Take Point

Dual Lease Line Spacing (467 /100 ) 467 330 /100 Spraberry Most Shale Fields 467 /200 Phantom (Wolfcamp) 100 TP

Off Lease Penetration Point See- Lighting Oil Company v. Anadarko E&P Onshore, LLC October 29, 2014 4 th COA, San Antonio

Lighting Minerals Briscoe Ranch - Surface Anadarko Lessee Chaparral Wildlife Management Area

No Perf Zone

A B 5 5% Non-Joining C D E Title on Each Tract

NON-PERFORATION ZONE D E 467

Box Rule Spraberry (Trend Area) If as drilled take points are inside box (solid blue rectangle), as drilled location complies with drilling permit even if take points are less than 467 from nearest lease line. Assume 467 lease line spacing rule and 50 box rule FTP = first take point LTP = last take point SL PP FTP 50 50 LTP T 467

Jones SL #3 Jones SL #2 Jones SL #1* *Record Well Determines Rule 86 Acreage Add-On Upper Wolfcamp No limit as long as within correlative interval Middle Wolfcamp Lower Wolfcamp All drainholes must lie within Spraberry (Trend Area) Field correlative interval Different surface locations No limit on vertical distance between horizontal drainholes of a Stacked Lateral well First drainhole for which completion papers filed is Record Well Record Well s length determines Rule 86 acreage add-on Record Well designation may change 660 Stacked Lateral Paths

Spraberry 80+80+240 = 400 ac. Barnett Shale 320+32+240 = 592ac. Sugarkane (4200 x 0.2) + 320 = 1160 Or - Special Field Rules 4200 Lateral Sugarkane (Eagleford) Field A= (L x 0.2) + 320 * UFT Proposal 100 BOPD per acre assigned

Pooling and Retained Acreage Provisions

Why does it matter? Oil well allowable vs. Gas well allowable Your well produces 7mmcfd, 700b o pd of 46 API liquid at 10,000. Allowable production as a Gas Well 700 bcpd & 7 mmcfd Allowable production as an Oil Well 34 bopd & 344 mcfd

What if my well produces less than 12,500:1 or it failed the ASTM Distillation Test?

FREE GAS Pore Space FORMATION WATER

If mole percent of C 7 + in Full Well Stream is less than 11% - then the well is a gas well. August 6, 2006 Railroad Commission Memo

Barnett Shale - 1998

Barnett Shale - 2007 100% PSA Sign-Up 98.5% PSA Sign-Up - Legal Staff denied (7-12-2007) - Commission Approved (10-24-2007) - Legal Staff 95% - Permitting Staff 90%

< 90% PSA Sign-Up < 90% PSA Sign-Up - Legal Staff denied - Commission Approved at 65% (9-9-08)

Cotton Valley/Haynesville 2008-2009 A Existing Cotton Valley Units B Proposed Horizontal Well C

In the Carthage (Haynesville Shale) Field, a case that lead up to the Klotzman decision, the Examiners incorrectly state, Devon is not the owner of the mineral under the various tracts..field. (Docket No. 06-0262000) it operates in the The facts are that Devon had existing oil and gas leases covering all of the tracts mentioned above. Devon had a fee simple ownership of its leases and thus, did own the minerals.

EOG 100% Leased Klotzman Lease No Oil Pooling Clause EOG 100% Leased EOG Allocation Well

Less than 100% Leased 100% Leased Allocation Well Issue Rule 37 Notice of Application No Protest in 21 days Permit Issues

Less than 100% Leased 100% Leased Allocation Well NPZ Commission Issues with a regular drilling permit

Allocation Well Permit #2 Code 25 Non-Concurrent Production Well Permit Tract 1 640 Ac.; 80 Ac. Field Rules: 8 Wells Existing-Developed to density Will Shut-In Well No. 1 1 2 3 S.I. Tract 2 Not Developed to density 4 5 6 9H 8 7 Allocation Well File Permit with Code 25 as to Well No. 1 in Tract 1 Commission issues a regular permit to Allocation Well

Operator Permits Anadarko 54 Apache 13 BHP 19 Bold Op 4 BP America Prod 7 Burlington 2 Callon 11 Chesapeake 34 Chevron USA 15 Classic 6 CML 1 COG 1 Devon 629 El Paso E&P 1 Elk Meadows 2 Encana 2 Energen 83 Enervest 52 EOG 29 Escondido 1 Fidelity 2 Foreland Op 2 Forest 1 Goodrich 2 Hat Creek 1 High Sky Prtns 7 Highmount Expl 2 Hunt Oil 13 Jilpetco 1 Operator Permits Laredo Petro 1 Linn 4 Marathon Oil 7 Matador Production 5 MDC Texas Energy 1 Memorial Prod Op 37 Mewbourne 1 Navidad 1 Newfield 3 NFR 4 Oxy USA 29 Parsley Energy 22 Patriot 7 Penn Virginia 6 Pioneer 26 QEP 1 Quicksilver 2 Resolute 16 Sabalo Expl 1 Sabine O&G 7 Samson 4 SM Energy 41 Statoil 12 Talisman 5 Texakoma 1 Texas American Res 4 Titan 1 Unit Petro 6 Vantage 88 WBH 19 XTO 8 Grand Total 1367 As of 06/18/15

Operator Permits American Energy PB 6 Apache 5 Approach Op 6 Athlon 73 BHP BILLITON 14 Blackbrush 2 Bold Op LLC 6 BP America Prod 8 Breittburn Op LP 25 Burlington 2 Cabot 16 Callon Petro 10 Chesapeake 4 Cimarex 5 Classic 5 COG 11 Crimson 4 Crownquest 6 Devon 126 Diamondback 22 Discovery 6 Eagle Ridge 1 El Paso E&P 1 Encana 33 Energen 43 Energy & Expl. Ptnrs 2 Enervest 19 EOG 19 EP Energy 1 Escondido 8 Exco 15 Forest 31 Forge 19 GMX 11 Goodrich 1 Halcon 41 Operator Permits Henry Resources 1 Hughes, Dan A. 2 Laredo Petro 149 Laredo Petro - Dallas 18 Le Norman 1 Lewis Petro 21 Marathon 4 Matador 10 McCutchin Petro 1 MD America 72 Mewborne 1 Murphy 6 New Gulf 1 Newark E&P 4 Oxy USA 1 Paloma 2 Parsley 7 Patriot 1 Pcore 1 Pioneer 129 PMO 3 QEP Energy 16 RSP 54 Sabalo Expl 4 Sabine O&G 3 Samson 12 Shell Western 1 SM Energy 9 Statoil Texas 1 Summit 3 Swift Energy 24 Tanos 5 Texas Petro Inv 2 Three Rivers Op 6 Trail Ridge 2 Valence Operating 2 W & T Offshore 1 Wildhorse 1 XTO 52 Grand Total 1240 As of 06/18/15