I am writing to raise concerns over the Midland Basin bellwether Pioneer Natural Resources’ Q1 2017 miss on forecast oil mix. Since the Great American Oil Shale Revolution began, a large body of evidence has been accumulating to suggest that current technology for forecasting oil production from shale is dramatically overestimating reserves to the tune of 50%. As an investor, and as an American, I am gravely concerned. I have assembled a theory that seems consistent with the majority of the evidence but this theory predicts an alarming fate: ALL oil shale wells (condensate excluded) will die a disappointing and gassy death. Here are just a few observations suggesting that “Bubble-Point Death” (as I shall call it) may be a fundamental revelation rapidly approaching America’s front door.

1. EOG’s 2011 public acknowledgement that oil recovery from shales is, in fact, driven primarily by pre-bubble-point pressure and oil phase expansion

2. 2009 public documentation of runaway GOR & face-planting oil production from the Bakken at bubble point (Clark, SPE 133719)

3. EOG’s abandonment of its once grand Midland Basin Wolfcamp program

4. Mark Papa and Scott Sheffield’s Mad Money-mediated tiff on the difference between shale combo [gas/oil] plays and true shale oil plays

5. The original, 1953 technical justification for unitizing the vertical Spraberry to combat runaway GOR

6. Approach Resources’ inglorious march from 48% oil to 27% oil once their drilling program terminated in 2014

7. Laredo Petroleum’s hard fought struggle to reach 60% of the 69% oil promised in September 2013, only to fall back to 45% oil once their drilling program was tapered back

8. And now (Q1 2017)…the Mighty PXD misses on % Oil mix due to unanticipated gas production.

I am afraid an unexpected guest, with finger extended, is reaching for America’s doorbell. And let’s be clear. It’s America’s problem because it wasn’t just investors who were influenced by ‘old math’ that clearly ‘casts doubt on oil reserves’. Americans, blinded by ever-escalating forecasts in barrels of oil equivalent and oblivious to dwindling oil barrels hiding behind the gas, have been steered to lift their longstanding oil export ban. In essence they flip-flopped on their policy that once regarded oil as strategic due to its rarity, now regarding it as strategic due to its abundance. I don’t want my country to be in for a surprise, or if a surprise is unavoidable, let’s learn of it now.

I implore you all to indulge me in an experiment that will test my theory. To do it, we need to challenge Pioneer and the analysts that may participate in their upcoming conference call to force a response to the following specific requests. Here is the challenge in the form of a letter:

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Dear Pioneer Natural Resources:

Given your highly influential role as a leading shale oil producer and bellwether stock, your recent failure to meet your own Oil Mix expectations coupled with the growing evidence for Bubble-Point-Death raises concerns about the accuracy of your current forecasts. To bolster investor and America’s confidence in your ability to estimate oil delivery into the future, please provide the following updates on some of the early well results that you used to promote your Midland Basin Wolfcamp play to the public:

1. Individual average daily GOR & Percent Oil for the month of June, 2017, for each Wolfcamp well listed on Slide 14 of your ‘Fourth Quarter 2013 Earnings’ presentation

2. Individual total cumulative GOR & Percent Oil through the month of June, 2017, for each Wolfcamp well listed on Slide 14 of your ‘Fourth Quarter 2013 Earnings’ presentation

3. Average daily GOR & Percent Oil for the month of June, 2017 for each of the Giddings twelve-well spacing test brought on production as published in your ‘Third Quarter 2013 Earnings' Release

4. Total cumulative GOR & Percent Oil through the month of June, 2017 for each of the Giddings twelve-well spacing test brought on production as published in your ‘Third Quarter 2013 Earnings' Release

5. Individual average daily GOR & Percent Oil for the month of June, 2017 for each and every Wolfcamp well used to generate Slide 9 of your ‘September 2012 Investor presentation

6. Individual total cumulative GOR & Percent Oil through the month of June, 2017 for each and every Wolfcamp well used to generate Slide 9 of your ‘September 2012 Investor presentation

According to the continuous assurances PXD has made dating back to the play’s emergence, we anticipate your responses to contain Percent’s Oil that are 70% or better and GOR’s that are 2,567 scf/STB or lower. If any of the above listed items surprise to the negative, please provide an explanation as to why such observations shouldn’t be relatable to last quarter’s disappointing oil mix due to excess gas production (or Laredo’s or Approach’s for that matter). If new completion technologies, choke management, or artificial intelligence/machine learning are sighted in your response, how confident should we be that these new technologies will be able to fight off an increasingly apparent, fundamental limitation of these frac-dependent, tight-as-a-tick shale reservoirs?

If the requested items disappoint to the negative of company forecasts, clearly something is very wrong with existing forecasting methods and we should all be concerned. If the requested items are as PXD promised, clearly something is very wrong with me. I apologize in advance of the latter case for wasting everyone’s time and giving you an unnecessary scare.

Sincerely,

Scott Lapierre

Principal

Shale Specialists LLC