IPAA Private Capital Conference Stroud Energy, Inc. Patrick J. Noyes January 2007.

IPAA Private Capital ConferenceIPAA Private Capital Conference

Stroud Energy, Inc.Stroud Energy, Inc.

Patrick J. NoyesPatrick J. NoyesJanuary 2007January 2007

22

Early HistoryEarly History

Formed in 1985 with the purchase of the Stroud Prue Formed in 1985 with the purchase of the Stroud Prue Sand Unit in Oklahoma. In 1995, purchased the Apache Sand Unit in Oklahoma. In 1995, purchased the Apache Canyon field (coal bed methane) in Raton Basin of Canyon field (coal bed methane) in Raton Basin of Colorado.Colorado.

In 2000, relocated company to Ft. Worth, hired new In 2000, relocated company to Ft. Worth, hired new management team and refocused efforts on horizontal management team and refocused efforts on horizontal drilling program in Austin Chalkdrilling program in Austin Chalk

Entered into a $50MM mezzanine facility with Mirant Entered into a $50MM mezzanine facility with Mirant (subsequently increased to $100MM) to finance Austin (subsequently increased to $100MM) to finance Austin Chalk developmentChalk development

During 2002, Board decided to replace management team During 2002, Board decided to replace management team in order to take the company in a new directionin order to take the company in a new direction

Mr. Noyes joined as President and CEO in February 2003 Mr. Noyes joined as President and CEO in February 2003 with a two point strategy for growth:with a two point strategy for growth:

– Restructure the capitalRestructure the capital

– Diversify the asset baseDiversify the asset base

33

New Management TeamNew Management Team At 2002YE Stroud had:At 2002YE Stroud had:

– Total Proved Reserves – 72.9 Bcfe (99+% Austin Chalk)Total Proved Reserves – 72.9 Bcfe (99+% Austin Chalk)

– Daily Production – 12.5 MMcfe per day (net to Stroud)Daily Production – 12.5 MMcfe per day (net to Stroud)

– $64MM of Mezzanine Debt$64MM of Mezzanine Debt

Management developed a new strategy to help diversify and Management developed a new strategy to help diversify and grow the company:grow the company:– Continue successful drilling in Austin ChalkContinue successful drilling in Austin Chalk

– Diversify into new areas where management has expertise (Barnett Diversify into new areas where management has expertise (Barnett Shale and East Texas) through reserve and acreage acquisitionsShale and East Texas) through reserve and acreage acquisitions

– Apply advanced drilling and completions technologyApply advanced drilling and completions technology

– Generate large inventory of drilling locationsGenerate large inventory of drilling locations

In June 2003, Stroud purchased the mezzanine facility from In June 2003, Stroud purchased the mezzanine facility from Hydrocarbon Capital, largely financed by a Wells Fargo credit Hydrocarbon Capital, largely financed by a Wells Fargo credit facilityfacility

Stroud was fully drawn on our two facilities with Wells Fargo – Stroud was fully drawn on our two facilities with Wells Fargo – no “dry powder”no “dry powder”

In order to fund growth capital for expansion into new areas, In order to fund growth capital for expansion into new areas, the Board decided to bring in a major private equity partnerthe Board decided to bring in a major private equity partner

44

Private Capital Provider (EnCap Private Capital Provider (EnCap Investments)Investments)

In January 2004, EnCap Energy Capital Fund IV In January 2004, EnCap Energy Capital Fund IV invested $27 million in the form of redeemable invested $27 million in the form of redeemable preferred stockpreferred stock

EnCap’s equity facilitated the expansion into new areas EnCap’s equity facilitated the expansion into new areas and accelerated the drilling program and accelerated the drilling program

Stroud chose EnCap Investments for several reasons:Stroud chose EnCap Investments for several reasons:

– Capacity to pursue large acquisitionsCapacity to pursue large acquisitions

– High-level strategic/corporate guidanceHigh-level strategic/corporate guidance

– Risk managementRisk management

– Source of opportunities / deal flowSource of opportunities / deal flow

Ultimately partnership with EnCap allowed Ultimately partnership with EnCap allowed management to achieve its objectivesmanagement to achieve its objectives

The EnCap/Stroud Partnership was helpful from a risk The EnCap/Stroud Partnership was helpful from a risk management standpoint but supportive of management management standpoint but supportive of management recommendations on drilling and acquisitionsrecommendations on drilling and acquisitions

55

Stroud Picture (2002)Stroud Picture (2002)

($000s)($000s) 2002 YE2002 YE

Total Proved Total Proved PV10%PV10%

$129,40$129,4044

TP Reserves TP Reserves (MMcfe)(MMcfe)

