4 Steps to Securing Oil and Gas Lease Income

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1 Northwest Oil, Gas and Mineral Management Services 4 Steps to Securing Oil and Gas Lease Income A resource guide from your trusted local financial advisor. PLUS What you can do right now to get started!

2 4 Steps to securing your lease income This lease may be my best chance for financial security. Where do I start? As your trusted local financial advisor, Northwest does not charge an hourly fee for planning and guidance. The prospect of sudden wealth from an oil or gas lease may have you feeling a bit overwhelmed. The income can be substantial, but contracts, tax issues and financial decisions to be made during the process can be confusing not to mention scary Should I spend the money or invest it? Should I pay off debt? Will this new windfall sum allow me to retire early? What s the best way to leave something for my children? How can these new assets best provide for my future healthcare needs and protect my property? When it comes to properly structuring and preserving your newfound wealth, Northwest is uniquely qualified to assist you with unbiased advice, expanded financial services and a comprehensive approach we call Royalty Manager. There are tools available at each step of the process including before your oil or gas lease is even signed to help you maximize income. We fully understand the Life Cycle of a lease and we re here to guide you through each step with specialized knowledge, integrity and top-level service.

3 Step 1 Pre-Lease Planning How can I get the most from my Oil or Natural Gas Royalties? First, assemble a team of experienced, professional advisors to guide you through the process. The best time to have a professional review your proposed lease is, of course, before you sign it. Northwest s highly qualified legal, tax and estate planning professionals can help you maximize royalties, minimize taxes and transfer more wealth to your family right from the start. Legal Planning If you are like most landowners, your oil or gas lease will be the largest, most significant contract you will ever sign. When you sign it, you are presumed under the law to have fully read and understood it all of it. Each provision of an oil or gas lease has special meaning and can affect you and your family for years to come. We strongly recommend that you have your oil or gas lease reviewed by an attorney before signing it. Our team will work with your attorney to get you the lease you deserve. Estate Planning When you enter the world of oil or gas lease income, a simple will is no longer adequate. As your trusted advisor, we can help you and your counsel avoid pitfalls and confidently structure a federally taxable estate plan to minimize estate and inheritance taxes. We also offer estate administration and settlement services, wealth transfer (inheritance planning) services, family business services and trustee services as needed. Financial Planning Who would you rather benefit financially: the state and federal governments, or your spouse, children, relatives and charities? Our team of professional advisors will identify the appropriate tools at each stage of the process to reduce and minimize your tax exposure and maximize the wealth you transfer to your beneficiaries. Northwest offers wealth management, debt management, retirement planning and educational planning for your children, grandchildren and more. Let us tailor the investment and tax solutions to fit your needs. Tax Planning You need knowledgeable, experienced professionals to help you minimize income taxes and provide assistance with more complicated tax returns. On the federal level, you may have exposure to Income Tax, Gift Tax, Estate Tax, Alternative Minimum Tax (AMT) and Generation Skipping Tax (GST). The state may assess you and your family with Income Tax, Inheritance Tax and Transfer Tax. We can help.

4 Step 2 Leasing Preparation Have I met with my attorney to review the lease agreement? Have I discussed tax implications with my tax advisor? Do you know the difference between a Bonus Payment, Delay Rental Payment and Royalty Payment? How about a Pipeline Easement or Right-of-Way Payment? If you are like most landowners with an oil or gas lease, many or all of these payments may be coming your way. Each has unique characteristics you need to understand in order to structure them to your advantage and ensure you are being paid and taxed fairly. Before you enter into any legally binding contracts, you should have them reviewed by an attorney who is knowledgeable and experienced in state oil and gas laws, as well as an accountant who understands the federal and state tax implications associated with these unique contracts. No matter where you are in the leasing process, Northwest is here to help. Our team of attorneys, bankers, lenders and investment professionals work on salary and your needs are their top concern. They have been trained to understand the oil and gas issues that landowners face. Northwest s Royalty Manager (detailed on the next page) can give you everything you need to understand what is happening with your lease and how it affects your future.

