Empresa Energy, LPEmpresa Energy, LPJeff ElkinJeff Elkin

IPAA 2009 PCCIPAA 2009 PCCEmpresa 2008 MonetizationEmpresa 2008 Monetization

January 14, 2009January 14, 2009

Empresa Energy LP2

EELP Overview & Haynesville PositionEELP Overview & Haynesville Position

EELP is a EnCap Investments Fund V portfolio company with a drill-bit growth EELP is a EnCap Investments Fund V portfolio company with a drill-bit growth strategy focusing on East Texas and North Louisianastrategy focusing on East Texas and North Louisiana

While executing development program, Haynesville Shale play exploded due to While executing development program, Haynesville Shale play exploded due to public announcements from Chesapeake and Petrohawkpublic announcements from Chesapeake and Petrohawk

Touted highly attractive economics and the expansive acreage position in Touted highly attractive economics and the expansive acreage position in East Texas and North LouisianaEast Texas and North Louisiana

EELP held 30,000 acres within the core Haynesville areaEELP held 30,000 acres within the core Haynesville area

Acreage values escalated from $250/acre to $10,000/acre in one monthAcreage values escalated from $250/acre to $10,000/acre in one month

Acreage competition was driven by three primary playersAcreage competition was driven by three primary players

EELP had a very good relationship with all three companies EELP had a very good relationship with all three companies

EELP needed a strategy in order to capture the potential valueEELP needed a strategy in order to capture the potential value

Empresa Energy LP3

EarlyEarly 2008 Haynesville Risks/Concerns 2008 Haynesville Risks/Concerns Few Haynesville wells (Few Haynesville wells (limited public data and technical analysis)limited public data and technical analysis)

Potential for acreage prices to fall due to any poor Haynesville well results or Potential for acreage prices to fall due to any poor Haynesville well results or one of the primary competitors quits leasing (now we have seen that happen)one of the primary competitors quits leasing (now we have seen that happen)

Lease expirations were imminent and EELP could lose value by the dayLease expirations were imminent and EELP could lose value by the day

Large portions of acreage not HBP in deeper intervalsLarge portions of acreage not HBP in deeper intervals

Capital and resources are immense and unknown to develop HaynesvilleCapital and resources are immense and unknown to develop Haynesville

EELP’s financial position vs. capital required for developmentEELP’s financial position vs. capital required for development

30,000 acres – @80 acres/well – 375 wells – $3 billion net cost!30,000 acres – @80 acres/well – 375 wells – $3 billion net cost!

AMI’s and surface restrictions burdened portions of propertiesAMI’s and surface restrictions burdened portions of properties

If EELP sells all of the deep rights and the Haynesville wells are as good as If EELP sells all of the deep rights and the Haynesville wells are as good as advertised, EELP could leave substantial value on the tableadvertised, EELP could leave substantial value on the table

If EELP retains a working interest, which company is the best partner to executeIf EELP retains a working interest, which company is the best partner to execute

Empresa Energy LP

Field Locations North LouisianaField Locations North Louisiana

Elm Grove

Sligo

Caspiana

Holly

Shreveport

Empresa Energy LP

Empresa Acreage in Haynesville PlayEmpresa Acreage in Haynesville Play

Stonewall Bistineau

Woodardville

Clearlake

CHK Johnson Branch

EnCana Adcock 3

Empresa Energy LP6

Strategy – Analyzing Our Acreage PositionStrategy – Analyzing Our Acreage Position

30,000 acre net position in 4 main projects30,000 acre net position in 4 main projects Two prospects were fairly inactive with our model (Stonewall, Bistineau)Two prospects were fairly inactive with our model (Stonewall, Bistineau) One project operated by partner with ongoing low impact drilling (Clearlake)One project operated by partner with ongoing low impact drilling (Clearlake) One ongoing One ongoing operatedoperated project making 5+ MMCFD toward future sales point (Woodardville) project making 5+ MMCFD toward future sales point (Woodardville)

Stonewall (6,900 net Haynesville acres)Stonewall (6,900 net Haynesville acres) Negotiated drill to earn with experienced local operatorNegotiated drill to earn with experienced local operator

Tests included Haynesville exposureTests included Haynesville exposure Multiple stage deal with Horizontal Haynesville as goalMultiple stage deal with Horizontal Haynesville as goal

Woodardville (5,100 net Haynesville acres)Woodardville (5,100 net Haynesville acres) Retain deep rights and incorporate into ongoing development programRetain deep rights and incorporate into ongoing development program Gives ‘new’ deep buyer stable cash flow from the shallow production and adds big Gives ‘new’ deep buyer stable cash flow from the shallow production and adds big

excitement to shallow buyerexcitement to shallow buyer

Evaluate Market Value of Haynesville Rights in Remaining Two Areas Evaluate Market Value of Haynesville Rights in Remaining Two Areas (Clearlake, Bistineau)(Clearlake, Bistineau)

18,000 net acres and very good working knowledge to lease more if deal moves18,000 net acres and very good working knowledge to lease more if deal moves Deep tests help evaluate shallow targetsDeep tests help evaluate shallow targets

Empresa Energy LP

Divestment Acreage as of 06/01/08Divestment Acreage as of 06/01/08

Bistineau

Clearlake

Empresa Energy LP

How to Manage the ProjectHow to Manage the Project

Board decided to act quickly, use internal contacts and evaluate Board decided to act quickly, use internal contacts and evaluate decisions continuously, lots of communicationdecisions continuously, lots of communication

Retain option to bring in formal advisor if neededRetain option to bring in formal advisor if needed Dealt only with ‘Decision Level’ contacts at ‘Key” players already Dealt only with ‘Decision Level’ contacts at ‘Key” players already

familiar with play (negotiated with 5 companies)familiar with play (negotiated with 5 companies) ‘‘Key’ players must have shown deep pockets and ability to do a Key’ players must have shown deep pockets and ability to do a

deal.deal. Initial contacts by phone and email to judge interestInitial contacts by phone and email to judge interest Initial proposals were sufficient and similar enough to help board Initial proposals were sufficient and similar enough to help board

decide to:decide to: Proceed with the ideaProceed with the idea Retain some interest to keep upside exposureRetain some interest to keep upside exposure Keep all contacts in negotiations until best offer was obviousKeep all contacts in negotiations until best offer was obvious

Empresa Energy LP9

Transaction ResultsTransaction Results

Sold 90% of Haynesville rights only in Bistineau and Sold 90% of Haynesville rights only in Bistineau and ClearlakeClearlake

EELP participates in Haynesville upside and retains 100% EELP participates in Haynesville upside and retains 100% of shallow rightsof shallow rights

Signed PSA in one week and closed within one month of Signed PSA in one week and closed within one month of negotiating termsnegotiating terms

Company received ~ $190MM for deep rights Company received ~ $190MM for deep rights

Cost basis in acreage: ~ $15MMCost basis in acreage: ~ $15MM

Empresa Energy LP

EELP Current PlansEELP Current Plans

Participating in developing remaining Haynesville Participating in developing remaining Haynesville acreage acreage

(8 producers, 5 drilling or completing, ___ proposed)(8 producers, 5 drilling or completing, ___ proposed) Cautiously managing Cotton Valley/Hosston Cautiously managing Cotton Valley/Hosston

reserves reserves (drilling horizontal CV well and using deeper tests for (drilling horizontal CV well and using deeper tests for

valuable well information)valuable well information) Looking to expand position in play along with our Looking to expand position in play along with our

investorsinvestors We are well capitalized and have the ability to be We are well capitalized and have the ability to be

patient patient