1. Corporate Banking and Investment IPAA’s 2007 Private Capital Conference: Managing Leverage in a Volatile Commodity Market Second Lien Term Loans January 18, 2007 Evans Swann Director BNP Paribas

2. Corporate Banking and Investment 2 1. E&P Bank Lending Overview 2.Overadvance and Second Lien Bank Facilities 3.About BNP Paribas Table of Contents

3. Corporate Banking and Investment 1. E&P Bank Lending Overview

4. Corporate Banking and Investment 4 Energy Industry Risk & Return Paradigm Institutional Second Liens & High Yield Debt Bank Debt Bank Overadvances & Second Liens Mezzanine Capital Convertible Debt Private and Public Equity 5-10% 10-15% 20-30% 30% + Total Returns Controlled Risks Uncontrolled Risks PDP Reserves Proven Reserves Exploration Activity Engineering and Operations Risks Geological and Geophysical Risks Management Sponsorship Capitalization Hedging R/P F&D

5. Corporate Banking and Investment 5 Energy Bank Lending Parameters Lend against proven reserve value - primarily PDP Third party reserve estimates - usually risked somewhat Loan value determined by advance rates Cash flow model validates the analysis Conservative price deck employed Full value given to hedged volumes and prices

6. Corporate Banking and Investment 6 BNP Paribas utilizes the following advance rate guidelines to determine the borrowing base. PDP Reserves50-70% PDNP Reserves30-50% PUD Reserves20-40% BNP Paribas’ currently uses the following Base Case commodity price assumptions. Tristone Capital publishes quarterly a comprehensive review and summary of active oil and gas lender price decks…upcoming releases may be interesting if commodity prices continue to “drift”. Current Engineering Metrics

7. Corporate Banking and Investment 7 Current Bank Market Conditions Strong Commodity Prices Bolster Cash Flow Debt reduction & Share repurchases “Hot Sector” syndrome Significant loan appetite Defaults are non-existent Bank Price Deck divergence Private Equity Public “Headaches” Sarbanes Oxley Overadvance and Second Lien Facilities can optimize equity returns Public Equity Popular exit strategy

8. Corporate Banking and Investment 2. Overadvance and Second Lien Bank Facilities

9. Corporate Banking and Investment 9 Bank Market Second Lien Basics BNP Paribas opened the Second Lien E&P market in 2003 with a refinancing transaction for Quicksilver Have arranged and agented the majority of the subsequent Second Lien Facilities transacted in the bank market Several recent transactions for private companies Bank and institutional participants Navigated intercreditor issues True underwriting capacity Competitive alternative to High Yield

10. Corporate Banking and Investment 10 Drivers for Incremental Senior Debt Needs Evolution of acquisition metrics Development of commodity derivative markets Inability of bank price decks to match growth of futures prices Expansion of market capacity

11. Corporate Banking and Investment 11 Overadvance Facility vs. Second Lien RBL Facility

12. Corporate Banking and Investment 12 Second Lien Fundamentals Structure based upon conventional RBL parameters Engineering Review Cash Flow Analysis (based on bank price deck) Asset Coverage Test (PV / Total Debt) Financial Covenants Semi-Annual Redetermination Transaction Criteria Management Reserve Integrity Hedging Capitalization Standardized Documentation

13. Corporate Banking and Investment 13 Two Second Lien Markets Bank Debt Enhancement Product Smaller deals: $15-100MM Provided by Banks & Long Term Institutional Holders Pricing: LIBOR + 4 to 6% Covenants: PV / Debt and Debt / EBITDA Prepayment Flexibility Institutional Debt Maximization Objective Larger market capacity - $100+MM Paper is Liquid and Trades with Reasonable Frequency Premium Pricing for Larger Loan Capacity: LIBOR + 5% and higher Covenants Less Onerous Higher Prepayment Penalty

14. Corporate Banking and Investment 14 Bank Second Lien Advantages Capacity enhancement to conventional borrowing Longer maturity profile than standard overadvance bank facilities Ability to enhance equity returns by reducing lower-tiered capital contributions - private equity Compared to the High Yield alternative: +True underwriting +Lower minimum issuance size +Lower placement costs +Easily upsized +Prepayment flexibility +“Relationship Lending” intangibles - More covenanted