72,89372,893

Production Production (MMcfe/d)(MMcfe/d)

12.512.5

CashCash $1,198$1,198

Total DebtTotal Debt $64,276$64,276

Total (Book) EquityTotal (Book) Equity $(2,890)$(2,890)

Net Asset ValueNet Asset Value $66,326$66,326 Highly leveraged with Mirant mezzanine facilityHighly leveraged with Mirant mezzanine facility Board decided to replace the management team and move Board decided to replace the management team and move

in a new directionin a new direction

66

Stroud Picture (2002-2003)Stroud Picture (2002-2003)

($000s)($000s) 2002 YE2002 YE 2003 YE2003 YE


$129,40$129,4044

$204,72$204,7277


72,89372,893 83,17183,171


12.512.5 21.621.6

CashCash $1,198$1,198 $6,904$6,904

Total DebtTotal Debt $64,276$64,276 $35,624$35,624

Total (Book) EquityTotal (Book) Equity $(2,890)$(2,890) $39,842$39,842

Net Asset ValueNet Asset Value $66,326$66,326 $176,00$176,0077

In 2003, Stroud experienced downward revisions to reserves in the Austin In 2003, Stroud experienced downward revisions to reserves in the Austin Chalk, specifically Washington, Burleson and Fayette CountiesChalk, specifically Washington, Burleson and Fayette Counties

As a result, management redirected capital resources to Grimes County As a result, management redirected capital resources to Grimes County (Austin Chalk) and East Texas(Austin Chalk) and East Texas

77


($000s)($000s) 2002 YE2002 YE 2003 YE2003 YE 2004 YE2004 YE


$129,40$129,4044

$204,72$204,7277

$210,46$210,4655


72,89372,893 83,17183,171 117,578117,578


12.512.5 21.621.6 26.926.9

CashCash $1,198$1,198 $6,904$6,904 $2,721$2,721

Total DebtTotal Debt $64,276$64,276 $35,624$35,624 $21,800$21,800

Total (Book) EquityTotal (Book) Equity $(2,890)$(2,890) $39,842$39,842 $49,373$49,373


$191,38$191,3866

In 2004, Stroud drilled some of the most productive Austin Chalk wells in In 2004, Stroud drilled some of the most productive Austin Chalk wells in company historycompany history

The 2004 values include a $35MM acquisition of Barnett Shale properties The 2004 values include a $35MM acquisition of Barnett Shale properties with 23.5 Bcfe of proved reserves (the transaction closed in early 2005)with 23.5 Bcfe of proved reserves (the transaction closed in early 2005)

88


($000s)($000s) 2002 YE2002 YE 2003 YE2003 YE 2004 YE2004 YE 2005 YE2005 YE


$129,40$129,4044

$204,72$204,7277

$210,46$210,4655

$479,09$479,0977


72,89372,893 83,17183,171 117,600117,600 159,383159,383


12.512.5 21.621.6 26.926.9 29.729.7

CashCash $1,198$1,198 $6,904$6,904 $2,721$2,721 $569$569

Total DebtTotal Debt $64,276$64,276 $35,624$35,624 $21,800$21,800 $71,821$71,821

Total (Book) EquityTotal (Book) Equity $(2,890)$(2,890) $39,842$39,842 $49,373$49,373 $155,36$155,3688


$191,38$191,3866

$407,84$407,8455

In 2005, Stroud raised $173MM through a 144A private placementIn 2005, Stroud raised $173MM through a 144A private placement– Proceeds were used to pay down bank debt, give liquidity to shareholders and Proceeds were used to pay down bank debt, give liquidity to shareholders and

general corporate needsgeneral corporate needs The 2005 values include a $61MM acquisition of Barnett Shale properties with The 2005 values include a $61MM acquisition of Barnett Shale properties with

27.9 Bcfe of proved reserves (the transaction closed in early 2006)27.9 Bcfe of proved reserves (the transaction closed in early 2006)

99

Pro Forma As of 12/31/05:Pro Forma As of 12/31/05:Total Proved Reserves:Total Proved Reserves: 159 Bcfe159 BcfeNatural Gas:Natural Gas: 96%96%Pre-tax PV-10:Pre-tax PV-10: $479 MM$479 MMR/P Index: R/P Index: (1)(1) 14.714.7Operated:Operated: 99%99%

Core Areas (Pro forma as of Core Areas (Pro forma as of 12/31/05):12/31/05):Gross Developed Acres:Gross Developed Acres: 41,059 41,059 (34,981 net)(34,981 net)Gross Undeveloped Acres:Gross Undeveloped Acres: 37,446 37,446 (29,065 net)(29,065 net)Drilling Locations:Drilling Locations: 204 (65 PUDs)204 (65 PUDs)

