Randall & Dewey A division of Jefferies & Company, Inc. Member, SIPC IPAA/COGA – Denver Private Capital Conference David C. Rockecharlie Managing Director August 10, 2006 CONFIDENTIAL

2 Overview of Randall & Dewey, a division of Jefferies Jefferies was voted 2005 middle market investment bank of the year Jefferies was voted 2005 middle market investment bank of the year Focused on private companies and middle market public companies Focused on private companies and middle market public companies 2,000 employees across 25 offices worldwide 2,000 employees across 25 offices worldwide Randall & Dewey is the oil and gas group of Jefferies Randall & Dewey is the oil and gas group of Jefferies Largest E&P team on Wall Street global E&P professionals Largest E&P team on Wall Street global E&P professionals Randall & Dewey serves the entire E&P market Randall & Dewey serves the entire E&P market Work with E&P startups the Majors Work with E&P startups the Majors $15 billion in M&A transactions $15 billion in M&A transactions $5 billion in public and private financing transactions $5 billion in public and private financing transactions Deal sizes from $2 million to $2+ billion Deal sizes from $2 million to $2+ billion Advisor on nearly 50% of U.S. MA&D transaction volume Advisor on nearly 50% of U.S. MA&D transaction volume

3 Selected R&D Transactions M&A Capital Markets January 2006 Sale of Royalty Interests in Brea Olinda Field $49,750,000 Financial Advisor to the Seller December 2005 $250,000,000 Senior Secured Notes Offering Sole Placement Agent November 2005 $81,250,000 Follow-on Offering Co-Manager December 2005 $100,500,000 Public Equity Offering Sole Book-Running Manager Convertible Notes Sole Manager $50,000,000 July 2006 $276,250,000 Follow-on Equity Offering Joint Bookrunner May 2006 Financial Advisor to the Seller has been acquired by $750,000,000 June 2006 Financial Advisor to the Seller $1,246,000,000 has been acquired by December 2005 $2,450,000,000 Financial Advisor to the Seller has been acquired by Pending Financial Advisor to the Seller $2,200,000,000 has been acquired by November 2005 Transaction Advisor to the Seller Sale of Denver Julesburg Basin Assets acquired by

4 State of the Energy Market… Newton Discovers the Theory of Commodity Prices

5 Preliminary Term Sheet

6 An Abundance of Capital Sources Commercial Banks Commercial Banks Mezz Funds Mezz Funds Private Equity Private Equity Venture Capital Venture Capital Royalty Funds Royalty Funds Hedge Funds Hedge Funds Insurance Funds Insurance Funds Municipals Municipals End-user Industrials End-user Industrials Utilities Utilities MLPs/LLCs MLPs/LLCs Pension Funds Pension Funds High Net-Worth Individuals High Net-Worth Individuals Large-Cap Industry Players (CVX, RD, CHK, etc.) Large-Cap Industry Players (CVX, RD, CHK, etc.) Traditional Public Markets (NYSE, NASDAQ, AMEX, LSE) Traditional Public Markets (NYSE, NASDAQ, AMEX, LSE) Emerging Public Markets (AIM, TSE, Dubai) Emerging Public Markets (AIM, TSE, Dubai)

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8 Traditional Corporate Finance Alternatives Were Easily Classified…

9 The Increasing Gray Area…Create Order From Chaos VPPHigh YieldConvertible Debt Bank DebtMezzanine Debt Public EquityPrivate EquityRoyalty Sale Proved Reserves (Engineering Risk)3P Reserves (Geological Risk) Risk Profile Cost of Capital LowHigh Lines are starting to blur as financial instruments are being structured in unique ways to take on new characteristics  Warrants coverage  Participating interest rates (pegged to commodity prices, dividends, etc.)  Convertible Features  Increasing Risk Profile  Pref. Rights  Ultra Short/Long Maturities  Security  Covenants  Amortization / Bullet / Zero

10 The Elegant Solution is not Always Apparent Equity dilution vs. operational control? Leverage against my assets? Cost of Capital? Gives me credit for today’s commodity prices? Values my upside potential? Structural Flexibility? Einstein develops his theory of negativity.

Case Studies: Solving the Puzzle

12 Blacksand Energy In early 2005, Blacksand Energy undertook a recapitalization of the Company In early 2005, Blacksand Energy undertook a recapitalization of the Company Key considerations for Blacksand’s management team: Key considerations for Blacksand’s management team: Provide growth platform Provide growth platform Align asset characteristics with new capital structure Align asset characteristics with new capital structure Increase equity ownership Increase equity ownership Maintain operating control Maintain operating control Explored range of alternatives to find the right solution Explored range of alternatives to find the right solution Results Results Management nearly doubled equity stake in company Management nearly doubled equity stake in company Secured commitments of $250MM in debt and $50MM in equity from strong partners Secured commitments of $250MM in debt and $50MM in equity from strong partners Executed on acquisition and divestiture plan Executed on acquisition and divestiture plan Sold Company in ideal commodity price/capital markets environment Sold Company in ideal commodity price/capital markets environment

13 Blacksand Energy: Solving the Puzzle Recapitalization Buyout PartnerBank DebtSub DebtPrivate EquityHedge Monetization Royalty Sale 1Royalty Sale 2 Growth Offset Acquisition Exit = $ Sale to recent IPO Company Acquisition of Assets Management EquityPrivate Equity

14 Other Creative Financing Case Studies High Yield Debt with Warrants Recap + Development Capital Long-Term VPP Acquisition of BP San Juan Assets Leveraged Recap/ VPP Recap + Acquisition and Development Capital Convertible Debt Development Capital Bank Debt Warrant Exercise Financing S. Louisiana Asset Purchase High Yield/Private Equity/Hedges Structured acquisition of Belden & Blake