How to Become a Successful E&P Independent In Three Simple Steps

Step One Be Smart

Step One Be Smart Step Two Work really, really, really hard

Step One Be Smart Step Two Work really, really, really hard Step Three Don’t go broke

My Background  B.Sc. Geophysical Eng., Colo. School of Mines  MBA, Univ. of Houston

My Background  The Superior Oil Company Prospect Generation, Gulf Coast offshore

My Background  The Superior Oil Company Prospect Generation, Gulf Coast offshore  Mobil Oil Prospect Generation, Indonesia & Nigeria Invested in stock market Made decision to be an independent E&P

My Background  The Superior Oil Company Prospect Generation, Gulf Coast offshore  Mobil Oil Prospect Generation, Indonesia & Nigeria Invested in stock market Made decision to be an independent E&P  Edge Petroleum Prospect Generation, TX/LA onshore Learned the independent game Invested in stock market to create seed capital

My Background  The Superior Oil Company Prospect Generation, Gulf Coast offshore  Mobil Oil Prospect Generation, Indonesia & Nigeria Invested in stock market Made decision to be an independent E&P  Edge Petroleum Prospect Generation, TX/LA onshore Learned the independent game Invested in stock market to create seed capital  Founded KiwiEnergy in 2000

Process for getting Kiwi Up and Running  Entity - Legal and Tax Issues Limited Partnership with LLC as General Partner  Accounting Outside accountant for bookkeeping, tax and audit work

Opening Strategy for KiwiEnergy  Take promoted deals off the street Focus on TX/LA onshore Tertiary

– Getting started  Networked like mad

– Getting started  Networked like mad  Screened hundreds of prospects

– Getting started  Networked like mad  Screened hundreds of prospects  Took small working interests in good deals Invested nearly entire savings Drilled 54 wells, 31 commercial successes

– Getting started  Networked like mad  Screened hundreds of prospects  Took small interests in good deals Invested nearly entire savings Drilled 54 wells, 31 commercial successes  Created a prospect inventory and cash flow spreadsheet (Excel)

– Getting started  Networked like mad  Screened hundreds of prospects  Took small interests in good deals Invested nearly entire savings Drilled 54 wells, 31 commercial successes  Created a prospect inventory and cash flow spreadsheet (Excel)  Established a cash flow stream Reinvested 100+% of cash flow

– Getting started  Networked like mad  Screened hundreds of prospects  Took small interests in good deals Invested nearly entire savings Drilled 54 wells, 31 commercial successes  Created a prospect inventory and cash flow spreadsheet (Excel)  Established a cash flow stream Reinvested 100+% of cash flow  Established a reserve-based line of credit with Amegy Bank

Growth  Partnered with Square Mile Energy to shoot a 3D survey in Jefferson County

Growth  Partnered with Square Mile Energy to shoot a 3D survey in Jefferson County  Started generating prospects – onshore Tertiary

Growth  Partnered with Square Mile Energy to shoot a 3D survey in Jefferson County  Started generating prospects – onshore Tertiary  Sold down to manage risk

Growth  Partnered with Square Mile Energy to shoot a 3D survey in Jefferson County  Started generating prospects – onshore Tertiary  Sold down to manage risk  Expanded 3D data base through purchase and trade

Growth  Partnered with Square Mile Energy to shoot a 3D survey in Jefferson County  Started generating prospects – onshore Tertiary  Sold down to manage risk  Expanded 3D data base through purchase and trade  Hired generators, landmen, engineer, admin

Growth  Partnered with Square Mile Energy to shoot a 3D survey in Jefferson County  Started generating prospects – onshore Tertiary  Sold down to manage risk  Expanded 3D data base through purchase and trade  Hired generators, landmen, engineer, admin  Drilled 146 wells, 82 commercial successes

– Diversification and Oops  Significant investment in Marcellus shale

– Diversification and Oops  Significant investment in Marcellus shale  Larger per-well investments

– Diversification and Oops  Significant investment in Marcellus shale  Larger per-well investments  Borrowed heavily in 2009 to service cash calls on commitments made in Oops.

– Diversification and Oops  Significant investment in Marcellus shale  Larger per-well investments  Borrowed heavily in 2009 to service cash calls on commitments made in Oops.  Drilled 85 wells, 61 commercial successes

Mistakes  Letting emotions affect investment decisions

Mistakes  Letting emotions affect investment decisions  Not hedging to ensure revenue for committed capital requirements

Mistakes  Letting emotions affect investment decisions  Not hedging to ensure revenue for committed capital requirements  Straying from my sandbox without a trusted, proven partner

Lessons Learned  Look back each year What worked, what didn’t?

Lessons Learned  Look back each year What worked, what didn’t?  Establish technical, economic and people thresholds and don’t relax criteria

Lessons Learned  Look back each year What worked, what didn’t?  Establish technical and economic thresholds and don’t relax criteria  Develop and use a cash flow forecasting tool to help manage cash and risk with an eye on capital commitments

Lessons Learned  Look back each year What worked, what didn’t?  Establish technical and economic thresholds and don’t relax criteria  Develop and use a cash flow forecasting tool to help manage cash and risk with an eye on capital commitments  Trust your instincts

KiwiEnergy is your partner of choice for high-quality, onshore, Gulf Coast Tertiary prospects.