Core Areas Of OperationsCore Areas Of Operations

Central Gulf Coast (72 Bcfe)

Brazos, Burleson, Fayette, Grimes, Lee and Washington Counties

East Texas (16 Bcfe)

Harrison, Panola and Rusk Counties

Ft. Worth Basin/Barnett Shale (70 Bcfe)

Denton, Johnson, Parker and Tarrant Counties

1)1) Stroud statistic calculated as total proved reserves of 159.4 Bcfe / 2005 production of 10.8 Bcfe.Stroud statistic calculated as total proved reserves of 159.4 Bcfe / 2005 production of 10.8 Bcfe.

1010

Core Operations – Central Gulf Core Operations – Central Gulf CoastCoast

Austin Chalk PropertiesAustin Chalk Properties Key StatisticsKey Statistics Production is in the Giddings Field from the Austin

Chalk formation

Interest in 50 gross wells (41.6 net), with average working interest of 83%

41 total drilling locations (25 proved undeveloped drilling locations)

~2.4 Bcfe average reserves per completion – Grimes County

Average drilling & completion cost of $3.9MM – Grimes County

Developed acres: 30,162 gross (26,365 net)

Undeveloped acres: 13,400 gross (11,253 net)

WashingWashingtonton

GrimeGrimess

FayetteFayette

BrazoBrazossBurlesBurles

ononLeeLee

1111

ParkerParker

Core Operations – Ft. Worth Core Operations – Ft. Worth BasinBasin

Barnett Shale PropertiesBarnett Shale Properties

TarrantTarrant

JohnsonJohnson

Key StatisticsKey Statistics Largest natural gas field in Texas Advanced drilling and completion techniques

resulted in increases in productivity and reserves Interest in 50 gross wells (41.1 net), with average

working interest of 82% 84 total drilling locations (24 proved undeveloped

drilling locations) ~2.2 Bcfe average reserves per horizontal

completion Avg. horizontal drilling & completion cost of

$2.5MM Developed acres: 5,561 gross (4,788 net) Undeveloped acres: 14,405 gross (11,618 net)

DentonDenton

1212

Core Operations – East TexasCore Operations – East Texas

East Texas PropertiesEast Texas Properties

HarrisonHarrison

PanolaPanolaRuskRusk

Key StatisticsKey Statistics Cotton Valley Sand formation was primary target

in East Texas Basin

Interest in 20 gross wells (13.5 net), with average working interest of 68%

79 total drilling locations (16 proved undeveloped drilling locations)

~1.3 Bcfe average reserves per completion

Average drilling & completion cost of $1.4MM

Developed acres: 4,694 gross (3,640 net)

Undeveloped acres: 2,290 gross (1,837 net)

1313

159.4

117.6

83.272.9

-

20

40

60

80100

120

140

160

180

2002 2003 2004 2005

Reserve Base OverviewReserve Base Overview

Total Proved Reserves (Bcfe)Total Proved Reserves (Bcfe) Reserves by AreaReserves by Area

Reserve BreakdownReserve Breakdown

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Production ProfileProduction Profile

Total Production (MMcfe/d) Total Production (MMcfe/d) (1)(1)

12.5

21.6

26.929.7

38.6

-

10.0

20.0

30.0

40.0

2002 2003 2004 2005 2006E1)1) Estimate was management projection.Estimate was management projection.

1515

Operational PerformanceOperational Performance

Stroud’s accomplishments under new Stroud’s accomplishments under new management:management:– Drilled 51 out of 51 successful wells (through Drilled 51 out of 51 successful wells (through

December 31, 2005)December 31, 2005)

– Production increased 140% from 12.5 MMcfe/d in Production increased 140% from 12.5 MMcfe/d in 2002 to 29.7 MMcfe/d in 20052002 to 29.7 MMcfe/d in 2005

– Reserves grew 120% from 72.9 Bcfe in 2002 to 159.4 Reserves grew 120% from 72.9 Bcfe in 2002 to 159.4 Bcfe in 2005Bcfe in 2005

– Developed 204 drilling locations and 65 PUDs on Developed 204 drilling locations and 65 PUDs on propertiesproperties

– Acquired over 51 Bcfe of proved reserves and Acquired over 51 Bcfe of proved reserves and $104MM of PV10% value in the Barnett Shale$104MM of PV10% value in the Barnett Shale

1616

144A Offering 144A Offering Issuer:Issuer: Stroud Energy, Inc.Stroud Energy, Inc.

