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IPAA 2008 Private Capital Conference

IPAA 2008 Private Capital Conference. January 16, 2008. Chalker Energy Partners II, LP. Disclaimer – Forward Looking Statements.

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IPAA 2008 Private Capital Conference

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  1. IPAA 2008 Private Capital Conference January 16, 2008 Chalker Energy Partners II, LP

  2. Disclaimer – Forward Looking Statements Certain statements in this presentation regarding future expectations and plans for future activities may be regarded as “forward-looking statements”. They are subject to various risks, such as financial market conditions, operating hazards, drilling risks and the inherent uncertainties in interpreting engineering data relating to underground accumulations of oil and gas, as well as other risks. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct.

  3. CEP II Formation • Successor to CEP • Formed in December 2003 by Alan Smith & Tom Campbell • East Texas Focus • Sold March 2006 to Forest Oil for $224 million • Quantum Portfolio Company • CEP II formed April 2006 • Added a few new members to the management team • Quantum Portfolio Company • Started with CEP residual assets

  4. CEP II Strategy • Repeat CEP’s East Texas strategy of acquiring land & proving up acreage • Build sizable position in Buda Play in Houston County • Consolidate North Texas in Fort Worth Basin • Acquire sizable position in South Texas • Achieve 15 MMcfepd rate and 100+ Bcfe reserves prior to exit in 3 years

  5. CEP II Results – East Texas • Acquired 11,000 acres & 4.5 MMcfepd through acquisition • Leased additional 13,000 acres • Drilled & completed 44 wells in 12 months (4 rigs) • Increased rate to 23 MMcfepd • Proved Reserves increased to 294 Bcfe • Exited December 2007 – CEP II achieved ~4.0x ROI on $40 million equity investment • Additional 2,000 acre package to sell in 1Q 2008 NOTE: All values include co-investor/partner ownership

  6. CEP II Results – Houston County • Acquired 17,000 acres in 6 months in three separate transactions; 6 continuous miles along trend • Sold down to 50% operated position in May 2007 • Drilled horizontal well; IP’d at 1,000+ Bopd in November 2007 • Solicited bids in December 2007; signed PSA January 2008 • Expect +5.0x ROI on $3.5 million equity investment

  7. CEP II Results – North Texas • Acquired 800 Mcfepd and 10,000 acres in 3 separate transactions starting December 2006; included a management team • Sold 2,000 acre position with Barnett rights for $2.25 million • Drilled 7 new wells & re-entered 2 wells • Current rate at 2 MMcfepd with 10 Bcfe of reserves • Expect 2Q 2008 exit

  8. CEP II –Company Structure

  9. Lessons Learned • Management/Strategy alignment is key • Do everything with the end in mind; exit strategy • Make sure equity provider understands business plan and is committed; no wavering • Financial Engineering; use it to minimize variables in the equation to success • Use a bank that understands your plan and is flexible

  10. Equity Provider – Quantum Energy Partners • Acted as outsourced CFO • Sourced one of the acquisitions • Provided legal counsel /structuring expertise with Subsidiaries • Advised on the commodity strategy • Brought commercial banking relationships to finance the acquisitions

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