COGA/IPAA Denver Private Capital Conference August 10, 2006

EnCap Investments L.P. 2  Formed in 1988  Offices in Dallas and Houston  Four Co-Founders and Partners  Worked together over 25 years  100 years collective experience in oil and gas finance  Supported by strong team comprised of 14 investment professionals  Average 10 years of related experience Background The leading source of private equity to the independent sector of the oil and gas industry

EnCap Investments L.P. 3 Current Organization Brent BechtolMng. Dir. Jason DeLorenzoMng. Dir. Murphy MarkhamMng. Dir. Sean SmithMng. Dir. Wynne Snoots Mng. Dir. Doug SwansonMng. Dir. Mitch HovendickVice Pres. Jason McMahonVice Pres. Jonathan ShepkoVice Pres. Mark WelshAsst. VP Jimmy CrainAssociate Ryan DevlinAnalyst Todd HassenAnalyst Kyle KafkaAnalyst ADMINISTRATIVE STAFF Bobby HaierCFO Donna WrightController Audrey White Sr. Acct. John Stricker Sr. Acct. David Miller Partner Gary PetersenPartner Marty PhillipsPartner Bob ZorichPartner PRINCIPALS INVESTMENT STAFF

EnCap Investments L.P. 4  12 Institutional Oil & Gas Investment Funds  Total capital commitments of approximately $4.0 billion   3 Mezzanine Debt Funds  3 Reserve Acquisition Funds   6 Private Equity Funds  Closed new fund (sixth private equity fund) on May 17 th with $1.5 billion in total commitments Business Concept “Conduit” between institutional capital sources and oil and gas investment opportunities

EnCap Investments L.P. 5  Fund Size: $1.5 billion  100 Institutional Investors  Consists of insurance companies, university endowments, energy banks, foundations and wealthy family trusts  Investment Mandate  Private Equity  Transaction Size: $20MM to $100MM  Upstream and Midstream Sectors  North America and select international  Target Returns  2.0x ROI  25% IRR EnCap Energy Capital Fund VI

EnCap Investments L.P. 6  Provided 130 companies with growth capital  Hallmark of investment record is consistency of returns across multiple industry and hydrocarbon price cycles  Investment approach continues to evolve with changing industry environment / market dynamics Business Concept Long history of helping companies grow and create shareholder value

EnCap Investments L.P. 7 Equal emphasis on capital preservation and value creation  Back seasoned management teams with compelling business plans and like- minded approach to risk management  Provide growth capital to companies with acquire and exploit and/or repeatable drilling strategies  Structure designed to achieve alignment of interest with management  Capital generally advanced in tranches as attractive opportunities are presented  Engineerable reserve value substantially underpins invested capital Investment Strategy / Philosophy

EnCap Investments L.P. 8  EnCap generally contributes 95%+ of equity capital  Capital structure incorporates senior bank debt in addition to private equity  Multi-tiered back-in arrangement positions management to earn a blended 20% - 25% of the company  Our management teams averaged making $35 million in conjunction with 10 companies sold last year Deal Structure / Management Incentive

EnCap Investments L.P. 9  Pool of capital and number of fund managers have expanded substantially  All seeking opportunities to back established money-makers, but open- minded to “un-proven” teams  Majority of deals are start-ups  With abundance of capital and increased competition for investment opportunities, entry into business never been easier  Management teams have the value creation strategies  Input from private equity partner relates largely to risk management and strategic issues  Strong sense of reality and appreciation for cyclicality of business Private Equity Truths

EnCap Investments L.P. 10 EnCap Investments L.P.  Average IRR for vintage natural resource funds was 23%  versus 3.25% for all Private Equity Funds  and -3.60% for all Venture Capital Funds Natural Resource Funds Number of Funds Created Dollars Committed (Billions) Average Fund Size (Millions) $1.6$ $5.1$ $16.1$435 Source: Private Equity Intelligence.

EnCap Investments L.P. 11 EnCap Investments L.P.  Over involved in business  Exercise too much control / influence  Board representation is a function of size of investment  19 out of 20 times we say “yes”  Do not tell people who to... what to... when to...  Third-Party Engineering  Utilized more in a “hand holding” capacity than for detailed evaluations  Our sense of potential value and risk profile is shaped substantially by management  Generally do not require anything more than banks  Impatient money Private Equity Myths

EnCap Investments L.P. 12 EnCap Investments L.P.  Honesty, Integrity and Forthrightness  Strong technical and operational backgrounds  Well-defined business plan / value creation strategy consistent with experience  Adaptability  Common understanding of risk management  Receptive to “partnership” relationship Management Team Attributes

EnCap Investments L.P. 13 EnCap Investments L.P.  Proven money-makers have demonstrable track record of creating value  Initial commitments typically larger  Receive somewhat more favorable terms  Greater upfront spending flexibility  Unproven teams  Emphasis more on background/experience and strength of business plan  Greater receptivity early on to strategic input Differentiation between Proven and Unproven Teams

EnCap Investments L.P. 14 EnCap Investments L.P.  There are multiple forces that affect the industry  All your projects won’t be successful  What works today and what will work in 2-3 years probably will be different Reality and Importance of Adaptability  Hydrocarbon Prices  Capital Availability  Public Market Dynamics  People  Costs  M&A Opportunities  Supply of Rigs & Services  Regulatory Issues  Technological Advancements

EnCap Investments L.P. 15 EnCap Investments L.P.  Commitment Size: $50 million  $48.5 million from EnCap; $1.5 million from Management Team  Spend $5-$10 million of equity acquiring acreage and drilling initial test wells  Initial success facilitates accelerated drilling program funded largely by additional equity. Equity supplemented by senior bank debt as PDP value grows.  Likely add acreage and bolt-on acquisitions  Over a 2 to 4 year time horizon, drill a total of 25 wells, establishing proof of concept  Creating net daily production of 12.5 MMcfed, plus substantial inventory of PUD and Probable drilling locations  Sell to a large independent for $250 million  Waterfall results in payday for management team of $40 million Private Equity Investment Example

COGA/IPAA Denver Private Capital Conference Houston Office 1100 Louisiana Suite 3150 Houston, TX (713) Dallas Office 3811 Turtle Creek Blvd. Suite 1080 Dallas, TX (214)