Offering Type:Offering Type: 144A/Reg D Private Placement 144A/Reg D Private Placement OfferingOffering

Shares Offered:Shares Offered: 4.7 MM primary, 2.7 MM 4.7 MM primary, 2.7 MM secondarysecondary

Shares SoldShares Sold 6.3 MM primary, 4.6 MM 6.3 MM primary, 4.6 MM secondarysecondary

Offering Size:Offering Size: $111,000,000$111,000,000

Actual Size:Actual Size: $173,000,000 $173,000,000

Offering Price:Offering Price: $14.00 - $16.00$14.00 - $16.00

Actual Price:Actual Price: $16.00 $16.00

Pro Forma Market Capitalization:Pro Forma Market Capitalization: $220 million (mid-$220 million (mid-range)range)

Actual PF Market Capitalization:Actual PF Market Capitalization: $260 million (top $260 million (top of range)of range)

Book Running Placement Agent:Book Running Placement Agent: Raymond JamesRaymond James

Co-Placement Agents:Co-Placement Agents: A.G. Edwards, Petrie ParkmanA.G. Edwards, Petrie Parkman

(Results(Results))

1717

Range Resources MergerRange Resources Merger

After the closing of the 144A offering, but prior to After the closing of the 144A offering, but prior to the initial public offering, Range approached Stroud the initial public offering, Range approached Stroud regarding a potential mergerregarding a potential merger

Range’s offer (cash and/or stock) valued Stroud’s Range’s offer (cash and/or stock) valued Stroud’s stock at $350MM (~$20.50/share)stock at $350MM (~$20.50/share)

– Stroud’s 144A shareholders, who purchased stock for Stroud’s 144A shareholders, who purchased stock for $16.00 per share 9 months earlier, realized a 28% holding $16.00 per share 9 months earlier, realized a 28% holding period return on their investmentperiod return on their investment

Stroud’s Barnett Shale assets were a strategic fit for Stroud’s Barnett Shale assets were a strategic fit for Range, increasing its Barnett Shale acreage to Range, increasing its Barnett Shale acreage to approximately 46,000 acres (gross) and adding 182 approximately 46,000 acres (gross) and adding 182 drilling locationsdrilling locations

– With Stroud’s additional leasehold, Range planned to add With Stroud’s additional leasehold, Range planned to add 3 more rigs in the Barnett Shale3 more rigs in the Barnett Shale

1818

Equity ReturnsEquity Returns

When EnCap entered the picture in January When EnCap entered the picture in January 2004, the common equity of the Stroud 2004, the common equity of the Stroud shareholders was valued at $35MMshareholders was valued at $35MM

At the 144A offering in September 2005, these At the 144A offering in September 2005, these shareholders received $68MM from the sale of shareholders received $68MM from the sale of secondary shares and retained 5.4 million shares secondary shares and retained 5.4 million shares of common stock of common stock

Coincident with the Range merger, the original Coincident with the Range merger, the original Stroud shareholders exchanged their 5.4 million Stroud shareholders exchanged their 5.4 million shares for cash and/or stock worth $111MMshares for cash and/or stock worth $111MMJanuary 2004 January 2004

ValuationValuation$35MM$35MM

144A Proceeds144A Proceeds $68MM$68MM

Range Merger Range Merger ProceedsProceeds

$111MM$111MM

Common Equity Common Equity ROIROI

5.1x5.1x

1919

SummarySummary

Successfully implemented initial strategySuccessfully implemented initial strategy

– 100% drilling success rate in all areas100% drilling success rate in all areas

– Built meaningful positions in three attractive core areas of Built meaningful positions in three attractive core areas of operationoperation

– Enhanced reserve recoveries by implementing advanced Enhanced reserve recoveries by implementing advanced technologiestechnologies

– Created large inventory of drilling prospects with demonstrable Created large inventory of drilling prospects with demonstrable successsuccess

EnCap investment facilitated expansion into Barnett Shale EnCap investment facilitated expansion into Barnett Shale and East Texas and accelerated drilling programand East Texas and accelerated drilling program

– Risk management and capital markets expertise invaluable to Risk management and capital markets expertise invaluable to growth and ultimate exitgrowth and ultimate exit

Increased value and improved liquidity for shareholders Increased value and improved liquidity for shareholders through 144A offeringthrough 144A offering

Exited in opportune market, creating significant value for Exited in opportune market, creating significant value for shareholders and managementshareholders and management

IPAA Private Capital ConferenceIPAA Private Capital Conference

Stroud Energy, Inc.Stroud Energy, Inc.

Patrick J. NoyesPatrick J. NoyesJanuary 2007January 2007

IPAA Private Capital Conference Stroud Energy, Inc. Patrick J. Noyes January 2007.

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