company List Price Change % ChangeAnadarko Petroleum Corporation $69.15 $8.99 15%

Apache Corporation $65.95 $5.21 9%

Baker Hughes Incorporated $64.33 $3.85 6%

Chevron Corporation $111.56 $2.22 2%

ConocoPhillips $48.52 $4.29 10%

EOG Resources, Inc. $102.52 $10.08 11%

Energy Transfer Partners, L.P. $35.12 $1.68 5%

Exxon Mobil Corporation $87.30 $1.40 2%

Halliburton Company $53.09 $5.30 11%

Kinder Morgan, Inc. $22.20 $0.80 4%

LyondellBasell Industries N.V. $90.32 $6.60 8%

Marathon Oil Corporation $18.06 $3.11 21%

National Oilwell Varco, Inc. $37.36 $2.81 8%

Occidental Petroleum Corporation

$71.36 $3.79 6%

Plains All American Pipeline, L.P. $32.95 $3.29 11%

P. 38

PERMIAN PRODUCTION ON THE RISE UPDATE THROUGH AUGUST 2016 | REPORTER: ENNO PETERS - OILPRO

This interactive presentation contains the latest oil & gas production data from 10179 selected horizontal wells in the Permian (Texas & New Mexico) through August. Please click here to visit the interactive webpage for further information.

Although the data shows a small drop in August, I’m quite sure that once revisions come in, we see a slowly rising oil production in the Permian, from horizontal wells. The effect of revisions is nicely visible now, as in my previous update, March production was just below 1 million bo/d, while now it is just above. As the effect is likely to be stronger for recent months, I expect to eventually see August production around 8-12% higher than currently shown.

If you switch to gas (using the “product” selection in the top right), you’ll notice that gas production from these wells has risen sharply this year, even before upcoming (typically upwards) revisions.

In the “Well quality” overview, we can see that wells that started production in 2016 perform better than earlier wells, while also 2015 wells showed clear improvements over earlier wells. But also in this basin the number of new well starts is lower than in the previous two year, as you can see see in the “Well status” view. I attribute the steep drop in July and August to incomplete data.

The last view shows that of the major operators, only Pioneer has kept growing production undeterred during the past year. Its gas production is still lower than other operators, such as

Concho Resources, and Cimarex.The new ‘Advanced Insights’ presentation is displayed below: This first overview shows the path that wells from a certain period are taking towards their ultimate return. The wells are grouped by the month in which they started production (“first flow”).

A lot of information is displayed. What I aim to show by this is not the exact change in these paths over time, but very roughly the range of paths that older, and newer wells are taking, from which we can estimate a realistic range of ultimate oil (or gas) return

As we’ve seen already in North Dakota, and the Eagle Ford, the relationship between production rates, and (remaining) ultimate return is revealed quite well with this overview (in my opinion). I think that this dashboard also allows making a reasonable estimation of how much extra newer wells are likely to produce more than earlier wells.

I also recommend having a look at the next couple of views, as these show quite nicely how well productivity is distributed over operators, and geographically.

The last view (Gas Oil Ratio), shows, as already noted, that recently the GOR has risen across the basin. This is mostly due to the relative increase in gas production from older wells, as the top graph shows that newer wells start with a lower GOR than earlier ones.

For a more detailed description of these new overviews, please visit the first version of this advanced presentation for ND available here.

Next week Tuesday I will have another update on North Dakota, when the NDIC is currently planned to release October production data. Once Ohio publishes Q3 production, I will make a new post on the Appalachia basin.

Production data is subject to revisions, especially for the last few months in Texas. For this presentation, I used data gathered from the following sources:

•Texas RRC. I’ve estimated individual well production from well status & lease production data, as these are otherwise not provided. Because of these estimations, I recommend looking at larger samples (>50 wells) before drawing conclusions. About 7% of the horizontal Permian wells in Texas are excluded, as these were mixed with too many vertical wells on a lease, making reasonable well profile estimations impossible. I’ve no spud, DUC, or plugging information on wells & DUCs in Texas, so these statuses are unavailable in the “Well status” tab.

•OCD in New Mexico. Accurate individual well production data is provided.

•fracfocus.org

http://oilpro.com/post/29024/permian-production-rise

P. 39

OIL COMPANIES KEEP PAYING FOR PERMIAN LAND OCTOBER 23, 2016 | REPORTER: DAVID HUNN - HOUSTON CHRONICLE

Oil companies continue buying acreage in West Texas’s prolific Permian Basin.

