Strengths

The Permian Basin is an attractive operating area due to its multiple horizontal and vertical target horizons, favorable operating environment, high oil and liquids-rich natural gas content, substantial existing infrastructure, well-developed network of oilfield service providers, long-lived reserves with consistent reservoir quality and historically high drilling success rates. We believe that the following strengths will help us drive shareholder value:

All of our leasehold acreage is located in the Permian Basin in West Texas, and substantially all of our current properties are well-positioned in what we believe to be the core of the northern Midland Basin where horizontal drilling activity has increased by 300% since January 2012. Based on industry data, we believe the Permian Basin offers some of the most attractive returns among our nation’s producing oil and natural gas plays.

The vast majority of our acreage is located on contiguous blocks in the core of the Northern Midland Basin. We believe this large, contiguous acreage position allows us to optimize our horizontal and vertical development programs to maximize our resource recovery on a per section basis, and thus our returns. In particular, our contiguous acreage blocks allow us the flexibility to adjust our drilling and completion techniques, primarily the length of our horizontal laterals, in order to optimize our well results, drilling costs and returns. As the operator of approximately 95% of our net acreage, we retain the ability to adjust our development program, including the selection of specific drilling locations, the timing of the development and the drilling and completion techniques used to efficiently develop our significant resource base. This operating control also enables us to exchange data with other offset operators, which we believe contributes to reducing the risks associated with drilling the multiple horizontal zones of our acreage.

Our horizontal drilling experience targeting multiple pay zones in the Midland Basin provides us a competitive advantage in these areas. Our initial horizontal focus was on the Wolfcamp B formation in Midland County. We were among the first operators in the core of the Midland Basin to successfully drill and complete a horizontal well in the Wolfcamp B formation. In addition, we believe we were the first operator to successfully drill and complete a horizontal well targeting the Lower Spraberry shale in the Permian Basin. We are currently drilling what we believe will be the first horizontal well targeting the Middle Spraberry and the first operator to successfully drill and complete the first horizontal well in the Middle Sprayberry shale. We recently completed several wells in the Wolfcamp A Formation on our properties and early well results have been among the best wells we have completed on our properties. Additionally, our technical team has been drilling horizontal wells in North America since the early 1990s and applies this decades-long experience when drilling our target zones in the Midland Basin.

We have identified a multi-year inventory of horizontal drilling locations that we believe provide attractive growth and return opportunities. Based on our initial horizontal drilling results and those of other operators in our area to date, combined with our interpretation of various geologic and engineering data, as of May 2015, we had identified over 1,300 net horizontal drilling locations on our acreage based on five wells per 640 acres for short laterals and five wells per 960 acres for long laterals. These locations exist across most of our acreage blocks and in multiple target zones. We also believe that as we execute our horizontal drilling program, we will identify additional horizontal drilling locations. Additionally, we believe our acreage could be prospective for horizontal drilling of the Clearfork, Jo Mill, Dean, Strawn, Atoka, Mississippian and Devonian formations.

We believe that the experience of our management and technical teams in horizontal drilling and completions will help reduce the execution risk associated with unconventional drilling. We believe the significant collective experience of our management and technical teams has enabled us to recognize the potential in the core of the Midland Basin and to assemble a portfolio of assets that has been, and we believe will continue to be, highly productive. Further, our executive team has extensive experience in identifying acquisition targets and evaluating resource potential through its involvement in successfully building and selling several companies that executed acquisitions and divestitures as part of their growth strategy. We believe this significant experience identifying and closing acquisitions and divestitures will help us identify additional attractive acquisition opportunities in the future. Our management team has a meaningful economic interest in us, which we believe will provide significant incentives to grow the value of our business for the benefit of all stockholders.