15. Corporate Banking and Investment 15 Basic Bank Second Lien Terms Amount - $15 - $100 MM Maturity - 3 to 5 years Pricing - LIBOR +  4 - 6% Covenants Asset Coverage Ratio (PV / Total Debt) Debt Service Coverage PDP / Proven Ratio Execution Timing - 2 to 6 weeks

16. Corporate Banking and Investment 3. About BNP Paribas

17. Corporate Banking and Investment 17 BNP Paribas 3 rd largest bank in the world, with total assets of $1.3 Trillion Energy practice is largest revenue contributor globally Highly rated with S&P (AA) and Moody’s (Aa2) Worldwide presence: 500+ offices in 85 countries 15,000+ employees in the U.S. BNP Paribas’ activities are organized into four core businesses: Corporate and Investment Banking Private Equity Retail Banking Private Banking and Asset Management

18. Corporate Banking and Investment 18 BNP Paribas’ Energy Finance Group BNP Paribas has a global approach to the Energy sector: Reserve-Based and Corporate Lending Senior Bank Debt Second Liens VPP’s Commodity Derivative market maker OTC NYMEX 500 Energy Specialists in Houston, New York, Geneva, Paris, London and Singapore Global Capital Markets Capabilities High Yield Equity – Linked Securities Common Equity

19. Corporate Banking and Investment 19 BNP Paribas’ Houston office focuses on the upstream sector Primarily oriented toward independent producer financings $8 Billion portfolio with over 130 clients Seamless financing for commodity derivative products Dedicated marketer of commodity derivatives located in Houston office Demonstrated international transaction capabilities BNP Paribas’ Commitment to the Upstream Sector

20. Corporate Banking and Investment 20 2006 Oil & Gas Lead Arranger Rankings BNP Paribas’ rank by Volume fell from 5 th in 2005 to 7 th in 2006 due to Credit Suisse and UBS being significantly affected by $24 billion Anadarko financing. However, with its focus on smaller, independent producers, BNP Paribas ranked 4 th in # of Deals.

21. Corporate Banking and Investment 21 2006 Oil & Gas Agent Only Rankings BNP Paribas’ rank by Volume fell from 4 th in 2005 to 5 th in 2006 as several banks benefited from substantial financings by Anadarko ($24 billion) and Conoco Phillips (5 deals totaling $27.5 billion). As measured by # of Deals, BNP Paribas retained its 3 rd place ranking in 2006, thereby demonstrating the breadth of its market penetration.

22. Corporate Banking and Investment 22 This presentation is only an expression of our interest in connection with the proposed transaction and nothing contained in this presentation should in any way be construed as an offer or a commitment by BNP Paribas to extend or to provide any financing of any type, either on behalf of itself or any other entity. This presentation has been prepared by BNP PARIBAS for informational purposes only. Although the information in this presentation has been obtained from sources which BNP PARIBAS believes to be reliable, we do not represent or warrant its accuracy, and such information may be incomplete or condensed. This presentation does not constitute a prospectus and is not intended to provide the sole basis for any evaluation of the securities discussed herein. All estimates and opinions included in this presentation constitute our judgement as of the date of the presentation and may be subject to change without notice. Changes to assumptions may have a material impact on any recommendations made herein. BNP PARIBAS or its affiliates may, from time to time, have a position or make a market in the securities mentioned in this presentation, or in derivative instruments based thereon, may solicit, perform or have performed investment banking, underwriting or other services (including acting as adviser, manager or lender) for any company, institution or person referred to in this presentation and may, to the extent permitted by law, have used the information herein contained, or the research or analysis upon which it is based, before its publication. BNP PARIBAS will not be responsible for the consequences of reliance upon any opinion or statement contained herein or for any omission. This presentation is confidential and is being submitted to selected recipients only. It may not be reproduced (in whole or in part) to any other person without the prior written permission of BNP PARIBAS. Any U.S. person receiving this presentation and wishing to effect a transaction in any security discussed herein, must do so through a U.S. registered broker dealer. BNP Paribas Securities Corp. is a U.S. registered broker/dealer. © 2005 BNP PARIBAS. All rights reserved.