This time, it was Denver’s SM Energy, announcing Tuesday it was picking up 35,700 acres in Howard and Martin counties, north and east of Midland, from private-equity backed and Houston-based QStar for $1.6 billion in cash and stock. The deal included 2,400 barrels per day of existing oil and gas production and works out to at least $42,000 per undeveloped acre, analysts said, stacking the purchase up among top prices this year.

It’s the second big announcement in a week. Last Thursday, Dallas-based RSP Permian bought Silver Hill Energy Partners, also headquartered in Dallas, and its 41,000 acres for $2.4 billion, or as much as $47,000 per undeveloped acre, according to some analysts.

The investment banking firm Piper Jaffray called the purchase another among “transformational acquisitions” this year.

The two announcements again show how U.S. oil companies, regardless of the slump in oil prices, are fighting to get into the oil-rich Permian Basin, even as they pull rigs from other fields. They also show how much companies are willing to pay.

“The Permian is so hot right now,” said Ben Shattuck, an analyst with the energy research firm Wood Mackenzie. “These are high-water numbers.”

The Permian Basin’s two sections, the Midland and the Delaware, are the most

competitive markets in the country in tight oil right now, he said.

RSP’s buy was in the Delaware, the Permian’s western lobe. There, year-to-date transactions have averaged $14,400 an acre, Piper Jaffray said — about $30,000 less than what RSP paid.

It’s the second big Permian purchase for SM Energy. Just two weeks ago, the company bought Denver- and Houston-based Rock Oil Holdings and its 24,783 acres in Howard County for $980 million.

The two buys together buoyed SM’s Midland Basin footprint to 82,450 acres. Moreover, much of the land is contiguous, allowing the company to drill longer horizontal wells and get out more oil.

At the same time, SM Energy has pulled rigs from the Eagle Ford formation, west of Houston, and is now dumping its acreage in North Dakota’s Williston Basin, too.


EXPANSE ENERGY COMPANY PROFILE

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1155 Dairy Ashford Rd. Suite 450 / Houston, TX 77079Phone: 832.399.0054 / Fax: 832.399.0072

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EXPANSE ENERGY SOLUTIONS is a premier provider of electrical infrastructure, automation and maintenance services as well as materials to the energy and industrial industries. Expanse operates as a network of companies across the United States with a wide scope of offerings that answers the electrical demands of cutting-edge technologies in automation,

artifi cial lift and enhanced oil recovery.

Upstream, midstream or downstream, Expanse’s services reach across the industry’s broad operational spectrum. Along with their wide

scope of services Expanse also offers turn-key solutions by providing a national reach with local service capabilities, effi cient supply chain management and around-the-clock maintenance. All of these exceptional advantages and strategic placements make Expanse Energy Solutions the preferred provider for projects of any size.

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UPSTREAM • MIDSTREAM • DOWNSTREAM • AUTOMATION & INSTRUMENTATION INDUSTRIAL SOLUTIONS • COMMERCIAL SOLUTIONS • GREEN RENEWABLE

ENERGY • UTILITY INFRASTRUCTURE • WELL SITE & FACILITY ELECTRIFICATION MEASUREMENT & GAS CHROMATOGRAPHY • STORM RESTORATION • REMOTE

MONITORING • SERVICES AND MAINTENANCE

THE

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Jeff JohnsonChief Executive Officer

[email protected] • www.expanseenergy.comOffice: 832.399.0054 • Mobile: 432.208.9371

1155 Dairy Ashford Rd., Suite 450 • Houston, TX 77079

www.expanseenergy.com www.expanseenergy.com


EXPANSE ENERGY COMPANY PROFILE


www.expanseenergy.com

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SNATIONAL PRESENCE, LOCAL SERVICEExpanse is an organization of best-in-class companies united to provide streamlined solutions through a national presence that offers invaluable local expertise. While we have the most extensive presence in the Permian and Williston basins, Expanse also is working for customers in the Marcelles, Barnett, Eagle Ford and Woodford shale producing regions. Our national footprint combined with our regional knowledge gives customers effective, effi cient services across geographical and operational spectrums.SYSTEMS LIFECYCLEComprehensive services span the lifecycle of oil fi eld operations, from site preparation to site decommissioning. Services include:

• Well-Site Electrifi cation• Field Infrastructure• Artifi cial Lift• Automation and Telemetry• Maintaining and Repair • Upgrades • Retrofi ts • Emergency Response• Secondary and Tertiary Recovery• Decommissioning