5 Step 3 Managing Lease Income When will I receive payments? How do I report them for tax purposes? Royalty Manager from Northwest can help you level the playing field with oil and gas companies. How Royalty Manager Works 1 Enroll: Once you sign up with Northwest s Royalty Manager, your oil and gas royalty payments are received and processed by our staff each month. Complex and detailed oil and gas leases, declarations of pooling and unitization, division orders, income statements, tax forms and other royalty documents can be a nightmare to read and comprehend let alone verify. 2 Review: Your royalty account statement or check detail is examined and compared to your lease, division order and declaration of pooling and unitization. You can count on Northwest s Royalty Manager to help you understand these documents and properly manage your lease income. We speak the gas company s language. Let us help protect your interests. Who Needs Our Services... Individuals or businesses Farmers and timber acreage owners Landowner groups Owners of severed oil, gas and mineral interests Absentee royalty owners Municipalities, authorities and other government agencies Charities, endowments and foundations Reconcile: Production, price and expense data is reviewed and any discrepancies are flagged, triggering the Royalty Manager reconciliation process. Deposit: Your royalty proceeds are deposited within hours of verification into the checking, savings, tax escrow, investment, trust or other accounts of your choosing. Summarize: Detailed account data is compiled and summarized for your reference in monthly Royalty Manager statements from Northwest.

6 Step 4 Continuing Support How do I invest my royalty payments to secure my financial legacy for generations to come? Northwest s financial advisors will help you manage your gas royalty wealth wisely over the course of time. Northwest offers highly personalized investment and administrative services in personal, corporate, charitable and institutional trusts and employee benefits. We help you reach your financial goals with a three-point process: We work with you to assess your current financial situation We assist you in determining your financial needs for today and tomorrow We help you chart a course for the future with a personalized plan This comprehensive approach allows us to help you make better decisions on debt reduction, savings, long-term care insurance and investing for the future evaluating and planning from a wide range of investment advisory and portfolio management services, estate and trust services and a combination of FDIC-insured and non-fdic-insured accounts. Northwest is a trusted name with a proven history of providing expertise in royalty income management. We can get you where you want to go with absolute confidence.

7 What you can do right now The Northwest Savings Bank Strategy: Develop your plan, keep it simple and start now. See the back of this brochure for information on how to contact a member of the Northwest team, or call or visit your local office to set up a free consultation today! Please gather these records, if you have them, before meeting with us: Your deed(s) Your oil and gas lease(s) Declarations of pooling and unitization Division orders Statements reflecting all bonus, delay rental, spud fee and/or royalty payments received to date Investment portfolio Personal financial statement of assets and liabilities Past three years federal and state tax returns Current will Living will (or advanced health care directive) Power of attorney forms

8 About Northwest A trusted, local resource and no cost advisor, we do not charge an hourly fee for planning and guidance. Northwest Bancshares, Inc. is the chartered savings and loan holding company that operates Northwest Savings Bank. Founded in 1896, the bank operates community banking offices in Pennsylvania, New York, Ohio and Maryland. Headquartered in northwestern Pennsylvania, with offices located throughout the country s oldest oil and gas lands, we have unmatched experience helping royalty owners with their banking, lending and investment needs. In light of this history, Northwest delivers this service in an effort to address the needs of landowners throughout this expanding oil and gas producing region. Our Oil, Gas and Mineral Services Division Our goal is to serve as your trusted local resource and advisor in this often confusing and intimidating industry. We hope you ll come to think of Northwest as The Right Bank. The Right People. The Right Answers. Northwest Savings Bank provides this information for general guidance only, and the contents do not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with any professional tax, accounting, legal or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax information provided in this presentation is not intended to be used, and cannot be used, by any taxpayer for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is as is, with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose. Northwest Investment & Trust Services offers products that are not FDIC-insured, not bank guaranteed and may lose value in addition to FDIC-insured products. Attorney Bud Shuffstall Senior Oil, Gas and Mineral Officer (800) , ext bshuffstall@nwbcorp.com Tabitha Bean Oil, Gas and Mineral Operations Officer (800) , ext tbean@nwbcorp.com Attorney Chris Junker Oil, Gas and Mineral Officer (800) , ext cjunker@nwbcorp.com Pictured from left to right: Bud Shuffstall, Tabitha Bean, Chris Junker Oil, Gas and Mineral Management Estate Planning Financial Education Wealth Management REV 12/13