SUPPLY CHAIN MANAGEMENTA world-class supply chain is integral to supporting Expanse’s commitment to a rapid-response platform. With a material count of more than one million items, Expanse’s warehouses are fully stocked and have response vehicles outfi tted with commonly needed parts and supplies ready to serve at a moment’s notice. Through its strong partnership with suppliers, Expanse and its affi liated companies provide unparalleled lead-time advantages for special items, which improve project effi ciency. Expanse leads the industry in Original Equipment Manufacturer (OEM) relationships, and its technicians are trained to provide authorized services.VALUE PROPOSITIONExpanse provides compelling value for mission-critical services through a best-in-class value proposition.

• Safety • Behavior-based safety culture and training • Exceptional safety record• Reliability • Scale and redundancy in all service areas • Superior availability of materials • Dependable service and emergency response• One-Stop Shop Service Capability • System design • Installation • Programming • Maintenance • Emergency Response• Timeliness of Services • Delivering superior service through size and scale • Licensed personnel • Independent inventory of assets • Fully stocked warehouses and trucks available 24-Hours a day• Lower All-In Cost • Experience and scale drives installation effi ciency • Fewer, more effi cient labor hours

WHAT WE DOThe majority of Expanse’s network of locations have been the market-leading provider of energy industry services and electrical infrastructure materials since 1951. The company’s comprehensive solutions for oil and gas and industrial operations range from initial development through the long lifecycle of an oilfi eld or long-term maintenance or large industrial projects.

OIL & ENERGY

• Automation & Instrumentation • Electrical Services • Pole Line Services • OH & UG Distribution • Pipeline • Transmission

MONITORING

• Well Head • SWD Controls • Video Surveillance • Drone Assessments

INDUSTRIAL

• Manufacturing • Plant Turnarounds • Mining & Aggregates • Automation & Controls

COMMERCIAL

• Education • Medical • High Rise • Transportation & Border Control

PROJECT MANAGEMENT

• Project Scheduling • Material Management • Short Interval Planning • Subcontractor Management

SERVICE, MAINTENANCE, EMERGENCY RESPONSE

• Storm Restoration • 24/7 Service • Renewable Energy Installs • Lighting Retrofi ts • Energy Audits

www.expanseenergy.comwww.expanseenergy.com

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Action Electric, Inc.701.483.6416

Dixie Electric, LLC432.580.7095

Epic Integrated Services,LLC

432.238.9167

K&S Electric, Inc.406.778.3111

L & K Electric, Inc701.774.1094

Mac Supply Inc.806.669.2500

Monahans Electric432.943.3246

Patriot Automation and Controls, LLC325.653.7546

Strong Electric, LLC830.693.6382

Wellkeeper, Inc.888.935.5533

TM

www.strongelectric.net

• Licensed in These States• Offi ce Locations Corporate Headquarters

SAFETY, TRAINING & COMPLIANCEEvery industry professional employed by the Expanse group of companies makes a safe working environment the number one priority – no matter if they are in the offi ce, on the road or on a client location. We are not only concerned for our own health and safety, but continually strive to safeguard the health and safety of others who work on the locations we serve and travel down the roads we share. We pride ourselves on our industry leading safety records and memberships with some of the most prestigious associations dedicated to safety, training and compliance.

National Presence. Local Service.

Expanse Energy Solutions1155 Dairy Ashford Rd. Suite 450 / Houston, TX 77079Phone: 832.399.0054 / Fax: 832.399.0072

4

3

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1

02010 2011 2012 2013 2014 2015 2016

2,500,000

2,000,000

1,500,000

1,000,000

500,000

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Hours Worked TRIR Industry BLS TRIR Rate

Total Recordable Incident Rate

3.36

2.45

1.15 1.12 1.1 0.97 0.82

www.expanseenergy.com www.expanseenergy.com

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OFFERING PROCESS & TIMELINE> PROPERTY TOURS AVAILABLE Colliers International will be available to provide property and market tours with a seven (7) day advance notice. Colliers is available during normal work hours to answer

questions as it relates to the offering materials provided. Buyer will be responsible for travel expenses except seller will provide ground transportation. It takes two (2) full days, starting at 9am, to tour the full portfolio.

> BID GUIDELINES Each investor will be required to submit the following: • A detailed description of offering price and any contingencies. (Closing cost allocations and specific due diligence allowances are detailed in the proposed Purchase and Sale

Agreement.) • A detailed bio of the investor, the investor’s source of capital for the acquisition, and proof of its discretionary use of the acquisition funds. • A detailed description of the capital sources approval processes, if third party capital sources are required.

> BUYER SELECTION Buyer Selection will be based on many elements, including but not limited to: financial qualifications, source of buyer funds, buyer experience with sale/leaseback transactions,

the amount of time spent reviewing due diligence materials. All offers must be made in writing using the Purchase and Sale Agreement (PSA) provided to the buyer within the due diligence materials. Buyer will have forty-eight (48) hours to review the PSA, get any issues with the PSA resolved with the seller’s attorney, and get it signed and submitted to the seller for consideration. If accepted, seller will have twenty-four (24) hours to get the buyer signed PSA receipted by the title company. Subsequently, buyer will have three (3) business days to deposit the Earnest Money with the title company.

Offers will be accepted and evaluated on the individual properties. 2% Co-broker fee offered.

All offers should be submitted to Christopher S. Klein at [email protected].

EXCLUSIVE ADVISORS


Colliers International1233 West Loop SouthSuite 900Houston, Texas 77027




REGISTRATION, CONFIDENTIALITY AND DISCLAIMER AGREEMENT


REGISTRATION, CONFIDENTIALITY AND DISCLAIMER AGREEMENT

THIS AGREEMENT is intended solely for your use in considering the acquisition and lease-back of _____________________________ (“DELLC”) located at (see Exhibit “A” at-tached hereto and made a part hereof for Property Addresses) (the “Property”). Upon full execution of this Agreement, the undersigned Listing Broker will cooperate with under-signed Co-Broker to allow the undersigned Prospective Purchaser access to the Marketing Information (defined below). Prospective Purchaser’s execution of this agreement shall authorize Co-Broker to serve as agent for the Prospective Purchaser in connection with the providing access to the Marketing Information and the sale of the Property.

As used herein, the term “Marketing Information” means any and all information relative to the Property’s status, operation and terms of the sale provided to Prospective Purchaser pursuant to this agreement, including without limitation, offering memorandum(s) and other information provided on the Property specific web page including, by way of illustration and not limitation selected information pertaining to the business and affairs of the Property, proposed leases, Environmental Site Assessments, and proposed income and operating ex-pense information. Neither this agreement, nor any of the Marketing Information constitutes an offer for the sale or purchase of the Property. The Marketing Information, including the information provided on the Property specific web page, are not intended to be all-inclusive or contain all the information that a Prospective Purchaser may desire regarding the Prop-erty. Neither Seller nor Listing Broker make any representation or warranty, expressed or implied, as to the accuracy or completeness of the Marketing Information and the Property specific web page its contents and no legal liability is assumed or implied with respect thereto.

Co-Broker and Prospective Purchaser acknowledge that Colliers International (“Listing Broker”) and Seller expressly reserve the right, at their sole discretion, to alter or amend the terms of the Property’s offering, to reject any and all expressions of interest or offers to acquire the Property and/or to terminate discussions with Prospective Purchaser and any person or entity at any time with or without notice. Seller shall have no obligation to

Prospective Purchaser or any other person or entity reviewing the Marketing Information and the Property specific web page or making an offer to acquire the Property unless and until a written agreement for such acquisition has been fully executed by the parties to such agreement, delivered and approved by the Seller and any conditions to the Seller’s obliga-tions thereunder have been satisfied or waived.

By your receipt of and access to the Marketing Information and the Property specific web page, you agree that: its contents are confidential; you will hold and treat it in the strictest of confidence; you will not disclose or permit anyone else to disclose this material or its contents to any other entity without prior written authorization of the Listing Broker and Seller; you will not permit this material or its contents to be used in any fashion or manner detrimental to the interest of the Seller. Photocopying or other duplication is strictly prohib-ited. Co-Broker and Prospective Purchaser agree not to disturb any tenants in possession of the Property or employees affiliated with the Property, or to reveal to such tenants or employees that the Property is being offered for sale or any matters relating to the Marketing Information/Offering Memorandum and the Property specific web page. If you do not wish to pursue or discontinue negotiations leading to this acquisition, you agree to return all Marketing Information previously delivered to you, if requested to do so by Seller or Listing Broker.

THE MARKETING INFORMATION AND ANY AND ALL INFORMATION AND MATERIALS PROVIDED ON THE PROPERTY SPECIFIC WEB PAGE SHALL NOT BE DEEMED A REP-RESENTATION OF THE STATE OF AFFAIRS OF THE PROPERTY OR CONSTITUTE AN INDICATION THAT THERE HAS BEEN NO CHANGE IN THE BUSINESS, CONDITION OR AFFAIRS OF THE PROPERTY SINCE THE DATE OF PREPARATION OF INFORMA-TION AND MATERIALS. PROSPECTIVE PURCHASER’S DECISION TO PURCHASE THE PROPERTY SHALL BE SOLEY BASED ON PROSPECTIVE PURCHASER’S INDEPEN-DENT INVESTIGATION AND EVALUATION OF THE PROPERTY AND ALL INFORMATION RELATING TO THE PROPERTY AND NOT ANY INFORMATION PROVIDED BY SELLER OR LISTING BROKER. PROSPECTIVE PURCHASER AND CO-BROKER AGREE THAT THE SELLER AND LISTING BROKER SHALL HAVE NO LIABILITY WTH RESPECT TO ANY INFORMATION PROVIED BY THE SELLER OR LISTING BROKER.


It is essential that all parties to real estate transactions be aware of the health, liability and economic impact of environmental factors on real estate. Colliers International does not conduct investigations or analyses of environmental matters and, accordingly, urges its clients to retain qualified environmental professionals to determine whether hazard-ous or toxic wastes or substances (such as asbestos, PCB’s and other contaminants or petrochemical products stored in underground tanks) or other undesirable materials or conditions are present at the Property and, if so, whether any health danger or other liability exists. Such substances may have been used in the construction or operation of buildings or may be present as a result of previous activities at the Property.

Various laws and regulations have been enacted at the federal, state and local levels deal-ing with the use, storage, handling, removal, transport and disposal of toxic or hazardous wastes and substances. Depending upon past, current and proposed uses of the Property,

it may be prudent to retain an environmental expert to conduct a site investigation and/or building inspection. If such substances exist or are contemplated to be used at the Property, special governmental approvals or permits may be required. In addition, the cost of

removal and disposal of such materials may be substantial. Consequently, legal counsel and technical experts should be consulted where these substances are or may be present.

Co-Broker represents and covenants that Co-Broker is, and at the time of the consum-mation of any sale of the Property to the Prospective Purchaser will be, a duly licensed real estate broker in good standing in the state(s) where the Property is located. Co-Broker represents and covenants that the Co-Broker’s relationship with the Prospective Purchaser is, and at the time of the consummation of any sale of the Property to the Prospective Purchaser will be an “arms length” relationship, wherein the Co-Broker and its affiliates, officers, employees and agents will not be participating in the Prospective Purchaser’s proposed ownership structure of the Property.

In the event that the proposed sale is consummated by a closing and transfer of title from Seller to Prospective Purchaser, any fees that may be due Co-Broker shall be paid by the Prospective Purchaser pursuant to a separate agreement between Co-Broker and the

Prospective Purchaser. Colliers International shall not be responsible for any commis-sions or other fees due Co-Broker. Co-Broker will look solely to the Prospective Purchas-er for payment of Co-Brokers fees or commissions due Co-Broker and hereby waives the right to make any claims against Seller or Listing Broker.

Prospective Purchaser and Co-Broker agree to indemnify and hold harmless the Listing Broker and Seller against any and all costs, expenses, liability and attorney’s fee’s aris-ing from any claims of another broker, or parties claiming to have any dealings with the Prospective Purchaser in connection with the sale of the Property.

ACCEPTED AND AGREED TO:

PROSPECTIVE PURCHASER: CO-BROKER:

_____________________________ ___________________________________

Print Purchaser Name Print Co-Broker Name

Signature: _______________________ Signature: __________________________

By: ____________________________ By: _______________________________

Title:___________________________ Title: ______________________________

Company: _______________________ Company: __________________________

Address: ________________________ Address ___________________________

________________________ ___________________________

City State Zip City State Zip

Date: ___________________________ Date: ______________________________

Phone: _________________________ Phone: ____________________________

Email: __________________________ Email:______________________________

Please return to: Christopher S. Klein at [email protected] or [email protected]


E XC LUS I V E M A R K E T I N G A DV I S O R S




COLLIERS INTERNATIONAL

This document has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This publication is the copyrighted property of Colliers International and/or its licensor(s). ©2016. All rights reserved.

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